Updated Project Information Document (PID) Report No: AB319. Project Name. PAKISTAN - Sindh On-Farm Water Management Project Region

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Updated Project Information Document () Report No: AB319 Project Name PAKISTAN - Sindh On-Farm Water Management Project Region South Asia Regional Office Sector Irrigation and drainage (100%) Theme Rural policies and institutions (P); Water resource management (P) Project P Borrower(s) ISLAMIC REPUBLIC OF PAKISTAN Implementing Agency(ies) GOVERNMENT OF SINDH Directorate General of Agriculture Engineering and Water Management, Agriculture Department, Sindh Address: Block 'C' Shahbaz Building, Thandi Sarak, Hyderabad Contact Person: Mr. Nazir Ahmed Ursani, Director General Tel: dgaewm@yahoo.co.uk Fax: Environment Category B (Partial Assessment) Date Prepared January 7, 2004 Auth Appr/Negs Date September 12, 2003 Bank Approval Date May 20, Country and Sector Background Background Sindh Irrigation and Drainage Authority (SIDA) Address: 28-A, Civil Lines, Hyderabad Contact Person: Rafiq Safi Munshey, Managing Director Tel: Fax: sida@hyd.breeze.net.pk l.1 The Indus Basin Irrigation System. Irrigation and drainage are crucial to Pakistan's irrigated agriculture, which is the backbone of the economy. Around 80% of arable lands and 90% of agricultural output (25% of GDP) are entirely dependent on irrigation. The Indus Basin Irrigation System (IBIS) is the largest integrated irrigation network in the world, consisting of Indus river and its tributaries, three major storage reservoirs, 19 barrages, 12 inter-river link canals, 43 irrigation canal commands, and over 1 10,000 watercourses, delivering water to farms. Practically the entire system is unlined, resulting in seepage and operational losses. The losses are particularly high from watercourses. In saline groundwater areas these losses are generally irretrievable. Sindh has three major barrages on the Indus River that divert approximately 45 to 48 million acre feet (55.5 to billion cubic meters) of water annually to the 14 main canal commands in Sindh. There are about 42,000 watercourses (tertiary channels). So far only 7,500 watercourses have been improved/lined under various on-farm water management (OFWM) programs. 1.2 Drainage System. Around 78% of the area in Sindh province is underlain by saline groundwater, which is unsuitable for irrigation. Surface and sub-surface drainage systems are inadequate, resulting in much of the drainage affluent being either retained in the basin or disposed into rivers and canals. Due to inadequate drainage cover, nearly one-fifth of the canal command

2 2 areas have been affected by water logging and salinity. 1.3 Land and Agriculture. Sindh has a total population of over 30 million, majority of which (51%) lives in rural areas. The total geographical area is 14 million ha, constituting 17.5 percent of Pakistan. About 5.7 million ha is commanded by canals. Net area sown is about 3 million ha, with about I million ha sown twice a year. Over 93% of the farms are small (< 7 ha) and represent 64% of the total farm area. Large farms (> 7 ha) are only 7% in number but represent nearly 36% of the total farm area. 1.4 Poverty in Sindh. Poverty is pervasive and deep in rural Sindh. About 37% of the rural population lives below the poverty line. The corresponding figure for Pakistan as a whole is 33%. Over 70% of the rural population is landless. Analysis of the 2001 Pakistan Rural Household Survey data, however, shows that rural households, including the landless, derive 56% of their income from agriculture, directly or indirectly. The rural poor tend to be employed mostly as agriculture wage workers. The concentration of poor is the highest among categories of households where the head is an unpaid family worker, sharecropper, or owner-cultivator owning less than 2 hectares of land. Irrigation and Drainage Sector Issues 1.5 Irrigation and drainage in Pakistan face major issues that are evident in various forms (see below) with many of them stemming from underlying institutional weaknesses. The major institutional issue is a near exclusive control of the irrigation drainage system by public sector entities. Insufficient storage capacity and lack of control structures is another major constraint. Water availability in the Indus basin irrigation system is highly seasonal with 85% of annual river flows occurring during a 90 to 120 days period (June to September) making storage imperative for the Rabi (winter) crop season. While the construction of three major reservoirs (Tarbela, Mangla, Chashma) has provided some flexibility in canal operations to meet irrigation water demand in the Rabi crop season, the reservoir capacity and its operation is inadequate. This combined with the lack of control structures in the system make it difficult to manage the system on a "demand basis". Institutional weaknesses manifest in the form of: (i) low water delivery efficiency (only about 35-40% from the canal head to crop root zone); (ii) water distribution inequities; (iii) wasteful on-farm water use; (iv) waterlogging and salinity; and (v) poor O&M and low cost recovery. Sindh faces the same issues. Other Issues Affecting Irrigated Agriculture 1.6 Agricultural trade and pricing regimes have been substantially liberalized to the point that few distortions remain at the macroeconomic level. However, a significant agenda of second generation reforms remain to address the unequal opportunity and capacity to access credit and assets, markets, land, water and technology -- these factors directly affect productivity and farm incomes. Skewed land holdings and land tenure arrangements exacerbate rural poverty. GOSindh 's Sector Strategy and Implementation Status 1.7 A holistic water resources management strategy encompassing policy and institutional improvements, improved management of storages, infrastructure improvement, environmental sustainability, productivity enhancement, and poverty alleviation, is required to address the above issues effectively. While realizing the need for such a holistic strategy and initiating its preparation, GOSindh has evolved an interim strategy that would yield quick dividends, within the broader constraints mentioned above, while building the foundation for the longer term strategy. This interim strategy has three

3 3 inter-related elements: (a) fostering an institutional, policy and operationalframework conducive to efficient and self-sustaining operation and management of the irrigation system; (b) supporting farmer organizations [e.g. watercourse associations (WCAs)] in implementing high payoff infrastructure improvements at an accelerated pace; and (c) enhancing agricultural productivity by introducing improved technology, agronomic practices, and information/knowledge systems. 1.8 The first element of the strategy is predicated upon the implementation of fundamental and far reaching institutional reforms currently under way. These reforms involve decentralization and transfer of management of the irrigation and drainage system from the Sindh Irrigation Department to a multi-tier system of autonomous institutions. The key elements of the reforms, the hierarchy of the new institutions and their roles and responsibilities are as follows: (i) conversion of the Irrigation Department into an autonomous Sindh Irrigation and Drainage Authority (SIDA), with responsibility for intra-provincial aspects of the system; (ii) establishment of self-accounting, client responsive and financially sustainable area water boards (AWBs) --public utilities-- on each main canal, responsible for operating and maintaining the irrigation and drainage system within the main canal command up to the head of the distributary canals; and (iii) establishment of farmer organizations (FOs), owned and managed by farmers, and responsible for O&M of the irrigation and drainage system within the command area of distributary and minor canals and collection of abiana (water charges). In the long term, SIDA would enter into contracts with AWBs for bulk supply of irrigation water and receipt of the drainage effluent generated within the limits of the AWBs. The AWBs would enter into similar contracts with FOs for bulk supply of water at the head of the distributary canals. The FOs will collect abiana, retain a part of it and pass on the remaining proceeds to AWBs for maintenance of the main canals. It is expected that the reforms would lead to SIDA and AWBs developing into vibrant autonomous bodies capable of improved management and O&M of the upper tiers of the irrigation system that would result in improved and sustainable operations, higher water delivery efficiency, better scheduling of canal deliveries reflecting more closely the irrigation requirements in canal commands. Establishment of FOs would lead to more equitable distribution of water amongst watercourses, improved and cost effective maintenance and more efficient collection of abiana. 1.9 The second element of GOSindh's interim strategy --supporting communities to carryout accelerated high payoff infrastructure improvements at the tertiary level-- complements the first element of the strategy, but stands on its own merit. It involves establishing effective WCAs to provide a solid foundation for the upper tier reforms. Overall progress on establishing WCAs and infrastructure improvements at the tertiary level has been slow, primarily due to lack of capacity for social mobilization and capacity building. GOSindh wishes to improve the speed and effectiveness of this program through greater participation by WCAs The third element of the strategy -- supporting productivity and income enhancement measures-- is critical to reap the full benefits of institutional and infrastructure improvements in terms of higher productivity, and to help translate higher productivity into higher incomes. Past interventions in this regard have been limited to a few demonstration centers, routine training & visit (T&V) type extension activities and some efforts at information dissemination. Few attempts have been made to introduce improved technology (land leveling, improved farm layout, zero-tillage, sprinkler/drip, etc.) and

4 4 information systems. The impact has been modest. GOSindh is exploring new and more efficient ways of improving and scaling up delivery mechanisms for new technologies, extension, input supplies, storage and processing, market/marketing information, and modem information systems, including access to intemet. Current thinking is that these activities would be developed around the new institutional setup, primarily at the AWBs, FOs, and WCA levels. 2. Objectives 2.1 The project development objective is that farmers in the project area better manage water and increase agricultural productivity, supported by improved irrigation infrastructure and service delivery. This objective would be achieved by: (a) improving the efficiency, reliability, and equity of irrigation water distribution; (b) supporting agricultural productivity enhancement measures to complement and enhance the benefits of improved water management; and (c) enhancing long-term financial sustainability of the irrigation system by fostering self-sustaining farmer organizations at the watercourse and distributary canal levels, which is a key element of the decentralized and financially sustainable institutional apparatus, GOSindh is endeavoring to establish. 3. Rationale for Bank's Involvement 3.1 Amongst the donors supporting water sector interventions in Pakistan, the Bank has a comprehensive view of sector development, a strategic focus and global experience. The Bank is supporting GOSindh in implementing institutional reforms as well as formulating a long term policy and strategy for the water sector. The Bank's experience in Pakistan and its global experience in water resources management, place it in a unique position to help GOSindh achieve the intended outcomes. 4. Description 4.1 The proposed four-year project would focus on canal commands where upper tier institutional reforms are in progress and Area Water Boards (AWBs) have been established. The Agriculture Department has carried out an integrated social and environmental assessment (ISEA) of the project. The ISEA findings and recommendations have provided the basis for the project design and implementation framework. The project includes five complementary components: A. Social Mobilization and Capacity Building. This component involves developing sustainable farmer organizations (FOs) who can effectively operate and maintain the irrigation and drainage system, through social mobilization and capacity building. Numerous WCAs and more than 190 FOs have already been established in Sindh. Further social mobilization efforts are currently underway. The project will supplement these efforts by establishing further WCAs and FOs and building their capacity. The WCAs and FOs would be involved in planning, designing, and implementing irrigation improvement works under the project, as well as in providing agricultural support services. B. High Payoff Improvements of Irrigation Facilities: i) Tertiary level improvement, including: (a) improvement of about 4,000 watercourses, comprising, earthen improvements, lining, installation of pucca nuccas (concrete turnouts) culverts, community structures (e.g. washing bays for women), cattle crossings and buffalo baths; and (b) construction of approximately 200 water storage tanks in the barani (rain-fed) areas of Sindh; and ii) Improvement of distributary canals, targeting about 100 distributary/minor canals managed by

5 5 FOs. The improvement/rehabilitation works would be of a low cost nature. iii) Improvement/rehabilitation of branch canals, targeting about 25 branch canals supplying water to the distributary canals on which FOs are established. The ISEA has developed eligibility criteria for WCAs and FOs to access project resources, and prioritization criteria for targeting the above investments at relatively poorer farming communities (e.g. farmers at the tail-end of the irrigation system. smaller land holders, waterlogged areas, saline groundwater areas) as well as for encouraging participation of women and tenants in WCAs and FOs. These criteria are included in the Implementation Framework. C. Productivity Enhancement Program, comprising precise leveling of 100,000 acres (40,000 ha) of farm land using laser guided equipment; establishment of some 100 demonstration centers to disseminate a full range of improved water management and irrigation agronomy practices/techniques; training of FOs/WCAs in improved water management, cultural practices and new technology (land leveling, zero tillage, sprinkler and drip systems, etc.); integrated pest management (IPM), Integrated Plant and Soil Nutrient Management (IPSNM), information systems, market/marketing, etc. D. Monitoring and Evaluation, including design and implementation of a monitoring and evaluation system and establishment of a spatial GIS database. The M&E system would provide continuous feed back to the implementing agencies on the project performance and assess its physical, agricultural, social, financial / fiscal, environmental and economic impact, so that, corrective actions could be undertaken in a timely manner. E. Project management support, including, inter alia, technical assistance for project launch, supervision (quality assurance), mid-term review, development of a project management information system, productivity enhancement, preparation of and assistance in implementing a training and capacity building program for project staff, FOs and WCAs, promotion of participation of women and tenants in project activities, and preparation of a strategic social and environmental assessment of the entire Sindh province. 5. Financing Source (Total ( US$m)) BORROWER ($6.12) IDA ($61.14) LOCAL FARMER ORGANIZATIONS ($17.51) Total Project Cost: $ Implementation 6.1 The Department of Agriculture, SIDA/AWBs, and FOs/WCAs, would implement the project. The roles and responsibilities of each agency are summarized below The Department of Agriculture (DA) -- represented by the DGAEWM- would be the lead implementing agency and have overall responsibility for: social mobilization and capacity building of WCA and FOs; irnplementing watercourse improvements and the productivity enhancement program through WCAs and FOs; maintaining a MIS/GIS database for the project; quality assurance; establishing and operating an M&E system; and coordinating overall project activities. The Director General Agriculture Extension and Research (DGAER) would be responsible for implementing IPM and IPSNM related activities and demonstrations.

6 6 6.3 The Sindh Irrigation and Drainage Authority (SIDA) and Area Water Boards (AWBs) would be responsible for: registering FOs under the Sindh Water Management Ordinance of 2002 and entering into Irrigation and Drainage Management transfer Agreements (IDMTAs) with FOs; implementing civil works for improvement of branch canals; assisting FOs in identifying, preparing and implementing sub-projects for rehabilitation of distributary/minor canals. 6.4 Farmer Organizations have a central role in project implementation. Registered FOs who enter into IDMTAs with SIDA/AWBs would progressively take over irrigation management. They would distribute water among users, collect water charges, maintain income and expenditure accounts, and carry out the routine O&M of the distributary/minor canals. FOs would identify, plan and implement distributary improvements. FOs would also participate in the productivity enhancement program and have access to technology and equipment provided by the project. 6.5 Watercourse Associations (WCAs). The WCAs will undertake watercourse improvement and construction of water storage tanks. Agriculture Department staff will be responsible for carrying out survey and design work and supervision during construction, while WCAs will be responsible for procurement of materials and actual construction work. Project Coordination 6.6 A Project Coordination Committee (PCC), headed by a project Coordinator would be responsible for coordination among various agencies and facilitating project implementation. The PCC would have representatives of SIDA, AWBs and FOs as its members. Project Steering Committee (PSC) 6.7 A Project Steering Committee (PSC) headed by the Additional Chief Secretary Development (ACS Development) and comprising Secretary Agriculture, Secretary Finance, MD SIDA, and Secretary Irrigation, would provide policy guidance and monitor overall project outcomes. Stakeholders Fora 6.8 To seek feedback from various stakeholders on the project performance, Stakeholders Fora would be established in each District. Periodic feed back sessions would be convened. 6.9 Retroactive Financing. Retroactive financing would be provided to cover all eligible project expenditures, up to an amount of US$0.5 million equivalent, incurred after May 31, 2003 and before credit signing. 7. Sustainability 7.1 The ongoing institutional reforms in Sindh involve establishing self-sustaining AWBs, promoting beneficiary ownership, and O&M of the systems through formally organized and empowered FOs. The project will complemerit these reforms and provide a solid foundation for them by establishing more WCAs and FOs and building their capacity; supporting high payoff infrastructure investments as well as productivity enhancement measures; and fostering a culture of meeting an appropriate part of O&M costs and part of capital costs through user fees and cost sharing. This would help create an enabling environment for fiscal, institutional, financial and physical sustainability of Sindh's irrigation and drainage system.

7 7 8. Lessons learned from past operations in the country/sector The project design takes into account important lessons learned from the Bank's involvement in Pakistan's irrigation and drainage sector in Sindh and Punjab as well in other countries. Key lessons incorporated in the project design are: (a) Beneficiary participation is central to the success of the project. Social organization and capacity building are key to developing sustainable FOs/WCAs who can participate effectively in managing the irrigation system. (b) Investments to make the irrigation infrastructure functional and efficient are essential to enable the fledgling institutions (WCAs, FOs) to perform and achieve intended outcomes. (c) Productivity enhancement measures must complement improved water management to reap the full benefits. (d) Responsibilities and jurisdictions of various implementing agencies, have been clearly defined to unleash the full potential and strength of each agency. 9. Environment Aspects (including any public consultation) Issues : Consultations during project preparation included discussions with farmers and sharecroppers, community organizations (including women's groups), civil society organizations, and Government of Sindh agencies, including the Sindh Environment Protection Agency, Agriculture, Irrigation, Local Government, and Wildlife Departments. The overall impact of the project on the environment and on rural livelihood is expected to be positive. The likelihood of the following impacts, however, is assessed in the ISEA: (i) the impact of soil and silt removal during rehabilitation activities, which may contaminate community wells, water ponds, and water channels used for drinking water, and block the natural drainage; (ii) pollution of soil and groundwater and pesticide residues on agricultural produce due to increasing fertilizer and pesticide use and declining use of organic manure and compost; (iii) some tree clearing may be required in the realignment of watercourses; (iv) contamination of canal water due to washing of clothes and bathing of animals. With the exception of the impacts associated with increased use of pesticides and fertilizers, the impact identified and assessed in the ISEA is limited and manageable through simple mitigation and management measures. The ISEA has identified measures to mitigate impacts and enhance the quality of environment where possible, including supplementing activities and measures being implemented under a National Integrated Pest Management (IPM) Project recently approved by the Government of Pakistan, under the project. The project will not affect wetland recharge because (i) the project does not involve the lining of canals, (ii) less than 30% of the length of the watercourses will be lined, and (iii) seepage from watercourses accounts for a very small portion of wetland recharge. Any project activity within a protected area will only be initiated with the prior consent of the Sindh Wildlife Department. 10. List of factual technical documents: (i) Integrated Social and Environmental Assessment (GOSindh: July 24, 2003) (ii) Productivity Enhancement Program (Prepared by FAO/CP for Sindh Agriculture) (iii) PC- 1 for National Integrated Pest Management (National Agricultural Research Center, Pakistan Agricultural Research Council, March 2003)

8 8 11. Contact Point: Task Manager Usman Qamar The World Bank 1818 H Street, NW Washington D.C Telephone: Fax: For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.