Nepal - Second Sunsari Morang Irrigation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15336 IMPLEMENTATION COMPLETION REPORT NEPAL SUNSARI MORANG IRRIGATION II PROJECT (CREDIT 1814-NEP) FEBRUARY 7, 1996 Agricultural and Water Operations Division Country Department II South Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$ 1.0: NRs 22.30 1987 (at appraisal) NRs 26.09 1988 NRs 28.55 1989 NRs 32.18 1990 NRs 43.26 1991 NRs 47.59 1992 NRs 49.02 1993 NRs 50.00 1994/5 (at ICR preparation) WEIGHTS AND MEASURES I meter (m) = 3.28 feet 1 kilometer (km) = 0.62 miles I hectare (ha) = 2.47 acres =1.50 bighas I million cubic meter (Mm3) = 810) acre-feet or 35.3 Mft3 1 cubic meter per second (m3/s) = 35.31 cubic foot per second (cfs) 1 cubic foot per second (cfs) = 0.028 cubic meters per second (m3/sec) I metric ton = 2,205 pounds FISCAL YEAR OF BORROWER July 16 - July 15 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank CAD Command Area Development CAS Country Assistance Strategy CMC Chatra Main Canal DOI Department of Irrigation ERR Economic Rate of Return IIIMGN His Majesty's Government of Nepal ICB Internaional Competitive Bidding ICR Implementation Completion Report IDA International Development Association iP Irrigation Policy JT Junior Technician LCF Labor Conversion Factor M & E Monitoring & Evaluation MUV Manufacturers Unit Value O&M Operation and Maintenance POE Panel of Expert POP Project Operation Plan RWS Rotational Water Supply SAR Staff Appraisal Report SCF Standard Conversion Factor SMHP Sunsari Morang Headworks Project SMIDB Sunsari Morang Imgation Development Board SMIP Sunsari Morang Irrigation Project SMIS Sunsari Morang Irrigation System TIU Tertiary irrigation unit WUA Water Users' Association WUC Water Users' Conmittee WUCC Water Users' Coordinating Committee WUCCC Water Users' Central Coordinating Conmittee WUGs Water Users' Groups kharif Wet Season (June to October) rabi Dry Season (November to Februarv)  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT NEPAL SUNSARI MORANG IRRIGATION II PROJECT (Credit Number 1814-NEP) TABLE OF CONTENTS Description PREFACE EVALUATION SUMMARY ii Part I: PROJECT IMPLEMENTATION ASSESSMENT 1 A. Statement/Evaluation of Objectives 1 Statement of Project Objectives 1 Evaluation of Project Objectives 3 B. Achievement of Project Objective 5 C. Major Factors Affecting The Project 11 D. Project Sustainability 13 E. Bank Performance 14 F. Performance of Borrower 15 G. Assessment of Outcome 15 H. Future Operation 16 I. Key lessons Learned 17 Part II: STATISTICAL TABLES Table 1: Summary of Assessments 18 Table 2: Related Bank Loans/Credits 20 Table 3: Project Timetable 21 Table 4: Loan/Credit Disbursements - Cumulative Estimated and Actual 21 Table 5: Key Performance Indicators 22 Table 6: Key Indicators for Project Operation 23 Table 7: Studies included in Project 23 Table 8A: Project Costs 24 Table 8B: Project Financing 24 Table 9. Economic Costs and Benefits 25 Table 10: Status of Legal Covenants 25 Table 11: Compliance with Operational Manual Statements 26 Table 12: Bank Resources: Staff Inputs 26 Table 13: Bank Resources: Missions 27 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents mnay not otherwise be disclosed wiihout World Bank authorization.  Table of Contents (contd.) Description APPENDICES Appendix 1: Aide-Memoire of Supervision/Implementation Completion Reporting Mission 28 Appendix 2: Economic Re-evaluation 39 Table 1: Crop Budget for Stage - II (without project) 43 Table 2: Crop Budget for Stage - I & II (with project) 44 Table 3: Crop Yields and Production Inputs 45 Table 4: Financial and Economic Prices 46 Table 5: Economic Price Estimate for Tradable Commodities 47 Table 6: Cropping Intensity and Crop Area 48 Table 7A: Flow of Benefits in Stage - II and Stage-I 49 Table 7B: Build-up of Development Area & Yields, Input, Intensity 50 Table 7C: Incremental Net Value of Crop Production (Stage I) 51 Table 7D: Incremental Net Value of Crop Production (Stage II) 52 Table 8a, 8b, 8c: Yearwise Investment of Costs of Stage II, Stage I, SMHP 53-55 Table 9: Conversion Index for Local and Foreign Costs 56 Table lOA & 10 B: Annual Budget Requirement for O&M 57-58 Table 11: Benefit and Cost Streams 59 Table 12A: Farm Income of Typical Farm (1.4 ha) without Project 60 Table 12B: Farm Income of Typical Farm (1.4 ha) with Project 61 Table 13A: Farrn Income of Typical Farm (3.9 ha) without Project 62 Table 13B: Farmn Income of Typical Farm (3.9 ha) with Project 63 Table 14A & 14B: Crop Coverage without and with Project 64-65 Table 14C & 14D: Crop Budget without and with Project 66-67 Table 15: Incremental Employment Impact 68 Appendix 3: Borrower's Evaluation of the Project 69 Appendix 4: Project Performance Audit Report of Sunsari Morang Irrigation and Drainage Project (Credit 8 12-NEP) Evaluation Summary 80 Map: IBRD 19902 Sunsari Morang II Project Area 83  i IMPLEMENTATION COMPLETION REPORT NEPAL SUNSARI MORANG IRRIGATION II PROJECT (Credit Number 1814-NEP) Preface This is the implementation Completion Report (ICR) for the Sunsari Morang Irrigation II Project (SMIP-II) in Nepal, for which Credit 1814-NEP in the amount of SDR 31.2 million (US$ 40.0 million equivalent) was approved on June 2, 1987 and made effective on February 3, 1988. The Credit was closed on March 31, 1995, as originally scheduled. Final disbursement took place on November 3, 1995, at which time an undisbursed balance of SDR 2.8 million was canceled. The ICR was prepared by the Task Manager, Ohn Myint, Agriculture and Water Operations Division, Country Department II, South Asia Regional Office, and reviewed by Mr. Shawki Barghouti, Chief, Agriculture and Water Operations Division, and Ms. Kazuko Uchimura, Project Advisor. Preparation of ICR was begun during the Bank's final supervision/completion mission in March /April 1995. The mission comprised the previous Task Manager at appraisal, Mr. Y.K. Choi, Senior Agriculturist, and Ms. Ai-Chin Wee, Senior Economist, Mr. R.C. Mishra, Associate Program Officer, C.P. Rauniyar, Consultant, of the Nepal Resident Mission. It is based on material in the project file, discussions with the consulting team preparing a third phase Sunsari Morang Irrigation Project, project staff, and beneficiary farmers. The Borrower contributed to the preparation of ICR by furnishing a project completion report prepared by its consultants, a project operation plan, and an evaluation report, and by arranging all field visits. The Borrower's comments and evaluation on the project are included in Appendix III to the ICR.   ii IMPLEMENTATION COMPLETION REPORT NEPAL SUNSARI MORANG IRRIGATION II PROJECT (Credit Number 1814-NEP) Evaluation Summary Introduction 1. The Sunsari Morang Irrigation II Project (SM1:P-II) financed the second phase of IDA support for modification and rehabilitation of Sunsari Morang Irrigation System (SMIS). The system was built in early 1 970s with an irrigable area of 68,000 ha. Since inception, the system was faced with problems of sediment intrusion and water distribution. Later, the system's dry season water intake became progressively worse by a formation of sand shoal in front of it as the main river course migrated to the other side. The Bank financed to overcome these shortcomings by modification and rehabilitation of the system in phased manner. In 1978, SMIP-I financed the modification and rehabilitation works on first 9,750 ha, and in 1988, the current SMIP-II financed a seven-year time slice of modifications and rehabilitation on another 16,700 ha. Project Objectives and Works 2. The project aimed to ensure reliable and equitable year-round water supply system to increase agricultural production. The aim was to be achieved by: (i) protecting the system against siltation by an adequate facility; (ii) improving O&M procedures by promoting farmers' participation; (iii) providing technical support and training to strengthen local capacity to operate the project; and (iv) strengthening linkage between the Department of Agriculture (DOA) and the Department of Irrigation (DOI). 3. The project works include: improvements to main canal and structures; desilting operations; rehabilitation and improvement of distribution and drainage networks on 16,700 ha; modifications of distribution system in Stage I (SMIP-I) area to an easier operation; institutional support and training by providing consulting services for design and construction supervision; training, monitoring and evaluation, and support for incremental establishment and maintenance costs. Changes after Appraisal 4. The primary problem in the project is siltation. For the siltation problem, the Bank Appraisal team had consistently recommended to use an option of a desilting basin and dredgers in solving sediment problems since Stage I. But due to the Borrower's concerns over high investment and technical skills required by the recommended dredger option, Stage I was instituted with an alternate solution using sediment ejectors (vortex tubes). But it was found not effective. Again, at the Stage II (SMIP-II), no definite solution for protection against siltation was decided at Appraisal. Instead, it was agreed to delay the implementation of the desilting facility until further studies showed a definite viability of recommended dredger option  iii (mechanical solution) over a cheaper hydraulic flushing option, in spite of the unsuccessful experience with sediment ejectors installed under Stage 1, the working principle of which is similar to hydraulic flushing. However, the costs for the basin and the dredgers were provided in the Stage II project. 5. As for the dry season intake problem, due to the same concern of costs, a maintenance solution involving excavation of a supply channel through the sand shoal was considered in the project. The problem associated with the distribution was planned to be resolved by introducing tertiary minor distribution networks, which would be operated in rotational manner. 6. The studies conducted by a consulting team, which was reviewed by an independent Panel of Experts (POE) in 1991, strongly endorsed the mechanical option with some modifications on the Stage-II intake design. The studies indicated that without the new headworks project, the previous investments including SMIP-I would become questionable to achieve the objectives. Then only, almost after ten years of delay on the issue, the Borrower and the Bank finally agreed to modify the SMIP-1I project to reflect the outcome of the studies on siltation and acute intake problems. 7. The proposed modifications were: (a) moving the intake site to 1,300 m upstream; (b) constructing a larger capacity desilting basin utilizing dredgers to remove silt; and (c) constructing a micro-hydro unit in the head reach of main canal to provide hydro-power for dredger operations. The technical solution proposed by the studies requires additional funding for the above new items (a) and (c) to prepare the facilities not envisaged in the SMIP-I Credit. Therefore, the Borrower obtained a complementary IDA Credit of SDR 19.0 million (US$ 28.0 million equivalent) in 1993 to implement the Sunsari Morang Headworks Project (SMHP), which is currently under implementation. Implementation Experience and Results 8. Although the SMIP-II had proceeded since 1988, considerable difficulties and uncertainty were encountered in implementation in initial years due to unresolved sediment issues and inadequate budget funding. These were exacerbated by a trade and transit impasse with India in 1990, and a civil unrest during democratization turmoil in 1991. The progress was also impeded by frequent turnover of managerial staff, delays in establishing the Monitoring and Evaluation Division (M&E), in appointing Farmers' Association Organizers, and in establishing linkage between the project and the district agriculture office. 9. The implementation had improved only after the decision on SMIHP and apparent satisfactory performance of a larger desilting basin built in early 1992. At ICR, about 93% of the targeted works were completed, partly due to advanced procurement of ICB civil works, and partly due to concerted efforts of the project staff, the consultants, and the civil works contractor. Major incomplete items are tertiary drains (about 50%) in Sitagunj Distributory (8,400 ha) of Stage II area due to farmers resistance in land acquisition for drain excavations, and modification of water courses in the Stage I area (about 90%) due to uncertainty in earlier years. 10. The project achieved partial objective by completing minor irrigation distribution networks, a larger desilting basin, and by possible application of rotational irrigation supply with increased specific discharge in the last two years. The rotational water supply with higher specific discharge  iv is expected to significantly resolve the distribution problem of competing water demands at peak periods (land preparation and transplanting) compared to the system's conventional continuous supply with low specific designed discharge. Efficiency of water delivery can be improved if the farmers develop and continue to use field channels in irrigation. 11. The new desilting basin can trap about 60% of incorning coarse sediments (greater than 6 micron) to its full capacity. To maintain enough room for sediment on continuous basis in the basin, dredging is required in rainy season. The achievement of sediment protection is partial without full operation of dredgers. Two dredgers are now in operation since July 1995. 12. Farmers have responded well to the modifications and expressed satisfaction with the designed water supply system. They indicated their willingness to take over O&M responsibility if the system is maintained properly. The O&M aspect of the project was modified in the course of implementation to transfer completed tertiary irrigation units (less than 1000 ha distribution canal networks) following the new Government's Irrigation Policy of 1992. At ICR, about 94% of water user groups (WUGs) in the systems have been legalized, and about 45% developed tertiary systems were turnover to them. Collection of water charges have been revived in 50 percent of the turnover areas. 13. Actual Project Cost. The actual cost of the project was estimated to be about US$ 45.13 million or 91% of the Appraisal costs of US$ 49.9 million (NRs 1,221.8 million) including contingencies. Out of the IDA Credit of US$ 40.0 million equivalent (SDR 31.2 million), US$ 39.61 million (SDR 28.4 million) have been disbursed. 14. The project's partial impact is apparent by the increase in cropping intensity to 169% at ICR in the developed area, which would otherwise be no more than 130% to 138% without the project if the siltation did not stop water supply. Farmers also reported that more water reached the tail- ends of the system after improvement. Increase in yields and production of main crops (paddy and wheat) was also observed. However, over 10% of the developed areas still have problems in receiving sufficient, timely water due to deficient alignment of water courses. This indicated the need for extensive consultation with farmers in preparing the water course alignments during constructions. 15. Economic Rate of Return. (ERR). The ERR for Stage 1I as a stand alone project with prorata costs of SMIHP was re-estimated at 16%, as weD as a combined SMIP I, SMIP-II with total SM4HP with and without the project considering the sunk costs of SMIP-I has shown an ERR between 11% to 19%. The benefit and cost streams used in the analysis are detailed in Appendix 2. These results, compared to 13% to 21% estimated at Appraisal, are lower because Appraisal did not consider the fuiDl extent of SMHP investment as it was not the adopted solution. The calculations are, however, speculative and partial because the new intake is still under construction and its actual costs as well as its impact is still unknown at this early stage. Project Sustainability and Key Factors to achieve Objectives 16. The sustainability of SMIP-II itself is uncertain without SMHP. Even with SMHP, the sustainability of the project hinges on many factors, such as: (a) success in solving sediment and intake problems by SMHP works; (b) proper and capable operation and management of mechanical and electrical equipment installed under SMHP by the project agency in long run, (c) sufficient O&M  v funding by the Government; and (d) support and strengthening of farmers' and O&M staff's to make understanding of the new water management principle and practice. 17 The system of diverting water from large rivers in geologically fragile zone, has always inherent risks of river course changes due to land slides or glacier outbursts in upper catchment. The risk was minimized by the POE's selection of the new intake. Gradual transfer of knowledge through on-the-job training in operation of mechanical and electrical equipment was arranged in SMHP for two successive years after installation. 18. However, there is a high risks in O&M funding which was always inadequate countrywide. HMGN's capacity to support O&M is limited. Within the available scarce resources, the Government should prioritize O&M expenditure to areas where heavy investments are committed. Besides, water charges collection system must be strengthened. HMGN agreed in the DCA of SMHP to charge and collect water charges with a rate sufficient to cover the O&M costs of the main and distribution canals in Stage I and Stage II areas after receiving adequate supplies of silt free water. It must be aware that revision of water charges is a country-wide issue, and should extend beyond the project. 19. The sustainability of the water user groups depends upon satisfactory performance of the system when complete. This can be achieved only by proper O&M to ensure timely delivery of silt-free water year round, and the government's support in the management transfer activities. Summary of Findings and Future Operations 20. Findings. The overall conclusion of the project experience is that physical and institutional development aspects of the project were inadequately assessed, prepared, and only partly appraised initially. In terms of the mounting technical and institutional problems that the project is currently facing, it is now apparent that the process of decision making to proceed with the project investment in both Stage I and II seems too quick. However, physical implementation of the project in command area development is quite satisfactory and the new intervention of formation of water user associations, legalization and turning over of the completed tertiary irrigation distribution units to beneficiaries, who are expected to take full O&M in future, can be regarded as a good start for the project sustainability at the tailend and a notable achievement. 21. Farmers understanding of the new rotation irrigation system is still limited as they are used to a more conventional type of continuous irrigation. The improvement activities introduced in the system in relation to operation, training of staff and farmers to understand the new mode of operation, proper maintenance of the system, turnover of part of the system to farmers, and collection of water charges to maintain the system properly, are all inter-linked with each other. Continued support by the Government of this activity is important. 22. Plan for Future Operation. HMGN has agreed with the Bank to pursue the operation as detailed in Project Operation Plan (POP) of January 1995 which was prepared based on the implementation experience (footnote 10). The POP provides a time bound plan for tum over of all tertiary canal systems to water user associations by 1997. At full operation of SMHP in mid 1996, the POP would estimate crop water requirements, timing and quantities of water to be delivered  vi effectively. The POP also provides a series of monitoring parameters by which perfomiance of the project can be judged. 23. As the system is designed with a new rotational supply method, the M&E division should be strengthened and continued till the full tum over and water management training programs are completed. No constraints on monitoring should arise because of budget shortffll. The annual estimated maintenance budget requirement during management transfer diminishes steadily when all canals serving areas less than 1,000 ha have been handed over to water users. For a successful transition, HMGN must pay attention to ensure that: (a) the process of tum over continues; (b) DOI is reorganized to facilitate joint O&M of the system; (c) adequate funding for full O&M is secured by DOI; and (d) the collection of water charges continues in improved service areas. Key Lessons Learned 24. Lessons for Future Projects. The main lessons learnt from the project are: (i) In situations where difficult technical problems prevail, specialists in the technical field should be used extensively. Technical suggestions provided by concemed specialists should be implernented before committing heavy investment. No works should be started, unless technical issues are properly identified and solutions are articulated. (ii) Unreliable water supply for any reason destroys farmer confidence in the ability of irrigation authorities and leads to weak cooperation in construction and O&M works. (iii) Participation of beneficiaries in the design, construction and implementation, and O&M is very important as early as possible, especially in large public irrigation system, where available water resources have to be shared among many beneficiaries in an organized and timely manner. (iv) Training farmers to understand the design of the water system and its performance is necessary for large public irrigation systems where they have to share according to agreed time and quantity. The success of operation and sustainability of infrastructure depend not only on physical quality of the structures but also on beneficiaries' understanding, contribution and commitment. (v) The design adopted for a large public irrigation systems must be flexible, simple and socially acceptable by small farmers and their communities. Social acceptability should be tested before committing heavy investment. (vi) Service charges to cover full O&M costs of public utilities after improvement must be imposed and this should be considered as a country-wide issue in any investment project. (vii) Public and government awareness of proper utilization of natural resources must be instigated through various means of investment lending.   IMPLEMENTATION COMPLETION REPORT NEPAL SUNSARI MORANG IRRIGATION I PROJECT (Credit Number 1814-NEP) PART 1: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT/EVALUATION OF OBJECTIVES Statement of Project Objectives 1. Project Background. With marginal increases of crop production offset by population growth, His Majesty's Government of Nepal (HMGN) emphasized increasing agricultural production through improvements of irrigation facilities in the Terai plain. The Terai occupies 16% of the country's total area, 50% of the country's cultivated land, and over 80% of potential irrigable area. In support of this objective, the Bank approved a series of modification and rehabilitation of public irrigation projects in the Terai, including rehabilitation of the Sunsari Morang Irrigation System (SMIS). 2. The SMIS is the largest irrigation system occupying about 68,000 ha of cultivable area in the Terai of which about 58,000 are effectively irrigable. The original project was designed, financed, and constructed in mid- I 960s to rnid- I 970s by the Government of India (GOI) under Indo-Nepal bilateral aid agreement. The system diverts water from the left (east) bank of the Kosi River. The intake and main canal were designed for a discharge capacity of 45.3 m3/sec, which is equivalent to 0.66 liter/sec/ha rate of continuous supply over the whole original command area. 3. The original SMIS had regulation structures installed only on secondary canals, and the distribution canal system network was terminated at turnouts serving an area of more than 100- 200 ha. Because no minor canals were built below this level, the system had much wastage in distribution and was difficult to management, which limited the effective irrigation to only about 60% of the designated area. Apart from the defective design in distribution network, the system was troubled by heavy sediment intrusion at the intake site in monsoon, and the problem became progressively worse over the years as the main river course migrated westward (towards to the right bank). As a result, the system has faced with sediment intrusion during wet season when water is easy to extract, and with difficulty in intake of water during dry season (when water is sediment free) due to a formation of large sand shoal near to the existing intake structure. Thus, the original project did not fulfill its objectives. HMGN requested IDA assistance to overcome the shortcomings of the original project. 4. IDA involvement in the project has been divided into stages. The first stage, SMIP-I, which covers 9,750 ha., was completed in 1987 after three years of extension. The follow-up second stage project is the subject of this report, the Sunsari Morang Irrigation II Project (SMIP- II), which was designed to finance a seven-year time slice of modification and rehabilitation of another 16,700 ha of SMIS. The SMIP-Il was completed timely without any extension.  2 5. The main objectives of the project were to increase agricultural production by: (a) improving design and operation of the irrigation system to ensure reliable and equitable water supply; (b) protecting the system from siltation by a suitable desilting facility; (c) improving O&M procedures by enhancing beneficiary farmers' participation in O&M; (d) providing technical support and training to strengthen local capacity to implement and operate the project; and (e) strengthening linkages between the Department of Agriculture and the Department of Irrigation. 6. Project Components included: (i) improvements to Chatra Main Canal (CMC) including modifications to the head regulator; repair to main super passages; rehabilitation of drainage chutes on the headreach; replacement of gates and repairs to head regulators of distributory canals; completion of bridges; repairs and improvements to cross drainage works, siphons and access structures; replacement of cross aqueduct structures and other miscellaneous minor works including desilting of the CMC; (ii) improvement of desilting operations to provide a feasible desilting facility determined by studies during the first two project years by evaluating further the viability of mechanical solutions (a larger desilting basin provided with portable suction-cutter dredgers) against hydraulic flushing; (iii) rehabilitation and improvement of irrigation distribution and drainage networks in Stage II area (16,700 ha); (iv) modifications to the irrigation distribution works in Stage I area of 9,750 ha to an easier operable design; (v) construction of offices, staff quarters, a guesthouse at Biratnagar, houses for gate operators, and buildings for four irrigation block headquarters; (vi) procurement of equipment. vehicles and spares for O&M, and installation of radio communication for the system operation, and equipment necessary for desilting; (vii) technical support and training through the provision of consultancy services for design and supervision of construction, training, monitoring and evaluation, and studies; and (viii) support for incremental project establishment and maintenance costs. 7. Project Changes After Appraisal. As stated earlier, the system was faced with two inherent difficulties: (i) removal of incoming sediment into the system in wet season, and (ii) extraction of enough water in dry season. Based on the unsuccessful experience with the Stage I project in solving sediment problems using vortex tubes in the main canal, the Stage-II Appraisal team suggested three possible solutions to the sediment problem. These are: (i) a settling basin with two portable suction-cutter dredgers (known as mechanical solution), (ii) a desilting facility based on hydraulic flushing (known as hydraulic solution), and (iii) periodic extended closure of the main intake at times of heavy sediment concentration in the river. The maintenance option involving excavation of a supply channel to the intake at the end of every wet season was considered as the solution to the difficult intake problem in dry season. 8. The Appraisal team expressed that the feasibility of mechanical solution (option "i") is technically quite certain than the option (ii). The option (iii), extended canal closure, is also not feasible due to requirement for long duration of canal closures at times of high sediment concentrations (sometimes exceeding over 50-60 days in monsoon) which may turn the system into single cropping, or it may lead to enlarging the canal system involving major investment costs. As for the second problem relating to difficult intake in dry season, HMGN's consultants had proposed to relocate the intake site at about 2.3 km upstream of the existing intake and connect to the canal system with a long tunnel. This was dropped on ground of heavy costs. 9. However, HMGN had initially expressed concerns about heavy investment costs and technical complexity of the mechanical option (i), which in their opinion, may not be commensurate with technical skill available in Nepal. Instead, HMGN preferred the non-  3 mechanical (hydraulic flushing) solution (ii), and wished to pursue the mechanical solution only when further technical studies show the non-feasibility of option (ii). For the dry season intake problem, a 'hnaintenance scheme" requiring some river training with annual excavation of a supply channel to the intake at the end of wet season, to ensure adequate supply, was accepted. The Credit was approved with an understanding that additional studies on the sediment issues would be conducted within the first two years of project. 10. The results of sediment studies conducted by a project consulting firm in 1989/90 and 1990/91 to compare the viability of sediment removal by mechanical desilting versus hydraulic flushing showed the non-viability of the latter solution. The findings were also endorsed by an independent technical Panel of Experts (POE) invited to review the study in 1990. Moreover, the consultants and POE also advised to move the intake site upstream to solve sediment problem in monsoon and acute water intake problem in dry season'. Then only, the Borrower agreed to carry out the consultants' and POE's recommendations and decided to modify the SMIP-II by: (a) moving the intake site 1,300 m upstream of the existing intake; (b) constructing a larger capacity desilting basin; (c) utilizing dredgers to remove deposited silt from the desilting basin; and (d) constructing a micro-hydro unit in the headreach of the main canal to provide hydro-power for dredger operations. The extent of technical solution and the cost provision under SMIP-LI did not cover full funding requirement for these additional facilities under (a) and (d) to mitigate sediment and intake problems effectively2. Therefore, the Borrower obtained a complementary IDA Credit of SDR 19.0 million (US$ 28.0 million equivalent) in late 1992, for implementing a new Sunsari Morang Headworks Project (SMHIP) which is now under construction. There was a time gap of about four years in between the commencement dates of SMIP-II and SMHP. Evaluation of Project Objectives 11. Realism and Innovation. The design solution to protect the system against siltation was conceptually clear to both appraisal teams of Stage-I as well as Stage-Il projects since inception, and it was also not an unusually demanding objective for the Borrower3. However, decision making for effective sediment control works took considerably longer than ziiecessary in both projects due to the Borrower's concern over costs and complexity, and both Credits were approved without ascertaining a complete solution. Therefore, the achievement of the objective of ensuring sustainable and equitable distribution was doubtful until the commence of SMHP in 1993. The solution similar to hydraulic flushing by using vortex tubes installed in the Stage I could not remove the heavy sediment volume. In that respect, the Project Performance Audit Report (PPAR) for SMIP-I correctly highlighted the fact that the objective of the Stage-I project was not achieved satisfactorily until 1990, without a properly designed follow-up project to I Details are in the Technical Annex I of SMHP - MOP Report No. P 5696-NEP, October 1992; Revised Feasibility Study Report on "River and Canal Headworks Improvement and Schemes for Desilting Project Water Supply " - Sunsari Morang Irrigation -II Project, NEDECO & NIPPON KOEI, October 1989; Report of the Panel of Experts (K. Mahmood, E. L. Pemberton, P. Thimakorn, J. Huis in't Veld) on CMC Sediment Control and Water Supply, Februaiy 1990. 2 The SMIP-II Credit No. 1814-NEP covered US$ 2.2 million for the main desilting basin, USS 3.3 million for the dredging equipment, and US$ 0.5 million for the additional consulting services. No fund was provided for the upstream new intake structure and the power station, which are additional features proposed under the later studies. 3 Desilting with dredgers have been widely practised in the neighbouring India (West Bengal State) and limitedly used in Nepal in some hydro-electric stations. But for the DOI, the technology may be novel and there was a thinking that uptake of technical may be slower.  4 resolve the sediment issues. The Evaluation Summary of the PPAR is attached in AppendixA for reference. 12. But, it can be said that the project's objective of improvements in design and operation principles of water distribution was realistic. As stated in para 2 above, the original unit area design discharge of 0.66 I/sec/ha (specific discharge) is considered to be low for paddy based irrigation, and it can normally satisfy 50%-60% of peak water requirement in earthen canal system during land preparation period (July-August)4. Even if there was no constraint in water availability, with the value of agricultural produce, it was costly to enlarge (or to line) the original main and secondary canals and related structures, which were designed and built with the low specific discharge. To supply irrigation water to only 50%-60% of the area in one year and stop supply to the remaining area under a secondary system is also not practical and socially acceptable in a small holder system like in SMIP. Under the circumstances, doubling the specific discharge as designed in the newly introduced tertiary distribution canal networks, and transforming from the original "continuous supply" to "rotational on-off' system is the most rational solution, because the supply will closely satisfy the demand in peak water competing and requirement period. 13. The project was innovative in that it was built around eventual beneficiary farmers' ownership and management of the distribution system. Formation of water users groups (WUG), legalizing water user associations (WUA), and allowing them to participate in all stages of project development works and O&M, are innovative tools, and they are in line with the Bank's Country Assistance Strategy (CAS) and HMGN's new Irrigation Policy -2049 (IP-2049). But to achieve these objectives it needs continuous training of farmers and monitoring them for a long period to get them in tuned to the new operation and joint management system. 14. Complexity. The technical solutions given to sediment and distribution problems using ungated on-off tertiary distribution system are conceptually simple and involve less demand on management organization. However, proper maintenance of the canal system is very essential to keep tertiary system in a maximum operable capacity with the open gated system. Adaptation of a newly introduced rotational irrigation method by farmers, who are used to continuous field-to- field irrigation, requires much training of both field staff and farmers. Moreover, solutions to the sediment problems must be effective and conducive to gain farmers' willingness to adopt new irrigation methods. To start, a larger desilting basin, provided in 1992 under the project, has proven a partial success by trapping 50-60% of sediments5 even without continuous cleaning of the basin by dredgers, and the solution has increased confidence of farmers to some extent. 15. Responsiveness to Borrower's Circumstances. The project, if sustainable, will support the development strategy of HMIGN to accelerate food production and rural income, to increase employment opportunities in rural areas, and to reduce the O&M responsibility of the Government in the public irrigation sector, by allowing beneficiary farmers to take over ownership and management of part of the developed system. 4 The maximum irrigation demand with 80% probability for 5.0 mm/day effective rainfall period is as high as 1.9 I/sec/ha as mentioned in SMIP-II water management reports and Project Operational Plan - January 1995.' 5 The siltation measurements taken at different section of the system showed that by having a larger desilting basin alone can effectively reduce the sediment ingress volume by about 60% of its total (about 400,000 m3), though the trapping efficiency declines as soon as the basin is filled in with sediment.  5 16. Risks. There are two types of risk in the project, namely, technical (natural) and institutional, which are similar and common to other large-scale public irrigation investments in Nepal. By extracting water from one of the world's greatest rivers which has enormous destructive power in monsoon, there is always a risk of failure associated with natural calamities, if regulation of the project facility is not properly followed. To maintain and manage the improved facilities, particularly those installed under the new headworks project, DOI staff and farmers should be motivated and trained, as well as enough O&M funding must be provided to the developed area. 17. The technical risks are reduced or mitigated by following the advice of leading experts in the technical design of desilting facilities in solving the sediment and intake problems. The institutional risks are mitigated by introducing an on-the-job training component in the project for O&M staff and farmers for regulation of the system facilities and water distribution for about three years after completion of the project, by forming legalized WUAs, and by turning over part of the system to beneficiaries for participatory joint management to ease the financial burden of and ensure sustained O&M. The mitigation activities are still ongoing and it is early to determine their effectiveness. Unless the technical solution provided under SMIP succeeds, and the government is willing to support further training of staff and farmers, and to prioritize O&M funding within its limited financial resources, the risks remain high for the sustainability of project in long run. B. ACHIEVEMENT OF PROJECT OBJECTIVES 18. Overall Achievement. The project's completion is timely, and with SMHP follow-up, has so far partially achieved its physical, sectoral, and institutional development objectives. Macro- economic policies and financial objectives were not applicable to the project. Gender or equity issues were not specifically addressed, but can have indirect positive impacts through increased farm incomes. 19. Physical Objectives. To improve design and operation principles of the irrigation system that would ensure a reliable and equitable water supply, the following items under International Competitive Bidding (ICB) contract works envisaged in the Staff Appraisal Report (SAR) of the project were satisfactorily completed by May 1994, which was before the original Credit closing date of March 31, 1995: a) Improvements to Chatra Main Canal (CMC) and Its Related Structures. Desilting of about 1.3 million cubic meters of sediment in the main canal system, rehabilitation of 64 existing structures and construction of 31 new structures. b) Desilting Facility on the CMC Headreach. Construction of a new larger desilting basin (length 990 m and bed width 60 m) was completed in May, 1992. Two cutter-suction dredgers of 14.0 m3/hr capacity were procured, installed and tested. The dredger operation has started partially since July 1995. c) Completion of Stage II Area Command Area Development (CAD). Development works under the Stage II area of the project (16,700 ha) constructed down to field outlets of water courses (28 ha) are generally satisfactorily with overall completion of  6 93% of original works targeted in SAR. However, the project completed only 46% of tertiary drains mentioned in SAR for Sitagunj Distributory (8,400 ha), due to local farmers' resistance to land acquisition at the construction (1992 to 1994). Later, it is learnt that some farmers in the area realized the need for drainage, and even they requested drains when the Credit was due to close. Detailed key indicators for project implementation are shown in Table 5. d) Modification to Stage I Area CAD. The gated water courses of larger blocks (50 ha chaks) in the originally completed Stage I area (9,750 ha) was found unmanageable by DOI and farmers, and the water courses were planned to be transformed to non-gated water courses (28 ha chaks). But the program had been deferred at the beginning due to time and budget constraints, as well as uncertainty in resolving sediment problems. The modification was carried out on 1,000 ha of the area after completion of the desilting basin, only when farmers were partly convinced by the partial effectiveness of desilting basin. No further improvement was done after that. e) Buildings under the project were constructed according to need. The existing guesthouse in Biratnagar was renovated. Only 3 new gate operator houses were newly built and the rest were renovated. Modification of 3 out of 4 irrigation-block headquarters were also completed. Two equipment storage buildings were additionaLly constructed. f) Vehicles and Equipment. SMIS will have a new intake structure under the SMHP Credit (Cr.2430-NEP). Procurement of heavy equipment which was planned under SMIP-il for excavating temporary river chalnel diversion works in dry season was therefore deleted. Some equipment for future emergency O&M was also deleted on grounds that all major O&M works will be contracted in the future. Only some spares for existing equipment and workshops, two passenger cars for training and 2 pick-up jeeps, one station wagon, 12 motorcycles, and 128 bicycles were procured by the project. g) Technical Assistance. The project had used 108.5 mm of expatriate consultants and 290.5 mm of local consultants for the design, implementation, and training of irrigation system as against the appraisal provision of 110 mm and 452 mm which includes for the study of siltation problems. 20. The achievement of equitable water distribution at farm levels due to completion of distribution networks and a larger desilting basin is hard to quantify in the absence of detailed hydraulic data. The good side of new intervention is that the original continuous irrigation supply designed with a very low specific discharge of 0.67 liter per second per ha on a continuous basis has now been increased to double that amount at tertiary canal levels by applying rotational irrigation. The "on-off' rotational supply at the tertiary levels satisfies the peak requirement, which can significantly resolve competing water problems in distribution, and increases the efficiency of water management. However, in order to ensure a full supply discharge in tertiary distribution systems, the canals are to be properly maintained as designed at all times. 21. As the system is still new, irrigation water reached the tail-ends of the system in the last two seasons as expected after completion of the development works and eventually increased the  7 cropping intensity. This was also the first attempt to introduce water management practices in a large public irrigation system in Nepal where farmers are used to continuous irrigation, hence adaptation to rotational method at the outset was slow. This has picked up gradually in the last three years in Stage II, after farmers gain confidence in the method, and after they witnessed some positive effects of the larger desilting basin after 1992.6 22. The new desilting basin has been designed with a capacity to trap the incoming coarse sediments (greater than 6 micron) up to full capacity of about 3 50,000 m3. But in the absence of continuous dredging, the active storage of the basin is reduced by continuous deposition of sediment by time. At certain stage, the deposited sediments are entrained back into the stream due to lowering of trapping capacity. This phenomenon indicated the necessity of continuously cleaning deposited sediments with dredgers to maintain the capacity of basin and to get the best results in sediment trapping. The sediment protection objective will be achieved partially by having only desilting basin without full dredger operation as necessary. 23. Establishing a separate Water Management, Monitoring & Evaluation Division in the project, forning and legalizing WUGs, and providing training led to achieving the other project development objectives of improving institutional capacity and O&M. Though there were some irrigation rotation and time-share conflicts among farmers, in general, rotational supply of water (RWS) worked well so far. Recent surveys' indicated that cropping intensity in Stage I and II areas increased to 169% (against 125% in the nearby rain-fed area and 130%/o at appraisal of SMIP-II) and the yields of main crops (paddy and wheat) also increased by about 80%. Over 70% of farmers in the survey of the Stage II area expressed their satisfaction to the designed water supply system and indicated their willingness to take over O&M responsibility, if the system is properly maintained. However, the same survey indicated that not very high rate of farmers are aware of their WUA responsibility. 24. The practice of using field channels (4 ha command) in irrigation is novel to farmers practicing field to field irrigation. The practice is gradually increasing to about 50% of the developed areas in the system. WUGs in Jhumka pilot area (900 ha) are performing well ahead of other areas in all respects as the area was developed ahead of the other secondary canals (only after 3 years under RWS). The farmers from other areas are still on the learning curve to the new method. Over 10% of the developed area still has problems in getting sufficient water in a timely manner, and the farmers are complaining to the project management and WUC about deficient alignment of completed water courses. Because of the time pressure in construction stage, consultation with farmers were less extensive in laying out some water courses alignments, which created problems in post construction period. 25. Sector Policy Objectives. One of the objectives of the newly promulgated Irrigation Policy (1992) introduced to the project is to improve O&M procedures through farmer participation after development. A yardstick to measure the achievement of this objective is farmer willingness 6 SAR mentioned that the system was faced with the serious siltation problem as soon as it opened after Stage I completion in July 1986. The mninor canals and water courses suffered and many of them lost half of their conveyance capacity in one season and farmers could not keep pace with the rapid rate of siltation. At least this kind of drastic siltation has not happened after provision of the desilting basin although some 40% of sediment (about 150,000 m3) still intruded in the downstream system in one year. 7 Detailed Studies and Design of Sunsari Morang Irrigation HII Project. (Evaluation of System Performance) Vol I Main Report - Nippon Koei Co. Ltd. June 1995.  8 to take over ownership and management of the developed system. Turnover arrangements for management transfer were not originally anticipated at Appraisal. This was introduced only after promulgation of the revised IP- 1992, some five years after the Appraisal. At the Credit closing in March 1995, there was an indication of success by completing turnover to respective Water User Committees (WUCs) in 19 tertiary units (less than 1000 ha each) commanding about 7500 ha in total (i.e., 45% of the developed area under Stage II). A detailed time bound plan has been agreed with the Bank and included in the Project Operation Plan (POP) to continue tumover arrangement in the remaining tertiary systems 26. Institutional Development Objectives. The project impact on institutional development is in line with the Govemment's Irrigation Policy of facilitating formation of water user groups (WUG) in all stages of project development and legalizing them as autonomous entities. Out of the targeted 778 WUGs, 731 groups have been reported to be formed at the water course level (28 ha blocks) by Credit closure. Higher order Water User Committees (WUC) at tertiary canal levels and Water User Coordination Committees (WUCC) at secondary levels have been formed, and a Water User Central Coordination Committee (WJUCCC) representing beneficiary farmers at the project's central management level is being established. Water charges that have not been collected successfully since inception, are now being collected in 50 percent of the tumover areas. The tumover and legalization of WUAs and WUCC of the developed areas are planned to be completed by 1997. However, experience with the Stage I and other similar projects in Nepal showed that the sustainability of water user groups will depend on satisfactory performance of the system that can be achieved only by proper O&M to assure timely delivery of silt-free water year round. 27. HMGN has established the Sunsari Morang I.rigation Development Board (SMIDB) chaired by the Secretary, Ministry of Water Resources, as an autonomous decision making committee to oversee and steer project implementation. This arrangement enhanced timely decisions in many of the project's administrative and budgetary matters at the time of implementation. SMIDB is still in existence and is implementing SMHP. Assurance had been obtained from the Govemment to keep a proper O&M set-up after completion of SMHP, as the current set up including SMIDB will be dissolved after the project. Some technical decisions by the Department of Irrigation on such matter as siltation issues, logistical support, and appointment of key personnel were sometime also delayed. 28. Training of Operation Staff and Farmers. The introduction of a new 'bn-off'rotational irrigation method needs extensive in-door and in-the-field training for operation staff, agriculture extension staff( i.e. Junior Technician [JT] and their assistants [JTA]), and farmers. Training has been provided so far by project consultants since 1991 when the first developed area in Jhumka tertiary was put into operation. Three farmers from each field outlet (567 outlets x 3 = 1,701 farmers) were provided with two-day intensive training on the rotation irrigation method. Currently, practical training in the field is being continued for WUG leaders. The coverage of training at the time of Credit closure was about 30-35%. After the closure of SMIP-II's the water management consulting services including training was turned over to the consultancy services under Sunsari Morang Headworks Project (Cr.2430-NEP) in order to complete the coverage. 29. Project Impact. The project impact assessment is still preliminary as the outcome of SMHP and O&M capacity of the project agency cannot be judged fully at ICR. The initial impact can however be evaluated in terms of resolvina two interrelated problems which are seriously  9 affecting the timely and equitable distribution of irrigation water supply: (i) sediment ingress into the system, which is the primary cause of defunct conveyance of canals; and (ii) lack of distribution networks in the system. The first problem seems partly resolved by providing a larger desilting basin although sediment ingress to the system still prevails at a reduced level. The sediment monitoring results, as mentioned in the Borrower's PCR (see foot notes 9), showed that as much as 270,000 m3 (in 1992 to 1994) of annual sediment volume still entered into the system after completion of the desilting basin. The second problem has been partially resolved by rehabiliting the conveyance canals and introducing a rotational irrigation to the newly developed distribution system with higher specific discharge. The second problem regarding distribution will be resolved only after the project management gradually trains the farmers to understand the deficiency of system design in conveyance (can irrigate only 60% area at one time), and farmers willingly cooperate in water management activities to get full project impact. 30. Realization of Benefits by Construction. Because of proper planning during implementation by adopting a method of blockwise construction scheduling in the project, benefits were realized earlier. The Bank suggested and the project management and the consultant agreed to develop the area sequentially block-by-block of secondary canals. In this way of stagewise completion, the system could supply water to earlier completed sections while constructing the lower blocks. About 37% of net project areas have been achieved full development in yields at the time of the ICR, compared to what was expected in Appraisal. 31. Project benefits derived from provision of supplemental irrigation during kharif and main irrigation during rabi seasons, from additional agriculture extension activities for improved practices, and from increased use of inputs. The information made available from recent crop cutting surveys carried out by the project's M&E division and the consultants preparing the Stage III area feasibility study showed that at least the full Jhumka pilot area (900 ha) and part of the Sitagunj area have reached full development yields expected at appraisal. If this trends continues, the current cropping intensity of 169% can be increased to full development in future as the current dry season intake capacity limitation is expected to be resolved by SMHP. Estimated agricultural production at ICR as compared with agricultural production at Appraisal is shown below: Crops Stage 1 (9,700 haWin M-Ton Stage I (16,700 haWin M-Ton Total Incem at Appraisal I at ICR h Incremental I at Appraisal i at ICR lncrmental I ICR / Appr. Paddg(all var) 21,372 28712 7,340 35,804 48,146 12,342 19,682 Wheat 3,140 9,372 6,232 3,975 17,234 13,258 19,490 Oil seeds 488 585 97 167 1,202 1,035 1,132 Pulses 546 819 273 546 1,520 974 1,247 Vegetables 784 9,060 8,276 1,336 2,505 1,169 9,445 Potato 784 1,455 671 1,336 5,010 3,674 4,345 Sugarane 2,450 6,825 4,375 4,175 17,535 13,360 17,735 Jute 888 253 -635 1,520 430 -1,090 -1,725 Maize 936 194 -742 1,603 - -1,603 -2,345 Total 25887 43119 69.006 32. There were significant increases in paddy, wheat, vegetable and sugarcane production while jute and maize production declined from SAR levels. The area under improved paddy has gone up considerably to 75% (compared to 40% estimates in the SAR). The diversification of winter vegetables such as cauliflower, cabbage, potato is increasingly apparent in areas near main roads and markets. The speed with which the developed areas can be inigated equitably requires further cooperation of farmers in the development of field channels by them (currently 50% are developed)  10 and completion of new headworks. The effect of irrigation with and without field channels on equity of water distribution is hard to quantify. But the survey conducted by the Stage III consultants revealed that the losses are reduced and thereby area of satisfactory irrigation can be increased in the order of 20-25% through proper water courses and field channels. If new headworks functions satisfactorily, it will also ensure supplies of full discharge of comparatively silt free water year round. 33. Economic Rate of Return. The economic rate of return (ERR) of the project has been calculated for the SMIP-Stage II area as a stand alone project with prorata share of SMHP investment, and as a combined SMIP Stage I and Stage II with total SMHP investment8 with and without sunk costs for SMIP-Stage I. On the benefit side, except for the incremental agricultural benefits that are estirnated based on the present achievements (cropping intensity 169%) and projected as in SAR (cropping intensity 184% in 1998/99), other secondary benefits that will result from SMIHP, such as, an increased discharge from 45.3 m3/sec to 60 m3/sec, and generation of hydropower are not included as it was too early to assess. The benefit and cost streams used in the analysis are detailed in Appendix 2 The ERR for Stage It as re-estimated is shown between 11% to 19% for different cases at ICR compared to 13% to 21% estimated at Appraisal for Stage I & II (with and without investment of Stage 1). The ERR results are summarized below: (a) SMIP Stage II project with prorata SMIHP investment (base case): 16% (b) Same case with benefit decreased by 20% 14% (c) Same case with benefit decreased by 30% 11% (d) SMIP Stage I, Stage II, and full SMHP combined investment 13% (e) SMIP Stage I, Stage II, SMHP, with Stage I as sunk costs 19% 34. The results are lower but are comparable to the Appraisal estimate except that the Appraisal estimate did not cover the full extent of SMHP investment as it was not the adopted solution at Appraisal. The calculations are, however, speculative and partial because the new intake is still under construction and it is premature to determine its actual costs as well as its impact. However, the ERR of combined Stage I, Stage II and SMHP (total costs) at Appraisal of SMHP in 1992 was estimated at 15%. The ERR values vary in between 13% to 19% depending upon how Stage I costs and benefits prior to 1992 are accounted. Also the calculations are based on information of benefit buildup and incremental net value of production, and therefore it can have a considerable effect on the recalculated ERR. 35. The results under (b) and (c) correspond to cases where the present benefit build up stagnated at the current level. The extent of full development is still unknown as the current dry season irrigation supply is limited to 30- 40% of the full supply discharge due to acute intake problems, which is expected to be rnitigated by the new intake structure now under construction. 36. Farm Income and Employment. Farm income has been analyzed for a typical small farm of 1.4 ha (65% of holdings and 35% of area) and a medium-sized farm of 3.9 ha.(25% of holdings 200/o of area) at project start-up (1987/88) and at the projected full development (1998/99). Typical farm 8 ERR analyses include the additional costs for on-going SMHP since the benefits in SMIP- I and SMIP- II projects are questionable without realization of SMHP. However, the actual costs of the new headworks project are difficult to estimate at the ICR period, and the benefit would extend beyond Stages I and II. Moreover, the ERR for the combined project has taken into account the flIl amount of sunk costa for SMIP-I project and the expenditure incurred for Stage I improvement in Stage 11 which was about 2 % of the tol project costs. For detiled assumptions used in ERR analyses, please refer to Annendix 2 of of the report..  I1 budgets are given in Appendix 2 and the resulting incremental farm incomes with the project are shown below: Fanm Pre-project (NRs) Ful development(NRs) Percent improved SAR Estimate ICR findings SAR Estimate ICR findines SAR ICR Small(1.4ha) 8,675 16,309 23,156 40,282 167 247 Medium (3.9 ha) 20,643 42,897 49,444 109,243 140 255 (Note: SAR pre-project values are in 1987/88 prices, SAR fuU development values m 1990/95 prices but ICR values are m cwstant 1994/95 financial prices) It is also estimated that incremental employment due to civil work activities of the project was 2.5 million mandays during construction, and 0.6 million mandays during the O&M period. Incremental farm employment from agriculture was estimated at 0.8 million mandays per year at the full development stage against the appraisal estimate of 1.0 million mandays during construction, and 0.5 million mandays for the farm employment from agriculture, respectively. No estimate was given for the O&M period. C. MAJOR FACTORS AFFECTING THE PROJECT 37. Factors Not Generally Subject To Government Control. The implementation of the project was delayed at the beginning by a series of civil disturbances which were beyond the control of the Borrower. There were nation-wide fuel shortages between March 1989 and May 1990 (the second year of project) when the Indo-Nepal border was closed due to a trade and transit impasse with India, followed by civil unrest and democratization demonstrations in 1991. In spite of all these disturbances, the construction was substantially completed as scheduled by May 31, 1994, due to concerted efforts of project staff, the consultants, and the civil works contractor. 38. Factors Generally Subject to Government/ Implementing Agency Controls. There was a very prolonged delay for more than a decade in the resolution of the sediment issues by the Borrower which led to unsuccessful outcomes in Stage I project. Although further investment for the Stage II project was processed expeditiously, doubts on the technical solution made the project less important, and therefore provided with inadequate budget funding in early years, which had slowed down the implementation of desilting facilities and remodeling of the Stage I area distribution system. One of the reasons that delayed the resolution of the sediment issues was due to different options rendered by the technical study groups in 1980-81, the opinion of which was changed again after a June flood in 1980 (Tamu landslide) which brought a change in the river flow pattern. No further opinion was sought from capable body like POE in the case of Stage I project. These factors affected the project from achieving the completed schemes and realizing benefits at a quicker pace. 39. Since opening of the SMIS in 1974-75, it was a known fact that heavy suspended sediments ingress into the newly built system was severe that any investment to rehabilitate and modernize deficient irrigation networks would not be viable unless the sediment problems were resolved. The variants of providing an upstream settling basin and clearing deposited sediments by dredgers were suggested as early as in late 1970s when Stage I was appraised. The Borrower hesitated on account of the additional investment requirement and level of technical skill necessary to maintain dredgers. The Bank also agreed with the Borrower on that line and both agreed that the project adopted a less expensive variant involving a non-mechanical hydraulic flushing  12 solution in Stage I without exploring the details to get satisfactory solution. The project implementation was very slow in early years, and was rated "unsatisfactory" due to unresolved sediment issues which plagued the project since inception. 40. Project implementation was also affected by frequent turnover of key management staff (project manager and senior divisional engineers) under the Borrower's transfer regulation. There were some delays in establishing a Monitoring and Evaluation Division, in appointing Farmers' Association Organizers, and in establishing linkages between the project and the district agriculture office in the initial years of the project. 41. Although SAR provided for full implementation of drainage canals in the system, the project could not meet the design requirements of the SAR in Sitagunj Distributory (8,400 ha) in the Stage II area, due to farmers' resistance to land acquisition during implementation. This stemmed from the absence of capable farmer organization units during early project years to discuss with the farmers and to make them understand the benefits of having proper drainage. After two rainy seasons, farmers experienced and realized the negative impact of not having proper tertiary drains (only 47% were completed in Sitagunj) and asked that drains be installed when the Credit was due to close. On the other hand, the benefits of drainage were understood by the adjacent Ramgunj Distributory farmers, who cooperated in completing 97% of the designed drainage in their areas. 42. Actual Project Cost. Total project costs, including physical and price contingencies, were estimated at US$ 49.9 million (NRs 1,221.8 million) in the SAR. An IDA Credit of US$ 40.0 million equivalent (SDR 31.2 million) was to finance all the foreign exchange costs (US$ 36.6 million equivalent), and about 35% of local costs of (US$ 3.4 million equivalent). The actual cost ofthe project is estimated to be about US$ 45.30 million or 91% ofthe SAR estimate. The exchange rates between Nepalese Rupees and US dollars in the course of implementation differed significantly from appraisal estimate. The actual costs of the project in NRs were 1,384.53 million or about 113.3 % of the appraisal estimate of NRs 1,221.87 million. 43. As shown in Table 8A of Part II, substantial cost overruns were incurred for Land Acquisition by 7500/o, Technical Assistance and Training by 238% and for Incremental Staff Establishment by 407%, net of contingencies. The main reasons for these cost overruns were: (a) appreciation of the land value due to irrigation resulting in increased compensation for land acquisition; (b) depreciation of Nepalese rupee against dollar; and (c) the appointment of design consultants for major alteration of headwork and intake, which were not fully anticipated in the SAR. The cost overrun in incremental staff was also due to a change in conceptual design of farmer organization-tumover arrangements for the developed systems requiring additional training and organizational inputs. There were significant savings in Equipment and Vehicles. At closing, approximately SDR 28.4 million out of the Credit of SDR 31.2 million had been disbursed, a disbursement ratio of about 92%, and the unused SDR 2.8 million was canceled. 44. As stated earlier, the investment cost stream used in the economic analysis included a total estimated investment of US$ 25.0 million (NRs. 1207.32 million equivalent) for SMHP (shown in table 8c, Appendix II) in the years 1992/93 to 1996/97 (projected). The prorated costs of SMHP for the Stage-II project was taken as 63% in proportion to area ratio of Stage II to Stage I and Stage II combined areas. This assumption reflected the reality that the sedimentation effect is pronounced only within Stage I and II areas.  13 D. PROJECT SUSTAINABILITY 45. Project Operation. The project sustainability depends on many factors, such as: (a) success of the solution to the sediment problem during the monsoon and the water intake problem in the dry season, both of which inhibit reliable year-round water supply to the system; (b) successful outcome of the SMHP; (c) proper management of the mechanical and electrical equipment installed under SMIHP; (d) sufficient O&M funding by the Govermment; and (e) support to, and strengthening of, farmers organizations to make the O&M staff and farmers gain a better appreciation of water management. 46. The project diverts water from one of the largest rivers of the world that is located in a geologically fragile zone. There is always an inherent risk as mentioned in para 16 that the river flow pattem can change at any moment in future due to sudden unpredictable natural land slides or glacier outbursts in the upper catchment. However, the selected siting of the new intake under SMHP project was made by the POE after detailed search for a most stable point in the vicinity based on the last 30 years' aerial photos, and therefore can be assumed stable with a high degree of certainty. 47. The need for proper transfer of novel technology introduced in SMIHP and management of the project were acknowledged when SMHP was formulated. Gradual transfer of knowledge through on- the-job training on the operation of the system's mechanical and electrical equipment was arranged by allowing expatriate training consultants and local operation crews to work together for two successive years after installation of equipment. However, there is a possibility that, due to remoteness of the headwork site, the trained local operation crews would leave the job at any time. Therefore more teams should be hired and trained at the time. The project currently deployed three dredger operation crew teams, and the project management is considering to introduce a bonus system to the dredger crews based on output volume of desilted sediments. Enough spares for the electrical and mechanical equipment for five years use were procured under SM4HP. 48. Budget for O&M. The current level of O&M funding is inadequate. The previous seven year average was NRs 355/ha of which more than 30 % is on salary and overhead. The Project Operation Plan (POP) prepared by SMIP assumes an annual maintenance budget requirement of NRs 45.23 million in 1995/96 (NRs 769/ha for 58,800 ha of Stage I, II, and II1) decreasing steadily to NRs 30.02 million in 1999/2000 (NRs 51 0/ha) when all canals serving areas less than 1,000 ha are handed over to water users committees, who would undertake the O&M of these smaller canals. 49. It is a well known fact that because of low recovery of revenues, the HMGN's capacity to support O&M is limited. The 1995/96 O&M buget is only 60% of its requirement. But, within the available scarce resources, the Government should prioritize O&M expenditure. Keys to securing adequate O&M funding would be the successful collection of water charges, and the government's motivation to prioritize O&M funding allocations to areas where heavy investments have already taken place. The current rate of water charges of NRs 200/ha is inadequate and has not been revised in the last decade. In this regard, SMIHP's DCA (Schedule 4- Implementation Program) has a covenant stating that the Borrower shall charge and collect, in Stage I and Stage II areas after receiving adequate supplies of silt free water, a rate sufficient to cover the costs of O&M of the main and distribution canals. While this covenant will be carefully monitored in supervision of SMHP Credit, the issue of cost recovery should be addressed at higher level of management as it is related country-wide. 50. Some improvements in water charge collection have taken place after the establishrnent of WUGs. There is nevertheless a risk in sustainability of water charges collection once Government's  14 support to WUA's collection activities is withdrawn after project closure. Although, DOI is empowered to collect water charges, DOI has no motivation or incentive to carry out that duty. Besides, irrigation rules and regulations in all Nepal's public irrigation systems are not implemented due to various social and political reasons. Fafmers are never educated to abide by rules and regulations and never been penalized for offenses committed in using public irrigation utility owned by the public. It is important that once a satisfactory performance level of SMHP is attained, sanctions for non- payment of water charges should be instigated and irrigation rules should be enforced by the operating agency with the help of WUAs. E. BANK PERFORMANCE 51. Preparation and Appraisal. It was a known fact to the Bank as well as to the Borrower that heavy sediments ingress into the newly built original system and in rehabilitated Stage I were so severe that any investment in an attempt to rehabilitate and modernize its deficient irrigation networks would not be viable unless the sediment problems were resolved. In Stage I, difficulties and delays encountered in implementation led further reduction and postponement of some major river and sediment control components. The project also failed mainly due to inability of sediment control devices built in the system. In Stage II Appraisal, technical recommendation to the Borrower was mechanical solution using dredgers to reduce the sediment. The Borrower first declined to accept the solution, and the Bank allowed to make the investment with an agreement to carryout additional studies on the sediment problems in first two years of the project. 52. Due to various reasons, the technical solution suggested was not taken seriously in searching the solutions to both problems. The solution accepted by Appraisal to resolve the acute intake problem during dry season was incomplete. Although there were some studies and technical discussions to support the move of the existing intake upstream due to westward migration of the river course, the Bank failed to follow up the issue seriously, and accepted a 'inaintenance option"at appraisal which was to use the same intake with an excavated summer channel in front. With a limited capacity of O&M staff, only one-third of full discharge capacity was possible under this method. Thus the bulk of summer crops could not be grown, affecting the main economics of project investment. Only after 1990/9 1, by the advice of POE, the Bank and Borrower agreed to change the intake point from the existing site to a new site upstream at a more stable point. There were shortcomings in budget and other difficulties as the project proceeded without resolving all the technical issues initially. 53. The gated water distribution system under Stage I, which has proven difficult to manage and unsuitable for Nepalese small farmer communities, was changed in the Stage II design. The old design was replaced with new design of less sophisticated ungated tertiary system. But the new design demanded to keep all canals in as good conditions as designed, which may be difficult in Nepal due to their poor O&M reputation. It also requires different chak sizes and therefore different WUGs in the case of Stage I. The project was not fully prepared to transform to the original chak of 50 ha to the new design of 28 ha and concerned farmers were never consulted initially. This made the implementation slower than necessary. 54. The Bank Appraisal estimate and costs did not cover full extent of technical solution apparently required by the system. The supplementary cost was later introduced to the SMIP-II by providing a new SMHP investments. Due to these shortcomings, the Bank Preparation and Appraisal of the project was found deficient.  15 55. Supervision. The Bank missions provided regular, good and helpful supervisions and adopted a flexible approach to the implementation of project. The Bank advised the Borrower to change the Stage I area tertiary system in a streamlined manner so that the change would not drastically affect the distribution system where many WUGs had already been formed. The Bank also provided useful comments on the construction program of Stage II on a block-by-block basis, which allowed full irrigation to the completed blocks even during construction. The Bank was supportive and helpful in the Borrower's adoption of a participatory approach to implementing a big public irrigation system. Consultation with farmers on the development of water courses in the early years of the project was not a general practice, but it was later modified and improved. The Bank supervision is more or less satisfactory. F. PERFORMANCE OF THE BORROWER 56. Preparation. The Borrower concept and understanding of the problems inherent in the system at the preparation of the project was unclear and indecisive. It was compounded by many indecisive options submitted by many agencies. The decision process and mobilization of POE took more than a decade, which led to delays in resolution of sediment and intake site issues during implementation. The borrower performance during preparation was uncertain and incomplete and found u The issue was later resolved by additional studies and POE advice. 57. Implementation. The project suffered delays due to severe shortages of fuids as the Borrower put less support to implement the project diligently and efficiently in early years. The main reason of inadequate support at that time was due to uncertainty in technical solution adopted in the project. Audit reports were often late, but not enough to warrant suspension of the Credit. The Borrower was initially slow in appointing Monitoring and Evaluation staff to the project but later the issue was resolved. However, after the POE's recommendation, the Borrower made significant improvement to resolve the sediment problem and project implementation. The Borrowees consultant had closely estimated the cost of the main ICB civil work contract as well as correctly pursued the block by block construction schedule, which made it possible to irrigate completed portions even during construction. 58. A detailed Project Completion Report and a Project Operation Plan were prepared by the implementing agency and made available to the Bank in advance for review and remarks. The POP was revised, taking into account comments made by the Bank. Although there was a delay at the start, the Borrower, the consultant and the ICB contractor exerted full effort in implementing the Stage II project within the stipulated time and financial resources. It is rated satisfactorv. G. ASSESSMENT OF OUTCOME 59. The net present value of the irrigation component of different scenarios of the project when cash flows were discounted at 12% and 10% were all positive. Most of the project objectives were partially achieved and the remaining are expected to be met. The project works were substantially completed in time and the disbursement was satisfactory. The real achievement of the project is that the Government was able to transfer part of O&M of the public irrigation system to beneficianes which reduces O&M burden on publicfunding, and improves the level of O&M throughfarmers' sense of ownership. Once the management transfer can be successfully implemented, and benefits become sustainable, this can be a pilot case for management transfer in public irrigation systems in the country. The project outcome is therefore rated satisfactory. However, the assumptions are based on benefits built up following completion of SMH{P works and the on-going management transfer of  16 tertiary canal systems. Events which could change the present achievements are any potential failure of year round silt-free water supply from the new intake, and lack of Government interest in O&M and continued support for the management transfer process. H. FUTURE OPERATION 60. The Borrower's Project Completion Report9 and Project Operation Plan'" (POP) describe the present and proposed O&M organization with job descriptions of all assigned staff. The POP assumes that all tertiary canal systems commanding less than 1,000 ha would be turned over to water users' associations by 1997. At full operation of SMHP starting in mid 1996, the system will assure a year- round water supply of designed capacity, which will allow increase in dry season crops as well as assuring the monsoon supplemental irrigation. 61. The POP has planned to estimate crop water requirements, timing and quantities of water needed effectively. A computerized water management model has been established, system delivery efficiencies at different orders of canals are being measured, and the O&M staff are trained to run the model effectively by SMHP consultants. A detailed time-bound schedule of management transfer to beneficiaries is also described in the POP. The POP also provides a series of monitoring parameters through which the performance of the project can be judged. 62. Future performance of the project can be evaluated by monitoring the system closely and regularly. The project should systematically monitor the conveyance and distribution efficiencies with actual measurements in order to avoid undesirable water disputes at field levels. It is also important for water users to see that the full supply is being delivered by painting marks to indicate full supply level (FSL) on all distribution canals and dividing structures. The monitoring system must be efficient and transparent to the users and the staff so that the actual area irrigated in each season by the project can be recorded using the established irrigable boundary maps (already handed over to the users' committees) and the amount of water service charges can be assessed properly. 63. Systems and computerized data bases have been established at SMIP offices for agricultural production monitoring, covering both socio-economic and routine crop production surveys. Socio- economic surveys are required at intervals of three or more years just before and after SHMP operation and are best assigned to experienced local consultants. As the system is designed with a new rotational supply, the M&E division should be continued until the full tum over and water management training program are complete. Regular crop cutting surveys must be done seasonally and the results presented in a coherent report. Assistance from experienced project consultants may be necessary from time to time. No constraints on the sustainability of the monitoring should arise because of budget shortfalls. 64. For successful transition from construction to O&M, HMGN should pay attention to ensure: (a) turn-over of developed tertiary systems to water users' associations to undertake the furll O&M of tertiary canal systems; (b) the establishment of DOI organization suitable for O&M for the part of system that has not been handed over to water users' associations; (c) the provision of adequate annual budget for full O&M of the developed system for which DOI is responsible; and (d) collection of water 9 Project Completion Report, SMIP-Nippon Koei, December 1994 10 Project Operation Plan, SMIP, January 1995  17 charges regularly now, and revision of the charges to cover full O&M on improved services that are made available to users in Stage I and II after successful outcome of SMIHP. 65. The project as of now is designed with a very low specific discharge. Some improvement can be expected after receiving additional discharge of about 5 m3/sec after the new headworks. Any further investment in the system should consider the constraint and find out a feasible solution for the tailenders. The possible options are: (a) if found rational, enlarging (or lined) the conveyance system appropriately to increase the conveyance capacity, (b) gradually organize farmers to change the cropping pattem and intensify training in water management, or (c) consider conjunctive use of surface and groundwater at tailends by promoting private shallow tube well development. I. KEY LESSONS LEARNED 66. The main lessons learned from the project are: (i) In situations where difficult technical problems prevail, specialists in the technical field should be used extensively. Technical suggestions provided by concerned specialists should be implemented before committing heavy investment. No works should be started, unless technical issues are properly identified and solutions are articulated. (ii) Unreliable water supply for any reason destroys farmer confidence in the ability of irrigation authorities and leads to weak co( peration in construction and O&M works. (iii) Participation of beneficiaries in the design, construction and implementation, and O&M is very important as early as possible, especially in large public irrigation system, where available water resources have to be shared among many beneficiaries in an organized and timely manner. (iv) Training farmers to understand the design of the water system and its performance is necessary for large public irrigation systems where they have to share according to agreed time and quantity. The success of operation and sustainability of infrastructure depend not only on physical quality of the structures but also on beneficiaries' understanding, contribution and commitment. (v) The design adopted for a large public irrigation systems must be flexible, simple and socially acceptable by small farmers and their communities. Social acceptability should be tested before committing heavy investment. (vi) Service charges to cover full O&M costs of public utilities after improvement must be imposed and this should be considered as a country-wide issue in any investment project. (vii) Public and government awareness of proper utilization of natural resources must be instigated through various means of investment lending.  18 PART II. STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of obiectives Substantial Partial Negligible Not Applicable Macro policies L 9 l [< Sector policies K] ET n Financial objectives E 7 K] Institutional development K ] K E Physical objectives K] [Z K Poverty reduction E ] K ] Gender issues 7 [ K [ Other social objectives K] K K]- Environmental objectives K] K K]7 Public sector management ] K K]I Private sector development ] EI K ] Other (natural resources management) 7 [ K [ B. Proiect sustainability Unlikelv Uncertain Hi,gh~l C. Bank performance satisfactorv Satisfactorv Deficient Identification 5 23 [3 Preparation assistance K] K] Appraisal E7 K] Supervision ] E] K  19 Table 1 (continued): Summary of Assessments Hi&eh~l D. Borrower performance satisfactory Satisfactory Deficient Preparation Ff Implementation Covenant compliance F Operation (if applicable) Hiehly Highlv E. Assessment of outcome satisfactory Satisfactory Unsatisfactor unsatisfactorv Note: The proiect sustainabilitv is rated "uncertain" as it hinges upon many factors. These are: (i) sufficient support for O&M funding and institutional strengthening, (ii) successful operation and maintenance of the new headworks, dredgers, and hydroelectro mechanical equipment installed, and (iii) farmers' understanding and co-operation to the system design introduced under the project. These factors in turn depend on outcome of the on-going New Headworks Project and its ability to control sediment and mitigate actuate intake problems, which are still to be assessed awaiting completion of SMHP. The project identification, awpraisal and reparation are rated "deficient" due to incomplete technical solutions and costs adopted at the inception of the project, which was later rectified by a follow-up new headworks project. The Credit covenant pertaining to most of the important points, like, the study on sediment and intake problems, water charges collection was complied after some years delay or deferred. No satisfactory water charges collection has yet been realised awaiting SMHP completion, and therefore covenant compliance is also rated "deficient". However, the physical imnlementation of the project on the whole was completed timely with satisfactory disbursement and within the allocated financial resources. All scenarios of ERR calculations resulted NPV of the project positive at the OCC of the country. There was an indication that most of the development objectives in the Stage II project after completion of SMHP is expected to achieve satisfactory results. Therefore, the assessment of the outcome is rated "satisfactory" .  20 Table 2: Related Bank Loans/Credits Loan/credit title Purpose Year of approval Status Preceding operations 1. Birganj Irrigation Project Complete & upgrade irrigation 1973 Completed in (Narayani Zone) Cr. 373-NEP & drainage for 16,300 ha of the 1981. PPAR Narayani irrigat. System and to no.4267 1982 provide GW irrigat. to 2,700 ha north of the system 2. First Rural Development Project To improve small-scale 1976 Completed in Cr. 617-NEP irrigation schemes in the hills December and develop a high lift scheme 1983 on about 1900 ha in Nuwakot 3.Bhairawa-Lumbini GW I Project To provide 64 deep tubewell 1976 Completed Cr. 654-NEP systems serving 7,600 ha March 1983 PPAR 1984 4. Narayani Zone Irrigation Development Complete & upgrade irrigation 1978 Completed in Stage II Project & drainage for 12,800 ha of the March 1987 Cr. 856-NEP Narayani Irrigation System and to provide GW irrigation to 800 ha north of the system 5.Sunsari Morang Irrigation I Project To complete and upgrade the 1978 Completed in Cr.812-NEP first 12,000 ha of the Sunsari June 1987 Morang Irrigation System 6.. Second Rural Development Project To improve small scale irrigat- 1979 Completed in Cr. 939-NEP ion schemes in Mahakali Zone 1987 7.Mahakali Irrigation Project Stage I To rehabilitate and upgrade 1981 Completed Cr. 1055-NEP existing irrigation system for December 3,400 ha and extend 3,200 ha 1988 8.Bhairawa-Lumbini GW Irrigation Stage II To complete unfinished Stage I 1983 Completed in Cr. 1316-NEP well and construction of new October 1990 wells for another 7,000 ha 9.Narayani Irrigation III Project To complete and upgrade 1986 Completed in Cr. 1715-NEP another 8700 ha of Naravani June 1995 Irrigation System 10.Third Rural Development Project Construction of 28 small 1986 Completed in Cr. 1727-NEP irrigation schemes, Rehab. 18 August 1994 schemes in Rasuwa & Nuwakot Following operations 1. Irrigation Subsector Project To finance farmers managed irrigation schemes in hill and terai and management transfer of public irrigation schemes  21 Table 3: Project Timetable Steps in project process Date planned Date actual latest estimate Preparation June 1985 Appraisal November 1986 November-December 1986 Negotiations April 1987 April 14-17, 1987 oard presentation May 26, 1987 June 2, 1987 Signing November 20, 1987 Effectiveness 3 February 1988 Mid-term review (if applicable)11 Complementary New Headworks Project Appraisal September 1991 Project completion September 30, 1994 May 31, 1994 ,oan closing March 31, 1995 March 31, 1995 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ thousands) FY88 FY89 I FY90 FY91 FY92 FY93 FY94 FY95 Appraisal estimate 4,600 7,800 12,800 20,400 30,300 35,800 39,100 40,000 Actual 2,803 4,487 7,209 11,610 19,707 27,352 37,566 39,609 Actual as % of 60.9 57.5 56.3 56.9 65.0 76.4 96.1 99.0 estimate Date of final 4/26/88 5/30/89 2/15/90 5/10/91 6/10/92 6/04/93 6/30/94 7/31/95 disbursement"2 A complementary Credit of SDR 19.0 million for the new Headworks Project (SMHP) was approved after the detailed review of the project by an IDA mid-term review mission and Panel of Expert in mid 1990. 12 Final date of disbursement in each Fiscal Year  Table 5-Key Performance Indicators 22 As of March 1t95 Work Items Units B.O.Q. Quantity Revised Quantity Work Progrem % of completion I CMC Improvement 1. Desilting Work m^3 828,500 1,298,700 1.298,700 100 2. Rehabilitation of Existing Structure (a) Major Structures Nos 68 64 64 100 (b) Drainage Chutes Nos 5 86 86 100 3. Construction of New Structures (a) Major Structures Nos 8 31 31 100 (b) Drainage Chutes Nos 0 6 6 100 Average of CMC Improvement 100 11 Jhumka Pilot Area (891 ha) 1. Irrigation Canal Earthwork (I) Sub-secondary Canal (SSJ) uI 5,018 3,789 3,789 100 (2) Tertiary Canal m 6.213 6,237 6,237 100 (3) Watercourse usI 39.981 40.632 39,048 96.10 2. Drainage Canal Earthwork (I) Sub-secondary drain in 4.931 3.538 2,475 69.95 (2) Tertiary Drain in 7,931 6.588 5,148 78.14 (3) Collector Drain us 20,187 25,284 11,570 45.76 3. Structure Works (I) Irrigation Canal Structure (a) Strucwres Nos 235 162 160 98.77 (b) Field Outlets (FOs) Nos 246 247 247 100.00 (2) Drainage Structure (a) Structures Nos 79 55 52 94.55 (b) Junction structures Nos 27 4 4 100.00 Average Jhumka l&D 88.33 Ill Sitaeunj Area (8,388 hal 1. Irrigation Canal Earthwork (I) Secondary Canal m 14,340 14,340 14.340 100.00 (I) Sub-secondary Canal m 27,152 26,030 26,030 100.00 (2) Tertiary Canal m 85,145 85,533 85,533 100.00 (3) Watercourse In 340,275 336,126 334,452 99.50 2. Drainage Canal Earthwork (I) Main drain m 0 24,900 23,540 94.54 (2) Secondary drain nu 29,778 32,865 30,358 92.37 (3) Sub-secondary drain m 4.620 6,197 6,148 99.21 (4) Tertiary Drain m 37,745 24,549 11,350 46.23 (5) Collector Drain in 177,500 38,720 32,355 83.56 3. Structure Works (I) Irrigation Canal Structure (a) Structures Nos 1,190 1,142 1,132 99.12 (b) Field Outlets (FOs) Nos 2,126 2,144 2,144 100.00 (2) Drainage Structure (a) Structures Nos 423 375 367 97.87 (b) Junction structures Nos 211 27 25 92.59 Average Sit2guni 92.69 IV Rarguni Area (7,271 ha) 1. Irrigation Canal Earthwork (I)SecondaryCanal RI 11,555 11,631 11,632 100.01 (I) Sub-secondary Canal in 24.685 21,851 21,851 100.00 (2) Tertiary Canal m 74,701 78.676 78,676 100.00 (3) Watercourse m 324,728 318.661 312,712 98.13 2. Drainage Canal Earthwork (I) Secondary drain m 31.906 32,481 32,481 100.00 (2) Sub-seconidary drain m 107 0 0 (3) Tertiary Drain m 50,446 48,933 47,233 96.53 (4) Collector Drain in 172,383 89,290 81,184 90.92 3. Structure Works (I) Irrigation Canal Structure (a) Structures Nos 1,191 1,307 1,274 97.48 (b) Field Outlets (FOs) Nos 1,833 1,960 1,919 97.91 (2) Drainage Structure (a) Structures Nos 551 513 425 82.85 (b) Junction structures Nos 158 211 150 71.09 Average Rumganj Dy. 94.08 Averave % completion 92.90  23 Table 6: Key Indicators for Project Operation I. Key operating indicators in SAR Estimated in SAR* ICR Estimate at Full Development'3 1. Area irrigated 26,450 ha 26,450 ha 2. Increased food grain production'4 39,980 ton/yr 62,346 t/yr 3. Increased oilseed 2,470 ton/yr 1,884 t/yr 4. Increased sugarcane 2,400 t/yr 15,920/yr 5. Directly benefiting farm families 13,560 15,560 (at 1.7ha/farm)"5 . Generated farm employment 3,100 man-years/year 3,330 person-years/yr (at 240 days/yr)16 7. Value added to local economy NRs225 million/year NRs752 million/yr HI. Additional indicators for future Revised targets operation (if applicable) 1. Area assessed for water charges 26,450 ha (At ICR 4,500 ha has been assessed) 2. Amount of water charges assessed Full cost of O&M Recovery represents about 25% of 3. Amount of water chargescollected 100% targeted. * For SAR Estimate see page 47 of SAR Table 7: Studies Included in Project Purpose as defined Study at appraisal/redefined Status Impact of study 1. Canal Headworks Improvem- To determine the Completed in October 1989 which Provide solution -ent & schemes for desilting efficient method for becomes the basis for POE review to the sediment project protecting the system and finalization on sediment and and intake against siltation intake issues leading to SMHP problems 2. Socio-economic benchmark To provide benchmark Data collected and reviewed in Provide data on survey study against which February 1993 income level development can be changes measured 3. O&MPrinciple and Practices To establish physical Report on water management and O&M plan will and budgetary O&M plan 2/94 provide basis of requirements future O&M 4. Water Management Report To train the farmers Almost quarterly/seasonal basis. Irrigation Practice and staff in rotational Issued 19 reports from 1990-1994 based on the supply practice. report findings and suggestions. 5. Project Operation Plan Consolidated full Issued in January 1995 as Reviewed and O&M Plan Report for preparatory requirement for project sought agreement the project completion from Borrower 13 Estimated benefits are based on Stage I- 9750 ha and Stage I-16,700 ha in order to be compatible to SAR 14 Food grain includes cereal crops of paddy, wheat and maize 15 No. of farm family in the area has been deternined based on the average operated area of 1.7 halfamily 16 Total working days for farm employment corresponds to full development stage requirement of 799,260 man-day in the project per year  24 Table 8A: Project Costs Appraisal estimate Actual/latest estimate (US$M) (US$M) Item Local Foreign Total Local Foreign Total costs costs costs costs 1. RepairandImprovementstoCMC 0.9 2.8 3.7 0.94 3.15 4.09 2. DesiltingFacilitiesonCMC 0.5 2.1 2.6 0.57 1.93 2.50 Headreach17 3. CompletionofStagellareal&D 6.0 15.1 21.1 4.26 14.26 18.52 4. Improvement of Stage I area I & D 0.7 2.4 3.1 0.24 0.82 1.06 Sub-total Civil Works 8.1 22.4 30.5 6.01 20.16 26.17 5. Buildings 0.1 0.2 0.3 0.20 - 0.20 6. Vehicles and Equipment"8 0.0 4.8 4.8 0.0 2.98 2.98 7. Incremental O&M - Staffing 0.3 - 0.3 1.20 - 1.20 - Maintenance 1.3 0.5 1.8 4.49 - 4.49 8. Training, M&E, and Studies 0.1 0.3 0.4 0.03 0.12 0.15 9. Technical Assistance Consultancy 0.4 1.9 2.3 0.95 4.54 5.49 Total Baseline Costs 10.3 30.1 40.4 12.88 27.80 40.68 Physical Contingencies 1.3 3.6 4.9 0.28 0.62 0.90 Price Contingencies 1.7 2.9 4.6 1.51 2.21 3.72 Total Project Costs 13.3 36.6 49.9 14.67 30.63 45.30 Table 8B: Project Financing Appraisal estimate Actual/latest estimate _______________________ (US$M) (US$M) Local Foreign Total Local Foreign Total costs costs costs costs Source IDA 3.40 36.60 40.00 12.45 27.16 39.61' Domestic contribution 9.90 0.00 9.90 2.22 3.47 5.69 Total 13.30 36.60 49.90 14-67 30.63 45.30 17 Excludes dredgers and ancillary equipment I9 Includes dredgers, O&M equipment, Radio communication system & other minor equipment  25 Table 9: Economic Costs and Benefits Appraisal Estimate ICR Estimate Net Present Value at 12% for Stage II only (MNRs) N.A 358.9 Net Present Value at 12% Stages I & 11 (MNRs) 512 50.4 Net Present Value at 12% Whole Project (MNRs) 677 N.A Economic Rate of Return of Stage 11 only (%/) N.A 16% Economic Rate of Return StagesI&lI (%) | 21 13% Econornic Rate of Return Whole Project (%) 21 N.A. Underlying Assumptions: l - Project Life 30 years 25 years - Standard Conversion Factor 0.90 0.90 - Unskilled Labour Value -Shadow wage rate 0.90 0.75 - Financial Wage Rate (NRs/day) 8.67 35.0 Note: ICR Estimates include the costs of Sunsari Morang Headworks which were not fully accounted in Appraisal. Table 10: Status of Legal Covenants NEPAL Sunsari Morang Irigation II Project Original Revised Covenant type Present fulfillment fulfillment Description of Agreement Section status date date covenant Comments DCA 3.01 (a) Counterpartfunding C 06/02/87 Borrowet shall carryoutethe Shoitfall in alloted budget Management efficiency can be overcome by direct payment 3 02 Procurement C Procurement to Complied. be as Schedule 3 3.03 Environmental C Take measures Complied. to rnsumise malana, etc 4.01 (b) Accounts/audits C 9 months 12 months Furnish annual audit reports. Submitted without delay after FY after FY C 6 months after Furmished annual unaudlited Submitted without delay FY reports 4.02 Counterpart funding C Every Year Furnish estimated Furnushed every year for March 31 establishment & O&M needs IDA revlew Adopt procedure for assessing 4.03 (a) FinancialPerforrnancc CD Augustl1988 Junel1994 billing and collecting water Delayed for compliance charges until the issue being turnover to WUJC Charge and collect a flat water 4.03 (b) Financial Performance/ CD August 1988 July 1994 charges not less than 200/hatyr Partially complied as Revenue from benefic- satisfactory supply of water iary after improvement is not yet realized. Revenue From Review performance of 4.03 (c) Benficiary CP August 1988 and Auust collection,adjust every two Partially complied as It is (d) every two year 1994 year the rate and procedure to not fully capable to supply cover full O&M enough silt-free water Managemnent of Sch 3 Executing Agency C Shall employ end retain Nippon KoeL had been Sect II qualified Consultants retamed throught  26 Orginal Revised Covenant tye Present fulfillnent fulfillnent Description of Agreement Section status date date covenant Comnents Sch4(a) MEngementof C July 1988 July 1992 Commence operation of radio ParTially maintain with (b) system. Maintain Project telephone. PM post is Manager Post maintained Sch.4(c) Managementof C January1988 FurnishbDAeachyeartrain- TrainingtoO&MStaffand Executing Agency ing progran, overall training WUG has been caried out program, syllabus, material regularly with IDA review Sch. (d) Implementation CD September 1989 November Conduct agro-economic Just taken once after sytem 1994 survey every two year was supplied with water Sch (e) (f) Other C December 1987 December Constitute WUG as Statutory WUGs are constituted as 1990 body and cause to construct statutory bodies by April Field Channels 1989, FC action underway Decem. 1990 Establish WUG in all areas Complied receiving irrigation water by December 1987 Sch 4 (g) Management C Furnish Semi annual progress Complied I report Sch 4 (h) Management C Sept 1987 Position all staff, provide Complied. (i) adequate resources for agri- extension Sch 4(j) Management C Sept 1990' Fumish the result of mid-term Mid-term review done in (k) review and evaluate the FY90/91 and formulated design concept of RWS SMHP. RWS reviewed system every 4-6 months, Sch 4(1) Monitoring, reporting C Novem 1990 Novem Carry out studies to protect Complied under SMHP (m) and iniplementation 1992' the system against siltation, which is beig under report the results, plan and implementation. design for desilting facilities and implement Table 11: Compliance with Operational Manual Statements Statement number and title Describe and comment on lack of compliance OP 4.07 Water Resources Management No comprehensive framework for water resources development. Pricing policy does not achieve full cost recovery yet awaiting completion of SMIHP. Table 12: Bank Resources: Staff Inputs Planned Revised Actual Stage of project cycle Weeks US$ Weeks US$ Weeks19 US$ reparation to n.k. n.k. 75.33 129,967 appraisal Appraisal n.k. n.k. 45.26 83,277 Negotiations through n.k. n.k. 7.94 16,072 oard approval Supervision n.k. n.k. 130.20 234,665 Completion n.k. n.k. 7.05 15,759 | TOTAL .265.78 479,74020 19 As given in Operation Information System  27 Table 13: Bank Resources: Missions Peformance rating Number Specialized 1/ Implemen- Develop- Stage of Month/ of Days in staff skills tation melt Types of project cycle year persons field represented status objectives problems2/ Through appraisal Appraisal through Board approval Supervision 1. Sep 86 1 23 3/ I nr nr nr 2. Nov 86 1 P nr nr P 3. Feb874/ 4. May 87 2 3 A, W 2 2 M 5. Oct87 2 3 A,1 2 2 M 6. May 88 1 4 E 2 2 F. M 7. Nov 88 1 4 E 2 2 F 8. April 89 2 4 A,1 2 2 F 9. Nov-Dec 89 3 7 1, C, A 2 3 F July 90 1 E 3 3 F 10. Nov 90 1 8 1 3 3 F, P, T 11. Mar91 2 13 I 3 3 F,P,T 12. Sep 91 2 7 I 3 3 F, P, T 13. April 92 1 5 I 3 3 F, P, T 14. June 92 I I nr nr nr 15. Nov92 1 I 3 3 F,C,P,T 16. April 93 4 5 1, A, P 3 3 F,C,P,T 17. Oct93 4 I,A,P,F 3 3 F,P 18. Mar 94 5 1, A, P, F 3 3 F, P 19. April 95 4/ 2 2 1 Completion Feb 95 2 12 I,E 1/ I = Irrigation Engineer; P = Procurement; A = Agriculturalist; E Economist; C = Construction; F = Farmers Organization; P = Associate Programme Officer; W = Water Management Expert. / P = Procurement; F = Available Funds; M = Project Management; C = Compliance with Legal Covenants; T = Training. 3/ Includes other projects. 4/ No report on file for this mission. nr = not reported. 20 SW for ICR at FY96 estimated at 7.05 SW   28 Nepal Sunsari Morang Irrigation IH Project (Cr.1814-NEP) Supervision / Implementation Completion Reporting Mission March - April 1995 Appendix 1 Aide - Memoire Introduction 1. An IDA mission comprising Messrs/Mme. 0. Myint, Y. Choi (SA2AW) together with A.C. Wee, R.C. Mishra, and C.P. Rauniyar (SA2NE) visited the project from March 31 to April 5, 1995 to supervise and prepare an implementation completion report (ICR) on the above project. This aide memoire is based on findings of the mission during the visit and its discussions with the Department of Irrigation (DOI), staff of the Sunsari Morang Irrigation Development Project (SMIDP), the Consultants, ICB contractor for the project, farmers and other agencies and individuals concemed with the project as well as a review of project documentation, other relevant studies and reports. The Project Completion Report dated December 1994 prepared by the Consultants (Nippon Koei) and SMIDP, the Project Operation Plan dated January 1995 and the Semi-annual Progress Report (July- December, 1994) prepared by SMIIDP have been major sources of information. The mission's preliminary findings were discussed with the Secretary, Ministry of Water Resources (MOWR). 2. The draft aide memoire was distributed to the Ministry of Finance (MOF), MOWR, DOI, and the concerned project manager, and discussed at a wrap-up meeting at Department of Irrigation (DOI) on April 28, 1995. Amendments agreed at the meeting have been duly incorporated. The findings of the mission is subject to the approval of the Bank management. The mission wishes to thank the Director-General of the Department of Irrigation (DOI), the Project Manager (PM) and staff of SMIDP, the Consultants, the other agencies and staff for their cooperation, assistance and hospitality. The Project 3. The project, which was the second phase of rehabilitation and command area development (CAD) of a scheme designed to irrigate another 16,700 ha of Sunsari Morang Irrigation System (SMIP) having a total potential irrigable area of 68,000 ha, was to be implemented over a seven year period, incorporating the following main components: a) Improvements to Chatra Main Canal (CMC) and its related structures. Works on CMC would include modifications to the head regulator structure and gates; repair to main super passage at RD 21 on the canal headreach; rehabilitation of the drainage chutes on the headreach; provision of replacement gates and repairs to head regulators of distributory systems from the CMC; completion of three bridges; repairs and improvements to cross drainage works, syphons, and access structures; replacement of cross aqueduct structures and other miscellaneous minor works including desilting of the CMC.  29 b) Desilting Facility on CMC. Provision of a feasible desilting facility after undertaking studies during the first two years to evaluate further the feasibility of mechanical solution (a larger desilting basin with two portable section-cutter dredgers with support facilities against hydraulic flushing facilities). c) Stage I and II areas (28.700 ha). Modification to the irrigation distribution works in the Stage I area of 9,750 ha to easier operable design, and command area development and improvement to the irrigation distribution and drainage systems in an additional area of 16,700 ha under CMC. d) Buildings. Provision of a guesthouse at Biratnagar, 20 houses for gate operators on the canal syystem, and buildings for four irigation block headquarters. e) Vehicles and Equipment. Provision of additional equipment and plant necessary for desilting, and other maintenance equipment for the routine maintenance of the canal and drainage systems including communication equipment. f) Technical Support and Training including consultancies for (i) design and supervision of construction, (ii) project monitoring and evaluation and (iii) studies. g) Support of Project Establishment and O&M costs. 4. The total project cost of US$ 49.9 million was to be financed with the help of an IDA credit of million (US$ 40.0 million). The project was to increase the command area development of irrigated area from about 9,750 ha (Stage I) to 26,450 ha (Stage I and II). Incremental agricultural production was estimated to be 25,500t of paddy, 10,900t of wheat, 2,500t of oilseeds, 4,500t of pulses, 16,300t of vegetables, 18,400t of potatoes and 2,400t of sugarcane. The economic rate of return was estimated at 21%. Mission's Findings 5. Project Implementation. The implementation of the project was started on September 4, 1988 after selection of ICB contractor for constructing almost all the civil works mentioned under para 3 above. The project construction was assigned to complete by May 31, 1994. Alter immediate mobilization, the construction works were actually started in January 1989. Although a severe shortage of diesel fuel and lubricants during the trade and transit disagreement (March 1989 to June 1990) between India and Nepal, the construction works were satisfactorily completed within the original stipulated period. As initially agreed, the Borrower hired a consulting firm to carry out a detailed study on viability of introducing mechanical desilting using a larger desilting basin and dredgers or hydraulic flushing using the available head. The results of the study were reviewed by an independent panel of experts (POE). The POE endorsed the mechanical desilting method. However, due to the westward shifting of Koshi River course near the existing intake structure the system is facing with a new problem of difficulty in intake in dry seasons. Solving siltation problem alone in monsoon was not sufficient and effective for year round irrigation. The POE recommended that the project be modified by: (a) moving the intake structure 1,300 m upstream of the existing intake site, (b) constructing a larger capacity desilting basin, (c) utilizing dredgers to remove silt from the desilting basin, and (d) constructing a micro-hydro unit in the headreach of the main canal to provide power for  30 the dredger operations. The Borrower acquired a new complementary IDA credit as Sunsari Morang Headworks Project (SMHP) in the amount of SDR 19 million (US$ 28 million equivalent) in late 1992, to provide these additional works. The SMfHP Credit was approved in early 1993. The SMIHP is on track for completion in early 1996. 6. Completion. The following items of ICB contract works envisaged in the Staff Appraisal Report (SAR) of SMIP-IH were found completed satisfactorily on the Credit closing date of March 31, 1995. The quality of works and the ICB contractor's performance are also satisfactory. a) Improvements to Chatra Main Canal (CMC) and its related structures. Desilting of about 1.3 million cubic meter of sediments in the main canal system. Rehabilitation of 64 existing structures and construction of 31 new structures. Construction of a new larger desilting basin. b) Desilting Facilitv on CMC. A larger desilting basin of 60 meter wide and 990 meter long was completed in May 1992. Two cutter-suction dredgers of 14.0 m3/hr capacity have been procured by SMIP II Credit. The dredgers are being installed recently and are ready for operation in the 1995 monsoon irrigation season. c) Stage I and II areas CAD (25.450 ha). Command area development works under Stage H area of the project (16,700 ha) have generally been satisfactorily constructed down to the field outlets of water courses as follows: * Jhumkha Pilot Area (891 ha): a total of 6237 m of tertiary canals, 38,622 m of water courses, 616 nos. of canal related structures, and a total drainage length 18,993 m with 32 drainage structures were completed; - Sitagunj Distributory (8,400 ha): resectioning of 40,370 m of secondary and sub-secondary canals, construction of 85,533 m of tertiary canals and 334,451 m of water courses, 56,600 meter of main and secondary drainage canals, 43,600 m of tertiary and collector drains, 3,660 nos. of canal structures and 384 nos. of drainage structures; - Ramgunj Distributory (7,300 ha): resectioning of 33,482 m of secondary and sub-secondary canals, construction of 79,433 m of tertiary canals and 322,646 m of water courses, 36,000 m of main and secondary drains, 127,079 m of tertiary and collector drains, 3,194 nos. of irrigation and 451 nos. of drainage structures; Although modifications of the distribution irrigation network in the originally completed Stage I area (9,750 ha) was envisaged in SAR by changing from the original gated design of 50 ha water courses (chaks) to non-gated 28 ha water courses, the work had been deferred at the beginning period of the project due to time and budget limitation. The modification was finally able to carry out only on 1,000 ha of the area. So also, the project could not carried out filly as per drainage work requirement envisaged under the Sitagunj Distributory of Stage I area due to farmers' resistance in land acquisition at the time of implementation. The mission was informed that now  31 only, after two years of irrigation, the farmers in the area felt the need of drainage and came up with proposals for drainage. d) Buildings under the project were constructed as per the need of the project. The existing guesthouse in Biratnagar was renovated instead of building a new one. Only 3 gate operators' houses were built newly under the project and the rest were renovated. Modification of the 3 irrigation block headquarter buildings out of 4 was also completed. Two equipment storage buildings were additionally constructed. e) Vehicles and Equipment. With a view that services of ICB/LCB contractors are used in most maintenance works, procurement of the heavy equipment under the project was suspended by the Government. Only a few lots of spares for the existing equipment, workshop equipment, two passenger jeeps, 2 pick-up jeeps, one station wagon, 12 motorcycles, and 128 bicycles were procured by the project. f) Technical Support and Training. The project had used 108.5 mm of expatriate consultants and 290.5 mm of local consultants hired under an international consulting firm throughout the design and implementation period. An additional service of 44.1 mm of expatriate consultants and 35.4 mm of local consultants were used for the design of new headworks. g) Support of Project Establishment and O&M were also provided satisfactorily. 7. The Costs. The SAR estimated total cost of the project is about US$49.9 million (NRs 1,221.8 million using a parity of 1 US$=22.3 NRs). The actual expenditure for SMIP II at the time of credit closing on March 31, 1995 is estimated to be about US$ 46.03 million or about 92.2% of the SAR estimate in US dollar, but in Nepalese Rupees it is NRs 1864.1 million (real terms) or about 153% of the SAR estimate due to alterations in the rate of exchange between Nepalese rupee and US dollar in the course of project implementation (1 US$ = 22.3 NRs in 1987/88 to 49.21 NRs in 1994/95). Approximately SDR 28.4 million from the IDA credit have been disbursed so far. About SDR 0.6 million can be expected as payments for works and equipment procured under the credit before March 31, 1995. About SDR 2.0 million (about 6% of the Credit) will be remained unused which is to be canceled on July 31, 1995. However, it is to be noted that about SDR 1709.01 has been overdrawn at the end of March 1995 from Category I - Civil Works of the Credit that need to be adjusted. The Benefits 8. The larger desilting basin constructed in mid 1992 under the SMIP-II has proven successful. About 65-70 percent of the incoming sediment to the system has been trapped in the desilting basin in early part of monsoon kharif irrigation. However, as there was no continuous unsilting of deposited sediments from the basin as the case would be with continuous dredger operations, the capacity of the desilting basin reduces with its trapping efficiency by time. Over 250,000 m3 of deposited sediment was cleared mechanically in 1993 and in 1994. That was the positive indication of the effectiveness of  32 desilting basin provided. The mission found the two dredgers recently being installed in the basin and they are ready for operation in the coming kharif irrigation season in June. 9. Incremental Production and ERR. Project benefits derive from the provision of supplementary irrigation during the kharif season and irrigation during the rabi season and from the encouragement that security of water supply gives farmers to adopt improved practices and increase use of inputs. The information made available from the recent crop cutting surveys carried out by the project M&E division and the consultants of the Stage Im area feasibility study showed that at least full Jhumka pilot area and part of the Sitagunj area have achieved fuli development yields. In terms of total development, the present achievement represents about 37% of the project area. Incremental agricultural production at the ICR was estirnated to be 14,299t of paddy, 17,910t of wheat, 1,035t of oilseeds, 1,549t of pulses, 7,102t of vegetables, 3,757t of potatoes, 17,441t of sugarcane and 627t of maize. There is significant increase in paddy, wheat, vegetable and sugarcane production while Jute production decline from the SAR level. The speed with which the developed project area can be year round irrigated equitably requires further development of field channels by farmers (currently 500/o are developed) and completion of the new headworks ensuring the full discharge of comparatively silt free water year round for effective irrigation. The assumptions made in phasing of benefits will have a considerable effect on the recalculated ERR Due to the somewhat higher without-project situation and the slower build-up of benefits relative to costs it can be expected that the ERR will be about 20% at ICR against 21% at SAR for Stage I and Stage II. Performance of the Borrower 10. The Borrower made considerable efforts to implement the project with due diligence and efficiency but in early part of the implementation stage the project suffered some delays due to severe shortage of funds and unclear technical solution to the sediment ingress problem. The main reason of implementation delays in Stage I area was inadequate budget for efficient implementation and the Borrower's tardiness in selecting technical options. However, after the POE's recommendation the Borrower had asserted significant effort in decision maldng for improving the system's sediment problem. Audit reports were often late but not to the stage of credit suspension. The Borrower was initially slow in appointing Monitoring and Evaluation staff to the project. The Borrower's consultant had closely estimated the cost of the main ICB civil works contract as well as correctly pursued the block by block construction planning, which make the project possible to irrigate in the completed portion even during construction. Although there was a delay at the start, the Borrower, the consultant and the ICB contractor made full effort to complete the Stage II project within the stipulated time and in a satisfactory manner. A detailed Project Completion Report and a Project Operation Plan (POP) were prepared and made available to the mission in advance for the review and remarks. The POP was revised taking account of comments made by IDA. Performance of IDA 11. At the time of implementation of Stage I and appraisal of Stage II project IDA failed to take in account of the acute intake problem from the Koshi River during summer period due to its westward migration of river course away from the existing intake site. The change of river course limits the intake discharge in summer to one-third of its full capacity because of which the bulk of summer crops cannot be raised affecting the main economics of the project investment. However, it was a wise decision for IDA to encourage the Borrower to timely study the problem and change the design of an existing  33 intake system with the replacement of a new intake at a more stable upstream point which is being implemented under the SMHP project. The intake of water from the new intake will be realized in June 1995. The gated water distribution system designed under Stage I, although technically sound, has proved to be difficult to manage and it does not suitable for Nepalese small farmer community. IDA, at the later stage correctly changed the design in a gradual manner that will not drastically change the distribution network where many water user groups had already been formed. The participatory approach in designing a big public irrigation system by allowing fanners to take part in the project development works right from inception allows a public irrigation system to a successful completion. IDA provided frequent good and helpful supervision and adopted a flexible approach to the implementation of the project. Proiect Sustainabilitv 12. Water availability. Sunsari Morang Irrigation System is facing with a heavy sediment ingress problem in monsoon period since inception. The monsoon silt problem was exacerbated by the westward migration of Koshi River thereby creating an acute intake of water in dry season. SMHP project is aimed to solve both the sediment and intake problems. However, in view of the heavy sediment concentration in Koshi River in monsoon, the solution provided to the problem needs continuous dredging in the desilting basin at headworks and generation of hydropower for the dredger operation. Providing the mechanical and electrical equipment though ensure the year round water supplies in a sustained manner, it would require a proper level of operation and maintenance by the Borrower. The headworks project has considered the necessary on-the-job training to the Borrower's staff for two years. The importance of proper operation and maintenance was recognized when the project was formulated. There is nevertheless a risk that the sufficient attention to the operation and enough funds for proper maintenance be given to the infrastructure installed in the system. 13. At the full operation of SMHP starting in June 1995, the system will supply with an assured year-round water of designed capacity. The maximum design discharge of the Chatra Main Canal (CMC) is 45.3 cumecs. But the new intake will have a capacity of supply up to 60.0 cumec at all time of the year which will allow to increase the significant dry season crops as well as assure the monsoon supplemental irrigation. It is, however, not necessary that the peak flow be supplied at all times and it is reasonable for the CMC to be closed from time to time (November and April ) for maintenance and repair. The mission suggested and DOI agreed that, taking account of the SAR proposed cropping pattern, the Project Management should study a maximum amount of water that can be delivered in CMC, estimates of crop water requirements, and the timing and quantities of water required to make use of the additional discharge effwctively. The mission is pleased to note that a computerized water management model is established recently under the guidance of SMHP consultants and the project staff are trained to run the model effectively. The model would predict the actual field irnigation water requirement close to two weeks ahead of the application. The mission suggested and the DOI agreed that after satisfactory operation of the new headwoks in the coming kharif season irrigation the project management will include the need to find a way of establishing a pilot agriculture farm using saving funds from SMHP in the suitable area to demonstrate farmers crop diversification including premonsoon croppings. 14. Budget for O&M. The Project Operation Plan (POP) prepared by SMIDP assumes an anmual maintenance budget of NRs 45.23 million in 1995/96 (NRs 769/ha for 58800 ha of Stage I, II, and EII) reducing steadily to NRs 30.02 million in 1999/2000 (NRs 510/ha) by when it is assumed that all canals  34 serving areas less than 1000 ha would have been handed over to water users committees, who would pay for O&M of these smaller canals. Therefore, the proposed budget for O&M and repairs in 1995/96 of NRs 48.2 million, which includes preparation of turn over program seems reasonable. There is a risk if that amount allocated is not available. The mission recommends that O&M resources available be given priority to the areas in Stage I and II where investment on infrastructure development has been already made. 15. Formation of Water Users Groups and Committees. The water management problems have been significantly reduced by introducing a simple structured irrigaion design for CAD in the SMIP-II and partly in the SM[P-I. The resulting layout has proven to be acceptable to farmers. The implementation of CAD in SMIP-I & SMIP-II is consistent with the HMGNs Irrigation Policy of facilitating water users' participation in all stages of the project implementation. Legal WUGs have been formed in every developed water course units (mostly about 28-50 ha in size) in the SMIP-I (9750 ha) and II areas (16,700 ha). 731 out of 778 Water Users Groups (WUG) have been formed and about 160 have been maintaining tertiary canal system by themselves. To date, turnover of about 9 completed tertiary units (commanding for about 4110 ha) to the respective WUGs has been successfully complete. 31 Out of 38 Water Users Committees (WUC) have been formed at tertiary level. Similarly six out of seven higher order Water User Coordination Committee (WUCC) at the secondary canal level have been formed and a Water User Central Coordination Committee (WUCCC) to represent beneficiary farmers at the project management level is being established. In the system where the water charges were never collected successfully in the last three decades since completion are now being collected on 30 percent of the turned over areas and remitted to the goverrmnent treasury by WUCs themselves. Turnover and legalization of the WUAs and WUCC are phased out to be completed by 1997.. 16. Water Management. The structured irrigation adopted in the project is based on the principle that CMC would be running continuously during the irrigation seasons, supplying fulil water to secondary canals. Sub-secondary or tertiary canals commanding 1000 ha and less would run either at full capacity (on) or be closed (off) by turn. When they are running at full capacity, water would automatically be distributed into water courses (WC) proportionately to the area served. Water delivered to a WC (which serves about 28 ha in Stage II) would be distributed in rotation to field outlets serving about 4 ha each. The design requires that, when secondary and tertiary canals are running, they run at full supply discharge. The water management below the sub secondary is the responsibility of WUGs. In the last Kharif and Rabi crop seasons, Rotational Water Supply (RWS) was applied. Though there were some conflicts on turns and time-share, RWS worked in general and farmers generally satisfied with the equitable supply. They have started recognizing the importance of RWS and are cooperating in water management gradually. The supply of irrigation water by constructing field channels, especially in dry season rabi irrigation, has been increasing. At present about 50 percent of field channels exist in the systern. WUGs of Jhumka area are functioning satisfactorily in all respects (after 3 years under RWS) while others still have to get momentum. Still a few cases of farmers, who are not getting sufficient water, complaining to the committee and the project for improving deficiencies in alignment of water courses. Though farmers have been extensively consulted in the layout of water courses, there still remain to reinforce walk through procedure and improvement in the WC alignment, if found defective. In Sitagunj area where farmers resisted to drainage construction have now felt the need and have asked SMIP to provide remaining drainage. The mission suggests that the project consider construction of the drainage using O&M or other surplus funds after seeking the farmners' concurrence on necessary land acquisition.  35 17. As per design the canal efficiency for CMC is 90%, secondary canals 92%, tertiary canal 92%, water course 85% and field efficiency 65%. This gives the overall efficiency as of 42%. The project should systematically monitor the conveyance and distribution efficiencies by actual measurements in order to avoid undesirable water dispute at the field level. The mission found that there had been 10/o of the area still not satisfactorily received water. It is also important for water users to see that the full supply is being delivered. On the majority of dividing structures, it is suggested to paint marks to indicate full supply level (FSL). The mission considers it important that, if the system is to operate satisfactorily as designed, FSL should be marked on each dividing structure and, when the canal is operating, the water level should be maintained at this level. 18. Monitoring and Evaluation. Systems and computerized data bases have been established at the SMIP offices for agricultural monitoring, covering both socio-economic and routine crop production surveys. Socio-economic surveys are required at intervals of three or more years and are best assigned to experienced local consultants. As the system is designed with a new RWS a responsible officer specifically appointed for the task, the M&E division, should be continued till the full TO and water management training program are complete. Regular crop cutting surveys must be done seasonally and presented the results in a coherent report. Assistance from the experienced project consultant from time to time may be necessary. No constraints on the Sustainability of the monitoring should be arose because of budget commitment. 19. Water management monitoring at present started by measuring the flow entering the CMC and secondary canals in the Stage II area. This monitoring is now well established and there is no reason to think that it will not continue. More extensive water management monitoring of flows in CMC, secondary canals and Tertiary/WC system is recommended both as a record of water delivered to water users and to assess whether improved operations could be evolved. Records should be kept of the supply to main secondary and other important canals, with a record of whether FSL has been maintained and, where practicable, the flow entering the canal. Measurement of the flow leaving from the Stage II project area downward would provide valuable information for the future development of the project. 20. The results of all monitoring should be properly recorded at the Project Manager's office for reference and actions if required. The PM should draw the attention of SMIDB, DOI, Department of Agriculture and other agencies to areas where action is needed and act as a catalyst to ensure necessary action is taken. Issues at O&M Stage 21. Next Steps. The project is at an important transition from construction to full operation. For this transition to be successful, it is important that proper attention is paid to (a) the continued development of turn over to water users' associations which can undertake the O&M of tertiary canals and field channels of the system; (b) the establishment of the DOI organization for the O&M of the part of the system that has not been handed over to water users' associations; (c) the provision of adequate annual budget for full O&M of the part of the system for which DOI is responsible, and (d) collection of water charges regularly on improved services that are made available to the users in Stage I and H. HMGN must ensure that the above are achieved.  36 22. Staff for O&M of the Project. Now that the construction of major works by DOI is substantiLllv complete in SMIP Stage II. The SMIDB has consider the future staffing and how best to keep the staff necessary for O&M and withdraw the surplus staff It is likely that the SMIDB, which employs many of the present staff, will after two or three years, be replaced with a board containing representatives of the WUCCs. Many of the staff who are required for the continued O&M of the project are worried that they would then loose their jobs. The uncertainty about their future is, understandably, causing them concern. A decision is needed soon as to the future staffing of the O&M organization as agreed in POP. 23. Water Charges. The level of charges for surface water in public irrigation system in Nepal has been set at Nrs200/ha/year. Water charges collection duty is entrusted to the irrigation project authority. There is a change in collection system of water charges in SMIP because of its successfiul WUGs formation. The duty is now resumed in the system by the established WUCs themselves. To date NRs 190,000 have been collected from the completed turnover areas which had never been the case in the past eight years. The remaining water charges are being collecting from the other areas. In the transitional stage before all WUCs can take over their concemed areas from the project, it is still the duty of SMIDB staff to collect water charges from the remaining developed areas under Stage I and II project or the project can make use of the established WUCs for that purpose. The mission was informed by the local staff that there are some cases of unclear ownership which makes the collection difficult. The mission considers that it is essential, if charges are to be collected efficiently, that (i) for each season a record is kept of the areas irrigated using the available irrigable boundary map of all users or groups to whom water is supplied, (ii) an assessment is issued before the end of the main irrigation season to each user or group, (iii) the charge is collected promptly and (iv) sanctions for non-payment are instigated and enforced. The project is requested to see the matter carefully. Lessons Learned 24. Unreliable water supply for any reason destroys farmer confidence in the ability of the irrigation authorities and can lead to a lack of cooperation in any development works. 25. Participation of beneficiary farmers in any development works from the beginning is very important, especially in large public irrigation system, where the available water resources has to be shared among many beneficiaries. 26. Training farmers to understand the system performance is necessary for a large irrigation system where the farmers have to share the water by time and by quantity. The success of operation and Sustainability of the infrastructure depend not only on physical soundness of the structures but also on social organization of the beneficiaries. 27. The design adopted for a large public irrigation system must be simple and socially acceptable for small farmer community. Social acceptability should be tested before committing heavy investment. Summary of Recommendations 28. The following recommendations of the ICR/Supervision mission have been agreed by HMGN, DOI, and the project management that:  37 (a) the sufficient attention to the operation and enough funds be given for proper mnaintenance of the infrastructure installed in the system and that O&M resources available be given priority to the areas in Stage I and II where investment on infrastructure development has been already made (para 12 and 14); (b) after satisfactory operation of the new headwoks in the coming kharif season irrigation, the project management will consider the need to find a way of establishing a pilot water management demonstration farm in consultation with DOAD using saving from SMHP in a suitable area to demonstrate farmers crop diversification and water management including premonsoon croppings (para 13); (c) the project management consider construction of drainage in Sitaganj area using O&M or other surplus funds after seeking the farmers' concurrence on necessary land acquisition (para 16); (d) proper attention is paid to (i) the continued development of turn over of water course systems of the system; (ii) establishment of the DOI organization for the O&M of the part of the system that has not been handed over and monitoring on the handed over part; (iii) the provision of adequate annual budget for fill O&M of the part of the system for which DOI is responsible, and (iv) collection of water charges regularly (paras 21 & 23); (e) the Borrower's part of ICR will be prepared and sent to IDA not later than end June 1995.  38 Attachment I Guidance on Government's Contribution to the ICR. Government's own final evaluation of the project implementation is an important part of an ICR It is attached, unedited, to the ICR sent to the WB Board. It can be selective in its coverage and should address issues and lessons learned in project implementation, from the borrower's perspective. Topics covered can be the same as in the ICR, namely, project design, appraisal, implementation and project results. At each stage of the project the contribution should comment on both IDA and the implementing agencies' performances, with the observations, where possible, supported by evidence or reasoned argument. The ICR of the Government should be made available to IDA within three months from the Credit closing date of March 1995. For project design the contribution could address such questions as the appropriateness of the project's objectives, the size of the project and scope of the investments proposed, aspects of design leading to easy (or difficult) implementation and the effect on government institutions. For project appraisal comments should concentrate on any significant changes in the objectives, size and scope of the project and whether these were appropriate. Project implementation experience should be divided into an assessment of IDA performance in supporting and supervising the project and the performance of the implementing agencies. Project results include an assessment of the direct physical benefits leading to financial and economic benefits. Since financial and economic re-analysis of the project will be undertaken as part of the ICR, it is suggested, if HMGN so wishes, that the contribution could most usefully comment on the effect of the project from the Government's perspective. Such an analysis would be a most useful contribution to the ICR. Based on the foregoing sections the contribution should list the main lessons learned from the implementation experience and arising from the above analysis. WB suggests that if the contribution is more than ten pages it should include a summary. The latter is recommended for all but the shortest contributions. The mission will be happy to provide any further elaboration or clarification required to assist in preparation of the contribution.   39 NEPAL SUNSARI MORANG IRRIGATION II PROJECT (Cr. 1814-NEP) IMPLEMENTATION COMPLETION REPORT Appendix 2 Economic Re-evaluation Incremental Farm Benefits and Costs 1. The economic analysis of the Stage II project at the ICR period has been tested as a stand- alone project with prorata costs of an additional investment under Sunsari Morang Headworks Project (SMHP), and a combined Stage I and Stage II project with all new investments under SMHP2. Though the costs incurred under the on-going SMHP are still provisional as it is under construction, it cannot be ignored in the economic analysis. Without the inclusion of SMHP investment, the viability of previous investments in Stage I and II are brought into question as seeking effective solution to sediment problems is the main issue for the project's sustainability. This is because, prior to a major unsilting in 1992/93, the main canal carrying capacity was reduced from 45.3 m3/sec to 40.6 m3/sec due to siltation. This reduction in the designed discharge if translated in irrigability is equivalent to losing 5,000-6,000 ha from the system. 2. On the benefit side however, except for incremental agricultural benefits that would be obtained through the new SMHP by enabling Stage I and Stage II supplied with an adequate year- round of water, other benefits such as, additional water from the new intake (original designed discharge of 45.3 m3/sec will increase to 59.0 m3/sec ), and hydropower generation benefits are not accounted in the analysis. As these benefits have yet to be realized, a more complete economic analysis accounting all benefits must await an evaluation of the SMIHP after its completion in 1997. 3. Economic analysis of SMIP-II is treated as a self contained project or whether it is considered to be a time-slice of larger Sunsari Morang Irrigation System, which up to now includes SMIIP I, SMIP II, and SMHP. The sunk cost of Stage I project (previous investment) was taken into account in the analysis of the development project as a whole (Stage I, Stage II, and SMHP). There were some benefits in Stage I area after the SMIP-I investment. But as mentioned in the Project Performance Audit Report,22 it was assumed very marginal and uncertain 21 The actual costs incurred under SMIHP up to December 1995 and the projected costs for FY 1995/96, and FY1996/97 provided by the project consultants (based on remaining payments to the three ICB contracts) are included in the analysis. For the prorata costs of SMHP chargeable to Stage II, the area ratio of the Stage II to the total area of Stage I and H, which equals 63%, is adopted. The analysis implied that total cost under SMiHP is allocated to Stage I and E1 only, although the benefit is well beyond to the two stages. 22 The Project Performance Audit Report of SMIP I (para 33 of Report No. 8670, May 29, 1990) prepared by OED stated that "...a 1987 socio-economic survey conducted after improvements had been affected, indicates that incremental yields and cropping intensities of principal crops--local and improved (HYV) paddy, and wheat--have been considerably less than estimated in the SAR, and the yield and cropping intensity increases in a control area adjacent to the Stage I area (which represents a "without project" situation), are little different from those obtained within the project improved area, partly reflecting widespread use in the recent years of private tubewells, which have the important advantage of providing sediment-free water".  40 whether it was different from "without project condition" although cropping intensity had risen from 118% (at Appraisal in 1978) to 152% by 1987. 4. The main reason is the technical solution adopted for the sediment problem in Stage I was not effective to resolve the problems. Therefore, in this analysis only marginal benefit (with stagnated 1% built-up rate from 1987 to 1992) was adopted as outcome of the sunk investment under Stage-I Project. However, after partial completion of desilting facilities under SMIP-II in 1991/92, the observed cropping intensity increased from 152% and reached to 162% in 1994. This indicates that with some further improvement of the distribution system in Stage I, it can achieve similar growth like in Stage II. 5. Farm benefits and costs were calculated on the basis of crop budgets for Stage II, Without Project (1987/88), Table 1, and compared to the With Project situation at full development (1998/99), Table 2. These crop budgets were based on inputs and outputs estimated for 1987/88 (from the Staff Appraisal Report) and for 1998/99, Table 3. 6. Financial and economic prices are set forth in Table 4. Prices of locally-traded inputs and outputs are based on field survey taken at the time of ICR and recorded information available from SMIP-Ill feasibility study team, while prices for traded commodities are derived as shown in Table 5. 7. Cropping intensity is expected to increase from 152% in Stage I (after completion in 1986/87) and 129% in Stage II (at Appraisal) to 184% at full development. Total area under each crop is calculated according to the cropping patterns observed in the crop cut surveys and findings of SMIP-HI consultants during their feasibility studies in the project area, and are given in Table 6. The intermediate stage (build-up stage) cropping patterns and intensities at the time of ICR net returns per ha is derived from Tables 1 and 2 respectively. 8. Flow of benefits in Stage II and Stage I area is given in Table 7A. This is based on: (a) information on benefit buildup, Table 7B, calculating benefits according to the sum of percentage area coming under the "Improved" situation vis-a-vis the remaining area under the "Traditional" production scenario, and (b) Incremental Net Value of Crop Production in Stage I and Stage II area shown under Table 7C and Table 7D. Incremental net value of crop production in Stage I area, Table 7C was developed as a comparison. Tables 7C and 7D compare, in economic terms, the value of production in the Without Project situation (1987/88) and With Project situation at full development (1998/99). Project Investment and Operating and Replacement Costs 9. Yearwise investment costs are given in Table 8a for the Stage II, Table Sb for the Stage I and Table 8C for the SMHP. Costs are separated by foreign exchange and local cost components for all cost categories. Current costs (1978/88 to 1994/95) and future costs (1995/96 to 1996/97) were converted into 1994/95 constant prices using deflators derived from National Accounts statistics (for local costs), and MUV index for foreign costs, Table 9. 10. Annual requirement for full O&M and Replacement Costs were estimated for 1995/96 to 2006/07 at constant 1994/95 prices in Table 10a which was also mentioned in the agreed Project  41 Operational Plan (POP). Table 10b is the similar O&M costs for the past period 1988/89 to 1994/95 in economic NRs. Foreign exchange and local cost components were estimated and converted at economic prices into economic values. The O&M&R excluded the O&M costs for Stage Im area proportionately but included the O&M costs for the new SMHP as well as Replacement Costs of dredgers after 10 years of operation. 11. Details on Benefit and Cost Streams were compiled for a 25- 30 year period for the ERR calculations as shown in Table 11 a for the Stage II area as a stand alone project with prorata SMHP costs, and Table l1b for the combined Stage I and Stage II project including additional investment under SMIHP. The economic internal rate of return (ERR) for the different scenarios are as shown below: (a) Stage II as stand alone with prorata SMHP (base case), 25 yrs = 16% (b) Same (a) with benefit build-up decreased by 20% = 14% (c) Same (a) with benefit built-up decreased by 30% = 11% (d) Combined Stage I and Stage II including total SMHP costs (30 year period from Stage I period) = 13% (e) If stage I considered as sunk costs (SMIPI, SMIP-II and SMHP) = 19% Estimate of LRR for the whole SMIP including undeveloped SMI-III areas was not made in this ICR.23 due to uncertainty in effectiveness of SMIHP on Stage III. Changes in Farm Income 12. Changes were calculated to the income of the typical small farm (1.4 ha) and medium- sized farm (3.9 ha), at project start-up (1987/88) and at full development (1998/99). These are given in Tables 12a & 12b and Tables 13a & 13b, with information derived from Tables 14a, 14b, 14c, and 14d. 13. The results show that farm incomes for these typical farms changed as follows: PreProject At full development % change (Improvement) Small farm Rs 16,309 Rs. 40,282 247% Medium farm Rs 42,897 Rs. 109,243 255% 14. Incremental direct employment due to construction under the project was estimated in Table 15 at a total of 2.5 million mandays during the construction period (1987/88 to 1994/95) and 0.6 million mandays during the post-construction period. Incremental employment from agriculture was estimated at 0.8 million mandays per year at full development. Taken over the 20,700 households and 113,000 residents in the township of the Stage II area (1991 population 23 In MOP Report No. P-5696-NEP of SMHIP dated October 15, 1992, similar economic analysis of Stage I, Stage II and SMHP combined showed IRR around 15% if all benefits expected under SMHP were accounted. If Stage I costs are treated as sunk costs, IRR increased to 22%. Similar economic analyses for whole project (SMIP L SMIP II, SMHP and the remaining SMIP IH areas) in later analyses by the consultatnting team preparaing SMIP-m Feasibility Study (Ref. para 7.2.4 of Main Report of Sunsari Morang Irrigation m Detailed Feasibility Study and Design - June 1995) indicated ERRof 14.9%.  42 census, CBS), and the estimated available work force per family (240 nandays per year for half of the population), employment from agricultural activities in the project area would have been 13.5 million mandays per year without the project. 15. Incremental direct employment due to construction of SMIP II (2.5 million mandays) would have increased overall employment in the area by 18%, while operation and maintenance during the post-construction period would generate an additional 4.4% increased employment per year. Employment from agricultural activities in the project area alone would increase by 6% from pre-project to the "With project, full development" situation. With the ancillary growth and other downstream activities, the project has definitely increased economic activity in the project area.  43 NEPAL Sunsari Morang Irrigation II Project Implementation Completion Report Appendix 2 - Economic Re-evaluation TABLE 1 Crop Budget, Stage II (Without Project, 1987/88) NRathi Eoon. 1994/95 Prio. Production Pasmetrs Crp Paddy Paddy Maze What Oilleeds Pulse lute Potato Tomato Brinjl Sugarcane Cumm Cabbge (OAin) l (Eady) kb (LeW) Momig 1. Gross Retum (NRa/h) 28410 20938 16004 18676 8000 7595 16147.1 33360 0 14040 36250 0 0 A. Main Product (mtha) 2.4 1.6 1.6 1.4 0.5 0.7 1.3 8 0 8 25 0 0 Price(NRstt) 11050 12310 9810 13110 16000 10850 12290 4170 3000 1755 1450 16537 2650 Value (NRs) 26520 19696 15696 18354 8000 7595 15977 33360 0 14040 36250 0 0 B. By-product (nitt4a) 3.5 2.3 2.2 1.4 0 0 2.1 0 0 0 0 0 0 Price (NRs/t) 540 540 140 230 0 0 81 0 0 0 0 0 0 Value (NRs) 190 1242 308 322 0 0 170.1 0 0 0 0 0 0 2. Production Cost (NRa/a) 6127 6049 3535 5293.4 2503.6 3081 6647 12744 0 5677 11802 0 0 A. nputCost 1090 1720 938 2090 94.8 995 1532 8030 0 2073 5742 0 0 i) Seed a)Seedrate(Kgiha) 60 100 15 100 6 50 8 800 0 1 2500 0 0 Price(NRs/ha2 8.5 9.7 13.2 10.5 15.8 19.9 31.5 77 720 450 0.8 16.5 342 Value(NRs) 510 970 190 1050 94.8 995 252 6160 0 450 2000 0 0 ii) FertiLzer Cost 540 720 720 1040 0 0 1260 1870 0 1623 3742 0 0 a) N (Kg ) 20 0 0 20 0 0 20 20 0 35 65 0 0 Price(NRstkg) 27 27 27 27 27 27 27 27 27 27 27 27 27 Value (NRs) 540 0 0 540 0 0 540 540 0 945 1755 0 0 b) P (Kgfg) 0 0 0 20 0 0 0 10 0 20 40 0 0 Pric (NR5skg) 25 25 25 25 25 25 25 25 25 25 25 25 25 Value (NRs) 0 0 0 500 t 0 0 250 0 500 1000 0 0 c)K (Kgha) 0 0 0 0 0 0 0 0 0 10 15 0 0 Price (NRs/kg) 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 Value(NRs) 0 0 0 0 0 0 0 0 0 178 267 0 0 e) Manure (t/ha) 0 4 4 0 0 0 4 6 0 0 4 0 0 Price (NRs/t) 1SO 180 180 18 0 180 180 180 180 180 180 ISO 180 180 Value(NRs) 0 720 720 0 0 0 720 1080 0 0 720 0 0 iii) Chanicals (NRstha) 40 30 20 0 0 0 20 0 0 0 0 0 0 B. Labor Cost (Riba) 5037 4329 2597 3203.4 2408.8 2086 5115 4714 0 3604 6060 0 0 i)HumanLabor(Day) 120 90 70 69 38 35 150 125 0 110 150 0 0 Price (NRs/day) 236 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 Value (NRs) 2832 2124 1652 1628.4 896.8 826 3540 2950 0 2596 3540 0 0 ii) DraftLabor (PairDay) 35 35 15 25 24 20 25 28 0 16 40 0 0 Price(NRs/pairday) 63 63 63 63 63 63 63 63 63 63 63 63 63 VaIue (NRs) 2205 2205 945 1575 1512 1260 1575 1764 0 1008 2520 0 0 Net Economic Retur(NRs(t Xl-2) 22283 14889 12469 13382.6 5496.4 4514 9500.1 20616 0 8363 24448 0 0 Sources: (I) Outputsand Inpuft/per ba, from SAR (2) Econ Pnce (Tible 4) /a Ma in Monsoon Paddy. /b Early - Hot season/sprng Paddy. /c Byproducts for oilseeds, pulses, gms\mung, sugcawne not valued u famers generaly sel the whole crop to processors.  44 NEPAL - Sunsari Morang Irrigation II Project Implementation Completion Report Appendix 2 - Economic Re-evaluation TABLE 2 Crop Budget for Stage I & II With Project (1998/99) NRsba Econ. 1994/95 Prices Production Parameltn Crop Paddy Pddy Maim Weat Od Pulse Jute Potato Tomato Brr4al rcmane Gram Cabbbae (Main) (Early) (Latil) Mwtg I. Gross Return (NRstha) 40727 50331 29976 40020 12800 10850 18629.4 87570 72000 43875 65250 16537 50350 A. Main Product (mttha) 3.5 3.9 3 3 0.8 1 1.5 21 24 25 45 1 19 Price (NRxtt) 11050 12310 9810 13110 16000 10850 12290 4170 3000 1755 1450 16537 2650 Value(NRs) 38675 48009 29430 39330 12800 10850 18435 87570 72000 43875 65250 16537 50350 B. By-product(mt/Iha) 3.8 4.3 3.9 3 0 0 2.4 0 0 0 0 0 0 Price (NRIst) 540 540 140 230 4500 0 81 0 0 0 45 0 0 Value(NRs) 2052 2322 546 690 0 0 194.4 0 0 0 0 0 0 2. Producton Cost (NRs/ha) 8664.5 8710.5 6691.6 7219.8 3263.8 4044 6352 25605 10534 10146 14994 3812 9920 A. Input Cost 2407.5 2453.5 2795.6 3245 744.8 1525 647 19317 4317 4047 7124 1120 3939 i) Seed a)Seedrate(Kg4wa) 55 55 18 120 6 50 8 2000 1 1 2800 20 1 Price (NRak 8.5 9.7 13.2 10.5 15.8 19.9 31.5 7.7 720 450 0.8 16.5 342 Value(NRs) 467.5 533.5 237.6 1260 94.8 995 252 15400 720 450 2240 330 342 ii) Fertilizer Cost 1840 1840 2478 1975 530 530 395 3717 3447 3447 44U4 790 3447 a) N (KgIha) 45 45 40 50 15 15 10 60 50 50 100 20 50 Price (NRsA/g) 27 27 27 27 27 27 27 27 27 27 27 27 27 Value(NRs) 1215 1215 1080 1350 405 405 270 1620 1350 1350 2700 540 1350 b)P (Kg/ba) 25 25 20 25 5 5 5 30 30 30 50 10 30 Price (NRT/kg) 25 25 25 25 25 25 25 25 25 25 25 25 25 Value(NRs) 625 625 500 625 125 125 125 750 750 750 1250 250 750 c) K (Kg&a) 0 0 10 0 0 0 0 15 15 15 30 0 15 Price (NRk) 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 Value(NR9) 0 0 178 0 0 0 0 267 267 267 534 0 267 e) Manure (mtt/ba) 0 0 4 0 0 0 0 6 6 6 0 0 6 Price (NRst/) 180 180 180 180 180 180 1W 180 180 180 180 180 180 VahLe(NRs) 0 0 720 0 0 0 0 1080 1080 1080 0 0 1080 iu) Chemicals (NRstha) 100 80 80 10 120 0 0 200 150 150 400 0 150 B. Labor Cost (NRsaha) 6257 6257 3896 3974.8 2519 2519 5705 6288 6217 6099 7870 2692 5981 i) Human Labor ( Day) 145 145 85 83 40 40 175 165 170 165 200 50 160 Price (NRs/day) 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 23.6 Value (NRs/ha) 3422 3422 2006 1958.8 944 944 4130 3894 4012 3894 4720 1180 3776 ii) Draft Labor ( pair Day) 45 45 30 32 25 25 25 38 35 35 50 24 35 Price (NR&/pairday) 63 63 63 63 63 63 63 63 63 63 63 63 63 Value (NRAt/a) 2835 2835 1890 2016 1575 1575 1575 2394 2205 2205 3150 1512 2205 Net Economic Return (NRJ/haX1-2) 32062.5 41620.5 23284.4 32800.2 9536.2 6806 12277.4 61965 61466 33729 50256 12725 40430 TAS2 WL1 /T13  45 NEPAL Sunsari Morang Irrigation H Project Implementation Completion Report Appendix 2 - Economic Re-evaluation TABLE 3 Crop Yields and Production Inputs Stage 11 1. ICR Estimate (1994/95) Crop Season Yield (mt/ha) Seed Fertilizer Farm Manual Bullock Chemical Crop kg/ha N P K Manure Labor pair day NRs/ha Yield By-Product kg/ha kg/ha kg/ha mt/ha man day MainPaddy Kharif 3.1 3.2 60 35 15 0 0 130 40 60 Vegetable(Brinjal) Kharif 15.0 0.0 1 40 20 10 4 135 30 80 Wheat Rabi 2.4 2.4 120 35 20 0 0 80 30 10 Oilseed Rabi 0.6 1.2 8 10 5 0 0 38 22 0 Pulses(Lentil) Rabi 0.7 0.9 50 10 5 0 0 38 21 0 Potato Rabi 15.0 0.0 1500 40 20 10 4 150 35 300 Vegetable(Cabbage) Rabi 15.0 0.0 1 40 20 10 4 140 30 120 Early Paddy Hot/Spring 2.6 2.7 60 20 20 0 0 120 40 50 Maize Hot/Spring 2.0 2.6 20 20 10 0 2 75 25 60 Jute Hot/Spring 1.3 2.1 8 0 0 0 0 150 25 0 CTram (Mung bean) Hot/Spring 0.0 0.0 0 0 0 0 0 0 0 0 Vegetable(Tomato) Hot/Spring 0.0 0.0 0 0 0 0 0 0 0 0 Sugarcane Perennial 35.0 0.0 2500 90 45 25 0 180 45 250 2. At Full Development (1998/99) Main Paddy Kharif 3.8 3.8 55 45 25 0 0 145 45 100 Vegetable(Brinjal) Kharif 25.0 0.0 1 50 30 15 6 165 35 150 Wheat Rabi 3.0 3.0 120 50 25 0 0 83 32 10 Oilseed Rabi 0.8 0.0 /a 6 15 5 0 0 40 25 120 Pulses(Lentil) Rabi 1.0 0.0 /a 50 15 5 0 0 40 25 0 Potato Rabi 21.0 0.0 2000 60 30 15 6 165 38 200 Vegetable(Cabbage) Rabi 19.0 0.0 1 50 30 15 6 160 35 150 Early Paddy Hot/Spring 3.9 4.3 55 45 25 0 0 145 45 80 Maize Hot/Spring 3.0 3.9 18 40 20 10 4 85 30 80 Jute HoVSpring 1.5 2.4 8 10 5 0 0 175 25 0 Gram (Mung bean) HoVSpring 1.0 1.2 20 20 10 0 0 50 24 0 Vegetable(Tomato) Hot/Spring 24.0 0.0 1 50 30 15 6 170 35 150 Sugarcane Perennial 45.0 0.0 /a 2800 100 50 30 0 200 50 400 /a See Table 1, footnote /c. Source: same as table I TAB3.XLS1131196  46 NEPAL Sunsari Morang Irrigation II Project Implementation Completion Report Appendix 2 - Economic Re-evaluation Table 4 Financial and Economic Prices Financial Price Economnic Price Item Unit (1994/95) Conversion (1994 Constant) Crops/Goods By-product Crops/Goods By-product Crops/Goods By-product Crops NRs.fton Paddy (Main)2 6910 600 /1 /2 11050 540 Paddy (Early)6' 7700 600 /3 /2 12310 540 Wheat 6700 250 /1 /2 13110 230 Maize 6290 150 /2 /2 9810 140 Oilseeds Z' 17780 - /2 /2 16000 - Pulses/Lentil Z7 12050 /2 /2 10650 - Potato 4630 - /2 - 4170 - Brinjal 1950 - /2 1755 - Tomato 3330 - /2 . 3000 - Cabbage 2940 - /2 . 2650 - Sugarcanel U 760 - /1 /2 1450 - Jute 7980 90 /1 /2 12290 81 Gram (Mung) 18375 - /2 - 16537 - Grm. .. u9)8............. .. 135......... ...... ............n,, ,,,,, ............................. .......................... ............ ....................................... SeedtSeedlina NRs.Ag Paddy (Main)9 9.4 /2 8.5 Paddy (Early)6' 10.8 /2 9.7 Wheat 11.7 /2 10.5 Maize 14.7 /2 13.2 OilseedsZ' 17.5 /2 15.8 Pulses/Lentil 22.1 /2 19.9 Potato 8.5 /2 7.7 Brinjal 500.0 /2 450.0 Tomato 800.0 /2 720.0 Cabbage 380.0 /2 342.0 Sugarcane 0.94 /2 0.8 Jute 35.0 /2 31.5 Gram (Mung) 18.4 /2 16.5 ................................... .............. ............. ............... ...................................... ... ............................................... ....................... ......................... ....... Fertilizer NRs./kg Urea (46:0:0) 5.6 (12.2)/8 /1 12.4 (27.0)/5 DAP (18:46:0) 12.5(27.1)18 /1 11.5 (25.0)15 Potash (0:0:60) 8.5(14.2)/8 /1 10.7(17.8)/5 Farm Manure NRs9.on 200.0 /2 180.0 .....I.............................. .............. ............ ............ .......................... ...................... ... .......................... ......................... .......................... ......................... ........ Hired Labor NRs.day 35.0 23.6 Bullock Labor NRs./day 70.0 /2 63.0 TAB4.XLS Remarks: 1/ Derived from the data of WB Commodity Price Forecasts, Table 5. 2/ Financial value is converted to economic value by multiplying by SCF of 0.90.. J/ Assume the same premium for local paddy against improved paddy as in financial prices. 4/ Multiplied by SCF of 0.90 and shadow wage rate of 0.75. 5/ Economic price of nutrients (Nitrogen, Phosphorus, Potassium) based on Urea, DAP, Potash respectively. St Paddy: Main monsoon paddy and Eariy/Hot season paddy. 7/ Oilseed and Sugarcane: residues not valued separately as farmers sell whole seeds and cane to mill - pulses by product is used as fuel. 8 Financial prices of nutrients (N, P, K). :\bscottktab4wee -vY  47 NEPAL Sunsari Morang Irrigation li Project Implementation Completion Report Appedix 2 - Econoniic R-evalation Table 5 Economic Price Estimate for Tradeable Commodities Fam Products (Unit: /ton) tnm tUnit Paddy Wheat Main 9i ue I Projected 2005 World Price (in 1990 price) /1 US$ 267 147 91 235 292 2 Projected 2005 World Price (in 1994 pric) /1 US 286 158 98 252 313 3 QualityAdjus-ant % 90 95 90 95 100 4 Projected Price Adjusted for Quality Diffsoe US$ 257 ISO 8B 239 313 5 Intanational Shippeg nd Handmg US$ 38 70 66 66 0 6 FOB/CF Pricet Calcutt Part US 295 220 154 305 313 J JMf 8WaWnkn1 Nepa Bards 31 8 aPrcto c lBode im 332 257 IN1 3432 i7 Equivelat inNRs.Aon /2 NRs 16,600 12.850 9,550 17,100 13,300 9 Dormbc Transpot and Hndling from/to Wholeale Pont /3 NRB 340 340 340 340 0 10 Proeeing Ratio % 65 100 100 9 90 11 Procesr*gcst /3 NRB -162 0 0 -90 -45 12 By-ProductInughproc ing /3 NRs 280 0 0 50 0 13 Trieport1handling from Fntc /3 NRs -8 41 -81 -1 -41 14 Fargate Price NRs 11,050 13,110 9,810 1,450 12,290 FPm hnub Item USIt Un T.SP. KCL /4 DAP /5 I Projected2005WorldPrice(hil990price)/t AUSt 137 115 99 153 2 Projectd2005WorldPricr(inl994price)/A US$ 147 123 106 164 3 ntantoal Spai and Hadling SS 60 66 66 66 4 FOB/F Price at Calcutta Port US$ 207 189 172 230 5 Trnwport id Handlingronm/to Nepal Brdr UTSS 37 37 37 37 6 FOB/CF Prie at Bitugr US$ 244 226 209 267 Equivalent in NRa/tion /2 NRs 12200 11,300 10,450 13,350 7 Domestic T port wnd Handling to Dccler/Coo qat /3 NRs 140 140 140 140 8 Trnport/lndlingfroomFumgate /3 NRs 81 81 81 81 9 Fuigate Price NMs 12.421 11,521 10,671 13,571 10 Pnce of Nutint Contetr /6 NR 27,000 25,600 17,790 - Note: /I Based on the World Bank, Com.odity Market and the Developing Countries, Febny 1995. The IBERD eatmate are -e in 1990 consi US$, which lbva boen adjusted by the fActor of 1.0728 (MUV) to allow for price escalation betwen 1990 and 1994. Paddy Rice : Thai, Milled, 5% broken, FOB Bardeik Wheat Canadian No. 3, Western Red Sprun FOB St Lawrmce Maize : USNo. 2. YelLow, FOB Gulf Ports Sugarcane : Supr : ISA daily price, FOB and stowed at Greater Cribbean Ports Jute White D. FOB Chatgong/ChaIna Urea Bagad, FOB NW Europe T.S.P : Bulk, FOB US Guf KCL : Buk FOB Vancouver DAP : Bulk, FOB US Oulf /2 Excb.sa ate US$ 1.00 - NRb. 50.00 /3 Adjuyted'bySCFof 0.90 /4 Poteianm Chloride (Murnate of Potah) /5 Nutint contnt of Diwmwniu Phoaphat (DAP) is18:46:0. /6 Nutint content in 46%, 45%, mid 60%, rpetively for Urea, TSP and KCL.  48 NEPAL Sunsari Morang Irrigation 11 Project Implementation Completion Report Appendix 2 - Economic Re-evaluation Table 6 Cropping Intensity (% of CCA) and Cropped Area (ha) Appraisal Estimate ICR Estimate At Full Development Without Project With Project (1994/95) (1998/99) Crop Stage I Stage II Stage I Stage 11 Stage I Stage 11 Stage I Stage II (9,750 ha) (16,700 ha) (9,750 ha) (16,700 ha) (9,750 ha) (16,700 h!a) (9,750 ha) (16,700 ha) % ha % ha % ha % ha % ha % ha % ha % ha Kharif Main Paddy 84 8190 84 14028 84 8190 84 14028 95 9262 93 15531 84 8190 84 14028 Vegetable (Brinjal) 1 98 1 167 2 195 2 334 1 97 0 0 1 98 1 167 Sub-total 85 8288 85 14195 86 8385 86 14362 96 9359 93 15531 85 8288 85 14195 Rabi Wheat 23 2243 17 2839 28 2730 28 4676 40 3905 43 7181 40 3900 40 6680 Oilseeds 10 975 2 334 15 1462 15 2505 10 975 12 2004 12 1170 12 2004 Pulses (Lentil) 8 780 2 334 18 1755 18 3006 12 1170 13 2171 12 1170 12 2004 Potato 1 98 1 167 3 292 3 501 1 97 2 334 4 390 3 501 Vegetable (Cabbage) - - - - - - - - 2 195 1 167 3 292 2 334 Sub-total 42 4096 22 3674 64 6239 64 10688 65 6342 71 11857 71 6922 69 11523 Hot Season Early Paddy 11 1072 8 1336 16 1560 16 2672 - - - 0 16 1560 16 2672 Maize 6 585 6 1002 3 292 3 501 1 97 - 0 4 390 4 668 Jute 7 683 7 1169 5 487 5 835 2 195 2 330 3 292 3 501 Gram (Mung beam) - - - - 2 195 2 334 1 97 - - 2 195 2 334 Vegetable (Tomato) - - - - 1 97 1 167 2 195 - - 3 295 2 334 Sub-total 24 2340 21 3507 27 2631 27 4509 6 584 2 330 28 2732 27 4509 Perennial Sugarcane 1 98 1 167 1 97 1 167 2 195 3 501 0 0 3 501 Total 152 14822 129 21543 178 17352 178 29726 169 16480 169 28219 184 17942 184 30172 File: T-7 (Table 6.XLS)  NEPAL Sunsari Morang Irrigation II Project Implementation Completion Report Appendix 2 - Economic Re-evaluation Table 7A Flow of Benefits in Stage II Area In 1994 Constant Economic NRs '87/88 '88/89 189/90 S90/91 '91/92 '92/93 '93/94 94/95 '95/96 '96/97 '97/98 '98/99 99/100 Stage 11 Tobtl Area= 16700 ha 1 'Traditional" Production (frction) 1.00 1.00 1.00 0.99 0.96 0.88 0.76 0.59 0.38 0.20 0.06 0.00 0.00 2 'Improved" benefit buildup 0.00 0.00 0.00 0.01 0.04 0.12 0.24 0.41 0.62 0.80 0.94 1.00 1.00 rate (fraction) /a 3 Economic Net Crop 406.35 934.67 Production Value lb ("Tradit.") ("Improved") t Aggregate Crop Productiog Value/c 406.35 406.35 406.35 411.63 427.48 469.75 533.15 622.96 733.91 829.01 902.57 934.67 934.67 ,. 5 Increm.CropProductionValue/d 0.00 0.00 0.00 5.28 21.13 63.40 126.80 216.61 327.56 422.66 496.62 528.32 528.32 /a From Table 7B /b From Table 7D /c Equals sum of 1987/88 & 1998/99 production values (Row 3) multiplied by respective fractions in Rows I and 2. /d Incremtental values over 1987/88 levels. /e Assumed, as result of CMC improvements and desilting measures. Flow or Benefits in Stsae I Area 78/79-'85/S6 '86/87toS8/89 '89/90 '90/91 '91/92 '92/93 '93/94 '94/95 '95/96 '96/97 '97/98 98/99 99/100 100/101 101/102-bey Stags I 1 Pro-Project Production (fraction) 1.00 0.99 0.99 0.99 0.95 0.88 0.88 0.77 0.61 0.61 0.42 0.26 0.14 0.04 0.00 2 Improved (Buildup rate, fraction) 0.01 0.01 0.01 0.01 0.05 0.12 0.12 0.23 0.39 0.39 0.58 0.74 0.86 0.96 1.00 3 Incremental Ec. Net Crop 332.88 557.44 Production Value. 4 Agregeae Crop ProductionValuc 332.88 335.13 335.13 335.13 344.11 359.83 359.83 384.53 420.46 420.46 463.12 499.05 526.00 548.46 557.44 5 IncrenwcntalCropProductionValue 0.00 2.25 2.25 2.25 11.23 26.95 26.95 51.65 87.58 87.58 130.24 166.17 193.12 215.58 224.56  50 NEPAL Sunsari Morang Irrigation II Project Implementation Completion Report Appendix 2 - Economic Re-evaluation Table 7B Construction of Physical Works and Build-up of Yields, Inputs, Application and Cropping Intensity 1. Achievement of Phvsical Works (Construction) Year 88/89 /a 89/90 90/91 91/92 92/93 93/94 Total habyyear 891 2713 2421 2375 5037 3113 16550 ha cumulative 891 3604 6025 8400 13437 16550 % cum. of 16550 ha 5 21 36 51 81 100 Incremental % 0.05 0.16 0.15 0.15 0.30 0.19 /a Project started in 1987/88. Assumotion: Yearly build up of yields through changes in cropping intensity, inputs application is estimated at: Year 1 2 3 4 5 % 0 10 45 69 100 Total 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 Increm. physl.constr 1 0.05 0.16 0.15 0.15 0.30 0.19 Cum.benefit buildup 0.00 0.00 0.10 0.45 0.69 1.00 buildup of 88/89 0.00 0.00 0.01 0.02 0.03 0.05 0.05 0.05 0.05 0.05 0.05 buildup of 89/90 0.00 0.00 0.02 0.07 0.11 0.16 0.16 0.16 0.16 0.16 buildup of 90/91 0.00 0.00 0.02 0.07 0.10 0.15 0.15 0.15 0.15 buildup of 91/92 0.00 0.00 0.02 0.07 0.10 0.15 0.15 0.15 buildup of 92/93 0.00 0.00 0.03 0.14 0.21 0.30 0.30 buildup of 93/94 0.00 0.00 0.02 0.09 0.13 0.19 Total 0.00 0.00 0.01 0.04 0.12 0.24 0.41 0.62 0.80 0.94 1.00 Residual (Traditional) 1.00 1.00 0.99 0.96 0.88 0.76 0.59 0.28 0.20 0.06 0.00 Source: Nippon Koei Consultants, SMIP IlIl Feasibility Study, April 1995.  51 NEPAL Sunsari Morang Irrigation 11 Project Implementation Completion Report Appendix 2 - Economic Re-evaluation Table 7C Incremental Net Value of Crop Production in Stage I Area at Project startup (1987/88) & at full development (1998/99) Econ Rs Crop Without Project 1987/88 With Project 1998/99 Area Net Total Area Net Total Incremental Under Return Net Under Return Net Net Production Crop Per (ha) Return Crop Per (ha) Return in Value ha NRs NRs ha NRs NRs NRs Paddy Main 8190 26290 215315100 8190 32087 262792530 47477430 Paddy Early 1073 27704 29726392 1560 41646 64967760 35241368 Maize 585 10525 6157125 390 23304 9088560 2931435 Wheat 2243 22453 50362079 3900 32825 128017500 77655421 Oilseeds 975 7212 7031700 1170 9541 11162970 4131270 Pulses(Lentil) 780 11062 8628360 1170 13831 16182270 7553910 Jute 683 10238 6992554 292 12282 3586344 -3406210 tPotato 98 44351 4346398 390 66390 25892100 21545702 Tomato 0 0 0 295 61496 18141320 18141320 Brinjal 98 17720 1736560 98 33759 3308382 1571822 Sugarcane 98 27919 2736062 0 50306 0 -2736062 Gram (Mung) 0 0 0 195 12735 2483325 2483325 Cabbage 0 0 0 292 40460 11814320 11814320 All /Total 14823 - 333032330 17942 - 557437381 224405051 CCA= 9750 ha Intensity 152% Intensity 184% (-) Reflects the reduction in cropped areas of Jute and Sugarcane.  52 NEPAL Sunsari Morang Irrigation 11 Project Implementation Completion Report Appendix 2 - Economic Re-evaluation Table 7D Incremental Net Value of Crop Production in Stage 11 Area at project startup (1 987/88) & full development (1 998/99) Econ Rs Crop Without Project 1987/88 With Project 1998/99 Area Net Total Area Net Total Increnental Under Return Net Under Return Net Net Production Crop Per ha Return Crop Per ha Return in Value ha /a NRs /b NRs ha /a NRs /c NRs NRs Paddy Main 14028 22283 312585924 14028 32062 449765736 137179812 PaddvEarly 1336 14889 19891704 2672 41621 111211312 91319608 Maize 1002 12469 12493938 668 23284 15553712 3059774 Wheat 2839 13383 37994337 6680 32800 219104000 181109663 Oilseeds 334 5496 1835664 2004 9536 19110144 17274480 Pulses(Lentil) 334 4514 1507676 2004 6806 13639224 12131548 Jute 1169 9500 11105500 501 12277 6150777 -4954723 Potato 167 20626 3444542 501 61965 31044465 27599923 Tomato 0 0 0 334 61466 20529644 20529644 Brinjal 167 8383 1399961 167 33729 5632743 4232782 Sugarcane 167 24488 4089496 501 50256 25178256 21088760 Gram (Mung) 0 0 0 334 12725 4250150 4250150 Cabbage 0 0 0 334 40430 13503620 13503620 All /Total 21543 406348742 30728 934673783 528325041 Intensity 129% Intensity 184% CCA= 16700 ha Source: /a From Table 7 /b From Table I /c From Table 2 T*7D.XLS113i198  NEPAL Sunsari Morang Irrigation 11 Project Implementation Completion Report Appendix 2 - Economic Re-evaluation Table Sa Stage 11 ArPr Yearwise Investment costs - (NRs mill) /1 1987/U8 1988/89 1989/90 1990/91 1991/92 21.42 1993/94 /2 1994/95/3 Total Particulars FC LC Total FC LC Total FC LC Total FC LC Total FC LC Total FC LC Toal FC LC Total FC LC Total FC LC Total FINANCIAL COSTS /I I Land Acquisitio - 2.00 2.00 - 3.09 3.09 - 0 27 0.27 - - 0.00 - 8.47 8.47 - 8.50 8.50 - 8.49 8 49 - 2.08 2.08 0.00 32.90 32.90 2. Civil Works - ICB Consact -- 0.00 23.24 2.72 25.95 64.54 19.18 83.72 130.02 32.69 162.71 236.70 40.98 277 69 319.08 69.79 388.87 244 00 44.90 288.90 21.28 4.02 25.30 1038.85 214.27 1253.13 - Buildings/4 0.56 0.44 1.00 0.56 0.44 1.00 - - 0.90 0.00 0.00 0.00 0.84 0.66 1.50 1.56 1.22 2.78 0.54 0.43 097 - - 0.00 4.06 3.19 7.25 . LCBForce Account/4 4.59 10.70 15.29 7.41 17.30 24.71 3.35 7.82 11.17 4.28 10.00 14.28 7.31 1704 2435 5.57 12.99 18.56 11.66 27.19 38.85 4.05 9.45 13.50 48.22 112.49 160.71 Sub-Total 5.15 11.14 16.29 31 21 20.46 51.66 67.89 27 00 94.89 134.30 42.69 176.99 244.85 58.68 303.54 326.21 84.00 410.21 256 20 72 52 328.72 25 33 13.47 38.80 1091.13 329.95 1421.09 3. Equipmenl and Vhicles 0.14 000 0.14 4.30 0.23 4.53 0.65 0.03 0.68 1.40 007 1.47 2.41 0.13 2.54 2.03 0.11 2.14 107.33 5.65 11298 1567 0.08 15.75 133.93 6.30 140.23 4. Techoical Assistance and Training /4 - Consultants - - 0.00 1530 3.05 1835 14.15 2.78 1693 22.20 436 26.56 54.43 10.68 65.11 42.43 8.32 50.75 31 77 6.23 38.00 0.91 0.17 1.08 181.19 35.59 216.78 * Technical asssstance - 0.19 0.19 - 0.10 0.10 - 0.07 007 - 0.00 0.00 038 0.38 - 1.65 1.65 - 4.17 4.17 - 0.50 0.50 0.00 7.06 7.06 for training Sub-Total 0.00 0.19 0.19 15.30 3.15 18.45 14.15 2.85 17.00 22.20 436 26.56 54.43 11.06 65.49 4243 9.97 52.40 31.77 10.40 42.17 091 0.67 1.58 181.19 42.65 223.84 5. Establishment /4 - 3.25 3.25 - 3.57 3.57 - 3.34 3.34 . 4 29 4.29 - 8.23 8.23 - 7.59 7.59 . 7.57 7.57 - 8.20 8.20 0.00 46 04 46.94 Total oflnvestinentCost 5.29 16.58 21.87 50.81 30.50 81.30 82.69 33.49 116.18 157.90 51.41 209.31 301.69 86.57 308.27 37067 110.17 480.84 395.30 104.63 499.93 41.91 24.50 66.41 1406.25 457.84 18e64.10 ECONOMIC COSTS Local deflation index 0.44 0.48 0.52 0.65 0 77 0.85 0.92 1 00 Foreign deflation itnex 0.83 0.89 0.88 0 93 0 95 0.99 0.97 1.90 INVESTMENT COSTS (constant 94/95) I. Land Acquisition/5 0.88 1.48 0.14 0.00 6.52 7.23 7.81 2.08 2 Civil Works FC 4.27 27.77 59.94 125 31 233.35 324.25 248.77 23.33 L.C- Labour ( 0.3) /6 0 99257 1.98851 2.84298 5.61853 9.14987 14 4583 13.5105 2.72733 LC- Materials (0.7) 3.09 6.19 8.84 17.48 28.47 44.98 42.03 8.49 Sub- Total 8.35 35.95 71.63 148.40 270.96 383.69 304.31 36.54 3. Equipment and Vehicles FC 0.12 3.83 0.57 1.31 2.30 2.02 104.22 15.67 LC 0.00 0.10 0.01 0.04 0.09 0.08 4.68 0.07 Sub- Total 0.12 3.93 0.59 1.35 2.39 2.10 108.90 15.74 4. TA and Training FC 0.00 13.62 12.49 20.71 51.87 42.18 30.85 0.91 LC 0.08 1.36 1.33 2.55 7.66 7.63 8.61 0.60 Sub-Total 0.08 14.98 13.83 23.26 59.54 49.80 39.46 1.51 5. Establishmenlt 1.29 1.54 1.56 2.51 5.70 5.81 6.27 7.38 Total Invesament Cosl (Constant 94/95) 10.71 5738 87.75 175.52 345.11 448.62 466.75 63.26 NOTE 1. FC anSd LC corm inocludes cotgecis snd price esculatios 2. Iocludes SMHP Experuiture of die dredgrns paid under die Project. 3. Cost up to Mach 31, 1995 icduiag bill (t. 41) and fInal bill no.42 for ICB Contract. 4. Dat provided by SMIP AccoA Section, ircludes icrem. suff coast only. 5. Asmse tded at pprumity cost; LC = FEC, coverted by local inllation inldex. 6. Conversions for FC = 1.0: LC= 0.9 (exeqi land where FEC= LC); libtnur= 30% LC 0.9