]Document of

The World Bank FHLE COPYFOR OFFICIAL USE ONLY

Report No. 2678a-AL

STAFF APPRAISAL REPORT

OF THE

BAS CHELIFF I IRRIGATION PROJECT

ALGERIA

January 15, 1980

Projects DepartmentEurope, Middle East and North AfricaAgriculture II

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 EQUIVALEN'>TS

(as of September 1979)

Currency Unit - Dinars (Algeria)

US$1 = DA 3.82

DA 1 = US$0.26

WEIGHTS AND MEASURES

Metric System British/US Systems

1 millimeter (mm) - 0.04 inch (in)

1 meter (m) - 3.28 feet

1 kilometer (km) - 0.62 mile (mi)

1 hectare (ha) - 2.47 acres (ac)

1 cubic meter per second - 35.28 cubic feet per second (cfs)(m'/sec)

1 liter per second (1/sec) - 0.264 US gallons per second (GPS)

1 kilogram (kg) - 2.205 pounds (lb)

1 quintal (100 kilogram) - 220.5 pounds

DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

Fiscal Year

January 1 - December 31

FOR OFFICIAL USE ONLY

ABBREVIATIO)NS AND ACRONYMS

BAD Algerian Development Bank/Banque Algerienne de Developpement.

BAI Budget Annex for Irrigation/Budget Annexe d'Irrigation.

BNA National Bank of Algeria/Banque Nationale d'Algerie.

CACG Accounting and Management Cooperative/Cooperation Agricolede Comptabilite et de Gestion.

CAPCS Commune Level Agricultural Service Centers/Cooperatives AgricolesPolyvalentes Communales de Services.

CAPRA Agrarian Revolution Production Cooperatives/Cooperatives Agricolesde Production de la Revolution Agraire.

CCLS National Cereal and Grain Cooperative/Cooperative de Cerealeset Legumes en Sec.

COFEL Fruits and Vegetables Cooperative/Cooperative de Fruitset Legumes.

DEMRH Directorate of Environmental Studies and Hydraulic Research/Direction des Etudes de Milieu et de la Recherche Hydraulique.

DPRH Directorate for Design and Construction of Hydraulic Projects/Direction des Projets et Realisations Hydrauliques.

MARA Ministry of Agriculture and Agrarian Revolution/Ministere del'Agriculture et de la Revolution Agraire.

OAIC Algerian Grain Board/'Office Algerien Interprofessionnel desCereales.

ONAB Office for Animal Feed/Office National des Aliments du Betail.

ONAMA Office for Agricultural Equipment/Office National de MecanisationAgricole.

ONAMHYD Office for Hydraulic Equipment/Office National de MecanisationHydraulique.

ONAPO National Olive Board/Office National des Produits Olelcoles.

Wilaya Province

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

ALGERIA

APPRAISAL OF BAS CHELIFF I IRRIGATION PROJECT

Table of Contents

Page No.

I. THE AGRICULTURAL SECTOR .............................. 1

A. Sector Strategy and Performance ......... 1B. Main Sector Issues .................. ........... 4

II. THE IRRIGATION SUBSECTOR ................ ............ 5

A. Description .................................... 5

B. Government Objectives and Performance .......... 7C. Subsector Issues . .............................. 8D . Bank Role ......... I ............................. 9

III. PROJECT AREA AND NATIONAL INSTITUTIONS .............. 11

A. Project Area ................................... 11B. Natural Resources .................... .......... 13C. Land Tenure, Ownership and Employment ........ .. 15

D. Land Use, Agricultural Production, Yields andProfitability .................................. 15

E. Marketing, Cooperatives, Credits and SupportServices ....... ................................ 16

IV. THE PROJECT ......................................... 18

A. Objectives ....... .............................. 18B. Description .................................... 19

C. Construction Schedule and Status ofEngineering .................... ................ 21

D. Cost Estimates ...... ........................... 23

E. Financing ...................................... 24

F. Procurement .................................... 24G. Disbursements ...... ............................ 24

H. Advance Contracting and Retroactive Financing .. 25I. Environmental Impact ..... ...................... 26

This report is based on the findings of a Bank mission which vi,ited Algeria

in June 1979 comprising Messrs. J.H. Laeyendecker, H.D. Floyd and F. Remy

(Consultant).

Table of Contents (Continued) Page No.

V. PROJECT IMPLEMENTATION .............................. 26

A. Organization and Management .................... 26B. Operation and Maintenance ...................... 27C. Water Charges and Cost Recovery .... ............ 30D. Audits of Accounts and Monitoring .... .......... 32

VI. PROJECT JUSTIFICATION AND BENEFITS .... .............. 33

A. Project Justification .......................... 33B. Project Benefits ............................... 33C. Economic Rate of Return ........................ 35

VII. AGREEMENTS REACHED AND RECOMMENDATIONS .............. 37

ANNEXES

1. Schedule of Expenditures ................................. 382. Cost Table ............................................... 393. Disbursement Schedule .................................... 404. Selected Documents Available in the Project File ......... 41

CHARTS

20744 Development Program .2020745 Implementation Schedule .2220746 Organization Diagram Bas Cheliff District 28

MAPS

IBRD 14459IBRD 14460

I. THE AGRICULTURAL SECTOR

A. Sector Strategy and Performance

Background

1.01 Agriculture is constrained in Algeria by different climatic andgeological conditions, and about 80% of the total land area is unproductive.Generally, the richest agricultural areas are located in a narrow band inthe north, where annual rainfall (500-1,000 mm) permits growing fruits,vegetables, industrial crops, and high yield wheat varieties, and where theamount of fallow land is lowest. Areas in the 300-500 mm rainfall zone,located between the Northern zone and the steppe, depend on a rotation ofcereals and fallow. Further south in the steppe the population is almostentirely dependent on sheep and goat production. Overall, forest and alfagrass (stipa alticissima) cover about 4% of the land area, pastureland usedfor grazing of livestock about 13%, and cultivable land about 3%. Of theroughly eight million ha of cultivable land, five million ha were utilized in1976, and the balance left fallow. The cropping pattern included 43% wintercereals (wheat, barley, rye), 41% fallow, 5% fruit trees, 4% forage crops, 3%vineyards, 2% vegetables, 1% pulses and the balance under industrial and othercrops.

1.02 In 1977 agriculture employed about 43% of Algeria's total activepopulation of four million and 602; of Algeria's 17.3 million people lived inrural areas. However, the rapid growth of the industrial, hydrocarbon andurban services sectors and improvement in housing and social services inurban areas, has contributed to high migration from rural to ur'ban areas.During the past ten years population growth averaged 3.2% p.a., with growth ofurban population equal to 5.1% p.a., and that of rural population 2.0% p.a.

1.03 Government efforts to increase employment opportunities in non-agricultural sectors were relatively successful, with 359,000 jobs createdduring 1974-1976 or an employment growth rate of 6.8% p.a. Uneimploymentin non-agricultural sectors fell from 17% of the work force in 1973 to 10%in 1976. In agriculture, employment creation was considered slower. Thenumber of permanent jobs rose by 43,000 from 1973 to 1976 at a growth rate of1.6% p.a., while seasonal employment increased by about 0.3% during the sameperiod. Agricultural underemployment is high, with estimates ranging from 25%in the self-managed sector (para. 1.05), to 60% of the total agricultural workforce.

Sector Objectives and Investment Strategy

1.04 At the time of independence, Algeria was a predominantly agrariansociety with a very limited industrial base. The basis of Algeria's economicpolicy has been the promotion of rapid industrialization combined with

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increasing the country's economic independence. Structural reforms wereundertaken, the principal of which was the application of central planningto the economy. In parallel, efforts were made to develop education andtraining to meet the manpower needs of the strategy. The goal in agricul-ture, in addition to structural reform, was to shift from the export orienta-tion of the colonial,period to meeting domestic food requirements. However,by assigning paramount importance to achieving structural reforms, insuffi-cient emphasis was given to agricultural investment, incentive and produc-tivity.

1.05 The Self-Managed Farms. Just before independence, about 20,000properties on 2.4 million ha were owned by Europeans. Their land was nation-alized in 1963 and right to use it in perpetuity was given to the workersgrouped into worker "self-managed" farms. The European properties were inmost cases consolidated so that about 2,000 "self-managed" farms were createdon about 2.1 million ha of cultivable land. About 180,000 permanent workersare presently employed on these farms. A manager was appointed by Governmentto each self-managed farm to provide technical assistance and to implementGovernment instructions. The self-managed farms are only partly autonomous,implementing the investment and operating plans provided them by a centralizedplanning process previously emanating from the Central Government, butrecently decentralized considerably to the provincial level.

1.06 Cooperatives of the Agrarian Revolution and Private Sector. Furtherstructural changes took place in the "Agrarian Revolution" of 1974 in whichstate and communal land, as well as land expropriated from absentee landownersand from the largest private farmers was distributed to landless peasants.Most beneficiaries were organized into production cooperatives (CAPRA). By1978, about 7,000 cooperatives had been created allotting one million ha to100,000 beneficiary families. These Agrarian Revolution Cooperatives, togetherwith 2,000 self-managed farms, form the socialist sector, holding a total ofabout three million ha of cultivable land. The remaining private sectorsupports about 700,000 families on 4.8 million ha of cultivable land. Privatelivestock owners and farmers also exploit approximately 31 million ha of aridpasture-land.

1.07 Marketing and Credit. A major structural change was the creationof Government owned marketing and input supply "Offices", each specializingin a product or group of products. The "Offices" have in many cases notprovided adequate service. Another structural change involved the consolida-tion of the local assets of the European dominated banking system into theGovernment owned Banque Nationale d'Algerie (BNA), Banque Algerienne deDeveloppement (BAD) and other nationalized banks. However, credit allocatedto agriculture was reduced to low levels, contributing to the lack of replace-ment of equipment in agriculture during the 1960's. Agriculture marketing andinput supply centers ("Cooperatives Agricoles Polyvalentes Communales deServices", or CAPCS) were established during the 1970's. The CAPCS sellinputs to farms and market agricultural output; primarily fruit, vegetables,and fodder to the "Offices".

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1.08 Agricultural Planning. There has been a partial decentraliza-tion of the planning process from the Central Government to the Wilaya(Provincial) Government level, and the creation of crop and livestock specificinstitutes at the national level which are supposed to undertake agriculturaldevelopment, including applied research, demonstration and extension. Goalsfor agriculture under the Second Plan, which are likely to apply for the ThirdPlan, included:

(a) continuation of the shilft out of food exports to foodself-sufficiency;

(b) diversification of crop production;

(c) improvement of rural revenue, rural infrastructure, anddevelopment of rural employment opportunities;

(d) improvement of agricultural marketing and input supply; and

(e) relative improvement of the condition of the poorestgroups in the rural sector.

Agricultural Investment and Performance

1.09 Agriculture has been al'Located small and declining shares of in-vestment budgets: 15% under the First Plan (1970-1973), and 11% under theSecond Plan (1974-1977). Low priority accorded to agriculture for equip-ment and qualified personnel, as well as administrative delays in begin-ning projects, caused the sector to use up an even lesser proportion ofnational investment funds: 10% under the First Plan, and 7% under the SecondPlan. During this period investment in agriculture was nearly exclusivelydirected towards the socialist sector. The private sector, with 62% of theland, received less than 5% of credits to agriculture between 1972 and 1975.Among productive investments, shortfalls were most striking for irrigationschemes, where less than 50% of targeted areas were developed. Agriculture'sshare in GDP declined from 10% during the First Plan to 7% during the SecondPlan.

1.10 The cropping pattern has changed significantly over time as exportoriented crops have been replaced with domestically consumed foodstuffs. Asproduction of most crops in Algeria is highly variable in response to varia-tion in climatic conditions, it is difficult to discern marked trends inyields. Total grain production failed to keep pace with population growth,necessitating increasingly large imports. Due to changes in the area of crop,production of vegetables, pulses, some fruits and industrial tomatoes, hasincreased over the 1970-1977 period at an average rate equal to populationgrowth. Production of several industrial crops has tended to stagnate ordecline, particularly cotton, tobacco, and sugar beet.

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1.11 Food production failed to keep pace with demand due to higherconsumption levels brought about by improved standards of living. Foodimports increased rapidly over the 1970-1976 period. Despite very highgrowth in imports of non-agricultural goods, the average proportion offoodstuff imports to total imports rose from 14% to 17% between the First andthe Second Plans. At the same time, the agricultural exports declined. Thanksto the increase in imports of foodstuffs, Algerians on average are providedwith adequate intakes of calories and proteins. Unless substantial improve-ment takes place in the sector, the total food import bill is projected toincrease by some 3.6% per annum in real terms over the next ten years. Thismight result in further worsening of the spending on imported foodstuffs offoreign exchange earnings from hydrocarbon exports and worker remittances. In1976 the food import bill already represented 19% of foreign exchange earn-ings.

B. Main Sector Issues

Incentives and Investment

1.12 The central issue is how to make the sector more productive.If agricultural growth is to be accelerated, two basic requirements mustbe met. First, adequate incentives must be created, and second, more resour-ces (investment and human) must be devoted to the sector, particularlyto private farmers who own 62% of the arable land and represent 71% of thepermanent labor force engaged in agriculture.

Farm Level

1.13 Socialist sector farms must be given greater autonomy in financialdecisions as well as greater responsibility for repayment of credit obliga-tions to increase their incentive to make efficient use of investments.Increased production incentives must be provided to workers on socialistsector farms. Consistency of farm level activity with Government plans couldbe assured through the more systematic use of price policy. The presentGovernment policy of increasing agricultural prices relative to input pricesshould be continued to stimulate production, reduce urban/rural income dis-parities and promote the use of modern inputs.

Supporting Services

1.14 Government Administration. Over-centralization of Governmentservices still remains a serious problem, combined with a lack of coordina-tion between departments within the Ministry of Agriculture and AgrarianRevolution (MARA) and between MARA and other ministries, in particular

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the Ministry of Hydraulics which is; responsible for irrigation develop-ment. This lack of coordination cculd be resolved through (a) investment andprogram coordination in regionally integrated projects and (b) more decentral-ization of decision making from the Government administration to the level ofthe subdivision, enterprise, farm and commune. The major constraint onimplementing these recommendations is the availability of qualified personnel.The scarcity of qualified staff would probably inhibit rapid decentralizationat all levels. Within the Ministries greater incentives must be provided toinduce qualified personnel to enter public service and accept assignmentsat local and enterprise levels.

1.15 Research and Extension. Algeria should confine its agriculturalresearch program to relevant and urgent production oriented questions andinsist on proper coordination between crop and livestock institutes. Tocomplement research activities Government should insist that the institutescarry out their agricultural extension task to assist farmers. Such extensionservice should be systematically planned, implemented and supervised.

1.16 Marketing and Credit. The major marketing issues involve theneed to give the private sector access to modern inputs and commodity market-ing structures, and to reduce scarcities of farm inputs and of agriculturalcommodities. Solutions involve expansion of the role and facilities of theCAPCS, increased investment priority given to industries producing agricul-tural equipment and inputs, reorganization of the marketing "Offices" andinput supply intermediaries along market oriented as opposed to administrativelines and increased flexibility provided to input supply intermediaries inimporting inputs or equipment. The allocation of agricultural credit shouldbe decentralized to bank outlets at the commune level. Greater use should bemade of contractual relationships between farm units and public enterprisesor cooperatives. Contracts could facilitate the provision of credit andinputs to private farmers, with credit repaid out of sales contracted with theCAPCS.

II THE IRRIGATION SUBSECTOR

A. Description

2.01 The Ministry of Hydraulics was established in 1977 and incorporatesthe former Hydraulics Secretariat created in 1970. This ministry is respon-sible for the development and conservation of the country's water resources.

2.02 The topography of Algeria does not allow development of largescale irrigation schemes: the Atlas mountains are located close to thecoast and thus the highest rainfall occurs in the coastal zone. Many small

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rivers carry the runoff over a short distance towards the Mediterranean,traversing a small number of coastal plains which are limited in area. Largerplains and plateaus are found in the interior, where the hydraulic potentialis limited. The situation can be summarized by stating that the hydraulicpotential is not located in the same places as the land potential. Thus forlarge irrigation schemes costly dams and frequently also water transfers arerequired.

2.03 The areas actually irrigated in Algeria are estimated as follows:

--- ha--

Perennial irrigation in the North 200,500

Perennial irrigation in the South 76,500

Total controlled irrigation 277,000

Irrigation by flood water spreading 185,000

Total irrigated area 462,000

Irrigation in the South almost exclusively serves the culture of date palms.Perennial irrigation in the North allows for growing a large variety ofcrops, while flood water spreading, which varies greatly from one year tothe next is almost exclusively used for growing of winter cereals. Of thetotal 8 million hectares cultivable land, total irrigation comprises only6% and controlled irrigation only 3.5%. This is very little for a countrywhere the moisture deficit is such that no summer crops can be grown withoutirrigation except in high mountain areas.

2.04 In Algeria, a distinction is made between irrigation districts,with legally established boundaries, and "small" irrigation areas which mayvary from 100 to 1,000 ha and which have no legal boundaries. The hydraulicresource mobilization and infrastructure for either type of irrigation devel-opment may at one time been constructed by the Ministry of Hydraulics. Forthe districts, because of their size and importance, management and organiza-tion remain under the authority of the Ministry's Service for the LargeIrrigation Districts (Service des Grands Perimetres). The small hydraulicschemes are transferred after completion to local authorities who organizetheir operation and maintenance.

2.05 The about 63,000 ha actually irrigated in the large irrigationdistricts represent 31% of the perennially irrigated area in the North. Onlyabout 47% of the area equipped with hydraulic infrastructure is irrigated inthe large districts. The reasons for this low percentage are:

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(a) there is not enough water available to irrigate the equipped areabecause of reallocation of irrigation water for domestic and indus-trial supply, or because provision of infrastructure in the dis-tricts was based on planned mobilization of water resources whichdid not take place;

(b) statistics call areas "equipped", when only canals of highest order(primaries) were constructed while the lower order distributionsystem is missing; and

(c) the irrigated areas have been reduced because of salinity anddrainage problems.

2.06 The irrigation on 76,500 ha in the South involves mostly oasesand availability of irrigation water is an absolute requisite for any formof agriculture. It can be stated that here the hydraulic infrastructurecorresponds to the hydraulic resources mobilized at present and that waterresoures management is generally more adequate. For the small scale irriga-tion in the North, the infrastructure also better matches the water resources.

2.07 The separation between thte Ministries of Agriculture and Hydraulicshas resulted in a lack of coordination which renders efficient planning ofirrigation projects difficult. Frequently construction of major irrigationprojects is undertaken without consultation of the Ministry of Agriculture,not even in the planning stage. Design of the capacity of conveyance systemsand type of irrigation (sprinkler or gravity) are thus based upon croppingpatterns often conceived by the Ministry of Hydraulics without proper planningand coordination with the Ministry of Agriculture. Land consolidation, aprerequisite for modern rational irrigation networks, is often not carriedout, or at best applied as an afterthought, after execution of the worksinstead of before. In addition to the lack of coordination resulting from theseparation of the two key ministries, rational planning is further hampered bylack of continuity of key staff in both ministries and resulting changes inpolicy in the investment programs.

B. Government Objectives and Performance

2.08 Objectives. The National Charter foresees an increase of 800,000ha of newly irrigated land by the year 2000 for which 4 billion of water m3would be required. This figure corresponds to an irrigation reqlairement of5,000 m3/ha/year which is low in view of actual water consumption whichpresently amounts to 7,000 - 9,000 m3/ha/year for gravity schemes. This lowprojected consumption of water can only be explained by assuming a largeincrease in the percentage of cereals in the irrigated cropping pattern. Anadditional 2 billion m3 would be required to meet projected domestic andindustrial demand for the year 2000.

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2.09 From the 150 billion m3 provided annually by rainfall, a runoff of12.5 billion m3/year results in the Northern part of the country. Atpresent, about 7% or 0.9 billion m3 of this runoff is utilized. Mobiliza-tion of the 6 billion m3 needed in 2000 would require the construction ofabout 100 dams (5 per year) and imply a utilization of 48% of the nation'ssurface water resources. Large transfer structures would be required sincemany major water resources are not located near the cities or arable land.The total investment for this undertaking is presently estimated at US$10billion, without allowance for inflation.

2.10 It is not quite clear how the 6 billion m3 could be mobilized,since a global hydrological study for Northern Algeria indicates a maximumpotential for regulated discharge of 4.1 billion m3, or 33% of the averageannual discharge. The same study indicates that 50 dams would be required toobtain the volume of 4.1 billion m3.

2.11 The development of 800,000 ha by the year 2000 would correspond toequipping 40,000 new hectares per year for irrigation. This target is clearlyover ambitious in view of the existing technical and administrative structurein Algeria. Staffing and legal framework appropriate to achieve such devel-opment are not there. For example on the production side, the Ministry ofAgriculture has not yet developed a corresponding plan for the developmentof irrigated agriculture including land consolidation and distribution andformulation of cropping patterns, nor has a price policy been defined whichwould serve as incentive to cultivate irrigated crops rather than rainfedcrops in areas already equipped for irrigation.

2.12 Performance. Under the Second Plan (1974-1977) about 37,000 hawere equipped for irrigation in large districts, or 41% of the planned 90,000ha. About 22,000 ha of small schemes were completed, of which about 50% wasrehabilitation of existing schemes. Targets for the Third Plan are a morerealistic 49,000 ha for large schemes and an additional 21,000 ha of smallschemes. Expenditures for hydraulic works under the Second Plan were DA 4.6billion (US$1.2 billion) of which only DA 2.9 billion or 63% were actuallyspent. Since independence (in 1962) only 5 dams have been completed, buttenders for 6 new dams were received in 1978.

C. Subsector Issues

2.13 Subsector issues are the absence of a national irrigated agricultureproduction plan, the absence of a national water code defining the legal framework for water use and water charges, the lack of autonomy of individualirrigation districts for agricultural production and the lack of qualifiedtechnical personnel to manage and operate large districts. The very low levelof production of Algerian agriculture in general and in the socialist sectorin particular makes it more difficult to conceive economically viable newirrigation projects without introduction of substantial reforms at farm level,supply of farm inputs, marketing and credit (paras. 1.12 and 1.16). The lack

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of an irrigated agriculture plan and the new dynamism in hydraulic construc-tion threaten to increase the diviergence between mobilization of hydraulicpotential and corresponding deve:Lopment of agricultural potential.

2.14 A special effort is required for agriculture to catch up as quicklyas possible with the new and costly hydraulic potential which is becomingavailable within the next five years. A limited number of options exists tonarrow the gap. In the first place, emphasis should be placed on the promo-tion of those crops which show no economies of scale, which implies lowemphasis on large scale annual field crops, since these show the greatestshortfalls in yields and profitability, whether irrigated or rainfed. Govern-ment should become aware of the consequence of low yields of iield crops uponthe rentability of the investment in irrigation infrastructure and attempt toimprove financial responsibility in this respect. Productions to developinclude fruits, vegetables, milk and meat, with appropriate price incentivesfor the latter. In the second place, more emphasis should be given to involvethe private sector, which shows a quicker response to the market and whichdoes not possess the relative disadvantages of large scale operations. Thesuggested direction should be considered as a necessary interim solution.When large scale field crops improve in yields, a gradual transition towardstheir introduction under irrigation can be foreseen.

2.15 The socialist sector, with its 1,000 to 2,000 ha units, is charac-terized by labor extensive operations, hence its preoccupation with largescale field crops and its interest to mechanize farm operations. This con-trasts with the type of irrigation development presently taking place inAlgeria, which is of the traditional type, whether it is gravity or sprinklerirrigation with quick coupling pipes. Both are very labor intensive and runcounter to the existing labor situation on the self-managed farms. Thesocialist farms - after being equipped for irrigation - will have to shiftto a labor intensive operation, or these farms will have to adopt typesof irrigation offering the latest technology requiring least Labor intensiveoperation, i.e. self propelled sprinkler guns and central pivot systems.Such systems, however, require a rather advanced level of teclnical expertisewhich is not presently available in Algeria. Because of this limitation,the socialist farms will have to revert to irrigation systems requiring morelabor intensive operation. To improve further the productivilty of irrigation,it is necessary to involve more and more the private sector which has arelative abundance of labor.

D. Bank Role

2.16 The Bank has recently prepared an agricultural sector report whoseconclusions were accepted by Government and should constitute a basis forcontinued dialogue with the authorities on the sector. The rieport is based onmissions carried out in late 1977 and in early 1978. The views expressed inthe report have already found wide agreement among policy-makers in thesector. The report is complemented by a UNDP-financed study, which is setting

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up simulation models for the sector to assist Government in decision making,and to establish a sector-wide monitoring system. An agro-industrial loanof US$42 million for improvement of agro-industry was approved by the Boardin FY79 (Loan 1739-AL). The project will be implemented by ONAB, the officecharged with meat distribution and marketing. It aims at modernizing andimproving managerial as well as financial arrangements of typical publicenterprises in charge of processing and marketing of agricultural products.More specifically it aims at strengthening marketing of meat, coordinatingcrop and livestock activities, increasing livestock production and upgradingfinancial practices of the office. A technical assistance loan of US$8million for the preparation of Rural Development projects in the Steppe regionwas signed in September 1975 (Loan 1159-AL). This project provides technicalassistance to prepare and start implementation of integrated development inthe steppe zone of Ksar Chellala and the mountainous regions of Arris andAures, development of an extension service and assistance to BNA to improveits technical capacity to provide agricultural credit. This project which hasbeen plagued by long delays and bureaucratic problems related to hiring ofconsultants is now being implemented.

2.17 In the hydraulic sector, a US$82 million loan (1545-AL) for theimprovement of sewage collection and treatment in the greater Algiers areawas signed in FY79. This project includes engineering studies for watersupply of the cities of Oran and Constantine. In November 1979, negotiationswere concluded for a US$5 million engineering loan for the preparation of awater supply project for greater Algiers.

2.18 The Bank's role and strategy for the irrigation subsector were dis-cussed in the Bank's agricultural sector report and assistance to Governmentwas proposed as follows:

(i) to maximize use of existing irrigation infrastructurethrough mobilization of additional water resources forareas with existing hydraulic infrastructure, rehabilita-tion of old but serviceable infrastructure and reclamationof land lost for production due to salinity or drainageproblems;

(ii) to develop in irrigated areas highest return crops suchas fruits and vegetables, with possibly large moderndairy farming, consistent with existing management levels;and

(iii) to gradually improve and modernize management and equip-ment of irrigation schemes, reduce water losses throughmodernization and promote utilization of groundwaterresources.

2.19 Apart from the first point in para. 2.18, the remaining strategyitems are not related to existing (large scale) districts. On the contrary,

small schemes offer advantages related to their scale: management problemsare simplified and production in the vegetable and dairy subsectors showdiseconomies of scale. Development of many small schemes, in addition, wouldallow a spreading of risks.

2.20 Project Pipelines. The Bank sector mission of 1977 and 1978identified a number of projects for possible Bank financing, one of whichis the present project, which would be the first in the irrigation subsector.It would (i) address rehabilitation of existing infrastructure, (ii) improvemaintenance procedures, and (iii) support production of fruits and vegetablesin the project area where socialist and private sector farms are both active.It would further prepare for a follow up Bas Cheliff II Project (FY82)for which major involvement of the Ministry of Agriculture would be required,and possibly a Bas Cheliff III Project for further extension of irrigation topotential land (para. 4.02).

2.21 An integrated agricultural development project, which addressesdirectly the main issues in the socialist sector is under preparation for theSidi Bel Abbes Region. Project preparation is nearly complete but its finali-zation will await specific acceptance by the Government of the recommendationsmade by the Bank on such issues as organization, management, credit andmarketing. Other projects in the agriculture pipeline include projects infisheries, forestry and rural development.

III. PROJECT AREA AND NATIONAL INSTITUTIONS

A. Project Area

3.01 The project area is located in the lower Cheliff valley (Map IBRD14459) and is well served by a railroad, the main Algiers-Oran highway andelectric power. The Cheliff with its 44,000 km2 catchment area is Algeria'smost important river. Because of its mediterranean climate with continentalinfluence, discharges are high during the winter and are reduced to very lowflows (1 m3/sec) during the summer.

3.02 Irrigation water for the Bas Cheliff district is diverted by aweir at Bou Kader constructed in 1919. The hydraulic network was designed forthe supplemental irrigation of winter wheat grown by colonists. After con-struction of the Ghrib and Fodda reservoirs irrigation of summer crops becamea possibility, which only became serious practice in the early 1950's.In recent years the cultivation of fruits and vegetables, in particularmelons and water melons, has become highly remunerative and private farmersare responding by multiplying development of small scale gravity irrigationbased on movable diesel motor pumps (para. 5.06). Sometimes, use of thesepumps is illegal, since pumping directly from the Cheliff River is not allowedbecause releases from dams passing through the river are reserved for theirrigation district. The central water dispatch office in El Asnam estimatesthat the illegally irrigated area in the entire Cheliff valley now coversabout 4,000 ha.

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3.03 Upstream irrigation development and siltation of the two storagereservoirs have gradually reduced the availability of summer releases for theBas Cheliff district. It was therefore decided to construct the 58 Mm3 volumeMerdja Sidi Abed ground storage reservoir. This reservoir, which provides aregulated volume of 45 Mm3/year, will be filled with unregulated winter flowfrom the Cheliff, diverted at the Bou Kader weir and pumped by a low liftpumping station on the main canal via a 1 km pipe into the reservoir (see mapIBRD 14460). During the summer the direction of flow will be reversed towardsthe fields. The pumping station was completed in 1968. Construction of thereservoir ring dike started at about the same time, was interrupted, but willnow be completed in 1981.

3.04 Major hydraulic structures in the Bas Cheliff network are in a verypoor condition, in particular the gates of the diversion weir, three aqueducts,2 km of the main canal and the electro-mechanical equipment of the pumpingstations. Their complete breakdown is imminent and in some cases alreadyadvanced, threatening not only present irrigation but also the future opera-tion of the Merdja reservoir.

3.05 In the Bas Cheliff district, development of the hydraulic infrastruc-ture since 1936 has been uncoordinated. Thus sectors are found (Map IBRD 14460)in which primary canals were constructed but in which canals of lower order arepartially or totally missing. Lack of water precludes irrigation of the totalequipped area. The following table presents a breakdown of the area in differ-ent categories of serviceability:

Served by Pumping Stations(ha) (ha)

Total area within district 28,249 6,860Area under command 22,484 /a 6,860Area receiving irrigation overdifferent years 11,225 5,524

Area annually irrigated 4,000-4,500 2,400Correctly equipped area 6,631 3,723

/a Saline soils of 7,000 ha included.

3.06 In the Bas Cheliff district, the development based on small motorpumps is mostly found in sectors I, VIII and X. Water is pumped from theprimary canals or main drains. The latter receive their flow from tailwater of ongoing irrigation and from official and unofficial releases fromgates in the primary canals. Whereas pumping from the river is undesirablebecause it interferes with releases from the dams, pumping from the canalsinside the district should be considered as favorable, because:

(i) the pumping farmers optimize utilization of a scarce resource;

(ii) the pumps allow a flexible response to changes in water avail-ability, matching land resources to water resources;

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(iii) inventory and registration of pumps is easy;

(iv) the pumps perfectly complement the partially equipped areas,which do have canals of higher order but no tertiaries; and

(v) the pumps are an optimal way of tertiary distributionbecause they can be shifted from year to year followingthe crop rotation. This avoids a costly permanent tertiarydistribution system which only serves irrigation once everytwo or three years in a cropping pattern alternating betweenirrigated and rainfed crops.

B. Natural Resources

3.07 Soils. Within the Project area arable soils fall mainly into threecategories. Their distribution over the classified zone coverecd by the BasCheliff district is as follows:

light, non-saline soils 6,840 haheavy, non-saline soils 3,730 haheavy, saline soils 13,650 ha

Total 24, 220 ha

To the extent that the non-saline soils are equipped for irrigation, farmersprefer to use them for their irrigated production. These soils compose theslopes leading down to the valley plain and irrigation has been practiced onthem since Roman times. In addition to percolated irrigation water, rainfallinfiltrating on the limestone hills along the valley drains eventually towardsthe low heavy clay soils in the valley bottom. An equilibrium has set in, inwhich these valley bottom soils have become very saline and alkaline (EC about22 mmohs, exchangeable sodium percentage 38%). It is expected that extensionof irrigation on the valley slopes would not increase the area of salt affectedland but rather further increase the salinity of those already saline landswhich are not used for agriculture. It seems that poor drainage is the mainreason for their saline condition although the soils appear drainable. Pastefforts to bring them into production have included the growing of rice,introduced around 1957. This required high applications of irrigation water.However, the absence of a dense drainage network did not result in any majorpermanent desalinization in spite of the high applications of water. It didpermit cereal production in the same fields after rice as an alternate crop,though wheat yields were disappointing. Increasing water demands for othercrops have forced the abandonment of rice production. Most of the soils inthe fields now being irrigated have good internal drainage and are eithernon-saline or only slightly saline. Salinity of the irrigation water variesbetween I and 3 millimhos (600-2,000 ppm) which means water with a moderatesalinity hazard. Salt can be expected to build up in the soil over timewhen using irrigation water of this quality unless natural drainage exists ordrains are provided.

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3.08 Climate. The climate in the Project area is characterized by cool,

humid winters followed by hot, dry summers. Rains begin in October and end

in May. Annual rainfall averages 414 mm. Data from Oued Rhiou, located near

the center of the Project area, indicates that 93% of this falls during the

rainy season. Temperatures during the summer are high and have been known to

exceed 500 C. This creates a favorable micro climate in the valley which is

reported to be advantageous for the production of certain crops, particularly

melons. Olives, oranges, and artichokes also appear to thrive under good

cultivation. Winter rainfall is just adequate for the production of wheat,

barley and vetch-oats without recourse to supplemental irrigation, except once

every four years.

3.09 Average annual discharge of the Cheliff below the confluence of the

Djidiouia River is estimated at 960 Mm3 per year but large annual fluctuations

occur. Only a small portion of the flow is regulated (160 Mm3/year) by two

dams, the Ghrib and Fodda, both constructed in the 1930's. Siltation of the

reservoirs has progressed to the point that it presently takes place in the

volume allocated to active storage. Contracts for new storage facilities on

the Harezza and Deurdeur have been let, increasing the regulated flow with

65 Mm3 by 1985. Heightening of the Ghrib dam and completion of the ground

storage reservoir Merdja Sidi Abed would further increase regulated flow by

respectively 15 Mm3 and 4 Mm3 before 1985. Altogether 277 Mm3 of regulated

flow is expected available by 1985.

3.10 Further potential, dam sites exist, and have to a large extent been

investigated, on the Sly Ardjem, Sly-Lag, Zeddine and Rhiou rivers. A real-

istic construction scheme could increase the total regulated flow to 550 Mm3

by 1990 and 593 Mm3 in 2000. Ultimate possible development might eventually

reach 790 Mm3. A potential dam site at Ain Tedeles near the Mediterranean

with a storage capacity of 1.5 billion m3 is also under consideration by

the Ministry of Hydraulics. Its operation should be reviewed, because full

development of the upstream dam sites would not leave sufficient unregulated

discharge to fill this reservoir.

3.11 Three major irrigation districts have been developed in the Cheliff

valley: the Haut, Moyen and Bas Cheliff. The following table gives 1979

actually irrigated hectares and Government's projection of extensions for

ultimate development based on land and water resources:

Presently Irrigated Potential

---------------ha---------------

Haut Cheliff 6,600 27,700

Moyen Cheliff 10,200 19,500

Bas Cheliff 4,100 19,500

The regulated flow of 550 Mm3/year which could be realized by 1990 would

be able to meet summer irrigation demand of the fully developed potential.

Cereal irrigation and leaching would take place in winter and would not

seriously affect the available regulated flow. Full development of the

three Cheliff districts implies the necessity to construct a dam on the Oued

Rhiou River for the extension of the Bas Cheliff district.

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C. Land Tenure, Ownership and Employment

3.12 Land tenure in the Project area is as follows:

All Land Irrigated LandType of Tenure Area (ha) % Total No. Units Area (ha) % Total

State Farms 18,800 67 17 2,424 59Agrarian Reform Cooperatives 4,000 14 48 600 15Veterans' Cooperatives 80 - 1 12 -Private Farmers _5369 19 800 1,090 26

Total 28,249 100 4,126 100

Self-managed farms (Domaines Autogeres) are state-owned and worker-managed andoccupy much of the best land in the Project area. Members of the AgrarianReform Cooperatives have lifetime use-rights over the land they farm, but notproperty rights. Only private farmers have full property rights, though theamount of land they can own is limited by the Agrarian Reform Act of 1971.In this report, the first three categories of tenure are referred to as the"socialist sector" since ultimate control of their activities and financesresides with the Ministry of Agriculture.

3.13 Employment. The labor force employed in the Project's irrigatedareas is estimated as follows:

Type of Farms Permanent Workers Temporary Workers Total

State Farms 765 750 1,515Agrarian Reform Cooperatives 500 - 500Veterans' Cooperatives 14 - 14Private Farmers 800 800 1,600

Total 2,079 1,550 3,629

The state farm permanent work force includes administrative staiEf and watch-men. Temporary workers on private farms are usually members of the farmer'sfamily. Most of the work force in the area is underemployed throughout allbut the peak demand seasons of the year. The area suffers from a chronicunemployment rate of about 12%.

D. Land Use, Agricultural Production, Yields, and Profitability

3.14 Cropping Pattern. Orchards (olives, oranges, apricots) and vegeta-ble crops (melons, potatoes, tomatoes, artichokes and onions) occupy about90% of the Project irrigated area, as shown below:

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Crop Category Area (ha) Total %

Field Crops 350 9Orchards 1,826 44Vegetable Crops 1,950 47

Total 4,126 100

3.15 Inputs and Yields. The high returns for fruits and vegetablesenables the private sector to circumvent its customary shortage in inputs(para. 1.16) through purchase on the free market. Though both the socialistand private sectors appear to use adequate quantities of inputs, privatefarmers do a better job of farming and obtain higher yields. As shown below,crop yields on state farms are only 60 to 80% of those obtained by privatefarmers.

Yield (q/ha)Crop State Farms Private Farms

Melons 130 180Potatoes 90 110Artichokes 65 90Onions 70 95

In particular, private farmers pay more attention to the timeliness of farmoperations and carry out better weed control and irrigation on their fieldsthan state farmers. The mediocre yields in the latter sector are due more toa lack of motivation among management and labor than inability to obtainmodern inputs such as fertilizer, machinery and pesticides, though shortfallsin input supply do occur.

3.16 Profitability. Due to the strong demand situation for most fruitsand vegetables in the country and the existence of a vigorous parallel market-ing structure, farmers obtain high prices for most of their production. Farm-ing, consequently, is profitable. The average net return from irrigated cropproduction on private farms is DA 35,842/ha (US$9,382/ha). Melon productionis particularly profitable and private farms realize a return of DA 41,875/ha(US$10,962/ha). State farms are less profitable. This is due to the higherproportion of their land in low-profit crops as well as lower yields and lowerprices. Average return on state farms from irrigated crops is DA 5,435/ha(US$1,423/ha). (After deduction of DA 1,703/ha for labor and management, thisfalls to only DA 3,732/ha.) Olives, which occupy 41% of the irrigated area inthe socialist sector, produce a return of DA 1,159/ha. (After deduction of DA1,103/ha for labor and management, this falls to only DA 56/ha.).

E. Marketing, Cooperatives, Credit and Support Services

3.17 Marketing. The government has created several state agencies todeal with the marketing of specific commodities. Thus, the National Olive

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Board (ONAPO) with a branch plant in the Project area, purchases and processesthe olive crop. The Algerian Grain Board (OAIC), through local branches ofthe national cereal and grain cooperative (CCLS) does likewise with the wheatcrop. Fruits and vegetables are handled by another specialized cooperative(COFEL) whose activities are financed and controlled by the National Fruit andVegetable Board (OFLA) in the same way that the OAIC works through the CCLS.The service cooperatives (CAPCS) which sell inputs to farmers, also act aspurchasing agents for the COFEL. Prices are set for each harvest season byofficial decree and are planned to vary according to the price variationsestablished during the previous harvests. A committee exists in each province,however, to review the situation as the year progresses and to change pricesas conditions warrant.

3.18 A dynamic free market exists alongside the official marketing sys-tem. Prices on this market are decided by supply and demand, and profitswithin the system are directly related to the buying and selling skills ofthe individual merchants.

3.19 The socialist sector farmers are all required to deliver their pro-duce to the state-controlled buying agencies, and are paid official prices.Private farmers may also deliver their produce to official agencies, butnormally do so only when the official price for a given category of produceis higher on the official market than on the free market. Frequently, theofficial price for lower quality produce is higher than the free marketprice for the same quality. In this case, private producers sell their firstquality produce to private merchants and deliver their second-quality produceto the official market which is obliged by law to purchase it.

3.20 In addition, there is an extensive illegal market for produce fromstate farms. State farm workers and members of their families sell consider-able quantities of state farm produce for personal gain or give it to friendsand government officials. However, only produce which is sold to officialmarkets is considered for official yield calculations. This helps explainwhy certain state farms which appear reasonably well-operated neverthelessreport mediocre yields and operating losses year after year.

3.21 Cooperatives. The most important of the previously mentioned coop-eratives is the CAPCS, a service cooperative which provides inputs to both thesocialist and private farms. There are 8 branch outlets in the project areaand 3 in the irrigated zones. These provide seeds, fertilizerS, pesticides,and custom farm machinery services. They also have repair facLlities forfarm machinery. The branches in the irrigated zones also maintain stocksof simple farm tools and production hardware and a modest, though useful,stock of frequently requested spare parts. The senior staff are usuallyagricultural technicians who have had some formal training and the directoris always appointed by the MARA.

3.22 Credit. This is provided to members of agrarian reform cooperativesby the BNA through small offices located in each CAPCS branch. The BNA doesthe necessary bookkeeping so that any agrarian reform client who needs supplies

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can obtain them on credit. When the client sells his produce to the CAPCS,

part of receipts are applied against his outstanding balance due the BNA.

State farms are financed through the BNA directly. Credit is approved by the

BNA once the local MARA delegate has approved the purchase of the required

inputs. Repayment is made whenever the state farm sells its production.

However, crippling restrictions are placed on further credit advances once

the state farm is operating at a loss. The nature of these restrictions is

such that it is extremely difficult for a state farm once it has begun to

operate at a loss to ever regain its profit-making status.

3.23 Extension. There is no organized extension service in Algeria.

The Bank's rural development project addresses this situation through a

technical assistance component for extension. The MARA has created certain

institutes dedicated to improving production of certain crops or groups of

crops. These carry out some extension activities on an ad hoc basis. The

MARA personnel in the delegate's office in Oued Rhiou and the technicians

assigned to supervise the CAPCS also are available for consultation by

farmers. However, their main function is as administrators of MARA's programs

and none of them maintain ongoing extension programs within the project

area.

3.24 Research. There is a research station located within the project

area. Aside from experiments set up by the consultants who prepared this

project to test the leaching effects on saline soils and some small-scale

testing of plastic greenhouses, no work has been done recently or is now

being done at the station which would make a major contribution to increase

agricultural productivity on saline land.

IV. THE PROJECT

A. Objectives

4.01 The project would safeguard the continuation of irrigated agricul-

ture as practised at present in the Bas Cheliff irrigation district by repair-

ing major hydraulic structures. These structures are in such poor condition

that their breakdown is imminent or already advanced to a point where proper

operation is no longer possible. Breakdown of the structures would cause the

instantaneous loss of the irrigated production of about 4,100 ha. In addition

the project would improve operation and maintenance by providing suitable

transportation and maintenance equipment. Repair of the structures would also

be required to assure the proper functioning of the ground storage reservoir

Merdja Sidi Abed presently under construction. The construction of this

reservoir is not a part of the project. Neither its cost, nor its benefits

consisting of irrigation of about 2,000 additional hectares have been taken

into account in the economic analysis of the project.

4.02 The project is the first stage of a three stage development of

irrigation in the whole Bas Cheliff area. The second stage would consist of

improving irrigated agricultural production in the district, execution of

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reclamation works to improve about 10,000 to 13,000 ha of saline land and

studies for the extension of the irrigated area by about 13,000 ha. The third

stage would consist of construction of hydraulic infrastructure to equip

the 13,000 ha for irrigation. During the execution of each previous stage,studies will have to take place to prepare for the execution of the next

phase, see Chart 20744. Thus, the present project would provide studies

required for the execution of stage two, for the technical feasibility of the

extension of the area under stage three and for the construction of a model of

the hydrology of the entire Cheliff basin. This model would permit to estab-

lish the optimal scenario of irrigation development, depending on different

sequences of construction of the various potential dams in the basin.

B. Description

4.03 The project would include:

(a) Replacement of the six gates of the diversion weir at Bou Kader;

(b) Repair of the main canal over 2 km (see Map IBRD 14460);

(c) Replacement of the Rive Droite primary canal over 900 m and

repairs over 5 km;

(d) Replacement of 4 sluice gates in the main canal and 7 automatic

gates in the Primary canals; repair of 3 automatic gates in themain canal;

(e) Power supply to the present water turbine driven pumping station

and its replacement by electric pumps;

(f) Replacement of pumps, motors and controls in the pumping stations

III, IV, V, VII and minor repairs in the stations II and II bis;

(g) Replacement of a total of 263 m of the aqueducts across the Oued

Arid, Djidjouia and Djidjouia old streambed and repairs of the

Oued Rhiou aqueduct;

(h) Supply of transportation and maintenance equipment for the sub-division in Oued Rhiou consisting of trucks, excavators, a grader,

a fork lift truck, light passenger cars and motorcycles;

(i) Engineering services for (a) supervision of construction of the

Bas Cheliff I Project works; (b) continuation of leaching tests;(c) preparation of the Bas Cheliff II Project; and (d) prepara-

tion of a hydrologic model of the entire Cheliff Basin.

4.04 The executing agency for the project works would be the Ministry of

Hydraulics.

ALGERIABAS CHELIFF I IRRIGATION PROJECT

Development Program

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Preparation Bas Cheliff I se heehs

Appraisal Bas Cheliff I

RehabilitationExecution Bas Cheliff I

Completion Merdja Reservoir-

. 2,200 ha ex tensionExtension,

Leaching Tests Reclamation StudyPreparation Bas Cheliff II s ss _

Appraisal Bas Cheliff II

Reclamation 10,000 haExecution Bas Cheliff II - - - 9

Irrigation Extension and IHydrologic Model Studies Irrigation Extension Design

Preparation Bas Cheliff Ill _m i

Completion of

Qued Rhiou DamAppraisal Bas Cheliff IIl l

Exstpnqinin hv 1 q_nnn i-Execution Bas Cheliff iI I I I L i

Summer Irrigation ha 4,100 4,200 4,200 4,300 6,500 6,500 6,500 6,500 6,500 | 6,500 |13,000 19.500

FY79 I FY80 I FY 81 | FY82 I FY83 I FY84 I FY85 I FY86 FY87 FY88 FY89 | FY90

E555555555 UNDP FinancingFinanced under Bas Cheliff I

* U ~ * Financed under Bas Cheliff IIzz - - - Financed under Bas Cheliff III World Bank - 20744

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C. Construction Schedule and Status of Engineering

4.05 Construction Schedule. Construction of project works would startin 1980 and be completed by 1982. The proposed construction and activityschedule is presented in Chart 20745. It takes into account the completionof the ground storage reservoir Merdja Sidi Abed (not a part of the project)which is expected towards the end of 1981. Execution of works which alsoserve this reservoir, such as the weir at Bou Kader and the main canal, havetherefore priority.

4.06 Status of Engineering. Feasibility level design was satisfactorilycompleted in April 1979 and detailed engineering and tender documents for allworks were completed by end October 1979. This would permit advertisingfor bids in early 1980.

4.07 Consulting Services. Consulting engineering services would berequired for:

- Supervision of construction of the Bas Cheliff I repair works;

- Continuation of the leaching tests started under the UNDP-financedpreparation of Bas Cheliff I;

- Preparation of the Bas Cheliff II project, which would involve:

(a) Improvement of irrigated agricultural production includingan economic evaluation of optimum irrigated cropping patternsand tests to determine whether sprinkler irrigation ispossible;

(b) Engineering studies, including a field scale pilot area, forthe reclamation of saline land; tender documents would beprepared for the first year of construction;

(c) A study of water pollution in the Cheliff basin;

(d) A feasibility study of a desilting reservoir in the maincanal;

(e) A study of a short cut canal which might permit to fill theMerdja reservoir partly by gravity; and

- Preparation of two elements required for the Bas Cheliff IIIProject:

(a) Preparation of a hydrologic model of water availability andrequirements in the entire Cheliff basin, including an eco-nomic justification of priorities in the construction ofvarious dams;

ALGERIABAS CHELIFF I IRRIGATION PROJECT

Implementation Schedule

1979 1980 1981 1982

WORKS

Diversion Weir _ m Start of fillingof Merdja Reservoir

Main Canal _ d t

Pumping Stations _ _ _

Aqueducts _

Primary Canal North _ _

Procurement Maintenance - _--Equipment

STUDIES

Leaching Tests * _

Preparation Bas Cheliff II -__

Hydrologic Model and ___Irrigation Extension

m m _ * Bidding and award of contractsConstruction or execution of study World Bank - 20745

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(b) A preliminary engineering plan for the extension of the irri-gated area of the Bas Cheliff district based upon the irriga-tion development plan determined by the hydrological modelstudy.

D. Cost Estimates

4.08 Total project cost, including physical and price contingencies,taxes and duties, amounts to US$13.3 million (DA 51.0 million). The foreign

exchange component is estimated at US$8.1 million (61%). Taxes and dutiesamount to approximately US$1.4 million (DA 5.3 million). Cost estimates forcivil works and major equipment are based on unit rates obtained in contracts

for similar works in Algeria. Prices have been updated to January 1980equivalent. Physical contingencies for civil works were taken at 15% and for

all other items at 10%. Price contingencies were compounded at annual rates

of 12% based on a composite of expected local and international inflation.

Overall physical contingencies amount to 12% of base cost and price contin-gencies tc) 21% of base cost plus physical contingencies. The cost estimatesare summarized on the following table and shown in detail in Annex 2. Theschedule of expenditures is shown in Annex 1.

4.09 Housing is a major problem for consultants working in Algeria.Therefore purchase and erection of three prefabricated houses is foreseen inthe consultant's cost. A total of 212 manmonths of consulting, services isforeseen at a cost of $10,000 per manmonth including fee, overhead and foreign

travel expenses.

ForeignLocal Foreign Total Local Foreign Total Exchange

…-- DA Million---… ----US$ Millio _----- %

Civil Works 8.87 7.31 16.18 2.32 1.91 4.23 45Equipment 3.68 7.50 11.18 0.96 1.96 2.92 67Engineering,Administration 0.78 2.18 2.96 0.20 0.57 0.77 74Studies 1.47 5.86 7.33 0.38 1.54 1.92 80

Subtotal 14.80 22.85 37.65 3.86 5.98 9.84

PhysicalContingencies 1.93 2.65 4.58 0.51 0.68 1.19

PriceContingencies 3.37 5.40 8.77 0.88 1.41 2.29

Grand Total 20.10 30.90 51.00 5.25 8.07 13.32 61

/a Discrepancies due to rounding.

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E. Financing

4.10 The proposed Bank loan of US$8.0 million would finance the estimatedforeign exchange requirement. The Government would finance the local costcomponent for a total equivalent to US$5.32 million, or 40% of total projectcost. The Bank loan would be for a total of 17 years including a four yeargrace period, which are the standard conditions for Algeria. Interest andcommitment charges on the Bank loan during the construction period, estimatedto be about US$0.4 million, would be paid by the Government.

F. Procurement

4.11 Contracts for civil works and goods financed under the project wouldbe grouped to the extent practicable into about 15 contracts. Contracts forcivil works exceeding US$200,000 and equipment exceeding US$50,000 would betendered on the basis of international competitive bidding (ICB) in accordancewith Bank guidelines for procurement. These contracts are expected to amountto US$7.8 million in total. Small contracts for civil works not exceedingUS$500,000 in total would be procured by local competitive bidding proceduressatisfactory to the Bank. Contracts for limited numbers of equipment andvehicles not exceeding US$50,000 for each lot and totalling about US$0.7million would be procured by seeking quotations from at least three suppliersor manufacturers. In the interest of maintaining standardization, one motor-grader and one heavy dump truck would be purchased directly. The total amountinvolved would not exceed US$200,000. In the evaluation of quotations or bidsfor equipment procured under ICB would be allowed a margin of preference equalto the existing rate of customs duty applicable to competing imports or 15% ofthe c.i.f. price, whichever is lower. Civil works for the power connectionamounting to about US$80,000 would be awarded to the National Power Authority(SONELGAZ) through a negotiated contract. Consulting services amounting toabout US$3.17 million would be procured on terms and conditions acceptable tothe Bank. The above contracts will be procured by the departments of theMinistry of Hydraulics.

G. Disbursements

4.12 The Project implementation period would be abDut three years(September 1980-December 1983). The proposed Bank loan would finance:

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AmountCategory (US$ Million) Disbursement: Percentage

(a) Civil works and power line 2.4 46% of totaL cost

(b) Equipment consisting of gates, 67% of total costs orautomatic gates, electro- 100% of the c.i.f. cost ofmechanical equipment for imported goodspumping stations, vehiclesand maintenance equipment 2.4

(c) Foreign consultants for the 100% of foreign costssupervision of the BasCheliff I Project, leachingtests, preparation ofhydrological model of theCheliff Basin.

2.4

(d) Unallocated 0.8

TOTAL 8.0

The Bank loan of US$8.0 million would be disbursed in less than three and ahalf years. Disbursements would be made after receipt of proper documenta-tion. An estimated schedule of disbursements is summarized below and isdetailed in Annex 3.

Disbursements 1980 1981 1982 1983---------…US$ Million)---------

Annual 0.5 1.5 3.2 2.8Cumulative 0.5 2.0 5.2 8.0

H. Advance Contracting and Retroactive Financing

4.13 In view of the requirement to complete repairs of the main canal anddiversion weir before first filling of the reservoir, advance contracting forthese works according to Bank Guidelines after October 1979 is recommended.In addition, services to continue the leaching tests should be engaged withminimum delay. All together these contracts would amount to US$2.6 million.Retroactive financing for these contracts, if any, will not exceed US$130,000.

- 26 -

I. Environmental Impact

4.14 The Project would have no adverse effects on the environment. How-

ever, upstream cities such as El Asnam and Khemis presently discharge untreatedsewage in the Cheliff River. This poses a danger for the irrigation of fruitsand vegetables. In the framework of the Bas Cheliff II preparation study theproject would provide a component to study sources, type and magnitude ofpollution along the river.

V. PROJECT IMPLEMENTATION

A. Organization and Management

5.01 The Project is the first in the irrigation subsector in Algeria.The Ministry of Hydraulics would be responsible for its execution. Theregional authority at the provincial level is the division of the province ofMostagenem, located in Mostagenem. Under the division of Mostagenem falls theBas Cheliff subdivision, which manages the Bas Cheliff irrigation district.The national power company, Sonelgaz would be responsible for construction ofthe power connection. The managerial capacity at the level of the ministry isadequate to carry out the Project.

5.02 Water charges in the irrigation districts are established at thenational level and are reviewed from time to time. The last two revisionsresulting in raises of the charges took place in 1964 and 1979, respectively.Levels and type of water charges differ from district to district with theirrigation facilities offered and sometimes with the type of crops. Themanagement of the small irrigation areas (petite hydraulique), once they areestablished, is transferred to local authorities such as townships, which setwater charges in relation to operating costs. Usually, water charges consistof a combination of a volumetric charge and a fixed charge. The latter cantake the form of a per hectare irrigated land tax, or of a tax on the hydrauliccapacity of the farm turnout gate (para. 5.13).

5.03 In general, the subdivisions in charge of managing the irrigationdistricts have little autonomy. Much authority including awarding of majorcontracts is centralized in the Service for the Large Irrigation Districts,located in the Ministry in Algiers. During negotiations government informedthe Bank that the Bas Cheliff subdivision has been granted sufficient autonomyto award contracts for efficient maintenance and operations and assured theBank that government will provide on time the necessary funds for this purpose(para. 7.01). More precisely, the subdivision has now been authorized toaward contracts up to DA 100,000 per year per single contractor or supplier,which is considered adequate.

- 27 -

5.04 The organizational structure of the Bas Cheliff subdivision ispresented in Chart 20746. The water police is a recent addition made neces-sary by the dramatic increase in privately owned motor pumps which pump fromthe river, the canals and from open drains for the irrigation of highlyremunerative fruits and vegetables. The main purpose of the police is tolegalize these irrigators after they pay a small penalty and as a resultmost pump operators are now legally registered. This approach conforms topresidential instruction No. 51 of January 16, 1979 in which the authoritiesare instructed to make irrigation water available to the largest possiblenumber of farmers in order to increase production and reduce the seriousshortage in the supply of fruits and vegetables.

5.05 A number of shortcomings are encountered in the management of theBas Cheliff subdivision:

The district is over-staffed and under-mechanized with respectto the small area actually irrigated. The total personnelconsists of 69 permanent staff and 102 temporary labor. Ofthe latter, budget cuts allow only to employ about 26. Even so,the resulting personnel of 95 give a ratio of only 43 irrigatedhectares per employee which is too costly. Working conditionsand productivity of staff are poor because of lack of transporta-tion and inadequate equipment for maintenance. To alleviatethese difficulties, the project would provide for improvement ofmeechanization and transportation so that existing staff couldfulfill their tasks adequately. Furthermore assurances wereObtained that the subdivision will at all times be directed byCompetent management and that the Bank will be informed of allappointments expected to take place in the management: of theSubdtvision (para. 7.01>.

B. Operation and Maintenance

5.06 Operation. In the fall of each year the dispatching office in ElAsnam issues a forecast of available water from the Ghrib and Fodda reservoirsto the three downstream irrigation districts, Haut, Moyen and Blas Cheliff.On this basis the subdivision formulates a preliminary cropping pattern whichis submitted to the delegate of the Ministry of Agriculture for the townshipof Oued Rhiou. The Ministry of Hydraulics does not have any authority toimpose cropping patterns. The delegate for agriculture, together with themanagement of the state farms and the cooperative farms of the agrarianreform (CAPRA) determine their cropping pattern and water requ1irements andthe balance is made available to the private sector farmers. The latter havethe greatest flexibility to adjust because they are to a large extent equipped

ALGERIABAS CHELIFF I IRRIGATION PROJECT

Organization Diagram Bas Cheliff District/Organigramme Subdivision du Bas Cheliff

DistrictChief

AssistantChief

Chief Exploitation Chief of Water Maintenance Administrative Stpock Pumping Stations ExliainSectors Police Service Service WokhpMaterials

I I I Diversion M Transport &Pumping Station Maintenance _ Maintenance

Operators D itchriders Crews Equipment

World Bank - 20746

- 29 -

with movable motor pumps and because they cultivate mostly annual crops ofmid and late season which allows them to make last minute adjustments whenchanges occur in February in predicted releases from the storage reservoirs.After general agreement on cropping patterns, the definitive weekly waterallocation scheme (rotation) is established. In general, the system operatessatisfactorily. During the irrigation season farmers may change their fixedwater allocation three days before their scheduled delivery. The socialistsector is reluctant to irrigate at night, but private farmers take whateverwater they can get at any hour.

5.07 The operational activity of the water distribution employees (ditch-riders) is not only hampered by their lack of mobility, but also by the poorcondition of the dirt roads along the canals. The Project would provide agrader to remedy this situation.

5.08 The largest concentration of private farmers equipped with motorpumps is found in sectors I, VIII and X. They pump from the main and primarycanals and also from the main drain in sector X which receives tail water fromongoing irrigation and unofficial releases from the primary canal. The pumpsare frequently owned by groups of up to five farmers. Operation of thesepumps is relatively easy to check by the ditchriders and the water police.The private sector is using the water efficiently, since it uses any incrementin the availability of this resource to extend its irrigated acreage. Thedistribution to the private sector is only partially controlled but improving,because of the activities of the water police which results in increasingintegration into the distribution system of previously uncontro'lled use.

5.09 Maintenance. Maintenance is rather incidental and less than requiredfor such an old network where many of the components have outlasted theireconomical life. The subdivision submits to the Ministry's Budget Annex forIrrigation (BAI) an annual budget for operation and maintenance, which includesexcessive labor requirements. The BAI cuts the request - with justification -by allowing only 25% of the amount requested for maintenance by temporarylabor which still results in a high rate of employment per irrigated hectare(para. 5.05). For 1979, the requested and allocated budgets were:

Requested A:Llocated %------DA Mill-ion-----

Temporary personnel for repairs 1.741 0.435 11Other salaries (permanent personnel) /a 2.202 2.202 56Buildings and materials 0.233 0.233 6Operation of network (including power) 0.620 0.620 16Vehicles and maintenance equipment 0.453 0.453 11

5.249 3.943 100

(US$1.37 million) (US$1.03 million)

/a Including all social charges.

- 30 -

It is noted that the operation and maintenance budget is sufficient to performthe tasks, except for items explained in para. 5.11.

5.10 Staffing and operating costs of the Bas Cheliff district were com-pared with four 70 year old gravity irrigation districts in California and onein Tunisia. Relevant figures from this table are as follows:

California Tunisia Bas Cheliff

O&M cost per 1,000 m3 delivered US$3.50 US$22.40 US$24.20Irrigated area per district employee 448 ha 66 ha 43 haIrrigated area per ditchrider 963 ha 302 ha 125 haNumber of farm turn outs per ditchrider 67 12 10Personnel cost as % of total O&M cost 92% 82% 67%

From the four California districts the one with the smallest number of farmturnouts per ditchrider is presented in this table. The average O&M cost per1,000 m3 water delivered for the four California districts is US$3.25. Theconclusion may be drawn that in North Africa the managerial productivity peremployee is low, mostly because of poor mechanization, poor administration(communications) and management. Improvement can only be expected to evolvegradually. For the Bas Cheliff district this would imply no increase in staffwhen the irrigated area increases. Since salaries constitute 67% of theO&M budget, maintaining the same staff while increasing the volume of waterdelivered, would improve the productivity.

5.11 Proper maintenance is made more difficult by the poor condition ofthe trucks and maintenance vehicles. The project would provide six trucks,one fork lift truck, three excavators and one grader to improve this situation.The addition of the proposed equipment would add DA 1,112 million (US$0.29million) per year to the operating cost of the subdivision, which would amountto DA 5.055 million (US$1.32 million) per year by 1982.

5.12 Granting complete autonomy to the Bas Cheliff district is not yetpossible in the present Algerian context. It would have been the best way toremove the constraints discussed above. Managerial capability is not avail-able to grant complete autonomy. By insisting to exercise control overthe budget, the Ministry assumes responsibility that such a budget be properlyused and it should exercise this control by more frequent inspections of theoperation and maintenance procedures in the districts.

C. Water Charges and Cost Recovery

5.13 For the Bas Cheliff District, water charges since July 1979 are:

(i) a fixed annual levy on the hydraulic capacity of the farm turnoutgate at DA 100/1/sec (increase of 43% in July 1979);

(ii) a volumetric charge of DA 0.08/m3 (increase of 50% in July 1979);and

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(iii) if the foregoing combined, amount to less than DA 148/ha, a minimumirrigated land tax of DA 148/ha is levied on land equipped forirrigation. This tax was introduced as an incentive to use theirrigation network for winter wheat irrigation, when water isplentiful.

Farmers irrigating with pumps have their turnout levy assessed on the basisof installed capacity of their pump, usually 10 1/sec. In this case thevolumetric assessment is based on the estimated per hectare water consumptionper type of crop.

5.14 Based on 11,255 ha equipped, 3,313 1/sec underwritten turnout capac-ity and 26.75 million m3 sold, the expected 1979 minimum receipts would beDA 3.5 million (US$0.92 million) and the maximum receipts would amount toDA 4.3 million (US$1.13 million) if the volume sold would reach 36.5 millionm 3, which is expected in view of additional water releases promised for thesecond half of 1979.

5.15 The subdivision computes the water charges which then are approvedby the division in Mostagenem, approved by the Ministry of Hydraulics, handedover for collection to the Ministry of Finance (Service des Domaines) whichpasses on collection from the socialist sector to the National Bank of Algeria(BNA). Finally the money is received by the BAI in Algiers. Collection fromthe socialist sector is undertaken every three months and from the privatesector every six months. There are no delays in collection.

5.16 Once the Merdja reservoir will be completed, by end 1]981, an exten-sion of the irrigated area by at least 2,000 ha is foreseen. 'Such an exten-sion would generate receipts for 1982 of at least DA 4.72 million (US$1.24million) at minimal water use and a reasonable maximum of DA 5.88 million(US$1.54 million). Actual and predicted receipts from water charges andexpenditures for operation and maintenance are tabulated as fo'Llows:

Receipts (range)Low High O&M Expenditures

Year…( ______----(DA Million)-----------------

1978 - 3.08 3.941979 3.53 4.31 3.941980 3.53 4.31 3.941981 3.53 4.31 5.061982 4.72 5.88 5.06

The range of future receipts depends on rainfall and hence upon the volumes ofwater available behind the dams. High rainfall implies larger summer releasesand more hectares irrigated by the private sector and more waste of water inthe olive orchards of the socialist sector farms. For the latter, the rela-tively high cost per m3 as input for low value crops does not result inreduction of water waste because management of state farms is not penalizedfor financial insolvency. After the Merdja reservoir becomes operational,recovery of financial O&M costs from water charges would range between 93% and116%. It is therefore reasonable to expect full coverage in 1982 under thepresent level of water charges.

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5.17 Cost Recovery. For the 1,090 ha of private sector and 3,036 ha ofsocialist sector irrigated farms, rent and cost recovery indices were computedby taking net present values discounted at 10% over a 35 year period. Thesecalculations included the same estimate of the probability of breakdown ofthe irrigation structures as used for the rate of return calculations (para.6.11). An additional production cost of DA 1,000 per 1.36 ha farm per yearwas imputed to the private farmers to account for their unofficial contribu-tions to guarantee timely availability of irrigation water. On the other handthe socialist sector pays general taxes of 75% on its net cash income afterwater charges. These general taxes were added to direct water charges fordetermining the overall cost recovery from this sector. Detailed calculationson cost recovery are shown in Annex 4, Appendix 9 of the Project File. Themain indices are as follows:

Private Socialist TotalFarms Farms Project----------in percent---------

Rent recovery index 5 67 19Cost recovery index (investment plus O&M) 43 67 74 /aCost Recovery index for O&M only 62 96 106 /aCost Recovery index for Investment only 141 220 243

/a These higher rates are the result of payment of the irrigated land taxby non-irrigating farmers (see para. 5.13).

5.18 The indices will further increase if additional revenues for futureextension of the irrigated area (about 2,000 ha by 1981) are taken intoaccount (para. 5.16). The recovery rates achieved are fully satisfactory inview of the very high costs of operation and maintenance incurred (see para.5.10). However, the district has so far consistently achieved full recoveryof this rate. The situation of the water charges as described in para. 5.13is adequate. During negotiations the government confirmed that it was itspolicy to take into account recovery of O&M and capital costs and to reviewthe water charges at appropriate intervals to keep to these principles.

D. Audits of Accounts and Monitoring

5.19 The Bas Cheliff subdivision will maintain a separate projectaccount and will monitor the physical implementation of the Project.

5.20 Assurances were obtained during negotiations that the districtand government will carry out the foregoing and that the government willprovide the Bank with:

- an annual financial report for operation and maintenance of theBas Cheliff district showing sources of receipts and itemizedexpenditures;

- :33 -

progress reports on construction activities and engineeringstudies to be prepared quarterly by consultants; and

a completion report of the project not later than six monthsafter the closing date.

VI. PROJECT JUSTIFICATION AND BENEFITS

A. Project Justification

6.01 The rehabilitation program proposed under this project is urgentlyneeded:

(a) to avoid abandonment of irrigation in the Lower Cheliff, one ofthe best agricultural areas in Algeria;

(b) to permit continued operation of the Bou Kader weir and most ofthe main canal required for the operation of the Merdja reservoirnow nearing completion. This reservoir will permit extension ofthe Bas Cheliff irrigated areas by about 2,000 ha and would permitupstream summer releases to be allocated to the water short Hautand Moyen Cheliff districts. No summer flow will remain availablein the river; and

(c) to maintain utilization ofi 27% of the secondary canals which serve1,800 ha of perennial crops.

The structures to be rehabilitated will in any case continue to be used, what-ever decisions may be taken for subsequent extensions. Any alternative newsystem of distribution would be more expensive than the repair of the existingstructures; (sprinkler irrigation may not be superior to gravity irrigation,especially in view of the very high temperatures, summer winds and moderatesalt content of the irrigation water).

6.02 The objective of the project is to preserve the status quo. Rehab-ilitation should be confined to primary structures aimed at continuing presentoperations. No improvements are foreseen in agricultural practices nor instructures that might increase the effectiveness of the Merdja reservoir suchas a sedimentation basin. These problems which need further studying will beaddressed under the subsequent Bas Cheliff II Project.

B. Project Benefits

6.03 Production. The purpose of the project is to avoid the return ofpresent irrigated agriculture to rainfed agriculture because of the breakdownof irrigation facilities. Thus present production is compared to future pro-duction if the project were not carried out. Present value of production (91%

- 34 -

fruits and vegetables, para. 3.14) is DA 65 million. Without the project, theannual rainfall of 400 mm would permit only annual cropping of low valuewinter field crops, though production projections assume that the socialistsector would retain their 1,230 ha of olive orchards. It was projected thatthe remainder of the 4,126 ha presently irrigated would be under one thirdeach of durum wheat, barley and vetch-oats. The value of production underthese rainfed conditions would be DA 6.3 million, or less than 10% of itspresent value.

6.04 Net income would be reduced even more than the value of production.For the private sector the average net income per irrigated hectare woulddrop from DA 35,842/ha to DA 1,338/ha or 96% and for the socialist sectorfrom DA 3,732/ha to DA 294/ha or 92%. The olive orchards would show a netoperating loss of DA 230/ha.

6.05 Direct Beneficiaries. The beneficiaries of the project wouldinclude 800 farmers in the private sector and another 800 associated labor,irrigating an average farm size of 1.3 ha with vegetable crops. These cropsprovide an income of DA 35,000 to 45,000 per year per farm, i.e., the greaterpart of the family income. If the project is not undertaken, the 800 ownerswill have to live off 5 ha of rainfed land. They will be unable to obtain anyfurther seasonal work on the State farms, which will also have to revert torainfed farming. Their average earning will fall to DA 6,690 (US$1,751) perfarm per year. The average per capita income for the 1,600 families will dropto US$135, below the level gf absolute rural poverty (US$203). Also to benefitfrom the Project will be the 1,250 agricultural workers on State farms and inCAPRA cooperatives. These farms will see their harvests reduced as a resultof the uprooting of orchards, the falling production of olives and the aban-donment of vegetable crops: these are losses that cannot be compensated bysubstitute cereal crops. The reduction in the earnings on the irrigated 3,036ha of State farms would be DA 10.4 million or some 92%. The loss of employ-ment for unskilled workers in the socialist sector that the project willprevent amounts to 170,000 man days/year. Assuming the national average of6.5 individuals per family, the total number of direct beneficiaries of theproject is calculated to be 18,525.

6.06 Other Beneficiaries. These would be mainly individuals in theregion whose activities are linked to the level of earnings of the localpopulation - such as those engaged in commerce and other service activities -and, in addition, the whole body of Algerian consumers, who would be facedwith reduced supplies of fruits and vegetables.

6.07 Distribution of Benefits. For the private sector, holdings ofirrigated land are limited to a maximum of 5 ha. In reality, the holding of1.3 ha represents a reasonable estimate of the average size of family holdingssince labor constraints prevent operations on a large scale. No extremes inthe distribution of benefits therefore result for the private sector. Forthe socialist sector, benefits should affect mainly seasonal labor, sincepermanent workers on state farms will continue to receive the same salaries,regardless of whether they work in irrigated or rainfed agriculture.

- 35 -

C. Economic Rate of Return

6.08 Benefits. These represent the advantage to the Algerian economy topreserve the irrigated production on 4,126 ha. The net incremental benefitcommonly used in computing the economic rate of return is replaced by thenet value of production loss avoided, expressed in efficiency prices. Thisis the net benefit under irrigation minus the net benefit under rainfed con-dition. Since the project is about breakdown, there is no gradual decreasein benefits, unlike the gradual increase in benefits assumed under normalirrigation development projects. Efficiency prices have been computed using ashadow exchange rate 20% above the official rate for the Algerian Dinar,leading to a standard conversion factor of 0.84. Unemployment in the regionis about 12%. The unskilled part time farm workers are employed half time forabout 9 months and unemployed for the remainder of the year. This, combinedwith the standard conversion factor of 0.84 results in an opportunity cost forunskilled labor of 31% of the daily wage. For the computations a figure of30% was used.

6.09 Economic Value of Production at Efficiency Price. Oranges are theonly product exported. Their value has been determined by subtracting localtransportation handling and packaging costs from the fob Algiers price. Theireconomic value is DA 0.81/kg. Other fruits and vegetables have been valued atdomestic prices, corrected by the standard conversion factor of 0.84. Thedomestic price was weighted.to reflect the dual market system. Since melonsrepresent 72% of the financial value of the harvest, the price of melons wasparticularly scrutinized in view of its current high level. The price of thestanding crop, DA 1.67/kg, selected as reference price, has been correctedwith the standard conversion factor.

6.10 Costs. To the investment cost computed at efficiency prices hasbeen added the cost of purchase of additional equipment for maintenance.Agricultural production costs include water charges which take into accountthe operating costs of the additional equipment.

6.11 Calculation of Benefits. There are doubts as to the year in whichthe main structures are likely to collapse if the proposed works are not under-taken. It is impossible to estimate when the sluice gates at Bou Kader or theaqueducts will be carried away by winter flood waters of the Cheliff and itstributaries. It is equally impossible to predict when the pumps will breakdown for good. It is practically certain that these main structures will notlast more than five years, with a great likelihood of collapse within the next2 or 3 years. The economic rate of return calculations were therefore final-ized on the following assumptions with respect to distribution of the probablecollapse of the structures:

- 36 -

Probability of CollapseYear of Main Structures

1980 30%1981 30%1982 20%1983 10%1984 10%

6.12 The benefits of maintaining the 4,126 ha under irrigation are thesame from one year to another throughout the duration of the project. Theproject will not generate benefits until the year of collapse resulting fromfailure to undertake the rehabilitation program, which will extend overthree years. It will not be possible to avoid the likelihood of collapsebefore the end of the rehabilitation program. An approximate estimate indi-cates, however, that the work to be undertaken during the first two yearsshould halve these risks.

6.13 It is unlikely that all structures would break down at the sametime. However, 60% of the cost of rehabilitation involves structures on themain canal and diversion weir and the breakdown of anyone of these wouldaffect the entire district. The remaining structures to be rehabilitatedserve smaller areas. Since their costs are small and their repairs would takeno more than one year, their individual rates of return are higher than thatfor the total project treated as one unit. The latter approach thus providesa more conservative ERR.

6.14 The Haut and Moyen Cheliff irrigation districts presently experiencesome water shortage during the summer months, when these upstream districtshave to let releases from the Ghrib and Fodda dams destined for the BasCheliff district by-pass their intakes. If the project were not to be carriedout, irrigation in the Bas Cheliff would be terminated and this water wouldbecome available to alleviate the shortage in the upstream districts. Thusexecution of the project implies an increased production foregone for theupstream districts.

6.15 Of the 22.9 Mm3 released for the Bas Cheliff district in the periodJune through September, 19.1 Mm3 could have been sold in the Moyen Cheliffdistrict, taking into account conveyance losses. This would result in anadditional water application of 1,870 m3/ha per year on the 10,222 ha pre-sently irrigated in that district. It was assumed that this additional waterwould increase yields by 15% for an irrigated cropping pattern similar tothat found in the socialist sector of the Bas Cheliff district. The onlyadditional production cost associated with this yield increase would be thecost of the additional water. The resulting Moyen Cheliff benefits foregonethus calculated amount to DA 7.89 million per year and their probability ofoccurrence is the same as those for the Bas Cheliff losses avoided in para.6.11.

6.16 On the basis of the assumptions on the probability of collapse ofmain structures in para. 6.11, the rate of return, discounted over 35 years,

- 37 -

has an expected value of 73%. It is 80% likely to exceed 82% and is almostcertain to exceed 42%. Three factors together explain these high rates ofreturn:

(i) the low cost of the rehabilitation program in comparison with thecost of the total hydraulic infrastructure;

(ii) the high average value of the per hectare margin generat:ed byfruits and vegetable crops at full production; and

(iii) the expectation that certain major structures will break downwithin three years.

6.17 Sensitivity Analysis and Risk. The rate of return on the project isstill 27% on the assumption that the structures will not collapse before 1987.If it is assumed that melons will not generate a higher margin than oranges,the probable rate of return would fall from 73% to 52%. In this case theefficiency price for melons would be 1.13 DA/kg as compared with the 1.40DA/kg used for the basic hypothesis.

VII. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 Agreements obtained during negotiations included the fo:Llowing:

(a) The Bas Cheliff subdivision will continue to be grantedsufficient authority to engage in contracts for maintenancepurposes not exceeding DA 100,000 per individual contract.The funds for this purpose will be made available on time(para. 5.03);

(b) The Bas Cheliff subdivision will at all times be directedby competent management and the Bank will be informed ofall appointments to take place in its management (para.5.05); and

(c) Government will submit to the Bank (i) an annual projectaccount, (ii) an annual financial report for operationand maintenance of the Bas Cheliff irrigation district,and (iii) regular progress reports (para. 5.20).

7.02 Recommendation. With the above agreements the project is suitablefor a Bank loan of US$8 million equivalent for a term of 17 years, including afour year grace period.

January 15, 1980

- 38 -ANNEX I

ALGEI.

BAS CHELIFF I IERIGATION PROJECT

Schedule of Expenditures/gch6ancier des Depenses

Foreign Foreign19B0 1981 1982 Total Exchange Exchange

---------------- DA Million---------------__-_

Civil Works Genie Civil

Repairs 4.91 6.83 4.22 15.96 7.18 45 R8fectiomPower Line - 0.22 - 0.22 0.13 60 RaccordementEElectriqueSubtotal 4.91 7.05 4.22 16.18 7.31 45 SoustotalPhysical Contingencies 0.74 1.06 0.63 2.43 1.10 Ap16s PhysiqueBPr*c. Continsencies 0.34 1.54 1.60 3.48 1.57 A168a Financiers

Total 5.99 9.65 6.45 22.09 9.8 45 Total

Ecuicment Materiel

Hydro-mechanical - 1.80 3.75 5.55 3.33 6D Hydro-micaniqueElectro-mechanical 0.48 1.82 - 2.30 1.61 70 El.ctro-micsniqueMaintenance Equipment 1.00 1.10 1.23 3.33 2.56 77 Materiel d'EntretienSubtotal 1.48 4.72 4.98 11.18 7.50 67 SoustotalPhysical Contingencies 0.15 0.47 0.50 1.12 0.75 Aleas PhysiquesPrice Contingencies 0.10 0.99 1.80 2.89 1.93 Ales. Financiers

Total 1.73 6.18 7.28 15.19 10.18 67 Total

project Administration Etudes Li6es a. Proiet

Supervision of Works 0.87 0.87 0.86 2.60 2.13 82 Supervision TravauxAdministration 0.12 0.12 0.12 0.36 0.05 15 AdministrationSubtotal 0.99 0.99 0.98 2.96 2.18 74 SoustotalPhysical Contingencies 0.10 0.10 O.10 0.30 0.22 Alias PhysiquesPrice Contingencies 0.06 0.21 0.35 0.62 0.47 Aleas Financiers

Total 1.15 1.30 1.43 3.88 2.87 74 Total

Baa Cheliff I Project Projet Ban Cheliff I

Total Cost 8.87 17.13 15.16 41.16 23.03 56 Codt Total

of whicht dont,Physical Contingencies 0.99 1.63 1.23 3.85 2.07 54 Aleas Physiques

Price Contingencies 0.50 2.74 3.75 6.99 3.97 57 Aldes FinanciersTotal Contingencies 1.49 4.37 4,.98 10.84 6.04 56 Total Ales

Other Studies Autres Etudes

preparation sas Cheliff 11 0.97 1.94 1.94 4.85 3.88 80 Preparation Bas Cheliff 11Hydrological Model 0.50 0.98 1.00 2-8 1.98 80 mdhle uydioiogiqueSubtotal t1. M -2-.94 77.33 5-.86 89 SouostotalPhysical Contingencies 0.15 0.29 0.29 0.73 0.58 Aliss PhysiquesPrice Contingencies 0.09 0.61 1.08 1J8 1.43 Alias Financiers

Total 1.71 3.82 4.31 9.84 7.87 80 Tetel

GRAND TOTAL 10.58 20.93 19.47 51.00 30.90 60 G8RAD TOTAL

of which: dont:

Physical Contingencies 1.14 1.92 1.52 4.58 2.65 58 Alias PhysiquesPrice Contingencies 0.59 3.35 4.83 8.77 5.40 61 Ale.s Financiers

January 1980

39 ~~~~~~~~~~~~ANNEX 2- 39 - NM-

ALGERIA

EAS CHEL IFF I IRRIGATION PROJECT

Cost Estimates/Tableau des Coats L

Local Foreign Total local Foreign Total___----- DA Million ---------- --------- US$ Million---------

Civil Works Gieis Civil

Repairs 8.78 7.18 15.96 2.30 1.88 4.18 RefectionsPower Line 0.09 0.13 0.22 0.02 0.03 0.05 Raccordement ElectriqueSubtotal 8.87 7.31 16.18 2.32 1.91 4.23 SoustotalPhysical Contingencies 1.33 1.10 2.43 0.35 0.29 0.64 Aldas PhysiquesPrice Contingencies 1.91 1.57 3.48 0.50 0.41 0.91 Aleas Financiers

Total 12.11 9.98 22.09 3.17 2.61 5.78 Total

Equipment Materiel

Hydro-mechanical 2.22 3.33 5.55 0.58 0.87 1.45 Hydro-m'caniqueElectro-mechanical 0.69 1.61 2.30 0.18 0.42 0.60 Electro-i6caniqueMain.tnance Equipment 0.77 2.56 3.33 0.20 0.67 0.87 Materiel d'EutrstienSubtotal 3.68 7.50 11.18 0.96 1.96 2.92 SoustotalPhysical Contingencies 0.37 0.75 1.12 0.10 0.20 0.30 Alias PhysiquesPrice Contingencies 0.96 1.93 2.89 0.25 0.50 0.75 Alas Financiers

Total 5.01 10.18 15.19 1.31 2.66 3.97 Total

Project Administration Etudes Lides au Projet

Supervision of Works 0.47 2.13 2.60 0.12 0.56 0.68 Supervision TravauxAdministration 0.31 0.05 0.36 0.08 0.01 0.09 AdministrationSubtotal 0.78 2.18 2.96 0.20 0.57 0.77 SoustotalPhysical Contingencies 0.08 0.22 0.30 0.02 0.05 0.07 Alias PhysiquesPrice Contirgencies 0.15 0.47 0.62 0.04 0.12 0.16 Alias Financiers

Total 1.01 2.87 3.88 0.26 0.74 1.00 Total

Bas Cheliff I Project Proi-t Bas Ch-liff I

Total Cost 18.13 23.03 41.16 4.74 6.01 10.75 coGt Total

of which: Dont:Physical Contingencies 1.78 2.07 3.85 0.46 0.54 1.00 Alias PhysiquesPrice Contingencies 3.02 3.97 6.99 0.79 1.04 1.83 Alias Financiers

Total Contingencies 4.80 6.04 10.84 1.25 1.58 2.83 Total Alias

Other Studies Autres Etudes

Preparation Bas Cheliff IT 0.97 3.88 4.85 0.25 1.02 1.27 Preparation Bas Cheliff IIHydrological Model 0.50 1.98 2.48 0.13 0.52 0.65 Modble HydrologiqueSubtotal 1.47 5.86 7.33 0.38 1.54 1.92 SoustotalPhysical Contingencies 0.15 0.58 0.73 0.04 0.15 0.19 AlEas PhysiquesPrice Contingencies 0.35 1.43 1.78 0.09 0.37 0.46 Alea Financiers

Total 1.97 7.87 9.84 0.51 2.06 2.57 Total

GRAND TOTAL 20.10 30.90 51.00 5.25 8.07 13.32 GRAND TOTAL

Of which: Dont:Physical Contingencies 1.93 2.65 4.58 0.51 0.69 1.20 Alias PhysiquesPrice Contingencies 3.37 5.40 8.77 0.88 1.41 2.29 Alias Financiers

/a Discrepancies due to rounding

January 1980

- 40 -

ANNEX 3

ALGERIA

BAS CHELIFF I IRRIGATION PROJECT

Disbursement Schedule

IBRD Fiscal Year Cumulative Disbursementsand Quarter at End of Quarter

US$ Million

1981September 30, 1980 0December 31, 1980 0.5March 31, 1981 0.7June 30, 1981 1.1

1982September 30, 1981 1.5December 31, 1981 2.0March 31, 1982 2.5June 30, 1982 3.3

1983September 30, 1982 4.2December 31, 1982 5.2March 31, 1983 6.3June 30, 1983 7.4

1984September 30, 1983 7.8December 31, 1983 8.0

July 1979

- 41 -

ANNEX 4Page 1

ALGERIA

BAS CHELIFF I IRRIGATION PROJECT

Selected Documents Available in EMENA File

A. Material on Algeria's Agricultural Sector

Al. Algeria - Agricultural Sector Survey. Analysis of Issues;Two volumes. World Bank October 1978.

B. Other Reports and Studies Related to the Project

Bl. Projet Bas Cheliff I - Etude de Factibilite.Grontmij International, March 1979.

B2. Projet Bas Cheliff I - Etude sur le Systeme d'Irrigation.Grontmij International, April 1979.

B3. Projet Bas Cheliff I - Etude Hydrologigue Globale.Grontmij International, May 1979.

B4. Projet Bas Cheliff II - Projet Termes de References desEtudes et des Travaux. Grontmij International, June 1979.

B5. Amenagement Hydro-Agricole de la Vallee du Cheliff.N. Mechai, DEMRH, January 1978.

B6. Perimetre du Haut Cheliff. Commissariat de DeveloppementRural du Perimetre Irrigable du Haut Cheliff, January 1977.

B7. Ressources en Eau de Surface de l'Algerie du Nord, Rapportde Synthese. Hydrotechnic Corporation, 1971.

B8. 'Projet Termes de References des Etudes et des Travaux.Grontmij International, June 1979.

B9. Rapport sur les Essais de Drainage et de Lessivage des SolsLourds Sales du Bas Cheliff. Grontmij International',September 1979.

- 42 -

ANNEX 4Page 2

G. Selected Working Papers

Appendix 1 - Value and Number of Contracts

Table 1: Estimated Value of ContractsTable 2: Operational and Maintenance Equipment

Appendix 2 - Agricultural Production, Yields and Profitability

Table 1: Farmgate Value of Crop Production 1978-1979Table 2: Farmgate Costs of Crop Production on State

Farms 1978-1979Table 3: Farmgate Costs of Crop Production on Private

Farms 1978-1979Table 4: Summary of Farmgate Costs of Crop Production

1978-1979Table 5: Farmgate Value of Crop Production

(without Project)Table 6: Farmgate Costs of Crop Production on State

Farms (without Project)Table 7: Farmgate Costs of Crop Production on Private

Farms (without Project)Table 8: Net Profit from Crop Production on State

FarmsTable 9: Returns to Labor and Management from Crop

Production on Private FarmsTable 10: State Farms of 253 ha - Production CostTable 11: Value of Crop Production - State FarmTable 12: Private Farm of 1.36 ha - Production CostTable 13: Value of Crop Production - Private Farm

Appendix 3 - Input Supply, Credit, Cooperatives, Extension, Marketsand Prices

Table 1: Fruit and Vegetables - Official FarmgatePrices

Table 2: 1979 Weighted Farmgate Prices

Appendix 4 - Soil. Salinity and Improvement

Appendix 5 - Climate and Irrigation Water Demand

Table 1: Climatic DataTable 2: Gross Crop Water Requirement at Farm

Turnout

- 43 -

ANNEX 4Page 3

A.ppeadix 6 - Water Resources and Demand

Table 1: Regulated FlowsTable 2: Merdja Sidi Abed Operating ScheduleTable 3: DEMRH Projections for Ultimate D)evelopment

of the Cheliff Basin

Appendix 7 - Operation and Management

Table 1: Comparison of Operation of VariousIrrigation Districts

Appendix 8 - Economic Analysis

Table 1: 1979 Investment in Efficiency PricesTable 2: Input Unit PricesTable 3: Produce Unit PricesTable 4: Benefit Streams as Function of Year of

Structure BreakdownTable 5: Economic Efficiency AnalysisTable 6: VaLues of ERR

Appendix 9 - Water Charges

Table 1: Rent and Cost Recovery Indices

Appendix 10 - Draft Terms of Reference for Studies and Works

IBRD 14459AUGUST 1979

ALGERIA MEDITERRANEAN S E A

BAS CHELIFF I IRRIGATION PROJECT ALGI

Lower Cheliff River Catchment Cherchel/

p0 2p; 40 6p Tenes OBLIDAlILOMETERS

t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~/ I - H~~~~~~~~~~~~~~~~~~AUT CHELIFF

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MOSTAGANE 0

m oussa B~~~~~~~~~~~~~~~~~~~~~ougzouI

°ORAN

kidi Mohamed .

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j Ghrib Existing Dams ALGIERPS

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h denominations used and the 0-h-ud.i-f sh-w on this map

ouw

do n-t-mply -o the port of th. Project Irrigation AreaWorld ank and its affiliate, anyjudgment us the opai statu ,f

anytmerritoroyor any esndorsemersnt |$ o B . 0|.N+:<>>.0h. Existing Irrigation Areasor-accptance of subh boundanes

Rivers OUED CHELIFF

CATCHMENT 40 340

IBRD -46O

;_ ALC.IERS _A,GUE,AE [ITAT.09NF+ANCED AST 97

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A EC T` PE' PART ALL EOLIPPED HOE R~OH

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