India - Third National Seeds Project

Document of The World Bank FOR OFFICLAL USE ONLY Report No. 1 6 5 4 6 IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Credit 1952-IN) May 5, 1997 Agriculture and Water Operations Division Country Department II South Asia Region 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 Currency Unit = Indian Rupees (Rs.) Rs. 13.5 = US$1 00 (Appraisal: June 1987) Rs.26.0 - US$1.00 (Intervening years: 1988-96) Rs.35.0 = US$1.00 (Completion Year: 1996) WEIGHTS AND MEASURES 1 hectare (ha) = ( 0,000 mi2) = 2.47 acres 1 kilogram (kg) 2.205 pounds 1 kilometer (km) = 0. 6214 miles I meter (m) 3 281 feet I square kilometer (kM2) 0 385 square miles FISCAL YEAR OF THE BORROWER April I to March 31 Vice President M Nishimizu Director R Drysdale Division Chief/Manager S Barghouti Staff Member H Harideep Singh, Financial Analyst  FOR OFFICIAL USE ONLY ABBREVIATIONS AND ACRONYMS AICCIP All India Coordinated Crop Improvement Project APIA Action Plan Implementation Agreement CSTL Central Seed Testing Laboratory DAC Department of Agriculture and Cooperatives DCA Development Credit Agreement ERR Economic Rate of Return GOI Govemment of India HYV High Yielding Variety ICAR Indian Council for Agricultural Research ICR Implementation Completion Report MOA Ministry of Agriculture NABARD National Bank for Agnrculture and Rural Development NSC National Seeds Corporation NSP I First National Seeds Project NSP II Second National Seeds Project NSP m Third National Seeds Project OP Operational Consultants OPV Open Pollinated Varieties PB Participating Bank PC Principal Consultants PMC Project Monitoring Committee PMU Project Management Unit SAR Staff Appraisal Report SAU State Agricultural University SFCI State Farms Corporation of India SSC State Seed Corporation SSCA State Seed Certification Agency TDC Terai Development Corporation 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.   IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr. 1952-IN) Table of Contents PREFACE .................................................................. i EVALUATION SUMMARY .................................................................. ii PART I: PROJECT IMPLEMENTATION ASSESSMENT ............................................ 1 A. PROJECT OBJECTIVES .................................................................. I Statement of Project Objectives .............................................................. I Evaluation of Project objectives ............................................................. 2 B. ACHIEVEMENT OF PROJECT OBJECTIVES .. .......................................... 2 Overall Achievement .................................................................. 2 Physical Objectives .................................................................. 3 Investment Credit Component ................................................................ 3 Productive Support Component .............................................................. 6 Program Component .................................................................. 8 Project Impact .................................................................. 9 C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT .................................................................. 11 D PROJECT SUSTAINABILITY ................................................................ 12 E. BANK PERFORMANCE .................................................................. 13 F. BORROWER PERFORMANCE .............................................................. 14 G. ASSESSMENT OF OUTCOME ............................................................. 14 H. FUTURE OPERATIONS .................................................................. 15 I. KEY LESSONS LEARNED .1  PART II: STATISTICAL TABLES Table 1: Summary of Assessments .......................... 18 Table 2: Related Bank Loans/Credits .................. , 20 Table 3: Project Timetable .................. 21 Table 4: Credit Disbursements: Cumulative Estimated and Actual .......................... ..... 22 Table 5: Key Indicators for Project Implementation ....................................... 23 Table 6: Key Indicators for Project Preparation .......................... 23 Table 7: Studies Included in Project ................. 24 Table 8A: Project Costs .25 Table 8B: Project Financing. .26 Table 9: Economic Costs and Benefits . 27 Table 10: Status of Legal Covenants .28 Table 11: Compliance with Operational Manual Statements .30 Table 12: Bank Resources: Staff Inputs 30 Table 13: Bank Resources: Missions .31 APPENDICES A. Aide Memoire .32 B. Borrower's Completion Report .39  IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr. 1952-IN) PREFACE This is the Implementation Completion Report (ICR) for the Third National Seeds Project (NSP III) in India, for which Credit 1952-IN in the amount of SDR 108.6 million (US$150.0 million equivalent) was approved on August 25, 1988 and made effective on September 28, 1989. The Credit was closed on June 30, 1996, after a one-year extension of the original closing date. Final disbursement from the Credit, which was fully disbursed, took place on December 13, 1996. A sum of SDR2.0 million (US$2.8 million equivalent) was canceled in May 1993. The ICR was prepared by an FAO/CP mission' which visited India in October 1996. It was revised by Harideep Singh (Agriculture and Water Operations Unit, Resident Mission, India), and reviewed by Hermnan van Wersch (Acting Chief Agriculture and Water Operations, Division II) and K. Uchimura (Project Adviser). The Borrower contributed to the preparation of the ICR through its views reflected in the mnission's Aide-Memoire and the draft ICR, and through the Borrower's Completion Report prepared by the Ministry of Agriculture, Government of India (MOA). Comments on the draft ICR were also received from National Bank for Agriculture and Rural Development (NABARD) and Indian Council of Agricultural Research (ICAR). The ICR is based on a review of the Staff Appraisal Report, legal documents, supervision reports and project files, as well as field investigations and discussions with Bank staff, Government of India (GOI), NABARD, ICAR, and participating organizations. C.J. Bevan, Mission Leader, M. Lemonius, Seed Industry Specialist, and A. Lieberg, Economist.   ii IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr. 1952-IN) Evaluation Summary Introduction 1. The World Bank has been associated with the seed industry in India since 1969 when it approved the Terai Seeds Project which established the Terai Development Corporation (TDC). The TDC served as a model for the two follow-on Bank-supported projects that established State Seed Corporations (SSCs) in nine states to take over responsibility for production and distribution of seed from the State Departments of Agriculture and the National Seeds Corporation (NSC). Project Objectives and Components 2. The Third National Seeds Project (NSP III) was designed to support GOI's effort to ensure timely and adequate availability of quality seeds of suitable varieties at economical prices. The objectives of NSP III were to: (a) reorient the operations of national and state level public sector seed corporations along commercial lines; (b) stimulate greater private sector investment (including in research and development); (c) improve the management of public sector variety development programs, and increase the quantity and improve the quality of breeder seeds produced; and (d) make seed industry regulation and control more effective. 3. These were to be achieved by: (a) reforming the SSCs based on a comprehensive review of their strategy and operations by management consultants; (b) providing a line of credit for refinancing by the National Bank for Agriculture and Rural Development (NABARD) of term loans provided by Participating Banks (PBs) to private seed companies and SSCs, (c) supporting investment to telescope variety development effort and enhance breeder seed production - implemented by the Indian Council for Agricultural Research (ICAR); and (d) providing equipment to seed regulation and quality control agencies. 4. Special Legal Covenants. Special legal covenants or agreements that were expected to promote the achievement of project objectives included the following: (a) reflecting the key principles of autonomy to SSCs in pricing and operational aspects, rightsizing staff levels, and reducing dependence on government funding in the reform Action Plan Implementation Agreement (APIA) that each SSC was committed to implementing; (b) linking releases of over 75 percent of the Credit in three installments to reform progress; (c) detailing the prerequisites of a comprehensive appraisal of the investment proposal by the PBs and a minimal return on equity of twelve percent for sub-loans to be refinanced by NABARD; and (d) requiring the 10 participating states to commit themselves to duly carry out the APIA.  111 5. Evaluation of Project Objectives. The project's objectives were generally appropriate, given the benefits that derive from the use of better seed, the scope for increasing the uptake of quality seed, the less than adequate performance of many SSCs, and a rather limited private sector participation in the seed industry with the prospects of only a modest expansion in the short term. 6. The project design was generally appropriate and adequately reflected the objectives. However, it was ambitious in assuming ICAR participation with the modest funds provided under the project, and in assuming that the Ministry of Agriculture (MOA) would succeed in reforming SSCs without any financial contribution from GOI. Both these inadequacies were addressed in the initial years of project implementation. The ICAR share was increased by Rs. 192 million, financed through project savings, and GOI passed on about US$55 million of the program component to the MOA to finance the SSC reform program. 7. A key project objective - that of reforming SSCs organizationally and financially - required considerable adjustment on the part of state governments and also called for high quality management staff which many SSCs found difficult to command given the recruitment and compensation scale restrictions. The Staff Appraisal Report (SAR) highlighted these as major risks. A longer-than-normal implementation period was therefore regarded as acceptable if it helped promote institutional changes to ensure the long-term viability of the reforming institutions. Implementation Experience and Results 8. Implementation of the project was delayed by almost 18 months due to start-up problems. At Credit closure, the project had partially achieved its objectives. Of the thirteen participating national and state seed corporations, only three have been fully financially restructured and appear to be profitable and financially independent. Four more corporations are expected to make a small profit in 1996 although they still have substantial debts and have not yet generated the required return on equity. The other six corporations, where Action Plans were finalized not long before Credit closing, still have to implement the reforms fully. 9. The project was more successful in facilitating private sector participation in the seed industry. Some 95 percent of project funds for refinancing by NABARD of term loans has been utilized by private companies. The project has also provided participating banks with training in appraisal of investment proposals from seed companies, together with first hand experience of lending to the private seed industry. Seed companies now report that there is no difficulty in raising capital for investments. 10. Investments to increase breeder seed production and generate new varieties have been carried out more or less as intended, although implementation was slow and, in a number of cases, was completed after Credit closure. There has been a substantial increase in the production of breeder and quality seed on the whole, and truthfully labeled seed by the private sector. However, as a result of delays in implementation, the 5-6 year timeframe for developing a new variety, and the normal two year timeframe for multiplication of breeder into certified seeds, any development of new improved varieties achieved to date or increase in the production of certified seeds during the project period cannot be directly attributed to the project. It is expected that the investment in research facilities by both the  iv public and private sectors will lead to the development of a number of new and improved seed varieties. In the near future, the increased breeder seed production should result in an increase in the production of certified seed. At full development, the private investment in quality seed production facilities is expected to yield an annual incremental production valued at about US$50 million. 11. Investments in quality control and regulation have been made more or less as envisaged; however, state seed certification agencies generally have limited staffing and operational autonomy, and there still is scope to improve their efficiency. 12. The current estimate of the project's economic rate of return (ERR) is 23 percent, down 9 percent from the appraisal estimate of 32 percent. The ERR is quite robust - even with an assumption of a 30 percent decline in seed production, it stands at 15 percent. 13. Project Sustainability. The ERR of the project is sufficiently robust to suggest sustainable economic performance. Given the number of SSCs expected to become commercially oriented, the success of private sector, apparent sufficiency of breeder seeds, and expected development of new/improved seed varieties, most of the project achievements are likely to be sustained. 14. More than half of the 13 participating SSCs are expected to become commercially independent as a result of the project. However, long-term SSC reform program sustainability, as measured by the full reform of all 13 participating SSCs, is not yet assured, depending on continued GOI and state government commitment to implement reforms. This commitment may not be forthcoming in the absence of GOI financial contribution to capital restructuring in states where APIA implementation is delayed and where state finances are in poor shape. 15. The continued development and expansion of the private sector seems assured, providing current policies are maintained. The pace of private sector expansion could, however, be increased by removal of seeds from the provisions of the Essential Commodities Act, and by either the removal of subsidies paid on open-pollinated varieties (OPV) of seeds to SSCs, or the extension of these subsidies to the private sector as well. 16. Increased production of breeder seeds is expected to be maintained. The sustainability of the initiatives to strengthen and develop new varieties is assured with ICAR having committed funds to maintain the facilities and meet the operating costs. Private investment in research facilities is also expected to yield new and improved seed varieties. Six of the ten assisted certification agencies are now free of government subvention and enjoy viable operations. To ensure their sustainability in the long run, state governments would need to commit themselves to the organizational reform of the agencies and particularly their autonomy to adjust prices of certification to reflect the true cost of the service provided. 17. Actual Costs, Financing and Implementation Timetable. At appraisal, the total cost of the project was estimated at Rs.2,396 million (US$177.5 million equivalent); and the amount of the Credit available was SDR108.6 million (US$150 million equivalent). Actual expenditure at the close ofthe Credit amounted to Rs. 5,212 million (US$181.8 million equivalent at historical exchange rates). The  v cost overrun in Rupee terms was due to devaluation of the US dollar against SDR, and of the Rupee against the US dollar. The magnitude of the overrun is largely a function of the Program Component of SDR 79.6 million which was to be disbursed in three installments, upon satisfactory progress in implementing financial and managerial reforms in the SSCs. In May 1993, at GOI's request, SDR 2.0 million was canceled. The reduced Credit of SDR 106.6 million was fully disbursed. The Credit financed about 83 percent of the total actual expenditure compared to 85 percent at appraisal. It was estimated that the project would be completed by December 31, 1994 and the Credit would close on June 30, 1995. Current estimates indicate that the final completion is not likely to be before June 30, 1997, although the Credit was closed on June 30, 1996 with a one-year extension. 18. Key Factors Affecting Achievement of the Major Project Objectives. These can be classified into: * Factors not generally subject to Government control. The Principal Consultants initially appointed were not able to carry out the assignment, as they did not have staff with appropriate financial experience. This delayed project start- up. Another negative factor was employee unrest (though short-lived) in National Seeds Corporation as a consequence of an effort to rationalize staffing levels. * Factors generafly subject to Government control. Of special mention is the promulgation of a new seed policy in 1988 that inter alia liberalized the seed import regime, permitted provisional notification and marketing of varieties/hybrids already registered in another country provided the material was introduced for official notification into the ICAR system, and facilitated the post-entry quarantine check process by allowing private importers to establish their own laboratories certified by a Designated Inspection Agency. More recently, ICAR has also extended sponsored breedership to the private sector. All these measures provided positive stimuli to private participation. * Factors generally subject to implementing agency control. These included inadequate staffing to monitor and report on the implementation of the productive support component by ICAR, and inadequate quality of, and consequent delays by PBs and NABARD in appraising, private sector sub-projects. 19. Performance of the Bank and Borrower. The Bank supervised the project competently, although it settled for less than full compliance with the conditions for the release of the third installment of the program component. At that time, a thorough review was undertaken of the progress made by all first and second batch SSCs. This demonstrated that although a small minority of SSCs had not fully implemented their APIAs, overall most of the conditions for the release of the third installment had been satisfactorily met. In the circumstances, it was considered that the whole project should not be prejudiced by the less than adequate performance of a minority of SSCs and the third installment was released. As for the Borrower, a project management unit (PMU) was established within the Department of Agriculture and Cooperation (DAC) after considerable initial delay. Technical progress reporting from the participating [CAR institutions was inadequate.  vi 20. Project Outcome Assessment. The project outcome is rated satisfactory in that the project has partly achieved its objectives, and there is good reason for believing that it will substantially achieve most objectives within the next five years. Summary of Findings, Future Operations, and Key Lessons Learned 21. Findings. The institutional, managerial, technical and financial adjustments promoted under the project have helped SSCs to improve their performance and set the stage for sustained development of a competitive commercially-oriented public sector seed sector. It has also helped in the development of a vigorous research-based private sector that is estimated to currently Y%ipply some 60 percent of all quality seed. The project has contributed to a substantial increase in the quantity of breeder seed produced and there has been an increase in the volume of quality seed produced. Although at this juncture, it is not possible to directly attribute any increase in the production of certified seeds or the development of new improved varieties to the project, in the near future, an increase in certified seed production and development of new improved varieties is expected. The project's re-estimated economic rate of return is a robust 23 percent. Long-term sustainability of project effort to commercialize SSC operations, as measured by full reform of all participating public sector seed corporations, is however not yet assured, and will depend on continued GOI and state government commitment to implement reforms in remaining SSCs. This commitment may not be forthcoming in the absence of Bank funding and given the poor financial situation in many states. 22. Future Operations. The DAC intends to maintain its support for the National Seed Program, and for the continued reform of the public sector seed corporations. In particular, through the involvement of staff of the Seed Division Cell who sit on the Boards of SSCs, it expects to be able to supervise completion of the reforms already initiated. Together with the cooperating ICAR units, Department of Agriculture and Cooperation will also ensure regular supplies of breeder seed. NABARD intends to maintain its program for seed sector development by continuing to extend refinance assistance to PBs to finance on-farm development activities such as minor irrigation and drainage works, and farm mechanization, in areas where there are a large number of contract seed growers. 23. Given the recent achievements of the private sector, and the limited opportunities for further investment in the public sector, there appears little justification for a future free-standing seed project. In some states, especially where implementing SSC reform was delayed, and where there is a clear need for continued public sector provision of quality seed, there might be scope for a seed component within a more comprehensive crop or unified diversification project. 24. Key Lessons Learned for Future Projects. The main lessons learned during project implementation are as follows: (a) Public Sector Reform. The project has demonstrated that it is possible to commercialize the operations of public sector enterprises providing it is well planned and there is government commitment to change. It has also shown that both public and private seed companies can co-exist and profitably produce and sell  vii seed of OPVs, at seed prices only 50 percent higher than grain prices. However, the experiences of both SSCs and certification agencies clearly indicate that reform, leading to the commercialization of public sector organizations, is less effective when the chief executive of an organization is deputed from another government department or agency. In contrast such reforms are noticeably more effective and sustainable when the chief executive has a tenured post for a period of not less than three, and preferably five years. In addition, it is essential that the chief executive has overall autonomy in the management of operations, especially in matters related to staffing and choice of activities/operations, and pricing decisions. (b) Importance of Private Sector. The project has demonstrated the importance of the private sector. Farmers have benefited from the regular introduction of new and better varieties by the private sector and competition has prevented exploitation of the market. In particular, the research-based private sector has come to dominate the high value-added hybrid seed market. The government should maintain the current policies for the seed sector and ensure that there are no unnecessary barriers to entry of private firms, no restrictions that inhibit the efficient operation of the private sector, and the private sector should continue to have equal access to improved germplasm produced by the research system. These aspects should be specifically addressed by the New Seed Policy on which preparatory work is underway. (c) Impact of Market Distortions. Subsidies could discourage private participation and could easily miss the target groups. Subsidies are currently paid only to SSCs for the supply of certified seed of new varieties (up to 10 years) of OPV such as rice and wheat. This has clearly kept efficient private companies from producing and selling such seed, and has provided a degree of protection for the more inefficient SSCs. Although intended as a subsidy for farmers, in practice, the experience of the project shows that it is a form of subsidy for SSCs as it helps maintain their business volume. If a subsidy needs to be paid on OPV seed, although there is no evidence that it is in fact needed, it should be paid to both private seed companies and SSCs to create a level playing field. Similarly, the present pricing system for breeder seed will have to be liberalized in order to enable production units to recover their costs in full. This will also encourage the development of efficient specialized private breeder seed producers. (d) Public Sector Involvement in the Supply of Quality OPV Seed. In a less than mature industry, the public sector may have to stand ready to fulfill roles not adequately performed by the private sector. Given the need to introduce new varieties of the main cereals to contain pest and disease pressure and improve yields, and the marginal profit from OPVs, it would appear that the public sector will have to continue to play a major role in developing and popularizing new varieties of OPV crops in the foreseeable future. The public sector will also remain  viii the principal supplier of quality seed in remote areas where transport costs absorb any marginal profit from producing such seed.   IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr. 1952-IN) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES Statement of Project Objectives 1. The Third National Seeds Project (NSP III) was designed to support GOrs effort to ensure timely and adequate availability of quality seeds of suitable varieties at economical prices. The objectives of NSP III were to: (a) reorient the operations of national and state level public sector seed corporations along commercial lines; (b) stimulate greater private sector investment (including in research and development); (c) improve the management of public sector variety development programs, and increase the quantity and improve the quality of breeder seeds produced; and (d) make seed industry regulation and control more effective. 2. These were to be achieved by: (a) reforming the SSCs based on a comprehensive review of their strategy and operations by management consultants; (b) providing a line of credit for refinancing by the National Bank for Agriculture and Rural Development (NABARD) of term loans provided by Participating Banks (PBs) to private seed companies and SSCs; (c) supporting investment to telescope variety development effort and enhance breeder seed production - implemented by the Indian Council for Agricultural Research (ICAR); and (d) providing equipment to seed regulation and quality control agencies. 3. Project Cost. The project was to be implemented over seven years from August 1988 to June 1995, and the total project cost was estimated at US$177 million (Rs.2,396 million). The IDA credit of SDR108.6 million (equivalent of US$150 million) was to finance about 83 percent of the project costs. 4. Special Legal Covenants. Special legal covenants or agreements that were expected to promote the achievement of project objectives included reflecting the key principles of autonomy to SSCs in pricing and operational aspects, rightsizing staff levels, and reducing dependence on government funding in the reform Action Plan Implementation Agreement (APIA) that each SSC was committed to implementing, linking releases of over 75 percent of the Credit in three installments to reform progress, detailing the prerequisites of a comprehensive appraisal of the investment proposal by the PBs and a minimal return on equity of twelve percent for sub-loans to be refinanced by NABARD, and requiring the 10 participating states to commit themselves to duly carry out the APIA.  2 Evaluation of Project Objectives 5. Clarity. The basic concept of the project - timely and adequate availability of quality seeds of suitable varieties at economical prices - was clearly important for increasing agricultural production in India. The first and last objective of the project, namely, a clear need to improve the efficiency of public sector corporations and quality control procedures, were relatively straightforward. The linkage between the second and third objectives - promoting private sector participation and managing varietal development programs through ICAR - and proposed investments were less well defined, depended on factors that were beyond the direct control of the project, and assumed that private companies, PBs, the Indian Council of Agricultural Research (ICAR) agencies and State Agricultural Universities (SAUs) were aware of and committed to achieving project objectives. 6. Realism. All four objectives were relevant for the development of the seed industry, and were based on the lessons learned in previous Bank-assisted seed projects in India. However, the appraisal mission was overoptimistic in its assessment of the commitment of state governments to commercially reorient the seed corporations. The project design was generally appropriate and adequately reflected the objectives. However, it was ambitious in assuming ICAR participation with the modest funds provided under the project, and in assuming that the Ministry of Agriculture (MOA) would succeed in reforming SSCs without any financial contribution from GOI. Both these inadequacies were addressed in the initial years of project implementation. The ICAR share was increased by Rs. 192 million, financed through savings, and GOI agreed to pass on about US$55 million of the program component to the MOA to finance the SSC reform program. 7. Complexity. A key project objective - that of reforming SSCs organizationally and financially - was unusually complex, required considerable adjustment on the part of state governments and also called for high quality management staff which many SSCs found difficult to command given the recruitment and compensation scale restrictions. The SAR highlighted these as major risks. A longer-than-normal implementation period was therefore regarded as acceptable if it helped promote institutional changes to ensure the long-term viability of the reforming institutions. 8. Responsiveness to Borrower's circumstances. The project responded well to GOI's strategy to develop a strong seed industry. 9. Risks. The main risk was associated with the failure of participating SSCs to implement reforms satisfactorily, thereby jeopardizing the success of the reform program and releases of the program funds. B. ACHIEVEMENT OF PROJECT OBJECTIVES Overall Achievement 10. Though the Credit was fully disbursed, due to delays in implementation, it is too early to fully assess the achievement of the project's physical and institutional development objectives. Apart from this reservation, the project would appear to have contributed to the overall development of the seed industry and is considered to have partially achieved its major objectives. In particular, it has assisted a number of SSCs to commercialize their operations, helped the  3 development of a vigorous research-based private sector seed industry that is currently estimated to supply some 60 percent (on a value basis) of all certified and truthfully labeled seed, and has contributed to an increase in the annual production of breeder seed. Physical Objectives 11. It is not possible at this point in time to quantify the increase in certified seed and quality seed (truthfully labeled seed) production attributable to the project. The project has contributed to a substantial increase in the amount of breeder seed produced annually, most of this increase taking place in the last three years of the project. Given that it takes 2-3 cropping seasons for breeder seed to be multiplied into certified seed, the effects of this increase will only begin to become manifest in the next year or so. Furthermore, any sustained increase in the production of seed will depend on continued progress being made with financial and managerial reform of the SSCs. It is also too early to attribute the development of any new crop varieties to project activity as it takes five to seven years for public sector research agencies to develop and release a new variety. Most private sector investment of project funds in research facilities commenced within the last eighteen months and has not yet been fully completed. Investment Credit Component 12. This component was intended to promote the expansion and modernization of the seed industry. Enterprises eligible to borrow were NSC, SFCI, SSCs, and private seed companies. At appraisal, it was envisaged that most of the investments would be made by public sector corporations once they had undertaken the essential financial and management reforms detailed in the APIA. However the PBs insisted, in addition, on government guarantees for any loans extended to public corporations. The central and state governments were not prepared to give such guarantees, unless the corporations were profitable (in which case they would have been able to access commercial loan funds according to normal bank procedures and criteria). Furthermore, some of the financial restructuring of the SSCs enabled them to use their own resources for essential investment. As a result, there was virtually no demand from public corporations for investment credit funds. 13. Initially demand was low from the private sector too. The main reasons for this were the relatively high cost of the NABARD refinance facility (it was only 4 percent less than the prime lending rate), and PB's unfamiliarity with the special demands of the seed industry, especially the high working capital requirement associated with investment loans. To familiarize bankers and seed industry entrepreneurs with the requirements of the industry, and the advantages of using the NABARD refinance facility, a number of workshops were organized at NABARD regional offices. In addition, a number of measures, such as including Cooperative Banks and enlarging the definition of sub-borrowers to include partnerships, were taken to widen the scope and appeal of the NABARD facility. The workshops and the promotional measures were generally quite successful and the number of loans sanctioned increased in the later years of the project as shown in the table on the next page.  4 Investment Credit - Yearwise Sanction and Disbursement (in Rs. million) Year No.m of TO FA RAA Actual % :schemes Refinance *: : :...... Sanctioned .. Disbursement 1990-9177740|0 70 t:10: 115.7: 75.4 57.5 49.7 5.3 1991,-92.1 : :12. 352.4 .2482 198.6 24.2 : 26 :992-93 35 361.81 267.4 219.7 73.7 7.8 19931-794 271 689.4 398.0 :318.9 :1 61.6 :17.2: i14-95 36 690.W8 529.4 413.4 168.4 17.9: 1995-96 21 371.2 232.4 186.0 112.3 1 L9 1996 7* 38 440.4 310.6 248.5 350.5 37.3: TO8TAL:- tt:5:0149 1 .3021.8 2061.4 1642.5 940.4 100.0 T:FO = Total Financial utlay VA: Financia li Assistance R;A 000jRe-ince Assisance *up3to4340no 1996 In total, 149 loans (of which four were withdrawn) were sanctioned, of which only seven, equal to some 5 percent of the total, were for public sector corporations as shown in the table below. Investment Credit - Public Sector (in Rs. million) No.Of NNme oflthet 1 Date of Sanctions Disbursements Schemes Corporation 0Sanctio __ _ _:: ___ TFO FA RA TFQOFA HAI 1 - AndhraPrades:SDC: 06.03.91 33.21 16.60 13.28 16.46 8.23 6.59 2- U P AtTarPsh&TDC: :A13.03.93 41.90 28.00 22.40 18.77 14.08 11.26: 3: StateFarms:,C.I. (SFCI) 24.03.95 161.45 129.16 103.33 : - - 4,: 0 WestBengalSSC 128.06.95 41.90 28.00 22.40 21.16 14.08 11.26 51i IKar a kSSC 22.03.96 9.63 7.72 6.16 8.67 6.50 6.16 6: HarH nSDC :22.05.96 19.42 15.54 12.43 19.42 15.54 12.43 7 Madh Pradesh SSDC