Document of

The World Bank

FOR OFFICIAL USE ONLY

I?R / //L7 gfi

Report No. 6067-NEP

STAFF APPRAISAL REPORT

NEPAL

NARAYANI III IRRIGATION PROJECT

June 2, 1986

South Asia Projects DepartmentIrrigation II Division

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

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CURRENCY EQUIVALENTS

US$1.00 = NRs 20.5

WEIGHTS AND MEASURES (METRIC SYSTEM)

1 meter (m) = 3.28 feet1 kilometer (km) = 0.62 miles1 hectare (ha) = 2.47 acres

1.50 bighas1 milliost cubic meters (Mm3) = 810 acre-feet or 35.3 Mft3

1 cubic meter per second (m3/s) = 35.31 cubic fooL per second (cfs)1 cubic foot per second (cfs) 0.028 cubic meters per second (m3/sec)1 metric ton = 2,205 pounds

FISCAL YEAR

July 16 - July 15

FOR OMCuL USE ONLYNEPAL

NARAYANI III IRRICATION PROJECT

Credit and Project Summary

Borrower: Kingdom of Nepal

Amount: SDR 21.6 million (US$24.5 million equivalent)l'

Terms: Standard

Project Objectives The main objectives of the project are to increaseand Description: dry-season agricultural production and reduce the

risks to monsoon crop production by introducing anequitable, predictable and reliable irrigation systemin the Narayani irrigation scheme. The proposedproject is the third phase of an IDA-supportedprogram and would complete the development ofirrigation and drainage infrastructure over about37,400 ha served by the Nepal Eastern Canal in theNarayani Zone of the Central Region of Nepal. Theproject would also provide for: flood protection andriver training works; improvements to village roadsand canal service roads; support to agriculturalextension and research; a regional workshop; trainingof project staff; consulting services; funding forproject establisment and O&M; a small component forgroundwater development; and monitoring andevaluation. In view of the experience with theimplementation of the first and second projects, nomajor risks are anticipated regarding the physicalimplementation of the project. Possible risks thatcould affect project objectives include: HMG'sfailure to make adequate provisions for O&M financingafter contributions from the credit phase out at theend of implementation; a major flood damage to themain canal and other essential irrigation infrastruc-ture; and inadequate water management. With respectto these risks, the cost of project establishment andO&M would be financed under the redit on a decliningbasis; under the project, special training would beprovided to project staff in water management andwater users' groups would be strengthened; andproject planning and design would enable theintroduction of a water management system that wouldenable the irrigation service to be timely, reliableand equitable.

1/ The project is also supported by a grant from the Swiss Development Cooperation(SDC) of SF 15.0 million (US$7.5 million equivalent).

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 Dank authorization.

ABBREVIATIONS

AADO - Assistant Agricultural Development OfficerADBN - Agricultural Development Bank of NepalADO - Agricultural Development OfficerAC - Auditor GeneralAIC - Agricultural Input CorporationBRVPD - Bihar River '.'alley Project DepartmentBSC - Branch Secondary CanalCCA - Cultivated Commanded AreaDE - Divisional EngineerDC - Director General (DIHM and DOA)DIHM - Department of Irrigation, Hydrology, and MeteorologyDOA - Department of AgricultureEE - Executive EngineerERR - Economic Lite of ReturnFAO - Food and Agriculture Organization (UN)GM - General ManagerGOI - Government of IndiaHMGN - His Majesty's Government of NepalHYV - High-Yielding Variety_CB - International Competitive BiddingIDA - International Development AssociationIEC - Indian Eastern Canal SystemJT - Junior TechnicianJTA - Junior Technical AssistantLCB - Local Competitive BiddingM&E - Monitoring and EvaluationMOA - Ministry of AgricultureMSC - Main Secondary CanalMWR - Ministry of Water ResourcesNEC - Nepal Eastern CanalNFC - Nepal Food CorporationNZIDB - Narayani Zone Irrigation Development BoardNZIDP - Narayani Zone Irrigation Development Project

(Stages I, II and III Areas)OCC - Opportunity Cost of CapitalO&M - Operation and MaintenancePLAA - Panchayat-Level Agricultural AssistantPPAR - Project Performance Audit ReportRD - Revenue DepartmentREC - Rice Export CorporationSA - Special AccountSCF - Standard Conversion FactorSDC - Swiss Development CooperationSF - Swiss FrancsSMS - Subject Matter SpecialistStage I Area - Narayani Zone - Blocks I-VI (15,900 ha)Stage II Area - Narayani Zone - Blocks VII-XII (12,800 ha)Stage III Area - Narayani Zone - Blocks XIII-XV (8,700 .ia)TC - Tertiary CanalT&V - Training and Visit System (of Agricultural Extension)USAID - United States Agency for International DevelopmentWUG - Water Users' Group

GLOSSARY

Block - An operational unit of 2,000-3,000 ha, intowhich the NEC command is divided.

Main Secondary Canal (MSC) - Principal branch canal from the NECserving a block of 2,000-3,000 ha.

Branch Secondary Canal (BSC) - Smaller branch canal from the NEC or fromMSC, serving about 200-600 ha.

Check - Cross-regulating structure.

Turnout - An ungated structure on a TC, commandingabout 30 ha.

Tertiary Canal (TC) - A canal conveying water from the 30-haturnouts to 4-ha command areas.

Outlet (Division Box) - A structure diverting (or closing) thewhole flow to a field channel within the4-ha area.

Field Channel - Canal within the 4-ha command area (belowthe division box).

Paddy - Unhulled rice

Panchayat - Village-level administrative unit

Ward - Subdivision of a panchayat

Nalla - Natural drain

Sajha - Cooperatives

NEPAL

NARAYANI III IRRICATION PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. BACKGROUND .................... 1

Introduction I 1The Agricultural Sector ......... . . .. . . . . . .............. 2The Irrigation Subsector .. .............. ......... . . . . . 4IDA Involvement in Irrigation Development ................ 6Rationale for IDA Involvement .................. ........ 8

II. THE PROJECT AREA .............. ................ 10

Location ................................................ 10Natural Resources ......... .. .... ... ... *. .............. .. 10Development of the NEC Command Area ...... ..... 12Land Use, Cropping Patterns, and Crop Yields .......-... 14Agr cultural Support Services t............ 14Other Public Services . ... .. . . ...... 15

III. THE PROJECT ........................................ L-)

A. Project Formulation and Objectives ...................... 15

roect Concept .............................................. 16Project Objectives ........... .. . .. . .. . .. . .. . .. .. . .. . .. . . 16Summary of Project Components ........................... 17

B. Detailed Faue .............................. 17Improvements to NEC and Repairs to the Tilawe Barrage ... 17Stage III Area Works ......... ............. *..*.......... 18Stage I and II Area Works ............................... 19Flood Protection and River Training Works ............... 19Improvement to Village and Service Roads ................ 20Vehicles and Equipment ......... ............ ............ 20Regional Workshop ...................................... 21Technical Support ................................ 21Support of Project Establishment and O&M Costs .......... 22

C. Design and Implementation Aspects ....................... 23Status of Preparation ........ *......*.. ............... 23Implementation Schedule .... ... . .... ......... . . . . . . * ... *. . 23

This report is based on the findings of a Bank mission which visited Nepalin November/December 1985, and comprised of Messrs. E. Cazit and M. Herman(Bank), B. Fawcett (CIDA), M. Barber, D. Campbell, A. Seager and L. Shanan(Consultants). Mrs. C. Leithmann-Frueh has assisted with the economicanalysis. Word processing was done by Ms. Z. Kalinger, with the assistanceof Mmes. C. Clay and K. Landerer.

Page No.

IV. COST ESTIMATES, FINANCING, AND DISBURSEMENTS ............ 24

Project Cost Estimates ................................. 24Financing ............................. 24Procurement ................ 444....*..... 25Disbursements .... ........................... *.... *4 27Accounts and Audits ..................................... 28

V. ORGANIZATION AND MANAGEMENT ............................ 28

General ...... *..........*****.... 28Narayani Zone Irrigation Development Project -Present Organizaticn 29...* ........................... . 29

Proposed Project Organization .......................... 30Quality Control 4444444 .................... 32Monitoring and Evaluation .............................. 32Agricultural Support Services ...... .................... 33Regional and District Coordinating Committees 4444444444 34Post Project Organization ...................... .. 34

VI. WATER MANAGEMENT ................ 35

Introduction ........................... 35Water Supply and Demand ............................... 35Water Management .... ***oe * ... ................. 36Management Organization ................................. 38Water Users' Groups tWUGs).............................. 38

VII. AGRICULTURAL PRODUCTION, FARM INCOME, AND COST RECOVERY 39

Agricultural Production ................................... 39Farm Incomes ........................................ . 42Impact on Poverty .... ..................... ............. 43Capital and O&M Costs * ................................. 43Cost Recovery .... a .................................... 44

VIII. BENEFITS AND JUSTIFICATION ................ ............. 47

Project Impact ................ 47Economic Analysis ........ * ....................... 47Sensitivity Analysis *.................................. 48Project Risk .................................................... 49Environmental Effects ....................... ........ 50

IX. AGREEMENTS REACHED AND RECOMMENDATIONS .................. 51

ANNEX 1 - Main Supporting Tables

Tables

1 - Salient Climatic Data2 - Present and Future Cropping Patterns and Yields3 - Existing and Future Staff Requirements - Agricultural Extension4 - Vehicles and Construction Equipment5 - Office, Su:rvey, Design and Supervision Equipment6 - Estimated Schedule of Expenditures7 - Disbursemient Schedule8 - Credit/Grant Allocation9 - Existing and Future NZIDP Staff Requirements10 - Project Irrigation Requirements and Flow Rates11 - Agricultural Production and Input Requirements12 - Summary of Financial and Economic Prices13.1 - Estimated Farm Budgets and Project Rent13.2 - Estimated Project Rent and Cost Recovery14.1 - Stage I - Costs and Benefits for Economic Analysis14.2 - Stage II - Costs and Benefits for Economic Analysis14.3 - Stage III - Costs and Benefits for Economic Analysis14.4 - Total Project - Costs and Benefits for Economic Analysis

ANNEXES (cont.)

2 - Detailed Cost Estimates3 - Assumptions for Financial and Economic Analyses4 - Selected Documents and Data Available with Project File

CHARTS

1 - Implementation Schedule2 - Organization Chart of the Department of Irrigation, Hydrology

and Meteorology (DIHM)3 - Organization of the Project (Construction Stage)4 - Organization of the Agricultural Extension Service5 - Historical Water Delivery at the Head of the NEC

MAPS

IBRD 19551 - Nepal - Irrigation DevelopmentIBRD 19552 - Nepal - Major Drainage BasinsIBRD 19550 - Project Location in Relationship to the Indian Eastern Canal SystemIBRD 19549 - General Plan of the Narayani Zone Irrigation Project

Volume II: Supplementary Data Volume

ANNEXES

5 - The Regional Workshop6 - Water Distribution System within 30-ha Tertiary Service

Area and Associated Structures7 - Terms of Reference for AADO8 - Project Consultants9 - Establishment and Operation and Maintenance

NEPAL

NARAYANI III IRRIGATION PROJECT

Staff Appraisal Report

I. BACKGROUND

Introduction

1.01 General. Landlocked between China and India, Nepal covers an area of141,000 km4 that divj des into three broad ecologicaL zones: the HimalayanMountains (21,000 km ); the Siwalik Hills (96,000 km2); and the Terai plainon the northern fringe of the Gangetic plain (24,000 km2). The mountain andh-ill zones have steep slopes, and only a limited area is suitable for anyform of agriculture, even with extensive terracing. Most of the landssuitable for cultivation and irrigation are in the Terai, where the monsoonrains can by and large support rainfed agriculture, although dry spells oftenaffect yields, as do storms, which are also common. The climate in most ofthe hills and in all of the mountain areas precludes the growing of wintercrops.

1.02 Between 1971 and 1984, Nepal's population grew a; an annual rate of2.7 percent and by the end of that period had reached an estimated 16.3 M,of which 94 percent were in rural areas. Because population density onarable land is now very high (356 per km2), cultivation has been extendedonto marginal lands and has encroached on the forests. As a result, mostof the Terai, which was covered by forest half a century ago, has been offi-cially cleared for agriculture, and the remainder has been thinned by illegalfelling and unofficial settlements. Hill forests have been denuded to meetthe growing demand for fuelwood (which accounts for 90 percent of Nepal'senergy consumption) and this, together with overgrazing, has helped toaccelerate soil erosion and the associated silting of the rivers. Floodingon the Terai has also become more frequent.

1.03 The General Economy. Agriculture, whi_ is largely rainfed,dominates the economy: it accounts for nearly 60 percent of Nepal's GDP and55-60 percent of its merchandise exports, and provides the livelihood forover 90 percent of the population. Crop production accounts for about 60percent of agricultural output, livestock for 30 percent, and forestry for 10percent. Foodgrains, of which rice is the most important, are planted onsome 90 percent of the cropped area; cash crops occupy the balance.

1.04 Nepal's industrial sector is small. Output consists of consumergoods (footwear, textiles, and processed foods), construction materials(bricks and tiles), and simple assembly items. Larger-scale manufacturing isundertaken by public enterprises in and around the Kathmandu Valley. Privateinvestment is concentrated in small and cottage industries, which account forabout 30 percent of the industrial value added. Since 1982, these industrieshave experienced impressive growth, which has even surpassed the annual rateof 11 percent achieved by the industrial sector as a whole during thisperiod. Furthermore, cottage industry provides part-time employment for morethan one million people.

1.05 The improved performance of the industrial sector was assisted byimprovements in the power sector. During 1982-85, the total installed gener-ating capacity increased from 138 MW to 172 MW, or about 6 percent per annum,

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and consumption grew at 12 percent per annum. In addition, reliability hasimproved since the commissioning of the 60-MW Kulekhani hydel station inDecember 1982. Further development of Nepal's vast hydropower resources willrequire financial exploitation and export agreements with neighboringcountries.

1.06 Although the road network is also being expanded, particularly in theTerai, a large part of the Hills is still inaccessible by road. Maintenancealso remains a problem. The national airline at present serves 38 localitieswithin Nepal and connects to nine Asian countries. Crowth in tourism hasbeen dynamic and, although it accounts for only 1 percent of GDP, it providesabout 20 percent of foreign exchange earnings.

1.07 Three decades of development efforts, supported by growing foreignassistance, have brought few improvements to the lives of the people. Rapidpopulation increases since 1970 have virtually offset real GDP growth. Bymost indicators, Nepal is still one of the poorest and least developedcountries in the world. Average per capita income is about US$170 per annum,life expectancy about 46 years, and infant mortality about 125 per 1,000births. Adult literacy is only 19 percent.

1.08 National Development Objectives. The Sixth Plan (FY81-85) accordedhigh priority to developing agriculture, small-scale industries, and thecountry's abundant water resources. It also stressed soil conservation,population control, and measures that would promote full utilization ofexisting infrastructure, alleviate absorptive capacity constraints, anddevelop human resources. In addition, it called for increased involvement ofthe private sector in agricultural support services, manufacturing, trade,tourism, construction, and transport operations. These objectives have beencarried over into the Seventh Plan (FY86-90), which also recognizes thatsuccessful and efficient implementation of development programs cannot beachieved without a strong and competent administration. It thereforeincludes details for enhancing the capability of ministries charged withformulating economic and development policies and implementing developmentprograms.

1.09 Investment expenditures, supported by growing foreign assistance,increased rapidly during the Fifth and Sixth Plan periods, from US$146 M (9percent of GDP) in FY75 to US$481 M (19 percent of GDP) in FY84. Moreover,there were substantial shifts in the focus of development spending fromtransport to agriculture, power, and social services.

The Agricultural Sector

1.10 Agricultural Performance. Nepal's economy depends greatly ondevelopments in, and the overall performance of, the agricuLtural sector,whose growth has been somewhat slow. During the 1970s, for example, thegrowth rate of all agricultural production was only 1.1 percent. Significantgrowth was achieved only in the case of wheat, which increased from a lowbase at an average rate of 9.6 percent per annum, largely because ofincreased acreage. Meanwhile, the average yields of other crops declined ata rate of 0.8-0.9 percent per annum.

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1.11 Inadequate input supplies (especially fertilizers), poor price incen-tives, and poor extension services contributed to the slow growth in agricul-tural production; but even more important were the poor monsoons, since thecountry relies predominantly on rainfed agriculture. As a result of severedrought in 1982/83, agricultural output dropped by 2.5 percent, nonagricul-tural activities virtually stagnated and GDP declined by 1.4 percent. Theeconomy rebounded in 1983/84 in response to a good monsoon, but a poor mon-soon in 1984/85 slowed the growth of both agricultural output and GDP. Theaverage annual CDP growth for the period 1982-85 is summarized below:

1982/83 1983/84 1984/85 1982/83-1984/85 1970/71-1984/85SectorAgriculture -2.5 8.7 1.7 2.5 1.5Non-agriculture 0.4 5.5 4.5 3.4 4.9CDP -1.4 7.4 2.8 2.9 2.8

1.12 Agricultural Institutions. Responsibility for Nepal's agriculturalpolicy and development rests with four ministries: the Ministry of Agricul-ture (MOA), the Ministry of Forests and Soil Conservation, the Ministry ofWater Resources (MWR), and the Ministry of Land Reform. The MOA includes theDepartment of Agriculture (DOA), which is responsible for agriculturalresearch, training, and extension and also oversees the Agricultural Develop-ment Bank of Nepal (ADBN) and the Agricu lkural Inputs Corporation (AIC). ADirector-General of Agriculture heads DOA, assisted by four Deputy-DirectorsGeneral who are in charge of Crop Development, Extension and Services, Hor-ticulture and Fisheries, and Planning and Coordination.

1.13 Agricultural Research. The research service operates 52 centers.These consist of (i) research stations for cereal crops; (ii) research cen-ters for cash crops; and (iii) research farms, most of which are engaged inthe production of foundation and stock seed, the latter to be passed on toAIC's contract growers (para 1.17). AIC is charged to develop suitableagricultural technologies for all the regions and climatic zones. Thebenefits of a coordinated approach to rice, wheat, and maize research andproduction can be seen in the Integrated Cereals Project (ICP), assisted byUSAID. The Cropping Systems Program (an integral part of the ICP) hasdeveloped improved cropping sequences and technologies under irrigated andrainfed conditions, but most of its work pertains to conditions in the Hills.

1.14 Agricultural research activities in the Terai are being strengthenedthrough the provision of staff, equipment, and buildings under the Agricul-tural Extension and Research Project (Cr. 1100-NEP, US$17.5 M, 1981) and theCash Crop Development Project (Cr. 1339-NEP, US$6.0 M, 1983). At the sametime, an effort is being made to decentralize the research organization, andthus four of the existing research stations have been designated as RegionalResearch Stations. One of these is Parwanipur, which serves the proposedproject area (para 2.23). In addition, research substations are beingdeveloped for oilseeds, sugarcane, tobacco, horticulture, and cereals. Aflow of relevant technology has already started. Furthermore, the extensionservice in 10 districts in the Terai is being strengthened through theAgricultural Extension Project (Cr. 1570-NEP, US$7.2 M, 1985). Six of thesedistricts have major irrigation projects.

1.15 Agricultural Credit. The major source of institutional credit is theADBN, established in 1968. Its function is to provide the overall credit

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requirements of agriculture and agro-based industries, and to mobilize ruralsavings. More recently, commercial banks have begun to provide agriculturalcredit, but their volume of lending is still small. The standard terms oflending by ADBN are 18 months at 15 percent annual interest for short-termloans, 7 years at 12 percent interest for medium-term loans, and 20 years at8 percent interest for long-term loans. ADBN has offices throughout thecountry. Lending from private sources is also widespread, although theinterest rates are much higher than those offered by institutional sources.

1.16 Cooperatives. The Sajha development program was introduced in early1976 to revitalize the cooperative movement, mobilize local savings, provideshort-term production credit to farmers using ADBN funds for on-lending, andto link economic development with political decentralization at the locallevel. Other objectives of the Sajhas are to provide agricultural inputs andmarketing facilities, and to sell salt, kerosene, diesel oil, coarse cloth,rice, and sugar in the villages. At present, one Sajha serves three to fourpanchayats. At the village panchayat level, they act as the local agent ofthe AIC to sell fertilizers and pesticides. Most of the Sajhas suffer frompoor management and a lack of resources.

1.17 Agricultural Inputs. The AIC, established in 1975, is the governmentagency responsible for supplying inputs. Its functions are to: (i) importand distribute chemical fertilizers and to maintain a buffer stock sufficientfor at least one cropping season; (ii) contract, collect, process, store, anddistribute improved seed; (iii) procure and distribute agricultural chemicalsused in protecting plants and storing grain; and (iv) distribute locallymanufactured agricultural tools and implements and import and distributeagricultural machinery. However, the AIC lacks the funds needed to importfertilizer on time and in adequate quantities. Thus, in recent years, about40 percent of fertilizer imports have been in the form of external commodityaid. Chemical fertilizers are uniformly priced throughout the country; therate takes into account import and re-ail prices in the adjoining areas ofIndia. About 90 percent of the fertilizers are consumed in the Terai and theKathmandu Valley.

1.18 Agricultural Prices. HMGN's policy is to subsidize inputs and todetermine minimum support prices (usually fixed below the expected marketprices) for major foodgrains and cash crops, with the objective of containingprices paid by the consumers, many of whom spend 70-80 percent of theirincome on food. The Nepal Food Corporation (NFC) procures foodgrains in theTerai for distribution to the deficit Hill areas and subsidizes transporta-tion costs to the Hills at rates that increase in direct relation to theremoteness of the deficit areas. However, public procurement of foodgrainsamounts to less than 15 percent of the total marketed output, and thereforegrain marketing is primarily a private sector operation.

The Irrigation Subsector

1.19 Water Resources Utilization. Nepal has abundant surface waterresources (seQ Map IBRD 19552). On the average, its rivers discharge about150 billion m a year, which would be enough to irrigate 8 to 10 M ha.However, only about 1.3 M ha are suitably located for gravity irrigation.Furthermore, both the major and minor rivers can serve only a relativelysmall command area in Nepal, since they are costly to develop owing to thelarge diversion structures needed to spill the huge monsoon floods.

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Moreover, large quantities of sediment should be desilted out of the systemevery year. The development of these rivers is further constrained by theneed for agreements with India. Although groundwater resources are abundantin the Terai, development is constrained by the lack of infrastructure tokeep scattered pumps and engines operating reliably. Electric power neededto energize tubewelLs is severely restricted in extent and amount, par-ticularly in the more remote parts, but the situation is improving.

1.20 Irrigation Development. At present, only about 540,000 ha have someform of irrigation (see Map IBRD 19551). About 140,000 ha are under publicschemes and the rest are mostly under private sector schemes. The inventoryof irrigation facilities (1985) by ecological zones and development regionsis as follows:

Region Mountain Hill Terai Total Percent…(h-------------------'a)…-------------------

Eastern 4,365 25,676 148,912 178,953 33.2Central 4,028 34,618 129,900 168,546 31.3Western 29 38,254 60,990 99,273 18.4Midwestern 2,254 12,313 32,674 47,241 8.8Farwestern 3,641 8,476 32,438 44,555 8.3Nepal 14,317 119,337 404,914 538,568

Percent 2.7 22.1 75.2 100.0 100.0

The private sector (mostly farmers' groups) developed surface irrigationinitially in the Hills. The schemes were simple river and stream diversions,many of which used temporary weirs to head up the river flows into ungatedintakes. During the first half of the 1900s, private sector irrigation beganto expand into the Terai with the conStruction of diversion schemes by largelandowners and farmer groups. Some of these schemes have since been improvedby construction of permanent weirs through government funding.

1.21 The first two government operated schemes--at Mahakali (4,700 ha)and Chandra (11,000 ha)--were constructed On the Terai during the 1920s andwere implemented with the assistance of the Indian government as recompenseto Nepal for water rights for much larger irrigation schemes in India. Thesewere based on river diversion and design parameters were similar to those ofthe Indian systems of the period: the idea was to spread water relativelythinly over the largest possible area so as to provide drought insurance tokharif crops. The distribution system was developed only to the 700-1,000 hablock level; farmers were expected to build the system beyond this level.Consequently, much of the potential command could not be serviced. AfterIndia gained its independence, it continued to help Nepal construct irriga-tion schemes based on traditional design concepts, but again the results wereunsatisfactory.

1.22 In the late 1970s, XMGN's planning objectives were gradually changedto (i) extend the distribution system to the 50-ha level; (ii) organize WaterUsers' Groups (WUGs); and (iii) provide Agricultural support services to thefarmers. This policy change was a corollary to increasing support of theirrigation sector by the World Bank and the Asian Development Bank. Becauseof the substantial benefits still to be gained through consolidation and

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better utilization of existing schemes, a more recent trend in public irriga-tion policy has been to extend the irrigation infrastructure to areas of5-7.5 ha. In addition, the agricultural extension services have beenimproved and better input services provided to the irrigated areas.

IDA Involvement in Irrigation Development

1.23 The first project undertaken with IDA assistance was the BirganjIrrigation Project (Narayani Zone) (Cr. 373-NEP, US$6.0, 1973). Its objec-tive was to complete and upgrade the irrigation and drainage system on 28,700ha of the 37,400 ha commanded by the Nepal Eastern Canal (NEC) (para 2.01),and to provide groundwater irrigation to 2,700 ha north of the NEC commandarea through public tubewell development (the Birganj Groundwater Scheme).Because of implementation delays and thus considerable cost overruns, thesurface component was reduced to 16,300 ha, which was designated Stage I.The reduced project was completed in 1981. The Project Performance AuditReport (PPAR No. 4267 of December 30, 1982) concluded that the groundwatercomponent has been less than successful, mainly because of inadequate atten-tion to operation and maintenance (0&M), some well failures, and thethen-unreliable power supply (para 1.05).

1.24 At present, IDA is involved in five irrigation projects, three ruraldevelopment projects with irrigation components, and three irrigationprograms related to future development. The Birganj Irrigation Project wasfollowed by the Narayani Zone Irrigation Development Stage II Project (Cr.856-NEP, US$14.0 M, 1978), which was designed to develop the 12,700 hadeferred from the Stage I project (para 1.23) and to provide intensifiedagricultural support services. It also extended the groundwater scheme toanother 800 ha through comunity-managed tubewells. Although progress in theachievement of physical targets has been satisfactory, operation and main-tenance and the full involvement of farmers in water distribution at the farmlevel need to be improved (paras 2.13-2.19). Completion is scheduled for theend of 1986.

1.25 The Bhairawa-Lumbini Groundwater Project (Cr. 654-NEP, US$9.0 M,1976) represented the first stage of a public sector groundwater irrigationdevelopment program in Western Terai. The project provided for the construc-tion of 64 deep tubewell systems serving about 7,600 ha, together withagricultural supporting services. Implementation of project works wasdelayed by two years, and the result was a 20 percent cost overrun. Thecredit was fully disbursed in March 1983, by which time the project was 80percent complete (PPAR No. 5261 of September 24, 1984). A follow-up project,Bhairawa-Lumbini Groundwater Project, Stage II (Cr. 1316-NEP, US$16.0 M,1982), provides financing for the completion of Stage I works, O&M of thecompleted wells during the 5-year implementation period, and introduction ofimproved design and construction of new tubewell irrigation systems. Theproject also supported the completion and rehabilitation of the publictubewells and the O&M costs of completed wells located north of the NarayaniIrrigation Project (para 1.23). The performance of completed tubewell sys-tems has suffered because of an unreliable power supply and a shortage ofspare parts needed for maintenance. The power supply is expected to improvenow that the national power grid is nearing completion (para 1.05). The lackof effective agricultural support and poor organization of the farmers intoWUGs have been additional obstacles to successful operation; this situationis now gradually improving.

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1.26 The Sunsari-Morang irrigation and Development Project (Cr. 812-NEP,T_ . theUS$30.0 M, 1978 was designed to restore and improve an existing system, the

Chatra Canal command, serving 69,000 ha, but it also included drainage, rivertraining, and sediment control works. The concept and scope of the projectwere revised in mid-1983, however, because (i) much more detailed approach towater dirtribution was needed than originally envisaged; and (ii) theimplementation and financial capacity of HMCN was too limited to develop theentire 69,000 ha at one time. Consequently, the project was divided intothree stages, and the area of the ongoing project (Stage I) was reduced to12,000 ha; the cost of the revised project was estimated at US$41.9 M. Aftera slow start, progress is now satisfactory on the main irrigation works andthe associated infrastructure in the command area. The first stage isexpected to be completed by the end of 1986. The second stage, covering anadditional 23,000 ha, is now under preparation.

1.27 The Mahakali Irrigation Project (Stage I) (Cr. 1055-NEP, US$16.0 M,1981) was designed to rehabilitate and upgrade an existing irrigation systemof 3,400 ha on the left bank of the Mahakali (Sarda) River in the Far WesternRegion and to extend it to 6,600 ha. Implementation is more than a yearbehind schedule, mainly because of delays in engaging local and foreignconsultants and in procuring equipment and materials, not to mention thedifficulty of maintaining communications with the rest of the country.Although most of the problems have now been resolved, the project area hasbeen reduced to 4,700 ha owing to (i) HMCN's decision not to release some ofthe forest lands for agriculture and (ii) mapping errors at the time ofpreparation. The reduced project continues to be viable. The government hasstrengthened the Mahakali Irrigation Development Board and implementation isnow satisfactory. Completion is scheduled for 1987.

1.28 The Babai Irrigation Engineering Project (Cr. 1093-NEP, US$3.5 M,1981) was to finance the preparation of detailed designs and tender documentsfor the first stage of the proposed Babai Irrigation Project on 13,500 ha,and for 46 km of the East-West highway. A consulting firm was engaged in1981 and work has progressed as scheduled. Final detailed designs and tenderdocuments were submitted in October 1983 and have since been updated.

1.29 A component of the First Rural Development Project (Cr. 617-NEP,US$8.0 M, 1976), completed in December 1983, provided for improvements ofsmall-scale irrigation schemes in the Hills and development of a high-liftscheme on approximately 1,900 ha on the Batar plateau in Nuwakot District.1he small-scale irrigation schemes have made a substantial impact on produc-tion, whereas the more complex lift scheme has not been up to expectation. Afollow-up, the Third Rural Development Project (US$18 M) is expected to bepresented to the Board during calendar year 1986. The Second Rural Develop-ment Project (Cr. 939-NEP, US$11.0 M, 1979) includes a component for theimprovement of small-scale Hill Irrigation schemes in the Mahakali Zone.Implementation is progressing slowly.

1.30 Three Bank-suppo:ted activities aimed at improving future irrigationdevelopment are either under way or due to start shortly. They are:

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(a) A survey to define strategies for future development of groundwaterresources in the Terai (with a potential of more than 400,000 ha),which is being financed under the Bhairawa-Lumbini II Project (Cr.1316-NEP);

(b) Preparation of a package of hill medium irrigation projects incentral Nepal, including the rehabilitation of existing projects andintroduction of water management components to improve the utiLiza-tion of water resources; this project is being financed by UNDP(UNDP/NEP/80/033) with the Bank as the Executing Agency.

(c) A program for strengthening the irrigation department so that it willbe better able to guide irrigation development in Nepal. The programwould be financed under a UNDP project (expected to start shortly)for which the Bank will be the Executing Agency,l/ and it would beconducted in close collaboration with USAID's complementary pro.ram.The two interrelated programs will include the following components:

(i) preparation of long- and medium-term master plans for the futuredevelopment of irrigation in Nepal;

(ii) establishment of countrywide planning and design criteria forirrigation systems;

(iii) establishment of O&M and M&E working principles and operationmanuals based on experience to be gained through countrywidepilot projects; and

(iv) a two-tier training program: in the principles of plarning,design, and operation of irrigation projects for the highechelon of the irrigation department, and in water managementprinciples for various levels of staff involved in irrigation,down to the farmers' leaders. A water management center is tobe established in the Terai in the near future to serve a sub-stantial part of this training program.

(d) Ways to improve organization and manpower planning of the irrigationdepartment would be studied under a manpower planning study, which isconsidered for inclusion under the ongoing Second Technical Assis-tance Project (Cr. 1379-NEP).

Rationale for IDA Involvement

1.31 The Bank's continued support of the development of Nepal's irrigationsector as a whole, and of the Narayani scheme, in particular, is stronglyjustified for the following reasons:

1.32 Support to the Irrigation Sector. As one of the world's poorestcountries with a high population growth rate, Nepal must continue to givehigh priority to increasing employment and agricultural production. The

1/ Final approval by HMNG is still awaited; following approval, the projectdocument needs to be signed by UNDP, HMGN and IDA.

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development of water resources would be an important means of doing so.l/This does not imply that only new areas should be developed. In view of theconditions in Nepal, investment that would help to improve the operation ofexisting projects would probably be more beneficial in the short run. Withthe Bank's assistance, HMGN has been able to utilize more fully and rapidlythe irrigation infrastructure already built and thereby made it possible forpast investments to realize their expected returns sooner. At the same time,there is a need to plan the Lo --term development of water resources and tobetter coordinate the activities of the various donors. The governmentshould therefore give careful attention to setting up clear irrigationdevelopment objectives and determining priorities among likely options. TheBank is well placed to faciLitate coordination among the various donors whosupport irrigation development in Nepal, and to assist HMCN with the intro-duction of new concepts and principles of planning, design, and operation ofirrigation schemes, as well as their management, with full farmer participa-tion. This, however, requires continuous Bank involvement in irrigationdevelopment.

1.33 The Narayani Project is among the most important rehabilitationprojects in Nepal. It is expected to serve as a model for the rehabilitationof the existing irrigation infrastructure as well as for newly developedprojects. The Bank's continued participation in the project would helpensure that the planned works in the command area are completed and that aneffective system is put into operation on a sustainable, continuous basis.JMGN would need the Bank's assistance in:

(a) speeding up project implementation by helping to strengthen manage-rnent skills, and to develop monitoring facilities to follow theprogress of works and agricultural development;

(b) building a system that would operate with minimum intervention andprovide farmers with a predictable, dependable irrigation service;

(c) strengthening WUCs, by giving them legal standing and appropriatetraining, so that they can effectively undertake their respon-sibilities;

(d) introducing a sound cost-recovery mechanism, aimed at recovering atleast operation and maintenance costs; and instituting a periodicreview of the level of water charges, and assessment and collectionprocedures; and

(e) allocating adequate operation and maintenance funds to ensure acontinued efficient irrigation service to farmers.

l/ In India, where conditions are similar to those in Nepal's main produc-tion area (the Terai), analyses ot recent trends indicate that irrigationaccounted for one-half to two-thirds of the total increase in foodgrainproduction over the past three decades; and much of the remainingincrease was due to the carry-over effect of irrigation promoting the useof high-yielding varieties and fertilizers.

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II. THE PROJECT AREA

Location

2.01 The project area, which covers about 37,400 ha,l/ is the command ofthe Nepal Eastern Canal (NEC), and is located in the administrative districtsof Parsa, Bara, and Rauthat, in the Narayani Zone of the Central Region. Thecommand area extends from the Indian border near Pipra, where the NEC takesoff from the Don Branch Canal of India's Eastern Canal System, to the BagmatiRiver in the east, over a distance of about 75 km, and from the NEC in thenorth to the Indian border in the south, over a distance of 4-6 km. Thecommand area is divided into 15 blocks, the boundaries of which are definedlargely by rivers which flow in a north-south direction.

Natural Resources

2.02 Climate. The project area has two seasons--a wet monsoon, from Mayto October, and a dry season, from November to April. The mean annual rain-fall is more than 1,400 mm, with about 90 percent falling during the monsoon.It is difficult to predict when the monsoon season will begin and end, andperiods of drought may occur during the monsoon itself. Although thedry-season rains form a small proportion of the total rainfall, they con-tribute to crop water requirements. However, uncertainty regarding theamount and distribution of rainfall make irrigation a prerequisite for suc-cessful crop production, even in the monsoon season. Diurnal temperaturevariations in the rabi cause heavy morning dew, which also contributes waterto the crops.

2.03 Temperatures range from a mean daily minimum of about 80 C in January(with extremes below 60 C) to a mean daily maximum of about 370 C in May(with extremes in excess of 400 C). Annual evaporation averages about 1,600mm; mean daily evaporation ranges from 2.1 mm/day in December to 7.1 mm/dayin April and May. Sunshine hours per day range from a mean of 5.9 in Augustand September to 9.7 in May. (Climatic data for the project area are sum-marized in Annex 1, Table 1.)

2.04 Topography and Drainage. The area lies on an alluvial plain thatslopes from north to south. The gradient is between 1:750 and 1:1,000, withthe more gentle slopes in the south. The area is crossed by 17 streams andrivers, which tend to be closer together in the eastern part of the area andthus account for the more dissected topography and the higher proportion ofriver levee soils there. Most of the natural drains are poorly developed anddistinctly meandering, and regularly overtop their banks during the monsoon.Therefore, some of the rivers require embankments to prevent flood damageto crops and the canal system.

2.05 Soils. The soils are medium to moderately fine textured alluvialsilt to clay loams. Sandy soils occur near the streams and rivers. Thereare no salinity and alkalinity problems: pH values are between 6.0 and 8.4.Internal drainage is generally good. Although the water table approaches the

1/ Not including the adjacent groundwater development (3,600 ha) describedin paras 1.23 and 1.24.

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land surface by the end of the monsoon, it does not adversely affect rice,the predominant monsoon crop, but it does affect sugarcane, except atslightly higher elevations. After the rains, groundwater Levels fall rapidlyto depths that do not normally affect the yield of rabi crops. During thedry season only a few pockets have water table depths of less than 1.0 m andmay thus be regarded as waterlogged. According to U.S. Bureau of Reclama-tions standards, about 90 percent of the command area is Class II or III landwith respect to irrigation suitability. With proper surface drainage, almostthe entire area would be suitable for irrigated paddy, wheat, maize, rape,mustard, pulses, and sugarcane.

2.06 Surface Water Resources. The principal source of water to the NECis the Indian Eastern Canal system, which originates by a barrage on theGandak River. At that point, the river has a catchment area of 35,000 km2,which is located entirely in Nepal (Map IBRD 19550). The river is perennial;flows are generated by runoff from the monsoon rains, snowmelt in theHimalayas, and effluent flows from the groundwater systems in the catchment.Mean monthly discharge rates range from about 300 m /sec (10,600 cusecs) inMarch to about 4,570 m3/sec (161,000 cusecs) in August. The design capacityof the headworks of the Indian Eastern Canal system is about 425 mi/sec(15,000 cusecs). In March, water allocation to the Indian Western Canalsystem is about 105 m3/sec (3,690 cusecs).

2.07 An agreement between HMGN and GOI, dated December 4, 1959, furtheramplified by an exchange of correspondence on the same day, amended onApril 30, 1964, and clarified by the Agreed Minutes of Discussions betweenthe tw3 parties dated October 27, 1971, permits Nepal to draw up to24.1 m /sec (850 cusecs) from the Don Branch (part of the Indian EasternCanal system) at all times except when the branch is closed for repairs andmaintenance. This allocation represents about 8 percent of the mean riverdischarge in the low-flow month of March, about 14 percent of the EasternCanal system's scheduled delivery in that month, and about 34 percent of thedesign head capacity of the Don Branch.

2.08 In addition to supplies from India, minor barrages on the Tilawe,Sirsia, and Jhanj rivers (Map IBRD 19549), which cross the NEC command,provide some supplemental water to the project area from the onset of therains and for some period into the dry season.

2.09 Groundwater Resources. The NEC command area is an alluvial depositmore than 300 m deep. The upper 60 to 100 m consists of clay and silt,intercalated with sand beds. This sequence is underlain by more than 200 mof clean, fine to coarse sand of high permeability containing thin, discon-tinious clay beds. The entire sequence forms a single aquifer complex. Thewater table is shallow (generally less than 3 m below land surface) and ofgood quality. The deep aquifer below the clayey sequence will supporthigh-yielding wells (> 80 1/sec). Public tubewell irrigation systems basedon such wells were constructed north of the NEC command under Stages I and IIof the project.

2.10 Private shallow tubewells, about 30 m deep, are constructed by handdrilling. Their discharge averages about 10 1/sec. They use surface-mountedcentrifugal pumps. A portable diesel pump unit often serves several wells.This practice is most common in the eastern part of the NEC command (StageIII area), where private wells are used mainly for vegetable cultivation.

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2.11 Population. About 260,000 people live in the project area. Thetotal number of households is about 37,000; the average family size consistsof about seven persons. The farm population accounts for some 85 percent ofthe total population; another 10 percent is landless. In addition, about60,000 people live in Birganj, the largest urban settlement within the com-mand.

2.12 Farm Size and Land Tenure. The average size of a farm is 1.2 ha withfarm holdings typically fragmented into 2-5 parcels. Distribution by holdingsize is as follows:

Farm Holdings Cultivated AreaFarm Size Incremental Cumulative Incremental Cumulative(ha)- --- …

Less than 0.15 8 8 1 10.15 - 0.5 31 39 10 110.5 - 1.0 25 64 17 281.0 - 3.0 30 94 48 76Over 3.0 6 100 24 100

Holdings of 1.0 ha or less represent 64 percent of the total and account for28 percent of the cultivated land. About 41 percent of operational holdingsare fully owned, 32 percent are partly owned and partly rented, and 27 per-cent are wholly rented. Rents are commonly paid in the form of produce; theyamount to about 20-30 percent of gross production value, thereby providingthe tenant with a good incentive to increase his productivity. All inputsare paid for by the tenant. Water charges for all crops other than maincroppaddy are also paid for by the tenant; however, the landowner pays the watercharges for maincrop paddy.

Development of the NEC Command Area

2.13 Background. Under the Agreement with Nepal of December 4, 1959 (para2.07) as amended, India was to finance the construction of the N C andassociated distribution system down to about the 20 cusec (0.6 m /sec). Thesystem was constructed by the Bihar River Valley Projects Department (BRVPD).The BRVPD Landed over the system to HMGN in stages; the last was transferredin June 1976. Design and implementation standards were low, and since nominor canals and structures were constructed, the system could not deliver areliable supply of water to most of the fields. Farmers were thereforeunable to realize significant irrigation benefits. In addition, no provisionwas made for drains or a farm road network. The cut-off of the distributionsystem at the 20-cusec level meant that farmers within 900 ha command areashad to organize further distribution among themselves; since the average farmis about 1 ha, this implied an administratively impossible farmer grouping of900 units. The IDA-assisted Narayani Zone Stage I and Stage II IrrigationProjects (Cr. 373-NEP and Cr. 856-NEP) were conceived to rectify unsuitabledesign details and to extend the irrigation system closer to the farmgate.The proposed project would complete that process.

2.14 Stage I Area consists of Blocks I to VI and has a CCA of l5,900 ha.In addition, about 2,700 ha were developed under the groundwater scheme wheresurface irrigation is not feasible. Improvements to the irrigation and

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drainage system in the area were initiated in 1975 under the firstIDA-assisted project (Cr. 373-NEP) and were continued under the Stage IIproject (Cr. 856-NEP). Completed works included construction of secondaryand tertiary canals and structures, improvements to canal flood embankments,and canal service roads. By 1980, all of the Stage I area had an irrigationservice. However, since systematic canal operation has not been practiced,water is poorly and unevenly distributed: large abstractions in the headreaches cause water deficits at the tail ends. Since night irrigation hasnot been practiced on a large scale, operational losses have been excessive.In addition, maintenance has been unsatisfactory and many of the tertiarycanals (TCs) are now inoperative.

2.15 Stage II Area consists of about 12,800 ha in Blocks VII to XII, ofwhich about 2,000 ha receives some water supply from the Sirsia River irriga-tion system (para 2.08), built in 1958 with USAID assistance. In addition,about 900 ha were added to the groundwater scheme started at Stage I. TheStage II project included improvements to the main canal system, along withthe construction of secondary canal systems, drains, and canal service roads.The majority of these works have now been completed, and irrigation is nowbeing provided for most of the commandable area along the completed canals.However, operating procedures and the service are still unreliable, espe-cially at the tail end of the distributaries.

2.16 Stage III Area commands about 8,700 ha within Blocks XIII-XV, ofwhich about 2,900 ha receive a wet-season irrigation supply, including1,200 ha within Block XV from the Jhanj irrigation system (para 2.08), builtwith Indian assistance in 1961. No improvements have been made to the systemsince it was handed over by India in 1976. It consists of 19 km of the tailsection of NEC and 12 km of the upper reaches of three secondary canalscompleted to the 0.6 m /sec level.

2.17 A significant activity in Stage III area (which has also extendedinto the eastern part of Stage II area) has been the development ofgroundwater by private shallow tubewells (para 2.10). At present, thesewells serve about 260 ha, mainly to irrigate vegetables.

2.18 Lessons Learned under Narayani I and II. The PPAR of the NarayaniStage I Project (Report No. 4267, 1982) concluded that the project hasimproved productivity and agricultural production in the zone; its economicrate of return was reestimated at 21 percent. As the first IDA-supportedirrigation project in Nepal, it has provided valuable lessons. In par-ticular, it has pointed to the need for: (i) considerable technical supervi-sion, given the implementing agency's institutional capability; (ii) trainingof local staff, particularly at the support level; (iii) a stronger institu-tion-building effort than had been envisaged at appraisal; and (iv) moreinvolvement and participation by farmers.

2.19 The Stage II project is due to be completed in 1986. It has focusedmainly on construction activities. Other components, including management ofcompleted parts of the irrigation system, institution building, training, andfarmers' involvement in WUCs were addressed, but the results have not beenentirely satisfactory. The proposed project would consolidate the achieve-ments under Stage I and II and, in particular, incorporate lessons learnedfrom the earlier projects.

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Land Use, Cropping Patterns, and Crop Yields

2.20 Except for village sites and other small areas set aside for specialpurposes (such as shrines and temples), all the land is cultivated, and some85 percent is either already irrigated or will be commandable at fulldevelopment. The crops grown are the same with and without irrigation:almost exclusively rice in the kharif, and wheat, oilseeds (rape and mus-tard), lentils, and chickpeas in the rabi. Sugarcane and vegetables aregrown on the levees and the older terraces, where surface drainage is better.Rabi crops, even in some parts of Stage I and II areas, rely mainly onresidual moisture, the high water table, and the high water-retentioncapacity of the soil; irrigation is treated as a supplementary source ofwater. Owing to strong extension efforts in recent years and the readymarket in India, wheat has shown considerable growth in area planted andyields. The present cropping pattern and crop yields for the NEC command isshown in Annex 1, Table 2. The somewhat more elevated lands and the greaterextent of levees in Stage III area, together with the larger number of riversthat make it possible to dig shallow wells, account for the higher proportionof vegetables and sugarcane, and also the better sugarcane yields.

Agricultural Support Services

2.21 Agricultural Extension. Extension services are provided by DOAthrough the administrative district. The DOA follows the Training and Visit(T&V) system, which was first introduced in Nepal in Bara and Parsa Districtsin 1975 under the first Narayani Project (Cr. 373-NEP). An AgriculturalDevelopment Officer (ADO) is in charge of all extension-related activitieswithin a district, assisted by an Assistant Agricultural Development Officer(AADO). Junior Technicians (JT) operate at Extension Training Centers; eachserves 15-20 Panchayats. Typically, the JT supports and supervises fiveJunior Technical Assistants (JTA), each of whom serves three to fivePanchayats. The extension contact at the Panchayat level is provided bypart-time Panchayat Level Agricultural Assistants (PLAA), who are selectedfrom local leading farmers. Subject Matter Specialists (SMS) are posted toeach district, to provide specialized support for JTs and JTAs and toorganize periodic training courses.

2.22 The present staffing of the agricultural extension service in thethree districts is shown in Annex 1, Table 3. Although the total number ofstaff and the ratio of PLAAs to their first and second-line supervisors areadequate, the present organization and the training given to staff workingwith irrigation farmers within the command area are not sufficiently specificto serve the needs of irrigated agriculture. Activities of the TrainingCenters are further restricted by the lack of adequate transport.

2.23 Agricultural Research. The Parwanipur Research Station is about 10km north of Birganj, outside the NEC command. It was established in 1947 andhas been involved in research activities since 1960. Under the IDA-supportedCash Crop Development Project (Cr. 1339-NEP), it has been upgraded to aRegional Research Station. It is the main rice research station in Nepal; italso conducts trials on planting methods, fertilizer applications, andirrigation timings and quantities for other crops, One of its functions isto provide preseason training for extension workers in the Eastern andCentral Terai.

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2.24 Agricultural Inputs. Seeds, fertilizer, and pesticide distributionis under the control of AIC's Birganj office. These items are retailedthrough village outlets operated by the cooperatives (Sajha), to whom AICdelivers on demand, on whatever transport is practicable on the presentlyinadequate road network. Since Birganj is the main transhipment depot fromCalcutta (where most of Nepal's imports and exports are handled), the supplysituation there is better than in other parts ot the country.

2.25 Agricultural Credit. The ADBN has established one branch office andfour subbranch offices in the project area. In addition, there are about70 Cooperative Societies (Sajhas), each serving about 800-1,000 farmhouseholtds. Most of the credit is for short-term production Loans. Recoveryrates during the last few years have been about 70 per;ent. There are twocommercial banks in the area, but their involvement in agricultural lendingis limited. Lending from private sources is widespread, although there areno reliable data to indicate the extent (para 1.15).

2.26 Processing and Marketing. The area is well served by a number of ricemills with an estimated annual milling capacity of 24,100 tons. Many smallrice hullers operate in the villages. A sugar mill located in Birganj ispresently operating considerably below its capacity of 1,500 tons of cane perday for 150 days. There is also a roller mill, processing wheat. Marketingchannels for foodgrains are well developed; millers and grain merchants inBirganj and neighboring Indian towns have a widespread. network of traders inthe villages. A branch of the Rice Export Corporation (REC) handles riceexports, primarily to India. Wheat has been exported to Bangladesh throughgovernment-to-government deals. Extensive trading algo takes place throughinformal channels across the border (para 7.09)t which lately has beenaffected by the foodgrain surpluses in Bihar.

Other Public Services

2.27 The trunk road network consists of the Kathmandu-Raxaul (India)highway, which passes through Birganj, bisects the project area, and connectsto the National East-West Highway, about 25 km to the the north, and with theIndian highway system. Air service to Kathmandu is provided by a smallairport at Simra, to the north of Birganj. A network of power supply linesserves the area from the national grid. There are municipal water suppliesin the main towns, but most villages rely on open ponds and handpumps.Health clinics and schools are confined to towns and a few of the largervillages.

III. THE PROJECT

A. Project Formulation and Objectives

Background

3.01 The irrigation facilities in the first 12 blocks of earlier stages ofthe project do not yet provide an adequate, timely, and equitable watersupply to many parts of the command area. This is due to several problems,especially: (i) inadequate density of the tertiary and field channels withinthe 30 ha command areas; (ii) design deficiencies affecting the operationof secondary and tertiary channels; (iii) the general deterioration of the

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system because of inadequate maintenance; (iv) the lack of adequate floodcontrol devices; (v) insufficient drainage facilities; and (vi) an incompleteroad network. As a result of these deficiencies, the system's operators havebeen unable to provide an effective and reliable irrigation service essentialto development of productive, market-oriented farming systems, and to theattainment of the full potential benefits of the system.

Project Concept

3.02 The policy of HMGN, as stated in ehe Sixth Plan (FY 81-85) andreiterated in the Seventh Plan (FY 86-90), is to make full use of the exist-ing infrastructure and to operate and maintain the systems properly. Theseobjectives apply particularly to large surface irrigation projects. Takingthe Plan objectives into account, and also the compelling need to contributeto the relief of Nepal's balance of payments situation, the project'sagricultural objective is to raise production through the more effective useof water and other inputs, adjustments to the present cropping patterns, andimproved farm-to-market communications. Production objectives would befurther promoted through the establishment of more formalized relationshipsbetween the project authority and DOA, particularly in the fields of agricul-tural extension, adaptive research, and farm-level water management.

3.03 Staff training under the project and the establishment of a properlyfunded, organized, and equipped maintenance system would improve the techni-cal competence of project staff and their capability to operate and maintainthe irrigation system. During the project execution period, the assistanceof outside consultants would be needed. Another major project task is torelieve HMGN's serious and persistent budgetary constraints by improving costrecovery from farmers who benefit from improved irrigation services in theNarayani and similar, large, public-supported projects.

Project Objectives

3.04 The objectives of the project are to increase dry-season agriculturalproduction by introducing an equitable, predictable, and reliable irrigationsystem in the project area and to reduce the risks to monsoon crop productionby making protective irrigation available when requested. Flood protectionand drainage improvements would reduce the risks to crops and the physicalinfrastructure. Management objectivea would be to develop full farmer par-ticipation and cooperation in the water distribution system.

3.05 To achieve these objectives, project works would upgrade the irriga-tion, drainage, flood control and road infrastructure for the entire NECcommand (37,400 ha), and would complete the irrigation and related civilworks infrastructure in the Stage III area (8,700 ha), which is located atthe tail reach and is part of the NEC command. It would introduce an effi-cient water management system, including the necessary civil works to make itpossible, provide a farm road network, and improve the canal service roads.In addition, the project staff's capability to operate and maintain theproject would be strengthened through the purchase of O&M equipment, estab-lishment of a radio-communication system, and by support of O&M and estab-lishment costs. A regional workshop to maintain and repair vehicles andequipment of Narayani and other Terai irrigation projects would also beprovided under the project. Cost recovery would be improved by simplifying

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the method of assessment. The task of collecting dues would be transferredto the Revenue Department, which has had more experience and has more powersto collect than NZIDP.

Summary of Project Components

3.06 The proposed project, which is designed to give Nepal the use ofGandak River water--to which it is entitled in accordance with its agreementwith India (pare 2.07)--would be implemented over a seven-year period(1986-93), incorporating the following main components:

(a) Improvements to NEC and Repairs to the Tilawe Barrage. Works on NECwould include lining of selected canal reaches, canal slope protec-tion, strengthening of canal embankments, and construction of controland access structures. The Tilawe Barrage, severely damaged duringthe 1985 monsoon, would be extensively repaired.

(b) Stage III Area (8,700 ha). Construction of irrigation and drainageworks down to the farm level together with about 40 shallowtubewelts.

(c) Stage I and II Areas (28,700 ha). Improvement and repairs of theirrigation and drainage systems, down to the farm level.

(d) Flood Protection and River Training Works. Construction of embank-ments on the Lal Bakeya and Bagmati Rivers (Stage III area); floodprotection and river training works on eight rivers crossing theStage I and II areas.

(e) Improvement to Village and Service Roads. Gravel metalling of exist-ing service roads in Stage I and II areas; construction of similarservice roads in the Stage III area; and upgrading of selected vil-lage roads throughout the NEC command.

(f) Vehicles and Equipment. Purchase of O&M equipment including spares;and a radio-communication system for NEC system operation.

(g) Regional Workshop. Establishment of an equipped workshop, for ser-vicing and repairing O&M equipment of Narayani and other projects inthe central Terai.

(h) Technical Support. Provision of consultancies; training; agricul-tural support; monitoring and evaluation; and studies, includingplanning and design, of suitable irrigation projects in the Terai;and

(i) Support of Project Establishment and O&M Costs.

B. Detailed Features

Improvements to NEC and Repairs to the Tilawe Barrage

3.07 Although the NEC was considerably improved under the previousprojects, further improvements are needed now that the canal system is

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operating with discharges approaching designed capacity. Specific improve-ment works proposed under the project would be: lining of about 3 km ofcanal section in need of protection, principally in curves; reforming andprotection of canal slopes (2 km); strengthening of embankments (3.5 km);improvement of service roads (18.5 km); and provision of check and crossdrainage structures, and cart and foot bridges.

3.08 Before the NEC was constructed, a barrage on the Tilawe River (paras2.08 and 6.04) commanded some 6,500 ha, most of which was integrated intothe NEC command. The barrage was extensively damaged during the 1985 mon-soon. Since its diverted waters are required within and outside the NECcommand, it would be rebuilt and its flood protection works strengthened.

Stage III Area Works

3.09 Irrigation Works. Two rivers divide the Stage III area (8,700 ha)into three irrigation blocks (Blocks XIII-XV). Each block would be providedwith one or two main secondary canals (MSC) taking off from a gated structureon the NEC, and with several branch secondary canals (BSC). The MSC and BSCwould be unlined channels with about 85 structures including culverts,cross-drainage structures, and drops, as required. The total length of MSCand BSC in the Stage III area would be about 150 km, equivalent to an averagelength of about 17 m/ha.

3.10 Tertiary Canal (TC) turnouts would be fixed-discharge structures,serving unlined TCs sized to deliver about 1 litre/sec/ha. Each TC turnoutwould command about 30 ha. To encourage rabi irrigation, the TCs would beconstructed down to the 4-ha area. With the small number of farmers involved(about 10-12) in this 4-ha area, and the shorter distance from TC outlet tothe farmgate (generally less than 150 m), the distribution to the farm wouldbe arranged by the farmers themselves (para 6.12). The alignment of channelswould be decided with farmers when the TC system is designed. Constructionof field channels would be undertaken by the WUGs, but would be designed andsupervised by project staff. Minor structures would be provided by theproeect within the 4-ha command areas. The average length of TC down to the4 ha outlet would be about 50 m per ha of CCA. The design and operation ofthe TC system are detailed in Annex 6, Supplementary Data Volume (SDV).

3.11 Development of Local Groundwater Resources. The closing of theIndian Eastern Canal System (IEC) from early March to the end of April (para6.02) affects water supply for rice nurseries. To ensure reliable supplies,independent of IEC,l/ many farmers have developed shallow tubewells (para2.17). Provision has been made under the project to construct about 40additional shallow tubewells where early supplies for rice nurseries mayotherwise be difficult to obtain. Their final locations are yet to be deter-mined. The construction and energization of the wells are supported underthe Stage III development program, but the WUGs would be responsible fortheir O&M.

1/ With increased demand in the future, March/April closure would not benecessary (para 6.03).

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3.12 Drainage Works. An internal drainage system, linked to n.aturaldrains and rivers, would evacuate surplus irrigation and rainfall waterduring the monsoon. Design capacity would be 3.0 I/sec/ha. The Stage IIIarea would require about 74 km of main and major drains and 95 km of minordrains, equivalent to an average of about 17.5 m/ha of CCA, as well as suffi-cient field drains.

3.13 Construction Camp. The existing construction camp at Lal Bakeyawould be extended to accommodate the staff required to supervise new con-struction in the Stage III area. Once project construction is completed, thebuildings and field offices would be used by the O&M staff and would serve asa local training center for staff and farmers (para 3.27).

Stage I and II Area Works

3.14 The distribution system on commissioned parts of the command has notbeen adequately completed and maintained and therefore cannot be operatedproperly (para 6.01). Because the WUGs had no statutory authority to *-nforcetheir directives to members, many field channels have not been constructed;the ones that were constructed have not been properly maintained andrepaired. Thus, provision of equitable water distribution amongst farmers isalmost impossible.

3.15 To improve the distribution system within the Stage I and II areas(28,700 ha), the project would construct or rehabilitate about 450 struc-tures, including ungated control structures, and calibrated offtakes from theNEC to the MSC and the BSC canals. About 1,000 fixed, ungated turnouts atthe head of the tertiary channels servicing the 30-ha areas and about 7,000outlets 3erving the 4-ha subareas would also be provided.

3.16 In addition, about 85 km of secondary canals and i,730 km of TCssystem would be repaired and the TCs would be extended to the 4-ha level(para 3.09). The WUCs would be provided with a layout plan of the fieldchannels below the 4-ha outlets, which they would construct themselves. Anystructures that may be required below the TC outlet would be constructed bythe project (para 3.10). Modification to the layout of TC command areaswould be made, where necessary, so that the WUGs are as far as possible inthe same administrative ward (para 6.13). In addition, improvements would bemade to the natural and constructed drains and to their related structures,including completion of the missing portion of major drains within the 12blocks and the pertinent field drains.

Flood Protection and River Training Works

3.17 In the Stage III area, flood flows in the Lal Bakeya River and Bag-mati River (the eastern boundary of the NEC command) regularly inundateadjacent lands. Retaining embankments would be constructed on criticalreaches to protect irrigated lands and the irrigation and drainage systemsagainst flooding. The Lal Bakeya embankments would be located at least 100 mfrom the present river banks on both sides, would extend for about 23 km andhave an average height of 2.5 m. Gabion protection would be provided to theinner slope on about 7 km of the embankment. Drainage gates would beprovided at ten locations. The Block XV embankment, started under Stage II,would be extended by about 7 km; average height would be 3 m, and the widthat the top would be 4 m, to contain flooding from the Bagmati. Gabionprotection would be provided to the inner slope over 4 km; there would be

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five drainage gates. Trees would be planted on the embankment toe on theside away from the river. The rest of the embankment would be grassed over.

3.18 In the Stage I and II areas, works would be constructed to protectland against floods from rivers crossing the command area. 'Short-cut'channels (2.3 km) would be constructed on five rivers 1/ in Blocks I, II, andIV, to improve the rate at which floodwater can be removed from the projectarea. The 'short-cut' sections would have an average bed width of 21.5 m,depths of 3 m, and side slopes of 1:2. New flood embankment (8.0 km) wouldbe constructed along four rivers 2/ in Blocks IV, V, VII, and IX at not lessthan 50 m from the present river banks. Typical dimensions of flood embank-ments would be 2 m high, with a top width of 4 m, and side slopes of 1:2.All the above flood protection and river training works are required toadequately rehabilitate the Narayani irrigation scheme and will not adverselychange the quality and quantity of water flows downstream.

Improvement to Village and Service Roads

3.19 Roadworks would include: (i) upgrading of link roads connectingvillages with a population in excess of about 700 and storehouse locations tothe NEC service road throughout the command area; (ii) gravel metalling ofpart of the existing MSC and BSC service roads in the Stage I and II areas;and (iii) construction of gravel-metalled service roads along part of theMSCs and BSCs planned for the Stage III area. The upgraded village linkroads would have a dirt surface 3 m wide. Of the 91 km to be upgraded, 40 kmwould be in the Stage I area, 30 km in the Stage II, and 21 km in the StageIII. The gravel metalling to the existing roads along the canals would be2.5 m wide; about 152 km of such roads would be upgraded, of which 83 km arein the Stage I and 69 km in the Stage II areas. The new roads along thecanals (for service and public use) to be constructed in the Stage III areawould be 3 m wide with 2.5 m of gravel metalling; about 60 km of such roadswould be required. Crossings over canals, drains, and streams would beconstructed in sufficient quantities to provide for farmers' access to theirfields. Additional service roads would be constructed along the main andsecondary drains under the drainage component.

Vehicles and Equipment

3.20 The project would provide equipment for maintenance of project worksand spares for equipment and vehicles already with the project authorities,to facilitate their repair and efficient utilization. Details are inAnnex 1, Table 4, together with cost estimates. In addition, office, survey,design, and drawing equipment would be required to improve the effectivenessof project staff; items provided under the project along with estimated costsare listed in Annex 1, Table 5.

3.21 Radio-communication system. An internal network would support themanagement and operation of the new and commissioned canal systems. Improve-ment of the communication network system linking the project head office in

1/ Uria, Sikta, Dhutaha, Dhongahi, and Navrangia rivers.

2/ Navrangia, Tilawe, Bangari, and Pasaha rivers.

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Birganj to key points on the Indian Eastern Canal System is recommended, toensure smooth water supply from India to the NEC command.

3.22 The internal radio-communication network would replace the existingunreliable telephone links, which rely on vulnerable land lines. Tile systemwould be of 150 MHZ, VHF and would connect the project head office with sixexisting field camps and control points located at ten cross-regulators andthree gated spillways on the NEC. The voice system would be duplex in 50 Wfor the headquarters' master station and simplex in 25 W for substations.

3.23 With regard to the communication system between the project head-quarters in Birganj and key points on the IEC, an understanding was reachedthat HMCN may consider approaching the Indian authority to improve thissystem.

3.24 To ensure that an effective internal communication network is estab-lished as scheduled under the project, agreement has been reached with HMGNthat it would, by July 1, 1987, issue all the necessary authorizations andpermits to commence operation of the internal radio communication system.

Regional Workshop

3.25 The project would support the construction of a fully equippedregional workshop in Birganj, to service vehicles and equipment from this andother public irrigation systems in the Terai. Details and estimated costsof the regional workshop component are given in Annex 5, SDV.

Technical Support

3.26 Consultants. Consultants would be retained to assist, inter alia,the DIHM and project management with in-service training, project planning;scheduling; design of irrigation, drainage and road systems; preparation ofbid documents and bid evaluation; construction techniques; constructionquality control; monitoring of progress of work; establishment of operationand maintenance and water management criteria; and studies, including plan-ning and design, of other irrigation schemes in the Terai. It is expectedthat, as in the Stage I and II projects, most of the consultants would beexpatriates, and the cost of the consultancy has been estimated on thisbasis. However, whenever local consultants with suitable qualifications canbe found--this has been increasingly the case during the last few years--theywould be hired individually and/or form part of a consulting team or teams.About 280 man-months of expatriate consultant services would be provided overa seven-year period. Details, including proposed terms of reference forconsultants, are given in Annex 8, SDV. An agreement has been reached withHMGN that it would employ consultants whose qualifications, experience, andterms and conditions of employment are satisfactory to IDA, and select themin accordance with Bank/IDA guidelines on employing consultants.

3.27 Training. In-service training of the project staff initiated underthe Stage I and II projects is an ongoing activity and would be furtherstrengthened under Stage III (para 5.12). Provision would be made under the

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project to (i) construct or rehabilitate and equip training facilities,l/including dormitories; (ii) engage instructors, and (iii) prepare trainingcurriculae. The project would also support overseas training (through shortcourses and visits to other irrigation projects) for professional staff inirrigation system design, construction, and management.

3.28 Agricultural Extension and Research. The Agricultural ExtensionService in the three districts of Parsa, Bara, and Rauthat--which are in partcovered by the NEC command--is organized on a district basis according to theT&V system (para 2.21). To serve the special extension requirements ofirrigated agriculture, one additional AADO and one SMS specializing inirrigated agriculture would be provided to supplement the ADO's staff in eachdistrict (para 5.19). The project would provide offices, vehicles, andequipment, and recurrent costs of these AADOs and SMSs. Six houses--two foreach district--would also be provided for additional agriculturaL extensionservice staff who would be assigned to the irrigated areas in the districts.

3.29 Adaptive agricultural research appropriate to the project would becarried out in cooperation with Parwanipur Research Station (para 5.20). Theexperimental and demonstration work would be carried out on rented landwithin the NEC command area and be funded by the project.

3.30 Monitoring and Evaluation. The project would strengthen and providefacilities and equipment for a division within project management to monitorand evaluate progress s-d the performance of commissioned works. Specialattention would be pai. to water deliveries and agricultural performance(para 5.15).

Support of Project Establishment and O&M Costs

3.31 Large-scale public irrigation projects, such as the Narayani Scheme,are implemented by Irrigation Development Boards under the Ministry of WaterResources; on completion, the Boards are meant to be dissolved and the staffis either kept in the project, absorbed by DIHM in other projects or assign-ments, or discharged (para 5.01). Budget allocations to the Boards aregenerally inadequate to cover all necessary establishment costs or to provideeffective maintenance of the completed parts of irrigation and drainagesystems. Therefore, the project would support establishment expenditures(staff salaries and allowances and other running expenses) for implementationand O&M of the project at a rate that woald be progressively reduced duringproject implementation (para 4.05).

3.32 O&M Costs. At present, O&M funding of irrigation schemes in Nepalis based on financial norms not related to a careful review of the physicaland staffing requirements. Budgetary allocations for O&M were only NRs140/ha,2/ while a tentative estimate of appropriate O&M is NRs 370/ha, whichhas been used in the economic evaluation of the project (Annex 2, Table 10).The project would provide the facilities and equipment to undertake effective

1/ In addition to the modifications to the construction camp described underpara 3.13.

2/ In Practice, much less is allocated to the projects.

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operation and preventive maintenance and would strengthen the O&M organiza-tion for the NEC system. Moreover, the extent and frequency of repairs androutine maintenance would be regularly reviewed. Therefore, an agreement hasbeen reached with HMGN that it would, through NZIDB: (i) carry out, byDecember 31, 1986, under terms of reference satisfactory to IDA, a detailedstudy of the physical and budgetary requirements for operation and main-tenance of the works under the project; (ii) furnish, by June 30, 1987, toIDA for its review and comments, a report summarizing the results and recom-mendations of the study; and (iii) taking into account IDA's comments, ifany, implement the results and recommendations of such a detailed study(Annex 8, SDV).

3.33 Estimates of establishment and O&M costs for the project are given inAnnex 2, Table 10. To confirm actual annual project establishment and O&Mcosts, an agreement has been reached with HMCN that it would by March 31 ofeach year, commencing on March 31, 1987, and thereafter, furnish to IDA forreview and comments, its estimates for the irrigation schemes and relatedfacilities in the project area for the forthcoming fiscal year of:(i) salaries and allowances for project staff; and (ii) operation and main-tenance costs (excluding establishment costs).

C. Design and Implementation Aspects

Status of Preparation

3.34 The project has been prepared with the assistance of consultants.Preliminary designs, including modifications proposed by the appraisal mis-sion, are now completed. A detailed work program and revised final designsfor the first two years of construction, scheduled to start in November 1986,are to be completed by the consultants by July 1986. As a condition ofproject effectiveness, designs must be completed for at least the 1986-87construction season, and must be satisfactory to IDA. In addition, an agree-ment has been reached with HMGN that it would ensure that the planning,design, construction, upgrading, and operation and maintenance of projectworks would be carried out in accordance with standards satisfactory to IDA.In accordance with Bank's policy on projects implemented on internationalinland water ways, there is no need in this case to inform the downstreamriparian (India), because the project is designed to rehabilitate an existingirrigation scheme, in accordance with the existing agreements between theriparian states for the use of the water of the Gandak River (para 3.06).

Implementation Schedule

3.35 Project implementation would start about November 1986. Theimplementation schedule (Chart 1) is based on the profile for major irriga-tion projects in Nepal that have been completed within 6-3/4 to 7-1/2 years.The implementing agency is well experienced and will have stronger consult-ancy support than in the past. In addition, the contract package for most ofthe civil works would be large and thus more conducive to quicker implementa-tion (para 4.03).

3.36 The main construction season is from November through May. However,certain activities would be confined to the closure periods of the NEC andother minor irrigation systems that serve the project, the only time whenthere is an access to the fields. Other activities, such as preparation of

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precast elements, could continue throughout the year. Most of the majorworks would be implemented through a single ICB contract (para 4.03). Therate of implementation is considered to be within the planning, design,construction, and supervision capabilities of the project staff, assisted byconsultants, and the expected implementation capacities of the leading con-tractor(9).

IV. COST ESTIMATES, FINANCING, AND DISBURSEMENTS

Project Cost Estimates

4.01 Total project costs are estimated to be US$35.5 M equivalent, exclud-ing taxes and duties from which foreign aid projects are exempt. The costestimates are given in Annex 1, Table 6, detailed in Annex 2 (Tables 1 to11), and summarized below:

(NRs Million) (USS Million) v Foreign % BaseLocal Foreign Total Local Foreign Total Exchange Costs

A. NEC improvement and repairsto the Tilawe Barrage 24.0 20.5 44.6 1.2 1.0 2.2 46 8

S. Irrigation and drainage(Stage III Area) 31.5 62.3 93.8 1.5 3.0 4.5 66 18

C. Irrigation and drainage(Stage I and II Areas) 24.1 45.6 69.7 1.2 2.2 3.4 65 13

D. Flood control andriver training 10.7 21.7 32.4 0.5 1.1 1.6 67 6

E. Upgrading of road network 11.0 22.4 33.4 0.5 1.1 1.6 67 6F. Equipment and radio-

communication system 2.1 26.4 28.5 0.1 1.3 1.4 93 5G. Regional workshop 2.7 18.4 21.1 0.1 0.9 1.0 87 4H. Technical support 32.2 51.0 83.1 1.6 2.5 4.1 61 16I. Establishment and O&M 73.8 36.2 110.0 3.6 1.8 5.4 33 21J. Land acquisition and

crop compensation 11.7 - 11.7 0.6 - 0.6 - 2Total BASELINE COSTS 223.8 304.4 528.3 10.9 14.9 25.8 58 100

Physical Contingencies 22.9 37.2 60.1 1.1 1.8 2.9 62 11Price Contingencies 60.4 78.4 138.8 3.0 3.8 6.8 56 26

Total PROJECT COSTS 307.1 420.0 727.7 15.0 20.5 35.5 58 137or.s== =g=" s:rc 33w 3533 ====

The foreign exchange component would be US$20.5 M, or about 58 percent oftotal project costs. Costs are based on April 1986 prices. Physical contin-gencies have been assumed at the rate of 15 percent on civil works and 10percent on equipment, and represent about 11 percent of base cost or 8 per-cent of total project cost. Price contingencies, which account for about 26percent of the base cost, or about 19 percent of total project cost, reflectexpected inflation rates over the project period. The same rates have beenassumed for local and foreign expenditures: 7 percent in 1986-87 th.rough1989-90, 5.5 percent in 1990-91, and 4 percent thereafter.

Financing

4.02 The proposed credit/grant of US$32 M would finance about 90 percentof total project costs, or all the foreign exchange component, and about 77percent of local costs. Of this amount, IDA will finance US$24.5 M, and theSwiss Development Cooperation (SDC), US$7.5 M. The proposed credit/grantallocation for IDA and SDC by categories is given in Annex 1, Table 8.

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Accordingly, IDA will finance civil works and equipment, while SDC willfinance technical services and the recurrent expenditures of O&M andsalaries. The balance of capital and recurrent expenditures over theimplementation period would be met by HMGN from its development budget, forwhich adequate funds were ailocated under the Seventh National Plan(1986-91). IDA credit would be made to HMCN on standard IDA terms while SDCcontribution would be given as a grant. Agreement has been reached with HMCNthat it would promptly provide resources and funds to execute the project inaccordance with the agreed implementation program and expenditure schedules.

Procurement

4.03 Civil Works. Major works to be financed under the project would costabout US$17.5 M (about 50 percent of total cost), including physical andprice contingencies but excluding land acquisition and engineering andadministration costs. All these works would be packaged under one contractto attract competition from large contractors and would be procured under ;CBprocedures. This would enable the contractor to plan a more continuous workprogram by switching between activities according to seasons and the acces-sibility of sites. Many of the irrigation and drainage works would berestricted to the closure periods, but other activities, such as constructionof roads and flood control works, could be more continuous. Moreover, alarge contractor could mechanize construction of some types of works, andcould prepare precast structures in advance at times when other activitiesare restricted. Contractors who propose to bid for project works totalingthe equivalent of US$1.0 M or more would have to be prequalified.

4.04 The estimated cost of minor works procured under LCB procedures wouldbe about US$2.1 M. Force account work would amount to about US$0.6 M. Con-struction of structures in the field channels below the TC outlets would becarried out through force account (paras 3.10 and 3.16).

4.05 O&M and Establishment Costs. O&M of the NEC system and establishmentcosts supported under the project amount to US$7.3 M. Of this total,salaries and allowances of incremental project staff and other managemertcosts, estimated at US$4.3 M, would not involve procurement. Of the main-tenance works, US$2.0 M would be implemented by small contracts and procuredthrough LCB procedures, and the remaining US$1.0 M would be implemented byHMCN's departmental forces. SDC would support establishment and O&M costsand salaries and allowances--representing in the aggregate about 65 percentof total salaries and allowances of staff--on a sliding scale, in annualratios as given below (para 3.31). HMCN's share would increase accordingly.

HMCN's Fiscal Year SDC HMGN----------- %-----------

1987-88 to 90 101989-901990-91 to 70 301991-921992-93 50 501993-94 25 751994-95 - 100

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4.06 Equipment and Vehicles to be financed under the project would costapproximately US$2.7 M, including physical and price contingencies. Heavyequipment, vehicles, and workshop facilities (US$1.9 M) would be groupedinto appropriate packages of US$100,000 or more, and procured through ICBprocedures. Light equipment, including motorcycles, bicycles, and dieselgenerators (US$0.8 M), would be purchased at various times over the projectlife; they are available locally and would be purchased through limitedinternational tendering from at least three qualified suppliers eligibleunder IDA procurement guidelines. Local purchase would ensure servicingfacilities and spares.

4.07 Technical support, comprising consulting services, studies, train-ing, agricultural research, and monitoring and evaluation to be providedunder the project, is estimated at about US$4.4 M, including physical andprice contingenc.es. Consulting firms are expected to provide servicesvalued about US$3.9 M, of which about US$3.0 M will be provided by foreignconsultants and the remaining US$0.9 M by local consultants, all financedby SDC. Training, M&E, and agricultural research costs are estimated to beUS$0.5 M and will be financed by IDA. Selection of consultants would be inaccordance with Bank/IDA guidelines for the procurement of consultingservices. Motorcycles and bicycles for extension staff (US$0.1 M) would beprocured under limited international tendering (para 4.06) and buildings(US$0.4 M) would be procured under force account (para 4.04); other items,including training, would not involve bidding.

4.08 Procurement Summary. Procurement arrangements and costs in eachcategory to be financed by the credit are summarized in the followingtable:

Procurement Method(US$ M)

Item ICB LCB Other NA/a Total Costs

Civil works 17.5 2.1 0.6 -- 20.2(17.5) (2.1) (0.6) (20.2)

Equipment, vehicles 1.9 -- 0.8 /b -- 2.7and workshop facilities (1.9) __ (0.8) (2.7)

Consulting services /c 3.9 -- 3.9(3.9) -- (3.9)

Training, agriculture -- -- 0.5 -- 0.5research, monitoring (0.5) (0.5)and evaluation

Establishment, operation -- 2.0 1.0 4.3 7.3and maintenance (1.6) (0.4) (2.7) (4.7)

Land acquisition -- -- -- 0.9 0.9(0) (0)

Total 19.4 4.1 6.8 5.2 35.5(19.4) (3.7) (6.2) (2.7) (32.0)

/a NA - not subject to procurement./b Procurement under limited international tendering./c Including studies which comprise, inter alia, planning and design of

suitable irrigation projects in the Terai.NOTE: Figures in parentheses are amounts to be financed by IDA and SDC.

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4.09 Contract Review. All bidding packages for works estimated to costUS$0.5 M equivalent or more, and aLl contracts for goods and services, wouLdbe subject to standard IDA pre-action review. Such packages would accountfor about 90 percent of the total estimated value of the civil works andabout 70 percent of he goods and services. The remaining contracts would besubject to post-action review by IDA. Preferences for domestic contractorsand domestic manufacturers will be granted.

Disbursements

4.10 Disbursements under the credit would be made against:

(a) 100 percent of expenditures on civil works, including buildings;

(b) 100 percent of foreign expenditures, 100 percent of local expendi-tures ex-factory cost, and 70 percent of local expenditure cost forother items procured locally--on vehicles, equipment, and workshopfacilities;

(c) 100 percent of expenditures for consultancies, training, agriculturalresearch, and M&E;

(d) 90 percent of expenditures on establishment and O&M costs, andsalaries and allowances for project staff for FY87 to FY89, 70 per-cent for FY90 and FY91, 50 percent for FY92, and 25 percent for FY93.The percentage of salaries and allowances financed under the projectrepresents in the aggregate about 85 percent of incremental salariesand allowances of staff.

4.11 Subject to IDA's approval, disbursement for civil works would be madeagainst certificates of expenditure submitted by NZIDB and itemized byproject component; likewise, disbursements would be made for payments of lessthan NRs 500,000 for works (including departmental works), NRs 250,000 forgoods, staff costs for training, adaptive research, monitoring and evaluationand the costs for special surveys. Documentation for these works would beretained by project management and made available for inspection by IDAduring review missions. Full documentation would be required for all otherdisbursements.

4.12 To speed up disbursements and to reduce the burden on HMCN'sTreasury, a special account (SA) would be established from which suppliersand contractors would be paid. This SA would be for the equivalent ofUS$0.4 M, which is the approximate amount HMGN is expected to spend in afour-month period. All expenditures from this SA would be promptly reportedand documented to the IDA to facilitate its rapid and smooth replenishment.The SA may only be used to pay for expenditures eligible for reimbursement byIDA.

4.13 The estimated schedule of expenditures is given in Annex 1, Table 6.The semiannual disbursement schedule for both IDA and SDC is given inAnnex 1, Table 7, and the proposed allocation of the qredit/Grant in Annex 1,Table 8. The expected rate of disbursement follows th,e typical disbursementprofile of the Nepalese irrigation sector. Disbursements are expected to be

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completed by May 31, 1994. However, if the project is implemented moreefficiently and with fewer delays, the implementation period could be reducedsubstantially.

Accounts and Audits

4.14 Project accounts would be maintained by a cnief accounts officer,who represents the Comptroller-General. Under HMGN rules, it is the respon-sibility of the Ministry of Finance to maintain, through the offices of theFinancial Comptroller General, all government accounts. The Auditor-Ceneral(AG) is responsible for auditing all acccunts. HMGN seeks to ensure that allaccounts are maintained according to sound accounting principles and thescope of the audit is sufficient to evaluate the regularity, propriety,economy, efficiency, and effectiveness of public expenditure. However, theperformance of HMGN in respect of the IDA audit and accounting requirementshas been weak and in most projects, the audited accounts are frequently indefault. This is partly because expenditures related to IDA-financedprojects are audited by the AG as part of the implementing government depart-ment's overall financial records and the AG does not release the full auditreport until it is cleared through several steps. To ensure timely com-pliance with covenants related to audit in IDA-supported projects, IDA hasbeen assisting project accounting staff in preparing separate projectaccounts in such detail as required for audit, soon after the end of eachfiscal year, and has been presenting these to the AG. IDA has also proposedthe format and content of the auditor's report on accounts that can beprepared by an independent auditor acceptable to IDA, without waiting for thefull audit report of the AG, regarding the concerned department's overallannual financial accounts. Similar procedures are being instituted for aseparate annual audit of all withdrawal applications based on statements ofexpenditure. Agreements have been reached with HMGN that it would causeJIHM, and NZIDB to (i) maintain separate records and accounts for allproject expenditures in accordance with appropriate accounting principles;(ii) furnish to IDA such accounts, including the Special Account (SA),audited by an independent auditor acceptable to IDA, in accordance with soundauditing principles; (iii) forward to IDA such accounts, together with theauditor's reports, within nine months after the end of each fiscal year;(iv) include in the annual audit reports, submitted to IDA, a separateopinion from the auditor as to whether the disbursements made on the basis ofstatements of expenditure were in respect to goods and services received andincurred for the purposes of the project.

V. ORGANIZATION AND MANAGEMENT

General

5.01 Public irrigation in Nepal is the responsibility of the Ministry ofWater Resources (MWR) through its Department of Irrigation, Hydrology, andMeteorology (DIHM). The Secretary, MWR, is its chief executive officer. TheDIHM is headed by a Director-General, usually a professional promoted fromwithin the ranks of the DIHM organization (Chart 2). Responsibility for theimplementation of any public irrigation project financed by external donorsrests with their nominated Boards, which consist of representatives from thevarious ministries and other entities related to rural development.

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Narayani Zone Irrigation Development Project - Present Organization

5.02 General. The Narayani Zone Irrigation Development Board (NZIDB),formed in 1973 for executing the Birganj (Narayani Stage I) IrrigationProject, continued its functions under the Stage II project and would executethe proposed Stage III project. It is a semiautonomous government agency,located in Kathmandu, chaired by the Secretary, MWR. At present it has 14members, including representatives from the Ministries of Finance, Agricul-ture and Land Reform, the Planning Commission, the Directors-General of DIHMand of DOA, and the Regional Directors of DIHM and DOA (Central Region). TheGeneral Manager (CM) of the project is the Member-Secretary to the Board.The Board's functions are to (i) approve the annual budget proposils forimplementing and operating the project; (ii) appoint senior staff;(iii) award large contracts and consultants' agreements; (iv) prepare semian-nual reviews of implementation programs and progress; (v) coordinate policymatters on programming, budget, and finance; and (vi) determine the level ofwater charges.

5.03 Performance of NZIDB. As originally constituted, the full Board mustapprove all civil works contracts valued more than NRs 2.5 M (US$125,000),equipment purchase contracts valued more than NRs 500,000 (US$25,000), andemployment of consultants. Consequently, NZIDB spends much of its time onrelatively minor administrative matters and therefore delays decisions on itsmain function of project policy formulation, promotion of project develop-ment, overall control of project activities and expenditures, and coordinat-ing the services of government institutions represented on the Board. Thus,NZIDB is unable to keep close control over actual project implementation.

5.04 Project Management. The Chief Executive Officer of the project isthe GM, appointed by HMGN after consultation with the Ministry of WaterResources, the Secretary of MWR and the DG of DIHM. Agreement has beenreached with HMGN that it would, at all times, maintain in the position ofGeneral Manager of NZIDB an officer whose qualifications, experience, andterms of reference shall be satisfactory to IDA. Regarding other seniorproject staff, past record of changes and transfers has been good: staffrotation was well within the limits that ensure continuity. This is expectedto continue.

5.05 The GM, the heads of all the operating divisions and the projectconsultants are in Birganj, at project headquarters. The GM is responsiblefor (i) preparing the .nnual engineering work program, budget, and staffrequirements, for presentation to the Board; (ii) overseeing project staff,including consultants; (iii) authorizing construction by force account and ofcivil works and equipment contracts up to the limits of his financialauthority; and (iv) coordinating all project activities at the Regional andDistrict levels. The project organization and its linkages to the agricul-tural support services, the Regional and District Coordinating Committees andfarmers is shown on Chart 3.

5.06 Organization Structure. The project staff is divided into fivedivisions:

(a) The Administrative Division, responsible for personnel, contractprocurement, land acquisition, water charge assessment and collec-tion, and general administration.

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(b) The Finance Division, responsible for budgeting, finance, internalaudit of the stores, and inventory control of equipment.

(c) The Design and Construction Division, responsible for design, biddocumentation and evaluation, supervision of construction of projectworks, and provision of designs and construction assistance to theWUGs for developing the field channel systems. It is headed by anExecutive Engineer (EE) and is subdivided into two sections: one forsurvey and design, and one to supervise all construction activities.Each is headed by a Divisional Engineer (DE). This division wouldrequire considerable strengthening.

(d) The Operation and Maintenance Division has only been separated fromthe Design and Construction Division under the Stage II project. Itstask, for which at present it is not adequately equipped and staffed,is to operate and maintain the entire system, fromn the Indian borderdown to the 4 ha area level.

(e) The Mechanical Division is responsible for repair and major main-tenance of all project vehicles, equipment and plant, including pumpunits for tubewells constructed under Stage I and II projects.

5.07 Monitoring and Evaluation (M&E) is at present carried out by a smallsection, which conducts agricultural surveys of limited scope. It is toosmall to undertake the comprehensive, project-wide program that would be ofparticular importance, given tne proposed project's emphasis on water manage-ment. However, with the assistance of CIDA, detailed objectives and proce-dures for M&E of the project were formulated during the Stage II project, andwill be introduced in Stage III.

Proposed Project Organization (Charts 3)

5.08 The NZIDB. HMGN is considering a reduction in the membership of theBoard. According to present thinking, it would be confined to the Secretaryof MWR who would continue to be its Chairman, the Directors-General of DIHMand DOA and one representative each from the Ministry of Finance and thePlanning Commission. The GM of the project would be its Secretary.

5.09 The Board would meet four times a year to consider policy and inter-agency coordination issues, allowing the GM to spend more time on theday-to-day management of the project. To reduce the Board's involvement,the GM would be given increased authority to approve contracts for civilworks and for the purchase of equipment. Accordingly, an agreement has beenreached that by December 31 of every second year, commencing on December1987, HMNG would, in consultation with IDA, review, and if required, revisethe Project General Manager's limits of contractual commitments for theoperation and management of the project. The GM would continue to be fullyaccountable to the Board, to whom he would justify all commitments made underhis increased limits of authority.

5.10 Project Management. The existing project organization would bechanged as follows:

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(a) The Administrative Division's responsibilities for assessment andcollection of water charges would cease with the proposed transfer ofthis function to the Revenue Department (RD) (para 7.24);

(b) The Finance Division would continue to function and be staffedwithout substantial changes;

(c) The Design and Construction Division would be subtantiallystrengthened during the implementation period, and its functionsadapted to the changing scope of works (Annex 1, Table 9). Thedivision's organization structure is described in detail in Annex 9,SDV. It would, as before, be headed by an executive engineer (EE).Additional assistant engineers wouLd be assigned to the design andsurvey section as required by the annual work load. The presentcadre of supporting staff would be replaced by draftsmen and sur-veyors. All design staff would require substantial training toensure that it can design and supervise civil works and structuresaccording to the principles and concepts of the project. The divisionwould be phased out when the project is completed; most of its per-sonnel would be transferred to other irrigation projects, but somewould be assigned to the O&M Division in which a small nucleus ofprofessionals would be retained for any future development work inthe project area;

(d) The Operation and Maintenance Division would also need considerablestrengthening. An EE would head the division, which would havesections for operation and for maintenance of commissioned parts ofthe system; each section would be headed by a DE. The OperationsSection would operate the system from the headworks to TC turnout atthe 30-ha area and supervise WUG activity below the TC turnout. Itwould consolidate the canal inspectors' records at the TC level, andcollect information from which water charges can be assessed(para 7.23). As part of its overall water management function, theOperations Section would allocate water and monitor deliveries at alllevels (para 6.11). The Maintenance Section would maintain theconveyance and delivery system from the headworks of NEC to the 30 haturnouts, the drainage system, all flood control works and roads.The division's organization structure is described in detail in Annex9, SDV.

(e) The Mechanical Division would be built up to enable it to maintainand repair all project works and equipment, including projecttubewells, and to administer and operate the Regional DIHM Workshop(para 3.25 and Annex 5, SDV).

(f) The Monitoring and Evaluation (M&E) Unit would become a division andgiven additional staff and resources. It would collect and evaluatedata to fulfill the M&E tasks described in para 5.15, provide projectmanagement with quarterly and semiannual progress reports, andmonitor project quality control (para 5.14).

5.11 Staffing. The staff required to implement and to operate and main-tain the project are listed in Annex 1, Table 9. The EEs required to headthe technical divisions are in place. The main additional requirements oftechnical staff would be at Assistant Engineer, Overseer and Supervisor level

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in the Operations Section of the O&M Division, and for assistant engineers,draftsmen and surveyors in the design section. To enable project managementto carry out the functions described in para 5.10, HMGN would be required asa condition of effectiveness to authorize all staff positions required by theproject for effective management. In addition, an agreement has been reachedwith HMGN that it would continue at all times to provide all staff positionsrequired to properly manage and operate the project.

5.12 In-Service Training. The ongoing in-service training would be sub-stantially extended and would place special emphasis on survey, design cal-culations, construction supervision, quality control for irrigation anddrainage systems and associated civil works, and design and layout of fieldchannels below the TC outlet. The project field staff, with the new posi-tions added, would be trained in survey procedures to locate and layout TCsystems and set up and supervise the activities of the WUGs. Appropriatetraining would be provided to canal operators at all levels in operation andmaintenance of the system within their required scope of work respon-sibilities and to WUG members in improved irrigation techniques.

5.13 To strengthen the existing training program, an agreement has beenreached with HMGN that it would cause NZIDB to (i) furnish IDA for itsapproval by January 1, 1987, the overall training program; (ii) by January 1of each year, commencing on January 1, 1987, furnish to IDA for its approval,the annual training program for the following Borrower's fiscal year and(iii) thereafter, on April 1 of each year, implement such training programsas so approved.

Quality Control

5.14 Quality control during project implementation will be the task ofthe Design and Construction Division monitored by the M&E Division. Oncompletion of the project, the Operation and Maintenance Division will ensurethat the quality of maintenance is such as to enable effective project opera-tion. Accordingly, an agreement has been reached with HMGN that it will takeall such actions as shall be necessary to ensure quality control of planning,design, construction, upgrading and operation and maintenance of projectworks.

Monitoring and Evaluation

5.15 The M&E Division (para 5.10) would be responsible for collecting andanalyzing data on project planning, implementation and performance, par-ticularly with respect to (i) construction targets, progress and qualitycontrol; (ii) actual disbursements compared to targets; (iii) effectivenessof water management: timeliness and quantity of deliveries compared toprojected schedules; (iv) operations and effectiveness of WUGs in securingcompliance of their members to rheir directives; (v) maintenance quality andcosts; (vi) agricultural progress in terms of changing patterns of land use,croping patterns, institutional changes in tenancy agreements, trends, ifany, to increase or decrease owner occupancy; (vii) support from ABDN,cooperatives, AIC and the agricultural extension; .viii) water charge collec-tion; and (ix) monitor quality zontrol under the project.

5.16 To undertake the tasks listed above, the M&E staff would collect thenecessary data from the line divisions and other agencies responsible for the

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activity. To obtain the agricultural performance data required, the M&EDivision would complete questionnaires for each crop season on a sample groupof farmers, spatially distributed over the project area and covering a rangeof farm sizes and land tenure arrangements. In addition, the division wouldreview selected crop-cutting data pertaining to the project area routinelycollected by the ADO's staff, to obtain an independent estimate of cropyields for each season. Periodic M&E Reports would be prepared for the GMand the Board; such reports would compare actual achievements with estab-lished targets and make it possible to set realistic targets for the comingyear or season.

5.17 In addition to reports prepared by M&E division to the Board, theywiLt prepare all project progress reports for project management that canbe used to provide information to IDA. Accordingly, an agreement has beenreached with HMNG that it wouid (i) furnish to IDA, commencing on January 1,1987 and thereafter, until the completion of the project, semiannual projectprogress reports in the scope and detail acceptable to IDA, and submit themwithin two months after the end of each reporting period; and (ii) submit IDAnot more than six months after the completion of the project, a projectcompletion report in a format agreed with IDA.

5.18 To provide a benchmark against which development can be measured, anagroeconomic survey would be undertaken separately for the Stage I, II andIII areas. Follow-up surveys would be conducted every two years, tofacilitate the assessment of changes in agricultural production as theproject is implemented. Reports summarizing the findings of the initial andfollow-up surveys would be prepared by the project authorities for theBoard's perusal. The M&E Division would be responsible for conducting thesurveys itself, or through a contracted competent agency. Accordingly, anagreement has been reached with HMGN that it would cause the NZIDB to: (i) byJune 30, 1987, conduct a base-line agroeconomic survey, under terms ofreference satisfactory to IDA, and submit to IDA for its review and comments,a report summarizing the results and conclusions of the survey; (ii) takinginto consideration IDA's comments on the initial survey, repeat the surveyevery two years and submit, by June 30, 1989, 1991, and 1993, to IDA for itsreview and comments, reports summarizing the results and conclusions; and(iii) as a result of the above surveys, take such remedial action as neces-sary.

Agricultural Support Services

5.19 Agricultural Extension (Chart 6). At present, the agriculturalextention service does not address effectively the needs of farmers who usecanal irrigation. To ensure that they are adequately supported and advised,the ADO's staff would be supplemented with a second Assistant ADO (AADO),and a SMS specializing in irrigated agriculture, assigned specifically tocanal commanded areas (para 3.28). The AADO Irrigation would be the contactwith the office of the GM. His terms of reference are given in Annex 6.Agreement has been reached with HMGN that it would, by June 30, 1987, appointa second Assistant Agricultural Development Officer and a Subject MatterSpecialist for irrigated agriculture to each of the three project districts,together with supporting office staff, and equipment, under functions andterms of reference satisfactory to IDA.

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5.20 Agricultural Research. An adaptive research program under the projectwould focus primarily on crop selection and sequences, taking into account produc-tion constraints faced by farmers. Another aspect of the program would be theintegration of crops into the recommended crop sequences for which there is a readymarket. The venue would be suitably located rented land; the work, conducted bystaff employed by the project, would probably be supervised and coordinated by theParwanipur Research Station (para 2.23). Agreement has been reached with HMCN that,by June 30, 1987, it would establish, and thereafter maintain an adaptive farmplanning research program with terms of reference satisfactory to IDA, aimed tosupport the agricultural objectives of the Narayani Scheme, under the technicalsupervision and control of the Borrower's Department of Agriculture.

Regional and District Coordinating Committees

5.21 Central Region Coordination Committee (CRCC). HMGN intends to establish aCRCC to promote interagency coordination and cooperation at the regional level. Itis proposed that the committee be chaired by the GM and include the Regional Direc-tor of Agriculture, the Zonal Managers of ADBN and AIC from Birganj, and threefarmer representatives (one from each project district). The committee would meettwice a year, after the paddy and wheat harvests, to review production problemsduring the past season and to propose remedies.

5.22 District Coordination Committee (DCC). District Coordination Committeeswould also be established, because of the division of irrigation and agriculturalsupport services between the two ministries and their agencies. District agricul-tural committees already exist; they meet monthly, but no one from the projectattends the meetings. The current membership consists of the ADO, the DistrictManagers of ABDN and AIC, and the District Cooperative Officer. The membershipwould be expanded to include EE of the O&M Division of the project and the AADOresponsible for irrigated agriculture extension in each district, since it would beappropriate to utilize these committees for coordinating the project's activities.

Post Project Organization

5.23 The present project would complete construction of all the physicalinfrastructure of the scheme. Inevitably, operational experience will indicate theneed for modifications of designs and structures, but these are expected to beminor. It would, however, be essential to determine the detailed organizationalarrangements that would be concerned within DIHM with project operation, managementand maintenance. Although the exact range of disciplines, and the number of staffin each section cannot be determined at present, it appears certain that a nucleusof design and construction engineering would have to supplement sections concernedwith system operation and maintenance and close liaison, cooperation, and guidanceto the WUGs. A tentative post project organization is given in Annex 1, Table 9and shown on Chart 2, Annex 9, SDV. It assumes that the Board would continue tofunction even after the project is completed, as well as the CM. An agreement hasbeen reached with HMCN that by July 1, 1991, it will prepare and furnish to IDA forits review and comments, a proposal relating to the organizational arrangementsfor operation and maintenance of the irrigation schemes and related facilities inthe project area to be established within its Irrigation Department; such organiza-tional arrangements, satisfactory to IDA, would be implemented starting July 1,1992.

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VI. WATER MANAGEMENT

Introduction

6.01 The Stage I and II projects emphasized the construction of canals andstructures capable of providing the designed water requirement;. However,the management of the completed works was not geared to ensure a predictable,reliable service to the farmers. Without such a service, farmers resort toillegal means to take the water they require at the expense of other users;the system then becomes unmanageable. To overcome these problems, theproject would provide the necessary infrastructure to convey water so thateach farmer can receive his timely allocated share and operate the systemaccording to a water management plan that will ensure that water is usedefficiently. The water management objectives and the plan and generalguidelines according to which they would be achieved (para 6.08) were dis-cussed and agreed with the project authorities during the project preparationand appraisal. However, to ensure its implementation, HMCN and its NZIDBwill have to define details of the following: (i) principles of waterallocations; (ii) water distribution procedures to minimize operationallosses and to match the varying demand patterns through the annual irrigationcycle; (iii) criteria for procedures for efficient operation and preventivemaintenance so that the system will continue to provide the designed irriga-tion service; and (iv) the role that water users would have in the managementprocess.

Water Supply and Demand

6.02 Nepal's agreement with India (para 2.07) specifies that up to24.1 m3/sec (850 cusecs) be delivered to the head of NEC whenever required,except during scheduled closure periods for repairs and maintenance of theDon Branch, which feeds the NEC.

6.03 In the past, principally because the NEC command area has not beenfully developed, actual deliveries were well below authorized quantities, asshown on Chart 7. At present, the Indian system is subject to two annualclosures: the first in November/December and the second in March/April.While the November/December closure, for about 45 days, is essential formaintenance after the monsoon, its timing has some flexibility. However, inMarch/April, water is available and can be delivered to the NEC regardless oflow irrigation demand in Bihar during this period. In the monsoon period,the Don Branch has to be closed occasionally, either because of damages tocross drainage structures, or because of a high silt load carried by theGandak River which, if allowed into the canal, would clog it. Generally, inthe past, BRVPD has been able to restore interrupted supplies in less thantwo weeks, thus causing no damage to growing crops. Ocassionally, the DonBranch is closed in the kharif because there is no demand for water. Thereis no reason to believe, either from past experience or from operationalconsiderations, that COI would not honor its water Agreement with Nepal inthe future.

6.04 In addition to water coming from India, the NEC system obtains, orhas the potential to develop, a limited surface supply from local sources.Three rivers (Tilawe, Sirsia, and Jhanj, para 2.08) are diverted throughsmall barrages that serve distribution systems that interlink with the NEC

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system. Fourteen other streams with water resource potential cross the NEC.However, supplies in all the 17 rivers are unreliable toward the end of thedry season. Many private shallow tubewells have been developed, and thisdevelopment is accelerating.

6.05 Irrigation requirements at the head of NEC for the proposed designedcropping pattern are presented in Annex 1, Table 10. During the peak demandperiod an estimated conveyance system efficiency of about 65 percent betweenthe NEC and the individual field has been assumed. It can fluctuate between60 percent to 70 percent. Field application efficiencies are estimated atabout 70-75 percent. Therefore, the overall system efficiency (from the headof NEC to the plant) on completion of the project, would vary between 40 and55 percent.l/ Sufficient water would be available in the NEC command at peakdemand periods to satisfy the irrigation requirements of the design croppingpatterns, even without taking into account the local resources.

Water Management

6.06 Water Allocation. At present, only about 75 percent of the total NECcommand area is developed. Even within this area the canal distributionsystem is incomplete and water allocation among farmers served has not beenequitable: the quality of the irrigation service depends on the distance fromthe NEC. There is virtually an 'on demand' supply in the head reaches and adeteriorating service in both quality and quantity towards the tail ends.Under the project, the full NEC command area would be developed with a dis-tribution system down to about the 4-ha area; channels and control struc-tures, mostly ungated, would be provided so that water can be distributedevenly to all parts of the command area with minimum reliance on operators.

6.07 Water Management Objectives. The objectives of the water managementimprovement program are to: (i) deliver water in a timely and equitablemanner to all farmers in the project area so that they fairly share availablesupplies; (ii) deliver water to each farmer at a flow rate that enablesefficient on-farm irrigation; (iii) notify farmers before the beginning ofthe rabi season of the time they will receive their allocations, by preparingoperation schedules which take account of the physical constraints of thenetwork and the expected water supplies at the head of the NEC; and (iv) sofar as possible, adapt the delivery schedules to crop requirements. Toachieve these objectives it would be necessary to make project managementfully conversant with its task by providing to all pertinent staff andfarmers full and thorough training.

6.08 Guidelines for Water Deliveries. Operation of the network would bebased on the following guidelines:

1/ The overall efficiencies of similar projects in the Terai have beenestimated to be between 40 and 55 percent. The higher efficiencies areobtained during the kharif, for the rice irrigation; the lower ones relateto the dry season.

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(a) The NEC would be operated continuously with variable flows, dependingon the demand for'water in the system, up to the limit of Nepal'swater entitlement from the Don Branch at the head of NEC under the1959 Agreement.

(b) The MSC and BSC canal systems, grouped into 15 blocks, would beoperated on an intermittent 'ON/OFF' weekly rotation; all operationalcanals within each block would be maintained at full supply level(FSL) during their 'ON' period and provided with control and measur-ing structures at all flow division points. The number of gatedstructures would be minimized by constructing modular divisor struc-tures to regulate the flows according to design requirements to eachpart of the system.

(c) All TC turnouts within a block would operate simultaneously during an'ON' period and would be modular structures capable of deliveringfixed flows from the parent canal to the 30-ha service areas.

(d) Outlets serving the 4-ha area within a TC command would be gatedstructures and water supplies would be rotated so that the full flowof the TC can be diverted in turn to each 4-ha outlet over a rotationwhich would be allocated in one week (168 hours) periods.

(e) Each farmer would receive the full discharge of the turnout for atime period in proportion to his land holding to the command areaof the outlet.

During the rabi season when rainfall is insignificant and full irrigation isrequired, water delivery schedules to each block would be predetermined andall users within the block would be notified in advance. During the kharif,only supplementary irrigation is required; demand would depend on gaps in themonsoon rains. Since water supply and canal capacity would be generallyadequate, the system in the kharif would operate "on demand." During kharifshortages, water would be allocated following the operation criteria used inthe rabi.

6.09 For a farmer to irrigate efficiently, the stream size has to bearourd 18 1/sec (0.6 cusecs). If it is less, the water is difficult tospread evenly over the fields; if much greater, it would be difficult tomanage the flow and operational losses would increase. Allowing for systemlosses, about 18 1/sec would be the required flow to irrigate about 30 ha ina week (168 hours). The TC turnout in the conveyance system is thereforefixed to command about 30 ha below the turnout. To ensure effective andequitable water distribution, an agreement has been reached with HMGN that itwould by January 31, 1987 adopt, and thereafter implement a detailed watermanagement plan, satisfactory to IDA, for the irrigation schemes in theproject area.

6.10 The proposed water management program can only be implemented if thesystem, including field channels, is properly maintained. To ensure effec-tive maintenance, staff would be provided with adequate transport and equip-ment to inspect and maintain on a regular basis all canals, drains, and otherassociated structures and service roads.

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Management Organization

6.11 The NEC system would be operated at two distinct but interdependentmanagement levels: the canal system from the NEC headworks down to TC tur-nouts would be operated by the project through the O&M Division (para 5.10).Below the TC turnouts, the TC and field channel systems (down to thefarmgate) would be managed by WUGs (para 6.14) under the guidance of theproject staff. It would be the individual farmer's responsibility to managesupplies on his farm. Under the project, the tasks at each management levelhave been defined so that logical operational procedures can be formulated tomanage effectively and efficiently the water supply through the yearlyirrigation cycle. To enable the different management levels to fulfill theirfunctions, a maintenance program has been formulated under Stage II, but amore detailed program will be defined in the future within an O&M plan to beprepared under the project (Annex 9, SDV). Facilities, financial andinstitutional arrangements would be provided under the project to enable theoperational staff to function efficiently (paras 3.20 and 3.32). The perfor-mance of the irrigation service would be monitored (para 5.15).

Water Users' Groups (WUGs)

6.12 An essential prerequisite for successful operation below the TCturnout would be to organize the water users within the 30 ha area so thatthey can manage the rotation of water supplies under the supervision of theproject staff (para 5.06). Once a TC command area is defined at the detaileddesign stage, the potential users should be organized into Water Users'Croups (WUGs). For that purpose, an agreement has been reached with HMGNthat it would establish Water Users' Groups (WUGs) as follows: (i) in ter-tiary commands where there is already an irrigation service by December 31,1986; and (ii) in tertiary commands to be brought under irrigation not lessthan six months before the tertiary is scheduled to begin operation. Thisadvance establishment of WUGs would enable project management to deal with aresponsible body of farmers regarding the layout design and the constructior.of the TCs and field channels (para 6.14).

6.13 To be successful, the WUGs should be as cohesive as possible. There-fore, as far as topography allows, their area of activity would coincide withboundaries of the local administrative ward, even if this would require somechanges in the TC command area boundaries in the Stage I and II areas. TheWUGs would elect their Chairman from their membership.

6.14 The project staff would explain to the WUGs their responsibilitiesunder the project, together with the rights of individual users, and proce-dures to be followed in undertaking their managemert responsibilities. Thefirst task of the WUGs would be to construct, under the project staff'stechnical supervision, the field channel systems within the TC command areas.Material and labor for all needed structures would be provided by theproject. If the WUG members failed to construct the field channels, the workwould be done by the project and the farmers would be called upon to repayproject authorities the full cost as arrears of land revenue. During andafter construction, the project staff would ensure that all WUG membersunderstand the principles of water allocation, weekly rotation to the 4 haoutlets, and their turns within the 4-ha area. The users would also beinformed of the procedures for assessment and collection of water charges andof their legal rights and actions in case of disputes or problems related towater supplies.

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6.15 To enable the WUGs to perform these functions effec*tively, they needstatutory powers. Accordingly, an agreement has been reached with HMGN thatit would by September 31, 1987, take all such actions as shall be necessaryto constitute the Water Users' Groups as statutory bodies, with sufficientpower to (a) supervise the distribution of water amongst its members inproportion to the size of their landholding; (b) cause its members to con-struct and maintain the required field channels including field drainagesadjoining their holdings and any other section of the field channels andfield drainages that does not skirt commandable areas; and (c) in case ofdefault, arrange for such work to be done at the cost of the defaulters;provided that in the event that a Water Users' Group does not carry out suchmaintenance work, the Borrower shall, at the expense of such Water Users'Group, carry out the construction and maintenance work in question.

6.16 In view of the fact that the panchayat and its derivative, the wardorganization, are very strong in Nepal, the WUCs (which would, as far aspossible, be based on wards, see para 6.13) are the most likely forum tobring pressure on their members to work together, to operate and maintaintheir systems properly, and to pay water charges--assuming that the servicethey receive meets the project's objectives. The WUGs use moral and peerpressure on their members to contribute their labor and maintenance works andto irrigate only during their turns without necessarily resorting toauthority.

VII. AGRICULTURAL PRODUCTION, FARM INCOMES, AND COST RECOVERY

Agricultural Production

7.01 The Present Situation. Present agricultural production and thefarmers' cropping patterns reflect differences in irrigation water supply(Annex 1, Table 2). The entire project area receives some kind of kharifsupply, although the distribution network beyond the 1,000 ha offtakes (0.6m /sec) is more or less completed only in the Stage I and II areas. In thekharif, most of the area is planted to rice. In the rabi, the main crops arewheat, oilseeds, and pulses. Wheat is irrigated in most of the Stage I andII areas, but in the Stage III area is largely grown on residual moisture.Other rabi crops in all the three areas are grown mostly on residual mois-ture. The proportion of wheat is higher in the irrigated areas. Sugarcaneoccupies about 2 percent of the area; vegetables about 1 percent. Most ofthe sugarcane is produced under rainfed conditions. Climatic factors andagricultural practices constrain yields. Although the Birganj sugar factoryconstitutes a secure market for the cane growers in the project area, theprofitability of sugarcane production versus other crops and crop combina-tions is very low.

7.02 Expected Future Developments. In the 'future without project' situa-tion, some improvements are likely in the Stage I and II areas as farmers andsystems operators gain experience. However, the Stage III area would changeonly marginally because the infrastructure for water distribution, drainageand transport would not exist.

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7.03 In the 'future with project' situation, the cropping pattern isexpected to be fairly uniform, and the relatively high proportion ofvegetables in the Stage III area (3 percent), now irrigated mostly by wells,would be maintained.

7.04 Paddy would remain the predominant kharif crop. Improved drainageand improvements in the agricultural practices will lead to increasedprofitability of sugarcane production. In addition, the market for canewould be assured. However, a conservative estimate has been made assumingabout 3 percent of the project area to be planted with sugarcane in thefuture. It is further assumed that this percentage will remain unchanged atfull development of the project. Even so, some farmers, particularly largerones, might :)Lant a somewhat higher proportion of their land to sugarcane.The proportion of paddy planted in early May is expected to increase;however, since its harvesting, which takes place during the rains, is dif-ficult, it would be restricted to around 15 percent of the CCA. The improveddry-season irrigation supply, coupled with earlier planting of the main paddycrop, would make it possible to inicrease wheat to about 50 percent, oilseedsto 16 percent, and pulses to 11 percent of the CCA, though the actual crop-ping pattern would respond to market demands (para 7.08). Vegetables, sup-ported by private groundwater supply, are likely to occupy 1-3 percent of theCCA in each season. The cropping intensity is estimated to reach about 175percent at full development (year 15) in comparison with the present inten-sity of about 135 percent (Annex 1, Table 2).

7.05 Crop Yields. In the 'future without project' situation, some yieldincreases in presently irrigated areas are likely as farmers, supported byimproved extension, will increase input use and improve cultural practices.However, such increases would be small as water supply is likely to remainunreliable. In the with-project situation, average yields of $YV paddy atfull development are estimated to reach 4.2 t/ha, local paddy varieties (ifstill grown) 3.5 t/ha, wheat 3.2 t/ha, pulses 0.8 t/ha and oilseeds 1.5 t/ha.These increases reflect response to an improved water supply and to theimpact of an intensified and irrigation-oriented extension service. Annex 1,Table 2 shows present and future cropping patterns and yields.

7.06 Production. The annual incremental production with the project, atfull development, based on the projected cropping patterns and crop yields,is given in Annex 1, Table 11, and summarized in the following table:

Future Future IncrementalWithout Project With Project Production

…______________-------- 000 tons-------------------------

Paddy 116.0 146.9 30.9Wheat 24.7 59.6 34.9Oilseeds 1.6 8.3 6.7Sugarcane/a 2.2 3.7 1.5Vegetables 17.9 21.9 4.0

/a Sugar equivalent.

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7.07 Input Requirements. As indicated above, only limited changes incultural practices are assumed under the 'future without project' situationand no substantial increases in the use of inputs have been envisaged. Inthe 'future with project' situation, certified planting material wouldaccount for about a sixth of farmers' requirements: about 200 tons of cer-tified seeds and about 7,000 tons of fertilizers would be used annually.Existing storage facilities for fertilizers in the project area are adequate.Fertilizer and seed requirements are detailed in Annex 1, Table 11.

7.08 Market Prospects. The grain trade from the project area has tradi-tionally been oriented toward India. To some extent, this is likely tocontinue, although India itself now has surpluses and therefore entry intoits market may become more difficult. However, given the food deficit inNepal, it is expected that surplus grain from the project area would be usedin the country. According to a recent study 1/, Nepal had in 1982-83 anoverall food deficit of about 24 percent.2/ The study shows that the mountainand hill regions are almost always deficit areas, and that surpluses areproduced in the Terai.

7.09 Prices. Partly because there is no sizable commercial movement offoodgrains from the project to the deficit regions, and partly because of thegood transport and communication links between the project area and theIndian State of Bihar, foodgrain prices have been largely determined byprices in adjoining Indian markets. This trend is expected to continue.Projected prices, detailed in Annex 1, Table 12, assume a slight decline inmajor grain prices, with most other prices holding steady. The agriculturalprice support policy of HMGN has been ineffective, since announced supportprices are not maintained by appropriate market interventions (para 1.18).As a result, prices are subject to fairly wide seasonal fluctuations andregional variations. The large number df independent traders and agentspurchase about 80 perceqt of the marketable surplus directly from farmers;they are alsp a major source of credit. The lack of on-farm storagefacilities and the need to repay loans force farmers to sell their producesoon after harvest (about 50 percent of marketable surplus) when prices aregenerally lower. Although farmers would benefit from a more effective pricesupport mechanism primarily by greater price stability, it has been assumedin the following analyses that prices would remain subject to seasonal varia-tions and that many farmers would continue to sell at the lower post-harvestprices. Input prices, with the exception of fertilizers and pesticides, aredetermined by local supply and demand. Fertilizer prices contain a subsidyelement which, it has been assumed, would be gradually phased out completelyat full development; similar expectations prevail in adjoining areas ofIndia, to which all trading activities in the project area are closelylinked.

1/ Rerort of the Food Security Review Mission to Nepal. FAO, 1984.

2/ This estimate is derived by comparing total grain (plus potato) produc-tion in terms of calories with total calorific requirements of thepopulation, assuming an average per capita daily requirement of 1,800calories.

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7.10 Storage and Processing. On-farm storage is usually limited to grainfor family consumption, and to seed. Off-farm grain storage is maintained bythe Sajhass the NFC, the Rice Export Corporation (REC), grain merchants, andmillers. Eidisti;ng wholesale storage facilities near the project area areadequate. The area is well served by privately owned milling facilities,including a modern roller mill for wheat. Any additional grain processingdemand resulting from the project can be expected to be satisfiel by theprivate sector. Oilseeds are processed primarily as a small-scale cottageindustry, with most of the cake finding a market in India. Pulse milling isalso a small-scale private enterprise.

Farm Incomes

7.11 Present incomes from holdings of comparable size vary in line withthe availability of water which ranges from farms which are completelydependent on rainfall, through farms with an insecure canal supply, to farmswith a relatively abundant canal supply. The situation reflects the degreeof completion of the irrigation system and the location of the holding rela-tive to the existing canal system. In the Stage I and II areas, location ofthe holding with respect to the main canal is the dominant factor affectingthe security of present water supplies. In the Stage III area, at presentmost of the farmers are either totally dependent on rainfall or have at bestan insecure supply of surface water.

7.12 Project impact regarding farm income and poverty has been assessedthrough representative farm models. The impact has been examined for farmsizes of 1.0 ha: (i) near the NEC in the Stage I and II areas; (ii) towardthe tail of a secondary canal in the Stage I and II areas; and (iii)-a loca-tion dependent exclusively on rainfall in the Stage III area. The main modelassumptions, such as cropping patterns intensities, household size, and useof hired labor, based on farm surveys and district statistics, are detailedin Annex 3.

Net Farm Incomes/a Increase due(1.0 ha holding) to project

P W W (W-

Farm Location -------NRs ------- ()

(a) Near NEC in Stage I and II areas 7,500 9,300 14,200 53(b) At the tail of a secondary canal in

Stage I and II areas /b 6,800 8,870 14,200 60(c) Exclusively rainfed location in

Stage III area 5,680 7,350 15,000 104

P - Present, W - Future without Project, W - Future with Project/a Net return to family labor and farm capital investment before tax and

water charge payments, assuming that farm implements are fully ownedby the farm family. The depreciation allowance is excluded from theinput cost.

/b It is assumed that cropping intensities of tail end farmers amount to93 percent in the present and to 95 percent in the 'future with project'situation as against the intensities of head reach farmers.

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7.13 As can be seen above, increases in net farm incomes due to theproject would range from 53 to 104 percent. Production increases on farmslocated near NEC in the Stage I and II areas would result mainly fromimproved timeliness of the irrigation service but, as they are located closeto the main canal, would be small. The farms located on the tail reaches ofsecondary canals in the Stage I and II areas would benefit from a substantialincrease of timely water supply; hence, the considerable increase in theirnet income. The greatest increases in benefits would be experienced by thefarms in the Stage III area, which is presently dependent on rainfall.

Impact on Poverty

7.14 The project impact on poverty has been analyzed for 0.3-ha, 1.2-ha,and 2.0-ha farm models. The main assumptions are similar to these made forthe farm income models (para 7.12). The average farm family size was assumedto be seven persons. The results are summarized in the following table:

farm sign 0.3ha 1.2 ha 2 .0 ba

xra locatio i 1 it X 1 wkM

(a) Sear NEC in Stage I and I1 areas 2,790 4,260 1,470 11,160 17,040 5,880 18,600 28,400 9,800

(b) At tail of secondary canal 2,660 4,260 1,600 10,640 17,040 6,400 17,740 28,400 10,660in Stage I and II areas

(c) bIeluively rainfed location 2,200 4,500 2,240 8,700 18,000 9,300 14,700 29,400 14,700in Stage III area

F - ulture witbout project, V - future witb project.

Ia Not return to family labor and farm capitl iwleasmt before tax and water charge payments.

7.15 The poverty level in Nepal is estimated at NRs 1,600 per capita peryear (1986 prices). The minimum farm size which would be required to achievethis level of income at full development would be about 0.8 ha. Thus,although all project farmers are expected to realize incremental benefits,about 60 percent of the farm families are likely to remain below the povertylevel at full development, unless they could generate significant off-farmincome. Without the project, some 90 percent of the farmers would remainbelow poverty level.

.Capital and O&M Costs

7.16 For the purpose of evaluating cost recovery, the costs (expressedin 1986 prices) have been divided into capital and O&M costs. The presentvalue of the irrigation infrastructure to be constructed under this projectin the Stage I and II areas (28,700 ha) is estimated at NRs 5,960/ha. Thepresent value of the irrigation infrastructure (including on-farm developmentworks, flood protection, and upgrading of roads) to be constructed in theStage III area (8,700 ha) is estimated at NRs 13,100/ha. Costs of workscompleted under Stages I and II have been adjusted to 1986 price level, butno account has been taken of works executed by BRVPD prior to 1973, whichwere a way of compensation to Nepal by India for the use, in India, of theGandak River water, and were therefore free of charge. This places theweighted average present value of the capital costs for the entire commandarea at NRs 16,910/ha. Annualized capital recovery at 10 percent interest,

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discounted over 30 years, would amount to about NRs 1,790/ha. The annualexpenditure on O&M is estimated at NRs 370/ha. Thus, achieving full costrecovery from the farmers would entail payments of NRs 2,160/ha/year, orabout 15 percent of the estimated average net farm income at full develop-ment.

Cost Recovery

7.17 Background. Present revenues from water and water-related charges donot cover the cost of O&M. While in the short run the deficit has beenlargely covered through government support, this imposes a heavy burden onthe government budget and cannot be regarded as a long-term solution. It istherefore essential to devise a cost recovery system that would ensure suffi-cient revenues to cover at least the full O&M costs without impairingfarmers' incentives to optimize irrigation benefits. Such a recovery systemis planned for the project and, taking into account experience gained, wouldbe gradually extended to other projects providing a service of comparablestandard (paras 7.24-7.25).

7.18 Agricultural Land Tax. Taxes on farmland, which have remainedunchanged since 1967/68, form one means of revenue mobilization. They couldbecome an important vehicle for indirect recovery of public investment inirrigation. They average about NRs 35/ha in the project area, but varyaccording to land grade. Despite the low rates and the numerous exemptionsand rebates, the rate of collection is not very high. For example, in ParsaDistrict, out of a total assessment of NRs 3.0 M in FY 1984/85, only aboutNRs 1.8 M (60 percent) was collected. The Bank's 1985 Economic Report 1/recommended that HMGN should raise the land tax to achieve an average effec-tive tax rate of 1.5 percent of agricultural output and institute periodicadjustments for inflation.

7.19 Present Water Charges. Water charges have so far been introducedonly in a few donor-financed irrigation projects, including projects financedby IDA. In the case of Narayani project, the NZIDB charges project farmersat a rate of NRs 100/ha for irrigating a one-season crop and NRs 200/ha forsugarcane. This is equivalent to an average of about NRs 140/ha per year inthe completed parts of NEC command at the presently reported irrigationintensities. A flat charge of NRs 200/ha/yr is levied for public tubewellwater. The recovery from surface water has been poor; for example, from thetotal assessment of NRs 1.67 M in 1983/84, only about NRs 0.21 M (13 percent)was collected; present rates of recovery are only fractionally higher. Thepoor recovery reflects in part the farmer's reluctance to pay for an unreli-able and inequitable service. The recovery from project tubewells has beensignificantly better, in part, because of the more reliable and equitableservice and, in part, because of more effective enforcement (a farmer issupplied with water only upon the presentation of payment for the lastdelivery). From the total assessment of NRs 173,200 for groundwater in1983/84, about NRs 120,000 (70 percent) was collected.

1/ See "Nepal--Prospects for Economic Adjustment and Growth," World Bank,1985.

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7.20 Farmer's Ability to Pay Water Charges. To assess the farmers'ability to pay water charges, the project rent 1/ has been estimated. Atfull development, this would average about NRs 4,740/ha (Annex 1,Table 13.1). Although, in the intermediate period the rent would be con-siderably lower, the rent indicator shows that there would be scope forincreased cost recovery in the future. The rent resulting from irrigation isreflected by the difference in values between irrigated and rainfed lands.Land with assured irrigation near the NEC and on head reaches of MSCs seLlsfor about NRs 130,000/ha, while the unirrigated land on the left bank of theNEC is valued at about NRs 70,000/ha. Land prices at the tail end of the NECsystem also reflect the lack of assured irrigation and are similar to thoseabove the NEC.

7.21 Present Assessment and Collection Procedures. The nationwide legalbasis for the assessment and collection of water charges is laid down in the"Irrigation, Electricity and Related Resources Act, 1968." According to theAct, water charges are not taxes, but user fees charged to farmers for theirrigation service. However, the existing law establishes only the basicprinciples. In irrigation schemes where there is no Irrigation DevelopmentBoard, water charges are determined by HMCN and the dues are collected byDIHM. In schemes with a Board, e.g. the NZIDB, the level of water charges isrecommended to HMGN by the Board. On the basis of this recommendation, HMGNdetermines the rate; the dues are then collected by the Board (paras 5.06 and5.10) and paid into the general revenue account of the Treasury. This systemhas been in effect since 1982/83. Previously, project staff were responsibleonly for recommending the assessment; water charges were collected fromlandowners, along with land taxes, by the staff of the District Office of theLand Revenue Department (RD). It was believed that transferring respon-sibility for collection of water charges to the project would be a steptoward making it financially independent. However, these expectations didnot materialize.

7.22 Present Constraints to Cost Recovery. The present poor quality ofthe irrigation service is the main reason why farmers do not pay water char-ges in the Narayani or other government irrigation schemes. However, while areliable service is a prerequisite to improved recovery, it is unlikely toresult in significant improvements without an appropriate collectionmechanism. Present collection arrangements are unsatisfactory. The lawprovides DIHM with only limited support and incentive to improve costrecovery. Verification procedures to ascertain that irrigation water has infact been delivered to a farmer's field are unclear. Although the projectauthorities are responsible for collecting charges, they have no legalauthority to enforce payments.

7.23 Proposed Improvements. Covenants for recovering O&M costs, and suchportion of capital costs that lie within the farmers' payment capacity, existin major irrigation projects supported by IDA (Mahakali, Bhairawa-Lumbini,Narayani II, and Sunsari-Morang) as well as those supported by the AsianDevelopment Bank; between them, they cover over 95 percent of all public

1/ The project rent is equal to the net incremental income l2ss the neces-sary rewards to the farm family for its labor, entrepreneurship, andcultivation risk.

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schemes in the Terai. Most of the projects have a Board with authority todetermine the level of water charges. However, HMGN has difficulty in com-plying with these covenants prior to providing a reliable irrigation service,an important objective of all these projects. Therefore, any improvement incollection rates, and the imposition of realistic charges, must necessarilyfollow the provision of a reliable, equitable service and adequate, verifi-able documentation of deliveries. Moreover, assessment procedures should besimplified, for example, by replacing the existing rates with a flat rateper hectare per year irrespective of the crops grown, which would eliminatethe need for a detailed examination and verification of the crops actuallyirrigated. This would be feasible since each farmer will have access to thesame amount of water per unit area. Other IDA-supported irrigation projectsin the Terai are planned on similar principles and could therefore eventuallyalso charge a flat rate if the system proves successful. Further, if collec-tion were to become the duty of RD, which has the experience and the legalauthority to secure payments, rates of collection should also improve.

7.24 Accordingly, an agreement has been reached with HMCN that it would:(i) by December 31, 1986, (a) introduce a flat rate of NRs 200/ha/yr on allcommandable land in the Narayani Scheme that receives a regular surface watersupply; (b) increase water charges in the Birganj Groundwater Scheme toNRs 400/ha/yr; (ii) by July 16, 1987, assign its Revenue Department with theresponsibility of collecting water charges in the Narayani Scheme; and(iii) by August 31, 1988, and thereafter every two years: (a) review and, ifrequired, revise the collection procedures of water charges in the projectarea; and (b) adjust, as required, the rates of water charges to cover byfiscal 1993; and thereafter, full costs of operation and maintenance of theirrigation schemes under the project and a reasonable portion of capitalexpenditures, taking into account the farmers' payment capacity.

7.25 Agreement has been reached with HMGN that it would by April 1, 1989,prepare and furnish IDA, for its review and comments, with the results andrecommendations of a study undertaken under terms of reference satisfactoryto IDA on all major irrigation projects in Nepal for implementing therein theimproved cost recovery measures introduced under this project, and there-after, taking into account IDA's comments, if any, on the basis ofappropriate recommendations of such study, implement cost recovery measuresfor such major irrigation projects. Such terms of reference will includeassessment of: (i) the need to rehabilitate the water distribution system,(ii) farmers' capacity to pay, and (iii) the availability of reliable watersupply in each such major irrigation project commanding not less than2,000 ha.

7.26 Cost and Rent Recovery Under the Project. Cost and rent recoveryindices are estimated at 13 percent and 16 percent, respectively (Annex 1,Table 13.2). The estimates have been based on the following assumptions:(i) a flat rate of NRs 200/ha/yr would be charged in completed irrigationblocks provided with a reliable irrigation supply; (ii) water charges wouldincrease in real terms at about the same rate as the projected increases inproductivity to gradually cover all O&M costs; and (iii) assessments would befuLly collected.

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VIII. BENEFITS AND JUSTIFICATION

Project Impact

8.01 The project impact in terms of increased agricultural production,employment generated, farm families benefited, and value added to the localeconomy is summarized in the following table:

Stage I & II Stage III Total Area

Increase in irrigated area (ha) 5,800/a 8,700 14,500Increased foodgrain production (tons/yr) 42,775 22,715 68,490Increased oilseed production (tons/yr) 5,800 960 6,760Increased sugarcane production (tons/yr) 13,685 3,130 16,815Directly, benefiting farm families (nos.) 24,100 7,400 31,500Generated farm employment

(men-year equivalent) 7,040 2,260 9,300Value added to the local economy (NRs M/yr) /b 140 66 206

/a About 20 percent of the already developed command (various tail end parts)which does not receive irrigation at present would be fully integratedinto the system.

/b Defined as the sum of gross farm incomes minus cash inputs (excluding labor).

8.02 Employment Effects. The increase in employment opportunities result-ing from project activities would come from: (i) construction works; (ii)intensification of agricultural pro4uction; and (iii) transport, marketing,and processing. It is estimated that labor employed during the main con-struction period (November - April) over the next seven years would averageabout 7,500 jobs per day. Labor requirement for a typical cropping patternis expected to increase from 150 man-days ha at present to about 220man-days/ha at full development. Thus the project would create about 10,700full-time farm jobs, with additional employment generated in transportation,marketing, and processing of incremental production.

Economic Analysis

8.03 Main Assumptions. The assumptions in the economic analysis aredetailed in Annex 3 and are summarized below:

(a) Prices and Conversion Factors. Agricultural output was valued onthe basis of June 1985 IBRD projected world market prices (1986through 1995) expressed in 1986/87 currency values with appropriateadjustments for freight, handling, and processing. Nontradedfoodgrains and other nontraded goods and services were adjustedthrough the use of two conversion factors: (i) Standard (SCF-0.90)and (ii) Construction (CCF-0.90). Thq shadow wage rate (NRs7.8/man-day) has been derived as a weighted average of the observedmonthly rates and adjusted by the SCF. The opportunity cost ofcapital (OCC) in Nepal was assumed it 10 percent. A summary ofeconomic prices is given in Annex 1, Table 12.

(b) 'Without' and 'With' Project Situation. Average annual growth rateof 3.2 percent achieved in Nepal over the 1980/81 to 1984/85 periodhas been assumed for the 'future without project' situation. The

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projections for the 'future without' and 'future with project' situa-tions were based on cropping patterns and yields (Annex 1, Table 2),developed from field surveys, results of monitoring and evaluationstudies and district agricultural statistics.

(c) Benefits Build-up Rates. The increase in agricultural productionbenefits was based on: (i) a seven year build-up period for transi-tion of yields from the 'present' to 'future with project' situation;(ii) a build-up period of three years for the transition from'present' to 'future with project' crop intensities; and (iii) rateof remadeling of existing, and completion of new irrigated areas inline with the project implementation schedule.

(d) Project Cost. The economic cost streams include the cost of projectcivil works (including establishment, consultant services, and physi-cal contingencies) required for the completion of the entire Narayaniirrigation system, the opportunity cost of land lost due to construc-tion of the canals, the cost of O&M, and of upgrading and maintenanceof the road network. The economic costs are derived from the cor-responding financial ones excluding taxes and adjusted by theappropriate conversion factors.

8.04 Economic Rate of Return (ERR). The ERR and the Net Present Value(NPV) were separately estimated for Stages I and II and Stage III areas. Theresults, summarized below, and detailed in Annex 1, Table 14.1 to 14.4,indicate that the entire project, as well as each of its components, would beeconomically viable.

ERR NPV /a717 (NRs/hia)

Stage I and II areas (28,700 ha) b/ 22 15,675Stage III area (8,700 ha) 19 18,370Total NEC command area (37,400 ha) 21 16,300

a/ Discounted at 10 percent interest which is the estimated OCC in Nepal.b/ The ERR would decline to 19 percent if the sunk cost of the Stage I

and II projects were included.

Sensitivity Analysis

8.05 A sensitivity analysis was conducted to determine the effects ofdeviations from the main assumptions on the economic viability of theproject. The measure of sensitivity used, the 'switching value', is thevalue of the variable tested which would reduce the present value of theproject's net incremental benefits discounted at 10 percent (OCC) to zero.The main results are in the following table:

Stage I & II Areas Stage III Area Total Project

Variable AP SV Change AP SV Change AP SV Change

Net IncrementalBenefits (NRs M) /a 701 252 -64% 299 139 -54% 1,000 391 -61%ConstructionCosts (NRs M) 195 645 +231% 105 +265 +152% 300 910 +203%AP - Appraisal Value, SV - Switching Value/a Costs and benefits discounted at 10 percent interest.

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8.06 Additional sensitivity tests conducted are summarized below:

(a) HMGN Funding of O&M Cost. The funding of O&M cost would be supportedon a decreasing scale by SDC so that by the end of the implementationperiod HMGN would finance the entire cost of O&M from its recurrentbudget (para 3.31). However, if O&M support were to be inadequate(para 3.32), the achievement of expected development impact would beseriously jeopardized and irrigation service to farmers would revertto the level currently in the Stage I and II areas. It is estimatedthat if O&M allocations were to be reduced by 50 percent of require-ments, irrigation benefits would gradually decline to about NRs2,000/ha by the year 2000. Under these circumstances the ERR for theproject would decline to 11 percent.

(b) Commodity Prices. A reduction in the price of either paddy or wheatthe main crops in the project area) by 25 percent would reduce theERR by less than one percentage point.

(c) Implementation Delays. Major civil works would be packaged underone contract to attract competition from large contractors. However,the nature of the works may force the execution of civil worksthrough a series of small contracts which could delay construction(three years delay was assumed) and result in higher cost (20 percentcost increase was assumed). Under these circumstances the ERR woulddecline to 18 percent for the Stage I and II and to 15 percent forthe Stage III area, respectively.

(d) Reduction of Implementation Period to 5 years. A reduction in thetime required to complete the project from seven years (base case)to five years would increase the ERR from 21 percent to 23 percent;and the NPV would increase from NRs 16,300/ha to NRs 19,100/ha.

(e) Increase in Sugarcane Area. An increase in the area planted tosugarcane from 3 percent expected at full development in the 'withproject' situation to about 8 percent would lower the ERR only mar-ginally. Overall project profitability would remain unchanged at 21percent.

Project Risk

8.07 Apart from deviations from main assumptions analyzed above, the netbenefits and/or the equity of their distribution could be affected by thefollowing specific conditions or events:

(a) Surface Water Supply. The Indian authorities could fail to supplyNEC with water from the Don Branch in the quantities assumed. Thisrisk is small (except in the case of major damage to the Don BranchCanal, see (b) below) as supplies potentially available in the GandakRiver are more than adequate (para 2.06). In fact, with bettercoordination between the project authorities and the Bihar authorityresponsible for management of the Indian Eastern Canal system(BRVPD), it is likely that, the assumed supply will be improvedparticularly with respect to the present pre-kharif closure.

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(b) Major Flood Damage to the Don Branch or NEC. Both canals crossdifficult terrain and have many cross-drainage structures over riversand torrent streams. Experience has shown that these canals andtheir associated structures are susceptible to flood damage; majorfloods could lead to a prolonged closure. However, in the past, boththe Indian and Nepalese authorities have been able to repair anydamage quickly, so that the risk is small of interruption to suppliesfor a period that would significantly affect crop yields.

(c) Inadequate Water Management. Many of the benefits, particularly inthe Stage I and II areas, are predicated on the assumption that thesystem would be managed in such a way as to provide a secure, equi-table, and timely water supply to all the farmers in the command.The system improvements proposed to achieve these ends would makeoperation of the secondary and tertiary canals a relatively simpleprocedure involving only a limited number of major control points.The project would define the operationaL procedures necessary toattain the required management capability levels and would train theconcerned project staff and the WUCs in their respective operationalroles. Nevertheless, implementation of any management system demandsthe cooperation of the farmers, and the possibility of managementfailure is a greater risk, particularly in view of the lack of dis-cipline among the farmers in earlier projects. However, this problemdeveloped at least in part because the system could not be managedproperly owing to design deficiencies. That is to say, there was nocontrol over allocation of the water supply since farmers locatednear the NEC and on the upper reaches of the secondaries had a markedadvantage. Since in the future, it will be possible for the projectauthorities to manage the canal system in a manner that is lesssusceptible to abuse, and the WUGs would be strengthened and accordedlegal status, the risk of a major failure with respect to watermanagement would be greatly reduced.

(d) Agricultural Objectives. The expected agricultural production isbased on crops with which the farmers have long experience, and theproposed changes of the cropping pattern are small. They are sup-ported by known and tested cultural practices. Such practices havebeen adopted by many farmers in the project area with access to arelatively secure water supply. Therefore the risk of not attainingthe assumed crop yields and cropping patterns is small.

The above discussion and the results of the sensitivity analysis indicatethat only large deviations from the basic assumptions would make the economicviability of the project doubtful.

Environmental Effects

8.08 The main water-related diseases on the Terai are malaria and typhoid.The latter relates to drinking water supply, but the project would havelittle direct impact on the supply. Improvements to the drainage systemwould result in less ponding of wastewater, but given the preponderance ofrice paddies in the wet season (both with or without the project), this wouldnot effectively reduce mosquito breeding sites in the kharif. HMGN hasabreed to take all the necessary measures to minimize the risk of malaria andother water-related diseases within the project area.

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IX. AGREEMENTS REACHED AND RECOMMENDATIONS

9.01 Agreements have been reached with HMGN that it would:

(a) by July 1, 1987, issue all the necessary authorizations and permitsto commence operation of the internal radio communication system(para 3.24);

(b) employ consultants whose qualifications, experience, and terms andconditions of employment are satisfactory to IDA, and select them inaccordance with Bank/IDA guidelines on employing consultants (para3.26);

(c) through NZIDB: (i) carry out, by December 31, 1986, under terms ofreference satisfactory to IDA, a detailed study of the physical andbudgetary requirements for operation and maintenance of the worksunder the project; (ii) furnish, by June 30, 1987, to IDA for itsreview and comments, a report summarizing the results and recommenda-tions of the study; and (iii) taking into account IDA's comments, ifany, implement the results and recommendations of such detailed study(para 3.32);

(d) on March 31 of each year, commencing on March 31, 1987, and there-after, furnish to IDA for review and comments, its estimates for theirrigation schemes and related facilities in the project area for theforthcoming fiscal year of: (i) salaries and allowances for projectstaff; and (ii) operation and maintenance costs (excluding estab-lishment costs) (para 3.33);

(e) ensure that the planning, design, construction, upgrading, and opera-tion and maintenance of project works would be carried out in accord-ance with standards satisfactory to IDA (para 3.34);

(f) promptly provide resources and funds to execute the project inaccordance with the agreed implementation program and expenditureschedules (para 4.02);

(g) cause DIHM, and NZIDB to: (i) maintain separate records and accountsfor all project expenditures in accordance with appropriate account-ing principles; (ii) furnish to IDA such accounts, including theSpecial Account (SA), audited by an independent auditor acceptable toIDA, in accordance with sound auditing principles; (iii) forward toIDA such accounts, together with the auditor's reports, within ninemonths after the end of each fiscal year; (iv) include in the annualaudit reports, submitted to IDA, a separate opinion from the auditoras to whether the disbursements made on the basis of statements ofexpenditure were in respect to goods and services received andincurred for the purposes of the project (para 4.14);

(h) at all times, maintain in the position of General Manager of NZIDB an.officer whose qualifications, experience, and terms of referenceshall be satisfactory to IDA (para 5.04);

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(i) on December 31 of every second year, commencing on December 1987,in consultation with IDA, review, and if reo'uired, revise the ProjectGeneral Manager's limits of contractual commitments for the operationand management of the project (para 5.09);

(j) at all times provide all staff positions required for effectiveproject management (para 5.11);

(k) cause NZIDB to: (i) furnish IDA for its approval by January 1, 1987,the overall training program; (ii) by January 1 of each year, com-mencing on January 1, 1987, furnish to IDA for its approval, theannual training program for the following Borrower's fiscal year and(iii) thereafter, on April 1 of each year, implement such trainingprograms as so approved (para 5.13);

(1) take all such action as shall be necessary to ensure quality controLof planning, design, construction, upgrading, and operation andmaintenance of project works (para 5.14);

(m) (i) furnish to IDA, commencing on January 1, 1987 and thereafter,until the completion of the project, semiannual project progressreports in the scope and detail acceptable to IDA, and submit themwithin two months after the end of each reporting period; and(ii) submit IDA not more than six months after the completion of theproject, a project completion report in the format agreed with IDA(para 5.17);

(n) cause the NZIDB to: (i) by June 30, 1987, conduct a base-lineagro-economic survey, under terms of reference satisfactory to IDA,and submit to IDA for its review and comments, a report summarizingthe results and conclusions of the survey; (ii) taking into con-sideration IDA's comments on the initial survey, repeat the surveyevery two years and submit, by June 30, 1989, 1991 and 1993, to IDAfor its review and comments, reports summarizing the results andconclusions; and (iii) as a result of the above surveys, take suchremedial action as necessary (para 5.18);

(o) by June 30, 1987, appoint a second Assistant Agricultural DevelopmentOfficer and a Subject Matter Specialist for irrigated agriculture toeach of the three project districts, together with supporting officestaff, and equipment, under functions and terms of reference satis-factory to IDA (para 5.19);

(p) by June 30, 1987, establish, and thereafter maintain an adaptive farmplanning research program with terms of reference satisfactory toIDA, aimed to support the agricultural objectives of the NarayaniScheme, under the technical supervision and control of the Borrower'sDepartment of Agriculture (para 5.20);

(q) by July 1, 1991, prepare and furnish to IDA for its review and com-ments, a proposal relating to the organizational arrangements foroperation and maintenance of the irrigation schemes and relatedfacilities in the project area to be established within its Irriga-tion Department; such organizational arrangements, satisfactory toIDA, would be implemented starting July 1, 1992 (para 5.23);

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(r) by January 31, 1987 adopt, and thereafter implement a detailed watermanagement plan satisfactory to IDA for the irrigation scheme in theproject area (para 6.09);

(s) establish Water Users' Groups (WUGs) as follows: (i) in tertiarycommands where there is already an irrigation service by December 31,1986; and (ii) in tertiary commands to be brought under irrigationnot less than six months before the tertiary is scheduled to beginoperation (para 6.12);

(t) by September 31, 1987, take all such actions as shall be necessary toconstitute the Water Users' Groups as statutory bodies, with suffi-cient power to (a) supervise the distribution of water among itsmembers in proportion to the size of their landholding; (b) cause itsmembers to construct and maintain the required field channels,including field drainages adjoining their holdings and any othersection of the field channels and field drainages that does not skirtcommandable areas; and (c) in case of default, arrange for suc~h workto be done at the cost of the defaulters; provided that, in the eventthat a Water Users' Group does not carry out such maintenance work,the Borrower shall, at the expense of such Water Users' Group, carryout the construction and maintenance work in question (para 6.15);

(u) (i) by December 31, 1986, (a) introduce a flat rate of NRs 200/ha/yron all commandable land in the Narayani Scheme that receives aregular surface water supply; (b) increase water charges in theBirganj Groundwater Scheme to,'NRs 400/ha/yr; (ii) by July 16, 1987,assign its Revenue Department with the responsibility of collectingwater charges in the Narayani Scheme; and (iii) by August 31, 1988,and thereafter every two years: (a) review and, if required, revisethe collection procedures of water charges in the project area; and(b) adjust, as required, the rates of water charges to, cover byfiscal 1993, and thereafter, full costs of operation and maintenanceof the irrigation schemes under the project and a reasonable portionof capital expenditures, taking into account the farmers' paymentcapacity (para 7.24);

(v) by April 1; 1989, pr,'pare and furnish IDA, for its review and com-ments, witfi the results and recommendations of a study undertakenunder terms of reference satisfactory to IDA on all major irrigationprojects in Nepal for implementing therein the improved cost recoverymeasures introduced under this project, and thereafter taking intoaccount IDA comments, if any, on the basis of appropriate recommenda-tions of such study, implement cost recovery measures for suchirrigation projects. Such terms of reference will include an assess-ment of: (i) the need to rehabilitate the water distribution system;(ii) farmers' capacity to pay; and (iii) the availability of reliablewater supply in each major irrigation prpject commanding not lessthan 2,000 ha (para 7.25); and

(w) take all measures as may be considered necessary to minimize the riskof malaria and other water-related diseases within the project area(para 8.08).

-54-

9.02 Conditions of effectiveness would be that:

(a) designs, which must be satisfactory to IDA, have been completed forat least the 1986/87 construction season, (para 3.34);

(b) HMGN have authorized all staff position required for the project in amanner satisfactory to IDA (para 5.11); and

(c) all conditions, precedent to the effectiveness of the Swiss Contribu-tion Agreement have been fulfilled.

9.03 With the above agreements, the proposed project would be suitablefor a credit of US$24.5 M on standard IDA terms and a grant of US$7.5 M onstandard SDC terms. The Borrower would be His Majesty's Covernment of Nepal.

-55-

ANNEX 1

NEPAL

NARAYANI III IRRIGATION PROJECT

MAin Supporting Tables

Tables

1 - Salient Climatic Data2 - Present and Future Cropping Patterns and Yields3 - Existing and Future Staff Requirements - Agricultural Extension4 - Vehicles and Construction Equipment5 - Office, Survey, Design and Supervision Equipment6 - Estimated Schedule of Expenditures7 - Disbursement Schedule8 - Credit/Grant Allocation9 - Existing and Future NZIDP Staff Requirements10 - Project Irrigation Requirements and Flow Rates11 - Agricultural Production and Input Requirements12 - Summary of Financiai and Economic Prices13.1 - Estimated Farm Budgets and Project Rent at Full Development13.2 - Estimated Project Rent and Cost Recovery14.1 - Stage I - Cost and Benefits for Economic Analysis14.2 - Stage II - Cost and Benefits for Economic Analysis14.3 - Stage III - Cost and Benefits for Economic Analysis14.4 - Total Project - Cost and Benefits for Economic Analysis

-56- ANNEX 1Table 1

NEPAL

NARAYANI III IRRIGATION PROJECT

Salient Climatic Data

Mean Average PanTemperature Rainfall Evaporation

(OC) (mm) (mm)

January 15.7 15.5 74.4

February 17.8 18.2 78.4

March 22.8 12.8 148.8

April 27.5 37.9 213.0

May 29.7 87.7 220.1

June 20.0 218.0 186.0

July 29.5 442.9 161.2

August 29.1 258.0 148.8

September 28.8 231.1 129.0

October 26.5 82.2 105.4

November 21.5 4.9 84.0

December 17.2 6.3 65.1

Total/Average 24.6 1,414.7 1,614.2

ANAUhhI III IaixMiOu ft0JNC?

Prenami and ftta. C an rattrs An" i.

Stan. I (15.900 ha) Stamm I1 (1280 be) Aae (8Ml 00 b2)

p i P ii v * It v

e~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A lld Ani e ede fl LA )( {J

Lice U 3.2 94 3.4 94 4.2 96 3.0 ff 3.2 94 4.2 95 2.5 95 3.0 92 4.2

tegnrcan. I 17.0 3 25.0 3 40.0 2 16.0 3 23.0 3 40.0 2 20.0 2 22.0 2 40.0

Vegetableas 1 30.0 1 35.0 1 40.0 1 30.0 1 35.0 1 40.0 3 27.0 3 30.0 3 40.0

lbat 35 2.0 35 2.2 S0 3.2 31 2.0 33 2.2 50 3.2 24 1.0 24 1.0 49 3.2

Oileeds I 0.8 3 1.0 16 1.2 4 0.8 4 0.9 16 1.2 6 0.7 4 0.8 16 1.2

vote" 2 0.5 4 O.A 11 0.8 3 0.5 5 0.o 11 0.8 5 0.4 5 0.4 11 0.8

Total ltasity- bart 137 142 175 137 142 175 135 135 173

lad occupacsy 139 145 178 139 145 178 13t 137 175

la, Vegetables are a blead of laf, tuber and fruit vegetables. homene the yield is ,otionel.1k lend occupancy intemaity slhow bow the fern is used. Sugarcane occupies tbe land

for the full year, beanc the blagber figure.

-58- AN"NEX 1

Table 3

NARAYANI III IRRIGATION PROJECT

Exisia and putlre Staff Reguireuets - Aaricultural ExtensioQ

Organization and Present PostStaff Category status 86/87 87188 88/89 A8.919 2% LL 5IL%2 921 Cosujy.tsn

AgriculturalExtension Serlice

Pars& District.

DADO 1(1) 1 1 1 1 1 1 1 1AADO District 1(1) 1 1 1 1 1 1 1 1AADO Irrigation -(-) 1 1 1 1 1 1 1 1Sms 2(2) 3 3 3 3 3 3 3 3JT 23 (26) 23 23 23 23 23 23 23 23JIA 20 (31) 20 20 20 20 20 20 20 20PLAA 121 (143) 121 121 121 121 121 121 121 121

Bara Distr ct

DADO 1(1) 1 1 1 1 1 1 1 1AADO District 1(1) 1 1 1 1 1 1 1 1AADO Irrigation -(-) 1 1 1 1 1 1 1 18M8 2(2) 3 3 3 3 3 3 3 3JT 17 (22) 17 17 17 17 17 17 17 17JTA 11 (27) 11 11 11 11 11 11 11 11PLAA 54 (134) 54 54 54 54 54 54 54 54

RAuthat District

DADO 1(1) 1 1 1 1 1 1 1 1MADO District 1(1) 1 1 1 1 1 1 1 1AADO Irrigation -(-) 1 1 1 1 1 1 1 1sms 2(2) 3 3 3 3 3 3 3 3JT 2(12) 2 2 2 2 2 2 2 2JTA 5(34) 5 5 5 5 5 5 5 5PLAA 15 (101) 15 15 15 15 15 15 15 15

AIC and ADBN Liaison

AIC 1 1 1 1 1 1 1 1 1ADBN 1 1 1 1 1 1 1 1 1

Figures in parentheses indicate district totals.DADO - District Agricultural Development Office;AADO - Assistant Agricultural Development Officer; 8N8 S Subject Matter Specialist;JT - Junior Technician; JTA - Junior Technical Assistant.

ANNEX 1-59- Table 4

NEPAL

NARAYANI III IRRIGATION PROJECT

Vehicles and Construction Equipment

Total Method ofItem Description Quantity Unit Cost Base Cost Procurement

(NRs '000) (NRs '000) (ICB)A. New Items

1. Angle dozer, 12 tons 2 1,205.2 2,410.3 ICB

2. Wheel Loader, 1.4 m3 1 982.0 982.0 "

3. Motor grader, 3.1 m 1 1,071.2 1,071.2 "

4. Tire roLler, 8/16 tons 2 720.5 1,441.1

5. Macadam roller, 8/10 tons 2 605.8 1,211.5

6. Dump truck, 4 tons 4 338.0 1,351.8

7. Water sprinkling tanker;6000 lit. 1 497.4 497.4 it

8. Fuel tanker, 2000 lit. 1 242.3 242.3

9. 4 WD type vehicle 5 199.0 994.7 t

10. Pick-up truck 3 174.3 523.0 to

11. Motor cycle 10 15.0 153.0 LTD /a

12. Bicycle 20 1.3 25.5 "

13. Portable diesel generator,5 KVA 3 58.3 174.8 "

14. Spare parts for above (20X ofcost) sum - 2 207.5 "

Sub-total 13,286.2

B. Existing vehicles and equipment

1. Spare parts sum - 5,779.0TOTAL 19,065.2

/a Limited International Tendering.

-60- MLITable 5

W-L

M AFS A III SIRG&TI MA PROJECT

Officg, Survey, Deua and Sunervision Eanimnt

Totallte Descrilption guagaitv 21t C08st I sl CUt

A. Office Ecuinment

1. Personal Computer with voltage stabilizer 1 186.2 186.22. Photocopy machine with voltage stabilizer 1 79.1 79.13. Blue copy machine witb voltage stabilizer 1 66.3 66.34. Air conditioner 5 165.8 828.95. Spare parts for above (202 of cost) sun - a

Sub-total 1,266.4

B. Survey Ecuiment /J

1. Theodolite witb tripod 4 53.0 212.02. Auto level witb tripod 7 18.0 126.03. Electric distance (ceodimeter) 1 140.0 140.04. Plane table with alidade and tripod. 4 5.0 120.05. Stereoscope 1 14.0 14.06. Survey Staff, 5S 12 1.0 12.07. Survey staff, 3a 24 0.8 19.28. Survey pole, 2. 20 0.7 14.09. Camping sets 6 7.0 42.0

10. steel tape, lo0 3 3.0 9.0II. Steel tape, 50m 3 2.0 6.012. Linen tape, 50. 6 1.0 6.013. Linen tape, 30. 12 0.8 _.J9

Sub-total 729.8

C. Dsin guinment /lg

1. Progrsmmable calculator witb printer, cassetterecorder and interface 2 20.0 40.0

2. Drafting equipment with table and lights 6 16.0 96.03. Lettering set 6 3.0 18.04. Planimeter with calculator 4 5.0 20.05. Curvimeter 4 5.0 2.06. Drawing sheets sum - 15.07. Tracing paper sum -__

Sub-total 200.0

D. utervision Eauiument

1, Rand auger 2 10.0 20.02. Cone penetrometer 1 15.3 15.33. Moisture and dry density measuring equipment 2 330.3 660.64. Schdidt hamer 2 17.9 3575. Current meter 1 42.1 A"

Sub-total 803.0

TOTAL 2,999.2

/I Equipment required for project establishment.

06661061 III 106106110 UWECEmtlNted Scedule of Ripead1t"rO

otael. IflledIa 7 Cu t1_hs .. Totals Including c nti ngo-toomass 1ii,, Ws iIISion)$68 818 86M 80Ot Itl 12M t@t*I 81/8 61186 86/69 SOM 90/91 91192 92/ totalzs*5c asset stage *Ua *85 9 ***-**t*-t5t$e ex-3w tsagtas sags *2=: sxagas 2Uzza szz-_T S=-=5A. NEC Itprvi_nt ad _oair$ of Tfloa Uara t155 It0. 120 1 4 .0 1.0 - .sS 0. 6 s 0.6 0.6 0.4 0.0 - 2.9V. 1n1i.t1an end Ssfnp Stags III fe 3.? 6.2 11.6 31.3 5 .4 26.6 17.0 140.0 0.2 0.4 0.9 I.5 t.? 1.3 0.6 S 6t Ielbigstion,WOfage. Istag,I ad!I fr.1d 0.8 6S 3.6 38 L2 26. 1L.2 & L 10o.3 0.0 0.3 1.0 1.4 1.2 0.6 0.2 S.00. Flood Cmntrol and tivr Trsbfngf - I6,3 13 Il . - - - 43.6 - o.8 0.8 0. - - - 2.1E. I_gading of bed Ustusch 2.2 6.2 1.2 1. 8.2 . t6 6.t 49. 0.1 0.3 0.4 0.4 0.4 0.4 0.4 2.4F. Wpuu_t and Ondlo-(44mnlteaton System 24.9 1.3 1.4 I'S 1.6 I.T 1.8 34.3 1.2 0.t 0.1 0.1 0.1 0.1 0.1 t.?6. bgIioalW wshop 4.2 6. t0.2 1.9 2.0 2.t 2.2 2a8 0.2 0.3 0.S 0.1 0.1 0.1 0.1 1.4It. Teaficat Sepot 26.3 17.6 17.4 1.6 1S.4 9.t 4.0 1065 1.3 0.9 0.8 0.8 0.9 0.4 0.2 S.31. (stabli1t1int. Oerationnd Btntence 11.9 1t.1 20.2 22.1 23.S 24.? 23.9 14S.5 0.6 0.8 1.0 1.t 1.1 1.2 1.2 t.0d. tad Iqlasition an Crp C_spsAtion 0.9 t.0 2.4 3.0 3.2 3.4 3.5 t1.S 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.9

Total PaCT COSTS 90.6 129 I1135.3 2t.2 92.6 C46 M.1 4.4 4.4 &I 6.6 6.2 4.6 3.1 3S.5

. .~~~~~~~~~~~~F

to

NEPAL

NARAVANI III IRRIGATION PROJECT

Disburseaent Schedule /a(USS N)

IDA Credit SOC Grant /b IDA Credit and SOC GrsntIDA Fiscal Year During During Duringand Semester Semester Cumulative Semester Cumulative Srmester Cumulative

1987

2nd 0.8 0.8 0.2 0.2 1.0 1.0

1986

1st 1.0 1.8 0.3 0.5 1.3 2.32nd 1.3 3.1 0.4 0.9 1.7 4.0

1989

Ist 1.5 4.6 0.5 1.4 2.0 6.02nd 1.9 6.5 0.6 2.0 2.5 8.5

1990

1st 2.0 8.5 0.7 2.7 2.7 11.22nd 3.0 11.S 0.8 3.S 3.8 1S.0

1991

$st 3.5 15.0 0.8 4.3 4.3 19.32nd 3.0 18.0 0.8 5.1 3.8 23.1

1992

Ist 2.0 20.0 0.7 S.8 2.7 25.82nd 1.7 21.7 0.6 6.4 2.3 28.1

1993

1st 1.3 23.0 O.S 6.9 1.8 29.92nd 1.0 24.0 0.4 7.3 1.4 31.3

1994

1st 0.5 24.5 0.2 7.5 0.7 32.0

/a Based on the Nepalese irrigation sector disbursement profile.

/b SDC grant is in Swiss Francs (SF) and amounts 15 M SF; the present US Dollar equivalentof 7.5 M may vary with exchange rate movements. FE

-63-

ANNEX 1Table 8

NEPAL

NARAYANI III IRRIGATION PROJECT

Credit/Grant Allocation

Amount ofcredit/grant

Caterorv allocated Percentage Financed

IDA SDC /l

1. Civil works: 18.0 1002

2. Equipment, vehicles and 2.4 1002 of foreign expenditures,workshop equipment 1002 local expenditures of

ex-factory costs and702 of other locally

procured items.-

3. Technical services and studies:

(a) Consultancies and studies 3.5 lOO1

(b) Training, agricultural researchand monitoring and evaluation 0.4 100l

4. Project establishment andOaM costs (excluding salaries) 2.4) 902 in FY 87-89

} 702 in FY 90-91} 50 in FY 92} 252 in FY 93

5. Salaries and allowances of staff /b 1.6) 902 in FY 87-89} 702 in FY 90-91} 50%in FY 92) 25% in FY 93

6. Unallocated 3.7 7

Subtotal 24.5 (7.5

TOTAL 32.0

la Swiss Development Cooperation/b For administrative feasibility, disbursements would be made against

totai salaries and allowances; the declining disbursement rate would meanthat grant allocation represents in the aggregate 85% of the salariesand allowances of incremental staff.

/£ St 15.0 X

-64-ANNEX 1Table 9

NEPAL

NARAVANI 111 IRRIGATION PROJECT

Existina and Futuro NZIDP Staff Requirements

Division and Present PostStaff Category Stetus 86/87 87/88 886/89 89/90 90/91 91/92 92/93 ProJect

Finance and AdministrationDivisions

Chief AeCountant I I I I I I 1 aSenior ACcountant 2 2 2 2 2 2 2 2 2Section Officer I a I I a I a 1 IOfficer Assistant 3 3 3 3 3 3 3 3 3Accountant 2 2 2 2 2 2 2 2 2Junior Office Assistant 4 4 4 4 4 4 4 4 4Assistant A4countsnt 4 4 4 4 4 4 4 4 4

Design and ConstructionDivision

Ezecutive Engineer I I I I I 1 t I

Desian and Survey Section

Divisional Engineer - 1 1 1 a 1 1 IAssistant Engineer - 12 12 12 12 12 12 12Overseer - 24 24 24 24 24 24 24DOaftstan - 12 12 12 12 12 12 12surveyor - 12 12 12 12 12 12 12 -(Laborer) _ 12 12 12 12 12 12 12 -

Construction Section

Divisional Engineer - I I 1 1 1 1 1 -Assistant Engineer 2 2 4 5 5 S 5 4 -Overseer 7 4 8 10 10 10 10 a8 -Supervisor 14 4 8 to 10 10 10 8 -

Operation and MaintenanceDivision

executive Engineer 1 1 I 1 1 1 1 1 1

Ooerations Section

Divisional Engineer - 1 I I I I 1 I I

Water Management Unit

Senior Assistant Engineer I I 1 f I 1 1 IAssistont Engineer - 5 5 5 5 S 5 5 5Overseer II 13 13 14 14 14 14 14 10Supervisor 10 20 30 35 35 30 30 25 15Canal Inspector 400 400 400 350 300 250 200 200 105

Cooperative Unit

Cooperstive Officer 1 1 1 1 1 1 1Senior Assistant Engineer 1 1 1 t 1 t I

WUG Oroaniaation Unit

Assistant Engineer - I I 1 1 1 1 1 1Overseer 1 2 2 4 6 7 7 7Supervisor - 3 12 12 22 32 37 37 37

Water Charge Unit /a

Survey Team Chief 1 1 1 1 I I 1 I ISurvey Inspector 7 7 7 7 7 7 7 7 7Surveyor (Amins) 27 27 27 27 27 27 27 27 27

Maintenance Section

Divisional Engineer I 1 I I 1 1 I 1A5sistant Engina r 3 2 2 2 2 3 3 3 3Overseer 2 4 4 4 4 6 6 6 aSupervisor - 10 10 10 10 12 12 12 a2

mechanical Divisiof'

Divisional Engineer 1 I 1 I i 1Assistant Engineer 1 2 2 2 2 2 2 2 2Overseer 2 2 2 2 3 3 3 3 3Senior Mechanic 3 3 3 3 3 3 3 3 3Auto Electrician 1 1 I 1 I 1 I I 1Machinist - I 1 1 1 1 1 1

Mtonitoring andEvaluation Section

Senior M&E Officer - 1 1 1 I I I I 1M&E Officer I 1 I I 1 1 1 I IJunior Technician I S 5 5 5 5 6 5 6Junior Technical Assistant 3 30 30 30 30 30 30 30 30

/a May rovert to Revenue Department.

-65-

ANNEX ITable 10

NEPAL

NARAYANI III IRRICATION PROJECT

Project Irrigation Requirements and Flow Rates /a

Rice Wheat Oilseeds Pulses Sugarcane Vegetables Total Flow Rate---------------- (Mm3)…------------- (m3 /sec)

January - 30.4 10.0 5.8 3.8 2.1 52.1 19.8

February - 37.8 - 5.6 3.1 1.5. 48.0 18.3

March - 46.6 - 2.8 5.5 2.3 57.0 21.7

April - - - - 5.6 2.3 7.9 3.0

May 16.3 - - - 7.1 2.8 26.2 10.0

June 26.0 - - - 3.3 1.5 30.8 11.7

July 19.1 - - - 1.1 0.1 20.3 7.7

August 60.5 - - - 2.4 0.9 63.8 24.1 /d

September 60.4 - - - 2.0 0.8 63.2 24.1 /d

October 41.6 - - - 3.8 1.5 46.9 17.9

November - - - - - /b - /b - -

December - 14.9 10.8 3.3 3.8 /b 1.9 /b 34.7 13.2 /c

Total 223.9 129.7 20.8 17.5 41.5 17.7 451.0 -

!a At the head of the NEC. Overall efficiency used is 40 percent./b In addition to the amounts indicated, sugarcane and vegetables would be supplied

partly from wells during the November-December closure period. The waterrequirements during this period would be (i) for sugarcane, 3.8 Mm in Novem erand 3.8 Mm" in December; (ii) for vegetables, 1.9 Mm in November and 1.0 Mmin December.

/c Assuming canal opens on Dec mber 16./d All quantities above 24.1 m /sec will be supplied from local schemes.

tU1 ImnDn E

Agrlcultural Production and Input Re!luirewnts

Usit With Pm t I l

b1it M 205 jo36 2025 193 315In Paiutitn

PM UKt 103,tlU., !15:92 ia,m.9 144,924.4 - h30932.1c SwE S ta 15,657.0 17375.0 15#65.0 1920o. - 4,045.0

any t 2199W.2 24Pd7J 2.m.o2 59,561.6 34495.0m tms.e 974.4 5M9 -3639.2 2444.8

6Jlt9 tans 8e.3 1,566.4 694.3 325.5 - 6h757.1pm ". ta 12.P30 24.5540 12,992.0 41,400*0 'Z13S.0

so "rawtssW ts 146.813.0 15fft2.2 146,813.0 234o334.3 - 75.4t199 Wu 1#444.3 258 1e4o4.3 4,140.0 - 1,9.2

9(13 hk 2.6e7o.016. 2.724.4m30 29673.016.0 34324#301.5 - 59965umIfIIIIIIE h51 1.40.915k0 2,215,21S.0 1.940415.0 30554.300.0 - 1339.085.0E1 hi 111120 923,810.0 391,1|23.0 1,91g410. - 927,0.DI0 kg - 2VIM.0 - 9 665.0 70.315.0

Kml UiciU gb. 2.20&M0.0 3.00310.0 2P203.03.0 5M272.30. - 2.214.51iO.BIII PM d 4#264.984.0 4,4557630 4.264.994.0 5,362.52.0 - Fwb*oE ll9(1 Subs 11.7151. 0 11.M3583.0 11,715.03v.0 1te3761176.0 - 6fla 30Ldsro3 miduus 5.557,332.0 5,969.159.0 5.f2.D.0 7,896.723.0 - 2.047,564.0

-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-

-67-

ANNEX ITable 12

NEPAL

NARAYANI III IRRIGATION PROJECT

SummaEy_of Financial and Economic Prices

1986/87 1990/95Crops (NR9/ton) Financial Economic Financial Economic

Paddy (medium) 2,800 3,040 3,320 3,600Wheat 3,000 4,640 2,670 4,130Maize 2,500 3,760 2,310 3,470Pulses 4,100 4,500 4,100 4,500Oilseeds 5,140 5,750 5,140 5,750Sugarcane 320 160 320 260Vegetables 1,670 1,500 1,670 1,500Straw 300 270 300 270

Inputs

Fertilizer (NRs/kg)-N 7.78 11.54 13.73 13.73-p 5.87 9.06 9.58 9.58-K 2.63 5.56 5.75 5.75

Bullock Labor (NRs/day) 30.00 27.00 30.00 27.00Wage Rate (NRs/manday) 11.00 7.80 11.00 7.80

NEPAL

NARAYANZ IZZ IRRIGATION PROJECT

Estimated Farm Budgets and ProJect Rent at F4ll Development

Presently Rainfed Farms Presently Irrigated Farms /a

P W w P W W----------------------------- (NRs/ha)-----------------------------

Farm Budget

Gross Value of Production 10,"60 12,420 22,300 12.320 15.020 21.690

Less Input Cost 4.100 4,570 6,600 4.370 5,180 6.790Less Depreciation Allowance forFarm Implements 300 300 500 320 320 500

Less Cost for Hired Labor 480 500 700 490 520 700Less Land Tax and Water Charged lb 0 0 200 140 150 200

Total Costs 4,880 5,370 8.000 5.320 6.170 8.190

Net Farm Family Income 5.380 7,050 14.300 7.000 8.850 13.500Reward to Family Labor 1,120 1,160 1.600 1,150 1,220 1.630Net Return to Farm 4,260 5,890 1.~,700 5,850 7.630 11,870

Project Rent00

Net Return to Farm 4.260 5.890 12,700 5.850 7,630 11.870Taxes and Water Charges /c 0 0 200 140 150 200Net Return Before Tax 4,260 5,890 12,900 5.990 7,780 12.070Less Management Fee (10%) /d 430 590 1,290 600 780 1.210Less Risk Equivalent /e 1,030 1,240 560 620 750 540Implicit Land Rent 2,800 4.060 11,050 4.770 6,250 10.320Project Rent If (W - 6.990 1,480 /2 4,070

P - Present, W - Future Without Project, W - Future With Project

/a Headreac' farms near NEC in Stage I and Stage It areas./b Land taxes vary in accordance with land grade and amount to about NRs 35/ha. However. all farms

smaller than 1.0 ha are tax exempt. In addition, numerous other exemptions and rebates are ineffect leaving most agricultural land untaxed.

/c Since project rent should show the incremental land rent before water charges are paid. water chargesare added before calculating project rent.

/d Premium for management and entrepreneurial skills. assumed as 10% of net return to thle tarms.Se Risk equivalent for uncertain availability of water assumed as 10% of gross value under

rainfed conditions. 5% under present unreliable irrigation and as 2.5% under irrigatedconditions with project.

If Project rent is the incremental land rent due to the project./9 Projact rent as the incremental land rent due to the Stage I and Stage II projects i.e. tW - P).

NEPAL

NARAVANI III IRRIGATION PROJECT

Estimated Project Rent and Cost Recovery /a(NRs/ha)

Stage I and IS Stage III Total ProJect

Project Rent

Gross Value of Production 27,010 35.920 29.060Less Production Cost 7.210 8.080 7.410Less labor Cost 2.410 2.280 2.380Net Income 17.390 25.560 19.270

Less Management Fee 1.740 * 2,560 1,930Less Risk Equivalent 870 1.800 1.080

Project Rent 14.780 21.200 16.260Project Rent as % Of Net Income 85% 83% 84%

Cost Recovery (Rs/ha of net CCA)

Water Charges 2.900 1.500 2.580

Cost Recovery as % of Project Rent 20% 7% 16%

Project Cost

Capital CostIrrigation Infrastructure 12.120 /b 13.100 n.a.Remodelling Works 5960 _- n.a.Sub-total 18.080 13.100 16,920

Operation and Maintenance Cost 2.830 1,500 2.520

Total Cost 20.910 14.600 19.440

Cost Recovery as % of Project Cost 14% 10% 13%Cost Recovery as % of Operationand Maintenance Cost 102% 100% 102%

/a Expressed in incremental present values discounted over 30 years at 10%in constant 1986 prices.

/b Capital cost of works completed under the Stage I and 11 projectsadjusted to 1986 price level excluding interest.

IMTM U!l IfUI I.C

Stais I - Cost and 3.tit. tfo Econmic bllsis

1987 1916 1961 1990 1991 12 19S3 1994 1995 1996 19 19 1SY9 20-2016

A. 1E I URICOLTE. rU = U T MmCT

6rss Val Uitt proJwct 227460 23*30 23.0 24730 256.10 264.60 268.30 27*40 272.40 272.90 2#290 272.90 272.90 272.90Proacti Cost Uiu Project 91.70 92*.6 93.60 94."0 96.70 96.30 99.3o 100.20 100.0 100.31 100.30 100.60 100.3 100.90

IL Valu VitiUt ProJct 135.90 140.70 14S.90 152.40 159.40 166.M0 16900 171.20 171.30 172.10 1210 172.10 172.10 172.1

I. WAUE OF MRIULL FUUcnO ON PLECT

Boss Val 1th Proct 227.60 233.30 239.0 250.20 264.60 202.0 29790 317.30 337.40 353*40 375. 318.40 M3. 401.40pro6ctlom cut With projet 1.O 92.60 93.60 95.70 96.08 102.7 106.90 '12.00 117.30 22.3 127.30 130.70 132.90 134.1

at vale With Pject 135.90 140.t70 15.90 154.3 1653 19.30 11.0 205.30 22.10 235*60 24820 257.70 264.10 217*30

Iinowtal btits /a - - - 2.10 6.40 12.60 22.00 34.10 46.30 63*50 76.10 65.60 92.oo 95.20

C. IInSTIU COST

Prrot of Cao El1U 14.00 13.00 31.71 15.53 12.63 6.60 4.04bRoelUnm and izaizs 0*69 4*60 11,54 11*54 7.71 - - - - - - - - -0th., 1.05 2.22 2.79 2.9 2.79 2.79 2.79 - - -

Sutl 15.74 19.82 46.04 29.06 23.13 t.39 6.83 - - - - - - -

D. a11cu COST

orratim .n Hmintao 2.40 2.40 2.40 2.40 2.40 2.40 2.40 2.40 2.40 2.0 2.40 2.40 2.40 2.40Ecamic Ct Lnd Asist 0.94 0.94 0.94 0.94 094 0.94 0.4 04 0.94 94 4 0.94 0.94 0.94 0.94

9i*-tStal 3.34 3,34 3.34 3.34 3.34 3.34 3.4 3,34 3.34 334 34 3.34 3.34 3.34

TOt cost 19.0 23*16 49.3 33.20 26.47 12.73 10.17 3.34 3.34 3*34 3.34 3.3 334 3.

uT UIImIL BEFmITS -19.08 -23U -493 -31.10 -2007 0.07 11.63 33076 44.96 0.16 72.76 92.26 36"6 91.6~~~~~~-"- - "- --- --- --

Iit.l ate .f btum 21,70L.

_a 15e900h

, l5.9eob Fq~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-

IWI*MZI III RTIO TRM

Stabt 1 - Cust and hoefits top Ecimmit Mulsis

£967 198 189 1 991 19 1M 1M 4 1995 16" 1997 1"9 1999 2002016

A. VWE O A3XOLTM.. PUU I HimhJ PUJCT

6ress Vale Wiut project 160.20 165.00 19. 196.70 204.10 211.20 214.20 216.70 217.70 216.10 216.10 218.10 216.10 21812Proutian Cost lithMt Project 72.80 73,50 74*40 75*50 76,0 78.30 N.10 79.90 80,20 60.50 60.50 10.50 80.50 60.50

Not Value Dithout P t 107.40 111.50 11590 121.20 12720 13290 135.10 1360 137.50 137.60 Z7.60 137.0 13.60 1.#60

8. LtIE O t0RICULTUL PURTIS WITH PIIIIECT

Gross Value ith PoJect 160.20 185.00 190*30 19.20 211,00 225.30 238.20 254.10 270.60 287.60 301.70 312.30 319.50 323.10Production Cost With Project 72.80 73.50 74.40 76.10 78.70 81.90 85.40 69.60 93.0 98.59 102.20 104.90 106.80 107.80

met Value 8ith Proect 107.40 111.50 115.90 123.10 132.30 143.0 152*.0 164,50 176,70 189.30 19.*50 207.40 212.70 215.30

Incr_wu lneita /a - - - 1t90 5.10 10.50 17.70 27.70 39.20 51.70 1.90 69.60 75.10 77.70

C. IDlEIEN COST

Prororti4 of Comn Elnti 6.54 19.13 17.25 15.00 5.93 3.41 1,74 - - - - - - -Rlodulln VWd Nodtmization - 0.60 4.40 8,64 10,37 1045 6.29 - - - - - - -

Otr 0.61 2.25 2.35 2.35 2.35 235-

S-total 7,15 21.#9 24,00 25.99 18.65 16.21 10.03 - - - - - - -

. REtURIT COST

aeation and Maintena 1,92 1.92 192. l2.92 192 1.92 1.92 1.92 1.92 1.92 1.92 1.92 1.92 1.92Economic Cut ot Lan hmasitim 0,76 0.76 0,76 0.76 0*76 0*76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76

sb-total 2.68 2.68 2,68 2.68 2.68 2.68 2.66 2,66 2.68 2.48 2.68 2266 268 2.68

total Cest 9.83 24.66 26,68 28667 21.33 18.89 12.71 2.68 2.66 2*6 2.68 2,68 2.68 2.U6

MET IIElltAL MOM -9.B3 -24.66 -26.6 -26.77 -16.23 -8.39 4.99 25.02 36,52 49.02 59.22 67U12 72.42 75.02

Internl Rte of Retum a 22.442. ¢ z

/a 12.600 ha

6AY11 III IUIOTIIN FISET

Stm III - Cost aNd 8.tits for Lesmic baltiu

Alls N

1987 1988 1 96I 199 11 12 1993 199 19996 9 1998 199 210-2016

A. WLIE OF AWIUt. PUCUU O IZ T IT

Bss Value liiwut ProJect 98.40 101400 103.80 107,40 111.50 115*50 117.10 118.40 118.70 WO0 118.70 116.70 118.70 118.70Productimn Cost Vithwt Proct 46.90 47.20 47,50 47.# 48.30 48.70 48.90 49.10 49.10 49.10 49.10 49.10 49.10 49.10

lSt value WUletut cProJt 51*50 53.80 5630 59.0 63.20 66.80 68.20 69.30 69.60 69.60 69.60 6940 69.60 69.60

Do VMlE OF 48RXtU.LIW M.fIVCTIU UITN PROECT

6Ur VluW 11th ProJect 98.40 101.00 103.0 107.40 111.5 119.40 129.40 142.80 157.50 172.80 188.9 205.80 217.10 m.94Proctn Cost 1ith Project 46.90 47.20 47,50 47.80 48.30 49.*60 5150 54.40 57.50 60.70 64.10 67.70 70.20 71.40

Not Vdlus I1th ProJct 51.50 53.80 56.30 59.60 63.20 6980 77.50 68.40 100.00 112.10 124.80 138.10 146.9 151.50

lacutald Bmtits /a - - - - - 3.00 9.30 19.10 30.40 42.50 S520 68.50 77.30 81.90

C. ID Pau COSrT

PriuortUe at Coa f Elaut 4.71 13.02 9.23 9,03 12.72 4.93 2,07 - - - - - - -

Irrilatm DistrMiutm Sute 3.25 6.39 13.50 22.37 23.38 1.24 1O.S0 - - - - - - -

nw **0.28 0.28 0.28 0.32 0.28 0.23 0.23 - - - - - - -

&btl 8.24 19*69 23.01 31.3 36.88 22.45 12.15 - - - - - - -

D. IECII COT

eation a Nint e. - - - - 0.31 .83 1.71 2.28 244 2.64 2.64 2.64 2.64 2.64kcuiinic c.t f LW eitim - - - - 3*27 3.27 3.27 3.2 3.D 3.2 27 347 3.27 3. 3.27

8Sb-t@tAl - - - - 3.58 4.10 4" 58.55 5.91 5.91 5.91 5.91 s59 s.

TOtal Cet 8.24 19.69 23.01 31.8 40.46 26.3 17.83 5.55 5.9 5s.9 So1 59 5.91 s."

ET IIIEIEI BEIMS -6,24 -19.69 -23.01 -31,68 -0.46 -23.55 -8.53 13.55 24.49 36.59 49n.2 42.59 71.39 75.99

Iatteral but at Return 3 184.8

is 8700 byLi)

11FTM11 III tllUATIX MJEtT

totw pr.t - Cast Sd wits tor Ecmi. bialusis

m5 3

197 198 19 199 199 1M 19 194 195 199 IM 16 199 200206

A. VALUE OF MIXaLTWA M. IOIES WIIETO MULE

ross Vaiw Wtiut Plrojat 50620 519.30 53.60 5.40 571.70 5 0 599.0 606.50 608.0 609.70 0970 09.70 60970 609.70Ptductin Cost ithout Proiat 211.40 213.30 21*550 218.20 221.90 22530 227.30 229.20 722.90 230.40 230.40 230.0 23040 230.40

Nt Valw Nitout Projat 24.80 36.00 318.10 333.20 349.80 366.20 32.30 377.30 378.90 379,30 379.30 379.30 379.30 379.30

B. VIE OF ACtLTM fMUCTII INM PRCt

Gross Valuiw ith Priect 506.20 519.30 533*.6 556.o0 587.10 626.70 665.10 714.20 765.50 19.0o 86.10 906.50 933.60 4740Produdtan Cast With Projet 211.40 213.30 215.50 219.60 225*80 234.20 243.80 256.00 248.70 22.00 M.60 303.30 309e.9 313.30

Nit alu With projet 294D.0 30600 318.10 337.20 361.30 392.50 421.30 458.20 496.80 537.00 572.50 603.20 623.70 634.10

lrumntal knits - - - 4.0 11.50 26.30 49.00 8O9 117s" 157.70 193.20 223.90 244.40 254.80

C. tIlESllENT COS

Pror,otien at Con Elements 25.25 45.15 58.19 39.6 31.28 14.94 7.85 - - - - - - -aumdellingt bdenization and Km Norks 3.94 11.59 29.44 42.55 41.9 27.69 1879 - - - - - - -Othr 1.94 4.75 5.42 5.42 5.42 5.42 3,07 - - - - - - -

9Sb-total 31.13 U.49 93.05 87.53 78.66 4B.0S 29.71 - - - - - -

1>. IECINUNT COiST

Iheration md NhIntemt 4,32 4.32 4.32 4.32 4.63 5.15 6.03 6.60 6.96 6.96 6.96 6.96 6.96 6.96Ecwmic Cost af Land kcisdsUt 1.70 1. 1,70 1.70 4,97 4.7 4.97 497 49 4.9 7 4.97 4. 97 4.997

9 1-tota1 6.02 6.02 6.02 6.02 9.60 10.12 11.00 11.57 11,93 11.93 11.93 11.93 11.93 11.93

Total Cost 37.S 67.51 9.07 93.55 U.26 58.17 4071 11.57 11.93 11.93 11.93 11.93 11.93 11.93

MT ICM TM MUMEFItS -37.15 -67.S1 -n.07 -B9.55 -76.76 -31.87 .29 69.33 105.97 145.77 181.27 211.97 232.47 242.87uu anammam um ui ii u3n i u m u ni

Int b of Returm a 21.01L. Z

/____ he

/ .400 ba > I.

-74-

ANNEX 2

NEPAL

NARAYANI III IRRIGATION PROJECT

Detailed Cost Estimates

Tables

1 - NEC Improvements

2 - Irrigation and Drainage Works in Stage III Area

3 - Remodelling Stage I Area - Irrigation and Drainage Works

4 - Remodelling Stage II Area - Irrigation and Drainage Works

5 - Flood Protection Dike and River Training Works

6 - Upgrading of Poad Network

7 - Equipment and Vehicles for O&M and Radio Telecommunication Works

8 - Regional Workshop

9 - Technical Support

10 - Establishment and O&M Costs for Stage I and II and III Areas

11 - Land Acquisition Requirements

ARutJAuI III IRRIGATION PROJECTTable 1. NEC tiprovennt /a

Ostailed Cost tablo(NeN '000)

Quantity Be" Costs

unit I987? t98 1989 1990 1991 1992 1993 Total Unit Cost t987 1988 t989 1990 1991 t192 193 Totatl

1. INVESTRENT tOSTS

A. Canal Lining lm - I I I 0.6 - - 3.6 6.706 - 6.706.0 6.706.0 6,706.0 4.023.6 - - 24,141.6S. Canal Slope Protection km - 0. 0. 5 0. S 0.5 - - 2 31S - 157.5 1t7.S 157.5 15.S - - 630.0C. Left Sank Strenthening km - 0.5 I I I - - 3.S 140.2 - 70. 1 140.2 140.2 140.2 - - 490.70. Raising of llo. 2 Service Road 1 - 3.5 5 5 5 - - 18.5 SO - 175.0 250.0 250.0 250.0 - - 925.0E. Additional Structures

Check Strcturs no - I 1 1 - - - 3 279 - 279.0 279.0 279.0 - - - 837.0Cross Orains no - I 1 I - - - 3 359 - 359.0 359.0 3S9.0 - - - 1t077.0Cart Bridges no - 2 2 1 1 1 - 7 300 - 600.0 600.0 300.0 300.0 300.0 - 2.100.0Foot Bridge no - I I I - - - 3 50 - 50.0 50.0 SO.0 - - - 150.0O/S Protectton no - - 7S 75 75 i5 - 300 4 - - 300.0 300.0 300.0 300.0 - 1,200.0

Su-Total Additionat Structurs -. 1288.0 1, 588. 0 1,288. 0 600.0 600.0 - 5.364.0F. Reirs of Tlau. Barrage and Reolted Works b - - - 13000.0 - - - - 13,000.0

Total INVSTENT COSTS t3. 000.0 8, 396. 6 8.841. ? 8 541. 7 S. 171. 3 600.0 - 4,4551.3

Total 13,20040.0 28,396.Z6 8.8421.? 8.05241.? 5,*171.32 8600. 0 '2- Z44,5251.4322=S222 2 ::::: 2- ::::::5 22: 22*2 = =22 2 *2 -=2Z2

la Cost schedule in NIOGII fiscal year with base costs as of Apr11 1986. Iib Preliminary cost estimate based on the *xtent of flood deage.

(XD

nKiPL""Text8 III 1181461118 P60410

'table,& termigst and soinA bi in Stop III am UlocO 12-Is. e.7oo No /asait lad eCost tal.e

Ot*fiit low l116 0001f

otatity so" Costs

thit Sts7 toIs NCt tsnie li1 1692 10962 total unit Cot 11s7 tsss 1069 t110 taot tw2 tss6 Totel.... ...... .... .... .... ............... ................ .... ..... ..... ..... ...... .........

t. twisntt COSTS

A. tin And franch Seondary Cools

Canal sorks U1 - - to Is iS 15 S4 61.4 ot n - - t.010.0 e, 5.0 I.515.0 1.s1ts.0 6184 6201.4Str.ctts - i s5 75 so 26 27s 4.1t3 2.406.5 32,600.6 2.600 2.a6.4 1251.4 tSa2u.s

%&-lotIl tin and Branch S_condwy Canls - - 2.4,16 5,124.6 5s12 3.n121.s t.0 7.89 ",485.3L 5%*-Sconary Cnoal

Caal ke to - - 1 25 20 14.1 a8. I 6as - - tse0 60 412s5 27*n 0 266.5 t.654.0Stto i - - 21 53 5? 52 27 237 37 - 1 044.9 2.4.1. 2,.S62.0 2101. I 1.43t.11 1171.2

"*-TotaI S*-Secondary Caal - - 1.233.1 2s4211 2065.4 2,429.1 1. GM64 tO. a".sC. Tortias VW COf h

Tertiary Cwal :kWe U - - O 2s 2 25 2s a 03 2 - - 2.0 205.0 205.) 2S. 0 65. 6 62.6tertiary Sttwa rno - - 1SO 230 250 250 225 1.15 6L4 - - 05 1,607..s 1.607.S 167.5 t . 446L8 1.233.800 Awthors to - - 1.00 2.000 2.000 2,000 1.700 I a700 0.2? - - 29 5.7 31.1 s31.7 452.0 2,313.00mi Strutqs bs - 452.1 71f4. 6 2.234.S2.651.3 2.4923.4 6.700, 6.64 712, S 2.2)0.3 0 2.36L2 2.353. 6,212.3

S*-Totsl frtllia Ias and 0*b -A 1.73.0 3.0S&? ,55s4.6 4.512.0 4.327.0 M W1t.1D. 11r VW Sinar Cosina

llsJcr *oras k - 10 20 20 Is 6L4 73.4 42.6 -426. 656S.L0 656.0 642.0 25S.5 3141.5SStr" is s o 5 to0 71s 75 20 320 27.1 ,315.0 2.716.0 2,032S 2.032.5 12 .0 L.67NI,.. Drict to to1 25 25 25 t0 05 S.174 57.4 1463.5 S 43.5 143.$ 57.4 S45. 3Stituro I t 40 40 40 II 141 764 4252.4 1.0 sL -056.0 1,056.0 290.4 3,A 8

S%6-Total biosr ai iner "tow nft - 2262.6 A.765.5 4,0680 2.874.0 t.242.3 1. 2.20.6L Cana srice oda k - S s 20 20 L. 61.4 226 - 1,0 0 2,42.0 4.510.0 4, 5S. 0 216. - 1a9.1 ,f. Oral s Srrce Sands %M S i s6 2 2 2.4 - 63.4 23.5 -SM.S 252.5 470.0 410.0 71., - 1I ,48.S6 lsic andt ohdificati of [txisting Stretww 000 Is - - 1 2 2 2 tI7 67 too0,3 - - 10.4 210 216.2 216.6 al4.3 143.3. Nicacllansus Morks OWls - 1 2 2 2 I.7 L7 442.06 442. a4 680.1 8610.1I 751.5 2,845.1

I. Shatll Idall scm

friling marks 4fo 4 01#ell sett - 40 - - - - 40 74 - 2s950.0 -0 -Proc_?At of Pp ed Sia _It - 0 -tell- - 40 to - 720.e - . 720.0Pmp Manse s_ PipIng tel 4 - 4G 26 - I. 12. 0 1. 120.03 py orsry sets - 40 - - - - 40 12 46.0 - . 460.0

Sub-Total Shallow 6tiell I S_r - s6260.0 - S-26.04. fiol to Cp - - - - - - - 3.125.0 - - -&3

total IUntsIUII 1O676 a 250 e.275 i76.f1 n 21,t.7. 22,0 n 2.7 Lt577. 2 tQOW66.23. M 16

toktl ILt125.e 0I375 t2, 7* 1. 217.02S. 22.7 165ttS77.2 MOMS.93.726.6

to Coat achdal* #n tim yl - w ttb bae" 605t as of l Ap 6l 6r Uetal tI of arwtuerks aw stm4t_rs olse in A_os 6. SW.

-------- ----- --- - -- ------------- ---- - --------------------------------------------------------------- ------------------------------------------------------- - -------------------------------- l- l-

tJIS

NEPALItY63l ftI It6t30*110 PRWECT

tabI.a R ds1l tng of Stag I Area rirgtion S Orsfeg lMorka Stocks I to 6 15.980 hat aDetailed Cost Table

sit I eol

tuantity ease Costs----------------- ~~------------------- i ----------- ~---- unit --------------- _----_--_______----_----_--___--__--__--__Unit t9B7 19U 18989 199 1991 1992 1993 Total Cost 1981 19U t1989 t90 M99t t992 1993 Total.:3:.5: sags saga:::: sagas::. s 2:::2 g :::: Xs: a:5:: nsa::.. sa as:.:: :sags: as :::::: s:a*s=:s sa:: . ax s B:os Saga sa:%..-

1. INVESTMENT COSTS

A. Ibin and 8rtnch Secory Canal

Rhimodalllng 0001h - 3 5 S 3 - - tS 291 - 873.0 t,455.0 1.455.0 n3.0 - - 4.6.0Aiturcation 000 ba - 2 5 5 4 - - 16 83 - I68.0 41S.0 415.0 332.0 - - 1.328.0Ssb-totaI Ntin an Branch Secondary Canl - 1.039.0 1.870.0 1.870.0 1.205.0 SU.9 08, Sub-secondery Cantl

Cal orks he - S 9 9 5 - - 28 1S. 5 - 77. S 139.1 139.5 77.S - - 434.0Structuses - 30 60 60 40 - - t9o 28 - 780.0 .560. 0 t. S.0 1.040. O 4.940.0

Suib-Totel Sub-secondary Canal - 857.5 t.699.5 1.B99.5 t. 117.5 - - S.374.0C. Tertiaries and CfO Ob

OFO aerthworks a - 2. 663.3 S.326. 7 S. 326. 2. 663.3 - - 15.980 0.23 - 616. 0 1.232.0 1,232.0 616.0 - - 3.696 0 1OFO Structures ha - 1.342. S, 29. 4 5. 295.4 4. 046 5 - - t5.980 0. 95 - t, 273. 5 S 022.5 5. 022.5 3S. 0 - - IS. t56. 5 __.. _ _-- _ __---___ _ _-- -- - - - - - - - -- - - -- - _ --- --- -- - _4

Sub-Total Tertiaties and OfO hb - 1,i89.5 6.2S4.5 6,254.5 4.4S4.0 - - 18,52.5S0. Service Roads km - 12 24 24 12 - - 72 53 - 636.0 1,272.0 1,272.0 636.0 - - 33816.0E. liqwoimnt of Existing Project CMs - - -- .- 662.0 - - - - - - 662.0

Total INVESTEINT COSTS 662.0 4,422.0 1.026.; tt.O950 7412.15 - - 34.;68;.5gags: sagaus: sagasg22a:ssaasza:a55::: aa as gavs::::

total 682.0 4.422.0 110. tt00 110.0 t7.412.5 - 34.66. 5::::ss =g: assssagagsa: sa:5gs5::=:: gaa a:g-Z:B sass sssasa

/a Cost schetul, in WIGN fiscal yer with base costs as of ritl 1986.ib Oetails of earthoorks and structures given in Annex 6. SOM.

-- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - ----------------------------------------------------------------------------------------

IW 3

NEPALWARAThNI 111 IRRIGATION,PMOECI

table 4. Romdalling of Stag. 11 Area Irrigation and oreinage Uwrks (Blacks 7 to (2. 12.8t0 (I. /aDetailed Cost Table

U1QR 0001

Quantity Base Costs

Unit mie lo88 U989 (990 (991 1992 (993 Total Cott (987 le88 I98" (990 991 199 1993 Total

1. INVESTNENT COSTS

A. Wain and Breanch Socondary Canals

Remodelling 000 hae 2 4 4 2.8 12.8 218 - 432.0 884.0 84. 0 604.8 - 2.26C 8Structures 000 hae 2 3 4 3.8 - 12.8 93 - - 188.0 279.0 372.0 353.4 - (.190.4

Suli-Total Mlain an Branch Secondary Canals Gi6180 1. 143.0 (.236.0 958. 2 3.955.2B. Sub-secondary Canal

Cana Iworks km - - 13 14 14 13.6 - 54.6 IS.8 - - 202.8 2(8.4 2(8.4 212.2 - 831.8aStructures no - - 60 65 T0 69 - 264 286 - t. S60.0 (. 690. 0 1.820.0 t .794.0 - IL 884. 0

Sub-Total Sub-secondery Canal - - .762.8 t. 90& 4 2,3. S.4 2, 008.2 - 7.715.8C. lertlaries and 0(0 /6b

0.0 Eartheorks ha - - 1 .996.4 4.159. 1 4. 159.1 2.495.4 12.810 0.23 - - 462.0 962.5 962.5 577.5S 2.964.5 00(0 Structures hae - - 3.056.6 4.019.5 4,395.2 1,338.5 (2.810 0.95- - 2.9(2.7 3,630.0 4. 168.0 (.275.4 12.206.0

Sub-Total Tertiaries end 0f0 /b - - - 3.374.? 4.792.S 5. 150.5 1.852.9 (5, (70. 5D. Drainage System

Major Drainag" Canals ha - - 6 6 7 7. 2 - 26. 2 19 - - ((4.0 114.0 133.0 (36.8 - 497. 8Plinor Drainaew Canals ha - - 13 14 14 (3.6 - 54.6 B. 23 - - 61.0 67.2 87.2 64.7 - 340.2Structures no - - 25 26 26 27 - 104 28 - - 700.0 728.0 728.0 7S6. 0 2.912.0

Stb-lotal Drainage System - - 39.0 929.2 948.2 977.5 3,710.0E. Service Road, ha - - (8 (8 16 (8 - 2 53 - - 954.0 954.0 954. 0 954.0 - 3.8(S. 0F. Improvement of luisting I'ro3ect Cw - 388. 0 -- - 358. 0

Total INVESTNENT COSTS S 55.0 4. 229.8 S. 309.3 9.296. I (0.046.4 (.85S2. 9 34,965. 4

Total 556.0 4,229.8 B. 39. 3 9.989.) ( 0.048.4 (.852.9 34,965.4

/a Cost schedule in lNNW fiscal year with base costs at of priIl 1968./b DetilIs of eartheorks and structures given in Ann.x IL SOYl.

NEPALNARAYINI III IRRIGATION PROJECT

Table 5. Flood Protection Dikes and River Training Works /aDetailed Cost Table

4NRs 0001

Quantity Base Costs

Unit 1987 1988 1989 1990 1991 1992 1993 Total Unit Cost 1987 1988 1989 1990 1991 1992 1993 Total2:=: :==S :=:: 2::: 2:: ::: :::::=: :::: :2::= =:::::::: 2::: :: ,=:: =22 == == ==

1. ItNVESTMENT COSTS

A. Flood Protection Dikes

1. tal Eakeys River

Enbankaunt kV - 4 4 4 - 1 - t2 1. 234 4.936. 0 4.936.0 4.936.0 t14. 08. 0

Sub-Total La$ Bakeys River - 4.936.0 4.936.0 4.93&0 - - 1 '4.808.02. Sageeti River

Erbantunsnt km - 4 3 - - - - 7 1.1 90 - 4. 760. 0 3.570. 0 - - - 8.330.0

Sub-Total Begmati River 4,760.0 3.570.0 - - 8.330.0

Sub-Total Flood Protection bikes 9.696. 0 8.506.0 4.936.0 - - -23.13A 0B. River Training Works

t. River Training Works in Stage I Area -

Short Cuts km - 0.9 0.9 0.9 - - - 2 7 ?.4U8 - 2.264. 1 2.264. 1 2.264. 1 - 6.792.2Flood Dikes k'm - I I I - - - 3 265. 7 - 265.7 265.? 265.7 - - 797. I

Sub-Total River Training Workes in Stage I Area - 2.529.8 2.529.8 2.529.8 - - - t.589.32. River Training Works in Stage 11 rea

Flood Oske Along the Bangari River km - 0.7 0.7 0.7 - - - 2 t99.3 - 133.5 133.5 133.5 - - - 400.6Flood Dike Extension Along the Pasaha River km - 0.7 0.7 0.7 - - - 2 181.4 - 12t.5 12t.5 12t.5 - - - 364.6Gabion Works Along the Pasaha River km - 0.2 0.2 0.2 - - - 0.5 1.782 - 297. rC 297.6 297.6 - - - 892.8

Sub-Total River Training Works in Stage It Area - 552.7 552.7 552.7 - - - 1,658. 0

Sub-Total River raoining Works - 3. 082. 4 3.082.4 3.082.4 - - - 9,247.3

Total INVESTMIENT COSTS - 12,778.4 1i. 588. 4 8. 018.4 - - - 32.385.3

Total - 12,778.4 1 588.4 8, .018. 4 - - - 32. 385. 32=::::::::::::: ==::: :: r:===:: ::::=

/a Cost schtdule in HH6g1 fiscal year with base costs as of April 1986.

'go

tnsi

NEPALNARAYAISI Zil IRRIGATION PROSJECT

labl 6. Upgrading of Road Network /aDtetaild Coat table

(*Rs I 000I

tantity Base Costs- -- - - -- - Unit ------ ______

Unit 1987 1988 1989 1990 3991 1992 1993 Total Cost 1987 t988 t989 1990 t991 t992 t993 Total.. fl S: mf:lm ==lZ :m:. ::=l m=:: mm:.'=r tin: mm:. n.m.:== =:32mm: ::====5 Ct====: .2:==== 35535:t mm..m.3 flmmflm

1. INVESTRIENT COSTS

A. Upgrading of Villagp Link Road

Stag I Area km 2 3 7 7 7 7 7 40 9* 188.0 282.0 658.0 658.0 658. 0 658.0 658.0 3,7 60.0Stge 11 Area, la 1 4 S 5 5 5 5 30 93 93.0 372.0 4t5.0 465.0 465.0 465.0 465.0 2.790.0

Stage III Area km 3 3 3 3 3 3 3 21 93 279.0 279.0 279.0 279.0 279.0 279.0 279.0 1,953.0

Sub-Total Upgrading of Village Link oad 560.0 933.0 1,402.0 1, 402.0 1.402.0 t.402. 0 1. 402.0 8.503. 0S. Grawvel Ptaolttig on Existitn tSC A ISC Road,

t. Stage I Area ke 5 13 13 13 13 13 13 83 164 820.0 2. 132.0 2, 132.0 2,132.0 2. 132.0 2. 132.0 2. 132.0 t3, 612. 02. Stage II Area km 3 It It II It It It 69 163 489.0 t, ?93.0 t. t93.0 t, 793.0 1, 793.0 t.793.0 1, 793.0 11,247.0

Sib-Totat Gravel Metalling on Existitng tSC 3 BSC Roadt 1,309. 0 3.925.0 3,925.0 3.925.0 3.925. 0 3.925.0 3,925.0 24,859.0 CO

Total INVESTMENT COSTS 1,889.0 4. 858. 0 5.327.0 5. 327. 0 5,327.0 5.327.0 5. 327.0 33.362.0 1=::::= ::,= .:::::: s:s= ======= ::==::= ::m=:s: :::,:===SSf

Total 1,869. 0 4. 858.0 5. 327.-0 5, 327. 0 S. 327. 0 5,327. 0 5.,327. 0 33,362. 0==::=== :=S=== ==== :2BM =====. =m======azam *==-== 2 .:a.::*:- xza

...... ........ ___________________________.___________..................mm.........min..s........m..................m...m.............m__________

/a Cost schodule in tt8MN fiscal year with bas costs as of Oprit 1986.

I----ONts

NEPALNARAYANt ItI IRRIGATION PROJECT

Table 7. Equipment and Vehicles for 081 and Radio-Communicat1in System /aDeta1led Cost Table

itRs I0003

Quantity Base Costs---------------------------------------- Unit -------------------_----__--_,___-----__------__---_______--__Unit 1987 1988 1989 1990 t99t 1992 1993 Total Cost 1987 198 1969 1990 1991 1992 1993 Total

::,: :,:: :::: :::: ::: :t: z::: :::, ::::: :::: :::::::: in:::::: s::s:=: tan===:::-= in:=: :t::.in ====:=,i ===n:====,

1. INVESTENET COSTS

A, Equipomnt and Vehicles for 08M

OH Equipment for Stags tIl h-- t13286 0 - - - - - - t3.286 0Office Equipment /c - ,2i6.0 - - - - - - 1,265.0Swp,evision Equipmnt /d 603.0 - - 803.0

Sub-Total Equipswit nd Vehicles for 081 15,355.0 - - - - - 15.355.08. Survey rsa Design Equipment

Survey Equipment /- - - 627.0 - - - - 62?. 0Design Equipment If , - 200.0 - 200.0Sub-Total Survey nd Design Equipnmt - 827.0 - - - - - 627.0C. uadto-Comuanication System

t. Equipment

Naster Station - 767.4 - - - - - - 767.4Sib-Station (Type A. 6 Stations) 1,380 - - - -t3U0 - - 1,383.0Sub-Station IType IL 18 Stations)- 4. 031.0 - - - - 4,031.0Sub-Total Equipcent 61 8. 4 - 6,181.4 F-2. Erection - 334.0 - 334.0 t

Sub-total Radio-Camjrnication System 6, t5 4 - - b .Sl.Total INVESThENT COSTS 255870.54 27.0 : : - - 22. 697.4

It. RECURRENT COSTS

AL Spare Parts - 274.0 11 tOt.0 1101.0 1.0 tOt t t10t0 1 10.0 5 t9. 0Total RECURRENT COSTS - 274.0 1.101,0 3,101.0 I,101.0 1,t101.0 1.10.0 5,7?9.0

t::::==== ==a=t:=:: S::t: sat::::$ =S5==::: ::===tg ttttt:= 5======Total 218041. 1001.0 1.13. .103.100 3 101.01.1.0 .0 1. 1021.0 2,7.

Ia Cost schedule in NNWG fi scal year with base costs as of April 1986.h Details given in Annex t, Table 4.Ic Details given in Annex t, Table 5./d Dataijs given in Annex t, Table 5./I ODtails given in Arnnex 1, Table 5.If Details given in Annex 1. Table 5. lb------------------------------------------------------------- _------- ------------------------------------------------------------------------------------------------ toD -

_4 t-

NEPALNARATAWI IIl IRRIGATION PROJECTTable 8. Regional Workshop /a

0eteiled Cost Table

Base Costs0uantity Unit INRs '0001

- Cost -- - - - - - - - - - - - - - -Unit 1987 1988 1989 1990 1991 1992 1993 Total lNRsl 1987 19SS t9S9 1990 1991 1992 1993 Total

: :2 :=:=::5 S: :::: :::.. : : :::: ::.:: :::: :=:::::::::::::::::::::=:::::

1. IWVESTNENT COSTS

I. Land an nd L .ivelopmnt - 240.0 - - - - - - 240.0

8. Civil Morks and Building - 1. 100.0 2 100. 0 4 160. 0 - - - - 7 360. 0C. Equipment. fchinery and Tools - - 250.0 t 590. 0 - - - - 1.840. 00. Off,ce Equipment ---- - - 260.0 - - - - 280.0E. local Consultancy Service --- 240.0 200.0 200.0 - - - - 640.0

F. Training Expenses - - 260.0 260.0 260.0 260.0 260.0 260.0 1.560 0G. Inventory of Spare Parts --- 2.000.0 2. 000. 0 1 040.0 1 040.0 1. 040.0 i. 040. 0 1. 040. 0 9.200.0

Total iNVESTMENT COSTS 3 580.0 4B. 10. 0 7. 530. 0 1.300. 0 1. 300. 0 1. 300. 0 1. 300. 0 2. 120.0

Total 3,580.0 4. 810.0 7.530.0 1. 300. 0 1. 300.0 1,300.0 1.300.0 21. 120.0

/a Cost schedule in HNGM fiscal year with bae costs as of April 19866.

"3

m >4

tD X1

kEI-AINARATARI III IRRIGATIONI PROJECTTable 9. Technical Support /a

Detailed Cost tableiNRs I 000)

Quant ity Base Costs

Unit 1987 t968 1989 1990 1991 1922 1993 lotal Cott 1987 1988 12989 1990 1991 1992 1993 total

1. IUVESTPIENT COSTS

A. Agricultural EKtenston and Research

Office and quarters - 6398.0 - 8.398.0Accamodat ion at81. 0 - - - - 8)0.0

Vehicles -1,230.5 - - - - - 1 2430. 5Fuel and Oil -229. 6 344.4 344.4 344.4 344 4 344.4 344.4 2,296.0Research and Training -124.1 185.2 188.2 186. 2 186.2 186.2 116 2 1.241.0

5t&-Total Agricultural Extension and Research 10.7192. 2 530. 6 530. 8 530.6 330. 6 530.85 530.6 13. g75.5S. Training

Rehabilitatiorn of Traisning Centers- 600.0 600.0 600.0 - - - l. no. 0Overseas Training in Technical Services /b--668.)t 432.3 216. 2 216. 2 2)6.2 216.2 - l.965. 0Training for On-Form De"veopmnt -753.2 753.2 1,53.2 753.2 376.8 378.6 - 3.1660

S%6-Total Training 2.021.3 l.78.5S 1, 569. 4 969.4 592.8 592.8 - 1.531.0

C. Consultant Services /C

Consultant Services 47 57 52 45 53 20 6 280 20 S 9,33. 0 11. 685. 0 10,660.0 9.225.0 10,866.0 4,100.0 1, 230. 0 57.400.0

ePAort printing and other misc, services- - - - - - - - - S5.2 220.0 295.4 208. 1 t30.9 257. 3 298 1 1.463. 0

Sub-Total Consultant Services S. 690. 2 1 1, 90.0 10. 955. 4 0. 433.)t 10. "S.9 4 3157. 3 1,5S28.1 3SO.863. 0

Total IWVESI)SENT COSIS 22. 503. 7 14. 221. 1 13.055. 3 10.933,0 12. 119.2 S. 480. 6 2.058. 7 80. 371 5 O

IL. RECURRENT COSTS

A. Agricultural Extentsion and Research

Spare Parts for Vehicles - 5.5 8s5 s 85.5 85.5 85.3 S1.3 478.8

Suh-Iotal AgrIcultural Extention and Research - 5. 5 65. 85. 85.5 85.5 51. 3 478.8

S. Monitoring and Eva,.jetion

NAT Services 000 ha 27 27 29.9 32. 8 35. 7 38.6 38. 6 229.8 t0 270. 0 270 0 299. 0 328.0 357.0 386.0 386.0 2. 296. 0

Sthb-Totat I Woitor tng and Evaluation 270.0 270.0 299. 0 328.0 357. 0 386 0 386.0 2, 296.0

7otal RECURRENT COSTS 270.0 3S5.5 384.5 413.5 442.5 471.5 437.3 2,774.8

Iota) 22.7?73. ? 14,576. 6 13. 439.8 It, 346. 5 12.561 I 5.952. 1 2,496.0 83. 146.3

/a Cost schedule in NIIGN fiscal year with base costs as of April 1986.lb Foreigjn currency is required for 1986/87. 1987/88 end 19881/89./C quantities extpressed in equivalent maronths of foreign consultants time. Details are

provided in Anwes 7. SOV

%O 1,4)

NEPMt88981881 IIS 198118TI10 PU&CT

Table 10. Establishment and Opeation 8 98intanee Cost for Stages 1. II J III /aODta led Cost tabl

.urns '0o0oOwentity BaMe Cost

_.__________ --------.------------------ Uni t --- ~----------^----~~-----~------~~-~~~-~------------------~-~~~-----------unit 1S87 1988 198 1990 tni 1992 1113 Totel Cost 198t7 IS 199 1990 tS9t 1992 1993 Total

1. INWESTNENT COSTS

A. Project Establialint A - 904.5 4.522.5 6L030.0 6 3t1.5 5.427.0 4.522.5 2.412.0 30J 50.0

Total INVESTIgUT COSTS ;904.5 4.522S. GU030.0 6,231. 5 5.427. 0 4.522.5 2.412.0 30.t50.0

It . ICOIRUNT COSTS

. eration aW sinte

Salary of Staff 000 ha 28 28.? I28. 28.7 31.6 34.5 37.4 28.3 17 3,357T. 35. 3.357.9 3.357.9 3.697.2 4.03L85 4.375.S 25541t.I

S.pir and Msantenance Coat of 08I Eqwlpwnt 00 to 28.7 2.72 28.72a7? 31.6 34.S 37.4 216.3 3t 8.7 489.7 889.7 8 6 97 9791.6 1t 09.5 I.1514 6767.3

fuel Cost for 088 EquipSent 00 ha 2a 7 28 7 2a 7 2 31.6 34.5 37.4 216.3 4 1. 348 9 1, 346.9 1. 348 9 1. 34 9 1,485.2 1t621.5 1 757. 6 10. 20.

tabor Cost for Bapair and Naintoenas of Project facIlities Ot he 28.? 28.728.728.? 31.6 34.S 37.4 218.3 39 1t.t9.3 1. 11. 1,111.3 1.1I9.3 1.232.4 1.34s.5 1.458a6 513.7

Material tost foe RIar 8 4 ltaint e- of lroject Facilittio 0o0 h 26.7 28.7 28.7 28L 31.6 34.S 37.4 216 3 100 2.610.0 2,670.0 2.870.0 2.870.0 3.t60.0 3,4S0.0 3.740.0 21.8130.0Other 00 ha 28.7 28.7 28.7 28.7 31.6 34.5 37.4 218.3 32 918.4 91& a Ofta4 018.4 1.011.2 1.104.0 1.t986. 6M989.6

Sub-Total operatio and V aintanto 10,504.2 10,504.2 10, SO4.2 10 S04.2 1.S5M.8 12, f2.0 13.6S&.4 7n1.t97.8 1

Total tECIIU1EIS COSTS 10. 504.2 10. 54.2 .504. 2 10. 504. 2 It. 55. 0 t2.627.0 13,6 8 4 .6897. 8 I

total 11 , 40 87 t5, 02fL67 t1, 534.2 16,8A3.7 16,92.6 0 t7.1419.5 16,1O0. 4 t1t10.047.8sosass . s.. as ta5.5.5* s-sa a:a%e 8... as sassa:: 55a.stsssafl ssa.ssza.

_ ---- -- _ - --_ --_- -_ -_- - ---___ -_ ----- -- --- -- --- -- --------___ -______ -. _-_-------

/a Cost sce_ule in NIOM fiscat lor wtth bo costs as of 4rit t98lb Enginoing and Ministration.

0-

NEPALARAVARI fi1 IRRIGUTIOU PRIOJECT

Table It. Land Acquistition Requirements /aDetailed Cost lable

Bass CostsQuantity (MhR lOOt

Unit 1987 19; 1989 1990 1 ;91992 1993 Total ste?l ;98; ;911 1989 1990 1991 1992 1993 Totalass exss on. s s sea. Rass sas S:u *s:: swats assass :5:55 ass:: sass::. sZass::: sat::::: 55:55::: ssas:. g5215225

1. IlUESTNENT COSTS______________._

A. Flood Skas

fanti he 3.4 3.4 1.7 - - - - 8 s 32. 100 109.1 109.1 54.6 - - - - 272.9tal fakeya ha 7.5 7.5 3. 6 - - - - 18.6 32.100 240.8 240. 115. 6 - 97. 1

Sub-Total Flood DiksI 349.9 349.9 t?O. I - - - - 880.98. River Training

______________

Short Cuts ti 4. 6 4.6 4.6 - - - - 13.8 32t100 147.7 147.7 147.7 - - - - 443.0Dties ha 4 4 2.4 - - - - 10.4 32.100 128.4 t28.4 77.0 - - - - 333.8

Sub-Total Riwer Training 276. 1 276. 1 224.7 - - - - 776.8C. Rods

Upgrading of Village Roods he 5.2 5.2 5. 2 S.2 5.2 S. 2 5.2 36.4 32.tOO 166. 9 166.9 168.9 166.9 166.9 166. 9 1668 t. 18.4

Sub-Total Roud 166.89 166.9 166.9 166.9 166.9 166.S 166.9 1.168.4D. Field Cop nd Qartors ha 0.1 - - - - .- O.1 32.100 3.2 - - - - - - 3.2E. Irrigation and Drainage Facilities i Stags Itn ArSa

Rain Secondary Canals ha - - 7.3 7.3 7.3 7.3 7.3 36.5 32.100 - - 234.3 234.3 234.3 234.3 234.3 1.171.?franch Secondery Canls ha - - 6.5 6.5 6.S 6.5 6.5 32.5 32,100 - - 208.7 208.7 208.7 208 7 208.7 1.043.3Sub-Secondary Canls he - - 8.7 8.7 8.7 8. 8. ? 43.5 32.100 - - 279.3 279.3 279.3 279.3 279.3 1.396. 4lertiary Canals he - - - 10.7 10.? 10.? 10.7 42.8 32.100 - - - 343.5 343.S 343.5 343.5 1.373.9Rein and ajor Orains ha - - 14.9 14.9 14.9 14. 9 14.9 74.5 32.100 - - 478.3 478 3 478.3 478.3 478. 3 2. 391.5Ninor Drains he - - - tt.9 11.9 11.9 11.9 47.6 32.100 - - 382.0 382.0 382.0 382.0 1.528.0

Sab-Totl Irrigation and Orainaga facilities in Stage 111 Area - - 1.200. 1.926.0 t.928.0 t.926.0 t.926 0 8,904.5

Total IVSTNENT COSTS 796. 792.9 1.762.3 2.092.9 2.092.9 2.092.9 2.092.9 11.722.9a:: :::: ass: ss::: 55:::s:t StSS-.: 555:::: :5:=S:3 :S::=:SS

Total 796.1 792.9 1.762.3 2.092.9 2.092.9 2.092.9 2.092.9 11.722.9s:::: *ssss sas::.as::: 5:555:: 5fl5555 flfl555 55555555w=zz

/a Cost schedule in OG fiscal year with bas costs as o' ; IOl 1988.-------------- _-------------------------------------------------__-----------__--------.--------------------------------------------------_---__--_--------__-----------------_---

….4

,-tsl

-86-

ANNEX 3

NEPAL

NARAYANI III IRRIGATION PROJECT

Assumptions for Financial and Economic Analyses

(Table of Contents)

Prices and Conversion Factors

GeneralExchange RateStandard Conversion FactorEconomic and Financial Prices of CommoditiesPrices of Agricultural InputsOpportunity Cost of LaborEconomic Cost of Unskilled Construction LaborConstruction Conversion Factor

Agricultural Benefits

Crop Yields and InputsCropping IntensitiesRate of Modernization and Completion of New WorksCrop and Farm Budgets

Cost of Irrigation

Investment CostOperation and Maintenance CostLand Acquisition Cost

Additional Sensitivity Tests (Appendix)

-87-

ANNEX 3Page 1

NEPAL

NARAYANI III IRRIGATION PROJECT

Assumptions for Financial and Economic Analyses

Prices and Conversion Factors

1. General. The economic prices 3f major traded agricultural com-modities (at farm gate) were derived from the IBRD world market prices (1986projected through 1995) expressed in 1986/87 currency values with appropriateadjustments for freight, handling and processing. Non-traded foodgrains andother non-traded goods and services were brought to a common basis with thetraded goods and services through the use of conversion factors. Two conver-sion factors have been used: (i) Standard (SCF); and (ii) Construction(CCF). Details on their derivation and use is described below. The oppor-tunity cost of capital (OCC) was assumed at 10 percent.

2. Exchange Rate. Conversions from local into foreign currency and viceversa were made at the rate of US$1.0 = NRs 20.5. The official rate isestablished daily by the Nepal Rashtra Bank based on a trade-weighted basket,with the US dollar as the intervention currency.

3. Standard Ccigversion Factor. A SCF of 0.9 has been used in theeconomic analysis of the project. To measure Nepal's net economic benefitsfrom the project, costs and benefits of the project have been evaluated atworld market prices. This requires certain price adjustments, since manyitems are not traded in the world markets and the prices of others areaffected by tariffs and trade restrictions. To make them comparable, a SCFhas been applied to the price of non-traded goods. In the absence of traderestrictions, the SCF can be estimated by using the following formula:

SCF X + m(X+SX-Tx )+(M-sm+Tm)

Where: X = export value (f.o.b.);M = import value (c.i.f.);S = subsidies on exports;T = taxes an duties on imports.

Using available trade statistics for the years 1977/78 - 1983/84 yield a SCFof above 0.91. However, since this method does not take into considerationquantitative restrictions on trade, the estimates derived provide only anupper limit.

-88-

ANNEX 3Page 2

4. Economic and Financial Prices of Commodities. The economic pricesfor traded commodities such as rice, wheat, maize and sugarcane were derivedby using border prices in US dollars according to IBRD commodity projectionsand converted to local currency values at the standard exchange rate(Annex 1, Table 12). The domestic cost components (local transport, handlingand marketing charges) were adjuste& by a SCF of 0.90. Although Nepal hastraditionally been an exporter of ri-e, the combined eifects of stagnating orde^lininZ production and pnpulation pressure have brought about an overallfood deficit of 23.5 percent in 1982/83 which is expected to persist. Adetailed review of the supply and demand pattern for major agriculturalcommodities indicates that regional markets in deficit are the hills andmountains and that the Terai produces a surplus. However, road communica-tions are limited and project farmers react more readily to the demand pat-tern in India than in the country's interior. For example, the presentmarket price for medium rice in Birganj is about NRs 2,800/t, which is equiv-alent to the price prevailing in Raxaul (India). The price is About NRs4,100/t in the mountains. However, this higher cost reflects the high costof transporting rice to the mountains.

5. Prices of Agricultural Inputs. Input prices, with the exception o;fertilizers, are determined by local supply and demand. Fertilizer pricescontain a subsidy element, which it has been assumed would be graduallyphased out and eliminated completely by full development; similar expecta-tions prevail in adjoining areas of India, to which all trading activities inthe project area are closely linked. Fertilizers have been valued at theprojected world market prices. Pesticides and insecticides have been assumedto be traded. The SCF has been applied to the local components (transporta-tion, storage and marketing) of these largely imported inputs. The economicprice of farm power (bullock pair with operator) was derived from going dailyrental rates, adjusted by the SCF. A summary of economic and financialprices is presented in Annex 1, Table 12.

6. Opportunity Cost of Labor. The shadow wage rate for labor wasestimated at NRs 7.8/manday which amounts to a conversion factor forunskilled labor of 0.7. Most wages for farm labor are paid in kind. Therate of compensation varies from 3.3 to 5.0 kg of paddy which amounts toabout NRs 11.0 per day. Labor demand has a pronounced seasonal pattern withpeak monthly requirements for paddy cultivation extending from May throughSeptember. The peak labor demand also attracts migrants from the State ofBihar and from the Nepalese hills, where unemployment is severe. In slackmonths (October through April) labor demand may decline in some periods to aslow as 15 percent of the available labor supply and wages decline to aboutNRs 7.0/manday. The shadow wage rate has been derived as a weighted averageof the observed monthly rates and adjusted by the SCF.

7. Economic Cost of Unskilled Construction Labor. Wages paid tounskilled construction labor, averaging about NRs 15.0/manday, have beenadjusted by the conversion factor for unskilled labor of 0.7. The improve-ment of the NEC and the construction of additional irrigation facilitieswould be carried out by labor-intensive methods during the agricultural slackseason (November through March). The main source of labor would be theproject area.

-89-

ANNEX 3Page 3

8. Construction Conversion Factor. The construction of project civilworks requires the use of a mixture of equipment, materials, and skilled andunskilled labor:

(a) Traded Components include capital-intensive works whic: -.uireimported materials and expatriate support in survey, design andconstruction supervision. Hence the conversion factor of 1.00 hasbeen used. It is estimated that about 40 percent of the constructioncosts fali under this category.

(b) Non-Traded Components include works that require skilled labor andlocally manufactured materials. The SCF of 0.90 has been used as theconversion factor for these works which account for about 15 percentof the construction costs.

(c) Unskilled Labor. A ratio of economic to financial wages equal tothat assumed for agricultural labor (0.70) has been used forunskilled construction labor (para 8). It is estimated that the costof unskilled labor would constitute about 25 percent of the totalconstruction costs.

The weighted average of these conversion factors wouid be as follows:

Conversion Factor Weight

Traded Items 1.00 0.60Non-Traded Items 0.90 0.15Unskilled Labor 0.70 0.25

Construction Costs 0.90 1.00(weighted average)

Thus, a CCF of 0.90 has been adopted for converting the costs ofconstruction works from financial to economic prices.

Agricultural Benefits

9. Estimates of crop production, yields, inputs and farm incomes atpresent, future without, and future with project situations are based on thecrop yields and input data given separately for: (i) irrigation facilitiesin the already developed command area (28,700 ha); and (ii) extension ofirrigation facilities into new areas (8,700 ha). The input and outputrequirements are presented in Annex 1, Table 11 and the build up assumptionsare summarized below:

(a) Crop Yields and Inputs. A seven year build-up period has beenassumed for transition of yield levels from the 'present' to 'futurewith' projeet situation. The build-up rate was based on surveys,studies, monitoring of irrigation impact under the Stage I and IIprojects and performance already achieved by good farmers with access

-90-

ANNEX 3Page 4

to reliable irrigation water supply. In the 'without project' situa-tion yields were assumed to improve by about 3.2 percent in the nextten years provided that adequate O&M of existing facilities isensured. In tho case of less than adequate O&M, it was assumed thatyields would either remain unchanged (paddy) or decline by about 10percent (all other crops).

(b) Cropping Intensities. Experience from irrigation projects in similarareas suggests that increases in cropping intensity to the fulldevelopment level would be faster than increases of crop yields. Abuild-up of three years has therefore been assumed fcr transitionfrom 'present' to 'future with' project intensities. The 'futurewithout' project cropping pattern is expected to change onlymarginally, with small increase in the area planted to sugarcane andoilseeds enabled by an overall increase in cropping intensity byabout 6 percent.

(c) Rate of Modernization and Completion if New Works. The rate ofcompletion of modernization works and the completien of newirrigation blocks was based on the current implementation proposalsprepared by project consultants.

The summary of the expected build-up rates is as follows:

Rate of Change Year 1 2 3 4 5 6 7 8 9 10

Yields and Inputs (%) W 6 14 28 49 68 84 97 100W 14 36 76 92 100

Cropping Intensities (%) W 10 20 30 40 50 60 70 80 90 100W 40 70 100

W = 'future without' projectW = 'future with' project

Rate of Modernization and Completion of New Works

Year 1988 1989 1990 1991 1992 1993 1994 Total--- Incremental f'0000 -----_-___

Modernization

Stage I 0 3.2 3.2 3.2 3.2 3.1 0 15.9Stage II 0 2.5 2.5 2.5 2.5 2.8 0 12.8

New Works

Stage III 0 0 0 0 2.9 2.9 2.9 8.7

Total Area 0 5.7 5.7 5.7 8.6 8.8 2.9 37.4

10. Crop and Farm Budgets. Using project yields and input dataindividual crop budgets at both financial and economic prices have beencalculated for the main crops for the present, and the future without and

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ANNEX 3Page 5

future with project situation at full development. Annex 1, Table 13.1provides the typical farm budgets for farmers representing typical projectconditions.

Costs of Irrigation

11. Investment Cosc. The capital costs of all civil works, including thecost oF roads, radio telecommunication equipment, charges for surveys, designand construction supervision and physical contingencies were based on 1986expected contract rates and adjusted by the CCF.

12. Operation and Maintenance Cost. Since O&M involves mainly employmentof unskilled or semiskilled labor, the unskilled labor conversion factor(0.70) was used for adjustment of the financial O&M cost. Thus, for theeconomic analysis, annual O&M cost for the surface irrigation schemeestimated as NRs 370/ha was adjusted to NRs 270/ha reflecting the largeproportion of unskilled labor cost of this item.

13. Land Acquistion Cost. Land acquisition requ.rements for the projectare expected to be about 270 ha and would be mostly confined to the Stage IIIarea. The cost of land for the irrigation system was deducted from theinvestment cost. Instead, the expected value of this land without irrigation(NRs 6,200/ha) based on the future without project situation was taken torepresent the opportunity cost and was entered as a recurrent cost :streaminto the analysis.

-92- ANNEX 3Appendix

NEPAL

NARAYANI III IRRICATION PROJECT

Additional Sensitivity Tests

1. Two additional sensitivity test have been performed to estimate theimpact of: (i) a reduction in the time required to complete the project fromseven years (base case) to five years; and (ii) a change in the area plantedto sugarcane from 3% expected in the base case in the 'with project' situa-tion to about 8% experienced at present.

2. Five Year Implementation Period. A reduction in the time required tocomplete the project from seven years (base case) to five years wouldincrease the ERR from 21% to 23% and the NPV would increase fromNRs 16,300/ha to NRs 19,100/ha. Other things being equal, the rate of com-pletion of modernization works and the completion of new irrigation blocksfor this test have been revised as follows:

Rate of Modernization and Completion of New Works a/

Year 1988 1989 1990 1991 1992 1993 1994 Total-------------Incremental '000) ----------------

ModernizationStage I 0 3.2 4.2 4.2 4.3 0 0 15.9Stage II 0 2.5 2.5 3.9 3.9 0 0 12.8

New WorksStage III 0 0 2.9 2.9 2.9 0 0 8.7Total Area 0 5.7 9.6 11.0 11.1 0 0 37.4

a/ See 'base case' implementation schedule for comparison (para 9, Annex 3).

3. Increased Area under Sugarcane. An increase in the area planted tosugarcane from 3% expected at full development in the 'with project' situa-tion to about 8% would lower the ERR marginally by about 0.5% at theprojected price and yield developments. While yield increases to 60 to 80tons per hectare appear feasible, particularly if extension efforts areincreased under the ongoing Cash Crop Development Project, they are expectedto take place only gradually and would not change the economic viabilitysubstantially

-93-

ANNEX 4

NEPAL

NARAYANI III IRRIGATION PROJECT

Selected Documents and Data Available Within the Project File

Documents Related to the Project

1. Project Preparation Report on Narayani Zone Irrigation DevelopmentStage III Project; Nippon Koei Co., Ltd, Birganj; June 1984

2. Updated Project Preparation Report on Narayani Zone IrrigationDevelopment Stage III Project; Civil and Irrigation; Nippon Koei Co., Ltd.Birganj, September 1985

3. Project Preparation Report on Narayani Zone Irrigation DevelopmentStage III Project (Agriculture and Economic Analysis), Development ResearchGrcip 0D) Ltd, Lattipur, August 1985

4. Agriculture Practices in Narayani Zone Irrigation Development Project;(Parsa), R.C. Mishra IDS; November 1985

5. Water Requirement Calculations - Narayani Zone Irrigation Project;A. Seager (Consultant), December 1985

6. Staff Appraisal Report - Birganj Irrigation Project (Narayani Zone)Nepal; The World Bank, Report No. PA 146a, March 1, 1973

7. Staff Appraisal Report -~ September 18, 1978, Narayani Zone IrrigationDevelopment Stage II Project; The World Bank, Report No. 2067a-NEP

8. Project Performance Audit Report - Nepal Birganj Irrigation Project(Narayani Zone)(Credit 373-NEP); The World Bark, Report No. 4267,December 30, 1982

9. Evaluation of Proposal of Establishing Central Workshop forIrrigation Projects; APROSC, Kathmandu, Nepal, September 16, 1985

10. Report on Preventative Maintenance Requirements; CIDA, April 1979

General Documents

1. Report of the Food Security Mission to Nepal; FAO, Rome,September 1984

2. Study to Establish Irrigation Subsector Policy Priorities Vol. I, IIand III; His Majesty's Government of Nepal, Ministry of Water Resources,Water and Energy Commission; Kathmandu, Nepal, undated.

3. Nepal - Prospects for Economic Adjustment and Growth; The World Bank,Report No. 5867-NEP, December 12, 1985

NEPALNARAYANI III IRRIGATION PROJECT

IMPLEMENTATION SCHEDULE

Calendar Year 1966 1987 1988 1989 1990 1991 1992 1993

Financial Year FY87 FYr8 FY89 FY90 FY91 FY92 FY93

Project Year (1) (2) (3) (4) (5) (6) (7)

Quarter III1IVI 11 III IV I It IIIIV I I 11 III IVI I I 11 IV I I I It IV I ti I III IEt7

Monsoon _ 1$ -: 19 _ I 1 -- t

CANALS - _- _ -. _STRUCTURESREPAIRS Or TILAWE 8ARRACE

II.~~~~~~~~~~ _-=V II :LCA =- _ W_ -- l_ _ _ =e

SECONDASY CANALSCANALS

TERTIARIES & OFD -

CANALSDRRAINS

MA MOR DRAINS -- -CANALSstaucruacs

SERVICE ROADS A CAMPS km .

It IRIAtNINC DRAIAE (SAE II fAREF 3 i

SECONDARtY CANALSCANALS

TERTIARIES & OfI) CANALSDRAINS STRUCTUEtS6

MAJOR & MINOR DRAINS

STRUCTruRESSERVICE ROADS & CAMPSSHALL.OW TU9EWEU.S 1

EMBANKMENT

CABIONS

VEHICLES & EQUIPMENTRADIO TELECOMMUNICATION

AGRICULTURAL EXTENSIONMoNITroRiN- r v-ALuATIONTRAININGCONSULTANCY

FEBRUARY 198O

NLIALNARAYANI III IRRIGATION PROJECT

ORGANIZATION CHART OF DEPARTMENT OF IRRIGATION,HYDROLOGY AND METEOROLOGY (DIHM)

MINISTRY WATER&OF WATER ENERGY

RESOURCES COMMISSIONSECRETARiAT

DIRECTORGENERAL

HYDROLOG PLANNING & CENTRALLY& MtETEOROL DES$.N CONSTRUCTION OPERATED

ID IVISION DIVI 10 DIVISION DIVISION

HYDROLOGY METEOROLOGY ROECT DESIGN CONSTRUC'TION PLANNING KAMALA MANIAKALISECTION SECTION SECTION SECTION SECTION SECTION SECTION PROJECT

_ l KARNA,2 L MAJOR WORK GROUNDWATERGROUNDWATER _ _j WATER PROJECT PROGRESS DEVELOPmENT CHITWAN

SECTiON RESOURCES I MPLEMENT EVALUATION BOARD PROJECTL PROJECT SECTION SECTION

OTHER RESERVED PENDMSARWADMIttN. r FINANCE SURVEY POOL PHEWN DAM BAIRAWA

SECT,ON | SEC7ION SECTION POST RECONSTRUCTION GROUNDWATER PROJECT PROJECTPROJECT PROJECT

r 4R- ^, tUtDW- ESTERN CENTRAL EASTERN KOSiWESTERN WESTERN RECIONAL REGIONAL REGIONAL WESTERNREGIONAL REGIONAL DIRECTORATE | DRECTORATE| DtRECTORATE CANAL DEV

DIRECtORATE DIRECTORATE lARD

USA:DRRIGAT.ON

I MANAGEMENTPROJECT

WORLD BANK 30365B

NEPALNARAYANI III IRRIGATION PROJECT

ORGANIZATION CHART OF NARAYANI ZONE IRRIGATIONDEVELOPMENT BOARD (CONSTRUCTION STAGE)

NZIBD

CENTRAL GENERALIMONITORINGREGI ON MANAGER | AND

COORDINATION (GM)&SEC'Y, EVALUATION

COMMITTEE NZIEB DIVISION

DESIGN <& OPERATION & AGRICUL. 1ADMINISTRATION FINANCE CONSTRUCTION MAINTENANCE MECHANICAL SERVICES I

DIVISION DIVISION DIVISION DIVISION DIVISION LIAISON -ADBN/AIC

I~ 'II I

DISTRICT UNIT NO. 1 UNIT NO. 2COORDINATION IDIVISIONAL DIVISINAL

COMMITTEE ENGINEER ENGiNEER

FARMERS

LEGEND

LINE AND EXECU71VE AUTHORITY----- LIAISON AND COORDINATiON WORLD BANK 30365C

NEPALNARAYANI III IRRIGATION PROJECT

EXTENSION ORGANIZATION & ITS RELATIONSHIP TO THE PROJECT

DIRECTORGENERAL OF PROJECTAGRICULTURE COORDINATOR

REGIONALREGION DIRECTOR -

SAEO

AGRICULTURAL …-SMS TEAMDISTRICT DEVELOPMENT

OFFICER NZIDP-3 I RRIGATION_ | ~~~~~~DISTRICTS Ss IS

SUB-CENTERSUB-CENTER JUNIOR AADO l…NZIDP

TECHNICI_ I RRIGATION --

[SUB-CENTERJUNIOR

TECHNICIAN l

JUNIOR JUNIORTECHNICAL TECHNICALASSISTANT ASSISTANT

P. L.A.zA L.LA iA9 WARDS 9 WARDS

LEGEND'

LINE OF COMMAND----COORDtNATION WORLD BANK 30365E

-98- CHART 5

NEPALNARAYANI 1II IRRIGATION PROJECT

Historical Deliveries to Head of the Don Branch and Head of the NEC

70

60 lJx Delivery to Head

of Don Branchso No Record

for Don40DelEvery to Head of NEC

b 30Design Capacity of NEC

~20

DJF M A MJi JAISON 0 MAM j A S O ND J F M AM J JASO0N

1983 1984 1985

World Bank -- 30.36b

80° 2 .

N D IA C,u H CIN A, > ' , . ~~~~~HUMLA <

DARCHUlA r ' ,;- r\ ,_,,+>-' B~A.;4ANG ; ,

.t~~~~~V INAD W /.l AUPA 'A M G l '

8 DADElDHURlA, -_) x 4 ~~~DC.-f r ACHHAM ,% KLKT, igW\fDOLPA

-e r i^JAKKS \- aI"IUS.^ Gaoe t~~~~~AJAROT

HAN~* _ 204 PUTA

I ) KA111MANDU \ . 1BARD) A SALYA

yf-, / BHAKTAPUR / -1 < / t~~~~~~~~~~~~~~~

*11409%s@8z-oo3// 1l \~~~~~~~~~~~~~~~~~~~~~~~/1~~~~~~~~~~~~~~B p

st / \ \_ V~~~~~~~~~~~DNGEKHRKATHAANDTUR VALLE Hist PAaseepePPAr

I \ lof Ine cots olbe ~~~LUM IN| ., teas*fs std ts Cxtlusne lof a, | ) l M~~~~~(K

KAHIO NAWALPARASIr,, d at

I . atd Iheriletnbonalfnstr

LAITU T#. mapr ygnn rIh eashas bee peae &f-

YA N I ~ ~ ~~~~~~'h Wol Bawsr sttpeaf ctw*neo 2 08

\¢~~~~S aS it boua" MOs

\ ~~~~ On26° t O ~pa fTeKd 8a 2 84m 4 2

IBRD 195586' 88'

NEPAL

NARAYANI IRRIGATION PROJECTIrrigation Development 30'

E7i Investigation Rivers

Z| |Under Construction Development Region Boundaries

F -1 Construction of Main Infrastructures Administrative Zone Boundaries

E ] Main Construction Completed District Boundaries

m Completed International Boundaries

17 Reference Numbers(See reverse side for list ofPublic Irrigation Projects)

AA />C H I N A/~~~/GOR / V

/ !1 t \ j RASUWA

JDHADING'L$ A Gl7M Ai T I M, Everest 280

& Id' /, IN\3IUPALCHOK -N<

W WE2 17 J A$pUKOT~ I / , < 1P - / X | I ~~~~~~DOLAKHA-

4~~m 5~~~~ x--- 6THM odu / , ) ! -. >1 t.* 13 7

j \A B K6t^^f,^ > { / / I / SOWKHUMBU1 BHAISTAPUR S / '! SANKHUWASABHA TAPLEJUNG

~ASHRE-

~'~) MAKWJNIU LALAMEC PKHTA&

PARSA 'q S"' OKHALDHUNGA

d 1 < ' _ SINDHULI -r SOERHATUUMBA\tA ' R ANCHTART

IJALAM

,UDAYAPUR

A SAPTARI ~~~~~~~ ~~~~~MORANG -

SAPTA iHAPA~~~~~~~~~ARI 18

V' ~~ ~~~~C H- I N ANE A2 _ ' ; & 5 2 >-=¢ 2 Dr >t < C H t N A ~~~~~~~~N E P A L

dn.-R2 t si-- HU^tA - NARAYANI im IRRIGATION PROJECTt _ 00 W, 1) S /? Major Drainage Basins

.f RCJTA£-i / S-o.NSo2 ><, * ^t+ 4 8 * ' ;> { SHI Rtver basin drainage areas0<> - 'A >l/4Q>#' ~ 9; . i [. ; --- - -- Rivers

I ~~~~~~ .'-4~~~~~~~~~j Jt*MLA @ ~~~~~~~~~~~~~~National capital

p,t; 3% *m -f,2 , J.i) X i * ..? *5 2 / *, O { C|_ o Selected towns-'-a 4 4 ,, , , ,,District boundaries

ANCHANPUR ' O;*f-lttfaw n Ei .M U --- Zone 1boundanes< . < t2 . :^ r SZ ;Z bnJA. -' ' A$$G -~~~~~~~~~~~~~~~~~~~~~~. Region boundanesS j International boundarCes

i' v~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~r~~A*_N i4's 8F -gXA_ q } SlEU#)( AIN

N AA r

KIII)MVE\ FRSA -1 L| 1, 10 ', 4 6

*-~~~~~~~~~~J~~ *k D >SAUfeO E,AKl4;AIT t #AU8(MA~_. fl t44,.>

MlLOMtfR0o 20 io eo IQ 0 o 160 }~ Htbt5§H * I2i

filLES0 20 40 tfO 80 100 4,X,,r vl ,_ l 7,M 'o 4*ASUW

Th. W.W P-A AW ft0 - '- /k.

-. T. ¼-d .. sb4 .,4 .. -r. hh/ f. d f

f ,~~~~~~~~~~~~~~-. . ECNAI .r 4sffoS=r drsrO snp7 o

. ..fru San, ,n'- sv-b~ o. rd n f o. honk 5,64 eac.sef tot c onw.fb7f r.n.~-..>. any.ll<f, on.Z Arnan dC ifr.^ nfra u sa$T flOridT flak ndR sbO'ac ,

Fn,Sot, r-dooonouo n O.botan o n2, stop o ...oN.

rC*

Project areasGroundwatet (developrmnelil v,l

i Barrage NARJiIlrgotion conal

Control gatesQ2 Power stotion

RoadsRailroads

_._-._ international boundaries H F P

Gandok_____.r_Barrage . Tni~en, -'_lrn-k'nag- *

Commrnnd Area%.40,000 ha(Gross)

\ - K ; ~~~~Commond Areo 23, 520 Ha (Gross) CANAL

930,000 Ho ( Gross)

Cma e ComAmrend ArezI 5 !'0 15 . 2J 680,000 ha (;

Kilometers

83'30 84'0 ',

. . .~~~~~~~~~~~~~~~

IBRD 19550

N E P A L j

IRRIGATION PROJECT . , ,)ject Location Arna-

I N D I A

*4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~5 ..-;.. .. -

(3AN(if,AlIJU"H

-.

X Qq<? 12700h~~~~~~~~~~~:ra'- ;,_j

1. KATHIMANDU

/ StagelArea

16,000ho

.~ ~~ % \./*S*BIgnAt

12,700F h

Stage ID* Area

CommadAe ~8$Oh52,000H Gos ~ ~

FEBRUARY 1986

To Kathmondu

C H I N A

( C-5HU}TAN z s

I (If i ILIp9;r^ jwr)$

Of III~~~~~~~~~~~~~~~~~~~~~~~~~~~~t.ANGL AJESH i

Tilowe N '1Boarrage

Pwanipur

- rX Pro1ectdAuthority Q

lMc'ck 1V h < rIock )

\ , \ Ae X -_ U, b . 71

a / . \/Ls 3~~~~~) 0 ,1\ f'.

Wock~~~~~Ic

; + s ef E X .t>; i \s ' 5x ~~~~~BIRGANJ - " \Block V

(4 ~~~~~BockJl DI 41

.. , N 4*y ~ ~ ~ ~~I DI

I- ; 1 -STAGE. I STAGE 21 -'n prt red by Thi World BLk ans B exCloiswy for' e c AvsC ofS exCluvely for Vh inform/ uw of The World 8 tI nterna l Iw'on rhe denominfntJons used end Me bowndarie jAow on thi nwp do fam

Of "to World Onk and te kgornan Finane C'orv y ofedfio^ v$t Aas of 'y terrioy or Cty er4of?e or accepftan of wIA* bwmtteem

IBRD 1954s

N E P A L

NARAYANI m IRRIGATION PROJECTGeneral Plan

Project areas Block boundariesProposed flood dikes Existing roads

ut t |l!*Existing flood dike - - -- Railroad

2 4 6 8 - Main canal Transmission linesKilometes JSecondary canals 1 TownsKilometers

2 3 4 5 Rivers .- -international boundariest: Groundwater development

Mile, areas

Existing tubewelis

- .1~~~~~~~~~~~~

it " \ N ' t \\m/' 7 '

i , '3loch \ 3lok t'' '\ '"

'I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'

STAGE Ir S TAGE M? a

: . I \ ~ ,

' '-- -N

MARCH 1986