APPENDIX - K. Project Evaluation for Master Plan

Transcription

1 APPENDIX - K Project Evaluation for Master Plan

2 APPENDIX - K PROJECT EVALUATION FOR MASTER PLAN Table of Contents Page Chapter 1 GENERAL BACKGROUND... K A Note on Economic and Financial Analyses... K Valuation of Prices... K Economic Prices of Traded Goods and Services... K Economic prices of Non-traded Goods and Services... K Conversion Factors... K - 2 Chapter 2 ESTIMATION OF PROJECT COSTS AND BENEFITS... K Project Economic Evaluation... K Economic Prices and Conversion Factors... K Pricing of Agricultural Outputs and Inputs... K Economic s... K Economic Benefits... K Economic Internal Rate of Return... K - 7 Chapter 3 FARM BUDGET ANALYSIS... K General... K Improvement of Farm Economy... K Farmers Solvency for Irrigation Service Charge... K - 10 Chapter 4 SOCIO-ECONOMIC IMPACT... K - 12 Table of Contents Page Table K 2.1 Calculation of Standard Conversion Factor (SCF)...KT - 1 Table K 2.2 Conversion Factors for Fertilizers, Agrochemicals & Seeds...KT - 1 Table K 2.3 Rice Import Parity Price KT - 2 Table K 2.4 Economic Farm Gate Prices of Urea...KT - 2 Table K 2.5 Financial Project s...kt - 3 Table K 2.6 Economic Project s...kt - 4 Table K 2.7 Annual Disbursement Schedule of Financial and Economic Project s...kt - 5 i

3 Table K 2.8 Financial Crop Budget - Without Project...KT - 6 Table K 2.9 Financial Crop Budget - With Project (1/2-2/2)...KT - 7 Table K 2.10 Economic Crop Budget - Without Project...KT - 9 Table K 2.11 Economic Crop Budget - With Project (1/2-2/2)...KT - 10 Table K 2.12 Irrigable Areas of Irrigation Schemes under With and Without Projects...KT - 12 Table K 2.13 Annual Incremental Benefit...KT - 13 Table K 2.14 Project s and Benefits Flow (1/6-6/6)...KT - 14 ii

4 APPENDIX - K PROJECT EVALUATION FOR MASTER PLAN Chapter 1 GENERAL BACKGROUND 1.1 A Note on Economic and Financial Analyses Both economic and financial analyses of this and other similar projects are carried out in monetary values with a view to quantification of the costs and benefits. The difference between the economic and financial analyses is in the definition of project costs and of project benefits. Financial analyses evaluate the commercial viability of the project from the viewpoint of the project entity or of the individual farmer all expenditures incurred on the project or the farm and resultant revenues or returns are taken into consideration. The financial analyses are necessary to evaluate or assess the degree to which the project or farm would generate revenues or returns sufficient to meet the financial obligations of the entity or that of the farmer. The goal of economic evaluation is to quantitatively assess the overall impact of a project in achieving national economic objectives. The impact of the project is assessed in the context of the national economy rather than in the context of the project entity or that of the farmer. Economic analyses differ from the financial analyses in identification and evaluation of both inputs and outputs. It therefore affects both the cost and the benefits. In economic terms, the benefit from the project is the extent to which the end - product contributes to the achievement of national objectives. On the other hand, costs reflect the degree to which the achievement of those national economic objectives is given up (or diverted) by use of these resources in this project. 1.2 Valuation of Prices Economic Prices of Traded Goods and Services As a starting point a distinction is made between goods and services traded internationally at the margin and those that are not. These are commonly referred to as traded and non-traded goods and services. Traded not only means that these goods are actually imported into or exported out of the country but that these goods are not subject to binding quantitative restrictions such as import quotas or prohibitive trade taxes that hinder a free flow across national boundaries. All other goods and services are classed as non-traded and the valuation of these two groups is different in economic analyses. K - 1

5 In the case of traded goods and services it is usual to assume that the country can buy and sell such goods at prevailing prices. Traded goods and services are valued at their border prices net of trade taxes or subsidies in existence in that country i.e. the C.I.F prices in the case of imports and the F.O.B prices in the case of exports. The prices are calculated using the official exchange rate. These are then adjusted for local transport and distribution costs. Trade taxes and subsidies are excluded in the price used in economic evaluation. Production or use of traded goods generally does not affect border prices since the impact on global demand and supply is likely to be small or insignificant. However, this assumption may not be justified in some cases and in such an event marginal cost or marginal revenue as relevant may be used in the valuation of traded commodities Economic Prices of Non-Traded Goods and Services The valuation of non-traded goods and services are more complex. Production and use of non-traded goods and services in a project often affects domestic market prices of these and consequently the use of these goods by other users and producers. The use of non-traded goods as farm input may be met by reducing its use elsewhere or by increasing domestic production. If the use of the non-traded input by the project affects only the quantity of the input s use by others, the input s economic price is derived from its marginal value to users (demand price). If the project affects only the level of production, then the economic cost is derived from the input s marginal cost of production (supply price). 1.3 Conversion Factors Based on the above, tradable goods are valued in terms of border prices and non-tradable goods in terms of opportunity costs measured in domestic market prices. Then there is a need to bring the two sets of prices into correct alignment. This could be done in one of two ways. The first is the shadow exchange rate approach that converts the border value of tradable inputs and outputs into an equivalent value in domestic market prices. The second and more often used approach is the conversion factor approach. In the latter, the domestic price valuation on non-tradable goods is converted to an equivalent value in border prices. This latter approach is used here for the economic analysis and has the advantage of being able to take account of the distortions in the pricing of non-tradable inputs and outputs that are specific to the project. K - 2

6 The above explanation has discussed conversion factors for specific commodities and services. However, in practice, benefits and costs are in the form of aggregates for commodities e.g. civil construction or machinery. In such cases Group Conversion Factors (GCF) are used as is done in this exercise. GCF s are weighted averages of commodity conversion factors for a group of commodities. There are some items for which even a GCF cannot be readily calculated. In such cases, use is made of the Standard Conversion Factor (SCF) - that is the weighted average of commodity conversion factors for all commodities produced or consumed in the economy. Conversion factors are basically used in converting domestic prices of nontradable outputs into equivalent border prices. Tradable goods can be valued directly in terms of border prices, but since the conversion factors for nontradable outputs are derived on the basis of conversion factors of closely related substitutes and complements, it is necessary to have a conversion factor for tradable goods. Conversion factors are useful in estimating group conversion factors for both inputs and outputs. Finally, even though tradable goods can be border priced directly, it is convenient to have the commonly encountered project inputs and outputs readily available. Conversion factors for each specific commodity are calculated by the following formula: M i + X i α i = (Mi + TMi) + (X i + TXi) α i = Specific Commodity Conversion Factor M i = Value of Imports of i number of commodities X i = Value of Exports of i number of commodities TM i = Value of Exports of i number of commodities TX i = Value of Taxes on Exports of i number of commodities GCF and SCF are estimated by grouping related commodities and by aggregating all commodities as in the formula above. K - 3

7 Chapter 2 ESTIMATION OF PROJECT COSTS AND BENEFITS 2.1 Project Economic Evaluation The project economic evaluation is carried out through estimation of the project s economic cost and economic benefits over the life of the investments. This enables estimation of the Economic Internal Rate of Return (EIRR), the Benefit- Ratio (B/C) and benefit minus cost (B-C). These estimations were undertaken individually for this project for 8 major schemes, 11 medium schemes and 9 hydrological groups. For the EIRR it is necessary to derive a stream of costs and benefits over the life of the project by converting financial prices into economic prices through the use of the SCF, GCF and border pricing. The EIRR is the rate of discount at which the total present value of the project cost is equal to the total present value of project benefits over the life of the project. The evaluation for this project was based on the following main assumptions: 1) As about two-thirds of project costs comprise construction costs for rehabilitation of existing irrigation systems, the project life is assumed to be 25 years as this is the expected life of the rehabilitated works. 2) All values are expressed in 1999 constant Sri Lanka rupees. For internationally traded goods, prices were obtained from the World Bank commodity forecasts as appear in Global Commodity Markets (1999), while those for non-traded goods are based on domestic financial prices that were collected in the field at farm gate. Appropriate adjustments were made for freight, handling, processing and quality differentials. 3) The exchange rate of US$ 1.00 = SL Rs is used, which was the exchange rate at the end of ) Due to lack of data and methodological shortcomings to quantify benefits from social amenities, environmental improvements and infrastructure, the economic analysis quantifies only the incremental value of agricultural production resulting from rehabilitation. These consist of increased cropping intensity due to increased availability of water and shift to high value crops and increased yields due to more reliable water supply. To the extent that other benefits have not been quantified in this analysis, the results shown here are an under-estimation of the overall benefits. 5) It is assumed that construction of all irrigation schemes commence simultaneously, in order to evaluate each irrigation scheme. 6) Project costs are those directly associated with irrigation rehabilitation and improvement works and related components for each of the 8 major, 11 K - 4

8 medium and the 9 hydrological groups of minor schemes; (a) all investment costs and incremental recurring costs ( costs) during project life of 25 years; (b) replacement costs assumed to be every 10 years. The costs are assumed to start incurring on completion of construction. 2.2 Economic Prices and Conversion Factors Following identification of all financial costs and benefits, economic prices were applied to estimate the benefits in meeting national objectives. Several conversion factors were estimated to convert financial prices to economic values. In order to evaluate project costs and benefits in terms of world market prices, the Standard Conversion Factor (SCF) was estimated using trade data (import and export values for the most recent five years) and is applied to all goods and services for which a Group Conversion Factor (GCF) was not applied. The estimation of the S.C.F appears in Table K 2.1. The group conversion factor was estimated for agricultural inputs of fertiliser, agricultural chemicals and seeds. The conversion factor was not used for urea as urea is wholly imported; is widely used by farmers and is the most important fertiliser in the project area. Instead, the import parity price was estimated as shown in Table K 2.2. The shadow price of unskilled labour was taken as 0.55 and was based on this estimate of another project in the same project area 1 Conversion factors were also estimated for the capital costs of rehabilitation and for project management and support facilities, including institutional support and are given in the following table: 2.3 Pricing of Agricultural Outputs and Inputs Prices for locally traded agricultural commodities in the project area were collected during the fieldwork. These were prices collected at the farm gate or were adjusted accordingly for freight and quality differentials. The financial output prices were converted to economic prices using the SCF except for rice. Economic price of rice was estimated using international market forecasts by IBRD in Global Commodity Markets in 1999 current prices as shown in Table K 2.3. The price for rice was adjusted for forecast prices in Import parity price was also estimated for urea as this item is wholly imported, is subsidised by government and is the most important fertiliser for farmers in the project area. International prices for both rice and urea were adjusted for 1 North Central Province Participatory Rural Development Project, IFAD, February, K - 5

9 freight, packaging and internal transport to farm gate and for quality differentials. (See Table K 2.4) Prices for agricultural inputs such as seed, fertiliser, agro-chemicals and farm labour were collected during field visits from traders and other agents dealing with these inputs. In the case of fertiliser, seeds and agrochemicals the prices were adjusted based on the group conversion factors that were estimated. Unskilled labour was also adjusted to the shadow wage rate. These adjustments were made to convert financial prices to economic prices. 2.4 Economic s The economic project costs of all irrigation schemes were estimated, based on the financial project costs (see Table K 2.5). Total projects costs that were prepared in financial terms were broken down by rehabilitation and improvement costs of irrigation facilities (inclusive of farm roads) capital costs for project management and support facilities. These included buildings, vehicles, and equipment to support agricultural extension and income generating activities. Total economic costs are summarised as follows, and details are shown in Tables K 2.6 and K 2.7. (Unit: Rs. Million) Financial Conversion Factors Economic Rehabilitation and Improvement s 1, ,519.3 Project Management and Support Facilities Awareness and Training Programmes Administration Engineering Total 2, , Economic Benefits There are many economic benefits that are likely to result with a rehabilitation and improvement project. By far the most important benefit is the increase in agricultural production. This results from increased crop intensity, additional cropping area and the increased productivity resulting from changes in cropping patterns. However, there are likely to be other benefits, depending on the project components. Provision is made in the project for livestock extension services, but the benefits of these investments are not quantified in this analysis. Not all economic benefits are quantifiable. Further, some benefits are lagged and results are visible only after a prolonged period of years e.g. improvement in veterinary services is likely to reap benefits only after improved technical K - 6

10 practices have been adapted by farmers and livestock herd improved. In addition, capital improvements are likely to have secondary impacts and delayed benefits that could not be easily measured. The improvement of farm roads in this project is expected to make remote areas more accessible and lead to better market opportunities and social amenities, particularly education and health services. The project is also expected to provide employment to the members of farm organisations and other rural skilled and unskilled labour during the construction period. These and other such benefits have not been quantified in this analysis because of a lack of relevant data. To that extent the benefits shown below are under- estimated. The economic benefits of increased value of agricultural production arises from increased acreage and more reliable access to water. Approximately 1,400 additional hectares would come under irrigation by year 7 and the increased value of production would be largely due to the increased productivity of the land due to shifting to high value crops. The analysis of the economic benefits is based on crop budget analysis of the present without project situation and the proposed cropping pattern at full project implementation to assess the incremental value of agricultural production. There would be a substantial shift in cultivation to other field crops, particularly chillies, onions, pulses and vegetables all of which are high value crops that would enhance value of production. The incremental net value of production in financial terms is adjusted using border prices and conversion factors to obtain the net incremental benefit in economic terms. Adjustments are also made for the time lag due to rehabilitation and construction in the initial years of the project. The economic crop budgets for each crop and irrigable areas with and without the project are presented in Tables K 2.8 to K 2.12). Based on this data the annual incremental benefit for each scheme has been worked out and appears in Table K The crop budget with the project is based on agronomic data and takes into consideration a host of factors such as soils, rainfall, demand, cropping patterns, the cost of cultivation, technical practices and farmers willingness to grow these crops. 2.6 The Economic Internal Rate of Return The EIRR, the Benefit- ratio and the B-C were estimated for each of the 8 major schemes, 11 medium schemes and the 80 minor schemes that were grouped into 9 clusters. The results of the analysis for each scheme are in Table K A summary of the results is as follows: K - 7

11 Code No. Summary Results of Economic Evaluation Scheme Economic (US$/ha) Economic Benefit (US$/ha) EIRR (%) B/C B-C (Rs. Million) 1MA-01 Nachchaduwa 2, MA-02 Nuwarawewa 1, MA-03 Tissawewa 1, MA-01 Rajangana 2, MA-01 Palukadawela 1, MA-02 Attaragalla MA-03 Abakola 1, MA-01 Magallewewa 1, ME-01 Thuruweli 1, ME-02 Eruwewa 3, ME-03 Uttimaduwa 1, ME-04 Periyakulama 3, ME-05 Maminiya 2, ME-06 Mahabulankulama 2, ME-01 Angamuwewa ME-01 Mahananeriya 1, ME-02 Mahagalgamuwa 2, ME-01 Hulugalla 1, ME-01 Meddeketiya 1, ME-02 Moragoda I 8 minor schemes 1, II 8 minor schemes 1, III 10 minor scheme 1, IV 9 minor scheme 1, V 10 minor scheme 2, VI 11 minor scheme 1, VII 10 minor scheme 2, VIII 10 minor scheme 1, IX 4 minor scheme 1, All Schemes 1, K - 8

12 Chapter 3 FARM BUDGET ANALYSIS 3.1 General In order to evaluate the improvement of farm economy and to clear the farmers solvency for irrigation service charge, the farm budgets of farmers under with and without project conditions were analysed, as shown in the following table. Holding size of Farm Budget Analysis Present With Project irrigated paddy field Average ha Below 0.4 ha Average ha Below 0.4 ha (No. of samples)*1 1, (Proportional Extent) 100% 32% 21% 100% 32% 21% I. Extent of irrigated paddy field (ha/household) II. Cultivated area (ha/ household) III. Farm budget (Rs./household/year) 1) Gross income 96,800 81,200 66, , ,900 77,500 - Farm income 33,600 24,000 11,800 76,500 47,600 21,000 - Non farm income *2 60,500 55,200 53,900 60,500 55,200 53,900 - Loan 1,700 1, ,600 5,300 2,300 - Others 1, , ) Gross outgoing 77,500 65,400 63,600 99,300 78,000 67,700 - Production cost *3 17,900 12,000 6,200 31,300 19,600 8,400 - Loan repayment * ,100 5,600 2,400 - Living expenditure *2 58,700 52,700 56,900 58,700 52,700 56,900 - その他 ) Net income 19,300 15,800 3,300 47,300 30,900 9,800 (Bank deposit) (1,900) (1,300) (1,400) IV. Incremental net income (Rs./household/year) 28,000 15,100 6,500 V. Salaris and cost (Rs./household/year)*6 1) Major schemes Salaris * Material cost Labour cost ) Medium & minor schemes 1, Salaris * Material cost Labour cost *1 Samples of questionnaire survey. *2 Non-farm income and living expenditure under with project are assumed to be same amount as the present condition. *3 Excluding family labour. *4 Assuming that farmers borrow group loan (cultivation loan) from the banks. *5 Allowance of gate operator. *6 costs after completion of the project were estimated at Rs.2,000/ha/year for the major schemes (Rs,1,000 for farmers share) and Rs.1,500/ha/year (all farmers share). Out of the amount of farmers share, Rs.500/ha/year is for the Salaris (same amount with the present), 30% for material cost and 70% for labour costs. Present holding size, cultivation extent, and farm budget in the table were obtained from the result of the farm economic survey carried out by the Study Team in 1999, and indicate figures of one year in the 1998 Yala and 1998/99 Maha seasons. Increase in incomes under with project includes only agricultural production consisting of increased cropping intensity due to increased availability of water, increased yields due to more reliable water supply and the new additional cultivated areas as a result of increased water K - 9

13 from the rehabilitated works. Other incomes obtained through income generating plan are not included in the analysis, because no reliable data is available for estimating them. 3.2 Improvement of Farm Economy Under the with project condition, an average gross income of farmers in all schemes would increase about 50% from the present level, and an annual net incremental income would average Rs.28,000. The gross income of the farmers having irrigated paddy field between 0.4 and 0.8 ha would also increase 34%, and the annual net income would be estimated at Rs.15,000 up from the present. On the other hand, the small farmers having irrigated paddy field less than 0.4 ha and accounting for 20% of total farmers are at a disadvantage for farm economy. The annual gross income of the small farmers would increase only 16%, and the annual net income would also be only Rs.6,500 lower than the above big farmers. The average holding size of irrigated paddy field of such small farmers is estimated at 0.2 ha/household, and it is similar with the landless farmers. To such small farmers, it is necessary to improve non-farm income through income generating plan. 3.3 Farmers Solvency for Irrigation Service Charge After completion of the rehabilitation works, irrigation facilities of D-canals and F-canals for the major schemes and all facilities for the medium and minor schemes will be maintained by the farmers themselves. (The Government is responsible for the of tanks and main canals of the major scheme.) All costs including material and labour required for of facilities will be borne by the farmers. In addition, the farmers will shoulder all allowance (Salaris) for gate operator. The farmers solvency for these costs was evaluated. Present collecting method of the irrigation service charge by FOs is that material cost is borne by farmers cash payment, while labour cost is covered by Sramadana (non cash payment). In addition, FOs is collecting Salaris, separately. In general, the irrigation service charge defined by the farmers is material cost, and Sramadana is not included in the charge. The farmers distinguish Salaris from the irrigation service charge. Therefore, the evaluation was made to the following two cases: i) bearing all of those costs including material, labour and Salaris by cash, and ii) paying only material costs. In case of i), the farmers solvency is evaluated to a ratio of the irrigation K - 10

14 service charge including all costs (material, labour and Salaris) to the annual net incremental income under with project. As seen in the table of farm budget analysis, the irrigation service charge including all costs is estimated at Rs /year/household for the major schemes and Rs.320-1,130/year/houshold for the medium and minor schemes. These amounts account for below 5% of the annual net incremental income, and it seems that almost all farmers can pay such small amounts, in view of the farm economy under with project. As for the case ii), the evaluation is based on the farmers willingness to pay the irrigation services charge (material cost), because farmers share of the charge is largely influenced by their willingness. Based on the results of questionnaire survey and RRA carried out by the Study Team, an appropriate charge considered by the farmers is estimated as follows: ( No. of Samples ) Below Rs.125 Rs Rs Rs Rs.750-1,000 Charge (Material ) Rs./ha/Year 0 Appropriate Charge considered by Farmers All Schemes Major Medium Minor 1, Source: Questionnaire survey carried out by the Study Team(1999) ( No. of Schemes ) Below Rs.125 Rs Rs.500-1,000 Rs.1,000-1,500 Rs.1,500-2,000 Charge (Material ) Rs./ha/Year Appropriate Charge considered by FOs Leaders Answers obtained from the farmers and FO s leaders mentioned above include only material costs, and Salaris and labour costs are not included. As seen in the above figure, more than half of the farmers have been estimated at Rs.250/ha/year as the appropriate charge, and the majority of FOs leaders have been Rs.500/ha/year. To such answers, the required amount of material cost under with project is estimated at Rs.150/ha/year for the major schemes and Rs.300/ha/year for the medium and minor schemes. The required amount of the medium and minor schemes is similar with the appropriate amount pointed out by the farmers, and it will be concluded that the farmers will pay such amount for material cost, if the irrigation facilities are rehabilitated No. of Farmers' Responses (%) Source: Inventory survey carried out by the Study Team (1999) All Schemes Major Medium Minor No. of Irrigation Schemes (%) K - 11

15 Chapter 4 SOCIO-ECONOMIC IMPACT After implementation of the Project, various indirect benefits and socioeconomic impacts are expected as mentioned below. (1) Improvement of Farmers /People Income and Employment Opportunity As a result of rehabilitation and improvement of irrigation facilities and strengthening of agricultural support services, the farmers income will improve considerably through increasing of crop yields. In addition, it would be expected to improve employment opportunity and farmers /people s incomes in consequence of the implementation of income generating programme consisting of home garden activities, livestock raising and inland fisheries, employment information system, job training, loan services for self employment and small enterprises activities. (2) Activation of Regional Economy In addition to increase of production, marketing of farm inputs and outputs would expand through establishment of Pola and collecting points, introduction of co-operative shipping system, improvement of agricultural credits, etc. Farmers' purchasing power would increase along with improvement of farmers income. Moreover, FOs would have profit activities such as co-operative purchasing and agro-processing. All these would contribute to activate the regional economy. (3) Poverty Alleviation As the consideration toward the poor who are landless farmers, widow, etc., the income generating programme for them was planned as one of the development component, and its programme will be implemented by FOs. For the target group of this programme, almost all FOs leaders have agreed at the group discussion carried out by both the Study Team and FOs. In addition, Sri Lankan communities have a good tradition system, so called Kaiya, which supports them. Therefore, the implementation of this programme for the poor would be possible, and would contribute to alleviate poverty in the community. Moreover, the poor can access not only revolving loan planned in the income generating but also multi-aid credit, therefore, such financial support would also be able to improve the poor. (4) Creation of Stable Community by FO s Social Support Services K - 12

16 As the autonomous and representative organisation in the community, it was planned that FOs provide social support services such as anti-alcohol campaign and improvement of public health to the farmers/people. For the implementing organisation of such services, it was proposed to establish the subcommittee of income generating/social services under FO. These activities would contribute to create stable community. (5) Empowerment of Women It was proposed to appoint women s leaders in the subcommittee of income generating/social services mentioned above. This is to provide place and organisation for women s equal activities with men in the community. In addition to such programme, multi-aid credit managed mainly by women s groups was recommended. These would enable certainly to improve social status of women in the community. (6) Environmental Conservation Deforestation and soil erosion due to expanding and continuous chena cultivation in the catchment area has become a problem for the environment. This is caused, increasing dependence of villagers to the chena due to low income. The Project would enable to increase people s income through improvement of land productivity and employment opportunity by the rehabilitation of irrigation facilities and the income generating programme. Therefore, the Project would be able to reduce the people s dependence on chena. (7) Capacity Building-up of Staff Concerned The development plan includes following programmes: i) training on participatory planning to officers of the executing agencies concerned, ii) training on agricultural extension to officers related to agriculture, livestock and inland fisheries, and iii) training to officers of the department of agrarian services (staffs for strengthening of FOs). Such capacity building to them would be helpful largely to implement other development projects in the future. (8) Effect on Strengthening of Extension System to Other Area The plan for agricultural support services includes upgrading and strengthening of IPEU and PDOA offices, Galgamuwa seed farm (nursery tree), ISTI (Maha Illuppallama), IFTC (Nikaweratiya), Aqua-culture Extension Centre (Anuradhapura). These strengthening and improvement plan would enable K - 13

17 activating support services not only in the 100 irrigation schemes but also in those surrounding schemes. (9) Ripple Effect on Development in the Dry and Intermediate Zones As the common problem of the irrigation schemes in the intermediate and dry zones, it is pointed out that the farmers have a general tendency to depend on outside sources for and agricultural supporting services. For the countermeasure, recent projects had and have taken a participatory approach to arouse farmers self-reliance for sustainable management of facilities. In many cases, however, it shows little effect on farmers self-reliance for of irrigation facilities. Meanwhile, a characteristic of this Project differing from others is implementation of awareness programme and strengthening of FOs which play an important role on sustainable development of rural agriculture through its programme. Prior to commencement of the Project, the awareness programme is implemented to both officials concerned and FOs leaders for improving their awareness on participatory development and building-up its implementing system. Secondly, the farmers/community people review the development component proposed in this report, then take up them into their own action plan. At the final stage of the awareness programme, the farmers/community people reorganise FO as an autonomous and representative organisation in their community, and the action plan is implemented by this FO. The government agencies concerned will support FOs by the participatory approach (CAP, PCM, LFA, etc.) for raising farmers self-reliance. As a model project, this development approach would have a considerable ripple effect on development of the irrigation schemes in the dry and intermediate zones. K - 14

18 TABLES

19 Table K 2.1 Calculation of Standard Conversion Factor (Unit: Mill. Rs.) Particulars/Year Yrs Average Export of Good and Services (f.o.b.) 158, , , , , ,194 Import of Good and Services (c.i.f.) 235, , , , , ,364 Export Subsidy Export Tax Import Subsidy Import Tax 23,512 25,300 26,519 27,659 31,961 26,990 SCF Source: Central Bank of Sri Lanka, Annual Report, Note: SCF = (E+I)/{(E+Es-Et)+(I-Is+It)} Where: E = Export, I = Import, Es = Export Subsidy, Et = Export Tax, Is = Import Subsidy, It = Import Tax Table K 2.2 Conversion Factors for Fertilizers, Agrochemicals & Seeds Component Fertilizers Chemicals Seeds *1 Financial Component (%) Materials Local Imported Labour Tax & Surcharges Total Economic Component (%) Materials Local Imported Labour Tax & Surcharges Sub-total Less 5% adjustment Total Economic Conversion Factor Source: Based on Policy Incentives and Comparative Advantage of Non-Plantation Sector in Sri Lanka, World Bank Working Paper. Remarks: *1 Imported components includes bags, dressing and fumigants. *2 Labour is 30% skilled and 70% unskilled. The shadow wage is 1.0 and 0.9, respectively. *3 Taxes and surcharges represent transfer payments and therefore reduced to zero. *4 The bulk purchase of inputs reduces purchase costs by 5%.

20 Particulars Unit US$ Rs. 1. Projected price of rice Bangkok, Thailand, f.o.b. US$/t Quality adjustment 90 (25% broken) US$/t Insurance, freight, etc. US$/t Projected 1999 c.i.f. price of rice, Colombo US$/t Rs./t 16, Port charge, handling, losses storage, financing, etc. Rs./t 2, Value in store in Colombo Rs./t 18,910 Rs./kg Transport to wholesale point Rs./kg Value of rice in project area Rs./kg Marketing margin - 10% Rs./kg Transport - village to wholesaler Rs./kg Value of milled rice at mill Rs./kg Conversion of paddy Rs./kg Milling cost Rs./kg Tranport farm to village Rs./kg Economic farm gate price Rs./kg 9.97 Note. Table K 2.3 Rice Import Parity Price ) Thai 5% broken 1999 constant (Source: Commodity Market, World Bank, Aug.1998) long-term projection (1990 constant) US$/t - Price index (MUV) long-term projection (1999 constant) US$/t 2) Conversion rate: US$ 1.00 = Rs ) Values in 1999 constant terms 4) Wholesaler assumed to be in the Study area 5) Transport assumption: Colombo to Stduy area is 130 km. 6) Rs.4.0/t/km 7) Assumed that rice is milled in village mill. Milling cost is Rs.20/bushel (21.5 kg) 8) Non tradable goods have been converted to economic values using standard conversion factor of Table K 2.4 Economic Farm Gate Prices of Urea Particulars Unit US$ Rs. 1. f.o.b. bulk Palembang, Indonesia US$/t Freifgt to Colombo US$/t c.i.f. Colombo US$/t 104 Rs./kg Port charge, handling, distribution, storage, financing (12%) Rs./kg Bagging Rs./kg Urea price ex distributor in Colombo Rs./kg Transport to the Study area, make up Rs./kg 0.84 margins, etc. (10%) 8. Farm gate price Rs./kg 9.25

21 Code No. Name of Scheme Table K 2.5 Financial Project s (Excluding Price Contingency and GST) s for Project Management and Support Facilities (Unit: Rs.1,000) Majot Medium Minor All Schemes Administration Commanding Area (ha) Rehabilitation and Improvement s for Irrigation Facilities and Farm Roads 14,167 1,194, ,120 1,373, , ,178 13, ,538 57,536 9,214 6,879 64,937 6, , , ,930 2,107, ,800 2,100 1, ,360 10, ,800 22,440 14,408 1,840 38,688 9,414 1, ,896 1,131 23,687 14,640 17, , ,800 1,950 2, ,840 5, ,150 84,480 23,954 5, ,854 41,840 6,704 1,217 19,527 3,465 72,753 23,485 29, , ,900 1,970 18,186 1,404, ,870 1,599, , ,540 20, , ,790 17,430 8,830 95,360 11, , , ,423 2,668, ,700 2,070 *1 Including Angamuwawewa *2 Part of the Rajangana irrigation scheme *3 10% of rehabilitation and improvement, capital costs for project management and support facilities, and awareness and training programmes. s for Awareness and Training Programmes Support Programme Contingency Awareness Pro- Direct Contingency Total gramme gramme (5%) (10%)*3 Others Total Contingency Centres Farmers/ Farmer for Total Others (5%) FOs (Rs/ha) (US$/ha) 1MA-01 Nachchaduwa Wewa 2, ,560 51, ,090 18,480 24,237 2,135 44,852 7,324 1,174 1,233 13,012 1,139 23,882 23,088 46, , ,000 2,960 1MA-02 Nuwarawewa 1,134 53,920 8,090 62,010 10,560 10,820 1,069 22,449 3, , ,266 9,934 9, , ,600 1,420 1MA-03 Tissawewa ,725 3,110 23,835 3,960 3, ,813 1, , ,112 3,604 3,576 42, ,600 1,660 2MA-01 Rajangana Wewa*1 5, ,920 89, ,610 55,440 54,084 5, ,000 29,290 4,690 2,753 23,550 3,008 63,291 49,650 86,590 1,002, ,800 2,490 4MA-01 Palukadawela ,040 7,660 58,700 9,240 9, ,282 3, , ,731 9,202 8, , ,700 1,570 4MA-02 Attaragalla Wewa ,960 4, ,787 3, , ,050 4,529 1,584 21,950 47, MA-03 Abakola Wewa ,760 2,510 19,270 3,960 3, ,264 3, , ,311 3,796 3,385 41, ,100 1,410 5MA-01 Magallewewa 2, ,223 16, ,753 26,400 25,114 2,577 54,091 5, ,278 10, ,847 24,522 20, ,282 93,200 1,310 1ME-01 Thuruweli Wewa 227 8, ,570 1,320 2, , , ,049 1,994 1,528 18,802 82,800 1,170 1ME-02 Eru wewa 34 4, ,500 1, , , , ,700 3,400 1ME-03 Uttimaduwa Wewa 93 6, ,080 1, , , ,091 12, ,800 1,950 1ME-04 Periyakulama 91 16,230 1,620 17, , ,035 23, ,900 3,600 1ME-05 Maminiya Wewa ,530 2,650 29,180 1,320 2, , , ,918 1,922 3,460 39, ,500 2,670 1ME-06 Mahabulankulama 90 11,050 1,110 12,160 1, , , ,590 18, ,200 2,880 2ME-01 Angamuwawewa* ME-01 Mahananeriyawewa ,760 1,280 14,040 1,320 1, , , ,074 2,231 1,908 23, ,000 2,070 4ME-02 Mahagalgamuwawewa ,650 1,670 18,320 2,640 1, ,705 1, , ,318 1,850 2,634 30, ,700 2,250 5ME-01 Hulugalla Wewa 121 1, ,850 2,640 1, , ,665 1, ,270 76,600 1,080 6ME-01 Meddeketiya Wewa , ,139 2, , , ,600 1,560 6ME-02 Moragoda Anicut ,280 1, ,487 1, , ,375 1,850 1,086 13,798 71,100 1,000 I 8 Minor Schemes , ,550 9,240 2, ,738 4, , ,558 2,823 3,185 37, ,900 1,760 II 8 Minor Schemes 278 9, ,420 7,920 2, ,102 4, , ,468 2,727 2,899 34, ,500 1,750 III 10 Minor Schemes ,780 1,240 26,020 10,560 3, ,213 5, , ,626 3,804 5,086 59, ,000 2,040 IV 9 Minor Schemes 349 8, ,400 9,240 3, ,209 4, , ,493 3,023 3,110 37, ,600 1,500 V 10 Minor Schemes 179 7, ,690 9,240 1, ,507 5, , ,361 1,786 2,756 32, ,300 2,530 VI 11 Minor Schemes , ,510 11,880 3, ,662 5, , ,818 2,887 3,999 46, ,500 2,080 VII 10 Minor Schemes , ,870 10,560 2, ,684 5, , ,736 2,647 4,029 46, ,800 2,550 VIII 10 Minor Schemes 271 9, ,580 10,560 2, ,802 5, , ,688 2,695 3,207 37, ,100 1,970 IX 4 Minor Schemes 139 3, ,110 5,280 1, ,937 2, , ,005 1,093 1,505 17, ,000 1,790 Followup Pro- Engineering Grand Total per Hectare

22 Code No. Name of Scheme (Unit: Rs.1,000) Majot Medium Minor All Schemes Administration Commanding Area (ha) Rehabilitation and Improvement s for Irrigation Facilities and Farm Roads Table K 2.6 Economic Project s s for Project Management and Support Facilities 14,167 1,134, ,167 1,304, , ,420 12, ,511 54,660 8,754 6,534 61,692 6, , , ,934 2,002, ,300 1,990 1,510 99,145 9, ,066 21,318 13,688 1,749 36,755 8,945 1, ,351 1,073 22,504 13,909 16, , ,800 1,860 2, ,549 5, ,596 80,256 22,756 5, ,162 39,750 6,369 1,157 18,551 3,291 69,118 22,312 28, , ,900 1,870 18,186 1,334, ,135 1,519, , ,864 19, , ,355 16,560 8,389 90,594 10, , , ,055 2,534, ,400 1,960 *1 Including Angamuwawewa *2 Part of the Rajangana irrigation scheme *3 10% of rehabilitation and improvement, capital costs for project management and support facilities, and awareness and training programmes. s for Awareness and Training Programmes Contingency Awareness Pro- Direct Contingency Total gramme gramme (5%) (10%)*3 Others Total Contingency Centres Farmers/ Farmer for Total Others (5%) FOs (Rs/ha) (US$/ha) 1MA-01 Nachchaduwa Wewa 2, ,382 48, ,336 17,556 23,025 2,028 42,609 6,958 1,115 1,171 12,361 1,082 22,687 21,934 44, , ,500 2,810 1MA-02 Nuwarawewa 1,134 51,224 7,686 58,910 10,032 10,279 1,016 21,327 2, , ,753 9,437 8, ,426 95,600 1,350 1MA-03 Tissawewa ,689 2,955 22,644 3,762 3, ,422 1, , ,906 3,424 3,397 40, ,800 1,570 2MA-01 Rajangana Wewa*1 5, ,024 85, ,230 52,668 51,380 5, ,250 27,826 4,456 2,615 22,373 2,858 60,128 47,168 82, , ,000 2,370 4MA-01 Palukadawela ,488 7,277 55,765 8,778 8, ,318 3, , ,195 8,742 8, , ,100 1,490 4MA-02 Attaragalla Wewa ,762 4, ,348 3, , ,698 4,303 1,505 20,854 45, MA-03 Abakola Wewa ,922 2,385 18,307 3,762 3, ,851 2, , ,996 3,606 3,216 38,976 95,100 1,340 5MA-01 Magallewewa 2, ,712 15, ,416 25,080 23,858 2,448 51,386 5, ,214 10, ,855 23,296 19, ,019 88,500 1,250 1ME-01 Thuruweli Wewa 227 8, ,092 1,254 2, , , ,947 1,894 1,452 17,863 78,700 1,110 1ME-02 Eru wewa 34 3, ,276 1, , , , ,600 3,230 1ME-03 Uttimaduwa Wewa 93 6, ,726 1, , , ,036 12, ,900 1,860 1ME-04 Periyakulama 91 15,419 1,539 16, , ,933 22, ,100 3,420 1ME-05 Maminiya Wewa ,204 2,518 27,722 1,254 1, , , ,822 1,826 3,287 37, ,000 2,540 1ME-06 Mahabulankulama 90 10,498 1,055 11,553 1, , , ,511 17, ,000 2,730 2ME-01 Angamuwawewa* ME-01 Mahananeriyawewa ,122 1,216 13,338 1,254 1, , , ,970 2,119 1,813 22, ,600 1,970 4ME-02 Mahagalgamuwawewa ,818 1,587 17,405 2,508 1, ,470 1, , ,152 1,758 2,502 29, ,700 2,140 5ME-01 Hulugalla Wewa 121 1, ,758 2,508 1, , , ,808 72,800 1,030 6ME-01 Meddeketiya Wewa , ,882 1, , , ,100 1,480 6ME-02 Moragoda Anicut ,016 1, ,112 1, , ,206 1,758 1,032 13,108 67, I 8 Minor Schemes , ,973 8,778 2, ,101 3, , ,181 2,682 3,026 35, ,700 1,670 II 8 Minor Schemes 278 9, ,899 7,524 2, ,547 3, , ,095 2,591 2,754 32, ,300 1,670 III 10 Minor Schemes ,541 1,178 24,719 10,032 3, ,453 4, , ,145 3,614 4,832 56, ,800 1,940 IV 9 Minor Schemes 349 8, ,931 8,778 3, ,549 4, , ,069 2,872 2,955 35, ,300 1,430 V 10 Minor Schemes 179 6, ,306 8,778 1, ,932 4, , ,944 1,697 2,618 30, ,300 2,400 VI 11 Minor Schemes , ,785 11,286 2, ,879 5, , ,327 2,743 3,799 44, ,100 1,970 VII 10 Minor Schemes , ,977 10,032 2, ,999 4, , ,300 2,515 3,828 44, ,800 2,420 VIII 10 Minor Schemes 271 8, ,101 10,032 2, ,112 4, , ,253 2,560 3,047 36, ,100 1,870 IX 4 Minor Schemes 139 3, ,905 5,016 1, ,590 1, , ,804 1,038 1,430 16, ,600 1,700 Followup Pro- Support Programme Engineering Grand Total per Hectare

23 Table K 2.7 Annual Disbursement Schedule of Financial and Economic Project s (Unit: Rs. 1,000) Financial Project s Economic Project s Years After Commencement of the Project Implementation Years After Commencement of the Project Implementation 1st 2nd 3rd 4th 5th 6th 7th 8th Total 1st 2nd 3rd 4th 5th 6th 7th 8th Total 1MA-01 Nachchaduwa Wewa 20,781 22, , , ,343 18,147 6,431 7, ,294 19,742 21, , , ,476 17,240 6,109 6, ,630 1MA-02 Nuwarawewa 6,943 7,438 51,504 30,314 8,523 5,625 1,673 2, ,132 6,596 7,066 48,929 28,798 8,097 5,344 1,589 2, ,425 1MA-03 Tissawewa 2,759 2,757 19,691 10,638 4,131 1, ,940 2,621 2,619 18,706 10,106 3,924 1, ,792 2MA-01 Rajangana Wewa*1 52,135 50, , , ,052 30,543 14,746 14,474 1,002,141 49,528 48, , , ,699 29,016 14,009 13, ,034 4MA-01 Palukadawela 6,773 7,055 48,140 28,954 8,300 4,196 1,499 1, ,786 6,434 6,702 45,733 27,506 7,885 3,986 1,424 1, ,446 4MA-02 Attaragalla Wewa 4,012 3,656 5,404 3,675 2,329 1, ,950 3,811 3,473 5,134 3,491 2,213 1, ,852 4MA-03 Abakola Wewa 3,952 3,762 17,155 10,784 2,218 1, ,026 3,754 3,574 16,297 10,245 2,107 1, ,974 5MA-01 Magallewewa 14,606 16,154 96,126 77,573 19,877 12,549 3,690 4, ,282 13,876 15,346 91,320 73,694 18,883 11,922 3,506 4, ,019 1ME-01 Thuruweli Wewa 1,444 1,336 12, ,802 1,372 1,269 12, ,862 1ME-02 Eru wewa , , , ,807 1ME-03 Uttimaduwa Wewa 1, , , , ,264 1ME-04 Periyakulama 1, , ,288 1, , ,124 1ME-05 Maminiya Wewa 1,790 1,601 32, ,112 1, ,982 1,701 1,521 30, ,056 1, ,983 1ME-06 Mahabulankulama 1, , ,378 1, , ,459 2ME-01 Angamuwawewa* ME-01 Mahananeriyawewa 1,350 1,185 17, ,222 1,283 1,126 16, ,061 4ME-02 Mahagalgamuwawewa 2,701 1,514 23, ,827 2,566 1,438 21, ,286 5ME-01 Hulugalla Wewa 1, , , , ,806 6ME-01 Meddeketiya Wewa 2, , ,839 2, , ,297 6ME-02 Moragoda Anicut 2,339 1,228 7, ,798 2,222 1,167 7, ,108 I 8 Minor Schemes 5,867 2,196 24,477 1,402 1,440 1, ,855 5,574 2,086 23,253 1,332 1,368 1, ,962 II 8 Minor Schemes 5,749 2,074 21,874 1,329 1,326 1, ,617 5,462 1,970 20,780 1,263 1,260 1, ,887 III 10 Minor Schemes 7,634 3,317 41,213 1,657 2,338 1, ,750 7,252 3,151 39,152 1,574 2,221 1, ,762 IV 9 Minor Schemes 6,538 2,536 22,345 1,193 1,936 1, ,235 6,211 2,409 21,228 1,133 1,839 1, ,373 V 10 Minor Schemes 6,599 1,868 19,882 1, ,100 6,269 1,775 18, ,496 VI 11 Minor Schemes 7,756 2,638 23,468 8,375 1,846 1, ,876 7,368 2,506 22,295 7,956 1,754 1, ,533 VII 10 Minor Schemes 7,048 2,379 32,265 1,369 1,396 1, ,966 6,696 2,260 30,652 1,301 1,326 1, ,619 VIII 10 Minor Schemes 6,912 2,289 23,839 1,257 1,353 1, ,972 6,566 2,175 22,647 1,194 1,285 1, ,073 IX 4 Minor Schemes 2,890 1,231 11, ,650 2,746 1,169 10, ,768 All Schemes 186, ,094 1,111, , ,534 94,496 37,009 41,401 2,668, , ,787 1,056, , ,009 89,776 35,160 39,318 2,534,702