L Nepal: Appraisal of the

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized L Nepal: Appraisal of the Bhairawa-Lumbini Groundwater Project Report No. 1093a-NEP June 17, 1976 Irrigation and Area Development Division South Asia Projects Department FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS US$1.00 = Nepal Rupees (NRs) NRs 1 US cents 8.00 WEIGHTS AND MEASURES EQUIVALENT kv = Kilovolt = 1,000 volts kwh = Kilowatt hour = 1,000 watt hours

3 FOR OFFICIAL USE ONLY PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ADADO = Assistant District Agriculture Development Officer AD Agricultural Department ADBN Agricultural Development Bank of Nepal AIC = Agricultural Inputs Corporation AJT Assistant Junior Technician BLGPO Bhairawa-Lumbini Groundwater Project Office CDO Chief District Officer DA Department of Agriculture DADO District Agricultural Development Officer DIHM Department of Irrigation, Hydrology and Meteorology FAMSD Food and Agriculture Marketing Services Department GDP Gross Domestic Product GRDB Groundwater Resources Development Board HMGN = His Majesty's Government of Nepal HYV High Yielding Variety ICB International Competitive Bidding I&D Irrigation and Drainage JT Junior Technician JTA = Junior Technical Assistant LCB Local Competitive Bidding IAAS = Institute of Agriculture and Animal Science MFAI = Ministry of Food, Agriculture and Irrigation MHP Ministry of Home and Panchayat MLR = Ministry of Land Reform MWP Ministry of Water and Power MWT Ministry of Works and Transport NEC = Nepal Electricity Corporation NFC = Nepal Food Corporation NZIDB = Narayani Zone Irrigation Development Board O&M = Operation and Maintenance PCC = Project Coordinating Committee PLAA = Panchayat Level Agricultural Assistant PM = Project Manager RD = Roads Department SMS = Subject Matter Specialist GLOSSARY Panchayat = Smallest subdivision of Government. FISCAL YEAR His Majesty's Government of Nepal - July 16 to July 15 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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5 NEPAL APPRAISAL OF THE BHAIRAWA-LUMBINI GROUNDWATER PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS i-iii I. INTRODUCTION... 1 II. BACKGROUND... 2 General... * *... 2 Agriculture.. *...* Irrigation Development *... 3 III. THE PROJECT AREA General Climate... 5 Topography and Soils Hydrogeology... 5 Existing Irrigation **.. 5 Farm Size and Land Tenure Agricultural Production Transportation and Marketing IV. THE PROJECT... 7 General... 7 Project Works and Other Project Components... 8 Water Supply, Demand and Quality... 9 Engineering Design Consulting Services * Construction Schedule Project Costs Financing Procurement and Contracts Disbursements Accounts and Audits Environmental Impact V. ORGANIZATION AND MANAGEMENT Operation and Maintenance Agricultural Supporting Services Farmers' Organizations Monitoring the Project Cost Recovery This report is based on the findings of an Appraisal Mission including Messrs. J.K. Lee, U. Hpu, and W.G. Rodger (IBRD) and W. Barber who visited the project area in Nepal, November/December 1975.

6 -2- Page No. VI. PRODUCTION, MARKETING, PRICES AND FARM INCOMES Crop Calendars and Cropping Patterns Yields and Production Marketing and Processing Prices Farm Income VII. BENEFITS AND JUSTIFICATION General Foreign Exchange Earnings Income Distribution Employment Opportunities Rate of Return Sensitivity Analysis VIII. AGREEMENTS REACHED AND RECOMMENDATIONS ANNEXES CHART MAPS 1. Agricultural Development 2. Climatic Data 3. Project Works 4. Hydrogeology of the Project Area 5. Irrigation Water Supply, Demand and Quality 6. Implementation Schedule 7. Cost Estimates and Schedule of Expenditure 8. Proposed Credit Allocation and Estimated Schedule of Disbursement 9. Agricultural Supporting Services 10. Present and Projected Cropping Patterns and Production 11. Prices for Economic and Financial Analyses 12. Crop Inputs and Farm Budgets 13. Farm Labor Analysis 14. Economic Analysis Project Organization Project Location and Civil Works Project Area Typical Irrigation Service Unit

7 NEPAL APPRAISAL OF THE BRAIRAWA-LUMBINI GROUNDWATER PROJECT SUMMARY AND CONCLUSIONS i. Agriculture dominates the economy of Nepal. It accounts for about 90% of the employment, 80% of the export earnings and 67% of the GDP which averages about US$100 per person. Nepal imports most of the industrial and manufactured consumer goods required by its population and it depends primarily upon the earnings from agricultural exports, the income from tourism and Gurka transfers to pay for such imports. In the last two years, the balance of payments has taken an adverse turn and the Government is re-examining its development and trade policies in an effort to identify action that can be taken to cope with recent trends. Increased development of small and quick maturing irrigation projects is one of the approaches being pursued. ii. The Terai, the southern lowland portion of the country, offers the greatest potential for such quick yielding irrigation projects. The Terai includes 68% of the cultivated land area, most of the 260,000 ha which are now irrigated, and it is adjacent to India where the surplus agricultural products can be sold. Moreover, much of the Terai is underlain with groundwater which can be quickly developed and put to use without the need to develop major hydraulic works normally involved in surface water development and which require long gestation periods. iii. This would be the second project involving groundwater on the Terai. The first was the Birganj Irrigation Project (Credit 373-NEP) granted in 1973 which includes 2,700 ha to be irrigated by tubewells and 28,700 ha by surface water gravity systems. The Bhairawa project would include an additional 7,500 ha. The two projects taken together would provide the opportunity to explore problems in development and management of the tubewell systems under the two different ethnic groups that inhabit the Terai. If these projects prove successful, they would open the way for much larger future developments. iv. The proposed project would involve the construction of 63 tubewells to serve the 7,500 hectares that are now limited to the production of one crop a year under rainfed conditions during the monsoon season. In addition, the project would include the construction and improvement of village roads, the construction of an 11 kv transmission system to electrify the wells, the provision of additional grain storage capacity, strengthening of the agricultural supporting services--particularly the extension service and provision of agricultural production credit, the completion of a feasibility study for another tubewell project in adjacent areas, and a study of water charges in Nepal. v. The total project cost is estimated at US$13.7 million equivalent with a foreign exchange component of US$6.8 million. The major elements in the cost estimate include land acquisition of US$0.3 M, civil works (US$3.7 M), equipment and vehicles (US$3.0 M), consulting services (US$1.5 M), agricultural supporting services (US$0.2 M), engineering and administration (US$0.5

8 - ii - M), production credit to farmers (US$1.0 M) -- making the base project cost US$10.2 M. Physical and price contingencies (US$3.5 M) raise the total cost to US$13.7 M. vi. Project implementation would take four years. The Department of Irrigation, Hydrology and Meteorology of the Ministry of Food, Agriculture and Irrigation would be responsible for tubewell installation and construction of irrigation and drainage networks for each well, the construction of village roads and the grain storage, as well as coordination of the other project components carried out by other participating agencies. The Nepal Electricity Corporation of the Ministry of Water and Power would be responsible for the construction of the necessary transmission system for electrifying the wells. Other appropriate agencies of the MFAI would carry out the extension program and the management of the agricultural production credit. The Project Manager would be assisted by a Project Coordinating Committee operating under the Chairmanship of the Chief District Officer and including representation of all agencies involved in the project at the local level. A consulting firm would be employed to assist with project implementation and the preparation of feasibility report for the next tubewell project and a study of irrigation water charges including their future recommended levels. The irrigation and drainage system under each well would be operated and maintained by a Water Users Group comprised of all cultivators receiving service from an individual well. vii. The procurement of well equipment including drilling rigs, pumps and motors would be by international competitive bidding while construction of those items that are small and would involve labor-intensive construction methods such as irrigation distributary canals, drainage networks and village roads would be through local competitive bidding. The drilling and installation of the wells would be by force account. viii. At full development in 1985, it is anticipated that the incremental production of milled rice would be about 11,000 tons and wheat about 16,000 tons over present production. The project related increases of about 27,000 tons of such foodgrains would result in annual net foreign exchange earnings of US$1.7 million. ix. The project would directly benefit some 4,500 farm families (22,500 persons), 60% of whom are currently living below the poverty level of US$50 per person (NRs 3,100/family). At full development and after paying the proposed water charges, the incomes of all farmers operating farms of 0.5 ha or more would be sufficient to provide the basic necessities for family living. The more intensive cultivation anticipated under the project would also double the farm labor requirements -- an increase in employment opportunity of 1.1 million man-days. x. The project's economic rate of return would be 19%. Sensitivity tests indicate that even under a variety of adverse conditions, the project would continue to be economically viable.

9 - iii - xi. The project is suitable for an IDA credit of US$9 million. The credit would cover the foreign exchange costs as well as 32% of the local cost of the project or 66% of the total project costs. The Borrower would be the Kingdom of Nepal.

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11 NEPAL APPRAISAL OF THE BHAIRAWA-LUMIBINI GROUNDWATER PROJECT I. INTRODUCTION 1.01 His Majesty's Government of Nepal (HMGN) has requested IDA assistance in financing the Bhairawa-Lumbini Groundwater Project. Since the beginning of its operation in Nepal in FY1970, the Bank Group has extended nine credits totaling US$66.7 million. The Bhairawa Groundwater Project would be the Bank Group's second project in support of the country's irrigation development, the first being Credit 373-NEP for the Birganj Irrigation Project which was signed on April 18, That credit provided US$6 million to assist in completing the distribution networks necessary to provide surface irrigation to 28,700 ha and to install tubewells and other related facilities to irrigate an additional 2,700 ha Out of a total irrigable area of some 1.3 million ha in Nepal only 260,000 ha have been irrigated. Most of Nepal's undeveloped irrigable land is in the Terai -- the southern lowland part of the country. Because of numerous streams that dissects the area, easily erodable soil condition and the severity of the monsoon rains, the development of surface water gravity irrigation in the conventional manner in Nepal has limited potential. As a supplement to surface water schemes, HMGN is exploring the groundwater potential of the Terai, and there is good reason to be optimistic about the availability of sufficient water to irrigate a large part of the irrigable lands in that region One of the major problems encountered in the development of groundwater projects is that of organizing the farmers using each well and the management of the individual well systems. The Birganj and Bhairawa Groundwater Projects would serve as pilot developments under each of the two major ethnic groups (Aryan stock from India in the former case and a mixture of Aryan and Mongoloid people who migrated from the mountains in the present case) inhabiting the Terai. These projects would provide a sound basis for proceeding with the development of additional groundwater projects A feasibility study of this project, originally identified by IDA in July of 1974, was completed by Tahal Engineers Ltd. (Israel) in October, 1975, and appraisal was completed in November/December 1975 by a Bank Group mission comprising Messrs. J.K. Lee, U Hpu, and W.G. Rodger (IBRD) and W. Barber (Consultant).

12 - 2 - II. BACKGROUND General 2.01 Nepal is a landlocked country bounded by India on the east, south and west and China on the north. It is roughly rectangular in shape and extends approximately 850 km from east to west and 180 km from north to south. The country divides naturally into three zones; the Terai, an extension of the broad Gangetic plain of India along the southern border ranging in elevation from 100 m to 450 m; the hills, comprising the foothills of the Himalayas, ranging in elevation from 450 m to 3,600 m; and the rugged mountain regions of the Himalayas to the north with elevations above 3,600 m The Terai has a humid subtropical climate with rainfall varying between 2,500 mm in the east to 1,400 mm in the west. The hill zone, particularly in the higher portions, has a temperate climate while the mountain areas have an alpine climate. Nepal has a typical monsoon wet season which extends from May through October, with the most rainfall occurring in July and August The total land area of Nepal is 14.1 million ha with only 2.0 million ha (14%) being cultivated and only about 260,000 ha (13% of cultivated land) being irrigated. Although the Terai includes only 17% of the total land area, it includes 68% of the cultivated land and most of the irrigated land Nepal's population, currently about 12.5 million, is increasing at the rate of 2.1% a year. Over 90% of the population depends upon agriculture for its livelihood. The annual gross national product in the country amounts to only about US$100 per person. The pressure of population on the cultivated land area in Nepal, particularly in the hill area, is among the most acute in the world. Following the control of malaria in the mid-1950s, many of the hill and mountain people migrated to the Terai in anticipation of a better life. However, this has done little to relieve the overall pressure on the land resource in the hill region. The birthrate has quickly overtaken any temporary relief that might have resulted from such migrations The terrain of the country as well as the mountain streams that debouch onto the Terai have made it extremely difficult to provide an effective transportation system. However, within the last two decades, roads have been constructed on the north-south axis from Kathmandu to China and India. There is also a road extending from Kathmandu west to Pokhara and from there south to the Indian Border. HMGN is now in the process of constructing an east-west highway on the Terai, the eastern portion is completed and the middle section is under construction. In 1972, there were 1,250 km of roads in the country. Most of the Terai, particularly the western portion, is accessible only through India. The principal means of transport in the hill country is by human porters or pack animals utilizing trails and suspension bridges.

13 Nepal imports most of the industrial products, a significant portion of the manufactured consumer goods and all of its commercial fertilizer; it pays for these imports mainly through its exports -- mostly foodgrains -- and earnings from tourism. Because of its transport linkages, it is only natural that India should be Nepal's major market as well as source of imports Since the mid-1960s, foodgrain production has grown less than 1% annually, mainly due to expansion in the cropped area rather than increases in crop yields. Hence, during the last decade because of the growing population in relation to foodgrain production, Nepal's grain exports have fallen from about 500,000 tons per year to only about 200,000 tons -- or to only 10% of its annual production. Also, in the last two years, because of worldwide inflation, including particularly the high prices of petroleum products, Nepal's terms of trade have taken a decided turn for the worse. HMGN realizes that it must take drastic steps to increase exports of foodgrains and to increase the earnings from tourism. The Fifth Five Year Plan which began in FY1976 is aimed at expanding the irrigated acreage and increasing the generation of hydroelectric power in order to make more effective use of the country's huge water resource as well as the road and power infrastructure that has recently been constructed. So far as irrigation is concerned, the primary emphasis is now upon quick-yielding projects. Agriculture 2.08 Agriculture is characterized by subsistence farming with much of the land under foodgrain production. Paddy accounts for 51% of the total cropped area; maize 19%; wheat and other cereals 16%; and other crops including oilseeds, pulses, jute, potatoes, sugarcane, tobacco and horticultural crops 14%. Even though the climate on the Terai is suitable for year-round crop production, because of lack of rainfall, farmers make very little attempt to produce crops during the dry season. Also because of frequent droughts during the wet season, they are reluctant to use improved seeds and to apply the necessary fertilizer required to produce high yields. Under the present system, they apparently consider the risks too great to justify the use of such inputs. The present cropping intensity is only 118% and.the yields of wheat and paddy are only about 0.8 tons and 1.1 tons per ha, respectively. The yields of paddy are significantly lower on the Terai than in the hill region of the country (Annex 1). Irrigation Development 2.09 Because of physical conditions, irrigation development in Nepal has been slow. As the rivers emerge from the foothills, their gradients flatten, resulting in the deposition of large fans of gravel and sediment. These fans, in turn, result in an unstable condition in the streambeds and, because of this, construction of diversion dams at such locations is both difficult and costly. To compound this problem, only small areas can be commanded by gravity diversions between the foothills and the Indian border, and also to permit year-round irrigation, storage is required to supplement the natural river flows during the dry months.

14 2.10 Prior to 1950 only about 15,000 ha were reported as irrigated by public projects although there were areas that were partially served during periods of high natural river flow by privately built works. By 1975, an estimated 260,000 ha were irrigated ,000 ha by farmer-built projects and 104,000 ha by projects constructed by HMGN. During the 19-year period, from , large surface water irrigation projects with small hydro-power components were undertaken in cooperation with India. These included the Gandak, Kosi West and Kosi East. While such projects promise to be significant, they require long planning and gestation periods Between 1970 and 1975, HMGN has obtained assistance from IDA for the construction of 32,000 ha Birganj Irrigation Project and 17,000 ha at Chitwan and Kankai which are assisted by the Asian Development Bank. These projects are still on-going. In addition, HMGN is undertaking the development of 32,000 ha at Kankai and Mahakali with its own resources and it is completing groundwater reconnaissance studies on 300,000 ha in the western Terai Region Most of the Terai is underlain by a groundwater aquifer which drains the underground flows from the foothills to the Ganges River. Through the installation of tubewells, these aquifers can be tapped for irrigation purposes, thus avoiding the difficult problems associated with conventional surface water development. However, the development of groundwater is not entirely devoid of problems. Compared to conventional surface water developments, the cost of energy for pumping and replacement of pumps, motors and wells results in high annual operating costs. To make such projects viable, the operating costs must be held to a minimum and water used efficiently. This requires effective management of the individual wells and adequate provision of agricultural inputs The present project would be the first medium-sized groundwater irrigation development in western Nepal and would include a feasibility study for a further groundwater development. With the removal of the water constraint, it is anticipated that farmers would demand the necessary production inputs to optimize crop yields. In addition to providing irrigation water, the project provides agricultural credit to facilitate the use of such inputs. III. THE PROJECT AREA General 3.01 The 20,000 ha gross project area is located within Rupandehi District in the Western Terai at an altitude of about 100 m (Map 12074). It lies between the Dana River in the west and Rohini River in the east and the Churia (Siwalik) Hills to the north and the India/Nepal border to the south (Map 12075). The area is bisected by the north-south Butwal-Bhairawa road which connects to the major highway systems of Nepal and India. Bhairawa, the main town, has a population of about 30,000 and has air service.

15 -5- Climate 3.02 The project area climate is monsoonal with three distinct seasons: a warm wet season from mid-june through September, a cool dry season from October through February and a pre-monsoon hot season from March through mid-june. Average rainfall, about 1,400 mm with over 85% during June through September is erratic; dependable rainfall with a probability of 0.8 (four out of five years-) is lower and not more than 800 mm. Temperatures range from about 60C in January to over 38 0 C in May; mean monthly temperatures are 21 C-29 0 C in March-November and 15 0 C-17 C in December-February. Daily sunshine occurs through the year; 8-10 hours daily in October-May and 5-7 hours daily during June-September (Annex 2). Topography and Soils 3.03 The topography is that of a flat plain sloping gently from north to south at about 1:800. Broad slightly elevated ridges and lower troughs differing by less than 1 m characterize the area which is intersected by small deeply incised north-south rivers and streams. The soils are alluvial, moderately fine textured silty loams, silty clay loams and silty clays. They are non-saline, moderately alkaline and with proper irrigation and surface drainage are suitable for growing a wide range of crops. Over 80% of the area has been classified by the US Bureau of Reclamation standards as Class II or III for irrigation. Hydrogeology 3.04 The Western Terai including the project area is underlain by deep alluvial deposits ranging from course, fragmented rock deposits in the outwash fans of the Churia Hills (the Bhabar zone) to thicker clay beds in the south (the Gangetic zone). Both zones have high yielding aquifers which have been investigated by HMGN with US Geological Survey assistance provided under a USAID program and subsequently by consultants funded under the Birganj Irrigation Project (para 1.04). Present groundwater development is limited to 3 about 160 widely scattered very small free-flowing wells yielding about 10 mm annually and serving a small area -- mostly south of the project area. Existing Irrigation 3.05 Farmers have constructed simple diversion works on the unstable Tinao River, which bisects the project area, to serve, with widely varying success, up to 7,000 ha of land (of which 5,000 ha lies within the 20,000 ha gross project area). These cooperatively managed systems supply mainly supplemental irrigation during high-flow periods. The inadequate diversion and conveyance structures provide, at best, uncertain irrigation -- particularly to the lower reaches of the distribution system.

16 -6- Farm Size and Land Tenure 3.06 The cadastral survey conducted by the Ministry of Land Reform (MLR) indicates farm sizes in Rupandehi District, as shown below: Average Farm Size Farm Holdings Cultivated Areas Holding (ha) (no) % (ha) % (ha) Less than , ,152 7 ) ) , , ) , , , , ) ) 6.07 Over , , , , The bulk of project beneficiaries would be small farmers. On the basis of the District data, the number of farm families in the project area is estimated to be around 4,500 with an average holding of 1.7 ha. About 61% of the families have an average size holding of only 0.6 ha, 23% about 2 ha and 16% about 6 ha. A farm survey of four villages in the project area indicates that 93% of all cultivators own all of the land they farm and 7% rent part of their land. The families cultivating up to 1.5 ha generally use their own family labor, but those cultivating from 1.5 to 5 ha may engage some hired labor while those cultivating above 5 ha do their cultivation mainly with hired labor. Agricultural Production 3.08 Paddy is by far the most important crop and accounts for 80% of the cropped area. There is only one crop of monsoon paddy, the climate being too cold to raise a second crop in winter. Nursery seedbed preparation begins with the onset of the monsoon in May and June. Early maturing coarse varieties are planted first and harvested in October and early November, and longlife fine varieties are planted later in June-July and harvested in November- December. Wheat is of next importance, accounting for 12% of the cropped area. It is the major dry season crop and is grown with residual soil moisture following paddy. Other crops include rainy season pulses, mainly pigeon peas, winter pulses, oilseeds and sugarcane -- each occupying about 2% of area. The present cropped area is about 9,600 ha which on a net cultivated area of about 8,100 ha 1/ gives a cropping intensity of 118%. 1/ With the project the area lost to irrigation and drainage networks including reservoirs and roads would be about 600 ha.

17 3.09 The HYV paddy (IR 20, IR 22 and Mashooli) has been introduced but so far accounts for only 300 ha or 4% of the area under paddy cultivation, although it is becoming increasingly popular in the neighboring areas where dependable irrigation is available. The HYV and local rainfed paddy presently give low yields and 1.1 tons per ha, respectively. The yields of other crops are also low being only 0.8 tons for wheat (mainly RR 21), 0.4 tons for oilseeds, 0.5 tons for pulses and 25.0 tons for sugarcane. The total production is about 8,700 tons paddy, 900 tons wheat, 170 tons pulses, 200 tons oilseeds and 5,000 tons sugarcane. Transportation and Marketing 3.10 The farmers in the project area sell their surplus grain and oilseeds to traders operating in Bhairawa. There are about 60 such traders and each of them has sufficient space to store about 25 tons. In total, they handle about 40,000 tons per year from the Rupandehi District. The farmer is free to sell to any trader he wishes, but as a matter of habit, he usually sells to the same buyer year after year and more often than not to one who has advanced him production credit The trader, in turn, sells the crops directly to the Indian agents or in the case of rice to the rice export companies. The export companies are required to sell a specified portion (25% in 1975) at a preferential price to the Nepal Food Corporation (NFC) for distribution in the food deficit areas within Nepal. The export companies are free to sell the balance to the Indian agents. Transport from the traders shop in Bhairawa to the railhead in India is by truck. From that point it is transported by road and rail to the destination in India -- usually the deficit areas in Uttar Pradesh, Bihar and West Bengal. The prices received by the Nepalese farmers are closely related to the prices in India Because of lack of storage, problems of transport during the monsoon, and the need to sell the crop as soon as possible to repay creditors, most crops are marketed by the farmer immediately after harvest -- the paddy in October/November and the wheat in March/April. The concentration of the marketing in these few weeks has a depressing effect upon prices. IV. THE PROJECT General 4.01 The proposed project would be the first stage of a groundwater development program to provide irrigation for the Western Terai. The scope of the project was selected on the basis of need, accessibility to and agricultural potential of the project area, proven groundwater resources, and implementing capability of HMGN.

18 - 8 - Project Works and Other Project Components 4.02 Project Works: (a) installation of 63 deep tubewells varying in depth from 120 to 200 m, equipped with eiectric powered pumps capable of discharging 300 m /hour with 30 m lift; (b) construstion of 63 storage reservoirs, each with 2,000 m capacity for receiving discharges from the tubewells; (c) construction of irrigation and drainage networks equipped with control structures to serve 120 ha under each well; (d) construction of approximately 75 km of 11 kv transmission lines and stepdown transformers from 11 kv to 0.4 kv through which power would be delivered from the existing 33 kv Bhairawa-Butwal grid to the project pumps; (e) construction of approximately 70 km of village roads linking the major villages to the existing black-top road network; (f) construction of a 1,000 ton grain storage facility, enlargement of the existing offices of the Department of Irrigation, Hydrology and Meteorology (DIHM) and of the Department of Agriculture at (DA) Bhairawa, and construction of a small training facility and simple residential housing accommodations at the Bhairawa Research Farm Other Project Components: (a) two drilling rigs to be owned and used by the DIHM for drilling of the tubewells; (b) vehicles and equipment to be used for surveys, construction supervision, project administration, operation and maintenance, and research and extension; (c) about 235 man-months of consulting service to assist with project implementation and to prepare a feasibility report for a further groundwater development in adjacent areas and a study of irrigation water charges and their future recommended level;

19 -9- (d) an additional staff of 68 Nepalese agriculturists (extension) and technicians for a period of four years to carry out the intensified agricultural extension and training programs; and (e) NRs 12.5 million agricultural production credit to farmers managed by the Agricultural Development Bank of Nepal (ADBN) for financing the increased agricultural inputs (fertilizer, pesticides, seeds, and payment for hired labor and bullock teams) that would be required with an assured irrigation water supply. The project works and components are detailed in Annex Tubewells, Pumps and Motors. Motor starters on the tubewells would be activated automatically through electrical relays in response to variations in the reservoir water levels and an override control would be provided to shut the pumps off during periods of peak power demand (maximum five hours/ day). The tubewells, pumps and motors for individual wells would be housed in a single brick building Distribution and Drainage Networks. The canal and drainage system serving the 120 ha under each tubewell would be built with select fill materials and provided with both water control and crossing structures. The irrigation channels would lead from the storage reservoir down to 5 ha block turnouts. The drainage network would connect each block to the outfalls connecting with the natural north-south rivers and streams. Within each 5 ha block, farmers would construct their own small water distribution and drainage channels and prepare the fields for irrigation under the technical guidance provided by the project office (Map 12076) Village Roads. The village roads would be gravel surfaced to a width of 3.5 m and would be located mainly in north-south direction to minimize stream crossings. So far as possible, existing tracks and established rights-of-way would be utilized for these roads. Water Supply, Demand and Quality 4.07 Groundwater balance st.dies indicate an annual average recharge for the project area of about 150 Mm (Annex 4). Water requirements derived by the Blaney-Criddle method using project 3 area data and experience in other Perai irrigation projects amounts to 12,000 m /ha/year in a dry year and 9,000 m /ha/ year in an average year (Annex 5). At Year Eight when all the wells would operate at fuli capacity and at full de3elopment, the extraction would amount to about 90 Mm in a dry year and 70 Mm in an average year, well within the annual recharge for the project area. Hence, it is assured that there will not be any mining of groundwater. Also because of the location of the project area, there is no possibility that future developments, either surface or groundwater, might adversely affect the groundwater supply. The presently irrigated lands immediately to the north of the proposed tubewell area act

20 as a spreading ground for the recharge of the aquifers hence any increase in diversions to that area, particularly in the dry season, would improve the groundwater supply. There are no other potential surface or groundwater developments upstream from the proposed tubewell project The groundwater has been extensively sampled, tested and found to be of good quality and satisfactory for continued irrigation use. Engineering Design 4.09 During 1975, surveys and designs were completed as follows: well field and tubewell design; village road network planning; irrigation and drainage networks for four typical irrigation service areas; drainage outfall planning and preliminary designs of 11 kv electric power transmission networks. The DIHM, DA, and the Nepal Electricity Corporation (NEC) would complete detailed designs and contract documentation prior to construction of project works. The DIHM and DA would be assisted by project consultants. Consulting Services 4.10 A consulting firm would be retained: (a) to provide the project with technical assistance and advisory services in construction, procurement, general administration and operation and maintenance and monitoring project effects, and (b) to conduct feasibility studies for a further 15,000-20,000 ha groundwater irrigation project in adjacent areas of the Rupandehi District and a study of water charges for the country. Construction Schedule 4.11 In the prevailing monsoon rain conditions, the construction season is limited to eight months from November through June. Project implementation would take four years and would be completed in 1980 (Annex 6). Detailed topographic mapping using the existing 1:12,000 aerial photography would be completed during the first working season. Sufficient survey and planning is already available to commence construction of eight wells and the associated irrigation and drainage networks, 10 km of 11 kv transmission network together with up to 10 km of village roads during the first year of implementation. Project Costs 4.12 Total project costs are estimated to be NRs 171 million (US$13.7 million equivalent) net of taxes. The foreign exchange component would be NRs 85 million equivalent (US$6.8 million) or 50% of the total project cost. Estimated costs are based on price levels prevailing in December Physical contingencies at about 10% of basic costs have been included. Expected price increases for civil works begin at 14% and taper to 8% in the fourth year. Equipment and vehicles, project administration, supporting services and consultants have estimated price increases ranging from 10% to 8% over the same period. Project costs are detailed in Annex 7 and summarized below.

21 - 1l1 - % of Local Foreign Total Local Foreign Total Total -----(NRs Million) (US$ Million) Land Acquisition Civil Works Irrigation and Drainage Networks Village Road Improvement Tubewell Drilling kv Transmission Line Buildings Subtotal Equipment, Vehicles and Imported Materials Tubewell Equipment Other Equipment and Vehicles Imported Materials and Equipment for Transmission Line Roads Subtotal Consulting Services Project Services Agricultural Supporting Services Engineering and Administration Subtotal O Subtotal Items Agricultural Credit to Farmers Base Cost Physical Contingencies Expected Price Increases Total Project Cost ~~

22 Financing 4.13 The proposed IDA credit of US$9 million would finance the foreign exchange cost and 32% of the local costs, amounting to 66% of the total project costs. HMGN would contribute the balance (US$4.7 M equivalent) through annual budgetary appropriations. Assurances were obtained that HMGN would make adequate budgetary provisions to the agencies involved to cover their share of the project costs and that it would furnish to IDA annually a detailed plan for the implementation of the project with related financial requirements for the following fiscal year (July 16 to July 15 inclusive). Procurement and Contracts 4.14 All equipment, vehicles and imported materials (Annex 7, Tables 3, 4 and 5) for the project would be procured through international competitive bidding (ICB) in accordance with Bank Group Guidelines. Such materials and equipment would be grouped so far as possible in lots, each lot being of not less than US$100,000, and local manufacturers would be allowed up to 15% preference. Drilling and development of project wells would be carried out by force account. The consultant team would include two drilling foremen to assist the project engineers and technicians in carrying out the well program The irrigation and drainage networks, transmission systems, project buildings, and roads would be small, simple, suitable for the labor-intensive construction method, subject to seasonal weather interruption and, so far as possible, would be constructed at a time to minimize interference with farming operations. These would not be attractive to international contractors and would, therefore, be procured by local competitive bidding (LCB) procedures under arrangements which are satisfactory to IDA. To avoid delays which could be the basis of contractual claims, assurances were obtained that no civil works contracts would be awarded until the necessary land or rights-of-way (in case of transmission lines) had been acquired. Small off-the-shelf items costing less than the equivalent of US$10,000 which for reasons of economy and efficiency would be purchased through normal Government procurement procedures which are satisfactory to IDA, provided the total cost of such procurement would not exceed US$100,000. Disbursements 4.16 Disbursements from the proposed credit would cover: (a) 100% of foreign expenditures for directly imported construction materials, equipment, vehicles and spares; (b) 90% of local expenditures (ex-factory cost) for locally manufactured construction materials, equipment, vehicles and spares; (c) 75% of total expenditures for other construction materials, equipment, vehicles and spares (off-the-shelf);

23 (d) 100% of foreign expenditures for consultant services; (e) 75% of local expenditures for civil works if carried out by force account, and 100% of foreign expenditures and 75% of local expenditures if carried out by local contractors. Disbursements for civil works carried out by force account would be made a-ainst statements of expenditures, the documentation for which would be retained bv the DIHM for review by supervision missions. All other disbursements would be made against full documentation. Disbursements are expected to be completed by June 30, 1981, which is approximately six months after the end of the four-year implementation period. Any funds remaining in the credit account after completion of the project would be cancelled. A semi-annual disbursement schedule and the proposed allocation of the proceeds of the credit are shown in Annex 8. Accounts and Audits 4.17 Assurances were obtained that HMGN would cause (a) the DIHM and other participating agencies responsible for carrying out the project to establish and maintain separate accounts for the project in accordance with sound accounting practices and that these accounts would be audited annually by an independent auditor acceptable to IDA, and (b) certified copies of the audited account and the auditor's report would be sent to IDA within six months after the close of each fiscal year. Environmental Impact 4.18 Gastro intestinal diseases resulting from polluted water used by the villagers are the most common public health problem occurring in the proposed project area. Water from tubewells in the project area is potable and the development would definitely help in reducing the incidence of these diseases. At one time malaria was very common in the area, but with the advent of DDT this disease was brought under control in the mid-1950s. Since DDT as well as pyrethrum are available for the control of mosquitoes, it is not anticipated that any serious water-related diseases would result from the project. V. ORGANIZATION AND MANAGEMENT 5.01 The implementation of the project would be carried out by existing line agencies of MOGN with special arrangements to insure coordination among these agencies. The DIHM of the Ministry of Food, Agriculture and Irrigation (MFAI) would be responsible for the topographic survey of the project area,,he design and construction of tubewells, associated irrigation and drainage networks,the village roads, the grain storage and project buildings. It is crucial to the success of the project that the water users accept the responsibility for the operation and maintenance (O & M) of the irrigation and drainage networks and for repayment. Prior to the initiation of the drilling of any individual well, the beneficiaries shall be signed up in a Water User

24 group and agree to pay water charges. If drilling and well installation work were given out to contractors, this requirement could occasion delays in the drilling of some tubewells and thus provide a basis for contractors' claims. To avoid this possibility, it is necessary that the drilling and installation of wells be carried out under force account. The DIHM has had considerable experience in this kind of work; with the assistance of USAID, over the last decade, it has carried out a groundwater investigation on over 300,000 ha in the Western Terai. Assurances were obtained from HMGN that drilling of any individual tubewell would not begin until the potential beneficiaries representing two-thirds of the service area had signed up in a Water Users group and agreed to pay water charges The construction of the electrical transmission system would be carried out by the NEC of the Ministry of Water and Power (MWP). The agricultural and extension and education components of the project would be carried out by the DA. The agricultural production credit component of the project would be managed by the ADBN. The mobilization of inputs would be the duty of the Agricultural Inputs Corporation (AIC). The DIHM would establish the Bhairawa-Lumbini Groundwater Project Office (BLGPO) in the project area headed by a Project Manager (PM) to carry out DIHM's responsibility for the project and coordinate all the other project components with other line agencies. A condition of credit effectiveness would be that the PM, with qualifications and experience acceptable to IDA, shall have been appointed Coordination of the various project components would be achieved at two levels by two coordinating committees. The existing Groundwater Resources Development Board (GRDB) at the national level, would advise and coordinate on policy matters including programming, budgeting and finance. The present membership of the Board includes the Secretary of the MFAI who serves as Chairman and representatives of the Ministries of Finance (MF) and MWP, the National Planning Commission, the DA, the Director General of the DIHM and the Project Manager of GRDB who serves as Secretary. There is provision in the order establishing the Board for the addition of other members as appropriate. For purposes of implementing the project, HMGN agreed that representatives of NEC and the Ministry of Home and Panchayat (MHP) would be added to the Board At the project level, a Project Coordinating Committee (PCC) under the chairmanship of the Chief District Officer (CDO) and including the District level officers and representatives of participating agencies as members or associate members would advise and assist the Project Manager in the coordination of various components of the project, in particular in the siting of wells and the organization of Water Users groups which are the most crucial factors for the success of the project. Members of PCC would include the Assistant District Agricultural Development Officer (ADADO), a representative of NEC, and the PM as member and secretary. Associate members of PCC, to be called when needed, would include heads of the Bhairawa Agriculture Research Station, District Officers of the AIC and of the Food and Agriculture Marketing Service Department (FAMSD), District Manager of ADBN, and a representative of the Soil Survey Division of DA. The project organization chart is presented at the end of this report. A condition of credit effectiveness would be that

25 the PCC with the chairman, members and associate members as described above, will have been established. Judging from the working relationships among Government Agencies, there is good reason to be optimistic that the above organizational plan would work satisfactorily A firm of consultants would be employed to provide about 235 manmonths of services to assist in project implementation (180 man-months) and to prepare a feasibility report (55 man-months) for a further groundwater irrigation project of approximately 15,000-20,000 ha in adjacent areas and a water charges study. In project implementation, the consultants would assist and advise in all activities that are the responsibility of the BGPO including topographical survey and mapping, planning and design of tubewells, reservoirs, irrigation and drainage networks and roads, preparation of tender documents and procurement of equipment, vehicles and imported materials, construction of tubewells, reservoirs, irrigation and drainage networks, roads and project buildings, accounting, reporting and monitoring of groundwater level and discharges and the agricultural impact of the project. They would also prepare the 0 & M manual for tubewells and advise the PM on the administration and management during project implementation. A condition of credit effectiveness would be that a firm of consultants to perform these services has been selected. Operation and Maintenance 5.06 During project implementation, the 0 & M of all irrigation facilities down to 5 ha service blocks would be the responsibility of the BLGPO. Following completion of construction, the BLGPO would continue to be responsible for the 0 & M of tubewells and roads, but the responsibility for the reservoirs, canals and drainage networks would be turned over to the Water User groups served by each tubewell. The NEC would be responsible for the 0 & M of the transmission system. After transfer of the irrigation and drainage networks to the Water User groups, each group would appoint a water master who would be responsible for the 0 & M of that particular system. Water would be turned out of the irrigation channels on a rotational basis during daylight hours to 5 ha blocks. The field irrigation and drainage channels within each 5 ha block would be constructed and operated from the outset by the water users within that block, with technical assistance from the BLGPO. Assurances were obtained that if any farmer has not carried out the construction of on-farm development works as contemplated in para within one year following the completion of the project water delivery and drainage networks, the DIHM would carry out such development work and charge the cost to the farmer involved, and until such work has been completed water would not be released to the farm unit involved. Assurances were also given that HMGN would make adequate provision in the annual budgets to finance the 0 & M of the various project components in accordance with sound technical standards.

26 Agricultural Supporting Services 5.07 Research. The existing program of applied research for both paddy and wheat would be continued and expanded. Mlore emphasis would be placed on irrigation practices for dry season crops such as wheat, oilseeds and pulses, and also upon the irrigation of HYV paddy. Four subject matter specialists (paddy, wheat, plant protection and on-farm water management) and supporting staff would be appointed and transport facilities would be provided under the project. The Rice Research Development Center at Parwanipur Research Farm and the W^Iheat Research Development Center at the Bhairawa Research Farm would continue to support the project by providing foundation seeds of HYV suitable for the project area and technical guidance relative to crop selection, improved cultural practices, application of agricultural inputs, plant protection and on-farm water management. withl the assistance of the consultants, the Bhairawa Center would also provide training to extension staff and progressive farmers Extension. Starting from 1975, HMGN has introduced a new type of agricultural extension service in the Birganj Irrigation Project. The service is modeled after those introduced on the Bank-assisted irrigation projects in nearby countries. The system involves the reorganization and strengthening of existing extension services, extension and demonstration, strict adherence to the schedule and concentration at the outset on important practices for the major crops. Close coordination with applied research and regular in-service training for extension staff is also emphasized The extension organization for the Bhairawa-Lumbini Project would be headed by a District Agricultural Development Officer (DADO) assisted by an ADADO with particular responsibility for the tubewell irrigated area. The gross project area of 20,000 ha would be divided into three extension subdivisions each headed by a Junior Technician (JT). Each JT would be supported bv three Junior Technical Assistants (JTAs) who would each supervise seven Panchayat Level Agricultural Assistants (PLAAs). Each PLAA would provide extension to about 200 farmers through about ten contact farmers. The total extension staff for the project area would be about 98 persons. The 12 JTs and JTAs could be provided from the sanctioned extension staff for Rupandehi District. The 63 PLAAs would have to be recruited. Assurances were obtained that an ADADO, 63 PLAAs and four Subject Matter Specialists (SMSs) would be recruited and appointed to work for the project in addition to the existing staff (Annex 9) Fertilizers. Although fertilizer is presently used mainly by the larger and progressive farmers, all cultivators are aware of the benefits. They would use close to the optimum dosage if irrigation water supplies were assured. Fertilizer supplies would be provided by the AIC with production credit supplied to farmers by the ADBN supported by a project credit component Seeds. Foundation Seeds for HYV wheat and paddy are produced at the 'Wheat Research Production Center at Bhairawa and the Rice Research Development Center at Parwanipur, respectively. Seeds which command premium

27 prices are multiplied by selected farmers. As fresh seed to sustain yields is required for replacement only every three or four years, the 7,500 ha net irrigated area will require only 200 tons per annum of HYV paddy and 350 tons per annum of HYV wheat. The existing seed production system which could easily be expanded is capable of supplying the quantities needed with the added advantage that the seed production centers are located close to the development area Plant Chemicals. Under the direction of the reorganized extension service, farmers would be guided in the proper, and timely use of the necessary plant chemicals which would be supplied by AIC through the cooperative societies with credit provided by ADBN. It was agreed that the AIC would make agricultural inputs available in sufficient quantity to meet the needs of the project Agricultural Credit. Short-term (production) credit for the purchase of fertilizer, seeds, pesticides and payment for hired labor and bullock teams is provided to project farmers by the ADBN and private money lenders. The ADBN provides production credit directly to farmers at 15% interest and through its guided cooperatives to which money is loaned at 11% interest and passed on to farmers at 15% interest. The ADBN has a sufficient number of branches in the project area to serve the project and the guided cooperative system is being strengthened. While ADBN has been able to finance all approved loans in Rupandehi District during the past year, it has had a credit shortfall of about 20% at country level. Under project conditions, it is anticipated that the annual incremental requirement for production credit would amount to NRs 19 million. The farm operators could reasonably be expected to provide one-third of this from savings or current income but it would be necessary for them to borrow the balance of about NRs 12,650,000 annually. To ensure that ADBN would be able to earmark the necessary production credit for the Bhairawa-Lumbini Groundwater Project, an amount of NRs 12,500,000 would be included as a project component. Assurances were obtained that HMGN would make funds available annually to meet the production credit needs of the project farmers. Farmers' Organizations 5.14 Existing farmers' organizations includes multipurpose, village cooperative societies (now being reorganized as cooperatives by ADBN) and informal Water Users Associations on farmer constructed surface-water irrigation systems. Under this project each farmer would be required to sign a contract issued by the DIHM under the general authority provided by the Irrigation Electricity and Related Water Resources Act of 1967, agreeing to join a Water Users group and to pay water charges. Such Water User groups for each well would elect their own officials including a water master and would be responsible for the management of the water including the establishment of rotations among the water users and the release of water to the service blocks. The groups would also be responsible for the maintenance of the water supply and drainage systems (reservoirs, canals and drains) down to the individual service blocks.

28 Such Water User groups would provide a suitable organizational framework for execution of additional assignments as their management capability develops. For instance, they could collect the electricity charges for pumping water which would be billed monthly, they could provide an avenue for channeling agricultural inputs to the project farms and they could provide storage, transport, milling and marketing services for the project farmers. Eventually they might even take over the operation of the individual wells. Looking towards more complete utilization of such groups, it is suggested that six be selected and given additional responsibilities as well as special training and support. If this program proves successful, it could be expanded to include the entire project. It would also provide an example for future irrigation projects. Monitoring the Project 5.16 The BLGPO would monitor the effect of pumping on the groundwater aquifers both during and following the completion of construction. In addition, the ADADO would monitor the agricultural production and benefits that result from the project. Assurances were obtained that HMGN would institute such monitoring programs and that reports covering both activities would be submitted to IDA annually but not later than December 31. Cost Recovery 5.17 Farmers pay a land tax as part of general taxation. This tax has varying rates depending on classes of land; average land in the project area bears a tax of NRs, 75 per ha. The Nepal Irrigation, Electricity and Related Water Resources Act of 1967 authorizes a water cess on landowners served by licensed surface irrigation organization; it also provides HMGN with the legal authority to levy charges on users of publicly constructed surface and groundwater irrigation works. Thus, farmers in surface irrigation projects recently constructed by HMGN are charged about NRs 10.0 per ha for water; this rate is nominal and represents only a small fraction of actual O&M costs. Nepal has had no experience in the operation of state owned tubewells or in charging farmers for groundwater In view of the rapidly increasing role of the public sector in developing the country's water resources, Government realizes the importance of mobilizing budgetary resources from the beneficiaries of irrigation projects and is committed to the gradual introduction of water charges. In pursuit of this policy, Government is proposing to introduce annual charges of NRs 160/ha for beneficiaries of the IDA-financed Birganj Project and over the next few years as the project area develops to its full potential to increase these charges to levels adequate to cover at least the full O&M costs plus a portion of the capital cost For the project under consideration, the capital cost of the irrigation works would amount to NRs 12,250/ha. The recovery of this cost in 30 years at 10% interest would require an annual payment of NRs 1,300/ ha. In addition, the total annual O&M costs (including the replacements for the motors and pumps) would amount to NRs 535/ha. As the labor for the

29 maintenance of irrigation and drainage network, valued at NRs 75 per ha, would be provided by the beneficiaries, the full recovery of project costs would require an annual payment of about NRs 1,750. Such a charge would represent on the average about 55% of the net incremental farm family incomes excluding the cost of family labor Analaysis of the farmers' ability to repay the project costs indicates 'project rents' varying between NRs 1,700 to 1,900 per ha i.e. approximately adequate for full cost recovery. However, because of the heavily skewed land distribution a large majority of the farmers in the project area are subsistence farmers whose present income levels are about 40% of the national average. Even after the project, their incomes would remain below the national average and hence full cost recovery would impose an unduly heavy burden on them. On the other hand, the large and medium size farmers, owning some two-thirds of the cultivated land should be able to pay a higher level of charges 1/. Thus, there may be an opportunity for collecting water charges on a progressive basis, with the larger farms paying more per hectare than the smaller farms. There are numerous possibilities for varying the water charge to accomplish this objective, but, as a minimum, to assure the continued operation of the project and to encourage farmers to economize in the use of water, all beneficiaries should be required to pay at least the annual O&M cost of NRs 535/ha. Assuming that for socio-political reasons the maximum level of charges is constrained to be about twice that of the minimum level, the capital recovery component could be graduated on a straight-line basis starting at zero for the one hectare farm and increasing to NRs 365 for the 6 ha size farm and above. The revenue produced would be equal to that which would result from the application of a uniform capital recovery charge of NRs 265/ha. The average total annual charge, O&M cost plus capital recovery, of NRs 800/ha would amount to 45% of project rent or 26% of incremental net farm family income or about 10% of gross production value. Alternatively this would mean recovering full O&M costs and about 20% of the annual capital cost of NRs 1,300/ha. Below, the water charges that would be levied under the system on farms of varying sizes is shown: Size of farm (ha) Water charges % of gross production value Water charge/ha NRs While the graduation of water charges by size of farm would be worthy of consideration it must be recognized that it presents problems. The most obvious of these are: 1/ See para 3.06 for farm size distribution.

30 (i) evasion through excessive fragmentation of holdings -- large extended families are usually associated with large farms; (ii) disruption of social harmony among project participants due to large farmers objecting to paying more than others with likely negative impact on the adoption of improved water management and cultural practices; and (iii) administrative complexity In view of the above, there is a need for a thorough study of water charges in Nepal including the levels required to recover the full operation and maintenance cost and a reasonable portion of the capital costs having due regard for farmer incentive and capacity to pay. Assurances were obtained from HMGN that such a study would be made as part of the feasibility study of the next groundwater development in the Terai In the absence of a Government policy on cost recovery and water charges, in this case it was agreed to assess water charges starting one year after completion of the works for each tubewell at the level required to cover the annual operating costs, which would assure the continued operation of the project after it is constructed, as well as a reasonable portion of the capital cost (cost of irrigation facilities am rtized in 30 years at 10% interest), such water charges would be applied in progressive steps (incremental) over a reasonable period of time. Assurances to this effect were obtained from HMGN. It was also agreed that following the initial implementation of the plan, the Government, in consultation with IDA, would review and revise, as necessary, the level of charges and collection procedures at intervals of not more than three years In addition to the direct payments to be made by the water users, they would also make indirect payments through the rice procurement program (para. 6.04). At full development, the annual savings to HMGN through this procurement program (versus purchase at market price) would amount to NRs 825,000 or NRs 110/ha. This amount could be considered as indirect payment by water users toward capital cost recovery. VI. PRODUCTION, MARKETING, PRICES AND FARM INCOMES Crop Calendars and Cropping Patterns 6.01 After completion of the project, paddy would continue to be the dominant crop in the wet season, and the area under wheat would greatly expand in the dry season. The availability of supplementary irrigation in the wet season would increase the comparative advantage of HYV over local paddy and together with intensified extension services would cause a shift from local to HYV paddy. The reliable water supply in the dry season would also ensure successful cultivation of HYV wheat. There would also be some

31 increase in the area under pulses and oilseeds while potato cultivation would cover about 250 ha. On the whole it is estimated that the cropping intensity would increase from 118% at present to about 186% The present and projected cropping patterns are as follows (Annex 10): Crops Present Future Without Project Future With Project ('000 ha) Paddy - local Paddy - HYV Wheat - HYV Maize Pulses Oilseeds Potatoes - _ 0.3 Sugarcane Total Cropped Area Net Cultivated Area Cropping Intensity 118% 118% 186% Yields and Production 6.03 Estimated yields at present and at full development are summarized below: Crops Present Future Without Project Future With Project (tons/ha) Paddy - local Paddy - HYV Wheat - HYV Maize Pulses Oilseeds Potatoes Sugarcane Some minor yield increases of paddy, wheat and sugarcane are assumed possible without the project. With the project and at full development in Year Eight (Year Five for any individual well) it is assumed that the yields of HYV paddy would reach 3.5 tons/ha, wheat 3 tons/ha and sugarcane 50 tons/ ha. These yields reflect significant increases in the use of fertilizer and extension services following the provision of a dependable water supply. Production of paddy would increase from 8,700 tons at present to 25,000 tons, wheat from 900 to 16,500 tons, pulses from 170 to 300 tons and oilseeds from 80 to 200 tons. Also new crops of maize and potatoes would produce 400 and 2,500 tons respectively. Production of sugarcane would remain at 5,000 tons although the area would decrease from 200 to 100 ha.

32 Marketing and Processing 6.04 The construction of additional grain storage which would be operated by the NFC and the improvements of the feeder roads from the villages to the major road network would add some flexibility to the marketing process, but even with these improvements it is anticipated that the traditional marketing practices would continue to be followed. After harvest, the farmers would bring their crops to the market by pack animal or by ox cart. After sacking the crops, the traders would sell the rice to the export companies which would turn over a percentage (25% in 1975) to the NFC and sell the balance of the rice as well as other crops, to the agents of Indian importing firms. Transportation from Bhairawa to deficit areas in Nepal or to the railhead in India would be by truck The rice milling industry is the oldest industry in Nepal, and 126 mills are now operating in the Rupandehi District. Of these, 26 mills each have a milling capacity of 1/4 ton paddy per hour, 88 mills 1/2 ton paddy, 11 mills 1 ton paddy and I mill 2 tons paddy per hour. Currently there is a reserve capacity of about 40% which would be more than sufficient to cope with the expected increase in production from the project area. Moreover, two additional new mills are being constructed by the private sector. Prices 6.06 The farm gate prices used in the economic analysis were based on the Bank's 1985 projections for internationally traded commodities -- rice, wheat, maize and sugar; and the assumption that Nepal would continue to be an exporter of foodgrains. Appropriate adjustments were made for quality differences, handling and shipping to Northern India (Bihar, Uttar Pradesh and West Bengal). Additional adjustments were also made to reflect the cost of hulling, milling, transport and handling from the project farms to Bhairawa, the local market center, and from there on to the northern India market centers. The prices for those minor crops for which the long-term projections were not available were based upon the historical relationship between the local and international prices of rice and wheat The farm gate prices used in the financial analyses were based upon the retail price in the Rupandehi District during the 1974/1975 harvest months, adjusted to the farm gate based upon published price spreads between the farm and retail outlet. The prices thus derived were then increased by 8% to bring them up to the December 1975 level (Annex 11). Farm Income 6.08 Farm budgets were prepared for four representative farm sizes ha or one bigha, 1.0 ha, 2.04 ha or three bighas, and 6 ha or 9 bighas to represent both the present and the future with project condition (para 3.06). District representatives of the MLR, which is responsible for the administration of the land reform acts of 1959 and 1964, have indicated that the program was fully implemented in the project area. Therefore, after

33 completion of the project, significant changes in sizes of farm operating units are not expected to occur. In preparing these budgets, it was assumed that subsidies for agricultural inputs would remain at current levels. The annual net income including off-farm earnings, but before deduction of irrigation costs, are shown below for the four representative farm sizes. Farm Size Present Future With Project Increase (ha) (NRs) (NRs) (%) ,588 4, ,002 5, ,072 10, ,671 21, In calculating the farm family income, cash payments for farm inputs, hired labor (including that required for the maintenance of the irrigation systems) and the rental charge of bullocks were all included as production costs. Off-farm earnings which were included as income were based upon the availability of unused family labor during peak labor seasons when opportunities for employment on nearby larger farms would be available (Annex 12). VII. BENEFITS AND JUSTIFICATION General 7.01 The development of the project would be compatible with the objectives of the Fifth Five Year Plan. It would improve the incomes of those farmers and their families in the project area who are now living in conditions substantially below the poverty level, and it would increase the opportunity for farm employment of landless laborers and the operators of small farms in the project area as well as in Rupandehi District. Foreign Exchange Earnings 7.02 Most of the present production of paddy and wheat in the project area is used locally for food and seed; probably not over 1,000 tons goes into commercial channels. It is anticipated, however, that after full development a large part of the increase in production resulting from the project would move into the commercial channels and would mainly be exported to India. After taking account of the rice that would be acquired by the NFC under the present compulsory procurement system to be shipped to food deficit areas within Nepal, it is estimated that 3,400 tons of rice and 14,000 tons of wheat would be available annually for export. This would produce foreign exchange earnings of about US$2.4 million. After deduction of US$750,000 in foreign exchange for the purchase of fertilizer and pesticides required for production, the net foreign exchange earning due to the project would be about US$1.7 million.

34 Income Distribution 7.03 The average annual per capita income, including off-farm earnings, for the people presently living in the project area is about US$37 compared to the national average of US$100. Moreover, depending upon the size of farm, there is a large variation in income within the project area. This is illustrated in the table below. Income/Person /1 Farm Size Population Present FWP (ha) (no) (%) (US$) , /2 /3 17`- 25- /2 /3 62-/ 68- / , , , TOTAL or Avr./5 22, /1 Future with project. /2 Excluding off-farm income. /3 Including off-farm income. /4 After payment of water charges (NRs 725/ha in cash and NRs 75/ha in labor) and including off-farm income. /5 Weighted. It is apparent from the table that the income distribution is badly skewed; over one-third of the people in the project area receive farm incomes of US$17 or less (US$25 with off-farm income) and an additional quarter receives annual incomes of between US$17 and US$25 (US$25 to US$32 with off-farm income). In all, about 80% of the farm population receive annual incomes of US$50 or less which is the minimum required to provide the basic essential for family living (NRs 3,100 for a family of five). This project is expected to have a major impact on the standard of living of project area farmers. Under conditions of full development with the project, the incomes of all families having farms of 0.50 ha or larger (about 75% of project area population) would exceed the poverty level of US$50 per person. Employment Opportunities 7.04 The large expansion of the wheat hectarage during the dry season and the shift from local to HYV of paddy during the wet season, as well as the expansion in the acreage of minor crops, would result in a substantial increase in the farm labor requirements and opportunities for employment on the project farms. It is anticipated that with the project there would be a requirement for about 2,260,000 man days of labor per year within the project area which would represent an increase of 100% over that which could be expected in the future without the project. Assuming 300 working days per

35 workers would be hired. If valued at the opportunity cost of labor (NRs 4.7 per day) this would add the equivalent of about NRs 5 million annually to the farm labor payroll. It is anticipated that about 25% of this increased payroll would go to the operators of small farms, and that perhaps as much as 40% to other farmers within the Rupandehi District. The balance or about 35% would go to seasonal laborers brought in from India (Annex 13). (The returns to the operator and his family for the increased labor they would perform on their own farms is reflected in the increased farm income, Annex 12, Page 4) The marketing, processing, transportation and distribution of the increased production of agricultural products that goes into commercial channels would also result in significant increases in opportunities for employment of the urban population, principally in Bhairawa. Rate of Return 7.06 The rate of return which is estimated at 19% is based upon the following: (a) benefits measured in terms of future increases in net farm income over that which would occur without the project; (b) a 30-year period of analysis; residual value of drilling rigs was recognized; (c) 1985 world market price expressed in 1976 currency values; (d) incremental farm labor valued at the alternative opportunity cost of NRs 4.7 per day; (e) price contingencies, production credit and the cost of the investigation of the second stage excluded from capital cost; (f) cultivators provide labor to maintain the irrigation and drainage system; (g) energy for pumping costed at the marginal cost of NRs 0.25 per kwh; (h) replacements for the pumps every five years and the turbines in 15 years; (i) a four-year construction period; (j) full agricultural production under each well in Year Five (Year Eight for total project); and (k) the benefits resulting from increased employment in agriculture and in the urban areas excluded.

36 Sensitivity Analysis 7.07 Several tests were made to determine the sensitivity of the project to varying assumptions regarding both benefits and costs: Rate of Return (%) (a) a decrease of 20% in projected benefits 15 (b) an increase of 20% in the capital cost of the project 16 (c) a delay of one year in the realization of benefits 16 (d) all incremental farm labor valued at going wage rate of NRs 6 per day 18 (e) combination of (a) and (b) 13 (f) combination of (b) and (c) 14 (g) combination of (a), (b) and (c) 11 (h) shadow pricing of exchange rate at NRs 15 to US$ The project rate of return is more sensitive to the magnitude of the benefits than the increase in project cost or delay in the realization of benefits. A delay in the benefits by one year or an increase in the capital cost by 20% had less effect on the rate of return than a reduction of 20% in the project benefits. However, even if the benefits were to be reduced by 20% and delayed by one year and at the same time the capital costs were to be increased by a like percentage, the project would still be economically viable. The significance of the magnitude of the benefits in the analyses underscores the need to provide all the necessary inputs including extension on a timely basis (Annex 14). It should, however, be noted that the yields and production at full development, and hence the benefits, assumed in the analysis are conservative. VIII. AGREEMENTS REACHED AND RECOMMENDATIONS 8.01 Agreements on the following points were reached with HMGN: (a) it would make adequate budgetary provisions to the agencies involved to cover their share of the project cost and that it would furnish to IDA annually a detailed plan for the implementation of the project with related financial requirements for the following fiscal year (para. 4.13);

37 (b) contracts for civil works would not be awarded until HMGN had acquired the necessary land or rights-of-way (para. 4.15); (c) the DIHM and other participating organizations responsible for carrying out any part of the project would: (i) establish and maintain separate accounts for the project in accordance with sound accounting practices. Such accounts would be audited annually by an independent auditor acceptable to IDA, and (ii) certified copies of the audited accounts and the auditor's reports would be sent to IDA within six months of the close of each fiscal year (para. 4.17); (d) drilling of any individual tubewell would not be commenced until the potential beneficiaries representing two-thirds of the service area had signed up in a Water Users group and agreed to pay water charges (para 5.01); (e) for purposes of implementing the project, it would expand the GRDB to include representatives of NEC and the Ministry of Home and Panchayat (para. 5.03); (f) if any farmer had not carried out the construction of field channels, drains and land development as contemplated in para within one year following the completion of the project water delivery and drainage networks, the DIHM would carry out such work and charge the cost to the farmer involved and water would not be released to any individual farm unit until such work had been completed (para. 5.06); (g) it would make adequate provision in the annual budgets to finance the 0 & M of the various project components in accordance with sound technical standards (para. 5.06); (h) it would recruit and appoint an ADADO and 63 PLAAs and four Subject Matter Specialists (SMSs) to work for agricultural extension services in the project areas in addition to the existing staff (para. 5.09); (i) AIC would make agricultural inputs available in sufficient quantity to meet the needs of the project (para 5.12); (j) it would make funds available to meet the agricultural production credit needs of the project farmers (para. 5.13);

38 (k) the BLGPO would monitor the effect of pumping on the groundwater aquifers both during and following the completion of construction. In addition, the ADADO would monitor the agricultural production and benefits that result from the project. Reports covering both activities would be sent to IDA annually but not later than December 31 (para. 5.16); (1) it would make a thorough study of water charges in Nepal including the level of such charges required to recover the full operation and maintenance cost and reasonable portion of the capital costs, having due regard to farmer incentive and capacity to pay (para. 5.22); (m) beginning not later than one year after completion of the works of each tubewell, the Government should establish and collect water charges to recover the full annual operating costs --energy, operation, maintenance and contribution to replacement reserve-- and having due regard to the incentives and capacity of such farmers to pay, a reasonable portion of the capital cost of the irrigation facilities in progressive steps (incremental) over a reasonable period of time (para. 5.23); and (n) the Government in consultation with IDA, would review and revise, as necessary, the level of charges and collection procedures at intervals of not more than three years (para. 5.23) Conditions of credit effectiveness would be that: (a) a PM with qualifications and experience acceptable to IDA should have been appointed (para. 5.02); (b) the PCC chaired by the CDO with District level officers and representatives of all participating agencies as members or associate members shall have been established (para 5.04); and (c) a firm of consultants shall have been selected to assist with project implementation, preparation of a feasibility study for a further groundwater development and a study of water charges (para. 5.05) With the above agreements, the proposed project is suitable for an IDA credit of US$9 million under standard IDA terms. The Borrower would be the Kingdom of Nepal. June 17, 1976

39 ANNEX 1 Page 1 NEPAL BHAIRAWA-LUMBI.NI GROUNDWATER PROJECT Agricultural Development The Role of the Agriculture Sector 1. Agriculture dominates the economy of Nepal. It provides employment to 94% of the population, generates two-thirds of GDP and accounts for about 80% of export earnings. The major exports are rice, raw jute and jute manufacture. Foodgrain production has grown at less than 1% annually since the mid-1960s, while the population has been growing at 2% to 2.4% p.a. Accordingly, the near stagnant production and an increase in population, estimated at 12.6 million in 1975, has brought down the rice export surplus from a half million tons around the beginning of the 1960s to an estimated 200,000 tons at present. Production of other crops has also declined considerably. 2. Therefore, the Fifth Five-Year Plan of HMGN ( ) gives priority to the agricultural sector for securing increased production, as agriculture in addition to provision of food, has potential for creating employment opportunities and generating foreign exchange. Agricultural Development Problems 3. The total area of Nepal is about 14.1 M ha of which only about 2 M ha are cultivated. Agriculture in general, is characterized by subsistence farming with much of the land under foodgrain production. The topography is most varied. Geographically, the country is divided into three roughly parallel strips, each running generally from east and west. The southern most strip called the Terai, an extension of the Gangetic plain of North India, covers about 17% of the total area, while the central strip or hills cover about 68%, and the northern most strip consisting of the great Himalayan Range, the remaining 15%. About 70% of the cultivated area is located in the Terai Plains and only 30% in the Hills and very little in the mountains. Population pressure on the land resource is highest in hilly and mountainous areas which support about 60% of the country's population. This pressure has forced people from the hills and mountainous areas to attempt to cultivate marginal land on steep hill slopes and/or to migrate to the Terai and beyond. 4. To increase agricultural production, the Fifth Five-Year Plan gives emphasis on intensive land use and higher yields. This is to be achieved by: accelerating the spread of seed-based technology involving improved cultural practices; increasing the use of HYV seed--particularly of paddy and wheat-- and of fertilizers and pesticides; and implementing the irrigation schemes for which feasibility studies were initiated during the Fourth Plan. 29

40 ANNEX 1 Page 2 Crops and Cropping Seasons 5. The total cropped area in Nepal is about 2.33 M ha which on a net cultivated area of about 1.98 M ha gives a cropping intensity of 118%. Paddy accounts for 51% of the total cropped area, maize 19%, wheat 10%, barley and millet 6%, and other crops comprising oilseeds, pulses, jute, potato, sugarcane, tobacco and horticultural crops the remaining 14%. The area under tea is negligible being only about 500 ha, and it is located in the eastern region. 6. There is only one crop of wet season paddy, the temperature in winter being too cold to raise a second crop of paddy. About 85% of the paddy area is located in the Terai and only 15% in the hills. Nursery and seed-bed preparation starts with the onset of the rainy season in May and June. Mostly traditional varieties are grown. Coarse varieties that mature in 120 to 150 days from seeding are planted first and harvested in October and early November. Long life fine varieties which have an average growth period of 150 to 180 days are usually transplanted in July and harvested in November-December. The early maturing varieties give lower yields (0.8 to 1 t/ha) because of lack of sunlight and heavier infestation of pests and diseases, while the long life varieties give higher yields (1 to 2 t/ha). 7. High yielding varieties of paddy have been introduced since the late 1960s and presently cover about 7% to 8% of the paddy area. They include IR-8, IR-22, IR-20 and Mashowli for which particulars are given in Table 2. Their yields are two to three times that of the local variety. Expansion of HYV paddy is, however, mostly being done in the irrigated areas where reliable water supplies justify application of inputs and ensure good crops. 8. Maize is cultivated mostly in the hills which accounts for 65% of the area under maize while the Terai Plains account for only 35% of the area. In the Terai it is usually sown in March-April and harvested in June-July. The yield is about 1 to 1.2 t/ha. 9. The most important winter foodgrain is wheat which is usually grown with residual moisture after paddy or maize. It gives higher yields if two or three irrigations can be given after sowing. At present, about 48% of the area under wheat is located in the hills and 52% in the Terai Plains. But the area under wheat is expanding in the Terai with increased irrigation facilities e.g. from The Birganj Project and the ADBN financed artesian wells. It is usually sown in November-December and harvested in March-April in the Terai. The yield from the non-irrigated crop is low being only about 0.7 to 1.0 t/ha while the yield from the irrigated crop is two or three times as much. 30

41 ANNEX 1 Page 3 Agricultural Inputs 10. The distribution of improved seed has increased from practically nothing about ten years ago to about 300 tons HYV paddy, 50 tons of maize and 1,500 tons HYV wheat annually during the last three years. There is a good system of seed multiplication, procurement and distribution. 11. The fertilizer use has also increased from about 400 tons nutrient in to about 12,500 tons nutrient in as shown below: Fertilizer Use in Nepal (nutrient tons) Nitrogen Phosphate Potash Total Average to , ,494 Average to ,348 1, ,985 Average to ,541 3, ,542 There has also been an encouraging improvement in the use of balanced fertilizer as the NPK ratio has increased from 100:31:8 in to 100:36:11 in Records are not available to indicate the quantity of plant protection materials used. But the expenditure on the plant protection materials has increased from NRs 21,000 in to NRs 610,000 in June

42 NEPAL BiAIRAWA-LUMBINI GROUNDWATER PROJECT Area Under Main Crops in Nepali! ('000 ha) Paddy 1,101 1,111 1,100 1,154 1,172 1,173 1,122 1,204 1,140 1,213 2 Maize Wheat Barley Millet Sugarcane Jute Oilseed Tobacco Potatoes Others (Pulses.3 horticultural cropo, etc.) Total cropped area 2,039 2,098 2,094 2,200 2,257 2,285 2,290 2,395 2,333 2,432 Net cultivated area 1,800 1,800 1,800 1,880 1,900 1,940 1,940 1,960 1,980 1,980 Cropping intensity 113% 116% 116% 117% 118% 118% 118% 122% 118% 123% Source: 1/ Agricultural Marketing Services Department, Nepal. 2/ Mission estimates. CD'

43 NEPAL BHAIRAWA-UIMBINI GROUNDWATER PROJECT Recommended HYV for the Terai Plains Days to Height Yield Eating Name of HYV Source Maturity (cm) (Kg/ha) Quality Remarks A. Paddy 1. Parwanipur 1 Nepal ,800 Fair Susceptible to paddy blast and blight. 2. IR-8 IRRI ,100 Coarse Susceptible to paddy blast and blight. 3. IR-22 IRRI ,800 Good Susceptible to paddy blast and blight. 4. IR-20 IRRI ,800 Good Good resistance to paddy blast and bacterial blight. 5. IR-22 India ,500 Very Good Good resistance to paddy blast and bacterial blight. B. Wheat 1. RR-21 India ,300 Very Good Less occurance of yellow smut but susceptible to loose smut. 2. Kalyan Sona India ,200 Very Good Less susceptible to yellow and loose smut. 3. S 331 India ,400 Good Less susceptible to yellow, but susceptible to loose smut Nt 30 Nepal ,500 Good Less susceptible to yellow, &10 but susceptible to loose smut. * w

44 NEPAL BHAIRAWA-UMBINI GROUNDWATER PROJECT Climatic Data A. Mean monthly rainfall (mm) Record Station Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total Years Sirha h Bairia h Woh.2 20o , Bhairawa ,220 6 Butwal h h.7 2, Darbhan.a (India) L h h , Patna (India) , Muzzafatpur (India) h h ,212 5o B. Monthly rainfall at Bairia 80% dependable (D> CD

45 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Climatic Data C. Potential evaporation at Hardenath (mm) Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total ,624 D. Monthly sunshine at Parwanipur (hr:min/day) Mean 8:03 8:49 7:50 8:48 10:18 5:14 5:o0 6:17 6:57 9:07 9:11 8:55 7:53 0 E. Air temperature at Bhairawa ( c) Mean monthly Mean monthly , maximum Mean monthly minimum 6.o F. Relative humidity at Parwanipur (% at 08:40 hrs) Mean o LO)

46 ANNEX 3 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Project Works A. Past Development 1. Existing farmer--built and operated surface water development consists of a number of diversions from the right and left bank of the River Tinao along the reach just below the bifurcation of the Tinao and Dano rivers. The diversions lead into unlined and unregulated canal systems. The gross command area of the surface water system is about 7,000 ha of which some 5,000 ha lies within the proposed project area. During recent years, there has been minor public expenditure on the system, particularly in renovating and preserving the intakes. The existing private sector groundwater development consists of small diameter (1-1/2 to 3 inches) flowing wells in that part of the area where artesian pressures are adequate. The wells were drilied by hand to a maximum dspth of 60 m. Discharges range from 0.5 to 20 m /hr and average about 6 m /hr; command areas are generally less than one hectare. The total area presently perennially irrigated by small diameter wells within the project area totals 80 to 100 ha while perhaps 300 ha are irrigated by this means in the general vicinity of the project area. 2. In the early 1960s, HMGN, completed a diversion weir on the River Tinao near Butwal together with a left bank canal to irrigate 12,000 ha in the southern part of the Lumbini Terai. However, the system never operated because the right bank approach embankment was breached and the river bypassed the structure, isolating it from the canal. The system has not been repaired. 3. During the past five years, the DIHM, Groundwater Division has carried out an exploratory drilling program to obtain data on the alluvial aquifer system which underlies the Lumbuni Terai. Wells range in diameter from 3 to 14 inches and the greater proportion were drilled in the flowing artesian zone. Some sixteen of the wells are located in the proposed project area. A few of the exploratory wells are utilized for public water supply and Government centers; the balance are not used. B. Present Problems 4. The farmers' existing surface water irrigation system depends on base flows in the River Tinao, an unstable spate stream, which decreases throughout the dry season. Moreover, there is considerable inter-annual 36

47 ANNEX 3 Page 2 variation in monthly flows. The intakes are capable of diverting only a small proportion of the low flows and are difficult to maintain under high flow conditions. Transmission losses in the conveyance systems are high. Actual flows in the canals are too small to serve adequately the nominal command areas. Thus, especially in the lower parts of the command areas irrigation becomes increasingly uncertain as the dry season progresses. 5. The small diameter flowing wells have a short life (maximum five years) and are subject to sudden failure due to collapse of clay around the entry point to the pipe. Their discharge varies over the year with the artesian headed by up to 30% to 50% of the high discharge. Their continued effectiveness is contingent on maintaining sufficient positive head to ensure the required discharge which limits extraction in any area. The wells cannot be shut down due to the possibility of well failure and part of the flow often escapes to the surface in the annulus between casing and formation; this leads to an extremely wasteful use of water. The small discharges, which are not regulated, can only be conveyed for short distances in the canal systems. C. Description of Project Works 6. The project which would be located to the south of the farmer's surface water irrigation area would include provision of: electrically operated deep tubewells with night storage reservoirs and irrigation and drainage networks for 63 individual 120 ha command areas; 75 km of 11 kv electric power transmission lines with stepdown transformers at each tubewell; approximately 70 km of village link roads; a 1,000 ton grain storage facility at Bhairawa; project offices, workshop, agricultural extension service training center buildings; and consulting services for technical assistance. These consulting services would: (a) (b) assist planning and implementation of project works including detailed surveys and investigation, and conduct feasibility studies for further groundwater projects. Irrigation and Drainage System 7. Well Field and Well Design. Some sixty-three wells are required at a spacing of 1,300 m. This would incur well interference, particularly in the artesian area. The additional drawdown accruing from interference and the drawdown with time which would occur as the piezometry adjusts to the new water balance has been allowed for in the well design which permits pump setting of 40 to 50 m. 37

48 ANNEX 3 Page 3 8. The wells would range in depth from 120 to 200 m, the shallower wells being in the north with increasing depth to the south as the proportion of clay beds in the section increases. For the purpose of cost estimates, the wells have been grouped into 120, 160 and 200 m depth groups with 6, 23 and 34 wells in each group, respectively. 9. The wells would be drilled by the direct circulation, rotary mud flush technique. Heavy mud would be required to control artesian flows while drilling in some parts of the area. A percussion drilling adaption could be required if boulders are encountered in the northern part of the area. 10. A typical well design consists of: an 18 inch diameter conductor pipe of mild steel to a depth of 10 m which would be grouted; a pumping chamber of 14 inches internal diameter to depth of 40 to 50 m of heavy duty casing American Petroleum Institute equivalent (API); the annulus between the drilled hole and the casing pressure grouted to prevent upward leakance of water under artesian pressure; a fiberglass liner of screen and casing of a 10 inch outside diameter, of the length of m; design m of screen with 2 mm slots and a minimum open area of 10%. Because the aquifer material contains a considerable proportion of gravel grade, natural development would be possible without gravel packing. Assuming a unit permeability of 100 m/dy and a screened length of 30 m, a 100% efficient well would produce 300 m /hr for a drawdown at the well of about 3 m. Assuming a well efficiency of 70%, implies a drawdown at the well of 4.5 m. See Fig Well Completion. After evacuating drilling mud from a completed well by circulation of clean water, development would proceed using the following techniques: (a) flushing and screen jetting using a proper chemical solution; and (b) pumping and surging using an airlift pump and the rig slush pump alternately. The wells would be pumped by airlift or by turbine pump at 350 m /hr until the water is sand-free to complete development. The following well tests would be carried out: (a) constant yield-drawdown and recovery test, the well being pumped at 300 m 3 /hr for 24 hours. (b) a step-drawdown test in three or four steps. 38

49 ANNEX 3 Page A temporary arrangement of piping and valves could be required to control artesian flows in part of the area during the early stages of project implementation. 13. Pumping Equipment. The pump would be a vertical shaft turbine, water lubricated pump with a vertical drive head, a 12 incq diameter pump, barrel and a 10 inch diameter rising main to deliver 300 m /hr against a head of 30 m. The turbine would be selected to give reasonable efficiency over the widest possible range of working heads up to 30 m. The prime mover would be a 380/440 volt, 35 KVA, 50 cycle electric motor geared for vertical drive of the above pump. Ancillary equipment includes automatic control for starter, no-float control for starter, time control for starter and electrical relays and meters. 14. Pump House. The pump house would be constructed of brick walls and concrete slab roof of sufficient height to allow pulling of 1.5 m length sections of rising main using a traveling beam and chain block to be set permanently below the roof. The well head would be completed with a concrete plinth one meter square by 0.2 m thick. The building would have a concrete floor. 15. Night Storage Reservoir. The tubewell would pump directly into a 2,000 m 3 capacity clay-lined earth reservoir which would fill automatically under the control of a non-flote system attached to the electric prime mover of the turbine pump. A pre-set time relay would cut out pumping during peak electricity system demand hours. 16. Irrigation and Drainage Networks (Map 12074). From the night storage reservoir, each typical 120 ha tubewell command area would be served by distributary canals built of selected earth fill material and earth drains, down to each 5 ha block of and. Within the 5 ha blocks farmers would, under the guidance of the project authority, improve their existing small ditch network (which was constructed to distribute and remove natural rainfall) to enable better distribution to each plot as well as for more effective drainage. The project distributaries would have a conveyance capacity of 1.3 1/s/ha to facilitate rotational irrigation. The drains which would have a 4 1/s/ha discharge capacity would remove excess monsoon flooding to the existing north-south rivers and streams and create conditions more suitable for higher paddy yields and for planting wheat after paddy. The average channel network density would be about 100 m/ha for distributaries and 60 m/ha for drains. The main distributary channels would be flanked by a 1.5 m wide access path suitable for bicycles to enable operation and maintenance supervision. The drains would be provided with appropriate checks, falls, division, drainage, water control structures and cattle crossings constructed of masonry and reinforced concrete. 39

50 ANNEX 3 Page Because the irrigation and drainage channel works would be small in scale, scattered, labor-intensive and would have to be scheduled to suit weather conditions and farming operations, as far as possible, they would be constructed by small contracts. They would be designed and their construction supervised by project engineering staff assisted by the project consultants. Other Project Works 18. Village Roads (Map 12075). About 70 km of 3.5 m width village link roads would be improved, realigned and extended to improve access for project services, and to assist transport farmers' produce to market and import of agricultural inputs. The roads would be of selected earth fill and surfaced with 30 cm of graded gravel finish to enable year-round use for farm tractors and field vehicles. Whenever technically and economically possible, the improved roads would be located within existing HMGN road reserves. Roads would be constructed under small and medium contracts procured under LCB, and timed to suit weather and agricultural conditions. 19. Land Acquisition. The HMGN would acquire the necessary land for irrigation, drainage, road networks and would obtain way-leaves for the 11 kv electric power transmission line at least nine months ahead of the beginning of construction kv Electric Transmission (Map 12075). About 75 km of 11 kv power line, with step down transformers (11 kv/0.40 kv) at each tubewell, would be extended from the existing 33 kv network to provide electric power to each of the 63 tubewells. These works would be planned, designed and constructed by NEC under LCB. 21. Project Equipment. Because most works would be constructed mainly under contract, vehicles and equipment would be needed only for surveys, investigations, supervision, operation and maintenance, and for the agricultural supporting services. These are listed in Annex 7. Vehicles for consultants are also included in the list. 22. Buildings. The project would construct a 1,000 ton capacity grain store near Bhairawa town. This would provide a central facility for NFC operations. As and when required, it would also provide overspill storage for other agricultural inputs such as fertilizers, improved seeds and plant chemicals. Other project buildings would include small extensions to the DIHM and DA Bhairawa Research Farm; the latter would be of inexpensive traditional construction and would include simple accommodation for farmers' and staff residential training courses. 40

51 ANNEX 3 Page 6~ 23. Monitoring. HMGN would direct ADADO and the Food and Agri-V culture Marketing Services Department in working with the BLGPO to monitgr project inputs, measure project benefits and to carry out reguar,ecanomic evaluation of the project. Monitoring would include continuing 4soessmeqt of: project costs; crop yields and production; labor employmeit; ue and cost of agricultural inputs; supply and utililation of water, and i4entiif cation of constraints to fuller development. The BLGPO would alpo conttnr uously monitor the affect of pumping on the groundwater aqvdfer, D. Surveys, Investigations, Planning and Techni4c AsAistance Status of Engineering Design 24. During the 1975 studies which were adequate to establish the feasibility of the project, the following were completed; area-wide plans ning of village roads networks and drainage outfalls; semi-detailed soils surveys; well field and tubewell design; irrigation and drainage network designs in four typical irrigation service areas; and preliminary dsi4ns of the 11 kv electric network and project buildings. 25. Prior to project execution, detailed surveys, planning, enait" neering designs, specifications, bidding documents and bid evaluation would have to be completed on a phased program (Annex 6) for all prqject works described in Section C. Civil, electrical and mechanical engineering of the irrigation and drainage networks, tubewells and project buil4in;* would be the responsibility of DIHM. The NEC would be responsible for 11 kv electric power transmission system. Consulting Services 26. Due to its extensive irrigation development program including complex projects scattered throughout the country (Appendix 1), HKGN i8 short of experienced technical staff for investigations? planning and construction supervision. The project would, therefore, prov±4e thpical assistance in the form of consulting services both for project inplementa" tion and for feasibility studies of future groundwater development. Outline Terms of Reference for the employment of consultants are given in Appendix g and estimated costs are in Annex 7, Table Project Implementation. The project would provide 180 man-months of consulting services in groundwater engineering, mapping, civil? meqhaniqai and engineering design, construction supervision and procurement. Vetng the existing 1:12,000 scale aerial mapping, the consultants would assist the DIHg in preparing 1:5,000 scale one meter contour basic planning maps. In-fill detail would be completed by DIHM topographic survey technicians and AD soil surveyors with consultants' assistance. 41

52 ANNEX 3 Page Feasibility Studies. The project could be replicable in comparable adjacent areas of the Lumbini Terai. About 54 man-months of consulting services would be required to prepare a 15,000-20,000 ha scale groundwater project; this work would involve topographic mapping and groundwater investigation over a gross 50,000 ha area to be completed within two years and would include a study of water charges in Nepal. Planning and Development of Irrigation Service Areas and Formation of Water Users Groups 29. Development of irrigation service units would be on a well by well command basis. To ensure that the project would be operated and maintained efficiently and the project costs recovered in timely fashion, it would be necessary prior to well drilling to enroll prospective beneficiaries, and obtain agreement from these future beneficiaries, covering at least 66% of the 120 ha, an to form a water users group, with powers to levy water charges and guarantee cooperative rotational operation and maintenance down to the 5 ha turnout level. 30. Development would commence with DIHM (topographic) DA (soils) and District Administration/Panchayat (cadastral) detailed surveys to delineate the precise boundaries of each 120 ha service area. The whole process would be carefully coordinated by the PM who would be assisted by the PCC. 31. Following the boundary definition, the CDO and his staff would obtain farmer beneficiary agreements to the irrigation water users group rules and powers and to repayment of water charges. A farmer beneficiary refusing to sign up would be excluded from project services and facilities. The CDO would adjust irrigation service area boundaries to suit the particular organizational circumstances. No service area would extend beyond the boundaries of a single panchayat. The water user groups would be organized under the Irrigation, Electricty and Related Water Resources Act of June

53 NEPAL ANNEX 3 Appendix 1 BHAIRAWA-LUMBINI GROUNDWATER PROJECT List aof IrrIn ytin- i jectsticluded cl in Fifth Five-Year Plan Name of Irrigation Project 1. Kankai Irrigation Projects 5,ooo 2. West Kosi Canal 11, Kamla Irrigation ProJect (lst phase) 21, Chitwan Irrigation Project 11,000 5, Narayani Zone Irrigation Development Proiect 29, Bananga Irrigation Project 6,ooo 7. Mahakali Irrigation Projects (2nd phase) 7, Western Gandak Project 16, Tubewell Irrigation Project a) Kailali, Kanchanpur Districts 8,000 b) Rupawedhi Districts (0hairawa-Lumbini Groundwater Project) 8,000 c) Janakpur Districts 420 d) Bara Parsa Districts 2,750 10, Phewa Dam Reconstruction anchan Pand frrigation Project 10, Chour-ahari Hill Irrigation Project Chapakot Hill It it 2, Hadetar " " 200 I$. Kathe Kulo Hill Ramgha Tar " "t 2h4 J,71 Deadgaon Tar Hill "I ti Manusmara Irrigation Project (2nd phase) 2,000 19' Kanchhami Irrigation Pro.ect 4Oo 20. Renovation of Panchayat Level Local Canals 1, New Hill Irrigation Protects 2,000 43

54 ANNEX 3 Appendix 2 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Consulting Services Draft Terms of Reference I. Objectives 1. Consulting services are required by the Department of Irrigation, Hydrology and Meteorology, and the Department of Agriculture to assist and advise them in the implementation of the Bhairawa Groundwater Project. In broad terms, the consultant shall provide: (i) the plans, designs, specifications, tender documents and construction supervision for the tubewell irrigation facilities to serve a net area of 7,500 ha, for 70 km of village link roads and for a 1,000 ton grain store; (ii) advisory services to the Project Director on management, accounting, and monitoring of the effect of the project on the groundwater aquifers; (iii) advisory services to the Soil Survey Division of the DA on soil surveys (irrigability land classification); (iv) advisory service to the Assistant District Agricultural Development Officer, in charge of extension relating to on-farm water management, monitoring project effects on agriculture and rural families; and (v) a feasibility report for a further groundwater development project on the Western Terai to serve 15,000 to 20,000 ha to be selected from a gross project area of approximately 50,000 ha including a study of water charges in Nepal. 2. HMGN would provide appropriate full-time professional or technical personnel as counterparts to work with the consultants. During the course of the consultants' undertakings, the counterpart professional and technical personnel would be trained and guided in their performance by the consultants. 44

55 ANNEX 3 Appendi x 2 Page 2 3. Consultant services (235 man-months) would be provi4ed over a four-year period ending June 30, II. Responsibilities of the Consultant 4. Mapping and Survey. The consultant shall advise and assi8 t in the following: (a) preparation of maps of the project area on a scale of 1:5,000 with 1.0 m contours; (b) staking on the ground the alignments of all irrigation canals and channels (down to 5 ha service blocks) drainage canals and village roads with permanent benchmarks at appropriate intervals; (c) carrying out staking surveys to demarcate the boundaries of lands to be acquired by HMGN for the construction of all project facilities; (d) preparation of all maps and survey drawings to be used for planning, design, land acquisition and easements. 5. Engineering $ervices. The conpultant's responsibillties shall include: (a) assist in the formation of water user groups and the siting of wells; (b) assist in the preparation of detailed specifications and tender documents suitable for use by the PM in international competitive bidding for drill rigs, casing, pumps, turbines, switch gear and appurtenant works for the 63 tubewells and. after receipt of tenders, assist in the evaluation of same and make recommendations for award; (c) supervise the drilling of the wells, the installation of the casing, the testing of the wells and the installation of turbines, motors and control equipment to agsure proper performance; (d) assist in the selection of the location for the village 2In1 roads and in the preparation of the designs and specifications for such roads, and supervision of their construction; 45

56 ANNEX 3 Appendix 2 Page 3 (e) assist in (i) the preparation of designs and specifications suitable for local competitive bidding for the village roads, project buildings,storage reservoirs, canals, drains, pumphouses, grain store and (ii) the staking of canals and drains down to the 5 ha blocks and the entire road system. After having received the tenders, the consultants would review them and make recommendations for award; (f) provide two drilling superintendents to supervise the construction, development and testing of the 63 new wells; (g) prepare a manual for the operation and maintenance of the tubewells; (h) supervise the collection of hydrogeological data and analyze it as required to determine the ultimate development of groundwater irrigation on the Lumbini Terai; (i) advise on the operation of the tubewells and monitoring the collection of data on costs and benefits necessary for the evaluation of the feasibility of further groundwater developments on the Western Terai; and (j) collect data and information on investment, operation and maintenance costs of tubewells, and the related canal and drainage system for use in planning further groundwater developments on the Terai. 6. Administrative and Agricultural Advisory Services. The consultant shall assist and advise DIHM and PM in administration of personnel, finance, accounting and auditing and in the operation of the project as an integrated agricultural development including agricultural extension and co-operative services. Preparation of Feasibility Report for Further Groundwater Development (a) supervise the preparation of base maps, topographic maps and reconnaisance land classification for a gross area of 50,000 ha; (b) assist in the assembly and analysis of hydrogeological information on water supply and quality; (c) assist in the selection of a project plan including all project works and components and the determination of the scale of development--in the range of 15,000 to 20,000 ha; 46

57 ANNEX 3 Appendix 2 Page 4 (d) assist in the preparation of the cost estimates--both gonstruction and annual 0 & M; (e) assist in the evaluation of project benefits, economic justification, farmers' payment capacity and preparation of the financial analysis; and (f) take the leadership in the preparation of the final feasibility report including preparation of 50 copies of the report to be completed by December 30, 1978 including a study of water charges. III. Reporting 7. The Consultant shall prepare and submit to the PM 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, PCCs activities, problems encountered and measures to overcome these problems and Consultant's financial statement. 8. The Consultant shall assist the PM in the preparation of semi-annual and annual reports for submission to the Association. IV. Undertaking of HMGN 9. 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) 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; 47

58 ANNEX 3 Appendix 2 Page 5 (iii) 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 subsequently be withdrawn therefrom upon departure of such personnel; however, to qualify for these exemptions, shipment of such property into the country would have to be arranged by contract no later than three 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; (i) provide all local transport facilities and equipment required by the Consultant; (j) provide the existing aerial photographs on a scale of 1:12,000 to the Consultants. 48

59 ANNEX 3 ApPen4ix 2 Page 6 V. Necessary Procedure to be Followed by Invited ConsuItini Firms 10. Consulting firms invited to submit proposals are requested to state clearly in their proposals the followieg: (a) terms and conditions under which they wovld cgary out the duties and responsibilities specified above, fina%nctal terms are not desired at this stage; (b) the proposed composition of the team which they intend to assign to the project both in thq field and at the home office, number of man-months of each individual tqgether with the name and qualification, inclidin$ proficiency *n spoken and written English; (c) a list of vehicles and equipment which they anticipate wo4ld 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 Gqverpment to provide to work with them at no cost to the firm. 49

60 NEPAL BHAIRAWA - LUMBINI GROUNDWATER PROJECT TYPICAL WELL DESIGN ANNEX 3 Figure 1 Concrete plinth 20" drilled hole 18" 10 mild steol csin (lom) (lomn) grout 17Mz" drilled hrle ( m) 14" ID APt casing grout ( 40-50m) Casing hanger il4"/10"i l F 10" OD fiberglass casing ( m) 13'A/V drilled hole --- (70-160m) Naturally deyeloped l 1 10" OD fibergiesslotted greded pack screen (30-40m) Total Depth 120 to 200 m 50 World Bank-16189

61 ANNEX 4 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Hydrogeology of the Project Area General 1. The Western Terai, of which the project area forms a part, is underlain by a sequence of alluvial deposits which thicken southwards into the Ganges Plain. Drilling has proved thicknesses of alluvium in excess of 450 meters. Coarse fragmented rock predominate in the sections towards the northern edge of the Terai adjacent to the Churia Hills to form what is termed the Bhabar zone. This zone is particularly well developed to the south of Butwal by the outwash fans of the Tinao-Dano river system and Bhabar zone sediments extend into the northern part of the project area (Map 12075). Southwards from the Bhabar zone the proportion of fine material in the alluvial sequence increases and there is a transition to the Gangetic zone of sediments in which beds or lenticles of coarse, clay free, fragmented rock occur within a clayey sequence. 2. The alluvial aquifers of the Western Terai may be regarded as a single complex aquifer system. An essentially unconfined aquifer underlying the northern part of the plain passes laterally to the south into a system consisting of a thin phreatic aquifer underlain by a number of confined aquifers separated by beds of clayey deposits. The confined part of the system is believed to form a plexus of conduits which are to a greater or lesser extent interconnected by lateral continuity or by vertic4l leakance. Lithology of the Alluvial Deposits 3. The Bhabar zone is underlain by predominantly coarse broken rock alluviumw. Occasional beds of fine sediment occur. At depths below the Bhabar zone, the alluvial sequence passes transitionally into a Gangetic type sequence in which fine materials predominate. The coarse fragmented rock of the Bhabar zone consist mainly of gravel with an admixture of sand. Boulders and cobbles are fairly common particularly in the northern part of the zone. 4. The transition to the Gangetic zone is achieved by an increase in the proportion of clayey beds within the sequence. In the southern part of the project area, the proportion of clay-free, coarse, material decreases to about 25% of the top 200 meters of the section. The coarse deposits consist mainly of gravel with sand, though fine-to-coarse sand beds also occur. The coarse materials occur in relatively thin beds, rarely exceeding 15 meters in thickness, and are probably in the form of lenticular bodies of varying lateral extent. 51

62 ANNEX 4 Page 2 Recharge - Discharge Relationships 5. The Bhabar zone is recharged by infiltration of rainfall, by seepage losses from water ponded on the paddy fields and by transmission losses of flows in the river beds. Marked changes in groundwater level occur below the Bhabar zone during the monsoon. Water level rises of up to 18 meters have been recorded during the period of the years 1973 and 1974 and permit estimates to be made of change in groundwater storage. Applying a global value for the storage coefficient of 0.1 provides estimates of a net change in storage in the Bhabar zone over the monsoon period of 1973 and 1974 of about 130 Mm 3. This estimate does not represent total recharge as discharge by lateral flow is not accounted for in the change in storage balance. A recharge estimate of the same order of magnitude is obtained by applying infiltration rates of 10 to 12 mm/day from the paddy fields on the Bhabar zone gravel assuming that water is ponded for 120 days. 6. The proportion of the recharge retained by the groundwater system under present conditions is not accurately known. It is estimated that the confined aquifers in the Gangetic zone may transmit 40 to 60 Mm3/annum under the existing hydraulic gradients. Thus, less than half of the potential recharge to the Bhabar zone can be accounted for as lateral flow to the Gangetic zone aquifers; the balance must be rejected from the Bhabar zone aquifer as effluent seepage to the surface drainage. 7. Drilling near the southern edge of the Terai near the frontier with India indicates that the proportion of aquifer material in the upper 200 meters of the Gangetic zone reduces to a negligible amount in this region. It seems probable that there is a discharge area in the vicinity of the frontier and that water flows from the confined aquifers to the phreatic part of the Gangetic system by upward leakance. Groundwater Flow Pattern 8. The regional direction of groundwater flow is from north to south, the flow lines radiating from the recharge area of the Bhabar zone. Hydraulic gradients within the Bhabar zone range from in the wet season to by the end of the dry season. The steepening of the wet season gradients reflects the effect of the rapid recharge which occurs during this period. Hydraulic gradients in the aquifers of the Gangetic zone range from to and steepen towards the south as the decrease in proportion of aquifer material reduces the transmissivity of the system. Aquifer Characteristics 9. The majority of the wells available for aquifer testing tap less than ten meters of aquifer material. Thus, well performance is rarely directly indicative of the productive capacity of the aquifer system. The 52

63 ANNEX 4 Page 3 tests carried out do provide estimates of mean unit permeability for individual aquifers or parts of aquifers within the system. Aquifer tests on Bhabar zone wells indicate unit permeability values in the range of 300 to 800 m/day. This range is in accordance with the lithological characteristics of the aquifer which is formed mainly of clean, coarse gravel. Unit permeability values from tests of the Gangetic zone artesian aquifers range from about ten to 400 m/day with a mean of 27 tests of about 100 m/day. This range is again in accordance with the known lithological characteristics of the aquifers of the part of the system. 10. Credible estimates of storage coefficients are not provided by the aquifer tests. However, the lithology of the phreatic aquifer of the Bhabar zone indicates storativity in the range of 0.1 to The artesian storage coefficient of the onfined aquifers of the Gangetic zone is probably on the order of 3 x 10 Water Quality 11. Electrical conductivity values of the groundwater contained in the Bhabar zone and in confined aquifers of the Gangetic zone fall in the range of micromhos/cm. The Sodium Adsorption Ratio (SAR) values are generally less than 1.0. According to the US Salinity Laboratory, Riverside, classification, the water qualities are either Cl-Si or C2-S1. Present Exploitation of the Aquifer System 12. There are at present eight large diameter flowing artesian wells being utilized for domestic water supply and irrigation and some 153 small diameter flowing wells providing irrigation water in and around the vicinity of the proposed project area. The majority of the small diameter irrigation wells are located to the south of the schematic well field lay-out illustrated by Map The estimated annual discharge of the large diameter wells 3 totals 1.4 Mm, and extraction by small diameter wells totals about 10.3 Mm / annum. The latter penetrate to the top of the first artesian aquifer below the well si e and are generally less than 60 m deep. Discharges range from 0.5 to 20 m /hr, though the majority of the wells yield less than 6 m /hr. The wells flow uncontrolled throughout the year and a large proportion of the water discharges to waste. Groundwater Availability for Development 13. The safe yield of the aquifer system approximates to the annual recharge in the Bhabar zone. 3 Under present conditions, this is believed to be on the order of 150 Mm. It seems probable that additional recharge could be induced by appropriate groundwater management. However, maximizing the groundwater resource would involve creation by pumping of an operational reservoir within the aquifer system in the Bhabar zone. This could entail 53

64 ANNEX 4 Page 4 pumping lifts which cannot, in the present state of knowiedge, be estimated. It is considered that a first phase development of 70 Mm /annum could be achieved with pumping lifts which would not exceed about 30 meters in the long term. It is believed that a phased approach to groundwater development will allow optimal development of the water resource. Effect of Proposed Withdrawals on Existing Wells 14. The proposed groundwater development will cause a major change in the water balance of the alluvial aquifer system in this part of the Lumbini Terai. The system will respond by head decline to form a cone of water level depression in the phreatic zone and of pressure relief in the artesian zone within the vicinity of the pumping area. Declines will continue until a new state of dynamic equilibrium is attained. The effect of change in head in the artesian zone will be to decrease and eventually kill the artesian flows from wells within or in the close vicinity of the project area. The delay time before the effects of the proposed pumping causes response on the existing artesian flows will be short. It may be foreseen that during the first year when all wells are in operation (Year Five of the project) the existing wells in the project area will cease to flow at least during the period of heavy pumping. Alternative Methods of Groundwater Development 15. The alternatives devolve essentially on well diameter and well depth which affect well yields. So long as pumping is involved, the highest yielding well normally provides the lowest cost water at well head. However, high yields imply relatively large command areas with proportionately greater management requirements. Under the conditions in the project area, the average net command area to be envisaged from a water point is about 120 ha. This requires a 300 m 3/hr well assuming 20 hours of pumping to meet peak demand. 16. The flowing artesian zone of the Western Terai offers a possible alternative for water production which would not involve pumping. Thus, only the capital and amortization costs of the well would be involved. The existing small diameter wells are drilled by hand to a maximum depth of 60 meters. They serve, on the average, command areas of one to two hectares and cost US$250 to US$350. Their life is normally less than five years. The wells are poorly designed and cannot be shut in. They are, therefore, extremely wasteful of water. It is considered that slim wells (2 inches to 3 inches diameter) of good design penetrating to 60 to 80 m could be constructed to yield 5 to 20 m3 /hr in the southern part of the project area. Equipped with night storage reservoirs, such wells could serve two to eight hectares and would cost US$1,500 to US$3,000, depending on diameter and depth and would have a life of about 15 years. Thus, a slim flowing well serving, say 4 ha and costing US$1,500 would have a capital cost per hectare of US$375 and an amortizaiton cost of US$49/ha per annum. 54

65 ANNEX 4 Page The operation and maintenance costs of a slim flowing well appear to be less than those for a large capacity pumped well and capital costs per hectare are similar. However, the efficiency of the flowing water point would depend on maintaining the artesian head. This implies a relatively wide well spacing resulting in a net to gross command of perhaps 10% to 15%. 18. Given the situation described above, the proposed project has accepted the higher management requirements inherent in larger command areas and opted for a 300 m3/hr pumped well serving 120 ha. The well design allows for water level decline, thus permitting maximization of net to gross command by groundwater irrigation within the project area. June

66 ANNEX 5 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Irrigation Water Supply, Demand and Quality 1. Water Supply. The project water supply would be obtained from an 80% dependable annual rainfall of about 1,400 mm (Annex 2) and about 90 Mm 3 from groundwater (Annex 4). 2. Water Demand. The projected water demand was derived from conservative estimates of crop water requirements adequate to establish the project water balance, to determine the tubewell pumping requirements, and to design the channel conveyance capacities. The total water required in a dry year to meet the demands of the 186% irrigation intensity for the projected cropping pattern at full development was estimated at 90 m 3/year equivalent to 12,100 m /ha/year (8,900 m 3ha in an average year) over the 7,500 ha area. The average monthly demands of a typical 120 ha tubewell command area can be met by pumping not more than 20 hours per day thus meeting the offpeak only pumping hours restriction. During a dry year, daily pumping would be required up to 22 hrs (May), 21 hrs (June) and 21 hrs (July). 3. The maximum water requirements for individual crops were determined (Table 1) from: (a) consumptive use calculated by the Blaney Criddle method using the climate data at Chitwan and Bairia, the nearest stations with significant periods of record; (b) effective rainfall assumed to be 70% of the 80% monthly dependable rainfall at Bairia; and (c) deep percolation at the rate of 1.8 mm/day during the paddy cultivation season. Appropriate provision was made for land preparation, nurseries and filling paddy fields. For late wheat a nominal standby provision was made for land preparation water at the beginning of the season as insurance against premature cessation of the preceeding monsoon rains when resulting hard soils would be difficult to cultivate with typical small farmers' equipment. Gross irrigation requirements were determined by applying the following efficiencies (%: Paddy Other Crops Field Conveyance Overall Efficiency These water requirements are in line with those on similar projects in the Terai. 56

67 ANNEX 5 Page 2 4. It would be possible, under improved water management conditions, to economize up to about 20% of the irrigation water requirements. Such savings would provide for intensified cropping possibilities or limited extension of individual tubewell commands. 5. Water Quality. Extensive tests of groundwater showed this was of high quality Cl-Si and C2-S1 and suitable for sustained irrigation use. June

68 Table 1 NEPAL- BHAfIFAWA-LUDWINI GROUNDVATUR MOJIT esitt atd Cen VWae Retulrint. ( Jan Feb match, Apr11 N'y t e Jely Augrat _Sat Oct Na- lt Par EnprTtesa(i V7 M LetnIol (80. prob.bility) (i) ISO S llolru(.tli (Mean) Era1 (26) (10) (171 (26) (50) (229) (430) (40) (204) (52) (115 (10) F-rty Paddy 5.3DO ha SeeId ted. l>op 'itctr ~~~~~ ~~~~~ 1.22 ~~~~~ 1.39 ~~~ 1.10 ~ ~ --- ~ ~ ~ ~~~~1.08 Itnc.cc a Sepprole(1.8 s/day) layprprtinad Effeyi'cae el /- 25 U Nk lrpainrqieet Cross lezlgation (60%*ffy5Y rtquirt,nants - ~~~~ ~~~ OD- 3 GrossIrrIatIo requrnrotn (800 ) LiePaddy ha Crop (actor Ft, 17L 1s) Ded bcmln rprto n (ln hey pertelttlne ~~ ~ ~~~ ~~~ ~~~ ~~ ~~~~~~~~~~56 yr rein Pall ~~~~ ~~~~ 1)7 ~~~~ 154 ~~~~ 12,6 ~~~ 10 ~~126 - (((toni flt lrlalneqiset (rota(rrlatl.n reqiireaora(60% effy) Gretalrrlotiao aqoiruenta('05 *3) tori: OSrast ha (ro. fa-tor St S taed preartin ErttlerSn l ye trlafnnocona Gro tir(tiorturret (52t affy) Crn_rjltInrnotmai late meoat he Cent(ote Fr H, rl, o rq tmtt f frn(rg nreqoir.torot (52% ffsy) UOQ ) l Crop -ec Ft folcetiv. ra(n(ais - - ~ ~ 0 ~~ ~~~ 25 ~ ~~0 freen SatIqotlon rnq trntt. 3% Greta i-rxtlooie etqor,eete(000 3S Ceep (o (E9 La.. rtaaln43 52 too { 97 3 Eff-ecl', raooi Nt tirl-ocel-, rnqolita.tt O tat Iegtnd dtaei (co t3b-th * ~ fros le Iadnrq.fIten.t. (521 tfjy) j tter I-ye Iri(tat- Ineqitnr('000.' 83 ill ) Cro.p fotr , 0.37 FL PtEctle ninpall rN clonerotrm,t Cres -twi-alorqrtet (521 *8fy) I F"Ii(,0 ~ 'eaea250 ha Crap tara Ea G(Pe_tloecanPl tint IrIgatIn raqt(rnmsn ' Proselrrlatlo atqriraertta(52% effy) l Grate WitgatIon rnqialtetnt ('Oe00 *3) so C2 Oil-rdt 200 ha Crp motor Ct ~~~ ~ ~ ~ ~ ~ ~ ~~ ~~~42 FE(tcciot raln(all ~~ ~~~0~ :, 10-2 Coalelatorqorn-.na (52% ty Gryce lratnrqaia.nnta ('000 a) tin VC0-0 Ct3) n , , , ,575 Water raqlterent 'CGi 3 S eanh ttab-11al Watr- 3 abit at each tob-1s1 '0 i (25 be' pua.pino) " 18o Palily p-eplno eraed.dring dry y.ar 8a ~ ~~ ~~ ~~~~~~~~~~~~~~~~~~~~~~~~~cr tfs 1/ St-d bed and Thad ctaaan 100c 2I EfffttIon retafa tabtt a. 70% ralefll Qteearlng 4 er c 05 a et'rifl eeanfreprt. tint~ errt Sc s~e. tieypadtty titlda 42, Cetdtyatn afltfydre o5h anst8% lad nfftalenay Paddy 75%. -the atop. 63%. TOTAL 22-8

69 NEPAL BHAIRAWA-LIMBINI GROUNDWATER OJECT Implementation Schedule Calendar Year and Quarters Item Total Unit XQ Topographic mapping 200 km Soil survey (development area) 200 km Soil survey(feas. of stage 2)500 km Well construction 63 No z 5. Equipping of wells 63 No I & D network 7,500 ha O9602 2o Feeder roads 70 km B. Power transmission network 70 km. 9. Miscellaneous works Feasibility report (stage 2) Contracts and Procurement Schedule Item Consultants -x* 2. Well drilling (Force Account) -_wcef.. 3. Power network (LCB) 4. Feeder road contract (ILB) 5. Buildings contract (LCB) --- 2xx Materials (wells) (ICB) _cx3uv+"-l Pumps, motors, etc. (ICB) l Materials (power network) (ICB) -. cxx+++-l l Vehicles (ICB) a. 10. Other minor equipment *vs** **** *a** - Preparation of contract or tender documents xxxxx Call for tender ***** Analysis of bids and award Mobilization or delivery -1- Break-point in materials delivery feas. = feasibility

70 Table 1 unit Local unit Qntity Foreg D taj Y"r 1 Yr 2 Y"r 3z Wg US$ilion --_- 1. Land Acquisition LS g Civil Works 2. Irrigation and Dru,.e Welhead reservoirs Canal sarthvorkes a 2,000,0GO Cnal structures. LS 930,a Villae load Nst, rk Inpro mnt T&V15) Hoads including oulverts km 70 10, k Tubavells Wll drilling and installotion (Table 2) No 63 24, O S Pu phouses so 63 2, kv line with transformers LS O.IO 0.15 o.55 o.o Buildings 1,000 ton Grain Store LS - 90, Agriculture supporting services buildings - 30, OWY Workshop and Store is - 20, lnginerinog end Admnistrative Office extensions LS - 10, Subtotal o Physical Contingencies (10%) 0_ k Civil Works Subtotal_ Items 2,3,4, o Expected Price Increases (%) (14) (26) (38) (50 Cost o Civil Works Cost (Items 2-5) 4 = = 2j Ql Z.12 1 l2z 6. T,bewell Equlpment (Table 3) liptnd Vehicles (Table 4 ) Pokject vehicles o.o _ Workshop ad miscellaneous O equip_nt Subtotal Item _ 8. Projiect Services Agricultural Supporting Services Enginering and Aiinistrmtion o Consultants: Project iaplmentation o 0.10 (Table 6 ) Feasibility Studies 0.3k o Subtotal Ite T Subtotal Items 6,7, Physical Contingeocies (10%) Subtotal i Expcted Price Increase (M) Cost ,0k o Subtotal Item 6,7,8 28 ii 21 2 Total Cost Items i Production Credit 1.00 Orend Total Cost of Project 60

71 NEPAL Table 2 BHAIRAWA-UJXBINI GROUNDWATER PROJECT Cost Estimates Drilling and Installation of 63 Tubewells (not including cost of casings and pumping equipment) Item Total Costa (u '000) 1. Mobilization to and from project site 5 2. Moves between wells, rigging up and rigging down 10 2/ 3. Drilling at 22 inrdiameter Casing at 18 in diameter 18 s. Grouting at 22/18 in diameter Drilling at 17.5 in diameter Casing at 14 in diameter Grouting at 17.5/14 in diameter Drilling at 13.5 in diameter Casing at 10 in diameter Pump Testing and well developaent Pump pedastal and temporary cap Installation of pumping equipment 40 Total Cost 500 g/ Including indirect foreign exchange costs. 2/ in * inches 61

72 ANNEX 7 Table 3 NEPAL E[AIRAWA-LUMBINI GROUNDWATER PROJECT Tubewell. Transmission Line Materials and FAuipment Unit Cif J Item Quantity Cost Cost (us$) (u-s'000) A. Tubewell 1. Combination drilling rigs capable of drilling 14" holes to 210 m depth with accessories and spare parts 2 350, Casings 18" diameter for 63 wells LS Casings 14" diameter for 63 wells LS _ Casings 10" diameter for 63 wells LS kv electric motor plus spares 63 4, Automatic switch gear plus spares 63 1, Turbine, rising main, shaft, vertical head 63 8, Miscellaneous LS - 21 Subtotal 2,100 B. Transmission Line Wire, insulators, etc., and transformers L40 1/ Not including inland transportation and handling 62

73 ANNE Tableh4 NEPAL BH AALON GROUNDWATER PROJZCT Cost Estimates Project Equipment and Vehicles Unit cifl Item Quantity Cost Item TUW) Cost (Uw$'000) 1. Field vehicles 10 41, ton truck 1 8, Mobile workshop field vehicle 1 15, Light motorcycles 20 1, Tractors and trailers 4 7, Spare parts Lump Sum (LS) 12 Subtotal items Workshop equipment LS Communication equipment LS 5 9. Sprayers 5 1, Hand tools LS Survey and hydrological equipment LS Office and miscellaneous equipment 15 Subtotal items Total Cost 220 g/ Not including inland transportation and handling. 63

74 ANNEX 7 Table 5 NEPAL BHAIRAWA-IDMINI GROUNDWATER PROJECT Cost Estimates Road Construction Equipment Unit cif " Item Quantitv c c 1. Road roller 1 15,000 15,ooo 2. Dump trucks - 5 ton 5 8,000 4o,ooo 3. Flat bottom truckb- 5 ton 2 7,000 14,0oo 4. Inspection vehicle: 1 5,ooo 5,ooo 5. Spare parts LS 20, Miscellaneous equipment and tools LS 6,1000 Total Cost 1o0o0000 g Not including inland transportation and handling. 64

75 ANNEX 7 NEPAL Table 6 BUAIRAWA-LUMBINI GROUNDWATER PROJECT Cost Estimates Consultink Services A. Project IMletmentation Consultants M a-motho Cost (T'W;1 000) Teamleader (I and D Engineer) 30 in Design Engineer Hydrogeologist/Groundwater Engineer Drilling Superintendent Soil Surveyor Topographic Surveyor Mechanical and ELectrical Engineer Subtotal PhetxramtrJ and X production 1 :5,000 scale for 20,000 ha 80 Local costs of supplies and services 4- Sub-total A 1,100 B. Feasibility Studies on 50,000 ha Teamleader (I and D Engineer) 2/ Design Engineer Hydrogeologist Soil Surveyor 6 30 Topographic and Ground Control Surveyor Report and map production. 70 Mic eouesso costs and services - 20 u o 54 ~~~~~~~~~~~~~~~~~~~ 1/ The project ieplemnmtation and feasibility studies are to be conducted in the Western Terai, therefore, the teauleader would be able to participate in both activities. 65

76 ANNEX 8 Table 1 NEPAL BAI3RAWA-UJBINI GRCNDVA! ER ProDosed Credit llocation IWR Amount of the Credit Allocated % of (Expressed in Eapenditurs Cat.qory Dollar 3ui%vsAgt) to be H d (1) Construction mate- 2,700,000 rials, equipment, vehicles and spare parts: (a) imported 100% of foreign directly expenditures (b) locally pur- 90% of local chased from expenditures local manufacturer (c) otherviae 75% of local locally expenditures purciaed (2) Civil works (excluding items listed in Category (1) above) dones (a) by force account 400,OOO 75% of local expenditures (b) under contract 2,400, % of foreign exenditures and 75% of local expenditures (3) Consulting services 1,94O,O00 100% of foreign expenditure. (4) Uallocated 2,100,000 Total 9.QQg0 66

77 ANNE 8 Table 2 NEPAL BHAIRAWA-LIBINI GROUNDWATER PROJECT Estimated Sochdulo of Disbursemt IDA Fiscal Year and Semester Azevmlatsd Disbursments (US$ minion) st 0.5 2nd st 2.0 2nd I4.o lot 2nd st 7.0 2nd 8.0 1st 8.5 2nd

78 ANNEX 9 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Agricultural Supporting Services General 1. HMGN has three ministries dealing with agriculture: MFAI; the MLR and the MWP. 2. The Departments under the MFAI include the DIHM, DA, Department of Food and Agriculture Marketing Services and the Department of Land Settlement. The Ministry also has overall responsibility for a number of public sector corporations which include the AIC, ADBN, NFC and also GRDB. 3. The DA consists of the Divisions of Agricultural Education and Research, Extension, Horticulture, Livestock and Veterinary Services, and Fisheries. 4. The DIHM 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, and MHP. The Ward Panchayat is a publicly elected Government official representing the citizens of about ten rural villages. That official has responsibilities for the development of agriculture, minor irrigation and village roads. Division of Agricultural Extension 6. The Division of Agricultural Extension is responsible for agricultural extension in the country through demonstration and training programs. Agricultural officers are assigned to extension services at regional and District levels and also at different District sub-centers. There are four Regional Directorates based in Biratnagar, Kathmandu, Pokhara and Nepalganj. Each District has a DADO who is in charge of the District extension staff including one or more JT, and several JTA. The DADO of the Rupandehi District in which the project is located reports to the regional office in Pokhara and to the central office in Kathmandu. 68

79 ANNEX 9 Page 2 Division of Agricultural Education and Research 7. Nepal's agricultural graduates are trained abroad, most of them at Indian agricultural universities. They are posted as research officers, as DADOs and other District level officers and above. Previously JTs and JTAs were trained at the College of Agriculture, upgraded from a School of Agriculture in 1969, and located at Kathmandu. This college has now been moved to Rampur (Chitwan District) and renamed as the Institute of Agriculture and Animal Science (IAAS). It has better facilities particularly for field training than its former location, and has a two year Diploma as well as a four year degree course. In the future, JTs will be recruited mostly from graduates of IAAS. 8. Presently JTAs are recruited from Certificate holders trained at the Agricultural Training Institutes located in the agricultural experimental farms at Kathmandu, Parwanipur, Nepalganj and Janakpur. The Institutes receive grants from the Ministry of Education and are under academic control of the Tribhuvan University at Kathmandu. A total of 200 students, 50 at each Institute, are given one year training course at these Institutes. Of these, 45% are given stipends and the remaining 55% attend the course at their own expense. There have been some shortfalls in the number of applicants for admission to this course in the last 2 to 3 years, but this condition greatly improved in 1976 when as many as 375 candidates applied for 50 student positions in the Parwanipur Institute alone. The educational qualification for admission to the training course is having graduated from high school, and the University issues Certifcates to the successful students. Up to 5% of the certificate holders are permitted to attend the diploma course at IAAS. 9. The National Rice Improvement Program is responsible for research on various aspects of rice improvement and production. The research center is located at the Agricultural Research Station at Parwanipur near Birganj. So far, research work has concentrated on screening, selecting and field testing of materials obtained from IRRI and India, and on planting dates, crop response to fertilizer application and control of insects and plant diseases. Varieties are tested under both rainfed and irrigated conditions. Plant breeding work was initiated in 1971 and a few new varieties including crosses with exotics as well as local materials have been developed. The USAID provides consultants and funds for research and extension training on cereal production and water management. 10. The National Wheat Development Program is responsible for all aspects of wheat improvement and production. The Bhairawa Agricultural Research station which is adjacent to the project area is the research center for wheat development. It has an area of 35 ha of which 23 ha are cultivated with paddy in summer and wheat in winter. So far the research work on wheat has concentrated on introduction of new varieties--mainly from India--while paying increasing attention to developing new varieties. More emphasis would be placed on irrigation practices for wheat and other dry season crops such as oilseeds and pulses, and also on timely and efficient irrigation of HYV paddy. 69

80 ANNEX 9 Page 3 Work in the Project Area 11. The above rice and wheat research programs would continue to support the project. Housing for training extension staff and progressive farmers would be provided by the project at the Bhairawa Research Farm. A limited number of full-time research, Subject Matter Specialists (SMSs) and supporting staff would be appointed and some transport facilities would be provided under the project. 12. Presently the extension service in the Rupandehi District is understaffed as there are only seven JTs and 15 JTAs against a sanctioned strength of nine JTs and 24 JTAs. With better enrollment for the JTAs course at the Agricultural Training Institutes it is expected that these posts would be all filled by next year, and a total of 12 JTs and JTAs required for the project could all be provided from the existing sanctioned extension staff for this District. 13. The agricultural extension service for the project area would be modelled on the lines of the service which HMGN has introduced in the Birganj Irrigation Project starting from The system involves reorganization and strengthening of existing extension services, new methods of demonstration, strict adherance to a schedule and concentration on important practices for the major crops. The service would be headed by the DADO of Rupandehi District assisted by an officer of similar rank with particular responsibility for the tubewell irrigated area. The gross project area of 20,000 ha would be divided into three extension subdivisions each headed by a JT. Each JT would be supported by three JTAs who would each supervise seven PLAAs. Each PLAA would provide extension to about 240 farmers. For this, 63 PLAAs would have to be recruited and trained at the Bhairawa Agricultural Research Farm (Table 1). Agricultural Inputs Corporation 14. The AIC which was previously known as the Agriculture Supply Corporation is responsible for marketing of modern agricultural inputs essential for intensive farming in Nepal. The main responsibilities include: - import, multiplication, processing and distribution of seed; - procurement and distribution of fertilizers, and equipment and agrochemicals for plant protection; and - import and distribution of farm machinery. 15. Seed multiplication is made through registered seed farmers. Recently a seed processing plant was established in Hetauda with the joint 70

81 ANNEX 9 Page 4 co-operation of HMGN and UNDP. Presently all the required seed for distribution is grown and processed within the country. Improved seed, chemical fertilizers, plant protection equipment and agro-chemicals, and farm machineries are distributed through co-operatives and private dealers. As institutionalized distribution is given priority over the private distribution channel, co-operatives get higher commission than the private dealers. There are about 890 dealers (co-operative and private) in the country, of which about 30 are in Rupandehi District. 16. The AIC owns a number of warehouses at various centers in the country, totalling 28,750 tons capacity at present, and has programmed to construct additional warehouses with a total capacity of 33,500 tons including warehouses of 7,000 tons capacity for seeds. The AIC would also expand the capacity of godowns and the number of dealers in the project area as required. It is expected that the input requirement of the project area could be met from the existing program of AIC. Agricultural Development Bank of Nepal 17. The ADBN has been the only official rural credit institution in Nepal since It emerged from a consolidation of the 'old' ADBN (the 1967 successor to the Co-operation Bank) with the Land Reform Savings Corporation created in The ADBN provides short, medium and long-term credit to individual farmers, co-operatives and corporate bodies engaged in the task of agricultural development. Short-term production credit is granted for purchase of agricultural inputs and small farm tools and for labor expenses. Farmers owning 6 ha of land and over can go directly to the bank for seasonal loans, while those owning less than 6 ha obtain such loans through co-operatives. Medium and long-term loans repayable within a period of 3 to 20 years are granted for such items as livestock, tractors, pump sets, and warehouse construction directly to individuals. Land purchase loans which are medium-term loans repayable within seven years are also provided to tenant farmers to purchase land tilled by them. 19. After scrutiny of loan applications the bank usually advances loans for the agricultural inputs in kind by issuing supply order to concerned supply agencies. Cash loans to pay hired labor are disbursed only after the agricultural inputs have been obtained. 20. Presently institutional credit accounts for only about one-fifth of the total agricultural credit in Nepal, while it accounts for over 90% of the credit for purchase of agricultural inputs and 100% of the credit for purchase of heavy farm machinery. Fertilizer use in the project area is expected to increase from 100 to 4,500 tons and pesticides use from practically nothing to 20 tons. 71

82 ANNEX 9 Page The incremental annual cost of farm inputs including the cost of hired labor, rental of bullock teams by small farmers, and the cost of improved seeds as well as the purchase of fertilizers and pesticides under conditions of full development would amount to about NRs 19 million. The farmers would be able to provide one-third of the funds necessary for the purchase of such inputs from either savings or current income, but it would be necessary for them to secure the balance from other sources. To assure that the balance of such funds would be available annually when needed, an amount of NRs 12,500,000 has been included as a component of the project. These funds would be managed by the ADBN and would be loaned to the cooperatives which would in turn on-lend them to the farmers. In the case of larger farmers, they would secure production loans directly from the ADBN (see Table 2). Nepal Food Corporation 22. NFC was established only a year ago. Its main function is to procure surplus foodgrains, mainly rice from the surplus areas in the Terai and distribute them to the deficit areas in the hills (especially Kathmandu). The second function is to export rice, mainly to India. For rice export, NFC has formed eight rice export companies with HMGN owning 51% of the shares and private mill owners and merchants owning the remaining 49%. The Chairman of each company is nominated by private shareholders, while the Central Manager is deputed by HMGN. The detailed functions of these companies are still to be defined. Presently, rice export is made by export companies with export licenses which were issued contingent upon handing over 25% of their registered stock to NFC at a fixed price which is about 30% cheaper than the market price. So far NFC handles only rice, and rice sales in the hills are subsidized by HMGN. Food and Agriculture Marketing Services Department 23. The FAMSD is responsible for collection and compilation of agricultural statistics, collection and disemination of market intelligence and prices, formulation of marketing policy for agricultural products and inputs, food research and for conducting farm management studies and economic surveys. It took over most of the functions of the Economic Analysis and Planning Division of MFAI. Agricultural statistics on cropped area, yield and production are collected with the assistance of agricultural extension staff, while market intelligence materials are gathered by its own staff. June

83 ANNEX 9 Table 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Agricultural Extension and Training Annual Incremental Qperating Cost Project Field Total Cost Number Salar Allowance Allowance Total Per Year (NRs) (NRs) (Ns) (NRs) (NRs ) DADO 1 * ,520 Add. DADO & Subject Matter Specialists ,600 JT (Headquarters) 2 * ,800 JT (Field) 3 * ,200 JTA ,500 PLAAs ,420 Accountant t ,720 Driver & Sub-Accountants ,000 Peon , ,80 Fuel & Maintenance 30, ,000 Bicycle Allowance 12 a 240 2,880 Extension Activities - 25,000 Training of PLAAs 63 75,600 Farm Training - 25, ,480 Total 595,280 Salary * Paid from the existing Departmental Budget. 73

84 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Incremental Cost of Crop Inputs - (Financial) Items Unit Future Increment Price Incremental Cost of W/O /W 1/ Inputs 'OOO) (NRs/unit) (NRs '000) Seeds Paddy (local) KG Paddy (HYV) Wheat " Maize Oilseeds " Pulses " Potatoes Sugarcane " Fertilizer Complex " 351 2,667 2, ,253 Urea " 200 1,276 1, ,336 Muriate of Potash " 30 1,182 1, , ,663 Plant Protection NRa 88 2,334 2,246 NA 2,246 Bullock Team (hired) days ,056 Labor (hired) days ,522 19,217 1/ O. Without ProJect; W = With Project o

85 ANNEX 10 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Present and Projected Cropping Patterns and Production Present Cropping Patterns and Production 1. The present cropped area for the project is about 9,600 ha which on a net cultivable area of 8,100 ha gives a cropping intensity of 118% -- the same as the average for the whole country. Paddy is the dominant crop and accounts for 80% of the cropped area. Wheat is the major winter crop accounting for 12% of the cropped area. Minor crops include wet seasffn'pulses, rabi or winter pulses and oilseeds, and a year-round sugarcane crop-fwiich together accounts for the remaining 8%. 2. High yielding varieties of paddy (IR 20 and 22) have been introduced during the last decade, but due to inadequate rainfall and the consequent investment risk on inputs, HYV presently covers only about 4% of the total paddy area. Wheat is mainly RR 21, a high yielding variety introduced from India, which is sown with soil moisture remaining after harvesting paddy. 3. Wet season pulses (Cajanus Indicus) account for 2% of the cropped area while rabi or winter pulses account for another 2% and mustard oil seeds 2%. Sugarcane is not an important crop and is grown mostly on marginal land. 4. The present cropped area and production shown in Table 1 are reproduced below: Crops Area Production (ha) (tons) Paddy (local) 7,425 8,167 Paddy (HYV) Wheat 1, Pulses Oilseeds Sugarcane 200 5,000 Total 9,600 Net cultivated area 8,100 Cropping Intensity 118% 75

86 ANNEX 10 Page 2 Future Cropping Patterns and Production 5. Irrigation from the project would make significant changes in the cropping pattern. Lack of irrigation is presently the major constraint to a total shift to HYV paddy during the wet season and to expansion of the wheat area during the winter dry season. Therefore, the supplementary irrigation during the wet season would make a major shift from local to HYV paddy, and irrigation in winter would enable large scale expansion of the area under wheat. With an assured water supply, farmers would not hesitate to apply increased dosage of fertilizers and other inputs. 6. The projected cropped area is 14,000 ha which on a net cultivated area of 7,500 gives a cropping intensity of 186%. It will be noted that the net cultivable area at full development will be less than that of the present by about 600 ha which will be required for constructon of roads, storage tanks, distributaries and field channels. 7. The future with project cropped area and production shown in Table 1 are reproduced below: Crops Area Production (ha) (tons) Paddy (local) 500 1,350 Paddy (HYV) 6,725 23,537 Wheat 5,500 16,500 Pulses Oilseeds Maize Potatoes 250 2,500 Sugarcane 100 5,000 Total 14,000 Net cultivated area 7,500 Cropping Intensity 186% It is possible that the area under wheat may expand more than the projection. Future Crop Yields 8. With an assured water supply, improved farm management, an adequate supply of inputs, expanded use of HYV seed, and an improved extension service, crop yields are projected to increase over a five year development period (for each well) as follows: 76

87 ANNEX 10 Page 3 Present Future Yield Yield (tons/ha) Paddy (local) Paddy (HYV) Wheat (HYV) Pulses Oilseeds Maize Potatoes Sugarcane June

88 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Present and Projected Cropping Patterns, Yields and Production Present Future Without Proect Future With P ect Area ield Production Area Yield Productio. Irma -ield Production (7 a n ton K) tons) (ha) -(tons) Wet Season & Annual Crops 1. Paddy (local) 7, , , , , Paddy(HlV) ,200 6, , Sugarcane , , , Pulses Maize-/ Dry Season Crops 6. Wheat 1, , ,350 5, , Oilseeds Pulses Q Vegetables (potatoes) ,500.0 Total cropped area 9,600 9,600 14,000 Net cultivated area 8,100 / 8,100k' 7,500 Cropping intensity 118% 118% 186%, 1/ It is assumed that maize will be grown by small farmers between wheat and HYV paddy on a small portion of their land. 2/ It is assumed that about 8% or 600 ha will be required for construction of roads,storage tanks, irrigation 00 channels and bunds, leaving 7,500 ha of irrigated land on completion of the project.

89 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Cropping Calendar Crops Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Paddy (Local) Paddy (HYV) Maize Wheat / Pulses Oilseeds Potatoes Sugarcane Planting a- Nu.rwy period Growing period in the fid 1! World Bank-15945

90 ANNEX 11 Page 1 NEPAL BRAIRAWA-LUMBINI GROUNDWATER PROJECT Prices for Economic and Financial Analyses 1. Prices used in the economic and financial analyses are presented below: Item Price Economic Financial (US$/ton) (NRs/ton) (NRs/ton) Crops Paddy 155 1,938 1,400 Maize 105 1,312 1,800 Wheat 130 1,625 1,600 Oilseeds 345 4,312 3,900 Pulses 320 4,000 3,800 Potatoes Sugarcane Fertilizers Urea 255 3,190 3,050 Muriate of Potash 150 1,875 1,840 Complex ( ) 210 2,625 2,670 Labor (NRs/day) Farm Gate Prices for Economic Analysis 2. Nepal currently exports about 10% of its grain production as well as some of its mustard and sugarcane to India; such agricultural exports are one of the major sources of foreign exchange. In view of the importance of such foreign exchange it is expected that Nepal will make every effort to continue exporting agricultural crops. The prices selected for use in the economic analysis reflects this continued export position. As opposed to crops, Nepal imports all of its fertilizer and this trade position is also reflected in the economic prices used in the analysis. 80

91 ANNEX 11 Page 2 3. The derivation of the prices for the internationally traded agricultural crops and fertilizers is presented in the following two tabulations. 4. The derivation of the economic prices for pulses and potatoes which are not internationally traded and which are minor crops in the projected cropping patterns for the BGP were based largely upon the current market prices in the project area. The economic price for mustard was developed by reference to the other oilseed crops which are internationally traded and which are included in the price projections made by the Bank Group. 81

92 ANNEX 11 Page 3 Steps Paddy Maize Wheat Mustard - (US $/ton) Projected 1985 price (a) in 1973 values *300 (b) in early 1976 values (assumed conversion factor 1.42) Price adjusted for quality differential (% of above) (70%) 239 (90%)100 (75%)122 (80%) 340 Estimated shipping and handling charges to potential trading areas in UP (India) cif price UP (India) Estimated transport, handling, marketing between project area and UP fob/cif price project area Estimated handling, milling and transport cost from farm gate to market centers Farm gate price Farm gate price for paddy assuming 65% milling yield * Based upon 1985 average of projected price for all oil crops - Annex 1, p.37, Bank Report No * UP is Uttar Pradesh State. Muriate of Triple Super Steps Urea Potash Phosphate Complex (46%) (60%) (46%) ( ) 1/ Projected 1985 price (U.S. $/ton) na Adjustment to January, 1976 (142%) na Addition of freight and handling 2/ na Total Price (U.S. $/ton) / 1/ FOB origin price: Source: (Economic Analysis and Projections Dept., May, 1975). 2/ Source: Report No. 959-NEP; Appraisal of Rural Development, Nepal. 3/ Derived from prices of urea and TSP. 82

93 ANNEX 11 Page 4 Farm Gate Prices for the Financial Analysis 5. Unfortunately Nepal does not publish farm prices for agricultural products; the only price series available is one on retail prices and these are available for Kathmandu as well as the four Districts including Rupandehi. There is also a marketing publication for paddy which gives the price spreads between the farm gate and the retailer. 1/ With appropriate adjustments this can be used to adjust the retail price to the farm gate for all crops. The farm gate prices for the financial analyses were developed by starting with the 1974/1975 retail prices in the harvest months when most of the commercial crops are sold, adjusting these to the farm gate and adding 8% to bring the 1974/1975 price up to the current level (January 1976) as shown in the following tabulation. These were then checked with prices reported by farmers to the mission and found to be in substantial agreement. Mustard Steps Rice Wheat Maize Pulses Seed Retail price -- Rupandehi (NRs/kg) Adjustment to farm gate price (%) /a 54 /b Farm gate price (NRs/kg) Adjustment to Jan 1, 1976 (108%) Price/ton (NRs) 1,430 1,580 1,810 3,840 3,890 Rounded 1,400 1,600 1,800 3,800 3,900 /a Includes allowance for storage, transportation, drying and processing. /b Includes conversion from paddy to rice at milling turnout of 65%. 6. The financial price for fertilizer was developed through interviews with farmers, extension people and the AIC. The financial price for paddy reflects the paddy procurement policies of the Government and its endeavor to 1/ Economic Analysis and Planning Division, Ministry of Food and Agriculture, Nepal, "Rice Marketing in Nepal," March

94 ANNEX 11 Page 5 keep the retail price of rice low in the urban areas. The financial price for maize reflects both the scarcity and relative importance of this crop in the diet of the hill people. It is coincidental that the economic and financial prices of fertilizer are almost identical. This results mainly from the policy of the Government to subsidize the price of fertilizer to the farmer. 7. Rate of Exchange. For some years HMGN has maintained a dual exchange rate, one in terms of US dollars and the other in terms of Indian rupees. On Oct. 9, 1975, HMGN depreciated the Nepalese rupee against the dollar by 15.5% resulting in an exchange rate of NRs 12.5 to US$1 while keeping unchanged its exchange rate of NRs to Indian rupees 100. This change eliminated the disorderly cross rate situation which had developed since 1972 and at the same time brought the NRs substantially into line with the US dollar. The official exchange rate (NRs 12.5 to US$ 1) was used in the economic and financial analyses, but the country's basic resource potential remains weak and the long-term outlook remains unfavorable. In recognition of this, a sensitivity analysis was made using a rate of NRs 15 to US$ 1. The specific adjustments required in the rate of return analysis to reflect the shadow exchange rate depends upon whether the analysis is made in terms of local currency or US dollars. In this case, the analysis was made in terms of dollars. Therefore, the use of the shadow rate of exchange decreased the cost of project works and components involving local currency including the cost of O&M, and on the benefit side, it reduced the cost of local transport and handling and this increased the economic farmgate prices. Thus, the use of the shadow rate of exchange in the analysis decreased the project costs, both capital and operating, and increased the project benefits. The results of this analysis are shown in Annex 14. June

95 ANNEX 12 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Crop Inputs and Farm Budgets General 1. Present agricultural practices and the expected overall changes in cropping patterns, yields and production in the project area are described in Annex 10. The main purposes of this Annex are to determine: (a) the impact of the project upon the income of the farm families who are living at or below the poverty level, and (b) the capacity of the project beneficiaries to repay project costs. Crops Input Requirements 2. Present and projected farm inputs and labor requirements under the project are given in Table 1. The estimated current levels of inputs and labor requirements are derived from the data supplied by the FAMSD and from the sample surveys conducted by the Tahal Consultants in the project and adjacent areas. These were updated by interviews with the farmers in the project area. Future requirements are based on the recommendations of the DA and on observations of the cultural practices of the progressive and other farmers of adjacent areas where paddy and wheat crops are cultivated under irrigation. For the various inputs and labor requirements, the following are the basic assumptions: (a) Fertilizers. Very little fertilizer is used at present. No fertilizer is used for local rainfed paddy while a little urea is used for HYV paddy. A little 'Complex' fertilizer (20:20:10) and Urea is used for wheat. The recommended dosage for HYV paddy and wheat is 100 kg N, 60 kg P205 and 40 kg of potash per hectare. Even the progressive farmers in the nearby irrigated areas do not apply fertilizers up to the recommended dosage, but it is expected that with the project the use of fertilizers would increase up to 80-90% of the recommended dosage for nitrogen and potash and 66% for P 05. On this basis, the projection for the future use is 96 kg N, 40 kg P and 36 kg Potash. 85

96 ANNEX 12 Page 2 (b) Farm Labor. Monthly labor requirements including both family and hired labor for each crop are presented in Table 1. These estimates are based on the assumption that no substantial change in farming practices will take place. (c) Bullock Expenses. Bullocks used for land preparation, threshing and hauling are usually owned by the larger land holders and rented by the small holders. However, the imputed cost of a pair of bullocks to the owner is roughly equal to the daily rental charge. Consequently, this cost has been uniformly applied for all crops and farm sizes. (d) Miscellaneous at 10% of total production costs includes interest on short-term production credit. Farm Budgets 3. Based on the cadastral survey conducted by the MLR, about 61% of the farmers in the project area have an average holding of 0.6 ha, 23%, 1.99 ha and the remaining 16%, 6.07 ha. Of the first group of small farmers, about 40%, have holdings that would average 1 ha in size. Therefore, four representative farm sizes have been chosen for preparation of farm budgets: 0.68 ha (or 1 bigha), 1 ha, 2.04 ha (or 3 bighas) and 6 ha (or 9 bighas). 4. Farm budgets for the four farm sizes are given in Tables 2-5. The following assumptions were made in preparation of these budgets: (a) Cropping Patterns and Intensity (i) The cropping pattern in respect of the main crops of paddy and wheat would be more or less the same for all farm sizes except that the present cropping intensity would be about 130% for small size farms (0.68 and 1 ha) as against 120% for 2.04 ha farms and 115% for 6 ha farms. At full development, the cropping intensity on smaller farms would increase to about 190% as against 180% for 2.04 ha farms and 175% for 6 ha farms. (ii) The operators of the smaller size farms would grow a crop of maize immediately after the wheat harvest and before transplanting paddy on about 10% of crop land to add to the supply and variety of foodgrains available for family use. 86

97 ANNEX 12 Page 3 (iii) The operators of the medium size farms would grow a small hectarage of potatoes while the larger farmers would concentrate mainly on rice and wheat without maize and potatoes. They would also continue to grow sugarcane on their marginal land but on only half the present area under this crop. (b) Crop Yields and Total Input Requirements Projected yields used in the budgets are given in Annex 10. Crop inputs have been estimated based on the input requirements discussed above and given in Table 1. (c) Hired Farm Labor. The monthly labor requirements, based on Table I and the cropping patterns, have been calculated for each farm size. The need to hire labor varies with the size of farm. Generally small farms (0.68 and 1 ha farms) do not need to hire any labor although there might be some labor exchange arrangements during peak seasons, as labor requirements can be fully provided by the farmer and his family. Medium size farms (2.04 ha farm) will need to hire about 8-10% of their labor requirements at present and at future without project, but about 20% at full development in the future with the project. Most operators of large farms (6.0 ha) act only as managers and hire all the labor needed to cultivate their land. Labor inputs for channel maintenance at 12.5 days per ha have been included in the future with project budgets. (d) Prices. Present and future inputs are valued using the 1975 financial prices which in the case of fertilizers are subsidized to the extent of 40-50%. (e) Non-Farm Income. Such income is very limited as it is derived mainly from field work on larger farms during peak seasons. (f) Irrigation. Costs of irrigation water have not been included as a production cost in the derivation of net farm income. Effect on Family Income 5. With irrigation provided under the project, income levels will change as follows: 87

98 ANNEX 12 Page 4 Gross Value Production Net Value Non-Farm Total of of Family Farm Size /a Production Cost /b Production Income Income NRs ha (one bigha) Farm P 1, , ,588 W 1, , ,003 W 5,986 2,115 3, ,261 Increase over W (%) ha Farm p 2, , ,002 X 3, , ,728 W 8,796 3,112 5, ,894 Increase over W (%) (3 bighas) Farm 3, , ,072 W 5,567 1,505 4, ,122 W 17,406 6,947 10,459-10,459 Increase over W (%) (9 bighas) Farm P 11,466 7,795 3,671-3,671 W 16,296 9,590 6,706-6,706 W 49,944 28,747 21,197-21,197 Increase over W (%) Accordingly the net income from farming will increase 146 to 216%, and the total family income 113 to 216%. /a P = present, p = future without project, W = future with project /b Does not include cost of family labor and management. 88

99 ANNEX 12 P~~5 Project Rent 6. Utilizing the basic infqrmation presented in the fari udget4, the project rent was calculated for each of the farm models; when reduced to a per ha basis, it was found to be practica4ly tie same for all four models. The assessment of water charges equal to 45X of the project rent would result in a water charge of app;oximately Nl 800 per ha and, assuming only about 20 days of off-farm employment per year by operators of the smaller farms, would leave sufficiett i,wome on all models to enable the farm families to live at or above the poverty level of NRs 3,100 per family per year (Table 6). June

100 NEPAL BHAIRAWA- UJMBINI MROUNDWATER PROJECT Basic Inputs per Hectare for Various Crops Paddy Paddy Maize Wheat Oilseeds Pulses Potato SUgarCane Local u.y.v. P W W P W W P w W P W P W P W P W W P W w INPUTS Seed - Kg ,200 3,000 3,000 3,000 NRS ,400 Goo Fertilizer Complex - Kg NRS Urea - Kg NRs M P-Kg NRs Plant Protection Wllock gxpenses Total NRa , , , ,174 1,257 1,650 2,237 IAOR (man-days) January a February March April may June July August Septe11er October November Decanber Total _ IEa 6 per man-days , ,800 1,980 2,040 2,400 1/ Includes family & hired labor.

101 8KPAL BHAIRAWA-UMY8INI GROUNDWATER FROMMET Farm Budset for 1 Bisha (0.68 ha) Farm Present Future Witbout Prolect Future With Proiect Area Yield Production Value Area Yield Production Value Area Yield Production Value ha t/ha tons Bs. ha t/ha t.ans NR.s ha t/ha tons Rs Revenue Paddy (local) , , ' 01w) ,982 Maize Wheat ,256 Oilseeds Pulses Potatoes Sugarcane Total , ,986 Net Cultivated Area Cropping Intensity 131% 131% 191% Production Costs Seed _ _ 129 Fertilizer ,10l Plant Protection _ Bullock Expenses _ 379 Hired labor _ Land Tax _ _ 51 Channel Maintenance i Miscellaneous Total ,115 Net Income before Irri- 3 gation Costs 1,078 1,493 3,871 Incremental Income 9 1. Over Present 2. Over Future Without Project 2,793 2,378 E Non-farm Income Total Family Income 1,588 2,003 4,261

102 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJYiCT Farm Budget For One Hectare Farm Present, Future Without and With Project Revenue Present Future Without Pro1ect Future With Proiect Area Yiel Production Value Area Yield Production Value Area Yield Production Value ha t/ha tons (Farm Gate) ha t/ha tons NRs. ha tjha tons we NRs. Paddy (local) , , " ( HYV) ,410 Maize Wheat ,360 Oilseeds Pulses Potatoes Sugarcane Total , , ,796 Net Cultivated Area Cropping Intensity 130% % Production Costs Seed Fertilizer T ,623 Plant Protection Bullock Expenses Mired labor _ _ Land Tax Labor of Channel Maintennce Miscellaneous Total a,112 Net Income before Irrigation Costs 1,582 2,308 5,684 Incremental Income 1. Over Present 4, Over Future Without Project 3,376 Non-farm Income Total FamilY Income 2,002 2,728 5,894

103 NEPAL BHAIIAWA-LUMBINI GROUNDWATER PROJECT Farm Budget For 3 Bighas (2.04 ha) Farm Present Future Without Proiect _ Future With Project Area Yield Production Value Area Yield Production Value Az-ea Yield Production Value hs t/ha tuna NRs, ha t/ha tons NRa. ha tlh tons Revenue Paddy (local) , , (HYV) ,960 Maize Wheat ,240 Oilseeds @ Pulses Potatoes Sugarcane Total , , ,406 Net Cultivated Area Cropping Intenaity % Production Costs Seed is- - _ 508 Fertilizer ,142 Plant Protection Bullock Expenses t 067 Hired labor Land Tax _ Channel Maintenance Miscellaneous Total , Net Income before irri ,012 _ 4,0t* ,459 gation costs Incremental Income 1. Over Present 2. Over Future Without Project 6,397 Non-farm Income Total Family Income 3,072 4,122 10,459

104 NEPAL BHlAIRAWA-IMBINI GROTJNDWATER PROJECT Farm Budget for 9 BighaS (6 hal Farm Revenue Present Future Without Project Future With Proiect Area Yield Production Value Area Yield Production Value Area Yield Production Value ha ttha tons NRs. ha t/ha tons KRe. ha t7ha tons NRs Paddy (local) , , ,890 " (HYV) , , ,950 Maize Wheat ,200 Oilseeds Pulses PotatoeS -_ Sugarcane Total , Net Cultivated Area , Cropping Intensity 115% % % - - Production Costs Seed ,127 Fertilizer , ,364 Plant Protection ,847 Bullock Expenses ,200 _ - - 1, ,120 Hired labor - - 4, , ,776 Land Tax Channel Maintenance Miscellaneous Total , T3PT _ - _ 2,747 Net Income before Irri ,671 6, ,197 gdtion Cost Incremental Income 1. Over Present - - _ 17, Over Future Without Project ,491 Non-farm Income - Total family Income 3,671 6,706 21,197

105 BHAIRAWA-IUMBINI GROUNDWATER PROJECT Pro.ject Rent For Four Farm Models Farm Models I (o.68 ha) II (1.0 ha) III (2.04 ha) IV (6.0 ha) Items * w W w _ w (i) (ii) Expected Gross Production Value (NRs) 1/ 1,980 5,986 3,021 8,796 5,567 17,X06 16,296 49,944 Certainty Fquivalent of (i) (NRs) 2/ 1,782 5,387 2,719 7,916 5,010 15,665 14, ,995 (iii) Crop Inputs (NRs) 2/ 487 2, ,112 1,505 6,9h7 9,590 28,747 (iv) Family Labor (NRs) L/ 585 1, ,679 1,537 2, (v) Net Returns (NRs) 5/ 710 2,130 1,14 3,125 1,968 6,o0)5 5,077 16,2L8 (vi) Management fee (NRs) 6/ ,625 (vii) Net Farm Returns (NRs) 639 1,917 1,030 2,813 1,771 5,441,569 lh,623 (viii) Project Rent (NRs) 7/ , (ix) Project Rent per ha (NRs) 1,879 1,783 1,799 1,675 (x) Rent Recovery Index with total charge of NRs 800/ha 8/ (xi) Amount Available for Family Living (NRs) 2/ 2,57 h,079 7,239 11,898 B - = Future without project; W = Future with project. 1/ Tables 2, 3, 4, and 5. 2/ (i) less 10%. 3/ Tables 2, 3, 4 and 5. an k/ Some labor hired on Model III; all labor hired on Model IV. 5/ (ii) less (iii) and (iv). 6/ (v) less 10%. 7/ Net Farm Returns in future with project less future without project. 8/ Comprised of cash payment of NRs 725. and labor contribution of NRs 75/ha. Since the NRs 75/ha has been 1.0 deducted as a cost in the farm budget representing the future conditions with the project, in calculat- Lu ing the Rent Recovery Index the Project Rent (line ix) was increased by that amount. 2/ (ii) less (iii) and 725 NRs per ha.

106 ANNEX 13 Page 1 NEPAL BRAIRAWA-LUMBINI GROUNDWATER PROJECT Farm Labor Analysis General 1. Even though the farms in the Bhairawa-Lumbini Groundwater Project area are relatively small, because of the labor-intensive methods of farm production employed there is a shortage of farm labor in the area--particularly on the larger farms. The operators of such farms find it necessary to recruit seasonal labor in India to meet the peak requirements. Labor shortages occur in July when the paddy is transplanted and again in October and November during the harvest of paddy. Such labor shortages, particularly during the harvest season, would be accentuated with the project. Labor Supply 2. Based upon the equivalent of two adult workers per family and 25 working days per month, the 4,500 farm families in the project area could theoretically perform 225,000 man-days of work per month or 2,700,000 man days per year (See Table 1). The operators of small farms in the area do some work for operators of larger farms during the peak seasons, but as a group they are nearly fully occupied on their own farms during the peak labor seasons when there is a shortage of labor in the area. The residents of project towns such as Butwal and Bhairawa do not assist with farm work-- even during the peak seasons and thus do not contribute to the farm labor supply. Labor Requirements 3. In the future with the project, the farm families could provide the total labor required during all months except in July when it would be necessary to hire help to assist in the transplanting (Table 1). In the future with project condition farm labor shortages would also occur during the paddy harvest months--september and October. As a result of the increase in the hectarage of wheat there would also be substantial increases in the labor requirements during February, March and April, but the labor supply from project farms would be able to meet the requirements during those months without employing outside help. 96

107 ANNEX The need to employ labor varies with the size of form, As a general rule, the labor supply for the farms less than 1.7 ha in size can be provided by the operator and his family. Farmers cultivating larger farms find it necessary to hire additional labor to assist with the farm jobs during the peak labor seasons. Most operators who farm over 5 ha act only as managers and hire all the labor needed to culttvate their land. Such operators employ one or more full time laborera as well as casual help as needed during the peak labor seo4ons, 5. Under future conditions with the project it is anticipate4 that the farmers would provide labor rather than cash to maintain the irriw gation and drainage systems; it is estimated that this would require 12.5 man-days per ha per year. This requirement, which would omoupt to 93,750 man-days per year or 7,810 per month has been included in tho farm labor analysis. Economic Cost of Labor 6. It is expected that under conditions of full development with the project, the annual labor requirement of the project faris would amount to 2,257,000 mandays in contrast to 1,126,000 in the future without the project -- an increase of 1,131,000 mandays (Table 2). Most of the labor required to meet the incremental requiroments could be provided by the project farmers and their families and landless people U.vins in the project area. However, during the peak season it would be necessary to bring labor in from India. Such labor is available at a rate of NRs 6.5 per day and this has been taken as the alternative opportunity cost of labor during the peak season. During the slack season, the alternative opportunity cost has been taken at NRs 2 per day which is consudered to be the incremental cost of subsistence associated with workins in cont;ast to remaining idle. In other seasons of the year when the farm labor supply is nearly fully occupied, the alternative opportunity cost has heen taken at NRs 4 per day. Utilizing these rates, an average alternative opportunity cost of incremental labor is determined to be NRs 4.69 per day gnd the total annual economic cost of incremental labor for the project is NRs 5.30 million. June

108 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Seasonal Farm Labor Analysis Items Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total Farm Family Labor ('000 mandays) ,700 Labor Requirement Future without project ('000 mandays) ,126 Future with project ('000 mandays) h ,257 Shortages: Future without project ('000 mandays) Future with Project ('000 mandays) % 13 '00

109 BHADWA-ILWwI 5lOROUDWWTE PR0MWT leonuc Cot of Fa abor Itcs aa bb. =. =. 11= J=n iulr L. SoDt. Oct. YRL. Dc Labor Requirement.s ('000 Mwdu) Future without project ,126 Future with project ,257 Incree nt with project ,131 Average looenmc Opportaidty Cost (k/sandya) i 4.69 Ineremental Economic Cost (flu/million) o '0~~~~~~~~~~~~~~~~ II

110 ANNEX 14 Page 1 NEPAL BRAIRAWA-LUMBINI GROUNDWATER PROJECT Economic Analysis Assumptions 1. The economic analysis is based upon the following assumptions: (a) Prices. The farm gate prices for crops and fertilizer in the economic analysis are derived from projected 1985 world market prices expressed in 1976 currency values and an exchange rate of NRs to US$1.0. Appropriate adjustments to these prices have been made for freight, handling and processing. The price assumptions are discussed in more detail in Annex 11. (b) Benefits. The benefits for the 7,500 ha to be served by the tubewells are measured in terms of increases in net farm income over that which would be expected to occur in the future without the project (See Table 1). The cropping patterns, yields and production are presented in Annex 10 and the costs of production in Annex 12. For purposes of the economic analysis, these costs have been modified to reflect the economic cost of seed, fertilizer and labor rather than the financial cost (See Table 2). Interest paid on production credit (miscellaneous cost) was omitted. The project will provide village roads for the 20,000 ha project area and an improved extension service for the entire Rupandehi District. These will result in some benefits to the enlarged area, but these have not been quantified and are not reflected in the benefit analysis. (c) Labor. The annual incremental cost of farm labor under conditions of full development has been evaluated at NRs 4.7 per day; for the total project it will amount to NRs 5,320,000 (Annex 13). The farm labor analysis includes the labor required for the maintenance of the irrigation and drainage system in the future with the project. (d) Capital Costs. All project costs except price contingencies, production credit and the cost of the investigation of the second stage are included in the project costs (US$9.67 million). 100

111 ANNEX 14 Page 2 (e) Annual Operating Costs. The maintenance of the tubewells, pumps and motors (NRs 35 per ha or NRs 262,500 for project), roads (3% of original cost or NRs 345,000), transmission system (2% of original cost or NRs 172,500), and servicing of the agricult ual production credit (NRs 160,000) have all been included in the annual operating costs. Allowance has also been made for the replacement of the motors every five years (NRs 3,809,375) and the turbines after fifteen years (NRs 9,525,000). Finally, an amount of NRs 1,250,000 has been included to cover that part of the cost of energy for pumping -- related to non-project facilities based upon an overall rate of 25 pais per kwh. (That part of the energy cost related to the project transmission system is included above as part of the project capital and operating cost.) There would also be some cost of maintenance associated with the investment in the agricultural services and extension program. However, since the benefit that will accrue to non-project lands from this service has not been included in this analysis, neither has the increased cost of operation and maintenance associated with the extension program been included. The cost of maintenance on the irrigation and drainage networks were considered as a farm production expense in the farm budgets and deducted directly from the incremental farm income in the benefit analysis (Table 2). Therefore, it is considered as an annual operating cost in this part of the analysis. (f) Period of Analysis and Residual Value. The economic analysis has been based oupon a 30-year period. The end of the 30 years would coincide with the end of the useful lives of the wells, the first replacement of the turbines and the fifth replacement of the motors. Thus, at the end of 30 years there would be no residual value in the tubewells and appurtanant equipment. There would, however, be a residual value of approximately US$400,000 in the drilling rigs and this has been taken into account in the analysis. There would also be some residual value associated with the canals and drainage system, the village roads, and the storage facilities but to be conservative these values have not been included in the analysis. (g) Benefit Accrual Period. All of the lands included in the project are currently developed and are being used for rainfed agriculture and only a minimum of development would be required to prepare them for irrigated agriculture. Therefore, it is anticipated that the time required to achieve full production on the lands under each well would be relatively short compared to the normal new land irrigation 101

112 ANNEX 14 Page 3 project. Even so, to be conservative, it is estimated that no benefit would accrue to the water users the first year, only 40% of full benefit would accrue in the second, 70% in the third, 90% in the fourth and 100% in the fifth. It is further estimated that 12% of the wells would be developed the first year, 32% in each of the second and third years, and the remaining 24% in the fourth year. Reflecting both the rate of benefit accrual under each well and the well installation schedule, the accrual of project benefits is estimated as follows: Year % of full benefit Rate of Return 2. The resulting cost and benefit streams are shown in Table 4. The rate of return is estimated to be 19%. Sensitivity Analyses 3. Several tests were made to determine the sensitivity of the rate of return to some of the basic assumptions made with respect to both the benefits and costs used in the analysis. (i) A decrease of 20% in benefits 15 (ii) An increase of 20% in capital cost of 16 project (iii) A delay of one year in realization 16 of project benefits (iv) All incremental farm labor valued at 18 going wage rate of NRs 6 per day (v) Combination of (i) and (ii) 13 (vi) Combination of (ii) and (iii) 14 (vii) Combination of (i), (ii) and (iii) 11 (viii) Shadow pricing of exchange rate at NRs 15 to US$ June

113 NE PAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Value of Incremental Production (Economic) Value Crops Production Price Incremental F-W/0 /1 F-W Z Increase Production -- -_('000 tons) (NRs/ton) (NRs'oO0; Paddy (Local) ,938-19,787 Paddy (HYV) ,938 43,295 Wheat ,625 24,619 Maize 0.00 o.ho , Oilseeds , Pulses , Potatoes ,250 Sugarcane Total n.a. n.a. n.a. n.a. 51,888 Incremental Farm Costs 21,871 Net Balance 30,017.. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* - -p 1,/ F-W/O 5 future without project; F-W future with project. 0 Li,

114 NEPAL BHAIRAWA_-lKBINI GROUNDWAThR PRCJECT IngcreAntal CroD Production Costs (loonomic) IncreRental Crop Unit FuSure InPritce PzttheLd.ls Coat (NRH/unit) (Is 00OO)3 *sddy (looal) KG Paddy (HYV) heat n %Rise Oi3a..da. n Pulses n h.o 8.0 Potato" Sugar Cane n _ omplexn 351 2,667 2, ,021.6 urea " 200 1,276 1, ,443.2 Muriate of Potash 30 1,182 1, ,583.6 NR 88 2,334 2,246 na 2,246.0 Bullock Team days ,112.0 Crops days 1,126 2,16 2 1, ,869.2 Irrigation iyutem days ,311.0 Total na na na na na 21,870.8 w/o T/ without project; W = with project

115 ANNEX1-4 Table 3 NEPAL BHAIRAWA-LUMBINI GROUNDWiATER PROJECT Cost and Benefit (TJs$ ' ooo) Stresas Net Benefits Ydears Costa to Farrs 1 1, , , , , , , , , o n o J Capital and Operating. 105

116 NIPAL RHAIRAWA-LUNtBINT GROUNDWATER PROJECT Organization Chart Gruntar Resources Ministry of Food Dbve.opsnt Board _Agriculture and Irrigation Secretary, NiDistry of Food, Agriculture azid Irigation(XFAI[,Department and Irrig tion (IAI), of rrigation, Yq'drology Reprosentatire, KeiWatry of Finance, Meber I and Meteorology ~~~~Groundwrater Representative, Representztire Bhairawa-Lumbini Project -P roject Co Coordinating itt"s Ministry of and 1!i (BlGP Power, Mmber Cattr Representative,Project Naim Prolae Maage Coxiusion, Member onsltantn Chief atrict Officer Assistant IUstrict Ldrector Generdt, mrectoi (~~~~~~~~~~~~~*.~~~~J ~~Agricultural Officer frrteion) Developmeznt Department of Agriculture, MAmber Admini tration and Account= n Bsprae"ntative, epal ZlectUicity Director General, Topographic Survey Corporation MMN, laber Froject YManagr, Representative, _lanning, Deign B2airava Grounhbmter nd honitoring Nepal zectricity FroJeet, N_bsr/Seeret Corporation, Member Procurement hapesentative, Ministry of HMe and Construction Panuayat, Member project Manager, Groundumter Rsowurce Dsvelopaent Progra, Member/Secretarr lrect Lin Responsibility Advisory V Impl tig Dhpartent. g/ Coordinating Citt.s at national level for policy, program, budgeting and finance. i/ Coordinating Cimitteo at project level for implemntation. Asociate msmbers to attend as requesteds Need, lairam Agriculture Saserch Station lklstriot lganaer, Agricultural DeveloPent Bank Representative, Soil Sere Division, Departeent of Agriculture Dlstrit Officer, Food and Agricultural arketing Service Departmnt Dstrict Officer, Agricultural Inputs Corporation 106

117 BRD am 62~~~~~~~~~~~~~~~~ am am am APRIL 1976~~~~~~~~~~~~~~~~~ INDIA -.-- C H I N A N EPAL (TIBET) B-. RHAIRAWA GROUNDWATER PROJECT -30, ' ; r OSIMI-OT PROJECT LOCATION AND CIVIL WORKS 30_ 0X, d,,, \~, 7,7 PROPOSED PROJECT AREA TRANSMISSION LINE CESALEOT EXIST NG IRR GATED AREAS TRANSMISSION LINES EXISTING OR UNDER CDNSTRUJTION )~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~OETA NI'O POJECTIS RIGATION IR PROPOSED POWER PLANTS IRRIGAAD DETIO UNDERAOSTUIO POWER PLANTS COMPLETED OR UNDER CONSTRUCTION TERAI BOUNDARY ) ; R _ Cl SASKOT ODU MK Q g A - = PROPOSED ROADS WADMINISTRATIVE UNDARIES AND NAMES EIMSTPIN EASED ROADS INTERNATIONAL ROUNDARICS - -MAJOR ROADS UNDER CONSTUICTION MAHAEARKABAK DA ILEK - H \ C. 4 RAILWAYS -S X, 0 \ i,r ' \-^i r RN,! -!2- -AT^RNT^N92 tmb _ D I i 4 :4 I N I( T B E T MRTHAY\O\ OH, R,NSOUNCHE EGTN F ~#~CKp<4RIRRcIR1Oat ORse ~R R N 4-~~~ ~\ >?, HODPAAN,. Sea Ix <- ; X;?o SRI u LANCA MS A5, DD _ 26' 82. ' SL 8C4. 86-

118

119 NEPAL BHAIRAWA GROUNDWATER PROJECT PROJECT AREA APPROXIMATE LIMITS OF GROSS PROJECT AREA 2::SOUTHERN LIMITS OF BHIABAR ZONE SEDIMENTS - -NORTHERN LIMITS SF FLO WINO ARTESIAN WATER C GROUNDWATER CONEMAND AREA 1120 ha no UNDER EACH WELL) PARROHA..- taarea OF INTENSIVE DEVELOPMENT OF SMALL WELLS /<;fr7;;cat;4t12: /~~~~~~~~~v~~ '. N >NN O~~~~IAMETEDFLDWING GROSS COMMAND AREA OF EXISTING SURFACE IRRIGATION FOREST -- VI LLAGE RODADS TO BE CONSTRUCTED -t ~ ~ -A ~~~~~ -- EXISTINO TRACKS C S TO T0 BE EU UPGRADED G A TO O VILLASEEXI L GE GOADS O D khar$ij,ekan- ~ I ~ ~ ~ ~ j7 ~~~~4~#AHA k\--n ~~~- 1~~~~~~:.W. \ LACK TOP ROAD UNDER CONSTROCTION ~~~~~~~~~~- EXISTING NLACK TOP ROADS A I - --~~~~~~~~~~~~~~~~EXISTING UNMETALED ROADS '-N- / ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ kv TRANSMISSION LINES EXISTING OR UNDER CONSTRUCTION SITEAJEURA, W1 ~~~~~~~ /4' t -27' - % -,oc-~~~~~~~~~~~~~~~~~~ )CONTOUR LINES IN FEET j~,rivers AND STREAMS V ><~~~~~~~t $AkAHEA 7 (4' S2'~~~~~~~~~~~C TOWNS AND VILLAGES ~~~~~~~~~~~~ KILOMETERS All~ ~~~~~~~~~~~~~~~~~~t V.~~~~~/ z3?~~~~~~~~~~~~~~~~~~~~~ BAREWIA ITHAR PAKOSTADfr~~~~~~~~~~~~~~4 N'D I A~~~~~~~~~~~~~~~~~~~~HVA fi The b ~d,ufdfe, h- 'n(dmp~ - N 1 A 0300 Uce y.c I N-.. TERNTIOAL BOuNDARIE-