Nepal - Bhairawa Lumbini Groundwater Irrigation III Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No.: 19985 IMPLEMENTATION COMPLETION REPORT NEPAL BHAIRAWA LUMBINI GROUNDWATER IRRIGATION III PROJECT (CREDIT NUMBER 2144-NEP) DECEMBER 27, 1999 Rural Development Unit South Asia Regional Office This document has a restricted distribution and may be used by recipients only in The performance of their official duties. It contents may not otherwise be disclosed Without World Bank authorization.  CURRENCY EQUIVALENTS US$ 1.0: NRs 28.60 1989 (at Appraisal) NRs 33.30 1990, NRs 39.90 1991, NRs 45.70 1992 NRs 49.30 1993, NRs 50.00 1994, NRs.55.20 1995 NRs 55.50 1996, NRs 60.20 1997, NRs 62.00 1998 NRs 67.00 1999 (at ICR mission) WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet; 1 kilometer (km) = 0.62 miles; 1 hectare (ha) = 2.47 acres =1.50 bighas; 1 million cubic meter (Mm3) = 810 acre-feet or 35.3 Mft3 1 cubic meter per second (m3/s) = 35.31 cubic foot per second (cfs); I cubic foot per second (cfs) = 0.028 cubic meters per second (m3/sec); 1 metric ton = 2,205 pounds FISCAL YEAR OF BORROWER July 16 - July 15 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank BLGWP Bhairawa Lumbini Groundwater Irrigation Project CAS Country Assistance Strategy DOI Department of Irrigation DIO District Irrigation Offices DTW Deep Tube Well ERR Economic Rate of Return FIA Farmers' Irrigation Association FMIS Farmer Managed Irrigation System HMGN His Majesty's Government of Nepal ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IP Irrigation Policy LCF Labour Conversion Factor M & E Monitoring & Evaluation MUV Manufacturers Unit Value NEA Nepal Electricity Authority O&M Operation and Maintenance PCR Project Completion Report POP Project Operation Plan SAR Staff Appraisal Report SCF Standard Conversion Factor TW Tube well WID Women in Development WUA Water Users' Association WUC Water Users' Committee WUGs Water Users' Groups kharif Wet Season (June to October) rabi Dry Season (November to February) Vice President Meiko Nishimizu Country Director Hans Rothenbuhler Sector Director Ridwan Ali Team Leader Ohn Myint  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT NEPAL BHAIRAWA LUMBINI GROUNDWATER IRRIGATION III PROJECT (Credit Number 2144-NEP) TABLE OF CONTENTS Description Part 1: PROJECT IMPLEMENTATION ASSESSMENT Preface v A. Project Data I B. Principal Performance Ratings 2 C. Assessment of Development Objectives and Design and Quality at Entry - Development Objectives 2 - Original Components 2 - Revised Components 3 - Quality at Entry 4 D. Achievement of Objectives and Output - Outcome/Achievement of Objectives 4 - Output by Components 6 - Net Present Value/Economic Rate of Return (ERR) 7 - Sensitivity and Risk 8 - Financial Rate of Return 8 - Institutional Development Impact 8 E. Major Factors Affecting Implementation and Outcome - Factors generally subject to Government control 9 - Factors generally subject to implementing agency control 9 - Costs and Financing 9 F. Sustainability - Rational for Sustainability Rating 10 - Transition Arrangements to Regular Operation 11 E. Bank and Borrower's Performance - Lending 11 - Supervision 11 - Overall Bank Performance 12 - Borrower's Preparation 12 - Borfower's Implementation 12 - Overall Borrower Performance 13 H. Lessons Learned - Preparation and Lending 13 - Implementation and Operation & Maintenance 13 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Part II: ANNEX-ES (STATISTICAL DATA) Annex 1 a Key Performance Indicators (Outcome and Impact) 15 Annex lb Key Performance Indicators (Output) 16 Annex 1 c Key Performance Indicators ILC and IDS Components 17 Annex Id Key Performance Indicators Output indicators IDS Component 18 Annex 2a Project Costs by Component 19 Annex 2b Project Costs by Procurement Arrangement 20 Annex 2c Project Financing by Component 20 Annex 3 Costs Benefits Analysis 21 Annex 4a: Bank Inputs (Missions) 22 Annex 4b: Bank Inputs (Staff) 23 Annex 5: Ratings for Achievement of Objectives/ Outputs by Components 24 Annex 6 Ratings of Bank and Borrower Performance 25 Annex 7 List of Supporting Documents 26 Table of Contents (contd.) Description APPENDICES Appendix 1: Aide-Memoire of Supervision/Implementation Completion 27 Reporting Mission Appendix 2: Economic Re-evaluation of Bhairawa Lumbini GW Irrigation III 38 Financial and Economic Re-evaluation 38-42 Table 1: Number of Operation DTW and command area by year 43 Table 2: Crop Area, Yields and Production for Stage - I 44 Table 3: Crop Area, Yields and Production for Stage 11/ii and Stage III 45 Table 4. Crop Area, Yields and Production (Artesian) 1 ha 46 Table 5: Per ha Financial Crop Budget Present/Future without Stage I 47 Table 6: Per ha Financial Crop Budget Present/Future without Stage II&III 48 Table 7: Per ha Financial Crop Budget with project for Stages I, II, and III 49 Table 8: Per ha Financial Crop Budget without project for Artesian well 50 Table 9: Per ha Financial Crop Budget with project Artesian well 51 Table 10 Summary of Financial and Economic Prices 52 Table 11: Economic Price Derivation 53 Table 12: Investment Costs of one DTW 54 Table 13. Investment Costs of Artesian well 55 Table 14. Annual O&M costs of DTW 56 Table 15: Financial Analysis of a DTW model 57 Table 16. Financial Analysis of an Artesian DTW model 58 Table 17: Per ha Economic Budget without project Stage I 59 Table 18. Per ha Economic Budget without project Stage II and Stage III 60 ii  Table 19. Per ha Economic Budget without project Stages I, II, and III 61 Table 20: Per ha Economic Budget without project Artesian 62 Table 21: Per ha Economic Budget with project Artesian 63 Table 22: Economic Analysis of a DTW model 64 Table 23. Economic Analysis of an Artesian DTW model 65 Table 24. Project Expenditures (NRs Million) 66 Table 25. Post Project Costs 67 Table 26. Economic Analysis of Stage I 68 Table 27. Economic Analysis of Stage II and Stage III 69 Table 28. Combined Economic Analysis of Stages I, II, and III 70 Table 29. Financial and Economic Analysis of ILC sample 20 projects 7 1 Appendix 3: Borrower's Evaluation of the Project 72-78 Map: IBRD 22125 Bhairawa Lumbini Stage III Project Area . .   IMPLEMENTATION COMPLETION REPORT NEPAL BHAIRAWA LUMBINI GROUNDWATER IRRIGATION III PROJECT (Credit No. 2144-NEP) Preface This is the Implementation Completion Report (ICR) for the Bhairawa Lumbini Groundwater Irrigation III Project in Nepal, for which Credit Number 2144-NEP in the amount of SDR36.6 million equivalent were approved on May 20 1990, and made effective on February 19, 1991. The Credit closed on June 30, 1999, as stipulated at appraisal. Final disbursement took place on November 16, 1999 at which time a balance of SDR 62,220.0 was cancelled. The ICR was prepared by the staff of SASRD in cooperation with a FAO/CP economist. The report was peer-reviewed by Jock R. Anderson (RDV) and R.B. Reidinger (EACCF). The Borrower provided separate evaluation that has been appended as Appendix 3 of the ICR. Preparation of this ICR was begun during a mission to Nepal between May 22 to 28, 1999. It is based on material in the project file. The Borrower contributed to the preparation of the ICR by providing project completion report and project operation plan of the project. v   A. Project Data Report Date: December 27, 1999 Name: Bhairawa Lumbini Groundwater Irrigation III Project Credit number 2144-NEP Country/Department: Nepal/SASRD Region: South Asia Sector/Sub-Sector: Agriculture/Irrigation Original Revised/Actual Key Dates Preparation/PCD July 1989 June-August 1989 Appraisal Nov/December 1989 Nov/December 1989 Approval May 29,1990 May 29, 1990 Effectiveness December 1990 February 19, 1991 MTR December 1996 December 1996 Closing June 30, 1999 June 30, 1999 Borrower His Majesty Government of His Majesty Government Nepal of Nepal Implementing Agency Department of Irrigation Department of Irrigation Other Partners Department of Agriculture Department of Agriculture Nepal Electricity Authority Nepal Electricity Authority Water User Associations Water User Associations Current AtAppraisal Staff Vice President M. Nishimizu A. Karaosmanoglu Country Manager Hans M. Rothenbuhler S. Asanuma Sector Manager R. Ali C. Helman Team leader of ICR J. Perumalpillai-Essex Task Leader of ICR Ohn Myint ICR Primary Author Ohn Myint Team Leader of Appraisal R. Reidinger  2 B. Principal Performance Ratings Outcome Satisfactory Sustainability Likely Institutional Development Impact Satisfactory Bank Performance Satisfactory Borrower Performance Satisfactory Quality at entry Satisfactory Project at Risk at any time Minimal C. Assessment of Development Objectives and Design and of Quality at Entry 1. Development Objectives. The objectives of the Bhairawa Lumbini Groundwater Irrigation III Project (BLGW III) were to: (a) raise agricultural production and farm incomes and increase food security through expansion of on-going deep tube-well (DTW) irrigation programs and through construction and rehabilitation of private farmer-managed irrigation schemes (FMIS); (b) promote privatization and increased farmer participation in managing irrigation systems, thereby reducing government costs, improving operation and maintenance (O&M) and ensuring greater sustainability; and (c) strengthen Nepal's irrigation institutions, particularly the Department of Irrigation (DOI), in implementing the Government's new irrigation policy (IP-1988), which mandated a shift away from traditional publicly-owned and managed irrigation towards participatory management systems. 2. The project was a follow-on to two earlier DTW irrigation projects. Its objectives were innovative and important for the country, which was testing the recently introduced irrigation policy mentioned above. These objectives remained unchanged during project implementation. 3. Original Components. The BLGW III had three separate components: (a) construction of new tube-wells in Stage III, and completion and O&M transfer of previously funded DTW systems in the Stages I and II in Rupandehi District; (b) expansion of an irrigation line of credit (ILC), a pilot project designed to test the Government's irrigation policy; and (c) continued institutional development support (IDS) for DOI. Components (b) and (c) were originally conceived under the Mahakali Irrigation II Project (Credit Number 1924-NEP). Part A: BLGW Component * construction of 73 new DTWs serving some 8,600 ha in Stage III; * completion of 16 DTWs serving nearly 2,000 ha implemented in Stage II and turnover to farmers of 38 completed Stage II DTWs; * modification and turnover of 64 DTWs in Stage I serving some 7,680 ha; * maintenance of project facilities including staff quarters, vehicles, equipment, spare parts and materials; * support to agricultural services;  3 * support to farmers' organizations; and * technical support, training and studies. Part B: ILC Component This component aimed to pilot further the Government's policy for demand-driven irrigation development. This piloting was to be implemented in 30 months. The project targeted three types of sub-projects covering 6,600 ha of irrigable land in 8 hill districts and 5 terai districts in the three western development regions. IP-1988 required a beneficiary contribution to capital costs and O&M. The component was designed to: * rehabilitate existing farmer-owned small and medium-sized irrigation sub-projects in selected districts of three western regions; * turnover rehabilitated small- and medium-sized public irrigation schemes to farmers for O&M; and * construct and improve groundwater schemes to be managed by farmers' groups. Part C: IDS Component This component assisted DOI in developing the institutional capacity to support a long-term irrigation sector program. It comprised: * strengthening the Planning, Design and Research (PD&R) Division of DOI by providing office and engineering equipment, vehicles, training and consultant services for sub-project identification and feasibility studies, development of a computerized DOI's management information system, and support to farmers' organizations; * strengthening DOI regional and district offices by providing buildings, equipment and vehicles, and funding mobile irrigation teams (staffing, training, equipment and operational costs); * strengthening DOI at the center by renovating its headquarters, through human resource development and through assessment of its financial resources, training requirements and administration. 4. Revised components. The original components were maintained, but their scope was scaled up on account of savings in the Credit and increased farmers' demands for the ILC, as follows: * the number of new DTWs in Stage III was increased from 73 to 78, and 8 out of 22 completed DTWs in Stage II/Phase II were re-drilled due to well caving. * agricultural services were supplemented in the later stages of the project by extension activities such as the introduction of new high value cash crops, provision of marketing information to farmers, organization of marketing groups, and women in development (WID) activities including literacy and skill training for women's groups. These additional activities contributed to significant increases in farmers' knowledge and incomes.  4 the implementation period of the ILC component was extended from 2.5 to about 6.5 years, and many additional schemes were included to meet growing demand from farmers. This reflected a general acceptance of IP-1988. Coverage was expanded from 13 hill and terai districts to 36 hill and terai districts. In total, the project served 605 farmer-managed irrigation schemes (FMIS), covering about 54,850 ha, compared to the appraisal estimate of 6,600 ha. 5. Quality at Entry. Preparation and design of the project were satisfactory. Problems and lessons learned from BLGW I and II were built into the design of BLGW III, including experience gained in the construction and installation of DTWs, provision of a dedicated power supply, roads and other support services to farmers (farner organization, agricultural extension). These were all satisfactory during implementation. However, the creation of self-contained support divisions within the project, such as the project's agricultural and electro-mechanical divisions using staff appointed by the Groundwater Development Board, may become a liability for the Government following project completion. The eventual hand-over of these support services to the district line agencies may be problematic on account of the rather poor interaction between the project and the line agencies during project implementation. 6. The project design was innovative in its participatory approach, involving farmers in planning and implementation and in contributing to capital costs. The turnover of completed DTWs to farmer management promoted sustainability and replicability and reduced the financial burden of O&M on the Government. The ILC and IDS components were well justified in further testing IP-1988 on demand- driven FMIS and to strengthen DOI's institutional capacity. 7. The increased scope of the project during implementation was appropriate as it was determined on the basis of development needs, agricultural potential and proven groundwater resources of the project area. It was also compatible with the Government's growing implementation capability. D. Achievement of Objectives and Outputs 8. Outcome/Achievement of Objectives. Overall, the achievement of project objectives, as indicated by the baseline survey and yearly M&E activities, was marginally satisfactory. The objective of increasing agricultural production and farn incomes was largely achieved. Under the BLGW component, the Stage III project completed a total of 158 DTWs (including 60 DTWs in Stage I, 20 in Stage I/Phase 11, and 78 in Stage III, but excluding 11 DTWs already turned over to WUGs in Stage II/Phase 1), covering a total command area of about 18,971 ha. This is slightly above appraisal targets of 153 DTWs (64 in Stage I, 16 in Stage II, and 73 in Stage III) and a total command area of about 18,280 ha. The total effective area irrigated by DTWs only is estimated at about 80 percent of the total command area, or about 15,170 ha, the remaining 20 percent being irrigated in any given year from other sources, particularly artesian and surface water1. This is less than had been predicted at appraisal, because the existence of artesian water had not been foreseen, nevertheless as indicated below the positive impact on agriculture production was still more than sufficient to justify the investment. 9. Incremental production in the project area is estimated at around 114,000 tons per year, against 54,500 tons estimated at appraisal (see Appendix 2 for detailed financial and economic analysis). This ' There is a wide variation of pumping hours in all the developed wells (from over 1,000 hrs/well to 100 hrs/well.). It is partly because over 30 percent of tube-wells (24 in Stage I, 9 in Stage II and 24 in Stage III) have significant artesian flows (more than 50 percent of design flow) for a considerable part of the year.  5 achievement was based on a substantial increase in cropping intensity and yield. With the project, the cropping intensity increased to about 209 percent, 20 percent higher than the appraisal estimate2. Yields of major crops increased by 50 percent (to 4.5 ton/ha) for paddy and by 95 percent (to 3.0 ton/ha) for wheat. These yields are 10-20 percent higher than the appraisal estimates of 3.8 and 2.7 ton/ha respectively. 10. Farmers' net incomes increased dramatically (from a net cash income of NRs 57,000 to NRs 132,000 in Stage I and from NRs 32,000 to NRs 132,000 in Stages II and III). This increase is proportionately less than had been estimated at appraisal (from NRs 14,000 to NRs 95,000 for an average farm size of 1.64 ha) (Appendix 2). Nevertheless, it is considered satisfactory and provides more than adequate financial incentives to participating farmers. 11. Under the ILC component, 276 surface irrigation schemes covering 28,355 ha were rehabilitated, and 217 new groundwater tube-wells covering 4,210 ha were constructed. The sizes of ILC tube wells varied from 12 ha to 40 ha, and are smaller than Bhairawa Lumbini DTW. The remaining 212 schemes covering 22,293 ha were transferred to the Nepal Irrigation Sector Project after July 15, 1997, when the ILC was closed under this project. The total completed command area under ILC was approximately 32,500 ha, a 5-fold increase on appraisal estimates. Based on the agriculture baseline surveys conducted in 17 selected surface irrigation schemes and 3 groundwater tube-well systems, cropping intensities increased by about 40 percent for the surface irrigation schemes and by 47 percent for the tube-wells, somewhat lower than the 65 percent estimated at appraisal. Yields of paddy and wheat increased by about 60 percent, as anticipated at appraisal. Farmers' net incomes per ha are substantial, ranging from NRs 17,270 to NRs 27,186 (see Table 29 for financial and economic analysis results of selected 20 sub- projects). These incremental net farm incomes are lower than those estimated at appraisal due to substantially lower incremental cropping intensities3. Nevertheless, they provide adequate financial incentives to farmers. 12. The objective of promoting privatization and increased farmer participation in planning, implementation and cost sharing was largely achieved in the main component. The project provided assistance in forming WUAs, four Regional Coordination Committees (RCC) and one Central Coordination Committee (CCC), their formal registration at the Chief District Office, and drawing up the constitution of WUAs. Of the 169 DTWs (including 11 in Stage IIl/Phase 1) at ICR, 121 (72 percent) in all Stages were fully handed over to the concerned Water Users' Groups (WtJG) of each tube well, who managed O&M on their own. Of the remaining DTWs, 19 were in the process of being handed over to WUGs, while 29 were planned for turnover shortly. Regarding capital cost sharing, farmers deposited NRs 300 up-front earnest money and contributed free labor for construction of buried pipes and field channels4, representing about 2 percent of total Stage III costs (NRs 156,000/ha), as anticipated at appraisal. Farmers' contributions in some tube-wells were not well coordinated with the overall construction schedule, resulting in weaknesses in farmers' direct involvement in construction. 2 Incremental cropping intensity, as well as incremental yield, was lower in Stage I, compared to Stages II and III, as the former was already under irrigation before intervention (canal lining) of BLGW III, whereas Stage II (virtually) and III (totally) were non-irrigated before the BLGW III intervention. 3 Appraisal estimates for ILC were based one typical model subproject for each type. ' The average length of trench per ha holding is 95m by 1.2m x 0.6m equals 68.4 m3/ha (NRs 2,800 worth) Experience shows that small land-holders usually excavated their quota by themselves whereas larger land-holders contracted the work to the incumbent civil works contractor. Quality of work was better in the latter case, as the construction season coincided with the crop harvesting and processing period. Government subsidy policy for DTW was 90 percent.  6 13. Under the ILC component, Farmers' Irrigation Associations (FIAs) were formed for all the completed sub-projects, and O&M works were taken over by them. In addition, farmers' contributions to capital costs in the form of labor for construction works ranged from 3-21 percent for the surface irrigation sub-projects, and 15 percent for the groundwater irrigation development. Overall, farmers' contributions under ILC amounted to 12 percent of total ILC costs, compared with 7-40 percent estimated at appraisal. In some cases (about 15 percent of the total sub-projects), the beneficiary demand concept was not really applied, nor was there any genuine farmers' contribution to development costs. In those cases, demands were made by a few influential farmers, whose own contributions leverage a significant government subsidy. This kind of leakage is to be expected where large capital subsidies are made available. In limiting it to about 15% on average, the project largely achieved its objective of targeting smal] farmers. 14. The performance of the institutional development component was generally satisfactory in the private sector (as described above) but only marginally satisfactory in the public sector. The capability of district DOI and PD&R division staff in reviewing and updating the irrigation master plan, data base and design criteria was substantially improved and was initially satisfactory. However, the momentum was not maintained due to frequent staff transfers and lack of incentives in the system. The use of a computerized management information system (MIS), established in DIO headquarters for accounting, manpower planning and inventory, was limited by a lack of interest by management and by low pay for computer staff. 15. Output by Components. Overall, output of the project is rated satisfactory. With a few shortfalls, the physical achievements of the project exceeded appraisal targets. Under the BLGW component, the project affected 180 DTWs, including turnover of 16 DTWs in Stage II/Phase II to WUGs. A total of 140 DTWs were operational at ICR, including 60 modified DTWs in Stage I, 31 new DTWs in Stage 11 and 49 DTWs in Stage III. An additional 29 DTWs in Stage III are expected to be operational shortly after turnover to farmers (Table 1). However, only 4 km of the targeted 10 km of drainage works were completed, because of farmers' resistance to land acquisition for drainage channels. Moreover, the repair of some defects on 16 irrigation distribution pipe networks remains to be completed in Stage Il/Phase II. Except for the 16 DTW systems which are to receive power from a newly completed 5 MVA sub-station, all DTW systems are in operable condition. Operation of the new sub-station is pending and is yet to be handed over to the Nepal Electricity Authority (NEA) by the project. 16. Maintenance facilities, including project roads, vehicles, equipment, spare parts and materials, were all completed as targeted. A considerable amount of spares was left over for use in the project's operational phase. The project management has arranged for these surplus spares to be valued and sold to the WUAs, as required, through their central committee. 17. Under the BLGW component, agricultural support services were also maintained at a high level involving farmer training and demonstrations for the introduction of new cash crops, such as kidney bean, sunflower, peas, soybean and cow peas, providing marketing knowledge to farmers, and the establishment of two agriculture sub-centers. However, the provision of five storage facilities was excluded, as similar facilities are now available in or near the town of Bhairawa. 18. The BLGW component also financed local and foreign technical training and a number of specific studies. About 204 months of foreign consultants and 324 months of local consultants were used for implementation assistance and studies. In addition, two separate studies were carried out by international consulting firms, namely: (a) Birganj Groundwater Development; and (b) Terai Groundwater Development. Local consultants also completed studies on WID and Marketing of Agricultural Products.  7 The project successfully launched a number of WID activities (i.e. literacy classes, kitchen gardening and sewing classes), and assisted farmers in marketing. 19. The ILC component far exceeded its physical targets, on account of a large unforeseen demand by farmers. Because of delays in the preparation of a proposed follow-on NISP, implementation oftheILC pilot program was extended until July 15, 1997. For the same reason, its area of coverage was also expanded to 36 hill and terai districts. The recruitment of consultants under this component was delayed until mid-1994. Eventually, 207 (including 22 expatriate) months were provided under the component. 20. Under the IDS component, a new DOI central building was completed and all HQ staff have been accommodated there since February 1997. 7 district irrigation offices (DIO) were also completed and some building extension works were undertaken in the Far Western Regional Directorate. A computerized MIS and a departmental library were established in the DOI headquarters. Under the component, not all technical targets were met. Completed activities included the updating of the irrigation master plan and irrigation data base, updating of low flow measurements in terai rivers, revision of the IP (1992) and several feasibility studies of medium and large FMIS. However, in the pilot testing of Participatory Joint Management conducted in three public irrigation sub-projects, the program was not pursued satisfactorily due to a lack of coordination between center and field staff. Under the ILC, training of staff for implementation of ILC procedures was conducted and many DIO field staff were trained within the country. However, no foreign study or fellowships were undertaken, as the Government suspended the use of the Credit for training. This amounted to non-compliance with the Credit Agreement. Throughout the region Borrowers are reluctant to use credit money to finance foreign training and therefore in future projects, the need to include such training should be carefully reconsidered. 21. Net Present Value/Economic Rates of Return (ERR). Total project costs estimated at appraisal were NRs 1,533.42 million (US$52.69 million equivalent), including NRs 1,154.55 million (US$39.67 million) for the BLGW III component, NRs 308.29 million (US$10.59) for the ILC component and NRs 70.58 million (US$2.43 million) for the IDS component. Actual expenditures as of 30 June 1999 were estimated at NRs 3,113 million, 203 percent of the appraisal estimates (Table 2). In terms of US dollars these expenditures were approximately US$59.43 million, or 113 percent of the appraisal estimates, as shown below: Component SAR Estimates ICR Estimates NRs M US$ M NRs M US$ M BLGW III 1,154.55 39.67 1,854.93 35.12 ILC 308.29 10.59 1,144.38 22.26 IDS 70.58 2.43 114.06 2.05 Total 1,533.42 52.69 3,113.37 59.43 22. Under the BLGW Component, separate ERRs were estimated at ICR for each stage, allowing for incremental costs and benefits associated with: (a) modification of the DTW system (lining) in Stage 1; and (b) construction of new DTWs in Stages II and III and the BLGW main component. In general, the evaluation followed appraisal assumptions and methodology. However, it introduced two additional assumptions, namely: (i) areas irrigated by DTWs were estimated at about 80 percent of total command areas; and (ii) peak cropping intensity and yields for major crops were assumed to be achieved over 7 years, against the appraisal estimate of 5 years. Based on these assumptions, the ERRs are robust,  8 ranging from 22.1 percent for a typical DTW to 33.3 percent for an artesian well (see Appendix 2, Tables 22-23). 23. Based on recorded project expenditures (Table 24) and post-project maintenance costs for infrastructure, WUAs and agricultural support (Table 25), the overall ERR is robust (32.9 percent) for the modification of the existing DTW system in Stage I, and favorable (15.0 percent) for the installation of the new DTW system in Stages II and III (Tables 26-27). Taken as a whole, the ERR for the BLGW component, including Stages I, II and III, is favorable at 18.3 percent (Table 28), 3.7 percent lower than the appraisal estimate of 22 percent. 24. Sensitivity and Risk. Generally, the ERRs are more sensitive to decreases in benefits than to increases in project costs, particularly in Stages II and III. The ERR falls to 12 percent (assumed opportunity cost of capital) if benefits are reduced by 25-70 percent or if costs are increased by 40-230 percent. 25. Overall, the risks to project sustainability are minimal. Several risks were tested, particularly farners' willingness and ability to: (a) take over and manage the completed DTWs; (b) undertake regular and periodic O&M; (c) achieve the assumed effective area irrigated by DTWs (estimated at 80 percent of command area); and (d) achieve the projected cropping intensity and yields of major crops. In all cases, the ERRs of the sub-components and of the whole project remained acceptable. 26. Under the ILC component, ERRs were calculated based on an analysis of 20 selected sub-projects, which was prepared by ILC consultants and DOI and incorporated in the Mahakali Irrigation II Project Completion Report (Cr. 1924-NEP, December 1997). With the exception of one surface irrigation sub- project (ERR -5 percent), the ERRs were acceptable and robust, ranging from 12.4 percent to 30.7 percent for 16 surface irrigation sub-projects (14-35 percent estimated at appraisal) and from 16.3-25.7 percent for 3 groundwater irrigation sub-projects (18 percent estimated at appraisal). 27. Financial Rates of Return (ERR). At appraisal, no FRRs were calculated. However, at ICR, calculations were made for a typical DTW model and for an artesian model. Based on recorded DTW and artesian well investment costs (Appendix 2, Tables 12-13) and on estimated annual O&M costs (Appendix 2, Table 14), the FRRs over a 20-year period were robust, ranging from 21.5 percent for a typical DTW to 31.1 percent for an artesian well (Tables 15-16). 28. Institutional Development Impact. Under the BLGW component, over 168 WUA chairmen, 190 pump operators (more than one for each tube-well) and 58 WUG members were trained on the management aspects of tube-wells and irrigation canal lining. The project helped form a Central WUA, four Regional WUAs, and over 169 individual tube-well WUGs, and it introduced WIUAs to the private mechanical and electrical workshop facilities available in the area. Some interaction between private workshop personnel and the WUAs was established through training courses given by project staff. More attention was given to deep tube wells under the Bhairawa main project since the size of each tube well is bigger (120 ha) than the ILC small and medium tube wells (12 ha to 40 ha). 29. At the suggestion of IDA, the project initiated a program of WID activities in 1996. The project area contains over 80,000 people in 14,000 households, of whom 49 percent are women. Only 12 percent of these women are literate, compared to a national literacy rate of 32 percent. About 65 percent of them are aged between 10 and 65 and are directly engaged in agriculture. Four WID activities, namely: (a) literacy classes; (b) sanitation and environment training; (c) basic agro-technology; and (d) financial management training were carried out. About 108 women's groups (each of 30 women) were formed and given training.  9 30. Under the ILC, the legalization of over 300 ad hoc FIAs at the District Development Offices was achieved. User groups continue to be provided with training on water use and agriculture by the District Irrigation and Agriculture Offices. On-farm water management training, including irrigated agriculture, continues under the NISP. Under IDS, the project provided opportunities for DOA staff to receive training on sub-project identification and criteria for sub-project preparation. E. Major Factors Affecting Implementation and Outcome 31. Implementation took longer than expected but it did not extend beyond the Credit closing date. The stipulated construction completion date was December 31, 1998, and final completion took place on June 30, 1999 (Credit closing date). At that time, farmer turnover activities remained to be completed in 29 tube-well systems. Mostly, the factors causing delay were within the control of the Government and the implementing agency (below). 32. Factors generally subject to government control: During project implementation there were at least five changes of government and many untimely changes of senior project staff, affecting all components. Not all of these changes were the result of the transfer regulations for government staff, and they had a significant negative impact on project implementation. Most important, they caused: (a) delays in the award of ICB/LCB contracts; (b) a lack of coordination between government agencies, in particular the DOI and the Nepal Electricity Authority (NEA); and (c) late approval of annual work programs. Implementation was also delayed by insufficient budget releases in the early years and late releases of funds throughout the project period. A serious generic issue is the non-synchronization of annual budget releases with the main construction season for civil works, which is only 6-7 months/yr. 33. Factors generally subject to implementing agency control: A significant problem was the lack of coordination and supervision by project staff of the (mandatory) farmers' contribution of trenching and refilling buried irrigation pipe in the BLGW component. This had a negative impact on both the construction schedule and the quality of civil works. There was also a lack of coordination between project managers on the use of the Special Account (SA), which led to funding problems. In the BLGW component, more than 10 tube-wells were abandoned because of poor site selection (either in low lying areas where irrigation is not necessary or in areas where artesian or surface water is sufficiently available). In the ILC, procedural and technical guidelines were sometimes put at risk by the frequent transfer of district level staff, local political intervention, and large farmers' influence in sub-project selection. These factors were also responsible for difficulties in the institutionalization of PIM and of demand-driven principles for project selection. There was at times a lack of transparency in the public dissemination of procedures for sub-project preparation, selection and approval, cost sharing and contracting. Due to the lack of proper monitoring and follow-up, there were delays in account compilation at the districts and regional offices, which almost led to suspension of the Credit several times. In addition, deficiencies in proper documentation and maintenance of expenditures led to some audit qualifications. In many instances warning letters were sent to the borrower about the qualifications. Other than the points noted above, the management including financial management of the project were considered satisfactory. 34. Costs and Financing. Some increases in project expenditures (par. 21 above) were attributable to increases in the scope of works. In the BLGW III main component, there were: (a) an increase in civil works for Stage II tube-wells, (b) construction of 6 additional DTW systems in Stage III; (c) drilling and re-drilling of additional DTWs in Stages I and II; (d) significant increases in unit costs of mechanical and electrical works; (e) repair of leakage in piped distribution networks; and (f) hiring of consultants for additional studies. It is important to note that farmers' own contributions also increased substantially,  10 from NRs 8.36 million estimated at appraisal to NRs 20.71 million at ICR. In spite of the large over-run in NR costs, total expenditure on the BLGW component in US$ equivalent (US$4.55 million) was 11 percent lower than the original appraisal estimate. In the ILC component, however, US$ expenditures were 210 percent of the appraisal estimate on account of the large increase in the scope of works and affected irrigated areas. Costs in the IDS component were about 62 percent above appraisal estimates in NR terms, but substantially lower in US$ equivalent. F. Sustainability 35. Based on the experience of Stage 1 (60 DTW) and Stage II/Phase I (16 DTW), which have been in operation for 7 to 14 years, the project will have a significant positive impact on agricultural development and farm incomes in the project area. This will be complemented by the proper formation of central and regional WUAs, participation and interaction of WUAs with private workshops and steady improvement in the availability of power and reliability of water supply, which will allow farmers to adopt improved agricultural practices and to diversify their crops. 36. Rational for Sustainability Rating. The sustainability of the BLGW Project depends mainly on beneficiary farmers' attitudes and their ability to operate and maintain the tube-well equipment. Their willingness to do so will depend on the benefits they derive from tube-well irrigation and their interaction with private workshops and O&M facilities, and on government technical support made available in their vicinity. Experience in Stage I and Stage II/Phase I indicates that increased farm incomes were achieved with the use of appropriate inputs and suitable marketing outlets, aside from water. Cursory analysis shows that net incremental agricultural production values vary from NRs 45,000/ha to NRs 13,000/ha under full to partial irrigation. Average O&M expenditures, including preventive (every three years) and regular O&M, vary from NRs 3,700 to 1,700 per hectare. Regarding the availability of O&M facilities in the area, many private workshops are now capable of repairing and casting pump and motor equipment used in the system. The project management correctly encouraged private workshops in the area to complement project facilities, promoted WUAs at the Central and Regional Water User Coordination Committee, and trained mechanics from private workshops. With these arrangements in place and likely to be complemented by future technical assistance from the regional Groundwater Field Office, the project is likely to be sustainable. 37. In the case of the ILC, almost all schemes are farmer developed, owned and operated, except for 20 turnover schemes, which were formerly managed by the DOI. There is no doubt about farmers' ability to operate as in the past. Most improvements to the systems made during the project will allow for easier system operation and less repair during the wet season, because temporary weirs have been replaced by more permanent structures made up of locally available material. Aqueducts now built into the systems will also allow less interruption to water supply from cross drainage. Sustainability is now dependent mainly on some head-works and permanent intakes that were new to FIAs. The sustainability of these structures depends on training and timely technical assistance on some aspects of O&M which FIAs cannot cope with. Technical assistance by DIO to the FIAs seems to be readily available in all districts, provided the concerned FIAs meet the costs of regular maintenance. In a few sub-projects farmers need to be trained to operate and maintain new types of structures with masonry and steel gates, especially in Terai. Overall, the ILC is likely to be sustainable. 38. During implementation, the project also provided for many development activities of a non- engineering nature, including WUA training and support, agriculture planning, extension, marketing training and WID training. All these activities were carried out under the project umbrella using project facilities. Support and transfer of these activities to the respective line agencies in the concerned districts  II is under way, but some time is needed for a smooth transition. Besides, farmers in some 35 DTW systems that came into operation recently in Stage III require adequate training and guidance. To meet these requirements the project proposed to continue to maintain the core staff of the O&M, Agricultural, Farmer Organization, and Administration Units to perform the supporting role during the transition period of about two years after Credit closure. 39. Transition Arrangement to Regular Operation. At ICR, the project proposed a plan of operation and staffing detailed in the project's POP (Project Operation Plan). The POP deals with the next two years, during which O&M support activities are to be gradually taken over by district line agencies, including the Groundwater Field Office at Butwal. Thereafter, core staff mentioned in the POP and their supporting role will be progressively reduced. The Groundwater Field Office (GFO) would provide future technical activities, NEA would operate the new sub-station, the Department of Agriculture would carry out extension and training, and private sector workshops would provide for tube- well equipment maintenance. A budget of NRs 27 million and NRs 11 million for the transitional two- year O&M phase would cover core staff salaries and overhead, buildings maintenance, office running costs, equipment, machinery and vehicle maintenance, training of farmers and maintenance of roads, pumps and accessories (19 tube-wells), which are to be handed over in FY2000. Further costs of agricultural training and extension would be bome by the on-going AREP. 40. Post-project activities can be monitored through the on-going Nepal Irrigation Sector Project (replication of ILC) covering the three western development region districts and Rupandehi District of BLGWP. The outcome and the lessons learned from the project will be used in a proposed follow-up project of a similar nature, the Terai Groundwater Project (TGWP). The impact evaluation of the BLGWP by OED would best be done in FY2001, when all O&M support systems will have been handed over to the district level, and before the finalization of the TGWP preparation and appraisal. G. Bank and Borrower's Performance Bank 41. Lending. The project concept was based on the experience of Stages I and II of BLGWP at the time of project preparation. The change in the O&M principle from Stage I to Stage II, based on participatory demand, supported the newly-promulgated IP-1988. The concept was innovative, but IDA had some experience from Mahakali Irrigation II, and experience was also available from the ADB- financed Irrigation Sector Project. The project was consistent with the Government's development strategy at that time. IDA encouraged the Borrower to study the experience and to effect changes in project implementation procedures, as appropriate. The project was prepared in sufficient detail, and preparation and appraisal concentrated on most of the issues observed in the previous two stages. The appraisal team comprised the necessary quality and skill mix of staff, some of whom continued to be involved in the project for many years. As the project was based on sector reform, it had a wide geographic spread, which led to some logistical difficulties during preparation and appraisal. The financial management arrangements put in place under Stage I and 11 of the project were continued under Stage III, and with the exception of some minor difficulties noted in Paragraph 43 below were satisfactory. 42. Supervision. At the time of implementation, it was apparent that the mandatory farmers' labor contribution to trench excavation for distribution pipelines was the primary reason for poor quality in finished works. Due to the high level of technology required for DTWs powered by electrical pumps and with buried pipe systems and the need for multi-agency involvement in operations (electrical, mechanical and civil works), the turnover to farmers took longer than expected at appraisal. Farmers expressed their  12 preferences to the smaller tube well units like in the ILC. Options to modify tube-well size or the development methods as defined in the project were rather limited, because all pumping equipment and accessories were procured in lots in the early stages of implementation. This was a significant problem at the mid-term review. 43. Continuity of Bank staff supervision was generally good. IDA provided frequent and effective supervision, but this could not cover the entire geographic spread of ILC participating districts. Thus ILC and IDS account compilation in the early implementation periods were not effective nor timely. This caused disbursement problems, qualified audit opinion, and delays in audit report submission, which almost led to suspension of the Credit. This was solved when the Bank was able in the later stages to mobilize SOE and account supervision and review missions teamed with the Kathmandu office staff. 44. In spite of these difficulties, the Bank's follow-up and efforts to resolve implementation problems allowed the project to be completed within the original time frame and within the resources of the Credit. The Bank's lending and supervision can be rated satisfactory. Borrower 45. Overall performance of project management was satisfactory. In general, the Borrower made considerable efforts to implement the project with diligence and efficiency in spite of some generic problems arising from political pressure on some aspects of project management. 46. Preparation. As the project was a follow-on from Stages I and II in the case of BLGW, and of Mahakali II in the case of ILC and IDS, the project needed little organizational adjustment, technical investigation or logistical support during preparation. The most important innovation was the participatory project implementation, which introduced a range of conditions regarding the FIAs and WUAs. These were willingly adopted by the Borrower. Essentially, no major issues arose during preparation. 47. Implementation. During implementation, problems were caused by changes of project manager and senior staff in the main component, and of project coordinators in the ILC and IDS components. These resulted in unnecessary delays in decision-making. Though usually in accord with the transfer regulations for government staff, the frequent turnover of key staff impeded the momentum of project implementation, especially during its early stages and during its final wind-up. Following each turnover, new managers could not reach decisions promptly on various contractual issues affecting the completion of tube-well systems, i.e. procurement, disbursement and contractual settlement, training and even system operation. Management of the special account by the Financial Comptroller General Office was unsatisfactory initially due to a lack of coordination between project components. This was later resolved by introducing a pro-rated quota for each component. Audit reports on all components were often late, but not to the point of Credit suspension. In spite of all these problems, with the concerted efforts of the Borrower, project construction was completed, and partial operation of some tube-well systems (about 49 TWs) in Stage III took place one year ahead of Credit closure. 48. Other problems arose in synchronizing planning and decision-making. For example: (a) a delay in the turnover of the new East sub-station to the Nepal Electricity Authority (NEA) despite the Ministry's approval; and (b) inadequate attention paid in the selection of transmission line alignment, which resulted in delays in commissioning and completing DTW systems taking power from that line. Diring tube-well site selection, identification of irrigable areas was not always satisfactory, and in a few cases tube-well areas ended up in low-lying areas or in areas already receiving surface water. Due to inappropriate well development technology in Stage II, 8 tube-wells (out of 38 wells developed) had to be re-drilled. A lack of  13 quality control, supervision and coordination in the construction of some distribution systems in Stages II and III using beneficiary farmers led to a need for repairs to piped distribution systems after completion. 49. At the later stage of implementation, the implementing agencymade a major effort to complete the project successfully within the stipulated period. Many innovative and good programs were introduced to help WUAs carry out their own O&M after the project. Additional activities affecting WID, marketing, training and other initiatives outside the original scope of works were implemented. A Project Completion Report (PCR) and Project Operation Plans (POPs) were prepared and made available to the ICR mission for review and comments. The PCR was reviewed and commented on by the ICR mission. Recommendations made were taken up by the management. The Borrower's performance in project preparation and implementation are rated satisfactory. H. Lessons Learned 50. Lessons learned from BLGWP and ILC are described below. Preparation and Lending: (a) The project confirms the success of earlier development models, based on farmer participation in all phases of planning, investment and operation. Such arrangements were already in place in the ILC (FMIS and shallow well) areas. This project introduced them for deep tube-wells through turnover of public wells to farmers' groups. The success of this process is supported by empirical evidence from many other parts of the world. (b) It has taken three project cycles to reach what can be regarded as fully sustainable development in this case. This reflects a need to take a long-term view of institutional change and of the preparation of beneficiaries for full participation. It suggests that Bank interventions should be seen as part of a continuing process, possibly involving more than one project cycle. (c) The models supported by the project depend on strong financial incentives for beneficiaries. These in turn require sound technical and economic evaluation of investments and careful selection of priorities, particularly in cases where artesian or other surface water source is evident. They also require open and transparent processes for site selection. By and large, this project succeeded because of these incentives, even in the DTWs, which by their nature are less attractive for small farmer groups than the shallow or smaller wells like in the ILC. Experience with the deep tube well in Nepal shows that size of irrigation unit per deep tube well should be no more than 40 ha (ILC type) though larger unit may be more cost effective. (d) Equity considerations and poverty objectives require early agreement in communities on gender and distribution issues. Such agreement is critical in the process of site selection and priority setting. Furthermore, the design and preparation of projects involving significant targeted subsidies, such as applied in this case, need to focus heavily on ensuring minimal leakage towards the larger land-holders. Implementation and Operation and Maintenance (e) The main problem areas in this project have been in the role and functioning of the public sector, in particular in the release of funds and their synchronization with construction schedules, public procurement, account compilation, financial management and timely disbursement. These are all matters requiring close attention, and if necessary project execution training to staff, in future sector reform projects with wide geographic coverage involving many districts and agencies.  14 (f) The critical role of public services is also evidenced by the project, especially technical support to farmer groups. There is a need in all future projects of this kind to work up-front in defining this role, in disseminating it among the communities, in defining the complementary role of private service agents (eg workshops), and in defining who will be responsible for maintaining technical support following the project. At ICR, these were the least satisfactory aspects of the project. (g) The failure of the Borrower to use the Credit allocation for the foreign training reflects a widespread reluctance in South Asia to use credit money for this purpose. In future projects this should be taken into account during the design and negotiations. (h) The project orientation towards promotion of private sector investment in service delivery aspect should be encouraged right from the outset with proper investment regulations and rules, training and knowledge dissemination, while public sector takes up more and more regulatory and technical support role.  15 Annex la: Key Performance Indicators Outcome/Impact Indicators ICR Estimate Actual or at full Indicators Unit SAR Estimate ICR Estimate development A. BLGW III Component Input: - Irrigable Areas by DTWs Stage I ha 7,680 7,200 7,200 Stage II ha 2,000 2,522 2,522 Stage III ha 8,600 3,463 9,249 Total 18,280 13,185 18,971 - Irrigated Areas by DTWs Stage I ha 7,680 5,760 5,760 Stage II ha 2,000 2,018 2,018 Stage III ha 8,600 4,629 7,399 Total 18,280 12,407 15,177 Output: - With Project Cropping intensity % 189 167-197 209 - With Project - Paddy Yield tons/ha 3.8 3.0-4.2 4.5 - With Project - Wheat Yield tons/ha 2.7 2.5-3.0 3.0 - Farm Incomes (FY98/99 Prices) Rs./ha 94,500 88,585 88585 - Farmers contribution to capital costs % 1.4 1.4 B. Irrigation Line of Credit Input: Irrigable Areas by Surface and GW ha 6,600 32,565 32,565 Output: - Cropping Intensity % 189 132-280 157-280 - Crop Yield- Paddy tons/ha 3.8 1.7-3.5 2.2-3.5 - Crop Yield - Wheat tons/ha 2.7 1.0-2.5 1.6-2.5 - Farm Incomes (1997 Prices) Rs./ha 24,500-30,600 17,270-27,186 17,270-27,186 - Farmers contribution to capital costs % 7-40 12 C. Institutional Development Support - MIS system now functional % 100 70 100 - No. of DlOs now preparing full-scale % 100 90 100 irrigation projects -PJM system has been working satisfactorily and adopted by farmers in all schemes % 100 100 100  16 Annex 1b: Key Performance Indicators Output Indicators Indicators unrt Appraisal Revised ActualICR Estimate Actual/ICR Estimates as % Target Target Appraisal Revised A. BLGW III Component Modification of Stage I Systems Additional watercourse lining km 140 140 140 100% 100% Appraisal Target ActuaVICR Estimate Actual/ICR Estimates Completion of Stage II Systems Phase I Phase II Phase I Phase II as % of Appraisal Drilling and testing tubewells no 8 22 8 22 100% Artesian sealing of tubewells no 8 0 8 100% Pumphouse/control chambers no 16 22 16 22 100% Distribution systems systems 16 22 16 22 100% Provide/install pumps no 16 22 16 22 100% Powerlines no 16 22 16 22 100% 33/11 kv substation no 0 1 0 1 100% Roads km 0 1.5 0 1.5 100% Drainage works km 0 19 0 17 89% Buildings no 0 1 0 1 100% Redrilling no 0 0 1 8 Construction of Stage IlIl Systems Appraisal Revised ActuaVICR Estimate ActuaVICR Estimate as % Target Appraisal Revised Land Acquisition ha 76 Drilling and testing tubewells no 73 79 79 108% 100% Pumphouse/control chambers no 73 79 77 105% 97% Distribution systems no 73 79 77 105% 97% Drainageworks km 38 10 4 11% 40% Installed pump units no 73 79 77 105% 97% Power lines/Transformers km 118 134 117 99% 87% 33/11 kv substation no 0 1 1 100% Roads km 92 123 118 128% 96% Subcenter no 2 2 2 100% 100% Input godowns no 5 5 0 0% 0% JTA quarters no 6 6 4.5 75% 75% B. ILC Component 1/ No. Surface Irrigation Schmes completed no NS 276 No. Surface Irrigation Schmes started no NS 69 but remained incompleted 2/ No. GWs completed no NS 217 No. GWs started but remained incompleted 2/ no NS 43 NS-number of subprojects were not specified at SAR as subprojects were to be identified during project implementation. Only total area of 6,600 ha were estimated. 11 See details in Appendix 1. 2/ Incompleted schemes and GWs are carried over to NISP. Source: Project Office, BLGWP III and Mahakali Irrigation II Project Completion Report (December 1997).  17 Annex Ic: Key Performance Indicators Output Indicators ILC AND IDS COMPONENT (June 1997) Transfer from Under BLGW m Total Mahakhali II 1. Surface Irrigation No. Schemes Completed 36 240 276 Area (ha) 2137 26218 28355 No. Schemes Incomplete & Carry Over to NISP 69 69 Area (ha) 21459 21459 2. Groundwater No. Wells Completed 67 150 217 Area (ha) 959 3251 4210 No. wells Incomplete & Carry Over to NISP 43 43 Area (ha) 834 834 Total Area (ha) 3096 51762 54858 Expenditures (NRs Million) Appraisal . _ ....Actual. Est'mates FY90191 FY91192 FY92193 FY93194 FY94195 FY95S96 FY96197 Total ILC Civil Works-Project 289.00 26.61 39.17 101.93 183.75 214.23 39.16 280.70 885.55 Civil Works-Farmers'Contribution 2.13 3.13 8.15 14.70 17.14 3.13 69.81 118.20 Agric. Support and Environment 19.29 1.02 23.46 17.89 24.77 20.60 3.31 49.58 140.63 Subtotal ILC 308.29 29.76 65.76 127.97 223.22 251.97 45.60 400.09 1144.38 IDS 70.58 0.00 0.00 0.00 17.00 t.80 33.38 54.88 114.06 Total Costs 378.87 29.76 65.76 127.97 240.22 260.77 78.98 454.97 1258.44 Source: Mahakhali Irrgation II Project, PCR, June 1997.  18 Annex ld: Key Performance Indicators Output Indicators C. Institutional Development Support (IDS) UNDER BLGW III PROJECT Civil Works DOI, HQ building 7 District Irrigation offices in Palpa Parbat Baglung Pyuthan Dailekh Surhket Dhangarhi Other works in DOI, HQ Fire Fighting equipments Flooring, furnishing and furniture Studies Ram Jamra & Kularrya Kulo (Kailai) Proganna Kulo (Dang) Low Flow Measurement Updating Master Plan Irrigation Data Base Updating Social Assessment Study of Model NISP Subprojects Irrigation Policy 2049 Updating Consultancy Services Design and Supervision of DOI Central Building Participatory Joint Management (PJM) to foster PJM in the following schemes: West Gandak Canal System, Nawalparasi Begnas Tal Irrigation Project, Kaski Rampur Phant Irrigation Project, Palpa  19 Annex 2a: Project Costs by Components (US$ million equivalent) Components Total Appraisal Total Actual 2/ Actual as Estimat. I/ % of appraisal estimates Local Foreig Total Local Foreign Total n BLGW III Modification of Stage I 1.69 0.83 2.52 2.61 0.69 3.30 131 Construction of Stage II & III 9.39 13.82 23.22 15.10 12.40 27.50 118 O&M Costs 0.49 0.92 1.41 0.87 0.37 1.25 89 Agric. Support 0.46 0.35 0.81 0.28 0.19 0.47 58 Farmer Organization Support 0.25 0.41 0.66 0.05 0.08 0.13 20 GW Investigation 1.41 1.69 3.10 1.01 1.51 2.52 81 Subtotal 13.70 18.03 31.73 19.93 15.24 35.17 111 Irrigation Line of Credit 7.14 3.45 10.59 18.11 3.96 22.06 208 Institutional Development 1.41 1.01 2.43 1.76 0.44 2.20 91 Support . Total baseline Costs 22.25 22.49 44.75 l 39.79 19.64 59.43 133 Contingencies 5.0 2.25 7.95 - I --- Grand Total 27.95 24.75 52.70 1 39.79 19.64 59.43 113 1/ US$1.0 = NRs. 29.10 2/ Annual exchange rates over project implementation period were averaged at US$1.0 = NRs 52.39.  20 Annex 2b: Project Costs by Procurement Arrangements (US$ million equivalent) Expenditure Appraisal Estimates Actual/ Categories ICR Estimates ICB LIB LCB Other NA Total Works 18.60 4.00 22.60 38.02 Goods 10.30 0.60 3.00 0.20 14.10 8.16 Land Acquisition 0.30 0.30 0.21 Services 7.40 7.40 7.24 Salary & O&M Costs _ _ 8.30 8.30 5.80 Total 10.30 0.60 21.60 11.60 8.60 52.70 59.43 Annex 2c: Project Financing (US$ million equivalent) Expenditure Appraisal estimates Actual/ICR Estimnate Categories IDA HMGN Farner Total IDA 1/ HMGN2/ Farner Total __________ __________ ~~~ ~ ~~ ~~3/ _ _ _ _ _ Works 20.70 1.40 0.50 22.60 33.44 1.91 2.67 38.02 Goods 14.00 0.10 14.10 8.10 0.06 8.16 Land Acquisition - 0.30 0.30 0.21 0.21 Services 7.40 7.40 7.24 7.24 Salary & O&M Costs 5.10 3.20 8.30 3.81 1.99 5.80 Total 47.20 5.00 0.50 52.70 52.59 4.17 2.67 59.43 1/ Total cumulative disbursements as of 9 August 1999 stood at US$51.61 million equivalent. It was expected at ICR that total Credit of SDR36.60 million (US$52.59 million equivalent) would be fully disbursed within October 31, 1999. But at the end of the grace period i.e., end October 1999 the disbursement amount was US$51,86 million only. The unused credit amount of US$ 84,996.86 (SDR 62220.00) was canceled on November 16, 1999. 2/ HMGN's contributions reduced significantly due to substantial increases in farmers contribution under ILC. 3/ Including farmers' contribution in labor for construction of DTWs under BLGW III component (US$0.39 million) and rehabilitation of surface irrigation schemes and construction of groundwater wells under ILC component (US$2.28 million).  21 Annex 3: Cost Benefit Analysis Bhairawa Lumbini Groundwater Irrigation III Component Appraisal Estimate ICR Re-Estimate A. BLGW III Component Economic Rates of Return (ERRs) (%): 1/ -Stage I Area - 32.9% -Stage 11 and III Area 22% 15.0% -Whole Project 2/ 22% 18.3% Net Present Values (NPVs) (NRs. million) -Whole Project 2/ 728.09 932.61 B. ILC Component Economic Rates of Return (ERRs) (%): 3/ Surface Irrigation Sub-project Models 14-35 9-31 Groundwater Subproject Models 18 16-26 C. Underlying Assumptions Project Life (years) 30 30 Standard Conversion Factor 0.90 0.90 Effective Areas irrigated By DTWs (%) 100% 80% With Project Cropping Intensity and Yields to be achieved (Years) 5 7 Unskilled Labor Value-Shadow Wage Rate (NRs/md) 16.88 67.50 Financial Wage Rate (NRs./md) 25 75 Opportunity Cost of Capital (%) 10 12.00 1/ Unlike SAR, the ICR re-estimate shows statewise ERRs. SAR estimated all stages combined. 2/ Including Stage I, II and III. 3/ See Summary of Economic Re-evaluation parameters and results of selected 17 surface irrigation sub-projects and 3 groundwater subprojects in Appendix 2.  22 Annex 4a: Bank Inputs (Missions) Performance Rating 2/ Number Specialized Implementa Development Stage of Month/ of Days in Staff Skills tion Objectives Project Cycle Year Persons Field Representedl/ Progress Preparation a/ 6-8/89 7 155 Eng, Eco(2), Inst, Ag, _ HydrGeo, Soc Appraisal 11-12/89 4 96 Eng,Ag,Eco, Inst _ Supervision I b/ 6/90 - - Eco _ Supervision 2 10-11/90 4 20 Ag, HydroGeo, Eco,Inst 1 I Supervision 3 2-3/91 2 40 Ag, HydroGeo I I Supervision 4 3-4/91 2 56 Eng, Soc 1 I Supervision 5 7/91 1 22 Eco 1 I Supervision 6 11/91 2 22 Ag, HydroGeo 2 1 Supervision 7 34/92 2 50 Ag, Eco 2 1 Supervision 8 10-11/92 3 54 Eng,Ag,Popr 2 1 Supervision 9 34/93 4 70 Ag,Eng,Eco,Fin 2 1 Supervision 10 9-10/93 5 75 Soc, Popr, Eng, 2 HydroGeo, Ag Supervision 11 6/94 3 28 Eng, Ag, Disb 2 1 Supervision 12 11/94 3 15 Ag (2), Popr 2 1 Supervision 13 4/95 4 20 Eng(2),Ag (2) 2 2 Supervision 14 11/95 4 20 Eng (2), Ag(2) 2 2 Supervision 15 3/96 5 25 Ag (2),Eng(2),Opr 2 2 Supervision16 12/96 4 22 Ag,Eng (2),Eco 2 2 +MTR Supervision 17 6/97 5 22 Eng (3),Ag, Env 2 2 Supervision 18 11/97 2 10 Eng(2) 2 2 Supervision 19 6/98 4 15 Eng (2), Ag, Soc 2 2 Supervision 20 11/98 5 20 Eng(2),Ag, Soc, Popr 2 2 Completion 5/99 5 40 Eng (2),Eco (2),Disb 2 2 I/ Eng=lrrigation Engineer; Eco=Economist; Ag=Agriculturist; HydroGeo= Hydrogeologist; Inst-lnstitutional Development Specialist; Soc=Sociologist; Env=Environmental Specialist; Progr-Program Officer; Disb=Disbursement Assistant. POPR=Principal Operation Officer; Disb=Disbursement, Fin=Financial Specialist, Opr=Operation Officer. 2/1-Highly Satisfactory; 2- Satisfactory; 3-Unsatisfactory; 4 -Highly Unsatisfactory; NR-Not Rated; NA-Not Applicable a/ Including two separated missions (one for detailed preparation works and one for preparation reviews) b/ Start up mission.  23 Annex 4b: Bank Inputs-Staff Stage of Actual/Latest Estimate Project Cycle Staff weeks US$(000) Preparation to Appraisal 45.00 114.75 Appraisal / Negotiations 28.00 71.40 Negotiations through Board Approval 8.10 20.65 Supervision 202.00 515.10 ICR 13.00 33.15 TOTAL 296.10 755.05  24 Annex 5: Rating for Achievement of Objectives/outputs Highly Highly Objectives/Outputs Satisfactory Satisfactory Unsatisfactory Unsatisfactory Not Applicab Macro policies Z O Sector policies W L LZ Physical [ W LI Financial L LI Institutional development [I L L Environmental ] ] LI] Social: -Poverty reduction [ V LI LIII -Gender El] ] I L LI] -Farmer Participation W I [Iii] Private sector development W LI Public Sector Management V LI Other (specify) L L0  25 Annex 6: Rating of Bank and Borrower Performance Highly Highly Bank Performance Satisfactory Satisfactory Unsatisfactory Unsatisfactory (