ASIAN DEVELOPMENT BANK

PPA:PAK 21220

PROJECT PERFORMANCE AUDIT REPORT

ON THE

SECOND BARANI AREA DEVELOPMENT PROJECT (Loan 1012-PAK[SF])

IN

PAKISTAN

August 2002

CURRENCY EQUIVALENTS Currency Unit Pakistan Rupee/s (PRe/PRs) At Appraisal (December 1989) $0.0465 PRs21.4736 At Project Completion (October 1999) $0.0195 PRs51.30 ABBREVIATIONS ABAD ADB ADBP ADTA AI AR BADP BARI BLPRI CIF DCW DLDD EIRR FOB ha IFAD km NGO O&M OEM P&D PC-1 PCR PCU PPAR RIV SAWCRI SDR t TA t/ha UNDP Agency for Barani Area Development Asian Development Bank Agricultural Development Bank of Pakistan advisory technical assistance artificial insemination appraisal report Barani Area Development Project Barani Agricultural Research Institute Barani Livestock Production Research Institute cost, insurance, freight Department of Communication and Works Department of Livestock and Dairy Development economic internal rate of return free on board hectare International Fund for Agricultural Development kilometer nongovernment organization operation and maintenance Operations Evaluation Mission Planning and Development Board Planning Commission Form 1 project completion report project coordination unit project performance audit report resource intensive village Soil and Water Conservation Research Institute special drawing rights metric ton technical assistance ton per hectare United Nations Development Programme NOTES (i) (ii) The fiscal year (FY) of the Government ends on 30 June. In this report, $ refers to US dollars. Operations Evaluation Department, PE-599 At Operations Evaluation (March 2002) $0.0166 PRs60.15

PRe1.00 $1.00

= =

CONTENTS Page iii iv vii 1 1 1 1 2 2 3 3 3 4 4 5 5 6 6 11 12 12 12 14 14 14 14 15 15 15 15 16 16 16 16 18 19

BASIC DATA EXECUTIVE SUMMARY MAP I. BACKGROUND A. Rationale B. Formulation C. Purpose and Outputs D. Cost, Financing and Executing Arrangements E. Completion and Self-Evaluation F. Operations Evaluation PLANNING AND IMPLEMENTATION PERFORMANCE A. Formulation and Design B. Achievement of Outputs C. Cost and Scheduling D. Procurement and Construction E. Organization and Management ACHIEVEMENT OF PROJECT PURPOSE A. Operational Performance B. Economic Reevaluation C. Sustainability ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS A. Socioeconomic Impact B. Environmental Impact C. Impact on Institutions and Policy OVERALL ASSESSMENT A. Relevance B. Efficacy C. Efficiency D. Sustainability E. Institutional Development and Other Impacts F. Overall Project Rating G. Assessment of ADB and Borrower Performance ISSUES, LESSONS, AND FOLLOW-UP ACTIONS A. Key Issues for the Future B. Lessons Identified C. Follow-up Actions

II.

III.

IV.

V.

VI.

ii APPENDIXES 1. 2. 3. Comparison of Appraisal and Actual Project Costs Summary of Physical Accomplishments Economic Reevaluation 20 21 23

SUPPLEMENTARY APPENDIXES (available upon request) A. B. Subsidies for Irrigation Investment Village Survey Data

BASIC DATA Second Barani Area Development Project (Loan 1012-PAK[SF])

PROJECT PREPARATION/INSTITUTION BUILDING TA No. TA Name Type Person-Months 708 1357 Master Plan for Barani Area a Development Barani Farming System Training and Research ADTA ADTA 23 51 Amount ($) 1,300,000
b

Approval Date 15 Oct 1985 27 Jun 1991

691,000

KEY PROJECT DATA ($ million) Total Project Cost Foreign Exchange Cost Local Currency Cost ADB Loan Amount/Utilization Amount of Cofinancing IFAD ADBP Government UNDP Farmers Contribution KEY DATES Appraisal Loan Negotiations Board Approval Loan Agreement Loan Effectiveness First Disbursement Project Completion Loan Closing Months (effectiveness to completion) INTERNAL RATE OF RETURN (%) Economic Internal Rate of Return BORROWER EXECUTING AGENCIES MISSION DATA Type of Mission Fact-Finding Appraisal Project Administration Inception Review Project Completion d Operations Evaluation Pakistan

As per ADB Loan Documents 59.9 21.5 38.4 25.0 19.4 0.8 10.8 0.7 3.2 Expected

Actual 51.3 20.9 30.4 22.8 15.5 1.3 8.3 0.7 2.7 Actual 22 Jun11 Jul 1989 1316 Nov 1989 20 Feb 1990 19 Mar 1990 6 Dec 1990 4 Feb 1993 31 Dec 1998 24 Dec 1998 97

17 Jun 1990 31 Dec 1997 30 Jun 1998 90 Appraisal 24.0 PCR 10.1

PPAR 4.1

Provincial Government of Punjab Agricultural Development Bank of Pakistan No. of Missions 1 1 1 14 1 1 No. of Person-Days c 138 c 200 10 387 15 42

ADB = Asian Development Bank, ADTA = advisory technical assistance, IFAD = International Fund for Agricultural Development, TA = technical assistance, UNDP = United Nations Development Programme. a This was not a project preparation TA. Its findings, however, were used in the design of the Project. b Funded by UNDP. c Including a large amount of staff consultant inputs financed by IFAD. d Comprising Ellen Qiaolun Ye, Senior Evaluation Specialist (Mission Leader) and Gary Holm (international consultant). In addition, Qaim Shah (domestic consultant) conducted a village survey.

EXECUTIVE SUMMARY The Project aimed to (i) increase farm household production, employment, and income, particularly among smallholders, the landless, and women; (ii) reduce the growing migration of population to urban areas; and (iii) alleviate constraints on agricultural development. The Project comprised a number of components related to soil and water conservation, rangeland and forestry development, water harvesting, crop husbandry, animal husbandry, rural infrastructure, rural credit, and institutional strengthening. The Projects objectives were consistent with the development strategy of the Government and the operational strategy of the Asian Development Bank at the time of project appraisal. By promoting agricultural development in a region bypassed by earlier development, the Project contributed, in a limited way, to balanced regional development and increased agricultural production. The project design, however, did not include measures to ensure that the intended target groups (smallholders, the landless, and women) received a proportionate share of benefits. In conjunction with a top-down approach that focused on technology improvement, this resulted in the capture of a significant amount of benefits by a small number of large landholders. The Project is therefore rated partly relevant. The Project met most of its physical targets as revised during implementation. The Project also fulfilled, to a reduced extent, its primary objective of increasing farm household production, employment, and income. However, its intention to increase household income particularly among smallholders, the landless, and women was not fulfilled. The objective of reducing constraints to rain-fed agriculture was fulfilled only in the farmlands that received irrigation facilities. The achievements were less than anticipated due to the small number of farms that received irrigation facilities. Finally, the Project did not fulfill its objective of reducing migration to cities. On balance, the Project is rated less efficacious. The Projects economic internal rate of return has been reestimated at 4.1%, substantially below the appraisal estimate of 24.0%, primarily due to a significant reduction in the number of project beneficiaries and underuse of irrigation facilities. The high subsidies for irrigation investment distorted private decisions and provided less incentive for project staff and farmers to select the most cost-effective interventions. The design of the livestock centers focused on provision of buildings without addressing the key constraint of staff shortage, resulting in significant underuse of the centers. The Project is therefore rated less efficient. The Projects primary benefits have been increased farm production and household income in farms that received irrigation facilities. The sustainability of these benefits is likely as the irrigation facilities have been well maintained by their owners, and continued operation of these facilities is likely. Other project facilities such as roads and water supply systems have also been well maintained. The project facilities without clear sustainability are those that did not generate significant benefits, even during implementation, such as the womens agricultural extension program. Overall, the Projects sustainability is rated likely. The Project had a positive impact on the Governments policies and public agencies as it encouraged the Government to continue to invest in rain-fed agriculture, and trained a large number of project staff. The project design included community mobilization, nongovernment organization (NGO) engagement, and a womens extension program. However, as measures to ensure successful implementation were not developed, the impact on local communities and women was minimal. The insufficient attention to the distribution of benefits restricted the impact

v on poverty reduction. On balance, the Projects institutional development and other impacts are rated moderate. Based on these assessments, the overall project rating is partly successful. The evaluation has identified the following issues: Distribution of Project Benefits. A major portion of the project subsidies was captured by a small number of large landholders instead of the intended target groups because (i) the subsidies were open to all farmers on a first come, first served basis; (ii) the high subsidies (75% of investment cost or a maximum of $16,000 for a minidam) attracted nontarget groups, including influential people; (iii) there was no ceiling on how much one household could receive in subsidies from various project activities; (iv) the requirement that farmers contribute at least 25% of investment cost put the target groups in a disadvantageous position as most smallholders had neither their own capital nor easy access to long-term loans; and (v) a topdown approach was adopted, which excluded the participation of local communities in the selection of subproject sites and beneficiaries. In retrospect, the Project could have benefited many more farmers, especially smallholders, if its design had included measures to ensure a fair distribution of project subsidies. Use of Public Subsidies. The benefits of the small-scale irrigation facilities in the project areas are highly localized, confined mostly to adjacent fields belonging to one household. If the Project had used subsidies for environmental purposes, a catchment approach could have been adopted to identify critical sites where the construction of water conservation structures was critical to the entire region. If the Project had used subsidies for poverty reduction, large landholders could have been excluded from the irrigation subsidies. Cost Effectiveness. Inefficiencies were reported including oversized construction of some irrigation structures, a lack of clear need for many water spillways and outlets, and underuse of some minidams as their owners did not invest in supplementary activities such as land leveling. In retrospect, measures could have developed to make farmers treat the subsidies like their own money, such as giving subsidies in the form of a fixed amount instead of on a percentage basis without limit. Integrated Approach. Although the Project adopted an integrated area development approach to address multiple needs in the rain-fed areas, this appeared to have been confined to the conceptual level without guiding the selection of subproject sites. Each implementing agency selected subproject sites based on its own criteria without particular attention to the complementary needs of the beneficiaries under other components. The desired synergy impact of using multiple interventions to simultaneously address the key constraints in a particular area was not apparent. Alternative approaches that integrate project interventions at the village level should be considered for future projects of this nature. The Project has provided valuable lessons learned including the following: (i) Implementing a project in a poor region may not automatically have a significant impact on poverty reduction if specific measures are not taken to ensure a fair distribution of project benefits in favor of the poor. Inclusion in a project design of poverty-reduction activities such as NGO engagement and community development may not have the desired social impact if careful arrangements are not made for effective implementation of such activities.

(ii)

vi (iii) Provision of a credit line may not have the desired social impact if careful arrangements are not made to develop borrower groups and microfinance institutions that can deliver microfinance services to the poor. Inclusion of numerous training programs may not have the desired impact if the training is not based on beneficiary demand and is not aimed at building up longterm capacity in the local communities with continued support after the training. Smallholders and landless poor can easily be bypassed by public assistance that focuses solely on technology improvement. Support for agricultural research should focus on improvement in farmers fields. Incentive measures need to be included in project design to encourage research institutes to develop suitable technologies that match the prevailing conditions on most farms instead of aiming at the highest possible yields in research institutes under the most ideal conditions that are not accessible by most farmers. Free provision of inputs to farmers may lead to closure of such services after project completion. Project design should aim at the long-term operation of the introduced services and use funds during implementation to build up local institutions and capacities to sustain such services. Provision of project facilities (such as buildings) without addressing constraints to their full operation (such as staff shortage) may lead to underuse of such facilities and unnecessary maintenance cost.

(iv)

(v) (vi)

(vii)

(viii)

I. A. Rationale

BACKGROUND

1. The Green Revolution that began in the 1960s brought significant increases in crop yields to Pakistan. However, adoption of the new technology was largely confined to areas with access to irrigation. As the income gap between irrigated and barani (rain-fed) areas rose, more attention was given to balanced regional development and special assistance for rain-fed areas. In March 1986, the National Commission on Agriculture proposed the allocation of public funds to promote development in rain-fed areas, which was seen to have high potential for increasing crop yields, contributing to overall agricultural growth, and mitigating increasing regional disparity. At the time of project appraisal, the Asian Development Bank's (ADBs) operational strategy in Pakistan supported balanced regional development, with its assistance to agriculture focusing on increasing productivity, farm production, and rural employment. B. Formulation

2. The Project was a follow-up of the first Barani Agricultural Development Project (BADP), which was financed by the International Fund for Agricultural Development (IFAD) and implemented from 1981 to 1990 under ADB administration. The Project was formulated in accordance with a Master Plan for Barani Agricultural Development (the Master Plan), which was developed during 19861988 under a technical assistance (TA) financed by the United Nations Development Programme (UNDP) under ADB administration. Feasibility studies contained in the Master Plan were used in formulating the Project, together with a large amount of consultant inputs financed by IFAD during joint ADB/IFAD missions. C. Purpose and Outputs

3. The Project aimed to (i) increase farm household production, employment, and income, particularly among smallholders, the landless, and women; (ii) reduce the growing migration of population to urban areas; and (iii) alleviate constraints on agriculture in the project areas.1 4. The Project comprised five components: Part 1 Watershed Improvement, including (a) soil and water conservation, (b) rangeland and forestry development, and (c) water harvesting; Part 2 Crop and Livestock Development, including (a) crop husbandry, which covered (i) basic agricultural research, (ii) adaptive agricultural research, (iii) agricultural extension, and (iv) womens agricultural extension program; and (b) animal husbandry, which covered (i) livestock production extension, (ii) animal health, and (iii) livestock nutrition research; Part 3 Rural Infrastructure, including (a) upgrading of farm-to-market roads, and (b) village water supply systems; Part 4 Rural Credit; and Part 5 Institutional Strengthening, which included (a) improvement of capacities of government staff, (b) training for beneficiaries and project staff, and (c) support for the project coordination unit (PCU). 5. The Project covered four subdistricts in Punjab Province (see Map); two subdistricts had been partially covered by the BADP and the other two were new subdistricts. The selection of the project areas considered (i) the desire to represent the low, medium, and high rainfall regions in the rain-fed areas for pilot testing, and (ii) the large number of landless poor in these

The constraints identified were erratic rainfall, soil erosion, labor scarcity, inadequate inputs, small farms, poor communications, inadequate marketing, and lack of farm systems technology.

2 subdistricts.2 Project activities were aimed at farmers with landholdings of 5 hectares (ha) or less, estimated at 92,000 households or 580,000 people in 865 villages, accounting for about 80% of the population in the project areas.3 D. Cost, Financing, and Executing Arrangements

6. At appraisal, the project cost was estimated at $59.9 million (Appendix 1), financed by an ADB loan of SDR19.024 million ($25.0 million equivalent) from ADB's Special Fund resources. The rest was to be financed by an IFAD loan of $19.4 million, a UNDP grant of $0.7 million, and counterpart funds from the Government ($10.8 million equivalent), Agricultural Development Bank of Pakistan (ADBP) ($0.8 million equivalent), and farmer beneficiaries ($3.2 million equivalent). The UNDP grant was to finance training and consulting services as well as an ADB TA associated with the Project.4 7. The Project involved two executing agencies. ADBP was responsible for executing the credit component while the Government of Punjab was responsible for all other components. The Project involved a number of government departments.5 A project steering committee and a project coordination committee established under BADP continued to supervise and coordinate implementation at the secretariat level and the project level, respectively. The Agency for Barani Area Development (ABAD) was responsible for interagency coordination and policy guidance. The PCU established under BADP was responsible for field-level coordination between line departments. At the subdistrict level, the project director of the PCU, or his representative at a subdistrict field office, was responsible for coordination between various line agencies. A project planning and implementation committee formed under the project director comprised subdistrictlevel officers from various implementing agencies. E. Completion and Self-Evaluation

8. The Project was completed in December 1998. A project completion report (PCR) prepared by ADBs Pakistan Resident Mission was circulated to the Board in August 2000. The PCR rated the Project partly successful.6 Issues identified in the PCR included: (i) project benefits were captured by a limited number of beneficiaries, including large landholders, (ii) provision of free saplings resulted in no continuity of social forestry at project completion due to farmers lack of willingness to pay for the saplings, (iii) use of ADBP in credit delivery resulted in a very small portion of loans being received by women due to ADBPs culture of focusing on large-scale lending, (iv) the quality of eight livestock centers was poor due to weak construction supervision, (v) there was a significant delay in community organizing due to a 4-year delay in consultant recruitment, and (vi) ADB supervision was weak because of frequent staff changes.

4 5

Landless livestock holders ranged from 11% in Chakwal Subdistrict to 37% in Shakargarh Subdistrict at project appraisal. Due to a lack of regular rainfall, much of the land in the project areas was not productive without irrigation. Consequently, farming with 5 ha or less was classified at the subsistence level in the Appraisal Report. ADB. 1991. Technical Assistance to Pakistan for Barani Farming System Training and Research. Manila. Department of Agriculture, Department of Forestry, Department of Livestock and Dairy Development, Department of Communication and Works, and Department of Public Health and Engineering. The rating was based on the previous three-category system (generally successful, partly successful, and unsuccessful).

3 F. Operations Evaluation

9. This project performance audit report (PPAR) assesses the Projects design, implementation, outputs, and impacts, and draws on lessons learned for future improvement. The PPAR presents the findings of an Operations Evaluation Mission (OEM), which visited Pakistan in March 2002. The OEM has drawn its conclusions and recommendations from three sources: (i) a desk review of relevant project documents and records, (ii) discussions with relevant governmental officials and field staff, and (iii) focus group discussions and interviews with beneficiaries and nonbeneficiaries in the project areas.7 Copies of the draft PPAR were submitted for review to the executing and implementing agencies, as well as to ADB staff concerned. Comments received were considered in finalizing the PPAR. II. A. PLANNING AND IMPLEMENTATION PERFORMANCE

Formulation and Design

10. The project design was based on the Master Plan that represented the Governments long-term development strategy in the rain-fed areas. The design was also based on the Governments strong commitment to rain-fed area development, demonstrated by its allocation of development funds for a number of projects. Last, the project design was built upon the achievements of BADP and incorporated a few lessons learned from that project.8 11. The OEM, however, noted certain weaknesses in the project design. First, while the Project intended to target smallholders, the landless, and women, its design did not include measures to ensure distribution of benefits in favor of the intended target groups. In contrast, project subsidies9 were open to all farmers in the project areas on a first-come, first-served basis. Furthermore, beneficiaries were required to contribute at least 25% of the investment costs for construction of irrigation facilities. Although this requirement had the merit of encouraging ownership, it excluded most of the smallholders and landless poor who had neither their own capital nor access to long-term loans. In contrast, large landholders, with their better connections, information, and financial capacity, were the first to take advantage of the irrigation subsidies. As a result, the 5 ha limit of beneficiary targeting (para. 5) was not observed. As reported by the PCR, a substantial increase in farm productivity was observed on farmland belonging to large landholders whereas widespread increases in household income of the intended target groups were not evident. 12. Second, the project design adopted an engineering approach in the selection of subproject sites based primarily on technical feasibility. The top-down approach excluded the participation of the intended target groups in project decisions, including selection of subproject sites or beneficiaries. In conjunction with a monitoring system that emphasized physical targets, project staff focused almost entirely on the fulfillment of their physical targets, such as the
7

The OEM visited 13 villages in the project areas to inspect project facilities and hold discussions with farmers and field staff. After the OEM, a survey of 19 villages was conducted to collect further information on the Projects benefits. For example, the level of irrigation subsidies was reduced from 100% to 75% to encourage farmers maintenance of the irrigation facilities. However, other important lessons were ignored (paras. 11 and 12). Subsidies provided under the Project were in the form of government provision of a large portion of investment cost for construction of irrigation facilities such as minidams, ponds, tubewells, and dugwells, and use of government tractors for land leveling and deep plowing. The subsidies were received by individual farmers without significant external benefit to the public. In addition, tree seedlings were provided to farmers free of charge, and poultry units were supplied at subsidized prices.

4 number of irrigation facilities constructed, with less attention to the level of use of the facilities after construction, benefits generated, or distribution of the benefits.10 B. Achievement of Outputs

13. Many of the projects targets were revised significantly during project implementation (Appendix 2).11 This flexibility allowed the reallocation of funds to better uses when more information became available.12 Against the final revision, most of the important targets were met. For some small items, such as culverts, small water gates, and drop siphons, the targets were exceeded by a large margin. For a few items, such as handpumps, drip irrigation systems, and portable irrigation systems, the targets were not met.13 Chapter III provides detailed assessments by project component. C. Cost and Scheduling

14. At $51.3 million, there was a project cost underrun of 14%, leading to cancellation of the ADB loan by SDR2.8 million ($3.7 million equivalent).14 Cost deviations of individual components varied, with significant under- and overruns (Appendix 1).15 The large cost deviations were associated with the substantial changes in project targets as well as depreciation of the local currency against the dollar between project approval in 1990 and project completion in 1998. 15. The Project suffered serious delays in its first 4 years of implementation. Initially, loan effectiveness was delayed by aboaut 6 months due to the longer than anticipated compliance with conditions for effectiveness, such as project approval by IFAD and UNDP, and the Governments approval of their project documents (Planning Commission Form 1 [PC-1]). An unusually slow release of IFAD funds was experienced in the initial 2 years due largely to lack of experience of the National Bank of Pakistan in dealing with the transfer of the IFAD loan. A government ban on hiring of new staff led to slow recruitment of project staff; many of them were hired only in the fourth and fifth year of project implementation. Cumbersome procedures in documentation resulted in very slow liquidation.16 The Governments slow approval of the revised PC-1 also contributed to the delays.
10

The Project was designed in the late 1980s when ADB assistance focused on productivity increases and government subsidies were widely used to facilitate the implementation of government programs. Furthermore, neither the Government nor donors were familiar with the community participatory approach at that time. Significant improvement has been made since the early 1990s in the use of the participatory approach in development projects. 11 The revisions included substantial increases in some activities such as minidams (increased by 448%), ponds (by 475%), lift pumps (by 229%), tubewells (by 158%), and roads (by 86%), as well as significant reductions in others, such as turbine pumps (by 64%), water disposal outlets (by 58%), and fencing for public forestry (by 73%). 12 For example, it was found during project implementation that turbine pumps required a large amount of water flow and high investment cost (PRs50,000 per ha), and yet resulted in low use of water resources (only 8%). After failure of the first 3 turbines, the target for turbines was reduced from 14 to 5, and the savings were used to finance increases of other activities. 13 The drip irrigation system was found unsuitable for the project areas. 14 Two cancellations, one in June 1998 and the other in December 1998, amounted to SDR2.3 and SDR0.5 million, respectively. The dollar equivalent amount varied due to exchange rate fluctuations. 15 The most significant cost underrun was in the soil and water conservation subcomponent (by 23%), credit component (by 45%), and consulting services (by 20%). In contrast, significant cost overruns were experienced in the water harvesting subcomponent (by 163%), rural infrastructure (by 79%), training (by 150%), and project management (by 72%). 16 ADBs loan review missions reported that it took up to 4 months for a line agency to furnish the required documents for the PCU to submit liquidation to ADB, and up to 1 year if procurement of machinery or equipment was involved. A minimum of 23 months was needed for ADB/IFAD disbursement to reach the project accounts.

5 16. ADBs weak project supervision in the initial years was another cause of the delays. The OEM noted that ADB did not field any mission between project inception in August 1990 and the first loan review mission in February 1992.17 Frequent changes of ADB supervisory staff decreased the effectiveness of project implementation.18 After a midterm review in mid-1994 and change of the director general of ABAD, project implementation picked up momentum in early 1995, accelerated with Governments approval of the first revision of PC-1 in October 1995, was in full swing in 1996 and 1997, and was completed in December 1998, 1 year behind the original completion date. D. Procurement and Construction

17. Goods and services were procured in accordance with ADBs Guidelines for Procurement. Local competitive bidding was used to select prequalified contractors for upgrading farm-to-market roads. Procurement was made through each implementing agencys procurement committee with members from ABAD as well as senior staff from that agency. A consultant selection committee in the Planning and Development Board (P&D) processed consultant recruitment. 18. The OEM inspected project facilities at the sites visited, including farm-to-market roads, water supply systems, and irrigation facilities as well as buildings and equipment. In general, construction quality appeared to be good with the exception of buildings in the eight livestock centers. Factors contributing to the poor construction quality in these centers included weak supervision of construction work by the Department of Communication and Works (DCW), and less ownership and attention of the Department of Livestock and Dairy Development (DLDD), which only identified the quality problems months after having accepted the buildings. It was too late for DCW to request the contractors to repair the buildings. E. Organization and Management

19. The project organization worked smoothly, especially in the later years. The project steering committee met only when issues arose that were beyond the control of the project director. The project coordination committee and project planning and implementation committee met more regularly and facilitated coordination between line agencies at the project and subproject levels. One area of weakness in project management concerned the monitoring system, which focused on the achievement of physical targets and financial targets (use of budget allocated) instead of results and project objectives. 20. The Government complied with most of the loan covenants. In particular, the entire amount of the Governments counterpart funds was released at project commencement. The few exceptions included requirements for timely recruitment of project staff, their retention, and provision of sufficient funds for operation and maintenance (O&M) of project facilities. While most of the project staff remained in government service, some contractual staff were laid off after project completion, including most women agricultural officers and extension workers. 21. Consultant recruitment was delayed by 4 years due to a number of problems. While the Project intended to use nongovernment organizations (NGOs) rather than consultants for community development under the associated TA, no assessment on the availability of NGOs
17

ADBs supervision intensified later, with four loan review missions in 1992, two in 1994, three in 1995, and two in 1996. 18 As noted by the PCR, seven ADB staff supervised the Project during its 8-year period.

6 was given in the appraisal report. At the end, no NGO was engaged under the Project due to difficulties in identifying credible NGOs with the capacity to work in the project areas. After 4 years of delay, two consulting firms were engaged, one for marketing and enterprise development and the other for training and community development. Due largely to weakness in the project design and delayed TA commencement, the TA activities did not perform well. The consultants focused on fulfillment of their terms of reference, with less attention to the relevance, quality, and sustainability of their outputs (paras. 41 and 42). III. A. ACHIEVEMENT OF PROJECT PURPOSE

Operational Performance 1. Watershed Improvement a. Soil and Water Conservation

22. This subcomponent aimed to provide a structural basis to enhance infiltration of rainfall and moisture storage within the soil profile through the construction of earthen bunds, water outlets, gully plugging, terracing, and land leveling as well as construction of minidams and ponds. Most of the revised physical targets were completed, and generally construction was of a good standard. 23. Based on available data and discussions with farmers, the OEM estimated that the nonirrigation investment had increased the yield of rain-fed wheat by 17% from 1.2 metric tons per ha (t/ha) to 1.4 t/ha. The financial return on such investment was less attractive, and farmers said they would not have carried out the investment without project subsidies. In sharp contrast, the impact of minidams and ponds was most impressive, including substantial increases in crop yields as well as a shift to high value crops such as vegetable and fruits, or to fish production in some cases. The high investment cost (an average of almost 10,000 per minidam) could be recovered by the high financial returns within 4 years even without project subsidies. The OEM found, however, that most owners of the minidams were large landholders instead of the intended target groups. While there were secondary benefits such as raised water table in adjacent areas and improved supply of water for livestock, optimal environmental benefit to the public is less clear. The project design intended to construct minidams and ponds in strategic locations to reduce flood-generated runoff from the catchments. This was not implemented as subsidies for minidams were open to all farmers, and most dams were built for irrigation rather than for soil conservation. In retrospect, the minidams could more appropriately be classified as private irrigation facilities instead of soil and water conservation works. 24. Significant underuse of minidams was reported, as only half of the command area has been cultivated. OEMs village survey also confirmed this finding.19 This problem could have been avoided if the project design had required that construction of minidams be based on beneficiaries willingness to invest in supplementary facilities such as land leveling and water conveyance systems.

19

For example, the survey found that a farmer received a minidam but did not invest in supplementary land leveling. As a result, water ran off the fields and only 3 ha of land were brought under cultivation in spite of sufficient water supply throughout the year. The OEM also found that some beneficiaries of minidams were absentee landlords; their limited attention to agriculture contributed to underuse of the irrigation facilities.

7 b. Rangeland and Forestry Development

25. The rangeland and forestry development subcomponent financed reforestation on private lands and noncultivable public lands, mainly through the provision of free saplings. Seventeen private nurseries were engaged by the Department of Forestry to produce saplings and distribute them to farmers. Most of the targets were met or largely met, and the Project contributed to increased vegetation in the rain-fed areas. However, since this subcomponent provided saplings without controlling the sites of tree planting, many farmers did not plant trees in the upstream areas due to considerations of distance and management costs. The provision of free saplings also led to cessation of operations of the nurseries after project completion when subsidies ended and few farmers were willing to pay for the saplings. c. Water Harvesting

26. The water harvesting subcomponent aimed to provide small-scale irrigation schemes, including turbine pumps, tubewells, lift pumps, and drop siphons. The engineering wing of the Department of Agriculture was responsible for the construction of tubewells, and the on-farm water management wing was responsible for the delivery of water to cultivated areas through provision of water-lifting devices and irrigation conveyance systems. This subcomponent achieved most of its revised physical targets. In response to heavy demand, appraisal targets for tubewells and lift pumps were revised upwards; new targets were introduced for dugwells, water storage tanks, and handpumps. These irrigation facilities had a significant impact on increasing crop yields. The OEM noted that many dugwells were provided to smallholders whereas the expensive tubewells were concentrated in the hands of large landholders. As a minimum of 6 ha of landholding was required for the construction of a tubewell, smallholders with 5 ha or less were excluded.20 2. Crop and Livestock Development a. Crop Husbandry

27. Basic and Adaptive Research. This subcomponent aimed to support basic research to examine the effect on crop production of variations in tillage techniques and seedbed preparation as well as adaptive research to test the findings of the basic research. The OEM visited a number of basic and adaptive research institutes supported by the Project. The trials of improved crop varieties were impressive, indicating the potential contribution of agricultural research to increased crop yields in rain-fed agriculture. The OEM found that farmers in rain-fed areas were aware of the recommended varieties, especially wheat, and improved land preparation technologies. However, a considerable proportion of farmers did not apply them due to cost considerations and other constraints.21 The OEM found that agricultural research under the Project was largely conducted under ideal rain-fed conditions such as flat cropland with good availability of inputs including, in particular, timely access to machinery services and intensive management. There is a need for the research institutes to adopt a more resultsoriented approach aiming at higher crop yields in farmers fields under prevailing conditions instead of highest yields under the best conditions in the research institutes.
20 21

This minimum requirement was set to ensure economic efficiency. The recommendations included increased use of improved seeds and fertilizer as well as deep cultivation of land before or very early in the rainy season. Most smallholders could not compete with large landholders for timely access to sufficient machinery services within the key season. Smallholders were also hesitant to use improved seeds and fertilizer in view of the high risk of drought, which was severe in the past 2 years.

8 28. Agriculture Extension. The extension activities focused primarily on 44 resource intensive villages (RIVs), which were selected to demonstrate recommended farm technologies. This subcomponent fulfilled all of its revised physical targets. The OEM observed that farmers who adopted a greater proportion of the recommended practices were those with good contact with agricultural extension staff, who tend to visit large landholders with good technical and financial capacities. Smallholders and the landless poor, without being organized into groups, had less access to extension services. OEMs village survey also found that many smallholders considered extension services less relevant to them as they already knew the recommended technologies, which could not resolve their problems. The demonstration plots were selected on good farmland with irrigation facilities, and were seen by the poor as mainly benefiting large landholders who received improved seeds and fertilizer for their demonstration plots with heavy subsidies. The OEM also noted that concentration of extension activities around RIVs reduced extension contact in outlying areas. 29. Womens Agricultural Extension. This subcomponent aimed to provide training for women agricultural officers, women extension workers, and female farmers, including training on crop production, poultry and livestock husbandry, vegetable and fruit tree culture, and marketing as well as enterprise development. Although a large amount of training was conducted, OEMs discussions with trainees found limited long-term impact of these activities. Only a few womens groups were organized under the Project and none of them sustained their operation after project completion, largely due to lack of demand and support. A greater impact on women could have been made if the design of this subcomponent had been based on a better understanding of womens needs and constraints. Interviews with women found that they preferred sewing machines and associated training as well as microfinance services. These activities could have been provided if a bottom-up approach had been adopted to engage women beneficiaries in the project design. b. Livestock Husbandry

30. Livestock Production Extension. This subcomponent established eight livestock production and veterinary centers to provide curative and preventive animal health facilities as well as extension services. The OEM visited two of these centers. The quality of the buildings was poor due to weak construction supervision (para. 18). Livestock owners in the project sites reported benefits of these centers when they were in full operation during implementation. In particular, the provision of artificial insemination reportedly doubled milk production from improved breed crosses. Due largely to staff shortage and inadequate funding, however, these centers have been operating below capacity since project completion, with only one part-time staff borrowed from other centers.22 After project completion, these centers were not transferred to the Governments regular budget due to the poor condition of the buildings and operations. With inadequate maintenance, the buildings are now in a very poor state. 31. Animal Health and Nutrition Research. The Project provided support for the Barani Livestock Production Research Institute (BLPRI), which developed several feeding options for livestock owners that enabled animals to better withstand rain-fed conditions. These options included balanced livestock feeds using local crops and a urea-molasses block for milking animals. The capacity of the BLPRI feed mill was expanded to produce more feed for the institute and farmers. The feed mill has continued to operate since project completion, and
22

The OEM was told that normally one third of DLDDs technical positions were vacant in rain-fed areas due partly to staffs reluctance to be stationed in remote sites. Senior staff in DLDD tried to modify the design of this subcomponent at an early stage to downsize the centers to small units with fewer staff. This could not be accommodated as the tendering process had already been initiated.

9 approval has recently been received to establish a revolving fund to facilitate the sale of the feed and allow the mill to operate on a sustainable basis. BLPRI also provided training for livestock staff of DLDD and village workers. Although the training of village workers in improved livestock management, feeding, artificial insemination, and first aid treatment was a very practical approach to improving livestock production, there was no follow up by DLDD on the effectiveness of the training, or further assistance to let trainees practice the new technologies after the training. 3. Rural Infrastructure a. Farm-to-Market Roads

32. This subcomponent intended to upgrade 160 kilometers (km) of roads, each ranging from 2 to 8 km in length, from earthen to hard-surface. The physical target was increased to 298 km during implementation to use the large amount of loan savings from substantial reductions in other components. At project completion, 72 roads were upgraded with a total length of 307 km. The roads inspected by the OEM appeared to be in good condition. The linkage between the roads and other project interventions, however, was less clear as the sites for road improvement were selected independently from other project components. DCW, which has recently been devolved to the district level, is responsible for maintaining the roads with reportedly sufficient funds from a general budget of the concerned district councils. b. Village Water Supply

33. The village water supply subcomponent aimed to provide 16 water supply schemes to serve 3,200 households. The target was increased to 18, but one of the completed schemes was damaged by a flood in 1994. Sites of the water schemes were selected by the Department of Public Health Engineering based on four criteria: (i) technical feasibility, (ii) village size larger than 100 households, (iii) willingness of most households to be connected to the water system, and (iv) communities willingness to take over O&M after completion of the scheme. The last requirement was introduced after 1994, incorporating lessons learned from schemes constructed earlier where local communities refused to take over O&M since they had not been consulted and found the schemes unaffordable. 34. The OEM visited two water schemes. Due to a design flaw, one scheme was not using the water storage tank constructed. The other was at an isolated village that received no other interventions under the Project. In both villages, water was pumped daily for half an hour, which was sufficient to fill enough water containers to cover household needs for a day. The communities strongly supported O&M of the schemes with monthly fees collected on time and in full. The OEM noted that benefits from the water schemes were equally distributed among all households, with a typical time saving for women of about 1 hour per day. While the provision of potable water reduced incidences of water-borne diseases, the overall benefit is less clear as sanitation problems were reported due to inappropriate disposal of wastewater since this subcomponent did not include sanitary systems. 4. Rural Credit

35. The rural credit component aimed to assist ADBP to develop a special lending program in the rain-fed areas to meet the needs of the rural poor. Demand for credit was estimated at PRs155 million at appraisal, with a target of 3,800 subloans for small-scale agricultural

10 production, irrigation, and cottage industries. At project completion, a total amount of PRs317 million had been disbursed in 7,565 subloans, nearly double the appraisal target. The accumulated recovery rate of these loans was 68%,23 better than the overall performance of ADBPs operations. Since project completion, ADBP has disbursed 2,996 additional loans worth PRs163 million, making a total amount of loan disbursement of PRs480 million from project inception to the end of January 2002. 36. While this component intended to target the poor, the OEM found that most landless poor and women were excluded as 98% of the loans disbursed under the Project required land collateral. The remaining 2% were surety loans, which did not require assets or land registration of the borrower. However, those who provided the surety for the borrower had to ensure the availability of assets. As a result, only 7% of the loans issued under the Project were received by women. Furthermore, farmers interviewed by the OEM complained about the cumbersome loan application procedures, which appeared to be simple on paper and reportedly could be completed in one day. Smallholders with little connection to ADBP personnel and other government officials, however, needed days or weeks to obtain the required documents, especially the certificate of land ownership required for loan collateral. 5. Institutional Strengthening a. Improvement of Capacities

37. This subcomponent was to provide research support, survey assistance, training materials, vehicles, and equipment to the executing and implementing agencies for project implementation. In view of a lack of reliable baseline data under BADP, the project design specified the use of a local economic research institute to undertake a baseline survey and update it at project completion. The baseline report was completed in December 1993, 3 years after project commencement, and contained no poverty data. Project staff might have gained better experience if an in-house monitoring system had been established instead of using external experts for the required survey and evaluation. b. Training

38. The training subcomponent supported international training in farming system methods and agrometeorology as well as international study tours to review soil conservation practices. In addition, a large amount of domestic training was provided to project staff and beneficiaries on social forestry, farming system methods, livestock nutrition and health, womens extension, and village literacy. Most of the training plans were implemented with reportedly a large number of trainees. Trainees expressed great appreciation for their training opportunities, especially for their international experience. The OEM noted that the training could have had a larger impact if it had been designed based on beneficiary demand with an aim to build up local capacity, monitored by training impact assessment, and followed up by post-training assistance. c. Project Coordination

39. The project coordination subcomponent provided office buildings, vehicles, equipment, and incremental staff for the PCU. Overall, the PCU performed well in project implementation, especially in the late years. It was noted that slow progress during the initial years was due
23

The poor recovery rate appeared to be due to slow collection of repayments, as the accumulated recovery rate had increased to 88% as of 31 January 2002.

11 partly to insufficient experience of the PCU in coordinating the numerous agencies in a complex project as well as the heavily centralized procedures for staff recruitment, procurement, and consultant engagement. A pressing area for improvement was in monitoring and evaluation, which should have focused on project results instead of physical targets (para. 12). 6. Advisory Technical Assistance on Barani Farming Systems Training and Research

40. The ADTA was financed by the UNDP grant (para. 6, footnote 4). The original design of engaging NGOs did not materialize due to difficulties in identifying suitable NGOs in the project areas in the early 1990s. As a result, a consulting firm was recruited for marketing and enterprise development. After a market survey, the consultants concluded that the project areas had no competitive advantage in industry except for animal products. Instead of developing new enterprises, it was more prudent to strengthen the existing ones. To fulfill the TA requirement of establishing 60 enterprises, the consultants facilitated 49 borrowers to obtain ADBP loans, and gave cash grants of about PRs5,000 each to another 38 small enterprise owners. 41. Another consulting firm was engaged under the TA to organize community groups in 100 villages. After consultation with the PCU, the consultants decided to work in non-RIV villages, as the RIVs were large and had been well served by various government programs. Because consultant recruitment was delayed 4 years, the community development was conducted in isolation from other project activities. At TA completion, the village organizations were still young and immature, and there was no follow-up monitoring or assistance. The consultants also trained 108 village training masters. While these masters probably benefited from the 1-week literacy training, there was no assistance to help them train other farmers in their villages. 42. The above problems originated from weaknesses in the project design, which included community development without specific measures to ensure its success. The 2-year TA period was too short to sustain the newly established village organizations. The necessary sequencing of community development ahead of other project interventions was not possible due to inadequate attention to sequencing in the project design, and the 4-year delay in consultant recruitment. The use of consultants for community development was ineffective as consultants focused on the delivery of short-term tasks rather than long-term relationships with the targeted communities. B. Economic Reevaluation

43. Based on directly quantifiable benefits and costs, the economic internal rate of return (EIRR) for the Project (excluding rural infrastructure and rural credit) is reestimated at 4.1% (Appendix 3), substantially below the appraisal estimate of 24.0% and the PCR reestimate of 10.1%.24 The primary cause of the reduced EIRR is a substantial reduction in the Projects outreach. Instead of benefiting 32,000 to 51,000 farms as anticipated at appraisal, the Projects crop components benefited about 20,200 farms, of which only 2,257 farms (11%) gained significant financial returns with access to irrigation facilities. The low usage of some irrigation facilities is another factor contributing to the low EIRR, largely due to farmers reluctance to finance complementary investments such as land leveling and water conveyance systems.

24

Rural infrastructure (farm-to-market roads and water supply) and rural credit were excluded in the EIRR calculations at appraisal and at PCR, which covered only the main components of crops, livestock, and forestry.

12 44. EIRR estimates for individual project components range from 3.3% for the forestry component to 3.8% for the crop component to 26.5% for the livestock component (Appendix 3). The high EIRR for the livestock component is due to the significant benefits of artificial insemination and its low cost. Sensitivity analysis was conducted for the project EIRR, which is highly sensitive to increases in production costs, but less sensitive to reduction in crop yields or increases in O&M costs. A 10% increase in production costs would make the project EIRR negative. C. Sustainability

45. The irrigation facilities provided under the Project were reportedly well maintained by their owners; this was confirmed by the OEMs field inspection. Buildings and equipment in the research and extension agencies were transferred to the Governments regular budget after project completion and are well maintained. The farm-to-market roads inspected by the OEM were in good condition under the maintenance of district offices of DCW. While repairs are needed on some roads, DCW reported sufficient allocation of maintenance budget from district councils. O&M of 12 of the 17 water supply systems has been transferred to local communities, where water user committees collect monthly fees for O&M of these systems. The remaining five schemes, which were constructed in the early years without prior agreements with local communities on their O&M responsibilities, have not been transferred and are being maintained and operated by DCW district offices. The OEM noted that some of the project activities have been terminated since project completion, such as the 17 private nurseries and the womens agricultural extension program. Since the womens agricultural extension services contributed little to the Projects primary benefits, their termination did not seriously affect the Projects sustainability. IV. A. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

Socioeconomic Impact

46. The Projects most significant impact was apparent on farmlands that received access to irrigation after project interventions. Crop yields were doubled, cropping patterns shifted from wheat to high-value crops, and farm income substantially increased. Access to irrigation significantly reduced the risk of crop failure due to erratic rainfall. The impact was particularly remarkable when comparing farms which benefited from minidams and tubewells with rain-fed farms that had no access to irrigation and suffered from severe drought in the past 2 years. As the irrigation facilities will continue to generate benefits, these facilities seem to be the most effective long-term solution to overcoming constraints to rain-fed agriculture. 47. The OEM noted, however, that benefits of the small-scale irrigation facilities in the project areas are highly localized, mostly confined to adjacent fields,25 which, in most cases, belong to one household. The external benefits of these facilities are rather small, including the convenience of washing clothes, or increased water supply for animals, which could be most critical in times of severe drought. While increased demand for farm labor occurred, the OEM noted that most of the newly hired tenants were not local farmers but migrants with experience in vegetable planting since the irrigated land was shifted to vegetable production and local farmers lacked such experience. Smallholders could not participate in the irrigation investment due largely to their inability to compete with large landholders in accessing project subsidies, including their inability to provide the required counterpart funds for the investment.
25

For example, a minidam on average irrigates about 6 ha; a pond, 1 ha.

13 48. The OEMs village survey found a highly skewed pattern of project benefit distribution, with only 1.3% of the households having received irrigation subsidies in the surveyed villages.26 While some smallholders received subsidies on dugwells and minor works such as spillways and water outlets, the most expensive subsidies (those for minidams and tubewells) were concentrated in the hands of nontargeted groups such as farmers with more than 10 ha of land. Furthermore, the OEM found significant variations in the amount of subsidies to individual irrigation items and a high concentration of a large amount of subsidies to a few households, including some that received two minidams or multiple ponds.27 49. The Project strengthened the capacity of a number of research institutes and extension agencies, which developed and disseminated improved varieties with higher crop yields. The full impact of the Projects support for rain-fed agricultural research may be revealed only in the long run. In the short run, however, the adoption of the recommended technology and its impact were less clear. Many smallholders and landless poor considered the extension services less relevant to them as they did not have the necessary conditions (such as good quality land, sufficient inputs, and timely access to machinery services) to adopt the recommended technologies. 50. The Project intended to reduce migration to cities; this objective was not fulfilled. Instead, the farm-to-market roads have not only improved farmers access to markets but also facilitated their search for employment in cities. It was reported that off-farm earnings were a major source of household income in the rain-fed areas, especially for the poor. Improvement in roads also facilitated visits of extension and social workers to remote communities and provided better access to emergency assistance in times of need. The OEM noted, however, that the 72 roads upgraded benefited less than 10% of the 865 villages in the project areas. 51. The benefits of the water supply systems were evenly distributed to all households connected to the systems. Beneficiaries interviewed by the OEM appreciated the Projects support and demonstrated willingness to pay for the continuity of the services. The water quality was considered better than the wells they used before the Project, and the distribution of water to households doorways significantly reduced womens household chores. The OEM noted, however, that the 17 water systems covered only 2% of the villages in the project areas. 52. The social impact of the credit component was limited as the requirement for land collateral excluded most landless poor and women. The lengthy and difficult procedure was quoted by smallholders as another major constraint to accessing loans from ADBP. The 7,565 loans issued under the Project covered only 8% of the 92,000 households in the project areas.

26

Based on data in 17 of the 19 surveyed villages, a total of 86 households received irrigation subsidies, representing 1.3% of the 6,400 households in these villages. The percentage of farmers that received irrigation subsidies in individual villages varied from 0.3% to 7.2%. 27 An analysis of beneficiary records found that subsidies for minidams ranged from $704 to $22,219, with an average of $8,130. Subsidies for ponds ranged from $77 to $5,407, with an average of $1,504. In terms of beneficiary, the top five beneficiaries of minidams received an average of $22,680 per beneficiary, whereas the bottom five received an average of $1,369. The top five beneficiaries of ponds received an average of $13,989, whereas the bottom five, an average of $132. Furthermore, the top five beneficiaries of minidams received 4.3% of the total subsidies for dams versus 0.3% received by the bottom five beneficiaries. The top five beneficiaries of ponds received 6.6% of total subsidies to ponds in contrast with 0.1% received by the bottom five beneficiaries. Finally, since there was no ceiling on how much in subsidies one household could receive, 63 beneficiaries received several ponds and 8 beneficiaries received two dams, with the highest subsidy of $26,702 going to one farmer who received two minidams.

14 53. The Project intended to target small farmers with landholdings of 5 ha or less, estimated at about 92,000 households. The OEM found that the most significant benefits came from the construction of minidams, ponds, tubewells, and dugwells, which benefited 2,257 households (Appendix 3, Table A3.12). The investment in rain-fed agriculture benefited another 17,925 farms, where wheat yields increased by 17%. The Project also provided subsidies for 965 lift pumps and 798 spillways/outlets and therefore benefited another 1,763 households. In addition, about 10% of the villages benefited from road improvement; 2% benefited from improved water supply; and a large number of households received free tree seedlings, poultry units, training, and extension services. However, these benefits were small compared with the benefits of irrigation facilities. B. Environmental Impact

54. The Project generated a positive impact on the environment with negligible negative influence. First, most of the irrigation structures such as minidams and ponds were relatively small as were land reclamation interventions such as gully plugs and land leveling. Increased use of wells and lift pumps may have lowered the water table in some locations, but the significance is difficult to assess after several years of continued low rainfall. Second, improved cultivation has an impact on augmenting water retention and intensifying vegetative cover. Third, roads constructed were mainly on flat or low undulating terrain, normally not requiring cuts into steeply sloped areas. Finally, potable water supply has reduced incidences of waterborne diseases. 55. The Project could have generated a better environmental impact if watershed management had been used to make optimal use of water resources and stabilize soil erosion in a catchment area. Most of the water and soil conservation works, however, took place in localized areas without taking into account the large catchment or subcatchment area. Furthermore, the social forestry component was unable to direct tree planting to the most critical areas due to its focus on plant nurseries. C. Impact on Institutions and Policy

56. The Projects achievements in ameliorating constraints to rain-fed agriculture by developing small-scale irrigation facilities have encouraged the Government to continue public investment in rain-fed areas. After the Project, the Government implemented the Barani Village Development Project financed by IFAD, and is currently preparing another intervention to be financed by ADB. The Project has not only provided rich experience and lessons learned for the design and implementation of follow-up projects, but also trained a large number of government officials and field staff who continue to work on such projects. Its institutional impact on local communities, however, was minimal as they were largely excluded from the design and implementation. Although the TA consultants organized a number of community groups, none of them sustained their operations after TA completion. V. A. Relevance OVERALL ASSESSMENT

57. The Projects objectives were consistent with the development strategy of the Government and the operational strategy of ADB at the time of appraisal. By promoting agricultural development in a region bypassed by earlier development, the Project contributed, in a limited way, to balanced regional development and increased agricultural production. The

15 project design, however, did not include measures to ensure that its intended target groups (smallholders, the landless, and women) received a proportionate share of benefits. In conjunction with a top-down approach that focused on technology improvement, this resulted in the capture of a significant amount of benefits by a small number of large landholders. The Project is therefore rated partly relevant. B. Efficacy

58. The Project met most of its physical targets as revised during implementation. The Project also fulfilled, to a reduced extent, its primary objective of increasing farm household production, employment, and income. However, its intention to increase household income particularly among smallholders, the landless, and women was not fulfilled. The objective of reducing constraints to rain-fed agriculture was fulfilled only in the farmlands that received irrigation facilities. The achievements were less than anticipated due to the small number of farms that received irrigation facilities. Finally, the Project did not fulfill its objective of reducing migration to cities. On balance, the Project is rated less efficacious. C. Efficiency

59. The Projects EIRR reestimated by the OEM is substantially below the appraisal estimate primarily due to a significant reduction in the number of project beneficiaries. Furthermore, farmers reluctance to finance investment supplementary to minidams and ponds led to low use of these facilities. The high subsidies for irrigation investment distorted private decisions and provided less incentive for project staff and farmers to select the most costeffective interventions. The design of the livestock centers focused on provision of buildings without addressing the key constraint of staff shortage, resulting in significant underuse of the centers. The Project is therefore rated less efficient. D. Sustainability

60. The Projects primary benefits have been increased farm production and household income in farms that received irrigation facilities. The sustainability of these benefits is likely as the irrigation facilities have been well maintained by their owners, and continued operation of these facilities is likely. Other project facilities such as roads and water supply systems have also been well maintained. The project facilities without clear sustainability are those that did not generate significant benefits, even during implementation, such as the womens agricultural extension program. Overall, the Projects sustainability is rated likely. E. Institutional Development and Other Impacts

61. The Project had a positive impact on the Governments policies and public agencies as it encouraged the Government to continue investment in rain-fed agriculture, and trained a large number of project staff. The project design included community mobilization, NGO engagement, and the womens extension program. However, as measures to ensure successful implementation were not developed, the impact on women and local communities was minimal. The insufficient attention to the distribution of benefits restricted the Projects social impact on poverty reduction. On balance, the Projects institutional development and other impacts are rated moderate.

16 F. Overall Project Rating

62. The overall project rating, based on the five rating criteria (paras. 5761), is partly successful.28 The Project has met most of its revised physical targets; its impact on increasing farm production was marked on farmlands benefiting from irrigation facilities. The primary benefits of the irrigation investment, however, flowed to a small number of large landholders. The Project had intended to target smallholders and landless poor. In the absence of implementation measures, however, it bypassed the majority of its intended target groups. G. Assessment of ADB and Borrower Performance

63. ADB designed the Project based on the Governments initiatives and long-term strategy for rain-fed area development. ADB also mobilized cofinancing from other donors. However, ADB should have given more attention to developing measures to ensure appropriate distribution of benefits. ADBs supervision of implementation could have been more effective in the initial years. Less frequent turnover of supervisory staff could have ensured the effectiveness of project supervision. Overall, ADBs performance is rated partly satisfactory. 64. The Government demonstrated strong ownership and commitment to rain-fed area development, and fulfilled the loan covenants with few exceptions. In particular, the entire amount of counterpart funds was made available at project commencement, thus avoiding implementation delays due to slow releases of counterpart funds. ABAD and other line agencies implemented the Project largely as designed. Although there were serious delays in the initial 4 years, implementation accelerated in later years and was completed with only 1 year of delay. Overall, the performance of the Government is rated satisfactory. VI. A. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

Key Issues for the Future

65. Distribution of Project Benefits. A major portion of the project subsidies was captured by a small number of large landholders instead of the intended target groups because (i) the subsidies were open to all farmers on a first come, first served basis; (ii) the high subsidies (75% of investment cost or a maximum of $16,000 for a minidam) attracted nontarget groups, including influential people; (iii) there was no ceiling on how much in subsidies one household could receive from various project activities; (iv) the requirement that farmers contribute at least 25% of investment cost put the target groups in a disadvantageous position as most smallholders had neither their own capital nor easy access to long-term loans; and (v) a topdown approach was adopted, which excluded the participation of local communities in the selection of subproject sites and beneficiaries. In retrospect, the Project could have benefited many more farmers, especially smallholders, if its design had included measures to ensure a fair distribution of project subsidies.29

28 29

Using the current four-category rating system (highly successful, successful, partly successful, and unsuccessful). For example, household coupons could have been issued and distributed exclusively to smallholders indicating the amount of project subsidy available for them to invest on irrigation. A number of smallholders could have combined their coupons to enable the construction of an inexpensive dugwell, which could have removed the key constraint to their farms and increased their household income. A bottom-up approach could have been adopted to organize local communities to facilitate the implementation of the household coupon system.

17 66. Use of Public Subsidies. The OEM considers subsidies to irrigation investment in the rain-fed area justified under two criteria: (i) the investment has significant environmental impact due to its critical location in a watershed area, or (ii) the investment generates a significant impact on poverty reduction due to its direct benefits to a large number of the poor. These two criteria, however, were not followed under the Project. The benefits of the small irrigation facilities in the project areas are highly localized, confined mostly to adjacent fields belonging to one household. If the Project had used subsidies for environmental purposes, a catchment approach could have been adopted to identify critical locations where the construction of water conservation structures was critical to the entire region. If the Project had used subsidies for poverty reduction, large landholders could have been excluded from the irrigation subsidies.30 67. Cost Effectiveness. Inefficiencies were reported during implementation, including oversized irrigation structures and a lack of clear need for many water spillways and outlets, which were 100% subsidized. Cases of underuse of minidams were thereafter reported as their owners did not invest in supplementary measures such as land leveling. Some farmers interviewed by the OEM said that they would not have constructed the water outlets without government subsidies. Others said that they could have reduced the investment by using local materials if the investment money had been their own. It appears that the project subsidies distorted private decisions on investment as farmers compared the financial returns with their own portion (25%) instead of with the entire investment cost. Furthermore, the subsidies provided little incentive or pressure for project staff to promote cost-effective measures, as they had the authority to allocate the attractive subsidies. In retrospect, incentives should have been developed to make farmers treat the project subsidies like their own money.31 To remove constraints to irrigation investment, efforts could have been made to provide easy access to long-term loans for all farmers who were interested in irrigation.32 Research institutes could have been encouraged to develop and disseminate affordable technologies. It is likely that farmers can make the most cost-effective investment decisions if they are (i) free from financial constraints, (ii) made fully aware of the investment costs and benefits, and (iii) given multiple choices, including cheap alternatives. 68. Integrated Approach. Although the Project adopted an integrated area development approach to address multiple needs in the rain-fed areas, this appeared to have been confined to the conceptual level without guiding the selection of subproject sites. Each implementing agency selected subproject sites based on its own criteria without particular attention to the complementary needs of the beneficiaries under other components. The desired synergy impact of using multiple interventions to simultaneously address the key constraints in a particular area was not apparent.33 Alternative approaches that integrate project interventions at the village

30

For large landholders, the Project could have organized study tours to visit successful investment cases, and provided free engineering design and financial analysis to encourage them to invest in irrigation using their own capital. 31 For example, the provision of subsidies could have been in the form of a fixed amount instead of on a percentage basis without limit. 32 Land collateral may still be required to ensure financial soundness of intermediaries. However, procedures for loan application should be simplified for small landholders. 33 The lack of synergy impact was due to the following reasons: (i) the current set-up of government organizations does not easily facilitate the integration of different project activities across different line agencies; (ii) the Project used physical targets to monitor the performance of various agencies; the targets became the basis of budgetary allocation and a driving force motivating each agency, which endeavored to achieve its own targets instead of the final goal and objectives of the Project.

18 level should be considered for future projects of this nature.34 Such an approach may also simplify project design by limiting the number of participating government agencies to a single agency responsible for area development, with strong field offices set up under local governments in the project areas. Various line agencies could participate in the project and provide services on a contractual basis. B. 69. Lessons Identified The Project has provided valuable lessons learned including the following: (i) Implementing a project in a poor region may not automatically have a significant impact on poverty reduction if specific measures are not taken to ensure a fair distribution of project benefits in favor of the poor. Inclusion in a project design of poverty-reduction activities such as NGO engagement and community development may not have the desired social impact if careful arrangements are not made for effective implementation of such activities. Provision of a credit line may not have the desired social impact if careful arrangements are not made to develop borrower groups and microfinance institutions that can deliver microfinance services to the poor. Inclusion of numerous training programs may not have the desired impact if the training is not based on beneficiary demand and is not aimed at building up longterm capacity in the local communities with continued support after the training. Smallholders and landless poor can easily be bypassed by public assistance that focuses solely on technology improvement. Support for agricultural research should focus on improvement in farmers fields. Incentive measures need to be included in project design to encourage research institutes to develop suitable technologies that match the prevailing conditions on most farms instead of aiming at the highest possible yields in research institutes under the most ideal conditions that are not accessible by most farmers. Free provision of inputs (such as tree seedlings) to farmers may lead to closure of such services after project completion. Project design should aim at the longterm operation of the introduced services and use funds during implementation to build up local institutions and capacities to sustain such services. Provision of project facilities (such as buildings) without addressing constraints to their full operation (such as staff shortage) may lead to underuse of such facilities and unnecessary maintenance cost.

(ii)

(iii)

(iv)

(v) (vi)

(vii)

(viii)

34

One alternative approach of village-level integration may include the following steps. First, conduct intensive consultations with local communities and let them identify their key constraints and investment priorities. Based on the results of the consultations, a village plan may be developed, which should focus on one or two primary investments. Other investments could be considered only if they facilitate the removal of constraints to the full operation of the primary investments so as to maximize their impact. Second, select project components and activities based on the village plans. Third, issue and distribute village coupons to the targeted villages; the coupons should specify the amount of project assistance available to finance public investments (such as roads or water supply systems) in the village plans. Fourth, let villages use their coupons to buy investment services from concerned government agencies. The demand for public services will then become a basis for budgetary allocation to line agencies. The performance of the government agencies will then be monitored by the local communities, who are now clients of the government agencies. Finally, a project design should provide maximum flexibility for effective implementation. At the initial stage, the target indicators of a project may be set in terms of its final goals, such as the number of villages and number of households that will be better-off after project interventions, instead of physical targets of dams and wells. The definition of the better-off situation and its monitoring indicators could later be developed through consultations with local communities.

19 C. Follow-Up Actions

70. The OEM has identified the following actions required to ensure the sustainability of project benefits. The OEM recommends that the Pakistan Resident Mission take the overall responsibility for monitoring the implementation of these actions. (i) The Government of Punjab, through P&D, should, by March 2003, ensure that DLDD transfer the eight livestock centers to the Governments regular budget to enable immediate repair of these facilities and to sustain their long-term operations. DLDD should, by March 2003, post at least one full-time veterinary assistant to each of the eight centers. The Government of Punjab, through P&D, should, by March 2003, ensure that the concerned district councils of the four project subdistricts allocate sufficient budgets for proper maintenance of the farm-to-market roads in these subdistricts. The Government of Punjab, through P&D, should, by March 2003, ensure that the concerned district councils of the four project subdistricts allocate sufficient budgets for proper maintenance of the five water supply systems that will not be transferred to local communities. ABAD should review lessons learned from the Project and incorporate them into the design of the proposed third barani intervention, which will be prepared through TA in 2003.

(ii)

(iii)

(iv)

COMPARISON OF APPRAISAL AND ACTUAL PROJECT COSTS ($ million)

At Appraisal Component A. Watershed Improvement 1. Soil and Water Conservation 2. Rangeland and Forestry Development 3. Water Harvesting B. Crop and Livestock Development 1. Basic Agricultural Research 2. Adaptive Research 3. Agricultural Extension 4. Livestock Husbandry C. Rural Infrastructure (Roads and Water Supply) D. Rural Credit E. Institutional Strengthening 1. Consulting Services 2. Training 3. Project Coordination Subtotal F. Contingencies 1. Physical Contingencies 2. Price Escalation G. Service Charge on ADB Loan H. Interest on IFAD Loan Total = not calculated. IFAD = International Fund for Agricultural Development. Source: Appraisal Report and Project Completion Report. Foreign Exchange Local Currency Total Foreign Exchange Actual Local Currency Total Actual as % of Appraisal Estimate Foreign Exchange Local Currency Total

4.3 0.5 2.3

6.5 3.4 1.3

10.7 3.9 3.6

2.5 0.0 5.5

5.7 3.5 4.0

8.2 3.5 9.5

59 0 242

88 101 298

77 89 263

0.1 0.2 0.3 0.7 4.1 0.1

0.5 1.0 2.1 1.9 3.0 7.5

0.6 1.2 2.4 2.6 7.2 7.6

0.1 0.2 0.3 1.0 7.5 0.3

0.5 1.1 2.2 2.2 5.3 3.9

0.6 1.3 2.5 3.2 12.8 4.2

94 95 96 144 182 259

105 114 105 115 175 52

102 111 104 123 179 55

0.9 0.1 0.1 13.6

0.1 0.0 1.1 28.4

1.0 0.1 1.2 42.0

0.5 0.2 0.3 18.4

0.3 0.0 1.8 30.4

0.8 0.2 2.1 48.8

56 250 252 135

268 164 107

80 250 172 116

1.7 2.0 1.0 3.2 21.5

2.2 7.8 0.0 0.0 38.4

3.9 9.9 1.0 3.2 59.9

0.0 0.0 0.8 1.7 20.9

0.0 0.0 0.0 0.0 30.4

0.0 0.0 0.8 1.7 51.3

0 0 81 54 97

0 0 79

0 0 81 54 86

Appendix 2
SUMMARY OF PHYSICAL ACCOMPLISHMENTS At As Appraisal Reviseda

21

Item A. Watershed Improvement 1. Soil and Water Conservation Improved Cultivation Deep Plowing/Chiseling Terracing and Leveling Land Reclamation Gully Plugging Water Disposal Outlets Demonstration of Vetiver Grass Establishment of Nurseries Stream Bank Training Minidams Ponds/Weirs 2. Rangeland and Forestry Development a. Public Forest Dry Afforestation/Seeding Anti-Erosion Work Fencing b. Private Lands Silvopastoral Agrisilvicultural Water Harvesting Turbine Pumps Dugwells Tubewells Lift Pumps Small Water Gates Drop Siphons Water Storage Tanks Water Conveyance Network Culverts Handpumps Drip Irrigation System Portable Irrigation System

Unit

Actual

Revised as % Actual as % of Appraisal of Revised

acre acre acre acre acre acre acre no. km no. no.

174,322 108,497 138,650 12,025 22,400 53,122 1,000 6 52 54 120

93,204 70,965 79,172 15,277 21,966 22,191 1,001 6 52 296 690

83,205 66,306 73,936 15,293 21,966 22,191 1,001 6 53 323 708

53 65 57 127 98 42 100 100 100 548 575

89 93 93 100 100 100 100 100 102 109 103

acre acre acre acre acre

13,000 13,000 13,000 9,500 9,500

14,747 13,993 3,507 4,580 21,265

12,568 12,133 2,912 3,896 21,170

113 108 27 48 224

85 87 83 85 100

3.

no. no. no. no. no. no. no. no. no. no. no. no.

14 0 36 300 2,100 1,400 0 0 0 0 0 0

5 1,140 93 987 2,636 622 91 134 24 1,077 330 166

5 1,144 92 965 3,923 847 107 147 49 727 110 156

36 258 329 126 44

100 100 99 98 149 136 118 110 204 68 33 94

B. Crop and Livestock Development 1. Basic Agricultural Research BARI SAWCRI 2. Adaptive Research Demonstration Plots Farmer Days Model Farms Distribution of Technical Literature

no. of trials no. of trials no. of trials no. no. no. no.

0 0 0 0 0 0 0

299 255 307 2,078 141 116 4,676

284 276 354 1,237 135 104 4,526

95 108 115 60 96 90 97

22

Appendix 2
Revised as % Actual as % of Appraisal of Revised 100 100 99 112 129 103 100 100 100

Item 3. Agricultural Extension Resource Intensive Villages Demonstration Plots Farmer Days Distribution of Technical Literature Pre- and Postharvest Training Agricultural Officers/Field Assistants Women Agricultural Officers Village Women Motivators Livestock Husbandry Distribution of Improved Poultry One-Week Course on Livestock Distribution of Veterinary Kits Outreach Training Artificial Insemination Farmer Days

Unit no. no. no. no. no. no. no. no.

At Appraisal 44 0 0 0 0 44 8 72

As Reviseda 44 2,184 1,678 19,708 4,896 8 4 72

Actual 44 2,173 1,874 25,454 5,053 8 4 72

18 50 100

4.

unit no. of trainees no. no. of trainees no. of animals no.

15,000 700 700 0 0 0

48,389 847 770 9,600 21,285 96

48,389 814 719 8,932 20,495 126

323 121 110

100 96 93 93 96 131

C. Rural Infrastructure 1. Farm-to-Market Roads 2. Village Water Supply

km no. of schemes

160 16

298 18

307 17

186 113

103 94

D. Rural Credit 1. Disbursements 2. Borrowers

b

PRs million no.

155 3,800

293

317 7,565

189

108

E. Institutional Strengthening

Training on Soil Conservation Training on Livestock Extension Training on Enterprise Development Training on Women Village Motivators Training on Livestock Farmers Formation of Beneficiary Groups Training of Masters for Literacy Training Training on Livestock Management Training on Women Farmers Training on Marketing Establishing of New Enterprises Strengthening of Existing Enterprises Farmer Days on Crop Production Farmer Days on Livestock

no. of staff no. of staff no. of staff no. of staff no. no. no. of farmers no. of farmers no. of farmers no. of farmers no. no. no. no

18 20 0 72 700 100 0 0 0 190 60 0 0 0

25 12 40 72 814 107 109 133 80 395 87 2,009 126

139 60 100 116 107

208

BARI = Barani Agricultural Research Institute, ha = hectare, km = kilometer, no. = number, SAWCRI = Soil and Water Conservation Research Institute. a Target figures were revised in September 1995 and July 1997; the revision targets of July 1997 are used in this table. b As there were no revisions on targets under this component, the actual accomplishments are compared with the appraisal targets. Source: Appraisal Report, Project Completion Report, Project Coordination Unit, and Implementing Agencies.

Appendix 3

23

ECONOMIC REEVALUATION A. Methodology and Assumption

1. The method used in the economic reevaluation follows Asian Development Bank Guidelines for the Economic Analysis of Projects. The economic internal rate of return (EIRR) is estimated for the Projects major components (irrigated and rain-fed agriculture, forestry, and livestock) individually and jointly. Major assumptions used in the analysis include the following: (i) (ii) All costs and benefits are expressed in constant 2002 prices. Financial prices of nontraded commodities are adjusted by employing a standard conversion factor of 0.9 used for similar projects in Pakistan. Input and farm product prices are based on seasonally adjusted 2002 prices. Economic prices for internationally traded commodities (wheat, milk, and urea) are based on March 2002 World Bank commodity price projections (Tables A3.1A3.2). The economic price of labor is calculated using a shadow exchange rate of 0.75, a standard practice for rural development projects in Pakistan. A comparison of financial and economic prices used at appraisal, project completion report (PCR), and project performance audit report is given in Table A3.3. Quantifiable benefits for the agricultural components are derived through farm budget analyses for crops on farms supported by the Project. Crop models are constructed for rain-fed crops including chickpea, millet, rapeseed, and wheat, and for irrigated crops, including cauliflower, onion, maize, and wheat (Tables A3.4A3.11). Based on the estimated crop yields and input uses, net returns are calculated. The assumed economic life of the Project is 20 years while the investment period covered 8 years from 1992 to 1998.

(iii)

(iv)

B.

Estimation of Project Benefits

2. The main project benefits were increased agricultural, livestock, and forestry production. Estimation of these benefits is derived from a comparison between the with and without project scenarios. Based on the annual completion figures provided by the Project Coordination Unit (PCU), it is estimated that a total of 20,181 farms benefited from the project interventions, including 17,925 farms that received project subsidies for land leveling, deep plowing, gully plugging, and land reclamation, and 2,257 farms that received minidams, ponds, tubewells, and dugwells. The total crop area affected by the Project is estimated at 40,011 hectares (ha), including 3,713 ha of irrigated land (Table A3.12). 1. Rain-Fed and Irrigated Agriculture

3. There were two types of crop enterprises in the project areas: the majority of farms were small (less than 5 ha) and dependent on rain-fed agriculture. Irrigated farms were larger using heavily subsidized and more capital-intensive structures provided under the Project. Accordingly, farm models are constructed for rain-fed and irrigated agriculture, including models of rain-fed (2.5 ha), minidam (6 ha), pond (1.74 ha), and dugwell (1.3 ha) (Tables A3.13A3.16). Farm financial budgets are calculated based on these models taking into account revenues from

24

Appendix 3

farm production as well as investment and operational costs. The results show low returns to investment on rain-fed agriculture such as land leveling, gully plugging, and land reclaiming. If without project subsidies, it would take farmers 26 years to recover these investment costs. That would be reduced to 7.4 years if project subsidies were received (Table A3.13).1 In sharp contrast, investment in irrigation facilities has very high returns. In the case of minidams, the total investment cost of PRs386,184 could be recovered by incremental returns in 4.1 years without project subsidies, and in 1.5 years with subsidies (Table A3.14). In the case of ponds, the investment cost of PRs73,052 could be recovered in 3.1 years without project subsidies and in 1.2 years with subsidies (Table A3.15). In the case of dugwells, the investment cost of PRs58,897 could be recovered in 3.3 years without project subsidies (Table A3.16). The quick recovery of investment costs is based on the assumption of full use of the available command area. 4. It is assumed that farms that received project subsidies for land leveling, gully plugging, and land reclamation adopted improved rain-fed cultivation practices. A total of 17,925 farms with 36,298 ha are included in this group based on available data (Table A3.12). Applying the rain-fed agricultural model, the calculated EIRR for rain-fed agriculture is 4.0% (Table A3.17). 5. Irrigated farms included in this analysis are those that received minidams, ponds, tubewells, or dugwells under the Project. Based on the yearly completion data provided by the PCU, these included a maximum of 2,257 farms with a total crop area of 3,713 ha (Table A3.12).2 The calculated EIRR for the irrigated agriculture is 3.3% (Table A3.18). When combining rain-fed and irrigated agriculture, the calculated EIRR for the crop components is 3.8% (Table A3.19). 2. Livestock

6. Primary benefits from the livestock subcomponent resulted from provision of vaccinations and artificial insemination (AI) units through the eight livestock centers. It is reported that AI could double milk production from improved breed crosses. Based on the actual numbers of AIs and vaccinations provided, as well as discussions with beneficiaries and project staff, it is estimated that the Project reached about 15,000 livestock households through these centers. Due to the late start in providing services, less than 50% of the households benefited in the first half of the project period. The number of beneficiaries progressively increased to 100% in the last 2 years of the Project. The Operations Evaluation Mission (OEM) estimated that the gains from improved livestock husbandry would flatten after 10 years inasmuch as the centers have been significantly underused since project completion due to staff shortage, although some services would continue on a reduced scale. 7. Despite the above assumptions, the estimated EIRR for the livestock subcomponent is high (26.5%, Table A3.20), largely due to the low cost of vaccinations and AI units, the substantial increase of milk production from the breed improvement, and the impact of converting local milk price to high border price.

1
2

These results are consistent with the OEMs findings as farmers interviewed said that they would not invest in these items without project subsidies. Since there are no data on the number of beneficiaries of tubewells and dugwells, the number of completed items are used as an approximation of the number of beneficiaries. This estimate could serve as the maximum number of beneficiaries assuming that no beneficiary received more than one item. Estimation of the crop areas is based on data of command area and its use.

Appendix 3

25

3.

Forestry

8. The primary benefits from forestry are estimated based on areas planted with trees for wood or plants for fodder during the project. The production results were estimated based on discussions with staff from the Department of Forestry. Due largely to the relatively low value of the forestry products in terms of low quality wood and fodder, the estimated EIRR for this component is 3.3% (Table A3.21). It is noted that the trees and fodder generate a substantial amount of unquantifiable economic benefits relating to environmental protection, as the dryland in the project areas suffers considerably by wind and water erosion if without vegetation coverage. 4. Nonquantified Economic Benefits

9. At appraisal, nonquantified economic benefits were expected to accrue from the effects of soil conservation, watershed improvement, decreases in silt deposition, improved market access with improved rural roads, and nutritional impacts from water supply and womens extension activities. The OEM found no baseline or subsequent evaluation information that would provide sufficient data to carry out an economic assessment of these benefits, although they could be significant.3 10. Benefits from improved farm-to-market roads would include increased access to markets, better prices for farm inputs and agricultural outputs, as well as better access to government extension services due to greater ease for extension staff to visit farm sites. Improved accessibility to product markets would allow farmers to sell at market centers rather than at farmgate providing opportunities to realize higher prices for their products. In the case of milk, the price difference was quoted as great as 50% between farmgate and market centers. 11. For the water supply component, three types of economic benefits were expected including (i) time savings for women providing opportunities for other productive activities; (ii) reduced incidence of water-borne diseases; and (iii) savings accruing from reduced visits to medical practitioners and use of medications. Due to a lack of reliable baseline information, however, it is difficult to estimate the level of water-borne diseases and expenditures on health. C. Economic Internal Rate of Return for the Entire Project 1. Base Case

12. The estimated EIRR for the entire Project (excluding rural infrastructure and rural credit) is 4.1% (Table A3.22), much lower than what was estimated at appraisal (24.0%) and recalculated by the PCR (10.1%).4 The primary cause of the substantial reduction was the significantly reduced outreach of the Project in the rain-fed and irrigation components, which

Research activities supported under the Project included monitoring of soil erosion and silt deposition, but no data on the results of the research was available as baseline and evaluation data collected for the Project focused on agricultural production activities. Furthermore, no information was collected on changes in road traffic, water-borne diseases, or expenditures on health. As a result, there are no reliable data to quantify the benefits for the rural infrastructure component. The project components of farm-to-market roads, water supply, and rural credit were excluded in the EIRR calculations at appraisal and in the PCR, which covered only the main components of crops, livestock, and

forestry.

26

Appendix 3

intended to benefit about 50,000 to 78,000 households.5 In this analysis, it is estimated that only 20,181 farm households benefited from the crop components with a total of 40,011 ha of cropland (Table A3.12). Furthermore, the substantial increases of crop yields estimated at appraisal have been proven to be overly optimistic (Table A3.23). Of the 20,181 beneficiaries of the agricultural components, only 2,257 (11%) farms received irrigation facilities and experienced significant crop yield increase. Finally, use of the available command areas was significantly below design estimates due to farmers reluctance to finance supplementary investments such as land leveling and conveyance networks. 2. Sensitivity Analysis

13. Sensitivity analysis was conducted for the project EIRR against various scenarios. A 10% reduction in crop yields would reduce the project EIRR from 4.1% to 3.0%; a 10% increase in operation and maintenance costs would reduce the EIRR to 3.7%, whereas a 10% increase in production cost would reduce the project EIRR to negative.

The appraisal report anticipated that at least 54%, and as high as 85%, of the 92,000 targeted households would adopt the recommended technologies and thus benefit from the agricultural components.

Appendix 3

27

Table A3.1: Financial and Economic Prices (PRs)

Item Outputs Wheat Maize Wheat Straw Millet Millet Straw Chickpea Rapeseed Groundnut Vegetables Onion Cauliflower Livestock Milk Cull Buffalo/Cattle Male Calf (12 months) Female Calf (12 months) Chicken Eggs Wool Manure Inputs Wheat Seed Maize Seed Millet Seed Groundnut Seed Groundnut Seed (improved) Chickpea Seed Rapeseed Vegetable Seed Fertilizers Urea Diammonium Phosphate Potassium Sulphate Insecticide Machinery Plowing Deep Plowing Bed Preparation Threshing Livestock Concentrate Kharif Foddera Wheat Straw Milk for Calf Replacement Labor Labor November Transport Pumping
a

Unit Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg L Head Head Head Kg no. Kg Kg Kg Kg Kg kg kg kg kg kg kg kg kg l tractor h tractor h tractor h tractor h kg kg kg l head person-day person-day bag lump sum

Financial Prices 7.5 9.5 2 10 1.8 24 15 24 10 5 8 25,000 2,000 3,000 50 2 40 0.15 14.25 11 12 30 40 32 25 12 8.3 14.2 10 450 200 200 200 200 10 1 2 10 22,500 100 80 20 1,500

Economic Prices 10.7 8.6 1.8 9.0 1.6 21.6 13.5 21.6 9.0 4.5 11.9 22,500.0 1,800.0 2,700.0 45.0 1.8 36.0 0.1 12.8 9.9 10.8 27.0 36.0 28.8 22.5 10.8 9.2 14.3 12.5 405.0 180.0 180.0 180.0 180.0 9.0 0.9 1.8 14.9 20,250.0 75.0 60.0 18.0 1,350.0

Summer crop season from April to September. h = hour, kg = kilogram, l = liter, no. = number. Source: Operations Evaluation Mission estimates.

28

Appendix 3

Table A3.2: Import Parity Price at Farmgate (2002 prices)

Item A. Wheat (per ton) b US No. 1 Hard Red Winter, Ordinary Protein, Gulf Freight Insurance CIF Karachi CIF Karachi Port Charges Losses (5%) Transport to Rawalpindi Less Local Agent Commission Local Transport and Handling Farmgate Price, Wheat (economic) Farmgate Price (financial) B. Milk (per 1,000 liters) Whole Milk Powder, CIF Karachi (per ton) CIF Karachi Local Transport and Handling Cost Landed Cost, Factory Reconstitution Costs for 1 liter of Milk 125 kg of Whole Milk Powder per 1,000 liters Reconstitution Costs Economic Price of Reconstituted Milk, Factory Gate Collection and Chilling Cost Farmgate Price, Cattle Milk per 1,000 liters (economic) Farmgate Price (financial) C. Urea (per ton) a Urea, Bulk, Spot, FOB Northwest Europe Freight Insurance CIF Karachi CIF Karachi Port Charges Losses (5%) Packing Transport to Rawalpindi Transport to Farm Farmgate Price, Urea (economic) Farmgate Price (financial) $ PRs PRs PRs PRs PRs PRs PRs PRs PRs 1,800 108,000 2,565 110,565 13,821 1,710 15,531 (2,250) 13,281 8,000 95.90 15.00 5.00 115.90 6,838 250 342 350 1,710 110 9,575 8,300
a

Currency Amount $ $ $ $ PRs PRs PRs PRs PRs PRs PRs PRs 123.90 18.50 5.00 147.40 8,697 300 435 1,620 (216) (120) 10,716 7,500

$ $ $ PRs PRs PRs PRs PRs PRs PRs PRs

CIF = cost, insurance, freight; FOB = free on board. a Metric ton is meant throughout. b Export price delivered at the Gulf port for prompt, or 30 days shipment. Source: Estimated by using World Bank's commodity price index March 2002.

Appendix 3

29

Table A3.3: Summary of Financial and Economic Prices of Outputs and Inputs (PRs)
Item
Outputs Wheat Millet Chickpea/Gram Rapeseed Groundnut Cattle (female) Buffalo Milk Cow Milk Inputs Urea Tractor Hire/Plowing

Unit kg kg kg kg kg head l l kg h kg kg personday

AR

Financial Prices PCR PPAR 7.00 10.00 12.00 12.00 b 4,000 9.50 7.50 10.00 24.00 15.00 24.00 b 3,000 8.00 8.30 200 10.00 1.00 100

AR

Economic Prices PCR PPAR 9.94 9.00 10.80 10.80 b 3,600 14.16 10.10 9.0 21.50 13.50 21.60 b 2,700 11.90 9.20 180 9.00 0.90 75

2.03 2.40 5.40 12.00 9.00 a 1,380 4.00

5.04 2.16 4.86 10.80 8.10 a 1,242 3.60

Livestock Concentrate Fodder Labor

2.74 60 2.50 0.10.6 35.00

7.30 150 9.50 0.75 80

4.91 60 2.25 0.25 22.75

8.10 135 8.55 0.68 60

AR = appraisal report, h = hour, kg = kilogram, l = liter, PCR = project completion report, PPAR = project performance audit report. a Breeding female. b 12 month female. Source: Appraisal report, project completion report, and Operations Evaluation Mission estimates.

30

Appendix 3

Table A3.4: Wheat Rain-Fed (yields and inputs per hectare)

Item Main Production Wheat Wheat Straw Input Costs Tillage Bed Preparation Drilling Seed Urea Diammonium Phosphate Threshing Transport Labor Costs April Hired April Family November Family Unit Without Project With Project Change (%)

t t tractor h tractor h tractor h kg kg kg tractor h bag person-day person-day person-day

1.2 1.2 7.5 3 1.5 100 50 50 1.5 24 2 7 4

1.4 1.4 8 3 1.5 100 65 65 1.75 28 2.5 6.5 4.5

17 17 7 0 0 0 30 30 17 17 25 (7) 13

Financial Budget (PRs per hectare)

Revenue Wheat Wheat Straw Subtotal Revenue Input Costs Tillage Bed Preparation Drilling Seed Urea Diammonium Phosphate Threshing Transport Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Hired Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

9,000 2,400 11,400 1,500 600 300 1,425 418 710 300 480 5,733 5,667 200 200 5,467

10,500 2,800 13,300 1,600 600 300 1,425 543 923 350 560 6,301 6,999 250 250 6,749

17 17 17 7 0 0 0 30 30 17 17 10 23 25 25 23

Appendix 3

31

Table A3.5: Rapeseed Rain-Fed (yields and inputs per hectare)

Item Main Production Rapeseed Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Labor Costs April Hired April Family November Family Unit Without Project With Project Change (%)

t tractor h tractor h kg kg kg person-day person-day person-day

0.6 3.5 3.5 25 60 60 6 14 4

0.75 3.5 3.5 25 100 100 7.25 16 6.25

25 0 0 0 67 67 21 14 56

Financial Budget (PRs per hectare)

Revenue Rapeseed Subtotal Revenue Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Hired April Family November Hired Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

9,000 9,000 700 700 625 498 852 3,375 5,625 600 0 0 600 5,025

11,250 11.250 700 700 625 830 1,240 4,275 6,975 70 0 0 700 6,275

25 25 0 0 0 67 6 27 24 17 0 0 17 25

32

Appendix 3

Table A3.6: Chickpea Rain-Fed (yields and inputs per hectare)

Item Main Production Chickpea Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Labor Costs April Family November Family Unit Without Project With Project Change (%)

t tractor h tractor h kg kg kg person-day person-day

0.5 3.5 3.5 50 0 0 15.5 2.5

0.6 3.5 3.5 50 20 40 18.5 2.75

20 0 0 0 0 0 19 10

Financial Budget (PRs per hectare)

Revenue Chickpea Subtotal Revenue Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Family November Family Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

12,000 12,000 700 700 1,140 0 0 2,540 9,460 0 0 0 9,460

14,400 14,400 700 700 1,140 166 568 3,274 11,126 0 0 0 11,126

20 20 0 0 0

29 18

18

Appendix 3

33

Table A3.7: Millet Rain-Fed (yields and inputs per hectare)

Item Main Production Millet Millet Straw Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Labor Costs April Family Unit Without Project With Project Change (%)

t t tractor h tractor h kg kg kg person-day

0.36 1 3.5 3.5 5 50 50 10.5

0.4 1.2 3.5 3.5 5 75 75 11

11 20 0 0 0 50 50 5

Financial Budget (PRs per hectare)

Revenue Millet Millet Straw Subtotal Revenue Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Family Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

3,600 1,800 5,400 700 700 60 415 710 2,585 2,815 0 0 2,815

4,000 2,160 6,160 700 700 60 622.5 1,065 3,148 3,013 0 0 3,013

11 20 14 0 0 0 50 50 22 7

34

Appendix 3

Table A3.8: Wheat Irrigated (yields and inputs per hectare)

Item Main Production Wheat Wheat Straw Input Costs Tillage Bed Preparation Drilling Seed Urea Diammonium Phosphate Threshing Transport Pumping Labor Costs April Hired April Family November Family Unit Without Project With Project Change (%)

t t tractor h tractor h tractor h kg kg kg tractor h bag lump sum person-day person-day person-day

1.2 1.2 7.5 3 1.5 100 50 50 1.5 24 0 2 7 4

1.9 1.9 8.5 4 1.5 100 100 100 1.75 38 1 3 9 5

58 58 13 33 0 0 100 100 17 58

50 29 25

Financial Budget (PRs per hectare)

Revenue Wheat Wheat Straw Subtotal Revenue Input Costs Tillage Bed Preparation Drilling Seed Urea Diammonium Phosphate Threshing Transport Pumping Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Hired Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, t = metric ton.
Source: Operations Evaluation Mission estimates.

9,000 2,400 11,400 1,500 600 300 1,425 415 710 300 480 0 5,730 5,670 200 200 5,470

14,250 3,800 18,500 1,700 800 300 1,425 830 1,420 350 760 3,000 10,585 7,465 300 300 7,165

58 58 58 13 33 0 0 100 100 17 17 85 32 50 50 31

Appendix 3

35

Table A3.9: Maize Irrigateda (yields and inputs per hectare)

Item Main Production Maize Grain Maize Thinning Maize Stover Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Pumping Labor Costs April Hired April Family November Hired November Family Unit With Project

t t t tractor h tractor h kg kg kg lump sum person-day person-day person-day person-day

1.5 0.5 1.5 3.5 3.5 40 150 150 1 4 16 10 10

Financial Budget (PRs per hectare)

Revenue Maize Grain Maize Thinning Maize Stover Subtotal Revenue Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Pumping Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Hired November Hired Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, t = metric ton. a New crop introduced with the Project. Source: Operations Evaluation Mission estimates.

14,250 1,000 3,000 18,250 700 700 440 1,245 2,130 0 6,715 11,535 400 800 1,200 10,335

36

Appendix 3

Table A3.10: Cauliflower Irrigateda (yields and inputs per hectare)

Item Main Production Cauliflower Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Potassium Sulphate Insecticide Transport Pumping Labor Costs April Hired April Family November Family November Hired Unit With Project

t tractor h tractor h kg kg kg kg I bag lump sum person-day person-day person-day person-day

20 12 4 1 200 400 150 3 20 1 8 30 10 2

Financial Budget (PRs per hectare)

Revenue Cauliflower Subtotal Revenue Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Potassium Sulphate Insecticide Transport Pumping Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Hired November Hired Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, l = liter, t = metric ton. a New crop introduced with the Project. Source: Operations Evaluation Mission estimates.

100,000 100,000 2,4000 1,000 8,500 1,660 5,680 1,500 1,350 400 10,000 32,490 67,510 800 160 960 66,550

Appendix 3

37

Table A3.11: Onion Irrigateda (yields and inputs per hectare)

Item Main Production Onion Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Potassium Sulphate Insecticide Transport Watering Labor Costs April Hired November Hired April Family November Family Unit t tractor h tractor h kg kg kg kg l bag lump sum person-day person-day person-day person-day With Project 15 15 5 1.25 200 400 125 3 15 1 25 30 25 85

Financial Budget (PRs per hectare)

Revenue Onion Subtotal Revenue Input Costs Tillage Bed Preparation Seed Urea Diammonium Phosphate Potassium Sulphate Insecticide Transport Watering Subtotal Input Costs Net Income (Before Labor Costs) Labor Costs April Hired Subtotal Labor Costs Net Income (After Labor Costs)
h = hour, kg = kilogram, l = liter, t = metric ton. a New crop introduced with the Project. Source: Operations Evaluation Mission estimates.

150,000 150,000 3,000 1,000 3,750 1,660 5,680 1,250 1,350 300 10,000 27,990 122,010 2,500 2,400 4,900 117,110

Table A3.12: Beneficiaries of Agricultural Components (no. of farms and crop area)
Item No. of Farms Benefited Total Farms Rain-Fed Irrigated Dugwell Pond Minidam Tubewell Area Benefited (ha) Total Crop Area Rain-Fed Irrigated Dugwell Pond Minidam Tubewell
a

Year 1 New Cum

Year 2 New Cum

Year 3 New Cum 4,848 4,608 240 0 205 16 19

Year 4 New Cum 2,914 2,847 67 0 57 9 1 7,762 7,455 307 0 262 25 20

Year 5 New Cum 2,491 10,253 2,308 9,763 183 490 0 0 136 398 40 65 7 27

Year 6 New Cum 2,437 12,690 2,158 11,921 279 770 0 0 154 553 85 150 40 67

Year 7 New Cum

Year 8 New Cum

Year 9-20 New Cum 0 20,181 0 17,925 0 2,257 0 1,140 0 709 0 323 0 85

1,070 1,070 1,719 1,053 1,053 1,643 17 17 76 0 0 0 16 16 67 1 1 5 0 0 4

2,789 2,060 2,696 1,912 93 147 0 0 83 122 6 10 4 15

4,321 17,011 3,170 20,181 3,075 14,996 2,929 17,925 1,246 2,015 241 2,257 1,050 1,050 90 1,140 71 623 85 709 116 266 57 323 9 76 9 85

2,157 2,158 3,452 2,133 2,133 3,327 25 25 126 0 0 0 21 21 88 4 4 19 0 0 19

5,610 4,142 5,460 3,873 150 269 0 0 109 161 22 37 19 72

9,752 9,332 419 0 269 59 91

5,878 15,629 5,765 15,097 113 532 0 0 75 344 33 92 5 96

5,033 20,663 4,674 19,771 360 892 0 0 179 523 148 239 34 130

5,077 25,739 4,369 24,140 708 1,599 0 0 203 725 313 553 192 322

7,883 33,622 6,389 40,011 6,227 30,367 5,931 36,298 1,655 3,255 459 3,713 1,092 1,092 94 1,186 93 818 112 930 427 980 210 1,190 43 365 43 408

0 40,011 0 36,298 0 3,713 0 1,186 0 930 0 1,190 0 408

Cum = cumulative, ha = hectare. a Crop area of rain-fed agriculture refers to utilized farm area that underwent land leveling, gully plugging, and land reclamation. Irrigated crop area refers to utilized command area of the irrigation facilities. Source: Yearly physical performance data from the Project Coordination Unit.

Appendix 3

39

Table A3.13: Farm Model Rain-Fed (2.5 hectare) (financial budget [aggregated] in PRs)

Item Main Production Wheat Millet Pulse Rapeseed Groundnut Straw Subtotal Production Value Production Cost Mechanical Inputs Seed Fertilizer Chemicals Subtotal Purchased Inputs Hired Labor Subtotal Production Costs Net Income Incremental Net Income Investment Cost Without Subsidy Leveling @ 2,470/ha x 25% Land Reclamation @6,250/ha x 25% Gully Plugs @ 5,580/ha x 25% Subtotal Investment Cost with Subsidy Net Financial Return Without Subsidy No. of Years Before Investment Paid-Off Investment Cost With Subsidy Leveling @ 2470/ha x 25% Land Reclamation @ 6,250/ha x 25% Gully Plugs @ 5,580/ha x 25% Subtotal Investment Cost with Subsidy Net Financial Return With Subsidy No. of Years Before Investment Paid-Off
ha = hectare, No. = number. Source: Operations Evaluation Mission estimates.

Without Project

With Project (Year) 1 2 3 to 20

8,820 1,080 1,560 540 6,384 600 18,984 4,600 3,350 2,250 0 10,200 300 10,500 8,484

9,261 1,123 1,669 583 6,959 600 20,195 4,700 6,685 2,565 0 10,950 333 11,283 8,912 428

9,702 1,166 1,778 632 7,533 600 21,412 4,800 4,020 2,880 0 11,700 366 12,066 9,346 862

10,319 1,199 1,872 675 8,172 708 22,945 5,000 4,355 3,173 113 12,640 399 13,039 9,906 1,422

6,175 15,625 13,950 35,750 (35,322) 26.2

862

1,422

1,544 3,906 3,488 8,938 (8,509) 7.4

862

1,422

40

Appendix 3

Table A3.14: Farm Model Minidam Irrigated (6 hectare) (financial budget [aggregated] in PRs)
Item Main Production Wheat Rapeseed Chickpea Cauliflower Maize Onion Millet Groundnut Subtotal Production Value Production Cost Mechanical Inputs Maintenance and Replacement Seed Wheat Maize Millet Chickpea Rapeseed Groundnut Cauliflower Onion Fertilizer Urea Diammonium Phosphate Potassium Phosphate Chemicals Insecticide Treatment Subtotal Input Cost Hired Labor Family Labor Subtotal Labor Costs Subtotal Production Costs Net Income Incremental Net Income Investment Cost Without Subsidy Net Financial Return Without Subsidy No. of Years Before Investment Paid-Off Investment Cost With Subsidy Net Financial Return With Subsidy No. of Years Before Investment Paid-Off
No. = number. Source: Operations Evaluation Mission estimates.

Without Project

With Project (Year) 1 2 3 to 20

25,920 2,700 1,800

3,240 10,080 43,740

52,043 5,870 7,513 52,174 18,587 78,261 3,130 11,270 228,848

54,409 6,136 7,855 54,545 19,432 81,818 3,273 11,782 239,250

59,850 6,750 8,640 60,000 21,375 90,000 3,600 12,960 263,175

11,200 4104 54 240 187.5 2700

1718.1 3770.1

4,348 69,522 5,204 574 47 835 326 3,130 4,435 2,217 7,394 16,447 1,435 1,350 157 117,421 6,722 6,722 124,143 104,705 85,014 386,184 (301,170) 4.1 121,634 (36,620) 1.5

4,545 72,682 5,441 600 49 873 341 3,273 4,636 2,318 7,730 17,195 1,500 2,025 164 123,372 7,027 7,027 130,399 108,851 89,160 89,160

5,000 79,950 5,985 660 54 960 375 3,600 5,100 2,550 8,503 18,914 1,650 2,025 180 135,507 7,730 7,730 143,237 119,938 100,247 100,247

23,974 7.5 68 76 24,050 19,691

89,160

100,247

Appendix 3

41

Table A3.15: Farm Model Pond Irrigated (1.7 hectare) (financial budget [aggregated] in PRs)
Item Main Production Wheat Rapeseed Chickpea Cauliflower Maize Onion Millet Groundnut Subtotal Production Value Production Cost Mechanical Inputs Maintenance and Replacement Seed Wheat Maize Millet Chickpea Rapeseed Groundnut Cauliflower Onion Fertilizer Urea Diammonium Phosphate Potassium Phosphate Chemicals Insecticide Treatment Subtotal Input Cost Hired Labor Family Labor Subtotal Labor Costs Subtotal Production Costs Net Income Incremental Net Income Investment Cost Without Subsidy Net Financial Return Without Subsidy No. of Years Before Investment Paid-Off Investment Cost With Subsidy Net Financial Return With Subsidy No. of Years Before Investment Paid-Off
No. = number. Source: Operations Evaluation Mission estimates.

Without Project

With Project (Year) 1 2 3 to 20

7,517 783 522

940 2,923 12,685

15,093 1,702 2,179 15,130 5,390 22,696 908 3,268 66,366

15,779 1,780 2,278 15,818 5,635 23,727 949 3,417 69,383

17,357 1,958 2,506 17,400 6,199 26,100 1,044 3,758 76,321

1,190 16 70 54 783

1,261 20,161 1,509 166 14 242 95 908 1,286 643

1,318 21,078 1,578 174 14 253 99 949 1,345 672

1,450 23,186 1,736 191 16 278 109 1,044 1,479 740

498 1,093 4,770 416 392 45 34,052 1,949 1,949 36,001 30,364 21,819 73,052 (51,233) 3.1 24,107 (2,288) 1.2 4,987 435 587 47 35,778 2,038 2,038 37,816 31,567 23,021 23,021 5,485 479 587 52 39,297 2,242 2,242 41,539 34,782 26,237 26,237

3,704 435 435 4,139 8,545

23,021

26,237

42

Appendix 3

Table A3.16: Farm Model Dugwell Irrigated (1.3 hectare) (financial budget [aggregated] in PRs)
Item Main Production Wheat Rapeseed Chickpea Cauliflower Maize Onion Millet Groundnut Subtotal Production Value Production Cost Mechanical Inputs Maintenance and Replacement Seed Wheat Maize Millet Chickpea Rapeseed Groundnut Cauliflower Onion Fertilizer Urea Diammonium Phosphate Potassium Phosphate Chemicals Insecticide Treatment Subtotal Input Cost Hired Labor Family Labor Subtotal Labor Costs Subtotal Production Costs Net Income Incremental Net Income Investment Cost Without Subsidy Net Financial Return Without Subsidy No. of Years Before Investment Paid-Off a Investment Cost With Subsidy Net Financial Return With Subsidy No. of Years Before Investment Paid-Off Without Project With Project (Year) 1 2 3 to 20

5,702 594 396

713 2,218 9,623

11,450 1,291 1,653 11,478 4,089 17,217 689 2,479 50,347

11,970 1,350 1,728 12,000 4,275 18,000 720 2,592 52,635

13,167 1,485 1,901 13,200 4,703 19,800 792 2,851 57,899

903 12 53 41 594

378 829

957 15,295 1,145 126 10 184 72 689 976 488 1,627 3,618 316 297 34 25,833 1,479 1,479 27,311 23,035 16,553 58,897 (42,344) 3.3 0 16,553

1,000 15,990 1,197 132 11 192 75 720 1,020 510 1,701 3,783 330 446 36 27,142 1,546 1,546 28,688 23,947 17,465 17,465

1,100 17,589 1,317 145 12 211 83 792 1,122 561 1,871 4,161 363 446 40 29,811 1,701 1,701 31,512 26,386 19,904 19,904

2,810 330 330 3,140 6,483

17,465

19,904

No. = number. a Capital cost of dugwells was 100% subsidized by the Project, whereas farmers provided labor cost. Source: Operations Evaluation Mission estimates.

Appendix 3

43

Table A3.17: Economic Benefit Cost Stream and EIRR Rain-Fed Agriculture (PRs000)
Project Costs Extension and Adaptive Basic Research Research (12,976) (3,090) (9,026) (8,423) (15,449) (25,914) (1,764) (16,174) 0 0 0 0 0 0 0 0 0 0 0 0 (13,532) (9,680) (10,073) (1,620) (4,381) (9,712) (401) (34,080) 0 0 0 0 0 0 0 0 0 0 0 0

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Benefit (10,648) (12,249) (7,891) (13,888) (10,435) (3,068) (6,157) (945) 25,924 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 EIRR

Net Benefit Stream (37,156) (25,019) (26,990) (23,931) (30,265) (38,694) (8,322) (51,199) 25,924 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 4.0%

EIRR = economic internal rate of return. Source: Operations Evaluation Mission estimates.

44

Appendix 3

Table A3.18: Economic Benefit Cost Stream and EIRR Irrigated Agriculture (PRs000)
Project Costs Soil and Water Conservation Soil Loss and Water Monitoring Management (124,024) (37,174) (45,780) (37,249) (151,205) (244,736) (17,434) (162,557) 0 0 0 0 0 0 0 0 0 0 0 0 (3,103) (6,615) (12020) (1,990) (3,922) (13,563) (376) (13,352) 0 0 0 0 0 0 0 0 0 0 0 0

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Benefit 105 721 3,135 8,949 11,251 15,988 37,898 68,190 81,608 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 EIRR

Net Benefit Stream (127,022) (43,068) (54,665) (30,290) (143,876) (242,311) 20,088 (107,719) 81,608 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 3.3%

EIRR = economic internal rate of return. Source: Operations Evaluation Mission estimates.

Appendix 3

45

Table A3.19: Economic Benefit Cost Stream and EIRR Agriculture and Irrigation (PRs000)
Project Costs Extension and Adaptive Research Soil and Water Conservation and Water Management

Year

Basic Research

Soil Loss Monitoring

Benefits Rain-Fed Irrigated

Net Benefit Stream

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

(12,976) (3,090) (9,026) (8,423) (15,449) (25,914) (1,764) (16,174) 0 0 0 0 0 0 0 0 0 0 0 0

(13,532) (9,680) (10,073) (1,620) (4,381) (9,712) (401) (3,408) 0 0 0 0 0 0 0 0 0 0 0 0

(124,024) (37,174) (45,780) (37,249) (151,205) (244,736) (17,434) (162,557) 0 0 0 0 0 0 0 0 0 0 0 0

(3,103) (6,615) (12020) (1,990) (3,922) (13,563) (376) (13,352) 0 0 0 0 0 0 0 0 0 0 0 0

(10,648) (12,249) (7,891) (13,888) (10,435) (3,068) (6,157) (945) 25,924 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987

105 721 3,135 8,949 11,251 15,988 37,898 68,190 81,608 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 EIRR

(164,178) (68,087) (81,655) (54,221) (174,141) (281,005) 11,766 (128,246) 107,532 113,120 113,120 113,120 113,120 113,120 113,120 113,120 113,120 113,120 113,120 113,120 3.8%

EIRR = economic internal rate of return. Source: Operations Evaluation Mission estimates.

46

Appendix 3

Table A3.20: Economic Benefit Cost Stream and EIRR Livestock (PRs 000)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Project Cost (23,567) (4,418) (28,688) (13,941) (15,616) (19,940) (1,718) (12,875)

Benefits 5,097 (7,483) (15,421) (2,322) 8,049 21,403 35,366 49,960 65,205 75,547 76,309 77,072 77,072 77,072 77,072 77,072 77,072 77,072 77,072 77,072 EIRR

Net Benefit Stream (18,470) (11,901) (44,109) (16,263) (7,567) 1,463 33,648 37,085 65,205 75,547 76,309 77,072 77,072 77,072 77,072 77,072 77,072 77,072 77,072 77,072 26.5%

EIRR = economic internal rate of return. Source: Operations Evaluation Mission estimates.

Appendix 3

47

Table A3.21: Economic Benefit Cost Stream and EIRR Forestry (PRs000)
Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Project Cost (18,656) (15,767) (30,163) (18,254) (32,675) (31,615) (1,426) (13,550) Benefits (2,445) (3,504) (2,717) (3,266) (2,353) (1,634) (2,197) (1,394) (977) 21,281 45,167 26,843 38,989 24,796 15,499 23,060 13,620 13,620 13,620 13,620 EIRR
EIRR = economic internal rate of return. Source: Operations Evaluation Mission estimates.

Net Benefit Stream (21,101) (19,271) (32,880) (21,520) (35,028) (33,249) (3,623) (14,944) (977) 21,281 45,167 26,843 38,989 24,796 15,499 23,060 13,620 13,620 13,620 13,620 3.3%

48

Appendix 3

Table A3.22: Economic Benefit Cost Stream and EIRR The Project (PRs000)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Project Costs (206,506) (88,993) (143,641) (95,365) (233,683) (348,548) (29,276) (222,861) 0 0 0 0 0 0 0 0 0 0 0 0

O&M Cost (8,814) (13,235) (16,593) (17,266) (21,304) (28,527) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954) (35,954)

Rain-Fed (10,648) (12,249) (7,891) (13,888) (10,435) (3,068) (6,157) (945) 25,924 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987 29,987

Benefits Irrigated Livestock 105 721 3,135 8,949 11,251 15,988 37,898 68,190 81,608 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 83,133 5,097 (7,483) (15,421) (2,322) 8,049 21,403 35,366 49,960 65,205 75,547 76,309 77,072 77,072 77,072 77,072 77,072 77,072 77,072 77,072 77,072

Forestry (2,445) (3,504) (2,717) (3,266) (2,353) (1,634) (2,197) (1,394) (977) 21,281 45,167 26,843 38,989 24,796 15,490 23,060 13,620 13,620 13,620 13,620 EIRR

Net Benefit Stream (223,211) (124,743) (183,128) (123,158) (248,475) (344,386) (320) (143,004) 135,806 173,994 198,642 181,081 193,227 179,034 169,728 177,298 167,858 167,858 167,858 167,858 4.08%

EIRR = economic internal rate of return, O&M = operation and maintenance. Source: Operations Evaluation Mission estimates.

Appendix 3

49

Table A3.23: Comparison of Crop Yields (per hectare)

Crop Wheat Millet Chickpea/Gram Rapeseed/Oilseed Groundnut Maize Cauliflower Onion

Unit kg kg kg kg kg kg t t

Without Project AR PCR PPAR 800 400 380 300 550 1,473 720 983 503 1,200 360 500 600 700

AR 2,500 900 1,200 1,200 1,300

With Project PPAR a PCR Rain-Fed Irrigated 1,641 960 1,032 929 1,400 400 600 750 900 1,900

1,500 20 15

AR = appraisal report, kg = kilogram, PCR = project completion report, PPAR = project performance audit report, t = metric ton. a The Operations Evaluation Mission noted that many farmers shifted from grain production to high value cash crops after receiving irrigation facilities. Source: Appraisal Report, Project Completion Report, and Operations Evaluation Mission estimates.