Document of

The World Bank

FOR OFFICIAL USE ONLY FPY

Report No. 2198-IN

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

STAFF APPRAISAL REPORT

December 4, 1978

South Asia Projects DepartmentAgriculture D Division

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS 1/

US$1 = Rs 8.60

Rs 1 = US$0.116

Rs 1 million (M) = US$116,279

WEIGHTS AND MEASURES

Metric Units are used.

1 kilogram (kg) = 2.20 pounds1 metric ton (ton) = 1,000 kg = 0.98 long ton1 quintal 100 kg

- 1 meter (m) = 1.09 yards

1 kilometer (km) 0.62 miles1 hectare (ha) 2 2.47 acres1 square kilometer (km ) = 0.386 square miles

INDIAN FISCAL YEAR

April 1 to March 31

Kharif Season - Monsoon Season(May to October)

Rabi Season - Dry Season

(November to April)

1/ Until September 24, 1975, the Rupee was officially valued at fixedPound Sterling rate. Since then it has been fixed against a "basket"of currencies. As these currencies are floating, the US Dollar/Rupeeexchange rate is subject to change. Conversions in this report havebeen made at US$1 to Rs 8.60, which was the short-term average rateprevailing at the time of appraisal, June 1978.

FOR OFFICIAL USE ONLY

ABBREVIATIONS

APC - Agricultural Production CommissionerARDC - Agricultural Refinance and Development Corporation

CAP - Cover and Plinth (bagged grain placed on brick plinth

and covered with polyethelyne sheets)CWC - Central Warehousing CorporationDCB - District Central Cooperative Banks

FCI - Food Corporation of IndiaGOH - Government of Haryana

GOI - Government of India

GOO - Government of Orissa

GOS - State Governments

GOUP - Government of Uttar Pradesh

HAFED - Haryana State Cooperative Supply and Marketing Federation

IFFCO - Indian Farmers' Fertilizer Cooperative Limited

MDI - Management Development Institute

NCDC - National Cooperative Development Corporation

OSCMF - Orissa State Corporation Marketing FederationPCC - Project Coordination Committee

PCF - Uttar Pradesh Cooperative Marketing Federation

PCS - Primary Cooperative Societies (also known as Mini Banks,

PACS and LAMPS)RBI - Reserve Bank of India

RCMS - Regional Cooperative Marketing Societies

RCS - Registrar of Cooperative Societies

SCB - State Cooperative Banks

SLDB - State Land Development Bank (generic term for all land

banks)SWC - State Warehousing CorporationTDCC - Tribal Development Cooperative Corporation

This document has a restricted distribution and may be used by recipients only in the performanceof their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

TABLE OF CONTENTS

Page No.

I. INTRODUCTION .......................................... 1

II. AGRICULTURAL SECTOR AND COOPERATIVES .................. 1Agriculture ...................................... 1The Cooperatives ................................. 2

III. PROJECT INSTITUTIONS .................................. 4National Cooperative DevelopmentCorporation (NCDC) ....... ...................... 4

State Cooperative Banks (SCB) .................... 6Cooperative Marketing Federations .... ............ 10Primary Cooperative Societies (PCS) .... .......... 11Training ......................................... 11

IV. THE PROJECT .13Project Objectives and Rationale .... ............. 13Project Description .............................. 14

* Cost Estimates ................................... 16Project Financing ................................ 18Procurement ...................................... 19Disbursements .................................... 19

V. ORGANIZATION, MANAGEMENT AND LENDING OPERATIONS ....... 20General .......................................... 20Cooperative Societies (RCMS and PCS) .... ......... 20Cooperative Federations and TDCC .... ............. 21State Cooperative Banks .......................... 21NCDC's Role ................ 21Subproject Appraisal and Monitoring .... .......... 23Project Evaluation ............................... 24Accounts and Audit ............................... 25Lending Terms .................................... 25

VI. GODOWN USAGE AND FINANCIAL RESULTS .................... 28Incremental Godown Capacity ...................... 28Effect of Godown Costs and Commodity Prices ...... 28

This report is based on the findings of an appraisal missioncomposed of Messrs. S. Thillarajah, T. Turtiainen (IDA), R. Hoover, andH. Kramer (Consultants).

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TABLE OF CONTENTS (cont'd)

Page No.

Financial Projections ............................ 29

Cash Flow ....................................... 31Cost Recovery .................................... 31

VII. BENEFITS AND JUSTIFICATION ............................ 31Principal Benefits ............................... 31Economic Rate of Return .......................... 31Employment Effects ............................... 33Other Benefits ................................... 34Project Beneficiaries ............................ 34Project Risks .................................... 34

VIII. AGREEMENTS REACHED AND RECOMMENDATIONS .... ............ 35

ANNEXES

1. Project Tables and Charts2. Model Bylaws of PCS and Federations3. Disbursement Schedule4. Subproject Outline and Criteria5. Project Evaluation and Monitoring6. Documents and Data Available in the Project File

MAP (IBRD 13776)

INDIA

APPRAISAL OF THE

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

I. INTRODUCTION

1.01 The Government of India (GOI) has requested an IDA Credit of US$30

million (M) to help the National Cooperative Development Corporation (NCDC)

finance a rural storage project in the States of Haryana, Orissa and Uttar

Pradesh. GOI attaches high priority to agriculture and rural development

and relies heavily on the cooperative sector to achieve development and amore equitable distribution of the growth benefits. NCDC, as the nationalinstitution established by GOI specifically to promote, develop and finance

cooperative agricultural enterprises, is a natural choice for giving effectto this policy.

1.02 This project was prepared by NCDC in association with State govern-ments (GOS) of Haryana, Orissa and Uttar Pradesh. Since NCDC had hithertonot been used by the World Bank Group as an onlending channel, a Bank Eval-

uation Mission visited India in October/November 1976 to review its organiza-* tion, policies, procedures and performance. The mission concluded that NCDC

would be a suitable onlending channel subject to implementation of variousrecommendations contained in its Evaluation Report dated April 8, 1977.NCDC accordingly engaged the services of the Management Development Institute

of India (MDI) to review its organization, management and procedures. SinceMarch 1, 1978 MDI's recommendations and others approved by NCDC's Board are

being implemented (5.08 and 5.09).

1.03 This report is based on the findings of an IDA appraisal missioncomprising S. Thillairajah, T. Turtiainen (IDA), R. Hoover and H. Kramer

(Consultants) which visited India in May/June 1978. The mission was assisted

by Mr. Paul Dax (IDA).

II. AGRICULTURAL SECTOR AND COOPERATIVES

Agriculture

2.01 Agriculture is the most important sector and mainstay of India's

economy. It provides 71% of direct labor employment, accounting for 45% of

GNP and 37% of export earnings. During the last decade, GOI's development

plans have emphasized agriculture. However, although agricultural production

in recent years has reached record levels, it has not grown more than anaverage of 3% per annum over the last decade--just above population growth.If the economy as a whole is to grow much faster, if unemployment is to be

reduced and if reasonable equity in income distribution is to be achieved,the agricultural sector has to grow much faster. Thus, GOI in its draftSixth Five-Year Plan, more than in its Fifth Five-Year Plan, has placed highpriority in agricultural sector. GOI recognizes that faster agriculturalgrowth is necessary not only to increase output but to increase employmentas well. GOI's policies aim at increasing the rate of irrigation developmentand making more readily available to farmers a complete package of agricul-tural inputs, including credit, appropriately supported by improved extensionservices and research. A key element in this strategy is the development ofthe village cooperative society which in much of rural India is the onlyinstitution situated at the village level to provide credit and other inputsand post harvest facilities to help farmers progress toward higher technologyin agriculture.

The Cooperatives

2.02 The cooperative movement in India started in 1906 with the organiza-tion of farmers' credit societies. After independence in 1947, GOI has madea major and continuing effort to develop cooperatives as a means of providingboth rural and urban services. Cooperatives are organized on a State-by-Statebasis. Through various promotion programs and active support from Central andState governments, the cooperative movement has evolved into a large andeconomically important institution. While the performance of cooperativeshas been uneven, the system as a whole has reached a stage of developmentwhere the movement can be used as an effective tool for economic and socialdevelopment. There are about 310,000 cooperative societies with a membershipof more than 80 million families.

2.03 In general, the cooperative infrastructure is organized under athree-tier system. In the villages, the Primary Cooperative Society (PCS),using deposits from members and institutional borrowings, provides short andmedium-term credit; distributes farm inputs and consumer goods; and providesprimary marketing services. PCS in each district are members in a DistrictCentral Cooperative Bank (DCB) that provides funds for credit, and also ina Regional Cooperative Marketing Society (RCMS) located at the Block head-quarters and rural markets. RCMS provides wholesale marketing services toPCS and primary marketing services directly to its other members. Within eachState, DCB are shareholders in the State Cooperative Bank (SCB) and depend onit for refinance and other banking services. Wholesale marketing servicesrequired by RCMS are provided by the State Cooperative Marketing Federation.Procurement, storage and distribution of fertilizers, foodgrains and consumergoods make up most of the business volume of the RCMS and Federations.

2.04 Although the cooperatives function in the agricultural, industrialand commercial sector, their greatest impact is in the agricultural sector,particularly in providing short-term credit and farm inputs. The gross valueof agricultural input and commodity marketing by the cooperatives in 1976/77is estimated to be well in excess of Rs 20 billion (US$2.4 billion). Shortand medium-term credit granted and outstanding is estimated to be in excessof Rs 25 billion (US$3 billion). The long-term cooperative credit structureserving the farmers comprises State Land Development (or Mortgage) Banks(SLDB) which function through branches or affiliated Primary Land Development

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* Banks (PLDB). They provide loans for periods ranging from five to fifteen

years for agricultural development, mostly refinanced by the AgriculturalRefinance and Development Corporation (ARDC).

2.05 The performance of the cooperatives has been variable from State

to State and from year to year--being relatively poor in the lesser developedStates in the northern and eastern regions (e.g. Himachal Pradesh, Assam,

Orissa) and during years of poor harvests. Weakest links in the chain havebeen the primary levels--both credit societies and marketing societies. Inthe early seventies, many PCS were small in members, financial resources andvolume of business and consequently unable to pay for competent and full-timemanagement. Concern of governments over poor performance by cooperatives ledto several policy changes, mostly as a result of studies made by Reserve Bankof India (RBI) in collaboration with GOS. RBI prepared special studies andplans for most States for amalgamating small primary cooperative societiesto make them large enough to be viable. The late seventies thus witnessed adeliberate decrease in the number of primary societies--PCS reduced from about175,000 in 1973 to 125,000 in 1977. Along with these mergers, GOI's aim has

been also to change the character of the primary societies from mere credit or

specialized institutions into multipurpose cooperatives.

Cooperative Institutions

2.06 The cooperative movement in India receives the active support, par-

ticipation and influence of the Central and State governments both directlyand through national and state institutions established by GOI and GOS. Theinstitutions most concerned with the proposed project are NCDC, SCB, Coopera-tive Federations, PCS and State Registrars of Cooperative Societies (RCS)(3.01 through 3.33). Others of major significance are:

- National Cooperative Union of India (NCUI) established in1929 for promotion, research, education, training, nationaland international liaison, public relations, and dissemina-tion of information.

- National Dairy Development Board (NDDB) set up by GOI in 1965to provide technical, engineering, research, training advi-sory and support services for development of India's dairyindustry. NDDB, in conjunction with its financial affiliateIndian Dairy Corporation (ID.C), concentrates on extendingfinance and services to cooperative dairy developmentprojects. 1/

- National Agricultural Cooperative Marketing Federation of India(NAFED) established in 1958 as an apex national body of theseveral State Marketing Federations to assist in marketing offarm produce, distribution of consumer goods, and supplyof farm machinery and inputs.

1/ NDDB and IDC are implementing agencies for IDA's National Dairy (824-IN),Madhya Pradesh Dairy (522-IN), Karnataka Dairy (482-IN) and RajasthanDairy (521-IN) Projects.

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Indian Farmers Fertilizer Cooperative Ltd (IFFCO) set upin 1968 to undertake manufacture and marketing of fertilizer.

National Federations of State Land Development Banks (SLDB)and State Cooperative Banks (SCB) which coordinate theshort-, medium- and long-term credit activities in thecooperative sector.

Agricultural Refinance and Development Corporation (ARDC)established in 1963 to enlarge term credit available foragricultural investments and to improve lending qualitywithin agriculture.

III. PROJECT INSTITUTIONS

National Cooperative Development Corporation (NCDC)

3.01 The National Cooperative Development Corporation (NCDC) is an all-India public institution established by GOI under the National CooperativeDevelopment Act of 1962 to plan, promote, develop and finance agriculturaland agro-based industrial cooperative enterprises. NCDC participates indevelopment schemes of cooperatives engaged in production, processing,storage, marketing, export and import of agricultural inputs and output. Underthe Act (as amended up to 1974), NCDC is authorized to advance loans, providegrants and subsidies, and participate in the share capital of cooperativeenterprises either directly or through GOS and SCB. Within these broad limitsof authority, NCDC has engaged in a variety of special activities includingfinancial assistance for specific schemes both of the Central government andthose sponsored by NCDC. Examples are storage, sugar factories, spinning mills,stocking and distribution of fertilizers, and distribution of consumer goods inrural areas. It has also provided technical and financial assistance for suchdiverse activities as pre-investment surveys, initiating marketing studies,conducting feasibility studies, establishing research laboratories, under-writing training costs, strengthening management, and supplementing theshare capital of cooperatives.

3.02 NCDC is governed by a General Council of 51 members and a Boardof Management of 12 members. The Council is responsible for the NCDC's policywhereas general management is vested in the Board. The Managing Directorwho is also a member of the Board is the chief executive. He is supportedby a secretary, a financial advisor and six directors each in charge ofmarketing, processing, fertilizer input storage, rural consumer goods, tex-tiles and research and evaluation departments. NCDC has a staff of about350 including more than 100 executives specialized in cooperative and admin-istrative management and technical aspects of agri-business. NCDC has eightRegional Offices. Chart 1 in Annex 1 shows NCDC's present organizationstructure.

* NCDC's Sources of Funds and Lending Operations

3.03 NCDC Act does not provide for share capital. The sources of NCDC'sfunds are grants from GOI, borrowing from the market and GOI and retainedearnings. GOI has made funds available to NCDC in the form of annual budgetallocations. NCDC is also authorized to borrow from the market by sale ofbonds and debentures. NCDC resorted to market borrowings for the firsttime in 1974/75 when it raised Rs 27.5 M. This was followed by furtherissues of Rs 27.5 M, Rs 55 M and Rs 110 M in the succeeding years bringingthe total bonds now outstanding to Rs 220 M. Retained earnings are creditedto a capital account styled NCDC Fund Account which had a cumulative balanceof Rs 455 M on March 31, 1978. Borrowings from GOI on this date, amountedto Rs 767 M (see Comparative Balance Sheets summarized in Annex 1, Table 1).Sources and application of funds are summarized in Annex 1, Table 2.

3.04 NCDC channels loans and subsidies to client cooperatives mostlythrough the respective GOS (almost 90%), and sometimes through the SCB inthe State. It also lends directly to apex federations and cooperatives withinterstate business operations (details in Annex 1, Table 3). NCDC's loanparticipation in individual investments has ranged from 50% to 75% of totalcosts, the balance being met by the borrowing cooperatives, or by GOS as loansand share capital or by SCB with loans.

3.05 Since its inception up to April 1978, NCDC has provided Rs 2,325 M(US$270 M) for various cooperative development schemes; Rs 2,025 M (US$235 M)

* as loans, about Rs 269 M (US$31 M) as grants and subsidies and Rs 33 M(US$3.8 M) as direct participation in share capital. Financial assistanceprovided by NCDC falls into two categories--Centrally (GOI) Sponsored Schemesand NCDC Sponsored Schemes. The former includes loans for margin money forfertilizer distribution, special programs for underdeveloped states or unionterritories and for investments in sugar factories, spinning mills and agri-cultural chemical factories. NCDC schemes encompass an extensive rangeincluding storage, distribution, marketing of agricultural inputs and outputsand consumer goods. NCDC also finances from its own funds, as grants, num-erous development and promotional activities including training programs,market surveys and feasibility studies. Centrally Sponsored Schemes accountedfor 55% of the last five years disbursements, the remaining 45% NCDC Schemes(Annex 1, Table 4).

3.06 Loans outstanding at April 1, 1978, totaled Rs 1,330 (US$155 M).About 90% of this was owed by GOS, 8% by SCB and 1% by other cooperatives,roughly the same as the disbursement pattern. All loans to SCB and StateCooperative Federations are guaranteed by the States concerned. NCDC's loanrecovery record has been excellent. Loan repayment by borrowers 1/ arerecycled by further lending. The annual cash inflow from loan repaymentsbetween 1978/79 and 1983/84 is expected to average Rs 296 M 2/ (Annex 1,Table 5).

1/ After meeting repayment obligations to GOI on NCDC's own borrowing.

* 2/ Excluding transactions related to proposed Project.

3.07 Overdue loans are insignificant. Four loans totaling Rs 2.5 M(including accrued interest) were overdue as of March 31, 1978. One of thesewas overdue less than one month, another less than five months, and a thirdfor one year; progress was being made in collection of two of these at thetime of appraisal. Only one loan for Rs 0.4 M was considered chronic, havingfallen due in November 1976. There is no specifically designated reserve forbad debts. It is considered to be an unspecified component of the NCDC Fund.

Operating Results

3.08 NCDC has a favorable record of excess income over expenditure. Ithas increased in absolute terms over each of the past four years, and substan-tially in the past two years. Excess income over expenditure at the close of1977/78 was equivalent to 35.7% of gross income for the year although thisratio had declined slightly from higher levels reached in preceding years.A comparative statement of NCDC's Income and Expenditure is shown in Annex 1,Table 6.

Financial Position

3.09 NCDC has had a steady financial growth. Almost all of its loanshave been given to or been guaranteed by GOS. Major liabilities are Rs 766 Mowed to GOI and Rs 220 M in market borrowings. Debt equity ratio is 2:1.NCDC is a financially viable institution and should be in a position toimprove its financing and operations with its development programs plannedfor the Five Year Plan period 1978-83.

NCDC as an Additional On-lending Channel for Bank Group Funds

3.10 The Bank Group presently uses ARDC as the principal channel fordistributing agricultural credit through Cooperative Land Development Banksand Commercial Banks. The thrust of development activities financed throughthese institutions has been to increase agricultural production. Parallelemphasis is needed in establishing the infrastructure to facilitate handlingof such increased production. New investments should also enable the indi-vidual producer and the small entrepreneur to receive his proper share of suchenhanced product value.

3.11 GOI and GOS are, therefore, keen to assist cooperatives to enterinto, or extend their existing activities in storage, processing and marketing.Promoting or establishing cooperative institutions is not a function speciallyassigned to ARDC or other institutions used by IBRD. Neither does any of theseinstitutions possess the specialized experience or skilled staff to enable itto undertake the task. NCDC has such experience and staff and following imple-mentation of the recommendations of the Bank Evaluation Mission and the MDIstudy (1.02), it will be equipped to support the cooperative sector, partic-ularly for agro-industrial activities.

State Cooperative Banks (SCB)

3.12 There are 26 SCB in India. A SCB is essentially a banker forDistrict Central Cooperative Banks (DCB) and apex cooperatives (federations) S

* in the State. Membership in SCB is open to these DCB, other cooperatives and

to the State government concerned. SCB's functions include:

- financing DCB and other cooperative institutions;

- carrying on the general business of banking;

- acting as a balancing center for surplus funds in the

state;

- arranging supervision and inspection of DCB;

- providing training facilities; and

- promoting principles of cooperation.

3.13 SCB face competition from commercial banks in mobilization of funds.

But they are virtually without institutional competition in servicing the

short-term credit requirements of typical small cooperative enterprises and

the small scale farmer sector.

SCB Management and Organization in Project States

3.14 The General Body of SCB members or their designated representatives

is technically responsible for overall policy-making. This Body meets asoften as necessary but at least once each year following the annual audit.

In practice, policy making takes place at the second level which is the Board

of Directors (or Management Committee as in Orissa). The Board, comprising as

many as 20 Directors, includes the RCS, DCB representatives and GOS nominees.

The function of the Board of Directors which meets at least quarterly include:

- defining financial policies, e.g., loan maturity periods,

security, action on arrears and other lending terms and

conditions;

- defining staff strength, conditions of employment and

service rules;

- raising of funds, capital investments, and investment of

surplus funds; and

- setting deposit and business terms.

The Board may also designate special purpose committees to deal with specific

matters and policy issues.

3.15 SCB's Managing Director, the chief executive, is appointed by the

Board of Directors with approval of RCS. All those currently serving in the

SCB of the three Project States are government administrative officers ondeputation from GOS. They are competent and experienced and are keenly aware

of good credit practices necessary to make and collect loans and of their

responsibility to operate on sound banking principles. In these three States,

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SCB senior management staff are generally long on experience with the SCB,

backed by a University degree.

3.16 Annex 1, Chart 3 shows the organization structure of the Haryana

SCB which could be considered typical, although variations exist among the

three SCB in Project States. GOS and SCB recognize the need for improvements

in organization, staffing and procedures. An RBI study team which reviewed

the organizational structure of SCB in Uttar Pradesh has made recommendations

for an improved structure which SCB in Haryana and Orissa have also decided

to follow. (The main suggestions include establishment of five divisionsfor Administrations, Accounts, Inspection, Operations, and Planning and Devel-

opment. A Training Division would be formed when training of PCS secretaries

and DCB staff would have expanded sufficiently. Management efficiency would

be improved by establishing a new General Manager's post and assigning more

senior staff to assist the branch offices). Additionally, all three SCB have

arranged to strengthen their Special Loan Departments with staff capable of

carrying out project appraisal and monitoring work and to set up an Organi-

zation and Methods Unit (5.06).

SCB Staffing and Training

3.17 The three Project SCB have a total staff strength of about 635 of

which 100 could be classified as senior executives, 250 as junior executives

or assistant level officers and the remaining 285 as subordinate/support staff.

SCB also exert a great influence in the recruitment and training of the staff

under a Common Cadre Schemes. The Schemes employ all PCS managers and senior

staff of DCS under a separate administration and post them where they best

suit. The expenses of PCS Cadre are mainly recovered from the benefitting PSC,

based on a specified standard scale (related to credit/sales turnover) and

deficits are met by the DCB and SCB. This method of staffing has resulted

in higher caliber and more independent management in the largest and weakest

tier of the cooperative structure. This scheme was initiated to regulate

service conditions, appointments, supervision, training and control of

managers of the PCS.

SCB's Lending Operations

3.18 SCB lends to DCB and other cooperative institutions. In the Project

States less than half is directly for agricultural credit through DCB (Annex 1,

Table 7). Loans are predominately short-term. The proportion of medium-term

loans varies from less than 5% of disbursements in Haryana to over 20% in

Orissa. Long-term lending volume is very limited. Loan disbursements in

recent years have been expanding at an annual rate of over 30% in total for

the three Project SCB. Amounts disbursed in 1976/77 reached Rs 4,793 M.

Total loans outstanding at end of that year amounted to about Rs 1,693 M

(Annex 1, Table 8). It is estimated that over one-fourth is in medium-term

loans.

3.19 Refinancing of DCB for their short-term lending to PCS is based on

a system of setting maximum credit limits first for each farmer member and

subsequently consolidating at the various tiers. Loans for seasonal inputs

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* in cash and in kind are then made against this credit limit. Medium-term loan

purposes vary somewhat by area. They include purposes such as milch cows,bullocks, minor irrigation, small buildings, implements, rice mills, pulse

plants, bakeries, vegetable oil plants, handlooms, sugar mills, and cold

storage.

SCB Loan Recovery Record

3.20 Overdue loans have been kept within a narrow range (1 to 5%) and

have shown improvement over recent years when compared with demand or out-

standings. Some 22% of the overdues are considered as bad and doubtful debts.

Provisions made are more than adequate to cover this amount. A summary total

on June 30, 1977 for the three project SCBs is as follows:

Loans overdue Rs 39.5 MOverdue as % of demand 1.8%Overdue as % of outstandings 2.3%Bad and doubtful debts Rs 8.9 MProvision for bad and doubtful debts Rs 13.4 M

Details for the individual SCB, over each of the past five years, are shown

in Table 9. Currently all three SCB have a recoveries rate well in excess of

75%. To ensure consistent recoveries standards among various IDA-supportedcredit projects in India, NCDC would follow the same recoveries performancecriteria applied by ARDC in respect of SCB. Aging of overdues among the3 three Project SCB as of June 30, 1977 is as follows:

Uttar Pradesh Haryana Orissa Total------------ Rs Millions ------------

Less than 1 year 2.8 18.6 nil 21.41 to 2 years nil nil nil nil2 to 3 years nil nil 0.1 0.13 to 4 years 8.7 nil nil 8.7Over 4 years 9.0 0.1 0.2 9.3

Total 20.6 18.7 0.3 39.5

Financial Performance of SCB

3.21 Comparative Income and Expenditure Statements for the year 1976/77and the Balance Sheets as of June 30, 1977 for all three SCB are summarizedin Tables 10 and 11. Analysis of their performance during the five-year

period ended June 30, 1977 confirms that all these SCB are suitable for useby NCDC as onlending channels under the proposed Project.

Cooperative Marketing Federations

3.22 In general, all Federations in the Project States act as State level

wholesalers and distributors of farm inputs, and buyers, processors and mar-* keters of agricultural produce, dealing through marketing societies and village

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level cooperatives. The Federations that would participate in the proposed 0Project are: the Haryana Cooperative Supply and Marketing Federation Ltd.(HAFED); the Uttar Pradesh Cooperative Federation Ltd. (PCF) 1/; and OrissaState Cooperative Marketing Federation Ltd. (OSCMF). All Federations aregoverned by a General Body of Members and a Board of Directors. The ManagingDirector is the chief executive of the Federation and, in all three cases,

the present incumbents are government officers appointed on "deputation".All three Federations also have specialized civil engineering departments

with qualified staff. Financial performance of these Federations has beensatisfactory.

3.23 HAFED, established in 1966, has a membership of 71 (mainly marketingsocieties) and staff strength of about 900. It is recognized as a successfulApex cooperative institution and could serve as a model for others. Farm in-puts handled include fertilizer, pesticide and seed. Agricultural commoditieshandled are mainly wheat, paddy and maize. Others include pulses, barley,mustard, potatoes, onions, cotton and apples. HAFED also owns and operatestwo cattle feed plants, nine rice shellers, two pulse mills, two fertilizergranulating plants and a bakery. It also operates 80 covered godowns of81,500 tons and CAP storage of 29,000 tons.

3.24 PCF, established in 1943, has a membership of 279 including 184marketing societies and 31 DCB and 52 District Cooperative Federations.PCF has emphasized distribution of fertilizer, handling more than 150,000nutrient tons in 1976/77. For wheat procurement, PCF has opened more than1,400 Purchase Centers throughout the State and now commands about 57% ofthe total wheat bought in Uttar Pradesh under the Procurement Scheme. PCF'sother marketing operations include pulses, oilseeds, and oils. Godown capa-city owned and operated by PCF is about 130,000 tons. It also operates avegetable oil mill, rosin and turpentine factory, "ayurvedic" drug factory(based on herbs), cold storage, printing, plastic goods manufacturing andthe U.P. Handicrafts Emporium in Bombay.

3.25 OSCMF, established in 1948, has 154 members and a staff of 243.Although concentration in farm inputs has been on fertilizer, the quantitydistributed in 1976/77 was only about 25,000 tons because use of fertilizersin Orissa is much less than in Haryana and Uttar Pradesh. Foodgrain procure-ment is confined to procure paddy for GOO which in the same year was about25,000 tons. The general reason for the relatively smaller role playedby OSCMF is also that the Cooperative Marketing Societies in Orissa arestronger than their counterparts in Haryana and Uttar Pradesh--they own therice mills and most of the storage capacity used by them. OSCMF owns andoperates about 10,000 tons of godowns.

3.26 A Tribal Development Cooperative Corporation (TDCC) was establishedin 1967 specifically to promote development of the "Tribals" of Orissa.Similar to the Cooperative Federations, TDCC is engaged in procuring andmarketing of surplus agricultural and minor forest produce but concentrating

1/ PCF is the acronym derived from its old name Provincial CooperativeFederation. i

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* its activities in the "Tribal Areas." TDCC also supplies the Tribals withmost essential consumer goods and provides production and consumption loans.The membership of TDCC consists of 190 "Large Scale Marketing PrimarySocieties" (LAMPS) and GOO. The latter owns 80% of TDCC's capital of Rs 20 M.TDCC had a total turnover of Rs 42 M in 1976/77. Godowns capacity owned andoperated by TDCC at railheads and major road junctions in the Tribal areasis about 10,000 tons.

Primary Cooperative Societies (PCS)

3.27 In the initial stages, the major function of these societies hasbeen distribution of short- and medium-term credit to member farmers. Grad-ually, many of the PCS have diversified their activities into other services,particularly stocking and distribution of farm inputs--mostly fertilizer. Inrecent years, it has been government policy to encourage and enforce theamalgamation of small PCS each serving one or two villages into larger multi-purpose societies, adding marketing of farm produce, distribution of consumergoods, and mobilization of savings deposits to their existing functions. Theobjective was to provide an expanded membership, covering 5 to 15 villages, togenerate sufficient business to be able to support a trained manager and tomake the PCS financially viable.

3.28 The policy of restructuring and amalgamation of agricultural creditsocieties, followed nationally, resulted in a significant reduction in theirnumber from 175,000 in 1973 down to about 125,000 in June 1977 (Annex 1,

* Table 12). In the Project States, the total of PCS in 1976 numbering 18,761was reduced by 31% to 12,915 in May 1978. The reorganized societies havebeen renamed with different names in the project States. 1/ They serve asmultipurpose service centers and function as focal points for rural develop-ment activity.

Training

3.29 Construction of new godowns under the Project would not by itselfwarrant special training of participants (introductory orientation sessionswould be arranged in all areas by the RCS and SCB). One of the most essen-tial factors for longer term success of the cooperatives, especially at thePCS level, is the availability of trained and motivated staff and informedmembership. Reorganization of PCS and employment of new managers, and insome cases accountants/salesmen, has increased the training needs manifold.The managers to be trained number over 2,000 in Haryana, 8,000 in UttarPradesh and 2,500 in Orissa. In addition, the new field staff of RCS,several hundreds in each State, also require training. In all Project States,the training requirements have been acknowledged by RCS and State CooperativeUnion officers and satisfactory arrangements have been made to train the newstaff. Competent training staff would be available. They would come partly

1/ Often known as "Mini Banks" in Haryana, "Nyaya Panchayat Societies" inUttar Pradesh, and PACS (Primary Agricultural Credit Societies) andLAMPS (Large Marketing Primary Societies) in Orissa.

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from universities and be trained for cooperative work at Pune Institute

(3.31), and partly from Cooperative Departments on secondment basis. A crash

induction program of three to eight weeks has been designed for the PCS man-

agers and courses have already been started in all three States. The syllabus

of crash induction courses has been pruned of the rather heavy idealistic,

historical and theoretical subjects typical for the basic cooperative courses

which were the most common training in the past. Also in the future, PCS

managers would attend the basic courses within one to three years from theinduction course. Separate arrangements have been made to ensure that store-keepers and salesmen will receive the training they require.

3.30 In Haryana, there are four junior staff training centers and two

more are to be opened in 1978. The annual intake would be 1,400 students in

the crash program (700 students in 1978). In Uttar Pradesh, four training

centers are used for the basic courses and seven new ones have been included

in the draft Sixth Five-Year Plan. For the crash orientation program, fif-

teen temporary training centers have been established. In Orissa, there are

eleven training centers. Construction of new school buildings is underway

and in 1979, eleven centers out of seventeen planned would have permanent

buildings (part financed under IDA Credit 682-IN). At present, the training

capacity is about 700-800 persons/year. These arrangements would allow train-

ing of all recruited staff in the PCS more speedily than the completion of

new godowns.

3.31 Adequate facilities also exist for training the more senior staff

of the cooperatives participating in the Project. The training institutions

catering for this level are Cooperative Training Colleges, located in each 0of the Project States and the Vaikuth Mehta National Institute of Cooperative

Management situated in Pune. A second similar higher level training insti-

tution is to be opened in Uttar Pradesh in 1978. The RCS officers receive

their training in the same institutions as the cooperative movement staff.

For specialized banking training of SCB staff, the Bankers Training College,

College of Agricultural Banking and RBI Staff Training College are available.

The Federations' staff have equally good opportunities in public training

institutions. Marketing and storage training facilities are available at

the FCI Staff Training College.

3.32 The training of society members and committee members received

little attention before reorganization of the societies. Since then, a

number of field education teams have arranged many courses and education

events for these groups. The training need is enormous, i.e., about 20,000

committee members in Haryana, 80,000 in Uttar Pradesh and 25,000 in Orissa,

and 0.8 million society members in Haryana, 7.0 million in Uttar Pradesh

and 2.2 million in Orissa. The resources available (5 teams in Haryana,

57 in Uttar Pradesh and 23 in Orissa) have, however, been far short of needs.

The State Cooperative Departments have already acknowledged this in their

planning.

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IV. TIIE PROJECT

Project Objectives and Rationale

4.01 While the physical objective of the Project is to construct godownsin three States -- Haryana, Orissa and Uttar Pradesh -- the primary objectivesare in institution building. First, the aim is to make NCDC grow into a moreeffective and viable development institution. Second, construction of godownsis meant to promote building a stronger cooperative infrastructure in ruralareas. Godown construction activity was selected because of the urgent needto provide storage in rural areas for agricultural inputs and outputs and theneed for supporting the development of the cooperative sector. Only threeStates are included in the project to keep the geographical spread withina conveniently manageable scale. The States chosen for the Project also pro-vide a representative picture of the varying levels of cooperative developmentin India. Haryana is high on the scale of cooperative development whereasOrissa is low on the scale. Uttar Pradesh is on an intermediate and also ina mixed stage of development--certain parts of the vast State are very welldeveloped whereas other parts are poor in development of cooperatives. Asthe Project emphasis is on institution building of NCDC and onlending SCB,the cooperatives and institutions concerned in cooperative development, thephysical aspects of the project have been designed deliberately simple. Thisapproach would also enable an early assessment of NCDC's institutional progress

* so that a broader based cooperative lending program through NCDC could betaken up for consideration within a reasonably short period.

4.02 NCDC would be provided with funds to help Primary Cooperative Societies,Marketing Societies and Cooperative Federations in the three Project Statesand TDCC in Orissa construct additional storage-cum-office facilities and im-prove existing infrastructure at village and rural market levels. The storagebuildings would enable the cooperatives to handle more effectively agriculturalinputs and outputs and also facilitate the sale of consumer goods and serve asrural service centers. The storage provided under this Project is for themost part at village level and of a type different from, and complementary to,the facilities provided by the Central Warehousing Corporation (CWC), StateWarehousing Corporation (SWC) and Food Corporation of India (FCI). Facilitiesprovided by CWC, SWC and FCI are mostly concerned with storage of foodgrainsin the hands of Central and State Governments. Village storage needs werewell recognized and had been identified and confirmed during the EasternFoodgrains Sector Reviews and the appraisal of the Orissa AgriculturalDevelopment Project (4.04).

4.03 The storage capacity required at the rural level is directly relatedto farm inputs usage and agricultural production. Under the draft Five-YearPlan (1978-83) projections, fertilizer demand and foodgrain output in theProject States have been projected to increase annually at 15 to 22% and 4to 6% respectively. Although the foodgrain increases have been taken in theProject planning as projected, the growth of fertilizer use has been assumedmore conservatively, ranging from 10 to 17% (Annex 1, Table 13). Additional

a storage capacity is required not only to satisfy the existing unmet demand

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(about 170,000 tons in Haryana and about 500,000 tons each in both UttarPradesh and Orissa, according to 1976/77 estimates) but also to accommodatethe projected demand increase.

4.04 The cooperatives currently distribute more than half of the non-organic fertilizers used in India (80% in Haryana, 60% in Uttar Pradesh and50% in Orissa). In recent years, the cooperatives have procured 25 to 50%of foodgrains purchased by the public sector agencies, but the share ofgodown capacity of the Cooperative Federations and Regional CooperativeMarketing Societies of State needs in 1976/77 was 5% in Haryana, 4% in UttarPradesh and 5% in Orissa (Annex 1, Table 13). GOS have assumed in theirplanning process for the draft Five-Year Plan (1978-83) that the coopera-tives will maintain their current share of the fertilizer sales and undertakea growing share of the procurement of grain and other farm produce. Conse-quently, the need of the cooperatives for increased storage capacity isbecoming more urgent. Care has been taken to ensure that there would beno excess supply of storage either at village level or market centers. InHaryana, a storage coordination committee set up by GOH has assessed thefuture storage needs of the State and decided on the cooperatives' shareof it. In Uttar Pradesh and Orissa, godowns required to be constructedby cooperatives have been determined by the RCS in collaboration with theDepartment of Agriculture and the public agencies owning warehouses. InOrissa, the additional need for cooperative godowns has been ascertainedby the IDA mission for the Orissa Agricultural Development Project (CreditNo. 682-IN). 1/

Project Description

4.05 The Project comprises the construction of godowns over a five-yearperiod of about one million tons in all three Project States and rehabilita-tion of about 1,100 existing godowns in Orissa which would result in anincremental capacity of 80,000 tons. Of the total 7,550 new godowns to beconstructed 7,150 would be for Primary Credit Societies. These buildingswould be of either 50 or 100 tons capacity. Many of the PCS godowns wouldhave a manager's residence attached. Because of windy conditions prevalentin certain areas, many godowns would require reinforced cement concrete roof-ing while the others would be constructed with wood trusses and asbestossheets. Two-thirds of the PCS new godowns would have attached manager'sresidence and a similar proportion would need reinforced concrete roofs(Annex 1, Tables 14.3 to 14.5).

4.06 Regional Cooperative Marketing Societies (RCMS) in Orissa whichalready own the godowns they operate would have 280 units of 250 tons and 500tons constructed under this Project. RCMS in the other two States prefer tosecure their additional storage requirement by renting from the apex Federa-tions -- HAFED and PCF.

1/ Appraisal Report No. 1301a-IN. s

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* 4.07 The apex Marketing Federations would construct about 135 godownsof capacities ranging from 250 to 5,000 tons each, making a total of 294,000tons. HAFED would construct 70 units for 214,000 tons, PCF 35 units for50,000 tons, OSCMF 23 units for 20,000 tons and TDCC 10 units for 10,000tons.

Building Designs and Specifications

4.08 All buildings would be based on standard designs of four differentcapacities -- 50 and 100 tons for use by PCS and 250 and 2,000 tons for RCMSand Federations. Design drawings for all capacities were agreed duringappraisal. Godowns with 500 tons capacity would be double the length of a250 ton unit and a 1,000 ton capacity would be half as long as the 2,000 tonmodel. Godowns of 3,000 and 5,000 tons would similarly be based on the2,000 ton model, having their lengths proportionately increased (4.09).Facilities provided for PCS would include storage space for fertilizerseparated from space for farm produce, space for consumer goods storage andsales, society office, drinking water supply, WC facilities, veranda, patiofor meetings, and parking yard. Materials used for all construction wouldbe mainly clay bricks, cement, steel, timber, asbestos roofing sheets andsand. Building designs for the most typical models are shown in Annex 1,Charts 4 to 6.

4.09 The PCS godowns have been designed for bagged storage of foodgrainsand fertilizers with adequate ventilation and space for workers to move aboutand for handling, offices and consumer shop facilities. The designs arebased on a norm of floor space of 6 sq ft/ton. The drawings for large capa-city godowns are standardized in India based on storage capacity, strengthof structure, and economy in construction. The type designs so prepared aremultiplied span-wise, spacing roof trusses to suit the capacity. Due to thehot climate of the country, reinforced cement concrete (RCC) roofing is pre-ferred for PCS godowns. RCC has better heat insulation properties thanasbestos roofing in addition to being a more permanent type of construction.Large godowns will have asbestos roofing on the pattern of existing godownsof other storage agencies like FCI, CWC and SWC. NCDC's assurance has beenobtained that building designs, specifications and construction standardsfollowed for project godowns would be acceptable to IDA.

Land for Godowns

4.10 Selection of suitable land for locating the godowns is recognized byall participating GOS and SCB and by NCDC to be vital to the success of theoperations carried on by use of these buildings. As the extent of the landrequired for the buildings is small, finding suitable land is not consideredto cause problems. The land required could be as small as 0.25 acre for a50 ton godown for PCS and 2.0 acres for a 5,000 ton unit of the Federations.In Haryana and Uttar Pradesh, Panchayat land belonging to the village wouldin many cases be transferred, free of cost, to the PCS for this purpose. InOrissa, however, it is expected that a larger proportion of the PCS wouldhave to purchase the land required. In view of the importance of availability

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of suitable land, this element has been emphasized in the subproject appraisal

criteria to be followed by NCDC and SCB (para C.1 Technical Criteria in

Annex 4).

4.11 Components in addition to godown construction include technical

assistance, vehicles, and engineering instruments. Although these miscel-

laneous components represent only about 1-1/2% of the total project costs,

they are vital to the successful implementation of the project.

4.12 Technical Assistance. Local consultant services totalling 60 man-

months would be engaged to assist the new Organization and Methods (O&M)

Departments set up in the NCDC and the SCB in the three Project States--24

man-months for NCDC and 12 man-months each for the three SCB. The cost per

man-month has been calculated at Rs 25,000. The consultants will assist in

organizational improvements of these institutions and in staff training,

improving accounting and management information systems and preparation of

procedure manuals. Assurances have been obtained from NCDC that the terms

of reference for these consultants would be agreed with IDA.

4.13 Mobility of the executive and technical field staff of NCDC, SCB

and of the participating cooperatives is essential for effective project

implementation. Provision has, therefore, been made in project for vehicles

suitable for field conditions -- 33 motor cars for executives in NCDC's Zonal

offices and engineers in SCB Headquarters and Divisional Offices, 150 motor

scooters for junior engineers and development officers to be employed by SCB,

and 8,200 pedal bicycles for the managers of the participating PCS. Motor

Cars would be owned and maintained by NCDC and SCB whereas the motor scooters

and pedal bicycles would generally be provided to the staff under a loan-

purchase scheme.

4.14 Provision is also included for supply of engineering instruments

for use by the engineering staff of SCB and NCDC. These are required in

connection with survey, design drawings, construction, supervision and payment

certification of the Project godowns.

Cost Estimates

4.15 Project costs, over a five-year development period, are estimated

at Rs 550 M (US$64 M), very little of which is expected to involve foreign

exchange for direct imports. Duties and taxes included in total costs are

estimated at about Rs 32 M (US$4 M). Details of costs, summarized below,

are in Annex 1, Table 14.

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Summary of Project Costs /a

Unit No. Total Cost Cost

Capacity of Capacity Rs US$Tons Godowns Tons Millions Millions

New Godowns:Haryana:Federation (HAFED) 1-5,000 70 214,000 57.8 6.7

Primary CooperativeSocieties 50-100 1,500 125,000 68.5 7.9

Subtotal 1,570 339,000 126.3 14.6

Uttar Pradesh:Federation (PCF) 1-2,000 35 50,000 14.5 1.7

Primary CooperativeSocieties 50-100 4,600 410,000 220.0 25.6

Subtotal 4,635 460,000 234.5 27.3

Orissa:Federation (OSCMF) 250-2,000 23 20,000 5.0 0.6

Tribal DevelopmentCoop. Corporation 1,250-2,500 6 10,000 2.4 0.3

Regional CooperativeMarketing Societies 250- 500 280 80,000 20.8 2.4

Primary CooperativeSocieties 50- 100 1,040 104,000 45.3 5.3

Subtotal 1,349 214,000 73.5 8.6

Godown Rehabilitation

Orissa: 50- 100 1,100 80,000 8.2 0.9

Technical Assistance, Vehicles

Engineering Instruments 6.5 0.8

Total Base Costs 449.0 52.2

Physical Contingencies (5%) 22.3 2.6

Price Contingencies 78.6 9.1

TOTAL 8,654 1,093,000 549.9 63.9

/a Foreign exchange costs, mostly indirect, would amount to about 10%

of total costs, or about US$6 M.

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4.16 Cost estimates are based on findings during appraisal updated toJuly 1978. Physical contingencies have been added at 5% on base costs. Pricecontingencies totalling 16.5% of base costs, calculated in accordance withBank estimates of future price movements in India, 1/ are also included.

Project Financing

4.17 An IDA credit of US$30 M, representing 50% of the total Projectcosts, net of duties and taxes, is proposed. The IDA credit would meet about47% of the planned investments. The remaining 53% would be met by theparticipating cooperatives, governments of the Project States and NCDC asindicated below.

Project Financing Table

Percentageof Total Rs US$

Project Costs Million Million

NCDC through SCB, as Loan toBeneficiaries 47 256.5 30.0(Representing IDA Credit)

NCDC through SCB, as Loan toBeneficiaries 13 71.9 8.3(NCDC's own funds)

NCDC to State Governments, as Loan /a 15 83.0 9.5State Governments to Beneficiaries

(from State Budget Funds) /b 20 110.8 12.9Beneficiary Cooperatives 5 27.7 3.2

100 549.9 63.9

/a State governments will pass this on to the beneficiary cooperatives asequity contributions.

/b State governments will provide this as equity to the beneficiary coop-eratives except in Orissa where this 20% would be given as a grant.

4.18 The IDA Credit to GOI would be on standard terms. GOI would onlendthe proceeds of IDA Credit to NCDC under financial arrangements to be enteredinto in accordance with terms and conditions published by the Department ofBanking of GOI's Union Ministry of Finance. 2/ Foreign exchange risk wouldbe borne by GOI. NCDC's own contribution totaling 28% would be funded out ofadditional loans from GOI to NCDC, market borrowings by NCDC or from repaymentreceipts from past lendings. Assurances have been obtained from GOI thatadequate funds would be made or caused to be made available to NCDC to meet

1/ Currently estimated at an annual rate between 6% and 7%.

2/ Current rate of interest applicable to loans not exceeding 15 years is7-1/4% p.a.

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* the latter's financial commitment under the Project. The finalization offinancial arrangements between GOI and NCDC acceptable to IDA would be a con-dition of credit effectiveness. Lending terms and conditions governing loansto be made by GOI, NCDC and SCB are described in para 5.24.

Procurement

4.19 The project would involve relatively small investment at a time byseveral individual cooperatives, spread throughout the three Project States.Since contracts for godown construction would be individually small, 1/ dis-persed in time and place, they would not be attractive for, and thus would notwarrant, international competitive bidding procedures. These would, therefore,be let on local competitive bidding, advertised locally, and in accordancewith procedures satisfactory to IDA. Suitable technical assistance services(US$170,000) are expected to be available locally and will be attained inaccordance with procedures agreed with IDA. Supervisory vehicles (US$560,000)and engineering instruments (US$12,000) would be procured by prudent shoppingas the quantities and values involved are not significant enough to merit theobservance of competitive bidding procedures and selling prices of locallymanufactured vehicles are well established. The Federations (and TDCC) wouldhandle their own procurements. SCB would manage the procurement for PCS andRCMS (5.17).

Disbursements

*:^ 4.20 The IDA disbursements for godown construction (US$29.4 M) would bemade against NCDC's certified statements of loans extended by participatingSCB and refinanced by NCDC. For ease of administration, IDA disbursementswould be set at 80% of project loans made by NCDC to SCB. Documents insupport of these would not be submitted to IDA for review, but would beretained by NCDC and made available to IDA for inspection during Projectsupervision. Other disbursements (US$0.6 M) under the Credit would cover:

- 100% of technical assistance services;

- 100% of foreign expenditure for imported items; and

- 80% of locally manufactured vehicles and equipment andlocally procured items.

Disbursements against these three categories would, however, be fully docu-mented. Appropriate assurances in this regard have been obtained from GOIand NCDC. In order to relieve resource constraints and encourage initiationof Project activities before Board approval, expenditure for godown construc-tion, vehicles, technical assistance consultants, and engineering instrumentsincurred on the Project after July 1, 1978, but prior to Credit signing, wouldbe eligible for disbursement up to a limit of US$1.0 M. A schedule of esti-mated disbursements is given in Annex 3.

1/ The largest godowns would be those constructed by the three State Feder-ations (HAFED, PCF and OSCMF) with a maximum of 5,000 tons costingRs 1.2 M (US$139,000).

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V. ORGANIZATION, MANAGEMENT AND LENDING OPERATIONS

General

5.01 NCDC would be the major implementing agency coordinating Projectactivities of all other participating agencies. GOS concerned would continueto provide overall policy guidance in regard to development of the cooperativesector in their respective States. The godowns would be owned and operated bythe various multipurpose cooperative societies (PCS), the marketing societies(RCMS), the State-level Cooperative Federations (HAFED, PCF and OSCMF) andTDCC. Primary responsibility for Project promotion, subproject identificationwould be that of the RCS in each State. RCS staff would also assist the par-ticipating PCS and RCMS to prepare subprojects. NCDC's Zonal Office staffwould provide additional support in the promotion and sub-project identifi-cation work. SCB would be NCDC's onlending channel and implementing agencyat State level.

Cooperative Societies (RCMS and PCS)

5.02 Legally, the highest authority of these societies is the GeneralBody of members and decisions by them are taken at general meetings. Insocieties with less than 250 members, each member has one vote. In largersocieties, each group of 10 members elect a delegate to attend and voteat meetings of the General Body. Each society appoints a Management Boardnot exceeding eleven members, three of whom may be appointed by GOS (RCS).The Board appoints one of their members as the honorary President of thesociety. The Board also appoints a paid full or part-time Secretary 1/ orManager who, in consultation with the President, carries out all executivefunctions of the society.

5.03 Depending on the size of the society and the type of activitiescarried out, the manager is provided with appropriate support staff suchas clerks and salesmen. With the reorganization and mergers of PCS, ithas become possible for more and more societies to employ full-time compe-tent managers (3.27 and 3.28). The recent trend has been to bring themanagers of the reorganized societies in each State under a special Coop-erative Society Managers' Cadre (3.17). Their recruitment, training, transferand administration are the responsibility of DCB (in Haryana and Orissa)or SCB (in Uttar Pradesh). Each of the cooperative societies participatingin the project could thus be assured of a capable and professionally trainedmanager. He will be of a caliber not only to be able to prepare the godownsubproject 2/ and to follow-up the godown construction program but also tomanage the society's subsequent business operations efficiently.

1/ Where financial viability does not permit this, the Board of managementcarries out the executive functions through honorary secretaries andtreasurers.

2/ With active assistance from RCS staff and SCB's field officers.

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* Cooperative Federations and TDCC

5.04 The Managing Directors of HAFED, PCF, OSCMF and TDCC are all nominees

of the respective participating GOS. The present incumbents are all of high

caliber and have proved themselves equal to their tasks. All these institu-

tions have adequately qualified staff and also the experience in investment

planning, project preparation for loan financing, preparing engineering designs

and tenders, supervising building construction and should, therefore, not face

major problems in successfully implementing their share of Project activities.

Arrangements have already been made by these institutions to recruit and train

the additional staff required to cope with the increased work load related to

this Project (Annex 1, Table 15).

State Cooperative Banks

5.05 Special responsibility for Project implementation in SCB would be

that of their Special Loans Department. All past long-term lending activities

were handled in this investment department headed by a Senior Program/Project

Officer. SCB has made arrangements to strengthen their staffing capacity to

appraise, supervise and monitor the godown construction subprojects. This

department would also have an engineering division to take care of the tech-

nical aspects of the subprojects. The staffing intensity in the three Project

States varies according to number and geographical scatter of the Districts,

the SCB divisional offices, and the DCB offices which would be used as dis-

bursing and collecting agents.

5.06 The engineering division in each of the SCB would be headed by a

qualified Executive Engineer based at the bank headquarters. An Assistant

Engineer would be stationed at each of the Divisional Offices of the SCB

(Haryana 4, Orissa 6, and Uttar Pradesh 11). About 100 Junior Engineers

(technical assistants specialized in building construction) and 46 Development

Officers would be employed. All of these would spend most of their time in

the field, assisting the managers of cooperatives, counselling on completion

of subproject reports and loan applications in addition to appraising, moni-

toring and certification of construction for payments (Annex 1, Table 15). An

assurance has been obtained from GOI and NCDC that SCB would strengthen its

staffing with the type, numbers and phasing agreed with IDA.

NCDC's Role

5.07 NCDC, as the prime implementing agency, would assist, coordinate

and monitor the activities of other participating agencies at all phasesof project implementation and maintain active liaison with the governments

of all three States and GOI. NCDC's organization and management are wellequipped to handle development finance. Special organizational and staffing

arrangements are, however, being made to implement this Project--the first

one NCDC is undertaking with financial assistance from international insti-

tutions. This Project also provides the first opportunity for NCDC to use

banking institutions such as SCB, as onlending channels and to enforce bank-

ing disciplines on any significant scale. Hitherto, most of the lendingwas channeled through the RCS in the States in which the borrowing coopera-

tives are situated.

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5.08 The major steps taken by NCDC towards this goal are:

(a) restructuring and staffing the Fertilizer/Inputs/StorageDepartment at headquarters, giving greater emphasis to

investment appraisal, godown construction and monitoring;

(b) reorganizing and upgrading its Regional Offices into Zonal

Offices which would function as NCDC's branches with ade-

quate delegation of powers to the Zonal Managers;

(c) appointment of Project Officers at the Zonal Offices specially

assigned to help in implementation of this Project;

(d) formation of an Organization and Methods (O&M) department at

headquarters to be assisted by 0&M consultants to improveaccounting and management information systems and procedures; and

(e) creation of a Specialists' Pool to support subproject appraisal

and monitoring activities.

Annex 1, Chart 2 reflects the foregoing organizational arrangements.

5.09 NCDC's Zonal Offices responsible for Project activities would belocated in Chandrigarh (Haryana), Lucknow (Uttar Pradesh) and Calcutta (for

Orissa). The Calcutta Zonal Office is in West Bengal, far away from

Bhubaneswar (capital of Orissa). Orissa is relatively backward in coopera-

tive development. A Project Office is, therefore, being set up in Bhubaneswar

as an arm of the Calcutta Zonal Office, with staff experienced in project

analysis. NCDC's new General Manager at New Delhi who reports direct to the

Managing Director is given the special responsibility for monitoring the

implementation of this Project.

5.10 A Project Coordinating Committee would be established in all Project

States for promotion of Project activities and monitoring and coordination

purposes. This Committee would be headed by the Agricultural Production or

Cooperative Commissioner and have as members representatives from partici-

pating agencies. The committee would have a senior officer as its executive

secretary.

Operational and Lending Procedures

5.11 Initial steps in the further development of the cooperative sector

through construction of village and rural godowns under the Project have

already been taken by the three participating States in consultation with

the respective RCS, SCB and NCDC. The number of cooperatives which wouldundertake godown construction, the geographical distribution of the potentialborrowers, and the phasing of construction have also been tentatively planned

and agreed.

5.12 The field staff of the Office of RCS and the Project Development

Officers of SCB would be given a Project orientation by the NCDC's head-quarters executives and the Zonal Office Managers. The RCS staff would

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concentrate on Project promotion and identification of the cooperatives which

would most benefit from the godown construction program and are ready and ableto undertake the desired investment. SCB's Project Development Officers wouldhelp the managers of the cooperatives to prepare subproject reports and theloan application forms. Subproject report format is suggested in Annex 4.

5.13 The subproject report would contain vital information to establishthe need for the godown of the size planned, its financial viability andrelated social benefits. The Project Officers in NCDC's Zonal Offices wouldprovide guidance to RCS and SCB staff and the committee members and managersof the participating cooperatives on finding the most suited sites for godownlocations and on data collection for preparation of subproject reports. TheFederations and TDCC are equipped to prepare their subproject reports withoutexpecting too much help from these agencies.

5.14 The subproject reports would be completed in quadruplicate--original

sent to SCB (Divisional Office), one copy to RCS, the second copy to NCDCZonal Office and the third copy retained by the cooperative. This would enableall three parties to review the subprojects independently and simultaneously

and to avoid delays that would be inevitable if reviews were to follow insuccession.

Subproject Appraisal and Monitoring

5.15 RCS reviews the subproject and loan application not only to giveGOS approval for activities undertaken by cooperatives in the State, but alsoto arrange for the provision of its share of finance for the investment (4.17).The NCDC Zonal Office reviews the subprojects because NCDC would be required

to refinance SCB loans to cooperatives. Detailed appraisal of every subprojectwould be the responsibility of SCB who carry the greatest degree of lendingrisks. Unless RCS (on behalf of GOS) or NCDC Zonal Office staff intimate toSCB, within 5 working days, any reservations connected with the subproject,the latter would be entitled to assume that the other two parties would honortheir obligations -- GOS to provide 20% out of budget towards equity (or grantfor some cases in Orissa), and borrow 15% from NCDC to be passed on as equityin the cooperatives; and NCDC to lend 15% to GOS, and 60% to SCB for loansgiven to ultimate borrrowers.

5.16 Appraisal of the subproject by SCB would include a thorough review

of technical and financial feasibility including field investigation by theSCB staff. These appraisals would be based on criteria established in agree-ment between NCDC and IDA (Annex 4). Suitable assurances have been obtainedfrom GOI and NCDC that these criteria would be applied by SCB in every loanapplication covered under this Project. Subprojects for all godowns of 1,000tons and above and for the first five godowns of each of different capacitiesin every participating State would be subject to NCDC's full appraisal andapproval. Subsequent subprojects would be reviewed by NCDC on a sample basisand approved. IDA would review a selected number of subprojects during follow-up visits. Subject to positive appraisal by SCB, it would enter into a loanagreement with the borrowing cooperative. SCB would submit to RCS and NCDCperiodical statements of such loan approvals, based on which GOS and NCDCwould arrange to honor their financial commitments.

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5.17 The Federations and TDCC are technically equipped to handle theirown procurement and construction supervision. Once they receive from SCBthe confirmation of loan approval they would proceed to prepare detail build-ing designs and tender documents for award of godown construction contracts.The other cooperatives (PCS and RCMS), however, would have to rely on outsidehelp for their technical needs. The engineering division of the SCB wouldprovide this technical support. Detail specifications would be based onstandard designs (Annex 1, Charts 5 and 6) and tenders would be invited forconstruction contracts which would as far as practical be bulked based ongeographical and time scatter. This would enable the cooperatives also toparticipate in benefits of scale.

5.18 The engineering and technical staff of SCB would also supervisethe building construction by periodical visits. The vehicles provided underProject would enable the field staff to carry out these supervisions morefrequently and effectively. Loan disbursements by SCB would be based on workcertification by its field technical staff. NCDC's Zonal Office staff wouldalso make periodic field visits providing necessary liaison between parti-cipating agencies and making test checks of subproject progress. The Statelevel monitoring and coordination would be carried out by the Project Coor-dinating Committee. Monitoring arrangements are also discussed in Annex 5.

Project Evaluation

5.19 NCDC would have as one of its specific responsibilities the task ofensuring effective project evaluation. For this purpose, NCDC has arrangedto establish an Evaluation Unit, reporting directly to the Managing Director.This Unit would follow-up Project implementation; identify problem areas;assess effectiveness of participating institutions, and measure subprojectimpact on the participating cooperatives and their members and the farmingcommunity served by the cooperatives; comparing costs and benefits realizedwith appraisal estimates and projections. The head of the Unit would bean economist, supported by a statistician and a cooperative specialist. TheEvaluation Unit would be independent of all other departments of NCDC andwork in close collaboration with its Management Audit (internal audit)Department.

5.20 The Unit would carry out its activities by keeping close and con-tinuous liaison with GOI and GOS institutions, SCB and borrowing cooperatives.Cooperation of all Project participants and concerned institutions and indi-viduals would be solicited to furnish whatever information is consideredrelevant for the evaluation. The Unit would also make its own arrangementsto collect information and data required for its studies both from Projectrecords and outside sources.

5.21 The reports would be prepared at least half-yearly and submittedto the NCDC Managing Director (Annex 5). Copies of all evaluation reportswould be made available to IDA for information. The Evaluation Unit wouldbe responsible for the preparation of the Project Completion Report submittedto IDA. Appropriate assurances have been obtained from GOI and NCDC on thesematters.

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Accounts and Audit

5.22 The accounting and auditing procedures proposed for this Projectwould be similar to those followed in other Indian agricultural Creditsfinanced by the Bank Group. NCDC, as Project implementing agency, wouldprepare annual budgets, quarterly progress reports, summary loan statements,and annual accounts as they relate to Project activities. Participating SCBwould maintain detailed memorandum records, and ledger and control accountsrelating to all subproject loans. These records together with subproject re-ports and related loan documentation and supervision summaries would providea complete record of each subproject cycle, its progress including projectappraisal, loan approval, disbursements, contribution by GOS, interest charges,installments due, collections, overdues and follow-up action. These recordswould be reviewed periodically by IDA supervision missions. Summarized in-formation on these would be incorporated in NCDC's quarterly progress reports.Assurances have been obtained from GOI and NCDC that copies of the followingdocuments would be made available to IDA:

(a) Annual work programs and related cost estimates; and

(b) Quarterly progress reports.

5.23 NCDC's accounting system meets with statutory requirements and fol-lows standards acceptable to the Government Auditor General. As part of its

* general reorganization, however, NCDC is making arrangements to modernize andis simplify its accounting system. The Auditor General carries out a statutory

audit but NCDC is also considering appointing a firm of Chartered Accountantsto function additionally as auditors to cover management and systems aspectsas well. An assurance has been obtained from NCDC that its accounts would beaudited by auditors satisfactory to IDA. The accounting systems employed bySCB follow standard reporting requirements of RBI and are generally adequatefor effective credit management. Annual audits of these and other cooperativesthat would participate in the Project are conducted by the State RCS and areconsidered satisfactory. Assurances have been obtained from GOI that auditarrangements for NCDC and participating SCB would be satisfactory to IDA andthat their audited accounts, together with long form and short form reports,with which GOI is familiar, would be submitted to IDA within six months ofthe close of their financial year.

Lending Terms

5.24 NCDC's lending in the past has mostly been through GOS who wouldonlend to ultimate borrowers without adding any margin for such service.Current interest rates charged to GOS by NCDC are 9-1/2% for programs inHaryana and Uttar Pradesh and 8% in Orissa which, defined as a backward area,is entitled to a preferential rate. Following past practice, NCDC's loans toGOS (15% of subproject costs) would be at the 9-1/2% and 8% interest to bepassed to participating cooperatives either as equity capital (in Haryana,Uttar Pradesh, and non-tribal and cooperatively developed areas of Orissa) andas grants to cooperatives in backward and tribal areas. Interest on loans toS cooperatives for funds channelled through SCB (60% of subproject costs) would

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be at 10% compared with the 9-1/2% and 8% currently borne on borrowings for

godown construction. 1/ Interest rate applicable to NCDC borrowings from GOI

for IDA projects will be 7-1/4%. 2/ NCDC's bond issues in recent times carry

interest at 6%. NCDC proposes to charge 7-3/4% interest to SCB. Cooperatives

would receive funds from SCB as 15 year loans including a 3-year repayment

grace period. The proposed rates would provide 2-1/4% margin for SCB and a

1/2% margin for NCDC on funds loaned by GOI. NCDC would have a larger margin

on funds it might raise in the market through bond issues. All NCDC loans to

SCB would be guaranteed by the respective GOS in accordance with the provi-

sions of the NCDC Act. An assurance has been obtained from NCDC that its

terms of lending to SCB and SCB's terms of lending to cooperatives would be

satisfactory to IDA.

5.25 Inflation in India over the past three years has averaged 2.1% per

annum. The inflation rate over the next three years is not expected to ex-

ceed 6% per annlm. Therefore, the proposed rate of 10% to the ultimate

recipients -- the cooperatives -- would be positive. The onlending terms

are consistent with those of comparable subloans and suitable given the

following considerations:

(i) almost all of NCDC's lending in the past, including loans

for godown construction, has been through the State Gov-

ernment RCS who passed on the funds to the cooperatives

at 8% to 9-1/2% without addition of a margin.

(ii) although the godowns which are to serve as rural growth

centers would result in significant social and economic

benefits, the financial benefits which are not high,

particularly in the early years, argue in favor of

minimizing the debt service burden. From a cash flow

point of view, in the initial years, it is important

that the financing terms not be too onerous. The terms

proposed should ensure that cooperatives would be able

to build up a modest equity and help to achieve their

social and economic objectives.

(iii) the difference in the ultimate borrowers' interest rates

as between ARDC and NCDC schemes also reflects the lower

lending costs for the latter. IDA funds passed on to

NCDC by GOI would bear interest at 7-1/4% as in the case

of ARDC. Between NCDC and the ultimate borrower, only

one intermediary (SCB) would be involved whereas in ARDC

schemes, the Cooperative Land Development Banks would be

1/ Interest charged to borrowers in ARDC sponsored programs are 10-1/2%

for minor irrigation schemes and 11% for other agricultural development

programs.

2/ According to the Interest Rates Schedule published by the Department

of Banking in the GOI Ministry of Finance. C

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0 involved in Central (State) and Primary levels. Underthe NCDC scheme for the Project, ultimate borrowersare solely cooperative institutions made up largely ofsmall farmers while under ARDC schemes they are mostlyindividual farmers. A spread of 2 to 2-1/4% is adequateto cover SCB's administrative costs and lending risksand to leave a reasonable profit margin. 1/ The remain-ing 1/2% margin for NCDC is adequate to cover its incre-mental costs particularly because the strengthening ofthe Zonal Offices in the Project States also enables itto appraise and monitor its other lending schemes moreeffectively. Furthermore, NCDC would not encountereffective lending risks since under the NCDC Act, allloans to SCB are guaranteed by the State governments.

(iv) compared with those in India's agricultural sector, the in-terest rates proposed by GOI and NCDC are reasonable. Rulingrates range from 4.5% to 11%, the lower rates applying toGOI's centrally sponsored schemes. The interest rate appliedin the IDA-financed National Dairy Project (NDP) 2/ is 8-1/2%.The interest payable under NDP by the borrower is only on 70%of the project costs, the balance up to 30% is to be financedby the Indian Dairy Corporation (IDC) as a grant to the borrower(Cooperative Dairy Union). Comparison of interest rates withthat applied in NDP is very appropriate since that projectalso relates to cooperatives and to rural poor.

(v) transfer of resources to the poorer segments of the agricul-tural sector and development of cooperatives for rural invest-ment are consistent with national policy. Furthermore, anysurplus made possible through relatively lower rates of interestwould enable the cooperatives to offer better services to therural families who are members of such societies. Surpluseswould also help the societies to finance community uplift pro-grams which should result in substantial social benefits andimprovements in the quality of life.

5.26 In sum, the 10% rate proposed represents an increase of 2 percent-age points in the case of Orissa and 1/2 percentage point in the case of theother two Project States. The Project would represent less than half ofNCDC's total lending program for village storage and only about 10-15% of itsoverall activities. The interest rates under the Project would already behigher than those charged in other States and for other types of investments.In the circumstances, the achievement in increasing rates for the projectinvestments represents a reasonable first step in the right direction.

1/ SCB would in addition recover from the borrowing PCS a one time levy ofup to 7% out of subproject costs as technical supervision and service fee.

. 2/ IDA Credit No. 824-IN.

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VI. GODOWN USAGE AND FINANCIAL RESULTS

Incremental Godown Capacity

6.01 New godown construction under the Project would provide additional

storage capacity of approximately 1.01 million tons (4.05). About 300,000

tons with Federations (HAFED, PCS, OSMCF and TDCC) would be located at town

centers and railheads, 80,000 tons capacity constructed by RCMS at rural

market centers, and the remaining 635,000 tons with PCS at village (or

Panchayat) level (4.06 and 4.07). These godowns would be used for purchasing,

receiving, warehousing, selling and delivering farm inputs, mainly fertilizers,

and also farm implements, seed, weedicides and pesticides; farm produce mainly

foodgrains and also nonperishable food and other commodities; and consumer

goods.

6.02 The buildings to be newly constructed, and those to be rehabilitated

(in Orissa only) by PCS would in addition function as rural service centers

and as essential infrastructure for village community development based on

cooperative principles. In measuring the utilization of the physical assets

(godowns) of the PCS, it is necessary to take into account the increase in

its loaning or credit business because most of the physical activities in

handling goods would generally reflect themselves in almost equal measure

in the growth of credit demand by the society members.

6.03 Besides sizeable quantities of seeds and chemicals, which have not

been projected, the turnover of farm inputs, outputs and consumer goods in

the three Project States is anticipated to be above the preproject level

as follows (with price contingencies):

1,000 tons Rs M

Fertilizer 240 320

Farm Produce 540 950Consumer Goods - 400

These figures reflect the incremental turnover level reached in Project year

five. The consequential increase of credit extended to farmer members of PCS

annually is estimated to be Rs 540 M. This increasing trend would continue

thereafter, making the societies stronger.

Effect of Godown Costs and Commodity Prices

6.04 The costs of godown construction are based on mid-1978 prices for

labor and materials. As the sizes of godowns vary from 50 to 5,000 tons,

the differences between the cost per ton are also large. In order to

arrive at realistic figures, detailed calculations for materials, labor and

other costs were made for the basic models in each participating State. The

costs vary depending on the size of the godowns, the type of roof and whether

the godown includes a manager's residence or not, and on the expense levels

in the respective States (Annex l,Table 14.2). In Haryana the most typical

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godown, (100-ton office-cum-storage building) would cost Rs 58,000 and a2,000 ton godown Rs 490,000. In Uttar Pradesh, the costs would be about thesame, but in Orissa they would be approximately 15% lower. The average costs(in Haryana and Uttar Pradesh) per ton capacity for different sized godownswould be: 1/

- 50 ton godown, without a manager's residenceand with an asbestos sheet roof Rs 480/ton

- 100 ton godown with residence and two-thirdshaving reinforced cement concrete slab roofs Rs 420/ton

- 250 ton godown without residence and withasbestos sheet roof (Orissa) 2/ Rs 270/ton

- 2,000 ton godown without residence and withcorrugated steel sheet roof Rs 245/ton

6.05 The financial benefits derived by the participating cooperativesdepend on the commodity prices and profit margins. However, as the marginsare only a few percentage points of produce price for each activity, changesin the gross commodity prices would have only a minor effect on the financialresults. Furthermore, as the prices of fertilizers and most agriculturalproduce and consumer goods which the cooperatives handle are government con-

* trolled, the price changes are not expected to be large. Therefore, most ofthe prices used in the financial calculations, which are based on the mid-1978 current prices, are conservatively assumed to grow only by half of theanticipated inflation rates.

Financial Projections for PCS

6.06 Traditionally, the main activity of PCS has been provision of creditto members. As the new buildings would facilitate additional activities andfaster growth of existing activities, the entire business of the society hasto be taken into account in assessing financial viability of the godowns.Separate analyses were made of the growth projected for a typical PCS in eachof the participating States. As an illustration, the financial rate of return(FRR) was computed for a model in Haryana. In the calculations, the costs areassumed to grow beyond year 5 at 7% rate, same rate as before year 5. Thegrowth of benefits are assumed to drop from over 20% in the first five yearsto 10% in years 6 to 10 and to 7% in years 11 to 20. Based on the marginspresently obtained for the different activities of PCS (credit, 3/ inputs,sales, crop procurement agency, sale of consumer goods), FRR for the society'sinvestment would be 16%.

1/ Exclusive of land costs.

2/ This type of godown would be built only in Orissa.

a 3/ Without possible bad debts.

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6.07 FRR is most sensitive to changes in interest margin on credit(currently 2.5% between the funds borrowed and loans granted). Reductionof this margin to 2% (or 20% drop in interest income) would decrease FRR to12.9%. To provide for the risk of delays in starting the new activitiesby the society, despite the godown construction having been completed andmade ready, FRR was also tested for the case with the start of new activi-ties one year later than scheduled, and the credit activity and overheadcosts continuing to be incurred as normally. Under these assumed adverseconditions, FRR would be 13.8%. The following is a summary of the FRRsensitivity tests:

Cost/Benefit Percentage PercentageItems Change FRR Change FRR

All as projected - 16.4 - -

Cost of construction -10 17.8 +10 15.2

Staff expenses -10 18.3 +10 14.5

Other recurrent expenses -10 17.0 +10 15.8

Credit income -20 12.9 +20 19.7

Income from otheractivities -10 14.3 +10 18.4

Delay of other thancredit income (1 year) 13.8 - -

Salvage value -50 16.3 +50 16.5

In case that the construction design includes manager's residence on theground level of the building, and without using reinforced concrete roof-ing, FRR would be 17.6%. When residential quarters are excluded, FRR wouldbe higher at 21.2%.

Financial Projections for Federations and RCMS

6.08 In the case of Marketing Federations (and TDCC) financial calcula-tions were made for a 2,000 ton model godown. As with PCS, the Federationswould use these godowns to facilitate their general business activities. Anaverage annual net benefit per ton of godown capacity was calculated by tak-ing into account last three years' profits and making interest and deprecia-tion adjustments relating to godowns now operated by the Federations. Thecost streams of new godowns are based on 1977/78 actual costs incurred forsimilar godowns. Based on these assumptions, FRR is 16.7%. FRR is not par-ticularly sensitive to moderate changes in any cost or benefit item as willbe apparent from the sensitivity tests summarized below:

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Cost/Benefit Percentage PercentageItems Change FRR Change FRR

All as projected - 16.7 - -

Construction costsgodowns -10 19.1 +10 14.8

Permanent staff costs -10 17.0 +10 16.4

Operations and mainte-nance costs -10 17.2 +10 16.3

Administration andoverheads -20 17.1 +20 16.4

Adjusted net profit/ton -10 13.5 +10 20.0

Salvage value (20years; land + 1/3 ofconstruction costs): -50 16.5 +50 16.9

6.09 As the activities of RCMS are closely related to those of theFederations, the calculation methodology and rate of return would be verysimilar to those shown in the Table of paragraph 6.08.

Cash Flows

6.10 Cash flow calculations were made for typical PCS and Federationsin each Project State. They show that PCS would have difficulties to servicethe loan taken for godown construction during the years 1 to 3 after comple-tion of the buildings. Although the annual net cash flows are negative alsoin years 4 to 5, the cumulative surplus would allow repayment to commencein the fourth year. Payment of dividend on equity could be started from year5, and repurchase by the society of State-held redeemable equity could becompleted by year 10. If the Federations' new godowns are considered asseparate business entities, and not as an integral part of the Federationas they in reality are, loan servicing by them could also start convenientlyin year 4 and the cumulative cash flow would be positive thereafter.

Cost Recovery

6.11 The investment and operation costs of the participating entitieswould be recovered from the operational profits they are expected to earn.The contribution to the Project by the participating GOS would be Rs 187.1 M,of which Rs 186.5 M would be given as redeemable equity capital. They wouldreceive Rs 80.2 M as loans from NCDC to partly meet this commitment. Only

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in Orissa there would be a grant element of Rs 0.6 M given to cooperativesin Tribal and backward areas. The cash flow projections for the PCS indicatethat during the first 3 to 5 years, they would not be able to pay dividendson the equity capital. At an 8% yield, GOS would have interest costs anddividends not received amounting to Rs 6 to 7 M. Taxes payable by PCS,RCMS and Federations are insignificant. However, the general sales tax isapplicable in all States. Therefore, a 4% tax (estimated at Rs 10 M) would belevied on all building materials used in godown construction. Most fertilizerand produce handled by the Project entities would also be taxed at the samerate. The incremental tax on fertilizers and farm produce is estimated togrow from Rs 4 M in year 2 to Rs 20 M in year 5. Costs incurred in the formof grants (in Orissa) and dividends not declared in initial years would,therefore, be quickly recovered through sales taxes.

VII. BENEFITS AND JUSTIFICATION

Economic Rate of Return

7.01 The Project would make fertilizer and other farm inputs availablein the immediate vicinity of large numbers of farmers who do not have thetransport facilities to collect these over long distances. It would alsoallow farmers to deliver their excess produce to the local PCS close to theirfarms instead of to the more distant market center towns. Transport servicesprovided by the cooperatives would allow use of more efficient methods oftransportation and provide cost savings by way of economies of scale which areparticularly critical for small farmers. Typically, savings would arise fromuse of truck transport instead of individual bullock cart transport and wouldamount to about Rs 4 per ton/kilometer. For the typical PCS, the averagebenefit would total about Rs 28 per ton (about 2% of the value of fertilizerand produce handled).

7.02 Economic benefits would be obtained also by the avoidance of lossesof farm produce and fertilizer through storage in the new cooperative godownsand stores. The Project facilities would save about 2% of the farm produceand fertilizer handled annually by the PCS, which without the Project wouldhave been wasted. It is generally accepted that by providing secure storagefor foodgrains, the average loss of stored grain can be reduced from 6.0% toabout 3.5% (wheat, 12 months' average). 1/

7.03 In the economic analysis calculations, full account has been madeof the economic value of Project investment and operating costs. In calcu-lating these costs, a Standard Conversion Factor of 0.8 has been applied toall domestic expenses. For unskilled labor, a shadow wage rate of 50% ofmarket value has been used to take into account the high levels of ruralunemployment and underemployment in the Project States. Salaries of semi-skilled and skilled technical and administrative personnel are costed atmarket rates. The economic prices for traded goods are based on their border

1/ IBRD: Second Foodgrain Storage Project Report, 1643 A-IN, Annex 4. 6

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prices at the official exchange rate, and 20 years is assumed to be the Proj-ect life (this being the average life of the principal assets created). Basedon the foregoing assumptions, the economic rate of return is estimated at 22%.The cost and benefits streams are as follows:

Years 1 2 3 4 5 6 7-20(Rs million)

Costs

Project Investments 42.7 88.6 93.4 101.9 107.8 56.5 -

IncrementalOperating Costs 9.1 15.5 22.7 27.5 44.6 53.5 53.5

Benefits

Reduction inStorage Losses 3.3 10.5 19.1 33.1 49.8 69.7 7% growth

annually /aTransport CostSavings 3.2 11.2 20.3 34.6 51.7 69.0

Economic Rate of Return: 22%

/a About half of PCS will reach their maturity in years 6-10, after whichthe growth will stabilize.

7.04 The incremental use of farm inputs and corresponding additionalcrop production as a result of PCS services, while undoubtedly large, isdifficult to quantify precisely. Accordingly, these indirect benefits havenot been included in the above return calculations. Knowledgeable officialsin the Project areas have, however, estimated that incremental fertilizer usein the operational areas of new PCS could be as high as 25 to 50% of theirfertilizer sales. In the event that only 10% of the fertilizer handled byProject PCS is incremental, the net economic value of additional crop couldtotal more than Rs 250 M annually, thus illustrating the high indirectbenefits of the Project.

Employment Effects

7.04 The Project would have a substantial employment impact. Godownconstruction itself would require 46,000 man-years of employment during thefive year implementation period. About 200 technical staff would have to bespecially employed to prepare subprojects and supervise construction. Onceconstruction is complete, it is estimated that participating PCS will need8,000 PCS managers, 6,000 storekeepers and 8,000 watchmen to manage andhandle the new facilities and cooperative business that the Project willstimulate and facilitate. Through its indirect impact on farm production,

a the Project would result in substantial additional farm employment (7.04).It is estimated that this could be as much as 34,000 man-years by Projectyear 5.

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Other Benefits

7.06 A major but not quantifiable benefit would be strengthening NCDCas a development finance institution for the cooperative sector not only forrural storage but also for other agricultural processing, industrial andmarketing type activities. By becoming a stronger and more professionallyoriented organization, NCDC's autonomy would be increased and its dependenceon government contributions would be reduced. The Project would also assistother participating institutions (SCB, Cooperative Marketing and PrimarySocieties, District Central Cooperative Banks and government departments) tostrengthen their capacities and procedures. Thereby, the Project would great-ly assist in institution building at lower levels which is in accordance withthe GOI policy to create growth centers at the level of Panchayat (20,000-30,000 people in Uttar Pradesh) instead at Block level as before (about100,000 people). The Project would thus help promote regionally balanceddevelopment. The cooperatives under the Project provide basic rural services(supply of farm inputs and storing and marketing the surplus farm produce)required to support other projects. Examples are Orissa Agricultural Develop-ment Project (IDA Credit 682-IN), irrigation projects in all Project Statesand Small Farmers Development Program in Orissa. A strong cooperative infra-structure would also complement the work of governmental agricultural extensionofficers, closely linking it with farm input supply and marketing facilities.

Project Beneficiaries

7.07 The Project would benefit the members of participating PCS. Thesecurrently total 5.7 M farm families (31 M people 1/); 0.5 M in Haryana, 3.9 Min Uttar Pradesh and 1.3 M in Orissa. Over 65% belong to the categories oflandless, marginal and small farmers (small farmers having less than 5 ha ofunirrigated land, or 2.5 ha of irrigated land). Consequently, a large per-centage of the Project participants would be part of the 48% of India's ruralpopulation that are considered by GOI to live below the poverty line.

Project Risks

7.08 The technical aspects of the Project are relatively uncomplicatedand although the number of godowns to be constructed is large, implementa-tion should be manageable given the organizational arrangements outlined inChapter V and the strength of the cooperative movement, particularly that ofthe implementing agencies in the Project States. Consequently, the risks ofpartical or full Project failure are no greater than can be normally expectedwith operations of this type in India and acceptable in view of the fact thatthe Project benefits would be large and accrue to the cooperative sector andlarge numbers of small farmers.

1/ Based on an average family size of 5.5.

69

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VIII. AGREEMENTS REACHED AND RECOMMENDATIONS

8.01 During negotiations assurances have been obtained from GOI and NCDCon the following matters:

(a) building designs, specifications and construction standardsfollowed for Project godowns would be acceptable to IDA(4.09);

(b) GOI would make or cause to be made adequate funds availableto NCDC for meeting its Project commitments (4.18);

(c) all documents supporting IDA credit disbursements, againstgodown construction, would be retained by NCDC and madeavailable for review by IDA supervision missions (4.20);

(d) SCB would strengthen their staffing with the type, numbersand the phasing to be agreed with IDA during negotiations(5.06);

(e) NCDC and SCB would apply subproject appraisal criteriaagreed with IDA during negotiations, for every loanapplication covered under this Project (5.16);

(f) submission to IDA, periodically of copies of NCDC's andSCB's annual work programs and budgets, and quarterlyprogress reports (5.22); and

(g) terms of lending to SCB and SCB's terms of lending toCooperatives would be satisfactory to IDA (5.24).

8.02 Finalization of financial arrangements between GOI and NCDC, accept-able to IDA, would be a condition of credit effectiveness (4.18).

8.03 It is recommended that retroactive financing up to a total ofUS$1.0 M be made available for disbursements against expenditures incurredafter July 1, 1978 (4.20).

8.04 With these assurances the Project would be suitable for an IDACredit of US$30 M to GOI.

ANNEX 1

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Project Tables and Charts

Table Title

1 NCDC: Comparative Balance Sheets2 NCDC: Sources and Application of Funds3 NCDC: Loan Disbursements by Channel and Purpose4 NCDC: Disbursements During the Fifth Five-Year Plan5 NCDC: Projections of Loanable Funds6 NCDC: Comparative Income and Expenditure Statements7 Loan Disbursements by SCB in Project States8 Loans of SCB Outstanding in Project States9 Overdues, Bad and Doubtful Debts of SCB in Project States10 Summarized Statement of Income and Expense for State

Cooperative Banks in the Project States, 1976/7711 Summarized Balance Sheets of SCB in Project States

as of June 20, 1977* 12 Statistics on Primary Cooperative Societies in the Project

States13 Agricultural Production, Fertilizer Use and Storage

Capacity in Project States14 Project Costs14.1 Number of Godowns to be Constructed14.2 Estimated Costs of Godowns14.3 Project Costs: Haryana14.4 Project Costs: Orissa14.5 Project Costs: Uttar Pradesh14.6 Investments in Vehicles14.7 Engineering Equipment for Design, Layout and Inspection Work15 Additional Technical and Professional Staff for the Project16 Summary of the Employment Effects

Charts

1 Existing Organization, Functions and Staff of NCDC2 Proposed Organization Chart for NCDC3 Organization Chart of a SCB4 Model Design for 50-ton Godown Without Residence5 Model Design for 100-ton Godown With Residence at Ground Level6 Model Design for 2,000-ton Godown7 Implementation Schedule for Construction of 100-ton Godown8 Implementation Schedule for Construction of 2,000-ton Godown

ANNEX 1Table 1

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

NCDC: Comparative Balance Sheets(Rs Million)

Assets 1973/74 1974/75 1975/76 1976/77 1977/78

Fixed Assets 0.8 0.9 0.9 1.9 3.7

Loans to:

State Governments 721.6 729.2 855.4 1,037.1 1,203.9

Cooperative Banks 36.6 56.6 77.8 99.9 107.4

Other Cooperatives 3.0 33.0 14.8 16.2 18.5

Investments 11.2 11.4 9.6 9.8 15.0

Advances to Staff 0.3 0.5 1.0 1.4 1.9

Bond Redemption A/C - - 2.0 6.8 14.2

Interest Accrued 16.0 15.9 19.5 27.2 29.4

Prepaid Expenses 8.9 8.1 8.2 10.0 14.3

Bank and Cash Balances 46.0 33.4 44.0 31.6 67.7

Total 844.4 889.0 1,033.2 1,241.9 1,476.0

Liabilities

NCDC Fund Account 285.6 318.8 355.0 402.6 454.9

Reserves 4.8 5.3 7.3 13.0 20.6

Loans from GOI 550.0 533.3 608.6 707.2 766.5

Market Borrowings - 27.5 55.0 110.0 220.0

Other Liabilities 4.0 4.1 7.3 9.1 14.0

Total 844.4 889.0 1,033.2 1,241.9 1,476.0

IND IA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

NCDC: Sources and Application of Funds(Rs Million)

1973/74 1974/75 1975/76 1976/77 1977/78

SourcesNCDC Fund 33.4 33.3 36.2 47,6 52.3Additions to Reserves andRetained Earnings 0.9 0.5 2.1 5.7 7.7

Market Borrowings - 27.5 27.5 55.0 110.0Other Loans and Advances 71.7 31.0 129.5 161.8 144.8Loan and Advance Repayments 70.3 97.9 108.0 98.7 122.1

Total 176.3 190.2 303.3 368.9 436.8

Application

Fixed Assets Expenditure 0.2 0.0 0.0 1.0 1.8Investments - 2.0 2.0 5.0 12.6Loans and Advances 110.3 156.0 237.6 304.3 299.3Change in Current Assets/Liabilities 21.3 -15.4 9.4 - 4.8 37.6Loan Repayments 44.5 47.6 54.3 63.4 85.5

Total 176.3 190.2 303.3 368.9 436.8

fD, 1

ANNEX 1Table 3

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

NCDC: Loan Disbursements by Channel and Purpose1973/74 - 1977/78(Rs Million)

Inputs &Marketing Processing Storage Other Total

Through State Governments:

1973/74 20.7 21.6 27.0 23.9 93.21974/75 14.3 37.7 10.0 20.5 82.51975/76 27.9 121.1 16.1 37.1 202.21976/77 46.0 167.2 17.8 44.6 275.61977/78 62.0 164.2 44.0 10.8 281.0

Sub-total 170.9 511.8 114.9 136.9 934.5

Through State CooperativeBanks: _

1973/74 - 11.8 - 2.2 14.01974/75 - 22.1 - 1.0 23.11975/76 - 23.1 - - 23.11976/77 - 26.0 - - 26.01977/78 - 13.1 - - 13.1

Sub-total - 96.1 - 3.2 99.3

Directly to Apex Institutions

1973/74 1.5 1.1 - - 2.61974/75 - _ _1975/76 1.5 10.3 - - 11.81976/77 0.4 1.0 0.2 - 1.61977/78 2.3 0.5 0.0 - 2.8

Sub-total 5.7 12.9 0.2 - 18.8

ANNEX 1Table 4

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

NCDC: Disbursements DurinR Fifth Five-Year Plan Period

(Rs Million)

5th PlanOutlay 1973-74 1974-75 1975-76 1976-77 1977-78 Total

I. CENTRAL SPONSORED SCHEMES:

1. Margin Money for Fertilizer Distribution 153.0 18.7 5.0 29.0 43.4 8.0 104.1

2. Central Scheme for DevelopmentCooperatives in Under-developed States 148.5 56.3 5.0 20.5 39.9 45.7 167.3

3. Assistance to Cooperative Sugar Factories 270.1 - 15.0 55.3 80.0 75.5 223.7

4. Assistance to Cooperative Spinning Mills 9.0 - 5.0 14.5 24.5 7.0 51.0

5. Assistance to Cooperative Federations - - 1.0 8.0 0.9 2.0 11.6

6. Assistance to Weavers Spinning Mills - - - 5.5 15.4 22.4 43.2

Subtotal 508.6 75.0 31.0 130.7 204.1 160.5 601.2

II NCDC SPONSORED SCHEMES:

1. Margin Money & Share Capital toMarketing Federations and Societies 55.0 - 8.0 19.5 14.6 20.2 62.2

2. Assistance to Processing Federation 0.4 - - - - 0.4 0.4

3. Agricultural Crop Processing 98.6 0.9 29.2 23.7 27.6 22.1 103.44. Fruit and Vegetables Marketing 9.0 - - 1.8 1.0 0.5 3.3

5. Processing Rehabilitation & Margin Money 14.2 11.8 - 6.8 - 10.2 28.8

6. Cooperative Storage 67.0 - 9.3 11.3 13.3 40.3 74.2_1. Cooperative Cold Storage 21.6 - - 4.9 4.9 5.0 14.9

Distribution of Consumer Goods 26.0 - - 1.2 12.6 16.5 30.3-Y Consumer Industries 0.1 - - - - 0.1 0.1

10. Seed Multiplication 13.5 0.0 - - - 1.0 1.7

11. Agro Service Centers 17.4 3.9 1.4 1.5 1.1 0.2 8.112. Agro Chemicals Formulation 2.0 0.1 - - - 0.4 0.5

13. Soil Testing Laboratories 0.8 0.1 - - - - 0.1

14. Fishery Cooperatives 9.0 - 0.3 0.7 0.9 1.2 2.015. Poultry Cooperatives 37.6 - - - 9.9 0.4 0.5

16. Dairy Cooperatives - - - 10.3 - 7.7 27.9

17. Tribal Cooperatives 21.5 - 3.7 5.1 3.3 9.0 20.918. Cooperatives for Hill Areas 1.0 - - - - - -

19. Handloom Cooperatives 10.0 - - - - 7.7 7.7

20. Cotton Development Scheme 3.0 - - - 0.1 - 0.1

21. Cooperatives for Coir, and Sericulture 3.0 - - - - 3.0 3.0

22. Technical and Promotional Cells 3.0 0.5 0.3 0.3 0.3 2.6 1.623. Training Programmes 1.0 0.0 0.1 0.1 0.1 1.8 0.424. Assistance for Feasibility Studies 2.1 0.0 0.1 0.2 0.0 0.1 0.525. Assistance for Market Surveys - - - - - 0.1 0.1

26. Management Studies - - - - - 0.2 0.2

27. Publicity 2.5 0.3 0.3 0.2 0.5 0.4 1.7

28. Ad hoc Schemes 82.2 15.2 24.7 11.8 18.7 0.7 71.229. Investments - - - 10.0 0.2 5.2 15.4

30. Granular Units 7.4 4.0 1.6 0.5 0.4 - 6.5

SUB-TOTAL 509.9 36.8 78.7 109.8 109.9 153.6 488.8

TOTAL 1,090.5 111.8 109.7 240.5 314.0 314.1 1,090.0

ANNEX 1Table 5

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

NCDC: Projection on Loanable Funds(Rs Million)

RECEIPTS 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84

Opening Balance 31.6 28.5 15.3 29.2 47.1 47.0 20.8

Repayments against loans:

up to Apr. 1 Principal 120.4 114.0 111.5 121.0 113.0 107.5 102.0

1977 Interest 88.7 77.0 67.5 61.5 52.5 44.0 36.5

77-78 Principal - 6.3 6.3 7.8 14.2 14.2 14.2

Interest - 15.9 15.4 14.8 14.1 12.8 11.5

78-79 Principal - - 10.0 10.0 12.3 22.5 22.5Interest - - 25.2 24.3 23.4 22.3 20.3

79-80 Principal - - - 5.7 5.7 7.0 12.9

Interest - - - 14.4 13.9 13.4 12.7

80-81 Principal - - - - 7.1 7.1 8.8

Interest - - - - 18.0 17.4 16.7

81-82 Principal - - - - - 7.5 7.5

Interest - - - - - 18.9 18.2

82-83 Principal - - - - - - 7.8

Interest - - - - - - 19.6

(A) TOTAL: 240.7 241.7 251.2 288.7 321.3 341.6 332.0

PAYMENTS

Repayments to GOI against

loans up to 1/4/1977: 131.5 127.0 106.7 101.2 91.8 82.7 76.6

Interest on Market Borrowings 6.4 13.2 18.0 24.0 31.2 38.4 45.6

Administrative Expenses 8.2 6.5 6.5 6.7 7.0 7.3 7.5

Land and Buildings 1.7 2.5 0.5 - - - -

Redemption of Bonds 7.4 14.0 20.0 26.0 34.0 42.0 50.0

Income Tax 13.7 10.0 11.0 11.5 12.0 12.5 14.0

(B) TOTAL: 169.0 173.2 162.7 169.4 176.0 182.9 193.7

Difference (A - B) 71.7 68.5 88.5 119.3 145.3 158.7 138.3

GOI Grants for Special Schemes 48.4 60.0 30.0 30.0 30.0 30.0 30.0

Market Borrowings 110.0 110.0 100.0 120.0 120.0 120.0 190.0

Funds Available for New projects- 230.1 238.5 218.5 269.3 295.3 308.7 358.3

1/ Excluding borrowingsand NCDC-Fund support from GO; and IDA-Funds.

ANNEX 1Table 6

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

NCDC: ComparAtive Income and Expenditure Stat(Rs Million)

1973/74 1974/75 1975/76 1976/77 1977/78

Income

Grants from GOI 26.3 30.5 30.5 45.5 53.9Interest on:Loans 44.4 45.8 53.2 70.6 88.3Debentures and OtherAdvances - 0.4 0.2 0.7 0.2Bank Accounts 1.9 2.9 4.3 3.5 2.3Dividend on Investments 0.5 0.1 - 0.2 0.0Other Income 0.5 0.0 0.2 1.9 1.7

Total 73.6 79.7 88.4 122.4 146.4

Expenditure

Grants to GOS, SCB andOthers 1.9 0.7 2.6 9.7 11.4Interest on Borrowing 28.9 31.4 35.4 42.4 54.1Discount on Bonds - 0.3 0.3 0.6 1.1Administration 3.0 3.7 4.1 5.1 5.8Income Tax 5.0 8.9 7.4 6.0 8.6Refund of Subsidy to GOI 0.4 - 0.1 - 0.1Publicity Programs 0.3 0.3 0.2 0.5 0.5Accrued Expenses - 0.6 0.0 4.1 3.1Transferred to Reserves:Building/Gratuity 0.9 0.5 0.1 2.0 2.0Bond Redemption - - 2.0 4.5 7.4Excess Income to NCDC Fund 33.2 33.3 36.2 47.5 52.3

Total 73.6 79.7 88.4 122.4 146.4

ANNEX 1

Table 7

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Loan Disbursements by SCB in Project States(Rs million)

1972-73 1973-74 1974-75 1975-76 1976-77

Uttar Pradesh

Agricultural Purposes 537.0 571.9 674.1 851.2 1,053.9

Other Purposes 631.0 746.1 1,192.2 1,665.2 2,120.7

Sub-Total 1,168.0 1,318.0 1,866.3 2,516.4 3,174.6

Haryana

Agricultural Purposes 264.9 303.5 413.2 415.9 599.0

Other Purposes 389.9 310.1 400.8 494.8 551.0

Sub-Total 654.8 613.6 814.0 910.7 1,150.0

Orissa

Agricultural Purposes 113.9 95.0 119.8 158.4 168.7

Other Purposes 62.4 77.5 118.3 99.0 299.9

Sub-Total 176.3 172.5 238.1 257.4 468.6

TOTAL

Agricultural Purposes 915.9 970.4 1,207.0 1,425.6 1,821.6

Other Purposes 1,083.3 1,133.6 1,711.3 2,259.1 2,971.5

Grand Total 1,999.2 2,104.0 2,918.3 3,684.7 4,793.1

ANNEX 1Table 8

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Loans of SCB Outstandin2 in Project States(Rs million)

1972-73 1973-74 1974-75 1975-76 1976-77

Uttar Pradesh

Agricultural Purposes 486.9 507.1 559.8 430.7 580.7Other 203.5 224.7 269.5 234.1 424.7

Sub-Total 690.4 731.8 829.3 664.8 1,005.4

Haryana

Agricultural Purposes 75.5 90.4 129.2 121.0 228.1Other 77.4 84.5 153.3 140.9 183.6

9 Sub-Total 152.9 174.9 282.5 261.9 411.7

Orissa

Agricultural Purposes 49.5 43.0 67.7 111.5 144.2Other 32.3 45.1 62.0 38.9 131.4

Sub-Total 81.8 88.1 129.7 150.4 275.6

TOTAL

Agricultural Purposes 611.9 640.6 756.8 663.2 953.0Other 313.2 354.3 484.7 413.9 739.7

Grand Total 925.1 994.9 1,241.5 1,077.1 1,692.7

ANNEX 1

Table 9

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Overdues, Bad and Doubtful Debts

of SCB in Project States(Rs million)

1972-73 1973-74 1974-75 1975-76 1976-77

Uttar Pradesh

Loans overdue 20.3 22.6 37.3 19.2 20.6

Demand N/A 540.9 638.3 911.6 857.6

% overdue to demand N/A 4.2 5.9 2.1 2.4

% overdue to outstandings 2.9 3.1 4.5 2.9 2.1

Bad and doubtful debts 6.8 4.7 5.5 8.3 8.5

Provision for bad debts 7.3 7.4 8.3 10.2 11.6

Haryana

Loans overdue 0.1 0.1 0.1 0.1 18.6

Demand 631.1 591.6 687.6 931.4 1,018.9

% overdue to demand 0.0 0.0 0.0 0.0 1.8

% overdue to outstandings 0.0 0.0 0.0 0.0 4.5

Bad and doubtful debts 0.1 0.1 0.1 0.1 0.1

Provision for bad debts 0.8 0.8 1.0 1.4 1.5

Orissa

Loans overdue 10.1 4.3 4.4 0.8 0.3

Demand 166.2 129.1 169.8 173.3 287.3

% overdue to demand 6.1 3.3 2.6 0.4 0.1

% overdue to outstandings 12.3 4.9 3.4 0.5 0.1

Bad and doubtful debts 0.4 0.6 0.4 N/A 0.3

Provision for bad debts 0.3 0.3 0.4 0.2 0.3

ANNEX 1Table 10

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Summarized Statement of Income and Expense

for State Cooperative Banks in Project States, 1976-77(Rs million)

Uttar Pradesh Haryana OrissaIncome

Interest 108.4 44.2 22.8Other 0.4 1.8 0.5

Total 108.8 46.0 23.3

Expenditure

Interest 77.6 31.8 18.3Salaries 1/ 5.2 0.9 0.7Other 10.5 3.1 2.1Profit 15.5 10.2 2.2

Total 108.8 46.0 23.3

Percentage of:

Profit to Gross Income 14.2 22.2 9.4Salaries etc. to Profit 33.5 8.8 31.8Expense to Gross Income 85.8 77.8 90.6

1/ Including Provident Fund Contributions and Travelling Allowances.

ANNEX 1

Table 11

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Summarized Balance Sheets of SCB in ProjectStates as at June 30, 1977

(Rs million)

Uttar Pradesh Haryana Orissa

Liabilities

Share Capital 74.0 24.2 16.0

Reserves 98.6 32.8 20.5

Deposits 1,046.6 286.6 154.6

Borrowings:R.B.I. 115.3 204.1 138.8

Government 18.2 0.2 0.2NCDC 16.5 18.6 2.5

ARDC 10.0 9.9 7.2

Other Liabilities 61.5 7.2 6.1Profit and Loss A/c 15.5 10.2 2.2

TOTAL 1,456.2 593.9 348.1

Assets

Cash and Bank Balances 135.5 107.6 16.1Investments 297.4 46.6 50.8Advances:Short Term 875.6 310.0 144.9

Medium Term 57.2 63.1 122.3

Long Term 72.7 38.5 10.3

Interest Receivable 6.1 23.9 1.0Other Assets 11.7 4.1 2.7

TOTAL 1,456.2 593.9 348.1

X INDIA 0NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Statistics on Primary Cooperative Societies in the Project States

Haryana Uttar Pradesh Orissa Total

Number of Cooperative PrimarySocieties, June 1976 2,409 12,994 3,358 18,761

Number of Societies, May 1978 2,168 8,002 2,745 12,915

Target Number of viableSocieties 1/ 2,200 8,000 2,500 12,700

Number of Societies owningGodowns 600 3,200 1,800 5,600

Number of Society Godowns to becrnstructed under the Project 1,500 4,600 1,040 7,140

Number of Members in allSocieties (Million) 0.8 7.0 2.2 10.0

Number of Members in ProjectSocieties (Million) 2/ 0.5 3.9 1.3 5,7

1/ RBI's and Cooperative Departments' target, based on surveys on viability and potentialof cooperatives after amalgamating them into bigger units.

2/ Calculated by using the current average memberships and number of Societies for whichgodowns are to be constructed under the Project. 1 M

a J

NH

INDTA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Agricultural Production Fertilizer Use and Storage Capacity in Project States (on bipnnial intervals)

(Quantities in million tons)

---------------- Actual ----------------- -------------- Projections -------------

1972/73 1974/75 1976/77 1978/79 1980/81 1982/83

Production of Foodgrains- Haryana 1/ 4.07 3.34 5.26 5.40 5.80 6.60

- Uttar Pradesh 2/ 18.13 16.33 19.52 21.20 22.10 24.10

- Orissa 3/ 4.80 3.97 5.95 6.60 7.40 7.95

Use of Fertilizeis (material)- Haryana 4 0.23 0.17 0.30 0.41 0.58 0.73

- Uttar Pradesh 5/ 1.12 1.02 1.05 1.95 2.37 2.85

- Orissa 6/ N/A 0.12 0.15 0.27 0.38 0.51

Estimated Storage/Transportationrequirement 7

- Haryana 1.45 1.20 1.85 1.95 2.15 2.55

- Uttar Pradesh 4.00 3.65 4.30 5.00 5.30 5.90

- Orissa N/A 0.85 1.20 1.40 1.60 1.80

Cooperative Storage Capacity;Federations and RMCS 8/

- Haryana 0.04 0.08 0.10 0.15 0.24 0.32

- Uttar Pradesh N/A N/A 0.16 0.17 0.19 0.21

- Orissa N/A N/A 0.06 0.10 0.14 0.19

Cooperative Storage, percentof the total requirement

- Haryana 2.7 6.7 5.4 7.7 11.2 12.5

- Uttar Pradesh N/A N/A 3.7 3.4 3.5 3.6

- Orissa N/A N/A 5.0 7.1 8.7 10.5

Village Level CooperativeStorage 8/ 9/

- Haryana N/A 0.09 0.10 0.11 0.16 0.21

- Uttar Pradesh N/A 0.10 0.20 0.35 0.50 0.67

- Orissa N/A 0.10 0.11 0.12 0.15 0.20

1/ Annual growth about 4% from 1976/77-1982/83.2/ Annual growth 4.4% from 1976/77-1980/81.3/ In Orissa the production in 1976/77 is an estimate. The projected growth from 1976/77-1982/83 is over 5.5%/year.

4/ Annual growth about 17%.5/ For 1977/78 estimated at 1.75 million tons. The growth between 1977/78-1982/83 about 10% annually.

6/ Annual growth about 15%.7/ The assumptions are the following (as obtainted from the state agricultural authorities in Haryana and Uttar Pradesh) Due to -

seasonality the peak stock of fertilizers is about 40% of the annual sales. The produce storage peak is about one third of

the foodgrain production in Haryana and about 20% in Uttar Pradesh. For Orissa, the Uttar Pradesh percentage has been used.

8/ Projections include the new godowns planned under the Project.9/ The village level godown capacity has not been added up with the cooperative "wholesale" storage, because they are only

partly complementary.

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Project Costs(Re Million)

1 2 3 4 5 6Construction of Godownasl 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 Total

In haryana (Table 14.3)

HATED 8.1 12.1 12.2 10.8 10.0 4.6 57.8

Primary Coop. Societies 6.9 13.7 13.7 13.7 13.7 6.8 68.5Subtotal T5235 T-27

In Orissa (Table 14.4)

OSCHF 0.5 1.0 1.0 1.0 1.0 0.5 5.0

Regional Coop. Marketing 1.6 3.5 3.9 4.6 4.9 2.3 20.8Societies 0

Tribal Development Coop. 0.6 0.9 0.6 0.3 - _ 2.4Corporation

Primary Coop. Societies 4.4 7.5 7.2 9.3 11.2 5.7 45.3

Godovn Rehabilitation 0.7 1.5 1.5 2.2 1.5 0.8 8.2Subtotal 7.8 i.T TT T7.

In Uttar Pradesh (Table 14.5)

PCF 1.4 2.9 2.9 2.9 2.9 1.5 14.5

Primary Coop. Societies 22.0 43.9 44.0 44.0 44.1 22.0 220.0Subtotal 23.4 46.8 46.9 4694-7.0O 23.5 2~34.5

Technical Assistance 0.7 0.8 - - _ _ 1.5

Vehicles (Table 14.6) 2.0 1.1 0.5 0.5 0.5 0.3 4.9

Engineering Instruments (Table 14.7) 0.1 - - - - _ 0.1

Total Base Costs 49.0 88.9 87.5 89.3 89.8 44.5 449.0

Physical contingencies 5% 2.4 4.4 4.4 4.4 4.5 2.2 22.3Price contingencies 2/ 1.7 6.2 11.4 18.7 25.1 15.5 78.6

Total Costs 53.1 99.5 103.3 112.4 119.4 62.2 549.9

1/ For the number of godowns, see Table 14.1.2/ The base prices are from mid-1978. The price contingencies representing price increases have been added by using the following

estimated inflation rates, compounded annually: 1978/79, 3.5% (half of the project costs for the 1st year will be used beforeend 1978); 1979/80, 7%; 1980-82, 6.5%; 1983/84, 6%.

I-.

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Number of Godowns to be Constructed

__________-_----- Year -----------…----------1 2 3 4 5 6 Total

HaryanaHAFED 1/ 10 15 15 13 12 5 70Primary Cooperative Facilities- 50 tons 50 100 100 100 100 50 500- 100 tons 100 200 200 200 200 100 1,000

150 300 300 300 300 150 1,500Uttar PradeshPCF 1/ 3-4 7-8 7-8 7-8 7-8 3-4 35Primary CooperativeSocieties- 50 tons 100 200 200 200 200 100 1,000- 100 tons 360 720 720 720 720 360 3,600

460 920 920 920 920 460 4,600

OrissaOSMCF 1/ 2 4-5 4-5 4-5 4-5 2-3 23Regional MarketingCoop. Societies 25 50 55 65 65 20 280TDCC 1-2 2-3 1-2 1 - - 6Primary CooperativeSocieties and LAMPS- 50 tons 10 16 10 14 20 10 80- 100 tons 95 159 155 201 240 120 970

105 175 165 215 260 130 1,050

RehabilitationSocieties 100 200 200 300 200 100 1,100 3 >

1/ The annual number of godowns which may differ from these figures, are calculated by dividingannual tonnage to be constructed by the average size of godowns.

^ ^ *~~~~~~f

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Estimated 1978 Costs of Godowns 1/(Rupies)

Hodel Construction Cost Cost of -Type Model Description Roof Type 2/ Cost of Cost of Water Land Total Cost Remarks

Godown Residence SupplyO 3Al 50 MT Godown (without Asbestos Godown consists of one

residence) Cement Sheets room 18'x21', one roomon Steel Truss 22000 - 2000 1000 25000 12'xlO', and one lobby

6'xlO'

A2 50 MT Godown (with - do - 22000 12000 2000 1000 37000 Residence is Isame as,forresidence) Model-type B4, adjacent

to Godown and on groundlevel

Bl 100 MT Godown Reinforced 42000 - 2000 2000 46000 Godown consists of two(without residence) Concrete Slab rooms each 19'x16.5',

two rooms each lO'x12',and one lobby 14'x8'

B2 100 MT Godown (with - do 42000 12000 2000 2000 "8O0Q Residence above Godownresidernce) consists of rooms for

livinig-sleeping, dining,kitchen, terrace and W.C,

B3 100 MT Godown Asbestos 37000 - 2000 2000 41000 Decrease in coaL because(without residence) Cement Sheets on of Asbestos Cemi-ttype

Steel Truss roof

B4 100 MT Godown (with - do - 37000 12000 2000 2,000 53000 Residence oh groljnd levFAresidence) adjacee .eo Co iu.

C 250 MT Godown Asbestos 58500 2000 4000 66500 5/ Godown consists '.F one(without residence) Cement Sheets room 51.25'x30'

on Steel TrussD 2000 MT Godown 22 gauge 462500 - 4000 50000 540500 4/ Internal area of Godown

(without residence) corrugated would be 70'xl74'Steel Sheetson SteelTruss (70'span)

1/ The cost estimates are for Haryana and Uttar Pradesh States. Costs in Orissa may average 15 percent lowerbecause of lower cost of labor and land.

2/ A reinforced concrete slab roof is recommended for minimum storm damage, less corrosion and more effectivefumigation. Slab construction is essentialwherea living quarters is provided above the godown.

3/ Potable water would be provided for laborers and for bullocks, and would be available for the society members.4/ Includes Rs. 24,000 for boundary fence.5/ Includes Rs. 2,000 for boundary fence.

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Project Costs: Haryana 1/(Value in Rs millions)

______________________------ Year -------------------------1 2 3 4 5 6 Total

HAFEDGodowns - Capacity tons 30,000 45,000 45,000 40,000 37,000 17,000 214,000 tons

- Rs. M. 8.1 12.1 12.2 10.8 10.0 4.6 57.8

PCS Godowns50 tons units: - tons 2,500 5,000 5,000 5,000 5,000 2,500 25,000 tons

- Rs. M. 1.3 2.5 2.5 2.5 2.5 1.2 12.5Residences Rs. M. 2/ 0.4 0.8 0.8 0.8 0.8 0.4 4.0

Rs. M. 1.7 3.3 3.3 3.3 3.3 1.6 16.5

100 tons - ton 10,000 20,000 20,000 20,000 20,000 10,000 100,000 tons- Rs. M. 3/ 4.4 8.8 8.8 8.8 8.8 4.4 44.0

Residences Rs. 2/ 0.8 1.6 1.6 1.6 1.6 0.8 8.0Rs. M 5.2 10.4 10.4 10.4 10.4 5.2 52.0

Total Rs. M. 15.0 25.8 25.9 24.5 23.7 11.4 126.3

1/ Excluding contingencies2/ About 2/3 of the societies are estimated to need a residence for the manager costing Rs. 12,000.3/ Two thirds of these units are estimated to have roofs of reinforced concrete slabs, one third of wooden

trusses and asbestos sheets.

M >4

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-I

ANNEX 1Table 14.4

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Project costs: Orissa 1/

_________________--- Year ------… - …--------

1 2 3 4 5 6 Total

New GodownsOSCMF

- Tons 2,000 4,000 4,000 4,000 4,000 2,000 20,000 tons- Rs. M. 0.5 1.0 1.0 1.0 1.0 0.5 Rs. 5.0 M

Regional CooperativeMarketing Societies

- Tons 6,000 13,500 15,000 17,500 19,000 9,000 80,000 tons- Rs. M. 1.6 3.5 3.9 4.6 4.9 2.3 Rs. 20.8 M

Tribal DevelopmentCooperative Corporation

_ Tons 2,500 3,750 2,500 1,250 - - 10,000 tonsRs. M. 0.6 0.9 0.6 0.3 - - Rs. 2.4 M

Primary CooperativeSocieties and LAMPS

50 Tons

- Tons 500 800 500 700 1,000 500 4,000 tons- Rs. M. 0.2 0.3 0.2 0.3 0.5 0.3 Rs. 1.8 M- Residences 2/ 0.06 0.11 0.06 0.09 0.12 0.06 Rs. 0.5 M

Rs. M. 0.3 0.4 0.3 0.4 0.6 0.4 Rs. 2.4 M

100 Tons

- Tons 9,500 15,900 15,500 20,100 24,000 12,000 96,000 tons- Rs. M. 3/ 3.5 6.0 5.9 7.6 9.1 4.5 Rs. 36.6 M- Residences Rs. M 2/ 0.6 1.1 1.0 1.3 1.6 0.8 Rs. 6.3 M

Rs. M. 4.1 7.1 6.9 8.9 10.6 5.3 Rs. 42.9 M

Rehabilitation Godowns 4/ 0.7 1.5 1.5 2.3 1.5 0.7 Rs. 8.2 M

Total Orissa 7.8 14.4 14.2 17.5 18.6 9.2 Rs. 81.7 M

a Excluding contingencies.2/ About 2/3 of the societies estimated to need a manager's residence costing

Rs. 10,000.3/ Two thirds of them are estimated to have roofs of reinforced concrete slabs,

one third of asbestos sheets.4/ At the average cost of Rs. 7,500 as in the original proposal.

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Project costs: Uttar Pradesh 1/

------------ Year ------------------------------ Total

1 2 3 4 5 6

PCF godowns

- tons 5,000 10,000 10,000 10,000 10,000 5,08" 50,000 t

- Rs. M 1.4 2.9 2.9 2.9 2.9 1.5 Rs 14.5

Primary CooperativeSocieties' godowns

50 tons- tons 5,000 10,000 10,000 10,000 10,000 5,000 50,000 t--s

- Rs. M. 2.5 5.0 5.0 5.0 5.0 2.5 25.0

- Residences Rs. 2/ 0.8 1.6 1.6 1.6 1.6 0.8 8.0

3.3 6.6 6.6 6.6 6.6 3.3 33.0

100 tons- tons 36,000 72,000 72,000 72,000 72,000 36,000 360,000 t ,S

- Rs. M. 3/ 15.8 31.6 31.7 31.6 31.7 15.8 158.2

Residences Rs. 2/ 2.9 5.7 5.7 5.8 5.8 2.9 28.8

Rs. M. 18.7 37.3 37.4 37.4 37.5 18.7 187.0

Total U.P. Rs. M. 23.4 46.8 46.9 46.9 47.0 23.5 234.5

1/ Excluding contingencies.2/ Two thirds of the societies are estimated to need a manager's residence costing Rs. 12,000.

3/ Two thirds of these units are estimated to have roofs of reinforced concrete slabs and one third of asbestos

sheets.

M

H z

ANNEX 1Table 14.6

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECTInvestments in Vehicles

---------------Year----------------- Total1 2 3 4 5 6

Motor vehicles 1/No. 25 8 - - - - 33Rs.'000 1250 400 - - - - Rs.1,650,000

Scooters 2/No. 110 36 - - 146Rs.'000 550 180 - - - - Rs. 584,000

Bicycles 3/No. 815 1595 1585 1735 1680 840 8,250Rs.'000 245 478 476 520 504 252 Rs.2,475,000

Rs.'000 2045 1058 476 520 504 252 Rs.4,855,000

1/ Four-wheel drive vehicles, or when conditions allow, motor cars forthe state and divisional level engineering supervisors(3 for NCDCzonal offices; 4 for the SCB's state level offices; 26 for thedivisional level offices: at the maximum cost Rs.50,000 each.

2/ For all field Project Development Officers (46) and EngineeringSupervisors (100); at the cost of Rs.5,000 each.

3/ For all societies with a new or rehabilitated godown: Rs.300 each.

ANNEX 1Table 14.7

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Engineering Equipment for Design,Layout and Inspection Work

Number of Equipment Items Unit Cost Total CostHaryana Orissa U.P. Total Rs. Rs.

1. Dumpey level andlevelling rod 1/ 6 6 12 24 2490 59,760

2. Prismatic compass l/ 6 6 12 24 165 3960

3. Drawing boards 2 3 3 8 415 3320

4. Drawing instruments 2/ 2 3 3 8 290 2320

5. Plumb bob 3/ 18 26 58 102 20 2040

6. Spirit level 3/ 18 26 58 102 40 4080

7. Iron square 3/ 18 26 58 102 40 4080

8. Measuring gauge 3/ 18 26 58 102 20 2040

9. Measuring tapes(30 and 2m) 3/ 18 26 58 102 125 12,750

Total funds needed 94,350

1/ For the divisional level Assistant Engineers in the Federations and SCB.2/ For the Executive Engineers' offices at the State level (and TDCC in Orissa).3/ For the construction inspectors (Engineering Supervisors), who will carry

this equipment with them to the construction sites.

ANNEX 1Table 15

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION

Additional Technical and Professional Stafffor the Project

X . He g0

Ai 0. 0S

0 w > r -nK&F-E 01 1 2

J.hO 0 0 0 -H0O

W~~~Gj 0) 0 m

00 -q "I'.4 9 ci 0cCr 4JW .740S 4 44V ) 0 $ 4 wI. P.aQ2

S -42/ 1 8 2J14 12O'44 0~4.40 cJ )0 50 C

NCDCDelhi Office 1 1Zonal Offices (3) 3

Utar PradAPFED 1/ 1 2 6SCB /8 2 1 4 12

OrissaOSCMT 1/../ 1 2TDCC 2/ 6 1 -SCB I/ - for oCowsf and PCSs 8 2 isco4 15- for Rehabilitation 6 1 1 2 7-8

Uttar PradeshPCF 1/../ 1 3SCB 2 24 4 1 11 55

Total 46 9 5 26 100

1/ In the Federations the suggested annual planning and inspection task would be5-7 godowns for an Assistant Engineer and inspection of 2-3 godowns'construction for an Engineering Supervisor (Junior Engineers).

2/ In the SCB an Assistant Engineer would scrutinize the drawings and start (andpartially inspect) 65-80 godowns per year, and an Engineering Supervisor checkconstruction of 17-20 godowns from start to completion. A Project DevelopmentOfficer would initiate 33-50 godowns a year and later monitor the problemsocieties' progress.S This efficiency will be achieved if there is one Assistant Engineer in eachdivision, one Engineering Supervisor in each district and one ProjectDevelopment Officer for one or two districts depending on the workload.

3/ The planning and inspection need in the TDCC is below 2 godowns a year.4/ The Federations and Orissa SCB already have one Executive Engineer on their

staffs.

ANNEX 1Table 16

INDIA 0NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Summary of the Employment Effects(Annual Man years)

Haryana Uttar Pradesh Orissa Total

Manpower connected witheonstruction

project officers and juniordevelopment officers of SCB 1/ 9 26 15 50

banking staff of NCDC/SCB 1/ 3 5 4 12

technical staff of SCB/Federations 1/ 2/ 26 71 34 131

construction workers 3/- skilled 650 1,550 450 2,650- unskilled 1,400 4,200 900 6,500

Total during Project implementation 2,088 5,852 1,403 9,343period

Business operations of cooperatives 4/

PCS managers - 1,500 4,600 2,240 8,340store keepers 1,070 3,635 1,270 5,975watchmen 1,640 4,670 1,650 7,960

Total annual staff 4,210 12,905 5,160 22,275

Incremented harvesting labor 5/ 9,000 20,600 4,800 34,400

1/ See Table 15 ("Additional Technical and Professional Staff for the Project"').Part of this staff would become permanent, as similar needs would appear alsoin the future.

2/ Technical staff would be employed for 5 years, but at least a half would likelybe needed also later for similar tasks.

3/ The construction workers are employed by the contractors and they would be neededfor 5 years. To get illustrative employment figures, year 2 has been selected asan example. The following averages and typical cases have been used:- small godowns: 20 men/women for 3 months; one third of them are skilled workers.- 2,000 ton godowns: 60 men/women for 6 months; one third of them are skilledworkers.

4/ At the time when all godowns scheduled have been constructed. Each PSC wouldhave a manager and a watchman and the 100 ton godowns also a store-keeper. All Federations' and other large godowns would have a storekeeper andtwo watchmen.

5/ In the fifth year.

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

EXISTING ORGANIZATION, FUNCTIONS AND STAFF OF NCDC

M.ANAGI NAG-IECTO

DDNGOIDTDN PIDNTTGANDPODACTDPPOISD GAG- DIO

TrogNIIs *FI.I,',T AIIIIdlgs andT Pan F,TTA OtTADTI DTOv sIISM I',luD,TgIT LIDIDT1ITT IT, Suc FTTTDTTT.IDTTA TDTQD FomlRn nul tF n rdlngShm Pmongo omlAItTATATTI DTDDTlTT'g .T dD TD.C AT,dlqtdudT

*DATTT FT,Dlsma Cn l DTDIm n g *A T. D.,T.D DATDA _ l. s G ,FeqT.I[lucH PlI,.u 11t e.s1zt rQ9 FIIT'TII ATAITATTA. AkDI. FlAIlb 1 TIDDA FTTTSeudAI F>OI TEIIDr ACOT oDTT3TTTdTTD *ADTI DdD

.Ard ATTTTTT.TDTDILT STT TITTITIT ATlp gSrvc .rdl srvo rvDm SamTD TA-IA,, DATi D ITTTI DeATAo Tt aPd: F-A DmTn,Tn TTTDATTTTDTT TTTANTFTIAT OV*MngsTT guBdlATv

DDDFF DTAD F DTADf DSTAF STAFF STAFF DTAFF STAfE DTAFF DTAD r STAFF SADFF DTADF STAFFR oIDIiDTT oa ATe D,T.DTIL EtA x,TTDTTT F DIt,DT-nDT 1e TTDITFTII C D,.fI t MICoaula tDl J D rlor 171 Tm,TID,[I ANTI ID TIECXOI (11 D rffI> ) DD-TTDAAIAI At TIDT F. AItAA 01 TTDTD- GT T 1 D fTTAT] n c T1TDADAAs - -11

DAsst rDO 1 A ATG[IAD TTD DAF I A TT z ITT] DATDASLs O rzTD, 2' D TIL f FITITAT DT D A ,ItD ,,TA. P DDD T A D DDDT AD DT11D D 1DAuTV DDecTTTDIDT.1T C t DAIA DIDDTTDTA

' T A F F S T4 nF S T A F F ST A F I I TAqF ST A F F -UD PO (R n k ST 8tF S U rP O n l9 S T { r S U P P O m 9 SR 8fF ro g ram O r2 m tA D T !2 '

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Proposed Organization Chart for NCDC

General Council

I

Borad of Management

Managing Director

| Managing Gen l MDirector's Office |Manager

a

ZAmanager & GD Manager1Ad ministration - ~- -_ - - - -m iace

& Methods | l ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Storage

Proec Adin ; Gen NCDC | Manager Evaluatn Services Accounts Processing I

Management|Personnel Operational ManagerAudit & Training Accounts Industries

Spcilist Legal Budget & Manager

Management ~~~~~~~Development

{ Relations l l Liaison | | Coordination o BManagers 19246

World Bank -19246 |t

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Organization Chart of the Haryana State Cooperative Bank

Board of Directors

Managing Director

Deposits Loan Establishment Development & Training &Dept. Debts Debt Planning Dept. Inspection Dept.

(Dy. Gen. Mgr.) (Dy. Gen. Mgr.) (Dy. Gen. Mgr.) MyV Gen. Mgr.) (Dy. Gen. Mgr.)

MnerManagers Establi,shment Managers ManagersE~~~~~~~~~~~~~~~~~~aa Of E rsEg Savings | m ; 7 Cash ] Spshcial Poiis&Training _

Bank _ Cr~~~~~epoitPrcdes _Center_

r r X;v~~~~~~~~~~~~~~~~SceeFunds Term ~~~~~~~~~~~~~~~~~Research & Inspection

Maintenance Finance Rehab Cellsisisiiso

Term _ ~~~~~~Internal|X

Ast aaesAsst. Managers EstablishmenAst Asst. Manae Sr. Acc~ountant

Jr. Aoountants ~~~~~~~Accountants ClrsStatistical At.Faculty MembersTypistssClerks Inspectors i

StenographersIVStaffStenographer 19

World Bank - 19435

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Al. Model Design for 50-ton Godown without Residence

FRONT ELEVATION SECTION A-A

A1

GO DOWN19'x 16.5'

SCAt FVERANDA CENTIR

_ _ 6. K 1 ° X 1 2 K 1 0 0 rt

01

_ _ _ E I F 5~~~~~~~~CAL F 1/E'' 1' O''

A 1

PLAN VV... ~~~~~~~~~~~~~~~~~Id B;,,k 19199

ANNEX 1Th a.rt S

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECTB 4. Model Design for 100-ton Godown with Residence at Ground Level

_ ___ < L I E,.- F--SIDE ELEVATION SECTION A-A

FRONT ELEVATIONz CZ~~~~~~~~~W

_~~~~~~

CHAMBER CHAMBERFOODGRAIN. FERTOILZER KITCHS

_I C 1s liaL9" 16-6- 19. 16-,6 r

D/RS ID'RS BED ROOM

OFFICE R 0WIE CEVATO R

rVI~~~ 8', 0"V, l DE.

L 10' 12' C OVEREDVERANDA SHOP

1,10x 12' VER L -F W

-_ J oT d X 5 < . ~~~~~~~~~~~~~~~~~~~~~~B EC)

A PLAN 0 6 10

sCR LF 3:32 1 0'

Word B.r-k 19200

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

D. Model Design for 2,000-ton Godown

22 GAGE C STEEL SHEETS FOR ROOF COVERING

__. ^ ~~ t EARTH. FILLING3-

FRONT ELEVATION SECTION A-A

Lb _ ~~~~~~ ~ ~ ~~~~~~~~117' O" Al

12ATFO-M

-6-

r I II

,V I II I,I v

I I I I I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~SCL /~-I-I I I I I I I~~PLAFOR

I I I ~~~~~~~~~~~PA iI I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.l - 90

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Implementation Schedule for Construction of 100 Ton Godown

Time ReservedAct oln for the Action 30 60 90 120 150 180 210

(Days) 3 6 9 2 1 1 210

1 Land Acquisition 1/ 50

2 Tenider Preparation 10

3 Tender Advertising 10 _

4 Response to Tender 20

5 Tender Evaluation 10

6. Avarld, Sgning of Contract 5

7. Cortitactor's Preparation

for Construction 8

8. Start of Construction 7 _9. Completion up to Plinth 20

10. Completion up to Roof 45

11. Completion of Constructior, 15

12. Interim Inspections by

the SCB --

13 Final Inspection and

Approval 15

14. Finai Payment to Contractor 45

15 Utilization of the Godown _.

LI Before this step the godown drawings havebeen prepared, the loan applied for and granted

World Bank -19218

'1 c'

|J rt ->

INDIANATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

IMPLEMENTATION SCHEDULE(For Construction of 2000 Ton Godown)

Timereserved Number of Days After Loan Decision

fortshea ction

(days) o 20 40 60 80 100 120 140 160 180 200 220 240

Land Acquisitionl/ 55 * 0--1

Tender Preparation 15 1-15-25

Tender Advertising 10

Response to Tenders 2045-55

Tender Evaluation 1055-65

Award and Signing of Contract 10 60-67

Contractor's Preparation for Construction 7 -75

Start of Construction 8 75-110

Completion up to Plinth 35110 -170

Completion up to Roof 60 170 -190

Completion of Construction 20 97 17 150-

Pre-payment VVork Inspection each 30 Days - 190-205

Final Inspection and Approval of Construction 15 205-235

Final Payment to Contractor 303

Utilization of New Godown

1/ It is assumed that before this action a sufficient staff for the Federation Technical Cell has been empoloyed andthe drawings have been completed.

World Bank -19189

rt

OCx 1-~

ANNEX 2Page 1

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Model Bylaws of PCS and Federations

Model Bylaws of a Primary (Agricultural)Cooperative Society 1/

Objectives Salient Features

* 1. - provide short and medium term loans to agricultureand programs connected with agriculture;

- procure and distribute agricultural inputs likeseed, fertilizer, pesticide, weedicide and imple-ments;

- arrange for the sale of the members' agriculturalproduce and products of cottage industry products

* at fair price;

- rent or contract godowns for safe storage of members'produce;

- act as an agenct of any cooperative organization fordistribution of seed, fertilizers, etc., and makerecoveries of advances on their behalf;

- promote thrift and self-help among the members.

Membership Qualifications

2. Any adult, solvent person can become an ordinary (voting) memberof the society, provided that the person

- lives or does business in the area of the cooperativesociety, or

- has property in the area, and

- is not a member of any similar society.

The State Government and State and Central Cooperative Banks also can becomeordinary members of the cooperative society. Contractors or anybody doing

1/ There are slight differences between the model bylaws from State toState. This presentation describes the Uttar Pradesh case.

ANNEX 2Page 2

business with the society can become Nominal members (in order to allowarbitration by the Registrar of Cooperatives without court action).

Decision Making and Management

3. The highest authority of a society is the General Body. In casethat the society has less than 250 members, each member has one vote. Ifthe members are more than 250, groups of 10 members are formed and they electa delegate for the meetings of the General Body. There are limitations tothe general voting prerogative. For instance, persons who have commited acrime, or have accepted any office in the society, or have been loandefaulters more than six months, and who themselves or whose family membersare engaged in a similar business as the society, are not allowed to vote.

4. The Management Board consists of maximum eleven members, three ofwhom can be appointed by the State Government (RCS). The same restrictionsas for voting in the General Body apply to the membership of the ManagementBoard. In addition, no Board member can hold a similar position in morethan three societies, neither can the person be a near relative of any otheremployed by the society. Decisions in the Board meetings are made by majorityvotes, the president having a casting vote. The president is appointedby the Board among themselves.

5. The State Government (RCS) participates in the affairs of the Coop-erative Society by directing amendments to be made in the bylaws of thesociety and by arranging audits, inspections and inquiries. It can promotethe society's activities by financial and manpower assistance. If mismanage-ment or negligence has been found in carrying out the society's activities,the guilty Board member can be removed, or the entire committee superseded.Generally, the RCS and his officers supervise that the societies work and actin accordance with the Cooperative Act and bylaws.

Funds and Distribution of Profits

6. Funds can be raised by collecting share capital (Rs 20/share) andadmission fees, taking loans and deposits, getting subsidies and grants andaccumulating profits. No member can buy shares for more than Rs 5,000. Theliability of individuals is limited to 10 times the amount of his shares.

The annual profits shall be used as follows:

- at least 25% to be transferred to a reserve fund;

- at least 1% to a cooperative education fund;

- from the remainder can be paid:

- a dividend to members on their share capitalat a rate not exceeding 9%; 6

ANNEX 2Page 3

a bonus to the members on the amount or volumeof business transacted by them with the society;

contribution to a bad debt fund, building fund,rural improvement fund or other funds;

donations up to 5% for any charitable purpose; and

a bonus to employees of the society as specifiedin each society's bylaws.

ANNEX 2Page 4

Model Bylaws of a State Cooperative Marketing Federation 1/

Salient Features

Purposes

1. - Make arrangements for marketing of agricultural producein the State;

supply agricultural inputs such a fertilizers, insecti-cides, weedicide, implements and consumer goods;

organize processing of agricultural produce and manu-facturing of farm inputs; and

promote the work of the member cooperative societies.

Membership and Shares

2. Membership is open to:

- district-level wholesale societies;

- cooperative marketing societies;

- cooperative cold storages;

- credit and service societies and other societieswhich are approved by the Registrar of CooperativeSocieties; and

- State government.

3. Every member should pay an admission fee of Rs 5 and buy at leastone share of Rs 500. The Board of Directors may call at any time the membersto contribute to the share capital of the Federation by purchasing additionalshares.

Policy Making and Management

4. The General Body of the members is the highest authority in allmatters relating to administration of the Federation except when otherwiseprovided in the bylaws. The General Body meets at least once a year anddeals, among other things, with the following matters:

1/ There are some differences between the bylaws from State to State. Thispresentation relates to Haryana.

ANNEX 2

Page 5

removal of members of the Board of Directors,

- consideration of the annual report and accounts and

disposal of profit;

- fixation of maximum borrowing limits (subject to approval

of the Registrar)

- amendment of bylaws.

The policy making body is the Board of Directors, which is constituted as

follows:

- Registrar of the Cooperative Societies or his

nominee;

- Director of Agriculture or his nominee;

- Director of Food and Supplies or his nominee;

- Managing Director of the Federation;

- a representative of the State Cooperative Bank;

- one representative for each 10 member societies;

- any other member nominated by the RCS.

5. For management purposes there is an Executive Committee consisting

of seven members, viz. the President and Vice-President of the Board of

Directors, the RCS (or his nominee), Managing Director and three directorsappointed by the Board out of its members. The Managing Director, who shall

be appointed by the State Government takes care of the day-to-day management.

The other senior staff belong to a common cadre of the Federation, governedby its own salary and promotion regulations.

Funds and Borrowing Limits

6. Capital may be raised by: (i) issuing shares; (ii) taking loans

from State Government, cooperative banks and with the approval of theRegistrar, from commercial banks and others; (iii) accepting deposits

from members and non-members; (iv) accepting grants, subsidies and other

financial assistance from the Government, other institutions or individuals.

7. The maximum borrowing limit of the Federation is decided from time

to time by the General Body but it cannot be more than 10 times the capitalof the Federation. Borrowing against trades stock is, however, not subject

to this limit.

ANNEX 2Page 6

Distribution of Profits

8. Allocation of net profits is decided by the General Body on the

recommendation of the Board of Directors. After making provisions for depre-

ciation on buildings, machinery and other stocks, the net profits shall be

distributed as follows:

(i) at least 10% to the Reserve Fund;

(ii) 10% to Price Fluctuation Fund;

(iii) to the Cooperative Education Fund such a percentage,not exceeding 5%, as is decided by RCS;

(iv) the remainder may be utilized for one or more of thefollowing purposes:

- distribution of dividend on members' shares atmaximum rate of 10%;

- rebate to members in proportion to their purchasesfrom the Federation;

- creation of a building fund, loss adjustment fund orother funds required by the Federation;

- charitable purposes a sum not exceeding 9% of thenet profit.

The Powers of the Registrar of Cooperative Societies

9. The Federation shall prepare and submit to RCS the returns and

statements he requests. The Registrar is the authority to interpret thebylaws and Cooperative Act. He can order audits, inspections and inquiries

of the affairs of the Federation. If mismanagement or negligence is found

or suspected, the committees can be superseded by the State government. RCS

can wind up or cancel the registration of the Federation in the event of

unsatisfactory performance in attaining the objectives.

ANNEX 3

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Disbursement Schedule(US$ millions)

IDA Fiscal Year Cumulativeand Quarter Disbursement Disbursement

1979 3rd -4th 2.16Total 2.16 2.16

1980 1st 0.722nd 1.35

3rd 1.354th 1.36Total 4.78 6.94

1981 1st 1.352nd 1.403rd 1.404th 1.39Total 5.54 12.48

1982 1st 1.402nd 1.533rd 1.534th 1.52Total 5.98 18.46

1983 1st 1.532nd 1.623rd 1.624th 1.67Total 6.44 24.90

1984 1st 1.702nd 1.703rd 1.70Total 5.10 30.00

S0

ANNEX 4

Page 1

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Subproject Outline and Criteria

Suggested Subprojects Preparation

(Information to be given in tables and brief statements. Narratives to be

kept to a minimum.)

1. General

- Borrower, address, identification number, and

associated bank

2. Background

- Year of establishment and possible mergers;

- growth of membership;

- population within agriculture and ie other occupations;

- area covered (names of villages, km );- agricultural area, irrigated part.

3. Agricultural Production

- Agricultural activities in the area--dairy, crops, etc.

and their yield;- farm inputs used;- agricultural projections in tons.

4. Storage

- Available facilities, vertical links with marketing

societies, apex federations, SWC, CWC, FCI, IFFCI,

others;- storage available--all private godowns existing within

the area of operation of the society--usage, distance

and ownership.

5. Operations

- Present arrangements for handling existing volume of

proposed activities by society;- level of ST and MT credit availed;- credit record--five years (granted, repaid, overdues,

ANNEX 4Page 2

6. The Project

- Brief description and justification of projectobjectives and targets in quantitative terms;

- reason for selecting project location and land size;- choice of godown design and justification for managers'

residence, if any, and special construction changes fromstandards if required.

7. Project Costs

- Summary of investment costs with quarterly phasing.

8. Organization and Management

- Number, names and positions of committee members;- qualification, experience, training and salary of

manager/secretary and other employees;- implementation schedule with monthly phasing.

9. Business and Financial Questions

- Projected business--inputs, crop handling, consumer goods,credit;

- borrowing, investment cost, projected cash flow of allincome and repayment items.

10. Economic and Social Benefits

- Projections for the number of families participating;- land area to be covered by members, landless farmers,

tribals, scheduled castes;- social and community development plans of the society.

11. Project Risks

- Main sources of risk to the attainment of projectobjective.

Covering Page

- Loan Application Form

Annexes

- Area Map with PCS Location- Bylaws of the Borrower - Statistical Tables3 - Godown Specification - Financial Forecasts- Project Cost Details - Cash Flow Statement

ANNEX 4Page 3

Criteria for NCDC and State Cooperative Bank Appraisalof Subprojects

A. General:

1. Subproject objective to be in keeping with the DevelopmentCredit Agreement between IDA and GOI, Project Agreementbetween IDA and NCDC and financial arrangements betweenGOI and NCDC.

2. Willingness of State Cooperative Bank (SCB) concerned to enterinto an agreement with NCDC, subject to Government of Stateapproval, defining subproject objectives, organization, financ-ing, and mutual responsibilities and rights.

3. Cooperative by-laws governing the borrowers and SCB regardingcapital, borrowing powers and objectives to be deemed adequateby NCDC.

4. Subproject preparation reports and loan applications to be sub-mitted by borrowers to be in such form, content and detail asprescribed by NCDC and agreed with IDA.

5. Primary Cooperative Societies to be reorganized and amalgamatedas necessary to become viable and acceptable to NCDC as quali-fied borrowers under the Godown Construction Scheme.

6. Arrangements satisfactory to NCDC are made by Primary CooperativeSocieties to maintain and improve loan recoveries from members.

7. Primary Cooperative Societies shall have demonstrated, in therelevant previous financial year, satisfactory performance inrespect of obligations to SCB or DCB, i.e. have made repaymentsin respect of 50% or more of all sums due. In special cir-cumstances, Primary Cooperative Societies not meeting thisstandard could be deemed eligible to participate in the pro-ject, provided NCDC is satisfied that such Primary CooperativeSocieties have adopted programs which would improve theirfinancial performance to meet this standard.

B. Management Criteria:

1. Organization, staffing, training procedures and facilities ofborrowers are considered by the concerned SCB and NCDC to besatisfactory.

2. Organization, staffing, training procedures and facilities ofthe concerned SCB are considered by NCDC to be satisfactory.

S

ANNEX 4Page 4

3. The Project Coordination Committee in the concerned State

is considered by NCDC to be adequately staffed to function

effectively.

4. Arrangements for staff continuity in borrowers and SCB are

considered by NCDC to be satisfactory.

5. Subproject implementation schedules to be in such detail

as to enable close monitoring possible by borrowers, SCB,

NCDC and IDA.

C. Technical Criteria:

1. Lands chosen for godown sites should be

(a) free of encumbrances until loan repayment is completed;

(b) suitable for the type of godown construction and use for

which it is designed;

(c) not subject to flooding and having legal drainage outlet

for rain water;

(d) easily accessible and served by access roads, or suitable

provision made in the proposal for such roads;

(e) large enough to provide for appertinent facilities and

foreseeable expansion of the godown. A minimum area to

be prescribed by NCDC for each of the different fourmodels;

(f) available with vacant possession to the borrower prior

to granting of the loan;

(g) not adjacent to objectionable installations, such as

garbage dumps, etc.

2. Godown construction and appertinent facilities are in accordance

with national standards and designs approved by NCDC in consulta-

tion with IDA and not in conflict with existing construction codes.

3. Construction works supervision and inspection arrangements

should include employment of qualified civil engineers.

4. Certification arrangements for progressive contract payments

to be in accordance with instructions issued by NCDC agreed

with IDA.

ANNEX 4Page 5

5. Civil works to be carried out by engineering contractors leton local competitive biddings in accordance with IDA procure-ment guidelines and local procedures acceptable to IDA.

D. Financial and Viability Criteria:

1. Data furnished by borrowers to be adequate to establishthe need for new, additional or improved storage space andappertinent facilities and probability of full utilizationof proposed investment.

2. Financial benefits accruing to the borrowing cooperativesfrom storage of agricultural inputs, output and consumergoods and the marketing thereof together with other rentalincome should offer a minimum 10% average return (or otherrate as may be agreed between NCDC and IDA) on investmentcalculated before deducting any portion of such benefitspassed on to their members.

3. The financing plan in the subproject preparation reportto include arrangements for working capital requirementssatisfactory to NCDC.

4. Cash flow projections to permit completion of loan repaymentwithin fifteen years including the grace period of threeyears.

E. Appraisals by SCB, NCDC and IDA:

1. All subprojects to be appraised by SCB. All godowns of 1,000ton capacity and above, and the first five godowns of eachof different capacities in each participating State to besubject to NCDC's full appraisal and approval. Subsequentsubprojects to be reviewed by NCDC and approved. IDA willreview a selected number of subprojects during follow-up visits.

2. Subproject monitoring arrangements to include furnishingof requested information to and periodical physical super-vision by SCB concerned, NCDC and IDA.

ANNEX 5Page 1

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Project Evaluation and Monitoring

Project Monitoring and Evaluation Arrangements

1. The physical component of the Project is based on designs and costsagreed in advance, and is therefore not too complicated. However, the largenumber of units to be constructed as well as the multifarious activities under-taken by the cooperatives supported under the Project, will require organizedmonitoring and evaluation. Furthermore, several governments as well as cooper-ative institutions have to be actively involved in Project implementation andsubsequent operations. Also great hopes are placed on project replicabilitynot only in storage in other States but also other types of investment in theCooperative sector. Monitoring arrangements which were discussed during creditnegotiations are described in Attachment I.

2. Overall responsibility for Project evaluation would be that of NCDC.It was agreed during appraisal that a Project Evaluation Unit in NCDC would beformed in 1978. The Evaluation Unit, headed by an economist and supported bya statistician and a cooperative specialist would follow up Project implemen-tation, identify problem areas and deviations from appraisal estimates, assesseffectiveness of the participating institutions and measure subproject impacton the participating cooperatives, their members, and the farming communityserved by the cooperatives. The Evaluation Unit would be independent of allother departments of NCDC and work in close collaboration with its ManagementAudit Department. It would report directly to the Managing Director.

3. Project evaluation by this Unit would cover physical, technical,financial, managerial and economic aspects of the Project. It would receivea major part of information it requires from the monitoring process at theState level, where the implementation is followed and supervised by theProject Coordinating Committees, headed by the Agricultural CooperativeProduction or Cooperative Commissioner and including RCS. The followingdocuments and reports would be relevant for the NCDC's Project EvaluationUnit and State Project Coordination Committees:

Project Appraisal ReportDevelopment Credit AgreementSubproject Implementation SchedulesAnnual Budgets )Quarterly Progress Reports )Draft Annual Accounts ) of participating institutionsAnnual Audit Reports )Annual Reports )

ANNEX 5Page 2

04. The Unit would make its own arrangements to collect information

and make surveys on impact and effects which are not available from the

normal monitoring procedure. Written evaluation reports, which should be

prepared at least half yearly, would be submitted to IDA. Findings would

be reported to the Project Coordinating Committees in written or oral form.

Information to be collected from the State level, to be summarized and

analyzed should include:

(a) Achievements during the reporting period and deviations

from agreed Implementation Schedules - causes, extent,

effects and action;

(b) Project modifications from original plan - nature, reasons

and effects;

(c) Variations of important assumptions made in the appraisal

report;

(d) Cost overruns and arrangements to meet them;

(e) Profitability and efficiency of the participating

institutions and benefitting cooperatives;

(f) Credit and marketing services to the PCS, by SCB,

Federations and RCMS;

(g) Services to the farmer members by PCS;

(h) Project benefits to communities served by the PCS -

expansion of memberships, employment effects, utiliza-

tion of services.

5. The NCDC's Project Evaluation Unit would also be responsible for

preparation of the Project Completion Report.

6. Objectives and key performance indicators of relating Project mon-

itoring and evaluation are tabulated in Attachment 2.

ANNEX 5Attachmont 1

w ~~~~~~~~~~~~~~~~~~Pagc

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Project Monitoring Arrangements - Reporting Requirements

1. Each of the participating cooperatives and the State CooperativeBanks, as well as NCDC would have arrangements for monitoring subprojectimplementation and operations. Management at various levels of the respectiveinstitutions will maintain key records, summaries of which would be distributedinternally to executives for information feedback and follow-up action.Duplication in collating information would be avoided. Attention would bepaid to simplification of reporting and confinement to essential information.These principles would also be followed in the reporting procedures to befollowed by NCDC in providing information periodically to IDA.

2. For each level of project organization, reporting would generallyinclude the following:

(a) Quarterly progress reports;

(b) Annual accounts and board report;

(c) Audit report;

(d) Half-yearly review reports;

(e) An annual monitoring and evaluation report; and

(f) Ad-hoc reports on significant developments.

3. All reports--whether prepared by societies, Federations, SCB or NCDC--would be made available to IDA review missions. Additionally, the followingreports prepared by SCB and NCDC would be forwarded to IDA:

(a) Annual work programs and budgets not later than twomonths prior to commencement of their financial year;

(b) Quarterly project progress reports within one monthof the close of each quarter; and

(c) Audited annual accounts and reports within sixmonths of the close of their financial year.

4. NCDC's quarterly progress reports would normally comprise threemain sections, the first part outlining overall progress and problems relative

_ to Project implementation and lending activities. The second part would be

ANNEX 5Attachment 1Page 2

the report on progress and problems relating to SCB, NCDC Zonal Offices, and

the activities in the Project States. The third part would relate to the

physical progress of the subprojects which would be at varying stages of

development.

5. The first part of NCDC's quarterly report will eventually contain

basic Project data indicated in para 6. This would be followed by a narrative

report summarizing the highlights of the quarter as indicated in paras 6

through 13. Tables prepared by NCDC and attached to the quarterly progress

report would include information:

(a) subprojects identified during quarter and agreed between

SCB and RCS;

(b) subprojects for which report and loan applications are

under preparation;

(c) subprojects under appraisal by SCB;

(d) progress of appraisal undertaken in previous quarter;

(e) subproject loan applications approved by SCB;

(f) progress of SCB disbursements on loans approved;

(g) reimbursements by NCDC;

(h) SCB's loan recovery performance;

(i) field visits by SCB and NCDC headquarters staff

during the quarter;

(j) NCDC and SCB board decisions of significance;

(k) changes in senior executive staff of APC, RCS, NCDC,SCB, Federations and TDCC.

6. Basic Project Data

Date of Credit Agreement

Date of Credit Effectiveness

Closing Date

Total Project Cost at Appraisal million

Project Funds Expended to end of Quarter

ANNEX 5Attachment 1Page 3

Amount of NCDC Loan Rs million

Disbursements as % of Loans

Summary of Progress

(a) Brief summary of progress made during the quarter in respect

to each project component.

(b) Major problems encountered in project implementation, together

with the action proposed to overcome them. Action taken since

last quarterly report. Comments on new developments and the

outlook and forecast for the ensuing quarter.

Management

7. Report on major changes in the senior executive staff and organiza-

tion of participating institutions.

Project Expenditures and Disbursements

8. Detail Project expenditures for each Project State, indicating

the main reasons for any significant differences between actual expenditures

9 and those listed in the Credit documentation.

Cooperative Activities

9. Description on essential cooperative developments in the Project

States, particularly changes in cooperative policies and governmental support.

Brief description of market trends and prices for building materials, farm

inputs and major agricultural crops.

Farm Management

10. Important trends occurring in farm management policies and practices

as a result of price trends and technological changes. Discussion of any

apparent impact of the Project on the cooperatives' and members' income

and on the manner this incremental income is being spent.

Credit

11. Assessment of demand for godown capacity in the Project States,

estimate of credit extended by PCS and the credit recovery performance.

Action Taken

12. Usefulness and impact of specific measures taken to resolve problems

recognized in the previous report.

IANNEX 5Attachment 1Page 4

Action Proposed

13. Planned activity to expand project activities and on any actionsrequired to overcome problems in achieving project objectives.

e

*i ANNEX 5Attachment 2

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Monitoring and Evaluation Arrangements

Responsible Body for

Component Major Objectives Key Indicators Monitoring/Reporting

Institution building Develop NCDC into a more -organizational restructuring NCDC's Project Evaluation

of NCDC effective development along the lines of MDI-study Unit with help of Organization

finance institution for the and recommendations of IDA and Methods Unit.

cooperative movement and as (Annex 1, Chart 2)a new channel for Bank Group -implementation of improvedfunds accounting and management

information systems-preparation of proceduremanuals-purchase and use of about110 sets of engineering andmeasuring equipment as in NCDC's Project Evaluation UnitAnnex 1, Table 14.7 with help of Marketing and-purchase and use of the Storage Division and Engineerinvehicles as in Annex 1, SectionTable 14.6

if

-disbursement oy IDA andutilization by NCDC (throughGOI) of US$ 30.0 M IDA creditfor storage lending asindicated in Annex 4.

Institution Building Build up the long-term -Establishment of engineering At the coordination level, in

of State Cooperative financing capability of the cells each with 1-2 executive all Project evaluation aspects:

Banks SCB in Haryana, Uttar engineers, 4-11 assistant Project Coordinating Committees

Pradesh and Orissa for engineers and 12-55 junior At the operation level: SCB's

storage and other similar engineers (Annex 1, Table 16) Project Officer

development projects -Employment of Project "

Promotion staff each with 1-2Senior development officersand 8-24 junior development

Responilble Body !-r

Component Major Objectives Key Indicators Monitc .kg/Report q

officers (Annex 1, Table 16)-effecting organizationalimprovements as recommended byRBI-implementing new training andprocedures for processing ofProject loans and loanadministration to be developedby NCDC and the consultants(4.12)-efficiency of the operations SCB's accounts and statis-in terms of tics unitsa) interest ratesb) interest marginsc) debt collection and over-

duesd) credit expansione) savings mobilizationf) increase in loans by typeg) development of own capitalh) staff members and caliberi) loan numbers and amounts-statistics on construction SCB's Project officescosts of different sizes ofgodowns

Activity Expansion by Expand building space and -Construction of godowns as in SCB's Project Officer onFederations and RCMS business activities of HAFED, Annex 1, Tables 14.3 to 14.5 the basis of reports from

PCF, OSCMF, TDCC and RCMS in the Federation and RCMSorder to facilitate their full -Statistics on cooperative RCSand profitable servicing of the turnover of farm produce andneeds of Primary Cooperative farm inputs in the ProjectSocieties. States, and the market share

of these institutions

-Quality to be measured by the RCS, according to a systemstatistics on timely deliveries/ to be developed in collabora-collections and percentage of tion with the SCB's Projectstaff trained in relevant Officer.courses.

* * *t~

0 * Responsible Bo forComponent Major Objectives Key Indicators Monitoring/Reporting

-Annual profitability calcula- SCB's Project Officer witions of the godowns and total the help of the Federatibusiness activities, and and RCMScomparisons with relevantcompetitors (net profit/ton;service fees in percent ofcommoditv Prices)

Activity Expansion of Expansion of the office-cum- -Construction of godowns as SCB's Project OfficerPrimary Agricultural storage premises of 1,500 in Annex 1, Tables 14.3 to on the basis of reportsCooperative Societies PCS in Haryana, 4,600 in 14.5 from Junior Development

Uttar Pradesh and 2,140 in Officers in the fieldOrissa, in order to facilitatefull and profitable servicing -Statistics on each PCS turn- RCSof farmer members over and number/amounts of

-credit and deposits-farm input sales-crop agency-consumer goods

-Membership statistics (amd RCScomparison with total popula-tion of the respective villages)-Employment statistics RCS

-Annual profitability calcula- RCStions of the societies andtheir different activities

-efficiency of operations in RCSterms ofa) interest ratesb) credit/applicationsc) repayment statisticsd) service fee (margin)

in fertilizer salese) service fee (margin)

in crop agencyf) service fee (margin) in

consumer goods by basicarticles

ANNEX 6Page 1

INDIA

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

Documents and Data Available in the Project File

1. Agricultural Cooperative Organizations in India - A MissionWorking Paper.

2. National Cooperative Development Corporation - A MissionWorking Paper.

3. Annual Reports of NCDC 1971-77.

4. Management Development Institute: Report on Organization andManagement Control System in NCDC.

5. IDA: Report of the October/November 1976 Evaluation missionon NCDC--dated April 8, 1977.

6. Cooperative Marketing Federations in Haryana, Uttar Pradeshand Orissa -- A Mission Working Paper.

7. Annual Reports 1976/77 of Haryana, Uttar Pradesh and OrissaCooperative Marketing Federations.

8. State Cooperative Banks with Special Reference to Haryana,Uttar Pradesh and Orissa--A Mission Working Paper.

9. Financial Analysis of NCDC and SCB for handling the Project.

10. Forms used in Lending Procedures by NCDC and State Coop-erative Banks.

11. Technical Papers and Model Designs relating to the Project.

12. National Program for Construction of Cooperative Godownsin the Draft Sixth Development Plan of India (Table).

13. Pre-Project Actions by NCDC.

14. Support Material for Economic and Financial Analysis.

15. Division of Cooperative Members by Farm Size.

IBRD 13776

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NATIONAL COOPERATIVE DEVELOPMENTCORPORATION PROJECT

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