India - Uttar Pradesh Forestry Project

Document of The World Bank Report No. 16915-IN PROJECT APPRAISAL DOCUMENT INDIA UTTAR PRADESH FORESTRY PROJECT October 7, 1997 Rural Development Sector Unit South Asia Region  CURRENCY EQUIVALENTS Currency Unit Rupees (Rs.) US$1. 00Rs. 34.7 WEIGHTS AND MEASURES The metric system is used throughout this report GOVERNMENT FISCAL YEAR April I to March 31 ABBREVLATIONS CCF Chief Conservator of Forests CF Conservator of Forests DCF Deputy Conservator of Forests DEA Department of Economic Affairs DFO Divisional Forest Officer EDSF Ecodevelopment Support Fund ERR Economic Rate of Retum FMIS Forest Management Information System GOI Government of India GOUP Government of Uttar Pradesh iCB Interrational Competitive Bidding IDA International Development Association NCB National Competitive Bidding NGO Non-Governmental Organization .)NTPV Net Present Value NTFP Non-Timber Forest Products OCC Opportunity Cost of Capital PA Protected Area PAU Policy Analysis Unit PCCF Principal Chief Conservator of Forests PDU Past!re Developmnent Unit PIP Project Implemnentation Plan PME Planning Monitoring and Evaluation PRA Participatory Rural Appraisal PlJ Project Unit SOE Statement of Expenses UP Uttar Pradesh UPFC Uttar Pradesh Forest Corporation UPFD Uttar Pradesh Forest Department VFC Village Forest Conmittee VFDF Village Forest Development Fund [Vice President: - Mieko Nishimnizu Country Director: - Edwin Lim Sector Manager: - Michael Baxter and Ridwan Ali Task Team Leader: - Ian Hill  MDIA UTTAR PRADESH FORESTRY PROJECT Project Appraisal Document Table of Contents PROJECT DATA SHEET ...................................................................I BLOCK 1. PROJECT DESCRIPTION .............................. .....................................2 1. Project Development Objectives .2 2. Project Components .3 3. Benefits and Target Population .4 4. Institutional and Implementation Arrangements. 4 Project Coordination .4 Implementation Responsibilities by Component. 5 Project Oversight .5 Procurement .5 Disbursement 5 Accounting, Financial Reporting and Auditing Arrangements 6 Monitoring and Evaluation .6 BLOCK 2. PROJECT RATIONALE ........................... .......................................8 5. CAS Objectives Supported by the Project .8 6. Main Sector Issues and Government Strategy. 8 7. Sector Issues to be Addressed by the Project and Strategic Choices 8 8. Project Alternatives .9 9. Major Related Projects .10 10. Lessons Learned and Reflected in Project Design .11 II. Indications of Borrower Commitment and Ownership.I 1 12. Value Added of Bank Support .11 BLOCK 3. SUMMARY PROJECT ASSESSMENTS ......................................................... 12 13. Economic Assessment .12 14. Financial Assessment .13 15. Technical Assessment .14 16. Institutional Assessment .14 17 Social Assessment .15 18. Environmental Assessment .17 19. Participatory Approach .18 20. Sustainability .18 21. Critical Risks .19  ii Table of Contents (Contd) Page BLOCK 4. MAIN LOAN CONDITIONS ............................................................................21 22. Assurances .................................................................. 21 BLOCK 5. COMPLIANCE WITH BANK POLICIES ........................................................ 22 ANNEXES. 1. Project Design Summary 2. Issues and Actions 3. Detailed Project Description 4. Estimated Project Costs 5. Implementation Responsibilities 6. Cost Benefit Analysis Summary 7. Economic and Financial Aspects 8. Financial Summary 9. Procurement and Disbursement 10. Project Processing Budget and Schedule H1. Documents in the Project File 12. Statement of Loans and Credits 13. Country at a Glance  l INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION South Asia Regional Office Project Appraisal Document India Uttar Pradesh Forestry Project Date: October 3, 1997 []Draft [X ]Final Task Manager: Ian Hill Country Manager: Mr.. Edwin Lim Project ED: INPA 35169 Sector: Rural Development Lending Instrument: Credit PTI: [] Yes ]No Project Financing Data Loan [] Credit [ X] Guarantee [ Other [Specify] Credit Amount: SDR 39.0 million (US$52.94 million equivalent): ........................................................................................ ............................................................................................................................................... Proposed Terms: [] Multicurrency [] Single currency Grace period (years): 10 [ Standard [] Fixed [] LIBOR-based Variable Years to maturity: 35 Commitment fee: Not exceeding .5% Service charge: 0.75% T i................................................................................................................................................................................................................................... ............ Financing Plan (US$m): Source Local Foreign Total Government 7.87 0.00Q 7.87 IDA 43.75 9.19 52.94 Beneficiaries 4.20 0.00 4.20 Total 55.82 9.19 65.01 1/ Includes duties and taxes of US$1.58 million Borrower: India Beneficiary: Government of Uttar Pradesh (GOUP) Responsible Agency: Uttar Pradesh Forest Department (UPFD) Estimated Disbursements (Bank FY/US$M): 1998 1999 2000 2001 2002 Annual 4.34 10.20 13.08 16.34 8.98 Cumulative 4.34 14.54 27.62 43.96 52.94 Expected effectiveness date: February 1, 1998 Completion date: January 31, 2002 Closing date: July 31, 2002  2 BLOC]K 1: PROJECT DESCRIPTION 1. Project Development Objectives (see Annex I for key performance indicators and Annex 2 for issues and actions affecting these development objectives): 1.1 The main objective of the project would be to assist with the implementation of the GOUP strategy for development of the forestry sector in Uttar Pradesh. This aims to improve public sector management of the sector, in order to increase forest cover, productivity and biodiversity in an environmentally and socially sustainable manner. It is recognized that the project is planned as the first phase of long-term support to the sector. More specifically the development objectives are: (i) To improve public sector management through: (a) introduction of the necessary changes to ensure that policies, management processes and the structure and resources of UPFD are appropriate to its role as the nodal public sector agency in the forestry sector; (b) development of human resources for the planning, implementation and monitoring of the strategy; (c) development of information systems to assist with all aspects of the planning and management of the forest resource. (ii) To increase both forest cover and productivity through: (a) development of participatory processes for management and use of forest resources, taking special account of the interests of disadvantaged groups; (b) development and adoption of improved technologies for management of forest resources; (c) privatization of the production of forest products through improving incentives for forest management and the cultivation of trees on non- forest land, and the provision of technical and management advice. (iii) To conserve biodiversity through (a) improved strategic planning; (b) improved management of Protected Areas (PAs); (c) ecodevelopment programs to involve communities in PA management 1.2 Central to achieving these objectives is process change as without such change the physical project outputs cannot be achieved. There are three main elements: (i) Change in the role of UPFD, from a predominantly regulatory role to one in which communities are treated as equal partners in the management of forest resources. Stakeholders would be enabled to make decisions and manage and protect the forest, ensuring both the appropriateness and effectiveness of the microplan, whilst UPFD would remain the custodian of national interest, the concept of joint management; (ii) Change in management systems, that would be client oriented and adaptable, based on decentralization of decision making, and improved planning, monitoring and evaluation; (iii) .Human Resource Development linked to role definition, skill-gap analysis and appropriate manpower planning and management.  3 2. Project Components (see Annex 3 for a detailed description and Annex 4 for a detailed cost breakdown): Component Category Cost Incl % of Total Contingencies _ _ _ _ _ _ _ _ II1~~~~~~~~~~(S$M) Institutional Development. Development of the management Training, 12.57 19 of the sector through: changing the approach of UPFD, consultants, improving the management process, and developing human civil works, resources through improved manpower planning, and process equipment and skill-gap analysis, combined with competency-based training. Improved planning, monitoring and evaluation, and environmental analysis procedures would be introduced, together with the necessary management information system. Policy analysis capabilities would also be strengthened. Forest Development. The project would finance a variety of Forest 39.75 61 interventions in the development of forest resources in Uttar operations, Pradesh, including management of both undegraded and civil works, degraded natural forests, plantation development, and farm, training, community and urban forestry. Priority would be given to consultants community participation in natural forest management, that is Joint Forest Management (JFM), though certain less degraded areas and plantations would continue to be managed by UPFD. Farm forestry would be a purely private sector matter, involving nursery entrepreneurs and individual farmers. The project would also support the development and implementation of fire and grazing management strategies. Research and Technology. Development of a more effective Operational 3.88 6 research organization working to a prioritized research costs, civil program, that would include improvements in reproductive works, technologies and research into NTFPs. Provision of necessary equipment equipment and training to develop linkages with research databases. A planting material improvement program to ensure better quality seeds and seedlings are utilized in the sector, through maintenance of selected seed sources and development of seed handling facilities and research nurseries. Biodiversity Conservation. Long-term strategic planning for Forest 8.81 14 biodiversity conservation in the state, both within and outside operations, Protected Areas (PAs). Improved management of 9 clusters of civil works, priority PAs made up of 18 individual PAs, linked to training, ecodevelopment programs to provide alternative incomes or consultants resources for communities in areas peripheral to the PAs. Associated programs for research, the monitoring of indicators of biodiversity conservation, pilot habitat restoration and public awareness. I_____ Total 65.01 100  4 3. Benefits and Target Population: 3.1 About 1,000 forest fringe village communities, and another 230 communities in the plains of Uttar Pradesh participating in the management of about 250,000 ha of forest would receive direct benefits from the project. The benefits include not only the improved access for communities to forest products and grazing, but also the benefits resulting from the use of village funds generated through the program, for improved agriculture and alternative income generating activities. The project would have important benefits in terms of empowerment and equity as about five million person-days of employment would be generated, a benefit which would be almost wholly captured by the poorest and landless households. Women are the predominant collectors of fodder, fuelwood and Non-Timber Forest Products (NTFPs) and would benefit considerably from the project. The proposed JFM arrangements would significantly enhance the availability of many forest products that are collected to provide for household needs and secondary income. Effective participation of women in JFM arrangements would be critical to ensure sustained management of the resource. The project, therefore, includes a number of mechanisms ensuring the participation of women and the representation of their interests. The population in and around the forests of Uttar Pradesh includes large numbers of tribal people and scheduled castes. These groups would, therefore, be the main participants and beneficiaries in the JFM and Ecodevelopment Programs. The development concerns of these groups are thus central to the project, and are addressed in an integral fashion under the rubric of social impact, participation, and equity, rather than as a subsidiary tribal or social development plan or component. Processors and marketers of wood and NTFPs would also benefit through increased supply of raw material. 4. Institutional and Implementation Arrangements: Implementation period: The project would be implemented over a four year period. Executing agency: Uttar Pradesh Forest Department and Government of Uttar Pradesh Project Implementation Plan: The UPFD Project Implementation Plan and its accompanying annexes records the agreed time-bound action plan, procedures and criteria to be used by UPFD for project implementation and the indicators to be used in project monitoring and evaluation Project Coordination: 4.1 Project Unit. A Project Unit (PU) has been established, headed by a Chief Conservator of Forests (CCF) Process Change (Project Director), reporting to the Principal Chief Conservator of Forests (PCCF) UP. Three Conservators would take responsibility for Process Change, Planning, Monitoring and Evaluatilon, and Extension, and a qualified accountant would be appointed as Finance Officer for Project Budget. An officer of CF or DCF rank, reporting directly to the Project Director, would be responsible for procurement matters and supported by a procurement agent. Each responsible officer would be assisted where necessary by one or more DCFs. No additional posts would be created as the posts would be filled by transfer of staff from existing posts for these activities, presently distributed in various parts of the UPFD structure. The PU would be responsible for coordination of all project-financed activities, in accordance with the time-bound action plan presented in the Project Implementation Plan (PIP) Annex 16. The project is, however, designed to ensure that project activities are integrated into the normal operations of the UPFD, and that the PU does not become a parallel operational structure. The Project Unit would cease to be designated as a separate entity at the end of the project period and responsibilities for activities initiated under the project would continue as part of the line structure of the Department. The structure of the PU and linkages with other functional units of UPFD are illustrated in the PIP.  5 These linkages would be reinforced by the creation of Departmental Technical Working Groups to ensure the technical quality of project-financed programs. Further details of the responsibilities and composition of these Working Groups are presented in PIP Annex 13. 4.2 The PU would be responsible for the preparation of annual Implementation Programs. That for the first year of the project was prepared prior to negotiations and for subsequent years, would be prepared by December 31, starting December 31, 1998. The PU would coordinate the recruitment of consultants and the commissioning of special studies. The PU would also be responsible for project- related procurement and accounting and would be the main contact for project supervision by the World Bank. Implementation Responsibilities by Component: 4.3 Details of implementation responsibilities by component are presented in Annex 5, together with the main assurances obtained to ensure effective implementation. Project Oversight: 4.4 Project Steering Committee. A Project Steering Committee has been established under the Chairmanship of the Secretary of Forests. The Project Director/CCF Process Change would be Member Secretary, and members would include the PCCFs UP, Hills, and Management, CCF Planning, East, Center, West, Hills, and Wildlife, Managing Director UPFC, and representatives of the Departments of Planning, Finance, Hill Development, Agriculture, Horticulture, Animal Husbandry, and Rural Development. The committee would meet bi-annually. Arrangements for coordination with other agencies at the district or other levels would be integrated with existing inter-sectoral coordination committees. Details of the membership and functions of this and other project committees and working groups are presented in PIPAnnex 13. Procurement (Annex 9): 4.5 Procurement would be in accordance with procedures acceptable to IDA as summarized in Annex 9. Although the Department has some experience of IDA procurement procedures a DCF in the PU in charge of procurement, would be appointed with responsibility for coordinating procurement requirements and the preparation of equipment specifications, procurement schedules, and bidding documents. Funds for the recruitment of a procurement agent would be available. Procurement would be in accordance with the Procurement Schedule presented in PIPAnnex 13. Standard procurement documents as already agreed with GOI would be used. Design and actual tender documents for works and. goods to be procured would be approved by IDA. Progress with procurement would be reported in the six-monthly project report, in the format presented in PIPAnnex 12. Disbursement: 4.6 Disbursements against civil works and equipment, seeds, fertilizer, construction materials and supplies, on contracts exceeding US$200,000 equivalent and consultant contracts exceeding US$100,000 equivalent for firms, and US$50,000 equivalent for individuals, would be fully documented. Disbursements for other expenditures would be made against Statements of Expenditure (SOEs). Supporting documentation for SOEs would be retained by GOI and GOUP and be made available to Association staff during supervision. Forest development costs eligible for reimbursement include costs of nurseries, land preparation, including labor inputs for tree planting, maintenance and protection.  6 Expenditures for project activities incurred after March 31, 1997, including works, goods, training and consultancies, would be eligible for retroactive financing, up to a maximum of SDR 3.7 million (US$5.0 million equivalent). All contracts and items to be financed retroactively will have been procured in a manner acceptable to the Association. Disbursements are projected over a period of five IDA fiscal years, from 1998 to 2002. The closing date of the Credit is July 31, 2002. 4.7 To facilitate project implementation and to reduce the volume of withdrawal applications, a Special Account in US dollars would be established in the Reserve Bank of India, with an authorized allocation of US$4.0 million. Assurances were obtained at negotiations that GOI and GOUP would implement a system satisfactory to IDA for channeling funds required for carrying out the project. An understanding was reached at negotiattons that GOI would release anticipated project expenditure in the form of advance assistance to GOUP, and that on receipt of funds from GOI, GOUP will immediately transfer such funds, together with quarterly counterpart contributions to project accounts of UPFD as the implementing agency. Accounting, Financial Reporting and Auditing Arrangements: 4.8 iAccounting and Financial Reporting. Responsibility for project accounting and processing of reimbursement claims would lie with the Finance Officer in the Project Unit. UPFD would establish a separate Project Account. which, together with supporting documentation, including contributions from GOI and the Credit, would provide a comprehensive record of project financing and expenditures. The Finance Officer would be responsible for ensuring that the accounting system provides information on expenditures by component and category, and that financial reports in the format agreed with IDA show actual versus budgeted expenditures for the current period and to-date. Information regarding the method of procurement, would be required so that limits of procurement laid down in the Procurement Schedule are monitored. The Finance Officer would also be responsible for ensuring that documents for transactions, including Statement of Expense disbursements are made available to IDA for review. The Project Account and the Special Account would be subject to normal GOI and GOUP accounting procedures and controls. UPFD would establish a Project Financial Management System for project accounting by June 30, 1998, with specifications and outputs agreed with IDA. This system would be integrated into the proposed FMIS and would therefore be designed to be fully compatible with the future system. A proportion of the remaining Japanese Grant Funds, provided for project preparation, would be used to design and install the financial management system. 4.9 Auditing. Project accounts would be audited annually by an independent auditor in accordance with standards acceptable to IDA. Monitoring and Evaluation: 4.10 Direct operational responsibility for monitoring and evaluation activities would rest with the PU officer in charge of Monitoring and Evaluation. At headquarters, the PME Unit would fonm a nodal point for system development, the provision of technical advice, quality control and coordination of training. The Information Systems Officer in the PU would be responsible for ensuring that the Forest management Information System serves the needs of monitoring and evaluation. Changes in management of the sector for implementation of the agreed strategy would require changes in the approach to monitoring and evaluation to ensure that these functions become an integral part of the planning and implementation of the work of UPFD. Key development objective indicators are presented in Annex 1. More detailed indicators required to monitor project implementation are presented in PIP Annex 10 and these would be finalized and if necessary further developed by UPFD in the course of the  7 design and implementation of the monitoring system. These, together with monitoring and evaluation procedures, and the development of improved procedures where necessary, would be reviewed as an integral part of the overall management review referred to above. The design of Planning Monitoring and Evaluation (PME) systems and the choice of hardware and appropriate software would be dependent on the PME procedures developed and no new systems would be introduced until the completion of the review. 4.11 Reporting, Mid-Term and Completion Reviews. The PU would be responsible for preparing six-monthly progress reports to be submitted not later than January 31 and July 31 of each year for the preceding six months, in the format presented in PIPAnnex 15. It was agreed at negotiations that no later than January 31, 2000, a report integrating the results of the monitoring and evaluation activities of project progress would be prepared and reviewed and discussed with IDA no later than February 29, 2000 and the recommendations of the review would be thereafter implemented. The review would involve UPFD and IDA and would establish progress towards the main project objectives and not merely an inventory of disbursements. To this end, the review would focus on the key indicators presented in Annex 1, though the more detailed monitoring and evaluation data (See PIPAnnex 10) would also be utilized. The review would pay particular attention to policy reforms, changes in the approach of UPFD to the management of the sector and to the success of human resource development programs. Another important aspect would be the impact of JFM and Ecodevelopment programs on the condition of forest lands and PAs and the socio-economic conditions of participating communities. The operation and management of supporting NGO and ecodevelopment funds would be closely examined by the review team. The development and introduction of improved planting material and improved silvicultural practices would also be examined. Successful operation of the monitoring and evaluation system would be an important input to the review. To facilitate the review, the PU would take the lead in the preparation of project status reports. The reports would be distributed to all participants four weeks prior to the start of the reviews. 4.12 The project completion report would focus on the achievements of the project and its impact in relation to its objectives as reflected by the key indicators presented in Anne-x 1. In the light of the findings, recommendations would be made for future development of the forestry sector in Uttar Pradesh. The report would also examine the successes and shortcomings of the JFM and ecodevelopment programs and make recommendations as to how they could be improved. Terms of reference for the review team and its composition would be agreed with IDA, and the report submitted to IDA no later than six months after completion of the project. 4.13 Project Supervision. Project Supervision would be closely linked to the implementation schedule discussed above and would involve monitoring a number of key development objective indicators. There would be two missions during each year of the project, and the first mission would correspond with a project launching workshop, to provide assistance during the critical start-up period. Subsequently, the main supervision mission would coincide with the review of annual plans for the various project activities, taking place early in the fourth quarter of each year. In the second year of the project this main mission would coincide with a project review. There would be one additional supervision mission in the second quarter of each year. In addition to the usual indicators of physical and financial progress, which are related to the implementation and disbursement schedules and to the detailed cost tables, supervision would monitor key indicators of development impact in relation to the primary management objectives for the sector. UPFD staff, in particular, PU staff responsible for monitoring and evaluation, would play a key role in these supervision activities. Supervision missions would also monitor the planning and implementation of ecodevelopment programs and PA management.  8 BLOC'K 2: PROJECT RATIONALE 5. CAS Objectives Supported by the Project: 5.1 India Country Assistance Strategy. Report No. 14509-IN dated May 19, 1995. Discussed at Board on June 20, 1995. CAS Progress Report of May, 1996. 5.2 The proposed project would be consistent with the overall country assistance strategy, including the strategy for Bank assistance to the agricultural sector in India, which seeks to promote increased productivity and improve rural incomes through better selection of investments, product diversification, and more efficient public sector management. It is also consistent with the objectives of the Bank's forestry policy and the Asia Region's strategy for lending for forestry, which links policy dialogue with major investments in the forest sector. 6. Main Sector Issues and Government Strategy: 6.1 The main issues affecting the sector relate to legislation and policy, poor public sector management and associated human resource development, poor forest management and protection resulting in low productivity due to limited introduction of participatory forest management and the slow adoption of improved technology, poor incentives for private sector development, and adverse impacts of rapidly increasing human population on conservation of biodiversity. Many of these issues have been identified in the India Forest Sector Review (Report No. 10965 - IN 1992). The National Forest Policy of 1988 is: to ensure environmental stability and maintain ecological balance; to conserve the national biological heritage; to increase substantially the forest and tree cover in forest and farm lands; to increase the productivity of forests; and to ensure the participation of the people in the management of forests and trees to achieve these objectives. These objectives represent a major change from the traditional objectives for the forest sector so the State Forestry Action Plan (1996) sets out a new strategy for the development of the sector. This addresses the main issues identified above as it involves: changes in the policy framework; institutional development based on a changed management approach and, if necessary, structure in UPFD, linked to human resource development and improved planning and monitoring procedures; increased privatization through identification of the various stakeholders in the sector and transferring responsibilities from public to private agencies as appropriate, whilst at the same time strengthening linkages between the stakeholders; and changes in forest development programs that emphasize the participation of people in the management of forest resources. 7. Sector Issues to be Addressed by The Project and Strategic Choices: 7.1 The project specifically addresses the key issues related to: public sector management; improving forest protection, management, and productivity of forest resources through introduction of Joint Forest Management and improved technology; improving incentives and technical support to private sector growers; and improving biodiversity conservation and environmental management through involvement of communities and improved management of Protected Areas. The issues are summarized in matrix form in Annex 2, which identifies the issues, notes the effects, the proposed changes and the necessary actions. 7.2 GOUP has endorsed the State Forestry Action Plan, subject to any modifications required by the Nationail Forestry Action Plan, and have provided an associated statement of policies and actions that constitute the framework for improving the management of forests in Uttar Pradesh, including policy, institutional and technical reforms, summarized in Annex 2. Additionally, GOUP has issued orders to:  9 (i) Constitute Village Forest Committees with functional and financial autonomy under the Panchayat Raj Act and Rules; (ii) Notify the Village Forest Joint Management Rules and; (iii) Modify the Tree Protection Act and the Timber and Transit Rules to facilitate the development of farm forestry. Modifications to the rules governing forest Van Panchayats to give them similar status to Village Forest Committees with greater authority and control of funds would be drafted. The draft of a Government Order on ecodevelopment has been prepared. 7.3 Future development of the forestry sector in Uttar Pradesh will involve long-term programs, so a strategic plan is needed for the provision of IDA support to the sector over a period of about ten years. Given the area of forest in Uttar Pradesh and its economic and environmental importance to both the state and the nation, investments over a ten-year period could total more than US$300 million. However, the GOUP strategy for the sector, involves substantial change in the way the sector is managed and the introduction of innovative new programs for participatory management of forests. Lessons from previous Bank lending show that these changes take time and may slow implementation. Consequently, strategic planning for the provision of IDA support to the sector, is based on a two-stage approach. The first stage would be a project of four years duration, which is described below. This is designed to allow UPFD to develop the new processes, systems and skills required for implementation of the new GOUP strategy and to provide for necessary investments in the sector. Project support for improved management would have an impact on the sector as a whole. Investments in forest development and management would be initiated throughout the state, but in a small proportion of the 6.6 million ha of forest land and in a representative number of the villages located in forest fringe areas. These would form the basis of larger scale investments that could be provided in a second-stage project, that would build on experience gained, and incorporate any necessary modifications to programs and processes initiated during the first stage project. Approval for such a second stage project could be sought during the fourth year of implementation of the first stage. It is not possible to be precise about its magnitude as it would depend on implementation experience. However, it can be assumed that successful forest development programs would grow exponentially, so investments would be correspondingly greater. 8. Project Alternatives Considered and Reasons for Rejection: 8.1 Possible alternatives to the project would be a project of longer duration, or one that is more narrowly focused on a specific aspect of forest management. Experience with past forestry projects (Para 10) suggests that these alternatives would not be effective mechanisms for providing support to the sector. Alternatives for individual components are discussed below. 8.2 Institutional Development. UPFD is the main public sector agency responsible for management of the forest estate and as such, the project provides support for its development. The Uttar Pradesh Forest Corporation (UPFC) plays an important role in marketing of forest produce, enjoying a monopoly position, without having any production responsibilities. A change in the role of the Corporation that would impact on the future role of UPFD has been considered, but no agreements have been reached, prior to the completion of a project-financed study to examine options. 8.3 Forest Development. Alternatives for management of forest reserve land are constrained by the fact that UPFD is the legal custodian. JFM arrangements permit communities to participate in forest management but title to the land remains with UPFD. Cost sharing arrangements are still under consideration. Private sector involvement in existing commercial plantations in forest reserve land was considered, but GOI legislation does not perrnit the leasing of reserve forests to the private sector. Another altemative would be some form of joint venture between UPFC and the private sector, but this would depend on future decisions about the role of the Corporation. The extent of private sector  10 provision of extension services for farm forestry was considered, together with the level of charges to be levied. The operational difficulties experienced by existing wood-processing industries mean that they would not at present adopt outreach programs. However, pilot operation of private nurseries and associated extension services is being promoted in five districts. 8.4 Research and Technology. Forestry research has had a low priority for some years in Uttar Pradesh. Alternatives include contracting out research and this option remains, as disbursement of research funds is dependent on the development of a strategic research plan and the appointment of staff. 8.5 Conservation of Biodiversity. Alternatives for this component include provision of support for selected species such as the tiger, and a focus only on existing Protected Areas (PAs). These were rejected because of the importance of establishing PAs for the conservation of the full range of species and ecological conditions in Uttar Pradesh. Differing levels of support for selected PAs were also considered, but disregarded either because they were inadequate or could not be implemented. 9. Major Related Projects: 9.1 Financed by the Bank. The World Bank has supported ten projects in the field of forestry and resource conservation in India with lending amounting to about US$500 million. The most recent are listed below. Project Effectiveness Date Last Form 590 Ratings IP DO State Forestry Projects Maharashtra 5/19/92 S S West Bengal 6/23/92 S S Andhra Pradesh 7/29/94 S S Madhya Pradesh 9/29/95 S S National Projects Forestry Research Education and Extension 9/30/94 S S E,codevelopment 1/1/97 na na 9.2 Financed by Other Development Agencies Development Agency Project Cost Rs.(Millions) OECF Gujarat. Integrated Forestry Development Project 6,080 Rajasthan Afforestation and Pasture Development 1,075 Rajasthan Afforestation Project Aravalli Hill 1,669 Rajasthan Forestry Development Project 1,400 Tamil Nadu Forestry and Ecorestoration Project 4,500 Karnataka Forestry and Environment Project 5,600 United Kingdom Western Ghats Forestry Project 830 Himachal Pradesh Forestry Project 150 EU Haryana Rehabilitation of Common Lands 480 FRG Himachal Pradesh Ecodevelopment for Changar Valley 100  11 10. Lessons Learned and Reflected in the Project Design: 10.1 Experiences gained through supervision, project completion reports and reviews of the sector in India and the Asia region have been assessed. In the past, forestry projects in India mainly providing support for social forestry and watershed protection activities have had mixed success. The involvement of local people in some of these projects was inadequate. Many of the projects encountered implementation problems due to slow project start-up, institutional weaknesses and insufficient local funding. The major lessons from the early projects was that the programs were inadequate to address the complex issues affecting the forest sector. Other important lessons have been learnt from more recent projects. These include: the need to ensure Government commitment to and action on policy and institutional reforms; an emphasis on the introduction of improved environment and biodiversity friendly technology, particularly improved planting material; better extension services; better processes to involve local communities in the planning and management of forest resources and; the need to maintain staff continuity of project management and to build procurement skills. These lessons have been taken into account in the design of the proposed project. 11. Indications of UPFD Commitment and Ownership: 11.1 UPFD is conscious of the need for change in the management of the forest sector and this is reflected in the State Forestry Action Plan, which presents a radical agenda for change. GOUP requested GOI to seek Bank finance to assist with the introduction of the necessary changes and the implementation of the action plan. UPFD staff participated with the consultants in the preparation of the project and were involved in intensive dialogue during Bank pre-appraisal and appraisal missions. UPFD have also initiated agreed actions with PPF funding, most significantly, reorientation and training of staff, as well as additional studies. Government commitment is also reflected by action taken to meet the conditions of negotiation which include policy reforms and institutional arrangements for implementation. 12. Value Added of Bank Support: 12.1 Future development of the forestry sector in Uttar Pradesh in accordance with the National Forestry Policy will require long-term commitments. The Bank is one of the few institutions that could provide the necessary continuity of support. In addition, the Bank's involvement in similar state forestry projects provides a mechanism for transferring up-to-date practical experience with project implementation. This experience enables the Bank to engage in a constructive dialogue on sector management issues with both state and central governments. The Bank is also in a position to ensure that improved technology will be made available to UPFD in a timely manner, both through its support for the national Forestry Research, Education and Extension Project, and through linkages with international forestry research organizations. The proposed project would be consistent with the overall country assistance strategy, including the strategy for Bank assistance to the agricultural sector in India, which seeks to promote increased productivity through better selection of investments, product diversification, and more efficient public sector management. It is also consistent with the objectives of the Bank's forestry policy and the Asia Region's strategy for lending, which links policy dialogue with major investments in the forest sector.  12 BLOCK 3: SUMMARY PROJECT ASSESSMENTS (Detailed assessments are in the project file. See Annex 10) 13. Economic Assessment (see Annex 6): Cost-Benefit Analysis Project: Project excluding ANR-sal: NPV (12%, 35 years): US$29 million NPV (12%, 35 years): US$5 million ERR (35 years): Not Appropriate ERR (35 years): 13% 13.1 Benefits. The project would increase, directly or indirectly, the production of wood, NTFP, and animal products which would benefit the rural poor and improve the supply of wood to forest-based industries. About 1,000 forest fringe village communities and a further 230 communities on the plains of Uttar Pradesh, participating in the management of about 250,000 ha of forest would receive direct benefits from the project. The benefits include not only the improved access for communities to forest products, but also the benefits resulting from the use of village funds generated through the program, for improved agriculture and alternative income generating activities. The project would have important benefits in terms of empowerment and equity as about 5 million person-days of employment would be generated, a benefit which 'would be almost wholly captured by the poorest and landless households. Processors and marketers of wood and NTFPs would also benefit through increased supply of raw material, resulting from the improved management by UPFD of less degraded and often high value forests, from improved productivity of commercial plantations, and from the development of commercial plantings on farmers' land. There would be significant institutional benefits including empowerment of communities and the transfer of responsibility for future funding of forestry conservation from the state to the community. There are major environmental benefits resulting from the project - of particular importance in the hills of Uttar Pradesh. 13.2 Economic Analysis. The direct and quantifiable benefits of the project are mainly due to investments in the management and development of forests by: (a) dependent communities under JFM arrangements for local use; (b) farners for on-farm commercial plantings; and (c) by UPFD for (i) commercial plantations and (ii) Assisted Natural Regeneration (ANR) of Sal. The economic analysis is, therefore, in three parts focusing on Joint Forest Management, private farm forestry, UPFD management of forests, mainly sal forest in the terai. These analyses are discussed briefly below and summarized in Annex S and PIPAnnex 16. Details of the calculations are presented in Working Paper 7. A time horizon of 35 years was assumed. Cashflows were discounted to the base year, using the Opportunity Cost of'Capital (OCC) for projects in India, currently estimated to be 12%. Overhead costs directly related to forest development were apportioned to sub-components on the number of divisions involved. The benefits of the conservation of biodiversity, and research and technology components have not been quantified. 13.3 Economic Rates of Return (ERR) calculated for the JFM sub-components, show significant regional variations, though it is dominated by JFM in the hills. The overall (private) ERR to JFM is estimated at 10%, but excludes the non-quantified externality or environmental benefits stemming from JFM project interventions. An additional 18% of discounted production benefits are needed to obtain an OCC of 12%. This break-even environmentalpremium amounts to Rs 340 per hectare per year over 20 years of'protected land under JFM and can be compared to society's willingness to pay for downstream environmental benefits. Rs 340 per hectare is equivalent to about 50kg of rice or less than 2% of mean rice yiellds in the Gangetic Plain. This suggests that the project could just be justified on the basis of the private and externality benefits associated with JFM component alone. Further, in areas where existing rootstock creates scope for replacing expensive planting with less expensive rehabilitation through  13 protection, the incentives provided under JFM, if effective, should lead to significantly reduced costs per ha thereby allowing greater coverage and, therefore, more benefits to be associated with project costs. 13.4 However, there are additional benefits arising from other sub-components. Modest assumptions about the uptake of farm forestry (ERR of 16%) and about incremental yields on UPFD commercial plantations (ERR of 15%) increase the overall ERR to 13%. The economic benefits of UPFD management of ANR-sal, which were calculated on the basis of an assumed delay of 5 years in harvesting sal in the terai, provide substantial net incremental benefits. These dominate the overall project economic returns since they are strongly positive from the first year. The overall NPV(12%, 35 years) was Rs 1,007 million (a meaningful overall ERR was impossible to calculate). 14. Financial Assessment (see Annex 6): NPV=US$29 million (12%, 35 years) FRR= NA 14.1 Income Analysis - Joint Forest Management. The incentives for communities to participate in JFM depends in part, at least, on the arrangements for the sharing of benefits and costs between communities and FD and on any benefits from direct employment. It has been assumed that the communities would provide general 'ward' over the entire micro-plan area, and would contribute about 20% of planting costs, roughly equal to 'watch'. The income analysis relates to the benefits and costs as experienced by the community under these arrangements and shows positive returns (an FRR was not possible to calculate). These were especially significant in areas where there is growing stock and scope for coppicing. Under the JFM arrangements, communities have a choice between rehabilitation of the forest through planting or protecting. The analysis showed that although the value of the production benefits were similar, the employment benefits were slightly higher for planting, but under protection the community could use the money for other income-generating activities. The impact of these procedures will need to be monitored during the project. 14.2 Farm Forestry. The costs and returns to a private farmer of agro-forestry investrnent were estimated on the basis of the following assumptions: (a) on each plot of 1 hectare, the area under agriculture would decline over time depending on the species planted (b) agricultural land is valued at its approximate rental value; (c) approximately 400 seedlings are planted per hectare; (d) a range of species would be planted in different regions. On the basis of these assumptions, the financial return per hectare to a mix of species was estimated to be 26%. The model is not more widely adopted at present due to marketing constraints and regulations governing felling and transport of trees on private land, which have been modified prior to negotiations. 14.3 Revenue Flows to Typical Village Forest Committees (VFC). The Village Forest Development Fund (VFDF) brings together the cash transactions of the VFC, including input costs and eventually, revenue shares. The flow of funds through the VFDF was analyzed for each region using the micro-plan model to simulate the flows in and out of this account. Flows are either positive but slow to accumulate or show a large initial inflow (from an initial coppice) and lower subsequent flows. Overall, they provide a highly satisfactory revenue stream. 14.4 Revenue Flows to GOUP. The main source of revenue for the state is from the sal areas which require selection felling to enable regeneration. Under the project a total of 16,000 ha of these forests would be managed realizing an estimated total revenue of Rs 2,349 million (approx US$ 67 million) over the 4 years of the project. The revenue is not presently realized.  14 14.5 Fiscal Impact. The IDA Credit would cover about 82% total project costs. GOUP would contribute US$7.2 million over the four year period as shown in Annex 7. This compares with the total GOUP allocation for forestry of US$127 million for the 1993-97 plan period, which was less than 1% of state expenditures, and the Plan Budget of US$21.6 million for 1995-96. The substantial revenue flows from mlanagement of the sal forests in the terai would more than compensate for any GOUP outlays on the project, but it is important that mechanisms be established to ensure that adequate budgetary provision is made for management of these areas in a sustainable manner. 15. Technical Assessment: 15.1 Project proposals for improvement of sector management are linked to a management consultant study of the existing management practices and structure of UPFD. The project-financed human resource development program is based on the foremost thinking in India on manpower planning, skill gap analysis and competency-based training. Forest management planning involves the development of Forest Idanagement Plans (FMPs, formerly known as Forest Working Plans) and project-financed improvements through increased use of spatial and remote sensing data, supported by a new FMIS that would include GIS, introduces state-of-the-art technology. Forest management technologies would be suited tD particular resource and socio-economic contexts with varying roles and responsibilities for UPFD, forest user groups and farmers. In JFM areas forestry practices include protection, enrichment planting and coppice management. Management of less degraded forests by UPFD forests has in the past been based on four established silvicultural concepts set out in FMPs: (i) Coppice with reserves: mainly in the dry mixed deciduous forests in the Vindhyan region; (ii) Conversion by clear felling: miscellaneous mixed forest in the Terai, converted into industrial plantations; (iii) Shelterwood systems: sal forests in the Terai and chir pine forests in the hills; and (iv) Selection systems: sal forests on broken lands and hill slopes. Since the late 1970s FMP prescriptions have not been fully implemented in many areas, due to a lack of budgetary resources and concerns about uncontrolled illegal exploitation and adverse environmental impacts. This has resulted in forests with over-mature trees and a reduction in natural regeneration. The project would support UPFD to re-introduce these technically sound management concepts, with the exception of conversion by clear felling and the constraints imposed by the GOI ban on felling above 1,000m which prevents prescribed felling and overwood removal in pine forests. Management of natural forests would be further improved through project support for a more systematic approach to fire and grazing hazards, based on management rather than control, and the involvement of communities. Improvements would be introduced through the use of detailed site- specific plans (PIPAnnex 10) which would include an environmental analysis (PIPAnnex 18), for undegraded forests, and of site-specific micro-plans for areas to be managed under JFM arrangements. Improvement of the quality of planting material through seed selection and the introduction of modem nursery technology financed through the project, would provide the basis for significant technical advances in the management of public and private forests. Thus, project support for plantation forestry is dependent on the use of improved planting material and silvicultural practices, whilst the focus of the farm forestry program is the development of modem nurseries producing high quality seedlings, using selected seed. Similarly, iimproved management planning for Protected Areas and the development of strategic plans, leading to the eventual establishment of an Integrated Protected Area System for the state would mrake important technical contributions to successful biodiversity conservation programs. 16. i[nstitutional Assessment: 16.1 ]Executing agency: UPFD is a long established department with a well-defined structure. Officers are members of the Indian Forest Service, an all-India senrice, with rigorous selection and training procedures. Other staff constitute the State Forest Service. The Department has a long tradition  15 of forest management and a presence in all parts of the state, with a total staff of about 21,400. However, the traditional role of UPFD has been the protection and exploitation of forest resources for the state and industry. The new role required by the National Forest Policy requires a fundamental change in approach, from regulation and control, to participation and cooperation with local communities, and the provision of advice. The project would foster this major change in approach to which UPFD management is committed. As the rate of change is likely to be slow, the phasing of the project takes this into account and is explicitly linked to the capacity to train staff. Management changes based on greater decentralization and delegation of decision making to the field level also represents a significant change from the present system, which tends to be centralized and hierarchical, and the readiness of UPFD to implement such changes will require careful monitoring. Policy changes associated with the strategy for the sector would provide greater incentives for private sector participation and project support for a Policy Analysis Unit, would assist UPFD to encourage the contribution of private entrepreneurs to improved productivity in the forest sector. Arrangements for project coordination would also serve to create stronger linkages with other government agencies. 16.2 Project Management: The Project Unit would play a key role in the management of the project, providing support to the PCCF and senior staff of the Department. UPFD have already appointed a Chief Conservator of Forests as Project Director, and all other staff of the Unit. The development of a project- finance Forest Management Information System based on an assessment of information needs at different levels of UPFD, will provide an invaluable tool for improving management of the Department as a whole, and not just of the project. 16.3 Institutional Development Costs: The total cost of the institutional development component would be US$12.37 million, of which about 40 percent would be devoted to the training and staff development. Of the remainder, about 35 percent would be used for development of the FMIS. The total area of forest in Uttar Pradesh is about 6.7 million ha of which about 60 percent is in the hills. These forests are important from an environmental perspective, and because of their essential contribution to the livelihood of much of the rural population in providing fuelwood and non-timber forest products. Projections indicate a fuelwood deficit of about 15 million m 3 by the Year 2000, whilst deficits of 3 industrial wood supply are estimated at over 10 million m . Expenditure of US$12.37 million on developing the institutional capacity of UPFD amounts to about 8 cents per 100 people or less than $2 per ha of forest land over 25 years. 17. Social Assessment: 17.1 Social Variations and Complexity. Socio-economic conditions vary considerably from region to region of Uttar Pradesh. In many areas, social entities like family, caste and political factions are more significant than any collective sense of village community. This setting is not always conducive to joint management of natural resources. Thus a critical aspect of developing JFM in a forest area is good social targeting that will identify the most dependent forest users. The target group would most often be the poorest families in a village who depend on forests for their livelihood or for meeting basic needs. The procedures for stakeholder identification and social targeting in each village will use gender, poverty, class, caste, and tribal group as criteria for ensuring access of all vulnerable and disadvantaged groups to forest products, as well as their participation in forest management committees. The project's major target groups would include poorer general and scheduled caste villagers, and tribal groups. Their concerns are, therefore, central to the project and are addressed in an integral fashion under the rubric of social impact, participation and equity, rather than as a subsidiary tribal development plan or poverty alleviation program. There would be no involuntary resettlement associated with the project and the  16 social targeting process criteria would exclude groups and families who only have a rent seeking interest in forest management. 17.2 In contrast to other UP regions where caste and class cause social fragmentation, villages in the Hills are fairly homogeneous, consisting mostly of Thakurs and Brahmins. There are fewer Scheduled castes and tribes in the Hills than in UP in general. The prospects for JFM in the Hills are good for the following reasons: (i) villagers in the hills are highly dependent on forests for their livelihood; (ii) there is considerable social cohesion and community based leadership; and (iii) villagers have a strong tradition for cooperation in forest management in the framework of Van Panchayats. In the Terai, JFM is likely to face considerable challenges. The socio-economic conditions here are very different from any othier region in the state. The villages in the Terai are socially heterogeneous and consist of immigrant groups like Punjabis, Bengalis, and tribals who were brought in from the Hills as laborers to fell the forest. There is also a sizable Gujjar population who depend strongly on the forest for animal grazing which is part of their traditional nomadic lifestyle. All these groups have settled in the area over the last 50 years. Punjabis and other recently settled big farmers play a significant role in the rural economy and the local power structure and as active rural entrepreneurs they are likely to have strong vested interests in JFM arrangements. In the Terai area, a cautious approach would be adopted under the project, whereby more time would be allowed for participatory planning processes, stakeholder analysis, and social targeting. The arrangements for JFM and eco-development acknowledge the diversity of the current access and use of forests by various groups. 17.3 Poverty. The faces of poverty vary from a more equal distribution in the Hills to more rigid inequality between rich and poor in the East and the Bundelkhand. The Hills are the poorest with a per capita income half that of the state average. Poverty in the Hills stems from a disruption in the way the Hill peoples used to control and manage their natural resources through close integration of crop cultivation, animal husbandry and forestry. The diminishing forest cover and loss of traditional community ownership of reserve forests have eroded the self-sufficiency of the farming system and over-exploitation of community forests close to villages. As a response to poverty men have migrated out for jobs leaving women and children with heavy workloads including difficult and time-consuming collection of fuel-wood, fodder, and NTFP. There is a harsh daily life for the poor trying to make ends meet as tenant small-holders and seasonal laborers. Seasonal unemployment is endemic. The response is migration for work and subsistence loans from moneylenders or patron landlords. For JFM to also address poverty, and create assets and income for the poor, careful social targeting becomes crucial. The project's strong emphasis on giving NGOs a direct role in JFM planning and implementation would be a crucial factor for ensuring a poverty alleviation focus. The project's emphasis on training FD staff and NGOs (as Spearhead Teams)in a basic version of stakeholder analysis, social targeting and formation of user groups would include sensitivity to poverty aspects. The fundamental incentive for the FD in targeting poor families for the forest user groups is that: if the poor, who rely on the forest for their livelihood, are not included they will go on using the forest anyway, and in a way that could create conflict and undermine sustainable forest management in the long run. By targeting the poor not only will JFMA help to alleviate poverty, it will also create a socially sustainable basis for forest management. The JFM rules and guidelines ensure that there will be representation from "backward classes, scheduled castes and/or scheduled tribes". Since these communities usually belong to the poorest strata, there is a good possibility that the poor will get an active voice on the VFC. 17.4 Gender. JFM, community forestry and eco-development will involve both men and women according to the existing gender division of labor in the management of natural resources. It is common for all social groups who will benefit from the project that men tend to control decision making on access to forests and existing types of forest management. It is also the men who play the broker role with local  17 government, the Forest Department, and the influential individuals or groups in the local or neighboring villages. Women (and children) constitute the work-force. They are the predominant collectors of fodder, fuel-wood and NTFP. In the Hills, where sometimes more than half the male population are migrant workers, women as de facto head of households play an even a stronger role in household affairs. They also have to work extremely hard. A study from Almora district shows that at certain times of the year women work 12-16 hours a day collecting and fetching fuel, fodder and NTFP from the forest. As with the poorer families and groups, the project will address the situation of women and their and problems as part of the social targeting efforts under JFM. NGO participation is equally important here. The capacity building inputs from NGOs would include supporting women in decision making functions, and in their efforts to enhance the availability of forest products for basic household needs and secondary incomes. The involvement of women would be institutionalized as follows: (i) women, as a special stakeholder group, will be represented in the VFC; and (ii) women will fortn special working groups during the process of micro-planning in order to single out activities that would benefit women. The criteria for women-friendly activities in micro-plans would be (i) activities in support of basic livelihood needs; (ii) activities that generates additional income for women and which remains under their control; and (iii) activities that that lessen their workload and saves time. 17.5 Indigenous Peoples and Scheduled Castes. Only about 2% of the population in Uttar Pradesh are classified as Scheduled Tribes. They are concentrated in the Hills, the Terai, and the Bundelkhand. Scheduled Castes are found in the Plains and the Bundelkhand, similar in numbers and social setting to the rest of Northern India. There are few scheduled castes in the Hills. In the Terai and the Hills, the Tharu, Gujjar, and various Pahari groups predominate. Tribals live in or around the forests, and their economy has always been dependent on the forests. These groups would therefore be the main participants in the JFM and eco-development programs. The development concerns of tribals are central to the project, as experienced in other forestry projects in India. Their concerns will be addressed through a sequence of participatory arrangements, social targeting and formation of forest user groups in particular. The project would therefore benefit the tribals population in targeting them as sub-groups and stakeholders, according to their specific needs and development potentials, rather than through subsidiary indigenous peoples development plan. Although there is a disappointing record of by-passing or misunderstanding the needs of tribals in development efforts, experience with JFM in tribal areas elsewhere in India shows good results. Tribal forest groups seem to function more effectively than groups consisting of non-tribals, probably because of the social and economic homogeneity of tribal villages. The project will draw upon lessons learned in Bank supported projects on AP and MP, as well as securing the involvement of local NGOs who have a long record in working with tribal groups. 18. Environmental Assessment: Environmental Category B 18.1 An environmental review was undertaken during project appraisal. It was concluded that project actions would have beneficial environmental impacts, consistent with many of the priorities in the India Environmental Action Program, 1993. Specifically, these include conservation and sustainable utilization of biodiversity in selected ecosystems, including conservation of endangered plant and animal species and critical habitats; afforestation, based on community participation in forest protection and management in watershed and other areas; wasteland development involving private and community tree planting; participatory fire and grazing management and; soil and water conservation. Estimates of the value of some externalities have been discussed in Para.13.3. There would be no major negative impacts arising from project actions. Environmental considerations would be mainstreamed in almost every component of this project, and integrated in planning, design, implementing, and monitoring activities both at the local and regional scales. PIPAnnex 18. Thus, the project would support the completion of environmental analyses associated with site specific management plans in sal forests. The  18 project would also ensure that these analyses are extended to the management of other forest types and forest management activities in the near future. In addition, environmental criteria would be included in the selection of priority sites for UPFD forest management and JFM, and environmental analysis and forest ecology training courses would be provided for UPFD staff. The project would also finance a Strategic Environmental Study to assess the social and ecological impacts, at the State level, of reintroducing the silvicultural activities that have been suspended since about 1980. The project is consistent with the National Forest Policy, the State Forestry Action Plan and the World Bank Operational Policies and Directives for forestry activities and environmental assessment (OD/OP 4.01; 4.36 and 4.04), Indigenous People (OD 4.20), and Involuntary Resettlement (OD 4.30) 19. Participatory Approach: Identification/ Implementation Operation Preparation Beneficiaries/community groups CON COL COL Intermediary NGOs CON COL COL Academic institutions CON CON NA Local government CON COL NA Other donors CON NA NA CON = Consultation COL = Collaboration NA = Not Applicable 20. Sustainability: 20.1 Institutionally, the significant commitment by UPFD to the process of change underlying the project, discussed in Section 11, is an important indicator of the sustainability of the project. From a technical point of view, the mainstreaming of environmental concerns into the planning and implermentation of UPFD activities contributes to long-term sustainability, while the very considerable revenues generated from management of high value sal forests in the terai ensure the overall financial sustainability of the project (See Para. 14.4) Elsewhere, successful introduction of JFM involving active participation of communities is essential to achieve project objectives in a sustainable manner. Community contributions to forest management would be not less than 20% of costs over the first five years, at which point the benefits would be such that communities could manage these areas in a sustainable manner.  19 21. Critical Risks (see fourth column of Annex 1): Project outputs to development objectives Risk Risk Rating Risk Minimization Measure Improved Sector Management Political support for policy and institutional Low Agreement on sectoral strategy with associated policy reforms is not maintained so that new policies changes formalized through the issue of Government can not have an impact Orders. In addition, as this four-year project is the first stage of a planned phased approach to sector development, it provides a means for GOUP to demonstrate commitment to change. Process change and staff training and Low Institutional development lying at the heart of the project reorientation are not undertaken, or do not addresses this risk. A major focus would be on human equip UPFD to fulfill its role as the nodal resource development to reorient staff and equip them with public sector agency for implementation of the the required competencies and change the current new strategy hierarchical supervision relationships, to support relationships. In addition, the project supports the introduction of new management practices to ensure that planning is decentralized and site-specific, rather than centralized, target driven and based on pre-determined models Increased Forest Cover Political support for community institutions is Low Political support for increased local government and not maintained. community participation in decision making is enshrined in the Panchayati Raj Act Participatory arrangements for management of Low Development of guidelines and criteria to promote and forests does not prove effective measure participation in decision-making by local communities. Analysis of cost and benefit sharing arrangements, indicate that there are strong incentives for participation, and these will be monitored. Staff training in participatory techniques will support the development of sustainable and empowered local forest institutions. Improved Forest Productvity Budgetary and staffing commitments to Medium Project funding for research is dependent on development of research not maintained a prioritized research program and adequate staffing UPFD is not able to provide appropriate Medium The introduction of private sector nurseries and associated advice to the private sector to ensure that new extension services will reduce this risk technology is adopted on a widespread basis. Improved Conservation of Biodiversity Political will for biodiversity conservation not Low GOI legislation and the active conservation lobby will maintained ensure that biodiversity conservation remains an integral part of GOUP programs.  20 Critical Riisks (Contd.) Project comnponents to outputs Risk RiskBRating Risk Minimization Measure 1. InstiNttional Development Funds for management consultancy not Low Process change forms the core of project design, strongly utilized endorsed by UPFD. Activities undertaken prior to project Training plan not complied with effectiveness which include measures to change policies, Completion of system design consultancy and completion of an initial management study, and initiation of an procurement of equipment delayed. appropriate reorientation and training program, indicate UPFD commitment to change and ability to mobilize consultancy advice. Approval of the second phase of the project will be dependent on continuing commitment. Project Unit does not remain fully staffed Medium Assurances that key staff would be maintained in position would be sought 2. Forest Development UPFD do not adopt participatory approach to Low The agreed strategy and State Forestry Action Plan emphasize forest management the necessity of adopting participatory forest management. In addition, project-supported reorientation and training programs ensure that staff will understand and promote the concept. Assurances were obtained at negotiations that budgetary flows Budgetary flows for UPFD management of Medium to will be maintained, but continuing state-wide budgetary forests is not maintained. high shortages may put compliance with the assurances at risk. Agreed policy changes will inprove the environment for private growers, and long-term demand for timber in India will Incentives for private sector growers do not Low to increase. However, local market failures may adversely affect remain attractive medium incentives 3. ResearchA and Technology UPFD do not recruit appropriate research staff Medium Project funding for research is dependent on development of a and do not maintain adequate budgetary prioritized research program and adequate staffing support for research 4. Conservation of Biodiversity UPFD do not maintain staffing strength of Low Project funding for this component is dependent on maintaining Wildlife Whig adequate staffing. Overall project risk rating Support for ILUPFD does not result in improved Low The provision of IDA support to the forest sector in Uttar conservation and increased productivity of Pradesh is based on a two-phase approach. This four-year natural forests, nor an increase in production project is the first phase, designed to allow UPFD to develop of forest products from non-forest land, and no the new processes, systems and skills required for the improvement in biodiversity conservation. implementation of the new GOUP strategy for the development of the sector. The second phase project would be dependent of successful implementation of the first phase and building on experience gained and incorporating any necessary modifications to programs and processes.  21 BLOCK 4: MAIN LOAN CONDITIONS 22. Assurances: Accounting a) UPFD would establish a separate Project Account, which together with the Special Account to be established by GOI would be subject to annual audit (Para. 4.7 and 4.8); b) A Financial Management System for project accounting would be established by June 3o, 1998, with specifications and outputs agreed with IDA (Para. 4.7); Implementation c) An annual Implementation Program satisfactory to IDA would be prepared by December 31 of each year for the following financial year, starting December 31, 1998. (Para. 4.2); d) The review of management processes in UPFD would be completed by December 3 1, 1998, findings discussed with IDA and agreed modifications to management procedures introduced not later than December 31, 1999 (Annex 5. Para. 1); e) A Human Resources Development Plan for UPFD, setting out staffing policy linked to proposed changes in the management system, would be prepared and reviewed with IDA by March 31, 1999 and an agreed action plan implemented in a phased manner by February 29, 2000 (Annex 5. Para. 2); f) An annual training plan would be prepared and discussed with IDA not later than June 30 of each year, starting in 1999 (Annex 5.Para.2). In addition, by June 30, 1998: (i) Contracts for the provision of training during the first year of the project would be finalized; (ii) the Center for Forest and Natural Resource Management Development would be established and four course coordinators recruited on a contract basis; (iii) a contract for provision of technical support to the Center by an established training institute would also be finalized; (iv) a contract for placement and support of overseas trainees, with an institution acceptable to IDA, would be agreed (Annex 5. Para. 3); g) The first three JFM and Ecodevelopment microplans(Annex 5. Paras. 6 and 18), the first three Site Specific Plans and associated environmental analyses for the management of identified areas of forest to be financed with project funds(Annex 5. Para. 10) , and the first three fire and grazing management plans (Annex 5. Para. 12)would be agreed with IDA prior to implementation; h) A strategic analysis of the impact of different management systems for sal forest in the terai, on markets, revenue, forest sector expenditure, the environment and conservation of biodiversity would be completed by December 31, 1998 (Annex 5. Para. 10); i) Plantation sites would be identified in accordance with criteria agreed with IDA and plantations developed using improved planting material and silvicultural practices (Annex 5. Para. I 1); j) UPFD would phase out seedling production in at least four forest divisions and provide buy-back guarantees to private nursery entrepreneurs for a fixed number of seedlings meeting publicized quality criteria (Annex 5. Para. 14);  22 k) The implementation of the prioritized research program would be based on the strategic research plan agreed with IDA, and suitably qualified and experienced staff toundertake the research would be appointed by June 30, 1998 (Annex 5. Para. 15); 1) No later than January 31, 2000 prepare a report integrating the results of the monitoring and evaluation activities of project progress, which would be reviewed and discussed with IDA no later than February 29, 2000 and the recommendations of the review would be thereafter implemented (Para. 4.10). Management m) All staff of the PU and PAU (Annex 5. Para. 1) and the Wildlife Wing (Annex 5. Para. 16) would be appointed and in post by June 30, 1998. n) Responsibility for all PAs would be transferred to the Wildlife Wing by March 31, 1998; Involunta,y Resettlement o) There would be no involuntary relocation of any of the communities or individuals resident within PAs. Any proposals for voluntary relocation would be preceded by an independent study to assess the impact of such communities on the conservation of biodiversity within the PAs. All proposals would be consistent with GOI provisions and the Bank's OD 4.20 and OD 4.30 and would requjire the prior approval of IDA. In addition, a monitoring program by an independent agency acceptable to IDA would be established(Annex 5. Para. 17). BLOCK 5: COMPLIANCE WITH BANK POLICIES. This project complies with all applicable Bank policies. Task Manager: Ian Hill Country Director: Edwin Lim  Annex 1 Page 1 of 3 Annex 1 Uttar Pradesh Forestry Project Project Design Summary Narrative Summary Key Performance Indicators Monitoring and Critical Assumptions and Risks Supervision CAS Objective Better selection of investments and Allocation and utilization of Public sector more efficient management in the public sector budgetary expenditure reviews. forestry sector resources Project Development Objectives To: 1. Improve public sector management Changed management UPFD and IDA Continued GOUP commitment to of the forest sector in Uttar Pradesh; approaches. progress and the objectives of the National 2. Increase forest cover and Increased community supervision reports. Forest Policy and the State Forestry productivity; involvement in forest Evaluation at mid-term Action Plan. 3. Conserve biodiversity; management. and closing in an environmentally and socially Improving trends in area of sustainable manner, recognizing the forest cover, productivity and project is planned as the first phase of biodiversity. long-term support to the sector.  Annex 1 Page 2 of 3 Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks Project Outputs I. Strong UPFD with improved 1. I Appropriate sector policies 1. 1 Issue of GOUP Government Political support for reforms is administrative and forest adopted Orders maintained so that new policies management processes and can have an impact structure, working within a framework of appropriate sector policies 1.2 Recommended institutional 1.2 UPFD progress reports Process change, and staff reforms implemented showing implementation as % training and reorientation will of planned physical and equip UPFD to fulfill its role as financial targets the nodal public sector agency for implementation of the new strategy for forest sector 1.3 Strengthened human 1.3 UPFD progress reports, resources in UPFD with new surveys of VFC opinion and approaches and skills required qualitative assessment for implementation of SFAP. 1.4 Management processes for 1.4 UPFD and IDA progress (a) forest management; (b) and supervision reports administration based on timely, site-specific planning that includes monitoring feed-back linked to reliable data available from FMIS 1.5 Sustainable funding 1.5 UPFD and IDA progress mechanisms established and supervision reports 2. Mechanismrs to Increase 2.1 Upward trend in area of 2.1 FSI surveys Political support for community Forest Cover E,stablished forest cover institutions is maintained in the 2.2 No. of VFCs formed 2.2 Process documentation medium term UPFD M&E, consultants and NGOs Participatory arrangements are an effective means of managing forests 3. Technologies to Improve 3.1] Development of improved 3. UPFD Research progress Budgetary and staffing Forest Produclivity in Place planting material technologies at reports, UPFD M&E annual commitments to research 10 demonstration sites reports, project evaluation at maintained 3.2 Growth parameters, mid-term and closing survival, coppice count, UPFD is able to provide advice site/species matching in to communities and private managed forest areas sector entrepreneurs so that new 3. 3 50 % of all seed used is technology is adopted on a selected widespread basis 3.4 35% of all seedlings distributed are grade A 3.5 Reduced fire incidence 3.6 Area of controlled grazing 3.7 Area of private plantations 4. Processes to Improve 4. 1] Strategic plan for 4.1 Adoption of strategy by Political will for biodiversity Conservation of Biodiversity biodiversity conservation GOUP conservation is maintained Introduced developed 4.2 Completion of 18 PA 4.2 UPFD Wildlife progress management plans reports 4.3 Management of PAs 4.3 Ecological surveys and improved UPFD Wildlife and IDA progress and supervision reports 4.4 Mobilization of community 4.4 Socio-economic surveys support for PA conservation and qualitative assessments through ecodevelopment programs initiated around PAs _  Annex 1 Page 3 of 3 Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks Expenditure ($ millions) Project Components 1. Institutional Development * Sector Management UPFD and IDA progress and Management consultancy leads supervision reports to improved management system * Human Resource UPFD and training Development institutions progress reports * Forest Management UPFD Planning and M&E FMIS is actively used as input to Information Systems progress reports PM&E * Project Unit UPFD and IDA progress and Project Unit remains fully staffed supervision reports 2. Forest Development * Joint Forest Management UPFD M&E progress UPFD adopt participatory reports. approach to forest management VFCs representative of users of forest resources * UPFD Management UPFD and UPFC progress Budgetary flows for UPFD * ANR reports management of forests * Plantations maintained. * Forest Protection * Strip Plantations * Urban Forestry * Farm Forestry UPFD progress reports Incentives for private sector growers remain attractive * Operational Support UPFD and IDA progress and supervision reports 3. Research and Technology * Research UPFD Research and IDA UPFD recruit appropriate progress and supervision research staff and maintain reports budgetary support for research * Planting Material UPFD progress reports Improvement 4. Conservation of Biodiversity * Strategic Planning UPFD Wildlife progress UPFD maintain staffing strength * Management of PA System reports and IDA supervision for Wildlife Wing and * Ecodevelopment reports. responsibility for PAs transferred * Research Training, Public to Wildlife Wing Awareness  UTTAR PRADESH FORESTRY PROJECT Issues and Actions ISSUE EFFECT PROPOSED CHANGE ACTION '' ' '.':'.. . . .' ''','"':'"''''. :'," . .' '';' .'',-,'. '.. '" ' "'.'' ''. ''., .S' .' Indian Forest Act (1927). Does not National Forest Policy is not legally Recast the Indian Forest Act to meet GOUP to discuss with GOI the provide a comprehensive legal basis binding the requirements of the National ongoing review of draft legislation for the National Forest Policy (1988) Forest Policy (1988) Jurisdiction. Control of RF, civil and Different regulations and approaches Adopt consistent approach to Modify VP rules to give more soyam land and VP lands by UPFD, to community participation in forest communities by progressively giving authority and control of funds to VPs RD and VPs, respectively management. control of civil and soyam land and funds to VPs or GPs. UPFD to provide technical support. Panchayat Forest Rules (1976) give VPs cannot manage and control all Give VPs responsibility for civil and VPs responsibility for forest lands close to their village soyam lands close to the village, management, but give authority to irrespective of previous jurisdiction RD and UPFD Joint Forest Management. Legal JFM notifications give VFCs rights to Ensure consistency between JFM Constitute VFCs with functional and framework for JFM is uncertain in distribute benefits and control forest rules and requirements of the new financial autonomy under the the light of the new Panchayat Raj funds, but rights and control of all Panchayat Raj Act Panchayat Raj Act and Rules Act community funds are accorded to the Panchayat under the new Act  UTTAR PRADESH FORESTRY PROJECT Issues and Actions ISSUE EFFECT PROPOSED CHANGE ACTION ~~~~~~~~~~.. ... . . . .. . . ... , .. .,., ..,.. . ..'"""""''"' Industrial Supply. Large quantities of May lead to loss of revenue and Increase market competition Calculated allotment price to be forest produce provided to industry royalty as selling price calculated, linked directly to market price on annual contract basis rather than determined by open sale Introduce regular auctions for industrial supply of Acacia catechu NTFP. Monopoly collection and sale Disincentive to private sector Permit private sector involvement in Study alternative mechanisms for of some NTFPs participation and collectors do not NTFP marketing NTFP collection and sale that will receive market prices provide protection for collectors and ensure revenue is collected for the state and collectors. Discuss options with GOI. Undertake NTFP market study in different ecological zones UP Rural Areas Tree Protection Act Disincentive to planting of trees on Remove restrictions Modify Tree Protection Act and and UP Timber and Transit Rules. private land modify Timber and Transit Rules. Restrictions on felling of trees and Publicize changed regulations transit of wood. Seedling Prices. High quality tree Low pricing discourages private Seedling prices to cover full Publicize criteria for quality seedlings seedlings not readily available seedling product ion. Encourages production costs and profit. for each species. Permit increase in planting of sub-standard seedlings Encourage private sector seedling seedling prices. Announce closure of production by stopping all FD FD nurseries. Contract supply of seedling production in selected areas. seedlings required by FD in following W year, at pre-determined prices for