DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TNTlPRNTIONAL DEVELOPMENT ASSOCIATION

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1 Public Disclosure Authorized DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TNTlPRNTIONAL DEVELOPMENT ASSOCIATION Not For PubLic Use Public Disclosure Authorized Reort No. PA-146a Public Disclosure Authorized APPRAISAL OF BIRGANJ IRRIGATION PROJECT (NARAYANI ZONE) NEPAL Public Disclosure Authorized March 1, 1973 Agriculture Division ASIA PROJECTS DEPARTMENT This report was prepared for official use only by the Bank Group. It mnay not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.

2 antecy MEQUIVALENTS- US$ Nepalese Rupees (NRs) NRs 1.00 m US$ NRs 1 million - US$98,765 WEIGHTS AND MEASURES (METRIC SYSTEM) 1 hectare (ha) n 2.47 ucres (ac) 1 kilometer (km) miles (mi) 1 meter (m) feet (ft) 1 cubic meter (m 3 ) cubic yards or cu ft 1 million m 3 (Mm 3 ) = 810 acre feet (ac-ft) 1 m 3 /sec cubic feet per second (cfs) 1 liter/sec cfs ABBREVIATIONS ADBN - Agricultural Development Bank of Nepal AmC - Agricultural Marketing Corporation GOI - Government of India EHGN - His Majesty's Government of Nepal NZIDB- Narayani Zone Irrigation Development Board 0 & N- Operation and Maintenance UNDP - United Nations Development Program USAID- United States Agency for International Development FISCAL YEAR July 16 to July 15 1/ Excha*ge rate in force on February 19, 1973.

3 NEPAL APPRAISAL OF BIRGANJ IRRIGATION PROJECT (NARAYANI ZONE) TABLE OF CONTENTS Page No. SUMIARY AND CONCLUSIONS i-ii I. INTRODUCTION... 1 General. 1 Gandak Irrigation and Power Project Agreement... 1 II. BACKGROUND. 2 General. 2 Agriculture. 2 Irrigation and Drainage. 3 Fourth Five-Year Plan for Agriculture. 3 III. TIE PROJECT AREA. 4 Location. 4 Climate. 4 Topography and Soils. 4 Crop Production and Yields... 4 Existing Irrigation Facilities. 5 Farm Size and Land Tenure. 5 Agricultural Support Program. 6 Credit, Marketing and Storage. 6 Transportation. 7 IV. THE PROJECT... 7 A. General Description.. 7 B. Detailed Features... 7 The Project Works.. 7 On-Farm Development.. 9 Status of Engineering. 9 Consulting Services.. 9 Water Supply and Demand..10 Construction Schedule..11 C. Cost Estimates..11 D. Financing..12 Financing Plan..12 Procurement and Contracts..12 Disbursement..13 Accounts and Audit..13 This report was prepared by Messrs. K. Pranich, D. D. Brown, M. Burer, H. R. McDonald, T. H. Yoon (IDA), and M. Cassam (FAO/IBRD Cooperative Program).

4 -2- Page No. V. ORGANIZATION AND MANAGEMENT Project Organization Monitoring of Benefits Operation and Maintenance Recovery of Costs VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM INCOME.. 16 Production Market Prospects Prices Farm Income VII. BENEFITS AND JUSTIFICATION Economic Benefits Ecology and Environment VIII. AGREEMENTS REACHED AND RECOMMENDATIONS ANNEXES 1. Agreement between His Majesty's Government of Nepal and the Government of India on the Gandak Irrigation and Power Project 2. Climatic Data 3. Agriculture 4. Agricultural Support Services 5. Description of Project Works 6. Irrigation Water Demand and Supply 7. Construction Schedule 8. Detailed Cost Estimates and Expenditure Schedule 9. Estimated Schedule of Disbursement 10. List of Equipment 11. Project Organization and Consultants 12. Irrigation, Electricity and Related Water Resources Act, Farm Incomes 14. Economic Rate of Return and Sensitivity Analysis

5 - 3 - CHART: Organization Chart World Bank (R) MAPS IBRD 3895 IBRD 3896 Project Location General Plan

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7 NEPAL APPRAISAL OF BIRGANJ IRRIGATION PROJECT (NARAYANI ZONE) 1/ SUMMARY AND CONCLUSIONS i. Agriculture accounts for about 70% of Nepal's GDP and 80% of export earnings, and provides employment for about 90% of the labor force. Total cultivated land has been estimated at 1.8 million ha, or about 13% of the country's total area. Most of the cultivated area is used to produce foodgrains with more than 50% being utilized for the production of paddy. Foodgrains are grown mainly during the monsoon season (June to September) and because the timing and amount of rainfall are erratic, crop damage from drought and floods is common. Second crops are grown on only about 33% of the cultivated land, but yields are very low. Irrigation is of increasing importance in Nepal's agriculture. By 1970, the Government had provided irrigation facilities for about 120,000 ha. However, these facilities are designed primarily to provide supplementary water to the wet season rice crop, and double cropping on irrigated land is therefore very limited. The Government has recognized for some time the need for irrigation schemes designed for double cropping, and several such projects are in the planning stage, including the Birganj Irrigation Project. This would be the first agriculture project to be financed by IDA in Nepal. ii. The project would complete the construction of a canal distributary system to irrigate 28,700 ha with water supplied from a barrage on the Gandak River on the India-Nepal border and a main canal constructed by the Government of India (GOI), and a tubewell irrigation scheme to irrigate a net area of 2,700 ha in an adjoining area. It includes drainage, on-farm development, service roads, agricultural extension, research and cooperative services to provide inputs and credit to farmers, providing an integrated approach to the agricultural development of the project area. In addition it would also provide for the preparation of feasibility studies for a small pumping scheme and a surface irrigation project. The project would be executed by the Narayani Zone Irrigation Development Board (NZIDB) recently established as an autonomous government agency, having jurisdiction over an area encompassing five administrative districts. The staff of NZIDB would be trained by a consultant team in the planning, design, construction, operation, maintenance and management of both the surface and groundwater irrigation systems as well as in agricultural development. Since NZIDB is a new agency, drawing its key staff from several ministries, its success in implementing and managing the project would depend on strong support i:rom HMGN as well as on the assistance and training of NZIDB staff by the consultants. 1/ Throughout this report referred to by its short title of "Birganj Irrigation Project".

8 - ii - iii. The estimated cost of the project is NRs 102 million (US$10.1 million), comprising land acquisition NRs 11 million, civil works NRs 30 million, equipment and spares NRs 7 million, consultants NRs 20 million, administration and contingencies NRs 24 million and on-farm development works by farmers NRs 10 million. The estimated foreign exchange cost is US$4 million and the remaining US$6.1 million equivalent would be local costs. All contracts for civil works and equipment would be awarded after international competitive bidding. The project would take 5 years to complete. iv. The major benefit from the project would be the substantial increase in foodgrain production in the project area, mainly rice and wheat, which would lead to an increased agricultural income and employment opportunities for some 20,000 farm families. The primary beneficiaries would include the majority of the project area population who are subsistence smallholders with current incomes significantly below the national average farm income. At full development of the project, the annual gross value of project agricultural output is expected to increase from the current NRs 47 million to NRs 122 million, more than doubling the projected output without the project (NRs 51 million). The economic rate of return of the project would be about 21% if sunk costs which consist of the GOI's expenditures toward this project are disregarded; or 14%, if the sunk costs without interest are included in the first year. The economic rate of return for the tubewell scheme alone, which has been included in order to expand an existing pilot tubewell project and to develop institutional capacity for construction and management of future tubewell irrigation projects, would be about 14%. Other intangible but important benefits include the demonstration effects of the project, institution-building and training which would set an example for, and contribute to, agricultural development in Nepal. v. Though the economic rate of return of the project is somewhat sensitive to changes in investment costs and reduction in benefits, the economic viability of the project is secure, within reasonable ranges of variation in benefit and cost variables. A 20% increase in investment costs reduces the rate to 18% while a 20% reduction in benefits would lower it to 17%. Even with an extremely pessimistic combination of a 20% increase in investment costs and a 20% reduction in benefits, together with a 2-year delay in project completion, the rate of return would still be 14%. vi. The project is suitable for an IDA credit of US$6.0 million equivalent which is about 59% of the project costs. This amount would finance the foreign exchange costs of the project and 33% of total local costs equivalent to 50% of the local costs excluding land acquisition and on-farm development works to be carried out by farmers. The borrower would be the Kingdom of Nepal.

9 NEPAL APPRAISAL OF BIRGANJ IRRIGATION PROJECT (NARAYANI ZONE) I. INTRODUCTION 1.01 General. His Majesty's Government of Nepal (HMGN) has requested the International Development Association (IDA) to help finance irrigation development in the foothill plain (Terai) in Eastern Nepal. The project would complete the construction of the Birganj Irrigation Project, a surface system to irrigate 28,700 ha in Nepal with water supplied from a barrage on the Gandak River and main canals constructed by the Government of India (GOI). It would also include the rehabilitation and installation of tubewells to irrigate 2,700 ha from groundwater sources, engagement of consultants to assist in project implementation and to prepare feasibility studies for a small pumping scheme and a surface irrigation project The feasibility report of this project, which is to be Nepal's first IDA-assisted project in the agricultural sector, was prepared by consulting engineers (Nippon-Koei, Japan) under the UNDP/FAO NEP-7 study with assistance from the FAO/IBRD Cooperative Program. This appraisal report is based on the feasibility study and the findings of an appraisal mission consisting of Messrs. K. Pranich, D. D. Brown, M. Burer, H. R. McDonald (IDA), and M. Cassam (FAO/IBRD Cooperative Program) which visited Nepal during November and December This report was prepared by the mission assisted by Mr. T. H. Yoon Gandak Irrigation and Power Project Agreement. An agreement between HMGN and GOI, signed in 1959, provides for the execution of the Gandak Irrigation and Power Project (Annex 1). Under the agreement, GOI has undertaken to finance and construct a barrage on the Gandak River, which originates in Nepal, and irrigation systems on the left and right banks of the river, down to secondary canals of 0.57 m3/sec (20 cusec), commanding a total area of about 1.2 million ha in India and about 60,000 ha in Nepal. There will also be a small hydro-electric power station on the Nepal Western Canal which is one of the two main canals on the right bank. Construction of the distributary system below 0.57 m 3 /sec is the responsibility of HMGN with India contributing 1.5 million Indian Rs (US$200,000). On the left bank, the Don Branch Canal, which is one of the three main canals, would convey water to irrigate farm lands in India and Nepal. After running for 92 km in India till it reaches the India-Nepal border, the canal bifurcates into the Nepal Eastern Canal, which is the main canal of this proposed project, and the Ghora Sahan Branch Canal in India (Map IBRD 3895). The present project would complete the development of the command area of the Nepal Eastern Canal extending from the border to the Arwa River in Nepal GOI has completed most of its work on the first 26 km of the Nepal Eastern Canal and is expected to complete all works on the whole 62 km to the Arwa River by March 1, In order to provide efficient water control for year-round irrigation, additional control structures and modifications

10 - 2 - to some existing structures would have to be made on the main and secondary canals. Additional secondary canals, all tertiary canals and drainage networks would be provided under the proposed project. II. BACKGROUND 2.01 General. Nepal is a land-locked country of 141,000 km2 nestling on the Himalayan mountain range between India and China. The population, currently estimated at 11.2 million, is growing at an annual rate of 2.2%. About 10% of the people live in the Himalayan region, 60% in the hills and 30% in the foothill plain (Terai). In 1971 per capita GDP was estimated at US$ Prior to 1951, Nepal was relatively isolated from the outside world. The Government's effort towards economic development was intensified in 1957 with the launching of the First Five-Year Plan Agriculture. The Nepalese economy is predominantly agricultural. This sector accounts for about 70% of the GDP and 80% of exports, and provides employment for 90% of the labor force. Farming, in general, is of a subsistence nature with much of the land under foodgrain production About 1.8 million ha or 13% of the total area is under cultivation with about 2.4 million ha of crops grown each year. Practically all the cultivated land is under seasonal crop production; paddy covers more than half of the area. Other main crops are maize, wheat, millet, potatoes, oilseeds, pulses, jute, sugarcane and tobacco. Tea and seed potatoes in the east and horticulture in the west are of local importance Apart from jute, which accounts for about 70% of exports to countries other than India, almost all agricultural exports are sold to India, which is Nepal's major trading partner. Commercial relations between the two countries are governed by a trade and transit treaty During the 1960's an Intensive Agricultural Development Program was established in 16 of the 75 districts, where land and other resources were considered to be promising for crop production. Efforts were made to enlarge the irrigated areas, to introduce better crop varieties and a more intensive use of fertilizers and plant protection. A less intensive program was also initiated in other districts. Roads constructed in the eastern and central Terai with connections to Kathmandu, Pokhara, Bhairawa and the People's Republic of China have improved market opportunities for farmers The Agricultural Marketing Corporation (AMC) supplies inputs to farmers and regulates the marketing of farm produce. Other vital organizations for increasing agricultural production include the Agricultural Development Bank of Nepal (ADBN), which is the only institutional source of agricultural credit in the country, and the Agriculture Department which takes care of extension, training, research, horticulture and fishery, livestock and veterinary services. In 1970/71, the ADBN had NRs 23 million

11 share capital and NRs 12 million from borrowings, deposits and reserves, in addition to a loan of US$2.4 million granted by the Asian Development Bank for the procurement of tractors and pump sets for sale to farmers on credit. The procedures for obtaining a loan from ADBN are cumbersome and timeconsuming and there is a lack of contact between the borrower and the loan officer. The Agricultural Extension Service is weak primarily because of the inexperience of the staff. Agricultural research has only just begun and its impact is still meager In spite of all the efforts during the 1960's to increase food production, agricultural growth has been disappointing. During the Third Plan period (1965/66 to 1969/70), the sector's growth rate was estimated at only 1.8% per annum, compared with the estimated 3.8% of the non-agricultural sector. The major development constraints include insufficient irrigation and drainage facilities, low level of modern agricultural inputs application (particularly fertilizers), inadequate supporting agricultural services, and most importantly, the shortage of trained manpower Irrigation and Drainage. Though rainfall in Nepal is substantial, it is unreliable and unevenly distributed with heavy concentration during the monsoon season. Irrigation is essential for reliable crop production but the total irrigated area is currently only 120,000 ha or about 7% of the total cultivated land. Existing irrigation works can supply water only during the wet season and drainage is inadequate Irrigation and drainage works are the responsibility of the Department of Irrigation, Hydrology and Meteorology of the Ministry of Food, Agriculture and Irrigation. Planning, design, administration and budget control of irrigation and drainage works are centralized in Kathmandu. Generally minor construction works are carried out by force account while major works are executed by contractors. Operation and maintenance of irrigation projects are the responsibility of district irrigation engineers posted by the Department in the district or project areas Fourth Five-Year Plan for Agriculture. Nepal is now in its Fourth Five-Year Economic Development Plan (1970/ /75). The total expenditure for the Plan period is US$257 million, of which 26% would be for agriculture. The annual growth target of the Plan is 4% in real GDP and 3% in agriculture. The Plan stresses continued expansion of foodgrain and livestock production and places additional emphasis on crop diversification, increase in cash and industrial crop production as well as improvement of marketing and storage facilities To achieve the above targets, HMGN is strengthening its activities dealing with research, education, extension, the distribution of farm inputs and agricultural credit. Applied research on higher yielding crop varieties and the use of inputs has been increased. The Intensive Agricultural Development Program which formerly covered only 16 districts has been extended to include a total of 28 districts. Funding of the AMC and the ADBN has been increased and additional local service branches have been established and provided with trained staff. However, judging from past performance

12 - 4 - and in view of the shortages in trained and experienced personnel the annual growth target of the Plan may be too optimistic In the irrigation sub-sector, the Plan calls for continuation of work on eight major projects started during the 1960's, the initiation of four new major projects and the construction of minor works and tubewells, totalling an additional 184,000 lha. However, because of shortage of key staff for planning, design and construction, not more than 50-60,000 ha are expected to be completed by the end of the Plan period. III. THE PROJECT AREA 3.01 Location. The project is located in the Bara and Parsa districts of the Narayani Zone in the Central Terai at an altitude of about 80 m. Birganj is the largest town (population 60,000) situated in the project area. The project area to be irrigated with surface water adjoins the Indian border; the groundwater area is immediately to the north of it. The Kathmandu-Birganj highway bisects the project area and connects with the Nepal east-west highway, which is about 10 km to the north, and with Raxaul, an Indian town at the border, to the south. A narrow-gauge railway line connects Birganj to Raxaul and the Indian railway system (Map IBRD 3895) Climate. The project area has two distinct seasons, the wet season from late May to early October and the dry season. Annual rainfall is about 1,350 mm, with over 90% falling in the wet season but with erratic distribution (Annex 2). About two years in ten it is less than 1,000 mm or more than 1,600 mm, with crop damage to rainfed crops in either case. Temperatures range from a low of 8 C in January to a high of 38 C in April and imay. Humidity is 65% to 70% from March to May and ranges between 75% to 85% for the remainder of the year Topogra2hy and Soils. The project area is located on a large, fertile, undulating alluvial plain adjoining the Nepal/India border and is intersected and drained by several rivers and streams originating in the northern hills. The land slope ranges from 1:750 to 1:1000 from north to south. Soils are alluvial and generally medium to fine textured ranging from silty sand to clay loam. They are nonsaline and of satisfactory fertility, suitable for growing a wide variety of crops. Crops respond well to fertilizers on these soils. By United States Bureau of Reclamation standards about 90% of the area would classify as Class II or III for irrigation (Annex 3). With drainage and some land-shaping where appropriate, the area is suitable for irrigated farming Crop Production and Yields. Climatic conditions favor the cultivation of a wide range of crops. However, heavy rainfall in July and August, cloud covers in the rainy season and low winter temperatures affect yields and hamper harvest operations, in particular of rainfed crops. Rice grown in the wet season is the main crop. Dwarf wheat, introduced about five years ago, is the major dry season crop. Sugarcane is grown on about 5%

13 -5- of the area, mostly near the Birganj sugar factory in the Tilawe and Sirsia irrigated areas (para 3.06). Dry season vegetables, pulses and oilseeds (mustard) are cultivated on a limited scale. Even more limited is the cultivation of Marijuana or "Ganja", which is grown in small plots (1/20 to 1/10 ha), totalling no more than 100 ha, scattered over the project area. Production is licensed by the Government (see para 7.09 and Annex 3). Though this is a highly profitable crop, its growing involves high investment, knowhow, high risk of failure and substantial labor inputs The present average yield of 1,500 kg/ha paddy is about the same as in the adjoining districts in India. Yields of wheat, 1,000 kg/ha; sugarcane, 15 ton/ha; oilseeds, 400 kg/ha; pulses, 500 kg/ha; and vegetables, 5,500 kg/ha are low due to inadequate rainfall during the dry season and the low level of agricultural technique of farmers. The overall annual cropping intensity is about 135% Existing Irrigation Facilities. The Tilawe and Sirsia Irrigation Projects, constructed some ten years ago, provide mainly supplementary irrigation during the wet season, to about 7,000 ha of the project area (Blocks 5, 6 and 7, Map IBRD 3896). HMGN built only the main and secondary canals; construction of the tertiaries, on-farm watercourses and land levelling was left to the farmers who generally have so far failed to implement these works. The systems also suffer from inadequate drainage facilities The groundwater potential in the area north of the Nepal Eastern Canal is substantial. Under the Indian aid program, a pilot project consisting of 21 public tubewells was constructed between 1968 and 1970, but 7 of these wells are considered unusable either because they pump sand or because of their low yields and distance from power supplies. The 14 usable wells are poorly equipped with unsuitable pumps and motors Farm Size and Land Tenure. A farm survey of four villages in the project area held in and district statistics give the rough indication of farm sizes shown in the table below: Farm Size Farm Holdings Cultivated Area (ha) (No.) (%) (ha) tz) Less than , , , , , , , Over 3.0 1, , , , Many families in the area have more than one holding and the number of farm families is estimated to be around 20,000. About 75% of t:he families are owner-cultivators while the remainder are tenants. Due to the caste system, heavy field work, such as land preparation, is often carried out by hired labor even on some of the smallholdings. Farm owners

14 - 6 - and tenants live in about 200 villages and hamlets scattered throughout the area. Transient labor from India is also used to some extent to transplant, weed and harvest paddy and sugarcane. Most of the land preparation is performed with bullocks, though for larger farms tractors may be employed. There are about 125 farm tractors in the project area Agricultural Support Program. There is only one extension worker for every 2,000 farm households, and the extension effort itself is weak because of inadequate training and incentives offered to the workers and the lack of transportation. Adaptive research is carried out at the Parwanipur Research Station near the project area. The work has been mainly on planting and fertilizer trials, and has only been recently expanded to include plant breeding. Almost all the attention has been on paddy and wheat, with little on maize and oilseeds. The station also has training courses for extension staff posted locally (Annex 4). UNDP and USAID have provided consultants and financial support to the station and these would continue to 1974/ AMC provides fertilizers, seeds, plant protection chemicals, tools and pumps to farmers in addition to services on marketing of farm produce. At present, demand from farmers for inputs is low: in 1970, the total fertilizer demand for the whole country was only 4,600 tons and the demand for other inputs was negligible. Hence, present demand is easily handled by AMC which has a branch in Birganj and a distribution network of 22 private and 6 cooperative retailers Credit, Marketing and Storage. ADBN has a branch in Birganj. During , only about NRs 4.0 million was lent at an interest rate of about 10%. Current lending procedures are cumbersome and ADBN is reorganizing its activities to streamline the work. Aside from staff training as part of the reorganization effort, branch managers would be given greater autonomy in lending operations and the 43 cooperatives in the project area would be merged into a few viable units under ADBN management (Annex 4) Marketing channels are well developed; millers in Birganj, Kalaiya and neighboring Indian towns have a network of agents penetrating into the villages. All grain surplus above family requirements moves directly to these millers, who process paddy, wheat and oilseeds in their mills. Sugarcane is sold to the mill in Birganj. Most of the pulses and vegetables are consumed in the villages Over 75% of the marketed paddy and wheat is exported to India. Indian price and procurement policies, which attempt to minimize seasonal price fluctuation, govern the prices in Nepal and encourage farmers to store only what is needed for local consumption. Grains stored in the village may lose considerable volume and quality because of high moisture, rodents, insects, birds and pilferage.

15 3.15 Transportation. In addition to the main roads (para 3.01) about 25 km of improved dirt roads and considerable length of bullock cart trails provide transport routes from the villages to Birganj and nearby Indian towns. The east-west layout of the project area, intersected by ten major rivulets, makes it difficult for distant farmers to deliver their produce to the Birganj market, hence these farmers currently prefer selling their products to nearby Indian towns. Farmers use bullock carts to transport their produce and trucks also use these roads and trails during the dry season. Imported goods usually move from the Indian port of Calcutta to Raxaul by rail or truck and by truck to the Nepal destination. Exports move by bullock cart or truck at many points across the border to Indian markets. IV. THE PROJECT A. General Description 4.01 The project would complete the canal distributary network of the Birganj surface-water irrigation project with a net area of 28,700 ha and provide tubewell irrigation to 2,700 ha in an adjoining area. It includes drainage, on-farm development, office buildings, project staff quarters, cooperative stores, service roads, procurement of vehicles and equipment, agriculture extension and cooperative services to provide integrated agricultural development. It also includes provisions for the preparation of feasibility studies for a small-pumping scheme and a surface irrigation project. The project would be executed by the Narayani Irrigation Development Board (NZIDB) recently established for the purpose as an autonomous Government agency, assisted by consultants (see para 5.01). B. Detailed Features 4.02 The Project Works. Project works, details of which are given in Annex 5, would include: (a) Surface-water Irrigation (i) Improvement of the Nepal Eastern Canal including the construction of additional control structures and the improvement of existing structures. (ii) Improvement of about 50 km of secondary canals above 0.57 m 3 /sec (20 cusec) including the addition of control structures. (iii) Construction of about 1,150 km of secondary and tertiary canals with control structures and field turnouts.

16 - 8 - (iv) Construction of about 800 km of drainage networks. (v) Construction of about 290 km of canal service roads and surfacing of about 110 km of these roads to link project area with Kathmandu-Birganj road and with cooperative stores. (b) Groundwater Irrigation (i) Testing of existing tubewells and replacement of inadequate pumps, motors and control devices. (ii) Drilling and equipping of about 14 new tubewells. (iii) Construction of about 18 km of 11 kv transmission lines to serve existing and new tubewells. (iv) Construction of related storage tanks and irrigation distribution systems, consisting of lined main canals and unlined secondary canals to the turnouts commanding ha service unit each, and drainage networks in the command of each tubewell. (c) Project Facilities (i) Construction of offices, workshops, stores and living quarters for staff and consultants. (ii) Installation of a communication system for irrigation system operations. (iii) Installation of hydrological telemetry equipment for the Nepal Eastern Canal. (iv) Construction of about 12 cooperative stores. (d) Technical Assistance. A consulting firm would be retained to provide the project with training, technical assistance and advisory services in engineering, construction, general administration, personnel finance, accounting and auditing, agricultural extension and cooperative services and in the operation and management of the project as an integrated agricultural project. Farmers in the project area would be provided technical assistance for the planning, design and execution of on-farm watercourses, field drains and other on-farm development works. (e) Feasibility Studies. Feasibility studies would be provided for: (l) A pumping scheme to lift water from the Nepal Eastern Canal to irrigate areas north of the said Canal. (ii) A further irrigation project to be selected.

17 4.03 On-Farm Development. Because of the heavy wet-season rainfall and undulating topography, it would be necessary to construct a comprehensive on-farm irrigation and drainage system, and carry out landshaping in some areas, if the projected crop yields are to be obtained. The project would provide technical assistance to plan, design, and lay out on-farm watercourses and field drains and to indicate areas requiring landshaping. The project would also organize farmers to complete construction of these works themselves. Because holdings in the project area are small, most of the farmers would be able to carry out the works with their own labor. Farmers with holdings larger than 3 ha who are not able to undertake the work with their own labor may hire NZIDB to carry out the work for them. The ADBN would provide credit to these farmers to help finance the works. ADBN generally lends to cooperatives at 7% interest and cooperatives on-lend to farmermembers at 10% interest. Assurances were obtained during negotiations that under the project farmers would receive irrigation only after they have completed all on-farm development works on their lands. Should a farmer fail to complete the construction of the watercourses, field drains and land-shaping as indicated in the plan within one year after construction of the tertiary canal and drain serving his area, NZIDB would perform such construction and recover the expenses from the landowners. Assurances were also obtained that NZIDB would have these rights included in the order establishing the Board Status of Engineering. The status of works carried out by GOI in the project area at the end of June, 1972 was as follows: (a) From km 0 to km 26.5 of the Nepal Eastern Canal at Kathmandu-Birganj Road, the excavation of the canal was nearly completed except for short distances at km 6.7, 11.3, 25.9 and 26.4 where there were problems of land acquisition and farmers' demand for additional canal bridges. Of the 44 structures, 40 were completed and the remainder are expected to be completed by March, Three out of five secondary canals larger than 0.57 m 3 /sec (20 cusec) were completed and the other two are expected to be completed by March, (b) From km 26.5 to the end of the canal at Arwa River - km 62, the excavation of the canal was nearly completed except for small interruptions (10-15 m length) due to farmers' demand for bridges at km (5 interruptions), 31.1, 37.5, 37.8, 39 and Of the 47 structures on the canal, 26 were completed and 21 were under construction. Of the four secondaries above 0.57 m 3 /sec, two were completed and two were under construction. HMGN expected that GOI's remaining works on this portion of the project area would also be completed by March, Consulting Services. UNDP financed a bridging operation extending from November 1971 to July 197 for the consulting engineers (Nippon Koei, Japan) to prepare design drawings, specifications and tender documents for

18 Block 1 of the surface-water irrigation area (Map IBRD 3896). Hence as soon as the land required for civil works in this block has been acquired (para 4.17), invitations to bid could be issued Since there is a shortage of trained and experienced engineers, agriculturists and managers in Nepal, consultants would be required to assist NZIDB in the planning, design and supervision of construction of the project and to carry out feasibility studies (para 4.02). They would also train and advise NZIDB staff in all phases of project execution, management, accounting, agricultural development and extension activities. About 40 man-years of consultants would be provided under the project inclusive of 6 man-years for feasibility studies. Assurances were obtained during negotiations that HMGN would retain consultants acceptable to, and appointed on terms and conditions satisfactory to, the Association, and that within 12 months from the effective date of the credit HMGN would provide the Association with a plan for staff training to be carried out by the consultants Water Supply and Demand. Nepal's agreement with India (Annex 1) assures the delivery of 24.1 m 3 /sec (850 cusec) of water into the Nepal Eastern Canal at all times except when under annual repair and maintenance. These deliveries would depend on proper maintenance of the Don Branch Canal, wholly inside India, by GOI. Agreements have been made between Nepal and GOI for (a) the proper operation and maintenance and repair of Don Branch Canal, and (b) the completion of the civil works in the project area under the Gandak agreement The amount of water to be delivered to the headgate of the Nepal Eastern Canal represents about 2% of the mean annual flow of the Gandak River and 8% of the lowest probable river flow. The project's projected cropping pattern at full development would utilize 65% to 75% of this supply from May through September and about 30% to 50% during the dry season months; thus, sufficient water would be available for the project area and would permit expansion at a later date by means of lift irrigation or extension of the Nepal Eastern Canal from Arwa River to Bagmati (Annex 6). During negotiations assurances were obtained that HMGN, with the help of consultants, would conduct a study of the feasibility of a pumping scheme to lift water from the Nepal Eastern Canal to irrigate areas north and adjacent to it; a copy of the report would be provided the Association within 18 months of the credit effectiveness The 14 existing tubewells to be improved under the project would be expected to yield 50 1/sec; each of the 14 new tubewells, 80 1/sec. They would irrigate 75 and 120 ha net area per well, respectively. Water balance studies indicate an average annual recharge of about 50 million m 3, while anticipated withdrawals would amount to about 27 million m 3. If the study of the pump scheme (para 4.08) shows that low lift pumping is more economical than tubewells, it would be desirable to resite some of the proposed new tubewells further north on land that cannot be irrigated by low lift pumps from the canal. The siting of these new wells would be the responsibility of the consultants and would be decided when the study results are available.

19 Construction Schedule. Because of the heavy monsoon rains the construction season is limited to November/December to June. HMGN expects that GOI will complete all its share of the works by March 1, Bids for project works in Block 1 for which tender documents have been completed during the bridging operation (para 4.05) would be called as early as possible so that works could be undertaken in the 1973/74 dry season. Thereafter, works in other blocks would be scheduled to start as soon as tender documents are prepared and land has been acquired. All blocks would be completed by June 1978 (Annex 7). This schedule is realistic considering the restricted working seasons Improvement of the existing 14 tubewells and the construction of their canal distributary systems would be performed in the dry season of 1974/75. C. Cost Estimates 4.12 The total cost of the project would be about NRs 102 million (US$10.1 million) as detailed in Annex 8 and summarized below: Local Foreign Total Local Foreign Total - NPRs million US$ million Land Acquisition Civil Works Surface Groundwater Buildings and Stores Equipment and Spares Consultants Administration Subtotal On-Farm Development Contingencies Physical Price Subtotal Total

20 Cost estimates are based on unit rates and prices of similar works constructed in Nepal and are net of custom duties. Except for land acquisition and on-farm development, physical contingencies are estimated at 10% on all items and price escalation was calculated at the rate of 7% per annum for local costs and 5% for foreign exchange costs on the unexpended balance. The estimated foreign exchange cost of US$4.0 million would be about 39% of project costs. The above cost estimate does not reflect the recent devaluation of the United States Dollar. D. Financing 4.14 Financing Plan. The financing plan proposed for the project is shown below: IDA Credit % of NRs million US$ million Project Cost Foreign costs Local costs HiMGN Contribution Local costs Farmers' Contribution Local costs The proposed IDA credit of US$6.0 million would finance the foreign exchange costs of the project and 50% of the local costs excluding land acquisition and on-farm development, i.e. about 59% of the project costs. HMGN would provide 51% of the local costs requirement or 31% of the project costs, and farmers' contribution in the form of own labor for on-farm development works would provide the remaining 10% of costs of the project. A breakdown of projected annual expenditures and a quarterly disbursement of the IDA credit are presented in Annexes 8 and Procurement and Contracts. In order to phase construction with the training of Nepalese engineers and extension workers and with on-farm development, civil works would be spread over five working seasons. There would be about six contracts for works in 12 blocks, one contract for Block 1 for which contract documents are completed, one contract each for the combined Blocks 2 and 3; Blocks 4, 5 and 6; Blocks 7 and 8; Blocks 9 and 10; and Blocks 11 and 12 (Map 3896). The improvement of Nepal Eastern

21 Canal would be in 1 or 2 contracts. Construction of transmission lines, civil works and well drilling in the groundwater area would be in a separate contract. The value of each contract would range between US$300,000 and US$500, Assurances were obtained during negotiations that equipment and vehicles (Annex 10) would be procured and civil works would be awarded after international competitive bidding in accordance with the Association's Guidelines; and that civil works contractors would be prequalified. In order to avoid delays which could be grounds for claims by contractors, assurances were also obtained during negotiations that no civil works tenders would be issued until the lands required had been acquired by HMGN. Though Nepal has a Treaty of Trade and Transit with India which gives preferential customs duties to goods imported into either country from the other, this would not affect project procurement as bids on all equipment and spare parts under the project would be compared on c.i.f. values without custom duties Disbursement. Disbursement from the proposed credit would cover the cif cost of imported equipment and spares (US$0.7 million) and 100% of the foreign cost of consultants (US$1.7 million). Disbursement for civil works (US$2.5 million) would be at a percentage (presently estimated at 85%) of progress payments as certified by the consultants. An unallocated sum (US$1.1 million) would be available to meet physical contingencies and price escalation of the above. Disbursement would not be made for the costs of land acquisition, administration or on-farm development works, nor for operation and maintenance (other than equipment as specified in Annex 10) Accounts and Audit. Assurances were obtained during negotiations that (a) NZIDB would maintain its own accounts and carry out internal audits regularly; (b) the project accounts would be maintained separately and audited annually by an independent auditor acceptable to the Association; and (c) copies of the audit report would be sent to the Association within four months after the close of each fiscal year. V. ORGANIZATION AND MANAGEMENT 5.01 Project Organization. Irrigation projects are generally planned, designed, constructed, operated and maintained by the Department of Irrigation, Hydrology and Meteorology of the Ministry of Food, Agriculture and Irrigation. Because this would be the single largest integrated agricultural development project to be undertaken in Nepal, HMGN has established NZIDB under the Development Board Act of 1956, to be responsible ffor its execution, management, operation and maintenance. This would insure efficient coordination of the various activities necessary for such development in one organization instead of being spread over several departments and institutions. The Board will be responsible for irrigation development throughout the Narayani Zone, one of the fourteen zones into which Nepal is divided. The zone includes five districts. NZIDB will be funded by an annual budget allocation which would be sufficient to cover all estimated

22 project costs except on-farm development. Its powers are vested in an eight-member Board of Directors appointed by HMGN, consisting of the Secretary, Ministry of Food. Agriculture and Irrigation (Chairman), six members representing government agencies and the Project General Manager. The Board would determine-i`olicy; its appointed General Manager would be the chief administrative officer responsible for staff appointment, dismissal and assignment of duties within the general rules of the Nepal Public Service Commission. Consultant would be engaged under the project to assist NZIDB in project implementation (para 4.06 and Annex 11). Since NZIDB is a new and untried agency, drawing its key staff from several ministries, its success in implementing and managing the project will depend on strong support from HMGN as well as on the assistance and training of NZIDB staff by the consultants NZIDB will have three divisions (see Organization Chart, IBRD 6877 (R)). The Administration and Finance Division would be responsible for general administration, personnel, accounting, finance, procurement and inventory control of equipment and supplies. The Engineering Division would be responsible for planning, design, supervision of construction of all works and operation and maintenance of the irrigation and drainage systems; working closely with the Extension Service Section of the Agricultural Division, it would render technical assistance to farmers on on-farm development works. The Agriculture Division would be responsible for extension work and for collaboration with AM4C and ADBN in the distribution of the necessary inputs and credit to farmers mainly through cooperatives. In collaboration with the Parwanipur Research Station, it would conduct research, including experiments on promising crops such as sugar beets for the project area. Key administrative staff would be transferred from the other Governmental ministries and departments. The engineers and technicians in the Engineering Division would be seconded from the Department of Irrigation, Hydrology and Meteorology. Although these men are mostly young and inexperienced, they are graduates of universities and technical colleges in India or Nepal and are expected to learn quickly with the guidance of the consultants. Likewise the staff of the Agriculture Division who are graduates of similar institutions and some Junior Technical Assistants with high school certificates and training in agriculture would be seconded from the related departments and corporations of the Ministry of Food, Agriculture and Irrigation. They would receive on-the-job training under the guidance of the consultants Assurances were obtained during negotiations that NZIDB would be established with rules satisfactory to the Association and managed at all times by a full-time General Manager with qualifications and experience acceptable to the Association and that HMGN would cause the necessary inputs and credit to farmers in the project area to be provided. As the jurisdiction of the NZIDB extends over a considerably larger region than the project area and as the NZIDB would not have sufficient staff for work beyond the present project, an assurance was obtained during negotiations that NZIDB would work exclusively on the project until its completion. It would be a condition of effectiveqess of the credit that a General Manager with qualifications and experience acceptable to the Association had been appointed.

23 Monitoring of Benefits. In order to measure the economic benefits and changes in farmers' income as a result of the project, NZIDB, in collaboration with the Economic and Statistics Division of the Ministry of Food, Agriculture and Irrigation, would conduct field surveys, collect pertinent information and data and carry out an evaluation study of the project results. This work would start from the first project year in order to obtain accurate benchmark data and continue for some years after completion of the project works Operation and Maintenance (O & M). NZIDB would be responsible for the 0 & M of both the surface and groundwater irrigation systems down to turnouts for each irrigation service unit. The consultants would prepare o & M manuals for the irrigation systems. Farmers in each service unit would be organized into an "Irrigation User Group" to be responsible for the construction as well as 0 & M of on-farm water courses and field drains under bhe direction of NZIDB's engineers Recovery of Costs. Farmers pay a land tax as part of general t:axation. This tax has varying rates depending on classes of land; the average land in the project area (Class II) bears a tax of NRs 70 per ha. By providing perennial irrigation, the land would be reclassified as Class I with a tax of NRs 81 per ha Farmers in surface irrigation projects constructed by HMGN currently are charged about NRs 6.0 per ha for water, a rate much below the estimated 0 & M costs. Nepal has had no experience in the operation of state-owned tubewells or in charging farmers for the groundwater. The N4epal Irrigation, Electricity and Related Water Resources Act of 1967 (Annex 12) authorizes a water cess on landowners served by licensed surface :Lrrigation organizations. It also provides HMGN with the legal authority t1o levy charges on users of publicly constructed surface and groundwater :Lrrigation works. ';.08 All beneficiaries in the project area would pay the full 0 & M icost together with a portion of the investment cost of the project. The amnual 0 & M cost of the surface irrigation system is estimated at NRs 80/ha uhile that of the groundwater system at NRs 160/ha. For the purpose of estimating farm incomes, it was assumed that at full development farmers would also pay an annual investment recovery charge of NRs 160/ha for both t:he surface and groundwater systems; thus together with 0 & M cost the total project charges for a surface water system would be NRs 240/ha and for g,roundwater NRs 320/ha. These levels of project charges would be equivalent i:o 20-25% of incremental farm incomes at full development in Year 10 and would result in recovery of investment costs including contingencies at 4% interest during the 50 year project lifetime In order to measure the subsidy element, full project cost as well.as the above project revenues were discounted at 10% over the project life of 50 years. Comparison between the two results shows that the present value of the government subsidy amounts to about NRs 45 million or 44% of,osts. Including sunk costs the corresponding figures would be NRs 95

24 million and 62%. Considering the current low per capita income in the project area and that even with the project the income would still remain below the national average, this level of public subsidy would be justified. Assurances were obtained during negotiations that, beginning not later than one year after completion of the works in each block or each tubewell command area, HMGN would establish and collect water charges to recover from the farmers benefitting under the project (a) the operation and maintenance costs of the works as they are incurred; and (b) in progressive steps over a reasonable period of time, as much as practicable of the investment cost of the project, having due regard to farmers' incentives and capacity to pay. HMGN would also review and, if necessary, revise the water charges not less than once every five years. VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM INCOME 6.01 Production. In the next years paddy and sugarcane would continue to be the major wet season crops. Wheat, the principal dry season crop, currently planted on about 25% of the area, would increase to about 50% with the project. Oilseeds, pulses, and vegetables would continue to occupy about 15% of the area during the dry season. With the project, the cropping intensity would increase from the present 135% to 170% as presented in Annex 3 and summarized below: Cropped Area (ha) Production ('000 tons) Without With Without With Present Project Project Present Project Project Paddy-Local 27,200 28,260 15, Paddy-HYV , Sugarcane 1,570 1,570 3, Wheat 7,850 9,420 15, Oilseeds 1,200 1,570 1, Pulses 1,500 1,570 1, Vegetables 1,570 1,570 1, Total 40,890 43,960 53,160 The "Without Project" production assumes a small increase in paddy and wheat area and a 1% per year increase in yields. Expected yield levels in ton/ha for the main irrigated crops under the project are as follows (figures in parentheses represent current yields): paddy, 3.0 (1.5); wheat, 3.0 (1.0); and sugarcane, 40.0 (15.0). These yield levels would be reached gradually over a ten-year period following the start of irrigation Market Prospects. Nepal is expected to continue to be a net exporter of rice and wheat to India. Even if India becomes self-sufficient in foodgrain, it is likely that the farmers in the project would still find Indian markets in Bihar, Uttar Pradesh and West Bengal because of the projected regional shortages. Bangladesh is another possible export market.

25 Oilseeds, pulses and sugarcane will continue to be in deficit in Nepal and the quantity of these crops that can be supplied by the project is relatively small compared to the total shortages Prices. Prices used for farm budget analysis represent an average farm gate post-harvest price received for each commodity in recent years. Over 70% of the marketed produce is sold during the first three months after harvest. Prices during this period are determined by the market condition of the Nepal-India border region because most of the marketed foodgrain surplus is sold in the State of Bihar in India. Farm inputs are valued at current prices Farm Income. Farm incomes of representative farms in the project area have been analyzed and are presented in Annex 13 and summarized below. Since farm size varies (para 3.08), three farm models have been chosen, 0.5 ha, 2 ha and 5 ha. The first model represents farms smaller than 1 ha since more than half the number of holdings of less than 1 ha are of about 0.5 ha size. The 2-ha farm represents farms between 1-3 ha which comprise 30% of the project area. The last model covers farms larger than 3 ha. Farm Income With Project Project Charges (excluding as % project Project of Incremental Farm Size Without Project charges) Charges Income (ha) (NRs) (%) Surface Irrigation , ,680 5, ,290 8,690 1, Tubewell Irrigation 2.0 2,680 5, VII. BENEFITS AND JUSTIFICATION 7.01 Economic Benefits. The provision of perennial irrigation and other inputs and services under the project would bring intensive and modern agriculture to some 31,400 ha, which are currently under rainfed subsistence farming. The major benefits from the project would be the substantial increase in agricultural production and the resulting increased incomes and

26 employment opportunities of some 20,000 farm families in the area, about two-thirds of whom are small farmers owning less than 1 ha. Among the intangible benefits are the demonstration effects of the project, institution-building and training in various agricultural disciplines, all of which would contribute to agricultural development in Nepal At full development the annual gross value of project production, at projected 1980 world market prices, adjusted to farm-gate value, is expected to increase from the current NRs 47 million to NRs 122 million, more than doubling the expected output without the project (NRs 51 million). After deducting all production costs except labor, the incremental value of the net annual output attributable to the project would be NRs 42 million (US$4.2 million). Labor has been costed at the full market rate of NRs 5 per day only in the peak seasons (1 month without the project and 2 months with the project) and at a shadow rate of NRs 1 per day at other times. No distinction has been made between family and hired labor for the purpose of economic analysis. Net annual foreign exchange earnings from the increased paddy and wheat exports would reach NRs 55 million (US$5.5 million). There would also be some import substitution savings from the increased production of sugarcane, oilseed and pulses The economic rate of return, excluding sunk costs, is estimated at 21% (Annex 14). If sunk costs without interest, estimated at NRs 50 million, were costed in the first project year, this rate would be reduced to 14%. In order to test the economic feasibility of the tubevell irrigation, separate economic analyses for surface and groundwater irrigation components have been performed. The analyses show that both subprojects are economically viable, since the economic rates of return are estimated at 24% and 14%, respectively; and with the sunk costs 14% and 11%, respectively Though the tubewell scheme has a lower rate of return, it would serve to develop the institutional capacity for the construction and management of future tubewell projects. Its current investment cost is high because of the small number of new wells and the high costs of consultants and administration per well. A future project with a larger number of wells would give a higher rate of return A sensitivity analysis shows that there is moderate sensitivity to the shadow price of labor: if all labor is valued at NRs 5 per man-day, approximating the wage rate for hired labor at peak periods, the rate of return falls to 16% (Annex 14). The economic viability of the project is also secure for reasonable ranges of variation in benefit and cost variables. A 20% increase in investment costs reduces the rate to 18% while a 20% reduction in benefits would lower it to 17%. Even with an extreme combination of a 20% increase in investment costs and a 20% reduction in benefits, together with a 2-year delay in project completion, the rate of return would still remain about 14%. The rate of return is moderately sensitive to assumptions of future cropping patterns as returns per hectare for wheat, sugarcane and vegetables are significantly higher than for the other crops. Replacing the assumed increased wheat area of 6,200 ha with pulses and oilseeds, lowers the rate of return to 18%.

27 Because of the complex: socio-economic characteristics of the labor force (para 3.10), poor cadastral data in the project area and lack of reliable statistics on the transient seasonal farm labor from India, the quantitative account of distributive and employment effects of the project cannot be accurately estimated. However, the direction of the impact is clear. Practically every farmer in the area would be better off compared to the condition projected under "without project." The many subsistence smallholders in the project area estimated at two-thirds of the project farm population, would be the primary beneficiaries of the project through increased and stable income and employment opportunities. During the project construction period, aggregate annual employment of labor solely attributable to the project construction would be about 7-8,000 man-years. The additional agricultural output produced by the project would also stimulate marketing, processing and supporting industries which would undoubtedly create additional employment opportunities in the project area Ecology and Environment. The project would not require resettlement of any farmers nor construction of new villages. It would provide drainage which would help in reducing floods and soil erosion and minimizing waterlogging. In addition, increased production, particularly of pulses and vegetables, would improve the quality of human nutrition There is no schistosomiasis in Nepal but the perennial irrigation may increase the incidence of malaria and other water-associated diseases, insect pests, weeds and rodents that affect high-yielding plants and man. There is a campaign for malarial eradication over the whole of Terai and NZIDB through its Extension Services Section would train farmers in the proper use of chemicals to control pests and rodents Currently the growing of Marijuana or "Ganja" is licensed by the Government. HMGN has, however, expressed intention to further restrict the production and distribution of all narcotic drugs in Nepal. They also assured the Association that the cultivation of narcotic plants would be prohibited in the project area. VIII. AGREEMENT REACHED AND RECOMMENDATIONS 8.01 During credit negotiations, agreement was reached on the following principal points: (a) should a farmer fail to carry out on-farm development works as requested by NZIDB within one year after construction of the tertiary canals and drains serving his area, NZIDB would undertake to construct these works and recover the costs from the landowner (para 4.03); (b) a consulting firm acceptable to the Association would be appointed on terms and conditions satisfactory to the Association (para 4.06);

28 (c) the rules to be issued by NZIDB would be satisfactory to the Association (para 5.03); and (d) the necessary agricultural inputs and credit would be provided to farmers in the project area (para 5.03) A condition of effectiveness of the proposed credit would be that NZIDB's General Manager with qualifications and experience acceptable to the Association, shall have been appointed (para 5.03) The proposed project constitutes a suitable basis for an IDA credit of US$6 million on standard IDA terms. The Borrower would be the Kingdom of Nepal.

29 ANNEX 1 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Agreement Between His Majesty's Government of Nepal And The Government of India on the Gandak Irrigation and Power Project Preamble. - WHEREAS His Majesty's Government of Nepal and the Government of India consider that it is in the common interests of both Nepal and India to construct a barrage, canal head regulators and other appurtenant works about 1,000 feet below the existing Tribeni canal head regulator and of taking out canal systems for purposes of irrigation and development of power for Nepal and India (hereinafter referred to as "the project"). AND WHEREAS in view of the common benefits, His Majesty's Government have agreed to the construction of the said barrage, canal head regulators and other connected works as shown in the Plan annexed to this Agreement to the extent that they lie within the territory of Nepal, by and at the cost of the Government of India. NOW THE PARTIES AGREE AS FOLLOWS: - 1. Investigation and Surveys. - His Majesty's Government authorise the Project Officers and other persons acting under the general or special orders of such officers to move in the area indicated in the said Plan with men, material and equipment as may be required for the surveys and investigations in connection with the Project, before, during and after construction, as may be found necessary from time to time. These surveys include ground, aerial, hydraulic, hydrometric, hydrological and geological surveys; investigations for communication and for the alignment of canals and for materials required for the construction and maintenance of the Project. 2. Authority for the execution of works and their maintenance. - (i) His Majesty's Government authorise the Government of India to proceed with the execution of the Project and for this purpose His Majesty's Government shall acquire all such lands as the Government of India may require and will permit the access to, the movement within and the residence in the area indicated in the Plan of officers and field staff with labour force, draught animals, vehicles, plants, machinery, equipment and instruments as may be necessary for the execution of the Project and for its operation and maintenance after its completion. (ii) In case of any apprehended danger or accident to any of the structures, the officers of the Government of India will execute all works which may be necessary for repairing the existing works or preventing such accidents and/or danger in the areas indicated in the Plan. If any of such works have to be constructed on lands which do not belong to the Government

30 ANNEX 1 Page 2 of India, His Majesty's Government will authorise these works to be executed and acquire such additional lands as may be necessary for the purpose. In all such cases the Government of India shall pay reasonable compensation for the lands so acquired as well as for damage, if any, arising out of the execution of these works. 3. Land acquisition. - (i) His Majesty's Government will acquire or requisition, as the case may be, all such lands as are required by the Government of India for the Project, i.e., for the purpose of investigation, construction and maintenance of the Project and the Government of India shall pay reasonable compensation for such lands acquired or requisitioned. (ii) His Majesty's Government shall transfer to the Government of India such lands belonging to His Majesty's Government as are required for the purpose of the Project on payment of reasonable compensation by the Government of India. (iii) Lands requisitioned under paragraph (i) shall be held by the Government of India for the duration of the requisition and lands acquired under sub-clause (i) or transferred under sub-clause (ii) shall vest in the Government of India as proprietor and subject to payment of land revenue (MIalpot) at the rates at which it is leviable on agricultural lands in the neighbourhood. (iv) When such land vesting in the Government of India or any part thereof ceases to be required by the Government of India for the purposes of the Project, the Government of India will reconvey the same to Ilis Majesty's Government free of charge. 4. Quarrying. - His Majesty's Government shall permit the Government of India on payment of reasonable royalty to quarry materials, such as block stones, boulders, shingles and sand required for the construction and maintenance of the Project from the areas indicated in the said Plan. 5. Communication. - (i) His Majesty's Government shall allow the Government of India to construct and maintain such portion of the Main W4estern Canal which falls in the Nepal territory and to construct and maintain communications for the construction and maintenance of the Project. The roads will be essentially departmental roads of the Project and their use by commercial and non-commercial vehicles of Nepal will be regulated as mutually agreed upon between His Majesty's Government and the Government of India. (ii) The bridge over the Gandak Barrage will be open to public traffic, but the Government of India snall have the right to close the traffic over the bridge for repair, etc. (iii) The Government of India agree to provide locking arrangements for facility of riverine traffic across the barrage free from payment of any tolls whatever, provided that this traffic will be regulated by the

31 ANNEX 1 Page 3 Project staff in accordance with the rules mutually agreed upon between His Majesty's Government and the Government of India. (iv) His Majesty's Government agree to permit installation of telegraph, telephone, and radio communications as approximately indicated in the Plan for the bona fide purpose of the construction, maintenance and operation of the Project. (v) The Government of India shall permit the use of internal telegraph, telephone and radio communications as indicated in the Plan to the authorised servants of His Majesty's Government in emergencies, provided such use does not interfere with the construction, maintenance and operation of the Project. 6. Ownership, operation and maintenance of works. - Subject to the provisions of sub-clause (v) of clause 7, all works connected with the Project in the territory of Nepal will remain the property of and be operated and maintained by the Government of India. 7. Irrigation for Nepal. - (i) The Government of India shall construct at their own cost the Western Nepal Canal including the distributary system thereof down to a minimum discharge of 20 cusecs for providing flow irrigation in the gross commanded area estimated to be about 40,000 acres. (ii) The Government of India shall construct the Eastern Nepal Canal from the tail-end of the Don Branch Canal up to river Bagmati including the distributary system down to a minimum discharge of 20 cusecs at their own cost for providing flow irrigation in Nepal for the gross commanded area estimated to be 1,03,500 acres. (iii) His Majesty's Government shall be responsible for the construction of channels below 20 cusecs capacity for irrigation in Nepal but the Government of India shall contribute such sum of money as they may consider reasonable to meet the cost of construction. completed, barrage. (iv) The Nepal Eastern Canal and the Nepal Western Canal shall be as far as possible, within one year of the completion of the (v) The canal systems including the service roads situated in Nepal territory except the Main Western Canal, shall be handed over to His Majesty's Government for operation and maintenance at their cost. Also, the head regulator of the Don Branch Canal shall be operated by His Majesty's Government keeping in view the irrigation requirements of areas irrigated by this branch canal in India and Nepal. (a) (a) This has been added in accordance with the revised agreement signed on the 30th April 1964.

32 ANNEX 1 Page 4 8. Power development and reservation for Nepal. - (i) The Government of India agree to construct one Power House with an installed capacity of 15,000 KWl in the Nepal territory on the Main Western Canal. (ii) The Government of India also agree to construct a transmission line from the Power House in Nepal to the Bihar border near Bhaisalotan and from Sugauli to Raxaul in Bihar in order to facilitate supply of power on any point in the Bihar Grid up to and including Raxaul. (iii) The Government of India shall supply power to His Majesty's Government at the Power House and/or at any point in the Grid up to and including Raxaul to an aggregate factor not below The charges for supply at the Power House shall be the actual cost of production, and on any point on the Grid up to Raxaul it shall be the cost of production plus the cost of transmission on such terms and conditions as may be mutually agreed upon. (iv) His Majesty's Government will be responsible for the construction at their own cost of the transmission and distribution system for supply of power within Nepal from the Power House or from any point on the Grid up to and including Raxaul. (v) The ownership and management of the Power House shall be transferred to His Majesty's Government on one year's notice in writing given by them to the Government of India after the full load of 10,000 KW at 60 per cent load factor has been developed in Nepal from this Power House. (vi) The ownership of the transmission system constructed by the Government of India at its cost shall remain vested in the Government of India, but, on transfer of the Power House, the Government of India shall continue the arrangements for transmission of power, if so desired by His Majesty's Government, on payment of the cost of transmission, provided that His Majesty's Government shall have the right to purchase the transmission system from the Power House to Bhaisalotan situated in the Nepal territory on payment of the original cost minus depreciation. (vii) The Government of India shall be free to regulate the flow into or close the Main Western Canal Head Regulator temporarily, if such works are found to be necessary in the interest of the efficient maintenance and operation of the Canal or the Power House, provided that in such situations the Government of India agree to supply the minimum essential power from the Bihar Grid to the extent possible on such terms and conditions as may be mutually agreed upon. 9. His Majesty's Government will continue to have the right to withdraw for irrigation or any other purpose from the river or its tributaries in Nepal such supplies of water as may be required by them from time to time in the Valley.

33 ANNEX 1 Page 5 For the trans-valley uses of Gandak waters, separate agreements between His Majesty's Government and the Government of India will be entered into for the uses of water in the months of February to April only. (b) 10. Deleted. (c). 11. Sovereignty and Jurisdiction. - Nothing in this Agreement shall be deemed to derogate from the sovereignty and territorial jurisdiction of His Majesty's Government in respect of lands acquired by His M4ajesty's Government and made available to the Government of India for :investigation, execution and maintenance of the Project. 12. Arbitration. - (1) Any dispute or difference arising out of or in any way touching or concerning the construction, effect of meaning of this Agreement, or of any matter contained herein or the respective imihts and liabilities of the parties hereunder, if not settled by discussion, shall be determined in accordance with the provisions of this clause. (2) Any of the parties may by notice in writing inform the other party of its intention to refer to arbitration any such dispute or difference mentioned in sub-clause (1) and within 90 days of the delivery of such notice, each of the two parties shall nominate an arbitrator for jointly determining such dispute or difference and the award of the arbitrators shall be binding on the parties. (3) In case the arbitrators are unable to agree, the parties hereto may consult each other and appoint an Umpire whose award shall be final and binding on them. (b) This has been amended vide the revised agreement signed on the 30th April The original clause reads as follows: - "9. Protection of Nepal's riparian rights. - Hlis Majesty's Government will continue to have the right to withdraw for irrigation or any other purpose from the river or its tributaries in Nepal such supplies of water.1s may be required by them from time to time and His Majesty's Government agree that they shall not exercise this right in such manner as is likely, in the opinion of the parties hereto prejudicially to affect the water requirements of the Project as set out in the schedule annexed hereto." The schedule referred to may be seen in Appendix II. (c) This has been deleted in accordance with the revised agreement signed on the 30th April The original clause reads as follows: - "10. Pro rata reduction of supplies during period of shortage. - Whenever the supply of water available for irrigation falls short of the requirements of the total area under the Project for which irrigation has to be provided the shortage shall be shared on pro rata basis between the Government of India and His Majesty's Government."

34 ANNEX 1 Page This Agreement will come into force with effect from the date of signatures of the authorised representatives of His Majesty's Government and the Government of India respectively. IN WITNESS WHEREOF the undersigned being duly authorised thereof by their respective Governments have signed the present AGREEMENT in Nepali, Hindi and English in duplicate, all three texts being equally authentic, at Kathmandu this 19th day of Marg Sambat 2016 corresponding to December 4, For purposes of interpretation the English text shall be used. For the Government of India - On behalf of For and on behalf of the IIIS MAJESTY'S GOVERNMENT PRESIDENT OF INDIA - OF NEPAL - BHAGWAN SAHAY, SUBARNA SHAMSHERE, Ambassador of India. Deputy Prime Minister. July 12, 1972

35 ANNEX 1 Page 7 (Letter dated 4th December, 1959 from the Ambassador of India and confirmed by the Deputy Prime Minister of Nepal on the same date) MY DEAR, There are a few matters pertaining to the Gandak Irrigation and Power Project Agreement in respect of which certain understandings are necessary. They are detailed below: - (a) Sub-clauses (i) and (ii) of clause 3 lay down that the Government of India shall pay reasonable compensation for acquisition or requisition of any lands which may be required for the Project. It is agreed that for purposes of fixation of rates of compensation His Majesty's Government would appoint an Expert Committee with which Revenue Officers of the Gandak Project would also be associated. The Committee will visit the area of the Project and fix the principles for assessment of compensation payable for such lands. The total compensation payable for the lands acquired or requisitioned will be calculated on the basis of the agreed rates fixed by the Committee. The Government of India shall deposit the agreed amount of compensation to the credit of His Majesty's Government in the Rashtra Bank. Thereupon His Majesty's Government will make the required arrangements for payment of compensation to those persons to whom it may be due. (b) Clause 4 provides that Ilis Majesty's Government will grant permission to the Government of India for the quarrying of materials required for the construction and the maintenance of the Project in the areas shown in the Plan annexed to the Agreement. It is our understanding that if suitable materials are not available from these areas in sufficient quantities His Majesty's Government will permit on the request of the Government of India quarrying in such other areas as may be mutually agreed upon. (c) Sub-clause (ii) of clause 7 of the Agreement states that under the Eastern Nepal Canal the gross commanded area will be 1,03,500 acres. It may be explained that this gross commanded

36 ANNEX 1 Page 8 area will be possible only on the execution of the training works on the river Bagmati for which certain proposals have already been under discussion with His Majesty's Government. The river has been taking a westward course and certain training works are required to be set up in order to divert it back into its old eastern channel to flow under the Bagmati Railway Bridge. Without the river training scheme the gross commanded area will not exceed 93,000 acres. (d) Sub-clause (iii) of clause 7 of the Agreement refers to a contribution by the Government of India of a sum which they consider reasonable towards the cost of construction of channels below 20 cusecs capacity for irrigation in Nepal. It is our understanding that such contribution would not cover any cost of land acquisition for the channels but would be related only to the actual expenditure on works. As regards the latter it is estimated that a sum of rupees fifteen lakhs will be sufficient and accordingly the Government of India will make this sum available to His Majesty's Government in suitable instalments according to the progress of construction. (e) Sub-clause (v) of clause 8 provides that the ownership and management of the power house shall be transferred to His Majesty's Government on one year's notice by them after the full load of 10,000 K.W. at 60 per cent load factor has been developed in Nepal from this power house. It is our understanding that for a period of fifteen years after obtaining the ownership and management of the power house His Majesty's Government would be generating secondary power to the full extent possible and supplying it to the Government of India on payment of its actual cost of production. (f) The schedule annexed to clause 9 gives the minimum quantities of water required for the Project after making the allowance for the withdrawal of water from the upper reaches of the Gandak river and its tributaries sufficient for the irrigation of two lakh acres which is the maximum area estimated to be available for the purpose. It is our understanding that if at any time, due to natural causes, the supplies in the river are insufficient for all the

37 ANNEX 1 Page 9 purposes His Majesty's Government will be entitled to continue to withdraw water sufficient for the irrigation of such area. (g) His Majesty's Government and the Government of India also agree to set up as early as possible a Co-ordination Committee consisting of three representatives of each Government with a Minister of His Majesty's Government as its Chairman and the Chief Administrator of the Project as its Secretary. The Committee will meet from time to time to consider such matters of common interest concerning the Project as may be referred to it by either Government with a view to expedite decisions for the early completion of the Project. The Governmient of India will bear all expenditure in connection with the working of the Committee, such as salaries of special staff, if any, travelling allowance of members, etc. 2. I shall be grateful if you will kindly confirm the understandings explained above. Yours sincerely, BHAGWAN SAHAY, Ambassador of India. His Excellency Sri Subarna Shamshere, Deputy Prime Minister, His tmajesty's Government of Nepal.

38 ANNEX 1 Page 10 (Exchange of Letters) Kathmandu, April 30, Excellency, In the course of recent discussions it has been decided by our two Governments that certain clauses of the Gandak Project Agreement require amendment. The terms of this decision are as follows: - (i) It is agreed between His Majesty's Government of Nepal and the Government of India that Clause 10 of the Gandak Irrigation and Power Project Agreement entered into on December 4, 1959, shall be deleted and Clause 9, shall be modified and shall hereafter read as under: - "Clause 9. Protection of Nepal 's Riparian Rights: - "His Majesty's Government will continue to have the right to withdraw for irrigation or any other purpose from the river or its tributaries in Nepal such supplies of water as may be required by them from time to time in the Valley. For the trans-valley uses of Gandak waters, separate agreements between His Majesty's Government and the Government of India will be entered into for the uses of water in the months of February to April only." (ii) The following shall be added under clause 7(v): - "Also, the head regulator of the Don branch canal shall be operated by His Majesty's Government keeping in view the irrigation requirements of areas irrigated by this branch canal in India and Nepal." I shall be grateful to have your confirmation that the amendments agreed upon, which will take effect immediately, are correctly set out above. Accept, Excellency, the assurances of my highest consideration. HARISHWAR DAYAL, Ambassador of India at the Court of Nepal. His Excellency Major-General Padma Bahadur Khatri, Foreign Secretary, His Majesty's Government of Nepal, Kathmandu.

39 ANNEX 1 Page 11 NEPAL BIRGANJ IRRIGATION PROJECT Extract from Agreed Minutes of Discussion held between Irrigation and Power Delegations of His Majesty's Government of Nepal and Government of India at Kathmandu between 20th and 27th October I. EASTERN NEPAL CANAL OF GANDAK PROJECT The leader of the Nepalese Delegation stated that according to the agreement Nepal was entitled to 850 cusecs at the point of entry of Canal in the Nepalese territory. The leader of the Indian delegation stated that they will abide by the agreement and India was agreeable to supply 850 cusecs of water through this canal at all times. The leader of Nepalese delegation stated that the Government of India had earlier agreed to provide Rs 15 lakhs to H.M.G. for the construction of channels below 20 cusecs. The cost as now assessed by them is very much higher and they desired that the Union's contribution should be revised upwards. It was agreed that the Government of India will assess the likely reasonable cost on the basis of the practices adopted in the project command in Bihar and communicate it to H.M.G. It was agreed that the Project Authorities will complete the construction of the main canals and channels of 20 cusecs and above by June 1972 or 6 (working) months from the date land is made available for the project whichever is later. II. CUSTOMS LEVIES ON GANDAK PROJECT The Indian delegation raised the question of exemption from payment of customs duty and other taxes on the materials, equipment, machineries, etc. required for the Gandak Project in the territory of Nepal as is available in the Kosi Project. The Leader of the Indian delegation requested that His Majesty's Government of Nepal may allow necessary exemption from payment of custom duty during construction and maintenance of the Gandak Project in Nepal. The Leader of the Nepalese delegation agreed to place the request before the appropriate

40 ANNEX 1 Page 12 authority of H.M.G. for consideration and communicate the result to the G.O.I. Sd... Sd.. ( B. P. Patel) (Krishna Rajbhandari) Secretary Secretary Ministry of Irrigation & Power Government of India Leader of Indian delegation. Ministry of Water & Power His Majesty's Gov't., Nepal. Leader of Nepalese delegation. Signed at Kathmandu on October 27, July 12, 1972

41 NEPAL BIRGANJ IRRIGATION FROJECT Climatic Data Jan. Feb. Mar. Apr. Ma June July Au * pt. Oct. Nov. Dec. Total Mean Monthly Rainfall (mm) At Sirha l5.) ,413 At Parwanipur Nil Nil 1,335 Potential Evapotranspiration (mm) At Hardinath 1970) i ,623.9 Bean Monthly Sunshine (hr:min/day) At Hardinath 605 0:15 8:22 9i07 9: :31 5:33 5:50 9:23 8:23 8,24 7:50 (Jan. to Mar. obtained from records of 1970 while the remainder observed in 1969) At Parwanipur 8:03 8:49 7:50 8:48 10:18 5:14 5:09 6:17 6:57 9:07 9:11 8:5 7:53 Mean Monthly Air Temperature (C1) At Hardinath (1970) At Parwanipur (Average of 7 years) Relative Humidity at 0840 hours (%) At Hardinath (1970) At Parwanipur (A,verage of 2 years)

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43 ANNEX 3 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Aariculture General 1. The total area of Nepal is about 14.1 million ha of which only 1.8 million ha are cultivated and planted to 2.4 million ha of crops. In 1970, only 6%, or 117,400 ha of the gross cropped area was irrigated. The main agricultural regions are the Terai plains and the hill areas, covering about 70% and 30%, respectively, of the total cultivated area. Paddy, maize, and wheat are grown on approximately 90% of the cultivated land and cash crops such as jute, oilseed, sugarcane and potato, on the remainder. Soils and T2oporaphy 2. The project area, located in Bara and Parsa districts in the Terai, consists of a gravity-fed area of 44,000 ha gross with 28,700 ha irrigated and a groundwater area of 3,600 ha gross with 2,700 ha irrigated. Soils are alluvial clay to sandy loams (paddy soils) laid down by rivers from the Churia Hills. The natural drainage is poor and would require upgrading in conjunction with irrigation development. The ph value of the topsoil layer ranges from 6.0 to 7.2. These soils are suitable for most subtropical crops. 3. The gradient of the region ranges from 1:200 at foothills in the northern part of the plain to 1:1,000 near the Indian border. In the project area the north-south gradient varies between 1:750 and 1:1,000; about 10-15% of the command area would benefit from land shaping. About 90% of the area lands would be classified Class II or III for irrigation suitability under the U.S. Bureau of Reclamation standards. Climate 4. Annual rainfall is about 1,350 mm, with over 90% occurring between May to October. Ten-day intensity sometimes exceeds 350 mm. About two years in ten, less than 1,000 mm or more than 1,600 mm is received, causing crop losses from drought or flood. Temperatures range from a low of 8 C in January to a high of 38 C in April and May. Humidity is at 65% to 70% from March to May and ranges between 80% and 85% for the remainder of the year. Detailed information is given in Annex Climatic and soil conditions favor the production of paddy and sugarcane during the rainy season and wheat, pulses and oilseeds during the winter months. From July to September cloudiness delays crop maturity

44 ANNEX 3 Page 2 and inhibits crop yields; the high rainfall hampers crop harvesting and threshing. Cold weather retards paddy production from January to April but is more favorable for wheat and pulses. The Cropping System 6. During the rainy season, about 90% of the project area is in paddy; with sugarcane, vegetables and pulses utilizing another 5%. Most of the sugarcane is grown with semi-perennial irrigation at Tilawe and Sirsia project areas. Wheat, winter vegetables, pulses and small oilseeds are grown from September to May on about 40% of the area for a crop intensity of 135%. 7. Cultivation activities are labor intensive. Some of the labor used to transplant paddy and harvest paddy and sugarcane migrates from Bihar and West Bengal, India where unemployment is severe. Bullocks are used for soil preparation, threshing and transporting. However, in , over 125 farm tractors were used to supplement bullock power. Paddy 8. Nursery and seed-bed preparation starts with the onset of the rainy season in May and June. Coarse varieties that mature in 120 to 150 days from seeding are planted first and harvested in October and early November. Long-season fine varieties are usually transplanted between June 20 and July 15 when sufficient rains have fallen to reduce the risk of water shortage, and are harvested in late November and December. The early maturing varieties give lower yields because of the lack of sunshine and the heavier infestation of insects and diseases. The late-maturing varieties give higher yields and fetch higher prices; but make wheat growing without irrigation virtually impossible. Fertilizers and plant protection materials are seldom used. Only a small area is sown to new varieties. 9. Paddy blast (Pyricularia Oryzae) and bacterial blight (Xanthomonas Oryzae) are the most serious diseases; the latter affects some of the new high-yielding varieties IR5 and IR8, but the new variety IR20 has a good resistance to these diseases. The coreid bug (Leptocorisa acuta) and stemborer are the major insect pests but do not seriously affect the crop. Rats may damage the standing crop, undermine the bunds, and consume paddy in storage. 10. With irrigation and drainage provided by the project, and with the expected availability of more disease-resistant varieties, the area planted to early paddy should increase considerably in order to have the possibility of a second crop. With harvesting completed in October, this area would be sown to wheat, pulses or oilseeds. Paddy yields would be expected to increase from the current 1,50Q kg to 3,000 kg per ha at full development. Already some progressive farmers obtain 4,000 kg per ha with IR8 on irrigated farms in the Tilawe area, whereas tests on the Hardinath Demonstration Farm produce yields of 6,000 to 7,000 kg per ha. A projected yield of 3,000 kg as an average of the project area after 10 years is thus reasonable.

45 ANNEX 3 Page 3 Wheat 11. As was found on the Hardinath Demonstration Farm and confirmed at the Parwanipur Agricultural Station, optimal sowing time of wheat is mid-november, with harvesting in April. Delay of sowing until mid-december reduces the yield because of the high temperature and hot winds in late April and May, which retard vegetative growth, weaken the plants and make the crop more susceptible to rusts. 12. Since 1966 the dwarf wheat varieties have replaced most of the local types. The recommended varieties are the early variety RR21 and the even better medium varieties S227 and S331. On an experimental basis yield averages 3,000 tb 4,000 kg per ha for these varieties over a twoyear period. Agricultural Extension Service recommends NPK fertilizer applications ( or ), though actual application rates are low. Serious pests and diseases have not yet occurred. With a continuous improvement of promising varieties at the Parwanipur Agricultural Station, the use of irrigation water and sufficient fertilizers, a projected increase of the present average productions of 1,000 kg per ha in the project area to 3,000 kg within 10 years is considered obtainable and reasonable. Sugarcane 13. Only about 5% of the project area is planted to sugarcane: the major portion adjoins the sugar mill at Birganj where supplemental irrigation from Tilawe is available; the remainder is cultivated by small farmers in rainfed fields. The sugar factory management tries to stimulate sugarcane growing by providing to the growers agricultural advice and credit to purchase cane sets, fertilizers, plant protection chemicals and additional labor for harvesting. Also, transportation is arranged as much as possible for inputs to the farms and for the cane to the mill. 14. Despite all these measures, yields average only 15 tons of cane per ha because planting material produced on the farmers' fields or imported from India is impure and of low quality. Besides, insufficient irrigation during the hot and dry months of May, June and July and the low temperatures from December through February virtually stop growth of the crop. The sugar mill at Birganj which has excess capacity also accepts sugarcane brought in from remote, rainfed fields so that the average output of the processed cane is only approximately 8% to 9% refined sugar. 15. The sugar mill at Birganj obtains an average of 25 tons per ha of cane on non-irrigated land and about double on irrigated fields on its own 700 ha area. The sugarcane variety BO50 produced yields of 68 tons per ha on varietal trials in Parwanipur. With the project, yields would be expected to average 40 tons per ha within 10 years' time, due to sufficient water, improved planting material from the sugar factories and the Parwanipur Agricultural Station, and because of more appropriate cultivation practices stimulated by better trained agricultural extension services. Since the low winter temperatures in the Project area are more suitable for sugar beet production, this crop should be included in varietal trials at Parwanipur.

46 ANNEX 3 Page 4 Oilseeds, Pulses, Other Crops 16. Oilseeds, usually mustard, and pulses are important winter crops seeded either separately or as a mixture after paddy. Gram and pea may be seeded after late paddy. Yields are low, about 400 kg per ha for oilseeds and 500 kg for pulses and would, with irrigation and improved practices, increase to 850 kg and 750 kg per ha respectively. 17. Vegetables are grown on about 5% of the area, mostly for family use. The area and yield could be increased with irrigation and improved cultural practices; however, market demand would not absorb a substantive increase in output at profitable prices. 18. Hemp 1/ (cannabis sativa, L.) is also grown solely for its narcotic resin. Hiemp in the project area is known as "ganja" and is presently grown on small plots (1/20 to 1/10 ha) totalling no more than 100 ha scattered over the area. It is generally planted on light soils and is liberally irrigated by hand pumps. Investments are high due to the very intensive soil preparation, high fertilizer demand and the special way of selecting only the plants bearing unfertilized female flowers. The resin is formed only when these female flowers are not fertilized, and since fertilized flowers are worthless as yielders of "ganja" and male and female plants which normally occur in a hemp field are difficult to distinguish, this hemp growing for "ganja" production involves high risk of failure. HMGN controls the growing of ganja and requires that each grower must possess a license (license fee NRs 5,250/ha). Apart from its use as a drug, the seeds of the plant contain up to 20% of a semi-drying oil, rather similar to cottonseed oil, which can be used for cooking purposes. The net return from reasonably productive fields has varied in recent years, from NRs 500 to NRs 1,500 per 1/10 ha plot, depending on the market. Cash costs and returns on a typical 1/10 ha plot for a successful crop sold at a good price are as follows: 1/ Hemp may produce three types of narcotics: (a) "jhang" (Hindustani) or "hashish" (Arabic), which is the dried leaves and flowering shoots of male and female plants, both cultivated and wild, and with a low resin content; (b) "ganja", which is the dried female inflorescence of special cultivars grown in India and Nepal; and (c) "charas", produced in Central Asia, which is the crude resin collected by rubbing the tops of the plants with the hands or beating them with a cloth. These narcotics, though quite different in cultivation and resin content, fall under the umbrella te.m "marijuana".

47 ANNEX 3 Page 5 Costs Returns Fertilizers NRs kg Manure 20 at NRs 100 NRs 2,000 Pruning (skilled labor) 400 Total cash costs 1,045 Subtotal 520 Net return, with license 955 License (if obtained) 525 License fee 525 Total cash costs 1,045 Net return, without licensel,480 Area, Yield and Production 19. Based on the foregoing figures a comparison between the present and future situation (10 years after project works completed) regarding area, yield and production may be summarized as follows: Present Without Project With Project Crops Area Yield Prod. Area Yield Prod. Area Yield Prod. (ha) kg/ha ('OOOmt) (ha) kg/ha ('OOOmt) (ha) kg/ha ('OOOmt) Paddy-local 27,200 1, ,260 1, ,430 2, Paddy-HYV 13,910 3, Sugarcane 1,570 15, ,570 18, ,140 40, Wheat 7,850 1, ,420 1, ,700 3, Oilseeds 1, , , Pulses 1, , , Vegetables 1,570 5, ,570 6, ,570 12, At full development the annual gross value of agricultural production of the project area, at projected 1980 world market prices, adjusted to farmgate value, is expected to increase from the current NRs 47 million to NRs 122 million, more than doubling the expected output without the project (NRs 51 million). February 12, 1973

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49 ANNEX 4 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Agricultural Support Services General 1. At the time of appraisal, HMIGN had three ministries dealing witlh agriculture, viz: the Ministry of Food and Agriculture, the Ministry of Land Reform and the Ministry of Water and Power. In the last quarter of 1972 responsibility for all aspects of agriculture was placed under an expanded Ministry of Food, Agriculture and Irrigation. 2. The Ministry consists of the Department of Irrigation, Hydrology and Metereology, the Department of Agricuilture, the Department of Food and the Department of Land Settlement. The Ministry also has overall responsibility for five public sector corporations: the Agricultural Marketing Corporation (AMC), Agricultural Development Bank of Nepal (ADBN), Food Management Corporation (FMC), Nepal Resettlement Company, and the Dairy Development Corporation. 3. The Department of Agriculture consists of the Divisions of Agricultural Education and Research, Extension, Horticulture, Livestock and Veterinary Services, and Fisheries. 4. The Department of Irrigation, Hydrology and Meteorology comprises a Planning and Design Division, a Construction Division and a Hydrology and Meteorology Division. In addition there are four Regional Directorates based in Kathmandu, Suakhet, Pokhara and Dhankuta. 5. Ministries dealing indirectly with agriculture and of importance to the project include Public Works and Transport (PWT), and Home Panchayats (HP). PWT is responsible for planning, designing, constructing and maintaining all public buildings and public roads. The Ward Panchayat is a publicly elected government institution representing the citizens of about ten rural villages. It has responsibilities for the development of agriculture, minor irrigation and village link roads. Division of Agricultural Extension 6. The staff from this division is posted in 71 of the 75 districts and supervised from the Kathmandu central office. The District Agricultural Development Officer (DADO) has a bachelor of science degree in agriculture and is in charge of the district staff including one or more Junior Technicians (JT), and several Junior Technical Assistants (JTA); the number depending on the intensity of agricultural production in the area. In 1970, one

50 ANNEX 4 Page 2 extension worker served an average of 2,000 agricultural households. Their activities were aimed at increasing crop production by use of demonstration plots of high-yielding variety seeds and fertilizers and by publicity. They also estimated crop yields, advised the ADBN on the technical feasibility of farm plans for loan applicants and helped the AMC distribute seeds and fertilizers. 7. Bara and Parsa districts have had the Extension Division's Intensive Agricultural Development Programme during the Third Plan. The public sector sugar mill at Birganj also has an extension staff to work with sugarcane growers. In the two districts there are 3 DADOs, 10 JTs, and 49 JTAs to serve about 80,000 landowners and 40,000 tenants. Division of Agricultural Education and Research 8. Nepal's agricultural graduates are trained abroad, most of them at Indian agricultural universities. About 700 students will complete this training during the Fourth Plan, making a total of about 1,000 graduates to assist the agricultural divisions as technicians, and as DADOs and other district-level officers. 9. JTs and JTAs are trained at the College of Agriculture, upgraded from a School of Agriculture in 1969, and located at Kathmandu. Candidates with a high school diploma receive three months' basic training in agriculture at the college before assignment to a DADO for six months' practical field training. Then, an additional three months' training is given at the college; successful candidates receive certificates and a job in the extension service, if available. After four or five years of field experience, the JTA may return to the college for six to eight months of specialized training for a diploma. Since 1957, 920 certificates have been awarded and 626 recipients are employed in extension work as JTAs. About 150 JTs have received diplomas; 128 are in extension work. 10. The agricultural research program is designed to increase the flow of yield-increasing agricultural technology. The related disciplines of agricultural botany, agronomv, agricultural engineering, entomology, plant pathology and soil science are included in research activities conducted at Kathmandu, five field stations, and four agricultural farms. Research work has concentrated on the introduction of new varieties, planting dates, crop response to fertilizer application, and control of insects and plant diseases. Plant breeding work was initiated in The Divisionl operates an Agricultural Research Station at Parwanipur, adjoining the project area, where it has concentrated on increasing the production of paddy, wheat and maize. At this station, USAID provides consultants and funds for research and extension training on cereal production and water management. UNDP (NEP-12) provides technical assistance for training of the extension staff to conduct field trials and demonstrations with farmers to show the benefits of the recommended varieties, fertilizer use and water control. The research a:d extension training work and the consultant assistance at Parwanipur would be available for use in the project area.

51 ANNEX 4 Page 3 Work in the Project Area 12. The work of the Divisions of Extension, and of Education and Research, is crucial to the success of the project. Under current arrangements, salaries are low, provisions for housing, equipment and travel are inadequate, and the field staff lacks local supervision, technical assistance, and opportunity for advancement. To help solve these problems, the local extension service staff would be integrated into NZIDB and would include an extension director-in-charge, 6 extension specialists and 20 to 25 field workers. They would be assisted by consultants. 13. Under the project, the current research program at Parwanipur would be continued. New research would include the development of an efficient water management scheme for the area and testing the profitability of alternative crops such as sugarbeets, cotton, groundnuts, soya beans, pulses, and vegetables. The research agency would also evaluate the economics of irrigated farming under both tubewell and surface irrigation conditions. Agricultural Marketing Corporation (AMC) 14. The Agricultural Marketing Corporation (AMC) supplies inputs to farmers and regulates the marketing of farm products. It has the responsibility for importing all farm production inputs involving the use of foreign exchange other than Indian rupees, mostly fertilizers, and of procuring and importing items such as high-yielding variety seeds and pumps from India. To serve as the importer/wholesaler for the project area and the adjacent regions, AMC maintains warehouses with 5,000 tons of storage capacity at Birganj. Within the project area 22 private dealers and 6 cooperatives served as AMC fertilizer retailers during Additional wholesale storage for inputs would be provided by AMC, if needed. In addition, more private retailers can be engaged as needed. 15. All materials are sold on a cash-and-carry basis by AMC, fob the Birganj warehouse. Farmers also purchase fertilizers and other inputs directly from Indian retailers located near the Nepal border. At the time of appraisal most inputs were readily available at competitive prices within 10 km to 15 km of any village in the project area. 16. AMC's experience indicates that a 50-ton capacity rural store serves adequately for the distribution to farmers of up to 300 tons of fertilizers per year and that no additional space is needed by a retailer or a cooperative engaged in selling other inputs and handling short-term agricultural credit loans. More than 500 tons of fertilizers could be retailed from a 50-ton capacity store located on all-weather roads and with improved communications. A 100-ton capacity warehouse could handle more than twice these volumes and, at least during the five to ten years required to build sales, it also could be used for the storage and marketing of agricultural produce. Farmers currently drive their bullock carts 5 km to 20 km over village trail roads to purchase inputs and market produce. 17. The feasibility study proposed 42 warehouses of 500-ton capacity for the distribution of inputs and storage of grains. However, the demand

52 ANNEX 4 Page 4 for this volume of grain storage and the economic feasibility of each unit was not assured. Therefore, this aspect of the proposal would be changed to include not more than six storage facilities of 100-ton capacity and six of 50-ton capacity, as recommended by AMC. These facilities plus the six existing units would be operated by cooperatives. AMC would train the managers to sell fertilizers and other inputs. Agricultural Development Bank (ADBN) 18. The ADBN, organized in 1968, functions to provide short-, mediumand long-term loans for agricultural production purposes to farmers and to cooperatives for on-lending to farmer-members. It provides an investment loan service to individuals and corporate bodies engaged in manufacturing agricultural inputs or processing agricultural commodities. It is authorized to undertake banking functions in a region only with the approval of the Central Bank. In 1970/71, its share capital was NRs 22.8 million and an additional NRs 12.1 million was available from borrowings, deposits and reserves. Loan commitment exceeds NRs 30.0 million, of which more than NRs 16 million have been disbursed. Overdues were about 20% of loans due from cooperatives and 10% of the amounts due from private borrowers. 19. In 1971, the Asian Development Bank granted ADBN a loan of US$2.4 million to procure tractors and to hire three expatriate consultants. These consultants, available until 1975, will advise ADBN regarding its organization and management procedures, and train its managers and accountants for placement in 135 "model." cooperatives. 20. Cooperatives borrow funds from ADBN at 7% interest and on-lend to creditworthy farmer-members at 10% interest. Repayment is usually scheduled within 60 days of crop harvest. Loan applications are reviewed and cleared by the local JTA and the primary society manager and board before acceptance by the regional ADBN branch manager. When approved, the borrower receives a chit authorizing him to procure fertilizers and seeds from the local cooperative store or private dealer. Cash loans to pay hired labor are disbursed only after the fertilizers have been obtained. The procedure is cumbersome, takes considerable time of the borrower, and there is lack of contact between the borrower and the loan officer. 21. In the project area, only 6 of 43 cooperatives are providing farmers with input distribution and production credit services at acceptable levels of performance. The BIPB proposes to strengthen these 6 and reorganize the remainder into 12 economically viable units with an office and storage facilities (para 15). The ADBN has assured HMGN that, through its Birganj branch office, it would provide funds as needed to finance production inputs and on-farm development works of creditworthy farmers in the project area. It would train and supervise managers and accountants and supervise the lending operations. Lending and collection procedures would be improved. BIPB would provide a technical staff to help each ccoperative develop its membership participation and local capital resources. February 1, 1973

53 ANNEX 5 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Description of Project Works A. Existing Works 1. The 1959 agreement between HMGN and Government of India (GOI) provides that GOI would construct a barrage, canal head regulators and other appurtenant works on the Gandak River at the border near Tribeni for irrigation and development of power for Nepal and India. The Gandak works, costing about US$175 million, when completed would generate 15,000 kw of electricity and irrigate a net command area of 1.24 million ha: 950,000 ha in Bihar, 230,000 ha in Uttar Pradesh and 60,000 ha in Nepal (see Map IBRD3895). The agreement also stipulates that GOI would construct the Don Branch Canal for about 92 km in Bihar-India to deliver irrigation water to the Nepal border and nearby India. 2. GOI agreed to construct, at no cost to NepalA the main canal (Nepal Eastern Canal) and the secondary canals down to 0.57 md/sec (20 cusecs) for the gravity-fed area included in this project. Nepal was to acquire all land needed for these works, also at GOI's expense. GOI also agreed to provide a cash payment up to Indian Rs 1.5 million (US$200,000) for the distributing works below 0.57 m 3 /sec. The Irrigation Department of Government of Bihar was responsible for works design and construction in Bihar and Nepal. A supplemental agreement completed between HMGN and GOI in October 1971 specifies that 24.1 m 3 /sec (850 cusecs) of water would be delivered through the Don Branch Canal to the Nepal border at all times, except for necessary repair and maintenance. This is the source and amount of surface irrigation water available for the Birganj project area. 3. At the time of appraisal the barrage, the Don Branch Canal, and about 75% of the Nepal Eastern Canal had been constructed. By the end of August 1972 excavation of the Nepal Eastern Canal was substantially completed, 66 out of 91 structures were built and 5 of the 9 secondary canals were completed. At the December 1972 meeting between representatives of the two countries it was agreed that works would be completed by March 1, 1973, and that the Nepal Eastern Canal would be ready for commissioning on this date.

54 ANNEX 5 Page 2 4. Ten years ago, HMGN constructed a barrage and canal system at Tilawe and at Sirsia that irrigates about 7,000 ha in the project area from June to October. Farmers constructed some field watercourses and drains themselves without technical guidance from the Irrigation Department. This area is included in the project to provide perennial irrigation and improvement of the distribution system. 5. In the groundwater area, HMGN, under the Indian Aid Program, installed 21 tubewells between At the time of appraisal, only five wells had been energized and used. The project proposes to energize 14 of these, each with a net command area of 75 ha. Seven wells are considered unusable either because they pump sand or because of their low yields and being too far from power supplies. B. New Works - Surface Irrigation 6. Main Canal. The Nepal Eastern Canal originates at the Nepal-India border on the western edge of the project area and extends eastward 62 km to the Arwa River. It would receive 24.1 m 3 /sec of water continuously and would be controlled by a regulator gate located on the Don Branch Canal at the border. Water would be distributed from the Nepal Eastern Canal to 12 major and several minor secondary canals for distribution throughout the command area. 7. The proposed project differs somewhat from the original plan in that water would be provided during both the wet and dry season; thus the system, after completion of construction by GOI mainly for wet season irrigation, would need eight additional check regulators and four additional escapes. A 4.5-rm-wide service road along the entire length of the main canal would be surfaced and would become a public road with bridges and feeder road connections to villages in the area. 8. Most of the construction consists of labor-intensive excavation and installation of masonry structures with steel gates. Two civil works contracts would be tendered, one to include the first 26 km with the work to be started in 1973/74 and completed in 1974/75; the second to include the remaining 36 km to be started in 1974/75 and completed in 1975/ Distributary Canals and Drainage. North-south rivers and streams divide the project area into 12 self-contained irrigation blocks. Each block would be served by a distributing canal system connected to the main canal and consisting of a main secondary canal and several branch secondary and tertiary canals to supply farm turnouts, each serving about 40 ha of net command area. There would be about 79 km of main secondary and 210 km of branch secondary canals.

55 ANNEX 5 Page To remove monsoon flooding, and create conditions more suitable for higher paddy yields and for planting wheat after paddy, a drainage system linking the irrigation service units and farmers' fields to the natural drains would be constructed. These drains would be provided with appropriate structures at road and canal crossing points and at the tail ends. About 800 km of secondary and tertiary drains with associated structures would be included. 11. About 290 km of 3-m width operational roads would be constructed adjacent to most of the main and branch secondary canals to provide access for canal operation and maintenance. The feasibility study proposed that most of these roads be cobbled and used to provide farm-to-market transport service for farmers in the area. In addition, the study proposed over 70 km of cobbled farm-to-market roads to link every village to the canal operational roads and to BirganJ. However, the appraisal revealed that farmers market more produce directly to Bihar-India markets than to Birganj. They also procure a part of their fertilizers and seeds directly from Bihar. The layout and design of the system and the use of cobblestones did not appear reasonable for farmer-users. Therefore, the metalling of the canal operational roads would be restricted to the main canal and the secondary canals that connect with each of the 18 rural stores. Thus, the project would include the metalling of 62 km of roads along the main canal plus about 50 km of 3-m width connector roads to the rural stores. Bullocks generally refuse to walk on a cobbled road unless covered with dirt. The NZIDB would review the cost of alternative surface materials before offering contract tenders. 12. Construction of the distributary canals, drainage and road systems would be labor intensive. Civil works contracts would be prepared to include the canal and road works in each block. C. Groundwater Pilot Project 13. In the groundwater sub-project, HMGN would monitor and evaluate the costs and returns expected from tubewell irrigation and methods of working with farmer-users at each tubewell. The NZIDB would be expected to plan and execute a program that would achieve these objectives and provide IDA with the annual reports of the results. 14. Existing Wells. The project would re-equip 14 existing tubewells with pumps, electric motors, automatic controls, a regulating reservoir, lined main canals and unlined distributary canals, and drains. Each tubewell has a designed capacity of 50 1/sec to provide perennial irrigation for 75 ha. 15. New Tubewells. The project would drill and equip 14 new tubewells, each to irrigate 120 ha. The project also provides for the feasibility study of a pumping scheme to lift excess water from the Nepal Eastern Canal to irrigate an area with and adjacent to the canal. Should the study reveal favorable result it would be desirable to resite some of the proposed

56 ANNEX 5 Page 4 new tubewells farther north from the canal on land that cannot be irrigated by low lift pumps. Each tubewell drilled to a depth of about 150 m would be fitted with a 35.6 cm diameter mild steel pump chamber to a depth of 80 m. Fiberglass reinforced epoxy resin pipe screens 20.3 cm in diameter with appropriate factory perforated slots of 0.16 cm width would be installed. Three wells would be equipped with stainless steel screens instead of fiberglass to permit the study of different types of construction. Fiberglass pipe of 25.4 cm in diameter would be joined to the pump chamber by a connector and to the screen pipe by a reducer. 16. A 15.2-cm diameter pilot hole would be drilled initially by the rotary method to the final depth and logged lithologically and electrically. With these data the portions of the hole to be screened can be identified. The pilot hole would then be reamed to the final 61 cm diameter, thus providing an annular space of about 12.7 cm for placing the gravel packing through a tremie pipe. 17. Each well would have a pumphouse and a small regulating reservoir. All main canals leading from the wells would be lined, but all other canals would be unlined. The area would also be provided with drains. Farmers would construct at their expense the watercourses, field drains and landshaping on their holdings, but under the design and supervision of the BIPE. 18. Electricity. About 18 km of 11-kv power line with transformers would be constructed to provide electric power to operate the 28 tubewell pumps. 19. Equipment, including spares, for the 14 existing wells and the 14 new wells would be grouped and offered in one tender in 1973/74. One contract would be tendered for the replacing of equipment on existing wells as well as the drilling of 14 new wells including the construction works for the pumphouse,, reservoir, canal and drainage and installation of the transmission line, on a turn key basis. D. On-farm Development 20. Landowners would be responsible for the construction of all on-farm works beyond the outlet gate on tertiary canals. These works include field watercourses and field drains for the surface and tubewell command area and land-shaping wherever needed. NZIDB would provide technical engineering services to design and lay out an on-farm development scheme for each outlet gate. Landowners would be encouraged and persuaded to adopt the plan and complete construction of the works under NZIDB's guidance and supervision. In the event of a farmer not completing the work within one year after NZIDB had completed the tertiary canals and drains in the project serving his farm, NZIDB would perform the necessary work and recover the expenses from the farmer. Irrigation water would not be provided to any farmer until all of the on-farm development work on his land had been completed.

57 ANNEX 5 Page 5 E. Equipment for Project Execution, Operation and Maintenance 21. Most of the civil, works would be executed by contractors; therefore, NZIDB would need equipment only for general administration and operation and maintenance purposes. The list includes vehicles, workshop equipment, earth-moving machines and some construction equipment for repair works as given in Annex 9. Vehicles for consultants are also provided in the list. F. Buildings 22. Rural Stores. The project feasibility report proposed the construction of 42 warehouses, each with 500 tons of storage capacity, to be used to store and distribute agricultural inputs and to store grains. The size and number of these stores are considered excessive and not economically viable. Hence to facilitate the distribution of inputs, the project would provide for the construction of only up to six rural stores of 100 tons storage capacity and up to six rural stores of 50 tons storage capacity. NZIDB would arrange for ADBN and local cooperatives to wn and operate these facilities. 23. Project Buildings. NZIDB would need a headquarters office and canal offices, housing for staff and consultants, a workshop and a training center. These buildings would be designed and tendered for construction by NZIDB. G. Other Facilities and Services 24. NZIDB would finance the Agricultural Extension and Cooperation staffs to work with farmers in the command area. Project funds would be used to supplement agricultural research and staff training operations at the Parwanipur Agricultural Experiment Station. NZIDB would make arrangement with the Economic and Statistics Division of the Ministry of Food, Agriculture and Irrigation for providing monitoring of project benefits and carrying out economic evaluation of the project. A study of the feasibility of a pumping scheme to lift water from the Nepal Eastern Canal to irrigate areas with and adjacent to the Canal would be conducted by HMGN, with the assistance of the Consultants. H. Consultants 25. HMGN and the Department of Irrigation, Hydrology and Meteorology have a limited cadre of trained and qualified engineers to plan, design, prepare specifications, and supervise field construction. The shortage is, in part, due to staff assignment to other irrigation projects under

58 ANNEX 5 Page 6 construction. A similar shortage of experienced staff exists for key positions in project administration and the Agricultural Extension Service. Expatriate consultants would be provided under the project to assist NZIDB in the execution and management of the project works, to carry out feasibility studies and to train NZIDB staff (Annex 11). january 23, 1973

59 ANNEX 6 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Irrigation Water Demand and Supply 1. Climate. Annual rainfall, as given in Annex 2, is about 1,350 mm, 90% of which occurs from May to October. Monthly average rainfall data recorded at the Sirha station, about 100 km east of the project area, for the last 19 years were used in the water requirement-supply calculations. 2. Crop Water Requirements, Estimates of water requirements for the projected crop patterns were based primarily on two years of study at the Hardinath Experiment Station. For paddy and wheat, the water requirements were determined by field measurements including evaporation from "Class A" pan, crop consumptive use, and deep percolation losses for each 10-day period during the growing season. The crop coefficient thus determined was related to the growth stage of the crop. The requirements for land preparation and puddling for paddy were assumed to be 150 mm. Crop coefficients and standard evaporation pan data were used to determine consumptive use for sugarcane, oilseeds and vegetables. 3. Using the Sirha station data, effective rainfall for paddy was computed for average 10-day periods as follows: (1) if the total rainfall was less than 5 mm, none was considered effective; (2) if the rainfall exceeded 5 mm in depth, the excess was considered effective to a depth of 10 cm and all the excess over 10 cm was assumed to be wasted. Effective rainfall for crops other than paddy was based on the average field holding capacity of 40% of effective root zone depth. Based on these criteria, the following table shows the percentage of monthly effective rainfall to total monthly rainfall: Effective Rainfall (% of total for month) Month Paddy Other Crops May June July August September October 80 80

60 ANNEX 6 Page 2 4. Water losses from the field outlet to the crop in the surface irrigation area were calculated at 20% for paddy and 25% for other crops. In the groundwater area, field losses were estimated at 5% for paddy, because of the canal lining and better control of water with pump irrigation, and 25% for other crops. 5. Water Supply-Surface Irrigation Area. Irrigation water for the surface area would be diverted by a barrage located at the Nepal-India border on the Gandak River and conveyed about 100 km through the Don Branch Canal, located in India, to the Nepal border and the Nepal Eastern Canal (see Map 3895). These works were constructed by GOI and except for the Nepal Eastern Canal would be maintained by GOI. The Gandak River, with about 35,000 km 2 of watershed area entirely in Nepal, has a mean annual flow of 1,534 m 3 /sec; monthly discharges vary from 4,570 m 3 /sec in August to 300 m 3 /sec in March (based on 5 years data collected at Narayan Garh station). 6. Under terms of an agreement with India (Annex 1), GOI would provide Nepal with a continuous flow of 24.1 m 3 /sec (850 cusec) water into the Nepal Eastern Canal, the main canal for this project. It will be necessary to close periodically the Don Branch Canal for maintenance and repair purposes. HMGN and GOI would establish a subcommittee with the responsibility for continuous inspection of the Don Branch Canal and the determination of the time and duration of closure for routine and emergency repairs and maintenance. 7. Barrages on the Tilawe and the Sirsia Rivers near Birganj provide supplemental irrigation from June to November for about 7,000 ha in the project area. These systems would be incorporated into the project, improved and provided with water for perennial irrigation. 8. Table 1 shows the monthly water demand and supply for the projected surface area crop pattern. 9. Water Supply-Groundwater Area. The hydrology for an area of about 200 km 2, including the project area, was studied by the UNDP consultants. The area (Map 1), bordered on the north by the Churia Hills, a sub-range of the Himalayas, is underlain by alluvial deposits to a depth of about 300 m and saturated with groundwater to within 3 to 5 m of the land surface. Three zones of aquifers were identified, each with different lithologic and hydrologic characteristics. Groundwater occurs under both confined and unconfined conditions. 10. Feasibility studies included: (1) an analysis of the flow dynamics of the groundwater in the aquifer system to a depth of about 300 m; (2) a determination of the water balance in the upper m of the system; (3) analysis of the recharge and potential for development of the aquifer system; (4) design, construction and operation of a digital model under various assumed conditions of development; (5) preparation of designs and specifications for a two-phased groundwater development - a pilot project phase and an ultimate phase; and (6) recommendations for additional studies to be carried out during and subsequeit to development. The studies also

61 ANNEX 6 Page 3 included drilling of test and production wells, aquifer testing, geophysical surveys, lithological and electric bore hole logging, topographic mapping, well inventory and chemical analysts of groundwater. 11. The principal aquifer to be developed by project wells is identified as layer 3. This aquifer, the most extensive of the three, has the greatest transmissivity; although in some areas the aquifers are hydraulically interconnected. The top of layer 3 ranges from 60 to 100 m below ground surface; it has a thickness ranging from 140 to 280 m. Tubewells supplied from this aquifer would average about 150 m in depth. Recharge to the aquifer system occurs directly by infiltration of rainfall within the area and by lateral flow from the north. Water balance studies indicate that the annual average recharge is in the order of 50 million m. 12. Aquifer characteristics of layer 3 were determined by eleven pumping tests. Transmissivity values ranged from 520 to 1,600 m 2 /day, and the equivalent range of permeability would be 17.4 to 53.3 m/day. Specific capacities of wells pumping from layer 3 aquifer ranged from 21 to 45 m 3 /h/m. Drawdown resulting from pumping was determined by the use of a digital computer model. The model included the entire 200 km 2 and assumes that the base of layer 3 is 150 m. A storativity value of 5 x 10-3 was used for layer 3 aquifer. A sensitivity test, using a storativity value of 5 x 10,4 made during the visit of the appraisal team showed that the pumping lift at well E19 would increase from 27.0 to 28.5 m during peak periods. Although storativity values calculated during the pumping tests were weak, the sensitivity test demonstrated that this is not a critical factor in the determination of ptumping lift. 13. The project would equip and energize 14 existing wells, drilled under bilateral aid with the GOI, and construct and equip 14 new wells. Because the existing wells are designed for maximum pump settings of 30 m, the pumping lift during peak operations could not exceed this figure. New wells would be located in the well-field design in such a way that interference would not cause pumping lifts greater than 27 or 28 m. The areas to be served by both new and existing wells are shown on Map The existing wells would provide irrigation water for 75 ha each; the new wells, 120 ha each. This would require a discharge of 50 1/sec from the existing wells and 80 1/sec from the new wells in order to avoid operation of the pumps during peak demand time on the electric power system. Therefore, each well would be equipped with pumps and regulating reservoirs for automatic operation during 19 of the 24 daily hours. 15. Table 2 shows the irrigation requirements of crops to be supplied by a well of 50 1/sec capacity and a well of 80 1/sec capacity. August 9, 1972

62

63 JAN FEB MAR APR 1 NEPAL. IROANJ IRRIATlO PROJECT ESTIMATED CROP WATER REQUIREMENTS AT FULL DEVELOPMENT: SURFACE IRRIGATION SUBPROJECT MY JUN JUL AUG SEP OCT NOV DEC PADDY- EARLY _ PADDY - LATE -~ SUGARCANE -EARLY m- i.u SUGARCANE- LUTE Q 0-01EE01S PULSES &" OGETAS CDI --- d.. ~ ~ ~ ~ ~~~[1, D.UO op s,rr,ictott E~~~~~~~~ 20 ~~~~~~~~~~~~~~~~~~~~~ CC ~160 J- P1 pe.oit.o4 I-$ U.) o o ahbe pr-partoon recsv r.,rfahl ( F- Ar rcqg. 8(q,% ff DI,J t.. 0% ff on' 11* D,UPeroI.o (hae 80) l.(e ! V.ppI. art- -q ,350 h* lot. no terreqd. ~~~~~~~~~~~~~~~~~~~~~~~~~ ~ LI - Paddy Crop ontlietd DO- 0k0.VOpoOOtiUn (non) ~~~~~~~ ~~~~~~~ ~~~~~~~ ~~~~~~~ ) , Corn) ~~~~~~~~~~~~~~~~~~~~~'/ - ~~~~~~~~~~~~~ -p rrat flea m4) i dbe ~Obdpe.(n ,C.13 (me,) ~~~~~~~~~~~~~~~~ ~ USO.0 ~~~~~~ I96. ICCef. P 'fl.e) ~~~~~~~~~~~~~~~~~~~~~ , ' ) Yldel. -oqt. 802 Uff. (eo) L ereo 3.80% ~f - pd roi(26) e,60.9 I,. 15B , lot. 4rOton reqd. tre-' ~~~~~ ~~~~~ ~~~~~~~~~~~~~~ ~I o-p lo,ffer i.nt KEe 'U, eeaeeration ~~~~ ~~~ 66.9 ~~ ct.e rnul (o) D. 0.1 lrrg-at-o r-ql.. (n " -r1c efo. () 79.0 L 956 B i0-,eorne eeqt,. 708 ff. () 1, i70. Oe.. t~~~ton 4,-' roqi J 1~~~~l , (one) ~~66.65 fror. So onelfir~~~~~re 6/ 0.60 ~~~~ Et: (oe) pa t e-ap re lo (i) Eleerorofol(n I " i O.., I C).0 frp, - -eqt (en I pore 10. req. 73% -f..r'e) o L 91.0 ro-erseo rot. 00% ri>. Cm) roppoie (ha), , h vol. sneer reqo.,,, ~~ ~ ~~~~~ ~ ~~~ ~~~18 Mro -rofiio!" C) evp-a'ioo nn i63, me) ~~~~~~~~~~ U 7.oe -eranall L-r) U.70 -igorltion reqt. ( -) e.rqe. i - 70% elf. ln) ro. 0 Ie ef. C.) to -r93. IV, i.0-3- foo oleeane I8.03 oi ,llOUIe 5 ceipply otolize., ~~~~~~~~1J, , 0 O.OC1 prto (Et) for Pd obtoeod foam Hordipth Pilot Dw0t,onati-, fn.-. As,-., o,. ioy 1 ecar-imh 0,106 3,o-otrat,ne Ceem and other arena W.0IOB.ek-6523t2RI

64 NEPAL -MQ06 VOGATO PROJECT ESTIMATED CROP WATER REQUIREMENTS FOR GROUNDWATER SUBPROJECT JAN 05E MAR APR MAY JUN J L AUG 0EP OCI "OV DEC P0LDY EARtLY - -- I * f _ e-1_ - mt- WVOLAT{----'1-'4 SrGAOCANE EARtLy I 4 Efk n Y.OA4CANE LATE 5. L,l. &VGETASLLES - I - 9.r. OV.705AV.>O) (.3 ~~~~~~~~~~~~~~ ~~~~~~ ~~~16,020 C;..Yrf cr,o0' OW,4 I ,733I SF0 ('~~~~~~~~~K I ~~~~~~~~~~~~~~~~~"K So-dbd -no 1-d o i2 5eAOO m? t.. u 6~~ ~~~~~~~~~~~~~ Crop (no),rr g-~~~tlt.reqt. ~85.5 1l '5% (eff ) I ( 'S V 00 ~~~~~ ~~~ ~~~~~~~~~~~~ ~~~~~~~~~1069 'i-," K, 1 ~~~~~ ~~~~~ 1.36 ~~~~~~~~~~1.18 '1.4 3s') ~~~~~~~~~~~~~ ~~~~~~~ ~~~~~~~ ~~~~~~ octfvera) do' I (no.) 20.~ ~~~~~~~~~~~~~~~~ 4.2.o ~~ (. FTrL F ~~~~ ~ ~~~~~~~~~~~~~~~~~~ o447 ~~ '-58 ~~~~~~~~~~~~~~~~~~~. ~~~~~~ L i4i i6..50 re 5~~~~~0-', (os) ~ ( C.82 V ~~~~~~~~6.6 ~~~~~~~~~~~~~~~~~~~~~~~ Ht * ~~55.3 6' ~oq ~~~ (es.,) o "0- Fe' 'C. (so) ';.~~ I ~4roL~r ~~ ' (eo.) F ~~~~~ z: I55.3 OorO.t.~~~ TOL'OALI (as r ~~ ' o 0 5% r.(n 33' '~"f Er op ' ' g.-' oro rq. (-) :.7 28: o2 F'.~- ce rq.?0% erf. (o l ' ( i I.5% ~ff I "0 0O5psoAELOO (s-c 6' (~~~~~~ 'p Li11.7 Ft (so) 21,.) ~~~~~~~~~~~~~~1.84 tff'eotsve (to,) rororsil 0 0 ~ ~ ~~0 J TO'p L-T pt orr 50- 'e (, s0'71% TLf. 6;.) iesne F95% fi 5 Ii) o &rspod y O05e W 2" A'F,oF. ;Fo ~~~~~ I' ~~~~C Oroecc. I o VeOeS.o60eo ~~~~ 0> ~~~~0 0.04,7 ( ~ F ~ fl'p '0 h3 I ~ F..~ 0 2 A~epply -0 i L.ed 8 7S' rr- 5-3rV7 =W7_ n*4 ~ of Woton-r~ 5jo,o,o fse. TEes Wels lep'ja 1.20 h., (Xi) lis.3) A J,~~~~~~~ ~~~~~ ~~~~~~~ ~~~~~ ~~ (1, o.05~~~ ~~~~ I "F Y 0'9, "2C F I0, o:i F9 :5 0.Ols o.o00 F , An.00 0L0F50~~~~~~~ Ms ~~~0 'OF '0.r CF,,ed 0.00 ou ~C.i o I 0.0? F ~ , G.6?7.4 MV - 97'0, I '~~~~~~~~~~~ ~~~~~-C-h 8 ~~~~~0' t~~5 FI~'~~' rrr '-' F"'_'* tm77 78!8r T? 58T ' ,r f..r 13 "Td tn bsr 90!so 05A003009,10 1 hro/d60 ay jss.wo 62FF

65 NEPAL BIRGANJ IRRIGATION PROJECT CONSTRUCTION SCHEDULE (With 0 & M and Agricultural Supporting Services) WORK DESCRIPTION JFMA KP SO_N J,FMAAM JIAS NJF SN_ I I.F ND JOFNMD JFJA AAJO JJ SNN JA JJASONOJ F M JJ SONO I I I I I I j~roject SAT I D Y III II IIII IIIII IIII IIIiI Ii I PROJECT ENDS, Tender Doc--ets,_p on f._ E b.h re _ t Aot4.th-ty _- BRIDGING OPERATIO? o Land Acquistio O E Tender Caf11 & Coot-rt Preparo ton fo Estobfshmnc of Prouvement I of Eqorpmn-f M-hf-i 1 1_ Off ice & Oo-to- for P-ofe Stoffr M Sne-dary Canal7 290 cm <t f -ulisi D O&-Mnagow Fa-lt-Ie Secohi n dar Drain _ - T-426k roninud m2 rovemnt oi- f M- Cal f 62km _- in Hood Surfacing Teiephr..e Li-es!t~~~~~~~~T, Xl~ i W_vt 0ok' 50km ~ mrcmc f Ec-ting Tcke e11n o rlrqadtestrr oftr- T.L-Inels 14 VilnIl Con.. r Tank, Orat & ffeoted 0,-Troirrisr- Lion 18km Hood Sv-f-,iri 10km M-ntor rig of Preircf op-rtor--l & Ecurumc- etfr Fecelkility RA-P.- for Lifilrlgin, -- Lift i 0105&PttetrgtnnPeet & F-tre Ir-g.t-a P-o 1. te 0 Tech Atuvvrc nfriiri 4 ch croot lir Cna-rel & LD-ir- 0 & Md if hr & Draiag Spvor ~ - Vrl- Agricltrol Suppurliiru Aut-ruitrIc Jo -,'d 65306R E-

66

67 ANNEX 8 NEPAL BIRGANJ IRRICzATION PROJECT Detailed Cost Estimate and Expenditure Schedule-L Local Foreign Toa (s$ million) Surface Irrigation Land acquisition Civil works Main canal Secondaries Tertiaries, & Drainage o Road surfacing Sub-total Tubewell Irrigation Land acquisition Well drilling Civil works Electric line Equipment & spares Sub-total Consultant Services Project Implementation Feasibility Studies Sub-total o Administration Land acquisition Civil works Buildings Coop. stores M equipmnent Staff Eng. & Administration Agr. Ext. & Coops Supplies & Services 0.27 _ Sub-total On-Farm Development by Farmers Contingencies Physical (10% Price (7%/yr.) o Sub-total 0.81 o Total / This cost estimate does not reclect the devaluation of the United States Dollar on -ebnrary 12, 1973.

68

69 ANNEX 9 NEPAL BIRGANJ IRRIGATION PROJECT Estimated Schedule of Disbursement IDA Fiscal Year Disbursement Cumulative Disbursement and Quarter During Quarter End of Quarter US$ Million September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, January 23, 1973

70

71 ANNEX 10 Table 1 NEPAL BIRGANJ IRRIGATION PROJECT List of Vehicles and Equipment to be Purchased, Surface Water Area and 0 & M Unit Cost No CIF Birganj Total Costs Item Description Required US$ US$ 1 Inspection Vehicles, long chassis, 4-wheel drive 4 4,000 16,000 2 Inspection Vehicles, regular chassis, 4-wheel drive 24 3,600 86,400 3 Pick-up Truck 3 4,000 12,000 4 Small Trailers for use with Inspection Vehicles ,000 5 Liglit Motor Cycle ,000 6 Bicycle ,200 7 Truck, 5-6 ton 5 9,000 45,000 8 Truck with Cargo Boom, 7 ton 1 11,000 11,000 9 Dragline, 3/4 cu yd with accessories 2 38,000 76, Farm Tractor 60 hp with land levelling blade 6 7,500 45, Ditcher (plough type) to be attached to farm tractor 5 1,000 5, Truck Crane, 3 ton 1 25,000 25, Portable Air Compressor, with pneumatic tools 2 7,500 15, Pump 0 3" with accessories , Pump 0 2" with accessories , Concrete Mixer, 6 cu ft 2 2,500 5, Portable Generator, 3 kw 1 1,200 1, Portable Generator, 2 kw , Workshop Equipment 1 lot 25,000 25, Telephone System with Switchboard 1 lot 25,000 25, Telemetering Equipment 1 lot 20,000 20, Radio Transmitter-Receiver 3 2,500 7, Miscellaneous Equipment and Tools 1 lot 22,100 22,100 TOTAL 472, Spare Parts for Vehicles (20%) 1 lot 35, Spare Parts for Equipment (5-15%) 1 lot 33,000 GRAND TOTAL 540,000 January 23, 1973

72 ANNEX 10 Table 2 NEPAL BIRGANJ IRRIGATION PROJECT List of Equipment to be Purchased Groundwater Area Unit Cost Item Description No CIF Birganj Total Costs Required US$ US$ 1 Electric Motors and Switch Gear - Existing Tubewells 14 1,500 21,000 2 Pumps and Spares for Motors and Pumps (for existing tubewells) 14 1,000 14,000 3 Electric Motors and Switch Gear - for 14 New Tubewells 14 2,000 28,000 4 Turbine Pumps and Spares for Motors and Pumps (for new Tubewells) 14 4,500 63,000 5 Miscellaneous Equipment and Tools 4,000 TOTAL 130,000 July 3, 1972

73 ANNEX 11 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Project Organization and Consultants Organization and Staffing 1. ILMGN has recently established the Narayani Zone Irrigation Development Board (NZIDB) under the Development Board Act of 1956, to be responsible for the execution of the project and for its operation and maintenance. A similar administrative arrangement is in use for the West Germanassisted Gandaki Agricultural Development Project near Pokhara, the Kankai Irrigation Project assisted by the Asian Development Bank, and the Hardinath Agricultural Development Project under a bilateral assistance from Japan. 2. The powers of NZIDB will be vested in an eight-member Board of Directors drawn from Government agencies but including the Project General Manager. The Board would formulate and direct the policy of the organization. A General Manager appointed by the Board would be the chief administrative officer and would be responsible for the organization, appointment, promotion, dismissal and designation of functions and duties of staff within the general rules of the HMGN Public Service Commission. The Board would meet in Kathmandu but the General Manager and project staff would be located in Birganj. 3. In addition to the construction, operation and maintenance of the irrigation facilities, NZIDB would be responsible for the agricultural extension service in the project area. It would arrange with AMC for the procurement and distribution of inputs, with the ADBN for agricultural credit, and with the Department of Agriculture for training and research at the Parwanipur station. NZIDB would develop operational arrangements with other government and private agencies as needed to execute the project. The proposed administrative organization chart is shown in Chart IBVD 6877 (R). 4. The Department of Irrigation, Hydrology and Meteorology has a limited staff and has had little experience in the design, execution and operation of large-scale irrigation facilities. While a substantial number of partially trained engineers are available they will need advice, guidance and supervision by trained experts. With seven other major irrigation projects under development, the Department lacks the expertise of key staff personnel to execute this project. 5. Manpower in Nepal is also available by transfer or direct hire to staff the personnel requirements for the agricultural extension, cooperatives and other aspects of the project. Some of the probable staff members have had experience in these or other districts under the Intensive Agricultural Districts Program or the Rapti Valley Agricultural Development Program. HMGN proposes to transfer a few experienced personnel from other areas to execute this project.

74 ANNEX 11 Page 2 6. Other international agencies are currently prcviding li1gn wite six. expatriate consultants at least through FY 1974, to assist the HFMGN ataff atf Parwanipur with its research, extension staff training annx field testiyag cum-demonstrations on farmers' fields in the project area. Also, the ADEN has expatriate assistance from the Asian Development Bank to help train Its managers, accountants and farm planners for cooperatives, includtng tiose proposed for the project. USAID has provided and plans to continue to -rovide technical assistance to AMC for its wholesale and retail farm input distribution functions and to AMC and ADBN for the design and construction of farm service center stores and on-farm grain storage structures. 7. However, to achieve the project objectives it wii1 be necessarv to engage consultants to assist NZIDB about as follows:

75 ANNEX 11 Page 3 Birganj Irr. Feasibility Project Studies Total Administration Advisor to General Manager and Head of Consultants Team Administrative and Financial Expert Engineering Services Irrigation Engineer Civil (Structural & Contract) Engineer Construction Supervision Engineer Mechanical & Electrical Engineer O&M and On-Farm Development Engineer Hydrologist Hydrogeologist Master Driller Surveyor Draftsman Agriculture Agronomist Agricultural Extension Specialist Others Economist Other Short-Term Specialists Total

76 ANNEX 11 Page 4 Terms of reference for the consultants are given at the end of this Annex. Project Execution 8. NZIDB intends to begin as soon as possible the active management and execution of the civil works and equipment procurement aspects of the project. To enable this action to progress rapidly the UNDP continued its work on the project under a "bridging" operation until July 1972 to provide the design and drawings, specifications and civil works contract tenders for Block 1 of the surface water command area. The goal would be to start construction as soon as the credit becomes available. 9. Weather would enable selected works to be constructed after early October. However, the labor supply is fully employed with the harvesting of paddy and sugarcane and the planting of wheat until early December. Because of these conditions most of the heavy construction works can be performed from about December to June. All of the civil works are expected to be labor-intensive.

77 ANNEX 1 1 PAge 5 NEPAL BIRGANJ IRRIGATION PROJECT Draft Terms of Reference I. Objectives 1. Consulting services are required by the Narayani Zone Irrigation Development Board of His Majesty's Government of Nepal to provide: (i) the plans, designs, specifications, tender documents and construction supervision for the completion of irrigation facilities and buildings in the Birganj Irrigation Project (hereinafter referred to as the "Project"). The project is in Parsa and Bara districts in the Terai plain and comprises two subprojects: a surface water irrigation subproject covering a net area of 28,700 ha commanded by the Nepal Eastern Canal, and a groundwater subproject with a net area of 2,700 ha, contiguous to the surface water area; (ii) advisory services to the Project Board in its management, accounting, on-farm development, agricultural extension services and cooperatives; (iii) feasibility reports for (a) a pumping scheme to lift water from the Nepal Eastern Canal to irrigate an area north of the Canal, and (b) a second irrigation project suitable for international financial assistance to be selected by HMGN and the Association. 2. The Board would provide appropriate full-time professional or technical personnel to act as counterparts and to work with the consultant's staff. During the course of the consultant's undertakings the counterpart professional and technical personnel would be trained and guided in their performance by the consultants. 3. Consultant services would be provided for a five-year period ending June 30, II. Responsibilities of the Consultant A. Mapping and Survey 4. The Consultant shall perform the following:

78 ANNEX I 1 Page 6 (a) prepare maps of the project area on a scale of 1:2,500 with 0.25 m contours; (b) stake on the ground the alignments of all secondary and tertiary irrigation canals, drainage canals and service roads with permanent benchmarks at appropriate intervals; (c) carry out staking survey to demarcate the boundaries of lands to be acquired by HMGN for the construction of all canals; (d) prepare all maps and survey drawings to be used for planning design and land acquisition. B. Engineering Services for Surface Irrigation Area 5. The Consultant's responsibilities shall include: (a) planning and design of new structures and improvement of existing structures in the Nepal Eastern Canal; (b) planning and design of secondary and tertiary canals, drainage canals and all the structures therein down to the field turnout for each service unit of ha; (c) planning and design of on-farm development works to suit the various topographic characteristics of lands for the command area of each service unit; (d) planning and design of all service roads, office buildings, staff quarters, stores and other structures related to the project; (e) preparing drawings, specifications and tender documents for the purpose of international competitive bidding; (f) preparing bill of quantities and cost estimates for the above works; (g) assisting the Board in the issuance of invitation to bid and on the evaluation of bids received and making recommendations for award; (h) supervising construction of all works in the subproject including inspection of materials used, measurement of contractors' works and certification of contractors' vouchers; (i) preparing O&M manuals of the project and its major structures for the Board.

79 ANNEX 11 Page 7 C. Engineering Services for Groundwater Area 6. The Consultant's responsibilitieshall be as follows: (a) resiting some of the new tubewells further north on land that cannot be irrigated by low lift pumps from the Nepal Eastern Canal, if the pump scheme study mentioned in paragraph F.10(a) shows that the scheme is technically and economically better than tubewell irrigation; (b) preparing detailed specifications and tender documents suitable for use by the Board in international competitive bidding for pumps, motors, switch gear and appurtenant works for the 14 existing wells and 14 new wells and having received the tenders, assisting the Board in the evaluation of same and making recommendations for award; (c) supervising the installation and testing of equipment to insure proper performance; (d) preparing designs and specifications suitable for international competitive bidding for construction of: (i) regulatory reservoirs with appropriate inlet and outlet works and control devices; (ii) main canals to be staked on the ground from each well to the service units for each of the 11 (eleven) existing wells not so provided and for each of the 14 new wells to be constructed; and (iii) pumphouse and other structures related to the subproject. After having received the tenders, the Consultant would assist in the evaluation of same and make recommendations for award; (e) preparing designs, specifications and tender documents for use by the Board for approximately 18 km of 11 kv power line to serve both existing wells not now served and new wells; having received the tenders, the Consultant would assist in evaluation of same and make recommendations for award; (f) preparing detailed designs, specifications and tender documents for construction of 14 new wells suitable for international competitive bidding and having received the tenders, assisting in the evaluation of same and making recommendations for award; (g) providing a master driller to supervise the construction, testing and development of 14 new wells; (h) planning and designing on-farm development works for the command area of each tubewell; (i) collecting hydrogeologic data as required to calibrate a digital groundwater model for use in analyzing the ultimate development of groundwater irrigation in the study area;

80 ANNEX 1 1 Page 8 (j) advising in the operation of the tubewells and monitoring of data on costs and benefits suitable for use in evaluating feasibility of ultimate groundwater development of the region; (k) preparing a manual for the operation and maintenance of the tubewells; and (1) collecting data and information on investment, operation and maintenance costs of tubewells and their distribution systems, benefits accrued from such irrigation and use these information to update the feasibility report on groundwater irrigation (Feasibility Report of a Combined Surface and Groundwater Project in the Birganj Area and Annex V attached to the Report) in the 20,000 ha north of the Nepal Eastern Canal. D. Administrative and Agricultural Advisory Services 7. The Consultant shall assist and advise NZIDB and its General Manager in the general administration of personnel, finance, accounting and auditing and in the operation of the project as an integrated agricultural development project including agricultural extension and cooperative services. E. Training 8. The Consultant shall prepare and submit to NZIDB within six months of appointment proposals for a comprehensive training program for administrative, professional and technical counterpart staff engaged on the Project. After its approval the Consultant shall be responsible for implementation of the training program. 9. The program should give detailed consideration to the training requirements in the fields of engineering, agriculture and administration. The following subjects fall within the respective fields: (a) Engineering: Planning, design, drawing up of specifications, cost estimation, surveying and mapping, construction supervision, material testing, O&M procedures, related mechanical, electrical and other engineering works; (b) Agriculture: Irrigation agronomy, soil surveying, extension techniques, cooperative organization, farm budgeting, agro-economic surveys and other related agricultural development activities; and (c) Administration: Management techniques, finance, accounting, budgeting, personnel management, records, stores, public relations, land acquisition and contracts, etc.

81 ANNEX 1 1 Page 9 F. Feasibility Studies 10. The Consultant shall prepare: (a) A feasibility study and report for a pumping scheme to lift water from the Nepal Eastern Canal to irrigate an area north of the Canal; and (b) a feasibility study and report for a second irrigation project sditable for international financial assistance to be selected by HMGN and the Association. III. Reporting 11. The Consultant shall prepare and submit to the Board the monthly progress report giving a description of the Consultant's activities and personnel during the reporting period, progress of the various phases of project works, the Board's activities, problems encountered and measures to overcome these problems and Consultant's financial statement. 12. The Consultant shall assist the Board in the preparation of the Board's quarterly report, semi-annual report and annual report for submission to the lending institution. IV. Undertaking of H.M. Government of Nepal 13. Providing that established procedures are followed the Government shall: (a) exempt or bear the cost of, any taxes, duties, fees, levies and other impositions imposed under its laws and regulations or the laws and regulations in effect in its territories or of any political subdivision or agency thereof, on the Consultant and his personnel (other than personnel who are citizens or permanent residents of Nepal) in respect of: (i) any payments made to the Consultant or to such personnel in connection with the carrying out of the agreed to services; (ii) (iii) any equipment, materials and supplies brought into Nepal for the purpose of carrying out the services and which, after having been brought into such territories, will subsequently be withdrawn therefrom; any property brought into Nepal by the personnel of the Consultant and his dependents for their personal use and which, after having been brought into Nepal will

82 ANNEX 1 1 Page 10 subsequently be withdrawn therefrom upon departure of such personnel; however, to qualify for these exemptions, shipment of such property will have to be arranged by contract no later than 3 months after the arrival of the staff member; (b) facilitate prompt clearance through customs of any equipment, material and supplies required for the services and of the personal effects of the Consultant's personnel; (c) ensure that the Consultant's personnel and their dependents are promptly provided with any necessary entry and exit visas, residence permits, exchange permits and travel documents required for their stay in the territories of the Government; (d) issue all necessary permits and authorizations for the carrying out of the services; (e) provide reasonable furnished family living quarters acceptable to the Consultant; (f) provide full-time professional or technical personnel to be counterparts and to work with and to be trained by each consultant in carrying out these services; (g) make available to the Consultant all existing aerial photographs, maps, drawings, data, reports, and any other information pertinent to the execution of the contract; (h) provide office space equipped with necessary furniture and utilities such as water supply and electricity in the project area or in Birganj; (i) provide all local transport facilities and equipment required by the Consultant; (j) provide the Consultant with the available maps and materials as follows: (i) maps of the project area of a scale of 1:20,000 with 1 ft contours made in 1964 by Survey of India; (ii) aerial photographs of the project area of an approximate scale of 1:35,000 taken during November-December 1968, together with original films, and uncontrolled photomosaics of 1" to 1 mile scale; (iii) aerial photographs of the project area of an approximate scale of 1:12,000 taken in November 1971 together with original films; and

83 ANNEX 11 Page 11 (iv) feasibility report of the Birganj Irrigation Project, August 1971, by Nippon Koei, together with accompanying maps, drawings and diagrams. (k) provide the Consultant with available maps, aerial photographs and reports pertinent to the studies mentioned in paragraph F.(10)(b). V. Necessary Procedure to be Followed by Invited Consulting Firms 14. Consulting firms invited to submit proposals are requested to state clearly in their proposals the following: (a) terms and conditions under which they would carry out the duties and responsibilities specified above; financial terms are not desired at this stage; (b) the proposed composition of the team which they intend to assign to the project both in the field and at the home office, number of man-months of each individual together with the name and qualification, including proficiency in spoken and written English; (c) a list of vehicles and equipment which they anticipate would be required in the carrying out of their works; and (d) the category and number of counterpart personnel and other local staff which they would wish the Government to provide to work with them at no cost to them. January 23, 1973

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85 ANNEX 12 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Irrigation, Electricity and Related Water Resources Act, / Preamble: Whereas it is expedient to regulate the use of such important national wealth as rivers, streams, lakes, falls and underground water resources in order to maintain the convenience and economic welfare of the public, And whereas it is expedient to insure the development of electricity in a proper manner by regulating its output and supply, and to confer rights and facilities for its production and supply, And whereas it is expedient to make necessary provisions in respect to irrigation in order to insure its development in a proper manner, Now therefore, His Majesty King Mahendra Bir Bikram Shah Dev has enacted this law on the advice and approval of the National Panchayat. 1. Short Title, Extent and Commencement (1) This law may be called the Irrigation, Electricity and Related Water Resources Act, (2) It shall be applicable throughout the Kingdom of Nepal. (3) It shall come into force on the date prescribed by His Majesty's Government by notification in the Nepal Gazette. 2. Definitions Unless repugnant to the subject or context, in this Act: - (a) Water Resource means rivers, streams, lakes and falls as well as any other natural reservoir and underground water prescribed by His Majesty's Government by notification in the Nepal Gazette from time to time. (b) Electricity means power to be generated from water, coal, diesel oil or any other resource. (c) License means the license granted under this Act. 1/ Nepal Gazette, Vol. 17, No. 29A (Extraordinary), Kartik 6, 2024 (October 23, 1967), as translated by Nepal Press Digest (Private) Ltd.

86 ANNEX 12?age Z (d) Licensee means the person who obtains license under this Act. This term includes any individual, Panchayat or any other corporate body obtaining rights under this Act or the rules framed hereunder. (e) Consumer means the person who is supplied with water or electricity by a licensee. (f) Water Cess means the water cess to be levied on consumers under this Act. (g) Charges mean the charges to be collected from consumers under this Act as the price of electricity. (h) Prescribed or as prescribed means prescribed or in the manner prescribed in the rules framed or orders issued under this Act. 3. Use of Water Resources (1) No person shall be permitted to utilize any water resource without obtaining license under this Act. But no license need be obtained for utilizing any water resource for any of the purposes mentioned below: - (a) For meeting daily personal needs, (b) For operating wind-mills for cottage industry purposes, (c) For operating water-mills or irrigation channels, (d) For irrigating lands through underground water by means of tube-wells, (e) For drawing water for irrigation purposes from gullies, aqueducts or streams, ponds, wells, lakes, canals or dams through the labor and resources of the local people themselves either individually or collectively, in such a manner that no adverse effect is created on any hydro-electric, or irrigation project of His Majesty's Government constructed before or after the commencement of this Act, or those proposed to be constructed in the future. (2) Notwithstanding anything contained in Sub-Section (1), in case any person has obtained any right to use any water resources in accordance with the current Nepal law prior to the commencement of this Act for any purpose other than those mentioned in the restrictive clause of Sub-Section (1), he shall obtain a license within a

87 ANNEX 12 Page 3 period of one year from the date on which the appropriate water resource is declared as a water resource under this Act. In case he fails to obtain a license in this manner, his right shall be deemed to have ipso facto lapsed. 4. Production and Supply of Electricity (1) No person shall generate, supply or conduct surveys for electricity without obtaining a license under this Act. (2) Notwithstanding anything contained in Sub-Section (1) and Section 4 (sic), all licenses issued under the 1963 Nepal Electricity Act, prior to the commencement of this Act and existing at the time of its commencement shall be deemed to have been issued under this Act, and shall accordingly remain valid. 5. License But electricity to be generated or supplied under such license shall be generated and supplied subject to the provisions of this Act and the rules framed or orders promulgated... (1) Any person desirous of utilizing any water resource for purposes other than those mentioned in the restrictive Clause of Sub-Section (1) of Section 3 shall submit an application in the prescribed form containing the following particulars to the prescribed authority: - (a) Full name, address and occupation of the applicant, (b) Volume of water sought to be utilized, and the purpose of utilization thereof, (c) The area where the water is to be utilized, and the place where the utilized water is to be released, (d) A pledge to abide by current Nepal law and the conditions stipulated in the license, and (e) Other particulars as prescribed. (2) Any person desirous of generating or supplying electricity shall submit an application in the prescribed form containing the following particulars to the prescribed authority: - (a) Full name, address and occupation of the applicant, (b) The area where electricity is to be generated or supplied,

88 ANNEX 12 Page 4 (c) Volume of electricity sought to be generated or supplied, (d) Particulars of how electricity is intended to be generated or supplied, (e) A pledge to abide by current Nepal law and the conditions stipulated in the license, and (f) Other particulars as prescribed. (3) In case any person desires to conduct a survey of any water resource or of the production, supply or transmission of electricity, he shall submit an application in the prescribed form containing prescribed particulars to the prescribed authority. (4) In case the prescribed authority so deems appropriate after scrutinizing the application filed under Sub-Section (1), or Sub-Section (2) or Sub-Section (3) as the case may be, and after conducting inquiries regarding the financial, technical or any other aspects of such application, if so necessary, he may issue a license in the prescribed form to the applicant. (5) Licenses issued under this Act: - (a) Shall not be sold or otherwise alienated without the permission of the prescribed authority. (b) May be suspended, revised or revoked by the prescribed authority if it so becomes necessary in the public interest, or if the licensee violates any of the conditions stipulated in the license, or any provision of current Nepal law. (6) Every person obtaining a license under this Act shall pay such charges and annual fees to His Majesty's Government as may be prescribed. But exemption from the payment of such fees or charges may be granted to prescribed persons in prescribed circumstances. Acquisition and Requisition by His Majesty's Government (1) His Majesty's Government may acquire any electric and irrigation installation and related equipment against compensation, if it so becomes necessary for the purpose of making large-scale and comprehensive arrangements regarding electricity and irrigation.

89 ANNEX 12 Page 5 (2) The amount of compensation to be paid under Sub-Section (1) shall be determined on the basis of the current value of the land, building and equipment acquired (after deducting depreciation caused by breakage and ordinary use). (3) Canals, dams, electric installationo, any other construction project and related lands and equipment acquired under this section may be operated by His Majesty's Government itself or be handed over to any other person for operation with or without selling the same to him. (4) In case His Majesty's Government is satisfied that any licensee has not been able to operate regularly and systematically any water resource or electricity works for which he has obtained license, it shall requisition such water resource or electrical installation along with the related lands and equipment, and operate the same itself or have it operated by any other person until it begins to run regularly and systematically. 7. Water Cess, Electricity Charges and Other Fees (1) The licensee may impose and collect water cess, electricity charges or any other related fees from consumers. Provided that the approval of His Majesty's Government shall be obtained before imposing and collecting such cess charge or fee. (2) For the purpose of Sub-Section (1), His Majesty's Government may form a Committee including representatives of consumers and the concerned industrialist to advise it in matters relating to the grant of approval for water cess., electricity charges and other fees. 8. Utilization or Acquisition of Lands or Property Belonging to Others (1) His Majesty's Government, or the licensee with the approval of His Majesty's Government may acquire lands belonging to others for any of the following purposes as specified in his license: - (a) Construction of dams or embankments, (b) Construction of lands or irrigation channels, (c) Laying of pipelines on the surface or underground, (d) Establishment of reservoirs or water supply centers,

90 AN4NEX 12 Page 6 (e) Construction of electricity generating centers, transmission centers, conversion centers or supply centers, (f) Installation of electric poles, (g) Installation of overground or underground electric cables or lines, and (h) Any other necessary construction works. (2) Any person authorized by His Majesty's Government or by the licensee may enter into any land for any of the purposes mentioned in Sub-Section (1), or for inspection or maintenance of the works constructed thereunder. (3) His Majesty's Government or the licensee with the prior approval of His Majesty's Government may prohibit the use for any purpose of lands situated in the area where any construction project mentioned in Sub-Section (1) is under implementation, or of lands situated at a prescribed distance on either side of such area. (4) In case any land is acquired by His Majesty's Government or the licensee under this section, reasonable compensation therefor shall be paid to the concerned land-owner. (5) In case it becomes necessary to enter into any residential building for purposes mentioned in Sub-Section 1) or (2), this shall be done only after giving advance notice to the occupant. But it shall not be necessary for the prescribed authority to give advance notice under this Sub-Section if it becomes necessary to conduct search of any house on reasonable suspicion of misuse or pilferage of water or electricity or to avert any accident. 9. Power of His Majesty's Government to Utilize Water Resources or Generate and Supply Electricity not to be Affected (1) No provision contained in this Act shall be deemed to have affected the power of His Majesty's Government to develop any water resource or electricity directly. (2) His Majesty's Government may distribute or sell water or electricity developed from any water resource under Sub-Section (1) directly or through any other agency or individual.

91 ANNEX 12 Page Inspection His Majesty's Government may depute inspectors to ascertain whether the provisions of this Act and the rules framed hereunder, or the terms and conditions stipulated in the license, are being observed or not. 11. Power to Issue Directives His Majesty's Government may issue necessary directives to any licensee in the public interest, or for making proper arrangements for the development of water resources, or for generating and supplying electricity, and it shall be the duty of such person to comply with such directives. 12. Appointment of Advisors His Majesty's Government may appoint advisors according to need to advise it in any matter concerning the enforcement of this Act. 13. Penalties (1) In case any person takes any action in contravention of this Act or the rules framed or orders or directives issued hereunder, he shall be punished with a fine ranging from Rs 5.00 to Rs , and in case such person is a licensee, His Miajesty's Government may suspend or revoke his license, or direct the stoppage of any work connected with water resources or production and supply of electricity, if it has been done without obtaining any license. (2) In case any person will-fully causes any damage or loss to any canal, dam or any construction work relating to water resources, or to any electric installation or related equipment belonging to any licensee, or steals water or electricity being supplied by His Majesty's Government or by such person, or misuses water or electricity in such a manner as to put His Majesty's Government or such person to loss, or attempts to do any of such things, or in case he obstructs any action or operation mentioned in Section 9, he shall be made to pay the necessary costs, and, in addition, be punished with a fine of an equivalent amount or with imprisonment for a term not exceeding 6 months or with both. 14. Power to Frame Rules (1) For the purpose of implementing the objectives of this Act, His Majesty's Government may frame rules or promulgate orders, and such rules or orders shall be deemed to have come into force on the date on which they are published in the Nepal Gazette.

92 ANNEX 12 Page 8 (2) Without prejudice to the generality of the power conferred by Sub-Section (1), His Majesty's Government may frame rules or promulgate orders particularly in respect to the following matters: - (a) Form of applications to be submitted for obtaining licenses, and the particulars to be given therein, (b) Authority empowered to receive applications for license, (c) Form of license, and related charges, annual fees and other matters, (d) Quality and standard of water to be supplied, (e) Standard of canals, dams and any other construction work related to water resources, and the process of generating, supplying, transmitting and utilizing electricity, and the terms and conditions in respect thereto, (f) Standard of materials and equipment to be utilized in the construction of any canal or dam, and in any other construction project connected with water resources, and in the production, supply and transmission of electricity, and the process of utilizing such materials or equipment, (g) Duties and powers of inspectors, (h) Miatters pertaining to water cess, (i) Matters pertaining to electricity charges, (j) Accidents and inquiries thereinto, (k) Period for which a license is to remain valid, and the renewal, revision or cancellation thereof, (1) Provisions for prevention of harmful effects of survey, control and utilization of water resources and of the use of water, (m) Provisions for preventing the contamination of water,

93 ANNEX 12 Page Repeal (n) Provisions regarding water wasted in the course of utilization for industrial, commercial or other purposes, and (o) Other necessary matters. (1) The following Nepal laws have been repealed: - (a) Irrigation Act, (b) Nepal Electricity Act, 1963, and (c) Electricity, Motor or Power (Transfer and Removal) Act, (2) Other current Nepal laws which conflict with this Act shall be deemed to have been repealed to the extent of such conflict. (3) The liabilities and rights of the Nepal Electricity Board constituted under the laws repealed under Sub- Section (1) shall accrue to His Majesty's Government after the commencement of this Act. July 3, 1972

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95 ANNEX 13 NEPAL BIRGANJ IRRIGATION PROJECT Farm Incomes Farm incomes from crop production were analyzed for typical 0.5 ha, 2.0 ha and 5.0 ha farms irrigated from surface water, and for a 2.0 ha farm irrigated from groundwater sources. The farm budget tables, which are designed primarily to show "with project" and "without project" incomes (in cash and kind) of representative farms in the project area, are presented in Tables 1 through 4. The farm budgets have been estimated using the following assumptions and bases: (a) Farm income includes only income from crop production and does not take into account livestock and cash earnings outside of own farms or from non-agricultural employment. (b) Farm production was valued at an average farmgate postharvest price received for each commodity in recent years. Over 70% of the marketed surplus is sold during the first three months after harvest and prices are determined by both domestic and nearby Indian markets because most of the marketed surplus foodgrain is sold in the neighboring Indian states. (c) Input costs per ha are presented in Table 5, and the monthly labor requirements for the model farms are estimated on the basis of 50 man-days per family per month. February 12, 1973

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97 ANNEX 13 Table 1 NEPAL BI1GANJ IRRIGATION PROJECT 1/ Farm Budget for Typical 0.5 ha Farms-l Wet Season Crops Without Project With Project Pro- Produc- duc- Area Yield tion GVP Area Yield tion GVP TV (kg/ha) Tk (NR) (ha) (kg/ha) ( (N R Paddy - Local , , Paddy - HYV ,700 1, Dry Season Crops Wheat , ,250 1, Pulses Vegetables ,ooo 300 v 24Q , Total Farm Income 1,165 2,585 Production Costs NRs Seed Fertilizers Plant Protection Bullock Expenses Hired Labor - _ Land Tax 35 Other 10 5 Total Net Income 970 1, 995 Incyemental Income 1,025 Project Charges 120 'Net Incremental Income 905 Project Charges as % of Tncremental Income 12 1./ Farm production valued at farmgate price.

98 ANNEX 13 Table 2 NEPAL BIIzANJ IRRIGATION PROJECT Farm Budget for Typical 2.0 ha Farms-/ Without Project rro- -- With Project rroduc- due- Area Yield tion GVP Area Yield tion GVP T (kg/ha) 7kg (-NRS) TE (kg/ha) (kg (NRs) Wet Season Crops Paddy - Local 1.8 1,700 3,o60 2, ,700 2,700 2,025 Paddy - HYV 0.7 3,500 2,450 1,835 Sugarcane Dry Season Crops Wheat 0.6 1, ,000 3,000 2,s700 Oilseeds Pulses Vegetables 0.1 6,ooo ,000 1, Sugarcane ,000 1, O,O00 8, Total Farm Income 3,775 8,765 Production Costs NRs Seed Fertilizers Plant Protection Bullock Expen es Hired Labor! Land Tax Other Total 1,100 1,100 2,780 2,780 Net Income 2,675 5,985 Incremental Income 3,310 Project Charges 480 Tet Incremental Income 2,830 Project Charges as % of Incremental Income 15 1/ Farm production valued at farmgate price. 2/ Based on monthly labor requirements shown in Table 5, assuming family labor supplies 50 man days per month.

99 ANNEX 13 Table 3 NEPAL BIRGANJ IRRIGATION PROJECT Farm Budget for Typical 5.0 ha Farms2' Without Project With Project Pro- Produc- duc- Area Yield tion GVP Area Yield tion GVP 7 h kg7h7a T (ig;) (h (kg/ha) 7g R-sr) Wet Season Crops Paddy - Local 4.0 1,650 6,600 4., ,600 6,500 4,875 Paddy - HYV 1.0 3,400 3,400 2,550 Sugarcane Dry Season Crops Wheat 1.0 1,100 1, ,800 5,600 5,040 Oilseeds Pulses Vegetables 0.1 6,ooo ,000 1, Sugarcane ,000 9,000 1, ,000 40,000 5,200 Total Fann Income 7,870 19,050 Production Costs NTR Seed Fertilizers 470 2,130 Plant Protection 150 1,175 Bullock Expenses and Tractors 1, Hired Labor 2/ 1,410 3,430 Land Tax Other Total 4,580 4,580 10,365 10,365 Net Income 3,290 8,685 Incremental Income 5,395 Project Charges 1,200 Net Incremental Income 4,195 Project Charges as % of Incremental Income 22 1/ Farm production valued at farmgate price. 2/ Based on monthly labor requirements showm in Table 5, assuning tamily lador supplies 50 man days per month.

100 ANNEX 13 Table 4 NEPAL BIRGANJ IRRIGATION PROJECT Farm Budget for Typical 2.0 ha Farms with Tubewell Irrigation Wet Season Crops Without Project Pro- With Project Produc- duc - Area Yield tion GVP Area Yield tion GVP T(a (kg/ha) Tv (NRI) (ha (kg/ha) (kg) JNRs) Paddy - Local 1.8 1,700 3,060 2, ,700 1,890 1,420 Paddy - HYV 1.0 3,500 3,500 2,625 Sugarcane Dry Season Crops Wheat 0.6 1, ,300 3,300 2,970 Oilseeds 0.1 4Co Pulses Vetetables 0.1 6, ,000 1, Sugarcane ,000 1, ,000 8,000 1,040 Total Farm Income 3,775 9,220 Production Costs-NRs- Seed Fertilizers Plant Protection Bullock Expenp es Hired Labor?! 200 1,250 Land Tax 140 Other Total 1,100 1,100 3,760 3,760 Net Income 2,675 5,460 Incremental Income 2,785 Project Charges 6ho Net Incremental Income 2,135 Project Charges as % of Lncremental Income 23 1/ Farm production valued at farmgate price. 2/ Based on monthly labor requirements shot.;m in Table 5, assming family l&bor supplies 50 man days per month.

101 NEPAL BIRGANJ IRRIGATION PROJECT Basic Inputs Per liectare for Various Crops Cash Itput in NR6 Paddy-Local Paddy-HYV Sugar Cane Wheat Oil Seeds Pulses Vegetables W w w w W W W W W W Seed Fertilizer Plant Protecticn _ Others TOTAL CASH INPUTS ,045 _ 1,590 1, Labor IAnuts (in ma-days) January February March April May June July August September October o November December 15 _ TOTAL TABOR InDJTS O I With Project. j Without Project. PBullock expenses, farm equiyment ard Fctorace, etc.

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103 ANNEX 14 Page 1 NEPAL BIRGANJ IRRIGATION PROJECT Economic Rate of Return and Sensitivity Analysis A. Economic Rate of Return The economic rate of return from the project is estimated at 21.4%a. The investment costs and incremental net benefit streams are presented in Table 1. The rates of return from the two subprojects, surface and groundwater irrigation, are estimated at 24% and 14X, respectively. If sunk costs without interest are included in first project year expenditure, the project rate of return would be 14%, and for the subprojects 14% and 11%, respectively. Assumptions and bases of the economic rate of return calculation include: (a) a 50-year life for the surface irrigation works and a 30-year life for the groundwater installations; (b) the investment cost stream includes capital investment, physical contingencies, land acquisition for construction and on-farm development works by farmers (estimated cost US$1 million), together with the operation and maintenance costs of the irrigation system which are estimated at NRs 80/ha for the surface system and NRs 160/ha for the groundwater system; (c) because of the existing caste system a part of the potential labor force is unavailable for agricultural employment. On the average, the available labor force is estimated to be about 50 man-days/farm family per month. For the project area as a whole, the monthly labor supply is about one million man-days. The estimated monthly demand for agricultural labor in the project area under "with" and 'without" project conditions is given in Table 2. Clearly the available supply is considerably more than the existing requirements for much of the year and would continue to be so even after the completion of the project works. Full employment conditions prevail only during the month of June under "without" project conditions and in June and July under "with project" conditions. Accordingly, all labor inputs were priced at the going market wage rate of NRs 5.00 per man-day during the above peak periods and at a shadow rate of NRs 1.00 per man-day during the rest of the year;

104 ANNEX 14 Page 2 (d) economic benefits from the agricultural output (Table 3) were evaluated at 1980 world market prices, provided by the IBRD Economics Department, adjusted to farmgate values as follows: NRs/Ton Paddy 650 Wheat 700 Sugarcane 100 Oilseeds 1,000 Pulses 1,000 Vegetables 800 (e) yields under the without project conditions are assumed to increase by 1% per year, a rate equivalent to that prevailing in the area during recent years. This increase would take place up to full development (year 15) of the project and yields in ton/ha for individual crops are presented in Annex 3. B. Results of SensitivityTests Aossmptions Economic Rate of Return (a) The basic run excluding sunk costs 21.4 /1 (b) Including sunk costs of US$5 million (without interest) in the first year investment 14.0 /2 (c) 20% increase in construction costs 18.0 (d) 2-year delay in project completion 19.0 (e) Combination of (c) and (d) 16.0 (f) 20% of reduction in benefits 17.0 (g) Combination of (c), (d) and (f) 14.0 (h) Replace increased wheat area of 6,200 ha with oilseeds and pulses (paras 6.02 and 7.05) 18.0 (i) All labor costed at zero 26.0 (j) All labor costed at NRs 5 per man-day 16.0 /1 24% for surface irrigation and 14% for groundwater irrigation. /2 14% for surface irrigation and 11% for groundwater irrigation. February 12, 1973

105 ANNEX 14 Table 1 NEPAL BIRGANJ IRRIGATION PROJECT Economic Analysis Cost and Benefit Flows Year Costs Benefits - US$ , , , , ,243 1, , , , , , , , , , , , ,420 Internal rate of return: 21.4%. February 12, 1973

106 ANNEX 14 Table 2 NEPAL BIRGANJ IRRIGATION PROJECT Estimated Aggregate Labor Requirement '000 man-days Month With Project Without Project January February March April May June 1,219 1L089 July August September October November December T 0 T A L 8,201 4,727

107 N B PAL BIP.'AHJ IROIGATION PPOJECT Economic Analysis - Net Value of Production at Full Development Paddy-Local Paddy_HYV Sugar Cane Wheat Oil Seeds Pulses 'Vegetables Crop With (W) or Without (W) Project W W W W W W W X W W W W Yield (Tons/ha) O o Price (NRs/Ton) ,000 1,000 1,000 1, Gross Value of Production (NWs) 1,755 1,100 2,275-4,000 1,800 2, ,600 4,8oo Production Costs excluding labor (NRs) ,045-1,590 1, Net Return (NRs/ba) 1, ,230-2, , ,348 4,668 Cropped Area (ha) 15,430 28,260 13,910-3,140 1,570 15,700 9,420 1,570 1,570 1,570 1,570 1,570 1,570 Net Return from Crop ed Area (million OTs) With Without 12 (Million 5) (Million NRs) Nct Returas from Project Area 80.42q" 37.7 Imputed Labor Cost PeaR Labor olri-peak Labor 0t0 3.6 Totel Labor Cos Net r>eurrs from Projectl Ares Project Benefits at Full Developrnent 34.6 (us$3.42 m) I 3iee Annex 13, Table 5. /2 a'b, not coete3. / Be.oice - of toe roura off eergr, ito figes r.ay nolu EIree ea stly.

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109 NEPAL BIRGANJ IRRIGATION PROJECT ORGANIZATION CHART OF BIRGANJ IRRIGATION PROJECT BOARD PROJECT BOARD GENRALMANGER a CONSULTANTS AGRICULTURE DIVISION ENGINEERING DIVISION ADMIN. & FINANCE DIVISION APPLIED RESEARICH EXTENSION SERVICE SECTION COOP'ERATIVES SECTION CONSTRUISION SECTION PLANIGNG ON-FARM STORES SECTION ~ SUPRVIIONDEVEL AMNSRTO OPMENT SECTIONSETOSCIN IAC SECTION SECTION ~~~~SECTIONSETOSCIN W.~,)d B-k, ~FL

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111 o t in. : JUtNE 1977 z Pro1ect,rea NEPAL s J 47 ta t NEPAL Rivers & trem - Barrge IBIRGANJ IRRIGATION PROJECT _ Cootrol gates PROJECT LOCATION Powe staionl CA IN,~ Rood 73 R. ys. * Interneasional boondazrres.9 ~-~ E P A L 0-3 N D I A: N Ot?' 0 Z t-r L fgta 700 D.AW l :; 4\ATH-W 1 2 Cortaeaed\X Ljrol Are // AeaW 14,900 Nr aen olgron dwom B 520 H 11 to 2 0X 5iJ 30 7, tol ,000haj{Gross) \0z e4-00 5f4.,10' (G5'3e

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113 IBRD EATUMDU NP d i M ESS, > Ek.. e P~ -9.N _ C (X^IEN}A ; ro^/'s, 8a ; ) o.,, l t t I ~~~~~~~~~~~~~~~~~~~~~~NEPAL S,: S q ) () d \ A} (\N \ BIRGANJ IRRIGATION PROJECT PLAN 1''1 <.,) ) ZZL$ /fs e \ d 2J/t) I''' S GENERAL *'A-.C.- - G,oX,d..t, D-Ip;-i A- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - B-oIck B-od.,y I N Di A L Ekitig Rood K- '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ O,olo0IBoodn BL KL VI C ~ OK X ~ ~ ~ ~ ~ ~ ~ ~ ~ (OJBLOCK\XI~~~~~~~~~LOK i 6 3AN- ~ (BB KLO ANJ(x N AA 0L (. ~ - ~ ~ ~ ~ ~ 7~~~~~~0 0~~~~ ~~~~~~~~~~~~~~~~MIE 2