India - Second National Dairy Project

 Second national dairy project Report No: ; Type: Report/Evaluation Memorandum ; Country: India; Region: South Asia; Sector: Livestock; Major Sector: Agriculture; ProjectID: P009962 The India Second National Dairy project, supported by Credit 1859-IN and Loan 2893-IN for SDR 121.2 million (US$160 million, equivalent) and US$200 million, respectively, was approved in FY88. A total of US$82.9 million of the loan was canceled. The credit was closed, fully disbursed, on December 31, 1994, as originally scheduled. The loan was closed on April 30, 1996, sixteen months behind schedule. The European Union was to provide US$150 million, equivalent, in the form of dairy commodities. Commodity aid ceased in 1992 (after about $110 million worth had been supplied) when India made a small export of milk powder to France. The Implementation Completion report (ICR) was drafted by the FAO/World Bank Cooperative Programme and revised and finalized by the South Asia Regional office. It includes the Evaluation Report of the National Dairy Development Board (NDDB), but not the NDDB’s comments on the aide memoire and draft ICR. The project was designed to consolidate the rapid expansion which had taken place under three earlier IDA-financed projects to individual states and the (first) National Dairy project (Cr. 824-IN). In particular, all assisted states were to adopt the full Anand pattern of a three-tiered, farmer controlled, cooperative system—farmer-owned village level Dairy Development Cooperatives (DCSs) owning Milk Processing Unions (MPUs) which in turn were to own the State Cooperative Dairy Development Federation. This structure provides for professional managers working for farmer controlled boards of directors, with the right to set producer and consumer prices, hire and fire staff, and go bankrupt. Complementary objectives included improving financial performance of the MPUs, managerial strengthening of NDDB and MPUs, and the introduction of improved technology at the farm level. Funds provided under the project were to be spent principally on newly constructed and rehabilitated dairy processing plants, transport equipment, training, and assistance to farmers and DCSs. The project raised milk processing capacity to 19.2, chilling capacity to 8.7, and milk marketing to 14.8 million liters per day. Drying capacity was raised to 990 metric tons per day, and village cooperatives served was increased to 71,800. However, milk procurement was 20 percent below its projected level. Introduction of the Anand principles had only mixed success. All participating states (with the exception of Tamil Nadu) were willing to adopt the Anand principles, but implementation was mixed. The resulting lack of control by the State Cooperative Federations and MPUs over prices, staffing levels, and selection of senior managers led to mediocre technical and financial performance by some Milk Unions and State Federations. The good physical performance was achieved at a substantial cost underrun (in terms of U.S. dollars). The ICR and Operations Evaluation Department (OED) both rate Bank performance as satisfactory, project sustainability as likely, and institutional development as substantial. The ICR rated project outcome as satisfactory, but on the basis of the evidence in the ICR the project outcome is rated as marginally satisfactory by OED. The marginally satisfactory outcome rating is influenced by the success in reaching most of the project’s physical targets at a significant project saving, but reflects the lower than projected milk procurement, and difficulty in getting the Anand principles fully adopted. Without making a formal rating, the borrower faults Bank performance in the latter half of the project’s life. The main lesson drawn by the ICR is that the Bank might have taken a tougher line during project supervision in scrutinizing subproject appraisals, rejecting those for states which did not meet an acceptable level of compliance with the institutional requirements of the project. This is a difficult call, since it is not clear whether this would have led to more policy and hardware success or the reverse. The ICR provides a balanced account of project experience despite a slight dissonance between Bank and borrower views. An Audit is planned.