India - Uttar Pradesh Diversified Agricultural Support Project

Document of The World Bank Report No: 17279-N PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THEW AMOUNT OF SDR 37.2 ($50 MILLION EQUIVALENT) AND A PROPOSED LOAN IN THE AMOUNT OF US$79.9 MILLION EQUIVALENT TO INDIA FOR THE UTTAR PRA]DESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT APRIL 27, 1998 Rural Development Sector Unit South Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective August 1, 1997) Currency Unit = Indian Rupee US$ 1.00 = Rupees 36.0 FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS AG Auditor General KS Kissan Sahayak Al Artificial Insemination KVK Krishi Vigyan Kendras AMC Agricultural Management Center M&E Monitoring & Evaluation APC Agricultural Production Commission MIS Management Information System ATMA Agricultural Technology Management Agency MOU Memorandum of Understanding AWP Annual Work Plan NABARD National Bank for Agricultural & Rural Development BIRD Banker's Institute of Rural Development MANAGE National Agriculture Extension Management Institute CA Chartered Accountant NATP National Agricultural Technology Project CARP Competitive Agricultural Research Program NGO Non Govemment Organization CAS Country Assistance Strategy NPV Net Present Value CFO Chief Financial Officer PAD Project Appraisal Document CIA Chief Internal Advisor PCU Project Coordination Unit DASP Diversified Agricultural Support Project PC Project Coordinator DOA Department of Agriculture PIU Project Implementation Unit DOAH Department of Animal Husbandry PMC Project Management Committee DOH Department of Horticulture PRA Participatory Rural Appraisal DOS Department of Sericulture PSC Project Steering Committee DPIC District Project Implementation Committee PWD Public Works Departnent DPIU District Project Implementation Unit SA Special Account EPAU Economic Policy Analysis Unit SAU State Agriculture University ERR Economic Rate of Return SDC Swiss Agency for Development and Cooperation FA Farmer Association SEP Strategic Extension Plan IPM Integrated Pest Management SLRP Sodic Lands Reclamation Project FD Finance Department SMS Subject Matter Specialist FIG Farner Interest Group SOE Statement of Expenditure GA Gap Analysis UP Uttar Pradesh GOI Government of India VEW Village Extension Worker GOUP Government of Uttar Pradesh IPNM Integrated Plant Nutrient Management Vice President: Mieko Nishimizu Country Manager/Director: Edwin R. Lirn Sector Managers: Michael Baxter/Ridwan Ali Task Team Leader/Task Manager: Ashok K. Seth  INDIA UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT TABLE OF CONTENTS Page No. A. Project Development Objective ..................................................................2 1. Project development objective and key performance indicators ................................................2 B. Strategic Context ..................................................................2 1. Sector-related CAS goal supported by the project .................................................................. 2 2. Main sector issues and Government strategy ..................................................................3 3. Sector issues to be addressed by the project and strategic choices .............................................3 C. Project Description Summary ..................................................................4 1. Project components ............................................................4 2. Key policy and institutional reforms supported by the project ...................................................6 3. Benefits and target population ............................................................7 4. Institutional and implementation arrangements ............................................................7 D. Project Rationale ..................................................................11 1. Project alternatives considered and reasons for rejection ......................................................... 11 2. Major related projects financed by the Bank and/or other development agencies ................... 13 3. Lessons learned and reflected in proposed project design ........................................................ 13 4. Indications of borrower commitment and ownership ........................................................... 14 5. Value added of Bank support in this project ........................................................... 14 E. Summary Project Analyses ................................................................. 15 1. Economic ........................................................... 15 2. Financial ............................................................ 16 3 . Technical ........................................................... 17 4. Institutionall ......... 18 5. Social ......... 21 6. Environmental assessment ............................ 23 7. Participatory approach ............................ 24 F. Sustainability and Risks ............................ 24 1. Sustainability ...................... 24 2. Critical risks ...................... 24 3. Possible controversial aspects ...................... 25  G. Main Loan Conditions .......................... 25 1. Effectiveness Condition .......................... 25 2. Proposed Dated Covenants .......................... 25 H. Readiness for Implementation .......................... 27 I. Compliance with Bank Policies .......................... 27 ANNEXES Annex 1. Project Design Summary Attachment 1 Performance Indicators Annex 2. Detailed Project Description Attachment 1 Policy Matrix and Cost Recovery Schedule Attachment 2 Criteria for Research Evaluation Attachment 3 Sub-sectoral Investment Matrix for Technology Dissemination Attachment 4 NGO Participation & Selection Attachment 5 Social Assessment TOR 1 - Child Labor Study TOR MOU 1 - Roads Land Acquisition MOU MOU 2 - Improvement and Maintenance of Rural Haat Painths (Village Markets) MOU Attachment 6 Participatory M&E Attachment 7 Environmental Plan Attachment 8 Economic and Policy Analysis Unit Attachment 9 Draft TOR for Review of Fiscal Issues in Agriculture Annex 3. Estimated Project Costs Annex 4. Cost-Benefit and Financial Analysis Summary Annex 5. Financial Summary Table Annex 6. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Annex 7. Project Processing Budget and Schedule Annex 8. Documents in Project File Annex 9. Statement of Loans and Credits Annex 10. Country at a Glance Map No. IBRD 29458  INDIA UTTAR PRADESH DIVERSIFIED AGRICULTuRAL SUPPORT PROJECT PROJECT APPRAISAL DOCUMENT South Asia Regional Office Rural Development Sector Unit Date:April 27, 1998 Task Team Leader/Task Manager: Ashok K Seth Country Manager/Director: Edwin R. Lim Sector Managers: Michael Baxter/Ridwan Ali Project ID: IN-PE-35824 Sector: Rural Development Program Objective Category: Environmentally Sustainable Development Lending Instrument: Credit/Loan Program of Targeted Intervention: 11 Yes [XI No Project Financing Data [X] Loan [X] Credit [ Guarantee [] Other [Specify] For Loans/Credits/Others: Amount: Credit SDR million (US$50 million equivalent); Loan US$79.9 million Proposed terms: IDA IBRD [ ] Multicurrency [X] Single currency, specify Grace period (years): 10 5 [ ] Standard Variable [ Fixed [X] LIBOR-based Years to maturity: 35 20 Commitment fee: 0.5% 0.75% Service charge: 0.75% Financing plan: US$160.5 million Government of Uttar Pradesh 30.6 30.6 Cofmanciers IBRD 66.2 13.7 79.9 IDA 41.3 8.7 50.0 Other (specify) Total 138.1 22.4 160.5 Borrower: Government of India Guarantor: Responsible agency(ies): Government of Uttar Pradesh (GOUP) Estimated disbursements (Bank FY/US$M): 1999 2000 1 2001 2002 1 2003 1 Annua.l 21.8 33.8 28.5 26.7 19.1 Cumulative: 21.8 . 55.6 84.1 110.8 129.9 For Guarantees: I [ Partial credit [ Partial risk .......................................................................... ......................1 .1..................................................... ........................................................... ................................ Proposed coverage: .................................................................................................................................................................................................................................................. Poetsponsor: P o ec............................................................................................................................................... Nature of underlying financing: T.. "...................................................................................................................................................................................................................................... Terms of financing: Principal amount (US$) ......................................... ................................................................................................................................................................................................................. Final maturity Amortization profile T 11111 ........................................................................................... ...j....................................................... ................................................................................. Financing available without guarantee?: [ Yes [ No ........................................... ..'t .... ...a""""ity..................................................................... ............... . ........................................................... . ................................... If yes, estimated cost or maturity: ................... ...nc ............................................................................................................................................................................................... Estimated financing cost or maturity with guarantee: Project implementation period: Expected effective date: September 30, 1998 Expected closing date: March 31, 2004  Project Appraisal Document U.P Diversified Agricultural Support Project iNDIA Page 2 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): The principal objectives of the project would be to increase agricultural productivity through support for UP's diversified agricultural production systems, promote private sector development, and improve rural infrastructure. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 17241-IN Date of latest CAS discussion: January 15, 1998 Consistent with the government's national agenda for governance, the CAS places special emphasis on accelerating sustainable agricultural growth and rural development through improved: (i) composition and effectiveness of public spending to close productivity gaps in both irrigated and rainfed agriculture; (ii) technical, financial and environmental performance of irrigation systems; (iii) food security and price stability; and, (iv) environmental sustainability. There are five main areas of project activity that address the CAS areas of special emphasis: (a) Improving Food Security. This is addressed by focusing on agricultural growth and increased local participation and by providing the technologies, supporting services, and infrastructure that respond to the needs of the rural poor. (b) Rural Restructuring and Public Expenditure Reforms. This is addressed through reforms related to decentralization, the state-level policy areas of deregulation (e.g. in cold storage), cost recovery across a wide range of supplies and services, marketing policy, public expenditure priority setting processes, privatization (e.g., leasing and/or initiating economically viable alternative use of loss making government farms), land issues related to seed production, regulatory frameworks and, facilitation of contract growing arrangements. (c) Enhancing Institutional Capacity. The project addresses capacity building for both public and private investment through training, institutional restructuring (e.g. in technology development through initiation of a Competitive Agricultural Research Program (CARP), in extension by moving towards a multi-institutional partnerships between public, private, NGOs and farmer's interest groups), government staff redeployment, and substantial decentralization under the new Panchayat Raj arrangement. (d) Improving Rural Infrastructure. This helps to provide the essential base for a number of the strategic actions listed. It is addressed through both physical improvement and improvement in management. (e) Enhancing Sustainability and Conserving Biodiversity. This is being addressed through Integrated Pest Management (IPM) and Integrated Plant Nutrient Management (IPNM) sub-components and through interventions to conserve diversity of local breed/variety diversity in livestock and crops. While UP does not yet fall into the category of fully reforming states, it has widespread poverty and extreme dependence on agriculture. It is rich in natural resources (land and water) but has a high population density and declining soil fertility. It is the third poorest state in India with a per capita income of US$200 and a poverty index (head count) of 40 percent (42 percent in the rural areas) compared to an average for the country of 35 percent.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 3 More than 80 percent of the people in UP live in the rural areas and 75 percent are dependent on agriculture for their livelihood.I UP is also a state with a good record of implementing development projects. Under this project, it is embarking on a program of institutional and infrastructure development with significant moves toward increased participation and privatization. Furthermore, the record of the state in approaching the important and wide spread problem of land degradation, especially with respect to sodic lands, is extremely encouraging. Though the problem is massive, a start has been made through the first IDA-financed pilot operation, Uttar Pradesh Sodic Lands Reclamation Project (Cr. 251 0-IN), which has developed successful models for land reclamation in some of the poorest regions of the state. The state is continuing this work with increased emphasis on more sustainable management of natural resources based on strong beneficiary participation. 2. Main sector issues and Government strategy: Some key sector and economy-wide issues remain to be addressed. UP is not yet one of the states with a program of fiscal reform agreed with the Bank. Issues requiring further attention include state subsidies on rural power and water, commodity price distortions; and cost recovery and privatization of services in some areas. Some key sector issues have been, or are being, addressed. For example, cost recovery for a number of government services, some movement towards leasing out of government farms, reductions in price controls, e.g., cold storage, increased private role in agricultural research, removal of dual pricing for sugarcane molasses, and government involvement in rural markets. Some key sector issues exhibit good progress, for example, moves towards increased participation, institutional strengthening and capacity building, decentralization, and in sericulture removal of monopoly procurement of cocoons to encourage entry of private trade. The Policy Reform Matrix at Annex 2, Attachment 1 outlines GOUP's strategy, as confirmed in the policy letter of February 17, 1998 including reforms recently completed and those still to be undertaken in association with the project. 3. Sector issues to be addressed by the project and strategic choices: Briefly, the main project specific issues that will be addressed are in four main areas: (a) Policy reforms. improved cost recovery and increased privatization of services: The project would link investments to the reform of policy and the legislative/regulatory framework to rationalize the public/private roles. The project aims for improvements in quality as well as investment in agriculture. This would be achieved through phasing out of government involvement in supply of input materials and ensuring cost recovery from selected support services provided by public institutions. This would not only enhance financial sustainability but, more importantly, encourage increased private sector participation. (b) Technology development and dissemination aimed at intensification and diversification of farming systems: The project addresses fundamental constraints such as the weak technology base, inadequate support to dissemination of improved production practices, especially to resource poor farmners and post-harvest technologies, skill shortages, policy and institutional constraints to private sector participation and limitations in supporting infrastructure. (c) Greater participation of user communities: The project places a major emphasis on formation of self-help groups, particularly those formed by women, farmer associations and commodity groups 'Source: World Bank reports.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 4 to share production and marketing knowledge as well as mobilize credit. NGOs and the private sector would play an important role in the formation of these groups. (d) Human resource development: The project would provide self-employment through training of para-vets and of workers involved at various levels in the horticulture livestock, agriculture and sericulture sub-sectors. Line department staff would be trained and re-deployed to promote knowledge based participatory approaches to dissemination. Training and communication capacity at state and district levels would be improved by the project. The main strategic choices are discussed in more detail in Section Dl. They include: * breadth and depth of policy content--where the choice has been to focus on policies directly impacting on project components; * the degree of privatization--where the choice has been for some significant initial steps in a number of areas and a long term objective of phasing out of public services that could be better supplied by the private sector but in the short term a continued substantial public input to ensure a focus on the poverty objective; * the scale of the project--where the choice has been for a compromise between the enormous scale of the poverty challenge and the implementation capacity, balanced also with the need to test out new interventions in selected areas before wider replication; * the number and type of individual components--where economics, component implementation capacity, and private sector alternatives as well as project complexity all played a part in narrowing down the number of components to the final set. C: Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): .~~~~~~~~~~~~Citig ' (z ii M Supportfor Technology Development: Technology 17.1 1 1 14.0 11 (a) enhanced capacity for research Development coordination; (b) establishment of a competitive agricultural research program (CARP) to support time bound adaptive research on priority constraints, to increase productivity of the smallholder agriculture; and (c) strengthening of research support for Technology Dissemination activities.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 5 Establishment of a Demand Driven Technology 55.3 34 43.2 33 Technology Dissemination System Dissemination through: (a) rationalization, reorientation and strengthening of line departments to service a demand driven system; (b) increased participation by the private sector in input supply and support services; (c) increased participation by the farming communities mobilized with the help of NGOs; and (d) support for human resource development and greater use of inforrnation technology in technology dissemination. Supportfor i..................e...o....i...................... .......... ....................... .... ........ ................................................. ............. .................. Support for Increased Pr-ivate Sector Private Sector 4.1 3 4.0 3 Involvement and Public/Private Partnerships in Agri-business Development through: (a) credit mobilization and facilitation; and (b) provision for establishment of Project Development Facility to mobilize private sector initiatives aLnd promote vertical integration of smallholder agriculture with private investment in input supply and post-harvest value addition initiatives including agro- processing. Support for Rural Infrastructure Infrastructure 67.5 42 54.3 42 Development through: (a) improvement of up to 1,600 km of rural roads in the project districts; and (b) improvement of up to 145 rural markets (Haat Painths), 14 cattle markets owned by Panchayats/Zilla Parishads and rehabilitation/establishment of two model fruits and vegetable markets under Mandi Parishad in project districts; and (c) support :for Directorate for Agricultural Marketing to improve its market information collection and dissemination systems to benefit marketing activities of producers.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 6 Support for Project Management and Management 15.5 10 13.4 10 Enhanced Capacity for Economuc Policy Analysis through support for: (a) Project Steering, Management and District level committees to ensure effective oversight, policy guidance and management of the project; (b) a unit to coordinate day-to-day implementation of project activities; (c) an independent M&E arrangement; and (d) an Economic Policy Analysis Unit to assist the APC branch in analyzing agricultural policies and public expenditures. Project Preparation Facility Preparation 1.0 1 1.0 1 Total 160.5 100 129.9 100 2. Key policy and institutional reforms supported by the project: As part of its commitment to accelerate growth of the agriculture sector in the state, GOUP has accorded high priority to the development and diversification of agriculture in its Ninth Five Year Plan (1998-2002). Agricultural growth directly affects poverty reduction, which is the main goal of the state's developmental efforts. Apart from ongoing investments in the sector, a number of important rural policy reforms have been introduced during the period of project preparation to provide for an appropriate policy and institutional framework for the sector. A number of reforms remain to be carried out. A policy matrix in Annex 2 Attachment I sets out the current status. Briefly, reforms already implemented and/or initiated include: * Encouragement to the private sector participation in technology development and transfer through: phased withdrawal of the government from certified seed production; and, introduction of para-veterinarians who would charge beneficiaries for their services. * Changes in the legal and regulatory environmentfor increased involvement ofprivate sector in production, marketing and processing of agricultural produce through: elimination of price ceilings for cold stores; elimination of price controls on sugarcane molasses; allowing case-by- case permission to purchase/lease land for industrial purposes in excess of ceiling limits; relaxation of licensing requirements for horticulture nurseries; elimination of government monopoly purchase of cocoons to encourage greater private sector participation and competition to benefit sericulture producers; simplified procedures for cutting and transporting trees in order to facilitate replanting of aging orchards; raising stamp duty exemption limits and collateral limits for bank loans to improve access of the poor to credit. * Greater community participation through: completion of elections to Panchayat Raj institutions; completion of work by two government appointed commissions to recommend ways in which greater administrative and financial authorities can be devolved to Panchayats; and, devolution of greater administrative authority in the design and implementation of development programs to communities by 21 departments including the Departments of Agriculture, Animal Husbandry,  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 7 Dairy Development, Rural Development, Panchayat Raj and Minor Irrigation whereby district department officers would work under the functional control of district Panchayats. To further strengthen the policy and institutional framework within which agriculture can grow, GOUP has agreed to carry out a number of time bound policy actions during the course of the project period. These actions were confirmed in an agricultural development policy letter sent to the Bank by GOUP and are outlined in Annex 2, Attachment 1. Specific actions include: * phasing in full cost recovery for identified goods and services provided by the Departments of Agriculture, Horticulture, Animal Husbandry and Sericulture; * leasing and/or privatization of loss making state owned farms; * participation by farmer groups in technology dissemination activities; * agreement with Panchayats to dedicate fees collected from users of village markets (Haat Paiths) for operation and maintenance.; * completing elections to regulated market committees; * enacting of UP Silk Industry Development Act; * developing a rural roads maintenance policy. 3. Benefits and target population: The main benefits of the project would be accelerated agricultural growth and increased opportunity for rural employment leading to poverty reduction, sustainable management of land and water resources, and capacity building. Growth is expected to be enhanced by improved technology and policy environment as well as supporting investment programs in rural infrastructure. Poverty would be addressed mainly through raising farm family incomes and reducing risk by offering a larger menu of alternative technologies to a broad cross-section of the farming community and through increased local participation and employment opportunities. Sustainability would be enhanced through the improved plant nutrient and pest management practices. Capacity to manage a more diversified agriculture would be developed through the training programs at all levels as well as improvement in institutional capacity to manage these programs. The project would provide an enabling infrastructure and policies resulting in greater incentives for farm families to benefit from an expanded technology menu. In addition, consumers, who are starting to demand a wider range of products, would also benefit from improved productivity of a diverse range of commodities. Farm models suggest that adopters of the main technologies would about double farm incomes while reducing worst year outcomes due to diversification. Beneficiaries would be expected to include the full range of rural income levels but would have bigger impact on a substantial percentage of resource-poor small or marginal farmer who can utilize the land-based, but limited land-using, technologies such as silkworm production and processing, small ruminants, cow and buffalo milk production, and fruit tree cultivation on plot boundaries or in home gardens. Women are likely to represent about 60 percent of the beneficiaries given the expectation of significant adoption of livestock and sericulture activities which are largely managed by them. Children would also benefit, in a small way initially, but more broadly in the longer term, from improved family income and a more pro-active approach to preventing child labor becoming an issue during the production and reeling phases in sericulture. Annex 1 gives selected project performance indicators. 4. Institutional and implementation arrangements: Executing agencies: Overall responsibility for project execution would be with the Agriculture Production Commissioner (APC) Branch of GOUP. The APC, who is a senior official of GOUP, would oversee activities of all important line agencies involved in the project, including the Departmnent of Sericulture (DOS) (transferred to the APC branch in 1996 to facilitate coordination of sericulture activities of the project). The only exception in this regard would the Public Works Department (PWD) who would oversee implementation of the rural roads sub- component.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 8 Project oversight (policy guidance, etc.) and Implementation: GOUP would establish three committees, two at the state level and one at district level, to provide policy guidance and to oversee project implementation. The first would be the Project Steering Committee (PSC). PSC would be headed by the Chief Secretary of the state, with other senior secretaries and three non-officials, representing farmers organizations, NGOs and the private sector, as its members. PSC would provide policy guidance and maintain oversight on the project. The second, Project Management Committee (PMC), with the APC as the chairperson and Secretaries of the participating line departments as members, would have overall responsibility for the management of the project. PMC would approve annual work plans, address all implementation issues including resolving of inter-departmental conflicts. The third, the District Project Implementation Committee (DPIC) would operate at district/block level with the District Magistrate as chairperson and district level heads of other operational departments participating as members. The DPIC would also have representation from local govemment, NGOs, farners organizations and the private sector. DPIC would assist in the preparation of district plans and oversee their implementation. The Project Coordination Unit (PCU), established in March, 1996 to facilitate project preparation, would coordinate the project activities to be implemented by the line departments and other participating agencies. The Project Coordinator of PCU would be a full-time officer at the level of Secretary to GOUP. He would also be the Secretary Coordination, a position created in the office of APC to ensure effective planning and coordination of project activities, especially by the line departments in the APC branch. PCU would serve as the operating arm of the APC branch and provide secretariat to the PSC. Technical experts and managerial persons as well as support staff would be seconded from line departments, universities/institutes or be on contract for a specified duration with their salaries being funded from the project on a declining basis. No permnanent positions would be created. As a registered society, it would have a semi-autonomous status, with flexibility in administrative and financial procedures. In addition to providing technical and administrative support to the implementing agencies, other responsibilities of PCU would include: (i) reviewing the agricultural policy and strategy of the State with respect to goals of the project; (ii) assisting the line departments/participating agencies in preparing annual action plans, investment plans and budgets for each fiscal year; (iii) monitoring progress of project components, preparing quarterly progress reports, evaluating performance, and providing feedback to the line departments/participating agencies; (iv) coordination and liaisons with line departments, participating agencies, GOUP, GOI, World Bank, credit and financial institutions, training institutions, academic institutions, NGOs, farmer/producer groups and the private sector; (v) ensuring financial reports are available, audited and submitted to the World Bank within six months of the close of the fiscal year; (vi) organizing conferences, seminars, workshops and training courses as needed under the project; (vii) hiring and retaining experts and consultants for project implementation, training, monitoring, technical examination and evaluation; (viii) commissioning relevant studies; (ix) assisting in identifying appropriate training courses for the line departrnent's staff, NGOs, farmer's groups and entrepreneurs; and (x) if required, organizing necessary preparation work for a follow-on project. Within each of the concerned line departments (agriculture, horticulture, etc.) separate Project Implementation Units (PIUs) would be set up by redeploying and/or upgrading existing staff to ensure timely and effective implementation of project activities. Although implementation of components would be assigned to these line departments, the PCU and DPCC would have an essential role in coordinating activities at the local level, especially with respect to the formation of Farmers' Interest Groups (FIGs), including self-help groups (SHGs) and commodity organizations/associations (COs/CAs), with the help of NGOs. PWD has a core of experienced engineers to survey, design and plan the execution of the rural roads component through contractors. To ensure good construction quality and operation and maintenance of project roads, technical audit would be undertaken by independent consultants. Implementation of the Marketing Component would involve three different departments. Staff from the Department of Agriculture Marketing (DOAM) would provide technical and managerial back-stopping to implementation by the Village Panchayats and the Mandi Parishads, arrange training and prepare progress reports.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 9 Directorate Panchayaati Raj would be responsible for ensuring rehabilitation/expansion of village markets (Haat Painths). Improvements of cattle markets and model fruit and vegetable markets would involve Zilla Parishads and the Mandi Board respectively. At the district level, implementation of the Technology Dissemination Component would be the responsibility of a district technology team cojmprising of technical personnel from all the participating line departrnents, KVKs and concerned SAU and participating NGOs. In each district the team would meet regularly and take responsibility for the preparation of a strategic extension plan (SEP). The preparation of the SEP will be based on information collected using a participatory rural appraisal (PRA) and a gap analysis (GA) process. SEP would be the basis for developing an annual work plan (AWP) for technology dissemination activities in each district. Training of trainers in PRA techniques will be arranged by the PCU who would in turn train the field level workers. The National Agriculture Extension Management Institute (MANAGE) would help in training of trainers as well as in the preparation of SEPs for the first five districts. In addition, PCU would closely liaise with the Bank-assisted National Agricultural Technology Project (NATP) where similar approaches to technology dissemination are being tested. The decentralized management structure would ensure that most of the decisions, especially for the Technology Dissemination component, are taken at the district level. At the same time, making farmers full partners through their organizations/groups would ensure that the project caters to needs of all the socio-economic groups, including women. Although use of participatory methodologies, NGO participation and farmer involvement in decision making processes is currently not emphasized by the GOUP line departments, use of participatory approaches under an on-going IDA assisted project in the state (UP Sodic Lands Reclamation Project) has been highly successful, providing a number of important lessons for this project. Accordingly, the project design places considerable importance on participation, including involvement of NGOs and on skill enhancement of line department staff in participatory methodologies to ensure success. Annual Action Plans for the project would indicate activities for all the line departments, including demonstrations, organization of field days, meetings of FIGs, etc. The action plan would be shared with and agreed upon by all extension workers, NGOs and leaders of farmer groups. It would then be approved by the district technology team under the chairmanship of the District Magistrate. The formation of farmer interest groups and commodity associations would be undertaken by NGOs. The Economic Policy Analysis Unit (EPAU), to be established under the project, would operate from the PCU and would advise the APC on future policy directions to address the changing needs of the agricultural sector. The initial focus of its work program, however, would be to assess the impact of the project's policy reform program. At negotiations assurances were obtained that: (a) The Project Co-ordinator, DASP would also be the Secretary, Co-ordination, APC Branch for the duration of the Project. (b) By December 31 each year starting in 1998 PCU wouldfurnish an annual training plan satisfactory to IDA/Bank. (c) By December 31,1998 GOUP, in consultation with the Association and the Bank, would engage an experienced procurement officer. Accounting, Financial Reporting andAuditing Arrangements: OveralL PCU would have responsibility for project accounting under the leadership of a Project Coordinator (PC). PC would have full-time accounting staff familiar with double-entry book-keeping. A separate Project Account would be maintained, which, together with supporting documentation including those relating to contributions  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 10 from GOUP and IDA/Bank, would provide a comprehensive record of project financing and expenditure. The system would facilitate effective monitoring of progress and generate accounting data on category-wise and component-wise expenditures. It would also facilitate generation of a report comparing physical progress with costs incurred under the project. The following information would be available from the accounting documents: (i) actual expenditures under the project against budgeted expenditures for the current year and cumulative to enable compilation of financial reports; (ii) procurement method adopted for goods, materials and services to enable monitoring of limits of procurement laid down in the procurement schedule; and (iii) contract-wise expenditures according to categories and sub-categories to enable generation of the schedule of withdrawal of proceeds (Form IB) and Statement of Expenditures (SOE) (Form IC) required for submission to the Bank for withdrawal of Credit/Loan. Detailed documentation for SOE submission would be maintained either at PCU or the Project Implementing Units (PIUs) depending on the component, and would be made available to IDA/Bank for review upon request. Accounting and InternalAudit Organization. The Chief Financial Officer (CFO) would be a senior officer from State Finance and Account Services. The CFO would report to the PC and would be supported by a Finance Manager who would also be a qualified CA. Around four support staff (Finance & Accounts Officers and Accountants) would be required, in addition to a cashier. The project would have three internal auditors. Working closely with the auditors of PIUs, the internal auditors would assess the adequacy of internal controls in PIUs and identify actions for an effective internal control system. The team would be headed by a Chief Internal Auditor (CIA) with appropriate experience and would be assisted by two professionals. To ensure independence in the work, the CIA would report directly to the PD. Accounting and Reporting System. Work is progressing to establish in the PCU a computerized double-entry accounting system, along with the related budgeting and financial management system. Most expenditures will be incurred at the PCU and PIU levels. Accounting at DPCU level will only require a columnar cash book with appropriate accounting heads. This will form the basis for transaction accounting for DPCUs to be maintained centrally at PCU. Computer-literate accounting staff will be recruited in these units. A budgeting system interlinked with the accounting system for financial reporting will also be developed with a quarterly reporting system. This would be the trigger mechanism for further releases of funds from PCU to PIUs. The government budget/finance heads are different from project expenditure heads. Government departments, with PIUs, would continue to maintain project accounting as per government accounting procedures and controls with an added requirement that a separate budget head with appropriate sub-heads would be created in their annual budget document to capture all project related allocation and expenditure. A link chart correlating the project expenditure heads with UP Finance Department (FD) budget heads has been finalized which would be incorporated in the computerized financial accounting system to automatically generate information under the appropriate budget heads for Finance Department reporting. The project accounting system (double entry book-keeping in accordance with Generally Accepted Accounting Principles) would also generate information required for the quarterly Financial Management Reports under the Loan Administration Change Initiative (LACI) - Financial Statements (1-A through 1-F) and Project Progress Report. The Procurement Register maintained by PCU has also been modified to generate the required LACI Procurement Management Reports (3-A through 3-D). PCU would prepare and submit to the Bank periodic Project Implementation Report (quarterly for financial reporting), in a format agreed with the Bank. The report would indicate both physical and financial progress of the project in relation to the agreed plan, compare physical progress with costs incurred, duly explaining the reasons for variations and the remedial measures proposed to be taken. The financial management system would also be capable of providing estimated final project costs (by project components and expenditure categories), financing plan, estimated disbursement using appropriate foreign exchange rates, and possible overrun/saving. This would be provided on a regular basis to Bank review missions.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 11 Project Funds Flow. GOUP would make available adequate funds to PCU irrespective of releases from GOI. A lump sum financial sanction would be made for the project in the GOUP budget based on a component-wise budget proposal made by PCU. The key elements of the fund flow arrangement from PCU to PIUs include: (i) maintenance of a separate bank account and separate books of accounts for project-related transactions by PIUs; (ii) separation of documentation (vouchers, records) related to project expenditure for easy access; and (iii) submission of quarterly statements of expenditure by PIUs to PCU by the I 0th of the month following each quarter. Audit Requirement. The Project Account and the Special Account (SA) would be subjected to normal state govermnent and GOI accounting procedures and controls. Project financial statements would be audited annually in accordance with standards acceptable to the Bank. In the case of PIUs of the line departments and other participating government agencies, this would be undertaken by the Auditor General (AG). Accounts of PCU, DPCUs and for other non-governmental participating agencies audit would be undertaken by independent auditors. The audit of the project accounts would also include an assessment of the adequacy of accounting and internal control systems, ability to maintain adequate documentation for transactions, and eligibility of expenditures for Bank financing. The consolidated Project Account audited by the AG, including a summary of SOE disbursements and the AG's opinion on it, would be submitted to the Bank not later than six months after the close of each fiscal year. At negotiations assurances were obtained that by December 31, 1998, GOUP with assistance fromfinancial management consultants, would prepare a manualfor accounting, auditing and internalfinancial control practices acceptable to ID)A/Bank and, thereafter, put into effect a training program on such practices for all participating institutions responsible for implementing the project. D: Project Rationale 1. Project alternatives considered and reasons for rejection: No overall alternative project was contemplated since it was clear that in such a large state with so much rural poverty some form of rural development project was justified. The choices were more related to what combination of investments and policies should be included. Broad alternatives considered were: (a) whether the project would address the enabling policy environment across a wide range or focus on policies directly impacting on the identified investment areas, or some intermediate combination. The choice of strategy here has been to address policies that directly impact on project components, particularly on improved cost recovery; (b) the degree of privatization to pursue. The choice here has been to support privatization or public- private partnerships in areas such as veterinary services, horticulture nurseries, etc., however, in order to support the poverty objective, to move towards privatization of extension services circumspectly, laying the groundwork for further privatization in due course by focusing on cost recovery; (c) the extent to which the big sugar policy issues should be tackled head on. The choice has been to keep the end goal in mind but to move modestly, and in a phased manner, in terms of policy action for three reasons: first, because sugar is not only a state issue, it is a national issue; second, because on mechanisms for pricing on sugar content, further technical work is needed; and, third, because sugar is particularly sensitive politically;  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 12 (d) the extent to which to cover on the investment side the big commodities such as wheat and rice. The decision here was to focus predominantly on providing farmers with a wider diversification menu as the existing on-going state and national programns continue on wheat and rice. For these commodities the project would provide additional selective support in key areas related to the main project objectives, particularly in the areas of sustainability of productivity, e.g. nutrient management and integrated pest management; (e) the scale of the project in terms of districts/blocks tackled. The choice here has been to focus on a selected number of districts/blocks, enlarging project coverage in a phased manner; (f) the project length. Because of concerns about implementation capacity, a longer 7 year project was considered but rejected on the grounds that it would be better to cut the project period to 5 years with the agreed intention of preparing a follow-on second phase projects if the first phase is judged to be successful; (g) a number of individual alternative components were studied in considerable depth and rejected, or substantially changed, following analysis, these included: (i) aquaculture - dropped due to doubts about economics; (ii) support for the Institute of Biological Products - dropped for want of firm decision on joint venture management; (iii) Animal Husbandry Department HQ building - substantially changed - as it would have drawn away investment from more pressing needs; (iv) Angora Rabbit Rearing dropped - doubts about profitability for sufficient number of beneficiaries given technical and institutional constraints; (v) sericulture proposal reduced to one quarter its original size due to a number of potential constraints; (vi) research proposal originally called for direct funding to SAUs and zonal stations, this was redirected towards the CARP which would provide access to research funds on a competitive basis to wider range of actors including the private sector; (vii) much larger dairy investments were earlier proposed but following deregulation it was felt that much of this investment could now be made by the private sector, the dairy-related support now focuses on the hygiene and milk collection constraints from small and isolated operators; and (viii) a number of other proposals related to education facilities were reviewed but not picked up, it was felt that these would excessively complicate the design and would be better addressed under a separate project. This also applies to major institutional and investment needs of the irrigation and drainage management which were initially examined but given the complexity were dropped to be addressed through separate interventions.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 13 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Implementation Development Progress (IP) Objective (DO) Bank-financed The objectives of the project are to develop Uttar Pradesh Sodic Lands Satisfactory Satisfactory models for environmental protection and improve Reclamation Project (Credit agricultural production through reclamation of 2510-IN) sodic lands. This would be supported by strengthening local institutions, management, beneficiary participation and NGO support. This is to contribute towards poverty alleviation of families managing sodic lands. This has been a very successful project, widely visited and praised for its innovative approaches and excellent management. .............................. ................................................................... ................................................................ ................................................... The project's objectives are to improve the Tamil Nadu Agricultural Satisfactory Satisfactory capacity of the Government of Tamil Nadu to Development Project analyze development constraints and establish (Credit 2215-IN) priorities, enable institutions to render cost- effective services to farmers, support selected priority state investment programs in agriculture and rural development and support the participation of NGOs. The focus of the project was in agriculture, seed procluction, integrated watershed development, livestock development, forestry development, rural roads and rural water supply., Objectives of the project to accelerate the growth Rajasthan Agicultral Satisfactory Satisfactory of agriculture through improved technical, Development Project financial, and economic use of resources, enhance sustainability of the available resource base and enhance equity. Project investments are in crop husbandry, horticulture, animal husbandry, water resources, agricultural research and training, rural roads, project coordination and environmental strengthening. It strives for policy reforms in cost recovery, reduced input subsidies, improved and efficient water use, institutional reforms of cooperatives, removing constraints to private sector in agriculture and strengthening Govermment of Rajasthan's capacity in environmental protection. 3. Lessons learned and reflected in the project design: The main lessons from the above projects have been: (i) a practical balance must be achieved between integration to exploit complementari-ties on the one hand and manageability on the other; (ii) there are significant political limitations to achieving comprehensive policy changes, particularly where policy change may be seen to impact on  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 14 the poor, which can only be addressed by agreeing with the borrower the longer term target but specifying the achievable intermediate steps that would fall within the project period; (iii) flexibility in implementation may have a high pay-off therefore this should be an integral part of the project design (e.g. the excellent UP Sodic Lands Project has developed a number of supporting activities that were enabled during implementation); (iv) good institutional arrangements and good quality managers can have a huge impact on project performance, and (v) project start-up in India continues to be slow and subject to unexpected hurdles, therefore first and second year progress and disbursement projections should be modest and preparation for procurement should be as far advanced as possible before Board presentation. 4. Indications of borrower commitment and ownership: In spite of changes of government over the preparation period, GOUP has consistently indicated strong commitment in the following ways: (i) a PCU and a team handling preparation of the project was established which has now been given responsibility for project implementation and in recent months has facilitated completion of pre-project activities; (ii) a number of institutional changes have been introduced to facilitate project coordination/implementation, e.g., creation of a post of Secretary Coordination as a concurrent charge for the Project Coordinator, transfer of DOS to the APC Branch; (iii) a substantial number of policy changes over the last two to three years (see Policy Matrix Annex 2, Attachment 1) have been introduced which provide an improved environment for project implementation; (iv) an agriculture sector fiscal sustainability study has been completed with an agreement to move towards full cost recovery of many services over the next three to four years (see Annex 2, Attachment 1). 5. Value added of Bank support in this project: Value added of Bank support: The main value of Bank support falls in the following areas: (a) wide international and Indian experience in helping central/state/local governments improve, diversify and reform the agricultural extension and research systems as well as facilitating linkages with international centers of excellence; (b) a large portfolio of projects in India and as a result a good understanding of issues affecting the efficiency and effectiveness of the public/private provision of services; (c) a highly successful and innovative agriculture project in the same state, the UP Sodic Lands Reclamation Project, which addresses many of the local community level issues in agriculture and which has served as a model in the design of this project; (d) the only lender/donor large enough to tackle the short, medium and long term management reform and sectoral sustainability issues in a comprehensive and coordinated manner which is essential to make a difference in such a large state as UP; and (e) a commitment to, and continuing catalytic role in, analyzing and addressing difficult issues in a number of policy areas affecting the sector.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 15 E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic Assessment (supported by Annex 4): [x] Cost-Benefit Analysis: NPV=US$ 125 million; ERR= 22% []Cost Effectiveness Analysis: Annex 4 gives the Economic Analysis for the project and is backed up by detailed tables in the Project Implementation Plan and in the Project File. There are rather few direct and readily demonstrable relationships between project interventions and incremental benefits in a project of this type since most technology gains are expected to emerge through fairly new participatory processes whose rate of impact is very difficult to predict (although there is some very positive experience from the UP Sodic Lands Reclamation Project). Therefore the ERRs should be taken as only indicative. The overall Economic Rate of Return (ERR) is estimated at 22 percent. To the extent that component ERRs are relevant within a very integrated project design individual component ERRs are: Livestock 26 percent; Horticulture/Agriculture 49 percent (these were combined within a farm system analysis); Sericulture 17 percent; Rural Roads 14 percent. Sericulture and Roads exhibit rather low and sensitive ERRs. In the case of sericulture, it is argued that this is almost inevitable in a new industry and that given the potential very large impact on employment and poverty from the development of a sericulture industry in UP especially for the landless it is still a very worthwhile investment for the long term. In the case of roads, the analysis does not attribute benefits of reduced crop losses to the roads component itself since it is argued that these are covered under the agriculture and horticulture models. With roads plus agriculture and horticulture combined the ERR would be fully satisfactory. The high ERR for agriculture/horticulture can be attributed to the following: (i) the generally found hilgh returns to technology development; (ii) the large scale of UP agriculture and the limited number of zones, giving a huge 'market' for improved technologies; (iii) the fact that the enabling roads and market infrastructure have not been attributed as costs to the component; and (iv) the fact that most of the other enabling investments such as the participatory/NGO and technology development investments are not attributed to the component since they impact across all components. Methodology for the ERR analysis used was fairly standard. On farm costs and benefits were modeled, those direct overhead project costs that were considered directly be allocated to individual components were then deducted to give the component ERRs and those overhead project costs that were difficult to allocate to individual components were deducted in the overall ERR calculation. Particular care was taken not to double count benefits, for example, no separate benefits were claimed for the marketing investments, these were assumed to show up in the overall agriculture/horticulture analysis, although market analyses were undertaken that suggested that the returns from village market improvement were good. Also, no marketing loss savings were attributed to the roads component or the market improvement component since these were assumed to be covered by the agriculture and horticulture analysis. The overall project ERR is not very sensitive to changes in parameters in any one component, as is usual in multi- component projects. The most noteworthy areas for sensitivity are the following: (a) with sericulture benefits down by 10 percent the ERR drops to 10 percent, if costs go up 10 percent the ERR drops to 11 percent, (but see the rationale above for accepting a modest ERR at this stage); (b) with roads costs up 10 percent the ERR drops to 12 percent; and (c) delaying the benefit stream by two years, representing a slow start-up, perhaps the most realistic risk scenario, reduces the ERR to 16 percent. An unusually large number of alternative investments were reviewed and rejected during the preparation exercise - see Section DI of this PAD. A number of related economic questions have been addressed in the relevant sections of the PAD and in Annex 4. These are not repeated here except for the rationale for public investment.  Project Appraisal Document UP Diversified Agricultural Support Project INDIA Page 16 The rationale for public investment is partly related to the fact that the project represents a substantial move towards private investment either directly or indirectly. For example the project includes a Project Development Facility to facilitate implementation of private sector investment proposals in value addition activities; the use of para-vets and private vets; private contractors for Al inputs, including supply of liquid Nitrogen; increased cost recovery across a wide range of government services; support for improvements in private horticultural nurseries; leasing, and possibly sale, of government farms; access to funding under CARP for research; deregulation of monopoly procurement of cocoons. Rationale for the remaining areas of public investment are: the need for infrastructure to support other developments; technology development and dissemination to focus on needs of the poor; the externalities related to environmental sustainability and related investments which would not, at this stage, find private sector interest; the need for community participation investments to increase beneficiaries role in the development process; and, finally, that this is a capacity-building transition phase leading to further privatization in the future. 2. Financial: Farm models indicate that the financial returns to projected investments at the farm level are generally good. Income increases are expected to come from yield gains from improved technologies, frequently an improved crop cultivar or an improved livestock breed or crossbreed, and from farm enterprise diversification. Rates of return for representative models are adequate and sufficient to give confidence in farmer adoption in a low income high risk situation. Again, good experience has emerged from the UP Sodic Lands Project where quite rapid adoption has taken place even with beneficiaries with very low incomes. Farm models suggest the following: typical farm enterprise income increases from single crop technology adoptions in the region of 25 percent to 30 percent could be expected; typical whole farm income increases from adoption of diversification packages in the region of 100 percent by the end of a ten year period could be expected giving IRRs of about 45 percent (high, but close to a minimum needed in a high risk low income environment). In marginal farm situations (0.4 ha farms) incomes could rise with adoption of technologies and limited diversification from about US$4 per day equivalent to about US$8 per day. Fiscal impact Overview ofAgriculture Expenditures Size and Trends in Agricultural Expenditures. Agriculture and allied activities (as defined in government budgets include crop husbandry, soil and water conservation, animal husbandry, dairy development, fisheries, agricultural research, education, and sericulture) account for about four percent of GOUP's total public expenditures, with no clear upward or downward trend in this share since 1989/90. Irrigation accounts for another 7 percent of public expenditures, although in this case a perceptible decrease in investment has occurred from 10.5 percent in 1989/90 to 6.7 percent in 1995/96. In sum, total GOUP spending on agriculture, broadly defined to include allied activities and irrigation, is currently about 10 percent to 11 percent of total public spending. This is equivalent to about 2.5 percent of SDP. Composition of Agricultural Expenditures. More than the shrinking size, the changing composition of agricultural public expenditures is a cause for concem. Presently less than 10 percent of public expenditures in agriculture and allied activities are of a capital nature -- a situation largely unchanged since 1989/90. Of more concern are trends in irrigation where the share of capital expenditures in total expenditures have consistently fallen from 36 percent in 1989/90 to 26 percent in 1995/96. GOUP is aware of this trend and aims to try to correct it.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 17 Project Impact on Budget GOUP's contribution during the project period will peak at about Rs. 500 million per year in the first and second years and decline thereafter with post project operating costs expected to be around Rs 100 million and declining. With a state agriculture and allied activities budget of about Rs. 9000 million, the peak contribution by GOUP would be about five percent of the sector budget falling to about one percent. GOUP considers these levels manageable. In fact, increased cost recovery agreed under the project (see below) would more than cover the post- project operating costs and trends towards privatization of technology dissemination initiated under the project would make increasing contributions. Project Contribution to Fiscal Correction Cost Recovery in Publicly Provided Inputs and Services. The proposed project seeks to address the imbalance in costs and their recovery in agriculture and allied activities (irrigation is outside the ambit of the project). As part of agreements reached with GOUP, full cost recovery will be phased in by March 31, 2002 for a number of subsidized inputs and services currently being provided by the Departments of Animal Husbandry, Horticulture, Agriculture and Sericulture (see Annex 2, Attachment 1). These subsidies, apart from limiting private sector participation, also contribute to fiscal pressures in the state. As a result of the agreed cost recovery measures, at 1996/97 prices and quantities supplied, GOUP stands to gain about Rs 56 million in 2000/01, Rs 85 million in 2001/02, and Rs 100 million annually from 2002/03 (Table 1). The largest savings are in the livestock sector where from 2002/03 onwards the Department of Animal Husbandry (DOAH) is projected to annually save about Rs 82 million on subsidy expenditures currently incurred (equivalents to seven percent of its overall annual expenditures in 1995/96). Projected annual savings post-2002/03 are more modest in the other sectors: DOA Rs. 12 million, DOH Rs 4 million and DOS Rs 1.7 million (equivalent to two percent of total expenditures). In addition to the above, a Review of Fiscal Issues in Agriculture would be undertaken annually by EPAU (see Annex 2, Attachment 9 for TOR). The public extension service in agriculture, horticulture, animal husbandry and sericulture (areas being directly addressed under the project) is severely handicapped by a lack of operational resources. Information compiled from the proposed project districts shows that at the district, block and panchayat levels wages and salaries account for about 95 percent of the total expenditure on extension in all four departments. This suggests that at current levels and pattern of funding, the extension service would be unable to perform its function adequately. To create both an effective and financially sustainable extension system, the project is proposing to adopt a participatory planning approach which would not only increase farmer ownership of the system, but also provide opportunity of transferring increasing responsibility for technology dissemination to farmer groups/associations. Thus, by re- grouping and upgradation of skills of existing staff an opening would be created for greater participation by farmners organization's as well as the private sector. In the long run, this approach to manpower deployment along with full cost recovery of some of the services provided by the line department is expected to make significant improvements in the financial sustainability of the system. 3. Technical: The current technology development and dissemination work in UP is largely built around commodity specific activities. This is in contrast to the farming systems approach being proposed under the project. Accordingly, during the preparation period a careful review of available technologies was undertaken to identify appropriate recommendations that could be utilized during the initial stages of the project. This work has resulted in identification of some appropriate technologies for major components of production systems. At the same time this work also pointed to many gaps that need to be filled. The cropping systems where most information was available included rice-wheat, legumes and oil seeds. Systems where significant gaps were identified included those incorporating horticultural crops, sericulture and livestock. In addition, location specific recommendations on pest, land (including nutrient) and water management practices were also found to be weak. Therefore, the technology development wvork to be supported under the project would emphasize a systems approach to location-  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 18 specific work by interdisciplinary teams. The project would mostly support applied and adaptive technology development work aimed at improving productivity, stability and sustainability of major systems under different agro-ecosystems. The project funding for this work would principally be for competitive peer reviewed research proposal under the CARP. The creation of CARP and wide-ranging support for human resource development would increase the effectiveness, focus, accountability and administration of agricultural research. In addition, it would promote entry of other institutions outside the SAU system (general universities, foundations, NGOs, Farmer Organizations and the private sector) to work jointly or independently on eco-regional problems. At the same time with strengthening of UPCAR to promote and facilitate inter-institutional cooperation, access to new technologies would be improved. This would be of particular importance in the case of rice-wheat cropping systems where a consortium of national and international institutions is engaged in research dealing with yield stagnation and factor productivity decline in countries of the Indo-Gangetic plains (India, Bangladesh, Nepal, Pakistan). The specific research themes being supported by the consortium include: productivity trends, crop establishment sustaining soil fertility, water management, ecological consequences and policy options. This work and activities to be supported under the project are expected to result in increased availability of appropriate technologies that suit the agroclimatic and socioeconomic situation of small farmers. It must be emphasized, however, that this project would only be able to augment and strengthen on-going research activities so that they can better provide the technological base for important production systems relevant to the project areas. Given the complexity and size of U.P's agricultural research and education system, however, it would not be possible to address the many institutional changes and broad support necessary for the long-term health of the system. Such sweeping changes in a large state would need to await a possible free-standing operation incorporating initial experience of the new approach being tested under this project as well as NATP. In the case of technology dissemination, the most critical needs are to make the public service more demand driven with increased accountability to its clients, upgrade human skills and enhance financial sustainability. The strategy proposed under the project would be to seek greater involvement of farmers, NGOs and the private sector in the technology development and dissemination process. The project's support for strengthening of research- extension-farmer linkages and introduction of participatory methodologies would help to improve the relevance of research and extension activities. In addition, the project includes support for human resource development at all levels in the system. Roads would be improved to 'functional standards' based on some pragmatic adjustment to the normal local standard categories. This has been adopted to minimize land requirements. Formation width would be 6 meters with carriage-way width 3 meters for Type A and 3.75 meters for Type B. Design Speed is 30 km ph. Further detail on design is provided in the Project File. All proposed roads have been selected based on agreed screening criteria including: population served, cultivated area, share of perishable crops and improvement in their value, access to markets, existing traffic volumes, land acquisition or other adverse environmental considerations. The road network in UP mostly serves very heavily populated areas. Densities of 1,000 persons per km of road are a norm rather than an exception and densities may go as high as 25,000 persons per km. 4. Institutional: a Executing agencies: In general, GOUP has a good record of implementing Bank-assisted projects. Two of the most successful projects in the Indian portfolio (U.P. Sodic Lands Reclamation Project and Rural Water Supply Project) are in U.P. Given this experience and the establishment of PMC for project management, (which would have Secretaries as well as Directors of line departments as its members under the Chairmanship of the APC), effective administrative as well as technical guidance for project implementation would be ensured. Many of the line departments participating in the project have successfully executed externally aided projects in the past. A number of actions, which in past have delayed project implementation, e.g., establishment of coordination unit, staff re-deployment/recruitment, training in project management, procurement plans, etc., would be in place prior to negotiations. In addition, to provide autonomy and operational flexibility, PCU has been registered as a society, with APC as the Chairman of the Board of Governors. To encourage client focus and ability to respond to location specific needs of farmers, a decentralized management structure has been proposed where most of the decisions,  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 19 especially for the Technology Dissemination component, would be taken at the district level. At the same time, encouragement to farmers to become partners in project implementation through their organizations/groups would ensure that the project caters to needs of all the socio-economic groups, including women. Although use of participatory methodologies and farmer involvement in the decision making process is not widely practiced by GOUP agencies, introduction of these approaches under another IDA assisted project in the state (UP Sodic Lands Reclamation Project) has been highly successful providing a number of important lessons for this project. At the same time, the project design places considerable importance on participation by NGOs and on skill enhancement of line department staff to ensure success. b. Project M&E and Performance Indicators. The operational responsibility for planning and coordinating monitoring and evaluation activities would rest with PCU. In PCU, one senior officer would be given full-time responsibility to oversee this activity. PCU would utilize Computerized Project Management techniques to monitor progress and to link with monitoring activities within the individual participating line departments at the state level as well as district offices. At the district level, wherever there are more than three DASP interventions, PCU would be assisted by District Project Coordination Cells (DPCCs) to monitor district level activities. Following the very good experience with M&E under the UP Sodic Lands Project, DASP would engage the Indian Institute of Management Lucknow (IIML) as an independent agency to assist with the M&E work. IIML, based on a Memorandum of Understanding reached with GOUP, has agreed to establish an Agricultural Management Center (AMC), to undertake concurrent evaluation of the project. AMC would also offer support for the design and implementation of the monitoring system to be operated by the PCU with input from the participating agencies and assess impact of project components on the participants. Specialists in project management, statistics, economics, sociology, financial management, information technology systems, policy analysis and agriculture would constitute the core AMC team. The establishment of the AMC is part of a capacity building exercise being undertaken by GOUP. In time, it is envisaged that the work program of AMC would expand to include M&E of other GOUP programs (other than the DASP) in the agricultural sector. AMC would work closely with PCU and assist: (a) the implementing agencies in preparing annual action plans, along with an implementation schedule at the department and district levels using a Computerized Management System (CPM); (b) in the development of a project management system (MIS); (c) in identifying training needs/gaps and in the preparation of plans to meet these needs; (d) in concurrent evaluation and impact evaluation studies, including beneficiary assessments, at agreed periodic intervals. NGOs assisting with implementation of the project would also be involved with the M&E of community participation activities in the project. Annex 2, Attachment 6 contains TOR for Participatory M&E. Institutional credit mobilization for land-based production activities would be monitored by the Bankers Institute of Rural Development (BIRD), the training and monitoring wing of the National Bank for Agricultural and Rural Development (NABARD). To facilitate this work, PCU would be electronically linked to both NABARD as well as BIRD. Information generated by the project implementing departments/agencies would be consolidated and analyzed by the PCU and used to update the performance indicators for the project. Key development indicators are presented in Annex 1. A number of departments have prepared supplemental performance indicators for more detailed monitoring of individual components (Annex 1, Attachment 1). If necessary, these indicators would be further refined and developed by the PCU and participating line departments during project implementation. Field level implementation would be independently monitored by AMC, in consultation with PCU, by: (a) selecting one block within each district for intensive monthly visits and monitoring; (b) rotating monthly visits among the rest of the 3-4 participating blocks within each district.2 These visits would facilitate rapid identification of shortcomings and problem areas and enable steering of the project to successfully meet its development objectives. 2 Assuming, on average, the project covers 4-5 blocks per district.  Project Appraisal Document UP Diversified Agricultural Support Project INDIA Page 20 Data Collection and Management. Concerned implementing departments/agencies through DPIUs would assume the primary responsibility for collecting data to update the performance indicators. The data would be consolidated and managed by PCU using the computerized MIS. AMC would assist PCU in developing the computerized plan and the MIS for the project including for participating departments/agencies. For the concurrent evaluation and impact evaluation studies, AMC would be primarily responsible for data collection and coordination, using independent surveys. Preparation of evaluation studies for different components would be an ongoing process culminating in reviews of the project during implementation (see below) and on project completion. A baseline survey would be carried out by AMC/PCU in coordination with the line departments. The survey would be completed and a draft report prepared by the end of the sixth month of effectiveness of the project. Questionnaires and formats for this survey are under preparation. Resource requirements for various sample sizes of blocks, villages, farmer groups, and farmers have been worked out and a decision on sample size to be adopted will be made after pre-testing of questionnaires and taking account of statistical validation. Reviews. The project would be subjected to two major reviews to be carried out jointly by GOUP and IDA/Bank. The first one would be at 18 months and the second at 36 months after effectiveness of the project. The first review would focus largely on implementation processes and recommend adjustments in the project design and/or implementation arrangements to overcome bottlenecks. The second major review would be more comprehensive and would include an impact assessment of the project. Reporting Arrangements. PCU would submit to the Bank a six-monthly progress report and a comprehensive annual report. The six-monthly reports would consist of: (a) up-to-date physical and financial expenditure data; (b) updated project performance indicators; (c) successes and problems encountered during the reporting period with possible remedial actions; (d) socio-economic as well environmental impacts of the project; (e) progress against benchmarks in implementing policy reforms. The annual report would cover all quantitative and qualitative aspects of implementation progress, including implementation plans for the following year. AMC would submit brief monthly reports on implementation monitoring to the PCU and respective implementing departments. At negotiations assurances were obtained that: (a) GOUP would monitor and evaluate, on an ongoing basis, achievement of project objectives using performance indicators agreed with the Association and the Bank (b) By January 31 of each year, starting in 1999, the PCU would provide to IDA/Bank for review and comments a copy of the Project's Annual Work Program for the followingfiscal year to be financed under the project. (c) Starting December 31, 1998, six-monthly and annual reports would be submitted by PCU synthesising overall project progress within thirty days of the end of the reporting period for IDA Bank's review and comments. (d) (i) By December 31, 1999 and September 30, 2001, PCU would undertake two project implementation reviews; and (ii) by June 30, 2000 and March 31, 2001, in consultation with IDA/Bank, develop an action plan to implement their recommendations.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 21 5. Social: (See Annex 2, Attachment 5) An important strategy of the project is to facilitate a change in the overall work culture of the public institutions involved in agricultural research and extension to enable them to be more responsive to farmers' needs. The intention is to build on the highly successful experience of the UP Sodic Lands Reclamation Project. Throughout the project preparation phase there was a substantial focus on assessing social aspects which have significantly influenced the project design. These included: (a) beneficiary assessment through informal, field-based interactions with a diverse range of farmers in each of the five agro-ecological zones; (b) additional stakeholder analysis based on interaction with NGOs, private sector, implementation agencies, research institutions and government officials; (c) collection of secondary data for all districts, and additional data from fuirther investigations in selected districts to develop socio-economic profiles, in some cases geared to specific activities (e.g. sericulture); and (d) informal surveys which influenced the dialogue with credit institutions to improve access to credit. Arising from these assessments and the overall process of project design, the following are important elements of the project: (a) to ensure a focus on disadvantaged communities, certain project activities (e.g. pig/small ruminant production, sericulture, cow/ buffalo milk production) are self-targeting in nature as they require little or no land and therefore do not exclude landless/ marginal farmers, and provide home-based income earning opportunities to women; (b) a key role is envisaged for NGOs to facilitate the formation of farmer/ beneficiary interest groups in order that groups formerly left out of the development process (e.g. women, scheduled castes) may be specifically targeted by overcoming socio-cultural constraints (caste, gender) to the dissemination of extension messages through conventional channels. Group action is also expected to be important in relation to natural resource management activities. Annex 2, Attachment 4 gives scope and selection criteria for NGOs; (c) decentralization of activities to growers or user-group associations is central to the approach, including the development of district-based strategic extension plans tailored to local agro- ecological conditions; (d) the project would work through Farmer Associations (FAs) at the Naya Panchayat level, and FA representatives would contribute to the design and implementation of research and extension programs; (e) NGOs would play a crucial role in identifying potential beneficiaries through participatory needs- identification and priority setting exercises. NGOs would facilitate the formation of FAs, arrange farmer and FA representative training, liaise with local lending institutions to secure production/investment credit, extend technical and supervisory support along the lines of recommended production practices, and organize production under contract farming agreements between beneficiaries and intend processors/other enterprises; and (f) additionally, in horticulture and sericulture activities, village extension workers would be contract workers (as opposed to government workers) from FAs or NGOs.  Project Appraisal Document U.P Diversified Agricultural Support Project Page 22 GOUP would ensure that NGOs contracted under the project would be selected according to the criteria agreed with IDA/Bank; and by December 31, 1999 would appoint a suitably qualified agency to undertake an independent assessment of the participatory management process adopted under the project and no later than June 30, 2000 agree with IDA/Bank on an action plan to implement its recommendations. Child labor. Silk production in UP is a relatively new activity and is confined to selected districts where at present, there is no child labor. Unlike more established silk producing states of India, where child labor has become a problem during the reeling stage, climatic conditions in UP favor the production of higher quality bivoltine and multi-voltine cocoons which are better suited to types of equipment that do not provide opportunities for child labor. The project provides support to prevent the emergence of child labor in reeling as the industry takes off in UP. It is possible that some child labor may occur in the pre-cocoon stages of production as a part of family agriculture work. Child labor is quite common in the weaving industry in Uttar Pradesh which lies outside the scope of this project. The issue of child labor in weaving is being addressed by GOUP with help from UNICEF. The legal framework for safeguarding against the exploitative use of child labor in India comprises the Factory Act 1948; the Bonded Labor System Abolition Act 1956; and the Child Labor Prohibition and Regulation Act 1986, none of which clearly applies to sericulture under conditions prevailing in Uttar Pradesh owing to various exemptions (notably children working in the context of family labor in agriculture). Following a recent Supreme Court ruling (No. 465), state governments in India were instructed in December 1996 to conduct surveys to determine the extent of child labor use, and to implement preventive measures. GOUP has recently completed its preparatory work and intends to establish a revolving fund to finance the education of child workers while also protecting their families' livelihoods. The potential issue of child labor is also under consideration in the context of the draft UP Sericulture Act, along with strengthening of the licensing and technology regulation measures already being implemented by UP's DOS. In light of these initiatives already being undertaken by GOUP, the project will support the following: (i) an action-orientated study to draw lessons from other parts of India where child labor in sericulture is a problem and identify specific ways in which similar problem can be prevented in UP sericulture; (ii)fiurther regulation of reeling technology by reinforcing UP Department of Sericulture's existing licensing arrangements through the proposed Sericulture Act and through public-private partnerships focused on agreements with credit institutions to extend credit preferentially to operators using multi-end reeling units which precludes use of child labor; (iii) drawing on the relevant competencies of the NGOs involved in the implementation of the sericulture sub- component to sensitize and train those directly involved in silk production and reeling on the importance of child education, appropriate working conditions, and use of workers' groups to be promoted under the project for child labor prevention and monitoring; (iv) institutional dialogue and partnerships with NGOs and other agencies, e.g. UNICEF, working in the field of child labor prevention and rehabilitation in UP; (v) strengthening of GOUP's existing monitoring, enforcement and inspection procedures through staff training, revision, production and distribution of relevant operational guidelines, and involvement of independent agencies in monitoring activities; and (vi) promotion of convergence between DASP, especially in districts where sericulture is an important part of the farming system, and other GOI/GOUP/NGO programs/projects aimed at expanding and/or improving primary education. In addition, UPDASP is committed to implementing any additional measures that may be identified through the study, or through engagement with other concerned stakeholders, as and when necessary. The Social Assessment, Annex 2, Attachment 5 provides additional background. At negotiations assurances were obtained that no later than December 31, 1998 GOUP would complete the study on developing a monitoring program to safeguard against child labor and not later than March 31, 1999 commence implementation of recommendations of the study agreed with IDA/Bank. Tribal people represent only 0.2 percent of the total UP population. Some horticulture and sericulture activities under the project are proposed in hill districts where the tribal share of total population is up to 3.5 percent. In these areas, tribal people are among the intended project beneficiaries, particularly for sericulture. Various features of project design are aimed at the inclusion of other socially excluded groups who in UP are numerically  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 23 more significant and more disadvantaged than tribal people. Notable among these groups are scheduled castes, the functionally landless, and women . Scheduled castes account for 21 percent of the total population of UP and around one third of all landless households. The Social Assessment, Annex 2, Attachment 5, elaborates on this beneficiary assessment. At negotiations, assurances were obtained that by March 31, 1999 GOUP would establish a Task Force to assess the present situation and prepare a program on gender issues in technology dissemination and shall, thereafter, implement the agreedprogram in consultation with IDA/Bank. For the road improvement component, although roads would be improved on the existing alignments a small amount of land may be required in some locations where either the old road embankments are being re- constructed to their original slope or where some smoothing of curves is being done. Generally this would be only a few feet of land and often that would be land that was previously under embankment material before erosion took place. GOUP have advised that, as has been the past practice with rural roads, this land would be given voluntarily without any land acquisition and without compensation because of the strong interest by villagers in getting better roads. It has been agreed that a Memorandum of Understanding (MOU) would be signed with GOUP (District Magistrate or his nominee in the concerned district) by all impacted families and by the Village Bodies (Gram Sabha) of the beneficiary villages. Only after unanimous agreement by all affected parties would construction be started. Where any individuals are not willing to sign MOUs then fresh roads would be taken up. Tlhe process to be followed is: (i) initial road identification against prioritizing criteria; (ii) team of officials, including representatives of the PCU and the concerned District Magistrate, and PWD would contact villagers and village leaders to ascertain willingness; (iii) after positive preliminary report PWD would conduct detail plane table survey, finalize alignment, and prepare strip maps; (iv) these would then be transferred to village maps to idenitify affected plot numbers; (v) District Magistrate, PCU and PWD officials would then meet with the village mukhias, gram sabhas and individual land holders to complete the MOU process. The primary concern is to ensure that the vulnerable elements of the community are not disadvantaged by the process of voluntary land transfer. In addition to the MOU, the procedure to be followed (see MOU1) emphasizes a transparent, public consultation process in drawing up the list of concerned land holders, including those without legally documented rights in land. The intention is to bring about an attitudinal change among those implementing the project as well as to safeguard the interests of the vulnerable. Under the arrangements for independent monitoring and evaluation of project activities to be undertaken by Indian Institute of Management- Lucknow, close attention will be paid to monitoring this process to ensure transparency and that land contributions are made voluntarily. (Proposed conditionalities described in Annex 2). 6. Environmental assessment: Environmental Category [ lA J/J B fJ C The Environmental Plan is given in Annex 2, Attachment 7. A main objective of the project is to have a positive impact on the environment through a focus on improved natural resource management. The proposed support for research and development of recommendations based on IPM is expected to reduce pesticide use compared to the without project situation. The IPNM, aimed at balanced nutrient use, improved crop rotations and improved soil analysis capability, would limit the wasteful use of fertilizers reducing negative impacts on groundwater and saving farmers money. The project also would strengthen GOUP's overall capacity to manage green environmental issues including conservation of local breeds which will help to increase and conserve biodiversity. There is a small possibility of soil erosion impact from the roads component but since all roads would be following existing alignments except for a small number of minor local deviations and since improving drainage structures would be part of the investrnent the impact is not expected to be significant. Alignment and site selection would be done taking potential erosion into account. No roads are to be rehabilitated or constructed in the hill districts where potential for environmental impact is greater.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 24 7. Participatory approach: Primary beneficiaries and other affected groups (see Annex 2, Attachment 4 - NGO Participation and Attachment 5 - Social Assessment): Appraisal Operation Beneficiaries/community groups CON CON COL Intermediary NGOs CON CON COL Academic institutions COL COL COL Local government COL COL COL Other donors Private Sector CON CON COL Form of Planned Involvement:- CON=Consultation COL=Collaboration F: Sustainability and Risks 1. Sustainability: With respect to environmental sustainability, the project is expected to be sustainable and to contribute positively to future agriculture sustainability in UP. This would be enhanced by the following: (i) research focused on sustainability; (ii) diversification of crop and livestock farm enterprises which would reduce monocropping; (iii) more specifically, a focus on perennial crops such as fruit and mulberry which are good for soil management; (iv) a soil nutrient management component specifically to promote practices aimed at improving soil nutrient status; (v) an IPM component; (vi) the development of livestock stall-feeding and improved livestock efficiency which would reduce grazing pressure; (vii) studies to improve water use efficiency; (viii) greater cost recovery which would reduce wastage of resources. With respect tofinancial sustainability, a study on this issue was undertaken during project preparation. This indicates that project expenditure at the peak would represent about a five percent increase in the annual allocations to the agriculture sector. While there would be an added burden of maintenance expenditure after the project, this would be modest and would be very quickly offset by the increasing cost recovery initiated by the project. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): ....*.*..........................~~~~~~~~~~~~~~~~....... a.. Annex 1, cell "from Outputs to Objective" Slow pace of reform may not result in environment S Establishment of EPAU which would monitor sufficiently conducive to greater private sector progress and propose to APC corrective actions. involvement. Slower than anticipated technology development. M Close monitoring, institutional changes to improve management practices, and participatory processes to ensure that technology responds to farmer needs. In addition, relevant technology would also be obtained by closer linkages with national and international institutions. Annex 1, cell "from Components to Outputs" Risk of slow implementation due to slow M Strengthened procurement capacity in PCU, procurement. close monitoring especially in first two years. Risk of poor performance of technology S Careful design, monitoring, and institutional development investments due to lack of experience changes, and overseas training provisions to see with competitive processes, public/private how such activities are handled elsewhere. partnerships etc.  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 25 Organization and management arrangements for the S Research-Extension-Farner linkages would be Technology Dissemination activities may be strengthened with emphasis on participatory constrained by inadequate support form the public methodologies with sharing of responsibilities institutions (and costs) with farmer organizations/groups and the private sector. Overall Risk Rating S I_I Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: The project is taking a proactive approach in seeking to prevent the future use of child labor in the sericulture related activities of the project (see Annex 2 Attachment 5). However, it is possible that the actions proposed under the project would not satisfy all interested parties. Notwithstanding this concern, it was decided to include this component and endeavor to make a significant contribution on an important and difficult issue. G: Main Loan Conditions 1. Effectiveness Condition GOUP has finalized the rural roads maintenance policy for the state. 2. Proposed Dated Covenants In Relation to Technology Development a) By March 31, 2000 GOUP, in consultation with IDA/Bank, would engage experts to develop terms of reference and undertake a study to review progress in implementing the reform program in UPCAR and not later than September 30, 2000 complete the study and agree on an action plan with IDA/Bank to implement its recommendations. b) For the CARP: (i) UPCAR would finalize its approval of the first phase of research proposals in accordance with the criteria and operational procedures agreed with IDA/Bank not later than December 31, 1998; (ii) GOUP would provide continued funding during the post-project period for completion of the research work initiated during the project period; and (iii) subject to satisfactory performance of CARP, GOUP would provide continued funding support for the competitive research funding mechanism. In Relation to Establishment of a Demand Driven Technology Dissemination System a) For the management: of the Technology Dissemination activities at the district level and below, GOUP would, not later than December 31, 1998, establish Agricultural Technology Management Agency (ATMA) as a registered society to manage the Technology Dissemination activities as per Terms of Reference agreed with IDA/Bank. b) GOUP would take all necessary measures to ensure that, not later then December 31, 1999, extension services in at least one block of two project districts would be "contracted" to NGOs or private service providers in association with Commodity Groups/Association and/or Self-Help Groups with technical back-stopping by the district teams and block level staff of the line departments. c) GOUP would ensure that NGOs contracted under the project would be selected according to the criteria agreed with IDA/Bank; and by December 31, 1999 would appoint a suitably qualified agency to undertake an  Project Appraisal Document U.P Diversified Agricultural Support Project INDA Page 26 independent assessment of the participatory management processes adopted under the project and no later than June 30, 2000 agree with IDA/Bank on an action plan to implement its recommendations. d) GOUP would: (i) no later than December 31, 1998 complete the study on developing a monitoring program to safeguard against child labor becoming a problem in Sericulture; and (ii) by March 31, 1999 commence implementation of recommendations of the study agreed with IDA/Bank. e) By June 30, 2000 Animal Husbandry Department (AHD) would commission an independent review to assess implementation progress of the Para-vet program and based on recommendations of this review take appropriate actions to encourage commercial success of the Para-vet scheme including withdrawal of similar services provided by the AHD from areas with effective coverage by Para-vets. f) By March 31, 1999 GOUP would establish a Task Force to assess the present situation and prepare a program on gender issues in technology dissemination and shall, thereafter, implement the agreed program in consultation with IDA/Bank. In Relation to Increased Private Sector Involvement in Agri-business Development a) GOUP, by December 31, 1998, would engage an autonomous agency to establish project development facility to mobilize increased private investment in production and post-harvest value addition activities including agro-processing. In Relation to Rural Infrastructure Development a) With regards to the rural roads to be financed under the project, GOUP would: (i) select roads and improve these according to criteria and technical standards agreed with IDA/Bank; (ii) maintain them in accordance with the action plan consistent with the road maintenance policy to be finalized by GOUP by December 31, 1998; (iii) no later than December 31, 1998 employ consultants under terms of reference acceptable to IDA/Bank to inspect and verify the technical quality of roads improved; and (iv) where additional land is required for road improvement, as has been the past practice in the state, ensure that this is provided by local communities voluntarily in accordance with a MOU to be signed between GOUP (concerned District Magistrate or his nominee) and all affected members of the participating community; and (v) would not commence improvement of roads in locations where private land is needed until such MOUs have been concluded. In Relation to Overall Management of the Project a) GOUP to ensure that the Project Co-ordinator, DASP would also be the Secretary, Co-ordination, APC Branch for the duration of the project. b) By January 31 of each year, starting in 1999, the PCU would provide to IDA/Bank for review and comments a copy of the Project's Annual Work Program for the following fiscal year to be financed under the project. c) Starting December 31, 1998, six-monthly and annual reports would be submitted by PCU synthesising overall project progress within thirty days of the end of the reporting period for IDA's review and comments. d) GOUP would monitor and evaluate, on an on-going basis, achievement of project objectives using performance indicators agreed with the Association and the Bank. e) (i) By December 31, 1999 and September 30, 2001, PCU would undertake two project implementation reviews;  Project Appraisal Documeint U.P Diversified Agricultural Support Project INDIA Page 27 (ii) by June 30, 2000 and March 31, 2001, in consultation with IDA/Bank, develop an action plan to implement their recommendations. f) By December 31 each year starting in 1998 PCU would furnish an annual training plan satisfactory to IDA/Bank and shall thereafter commence implementation of such plans. g) By December 31, 1998, GOUP with assistance from financial management consultants, would prepare a manual for accounting, auditing and internal financial control practices acceptable to IDA/Bank and, thereafter, put into effect a training program on such practices for all participating institutions responsible for implementing the project. h) By December 31, 1998 GOUP would: (i) establish EPAU with key staff whose qualifications and experience are acceptable to IDA/Bank; and (ii) each year commencing from March 31, 1999 EPAU's annual work program would be agreed with IDA/Bank. i) By December 31, 1998, GOUP, in consultation with the Association and the Bank, would engage an experienced procurement officer. 2. Other [classify according to covenant types used in the Legal Agreements.]: H. Readiness for Implementation [/] The engineering design documents for the first year's activities are complete and ready for the start of project implementation.. [/] The procurement documents for the first year's activities are complete and ready for the start of project implementation. [/] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 1. Compliance with Bank Policies [/] This project complies with all applicable Bank policies. Task Tea Leader/Task nager: Ashok K Seth Sector Managers: Michael Baxter/Ridwan Ali Country Director: E R. Li  Project Appraisal Document U.P Diversified Agricultural Support Project INDIA Page 28  Project Appraisal Document Page 29 India - U.P. Diversified Agricultural Support Project Annex I ANNEX 1 ITTAR PRADESH DIVERSIFIED AGRICULTURE SUPPORT PROJECT PROJECT DESIGN SUMMARY CAS Objective Assumptions: Accelerate sustainable agricultural Shifts in productivity and contribution Reports provided by GOUP Research and extension, skill growth and rural development of agriculture to economic growth. enhancement, financial reform, and decentralization and other policy reforms would enhance productivity in agriculture. Improved productivity would enhance overall growth, reduce income/gender inequality and reduce rural poverty. Risks The pace of policy, institutional and fiscal reforms may be slower than anticipated. Project Development Objectives Changes in management practices of Assumptions: Increased productivity of UP's farmers due to new technologies Yield surveys of selected Institutional reforms, new deversified agricultural production and/or improved policy by farm size crops/livestock supplemented technologies, enhanced client systems. and type. by less formal participatory orientation would assist in techniques. Monthly recording increased private sector Level of adoption of new technologies of price data. Selective involvement, accelerate disseminated to improve productivity. household income and growth in diversified expenditure surveys in Year I agriculture and increase Number and type of human resource and Year 5 coupled with farmer income. development activities undertaken survey of technologies offered desegregated by gender. by zone. Risks Incentives, policy and legal Implementation progress of agreed Monitoring records on human framework may not be matrix of policy and institutional resource development with a sufficiently conducive to reforms associated with the project. gender focus. greater private sector participation due to slow pace Improvements in rural roads and Surveys of private sector of reform and political markets as per agreed timetable. participation in selected uncertainty. Districts in Year I and Year 5. Quality of technology may be Matrix updated and, where constrained by lack of new possible, impact evaluation of information and/or slower two or three selected reforms than anticipated research through sample survey and progress. MTR.  Project Appraisal Document Page 30 India - U.P. Diversified Agricultural Support Project Annex 1 Project Outputs 1. Technology Developnent. Assumptions: Enhanced efficiency and (a) Extent and levels of adoption of (a) UPCAR data sources Staff in public research effectiveness of research improved research management supplemented by M&E institutions would adopt coordination and quality and systems at UPCAR and SAUs consultant survey proposed changes in relevance of research.. operational modalities (b) Year 5 survey of inputs from non- (b) Assessment by M&E SAU institutions in technology consultant Capacity to generate new development. technologies exist and that they would be successfully utilized through competitive process. Risks Response to competitive allocation of research funds may be weaker than anticipated. Coordination among research- extension-farmer groups may be slower or more difficult than anticipated. ....................................................... ............... ................. .............................................. ................................ ................... ........... -..................................................... ........... . 2. Technology Dissem ination Estabiishment of decentralized and Effectiveness and sustainability of Assessment by Project PCU Assumptions: demand driven technology district extension operations as with assistance from M&E Sstems approaches improve dissemination system with greater measured by: (a) success of district Consultant the quality of technology participation by the private sector, technology plan; and (b) fund offered. NGOs and farming communities. availability and utilization. Review of extension plans and annual reports Participatory research and Level, nature and intensity of extension design enhances stakeholder participation in the adoption rates. Technology dissemination process. Farmers in selected districts Level of adoption and productivity are receptive to group impacts of new technologies by farm formation. size and type (long run). ~~~~~~~~~.......... ......................... ................................... ......................... zeadtpQogu)................. .................................................I............... ....................... .................... ......... 3. Support for Increased Private Sector Involvenent in Public/Private Partnerships and Agri-business Development ....................................................................... .............................................................................. ........................................................................................................ Reduce constraints to private entry, Legal and regulatory constraints and Shifts in investments in agri- NGO and the private sector greater private investment in agro- number and type of subsidies business by the private sector, and farmer's organizations industrial ventures and reduction in eliminated during project preparation may not be able to take over subsidies which reduce private phase and during implementation Impact study at the completion functions/activities previously entry. phase. of the project. undertaken by the public institutions. Number of new agri-businesses Leadership and capacity may established during the project. not be available to provide training in participatory approaches to develop need- based extension plans.  Project Appraisal Document Page 31 India - U.P. Diversified Agricultural Support Project Annex I 4. Rural Infrastructure Developmentw ........................................................................................................................................................ .............................................................. Improvements in rural infrastructure Number of markets and kms of rural Baseline and annual (roads and markets) to enable farmers roads upgraded. information based on market and private sector to fully exploit records on the volumes at market opportunities. Changes in percent of output targeted rural markets. damaged in transit and storage (e.g. horticulture produce, dairy (milk) Changed traffic flow on loss. project rural roads. Change in produce volume traded through rural markets. Project Activities 1. Technology Development ............................................................................ ............................................................................ ............................................................................................... (i) Enhance research coordination by (i) Increase efficiency measured by Review of research plans and Assumptions: strengthening UPCAR, SAUs and the number of new technologies program reports to assess: Introduction of competitive UP's linkages with the national adopted and their effectiveness allocation of funds with a research system. (a) number and stages of focus on multi-disciplinary (ii) percent of funds allocated to emerging technologies. systems oriented research (ii) to enhance efficiency and different agencies through CARP would produce results of effectiveness of research through utilized as per agreed objectives (b) current researcher/reviewer greater relevance to farmers. competitive allocation of funds to and composition of research satisfaction multi-disciplinary systems oriented institutions receiving funds from the Ability exists, or can be research which is open to public and CARP and their outputs (c) composition of research quickly established, to private institutions in UP with * number completed on schedule. funding administer competitive grants capacity for agricultural research. * technical and cost-effective to generate high quality including IPM and IPNM research. nature of the work. (ii) external review of research research. financed under the project at Motivation for greater (iii) (a) strengthen research- (ii) (a) Number of new technology 18 and 36 months to assess interaction between KVKs, extension-farmer linkages by development activities initiated quality and relevance ZRSs and line departments supporting interaction between KVKs through KVKs and ZRSs and line * monitoring and field exists. and ZRSs and SAUs and line departrnents interactions. survey at Year 3 and departments. Year 5 Risks Lack of prior experience of (b) enhancing the availability of (b) Assessment of genetic potential of (iii) (a) monitoring number competitive grants and improved genetic stock crops and selected crops and breeds before and and type of interactions systems oriented research and breeds. after the project e.g. number of new between the institutions the challenge of redirecting cross-breeds, number of new apple long-standing processes and varieties introduced. (b) baseline information on attitudes in existing large new genetic stock available organizations. * census of genetic stock available at Year 3 and Year 5  Project Appraisal Document Page 32 India - U.P. Diversified Agricultural Support Project Annex I _~~~~ 2. Technology Dissemnination ()Rtoaiainadroinain........................................................ .................... ......................................................... ....... ........................ ................ .............................................................. (i ainaILzation and reorientation of the public extension service of technical and a) Number of new location specific Baseline information from: Risks managerial decision making to the technologies adopted, especially those * line department records Insufficient commitment of district level and integration of impacting on improved resource * survey of farmers by the existing government functions of different agencies management. M&E consultant on institutions, NGOs and the through district strategic extension contact with extension small private sector to plans. (b) Matrix of technical/managerial workers coordinate successful links decision making decentralized to the between research-extension- Redeployment and training of line district level indicating the prior/new Project MIS records farmers. department staff to promote new decision maker. knowledge and participatory Year 5 Evaluation Survey by Realistic rate of progress in approaches to technology * Number of line department staff M&E consultants adopting the bottom-up dissemination. redeployed/trained in approach participatory methodologies. ............................................. ........................................ ....... .............................. ............................................... ....... .......... ...................................................... ...... . (ii) Increasing the Role of Private Sector ...................... ............................................. ............................................................................. ................................................................ ................................ (i) Agriculture: (i) Agriculture Baseline and follow-up * Increase privatelcommunity * Number of (based on annual evaluation surveys by M&E role and participation in on- monitoring by extension staff) of consultants on: farm, IPNM, IPM. [NM, on-farm, and IPNM * private sector and * Raise productivity of rainfed activities indicating prior and community participation arid to semi-arid districts current public/private in activities concerned through improved farm involvement. * income/gender management practices, * Change in per-hectare distribution of intended especially those related to land productivity of rainfed crops e.g. beneficiaries and water. oil seed and legumes (district * level of cost recovery level in the project area). from services (ii) Horticulture: (ii) Horticulture * Employment of horticulturist * Number of private horticulturists Survey of adopted inputs and commodity groups or other trained as extension workers associated technologies. private agencies and their * Change in the quantity of post training to promote and support harvest waste Review of extension strategy improved horticultural crop * Number of new/improved private changes over project period. management practices nurseries * Promotion of private nurseries * Quantity of output from private Project MIS records * Promotion of improved post- nurseries harvest management practices * Quality of fruit and vegetable Evaluation survey of program. markets by private sector Risk (iii) Livestock: (iii) Livestock Possibility of para-vets * Promotion of milk hygaine * Milk quality improvement. Monitoring of Al performance, dropping out due to non- program * Improvement in regulatory survey of paravets availability of inputs and/or * Establish Para-Vets to provide functions effectiveness disparity in service changes Al services to farmers on a full with public service. cost recovery basis. Assumption Credit and input supplies would be available and public service charges will be increased as per agreed cost recovery schedule outlined in policy matrix (Annex 2, Attachment I)  Project Appraisal Document Page 33 India - U.P. Diversified Agricultural Support Project Annex I Risk (iv) Sericulture: (iv) Sericulture Private investment may not * Expansion of public/private * Comparison of the number of silk Monitoring records by take place due to slower than production infrastructure for worm eggs and DFLs supplied. Sericulture staff/PCU anticipated skill enhancement supply of silk worm eggs and * Compare the quantity of silk of potential participants DFLs production before/after project Monitoring records by and/or access to institutional * Number of new local-level sericulture staff PCU credit. * Organize local-level sericulture sericulture extension workers; extension with the help of number of NGO Para-workers Assumption NGOs and FOs trained to participate in Sufficient number of skilled implementation of the project. new growers would take up * Establishment of a monitoring * Level, and changes in level and Monitoring of changes in sericulture, and have access to system to assess the status of conditions of child labor in legislation and enforcement credit. child labor in sericulture in UP reeling. related to child labor. and changes over time. Completion of studies on child labor and implementation of recommendations ...................................... ...... ............... ............................................................................................................... (ho Enh6~ancing th atcpto yFrigCmunities. (i) Formation of FIGs including (i) Number of FIGs formed and the Baseline survey of Assumptions: village based saving and credit SH[G variety/representation from different gender/income composition of: Grass-root level extension and CG/CA focused on the sub-sectors and gender/income * beneficiaries as each programs are more efficient in production and marketing of a distribution of membership. individual joins the FIG, technology generation and specific sub-sector SHG, and CG/CA adoption and would increase (ii) Number of SHG and CG/CA * at project mid-term farm productivity as well as (ii) Training of SHG and CG/CA members trained in each of financial * at project completion equity. members and participating management, group dynamics and Existing system can be supporting agencies (NGOs, line participatory concepts as well as their Project records. molded to adopt a department, and lending institution gender distribution. participatory approach. staff). The private sector can (iii) number of NGOs, FOs engaged in Group records and records successfully be used in input (iii) Facilitation of linkages with the day to day activities in extension maintained at the banks. supply and support services. lending institutions to mobilize services; measured changes in credit financing knowledge of extension workers. (iv) Amount of credit secured by the FIGs, SHG and CG/CA members including percentage of women by income group. (iv) Strengthening of extension (v) Before/after comparison of: Year 4 Evaluation survey Risks training and communications number of extension workers trained Farmers organizations may capacity in new methodologies adopted for not form as quickly as contacts with farmers; anticipated. 3. Supportfor Increaed Pivate Secor Involvement in Pub e Partnerships in Agri-busine s D. ve. opm. ........................................................ ........................................ ..................................................................................................................................................................... ............................... (a) Credit mobilization andfacilitation. Increase access to credit for Number of incremental loans received Monitoring and surveys by Assumptions: subsistence farmers, landless, by subsistence farmers, landless, M&E consultants of SHGs, CGs etc will enhance unemployed, and rural women unemployed and rural women as well effectiveness at 36 months and vulnerable group access to through self-help groups and as self-help-groups and commodity final year credit. commodity groups. groups. b) Project Development Facility (PDF) ~~~~~~~~~~e i.................... ..... V i......... ; ....................................... .. .. .. i;G i g......................................... ..................... ....... - establishment of a Project - Volume and quality of work of the Monitoring PDF will be successful in Development Facility (PDF). PDF. increasing private sector involvement in post harvest activities.  Project Appraisal Document Page 34 India - U.P. Diversified Agricultural Support Project Annex I 4. RuralInfrastructureDevelopment .............. .................................................. ............................................................................. ............................................................... ................................ Rural Roads: (a) (i) Number of km improved; 600 * PCU progress reports, Assumptions: (a) Improve about 1,600 km of rural km by end 2000, 1600 km by project M&E survey. Improved infrastructure/ roads. end. markets would be fully * Reviews and reports of utilized (a) (ii) Consultants appointed for independent technical quality review. examiner Risks (b) sustainable framework for * Beneficiary survey Failure to implement effective (b) Execute program of road maintenance established covering: (i) feedback from maintenance program. maintenance works and improve funding mechanisms; (ii) inter- communities maintenance management including institutional collaboration (iii) Possible delays in testing of new maintenance funding community participation; procurement processing mechanism and transfer of which may result in targets responsibility to communities not being met. (c) monitoring of changes in volume (c) Strengthen capacity of of work in procurement, and implementing agencies (e.g. PWD) qualitative assessment of changes in to plan and execute (procurement, financial management and capacity for contract administration, financial stakeholder consultation. management and stakeholder consultation) rural roads program Rural Markets: Risks (a) Upgrading up to 145 high * Number of Haat Painths as cattle Project records Unforeseen policy or volume Haat Painths and 13 cattle markets actually upgraded. associated infrastructure or markets (Revenue generated through * Proportion of revenue generated Impact study after project management constraints that service charges would finance for maintenance and the implementation reduce the ability of farmers operation and maintenance and proportion of total revenue used or traders to fully utilize future expansion of these markets). for future expansion of Haat Marketing Federation markets (b) Improvement of markets Painths management records. handling fruits and vegetables at * Type and frequency of farmer two Mandi Parishad secondary access to market information. market yards in priority horticultural * Changes in value of fruits and development areas. vegetables transacted and in handling losses. ~~~~~~~~~~~~~~~~~... ------ -....----. ----higl.s.s............................................ .......................................................... .............................. 5. Project Management Support ........... ................................................... .........................................................I.................... ................................................................ ............................... (i) Establish a Project Coordination * Implementation and Regular project reporting. Assumptions: Unit (PCU) for project management. disbursement of the project. Sound management can * Sound monitoring and evaluation Assessments of supervision substantially impact on (ii) Reputed independent agency to contributing to good project missions. project performance within undertake concurrent monitoring management and achievement of the constraints of policy and and evaluation of the project. objectives. PCU, Bank supervision, and level of development in the * Number of decisions based on DEA assessments of value and state. MIS feedback. quality of M&E data from * Assessment reports by M&E agency. Risk supervision missions. Attempting too large a * Quality of data for the MTR volume of information in M&E and failing to get timely quality information to management (iii) Establish an Economic Policy Number of high quality reports Assessment and evaluate the and Analysis Unit. evaluating public expenditure in report agriculture and, if any, the number resulting in policy reforms.  Project Appraisal Document Page 35 India - U.P. Diversified Agricultural Support Project Annex I/Attachment I PROJECT DESIGN SUMMARY PERFORMANCE INDICATORS No. Indicators Unit I Increase in beneficiary family income Rs.in thous. 2 Per-capita income Rs.in thous. 3 Component-wise Gender distribution % 4 Commodity-wise increase in area % 5 Commodity-wise increase in productivity tons/ ha 6 Commodity-wise cost recovery per year % 7 Commodity-wise change in price % 8 Investment by Private Sector Rs. in lacs 9 Ratio of investment: public/ private sector Rs. in lacs 10 Region-wise poverty % 11 Staff trained against staff deployed/ appointed % 12 Trained extension workers against selected workers % 13 N+P+K consumption kg/ ha 14 Consumption of FYM kg/ ha 15 Increase in Micro-nutrients availability - Zn++ % 16 Increase in Micro-nutrients availability - S-- % 17 Increase in Micro-nutrients availability - Fe++ % 18 Increase in Micro-nutrients availability - Mg++ % 19 Technologies adopted by farmners to the Tech. disseminated % 20 Length of constructed roads kms. 21 Length of roads upgraded kms. 22 Villages connected to roads nos. 23 Increase in traffic on constructed/ upgraded roads % 24 Reduction in spoilage of commodity in transit % 25 Reduction in spoilage of commodity in storage % 26 Cost of maintenance of roads per year Rs/km 27 Haat Paints developed/ constructed nos. 28 FIGs formed at village level nos. 29 Amount of credit available with farmers Rs. in lacs 30 Farmers Associations formed at Block level nos. 31 Increase in newly established private agro-industry venture nos. 32 Increase in produce recorded in rural market/ mandis % 33 Establishment of new private nurseries nos. 34 Upgraded private nurseries nos. 35 Conception against Al performed % 36 Progeny rate: Cow nos. 37 Progeny rate: Buffalo nos. 38 Increase in milk production: Cow % 39 Increase in milk production: Buffalo % 40 Increase in wool production: Sheep % 41 Increase in meat production: Goat % 42 Increase in private mini dairies % 43 Research Project Financed under CGPAR nos. 44 Allocation of funds under CGPAR to SAU's % 45 Allocation of funds under CGPAR to NGO's % 46 Allocation of funds under CGPAR to private sector % 47 Formal interaction between KVKs and ZRS nos. 48 D:FL intake lacs dfl/ ha 49 Establishment of new private ventures in cocoon activity nos. 50 Randitta ratio 51 Child labor involved in reeling nos.  Project Appraisal Document Page 36 India - U.P. Diversified Agricultural Support Project  Project Appraisal Document Page 37 India - U.P. Diversified Agricultural Support Project Annex 2 ANNEX 2 UTTAR PRADESH DIVERSIFIED AGRICULTURE SUPPORT PROJECT DETAILED PROJECT DESCRIPTION 1. Objective. The principal objective of the proposed project would be to accelerate the growth of UP's diversified agriculture in relation to agro-ecological potential and market demand with a particular emphasis on production systems which benefit the rural poor. 2. Design Considerations. As UP is a large state with diverse agro-climatic conditions offering a wide range of development opportunities, the project is envisaged as the first step of a long-term program. The first phase would be concentrated in selected areas (blocks) in different agro-ecological zones to ensure impact and for later expansion based on implementation experience. The area covered under the project would be enlarged in a phased manner. During the pre-project period the work is being initiated in selected blocks in about five districts to gain implementation experience. It is proposed to increase the area after project effectiveness to about 15 districts. Following the first major review of the project, to be undertaken about 18 months after project effectiveness, additional blocks would be brought under the project (increasing the total to about 32 districts) with appropriate adjustments in design based on experience. The only exception to this general approach would be some Animal Husbandry activities e.g. disease prevention program, which would be spread over a wider area. A second review 36 months after effectiveness would provide further opportunity for adjustments based on implementation experience and impact assessment. 3. The project would support govemment's development priorities to accelerate agricultural growth by focusing on areas that show potential for rapid growth through intensification as well as diversification and contribute to poverty reduction and regional disparities. Accordingly, the thrust of the project would be to: improve the quality and relevance of the technology development and dissemination system; ease infrastructure limitations; encourage greater participation by the fanning communities in decision making as well as implementation of proposed interventions; address policy and institutional constraints that linit growth and private sector participation. In addition, the project design emphasizes the need for analyses of prevailing fanning systems and emerging regional specialization to identify areas for intervention that have increased production potential based on proven technologies, producer interest and market prospects. 4. Social Context. Based on three indicators (real rural wages, agricultural labor share, share of small and marginal land holdings), the incidence of poverty within UP is lowest in Western UP, then comes the Hill region, followed by Bundelkhand and Central UP, the poverty distribution is highest in Eastem UP. This distribution is also confirned by a broader, capability- based definition of poverty, measured in terms of access to basic infrastructure, literacy rates and key demographic indicators. Caste is not a significant factor in the regional distribution of poverty, as the distribution of Scheduled Castes (21% of total population) is relatively even throughout the state. Scheduled Tribes constitute only 0.2% of the total population of UP, but even this figure tends to overstate their incidence as tribal people are concentrated within specific localities in Hill districts. Consequently, UP DASP does not aim specifically to target tribal people. 5. In relation to gender disparities, the regional pattern is somewhat different, and tends to reflect regional variations in the influence of caste- and religion-based cultural norms and practices such as seclusion of women within the household. Based on key gender-disaggregated indicators, particularly the female workforce participation rate, women in Eastern UP appear to be in a relatively "better" position than those in Western UP. This wider gender disparity in development indicators for Western UP strengthens the case for UP DASP intervention in the region, even though it has received greater development assistance in the past. In the Hill region a relatively lower incidence of poverty is matched by less unequal gender relations. 6. The design of UP DASP takes this regionally disaggregated view of poverty and gender imbalance into account. Several technology dissemination activities are targeted towards women. Interventions in Westem UP would assist women of all socio-economic status involved in agriculture through its focus on productivity improvements in milch cattle buffalo and small ruminants. Women have been traditionally involved in caring for animals and this work is well suited to be combined with other house-hold labor and child caring responsibilities. In addition, the project is attempting to capture the rapidly expanding growth of commercial horticulture with its large potential to create rural employment opportunities through stronger linkages between production and post-harvest value addition activities. The project activities would be promoted within the context of Self-Help Groups/Commodity Associations, facilitated by local NGOs. These have proven successful in UP for enhancing the capabilities, of farm families, especially women.  Project Appraisal Document Page 38 India - U.P. Diversified Agricultural Support Project Annex 2 Investment Components Component 1. Supportfor Technology Development Through Improved Research Coordination and a Competitive Grants Program 7. The main objective of this component would be to augment and strengthen on-going research activities so that they can better provide the technological base for the production systems to be supported under DASP. The specific activities to be supported would include: (i) Enhancing Research Coordination. At the state level, UP Council for Agricultural Research (UPCAR) would be restructured through revision of its mandate, governance, staffing and operational procedures (see Working Paper and other supporting studies on this component for details). It would be strengthened to provide policy guidance and to promote and facilitate inter- institutional cooperation in agricultural research. The project would finance incremental staffing, consultancies, training, vehicles, office equipment, computers and related hardware and software to improve its ability to communicate and coordinate the work program with other agencies both within and outside of the state. In addition, assistance would also be provided to enable UPCAR to develop a long-term strategic plan for agricultural research and an agricultural information system for the State. At the State Agricultural Universities (SAUs), the offices of the Research Directors would be strengthened through training, technical assistance and provision of additional staff and equipment to improve capacity to manage and coordinate research programs being implemented through various departments of the University. These efforts would not only enhance UP's linkages with the national research system, e.g. to fully benefit from research programs to be fmanced under the IDA/Bank assisted National Agricultural Technology Project (NATP), but also help to lay the ground work for a possible future project to support agricultural research and education activities in the state on a much broader front. At negotiations assurances were obtained that, by March 31, 2000 GOUP, in consultation with IDA/Banlk would engage experts to develop Terms of Reference and undertake a study to review progress in implementing the reform program in UPCAR and no later than September 30, 2000 complete the study and agree on an action plan with IDA/Bank to implement its recommendations. (ii) Competitive Agricultural Research Program (CARP) The project would assist to establish the CARP to commence a process aimed at enhancing the quality, relevance and accountability of agricultural research. At the same time, CARP would enable the broader scientific community to contribute more effectively to the development of knowledge and technology for agricultural development in the State. CARP would finance a problem-oriented, multi-disciplinary research program specifically aimed at addressing key production and processing constraints of the main production systems of the state. Research funds would be available through open competition to the SAUs and their Zonal Research Stations and Substations, agricultural faculties of general universities in the State, agricultural colleges, ICAR and CSIR national institutes operating in UP, private sector institutions and non-governmental organizations. CARP would be managed by UPCAR through a special cell at its Headquarters. The CARP mechanism would involve pre-project screening of proposal, invitation to preparation of full project proposals, project proposal evaluation through a peer-review process and approval. UPCAR would be provided services of consultants for the establishment and adoption of procedures for the operation of the CARP. In order to receive funding, research proposals would have to meet specified criteria such as their relevance to DASP objectives and priorities, resource constraints and preferences of producers, the likelihood of successful outcomes. More information on screening criteria is given in Attachment 2. The funding for successful proposals would provide for the necessary equipment, logistical support for conducting of field trials, project-specific training and technical assistance, salaries of temporary research fellows/associates, and materials and supplies required to carry out the research projects.  Project Appraisal Document Page 39 India - U.P. Diversified Agricultural Support Project Annex 2 In view of the importance of Integrated Pest Management (IPM) and Integrated Plant Nutrient Management (IPNM) to future sustainability of agriculture, the project includes specific provisions for research and development support on these two topics. However, as the scientists working in SAUs and other institutions have not been exposed to competitive peer reviewed process of obtaining research funds, during the first year of the project, specific research activities to be supported on IPM and IPNM research would be used to introduce scientists to the new process. The steps to be followed would include: (a) a workshop to identify key constraints; (b) development of specific research proposals by teams of scientists nominated to undertake the agreed work program; (c) review of proposals by a panel of research experts; and (d) financing of agreed programs. From the second year onwards a fully competitive process would be followed. At negotiations assurances were obtained that for CARP: (i) UPCAR wouldfinalize its approval of the first phase of research proposals in accordance with the criteria and operationalprocedures agreed with IDA/Bank not later than December 31, 1998; (ii) GOUP wouldprovide continuedfunding during the post-project periodfor the completion of research work initiated during the project period, and; (iii) subject to satisfactory performance of CARP, GOUP wouldprovide continuedfunding supportfor the competitive research funding mechanism. (iii) Strengthening of Research Support for Technology Dissemination Activities (a) Improving Research-Extension-Farmer Linkages The objective of this activity would be to improve technology transfer, and provide feedback on farmers' needs and conditions to the research system. These would include: on-farm research, validation and demonstration activities of the Krishing Vigyan KendraslKrishing Gyan Kendras' (KVKs/KGKs) in collaboration with Line Department extension agencies. The project would strengthen capacities of participating agencies through training and study tours, access to relevant literature through SAU libraries, equipment and other facilitate for participative farining systems research and on-farm validation activities. Mechanisms would be developed to provide for strong linkages with the Line Department extension agencies and farmers' groups. (b) Enhancing Availability of Improved Genetic Stock for Higher Productivity. The objective of this sub-component would be to support activities undertaken by SAUs and/or line departments to conserve and increase availability of improved genetic stock of crops/breeds for adoption by growers to increase farm productivity. As production of improved seed stock for agricultural crops, especially rice, wheat oil seed, already receive considerable attention from both the public and the private sector, the project would also give attention to the livestock and horticultural sub-sectors. Management of these activities through the Technology Development component would ensure better coordination and closer involvement of relevant SAU specialists, line departments and PCU Technical Specialists. Some examples are given below. Livestock Germplasm Enhancement. India has unique resources of livestock breeds, which have been inventoried through FAO's Program for Global Management of Farm Animal Genetic Resources. The important indigenous breeds in UP, which contains the largest number of livestock of any state in India, include Sahiwal, Hariana and Gangateri in cattle, Murrah and Bhadawari in buffaloes; Berberi and Beetal and Jamunapari in goats; and Nali in sheep. These breeds, which are still being used by the farmers, need characterization, preservation and improvement. Provision has been made in the project for strengthening the infrastructure required to conserve and develop the biodiversity, as well as to improve some of the existing Animal Husbandry Department (AHD) Farms to undertake breed improvement, multiplication, demonstration, distribution and training of private breeders. The project would also support the establishment of Open Nucleus Breeding System (ONBS) for the conservation and improvement of the local cattle, sheep and goat breeds. The project would finance purchase of initial batch of animals, rehabilitation of breeding farm, vehicle, equipment and other recording material for the base herd/flock recording system, and the operating costs of the system. It is envisaged that ultimately successful breeders would form their own associations and maintain the ONBS program. Krish Vigyan Kendras (KVK) (Agricultural Science Centers) are being established, in a phased manner, in all districts of India through a centrally sponsored program iinanced through the Indian Councel of Agricultural Research. Their main function is to assess and validate technologies developed by the research system in the context of local farming systems. They also train farmers and extension workers. Krish Gyan Kendras, financed through SAUs in U.P. in a few districts without KVKs, perfonn similar functions to those undertaken by KVKs.  Project Appraisal Document Page 40 India - U.P. Diversified Agricultural Support Project Annex 2 Broadening Genetic Base andAvailability of lmproved Varieties of Horticultvral Crops. Sources of horticultural technology in UP are the SAUs, DOH and the private sector. Fruit production is mainly from perennial crops with a long gestation period, while vegetables, floriculture and herbs and spices are primarily annual and biennial crops. The project would support improvement in post-quarantine handling facilities (secondary quarantine) at Pant Nagar SAU to facilitate introduction of improved genetic materials of temperate and sub-tropical crops. This facility would be operated under the overall guidance of ICAR's National Bureau of Plant Genetic Resources. At the same time to increase availability and adoption by farmers of disease free planting material of recommended horticultural crops the project would support a study to examine the possibility of initiating a voluntary budwood certification scheme for private nurseries. Technology Advisory Groups. To strengthen future development prospects for important commodities through all stages from production to marketing, the project would foster the formation of "Technology Advisory Groups" (TAG) on a commodity basis or a group of commodities. Each group would be composed of 3-4 eminent scientists at the SAUs, UPCAR representative, concerned line department, producers, middlemen, consumers and agribusiness entrepreneurs. The TAG activities and functions will be organized by the PCU's Technical Coordinator in cooperation with UPCAR, SAUs and the concerned line departments. Early examples of such groups would be in the horticulture sub-sector covering Horticultural Technical Advisory Groups (HTAG). Each HTAG would prepare a commodity Action Strategy Plan to resolve production and marketing constraints and promote project activities to resolve said constraints. The groups would meet as necessary prior to and during critical production and marketing periods. The groups would also maintain an oversight on project's activities in budwood mother orchards, model nurseries and staff training of the Horticulture sub-sector. Six HTAG have been proposed in the following commodities: (1) fruits (plains and hills); (2) vegetables (plains and hills); (3) herbs, spices and medicinal plants; (4) floriculture; (5) mushrooms; and (6) post harvest activities. Component 2. Establishment of a Demand Driven Technology Dissemination System 8. A major objective of this sub-component would be to make the public service more demand driven and accountable to farmers. A concurrent objective is to enhance its sustainability by fostering a new division of labour between government departments, the private sector, NGOs, and farmer organisations. The strategy to be adopted to achieve this objective would be to seek increasing involvement of farmers in the technology development and dissemination process through farmers grassroots organizations such as self-help Groups (SHGs) and Commodity Groups/Producers Associations (CGs/PAs). In addition, the govermment line departments would be facilitated to focus available resources on dissemination of "knowledge" based technologies. They would phase out direct involvement in production and activities directly related to input supply which the private institutions can provide in a more cost effective manner. This shift in responsibilities of the public institutions would require policy changes and withdrawal of subsidies as well as diminishing of government's involvement in providing production inputs to farmers, such as planting material and artificial insemination. In the context of this overall approach to technology dissemination, the focal point for the public and private interventions to accelerate intensification and diversification of production systems would be farmers and their organizations. 9. The implementation responsibility for investments proposed under the project would mainly be through the line departments. Accordingly, the activities to be supported under this component reflect the needs of the participating line departments as well as non-goverm-nental organizations/groups and training institutes participating under the project. These cover the funding requirements for re-deployment and training of extension staff, formulation of farmer's interest groups, support to NGOs, rehabilitation of facilities and procurement of goods and services. Each participating agency would prepare annual work program which would highlight the activities to be undertaken in line with the agreed approach and priorities. However, the funding levels proposed for the sub-sectoral activities are not intended to be final. Rather, in the interests of effective technology dissemination, competition between sub-sectors would be encouraged by making the continued availability of resources dependent on performance and farner demand, with redistribution of resources from slow moving to more in demand and efficient sub-sectors at the time of scheduled reviews of project perfornance (18 and 36 months after commencement). Key thrusts of the component are summarized below and the specific activities to be undertaken by the main line departments (Agriculture, Horticulture, Sericulture and Animal Husbandry) are summarized in Attachment 3.  Project Appraisal Document Page 41 India - U.P. Diversified Agricultural Support Project Annex 2 (a) Rationalisation and Reorientation of Public Extension Service (i) Support for Capacity Building of the Line Departments to Initiate Farming Systems Approach to Technology Dissemination. An irnportant element of reorienting the technology dissemination role of the line departrnents would be the project's assistance in redeployment and training of existing staff. The agriculture sector line department staff, along with specialists at district KVKs and KGKs; and selected Zonal Research Stations (ZRS), would be responsible for validating recommendations to address technical constraints faced by farmers in intensification and diversification of production systems under different agro-ecological conditions. The training program would pay special attention to skill requirements of the Subject Mater Specialists (SMSs) in managing a demand driven extension system through both public and private channels. In addition, the Departmnent of Animal Husbandry (DOAH), DOA and DOH would redeploy and train other staff (e.g. stockmen, in the case of AHD, staff involved with input distribution in the case of DOA) to impart new technical skills and assume direct responsibility for technology dissemination at the block level. Staff from different disciplines would operate as a team to give added emphasis and support to the Farming Systems approach (broad-basing of extension support which is a declared policy objective of GOUP) being emphasised under the project. This would require inter-departmental sharing of responsibilities in responding to fanner's needs for technological support. The DOH-in the plains has limited number of SMSs at the district level and no technical staff below the district level. Therefore, some incremental SMSs at the district level would be engaged on a contract basis. In addition, at the block level, needs of farmers related to horticultural crops would be supported by the DOA's Block Extension Officers. (ii) Decentralisation of Technical and Managerial Decision Making The project would support progressive decentralisation of technical decision making to the districts. Two different mechanisms would be tested. These arrangements for technology dissemination would provide a mechanism to strengthen co-ordination of activities of different agencies as well as strengthen research-extension-farmer linkages composed of existing and redeployed staff. Under the first mechanism at the district level a District project Implementation Committee (DPIC) would be established. To establish close links with district administration the District Magistrate (DM) would be the Chairman and the Chief Development Officer (CDO) the Vice-Chairman of DPIC. Its other members would include the key stakeholders the representatives of line departments, SAU/KVK, Farmers Organisations, local government officials and NGOs. The District Project Co-ordinator (DPC) would act as its member secretary. DPIC would have overall responsibility for implementation of the district level program of the project. To meet the technical needs of farmers, DPIC would establish district technical teams. The teams would include the District Officers from each line department, technical expert from ZRS, plus the trainers from the local KVK/KGK. They would work together to develop an overall Strategic Extension Plan (SEP) for the district using participatory rural appraisal (PRA) techniques. The annual work plans (AWPs) of line departments would be based on SEPs. The district teams, under the overall guidance and monitoring by DPIC, would take responsibility for management of district level extension, NGO program and related operational budget (about 15 percent of total funds allocated to each line department through PCU) to implement the AWPs. The second mechanism, to be tested in two districts, would involve establishment of a semi-autonomous Agicultural Technoloey Management Agencv (ATMA) with representation from all the key stakeholders. To enable direct transfer of project funds to ATMAs for timely inplementation and to provide operational flexibility, these bodies would be registered as societies and directed by a Governing Board composed of stakeholder representatives. The Board would take over the role performed by DPIC in other districts. To help achieve financial sustainability, ATMAs would be able to start recovering costs for selected activities and retain funds in revolving accounts to cover a part of operational expenses. ATMAs would encourage partnerships with the private sector service providers. Arrangements for preparation of SEPs and other operational modalities for day-to-day technology dissemination activities would be through the district technical teams proposed under the first mechanism described above. The project would expand farmer training program as well as provide in-service training and technical back-stopping for the extension fielld staff. At the same time, proposed operational changes with emphasis on participatory methodologies would begin to involve farmers and their organizations in the control for the technology system to further encourage involvement of farmer's organizations in the management of the technology dissemination system, Advisory and Consultative Teams (ACT) of farmer representatives would be supported. They would provide feedback to the project management on programs and activities of extension staff. ACT representatives would be encouraged to form a loose association to start working with key agencies to start influencing technology development and dissemination agenda of the district.  Project Appraisal Document Page 42 India - U.P. Diversified Agricultural Support Project Annex 2 At negotiations assurances were obtained thatfor the management of the Technology Dissemination activities at the district level and below, GOUP would in two project districts, not later than December 31, 1998, establish Agricultural Technology Management Agency (A TAM) as a registered society to manage the technology dissemination activities as per Terms of Reference agreed with IDA/Bank. (b) Increasing the Role of the Private Sector in Input Supply and Support Services (see Policy Matrix Attachment I and Annex 2 Attachment 3) The project would progressively reduce government's role in input supply functions and, wherever possible, facilitate leasing and/or sale of government facilities/farms to the non-govenrnental organizations including the private sector firms. In addition, to encourage introduction of improved breeds and varieties through the private sector the project would provide training and other support to para- veterinarians, (para-vet program), to small and medium sized private nurserymen, seed companies and breeders who wish to establish small businesses to provide inputs and related services to farmers. The project would assist to establish procedures for monitoring and regulating the production and distribution of planting material and breeds to ensure that farmers are receiving high quality production inputs from the private sector. To further strengthen this move to private sector for input supplies, State government subsidies for inputs and other services would be phased out, moving to full cost recovery over the life of the project. At negotiations assurances were obtained that by June 30, 2000 DOAH would commission an independent review to assess implementation progress of the Para-vet program and based on recommendations of this review take appropriate actions to encourage commercial success of the Para-vet scheme including withdrawal of similar services provided by the AHDfrom areas with effective coverage by Para-vets. (c) Enhancing Participation by the Farming Communities An essential element in creating a demand driven technology system is to directly involve farmers in identifying problems, establishing priorities, and on-farm testing of technologies to enhance productivity. To achieve this objective and to ensure long-term sustainability of project supported activities, it is planned to encourage formation of grassroots farmer organizations and farmer interest groups (FIGs). These would include the small village based savings and credit Self Help Groups (SHGs) as well as groups linked to specific crops or commodities. In view of past success with women's SHGs and to ensure that women members of the farming community receive appropriate attention, greater attention would be given to SHGs formed by women. To improve the terms on which farming communities gain access to markets, the project would promote formation of Commodity Groups(CGs)/Producer Associations (PAs). The primary responsibility for the fonnation of these groups in the initial years of the project would be with NGOs, who, in collaboration with the front line (district, block and village) extension staff of the line departments, would work with local communities to motivate farmers to join the groups. CGs/PAs would be formed in specific locations where farmers are predominantly involved in producing a single or related commodities, e.g. fruits, vegetables, pigs. The experience of successful SHGs and CGs in India and elsewhere is that they must be voluntary organizations, controlled by their members with the goal of increasing farm incomes and improving the living standards of the participating households. These would also be the guiding principles under the project. In addition to financing NGOs to assist with the establishment and promotion of SHGs and CGs, the project would also fund training activities aimed at capacity building of intervenors (NGOs, Extension Personnel and Credit Mobilization Cell described below) at different levels in the system. These would include training in financial management, group dynamics, group management, participatory concepts, leadership skills and production of appropriate training materials. Farmer Organizations (FOs) would be supported through training and logistical support to take responsibility for technology transfer activities or hire para-technicians who can provide technical services to members and establishing close linkages with the private sector organizations. At negotiations assurances were obtained that GOUP would take all necessary measures to ensure that, not later than December 31, 1999, extension services in at least one block of two project districts would be "contracted" to NGOs or private service providers in association with Commodity Groups/Association and/or Self-Help Groups with technical back-stopping by the district and block level staff of the line departments.  Project Appraisal Document Page 43 India - U.P. Diversified Agricultural Support Project Amnex 2 Participation by Swiss Agency for Development and Cooperation (SDC) To further encourage participation by the farning communities in preservation and improvement of local livestock breeds, SDC has agreed to finance short-term and long-term (3 years) services of local and international livestock experts and secretarial support services needed to make them operational in UP (Livestock Special Program Implementation Unit). Initially this assistance would be provided for three years. Specifically, the experts would assist to: (i) develop field recording schemes for performance and progeny testing, management and improvement of locally available breeds; (ii) develop local breeders' associations and train members to ensure that breeds are managed and conserved effectively; (iii) train staff of participating agencies in techniques of maintaining good breeds and breeding bulls for production of high quality semen and for natural services; and (iv) monitor operations of breeders' associations. Provision of this technical assistance is not part of the project but the experts are expected to provide advice to GOUP/PCU and other participating agencies, which they may suitably take in to account in project implementation. The cost of the technical assistance would be fmanced by the Swiss Government on a grant basis through its existing Special Studies Consultants' Trust Fund administered by the Bank. This would be untied assistance in the amount of about US$783,000, and such cost has not been calculated as part of the project costs, nor the fmancing plan. GOUP, through PCU, would hire and supervise the experts. Disbursements from the Trust Fund to cover the costs of this speical program would be against claims submitten by the PCU/Implementation Unit. (d) Support for Human Resource Development and Enhanced Communications Capacity To provide Subject Matter Specialists (SMSs) of participating agencies, especially the line departments, and KVK trainers with the necessary professional skills-including training in group formation procedures, communications and training methodologies/techniques, and how to use computers for electronic communications, and to prepare extension newsletters and materials-the project intervention would be at three levels. First, the State Institute for Rural Development (SIRD) and the National Institute of Agriculture Extension Management (MANAGE) would provide professional skill training to extension personnel across all line departments and the KVKs. SIRD and MANAGE would also help to develop capacity at the district level to provide professional skill training in participatory rural appraisal (PRA) techniques, strategic extension planning (SEP), and FA group formation procedures. Second, the three SAU extension directorates would be strengthened to function as the key research- extension linkage ulnits on each SAU campus, and to forward technical information and participate in technical training for KVK trainers and district level SMSs. Third, at the district level project resources would be used to finance equipment, vehicle, training packages and an enlarged communications capacity to strengthen capacity of each line department. This would enable broadening of the scope of work to cover farming systems and improve on- farm land and water management practices. The focus of enlarged district level electronic communications capacity would be to access technical information and backstopping from research system personnel, as well as improved administrative comrnunications with state departmental and project coordination offices. The enhanced management and extension training and communication capacity would enable the system to disseminate location specific messages, for both individual commodities and broader farming systems through (a) training programs for extension field staff and farmers, (b) the production and distribution of extension leaflets and commodity specific newsletters, and (c) improved mobility to plan and implement, in collaboration with the local KVK/KGK and zonal research station (ZRS) or sub-station, an expanded program of on-farm trials and demonstrations. Component 3. Support for Increased Private Sector Involvement and Public/Private Partnerships in Agri-business Developnent 10. As discussed above, measures have been built into all the project components to promote greater involvement of private institutions in support services delivery (Technology Development and Dissemination activities), human resources development and post-harvest activities, including processing. In addition to these measures, the project would specifically provide for: (a) credit mobilization and facilitation for smallholders and women's self-help groups to finance incremental investrnent needs; and (b) establishment of a Project Development Facility (PDF) to assist private sector investors in agro- business enterprises with feasibility studies and linkages with lending institutions. Specific activities would include: (a) Credit Mobilization and Facilitation. A critical element in uptake of improved technology disseminated under the project would be the availability of institutional credit. While National Bank for Agriculture and Rural  Project Appraisal Document Page 44 India - U.P. Diversified Agricultural Support Project Annex 2 Development (NABARD) is capable of and has expressed its willingness to meet the project's credit requirements by earmarking resources out of its planned future refnancing program for UP, it would be necessary to ensure that credit delivery to project beneficiaries, especially to marginal farmers and other rural poor, is well coordinated and efficiently implemented. There is also a need for specific support to promote lending through Self-Help Groups (SHGs) and to train field personnel of credit institutions to operate improved credit procedures suitably adjusted to meet the project's requirements. The project would, therefore, assist with credit mobilization and facilitation to ensure that: (a) access to institutional credit for subsistence fanners, landless and unemployed, and rural women is improved; (b) rural financing institutions (RFIs) are more proactive in assessing and meeting the credit needs of project beneficiaries in a timely manner and are efficient in the recovery of loans; and (c) Bankers Institute for Rural Development (BIRD) is properly equipped to organize and conduct project-related training for staff from field offices of lending institutions and other functionaries operating in the project districts. The project would also assist with workshops to disseminate credit extension services and studies for monitoring and evaluation (M&E) of the project's credit program. The project would fnance (a) the services of a Field Officer who would operate from PCU and assist in establishing effective linkages between SHGs and formal credit institutions; and (b) through BIRD, project related training, credit extension workshops, M&E studies and associated expenses. Additionally, the project would finance consultancy services and equipment to assist IBRD to undertake this. (b) Project Development Facility (PDF). An important objective of the project is to mobilize private sector initiatives and support vertical integration of smallholder production operations with the private sector post-harvest value addition initiatives, including agro-processing. Current levels of private investment in UP is low compared to availability of agricultural raw materials. There are many reasons for this slow development of agro-business. These include: unfriendly business environment, lack of awareness about potential for development, inability of potential investors to identify viable opportunities and develop them, lack of access to technology and technical expertise, weak linkages with producers and inadequate knowledge about the market and marketing opportunities. As the state has recently introduced a number of policy reforms, including a new agro-industrial policy, there is a need to promote investment possibilities in the context of the new environment. At the same time potential investors also need assistance in preparing feasibility studies and project reports for consideration by the lending institutions. There is, however, no agency operating in UP which is geared to providing these services, especially to small to.medium sized investors. Accordingly, under the project it is proposed to assist with a Project Development Facility (PDF) to help such investors to establish new ventures or to enlarge current operations to exploit market led opportunities for agro- business development. In the initial years, PDF would focus on promotional and developmental functions of encouraging and facilitating increased private investment in agribusiness ventures through dissemination of information, advice for new business and establishment of linkages between producers and processors. Later, as the service begins to be recognized, and in response to demand from potential investors, it would shift its emphasis to "for fee" commercial services including: (a) preparation of feasibility studies, project reports and business plans and market survey reports for potential investors for presentation to lending institutions; (b) assistance with raw material sourcing (through linkages with farmers organizations to be promoted under the project), product marketing and market tie-ups; and (c) provision of consultancy services and such other assistance specifically requested by prospective investors. It is proposed that an independent agency would be contracted through an open competition to provide this service to potential investors. Because of the service oriented nature of PDF's operations, in the initial years of the project it would be financed on a grant basis by GOUP. However, as PDF service begins to generate revenues thorough consultancy fees, GOUP support would decline in line with increasing income. At negotiations assurances were obtained that GOUP, by December 31, 1998, would engage an autonomous agency to establish project developmentfacility to mobilize increasedprivate investment in production andpost-harvest value addition activities including agro-processing Component 4. Rural Infrastructure Develppment 11. Poor rural infrastructure is a serious constraint to future intensification and diversification of production systems and is therefore addressed as a priority under the present project. Improvement of infrastructure would help to provide the enabling environment necessary for farners to exploit market opportunities to the utmost. The activities to be supported would include: (a) Rural Roads. The project would support the improvement of about 1600 km of rural " Farm to Market" roads to all weather road standards in the districts selected for DASP intervention. Roads are being/have been selected on the basis of agreed screening criteria which would help in opening up of new areas by linking unconnected Minimum  Project Appraisal Document Page 45 India - U.P. Diversified Agricultural Support Project Annex 2 Needs Program (MNP) villages selected according to their population size.(generally above 1000 ). Villages situated within two kilometers from an existing all weather road are presumed to be connected for this purpose. The selection criteria give preference to roads through cultivable areas growing perishable crops and roads in areas where project intervention is most intensive. Roads perfected for improvement would have no or minimal adverse environmental impact. The selection process involves participation by the beneficiary village communities. Almost all the roads would be improved on the existing alignments where little or no additional land is required to complete the improvement work. However, in some locations it is possible that a small amount of land may be required where either old road embankments are being reconstructed to their original slope or where some widening is being undertaken or where some smoothening of a curve is being done. GOUP has advised that, as has been the past practice with rural roads, this land would be given voluntarily without any formal land acquisition because of the strong interest by villagers in getting better roads. Land requirements would be ascertained by DASP and the district administration in thie early stages of the road selection process. It has been agreed that a Memorandum of Understanding (MOU) would be signed with GOUP by all impacted families and the Village Bodies (Gram Sabha) of the beneficiary villages. Only after completion of MOU that the civil works would be started. Where people are not willing to sign MOIJs, such roads would not be taken up under the project. To minimize the additional land requirements, wherever normal IRC rural roads standards related to design speed, right of way, formation width and standards of curves are not achievable, and also for roads of lesser importance, where higher standards are not necessary, the following adjusted "Functional standards" would be adopted: Right of way = 9 meters in open area and 5 meters in built up area Formation width = 6 meters Carriageway width = 3 meters for A type and 3.75m for B type roads CD works =7.5 meters width out to out of parapets for piped culverts Design speed = 30 lKmph Minimum radius of Curvature = 30 meters The road works would be carried out as per Ministry of Surface Transport (MOST)/Indian Road Congress (IRC) specifications. Most of the roads would be provided with the dust proofing treatment of double coat surface dressing. In the built-up areas, stoneset or concrete pavement would be provided if there is danger of road inundation due to poor drainage. Unless justified by projections based on the actual traffic counts, generally not more than 25 cm Water Bound Macadam (WVBM) crust would be needed for these roads. It is also not proposed to provide top layer of WBM with granite metal as is done on national highways before laying dust proofing treatment. The earthwork in embankments would be compacted to 95 percent proctor density using 8 to 10 Ton Static Diesel Road Roller. In the case of roads passing through black cotton soils, embankmnents would have at least 60 cm height and embankments, if constructed with local soils, would be encased with a 15 cm thick gravel blanket coat. The works would be executed by the Public Works Department (PWD) through its existing staff in the districts, however the field di[visions selected for this job would not have other major responsibilities, DASP roads would the main responsibility. Other activities to be supported under this subcomponent would include: (a) preparation of a strategy for maintenance of rural roads and support maintenance of the project roads; (b) training for PWD staff to strengthen capacity for road maintenance; (c) consulting services for Technical examination and Quality of works during construction, and (d) a study on socio-economic impact of roads subcomponent. At negotiations assurances were obtained that with regards to improvement of the rural roads to be financed under the project, GOUP would- (i) select roads and improve these according to criteria and technical standards agreed with IDA/Bank; (ii) maintain them in accordance with the action plans, consistent with the maintenance policy to be finalized by GOUP by December 31, 1998; (iii) no later than December 31, 1998 employ consultants under terms of reference agreed with IDA/Bank to inspect and verify the technical quality of roads improved; and (iv) where additional land is requiredfor road improvement, as has been the past practice in the state, ensure that this is provided by local communities voluntarily in accordance with a MOU to be signed between GOUP (concerned District Magistrate or his nominee) and all affected members of the participating community; and (v) would not commence improvement of roads in locations where private land is needed until such MOUs have been concluded.  Project Appraisal Document Page 46 India - U.P. Diversified Agricultural Support Project Annex 2 (b) Rural Markets. The main focus of this sub-component would be to improve the village markets (Haat Painths) with high volume through put which largely benefit small farmers. The project would support the upgrading of upto 145 existing high operating frequency rural Haat Painths managed by the Panchayats. The Directorate of Panchayati Raj would oversee implementation of this sub-component. The project would assist with the design, construction and/or upgrading of existing infrastructure facilities. Separate development plans would be prepared for each market in consultation with Panchayats and potential beneficiaries. Prior to the commencement of works, each participating Panchayat would sign a Memorandum of Understanding with the Directorate of Panchayat Raj regarding establishment of a dedicated account where service fees collected from the Haat Painth would be kept to finance operation and maintenance as well as future expansion of facilities. In addition, the project would provide funds to upgrade and expand facilities at: (a) a selected number of cattle markets managed by District level elected bodies (Zilla Parishads); and (b) two Mandi Parishad (Market Board) market yards in priority horticultural development areas to demonstrate modem storage and handling facilities for perishable produce Exact site and design for the fruit and vegetable markets would be finalized through an international consultancy during implementation. In addition, the project would assist the Directorate of Agricultural Marketing through technical assistance, training and equipment to improve its program of price data collection and dissemination at a selected number of market centers. Component 5. Supportfor Project Management and Economic Analysis Unit 12. Activities to be supported would include: (a) Project Coordination Unit (PCU). Project management would be the responsibility of the PCU, already established under the office of the Agricultural Production Commissioner (APC), headed by a senior official at the level of Secretary to GOUP, designated Project Coordinator. Implementation of project activities in districts would be facilitated by District Project Coordination Units (DPCUs). DPCUs would only be established in districts with a minimum of three DASP component/sub-component interventions. The project would finance secondment of staff from line departments for the duration of the project, training, office equipment, furniture and other facilities for establishment and operation of the PCU and DPCUs. (b) Monitoring and Evaluation (M&E). The project would fund concurrent M&E ofthe project, including socio- economic impact studies by Indian Institute of Management, Lucknow (IIML). IIML is currently providing similar support to another Bank assisted project (UP Sodic Lands Reclamation Project) and has developed expertise in this area. To guarantee effectiveness and assist with the establishment of a permanent capacity in the State for this type of work, GOUP has agreed with .IIML management to support establishment of an Agricultural Management Center (AMC). AMC would be contracted to undertake the project work. AMC would also offer support for the design and implementation of the monitoring system to be operated by the PCU with input from the participating agencies. As part of the agreed work plan AMC would: (a) assist PCU and the line departments in preparing annual action plans, along with an implementation schedule, at the department/district levels; (b) develop a computerized project management system for project monitoring; (c) help identify training needs/gaps and prepare plans to meet them; (d) carry out evaluation studies, including beneficiary assessments, at agreed periodic intervals. Key development objectives indicators are presented in Annex 1. If required, the list of indicators agreed at appraisal, would be further refined by the PCU and participating line departments in consultation with AMC during design and implementation of the M&E system. (c) Establishment of an Economic Policy Analysis Unit (EPA U). Project would assist with the establishment of EPAU to enhance state's capacity to develop and analyze impact of agricultural policies on rural development. This unit would operate from PCU and advise the APC on future policy directions to address the changing needs of states rural sector. EPAU would also develop capacity to critically evaluate public expenditures in agriculture with a view to making recommendations on improving the efficiency of investments being made using public resources. The initial focus of EPAU's work program would assess the impact of the policy reform program being supported under the project. The project would finance training, equipment, and incremental staff and operational costs. At negotiations assurances were obtained that by December 31, 1998 GOUP would: (i) establish the Economic Policy Analysis Unit (EPA U) with key staff whose qualifications and experience acceptable to IDA/Bank; and (ii) each year commencingfrom December 31, 1998 EPA U's annual work program would be agreed with IDA/Bank.  Project Appraisal Document Page 47 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment I UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT DRAFT POLICY AND INSTITUTIONAL REFORM MATRIX Issue | Effect Proposed Change Action Subsidized provision of Private sector participation Phase in full cost recovery for selected Reforms to be done agricultural inputs and limited in goods and services publicly provided goods and services. By March 31, 2002 GOUP will phase in full cost recovery services by public sector. subsidized by the public sector. for selected goods and services (see Annex 2 attachment 2) including: Inadequate coverage, quality and Livestock: Fodder seed, artificial insemination, natural delivery of subsidized inputs and service, castration, health examination and treatment, services. inoculation, post mortem, feed analysis, diagnostic services. Contributes to fiscal imbalances. Horticulture: Vegetable seed, fruit seedlings and fruit plants. Sericulture: Chawki reared worms. Full cost for the above goods and services will be determined annually by GOUP and these cost calculations will be made available to IDA/Bank by June 30 following the fiscal year to which they apply. Loss making state owned Inefficient use of resources. Privatize government owned farms after Reforms completed farms. retaining those deemed necessary for GOUP has agreed in principle for privatization/ Contributes to fiscal imbalances. research and verification purposes. economically viable operation of loss making state owned farms. 500 acres of government owned land leased to a private seed company (1994). Reforms to be done Various modalities are being considered separately by each department. Final decisions are expected to be different in each department, but are likely to be made without undue delay.  Project Appraisal Document Page 48 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment I Issue Effect Proposed Change Action Limited private sector role in Poor client orientation, weak Establish a research corpus in GOUP to Reforms completed technology generation. priority setting and decline in finance selected research activities on a Competitive Grants Program for Agricultural Research research investment. competitive basis. (CGPAR) established at UP Council of Agricultural Research (UPCAR) in June 97. Reforms to be done UPCAR to finalize operational modalities and initial priority research areas by negotiations. Limited private sector role in Poor client orientation, weak Introduce extension delivery Reforms completed technology dissemination. delivery systems and lack of mechanisms that include NGOs, private About 1000 private para-veterinarians from among accountability of public sector sector, and beneficiary participation unemployed youth trained and working in animal health extension service. with cost sharing arrangements and care. gradually replace lower level extension workers with trained farmer Reforms to be done organizations. Under the project DOA, DOH, AHD and DOS with the help of NGOs will identify and train farmer organizations for undertaking extension activities in pilot districts. In addition, 1800 para-vets will be identified and trained under the project. ..... .... ..... Administratively determined Uneconomic charges leading to Deregulate rates under the UP Cold Reforms completed ceilings on cold storage decline in number of cold stores Storage Act, 1976. UP Cold Storage Act amended to eliminate price ceilings charges. in the state. for cold stores (April 1997). Absence of cold stores inhibits agricultural diversification. Land ceilings prohibit Inhibits greater private sector Review and relax the UP Land Ceiling Reforms completed purchase of more than 12.5 participation in seed production Act to enable purchase of agricultural Agro-Industrial Policy allows divisional commissioners to acres of agricultural land by and other agro-industrial land in excess of ceiling limit. permit purchase/lease of land for industrial purposes in an individual or firm, activity. excess of ceiling limit on a case by case basis (1995). Inhibits agricultural diversification and value addition.  Project Appraisal Document Page 49 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment I Issue Effect Proposed Change Action Restrictive licensing Development of private sector Eliminate restrictive provisions in Reforms completed requirement for private nurseries inhibited. licensing policies. Licensing for private nursery producers relaxed from 1 year nurseries. to 3 years by amending the UP Fruit Nurseries Control Order, 1976. Renewal powers decentralized to district horticulture officers (1996). Dual pricing for sugarcane Increases administrative costs, Elimninate dual pricing structure for Reforms completed molasses. encourages leakage and distorts molasses. Dual pricing for molasses abolished in November 1997. resource allocation. Inadequate funding for O&M Rural roads suffer from Articulate a clear and comprehensive Reforms completed of rural roads. inadequate maintenance. policy for rural roads including O&M GOUP has prepared a draft 'Road Development Policy' for funding and implementation. the roads sector. Reforms to be done GOUP's cabinet sub-committee is formulating a Rural Roads Maintenance Policy which is expected to be ready by negotiations. Excessive government The actual players -- traders and Ensure greater representation of traders Reforms to be done involvement in management farmers -- have limited role in and farmers in the operation of village Operation and maintenance of haat painths (local village of rural markets. running of markets. level (haat painths) and regulated markets) to be handed over to village Panchayats. MOU to (mandis) markets. be signed between GOUP and Panchayats for this purpose Inadequate attention paid to has been developed. O&M of markets. Separate regulatory role of the Elections to Mandi Samitis will be held by December 31, Agriculture Marketing Directorate from 1998. its day to day managing of mandis. With support from the project, the Agriculture Marketing Directorate is to strengthen market intelligence activities in Ensure adequate funding for operation Mandi Parishad. and maintenance of mandis from money collected via market fees. Complete a study of the UPKUMSA to assess whether individual mandis are retaining adequate market fees to ensure proper O&M.  Project Appraisal Document Page 50 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment I Issue Effect Proposed Change Action Weak community Lack of community ownership Phased decentralization/devolution of Reforms completed participation in planning and and commitment to assets administrative and fmancial Elections to all tiers of Panchayat Raj institutions maintenance of rural created. responsibility to Panchayats completed in 1995. State Election Commission established infrastructure. administration. to ensure timely conduct of future elections. Inadequate O&M of rural infrastructure. Report of the Administrative Reform Commission on decentralization and devolution of administrative authority accepted by GOUP. As part of an ongoing process, 21 GOUP departments including the Departments of Agriculture, Animnal Husbandry, Dairy Development, Rural Development, Panchayat Raj and Minor Irrigation have issued orders devolving greater administrative authority to Panchayats whereby district department officers would work under the functional control of district Panchayats (1997). In certain cases the financial authority for construction and O&M of rural infrastructure (for instance rural village markets) has also been fully transferred to elected village bodies. Reforms to be done Recommendations of the State Finance Commission Report on financial allocations of levies and taxes between the State and Panchayats under consideration by GOUP and expected to be finalized by March 31, 1998. ..... . . . Sericulture production and Silk production stagnating. Eliminate government monopoly over Reforms completed marketing. procurement of cocoon. GOUP monopoly purchase of cocoons discontinued in Limited private sector 1994. involvement in cocoon and silk Establish appropriate legal and marketing. regulatory framework to ensure fair DOS placed under the Agricultural Production competition and enforcement of quality Commissioner wing. Inadequate quality and grading standards. standards. Reforms to be done Establish funding mechanism to increase Provide an appropriate legal and regulatory framework by Sericulture not integrated with financing for sericulture research and enacting the UP Silk Industry Development Act by March other agricultural activities. extension and O&M of cocoon and yam 31, 1999. markets.  Project Appraisal Document Page 51 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment I Issue Effect Proposed Change Action As part of the UP Silk Industry Development Act, establish Improve linkage of DOS with other a Sericulture Development Fund by imposing a 'cess' in agricultural departments. cocoon and yarn markets to fnance research, extension, and O&M of markets. Reduce number of DOS owned farms. 15 DOS farms identified for privatization (see above issue on state owned farms). Unclear public/private roles Inadequate and poor quality Only breeder and foundation stage Reforms completed in production of horticulture planting material. planting material/seed to be produced by Directives issued by DOA and DOH (1996). planting material. public sector; certified material by private sector. Forest Act constrains New and improved varieties Allow pruning/uprooting of perennial Reforms completed replanting of old orchards by cannot replace old and aging fruit crops for replanting purposes. GOUP simplified procedures by authorizing District prohibiting cutting and varieties. Horticulture Officer to permit felling of old trees and transport of trees. District Forest Ranger to permit transport of timber (1996). Institutional problems with Low priority to fodder Integrate fodder production with other Reforms completed responsibility for fodder extension. crop production activities. Extension responsibility for fodder production transferred production. from AHD to DOA (1996). Fodder production not integrated into farming system. Shortage of green fodder Collateral/land Limits access of poor to Raise lower limit for bank loans seeking Reforms completed mortgage/stamp duty agricultural credit. collateral. Limit raised from Rs. 20,000 to Rs. 25,000 by requirements for agricultural NABARD/RBI (1996). credit. Stamp duty on land mortgages offered as collateral for bank Increase exemption limit on stamp duty Statnp duty exemption limit raised from Rs. 20,000 to Rs. loans increases cost of loan for for bank loans. 45,000 by GOUP (1997). small farmers.  Project Appraisal Document Page 52 India - U.P. Diversified Agricultural Support Project  Project Appraisal Document Page 53 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment I TABLE: UPDASP AGREED COST RECOVERY SCHEDULE Item Full Existing Percent Cost Percent Cost Percent Cost Percent Cost Percent Cost Cost Fee Recovery Recovery Recovery Recovery Recovery (Rs.) (Rs.) Existing March 1999 March 2000 March 2001 March 2002 Veg. seed (Rs/kg) Okra 98.00 47.00 48 65 85 100 Onion 82.00 40.00 49 55 70 100 Cauliflower 245.50 112.04 46 60 80 100 Pea 45.00 24.32 54 75 100 Tomato 783.00 365.00 47 60 80 100 Brinjal 762.00 338.00 44 60 80 100 Potato 7.00 7.00 100 Fruit plants (Rs/kg) Mango 12.00 10.00 83 100 Guava 10.00 8.00 80 100 Banana suckers 3.00 2.00 67 100 Citrus 8.00 6.00 75 100 Aonla 12.00 10.00 83 100 Litchi 12.00 10.00 83 100 Fruit seedlings (Rs/kg) Mango 3.00 2.00 67 100 Citrus 3.00 2.00 67 100 Guava 3.00 2.00 67 100 Papaya 3.00 2.00 67 100 .~~~.. .~~~~...... .~~.. ..... :.:.....,:.' . ..~ ~ ~ ~~~~~~.. . . .. ...... . Ki K.,. . ..~....'..... Frozen Semnen (per 7.00 5.00 71 90 100 straw) Liquid Nitrogen (per 8.00 8.00 100 litre) Fodder Seed (per kg) - Jowar 19.78 17.00 86 100 Artificial Insemination: - atHQ 17.00 5.00 29 50 80 100 - at doorstep 24.00 20.00 83 100 Natural Service (per service): - Cow/buffalo 75.00 5.00 7 40 70 100 - Stallion/donkey 100.00 25.00 25 55 85 100 - Buck 5.00 1.00 20 40 70 100 - Boar 5.00 0.00 0 25 65 100 Castration: - At HQ -large 3.00 2.00 67 87 100 - At doorstep-large 4.00 2.00 50 75 100 - At HQ-small 2.00 1.00 50 75 100 - At doorstep -small 1.50 1.00 67 87 100  Project Appraisal Document Page 54 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment I Item Full Existing Percent Cost Percent Cost Percent Cost Percent Cost Percent Cost Cost Fee Recovery Recovery Recovery Recovery Recovery (Rs.) (Rs.) Existing March 1999 March 2000 March 2001 March 2002 Treatment: - Large animal 1.00 1.00 100 - Sheep/goat/pig 0.50 0.25 50 75 100 - Dog/cat 2.00 2.00 100 Inoculation: - H.S/B.Q 1.90 1.00 53 73 93 100 - R.P. 1.34 1.00 75 90 100 - RD. 0.24 0.05 21 40 70 100 - Fowl Pox 0.20 0.05 25 45 70 100 - Swine Fever 8.25 0.25 3 30 60 100 - Enterotoxaemia 1.55 0.25 16 35 65 100 - Sheep Pox 0.50 0.25 50 100 Post Mortem: - Large 100.00 0.00 0 30 60 80 100 - Small 20.00 0.00 0 30 60 100 - Poultry 5.00 0.00 0 50 100 Health examination: - Large 50.00 0.00 0 30 60 100 - Small 20.00 0.00 0 25 60 100 Feed analysis' 50.00 0.00 0 30 60 100 Diagnostic service - Blood 10.00 0.00 0 30 60 100 - Faecal 5.00 0.00 0 50 100 - Urine 5.00 0.00 0 50 100 Chawki reared worms 270.00 100.00 37 50 75 100 (per 100 dfls) Soil Testing 10-12 2-00 17 35 60 80 100 (N.P.K.) (a) Micro Nutrients 35=00 Nil - - - At present it (for so Mapping) is being Zn, Cu, Fe, Mg, etc. undertaken as a Promotional (b) For farmers activity in bringing samples to future cost laboratory themselves recovery tab: no fee charges will be started. Rhyzobium packet 5.50 4.00 72% 80 100 Culture (250 gin) Pesticides distribution 100 -  Project Appraisal Document Page 55 India - U.P. Diversified Agricultiral Support Project Annex 2/Attachment 2 IJTTAR PRADESH DIVERSIFIED AGRICULTURE SUPPORT PROJECT CRITERIA FOR RESEARCH PROGRAM EVALUATION 1. Selection criteria for research to be financed under UPDASP would be the same as those agreed for the Bank assisted National Agricultural Technology Project (NATP). 2. The following is an agreed listing of what were considered the key questions that the research reviewers would be expected to answer: Overall 1. How well does the proposal fit within the stated priorities and strategy for the given production system? Scientific Merit 1. Is the overall presentation and logic of the proposal sound; are the objectives and hypotheses appropriate and clear? 2. Has a sound justification been given, in particular does the proposal provide evidence that it is addressing high priority problems. 3. Is the work innovative? 4. Is there evidence of relevant literature review? 5. Are the research methods and experimental treatments appropriate to the problem? 6. Is there an adequate implementation workplan including milestones to track progress? Researchers and Research Infrastructure 1. Do the researchers have the skills to complete the research satisfactorily? (This would not be covered by the researcher in the application but would be assessed by the reviewers on the basis of their knowledge and experience of the team) 2. Is research infrastructure adequate for this proposal? 3. Are the resources provided or requested adequate and realistic? Evidence of New Directions 1. Does the proposal show evidence of using a multi-disciplinary approach including social scientists where appropriate? 2. Is there evidence of a systems approach involving more than one commodity or enterprise? 3. Is there evidence of involvement of potential beneficiaries?  Project Appraisal Document Page 56 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 2 Expected Impacts 1. Have the expected outputs been explicitly described and/or quantified e.g. depending on the type of research in terms of: impact on sustainability, hectares expected to be impacted, number of farm families, livestock head, etc. at realistic ultimate full adoption levels? 2. To what extent have the concerns of the small and marginal farmers been taken into account, particularly with respect to Production Systems Research? 3. To what extent have gender issues been taken into account in the proposal? 4. What is the justification for public expenditure? Is the proposal backed by economic analysis? Is it research that would be highly unlikely to be taken up or be better done by the private sector? Is it research that might be taken up or be better done by the private sector? Is it research that would be very likely to be taken up or be better done by the private sector? 5. Is there any linkage outlined in proposals on PSR about eventual dissemination of research results? (this may not be possible in many cases until near to the time of release/recommendation). 6. Are there any other unique features which justify the proposed research?  Project Appraisal Document Page 57 India - U.P. Diversificd Agricultural Support Project Annex 2/Attachment 3 UTrAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT Activity Matrix by Sub-Sectors to Establish a Demand Driven Technology Dissemination System Component Theme Activity in the Sub-Sector Livestock Horticulture Sericulture Agriculture (i) Rationalization and reorientation ofpublic extension services. (a) Support for capacity * Support for capacity . Capacity building in the * Capacity building in the DOA to building of the Line * Capacity building in building in the DOH Department of Sericulture will disseminate improved knowledge on Departments to initiate a existing the AH institutions institutions to provide training be supported with equipment, crop management systems, including farming systems (Departmental Headquarters, and demonstrations through: vehicles, training for staff, land and water resource management approach to technology central and regional diagnostic Horticulture Implementation workshops, and consultant practices through: dissemination. laboratories, PCDF, NGO) to Unit and District horticulture services 0 Integrated nutrient management enable them to provide offices will be provided with . Seven technology (INM) and integrated pest knowledge based technologies assistance in equipment, dissemination centers will be management (IPM) to farms will to farmers. vehicles and in operations & established over the project be made. Provision for equipment, * Assist in re-deployment, maintenance. period to provide technical and farm visits, staff, farmers training, training, workshops, study * DOH farms (12 farms in training support to NGOs and and demonstrations. tours, library support and total from the plains and the farmers. 0 Monitoring and evaluation of the purchase of essential hills as demonstration centers) * Input supply impact of INM and IPM equipment. This support will be strengthened through improvement. techniques. would be made available at the provision of equipment and * Enlargement of 0 The capacity of the Department of Directorate, Headquarters materials. infrastructure. (New silkworm agriculture and the district District, Block and Naya * Facilities at State grainages, 4 silk worm agriculture offices will be Panchayat levels. Agricultural Universities production centers, 4 P2 seed strengthened with support for * AHD implementation unit (SAUs), Horticulture farms and I P3 seed farm) will equipment, furniture, vehicles, will be supported to implement Technology Dissemination be provided with resources for training, technical assistance as project activities. Center (HTDCs), and land development, buildings well as in O&M. Horticulture Post-Harvest and all necessary equipment. Technology Centers and Sub- For the production, Centers (HPHTCs and multiplication and supply of HPHTSCs), will be upgraded silkworm eggs and improved with civil works, equipment quality mother stock. and materials and provide * Marketing and processing training to small scale of increased private production entrepreneurs. will be facilitated by support to the 3 cocoon markets, cocoon drying center and the silk  Project Appraisal Document Page 58 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 3 Component Theme Activity in the Sub-Sector Livestock Horticulture Sericulture Agriculture exchange. * Demonstrations on improved post-harvest management practices, including establishment of model cool chains would be supported * A pilot study on remote sensing to detennine the area under mango cultivation will be conducted within the Dept. of Horticulture. This will facilitate timely provision of information on prices/demand to farmers. A desk review of the horticulture crops data collection and dissemination system will also be funded through the project. (b) Decentralization of Decision making will be * Same * Same * Same technical and managerial transferred to the District and decision-making. Block levels. To coordinate technical and managerial decision-making at district level two new institutional arrangements will be rested: * District Technology Teams under administrative control of the District Magistrate. * On a pilot basis in two districts project would assist in the establishment of Agricultural Technology Management Agencies (ATMA).  Project Appraisal Document Page 59 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 3 Component Theme Activity in the Sub-Sector Livestock Horticulture Sericulture Agriculture Project will provide resources for thesefrom the current district level extension allocations. (ii) Increasing the role of * Private sector role in input * Private sector role in the * Private sector role will be * There are no specific investment the private sector in input supply, animal health and supply of inputs and marketing enhanced by training, capacity activities, but the focus is on policy supply and support breeding services will be will be enhanced through the building in production, changes to encourage greater private services. enhanced through support for: following activities: rearing, and reeling through sector participation in input supply, 0 Private veterinary clinics 0 Private nurseries will be the following activities: especially seed production, marketing (start-up assistance, promoted and assisted 0 Facilitating institutional and fertilizer distribution. technical assistance, travel through a new nursery credit and technical costs); to provide better establishment manual, assistance to private health care service to training, as well as mother silkworm producers. livestock owners. plant material and 0 NGOs will be engaged to 0 Private para-vets (liquid demonstration of good set up Growth Stimulation nitrogen containers, nursery management Centers (GSCs). Al/AH kits, Assistance practices. 0 NGOs through the GSCs with restocking, and 0 Health care service to will guide and train training); to provide for- livestock owners, producers to establish fee artificial insemination Horticulture Post-Harvest private Chawki Rearing and primary health care Technology Centers Centers. services. (HPHTCs) and 0 GSCs will provide 0 Support conservation and Horticulture Post-Harvest potential project improvement of local Technology Sub-Centers participants with basic breeds of cattle, buffalo, (HPHTSCs) to train DOH training in production sheep and goat through staff and small scale techniques and access to private breeder's entrepreneurs in fresh and support services. associations. processed handling of 0 Private sector * A study will be financed output. participation in processing to develop a strategy to 0 Demonstration and activities will be privatize the Veterinary training in post-harvest encouraged through Institute of Biologicals. technology. training in reeling * The quality of dairy activities. products will be enhanced 0 Marketing of increased through the provision of health production would be and hygiene kits to milk through private trade. vendors and farmers. 0 Training in reeling and entrepreneurship  Project Appraisal Document Page 60 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 3 Component Theme Activity in the Sub-Sector Livestock Horticulture Sericulture Agriculture development to investors in reeling activities. It is expected that in the long term the private sector would be able to engage in input supply. (iii) Enhance the * Farming community * Same as for livestock (the * Same as for livestock (the * Same as for livestock (the involved participation of farming participation will be enhanced involved line department will involved line department will line department will be DOA). Both communities. by establishing voluntary self- be DOH). Both SHGs and GCs be DOS). The groups formed SHGs and CGs will be formed. Special help-groups (SHGs) and will be formed. will most likely be only SHGs attention will be given to the rainfed commodity groups (CGs). as different commodities are agriculture of Bundelkhand region and NGOs in collaboration with not involved. In place of CGs, eastern U.P. to focus on their specific Line Department extension GSCs will organize potential needs. workers will coordinate. The project participants into project will: functional groups. 0 Train self help group representatives and members. 0 Train trainers and offer workshops for NGOs. 0 Strengthen line departments through workshops. 0 Provide communication and information materials to inform and motivate farmers to join groups. (iv) Support for human * SAU directorates of * SAU directorates of * SAU directorates of * State Extension Training Institute resource development extension will be strengthened extension will be strengthened extension will be strengthened (SETI) will be upgraded to a State and enhanced to provide technical to provide technical to provide technical Agricultural Management and communications information and participate in information and participate in information and participate in Extension Training Institute (SAMETI) capacity. technical training for KVK technical training for KVK technical training for KVK to provide professional skill training to trainers and district level trainers and district level trainers and district level KVK trainers and SMSs in SMSs. The project will SMSs. The project will SMSs. The project will participatory rural appraisal techniques provide: provide: provide: (PRAs), strategic extension planning 0 SAU directorates of 0 SAU directorates of 0 SAU directorates of (SEP) and FA group formation  Project Appraisal Document Page 61 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 3 Component Theme Activity in the Sub-Sector Livestock Horticulture Sericulture Agriculture extension (3) with extension (3)with extension (3) with procedures. The Project will provide to equipment and vehicles. equipment and vehicles, equipment and vehicles. SAMETI and State Institute for Rural 0 Staff training in 0 Staff training in 0 Staff training in Development (SIRD) with: farming systems and farming systems and farming systems and 0 Civil works, equipment, computers as well as computers as well as computers as well as vehicles, dormitory and initial study tours. initial study tours. initial study tours. classroom furniture etc. 0 DOAH will be 0 DOH will be supported 0 DOS will be supported 0 Training of trainers courses in supported to enhance to enhance their training to enhance their training PRAs, computer skills. their training and and communications and communications 0 Minimal necessary incremental communications capacity. capacity. staff (extension management, capacity. associate professors, computer Training will be provided network specialist and to milk vendors, farmers as library/electronic manager). well as milk and food 0 Farmer organization through inspectors to enhance their domestic and international public health awareness. study tours. * SAU directorates of extension will be strengthened to provide technical information and participate in technical training for KVK trainers and district level SMSs. The project will provide: 0 SAU directorates of extension (3) with equipment and vehicles. 0 Staff training in farming systems and computers as well as initial study tours. 0 DOA will be supported to enhance their training and communications capacity.  Project Appraisal Document Page 62 India - UP. Diversified Agricultural Support Project  Project Appraisal Document Page 63 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 4 UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT NGO PARTICIPATION AND SELECTION CRITERIA A. Role of NGOs 1. NGOs would play the key role in mobilizing the farming communities and forming them into groups and providing on-going support to sustain them. In this process the primary role of the NGO would be to motivate farmers and to provide them with opportunities to acquire the skills necessary to manage their own affairs. NGOs would follow participatory processes to promote self-reliance. 2. The full scope of the support to be provided by the NGO staff would cover: (a) Identifying affinity groups. (b) Forming Self-Help Groups (SHGs) and/or Commodity Associations. (c) Guiding groups in the formulation of savings and credit procedures and liaising with local lending institutions. (d) Providing training to group members and group representatives (f) Ih the case of SHGs, maintaining the group accounts and minutes for first 12 months (if no suitable person from within the group or community can be found initially), and training of a group member or local person to maintain the accounts thereafter. (g) Auditing group accounts half-yearly in the first year and thereafter annually. (h) Assisting SHGs in community consultation to establish priorities for social programs and submission of proposals to WDC district office. (i) Assisting groups with the organization of cluster level meetings as per the interest of the groups and later with formation of associations of clusters; and (j) Supporting common action programs and lobbying activities of SHGs. B. NGOs (Support Orgainization) Eligibility Criteria 3. The PCU would select Support Organizations (NGOs) according to the following criteria: (a) Legal Status: evidence of legal registration. (b) Constitution: constitutional provision to engage in agriculture production, farmer mobilization and related allied activities. (c) Track record: proven track record of at least three years experience in activities to agriculture, horticulture, anirnal health, sericulture development and farmer's groups formation. (d) Finance: accounts audited and certified by a chartered accountant; (e) Staff. demonstrated staffing capacity to carry out the proposed services or ability to procure such staffing capacity. 4. After advertisement, NGOs will be prequalified by PCU based on the above criteria. 5. In addition, during field visits, PCU/DPCU staff will conduct a review which would include a detailed manpower assessment (with reference to staff needed for implementing the TOR of NGOs) the type and availability of existing staff to work on the project and an assessment of other resources which the NGO could bring to the project. Discussion of fnancial turnover and expected commitments will also be reviewed to determine the impact and level of schemes which the NGO would be capable of implemnenting. In order to further rank NGOs, the following qualitative scale will be used to assign  Project Appraisal Document Page 64 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 4 points. NGOs not achieving at least 65 points would be disqualified from those meeting basic criteria. The criteria must be independently assessed by at least three staff, with the average score used as the basis for decision making. 6. The PCU will be responsible to shortlist NGOs. The shortlist along with the eligibility criteria will subsequently be forwarded to the Chief Development Officer (CDO) for review and comments. The CDO's comments will proceed with the final pre-qualification; if received within stipulated period. Characteristics Available Points Scored Points Purpose/intention suitable for providing direct 10 services to communities. Experiences of grassroot support, specifically: - Previous activities in the areas of Agriculture/ 20 Horticulture/Animal Husbandry/Dairy/ Sericulture programs. - Previous experiences in Farmer's 10 Mobilization/Self Help Group. - Other activities related to Rural development 05 Methods/Skills - skill in participatory methods and tools 15 - Financial and record keeping skills 10 - general management skills 10 Geographical Orientation and demonstrated loyalty 10 to particular communities over a period of time. Continuity of leadership in development 10 Total 100 7. Staff proposed by a pre-qualified NGO will be thoroughly assessed and evaluated during a training orientation. NGO whose staff have been evaluated as weak would be required to propose other staff for the project period. Qualified NGOs would then be oriented about the project and would be required to select one village in consultation with DPCU staff for developing at least two Self Help Groups (SHGs).  Project Appraisal Document Page 65 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment S UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT SOCIAL ASSESSMENT 1. Introduction. UPDASP aims to accelerate the growth of diversified agriculture in UP in relation to agro-ecological potential and market demand, with an emphasis on production systems and delivery mechanisms that benefit the rural poor and other socially excluded groups. Four principal issues are of relevance in the social assessment of the project: (i) the characteristics and distribution of the rural poor and other socially excluded groups (beneficiary assessment); (ii) design considerations to ensure that the project reaches these beneficiaries, including participatory management aspects and NGO involvement; (iii) preventive measures to ensure that child labor does not become an issue in future as silk production supported by the project grows in importance; and (iv) measures to ensure that where land contributions for the upgrading of rural roads under the project become necessary, these are truly voluntary. Beneficiary assessment 2. Poverty. UP has the largest number of poor people of all states in India. In 1987-88, almost half (48 percent) of the rural population of UP was estimated to live below the official 'poverty line', which compares with 45 percent for India as a whole and 41 per cent for South India.2 While the level of poverty in UP is high in general, there are wide variations between regions. The Hills region, accounting for only four percent of total population, has the lowest incidence of rural poverty (eight percent). The incidence of poverty increases within the plains along a gradient from west to east: there is substantially higher poverty in the Eastern plains (43 percent) than in the Western plains (26 percent), with each region accounting for over a third of total population. Agricultural wage rates in Eastern UP are as little as half those in Western UP 3. The Bundelkhand region (accounting for only five percent of total population) is something of an anomaly, with estimates of poverty varying widely depending on the criteria adopted. According to National Sample Survey data for 1987- 88 it appears to be the poorest region in UP, with half the rural population living below the poverty line. More recent estimates using proxy indicators (agricultural wage rates, agricultural labor as a share of total population) suggest a much lower incidence of poverty (less than 20 percent). 4. Human well-being. The incidence of material poverty is undoubtedly high in UP, but for several decades it has more or less matched the incidence of poverty in India as a whole. In terms of broader measures of human well-being, however, UP performs much worse than the all-India average. Child mortality, for example, was 50 percent higher in UP than in India as a whole in 1984. This discrepancy between material poverty and indicators of well-being is clearly reflected in regional differences within UP. Contrary to popular belief, the distribution of poverty within UP is a rather poor predictor of regional variations in well-being. In spite of the comparative prosperity and the lower incidence of material poverty in Western UP, the region does little or no better than Eastern UP in terms of human development indicators. For example, Western UP has a higher rate of child mortality than Eastern UP (particularly in the case of female children), and a higher level of fertility. 5. Gender inequality. The gap between material poverty and indicators of well-being is widest on a number of gender- disaggregated measures. The relative prosperity of Western UP has not been translated into improvements in human development indicators for women. The sex ratio is substantially worse in Western UP (844) compared with Eastern UP (925), largely reflecting higher female child mortality. Although very low in both regions, the female labor force participation rate is substantially lower in Western UP (only 1.4 percent) than in Eastern UP (7.1 percent). This reflects the lower degree of relative autonomy women experience within the household in Western UP as compared with Eastern UP and the correspondingly greater strength of social norms and customs such as seclusion of women which are generally associated with higher castes. Women's relative lack of autonomy within the household also translates into a more restricted role for women in influencing public decision making in Western UP as compared with Eastern UP 6. Caste and religion. The incidence of material poverty in UP is highest among scheduled castes, accounting for 21 percent of total population. An estimated 56 percent of the scheduled caste population in rural areas was living below the poverty line in 1986-87, compared with 38 percent for other social groups. Scheduled castes form a greater share of total 2Owing to methodological shortcomings, such head-count estimates of poverty should be treated with caution: they vary considerably even where the same data sets are used. The most recent published estimates of poverty in UP as a whole vary from 35 to 48 percent.  Project Appraisal Document Page 66 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 population in Central, Southern (26 percent in each case) and Eastern UP (21 percent) than in the Hills and Western UP (17 percent in each case). Scheduled tribes are negligible as a proportion of total population in the state (0.2 percent), and are concentrated in only a few districts particularly in the Hills region. Around 83 percent of the total population of UP is Hindu, and 16 percent Muslim, the latter being particularly well-represented in Western and Central UP Taken together, scheduled castes and 'Other Backward Communities' make up about half the total Hindu population of UP 7. Differences of religion and caste often reinforce gender disparities, and thereby contribute to regional disparities in gender-disaggregated human development indicators. For example, while only 32 percent of the male scheduled caste population is literate in UP as compared with a literacy rate of 48 percent for other males, the gender gap in literacy rates is even starker among scheduled caste women, only eight percent of whom are literate as against 23 percent for other women. At the same time, scheduled caste women are often better off than higher caste women in terms of their relative autonomy both within the household and in public life. For example, the female labor force participation rate for SC women is around 12 percent, compared with only 6 per cent among other social groups. SC women make up a third of the total female workforce, and are disproportionately represented in agriculture. Of those SC women who work, well over half are agricultural laborers. Nevertheless, given the strong social sanction against women working outside the home, even among the poor, access to income earning opportunities for women will most significantly be increased through home-based employment. 8. Agricultural land holdings. In 1990-91, 90 per cent of the 20.1 million operational land holdings in UP were small or marginal holdings (less than 2 ha), accounting for over half the total operated area. Three quarters of total operational holdings accounting for around a third of the total operated area were marginal holdings (less than I ha), and over half of all operational holdings were less than 0.5 ha in size. The average size of land holding was 0.90 ha. 9. Over the period 1985-86 to 1990-91, the rate of increase in the total number of operational holdings in UP (5.7 per cent) was exceeded by the rural population growth rate (8.5 percent). Since total operated area was extended by only 1.9 percent, the increase in operational holdings has been achieved largely through subdivision, and in smaller part as a result of the redistribution of public (panchayat) land. The number of small and marginal holdings increased by 5 percent and 7.5 percent respectively between 1985-86 and 1990-91, while their total area increased by 7 and 13 percent over the same period. In all other size classes, the number and total area of operational holdings declined over this period, with the most marked decline in the case of large holdings. 10. Land holdings belonging to scheduled castes (SCs) and scheduled tribes (STs) make up 16 per cent and 0.2 percent respectively of total operational holdings in UP The total number of operational holdings of STs is in direct proportion to their share of total population, and at 1.8 ha, the average size of their land holdings is twice the UP average of 0.90 ha. The share of total operational holdings belonging to scheduled castes, however (16 percent), is significantly smaller than their share of total population (21 percent), and their share of total operated area is even smaller (10 percent). 11. Scheduled castes make up a quarter of the rural population of UP yet account for around a third of total landless households. Nearly half of all scheduled castes in agriculture are landless agricultural laborers. Among other social groups in agriculture the rate of landlessness is less than 20 percent. Landlessness among SCs is particularly widespread in Central and Eastern UP where, given the legacy of the zamindari land tenure system, the distribution of land holdings is more skewed. Moreover, access to land via rental or lease markets is almost negligible: only 1.7 percent of SC households rent land holdings for cultivation (although this proportion increased slightly between 1981 and 1991 owing to the redistribution of panchayat land). Of those SCs who do own land, 95 percent operate only small or marginal land holdings, and the average size of land holdings among SCs is only 0.57 ha. Design features of UPDASP to beneflt socially excluded groups 12. Responses to local diversity. The regional distribution of project activities, and the selection of particular blocks within districts/ regions, generally takes account of the distribution of poor and disadvantaged groups as described above, as well as prevailing agro-ecological conditions. The sericulture activities, for example, are concentrated in eight districts in the Hills and Eastern/Central regions where conditions are well suited to mulberry cultivation and silkworm rearing. Other activities, such as livestock and horticulture, are more evenly distributed throughout the state, with targeting on a block-by- block basis rather than on a regional basis. While on head-count poverty indicators, the Eastern region unquestionably qualifies for project support, there is also strong justification for targeted support to women, scheduled castes and other disadvantaged groups in the relatively better-off Western region, given the fact that past development efforts in this region have failed to translate consistently into improved human well-being for all.  Project Appraisal Document Page 67 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 13. In technology dissemination, the district-level strategic extension plans (SEPs) will provide an overall framework for technology dissemination in a given district that is responsive to locally identified needs and priorities. The National Agriculture Extension Management Institute (MANAGE), which has proven experience in participatory approaches to action- research on farming and livelihood systems at national level, was engaged during project preparation to develop a 'model' SEP based on best-practice methodologies. Field-testing has demonstrated the success of participatory needs identification and priority setting by beneficiary groups and other stakeholders, including extension agents themselves. This validates the basic approach of the SEPs in examining livelihood systems-level linkages between the various sub-sectors and line departments involved in UPDASP (livestock, agriculture, horticulture, and sericulture), and has initiated a GOUP-level dialogue on operational modalities to achtieve better coordination between individual line department work programs. Preparation of the SEPs will be facilitated by subject matter specialists from the KVKs and line agencies, trained by experienced UP-based NGOs including Manavodaya and the Gorakhpur Environmental Action Group (GEAG). 14. Enhancing capabilities. It was recognized during project preparation that the commodity- and farming systems- orientation of UPDASP's technology dissemination components should not be viewed in isolation from broader failures of basic capabilities for socially excluded groups. For example, widespread illiteracy and the lack of relative autonomy for women significantly constrain the capacity of lower caste people and Women to interact in the public sphere, benefit from agricultural extension services, and access institutional credit. Significant cultural and behavioral barriers in UP's conventional agricultural extension services militate against overcoming social exclusion: the predominance of higher caste, male extension agents, for example, seriously constrains their ability to reach women and scheduled castes. Agreement has been reached with GOUP to establish a Task Force to assess the present situation and prepare an extension program on gender issues, with relevant NGO participation, and to implement the agreed program in consultation with IDA/Bank. A dated covenant to this effect is included in the PAD. 15. Self-targeting of project components. Certain components of the project are to some degree self-targeting, and stand to benefit socially excluded groups at least as much as better-off farmers. The livestock and sericulture activities, in particular, meet two requirements for socially excluded groups to benefit from the project: (i) they provide access to home-based income- earnig opportunities for women secluded from public life; and (ii) they are not biased against those with little or no land. Women are expected to represent some 60 per cent of the beneficiaries under these components, given the expectation of significant adoption rates. Households with small or marginal land holdings are also likely to benefit from horticulture activities, since fruit trees can be planted along plot boundaries or in home gardens. 16. Livestock activities include small ruminants (sheep and goats), and cow and buffalo milk production. There is substantial evidence from India that livestock production provides significant benefits to the poor, including those with little or no land (provided they also have access to commons, cut fodder or crop residues). It was also found during project preparation that a distinct caste in Eastern UP is associated with pig rearing, and have been marginalized from past development efforts. This low-caste group is being specifically targeted through tailored support for pig rearing. 17. The sericulture component involves mulberry cultivation and silkworm rearing. Although a minimum land holding size (0.5 ha) is required for participation in mulberry cultivation activities, silkworm rearing is not a land-based activity and does not exclude functionally landless families. Moreover, silkworm rearing, as a home-based activity, can easily be combined with other household labor and child-care responsibilities, and is therefore particularly attractive to women. 18. Participatory management and NGO involvement. The participatory management aspects of project design aimn specifically to reach poor and disadvantaged groups through the intermediation of NGOs in fostering participation, and in building appropriate community-based institutions with the capacity to make claims on agricultural extension services, mobilize savings, and obtain institutional credit where appropriate. NGOs will play a key intermediary role in this process, as trainers and catalysts in the formation of two types of grassroots farmer organizations: village-based women's savings and credit Self-Help Groups (SHGs), and commodity groups (CGs)/ producer associations (PAs). SHGs are an institutional innovation with demonstrable success in facilitating women's collective engagement in the development process. They have the potential to enhance capabilities across a broad front including functional literacy, savings ability, access to institutional credit and agricultural extension advice. CGs/PAs will be formed on a voluntary basis according to farmer demand, in specific locations where farmers are predominantly involved in producing a single commodity (e.g. fruits, vegetables, pigs) and would benefit from a collective approach to advancing their interests (e.g. in marketing or obtaining technical advice). 19. Intermediary NGOs will form the interface between the commodity- and farming systems-based approach of the line  Project Appraisal Document Page 68 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 departments, and the broader needs-based approach implied in SHG/ CG/ PA formation, with the aim to foster convergence of public action at village level. At least one local NGO with appropriate skills and experience (based on selection criteria agreed during appraisal and set out in Attachment 4) will be engaged in each district, starting small in one or two blocks during the first phase of implementation, and scaling up as appropriate, based on assessment through a concurrent process of participatory monitoring and evaluation (M&E). The training needs of the intermediary NGOs in relation to technology dissemination will be addressed in consultation with the relevant line departments, and could include training in financial management, management of conflict and group dynamics, and leadership and facilitation skills. 20. Several UP-based apex NGOs with extensive experience in training-of-trainers in participatory development (e.g. Manavodaya, GEAG) will have three functions to support this participatory management approach: (i) capacity-building of intermediary NGOs; (ii) training of line department staff in participatory learning and action, paying particular attention to attitudes and behavior; and (iii) overall responsibility for the participatory M&E, paying particular attention to process documentation and evaluation. 21. Participatory monitoring and evaluation. For the project as a whole, the Indian Institute of Management-Lucknow (IIML) will be responsible for independent M&E of ongoing project activities based on performance indicators for each line department. However, the participatory management approach adopted under the technology dissemination component calls for a different style of M&E. The degree to which the broader needs-based approach implied in SHG/CG/PA formation achieves the objectives of reaching poor and marginal farmers and women, and enhances their capacity to make claims on public services, demands close attention to monitoring the process of group formation itself.. Qualitative issues such as group dynamics, decision making processes and conflict management do not lend themselves well to the straightforward monitoring of inputs, and information on their key parameters need to be elicited using innovative methodological tools. It is essential that members of farmer organizations themselves are involved in self-evaluation and concurrent monitoring of their own evolving institutional strengths and weaknesses. Suggested parameters, methodologies, and stakeholder roles are described in the outline TORs (Attachment 6). Child Labor 22. The use of child labor in sericulture (particularly silk reeling), weaving and carpet-making in various parts of India is an issue of major concern to GOI as well as to NGOs and international organizations including UNICEF and ILO. India is a participating country in international programs aimed towards the elimination of child labor, and various sensitization, education, training and rehabilitation initiatives are being undertaken through partnerships between government agencies, NGOs, labor organizations and the media. Such initiatives are ongoing in the context of UP's weaving industry around Varanasi, fostered particularly through a number of activist NGOs. 23. The situation in UP's sericulture sector is different from that in other traditional sericulture states of India. With respect to production and reeling, sericulture is very much an infant industry in the state. There is no traditional reeling sector so no child labor is employed in sericulture reeling within UP at the current time. There is a very small level of production so child labor in the context of family labor probably exists as in all other family agriculture enterprises. The project is not involved in weaving and would leave that aspect to other organisations already involved. The project would focus on trying to ensure that child labor does not emerge in the future in the reeling industry. GOUP takes the issue of child labor seriously and has begun to take measures to safeguard against the possible future employment of child labor in sericulture, through licensing, regulation of technology, developing new legislation, and monitoring procedures. 24. The Indian Supreme Court recently passed a landmark ruling (No. 465) on the issue of child labor. On December 10, 1996, concerned state governments were instructed by the Supreme Court to conduct surveys within one year to determine actual numbers of child workers in both hazardous and non-hazardous industries, and immediately to implement measures to enroll child workers in schools while at the same time protecting their families' livelihoods. In response, the GOUP Department of Labor has completed its survey conducted between April-May 1997. As a result, 5,522 employers employing child labor in hazardous porcesses have been identified and issued notices to take action in accordance to the judgement of the Supreme Court. Concurrently, the Rural Development Department is taking measures to provide alternate employment to heads of families of child laborers identified working in hazardous industries. In addition, in compliance with the instructions of the Supreme Court, approval has been received from Cabinet to set up a Child Labour Rehabilitation and Welfare Fund on January 2, 1998. A sum of Rs. 7 crore (about US$270,000) has been provided by GOUP from the State Emergency Fund towards the Child Labor Rehabilitation and Welfare Fund. The interest from that fund would be used to fnance education of former child workers. In due course, the fund will be supplemented with fines levied on enterprises prosecuted for employing  Project Appraisal Document Page 69 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 child labor under Supreme Court ruling No.465 and under the Child Labor Prohibition and Regulation Act 1986. 25. Under a Departmental Order of the Department of Sericulture, GOUP already requires all silkworm rearers and silk reelers within U.P to be licensed. The existing licensing system already regulates the type of technology used in silk reeling, as licenses will only be awarded where multi-end or semi-automatic units are deployed. To take such regulation a stage further and to give it full legal backing, GOUP has formulated a draft Sericulture Development Act which will legislate for the licensing, monitoring and inspection of all silkworm rearing and silk reeling units. At appraisal, assurance was given by the Secretary, Directorate of Sericulture, that amendments to the draft Act relating specifically to child labor are under consideration, together with provisions for their enforcement through licensing, training of private entrepreneurs, monitoring and inspection. 26. While child labor is not currently an issue within the silkworm rearing and silk reeling sectors which UPDASP aims to support in 8 districts of UP, the project proposes to take a proactive stance towards guarding against the possible future use of child labor in silk production, and towards its eventual elimination in weaving. Several incremental measures are envisaged: (i) an action-orientated study to draw lessons from other parts of India where child labor in sericulture is a problem and identify specific ways in which similar problem can be prevented in UP sericulture; (ii)further regulation of reeling technology by reinforcing UP Department of Sericulture's existing licensing arrangements through the proposed Sericulture Act and through public-private partnerships focused on agreements with credit institutions to extend credit preferentially to operators using multi-end reeling units; (iii) drawing on the relevant competencies of the NGOs involved in the implementation of the sericulture sub-component to sensitize and train those directly involved in silk production and reeling on the importance of child education, appropriate working conditions, and use of workers' groups to be promoted under the project for child labor prevention and monitoring; (iv) institutional dialogue and partnerships with NGOs and other agencies, e.g. UNICEF, working in the field of child labor prevention and rehabilitation in UP; (v) strengthening of GOUP's existing monitoring, enforcement and inspection procedures through staff training, revision, production and distribution of relevant operational guidelines, and involvement of independent agencies in monitoring activities; and (vi) promotion of convergence between DASP, especially in districts where sericulture is an important part of the farming system, and other GOI/GOUP/NGO programs/projects aimed at expanding and/or improving primary education. In addition, UPDASP is committed to implementing any additional measures that may be identified through the study, or through engagement with other concerned stakeholders, as and when necessary. Land contributions for rural roads upgrading 27. The rural infrastructure component of UPDASP provides for the upgrading of rural roads to facilitate access to markets in those blocks/ districts selected for project activities. In some cases this work may require small amounts of new land to be acquired to facilitate construction works. The social issues surrounding land acquisition were investigated thoroughly during appraisal, in order to ensure that problems of compliance with OD 4.30 do not arise. 28. All road sections to be upgraded under UPDASP will follow existing alignments. Some sections selected for upgrading are on land already owned by the Department of Public Works (PWD), in which case no land acquisition is required. In other cases, land for 'chak' roads was set aside for future road construction around the time of the most recent land consolidation in UP arcund ten years ago. However, the width of these 'chak' roads is insufficient for proposed upgrading works to current PWD standards. In these cases, a few meters of additional land needs to be acquired either side of the existing 'chak' road to allow for current building standards (including hard-topping, embankments, and possible borrow pits). In some cases, some smoothing of curves is also required to comply with the required safety standards on upgraded roads, which will also entail some land acquisition. A further consideration to be taken into account is that even the existing 'chak' roads have frequently been encroached upon by farmers, so that the width of the alignment has been reduced in practice to little more than a pathway. The issue PWID faces, therefore, is to restore the full width of the 'chak' road and to acquire additional small amounts of land to accommodate current construction standards. 29. It is customary practice in UP for farmers to give up land voluntarily and without compensation for road upgrading. This precedent is based on a straightforward cost-benefit calculation on the part of the farmers affected: they will voluntarily contribute a portion of their land only if and when it is perceived that the benefits of the improved road outweigh the costs incurred in lost land. This was confirmed at appraisal in field interviews conducted with farmers likely to lose a portion of their land holdings for road upgrading. Several farmers commented that the benefits of road improvement were not restricted to market access. They particularly valued the additional benefits that would accrue with improved access to health care facilities. Proposed road upgrading under UPDASP will therefore follow the precedent already established in UP  Project Appraisal Document Page 70 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 30. Certain concrete measures are being undertaken in UPDASP to ensure that land contributions are truly voluntary, that undue social pressure is not exerted on individual land owners or land operators, and that all related transactions are conducted in a transparent manner. The agreed mechanism is to draw up a Memorandum of Understanding (MOU) between the District Magistrate or his appointed officer in the concerned district, the elected leader(s) (gram sabha) of the local village representative body(ies), and each and every land holder required to contribute land for the proposed road upgrading works (see MOUI). In the event that unanimous agreement to contribute the required land is not reached among the farmers affected, that particular road section will not be upgraded and a different section will be taken up instead. Only when each and every farmer affected has signed the MOU will the proposed construction works proceed. On no account will there be any involuntary land acquisition. 31. The procedure to be followed in concluding each MOU will follow a specific sequence of steps, designed to protect all parties. Each land holder will know precisely which land parcel(s) and how much land he is agreeing to contribute, but will also agree not to claim compensation. Proposed road sections shall be marked on maps, discussed in field visits and meetings, and marked clearly on the ground with survey pegs. Where more than one village is involved, public meetings (e.g. involving participatory mapping exercises) may be required to reach agreement on the particular alignment to be upgraded. The primary concem is to ensure that the vulnerable elements of the community are not disadvantaged by the process of voluntary land transfer. In addition to the MOU, the Procedure to be followed (see MOUI) emphasises a transparent, public consultation process in drawing up the list of concerned land holders, including those without legally documented rights in land. The intention is to bring about an attitudinal change among those implementing the project as well as to safeguard the interests of the vulnerable. 32. Under the independent M&E of project activities under UPDASP to be carried out by the Indian Institute of Management-Lucknow (IIML), specific attention will be paid to monitoring the process of land acquisition for roads upgrading. Field surveys will be conducted to confirm that the process of concluding MOUs is transparent, that undue social pressure is not brought to bear on unwilling land owners or operators, and to ascertain farmers' perceptions of the benefits they expect from road improvement.  Project Appraisal Document Page 71 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 TOR I UTT'AR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT TERMS OF REFERENCE CONSTILTANCY SERVICES FOR THE STUDY OF INVOLVEMENT OF CHILD LABOUR IN SERICULTURE SUB COMPONENT 1. Background India has been producing and exporting silk for a quite number of centuries. For quite a number of years the Government was supporting the industry and trying to boost the silk production. GOI created the Central Silk Board (CSB) an autonomous body involved with the responsibility of developing Sericulture. The State of Uttar Pradesh endowed with diversified agro-climatic conditions, offers vast potential for development of sericulture industry. UP is known world over especially amongst overseas Indian communities for its Varanasi Silk Sarees and other silk products. It has been estimated that weaving industries of Mubarakpur and Varanasi currently consuming 3000 MT of raw silk annually, which is approximately 25 percent of country's production. Sericulture comprises of two major activities namely cultivation of mulberry for raising the leaf crop to feed the silk worm and rearing the silk worm to produce the cocoons which is the raw material for the silk reeling industry. Mulberry cultivation is agriculture in nature, the operations involved being simple, straight forward and easy to be carried out. On the other hand Silk Worm Rearing (SWR) is a quite complicated process calling for specialized management skills with due understanding of various technological aspects involved. As in the case in other states, there are apprehensions in UP also that expansion of sericulture would result in use of child labor at various stages of mulberry leaf production, silk worm rearing and reeling. Accordingly, the present consultancy is being proposed with the following objectives. 2. Statement of Objectives The major objectives of the zssignment would be to collect information on: (a) based on the study of sericulture elsewhere in India, to identify the types of child labor that could potentially emerge in UP in future e.g. school going children of the families working as part of the family labor during their off time, child labor who work on full time and bonded labor who work on contract and other such illegal conditions-and the structural conditions that make for differing conditions of work, problems and compulsions that have forced them into child labor along with child abuse, health hazards, payment of wages and other aspects related to child labor. (b) in sericulture elsewhere in India and in related sector in UP(e.g. weaving) to analyze the causal relationship between child labor and the socio-economic needs of their families and the impact of loss of income of child labor on their families. (c) to assess the impacts of earlier efforts to eliminate child labor at industry, community and family levels in Uttar Pradesh, and allso the efforts to implement various laws related to child labor and the judgement of the Supreme Court. 3. Scope of Social On the basis of the social assessment carried out, the consultant would carry out the following: (a) to provide a strategy for minimizing the loss of income to the families who would benefit from activities related to sericulture in the event that child labor emerges in future;  Project Appraisal Document Page 72 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 TOR I (b) to assess the likely effectiveness of measures such as appropriate technological interventions such as multi end reeling units, in preventing child labor in sericulture; (c) suggest other strategies, including regulatory mechanisms, to elimninate child labor in sericulture, with a particular focus on enforcement procedures; and (d) based on a review of ongoing initiatives of other institutions ( e.g. UNICEF, CREDA, other NGOs), to suggest strategies for the involvement of government. organizations, non-government organizations and community based organizations in preventing and eiiminating child labor and in off-setting loss of income of the families of child labor, and also enabling children to go to school, help with technical skill, upgrading and identifying opportunity for apprenticeship employment, when they attain adult age. 4. Methodology (a) to select 3 districts randomly out of 8 districts identified under UPDASP where there are ongoing sericulture activities (Dehradun, Nainital, Udhamsingh Nagar, Bahraich, Gonda, Gorakhpur, Maharajgang and Padrauna) one in each eco-climatic zone for detailed study; (b) the consultant will collect preliminary data through semi-structured interviews and direct interactions of families and others involved in reeling, marketing and weaving in randomly selected villages of the randomly selected 3 districts out of 8; (c) the consultant will also use participatory methodologies such as focus group discussions and livelihoods analysis through visualization methods with child labor, their famnilies including mothers, children who worked as labor but are not working any more and their families, children of beneficiary families who go to school but also work in addition to women and various "interest groups" such as those involved in reeling and weaving industries in Varanasi and Mubarakpur, which are involved in different sericulture activities; (d) systematic analysis of the interests of concerned groups, and the ways these would be affected under possible future scenarios should be carried out (Stake holder analysis); and (e) the consultants would also involve NGO's who are working on issues related to child labor in Uttar Pradesh in order to use their experiences while preparing strategies mentioned above. 5. Data, Services and Facilities to be Provided by the Client UPDASP shall provide access to all places selected by consultant and related documents and facilities of free interaction with related personnel. The Consultant should make independent arrangement for travel, stay etc.and these should be included consultancy charges. 6. Schedule for Completion of Tasks Field Work 2 weeks from date of signing of contract to survey the selected mulberry production and silk worm rearing centers I Week survey of cocoon markets 3 Weeks survey of weaving industries and other related sectors. 2 Weeks review of on going initiatives in child labor prevention in UP (e.g. UNECEF, CREDA, other NGOs) Preparation of Draft Report 2 weeks Finalization of Report 2 weeks  Project Appraisal Document Page 73 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 TOR 1 7. Final Outputs Required from the Consultant Subsequent to the acceptance of proposal, the consultant shall submit a work plan to be adopted by: (a) Intermediary NGOs involved in mobilizing Farmers Interest Groups (FIGs) in villages proposed to be engaged in Mulberry cultivation and silk worm rearing to focus on sensitization and awareness raising on the issue of child labor, with and emphasis on the importance of education. (b) DOS, DASP and GOUP to modify their policy planning so that child labor exploitation could be minimized and to suggest measures to minimize the exploitation of child labor involved in Reeling/Weaving industry of sericulture. (c) NGO's and Agri-Business group to adopt proposed strategy of minimizing the involvement of child labor in sericulture activity. 8. Procedure of Review of Reports The consultant shall submit:- (a) a proposal of work plan within a week after signing of contract; (b) fortnightly report as per agreed program; (c) draft presentation as per plan; and (d) final report two weeks after draft presentation approval by the client. 9. Review Committee: (a) Fortnightly report Technical Coordinator/Technical Expert (Seri.) UPDASP (b) Consolidated report Technical Coordinator/Project Coordinator, UP DASP (c) Final report UP DASP/DOS/GOUP/WB  Project Appraisal Document Page 74 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 MOU I Memorandum of Understanding This memorandum of understanding is made on ............................ day of .. 199... corresponding to Saka Sambat .......... day of .19.. between Sri .son of ..resident of . (hereinafter referred to as "the first party") and the Governor of Uttar Pradesh through Sri ............................ sub- divisional officer .......... (hereinafter referred to as "second party"). THESE PRESENTS WITNESS AS FOLLOW: 1. That the first party is Bhumidhar with transferable right of. acre of land bearing khasra No ..... in village ....., pargana . tahsil .., district . 2. That the first party hereby grants to the second party above said land for the construction and development of LINK ROAD in the village ............................. for the benefit of the villagers and the public at large. 3. That the first party would not claim any compensation against the above said grant of land. 4. That the second party agrees to accept the above grant of land for the purposes mentioned in clause 2. 5. That the second party shall construct and develop the LINK ROAD and take all possible precautions to avoid damage to land adjacent to LINK ROAD. 6. That the first party also assures the second party that all possible measures would be taken to maintain the LINK ROAD so constructed/developed till the Government of Uttar Pradesh formulates the broader policy to maintain the LINK ROAD so constructed/developed and will not indulge in any willful act of damaging it or obstructing the movement of public and vehicles on the LINK ROAD. 7. That both the parties hereto agree that the LINK ROAD so constructed/developed shall be public premises. 8. That the provisions of the MEMORANDUM OF UNDERSTANDING will come into force from the date of signing of this deed. IN WITNESS WHEREOF the parties hereto have signed this deed on the day and the year first above written. Signatures of the first party: Signature for and on behalf of the second party Witness:- Witnesses: 1. 1. 2. 2. (Signature, name and address) (Signature, name and address)  Project Appraisal Document Page 75 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 MOU I PROCEDURE FOR SELECTION OF ROADS, ASCERTAINING THE LAND REQUIREMENT AND SIGNING MOUs WITH THE VOLUNTARY LAND DONORS 1. Executive Engineer P.W.D. will prepare a block map using 1:50000 scale topo sheets & marking on them surfacewise details of all the existing roads, tracks paths etc. in consultation with all the agencies involved in road construction. 2. Eligible roads according to the agreed criteria are then identified by the E.E. P.W.D. in coordination with the District Magistrate through CDO. 3. E.E. P.W.D. then carries out a reconnaissance survey of the identified roads. 4. Proposals are then submitted to DASP indicating the road lengths, their location etc. on map. 5. DASP & P.W.D. officers arrange field visits and public meetings with land holders & Gram Pradhans to verify the willingness on the part of land holders to donate land as required. Public meetings shall be well publicized in advance to give all those with rights in land an opportunity to come forward and comment. Where more than one village is involved, especially where different villages may have different views, public meeting with farmers from several villages may be needed. Not only should the upgrading of the proposed alignment be discussed with them, but also possible alternative alignments that they may suggest. 6. Final selection of alignment to be upgraded is to be made jointly by PWD & DASP. 7. Sub Divisional Magistrate (SDM) provides Sajara Maps to PWD. 8. PWD carries out detailed engineering surveys, fixing pegs on the site and after verification, prepares strip maps on "Sajara" sheets. 9. SDM carries out joint measurements and, in public consultation with Gram Pradhans and the concerned land holders, prepares a list of locally recognized land holders whose lands are required for road upgrading, indicating the respective areas of land required from each (see Annexure "A"). 10. MOU should be signed by District Magistrate or his authorized officer and all Voluntary Land Donors, before any bids are invited for the upgrading of the road. 11. District Coordmiator DASP/PCU will monitor this process, with independent M&E by Indian Institute of Management-Lucknow  Project Appraisal Document Page 76 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 MOU I ANNEXURE A Addforms as necessary per each and every village along proposed link road. Village Name: PLOT No./SAJRA No. NAMES OF LANDHOLDERS AREA OF LAND NEEDED FOR SIGNATURE OR MARK OF LAND ROAD CONSTRUCTION FROM HOLDER EACH LAND HOLDER  Project Appraisal Document Page 77 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 MOU 2 Memorandum of Understanding to be signed between the Director, Panchayati Raj, Uttar Pradesh and the concerned village Panchayat for the improvement and maintenance of the Rural Haathpainths (Village Markets) The Memorandum of Understanding (MOU) between the Director, Panchayati Raj, Uttar Pradesh through competent and authorized signatory thereof hereinafter called as the first party and the village panchayat (have) block (name), distt (name) through its component and authorized signatory hereinafter called as the second party for the construction and maintenance of the rural Haal: Painths constructed on village panchayat land (khasra No.) area (in unit) at the cost of Rs. lakh under U.P. Diversified Agriculture Support Project is signed today ie. (date) and both the parties entering into this agreement are mutually agreed to do abide by the following terms and conditions and it will come into effect from the day of its signing both the concerned parties: (1) That the development (including construction of building and other common utility facilities) of the haat painths, as referred to above, will be undertaken by the concerned village panchayat in accordance with the procedure rules in this regard of the Directorate of Panchayati Raj, Uttar Pradesh. (2) That the so constructed building and other infrastractual facilities as part of the development of the said haat painth will be the property of the concerned village panchayat and their entry would be ensured in the appropriate records of the concerned village panchayat as well as of the revenue department. (3) That the village panchayat .................... block ... distt . U.P. would also ensure that the property so created/developed is utilized solely and exclusively for the purpose and activities it is deemed for. (4) That the village panchayat .................... block .. distt . agrees to undertake the entire responsibility for maintenance of the property of the hattpainth created out of the one time grant received under U.P. Diversified Agriculture Support Project. (5) That the village panchayat would be authorized for maintenance and regulation of all such markets or fares, in total or part thereof, as the case may be, which are organized on public land under the provisions contained in Section 4, Subsection 2 of the "Sunyukta Prant Panchayat Raj Adhiniyam 1947 (as amended, 1994). (6) That the building/Shades constructed as a part of development of the said rural haatpainth will be allotted to bonafied users only and the village panchayat, in no circumstance, would lease out or rent out it to any contractor. (7) That the selection of the bonafied users would be done as per the provisions of section 29 of the Act by the 'LOK HIT S'AMITT" of the village panchayat which would have Pradhan of the concerned village panchayat as its chairman, besides three other members of the concerned village panchayat. (8) That the "LOK HIT SAMITT" would assist the village panchayat to discharge its functions as they relate to the haat painth, constructed/developed under the project. In order to assure the participation of the beneficiaries, one member each from the concerned farmers and trades would also be invited in the meting of the "LOK HIT SAMITT' as special invitees to give them opportunity for expressing their views and raising their probleims or the issues relating to haatpainth, but they would have no right to vote. (9) That the proceeding of the 'LOK HIT SAMITI" would be organized as per the provisions of the Panchayati Raj Act and the bye-laws given under them. (10) That the village panchayat would assume the responsibility to maintain and upkeep the property of the haatpainth developed with the assistance of the World bank under the U.P. Diversified Agriculture Support Project and be competent and authorized to levy and tax or fee as per the provisions of the act on the items brought there for sale.  Project Appraisal Document Page 78 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 5 MOU 2 (11) That all such receipts collected under the provisions referred in para (10) would be kept in the account of Gram Nidhi and a separate ledger of account would be maintained for it. The amount so collected would be used only for the maintenance and development of the said haatpainth and its diversion to any other place or purpose would be totally prohibited. (12) That the maintenance and upkeep of the haatpainth would generally include colouring, painting and repairing of the building, repairing of the hand pumps, clearing of the drainage and site, and arranging street lights. (13) That the terms and conditions laid down in this MOU would be acceptable and binding upon both the parties entering into this MOU and in case of any dispute arising of it, both the parties would seek the legal opinion from the Distt. Govt. Counsel (Civil) of the concerned district through the Distt. Panchayati Raj Officer and would abide by that. However, the cost thereto would be borne by the concerned village panchayat. (14) That the Distt. Panchayati Raj Officer would represent the Director, Panchayati Raj, Uttar Pradesh, in all places, records of evidences and similarly, Pradhan of the concerned village panchayat would represent the concerned village panchayat in all such matters. (15) That the concerned village panchayat would be allowed to develop other infrastructure facilities from its own resources at the site of the haatpainth as per the provisions of Section 15 (ka) of the Act. That the above MOU after going through its contents thoroughly is signed today before the following witnesses: First Party Second Party Signature of the Distt Panchayati Raj Signature of the Pradhan, Officer with full nuame, date and seal concerned village panchayat with on behalf of the Director, Panchayati Raj, UP full name, date and seal on behalf of the village Panchayat Block--------------Distt.--------------- Witnesses: Witnesses:  Project Appraisal Document Page 79 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 6 Participatory M&E and Beneficiary Impact Assessment with respect to CGs/SHGs Outline Terms of Reference Rationale The participatory management approach adopted under the technology component of UPDASP is designed to foster a two-way interaction between farmers and line department extension services, and the demand-driven tailoring of technology dissemination to suit locally specific constraints and opportunities. NGOs will play a key intermediary role in this process, as trainers and catalysts in the formation of various types of farmer interest group (FIGs) including Commodity Groups (CGs) and women's Self-Help Groups (SHGs). This approach callis for a different style of monitoring and evaluation from that based on performance indicators for each line department. The degree to which the broader needs-based approach implied in FIG formation achieves the objectives of reaching poor and marginal farmers and women, and enhances their capacity to make claims on public services, demands close attention to monitoring the process of group formation itself. Qualitative issues such as group dynamics, decision making processes and conflict management do not lend themselves well to the straightforward monitoring of inputs, and information on their key parameters need to be elicited using innovative methodological tools. It is essential that FIGs themselves are involved in self-evaluation and concurrent monitoring of their own evolving strengths and weaknesses. Key parameters for village baseline survey to include: * beneficiary perceptions of wealth/ well-being status (this process will itself elicit criteria that can form key parameters for subsequent M&E) * landholding pattern (% marginal, small, medium, large) a % landless/ sharecroppers * male and female 7+ literacy rates : female workforce participation rate male and female wage rates o caste (and tribal where relevant) composition of community - cross-comparisons of parameters (e.g. caste background in relation to wealth rank/ landholding class; female WPR in relation to caste/ religion) Suggested methods and sources to include: * participatory wealth ranking * social mapping * participatory village census * district/ block records (triangulate against wealth ranking) o simple, short questionnaire Additional parameters on gender relations within households of SHG members to include: * parameters as for village baseline survey, plus additional information on members: * number of women already holding bank accounts * household expenditure patterns by degree of control by adult male/ female member(s) (e.g. expenditure agreed jointly, tacitly, separately and not discussed, etc) * female mobility pattern Suggested methods to include: * household budget analysis (to be elicited by means of semi-structured interview and livelihood profile diagramming) * mobility 'mapping'/ diagramming * simple, shorl questionnaire  Project Appraisal Document Page 80 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 6 Additional parameters for SHG/ CG baseline profile and/or concurrent M&E to include: * membership profile according to parameters identified in village baseline survey (by wealth/ well-being status, landholding size, caste, etc) * document agreed procedures for membership, elections/ nomination of leadership, financial transactions, etc. and assess change over time * characterise decision-making processes and assess change over time * characterise approach to internal and external conflict management and assess change over time * purpose(s), frequency/ regularity of group meetings, and change over time * financial savings accumulated over time Suggested methods to include: * process documentation * network and/or venn (chapati) diagramming of internal/ external relationships * participant observation (by NGO facilitator) Stakeholders involved Infornation on the parameters suggested should be provided or elicited by the NGO facilitator working in the village, with the collaboration and joint analysis of FIG members. Self-evaluation of evolving group dynamics is particularly irnportant in relation to procedural aspects of the group and how these change over time. The NGO facilitator should share information with her/his intermediary NGO representatives at district level and interact with facilitators working in other villages/ blocks in order to learn from experiences and modify implementation approach. Representatives of each intermediary NGO should in turn share information with the central 'anchor' NGO at state level and (through networking meetings facilitated by the 'anchor' NGO) with other intermediary NGOs, again with a view to learning from experience and modifying implementation approach. Two-way communication and informnation flows between each of these levels are essential. The 'anchor' NGO should in turn provide IIML with summary reports at baseline and at agreed subsequent review milestones as an input to the overall M&E of UPDASP under the coordination of the PCU.  Project Appraisal Document Page 81 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 7 Environmental Management Plan Amongst Uttar Pradesh's (UP's) production systems food crop production is the largest user of natural "environment" (land, water, plant and animal genetic resources and climate). Given its high population density, UP already has a high proportion of land under cultivation (net sown area is about 60% of the total land area). Future growth in agriculture, therefore, would largely come from intensification and/or diversification of production systems. This would not only result in greater use of natural resources but would also increase mechanization and use of applied inputs such as fertilizers and pesticides. At the same time availability of short duration varieties allows intensive monocropping with a limited number of high yielding varieties with reduced fallows and simultaneous reduction in re-cycling of organic matter back to the soil. In the long-run, this practice would adversely affect crop development as well as result in narrowing of the genetic diversity. In addition, monocropping brings about build up of pest and diseases which farmers then attempt to control with increasing levels of pesticide use. Leakage of applied chemical into surface water and leaching into groundwater can lead to problem of downstream pollution. The potential for environmental degradation is particularly acute in rice -wheat cropping system where use of "green revolution" technology (increased fertilizer use, irrigation, and short-duration rice and wheat varieties) is widely practiced by farmers, especially in Western UP. Recent studies have shown that following initial increases in yields in these rotations, primarily in response to increased application of fertilizer, the productivity gains either reach a plateau or decline. There may be a reduction in total factor productivity, thus raising concern about long-term sustainability of the production system. There is also evidence of water-logging and salinization/sodification of inherently fertile lands due to irrigation. In view of importance of the production systems of UP's central and eastern plains to food security and the agricultural sector generally, monitoring and evaluation of environmental impact of the project would be focused on sustainability issues affecting the rice-wheat cropping system. In view of the complexity and scope of the task and limited institutional capacity, in addition to financing some independent activities, the project's approach to enviromnent management would be to establish close linkages and access information from on-going programs where similar work is either in progress or is due to start in the near future. The first example of collaboration with an existing program would be with the Rice-wheat Consortium for the Indo- gangetic Plains. The consortium comprising of the national research systems of India, Pakistan, Bangladesh and Nepal, selected international agricultural research institutes of the CG system (IRRI, CIMMYT, ICRISAT, IIMI) and Cornell University, USA. Participation of India in this regional program is being coordinated by the Indian Council of Agricultural Research (ICAR) who are also the implementing agency for the recently negotiated Bank/IDA assisted National Agricultural Technology Project. Support for the rice-wheat cropping research is an important sub-project under NATP in which two of the State Agricultural Universities of UP (at Pant Nangr and Faizabad) are active participant. The primary objective of this collaboration with be to participate/promote research (through UPCAR and SAUs) on issues that are fundamental to achieve enhanced productivity and sustainability of the rice-wheat cropping system. Four major research themes being financed by the consortium include: Integrated Pest Management, Tillage and Crop Establishment, Water Management and Integrated Plant Nutrient Management. A major concern for the UP government is the increasing sodicity of soils in the state which is an important contributor to low productivity of the food crop production systems. Therefore, the second example of collaboration under DASP would be with the on-going IDA assisted UP Sodic Lands Reclamation Project (SLRP). This project, soon to be followed by a second phase project, is assisting with reclamation of sodic areas. It includes a comprehensive enviromnent management plan to monitor and evaluate impact of this work on soil and land use, ground /surface water quality and biodiversity. SLRP I and II would also assist with an action program to prevent further build up of sodicity, especially through provision of effective and efficient drainage network which is considered to be a major contributor to increasing sodicity. Further details of SLRP's environmental management plan are given in Annex 10 of the Staff Appraisal Report No. 11715-IN In addition, the project specific environment management activities would include monitoring of: (a) groundwater and crop residues of pesticides; (b) support for IPM research and development program; (c) genetic resource conservation of crops and breeds; and (d) soil conservation in the context of civil works to be financed to upgrade the rural infrastructure. A matrix highlighting potential environmental impacts and risk reduction measures is given below. As a result of these actions the project is expected to have a positive impact on the environment.  Project Appraisal Document Page 82 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 7 Matrix of Potential Environmental Impacts and Risk Reduction Measures Issue Potential Project Impact Possible Effects Proposed Actions Environmental Pesticides use in the state Exposures of (i) Monitoring of pesticide residues in selected pollution, including is increasing, especially users/applicators to locations in: (a) ground water; and (b) two problems associated in high value crops such pesticides with potential representative crops (mango and a crucifer); (ii) with system ecology, as mango and negative health effects. support for research and development of and public health vegetables. Efforts to Integrated Pest Management (IPM) safety as a result of increase productivity Increasing levels of practices(mango, vegetables and pulses, increasing use of through greater pesticide residues in the including training of stafflfarmer leaders/groups. pesticides intensification and/or environment (ground IPM strategy to include promotion of resistant diversification of water and soil) and varieties, improved cultural practices, use of production systems, agricultural produce, biocontrol agents, monitoring and judicious use especially in Western especially fruit and of pesticides. Research to focus on definition of UP, could result in vegetables. different elements of IPM packages, and increased use of recommendations on rational pesticide policies agricultural chemicals. to help prevent development of pesticide resistance or contamination of enviromnent; and (iii) support for public awareness campaigns to promote safe and effective handling/use of agricultural chemicals. Sustainable Indications are that the A decline in total factor Support for technology development, management of Rice-Wheat cropping productivity. dissemination, training and promotional natural resources system, which activities to: (i) improve water-use efficiency at especially in the rice- constitutes an important crop, farm and system level; identify and wheat system part of UP's food crop measure indicators of productivity and production system, is sustainability in relation to progress and impact having problems with of current irrigation methods on water tables, water-induced land sodicity, water logging and water distribution degradation (monitoring of environmental issues related to (sodification, ground- water would largely be undertaken through IDA water depletion). In assisted UP Sodic Lands Reclamation Project addition, slow loss of which is already involved in extensive analytical fertility, possibly from work on soil, ground water and biological changes in the way monitoring to assess changes in quality); (ii) farmers manage organic enhance soil fertility through promotion of matter along with more Integrated Plant Nutrient Management (IPNM) sustained removal of practices involving organic matter recycling and nutrients associated with enrichment; promotion of bio-fertilizers; intensive cropping, may measures for correcting micro-nutrient also be occurring. deficiencies; soil testing and analysis; improved Support for further extension service and farmer training and on- intensification under the farm demonstrations to increase adoption rate of project may add to these recommended solutions. problems. Project would also collaborate with the Rice- Wheat Consortium through ICAR on research themes of importance to the state. Biodiversity Impact of intensive Reduced biodiversity Support for activities to conserve and increase conservation monoculture on exotic with narrowing of availability of improved genetic stock of crops breeds/varieties leading genetic base for and breeds through: (a) livestock germplasm to narrowing of production systems. enhancement involving development of biodiversity and loss of breeding and breed improvement programs in local breeds/varieties. local breeds based on animal registration and field performance recording system; and (b) introduction of improved genetic materials of  Project Appraisal Document Page 83 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 7 Issue Potential Project Impact Possible Effects ProposedActions temperate and sub-tropical horticultural crops suited to local conditions. Adverse environment Inappropriate Increased soil erosion To minimize any negative impact the road impact due to works management practices improvement works to use existing alignments; on rural roads may result in soil erosion improvements in drainage structure as part of due civil works activities the overall roads improvement program; to improve rural roads independent technical examiners to monitor adherence to agreed specifications  Project Appraisal Document Page 84 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 8 Uttar Pradesh Diversified Agriculture Support Project Economic and Policy Analysis Unit English Translation of the Govt. Order (not vetted) From, Sri Anant Kumar Singh Special Secretary Coordination Govt. of Uttar Pradesh To, Project Coordinator UPDASP A-11, Nirala Nagar Lucknow Coordination Section Lucknow: Dated 20 March, 1998 Subject: - Establishment of Economic and Policy Analysis Unit With reference to your letter no. 2276/DASP/98 dated 21.2.98 on the subject referred to above, I am directed to say that with the objective of analysing the progress of agriculture sector and formulating the strategy for agricultural development in the state within the framework of 'National Agriculture Policy', Honourable Governor is pleased to accord his approval to the establishment of "Economic and Policy Analysis Unit" in the World Bank aided "U.P. Diversified Agriculture Support Project". (2) The following positions sanctioned vide govt. order no. 1 99/Coord./1 997/ED(2)/96TCl dated 24.9.97 would be deemed as included in the above unit. (I) Manager (Planning & Analysis) - 1 post (al) Agriculture Economist - I post (III) Stenographer - I post (IV) Messenger - I post Manager (Planning & analysis) would be the head of the proposed unit. (3) The unit would be responsible for undertaking the following activities:- (I) To formulate and update periodically, an agricultural strategy for Uttar Pradesh in accordance with State's and national objectives, state resource endowments, market opportunities and comparative advantages. al) To recommend policies and appropriate inteventions for implementing the strategy as may be formulated. (Il) To assess the impact of policy reforms on sectoral growth, equity and resource use efficiency. To begin with, the focus of efforts in this area would primarily be on the policy reform programmes taken up under the UPDASP. (IV) To undertake the annual reviews of fiscal issues relating to agriculture. (V) To initiate and supervise special studies as may be needed from time to time. (VI) To publish and effectively disseminate fndings through regular interactions with senior officials of the government, regular briefing notes, workshops and other media. (4) The unit would function under the direct control of the Agriculture Production Commissioner, Uttar Pradesh and would conduct studies and organise seminars etc. in order to achieve its objectives as per requirements. Yours faithfully, Sd. (Anant Kumar Singh) Special Secretary  Project Appraisal Document Page 85 India - U.P. Diversified Agricultural Support Project Annex 2/Attachment 9 Review of Fiscal Issues in Agriculture Draft Terms of Reference 1. As part of its overall work program the Economic and Policy Analysis Unit will carry out an annual review of fiscal issues in the state's agriculture sector. For the purposes of the review, the agriculture sector will include agriculture and allied activities, irrigation, and rural roads. All expenditures in these areas, irrespective of the departments financing them (for example, the Department of Rural Development implemented programs directly related to the agriculture sector), will be included in the review. 2. The main objective of the review will be to provide a quantitative and economically meaningful analysis of fiscal issues in the agriculture sector. The review would provide policy makers with a sound analytical basis to identify measures that would lead to fiscal sustainability and improve the flexibility and development impact of public resources used in agriculture. The review would consist of the following main elements: (a) Assess key indicators of overall fiscal performance of the state such as fiscal deficit, debt, interest payments, tax and non-tax revenue, current and capital expenditure, and identify the main issues of fiscal sustainability. (b) Trend analysis of the size and composition of agriculture public expenditures (plan and non-plan), including an economic reclassification of agriculture public expenditures into recurrent and capital categories. Within the recurrent category, estimate the magnitude and changes in wages and salaries, non-wage operations and maintenance expenditures (especially irrigation and rural roads), implicit and explicit subsidies. (c) Evaluation of public expenditures including: (i) Assessment of adequacy, efficiency and targeting of sectoral expenditures taking account of the state's overall development objectives, sub-sectoral objectives and the existing fiscal and financial situation; (ii) Evaluation of the costs and benefits of selected programs and schemes (central as well as state government funded) in the sector. The particular schemes to be evaluated would be determined annually in consultation with the APC and the World Bank. The evaluation should include an assessment of the extent to which the scheme meets stated objectives, particularly targeting towards the poor if relevant, and estimate the economic rate of return of the scheme; (iii) Recormnendations based on above findings. (d) Investigate the relationship, if any, between trends in observed public expenditures and: (i) private investment in agriculture; (ii) sectoral growth; (e) Financing of expenditures including: (i) Main sources: Central loans and grants; Borrowing; State budget; Cesses/Surcharges. (ii) Cost recovery by sub-sector; (iii) Identification of areas of possible savings, rationalization of expenditures, and revision of tariff. (f) Identify reforms where agriculture could contribute to stabilize the debt/GSDP ratio, bring interest payments to manageable levels, and improve the flexibility and development impact of public expenditures.  Project Appraisal Document Page 86 India - U.P. Diversified Agricultural Support Project  Project Appraisal Document Page 87 India - U.P. Diversified Agricultural Support Project Annex 3 ANNEX 3 UTTAR PRADESH DIVERSIFED AGRICULTURAL SUPPORT PROJECT ESTMATED PROJECT COSTS Project Component Local Foreign Total -- - ---------- ---- ---US $ million---------- 1. Support for Technology Development 14.7 2.5 17.1 2. Establishment of Demand Drive Technology Dissemination 47.9 7.0 54.8 3. Support for Private Sector & PublicfPrivate Partnership 4.0 0.2 4.2 4. Increasing Access to Rural Infrastructure 59.3 4.2 63.5 5. Support for Project Management & Economic Policy Analysis 8.8 6.4 15.3 6. PPF Reimbursement 1.0 0.0 1.0 Total 135.7 20.3 156.0 Total Baseline Cost Physical Contingencies and Price Contingencies 3.8 0.6 4.4 Total Project Cost 139.5 20.9 160.5  Project Appraisal Document Page 88 India - U.P. Diversified Agricultural Support Project  Project Appraisal Document Page 89 India - U.P. Diversified Agricultural Support Project Annex 4 ANNEX 4 UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT COST BENEFrT AND FINANCIAL ANALYSIS SUMMARY Introduction. 1 . The main aim of the project is to support agricultural growth and diversification with greater cost recovery for public services and increased privatisation. Major elements of the strategy include: increased participation by beneficiaries; improved gender focus; strengthened technical support services; improved human resources; greater sustainability of land and water management; strengthened commercial base; better incentive framework; reduced public expenditure by GOUP; and improved enabling infrastructure and marketing. There are few direct and readily demonstrable relationships between project interventions and incremental benefits since most of the technology gains will emerge through new participatory processes involving large numbers of potential beneficiaries the outcome of which is difficult to predict. However farm modelling has been attempted and it is expected that benefits would include incremental production through both yield gains and diversification into higher value enterprises, yielding increased employment and incomes and improved sustainability. Approach. 2. The economic analysis presented here, together with the relevant sections of this PAD, attempts to answer the following questions: (1) What is the likely Economic Rate of Return to the project? What is the degree of sensitivity to changed parameters? (2) Does the project fit within the Country Assistance Strategy? (3) What are the alternatives to the project? (4) What would be the fiscal impact? (5) What are the main risks, including particularly institutional risks, and how would these impact on the project? (6) What is the likely poverty impact? (7) What would be the environmental impact? (8) What is the case for public investment in these activities? What is the likely Economnic Rate of Return of the project and the degree of sensitivity? 3. The overall Economic Rate of Return to the project is estimated at 22 percent. Tables and disc are available in the project file.) The economic analysis quantifies: (i) the technology dissemination component, where there are major interventions in livestock, horticulture, sericulture and agriculture;and, (ii) the rural infrastructure component, where there are complementary investments in rural roads and markets. Project investments are planned in 70 selected Districts but within those 70 Districts 32 of them are Districts of main focus with at least three components. Within Districts there is selectivity also with typically about 5 out of about 12 blocks per District being selected (the list is available in the Project File). The aim is to have some concentration of effort in what is seen as a first phase project. Policy changes already undertaken, or to be undertaken during the project period, would support the investment interventions. There are expected to be further additional benefits in the longer term from the technology generation components, the participatory components, and the overall institutional and coordination components which would fall outside the immediate selected project areas and five year time frame but these have not been quantified. 4. Financial Base Costs are expressed in 1997 prices. Economic values for the non-traded component of project costs have been estimated using a Standard Conversion Factor of 0.9. It is argued that little is gained by refining this to specific coefficients by item. Specific economic import and export parity prices have been estimated for major traded items on the basis of world market price projections. Unskilled labor was adjusted by a factor of 0.9. The period of analysis was 20 years. An opportunity cost of capital of 12% was used. 5. Technology Dissemination. There are four sub-components: livestock, sericulture, horticulture, and agriculture, the last two components have been modelled together in whole farm system models except for the hills area fruit component represented by apples which was treated separately. It should be noted at the outset that in an integrated project of this type individual component ERRs need to be interpreted with great caution. (a) Livestock (ERR. 26%). There are two main branches of the livestock component: an Al component and an improved natural breeding component both supported by improved husbandry technology dissemination and together covering cattle, buffalo, sheep, goats, and pigs. The small stock particularly are aimed at improving incomes for the poor. For the improved breeding the incremental number of artificial inseminations from both refurbished centers and through project established para-vets provides the basis for the numbers projected. The assumption is that due to the combined effect of AI, improved nutrition and health care, there would be incremental production of milk from crossbreds and milk and meat from buffaloes. There would also be an increased production and quality of meat from  Project Appraisal Document Page 90 India - U.P. Diversified Agricultural Support Project Annex 4 improved sheep, pigs and goats from the introduction of the open nucleus breeding system and better extension. These benefits are set against the increased costs of feed, health care, animal upkeep, etc. Overall herd build up was derived from herd models to ensure internal consistency and realistic build-ups. Representative key assumptions are: milk yields for cows rising by year 10 to a conservative 1800 litres per cow per year against a without project scenario of 1500 liters; insemination conception rates rising from 0.4 to 0.6 after 4 years; AI economic costs of Rs 30 per service; costs of incremental feeding and health care of improved over nondescript animals has been included. In the base case milk was valued at current domestic prices due to lack of reliable forecasts for future traded milk prices. The alternative would have beeen to use an importable hypothesis which calculations indicate would, at current prices, raise the price by about 60 percent. However, international prices have been trending downwards over the past year so this price has not been used in the base case. All project overhead costs for the livestock component were included. Detailed assumptions are contained inTable set A and B (Livestock Sections) in the Economic Analysis Working Tabulations in the Project File. This component is not very sensitive to changes in assumptions. (b) Sericulture. (ERR 17%) Economic analysis of the sericulture component is based on two major economic activities of cocoon rearing and raw silk production. Cocoon rearing incremental benefits are based on a without project situation which is a typical crop production cropping pattern since very little cocoon rearing is undertaken in UP at present. An assessment is then added of the value added from further processing in the form of reeling. This component also offers potential for some benefits that are not easy to measure including: employment increases for under-employed family labor, increased control over assets by women. Key assumptions are the following: 8450 ha of new mulberry giving 6400 mt of cocoons by year 7, the equivalent of about 750 mt of raw silk. This represents a substantial increase on the very low level of production of 20 mt current production but demand in UP is 3,000 mt and demand nation-wide is rising faster than production so marketing is not expected to be a problem. Yields of 600kg of cocoons per ha at Rsl 15 per kg are assumed. In 60 percentof cases mulberry would replace subsistence crops, in 40 percent mulberry would go on fallow or waste land; current financial prices are used which are linked to world prices and are considered conservative for the coming decade; costs for reeling are based on model 20-basin units. Project overhead costs included were all the sericulture component overheads except the seed farm costs because seed costs are included in the production models. The ERR is modest and sensitive to assumptions on costs and benefits. The component is still considered justified given the new industry status in UP, the differential impact on the poor and the suitability of UP with respect to climate and resources. Detailed analysis is in Table set C in the Economic Analysis Working Tabulations in the Project File. (c) Horticulture (ERR with agriculture = 49%) Except for the hills fruit component represented by apples this has been modelled as part of the whole farm system analysis together with agriculture. Project activities focus on providing the foundation for improvement through training of key staff, ensuring high quality planting material, and building expertise in the neglected area of post-harvest technology. In this component, rate of uptake is particularly uncertain since the technologies are new and there are uncertainties about the rate of uptake of planting material at full cost. Nevertheless, demand for horticulture products is rising quite rapidly and during preparation quite detailed marketing studies were undertaken. The project is addressing the issue of improved marketing informnation. The analysis has focussed mainly on mango, apples and potato as representative crops for fruit and vegetables. But a number of other fruits and vegetables would be given attention. Key assumptions for mango are: yields of improved mango reaching about 15 to 20 tons per ha by maturity, depending on variety and mango prices averaging Rs8 per kg. Project overhead costs included were all the horticulture costs. (d) Agriculture. (ERR 49% combined with horticulture) Representative farm models were developed for four zones: Eastern UP (two models - a 0.4 ha model and a 1.5 ha model, Western UP (two models - a 0.5 ha model and a 1.8 ha model), Bundelkhand (two models - a 1.5 ha model and a 3.5 ha model) and the Hills Zone (one model - an apple orchard model). All models accomodate the two season kharif and rabi pattern. All except the apple model were developed using the FARMOD computerised analysis package. They include the following representative crops: wheat, paddy, sorghum, mango (two types), oilseeds, potato, moong, chickpea, citrus, soyabean. The above representative models are a distillation and simplification of a larger range of models developed during project preparation. Yield increases arising from improved technologies were different for each crop but typically were in the range of 20% to 40% over a five year period from first adoption of a full package. Adoption rates of full pacakges assumed were very conservative, about 5% of the hectarage and/or farners by Year 6. However, the reality in the end may be larger numbers going for more partial adoption, at least initially. (The models were built to try to reflect the project's systems approach at the farm level with more than one adoption adjustment at the farm level, usually related to land use changes arising from diversification into a new commodity combined with an improvement in husbandry  Project Appraisal Document Page 91 India - U.P. Diversified Agricultrum Support Project Annex 4 in one or more existing enterprises, in some cases adding a 'catch crop'.) Larger numbers adopting fewer innovations per farm would tend to cancel out in the economic analysis although under that scenario there would remain complementarities at the farm level unexploited. Making realistic projections in this case is complicated by the following two facts: (i) only modest investments are being put directly into agriculture yet a number of these are expected to be key institutional changes in advancing technologies and sustainability and these are likely to spill over outside the immediate selected project areas, such spill-over has not been counted; (ii) the technology dissemination component, while following a new approach involving NGOs, will still rely considerably on the existing structure as the new modalities evolve, thus existing on-going extension service expenditures will contribute to the benefit stream although they are clearly non-incremental to the project since they would be incurred with or without the project; these have not been included in the cost stream, they would, of course, lower the ERR; however, equally important, the analysis also avoids claiming benefits that might arise from those on-going expenditures and which cannot largely be attributed directly to the project investments themselves. Traded inputs such as fertiliser and traded commodities (wheat and rice) were priced at border estimated prices using World Bank forecasts (see Tlable 2 in the Working Tables). Project overhead costs included were all the agriculture overheads. The ERR is high and not sensitive to changed assumptions. The high ERR at even modest adoption percentages should not be misinterpreted. It reflects: (i) the large scale of UP agriculture, in effect the huge market for any technological innovation; (ii) the potential to raise incomes through diversification as incomes and demand for higher value products rise; (iii) the fact that the enabling market and roads component costs are not attributed to the agriculture/horticulture component (conversely the lower ERR to the roads component would be higher were a share of the agriculture/horticulture benefits attributed to it); (iv) the fact that a number of investments that will contribute to agriculture and horticulture growth, such as the participatory/NGO investments and the technology investments, are not attributed directly to this component because they impact on all components including livestock. As noted above, in an integrated project of this type individual component ERRs need to be interpreted with great caution. The detailed analysis, including the FARMOD tables and the separate Hills Apples component are in Table set D in the Economic Analysis Working Tabulations in the Project File. 6. Rural Infrastructure. There are two components, rural roads and rural markets. (a) Rural Roads. (ERR = 14%) Project roads are roads which are being upgraded . In the component analysis these investments have been justified on the basis of savings on traffic costs alone. The impacts on agricultural and, particularly, horticultural production from road improvement are assumed to be captured within the agriculture component analysis. Because of the risk of double counting reduction in losses of perishable products, which is currently very high, have not been added to the roads component analysis. The economic analysis for roads consisted of two parts: (i) initial screening criteria for road selection which acted as a proxy for an economic evaluation of alternatives since it was based on criteria such as traffic volume and population densities; (ii) economic evaluation of representative roads. The screening criteria used included: cost of improvement and maintenance, access to existing market/service centers, population served, existing traffic volumes, cultivated area, share of perishable commodities, need for land aquisition and environmental considerations. Assumptions were different for each of the sample roads but the following is indicative: 4 percent growth for traffic, a shift of 20 percent of pedestrian/bicycle traffic to light vehicles after improvement and of 10 animal drawn vehicles per day to trucks. Based on analysed operating cost data truck operating costs were assumed to fall from Rs12 per vehicle km on existing roads (which are in bad condition) to Rs7 after improvement. Details of the analysis are given in the Economic Analysis Working Tabulations in Table set E in the Project File. (b) Rural Markets. 'The benefits would include improved efficiency of market operations, increased throughput resulting in lower unit costs, reduced spoilage, agricultural production benefits from reduced crop losses and increased production due to improved prices. However,as indicated above, the benefits from rural market improvement have not been separately estimated in the ERR calculation although earlier in the project preparation excercise such an analysis was done. It has been discarded because of the considerable risk of double counting in such an excercise. The assumption has been made that the benefits from markets are covered by the benefits from the technology dissemination components. Nevertheless, indicative analyses done for the rural markets component during project preparation indicated that the annualised capital cost of market improvement does not exceed RsO. I per kg of market throughput compared with a typical produce sales price of at least Rs5 per kg so only a quality or reduced losses gain of 2 percent would cover the marketing investment costs. It is expected that actual improvements would give much greater gains than this. Typically losses have been in the order of 20 percent. A willingness to pay analysis was also done for a sample market which suggested that a first year only financial rate of return on the  Project Appraisal Document Page 92 India - U.P. Diversified Agricultural Support Project Annex 4 investment would give a rate of return of between 5 percent and 11 percent. Another market analysis indicated that with an increase in vegetable prices of only 5 percent the rate of return on first year alone would be about 25 percent. 7. Sensitivity Analysis. The overall ERR is relatively insensitive to changes in assumptions about any one individual component. However the Sericulture Component and the Roads Component with ERRs of 17 percent and 14 percent respectively are quite sensitive to changed assumptions. This issue is discussed below. The most likely changes in assumnptions and the associated ERRs would be the following: (a) Slower take up or lower benefits in the Sericulture component due to slow establishment of the capacity to give the proposed support or poorer than projected productivity or higher costs. If the sericulture benefits were down by 10 percent the ERR forthe component drops from 17 percent to 10percent. If costs go up 10 percent the ERR drops from 17 percent to 11 percent. If both happen together the ERR falls to three percent. It has been argued above that for poverty and infant industry arguments there is a case for accepting these levels of ERR and sensitivity. (b) Roads costs up by 10 percent would reduce the ERR from 14 percent to 12 percent and costs up by 20 percent would lower it to 10 percent. Benefits down by 10 percent would reduce the ERR of that component to 12 percent. The above changes would therefore represent switching values. However, given the linkages to the productive components, especially related to horticulture loss reductions, which have been shown to be high (see above) but have not been covered within the roads component analysis, isolating the component analysis in this way within an integrated project design is not appropriate. (c) Livestock costs up by 20 percent would reduce the component ERR from 26 percent to 24 percent and the project ERR from 22 percent to 21 percent. Costs would have to climb by 120% to reach the switching value at which the component ERR falls to 12 percent, the OCC. As discussed above, with milk prices up at a current prices border parity level on an import assumption the ERR of the component would be above 35 percent. The ERR of the AI component is considerably higher than the natural breeding component which, with it's approximate share of 10 percent of the component overheads, gives an ERR of only 14 percent. The reason is intuitive, essentially that diluting semen pays. However, it would be wrong to discard the natural breeding component because, again, there are linkages. The AI component, in order to retain the genetic stock variety, needs the natural breeding component to survive in the longer term. (d) Project Overheads would have to climb substantially to significantly lower the ERR, a 50 percent increase in overheads would still give an ERR of 19 percent. (e) A more probable downside scenario would be a slow start-up and take-off. If the Net Benefit stream is lagged two years behind the Project Overhead Costs the ERR falls to 16 percent and three years would take it below the OCC. The history of the performance of similar types of project does make this a not unrealistic scenario. However, the UP Sodic Lands Project, from which this project design has drawn a great deal, does not appear to be following the same pattern and attention has been paid to ensuring early start-up and quick procurement. (f) With respect to the overall project ERR, a decrease of 20 percent in the benefits gives an 18 percent ERR. Benefits would have to fall by about 40 percent to reach the OCC. Costs would have to rise by over 40 percent to reach the OCC. Within the process of implementation the economic sensitivity issue has been addressed by agreeing that there would be substantial flexibility to redirect priorities at the point of the Mid-Tern review at which point revised economic analyses would be undertaken to try to pick up trends in emerging economic performance and reassess priorities. Does the proposed project fit within the Country Assistance Strategy? 8. This is discussed in Block 2, Section 5 of the PAD. The project addresses four particular areas in the CAS strategy: (a) Poverty. UP is a huge and very poor state with many small and marginal farmers. There are about 19 million farms below 2 hectares covering over 10 million hectares. The project aims to provide improved technologies and infrastructure to these farmers in selected blocks potentially covering in this first project about one third of  Project Appraisal Document Page 93 India - U.P. Diversified Agricultjral Support Project Annex 4 the farming population of UP . The attention to participatory approaches drawing on the experience of the Sodic Lands Project is the most important element in a strategy that would give the poor and women an increasing say in rural development affairs. Special attention is given to technologies that are of interest to the poor and landless, including particularly small livestock and sericulture. (b) Policy Refornm. The Policy Matrix in this Annex outlines the range of policy changes already accomplished and the changes expected under the project. (c) Fiscal sustainability is a major focus of the CAS. During project preparation a fiscal sustainability study of the agriculture sector was carried out which has contributed to the development of the schedule of increased cost recovery. Over the life of the project cost recovery on a large number of items currently supplied by government will rise up to or close to 100 percent. Attachment 2 of Annex 2 gives the agreed list of items and phasing. (d) Capacity building is a major objective of the CAS. The project has a major focus on three areas of capacity building: (i) institutional change; (ii) training; and (iii) planning. What are the alternatives to the project? 9. No complete alternative project was contemplated. It was always clear that such a vast poor state like UP had potential for some form of significant rural development project. The choices were more related to what combination of policies and investments would be included on what scale and how far was it realistic to move on policy reform. However, an unusually large number of potential investment components were subjected to preliminary analysis and were dropped for a variety of reasons, mainly where there were doubts about the economics, or due to concern to reduce complexity of project design, or where they were considered to be better suited to a separate project. The alternatives considered are outlined in Block 2, Section 8 of the PAD. With respect to policy, a middle way was adopted, partly in acknowledgement that considerable strides had been already made in UP over the last three years and partly because of a rapidly changing political situation which made policy discussion and rapid action more difficult (see PAD text, Section B 2).. What is the fiscal sustainability of the project? 10. Block 3 of the PAD (Fiscal Impact section) addresses this. Briefy, cost recovery is a major focus of the project (see Table 2). From the year 2003 UP would gain about Rs 90 million annually from the cost recovery measures. However,this is not large relative to the larger subsidy costs related to irrigation, power and fertiliser (which are largely a center rather than a state issue). Nevertheless, the move to full cost recovery in a large number of items will open the door to privatisation in a number of areas over the project period and this would be a major thrust of a Phase 2 project. What are the main risks including the institutional risks and how would they impact? 11. This is covered in the PAD Block 3, Section 21 .The main risks are the following: (a) That procurement and overall implementation will be slower than anticipated. This is addressed in the sensitivity analysis. Briefly, if the project took seven years instead of five years to reach its five year development level the ERR would fall to 16 percent. (b) That the participatory process would not work well due to lack of experience and slow impact of the training program. The impact of this on the ERR is very difficult to quantify but could be similar to (i) above. This is the area of greatest uncertainty since the approaches are relatively new, albeit tried with substantial success in the UP Sodic Lands Reclamation Project on which many of this project's processes are modelled. (c) That there would be either very slow policy change or even policy reversal. This would have an impact on the  Project Appraisal Document Page 94 India - U.P. Diversified Agricultural Support Project Annex 4 incentive environment and on the fiscal situation since much of the reform is related to cost recovery and privatisation. The impacts on this would be longer term and are difficult to predict but would certainly be serious with implications far wider than the project itself What is the expected poverty impact? 12. The scale of UP agriculture in terms of both people and resources is enormous. As indicated above there are about 19 million farms below 2 hectares, about 15 million below I hectare. A substantial proportion of the project activities are activities that are generally undertaken by the poor, including sericulture, dairy farming, sheep, goats, pigs, vegetables etc. Farm models indicate that with adoption of three or four enterprise innovations and with a small move towards diversification into horticulture, small farm families on farms below 1 hectare could about double incomes (which are currently very low). In addition levels of participation by women in the activities listed above, as both decision makers and workers, is high. With the project, women would also have access to institutional credit for the first time. Commercial banks have agreed to lift their restrictions on provision of credit to women. It is expected that the participatory approaches built into the project and borrowed from the Sodic Lands Project would help to give voice to the poor. This will be complemented by the decentralisation decisions to the Panchayats indicated in the Policy Reform matrix. What would be the environmental impact? 13. See the Environmental Section of the PAD. No environmental costs or benefits have been included in the economic analysis. The project would be predominantly positive for the environment. There would be a possibility of a limited potential negative impact from the roads component. But since all roads would follow existing alignments, since the work will incorporate drainage works, and since, precisely for environmental reasons, no hill roads are being picked up, the likelihood of negative impacts is small. The selection and design for the rural roads has taken into account environmental concerns. 14. Potential negative impacts from the use of inputs would be minimised through: (a) development of Integrated Pest Management; (b) strengthening of soil analysis capacity; (c) a focus on rotational cropping with legumes and overall diversification. In addition a permanent environmental oversight unit would be established within the PCU. What is the case for public investment in these activities? 15. A main aim of the project is to initiate the process of increasing private participation in the sector through the following means: (a) Project Development Facility; (b) the use of para-vets and private veterinarians; (c) private contractors to supply semen and liquid nitrogen; (d) increased cost recovery on most items publicly supplied; (e) leasing out of government farms; (f) establishment of a competitive research fund; (g) deregulation of monopoly procurement of cocoons; (h) development of the Registered Society ATMA concept for technology disemination The public investments in roads and rural markets are important and neccessary supportive investments. Other justified areas of public investment proposed are the very important technology development and disemination components, the community participation elements, NGO support, and the training components. There are a number of environment related investments where there is also a rationale for public investment on externality grounds, for example, the Integrated Pest Management and soil nutrient work, the soil analysis capacity, and the enviromnental oversight unit.  Project Appraisal Document Page 95 India - U.P. Diversified Agricultural Support Project Annex 4 Financial Analysis 16. The question to be answered under this heading is whether the investments expected to be taken up by rural families are likely to be profitable and likely to be sufficiently profitable to ensure adoption. In all cases the profitability modelled is satisfactory. However, it should be noted that the farm enterprises modelled are only intended to be representative and, particularly with horticulture crops, a range of alternatives may be chosen depending on prices, risk, etc. Briefly the models indicate the following: -- (a) In individual crop enterprises typical income increases from adoption of technology improvements within the enterprise are 25 percent to 30 percent. (b) In whole farm adoptions of combinations of improved technologies on several crops and adjustments to higher value crops typical income increases over 10 years are about 100 percent with an IRR of about 45 percent. (c) In marginal farm situations, for example 0.4 ha farm in Eastern UP before project incomes below the poverty line of around Rs5000 per year, say US$4 per day, increase to about double, Rs1O,000, say US$8 per day, after 10 years. (d) In sericulture, net income on a 0.4 ha plot rises from Rs5000 per year to about Rs13500 after 8 years with an IRR of over 100%. (e) In livestock, profitability depends very much on sources of feed. Net income is projected to rise from about Rs6000 per cow per year to about Rs9000 per cow. (f) In small stock about a doubling of net income per head is expected. The aspect of risk is difficult to model. Four main impacts can be expected. First, with rising average net incomes farm families should be alble to withstand income variation better in terms of impact on basic family welfare. Second, a number of the technology areas to be addressed under the project aim at improving water and nutrient management and thus reducing downside risk with respect to yields, including lowering input costs by better fertiliser use. Third, diversification per se should spread risks better by putting fewer eggs in the same basket. However, fourth, some of the diversification enterprises, for example in horticulture, do expose farmers to an increase in risk related to prices of surplus commodities which do not have any floor price mechanism. This will be addressed under the project through improving information and encouraging cautious and fairly wide diversification for the smaller farmers. Overall it is not expected that risk will change significantly except for those who diversify too aggressively across too narrow a range of commodities which is likely to be the larger farmers pursuing high profit commodities.  Project Appraisal Document Page 96 U.P. Diversified Agricultural Support Project Annex 5  Project Appraisal Document Page 97 U.P. Diversified Agricultural Support Project Annex 5 ANNEX 5 UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT Financial Summary Years Ending (Indicate currency, units and base year) Implementation Period Operational Period 99 00 01 02 03 TOTAL Project Costs Investment Costs 21.0 33.9 28.2 25.8 18.3 127.2 Recurrent Costs 3.5 6.2 7.1 7.6 7.9 32.3 Refinancing PPF 1.0 1.0 Total 25.5 40.1 35.3 33.4 26.2 160.5 Financing Sources (% of total project costs! IBRD (49.7%) 12.7 19.9 17.5 16.6 13.0 79.7 IDA (31.1%) 7.9 12.5 11.0 10.4 8.1 50.0 Government (19.2) 24.9 7.7 6.8 6.4 5.1 30.8  Project Appraisal Document Page 98 India - U.P. Diversified Agricultural Support Project  Project Appraisal Document Page 99 India - U.P. Diversified Agricultural Suppon Project Annex 6 ANNEX 6 1UTTAR PRADESH DIVERSIFIED AGRICULTURE SUPPORT PROJECT PROCUREMENT AND DISBURSEMENT ARRANGEMENTS 1. Civil Works (US$ 68.2 million): Civil works in the project consists mainly of the construction of rural roads; construction of new buildings (non- residential as well as residential) for the various departments; rehabilitation and refurbishment of existing offices and laboratories; construction of poly houses and net houses; construction of seed farms (grainages) of sericulture; improvement of haats/painths, improvement of cattle, horticulture and cocoon markets etc. Works would be procured following National Competitive Bidding (NC]B) or Force Account procedures (Bank Procurement Guidelines January 1995, Revised January, August 1996 and September 1997 ) as follows: NCB: Works to an aggregate value of US $62.1 million equivalent would be procured under contracts awarded on the basis of NCB procedures acceptable to the IDA/Bank. The justification for proposed NCB for civil works is that the works are located in widely scattered locations. The works would be grouped together into convenient packages for bidding; but the largest contract is not likely to be more than the equivalent of US $1,000,000, so it is unlikely that foreign firms would fmd such contracts attractive. Nonetheless, bids from foreign contractors would not be precluded. Force Account: Works for rural markets estimated to cost less than US$30,000 per contract, and other works estimated to cost the equivalent of US $20,000 or less per contract and farm development works upto an aggregate amount not exceeding US $6.1 million may be undertaken by: (i) direct contracting including unit rate/piece rate system to qualified contractors or registered NGOs or local community organizations; (ii) on the basis of comparison of price quotation obtained from at least three qualified contractors eligible under the Guidelines or registered NGOs or local community organizations; or (iii) by force account, in a manner satisfactory to IDA/Bank. These works are not suitable for competitive bidding due to small amounts and remoteness of location. Materials for works carried out as above on force account valued in an aggregate of US $4 million would be procured following national shopping procedures acceptable to IDA/Bank. 2. Goods, Equipment, Furniture and Supplies (US $19 million): Goods consisting of communication equipment, computers, scientific equipment, liquid nitrogen containers etc. would be procured following International Competitive Bidding (ICB) procedures (Bank Procurement Guidelines, January 1995, Revised January, August 1996 and September 1997). However equipment estimated to cost less than the equivalent of US $200,000 per contract upto an aggregate value of US $4.5 million would be procured following NCB procedures acceptable to IDA/Bank. Small items of equipment, urgent requirements of computers, office equipment, furniture, air conditioners, generators, laboratory equipment and some scientific equipment, field and laboratory supplies and some inputs etc. would be procured by the various implementmig agencies in small lots over the five year period. Individual contracts are not expected to exceed US $20,000 and as such would be procured using shopping procedures satisfactory to IDA/Bank, upto an aggregate amount of US$ 5.5 million. Rate contracts of Directorate General of Supplies and Disposals (DGS&D) would be acceptable as a substitute for national shopping. Satellite imagery, data, aerial photography, maps etc. valued at about US $0.3 million would be procured following direct contracting procedures from organizations such as National Remote Sensing Agency, Survey of India and other organizations. Similarly books, periodicals, extension and publicity materials, software, proprietary equipment and spares, livestock, semen, inputs such as seeds, fertilizer, pesticides, and plants etc. valued in the aggregate at about US $4 million would be obtained under direct contracting procedures since each contract would be small averaging less than $5000 per item. 3. Vehicles (US $3 million): The requirement of vehicles which covers about 10 departments and 3 SAUs is spread over the project period and thus would not be amenable to central and lumped procurement. Individual contracts are not likely to be more than US $100,000. Hence these would be procured using shopping procedures/DGS&D rate contracts. However, if bulked purchases over US$ 100,000 are undertaken, then they would be done using ICB procedures. 4. Consultancies and Training (US $32.9 million): Technical Assistance and consultancy services for studies (including technical audit of civil works for improvement of roads, preparation of project report for UPDASP Phase II, specialized studies, and Project Development Facility) estimated in the aggregate at US $17.4 million would be contracted on terms and conditions in accordance with IDA/Bank Guidelines for the use of Consultants (January 1997, Revised September 1997). A private sector company would be contracted for providing the Project Development Facility through open competition following the QBCS procedure. Training (aggregating to a total of US $15.5 million) would be procured in two  Project Appraisal Document Page 100 India - U.P. Diversified Agricultural Support Project Annex 6 ways : first a service contract for placement and support of trainees for overseas training would be procured/arranged foll6wing QCBS procedures with consultants requiring to demonstrate substantial local presence and experience; second, the training would consist of placement and support of staff for short and long duration courses and fellowships in identified foreign and local institutions. In addition study tours would be organized for staff and officers of the various departments both within the country and abroad. 5. Research Services (US $4.0 million): (a) Enhancing Research Coordination by strengthening of UP Council for Agricultural Research (UPCAR) (b) Competitive Agricultural Research Program (CARP) to enhance the quality, relevance and accountability of agricultural research. This program would be managed by UPCAR and would involve pre-project screening of proposals, invitation to preparation of full project proposals, project proposal evaluation through a peer-review process and approval. UPCAR would hire the services of consultants for the establishment and adoption of procedures for the operation of the program. Work Program Agreements (WPAs) would be finalized based on a competitive process open to public institutions, private sector, regular universities, NGOs and others to undertake agricultural research. WPAs would have specified benchmark/deliverables against which initial, interim and final payments would be made. For this sub-component Bank Consultant Guidelines do not apply. The process to be used for agreeing WPAs through CARP has been appraised by IDA/Bank and would be kept under review. 6. Recurrent Costs (US $32.3 million): These would cover salaries and honoraria of agreed incremental positions, contract workers, operation and maintenance of works, equipment and vehicles (including hiring cost), travel for local training, office supply and maintenance (including rent for office buildings) and computer consumable supplies, research consumable such as laboratory chemicals but excluding fertilizer and pesticides for field experiments. 7. Contract Review: All civil works, goods and equipment contracts valued at US $200,000 equivalent and above would be subject to prior review by the Bank as per Para 2 Appendix I of Bank Procurement Guidelines (January 1995, Revised January, August 1996 and September 1997). Except that the first two contracts between US$20,000 and US$200,000 for goods and the first two contracts between US$20,000 (US$30,000 in the case of rural markets) and US$200,000 for works would be subject to prior review. Prior review for consultancy contracts would be as follows: (a) With respect to each contract estimated to cost the equivalent of US $100,000 or more, the procedures set forth in paragraphs I and 2 [ other than the third subparagraph of paragraph 2(a)] and 5 of Appendix I to the Consultant Guidelines shall apply; (b) With respect to each contract estimated to cost the equivalent of US $50,000 or more, but less than the equivalent of US $100,000 the procedures set forth in paragraphs I and 2 [ other than the second subparagraph of paragraph 2(a)] and 5 of Appendix 1 to the consultant Guidelines shall apply; and (c) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of US $50,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Association for its prior review and approval. The contract shall be awarded only after said approval shall be given. In addition, Annual Procurement Plans would be reviewed by IDA/Bank. This would result in a prior review of about 70 percent of all contracts awarded under competitive bidding. Selective post review of awarded contracts below threshold levels would be carried out by IDA/Bank visiting missions. 8. Procurement Information: Procurement information would be collected and recorded as follows: (a) Prompt reporting of contract award information by PCU; (b) Comprehensive semi-annual reports by PCU indicating: (i) revised cost estimates for individual contracts and total cost; (ii) revised timings of procurement actions including advertising, bidding, contract award and completion  Project Appraisal Document Page 101 India - U.P. Diversified Agricultural Suppod Project Annex 6 time for individual contracts; and (iii) compliance with aggregate limits on the specified methods of procurement (c) Completion report by the borrower within three months of the credit closing date. 9. Procurement Schedule and Proposed Procurement Arrangements: The proposed packages and the Procurement Schedule for the project is given in the PIP. Selection of consultancy services would be undertaken in accordance with the selection plan presented in the PIP. The project's Training Plan is presented in the PIP. The project elements, their estimated costs and proposed methods of procurement are summarized in Table A. The thresholds for procurement methods and prior review are summarized in Table B. 10. Procurement Cell: The PCU would have a procurement cell to help with procurement of goods and equipment proposed under competitive bidding. PCU already has capacity for this type of work as shown by competent preparation of the procurement plan and handling of procurement issues during the pre-project period. This cell would be further strengthened by recruitment of an experienced procurement officer and nationaVinternational hiring of selected staff. About one year after project effectiveness performance of this cell would be assessed by the Bank supervision mission and, if necessry, appropriate remedial measures would be recommended. Civil works would be procured by the executing agencies of the GOUP. Technical audit of construction quality would be undertaken by independent consultants (see para. 4 above). 11. Research Expenditure: A separate category for research expenditure will be introduced. To qualify for reimbursement these items would have to be for eligible research programs which would be required to meet the following criteria: (a) The specific research proposal would have passed through the agreed review process and have been formally accepted by UPCAR. (b) Expenditures would not include new buildings; (c) Expenditure would not cover incremental staff salaries, only contracts of essential research assistants and research fellows assigned to particular research program; and (d) The initiated research proposal would be scheduled to be completed within the life of the project or would be covered by an express commitment to continue funding at the required level after project closing. Disbursement 12. The Credit would be disbursed as follows: (a) 80 percent of the costs of civil works; (b) 100 percentof foreign or ex-factory costs, or 80% of local costs, for goods, equipment and vehicles; (c) 100 percent of the costs of consultants, training and contracted services; (d) 100 percent of the cost of research services; and (e) 80 percent through March 31, 2000, 60 percent through March 31, 2002 and 40 percent thereafter for incremental staff and operating costs.  Project Appraisal Document Page 102 India - U.P. Diversified Agricultural Support Project Annex 6 13. The Credit/Loan would be disbursed in accordance with Table C of this Annex. Disbursements are projected over a period of five years from July 1998. Project completion is expected by September 30, 2003 and Credit/Loan closing by March 31, 2004. All requests for disbursements would be prepared by the PCU and reflect the implementation schedule specified in the Annual Action Plans. Disbursement for civil works, goods and equipment contracts packages exceeding US$200,000 equivalent would be fully documented and subject to prior review by the Bank. For consultants, this limit would be US$100,000 for firms and US$50,000 for individuals. For all other expenditures, Bank funds would be disbursed agains statements of expenditures (SOEs) in an agreed format and in accordance with the Bank's normal procedures for SOEs. SOEs would be certified by GOI as representing eligible project expenditures. Supporting documents for SOEs would be available for post-review by supervision missions and auditors, and retained by PCU for one year after Bank receipt of the audit report for the fiscal year in which the last withdrawal from the Credit/Loan account was made. The procedures for preparing SOEs would be project expenses summarized monthly by the PCU and put under expense headings agreed with the Bank, certified by the authorized officer and forwarded to the Controller of Aid Accounts and Audit at DEA within 30 days of each month- end. Retroactive Financing and Special Account 14. To assist with project preparation activities and to expedite project start-up, IDA/Bank would finance project costs incurred after August 31, 1997 up to a limit of SDR 4.5 million (US$6 million), provided IDA/Bank procurement procedures were followed. The activities to be covered by retroactive financing would include: (a) pre-project pilot activities related to all project components including the rural infrastructure; (b) project management capacity establishment; (c) activities related to M&E; and, (d) national and international, fact-fmding visits, training and workshops. In order to facilitate timely payments of project expenditures, a Special Account amounting to US$6.5 million (equivalent to four months expenditure) would be established in the Reserve Bank of India. The account would be replenished quarterly or when the account is drawn down to about 50 percent of the initial deposit, whichever occurs first.  Project Appraisal Document Page 103 India - U.P. Diversified Agricultural Support Project Annex 6 Table A U. P. DIVERSIFIED AGRICULTURAL SUPPORT PROJECT Summary of Proposed Procurement Arrangements Project Element Procurement Method NBF Total Cost ICB NCB Others* US $M 1 Works: 1.1 Rural roads 53.7 1 54.7 (42.9) (0.8) (43.8) 1.2 Construction of new buildings (non-residential and 8.4 5.1 13.5 residential ); rehabilitation and refurbishment of (6.7) (4.3) (10.8) existing offices, laboratories and construction of seed farms, improvement of haats/panths; improvement of cattle, cocoon markets etc. construction of poly houses, net houses; etc. Total 1 0.0 62.1 6.1 0.0 68.2 (49.7) (4.9) (54.6) 2 Goods: 2.1 Communication and scientific equipment, computers, liquid nitrogen 4.7 4.5 5.5 14.7 containers, office, scientific equipment, etc. (3.8) (3.6) (4.4) (11.8) 2.2 Vehicles 3.0 3.0 (2.4) (2.4) 2.3 Satellite imagery, maps, research data etc. 0.3 0.3 (0.2) (0.2) 2.4 Books, periodicals, extension and publicity materials, software, 4.0 4.0 proprietary equipment, spares, livestock, seeds, plants, fertilizer, (3.2) (3.2) pesticides, etc. Total 2 4.7 4.5 12.8 0.0 22.0 (3.8) (3.6) (10.2) (17.6) 3 Consultancies and Training: 3.1 Consultancy services including procurement and quality supervision 17.4 17.4 of roads (17.4) (17.4) preparation of project report, studies, project development facility etc. 3.2 Training and workshops (foreign and local) 15.5 15.5 (15.5) (15.5) Total 3 0.0 0.0 32.9 0.0 32.9 (32.9) (32.9) 4 Research Services 4.0 4.0 Total 4 (4.0) (4.0) 5 Recurrent Costs: 5.1 Salaries, allowances and honoraria 6.5 6.5 (3.9) (3.9) 5.2 Contract workers 4.2 4.2 (2.5) (2.5) 5.3 O&M Costs 9.4 9.4 (5.7) (5.7) 5.4 Travel Expenses 4.3 4.3 (2.6) (2.6) 5.5 Offices supplies and materials 6.3 6.3 (3.8) (3.8) 5.6 Others 1.5 1.5 (0.9) (0.9) Total 5 0 0 32.3 0 32.3 (19.8) (19.8) Project Preparation Facility 1.0 1.0 (1.0) (1.0) TOTAL PROJECT COST 4.7 66.6 89.2 0 160.5 (3.8) (53.3) (71.8) (129.9) Includes National Shopping and Force Account (Procurement of Small Works)  Project Appraisal Document Page 104 India - U.P. Diversified Agricultural Support Project Annex 6 Table B UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT Thresholds for Procurement Methods and Prior Review Expenditure Category Contract Value Procurement Method Contracts subject to Prior (Threshold) Review 1. Works: Civil Works >US $20,000 NCB US $200,000 and above <US $20,000 Force Account None 2. Goods Goods, equipment, >US $200,000 ICB US $200,000 and above Furniture, Supplies Materials >US $20,000 NCB <US $20,000 Shopping/ Direct Contracting 3.Vehicles: <US $100,000 Shopping/ DGS&D rate contracts 4. Consultancies In accordance with US $100,000 and above for studies. Training IDA/Bank Guidelines firms US $50,000 and above for Iidividuals 1/ The first two contracts for goods between US$20,000 and US$200,000 and the first two contacts for works between US$20,000 (US$30,000 in the case of rural markets) and US$200,000 would be subject to prior review.  Project Appraisal Document Page 105 India - U.P. Diversified Agricultural Support Project Annex 6 Table C U. P. Diversified Agricultural Support Project Allocation of Loan Proceeds Expenditure Category Amount in US$million Financing Percentage (1) Civil Works 51.9 80% (2) Equipment, materials and vehicles 16.7 100% of foreign expenditures, 100% of local expenditures (ex- factory cost) and 80% of local expenditures for other items purchased locally. (3) Consultants' (including NGOs' services) and 27.3 100% training (4) Research services 4.0 100% (5) Incremental operating costs 18.5 80% through March 31, 2000, 60% through March 31, 2002, and 40% thereafter (6) Refund of project preparation advance 1.0 100% (7) Unallocated 10.5 Total 129.9  Project Appraisal Document Page 106 India - U.P. Diversified Agricultural Support Project  Project Appraisal Document Page 107 India - U.P. Diversified Agricultural Support Project Annex 7 ANNEX 7 UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT PROJECT PROCESSING BUDGET AND SCHEDULE A. Project Budget (US$000) Planned Actual (At final PCD stage) US$1.7 million B. Project Schedule Planned Actual (At revised EPS stage) Time taken to prepare the project (months) First Bank mission (identification) 7/12/193 _/12/193 Appraisal mission departure _/01/1992: 11/01/1997 Negotiations a/..J1997 4/13/1998 Planned Date of Effectiveness (Board 1/97) 09/30/198 09/30/1998 Prepared by: UPCAR, GOUP Preparation assistance: Japanese Grant Fund, FAO/Investment Centre and SASRD Bank staff who worked on the project included: Salman Salman - Lawyer Cecil Perera - Disbursement Ashok Seth - Agriculturist Hamdy Eisa - Agriculturist Douglas Forno - Agriculturist Ridley Nelson - Agricultural Economist Robin Mearns - Social Scientist Deepak Ahluwalia - Agricultural Economist Harideep Singh - Financial Analyst Sanjay Vani - Financial Analyst M. Balasubramanian - Agriculturist N. Raman - Procurement K.N. Venkataraman - Procurement Vajeara Dorabawilla- Economist Brenda Scott - Team Assistant Marcia Whiskey - Team Assistant Vivi Scott - Team Assistant  Project Appraisal Document Page 108 India - U.P. Diversified Agricultural Support Project  Project Appraisal Document Page 109 India - U.P. Diversified Agricultural Support Project Annex 8 ANNEX 8 UTTAR PRADESH DIVERSIFIED AGRICULTURAL SUPPORT PROJECT Documents in the Project File* A. Project Implementation Plan UP Diversified Agriculture Support Project Preparation Report Vol. 1, II, and III FAO Investment Center Division Report No: 96/092 CP-IND, 24 September 1996 Relevant Working Papers included in Vol. II and III Credit Project Development Facility Rural Markets Research (Technology Development) Strengthening Extension and support Services (Technology Dissemination) Livestock Livestock Production Development Component - Cost Recovery Issues Bivoltine Sericulture Post-Cocoon Sector Market Prospects for Sericulture Industry in Uttar Pradesh Market Prospects for Horticultural Products in Uttar Pradesh Land Resource Management GOUP Project Implementation Plan prepared with the help of FAO Investment Center, February 27, 1998 Vol. I - Main Report Vol. II (a) - Annex 1-8 Vol. 11 (b) - Annex 9-23 Vol. III - Project Cost Tables Vol. IV - Working Paper on Economic and Financial Analysis Vol. V(a) - Procurement Plans and Schedules: Civil works Vol. V(b) - Procurement Plans and Schedules: Goods and Materials B. Bank Staff Assessments Working Paper on Economic Analysis] Included as part of the Project Detailed Project Cost Tables ] Implementation Plan Vol. III and IV C. Other General Socio-Agro-Economic Profiles of agro-Climatic Regions of UP, 1994 Zonal Analysis of Comparative Advantages and Constraints in Agricultural Diversification by U.K. Srivatava, 1994 Strategy for Agricultural Development in Uttar Pradesh - Post Reform Period - Dr. Rita Sharma, 1996 Related to Public Expenditure Review in Agriculture Review of Expenditure on Agriculture in Uttar Pradesh by O.P Agarwal, 1995 Review of Expenditure on agriculture in Uttar Pradesh - Additional study by O.P. Agarwal, 1996 Fiscal Sustainability in Uttar Pradesh - the Bajaj Study, 1997 Related to Technology Development and Dissemination (additional to working papers included in the preparation report)  Project Appraisal Document Page 1 10 India - U.P. Diversified Agricultural Support Project Annex 9 Research an Human Resource Development - M.D. Pathak, 1995 Restructuring of UPCAR and State Funding for Agricultural Research and Education - Raman and Raman, 1996 Improving Technology Dissemination Services Part-I: Organization and Management Part II: Agricultural Communication Part III: Farners Organizations Part IV: Human Resource Development Horticulture Development Horticulture in the Hill Region - Report prepared by ANZDEC Ltd., 1994 Uttar Pradesh Study - Prepared by High Value Horticulture Plc., 1995 Horticulture in the Hill Region by J.P. Nauriyal, 1995 Horticulture Interventions in the U.P. Plains by R.K. Pathak, 1995 Improving Post-Harvest Technology for Horticultural Crops in UP by Lisa Kitanoja, 1995 Research Needs in Sericulture in UP by S. Jayaraj, 1996 Integrated Pest Management in U. P. by S. Jayaraj, 1996 Improved Natural Resource management - A Working Paper prepared by FAO/CP, 1996 Soils, Fertilizers and Input Delivery Aspects by R.V. Misra, 1994 Integrated Plant Nutrient Management by R. V. Mishra, 1996 Related to Increased Private Sector Involvement Private Sector Development in UP by C. Shastri, 1994 Related to Rural Infrastructure Development Agricultural Regulated Markets: Institutional Study by U.K. Srivastava and D.C. Gupta, 1995 Traditional Haats and Melas in India by Pradeep Kashyap, 1995 Working Paper on Rural Roads and Rural Markets, 1996 *Including electronic files.  Project Appraisal Document Page 111 India - U.P. Diversified Agricultural Support Project Annex 9 ANNEX 9 Statement of Loans and Credits Status of Bank Group Operations in India IBRD Loans and IDA Credits in the Operations Portfolio (As of March 31,1998) Difference Between expected Original Amount in US$ Millions and actual Loan or Fiscal disbursements a/ Project ID Credit No. Year Purpose Original Form IBRD IDA Cancel- Undis- (SAR) Revised lations bursed Number of Closed Loans/credits: 375 Active Loans IN-PE-10561 IBRD42960 .1998 NATL AGR TECHNOLOGY 96.80 0.00 0.00 96.80 0.00 0.00 IN-PE-10561 IDA30480 .1998 NATL AGR TECHNOLOGY 0.00 100.00 0.00 99.43 0.00 0.00 IN-PE-35160 IBRD42710 1998 HARYANA POWER APL-I 60.00 0.00 0.00 60.00 0.00 0.00 IN-PE-35169 IDA30180 11998 U.P. FORESTRY 0.00 52.94 0.00 52.55 0.00 0.00 IN-PE-38021 IDA30120 1998 DPEP III (BIHAR) 0.00 152.00 0.00 146.13 2.31 0.00 IN-PE-49477 IDA30530 1998 KERALA FORESTRY 0.00 39.00 0.00 38.80 0.00 0.00 IN-PE-50638 IDA30130 1998 UP BASIC ED II 0.00 59.40 0.00 51.38 -6.69 0.00 IN-PE-9979 IBRD42260 1998 COAL SECTOR REHAB 530.00 0.00 0.00 530.00 0.00 0.00 IN-PE-9979 IDA29860 1998 COAL SECTOR REHAB 0.00 2.00 0.00 2.02 0.00 0.00 IN-PE-10473 IDA29360 1997 TUBERCULOSIS CONTROL 0.00 142.40 0.00 127.74 18.93 0.00 IN-PE-10511 IDA29640 1997 MALARIA CONTROL 0.00 164.80 0.00 155.07 3.70 0.00 IN-PE-10531 IDAN0180 1997 REPRODUCTIVEHEALTHI 0.00 248.30 0.00 234.88 11.20 0.00 IN-PE-35158 IBRD41660 1997 AP IRRIGATION III 175.00 0.00 0.00 175.00 -12.32 0.00 IN-PE-35158 IDA29520 1997 APIRRIGATIONIII 0.00 150.00 0.00 87.01 -12.32 0.00 IN-PE-36062 IDA29160 1997 ECODEVELOPMENT 0.00 28.00 0.00 24.05 -.06 0.00 IN-PE-43728 IDA29300 1997 ENV CAPACITY BLDG TA 0.00 50.00 0.00 43.84 .90 0.00 IN-PE-44449 IDA29420 1997 RURAL WOMEN'S DEV 0.00 19.50 0.00 18.19 3.60 0.00 IN-PE-45600 IBRD41140 1997 TAST'SRDINFRADEV 51.50 0.00 0.00 42.10 9.60 0.00 IN-PE-49301 IBRD41560 1997 A.P. EMERG. CYCLONE 50.00 0.00 0.00 50.00 14.70 0.00 IN-PE49301 IDA29500 1997 A.P. EMERG. CYCLONE 0.00 100.00 0.00 88.62 14.70 0.00 IN-PE-9995 IBRD41920 1997 STATE HIGHWAYS I(AP) 350.00 0.00 0.00 337.65 -2.35 0.00 IN-PE-10480 IBRD39230 1996 B SEWAGE DISPOSAL 167.00 0.00 0.00 135.29 49.32 0.00 IN-PE-10484 IBRD40560 1996 UP RURAL WATER 59.60 0.00 0.00 56.49 3.09 0.00 IN-PE-10485 IDA27740 1996 HYDROLOGY PROJECT 0.00 142.00 0.00 110.04 29.10 0.00 IN-PE-10529 IDA28010 1996 ORISSA WRCP 0.00 290.90 0.00 189.74 -18.68 0.00 IN-PE-35170 IBRD40140 1996 ORISSA POWER SECTOR 350.00 0.00 0.00 333.61 23.61 0.00 IN-PE-35821 IDA28760 1996 DISTRICT PRIM EDUC 2 0.00 425.20 0.00 368.98 19.74 0.00 IN-PE-35825 IDA28330 1996 STATE HEALTH SYS 11 0.00 350.00 0.00 292.16 42.48 0.00 IN-PE-39935 IBRD39920 1996 ILFS-INFRAS FINANCE 200.00 0.00 0.00 175.00 43.00 0.00 IN-PE-39935 IDA28380 1996 ILFS-INFRAS FINANCE 0.00 5.00 0.00 4.58 43.00 0.00 IN-PE-43310 IDA28620 1996 COALENV&SOCIALMIT. 0.00 63.00 0.00 53.42 6.55 0.00 IN-PE-10461 IBRD39076 1995 MADRAS WATER SUP 11 269.80 0.00 189.30 69.85 95.00 2.76 IN-PE-10463 IBRD37790 1995 INDUS POLLUTION PREV 93.00 0.00 0.00 83.66 50.68 0.00 IN-PE-10463 IBRD37806 1995 INDUS POLLUTION PREV 50.00 0.00 0.00 44.60 50.68 0.00 IN-PE-10463 IDA26450 1995 INDUS POLLUTION PREV 0.00 25.00 0.00 23.04 50.68 0.00 IN-PE-10464 IDA26610 1995 DISTRICTPRIMARYED 0.00 260.30 0.00 151.08 11.76 0.00 IN-PE-10476 IDA27450 1995 TAMILNADU WRCP 0.00 282.90 0.00 229.71 75.01 0.00 IN-PE-10489 IDA26630 1995 AP IST REF. HEALTHS 0.00 133.00 0.00 95.97 18.46 0.00 IN-PE-10503 IDA26990 1995 AGRIC HUMAN RES DEVT 0.00 59.50 0.00 41.47 24.59 0.00 IN-PE-10506 IDA27000 1995 MP FORESTRY 0.00 58.00 0.00 33.26 4.23 0.00 IN-PE-10522 IDA27330 1995 ASSAM RURAL INFRA 0.00 126.00 0.00 103.73 27.77 0.00 IN-PE-10563 IBRD38560 1995 FINANCIAL SECTORDEV 350.00 0.00 0.00 200.00 -167.50 0.00 IN-PE-10563 IBRD38576 1995 FINANCIAL SECTOR DEV 144.00 0.00 0.00 132.49 -167.50 0.00 IN-PE-10448 IDA25720 1994 FORESTRY RESEARCH 0.00 47.00 0.00 28.09 19.43 0.00 EDUCATION IN-PE-10449 IDA25730 1994 ANDHRA PRADESH 0.00 77.40 0.00 38.28 9.97 0.00 FORESTRY IN-PE-10455 IDA26110 1994 BLINDNESSCONTROL 0.00 117.80 0.00 89.17 25.62 0.00 IN-PE-10457 IDA26300 1994 POPULATION IX 0.00 88.60 0.00 59.40 11.06 0.00 IN-PE-34162 IDA25940 1994 MAHARASHTRA 0.00 246.00 29.19 22.93 48.47 11.94 EARTHQUA IN-PE-9870 IBRD37530 1994 CONTAINER TRANSPORT 94.00 0.00 0.00 82.42 68.43 0.00  Project Appraisal Document Page 112 India - U.P. Diversified Agricultural Support Project Annex 9 Difference Between expected Original Amount in US$ Millions and actual Loan or Fiscal disbursements at Project ID Credit No. Year Purpose Original Form IBRD IDA Cancel- Undis- (SAR) Revised lations bursed IN-PE-9964 IDA25920 1994 WATER RES CONSOLID H 0.00 258.00 0.00 165.81 58.01 0.00 IN-PE-10407 IDA24330 1993 ADP - RAJASTHAN 0.00 106.00 0.00 35.79 22.03 0.00 IN-PE-10408 IDA24390 1993 BIHARPLATEAU 0.00 117.00 0.00 74.43 72.63 0.00 IN-PE-10410 IDA24490 1993 RENEWABLERESOURCES 0.00 115.00 0.00 78.34 97.82 0.00 IN-PE-10416 IBRD35770 1993 PGC POWER SYSTEM 350.00 0.00 0.00 148.89 119.23 0.00 IN-PE-10418 IDA24830 1993 KARNATAKA WS & ENV/S 0.00 92.00 0.00 59.98 49.18 0.00 IN-PE-10423 IBRD36320 1993 NTPC POWER GENERATIO 400.00 0.00 0.00 147.89 147.90 0.00 IN-PE-10424 IDA25280 1993 NATLLEPROSYELIMINA 0.00 85.00 9.07 35.10 32.61 -4.46 IN-PE-9955 IDA25090 1993 UTTARPRADESHBASIC 0.00 165.00 0.00 41.37 -9.69 -122.30 IN-PE-9959 IDA24090 1993 RUBBER 0.00 92.00 36.58 31.39 53.74 2.07 IN-PE-9961 IDA25100 1993 UP SODIC LANDS RECLA 0.00 54.70 0.00 24.97 11.01 0.00 IN-PE-9977 IDA24700 1993 ICDS II (BIHAR & MP) 0.00 194.00 0.00 145.22 79.00 78.95 IN-PE-10390 IDA23280 1992 MAHARASHTRA FORESTRY 0.00 124.00 16.18 53.01 58.49 38.62 IN-PE-10393 IDA23500 1992 AIDS PREVENTION AND 0.00 84.00 0.00 14.89 15.46 0.00 IN-PE-10400 IBRD34980 1992 MAHARASHTRA POWER 11 350.00 0.00 0.00 237.75 235.94 0.00 IN-PE-9888 IBRD34360 1992 POWER UTIL EFFIC IMP 265.00 0.00 25.00 50.27 75.29 50.29 IN-PE-9921 IDA23290 1992 SHRIMP&FISHCULTUR 0.00 85.00 48.51 23.98 67.30 13.83 IN-PE-9946 IBRD34700 1992 NAT. HIGHWAYS II 153.00 0.00 0.00 153.00 64.12 0.00 IN-PE-9946 IDA23650 1992 NAT. HIGHWAYS 11 0.00 153.00 0.00 37.23 64.12 0.00 IN-PE-9963 IDA23940 1992 POPULATION Vill 0.00 79.00 0.00 63.83 49.06 0.00 IN-PE-10369 IDA22340 1991 MAHARASHTRA RURAL WS 0.00 109.90 0.00 28.76 32.28 0.00 IN-PE-9877 IDA22410 1991 DAM SAFETY 0.00 130.00 27.03 53.58 102.39 -1.64 IN-PE-9906 IBRD33340 1991 IND POLLUTION CONTRO 124.00 0.00 0.00 11.97 7.08 0.00 IN-PE-9906 IDA22520 1991 IND POLLUTION CONTRO 0.00 31.60 0.00 10.73 7.08 0.00 IN-PE-9958 IBRD33000 1991 AGR.DEV.I (TN) 20.00 0.00 0.00 20.00 17.87 0.00 IN-PE-9958 IDA22150 1991 AGR.DEV.I (TN) 0.00 92.80 0.00 5.58 17.87 0.00 IN-PE-9988 IDA22230 1991 TECHEDUCII 0.00 307.10 51.37 101.05 136.62 32.54 IN-PE-9860 IDA21310 1990 WTRSHPLAINS 0.00 55.00 0.00 11.49 12.38 4.04 IN-PE-9882 IDA21000 1990 WTRSH HILLS 0.00 75.00 0.00 24.87 33.40 20.40 IN-PE-9940 IDA21330 1990 POP. TRG (VII) 0.00 86.70 22.74 2.26 28.47 -5.27 IN-PE-9965 IDA20760 1990 PUNJABIRR&DRAINAG 0.00 150.00 4.72 21.37 24.50 5.79 IN-PE-9982 IBRD32370 1990 NOR REG TRANSM 485.00 0.00 0.00 200.24 200.23 0.00 IN-PE-9989 IDA21300 1990 TECH EDUC I 0.00 235.00 24.26 35.46 70.50 21.24 IN-PE-9869 IBRD30240 1989 NATHPA JHAKRI HYDRO 485.00 0.00 0.00 158.57 158.56 0.00 IN-PE-9941 IBRD30960 1989 MAHARASHTRA POWER 400.00 0.00 62.67 42.64 105.32 -1.15 IN-PE-9973 IBRD29940 1989 STATE ROADS I 170.00 0.00 61.41 5.25 61.38 -.03 IN-PE-9990 IDA20080 1989 VOCATIONAL TRAINING 0.00 250.00 116.15 18.09 159.21 18.21 Total 6,292.70 7,432.74 724.18 8,084.77 3,082.34 165.83 Active Loans Closed Loans Total Total Disbursed (IBRD and IDA): 4,703.22 30,874.00 35,577.22 of which has been repaid: 208.27 9,395.23 9,603.50 Total now held by IBRD and IDA: 12,792.95 20,854.59 33,647.54 Amount sold : 0.00 133.77 133.77 Of which repaid : 0.00 133.77 133.77 Total Undisbursed : 8,084.77 48.86 8,133.63 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. b. Rating of 1-4: see OD 13.05. Annex D2. Preparation of Implementation Summary (Form 590). Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system will be used (HS = highly Satisfactory, S = satisfactory, U = unsatisfactory, HU = highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994.  Project Appraisal Document Page 113 India - U.P. Diversified Agricultural Support Project Annex 9 India STATEMENT OF IFC's Committed and Disbursed Portfolio As of 31-Jan-98 (In US Dollar Millions) Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1964/75/79/90 MUSCO 0.00 1.08 0.00 0.00 0.00 1.08 0.00 0.00 1978/87/91/93 HDFC 40.00 2.29 0.00 0.00 40.00 2.29 0.00 0.00 1981 Nagarjuna Steel 0.00 .07 0.00 0.00 0.00 .07 0.00 0.00 1981/86/81/91/93/96 ITW Signode 0.00 1.55 0.00 0.00 0.00 1.55 0.00 0.00 1981/86/89/94/92 TISCO 6.46 15.37 0.00 0.00 6.46 15.37 0.00 0.00 1981/90/93 M&M .67 6.49 0.00 2.67 .67 6.49 0.00 2.67 1982 Modi Cement 16.08 0.00 0.00 0.00 16.08 0.00 0.00 0.00 1984/90/94 India Lease 1.09 .86 0.00 0.00 1.09 .86 0.00 0.00 1984/91 Bihar Sponge 12.47 .68 0.00 0.00 12.47 .68 0.00 0.00 1986 EXB-City Mills .48 0.00 0.00 0.00 .48 0.00 0.00 0.00 1986 EXB-CECL .01 0.00 0.00 0.00 .01 0.00 0.00 0.00 1986 EXB-NB Footwear .19 0.00 0.00 0.00 .19 0.00 0.00 0.00 1986 EXB-Paharpur .07 0.00 0.00 0.00 .07 0.00 0.00 0.00 1986 EXB-STG .40 0.00 0.00 0.00 .40 0.00 0.00 0.00 1986 EXB-TAN .03 0.00 0.00 0.00 .03 0.00 0.00 0.00 1986 EXB-Wires & Fab. .04 0.00 0.00 0.00 .04 0.00 0.00 0.00 1986/92/93/94 GESCO 0.00 11.97 0.00 0.00 0.00 11.97 0.00 0.00 1986/93/94/95 India Equipment .49 .77 0.00 1.20 .49 .77 0.00 1.20 1987 Hindustan 6.24 0.00 0.00 0.00 6.24 0.00 0.00 0.00 1987/88/90/93 Titan Watches 1.32 1.03 0.00 0.00 1.32 1.03 0.00 0.00 1988/90/92 Tata Telecom 0.00 .10 0.00 0.00 0.00 .10 0.00 0.00 1988/94 GKN Invel 0.00 1.40 0.00 0.00 0.00 1.40 0.00 0.00 1989 AEC 12.55 0.00 0.00 0.00 12.55 0.00 0.00 0.00 1989 UCAL 0.00 .63 0.00 0.00 0.00 .63 0.00 0.00 1989/90/94 Tata Electric 58.33 0.00 0.00 0.00 58.33 0.00 0.00 0.00 1989/91 Gujarat State 8.84 0.00 0.00 0.00 8.84 0.00 0.00 0.00 1989/95 JSB India 0.00 1.21 0.00 0.00 0.00 1.21 0.00 0.00 1990 HOEL 0.00 .28 0.00 0.00 0.00 .28 0.00 0.00 1990 TDICI-VECAUS II 0.00 1.59 0.00 0.00 0.00 1.59 0.00 0.00 1990/92 CESC 45.69 0.00 0.00 63.65 45.69 0.00 0.00 63.65 1990/93/94 IL&FS 23.25 3.11 1.81 8.00 23.25 3.11 1.81 8.00 1990/94 ICICI-IFGL 0.00 .30 0.00 0.00 0.00 .30 0.00 0.00 1990/95 ICICI-SPIC Fine 0.00 1.88 0.00 0.00 0.00 1.88 0.00 0.00 1991 BSES 42.50 0.00 0.00 0.00 42.50 0.00 0.00 0.00 1991/93 Triveni 0.00 1.11 0.00 0.00 0.00 1.11 0.00 0.00 1991/96 VARUN 9.53 1.35 0.00 4.67 9.53 1.35 0.00 4.67 1992 Indus VC Mgt Co 0.00 .01 0.00 0.00 0.00 .01 0.00 0.00 1992 Indus VCF 0.00 1.00 0.00 0.00 0.00 1.00 0.00 0.00 1992 Info Tech Fund 0.00 .64 0.00 0.00 0.00 .64 0.00 0.00 1992 SKF Bearings 4.78 0.00 0.00 0.00 4.78 0.00 0.00 0.00 1992/93 Arvind Mills 0.00 17.10 0.00 0.00 0.00 17.10 0.00 0.00 1992/94/97 Ispatlndustries 79.11 5.77 0.00 85.00 39.25 5.77 0.00 0.00 1992/95 Creditcapital VF 0.00 1.05 0.00 0.00 0.00 1.05 0.00 0.00 1992/96/97 NICCO-UCO 1.69 .50 0.00 0.00 1.69 .50 0.00 0.00 1993/94/96 Indo Rama 20.31 11.98 0.00 8.13 20.31 11.98 0.00 8.13 1993/97 20TH Century 15.62 .80 0.00 3.38 10.62 .80 0.00 3.38 1994 Centurion Growth 0.00 2.39 0.00 0.00 0.00 2.39 0.00 0.00 1994 Chowgule 14.65 4.58 0.00 23.72 14.65 4.58 0.00 23.72 1994 Crdcap Asset Mgt 0.00 .32 0.00 0.00 0.00 .32 0.00 0.00 1994 DLF Cement 9.37 4.94 0.00 13.39 9.37 4.94 0.00 13.39 1994 Global Trust 0.00 3.19 0.00 0.00 0.00 3.19 0.00 0.00 1994 Gujarat Ambuja 0.00 8.23 0.00 0.00 0.00 8.23 0.00 0.00 1994 Taurus Starshare 0.00 7.17 0.00 0.00 0.00 7.17 0.00 0.00 1994 TCAMC 0.00 .16 0.00 0.00 0.00 .16 0.00 0.00 1994/97 GVK 40.00 8.30 0.00 35.99 30.00 7.45 0.00 35.99 1995 Centurion Bank 0.00 3.87 0.00 0.00 0.00 3.87 0.00 0.00 1995 EXIMBANK 22.73 0.00 0.00 0.00 22.73 0.00 0.00 0.00 1995 GE Capital 12.50 5.00 0.00 0.00 12.50 4.39 0.00 0.00 1995 ISIC 0.00 .32 0.00 0.00 0.00 .32 0.00 0.00 1995 Prism Cement 15.00 5.02 0.00 15.00 15.00 5.02 0.00 15.00  Project Appraisal Document Page 114 India - U.P. Diversified Agricultural Support Project Annex 9 Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1995 Rain Calcining 19.25 5.47 0.00 0.00 17.00 5.47 0.00 0.00 1995 RPG Communicatns 0.00 8.30 0.00 0.00 0.00 8.30 0.00 0.00 1995 SaraFund 0.00 6.59 0.00 0.00 0.00 1.10 0.00 0.00 1996 CVF Oil Gas-AL 8.00 8.00 0.00 0.00 0.00 0.00 0.00 0.00 1996 India Direct Fnd 0.00 7.50 0.00 0.00 0.00 1.80 0.00 0.00 1996 Indus II 0.00 5.00 0.00 0.00 0.00 3.00 0.00 0.00 1996 Indus Mauritius 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1996 Moser Baer 5.70 .60 0.00 0.00 5.70 .60 0.00 0.00 1996 United Riceland 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1997 Asian Electronic 16.67 5.50 0.00 0.00 0.00 5.50 0.00 0.00 1997 CEAT 20.00 0.00 0.00 0.00 3.00 0.00 0.00 0.00 1997 Duncan Hospital 7.00 .93 0.00 0.00 0.00 0.00 0.00 0.00 1997 EEPL 0.00 .03 0.00 0.00 0.00 .03 0.00 0.00 1997 Owens Coming 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 1997 SAPL 0.00 .07 0.00 0.00 0.00 .07 0.00 0.00 1997 SREI 15.00 3.00 0.00 0.00 0.00 3.00 0.00 0.00 1997 WIPRO 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 TCWJICICI 0.00 10.00 0.00 0.00 0.00 1.50 0.00 0.00 TotalPortfolio: 659.11 208.45 1.81 264.80 518.33 176.37 1.81 179.80 Approvals Pending Commitment Loan Equity Ouasi Partic 1996 CESC II -BLINC 0.00 0.00 0.00 37.00 1996 DEV CREDIT BANK 0.00 1.89 0.00 0.00 1995 IB VALLEY POWER 50.00 20.00 0.00 0.00 1998 IDFC 0.00 20.00 0.00 0.00 1998 IL&FS (III)-RI 0.00 3.38 0.00 0.00 1997 ITC CLASSIC 20.00 0.00 10.00 0.00 1998 IVCAAF 0.00 5.74 0.00 0.00 1994 NEYVELI POWER 30.00 18.00 0.00 150.00 1997 NUFSL 5.00 0.00 0.00 5.00 1998 RAIN CALCININ RI 0.00 .84 0.00 0.00 1995 SPIC-RGHTS ISSUE 0.00 .86 0.00 0.00 1997 WALDEN - MGMT 0.00 .08 0.00 0.00 1997 WIV 0.00 6.00 0.00 0.00 Total Pending Commitment: 105.00 76.79 10.00 192.00  Project Appraisal Document Page 115 India - U.P. Diverssified Agricultural Support Project Annex 10 Annex 10 India at a glance POVERTY and SOCIAL South Low- India Asia income Development dlamond, Populabon mid-1996t(millions) 943.2 1,264 3.229 GNP per capita 1996 (US$) 380 380 500 Life expectancy GNP 1996 (billions US$) 358.4 481 1,601 Average annual growth, 1990-96 T Population (%) 1.7 1.9 1.7 GNP A Gross Labor force (%) 2.0 2.1 1.7 per F << > I prmary Most recent estimate (latest year available since 1989) capita j enrollment Poverty: headcount index (% of population) 35 Urban population (36 of total population) 27 26 29 Life expectancy at birth (years) 62 61 63 Infant mortality (per 1, 000 live births) 68 75 69 Access to safe water Child malnutrition (% of children under 5) 63 Access to safe water (% of population) 63 63 53 Illiteracy (% of population age 15+) 48 50 34 - dh Gross primary enrollment (3l ofschool-age population) 102 . 98 105 n Male 113 110 112 Low-income group Female 91 87 98 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1996 Economic ratlos GDP (billions US$) 91.0 214.3 328.3 355.8 Gross domestic investmenVGDP 20.8 24.2 26.2 26.5 Exports of goods and services/GDP 6.2 6.0 12.1 12.0 Openness of economy Gross domestic savings/GDP 20.4 21.1 22.7 23.1 Gross national savings/GDP 20.6 21.6 24.2 25.3 Current account balance/GDP 0.0 -2.8 -2.1 -1.2 Interest payments/GDP 0.3 0.8 1.4 1.3 Savings Investment Total debt/GDP 15.1 19.1 28.9 25.2 Total debt service/exports 13.1 22.7 26.9 22.6 8 Present value of debtGDP .. .. 22.8 Present value of debVexports .. .. 161.4 Indebtedness 197546 1986-96 1995 1996 1997-05 (average annual growth) India GDP 4.2 56.8 7.3 7.5 6.5 Low-income grup GNP per capita 1.9 3.5 5.4 5.2 Lwicm ru Exports of goods and services 3.9 11.5 31.6 7.5 10.3 STRUCTURE of the ECONIOMY (%6 of GOP) 1975 1985 1995 1996 Growth rates of output atd invtment%) Agriculture 40.5 33.0 27.9 27.8 30 Industry 23.7 28.1 30.1 29.2 Manufacturing 18.7 17.9 19.7 20.1 I Services 35.8 38.8 42.1 43.0 24 Private consumption 70.2 B7.8 66.8 66.4 .-s General govemment consumption 9.4 11.1 10.5 10.5 Imports of goods and services 6.6 9.1 15.6 15.3 GDI GDP 197545 1986-96 1995 1996 (average annual growth) Growth mtaes of exports and Imports (X) Agriculture 2.5 3.6 -0.1 5.7 40 Industry 5.3 6.6 11.6 7.0 Manufacturing 5.5 6.7 13.6 8.1 205A Services 5.1 6.7 8.8 7.4 Prvate consumption 4.5 4.8 2.6 6.8 o /5 General govemment consumpton 6.5 3.9 5.1 7.2 r 2 5 94 95 9l Gross domestic investment 4.1 7.1 17.9 8.5 .2 Imports of goods and services 9.1 6.0 17.3 5.7 Gross natonal product 4.1 5.4 7.2 6.7 Exports -'imports Note: 1 996 data are preliminary estimates. All GDP data other than sectoral value-added are in market prices. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.  Project Appraisal Document Page 116 India - UP. Diversified Agricultural Support Project Annex 10 India PRICES and GOVERNMENT FINANCE 1975 1985 1995 1996 Domesfc prices Inflatfon (%) (% change) Consumer prices / .. 5.6 10.2 7.0 implicit GOP deflator -1.5 7.5 7.3 7.0 Govemment finance (% of GDP) o Current revenue .. 23.8 24.7 25.2 91 92 93 94 9s 93 Current budget balance .. 2.2 1.0 1.3 - GOPdef. -C--CPI Overall surplus/deficit .. -11.0 -10.1 -10.4 TRADE 1975 1985 1995 1996 (millions USS) Export and Import levels (mill. US$) Total exports (fob) . 8,793 32,311 33,638 so,ooo Tea - 512 352 290 T Iron .. 473 515 484 4.0 Manufactures .. 5,640 24,540 24,749 30.000 Total imports (cip 15,957 43,670 46,121 2000 Food .. 1,321 . 1.293 1,359 Fuel and energy .. 4,054 7,526 9,679 10.00 Capital goods .. 3,502 4,560 4,513 Export price index (1980=100) .. 98 104 103 so 91 92 93 94 95 90 Import price index (1980=100) . 84 115 116 c Exports e Imports Terms of trade (1987=100) .. 118 90 89 BALANCE of PAYMENTS 1975 1985 1995 1996 (millions US$) Current account balance to GOP rafto (%) Exports of goods and services 5,650 12,773 39,668 42.556 Imports of goods and services 5,990 19,422 51,213 54,431 90 91 92 93 94 Resource balance -340 -6,649 -11,545 -11,875 -| Net income -150 -1,552 -3,735 4,118 Net current transfers 470 2,207 8,506 11,888 -2.. Current account balance, before offidal capital transfers -20 -5,994 -6,774 4,105 -3 Financing items (net) 20 6,542 3,050 10,095 Changes in net reserves 0 -548 3,724 -5,990 4 Memo: Reserves including gold (mill. USS) 2,065 9,493 21,246 26,160 Conversion rate (locallUS$) 8.7 12.2 33.5 35.5 EXTERNAL DEBT and RESOURCE FLOWS 1975 1985 1995 1996 (millions US$) Compositlon of total debt 1996 (mill. US$) Total debt outstanding and disbursed 13,708 40,960 94,858 89,827 IBRD 436 2,396 9,849 8,768 G A IDA 2,809 9,750 17,499 17,616 6726 8768 Total debt service 822 3,532 13,346 12,667 IBRD 89 313 1,713 1,514 / IDA 24 124 357 364 17616 F Compositfon of net resource flows 2856s Official grants 511 450 345 408 C Official creditors 1,260 1,424 -1,048 -163 1313 Private creditors 83 2,277 589 -1,102 2948 Foreign direct investment 85 106 2,133 2,359 E Portfolio equity 0 0 2,471 2,775 23891 World Bank program Commitments 917 2,882 1,697 1,725 A-IBRD E-Bilateral Disbursements 531 1,375 1,318 1,628 B - IDA D - Other mufilateral F - Private Principal repayments 63 157 1,169 1,074 C-IMF G-Short-term Net flows 467 1,218 149 554 _ Interest payments 50 280 901 804 Net transfers 417 938 -752 -250 Development Economics 1171797  MAP SECTION  -25' TB' 3D a 820 B)' 32-~~~~~~~~~~~~~~~ INDIA S. UTTAR PRADESH DIVERSIFIED ' . '. AGRICULTURE SUPPORT PROJECT / PFUUE,II HOS~~~~~~~~~~~E I-E4S I -MW' s UTTARKASHI A A A HORTCULTURE - , dT '." U a ANIMAL HUSBANDRY N F f-'"/4 , ( , * 0 \ * * SERICULTURE < t , > >, , , t @ S S ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~AGRICULTURE DEHRRA DUN-, $g\2F, PRRUADYAAGi' CHA