ASIAN DEVELOPMENT BANK PPA:PAK 21220

PROJECT PERFORMANCE AUDIT REPORT

ON THE

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

IN

PAKISTAN

August 2002

CURRENCY EQUIVALENTS

Currency Unit – Pakistan Rupee/s (PRe/PRs)

At Appraisal At Project Completion At Operations Evaluation (December 1989) (October 1999) (March 2002) PRe1.00 = $0.0465 $0.0195 $0.0166 $1.00 = PRs21.4736 PRs51.30 PRs60.15

ABBREVIATIONS

ABAD − Agency for Barani Area Development ADB − Asian Development Bank ADBP − Agricultural Development Bank of Pakistan ADTA – advisory technical assistance AI – artificial insemination AR – appraisal report BADP − Barani Area Development Project BARI – Barani Agricultural Research Institute BLPRI − Barani Livestock Production Research Institute CIF – cost, insurance, freight DCW − Department of Communication and Works DLDD − Department of Livestock and Dairy Development EIRR − economic internal rate of return FOB – free on board ha – hectare IFAD − International Fund for Agricultural Development km – kilometer NGO − nongovernment organization O&M − operation and maintenance OEM − Operations Evaluation Mission P&D − Planning and Development Board PC-1 − Planning Commission Form 1 PCR − project completion report PCU − project coordination unit PPAR − project performance audit report RIV − resource intensive village SAWCRI – Soil and Water Conservation Research Institute SDR – special drawing rights

t – metric ton TA − technical assistance t/ha – ton per hectare UNDP − United Nations Development Programme

NOTES

(i) The fiscal year (FY) of the Government ends on 30 June.

(ii) In this report, “$” refers to US dollars.

Operations Evaluation Department, PE-599

CONTENTS

Page BASIC DATA iii EXECUTIVE SUMMARY iv MAP vii

I. BACKGROUND 1 A. Rationale 1 B. Formulation 1 C. Purpose and Outputs 1 D. Cost, Financing and Executing Arrangements 2 E. Completion and Self-Evaluation 2 F. Operations Evaluation 3

II. PLANNING AND IMPLEMENTATION PERFORMANCE 3 A. Formulation and Design 3 B. Achievement of Outputs 4 C. Cost and Scheduling 4 D. Procurement and Construction 5 E. Organization and Management 5

III. ACHIEVEMENT OF PROJECT PURPOSE 6 A. Operational Performance 6 B. Economic Reevaluation 11 C. Sustainability 12

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 12 A. Socioeconomic Impact 12 B. Environmental Impact 14 C. Impact on Institutions and Policy 14

V. OVERALL ASSESSMENT 14 A. Relevance 14 B. Efficacy 15 C. Efficiency 15 D. Sustainability 15 E. Institutional Development and Other Impacts 15 F. Overall Project Rating 16 G. Assessment of ADB and Borrower Performance 16

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 16 A. Key Issues for the Future 16 B. Lessons Identified 18 C. Follow-up Actions 19

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APPENDIXES 1. Comparison of Appraisal and Actual Project Costs 20 2. Summary of Physical Accomplishments 21 3. Economic Reevaluation 23 SUPPLEMENTARY APPENDIXES (available upon request) A. Subsidies for Irrigation Investment B. Village Survey Data

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

PROJECT PREPARATION/INSTITUTION BUILDING TA No. TA Name Type Person-Months Amount ($) Approval

Date 708 1357

Master Plan for Barani Area Developmenta Barani Farming System Training and Research

ADTA

ADTA

23

51

1,300,000b

691,000b

15 Oct 1985

27 Jun 1991

KEY PROJECT DATA ($ million)

As per ADB Loan Documents

Actual

Total Project Cost 59.9 51.3 Foreign Exchange Cost 21.5 20.9 Local Currency Cost 38.4 30.4 ADB Loan Amount/Utilization 25.0 22.8 Amount of Cofinancing IFAD 19.4 15.5 ADBP 0.8 1.3 Government 10.8 8.3 UNDP 0.7 0.7 Farmers’ Contribution 3.2 2.7

KEY DATES Expected Actual Appraisal 22 Jun–11 Jul 1989 Loan Negotiations 13–16 Nov 1989 Board Approval 20 Feb 1990 Loan Agreement 19 Mar 1990 Loan Effectiveness 17 Jun 1990 6 Dec 1990 First Disbursement 4 Feb 1993 Project Completion 31 Dec 1997 31 Dec 1998 Loan Closing 30 Jun 1998 24 Dec 1998 Months (effectiveness to completion) 90 97

INTERNAL RATE OF RETURN (%) Appraisal PCR PPAR Economic Internal Rate of Return 24.0 10.1 4.1

BORROWER Pakistan

EXECUTING AGENCIES Provincial Government of Punjab Agricultural Development Bank of Pakistan MISSION DATA

Type of Mission No. of Missions No. of Person-Days Fact-Finding 1 138c Appraisal 1 200c Project Administration Inception 1 10 Review 14 387 Project Completion 1 15 Operations Evaluationd 1 42 ADB = Asian Development Bank, ADTA = advisory technical assistance, IFAD = International Fund for Agricultural Development, TA = technical assistance, UNDP = United Nations Development Programme. a This was not a project preparation TA. Its findings, however, were used in the design of the Project. b Funded by UNDP. c Including a large amount of staff consultant inputs financed by IFAD. d Comprising Ellen Qiaolun Ye, Senior Evaluation Specialist (Mission Leader) and Gary Holm (international

consultant). In addition, Qaim Shah (domestic consultant) conducted a village survey.

EXECUTIVE SUMMARY

The Project aimed to (i) increase farm household production, employment, and income, particularly among smallholders, the landless, and women; (ii) reduce the growing migration of population to urban areas; and (iii) alleviate constraints on agricultural development. The Project comprised a number of components related to soil and water conservation, rangeland and forestry development, water harvesting, crop husbandry, animal husbandry, rural infrastructure, rural credit, and institutional strengthening. The Project’s objectives were consistent with the development strategy of the Government and the operational strategy of the Asian Development Bank at the time of project appraisal. By promoting agricultural development in a region bypassed by earlier development, the Project contributed, in a limited way, to balanced regional development and increased agricultural production. The project design, however, did not include measures to ensure that the intended target groups (smallholders, the landless, and women) received a proportionate share of benefits. In conjunction with a top-down approach that focused on technology improvement, this resulted in the capture of a significant amount of benefits by a small number of large landholders. The Project is therefore rated partly relevant. The Project met most of its physical targets as revised during implementation. The Project also fulfilled, to a reduced extent, its primary objective of increasing farm household production, employment, and income. However, its intention to increase household income particularly among smallholders, the landless, and women was not fulfilled. The objective of reducing constraints to rain-fed agriculture was fulfilled only in the farmlands that received irrigation facilities. The achievements were less than anticipated due to the small number of farms that received irrigation facilities. Finally, the Project did not fulfill its objective of reducing migration to cities. On balance, the Project is rated less efficacious.

The Project’s economic internal rate of return has been reestimated at 4.1%, substantially below the appraisal estimate of 24.0%, primarily due to a significant reduction in the number of project beneficiaries and underuse of irrigation facilities. The high subsidies for irrigation investment distorted private decisions and provided less incentive for project staff and farmers to select the most cost-effective interventions. The design of the livestock centers focused on provision of buildings without addressing the key constraint of staff shortage, resulting in significant underuse of the centers. The Project is therefore rated less efficient. The Project’s primary benefits have been increased farm production and household income in farms that received irrigation facilities. The sustainability of these benefits is likely as the irrigation facilities have been well maintained by their owners, and continued operation of these facilities is likely. Other project facilities such as roads and water supply systems have also been well maintained. The project facilities without clear sustainability are those that did not generate significant benefits, even during implementation, such as the women’s agricultural extension program. Overall, the Project’s sustainability is rated likely. The Project had a positive impact on the Government’s policies and public agencies as it encouraged the Government to continue to invest in rain-fed agriculture, and trained a large number of project staff. The project design included community mobilization, nongovernment organization (NGO) engagement, and a women’s extension program. However, as measures to ensure successful implementation were not developed, the impact on local communities and women was minimal. The insufficient attention to the distribution of benefits restricted the impact

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on poverty reduction. On balance, the Project’s institutional development and other impacts are rated moderate. Based on these assessments, the overall project rating is partly successful.

The evaluation has identified the following issues:

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

Use of Public Subsidies. The benefits of the small-scale irrigation facilities in the project areas are highly localized, confined mostly to adjacent fields belonging to one household. If the Project had used subsidies for environmental purposes, a catchment approach could have been adopted to identify critical sites where the construction of water conservation structures was critical to the entire region. If the Project had used subsidies for poverty reduction, large landholders could have been excluded from the irrigation subsidies.

Cost Effectiveness. Inefficiencies were reported including oversized construction of

some irrigation structures, a lack of clear need for many water spillways and outlets, and underuse of some minidams as their owners did not invest in supplementary activities such as land leveling. In retrospect, measures could have developed to make farmers treat the subsidies like their own money, such as giving subsidies in the form of a fixed amount instead of on a percentage basis without limit.

Integrated Approach. Although the Project adopted an integrated area development approach to address multiple needs in the rain-fed areas, this appeared to have been confined to the conceptual level without guiding the selection of subproject sites. Each implementing agency selected subproject sites based on its own criteria without particular attention to the complementary needs of the beneficiaries under other components. The desired synergy impact of using multiple interventions to simultaneously address the key constraints in a particular area was not apparent. Alternative approaches that integrate project interventions at the village level should be considered for future projects of this nature.

The Project has provided valuable lessons learned including the following:

(i) Implementing a project in a poor region may not automatically have a significant impact on poverty reduction if specific measures are not taken to ensure a fair distribution of project benefits in favor of the poor.

(ii) Inclusion in a project design of poverty-reduction activities such as NGO engagement and community development may not have the desired social impact if careful arrangements are not made for effective implementation of such activities.

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(iii) Provision of a credit line may not have the desired social impact if careful arrangements are not made to develop borrower groups and microfinance institutions that can deliver microfinance services to the poor.

(iv) Inclusion of numerous training programs may not have the desired impact if the training is not based on beneficiary demand and is not aimed at building up long-term capacity in the local communities with continued support after the training.

(v) Smallholders and landless poor can easily be bypassed by public assistance that focuses solely on technology improvement.

(vi) Support for agricultural research should focus on improvement in farmers’ fields. Incentive measures need to be included in project design to encourage research institutes to develop suitable technologies that match the prevailing conditions on most farms instead of aiming at the highest possible yields in research institutes under the most ideal conditions that are not accessible by most farmers.

(vii) Free provision of inputs to farmers may lead to closure of such services after project completion. Project design should aim at the long-term operation of the introduced services and use funds during implementation to build up local institutions and capacities to sustain such services.

(viii) Provision of project facilities (such as buildings) without addressing constraints to their full operation (such as staff shortage) may lead to underuse of such facilities and unnecessary maintenance cost.

I. BACKGROUND

A. Rationale 1. The Green Revolution that began in the 1960s brought significant increases in crop yields to Pakistan. However, adoption of the new technology was largely confined to areas with access to irrigation. As the income gap between irrigated and barani (rain-fed) areas rose, more attention was given to balanced regional development and special assistance for rain-fed areas. In March 1986, the National Commission on Agriculture proposed the allocation of public funds to promote development in rain-fed areas, which was seen to have high potential for increasing crop yields, contributing to overall agricultural growth, and mitigating increasing regional disparity. At the time of project appraisal, the Asian Development Bank's (ADB’s) operational strategy in Pakistan supported balanced regional development, with its assistance to agriculture focusing on increasing productivity, farm production, and rural employment. B. Formulation 2. The Project was a follow-up of the first Barani Agricultural Development Project (BADP), which was financed by the International Fund for Agricultural Development (IFAD) and implemented from 1981 to 1990 under ADB administration. The Project was formulated in accordance with a Master Plan for Barani Agricultural Development (the Master Plan), which was developed during 1986–1988 under a technical assistance (TA) financed by the United Nations Development Programme (UNDP) under ADB administration. Feasibility studies contained in the Master Plan were used in formulating the Project, together with a large amount of consultant inputs financed by IFAD during joint ADB/IFAD missions. C. Purpose and Outputs 3. The Project aimed to (i) increase farm household production, employment, and income, particularly among smallholders, the landless, and women; (ii) reduce the growing migration of population to urban areas; and (iii) alleviate constraints on agriculture in the project areas.1 4. The Project comprised five components: Part 1 – Watershed Improvement, including (a) soil and water conservation, (b) rangeland and forestry development, and (c) water harvesting; Part 2 – Crop and Livestock Development, including (a) crop husbandry, which covered (i) basic agricultural research, (ii) adaptive agricultural research, (iii) agricultural extension, and (iv) women’s agricultural extension program; and (b) animal husbandry, which covered (i) livestock production extension, (ii) animal health, and (iii) livestock nutrition research; Part 3 – Rural Infrastructure, including (a) upgrading of farm-to-market roads, and (b) village water supply systems; Part 4 – Rural Credit; and Part 5 – Institutional Strengthening, which included (a) improvement of capacities of government staff, (b) training for beneficiaries and project staff, and (c) support for the project coordination unit (PCU). 5. The Project covered four subdistricts in Punjab Province (see Map); two subdistricts had been partially covered by the BADP and the other two were new subdistricts. The selection of the project areas considered (i) the desire to represent the low, medium, and high rainfall regions in the rain-fed areas for pilot testing, and (ii) the large number of landless poor in these

1 The constraints identified were erratic rainfall, soil erosion, labor scarcity, inadequate inputs, small farms, poor

communications, inadequate marketing, and lack of farm systems technology.

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subdistricts.2 Project activities were aimed at farmers with landholdings of 5 hectares (ha) or less, estimated at 92,000 households or 580,000 people in 865 villages, accounting for about 80% of the population in the project areas.3 D. Cost, Financing, and Executing Arrangements 6. At appraisal, the project cost was estimated at $59.9 million (Appendix 1), financed by an ADB loan of SDR19.024 million ($25.0 million equivalent) from ADB's Special Fund resources. The rest was to be financed by an IFAD loan of $19.4 million, a UNDP grant of $0.7 million, and counterpart funds from the Government ($10.8 million equivalent), Agricultural Development Bank of Pakistan (ADBP) ($0.8 million equivalent), and farmer beneficiaries ($3.2 million equivalent). The UNDP grant was to finance training and consulting services as well as an ADB TA associated with the Project.4 7. The Project involved two executing agencies. ADBP was responsible for executing the credit component while the Government of Punjab was responsible for all other components. The Project involved a number of government departments.5 A project steering committee and a project coordination committee established under BADP continued to supervise and coordinate implementation at the secretariat level and the project level, respectively. The Agency for Barani Area Development (ABAD) was responsible for interagency coordination and policy guidance. The PCU established under BADP was responsible for field-level coordination between line departments. At the subdistrict level, the project director of the PCU, or his representative at a subdistrict field office, was responsible for coordination between various line agencies. A project planning and implementation committee formed under the project director comprised subdistrict-level officers from various implementing agencies. E. Completion and Self-Evaluation 8. The Project was completed in December 1998. A project completion report (PCR) prepared by ADB’s Pakistan Resident Mission was circulated to the Board in August 2000. The PCR rated the Project partly successful.6 Issues identified in the PCR included: (i) project benefits were captured by a limited number of beneficiaries, including large landholders, (ii) provision of free saplings resulted in no continuity of social forestry at project completion due to farmers’ lack of willingness to pay for the saplings, (iii) use of ADBP in credit delivery resulted in a very small portion of loans being received by women due to ADBP’s culture of focusing on large-scale lending, (iv) the quality of eight livestock centers was poor due to weak construction supervision, (v) there was a significant delay in community organizing due to a 4-year delay in consultant recruitment, and (vi) ADB supervision was weak because of frequent staff changes.

2 Landless livestock holders ranged from 11% in Chakwal Subdistrict to 37% in Shakargarh Subdistrict at project

appraisal. 3 Due to a lack of regular rainfall, much of the land in the project areas was not productive without irrigation.

Consequently, farming with 5 ha or less was classified at the subsistence level in the Appraisal Report. 4 ADB. 1991. Technical Assistance to Pakistan for Barani Farming System Training and Research. Manila. 5 Department of Agriculture, Department of Forestry, Department of Livestock and Dairy Development, Department

of Communication and Works, and Department of Public Health and Engineering. 6 The rating was based on the previous three-category system (generally successful, partly successful, and

unsuccessful).

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

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

7 The OEM visited 13 villages in the project areas to inspect project facilities and hold discussions with farmers and

field staff. After the OEM, a survey of 19 villages was conducted to collect further information on the Project’s benefits.

8 For example, the level of irrigation subsidies was reduced from 100% to 75% to encourage farmers’ maintenance of the irrigation facilities. However, other important lessons were ignored (paras. 11 and 12).

9 Subsidies provided under the Project were in the form of government provision of a large portion of investment cost for construction of irrigation facilities such as minidams, ponds, tubewells, and dugwells, and use of government tractors for land leveling and deep plowing. The subsidies were received by individual farmers without significant external benefit to the public. In addition, tree seedlings were provided to farmers free of charge, and poultry units were supplied at subsidized prices.

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number of irrigation facilities constructed, with less attention to the level of use of the facilities after construction, benefits generated, or distribution of the benefits.10 B. Achievement of Outputs 13. Many of the project’s targets were revised significantly during project implementation (Appendix 2).11 This flexibility allowed the reallocation of funds to better uses when more information became available.12 Against the final revision, most of the important targets were met. For some small items, such as culverts, small water gates, and drop siphons, the targets were exceeded by a large margin. For a few items, such as handpumps, drip irrigation systems, and portable irrigation systems, the targets were not met.13 Chapter III provides detailed assessments by project component. C. Cost and Scheduling 14. At $51.3 million, there was a project cost underrun of 14%, leading to cancellation of the ADB loan by SDR2.8 million ($3.7 million equivalent).14 Cost deviations of individual components varied, with significant under- and overruns (Appendix 1).15 The large cost deviations were associated with the substantial changes in project targets as well as depreciation of the local currency against the dollar between project approval in 1990 and project completion in 1998. 15. The Project suffered serious delays in its first 4 years of implementation. Initially, loan effectiveness was delayed by aboaut 6 months due to the longer than anticipated compliance with conditions for effectiveness, such as project approval by IFAD and UNDP, and the Government’s approval of their project documents (Planning Commission Form 1 [PC-1]). An unusually slow release of IFAD funds was experienced in the initial 2 years due largely to lack of experience of the National Bank of Pakistan in dealing with the transfer of the IFAD loan. A government ban on hiring of new staff led to slow recruitment of project staff; many of them were hired only in the fourth and fifth year of project implementation. Cumbersome procedures in documentation resulted in very slow liquidation.16 The Government’s slow approval of the revised PC-1 also contributed to the delays. 10 The Project was designed in the late 1980s when ADB assistance focused on productivity increases and

government subsidies were widely used to facilitate the implementation of government programs. Furthermore, neither the Government nor donors were familiar with the community participatory approach at that time. Significant improvement has been made since the early 1990s in the use of the participatory approach in development projects.

11 The revisions included substantial increases in some activities such as minidams (increased by 448%), ponds (by 475%), lift pumps (by 229%), tubewells (by 158%), and roads (by 86%), as well as significant reductions in others, such as turbine pumps (by 64%), water disposal outlets (by 58%), and fencing for public forestry (by 73%).

12 For example, it was found during project implementation that turbine pumps required a large amount of water flow and high investment cost (PRs50,000 per ha), and yet resulted in low use of water resources (only 8%). After failure of the first 3 turbines, the target for turbines was reduced from 14 to 5, and the savings were used to finance increases of other activities.

13 The drip irrigation system was found unsuitable for the project areas. 14 Two cancellations, one in June 1998 and the other in December 1998, amounted to SDR2.3 and SDR0.5 million,

respectively. The dollar equivalent amount varied due to exchange rate fluctuations. 15 The most significant cost underrun was in the soil and water conservation subcomponent (by 23%), credit

component (by 45%), and consulting services (by 20%). In contrast, significant cost overruns were experienced in the water harvesting subcomponent (by 163%), rural infrastructure (by 79%), training (by 150%), and project management (by 72%).

16 ADB’s loan review missions reported that it took up to 4 months for a line agency to furnish the required documents for the PCU to submit liquidation to ADB, and up to 1 year if procurement of machinery or equipment was involved. A minimum of 2–3 months was needed for ADB/IFAD disbursement to reach the project accounts.

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16. ADB’s weak project supervision in the initial years was another cause of the delays. The OEM noted that ADB did not field any mission between project inception in August 1990 and the first loan review mission in February 1992.17 Frequent changes of ADB supervisory staff decreased the effectiveness of project implementation.18 After a midterm review in mid-1994 and change of the director general of ABAD, project implementation picked up momentum in early 1995, accelerated with Government’s approval of the first revision of PC-1 in October 1995, was in full swing in 1996 and 1997, and was completed in December 1998, 1 year behind the original completion date. D. Procurement and Construction 17. Goods and services were procured in accordance with ADB’s Guidelines for Procurement. Local competitive bidding was used to select prequalified contractors for upgrading farm-to-market roads. Procurement was made through each implementing agency’s procurement committee with members from ABAD as well as senior staff from that agency. A consultant selection committee in the Planning and Development Board (P&D) processed consultant recruitment. 18. The OEM inspected project facilities at the sites visited, including farm-to-market roads, water supply systems, and irrigation facilities as well as buildings and equipment. In general, construction quality appeared to be good with the exception of buildings in the eight livestock centers. Factors contributing to the poor construction quality in these centers included weak supervision of construction work by the Department of Communication and Works (DCW), and less ownership and attention of the Department of Livestock and Dairy Development (DLDD), which only identified the quality problems months after having accepted the buildings. It was too late for DCW to request the contractors to repair the buildings.

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

17 ADB’s supervision intensified later, with four loan review missions in 1992, two in 1994, three in 1995, and two in

1996. 18 As noted by the PCR, seven ADB staff supervised the Project during its 8-year period.

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

III. ACHIEVEMENT OF PROJECT PURPOSE A. Operational Performance

1. Watershed Improvement

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

As a result, water ran off the fields and only 3 ha of land were brought under cultivation in spite of sufficient water supply throughout the year. The OEM also found that some beneficiaries of minidams were absentee landlords; their limited attention to agriculture contributed to underuse of the irrigation facilities.

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

c. Water Harvesting

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

2. Crop and Livestock Development

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

before or very early in the rainy season. Most smallholders could not compete with large landholders for timely access to sufficient machinery services within the key season. Smallholders were also hesitant to use improved seeds and fertilizer in view of the high risk of drought, which was severe in the past 2 years.

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

b. Livestock Husbandry

30. Livestock Production Extension. This subcomponent established eight livestock production and veterinary centers to provide curative and preventive animal health facilities as well as extension services. The OEM visited two of these centers. The quality of the buildings was poor due to weak construction supervision (para. 18). Livestock owners in the project sites reported benefits of these centers when they were in full operation during implementation. In particular, the provision of artificial insemination reportedly doubled milk production from improved breed crosses. Due largely to staff shortage and inadequate funding, however, these centers have been operating below capacity since project completion, with only one part-time staff borrowed from other centers.22 After project completion, these centers were not transferred to the Government’s regular budget due to the poor condition of the buildings and operations. With inadequate maintenance, the buildings are now in a very poor state.

31. Animal Health and Nutrition Research. The Project provided support for the Barani Livestock Production Research Institute (BLPRI), which developed several feeding options for livestock owners that enabled animals to better withstand rain-fed conditions. These options included balanced livestock feeds using local crops and a urea-molasses block for milking animals. The capacity of the BLPRI feed mill was expanded to produce more feed for the institute and farmers. The feed mill has continued to operate since project completion, and 22 The OEM was told that normally one third of DLDD’s technical positions were vacant in rain-fed areas due partly to

staff’s reluctance to be stationed in remote sites. Senior staff in DLDD tried to modify the design of this subcomponent at an early stage to downsize the centers to small units with fewer staff. This could not be accommodated as the tendering process had already been initiated.

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

3. Rural Infrastructure

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

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

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

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

5. Institutional Strengthening

a. Improvement of Capacities

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

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

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

23 The poor recovery rate appeared to be due to slow collection of repayments, as the accumulated recovery rate had

increased to 88% as of 31 January 2002.

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

6. Advisory Technical Assistance on Barani Farming Systems Training and Research

40. The ADTA was financed by the UNDP grant (para. 6, footnote 4). The original design of engaging NGOs did not materialize due to difficulties in identifying suitable NGOs in the project areas in the early 1990s. As a result, a consulting firm was recruited for marketing and enterprise development. After a market survey, the consultants concluded that the project areas had no competitive advantage in industry except for animal products. Instead of developing new enterprises, it was more prudent to strengthen the existing ones. To fulfill the TA requirement of establishing 60 enterprises, the consultants facilitated 49 borrowers to obtain ADBP loans, and gave cash grants of about PRs5,000 each to another 38 small enterprise owners. 41. Another consulting firm was engaged under the TA to organize community groups in 100 villages. After consultation with the PCU, the consultants decided to work in non-RIV villages, as the RIVs were large and had been well served by various government programs. Because consultant recruitment was delayed 4 years, the community development was conducted in isolation from other project activities. At TA completion, the village organizations were still young and immature, and there was no follow-up monitoring or assistance. The consultants also trained 108 village training masters. While these masters probably benefited from the 1-week literacy training, there was no assistance to help them train other farmers in their villages. 42. The above problems originated from weaknesses in the project design, which included community development without specific measures to ensure its success. The 2-year TA period was too short to sustain the newly established village organizations. The necessary sequencing of community development ahead of other project interventions was not possible due to inadequate attention to sequencing in the project design, and the 4-year delay in consultant recruitment. The use of consultants for community development was ineffective as consultants focused on the delivery of short-term tasks rather than long-term relationships with the targeted communities. B. Economic Reevaluation 43. Based on directly quantifiable benefits and costs, the economic internal rate of return (EIRR) for the Project (excluding rural infrastructure and rural credit) is reestimated at 4.1% (Appendix 3), substantially below the appraisal estimate of 24.0% and the PCR reestimate of 10.1%.24 The primary cause of the reduced EIRR is a substantial reduction in the Project’s outreach. Instead of benefiting 32,000 to 51,000 farms as anticipated at appraisal, the Project’s crop components benefited about 20,200 farms, of which only 2,257 farms (11%) gained significant financial returns with access to irrigation facilities. The low usage of some irrigation facilities is another factor contributing to the low EIRR, largely due to farmers’ reluctance to finance complementary investments such as land leveling and water conveyance systems.

24 Rural infrastructure (farm-to-market roads and water supply) and rural credit were excluded in the EIRR

calculations at appraisal and at PCR, which covered only the main components of crops, livestock, and forestry.

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44. EIRR estimates for individual project components range from 3.3% for the forestry component to 3.8% for the crop component to 26.5% for the livestock component (Appendix 3). The high EIRR for the livestock component is due to the significant benefits of artificial insemination and its low cost. Sensitivity analysis was conducted for the project EIRR, which is highly sensitive to increases in production costs, but less sensitive to reduction in crop yields or increases in O&M costs. A 10% increase in production costs would make the project EIRR negative. C. Sustainability 45. The irrigation facilities provided under the Project were reportedly well maintained by their owners; this was confirmed by the OEM’s field inspection. Buildings and equipment in the research and extension agencies were transferred to the Government’s regular budget after project completion and are well maintained. The farm-to-market roads inspected by the OEM were in good condition under the maintenance of district offices of DCW. While repairs are needed on some roads, DCW reported sufficient allocation of maintenance budget from district councils. O&M of 12 of the 17 water supply systems has been transferred to local communities, where water user committees collect monthly fees for O&M of these systems. The remaining five schemes, which were constructed in the early years without prior agreements with local communities on their O&M responsibilities, have not been transferred and are being maintained and operated by DCW district offices. The OEM noted that some of the project activities have been terminated since project completion, such as the 17 private nurseries and the women’s agricultural extension program. Since the women’s agricultural extension services contributed little to the Project’s primary benefits, their termination did not seriously affect the Project’s sustainability.

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS A. Socioeconomic Impact 46. The Project’s most significant impact was apparent on farmlands that received access to irrigation after project interventions. Crop yields were doubled, cropping patterns shifted from wheat to high-value crops, and farm income substantially increased. Access to irrigation significantly reduced the risk of crop failure due to erratic rainfall. The impact was particularly remarkable when comparing farms which benefited from minidams and tubewells with rain-fed farms that had no access to irrigation and suffered from severe drought in the past 2 years. As the irrigation facilities will continue to generate benefits, these facilities seem to be the most effective long-term solution to overcoming constraints to rain-fed agriculture. 47. The OEM noted, however, that benefits of the small-scale irrigation facilities in the project areas are highly localized, mostly confined to adjacent fields,25 which, in most cases, belong to one household. The external benefits of these facilities are rather small, including the convenience of washing clothes, or increased water supply for animals, which could be most critical in times of severe drought. While increased demand for farm labor occurred, the OEM noted that most of the newly hired tenants were not local farmers but migrants with experience in vegetable planting since the irrigated land was shifted to vegetable production and local farmers lacked such experience. Smallholders could not participate in the irrigation investment due largely to their inability to compete with large landholders in accessing project subsidies, including their inability to provide the required counterpart funds for the investment. 25 For example, a minidam on average irrigates about 6 ha; a pond, 1 ha.

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

26 Based on data in 17 of the 19 surveyed villages, a total of 86 households received irrigation subsidies, representing

1.3% of the 6,400 households in these villages. The percentage of farmers that received irrigation subsidies in individual villages varied from 0.3% to 7.2%.

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

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53. The Project intended to target small farmers with landholdings of 5 ha or less, estimated at about 92,000 households. The OEM found that the most significant benefits came from the construction of minidams, ponds, tubewells, and dugwells, which benefited 2,257 households (Appendix 3, Table A3.12). The investment in rain-fed agriculture benefited another 17,925 farms, where wheat yields increased by 17%. The Project also provided subsidies for 965 lift pumps and 798 spillways/outlets and therefore benefited another 1,763 households. In addition, about 10% of the villages benefited from road improvement; 2% benefited from improved water supply; and a large number of households received free tree seedlings, poultry units, training, and extension services. However, these benefits were small compared with the benefits of irrigation facilities. B. Environmental Impact 54. The Project generated a positive impact on the environment with negligible negative influence. First, most of the irrigation structures such as minidams and ponds were relatively small as were land reclamation interventions such as gully plugs and land leveling. Increased use of wells and lift pumps may have lowered the water table in some locations, but the significance is difficult to assess after several years of continued low rainfall. Second, improved cultivation has an impact on augmenting water retention and intensifying vegetative cover. Third, roads constructed were mainly on flat or low undulating terrain, normally not requiring cuts into steeply sloped areas. Finally, potable water supply has reduced incidences of water-borne diseases. 55. The Project could have generated a better environmental impact if watershed management had been used to make optimal use of water resources and stabilize soil erosion in a catchment area. Most of the water and soil conservation works, however, took place in localized areas without taking into account the large catchment or subcatchment area. Furthermore, the social forestry component was unable to direct tree planting to the most critical areas due to its focus on plant nurseries. C. Impact on Institutions and Policy 56. The Project’s achievements in ameliorating constraints to rain-fed agriculture by developing small-scale irrigation facilities have encouraged the Government to continue public investment in rain-fed areas. After the Project, the Government implemented the Barani Village Development Project financed by IFAD, and is currently preparing another intervention to be financed by ADB. The Project has not only provided rich experience and lessons learned for the design and implementation of follow-up projects, but also trained a large number of government officials and field staff who continue to work on such projects. Its institutional impact on local communities, however, was minimal as they were largely excluded from the design and implementation. Although the TA consultants organized a number of community groups, none of them sustained their operations after TA completion.

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

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project design, however, did not include measures to ensure that its intended target groups (smallholders, the landless, and women) received a proportionate share of benefits. In conjunction with a top-down approach that focused on technology improvement, this resulted in the capture of a significant amount of benefits by a small number of large landholders. The Project is therefore rated partly relevant. B. Efficacy 58. The Project met most of its physical targets as revised during implementation. The Project also fulfilled, to a reduced extent, its primary objective of increasing farm household production, employment, and income. However, its intention to increase household income particularly among smallholders, the landless, and women was not fulfilled. The objective of reducing constraints to rain-fed agriculture was fulfilled only in the farmlands that received irrigation facilities. The achievements were less than anticipated due to the small number of farms that received irrigation facilities. Finally, the Project did not fulfill its objective of reducing migration to cities. On balance, the Project is rated less efficacious. C. Efficiency 59. The Project’s EIRR reestimated by the OEM is substantially below the appraisal estimate primarily due to a significant reduction in the number of project beneficiaries. Furthermore, farmers’ reluctance to finance investment supplementary to minidams and ponds led to low use of these facilities. The high subsidies for irrigation investment distorted private decisions and provided less incentive for project staff and farmers to select the most cost-effective interventions. The design of the livestock centers focused on provision of buildings without addressing the key constraint of staff shortage, resulting in significant underuse of the centers. The Project is therefore rated less efficient. D. Sustainability 60. The Project’s primary benefits have been increased farm production and household income in farms that received irrigation facilities. The sustainability of these benefits is likely as the irrigation facilities have been well maintained by their owners, and continued operation of these facilities is likely. Other project facilities such as roads and water supply systems have also been well maintained. The project facilities without clear sustainability are those that did not generate significant benefits, even during implementation, such as the women’s agricultural extension program. Overall, the Project’s sustainability is rated likely. E. Institutional Development and Other Impacts 61. The Project had a positive impact on the Government’s policies and public agencies as it encouraged the Government to continue investment in rain-fed agriculture, and trained a large number of project staff. The project design included community mobilization, NGO engagement, and the women’s extension program. However, as measures to ensure successful implementation were not developed, the impact on women and local communities was minimal. The insufficient attention to the distribution of benefits restricted the Project’s social impact on poverty reduction. On balance, the Project’s institutional development and other impacts are rated moderate.

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F. Overall Project Rating 62. The overall project rating, based on the five rating criteria (paras. 57–61), is partly successful.28 The Project has met most of its revised physical targets; its impact on increasing farm production was marked on farmlands benefiting from irrigation facilities. The primary benefits of the irrigation investment, however, flowed to a small number of large landholders. The Project had intended to target smallholders and landless poor. In the absence of implementation measures, however, it bypassed the majority of its intended target groups. G. Assessment of ADB and Borrower Performance 63. ADB designed the Project based on the Government’s initiatives and long-term strategy for rain-fed area development. ADB also mobilized cofinancing from other donors. However, ADB should have given more attention to developing measures to ensure appropriate distribution of benefits. ADB’s supervision of implementation could have been more effective in the initial years. Less frequent turnover of supervisory staff could have ensured the effectiveness of project supervision. Overall, ADB’s performance is rated partly satisfactory. 64. The Government demonstrated strong ownership and commitment to rain-fed area development, and fulfilled the loan covenants with few exceptions. In particular, the entire amount of counterpart funds was made available at project commencement, thus avoiding implementation delays due to slow releases of counterpart funds. ABAD and other line agencies implemented the Project largely as designed. Although there were serious delays in the initial 4 years, implementation accelerated in later years and was completed with only 1 year of delay. Overall, the performance of the Government is rated satisfactory.

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

28 Using the current four-category rating system (highly successful, successful, partly successful, and unsuccessful). 29 For example, household coupons could have been issued and distributed exclusively to smallholders indicating the

amount of project subsidy available for them to invest on irrigation. A number of smallholders could have combined their coupons to enable the construction of an inexpensive dugwell, which could have removed the key constraint to their farms and increased their household income. A bottom-up approach could have been adopted to organize local communities to facilitate the implementation of the household coupon system.

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

30 For large landholders, the Project could have organized study tours to visit successful investment cases, and

provided free engineering design and financial analysis to encourage them to invest in irrigation using their own capital.

31 For example, the provision of subsidies could have been in the form of a fixed amount instead of on a percentage basis without limit.

32 Land collateral may still be required to ensure financial soundness of intermediaries. However, procedures for loan application should be simplified for small landholders.

33 The lack of synergy impact was due to the following reasons: (i) the current set-up of government organizations does not easily facilitate the integration of different project activities across different line agencies; (ii) the Project used physical targets to monitor the performance of various agencies; the targets became the basis of budgetary allocation and a driving force motivating each agency, which endeavored to achieve its own targets instead of the final goal and objectives of the Project.

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level should be considered for future projects of this nature.34 Such an approach may also simplify project design by limiting the number of participating government agencies to a single agency responsible for area development, with strong field offices set up under local governments in the project areas. Various line agencies could participate in the project and provide services on a contractual basis. B. Lessons Identified 69. The Project has provided valuable lessons learned including the following:

(i) Implementing a project in a poor region may not automatically have a significant impact on poverty reduction if specific measures are not taken to ensure a fair distribution of project benefits in favor of the poor.

(ii) Inclusion in a project design of poverty-reduction activities such as NGO engagement and community development may not have the desired social impact if careful arrangements are not made for effective implementation of such activities.

(iii) Provision of a credit line may not have the desired social impact if careful arrangements are not made to develop borrower groups and microfinance institutions that can deliver microfinance services to the poor.

(iv) Inclusion of numerous training programs may not have the desired impact if the training is not based on beneficiary demand and is not aimed at building up long-term capacity in the local communities with continued support after the training.

(v) Smallholders and landless poor can easily be bypassed by public assistance that focuses solely on technology improvement.

(vi) Support for agricultural research should focus on improvement in farmers’ fields. Incentive measures need to be included in project design to encourage research institutes to develop suitable technologies that match the prevailing conditions on most farms instead of aiming at the highest possible yields in research institutes under the most ideal conditions that are not accessible by most farmers.

(vii) Free provision of inputs (such as tree seedlings) to farmers may lead to closure of such services after project completion. Project design should aim at the long-term operation of the introduced services and use funds during implementation to build up local institutions and capacities to sustain such services.

(viii) Provision of project facilities (such as buildings) without addressing constraints to their full operation (such as staff shortage) may lead to underuse of such facilities and unnecessary maintenance cost.

34 One alternative approach of village-level integration may include the following steps. First, conduct intensive

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

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C. Follow-Up Actions 70. The OEM has identified the following actions required to ensure the sustainability of project benefits. The OEM recommends that the Pakistan Resident Mission take the overall responsibility for monitoring the implementation of these actions.

(i) The Government of Punjab, through P&D, should, by March 2003, ensure that DLDD transfer the eight livestock centers to the Government’s regular budget to enable immediate repair of these facilities and to sustain their long-term operations. DLDD should, by March 2003, post at least one full-time veterinary assistant to each of the eight centers.

(ii) The Government of Punjab, through P&D, should, by March 2003, ensure that

the concerned district councils of the four project subdistricts allocate sufficient budgets for proper maintenance of the farm-to-market roads in these subdistricts.

(iii) The Government of Punjab, through P&D, should, by March 2003, ensure that

the concerned district councils of the four project subdistricts allocate sufficient budgets for proper maintenance of the five water supply systems that will not be transferred to local communities.

(iv) ABAD should review lessons learned from the Project and incorporate them into

the design of the proposed third barani intervention, which will be prepared through TA in 2003.

COMPARISON OF APPRAISAL AND ACTUAL PROJECT COSTS

($ million)

Foreign Exchange

Local Currency Total

Foreign Exchange

Local Currency Total

Foreign Exchange

Local Currency Total

A. Watershed Improvement 1. Soil and Water Conservation 4.3 6.5 10.7 2.5 5.7 8.2 59 88 77 2. Rangeland and Forestry Development 0.5 3.4 3.9 0.0 3.5 3.5 0 101 89 3. Water Harvesting 2.3 1.3 3.6 5.5 4.0 9.5 242 298 263

B. Crop and Livestock Development 1. Basic Agricultural Research 0.1 0.5 0.6 0.1 0.5 0.6 94 105 102 2. Adaptive Research 0.2 1.0 1.2 0.2 1.1 1.3 95 114 111 3. Agricultural Extension 0.3 2.1 2.4 0.3 2.2 2.5 96 105 104 4. Livestock Husbandry 0.7 1.9 2.6 1.0 2.2 3.2 144 115 123

C. Rural Infrastructure (Roads and Water Supply) 4.1 3.0 7.2 7.5 5.3 12.8 182 175 179

D. Rural Credit 0.1 7.5 7.6 0.3 3.9 4.2 259 52 55

E. Institutional Strengthening 1. Consulting Services 0.9 0.1 1.0 0.5 0.3 0.8 56 268 80 2. Training 0.1 0.0 0.1 0.2 0.0 0.2 250 — 250 3. Project Coordination 0.1 1.1 1.2 0.3 1.8 2.1 252 164 172

Subtotal 13.6 28.4 42.0 18.4 30.4 48.8 135 107 116

F. Contingencies 1. Physical Contingencies 1.7 2.2 3.9 0.0 0.0 0.0 0 0 02. Price Escalation 2.0 7.8 9.9 0.0 0.0 0.0 0 0 0

G. Service Charge on ADB Loan 1.0 0.0 1.0 0.8 0.0 0.8 81 — 81

H. Interest on IFAD Loan 3.2 0.0 3.2 1.7 0.0 1.7 54 — 54 Total 21.5 38.4 59.9 20.9 30.4 51.3 97 79 86

— = not calculated. IFAD = International Fund for Agricultural Development.Source: Appraisal Report and Project Completion Report.

Component

Appraisal EstimateActualAt Appraisal Actual as % of

Appendix 2 21

At As Revised as % Actual as %Unit Appraisal Reviseda Actual of Appraisal of Revised

A. Watershed Improvement1. Soil and Water Conservation

Improved Cultivation acre 174,322 93,204 83,205 53 89Deep Plowing/Chiseling acre 108,497 70,965 66,306 65 93Terracing and Leveling acre 138,650 79,172 73,936 57 93Land Reclamation acre 12,025 15,277 15,293 127 100Gully Plugging acre 22,400 21,966 21,966 98 100Water Disposal Outlets acre 53,122 22,191 22,191 42 100Demonstration of Vetiver Grass acre 1,000 1,001 1,001 100 100Establishment of Nurseries no. 6 6 6 100 100Stream Bank Training km 52 52 53 100 102Minidams no. 54 296 323 548 109Ponds/Weirs no. 120 690 708 575 103

2. Rangeland and Forestry Developmenta. Public Forest

Dry Afforestation/Seeding acre 13,000 14,747 12,568 113 85Anti-Erosion Work acre 13,000 13,993 12,133 108 87Fencing acre 13,000 3,507 2,912 27 83

b. Private LandsSilvopastoral acre 9,500 4,580 3,896 48 85Agrisilvicultural acre 9,500 21,265 21,170 224 100

3. Water HarvestingTurbine Pumps no. 14 5 5 36 100Dugwells no. 0 1,140 1,144 100Tubewells no. 36 93 92 258 99Lift Pumps no. 300 987 965 329 98Small Water Gates no. 2,100 2,636 3,923 126 149Drop Siphons no. 1,400 622 847 44 136Water Storage Tanks no. 0 91 107 118Water Conveyance Network no. 0 134 147 110Culverts no. 0 24 49 204Handpumps no. 0 1,077 727 68Drip Irrigation System no. 0 330 110 33Portable Irrigation System no. 0 166 156 94

B. Crop and Livestock Development1. Basic Agricultural Research

BARI no. of trials 0 299 284 95SAWCRI no. of trials 0 255 276 108

2. Adaptive Research no. of trials 0 307 354 115

Demonstration Plots no. 0 2,078 1,237 60Farmer Days no. 0 141 135 96Model Farms no. 0 116 104 90Distribution of Technical Literature no. 0 4,676 4,526 97

SUMMARY OF PHYSICAL ACCOMPLISHMENTS

Item

22 Appendix 2

At As Revised as % Actual as %Unit Appraisal Reviseda Actual of Appraisal of Revised

3. Agricultural ExtensionResource Intensive Villages no. 44 44 44 100 100Demonstration Plots no. 0 2,184 2,173 99Farmer Days no. 0 1,678 1,874 112Distribution of Technical Literature no. 0 19,708 25,454 129Pre- and Postharvest Training no. 0 4,896 5,053 103Agricultural Officers/Field Assistants no. 44 8 8 18 100Women Agricultural Officers no. 8 4 4 50 100Village Women Motivators no. 72 72 72 100 100

4. Livestock HusbandryDistribution of Improved Poultry unit 15,000 48,389 48,389 323 100

no. of trainees 700 847 814 121 96Distribution of Veterinary Kits no. 700 770 719 110 93Outreach Training no. of trainees 0 9,600 8,932 93Artificial Insemination no. of animals 0 21,285 20,495 96Farmer Days no. 0 96 126 131

C. Rural Infrastructure1. Farm-to-Market Roads km 160 298 307 186 103

2. Village Water Supply no. of schemes 16 18 17 113 94

D. Rural Credit1. Disbursements PRs million 155 293 317 189 108

2. Borrowers no. 3,800 7,565

E. Institutional Strengtheningb

Training on Soil Conservation no. of staff 18 25 139Training on Livestock Extension no. of staff 20 12 60Training on Enterprise Development no. of staff 0 40 Training on Women Village Motivators no. of staff 72 72 100Training on Livestock Farmers no. 700 814 116

no. 100 107 107Training of Masters for Literacy Training no. of farmers 0 109 Training on Livestock Management no. of farmers 0 133 Training on Women Farmers no. of farmers 0 80 Training on Marketing no. of farmers 190 395 208Establishing of New Enterprises no. 60 Strengthening of Existing Enterprises no. 0 87 Farmer Days on Crop Production no. 0 2,009 Farmer Days on Livestock no 0 126

a Target figures were revised in September 1995 and July 1997; the revision targets of July 1997 are used in this table. b As there were no revisions on targets under this component, the actual accomplishments are compared with the appraisal targets. Source: Appraisal Report, Project Completion Report, Project Coordination Unit, and Implementing Agencies.

Item

Formation of Beneficiary Groups

BARI = Barani Agricultural Research Institute, ha = hectare, km = kilometer, no. = number, SAWCRI = Soil and Water Conservation Research Institute.

One-Week Course on Livestock

Appendix 3

23

ECONOMIC REEVALUATION A. Methodology and Assumption 1. The method used in the economic reevaluation follows Asian Development Bank Guidelines for the Economic Analysis of Projects. The economic internal rate of return (EIRR) is estimated for the Project’s major components (irrigated and rain-fed agriculture, forestry, and livestock) individually and jointly. Major assumptions used in the analysis include the following:

(i) All costs and benefits are expressed in constant 2002 prices. (ii) Financial prices of nontraded commodities are adjusted by employing a standard

conversion factor of 0.9 used for similar projects in Pakistan. Input and farm product prices are based on seasonally adjusted 2002 prices. Economic prices for internationally traded commodities (wheat, milk, and urea) are based on March 2002 World Bank commodity price projections (Tables A3.1–A3.2). The economic price of labor is calculated using a shadow exchange rate of 0.75, a standard practice for rural development projects in Pakistan. A comparison of financial and economic prices used at appraisal, project completion report (PCR), and project performance audit report is given in Table A3.3.

(iii) Quantifiable benefits for the agricultural components are derived through farm

budget analyses for crops on farms supported by the Project. Crop models are constructed for rain-fed crops including chickpea, millet, rapeseed, and wheat, and for irrigated crops, including cauliflower, onion, maize, and wheat (Tables A3.4–A3.11). Based on the estimated crop yields and input uses, net returns are calculated.

(iv) The assumed economic life of the Project is 20 years while the investment period

covered 8 years from 1992 to 1998. B. Estimation of Project Benefits 2. The main project benefits were increased agricultural, livestock, and forestry production. Estimation of these benefits is derived from a comparison between the with and without project scenarios. Based on the annual completion figures provided by the Project Coordination Unit (PCU), it is estimated that a total of 20,181 farms benefited from the project interventions, including 17,925 farms that received project subsidies for land leveling, deep plowing, gully plugging, and land reclamation, and 2,257 farms that received minidams, ponds, tubewells, and dugwells. The total crop area affected by the Project is estimated at 40,011 hectares (ha), including 3,713 ha of irrigated land (Table A3.12).

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

Appendix 3

24 24

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

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

1 These results are consistent with the OEM’s findings as farmers interviewed said that they would not invest in

these items without project subsidies. 2 Since there are no data on the number of beneficiaries of tubewells and dugwells, the number of completed items

are used as an approximation of the number of beneficiaries. This estimate could serve as the maximum number of beneficiaries assuming that no beneficiary received more than one item. Estimation of the crop areas is based on data of command area and its use.

Appendix 3

25

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

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

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

3 Research activities supported under the Project included monitoring of soil erosion and silt deposition, but no data

on the results of the research was available as baseline and evaluation data collected for the Project focused on agricultural production activities. Furthermore, no information was collected on changes in road traffic, water-borne diseases, or expenditures on health. As a result, there are no reliable data to quantify the benefits for the rural infrastructure component.

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

Appendix 3

26 26

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

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

5 The appraisal report anticipated that at least 54%, and as high as 85%, of the 92,000 targeted households would

adopt the recommended technologies and thus benefit from the agricultural components.

Appendix 3

27

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

Item

Unit

Financial Prices

Economic Prices

Outputs Wheat Kg 7.5 10.7 Maize Kg 9.5 8.6 Wheat Straw Kg 2 1.8 Millet Kg 10 9.0 Millet Straw Kg 1.8 1.6 Chickpea Kg 24 21.6 Rapeseed Kg 15 13.5 Groundnut Kg 24 21.6 Vegetables Kg

Onion Kg 10 9.0 Cauliflower Kg 5 4.5

Livestock Milk L 8 11.9 Cull Buffalo/Cattle Head 25,000 22,500.0 Male Calf (12 months) Head 2,000 1,800.0 Female Calf (12 months) Head 3,000 2,700.0 Chicken Kg 50 45.0 Eggs no. 2 1.8 Wool Kg 40 36.0 Manure Kg 0.15 0.1

Inputs Wheat Seed Kg 14.25 12.8 Maize Seed Kg 11 9.9 Millet Seed Kg 12 10.8 Groundnut Seed kg 30 27.0 Groundnut Seed (improved) kg 40 36.0 Chickpea Seed kg 32 28.8 Rapeseed kg 25 22.5 Vegetable Seed kg 12 10.8 Fertilizers

Urea kg 8.3 9.2 Diammonium Phosphate kg 14.2 14.3 Potassium Sulphate kg 10 12.5

Insecticide l 450 405.0 Machinery

Plowing tractor h 200 180.0 Deep Plowing tractor h 200 180.0 Bed Preparation tractor h 200 180.0 Threshing tractor h 200 180.0

Livestock Concentrate kg 10 9.0 Kharif Foddera kg 1 0.9 Wheat Straw kg 2 1.8 Milk for Calf l 10 14.9 Replacement head 22,500 20,250.0

Labor person-day 100 75.0 Labor November person-day 80 60.0 Transport bag 20 18.0 Pumping lump sum 1,500 1,350.0

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

Appendix 3

28 28

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

Item Currency Amount A. Wheat (per ton)a US No. 1 Hard Red Winter, Ordinary Protein, Gulfb $ 123.90 Freight $ 18.50 Insurance $ 5.00 CIF Karachi $ 147.40 CIF Karachi PRs 8,697

Port Charges PRs 300 Losses (5%) PRs 435 Transport to Rawalpindi PRs 1,620 Less Local Agent Commission PRs (216) Local Transport and Handling PRs (120) Farmgate Price, Wheat (economic) PRs 10,716

Farmgate Price (financial) PRs 7,500

B. Milk (per 1,000 liters) Whole Milk Powder, CIF Karachi (per ton) $ 1,800 CIF Karachi PRs 108,000 Local Transport and Handling Cost PRs 2,565 Landed Cost, Factory PRs 110,565 Reconstitution Costs for 1 liter of Milk 125 kg of Whole Milk Powder per 1,000 liters PRs 13,821 Reconstitution Costs PRs 1,710 Economic Price of Reconstituted Milk, Factory Gate PRs 15,531 Collection and Chilling Cost PRs (2,250) Farmgate Price, Cattle Milk per 1,000 liters (economic) PRs 13,281

Farmgate Price (financial) PRs 8,000

C. Urea (per ton) Urea, Bulk, Spot, FOB Northwest Europea 95.90 Freight $ 15.00 Insurance $ 5.00 CIF Karachi $ 115.90 CIF Karachi PRs 6,838

Port Charges PRs 250 Losses (5%) PRs 342 Packing PRs 350 Transport to Rawalpindi PRs 1,710 Transport to Farm PRs 110 Farmgate Price, Urea (economic) PRs 9,575

Farmgate Price (financial) PRs 8,300 CIF = cost, insurance, freight; FOB = free on board. a Metric ton is meant throughout. b Export price delivered at the Gulf port for prompt, or 30 days shipment. Source: Estimated by using World Bank's commodity price index March 2002.

Appendix 3

29

Table A3.3: Summary of Financial and Economic Prices of Outputs and Inputs (PRs)

Financial Prices Economic Prices

Item Unit AR PCR PPAR AR PCR PPAR Outputs

Wheat kg 2.03 7.00 7.50 5.04 9.94 10.10 Millet kg 2.40 - 10.00 2.16 - 9.0 Chickpea/Gram kg 5.40 10.00 24.00 4.86 9.00 21.50 Rapeseed kg 12.00 12.00 15.00 10.80 10.80 13.50 Groundnut kg 9.00 12.00 24.00 8.10 10.80 21.60 Cattle (female) head 1,380a 4,000b 3,000b 1,242a 3,600b 2,700b Buffalo Milk l 4.00 3.60 Cow Milk l 9.50 8.00 14.16 11.90 Inputs

Urea kg 2.74 7.30 8.30 4.91 8.10 9.20 Tractor Hire/Plowing h 60 150 200 60 135 180 Livestock Concentrate

kg 2.50 9.50 10.00 2.25 8.55 9.00

Fodder kg 0.1–0.6 0.75 1.00 0.25 0.68 0.90 Labor person-

day 35.00 80 100 22.75 60 75

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

Appendix 3

30 30

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

Item

Unit

Without Project

With Project

Change (%)

Main Production

Wheat t 1.2 1.4 17 Wheat Straw t 1.2 1.4 17 Input Costs Tillage tractor h 7.5 8 7 Bed Preparation tractor h 3 3 0 Drilling tractor h 1.5 1.5 0 Seed kg 100 100 0 Urea kg 50 65 30 Diammonium Phosphate kg 50 65 30 Threshing tractor h 1.5 1.75 17 Transport bag 24 28 17 Labor Costs April Hired person-day 2 2.5 25 April Family person-day 7 6.5 (7) November Family person-day 4 4.5 13

Financial Budget (PRs per hectare)

Revenue

Wheat 9,000 10,500 17 Wheat Straw 2,400 2,800 17 Subtotal Revenue 11,400 13,300 17 Input Costs Tillage 1,500 1,600 7 Bed Preparation 600 600 0 Drilling 300 300 0 Seed 1,425 1,425 0 Urea 418 543 30 Diammonium Phosphate 710 923 30 Threshing 300 350 17 Transport 480 560 17 Subtotal Input Costs 5,733 6,301 10 Net Income (Before Labor Costs) 5,667 6,999 23 Labor Costs April Hired 200 250 25 Subtotal Labor Costs 200 250 25 Net Income (After Labor Costs) 5,467 6,749 23

h = hour, kg = kilogram, t = metric ton.

Source: Operations Evaluation Mission estimates.

Appendix 3

31

Table A3.5: Rapeseed – Rain-Fed

(yields and inputs per hectare)

Item

Unit

Without Project

With Project

Change (%)

Main Production

Rapeseed t 0.6 0.75 25 Input Costs Tillage tractor h 3.5 3.5 0 Bed Preparation tractor h 3.5 3.5 0 Seed kg 25 25 0 Urea kg 60 100 67 Diammonium Phosphate kg 60 100 67 Labor Costs April Hired person-day 6 7.25 21 April Family person-day 14 16 14 November Family person-day 4 6.25 56

Financial Budget (PRs per hectare)

Revenue

Rapeseed 9,000 11,250 25 Subtotal Revenue 9,000 11.250 25 Input Costs Tillage 700 700 0 Bed Preparation 700 700 0 Seed 625 625 0 Urea 498 830 67 Diammonium Phosphate 852 1,240 6 Subtotal Input Costs 3,375 4,275 27 Net Income (Before Labor Costs) 5,625 6,975 24 Labor Costs April Hired 600 70 17 April Family 0 0 0 November Hired 0 0 0 Subtotal Labor Costs 600 700 17 Net Income (After Labor Costs) 5,025 6,275 25

h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

Appendix 3

32 32

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

Item

Unit

Without Project

With Project

Change (%)

Main Production

Chickpea t 0.5 0.6 20 Input Costs Tillage tractor h 3.5 3.5 0 Bed Preparation tractor h 3.5 3.5 0 Seed kg 50 50 0 Urea kg 0 20 0 Diammonium Phosphate kg 0 40 0 Labor Costs April Family person-day 15.5 18.5 19 November Family person-day 2.5 2.75 10

Financial Budget (PRs per hectare)

Revenue Chickpea 12,000 14,400 20 Subtotal Revenue 12,000 14,400 20 Input Costs Tillage 700 700 0 Bed Preparation 700 700 0 Seed 1,140 1,140 0 Urea 0 166 Diammonium Phosphate 0 568 Subtotal Input Costs 2,540 3,274 29 Net Income (Before Labor Costs) 9,460 11,126 18 Labor Costs April Family 0 0 November Family 0 0 Subtotal Labor Costs 0 0 Net Income (After Labor Costs) 9,460 11,126 18 h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

Appendix 3

33

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

Item

Unit

Without Project

With Project

Change (%)

Main Production

Millet t 0.36 0.4 11 Millet Straw t 1 1.2 20 Input Costs Tillage tractor h 3.5 3.5 0 Bed Preparation tractor h 3.5 3.5 0 Seed kg 5 5 0 Urea kg 50 75 50 Diammonium Phosphate kg 50 75 50 Labor Costs April Family person-day 10.5 11 5

Financial Budget (PRs per hectare)

Revenue Millet 3,600 4,000 11 Millet Straw 1,800 2,160 20 Subtotal Revenue 5,400 6,160 14 Input Costs Tillage 700 700 0 Bed Preparation 700 700 0 Seed 60 60 0 Urea 415 622.5 50 Diammonium Phosphate 710 1,065 50 Subtotal Input Costs 2,585 3,148 22 Net Income (Before Labor Costs) 2,815 3,013 7 Labor Costs April Family 0 0 Subtotal Labor Costs 0 0 Net Income (After Labor Costs) 2,815 3,013 7 h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

Appendix 3

34 34

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

Item

Unit

Without Project

With Project

Change (%)

Main Production

Wheat t 1.2 1.9 58 Wheat Straw t 1.2 1.9 58 Input Costs Tillage tractor h 7.5 8.5 13 Bed Preparation tractor h 3 4 33 Drilling tractor h 1.5 1.5 0 Seed kg 100 100 0 Urea kg 50 100 100 Diammonium Phosphate kg 50 100 100 Threshing tractor h 1.5 1.75 17 Transport bag 24 38 58 Pumping lump sum 0 1 Labor Costs April Hired person-day 2 3 50 April Family person-day 7 9 29 November Family person-day 4 5 25

Financial Budget (PRs per hectare)

Revenue Wheat 9,000 14,250 58 Wheat Straw 2,400 3,800 58 Subtotal Revenue 11,400 18,500 58 Input Costs Tillage 1,500 1,700 13 Bed Preparation 600 800 33 Drilling 300 300 0 Seed 1,425 1,425 0 Urea 415 830 100 Diammonium Phosphate 710 1,420 100 Threshing 300 350 17 Transport 480 760 17 Pumping 0 3,000 Subtotal Input Costs 5,730 10,585 85 Net Income (Before Labor Costs) 5,670 7,465 32 Labor Costs April Hired 200 300 50 Subtotal Labor Costs 200 300 50 Net Income (After Labor Costs) 5,470 7,165 31

h = hour, kg = kilogram, t = metric ton. Source: Operations Evaluation Mission estimates.

Appendix 3

35

Table A3.9: Maize – Irrigateda

(yields and inputs per hectare)

Item

Unit

With Project

Main Production

Maize Grain t 1.5 Maize Thinning t 0.5 Maize Stover t 1.5 Input Costs Tillage tractor h 3.5 Bed Preparation tractor h 3.5 Seed kg 40 Urea kg 150 Diammonium Phosphate kg 150 Pumping lump sum 1 Labor Costs April Hired person-day 4 April Family person-day 16 November Hired person-day 10 November Family person-day 10

Financial Budget (PRs per hectare)

Revenue Maize Grain 14,250 Maize Thinning 1,000 Maize Stover 3,000 Subtotal Revenue 18,250 Input Costs Tillage 700 Bed Preparation 700 Seed 440 Urea 1,245 Diammonium Phosphate 2,130 Pumping 0 Subtotal Input Costs 6,715 Net Income (Before Labor Costs) 11,535 Labor Costs April Hired 400 November Hired 800 Subtotal Labor Costs 1,200 Net Income (After Labor Costs) 10,335

h = hour, kg = kilogram, t = metric ton. a New crop introduced with the Project. Source: Operations Evaluation Mission estimates.

Appendix 3

36 36

Table A3.10: Cauliflower – Irrigateda

(yields and inputs per hectare)

Item

Unit

With Project

Main Production

Cauliflower t 20 Input Costs Tillage tractor h 12 Bed Preparation tractor h 4 Seed kg 1 Urea kg 200 Diammonium Phosphate kg 400 Potassium Sulphate kg 150 Insecticide I 3 Transport bag 20 Pumping lump sum 1 Labor Costs April Hired person-day 8 April Family person-day 30 November Family person-day 10 November Hired person-day 2

Financial Budget (PRs per hectare)

Revenue Cauliflower 100,000 Subtotal Revenue 100,000 Input Costs Tillage 2,4000 Bed Preparation 1,000 Seed 8,500 Urea 1,660 Diammonium Phosphate 5,680 Potassium Sulphate 1,500 Insecticide 1,350 Transport 400 Pumping 10,000 Subtotal Input Costs 32,490 Net Income (Before Labor Costs) 67,510 Labor Costs April Hired 800 November Hired 160 Subtotal Labor Costs 960 Net Income (After Labor Costs) 66,550

h = hour, kg = kilogram, l = liter, t = metric ton. a New crop introduced with the Project. Source: Operations Evaluation Mission estimates.

Appendix 3

37

Table A3.11: Onion – Irrigateda

(yields and inputs per hectare)

Item

Unit

With Project

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

Financial Budget (PRs per hectare)

Revenue Onion 150,000 Subtotal Revenue 150,000 Input Costs Tillage 3,000 Bed Preparation 1,000 Seed 3,750 Urea 1,660 Diammonium Phosphate 5,680 Potassium Sulphate 1,250 Insecticide 1,350 Transport 300 Watering 10,000 Subtotal Input Costs 27,990 Net Income (Before Labor Costs) 122,010 Labor Costs 2,500 April Hired 2,400 Subtotal Labor Costs 4,900 Net Income (After Labor Costs) 117,110

h = hour, kg = kilogram, l = liter, t = metric ton. a New crop introduced with the Project. Source: Operations Evaluation Mission estimates.

Table A3.12: Beneficiaries of Agricultural Components (no. of farms and crop area)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9-20

Item New Cum New Cum New Cum New Cum New Cum New Cum New Cum New Cum New CumNo. of Farms Benefited Total Farms 1,070 1,070 1,719 2,789 2,060 4,848 2,914 7,762 2,491 10,253 2,437 12,690 4,321 17,011 3,170 20,181 0 20,181 Rain-Fed 1,053 1,053 1,643 2,696 1,912 4,608 2,847 7,455 2,308 9,763 2,158 11,921 3,075 14,996 2,929 17,925 0 17,925 Irrigated 17 17 76 93 147 240 67 307 183 490 279 770 1,246 2,015 241 2,257 0 2,257 Dugwell 0 0 0 0 0 0 0 0 0 0 0 0 1,050 1,050 90 1,140 0 1,140 Pond 16 16 67 83 122 205 57 262 136 398 154 553 71 623 85 709 0 709 Minidam 1 1 5 6 10 16 9 25 40 65 85 150 116 266 57 323 0 323 Tubewell 0 0 4 4 15 19 1 20 7 27 40 67 9 76 9 85 0 85 Area Benefited (ha)a Total Crop Area 2,157 2,158 3,452 5,610 4,142 9,752 5,878 15,629 5,033 20,663 5,077 25,739 7,883 33,622 6,389 40,011 0 40,011 Rain-Fed 2,133 2,133 3,327 5,460 3,873 9,332 5,765 15,097 4,674 19,771 4,369 24,140 6,227 30,367 5,931 36,298 0 36,298 Irrigated 25 25 126 150 269 419 113 532 360 892 708 1,599 1,655 3,255 459 3,713 0 3,713 Dugwell 0 0 0 0 0 0 0 0 0 0 0 0 1,092 1,092 94 1,186 0 1,186 Pond 21 21 88 109 161 269 75 344 179 523 203 725 93 818 112 930 0 930 Minidam 4 4 19 22 37 59 33 92 148 239 313 553 427 980 210 1,190 0 1,190 Tubewell 0 0 19 19 72 91 5 96 34 130 192 322 43 365 43 408 0 408

Cum = cumulative, ha = hectare. a Crop area of rain-fed agriculture refers to utilized farm area that underwent land leveling, gully plugging, and land reclamation. Irrigated crop area refers to utilized command area of the irrigation

facilities. Source: Yearly physical performance data from the Project Coordination Unit.

Appendix 3

39

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

With Project (Year) Item

Without Project 1 2 3 to 20

Main Production

Wheat 8,820 9,261 9,702 10,319 Millet 1,080 1,123 1,166 1,199 Pulse 1,560 1,669 1,778 1,872 Rapeseed 540 583 632 675 Groundnut 6,384 6,959 7,533 8,172 Straw 600 600 600 708 Subtotal Production Value 18,984 20,195 21,412 22,945Production Cost Mechanical Inputs 4,600 4,700 4,800 5,000 Seed 3,350 6,685 4,020 4,355 Fertilizer 2,250 2,565 2,880 3,173 Chemicals 0 0 0 113 Subtotal Purchased Inputs 10,200 10,950 11,700 12,640 Hired Labor 300 333 366 399 Subtotal Production Costs 10,500 11,283 12,066 13,039 Net Income 8,484 8,912 9,346 9,906 Incremental Net Income 428 862 1,422 Investment Cost Without Subsidy Leveling @ 2,470/ha x 25% 6,175 Land Reclamation @6,250/ha x 25% 15,625 Gully Plugs @ 5,580/ha x 25% 13,950 Subtotal Investment Cost with Subsidy 35,750 Net Financial Return Without Subsidy (35,322) 862 1,422No. of Years Before Investment Paid-Off 26.2 Investment Cost With Subsidy Leveling @ 2470/ha x 25% 1,544 Land Reclamation @ 6,250/ha x 25% 3,906 Gully Plugs @ 5,580/ha x 25% 3,488 Subtotal Investment Cost with Subsidy 8,938 Net Financial Return With Subsidy (8,509) 862 1,422No. of Years Before Investment Paid-Off 7.4 ha = hectare, No. = number. Source: Operations Evaluation Mission estimates.

Appendix 3

40

Table A3.14: Farm Model – Minidam Irrigated (6 hectare) (financial budget [aggregated] in PRs)

With Project (Year)

Item Without Project 1 2 3 to 20

Main Production

Wheat 25,920 52,043 54,409 59,850 Rapeseed 2,700 5,870 6,136 6,750 Chickpea 1,800 7,513 7,855 8,640 Cauliflower 52,174 54,545 60,000 Maize 18,587 19,432 21,375 Onion 78,261 81,818 90,000 Millet 3,240 3,130 3,273 3,600 Groundnut 10,080 11,270 11,782 12,960Subtotal Production Value 43,740 228,848 239,250 263,175 Production Cost Mechanical Inputs 11,200 4,348 4,545 5,000 Maintenance and Replacement 69,522 72,682 79,950 Seed Wheat 4104 5,204 5,441 5,985 Maize 574 600 660 Millet 54 47 49 54 Chickpea 240 835 873 960 Rapeseed 187.5 326 341 375 Groundnut 2700 3,130 3,273 3,600 Cauliflower 4,435 4,636 5,100 Onion 2,217 2,318 2,550 Fertilizer Urea 1718.1 7,394 7,730 8,503 Diammonium

Phosphate 3770.1 16,447 17,195 18,914 Potassium

Phosphate 1,435 1,500 1,650 Chemicals Insecticide 1,350 2,025 2,025 Treatment 157 164 180 Subtotal Input Cost 23,974 117,421 123,372 135,507 Hired Labor 7.5 6,722 7,027 7,730 Family Labor 68

Subtotal Labor Costs 76 6,722 7,027 7,730Subtotal Production Costs 24,050 124,143 130,399 143,237 Net Income 19,691 104,705 108,851 119,938Incremental Net Income 85,014 89,160 100,247Investment Cost Without Subsidy 386,184 Net Financial Return Without Subsidy (301,170) 89,160 100,247No. of Years Before Investment Paid-Off 4.1 Investment Cost With Subsidy 121,634 Net Financial Return With Subsidy (36,620) 89,160 100,247No. of Years Before Investment Paid-Off

1.5

No. = number. Source: Operations Evaluation Mission estimates.

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Table A3.15: Farm Model – Pond Irrigated (1.7 hectare) (financial budget [aggregated] in PRs)

With Project (Year)

Item Without Project 1 2 3 to 20

Main Production

Wheat 7,517 15,093 15,779 17,357 Rapeseed 783 1,702 1,780 1,958 Chickpea 522 2,179 2,278 2,506 Cauliflower 15,130 15,818 17,400 Maize 5,390 5,635 6,199 Onion 22,696 23,727 26,100 Millet 940 908 949 1,044 Groundnut 2,923 3,268 3,417 3,758Subtotal Production Value 12,685 66,366 69,383 76,321 Production Cost

Mechanical Inputs 1,261 1,318 1,450 Maintenance and Replacement 20,161 21,078 23,186 Seed Wheat 1,190 1,509 1,578 1,736 Maize 166 174 191 Millet 16 14 14 16 Chickpea 70 242 253 278 Rapeseed 54 95 99 109 Groundnut 783 908 949 1,044 Cauliflower 1,286 1,345 1,479 Onion 643 672 740 Fertilizer Urea 498 Diammonium

Phosphate 1,093 4,770 4,987 5,485 Potassium

Phosphate 416 435 479 Chemicals Insecticide 392 587 587 Treatment 45 47 52 Subtotal Input Cost 3,704 34,052 35,778 39,297 Hired Labor 435 1,949 2,038 2,242 Family Labor Subtotal Labor Costs 435 1,949 2,038 2,242Subtotal Production Costs 4,139 36,001 37,816 41,539 Net Income

8,545 30,364 31,567 34,782

Incremental Net Income 21,819 23,021 26,237Investment Cost Without Subsidy 73,052 Net Financial Return Without Subsidy (51,233) 23,021 26,237No. of Years Before Investment Paid-Off 3.1 Investment Cost With Subsidy 24,107 Net Financial Return With Subsidy (2,288) 23,021 26,237No. of Years Before Investment Paid-Off

1.2

No. = number. Source: Operations Evaluation Mission estimates.

Appendix 3

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Table A3.16: Farm Model – Dugwell Irrigated (1.3 hectare) (financial budget [aggregated] in PRs)

With Project (Year)

Item Without Project 1 2 3 to 20

Main Production

Wheat 5,702 11,450 11,970 13,167 Rapeseed 594 1,291 1,350 1,485 Chickpea 396 1,653 1,728 1,901 Cauliflower 11,478 12,000 13,200 Maize 4,089 4,275 4,703 Onion 17,217 18,000 19,800 Millet 713 689 720 792 Groundnut 2,218 2,479 2,592 2,851Subtotal Production Value 9,623 50,347 52,635 57,899 Production Cost

Mechanical Inputs 957 1,000 1,100 Maintenance and Replacement 15,295 15,990 17,589 Seed Wheat 903 1,145 1,197 1,317 Maize 126 132 145 Millet 12 10 11 12 Chickpea 53 184 192 211 Rapeseed 41 72 75 83 Groundnut 594 689 720 792 Cauliflower 976 1,020 1,122 Onion 488 510 561 Fertilizer Urea 378 1,627 1,701 1,871 Diammonium

Phosphate 829 3,618 3,783 4,161 Potassium

Phosphate 316 330 363 Chemicals Insecticide 297 446 446 Treatment 34 36 40 Subtotal Input Cost 2,810 25,833 27,142 29,811 Hired Labor 330 1,479 1,546 1,701 Family Labor Subtotal Labor Costs 330 1,479 1,546 1,701Subtotal Production Costs 3,140 27,311 28,688 31,512 Net Income 6,483 23,035 23,947 26,386Incremental Net Income 16,553 17,465 19,904Investment Cost Without Subsidy 58,897 Net Financial Return Without Subsidy (42,344) 17,465 19,904No. of Years Before Investment Paid-Off 3.3 Investment Cost With Subsidya 0 Net Financial Return With Subsidy 16,553 17,465 19,904No. of Years Before Investment Paid-Off No. = number. a Capital cost of dugwells was 100% subsidized by the Project, whereas farmers provided labor cost. Source: Operations Evaluation Mission estimates.

Appendix 3

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Table A3.17: Economic Benefit Cost Stream and EIRR – Rain-Fed Agriculture

(PRs’000)

Project Costs

Year

Extension and Adaptive Research

Basic

Research

Benefit

Net Benefit Stream

1 (12,976) (13,532) (10,648) (37,156) 2 (3,090) (9,680) (12,249) (25,019) 3 (9,026) (10,073) (7,891) (26,990) 4 (8,423) (1,620) (13,888) (23,931) 5 (15,449) (4,381) (10,435) (30,265) 6 (25,914) (9,712) (3,068) (38,694) 7 (1,764) (401) (6,157) (8,322) 8 (16,174) (34,080) (945) (51,199) 9 0 0 25,924 25,924 10 0 0 29,987 29,987 11 0 0 29,987 29,987 12 0 0 29,987 29,987 13 0 0 29,987 29,987 14 0 0 29,987 29,987 15 0 0 29,987 29,987 16 0 0 29,987 29,987 17 0 0 29,987 29,987 18 0 0 29,987 29,987 19 0 0 29,987 29,987 20 0 0 29,987 29,987 EIRR 4.0%

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

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44

Table A3.18: Economic Benefit Cost Stream and EIRR – Irrigated Agriculture (PRs’000)

Project Costs

Year

Soil and Water

Conservation and Water

Management

Soil Loss Monitoring Benefit

Net Benefit Stream

1 (124,024) (3,103) 105 (127,022) 2 (37,174) (6,615) 721 (43,068) 3 (45,780) (12020) 3,135 (54,665) 4 (37,249) (1,990) 8,949 (30,290) 5 (151,205) (3,922) 11,251 (143,876) 6 (244,736) (13,563) 15,988 (242,311) 7 (17,434) (376) 37,898 20,088 8 (162,557) (13,352) 68,190 (107,719) 9 0 0 81,608 81,608 10 0 0 83,133 83,133 11 0 0 83,133 83,133 12 0 0 83,133 83,133 13 0 0 83,133 83,133 14 0 0 83,133 83,133 15 0 0 83,133 83,133 16 0 0 83,133 83,133 17 0 0 83,133 83,133 18 0 0 83,133 83,133 19 0 0 83,133 83,133 20 0 0 83,133 83,133 EIRR 3.3%

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

Appendix 3

45

Table A3.19: Economic Benefit Cost Stream and EIRR – Agriculture and Irrigation

(PRs’000)

Project Costs

Benefits

Year

Extension

and Adaptive Research

Basic Research

Soil and Water

Conservation and Water

Management

Soil Loss Monitoring Rain-Fed Irrigated

Net Benefit Stream

1 (12,976) (13,532) (124,024) (3,103) (10,648) 105 (164,178) 2 (3,090) (9,680) (37,174) (6,615) (12,249) 721 (68,087) 3 (9,026) (10,073) (45,780) (12020) (7,891) 3,135 (81,655) 4 (8,423) (1,620) (37,249) (1,990) (13,888) 8,949 (54,221) 5 (15,449) (4,381) (151,205) (3,922) (10,435) 11,251 (174,141) 6 (25,914) (9,712) (244,736) (13,563) (3,068) 15,988 (281,005) 7 (1,764) (401) (17,434) (376) (6,157) 37,898 11,766 8 (16,174) (3,408) (162,557) (13,352) (945) 68,190 (128,246) 9 0 0 0 0 25,924 81,608 107,532 10 0 0 0 0 29,987 83,133 113,120 11 0 0 0 0 29,987 83,133 113,120 12 0 0 0 0 29,987 83,133 113,120 13 0 0 0 0 29,987 83,133 113,120 14 0 0 0 0 29,987 83,133 113,120 15 0 0 0 0 29,987 83,133 113,120 16 0 0 0 0 29,987 83,133 113,120 17 0 0 0 0 29,987 83,133 113,120 18 0 0 0 0 29,987 83,133 113,120 19 0 0 0 0 29,987 83,133 113,120 20 0 0 0 0 29,987 83,133 113,120 EIRR 3.8%

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

Appendix 3

46

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

Year Project Cost Benefits Net Benefit Stream 1 (23,567) 5,097 (18,470) 2 (4,418) (7,483) (11,901) 3 (28,688) (15,421) (44,109) 4 (13,941) (2,322) (16,263) 5 (15,616) 8,049 (7,567) 6 (19,940) 21,403 1,463 7 (1,718) 35,366 33,648 8 (12,875) 49,960 37,085 9 65,205 65,205 10 75,547 75,547 11 76,309 76,309 12 77,072 77,072 13 77,072 77,072 14 77,072 77,072 15 77,072 77,072 16 77,072 77,072 17 77,072 77,072 18 77,072 77,072 19 77,072 77,072 20 77,072 77,072

EIRR 26.5%

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

Appendix 3

47

Table A3.21: Economic Benefit Cost Stream and EIRR – Forestry (PRs’000)

Year

Project Cost

Benefits

Net Benefit Stream

1 (18,656) (2,445) (21,101) 2 (15,767) (3,504) (19,271) 3 (30,163) (2,717) (32,880) 4 (18,254) (3,266) (21,520) 5 (32,675) (2,353) (35,028) 6 (31,615) (1,634) (33,249) 7 (1,426) (2,197) (3,623) 8 (13,550) (1,394) (14,944) 9 (977) (977) 10 21,281 21,281 11 45,167 45,167 12 26,843 26,843 13 38,989 38,989 14 24,796 24,796 15 15,499 15,499 16 23,060 23,060 17 13,620 13,620 18 13,620 13,620 19 13,620 13,620 20 13,620 13,620

EIRR 3.3%

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

Appendix 3

48

Table A3.22: Economic Benefit Cost Stream and EIRR – The Project (PRs’000)

Benefits

Year

Project Costs

O&M Cost

Rain-Fed Irrigated Livestock Forestry

Net Benefit Stream

1 (206,506) (8,814) (10,648) 105 5,097 (2,445) (223,211)2 (88,993) (13,235) (12,249) 721 (7,483) (3,504) (124,743)3 (143,641) (16,593) (7,891) 3,135 (15,421) (2,717) (183,128)4 (95,365) (17,266) (13,888) 8,949 (2,322) (3,266) (123,158)5 (233,683) (21,304) (10,435) 11,251 8,049 (2,353) (248,475)6 (348,548) (28,527) (3,068) 15,988 21,403 (1,634) (344,386)7 (29,276) (35,954) (6,157) 37,898 35,366 (2,197) (320)8 (222,861) (35,954) (945) 68,190 49,960 (1,394) (143,004)9 0 (35,954) 25,924 81,608 65,205 (977) 135,80610 0 (35,954) 29,987 83,133 75,547 21,281 173,99411 0 (35,954) 29,987 83,133 76,309 45,167 198,64212 0 (35,954) 29,987 83,133 77,072 26,843 181,08113 0 (35,954) 29,987 83,133 77,072 38,989 193,22714 0 (35,954) 29,987 83,133 77,072 24,796 179,03415 0 (35,954) 29,987 83,133 77,072 15,490 169,72816 0 (35,954) 29,987 83,133 77,072 23,060 177,29817 0 (35,954) 29,987 83,133 77,072 13,620 167,85818 0 (35,954) 29,987 83,133 77,072 13,620 167,85819 0 (35,954) 29,987 83,133 77,072 13,620 167,85820 0 (35,954) 29,987 83,133 77,072 13,620 167,858

EIRR 4.08%

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

Appendix 3

49

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

With Project

Without Project PPAR

Crop Unit AR PCR PPAR AR PCR Rain-Fed Irrigateda Wheat kg 800 1,473 1,200 2,500 1,641 1,400 1,900 Millet kg 400 360 900 400 Chickpea/Gram kg 380 720 500 1,200 960 600 Rapeseed/Oilseed kg 300 983 600 1,200 1,032 750 Groundnut kg 550 503 700 1,300 929 900 Maize kg 1,500 Cauliflower t 20 Onion t 15 AR = appraisal report, kg = kilogram, PCR = project completion report, PPAR = project performance audit report, t = metric ton. a The Operations Evaluation Mission noted that many farmers shifted from grain production to high value cash crops

after receiving irrigation facilities. Source: Appraisal Report, Project Completion Report, and Operations Evaluation Mission estimates.