Report No. 781 a-PAK

DMI

PakistanAppraisal of the

FILE COPYSeed ProjectJanuary 21, 1976General Agriculture DivisionSouth Asia Pro1ects Department

Not for Public Use

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PAKISTAN

SEED PROJECT

Currency Equivalents

US$1 Rs 9.90Es 1. US$0.10Rs 1 million (H) US$101,000

Weights and Measures

1 acre (ac) - 0.405 hectareI mile (mi) - 1.609 kilometers1 pound (lb) - 0.454 kilogram1 maund (md) X 82.3 pounds1 long ton (ton) = 27.7 maunds

2240 pounds- 1.016 metric tons

Financial Year

July 1 - June 30

FOR OFFICIAL USE ONL)

PAKISTAN

SEED PROJECT

Abbreviations

ADA (NWFP) - Agricultural Development Authority (NWFP)ADBP - Agricultural Development Bank of PakistanADC - Agricultural Development CorporationARC - Agricultural Research CouncilFAO - Food and Agriculture Organization of the UNGOP - Government of PakistanHYV - High Yielding VarietyNRC - National Research CenterNSCA - National Seed Certification AgencyNSC - National Seed CouncilNWFP - North West Frontier ProvincePADSC - Punjab Agricultural Development and Supplies

CorporationPCCC - Pakistan Central Cotton CommitteeROR - Rate of ReturnSASO - Sind Agricult½ural Supplies OrganizationSBP - State Bank of PakistanSQCO - Seed Quality Control OrganizationTJNDP - United Nations Development ProgramUSAID - United States Agency for International

Development

Seed Classification(based on OECD nomenclature)

PRE-BASIC - seed of high genetic purity produced by theplant breeder.

BASIC - progeny of pre-basic seed produced by theSeed Corporations.

CERTIFIED - progeny of basic seed certified by the SeedCertification Agency.

APPROVED - seed true to species, multiplied from certifiedseed.

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

PAKISTAN

SEED PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS

I. INTRODUCTION ...... O@66S46666600690666660066 ......... 1

II. BACKGROUND .......... * **...**.........*.....*****..... 1

III. THE PROJECT ..... e ............................ ee 4

A. Project Definition and Scope .................... 4B. Project Areas ................................... 5C. Detailed Features o......**.....o...o ............. 6D. Cost Estimates ..........................o*..................... 10E. Project Financing ........ *...................... 12F. Procurement and Disbursements .................... 13

IV. ORGANIZATION AND MANAGEIMENT *66O@**eO*4.6 ....... 15

A. General ... o ...................................... 15B. Seed Corporations *.*.** *.*..... .. *.......... 16C. Credit and Inputs for Seed Growers .............. 17D. Other Institutions *................... 18E. Accounting Systems and Audit .................... 18F. Project Coordination ..................*.*... *., 19

V. PRICING, MARKETING AND FINANCIAL RESULTS ..... o ........ 19

A. Seed Procurement ..... o ........ ...... ** 19B. Corporation Sales ....... 0....... ...... * 0 . 20C. Pricing of Certified Seed ....................... 20D. Financial Projections .. .............. 00**0..... 21

VI. BENEFIT AND ECONOMIC JUSTIFICATION ................... 22

VII. AGREEMENTS REACHED AND RECOMMENDATIONS ............... 24

This report is based on the findings of an IDA mission to Pakistan inNovember/December 1974, comprising Messrs. S. Thillairajah, F. Thornley,J.A.M. Loup, B.N. Jones (IDA), W.o. Edwards (Islamabad Office) and M.J.Zijp (Consultant) and on information furnished by the FAO/IBRD CooperativeProgram in its Report No. 24/73 PAK of August 1, 1973.

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ANNEXES

1. Agricultural Sector and Seed Industry2. Project Scope and Size3. Farm Development4. Seed Processing5. Quality Control6. Research and Pilot Projects7. Technical Assistance and Training8. Project Costs9. Disbursement Schedule

10. Project Organization and Management (including the projectimplementation schedule)

11. Banking and Credit Services12. Seed Marketing and Pricing13. Financial Projections14. Economic Analysis

MAP - IBRD 11616R

SUMMARY AND CONCLUSIONS

i. Agriculture in Pakistan currently accounts for about 38% of theGross Domestic Product, 40% of export earnings, and provides direct andindirect employment for about 85% of the country's labor force. Govern-ment efforts to increase agricultural production to date have not been backedby improvements in the quality of seed used by farmers, but in its 1975/80Development Perspective Plan, the Government of Pakistan (GOP) has givenhigh priority to the establishment of an improved and effective seed industry.The proposed project would provide such improved seed and would enable farmersto improve their crop yields and realize optimum benefit from their labor andother inputs.

ii. This project would be the fourth IDA Credit for the developmentof the agricultural sector in Pakistan. The objective of the project isto establish a modern seed industry involving variety release, seed multi-plication, processing, certification, storage and marketing. 1/ It wouldcover cotton, wheat, rice and maize with lesser quantities of pulses,oilseeds and fodder. Pilot scale operations are included for vegetableand potato seed trials which would lead to the further expansion anddiversification of the seed industry.

iii. At full production more than 100,000 tons of quality seed wouldbe produced and sold to farmers. Commercial scale operations would beundertaken by two new Provincial Seed Corporations - one each i4 Punjab andSind Provinces. With the assistance of existing Research Institutes andunder the supervision of these Corporations improved,seed would be grownon about 70,000 acres for cereals, and about 245,000 acres for cotton onCorporation farms and by registered farmers in the project areas. Seedquality would be controlled mainly through two new national institutions- a National Seed Council and an National Seed Certification Agency. Thepotato and vegetable seed pilot projects 4n Punjab, North West FrontierProvince and Baluchistan would be the responsibility of the respectiveProvincial Departments of Agriculture.

iv. Provision has been made for: consultants' services to help inseed production, processing and pilot project activities; engineeringadvisory services; and training of local personnel overseas in seed industrytechnology and management.

v. Project costs covering a five year disbursement period areestimated at US$56.5 million (M) with a foreign exchange component of aboutUS$23 M (40%). Project investments comprise construction of seed processingplants, seed stores, administrative buildings, vehicles, and farm develop-ment and machinery for the Seed Corporations; development of seed growers'farms including tubewells and farm machinery; assistance to ResearchInstitutes; pilot project operations; laboratory buildings and equipment,facilities for variety trials, and supervision vehicles for the National SeedCertification Agency and the Registration Agency (an arm of the NationalSeed Council); and technical assistance and training.

'./ Research, including plant breeding, is the function of the Provincialresearch services development of which is presently being financed byother agencies.

vi. An IDA Credit to GOP of US$23 M is proposed of which US$12.7 Mwould be onlent at 8% 1/ interest to the Provincial Governments to be used bythe Seed Corporations for capital expenditures, and to selected local banks(through the State Bank of Pakistan) for extending credit to seed growers.US$2.1 M representing tubewell drilling rigs, research, pilot projects andquality control would be passed on by GOP as grants to the ProvincialGovernments. US$2.0 M would be utilized by GOP for technical assistance andtraining. US$6.2 M would remain unallocated to cover contingencies. TheProvincial Governments would provide funds required by the Seed Corporationsfor development as equity capital, and working capital for the Corporationsin the form of loans carrying interest at 11%. Seed growers would contribute15% of their investments, borrowing the remaining 85% from the local banks aseight year loans at 11% interest.

vii. All processing equipment, tubewell drilling rigs, and vehicleswould be procured by international competitive bidding (ICB) in accordancewith IDA guidelines. Civil works for construction and farm development, bySeed Corporations, Research Institutes, and Seed Certification and RegistrationAgencies (US$3.5 M) would not attract foreign contractors, because of theirsmall size, the heterogenous nature of the work, scattered locations, and timespread: they would be contracted after competitive bidding advertised locally.Some vehicles, office machines, laboratory, and research equipment requiredurgently at project commencement and items of small value - all limitedto a total of US$0.2 M, would be procured through normal trade channels.Farm improvement (US$3 M) would be carried out by the seed growers themselves,but some of this and tubewell drilling would be carried out by local privatecontractors, or, where this is not possible, by Provincial Departments ofAgricultural Engineering. Technical assistance specialists and serviceswould be engaged following IDA guidelines for selection of consultants.

viii. For wheel tractors, tubewells and farm equipment, customer choice(of about 1,900 farmers) and availability of servicing facilities in thescattered project areas are important factors. For these reasons ICB is notrecommended for these tractors (US$2.6 M) or for tubewell contracts and farmmachinery (US$4 M). Wheel tractors would be procured in three annual lotsthrough the GOP owned Pakistan Tractor Corporation by soliciting quotationsfrom manufacturers on the basis of customer preference.

ix. The main benefit from the project would be the improvement incrop yields, and quality (in cotton lint) for all users of project seedin Pakistan. Annual incremental benefits at full development of theproject are estimated at US$120 M for cereals and US$170 M for cotton.Some 2.1 million farmers or about 13 million people would benefit fromthe improved quality of project seed. Additional labor required annuallyto harvest the increased crops is estimated at 100,000 man years. Theprojec. would benefit up to 8 million of the poorest 40% of Pakistan'spopulation.

x. The project is considered suitable for an IDA Credit of US$23 Mto GOP.

1/ Central Bank Rate.

I. INTRODUCTION

1.01 The Government of Pakistan (GOP) has requested an IDA Creditto help finance a seed project estimated to cost a total of US$56.5 M. Theproject would form an important component of Pakistan's agricultural develop-ment plan. It would establish a modern seed industry involving varietyrelease, seed multiplication, processing, certification, storage and market-ing. In the Provinces of Punjab and Sind the project would cover cotton, wheat,rice and maize with lesser quantities for pulses, fodder and oilseeds. Theproject would also include pilot scale operations for vegetable and potatoseed in Punjab, North West Frontier Province (NWFP) and Baluchistan.

1.02 Bank Group involvement in Pakistan's agricultural sector com-menced in 1962. The Credit now proposed would be the fourth IDA financedproject in the sector. All three earlier IDA Credits (76-PAK (1965), 117-PAK(1968) and 157-PAK (1969) totalling US$67 M) were made available to theAgricultural Development Bank of Pakistan (ADBP) to assist farmers tofinance tractors and farm equipment, and installation of tubewells. Thefirst two Credits have been fully disbursed. Credit 157-PAK for US$30 Mis expected to be completely disbursed by March 31, 1976.

1.03 The project was formulated by GOP with the assistance of an FAO/IBRDCooperative Program mission which visited Pakistan in the Spring of 1973. 1/Following a subsequent policy decision by GOP to exclude private sectorparticipation and to make agriculture a Provincial responsibility, insteadof a Federal one, the Provinces submitted to IDA, in the Fall of 1974,separate proposals modifying those contained in the FAO/IBRD Report. Thisreport is based on the findings of an IDA appraisal mission comprising Messrs.S. Thillairajah, F. Thornley, J. A. M. Loup, B. N. Jones (IDA), W. H. Edwards(Islamabad Office) and M. J. Zijp (Consultant) which visited Pakistan inNovember/December 1974.

II. BACKGROUND

General

2.01 Agriculture is the mainstay of the Pakistan economy, accountingin FY 74 for about 38% of the Gross Domestic Product and 40% of exportearnings. It provides direct employment for some 65% of the country'sentire labor force, with an important indirect contribution through theemployment of an additional 20% in secondary and tertiary activities.Irrigated agriculture dominates the sector accounting for some 90% ofnational farm output.

2.02 To achieve higher agricultural production GOP has endeavored toincrease the availability of major inputs such as water, fertilizers,

1/ FAO/IBRD Preparation Report No. 24/73 PAK of August 1, 1973.

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pesticides, farmer credit, extension services and better seed. Earlierattempts to establish a seed industry, first by the Pakistan Department ofAgriculture and latterly by the para-statal Agricultural Development Corp-oration (ADC), have not given satisfactory results. The quality of seeddistributed has proved unacceptable to farmers, rarely being better inperformance than ordinary grain commonly used by farmers for sowing. Gen-erally unsatisfactory performance by ADC led to its dissolution in 1972.Its operations relating to seed production and distribution were transferredto Provincial Government institutions viz:

Punjab Agricultural Development and Supplies Corporation (PADSC);Sind Agricultural and Supplies Organization (SASO);NWFP Agricultural Development Authority (ADA-NWFP); andBaluchistan Department of Agriculture.

The activities of ADC and these organizations are described in Annex 1.

2.03 Since the reorganization, seed quality both physically and ingenetic purity has continued to be poor. As a result there is suspicionin the farming community regarding seed produced by Government institutions.

Main Crops

2.04 Wheat, the staple food crop in Pakistan, is cultivated on a totalof about 15 million acres. 11 million acres, mostly irrigated, are plantedwith high yielding varieties (HYV). In 1967/68, GOP imported 42,500 tons ofhigh yielding variety wheat from Mexico. This was sown on about 1.2 millionacres and thereafter spread so rapidly by farmer to farmer exchange that by1973 almost 9.6 million acres were being grown. Distribution of this newvariety coincided with a succession of good winter seasons and the resulthas been an impressive jump in area and yields. Yields have subsequentlyfallen back due mainly to deterioration in seed quality through mixing. Atpresent, strong and short strawed HYVs of both directly introduced Mexican,and locally bred varieties are available and are a satisfactory base for theseed industry in Pakistan. 1/ About 80% of the HYV wheat area is in Punjab,13% in Sind, and 7% in NWFP.

2.05 Rice is grown almost entirely in Sind and Punjab, in roughlyequal amounts. There is also a small area of about 135,000 acres in theSwat valley of NWFP. About 50% of the country's total rice area of 4 mil-lion acres is planted with dwarf IRRI-Pak HYVs (mainly IR-8), about 20%with Basmati (mainly in Punjab) - a long grained aromatic variety commandinga premium price - and the remainder is local coarse grained types grownmostly in Sind. About 30% of the crop, mostly Basmati, is exported and isnow a major earner of foreign exchange, about US$225 M in 1974. The availablevarieties (IR8, Basmati 370, Basmati 198, Abasi) are an adequate base onwhich to start commercial multiplication and the rice breeders are currentlytesting a wide range of new strains.

1/ Mexipaks 65 and 69, Chenab 70, PAK 70, Lyallpur 73, Tarnab 73.

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2.06 Maize is cultivated on about 1.5 million acres. About one-quarteris grown rainfed in the hills of NWFP, a further 0.5 million acres is grownin the irrigated Peshawar region also in NWFP, and the rest spread throughoutPunjab with concentrations in the Sargodha and Lahore Divisions. The areaunder improved varieties is negligible and yields have not increased fromthe average of 0.5 tons/acre over the last ten years. However, improvedvarieties, mostly synthetic composites with emphasis on early maturity, arenow available and merit multiplication (Changez, Khyber, Shaheen, Zia).

2.07 Cotton is a major cash and export crop cultivated on about 5.5miliion acres, almost entirely irrigated - 4.3 million acres in Punjab and1.2 million acres in Sind. Some 96% of the area is in American Upland typewhile the remainder is in Desi (local), a coarse and short stapled type.Yields have improved gradually over the past ten years but are still poor- averaging about 285 lb/acre in Punjab and 375 lb/acre in Sind compared to630 lb/acre in UAR. Low yields stem mainly from low plant populationsresulting from the use of poor seed. Lint quality and uniformity hassuffered through varietal admixture of seed. A range of improved varietiessuited to different ecological zones is available. Most important areAC134,149F and M100/M4. These are of medium staple, and fertilizerresponsive. It is expected that a new variety, B557, with longer staplethan AC134 and wide adaptability, will be released soon.

Other Crops

2.08 Vegetables are grown on about 300,000 acres. These representhigh value cash crops and provide an important contribution to nutritionin the local diet. Onions, melons, tomatoes and capsicum (pepper) are themost important market crops. Yields and market quality of vegetables arevery variable because of poor seed quality and varietal mixtures.

2.09 Potatoes. Potatoes are grown in all four Provinces but the areais limited to about 50,000 acres. The cultivated area could, however, ex-pand rapidly in the plains if virus free seed of high yielding varietiescould be made available to farmers. A number of imported varieties, mainlyfrom Holland, have been shown to be adapted to local conditions.

2.10 Other crops grown in Pakistan and which could benefit from betterseed are pulses, oilseeds, berseem, soya bean, pearl millet and sorghum.The main improvement would initially be in physical quality since for themost part HYV material is lacking.

Present Position of the Seed Industry

2.11 Most farmers use their own seed of wheat and rice or barter withfellow farmers. Probably no more than 10% of farmers on average (mostlythe larger, more progressive and commercially oriented ones) obtain seedoutside the farm from commercial sources. Purchases increase when newand proved varieties become available. With maize, however, farmers purchasemore than 30% of their seed requirements.

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2.12 Potato farmers have come to recognize the importance of goodquality seed and readily pay high prices, as much as five times the priceof local seed, for seed imported from Europe. This is because they obtainyields 2 to 3 times more than from local seed which, without exception, isheavily affected by virus diseases, of major concern being leaf roll virus.

2.13 Cotton farmers mostly purchase their seed from ginneries or fromseed merchants in market towns. Some obtain seed by exchange with neighboringfarmers. Specially produced good quality seed has only been obtainable insmall quantities from a few cotton ginning companies and on occasion, fromGovernment Research Institutes which 'leak' new varieties to farmers fortesting. The latter is an unsound practice which can lead to the releaseof unsatisfactory material (3.19). Further details of the present positionof the seed industry are given in Annex 1.

2.14 The establishment of an effective seed industry is required toback GOP's strategy for development of Pakistan's agricultural sector. Amajor objective of the 1975/80 Development Perspective Plan is a 7% growthrate for the agricultural sector through major measures which include "makingradical improvements in the output and distribution of improved seed". Theproposed project would secure a significant increase in total crop productionand also yield direct benefits to a large number of small farmers who wouldtake advantage of the improved seed to be produced, processed and distributedunder the project.

III. THE PROJECT

A. Project Definition and Scope

3.01 The project would be the first phase in developing a modern seedindustry in Pakistan involving variety release, seed multiplication, pro-cessing, certification, storage and marketing.

3.02 The project would:

(i) establish and equip two Provincial Seed Corporations inPunjab and Sind;

(ii) develop Corporation and private seed farms;

(iii) establish and equip, at national level, a Seed CertificationAgency and Registration Agency;

(iv) provide equipment to Research Institutes to improve productionand processing of pre-basic seed;

(v) finance pilot projects for vegetable and potato seed production;and

(vi) provide technical assistance and training to the seed industry.

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3.03 Annual seed production at the end of the five year project periodwould be about 103,000 tons - wheat 60,700 tons; cotton 36,500; maize 2,600;rice 2,500; and other crops 700. The proposed size and scope of the projectare determined on the basis of anticipated seed demand and related to thepackage of complementary activities necessary to ensure production and pro-cessing seed of acceptable quality (Annex 2). In computing seed demand itis assumed that 75% of the cereal areas in HYVs, and 100% of the Uplandcotton areas would be served by the project. Seed replacement is assumedto be five years for wheat and rice, three years for maize, and annuallyfor cotton (Annex 2, paras 6 thru 10).

B. Project Areas (Map No. 11616R)

3.04 The project would operate on a commercial scale in two of thefour Provinces - Punjab and Sind. 1/ Operations in Baluchistan and NWFP would,in the first instance, be on a pilot scale for vegetable and potato seed.Total area required for seed multiplication at all stages 2/ would be about316,700 acres.

3.05 Certified seed would be grown by progressive farmers who alreadypossess irrigable land suitable for seed multiplication. Project areashave been chosen on the basis of their having an adequate number of suchfarmers willing to register with the Seed Corporations as seed growers.Provincial Governments have carried out farm surveys in the proposed projectareas to aid finla selection. Proposed project areas are:

PUNJAB - Sahiwal for wheat, maize and rice;Nuridke for rice;Khanewal for cotton and wheat;DG Khan for cotton and wheat;

SIND - Nawabshah/Khairpur border for cotton andwheat;Larkana for rice;

3.06 For cotton only, the certified seed would be multiplied throughone further generation to produce approved seed. This would be done insegregated areas defined by statute. In a segregated area it would bemandatory that all cotton growers used only certified seed. Movement of cottonseed (other than pre-basic and basic seed under official control) into or outof the area would be prohibited. Approved seed cotton would be ginned atprivate ginneries and the seed supplied, under contract, to the Seed Corpora-tions for further processing. The segregated areas would surround the

1/ NWFP and Baluchistan would obtain cereal seed from Punjab and SindProvinces.

2/ Pre-basic seed, basic seed, certified seed and, for cotton only, ap-proved seed. For definitions of seed generations see Glossary inAnnex 2, Appendix.

processing plants in the D G Khan and Khanewal areas in Punjab, and theKhairpur area in Sind (3.18). Because of the large scale of approved cottonseed production they would be much larger than - but would include - theareas of concentration chosen for certified cereal seed production.

3.07 Pre-basic seed would be produced by Provincial Research Institutes:Lyallpur and Kala Shah Kaku in Punjab; Tandojam and Dokri in Sind; and Tarnaband Pir Sabak in NWFP. In addition pre-basic cotton seed would be producedat the Multan Station of the Pakistan Central Cotton Committee (PCCC). Allhave land adequate to meet the pre-basic seed requirements of the project.Assurances were obtained from GOP and Provincial Governments that theseinstitutions would meet pre-basic seed requirements of the Seed Corporations.

3.08 Basic seed would generally be grown on Seed Corporation farms.Suitable farms would be transferred to the Corporations from the ExtensionDepartments. In Sind, all basic seed requirements for rice could be producedeconomically at the Dokri Rice Research Institute. An assurance was obtainedthat selection of farms suitable for transfer to the Corporations would befinalized in consultation with IDA. Transfer of farms to the Corporationswould be a condition of Credit Effectiveness. The Corporations would alsoenter into contracts with registered seed growers in the project area forbasic seed multiplication as necessary to supplement production from theCorporations' own farms.

3.09 Only 70 acres of land would be required for vegetable seed operationsin Baluchistan. In Punjab, NWFP and Baluchistan the potato pilot projectswould operate through contract growers apart from very small trial plotswhich would be located on existing research farms. An assurance was obtainedfrom GOP that land suitable for pilot project operations, and selected inconsultation with IDA, would be made available to the respective Departmentsof Agriculture within six months of the Credit Agreement.

3.10 The project areas proposed are topographically and climaticallywell suited for the relevant crops (3.05). All seed farms would alreadyhave canal irrigation facilities although some tubewells would have to beprovided for supplementary irrigation (Annex 3). All areas would be readilyaccessible by existing roads and rail.

C. Detailed Features

Seed Production and Farm Development

3.11 The Punjab and Sind Seed Corporations would develop lands madeavailable to them for seed farms and undertake multiplication of basicseed from pre-basic seed supplied by the Research Institutes. Capitalexpenditure on farm development (land levelling, improvement of watercourses, tubewells), farm machinery, supervision vehicles, workshop andfarm buildings is included in project costs.

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3.12 Certified seed would be produced by registered seed growersunder contract with the Corporations. The selection of progressive farmers,registering them as seed growers and contracting with them for the requiredproduction would be the responsibility of the Corporations' ProductionDepartment advisory staff. They would also supervise and advise on thegrowing of the seed crops. There would be no direct contract betweengrowers of approved cotton seed and the Corporations.

3.13 The project would finance the development of seed growers' farms.This would be undertaken for two reasons - to induce farmers to becomeseed producers (some hesitation is anticipated because of bad experiencewith past programs) and as a means of improving project efficiency. Greateroutput per farm would mean fewer farmer contracts hence less managementproblems. Growers would be helped to plan their development by the Corpora-tions' advisory staff. Investments would cover tractors, implements, tube-wells and land development. Details on farm development proposals are inAnnex 3. Tubewells would be installed by both private contractors andProvincial Agricultural Engineering Departments. With the present insuf-ficient number of drilling rigs, however, the contractors and Departmentswould not be able to satisfy existing demand, and seed growers would have towait several months before new wells are installed. Provision has, therefore,been made in the project for the purchase of drilling rigs and spares by theAgricultural Engineering Departments in Punjab and Sind. An assurance wasobtained that during the project period priority in the use of these rigswill go to project participants.

Seed Processing

3.14 The Corporation plants would process all basic and certified seed.They would also gin seed cotton from the basic and certified seed crops.Approved cotton seed from the segregated areas would, however, be ginned atexisting private ginneries located in these areas with which the Corporationswould contract for the purchase of that proportion of the crop to be usedfor seed. 1/ Further processing - delinting, cleaning, treating, packagingand storing, would be done at Corporation plants. Although processing of cottonseed is in many ways dissimilar to processing of other seed there are manycost economies to be derived by handling all seed in the same processingcomplex. Thus two processing plants in Punjab and the Sind plant wouldhandle cotton in addition to other seed.

3.15 The project would finance the development of four processingplants. Capacities would be governed mainly by the planned throughput ofwheat and cotton seed; they would be:

1/ Seed from early and late pickings would not be taken for seed becauseof its inferior germination.

Wheat CottonPlant tons tons

Punjab - D G Khan 17,100 16,000Punjab - Khanewal 174100 12,000Punjab - Sahiwal 17,100 -Sind 9,40J 8,503

An assurance was obtained that plant locations and capacities would befinalized in consultation with IDA. Project costs include capital expenditureon factory buildings and processing machinery, including ginning and delintingequipment. Transport of seed from fields and private ginneries to the plantswould be entrusted to private truckers on contract. Seed distributors wouldbe expected to take delivery of processed seed ex Corporation warehouse.Hence the cost of trucks included for the processing plants is minimal andintended only for emergency transport. Provision has been made for cons-truction of factory administration offices, stores, laboratories, and housingfor senior factory personnel who should reside near the site. Details ofplants and their costs are given in Annex 4.

Quality Control

3.16 For the Droposed project to succeed there must be impeccable controlof seed quality (2.03, 2.04). This necessitates sound seed legislation.Seed legislation satisfactory to IDA would be enacted by the FederalGovernment. To implement the law a National Seed Certification Agency(NSCA) would be established. Project costs would cover the provision ofoffices, seed laboratories, vehicles and incremental operating costs forthe project period. Thereafter a levy on seed certified could cover costs.A Registration Agency would be created to undertake variety registration.It would be established as an executive arm of the National Seed Council(NSC). It would be funded by the project in the same way as the NSCA.Enactment of seed legislation satisfactory to IDA and the establishment ofSeed Certification Agency and Registration Agency would be conditions ofCredit effectiveness.

3.17 The NSC and Provincial Seed Councils have been created to formu-late seed policy. The NSC, with representation from all parties interestedin the seed industry, both public and private sector, would formulate, andfrom time to time amend as necessary, the Seed Rules. These Rules wouldestablish procedures and standards for the NSCA and the Registration Agency.

3.18 The production of quality cotton lint demands special qualitycontrol measures. To prevent admixture of different lint qualitiesvarietal zones are needed with control of ginning practices. Seed shouldbe grown in segregated areas with control of cotton seed movement and gin-ning. Legislation to meet these needs exists in Pakistan 1/ but has beeninadequately implemented. It would be critical to project success that theCotton Ordinance be made fully effective. Under the Ordinance, Agricultural

1/ Provincial adaptions of the West Pakistan Cotton Control Ordinance, 196h.

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Department staff can be designated as inspectors for the purposes of enforcingthe law. They would be supplemented by the expanded staff of the NSCA and ofthe Seed Corporations. Staff availability would therefore not constrain theimplementation of the law. An assurance was given by GOP that tile CottonOrdinance would be effectively implemented. Assurances were also obtainedthat varietal zones and segregated areas satisfactory to IDA would be notifiedunder the Ordinance and maintained throughout the project period. Detailson Quality Control and related project costs are in Annex 5.

Research

3.19 Assistance to the mainstream of agricultural research is beingprovided by other agencies - mainly USAID and UNDP - to the limit of Pakis-tan's absorptive capacity (Annex 6). For the main crops there is an adequaterange of varieties on which to found the seed industry. Project investmentswould therefore be restricted to facilities essential for the production andprocessing of .pre-basic seed. Present methods of producing, handling andprocessing pre-basic seed (a Research Institute responsibility) are unsatis-factory. The project would finance the purchase of small scale processingmachinery to improve the processing of pre-basic seed. This would be producedaccording to accepted methods on land set aside for the purpose. Use ofseed from experimental plots, as pre-basic seed, would cease. Greater con-trol would be exerted over the release of pre-basic seed. In particularseed of pre-release varieties grown in trials on farmers' fields would berecovered by the Research Institutes. Failure to do so leads to releaseof undesirable material and has led to particular problems with cotton.Appropriate assurances were obtained in this regard. Details of researchproposals and investments are in Annex 6.

Pilot Projects

3.20 The first phase in the development of Pakistan's seed industrywould cover mainly the major food crops plus cotton. This would minimizedevelopment and management problems. However, to pave the way for laterdiversification two pilot projects are proposed for vegetable and potatoseed. There appears to be excellent potential for seed production ofthese crops but information is lacking on appropriate production andprocessing techniques and costs, and markets.

3.21 A vegetable pilot project in Baluchistan would establish a smallfarm of 70 acres and a processing plant to enable the Department of Agricultureto investigate vegetable seed production and marketing. The project wouldfinance the development of the farm, construction and equipping of theprocessing plant and technical assistance specialists. The pilot projectsfor potato would embrace Punjab, NWFP and Baluchistan. The objective wouldbe to establish a system of potato seed mjultiplication that would minimizethe need for imported seed and would reduce the infection of seed with virusdisease. Details of the pilot programs are in Annex 6.

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Technical Assistance and Training

3.22 Governments recognize that the specialized technical skillsnecessary for the establishment of a modern seed industry are lacking inPakistan. Provision has therefore been made in project costs for 384 manmonths of specialist services: processing 108 man months; production 72;quality control 72; vegetable pilot project 78; and potato pilot project 54.In addition the project would finance 63 man months of consultant servicesfor processing plant design, preparation of tender documents and for super-vision of plant construction. An assurance was obtained that all technicalassistance specialists would be employed in consultation with, and on termsand conditions acceptable to IDA. Appointment of consultants for plantdesign and related services would be a condition of Credit Effectiveness.

3.23 To complement technical assis ance the project would financeoverseas training of senior project staff requiring technical skills notnow available in Pakistan. On-the-job training of all staff would bean integral part of the responsibilities of technical assistance special-ists. Details of technical assistance and training are in Annex 7.

D. Cost Estimates

3.24 The total cost of the project over the five-year developmentperiod would be Rs 560 M (US$56.5 M equivalent) of which about US$23 M (40%)would be the foreign exchange component. Details of project costs,sulmmarized below, are in Annex 8.

Summary of Project Costs(Amounts in millions)

Local Fereign Total Local Foreign Total Foreign(- - Rs Million --- ) (-------US$ Million --- ) Exchange

SEED CORPRATION

Corporation farms 4.17 4.19 8.36 .42 .42 .84 5GProcessing equipment 21.72 57.71 79.43 2.19 5.83 8.02 73Building and storage 25.62 6.29 31.91 2.58 .64 3.22 20Vehicles 2.39 2.08 4.47 .24 .21 .45 46Working capital 1154.7 - 115.47 11.68 _ 11.68 -

Sub-total 169.37 70.27 239.64 17.11 7.10 24.21

SEED GROWERS FARMS

Tractors 5.17 20.68 25.85 .52 2.09 2.61 80Implements 5.69 9.06 14.75 .57 .92 1.49 61Tubewells 5.88 17.62 23.50 .5y 1.78 2.37 75Land developrent 20.73 2.30 23.03 2.11 .23 2.34 10Drilling rigs and

spare parts - lO.9C- 10.00 - 1.00 1.00 100

Sub-total 37.47 59.66 97.13 3.79 6.02 9.81

QUALITY CONTROL

Registration Agency .76 .28 1.04 .07 .03 .10 2.7Certification Agency 6.16 1.80 7.96 .62 .18 80 23

Sub-total 6.92 2.08 9.00 .69 .21 .90

RESEARCH AND PIILT PROJECTS

Research equipment .60 2.84 3.44 .07 .28 .35 85Vegetable pilot project .90 .55 1..5 .09 .o6 .15 38Potato pilot project 7.89 3.52 11.L1 .79 .36 1.15 31

Sub-total 9.39 6.91 16.30 .95 .70 1.65

TECHNICAL ASSISTANCEAND TRAINING

Technical assistance 3.83 17.33 21.16 .39 1.75 2.14 82Training .25 2.52 2.77 .03 .25 .28 91

Sub-total 4.o8 19.85 23.93 .42 2.00 2.42

BASE COST ESTIM9ATE 227.13 158.77 385.yo 22.96 16.03 38.99 41

Physicalcontingencies (3.3%) 5.45 7.17 12.62 .55 .72 1.27

Prl. econtingencies (41.7%) 102.64 58.38 161.02 10.36 5.90 16.26

TOTAL COSTS 335.22 224.32 559.54 33.87 22.65 56.52 40

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3.25 Cost estimates are based on findings during appraisal and updated

as of April 1975. Physical contingencies have been added at 10% on theprocessing equipment, buildings and development of the Seed Corporations' farmsbecause the costs of processing plants are not based on detailed engineering

drawings and farm locations are yet to be finalized. For similar reasons,

5% has been added to capital costs relating to quality control, ResearchInstitutes and pilot projects. Physical contingency provisions are not con-

sidered essential for seed growers' farm development (including drilling rigs),

vehicles, or technical assistance and training costs. Price contingencies

totalling 42% of base costs (excluding physical contingencies) are also

included, representing price increases compounded annually on all local and

foreign cost components. These are based on projected inflation rates in

Pakistan and countries expected to supply goods and services (Annex 8,Table 7).

E. Project Financing

3.26 An IDA Credit of US$23 M would finance the foreign exchange costsof the project. The remaining local costs of US$33.5 M would be met byProvincial Governments, SBP and seed growers. The project financing plan issummnrized below.

Summary of Project Financing(US$ Million)

LocalBanks

Provincial (thru SeedIDA Governments SBP) Growers Total

Seed Corporations 8.7 15.5 - - 24.2

Seed Growers 4.0 - 2.4 2.4 8.8

Tubewell Drilling Rigs 1.0 - - - 1.0

Quality Control 0.4 0.5 - - 0.9

Research and Pilot Projects 0.7 1.0 - - 1.7

Technical Assistance andTraining 2.0 0.4 - - 2.4

Sub-Total 16.8 17.4 2.4 2.4 39.0

Contingencies 6.2 9.1 1.1 1.1 17.5

Total23.0 26.5 3.5 3.5 56.5

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3.27 The IDA Credit would be on standard terms to GOP. US$8.7 M,representing investments by the Seed Corporations, would be made availableby GOP to Provincial Governments as 20 year loans at 8% interest, includinga 10 year grace period for both interest and principal. US$4.OM, representingfunds for seed growers' farms, would be made available to local banks throughthe State Bank of Pakistan (SBP) as 9 year loans, including 2 years' grace,carrying interest at 8%. Conclusion of arrangements between GOP and SBP andparticipating banks of procedures, terms and conditions acceptable to IDA wouldbe a condition of Credit Effectiveness. A sum of US$2.1 M representing tube-well drilling rigs, research, pilot projects and quality control would bepassed on by GOP as grants to Provincial Governments. US$2.0 M would beutilized by GOP for technical assistance and training. The remaining US$6.2 Mof the Credit would be left unallocated to meet physical and price contin-gencies.

3.28 Punjab and Sind Governments would provide funds required for develop-ment by Seed Corporations in the form of equity, and the permanent workingcapital requirements in the form of long term loans carrying interest at11%. Suitable assurances were obtained in this regard.

3.29 Seed growers would contribute 15% of farm development costs(including machinery), and all working capital required. Funds for theremaining 85% of investment costs would be provided by participating localbanks as 8 year loans, including a 2 year grace period, carrying interestat 11%. 1/ The foregoing financial arrangements would be embodied in theDevelopment Credit Agreement.

F. Procurement and Disbursements

Procurement /

3.30 All processing equipment, tubewell drilling rigs, and vehicles(US$10.5 M) would be procured by international competitive bidding (ICB) inaccordance with IDA Guidelines. Bids from domestic manufacturers wouldreceive a margin of preference - of 15% or the prevailing customs duty,whichever is lower - in the evaluation of bids from competing foreignsuppliers. ICB would not apply to:

(i) civil works (US$3.5 M), because of their small size and scat-tered locations, contracts for these would be let on the basisof competitive bidding advertised locally in accordancewith local procedures, which are satisfactory to IDA.Local contractors are numerous and well capable ofcarrying out such works; and

1/ Ruling Commercial Bank rate of interest for agricultural credit.

2/ All value amounts stated under this heading exclude contingencies.

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(ii) certain items required urgently at the beginning of theproject (some vehicles, office machines, laboratoryequipment, and processing machinery for pre-basic seedproduction) and item of small value, all limited to atotal value of US$0.2 M which would be purchased throughnormal trade channels. Foreign suppliers of most itemsare well represented through local agents and competitionis keen.

3.31 Wheel tractors (US$2.6M) would be procured through the governmentowned Pakistan Tractor Corporation which at present enjoys a monopoly forimport of farm tractors. Annually the Corporation Imports about 5,000tractors which are distributed to farmers according to their choice oftractor brands. Tractor requirements under the project would be small -about 475, to be procured in three annual lots. Customer choice and avail-ability of reliable servicing facilities in the project area are also impor-tant factors. The procedure agreed by IDA under Credit 157 PAK i.e., solic-iting quotations from manufacturers on the basis of customer preference, isacceptable. As there is an adequate number of tractor manufacturers repre-sented in Pakistan this procedure would afford a realistic extent of inter-national competition. In order to ensure that project participants wouldhave prompt delivery of their tractor requirements an assurance was obtainedfrom GOP that the Corporation would not sell tractors financed under theproposed Credit to third parties.

3.32 Farm machinery and tubewell equipment (US$4.0 M) would be purchasedby Seed Corporations and seed growers direct from local suppliers. Becauseof the necessity to accommodate customer choice and to enable buyers toacquire only makes for which service and repair facilities are readilyavailable, bulking and competitive bidding procedures would not be practical.Local and foreign manufacturers of equipment are adequately represented andgoods are competitively priced. Farm improvement (US$3.0 M) involving finelevelling and water course improvement would be carried out by the farmersthemselves; tubewell drilling which would lie in scattered locations andbe spread out in time would be carried out by local private contractors or,where this is not practicable, by the Departments of Agricultural Engi-neering on force account. The selection would be left to the farmer, withthe help and advice of the Corporations, or to the Corporations and theResearch Institutes in the case of their own farms.

3.33 Technical Assistance specialists and services (US$2.4 M) providedfor the Seed Corporations, the Seed Certification Agency and the pilotprojects would be engaged in accordance with IDA guidelines for selectionof consultants. The balance of project costs (excluding contingencies)would consist of staff and operating expenses for the Certification andRegistration Agencies and pilot projects (US$1.1 M) and working capitalfor the Corporations, (US$11.7 M) entailing no procurement.

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3.34 Assurances were obtained from GOP that for all contracts inexcess of US$100,000, technical specifications and draft tender documentswould be submitted to IDA before bidding documents are issued and bidevaluations would be submitted to IDA for approval before making theawards.

Disbursements

3.35 Disbursements from the proposed IDA Credit would cover:

(a) 100% of foreign expenditures for imported items ;

(b) 100% of local expenditures (ex-factory) for locally manufactureditems procured after competitive bidding; 60% of expendituresfor other locally procured goods;

(c) 40% of the total cost of civil works carried out by localcontractors and civil works performed under force accountfor building construction and farm development other thanseed growers' farms;

(d) 50% of amounts disbursed under loans to seed growers bylocal banks for investments other than imported tractorsand equipment; and

(e) 100% of foreign exchange costs for technical assistanceand overseas training.

Disbursements for civil works carried out by force account and for loansmade to seed growers would be made against certified statements of expendi-tures, the documentation for which would be retained by the Seed ProjectCoordination Committee for review by supervision missions. All otherdisbursements would be made against full documentation. Any amounts notused for the project would be canceU ed. A schedule of estimated disburse-ments is given in Annex 9.

IV. ORGANIZATION AND MANAGEMENT

A. General

4.01 Agriculture, under the constitution, is a Provincial responsibil-ity. The Federal and Provincial Governments are therefore agreed thatproject activities should be decentralized on a Provincial basis with\complete Provincial autonomy. The Governments are also agreed that thenew Seed Corporations should be legally, operationally and--financiallyautonomous. Adequate and consistently applied quality control is vital forproject success, and the certified seed offered by the Seed Corporations

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should always be of high quality in order to win farmer confidence and hencecommand the premium prices essential to finance the seed industry; this wouldbe ensured by quality control measures including the safeguards to be providedin the seed legislation and by the operations of the National Seed Certifica-tion Agency.

4.02 The commercial scale operations (seed production, processing andmarketing) of the project would be entrusted to two new Seed Corporations:

Punjab Seed Corporation; andSind Seed Corporation.

Pilot project operations would be the responsibility of the Departments ofAgriculture in Punjab NWFP and Baluchistan.

B. Seed Corporations

4.03 The two autonomous Seed Corporations would undertake seed pro-duction, processing and marketing. The Provincial Governments would pro-vide the equity capital and long-term loans required by the Corporationsfor development (3.28). These Corporations would operate under commercialcodes. Business policy would be entrusted to Boards appointed by therespective Provincial Governments (Annex 10, para 6). Each Corporation wouldbe headed by a full-time chief executive - the Managing Director - and sup-ported by other Executive Directors responsible for finance, production,processing and marketing functions. The Production and Processing Specialistsengaged to serve the Corporations would also be entrusted with executiveresponsibilities during their tenure of appointments (Annex 7). During Creditnegotiations, terms of reference and qualifications for these Specialistsand Directors of the Corporations were agreed with Governments. A detaileddescription of the organization and management of the Corporations is givenin Annex 10.

4.04 The Corporations' activities would fall into five major divisions- administration, production, processing, marketing and finance.

General Administration. The Managing Director wouldbe responsible for this function covering internalcoordination of operations, external liaison, publicrelations, legal matters, price setting, personnelmanagement and general services.

Seed Production. This function would include:

- development and management of Corporation'sseed farms,

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- selection and registration of, and liaison with,seed growers,

- advisory services to registered seed growers(including farm development and crop cultivation),

- seed procurement from Research Institutes (pre-basic seed) and registered growers (basic andcertified seed), and

- liaison with local banks extending credit to seedgrowers.

Seed Processing. The Processing Department would beresponsible for transport from field and private ginneriesto the plant site, processing at the plant, packing,obtaining certification by NSCA, and storage.

Marketing. Establishing a market for quality seed wouldrequire considerable effort to regain farmer confidence(2.02). Market research, sales promotion and publicitywould therefore be undertaken by the Corporations thoughretail sales would be entrusted to distributors appointedby them. These would include both public sector organi-zations, such as PADSC, SASO and ADA (NWFP) 1/ and privatesector merchants.

Finance. This function would include budgetary control,financial planning and funds management, financialaccounting, cost accounting and control, computationof seed prices, inventory control, management informa-tion, and internal audit.

C. Credit and Inputs for Seed Growers

4.05 Credit needs of farmers registered with the Seed Corporationswould be served by local banks selected and supervised by SBP. Agriculturalcredit services currently available to farmers are described in Annex 11.ADBP which has hitherto played a major role in providing credit to farmerswould be excluded from participating in this project until arrangementssatisfactory to IDA have been made by GOP to remedy ADBP's financial, or-ganizational and managerial deficiencies already identified by IDA. Basedon the recommendations of the Corporations' advisory staffs the registered

1/ Successors of the ADC Supply Wing (see para 2.02 and Annex 1).

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seed growers would apply to one of the participating banks for long termloans to cover their investment requirements. Under their contracts withseed growers, the Corporations would act as collecting agents for thesebanks, paying to them the purchase price of the seed procured from thegrowers. However, the banks would carry the task of credit management,including appraisal, and the risk of any bad debts. SBP would ensure thatall participating banks would follow the policies, terms and conditionsagreed with IDA.

4.06 The credit provided to seed growers would cover tractors and farmmachinery, farm development, and tubewells. Existing arrangements forshort term credit needs are considered adequate. Similarly existing arrange-ments for distribution of fertilizer and pesticides through PADSC, SASO, theProvincial Departments of Agriculture, and private traders are adequate toserve the needs of seed growers.

D. Other Institutions

Quality Control

4.07 The quality of project seed would be controlled both by theSeed Corporations and by the institutions to be created under the new seedlegislation - the NSC with Registration Agency as an executive arm, theProvincial Seed Councils and the NSCA (3.16 and 3.17). The compositionsand functions of these bodies are described in Annex 5.

Research and Pilot ProJects

4.08 The Research Institutes would continue to operate under theProvincial Departments of Agriculture. Similarly the Provincial Depart-ments of Agriculture would be responsible for pilot project operationsin Punjab, NWFP and Baluchistan Provinces. The day to day execution of thepilot projects would be delegated to specially appointed executive staff asdescribed in Annex 6.

E. Accounting Systems and Audit

4.09 Seed Corporations, NSCA, NSC, SBP 1/ and, for the pilot projectand Research Institute operations, the Departments of Agriculture in Punjab,Sind, NWFP and Baluchistan would arrange to prepare annual budgets, quarterlyprogress reports and annual project accounts for submission, as appropriate,to the respective Boards and Provincial Governments. Assurances were obtainedfrom GOP that these institutions would submit to IDA:

1/ SBP would collate information from participating banks.

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(a) annual budgets not later than two months prior tothe commencement of their financial year;

(b) copies of their quarterly progress reports withinone month of the close of each quarter; and

(c) draft annual project accounts within three months ofthe close of their financial year.

4.10 The project accounts prepared by NSCA, NSC, SBP, and the Departmentsof Agriculture would be subject to annual audits by the Government Audit De-partment or other independent auditors acceptable to IDA. Assurances werereceived from GOP that audit arrangements for these institutions satisfactoryto IDA would be made and that audited accounts together with audit reportswould be submitted to IDA within five months of the close of their financialyears.

4.11 Since the Seed Corporations would function as commercial enti-ties the audit of their annual accounts would be carried out by privateauditors. There are several established firms of Chartered Accountants inPakistan competent to undertake the audit of the Corporations' annualaccounts. The scope of annual audits would, in addition to normal statu-tory requirements, include mAnagement aspects in accordance with guidelinesto be provided by IDA (Annex 10, Appendix 2). An assurance was obtainedfrom GOP that the independent auditors appointed by the Corporations wouldbe acceptable to IDA and that copies of audited accounts and auditors'reports would be submitted to IDA not later than five months after theclose of the Corporations' financial year.

F. Project Coordination

4.12 Since the project activities would be decentralized Provincially,a Seed Project Coordination Committee has been set up at national levelfor project coordination, project procurement, inter-Provincial communication,and liaison with national and international institutions (including IDA).This Committee has appropriate Provincial representation and will havea secretariat adequately staffed to carry out the functions described inAnnex 10 para. 17. An assurance was received from GOP that throughout theproject period the secretariat would continue to be adequately staffed.

V. PRICING, MARKETING AND FINANCIAL RESULTS

A. Seed Procurement

5.01 The Seed Corporations would buy approved cotton seed from gin-neries at prices marginally higher than prevailing market rates. All seed

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grown for certification would be bought from the registered growers at apremium. For crops other than cotton the premium would be paid only on theportion of the crop suitable for seed, the remainder would be paid for atthe market rate for commercial crops prevailing at the date of sale. Thegrower would receive the market price payment within three days and thepremium payment within thirty days of the agreed sale date. Growers wouldhave up to six weeks from delivery in which to nominate a sale day for thepurpose of price fixing. 1/ The NSCA would take and analyse samples ofseed from each farm to determine the basis for payment (samples would bedivided into three portions -- one for immediate analysis, one for refer-ence, and one for the farmer). In the case of certified seed cotton thepremium would be paid by the Corporations on the totality of the grower'sdelivery since it would not be possible to determine by laboratory teststhe proportion eventually going as seed. (Annex 12)

5.02 The level of the premium would be set by the Corporations tocompensate for the additional care required for seed growing. Financialmodels for the seed growers (Annex 13) show that premiums of 16% for cottonand 20% for cereals above the market price for commercial crops, wouldmake seed growing attractive (5.06). The concern must be to ensure adequatesupplies of well grown seed. The cost of the premium to the end user wouldbe a negligible part of total cultivation costs.

B. Corporation Sales

5.03 The Corporations would appoint authorized distributors who wouldsell certified seed through their own networks of retail outlets (4.04).The Corporations would fix retail selling prices allowing a sufficient marginto cover transport costs and selling commission. To ensure a wide coverageand efficient service, competition among distributors would be encouraged.The three public institutions (PADSC, SASO, ADA-NWFP) currently involved inthe production and sale of seeds would be retained as distributors for theCorporations, but only on a par with other appointed distributors in theprivate sector. An assurance was obtained that Corporations would not berestricted in their choice of distributors.

C. Pricing of Certified Seed

5.04 The low-quality seed currently produced commands prices onlymarginally higher than the ruling market prices for commercial crops.

1/ This is a practice presently followed by PADSC. Without such a pro-vision growers might be tempted to retain seed, to gain from post-harvest price rises. This would be undesirable as they have no suita-ble storage.

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In contrast, the high quality seed to be processed and sold by the Cor-porations would have to be priced higher if the Corporations were to befinancially viable. In the long term, the prices charged must be adequateto cover all the costs of the Corporations. Financial models for theCorporations' processing plants (Annex 13) show that for cereal seeds,the ex-plant price would have to be about 90% over the prevailing marketprice for commercial grain. In the case of cotton seed, the differencewould be only about 60%, because the cotton processing plants wouldachieve offsetting profits from ginning operations and lint sales.

5.05 The better quality of the new seed would more than compensate forits higher cost to the farmer. However, a lower initial selling price willbe required to overcome the farmers'current distrust of purchased seed andto establish a market for the new product. GOP has thus expressed its in-tention to subsidize seed prices in the first years of the project. TheCorporations would establish a target price, to cover all costs, to bereached over a five-year period. In the first year of op.eration, the Cor-porations would sell the seed at a price lower than this target price, butnot lower than the price paid to seed growers and ginneries. The difference,between sale price and target price would be gradually reduced over fiveyears. During this five year period, the difference between sale prices andtarget prices, which would be reviewed annually, would be reimbursed by theGovernments to the Corporations. Assurances were received from ProvincialGovernments that until such date as IDA shall establish subsidies would bereimbursed monthly by the Governments.

D. Financial Projections

Seed Growers

5.06 Farmers who grow seed for supply to the Seed Corporations wouldreceive a premium of 20% above the market price for cereals and 16% forcotton. The financial rate of return to investment in farm developmentand to seed growing would be in the range of 48% to 59% depending on thecrop rotation followed (Annex 13, Table 4). If this seems high it must bere-emphasized that the overriding concern must be to make seed growingattractive to ensure dependable supplies of the desired quality and quantityof seed. The seed grower would be expected to finance 15% of the invest-ment required out of his own resources, and the local banks would providethe remaining 85% as an eight year loan carrying annual interest of 11%.

Processing Plants

5.07 The financial viability of seed processing plants has been assessedon the basis of two models - one for cereals and the other for cotton (Annex13). Selling prices for processed cereal seed have been taken at 90% abovemarket price of grain, and 60% above market price for cotton seed. The Gov-ernments would reimburse the Corporations any subsidies involved in the

!

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sale of processed seed (5.05). Based on these assumptions the financial rateof return on processing plant investment would be about 15% (Annex 13, paras6 thru 8).

5.08 A cash flow statement for the Punjab Seed Corporation is givenin Annex 13, Table 6. This shows that all capital costs during the firstfive year period should be provided in the form of equity capital to enablethe Corporation to meet its debt service commitments. The permanent workingcapital would be obtained in the form of long term loans carxying interestat 11% (3.28). The Corporation would have to borrow short term to cove-peak months' working capital (cotton and wheat crops overlap). With thesearrangements the Corporation should be in a position to pay off all itsloans and commence paying dividends on its equity caplEal from year fifteen.This situation could be considered representative of the Sind Seed Corpora-tion as well.

VI. BENEFITS AND ECONOMIC JUSTIFICATION

Principal Benefits

6.01 The main benefit from the proposed project would be the highercrop yields in cereals and cotton obtained by the end users of the improvedquality project seed. Assuming no change in existing cultural practices orother farm inputs, the use of improved seed from the project would resultin annual yield increases (averaged over the number of years assumed forseed replacement - see para 3.03 and Annex 2, Table 2) of 20% for maize,and 10% for wheat, rice and cotton. Yield increment in the case of maizeis higher because traditional varieties would be replaced by HYVs; inother crops HYV areas would be virtually unchanged but seed would be ofhigher physical quality and varietal purity.

6.02 In addition to increased crop production, a significant qualityimprovement would be achieved in the case of cotton. In recent years,lint uniformity and length have deteriorated through varietal admixture,and use of degenerate seed. Average staple length is presently between15/16" and 1". The improved seed under this project, coupled with varietalzoning to be enforced, would give seed cotton with a longer staple - between1-1/32" and 1-1/16". The better lint length and uniformity would commandat least a 10% price premium in the market.

6.03 At full development, the annual increase in production of com-mercial grain would amount to about 640,000 tons valued at US$120 H. Theincremental benefit from cotton is valued at US$170 M annually, one-halfof which is attributed to increased production and the other half to premiumprice on improved lint quality. Against the total incremental productionvalued at US$290 M should be set off the incremental harvesting labor costof about US$23 M, giving a net value of US$267 M. However, since most of

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these commodities are currently either exported (rice and cotton) or imported(wheat), the annual benefit of US$290 M would be reflected in a comparableimprovement in the country's balance of trade.

Other Benefits

6.04 Additional benefits would arise from the demonstration effectof the seed growers' practices. By developing their land and followingthe advice of the Corporations, the seed growers would achieve bettercultivation standards which, in turn, should convince the surroundingfarmers of the profitability of modern techniques of cultivation. Thepilot projects would lay the foundations for future commercial productionof vegetable and potato seed, thus permitting diversification of the seedindustry in the future.

Beneficiaries

6.05 It is anticipated that nearly half of Pakistan's farmers wouldbenefit from the project, since the seed to be produced are those of themain crops of the country. It is estimated that some 2.1 million farmerswould obtain increased crop yields from the use of project seed; thus some13 million people would benefit from the project. Additional work wouldbe generated at harvest as the increase in yields would require some 100,000man-years annually for handling harvesting operations.

6.06 Large and progressive farmers are likely to understand andprofit first from the potential of the new seed but small farmers wouldquickly realize the advantage and also benefit from using it. It isestimated that two-thirds of the farmers benefitting, some 8 million people,would belong to the poorest 40% of Pakistan's population.

Cost and Price Assumptions

6.07 April 1975 prices have been used for all items, with the excep-tion of foreign exchange. A shadow foreign exchange rate of Rs 11 to theUS Dollar has been used for both costs and benefits compared with Rs 9.90used in financial projections (Annex 14 para 15). For the benefits, thevalue of the incremental production (6.01) was derived by using the worldmarket price of each crop. Incremental unskilled labor would be requiredfor harvest-related activities because of yield increases. Since thisadditional demand for labor would occur at a time of peak activity, thefull market rate of wages was taken as the economic price of labor.

Rate of Return

6.08 Using these assumptions, the rate of return (ROR) of the projectis 82% and remains very high when various alternative assumptions aretested. In particular, it is relatively insensitive to investment costsand to the shadow exchange rate. Increasing operating costs by 25% brings

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the ROR down to 73%; decreasina benefits by 25% gives an ROR of 66%; doingboth reduces the ROR to 55%. The project is thus economically justifiedunder any set of realistic assumptions. A detailed economic analysis andcomputations of costs and benefits are given in Annex 14.

VII. A1QIEMENTS REACH':D AND RECOMMENDATIONS

7.01 Assurances were obtained from GOP and Provincial Govrernments onthe following major points:

(i) selection of Corporation farms, and processin!7 plant locationsand capacities would be finalized in consultation with IDA(3.08 and 3.15);

(ii) technical assistance specialists would be employed in consulta-tion with, and on terms and conditions acceptable to IDA (3.22);

(iii) Pmijab and Sind Governments would provide equity capital toSeed Corporations adequate to cover development costs, andlona term loans carrying interest at 11% p.a. to cover permanentworking capital (3.28);

(iv) the secretariat of the Seed Project Coord.ination Committeewould be adequately staffed through the project period (4.12);and

(v) until such date as IDA shall establish, governments would reim-burse the Seed Corporations for subsidies involved in themark-etin- of seed (5.05).

7.02 In addition to the customary conditions, the following have beenaoreed as conditions of effectiveness of the proposed Credit:

(i) transfer to Seed Corporations of farms suitable for basic seedproduction (3.08 and 7.01 (i));

(ii) enactment of seed legislation satisfactory to IDA and establish-ment of Seed Certification Agency and Registration Agency (3.16);

(iii) appointment of technical assistance consultants for processingplant design and related services (3.22 and 7.01 (iii)); and

(iv) conclu3ion of arranvements between 3OP, SBP and participating banksof procedures, terms and conditions relating to Credit to seedcrowers, acceptable to IDA (3.27).

7.03 With the indicated assurances the project would be suitable for anIDA Credit of US$23 million to the Government of Pakistan.

ANNEX 1Pagc 1

PAKISTAN

SEED PROJECT

Agricultural Sector and Seed Industry

The Agricultural Sector

1. The agricultural policy of Pakistan is defined within the frame ofa Development Plan. When the Fourth Plan (1970-1975) was abandoned, it wasreplaced by a series of annual Development Plans, and now by the 1975/80Development Perspective Plan. This new Plan gives greater emphasis to agri-culture and agro-industry, and stresses the need for providing farm inputsin general and of high quality seed in particular. This project would thusdirectly further a major objective of GOP's agricultural policy.

2. The agricultural sector contributes about 40% of the GDP but provideswork directly or indirectly for about 85% of the total labor force. About80% of foreign exchange earnings come from agriculture and agro-based indus-tries, particularly cotton, cotton textiles and rice. Irrigation covers some75% of the cultivated area which contributes 90% of the national farm output.

3. Production. Wheat, rice and minor food grains take up the majorproportion of the cultivated acreage. The production figures below confirmthe predominance of wheat and rice, and also of sugar cane. (Details inTables 1 thru 5).

1967/68 1968/69 1969/70 1970/71 1971/72 1972/73(million tons)

Wheat 6.3 6.5 7.2 6.4 6.8 7.4Rice 1.5 2.0 2.4 2.2 2.2 2.3Minor foodgrain 1.6 1.3 1.3 1.5 1.5 1.4Cotton 1.5 1.6 1.6 1.6 2.2 2.1Sugar Cane 18.4 21.6 25.9 22.8 19.6 19.6

4. Farm numbers and size. About 4.9 million farmers cultivate a totalof 49 million acres - an average farm size of 10 acres. However this masksa considerable skewing in the distribution of land occupancy. 8% of farmersoccupy 42% of the farm area whereas 61% occupy only 32% of the area. (De-tails are given in Table 6).

5. Average crop yields are low (See Table below). This reflects acomplexity of factors in which lack of good seed and other inputs, shortageof draft power, unimproved irrigation technology and cultivation methods,and the occurrence of large areas of saline or water logged soils all play apart.

ANNEX 1Page 2

Yields: Maunds per acre - Malor Crops

Pakistan compared with selected countries

Wheat Paddy Maize Cotton

Pakistan 11.6 12.8 11.0 3.3India 12.0 17.4 10.9 1.4USA 20.7 53.9 53.6 6.3Mexico 28.6 - 13.1 7.9Japan - 62.1 - -UAR 55.5 - 7.6

6. Wheat, the staple food crop in Pakistan is cultivated on about15 million acres. 11 million acres, mostly irrigated, are planted with HighYielding Varieties (HYV). In 1967/68 GOP imported 42,500 tons of Mexi-Pakvariety wheat. This was sown on about 1.2 million acres and thereafterspread so rapidly, by farmer to farmer exchange, that by 1973 almost 9.6 mil-lion acres were being grown. Distribution of this new variety coincidedwith a succession of good winter seasons and the result has been an impressivejump in area and yields. Yields have subsequently levelled off due mainlyto deterioration in seed quality through mixing.

7. Rice is grown mainly and to an equal extent, in Sind and Punjab.A small area is also cultivated in the Swat valley of NWFP. About 502 ofthe country's total rice area of 4 million acres is planted with dwarfIRRI-Pak HYVs, (mainly IR-8), about 20% with BasmAti (mainly in Punjab) along grained aromatic variety commanding a premium price - and the remainderis local coarse grained types grown mostly in Sind. About 302 of the crop,mostly Basmati, is exported and is now the major earner of foreign exchange,(accounting for about US$225 M in 1974).

8. Maize is cultivated on 1.5 million acres, half of which is in thePeshawar region of NWFP, and the rest spread throughout Punjab with con-centrations in the Sargodha and Lahore Divisions. The area under improvedvarieties is negligible and yields have not increased, from the average of0.5 tons/acre over, the last ten years.

9. Cotton is a major cash and export crop cultivated on about 5.5million acres, almost entirely irrigated - 4.3 million acres in Punjab and1.2 million acres in Sind. Some 96% of the area is in American Upland typewhile the remainder is in Desi (local), a coarse and short stapled type.Although seed cotton yields have improved gradually over the past ten yearslint quality and uniformity has suffered through varietal admixture of seed.

10. Vegetables are grown on about 300,000 acres. These representhigh value cash crops and are nutritionally important in the local diet.Onions, melons, tomatoes and capsicum are the most important market crops.Yields and market quality of vegetables are very variable because of poorseed quality and varietal mixtures.

ANNEX 1Page 3

11. Potatoes are grown in all four Provinces but the area is limitedto about 50,000 acres. The cultivated area would be expanded if virus freeseed of high yielding varieties could be made available to farmers. A numberof imported varieties, mainly from Holland, have been shown to be adapted tolocal conditions.

12. Other Crops grown in Pakistan and which could benefit from betterseed are pulses, oilseeds, berseem, soya bean, pearl millet and sorghum.The main improvement would be in physical quality since for the most partHYV material is lacking. Provincial distribution of major crops areas andproduction is given in Tables 2 thru 5.

13. Advisory and other services to farmers have traditionally beenprovided by Provincial Directorates of Extension and of Agricultural Engineer-ing. Recently GOP has started an Integrated Rural Development Program tofurther the same objectives. However, it is still experimental. TheProvincial Directorates of Extension are understaffed and short of transport.With an average of 4,000 farmers within his jurisdiction, and a vehicle inpoor condition, the extension officer has negligible contacts with farmers.The field assistant usually has a vast area to cover with whatever means oftransport he can find. Thus the present extension service is seen in-adequate to provide the intensive guidance which new seed growers wouldneed. GOP and Provincial Governments recognize this weakness as well as theneed to improve extension service provided to crop farmers in general and toseed growers in particular. In April 1975 GOP signed an agreement with theWorld Food Programme (WFP) to receive assistance totalling US$1,205,000 fora project aimed to develop several farmlands in Sind used as seed farms andfarmer extension service centers. Although it is too premature to assessthe possible impact from the WFP project it serves to reflect the concernof the Governments over the need to improve extension services provided tofarmers. Directorates of Agricultural Engineering provide the farmers withcustom services, such as renting of tractors and bulldozers and drillingof tubewells, at subsidized rates. They are, however, short of equipmentand the farmers often must either hire private contractors' services athigher rates or wait for several months before being served.

14. Commodity and input prices are regulated by Federal and ProvincialGovernments through price controls and subsidies, through food grain pro-curement and release, through control over imports and allocation offertilizer, machinery and chemicals, and through export taxes. No under-lying consistency is evident in these complicated efforts and the net effecton the farmers is difficult to assess. Pakistan farmers are commerciallyoriented and make considerable use of modern inputs; they respond as readilyto changes in farm-gate prices of commodities as they do to changes in thecost of production and farm inputs.

Seed Industry Background

15. The Agricultural Development Corporation (ADC), a semi-autonomousorganization, was, until its dissolution in 1972, the main producer and

ANNEX 1

Page 4

distributor of seed. This function is now carried out by its successors,PADSC, SASO and ADA (NWFP), operating on a Provincial basis (para 25). Ananalysis of the functions and failure of ADC is essential if the same pit-falls are to be avoided in designing a new project. ADC was constituted byordinance in 1961 following the recommendations of the Food and AgricultureCommission of 1959-60. It first began operations in 1962-63 and was con-ceived as an operational agency outside normal Government channels designedto bring about rapid developments in agriculture.

16. The organization was divided into four wings: Supply, Field,Administration and Finance.

- The Supply Wing was responsible for fertilizers, improvedseed, farm implements, machinery services for farmers,pesticides and other agriculture inputs. Pakistan wasdivided into six regions - Peshawar, Rawalpindi, Multan,Bahawalpur, Hyderabad and Karachi, each controlled by asupply officer with assistants located in major districts.Later, the major responsibility for fertilizer distributionwas handed over to other organizations and to the privatesector (and not until then did sales really expand). Theallocation of fertilizer to ADC was about 25% of the nationalsupply, i.e. about 15% for its project areas and about 10%for allocation to its sale depots located around the country.

- The Field Wing was responsible for agricultural development,including land settlement and extension in various projectssuch as Ghulam Mohammed, Gudu, Kalabagh and Taunsa Barrages,with a total command area of 10 million acres with widelydifferent conditions, anti-erosion work on 300,000 acres inthe Sohan Valley, construction of small dams in the northerndistricts of the Punjab and NWFP, and animal breeding farms.

17. ADC had difficulty in transferring experienced staff from theRegular Government departments and had to recruit energetic staff from themilitary forces who had little agricultural experience, or from the RevenueService or from new graduates. To make things worse, ADC was constrainedto carry out elements of Government policy, in excess of its capabilities,which did not necessarily correspond with commercial practice. For exampleseed targets were arbitrarily established without reference to market demand.Fertilizer procurement and distribution were subject to changes in Governmentpolicy; thus in 1962, and again in 1965, fertilizer distribution through thecooperative system was ordained and ADC suffered-considerably from arrearsand bad debts.

18. The seed multiplication and distribution program deservesparticular attention. Pre-basic seed from Government Research Institutes wasmultiplied on ADC basic seed farms and then, through registered private

ANNEX 1Page 5

growers, certified seed was produced for sale to end-user farmers. Initially12 seed farms totalling 22,000 acres were transferred to ADC for basicseed growing. This area was later supplemented from the Kalabagh, Gudu andGhulam Mohammed Barrages so that at its peak activities ADC controlled about40,000 acres of seed farms. In 1965/66 a maximum of 1.4 million maund ofseed was procured from ADC farms and registered growers of which only 0.64million maund was sold as seed. Thereafter the quantity of seed, both pro-cured and distributed, declined because of its poor and unacceptable quality.Quantities of seed of major crops sold are shown in the following Table:

ADC/ASO - Seed Sales('000 maunds)

1965/6 1966/7 1967/8 1968/9 1969/70 1970/1 1971/2 1972/3

Cotton 246 79 81 113 171 169 175 320Wheat 328 415 1,042 648 237 180 259 456Maize 2 14 4 1 5 6 8 35Paddy 23 49 50 28 20 32 37 63Potato

(local) - 1 2 3 -) ) )Potato ) ) )

(imported) 10 41 19 37 30 ) 51 ) 56 ) 55

609 599 1,1-98 830 463 438 535 929

19. The multiplication system did not work; there was no coordinationor cooperation between the research wings of the Departments of Agricultureand the ADC. The Departments of Agriculture retained the best of the feworiginal seed farms as Research Stations, the quantities of pre-basic seedprovided to ADC were often too small and of dubious quality. Until ADC hadsufficient seed farms of its own, therefore, basic seed was boughtas and where available from private farmers, who often were those to whomthe Research Institutes had 'leaked' pre-basic seed for trial purposes. OftenGovernment-produced basic seed was, in any case, not up to certifiedstandards. Even when ADC managed its own basic seed farms, these wereput in the hands of young, inexperienced managers, hampered by shortage ofmachinery spare parts, funds and fuel. Understandably the operation ofmore than 20,000 acres proved too great a burden.

20. In addition, the registered grower system for certified seed existedin name only and was never properly organized. No grower selection was madeand there were no firm contracts binding on both ADC and the farmers. Thepremiums offered to seed growers (cotton Rs 3 per maund, grain Rs 1-2 permaund) were too low to ensure crop care and delivery by the farmer. Inconsequence many farmers disposed of seed on the open market so as to benefitfrom high early season prices. Others adulterated deliveries to increasequantities, while yet others, mainly large growers, tended to store theircrop, under poor conditions, until market prices for grain or seed rose priorto the next harvest. Mixing of cotton seed in ginneries was common.

ANNEX 1Page 6

21. Seed was not cleaned, processed, or graded, but was simply threshedand winnowed in the traditional way. Although at one time 16 seed cleanerswere imported, none was used. ADC had no special storage facilities andmerely rented and adapted domestic housing, godowns, garages, etc. for thepurpose. Seed was even stacked in the open. As a result of bad storage seedquality deteriorated further.

22. As regards marketing and distribution, ADC was not permitted touse commission agents or traders after some alleged malpractice and seedmixing in earlier years, and had to set up a network of 47 bulk centers and212 retail points throughout the country, supplemented by mobile sales centers.One consequence of using the farmer associations and cooperative societiesfor distribution was that the recovery of debts was difficult.

23. The result of these inadequacies was that the quality of seedoffered for sale to farmers proved unacceptable and about 30% had to beauctioned off for foodgrains or, in the case of cotton seed, for processinginto oil. Farmers were just unwilling to pay even the modest premiums thatADC was constrained to charge for seed to cover its overheads.

24. It must be recognized with hindsight that ADC was a GovernmentCorporation attempting to manage a commercial seed operation with in-sufficient resources, experience and operating freedom. Its financialstructure was weak, there was no budgetary provision for seed purchase.Overdrafts had to be obtained from commercial banks based on limits sanctioned,after long delays, by the Ministry of Finance. Since ADC made no profitsthere was no accumulation of reserves against losses, bad debts or replacements.As selling prices for seed were fixed annually by Government and productiontargets established in excess of realistic demand, the Government had tomeet the difference between the cost price and the price the market wouldbear. The subsidies were Rs 2.0 per maund for wheat and rice and Rs 3.0per maund for cotton. These subsidies offset the potential annual operatinglosses of ADC but were not enough to allow the Corporation to provide a realservice to farmers, nor was it permitted to restructure itself and operateon commercial lines. It was, therefore, neither a fully subsidized Govern-ment Department nor a profit-making independent commercial enterprise.

25. Provincial Supply Organizations. When ADC was dissolved, theSupply Wing was taken over by the Provincial Governments and from it wascreated the Punjab Agricultural Development and Supplies Corporation (PADSC),the Sind Aicultural and Supplies Organization (SASO) and the NWFP Agri-cultural Development Authority (ADA-NWFP). In Baluchistan, the ProvincialDepartment of Agriculture took over ADC's responsibilities. These organiza-tions took over most of the assets and staff of ADC and continued operations.In fact no clean break with the former ADC was made and the new organizationswere confronted with the same problems that brought about ADC's failure.

26. Private Companies. For the last 30 years cotton ginners and ex-porters such as Volkarts, Roberts Cotton Associates and Sind Land DevelopmentCompany in Punjab and Sind, wishing to ensure delivery of uniform and good

ANNEX 1Page 7

quality seed cotton to their plants, have supplied their growers with seed.Also, some of the broader-based and larger farm supply corporations such asDawood, PNO and Jaffer Brothers have been selling cotton seed since 1967.These supply corporations have between them a network of 3,000-4,000 distrib-utors who supply mainly fertilizers, cotton seed, chemicals, farm machineryand machinery services to farmers. Individual distributors have adequatefinancial resources and storage (150-200 tons each) and each has satellitesub-dealers.

27. Total sales by cotton seed supply corporations and cotton pro-cessors have been 125-145,000 maundes (4,500-5,000 tons) annually, at 50%premium. Some of the companies had started branching out into other typesof seed (vegetable and cereal). Current political and economic uncertaintieshowever, have all but stopped their development efforts.

28. Present Seed Sources. Most farmers save their own seed of wheatand rice or barter with other farmers. Probably no more than 5% of farmers(mostly the larger, more progressive) obtain seed from outside the farm fromcommercial sources. Purchases expand when new varieties become available.With maize, however, farmers buy up to 30% of their seed requirements. Withvegetables the situation is reversed. Only 20-30% of farmers use their ownvegetable seed or make exchanges with neighbors. (Vegetable seed is dif-ficult to produce, the seed crop usually requiring totally different treat-ment from the commercial crop.) Most seed is purchased from local merchants.However, this seed is often mixed (variety and species) and of poor germina-tion.

29. Potato farmers have come to recognize the importance of good seedand readily pay high prices (4-5 times that of local seed) for seed importedfrom Europe. From this they obtain yields two to three times greater thanfrom virus infected local seed which has been grown in the country for twoor more seasons. However, only small quantities are imported and mostfarmers use local seed. Much of this is produced in hill areas less subjectto aphis infestation hence virus spread. Unfortunately the 'seed' for theseed crop is often taken up from the plains thus virus spread is guaranteed.A controlled one way flow, from hills to plains, is essential. Cold storagefacilities, now lacking, are needed to carry seed from season to season.

30. Cotton farmers purchase most of their seed from ginneries or fromseed merchants in market towns. A very few save their own seed or obtain itfrom neighbors. Good quality seed has only been obtainable in limitedquantities from cotton ginning companies (para 26) or on occasion fromGovernment Research Institutes which 'leak' new varieties to farmers fortesting, or from bilateral aid schemes.

31. Seed Quality Control was attempted through a crop inspection andseed testing service operated by ADC from 1963. It consisted of a centralseed testing laboratory at Lahore and seven smaller laboratories at centers

ANNEX 1Page 8

located in regions where ADC normally procured seeds. Field crop inspectorsand seed analysts stationed at the centers were trained by an FAO SeedImprovement Specialist and a number received short duration trainingin Denmark and New Zealand. With the dissolution of ADC, control of theSeed Testing Scheme was transferred, as a temporary expedient, to the Agri-cultural Research Council of the Federal Ministry of Agriculture.

32. A major weakness was that most of the work carried out by thequality control service consisted of ADC monitoring its own production,which is an undesirable arrangement. Moreover, the difficulties of enforcingquality control and seed testing is near impossible in the absence of nationalseed legislation. Further, staff was insufficient, and lacked transportso that full field inspections could not be carried out, nor could bagging,tagging and scaling be supervised. Nonetheless, the basis has been createdfor the development of a sound independent quality control service.

ANNEX 1.

PAKISTAN r I

SEED PROJECT

Agricultural Production (Quantity) 1964~-65 toa .973-74

_jd~ins Unt 16J5 956 96j6 9765L_ 569 19t9/10 1970/71 197 IL2 19727 193 74

Cer3A.ls

Rice '000 tons 1,329 1.296 1,343 1,475 2,000 2,363 2,165 2,226 2,293 2,146

Wheat '000 tons 4,518 3,854 4,266 6,317 6,513 7,179 6,374 6,782 7,325

Bajra (Millet) '000 tons 439 364 365 407 325 297 349 354 299 346

Jowdar (Sorghum) '000 tons 288 270 273 286 258 279 324 308 297 372

Maize '000 tons 520 531 578 779 616 657 706 694 695 755

3arley '000 tons 116 82 57 106 95 107 90 102 107

Pu lses

Groam '000 tons 661 531 625 473 520 408 485 503 544 566**

Mash '000 tons 17 is 16 22 15 14 19 20 17

Mtasooc '000 tons 28 20 30 25 22 22 21 22 27

Mung '000 tons 30 219 29 34 27 25 32 35 30

Arhar '000 tons I I 1 1 1 1 1 1

Other ,ulses '000 tons 525 130 146 147 109 11010 120 119

Oilseeds

Rape and Austard '308 tons 212 179 200 270 225 251 255 296 2a2

Sesarnu 'OoO tons 9 7 7 9 a 8 10 13 10

Cotton Seed '000 tons 743 816 9-12 1,019 1,055 1,054 1,068 1,393 1,381 1,296

T.ins.e d '3000tons 4 3 3 4 3 3 3 4

Gronndnuts '000 tone 20 2 9 46 73 52 dl 44 56 4L53

C a sh C.r P.

Cotton (Li-at) '000 bales 2,124 2,331 2,605 2.911 2,967 3,012 3,051 3,979 3,947 3,704

Sugarcane '000 tons 18,3'3 21,957 21,635 18,365 21,624 25,953 22,801 19,648 19,632 22,709

Tobacco :14 pounds 182 243 308 286 275 256 249 193 148

Sannhesp '200 balas 43 36 41 36 39 35 35 36

Guarseetd '300 t3lv' 107 85 79 135 ...

Condi.ments and Spices

Onions '000 tons 182 199 196 209 210 240 243 248 184

Garlic '000 tons 11 9 19 21 22 19 17 26 24

Chillies '000 tons 30 23 22 31 37 39 42 31 56

Veszetabless

Potatoes '000 tons 170 151 165 186 227 176 225 250 238

Other vegetables '000 tons 702 831 943 1,567 1,292 1,234 1,375 1,331

Fruit

Bananas '000 tons 41 50 45 so 51 51 .

IMangoes '000 tons 343 356 625 608 618 669 .

Apples '000 tons 12.4 15.8 20.4 21.0 23.3...

Apricots '000 tons 10.8 9.0 11.4 12.0 13.3..*

Grapes '000 tons 16.8 19.9 20.7 22.1 22.3...

Peaches '000 tons 11.1 16.7 8.9 7.9 8.1 .

Pears '000 tons 27.0 34.7 14.0 16.8 16.5...

Plums '000 tons 74.0 62.0 34.9 10.3 25.1...

Dates '000 tons 131.5 156.4 139.4 143.5 188.4...

Guaves '000 tons 80.9 68.2 87.1 34.8 75.6...

Pomegranates '000 tons 30.1 22.2 22.0 20.0 20.0...

Citrus Fruits '000 tons 479.3 468.7 476.9 464.6 484.8 406.5 .

Source: Ectonomic Report, Gray CoverMarch 28, 1975

PAKI STAN

SEED PROJECT

Area and Production of Main Agricultural Crops in The Punjab

(in million acres/tons)

1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74

Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons

FoodgrsinsWheat 10.60 4.97 11.25 5.18 11.06 5.55 10.85 4.87 10.45 5.21 10.79 5.60 10.90 5.58

Barley 0.24 0.06 0.20 0.05 0.20 0.06 0.18 0.05 0.19 0.05 0.25 0.06 0.28 0.08

Jowar 0.60 0.12 0.52 0.11 0.52 0.12 0.63 0.14 0.58 0.13 0.56 0.12 0.63 0.14

Bajra 1.25 0.26 1.13 0.21 1.09 0.21 1.10 0.22 1.13 0.23 1.09 0.22 1.17 0.23

Maize 0.71 0.39 0.69 0.31 0.74 0.32 0.73 0.34 0.71 0.33 0.69 0.32 0.68 0.34

Rice 1.65 0.77 2.05 1.08 2.02 1.18 1.82 0.97 1.70 0.98 1.70 0.99 1.76 1.10

Total: 15.17 6.77 15.84 6.94 15.79 7.44 15.31 6.59 14.78 6.93 15.08 7.31 15.42 7.47

% TPP 70% 71% 68.50% 66. 66% 66% 65Z

Gram 1.97 0.34 1.56 0.35 1.68 0.36 1.57 0.34 1.71 0.36 1.81 0.39 1.97 0.43

Sugarcane 0.91 13.04 0.98 15.90 1.12 19.40 1.18 16.57 0.97 13.56 0.91 13.51 1.09 16.36

% TPP 71% 73.50h 74% 73h 69% 69% 69.5%

Oilseeds 1/4.14 1.00 3.83 0.94 4.01 0.97 3.97 0.96 4.62 1.27 4.75 1.19 4.33

Potatoes 0.03 0.12 0.02 0.11 0.03 0.13 0.04 0.17 0.04 0.16

Production million bales

Cotton .. .. 3.23 2.17 3.32 2.24 3.23 2.23 3.70. 2.98 3.90 2.83 3.38 2.53

hTPP .. 73.3% 74.50h 74.60Z 76% 72% 68%

Production million pounds (lbs.)

Tobacco 0.08 91.6 0.08 94.2 0.07 79.7 0.06 68.3 0.05 62.6 0.05 58.75 0.04 51.52

%TPP 32% 24Z 31.1% 27.4% 32.7% 41.9% 35.4%

TPP - Total Pakistan Production1/ - Cottonseed, rape, mustard, sesamum and groundnuts

Source: Economic Report, Gray Cover ro

March 28, 1975

PAKISTAN

SEED PROJECT

Area and Production of Main Agricultural Crops in the Sind

(in million acres/tons)

1967/08 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons

Food-grains

Wheat 2.10 0.82 2.04 0.84 2.20 1.09 2.07 1.10 1.93 1.06 1.90 1.08 2.08 1.23

Barley 0.03 0.01 0.03 0.01 0.03 0.01 0.03 0.01 0.02 0.01 0.03 0.01 0.04 0.01

Jowar 0.48 0.11 0.42 0.09 0.41 0.12 0.48 0.13 0.41 0.11 0.40 0.11 0.41 0.11

Bajra 0.91 0.13 0.62 0.10 0.39 0.07 0.67 0.12 0.64 0.11 0.34 0.06 0.53 0.10

Maize 0.04 0.01 0.04 0.01 0.05 0.01 0.05 0.01 0.06 0.01 '0.05 0.01 0.05 0.01

Rice 1.63 0.63 1.57 0.84 1.74 1.10 1.65 1.10 1.66 1.15 1.74 1.20 1.65 1.15

Total: 5.19 1.71 4.72 1.89 4.82 2.40 4.96 2.47 4.72 2.45 4.46 2.47 4.76 2.61

%TPP 19.27 20.2% 22.1% 24.7% 23.3% 23.761 22.7%

Gram 0.52 0.12 0.54 0.14 0.49 0.13 0.48 0.13 0.48 0.13 0.47 0.12 C.53 0.14

Sugarcane 0.15 2.36 0.17 2.73 0.21 3.34 0.20 3.19 0.19 2.74 0.20 2.87 0.25 3.73

%TPP 13% 12.6% 13.6% 13.37 14% 14.6% 15.8%

Oilseeds 1/1.56 0.36 1.57 0.37 1.44 0.36 1.46 0.38 1.56 0.44 1.45 0.48 1.55

Potatoes 0.004 0.01 0.003 0.01 0.003 0.01 0.004 0.01 0.003 0.01 0.002 0.01 1.55

Production million bales

Cotton .. .. 1.07 0.791 1.01 0.766 1.05 0.819 1.13 1.00 1.06 1.12 1.17 1.18

%TPP .. .. 26.5% 25.47 26.8% 24.1% 28.2% 31.5%

Production million pounds (lbs.)

Tobacco 0.002 2.3 0.002 2.2 0.002 2.0 0.001 1.6 0.001 1.7 0.001 1.6 0.002 2.24

%TPP . .. 1% 0.80% 0.7% 0.8% 1.1% 1.57.

1/ Cottonseed, rape, mustard, sesamum and groundnuts

not available

TPP Total Pakistan Production

Source: Economic Report, Gray CoverMarch 28, 1975

PAKISTAN

SEED PRWECT

Area and Production of Main Agricultural Crops in NWFP

(in million acres/tons)

1967/68 1968/69 1969/70 1970/71 1971/72. 1972/73 1973/74Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons

Food-grains

Wheat 1.52 0.39 1.50 0.36 1.54 0.38 1.46 0.33 1.46 0.43 1.69 0.58 1.71 0.60Barley 0.14 0.03 0.12 0.03 0.15 0.04 0.13 0.04 0.15 0.04 0.12 0.04 0.15 0.05Jowar 0.08 0.02 0.05 0.01 0.08 0.02 0.06 0.01 0.07 0.01 0.07 0.02 0.09 0.02Bajra 0.09 0.02 0.06 0.01 0.07 0.01 0.07 0.01 0.10 0.01 0.09 0.01 0.11 0.01Maize 0.74 0.38 0.78 0.30 0.79 0.32 0.79 0.35 0.78 0.34 0.84 0.36 0.81 0.40Rice 0.11 0.04 0.12 0.05 0.13 0.05 0.13 0.07 0.13 0.06 0.13 0.07 0.14 0.07

Total: 2.68 0.88 2.63 0.78 2.76 0.82 2.64 0.80 2.69 0.89 2.94 1.08 3.01 1.15

%TPP 9.507. 7.9% 7.5% 7. r/. 9.1% 9.8% 10.07.Gram 0.27 0.01 0.27 0.03 0.11 0.01 0.19 0.02 0.18 0.02 0.22 0.03 0.22 0.03Sugarcane 0.19 2.96 0.19 3.0 0.20 3.21 0.20 3.04 0.21 3.35 0.22 3.25 0.22 3.44

%TPP 16% 13% 12.3% 13.3% 15.4% 16.67 14.67

Oilseeds 1/ 0.17 0.03 0.09 0.02 0.14 0.03 0.16 0.03 0.18 0.04 0.18 0.04 0.19*

Potatoes 0.01 0.04 0.01 0.04 0.01 0.03 0.01 0.04 0.01 0.05 0.01 0.05

Production million bales

Cotton . 0.005 0.003 0.006 0.003 0.005 0.002 0.005 0.002 0.006 0.003 0.008 0.004

Production million pounds (lbs.)

Tobacco 0.084 186.3 0.074 173.4 0.072 167.6 0.082 174.3 0.065 124.10 0.049 67.87 0.06 80.64

%TPP 657. 62.7% 65.37 70.5% 64.3% 45.97 55.4Z

1/ Cottonseed, rape, mustard, sesamum and groundnuts ¢

not available O 4

TPP Total Pakistan Production

Source: Economic Report, Gray CoverMarch 28, 1975

Ai NuilELX ITab-La

PAKISTAN

SEED PROJECT

Area and Production of lMain Agricultural Crops in Baluchistan(in million acres/tons)

1967168 1968/69 1969170 1970/71 1971/72 1972/73 1973/74

Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons Acres Tons

Foodgrains

Wheat 0.58 0.13 0.43 0.10 0.59 0.16 0.40 0.07 0.48 0.08 0.37 0.07 0.41 0.11

Barley 0.02 neg 0.02 neg 0.01 neg. 0.01 neg. 0.02 neg. 0.01 neg. 0.03 0.01

Jowar 0.27 0.04 0.18 0-05 0.17 0.03 0.20 0.04 0.19 0.06 0.21 0.05 0.33 0.11

Bajra 0.01 neg. 0.05 neg. neg. neg. 0.01 neg. 0.01 mng 0.01 neg. 0.01 neg

Maize 0.01 neg. 0.01 neg. 0.01 neg. 0.01 neg. 0.01 neg. 0.01 neg. 0.01 neg

Rice 0.11 0.04 ' 0..1 0.04 0.11 0.04 0.10 0.03 0.10 0.04 0.10 0.04 0.09 0.03

Total 1.00 0.21 0,80 0.19 0.89 0.23 0.79 0.15 0.80 0.18 0.71 0.16 0.88 0.26

% TPP 1.3% 1.3% 1.5X 1.7% 1.5% 2.3%

Gram neg. neg. neg. neg. neg. neg. 0.01 neg. 0.01 neg 0.01 neg. 0.01 neg

Sugarcane .. .. .. .. .. .. .. .. .. .. ..

X TPP , . . . . . . . . . . . .

Oilseeds 1/ 0.09 0.01 0.08 0.01 0.10 0.01 0.10 0.01 0.07 0.01 0.06 0.09

Potatoes 0O.01 0.02 0.01 0.06 neg. 0.03 0.01 0.04 neg. 0.02 0.01 0.02

Production million bales

Cotton neg. neg. neg. neg. neg. neg. neg. neg. neg. neg. neg. neg. neg. neg.

%: TPP.. . .. . .. ... ... . .. ... .

Production million pounds (lbs)

Tobacco 0.005 6.1 0.OC3 5.8 0.003 7.2 .OO 4.9 .G04 4.7 .006 10.3 0.01 11.20

% TPP 2.1% 2.4% 2.7% 2.0% 2.4% 7 . 4% 7.7%

TPP Total Pakistan ProductionNeg. Negligible

1/ Cottonseed, rape, mustard, sesamum and groundnuts.

Source: Economic Report, Gray CoverMarch 28, 1975

ANNEX 1Table 6

PAKISTAN

SEED PROJECT

Classification of Farms by Size and Groups

Farm Size (acres) Farms Farm AreaNumber Percent (Total acres) Percent

Total 4,859,983 100 48,929,583 100

Under 1.0 742,216 15 334,356 1

1.0 - 2.5 855,732 18 1,345,475 3

2.5 - 5.0 805,984 16 2,911,107 6

5.0 - 7.5 580,952 12 3,545,720 7

7.5 - 12.5 758,703 16 7,356,971 15

Source: Economic Report, Gray CoverMarch 28, 1975

ANNEX 2Page 1

PAKISTAN

SEED PROJECT

Project Scope and Size

1. The proposed size and scope of the project are determined mainlyby choice of crops, anticipated seed demand and that package of complementaryactivities necessary to ensure the production and processing of the requiredseed quantities to the desired quality. In addition the pilot projectoperations are seen necessary to pave the way for a broadening of projectactivity in a second phase of seed industry development.

2. The history of the development of the seed industry in Pakistan isgiven in Annex 1. In order to lay sound foundations for growth when startingthe industry virtually from scratch, the project would be confined to large-scale production of seed of the main cereals: wheat, rice and maize, plusthe main cash crop, cotton. Only small quantities of other seeds (pulses,millets, sorghum, oil seeds and fodders) would be produced (para 12). Theaim is to produce seed of the highest quality, to internationally acceptedstandards, and to induce widespread use by farmers. Where varietal materialis available, as with the three main cereals, certified seed would be theend product; with cotton, because of the proposed large-scale and nature ofoperations, - zonal flooding - a further generation (approved seed) wouldbe produced. With other crops, where there is as yet no varietal material-to register, again only approved seed would be produced. The Appendixdefines the classes of seed referred to in this report: pre-basic, basic,certified and commercial.

Seed Quantities

3. Cereals - The project objective is to satisfy, at full development,the anticipated countrywide demand for quality seed to be sold at a pricesufficient to sustain financially viable production and processing operations.The factors taken into account in assessing demand are:

(i) total area of crop, irrigated and rainfed;

(ii) estimated area of crop under high yielding varieties (HVYs);

(iii) anticipated increase in area under HYVs;

ANNEX 2Page 2

(iv) proportion of HYV area 1/ in the cash market; and

(v) the rate of seed renewal.

4. In the late 1960's HVYs of wheat and rice were introduced intoPakistan from Mexico (Mexipak) and the International Rice Research Institute(IRRI) respectively. These were markedly superior to indigenous material andtheir use spread rapidly. In the case of wheat this was only made possiblebecause of the initial large import of seed, ca 42,000 tons (with rice theseed rate: yield ratio is high and hence varietal spread easier). Todaythe position is that there is no adequate system of servicing the large HYVareas of wheat and rice with seed of good quality, or at a rate sufficientto replace varieties satisfactorily. Thus through the use of poor qualityseed and overlong retention of varieties yields are well below potential.There is wide recognition of this situation particularly amongst progressivefarmers. Many indicated to the appraisal mission the great need for qualityseed.

5. In maize there is only a limited use of improved seed. Therehas been no dramatic increase in yields from the introduction of importedHYV material as with wheat and paddy. However, improved material is nowavailable from the plant breeders and an expanded program of extension anddemonstration is to be launched with the backing of CYMMIT 2/ staff. (Annex6)

6. The project would aim to service the present area of HVY wheat andrice. This area is not expected to expand significantly. HYV wheat alreadyoccupies about 90% of irrigated areas and 50-60% of rainfed areas. HYV usein rainfed areas is not expected to increase much because the HYV materialavailable is not suitable for areas of marginal growing conditions. Althoughthe proportion of rice area in HYVs is less than that of wheat, it is notexpected to expand significantly either. Areas not growing HYVs now, are, inthe main, either saline, waterlogged or both and unsuitable for the HYVmaterial available. In contrast, the HYV maize area is expected to expand,from the present 5% to about 40% of the total area as a result of the project.

7. In calculating demand, it is assumed that some farmers, usuallythe smaller and poorer ones, would continue to obtain seed on a farmer tofarmer exchange basis. Thus cash demand has been assumed to account for75% of the HYV area.

1/ Area is used here as a proxy for farmers. While no attempt is madeat quantification, in terms of proportions of farmers, it is assumedthat a preponderence of larger farmers will buy seed and that they farma disproportionate share of land, hence the rather large proportionsof HYV area assumed to be in the cash market.

2/ International Maize and Wheat Improvement Centre in Mexico.

ANNEX 2Page 3

8. The final factor in assessing the quantity of seed required is therate of seed renewal. Five years has been assumed for wheat and rice, butonly three years for maize which, being open pollenated, is subject to morerapid deterioration. Table 1 gives details of assumptions made and showsthe anticipated certified seed demand for all crops except cotton. Thequantities of pre-basic and basic seed required are a direct function of thecertified seed to be produced and are shown in Table 2.

9. Cotton - The project would aim to produce sufficient cotton seed to"flood" the entire area devoted to the American upland type (G. hirsutum)i.e. 96% of the total cotton area. The choice of this flooding approachis dictated by two factors. Firstly, only by zoning cotton production ona varietal basis can lint of uniform staple length be produced. This isdemanded by the Cotton Export Corporation and the textile trade and theywill pay a premium for it. At present, because of varietal admixture andthe use of poor seed, staple length has deteriorated and is below theuniformity and potential of the varieties in use. This is illustrated inTable 3. The second factor is that the cotton grower represents a. captivemarket in that he must renew his seed annually. This presents an idealopportunity to supply quality seed of recommended varieties.

10. Because of cotton's open pollenated character, regrown cotton seeddegenerates quickly over few generations from pre-basic. This degenerationis accelerated where several varieties are grown in close proximity as iscurrent practice. To prevent this happening single variety zones should beestablished. Within the varietal zone segregated areas are necessary inwhich different generations of cotton seed can be produced under carefullycontrolled conditions. Movement of other varieties into segregated areasshould be prohibited to stop admixture of seed occuring in the ginneriesoperating in the segregated areas. The need for such an approach isrecognized in Pakistan and legal sanctions exist to create varietal zones andsegregated areas, and to ensure that they are observed. However, thesesanctions have never been observed.

11. Under the project three zones would be established. In NorthernPunjab some 1.6 million acres are suitable for the variety AC134. In CentralPunjab about 2.2 million acres comprise a zone suitable for 149F, and inSind the entire area of about 1.2 million acres should comprise a zone growingM100. Thus the total area for which cotton seed would be produced amounts tosome 5.0 million acres requiring about 37,000 tons of seed. Table 4 showshow this figure is computed, the area necessary to produce it and the quan-tities of earlier generations of seed required.

12. Other Crops - Small quantities of seed of pulses, millet, oilseeds,sorghum and berseem would be produced. The objective would be to test farmerdemand for such seed and lay the ground for possible diversification ofproject activity at a later stage. Larger scale activity in these cropscannot be justified at present, because, in the main, effort should beconcentrated on the major food and cash crops until the seed industry hasbeen soundly launched; there is also no basis on which to estimate demandfor such seed since farmers have never been exposed to quality seed for theseminor crops.

ANNEX 2Page 4

Seed Production

13. The production of seed, of all generations, would be organized bythe Provincial Seed Corporations. The areas to be planted are a function ofthe net quantities of seed required, anticipated yields, and losses throughfield rejections and processing. Details are shown in Table 1.

14. Pre-basic Seed - would be produced at Research Institutes underthe supervision of the plant breeders responsible for the different crops.Locations would be as follows:

Province Research Institute Crops

NWFP Tarnab Wheat, Rice, Minor Crops,Pir Sabak 1/ Maize, Soyabean, Millet

Punjab Lyallpur Wheat, Cotton, Maize, MinorCrops

Multan CottonKala Shah Kaku Rice

Sind Tandojam Wheat, Cotton, Maize, MinorCrops

Dokri Rice

15. Present methods of producing and processing pre-basic seed are knownto be inadequate. The entire seed industry is vulnerable to deficiencies inthe quality and quantity of pre-basic seed produced. The production ofpre-basic seed must be of primary concern to the plant breeder since withoutit breeding work comes to nothing. The deficiencies in present methods ofpre-basic seed production and proposed remedies are discussed in Annex 6.Every effort must, therefore, be made to produce seed of the highest qualityand also to safeguard against supply constraints. Federal and ProvincialGovernments would ensure that Research Institutes would follow sound methodsin pre-basic seed production and that their annual production would meetthe Seed Corporations' requirements.

16. All pre-basic seed would be processed through special equipmentat the Research Institutes to minimize the risk of mixing.

17. Basic Seed - As with pre-basic seed, quality is of paramount concern.In order to ensure the closest possible control over production and handling,it is proposed that the bulk of basic seed be produced under direct Corporationcontrol. Sites for the Corporation farms have yet to be finalized and finalselection would be done in consultation with IDA. It is proposed that suitable

1/ Because of shortage of land at Tarhab some pre-basic seed of wheatmay have to be produced at Pir Sabak.

ANNEX 2Page 5

existing Government farms, now run by the Extension Departments, be handedover to the Corporations for seed farms. Several farms were seen by theappraisal mission from which suitable farms, would be selected. Developmentneeds and costs have been worked out on the basis of a 1,000-acre model whichwas indicated by the appraisal field visits (Annex 3).

18. Any shortfall in basic seed production would be met by contractgrowing. Shortfalls would only occur after the project had been underway fora few years. At that time, it would be possible to select the best fromamong the certified seed growers and use them for basic seed production.Such farmers would be subject to greater supervision than certified seedgrowers to ensure the higher quality required for basic seed.

19. Certified Seed - The Corporations would contract with privatefarmers for the production of certified seed. It is estimated that about1,900 farmers each farming 100 acres would be needed to produce the proposedquantities of certified seed. In order to reduce seed supply risks and tominimize managerial problems, only progressive farmers with large, welldeveloped farms, would be selected as seed growers. The major exception tothis policy would be the use of members of the Colony Cooperative FarmingUnion at Khanewal as seed growers. Here farm size is only 12-1/2 acres butthe high degree of organization and cooperation developed in the Union wouldmore than compensate for the small farm size.

20. Farmer selection would be handled by the Corporation ProductionDepartments. In advance of the first season for growing certified seed, theProduction Department staff would publicize project activity, and the needfor contract growers, throughout the project area. An attempt would be selectedto register as many farmers as possible up to the number required at fulldevelopment. Seed production would then be expanded by increasing the quantityof seed contracted to each farmer rather than expanding the number of farmers.Adopting this approach would maximize the exposure of farmers to projectstaff influence during the development period. It would enable the greatestimpact to be made on farm development and allow greater selectivity amonggrowers during the development period because of the greater exposure tostaff.

21. Approved Seed - As mentioned above (para 2) a fourth generation ofapproved cotton seed would be produced. In order to ensure the maintenanceof varietal purity segregated areas would be created within each cottonvariety zone. (These would be legally binding, Annex 5). Within the segregatedareas certified seed would be produced under contract by registered growers.This seed cotton would be ginned and the seed processed by the Corporations.It would then be sold to all farmers in the segregated area wishing to growcotton. It would be illegal to use other than certified seed of the approvedvariety in the segregated area. Thus it would be unnecessary to registerfarmers. All cotton seed produced in the segregated area would be sold toginneries located within the area. It would be illegal to move seed cotton

ANNE 2Page 6

or cotton seed (even for oil milling) into a segregated area (except for

pre-basic and basic seed). The ginneries would supply cotton seed, excludingthat from the early and late pickings which has doubtful germination, to theCorporations. This would be processed for sale as approved seed. Indrawing the boundaries of the segregated area it would be important toensure an adequate supply of seed cotton to the ginneries lying within theproposed boundaries. Failure to do so would be to tempt ginnery ownersto acquire seed cotton from outside the segregated area. Legal sanctionwould be no substitute for sound planning in this respect.

Project Location

22. The number of processing plants would be kept to a minimum becauseof economies of scale in processing (Annex 4). The proposed seed quantitieswould be processed at one in Sind and three in Punjab. To minimize managerialand farm to plant seed transport problems, production would be concentrated inas small an area as possible around each plant. Suitable areas would have:

(i) a suitable processing plant site as centrally locatedas possible;

(ii) a good road network;

(iii) an acknowledged repute for good farming;

(iv) good soils;

(v) predominantly sweet ground water; and

(vi) a good network of powerlines for tubewell energization.

23. In Sind the main production area, in which the plant would belocated, would cover the northern portion of Nawabshah District and theadjacent southern portion of Khairpur District. This location is a comr-promise. In Sind the further north cotton seed is produced the better is itsquality -- the proportion of immature seed is less, hence germination isbetter. However, further north than the area chosen there is no areasufficiently developed to produce the concentration of progressive farmersdesired. Hence the compromise; a slightly inferior zone for cotton seedaccepted in the interests of selecting an area that will have a concentra-tion of progressive farmers. The chosen area does not produce rice. InSind, rice production is mainly on the Indus right bank. The project'srice secd would be grown in Larkana District and trucked to the plant forprocessing. In both management and financial terms this would be betterthan locating a small plant in Larkana just for processing rice seed.

ANNEX 2Page 7

24. In Punjab the choice of two of the production areas is governedby the need for two segregated areas to produce cotton seed of two varieties.DG Khan would be a suitable segregated area for variety 149F -- to supplya varietal zone covering: DG Khan plus Bahawalpur (except Bahawalnagar)Multan (part), Muzzafargarh and Rahimcar Khan. Within the segregatedarea a smaller area around the processing plant - which would be near DGKhan town - would produce wheat and such other minor crop seed as required.The second segregated area for variety AC134 would supply the rest of theProvince not mentioned above. It would be on the main Lahore - Multan roadin the Khanewal - Mian Channu area. The plant would be located nearKhanewal or Mian Channu. Again wheat and other seed would be produced froma smaller area close around the plant. (This segregated area would embrace,and use land operated by members of, the Khanewal Colony Cooperative FarmingUnion).

25. The third area in Punjab would be in the vicinity of Sahiwal. Themain crop would be wheat - with rice and maize in the monsoon season. Coarserice is grown in the Sahiwal area but the main basmati area is around Muridke,north of Lahore. An attempt would be made to grow basmati rice seed in anon-traditional area, to minimize transport costs. To the extent that thiswas unsuccessful basmati rice would be grown in traditional areas and truckedto the plant.

ANNEX 2Appendix

PAKISTAN

SEED PROJECT

Classes of Seed

(i) pre-basic seed (sometimes called nucleus) is producedunder the control of the plant breeder and of high geneticpurity;

(ii) basic seed (sometimes called foundation) is the progenyof pre-basic seed or, infrequently, of basic seed which canbe traced to pre-basic seed. Production should be supervisedand approved by the Seed Certification Agency and accordingto the certification standards prescribed for the particularcrop;

(iii) (a) certified seed (first generation) is the progeny ofbasic seed.

(b) certified seed (second generation) is the progenyof first generation certified seed and may not beused to produce seed for reproduction. The productionof certified seed should be supervised and approved bythe Seed Certification Agency according to the certifi-cation standards prescribed for the particular crop.

(iv) approved seed is true to species and of the minimum physicalquality prescribed for the particular crop.

1/ Based on OECD nomenclature.

PAKISTAN

SEED PROJECT

Certified Seed Requirements (Cereals)

Seed

Percentage Annual Area Rate Yield Certified

Percentage of HYV Annual Receivin, ,Mauads Net Certified Gross Seel Haunds Seed Area

Crop Area of Crop Seed Bought!/ Replace- New Seed' Per Seed Required Required/ Per Required

Province Crop ('000 acres) Area in HYV Comnercially ment Rate ('000 acres) AQ= ('000 maunds) ('000 maunds) Acre (acres)

Wheat (Irr.) 8,432 80 75 .20 1,012.0 1.0 1,012.0 1,304.0 35 37,260

Wheat (Rainfed) 2,283 60 75 .20 205.5 1.0 205.5 264.8 35 7,570

Punjab Rice 1,725 67 75 .20 172.5 .2 34.5 44.5 40 1.110

Maize 565 40 75 .33 56.5 .5 28.2 36.4 35 1,040

Gram 465 25 50 .25 14.4 .4 5.7 7.4 9 820

Wheat (Irr.) 1,894 90 75 .20 255.7 1.0 255.7 329.5 35 9,410

Sind Rice 1,682 60 75 .20 151.4 .2 3C.3 39.1 40 980

Gram 459 25 50 .25 14.2 .4 5.7 7.3 9 810

Wheat (Irr.) 702 90 75 .20 94.8 1.0 94.8 122.2 35 3,490

Wheat (Rainfed) 999 50 75 .20 74.9 1.0 74.9 96.5 35 2,760

NWFP Rice 135 75 75 .20 15.3 .2 3.1 3.9 40 100

Maize 829 40 75 .33. 82.9 .5 41.5 53.4 35 1,530

Gram 223 25 50 .25 6.9 .4 2.8 3.6 9 400

Wheat 15,992 - - - 1,794.3 - 1,643 2,157 - 60,490

Total Rice 3,542 _ 339.2 - 68 88 - 2,190

Maize 1,394 - - 139.4 - 70 90 - 2,570

Gram 1,147 - - - 35.5 - 14 18 _ 2,030

1/ Rather than obtained in farmer-to-farmer exchange. Figure is a mission judgement. |

2/ Product of the four numbers to the left.3/ Gross seed is greater than net seed to allow for 3% field rejections and 207 factory wastage.&/ Details for Baluchistan not included in Table because quantities are margLnal - maximum net oertified seed requiremnts

less than 50 thousand maurds to be provided by the Punjab and Sind Corporations.

PAKISTAN

SEND PROJIYT

basic and Pre-Basic Seed Requirements (Cereals)

2/--------- Baic Seed-Second Generation----------- --------- Basic Seed-First Generation ------------ ------------- Pre-Basic Seed ----------------

Yield Y.d ilMaunds Certified Net Seed Gross Seed 3/ aunda Area Net Seed Gross Seed M Maunds Area Net Seed Grosa Seed 4/ Haunde AreaPer Seed Area Required Required Per Required Required Required Per Required Required Required Per RequiredProvince Crop Acre (Acres) (Maunds) (l4aunids) Acre (Acres) (Haunds) fMums) Acre (Acres) (Maunds) (Iad.) Acre (Acres)Punjab Wheat 1.0 44,830 44,830 52,740 35 1,500 1,500 1,770 35 50 50 75 35 2Rice .2 1,110 - - - - 220 260 40 7 1.5 2.5 40 .1Maize .5 1,040 - - - - 520 610 35 18 9 15 35 .3Gram .4 820 - - - - 330 390 9 45 18 27 9 3

Sind Wheat 1.0 9,410 9,410 11,070 35 320 320 375 35 11 11 l 35 .5Rice .2 980 - - - - 200 235 40 6 1.2 2 40 .1Gram .4 810 - - - - 330 390 9 45 18 27 9 3

NWFP 5/ Wheat 1.0 6,250 6,250 7,350 35 210 210 250 35 7 7 11 35 .3Rlice .2 100 - - - - 20 24 0 6 .2 3 40 reg.Raize .5 1,530 - - - - 770 9)0 3- 26 13 20 35 .5Gram .4 400 - - - - 160 190 9 20 20 30 9 3

1/ Rather than obtained in farmer-to-farmer exchuange. Figure is a missi on judgemeft .Becauae of the large wheat area two generations of wheat seed would be prodiiced.

3/ 15% lossee, rejections, etc. assuiaed..Allowance made for 50% safety margin.

/ NWFPs research institutes will deliver pre-basic seed pro.duced to the Punjab Seed Curpuration for furtber multipli.ation.

ANNEX 2Table 3

PAKISTAN

SEED FRECT

Scope and Size

Cotton tint Length

The potential staple length of the main cotton varieties now grownis:

Variety _Staple length (In&aes)

AC134 15/16 tol 1/16149 F 1 tol 1/16M4 27/32 tol 1/32Ml0oo 1 tol 1/16

The staple length produced is lower:

Staple length Percentage of Production ,/

1971/72 1972/73 1973/74Short (under 13/16") 5.3 5.5 5.7Medium (13/16" to 1 ") 81 .3 76.8 76.3Medium long (1 1/32" to 1 3/32") 13.2 16.8 17.6Long (1 1/8" to 1 5/1611) 0.1 0.9 0.4

From the above it can be seen that the bulk of production is of a staple lengthbelow the potential of the main varieties.

1/ Source: Pakist4.n Central Cotton Committee.

PAKISTAN

SEED FROJECT

Sumnary of Acreage and Cotton Seed Requirements I/

Seed Area Quantity of Seed(in acres) (in tons)

Processed Grown

Khanewal - Northern Punjab 2

Pre Basic 1.25 0.35Basic 48 12.35 ) 760Certified i/ 1,680 474Approved seed 6/ from segregated

area for 1.6 million acres 64,428 18150

Sub-total 66,157 12,287 19.210

DG Khan - Central Punjab 31

Pre Basic ~~~~~~~2.4i 0.7 )Basic c90 25.3 ) 1,560

Certified 5 /, 7/ 3,440 970 )Approved seed 6/ from segregated

area (DG KhanT to cover 2.1 millionacres (2.2-0.1 (segregated area)) 132,000 15.440 24,130

Sub-total 135532 1636 5690

Sind

Pre Basic 0.83 0.2 )Basic 32 9 555Certified 6 1,230 346 )Approved seed 2 from segregated ,

area (Guddu Barrage) to cover1.1 million acres (1.2-0.1)(segregated area)) 42.700 8.100 12.600

Sub-total 43,963 8,455 13,215

TOTAL 245,652 37.178 58.115

/ Seeding Rates: ,2 maund per acre or 136 acrds per ton.

2/ Total area 1.6 million acres, Variety AC 1343/ Total area 2.2 million acres, Variety 149F

V4/ Total area 1.2 million acres, Variety M4or M100

5/ Average yield or seed cotton 18 maumds oer acre or 7.7 manmds per acre ofprocessed cotton seed (t4% of total seed)

6 Average yield of clean seed 5 maunds per acre or 1/5 ton per acre.

L/ Sufficient to"tlood"DG Khan segregated area of 132,000 acres.

ANNEX 3Page 1

PAKISTAN

SEED PROJECT

Farm Development

1. Every attempt would be made to select progressive farmers with welldeveloped farms as seed growers. Nevertheless, after so doing, it would still

be possible to improve the level of development of the average grower's farm.Farm development would be undertaken for two reasons. First, as an induce-

ment to attract farmers to become seed producers (some hesitance is antici-pated because of bad experience with past programs). Second, as a means of

improving project efficiency. By making seed growing attractive some farmerselection would be possible. Further, by developing farms their output wouldbe increased. Both factors would enable the Corporations to concentrateseed growing around the processing plants and thus (i) reduce managementproblems through fewer farmer contracts, and (ii) reduce transport costs.

2. The Corporation Production Departments would be responsible for theselection of farmers and for advising those selected on needed improvementsto their farms. These would consist mainly of (i) purchase of additionaltractors and equipment, (ii) drilling of tubewells, and (iii) land levellingand irrigation channel improvement. The Corporation staff would assist

farmers in their approaches to credit institutions for loans. They would also

help them acquire necessary services - contractors, etc - for development.However, the Corporations would have no direct involvement in credit or

development activity.

Present Situation

Mechanization

3. There are now 27,000 - 28,000 agricultural tractors in Pakistan and

numbers are increasing rapidly. Farmer demand for tractors is strong; theADBP reports outstanding orders for over 6,000 tractors. Sales over the pastfour years have been in the range 3,500 to 5,500 per annum. It is Governmentpolicy to increase mechanization. In 1970 a policy review committee recom-mended an annual increase of 12-1/2% in the tractor population 1/ and it

would appear that this objective is being pursued.

1/ "Farm Mechanization in West Pakistan", Ministry of Works and Agriculture,1970.

ANNEX 3Page 2

4. As in many countries inadequate spares supplies have reduced tractorutilization. Problems arose both over foreign exchange, procurement arrange-ments, and inadequate dealership networks. The position is improving, par-ticularly for the more popular Massey Ferguson and Ford makes.

5. Tractor utilization is unsophisticated, in general being still atthe stage of a direct substitute for the bullock. This is reflected in thesmall numbers and limited range of implements in use. Compared with the 1970tractor population these were: 1/

Percent

Cultivators (tined) 80Trailers 40Earth levelling blades 22Disc plows 15Mould - board plows 13Disc harrows 11

Most implements can be obtained of local manufacture. However, imports, par-ticularly of the more sophisticated implements (combine seed/fertilizerdrills, planters, combine harvesters, etc.), continue.

Tubewells

6. Pakistan agriculture is almost totally dependent on irrigation.The canal system, the world's largest, was developed between 1870 and 1930.The designed capacity - generally geared to an 80% cropping intensity - isinadequate to meet the needs of today's much larger population and moreintensive agriculture. Tubewell development has emerged to fill the gap inareas of sweet ground water.

7. Tubewell development takes place in both public and private sectors.The former has a twofold aim; increase in water supplies, and a lowering ofwater table in order to reduce drainage and salinity problems. There are nowabout 8,000 public tubewells in operation. However, this is far below plannedtargets. Private investment in tubewells has therefore assumed major impor-tance. Most private tubewells have been installed in Punjab and Sind wherethere are estimated to be over 100,000. The annual installation rate is about11,000.

8. Wells in Punjab and Sind are installed by private contractors(using hand percussion equipment) and by Provincial Agricultural EngineeringDepartments (using hand or power equipment). Hand percussion equipment is

1/ "Farm Mechanization in West Pakistan", Ministry of Works and Agriculture,1970.

ANNEX 3Page 3

slow (takes more than three weeks for drilling) and not suited for deepwells. The Provincial Departments do not have the drilling capacity to meetdemand, and farmers have to wait six months to one year to have new wellsinstalled.

9. Most of the installed wells are relatively shallow, ca 50m, andequipped with diesel engine and centrifugal pump. Electric submersible pumpswould be both cheaper to install and operate. However, power distributionnetworks are limited and power supplies unreliable, hence the reliance ondiesel engines. Government subsidies cover some of the difference betweendiesel and electric installations. (The amounts vary according to areas;from Rs 4,000 to Rs 6,000 in irrigated areas and Rs 8,000 in rainfed areas.)

10. In all proposed project areas ground water resource data areadequate.

Land Development

11. Though data are inadequate it is generally accepted that fieldefficiency in the irrigated areas is about 50%. Farm layouts reflect agradual development without access to surveys and with little earth movingcapacity. They are therefore better suited to bullock than mechanicalcultivation. The layout of irrigation channels is often inefficient, andthe channels themselves usually unlined, leading to high seepage losses.For lack of equipment and access to survey services, land levelling isusually imperfect leading to further inefficiencies in water usage and alsoaggravating salinity problems in many areas.

12. USAID is financing a team of scientists from Colorado State Univer-sity who are examining water management practices, and methods of improvingthese. In addition USAID is financing a small team of advisors who aretraining Pakistan staff in fine levelling techniques. Already the advisorsplus some of the early trained staff are providing a limited service tofarmers wishing to fine level their lands.

Project Proposals

13. The project would finance the development of farms of contract seedgrowers. In addition it would finance the development of three 1,000-acrefarms for the Punjab Seed Corporation and one farm for the Sind Seed Corpo-ration. These farms would produce the bulk of the Corporations' basic seedrequirements. It is considered prudent to have the greater part of the criti-cal stage of basic seed production in the hands of the Corporations.

Seed Growers' Farms

14. Project estimates assume a model farm of 100 acres which currentlyis 50% mechanized and uses half the discharge of a typical tubewell (1 cusec discharge) to supplement canal water supplies. About 1,900 such farms

ANNEX 3Page 4

would produce certified seed for the Corporations. Approved seed of cottonwould be grown by all cotton growers in a segregated area; there would beno contractual arrangement with the Corporations and farm development wouldnot be undertaken on such farms.

Mechanization

15. The project would finance the purchase of about 475 tractors; onthe assumption that only one in every four participating farmers would requirea new tractor. 45 HP tractors would be provided; these are adequate for thework envisaged and are the most popular size, hence spares availability issatisfactory. These additional tractors would help to increase the mechanicalpower available by 50%, from an average of 500 hrs to 750 hrs per farm peryear. The project would also finance a range of implements. Details aregiven in Table 1. The implements provided under the project would cover abroader range than those traditionally used (para 5). The aim would be to im-prove tractor utilization, and standard and timeliness of cultural operations.It is assumed that many of the implements would be procured locally. Theappraisal mission visited one local manufacturing company which producesa range of equipment of good quality.

16. Nevertheless, in addition to tractors some implements, such as com-bined seed and fertilizer drills and seed planters, would be imported. Financefor the purchase of spares would be provided for tractors and imported imple-ments at the rate of 10% of value in the year of purchase, and 5% per year forthe remainder of the project period. By thus spreading spares purchases(rather than bulk buying at the time of initial equipment purchase) they couldbe tailored more specifically to needs.

Tubewells

17. The project would finance the drilling and equipping of about 470tubewells; also on the basis that one in every four participating farmerswould need an additional tubewell. A breakdown of the capital and operatingcost of a tubewell is given at Table 2. The cost estimates assume thattubewells would be equipped with diesel engines and centrifugal pumps. To-gether these cost about twice what an equivalent electric submersible pumpwould cost. However, electric power is not available in all areas nor isit always reliable when available. Most farmers therefore install dieselpowered tubewells. As the farm models show (Annex 13), despite itsrelatively high cost the diesel powered well is an attractive investment.

18. Insufficient tubewell drilling capacity could delay the implement-ation of farm development by seed growers in both Punjab and Sind Provinces.Provision has therefore been made in the project costs for the purchase offour drilling rigs (two each for the Punjab and Sind Agricultural EngineeringDepartments) to supplement the existing drilling capacity in the two Pro-vinces.

ANNEX 3Page 5

Land Development

19. The project would provide finance for the improvement of irrigationchannels and for fine levelling. (Farms requiring major development andlevelling efforts would not be selected). While the benefits of land develop-ment are indisputable, they do not have the immediate impact of the benefitsto be derived from investment in a tractor or tubewell. Furthermore, beingof a longer term nature, they are riskier. For these reasons farmers lessreadily invest in land development than in tractors and tubewells.

20. This factor underlies project estimates of the size of the landdevelopment component. It is assumed that all farmers obtaining tubewellsunder the project would undertake land development on half their acreage.In addition it is assumed that a further 10% of participating farmers wouldimprove half their acreage. Together these amount to the improvement of anestimated 17.5% of the land of participating farmers, or about 33,000 acres.The estimated costs for land development are given in Table 3.

21. Agricultural Engineering Departments would provide advisory servicesto farmers wishing to undertake land development. The Departments alsohave earthmoving equipment for hire at subsidized rates to undertake levelling.Advice on fine levelling would also be provided by the teams being trainedunder the USAID program (para 12). Farmers themselves could carry out finelevelling, if assisted with survey and planning, using wheeled tractors andlight levellers. Some farmers already undertake such work on a contractbasis and land levellers have been included among the implements to befinanced under the project to expand the availability of this service.

Benefits to Seed Growers

22. The proposed on-farm investments are complementary. The increasein tractor power, allied to suitable implements, would improve the qualityand timeliness of cultural operations. It would permit an increase in crop-ping intensity and it would also permit partial substitution for increasinglyuneconomic bullock power. (One 45 HP tractor is roughly equivalent to 8pairs of bullocks. The maintenance cost of a pair of bullocks is given inTable 4). The tubewells would supplement canal water supplies and the landdevelopment would improve the efficiency of water usage. Together theseinvestments would permit an increase in cropping intensity and the intensityof irrigation. (Because of shortage of water many farmers currently practicesuboptimal irrigation).

23. The overall effect of these developments would be an increase incropping intensity of about 15% and yield increases of about 15%. The rateof return to the on-farm investments - disregarding seed growing - would beabout 50%. Details are given in the farm models in Annex 13.

Corporation Seed Farms

24. Suitable Government farms currently operated by the ExtensionDepartments would be handed over to the Punjab and Sind Seed Corporations.

ANNEX 3Page 6

When the appaisal mission was in the field it was not possible to make afinal choice of farms for the Corporations. However, in Punjab and Sindthere are many farms in Government hands and the appraisal mission sawsufficient to be convinced that suitable farms could be made available.

25. Project estimates of the cost of developing Corporation farms arebased on a 1,000-acre model farm. The project would finance development alongthe same lines as seed grower's farms, namely tractors and implements, tube-wells and land development. No provision has been made for other farminputs e.g. fertilizer, as additional inputs are not considered essentialfor the project. The list of items to be provided and their costs isgiven at Table 5.

26. The full requirements of tractor and implement for the farms wouldbe provided under the project. It is assumed that when the Extension Depart-ment hands over the farms it would withdraw existing equipment. This, inany case, is inadequate and in poor repair.

27. The level of development of the Government farms seen by theappraisal mission was low. Provision has therefore been made for the pro-ject to finance the installation of four tubewells on each farm and for landdevelopment of 75% of this area (750 acres). In addition provision is madefor the construction of houses, for farm managers and superintendents, andof a limited range of farm buildings.

A&NNEX 3Table 1

PAKISTAN

SEED PROJECT

Farm Developmena

Farm Machineryr f'or Seed Growers

INVESTNENT COSTSUnit Number Total Foreign ForeignCost ol' Cost Exchange Exchange

Item Rs Units '000 Rs % '000 Rs

Tractor - 45 HP - 55,000 470 25,850 80 20,680Plow - 3 furrow 4,500 230 1,035 50 517Cultivator 4,000 35C 1,400 50 700Disc harrow 4,000 95 380 50 190Chisel plow 2,200 9C 198 50 99Border disc 4,200 95 399' 50 200Planter 1/ 7,500 190 1,425 80 I,1LOSeed drill 1/ 20,000 190 3,800 80 3,0c4oFertilizer spreader 1/ 5,000 90 450 80 360Sprayer-tractor mounted 6,ooo 94 564 5o 282Trailer 12,000 230 2,760 5O 1,380Thresher 17,000 94 1,598 50 79iLand leveller 5,000 140 700 50 350

Total Investment (by 1880 seed growers) 40,599 29,737

Average investment per seed grower 21,660

OPERATING COSTS

Tractor: AssumptionsInitial cost Rs 55,000Estimated life 10 years'Work hours per year 1,000

Costs Rs/Year Rs/hrDepreciation 5,500 5.50Insurance 250 .25Repairs and spares 5,500 5.50Fuel (1 gal/hr 9 Rs 5.75) 5,750 5.75Lubricants 1,250 1.25Operator 3,000 3.00

Total 21,250 21.25

Implements: AssumptionsValue of machinery

per tractor Rs 31,430Estimated average life 10 yearsTotal machine hours

per year 1,000

Costs Rs/Year Rs/hrDeoreciati,on 3,103 3.1Repairs and spares 3123 3.14

Total 6,286 6.23

1/ Assumed imported, others of local manufacture.

ANNEX 3Table 2

PAKISTAN

SEED PROJECT

Farm Development

Tubewell Costs

Investment V

Unit TotalItem Unit Cost No. Cost

Rs Rs

Drilling - 8" Ft. 10 200 2,000Casing Ft. LO 50 2,000Strainer Ft. 100 100 10,000Delivery pipe Ft. 30 30 90020 HP Diesel engine No. 25,000 1 25,000and centrifugal

pumpAccessories - - - 1,100Civil works 9 0 0

Cost Per Unit 50,000

Operating

Fixed Costs - Per Year Rs

Depreciation on well (5%) 1,195Depreciation on engine, pump and

fittings (10%) 2,610Repairs and spores (10%) 2,610Operator's salary - Rs250/month 3,000

TOTAL 9,415

Variable Costs - Per Hour

Diesel - 1 gal per hr 9 Rs5.75oil O. 0Grease 0.2,

TOTAL 6.50

Operating Costs - Per Hour

(Assuming 2,500 hrs. of operation per year)

Fixed cost Rs3.77Variable cost 6.50

TOTAL 10.22

1/ It is assumed that one of every four growers will require to investin al, additional tubewell. Thus:

Total number of tubewells required by 1880seed growers: 1880 ' 4 470Total tubewell investment byseed growers: Rs 50,000 x 470 Rs 23,500,000

Average tubewell investmentper grower: Rs 50,000 =- 4 Rs 12,500

ANNEX 3Table 3

PAKISTAN

SEED ROJECT

Farm Development

Cost of Land Development 1/

Item Unit Unit Cost Number Total CostRs

Main water course Ft. 6 20,000 120,000

Farm channels Ft. 3 20,000 60,000

Diversions/checks No. 150 30 4,500

Culverts - - 9,000

Fine levelling acre 200 400 80,000

Contingencies - - 6,50o

Total 200

Development cost per acre: Rs 280,000 ,400 Rs 700

Average development cost per seed grower: /Rs 700 x 17.5 acres ' Rs 12,250

Total investment by 1880 seed growers: 2Rs 12,250 x 1880 - Rs 23,030,000

1/ Based on a 400 acre unit - the average area below the main channeloutlet up to which the Irrigation Departments are responsible forchannels. The average development cost per acre (Rs 700) is assumedto be same for all project participants.

2/ Seed Annex 3, paragraph 20.

ANNEX 3lable 4

PAKISTAN

SEED PROJECT

Farm Development

Cost of Keeping a Pair of Bullocks

RsDepreciation 1/ 600

Green fodder - 1.5: acs @ Rs 800 1,200

'Wheat bhoosa 2/ - 110 maunds @ Rs 5 550

Gram - 3.5 maunds @ Rs 40 1i0

Veterinary expenses 80

Repairs to harness 50

Handlers wages @ Rs 140 per month 1,680

Total per annum 4,300

1/ Assuming 8 year life and Rs 1200 per pair slaughter value(this may understate the capital value, bullock prices haverisen steeply of late)

2/ Chopped wheat straw.

Source: Agricultural Development Bank

ANNEX 3

Tab] e 5

PAKISTAN

SEED PROJECT

Farm Development

Investment on Corporation Seed Farms 1/

Unit Unit Total Total Cost Foreign Forei gnCost Units Lxcnlrge Excha;ne

Land Rs '000 % Rs '000

Tubewells 2/ No O,,000 16 800 75 600LAnd development 3/ Acre 700 3,000 2,100 10 210

Buildings

Houses-Farm Managers (1 per farm) Sq.ft. 60 2,000 120 15 18Houses-Superintrndants (4 per farm) " 60 1,200 720 15 108Crop/Input Stores (1 per farm) " 50 3,000 150 1S 22.5Implement Shed (1 per farm) " 30 3,000 90 15 13.Architects Fees - 8% of3

building costis - 86 e4

Sub-total 1,166 166

Machinery

Tractors - 4S HP 4/ No 55,000 16 880 80 704

Tractors - 60 HP I/ n 75,000 8 600 80 480Combine Harvester I/

(self propelled 12' cut) " 180,000 4 720 80 576Plows-reversible m/b j/ " 15,000 16 240 80 192Plows-disc " 4,500 8 36 50 18Plows-chisel 2,200 4 8.8 50 4Disc harrow " 4,000 16 61 50 32Cultivator-row crop. " 5,000 16 80 S0 40

Seed drill (combine) ,/ " 20,000 8 160 80 128Planter (4 row) / " 7,500 8 60 80 48

Sprayer-tractor mounted ,/ 12,000 8 96 80 77Thresher n 17,000 8 136 50 68

Fertilizer spreader 4/ " 5,000 4 20 80 i6Border disc " 4,200 4 16.8 50 8Land plane 4/ " 20,000 4 80 80 6LTrailer " 12,000 16 192 S0 96Miscellaneous small tools

and equipment - 200 i>0 100Spares 5/ -- -- -- 700 80 560

Sub-total ,2 89.6 3,211

Total Investment Cost 8,355.6 4,187

1/ Assunptions based on four 1,000 acre farms, three in Punjab one in Sind.

2/ For cost breakdown see Annex 3 Table 2.

3/ For 75% of area of farms. For cost breakdown see Annex 3 Table 3.

4/ Imported items.

5/ 10% with purchase of imported items in year 2 plus 5% per year in years 3, L and 5. Spreading sparepurchases would avoid problems which could arise from inaccurate predictions of n eed, were all spareto be purchased at the time of original equipment purchases.

ANNEX 4Page 1

PAKISTAN

SEED PROJECT

Seed Processing

1. Processing is essential to the production of high quality seed.Drying may be necessary for storage without loss of germination. Cleaningand grading removes impurities - inert matter and impure seed -- and un-dersize seeds. Treatment will protect seed against pests and disease instorage and after sowing. Thus the end product should be an obviouslyattractive sample of bold seed which will germinate well to produce afull, even stand of strong seedlings of the selected variety.

2. Proc ssing plants are subject to economies of scale and Pakistanhas virtually io manpower trained in the special skills required in theseed industry. For these reasons the project would develop the minimumnumber of plants; three in Punjab and one in Sind. In Punjab a minimum oftwo plants would be required in order to locate a seed cotton facilityin each varietal zone. However, because of the large volume of wheat seedto be produced in Punjab, it is proposed to develop three plants. The smallloss of scale economies would in this case be more than compensated byreduced management and transport problems resulting from smaller seedproduction areas. Plants would be located as centrally as possible withinthe production areas to minimize transport costs.

3. The responsibilities of the Processing Departments of the SeedCorporations would commence at ginneries, and at the Corporations' and seedgrowers' farms, soon after the crop is harvested and would be completed onlywhen seed had been delivered to distributors. Thus the processing operationswould involve:

- taking delivery of seed crops in the field;- transport of seed from field/private ginneries (approved

seed cotton) to plant;- cleaning and grading of seed;- ginning of certified seed cotton and delinting of cotton seed;- drying of seed;- treating of seed with fungicide/insecticide;- packaging for sale;- storage under controlled conditions;- obtaining certification from Seed Certification Agency; and- delivery of seed.

ANNEX 4Page 2

Delivery and Transport

4. The Processing Department would, at the request of the ProductionDepartment, arrange the transport of seed from farms as soon as possibleafter harvest. The seed, which would be bagged, sampled, sealed and markedbefore delivery, would be weighed on arrival at the plant. The weight, and,

for crops other than cotton, the result of the NSCA analysis (Annex 5), wouldform the basis for payment to the seed grower. The Processing Departmentwould also arrange the transport of commercial cotton seed from private

ginneries.

5. Transport of seed to the plant would be entrusted to privatetruckers on contract as this activity would be seasonal and it would notbe economical for the Corporations to maintain a fleet of trucks specific-ally for this purpose. However, each plant would be provided with two 10-ton trucks for internal transport and emergencies. There are establishedand reliable transport contractors operating in all Provinces. Transportrates are about Rs 10 per ton for the average haul anticipated -25 miles.

Processing Plants

6. The throughput of the processing plants to be operated by theSeed Corporations would be as follows:

Annual Throughput of Major Crops (tons)/1

Plant Wheat Rice Maize Cotton Others Total

Punjab - Sahiwal 17,100 1,410 2,620 - 150 21,,280

Khanewal 17,100 - - 12,000 150 29,250

DG Khan 17,100 - - 16,000 150 33,250

Sind - Khairpur 9,400 1,100 - 8,500 300 19,300

TOTAL 60,700 2,510 2,620 36,500 750 103,080

Plant design and location would be dictated by the two most important crops

-- wheat and cotton. The planned wheat throughput governs the non-cotton

design aspects of all plants and is a factor in their location. Despite themany different operations required for cotton seed, joint wheat/cotton plantswould result in major economies over separate operations. The same staffcould put through both crops because their seasons. are complementary. Forthe same reason storage space, the major building cost, could be saved.Several operations -- drying, treating, bagging, weighing -- could use the

same equipment.

7. For wheat, plant throughput is geared to a 100 day processing period,

two shift working and 75% efficiencyl/. For cotton the processing periodwould be 120 days, and three shift working at 75% efficiency is assumed.

1/ In the Punjab plants however, during peak periods, three shift workingwould be required for about four weeks.

ANNEX 4Page 3

(Processing, storage and delivery periods are shown at Chart 1). The as-sumption of two shift working most of the time for wheat and related cropsleaves a safety margin of spare capacity. Cereal processing would coverseveral crops and a number of varieties of each crop. Each time processingchanges from one variety to another the plant must stop for cleaning. Asthe project develops and the seed industry diversifies such changes will bemore frequent. In contrast cotton seed processing in a plant involves onlyone variety and can proceed almost continuously, hence the assumption ofthree shift working from the outset.

8. It is proposed that the cereal plants operate on one floor level.Major operations and seed flows are shown at Chart 2. Hourly capacities, bymajor operation, are at Table 1. Costings for movement and storage arebased on handling in containers of 2 tons capacity. This system has twoadvantages over silo storage and mechanical conveyors. It is slightlycheap-r (despite the high timber costs and the need for regular replace-ment - a five-year life has been assumed), and permits the identity of eachfarmer's seed to be retained without materially complicating handling logis-tics. Because this method of handling is atypical, it would be re-examinedin detail by the design consultants to confirm the cost advantage and theneed for, and practicality of, maintaining the identity of seed lots.

9. Cotton plants would also operate on one floor level. Each plantwould have a small ginning unit sufficient to handle basic and certifiedseed. The ginning of these critical generations must be in Corporationhands to ensure that no mixing of seed takes place. Roller ginning is pro-posed to minimize mechanical seed damage.

10. From the ginning unit onwards all seed, - basic and certified fromthe Corporation ginning unit, and approved seed from private ginneries -would go through the same processes. Major operations and seed flows areshown at Chart 3.

11. Considerable attention was paid to checking different methods thatcould be used for delinting cotton seed. Acid, flame, and mechanical delint-ing methods were considered, and several factors have weighed in favor ofmechanical delinting despite the acknowledged superior seed quality obtain-able from the other methods. Both acid and flame delinting involve sophis-ticated techniques and constant managerial supervision, and mistakes wouldbe costly as whole batches of seed could be destroyed. In addition, aciddelinting entails some risks for the environment. (The commonest, wet acidplants, are no longer licensed in the USA). Mechanical delinting on theother hand is a simpler technique carrying smaller risks, already familiarin Paki^tan, and would produce a quality of seed commensurate with presenthusbandry standards. Although acid delinting has the advantage of ensuringthe destruction of pink boll-worm, the same result can be obtained by fumi-gating the seed after mechanical delinting. Operating costs of mechanicaldelinting are considerably lower than of acid delinting. For these reasonsmechanical delinting with fumigation has been visualized for the bulk ofthe project output. However, in final plant design, the consultants wouldconsider the merits of pilot flame and/or acid operations to pave the way

ANNEX 4Page 4

for upgrading seed quality over time. Change to more sophisticated process-ing would not render proposed investments obsolete, both flame and aciddelinting are additional to mechanical.

12. The Seed Processing Specialist to be employed by the Corporationshould study the desirability and the feasibility of installing a small lineof acid delinting for treating all basic and possibly certified cotton seed.This would enable experience to be gained in such methods of processing foruse in future cotton development projects which would perhaps also aim atmore sophisticated cultural practices.

13. Each Corporation's processed seed would be distinctively and at-tractively packaged and labelled. Much of the seed of each crop would bepacked in one maund bags, for ease of handling and transport. However, forcrops with low seed rates - rice and cotton - an adequate proportion of theoutput would be packed in smaller units, related to seed rate, to serve theneed of the smaller farmer. Packaged seed would be stacked on pallets andhandled by fork-lift truck.

14. The warehouse capacity to be constructed would provide storage forabout 75% of the wheat seed output. It is proposed that some of this capacitybe constructed as regional depots, to facilitate distribution, since presentstorage is inadequate. The proposed warehouse capacity would cater forabout half of the cotton output. This is considered adequate because cottonseed is currently traded more widely than other seeds, hence it can be ex-pected that a considerable proportion of the cotton output would be absorbedin the existing distribution network.

15. Details of the processing facilities to be developed under theproject, and their cost, are at Tables 2 through 6.

Organization and Management

16. The Processing Director of each Seed Corporation would be responsiblefor all processing and storage activities in the Province. Each factory com-plex would be placed under a full-time Plant Manager who would be assisted byan Administrative Assistant, a Stores Assistant, and, for each shift, a PlantSuperintendent. Staff requirements for a typical processing complex areshown in Table 7. Expatriate specialist services would be engaged to assistthe Corporations in the design of the factories; preparing technical specific-ations for machinery and equipment procurement; installation of the machinery;and running the plants during the initial periods. Local engineering serv-ices would be engaged to supervise civil works contracts (Annex 7).

OperatJng Costs

17. Operating costs have been calculated separately for cereals andcotton, based on models for a 15,000 ton wheat plant and a 16,000 ton cotton

ANNEX 4Page 5

plant. In the cotton model, only costs incremental to those incurred inwheat processing are included. For project wide financial and economicprojections (Annexes 13 and 14), the costs per ton of throughput derivedfrom this approach are used for all plants. It is appreciated that thesmaller plants would suffer some diseconomies of scale. However, these areignored since the costs affected - fixed costs plus salaries and wages -amount to only 5% of total operating costs. Details of the operating costsare given at Tables 8 and 9, for cereals and cotton respectively. Thederivation of these costs is elaborated in the Appendix to this Annex.

Revenues

18. The sales from representative plants, including non-seed by-pro-ducts, are shown at Tables 10 and 11, for cereals and cotton respectively.

ANNEX 4AppendixPage 1

PAKISTAN

SEED PROJECT

Seed Processing

Operating Costs Assumptions

Throughput

1. Plant operating costs have been worked out separately for cerealsand cotton. The throughput for the cereals plant is taken at 17,100 tonsof wheat, 1,410 tons of rice and 2,620 tons of maize. The cotton plantthroughput is taken as 16,000 tons of approved seed, 970 tons of certi-fied seed, and 25 tons of basic seed.

Variable Costs

Cereal Seed

2. Screening Loss: Of every 100 tons arriving at the factory, 5 tonswould be lost as waste at precleaning and 15 tons would be discarded duringscreening. It is assumed that screenings would be sold at half the marketvalue of grain. In order to obtain 17,100 tons of processed seed of wheat,1,410 tons of rice, and 2,620 tons of maize, the Corporation would have toprocure 21,375 tons of wheat, 1,760 tons of rice and 3,275 tons of maizefrom the seed grower.

3. The seed growers would be paid in two installments. They wouldfirst get the grain price on the totality of their sale, and after analysis,they would receive the premium on the part that is of seed quality. Witha premium of 20% and an average of 80% of the crop being of seed quality,the farmer would eventually receive a bonus on the totality of his saleequal to 16% above the grain price. The price paid to seed growers forseed delivered to the Corporations would be:

ANNEX 4AppendixPage 2

Market Price Premium Price(for grain) (for seed)

-------- Rs per Maund…-----

Wheat 45.00 54.00Rice - Basmati 1/ 58.00 69.60

- Coarse 26.00 31.20Maize 45.00 54.00

Cotton

4. Approved Cotton Seed. Of the tonnage of fuzzy seed bought fromginneries, some 6% of linters would be recovered and some 14% of the seedwould be rejected through screening and grading. Both linters and culledseed would be sold. To get 100 tons of processed seed, the plant wouldhave to buy 125 tons of seed from the linneries, which would correspond to156 tons of seed produced by the farmer or 230 tons of seed cotton. 2/ Foran output of 16,000 tons the plant would therefore buy 20,000 tons fromginneries. The price paid to private ginneries for approved cotton seedis taken at Rs 48 per maund which is the price for top quality cotton seed.(As an average price this implies a small premium).

5. Seed Cotton for Basic and Certified Seed. For basic and certi-fied seed the plant would purchase seed cotton direct from Corporationfarms and registered growers respectively. It is assumed, for purposes offinancial projections, that basic seed cotton from Corporation farms wouldbe procured at the same price as paid to registered growers for certifiedseed i.e. Rs 87 per maund. As with approved seed 20% of the seed cottonwould be discarded because of doubtful germination, and 6% linters and14% culled seed would be removed. Thus to finish with 970 tons of certi-fied seed and 25 tons of basic seed, 2340 tons of seed cotton should beprocured.

Haulage

6. Cereal. Average haulage distance from farms to plant would be about25 miles. Costs would average: transport Rs 0.35/md; loading and unloadingRs 0.15/md; and octroi Rs 0.10/md - a total of Rs 0.60/md or Rs 16.32/ton.

7. Cotton Seed. Average haulage distance from ginneries to plantwould be 50 miles. As cotton seed density is half that of cereals, trans-port cost/mile would be double; thus transport cost would be Rs 1.40/md.Loading and unloading would cost Rs 0.25/md and octroi Rs 0.10/md. Totalhaulage cost would be Rs 1.75/md or Rs 47.60/ton.

1/ For the purpose of the financial models, it has been assumed that Basmatiwould make up 1/5 of the rice, and coarse rice would make up the remainder.

2/ Cotton from the first and last picks would be discarded because of poorgermination.

ANXR 4AppendixPage 3

8. Seed Cotton. In the case of seed cotton for basic and certifiedseed, average haulage distance from farms to plant would be 25 miles witha transport cost per mile approximately double that of cotton seed (densityof seed cotton is much less than cotton seed). Transport would thus aver-age Rs 1.35/md. Loading and unloading would be Rs 0.30/md and octroiRs 0.10/md. Total haulage cost would be Rs 1.75/md or Rs 47.60/ton.

Plant

9. Seed Dressing. For costing purposes one typical dressing has beentaken for all crops, a single purpose liquid costing Rs 100 per imperialgallon (160 fluid ounces). Application rates would vary with differentcrops but the average taken is that for wheat, 1 fluid ounce per bushel or1.31 fluid ounces per maund. Seed dressing cost would thus be Rs 0.818/mdor Rs 22.27/ton.

10. Bags and Labels for Seed. Bags of various materials are availablein Pakistan: paper, cotton or polypropylene; they cost about the same.For cereals, this cost is estimated at Rs 3.5 per one maund bag. Cottonseed would take a larger bag for one maund, costing Rs 5. Labels would costRs 0.30 per maund bag. Packing costs would thus be: Rs 3.80/md for cerealsand Rs 5.30/md for cotton. (Note: A proportion of the packaging would bein quantities to sow one acre. This would slightly increase the cost, butis omitted from these calculations for simplicity).

11. Hessian and Baling Hoops for Lint and Linters. In the cotton pro-cess, lint and linters would be baled. The production of the plant wouldbe:

Lint: 1/3 x 2,340 tons = 780 tonsLinters: .06 x (20,000 + 1,500 tons) = 1,294 tons

Total 2,074 tons or11,834 bales

Each bale would need Rs 10 of hessian and Rs 20 for baling hoops.

12. Contract Sacks. Heavy jute bags holding 1 maund cotton seed or2-1/2 maunds cereals would be used for farm-to-plant transport. It isassumed these would be cleaned and re-used 7 times. Sacks are providedfor o-Lne-third the throughput of cereals and one-half the throughput ofcotton (because cotton seed would be stored in the sacks). At an assumedcos t f Rs 14 per sack unit costs would be:

ANNEX 4ARpendixcPage 4

Cereals Rs 0.27/md or 7.25/ton (of input)Cotton seed Rs 1.0/md or 27.2/ton (of input)

Electricity

13. Basic Requirements. -- A plant processing 21,130 tons of cerealseed (maize and rice in addition to wheat), and 16,000 tons of cotton seed,in a year, would consume 290 kw (full load) for 3,713 hours spread over 10months. Electricity costs would be:

Fixed charge at Rs 19.8/kw/month x 290 kw x 10 month = 57,420Energy charge Rs 0.13 per unit: 0.13 x 290 x 3,713 = 139,980

197,400Add 10% for offices, etc. 19,740

Total Rs 217,140

Unit Cost: Rs 0.22/md or Rs 5.84/ton

Additional Requirements for Cotton Plant

14. The cotton plant would, in addition, have 13 gins and a balingpress consuming some 45 kw for 2,160 hours spread over 4 months. Theadditional electricity cost would be:

Rs

Fixed charge at Rs 19.8/kw/month x 451kw x 4 months = 3,564Energy charge Rs 0.13 x 45 x 2,160 = 12,636

Total 16,200

Fuel

15. Furnace oil for dryers costs Rs 500/ton. 1 ton fuel evaporates6 tons water. It is assumed that the moisture content would have to bereduced by 10% for all rice, 6% for all maize, 6% for one quarter of thewheat throughput and 6% for half of the cotton seed throughput. Accord-ingly costs are:

Cereals: Rs 0.074/md or Rs 2/ton.Cotton: Rs 0.092/md or Rs 2.5/ton.

1/ Excluding cotton ginning and baling.

ANNEX 4AppendixPage 5

Fixed Costs

Corporation Overheads

16. The overhead costs of the Corporations would be apportioned toplants according to throughput. In this example 20% of the overhead costsof the Punjab Corporation has been allocated to each of the cereal andcotton models. (Of the three Punjab plants two are wheat/cotton, oneprimarily wheat).

Salaries and Wages

17. Table 8 gives the labor cost for a typical cereal/cotton plant infull production at Year 5. For the purpose of financial projections, thesecosts have been divided equally between cereals and cotton. Costs in theearlier years are interpolated by reference to (a) tonnage; (b) the learningcurve; (c) minimum managerial strength irrespective of tonnage.

Maintenance and Repairs

18. Assumptions used are: 2.5% of capital cost of buildings; 5% ofcapital cost of machinery and 10% of capital cost of vehicles. Maintenanceand repair costs would therefore be:

Buildings Machinery Vehicles Total…----Rs '000----

Cereal plant 195 632 39 866Cotton plant 56 803 - 859

Vehicle Running Costs

19. An annual mileage of 12,000 miles for cars and 4-wheel vehiclesand 20,000 miles for trucks has been assumed. The. assumed cost, of Rs 0.40per mile for a car, Rs 0.60 for a 4-wheel drive vehicle and Rs 0.50 permile for the trucks, is essentially made up of the cost of gasoline, andexcludes maintenance, repairs and depreciation (taken into account in therenewal of investment). The total cost would be Rs 32,000 pa and is dividedequally between cereals and cotton for financial projections.

Insurance

20. Taken as .05% of capital investment in buildings, plant andvehicles: Rs 104,000 for cereals and, Rs 91,000 for cotton.

ANNEX 4Taole 1

PAKISTAN

SEED PROJECT

Seed Processing1/

Processing Plant Capacities by Major Operation

Operation Khairpur Sahiwal Khanewal DG Khan

… ------------- ton/hr -----------… - - …------

CerealsReception/pre-cleaning 25 25 25 25

Drying 2/ 2.5/7.5 2.5/7.5 2.5/7.5 2.5/7.5

Fine cleaning/grading 8 12 12 12

Treating, bagging and 20 20 20 20weighing 3/

Cotton

Ginning bY *5 - .75 1.4

Seed cleaning 8 - 12 12

De-linting 8 - 10 12

Grading 6 - 12 12

1 Operational capacities do not closely reflect planned throughputs becauseof indivisibility of equipment.

2/ Two figures refer to paddy/wheat - the more critical governs choice of capacity.

3/ Used also for cotton.

4/ For certified seed only.

ANN1I 4Table 2

PAKISTAN

ITD PR0jECT

Seed Processing

Investment Costa - Sereal Processing Ecuipmentcad anidld o.(2 2

000 ton capacity)

unit Cost Number Total Cost Foreign Foreign Lifeas o000 RS '000 Etchange Exchange Expectancy

S___ 8 Rs _000 Years

IMP0RTE MACHNERY AND EJIFM.T

Reception:Weigh zridge 170 1 170 100 170 20Intake hopper 25 2 50 100 50 20Elevator 28 1 28 100 2S 20

Precleaning:Separator 77 1 77 100 77 20

DryiDng:Complete station 600 1 600 100 600 20

Fine Cleaning:Box turner 34 1 31 100 41 20Elevator 23 3 69 100 69 20Fine cleaning mchire / 218 3 611 100 654 20Indented cylinders 31 93 6 55d 100 558 20Cyclones for cleaning machines 38 2 76 100 76 20

Treatmnt and Ba;gging:9b7 turnear 34 1 34 100 31 20Elevator 23 1 23 100 23 20Seed treater 63 1 63 100 63 10Cross bagging weigher S3 1 53 100 .3 10Sewtng machines 12 2 8b 100 84 10

General:Aspirtion system and

miscellaneous (30%) 770 1 770 100 770 20Fork lift trucks 100 3 300 100 300Portable scales 4 20 100 20 SControl panel 200 1 200 100 200 20Workshop, tools and equipment 84 1 81 80 67Air conditioning, room units 5 16 0o 1oo 30 10Transformer substation 300 1 300 80 240 20Laboratory equipment 177 1 177 100 177 57rolleys, bag cleaning equipment .30 1 30 60 18 5Va.Lum .leaner 5 I 20 100 20Spares (5%) 230 1 230 95 219 20

Sub-total FOB 4,781 ,,681

lacking freight, insurance(20% of F.E.) 938 100 938

Sub-total CIF 5,722 5,622

Custom duty (20% of F.E.) 1,125Assembly and installation

(17.A% of FOB price) 837 S0 k18

Sub-total 7.684k 6.040

LOCAL EQIP.INT

F,urniture and fixtures 10 20 2 20Fire fighting (static lrerants) 20 20 20 Is 20Wooden boxes for seed handling *6dV 1,300 3,26i 5 163 5Wooden pallets .10 2,000 200 5 10 S

Sub-total 17.

UILOTNGS AND CC*S?MCTTW4

Plant building, units sq. ft. .100 13,000r 1,000 15 150 20Workshop .065 1,500 98 15 15 20Offices .100 1,000 100 15 15 20Laboratory .100 1,000 100 15 15 20Werehouse " . .06S 70,000 1,5O 15 682 20Fuel storage tank .0 1 50 25 12 20Ws11 to cormoand 100 5 S 20Hard stsnding and roadways .011 5,000 70 5 4 20Architect fees 8% of building cost

(urnits sq. ft.) J2L 20

Sob-totl o,.92 290

TOTAL 17,670 7,117

1/ Some additionaL equipment would be required for .ai.e. See Table l.

2/ For Sind -where only a 13,00 ton capact-y will bi roewirad. the euarn i f-r Line wleonlW will corssstof: 2 elevators. 2 fine cleaning macnines and - indented cylinders. The co.t of the aspiration system vill a-labe lese and the requirement for wsrehouses and boxes will be s=aller. The total cost therefore comes down toRs 13,728 thousand, of which Rs 6,040 thousand ts for foreign exchange.

Includes allowance for sieves and cylinders

ANNEX aTable 3

PAKISTAN

SEED PROJECT

Seed Processing

Investment Costs - Vehicles and Housing

Number Total Foreign Foreign LifeUnit Cost of Cost 5xchange achange Expectancy

Rs '000 uris_ Rs '000 % Rs '000 Years

VECLES

4-wheel drive 50 1 50 50 25 5

Car 50 1 50 50 25 5

Truck 127 2 25h 88 5

Sub-total 354 138

HOUSES

House of general manager 120 1 120 15 18 20(2,000 square feet)

Houses of administration 96 2 192 15 29 20and transportation managers(1,600 square feet each)

Houses of superintendents 72 2 14 15 22 20(1,200 square feet each)

Sub-total 456 69

TOTAL 810 207

Table 4

PAKISTAN

mvz PROJECT

Seed Processing

Investment Costs - Additional for Maize(3,000 ton capacity)

Unit Cost Number Total Cost Foreign Foreign LifeRs '000 of Rs '000 Exchange ExcChange Expectancy

Units % Rs '000 Years

MACHINERY AND EQUIPMENT

Maize sheller 100 1 100 100 100 10Conveyors and accessories 40 1 40 100 40 20Spares 5% 6 95 6

Sub-total FOB 146 146

Packing, freight, insirance20% of F.E. 29 100 29

Sub-total CIF 177 177

Custom duty, 20% of CIF 36 36Assembly and installation,

17.5% of FOB 26 50 13

Sub-total 239 226

B3JILINGS AND OTHER LOCAL ITEMS

Barn for maize storage anddrying, units sq. ft. .032 16,000 512 10 51 20

Maize cribs 1 330 330 20 66 10

Sub-total 842 117

TOTAL 13403

ANNEXTabie 5

PAKISTAN

SEED PROJECT

Seed Processing

Invesneat Costs - Cotton Processing Equipmnt and Buildings I/

____-____----____-------(all costa in Ra 'O0Cs)…------------------------ Foreignllsd.t nKehangeCost Sinnzl . 0. Ean Sird Total Component

Cost r of TItal larber of Total Mber of TotalUnits Cost Ulnits Coat Units Cost

IdAChNIERY AN 3pJIli'l'T

Opener/cleaner 380 1 380 1 380 1 380 100Double roller gins 3/ 72 7 504 13 936 5 360 100Conveying syst for seed cotton,

LInt and certified seed - - 8s0 - 1,000 _ 6s0 100Baling presa-double action type 1,130 1 1,130 1 1,130 1 1,130 100Condensor (pre-baler) 280 1 280 1 280 1 280 10oFour tray seed cleaner 183 3 549 3 549 2 366 100Delinters: - first cut 102 5 910 7 714 4 408 100

- second cut 102 10 1,020 14 1,428 7 7141 100Gummer 94 2 188 2 188 1 94 100Dczen files for gummer

(supply for 2 seasons) .018 1,000 48 52,000 48 500 24 100Lint cleaners: - for first cut 108 2 a6 2 216 1 108 100

- for second cut 130 3 390 3 390 2 260 100Lint sbale sbaker 14 1 14 1 14 1 14 100Iete beMcr . 43 1 43 1 43 1 43 100Shaker separator 66 2 132 2 132 2 132 100Pnewastic conveying sqrsts:a

- for seed cleaner - - 53 - 62 - 40 100-for delinters - ~595 - 700 - 455 100

- for ante beater 4- 43 - 51 - 33 100mechajical conveyors and hopp ers

- for seed cleaners - - 103 3 121 - 79 100- for delinters - - 269 - 317 - 206 100- for shaker separator - 89 _ 100 _ 65

Ptudgation equipment 42 2 84 2 84 1 42 100Spares - - 160 - 160 - 160 100

Sub-total FOB 7,646 9,043 6,013Packing, freight, insurance (20%) 529 1J809 1 209

Sub-total CIF 9,175 10,852 7,252 27,27Y luXCustom duty (20% of CIF) 1,835 2,170 1,450 5,455Assm.bly and installation (17.5% of FOE) 1l5_6 1 058 1 982 5°

3UB-TOTAL W 14bo9:0 36,716 30

uIILO;IM iUD GOSThCTION IV

Opener, ginning and baling buildixg .065 3,500 227 4,200 273 3,150 205 705 1SMechanical delinting building 5/ .o65 2,250 146 3,150 205 1,650 107 458 15

Open sided ahed for seed cotton .032 4,000 128 8,000 256 3,000 96 480 1Sarenouse for processed andunprocesaed cotton seed 6/ .o65 - 20,000 1.300 - 1 00 19

SUB-TOTAL 501 2,034 408 2,943 15

TOTAL 184 16,6ML 10o 168 19 75

1/ Required tn addition to tho-e for cereals. gquirP,t and buildirNs have a life ep- . nc of 2( 'afrm.

2/ All the motors and starters are included with the equipment. No provision -as made for testing and bagging since the equipment of thecereal plant will be used.

3/ Number of units taken from Table 6.

4/ No extra space has been provided for fumigating and treating the seeds since enough space will be available in the cereal plant building.

5/ 150 square feet per machine.

6/ In thanewal and Sind, the warehouse provided for the cereal plants should have enough capacity to store the cotton seeds.

ANNEX 4Table 6

PAKISTAN

SEED PROJECT

Seed Processing

Roller Gin Requirements

Khanewal DG Khan Sind

Input of seed cotton 1140 2340 832(in tons)

Output of lint (in tons) 380 780 277

Numnber of days of operation of 760 1560 555double roller gins /

Number of double roller gins required v 7 13 5

1/ On the base that each double roller gin has a daily capacity of i tonsof lint.

2J Assuming 120 days of operation per double roller gin.

ANNEX aTable 7

PAKISTAN

SEED PROJECT

Seed Processing

Cereal and Cotton PlantStaffing Requirements and Costsa/

Unit TotalAnnnal Annual

Number Salary Salar- -(Rs '000)- - - - -

General Manager 1 20.0 20.0Adninistration Manager 1 12.0 12.0Head Analyst (for laboratory) 1 10.0 10.0Transportation Manager 1 10.0 10.0Plant Superintendents 2 9.0 18.0Analyst 1 6.o 6.oLaboratory Assistant 1 2.0 2.0Foremen 10 6.5 65.0Drivers -4 2.0 8.0Mechanics 3 3.0 9.0Plant Operators 12 2.0 24.0Typists/Clerks 5 3.0 15.0Storekeepers 5 3.0 15.0Laborers - permanent 10 1.5 15.0Laborers - casual 12 0.8 9.6Cleaners 6 1.5 9.0Guards 2 1.5 3.0

250.6

Pensions, insurance and other allowances, 4I% 100.2

Total Salaries and Wage Costs 350.8

1/ Based on the larger wheat/cotton plants.

ANNEX 4Table8

PAKISTAN

SEED PROJECT

Seed Processing

Operating Costs - Cereals -/(Rs '000)

ForeignYear Year Year Year 4 and Exchange1 2 3 Following %

VARIABLE COSTS

Raw material -- 12,266 24,532 36,797 50

Haulage in -- 143 286 431 50

Dressing -- 157 31h4 470 60Bag, labels and packaging -- 728 i 1,456 2,183 20

Contract sacks -- 64 128 192 50Electricity -- 41 82 123 25

Fuel -- 14 28 42 50

Sub-total Variable Costs -- 13,413 26,826 40,238

FIXED COSTS

Corporation overheads 580 620 660 700 25Salaries and wages 3/ 55 95 135 175 __Maintenance and repairs -- 866 866 966 50Vehicle running costs -- 16 16 16 50Auditor fees -- 6 6 6 -Insuranae b104 104 104

Sub-total Fixed Costs 635 1,707 1,787 =1,867

TOTAL 635 15,120 28,613 42,105

1/ See Annex 4, Appendix for the method of computation of these costs.2/ The phasing of the Corporationoverheads has been worked out on the assumption

that, from year 1 onwards, staff costs and 1/2 of the other costs were fixedand the others built up with the production of the plant (see Annex 10, Table 2).For the purpose of these models, the total overhead costs of the PunjabCorporation were divided by 5 (3 cereals and 2 cotton units).

3/ The phasing of the wages has been worked out by assuming that foremen and lowerworkers will not work in year 1, work 1/3 of the year in year 2, and 2/3 inyear 3. The total wages (Table 7, Annex 4) were equally divided between cerealsand cotton

ANNEX]Table 9

PAKISTAN

SEED PROJECT

Seed Processing

Operating Costs - CottonVRs '000)

Year 4 ForeignYear Year Year and Exchange

1 2 3 Following Component

VARIABLE COSTS

Raw material 1 8,888 17,776 26,666 -Haulage in - 321 642 963 50Dressing - 126 252 378 60Bag, label and packaging - 935 1,870 2,805 20Contract sacks _ 181 362 544 50Electricity - 38 76 113 25Fuel _ 13 26 40 50

Subtotal - 10,502 21,004 31,509

xtID COSTS

Corporation overhejti / 580 620 660 700 25Salaries and wages' 55 95 135 175 -Maintenance and repairs - 859 859 859 50Vehicle running costs - 16 16 16 50Auditor fees - 6 6 6 -Insurance - 91 91 91 -

Subtotal 635 1,687 1,767 1,847

TOTAL 635 12,189 22,771 33,356

1/ See Annex 4, Appendix for the method of computation of these costs.2/ The phasing of the Corporation overheads has been worked out on the assump-

tion that, from year 1 onwards, staff costs and 1/2 of the other costs werefixed and the other built-up with the production of the plant (see Annex 10,Table 2). For the purpose of these models, the total overhead costs of thePunjab Corporation were divided by 5 (3 cereals and 2 cotton units).

3/ The phasing of the wages has been worked out by assuming that foreman andlower workers will not work in year 1, work 25% of the year in year 2, 5c%in year 3 and 75% in year 4 and thereafter. The total wages (Table 7,Annex 4) were equally divided between cereals and cotton.

Table 10

PAKISTAN

SEED PROJECT

Seed Processing

Revenue Stream - Cereals(Rs '000)

Year Year Year Year Year2 3 I4 5 6

Onward

SALES OF SCREENINGS -

Wheat 791 1,582 2,374 2,374 2,374Rice 65 130 194 194 194Maize 121 242 363 363 363

977 1,954 2,931 2,931 2,931

SALES OF SEE

Wheat 8,124 18,659 31,591 35,195 38,801Rice Basmati 170 381 631 692 751Rice Coarse 317 733 1,249 1,398 1,547Maize 1,243 2,855 4,839 5,392 5,945

9,854 22,628 38,310 42,677 47,044

SUBSIDIES -6,532 8,734 8,734 4,367 -

TOTAL 17,363 33,316 49,975 49,975 49,975

1/ See paragraph 2, Appendix , Annex 4.Sales of screenings from year 4 on consist of 3,206 tons of wheat,262 tons of rice and 491 tons of maize sold at Rs 22.5 per maund.

2/ It is assumed that 3p of the plant throughput is lost every year becauseof deterioration, mishandling or misplacement. When the plant comes onstream, in year 4, the output is then; wheat: 16,587 tons, rice: 1,368 tons,maize: 2,522 tons.

3/ For assumrptions on prices and subsidies, see Annex 12, table 2.

A10EX 4Table 11

PAKISTAN

SEED PROJECT

Seed Processing

Revenue Stream - Cottonl!(Rs '000)

Year 2 Year 3 Year 4 Year Year 6

Sale of lintl/ 1,626 3,254 4,880 4,880 4,880

Sale of linters / 176 351 527 527 527

Sale of culled seed 4 780 1,561 2,341 2,341 2,341

Sale of processed seed - 7,396 16,333 26,810 29,122 31,433

Subsidies on processed seed 3,079 4,623 4,623 2,311 -

TOTAL 13,057 26,122 39,181 39,181 39,181

1/ The plant comes on stream in year 4. It is assumed that in year 2 its productionwill be 1/3 of the final one and 2/3 in year 3.

2/ From year 4 on, the plant will sell some 780 tons of lint of a price ex-ginneryof Rs?3O per maund.

3/ From year 4 on, the plant will sell 1,294 tons of linters(6,0 of an 4 nput of20,000 + 1,560 - 21,560 tons of cotton seed) at a price of Rs 15 per maund.h/ From year 4 on, the plant will sell 2,152 tcns of seed (14% of an input of 2D,000+ 1,560 = 21,560 tons of cotton seed is culled; 70% of the culled seed can be

sold ). The unit price ex-factory is Rs 40 per maund./ It is assumed that certified, and approved seed will be sold at the same price.

From year 4 on, the output of the plant is about 17,000 tons or 462,264 maunds ofprocessed seed. The processed seed are sold Rs 48 per maund in year 2, Rs 53in year 3, Rs 58 in year 4, Rs 63 in year 5 and Rs 68 from year 6 on.

PAKISTANSEED PROJECT

HARVESTING, PROCESSING, STORAGE AND DELIVERY PERIODS

MARCH APRIL MAY JUNE JULY AUGUST SEPT. OCT. NOV. DEC. JAN. FEB.

. ( '/(/Sow/ Ha.s J _____ I ..COTTON a -| _ .--Process_

WHEAT Process. . . . . ............ Store _7 7

SIND E g S

4Harvest

RICE - Process -_.,_____

Wew~~~~~~~1flllUlm Store -_~~~~~~~~~~~~~~~~~Strel

1 | . EHarvestB Harvest

OTHER I - ProcSim Process 1

) l = - Store 1 1 -r p:''' I~StoreStore: -

COTTON < Proes P l c |

store~~~~~~~~~~~~~tr

t 'I 1 1 1 -1IDeliver

PUNJAS II| | | | er// SowI? arvest

MAIZE _ Se__|Process_ -Store ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Store

( __________l l | M HarvestBOVER Process Store p

10~~~~~~~~~~~~~~~~~~~~~~~~-

PAKISTANSEED PROJECTSeed Processing

Cereal Flow Diagram

Fine Cleaning BaggingReception mwmso_Pre-cleaning mmmufo. Drying momoo-and omolo- Treating Wigin

Grading Wihn

WAREHOUSE

)~~~~~~~~~~~~~~~~~C

NB All handling and storage, pre-bagging and weighing, is in 2 ton capacity boxes (120 x 160 x 140 cm), IP thereafter on pallets. World Bar. -9776

PAKISTANSEED PROJECTSeed Processing

Cotton Flow Diagram

Baling Linter Cleaning

O~~ening/ ~~Ginning Sed st Cut 2nmo- d Cut Gradigf WeghinCleaning ~~~~~~~ ~ ~~Cening Delinting Delinting Treatingj.- -

WARE HOUSE

± eception

NB All storage is in bag. Pneumatic cunveya,)ce is used for seed cotton, liat. lit.ers and fuzzy seed.

w~~'~ Seed cotton ~~Delinted seed is conveyed mnechanically- .SFuzzy seed

aii maui Lont/lintersm Delirted seed

weld 13.nk-9776

ANNEX 5Page 1

PAKISTAN

SEED PROJECT

Quality Control

Introduction

1. Government's efforts in expanding the availability of agriculturalinputs such as farm machinery, water, fertilizer and pesticide, do not resultin the anticipated crop yields because much of the seed used by the farmersis poor in genetic and physical quality. The "green revolution" fueled byseed of imported high-yielding varieties has lost momentum because farmerscannot renew their seed from high-quality stocks. Everywhere the appraisalmission went during their field visits they encountered stories of yielddeclines - of 20% to 25% in wheat yields-because of seed quality.

2. In the renewed efforts to establish a modern and viable seed industryin Pakistan, it is impossible to overemphasize the need for an effective systemof quality control. Prior to 1962, seed production was the responsibility ofthe Department of Agriculture. Between 1962 and 1972, the Agricultural Devel-opment Corporation (ADC) played a major role in the efforts to establish theindustry. Since 1972, When ADC was liquidated, new organizations in theProvinces have taken over seed activities from ADC (Annex 1). Past effortshave failed to establish a reputable seed industry. Seed produced and dis-tributed by all these institutions has been of low quality - both physicallyand in genetic purity - thus creating an entrenched suspicion in the farmingcommunity as to the merit of purchasing seed produced by Government institu-tions. The proposed project could be made a success only by regaining lostconfidence, and that could be done only by making quality control the corner-stone of its development.

Present Situation

3. For a seed industry to operate effectively, certain institutionalarrangements are essential. There must be a policy-making body, a mechanismfor the registration (hence release) of new varieties, an agency equipped toundertake certification and, finally, there must be legislation to back theforegoing.

4. There is no formally recognized forum in Pakistan for the determi-nation of seed policy. It emerges ad hoc from the Federal and ProvincialGover=nents. In theory, variety release is handled by Provincial VarietyRelease Committees. Practice is more haphazard, with some unsuitablematerial "escaping" from Research Institutes (Annex 6). In any event, thescrutiny given to new material is inadequate. A further weakness of thepresent release method is its decentralization. The same material can,and does, emerge from different Provinces under different names.

ANNEX 5Page 2

5. Certification is the responsibility of the Seed Quality ControlOrganization (SQCO). This is a Federal body, a remnant of the ADC, whichis attached to the Agricultural Research Council (ARC) as a temporary ex-pedient. The SQCO has its headquarters at Lahore. It operates nine smallseed testing laboratories (including one at the Lahore headquarters) and afield inspection staff of nine Seed Certification Officers, one at eachlaboratory. It has one car and four 4-wheel drive vehicles. Much of thelaboratory equipment, and the vehicles, require replacement.

6. The SQCO is ill-equipped and understaffed for the work expectedof it, the greater part of which relates to the seed programs of ADC's suc-cessor organizations, of which the Punjab Agricultural and Supplies Corpora-tion is by far the biggest. In 1973/74, the SQCO was supposed to have in-spected about 170,000 acres of crops and analyzed samples from about 65,000tons of seed. With its present resources, these are impossible tasks. Thework cannot be done properly and the resulting "certified" seed is that inname only. Lack of an adequate quality control organization is a major con-tributor to the unsatisfactory state of the seed industry.

7. However, the present staff and facilities would be invaluable tobridge the gap in the early project period until improvements could be made.In particular, the staff are well trained, six of the Certification Officershave received overseas training, and they would form a sound nucleus on whichto build the larger National Seed Certification Agency needed to achieve proj-ect objectives.

Prolect Prooals

Legislation

8. The starting point for effective quality control of seed productionand distribution must be suitable legislation. This would be enacted atFederal level to ensure uniform procedures and standards throughout thecountry.

Uniform Standards

9. Safeguards for maintaining nationally uniform standards would beprovided in the legislation by establishing two national institutions - aNational Seed Council (NSC), and a National Seed Certification Agency (NSCA) -

in which all four Provinces would be adequately represented.

ANNEX 5Page 3

Seed Councils

10. Under the Seed Act, a Provincial Seed Council would be set up ineach of the Provinces. Each Council would have representation from:

Provincial Government,Department of AgricultureResearch Institutions

Provincial Seed Corporation,seed distributors,seed growers, andseed users.

The main functions of the Councils would be to advise Provincial Governmentson Provincial policy, to liaise with the NSC and to nominate Provincial rep-resentatives to the NSC.

11. The main functions of the NSC would be to:

advise Federal and Provincial Governments on seed industrypolicy of national significance;

make, and change as necessary, the Seed Rules;notify species;register varieties; andliaise with Research Institutes, the University and Colleges of

Agriculture.

Interests represented on the NSC would include:

Governments - Federal and Provincial;seed growers,seed trade,seed users,ARC,PCCC,NSCA, andRegistration Agency.

Variety Release

12. Establishment of a modern seed industry demands an effective varietyrelease mechanism, since without it certification is impossible. A Registra-tion Agency would be established as an executive arm of the NSC. The Agencywould be located at the National Research Center (NRC) to be established nearIslamabad. About 10 acres of land would be provided for pre-release trials.Since not all crops can be grown at Islamabad, some trials would also belocated at Provincial Research Institutes.

ANNEX 5Page 4

13. The project would finance the investment and initial operating costsof the Agency. Major investment items would be buildings, including a con-trolled environment store for seed samples of released material, farm machineryfor trials, and laboratory equipment. In addition, finance would be providedfor six months overseas training for the Director of the Agency. Details ofinvestment and operating costs are at Table 1.

National Seed Certification Azency (NSCA)

14. An independent Seed Certification Agency would be established atnational level. NSCA established under the Seed Act would operate in accord-ance with procedures and standards laid down in the Seed Rules (which inturn would accord with international practice. The NSCA would absorb thepresent staff and resources of the SQCO. Incremental investment and operatingcosts to expand the NSCA would be provided by the project. In addition theproject would finance two specialists, one in field inspection the other inseed analysis, to help organize the expansion of the NSCA, develop its facil-ities and train staff. Details of investment and operating costs are givenat Tables 2 and 3 and of technical assistance and training in Annex 7. Bythe end of the project period, it should be possible to finance the NSCA bya levy on the seed industry. This could probably be collected on the basisof the amounts of seed certified at the premises of Seed Corporations.

15. The NSCA would have its headquarters at the National Research Centertogether with the Registration Agency. It is proposed that the two share acommon building and field equipment. The NSCA would require about 10 acresof land at the NRC site for pre and post-control trials. Pre-control trialswould be conducted on all pre-basic seed, and post-control trials on randomsamples of basic and certified seed.

16. In Punjab and Sind, the field activity of the NSCA would centeron the four processing plants to be established. Offices and a laboratorywould be constructed for the NSCA alongside each plant. These units wouldbe under a Senior Certification Officer who would have a team of six Cer-tification Officers, for field inspection, and two Seed Analysts. Certifi-cation Officers would each be provided with a vehicle to give them the mobil-ity essential to their task.

17. It may not be possible to stop activity at all points now operatedby the SQCO outside the project area. In this event, work would continue,but in accordance with the new techniques and standards to be determinedby the NSCA. In particular, it is not proposed that the seed testing lab-oratory in Baluchistan be closed. The Certification Officer posted therewould receive special training to enable him to deal with vegetable seed,a need expected to emerge from the work of the pilot project. Two otherCertification Officers would receive special training in potato seed cer-tification. They would be posted one to Baluchistan and one to Punjab.

18. In addition to quality control responsibilities the NSCA would havestatutory responsibility for the analysis of samples of raw seed to determine

ANNEX 5Page 5

the basis of payment to seed growers. Field Inspectors would sample the cropat the farm. The sample would be divided into three portions - each placedin sealed plastic bags - one for immediate analysis, one for reference andone for the farmer. Analysis would be undertaken in the NSCA laboratoriesby the Seed Analysts.

14. Field operations of the NSCA would be supervised by the Chief SeedAnalyst and Chief Inspector who would travel extensively from their base atheadquarters. Should need arise, field staff would be moved temporarily toother areas to deal with peaks in the work load.

PAIaS TANh

SEED PYOJECT

Quality Control

CoBts of Registrmtion Agency

Total Fcardgn Ford gn

Unit Cost YTr I Tear 2 Year 3 Year 4 Toear tost lxzbange Nxobange

unit an NO. Rn No. Ha No. RS No. Rs No. Re RB J Rs

Officea '00 sq.ft. 10,000 - 4 40,000 4 40,0OO - - 80,000 15 12,000

Laboratory '00 sq.ft. 10,000 - 1 10,000 2 20,000 - - 30,000 15 4,500

Controlled environsent store sq.ft. 200 - 100 20,000 200 0,°000 - - 60,000 30 18,000

Office equipmnt andfurniture set 6,ooo - - 6 36,000 - - 36,ooo 20 7,200

laboratory eqtipmzt - - - - 25,000 - - 25,000 85 21,250

Field equipment aid tools 1/ - - - - 150,000 - - 150,000 70 105,000

Car Now 50,000 1 50,0DO - - - 50,000 50 25,000

Cooling/dehuuidifyingequipment _- - 3D,000 - - 30,000 85 25,500

Architecta feee - 8% ofbuilding cost - - - 5,600 8.ooo - - 13.6o0 5 680

Total Investment C<stB 125,600 349,000 - - 474,600 219,130

OPERLTIN3

UlarioDirector MoLn year 18,000 .5 9,000 1 18,0COO 1 18,000 1 18,000 1 18,000 d1,000 -

Technical Ausiutants "4,500 - 5 22,500 5 22,500 5 22,500 5 22,500 90,00 -D

Secreta y 3,600 - 1 3,600 1 3,600 1 3,600 1 3,600 1,400 - -

Clerks 2,800 - 1 2,800 1 2,800 1 2,Boo 1 2,800 11,200 - -

Driver 2,200 - 1 2,200 1 2,200 1 2,200 1 2,200 8,800 - -

Choakidare and peonB 1,500 - 3 4.500 3 4.500 3 140500 3 14,500 J000 - -

9,000 53,600 53,600 53,600 53,600 223,400

Ot)wr'fice eappliee - - - 15,000 15,000 15,000 15,000 60,OOQ0 20 12,000

Labgratory supplies - - - 10,000 10,000 10,000 10,000 40,006 20 8,000

Field operationa a/ Acre 1,500 - - 15 22,500 15 * 22,500 15 22,500 67,500 20 13,500

Vehicle running(12,000 ailes 0 Rs 1.00) No. 12,000 - 1 6,000 1 12,000 1 12,000 1 12,000 42,000 50 21,000

Travel arid ubsistene Office 12,000 - 1 6,ooo 1 12,000 1 12,000 1 12,000 42,000 20 8,400

Staff allownce( 40% ofsalaries) - - 3,600 21,440 21.440 21,1440 21,440 89.360 - --

3.600 58,440 92,9140 92,940 92,940 340,860 62,900

Total Operating Costs 12,600 112,040 146,540 146,540 146,540 564,260 62,900

I/ Half coat of small tractor, implents and toola. (See Table 2 )

i/ Includea allowance for trials concducted at Research Institutes on crops wdhich cannot be grown at Islamabad.

PAKISTAN

SEED PROJECT

Quality Control

Investment Costs of tin National Seed Certification Agency

Unit Total Foreign ForeignUnit Cost Year 1 Year 2 Year 3 Year 4 Cost ExchanRe Erchange

Rs No. Rs No. Rs No. Rs No. Rs Rs % Rs

Headouarters

Offices '00 so ft 10,000 - 10 100,000 10 100,000 - 200,000 15 30,000Seed testing laboratories " 10,000 - 6 60,000 6 60,000 - 120,000 15 18,000Store for reference samples " 10,000 - 5 50,000 5 50,000 - 100,000 15 15,000rarage/implement shed 3000 7 21,000 8 24,000 - 45,000 15 6,750Perimeter fence aile I ,000 - 7 10,000 - - 10,000 20 2,000Office equipment & furniture set 6,000 - - 13 78,000 - 78,000 20 15,600Laboratory equipment - - 180,000 - 180,000 85 153,000Field equipment & tool,-/ - - 150,000 - 150,000 70 105,0004 Wheel drtve vehicles No 50,000 1 50,000 - 1 50,000 - 100,000 ia 50,000Cars No 50,000 2 100,000 - 1 50,000 - 150,000 50 75,000Architects fees - 8% of

building coat - - - 18,500 14,700 - 37,200 5 1,860

Sub-total 150,000 259,500 760,700 - 1,170,200 472,210

Field

Offices '00 so ft 10,000 - 30 300,000 30 300,000 - 600,00 15 90,000Seed testing laboratories ' 10,000 - 12 120,000 12 120,000 - 240,000 15 36,000Store for reference smples " 10,000 - 10 100,000 10 100,000 - - 200,000 15 30,000Office equipment & furniture set 6,000 - - 44 264,000 - 264,000 20 52,800Laboratory equipmeat set 90,000 - - 4 360,000 - 360,000 85 306,0004 Wheel drive vehicles No 50,000 - 4 200,000 4 200,000 4 200,000 600,0U0 50 300,000Architects fees - - - 41,600 41,600 83,200 5 4,160

Sub-total - 761,600 1,385,600 200,000 2,347,200 818,960

Total investeent CcstE 150,000 1,021,100 L4Z 200,000 3,1,400 91,170

I/ All building unit Costs include allowance of 5% for site preparation and 15% for connection of services.2/ Half ceot of gall troctor, implements and tools, balance coated to Registration Agency.

ANNEXTable 3

PAKISTANx

SEED P?JCT

Quality Control

Omeratini Costs of Certification Asency

Unit Total Foreign Foreignunit Cost Year 1 Year 2 Year 3 Y"r 4 Year 5 Cost 2xchang. 2xch-nge

Re No. Rs No. Rs No. Rs No. Rs No. Rs Rs 2. RHead4uarters

Salaries

Director Kan-year 27,600 1 27,600 1 27,600 1 27,600 1 21,600 1 27,600 138,000Chief Seed Analyst- ' 18.000 .s I 1 1 9,000 1 18,000 27.000Senior Seed Analyst2. 12,000 1 12,000 1 12,000 .5 6,000 - 30,000Chief Field Ipectorl/ " 18,000 .S 1 1 1 9,000 1 18,000 27,000Senior Field Inspector- 12,000 1 12.000 1 12,000 .s 6,000 - 30,000Poset-control Trials Officr " 12,000 1 12.000 1 12,000 1 12,000 36,000Pathologist 12.000 1 12,000 1 12,000 1 12,000 36,000 - -Seed Analyst 9,000 2 18,000 4 36,000 4 36,000 4 36,000 126.000Technical Assistants (trials) ' 4,500 2 9,000 2 9,000 2 9,000 27,000Laboratory Aasistants 2.200 1 2.200 2 4.400 2 4.400 2 4,400 15,400Secretaries 3,600 2 7,200 2 7,200 3 10,800 3 10,800 3 10,800 46,800 - -Clerks 2,800 1 2,800 2 5.600 3 8,400 3 8,400 3 8,400 33,600Drivers " 2.200 3 6,600 3 6,600 5 11,000 5 11.000 5 11,000 46,200 - -Cho.kidars and peons 1,500 i3 4,500 3 4,500 10 15.000 10 15.oao 10 15;000 54o000 - -

S.b-total 48,700 95.700 170,200 176,200 182,200 673,000 -

Other

Office supplies - 15,000 25,000) 40,000 40,000 40,000 160,000 20 32,000Laboratory supplies - - - 10,000 20,000 20,000 20,000 70,000 20 14,000Field operations acre 1,500 - - 10 15,000 10 15.000 10 15,000 45,000 20 9,000Vehicle running (12,000 miles@C( 1. 00) No 12,000 3 36,000 3 36,000 5 60,000 5 60,000 5 60,000 252,000 50 126,000Travel and subsistence Officer 12,000 3 36,000 3 36,000 5 60,000 5 60,000 5 60,000 252.000 20 50,400Staff allowances (40. of salaries) 19,500 38.300 68.100 70,500 72.900 269.300 - -

Sub-total 106,500 .145,300 263,100 265,500 267,900 1.048,300 231,400

Field

Salaries

Senior Certification Officers Man-year 12,000 4 48,ooo 4 48,000 4 48,000 4 4B,000 192,000 -Certification Officers 9,000 _ 3 72,oCu 16 144,000 24 216,000 24 216,200 046,000 - -Seed Analysts 9,000 - i 36,000 8 72,000 8 72,000 8 72,000 252,000 - -Secrecaries ' 3,600 4- - 14,400 4 14,400 4 14,400 43,200 - -Laboratory Assistants 2,200 - - - 4 8,800 4 8,800 4 8,800 26,400 - -Clerks 2,800 - 4 11,200 8 22,400 12 33,600 12 33,600 100,800 -Drivers 2,200 - 4 8,800 8 17,600 12 26,400 12 26,400 79,200 - -Ch-wkidars and pesos 1,500 - 8 12,000 12 18,000 12 18.000 12 18.COO 66uoo0 -

Sub-total 188,000 345,200 437,200 437,200 1,407,600 -

Other

Office supplies No 10.000 - o 40 o,o 4 40°000 4 40,000 4 40,000 160,000 la 32,000Laboratory supplies No 10,000 _ 40,000 4 40,000 4 40,000 4 40,000 160,000 20 32,000Field operational/ _ - - - 12,000 12,000 12,000 36,000 20 7,200Vehicle running (12,000 miles'a Rs (.00) No 12.000 - 4 48,0o0 8 96,000 12 144,000 12 144,0O0 432,000 s0 216,000Staff allovances (40% of salaries) _ 75,200 138,080 174.880 174,880 563.040 - -

Sub-total - 203,200 326,080 10,880 410,880 1,351,040 287,200

TOTAL OFXLATING COST 155,200 632,200 1,104,580 1,289,780 1,298,180 4,479,940 518,600

1/ First three an-years costed under Technical Assistance, - Annex 7.2/ Position dropped after withdrawal of Technical Assistanca personnel. incumbents presumed promoted.31 For post-control trials conducted at Research Institutes on crops which cannot be grown at Ialamabad.

ANNEX 6Page 1

PAKISTAN

SEED PROJECT

Research and Pilot Projects

1. Project involvement in the field of research would be limited.There is available sufficient varietal material of the major crops (wheat,cotton, rice, maize) on which to develop the seed industry. The priority,task must be to reap the benefits of research done, by disseminating theoutput of plant breeders. Also two major aid programs are under way toimprove the general research effort. USAID is supporting a US$20 M programto improve Federal and Provincial research capabilities while UNDP issupporting the development of the Pakistan Central Cotton Committee's (PCCC)Research Institute at Multan.

2. The project would finance the purchase of equipment to improve pre-basic seed production at Research Institutes. In addition the project wouldfinance two pilot projects to determine the feasibility, and best methods,of vegetable and potato seed production. Prospects for both look excellentbut data are lacking. The need is for field scale testing of production andprocessing techniques and farmer capabilities, rather than pure researchwork.

Background

3. Agricultural research is the responsibility of the Provinces andis carried out at their Research Institutes (those of concern to the projectare listed in the Appendix). The research capability of Federal agenciesis limited, with the exception of PCCC's Cotton Research Institute at Multan,discussed below (para 6). National planning for, and coordination of,agricultural research are tasks of the Agricultural Research Council (ARC).A limited amount of research is carried out by the University of Agricultureand Colleges of Agriculture.

4. In 1973 a joint Pakistan-American team reviewed agriculturalresearch in Pakistan. t/ Major observations were:

1/ Agricultural Research in Pakistan, Report of the Second Joint Pakistan-American Team. Islambad, March 1973.

ANNEX 6Page 2

(i) agricultural research generally in Pakistan has not beenimproved significantly in the past five years;

(ii) there is need for clarification of the role and responsibilityof the Central Government with respect to agriculture andparticularly with respect to agricultural research;

(iii) there is need for increased support in terms of funds,scientific manpower, equipment, etc.;

(iv) there is opportunity for improvement of research throughbetter consolidation and use of existing resources; and

(v) there is need for a change in attitudes on the part ofinstitutions and individuals concerned with research ifcloser cooperation and effective coordination are to beachieved."

5. Based mainly on this review USAID is supporting a major program,costing US$20 M over 5 years - 74/79 - to improve Pakistants researchcapability. A major objective of the program will be to develop ARC'scapabilities. The program's funds will be channeled through ARC. ARC willbe staffed to provide the kinds of expertise individual Institutes couldnot justify. A National Research Center will be developed (near Islamabad)at which ARC staff will undertake research in fields not covered by Pro-vincial programs. The program will also improve research facilities atProvincial Institutes, the University and Colleges of Agriculture. It alsoincludes a large man-power training component. Under the program a majorweakness of the past, inadequate operating funds, will be remedied. Prior-ity will be given to researching problems of major food and export cropswith emphasis on adaptation of importable technology.

6. Cotton research is carried out at Provincial Institutes and atPCCC's Cotton Research Institute at Multan. The PCCC, an autonomous bodylocated in the Federal Ministry of Agriculture, is the forum for nationalcoordination of cotton research and is the channel for Federal funds tosupport cotton research in the Provinces. UNDP is supporting the work ofthe Cotton Research Institute. When the appraisal mission was in the fielda one year project was being implemented. Its objective was to prepare alarge scale UNDP/FAO project to improve cotton research. The larger pro-ject's major components would be provision of equipment, technical assist-ance and manpower training.

7. In addition to the USAID and UNDP programs, mention must be madeof the valuable aid given to cereal research by the international centers.The Ford Foundation is currently funding the work of three CIMMYT scientists.One is advisor to the coordinated wheat research program, centered mainlyat Lyallpur, Tandojam and Tarnab. The other two are advisors to the maizeand millet program based mainly at Pir Sabak and Yousufwalla. Rice researchbenefits greatly from the supply of breeding material and technology fromIRRI.

ANNEX 6Page 3

8. Given the magnitude of present and planned assistance to Pakistan'sagricultural research effort there is neither the need, nor the absorptivecapacity, for a major research component in this project. However, tworelated weaknesses in the present research effort, common to all major crops,are of concern to the project. In the absence of a reliable seed industry,plant breeders have attempted to spread the benefits of their work bymultiplication and direct distribution of seed to farmers. The motivationand obJective are understandable; plant breeding per se is pointless, itmust be backed by seed multiplication and distribution. However, theresults are unfortunate.

9. Plant breeders have attempted to produce quantities of pre-basicseed beyond their capabilities - to compensate for lack of a subsequentmultiplication system. The quality of this, most critical, generation hassuffered. To augment supplies, seed from the randomized plots of varietytrials has been released as pre-basic seed; this is unsatisfactory. Theappraisal mission interviewed one first class farmer, who had a technicalbackground, and who had obtained wheat seed from a Research Institute; heclaimed to have had to rogue out 10% off-types from the crop which he wasgrowing for seed.

10. Because of the development of the practice of direct seed distri-bution by Research Institutes it has become commonplace for farmers to retainseed from trials grown on their farms. These are often micro-plot varietytrials containing material in the last stages of testing before officialrelease. Thus farmers can obtain and multiply seed of varieties which proveunsatisfactory and are never officially released. Particular problems areknown to have occurred with cotton in this respect. Much greater attentionis needed to the method of pre-basic seed production, its handling, thecontrol of seed from off-station trials and seed release from ResearchInstitutes.

11. Minor vegetable and potato research programs are conducted inNWFP, Punjab and Sind. They are of indifferent quality. The researchsuffers from the major problem of the farmers, lack of good quality seed.Potato trials seen by the appraisal mission were heavily infected by virusdisease; vegetable trials seen at Quetta were clearly grown from hetero-genous seed derived from inadequately isolated plots. Plant breeding hasmade little headway and major reliance is placed on imported varietalmaterial.

12. Reliance will continue to be placed on imported varietal material.This is acceptable. A plant breeding breakthrough can wait. The priorityproblems are to determine the feasibility and best methods of vegetable andpotato seed production, hence the proposed pilot projects.

ANNEX 6Page 4

Project Proposals

Pre-basic Seed Production

13. Pre-basic seed of impeccable quality would be essential to thesuccess of the proposed project, hence of the development of Pakistan's seedindustry. Pre-basic seed would be produced at the Research Institutes underthe control of the plant breeders responsible for the various crops. Thequantities of pre-basic seed required by the project are given in Annex 2,Table 2. The seed would be produced in areas set aside for the purpose, itwould not be taken from the yield of trials. The seed could be grown froma bulk of seed established in the immediate pre-release trials or by annualear to row multiplication. If the former, the bulk could be stored in thecontrolled environment stores of the Provincial Seed Corporations.

14. Pre-basic seed must be produced two years ahead of the certifiedseed crop for which it will give rise - or three years including pre-controltesting. Immediate action is, therefore, necessary to improve pre-basic seedproduction in readiness for the project's first certified crop.

15. The Institutes would be required to produce about 150Z of antici-pated requirements one year in advance. 1/ The seed would be stored in thecontrolled environment stores of the Corporations. A sample of the seedwould be grown in a pre-control trial by NSCA. Only seed of satisfactoryquality would be used to produce basic seed, hence the need to grow 150%of seed to allow for rejections. A 50% margin is considered adequatesince for most varieties there could be inter-Provincial cooperation tomake up short-falls. The margin would also safeguard against physicalcalamity resulting in loss of crop. The need to assure a reliable supplyof quality pre-basic seed cannot be overemphasized.

16. In order to produce a quality product and safeguard the future ofthe seed industry, the Research Institutes should confine their seed produc-tion activities to meeting the needs of the Seed Corporations. Seed produc-tion for distribution to farmers should cease. In addition control shouldbe maintained over the yield of trials grown on farmers' fields. Farmersshould not be allowed to retain these for seed.

17. Pre-basic seed must not only be grown with care, it must be handledwith care. The Research Institutes now lack equipment to handle pre-basicseed adequately. The project would, therefore, finance a range of laboratoryscale seed processing equipment for the Institutes. This is detailed atTable 1.

1/ To minimize the work burden on plant breeders, where the acreage ofcertified seed to be grown would be large, as for wheat in Punjab,the Corporation would produce two generations of basic seed.

ANNEX 6Page 5

Vegetable Seed Pilot Project

18. Baluchistan has areas well suited to the production of seed of thetemperate varieties of vegetables grown in Pakistan. The project wouldfinance the development of a 70 acre farm and small vegetable seed process-ing plant in the vicinity of Quetta. These would aim to establish appropriatemethods of seed production and processing and their technical and cost para-meters. Market information would also be gained. The objective would be tolay the foundations for the re-vitalization 1/ of the vegetable seed industryin Baluchistan based on a commercially viable processing plant and contractseed growers. Varietal material for multiplication would be imported. Theproject would not finance plant breeding research. Pilot project outputand its relationship to the national vegetable acreage is shown at Table 2.

19. Land for the farm and plant would be made available by the Govern-ment. About 70 acres would be required to allow for a cultivable 50 acres,plus buildings, etc. A suitable site has not yet been finalized. This wouldbe done in consultation with IDA.

20. Details of investment costs, Rs 1 M, are given in Table 3.Operating costs are detailed in Table 4. Project costs would include thefirst three years operating costs, Rs 0.37 M, after which they would becovered by revenues (Table 5). In addition the technical assistance componentof the project would cover the costs of the Director of the pilot project,of a vegetable seed processing specialist and of engineering services tosupervise development works.

21. The Project Director would be a specialist in vegetable seed pro-duction. He would be employed for the full project period. The processingspecialist would visit the project intermittently, to plan the processingplant and then to run it and train staff in its operation.

22. Project activity would be limited initially to a narrow range ofcrops to reduce management problems. Suggested crops and an outline croppingpattern are given in Table 7. Care would have to be taken to choose onlyspecies of which simple varieties suitable for multiplication were available.In the past, attempts have been made to multiply seed of European origin onlyto discover that it was of hybrid breeding and therefore useless for thepurpose. In the early stages of development there should be no question ofattempting to produce hybrid vegetable seed. The Project Director woulddesign and conduct trials, in collaboration with the Agricultural ResearchInstitute at Quetta, to determine the most suitable varieties for propaga-tion. Quality control would initially be a matter for project staff. Howev-er, a Certification Officer of the Seed Certification Agency would be trainedto hand- vegetable seed in preparation for the time that fully commercial

1/ Many years ago the industry was well established and Baluchistan exportedseeds mainly to India. The industry declined after partition.

ANNEX 6Page 6

operations were launched. Towards the end of the project period, providingresults on the pilot farm had been satisfactory, an attempt would be madeto expand seed production through contract growing.

23. The project would operate initially as a unit within the ProvincialMinistry of Agriculture, with the Project Director responsible to the Direc-tor of Agriculture. Later, if the technical and commercial feasibility ofthe venture were established, it would be handed over to the BaluchistanDevelopment Authority for expansion. Development of the project farm wouldbe carried out by the Agricultural Engineering Department. The limitedbuilding program could be undertaken by the Ministry of Works or localcontractors.

Potato Seed Pilot Projects

24. About 50,000 acres of potatoes are grown in Pakistan. Most, about40,000 acres, are grown in the plains as spring and autumn crops. The bal-ance are grown as a sumier crop in the hills, mainly of NWFP. Poor seedquality drastically reduces yields below the potential of present varietalmaterial and husbandry standards. The main problem is virus diseases,chiefly leaf roll.

25. Limited amounts of good seed are imported, usually from Europe.However, these are small relative to total needs (in the range 1-52) and thebulk of seed used is degenerate material from successive generations exposedto virus infection. Because storage is lacking there is a 'cycle' of potatoseed. Seed is taken from the spring plains crop for the autumn crop, fromthe autumn crop to the summer hills crop and then back to the spring cropto complete the cycle. Poor storage compounds the seed degeneration causedby virus diseases.

26. Imported seed is used for the spring plains crop. Unfortunatelythis is the worst season for aphids, hence spread of virus diseases. In theabsence of adequate insect control imported seed is thus subject to immediateheavy infection.

27. In theory Pakistan has the ecological zones to establish seed potatoproduction on lines similar to the United Kingdom, with seed produced in thehills, in aphid free areas, and supplied to the plains for the commercialcrop. The pilot project would set out to test four approaches to potatoseed production.

28. Program 1 would examine the feasibility of reducing reliance onimported seed by repeated multiplication of seed in the high hills (7,000-8,000 ft). This would be a on a trial plot basis only. Successive genera-tions of seed would be grown in trials in the middle hills, (around 5,000 ft)and plains, to check for degeneration.

29. Program 2 would examine on a field scale the feasibility of multi-plying imported seed, first on the high hills, then in the middle hills toproduce seed for commercial crop in the plains. A feature of this program

ANNEX 6Page 7

would be to grow an early crop in the middle hills to supply seed for theplains autumn crop. The normal hill crop is harvested too late to supplythe autumn crop. However, by planting early, in March/April, and liftingin June/July it should be possible to supply seed for the autumn crop andthus reduce the need for seed storage. A small portion of the autumn cropgrown under this program could be tested for its suitability for carryover,in cold store, for the following autumn. Being third generation seed itmight not be suitable, hence the proposed trial on a small scale only.

30. Program 3 would attempt to establish, on a controlled basis, themultiplication pattern already practiced to some extent. Imported seed wouldbe grown in a plains spring crop with good insect control. This crop wouldsupply seed for the following autumn and spring crops. Most of the seedwould be used for the autumn crop which, when lifted, would be placed incold store to supply seed for the following autumn.

31. Program 4 would combine parts of programs 2 and 3.- Imported seedwould be multiplied first in the middle hills then in the autumn plains cropto be cold stored for the commercial crop in the following autumn. The pro-gram would test an alternative, that might be necessary, if it proved Im-possible to induce an adequate nuiber of the very small farmers in the highhills areas, to produce seed under controlled conditions. Details of theseprograms, with seed flow diagrams, are given in Table 7.

32. Programs 2, 3 and 4 would be operated on a field scale using con-tract growers who would be paid a 25% premium for seed. Performance wouldbe closely monitored to ascertain yield levels for different seed generationsand sources, and to obtain yield and cost data. Market information wouldalso be obtained. For the purposes of project estimates it has been assumedthat seed produced under the project would sell at Rs 100 per maund. This is2-1/2 times the price of ware potatoes but considerably below the cost ofimported seed for which there is strong demand.

33. The project would finance the import of seed and the provision ofphysical facilities and equipment. The major investment would be a coldstore and grading shed, with a 1200 ton capacity. This would be located nearSialkot in Punjab. A smaller store (conventional not cold) and grading shedwould be built in the middle hill areas in NWFP (near to Madyan) and inBaluchistan (near to Avetta). Details of investment and operating costs aregiven at Tables 8, 9 and 10. Project costs would include the first threeyears of operating costs plus the initial purchase of seed from farmers, afterwhich the project would be self-financing. Project costs for the potatopilot project would be about Rs 10.5 million.

34. The projects would operate in two sections within the Departmentsof Agriculture of Baluchistan and Punjab. However, to ensure the coordinationessential to success, and to provide expertise now lacking in Pakistan, anoverall Project Director would be provided under Technical Assistance. Hewould be a potato specialist. (Qualifications and job description are given

ANNEX 6Page 8

in Annex 7.) He vould be assisted by an Assistant Project Director in eacharea who vould be responsible for day to day management. The AssistantDirector stationed in NWFP would cover both middle and high hills from hismiddle hill base. Two Certification Officers of the Certification Agencywould be trained in seed potato certification and would be responsible forthis activity.

35. Later in the project period, if warranted by results, an attemptwould be made to form farmer associations to take over the operation of thestores and organization of production.

ANNEX 6Appendix

PAKISTAN

SEED PROJECT

Research and Pilot Projects

Research Institutes

Institute Functi on

Fedexal Government National Research Center (to be developed)(Agricultural Research Provincial Research Institutes. Undertake

Council) research in fields not adequately coveredby Provinces eg. dry land farming.

NWFP Tarnab Nain station responsible for all crops.Pir Sabak Maize, sorghum and millet sub-station.

Pmjab Iallpur Main station responsible for all crops.Kala Shan Kaku Rice sub-station.Sialkot Potato sub-station.Yousufwalla Maize, sorghum and millet sub-station.Multan Cotton Institute (operated by PCCC).

Sind Tandojam Main station responsible for all crops(except rice).

Dokri Rice Institute.

Baluchistan

Quetta Vegetables.

ANNEX 6

Table 1

PAKISTAN

SEED PROJECT

Eqmipment for Research Institutes Prodmcing Pre-Basic Seed i/

Item Unit Cost No. Total Cost Foreign ForeignRs Rs Exchange Exchange

% Rs

Single ear thresher 2/ 12,000 18 216,000 85 183,600Trial plot planter 37 41k,000 9 369,000 85 313,650Trial plot combine 3/ 168,000 9 1,512,000 85 1,285,200Laboratory clipper T/ 27,500 6 165,000 85 140,250Laboratory air

screen cleaner 4/ 65,000 6 390,000 85 331,500Laboratory indentel

cylinder 4/ 35,000 6 210,000 85 178,500Laboratory gravity

separator 4i 34,000 6 204,000 85 173,400Concrete drying

floor 5/ 10,000 1 10,000 15 1,500Laboratory gins 6/ 40,000 6 240,000 85 204,000Laboratory openers 10,000 3 30,000 85 25,500

Total 3,316,000 2,837,100

1/ In NWdFp, Tarnab and Pir Sabak; in Panjab, Lyallp, Kala Shah Kukuand PCCC's Maltan Station; in Sind, Tandojam and Dokri.

2/ Four each at Tarnab, Lyallpur and Tandojam, two at Pir Sabak, Kala Shah Kakuand Dokri.

3/ Two each at Tarnab, Lyallpur and TandoJam, one at Pir Sabak, Kala Shah Kakuand Dokri.

hi One each, except IMultan.

5/ Kala Shah Kaku only.

6/ Two gins and one opener for each of Lyallpur, Miltan and Tandojam.

ANNEX 6Table 2

PAKES TAN

SEED PROJECT

Research and Pilot Projects

Pilot Project Vegetable Seed in National Context

Project,/ Seed Area Sown NationalOutput - Rates Project Seed Area

Crop Mds. Acr/Md Acres Acres

Cabbage 25 80 2,000 4.,900Carrot 25 5 125 7,160Cauli-flower 25 80 2iOOO 6,,460

Cucumber 25 27 -675 20,150Peas 100 0.8 80 8,600Radish 15 13 585 5,450Spinach 45 4 180 7,4ooTurnip 35 27 945 24,600

6.59o 20 2/

L/ At fill production

2/ Project Seed will cover 8% of the area of the crops involved.

AXR 6TabLe 3

SB1D ?MJZCT

Research and Pilot Pro4ecta

Inyestint Costs of Vegetable Seed Project

Foreign Fcr t 2gn0V.t Unit oat Total Cost Exchange 3hxcange

NO. Rs % Re

Irrization

")ubowell 2/ No. 50,000 1 50,000 75 37, 00Reservoir No. 20,000 1 20,000 20 4,1ooLend develoPnet 3/ Acre l,f00 50 75,000 10 7 S00

Sub-totAl 145,000 49,100

Farm Machiner

,"ractor (45 HP) NO. 55,)00 1 55,000 80 4&,000Plov - 2 furrow n 15,000 1 15,000 80 12,000

revuaible n/bDisc harrow W n 4,000 1 4,000 50 2,000Cultivator ,n 4,OO 1 4,000 50 2,100Ridger V ' 3,000 1 3,000 50 1,500Seed drill.-djoUble

for weg. need 20,000 1 20,000 80 16,000Thresher-ad hetabl e

for veg. seed n 50,000 1 o,o000 80 40,000Sprayer-motor 4/ 5,000 1 5,000 50 2,500Trailer 4/ 12,000 1 12,000 50 6,000Sll tools - -- - 10,000 50 5,000Sparee - / - -- - 35,00 80 28,000

Sub-total 213 ,000 159 ,no

Procwaing 31it

Clipper NO. 27,500 1 27,500 85 23,400Cleanr and grader n 6s,ooo 1 65,000 85 55,250IrAdented cylinder 35,000 1 35,000 85 29,750Gravity s rator 34,n)0 1 34,000 85 28,io00Scales 2,000 3 6,000 85 5,100Seed treater 8,COO 1 8,000 85 6,oO0Heat sealizg .acim 5,000 1 5,000 85 4,250lMiscellaneous - - 10,000 50 5.000

Sub-total 190,500 158,400

Suildiris

Phceasing hasl and stare '00 sq.ft. 10,000 20 200,000 15 30,000Offices 10,000 10 100,000 15 15,000Inlmant shed l,QO 5 15,000 15 2,250Farm store 5,000 5 25,000 15 3,750Comcrete surroumn 1,400 20 28,000 15 4,200Architects fees - 8% of

building cost -- - 294o00 5 1.500

Sub-total 397,400 56,700

Vehicle me. 50,000 1 50,000 50 25,000Office equiS; Sot 6,000 7 42,000 20 8,400Trenamdasion line ISle 45,000 1 45,00 80 36000

Sub-total 137.000 69.4oo

Total Investment Costa 1,082,900 492,500

V Pdyezg aswd - 60d in ymr 2, 40% in yer 3.

2/ Fr Annex 3, Table 2.

I/ Chamels 6,000 ft 0 Re 7.501 reeds 6,000 ft 8 Rs 30; lelling (mainly fine) 50 aca 9 Rs 240.

Itet of local manufactwr, otbar euipt *ane d imported.

10% witA p a of iperd items in year 2 (asamed for sizplicity) and 5% for each ofy~e3, =aad5

ANNEX 6

UAM h;bl * 1

SD FJCT

F_Bearch and Pilot Projictg

OCgtJU Coat of VYS.otabl 8.3d PnJmot

Total Ford gn For eign,ear 1 Tear 2 T"r 3-5 Cost inhaage fchange

Ua UEL*l C io* Re N. is oc. Ba Re Rt

Proje,ot liretar I/ Non Tier - .5 - 1 - I1As nt Director 12,000 .5 6,000 1 12,000 1 12,000 54,ooo

Processing Conultant l/ - .5 - .5 .5 -

Processing Superinteadent n 9,000 .5 4,500 1 9,000 1 9,000 lo,500Farn Suprintendent 9,000 .5 4,500 1 9,000 1 9,000 40,5s0Accountant 9,000 - - .5 k5.D0 1 9,000 31,500Secretax7 3,600 - - .5 180O0 1 3,600 12,600Artisan/nechanj,c for plant 2,200 - - - - 1 2,200 6,600Drivers 2,200 - - 1 2,200 2 4,400 15,400Farm labor 1,500 - - 3 4,500 3 4,500 18,000Plant labor 1,500 - - 2 3,000 2 3,000 ' 12,000 - -Peons and Chovkidars 1,500 - - 3 4,5oo 6 9,000 31,500Clerks n 2,000 - - 1 2,800 2 5.600 19.600

Sub-total 15,000 53,300 71,300 2d2,200

Farm

ctorwll 2/ 1ch0 3hours 11 6 1 Jo0' 602 21,r 77 000 50 38,50TructorAna -7 oOOb 300 ~ ~ 91 33,600 50 6,o

iqnpits,_V ( cr, 350 - - 25 8,750 50 17,500 61,250 50 30,600Caa1l labor '00 1In das 700 - - 7 4.900 15 10.5 64 - -

Sub-total, 29,450 59,600 208,25o 65,900

Plant I rat±on arx aairtenance - - - - - 4oo 15,000 os,o 20 9,000

Sacks packing aterials - - - - 15 000 000 20 9o000

Sub-total 30,000 90,000 18,000

Other

Staff allowances (43% of salary) - - 6,ooo 21,300 - 28,500 112,800 - -Ba1uding maintenance (214) - - - - - -- - 9,900 29,700 - -Office supplies - - - - - 7,500 - 15,000 52,500 20 10,500Vehicle enning

(10,000 wlas Rs 1.0) No 10,000 - - 1 10,000 1 10,000 4o0 50 20.000

Sub-total 6,000 38 800 634,0o 235.000 34 500

Total Operating Costs_ 21,000 11,550 224,300 815,450 13h 400

1/ Coated in Tecdical Assistance, A- 7.

Based on Annex 3, "able 2 ith depreciation omtt3d.

5/ Based on Amex 3, Table I wiLth depreciation oitted.

!/ Fertilizer 3 bags S Rs 75; pestcide Rts 5O; need Rs 50J; misceilammam R 25.

I/ Project Costa would include firet three yea" opatirg costa.

PAKISTAN

SEED PROJECT

Research and Pilot Projects

Vegetable Seed Production and Sales

Yield Production Price,/ RevenueMaund/ Year 3 Year 4 and on R/ Year 3 Yer 4 and onAcre --- maunds----------- Maund --------'000 Rs------------

Cabbage 5 25 25 1,200 30 30Carrot 5 - 25 1,200 _ 30Cauliflower 5 25 25 3,000 75 75Cucumber 5 25 25 3,500 87.5 87.5Peas 20 100 100 500 50 50Radish 9 45 45 1,200 54 54Spinach 9 45 45 1,200 54 54Turnip 7 _ 35 1,200 - 42

422.5

1/ Assumed ex-plant price based on retail prices in Quetta at time of appraisal.

VI 0

ANNEX 6Table 6

PAKISTAN

SEED PROJECT

Cropping Pattern of Vegetable Seed Farm

Year 2 Year 3 Year 4 Year 5

Cabbage 5 5

Carrot,/ 5 10 10 10

Cauliflower 5 5 5 5

Cucumber 5 5 5

Peas 5 5 5

Radish 5 5 5

Spinach 5_. 5 5

Turnip4 15 10 10 10

Nursery

1/ Numbper of acres.

2/ Biennial seeding,hence double acreage.

PAKIS TAN

SEED PROJECT

Research and Pilot Projects

Potato Seed Programs V

Gener- Project Seed Seed Seed Acres Anrualation Tears Season Location Source Amount Rate Planted 4ield Production

(tons) (tons/acre) (tons/acre) SeedWDsre LOu mIHIH

----- - - - - - - - - - - - - - - P R O C H a H I - - - -------------------Imported Seed

1 2,3,4,5 uuner high hill import 1.2 0.6 2 6 8 4 42i 3,4,5 summer high hiL-i 1 3.0 o.6 5.0 6 20 10 ) |2ii 3,4,5 summer middle hill 1 3.0 0.6 5.0 7.5 24 12 m HH P2iii 3,4,5 autumn plains 1 4.6 0.9 5.0 7.5 24 123i 4,5 summer high hill 2i 3.0 0.6 5.0 6 20 103ii I 4,5 mummer middle hill 2i 3.0 0.6 5.0 7.5 24 12 ) HH HH P3iii 4,5 autumn plains 2i 4.6 0.9 5.0 7-5 24 124i 5 sunmer high hill 3i 3.0 0.6 5.0 6 20 104ii 5 summer middle hill 3i 3.0 o.6 5.0 7.5 24 12 ) HH- IP4iii 5 autumn plainis 3i 4.6 0.9 5.0 7.5 24 12

- - - - - - - - - - - - - - - - - - - P R O tl R A M II - - - - - - - - - - - - - - - - - - - - -Impor ted See

1 2,3,14,5 summer high hill import 12 o.6 20 6 80 40 H12i 3,4,5 spring middle hill 1 60 o.6 100 6 400 200 ) MR (ppring) > H (sunmer)2ii 3,4,5 summer middle hill 1 60 o.6 100 7.5 500 250 4 - 4'3i 4,5 autumn plains 2i 400 0.9 445 7.5 3,300 P (autumn) P (srirg)3ii 4,5 spring plains 2ii 500 o.6 d30 7.5 6,200 J j4 5 autumn plains 3i 90 0.9 100 7.5 750 P (autumn)

- - - - - - - - - - - - - - - - - - - P R OG R A M III - - - - - - - - - - - - - - - - - - _Imported Seed

1 2,3,4,5 spring plains import 15 o.6 25 8 130 70 i P (spring)2i 3,4,5 autumn plains 1 130 0.9 145 7.5 700 350 ) P (auP (spirg)2ii 3,4,5 spring plains 1 70 0.6 115 7.5 8603 4,5 autumn plains 2i 700 0.9 775 7.5 5,d00 P (autumn)

- - - - - - - - - - - - - - - - - - - P R OG R A M IV-

ii 2,3,4,5 spring middle hill import 10 o.6 15 6 60 30 MH (spring g)4D Imported Seed MH (summer)lii 2,3,4,5 2ur.s',er middle hill import 10 0.6 15 7.5 70 352i 3,4,5 autumn p?.ains li 90 0.9 100 7.5 500 250 ) P (autumn) P (sprirg) ")2ii 3,4,5 spring plains lii 105 o.6 175 7.5 1,300 ) 1{3 4,5 autumn plains 2i 320 0.9 350 7.5 2,600 P (autumn)

V For both NWP' and Baluchistan. Acreages and quantities are equally distributed between these two provinces.

PAKISTAN

SEED PROJECT

Research and Pilot Projects

Investment Costs of Potato Seed project)]

Foreign ForeignUnit Unit Cost Total Coet Exchange Exchange

Re No. Rs % Rs

Project Director's Office

4-Wheel drive vehicle No. 50,000 1 50,000 50 25,000Office equipment - 15,000 30 4,500

Sub-total 65,000 29,500

Punjab (Plains)

Buildings

Cold store and grading shed '00 sq. ft. 20,000 90 1,800,000 30 540,000Offices 10,000 6 60,000 15 9,000Garage and store " 40,000 5 200,000 15 30,000Hard standing 1,400 1GO 140,000 5 7,000Wall to compound '00 ft. 3,000 10 30,000 5 1,500Architects fees - 8% of - 178,400 5 8,900building cost

Sub-total 2,408,400 596,400

Equipment

Weighbridge (20-ton) No. 170,000 1 170,000 85 144,500Conveyors No. 30,000 1 30,000 85 25,500Grader (5-ton per hour) No. 200,000 1 200,000 85 170,000Scales No. 5,000 2 10,000 85 8,500Cooling equipment - - 1,000,000 85 850,000Office equipment Set 6,000 5 12,000 20 2,400Sprayers - tractor mounted No. 12,000 2 24,000 80 19,200Small tools and equipment - - 20,000 50 10,000

Sub-total 1,466,000 1,230,100

Transport

4-Wheel drive vehicle No. 50,000 1 50,000 50 25,000Tractor (45 HP) and trailer No. 67,000 1 67,000 75 50,250

Sub-total 117,000 75,250

Continued on page 2/..

PAKISTAN

SE$D PROJECT

Research and Pilot Projects

Tnvestenlt Oosts of Potato Seed Project!/(continumifrom Page 1)

NWP and Baluchistan - Niddle Hill

Buildings

Stores and grading shede '00 sq. ft. 6,500 60 390,000 15 58,500

Offices " 10,000 a 80,000 15 12,000

Houses 6,000 40 240,000 15 36,000

Garages and store 4,000 8 32,000 15 4,8ooHard standings 1,400 80 112,000 5 5,600

Architects fee - 8X - - - 68,300 5 3'4°°

Sub-total 922,300 61,800

Equipment

Graders(3-ton per hour) No. 120,000 2 240,000 85 204,000

Scales No. 5,000 2 10,000 85 8,500

Office equipment Set 6,000 4 24,ooo 20 4,800Small tools and equipment - - 15,000 50 7,500

Sub-total 289,000 224,800

Transport

4-Wheel drive vehicle No. 50,000 2 100,000 50 50,000

NWFP and Baluchistan - High Wall

Buildings

Office sq. ft. 100 300 30,000 15 4,500Grading shelter 30 1,000 30,000 15 4,500Store 65 800 52,000 15 7,800House 60 1;200 72,000 15 10,800

Hard standing '00 sq. ft. 1,400 80 112,000 5 5,600Architects fee - 8% - - 23,6 5 1180

Sub-total 319,600 34,380

Equip-ent

Office equipment Sot 6,000 2 12,o00 20 2,400

Scales No. 5,000 2 10,000 as 8,500Tools and equipment - - - 10,000 50 5,000

Sub-total 32,000 15,9oo

TOTAL INVESTMXNT COSTS 2,318,130

/ Phasing Year 2, 60%; Year 3, 40%. For the middle and high hill prograas, the costs are equally aharedby NWFP arnd Baluchistan

PAKIS TA N

SEED PHWJECT

Research and lot Pro lects

OperatilK Coats of Potato Seed Project

Total Poreign Foreign

Unit Cost Year 1 Yaar 2 Year 3 Year 4 Tear 5 Coat Exchange Exchange

Urit _ fi No. Ha No. ls No. aie No. la No. Rl Ha Reg

Project Director's Office 1/

SalariesroJect Director 2/ Man-year .5 - 1 - 1 - 1 - 1 - - -

Accountant 4,50O .5 2,250 1 4,500 1 4,500 1 4,500 1 4,500 20,250D

Clark/typist 3,000 .5 1,500 1 3,000 1 3,000 1 3,000 1 3,000 13,500

Driver 2,200 .5 1,100 1 2,200 1 2.200 1 2,200 1 2,200 9.900 - -

Sub-total 4,850 9,700 9,700 9,700 9,700 43,650

OtoerStaff allowances

(40% of salary) - - - 1,940 - 3,880 - 3,880 - 3,880 - 3,880 17,460 -

Vehic le running(15,000'm/s 14Rs 1.0) No. 15,0O0 .5 7,500 1 15,000 1 15,000 1 15,000 1 15,000 67,500 50 33,750

Office rent ard supplies - - - 10,000 - 25,ooo - 25,000 - 25,000 - 25,ooo 110,000 10 11,000

Travel and subeistexte - - - 6,O0O - 12,000 - 12,W000 - 12,000 - 12,000 54,000 20 10,800

Imported seed-commercial Ton 3,5ou - - 35 122,500 35 122,500 35 122,500 35 122,500 490,000 90 441,000

-low virus Ton 7,0Do - - 13 91000 13 91,000 13 91.000 13 91,000 364 000 90 327 600

Sub-total 25,440 269,380 269,380 269,380 269,380 1,102,960 824,150

Punjab (Plairs)

Salaries21i~ Stant Project Director Man-year 12,000 .5 6,000 1 12,000 1 12,000 1 12,000 1 12,000 54,000 -

Grading and StorageManager 9,000 _- .5 4,500 1 9,000 1 9,000 1 9,000 31,500 -

Technical Assistant " It,500 - - .5 2,250 1 4,so0 1 4,500 1 4,5no 15,750 -

Administrative Assistant 4,500 - - .5 2,250 1 4,500 1 4,5o0 1 4,500 15,750 -

Accounts Clek " 3,200 - - .5 1,600 1 3,200 1 3,200 1 3,200 11,200 -

Clerks 2,800 - - 1 2,800 2 5,600 2 5,600 2 5,60O 19,600 -

Foreman 2,500 - - .5 1,250 1 2,500 1 2,500 1 2,5o0 8,750 -

Drivers 2,200 - - 1 2,200 2 4,400 2 4,400 2 4,400 15,400 -

Chokiddars aid Peonsan 1,500 - - 3 4,500 7 10.500 7 10,500 7 10,500 36,ooo5,6

Sub-total 6,000 33,350 56,200 56,200 56,200 207,950

Other i

Staff allowances (40%) _ _ - 2,400 - 13,340 - 22,480 - 22,480 - 22,4i0 83,180 -

Direct costs Of storageand gradirg _/ Ton 750 - _ _ - 1200 900,000 1200 900,000 1200 900,000 2,700,000 -

Office supplies - - 10,000 - 10,000 - 10, OO - 10,000 40,000 20 8,000

Vehicle running(12,000 mls O R.1.0) No. 12,000 - _ 1 12,000 1 12,000 1 12,000 1 12,000 48,000 50 24,000 D .

Tractor running - a

(t,?fV hr' e3 Rg 15) No, 18,000 - - - - I 18,000 1 18,n00 I 18/ion iO., ino ??,O IY

Trials-direct coatsless seeda4/ Acre 900 g 2.5 2,250 5 4.500 7-5 6,750 13,500 20 2,700

Repaira aid maintainance-buildings 2-1/2% - _ _ _ _ - 55,750 - 55,750 - 55,750 167,250 15 25,000

-equipDmnt 5% - 73, 0o - 73,000 - 73,000 219.oo 50 109.500

Sub-total 2,400 35,340 1,093,480 1,095,T30 1,097,980 3,324,930 196,200

PAKISTAN

SEED PROJECT

Research and Pilot Prolects

Operating Costs of Potato Seed Project(continue from Page 1)

YFP (Middle and High Hill.s

Salaries 5/Assistant Project Director Man-year 12,000 1 12,000 2 24,000 2 24,000 2 24,OOC 2 24,ooo 108,000Technical Assistant "4,500 - - 1 4,500 2 9,000 2 9,000 2 9,000 31,500Foremen i/9 grading

and Btore 3,000 - - 1 3,000 2 6,o0o 2 6,0oO 2 6,ooo 21,000Accounts clerki 3,200 - - 1 3,200 2 6,400 2 6,400 2 6,400 22,400Clerki 2,800 - - 1 2,800 2 5,600 2 5,600 2 5,600 19,600Driver " 2,200 - - 1 2,200 2 4,400 2 4,400 2 4,400 15,400Choukidars and PeDora 1,500 - _ 6 9.000 i 21.000 lb 21.000 IL 21.000 72-.M

Sub-total 12,000 48,700 76,400 76,400 76,400 289,900

OtherStaff aflloances - - - 4,8o0 19,480 - 30,560 30,560 - 30,560 115,960Direct costs of storage

and grading-3/ Ton 4T5 - - - 2400 1,L40,000 2400 1,140,000 2400 1,140,000 3,420,000Office supplies - - - - 20,000 - 20,000 - 20,000 - 20,000 80,000 20 16,000Vehicle runnirg

(12,000 uls ORB 1.0) Mo. 12,000 - - 2 24,000 - 24,000 2 24,000 2 24,000 96,000 50 48,oooTrials-direct costs

less seed / Acre 1,200 - - - - 12 14,400 22 26,400 32 38,400 79,200 20 15,d00Repairs and aintainance- building 2-1/2% - - 39,200 - 39,200 - 39,200 117,700 15 17,600- equipment 5% - - -- 17 ooo - 17,000 - 17o000 51o000 50 2Q

Sub-total 4,800 63,480 1,285,160 1,297,160 1.309,160 3.5S760 122,900

Total Operatirg Costs 55,490 459,95u 2,790,320 2,804,570 2,818,820 8.929.150 1,204.700

Purchase of seed fromfaruers a/ Ton 1,350 - - 24no 3,240,ooo 2400 3,240,000 2400 3,240,000 9,720,000

Revenues from-Middle Hills 8/ Ton 2 700 - - - 1000 2,700,000 1000 2,70,0o0 10 00 270000 8,1000 --Plains Ton 2 700 - - - - 90029 2 00 9 21430 000 4,600 -

Total Revemus 2,700,000 5,130,000 5,130,000 12,960,000 *|I|

Projsect Ccsts 2, 55,490 459,950 3,330,320 914,570 928,820 5,689,150

1/ Project Director baaed in Islamabad and responsible for NW-!, Pah;istar. cnd P4nJL2/ Costed in Technical Assistance, Annex 7.3/ See Table 10 .

U/ issumed land provided at Sialkot Research Station.O/ nly 2 chowkidars permanently based in high hills.

6/ Ineludes land rent.7/ Assumed farm gate price of Rs 1080 per ton plus 25% premium./Sales reflect losses through storage and grading; see Table 10. The Plaire crop revenues fali in the year following purchase.

2/ Project Costs will cover the dperating costs plus the initial purchases of seed from farmers mirnus revenues from seed sale.

ANNEX 6Table 10

PAKISTAN

SEED PROJECT

Research and Pilot Projects

Direct Costs of Cold Storage and Grading of Seed Potatoes

PunjabRs per ton

Operation of cold store - Rs 20 per ton per month 140.00Labor costs - .75 ton per man day at Rs 7 perman day 5.25

Sacks, labels, etc. 200.00Cleanings, soils, etc. - 10% 1/ 135.00Loss in storage - 2% per month 190.00Transport to store - 20 miles 10.00

680.25Contingencies (insurance, etc.) - 10% 69.75

750.00

NWFP and Baluchistan

Rs per ton

Labor costs 5.25Sacks, labels, etc. 200.00Cleanings, soils, etc. - 10% 1/ 135.00Loss in storage - 2% per month for 3 months 80.00Transport to store - 20 miles 10.00

430.25Contingencies (insurance, etc.) - 10% 44.75

475.00

1/ Based on an assumed farmgate price of Rs 40 per ton plusa 25% premium (in practice it may prove advisable to havea different premium for different generations of seed - forsimplicity this is ignored here).

ANNEX 7Page 1

PAKISTAN

SEED PROJZCT

Technical Assistance and Training

General

1. The establishment of a new and modern seed industry on the scaleproposed would require high caliber technical and managerial skills at allphases of project development. The organization of contract seed growingby farmers and the provision of advisory services to seed growers, for farmdevelopment planning, and seed crop cultivation, would be critical to projectsuccess. Although well qualified staff are available locally, they would re-quire specialist assistance and training to acquaint them with the particularproblems of seed production. For seed processing, quality control, and pilotproject activities, however, infusion of foreign technical and managerialskills, and training of local personnel, would be required on a much moresubstantial scale.

2. Internationally recruited specialists and advisory services arethus considered essential in the following areas:

National Seed Certification - pre- and post-controlAgency (NSCA) - field inspection

- seed analysis.

Provincial Seed Corporations - contract seed growing- processing plant operations

Pilot Projects - vegetable seed production and processing- potato seed production and storage

In addition to the technical assistance outlined above the project wouldfinance engineering services to assist with construction activities underthe various components. Locally recruited engineering firms would be ableto undertake this work. Technical assistance would cost Rs 21 M. Detailsare given in Table 1. TOR for all specialists'are given in the Appendixand schedule for their services is given in Chart 1.3. Staff training would be a priority responsibility of all specialists.Much of the training required could be given on the job. However, a number ofstaff would be given specialized training overseas to create the nucleus oftrained staff necessary to start operations in the various components. Thiswould be funded under the project. The cost would be about Rs 2.8 M. Detailsare given in Table 2.

ANNEX 7Page 2

Quality Control

4. Technical Assistance. Provision has been made in the project costsfor two specialists each for three years to assist the NSCA. One specialistwould assume responsibility for the Agency's field inspection activities, andpre- and post-control trials. The second specialist would be in charge of theAgency's laboratory operations and seed certification procedures. Both spe-cialists would be in post as soon as possible after project commencement soas to assist in organizing and staffing the Agency, planning the Agency oper-ations, making fields and laboratories ready, preparing a quality controlmanual of procedure, and commencing a staff training program.

5. Training. All the senior staff of the NSCA, including the fourSenior Certification Officers from the project areas, and the Director ofthe Registration Agency, would be given 6 months overseas training in theirrespective fields. Three Certification Officers, two for potato and one forvegetables, would also receive overseas training. The remainder of the staffengaged in quality control operations would be trained locally in accordancewith programs developed by the two specialists.

Seed Corporations - Production Departments

6. Technical Assistance. The first task of the Production Departmentswould be to plan a production program and then to publicize project activity,initiate farmer contacts, appraise farms of potential seed growers and event-ually arrange contracts for the first year's production. To fit with the pro-posed plant construction schedules this would have to be done quickly. Fur-thermore, in order to provide the maximum time within the project period forthe selection of the best growers and for farm development activities, earlycontacts should be made with a large number of farmers, despite the phasingto full production over three years.

7. In this phase of initial farmer contact, farmers would have to befully informed of the contractual requirements of a seed grower, and theconcomitant benefits to be derived from the seed premium and farm develop-ment offered under the project.

8. No problem is envisaged in staffing Corporation Production Depart-ments with well qualified agriculturalists. However, they would be totallylacking in knowledge of the seed industry and the techniques of seed produc-tion. Provision has, therefore, been made for two seed production specialiststo organize and operate Production Departments for two years. One specialistwould work full time with the Punjab Corporation, and the other with theSind Corporation.

9. In addition to the foregoing the production specialists would beresponsible for the planning, development and management of the Corporationseed farms.

ANNEX 7Page 3

10. Training. The task of organizing a large number of contract seedgrowers, advising them on farm development and developing Corporation seedfarms, would be enormous. To complement the work of the two productionspecialists the four Senior Production Advisors, three from Punjab and onefrom Sind, plus the Corporation Farm Managers, would be trained overseas inseed production techniques. The remaining Production Department staff wouldbe given on-the-job training by the two specialists.

Seed Corporations - Processing Departments

11. Technical Assistance. Consultant services would be made availableto assist in plant site selection, plant design and the preparation of tenderdocuments. Subsequently three processing specialists would be made available,each for three years, to launch the Corporations' processing operations.During this period they would ensure that the plants were operating efficient-ly and to planned capacity, and would supervise the training of operatingpersoinel .

12. Training. The General Managers and Superintendents of the plantswould be trained overseas prior to the start of operations. Plant Superin-tendents could probably be trained in India, and a lower training cost hasbeen assumed in consequence. Managers, however, would benefit from exposureto a wider range of operations and travel to Europe or the USA has beenassumed.

13. Provision has also been made for the Managing Directors of eachCorporation to travel overseas. The objective would be to familiarize themwith seed industry operations. This knowledge would be essential to theirrole in the development of an industry completely new to Pakistan.

Pilot Projects

14. Technical Assistance. Two specialists, in vegetable and potatoseed production, would be provided to run the two pilot projects since localexpertise in these fields is not available. In addition provision has beenmade for a vegetable seed processing consultant to advise on the processingaspects of the vegetable project.

15. Training. The Assistant Project Directors, two for potatoes, onefor vegetables, would be trained overseas in potato and vegetable seed pro-duction techniques.

Executive Functions

16. All specialists employed by the Seed Certification Agency, Provin-cial SeeU Corporations and for the Pilot Projects, would have executive res-ponsibilities assigned to them. The local personnel would be promoted totake over from them when trained and functioning effectively in their assignedpositions before the specialists' terms expire.

ANNEX 7Page 4

17. It might be possible to recruit specialists individually underseparate contracts. However, it is considered that it would be quicker andmore reliable if an international consulting firm, with seed production andprocessing expertise, were engaged to provide all the technical assistancerequired, uader a composite service contract.

Annex 7AppendixPage 1

PAKISTAN

Seed Project

Technical Assistance

Draft Terms of Reference

1. The Government of Pakistan (GOP) is engaged in the establishment ofa modern seed industry financed partly with a Credit provided by the Inter-national Development Association (IDA). The project involves the production,processing and distribution of pre-basic, basic, certified, and approvedgenerations of seed of cotton and cereals (wheat, maize, rice, pulses, berseem,oilseeds) on a commercial scale, and pilot scale production and processing ofvegetable and potato seed.

2. The commercial operations would be carried out by two autonomousGovernment owned Corporations in the Provinces of Punjab and Sind namely:

Punjab Seed Corporation (PSC) andSind Seed Corporation (SSC).

3. The quality control and seed certification would be entrusted theNational Seed Certification Agency (NSCA) to serve all Provinces in thecountry.

4. The Provincial Departments of Agriculture would be responsible forthe pilot projects:

Vegetables in Baluchistan;Potato in Punjab, and Baluchistan.

5. GOP is desirous of employing consultants specialized in the seedindustry to provide the following services:

ANNEX 7AppendixPage 2

ApproximateNumber Seed Production Duration

2 Specialists 3 years each

Seed Processing

Group Plant site selection, design andpreparation of tender documents. 15 man-months

3 Processing Specialists (one, or prefer-ably, two, to be conversant withcereals and cotton) 3 years each

Seed Certification

1 Field Inspection Specialist (also familiarwith pre and post control trials) 3 years

1 Seed Analysis and Certification Specialist 3 years

Pilot Projects

1 Vegetable Seed Production Specialist 4 years

1 Vegetable Seed Processing Specialist 24 man-months

1 Potato Seed Production Specialist 4 years

Engineering Services

Group Building design, preparation of tenderdocuments, contract supervision 30 man-months

6. All specialists would be resident in Pakistan continuously except:

the Group responsible for processing plant design etc.,and the Vegetable Processing Specialist. These would visitthe country as necessary according to an agreed schedule.Resident Specialists, other than the Engineering ServicesGroup, would be assigned executive and training responsibilitiesin the respective institutions in addition to functioningas advisors in their fields of specialization.

The Engineering Services Group would serve all Provincial Governments con-cerned. Terms of Reference and qualifications for the various specialistservices are indicated below.

ANNEX 7AppendixPage 3

Advisory Group - Processing Plants

7. The group would be required to:

- assist in the selection of sites for processing plants:

3 Cotton cum Cereal seed plants(2 in Punjab and 1 in Sind);

1 Cereal plant in Punjab;

- prepare site plans, building designs, processing equipmentspecifications, bidding documents and bid evaluations;

- resolve technical and engineering problems that may beexperienced during plant installation and commissioning;

The consultants assigned for this service would be qualified engineers withadequate experience in design; construction and operation of large, modernseed processing plants.

Processing Specialists

8. Each Processing Specialist would:

- be assigned to a Provincial Seed Corporation;- serve as an Executive Assistant to the Managing

Director of the Corporation;- be present during, and assist in the running in of, plant

and equipment;- be responsible for all seed processing operations including

engineering, transport and storage services;- be responsible for setting up and maintaining plant load

schedules, work records, and process costs;- be responsible for Processing Department budgets;- liaise with the Seed Certification Agency;- organize and implement the training program for the Corpora-

tion's Processing Department personnel; and- assist in procurement of processing equipment and

supplies.

ANNEX 7AppendixPage 4

Qualifications

- have a University Degree or equivalent in AgriculturalEngineering or other appropriate discipline;

- have not less than 10 years experience in seed processingof which at least 5 years should have been gained asthe manager of a commercial scale seed plant;

- have experience of cotton and/or wheat, rice, maize seedprocessing using modern machinery;

- have a knowledge of seed marketing;- be experienced in staff training;- be physically fit to undertake frequent travel within the

country; and- be less than 55 years of age.

Production Specialists

9. Each Production Specialist would:

- be assigned to a Provincial Seed Corporation;- serve as an Executive Assistant to the Managing

Director of the Corporation;- assist in the planning and development, and management of

Corporation seed farms;- instal management systems on Corporation farms, including

labor and equipment utilization schedules, work andfield records, job costs, and interfarm comparisons;

- prepare seed production programs for:(i). pre-basic seed by Research Institutes;(ii) basic seed by Corporation farms and, if

necessary, contract growers;(iii) certified seed by contract growers; and(iv) approved cotton seed within the areas

segregated for the purpose.- arrange registration of, and contracts with, seed growers

sufficient to meet production targets;- assist in organizing Corporation advisory services to

contract seed growers;- organize and implement training programs for Corporation

farm managers and advisory staff;- be responsible for the preparation of Production Department

budgets;- assist in procurement of field equipment; and- make frequent visits to seed farms in the Province.

ANNEX 7.AppendixPage 5

Qualifications:

- have a University Degree or equivalent in Agriculture;- have not less than ten years experience in farm management

of which at least 3 years should have been gained inseed production;

- have served at least 3 years as a consultant to, or manageror director of, a seed business;

- have experience in tropical farming conditions, and in thegrowing of cotton and or wheat, rice and maize;

- have experience in staff training;- be physically fit to undertake frequent travel within the

country; and- be less than 55 years of age.

Seed Certification Specialists

10. The Seed Certification Specialists would:

- be assigned to the Seed Certification Agency;- be responsible to the Director of the Agency;- work in close cooperation with each other;- help in the organization, staffing and management of the

Agency;- organize and implement the training program for Agency

personnel;- prepare Agency work programs and annual budgets;

assist in the procurement of equipment for the Agency (forfield trials and laboratories);

- establish procedures for field inspection, crop sampling,laboratory analysis; certification and pre and postcontrol trials;

- periodically visit seed farms, research institutions, pro-cessing plants in the country; and

- advise on the staff, procedures and equipment necessary torun the Registration Agency.

ANNEX 7AppendixPage 6

Qualifications:

- have a University Degree in Agriculture or related subject;- have not less than 10 years experience in seed quality control

with at least 5 years in an internationally recognized seedcertification agency;

- be familiar with legal aspects of seed quality control andseed certification;

- have experience in staff training;- be physically fit to undertake frequent travel within the

country; and- be less than 55 years of age.

11. The Potato Seed Production Specialist would:

- be assigned to work with the Departments of Agriculture inPunjab, MWI? and Baluchistan;

- report to the respective Directors of Agriculture;- prepare detailed work programs for the project including the

design of facilities (cold stores etc.) and trials;- be responsible for pilot project implementation according to

programs and schedules agreed by the relevant Departmentsof Agriculture;

- prepare project budgets;- assist in the procurement of services and equipment for the

project; and- train project staff.

Qualifications:

- have a University Degree in Agriculture or related subject;- have at least 5 years experience of potato seed production

in an areas(s) subject to the spread of virus diseaseby aphis;

- have experience of the design, conduct, analysis and inter-pretation of agricultural experimerts;

- have experience in the design and operation of cold stores;- have been exposed to working conditions in a developing country;- be physically fit to undertake frequent travel within the

country; and- be less than 55 years of age.

ANNEX 7AppendixPage 7

12. The Vegetable Seed Production Specialist would:

- be assigned to the Baluchistan Department of Agriculture;- be responsible to the Director of Agriculture;- liaise closely with the Processing Specialist;- prepare a detailed work program for the project;- plan, develop and operate the project farm;- arrange for a study of the market for vegetable seed in

Pakistan;- arrange markets for project output;- prepare project budgets;- assist in the procurement of services and equipment for the

project; and- train project staff.

Qualifications:

- have a University Degree in Agriculture or related subject;- have at least 5 years experience of vegetable seed production;- be familiar with vegetable breeding techniques and potential

sources of varietal material suitable for multiplicationin Pakistan by unsophisticated growers;

- be familiar with the design, conduct, analysis and interpreta-tion of agricultural experiments;

- have been exposed to working conditions in a tropical country;and be under 55 years of age and of good physical fitness.

Vegetable Seed Processing Specialist

13. The Specialist would:

- be assigned to the Baluchistan Department of Agriculture;- be responsible to the Director of Agriculture;- liaise closely with the Production Specialist;- visit the country as necessary, according to an agreed

schedule, to:(i) design the vegetable seed processing plant, prepare

specifications and tender docunents and assist withbid evaluations;

(ii) supervise the installation of equipment;(iii) run-in the plant and team staff in its operation.

ANNEX 7AppendixPage 8

Qualifications:

- have a University Degree or equivalent in AgriculturalEngineering or related subject;

- have not less than 10 years experience in seed processing ofwhich at least 5 years should have been with vegetable seed;

- have at least five years experience in a managerial capacityin the seed industry; and

have experience of the design of seed processing plants.

PAKISTAN

SEED PhOJECT

Technical Assistance aid Training

Cost of Teohnical Assistance

lvweig" ForeignUnit Cost Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost &Ldhaage Ekdhange

Unit 000 'Rs No. '000 Hs No. '000 Ns No. '000 Rs No. '000 Rs no. '000 Rs No. '000 Rs i '000 Rs

CORPORATIONS

Plant site selection, designand preparation of tender Han-docueonts month 75 5 375 5 375 5 375 - 1,125 100 1,125

bogineering services/contractsupervision " 5 6 30 12 60 12 60 30 150 _ _

Processing specialists / " 50 - _ 36 1,800 36 1,800 36 1,800 108 5,400 80 4,320Production specialists 3/ " 50 18 900 24 1.200 24 1.200 6 300 -- 72 3.600 802

Sub-total 1,305 1,635 3,435 2,100 1,800 10,275 8,325

QUAIITY COWNTOL

SMf ft:J A yst " 5° 9 450 12 600. 12 600 3 150 _ 36 1,800 80 1, 440

d irspector " 50 9 450 12 600 12 600 3 150 - 36 1,800 80 1.440

Sub-total 900 1,200 1,200 300 3,600 2,880

PILOT PWUITS

Project Director-Vegetable Seed " 50 8 400 12 600 12 600 12 600 10 500 54 2,700 80 2,160Vegetable Seed Processirg

Specialist 5 75 6 450 9 675 9 675 - - *4 1,800 100 1,800Project Director-Potato Seed " 50 8 400 12 600 12 600 12 600 10 500 54 20700 80 2,160Rigineering services/cortract

supervision - vegetable andpotato " 5 6 30 6 30 6 30 - _ 18 90 - _

Sub-total 1,280 1,905 1,905 1,200 1,000 447 7,290 6,120

TOTAL TWHICAL ASSISTAME ODST8 3,485 4,740 6,54o 3,600 2,800 21,165 17,325

/ Probably engineer, architect, cereal and cotton seed qpecialists._eOne ce l pacialiet in _ Pen3ab and 1aind;on cotton specialist sbared.Om each in JaJb and Sind.

AM=IC 7

PAKISTA

am PIOJIOT

Te@ 3 Aeiptsece m Trini

Costs of Traizil

gait *o For0oeti/ Year 1 ,,!ar 2 2oar 3i g Zhauqcs

a. _ _ _ _ _ _ __

Cororations

Managing Directors Mana mthm 12,500 8 100,000 -- - 8 l00,000 90 90,000General Managers (pa) 12,500 - 12 150,000 12 150,000 24 300,000 90 270,000Plant Superintendmn " " 6,ooo 16 96,ooo 16 96,000 36 192,000 90 172,800Farm Manar " 12,500 - 36 450,000 - 36 1450,000 90 405,000Production Advisorl/ " " 12,500 - 24 300 24 300° 90 270,000

Subtotal - 100,000 996,000 246,000 1,342,000 1,207,800

Quality Control

Director-Certification Ageny " 12,500 6 75,000 - - 6 75,000 90 67,500Director4egistation 12,500 6 75,000 6 75,000 - 12 150,000 90 135,000Senior Seed Anayt 12,500 - 6 75,000 - 6 75,000 90 67,500Senior Field Inapector 12,500 - 6 75,000 - 6 75,0O0 90 67,500Pout Control Trials Officer 7 U 12,500 - - 6 75,000 6 75,000 90 67,500Seed Pathologist n U 12,500 - - 6 75,000 6 ?5,000 90 67,500Senior Certification Officers n U 12,500 - 2i; 300,000 - 24 300,000 90 270,000Certification Officrs for

Potato and Vegetables n U 12,500 - 12 150,000 12 150,000 24 30° 000 90 270,

Subtotal - 350,000 675,ooo 300,000 1,125,000 1,012,500

Pilot Projects

Asaistant Project Directors -Potatoes n U 12,500 18 225,000 _- 10 225,000 90 202,500

Assistant Project Director -Vegetables n n 12,500 6 75,000 - - 6 75.ooo 90 67,5ao

Subtotal - 30000300000 270,000

TOTAL TRADiNG COStS I l,000 2.767.000

I/ Includes travel.

2/ Comld be trained in India, henoe lower costs assesment.

T/ Three froa Punjab, one froa Sind.

PAKISTANSEED PROJECT

SCHEDULE FOR TECHNICAL ASSISTANCE SERVICES

z0

o < Z RESPONSIBLETYPE OF CONSULTANT A RYEAR I YEAR 2 YEAR 3 YEAR 1 YEAR

_ z .

SEED PRODUCTION SPECIALIST 2 leach) CORPORATIONS E 1111

PROCESSING PLANT Group 15 CORPORATIONS E I IADVISORY SERVICES

SEED PROCESSING SPECIALISTS 3 (each) CORPORATIONS

FIELD INSPECTION SPECIALIST 1 36 NSCA '

SEED ANALYSIS AND 1 36 NSCA E|III-IIICERTIFICATION SPECIALIST ___l_________

VEGETABLE SEED 1 54 PILOT PROJECT __ ._::_._. _=

PRODUCTION SPECIALIST

VEGETABLE SEED 1 24 PILOT PROJECT .

PROCESSING SPECIALIST

POTATO SEED 1 54 PILOT PROJECT =....._ .PRODUCTION SPECIALIST l l

ENGINEERING SERVICES Group 30 ALL PARTI- _ X_,.i

CIPATINGAGENCIES .. )

E3VISITING CONSULTANTS SERVING INTERMITTENTLY. RESIDENT CONSULTANT IN CONTINUOUS SERVICES '

World Bank - 15274

ANNIY 8Table 1

PAKISTAN

SE8D POJ1CT

ProJeet CostsxSunurkRa 'OoOr

Forei-= txchangsYear 1 Year 2 Year 3 Year 4 Year 5 Total %- Total

SEED CORPORATIONS

Corporation fanms - 3,343 5,013 - - 8,356 50 4,187Processing equipent - 16,951 40,249 22,233 - 79,433 73 57,706Buildings and storage - 6,302 15,915 9,690 - 31,907 20 6,296Vehicles - 1,503 2,539 424 - 4,466 46 2,077Working capital _ - 23.448 57,915 34.113 115,476 - -

Subtotal - 28,099 87,164 90,262 34,113 239,638 70,266

SEED GROWERS' FAMIS

Tractors - 6,462 12,925 6,463 - 25,850 80 20,680Implements - 3,687 7,375 3,687 - 14,749 61 9,057Tubewells - 5,875 11,750 5,875 - 23,500 75 17,625Land development - 5,757 11,515 5,758 - 23,030 10 2,303Drilling rigs and spares - 10.000 - - _ 10,000 100 10.000

Subtotal - 31,781 43,565 21,783 _ 97,129 59,665

QUALITY CONTROL

Registration Agency 13 238 496 147 147 1,041 27 282Certification Agency 305 1,610 3,253 1,490 1.299 7,957 23 1,802

Subtotal 318 1,848 3,749 1,637 1,446 8,998 2,084

MESEARCH ANDPILOT FEMJETS

Research equipment - 3,346 - _ _ 3,346 85 2,837Vegetable pilot project 21 772 657 _ 1,450 38 553Potato pilot project 55 3,891 5,617 915 929 11,407 31 3,522

Subtotal 76 8,009 6,274 915 929 16,203 6,912.

TBCHIGCAL ASSISTANCEAND TRAINING

Technical assistance 3,425 4,740 6,540 3,600 2,800 21,165 82 17,325Training 550 1,671 546 - _ 2,767 91 2,520

Subtotal 4,035 6,411 7,086 3,600 2,800 23,932 19,845

BASE COST ESTIDATE 4,429 76,148 147,838 118,197 39,288 385,900 41 158,772

Physical contingencies - 3,069 6,359 3,192 - 12,620 7,169Price contingencies 621 22,417 61,261 54.716 22.001 161.016 58,375

TOTAL COSTS 5,050 101,634 215,458 176,105 61,289 559,536 40 2 36

ANNEX 8P AKI STAN Table 2

SEEI) PROJECT

Project Costs: Seed Corporations Y

(Rs '000)

Foreign ExchangeYear 1 Year 2 Year 3 Year 4 Year 5 Total % Total

PUNJAB

Corporation farms - 2,507 3,760 - - 6,267 50 3,139Processing equipment - 9,465 29,019 22,233 - 60,717 73 44,354Building and storage - 3,708 12,023 9,690 - 25,421 20 5,297Vehicles - 1,042 1,846 424 - 3,312 46 1,539Working capital _- _ 46,575 34,113 96,576 - -

Sub-total - 16,722 62,536 78,922 34,113 192,293 54,329

SIND

Corporation farm - 836 1,253 - - 2,089 50 1,048Processing equipment - 7,486 11,230 - - 18,716 72 13,352Building and storage - 2,594 3,892 - - 6,486 15 999Vehicles - 461 693 - - 1,154 47 538Working capital - - 7,56 L,30 ' - 18,900 - -

Sub-total - 11,377 24,628 11,340 - 47,345 15,937

ALL PAKISTAN

Corporation farms - 3,343 5,013 - - 8,356 5C 4,187Processing equipment - 16,951 40,249 22,233 - 79,433 73 57,706Building and storage - 6,302 15,915 9,690 - 31,907 20 6,296Ver,icles - 1,503 2,539 424 - 4,466 46 2,077Working capital - - 23,h48 57,915 34,113 115,476 - -

BASE COST ESTIMATE - 28,099 87,164 90,262 34,113 239,638 29 70,266

Physical contingencies - 2,660 6,118 3,192 - 11,970 6,819Price cozitingencies - 8,661 36,258 40,042 19,103 104,064 28,457

TOTAL COSTS - 39,420 129,540 133,496 53,216 355,672 30 105,542

1/ Investment costs for the Corporation farms are given in Annex 3, Table 5. Investment costs forprocessing equipment,. building and storage and vehicles are built up from the costs in Annex 4,Tables 2, 3, 4 and 5. The working capital represents the yearly increment in the stock of unprocessedcereal seeds; its value was computed in accord with Annex 4, Appendix , paras 2 and 3. (Since storageof cereal seed and cotton seed overlap for two months only, the value of cotton seed was not costedas part of the working capital).

ANNEN 8Table 3

PAISTAlN

S3m PRO.BOCT

Project Costa: Develont of Seed Growers' Farms,"'(Rs '000)

Foreizn lgchangzeYear 1 Year 2 Tear 3 Iear 4 Year 5 Total Total

PUNJAB

Tractors - 5,500 11,000 5,500 - 22,000 80 17,600Implements - 3,138 6,276 3,138 - 12,552 61 7,707Tubewells - 5,000 10,000 5,000 - 20,000 75 15,000Land developent - 4,900 9,800 4,900 - 19,600 10 1,960Drilling rigs and spare parts - 5,000 - - - 5,000 100 5.000

Subtotal - 23,538 3bt076 18,538 - 79,152 47,267

SIND

Tractors - 962 1,925 963 - 3,850 80 3,080Implements - 549 2,099 549 - 2,197 61 1,350Tubewells - 875 2,750 875 - 3,500 75 2,625Land developsent - 857 2,715 858 - 3,430 10 343Drilling rigs and spare parts - 000 - - - 5,000 100 5,000

Subtotal - 8,243 6,489 3,245 - 17,977 12,398

ALL PAKISTAN

Tractors - 6,462 12,925 6,463 - 25,850 80 20,680Implements - 3,687 7,375 3,687 - 1i4,749 61 9,057Tubewells - 5,875 11,750 5,875 - 23,500 75 17,625Land development - 5,757 11,515 5,758 - 23,030 10 2,303Drilling rigs and spare parts - 10,000 - - - 10.000 100 1

BASE COST ESTISTE - 31,781 43,565 21,783 - 97,129 61 59,665

Physical contingencies - - - - - -

Price contingencies a 8,953 18,406 11,905 - 39,264 20,001

TOTAL COSTS -A.731 61.971 33,688 - 136,393 58 79.666

1J/ Assmptions and unit coets for developjent of the seed growers' farms are given in Annex 3, paras. 13 to 20 andTables 1, 2 and 3. Out of 1,880 seed growers, 1,600 will be located in Pu?Jab, 280 in Sind.

ANNEX 8Table 4

PAKSTAN

SEED PROJECT

Project Cosi. qu ty Control

Foreign lxchangTear 1 Year 2 Year 3 Year 4 Year 5 Total _T.a

REGISTRATION AGENCY-

Capital Costs

Office and laboratory buildings - 76 108 - - 184 19 35Office equipment - - 36 - - 36 20 7Laboratory equipment - - 55 - - 55 85 _7Field equipment - - 150 - - 150 70 _05Vehicles - 50 - - - 50 50 25

Subtotal - 126 349 - - 475 219

Operating Costs

Staff salaries and allowances 13 75 75 75 75 313 - -

Other operating costs - 37 72 72 72 253 25 63

Subtotal 13 112 147 147 17 566 63

Total 13 238 496 147 147 1.041 282

CERTIFICATION AGENCTI/

Capital Costs

Office and laboratory buildings - 818 817 - - 1,635 14 234Office equipnent - 342 - - 342 20 68Laboratory equipment - - 540 - - 540 85 459Field equipnent - - 150 - - 150 70 105Vehicles 150 200 300 200 - 850 50 425

Subtotal 150 1,018 2,149 200 - 3,517 1,291

Operating Costs

Staff salaries and allowances 49 284 515 613 620 2,081 - -Other operating costs 106 308 58!9 677 679 2.359 12 511

Subtotal 155 592 1.104 1,290 1,299 4,440 511

Total 305 1,610 3,253 1,490 1,299 7,957 1,802

Base Cost Estimate 318 1,848 3,749 1,637 1,446 8,998 23 2,084

Physical contingencies - 45 }10 - - 155 53Price contingencies 45 604 1,555 737 810 3,751 827

TOTAL COSTS 363 5414 2,374 2,256 12,904 23 2,964

1/ See Annex 5, Table 1

2/ See Annex 5, Table 2

ANXM 8Table 5

PAKISTAN

SEED PROJICT

ProJect Costs: Research and Pilot Projectal/(Rs '000)

Foroign -xobangTear 1 Year 2 Year 3 Year 4 Year 5 Total Total

PUNJAB

Research equipment - 1,212 - - - 1,212 85 1,023Potato pilot projeci/

Capital costs - 2,932 1,955 - - 4,887 143 2,124Operating oosts 47 __4 3,190 768 776 5,185 22 II13

Subtotal 47 4,548 5,145 768 776 11,284 4,290

SIND

Research equipment _ 1.112 _ _ _ 1,112 85

Subtotal - 1,112 - - - 1,112 9145

BALUCHISTAN

Vegetable project

Capital costs _ 650 433 - - 1,083 45 492Operating costa 21 122 224 - - 367 16 61

Potato project:

Capital zosts - 499 332 - - 831 23 194Operating costs 8 56 140 147 153 504 12 61

Subtotal 29 1,327 1,129 147 153 9,785 808

NWFP-1

Research equipment _ 1,022 _ - - 1,022 85 869

Subtotal - 1,022 - - - 1,022 869

ALL PAKISTAN

Research equipment - 3,346 - _ _ 3,346 85 2,837Vegetable pilot project 21 772 657 - - 1,450 38 553Potato pilot project 55 3,891 5,617 915 929 11,407 31 3A22

BASE COST ESTIKATE 76 8,009 6,274 915 929 16,203 43 6,912

Physical contingencies - 364 131 - - 495 297Price contingencies 11 2,596 2.562 412 520 6,101 2.595

TOTAL COSTS 87 10,969 8,97 11327 9 22,799 43 9,804

1/ See Annex 6, Tables 1, 3, 4, 8 and 9.2/ The NWFP component of the pilot project has been included in tha cost of the pilot project for Punjab

since it will be rum by the Department of Agricultare of this prz*ince.

PAKISTAN

SEED PROJECT

Project Costs: Technical Assistance and Trainingl/(Rs '000)

Foreign ExchangeYear 1 Year 2 Year 3 Year 4 Year 5 Total %7 Total

CORPORATIONSTechnical Assistance 1,305 1,635 3,435 2,100 1,800 10,275 81 8,325Training 100 996 246 - - 1,342 90 1,208

Subtotal 1,405 2,631 3,681 2,100 1,800 11,617 9,533

QUALITY CONTROLTechnical Assistance 900 1,200 1,200 300 - 3,600 80 2,880Training 150 675 300 - 1,125 90 1,012

Subtotal 1,050 1,875 1,500 300 - 4,725 3,892

PILOT PROJECTSTechnical Assistance 1,280 1,905 1,905 1,200 1,000 7,290 84 6,120Training 300 - _ - - 300 90 300

Subtotal 1,580 1,905 1,905 1,200 1,000 7,590 6,420

ALL COMPONENTSTechnical Assistance 3,485 4,740 6,540 3,600 2,800 21,165 17,325Training 550 1,671 546 2,767 2,520

BASE COST ESTIMATE 4,035 6,411 7,o86 3,600 2,800 23,932 83 19,845

Physical Contingencies - - - - - - -Price Contingencies 565 1, 603 2,480 1,568 7,836 6,495

TOTAL COSTS 4,60o 8,014 566 5,20 68 31,768 83 26,340 CC)

I/ See Annex 7, Tables 1 and 2.

ANNEX 8Table 7

PAKISTAN

SEED PROJECT

Price Contingency (Percentage)

PriceCalendar Accumulated Contingency

Year Inflation Project Year Inflation Used

Equipment and Services

1975 12 _ _

1976 10 1 14.51/ 14

1977 8 2 24.8 25

1978 8 3 34.7 35

1979 8 4 45.5 45

1980 7 5 56.4 56

Civil Works

1975 20

1976 1 23./ 23

1977 12 2 39.0 39

1978 12 3 55.7 56

1979 12 4 74.4 74

1980 10 5 93.6 94

Base: April 1975

1/ 3/4 of 1975 Annual Inflation rate to bring prices from April 1975 toJanuary 1976 cumulated with 1/2 of 1976 Annual Inflation rate to bringprices from January 1976 to July 1976 (the mid-point of Project Year 1).

ANNEX 9Table 1

PAKISTAN

SEED PROJECT

Estimated Schedule of Disbursements

CumulativeIDA Fiscal Year Disbursement Disbursement atand Quarter During the Quarter end of Quarter

US $ '000 US $ '000

FY 1977

1st 100 1002nd 200 3003rd 500 8004th 700 1,500

FY 1978

1st 1,000 2,5002nd 1,500 4,o0003rd 2,200 6,2004th 2,500 8,700

FY 1979

1st 2,800 11,5002nd 3,000 14,5oo3rd 2,500 17,0004th 2,000 19,000

FY 1980

1st 1,500 20,5002nd 1,000 21,5003rd 800 22,3004th 300 22,600

FY 1981

1st 200 22,8002nd 200 23,000

ANNEX 10Page 1

PAKISTAN

SEED PROJECT

ProJect Organization and Management

1. The basis for development of the country's seed industry would bedefined in new seed legislation to be enacted by GOP. Seed industry policywould be entrusted to the Provincial Seed Councils and the National SeedCouncil created under the Provincial Seed Acts (Annex 5).

2. Pre-basic seed would be produced at Provincial Research Institutes 1/under the supervision of plant breeders. These Institutes would function asat present under the Provincial Departments of Agriculture.

3. Provincial Seed Corporations (para 5) would take over pre-basicseed produced by the Research Institutes and multiply basic seed mainly onCorporation owned farms and to a lesser extent through contract growers.All further stages of seed multiplication would be under contract by pro-gressive farmers registered as seed growers with the Corporations (para 8).

4. The Provincial Research Institutes and the Seeds Corporationswould have, as deemed by them to be necessary, internal arrangements foxvariety trials, laboratory testing and general quality control. Addition-ally an independent Seed Certification Agency (NSCA) established at nationallevel would monitor seed quality at all stages of multiplication, both in thefield and in the laboratory, and be responsible for final certification priorto the marketing of processed seed (Annex 5).

Seed Corporations

5. Supervision of seed multiplication, seed procurement, processingand packaging would be undertaken by Seed Corporations one in Punjab and onein Sind. They would be legally, financially, and operationally autonomous.Their equity capital would be contributed by the respective Provincial Gov-ernments. A Corporation Board would be responsible for business policy.The Board would comprise one representative each from the Provincial Depart-ments of Agriculture, Finance, Planning and Developmient; the Managing Direc-tor of the Corporation who would be a permanent member of the Board; and atleast three other members including representatives of seed growers and dis-tributors.

1/ Pakistan Cotton Control Committee (PCCC) also would undertake productionof pre-basic cotton seed on its Multan Station.

ANNEX 10Page 2

6. The Provincial Seed Corporations would be staffed and managed likecommercial corporate entities in the private sector. Each Corporation wouldbe headed by a Managing Director - the Chief Executive of the Corporation, whowould work within the policy guidelines set by the Board but otherwise havefull independence in all operational matters. The Managing Director would besupported by four Executive Directors: Finance, Production, Marketing andProcessing.

7. Personnel policies - recruitment, placement, promotion and motiva-tion - followed by the Corporations would be in line with private sectorstandards. In recruiting staff for the Corporations, particularly theDirectors and the senior executives, terms and conditions of employmentoffered would be such as to attract the right caliber of persons. Govern-ments recognize that it would not be possible to recruit local personssuitably qualified and experienced in seed production and processing. Theposts of Production and Processing Directors would, therefore, be filledinitially by specialists to be employed under the technical assistanceprovided for the project to function as Executive Assistants to the ManagingDirector. Suitably qualified local candidates would understudy thesespecialists so that the most competent of them could assume charge of therespective departments when the specialists complete their assigments(Annex 7).

8. The responsibilities entrusted to the Executive Directors wouldbe as follows:

Managing Director - in addition to being chief executive he wouldbe in charge of coordination, price setting, and of general adminis-tration including personnel management, legal matters and generalservices;

Production Director - management of Corporation farms, arrangingcontracts with registered growers, extension services to registeredseed growers, seed procurement and quality control;

Processing Director - management of processing plants, certification,packaging and storage;

Marketing Director - market research, publicity and sales promotion,and programming of seed distribution;

Finance Director - budgetary control and funds management, financialaccounting, cost accounting, computation of seed prices, inventorycontrol, management information and internal auditing.

TOR for the Managing Director and other Executive Directors are given inAppendix I. A Corporation organigram is given in the Chart 1. Staffrequirements are given in Table 1.

ANNEX 10Page 3

Seed Multiplication by Contract Growers

9. Multiplication of all certified seed and some basic seed would beentrusted to progressive farmers registered with the Corporations (Annex 3).The Production Department in each Corporation would be staffed with techni-cally qualified and experienced personnel to carry out the following functions:

selection of progressive farmers for registration as contract growers;

assisting registered growers in preparing their farm developmentplans and loan applications to banks;

liaison with the Provincial Agricultural Engineering Departments andprivate contractors who would undertake land development works forthe growers;

assisting growers in the supervision of the farm development;

special extension services to growers; and

helping growers in procurement of farm equipment, supplies andservices.

10. Most of the seed growers registered with the Corporation wouldrequire long-term credit to finance tractors and farm implements, tubewellsfor supplementary irrigation, land levelling and improvement of water courses.Such long-term credit needs would be provided by selected local banks (Annex11). When recommending a seed grower's loan application to a bank, theCorporation would also undertake to pay over to the bank the purchase priceof the seed procured from him. As prices paid by the Corporation for the seedwould be 16% to 20% higher than prevailing market prices loan default wouldbe minimal. However, the Corporations would not engage in credit managementoperations which are best handled by existing credit institutions specializedin such activities. Thus although credit services would be based on a tri-partite agreement between the grower, the bank and the Corporation all creditrisks and credit management workload would be borne by the bank - theCorporation functioning only as a collecting agent of the lending bank.

Seed Procurement

11. The Corporation would take from the grower all crop which had passedfield inspection as soon as possible after harvest. The National SeedCertification Agency would analyse samples to determine the proportion ofthe crop which would pass certification standards. Payment for seed ofcertified quality would be at a fixed premium above ruling market price atthe agreed date of sale. Rejected crop would be accepted at market pricewithout addition of any premium. The Corporation would arrange to ascertainand make available to seed growers prevailing market prices which wouldform the basis for such payments (Annex 12, paras 1 through 4).

ANNEX 10Page 4

erocessing and Marketing

The Processing Department -o-ld be reo' i'1e for the t. :;crtof seed from farms and private ginneries to the processing plants. Facilitieswould be provided at each plant site for seed processing, packaging, andstorage pending delivery to distributors (Annex 4).

13. Establishing a market for quality seed would require considerableeffort to regain farmer confidence. Market research, sales promotion andpublicity would therefore be undertaken by the Corporations though retailsales would be entrusted to distributors appointed by them. These wouldinclude both public sector organizations, such as PADSC, SASO and ADA (NWFP)and private sector merchants (Annex 12). The retail prices to the farmerwould be fixed by the Seed Corporations, and the distributors would workon the basis of a mutually agreed payment comprising handling charges andsales commission.

Financial Control, Accounts and Audit

14. The Corporation would establish an accounting system incorporatingmodern financial and cost control procedures, and an effective managementinformation flow and feedback. Internal control in the Corporation wouldbe strengthened by an Internal Audit Division.

15. Independent auditors acceptable to IDA would be appointed for eachCorporation to carry out comprehensive annual audits following generally ac-cepted professional standards. The auditors would, on completion of theauditors, submit both short-form and long-form reports as set out in guide-lines in Appendix 2.

Pilot Projects

16. Special units would be set up within the existing Departments ofAgriculture in Punjab and Baluchistan to manage the vegetable and potato pilotproject operations (Annex 6).

Project Coordination

17. A Seed Project Coordination Committee, comprising a representativeeach from the Federal Ministries of Agriculture and Planning and Finance,Provincial Governments and Seed Corporations, established at national levelwould coordinate project activities. This Committee would be entrusted withspecific responsibilities as follows:

(a) recruitment of Technical Assistance specialists for theCorporations, NSCA and Pilot Project operations;

(b) coordinate project procurement financed under IDA credit;

ANNEX 10Page 5

(c) liaison with Provincial Governments, Seed Corporations,Federal Government, banks and national institutions;

(d) liaison with international institutions including IDA;

(e) review of project progress; and

(f) IDA disbursements.

18. The Committee would be supported by an executive secretariatheaded by a senior officer. The specialists and executives appointed for theProvincial Seed Corporations and Pilot Project operations would help in thepreparation of procurement specifications, in bid evaluations and in othermatters requiring technical skills. An organigram for the Committee is atChart 2.

19. Project Implementation Schedule. Phasing of project implementationactivities is shown in Charts 3, 4 and 5.

20. Costs. Investment and overhead costs related to the Seed Corpora-tion headquarters and administrative offices are given in Tables 2 and 3.

ANNEX 10Appendix 1Page 1

PAKISTAN

SEED PROJECT

Draft Terms of Reference for Seed Corporation

Managing Director

1. The Managing Director of the Seed Corporation would:

be a full-time employee of the Corporation andfunction as its chief executive;

be responsible and report direct to the Corporation Board;

serve as a permanent member of the Corporation Board;

coordinate the responsibilities of other Executive Directors:Production, Processing, Marketing and Finance Directors;

be responsible for price setting, personnel management, legalaffairs and general administration of the Corporation;

implement the policy decisions of the Corporation Board;

present to the Board -

(i) the Corporation's draft annual budget not laterthan three months prior to the financial yearcommencement;

(ii) Corporation's draft annual accounts together withhis own annual progress report not later thantwo months after the end of each financial year;

(iii) audited annual accounts and audit report togetherwith his comments thereon not later than fourmonths after the end of each financial year; and

(iv) quarterly progress report on the Corporation'sactivities not later than one month after theend of each quarter.

ANNEX 10Appendix 1

Page 2

Qualifications Required

be not less 35 and not more than 55 years of age;

have a University Degree or equivalent in agriculture,engineering, economics, business administration orfinance and accounting;

have not less than ten years experience in business managementor public administration of which he should have serveda minimum of five years in the capacity of chief executiveof a recognized agricultural, industrial or commercialinstitution;

be experienced in personnel management; and

be able to undertake frequent travel within the project area.

2. Production Director

The Production Director would:

be responsible, and report direct, to the Managing Director;

work in close cooperation with the Processing, Marketing andFinance Directors and the Secretary of the Corporation;

be responsible for:

Corporation farm development and operations,seed multiplication under contract,Production Department budgets,liaison with Research Institutes and SeedCertification Agency,training of field staff,special extension services to registered seedgrowers;seed procurement, andseed quality control.

Qualifications Required

be not less than 35 and not more than 50 years of age;

have a University Degree in Agriculture;

have not less than ten years experience in agriculture andfarm management with at least three years at the levelof Manager or Director;

ANNEX 10Appendix 1Page 3

have experience in farm development, machinery utilization,budget preparation, work planning, field cost recordsand staff training; and

be able to undertake frequent travel to project areasvisiting Research Institutes, Corporation farms,contract growers and their farms.

3. Processing Director

The Processing Director would:

be responsible, and report direct, to the Managing Director;

work in close cooperation with the Production, Marketing andFinance Directors and with the Corporation Secretary;

be responsible for -

all processing plant construction, equipment andoperations;workshops and laboratories;seed transport;seed storage pending delivery to distributors;training of factory and workshop staff; andProcessing Department budgets.

Qualifications Required

be not less than 35 and not more than 50 years of age;

have a University Degree or equivalent in mechanical orproduction engineering;

have not less than ten years experience in factory managementwith at least three years at the level of Factory Manager,preferably in agro-industry;

have experience in machinery maintenance, production control,work planning, budget preparation, industrial cost recordsand training of factory staff; and

be able to undertake frequent travel to processing plants,workshops and farm sites in the project area.

ANNEX 10Apppendix 1Page 4

4. Marketing Director

The Marketing Director would:

be responsible, and report direct, to the M4anaging Director;

work in close cooperation with the Production, Processingand Finance Directors and with the Secretary of theCorporation;

be responsible for:

market research;marketing techniques;advertiuing and publicity;sales promotions;liaison with distributors;after sales searvice;sales budgets; andstaff training.

Qualifications Required

be not less than 35 and not more than 50 years of age;

have a Uliversity Degree;

have not less than ten years experience in marketing of whicha minimum of five years should have been as Manager orDirector in charge of marketing, preferably in agro-industrial business; and

have experience in marketing including: market research,marketing methods, advertising and publicity, salespromotion, distribution, and staff training.

5. Finance Director

The Finance Director would:

be responsible, and report direct, to the Managing Director;

work in close cooperation with the Production, Processing andMarketing Directors and with the Corporation Secretary;

be responsible for:

preparation of the cash budget;coordinating department budgets;funds management;

AEX 10Appendix 1Page 5

financial and cost accounting and controls;seed price computations;internal control including inventory control;internal audit;management information, training of accounting and

internal audit staff;annual accounts and quarterly progress reports; andliaison with independent auditors.

Qualifications Required

be not less than 35 and not more than 55 years of age;

be a member of a recognized professional accountancy institutee.g., Institute of Chartered Accountants or CertifiedPublic Accountants - preferably with a university degreeor equivalent in business administrationleconomics orcost/industrial accounting;

have at least ten years post-qualification experience infinancial and management accounting of which at leastthree years gained from working in a large, preferablyagro-industrial, company;

have experience in budgetary control, costing, organizationand methods, internal auditing, and staff training;

have experience in procurement procedures and inventorymanagement; and

be able to travel frequently to farms and processing plantsin the project area.

ANNEX 10Appendix 2Page 1

PAKISTAN

SEED PROJECT

Guidelines for Independent Auditors

1. The independent auditors of the Seed Corporation should submitboth short-form and long-form reports.

2. These reports should be addressed to the Chairman of the Boardand copied to the Managing Director.

3. When a qualified opinion is offered by the auditors in theopinion paragraph, the short-form report should be modified in such a wayas to make clear the nature of the qualification. It should refer spe-cifically to the subject of the qualification and of the effect on thefinancial position and results of operations, if reasonably determinable.

4. Generally accepted auditing standards include, in addition toadherence to accounting principles which are generally accepted, standardsof preparation, standards of field and factory records, standards of super-vision, review, reporting and disclosure. The scope of the auditor'sexamination should be sufficient to enable him to express the opiniondescribed above. All of these standards are well-known to accountants inprofessional audit practice.

5. In case generally accepted auditing standards could not befollowed, the auditors should expressly state so, indicating specificallythe circumstances.

6. Verification of assets and liabilities should cover:

cash and bank balances;seed stocks;other inventories; andfixed assets - vehicles; field, factory, workshop,

laboratory and office equIpment.

Verification should include physical and test checks; examination ofrecords and expenditure; and obtaining of certificates independently frombanks and other custodians of assets, contractors, suppliers, debtors andcreditors.

7. The long-form report is an extension of the short-form report.Appropriate details (analyses, summaries, explanations and comments) ofitems in the various certified financial statements should be includedin the long-form report.

ANNEX 10Appendix 2Page 2

8. Certified statements would include:

a balance sheet for the Seed Corporation;profit and loss account for the Seed Corporation;profit and loss statement for each farm, processing

plant or other unit of operation;sources and application of funds;fixed assets showing additions, disposals, depreciation

and balance sheet values;non-recurring expenses;miscellaneous income and expenditure; andage classification of debtors and creditors.

All statements should, when practicable, show comparative figures forthe preceeding years.

9. Comments and recommendations in the long-form report wouldinclude:

implementation of recommendations made in previousyear;

management and organization;budgetary control;unit costs;production and prices;financial and field controls;payroll, procurement and sales procedures;inventory control and stock levels;adherence to public accounting standards;efficacy of the internal audit procedures; andevents after the date of the balance sheet significantly

affecting the financial position of the Seed Corporation.

ANNEX 10Table 1

PAK ISTAN

SEED PROJECT

Staffing at the Seed Corporation Head Quarters

Annual Salar Range Punjab Sind

(Rs)

Executive Directors

Managing Director 48,000 - 60,000 1 1

Production Director )Processing Director ) 42,000 - 54,000 4 3

Marketing Director )Finance Director )Confidential Stenotypist 9,000 - 12,000 3 2

Administration Department

Corporation Secretary )Personnel Manager ) 18,000 - 24,000 3 2

General Services Assistance )Clerks/Typists 3,000 6,000 3 2

Production Department

Corporation Farms 18,000 24,000 2 1Seed Procurement ) 18,000 24,000 3Contract Growing )Farm Advisory Service 12,000 18,000 32 6Clerks/Typists 3,000 6,000 3 1

Processing Department

Transport Manager ) 12,000 18,000 2Stores Manager )Clerks/Typists 3,000 6,000 3 1

Marketing Department

Market Research Manager )Sales Promotion Manager ) 18,000 24,000 3 1

Sales Distribution Manager )Assistants 12,000 18,000 -2

Clerks/Typists 3,000 6,000 4 3

Accounts Department

Financial Accountant 30,000 - 42,000 1 1

Cost Accountant 24,000 30,000 1 1

Assistants 18,000 24,000 2Clerks/Typists 4,500 7,500 8 5

Internal Audit

Chief Internal Audits 24,000 30,000 1 1

Assistants 12,000 18,000 3 2

Clerks/Typists 4,500 7,500 4 3

General

Peons/Messengers 1,200 1,800 12 6Drivers 1,500 2,500 45 16

ANNEU 10Table 2

PAKISTAN

SEED PROJECT

Operating Costs of the Seed Corporation Head Quarters(Rs '000)

Pumjab Sind

Personnel Salariesl/ 1,80? 930Telephone 120 80Electricity and Water 18 6Building Maintenance 24 12Security and Cleaning 24 12Building Rates y4d Insurance 12 6Vehicle Running-' 600 250Postage and Telegrams 30 15Travelling 60 30Printing and Stationery 100 60Audit Fees 100 60

Subtotal 2,895 1,461

Contingency (2c%) 579 292

TOTAL 3.474 1L753

1/ The salaries have been worked out according to the staffingpattern given in Annex 10, Table 1. In addition to thebasic salaries, 40C has been included for allowances.

2/ Vehicles ranning camputed in the following basis:

4-wheel drive 18,000 miles x Rs 0.60/mile+10% of capital cost for maintenance

Motor car 12,000 miles x Rs 0.40/mile+l(C of capital cost for maintenance

(See Table 3, Annex 10 for cost and number of vehicles).

ANNEX 10Tab'le 3

PAKISTAN

SEE PROJECT

Seed Corporationst: Qaeral Buildings, Vehicles and Equipment

Unit Number Total Foreign Foreign LifeCost of Cost Exchange Exchange Expectanc

Rs '000 UZAits Rs '000 % 'Rs '000 Years

PUNJAB

Buildin Offices (sq. ft.) .100 8,100 810 15 120 20ControUed environment store

(sq. ft.) .200 300 60 30 18 20House of managing director

(2,50O sq. ft.) 150 1 150 15 22 20House of directors

(2,000 sq. ft.) 120 4 480 15 72 20

3ubtotal 1-500 2

Vehicles and Equipment4-wheel drive 50 34 1,700 50 85%) 5Cars qo 15 750 50 375 5Cooling end dehumidifying

equipment 30 1 30 85 25 10Basic seed cleaning equipment 200 1 200 95 190 20

Subtotal 2,680 1___0

OTAL PUNJAB _,8o172

BuildiagOffices (sq. ft.) .100 3,800 380 15 57 20Controlled environment store

(sq. ft.) .200 200 40 30 12 20House of managing director(2,500 sq. ft.) 150 1 150 15 22 20House of directors(2,000 sq. ft.) 120 3 360 15 54 20

Subtotal 930 145

Vehicles and Equipment4-wheel drive 50 6 300- 50 150 5Cars 50 10 500 50 250 5Cooling and dehumidifying

equipment 20 1 20 85 17 10Basic seed cleaning equipment 200 1 200 95 190 20

Subtotal 1,020 607

TOTAL SIND 1,950 2

PAKISTANSEED PROJECT

Organization Chart - Seed Corporations

BOARDOF

[ DIRECTORS

ES 5_MANAGING DIRECTOR)

r PRODUCTION rPROCESSiNG .................. ............... MARKETING | FINANCEDIRECTOR .... DIRECTOR ................ ...... ,,....... DIRECTOR .. DIRECTOR

|CORPORATION. | ~~~SECRETARY

I CORPORATION I LN ESNE AK NTEHNAL |

FARMS n PRTOS_ MNGMNT l EERH_ AUDITOR

CONTRACT sEED .I LEGAL & l ALES -FINANCIAL

GROWING TRANSPORT GENERAL H POMOTIO,N ACCOUNTING

J SEED l SEED l X PUEL~~~ ~~IC SALES AN OT

n PROCUREMENT l n STORAGE l 7 RELTIONS B ITRIETI ON ACOUNTING

tS O

ANNEX 10Chart 2

PAKISTANSEED PROJECT

Organization Chart - Project Coordination Committee

FEDERAL MINISTRYOF

AGRICULTURE

COORDINATIONCOMMITTEE

CHIEF EXECUTiVEAND

SECRETARY

ADMINISTRATIVE STEOTYPIST ACCOUNTSASrTR ASSISTANT

; PROCUREMENT |IPAYMENTS N I EQUIPMENT IIREIMBURSEET

_TECHNICAL ASSISTANCE1 IDAL-RECRUITMENT ETC. I ISBURSENT r

|LAISON WITH I|PROJECT ACCUT OJECT PARTICIPANTS I!AND AUDITr

I LIAISON WITH II PROGRES _ IDA AND OVTS. REPORT_

World Bank-9821

PAKISTANSEED PROJECT

PROJECT IMPLEMENTATION SCHEDULE ClANN lo

Activities Related to Seed Corporations and Research Institutes

MAIN ACTIVITIES AUfTfORITGY YEAR I YEAR 2 YEAR 3 YEAR 4 YEAR 5

Arransff of0 fc com,odatopn and *fwtt rapportsTaIl for SPCC SPCC 10i110

F-all-i Send Prolfct Erogram OIII all pernicipetirg NSC NItional Saed Co.-agonoin, SPCC NSCA - National Snd Certlicatioo Ag.EcY

Nagotiat. and asog TA co-tt -tS iconCultotidtt PDA P-oPiltiPr Doct EntitY witnin the ProA mcia Oparoenes at Aqrfoulrirwah IDA and aPPoit voaicltaota SPCC PCORP . Provinvi t dEatd CoPorenmAona

FinaIZa lendi-g arrenieamrns borneo GOP. SdP SPCC Seed Prqlet Coordin-t-on C.t-nIta.and par c.iaatinaf bosnk SPCC SRA - Sand Rag-cctinc Ag-eCy

TA TachnIca A-aaaotColal4 rCo-ntiu- epenlol prvoaaring ond stwagh f-ilti_t Contiooing ActVity

for oa-bswec fd R.sech Inatunea _ _ _ -_

Prepare spficatio. and pro-re pm--Sa scedPqud- ent Rpsearch Ina-tes C.,

Produce pro-ral sned Rstecrc loninueJ aan _1 oro

Arrange oiiica accoatnncition, recruit Ecaetionil Dir-ntor, aCO end ntial apo-nt ttfo Icr CORP CORP

Prepara CORP 1ana -rru-tmant and erasniegorogesare CORP 10000 0

Tran-fer toad iarns ro CORP PDA and SPCC

Select Proc-log plant rtit and anguiro laod righn CORP and TA

Pre.ar. plan .. , ta and tendat documnnt CORP Ond TA b-h 2 .......

Clear plant egutotnant tondor a -tuman nth I DA, itt batch 2nd ban!had.erta and ... . Ct Ssd. SPCC

Ecaluano bitd cleat wh IOA and ated bW t b t baifor P-ant aquiPment SPCC. CORP and TA xf,

R.coica and Wivco plant egap- ot no titan SPCC and CORP 7 | st etcn l . nd sh |

Conniruct plant bu,lding CORP 1'5 W,.h 2rd

Inotail plmt euipetnat CORP 1-1 b.th 27d WI,hi

Comm-nce proc-Ntg of c,fified 5eed Ilint batch I C Cottonot proceting otam-1 CORP

P,eacaranaoioar taeoa danunl-- ts - ath IDA. prooctu |and tecti-o drilling tras PDA and SPCC i

Select acd regitter wted grooea. atosst in praparing I farm traetmeetn pl-ns and lose opplcatohn- CORP

1 Procure iracrort and farm agatften- p I- r I gro-r CORP

Prtpoto spec fications -fr CORP farm rracor and-4-urltnt CORP

| Procure irtono and fgupmaet tr CORP f-armn CORP

D-eyiop CORP tarmt for ba.e v-n pruducn-on CORP

l l l I . l l l l l l l l l l l l l l l~~Creal ottcProduce btoic 5ed from or-bas.o.te. CORP SEEN

DOnion basic fld to, suprvise multiolbtiotyii . lend orocuts seed I_t Srowen CORP - - citan

WvnId B.. k 15276

PAKISTAN S3710SEED PROJECT

PROJECT IMPLEMENTATION SCHEDULE

Actiti,s PRdeted to Oality Control and Pilot Proje

MAIN ACTIVITIES RESPONSIBLE YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Ettablith SRA NSCISPCC NSC Nanonal Satd Counrd

NSCA Notional Sted Crtrfi.-tton AgencV

Aopoint Dirarcmn of SRA and NSCA NSCINSCA POA Protir-cial O jte rmintt of Agri4ulr,rePPE Pilot ProWect Entity eathii the Prom-mia DOpOrmtent, of AgrBtultoro

A,rrng.t tptroryv ,oco,eodaom. recruit .i,-.t CORP Prottrri.l Sed Corson-tton

saff tliK noen eJtisosg lerilitiee NSCA/SRA SPCC - Sted Prohtet Coodlaitmon CaohisrttSRA * Sed Rt gitration Agncy

Prepare long-tet. deoeflrntt piln NSCAISRA TA - Thfrocicl At-jiance Contultants-4. Cortinoing Activity

Slect rnd asoisire Iand for trial Plots. I gtOit ietanal offic. NSCAJVSRA

Prepa.re tpeificoron and tmnder dro ,&nt,n NSCAISRA

Procore qoopm nt and tnehtdic NSCAJSRA

Denelop land. pr"Per. tenodr drocor,rnts for bouildng.icontsouct boilinge NSCA/SRA

Coinntence staff rorndstntent and trmir 9 NSCAJSRA

Pre,psW. RlO. uodr td it-atio NSCA/NSCCor.i bislic

Coormnene cerrifsoatroo operostiono NSCA

Re-nnit Asat ant Direc,tor for Pilot ProtnPI SPCCIPOA

Pre dare antaIed onrk progroUn l badge anId

fhnding for Pilot Procto PPE

Comm-e- r-oroitmtnt ot .ff for Pilot Ptests PPE

Select Pilot Proiect si-.and equi Irnd rigihtt PPE/TA

parpe Pilot Project ago,p~nt uemfifottns arind

trod. doconteet PPEITA

Clea toat dooantent nath I OA, ..adta aodeCteie bid. SPCC/PPEJTA

EtralWte -sh bide, clear _th IDA and -ctrd bide PPEISPCCITA

Re:e.ie and defitrt equohs,nt to Piot Protetq sites SPCCIPPE

Con,otst,t balIdings for pilts and norme for Pilot

Prolects PEITA

Imtitall eqaiptst fot Pilot Proijct plns PPEITAAssoant Project Seed Certficatio

D | i Dretogr Of juficnionSand flot Protect taff for oVenet training PPE/SPCC

Im-ort mother eeed for Pilot Proet PPEISPCC

Surny farni and roqtterr sed gr,ow for cagPta E e. Potto Vegeleble

sod panamais PPE

Estabr S ierith tng chtann.. for egwetb and potatoteed PPE 9 5 l l | ! | ] \ | i

CO,,,tne produt- of -tW:O. ms,,iotm tttd PFIE l l l l | 7 ottPotato ~ Put

Cotrithie,0 proootion of cgOnsiks a ed Pobtet ted PPE

C oniteenot. mrtatrteg of ceetlid .nd potato teed WE

Aalyne trial retuln *nd oprpre fia report angetable end pottO seed WE 7 `7

World Snk - 15277

PAKISTANSEED PROJECT

PHASING OF SEED PRODUCTION AND PROCESSING

YEARS: YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

QUARTERS: 1st 2nd 3rd 4th 1st 2nd 3rd 4th Ist 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th

COTTON: Approved Seed

Certified Seed

Basic Seed

Pre-Basic Seed

WHEAT: Cettitied Seed

Basic Seed

Pre-Basic Seed1-/

RICE: Certified Seed

Basic Seed

Pre-Basic Seed

MAIZE Certilied Seed

Basic Seed

Pre- Basic Seed -_

I/ Wheat pre-hasic seed production) is critical and should cornrmerwe prior to Project Year 1 production period processoing period

World Bank - 15275

ANNEX 11Page 1

PAKISTAN

SEED PROJECT

Banking and Credit Services

A. Agricultural Credit in Pakistan

1. The major institutions concerned with agricultural credit inPakistan are the State Bank of Pakistan (SBP), which is the central bank;the Agricultural Development Bank of Pakistan (ADBP); and Pakistan's fif-teen commercial banks, which were recently'nationalized (see Appendix).

State Bank of Pakistan

2. SBP carries out the usual central bank functions of controllingthe money supply, and regulating and supervising the banking system. Inaddition, it has an Agricultural Credit Department whose responsibilitiesare to study the agricultural credit situation of the country, and to co-ordinate credit services to farmers offered by ADBP and the AgriculturalLoan Schemes of the commercial banks (para 8).

Agricultural Development Bank of Pakistan

3.. ADBP, Pakistan's principal institution for agricultural finance,was established by the Agricultural Development Bank Ordinance of 1961.The Government holds ADBP's entire share capital of Rs 185 M. The head office

is in Islamabad; this office also serves as Zonal Headquarters for NorthernPakistan (Punjab and NWFP). The Accounts Department and Zonal Headquartersfor Southern Pakistan (Sind and Baluchistan) is located in Karachi. Thereare 11 Regional Offices, each headed by a Regional Manager, and 166 branchOffices. ADBP has about 360 officers, most of whom have at least a Bachelor'sdegree in agriculture, economics or commerce.

4. Lending Policies and Procedures. ADBP grants loans for bothseasonal inputs such as seed, fertilizer, and pesticides, and capitalinvestments such as tractors, land levelling, tubewells. Loans are classi-fied as short-term if for 18 months or less, medium-term if for between 18months and 5 years, and long-term if for more than 5 years.

5. The loan applicant is required to present a plan specifying thepurposes for which the loan is to be used; this plan is then verified andevaluated by an ADBP Investigation Officer. A Branch Manager is authorizedto approve loans of up to Rs 60,000; requests for larger amounts are referredto Regional Office or Zonal Headquarters. Approved loans are disbursed in

ANNEX 11Page 2

the form of payments to the supplier or contractor rather than to the farmer.:he current rate of interest charged is 10X for lL.is under Rs 5,0CO and 112for larger sums, with a 2% penalty for overdue payments.

6. Lending Operations. The volume of lending fell from Rs 93M (forWest Pakistan) in 1970-71 to Rs 80 M in 1971-72, but then rose very rapidlyto Rs 169 in 1972-73 and Rs 405 M in 1973-74. In 1972-73, the distributionof loans, according to use, was as follows: tractor 28%; seasonal inputs24%; tubewells 15%; draft anImals 42; other 29%. Since its establishmentin 1961, ADBP has financed about 23,000 tractors and 19,000 tubewells. Debtrecovery rates have been poor - 42% recoveries in 1972-73.

Agricultural Lending by Commercial Banks

7. Pakistan has a well-developed commercial banking system. Thefifteen local commercial banks include three large ones with more than 500branches each. Market towns typically have one or more commercial bankbranches, and the great majority of progressive farmers maintain bankaccounts.

8. Before 1972, the commercial banks generally confined their activi-ties to commerce and industry. In that year, however, SBP took steps topromote their involvement in agriculture. A National Credit ConsultativeCouncil was established in September 1972, under SBP's sponsorship, withthe purpose of setting sectoral targets for bank credit on the basis ofthe country's socio-economic needs, with increased attention to previouslyneglected sectors. In December 1972, SBP, believing in the advantage of a"multi-agency approach" for meeting the credit needs of the agriculturalsector, promulgated its "Agricultural Loans Scheme for Commercial Banks."Under this scheme SBP sets annual targets for agricultural lending by eachcommercial bank. The penalty for failure to meet the target is that, at theend of the year, the difference between target and achievement must be de-posited with SBP without interest. The process of increasing Governmentsupervision of the banking system culminated in the nationalization of thelocal commercial banks on January 1, 1974.

9. The commercial banks have responded vigorously to SBP's initiativesto serve the agricultural sector. They have recruited M. Sc. graduates inagriculture, agricultural economics, and agricultural engineering, giventhem training in credit management, and put them to work in their newlyestablished Agricultural Credit Divisions. Loans are advanced for essen-tially the same purposes as ADBP loans: seasonal inputs, tractors, tube-wells, land development, livestock, etc. Lending procedures are alsosimilar to those of ADBP. Interest is charged at 11%. Most branches reportgood recovery performance (85-95%), while a few report recovery rates aslow as 50%.

10. The lending performance of the commercial banks under the Agri-cultural Loans Scheme is shown below:

ANNEX 11Page 3

Rs Million

For Seasonal Inputs For Capital InvestmentYear Target Achievement Target Achievement

1972-73 80 68 20 171973-74 250 226 50 611974-75 300 N.A. 120 N.A.

Thus in 1973-74 the commercial banks extended about 70% as much credit toagriculture as did ADBP.

B. Credit Services for Project Farmers

11. Farmers registered with the Seed Corporations as seed growers andrequiring credit for farm development would be eligible to receive creditfrom local banks selected and supervised by SBP. ADBP which has hithertoplayed a major role in providing credit to farmers would be precluded fromparticipating in this project until GOP makes arrangements satisfactory toIDA to remedy ADBP's financial and administrative defects already identifiedby IDA. The Seed Corporations would assist the farmers in preparing thefarm plans providing the basis for the loan, and the loan applications wouldbe submitted to the banks with the recommendation of the Corporations.

12. Lending terms would be the standard ones for agriculture: aninterest rate of 11%, and a repayment period of 8 years for capital invest-ments. The farmer would make a 15% down payment, while the loan wouldfinance 85% of the investment cost.

ANNEX 11Appendix

PAKISTAN

SEED PROJECT

Banking and Credit Services

List of Pakistani Commercial Banks

AustralasiaBank of BahawalpurCommerce BankEastern Banking CorporationEastern Mercantile BankHabib BankLahore Commercial BankMuslim Commercial BankNational Bank of PakistanPunjab Provincial BankStandard BankUnion BankUnited Bank LimitedSarbad BankPremier Bank

ANNEX 12Page 1

PAKISTAN

SEED PROJECT

Seed Marketing and Pricing

Procurement of Seed

1. The field staff attached to the Production Department of the SeedCorporations would prepare harvesting prograns in consultation with the seedgrowers. Based on these the Processing Department would schedule croptransport to the plants. Seed Certification Agency inspectors would visitthe farmers, or ginneries in the case of approved cotton seed. and collectpack, seal and mark representative samples of the harvested crop for qualitycontrol-laboratory tests and post-control trials. The samples would bedivided into three portions: one for immediate analysis, one for referenceand one for the farmer or ginnery. The seed to be delivered to the Corpora-tions would be bagged, sealed and marked. The Plant Manager would thenarrange to take delivery of the seed from the grower or ginnery and haveit transported to the nearest plant. The delivery receipt issued to thegrower or the ginnery would form the basis for their payment.

2. For seed other than cotton the grower would be paid an agreedpremium above the market rate for all seed meeting certification standard,as determined by the test of the NSCA. That portion of crop delivered butnot meeting the required seed standard would be paid for at the market ratefor the commercial crop; growers would have up to six weeks from deliveryin which to nominate a sale day for the purpose of price fixing. 1/ Inthe case of certified seed cotton, the premium would be paid on the totalityof the grower's delivery since it would not be possible to determine theproportion eventually going as seed. For approved cotton seed ginnerswould receive a small premium, above the oil mill price, to compensatefor the extra care necessary to segregate seed lots from different pickings.

3. Payment at market price would be made by the Corporations withinthree days of the agreed date of sale and premium payment within thirtydays of the agreed sale date.

Corporation Sales

4. The Seed Corporations would be responsible for market research,publicity, sales promotion, and programming sales and distribution. It would,

1/ Without such a provision, growers might be tempted to retain seed togain from post-harvest price rises. This would be undesirable as theyhave no suitable storage.

ANNEX 12Page 2

however, not engage in physical distribution of seed or in retailing activi-

ties. The Corporations would appoint authorized distributors who would be

responsible for the transport, and retail sales of certified and approved

seed to farmers through their own network of retail outlets.

5. Project success would depend on an efficient and low cost system for

seed distribution. No farmer convinced of the benefits of good quality

seed, and willing to pay the prices fixed by the Corporations, wherever

he might be located, should be denied the opportunity of securing his seed

requirements at the right place and time. It is, therefore, essential that

retail outlets should be spread throughout the country as widely as possible.

To ensure efficient service, competition among distributors would be

encouraged.

6. At present only limited quantities of seed passing through the

market are handled by three State institutions viz:

Punjab Agricultural and Supplies Corporation,Sind Agricultural Supplies Organization, andNWFP Agricultural Development Authority.

These three institutions also engage in distribution and sale of fertilizerand pesticide (Annex 1). While they can usefully continue to handle seed

distribution along with other agricultural supplies, it is neither feasible

nor desirable for them to open numerous new retail outlets in various

scattered locations. The Seed Corporations- would therefore appoint, as

additional distributors, other institutions, including those in the privatesector, to share in the distribution and sales of certified and approved seed

produced by the Corporations.

7. The Corporations would fix retail selling prices and sell to

distributors at wholesale prices, providing a price margin to cover trans-

port costs and selling commission. Distributors would be required to

submit periodical sales returns to enable the Corporations to effectively

control seed distribution and sales to farmers.

Pricing of Seed

S. In the long term, the retail prices charged to the farmers mustbe such as to ensure financial viability of the Corporations at full pro-duction and be adequate to cover:

premiums paid to registered seed growers;collection costs;processing costs;packing and storage costs;Seed Corporations' overhead costs;distribution costs (including sales commission); anda reasonable rate of return on Corporations' investments.

ANNEX 12Page 3

9. The major factors bearing on a seed pricing policy are:

(i) higher operating and overhead costs in the initial yearsof low throughput;

(ii) the time required to convince farmers, who presently purchaseunprocessed and low quality seed at almost commodityprices, of the increased benefits flowing from the use ofhigh cost, processed and certified seed;

(iii) the need for the new state-owned Seed Corporations todemonstrate to farmers their ability to deliver seedof guaranteed high quality. This too would requiretime, particularly against a history of marketing ofpoor quality seed by government institutions;

(iv) Governments' desire to make seed available at low pricesin order to reach the poorer farmers; and

(v) Governments' desire to expand quality seed productionvery rapidly.

10. In order to set prices the Corporations would calculate targetprices which would be the retail prices required to ensure financial viabilityat full production (pra 8). In the years before full production theseprices may not cover all costs, yet would be higher than the market wouldbear (para 9).

11. It would be normal commercial practice for deficits incurred inthe early years of a new operation to be capitalized as launching costs.Three factors militate against this approach in this case.

(i) a new product is being launched not on a new marketbut one which has constantly been exposed to inferiorproducts, from an almost identical source;

(ii) Governments' desire to expand output more rapidly thanwould be commercially prudent - without Government support;and

(iii) Governments' avowed intent to reach poor farmers quicklyby subsidizing seed prices -- and the desire for the creditfor so doing.

12. For five years from the start of Corporation operations seed priceswould therefore be subsidized. The prices for seed charged to farmers inthe first year of production would be not lower than the cost at which cerealseed would be procured from the registered growers, or cotton seed procuredfrom the ginneries. The selling prices would be gradually increased insubsequent years up to year six when there would be no subsidy - the prices

ANNEX 12Page 4

charged to the farmer would be the target prices fixed by the Corporationssolely on commercial grounds. The subsidies, which would be phased outover a period of five years, would be reimbursed to the Corporations bythe Governments.

13. Table 2 gives estimates of the ex-plant prices for the variouscrops. These prices have been worked out by starting from the estimatesof the prevailing market prices for grain (ex-ginnery price for cotton),and taking into account the investment and operating costs of the Corpora-tions. Using the financial models worked out for representative processingplants (Annex 13), the price level was set to ensure an attractive financialrate of return (about 15Z) to the Corporations.

ANNEX 12Table 1

PAKISTAN

SED PROJECT

Price Assumptions for the Major Project Crops /

(prices in Rs per maund, unless otherwise specified)

Wheat 2/

Farm gate price: Rs 45Market price: Rs 47Procurement price: Rs 37Br-product (Bhossa): Rs 5

Paddy,

$assati Coarse riceNilled rice: procurement price Rs 90 Rs 40IflJed rice: market price Rs 115 Rs .55Paddy price (delivered to the mill) ' Rs 59 Rs 2.7Paddy fara ate price Rs 58 Rs 26By-product (straw) Rs 2 Rs 2

CottonW

Seed cotton: price at the ginnery: Rs 77Seed cotton: farm gate price Rs 75Cotton seed: price at the ginnery: Rs 48Be-product (sticks) Rs 3

Maize

Farm gate price: Rs 45By-products (stalks) Rs 80(per acre)

(an

Farm gate price: Rs 45

Berseex (wet)

Farm gate price: Rs 2

Kharif Fodder

Farm gate price: Rs 1.5By-product Rs 27

1 These figures are forecasts of the crop prices at the time of harvest in1975, assuming that this harvest would be a "normal" one. At the time ofsowin& prices are normally 10 to 15% higher.

I These prices are averages of the prices of local and improved varieties.2/3 of the milled rice procurement price minus Rs 1. for milling charges.The prices of seed cotton are averages for the various qualities.

i/This price corresponds to good quality seeds (for sowing and not for crushing);the average price of all-quality seeds would be lower.

ANNIN 12Table 2

PAKISTAN

SEED PROJECT

Ex-Plant Prices for Proceased Seeds

(Rs per maund)

Farm gate Price Paid Year 2 Year 3 Year 4 Year 5 Year 6price for to the (ist yeargrain 2 Growers of operation

(_20_)_ of the plant)

CEREAL

Wheat 45 54 54 62 70 78 86Paddy Basmati 58 69.6 69 77 85 93 101Paddy Coarse 26 31.2 32 37 42 47 52Maize 45 54 54 62 70 78 86Cotton seed 48 __ 48 53 58 63 68Subsidy per maund

of paddy coarse -- __ 20 15 10 5 -Subsidy per maund

of all othercereals (incl.paddy basmati) -- -- 32 24 16 98 _

Subsidy per maundfor cotton seed -- -- 20 15 10 5

1/ Ex-ginnery price for cotton seed.

ANNEX 13Page 1

PAKISTAN

SEED PROJECT

Financial Projections

1. The purpose of these financial projections is to show that theprice level set for the seed at the various processing stages provides asufficient financial incentive to the participants. Farmers entering intoa legal agreement with the Corporations would get advice for developing theirland and preferential treatment for purchasing farm machinery in exchange fortheir commitment to grow seed for the Corporations. In addition to thisincentive and the compulsion provided by the agreement, however, it isnecessary that the farmer be convinced of the profitability of seed growingif he is to carry out this activity satisfactorily. Likewise, a similarfinancial incentive must be provided for the Corporations, which are to berun on commercial lines and expected to be financially viable.

2. To establish the financial viability of seed growing, two farmmodels were worked out (Tables 1 through 4). Each model represents theactivity of a typical seed grower owning a 100-acre farm. In both models,wheat is the principal rabi crop; the principal kharif crops are cottonin Model 1, rice and maize in Model 2. Three situations have been dis-tinguished: without project (Situation I), with additional on-farm invest-ment and the farmer still growing commercial crops (Situation II), andwith additional on-farm investment and the farmer growing seed (SituationIII).

3. The models show that, even if he does not grow seed, the per-formance of the farmer would be improved by the new investment (SituationII). Both models give a financial rate of return between 30% and 40% forSituation II over Situation I and the net cash income of the farmers, whenthey have paid off the loans incurred to finance their investment, is 50%higher than it was before making the investments.

4. Farmers willing to grow seed for the Corporations would receivefor their seed a premium above the market price for the commercial crop.It is proposed that the farmers would get a premium of 16% over the marketprice for cotton, and 20% for the other crops. (Annex 12, Table 2). Ex-cepting cotton this premium would be paid only on the part of the cropthat meets the seed quality standard after testing by the Seed CertificationAgency. It is assumed that, on the average, 80% of a farmer's crop wouldmeet this standard. In the case of seed cotton, however, the premium wouldbe paid on the totality of seed delivered by the grower since it would notbe possible to determine the proportion eventually going as seed.

ANNEX 13Page 2

5. The models show that the farmers would be considerably better offif, having invested on their farms, they took to growing seed for the Cor-porations (Situation III). The rates of return for Situation III overSituation I is 59% for Model I, 48% for Model II: and their net cash in-come after loan repayment some 75% higher than before investment. Twosensitivity tests (investment cost increase of 20%, yield decline of 10%)give rates of return of about 30% which is still attractive. The levelset for the premium to be paid to the seed growers is thus considered anadequate incentive.

6. The financial viability of seed processing has been establishedon the basis of two models. Since technologies and costs are differentfor processing cotton and cereal seed, one model was established for eachtype. The Corporation overhead expenses have been appropriately allocatedto the different plant models. Likewise, the cost of common facilitiesor inputs to be used jointly by a cereal cum cotton plant were apportionedbetween them. The cereal plant model has a throughputof 21 ,f1 30 tons(17,100 tons wheat, 1,410 tons rice and 2,620 tons maize); the cotton planthas a throughput of 16,000 tons of commercial cotton seed, 970 tons ofcertified seed, 25 tons of basic seed. Details of plant costs and revenuesare given in Annex 4.

7. The price of the seed was established ex-plant, i.e., exclusive ofdistribution and retailing costs (Annex 12, Table 2). Seed prices ex-plantwere determined so as to ensure a reasonable profit for the plants. Theselected set of prices would give each plant a financial rate of returnaround 15 % (Table 5). Sensitivity tests show that the rates ofreturn are not as sensitive to investment costs as to operating costs. Thus,Ihus, the selling price of the processed seed would be influenced more by

by operating costs of the plants (comprising a very high proportion ofraw materials cost) than by capital investment in the plants.

8. A cash flow statement for the Punjab Seed Corporation is given inTable 6. The financing structure assumed is that all capital costs duringthe project period would be met from equity capital. Permanent workingcapital would be obtained through 10 year loans carrying interest at 11% paand with a five year grace period. Short term working capital requiredduring peak months would be obtained from commercial banks. It is evidentfrom the cash flow statement that unless all capital costs are covered byequity capital the Corporation would be faced with an unserviceable debtburden. This situation is considered representative of the Sind Seed Cor-poration as well.

PAKISTAN

SEED PROJECT

Seed Grower's Farm - Revenue

(Amounts in Rupees)

Situation I Sttustpn I1/ Situation III-(Without Project) tWIth' Project InvetIment, Without Seed (With Project Investment, With Seed Crowing)

Growing)

Yields Production 2/ Yields Production Acres (of3/ Yields Seed4/ Non-seed Sood ! n-meedAcres (mds/ac) (ads) Revenue Acres (mda/ac) (mds) Revenue whlch Seed) (mde/ac) Production Production Revenu Revenue

Kai Ri RsOLDIL I ---- ---

Wheat 40 30 1,200 54,000 50 35 1,750 78,750 50 (374) 35 1,313 437 68,243 19,665Cotton 35 15 525 39,375 40 17 680 51,000 40 (7) 17I 119 561 10,308 42 075Bereem 10 600 6,000 12,000 10 700 7,000 14,000 10 (2) ( NS: 7001 8,100 16,2000

( : 550/7 14 1,260iherif fodder 12 800/3_/ 9.600/367/ ( 14,400 12 900/3 10,800/36.71 ( 16,200 12 (4) ( gS 90/3!/ 10,465/34 16,502

972 ( 972 ( S: 230/25 13 416

6/ 80,227 94,42Other 8 - 8 SL

Total 105 Rs 120,747 120 Ka 160,922 120 174,669

IDDEL 2

Wheat 28 30 840 37,800 36 35 1,260 56,700 36 (27) 35 945 315 47,436 14,175Hixse 10 30 300 13,500 12 35 420 18,900 12 (3) 35 105 315 5,268 14,175Rice 35 35 1,225 31,850 40 40 1,600 41,600 40 (2h) 40 100 1,500 3,003 39,000Gram 10 8 80 3,600 12 9 108 4,860 12 (2) 9 18 90 935 4,050Bereem 10 12,000 10 14,000 10 (2) 1,260 16,200

(as above) (as above) (as above)Katrif fodder 12 14,400 12 16,200 12 (4) 416 16,552

6/ 972 972 58,318 104,152Other 5 5 5 104 162

Total 110 114,122 127 153,232 127 162,480

1/ At full development (Year 3 Qnwards).2/ Price assumptions from TabLe 2 in Annex 12.3/ Seed acreage is keyed to seed production.1/ Seed production per farm is determined by dividing the Seed Corporationa' demand for seed awong the participating farms. The number of participating farms (estimated

at 1876, 90P of Model I and 940 of Model 2) is the number of farms needed to grow the seed crop for which there is the greatest demand, namely wheat. (And assumingthat participating farmers devote only 75. of their wheat acreage to seed, growing foodgrain on the rmaining 25Z of wheat acreage.)

5/ The seed growers receive a premium of 20Z of the foodgrain price for acceptable seed. However, asouLming 3% field rejection and 20Z factory rejection, they reoeive thepremium on only 77.67 of the seed crop, receiving grain price for the remainder. (However, there are no field rejections for berseem and kharif fodder, because thereare no recognizable varieties.)

6/ "0ther" consists chiefly of vegetables and sugarcane. It is omitted from the financial calculations because of lack of data and the fact that it is not affected by theproject.

7/ The number to the left of the slash refers to fodder; the number to the right refers to a coarse grain by-product.8/ NS: nonseed; 5: seed. A seed fodder crop is grown differently from a nonseed fodder crop, with less fodder removed during the growing season to ensure a larger seed

yield at the end.

PAKISTAN

SEED PROJECT

Seed Grower's - Fixed Operating Costs(Amounts in Rupees)

Situation I Situations II, III(incremental cost compared with Sit. I)

Item Rate (Rs) Usage Cost (Rs) Rate (Rs) Usage Cost (Rs)

Tractor and implements 27.5/hr!/ 500 hr 13,750 22/hr3/ 250 hr 5,500

Bullocks 2600/pr 4 pr 10,400 2600/pr -1 pr 4/ -2,600

Tubewell 25,665/yr 1/4 6,416 21,8605/ 1/4 5,465

Land Revenue 10/ac 100 ac 1.000 8,365 (incrementalcost)

31,566 31,566 (Sit. I cost)

39,931 (SituationII cost)

1/ Depreciation 5,500 Rs/yr 2/ Depreciation 3,805 Rs/yrInsurance 250 Repairs and Spares 2,610Repairs and Spares 5,500 Operator 3,000Fuel (5.75/hr) 5,750 9,415Lubricants (1.25/hr) 1,250 Fuel (5.75/hr) 14,375Operator 3.000 Lubricants (.75/hr) 1,875

21,250 25,665 i 4 = Rs 6416Implements 6,250(replacements 27,500 i, 1,000 hr/yr Rs 27.5/hrand repairs) 0

3/ As in 1/, except that depreciation is excluded to avoid double-counting the investment cost.4/ Bullock usage reduced from 4 pairs to 3 pairs. M

5/ As in 2/, except that depreciation is excluded.

PAKISTAN

SEED PROJECT

Seed Grower's Farm - Variable Operating Costa(Amounts in Rupees)

Divisible (by Crop) Costs per Acre Divisible Costs per FarmCrop, Canal 2/ DivisibleSituation Fertilizer Insecticide Seed I Water Labor Costs Model 1. I Model 1. II Model 1. III Model 2. I Model 2. 11 Model 2, III

Wheat I 225 - 45 12 115 457 18,280 12,796TI 225 - 45 12 182 464 23,200 5,800 16.704 4,176III 225 - 65 12 196 498 18,675 13.446

Cotton I 150 50 10 17 280 507 17,745II ISO 65 12 17 294 538 21,520 17,754III 150 65 17 17 315 564 3,948

Rice I 150 30 5 17 245 447 15,645II 150 60 5 17 259 491 19,640 18.413III 150 60 7 17 280 514 1,285

NaiZe 1 150 20 23 10 210 413 4,13011 150 20 23 10 217 420 5.040 3,780I 20ISO 20 30 10 231 444 1,332

Gran I - 18 10 175 203 2,030II _ - 18 10 182 210 2,520 2,100III - - 26 10 196 232 464

Berseem I - - 15 10 350 375 3,150 3,750ll - - 15 10 385 410 4,100 3,820 4,100 3,280III - - 22 10 385 422 844 844

Kharif I - - 14 10 280 304 3,648 3,648Fodder II - - 14 10 294 318 3,816 3,651 3.816 3,498

III - - 20 10 294 324 _ 162 324

Divisible Costs 43,423 52,636 54,660 41,999 51,820 52,942

Indivisible Costs 31,566 39931 39.931 31 566 39,931 39 931(from Table 2 )

Total Operativa Cost 74,989 92,567 94,591 73,565 91,751 92,673(At Full Development)

1/ Basic seed provided to the seed grower by the Corporation in priced 201 higher than certified seed, which in turn is prices 207 higher than ordinary seed, for a totalpriua. of 447..

2/ Man-days/acre x Re 7/isan-day./ Coat/acre (from left) x cropping pattern. At full development (year 3 onward) for Situations 11 and Ill.

ANNEX 13Table

PAKIST&N

SEED PROJECT

Seed Orws Farms

Cash Flowa

Situation I (Without Project)Xodal 1 IbeatJottoa Model 2 Wheat,Rioe4(a±se

Year Tear reYrs Tear ears Yer r Ysa tear Tears1 2 3-8 9 10-16 1 2 3-8 9 10-16

1. Revenue 12o.8 120.8 120.8 12o.8 120.8 114.1 114.1 114.l 1.14.1 114.1

2. Operating Costa 77 50 75.0 75.0 73 5 _L.5 73.5 73 5 2 3 5

3. Operating Surplus (- Net Cash ' 45.8 45.8 45.8 45.8 45.8 40.6 4.o.6 40.6 40.6 40.6

Situation II W ith ProJe tInvestent, Wthout *oed gwine)

.Rvenue / 3/ 120.7 138.5 160.9 16o.9 160.9 U14.1 131.0 153.2 153.2 153.2

5 . Operating Cost - 77.8 85.2 92.6 92.6 92.6 76.3 84.o 91.7 91.7 91.7

6 . Operating trplas 43.0 53.3 68.4 68.4 68.4 37.8 47.0 61.5 61.5 61.5

7 . Investsnt- 146.4 - - 20.3 - 46.4 - - 20.3 -

3 . Loan/(Repayaent4' 39.4 (8.4) (8.4) - - 39.4 (8.4) (8.4) - -

9. Net Cast (6-7+6) 36.0 4".9 60.0 48.1 68.4 30.8 38.6 53.1 41.2 61.5

10. Increnental Net Cash, II-I (7-3) (9.7) (0.8) 14.2 2.3 22.6 (9.8) (2.0) 12.6 0.6 20.9

Situation III (Yth ProJeot

11 . Reyenue/ g124.1 145.3 174.6 174.6 174.6 116.7 136.2 162.5 162.5 162.5

12 . Operating Cost 78.5 86.5 94.6 94.6 94.6 76.9 84.9 92.9 92.9 92.9

13. Operating Surplus 45.6 58.8 80.0 80.0 80.0 39.8 51.3 69.6 69.6 69.6

14 . Investzent / _46.4 - - 20.3 - 46.4 - - 20.3 -

15 . Loan/ARepayiment) 5/ 39.41/ (8.-) (8-4) - - 39.4 (.8-4) (8-4) - -

16 . Net Cash (13-14+15) 36.6 50.4 71.6 59.7 80.0 32.8 42.9 61.2 49.4 69.6

17 . Increa,ntal Net Cash, III-II (16-9) 2.6 5.5 11.6 11.6 11.6 2.0 4.3 8.1 8.1 8.1

18 . Incresental Net Cash, III-I (26-3) (7.2) 4.6 25.8 13.9 34.2 (7.8) 2.3 20.7 8.8 29.0

Financial Rates of Returnon Additional Investment

Situation II

2.9. incremental operating Surplus,Net of Invesatent Cost (6 -3-7) (49.2) 7.5 22.6 2.3 22.6 (49.2) 6.4 20.9 0.6 20.9

Rate of Return: 36% Rate of Return: 33%

Situation III

20. incremental operating Surplus,Net of Investeent Cost ( 13.3- 4) (46.6) 13.0 31.2 13.9 34.2 (47.2) 10.7 29.C 8.7 29.0

Rate of Return: 59% Rate of Returns 48%

Note: Figures may not add exactly due to rounding.

I/ Revenue (from Table 1) minus operating cost (Table 3).2/ From Table 1.

3/From Table 3. Cssprfrei/ Assumptifns underlying investment cost as stated in Annex 3, tables 1, 2 ani 3. Costs per farmer

are as follows: RsTractor and implEments 21,660Tubewell 12,500Land development 12.250

Total 46,410 Rs

In year 9, the tractor and tubewell engine are replaced: 26,00026 100Eef 5 .H h - 20,275

5/ Farmer makes 15% down payment on project inveataent; bank loan finances remaining 85%. The interest rate

is 11%; repayment takes place in years 2-8.

Table 5

PAXLSTANI

SLDPROJZCT

Financial late of Retarn - Pro iesin Plant Xodels

I e a r a1 2 3 4 5 6 7-10 11 1 1S 17-20

(I) C2RLLS PIANT(17,100 tons Wheat, 1,410 tons Riosand 2,620 tons Maies Seed)

Capital Costa/

Processing facilitiea2/ 21-34 - - - - 5.42 - 6.36 - 5.42 -General - propo%ion 0.83 - - - - 0.33 - 0.33 - 0.33 -Working capitalAW _ 6.13 6.13 6.13 - _ -_ _

Subtotal 22.17 6.13 6.13 6.13 - 5.75 - 6.69 - 5.75 -

Operating Costs5/ 0.63 15.12 28.61 42.10 42.10 42.10 42.10 42.10 42.10 42.10 42.10

Total *osts 22.80 21.25 34.74 48.23 42.10 47.85 42.10 48.79 42.10 47.85 42.10

Benefit.6/ _ 17.36 33.32 49.98 49.98 49.98 49.98 49.98 49.98 49.98i 49.98

Net benefits (22.80) (3.89) (1.42) 1.75 7.88 2.13 7.88 1.19 7.88 2.13 7.88

(II) CorToN PLANT(16,000 tcon Ciaercial, 970 tonsCertified and 25 tons Basic Seed)

Capital Costs

Processing facilitiesl/ 18.31 - - - - - - - - - _General - propo§)ion 0.83 - - - 0.33 _ _ - 0.33 _Working capital - 4-44 4-44 4-44 - - -

Subtotal 19.14 4.44 4.44 4.44 - 0.33 - - _ 0.33 _

Operating Cost2'/ 0.67 12.21 22.77 33.39 33.39 33.39 33.39 33.39 33.39 33.39 33.39

Total costs 19.81 16.65 27.21 37.83 33.39 33.72 33.39 33.39 33.39 33.72 33.39

Benefit.s'/ - 13.06 26.12 39.18 39.18 39.18 39.18 39.18 39.18 39.18 39.18

Net Benefits (19.81) (3.59) (1.09) 1.35 5.79 5.46 5.79 5.79 5.79 5.46 5.79

FINANCIAL UT% OF RNUJ 14.45> for Cereals Plant114.75% for Cotton Plant

1/ Included are inveatxnts and replaoement costs.2/ Based on costs in knnex 4, Tables 2, 3 and 4 plus a 1O for physical contingency. Replacement ooets are based on life

expectancy of fixed assets aa shown in tke sae Tables.3/ 1/5 proportion of Punjab Seed Corporation's investeenta in general buildings, vehicles and equipent at headquarters, as in

Annex 10, Table 2.4/ The value of working capital has been taken as the increietal value of the raw material (unprocessed cereal seeds) divided

by 2 since the seeds will be kept for half a year.5/ Details are in nnex 4, Tabla 8, and aesmptiona in Annex 4, Appendix.6/ Details are in Annex 4, Table 10.7/ Based on costs in Annex 4, Table 5, plus a 1IC for physical contingency. No provision for replacements as equipnent assumed

to have a 20-year life.8/ The value of working capital haa been taken as the incremental value of the raw material (unprocessed seed cotton and cotton

seed) divided by 2 since this working capital will be kept for half a year.9/ Details are in Annex 4, Table 9.10/ Details are in Annex 4, Table 1.

SEED POJECT

Cash Flow Statcent -,= Seed Corwrstion

PROJECT FARS: 2 3 4 5 6 7 8 9 10 11 12 13 14 15

SWURCED

Revenue Surplus

Processing

8aba - Cereals -_ (.63) 2.24 L.71 '. N 7.5 7.86 7.88 7.B8 7.88 7.88 7.88 7.88 7.88Manewal - Cereals (.51) 1.81 3.81 6.37 6.37 6.37 6.37 6.37 6.37 6.37 6.37 6.37 6.37 6.37hanea1 - Cotton (.50) .64 2.51 4.34 4.34 4.34 L.34 4.34 4.34 4.3 4 4.34 4.34 4.34 4.34

D. G. Inan - Cereal3 -- (.51) 1.81 3.81 6.37 6.37 6.37 6.37 6.37 6.37 6.37 6.37 6.37 6.37D. a. Fhan - Cotton - (.67) .85 3.35 5-579 5.79 5.79 5.79 5.79 5.79 5-79 5.79 5.79

Total Surplus (1.01) .64 11.22 a2.58 3u.75 3u.75 j0.75 3u.75 30.75 3u.75 30.75 30.75 30.75 30.75

ibuit Ca pital (Capital Coets) 22.00 66.00 48.0oe Loan (working Capital) - 21.45 6T.s3 41.02

Sort-Terk loans _.80 _.19 ( .99 )

rotal Receipts 21.79 88.28 125.76 o3.6u 30.75 3u.75 30.75 30.75 30-75 30-75 30-75 30-75 30.75 3u.75

APPLICATION

Capital Costs

Fans Development 2.51 3.76 - - 1.50 1.72 - 1.50 1.72Processin Facilities 9.41 29.49 22.23 5.)42 10.84 6.15 12.51 -Buildings and Storage 3.54 11.77 9.69 1.65 - - 1.65 -Vehiclss 1.04 1.85 .42 .52 1.85 .42 .52 1.85 .42

16.50 46.87 32.34 7.59 14.19 2.14 8.32 3 5.86 2. 14Physical Contizgenaiwe 1.49 3.80 2.78 - - - - -Price Contingencies 3.80 14.89 12.245 3.87 7.23 1.09 4.24 7.98 1.09

21.79 65.56 47.57 11.46 21.42 3.23 22.56 23.84 3.23

wrir4ng Capital (incremazeal) - 21.45 67.53 53.21

Short-Term Loan Interest W/ - .09 .11 -Long-Tesm Loans - Interest i/ - 1.18 6.07 12.04 lU.3C 12.65 12.10 12.10 10.'i5 d.25 5.50 L.4u 3.8,> 1.65

- Repa7ment - - - - 15.00 S.uu - i5.00 20.00 25.00 10.00 5.00 20.00 15.oo

Total Paymerits 21.79 88.286 ll.?d 6,.25 29.30 29.11 33.52 30.33 .ju.4h 33.25 2.i06 33.214 27.Ud 10.605

Surplus - Anual - - 4.40 <±.65) L.45 1.64 (2.77) .42 .30 (2.50) 2.69 (2.49) 3.07 144.1U- Cumulative - - 4.48 2.83 4.37 6.01 3.24 3.66 3.96 1.46 4.15 1.66 5.33 21.98

1/ For the Corporation's farmirE operations, it has been assumed that the revenuLs would Jiut cover the operating costs;thus no surplus on farming is included in ttis statement.

,/ Includes replacement a fixed assets.) Price contirgenries on all investment costs are included although revenus are stated at 1975 constant prices, in order

to be conservative in regard to the Corporations' cash flow.' Interest calculated at 11% per annum.

ANNEX 14Page 1

PAKISTAN

SEED PROJECT

Economic Analysis

1. The principal economic benefit to Pakistan resulting from theproject would be from higher crop yields that could be obtained by thefarmers using project seed. Lint quality improvement, in the case ofcotton would also be an important benefit. Additional benefits wouldaccrue from pilot projects operations.

Yield Effect

2. The individual farmer using high quality project seed would achievehigher yields than those from the mixed low-quality seed currently used.In computing the economic benefit from this improvement, only incrementalproduction of the major crops (wheat, maize, rice, cotton) is includedsince seed of these crops make up 99% of the total project production.

3. Wheat and Rice. The yield impact of project seed for these cropsis based on two assumptions. Firstly, that the seed would be bought byfarmers already growing the older HYVs. Thus the initial step from lowyielding varieties to HYVs has been made. Benefit would derive only fromimproved quality of HYY seed and speedier varietal replacement. Secondly,it is assumed that farmers buying project wheat and rice seed would replaceit every five years. This would be a sub-optimal replacement rate. Overfive years the seed quality, hence yield impact, would degenerate markedlymainly through admixture. However, it is likely to be the average rate ofreplacement for large numbers of unsophisticated farmers. On the basis ofthese assumptions, it is estimated that project wheat and rice seed wouldincrease yields per acre by an average of 10% over the replacement periodof five years. Because of the large acreage covered, the base taken is thenational average yield for irrigated areas.

4. Maize. Currently little HYV maize is grown. A higher yieldimpact is therefore assumed for maize to embrace both improved seed qualityand varietal improvement. A yield increase of 20% average for a three-yearreplacement period is assumed. The shorter replacement period reflects theopen pollenated character of maize leading to more rapid and apparent seeddegeneration.

ANNEX 14Page 2

5. Cotton. Cotton seed would be replaced every year, as most nowis. The yield impact of project cotton seed would derive from seed qualityimprovement, since no dramatic varietal improvement is in the offing.Improved quality seed with high germination rates, and treated against seedborne disease, would lead to improved plant populations, more vigorousstands, and, hence, higher yields. A yield increase of 10% is assumed.This appears conservative but it relates to the bulk of the cotton areawhere the potential would be diluted by poor husbandry, marginal growingconditions, etc.

Quality Effect

6. In addition to the yield effect, an important qualitative improve-ment would be achieved for cotton. In recent years lint uniformity andlength has deteriorated through varietal admixture, and use of degenerateseed. Project seed, allied to the varietal zoning to be enforced, wouldproduce a longer staple length and a better uniformity. Most of the lintcurrently has a staple length between 15/16" and 1". As a result of theproject, staple length would be increased to between 1-1/32" and 1-1/16"(Annex 2). In recent years such a difference in staple length has beenreflected in an 11.5% price advantage for the longer staple. In computingproject benefits it has been assumed that improved lint quality would resultin an average 10% price increase (Table 5).

Other Benefits

7. The project would increase the net cash income of the seed producers(Annex 13). The net benefit is relatively minor, however, and is not includedfor rate of return purposes. Land and irrigation improvement, farm mechanizationand improved cultural practices on the seed growers' farms would also have ademonstration effect on the farmers in surrounding areas. This benefit isnot quantified.

8. The pilot projects would pave the way for the diversification ofthe seed industry through production of quality seed of potato and vege-table. Potato yields are currently reduced by as much as 50% by virusdisease. Most of this loss could be reduced if disease free seed wereproduced. Vegetable seed currently produced has poor germination and isvery mixed. Thus yields are poor and the vegetables lack the uniformityessential to a quality product. Improved seed would give higher yields andgreater uniformity in the size and quality of vegetables, hence facilitatingtheir marketing. Local production of potato and vegetable seed would helpto save foreign exchange now spent on imported seed. Pilot project costsand benefits are, however, omitted from the analysis since benefits woulddepend esventially on the results of research and cannot be confidentlyforecas.

ANNEX 14Page 3

Project Beneficiaries

9. Since the new seed to be produced under the project is for thecountry's main crops, its impact would eventually benefit the majority ofPakistan's farmers. Farm laborers would also benefit, since about one-tenthof the incremental harvests would be paid in kind to the harvesting laborrequired. Initially, the major beneficiaries would be the larger, progres-sive farmers who are more likely to understand the potential of the newseed. These farmers are more familiar with improved technology and havehad a better exposure to good quality seed. As has been proved in Pakistanfollowing the introduction of Mexipak wheat varieties in the late 60s, thisresponsiveness of progressive farmers has a demonstration effect whichquickly persuades the smaller farmers of the advantages of good qualityseed. In a short time, this demonstration effect, added to extension effortswould ensure the wide use of project seed by all farmers.

10. The seed produced at full development, would serve about 15 millionacres (computed from Table 1). Assuming that on farms benefiting from pro-ject seed, 57% of the cultivated area (the national average) is under cropsfor which project seed would be provided, these farms would occupy 26 millionacres or 53% of the total farm area. Assuming, as seem reasonable, thatseed usage would increase with farm size, it is estimated that the 26 millionacres would be farmed by 2.1 millinn farmers.l/ The average farm familysize is 6 persons. Thus, some 13 million people could ultimately benefitfrom the project. This figure excludes the laborers who would benefit fromthe wages paid annually for harvesting labor required for handling the in-creased crop yields - estimated at 100,000 man-years annually. Some ofthese laborers could be members of farm families.

11. Surveys of income distribution in Pakistan indicate that the cut-off point for the lowest 40% is about 70% of the national average incomeor Rs 800 per capita. Figures derived from national statistics give a netproduct per farm acre of Rs 570. With an average family size of six, some8.5 acres would then be necessary to insure a per capita income of Rs 800.The assumptions used above (para 10) imply that 1.3 million farmers, or62% of benefiting farmers, would cultivate less than 8.5 acres. Thus atotal of 8 million beneficiaries would belong to the poorest 40% of thepopulation. This does not take into account the beneficiaries who are wageearning harvesting labor. Most of these harvesters would be small farmersor landless laborers and thus belong to the target group.

Methodology

12. In computing project benefits, incremental production of the maincrops (wheat, maize, rice and cotton) has been estimated as indicated in

1/ For this calculation it was assumed that: 40% of farmers cultivatingless than 7.5 acres, 50% of those cultivating 7.5 to 25 acres and 70%of those cultivating over 25 acres, would use project seed.

ANNEX 14Page 4

paras 3 to 5; a price premium of 10% for improved staple length of lint hasbeen estimated for the total cotton production from project seed.

13. The wheat, rice and cotton seed to be produced under the projectwould service areas already planted to HYVs. No genetic impact on yield isassumed, therefore no allowance is made for extra inputs, fertilizer, etc.For maize, some of the new seed would be sown on areas now under traditionalvarieties, the full benefit from the use of these new varieties would requiresome additional inputs. However, for simplicity the incremental yield assumedin this analysis (20% of the current average yield) is based on the expected(sub-optimal) increase from use of the new seed without extra inputs. Thus,for all the crops served by the project, the only additional factor of pro-duction required to achieve the assumed yield increases is the extra laborfor handling increased crops at the time of harvest, (harvesting, threshingand winnowing for wheat and rice, harvesting and shelling for maize andpicking for cotton).

14. The financial cost to the farmer for this additional harvestlabor is based on percentage of crop paid in kind since, in Pakistan,laborers carrying out these tasks are traditionally paid in this way -

one-tenth of the produce for harvesting grain, and one-sixteenth of theseed cotton for cotton picking. These operations take place at times ofthe year when labor demand is high. The economic cost of labor would there-fore not be different from financial cost.

15. For foreign exchange, a shadow price of Rs 11 per US$ has beenassumed compared with Rs 9.90 used in financial calculations. This shadowprice is taken from World Bank economic studies of Pakistan. For the bene-fit stream, domestic prices have been related to the world market pricesexpressed in constant US$ (Table 7). In particular, the probable futuredecrease in the prices of these commodities in constant dollars has beentaken into account.

16. Results. At full development, the increased annual productionof commercial grain would amount to about 640,000 tons, valued at US$120M(Tables 2, 3 and 4). Out of this one-tenth would be deducted for addi-tional harvesting labor to give net benefits of US$108 M. The increasedvalue of seed cotton would amount to US$170 M, (Table 5) of which one-halfis attributed to the increase in quantity (about 200,000 tons/year), andthe other half to quality improvement. Harvesting costs for incrementalcotton production would be one-sixteenth of crop giving net benefits ofUS$159 M. However, since most of these commodities are currently eitherexported (rice and cotton) or imported (wheat) the annual benefit of US$290M would be reflected in a comparable improvement in the country's balanceof trade.

ANNEX 14Page 5

17. The rate of return (ROR) of the project is 82% and remains veryhigh when various alternative assumptions are tested. In particular, itis relatively insensitive to the investment costs and to the shadow ex-change rate. An increase of the operating cost by 25% brings the ROR downto 73% and a decrease of the benefits by 25% would give a ROR of 66%.If both the operating costs increase by 25% and the benefits decrease by25%, the ROR would be 55%. Costs and benefits calculations are given inTables 6 thru 12.

18. The project is thus economically justified under any set ofrealistic assumptions.

PAZISTAJ

Phaaing of Seed Ptoduction By Plant (min cropŽ jV

--------- Tear 3 --------------- --------- i-- VIG r -------------- -------------- Yer 5 -------------- --------- Year 6 am rtr ---------

Cotton_ _ It Paddy Maize Cotton Whneat Paddy b lie Cotton WIbt Paddy Madaa Cotton t pidrd -il

PU IJAd t1. D. 0. IhMan -- - -- -- 6,700 6,400 -- -- 13,400 12,0bO -_ -- 20,000 17,080 __

2. Sahtval 5,400 7,100 40 500 10,700 11,400 580 1,400 16,0o0 17,080 1,010 2,310 16,0o0 17,080 1,410 2,620

3. Ihhanewal -- -- 6,400 -- -- 12,C80 _1 -- -- 17 oflo --

SID 3,500 3,200 400 __ 6,900 6,300 800 -- i10,300 9,1400 1,100 10,300 9,400 1,100

Sub-total 8,900 10,300 440 500 24,300 30,500 1,380 1,400 39,700 50,640 2,110 2,320 46,300 60 .440 2,510 2,620

Correction for certified cotton aeed / 40° 700 1,900 2,200

Total seed available to end unear 8,500 10,300 440 500 23,600 30,500 1,380 1,400 37,8ao 50,640 2,110 2,320 44,100 60,640 2,510 2,620

Acreage n with theae se.edathusand acreo) 925 280 60 27 1,588 830 188 76 4,113 1,377 287 126 4,798 1,639 341 143

1/ Per ach pSAnt, it was asaaued that the prodgctiop ata ta the year after the inveatomet. The prockction incrsaee by stage( i13 In te fifret year, then 2/3 and then the tota1itV) over a 3 year period.

2 Thee. certified cotton seed .ill be distributed to farner, in the segregated area to produce approved need. Certified seed- thus not be availabLe to the end oser. of msade.

PAKISTAN

SEED PROJECT

Project Benefit: Incremental Production of Wheat

Seeds ------------------------ - Years --------------------------------------------processed Acreage sown -/ 11inyear (thousand acres) 5 6 7 8 9 10 and after

Incremental production 2/(in tons) 3 280 16,470 16,470 16,470 16,470 16,470

4 830 48,823 48,823 48,823 48,823 48,8235 1,377 81,000 81,000 81,000 81,000 81,0006 1,639 96,011 96,411 96,411 96,411 96,4117 1,639 96,411 96,411 96,411 96,4118 1,639 96,411 96,411 96,4119 1,639 96,411 96,411

10 1,63Y_ 96,411

Total 16,470 65,293 146,293 242,704 339,115 419,056 466,644 482,055

Cost of incremental labor(in tons of wheat) 2/ 1,647 6,529 14,629 24,270 33,911 41,905 46,664 48,205

Net incremental production 14,823 58,764 131,664 218,434 305,204 377,151 419,980 433,850

Value of incremental production 4I(Rs '000) 30,000 116,247 259,2514 430,102 600,951 742,610 826,948 854,250

1/ See Table 1.2/ The incremental production has been estimated by using an incremental yield of 1.6 maund per acre over a 5year period.,/ The only incremental labor required would be for harvesting, threshing and winnowing. Traditionally, laborers carrying out tbe.se

tasks are paid in kind and get 10% of the produce -/ Calculated by using the price forecasts given in Table 7 and shadow foreign exchange rate of Rs 11 per US$,.

ANNEX 14Table 3

PAKISTAN

SEED PROJECT

Project benefit: Incremental production of maize

--------------Years…-------------------Acreage

Seeds sownprocessed (thousandin year acres) 1 4 5 6 7 8 9 and after

Incrementalproduction(in tons) 2/ 3 27 2,700 2,700 2,700

4 76 7,600 7,600 7,6005 126 12,600 12,600 12,6006 143 14,300 1i,300 14,3007 14,300 1L,3008 14,300

TOTAL 2,700 10,300 22,900 34,500 41,200 42,900

Cost ofincrementallabor (intons of maize) 3/ 270 1,030 2,290 3,450 4,120 4,290

Net incrementalproduction 2,430 9,270 20,610 31,050 37,080 38,610

Value ofincrementalproduction 4/ 3,983 114,990 33,326 50,208 59,958 62,432

(Rs 1000)

1/ See Table L12/ The incremental production has been estimated by using an incremental

yield of 2.7 maund per acre over a 3 year period.3/ The only incremental labor would be for harvesting, drying and shelling.

Laborers carrying out these tasks are paid in kind or in cash. Ineither case, their wage amounts to about 10% of the produce.Calculated by using the price forecasts given in Table 7 and a shadowforeign exchange rate of 'ls 11 per US$.

PAKISTAN

SEll PROJECT

Pro,lect Benefit: Incremental Production of Paddy

Seeds I- -______-__ Years (in tons) ----------------------------------------processed Acreage sownl' 11in year (thousand acres) 4 i 6 7 8 2 10 and after

Incremental production(in tons) 3 60 6,000 6,000 6,000- 6,000 6,000

4 188 18,800 18,800 18,800 18,800 18,8005 287 28,700 28,700 28,700 28,700 28,7006 341 34,100 314,100 34,100 34,100 34,1007 341 34,100 34,100 34,100 34,1008 341 34,100 34,100 34,1009 341 34,100 34,100

10 341 - 34L100

Total 6,ooo 24,800 53,500 87,600 121,700 149,800 165,100 170,500

Cost of incremental labor I/(in tons of paddy) 600 2,480 5,350 8,760 12,170 14,980 16,510 17,050

Net incremental production 5,400 22,320 48,150 78,840 109,530 134,820 148,590 153,450

Value of incremental production (Rs 000) v 10,989 44,194 92,159 145,696 195,182 232,834 256,615 265,008

v See Table 1.v The incremental production has been estimated under the following assumptions:

- 115 of the paddy seeds sold would be Bamati, 415 would be coarse rice,- the seeding rate for Basmati and coarse rice is the same,- improved paddy seeds (Basmati and coarse) would bring about a 10% increase of the yields over a 5 year period,- the current yields for the areas under improved seeds are; 20 maunds per acre for Basmati paddy p

29 maunds per acre for coarse varieties of padiy. 2/ The only incremental labor required would be for harvesting, threshing and winnowing . Traditionally, laborers carrying out these atasks are paid in kind and get 10% of the produce.

IL Calculated by using the price forecasts given in Table 7 and weighting the tonnage of paddy (hemati and Coa*r) in the proportion of theirincremental prodaction. k shadow price of foreign exchange was taken at ti 11 per US$.

PAKISTAN

SEED PROJECT

Project Benefit: Incremental Production of Seed Cotton

---------------------------------- Years ------------------- …-______________________10

2 4 5 6 7 8 2 and after

Area sown (in thousand acres) -/ 925 1,588 4,113 4,798 4,798 4,798 4,798 4,798

Production without project (in thousand tons) 2/ - 408 701 1,815 2,117 2,117 2,117 2,117

Value of production (Rs '000)3/ - 1,602,216 2,752,827 7,207,365 8,546,329 8,686,051 8,849,060 8,965,495

Production with project (in thousand tons) - 449 771 1,996 2,329 2,329 2,329 2,329

Value of production (Rs 1000) 3/ 1,945,966 3,333,033 8,738,988 10,324,457 10,503,790 10,683,123 10,811,218

Incremental value of production (Rs '0o0) - 343,750 5bO,206 1,531,123 1,778,128 1,817,739 1,834,063 1,835,723

Incremental cost of labor for picking (Rs '000) 4/ - 21,484 36,262 95,695 111,133 113,609 114,628 115,358

Net value of incremental production (Rs '000) 5/ - 322,266 543,944 1,435,428 1,666,995 1,704,131 1,719,435 1,730,365

1/ See Table 1./ Assuming an average yield of 12 maund per acre.3/ Calculated by using the price forecasts given in Table 7 and a shadow foreign exchange rate of Rs 11 per US$./ Traditionally, labor for picking of cotton is paid in kind iA6 of the produce. The incremental cost of labor has,

therefore,been calculated here as 1/16 of the value of the incremental cotton production./ This estimate of the benefits neglect the incoMes accruing to the cotton processing plant from the sale of lint,

linter and culled seed. These additional benefits would amount to 1 to 2% of the benefits accruing to the country from gthe improvement in yield and quality of its cotton production.

PAKISTAN

SEED PROJECT

Project Benefit: Summarv of Benefit Stream(In Rs, '000.)

Year Year Year Year Year Year Tear Years-4 5 6 7 8 9 10 11 and After

Wheat / 30,000 116,247 259,254 430,102 600,951 742,610 826,948 854,250

Maize./ 3,983 14,990 33,326 50,208 59,958 62,432 62,432 62,432

Paddy2/ 10,989 44,194 92,159 145,696 195,182 232,834 256,615 265,008

Gotn4/Cotton- / 322,266 543,944 1,435,428 1,666,995 1,704,131 1,719,435 1.730,365 1,730,365

TOTAL 367,238 719,375 1,820,167 2,293,001 2,560,222 2,757,311 2,876,360 2,912,055

1/ See Annex 14, Table 2.

2/ See Annex 14, Table 3.

3/ See Annex 14, Table 4. w c

4/ See Annex 14, Table 5. H

PAKISTAN Table 7

SEED POJE0T

Price Assuxptions For AEricultural Coodities

(1975 constant prices)

Years ----85

75 76 77 78 ,79 80 81 82 83 84 andt Rice (US$/ton) after

Rice Bas ti(FOB K5arach) I20 390 360 330 330 330 330 330 330 330 330A"": gging and transportation 14 31 14 14 14 14 14 14 14 14 lscharges to Karachi and delivery FOB

Net price/ton of rice 406 376 346 316 316 316 316 3316 316 316 316Equivalent price per ton of paddy (2/3) 271 257 231 211 211 211 211 211 21. 211 21MIlling cherges 3 3 3 3 3 3 3 3 3 3 3Net value per ton of paddy basuati 268 251 228 208 208 208 208 208 208 208 208

CaarserRice (FOB Karachi) 330 320 310 300 290 280 270 260 250 240 240vrage bagging and tranaportation 14 1 14 14 14 14 14 14 14 l14 1hCharges to Karachi and delivery FOB

Net price per tos of rice 316 306 296 286 276 266 256 2h46 236 226 226Fquivalent price per ton of paddy (2/3) 211 204 197 191 184 177 171 164 157 191 151Milling eharese 3 3 3 3 3 3 3 3 3 3 3Net value per ton o coere. paddy 208 201 194 188 181 174 ' 168 161 124 18 1li8

2/ Wheat (US$/ton)

Canadian, in store Thunder Bay 200 180 162 145 130 125 125 125 125 125 125Insurance and freight to Karachi 40 240 40 40 40 40 40 40 h40 ,40 40Price CIF Xarachi 240 220 202 185 170 165 165 165 165 165 165Bagging and transportation charges for distribution 14 14 14 114 114 1h 14 lh 1h lih 14Net price per ton of wheat 254 234 216 199 184 179 179 179 179 179 179

1Maise (US$/ton)

uS FOB Gulf Ports 125 112 109 100 95 93 93 93 93 93 93Insurance and freight to Karachi O 40 40 40 40 40 40 40 240 240 240Price CIF Karachi 165 152 145 140 13-5 133 133 133 133 133 133Bagging and transportation charges for distribution 11l 1h 124 14 124 1 14 14 14 14 14Net price per ton of maise 179 166 159 154 149 147 147 1147 147 147 17

3/ Cotton (USsAb)

Maxican SKl -1/16" CIF N. Drope 56 55 52 52 52 52 52 52 52 52 52Lint of sae length but average quality 2/

CIF N. rope 524 53 50 50 50 50 50 90 50 90 90Insurance and freight Karachi - N. Europe 3 3 3 3 3 3 3 3 3 3 3Lint 1-161 average quality FOB Karachi 51 50 47 47 47 47 47 47 47 47 47Ginning and baling expenses, transportation to

Karachi and exporter's comission 9 9 9 9 9 9 9 9 9 9 9Equivalent value to farer, per pound of lint 42 241 38 38 38 38 38 38 38 38 38Equivalent value to farmer, per ton of lint (in US$) 924 902 836 836 836 836 836 336 836 836 836Lint 1516" average quality 2/ FOB Karachi 46 45 242 42 42 42 62 42 i2 42 42Ginning and baling expenses, transportation to

Karschi and exporters cission 9 9 9 9 9 9 9 9 9 9 9Equivalent value to farmer, per pound of lint 37 36 33 33 33 33 33 33 33 33 33Equivalent value to farmer, per ton of lint (in US$) 8124 792 726 726 726 726 726 726 726 726 726Cotton seed CIF Karachi I/ (US$ per ton) 176 170 167 163 163 162 169 178 187 197 205Transportation and distribution cost (sS$ per ton) 10 10 10 10 10 10 10 10 10 10 10Equivalent value to the farmer per ton of

cotton seed (US) 186 180 177 173 173 172 179 188 197 207 215Equivalent value (US$) to the farmer for 3 tons of

seed cotton (1-1/6") / 1,296 1,262 1,190 1,182 1,182 1,180 1,194 1,212 1,230 1,250 1,266Equivalent value (S8) to td farmer for 1 ton ofseed cotton 1-1/l6") 432 2431 397 394 394 393 398 403 410 417 422

Equivalent value US0$) to the farmer for 3 tons ofseed cotton (1596") 4/ 1,186 1,152 1,080 1,072 1,072 1,070 1,084 1,102 1,120 1,140 1,156

Equivalent value (US$) to the farmer for 1 ton ofseed cotton ( 15A6" ) 395 384 360 357 357 357 361 367 373 380 385

1/ The difference of price between the top quality Menican SM 1-1/16" and an average quality ofthe same fiber length is about 2 ctsAb.

Z/ The lint with a fiber length of about 15/16" usually fetches prices some 10% below the 1-1/16" variety.

3/ To determine the value of cotton seed in relation to a world price, it is assued that the incrementalproduction will be import substituting by decreasing the need of import of vegetable oil. Therefore,the value of cotton seed is related to what would be the cost In PLkistan of 1 ton otf iported seed.

2 This value has been cosputad by adding the value of 1 ton of lint of the corresponding variety tothe value of 2 tons of cotton seed

PAltISTAN

SEED PROJECT

Economic Cost of the Seed Growera FarmsI(Rs '000)

Veer1 2 3 4 5 6 7 8 9 10 11 12-17 18 19 20

Inveetment and renewal it/ - 43,500 43,500 - - - - - - 19.031 19,031 _ 19,031 19031

- (24,882) (24,882) - (15,225) (15.2251 (15,225) (15.225) -

Operating aurplue vithout project-/Model I (wheet/cotto.) (940 farmer4) - 21,469 42,938

Model 11 (wheatrice/lize (9410 farmers) - 1,Q031 38 062

Ssb-total operating urplue - 40,500 £1,000- (40,500) (81,000)

Operating cost oModel I (.heat/cotton) (94I3 fermer) - 36,863 75,046 81,301 88,360 _ _ _

Hodel II (wheat/rice/iz*) (940 farmers) - 36,1 75 435 81,237 87,233 ,

8ub-total operating coats - 72,967 TrisT T_77M .15...(13,134) (27,072) (29,250) (31,608) - - --- ---- -------- _

SONILI W COSTS:

Inveatant - 43,500 43,500 - 19,031 19,031 _ 19,031 19,031

- (24,882) (24.882) -- (15,225) (15,225) - (15,225) (15,225)

Total annual cost- - 113,467 231.481 243,538 256,593- (53,634) (108,072) (110,250) (112.608) _ _ -

1/ Figures within brackets are the foreign exchange eomponent of the corresponding it_a. The economic coat for the project includes the o-veat.-nt cost, the operating aurplna to the aced grower

without the project and the operating coat with the project.2/ The unit cost of the investment per farm is given in Annex 13, Table 4. 1,880 farm are to be developed, in yeara 2 and 3. 50% each year.

3/ Operating surplus are given for the two types of farmers in Annex 13, Table 4. 501 of the farmers correspond to odel 1, 50% to wodel 11.

4/ The operating costa for the two types of famers re given in Annex 13, Table 4.

51 Operating surplus plus operating coste.

PAKI STANSEED PROJECT

Economic Cost of the Seed Corporations I

(Re '000)Years:

Invetmet ad Reewa 21 1 2 3 4 5 6 7 8 9 t0 11 12 13 14 15 16 17 18 19 20

Processing Equipment - 43,344 33,928 11.116 - - 10,113 7,890 2,647 - - 11,439 8,855 2,946 - - 10.113 7,890 2,647 -+ Physical Contingencies - 4,33 3,393 1,112 - - L1.01 789 265 - - 1,144 §86 295 1.011 789 265 -

- 47,678 37,321 12,228 - 11,124 8,679 2,912 - - 12.583 9,741 3,241 11.124 8,619 2,912 -- (28,608) (22,392)( 7,338) - -( 2,469) (1,909) ( 641) - -( 3,692) (2.763) ( 980) ( 2,464) (1,909) ( 64) -

building and Storage - 18,361 14,559 4.845 - -+ Physical Contingenciea - 1,836 1,456 484 - -

- 20,197 16,015 5,329 - --(4,039) ( 3,203) (1,066) - -

Vehicles - 3,406 1 ,7 52 212 - - 2,794 1,403 173 -- 2,799 1,403 173 -- 2,794 1,403 173 -+ Physical Contingencies (5%) 170 86 it - - 135 70 86 __-135 70 86 _135 70 86 -

- 3,576 1,838 223 - - 2,929 1.473 259 -- 2.929 1.473 2i5-9 2.929 1.473 259 -- (2,061) (1,059) (128) - - (1,687) ( 848) (149) -- (1,687) ( 848) (149) (1.687) ( 848) (149) -

Total: Investment and Renewal - 71,451 55,174 17,780 - - 14,053 10,152 3,171 - - 15,512 11.214 3,5 -0 14,053 10,152 3,171 -- (34,708) (26,654) (8,532) - - (4,156) (2,707) (790) - -(5,379) (3,611) (1,129) - (4,151) (2,757) (790) -

Operating Cost'Processing Plants 3

Cereals 41/ - - 4,608 13,645 22,519 26,802- (1,758)( 3,428) ( 5,672) ( 6.733)

Cotton Ž' - - 5,023 8,629 22,340 26,063Saefurs ro.ar6t20(1,420) (2,938) ( 6,313) ( 7,365)

Corporation Headquarters 6/ - 5,406 5,681 5,957 6,227 6,514- (1,350) (1,420) (1,489) (1,557) (1,628)

total: Operatini Cost - 5,406 15,312 28,231 51,146 59,379(1,350)( 4,598) ( 7,B55) (13,542) (15,726)

It Figures within brackets indicate the foreign exchange component.2/The various equipment costs are derived from Tables in Annexes 3,4 andI10.Thte phasing is as indicated in the Project Cost Annex (Annex a), but the years here taken ae-the calendar years instead of fiscal years as In the tables of the Project C'st.

were derived from Annex 4 , Tables 9 and 10 . respectively, leaving out the cost of raw material and the overhead coat of the Corporation (taken into account1

elsewhere) and adding the cost of transporting and distributing the processed seeds. The phasing of production is given In Table 1.4/ Or the baeis of e production cost of Re 229 per ton (derived from Anner 4, Tah!e 9 1, V!ua RA 181 per ton for distrrb,-in- aru .. 1. t, rh. f,-s.r~ Thf. latter

figure was itself arrived at by providing for a transportation cost of Re 1.65 and a desier cosuission of Re 5.00 per .saund.5/ On the basis of a product cost of Rs 373 per ton (derived from Annex 4 * Table 10 ) plus Re 218 per ton for distribution and sale to the farmer. This latter figure

was itself arrived at by providing for a transportation cost of Rs 3.00 (for an average distance of 100 miles) and a dealer comaiesion of Re 5.00 per maund.6/ See Annex 10, Table 2.

PAKISTAN

SEED PROJECT

Economic Cost of the Quality Control -1

(Re '000)

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

Investment:

National Seed Certification Agency 750 1853 1377 125 150 250 350 250 150 250 1,538 250 150 250 350 250 ----+ Physical Contirgencies 37 93 69 6 -- 7 12 17 12--- 7 12 77 12 -- __ _.i 7 -1

787 1946 1446 131 --- 157 262 367 262 --- 157 262 1,615 262 -- 157 262 367 262 ---(283) (701) (521) (47) (78) (131) (183) (131) (78) (131) (942) (131) (78) (131) (183) (131)

Registration Agency 63 412 -- -- -- 50 -- -- -- -- SO 241 --- --- 50 -- -- -- --+ Ph~ysical Contirgenciee 3 21 -- -- 15 ------- 12 5

66 433 -- -- -- 55 -- -- -- -- 55 253 --- 55 __ __ __ __(30) (200) -- __ __ (27) -_ __ __ -- (27) (167) --- --- (27) -_ __ __ __

Total Investment: 853 2379 1446 131 -- 212 262 367 262 --212 515 1.615 262 -- 212 262 367 262 __(313) (901) (621) (41) -- (105) (131) (183) (131) --(105) (298) (942) (131) --(105) (131) (183) (131) --

Operating CostsNational Seed Certification Agency 155 680 1272 1502 1510

(29) (72) (143) (163) (163)Same figures from year 6 to 20.

Registration Agency 13 112 147__ (9) (18)

Total Operating Costs 168 792 1419 1649 1657(29) (81) (161) (181) (181)

1/ Capital and operating costs are given in Annex 5, Tables I and 2. Figures ilthin brackets represent the foreign exchange component,

ANNEX 14Table 11

PAKISTAN

SEED PROJECT

1/Economic Cost of Technical Assistance and TrainIne-(Rs T000)

YearsYear Year Year Year Year 6 and1 2 3 4 5 After

Technical Assistance 2,930 3,715 3,640 1,970 450 -(2,403) (3,o46) (2,985) (1,615) (369) -

Training 1,350 1,00o 378 - -(1,215) (900) (340) - - -

Total 4,280 4,715 4,018 1,970 450 -(3,618) (3,946) (3,325) (1,615) (369) -

1/ The amount and phasing of technical assistance and training is givenin Annex 7, Tables 1 and 2. The cost of technical assistance andtraining for the pilot project was left out.

,'A. . .TM2

sEED P-2..~ 's.

5--oroooo1.. v , c o- f thE Prolc-(ft. '000)

1t I 2 3 4 5 o 7 S 9 10 1 12 13 14 15 16 17 li 19 20

' 1,.. Omonl - 43,500 43,500 - - - - - - 19.031 19,031 - - - - - - 19,031 19.031

- (24.882) ('!4,882) - - - - - (15,225) 115,225) I- _ _ _ _ 15,225) (15.225)

O -I Co _ 113.467 231.481 243. 538 .,3 25w593- (53.634) t108.072) (110.2501 (212,08) (112,608)

Seed Corporoolo.,sV/32200.62.000 - 71,451 55.741 7.180 - - 14,053 1',152 3.1,1 - _ 15,512 11,214 3,414 _ _ 14.053 10.152 3.171

- 34, 08) (20.6452 (8,532) - - (4,151) (2,757) (7901 - - (5,379) '3,S11) (1129) - - (4.151) (2,7571 (790)

Ot1..9 .o.t 5,406 15.310 2.231 5 .14- 59.379 51.12 _ _

- 21,350) (3.9982 (7.355) 13,542) (1 ,726 (15,726)

Oo.212o Co02001nl P5 .203 2,319 1.446 131 - 212 262 367 2v1 _ 212 515 1,615 202 212 262 357 262

.3131 902) (521) 04') _ (1052 '131) (13)3) ti3l) ( ) (293, 91.2) (13>) - 2103) (13:) 1163) (131)

OperotOOl C,,s) 2a5 79' 1.419 1.649 1.57 i1657 , _129) . i3) 116)1 11(1 219) 2)91 _)

'o..,,1e 0e1 2o'o-noo 4,20.) 4,115 S.0)9 1.97.) 45.2 _____________________________ ___

-n1 r000a1 4 '3,629) 25.9242 13.325) (1.6252 (3)59) _ ____

Th,0lve,0020eo00 5.133 122.245 1 4,0 i1 9.281 1i 2,2 2.3. 2 A S ,9 3.433 09,31 19.243 14.0'27 15,92" 2,66 . 212 14,3.5 29,550 22,464

23.931) 2(4.43') ¢55.3.3 2 20.194) 13302 220,2 24.232) (2,92.3, (921) (25.220) (15.331) (5,6'7) 24,553) (1,2502 - 1105) (4.2322 ( 165) (16.2061 -

07102p-fls 200? 159 219.6.55 OoA,012 203.020 3241,2), 322 620 217.623

(29) '55,0'5) 212.221) 112,0782) (124,3)1 8 1)0.511) (123.51;)

2000' C002or-.df2: Sh20v 56,.,rico9O .f

e5,52 120,4S9 109, 1, 20.3 322 .9 222 14,741 IJ,213 3,52 3 23,5)3 43,720 1i.59> 13,284 i,902 . 222 24,741 01.365 24.085

3700o?l.13 00 171 115.171 2,0,519 235,1)97 322,029 333,411( . -

Clr0- 5,-0f()7Ž - - - 3,2 '.23 219.,315 1.820.167 2,293,001 2.50,2U 2 .15,'.J 1 2.8,0 ,12,21

9e : 61)-6 (5,6971 9 215.4.50) (373.25) 2 1,,71 . 39 tI? 1,413,444 1.9,42 2,2L0,923 2, 1.'.3,30i 2,52213?, 2,52,0.740 2.5.2 .979 ? 2.5,.10 2.S''.fl2 2.51,.574 2.581.3 52 2,5h5.03, 2.55.,208 2.557.469 2,581.574

'1)-' 2.25 2! '03J,1) I' d27

NO,. F2,0, '2,.45 -oprO.. 10,,2 ( ,oel 20 1,,o.'onpoflot .

- 2 / 5.2. FaOlO 8 4/ 2n,, roSlo 11. il-

21 S- 9,o,,9. 5: See r",le S. , ,

3; S0,2 Ta?,' .13. 3/2,, 252. 112,0 .2,2!,, Izg;urc be 02 L..20. '.,.. 0 ( 0 200 2e, -,2le. I

I

I BRD- 11616R-620 66a 70 74.SEPTEMBER 1975

PAKISTAN U. S. S. R. J

SEED PROJECT -CHINAPRIMARY ROADS . -

SECONDARY ROADS - _

RAILWAYS

AIRPORTS ' ,.-

DISTRICT BOUNDARIES - JAMMU. ----- IN-TERNATtONAL BOUNDARIES A pND

PIVERS ZŽ'. LAABACF'.. . t CEA CEASIE LINE LINE..... - rdPehw an / - ta ( * . oceA@<RE LINE

arm KASHMIR> ~~~~ ;; - : t 5; I . ~~~~~~~~~~~~AREA IIV

.CEREAL, PROJECT AREAS .. sPUrF ,%~

CERALCOTONP'ROJECT AREAS Ijhel *

7 p POTATO PtLOT PROJECTS - D / h

'KhanV -~ V VEGETABLE PILOT PROJECT < Y I Lyallpur Mura

_.rr;~~~~~~~~~~~~~~~~~~~~~~~~~~~I h ih LKakuw

Quetta0.K

Kalat I h DawAlpur! DIAJ~~

,, ;,;E,<r >7 B A l U C H I N C N I NA

A R A B/I A N SE A Bumeji Pt. 0 o IKA,RACHI, Tatta ., I AGLDS

-24°~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~TO on n s affifiIN

0 100 200 300 40I A (..r-KILOMETERS -:,-,/NDIBA N O CEIA N

62 6