Report No. 725a-BD FILE COPYBangladesh: Appraisal of theMuhuri Irrigation Project

May 31, 1977

South Asia Projects DepartmentAgriculture Division A

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

The Bangladesh Taka is officially valued at 26.70to the Pound Sterling. The Pound now floats relative tothe US Dollar and consequently the Taka, US Dollar rateis subject to change. The rate below has been usedthroughout this report, except where stated to thecontrary.

US$1 = Tk 15.0Tk 1 = US$0.067Tk 1 million = US$67,000

WEIGHTS AND MEASURES

I acre (ac) = 0.405 hectare (ha)1 mile (mi) = 1.609 kilometers (km)1 square mile (sq mi) = 640 ac (259 ha)1 foot (ft) = 30.5 centimeters (cm)I maund (md) = 82.3 lbs (37.3 kg)I metric ton (ton) = 26.8 mdI cubic foot per second

(cusec) = 0.028 cubic meter per second

FOR OFFICIAL USE ONLY

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

BADC - Bangladesh Agricultural Development CorporationBRRI - Bangladesh Rice Research InstituteCEC - Central Evaluation CommitteeGOB - Government of BangladeshHYV - High Yielding Variety (of rice)IRDP - Integrated Rural Development ProgramLLP - Low-Lift PumpMFWP - Ministry of Flood Control, Water Resources and PowerPIC - Project Implementation CommitteeSCF - Standard Conversion FactorTAO - Thana Agriculture OfficerTEO - Thana Extension OfficerTCCA - Thana Central Cooperative AssociationTIP - Thana Irrigation ProgramUAA - Union Agriculture AssistantVEA - Village Extension AgentWDB - Water Development Board

GLOSSARY

Aiman - Rice planted before or during the monsoon andharvested in November or December (B. aman isbroadcast, T. aman is transplanted)

Aus - Rice planted during March and April and harvestedduring July and August (B. aus is broadcast, T.aus is transplanted)

Boro - Rice planted in winter and harvested during theperiod April to June

Khal - Natural drainage channelPaddy - Unhulled riceThana - Smallest administrative unit in Bangladesh. There

are 413 thanas in the country. Six or seven thanasform a subdivision, three or four subdivisions form aDistrict, and there are 19 Districts in the country

Union - A unit of local self government. There are aboutten unions in each thana

FISCAL YEAR

July 1 - June 30

I Thi document has a rmtricted distribution and may be used by recipients only in the perfotmanceof their official duties. Its contents may not otherwis be disclosed without World Bank authoriation.

BANGLADESH

APPRAISAL OF THE MUHURI IRRIGATION PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ............ .. ............. i - ii

I. INTRODUCTION . ......... ............................ 1

II. BACKGROUND ........ ............. ...................

General ............. .........................Agricultural Development ..... ................ 2Irrigation Development ...... ................. 3IDA Support to Irrigation ..... .............. 4

III. THE PROJECT AREA . ...................... ... 5

General .......................... 5Climate ....... .................... . 5Topography and Soils ................... ........ 6Water Resources ...... .................... 6Existing Irrigation and Drainage ............ . 6Farm Size and Land Tenure .................... 7Agricultural Production ..................... . 8Transportation and Marketing .............. ... 9

IV. THE PROJECT ....................................... 9

General ................................... . 9Project Features ... .......................... 9Water Quality, Supply and Demand ........ ..... 11Engineering Design ....... .................... 11Construction Schedule ...... .................. 12Cost Estimates ............................... 12Financing ............. ....................... 14Procurement and Contracts . ........ .......... 14Disbursement ................................. 15Accounts and Audit ........................... 15Environmental Impact ...... ................... 15

This report is based on the findings of an Appraisal Mission whichvisited Bangladesh in September-October 1974, comprising Messrs. R. R.Morton, P. Garg, U. Hpu, P. Ljung, and A. Feinstein (Consultant). Thereport was updated by Mr. P. Garg.

- 2-

Page No.

V. ORGANIZATION AND MANAGEMENT ...................... 16

Implementation of Project Works ............. 16Consulting Services ..... ................... . 17Monitoring and Evaluation .............. ..... 17Operation and Maintenance ................. *. 18Agricultural Supporting Services ............ . 18

VI. PRODUCTION, MARKETING, PRICES AND FARM INCOMES ... 20

Crop Calendars and Cropping Patterns ........ 20Yields and Production ..... .................. 21Marketing ............................................ o.... 21Prices ........ o ............................. 22Farm Incomes ......... . . . . .................... .......... . 22Recovery of Costs ......... ................ 23

VII. BENEFITS AND JUSTIFICATION ....................... 24

General ........ o ............................ 24Rice Production . ............................ 24Employment Opportunities ................. .. 24Income Distribution ...... ................... 25Economic Rate of Return ........a or............ 25

VIII. AGREEMENTS REACHED AND RECOMMENDATIONS .26

ANNEXES

1. The Agricultural Sector2. Climatic Data3. Project Works4. Water Supply and Demand5. Implementation Schedule6. Cost Estimates7. Schedules of Expenditures and Disbursements, and Proposed

Allocation of the Aid Package8. Agricultural Supporting Services9. Present and Projected Cropping Patterns and Production10. Prices for Economic and Financial Analyses11. Crop Inputs and Farm Budgets12. Farm Labor Analysis13. Economic Analysis

MAP No.

11532 Project Location11533 Project Area

BANGLADESH

APPRAISAL OF THE MUHURI IRRIGATION PROJECT

SUMMARY AND CONCLUSIONS

i. Agriculture dominates the economy of Bangladesh. It accounts forover half of the GDP, 75% of the employment, and over 80% of the exports.Although rice is grown on about 80% of the cultivated acreage and representsabout two-thirds of the value of agricultural production, rice productionhas not been able to meet the requirements of a rapidly growing population.During the past five years, Bangladesh has imported an average of 1.5 M tonsof foodgrains annually. GOB strategy for the agricultural sector gives highpriority to increasing food production through promotion of modern inputs(improved seeds, fertilizers and pesticides) and through further expansion ofirrigation from low-lift pumps and tubewells.

ii. Irrigation facilities provided by the project would expand the bororice area from the present 15,000 ac to about 50,000 ac. In the wet season,project works would reduce flooding and allow supplementary irrigation. Thiswould permit a shift from local varieties to HYVs on 10,000 ac. By preventingoverland seawater intrusion, 3,000 ac of presently marginal and largely un-cropped land would be brought to high productivity. About 1,100 units of5 to 7 hp diesel-powered low-lift pumps, each serving an average of 45 ac,would irrigate the area from an extensive network of natural and project-improved channels (khals). A reservoir formed by a coastal earthfill embank-ment, a dam across the Feni River Channel and a gated regulator structure wouldprovide a permanent source of fresh water. The rivers would be free of tidalfluctuations and the attendant salinity. Khal excavation would make wateravailable and small-vessel navigation possible throughout the area. The regu-lator would also improve flood drainage by protecting waterways from tidalsurges. This would allow discharge from the project area when tidal levelsin the Sandwip Channel drop below reservoir level. In addition to pumps andcivil works, the project would provide supporting facilities and equipment,including operation and maintenance facilities.

iii. Total project costs are estimated at US$52.0 M, including aboutUS$9.8 M equivalent in import taxes and duties. The foreign exchange compo-nent is estimated at US$18.4 M or about 44% of the total net of taxes andduties. The major elements in the cost estimates are: land acquisition(US$0.5 M); civil works (US$29.1 M); equipment & vehicles (US$2.7 M); con-sulting services (US$3.7 M); and management and administration (US$1.6 M) --adding to a base project cost of US$37.6 M. Physical contingencies (US$4.2 M)

and price contingencies (US$10.2 M) bring the estimated project cost toUS52.0 M.

iv. Project implementation would take five years. The Bangladesh WaterDevelopment Board, under the Ministry of Flood Control, Water Resources andPower, would have overall responsibility for management and execution of theproject works. Several Government agencies would be involved in implementing

- ii -

the project. Interagency coordination would be provided by an Interdepart-mental Project Implementation Committee chaired by the Project Director. ACentral Evaluation Committee, headed by a senior representative of the Govern-ment, would periodically review project progress and resolve coordinationproblems. A consulting firm would be engaged to assist in project imple-mentation.

v. Contracts for the supply of vehicles and equipment would be awardedafter international competitive bidding in accordance with Bank Group Guide-lines. The major civil works contract for the regulator has already beentendered for international competitive bidding, bids have been received andanalyzed, and the award is awaiting approval of the IDA credit. ICB wouldbe impractical for other civil works such as channel excavation, drainagestructures, embankments, access roads and transmission line as these worksinvolve many small operations, scattered over a wide area, which can beundertaken only during the dry season. Contracts for these works would beawarded after local competitive bidding. Equipment and imported materialsfor these works would however be procured through ICB.

vi. Following completion of project construction, the primary benefitfrom the project would be a 60% increase in rice production over the ensuingthree-year development period. This would lead to an increased income forsome 45,000 farm families, most of whom are small farmers (the average areafarmed is about 1.6 ac). Annual production in the project area would increasefrom the present 73,000 tons of paddy to 145,000 tons at full development.The net foreign exchange savings from incremental rice production under theproject would be around US$8 M per year. At the projected world market pricefor milled rice of US$280 per metric ton cif Chittagong, the project's eco-nomic rate of return would be about 16%. Sensitivity tests indicate that theproject would remain economically viable under a variety of adverse assumptions.

vii. With the agreements obtained from the GOB, the proposed project issuitable for an IDA credit of US$21 M equivalent. The IDA credit, togetherwith a proposed Canadian credit of Canadian $9 M (US$8.6 M), would finance70% of the estimated total project costs excluding taxes and duties. TheBorrower would be the People's Republic of Bangladesh.

BANGLADESH

APPRAISAL OF THE MUHURI IRRIGATION PROJECT

I. INTRODUCTION

1.01 The Government of the People's Republic of Bangladesh (GOB) hasrequested an IDA credit of US$21 M to assist in financing the Muhuri Irriga-tion Project. GOB also expects to receive a credit from the Government ofCanada for Canadian $9.0 M (US$8.6 M) for financing part of the projectcosts. Since Bangladesh independence in 1971, IDA has assisted in fourirrigation projects in Bangladesh. Two IDA credits have also been providedto finance technical assistance to the Government in project preparation.The status of IDA-financed projects for irrigation development in the countryis described in Chapter II.

1.02 Feasibility studies for the Muhuri Project were conducted by a jointventure of consulting engineers -- International Engineering Co., USA, andRahman and Associates, Bangladesh. The studies began in 1970 under IDA CreditS-10-PAK. When disbursements under this credit were suspended in December1971 due to the War of Independence, a draft report on a combined irrigationand flood control project had been completed. On resumption of studies underCredit S-14-BD, the basic data was updated and the irrigation and flood con-trol components analyzed on a phased development basis. A revised feasibilityreport was completed in December 1973 and preappraised in April 1974. AnAppraisal Mission, comprising Messrs. R.R. Morton, P. Garg, U. Hpu, P. Ljung(IDA) and A. Feinstein (Consultant), visited Bangladesh in September-October,1974. The mission concluded that the civil works required for the projectwould be complex in relation to works previously undertaken in Bangladesh andto estimate the project costs would entail an unusually large degree of uncer-tainty. To avoid possible cost overruns and to ensure economic viability ofthe project, it was decided that IDA assistance for the project would befinalized after evaluation of the bids for the major civil works contract forthe project. Following agreement with IDA on the above approach, GOB tenderedthe major civil works for international competitive bidding in accordance withIDA guidelines in June 1976. Bids were received in September 1976. Evaluationof the bids based on an agreed bidder post-qualification procedures was com-pleted in April 1977 and the contract award is awaiting approval of IDA creditfor the project.

1.03 This report, based on the findings of the 1974 Appraisal Mission,has been revised by Mr. P. Garg (IDA) to reflect the developments since theappraisal.

II. BACKGROUND

General

2.01 Bangladesh has an area of 55,000 sq mi of which 8,500 sq mi areforest about 5,000 sq mi are rivers and swamps, and about 35,000 sq miare cultivable. The population density of Bangladesh is among the highest

- 2 -

in the world with about 1,500 persons per sq mi (an estimated population of 81M in 1977, increasing at about 3% annually). About 90% of the population livein rural areas and at least 80% are dependent on agriculture, predominantlyrice and jute cultivation. About one-third of all rural households arelandless and about two-fifths of the labor force is under-employed all yeararound. Although nearly three-quarters of the adults are illiterate, currentlysome 56% of the children ages six to ten are enrolled in primary schools. Theper capita income of about US$125 (in 1977 prices) per year is among theworld's lowest.

Agricultural Development

2.02 Agriculture contributes about 55% of GDP and accounts for about80% of exports -- mainly raw jute, jute goods, and some tea. Over the lastfive years, the annual cropped area has averaged 30.3 M ac giving a croppingintensity of about 135%. Rice, by far the most important crop, accounts for80% of the cropped area; jute for 6% and a variety of other crops such aspulses, oilseed, wheat, sugarcane and vegetables for the remaining 14%.

2.03 During the 1960s, agricultural production grew at an annual rate ofabout 2.5% and foodgrain production at a rate of 2.4%. However, both laggedbehind the population growth rate of about 2.8% and as a result foodgrainimports increased. During the first half of the 1970s, for a variety ofreasons, production remained below the 11.8 M ton peak of 1969/70. In 1975/76, however, exceptionally favorable weather, improved availability offertilizers and unusually high foodgrain prices in the previous year, re-sulted in a record foodgrain production of 13 M tons. However, Bangladeshstill had to import about 1.5 M tons of foodgrains in that year. Substan-tial food imports are likely to continue for the foreseeable future.

2.04 Possibilities are limited for expanding the cultivated area of 22.5M ac and gains in production will require more intensive land use and higheryields. While soil fertility is generally good and temperatures allow year-round cropping, irrigation is essential for crop production during the dryseason (November - March). About 2.5 M ac are deeply flooded (over 15 ft)annually and cultivation is possible only after the flood subsides in November.An additional area of 5.5 M ac is flooded from 3 to 15 ft and is thereforeonly suitable for one crop of low-yielding, long stalk or floating rice. Inaddition, abnormal floods, cyclones and drought often limit production.

2.05 The average landholding villager owns about 1.5 ac. He may rentanother acre from farmers with larger holdings. His total area is usuallyfragmented into four or five plots. Most of the rice produced by theaverage farmer goes to feed his family; his cash earnings are small, andhe is usually in debt.

2.06 A primary objective of the Government is to improve villageliving standards by raising agricultural production. As the short-termapproach to increasing foodgrain production, GOB is emphasizing the need fora rapid spread of high yielding rice varieties (HYV), with the provision of

fertilizers, pesticides, and, where possible, of irrigation by low-lift pumpsand tubewells. This strategy, as detailed in the 9-volume Land and WaterResources Sector Study prepared by the Bank staff (Report No. PS-13 datedDecember 1, 1972) aims in particular at strengthening the agriculturalinstitutions, developing groundwater resources and improving input supply.

2.07 The strengthening of agricultural institutions is being helpedby an on-going review of the Ministry of Agriculture, financed under the IDATechnical Assistance Credit (Credit 409-BD). The IDA supported Agriculturaland Rural Training Project (Credit 621-BD), assisted by the UNDP/FAO Agri-cultural Extension Project, will provide training programs for extensionand rural development staff. The IDA supported Rural Development Project(Credit 631-BD) also provides for strengthening of the rural institutionsand services in seven thanas. A Jute Project is now being processed byIDA; it would strengthen the Intensive Jute Cultivation Scheme (IJCS) byproviding additional staff, vehicles and housing for the extension serviceand credit and storage facilities for the farmers. An Extension and ResearchProject (EARP) which would reorganize and strengthen the agricultural exten-sion and research services in Bangladesh is also under consideration. Theagricultural development in Bangladesh is discussed in more detail in Annex 1.

Irrigation Development

2.08 For centuries, Bangladesh farmers have used bucket-lift irrigationmethods for cultivating a dry-season rice crop (boro) on land near low-lyingwater bodies and perennial rivers. Almost no water resource developmenttook place until WDB was established in 1959 and BADC in 1962. Irrigationis now available for about 2.7 M ac: 0.2 M ac by gravity supply; 0.2 Mac by groundwater from tubewells; 1.3 M ac by low-lift pumps, and 1 M acby traditional methods. Flood protection has been provided for about 1.5 Mac, of which 1.3 M ac is primarily saline water protection in the coastalregion. Partial flood protection is provided for about 0.9 M ac.

2.09 In the early 1960s, much of the development effort was focused onlarge scale gravity irrigation and flood control projects such as the Ganges-Kobadak, Chandpur and Coastal Embankment Projects. Although these projectsnow provide irrigation to about 0.2 M ac and flood protection to about 1.5 Mac, their overall impact, particularly in view of the massive investmentsinvolved, has been disappointing. Most of the projects suffered fromlarge cost overruns and long implementation delays and benefits to-date havegenerally been much smaller than projected. Part of the reason for the dis-appointing results has been an all-pervasive weakness in implementation capa-city, although inadequate technical and economic evaluations have also beenpartly responsible for the disappointing results.

2.10 Considerably more successful have been relatively low-cost andquick-yielding minor irrigation schemes such as low-lift pump and tubewellschemes. Low-lift pumps (LLPs) are small capacity (1-2 cusecs) diesel poweredcentrifugal pumps used to raise irrigation water from perennial streams andponds. Starting from scratch in the late 1950s, the program has now expandedto some 40,000 pumps, irrigating an estimated 1.3 M ac. Despite problems of

- 4 -

underutilization and inadequate maintenance, the program is highly attractiveeconomically. The major constraint to further expansion of the LLP programis the availability of surface water during the dry season. It is estimatedthat installation of some 10,000 additional pumps would exhaust the currentpotential. Further expansion of the program would have to be in conjunctionwith improvement of natural channels, building of control structures andregulators and, in some cases, double pumping as proposed in this project(Muhuri Project) and in the IDA-supported Barisal and Karnafuli Projects).This would be more expensive but, still quite attractive in many cases.

2.11 Groundwater resources are being rapidly developed through the on-going programs of the Bangladesh Agricultural Development Corporation (BADC).The IDA supported Deep Tubewells Project (Credit 341-BD) provides for thesinking of about 3,000 deep tubewells in the North-West Region, and an IDAsupported Shallow Tubewells Project, for sinking 10,000 shallow depth (about100 ft) wells in the North-West, is now being processed; other shallow tube-well programs are being financed by the Asian Development Bank, Japan andGermany. There is also a nationwide drive to spread the use of hand pumps;about 570,000 of these will be financed by USAID, IDA and UNICEF during thenext five years.

2.12 Overall performance in minor irrigation has been quite satisfactory.However, serious problems remain in utilization and maintenance of irrigationfacilities. Pump/well utilization is only 15 to 20 ac per cusec comparedto the potential of 25 to 30 ac per cusec. The under-utilization is partlydue to the poor siting of pumps and tubewells under political pressures andpartly a reflection of difficulties in organizing and managing groups com-prising a large number of farmers. The maintenance problems are due toinadequate workshop facilities, poorly trained field staff, and lack of in-centives for farmers and BADC mechanics to keep equipment in good workingcondition. Heavy subsidies on irrigation by the Government are also a con-tributing factor to inefficient utilization and poor maintenance by the usersof irrigation facilities. Under the recently approved Rural Development IProject (Credit 631-BD), a major effort is being made to improve the pump/wellallocation mechanisms and to facilitate the organization and management ofpump groups. If successful, the Rural Development I Project procedures wouldbe implemented on a nationwide basis. For improving the maintenance of irri-gation facilities, the UNDP/ILO has recently approved a project for trainingfield staff at various levels. Support for improvement of repair and main-tenance facilities is included in the proposed Shallow Tubewells Project.

IDA Support to Irrigation

2.13 IDA has financed two large scale water control projects in Bangladeshboth of which have been completed: Dacca Demra (Credit 1-PAK, 1961, US$1.0 M)provides flood protection for about 10,000 ac and irrigation for about 15,000ac, and Brahmaputra Embankment (Credit 39-PAK, 1963, US$5.0 M) which givespartial flood protection for a gross area of about 580,000 ac. IDA has alsofinanced 3,000 low-lift pump sets (Credit 76-PAK, 1967, US$4.1 M) and 3,800pump engines (Credit 117-PAK, 1968, US$3.5 M) to provide irrigation for about275,000 ac. Currently, IDA is financing: construction of the Chandpur II

-5-

Irrigation Project (Credit 340-BD, 1972, US$13.0 M), to provide flood protec-tion for about 140,000 ac and irrigation for about 60,000 ac; the NorthwestTubewells Project (Credit 341-BD, 1972, US$14.0 M), to provide irrigation fromgroundwater for about 180,000 ac; the Barisal Irrigation Project (Credit 542-BD,1975, US$27.0 M) to provide irrigation for about 140,000 ac by low-lift pumping,and the Karnafuli Irrigation Project (Credit 605-BD, 1976, US$22.0 M) forproviding irrigation, flood control and drainage to 46,000 ac.

2.14 The implementation of all four irrigation projects, currently inexecution, is behind schedule. The NW Tubewells Project and the Chandpur IIIrrigation Project are also expected to have substantial cost overruns. Rea-sons for the slippage of the implementation schedules are primarily adminis-trative and include difficulties in: hiring of consultants; appointment ofproject staff; release of budgetary allocations; approval of contracts, andcoordination among the various implementing agencies. The cost overruns arepartly due to implementation delays and accompanying inflationary pressures,and partly due to weak financial management and unforeseen technical problems.The Association and the Government have been discussing specific measures toimprove project execution and as a result the Government has already taken anumber of steps to remedy the most serious bottlenecks. Among the steps areincreased decentralization in project approval and in procurement and con-tracting, and simplification of procedures for release of budgetary funds.The IDA and GOB have also given increased emphasis to regular monitoring andsupervision of the various projects in order to identify and resolve thepotential problems at an early stage. Also, in preparation and appraisal offuture projects, including the one under consideration, particular effortsare being made to incorporate the lessons from the previous operations and toresolve the more serious issues prior to the project approval. These stepswill hopefully be reflected in accelerated project implementation in the future.

III. THE PROJECT AREA

General

3.01 The project area is located around the confluence of the Muhuriand Feni rivers in southeast Bangladesh about 90 mi from Dacca. It comprisesparts of Sonagazi, Feni and Chhagalnaya thanas of the Noakhali District andpart of Mirsarai thana of the Chittagong District (Map 11532). The projectwould cover a gross areas of 99,000 ac and a net agricultural area of 67,000ac. Of the estimated 410,000 people living in the project area, about 300,000belong to farm households. The nearest town is Feni at the western projectboundary. It is a subdivisional headquarters with relatively good trans-portation and marketing facilities.

Climate

3.02 The project area has three main seasons: the monsoon from June toOctober, during which about 80% of annual rainfall is recorded; the dry season

- 6 -

from November to February, which has very little rainfall and the lowest tem-peratures and humidities, and the pre-monsoon season from March to May, whichhas the highest temperatures and evaporation rates with occasional heavy rainstorms. Cyclones, originating in the Bay of Bengal in April-May and September-November, periodically cause severe damage in the coastal areas.

3.03 Mean monthly temperatures vary between 67 F in January and 84 0Fin May. The mean diurnal range in temperatures is about 20 0F in the dryseason and 9 F during the monsoon. Relative humidity ranges from 75% to 90%.Mean annual rainfall is about 110 inches. Evaporation ranges from 2 to 3inches in December to 5 to 6 inches in April (Annex 2).

Topography and Soils

3.04 The area lies mostly in the lower part of the Muhuri Valley. Themajor portion consists of a wide, flat, flood plain, ranging in elevationfrom about 13 ft to 18 ft above mean sea level. The flood plain is intersec-ted by the Muhuri, Selonia and Feni rivers and by numerous khals. Soils aredeep, older alluvium and consist mainly of silt and clay. Soil permeabilityis low to moderate and is excellent for rice production. The area is season-ally flooded but on most of the area flooding seldom exceeds 2 ft to 3 ft andis thus suitable for cultivation of transplanted rice varieties during the wetseason. During the dry season, irrigation is essential for rice cultivation.Vegetable and winter (rabi) crops are cultivated with residual soil moistureafter harvest of the wet season rice crop. The many rivers and khals make thearea ideally suited for irrigation by low-lift pumps. This has already beenadopted by farmers to a limited extent. The main constraint to expansion ofirrigation is availability of fresh water during the dry season.

Water Resources

3.05 The Muhuri, Selonia, and Feni rivers drain a total catchment areaof 1,120 sq mi. The source of the Muhuri and Selonia rivers and most of theirtributaries is in the Tripura Hills in India which surround the upper valley.The Feni River forms a portion of the boundary between Bangladesh and India.About half of the project area's drainage basin is in India. The three majorrivers drain within a quarter-mile of each other into a tidal inlet of theSandwip Channel in the Bay of Bengal (Map 11533). The principal rivers andkhals within the project boundaries not only fluctuate with the tides in theSandwip Channel, but also allow the intrusion of seawater. This limits theperiods when farmers can irrigate by low-lift pumping. At the proposed re-gulator site, the average annual discharge from the drainage basin is 3,280cusec. February and March are the months of minimum flow with about 700 cusecin a typical year. Discharge is generally highest in July with an averageexceeding 10,000 cusec.

Existing Irrigation and Drainage

3.06 Present irrigation in the project area is primarily by low-liftpumps. These are rented by BADC to farmers organized under the Thana IrrigationProgram (TIP). The BADC collects the pumps at the end of the dry season for

maintenance and storage during the monsoon. It is also responsible for thesupply of fuel and lubricants. The TIP is responsible for organizing pumpgroups, providing pump operators, and collecting fuel and rental charges.Some 330 pumps are currently fielded in the project area, with an additional230 outside the project area but within the Muhuri-Selonia-Feni Basin inBangladesh. Without improvements proposed under the project it is unlikelythat these numbers of pumps could increase since pump utilization is alreadylimited by water availability and sea water intrusion. Of the pumps withinthe project area, 200 provide an adequate supply of water to an average of37 ac per pump, while 130 pumps provide only a partial supply to an averageof 42 ac per pump.

3.07 Flood protection and drainage in the project area is rudimentary.Khals convey excess water to the principal rivers, which are backed up duringhigh tides. Large areas are flooded several times during a monsoon season.About 5,000 ac are liable to prolonged flooding over 3 ft. One extreme flood,in October 1968, covered 85% of the project area. In order to cope with theproblem, a low coastal embankment with flap-gate drainage structures has beenextended from the Little Feni River regulator, west of the project area, to theright bank of the Feni River (Map 11533). This system not only aids flooddrainage but also prevents overland sea water flow from the Sandwip Channel.

Farm Size and Land Tenure

3.08 The project area has an estimated population of about 410,000,including about 45,000 farm households averaging 6.6 members per household,and about 25,000 families of landless wage earners and non-agriculturalproperty owners.

3.09 The lower Muhuri basin is one of the most densely populated areasin Bangladesh (2,600 persons per sq mi compared to the national average of1,500). Consequently, farms are smaller and households larger than in mostother parts of the country. At present, a minimum area of about 1.5 ac isrequired to support an average farm family and, as shown below, about 70%of all households in the project area are either landless or operate farmssmaller than 1.5 ac.

/a % of Cultivated AverageFarm Size-a % of Holdings Area Family Size

Less than 0.25 ac 35 2 4.10.25 - 1.00 ac 25 12 5.01.00 - 2.50 ac 23 31 7.12.50 - 5.00 ac 13 38 8.4Over 5 ac 4 17 10.5

/a Operated area (owned and rented).

- 8 -

3.10 The average farm size is 1.9 ac of which 1.6 ac are cultivated, andthe remaining 0.3 is farmstead, ditches and foot paths. Most holdings areheavily fragmented with plot sizes averaging only about 0.3 ac. About 90%of the land is farmer-owned, but only about half the area is owner operated.This is because farmers exchange land under a variety of arrangements suchas share cropping, cash lease, or long-term rental. Share cropping, the mostcommon type of lease, is usually based on a 50-50 sharing of the crop withexpenses shared on a variable basis between the land owner and the sharecropper. In the case of irrigated land, there is an increasing tendency thatthe share cropper pay all crop production costs plus a fixed rent (in kind)to the owner. Less than 1% of the farms are tenant operated.

Agricultural Production

3.11 Rice is by far the most important crop in the project area andaccounts for about 90% of the cropped area. There are four crops of rice --aus, broadcast aman (B. aman), transplant aman (T. aman), and boro. Aus, acrop with a short growth period, is usually broadcast (B. aus) with the earlyrains in March/April and harvested in July/August. Aman, the main crop, iseither broadcast (B. aman) or transplanted (T. aman), depending on flooddepths and water availability. The B. aman, which has a 220 to 250 day growthperiod and may elongate up to 15 ft depending on the depth of flooding duringthe monsoon, is sown about the same time as aus, and is harvested in November/December. The T. aman with a 150 day growth period, is sown in June/July,transplanted a month later and harvested in November/December. Boro, whichis cultivated with irrigation, is sown in December/January, transplanted onemonth later and harvested in May/June.

3.12 Aus is grown on 42,000 ac, B. aman on 2,000 ac, T. aman on 49,000ac and boro on 15,000 ac. Local variety rice still predominates with highyielding varieties (HYV) accounting for only 18,000 ac, or 17% of the areaunder rice cultivation. The local variety yields are relatively low: 0.5tons of paddy per ac for aus and B. aman; 0.6 tons per ac for T. aman, and0.8 tons per ac for boro. The HYV aman and boro give yields of 0.9 and 1.3tons per ac, respectively.

3.13 During the dry season, about 13,000 ac of pulses, oilseeds, andvegetables are grown utilizing residual soil moisture on land fallow afterharvesting the aus crop.

3.14 The present cropped area is about 121,000 ac which, on a net culti-vable area of 67,000 ac, gives an overall cropping intensity of 181% (theaverage for Bangladesh is 135%). Total production is: 73,000 tons of paddy;2,000 tons of pulses and oilseeds; and 11,000 tons of vegetables. Present andprojected farming practices, cropping patterns and yields are detailed inAnnex 9.

-9-

Transportation and Marketing

3.15 The transportation network within the project area is only skeletal.The Dacca-Chittagong railroad cuts through the area and a branch from Feni toSelonia serves its northern part. The main highway from Dacca to Chittagong,which is presently being upgraded and widened with IDA assistance (Credit408-BD), is the only paved all-weather road in the area. Other roads aregenerally usable only during the dry season. The Muhuri and Feni rivers andKalidas Khal (the outlet of the Selonia River) are used throughout the yearfor both cargo and passenger transport. During the monsoon season, the largenetwork of khals forms a widespread water transportation system, thereby per-mitting access to most villages.

3.16 The farmers usually take their paddy by carry-pole, oxcart or boatto the village market where it is bought by intermediary traders, who eitherbring the paddy to the town markets for resale to wholesale dealers or haveit milled by local hullers for direct sale. There are about 200 licensed ricehulling machines in the project area and an equal number of unlicensed hullers.Many of the private dealers have small godowns (generally 10 to 20 tons capa-city) for the storage of paddy and rice.

IV. THE PROJECT

General

4.01 The proposed project would provide irrigation, improved floodcontrol and drainage, and improved agricultural supporting services tofarmers in a net area of about 67,000 ac. The project would enable amajor increase in crop yields through the construction of facilities tocreate favorable conditions for growing HYV rice.

Project Features

4.02 The main components of the project, details of which are givenin Annex 3, are as follows:

(a) Coastal earthfill embankments and a dam acrossthe Feni River Channel, totaling 6.5 mi in length;

(b) A reinforced-concrete regulator structure equippedwith radial gates and flap gates;

(c) One major and 30 minor drainage structures equippedwith flap gates, and the improvement of an existingdrainage outlet;

(d) Improvement of 110 mi of natural khals and the ex-cavation of 6 mi of new khals;

- 10 -

(e) Improvement of 9 mi of existing roads and the con-struction of 9 mi of new roads for access to themain project works;

(f) About 1,100 diesel-powered, 2 cusec low-lift pumpsto raise water from the khals to adjacent farm lands;

(g) Workshops, equipment, and vehicles for maintenanceof project works and low-lift pumps;

(h) Offices, housing and vehicles for project staffresponsible for supervising project implementation;

(i) Transportation (field vehicles, motorcycles and bicycles),and agricultural equipment (hand sprayers, grain dryers)to facilitate agricultural extension and supportingservices; and

(j) Consultants to assist the Government in projectimplementation and in evaluation of the projectimpact.

4.03 Irrigation facilities provided by the project would expand theboro rice area from the present 15,000 ac to about 50,000 ac. In the wetseason, project works would reduce flooding and allow supplementary irriga-tion resulting in a shift from local varieties to HYVs on 10,000 ac. By ex-cluding overland sea water intrusion, 3,000 ac presently marginal and largelyuncropped, would be brought to high productivity. About 1,100 lowlift pumpspowered by 5-7 hp diesel engines 1/, each serving an average area of 45 ac,would irrigate the area from an extensive network of natural and project-improved khals. These khals along with the principal rivers, would serve bothreservoir (storage) and canal (conveyance) functions with a minimum of waterlosses. Low-lift pumping has already been adopted on a large scale in areasof Bangladesh where the rivers and khals carry fresh water throughout the dryseason. The reservoir formed by the regulator would provide a permanentsource of fresh water, the level of which would fluctuate only gradually with-in a range of 4.0 ft. The rivers would be free of tidal fluctuations and theresulting salinity problem. Khal excavation would make water available andsmall-vessel navigation possible throughout the area. The regulator wouldalso improve flood drainage by freeing waterways from tidal surges. Thiswould allow discharge from the project area when tidal levels in the SandwipChannel drop below reservoir level. The regulator would be designed to with-stand cyclones. However, full seaward protection of the embankment againstcyclones and tidal waves is not economically justifiable, and in the economicand financial analyses suitable provisions have been made to cover possiblerehabilitation needs for these works (Annex 13).

1/ Most of the 330 units currently in the project area will become due forreplacement during the project implementation period.

- 11 -

4.04 On-Farm Water Distribution. Farmers in the project area, andelsewhere in Bangladesh where low-lift pumps are used, have shown an abilityto adopt irrigation with only little additional on-farm improvement works.Paddy fields are already leveled and, in most cases, are fully or partiallydiked. Water distribution is from plot-to-plot with some small ditchesconstructed by the farmers. Difficulties are often the result of improperlocation of the pump or inadequate pump group management. Pump groups wouldbe formed in the project area under the direction of IRDP, which would beassisted in pump siting and distribution layout by WDB and the project con-sultants. Pump groups would complete their own water distribution systemswithin areas served by each low-lift pump. The IRDP would conduct trainingprograms in improved irrigation practices for selected members from eachpump group at the Thana Training and Development Centers (TTDC).

Water Quality, Supply and Demand

4.05 Quality. The rivers entering the project area provide goodquality waters well suited for irrigation. Construction of the proposedregulator and cross-dam would prevent the intrusion of sea water into theproject area and create a fresh water reservoir which would improveliving conditions for the people and enhance agricultural production.

4.06 Supply. The project would depend primarily upon stream flow forirrigation water supply since the live storage provided by the reservoirwould be only 25,600 ac-ft. This is equivalent to six inches over the netcropped area. Stream flow is lowest during February and March which are themonths of highest crop demand. Present average inflow to the project areaduring February and March is about 700 cusec. With due allowance for futurewithdrawals upstream, the average inflow is expected to decline to 580 cusec.About half the drainage basin is located upstream in India. The project wouldnot have any adverse effects on either dry or wet season flows in the Indianpart of the Feni, Muhuri and Selonia rivers. Siltation of the reservoir,upon which the project depends for both water storage and distribution, isprojected to take at least 40 years.

4.07 Demand. Theoretical irrigation requirements for the boro cropwould increase from four inches in January to 11 inches in February, thendecline to four inches in May (Annex 4). The total irrigation requirementwould be 38 inches or some 160,000 ac-ft. The peak water demand in Februarywould be 45,000 ac-ft requiring a withdrawal of 2,220 cusec for 8 to 9 hrs perday. A reservoir operation study indicated that at least 85% of theoreticalirrigation requirements would be met nine years out of ten (Annex 4). Thisdeficiency is minimal in view of the built-in safety factor in the theore-tical water demand calculation and the residual moisture retained by soils.The reduction in crop yields resulting from such deficiencies would be mini-mal. This has been taken into consideration in evaluating yields and projectbenefits.

Engineering Design

4.08 The project feasibility study effectively covers the planning andpreliminary design for the engineering works and the agricultural development

- 12 -

plan. Detailed design of the main project structures -- the Feni regulatorand the cross-dam -- requires additional foundation exploration, and thisstudy is currently in progress under an extension of the consultant's contractfinanced from IDA Credit 409-BD. The extended contract also included the de-sign and preparation of contract documents for the regulator, and the gatesand hoists. Construction drawings for the regulator and the detailed designsfor other project works would be carried out by consultants to be hired byWDB for assistance in project implementation (para 5.05).

Construction Schedule

4.09 Bidding documents for the regulator works and the gate equipmentwere completed in April, 1976 and bids were received in September 1976.Construction is scheduled to begin in October 1977 and is expected to becompleted in five years. Partial project operation would commence in the1981-82 dry season with full operations to follow a year later (Annex 5).Land acquisition and access road construction has already commenced.

Cost Estimates

4.10 Total project costs are estimated at US$52.0 M equivalent, includingUS$9.8 M in taxes and duties. The foreign exchange component is estimated atUS$18.4 M or 44% of the total excluding taxes and duties. Estimates are basedon preliminary designs, with unit prices at April 1977 levels. The prices arebased upon costs prevailing in Bangladesh and they take into account the bidsreceived for the regulator and gates tender. Physical contingencies of 10-15%have been applied to civil works costs and 5-10% to equipment and vehicle costs.Projected price increases due to inflation have been applied to estimatedannual expenditures at the following percentage rates:

YearsItem 1977-79 1980-82

Civil works 9 8Equipment andConsulting Services 7.5 7

The resulting expected price increases amount to US$10.2 M, or about 20% ofthe estimated total project cost.

4.11 Estimated project costs, presented in greater detail in Annex 6,are summarized below:

- 13 -

PercentLocal Foreign Total Local Foreign Total /a of Total----(Taka million---- ----(US$ million)----

I. LandAcquisition 7.5 - 7.5 0.50 - 0.50 1

II. Civil Works

Regulator &RelatedWorks 197.0 118.0 315.0 13.13 7.87 21.00 40Cross Dam &Embankments 55.6 26.1 81.7 3.71 1.74 5.45 10Channel Im-provements 24.0 2.0 26.0 1.60 0.13 1.73 3

DrainageStructures 7.0 2.5 9.5 0.47 0.16 0.63 1O&M Facilities 3.0 1.0 4.0 0.20 0.07 0.27 1Sub-Total 286.6 149.6 436.2 19.11 9.97 29.08 56

III. Equipment &Vehicles

Low-Lift Pumps 13.0 20.0 33.0 0.87 1.33 2.20 4Vehicles &Agric. Equip. 3.3 2.7 6.0 0.22 0.18 0.40 1O&M Facilities 0.6 1.4 2.0 0.04 0.09 0.13 -Sub-Total 16.9 24.1 41.0 1.13 1.60 2.73 5

IV. ConsultingServices 30.0 25.0 55.0 2.00 1.67 3.67 7

V. Management &Admin. 23.4 - 23.4 1.56 - 1.56 3Basic Cost 364.4 198.7 563.1 24.30 13.24 37.54 72

VI. Physical Con-tingencies 40.5 22.9 63.4 2.70 1.53 4.23 8

VII. PriceContingen-cies 99.1 54.4 153.5 6.60 3.63 10.23 20Total 504.0 /b 276.0 780.0 /b 33.60 /c 18.40 52.00 /c 100

/a Discrepancies in currency conversion due to rounding.

/b Includes Tk 147 M in taxes and duties.

/c Includes US$9.80 M equivalent in taxes and duties.

- 14 -

Financing

4.12 With assistance from the Bank Group, GOB has secured a credit ofCanadian $9 M (about US$8.6 M) from the Government of Canada for financingpart of the project costs. The proposed IDA credit of US$21 M, together withthe Canadian Credit, would finance the full foreign exchange costs and about47% of the estimated local costs or 70% of the total project cost net of taxesand duties. The GOB would contribute the remaining US$22.4 M through annualbudget appropriations. The Canadian credit would be on standard IDA terms andwould be administered by IDA on behalf of the Government of Canada. Assuranceshave been obtained that the Government would establish a project revolving fundand that it would replenish the fund on the first of each month to maintain abalance adequate to cover the estimated expenditures for the following threemonths. A draft Project Proforma (PP) has already been prepared. Approvalof the PP by the Executive Commitee of the National Economic Council and aninitial contribution of Tk 3.0 M to the project revolving fund by GOB wouldbe conditions of credit effectiveness. Another condition of effectiveness ofthe IDA credit is the fulfillment of conditions of effectivess of the CanadianCredit agreement.

Procurement and Contracts

4.13 Equipment and vehicles (estimated cost net of taxes and contingen-cies, US$2.5 M) would be procured after international competitive bidding inaccordance with Bank Group Guidelines. A 15% preference margin, or prevailingcustoms duty if lower, would be extended to local manufacturers in evaluationof bids. Small off-the-shelf items costing less than US$10,000 each, which arenot practical for international tendering, would be purchased through normalGovernment procurement procedures acceptable to IDA. Such purchases would belimited to a total of US$200,000.

4.14 The major civil works contract for construction of the main gatedregulator, estimated to cost about US$11.2 M (net of taxes and contingencies)was tendered for international competitive bidding in accordance with BankGroup Guidelines. A total of six responsive bids were received of which onewas from a foreign contractor. None of the responsive bidders was adjudgedto be fully qualified for the job. To avoid further delays in project im-plementation and to strengthen the domestic construction industry, GOB, inconsultation with IDA, undertook a detailed review of the technical, mana-gerial and financial capabilities of the lowest evaluated bidder, Messrs.Sikder & Co., a domestic contractor. Improvements necessary to increase thecontractor's capabilities and to ensure satisfactory project implementationwere agreed. Among the improvements would be hiring by Messrs. Sikder & Co.,of a 4-man expatriate technical assistance team for help during project im-plementation. The preliminary negotiations with the contractor have alreadybeen completed and the final award would be made following approval of theCanadian and IDA credits. Signing of the contract between WDB and Messrs.Sikder & Co., on terms and conditions satisfactory to IDA, would be a con-dition of credit effectiveness.

4.15 International competitive bidding would not be practical for theother civil works (channel excavation, drainage structures, cross dam &embankments, access roads, transmission line, and offices and houses), with

- 15 -

an estimated cost of US$8.0 M (net of taxes and contingencies). These worksare relatively small, simple in nature, diverse in location, constructionwould be seasonal, and they lend themselves to labor-intensive construction.For these works, contracts would be awarded on the basis of competitive bid-ding advertised locally and in accordance with procedures acceptable to IDA.Construction equipment and imported materials (estimated cost net of taxesand duties, US$4.0 M) for these works would however be procured after inter-national competitive bidding in accordance with IDA guidelines.

Disbursement

4.16 Disbursements from the proposed aid package would be made for:(a) 100% of foreign expenditures or 100% of local expenditures ex-factoryor 50% of other local expenditures for equipment and vehicles; (b) 100%of foreign expenditures and 50% of local expenditures on civil works; and(c) 100% of foreign expenditures and 70% of local expenditures for consult-ing services. No disbursements would be made against: the costs of landacquisition; staff salaries; overhead expenses; and taxes and duties ondirectly imported goods and services. Disbursement from the aid package wouldbe pro-rated to the Canadian and IDA Credits -- approximately 29% to theCanadian Credit and rest to the IDA credit. It is expected that the dis-bursements would be completed by June 30, 1983, approximately one year afterproject completion. Any undisbursed funds from the IDA Credit would be can-celled unless an alternative use was approved by IDA. The categories to befinanced, the allocation of the proposed credits, and expenditure percentagesto be disbursed under each category are summarized in Annex 7. Estimatedexpenditures and disbursement schedules are also shown in Annex 7. Provisionhas been made to reimburse the Government for up to US$250,000 for expendi-tures made on staff housing and site preparation after November 1, 1975.

Accounts and Audit

4.17 Assurances have been obtained that GOB would cause WDB, BADC andother departments and agencies responsible for carrying out any part of theproject, to prepare and maintain project accounts and financial statementsin accordance with sound accounting practices, and that it would employindependent auditors acceptable to IDA to audit these project accounts andthat certified copies of audited accounts and of the auditor's report wouldbe sent to IDA within six months of the close of each fiscal year.

Environmental Impact

4.18 The overall environmental effects of the project are expected tobe beneficial. Public health should improve because of the increased avail-ability of fresh water on a year-round basis. Schistosomiasis is not presentin Bangladesh. In remaining salt-blighted land along the coast, the proj-ect will enhance environmental conditions. Existing fisheries in the areaare small and the project would have little adverse effect on them. Majorcarp, the most important specie, can generally be expected to stay in thearea even during floodwater discharge through the proposed regulator. Thereservoir would have the potential to become an important area for fish pro-duction if the planned pilot fish culture facilities on the Halda River aredeveloped and fingerlings of major carp become available. Investigations of

- 16 -

the fish habitat in the Muhuri River including the potential effects of theproposed project and the prospects for future development are being financedunder the Karnafuli Irrigation Project (Credit 605-BD).

V. ORGANIZATION AND MANAGEMENT

Implementation of Project Works

5.01 The Water Development Board (WDB), under MFWP would have overallresponsibility for management and execution of the project works. The WDBwould be directly responsible for project preparation, design and constructionof all civil works. Responsibility for procurement and distribution of low-lift pumps would rest with BADC. The IRDP would be responsible for theformation of farmers' pump groups and their integration into the Thana Cen-tral Cooperatives Association (TCCA) structure (Annex 8). The Ministry ofAgriculture would be responsible for strengthening extension services tothe farmers.

5.02 In order to ensure coordination between the various departments andagencies responsible for project implementation, a Project Implementation Com-mittee (PIC) has been established. The PIC is to be chaired by the ProjectDirector and consists of senior officers of the participating agencies andDistrict administration officers. The Project Director would be a senior WDBofficial. Problems not resolved at this level would be referred to the Cen-tral Evaluation Committee (CEC). The CEC was formed for the Barisal Project(Credit 542-BD) by a Government order dated December 13, 1974 to periodicallyreview progress and problems on IDA-financed water development projects andwould function also for this project. The members of the committee are theSecretaries of the various ministries concerned with project implementationand the Chief, Flocd Control and Water Resources Division, Planning Commis-sion. Joint secretary, MFWP is secretary of the committee. The ProjectDirector has already been appointed, the members of the PIC designated, andthe project has been included in the CEC's portfolio.

5.03 As noted above, the PIC/CEC management concept was introduced onthe Barisal Project. It was also designated by MFWP to be adopted on theChandpur (Credit 340-BD) and Karnafuli Projects (Credit 605-BD). However,experience to-date on these projects has shown that, while the concept is via-ble and has resulted in some improvements in inter-agency cooperation, thedominant role of WDB with overall managerial and financial control has greatlyrestricted the anticipated benefits of this system of inter-agency coordina-tion. WDB management is still very construction oriented with little regardfor the key agricultural inputs essential for irrigation development. Staffassigned for other agencies to work with WDB on these projects still believetheir prime responsibility is to their own organization and the required proj-ect cooperation has not developed. IDA is currently reviewing with GOB therole of WDB in irrigation project development and the problem of poor coordi-nation among the various agencies. GOB, from its own studies, is fully awareof the shortcomings of WDB and it is expected that alternative organizational

- 17 -

arrangement for multi-sectoral projects, will be developed. Both IDA and GOBhave agreed that as and when new arrangements are fornulated, IDA would examinethe same and would be prepared to consider amending the Credit Agreement tofacilitate the introduction of revised organizational arrangements.

5.04 Annual Work Programs. Annual programs, to be prepared by the ProjectDirector in consultation with the PIC before each construction season, woulddetail the activities and works to be implemented by each agency. Assuranceshave been obtained from the GOB that the Project Director would prepare annualwork programs -- supported by maps, detailed description, and cost estimatesof physical works to be executed. The programs would be sent to IDA, by August31 of each year, for review and comment.

Consulting Services

5.05 The Government would retain a consulting firm, acceptable to IDA,to assist WDB, its Project Officer and the other agencies responsible forproject implementation. The consultant would have the major responsibilityfor the preparation of work programs, designs, contract documents, and O&Mmanuals and the supervision of construction. A project manager, administrativeofficer, and field engineer would be maintained in Bangladesh throughout theconstruction period. They would be supported, as necessary, by a structuralengineer, hydrologist, soils engineer, mechanical engineer, electricalengineer and procurement advisor both in Bangladesh and the consultant's homeoffice. Support staff for the consultant would be provided by WDB. Prelimin-ary negotiations with a prospective consulting firm (International EngineeringCo., Inc., USA) have already been completed. In preparing proposals for theassignment, the consultant was advised to give full consideration to utilizingtechnical skills available in Bangladesh -- such as using Bengalee specialistsor local consulting firms under sub-contracts. Due to WDB's limited experiencewith structures like the main regulator, it is estimated that a total of about600 man-months of consulting services, of which about 250 would be expatriate,would be required. Signing of the contract with the consulting firm, on termsand conditions satisfactory to IDA, would be a condition of credit effectiveness.

Monitoring and Evaluation

5.06 Monitoring of the project progress would be through quarterly andannual progress reports prepared by the concerned staff of the various imple-menting agencies. Reporting formats for such reports would be finalized by theProject Director with assistance from the project consultants (para 5.05). Thereports would include all relevant data on physical and financial progress ofthe project together with reasons for deviations, if any, from the targets setunder annual work programs (para 5.04). The PIC would review the progress re-ports and assisted by the consultants revise the future work program as neces-sary. Following review by the PIC consolidated quarterly and annual reportswould be promptly sent to IDA.

5.07 The main objectives of the evaluation studies would be to estimatethe direct and indirect benefits resulting from the project as well as thesocio-economic characteristics of the project beneficiaries. The data for

- 18 -

evaluation would be obtained through a few selected in-depth interviews inthe project area as well as through canvassing representative samples ofproject beneficiaries. A benchmark survey would be conducted about oneyear before project completion to establish the pre-project situation.Two follow-up surveys would be conducted after completion of the projectworks -- the first after one year and the second after three years. Theevaluation studies and surveys would be undertaken by well qualified localconsulting firms or research institutions selected in consultation with IDA.

Operation and Maintenance

5.08 The WDB would be responsible for O&M of the regulator,for maintenance of khals, cross Lam and all embankments. Theannual 0 & M cost is estimated at Tk 5.0 M. The BADC would be responsible forthe provision of fuel and maintenance facilities for the low-lift pumps.Assurances have been obtained from the Government that: (a) sufficient fundswould be made available at all times to operate and maintain all facilities inaccordance with sound engineering standards, and (b) the Project Directorwould be responsible for preparation of detailed manuals specifying projectO&M procedures. These manuals would be submitted to IDA for review andcomment within three years of the signing of the Credit Agreement.

Agricultural Supporting Services

5.09 The Ministry of Agriculture is responsible for agricultural re-search and extension, and, through BADC, for procurement and distributionof agricultural inputs in the project area, while the Ministry of LocalGovernment, Rural Development and Cooperatives is responsible for the Inte-grated Rural Development Program (IRDP), cooperatives, and the Thana Irri-gation Program (TIP) (Annex 8).

5.10 Agricultural Research. The Bangladesh Rice Research Institute(BRRI), which was established in 1970 and works in close cooperation withthe International Rice Research Institute, Los Banos, Philippines, is re-sponsible for research on various aspects of rice improvement and production,and for rice production training. The BRRI and its substations are adequatelystaffed with qualified personnel and their progress of work has been satisfac-tory. The project would draw on the services and facilities of BRRI, includingthe Institution's sub-station of Comilla located about 40 mi north of theproject area.

5.11 Agricultural Extension Services. The Directorate of Agriculture(Extension and Management) in the Ministry of Agriculture maintains ex-tension agents at both the thana and union levels. The Union AgriculturalAssistants (UAAs), an average of ten per thana, are the basic field exten-sion workers. Their work is supervised by Thana Agriculture Officers (TAO).As there is a vital need to strengthen agricultural extension, the Govern-ment plans to replace the TAOs who are mostly diploma holders, with collegegraduate Thana Extension Officers (TEOs) to ensure higher technical compe-tence. It also plans to extend extension services to the village level byappointing a minimum of two Village Extension Agents (VEAs), to replace the

- 19 -

present one UAA, in each Union. IDA-financed Rural Training Project (Credit

621-BD) would help to produce more trained personnel for posting as VEA. IDA

is also proposing to finance an Extension and Research Project (EARP) in the

NW region for strengthening these services to the farmers. It is expected

that EARP would be a model for improvement of extension service on a country-

wide basis. The credit would provide funds for procurement of additional

jeeps, motorcycles and bicycles to improve training and extension services to

the farmers in the project area. The extension service improvements for the

project area would be consistent with, and eventually integrated in the

national program for strengthening of the agricultural extension system.

5.12 Seed. The BADC would be responsible for multiplying and distribu-

ting HYV seeds. Seed multiplication would be done on BADC farms and also on

approved private seed farms under the registered seed growers' scheme. Once

new varieties have been introduced to an area, farmers retain seed from

their previous harvest or obtain seed from their neighbors. However, to

sustain high yields, it would be necessary to periodically introduce fresh

seed. The IDA-financed Cereal Seed Project (Credit 410-BD, 1973) aims

to improve the quality of seed production. One of the proposed six seed

processing plants would be established at Chittagong, 80 mi southeast of

the project area. Distribution to farmers would be made through TCCA

cooperatives, and approved private dealers.

5.13 Fertilizer. The BADC would also procure and distribute fertilizers

to TCCA and approved private dealers for distribution to farmers. This pro-

cedure has been quite satisfactory except in cases where BADC could not ob-

tain adequate supplies for distribution. The distribution of fertilizer in

the project area has increased from an average of 9 lb of nutrient per ac in

1965-66 to about 30 lb nutrient per ac at present. Fertilizer use is expected

to increase to an average of 100 lb nutrient per ac at full development in

1985. The Ashuganj Fertilizer Project (Credit 527-BD, 1975) aims to increase

the annual production of nitrogenous fertilizer by 528,000 tons of urea

(243,000 tons nutrient), and bilateral aid would help to increase the supply

of phosphate and potash fertilizer. A national study of the fertilizer dis-

tribution system is underway with financing from the First Technical Assist-

ance Credit (Credit 409-BD). It is envisaged that requirements for additional

storage facilities would be provided by bilateral sources and under a proposed

IDA fertilizer marketing and distribution project.

5.14 Other Inputs. Agrochemicals and sprayers for plant protection are

now procured by BADC, and are distributed to farmers through TCCA and approved

dealers. The proposed credit would provide for procurement of sufficient

sprayers for the project area. Since harvesting generally takes place in the

pre-monsoon season with its thunder storm rains, rice production from the boro

crop in the project area is reduced by a lack of paddy drying facilities.

In view of the major increase in boro crop production generated by the project,

the proposed credit would provide funds for procurement of 30 simple diesel-

powered dryers to be operated by cooperatives and located in villages through-

out the area. These dryers would have sufficient capacity to ensure optimum

production from harvested paddy.

- 20 -

VI. PRODUCTION, MARKETING, PRICES AND FARM INCOMES

Crop Calendars and Cropping Patterns

6.01 Rice would continue to be the dominant crop after completion of theproject but there would be considerable changes in the relative importance ofthe various rice crops. The reliable water supply would enable cultivationof HYV boro in most areas in the dry season. Irrigated HYV boro producesmuch higher and more stable yields than aus and B. aman and, since theirgrowing seasons overlap, the increase in HYV boro area would be accompaniedby a decrease in the area under aus and B. aman. The availability of supple-mentary irrigation in the wet season would increase the comparative advantageof HYV aman over local T. aman and cause a shift to HYV aman in part of theproject area.

6.02 With the availability of irrigation, there would be some increase inthe acreage under vegetables. On the whole, the cropping intensity wouldincrease from 181% to 192% (Annex 9). The present and projected future croppingpatterns are as follows:

Future without Future withPresent Project Project=----------- (thousand ac) ---------------

Paddy

Aus (Local) 42 37 8Aus (HYV) - 5 5B. Aman 2 2 -T. Aman (Local) 44 24 14T. Aman (HYV) - rainfed 5 20 15

- irrigated - 5 20Boro (Local) 2 2 -Boro (HYV) 13 13 50

Subtotal 108 108 112

Other Crops

Pulses oilseeds 9 9 9Vegetables 4 4 8

Subtotal 13 13 17

Total 121 121 129

- 21 -

Yields and Production

6.03 Estimated paddy yields at present and at full development in 1985

(3 year after project completion) are summarized below:

Future without Future with

Present Project Project

mds/ac tons/ac mds/ac tons/ac mds/ac tons/ac

Aus (local) 13 0.48 13 0.48 13 0.48

Aus (HYV) - - 28 1.04 30 1.12

B. Aman 13 0.48 13 0.48 - -

T. Aman (Local) 17 0.63 20 0.75 22 0.82

T. Aman (HYV) - rainfed 25 0.93 30 1.12 32 1.19

-irrigated - - 35 1.30 37 1.38

Boro (Local) 22 0.82 22 0.82 - -

Boro (HYV) 35 1.31 40 1.49 42 1.57

These yields were projected assuming that fertilizer use in the project area

would increase from an aggregate 3,000 tons per year at present to about

12,500 ton per year at full development. Use of pesticides is projected to

increase to about 40 tons. Paddy production would increase from 73,000 tons

at present to 145,000 tons at full development (Annex 9).

Marketing

6.04 Because of the high population density, the Muhuri area presently

faces a foodgrain deficit of about 25% of total demand. 1/ The 72,000 ton

increase in paddy production would turn this deficit into a 20% surplus by

1985, even with the projected population increase. With prospects of con-

tinuing food shortages in Bangladesh for the foreseeable future, the ex-

pected surplus from the project area should find ready markets in food-

deficit areas of the country.

6.05 Although the project area is a net importer of rice, the volume

of internal sales is large (about 25,000 tons). Consequently, all chains

in the marketing system are fairly well developed. Since the area has

railway and paved highway access to the major urban centers (Dacca and

Chittagong), it is expected that the marketing system will readily keep

pace with increased rice production.

6.06 The hulling industry adapted efficiently to the increased demand

when HYV rice and pump irrigation were introduced in the late 1960s and

early 1970s. Presently, there are some 400 private hullers operating in

the area. These hullers typically have a capacity of about 10 md of paddy

per hour, which indicates that, at present, they are working far below capa-

city. Consequently, it is expected that the private sector will be quite

capable of handling the increased volume of paddy from the project.

1/ Based on an assumed per capita consumption of 16 oz per day. (The aver-

age consumption in Bangladesh in the late 1960s was just below 16 oz.)

- 22 -

Prices

6.07 Prices for rice and farm inputs used in economic analysis are derivedfrom the Bank's projected 1985 world market prices expressed in 1977 constantprices. Production of crops other than rice is relatively small and most ofthe output is consumed locally. Projected prices for these products arebased on the historical ratios between their prices and the price of rice.

6.08 Based on a projected world market price of US$375 per ton fobBangkok for high grade rice (5% broken), the price for low to medium qualityrice (25%-35% broken) cif Chittagong is estimated at US$270-290 per ton. Afterallowance for transport and handling, the equivalent farm gate price is Tk 93per maund of aman paddy, which is the preferred variety. Boro and aus arepriced somewhat lower.

6.09 To reflect the protection provided by import restrictions and dutiesin the economic analysis, a standard conversion factor of 0.75 1/ has beenused to convert the local cost element in various inputs and outputs. Forfinancial analysis, prices based on GOB's present procurement policies havebeen used.. The assumption behind the projected prices used for financialand economic analyses are discussed in Annex 10.

Farm Incomes

6.10 Income to farm households includes the net value of crops producedon the farm and off-farm earnings from paddy processing, wage labor, andfishing. Most of the rice is consumed on the farm but part of the productionfrom larger farms is sold. The high population density and complex landtenancy arrangements have resulted in a wide variety of income levels in theproject area.

6.11 Present and projected farm budgets have been analyzed on the basisof three representative farm sizes: 1.0 ac, 3.0 ac and 5.0 ac (Annex 11).Only the value of crop production has been included as income in this analysis.Off-farm incomes are discussed in para 6.12. The annual net income fromfarming, including the imputed value of produce consumed on the farm (in 1977prices), for the three representative farm types are:

Net Farm Income (Tk)Future Future

Farm Size Present Without Project With Project

1.0 1,300 1,800 3,2503.0 3,700 5,100 9,1505.0 5,650 8,000 14,150

1/ i.e. a shadow exchange rate of US$1 = Tk 20 since standard conversionfactor = official exchange rate/shadow exchange rate.

- 23 -

In the derivation of these farm incomes, costs of hired labor and other inputsexcept irrigation has been charged as production costs. The estimates forthe 3.0 ac farm are based on a cropping pattern that reflects the average forthe project area. A slightly higher intensity is assumed for the 1.0 acholding and a slightly lower intensity for the 5.0 ac holding.

6.12 Off-farm employment is substantial in the project area. Familieswith 1.0 ac holdings typically have off-farm incomes of about Tk 2,000 peryear. For these families, off-farm employment is a necessity since a mini-mum holding of about 1.5 ac is required to support the average farm family.A larger proportion of the members of the richer farm households have atleast some elementary education and, consequently, better employment oppor-tunities are open to them. This, combined with the larger family sizes,brings the off-farm income of the families holding 3.0 ac and 5.0 ac farmsup to Tk 3,000 and Tk 3,500, respectively. The total farm labor requirementswould increase about 30% under the project. For families holding 1.0 ac farms,these increased opportunities to work on the farm would not to any noticeableextent conflict with off-farm employment. Since the daily income from off-farm employment for the larger farmers is higher than the cost of hiringfarm labor, requirements for these farms would be met by hired farm laborers.Consequently, off-farm incomes would not decrease due to the project. Thetotal family income for the submarginal farmers (1.0 ac holding), smallfarmers (3.0 ac holdings) and large farmers (5.0 ac holdings) would thenincrease at least 40%, 50%, and 55%, respectively, under the project. Theseincreases are considered fully adequate for obtaining active participationby the farmers in project activities.

Recovery of Costs

6.13 At a discount rate of 10% per annum, the present value of the proj-ect construction costs 1/ and expected costs of major repairs is estimated tobe about Tk 353 M or about Tk 10,100 per irrigated ac. The O&M of the projectworks would cost Tk 5 M per year or about Tk 140 per ac. In addition, theannualized capital cost of low-lift pumps would amount to Tk 6,000 per pump(about Tk 140 per ac) and the O&M cost to Tk 8,000 (about Tk 180 per ac).Accordingly, the total annual cost for a low-lift pump would be Tk 320 per ac.Assuming that water charges are introduced from Year Six of the project, fullcost recovery would require a total annual charge of Tk 2,120 per irrigatedac -- Tk 1,660 for recovery of construction costs, Tk 140 for O&M of civilworks, Tk 140 for the capital cost of low-lift pumps and Tk 180 for the O&Mcost of low-lift pumps.

6.14 If GOB's present policies on irrigation water charges (Annex 11)were to be applied to the Muhuri Project, the farmers in the area would pay atotal of about Tk 250 per irrigated ac -- Tk 70 (3% of the incremental grossvalue of production) as charges on project civil works, and Tk 180 for theO&M of lowlift pumps. The total charge would mean a cost recovery index of12% and a benefit recovery index of 14%.

1/ All costs are net of taxes and duties and in constant 1977 prices.

- 24 -

6.15 An analysis of the farmers' ability to repay the project costs in-dicates that on the basis of estimated "project rents", a reasonable upperlimit for the potential charges would be about the Tk 1,200 per irrigated ac(Annex 11). Thus, while full cost recovery would be infeasible, there is ascope for substantially higher charges than those in force at present.

6.16 Several alternative policies on water charges have been analyzedin Annex 11. Due to: (a) low income levels in the project area; (b) his-torically low level of water charges paid by the farmers; and (c) likeli-hood of present low water charges continuing outside of the project area, itis concluded that a reasonable policy would be to recover the full cost oflow-lift pumps and at least the O&M cost of the civil works, amounting to atotal of about Tk 460 per ac. This would represent a cost recovery index of22%, benefit recovery index of 26% and a rent recovery index of 38%. Due toadministrative problems, it would not be feasible to have a progressive ratestructure. Assurances have been obtained that: (a) the Government would atleast recover all costs for 0 & M and replacement of low-lift pumps and the0 & M for civil works; and (b) a separate account would be maintained for thecollected charges.

VII. BENEFITS AND JUSTIFICATION

General

7.01 During the past five years, Bangladesh has imported an average of1.5 M tons of foodgrain annually. This severely restricts the resourcesavailable for other essential imports. The primary national benefit from theproject would consequently be increased rice production and the resultantforeign exchange savings. The population in the project area would benefitdirectly from increased farm incomes and an increase in employment opportu-nities in agriculture, transportation and marketing. The project would alsodiscourage migration to the already overcrowded urban areas of Dacca andChittagong.

Rice Production

7.02 The project would increase the irrigated area by 35,000 ac and makeirrigation more reliable for 15,000 ac presently under irrigation. This wouldcause a major shift in the cropping patterns and increase the production ofmilled rice by some 35,000 tons over what is projected for 1985 without theproject. This represents annual gross foreign exchange savings of aboutUS$9.8 M (in 1977 dollars) based on a projected rice price of US$280 per toncif Chittagong. After deducting foreign exchange costs of spares and replace-ments, fuel, fertilizer, and pesticides, the net annual foreign exchangesavings attributable to the project would be about US$8.0 M.

Employment Opportunities

7.03 Increased production would result from the cultivation of highyielding rice varieties and shifts in the cropping calendar, rather than more

- 25 -

intensive land use. Therefore, farm labor requirements in the area at fulldevelopment would increase by only about 45%. Over the same period, theavailable agricultural labor force would increase from an estimated 115,000in 1977 to about 133,000 in 1985, that is by about 16%. Annual field laborrequirements in the area presently total an estimated 7.5 M man-days or about27% of the present labor supply, and would reach about 10.7 M, or about 33%of the estimated supply at full development (Annex 12). The 27,000 landlesslaborers presently supply about 1.2 M man-days of farm work and this amountwould double with the project.

7.04 The employment opportunities for landless laborers in marketingand transport would also increase substantially as a result of the increasedrice production. The project would increase the marketed volume from about25,000 tons at present to 65,000 tons, or by about 160%.

Income Distribution

7.05 Farms in the project area are smaller than in most other parts ofBangladesh and family sizes are somewhat larger. Consequently, it is esti-mated that the present average per capita income in the project area is onlyabout US$50 compared to the national average of US$70-75 1/. However, theunbalanced income distribution in the project area means that about 70%of the families have a per capita income of less than US$50 which is about theminimum income necessary for subsistence in rural areas.

7.06 With the project, the net farm incomes in the project area wouldtypically increase by 30-40% the demand for hired labor would also increasesubstantially and thereby create additional employment opportunities for land-less laborers and submarginal farmers. Although, the overall income dis-tribution will remain largely unchanged, the project will substantially reducethe level of absolute poverty in the area. Allowing for the increased popula-tion at full development in 1985, the proportion of below subsistence levelhouseholds would be reduced from 70% to less than 50%.

Economic Rate of Return

7.07 The project's rate of return is estimated to be about 16% (Annex13) based on the following assumptions:

(a) five-year construction period;

(b) full agricultural development is reached three years afterthe completion of the project;

(c) projected 1985 world market prices in terms of 1977 dollarsfor rice and fertilizers (see Annex 10);

(d) all farm labor is valued at about 55% of the peak marketwage (see Annex 12) and construction labor at the marketwage;

1/ These estimates are based on the foodgrain prices currently prevailingin rural areas of Bangladesh.

- 26 -

(e) a standard conversion factor of 0.75 is used to reflect theprevailing regime of import taxes and quotas.; and

(f) a 40-year project life.

Other important benefits, such as higher employment and income in tradeand industry based on agricultural production in the project area, werenot quantified.

7.08 The rates of return under different assumptions on costs, pricesand selected project features are:

(a) completion delayed two years : 14%(b) increase in construction cost of 15% 14%(c) decrease in the commodity prices of 15% : 13%(d) (a) + (b) 12%(e) (a) + (b) + (c) : 10%(f) increase in cost of crop inputs of 15% : 15%(g) increase in fuel and operating costs

of 25% : 16%(h) reduction in net irrigated area

from 50,000 ac to 40,000 ac : 13%(i) all farm labor valued at full

market wage 14%(j) standard conversion factor = 1.0 : 13%(k) standard conversion factor = 0.6 18%

7.09 The project faces considerable risks. The proposed regulatorstructure is large in relation to similar works undertaken in Bangladeshpreviously and local contractor capacity for executing large civil worksis limited. Moreover the pace of project implementation, especially in thewater resources sector in Bangladesh, has not been satisfactory, due inlarge measure to organizational shortcomings and a lack of interagency co-ordination. However measures--such as the provision of substantial assist-ance to the BWDB and to the contractor to be engaged to undertake the majorcivil works, and the setting up of an implementation organization that pro-vides for interagency coordination--have been taken to mitigate possibledifficulties and remove potential bottlenecks to successful implementation.As indicated above even if there were to be some slippage in project imple-mentation or increase in project costs, the project would still be economic-ally viable.

VIII. AGREEMENTS REACHED AND RECOMMENDATIONS

8.01 Assurances have been obtained from GOB that:

(a) the Government would establish and, on the first of eachmonth, replenish a project revolving fund to maintain abalance adequate to cover estimated expenditures for thefollowing three months (para. 4.12);

- 27 -

(b) the WDB, BADC and other departments and agencies responsiblefor carrying out any part of the project would prepare andmaintain separate project accounts and financial statements inaccordance with sound accounting practices, and independentauditors acceptable to IDA would be employed to audit projectaccounts which would be sent to IDA within six monthsof the end of each fiscal year (para. 4.17);

(c) not later than August 31 each year, the Project Directorwould prepare and submit to IDA, for review and comment,annual work programs (para. 5.04);

(d) sufficient funds would be made available at all times tooperate and maintain all project facilities in accordancewith sound engineering standards (para. 5.08);

(e) the Project Director would prepare detailed operation andmaintenance procedure manuals and submit these to IDA, forreview and comment, within three years of the signing ofthe Credit Agreement (para. 5.08);

(f) the Government would recover all costs for O&M and re-placement of low-lift pumps and the O&M for civil works(para. 6.16); and

(g) the Government would maintain a separate account for thecollected water charges (para. 6.16).

8.02 Conditions of Credit Effectiveness would be:

(a) the fulfillment of conditions of effectiveness of theCanadian Credit Agreement (para 4.12);

(b) the Government has approved the Project Proforma (PP)(para. 4.12);

(c) the Government has made an initial contribution ofTk 3 M to the project revolving fund (para 4.12);

(d) the WDB and Messrs. Sikder & Co. have signed the contractfor construction of the Feni Regulator on terms and con-ditions satisfactory to IDA (para 4.14); and

(e) engineering consultants, acceptable to IDA, would have been appointed

upon terms and conditions satisfactory to IDA (para. 5.05).

8.03 With the above agreements and together with the Canadian Credit ofCanadian $9 M, the proposed project would be suitable for an IDA credit ofUS$21 M under standard IDA terms. The Borrower would be the People's Republicof Bangladesh.

May 31, 1977

ANNEX IPage 1

BANGLADESH

MUHURI IRRIGATION PROJECT

The Agricultural Sector

1. Bangladesh is predominantly agricultural. The agriculture sectoraccounts for as much as 60% of GDP, 75% of all employment and over 90% ofall exports. It has, however, been unable either to feed adequately thecountry's rapidly increasing population or to provide gainful employmentto its largely unskilled and illiterate labor force. The major objectivesof the Bangladesh Government's (GOB) agricultural development efforts are toachieve food self-sufficiency, create employment for the rural poor, and toincrease export earnings. The Government's strategy for development of thesector emphasizes strengthening of rural institutions, improvement of farminput supplies, better utilization of existing irrigation facilities andfurther expansion of irrigation facilities through low cost, short gestation,minor irrigation schemes.

Land Use and Production

2. Bangladesh has a gross area of 35 M ac of which about 22.5 M acare under cultivation. According to official statistics, for the five yearperiod, 1970/71 - 1974/75, the annual cropped area averaged 30.3 M ac givinga cropping intensity of about 135%. Rice -- by far the most important crop --accounted for 80% of the cropped area; jute for 6% and a variety of othercrops such as pulses, oilseeds, wheat, sugarcane and vegetables for the re-maining 14%. During the 1960s, agricultural production grew at an annualrate of about 2.5% and foodgrain production, at a rate of 2.4%. However,both lagged behind the population growth rate of 2.8% and as a result food-grain imports increased from less than 0.6 M tons in 1960/61 to over 1.5 Mtons in 1969/70. A severe drought combined with the disruptions caused bythe 1971 civil strife resulted in a sharply reduced production in 1972/73 --some 15% below the 1969/70 level -- necessitating food imports of 2.8 M tons.Despite a substantial recovery, production in 1973/74 and 1974/75 remainedbelow the 1969/70 level. In 1975/76 due to favorable weather conditions,improved availability of fertilizers and unusually high foodgrain prices in1974/75, there was, however, a record foodgrain production of 13 M tons, whichexceeded the 1969/70 level by some 10%. Nonetheless, Bangladesh still had toimport about 1.5 M tons of foodgrains in 1975/76. Despite major emphasis bythe Government on achieving food self-sufficiency, substantial food importsare likely to continue for the foreseeable future.

28

ANNEX 1Page 2

Crops and Cropping Seasons

3. Variations in topography, soils, flooding levels and the availabilityof irrigation have resulted in the evolution of complex land use patterns andcropping calendars. There are, for example, four different rice crops -- aus,broadcast aman (B. aman), transplanted aman (T. aman) and boro. Aus is mainlygrown as a broadcast, rainfed crop on non-flooded to moderately flooded land,sown in March-May and harvested in July-August. It accounts for about 30% ofrice acreage and 25% of production. Typically, aus is a low yield, high riskcrop. B. aman is sown at the same time as aus on low-lying lands, eithersingly or mixed with aus, and is harvested mainly in November. It includesvarieties known as 'floating rice' which can elongate their stems with risingflood levels. It accounts for about 20% of rice acreage and about 15% ofproduction. Like aus, it is a rainfed, low yielding and a high risk crop.T. aman is the main rice crop in Bangladesh, accounting for about 40% of therice acreage and 45% of production. It is mainly transplanted in July-Auguston highland or medium highland and harvested in November-December. Almost allthe crop is rainfed, but it is considerably better yielding and less riskythan aus and B. aman. Boro is the dry-season crop grown with irrigation or inlowland areas which remain wet throughout the year. It is mainly transplantedin January-February and harvested in April-May. It accounts for about 10%of the rice acreage and 15% of the production. It is the highest yielding andleast risk-prone rice crop.

4. Jute, the main export crop, is sown about the same time as aus paddyand harvested in July-August. Pulses and oilseeds are winter or rabi crops.These are sown in November-December and harvested in February-March. Temperatezone vegetables such as cabbage, cauliflower and tomatoes, are also grown asrabi crops, whereas tropical vegetables, such as brinjal, okra, gourds andpumpkins are grown as kharif or wet season crops. Sugarcane is planted inNovember and harvested more than a year later between December and March.

Constraints and Potential

5. Agricultural development in Bangladesh is constrained by thefollowing:

(a) scarcity of cultivable land -- practically all 22.5 M ac ofcultivable land are already under cultivation. Consequently,any increases in production must come from more intensiveland use and yield improvements;

(b) limited potential of cutivable land -- large areas of landare only single cropped due to: deep monsoon flooding(especially in the north-east), shortness of the rainyseason (in the west), late recession of floodwater inflood plain basins, low moisture-holding capacity of somesoils, and dry season salinity in areas near the coastline;

29

ANNEX 1Page 3

(c) limited surface irrigation facilities -- surface waterresources in the dry season are barely enough to irrigate10% of the cultivated area. Lack of suitable reservoirsites makes it difficult to store rainy season surplus flows.The limited surface water potential is already close to fullexploitation;

(d) climatic hazards -- severe floods, droughts, cyclonicstorms and erratic temperatures frequently cause seriouscrop damage. The risk of crop loss due to thesefactors, combined with the largely subsistence nature ofBangladesh agriculture, makes it difficult to popularizeimproved production technologies requiring the use of cashinputs; and

(e) poor transportation and communications -- because of itsdeltaic origin, Bangladesh is criss-crossed by numerousrivers and channels. Transportation and communicationacross these barriers is often inadequate, slow andexpensive.

6. However, the above constraints can be overemphasized. On the posi-tive side, Bangladesh has large areas of highly fertile deltaic soils, aclimate suitable for year-round cropping, and abundant groundwater resourcesfor dry season irrigation. Also, in recent years, the development of high-yielding varieties (HYVs) of rice and wheat, suitable for cultivation inlarge areas of Bangladesh even under rainfed conditions, has opened up theprospects of substantial increases in production that can be brought aboutquickly and inexpensively. Wide differences between the crop husbandrypractices of the "best" farmers and "average" farmers indicate that withinexisting constraints, significant gains in production are possible withlittle or no increase in cash requirements and risk. Much of the potential,however, has remained undeveloped so far.

7. The reasons for underdevelopment are primarily sociological andinstitutional. There are some seven million farm households in Bangladesh,90% of which cultivate 5 ac or less. Even "large" farmers in Bangladesh aresmall by international standards. 1/ Hence to have any significant impact onproduction, developmental programs must necessarily involve the participationof millions of small farmers. Generally, farmers in Bangladesh are hard work-ing and receptive to proven innovations. However, their efforts have not beencomplemented by adequate and timely supplies of farm inputs, relevant technicaladvice, and suitable marketing, processing and storage facilities. The failureof the various existing agencies and departments to fulfill these key functionsis due to weaknesses in planning as well as in implementation. Agricultural

1/ A typical large holding is 10 to 15 ac. It is estimated that currentlyless than 20% of the cultivated area is in holdings of 10 ac or more.

30

ANNEX 1

Page 4

planning has generally been based on an extremely poor data base, inadequateanalysis, and very little feed-back from operating departments, resulting inunrealistic targets, inflexible and uncoordinated programs, and unexpectedbottlenecks during implementation. On the implementation side, the weaknesseslie in excessive centralization of decision-making and overly cumbersome admin-istrative procedures. Implementation also suffers because of inadequatelytrained field staff, unattractive staff salaries and benefits, and poorlydefined work responsibilities.

8. Lately, the Government has shown increasing awareness of these prob-lems and has taken a number of steps to overcome them. Among the steps areincreased decentralization in project approval and in procurement and contract-ing, and simplification of procedures for release of budgetary funds. Toovercome the lack of trained field staff, Bangladesh is implementing severaltraining projects -- the important ones being the IDA-supported Agriculturaland Rural Training Project (Credit 621-BD, US$12.0 M), the Swedish Aid Agency(SIDA)-sponsored training program for Cooperative staff and UNDP-assistedtraining programs for extension staff and for workshop maintenance personnel.As a follow-up to a comprehensive crop sector review by the Bank Group, GOBhas initiated a program for improving the effectiveness of the agriculturalextension services. Further support for the extension services is proposedunder an Extension and Research Project (EARP), appraised in November/December1976 for possible financing by IDA. Also underway, with Bank Group assistance,is a review of the organization, management and operations of the Ministry ofAgriculture and the Bangladesh Agriculture Development Corporation (BADC), thetwo agencies most deeply involved in the agricultural sector. A review of theagricultural credit system is about to get underway with assistance from IDAand ADB. GOB is also preparing a comprehensive plan for its rural developmentactivities and has requested IDA to organize and co-ordinate the various bila-teral and multilateral agencies interested in supporting rural developmentprograms in Bangladesh.

May 1977

31

BANGLADESH

MUHURI IRRIGATION PJDJECT

Climatic Datal"

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

NOAKHALI STATION (1958-1962)Tenperature (°F)

Mean of max. monthly 78.3 81.7 88.4 92.2 91.0 88.0 86.2 86.4 86.5 86.9 82.7 78.5Mean 66.7 70.4 78.3 83.6 84.3 83.1 82.0 82.3 82.1 81.2 74.1 77.2Mean of min. monthly 55.2 59.2 68.2 76.0 77.5 78.3 77.8 78.1 77.6 75.4 65.6 57.2Absolute maximum 86 91 98 104 105 94 93 91 93 93 9C 85Absolute minimum 46 46 57 66 67 71 69 75 71 68 54 50

Relative Humidity (X) 78.5 77.1 76.3 78.8 81.5 86.7 88.2 89.1 87.9 85.6 81.1 81.5

Wind Velocity (mph) 0.54 1.33 1.40 2.91 5.40 4.60 5.86 4.83 2.59 1.46 0.50 1.09

Daylight (hrs/day) 10.9 11.4 12.0 12.7 13.3 13.6 13.4 13.0 12.3 11.7 11.1 10.7

Sunshine (Z of da -

light hr.)2 86 82 76 75 67 41 40 41 49 67 B9 85

pan Evaporation (inches),(1961-70) 2.74 3.28 4.92 6.00 5.85 3.88 4.05 3.56 3.68 3.53 3.05 2.68

CHHAGALNAYA STATION (1902-1974)

Precipitation (inches)

Mean Monthly 0.40 0.95 2.57 7.19 11.83 20.50 22.37 21.34 14.00 7.69 1.81 0.32Minimum 0 0 0 0 0.77 5.53 5.61 7.16 1.61 0.82 0 0Lower quartile 0 0 0.35 2.71 7.38 15.40 17.20 14.54 9.33 4.29 0 0Median 0 0.35 1.86 6.15 10.85 18.89 20.96 19.88 12.84 6.48 0.60 0Upper quartile 0.25 1.50 3.70 10.27 14.84 24.93 27.19 27.22 18.85 10.59 3.21 0Maximum 5.47 5.12 16.68 26.40 38.25 41.00 41.85 66.25 40.55 32.20 9.80 4.58

1/ Source: Meteorclogical Department, Government of Bangladesh

2/ Estimated from Chittagong Station data for Noakhali Station.

ANNEX 3Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Project Works

1. The project would provide dry-season irrigation as well as sup-plementary wet-season irrigation, to about 50,000 net ac. It would alsodecrease the extent, depth and duration of flooding and prevent salt waterintrusion in the area. Project works would be designed and constructed overa five-year period (Annex 5).

2. Regulator. The major feature of the project would be a reinforcedconcrete regulator on the right bank of the mouth of the Feni River. Thiswould require about 37,000 cu yd of concrete and 1,400 tons of reinforcingsteel. The regulator would have 40 bays. Each bay would be furnished with aradial gate on the upstream side and by a flap gate on the downstream side.The radial gates would be operated by individual electrical hoists served bya new eight-mile 33 kV transmission line and a substation. A standby dieselgenerator would permit gate operation during emergency power outages. Duringthe dry season, the gates would remain closed thereby excluding salt water andcreating the project reservoir. During the wet season, as the reservoir risesabove normal pool elevation (12.5 ft MSL) the radial gates would be opened.When tides fall below the pool level, the flap gates would open and allowdischarge of the river into the bay. When tidal levels exceed the reservoirlevel, the flap gates would close thereby excluding the salt water and help-ing in drainage. With the gates open, the regulator would pass the probablemaximum flood (peak inflow 167,000 cfs, peak outflow 78,000 cfs) at a maximumreservoir elevation of 16.9 ft MSL. The regulator would be designed to with-stand cyclones.

3. For access during construction and for project operation and mainten-ance, 9 mi of existing roads would be upgraded and another 9 mi of new roadswould be built. These roads would extend from the existing Chittagong-ComillaHighway, down the east and west-bank areas of the reservoir to the cross-damand regulator. The main access road to the west bank has been partially con-structed during the 1976/77 construction season.

4. Construction of the regulator complex would be carried out underfour separate contracts: the improvement/construction of the access roads, theexcavation of the regulator channel, and the transmission line and substationwould be tendered locally in three separate contracts. The civil works forthe regulator and manufacturing and installation of gates, hoists and elec-trical controls has already been tendered under international competitivebidding procedures. GOB has reached agreement on the contract award and thecontract signing will take place after the credit approval.

33

ANNEX 3Page 2

5. Embankments. Coastal embankments (5 mi) in the project wouldextend across the project area and link up with the existing coastal embank-ment system. The crossdam (1.5 mi) across the mouth of the Feni River wouldlink these wing dikes and, with the regulator, create the project reservoir(normal high pool elevation 12.5 ft, normal minimum pool elevation 8.5 ft,live storage 25,600 ac-ft). Where necessary, as in the river-crossing section,slopes would be protected, by riprap over a filter, against wave and tidalaction. Full seaward embankment protection against cyclones and tidalwaves is not economically justifiable, and in the project's economic andfinancial analyses, a periodic replacement cost is included to cover re-construction of these works after partial destruction (Annex 13). The totalvolume of earthwork in embankments and the cross dam would be 60 M cu ft; some1.4 M jute bags filled with soil cement would be required for slope protection.Similar construction, including the dam closure section, has been successful-ly executed by local forces and the work would be tendered locally.

6. Channel Improvements. In the project area, 110 mi of existingchannels would be improved and 5.7 mi of new channels excavated. Totalexcavation would amount to some 124 M cu ft. As a result all channels wouldbe unobstructed and would have a maximum invert level 2.0 ft below minimumnormal pool level (elevation 8.5 ft MSL). This would permit local navigationyear-round and ensure adequate suction line submergence for low-lift pumps onthe channel banks. The resulting channel system would put all of the netirrigable area (50,000 ac) within 0.75 mi of a dependable water supply.

7. Drainage Structures. Some 30 reinforced concrete drainagestructures with flap gates would aid in water control. In the project area,some 3,000 gross acres lie below elevation 12.0 ft, that is, six inchesbelow normal high reservoir level and the drainage structures would preventthe backflow of water from the reservoir into such areas. A large drainagestructure through the coastal embankment at Sonagazi Khal would serve thesame function as the regulator but on a smaller scale. An existing struc-ture would be improved by the provision of flap gates and invert paving.

8. Low-Lift Pumps. Based on experience in Bangladesh, the projectwould provide 2 cfs capacity pumps which, when operating for about eight hoursper day, would irrigate 40 to 50 ac. The pump lift from the channels wouldseldom exceed 10 ft. Ideally for such discharge/lift conditions, an axial-flow pump operated through a speed reduction gear by a 5-7-BHP dieselengine would be most efficient. However, this size unit is not widelymanufactured, and efficient maintenance would be dependent on the import ofspare units and replacement parts. To date, all pump experience in Bangladeshhas been with heavier duty, and simpler, centrifugal pumps, and such pumpsare currently being both assembled and manufactured in the country. Theyare generally designed for a head lift of 40 ft and operated by imported16-BHP diesel engines. While maintenance can be carried out locally, thecapital cost of these units and their fuel consumption, in relation torequired duty, are unnecessarily high. Under the Chandpur II Irrigation

34

ANNEX 3

Page 3

Project, the Government and project consultants undertook a detailed reviewof the low-lift pump technology in preparing designs and specificationswhich aimed at: (a) a reasonable balance between efficiency and initialcost, and (b) simplicity in design and fabrication to allow a wider choiceof suppliers, including local manufacturers. Following receipt of bids forthe Chandpur II Project, a centrifugal pump with air-cooled engine wasselected by GOB. Such a unit can meet the capacity requirement with anengine of less than 5 hp. Similar units would be procured for this project.

9. The low-lift pumps currently in use in the project areas were pro-cured from a number of manufacturers (Indian, German, Japanese, British andAmerican) and the variety of types imposes an unnecessary burden on theBADC maintenance workshops. Since most of these pump units would requirereplacement during the project construction period, all existing pumps wouldbe returned to BADC (for use elsewhere, if practical) and replaced by thestandardized and more efficient pump unit to be provided under the project.An estimated 1,100 units would service the project area.

10. Operation, Maintenance, and Buildings. The project would provideworkshops, equipment, vehicles, and buildings for the operation, maintenance,and interim replacement and reconstruction of the project works. Projectheadquarters facilities in the town of Feni and housing at the regulator foroperating staff would also be provided. For low-lift pumps thana and zonalworkshops serving the project areas would be improved and supplied withadditional machinery and hand tools as necessary.

11. Vehicles and Agricultural Equipment. Transport vehicles (4-wheeldrive jeeps, motor cycles and bicycles) would be provided to Ministry ofAgriculture and IRDP to facilitate agricultural extension and formation ofpump groups. Vehicles would also be provided to WDB for use in supervisingproject implementation. Funds would be provided for procurement of about30 simple diesel-powered dryers as well as about 100 pesticides sprayers forsale to IRDP-TCCAs for custom work within the project area. Credit facilitiesto TCCAs for purchase of these equipment would be arranged by IRDP through thecommercial banks.

12. Consulting Services. To assist WDB and the other agencies respons-ible for implementation, services of a well-qualified consulting firm wouldbe provided. The consultant would have the major responsibility for thepreparation of work programs, designs, contract documents, and O&M manualsthe supervision of construction, and the planning and implementation ofextension services in the project area. A projects manager, administrativeofficer, and field engineer would be maintained in Bangladesh throughoutthe construction period. They would be supported, as necessary, by a structuralengineer, hydrologist, soils engineer, mechanical engineer, electrical engineerand procurement advisor both in Bangladesh and the consultant's home office.Support staff for the consultant would be provided by WDB. In light of WDB'slimited experience with structures like the main regulator, it is estimatedthat a total of about 600 man-months of consulting services, of which about250 would be expatriate, would be required. Preliminary negotiations with aprospective consulting firm have already been completed.

May 1977

ANNEX 4Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Water Supply and Demand

1. The 1,124 sq mile Muhuri-Feni River Basin is about equallydivided between India and Bangladesh, and is subdivided as follows:

India Bangladesh TotalRiver Sub-Basin (sq mi) (sq mi) (sq mi)

Selonia 64 39 103

Muhuri, Upper 242 - 242

Lower 62 122 184

Feni, Upper 70 245 315

Lower 138 113 251

Bakhtiar Hat - 29 29

TOTALS 576 548 1,124

Discharge measurements are available for a 13-year period at Parshuram gaugingstation on the Muhuri River and for a four-year period at Kaliachari stationon the Feni River. The drainage areas above Parshuram and Kaliachari are242 and 488 sq mi, respectively. A regression analysis correlating themonthly flows at Parshuram and Kaliachari was done and the results extrapolatedto the whole drainage basin. The total run-off was estimated at 4.78 timesthe Parshuram discharge. Utilizing this figure, the total water supply ona monthly basis was calculated for the 13 years of measurements at Parshuram.The results were used for a reservoir operation study.

2. In addition to the 50,000 ac proposed to be irrigated after theproject, the present and projected future irrigated areas in India andBangladesh are as follows:

36

ANNEX 4Page 2

India BangladeshRiver Sub-Basin Present Future Present Future

----------------- acres ----------------------

Selonia 1,500 3,000 800 1,000

Muhuri, Upper 1,000 3,200

Lower 2,000 3,000 3,800 4,500

Feni, Upper 500 1,000 1,200 3,500

Lower 1,000 2,000 1,000 1,500

TOTAL 6,000 12,200 6,800 10,500

The maximum future upstream irrigable area is, therefore, estimated at22,700 ac.

3. Theoretical monthly crop water requirements were determined onthe basis of the modified Penman indices for Comilla, multiplied by appro-priate growth stage factors. Peak percolation was taken as 3.5 inches permonth, a conservatively high figure in view of the impermeable soils in thearea which are further tightened by plow-pan. Pre-planting and transplant-ing requirements were taken as equivalent to six inches over the croppedarea. Rainfall was assumed 100% effective for the boro crop season. Lower-quartile monthly rainfall records were adopted, as a further conservativefactor. Water losses from low-lift pumping in Bangladesh are small due tothe compact service area (aver. 40 ac per pump) and the proximity of thestorage reservoir and water channels. In view of this, and the conservativepercolation and rainfall criteria, an overall efficiency of 85% was assumed.The water requirements for the boro crop are detailed in Table 1. The totalwater requirements for the project's 50,000 ac boro crop amounts to about160,000 ac-ft. The estimated future simultaneous water withdrawals forthe projected 22,700 ac upstream is about 70,000 ac-ft.

4. A reservoir operation study, based on the above criteria and theavailable 13-year records, indicated the following theoretical waterdeficiencies:

Deficiency (%) 0 0-5 5-10 10-15 15-20 25-30

No. of Years 5 2 2 2 0 2

The maximum water deficiency would reduce optimum paddy yields by about 10%only.

May 1977

37

ANNEX 4Table 1

BANGLADESH

MUHURI IRRIGATION PROJECT

BORO RICE WATER REQUIREMENTS (in inches)

Month Jan. Feb. Mar. Apr: M Total

Evaporation index 2.0 2.7 4.2 4.9 5.3

Crop factor 0.60 1.25 1.32 1.42 1.40

Evapotranspiration 1.2 3.4 5.5 7.0 7.4 24.5

Preplanting and transplanting 2.0 4.0 - - - 6.0

Percolation 0.1 1.8 3.5 3.5 3.5 12.4

Gross field requirements 3.3 9.2 9.0 10.5 10.9 42.9

Effective rainfall - - 0.4 2.7 7.3 10.4

Net field requirements 3.3 9.2 8.6 7.8 3.6 32.5

Pumping requirements 3.9 10.8 10.1 9.2 4.2 38.2

(A0

6£ OTHER WORKS - - FENI REGULATOR I

~ _ W1 S = 0 o

__ _- I? 1 _

S 'V~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'

ANNEX 6

BANGLADESH Page 1

MUHURI IRRIGATION PROJECT

Cost Estimates

Taxes & Taxes &Local Foreign Duties Total Local Foreign Duties Total

--- Taka Million -------- --- US$ Million Equivalent ---1/

(a) Land Acquisition 7.5 - - 7.5 0.50 - - 0.50

(b) Regulator & Related Works

Access Roads 2/ 9.5 3.0 1.0 13.5 0.63 0.20 0.07 0.90Regulator Channel

Excavation 3/ 39.5 20.0 10.0 69.5 2.63 1.33 0.67 4.63Regulator & Gates 4/ 75.0 93.0 60.0 228.0 5.00 6.20 4.00 15.20Transmission Lines 5/ 1.2 2.0 0.8 4.0 0.08 0.14 0.05 0.27

Sub-total 125.2 118.0 71.8 315.0 8.34 7.87 4.79 21.00

(c) Cross Dam & WingEmbankments

Stripping top soil 6/ 0.2 0.1 - 0.3 0.01 0.01 - 0.02Embankment Const.

& Compaction 7/ 4.0 2.0 1.0 7.0 0.27 0.13 0.07 0.47Dam Const. & Com-

paction 8/ 24.0 11.0 5.0 40.0 1.60 0.73 0.33 2.66Slope Protection &

Turfing 9/ 12.0 8.0 3.0 23.0 0.80 0.53 0.20 1.53River Diversion 10/ 2.4 5.0 4.0 11.4 0.16 0.33 0.27 0.76

Sub-total 42.6 26.1 13.0 81.7 2.84 1.73 0.87 5.4411/

(d) Channel Improvements 23.0 2.0 1.0 26.0 1.53 0.13 0.07 1.7312/

(e) Drainage Structures 5.7 2.5 1.3 9.5 0.38 0.16 0.09 0.63

13/(f) Low-lift Pumps 10.0 20.0 3.0 33.0 0.67 1.33 0.20 2.20

(g) O&M Facilities

Civil Works &Regulators 2.0 0.8 0.2 3.0 0.13 0.05 0.02 0.20

Low-lift Pumps 14/ 0.9 1.6 0.5 3.0 0.06 0.11 0.03 0.20

Sub-total 2.9 2.4 0.7 6.0 0.19 0.16 0.05 0.40

(h) Vehicles & AgriculturalEquipment 1.5 2.7 1.8 6.0 0.10 0.18 0.12 0.40

(i) Consulting Services - 15.0 25.0 15.0 55.0 1.00 1.67 1.00 3.67

(j) Management & Adminis-tration 16/ 23.4 - - 23.4 1.56 - - 1.56

(k) Base Project Cost 256.8 198.7 107.6 563.1 17.12 13.25 7.17 37.54

(1) Physical Contingenciesl7/28.0 22.9 12.5 63.4 1.87 1.53 0.83 4.23

(m) Price Contingencies 72.2 54.4 26.9 153.5 4.81 3.63 1.79 10.23

(n) Total Project Cost 357.0 276.0 147.0 780.0 23.80 18.40 9.80 52.00

40

ANNEX 6Page 2

1/ Total of about 500 ac at an average price of Tk 15,000 per ac.

2/ Upgrading of 9 mi of existing roads at Tk 0.5 M/mi and construction of9 mi of new roads at Tk 1.0 M/mi (comparable to those for pucca roadunder RD-I Project).

3/ Assuming total excavation (excluding those under regulator contract)to be 110 M cu-ft of which 35 M cu-ft would be done by self loadingscrapers at Tk 0.7/cu-ft and the rest by dredgers at Tk 0.6/cu-ft.

4/ Sikder bid of Tk 129 M adjusted to Tk 107 M to account for expected priceescalation covered in the bid price (Tk 10 M) and expected rental chargeson construction equipment to be procured under the project (Tk 12 M). Tothis are added the cost of proposed assistance team (Tk 14 M), incremental costdue to updating of material costs (Tk 17.0 M), incremental requirements of con-struction equipment (Tk 24 M), workshop for maintenance of constructionequipment (Tk 6 M), and taxes and duties (Tk 60 M). Accordingly the totalbase cost would be Tk 228 M. At project completion, estimated salvage valueof the construction equipment and the workshop for maintenance of constructionequipment would be about Tk 20 M (including taxes & duties).

5/ 8 mi at Tk 0.5 M/mi.

6/ 1.7 M sq-ft at Tk 180/1,000 sq-ft.

7/ 10 M cu-ft at Tk 0.7/cu-ft.

8/ 50 M cu-ft at Tk 0.8/cu-ft.

9/ 1.4 M jute bags filled with soil cement at Tk 16 per bag and Tk 0.6 M forturfing.

10/ 500 tons of steel sheet piling at Tk 22,800/ton. Salvage value Tk 6 M.

11/ 120 M cu-ft of manual excavation at Tk 0.2/cu-ft and 4 M cu-ft of excava-tion by dredging at Tk 0.5/cu-ft.

12/ One major structure at Tk 5.0 M and 30 minor structures at Tk 150,000 each.

13/ 1,100 pumps (2 cusecs) at Tk 30,000 each.

14/ Construction/completion of 4 thana workshops and one zonal workshops forBADC. Including cost of machinery, equipment and handtools, average costis assumed Tk 400,000 per thana workshop and Tk 1.4 M for the zonal workshop.

15/ 250 man-months of expatriate consultants at US$10,000 (net of taxes) permonth and 350 man-months of local consultants at Tk 5,000 per month. Inaddition, a lump sum provision of Tk 0.75 M is made for evaluating the impactof the project.

16/ 5% of items (a) - (h).

17/ 15% on (a) to (e) except on Regulator and Gates under (b) which has alreadybeen tendered and hence 10% are more appropriate; 5% on (f); 15% on (g); and10% on (h) and (i). 41

ANNEX 7Table 1Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Schedule of Expenditures

Total - Fiscal Year --------- …

Item Cost 1977/78 1978/79 1979/80 1980/81 1981/82Item -…- - ------- --- (Tk Million) -- …

(a) Land Acquisition

Base Cost 7.5 3.0 3.0 1.5 - -Physical Contingency 1.1 0.4 0.5 0.2 - -Price Contingency 1.1 0.2 0.5 0.4 - -

Sub-total 9.7 3.6 4.0 2.1 - -

(b) Regulator & Related Works

Access Roads 13.5 13.5 - - - -

Regulator Channel 69.5 10.4 20.8 20.8 17.5 -ExcavationRegulator & Gates 228.0 53.5 58.0 53.0 53.0 10.5Transmission Line 4.0 - 1.0 2.0 1.0 -

Base Cost 315.0 77.4 79.8 75.8 71.5 10.5Physical Contingency 35.9 9.0 9.1 8.7 8.1 1.0Price Contingency 74.3 5.3 13.3 21.7 28.6 5.4

Sub-total 425.2 91.7 102.2 106.2 108.2 16.9

(c) Cross Dam & WingEmbankments

Stripping Top Soil 6.3 - 0.1 0.1 0.1 -Embankment Construction& Compaction 7.0 - 1.4 2.1 2.1 1.4

Dam Construction &Compaction 40.0 - 6.0 14.0 14.0 6.0Slope Protection &Turfing 23.0 - 3.5 8.0 8.0 3.5River Diversion 11.4 - - - - 11.4

Base Cost 81.7 - 11.0 24.2 24.2 22.3Physical Contingency 12.3 - 1.7 3.6 3.6 3.4Price Contingency 31.3 - 2.0 7.2 10.0 12.1

Sub-total 125.3 - 14.7 35.0 37.8 37.8

(d) Channel Improvements

Base Cost 26.0 - 1.3 7.8 9.1 7.8Physical Contingency 3.9 - 0.2 1.2 1.3 1.2Price Contingency 10.4 - 0.2 2.3 3.7 4.2

Sub-total 40.3 - 1.7 11.3 14.1 13.2

(e) Drainage Structures

Base Cost 9.5 - 1.9 3.0 3.0 1.6Physical Contingency 1.4 - 0.3 0.4 0.5 0.2Price Contingency 3.3 - 0.3 0.9 1.3 0.8

Sub-total 14.2 - 2.5 4.3 4.8 2.6

(f) Low-Lift Pumps

Base Cost 33.0 - - - 16.5 16.5Physical Contingency 1.8 - - - 0.9 0.9Price Contingency 11.6 - - - 5.0 6.6

Sub-total 46.4 - - - 22.4 24.0

42

ANNEX 7Table 1Page 2

BANGLADESH

NUHURI IRRIGATION PROJECT

Schedule of Expenditures

Total -- - -------- -- Fiscal Year -- --------…

Item Cost 1977/78 1978/79 1979/80 1979/81 1981/82(Tk Million) -------

(g) 0 & M Facilities

Civil Works &Regulator 3.0 - - - - 3.0Low-Lift Pumps 3.0 - - - 1.5 1.5

Base Cost 6.0 - - - 1.5 4.5Physical Contingency 0.9 - - - 0.2 0.7Price Contingency 3.0 - - - 0.6 2.4

Sub-total 9.9 - - - 2.3 7.6

(h) Vehicles & AgricultureEquipment

Base Cost 6.0 2.0 0.5 0.5 1.0 2.0Physical Contingency 0.6 0.2 - 0.1 0.1 0.2Price Contingency 1.4 0.1 0.1 0.1 0.3 0.8

Sub-total 8.0 2.3 0.6 0.7 1.4 3.0

(i) Consulting Services

Base Cost 55.0 11.0 13.8 13.7 11.0 5.5Physical Contingency 5.5 1.1 1.4 1.4 1.1 0.5Price Contingency 12.1 0.6 2.1 3.3 3.7 2.4

Sub-total 72.6 12.7 17.3 18.4 15.8 8.4

(j) Management &Administration

Base Cost 23.4 3.4 5.0 5.0 5.0 5.0Price Contingency 5.0 0.2 0.6 1.0 1.4 1.8

Sub-total 28.4 3.6 5.6 6.0 6.4 6.8

Total Project Cost 780.0 113.9 148.6 184.0 213.2 120.3

April 14, 1977

43

ANNEX 7Table 2

BANGLADESH

MUHURI IRRIGATION PROJECT

Proposed Allocation of the Aid Package

Amount Allocated(US$ M Equivalent)

Category Total IDA Canada % to be Financed

I. Civil Works(including constructionmaterials, equipment andspares, and technicalassistance)

(a) Regulator Contract 10.0 7.1 2.9 100% of foreignexpenditures and 50%

(b) Other Works 10.0 7.1 2.9 of local expenditures.

II. Materials, Equipment and 100% of foreignSpares expenditures for(other than those under directly importedcategory I) 3.0 2.1 0.9 goods; 100% of ex-

factory cost oflocally manufacturedgoods; 50% of localexpenditures for otherlocally procured goods.

III. Consulting Services 2.6 1.9 0.7 100% of foreign expen-ditures and 70% of localexpenditures.

IV. Unallocated 4.0 2.8 1.2

Total 29.6 21.0 8.6

44

ANNEX 7Table 3

BANGLADESH

MUHURI IRRIGATION PROJECT

Schedule of Disbursements

Accumulated DisbursementsIDA Fiscal Year (US$ M Equivalent)and Semester Total IDA Canada

1978

1st 0.5 0.35 0.152nd 2.0 1.42 0.58

1979

1st 4.0 2.84 1.162nd 7.0 4.97 2.03

1980

1st 10.0 7.09 2.912nd 14.0 9.93 4.07

1981

1st 18.0 12.77 5.232nd 21.5 15.25 6.25

1982

1st 25.0 17.74 7.262nd 27.5 19.50 8.00

1983

1st 29.0 20.57 8.432nd 29.6 21.C0 8.60

45

ANNEX 8Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Agricultural Supporting Services

1. The Ministry of the Rural Development, Cooperatives and LocalGovernment is responsible for the Integrated Rural Development Program(IRDP), cooperatives and the Thana Irrigation Program (TIP). The Ministry ofAgriculture is responsible for agricultural research and extension, procure-ment and distribution of agricultural inputs, and installation, operation andmaintenance of low-lift pumps and tubewells. The success of any agriculturaLand rural development work depends on effective coordination between these twoMinistries at all levels.

Integrated Rural Development Program (IRDP)

2. IRDP is a program under the direct administrative control and super-vision of the Min. LG&RD, for developing stable, self-reliant and disciplinedcooperatives in rural areas. The IRDP approach is fashioned after the two-tiered cooperative system developed at the Comilla Academy during the 1960s.At the village level, farmers (typically 30 to 100) are encouraged to jointogether to form Village Agricultural Cooperative Societies (KSSs). Inturn, the KSSs within a thana (100 to 150) are federated into a Thana CentralCooperative Association (TCCA). The TCCAs organize supply of technicalservices (land use planning, training and extension), farm inputs and ma-chinery, and production-linked supervised credit for the member KSSs. Thetwo-tiered approach enables retaining the village as the natural unit ofdevelopment while still exploiting economies of scale inherent in organiz-ing and supervising the supply of inputs and services at the thana level.The IRDP, started in 1970, presently covers 200 thanas i.e. about one-half of the total 415 thanas in Bangladesh. All four project thanas arecovered by IRDP.

3. The IRDP is headed by a Director-General, who is assisted by fiveDirectors, each looking after one of the five divisions, namely: Admini-stration, Planning and Inspection; Training and Extension; Finance, Accountsand Audit; Cooperatives, Credit and Marketing; and Statistics, Research,Evaluation and Construction. In each District, there is a Project Directorassisted by a Deputy Project Director. In each thana, there is a ThanaProject Officer, assisted by a Deputy Project Officer and an Accountant.Village Accountants and Inspectors for maintenance and supervision of KSSfinances are employed by TCCAs. According to existing regulations, there isone Village Accountant for every six KSS, one Assistant Inspector for every12 KSS, and one Inspector for every five Assistant Inspectors. The TCCAs andKSSs are largely autonomous organizations, governed by the elected managing

46

ANNEX 8

Page 2

committees. Major responsibilities of the IRDP staff is to guide TCCAs in

rules and regulations of IRDP, advise them in technical matters, supervise

their financial affairs and assist them in bookkeeping and coordination of

various programs and services.

4. Funds for IRDP operations are provided by GOB as grants through

annual budgetary appropriations. The accounts are required to be maintained

in a manner prescribed by GOB and are subject to audit by the Auditor General

of Bangladesh. It is envisaged that once fully established, TCCAs would

cover their operating expenses from commissions and service charges earned

in providing various services to the members. For the interim (typically

for five years after establishment), TCCAs are being partially supported by

annual grants of Tk 100,000 each from IRDP. The TCCA and KSS accounts are

kept in a manner prescribed by IRDP and are annually audited by IRDP staff.

5. Compared to most other rural development programs in Bangladesh,

IRDP is a relatively strong program with better than average field staff and

good leadership. The IRDP Directorate is the main implementing agency for the

IDA-financed RD-I Project. A substantial amount of technical assistance for

improving IRDP's field operations is being provided under that project.

Further assistance is likely under future rural development projects pro-

posed for IDA financing. To assist the IRDP in organization and supervision

of irrigation pump groups in the project area, motorcycles and bicycles would

be provided to the IRDP/TCCA staff (Annex 3).

Extension Services

6. Of the many organizations concerned with agricultural extension in

Bangladesh, the Directorate of Agriculture (Extension and Management) (DEM)

of the Ministry of Agriculture is the most important. The basic extension

workers of the DEM are the Union Agricultural Assistants (UAAs); there is one

post of UAA in each of the 4,333 unions of the country. These UAAs are ad-

ministered by five levels of senior officers:

No. ofLevel Posts Agricultural Officer in Charge

National 1 Director of Agriculture (Extension

and Management) (DA)

Regional 4 Regional Director of Agriculture(RDA)

District 9 District Agricultural Officer (DAO)

Sub-Division 74 Sub-Divisional Agricultural Officer

(SDAO)

Thana 517 Thana Agricultural Officer (TAO)

47

ANNEX 8Page 3

7. GOB has recently started to modify this pattern. The posts ofSDAOs are being phased out while new posts have been created at district,thana and union levels. District Extension Officers (DEOs) are beingposted in the districts; they are better qualified than the DAO's whothey will in fact now supervise. Similarly, agricultural graduates arenow being recruited as Thana Extension Officers (TEOs) to supervise theTAOs. Finally, the Union Agricultural Assistants (UAAs) are being re-placed by better qualified Village Extension Assistants (VEAs). Only afew DEO, TEO and VEA posts have been created so far but GOB intends toestablish these eventually in all the districts, thanas and unions of thecountry.

8. The extension service has been largely ineffective so far because:(a) its programs tend to be obsolete and diffuse, seldom focusing on speci-fically attainable objectives; (b) the technical advice given by extensionworkers often lags behind practical research findings; (c) the staff ispoorly trained and handicapped by a lack of transportation facilities,housing and training materials; and (d) extension workers are often usedby other agencies for administrative work, such as the census, as well asstatistical reporting.

9. The activities of DEM are being supported by the Agricultural In-formation Service (AIS), a separate unit within the Ministry of Agriculture.AIS organizes a daily broadcast program for farmers and also operates mobileunits and prepares exhibits and pamphlets. Its efficiency has likewise beenhampered by lack of staff, equipment and funds.

10. Because of the weakness of DEM, the practice has developed forother agencies involved in agricultural development to create their own ex-tension services. Even within the Ministry of Agriculture, jute has its ownextension service, under DEM. This extension service, involving about 2,500Jute Extension Agents (JEAs), advises farmers on cultural practices; itis also concerned with credit and input supply, farmers' organizations andjute marketing. The numerous Development Boards (Water, Horticulture,Cotton, Tobacco) and some 19 voluntary organizations all have their ownextension wings. These various extension schemes cover the same areas as DEMstaff, causing unnecessary duplication and, at times, providing contradictoryadvice to the farmers.

11. During the past years, in recognition of the importance of an ef-fective extension service, the Government took a number of steps to strengthenit. Among them are the progressive in-service training of graduates at thethana level and the introduction of the "Training and Visit" system on anational basis. Further reorganization and strengthening of the agriculturalextension services in the NW region, along the lines successfully adopted inseveral Bank Group-supported projects in South Asia, would be the primaryobjective of the proposed Extension and Research Project (EARP). It is ex-pected that the EARP would eventually be replicated over the whole of Bangladesh.Funds for supply of vehicles and extension equipment to support the agriculturalextension in the project thanas during the intervening period are includedunder the project.

48

ANNEX 8Page 4

Agricultural Research

12. The Bangladesh Rice Research Institute (BRRI) is responsible forresearch on various aspects of rice improvement and production, and fortraining extension staff in rice production technology. The BangladeshAgricultural Research Institute (BARI) deals with development of crops suchas wheat, pulses and oilseeds; it also carries out field trials on all crops,including rice varieties. The Soil Fertility Institute is a department ofBARI mostly concerned with fertility trials. Separate organizations existfor research on jute, cotton, tobacco and sugarcane; the Bangladesh Agri-cultural University (Mymensingh) also is involved in agricultural research.Research coordination is the responsiblity of the newly established BangladeshAgricultural Research Council (BARC).

13. So far BRRI has been concentrating on screening, selecting andfield testing materials supplied by IRRI, while paying increasing attentionon developing new varieties including crosses between the exotic and localmaterials. The high yielding varieties of rice (HYV) that have been re-leased include IR-8, IR-5, IR-20 (Irrisail), Purbachi, BRRI-1 (Chandina)and BRRI-2 (Mala) which are all suitable for the project area (Table 1).

14. Four substations for rice research have been set up to supplementthe research activities at the main BRRI station in Joydepur in order tomake it possible to select and test varieties under different climatic andhydrologic conditions. One of the substations is located at Comilla about40 miles north of the project area. It has a 92 ac field, two researchofficers, one farm superintendent and several field assistants.

15. Both BRRI and BARI have concentrated on establishing their newcentral stations at Joydebpur. Adaptive research in substations has beenrather neglected. Research on the economics of crop production has alsonot been sufficiently emphasized. As a result, the recommendations givenby the institutes are not specific to the various agro-ecological zones;they may not even be financially optimal for the farmers. It is expectedthat the proposed EARP would substantially improve the quality of adaptiveresearch in Bangladesh.

Inputs Supply

16. Fertilizer. BADC procures fertilizers, locally manufactured orimported, and distributes them to thana depots. Private traders purchasethem from these BADC depots and sell them to farmers at government-fixedprices. Fertilizer demand has tripled over the last decade. BADC's ownstorage capacity has lagged behind and a recent USAID project will financethe construction of additional thana and intermediary godowns.

17. In the past, farmers have been reluctant to use high dosages offertilizer on rice and other crops. The local varieties of rice are notvery responsibLe to fertilizer application and are susceptible to lodgingwith higher fertilizer dosage. Farmers also frequently risk losing their

49

ANNEX 8Page 5

investment on wet season rice (aus and aman) due to flood, drought or pests.However, with the introduction of high-yielding rice varieties which areresponsive to fertilizer, farmers are now well aware of the benefits ofusing higher dosages of fertilizer on HYV rice. Annual fertilizer require-ments in the project area would rise from about 3,000 tons at present to10,000 tons at full development. The cost of fertilizer to the farmersis currently subsidized by the Government, however GOB aims at elimi-nating the subsidy completely during the next few years. As the increaseduse will be on HYV rice, it is expected that elimination of subsidy will notadversely affect fertilizer use.

l18. Plant Protection. BADC is responsible for procurement of pesti-cides and equipment for its application. The Plant Protection Directorate(PPD) in the Ministry of Agriculture was, until 1976, in charge of storageand distribution to farmers. It was also responsible for training farmersin plant protection. PPD has now been merged with DEM but the amalgamatonof staff and functions is not fully effective. GOB is studying the possi-bility of separating the commercial operation of pesticides and equipmentdistribution from the extension function in plant protection by handingover the former to the private sector.

19. Major rice pests are the stemborer, leafhopper, army worm, ricehispa, leadfolder and rice mealy bug, of which the first two frequentlycause severe crop damage. So far, the damage caused by disease is lessserious than that from pests. Pesticides are sold at subsidized pricesthrough TCCA and private dealers approved by BADC.

20. Seeds. BADC is in charge of procurement, multiplication anddistribution of HYV seeds. Seed multiplication is done on BADC farms andalso on approved private seed farms. Seed of HYV rice may be importedoccasionally by BADC for distribution to farmers. But, in general, HYVrice seed is multiplied locally on BADC farms and by private growers whoare approved by BADC under a Registered Growers Schemes. Farmers usuallyretain seed from the previous harvest or obtain seed from their negighbors,but may occasionally obtain fresh seed from BADC through TCCA and UAA tointroduce new varieties or to sustain high yields. Generally, BADC seed hasbeen low in quantity, poor in quality and irregular in supply. The ongoingIDA supported Cereal Seed Project (Credit 410-BD) will improve the situationby providing farm machinery and processing facilities and by setting up aquality control organization.

Agricultural Credit

21. About 85% of agricultural credit is from non-institutional sources(money-lenders, traders, friends and relatives). The main sources of insti-tutional agricultural credit are: (a) the Bangladesh Krishi Bank (BKB); (b)the Bangladesh Jatiya Samabaya Bank (BJSB), through its Central CooperativeBanks and Traditional Krishi Samabaya Samities (KSS) or village cooperativesand Union Cooperative Multi-purpose Societies; and, (c) the commercial banks

50

ANNEX 8Page 6

through IRDP cooperative societies (IRDP-TCCA/KSSs). Although BJSB providesboth short-term and medium-term loans, its loans are mostly used for cropproduction inputs. The BKB advances mostly medium-term loans to individualfarmers for financing larger investments such as STWs, draft animals andagricultural implements. Both BKB and BJSB have an unsatisfactory record;loans are often misused, the repayment record is poor and the beneficiariesare mostly larger farmers. Commercial bank (mostly Sonali Bank) involvementin agricultural credit started only in 1973. Although Sonali Bank's perform-ance through IRDP has been good (annual repayment rates average 80%), thesuccess of such an involvement is constrained by the limited coveragein providing agricultural credit.

22. The agricultural credit situation was the subject of a Bank ReviewMission in 1974. Further review is underway with assistance from the Bankand the Asian Development Bank. Recommendations from the latter reviewwould form the basis for discussions with GOB on the reorganization andstrengthening of the agricultural credit system.

May 1977

51

BANGLADESH

MUHURI IRRIGATION PROJECT

AGRICULTURAL DEVELOPMENT

Some New High Yielding Rice Varieties

312/ Maturity Height Yield Grain Table

Name Season (days) ( (md/ac) Type gmality Additional Remarks

IR-5 Aman 140 110 40 Medium Good Highest yielding aman released so far, but has to betransplanted in early June because of low coldresistance when temperature drops in October andNovember. Little acceptance by the farmers, since itdid not readily fit into rotations.

IR-8 Bora! 170 100 45 Coarse Fair Cold sensitive, photo insensitive, medium resistance to(Aus) (140) sheath blight but susceptible to other diseases & pests.4/

IR-20 Aman 120-135 110 40 Msdium/ Very Good Fair drought and cold tolerance, mildly photosensitive,(Irrisail) Fine resistant to bacterial blight, and medium resistance to

leaf streak and stem borer.

IR-442 Aman 140-150 125-150 35 Medium/ Good Fair drought tolerance, non-cold tolerant, non-(late aus) Fine photosensitive, reaction to pests and disease not fully

assessed, can resist flood up to 5 feet and be totallysubmerged for six days.

BRRI-1 (Boro)/ (150) 85 40 Medium Good Poor drought tolerance, cold resistant, photo insensitive,(Chandina) Auls 130 resistant bacterial blight and medium resistant stem borer.

Water requirements about 157 lower than IR-8.

BRRI-2 (Boro)/ (150) 115-120 40 Medium Very Good Similar to BRRI-1, but faster initial growth rate The(Mala) Aus 130 first WYV suitable for sue.

BRRI-3 Boro 160-170 80-85 40 Medium Good Drought tolerant photo insensitive, cold sensitive,Aus 130 90-95 40 resistant to bacterial blight and root rots, moderately

(Aman) (140) (100) (45) resistant to leaf streak, stem borer. Wide flexibilityin transplanting time (December-August).

purbachi Boro/ 150 90 35 Coarse Very Good Poor drought tolerance, cold susceptible, photo insensitive,(Chinese) (Aus) (130) extremely disease and pest suscept ble.

Notes: 1/ other varieties are undergoing pre-release trials.2/ Secondary season within brackets.3! Estimated long-term average on farms. They take into account the effects of cyclones, floods and other natural disasters. X134/ Bacterial blight, sheath blight, leaf streak, root rots and stem borer - wben not mentioned very susceptible. t 00

ANNEX 9Page I

BANGLADESH

MUHURI IRRIGATION PROJECT

Present and Projected Cropping Patterns and Production

General

1. The present cropped area is about 121,000 ac which, on a netcultivable area of 67,000 ac, gives a cropping intensity of 181%, which isconsiderably higher than the national average of 135%. Rice accounts forabout 90% of the cropped area; minor crops such as pulses, oilseeds andvegetables make up the remaining 10%.

Present Cropping Patterns and Production

2. Cropping calendars are shown in Figure 1. The present croppingpattern is presented in Figure 2. The spread in rainfall over eight monthsfrom March to October enables the farmers to practice double cropping on 82%of the area (62% B. aus followed by T. aman or rabi crops, and 20% T. amanfollowed by boro). The remaining 18% is single cropped. About 3% of theproject area is liable to prolonged flooding over 3 ft and is suitable onlyfor B. aman. Another 4% in undrained depressions has access to irrigationand is used for a single crop of boro. The T. aman is the only crop onabout 10% of the area. During the aus season from April to July, 67% oif theland is fully covered by crops and 9% is completely fallow while the remaining24% is under crops for one-third of the season and is fallow for two-th:irds ofthe season. During the aman season from August to November, about 80% of theland is fully covered by crops, 4% is deeply flooded, and 16% is fallow forabout two thirds of the season. But during the boro or rabi season fromDecember to March, only 42% of the land is fully covered with crops whereasthe remaining 58% is completely fallow.

3. High yielding rice varieties (HYV) account for only 18,000 ac or17% of the cropped area under rice and local varieties for 90,000 ac. Becauseof uncertain rains, disease, limited use of fertilizer, and high degrees oflodging, yields of local aus and aman are low - about 13 md of paddy per acfor aus and B. aman and 17 md for T. aman. These may be compared with HYVyields of 25 md of paddy per ac from rainfed T. aman of the recently intro-duced IR-20 variety. Without reliable supplementary irrigation, farmers arereluctant to invest much in fertilizer and pesticides for transplanted aman,both local and HYV, since this crop often suffers from drought during flower-ing and ripening. Lack of proper flood control and drainage also hampersthe expansion of dwarf HYV aman. The boro crop suffers fewer natural hazards

53

ANNEX 9Page 2

but is dependent upon a reliable water supply. Consequently, it is relianton efficient servicing of the pumps, as well as on adequate maintenance ofthe farm distribution system and the availability of cash to buy diesel fuel.Tall local boro which is irrigated by the traditional bucket system gives anaverage yield of 22 md of paddy per ac. This may be compared with the averageHYV boro yield of 35-40 md per ac from IR-8. The present overall yield of paddyin the project area is estimated at 18.0 md per ac or 0.67 ton per ac.

4. Present paddy production in the project area is estimated at about73,000 tons, most of which is produced during the wet season. There has beenno significant increase of wet season rice production in the last five years,but during that period, dry season rice production increased from 2,000to 19,000 tons. The reason for this was the introduction of HYV boro ricealong with rapid expansion of low-lift pump irrigation.

5. Of the three rice crops, the aman crop is the most important, sinceit accounts for 47% of the acreage and 46% of the production of rice in theproject area. It has, however, only an average paddy yield of 18 md per acat present. Since local varieties of T. aman are not very responsive tofertilizer application, only 0.2, 0.1 and 0.05 md per ac of urea, TSP andmuriate of potash, respectively, are presently used for these varieties.Even smaller amounts are used for local aus. The HYV varieties which arevery responsive to fertilizer application are usually given much higherdosages. The area presently sprayed by pesticides is limited and is probablyless than 2% of the total cropped area in the wet season.

Future Cropping Patterns, Yields and Production

6. Increased irrigation from the project would enable expansion ofboro rice cultivation in the dry season from 15,000 to 50,000 ac. The culti-vation of HYV boro (primarily IR-8) would however replace cultivation ofaus or B. aman, since the harvesting of this variety generally cannot becompleted in time to allow the next planting before early rains. The HYVvarieties would be grown for the entire boro crop and for 70% of the T. amancrop (in areas not likely to be flooded by more than 1 ft).

7. With an assured water supply, improved farm management, an adequatesupply of inputs, expanded use of HYV seed, an improved extension service, andimproved drainage, crop yields are projected to increase over the three yeardevelopment period (ninth year of the project) as shown below.

54

ANNEX 9Page 3

Yield (md/ac)Future Futurewithout with

Crop Present Project Project

Aus (local) 13 13 13Aus (HYV) - 28 30B. Aman 13 13 -T. Aman (local) 17 20 22T. Aman (HYV) rainfed 25 30 32T. Aman (HYV) irrigated - 35 37Boro (local) 22 22 -

Boro (HYV) 35 40 42Pulses & Oilseeds 6 7 7Vegetables 75 90 100

The projected yields are derived from those presently achieved under irri-gation in the project area and in the Noakhali and Chittagong Districts.

8. The future cropped areas and production are given in Table 1. Theexpected cropping pattern is presented in Figure 3. The projected croppedarea is 129,000 ac which, on a net cultivated area of 67,000 ac, gives acropping intensity of 192%. Rice will continue to dominate accounting for87% of the cropped area. The minor crops would make up the remaining 13%(pulses and oilseeds 7%, and vegetables 6%). The most significant changewould be the increase in boro area from 14% to 45% and the correspondingdecrease in aus and B. aman area from 41% to 7%.

9. At full development, total paddy production would be 145,000 tons.Of this, about 54% would be produced from boro in the dry season and theremaining 46% in the wet season.

10. In evaluating the project, it has been assumed that IR-8 boro cropwould expand at the expense of B. aus and B. aman. This is a conservativeassumption since it is quite possible that Chandina which has a shorter lifeperiod than IR-8 (Annex 8, Table 1), will replace IR-8 to some extent and thiswill make it possible to raise a crop of aus or vegetables on part of thisland during the aus season.

May 1977

55

ANNEX 9Table 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Present & Estimated Future Production

ProductionArea('000 ac) Yield (mds/ac) (1000 tons)

Crop P_ W W P W W P IWL

Paddy

Aus (local) 42 37 8 13 13 13 20.4 17.9 3.9

Aus (HYV) - 5 5 - 28 30 - 5.2 5.6

B. Aman 2 2 - 13 13 - 1.0 1.0

T. Aman (local) 44 24 14 17 20 22 27.9 17.9 11.5

T. Aman (HYV, rainfed) 5 20 15 25 30 32 4.7 22.4 17.9

T. Aman (HYV, irrigated ) - 5 20 - 35 37 - 6.5 27.6

Boro (local) 2 2 - 22 22 - 1.6 1.6 -

Boro (HYV) 13 13 50 35 40 42 17.0 19.4 78.4

Subtotal Paddy 108 108 112 18 23 35 72.6 91.9 144.9

Other Crops

Pulses & Oilseeds 9 9 9 6 7 7 2 2.4 2.4

Vegetables 4 4 8 75 90 100 11.2 13.4 29.9

Total All Crops 121 121 129

Net Cultivated Area 67 67 67

Cropping Intensity (%) 181 181 193

1/ P = Present, W = Future without Project, W = Future with Project.56

ANNEX 9Figure 1

BANGLADESHMUHURI IRRIGATION PROJECT

Present Cultivated Area

AUS SEASON AMAN SEASON BORO/RABI SEASON

1 t A m a n~~~~~~ma (HYV,//z;g t alIo

Boro T

60~~own n Favsigatallovveplc ih rae

50

U)

Cl)

30Fallow

10 ~ ~ .BR. us//j Flo

30 7' ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~5

ANNEX 9

Figue 2un BANGLADESH

MUHURI IRRIGATION PROJECT

Future Cultivated Area with Project

AUS SEASON AMAN SEASON BORO/RABI SEASON

67 >, x<xxx x : :BR. Aus (Local) Fallow

60 &> ~~~~~~~~~~~~~ > ~~~~VegetablesFallow

6( 0

.~~~~~~~~~R man

00

40

(HYVHY

20

ssVaWa0000 0{ | ~~~Flooded (Fallovv) B0|0 0W00 B0 000:-0

0

Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

NOTE: The cropping seasons have been simplified in this chart.Sowing and harvesting actually take place with greater 58overlap than shown here. World Bank-9688

ANNEX 9Figure 3

BANGLADESHMUHURI IRRIGATION PROJECT

Cropping Calendar

Jan. Feb. Mar. Apr May Jun. Jul. Aug Sep Oct. Nov. Dec.

Crops /

T.aus

B.aman . .,

Taman

Boro

Rabi

LEGEND

/ B: broadcast rice T: transplanted rice.Rabi: winter crops other than rice, including pulses,

Nursery Growing period mustard, potatoes and chilies.period in the field

World Bank -9944

59

ANNEX 10Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Prices for Economic and Financial Analyses

1. For economic analysis, the estimated future farm gate prices ofinternationally traded agricultural inputs and outputs are derived fromprojected 1985 world market prices (expressed in 1977 currency values),with appropriate adjustments for freight, handling and processing andquality differentials (Table 1). Production of crops such as pulses andoilseeds is small and most of the output is consumed locally -- often bythe cultivators themselves. Projected farm gate prices for such crops arebased on the typical ratio between their prices and the price of rice in thedomestic market. In view of the large unemployment and underemploymentsituation prevailing in the project areas, and the seasonal nature of muchof the employment, market wage rates have been adjusted to reflect the season-specific opportunity costs (Annex 12). Finally, to reflect the prevailingregime of import/export taxes and duties and quota restrictions in Bangladesh,a Standard Conversion Factor (SCF) of 0.75 1/ has been used to adjust thedomestic cost component in various inputs and outputs.

2. Projecting prices for use in the financial analysis is much morespeculative. Since independence in 1971, the domestic prices of agriculturalcommodities in Bangladesh have experienced wide swings. The wholesale pricefor medium quality rice, for example, rose from Tk 56 per md in 1971/72 to Tk272 per md in March 1975 and then declined to Tk 113 per md in December 1975.Similarly, the jute price rose from Tk 50 per md in 1972/73 to Tk 129 per mdin November 1974 and then declined to Tk 90 per md in December 1975. In part,these swings have been related to the fluctuations in the world market prices.To a large extent, however, the main determinants have been the domestic supply-demand conditions which, in turn, have depended upon quantity and timing offood aid shipments, local weather conditions and the attractiveness of smug-gling to neighboring countries. Although all through this period, the Govern-ment has intervened in the market through compulsory procurement at fixedprices or through "guaranteed support prices", its impact on the domesticprices has been rather limited. The high degree of uncertainty in many ofthe parameters which determine domestic prices, makes the task of projectingprices for financial analysis particularly difficult.

3. Two different prices assumptions are used for the financial analysisin this report. For the base case, it is assumed that due to construction ofadditional foodgrain storage, build-up of buffer stocks following the good

1/ i.e. A shadow exchange rate of US$1 = Tk 20 (SCF = official exchangerate/shadow exchange rate).

60

ANNEX 10Page 2

harvests in the past two years, and a general tightening up of the officialprocurement machinery, the Government would be able to intervene more effec-tively in the domestic market. As a result, the future farmgate prices (inconstant 1977 values) for paddy would average the current official procurementprices adjusted for transportation and handling costs between the farmgate andthe procurement centers. Prices for vegetables, and pulses and oilseeds areassumed to maintain typical historical ratios to the paddy prices. Also it isassumed that, in constant terms, GOB would maintain the prices for fertilizers,seeds and pesticides at the present levels. As regards human and animallabor, the prevailing wage rates are considered to be depressed due to lowfoodgrain prices at present and hence future rates are assumed to be about 20%higher.

4. The alternative price assumption is basically a continuation ofthe price situation experienced during the past year or so. It is assumedthat due to good harvests domestically and large food aid shipments fromabroad, the farm gate prices for foodgrains would remain below the officialprocurement prices. Prices for vegetables and pulses and oilseeds would main-tain their historical ratios to paddy prices while the jute prices would beinfluenced only partially. Also it is assumed that the Government would letthe prices (in constant terms) for fertilizers, seeds and pesticides todecline below the present levels. Lastly wage rates for the human andanimal labor are assumed to be as at present.

5. The projected financial and economic prices for the various inputsand outputs are shown in Table 2.

May 1977

61

ANNEX 10Table 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Prices for Economic Analysis

Co,odity

Item Rice Urea TSP NP

1. Projected 1985 World MarketPrice (US$/ton) 1/ 2/ 374 178 159 65

2. Adjustments for Quality 3/Differentials Cx) 65-70- 100 100 100

3. Projected Price Adjusted forQuality (US$/ton) 243-262 178 159 65

4. Shipping Costs to/from Chitt- 4gong (US$/ton) 25 10- 30 30

5. FOB/CIF Chittagong Price(US$/ton) 268-287 188 189 95

6. Handling and Transport CostsBetween the Port and theWholesale Market/Main Go- 20 20 10 10downs (US$/ton) 5/ 6/

7. Price Ex-Godowns (US$/ton) 288-307 168 199 105

8. Processing, Handling andTransport Costs Between 50 30 35 25the Wholesale Market/Go-downs and the Farm Gate 5/

9. Farm Gate Price (US$/ton) 238-257 198 234 130

10. Processing Ratio (%) 65 100 100 100

11. Farm Gate Price Adjusted forProcessing Losses (US$/ton) 155-167 198 234 130

(Tk/md) 87-93 110 130 73

1/ Source: IBRD Price Forecasts dated November 23, 1976. The forecasts,expressed in 1974 constant dollars have been escalated by 27% to convertthem into early 1977 currency values.

2/ Pricing BasisRice : Thai, milled 5% broken, FOB BangkokUrea : Bagged, FOB EuropeTSP : Bulk, FOB US GulfMP : Bulk, FOB Vancouver

3/ For 25-35% broken. Larger discount for boro and aus crops which are ofpoorer quality than the aman crop.

4/ Assuming Bangladesh would be an exporter and because of proximity tomarkets in South Asia would command a price advantage over Europeansuppliers.

5/ Using a SCF of 0.75 for the elements having non-traded goods andservices.

6/ Lower than normal due to proximity of project areas to Chittagong.

62

ANNEX IUTable 2

BANGLADESH

MUHURI IRRIGATION PROJECT

Prices for Economic & Financial Analyses

Financial Price Economic PriceCrops Basic Case Alt.Case

-- (Tk/md)----- (Tk/md)---

Paddy

Aman 70 55 93Aus 65 50 87Boro 65 50 87

Pulses & Oilseeds 100 80 150

Vegetables 50 40 50

Inputs

Urea 60 50 110TSP 48 40 130MP 40 30 73Diazinon 280 250 700Sumithion 950 800 2,300Seed HYV Paddy 1/ 90 80 150Seed HYV Wheat 1/ 110 100 150Animal labor 2/ 10 8 7.5Farm labor 3/ 8 6 3-6 4/

1/ For local varieties same as crop prices.2/ Tk/day for a pair of bullocks.3/ Tk/man-day.4/ See Annex 12 for details.

63

ANNEX 11Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Crop Inputs and Farm Budgets

General

1. The expected overall changes in cropping patterns, yields andproduction due to the project are described in Annex 9. This Annex discus-ses the impact on the individual farm. The purposes of this micro analysisare:

(a) to estimate the effects of the project on farm incomesfor representative farm sizes and cropping patterns inorder to determine the distributional impact;

(b) to compare the income levels of the project area farmerswith those of farmers in other areas;

(c) to determine the capacity of the project beneficiariesto repay the project costs, and

(d) to analyze the effects of different Government policiesregarding input subsidies and water charges.

Crop Input Requirements

2. Present and projected unit input requirements under the projectare given in Table 1. The estimated current input usage rates are derivedfrom two agricultural surveys carried out in the project area in 1964 and1970. The results of these have been adjusted and updated with informationsupplied by the Ministry of Agriculture and BADC. Future requirements arebased on recommendations by the Directorate of Agricultural Extension andManagement and on observed cultural practices of the progressive farmers

of the area.

Model Sizes for the Farm Budget Analysis

3. Households in the project area can, somewhat arbitrarily, beclassified into four groups according to their economic situation:

(a) Landless workers, most of whom earn their living as dailyworkers in the fields, in construction or distribution.About 35% of the households in the area fall in thiscategory;

64

ANNEX 11Page 2

(b) Sub-marginal farmers cultivate less than 1.5 ac of land,which is presently the minimum area required to supportan average family. Usually more than half of the householdincome comes from work outside the family farm. In the farmbudget analysis, a 1.0 ac farm has been chosen to representsome 35% of the households that operate between 0.25 - 1.5 ac;

(c) Small farmers cultivate an area of 1.5 - 4.0 ac and typicallyhave a per capita income that is well below the nationalaverage. About 20% of the households belong to this category,represented in the farm budget analysis by a 3.0 ac farm; and

(d) Large farmers defined as the "upper 10%." These farmers ownmore than 4.0 ac. They are far from being "large" by anyabsolute standard. Their families typically number about tenpersons and their per capita income rarely exceeds US$150. Themedium holding size for the "large" farmers is roughly 5.0 acand this size has been chosen to represent this group in thefarm budget analyses.

Farm Budget Analyses

4. The project area consists of three parts:

(a) 15,000 ac already irrigated;

(b) 17,000 ac which will remain non-irrigated.

(c) 35,000 ac presently without irrigation but to beprovided with irrigation under the project;

While farmers in the first two sub-areas will benefit due to improved agricul-tural supporting services and improved drainage under the project, the mainproject benefits would accrue to farmers in the third sub-area. Accordinglyfor the budget analyses only farms belonging to the third sub-area have beenconsidered.

5. Budgets on an annual cash flow basis for three representativefarm models are given in Table 3. The following assumptions have beenmade in the analyses:

(a) Net Cultivated Land

The area given in the surveys is based on the gross sizeof the farms. Since a part of this area is taken up byhomesteads, ditches, paths, trees, etc., the net cultivatedarea is somewhat lower. The figures given in Table 3 arebased on the results of the agricultural surveys.

65

ANNEX 11Page 3

(b) Family Sizes

Based on the 1970 agro-economic survey, the family sizes in theproject area for the various holding sizes are estimated to be asfollows:

Holdings Number of Persons Number of Workers I/1977 1985 1977 1985

1.0 ac 5.0 5.8 1.4 1.63.0 ac 8.2 9.5 2.3 2.75.0 ac 10.0 11.6 2.8 3.3

(c) Cropping Patterns

Reflect the average for the project area, but give asomewhat higher intensity for the small farms and somewhatlower for the large farms.

(d) Crop Yields and Input Requirements

Projected yields used in the analyses are given in Annex 9.Crop inputs have been estimated based on the input require-ments given in Table 1.

(e) Hired Farm Labor

The monthly labor requirements (based on Table 2) havebeen calculated for each farm size. Since the number offamily members varies with the farm size, the total laboravailability for each farm model has been calculated. Onthe average, 15% of available family labor is employedoutside the farm. Since the average daily wage for outsidework is generally higher than the cost of hiring farm labor,non-farm work is usually given preference over farm work.Based on the 1970 socio-economic survey in the project area,the monthly amount of hired labor for each farm model wasestimated with the following formula:

Hired man-days = Total farm labor requirement minusnet available family labor plus 10%total farm labor requirement.

Thus even if theoretically the family can supply all labor,on the average 10% of the requirements are hired.

1/ See Annex 12 for reasons for the low labor force participation rates.

66

ANNEX 11Page 4

(f) Prices

Present and future production and inputs are valued usingthe projected financial prices (in 1977 values) correspondingto the base case discussed in Annex 10.

(h) Non-Farm Income

Current levels are estimated from the socio-economic survey.The reasons for the relatively high non-farm incomes forthe large farms are their large family sizes and, primarily,better educational background which results in higher wages.The project will increase the demand for labor in the area(Annex 12). Although the non-farm income for the sub-marginalfarmers will increase somewhat by the project, it has beenassumed as constant in the analysis.

Farm Incomes and Incentives

6. Annual family incomes for the three typical farm models discussedabove are detailed in Table 3 and summarized below:

67

ANNEX 11Page 5

Gross Value of Net Value of Non-Farm Total FamilyProductions Production /c Income Income /c

(1) (2) (3) (4)=(2)+(3)-------------------------- Tk --------------------------------

I ac farm /aP 1,760 1,310 2,000 3,310W 2,350 1,790 2,000 3,790w 4,110 3,270 2,000 5,270

Increase /b 75 83 - 39(%)

3 ac farmP 5,190 3,700 3,000 6,700w 6,900 5,100 3,000 8,100W 11,850 9,170 3,000 12,170

Increase 72 80 - 50

(%)5 ac farmP 8,220 5,660 4,000 9,660w 11,180 7,980 4,000 11,980W 19,580 14,170 4,000 18,170

Increase 75 77 - 52

(%)

/a P = present, W = future without project, W = future with project.

/b Due to project (W - W).

c/ Before deducting charges for irrigation and rewards for family labor.

Consequently, for farmers who will be provided with irrigation, the netincome from farming will increase by about 80% and the corresponding totalfamily income by about 50%. These increases are considered adequate for fullparticipation by the farmers in project activities.

7. The family income figures give an exaggerated picture of incomeinequalities since the family size increases with the farm size. Thepresent per capita income for the 1.0 ac farmers and the 5.0 ac farmers isTk 660 and Tk 970, respectively. After the project is implemented, takinginto account the expected population increase, the comparable figures will beTk 910 and Tk 1,570. Thus, on a per capita basis, the inequalities would beconsiderably smaller.

Farmers' Ability to Pay Water Charges

8. For the estimation of the farmers' ability and willingness to paywater charges, the concept of project rent has to be introduced. Simplystated, project rent is the incremental net income when all factors of produc-tion, except water and related services supplied by the project, are given the

68

ANNEX 11Page 6

rewards that are required for their cooperation. In the absence of uncertain-ty, project rent is equal to the net incremental farm income minus the neces-sary rewards to family labor and management for their extra input of labor andentrepreneurship.

9. The need to account for risky nature of farm incomes arises from thefact that farmers, particularly the small farmers, are risk averse and prefer asomewhat smaller but certain income to an income, which although expected to belarger, is uncertain. A relatively simple way to incorporate the risk-aversebehavior of the farmers is to use a certainty equivalent (CE) instead of theexpected value (EV) for the gross production. Under a number of simplifyingassumptions about the underlying probability distributions for uncertain para-meters and about farmers' risk aversion, CE can be expressed as:

CE = EV - n x s

Where n = a factor expressing farmers' risk aversionand s = the standard deviation of EV.

10. The uncertainty in farm incomes comes primarily from two sources --the fluctuation in farm prices and the variation in crop yields. The variationin crop prices is partially a function of the effectiveness of the Governmentintervention in the foodgrain market. As mentioned in Annex 10, the priceshave fluctuated considerably during the last few years. It is likely thateven for the future, the annual price variation around the mean would average15-20%.

11. The variation in crop yields is primarily related to cropping cal-endars and climatic factors. Typically, aus is the most risky crop withaverage variation of 25-30% from the mean yield and irrigated boro the leastrisky, with variations of about 10% from the mean. The aman crop is in betweenthe two extremes, probable variation being about 20% under rainfed conditionsand 15% under irrigated conditions.

12. It is safe to assume that variations in prices and yields would havea substantial negative correlation with each other. Also, it is likely thatin a given year, yields for the various crops would be largely uncorrelated.In view of these and taking into consideration the relative importance ofvarious crops in the gross value of production, it is estimated that the GVPwould have a standard deviation of 15% without irrigation and 10% with theirrigation.

13. Reliable estimates for farmers' risk aversion are lacking. Empiricalstudies so far indicate that the farmers' choice of cropping pattern and pro-duction techniques can be predicted reasonably accurately for values of 'n'in the range of 1-2. Expectedly, the value of 'n' decreases with the farmsize. In view of the relatively small farm size in Bangladesh, a value of1.5 is assumed for the base case.

69

ANNEX 11Page 7

14. On the basis of the above, for the base case,, the certainty equi-valent of the GVP would amount to 77.5% of the GVP for the without irrigationcase and 85% for the with irrigation case.

15. The next problem that arises in the calculation of project rentis the value of family labor. In economic literature, there is considerablecontroversy about appropriate returns for family labor and management. Con-servatively, in the following analysis, all family labor is valued at theprevailing market wage (Tk 8 per day) during the peak months.

16. A reward for farm management is necessary because in addition tosupplying family labor for farm operations, the farmers supply some entre-preneurial skills as well. Also, many farm related activities such asapplying for credit and other inputs, attending meetings organized by ex-tension officers and supervising hired labor are not included in estimatingthe crop labor requirements. It is reasonable to assume that the demandsfor the entrepreunerial skills are related to the complexity of culturalpractices followed by the farmers. A measure of the complexity are thecrop production costs. Somewhat arbitrarily, it is assumed that the manage-ment fee would equal 10% of the cost of purchased inputs. Since for thewith project case, the cost of irrigation has been treated separately, themanagement fee is assumed to be 15% of the remaining production costs.

17. On the basis of the above, the project rent per irrigated acre forthe three farm models is estimated to be between Tk 1,330 - 1,440 per year(Table 4). Since these estimates are based on "typical" farms, they do nottake into account the variations in land and human resources for the variousfarms. Allowing a 10% margin for such variations, a reasonable upper limitfor the potential water charges would be about Tk 1,200 per irrigated ac.

Cost of Irrigation

18. At a discount rate of 10% per annum, the present value of the proj-ect construction costs 1/ and expected costs of major repairs is estimated tobe about Tk 353 M or about Tk 10,100 per irrigated ac. The O&M of the projectworks would cost Tk 5 M per year or about Tk 140 per ac. In addition, theannualized capital cost of low-lift pumps would amount to Tk 6,000 per pump(about Tk 140 per ac) and the O&M cost to Tk 8,000 (about Tk 180 per ac).Accordingly, the total annual cost for a low-lift pump would be Tk 320 per ac.Assuming that water charges are introduced from Year Six of the project, fullcost recovery would require a total annual charge of Tk 2,120 per irrigatedac -- Tk 1,660 for recovery of construction costs, Tk 140 for O&M of civilworks, Tk 140 for the capital cost of low-lift pumps and Tk 180 for the O&Mcost of low-lift pumps.

I/ All costs are net of taxes and duties and in constant 1977 prices.

10

ANNEX 11Page 8

19. Six basic alternative levels of water charges can be identified:

Total Charge Benefit Cost Rentper Irrigated Recovery Recovery Recovery

Altern- Acre Index Index Indexative Description (Tk) ( (%) (%)

1 Present policy /a 250 14 12 21

2 Farmers pay full cost for low-lift pumps and no othercharges 320 18 15 27

3 Full costs for low-lift pumpsplus a charge covering full0 & M costs for civil works 460 26 22 38

4 Full costs for low-lift pumpsplus a charge in line withthe Irrigation Ordinance(10% of incremental grossfarm income) 700 39 33 58

5 Farmers pay full "ProjectRent" 1,200 66 57 100

6 Full costs for low-lift pumpsplus 0 & M costs plus capitalrecovery of civil works 2,120 120 100 178

/a For low-lift pumps users pay costs of diesel fuel, lube oil, the operatorsalary, spare parts (Tk 400), and rental charges on low-lift pumps (Tk600) or a total of about Tk 8,000 per pump or Tk 180/ac. In addition,for similar projects like the Muhuri Project GOB has recently imposed acharge of 3% of the incremental gross production value for recovery ofinvestment in civil works. This charge would amount to about Tk 70per ac.

20. The analysis clearly shows that full cost recovery (Alternative 6)is infeasible. A cost recovery in line with Alternative 3 or 4 should, on theother hand, be feasible. However, still a number of other factors have to betaken into account when a decision is made about the exact level of watercharges; the most important are:

(a) The project rent is highly sensitive to variations in the

expected crop prices. Assuming prices are in line with the

alternative case (Annex 10), the project rent would be re-duced by about 25% to the Tk 900 per ac.

71

ANNEX 11Page 9

(b) About one quarter of the farmers in the area already havelow-lift pumps. The project would provide a more stablesource of water and also some flood protection for theirfarms, but their gains would be relatively small. Ananalysis along the above lines indicates that the poten-tial charge for the project's services for this group wouldbe about Tk 200 per ac in addition to the full cost for low-lift pumps. This amount is basically equal to the annual0 & M cost for civil works.

(c) The relatively low incomes in the project area might createstrong political pressure to keep the water charge at lowlevel.

(d) The difficulty of having substantially different water chargesin the project area than in other parts of Bangladesh.

In light of these factors, it is recommended that at least full cost for low-lift pumps plus 0 & M for civil works should be recovered. Roughly thisrepresents a doubling of the present charges.

Subsidies

21. At present, most agricultural inputs are subsidized by the Govern-ment, the estimated subsidy being Tk 50 per md for urea, Tk 80 per md forTSP, Tk 80 per md for MP, Tk 400 per md for diazinon, and Tk 1,300 per mdfor sumithion. These subsidies are clearly regressive, as can be seen fromthe following Table, which is based on the assumption that the present ratesof subsidies remain unchanged in the future:

Fertilizer and Net Farm Income Without FertilizerPesticide Subsidy and Pesticide Subsidies

Farm Size (Tk) (Tk)

1.0 ac P 30 1,280W 130 1,660W 330 2,940

3.0 ac P 110 3,590W 310 4,790W 980 8,190

5.0 ac P 160 5,500W 520 7,460W 1,510 12,660

The subsidies benefit the large farmers more than the small farmers and farmerswith irrigation more than farmers without irrigation. Consequently, they have

72

ANNEX 11Page 10

a detrimental effect on income distribution. Even more important is the indi-

cated "automatic" increase in Government expenditure. The implementation of

the project would increase the Government's annual cost for fertilizers and

pesticides in the project area by about Tk 13 M.

22. The change in cropping pattern that would follow the provision of

irrigation water would increase the amount of subsidy per acre by roughly

Tk 200. If the present system of subsidies and water charges remains un-

changed, the total per acre subsidy would be:

Tk/ac/year

Annuity on the investment inirrigation facilities 1,660

Operation and maintenance ofmajor irrigation facilities 140

Capital cost for low-lift pumps 140

Subsidies on fertilizers andpesticides 200

Total 2,140

23. As can be seen from the previous Table, most of the present sub-

sidies come from the low cost of irrigation water. There are indications

that farmers in Bangladesh use less fertilizer than what is optimal. Some

subsidies can in that case be taken as an incentive to use more fertilizers.

However, the use of irrigation water would remain very profitable to the

farmers even if the cost of water is increased substantially. Accordingly,

there is an urgent need to reduce present levels of subsidies on irrigation

water.

May 1977

73

BANGLADESH

MUIIURI IRRIGATION PROJECT1/

Crop Input Requirements

T.Aman(HYV)B.Aus T.Aus(HYV) B.Aman T.Aman (Local) (rainfed)

P W W P W W P W W P W W P W WFERTILIZERS AND PESTICIDES

Urea (46XN) (mds/ac) 0.1 0.1 0.1 - 1.4 1.5 0.1 0.1 - 0.2 0.4 0.5 1.0 1.3 1.5

TSP (46% P20 5 ) (mds/ac) 0 0 0 - 0.6 0.8 0 0 - 0.1 0.2 0.3 0.5 0.6 0.8

MP (607 K) (mds/ac) 0 0 0 - 0.1 0.3 0 0 - 0.05 0.1 0.1 0.2 0.4 0.4

Diazinon (mds/ac) 0 0 0 - 0.01 0.01 0 0 - 0.005 0.005 0.005 0.01 0.01 0.01

Sumithion (mds/ac) 0 0 0 - 0.01 0.01 0 0 - 0.005 0.005 0.005 0.01 0.01 0.01

ANNUAL FAMILY AND HIRED LABOR

Preparation (m-d/ac) 17 17 17 - 22 22 17 17 - 22 22 22 22 22 22

Planting andNursing (m-d/ac) 2 2 2 - 18 18 2 2 - 18 18 18 18 18 18

Crop Management (m-d/ac) 6 6 6 - 12 12 6 6 - 10 11 11 12 13 13Harvesting and

Threshing (m-d/ac) 20 20 20 - 27 28 20 20 - 22 24 25 27 28 29

Subtotal (m-d/ac) 45 45 45 - 79 80 45 45 - 72 75 76 79 81 82

OTUR INPUTS

Animal Power (a-d/ac) 15 15 15 - 17 17 15 15 - 17 17 17 17 17 17Seed (mds/ac) 1.0 1.0 1.0 - 0.4 0.4 1.0 1.0 - 0.4 0.4 0.4 0.4 0.4 0.4Irrigation (ax'iu/ac) 0 0 -0 - 18 18 0 O - 0 0 0 a oMiscellaneous (Tk/ac) 10 10 10 - 20 30 10 10 - 10 15 20 25 30 35

I/ P - present, W - future without project, W = future vith project I?S

BANGLADESH

MUHURI IRRIGATION PROJECT

Crop Input Requirementsl/T.Aman (HYV)

(Irrigated) Boro (Local) Boro (HYV) Pulses & 2/

mTILZERSNDPETICIESP W W P W W p W W P W W p W WPERTILIZERS AND PESTICIDES p i w wp i

Urea (46% N) (mds/ac) - 1.8 2.0 0.7 0.7 - 1.5 2.0 2.4 0 0 0 1.5 2.0 2.5

TSP (46% P2 0 5 ) (mds/ac) - 0.8 1.0 0.3 0.3 - 0.6 1.0 1.0 0 0 0 1.0 1.5 2.0

MP (607% K) (mds/ac - 0.5 0.5 0.1 0.1 - 0.1 0.5 0.5 0 0 0 0.4 0.6 1.0

Diazinon (mds/ac) - 0.01 0.01 0.005 0.005 - 0.01 0.01 0.01 0 0 0 0.01 0.01 0.01

Sumithion (mds/ac) - 0.01 0.01 0.005 0.005 - 0.01 0.01 0.01 0 0 0 0.01 0.01 0.01

ANNUAL FAMILY AND HIRED LABOR

Preparation (m-d/ac) - 22 22 22 22 - 22 22 22 10 10 10 22 22 22

Planting andNursing (m-d/ac) - 18 18 18 18 - 18 18 18 2 2 2 22 23 26

Crop Management (m-d/ac) - 13 14 12 12 - 15 16 16 3 5 5 16 20 24

Harvesting andThreshing (m-d/ac) - 32 33 25 25 - 31 32 35 18 20 20 40 50 58

Subtotal (m-d/ac) - 85 87 77 77 - 86 88 91 33 37 37 100 115 130

OTHER INPUTS

Animal Power (a-d/ac) - 17 17 17 17 - 17 17 17 8 8 8 17 17 17

Seed (mds/ac) - 0.4 0.4 0.4 0.4 - 0.4 0.4 0.4 0.4 0.4 0.4 1.0 1.0 1.0

Irrigation (ac-in/ac) - 5 5 30 30 - 38 38 38 0 0 0 0 0 0

Miscellaneous (Tk/ac) - 35 40 20 20 - 30 40 50 5 5 5 30 40 50

1/ P = present, W = future without project, W = future with project

2/ Composite crops. Input requirements are notional

Un

BANGLADESH

NUHURI IRRIGATION PROJECT

Monthly Labor Requirements for Various Crops(In man-days per acre)

January February March April May June J1S August September October November December Total

RICE (PADDY)

Aus P 0 0 7 13 2 2 12 9 0 0 0 0 45(Local) 0 0 7 13 2 2 12 9 0 0 0 0 45W 0 0 7 13 2 2 12 9 0 0 0 0 45

Aus P - - - - - - - - - - -(HYV) 0 0 7 28 10 4 18 12 0 0 0 0 79

W 0 0 7 28 10 4 19 12 0 0 0 0 80

Aman - B. p 0 0 7 13 2 2 1 0 0 6 14 0 45W 0 0 7 13 2 2 1 0 0 6 14 0 45w - - _ _ _

Aman - T. P 0 0 0 0 0 7 15 21 3 3 15 8 72(Local) 0 0 0 0 0 7 15 21 3 3 16 10 75W 0 0 0 0 0 7 15 21 3 3 17 10 76

Aman - T. p 0 0 0 0 0 7 15 21 4 4 19 9 79(HYV, rainfed) W 0 0 0 0 0 7 15 21 5 4 19 10 81

w 0 0 0 0 0 7 15 21 5 4 20 10 82

Aman - P - - - - - - - - - - - - -(HYV, irrig.) W 0 0 0 0 0 7 15 21 5 5 21 11 85

W 0 0 0 0 0 7 15 22 5 5 22 11 87

Boro P 12 27 3 3 11 17 0 0 0 0 0 4 77(Local) I 12 27 3 3 11 17 0 0 0 0 0 4 77

w - - - - - - - _ _ _ _

Boro P 12 28 4 L 13 21 0 0 0 0 0 4 86(HYV) W 12 28 5 14 13 22 0 0 0 0 0 4 88

W 12 28 5 5 14 23 0 0 0 0 0 .4 91

OTHER CROPS

Pulses and P 1 1 6 12 0 0 0 0 0 5 8 33Oilseeds V 2 2 7 13 0 0 0 0 0 0 5 8 37

W 2 2 7 13 0 0 0 0 0 0 5 8 37

Vegetables P 6 6 20 20 0 0 0 0 0 0 28 20 100W 7 8 25 24 0 0 0 0 0 29 22 115 mW 8 8 30 28 0 0 0 0 0 0 32 24 130

ANNEX 11Table 3

BANGLADESH

MUHURI IRRIGATION PROJECT

Farm Budgets

1.0 Acre Farm 3.0 Acre Farm 5.0 Agre FiArm

Cropped Areas (Acres) P W W p W W P W W

Aus - Local 0.7 0.6 - 2.0 1.6 - 3.5 2.5 -

- HYV - 0.1 - - 0.4 0.3 - 1.0 0.5Aman - Transplanted (Local) 0.8 0.4 0.1 2.2 1.2 0.5 3.5 2.0 0.5

- HYV, rainfed - 0.4 0.2 - 1.0 0.8 - 1.5 1.5- HYV, irrigated - - 0.5 - - 1.0 - - 1.5

Boro - HYV - - 0.7 - - 1.8 - - 3.0Paddy, Total 1.5 1.5 1.5 4.2 4.2 4.4 7.0 7.0 7.0Other Crops 0.1 0.1 0.1 0.4 0.4 0.4 0.5 0.5 0.8Total 1.6 1.6 1.6 4.6 4.6 4.8 7.5 7.5 7.8

Net Cultivated Area 0.8 0.8 0.8 2.5 2.5 2.5 4.3 4.3 4.3Cropping Intensity (%) 200 200 200 180 180 192 174 174 181

GROSS PRODUCTION VALUE (Tk) 1,760 2,350 4,110 5,190 6,900 11,850 8,220 11,180 19,580

Farm Production Costs (Tk)

Crop Inputs 370 470 710 1,090 1,350 2,030 1,760 2,200 3,410Hired Labor 80 90 130 400 450 650 800 1,000 2,000Total 450 560 840 1,490 1,800 2,680 2,560 3,200 5,410

Net Production Value L/(Tk) 1,310 1,790 3,270 3,700 5,100 9,170 5,660 7,980 14,170

1/ Before deducting irrigation costs and remuneration for family labor.-J~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

ANNEX 11Table 4

BANGLADESH

MEUHURI IRRIGATION PROJECT

Project Rent For the Three Farm Models

1.0 ac Farm 3.0 ac Farm 5.0 ac Farm

Item W W W W i W

(1) Expected Gross Pro-duction value 2/ (Tk) 2,350 4,110 6,900 11,850 11,180 19,580

(ii) Certainty Equivalentof (i) (Tk) 1,820 3,490 5,350 10,070 8,660 16,640

(iii) Crop Inputs2/,3/ (Tk) 560 840 1,800 2,680 3,200 5,410

(iv) Family Labor (Tk) 740 910 1,990 2,610 3,000 3,350

(v) Management Fee (Tk) 60 130 180 400 320 810

(vi) Implicit Land Rent(ii)-(iii)-(iv)-(v) (Tk) 460 1,610 1,380 4,380 2,140 7,070

(vii) Project Rent (Tk) 1,150 _3000 4,930

(viii) Irrigated Area (Ac) 0.8 2.2 3.8

(ix) Project Rent per acIrrigated Acre (Tk) 1,440 1,360 1,330

1/ W = without project, W = with project.2/ From Table 3.3/ Excluding family labor and management

78

ANNEX 12Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Farm Labor Analysis

General

1. The population density in the Muhuri area is one of the highestin Bangladesh and this has resulted in relatively small farms and a largenumber of landless households. Since commercial activities in the areaare limited, under:employment is substantial.

2. The poorest 40% of the families in the project area are landlessor operate farms smaller than 0.5 ac. The project's effect on this groupdepends on how much employment the project will generate. Little employmentdata exists, but some rough estimates, partly based on the 1970 agro-economic survey, are presented in this Annex.

3. Because of high underemployment, wage levels reported in the proj-ect area probably overstate the economic opportunity cost of farm labor. Forthe economic analysis, shadowed wage rates have been derived using the economicsupply curve for labor, shown in Figure 1. The assumptions behind the curveare discussed below.

Labor Supply

4. On the basis of the 1974 census, the current population in theproject area is estimated at about 410,000. The population grew at an annualrate of 1.0% between 1951 and 1961 and 1.5% between 1961 and 1974. This isequivalent to 40% and 50% of the national averages for these two periods,respectively. For this analysis, it is assumed that the future growth ratewill be 60% of the projected national average or about 1.8% annually.

5. In Bangladesh, women normally do not work in the fields and, there-fore, only males are included in the estimates of the agricultural labor force.Some 29-30% of the Bangladesh population belongs to the male labor force.The heavy migration from the project area has reduced the proportion of thepopulation in active age groups. Consequently, if the age specific laborforce participation rates for the whole country are applied to the 1974 censusfigures for the area, the male labor force amounts to about 28.5% of theproject population. Since the labor force participation rate is higher inurban than in rural areas, it has been assumed that the labor force parti-cipation rate in the area is 28%. The estimates of labor supply, given below,have been made using 240 days per year. This allows for less than a fullday's work for persons of extreme ages who are included in the labor forceestimates.

79

ANNEX 12

Page 2

Year Population Male Labor Force Labor Supply(persons) (persons) (milliion man-days)

1977 410,000 115,000 27.61980 435,000 122,000 29.21985 476,000 133,000 32.01990 520,000 146,000 34.9

Labor Demand

6. Besides agricultural production, the labor force is involved in:(a) farm and home maintenance; (b) off-farm subsidiary occupations suchas handicrafts, fishing, commercial activities, clerical and otherservices, and (c) new development schemes. Some of the activities undercategories (a) and (b) are undertaken by women. Category (c) includeslocal construction work in both urban and rural areas. Also, besides theproposed project, a Dutch-supported rural development project is expectedto be implemented in part of the project areas.

7. Estimates of monthly farm labor requirements for various cropsare given in Annex 11, Table 2. Estimates of the total montly labordemand are given in Table 1. Based on detailed calculations of laborsupply and requirements for different farm sizes, the following demandfor hired farm labor has been estimated:

Million man-daysHired

Total require- Supplied by Supplied by Supplied by land-ment family Total other farmers less laborers

Present 7.5 5.5 2.0 0.8 1.2Future withoutproject 8.1 5.9 2.2 0.9 1.3

Future withproject 10.7 7.5 3.2 1.0 2.2

8. Without the project, total farm labor requirements would fall from27% of the supply at present to about 25% in 1985. With the project, thefarm labor demand would be 33% of the supply in 1985. Even more important,the demand for hired labor would increase more rapidly than total laborrequirements. At present, about 40% of wage labor is supplied by sub-marginal and small farmers and 60% by landless workers. Due to increasedjob opportunities on their own farms, small farmers can increase their off-farm employment only to a limited extent. Consequently, with the project,the farm labor market for the landless will roughly double.

80

ANNEX 12Page 3

9. The present paddy production is 73,000 tons of which about 20,000tons are sold by the farmers and distributed within the project area. Some30,000 tons are imported into the area. After project implementation,farmers will sell approximately 70,000 tons of which 25,000 tons will beexported and 45,000 tons distributed locally. The use of fertilizers andpesticides will more than double due to the project. Consequently, employ-ment in agriculture-related trade and transport will increase substantially.

10. Net farm incomes will increase about 80% due to the project, butthe increase in cash incomes will be larger or about 110%. If the marginalpropensity to consume locally manufactured and distributed non-agriculturalgoods is at least half of the average propensity to consume these goods,the employment in small scale manufacturing, handicrafts and distributionof non-farm goods will increase at least 50% due to the project. The effectmight result in doubling the present employment.

11. Based on the 1970 agro-economic survey, it is estimated thatpresent non-farm employment is about 6.5 million man-days or almost 25%of total labor supply. The per capita income in the area is projected toincrease slightly even without the project. It is therefore realistic toassume that non-farm employment will at least grow at the same rate as thepopulation. This would give a non-farm employment of about 7.5 millionman-days in 1985 without the project. It was argued above that the employ-ment in trade, transport and small scale manufacturing would increase 50-100% due to the project. Since these activities make up somewhat more thanhalf the non-agricultural employment in rural areas, it is reasonable toassume that total non-farm employment would increase 25-50% due to the pro-ject. In order not to overestimate employment effects, the lower of thesevalues is chosen. The overall employment situation would then be:

1977 1985Without Project With Project

Total 27.6 32.0 32.0Agriculture 7.5 8.1 10.7Non-Farm Employment 6.5 7.5 9.4Surplus 13.6 16.4 11.9UnemploymentRate 49% 51% 37%

Employment for Landless Workers

12. The 28,000 landless workers presently carry out about 35% of thenon-farm work in the area or about 2.3 million man-days. Since the farmerswill experience increased demand for family labor on their farms, it isunlikely that the landless workers' share of non-farm employment will decline.It is estimated that their non-farm employment would increase to at least3.5 million man-days with the project. If the demand for agricultural fieldworkers is added, the total work volume for the landless would increase fromabout 3.5 million man-days at present to at least 5.7 million man-days withthe project.

81

ANNEX 12Page 4

Economic Opportunity Cost of Farm Labor

13. Scarcity of detailed data on farm income levels, off-farm employ-ment opportunities, and the agricultural labor force profile makes theevaluation of economic shadow rates for farm labor extremely subjective.Economic farm labor costs were estimated by using monthly shadow ratesreflecting different opportunity costs associated with various segmentsof the labor force and slack and peak periods during the year.

14. On the basis of available information about the project area andexperience from similar areas, it is postulated that the marginal oppor-tunity cost of farm labor can be represented by an "S-shaped" curve. Themarginal opportunity cost of farm labor is positive at all levels of demandand increases when more labor is absorbed into field work. The increasein opportunity cost is initially slow and reflects the scarcity of alterna-tive productive employment, but is is more rapid when the full labor supplyis utilized. At employment levels above the maximum available in the area,the opportunity cost would again increase at a slower rate since a largenumber of migrants would be attracted to the project area from neighboringareas where there is substantial under-employment. In practice, it isreasonable to approximate this idealized "S-shaped" curve by three straightsegments.

15. Figure 1 gives the curve of approximate shadow rates used in theanalysis. The curve shows the estimated marginal opportunity cost of laboras a function of demand (expressed as a proportion of the supply). Theshape of the curve is based on the following assumptions:

(a) at minimum employment levels, the marginal cost would bethe value of additional consumption needed for familymembers to undertake field work (0.5 per man-day 1/),plus the value of foregone activities such as fishing,home improvement, etc. (Tk 1.5 per man-day);

(b) at employment levels corresponding to 50% of the fullfarm labor availability, 2/ the marginal cost would bethe minimum market rate (Tk 5 per man-day);

1/ Taken as 75% of the current average daily consumption of foodgrains(16 oz per day).

2/ It is assumed that about 15% of the potential labor supply is permanentlyemployed in non-farm activities and hence unavailable for farm work. Ac-cordingly, peak farm labor availability would be about 2 M man-days permonth at present and 2.3 M man-days per month at full development in 1985.

82

ANNEX 12Page 5

(c) at a monthly labor demand corresponding to present peaklevel (about 70% of full farm labor supply), the marginalcost would be equal to the maximum market rate (Tk 8per man-day, see Annex 10);

(d) when the farm employment is equal to or larger than thefull supply from the area, the opportunity cost would beabout Tk 10 per man-day, since at this wage rate, alarge number of migrants would be attracted to the projectarea.

16. Wqhile the shape of the curve at the upper level can be viewed withreasonable confidence, the segments corresponding to low employment levelsare open to debate. Fortunately, however, the lower levels of employmentoccur in both "with" and "without" situations and hence the incrementalcosts of farm labor are not sensitive to the shape of the curve for lowemployment levels.

17. The monthly marginal opportunity cost can be read directly fromthe opportunity cost curve at the corresponding level of labor demand. Thetotal economic cost of farm labor is then the area under the curve up tothat level of employment. Table 1 shows the marginal and the total oppor-tunity costs for the various months. Presently, the estimated marginalcost varies from a low of Tk 2.5/day in September and October to a high ofTk 8/day in August. The increase in boro cultivation in the future wouldresult in a somewhat more even demand for farm labor. The two extreme oppor-tunity costs under "with" project conditions are estimated to be Tk 2.5/day(in September) and Tk 7.4/day (in June). The total annual economic cost offarm labor is estimated to increase from about Tk 25.4 million at presentto about Tk 26.2 million under "without project" conditions and about Tk 37.3million under "with project" conditions. Thus, the economic cost (in domesticprices) of using the additional 2.6 million man-days over the "without proj-ect" requirements is estimated to be about Tk 11.1 million, or an average ofTk 4.3/man-day. In view of the unemployment and underemployment situationprevailing in rural Bangladesh, this valuation is considered appropriate.

18. Since the economic opportunity costs of farm labor as estimatedabove are in domestic prices, it is necessary to multiply them with thestandard conversion factor (0.75) to convert them into "border prices." Onthis basis, the economic cost of farm labor is Tk 19.60 M without the projectand Tk 27.95 M with the project; the incremental cost being Tk 8.6 M.

May 1977

83

BANGLADESH

MUHURI IRRIGATION PROJECT

Economic Cost of Farm Labor

Jan Feb Mar Apr May Jun Jul M Sep Oct Nov Dec Total1/Farm Labor Requirements p 0.21 0.45 0.50 0.82 0.28 0.74 1.24 1.40 0.15 0.16 0.94 0.61 7.50(million man-days) W 0.23 0.47 0.54 0.93 0.32 0.76 1.27 1.42 0.20 0.19 1.06 0.72 8.11W 0.68 1.49 0.64 0.84 0.77 1.53 0.93 1.18 0.22 0.20 1.28 0.97 10.73Farm Labor Requirement p 11.00 23.00 25.00 41.00 14.00 37.00 62.00 70.00 8.00 8.00 47.00 31.00(7 of "Peak" monthly w 10.00 20.00 23.00 40.00 14.00 33.00 55.00 62.00 9.00 8.00 46.00 31.00labor supply 2/) W 30.00 65.00 28.00 37.00 33.00 66.00 40.00 51.00 10.00 9.00 56.00 42.00

Marginal Opp. Cost P 2.70 3.40 3.50 4.50 2.80 4.20 6.80 8.00 2.50 2.50 4.80 3.90of Labor (Tk/day)3/ W 2.60 3.20 3.40 4.40 2.80 4.00 5.80 6.80 2.50 2.50 4.80 3.90w 3.80 7.30 3.70 4.20 4.00 7.40 4.40 5.20 2.60 2.50 5.90 4.50

Total Economic Cost P 0.49 1.22 1.38 2.67 0.67 2.29 4.92 6.10 0.34 0.36 3.20 1.80 25.44of Labor (million Tk)3/ W 0.53 1.22 1.46 2.98 0.77 2.28 4.68 5.62 0.45 0.43 3.60 2.12 26.14w 1.97 6.12 1.82 2.60 2.31 6.44 2.98 4.18 0.51 0.45 4.74 3.15 37.27

1/ P = Present1W = Future without projectW = Future with project

2/ Peak monthly supply - Present - 2.0 million man-daysFuture = 2.3 million man-days

3/ In domestic prices.

OD~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

AMEl 12Figure 1

BANGLADESHMUHURI IRRIGATION PROJECT

Marginal Economic Cost of Farm Labor

TAKA/MAN-DAY

10 - - - ---------- -

6 _______J~~~~~~~~~~~~I 1

4 I

0 I I I I I 1 LABOR DEMAND

10 20 30 40 50 60 70 80 90 100 AS % OF LOCALSUPPLY

World Bank-9687(R)

85

ANNEX 13Page 1

BANGLADESH

MUHURI IRRIGATION PROJECT

Economic Analysis

Assumptions

1. The economic analysis is based on the following assumptions:

(a) Prices: The farm gate prices used in the economic analysisare derived from projected 1985 world market prices expressedin early 1977 currency values. Appropriate adjustments havebeen made for freight, handling and processing. A standardconversion factor of 0.75 is used to reflect the prevailingregime of import taxes and quotas. The price assumptionsare discussed in more detail in Annex 10.

(b) Benefits. The direct benefits of the project would be:increased agricultural production; reduced transport coststhrough improved navigation possibilities on khals, andincreased fish yields. The project would also havesubstantial secondary employment effects in trade andtransport. In this analysis, however, only increasedagricultural production due to the project is counted asa project benefit. Expected crop yields, acreages andproduction are shown in Annex 9. The gross benefits aresummarized in Table 1.

(c) Crop Production Costs. Per acre input requirements areshown in Annex 11. Prices for inputs other than farmlabor are discussed in Annex 10. Farm labor is evaluatedat a seasonally adjusted opportunity cost. The economiccost (in domestic prices) per man-day is estimated at Tk 4.3,which is about 55% of the peak wage rate (for a detailedanalysis, see Annex 12). Crop production costs (exceptirrigation costs) are summarized in Table 2.

(d) Low-Lift Pump Costs. Since about 330 low-lift pumps wouldbe operating in the area even without the project, invest-ment and O&M are based on 770 additional pumps only. It isassumed that the pumps will be replaced every seventh year.The annual O&M cost per pump is shown in Table 3. Out ofa total annual cost of Tk 9,000 per pump, about Tk 1,000would be in taxes and duties (mostly on diesel and spares)and Tk 5,000 in foreign exchange. Deducting taxes and

86

ANNEX 13Page 2

duties and multiplying the local costs with the standardconversion factor, gives an economic O&M cost of Tk 7,250per pump. For the 770 pumps, the cost would amount toTk 5.6 M (say Tk 6 M) per year.

(e) Investment Costs: All investment costs except pricecontingencies (Tk 153.5 M), cost of low-lift pumps(Tk 36.3 M) and taxes and duties (Tk 116.8 M) 1/ areincluded in the economic analysis. On this basis, theinvestment costs are estimated at Tk 473.4 of whichTk 200.6 M would be in foreign exchange. Using thestandard conversion factor of 0.75 for the local costsresults in an estimated "economic" cost of Tk 405.2 M(say Tk 405 M). The estimated salvage value of theequipment and materials used in the construction ofproject works, Tk 20 M in economic terms, is creditedagainst project cost after project completion. Projectfacilities are assumed to have a useful life of 40 years.It is assumed that the embankments would require majorrepairs every ten years at an estimated economic cost ofTk 5.0 M. The regulator gates would be replaced after20 years at a cost of Tk 40 M, and the cross dam wouldrequire major repairs at a cost of Tk 35 14 once duringthe project life. The replacement/repairs costs areincluded as investment costs in years 16, 26 and 36 ofthe project.

(f) Operation and Maintenance: The annual O&M costs forproject works and facilities (excluding low-lift pumps)are estimated at Tk 5 M of which about 1 M would be inforeign exchange. Accordingly in economic terms, theO&M cost would amount to about Tk 4 M per annum. Thesecosts are used as a cost stream against the projectbenefits.

(g) Development Phasing: Construction would be phased overfive years. Some benefits from khal excavations wouldaccrue even before the project is fully complete.Although all new low-lift pumps would be delivered bythe last year of construction, the formation of pumpgroups is likely to lag somewhat. Also, it would takea couple of years before the farmers adapt to the newcropping patterns. Consequently, it is assumed that

1/ Taxes and duties in the amount of Tk 30.2 million are includedin the price contingencies and the cost of low-lift pumps.

87

ANNEX 13Page 3

full project benefits would not be achieved for threeyears after all project construction is completed. Onthis basis, the overall phasing of the benefits isestimated to be as follows:

Year 0-4 5 6 7 8 9

Net benefits(% of full develop- 0 15 60 80 90 100ment benefits)

Economic Rate of Return

2. Resulting cost and benefit measures are shown in Table 4. Assuminga 40-year life of the project, the economic rate of return is estimated at16%.

Sensitivity Analysis

3. Several tests were made to determined the sensitivity of the rateof return estimates to various alternative assumptions. These reflect theuncertainty in some of the more important factors in the analysis.

88

ANNEX 13Page 4

Rate of Return

(a) Basic Case 16%

(b) Standard Conversion Factor (SCF)

(i) SCF = 1.0 13%

(ii) SCF = 0.6 18%

(c) Farm labor valued at the peak 14%market wage (Tk 8/man-day)

(d) Commodity Prices decrease by 15% 13%

(e) Crop Inputs Prices increase by 15% 15%

(f) Construction and Replacement Costs increase by 15% 14%

(g) Fuel and Operating Costs increase by 25% 16%

(h) Irrigated Area

(i) Reduction of the net irrigated area 13%from 50,000 ac to 40,000 ac dueto increased water usage upstream ofthe project area

(ii) Reduction of the irrigated area per 16%pump from 45 ac to 40 ac

(i) Delays

(i) Construction completed after 7 years 14%instead of 5 years

(ii) Full agricultural development delayed 14%by two years

Hence it may be concluded that the project is moderately sensitive to changesin rice prices, delays, increased upstream water usage and the estimated SCF.

May 1977

89

ANNEX 13Table 1

BANGLADESH

MUHURI IRRIGATION PROJECT

1/Annual Gross Benefits (Economic )

Item Price Production ('000 tons) Gross Value (Tk M)(Tk/ton) Incre- Incre-

W W ment W W ment

Aus Paddy 2,330 23.1 9.5 (13.6) 53.8 22.1 (31.7)

Aman 2,490 47.8 57.0 9.2 119.0 141.9 22.9

Boro Paddy 2,330 21.0 78.4 57.4 48.9 182.7 133.8

Pulses & Oilseeds 4,020 2.4 2.4 - 9.6 9.6 -

Vegetables 1,340 13.4 29.9 16.5 18.0 40.1 22.1

Total 249.3 396.4 147.1

say Tk 147 M

1/ W = Without Project, W = With Project, Increment = W-W.

90

ANNEX 13Table 2

BANGLADESH

MUHURI IRRIGATION PROJECT1/,2/

Annual Crop Production Costs (Economic)

Price Quantity Used Production Cost (Tk M)Item (Tk/Ton) K W Increment W Increment

Fertilizers (Tons)

Urea 2,950 3,390 8,130 4,740 10.00 23.98 13.98TSP 3,480 1,620 3,960 2,340 5.64 13.78 8.14MP 1,960 840 1,940 1,100 1.65 3.80 2.15

Sub-total 5,850 14,030 8,180 17.29 41.56 24.27

Pesticides (Tons)

Diazinon 18,800 22 39 17 0.41 0.73 0.32Sumithion 61,600 22 39 17 1.36 2.40 1.04

Sub-total 44 78 34 1.77 3.13 1.363/

Farm Labor (M m-days) 2-6 8.11 10.73 2.62 19.60 27.95 8.35

Animal Labor (M a-days)4/ 7.5 1.9 2.1 0.2 14.25 15.75 1.50

Seed (Tons)

HYV Paddy 3,0005,/ 640 1,340 700 1.92 4.02 2.10Local Paddy 2,6006/ 1,840 510 (1,330) 4.78 1.33 3.45Pulses & Oilseeds 4,00o6/ 130 130 - 0.52 0.52 -Vegetables 2,ooo70/ 150 300 560 0.30 0.60 0.30

Sub-total 7.52 6.47 (1.05)

Miscellaneous 2.39 4.78 2.39

Total 62.82 99.64 36.82

say TkaLŽ

1/ W = Without Project, W = With Project, Increment = W-W2/ Excluding irrigation costs.3/ Price in Tk/m-day. See Annex 12 for detail.4/ Price in Tk/a-day.5/ Assuming 20% replacement.6/ Approximately same as crop prices.7/ 50% premium over crop price.

91

ANNEX 13Table 3

BANGLADESH

MUHURI IRRIGATION PROJECT

Estimated Annual O&M Cost of a 2-Cusec Low-Lift Pump

Item Cost in Tk

A. Direct O&M Costs

(a) Pay of operator annual lump sum 1,000(b) Spare parts $ Tk 400 per annum 1/ 300(c) Diesel, 600 gallons $ Tk 9.50 per gallon 2/ 5,700(d) Lub. oil 10 gallons $ Tk 50 per gallon 500

Sub-total (A) 7,500

B. Indirect O&M Costs

(a) Salaries & allowances of BADC staff 1,200(b) Maintenance of workshop buildings and

structures 3/ 50(c) Depreciation of workshop equipment 250

Sub-total (B) 1,500

Total O&M Cost (A,+ B) 9,000

1/ Mlajor spares (estimated to cost Tk 500 per annum) are procured togetherwith the pumps. Cost of these are included in the investment costs of

the pumps.

2/ Assuming 1,000 hours of operation per year.

3/ No provision is made for depreciation of workshop buildings and structuressince construction costs are included as project investments.

92

ANNEX 13Table 4

BANGLADESH

MUHURI IRRIGATION PROJECT

Cost and Benefit Streams

Civil Works Low-lift Pumps Crop ProductionConstruction Replacement O&M Investment & O&M Incremental Incremental

Year Cost & Repair Costs Replacement Costs Gross Crop Produc-Cost Costs Benefits tion Costs

1 74 0 0 0 0 0 02 88 0 0 0 0 0 03 101 0 0 0 0 0 04 97 0 0 0 0 0 05 45 0 0 21 1 22 66 (20) 0 4 0 4 88 227 0 0 4 0 5 118 308 0 C 4 0 6 132 349-11 0 C 4 0 6 147 3712 0 C 4 21 6 147 3713-15 0 0 4 0 6 147 3716 0 5 4 0 6 147 3717-18 0 0 4 0 6 147 3719 0 0 4 21 6 147 3720-25 0 0 4 0 6 147 3726 0 80 4 21 6 147 3727-32 0 0 4 0 6 147 3733 0 0 4 21 6 147 3734-35 0 0 4 0 6 147 3736 0 5 4 0 6 147 3737-39 0 0 4 0 6 147 3740 0 0 4 21 6 147 3741-45 0 0 4 0 6 147 37

Economic Rate of Return = 16%

0Ka bo j J1. 30, ~~~~~~~~~~~~~~912'00' 90230'

D ~~~~~~~~~~~~~~~~~~~~~~~BANGLADESH

n~~~~~~~~~~~~ MUHURI IRRIGATION PROJECT

PROJECT LOCATION

Daudkondi Chandina ~) i23'30'

Matiab 0~Brur - - A\ ~ Rvrsystems

/ *--- Railways

CUITT C - -- ~~~~~~~~~~~~~~~~District boundaries

oksho eon~~~001 International boundaries

H ~~~~~~~~~~~~~~® District towns

;? T? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 Other urban areas

0Ramgo ~ ~ a. ~ s MUHURI IR A C ~ I.~0 0 2

nba,6 0 ~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~10 20 0 40 23~00'

Kcurnaf/ i . Kilorsot...

okshmipur haumohani ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~Reervoir

Hu%^ No.khali ~ ~~~ ~ ~ ~ ~ ~ ~ EX[D I/\ 0D Companiganj 0

I k

Sitabanda PROJE TFUL NEPAL)I

Miles. . . . ... -" CHA~~~~~~~~~~~~~~~~~~~~I D

Ni 1N 0 IA~~~~~~~~~~~~~~~~~KAPTAI~~~~~~~~~~~~~~~~~~~~~~~~~-

w~~~~~~~~~~~~~~~~~~~~~~~~~

I T Chan m ona A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~T

S -. bURMA C,'~~~~~2.'?4

IBRD 11533

;2195 BAW:;:,:2i,-.pl:- rm ffi :;S::GLAi)E*I:::: g L E.'1 R'M D i ' W«W^::::!:i 22!55' | 22-50 2245 APRIL 1975; ::7ig; ; 77: 15 6 iaW; Drv$ ;m 22< 2'5'' n; W>|

91°35'-

0 J'-~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~ XEIGCNRLTUTR

E ~~~~~~~~~~)7 f : S . :;0; e 7 4 iWw8/>IJG

C ~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~PROPETOSD3KU LNEDARY

- Sp/~nj~ -B'~or n.' - PRPSDCNRO TUTR7 ¼;;C; Fri MAJOR!--= CHANNEL;E IMPROVEMENTfg)3 a i < B{' 19X%;g W*#IWIWtz0WSISjlS.!iti 5H VAtEITGEBKE

- -MINOR CHANNEL IMPROVEMEMTZ'ZNEW CHANNEL

'V ~~~~~~~~~~~ v~~~~~~~~~ 1~~~~~~~~3S~~~~~~~~~ 5' ~~~~~~~~~AREAS BELOW 13.jT.~~~~~~~~~~~ 'is~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3 VLN

s-'~~~~~~~~-~~~~--'- ~ ~~ ~~~~~~~~JI ______ ~~~~~~~~~~~~~~~~PROPOSED ROAD4

rTIE 1-T. {U2&0< 5 SBMETALLED ROAD

gt iN DI * hE ; '0

UNMEy i DNTALLED ROAD

-;: ; - - , . .RAILROAD 91230RL

- -INTERNATIONAL BOUNDARIESF. m THANA HEADQUARTEES

MILES

2305 2300 ~~~~~~~~~~2 2'55' 22V50 22~45'

;~~~~~~~~~~~2-0 23'05 23sua _/v -J ,t- > g 00 DCNRO TUTR