Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 290la-IN

INDIA

KARNATAKA SERICULTURE PROJECT

STAFF APPRAISAL REPORT

May 14, 1980

Agriculture D DivisionSouth Asia Projects Department

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise 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

US$1.00 = Rs 8.40 1/

WEIGHTS AND MEASURES

Metric System

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

ADS = Assistant Director of SericultureARDC Agricultural Refinance and Development CorporationCB Commercial BanksCSB = Central Silk BoardCSRTI = Central Sericultural Research and Training InstituteDCCB District Cooperative Central BankDOS Department of SericultureGOI Government of IndiaGOK = Government of KarnatakaIDBI Industrial Development Bank of IndiaISDP Intensive Silk Development ProjectKSIC Karnataka Silk Industries CorporationKSSDI Karnataka State Sericultural Development InstituteLDB Land Development BankPRC People's Republic of ChinaPWD Public Works DepartmentRBI = Reserve Bank of IndiaSA = Sericulture AssistantSD Sericulture DemonstratorTSC Technical Service Center

FISCAL YEAR

GOI and GOK - April 1 - March 31

ARDC, IDBI and Cooperative Banks - July 1 - June 30

Commercial Banks - January 1 - December 31

1/ Until September 24, 1975, the Rupee was officially valued at a fixedPound Sterling rate. Since then it has been fixed against a "basket"of currencies. As these currencies are floating, the US Dollar/Rupeeexchange rate is subject to change. Conversions in this report arebased on the projected exchange rate during the project period.

FOR OFFICIAL USE ONLY

GLOSSARY

Basin - Part of a silk reeling machine in which cocoons float in warmwater.

Bivoltine - Silkworm varieties from temperate climate countries whichbreed only twice a year and whose eggs exhibit dormancy.

Charka - Simple, hand driven silk reeling machine with one basin andfour to six ends.

Chawki - South Indian name for very young silkworms.Cocoon - Silk capsule formed by silkworm larva in which it spends

pupa stage.Cottage Basin - Mechanized silk reeling machine used in villages. Each unit

has six to ten basins each with six ends.Degumming - Removal of sericin from silk waste.

Denier - Grams silk per 9,000 meters yarn or filament, used as measureof silk yarn or cocoon filament thickness.

Ends - Part of silk reeling machine where several cocoon filamentsare combined into silk yarn.

Filature - Large-scale silk reeling factory.Grainage - Establishment for silkworm egg production.Hatchery - Communally operated village establishment where eggs

hatch into silkworms.Laying - Egg production from one female moth.Multivoltine - Tropical silkworm varieties which breed throughout the

year and whose eggs have no dormancy.Raw Silk - Silk yarn, after reeling.Renditta - Measure of silk recovery from cocoon; ratio of kg cocoons

needed to reel 1 kg raw silk.Sericin - Gummy substance which binds filament together on cocoons

and also binds silk waste fibers together.Silk Recovery - Reciprocal of renditta.Silk Waste - By-product of silk reeling and raw material for spun silk.Spun Silk - Silk yarn prepared from silk waste by degumming, combing

and spinning process, similar to that used for wool.Univoltine - Similar to bivoltine silkworm varieties, but breed only once

during the year.

Note: Paragraph 1.06 of this report contains a brief description ofthe silk production process.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

INDIA

KARNATAKA SERICULTURE PROJECT

Table of Contents

Page No.

I. THE SECTOR ........................................ 1

General ........................................... 1

Sericulture in India .............................. 1

The Silk Production Process ..... .................. 2

Mulberry Cultivation .............................. 2

Silkworms and Silkworm Rearing ..... ............... 3

Cocoon Marketing and Processing .... ............... 4

Government Programs ............................... 6

Mulberry Silk Research and Technology .... ......... 6

II. SILK PRODUCTION IN KARNATAKA ...................... 7Agriculture in Karnataka .......................... 7

Silk Production Area .............................. 8

Topography, Climate and Soils ..... ................ 8

Production ........................................ 9

Holding Size and Tenure ........................... 10

Reeling ........................................... 10

Department of Sericulture (DOS) .... ............... 10

Credit ............................................ 12

III. THE PROJECT .. 13

Project Genesis .. 13

Project Summary .. 13

Silk Production .. 15Silk Processing .. 17

Karnataka Silk Industries Corporation Facilities 17

Research and Technical Assistance . .18Land for Project Facilities . .20

Environmental Aspects . .20Project Phasing .. 20

This report is based on the findings of a preappraisal mission

consisting of Mr. Ducksoo Lee and Ms. J. Stockard (IDA) and Messrs. T. Omura,

T. Kuwano and Y. Arakawa (Consultants) which visited India in February 1979;

and of the appraisal mission consisting of Messrs. G. Stern, J.C. Goldbrenner

and Ms. J. Stockard (IDA) and Messrs. T. Omura, T. Miyazaki, and R.G. Deshpande

(consultants) which visited India during September/October 1979.

- ii -

Page No.

IV. COST ESTIMATES, FINANCING, PROCUREMENT ANDDISBURSEMENTS ..................................... 21Cost Estimates .................................... 21Financing ......................................... 22Procurement ....................................... 22Disbursement ...................................... 23

V. ORGANIZATION AND MANAGEMENT ....................... 24Department of Sericulture ......................... 24Department of Agriculture ......................... 25Karnataka Silk Industries Corporation (KSIC) ...... 25Research ...... - .. ................ 26Credit for KSIC through the InoustrialDevelopment Bank of India (IDBI) .... ............ 26

Credit for Silk Farmers and Silk Reelersthrough ARDC .................................... 27

ARDC and IDBI Interest Rates ...................... 28GOI Ministry of Industries ........................ 28Training .......................................... 29Project Coordination .............................. 29Reporting Requirements and Evaluation .... ......... 30Accounts and Audits ............................... 30

VI. PRODUCTION, MARKET AND PRICES ..................... 31Yields and Production ............................. 31World Production, Consumption and Trade .... ....... 31Exports and the Domestic Market in India .... ...... 32World Raw Silk Price Projection ................... 33Indian Domestic Prices ............................ 33

VII. FINANCIAL PROJECTIONS ............................. 34Karnataka Silk Industries Corporation .... ......... 34Departmental Filature ............................. 35Cottage Basins for Private Reelers .... ............ 35Farm Models ....................................... 35Cost Recovery ..................................... 37

VIII. BENEFITS AND ECONOMIC EVALUATION .................. 37Benefits .......................................... 37Economic Evaluation ............................... 38Project Beneficiaries ............................. 39Project Risks ..................................... 41

IX. RECOMMENDATIONS ................................... 41

- 111 -

Table of Contents (Cont'd)

Schedule A - Lending Terms and Conditions

Annex 1 - Text TablesTable 3.1 Implementation Schedule Major Items

Table 6.1 World Cocoon and Raw Silk ProductionTable 6.2 World Raw Silk ConsumptionTable 6.3 World Raw Silk Exports and ImportsTable 6.4 Indian Mulberry Silk Production and Exports 1960-1978Table 6.5 Japanese Imported Raw Silk and Silk Waste Prices 1971-1979

Table 6.6 Financial Price Projection for Raw Silk

Annex 2 - Project Cost TablesTable 1 Project Cost Summary with PhasingTable 2.1 Grainages: Estimated Costs and PhasingTable 2.2 Hatcheries: Estimated Costs and PhasingTable 2.3 Model Hatcheries: Estimated Costs and PhasingTable 2.4 A. Technical Service Centers: Estimated Costs and Phasing

B. Mobile Demonstration Units: Estimated Costs and PhasingTable 2.5 Training Schools: Estimated Costs and PhasingTable 2.6 Cocoon Markets: Estimated Costs and PhasingTable 2.7 Departmental Filature: Estimated Costs and PhasingTable 2.8 DOS Incremental Administrative CostTable 3.1 KSIC Filature: Estimated Costs and PhasingTable 3.2 KSIC Spun Silk Mill: Estimated Costs and PhasingTable 4 Research: Estimated Costs and PhasingTable 5 Technical Assistance and Study Tours: Estimated Costs and

Phasing

Annex 3 - Schedule of Estimated Disbursements

Annex 4 - Financial AnalysisTable 1 KSIC Cash Flow Projections and Financial Rate of Return

Table 2 KSIC Consolidated Income Statement ProjectionsTable 3 KSIC Balance SheetTable 4.1 KSIC New Filature Estimated Operating ProfitTable 4.2 KSIC Spun Silk Mill Estimated Operating ProfitTable 4.3 KSIC Weaving Plant Estimated Operating ProfitTable 4.4 KSIC Existing Filatures Estimated Operating ProfitTable 4.5 KSIC Twisting Mill Estimated Operating ProfitTable 5.1 KSIC Workshop: Estimated Operating CostsTable 5.2 KSIC Headquarters: Estimated Operating CostsTable 6 Departmental Filature: Estimated Net Operating Profit

and Financial Rate of ReturnTable 7 Cottage Basins: Projected Reeler Income and Financial Returns

i v -

Table of Contents (Cont'd)

Table 8.1 0.5 Ha Irrigated Farm Model: Projected Income and FinancialReturns

Table 8.2 1 Ha Irrigated Farm Model: Projected Income and FinancialReturns

Table 8.3 0.5 Ha New Irrigated Farm Model: Projected Income andFinancial Returns

Table 8.4 1 Ha Rainfed Farm Model: Projected Income and FinancialReturns

Table 9 Departmental Facilities: Staff Salaries and Phasing

Annex 5 - Economic AnalysisTable 1 Economic Rate of Return to the ProjectTable 2 Price Summary for Financial and Economic Analysis

Annex 6 - Industrial Development Bank of India

Annex 7 - Related Documents and Data Available in the Project Files

List of Charts

Chart No. WB 21296 - Proposed Organization Chart, Karnataka Department ofSericulture

Chart No. WB 21295 - Proposed Organization Chart, Karnataka Silk IndustriesCorporation

Chart No. WB 21297 - Project Organization Chart

Chart No. WB 21303 - Department of Sericulture Implementation Schedule ofMain Project Activities

Chart No. WB 21387 - Project Initiation, KSIC, Technical Assistance andOverseas Training Implementation Schedule of MainProject Activities

Chart No. WB 21629 - Research Implementation Schedule of Main ProjectActivities

List of Maps

IBRD 14378R - Karnataka Sericulture Project

INDIA

KARNATAKA SERICULTURE PROJECT

I. THE SECTOR

General

1.01 Agriculture is the dominant sector of the Indian economy. Itcontributes 45% of the GNP, provides about 70% of the country's employmentand is the basis for almost 60% of its export earnings. Most of the 160million ha cultivable land in India is devoted to foodgrains, pulses andoilseeds, but industrial crops such as cotton, jute, tobacco and seri-culture, plantation crops such as tea, coffee, rubber, coconuts andcashewnuts, and a large range of spices and horticulture crops are importantin some states and make a sizeable contribution to the Indian economy.

1.02 During the last decade, Government of India's (GOI) developmentplans have emphasized agriculture, particularly foodgrain production, byincreasing use of irrigation, fertilizers, plant protection and good seeds,backed by improved extension and research services. Although productionhas responded impressively, leading to the build up of large reserve grainstocks, considerable further efforts are needed to insure the long-term foodsupply. Consequently, GOI is again giving high priority to foodgrain pro-duction in its Draft Sixth Five-Year Plan. However, the plan also emphasizesalleviation of rural unemployment and poverty and therefore includes invest-ment for labor intensive subsectors such as sericulture.

Sericulture in India

1.03 India ranks fifth among silk producing countries after Japan, thePeople's Republic of China, Korea and the USSR and sericulture holds animportant place in the Indian economy. About 3.8 million people are engagedin plant cultivation, silkworm egg production and rearing or in the predomi-nantly small-scale reeling and weaving industry. In 1978 production reached3,700 tons raw silk used to manufacture fabrics with an estimated value ofbetween US$200 and US$250 million. Since silk is rooted in Indian socialtradition, the domestic market is strong and most of the production is usedlocally. However exports, mostly fabrics, have expanded, particularly overthe last five years and earned about US$45 million in 1978.

1.04 Four silk varieties 1/ are produced in India--mulberry, 2/ tasar, 3/eri, 4/ and muga. 5/ Of these, mulberry silk, representing the bulk of inter-nationally traded silk, comprises about 85% of total Indian silk production.Introduced into India in ancient times, mulberry silk production received someemphasis during World War II for parachute production, but started to expandmarkedly only two decades ago and has received a boost during the last five

1/ Derived from different silk worm varieties feeding on leaves of:2/ mulberry bushes or trees,3/ a variety of trees chiefly oak, Terminalia and Sal,4/ castor or cassava, and5/ several tree species indigenous to Assam.

- 2 -

years, due to introduction of improved mulberry and silkworm varieties.Karnataka accounts for 74% of Indian mulberry silk. Therefore, large scaleexpansion there, which would be supported by the project, would have a majorimpact on Indian production.

1.05 Sericulture is highly labor intensive. One hectare of mulberryplantation creates 12-13 man-years of direct employment annually in mulberrycultivation, silkworm rearing, reeling, twisting, weaving and implementsfabrication. Development of sericulture therefore accords well with GOIpriorities for alleviating unemployment and rural poverty. Furthermore, thetime is propitious for expanding Indian sericulture since production is drop-ping in the countries of leading producers, notably Japan and Korea, due tohigh labor requirements and costs. India has other advantages over competitorproducers, notably an ample supply of suitable land, not available in Japan,for instance, and year-round production (up to seven silkworm rearings) com-pared to seasonal production (two to three rearings) in temperate countries.Consequently, GOI has included sericulture development programs in its DraftSixth Plan (1978/79-1982/83) to double production and exports. The projectwould contribute significantly to achieving these objectives.

The Silk Production Process

1.06 Sericulture, which in this report refers to mulberry silk production,consists of three activities: mulberry leaf production as silkworm feed(paras 1.07-1.08), silkworm rearing (paras 1.09-1.13) and silk reeling (paras1.15-1.17). Sericulturists cultivate mulberry plants and annually rearseveral crops of silkworms, producing cocoons which are sold to reelers. Foreach rearing, the sericulturist purchases eggs from a grainage, where, undercontrolled conditions, disease-free eggs are produced from selected silkwormvarieties. After hatching, fresh leaves are harvested several times dailyand brought to the rearing house to provide a continuous feed for the silk-worms for 26-28 days. Subsequently, in about a 48-hour period, the silkwormextrudes a continuous filament which it winds around itself, spinning a pro-tective shell, the cocoon. Inside the cocoon, over a ten day period, thesilkworm undergoes metamorphosis into a pupa and then into a moth. Undernatural conditions or for breeding and egg production purposes, the mothemerges from the cocoon and lays eggs, beginning the cycle anew. The seri-culturist, however, must sell cocoons before moth emergence so that the con-tinous silk filament can be removed from the cocoon by reeling. The reelingprocess exists at several levels of technology depending to a large extenton cocoon quality, but all reelers must stifle the pupae to prevent mothemergence by steam or hot air drying of the cocoons. Raw silk is generallythe term used to describe the filament after it has been reeled out of thecocoon and combined with several filaments to produce a thread of specifiedthickness, silk yarn. The yarn is then "thrown" or twisted to impart tensilestrength suitable for weaving purposes. These processes are described in moredetail below.

Mulberry Cultivation

1.07 Mulberry is a hardy and drought resistant tree. In Karnataka it iscultivated as a shrub in closely spaced lines and is allowed to grow two orthree meters high. The tree tolerates most soil conditions other than impeded

- 3 -

drainage and because of a range of varieties grows well from sea level to over1,500 m altitude. Establishment is by cuttings and the first crop of leavesis harvested five to six months after planting. Under rainfed conditions,harvesting is seasonal and tails off during the dry time between November andJune, whereas under irrigation five harvests at roughly 10 weekly intervalsare customary. The crop responds well to inputs and good cultivation practicesas evidenced by a 3,000 kg/ha average yield under rainfed (about 700 mm/annum)conditions, compared to commonly obtained yields of 30,000 kg/ha with a fullpackage of practices under irrigation. Such package includes an improved varie-ty (M5), regular weeding, heavy manuring (100 kg N,50 kg P and 50 kg K perhectare annually for rainfed crops and up to 300 kg N, 120 kg P and 120 kg Kper hectare annually for irrigated mulberry). Correct harvesting and pruningmethods play an important role in determining plantation yield and life.Mulberry sticks for fuel or planting material and parts of leaves not eatenby silkworms and used for cattle fodder, are valuable by-products.

1.08 Pests and diseases cause few problems. While leaf spot diseasesand powdery mildew are fairly common, they have caused little economic damageto date. Control measures are known, but their use is rarely called for. Awell tended mulberry garden comes into full production in the second yearafter planting and remains productive for 10-15 years.

Silkworms and Silkworm Rearing

1.09 Silkworm varieties have adapted themselves to the climate of theirenvironment. Tropical silkworms, including traditional Indian varieties, aremultivoltine and produce several generations during the year. Their eggs haveno dormancy. By contrast, temperate area silkworms from Europe or Japan, areuni or bivoltine having only one or two generations per year. Their eggsremain dormant for some months to allow over wintering. There are artifi-cial means of terminating dormancy so that silkworms of these varieties canalso be reared throughout the year. Multivoltine varieties have low produc-tivity compared to bivoltines and the successful adaptation of the latter totropical conditions has laid foundations for a major production boost forIndian sericulture.

1.10 The life cycle of mulberry silkworms in India lasts about 40-45 daysand comprises egg hatching, 26-28 days feeding on mulberry leaves, duringwhich worms undergo four moults 1/, about 2 days cocoon formation, 10-12 dayspupating, followed by moth emergence, mating and egg laying. Each moth laysabout 400 eggs. During the feeding period larvae from 100 layings consumeabout 700-900 kg mulberry leaves--over 80% during the last week--resulting inmature silkworms with about 10,000 times their birthweight. Mature silkwormsstop feeding and are transferred to cocooning frames, where they spin cocoons.

1.11 Cocoons consist of floss (a series of silk strands) with whichsilkworms attach themselves to the cocooning frame, pupa and a smooth shellconsisting of silk filament. Floss and filament are formed by extrusion of aliquid By silkworms that solidifies on contact with air. Length, thickness andweight of filament vary with rearing method and silkworm variety. For instance,

1/ A period during which the silkworm stops feeding and sheds its outerskin.

-4-

in traditional multivoltine varieties filament length averages 400 m, while in

modern bivoltine hybrids average lengths of 1,500 m are common. The uniqueness

of mulberry silk is that each cocoon has only one filament which is industrially

processed by reeling (para 1.15) rather than spinning employed for making yarnfrom other natural fibers.

1.12 Silkworm rearing requires skill, constant attention and is beset bymany risks. Ideally rearing should take place in specially designed rearing

houses which enable growers to control temperature and humidity and applyhygiene measures. In practice, rearing takes place mostly in farmers' houses.

Equipment used includes rearing trays, stands for the trays and cocooning

frames, all made locally by village artisans. Application of hygiene measures

are crucially important to prevent a complex of serious diseases that candestroy a whole rearing in a matter of hours and can be carried over to subse-quent rearings. The most important diseases are pebrine, flacherie, grasserieand muscardine. Pebrine, caused by a protozoan parasite, can be prevented by

ensuring disease-free silkworm egg production in grainages. The other three

diseases, caused by viral, bacterial and fungal pathogens can be prevented bydisinfection of rearing houses and equipment between silkworm rearings, main-

tenance of optimum temperatures and humidities, correct feeding practices,constant vigilance to detect diseases and immediate application of appropriate

controls.

1.13 Other important measures that determine silk yield include dailycleaning of trays, 1/ supply of sufficient fresh and good quality mulberryleaves, and provisiol of adequate, ventilated space at proper temperaturesfor the silkworms. i-or instance, the space required for one hundred layingsincreases from about 0.4 m2 after hatching to 35 m2 at maturity. Over-

crowding of worms to economize on trays is a common fault that causesexcessive competition for food resulting in low silk yields. Adequatesupply of disease-free eggs and services giving intensive farmer trainingand frequent advisory visits to each grower are prerequisites for a suc-cessful smallholder based silk industry.

Cocoon Marketing and Processing

1.14 Shortly after cocoon formation, farmers sell cocoons to reelers.Formerly reelers purchased cocoons from farmers either directly or through

agents, but in recent years most sales take place at state regulated cocoonmarkets, particularly in Karnataka where 85% of the crop passes through suchmarkets (para 2.16). There cocoons are auctioned by staff of the GOK Depart-ment of Sericulture (DOS) who also supervise weighing and payment to farmers.The large proportion of growers using these markets testifies to their effec-tiveness in ensuring fair trade practices.

1.15 Before reeling takes place the pupa inside the cocoon is stifledto prevent moth emergence and consequent damage to the filament. At present,stifling in India is done by steam, but in modern processing hot air is usedwhich results in improved cocoon storage quality and higher silk recovery.

Reeling consists of boiling cocoons to soften sericin, which binds loops of

1/ Silkworm droppings are used as manure.

-5-

filament together on the cocoon, unwinding filaments from cocoons, combining

several to form a thread of desired thickness and then winding the yarn (orraw silk, as yarn is known at this stage) onto reels.

1.16 Three types of reeling units are common in India:

- the charka - a hand powered device with one basin 1/ and fourto six ends. 2/ Several of these are combined in a typicalcharka enterprise;

- cottage basin - a mechanical reeling machine with six toten basins of six ends. As with the charka, a typicalcottage basin enterprise has several machines;

- filatures - mostly state owned consisting of equipment

similar in design to the cottage basin, but combined intolarge units.

1.17 Cocoon quality and reeling efficiency determine silk yield (per kg

cocoon) and silk quality. India's performance on both counts is low. Forinstance, in Japan 5-6 kg cocoons yield 1 kg silk while in India 12-16 kg areneeded. Quality of charka silk is lowest, but finds ready sale to handloomweavers, but even silk from filatures does not meet international marketquality standards. Reasons for poor results are inherently low yield andquality of local silkworm varieties and obsolete reeling equipment. Lackof modern equipment is a contraint to the spread of bivoltine silkworm varie-ties in Karnataka. With existing reeling machines the higher quality of

bivoltine cocoons is not translated into improved yarn quality. Consequentlysuch cocoons fetch only a small premium in the market at present that would

increase if efficient processing were possible. Purchase of modern reelingequipment, would therefore be necessary to support the spread of bivoltinesilkworm varieties, and would be financed by the project (para 3.14).

1.18 Silk waste is the most important by-product of reeling and comprisesdamaged cocoons, cocoon floss, other short lengths of filament and the innerportion of cocoons which cannot be reeled. Waste is processed in "spun silkmills" by a process similar to spinning wool. The end products are spun silkand the coarser noil, both much in demand for carpet weaving. The dead pupaeconstitute a second by-product of lesser value which is used for animal feed.

1.19 Raw silk is sold to silk merchants who in turn sell it to weavers.Weaving is mostly done by handloom or small scale powerloom enterprises andabout 150,000 handlooms are engaged in production of silk fabrics in India -predominantly sari materials. Silk waste is purchased by merchants partlyfor resale to the three publicly owned mills in India and partly for export.

1/ In all types of reeling equipment cocoons float in one or more "basins"of warm water. Except in automatic equipment, one operator handles abasin.

2/ Part of a reeling machine at which cocoon filaments are combined into

yarn.

-6-

Government Programs

1.20 Silk production is a state responsibility handled by stateindustries ministries. Most of the important silk production states have asericulture department. Central Government involvement was formalized in1949 with the establishment of the Central Silk Board (CSB), headquarteredin Bombay, operating under the GOI Ministry of Industries. The Board advisesGOI on policy and development programs, and is responsible for silk imports,export quality control, and assists some states with production programs,particularly high quality egg supply. In addition, the Board is responsiblefor silk research, and to some extent training of advisory staff, and operatesfour central stations, seven regional stations and about twenty researchextension centers in fourteen different states.

1.21 The establishment of the Board led to increasing attention by GOIto sericulture in successive development plans. Plan financial provisionincreased from Rs 4.5 million (US$550,000) in the First Plan (1951/52-1955/56)to Rs 255 million (US$30 million) in the Fifth Plan (1974/75-1977/78) andproposals in the Draft Sixth Plan (1978/79-1982/83) are for provision ofRs 1.6 billion (US$190 million) to develop sericulture. The programs havebeen comprehensive and have dealt with all aspects of the industry includingdevelopment of marketing and reeling. The sound framework established bythese programs has laid the foundations for expansion of sericulture to besupported by the project.

Mulberry Silk Research and Technology

1.22 Modern integrated sericulture research dates from 1961/62, when CSBbecame responsible for the subject. The complex of CSB stations has been in-dicated in para 1.20, but the main effort went into development of the CentralSericultural Research and Training Institute (CSRTI) at Mysore, Karnataka,which now has a team of about 40 scientists and 45 technicians working onmulberry and silkworm improvement, a modest reeling and fiber technologyprogram, as well as offering post graduate training for field officers.Silkworm breeding and genetics, with 10 scientists and 20 technicians, isthe strongest section of the Institute. The Institute also supervises eightsubstations. One at high altitude maintains silkworm breeders' stock. Theothers, called research/extension centers, perform the triple function ofapplied field research, advising extension staff and farmers and feeding backfarmers' problems into the research pipeline.

1.23 Results have been impressive. In the field of mulberry improvementa high yielding and more nutritious variety has been evolved and tested,together with a package of cultivation practices (propagation, spacing, fer-tilizing, harvesting), (para 1.07), which has found ready acceptance by farmers.Other improved mulberry varieties are being tested. Silkworm improvement hasalso been successful. Local varieties have been improved and used for hybridsgiving increased filament length and yields. However, the most valuable break-through has been adaptation of bivoltine varieties to the tropical environmentand their use for hybridizing with local varieties and more recently forbivoltine crosses with high yield and quality potential. Yield and qualityimprovements of hybrids are illustrated in the table below which shows resultsof CSRTI tests.

-7-

SilkCocoons Content Filamentper 100 of Length per FilamentLayings Cocoons Cocoon Thicknesskg % Meters Denier /a

Pure Mysore races 15.00 12-14 300-400 1.8 to 2.0Mysore hybrids 20.40 13-15 400-500 2.0 to 2.2Bivoltine/multivoltinehybrids 31.41 15-17 600-900 2.2 to 2.6

Bivoltine hybrids 35.15 20-22 1,000-1,500 2.6 to 3.0

/a Grams silk per 9,000 meters filament.

Source: GOK.

1.24 Rearing of bivoltines was initially beset by many problems, but

successful intensive research provided solutions and led to introduction ofthe Japanese method of communal hatcheries locally known as Chawki centers.There, under departmental supervision, silkworm eggs are hatched, and larvaereared during the initial 10 day period, which is a particularly delicate partof the life cycle, before distribution to farmers. Communal hatcheries haveincreased cocoon yields by an estimated 20% over farm-hatched silkworms, andCSRTI work was largely responsible for adapting this Japanese innovation toKarnataka conditions.

1.25 CSRTI publishes results in the form of advisory bulletins used byfarmers and advisory staff. As a result of close collaboration between CSRTIand the Government of Karnataka Department of Sericulture (para 2.12), use ofunimproved local varieties is being phased out rapidly.

1.26 Despite these impressive successes there is still a considerablegap between silk yields in India (40-50 kg/ha irrigated mulberry) and Japan(over 120 kg/ha rainfed mulberry). To ensure long-term growth of the industryresearch activities need considerable strengthening and researchers wouldbenefit from more contact with foreign researchers. The project would, there-fore, help to intensify research and provide foreign technical assistanceand training.

II. Silk Production in Karnataka

Agriculture in Karnataka

2.01 The state of Karnataka is situated in Southwest India, has an areaof about 192,000 km2 (19.2 million ha) and a population of about 30 million.Of the total land area, a little over 10 million ha are cultivated, of whichabout 1.35 million ha are irrigated, partly by canal or tanks and partly byindividually owned wells. Foodgrains, including rice, sorghum, finger millet,pearl millet and wheat, occupy roughly half the cultivated area and the statehas been substantially self-sufficient in foodgrains for some years. Withits climatic range from humid tropical coastal to more temperate uplandareas, the state has a large range of cash crops. Cotton and groundnuts are

-8-

each grown on about 1 million ha and about 130,000 ha sugarcane are spreadthroughout the state. Coconuts and cashewnuts are important in coastalareas, while the highlands account for three-fourths of India's coffee produc-tion. The area near Bangalore, the state capital, has a thriving horticultureindustry, famous for grape production. It is also this area and neighboringdistricts that produce 62% of India's silk. Sericulture, introduced 200 yearsago by Tippoo Sultan, then ruler of Mysore, is practiced by 200,000 farmersand provides employment for about 2 million people in the state.

Silk Production Area

2.02 The mulberry area is estimated at 110,000 ha including about30,000 ha irrigated, and 4,000 ha improved M5 variety, and remains largelyconfined to the five districts 1/ comprising the former Kingdom of Mysore(see map). However, over the last four to five years large scale cooperativetrials with farmers have proved the feasibility of profitable sericulture inmany other parts of the state and about 1,000 ha have been planted in "newareas". Change from local varieties in traditional areas to M5 is taking placerapidly, now that initial bottlenecks of planting material bulking have beenovercome. In new areas, the initial planting program has created strong demandfor mulberry area expansion that DOS, with its present meager staff and equip-ment resources cannot satisfy. The project would intensify production intraditional areas and help to increase production in nine "new" districts 2/comprising the central and northern portion of Karnataka (see map).

Topography, Climate .nd Soils

2.03 The sericulture areas are on an undulating plateau at an averagealtitude of 600-800 m in the west and south, and of 400-600 m in the east andnorth. The higher areas enjoy a temperate climate. Even summer (March-May)temperatures do not exceed 28-3OoC whereas in the lower areas summer temper-atures frequently reach 4OoC. In the higher areas ambient temperatures aresuitable for year round silkworm rearing and, fortunately, cooler nighttemperatures of about 24oC, allow regulation of rearing houses temperaturesfor successful silkworm rearing throughout the year even in the lower areas.Temperatures are suitable for mulberry in all areas.

2.04 Rainfall, mainly between May and November, ranges from 700-900 mmaverage annual precipitation in the higher areas to 500-600 mm in lowerareas, but is erratic. Annual totals frequently deviate by 50% from theaverage and monthly totals also vary sharply in different years. Mulberry,being fairly hardy, can withstand low rainfall, but irrigation doubles yieldeven in higher rainfall areas of Karnataka and is essential for economicsilkworm production in drier localities. Fortunately, there are sufficientirrigation facilities--canal or privately owned wells--to cater for the

1/ Kolar, Bangalore, Tumkur, Mysore and Mandya.

2/ Chitradurga, Shimoga, Hassan, Bijapur, Bidar, Raichur, Bellary, Dharwarand Gulbarga. In addition, there are parts of the five traditionaldistricts where sericulture has not been practiced to date, which areincluded in "New Areas".

- 9 -

comparatively small area of mulberry in dry areas. High humidity, associatedwith high rainfall years, tends to increase silkworm disease problems, afactor which sometimes offsets benefits from higher mulberry leaf production.

2.05 Red soils grading from sandy soils to clay loams, very suitable formulberry, cover the southern half of the project area, while black soils vary-ing from medium to heavy cracking clays predominate in the northern half.Mulberry grows well on the black soils, but care is needed to avoid poorlydrained or alkaline (ph above 8.5) conditions. Both red and black soils lacknutrients, particularly nitrogen and phosphorus, and mulberry gives goodresponse to fertilizers containing those elements.

Production

2.06 Mulberry area, cocoon and silk production have been expanding stead-ily. The table below indicates production and yield trends, but DOS staff ad-vised that until recently, when most cocoon production started to flow throughregulated markets, production data was subject to considerable errors.

Silk Production in Karnataka

Mulberry Production Yield /aArea (Tons) (Kg/ha) Silk Content /a

Year (ha) Cocoons Silk Cocoons Silk of Cocoons %

1951/52 43,000 11,800 727 274 17 6.21961/62 72,000 15,100 863 209 12 5.71971/72 93,000 29,100 1,775 313 19 6.11977/78 106,000 31,600 2,300 298 22 7.3

/a Mission calculation.

Source: GOK.

2.07 The large area of rainfed mulberry, 80,000 ha, mostly in MysoreDistrict, reportedly produced only 16,000 tons cocoons (about 190 kg/ha)during 1977/78, compared to 15,600 tons from 30,000 ha irrigated mulberry(520 kg/ha). While overall cocoon yields are low, those from irrigatedmulberry come close to Japanese yields of 600 kg/ha but, as already indicated,there is a wide gap in silk yields between Karnataka and Japan. The differenceis due to climate, varieties and rearing and reeling technology and presents achallenge to local research and extension services.

2.08 Improved technology in all branches of silk production has onlybecome available in the field in the last three to four years. Improved silkcontent of cocoons is the first visible impact. Cocoon yields of 800-1,000kg/ha in some intensively staffed village schemes and in silkworm seed pro-duction areas have proved the value of the new technology. Large-scaleadoption requires intensification of research and advisory services, increasedand improved seed production and introduction of improved reeling technology,all of which would form part of the project.

- 10 -

Holding Size and Tenure

2.09 According to the 1976/77 Agricultural Census, there are 3.8 million

holdings in Karnataka and average holding size is 3 ha. Distribution of

holdings by size class is illustrated in the table below:

Holdings Percentage Share of Average

Size Class Number Area Total Holding

ha 000 000 ha Number Area Size ha

Below 1 1,274 638 33.4 5.6 0.50

1 - 2 888 1,319 23.3 11.6 1.49

2 - 4 818 2,287 21.5 20.1 2.80

4 - 10 631 3,858 16.6 33.8 6.11

Above 10 199 3,254 5.2 28.9 16.30

Total 3,810 11,356 100.0 100.0 2.98

Source: GOK.

Average farm size in the silk areas ranges from 1.2 ha in Mandya to 5.3 ha in

Bijapur and in general is below 2 ha in the higher rainfall areas and above 3

ha in drier districts.

2.10 Tenancies have been abolished by land reform legislation and accord-

ing to the 1975/76 Agricultural Census all farmers are owner-operators. Seri-

culture is practiced in 6,300 villages by almost 90% of the farmers. Conse-

quently, the state distribution of holding size also applies to sericulturists.

The mulberry area per farmer (which reflects size of rearing operation) rarely

exceeds 2 ha, and about 80% of sericulturists with about 60% of the total area

grow less than 1 ha mulberries. Usually a sericulturist with irrigation

facilities has some irrigated paddy as well as a piece of dry farming land

where he grows mostly sorghum and finger millet. However, in non-irrigated

areas about 10% of the smaller farmers in "silk villages" devote all their

land to mulberry. The reason for the universally small size of operations in

Karnataka is the high labor requirement during the final stages of the silk-

worm cycle and the need for careful timing of operations, which make large-

scale sericulture operations difficult to manage even for more wealthy farmers.

Reeling

2.11 Reeling is predominantly a cottage industry. About 10,000 charkas

and 7,500 cottage basins account for 90% of all reeling, with the balance

processed mostly in government filatures. Up to about 1957, charkas dominated

the reeling industry, but in that year, to improve quality, GOK introduced

a 50% capital cost subsidy for establishing cottage basins. As a result, the

number of cottage basins increased rapidly and now their output exceeds that

of the charkas, which has remained constant.

Department of Sericulture (DOS)

2.12 Established in 1914, the Department, with a professional and tech-

nical staff of about 2,000, plays a key role in all aspects of raw silk pro-

duction in Karnataka and provides production, advisory and cocoon marketing

services. In addition, the Department fulfills regulatory functions, partic-

ularly in the fields of silkworm egg production and cocoon marketing. The

- 11 -

Department also used to operate an industrial wing comprised of seven fila-tures, a spun silk factory and a silk weaving factory, that has been trans-formed into a newly established GOK Corporation, the Karnataka Silk IndustriesCorporation (KSIC), which would operate commercially (para 5.05-5.08).

2.13 Silk Farms and Grainages. DOS operates 74 silk farms (average size10 ha) and 80 grainages that provide farmers with disease-free silkworm eggs.Silk farms multiply breeder stock through two succeeding generations, to finalmultiplication, which is done by closely supervised farmers in two special seedproduction areas, one for local "Mysore" races and one for bivoltines. Silkfarms also serve as bulking centers for improved mulberry varieties and asdemonstrations for improved sericulture practices. In grainages, cocoons arecollected from silk farms and from accredited growers, and moth emergence,mating and egglaying take place under carefully controlled, aseptic conditions.DOS sells eggs to farmers at Rs 35 per 100 layings, which covers grainageoperating costs.

2.14 In 1979, about half the production of 160 million layings came fromdepartmental grainages and the rest from 833 licensed private grainages, whoseproduct is of variable quality despite inspection by DOS staff. Because ofdanger of spreading disease from infected eggs, and in response to strongdemand from growers for better quality eggs, departmental egg productiondoubled during 1978/79 and is expanding rapidly. However, even departmentalgrainages lack modern facilities and are too numerous to allow highest qualitysupervision. A program to consolidate and modernize grainages and expand theircapacity would be supported by the project (para 3.08).

2.15 Technical Services. To date advisory services have not been inten-sive with many sericulturists receiving only occasional advisory visits. Thistype of service has not been sufficient to raise yields markedly and has onlybeen adequate to prevent disaster from silkworm diseases because of the rela-tively hardy nature of traditional varieties. Introduction of high-yieldingbut more disease susceptible new varieties requires intensive advisory services.A successful model has been developed in several "Intensive Sericulture Devel-opment Projects" (ISDP) as well as in the bivoltine seed production areas.The model is based on a technical service center (TSC) staffed by a sericul-ture assistant (SA) who supervises 8 sericulture demonstrators (SD). About12-13 communal hatcheries are attached to each center. Each demonstrator isexpected to visit each of about 100 farmers once every four days while rearingis in progress and supervise one or two hatcheries. Each SA during the courseof supervising his SD also visits farmers frequently. Such intensive visitsare necessary for close monitoring of disease status of rearings and have alsoserved to improve sericulture practices. Even experienced growers agree thatsuch services are necessary particularly with modern varieties. About 60 TSCand 640 hatcheries have been established but require additional equipment andstaff. The project would help to improve existing TSC and to establish similarintensive technical services based on TSC throughout Karnataka silk areas.

2.16 Cocoon Markets. GOK under 1959 legislation introduced regulatedcocoon marketing. To meet the requirement of legislation, the Departmentoperates 22 cocoon markets. Designed for 10,000 tons the markets alreadyhandle about 30,000 tons cocoons and existing markets are congested and longwaiting periods for farmers and insufficient shelter from dust or rain forcocoons are the result. Despite these inconveniences, the vast majority of

- 12 -

growers prefers this type of regulated cocoon marketing to former direct

trading with buyers and there is urgent need to expand and improve market

facilities. The project would support GOK plans for that purpose (para 3.09).

A fee of 1% of cocoon value is paid by reelers, which covers operating costs

and DOS plans to double the fee to recover a portion of capital costs as well.

Credit

2.17 Both cooperative and commercial banking is well developed in all

parts of Karnataka. The three-tier short/medium-term cooperative has an apex

bank, about 200 District Central Bank (DCCB) offices and 5,000 Primary Agricul-

tural Society offices in project districts; the two-tier medium/long-term Land

Development Bank (LDB) has 140 offices; and commercial banks (CB) have about

1,600 branches of which 1,000 are semiurban or rural. There are also several

Regional Rural Banks which cater specifically for the poorer section of the

rural community. Most banks, particularly LDB and CB, have had considerable

experience of Bank Group supported lending, notably through the Karnataka

Agricultural Credit Project (Credit 278-IN) and two Agricultural Refinance and

Development Corporation (ARDC) Credit Projects (Credits 540-IN and 715-IN),

all fully disbursed. Most of them are already engaged in sericulture lending

which they are keen to expand.

2.18 Because of currently high overdues that afflict all banks in

Karnataka and Reserve Bank of India (RBI) rules regulating cooperative bank-

ing, short-term credit cooperatives would be practically precluded from and

LDB severely limited in project participation. RBI/ARDC plans for improving

cooperative banks are under GOK consideration. In the meantime, coverage of

the project area by suitably staffed and qualified CB would be satisfactory.

2.19 A major credit scheme for sericulture development in Karnataka was

started in 1974, but has been disappointing to date. The scheme comprised

formation of combined sericulture and general service cooperatives that were

to have provided all inputs and services needed by sericulturists, including

cocoon marketing. The cooperatives were to have been supported by technical

staff on deputation from DOS and by CB and eligible DCCB for provision of long

and short term credit partly refinanced by ARDC. Formation of cooperatives

took several years, provision of technical services divorced from DOS proved

impracticable and spread of regulated marketing has reduced the advantages of

cooperative marketing. In addition, farmers complain that loan application

procedures are so tedious as to discourage many potential borrowers from using

credit. Consequently, there has been little demand for credit through these

cooperatives. For instance on June 30, 1979 only Rs 1.2 million of a Rs 30

million target had been disbursed by ARDC in 31 long term credit schemes for

cooperatives. At the same time both cooperative and commercial banks had,

over three years, disbursed well over Rs 50 million for sericulture to indivi-

dual borrowers, which proves that there is a demand for credit by silk farmers.

Consequently, for the project proposed in this report, lending would be to

individuals rather than cooperatives in new silk areas. In addition, ARDC

would explore ways of improving its ongoing schemes, providing credit in

traditional areas to individual borrowers who are not members of cooperatives

and, together with GOK, consider measures for easing burdensome loan applica-

tion procedures (paras 5.12-5.15).

- 13 -

III. THE PROJECT

Project Genesis

3.01 Because of employment generation and potential for improving ruralincome, both GOI and GOK have for some time been planning measures to expandsilk production in Karnataka. Both Governments felt that Bank Group assist-ance would be helpful for improving the silk industry. Preliminary discus-sions between GOI and the Bank took place in early 1977. As a result projectpreparation was undertaken by GOK--mainly by DOS--in collaboration with GOI'sMinistry of Agriculture Project Preparation and Monitoring Cell with assistanceby the Bank's New Delhi Office staff. The project is based on the resultingpreparation report dated January 1979 and on findings of the February 1979preappraisal and September/October 1979 appraisal missions.

Project Summary

3.02 The project would be the first IDA assisted scheme in support ofIndian sericulture and would cover about three quarters of Karnataka's silkproducing area. It would have three major objectives: firstly, to increaseraw silk production in Karnataka by about 1,600 tons including 1,000 tons highquality bivoltine silk per year, by providing better silkworm eggs and inten-sive advisory services to sericulturists already cultivating about 24,000 hairrigated and 60,000 ha rainfed mulberry; and to those who are projected toplant about 14,000 ha irrigated mulberry in new areas during the projectperiod; secondly, to introduce modern processing facilities and methods thatwould upgrade raw and spun silk to export grade quality; and thirdly, forlonger term improvement of the industry, to introduce the latest technologiesfrom leading silk producing countries and to expand local research. Toachieve these objectives the project would include components to expand DOStechnical, silkworm egg production and cocoon marketing services; GOK and GOIresearch facilities; and technical assistance, all of which would be financeddirectly through GOI and GOK. Additionally, there would be project credit foron-farm investment by sericulturists and for small-scale reelers which wouldbe channeled through ARDC and banks to borrowers; and for modernization ofGOK silk processing facilities which would be provided through the IndustrialDevelopment Bank of India (IDBI) to KSIC. The following is a list of projectcomponents:

(a) For Silk Production

(i) credit for farmers in new areas for planting 3,500 hamulberry, purchase of silkworm rearing equipment sufficientfor such mulberry area and construction of 1,400 silkwormrearing houses to support the 14,000 ha mulberry plantingprogram;

(ii) incremental staff, vehicles, equipment and operatingcosts for 150 TSC with 1,700 communal hatcheries, fourmobile training units, construction, equipment andoperating cost of 20 model hatcheries, and improvementof an existing sericulture training institute andestablishment of two new ones for expanding and strength-ening DOS technical services;

- 14 -

(iii) construction, equipment, staff and operating costs of 10

modern grainages to expand and improve silkworm egg suppliesfrom DOS; and

(iv) construction, equipment, staff and operating costs of 30

market units to expand 11 existing cocoon markets and toestablish 12 new ones.

(b) For Silk Processing

(i) establishment of a semiautomatic departmental small filaturein the new areas;

(ii) credit for reelers, for establishing 500 cottage basinunits; and

(iii) improvement of government silk processing factories by

replacing the existing seven outdated filatures with amodern one; and renovating, modernizing and expandingthe existing spun silk factory.

(c) For Research and Technical Assistance

(i) expanding facilities at the CSRTI main station andestablishing or improving of two regional stations and10 substations; supporting programs at three Karnataka

universities; and establishing a sericulture researchstation for the Karnataka State Sericultural Develop-ment Institute (KSSDI), which GOK is in the process ofsetting up;

(ii) technical assistance programs including 70 man-months

of consultants time and 380 man-months of overseastraining to support the production, research and pro-cessing components; and

(iii) monitoring and evaluation services.

3.03 Short-term effects of the project would be its impact on silk pro-duction and resultant considerable increase in rural incomes and employment.The longer-term impact on sericulture technology would be equally important.While mulberry production has reached high levels, there is enormous scope forimproving silkworm productivity and quality of local silk products. Project

assistance by way of strengthening research, introducing modern processing

technology and providing technical assistance and training, would leave India

well equipped to meet increasing demand for fine quality silk products due tofalling production abroad. The processing industry modernization programwould be one of special importance to the Indian silk industry. Introductionof technology for producing high quality yarn is vital in the first instanceto support spread of bivoltine silkworm varieties and to replace high qualityyarn imports, now necessary for weaving export quality fabrics. There is ahuge local market for handloom products, but export oriented production willbecome important in the longer term, to allow expansion of sericulture. Atthat time raw and spun silk will need to meet international quality standardsand competition. At present there is little sign of private sector investment

in modernizing the silk processing industry and GOK is therefore assuming the

- 15 -

role of innovator by introducing new technology that may stimulate privatesector investment in similar processing plants at a later date. Since the GOKfacilities would use only about 5% of available raw materials, there would beample scope for private sector development of modern silk processing factories.As a first step, however, GOK must introduce and demonstrate the new processingtechnology and its financial viability, both objectives that would be supportedby the project.

Silk Production

3.04 Increased silk production would entail intensification of sericul-ture in traditional areas and expanded production in the new area (para 2.02).Mulberry leaf production would be boosted by encouraging farmers to replacetraditional mulberry varieties with the improved variety M5 on 20,000 ha irri-gated land in traditional areas and planting the new variety on 14,000 hairrigated land in new areas. The M5 variety has become very popular and vir-tually total replacement of unimproved varieties in traditional irrigatedareas, which is proceeding at a rapid pace, may well be completed before theend of the project. In new areas demand for expansion of sericulture isstrong and at present DOS is hard pressed to provide adequate services quicklyenough to cater for the expanding mulberry area. Silk production would beimproved by the increase in mulberry leaf production, better leaf quality,better silkworm egg quality, spread of high yielding bivoltine silkworm varie-ties and, above all, intensification of advisory and other supporting servicesto foster adoption of proven practices for mulberry and silkworm production.While the main production increase would come from irrigated areas, the largerrainfed areas would also be improved. Components of the silk productionprogram, to be supported by the project, are described in more detail below.

3.05 Credit. Project credit would be provided only for new areas, be-cause traditional areas are already served by ARDC schemes which may have beendisappointing to date (para 2.19), but which ARDC is now endeavoring to improve.Besides, most silk farmers in traditional areas own well established silk pro-duction units, which enable them to meet development and working capital needsfrom earnings, without recourse to credit. In new areas, on the other hand,credit would be an important catalyst to expand silk production, by helpingto provide finance for farmers who are planting mulberry for the first time.The project credit scheme would serve a second important function by improvingthe credit delivery system for silk farmers in all areas. However, even in newareas demand for credit is hard to gauge. Therefore, to avoid the problem ofa large credit component in the project that may not be fully taken up, only amodest program has been included. It would support 3,500 ha (or 25%) of the14,000 ha mulberry projected to be planted in parts of the new area coveredby the project and, since demand for rearing houses has been small to dateeven in traditional areas, project credit would support construction of only1,400 (or 10%) of the 14,000 rearing houses that may ultimately be needed inthe new areas. The small size of the credit component would not be an imple-mentation constraint since possible credit demand in excess of project funds,which may well develop, could be met from IDA supported ARDC Credits. Loanswould be available to farmers for mulberry planting, purchase of silkwormrearing equipment, construction of rearing houses and recurrent cost for twosilkworm rearing cycles. The short-term finance would be consolidated withmedium/long-term elements for repayment purposes. Construction of rearing

- 16 -

houses would be according to DOS specifications and assurances were obtained

that such specifications, acceptable to ARDC and IDA, would be drawn up before

December 31, 1980.

3.06 Technical Services. Based on the successful ISDP model (para 2.15)

DOS technical services would be expanded by fully staffing and equipping the

existing 60 TSC and 640 hatcheries and by establishing 90 additional TSC and

1,060 hatcheries requiring an incremental staff of 150 SA and 1,200 SD. As

a result, DOS services in the project area would allow about 90% of all silk-

worm eggs there to be hatched and initially reared in communal hatcheries and

would be able to provide one SD per 60-100 growers. Project investments would

include hatcheries equipment, TSC and hatcheries incremental operating cost,

a vehicle, spraying equipment and microscopes for each TSC. To ensure staff

mobility necessary to maintain the farm visits schedule, the project would

finance 750 light motorcycles, for purchase by SA and SD through loans, which

would be provided by DOS. In the past DOS also provided advice for mulberry

production. From January 1980, this work has been done by extension staff of

the Department of Agriculture, which is being reorganized and strengthened

under the Composite Agricultural Extension Project (Credit 826-IN). This

arrangement would improve extension for mulberry production and would give

DOS staff more time to help farmers with silkworm rearing.

3.07 In support of the technical services, the project would improve and

expand an existing training institute and establish two new ones, each with

a capacity for 1,200 trainees a year, including staff and farmers. In addi-

tion,2the project wotId finance 20 model hatcheries, including the cost of a

110 m hatchery builcing, and equipment for each and its operating expenses.

These hatcheries would be strategically placed demonstrations, to encourage

growers to form groups to operate their own hatcheries. Finally, there would

be four demonstration vans with audio-visual equipment, which would travel

throughout the project area and support demonstrations by TSC staff.

3.08 Grainages. Private grainages were adequate to deal with relatively

hardy local varieties, but many of them are not capable of consistent produc-

tion of disease-free layings of more disease susceptible modern varieties.

Infected eggs are a threat to the industry, consequently GOK, partly reacting

to strong demand by farmers, is planning to offer farmers a greater egg supply

from its own grainages and would then be able to apply much stricter quality

control and licensing procedures to private grainages. All but the largest of

the present DOS grainages would be closed or converted into egg sale centers

and would be replaced by large modern grainages. The project would finance

ten of 5hese grainages. Each one would be a four-floor building with

3,200 m floor area, specifically designed and equipped for aseptic production

of 10 million disease-free layings per year. Seven grainages would have a

cold store each for egg storage. Such storage would allow year round produc-

tion and build-up of stocks for the peak demand period following the onset of

rains. To avoid egg spoilage in case of power outages, each grainage would

have stand by generators. Three grainages would have smaller cold store space

for preserving moths to give more flexibility for the breeding and egg laying

process. Direction of the grainage operation would be provided by senior

experts at DOS headquarters. In addition, project technical assistance and

overseas training programs (paras 3.20 and 3.21) are designed for introduction

of modern operating and quality control methods for the new facilities.

- 17 -

3.09 Cocoon Markets. To provide adequate facilities for ongoing cocoonproduction and for its expansion, the project would extend 11 of 22 existing

markets and establish 12 new ones. Eight existing and two new markets would

be Class I markets, that receive or are projected to receive more than 1 mil-

lion kg cocoons per month and the remaining 13 would be smaller, Class IImarkeis. All market expansion or new construction would be based on standard

900 m floor area units that would comprise a hall for waiting sellers; anauction area; offices and stores. Class I markets would have two or more units

each while Class II markets would each have one. Seventeen units would be

constructed at 10 Class I markets and 13 at 13 Class II markets, a total of30 units at 23 sites. Unit design is based on experience gained during thelast seven years and on advice from the FAO Markets Specialist in Delhi.

Silk Processing

3.10 The two main objectives of project processing investments are provi-sion of adequate reeling capacity in new areas and, by improving GOK facilities,introduction of modern technology to increase silk recovery from cocoons and

upgrade quality.

3.11 Cottage Basins. Most cocoons in the State would continue to be

reeled by cottage basins and the project would provide credit (channeledthrough ARDC and banks) for about 500 units in new areas. Project loans wouldfinance machinery, a shed and funds for purchasing a two-weeks cocoon supply.

As with loans to farmers, the working capital element would form part of the

term loan. Each unit would have about one ton raw silk per year capacity. Toattract reelers to new areas, GOK provides a subsidy equal to 40% of machinery

cost (about Rs 4,000), which has worked well in fostering cottage basin devel-opment elsewhere. This subsidy would be necessary to attract enough reelersto the new areas and GOK would continue to provide the subsidy.

3.12 Departmental Filature. In addition DOS would establish and operate

one modern semiautomatic filature in the new areas. The filature would test

the economics of operating modern reeling equipment in a small-scale enter-prise and would be a demonstration and training center for potential privateinvestors. Investments would include a 400 ends reeling unit, a rereelingmachine, hot air cocoon drier, boiler, factory building, staff quarters, a

truck and a van. The filature would process 400 kg cocoons per day and pro-duce about 11 tons silk yarn per year.

Karnataka Silk Industries Corporation Facilities

3.13 The Corporation would own and operate existing departmental fila-

tures, spun silk mill and weaving factory. Modernization of the filaturesand spun silk factory would form an important part of the project and is

described below.

3.14 Filatures. Because of obsolete equipment the existing filatures can-not achieve export quality yarn, would not be able to exploit the benefits of

high quality cocoons and are running at a loss. KSIC would modernize one of

the seven filatures and close the rest. The modernization program would meanreduction of the labor force for all proposed KSIC facilites from about 4,000

to 2,300 workers. Part of these 1,700 redundant positions wou'ld be dealt withby not replacing any workers that are retiring or otherwise leaving employment.

- 18 -

Many others would be offered employment in expanding DOS facilities that wouldrequire almost 6,000 workers. For those who cannot be placed, a compensationprogram has been planned. Production, presently averaging about 150 tons peryear, would be expanded slightly to about 160 tons of export grade raw silk.Investments would include three hot air driers, three cocoon boiling units,six semiautomatic reeling machines (each with 400 ends) and eight rereelingmachines. The existing buildings would be used to accommodate the new machinerywith some additions. The filature, together with the departmental filaturewould provide adequate reeling capacity to support bivoltine cocoon productionin the earlier project years. Later on GOK would decide whether to expandcapacity which may become necessary unless the private sector decides to investin modern filatures.

3.15 Spun Silk Mill. In view of the increasing and largely unsatisfieddemand for spun silk in India and in the world, and the increasing amount ofwaste silk available locally, the existing spun silk mill would be expandedfrom 45 tons spun silk production per year to 150 tons. The plant, establishedin 1936, and expanded and to some extent reconditioned since then, now requiresextensive repairs. A renovation program, based on a technical study byJapanese spun silk specialists would be carried out by the KSIC central work-shop (para 3.17), to be established at the factory site. Some of the existingmachines would be replaced and the renovation program would increase plantcapacity to 60 tons spun silk per year. The product would not be suitable forexport but would be easily absorbed by the local market. In addition, a new90 tons per year spun silk production unit would be constructed at the factory,that would be provided with the latest equipment and would produce exportquality spun silk. Both units would use modern waste silk degumming methodsthat would improve spun silk recovery from waste. No civil works would beneeded for the existing unit, but a factory building would be constructed forthe new unit.

3.16 At appraisal, GOK considered the alternative of scrapping the exist-ing plant in favor of a new 150 tons capacity factory. GOK decided againstthe latter option because of higher capital cost, lower employment requirement,somewhat lesser flexibility of end product suitable for local requirements,and the fact that financial returns would be almost identical for both options.GOK considered that these factors outweighed advantages of completely newplant such as easier management, raw material economies, and higher qualityend product. Since studies confirm that renovation is sound, the moderniza-tion program chosen by GOK would be satisfactory.

3.17 Central Workshop. The existing departmental central workshop inMysore would also be taken over by KSIC and needs to be expanded and reequippedfor reconditioning the spun silk mill and for maintenance of the other KSICprocessing factories. New equipment would include foundry equipment, lathes,grinders, drills, presses, sawing machines and small tools. The workshopwould be located at the spun silk mill which is a satisfactory location forserving other KSIC facilities.

Research and Technical Assistance

3.18 Research. The CSRTI had prepared a modest program for intensify-ing research but the preappraisal team, pointing to the success of intensiveresearch in Japan and Korea, advised increase of program size. As a result,

- 19 -

GOI and GOK staff together drew up a plan for expansion of research to befinanced by the project. CSRTI would remain the lead institute, but wouldcollaborate with three local universities and with the Karnataka State Seri-cultural Development Institute (KSSDI) which GOK is establishing. The planhas been reviewed and approved by GOI and GOK expert committees and is sat-isfactory.

3.19 Funds are required for laboratory buildings, staff housing, equip-ment, staff and operating costs by CSRTI, to strengthen its central station,establish two regional stations and five substations and to improve fiveexisting substations; by University of Agricultural Sciences, Bangalore forstrengthening its ongoing program focussed on silkworm disease control, start-ing new programs for mulberry and silkworm pest and disease incidence surveys,and for expanding its sericulture teaching faculty; by University of Bangalore,for silkworm genetics and mulberry research; by Mysore University, for specificresearch on silkworm genetics; and by KSSDI, to develop a research stationand laboratories to carry out research into all aspects of mulberry, silk-worms and silk processing.

3.20 Technical Assistance. The project would finance 70 man-months ofconsultants' time and a 380 man-months program for training abroad. In thecase of consultancies, about 19 man-months would be needed for visits of 5or 6 top level scientists to CSRTI to support mulberry and silkworm breedingwork and for exchange of ideas on other research topics. About 12 man-monthswould be used for two visits by a two-man team to help DOS with grainage dev-elopment and another expert would be needed for two visits of six months tohelp with the communal hatcheries program, with special Eocus on disease con-trol. In addition, about 27 man-months of consultancy would be used by KSICfor training staff to operate new filature and spun silk factory equipment.

3.21 The overseas training program would benefit 10 senior DOS officials(2 months training), 20 Assistant Directors (3 months training) and 45 SA(4 months training). Particular emphasis of this training would be on grain-age and hatchery operation and silkworm disease detection and control. CSRTIwould require ten study tours for senior researchers, each for attachment toa top research institute abroad for a 12 month period.

3.22 Japan, the leader in silk technology, would be the most suitablesource of expertise and training opportunities. To attract the necessarytop-class scientists and technicians, and in view of the proposed frequentand short-term assignments, a high man-month cost of US$15,000 has beenallowed, inclusive of air fares, living expenses and local travel. However,even with such high remuneration there is no certainty that all the desirableexpertise can be recruited, particularly on a timebound schedule. Arrange-ments for training should present fewer problems and the Japan InternationalCooperation Agency would be able to help with arrangements. Cost per trainingmonth has been estimated at US$3,400 which would include air travel, localtravel, tuition, living and miscellaneous minor expenses. The programs wouldassist and benefit the project considerably, but no part is so vital thatthe project would fail without it. With likely difficulties of recruitingconsultants in mind, assurances were obtained that the GOI Ministry of Indus-tries in collaboration with GOK, would, by December 31, 1980 draw up a planand timetable for the technical assistance and overseas training program andwould use its best endeavors to implement the plan for employing consultants

- 20 -

and study tours on terms and conditions mutually acceptable to GOI and the

Association.

3.23 Evaluation Study. The project would fund an evaluation study by a

local research institute or university. Arrangements for the study are dis-

cussed in para 5.23.

Land for Project Facilities

3.24 About 80 plots of land would be needed for DOS and KSIC components,

mostly small building plots. All but six of them are already in possession

of DOS and negotiations for official transfer of the remainder, all of which

are GOK land, are well advanced and are expected to be completed before the

end of 1980. CSRTI would require 12 land units ranging from one to eight

hectares in size for research substations. DOS has suitable land and agreed

to transfer it to CSRTI as and when needed. There would therefore be no land

acquisition constraint to impede the project.

Environmental Aspects

3.25 The project would have no adverse environmental effects. It would

cause change in land use only by replacing traditional with new mulberry varie-

ties or one crop, for instance sugar cane, with mulberry which would cause no

environmental changes. On the processing side, large processing plants would

be of modern design adhering to Indian factory safety and effluent disposal

regulations which are satisfactory. Care would also be taken that the smaller

privately owned units, to be sponsored by the project, would adopt satisfactory

safety and waste disposal measures.

Project Phasing

3.26 GOK had started project activities such as land acquisition, estab-lishment of KSIC, securing the project budget and sanction for appointment of

proposed project staff, and implementation of some components prior to negotia-

tions; and has started full-scale implementation from April 1980, the new GOK

financial year. In the first project year DOS would improve existing TSC and

hatcheries and concentrate on preparing to implement the other components by

finalizing designs, calling tenders and recruiting and training staff. Estab-

lishment of new TSC and hatcheries and completion of supporting facilities

(model hatcheries and training institutes) would be carried out progressively

over the following three years. The first grainages are to be commissioned

during 1982 and market units financed by the project during late 1981. The

two programs would each take two more years to complete. Construction of the

two KSIC factories would start early in 1981 and is scheduled for completion

by mid-1983. Detailed designs for most of the major civil works items were

already substantially completed at appraisal. The timing of the technical

assistance program is difficult to predict and may well extend up to mid 1985.

Depending on availability of consultants, the technical assistance program has

been tentatively projected to take place mainly during the third and fourth

project year while the overseas training program would start in the second and

extend to the fifth project year. Project phasing is shown in more detail on

Table 3.1 and Charts 21303, 21387 and 21629.

- 21 -

IV. COST ESTIMATES, FINANCING, PROCUREMENT AND DISBURSEMENTS

Cost Estimates

4.01 Total costs are estimated at US$95.1 million equivalent of whichUS$20.7 million or 22% would be foreign exchange costs and US$6.6 millionwould be duties and taxes. Estimates are based on September 1979 prices.A 10% physical contingency has been allowed for civil works and 5-10% formachinery, equipment, vehicles and incremental operating costs. Price contin-gencies have been applied at 10% for 1980, 7% annually for 1981 to 1983 and5% annually from 1984 onwards for local costs and at the following rates forimported machinery and equipment: 10.5% for 1980, 9% for 1981, 8% for 1982and 7% annuallv for 1983 to 1985. Total contingencies amount to US$22.8million or 24% of total cost. Detailed costs are given in Annex 2 and aresummarized below.

Summary Cost Estimates

-----Rs Million----- ---- US$ Million----- ForeignCategory Local Foreign Total Local Foreign Total Exchange

On-Farm CreditPlantation 14.0 - 14.0 1.7 - 1.7 -Equipment 17.5 - 17.5 2.1 - 2.1 -Rearing Houses 18.9 - 18.9 2.3 - 2.3 -

Credit for ReelingCottage Basins 16.0 - 16.0 1.9 - 1.9 -

Subtotal Credit 66.4 - 66.4 8.0 - 8.0 -Dept. of SericultureGrainages 85.7 0.5 86.2 10.2 0.1 10.3 1Hatcheries 73.4 - 73.4 8.7 - 8.7 -Model Hatcheries 5.1 - 5.1 0.6 - 0.6Tech. Service Cntrs. 85.8 - 85.8 10.2 - 10.2 -Mobile Demo. Units 1.1 - 1.1 0.1 - 0.1 -Training Schools 7.7 - 7.7 0.9 - 0.9 -Cocoon Markets 25.3 - 25.3 3.0 - 3.0 -Filature 2.6 3.4 6.0 0.3 0.4 0.7 57Inc. Admin. Cost 25.6 - 25.6 3.1 - 3.1 -

Subtotal DOS 312.3 3.9 316.2 37.1 0.5 37.6 1KSICFilature 6.8 35.6 42.4 0.8 4.2 5.0 84Spun Silk Mill 17.4 65.8 83.2 2.1 7.8 9.9 79Hdqrtrs. and Workshop 6.1 - 6.1 0.7 - 0.7 -Net Inc. Working Cap./a 3.9 - 3.9 0.5 - 0.5 -

Subtotal KSIC 34.2 101.4 135.6 4.1 12.0 16.1 75Research Component 55.3 11.8 67.1 6.6 1.4 8.0 18Tech. Asst./Study Tours 1.4 18.5 19.9 0.2 2.2 2.4 92Project Evaluation Study 1.5 - 1.5 0.2 - 0.2 -

Base Cost Estimate 471.1 135.6 606.7 56.2 16.1 72.3 22Physical Contingencies 25.2 11.8 37.0 3.0 1.4 4.4Price Contingencies 127.8 27.0 ,154.8 15.2 3.2 18.4

Total Project Cost 624.1 174.4 798.5 74.4 20.7 95.1 22

/a Working capital to finance incremental inventories, receivables and cashbalance necessary for efficient operations.

- 22 -

Financing

4.02 The proposed IDA credit of US$54 million would be made to GOI onstandard terms and would cover about 61% of project costs net of duties andtaxes, 57% of total project costs, or all foreign costs and 45% of local costs.The balance would be met by GOI, GOK, ARDC, IDBI, banks, silk farmers andreelers as shown in the following project financing plan:

Financing PlanFarmers! IDA % of

Total GOI/GOK ARDC IDBI Banks Reelers Amount Total--------------------- Rs Million --------------------------

Farmers/Reelers 82.3 - 29.8 - 7.5 8.0 37.0 45DOS 415.5 165.5 /a - - - - 250.0 60KSIC 182.3 60.8 - 41.5 - - 80.0 44Research 91.5 31.5 - - - - 60.0 66TA/Study 26.9 - - - - - 26.9 100

Total 798.5 257.8 29.8 41.5 7.5 8.0 453.9% of Total 100 32 4 5 1 1 57

/a About Rs 75 million is estimated cash generation from grainages, marketsand the small filature.

4.03 GOI would onlend US$4.4 million of the IDA Credit to ARDC torefinance silk farming development loans to farmers and cottage basindevelopment loans to reelers; and US$9.5 million to IDBI to lend to KSICfor modernization and expansion of silk processing factories. ARDC andIDBI interest rates are discussed in para 5.16. GOI would bear the foreignexchange risks for finance onlent to ARDC and IDBI. GOI would use US$5.5million for implementing the technical assistance, overseas training andCSRTI research programs and would channel the balance to GOK for componentsto be carried out by DOS, Universities and the KSSDI, in accordance with GOIstandard arrangements for IDA assisted state development projects. Retroac-tive financing to cover early project implementation costs from October 1,1979, up to US$1 million have been included. This financing would mainlycover expenditure for the departmental program for establishment of TSC andcommunal hatcheries.

Procurement

4.04 Civil works for KSIC, the departmental program and the researchprogram costing about US$8.2 million, would be carried out on about 90sites over five years. Contracts for such work would not attract foreignbidders and would be awarded after local competitive bidding, using GOI orGOK procedures, which are satisfactory to IDA.

4.05 About 250 motor vehicles (US$1.9 million) would be required byproject agencies, mainly DOS. They would be purchased over a five-yearperiod and would be widely spread in rural areas. Adequate maintenance andavailability of spare parts would be of paramount importance, and this wouldnecessitate purchase of locally made vehicles of types already in use byproject agencies. Procurement would be according to GOI and GOK procedures.

- 23 -

Motorcycles (US$0.3 million) would be purchased by individual departmentalstaff, from loan funds provided by GOK.

4.06 Reeling and spinning machinery and major items of ancillary equipmentsuch as boilers for KSIC and for the departmental filature (US$14.0 million)and cold store equipment, refrigerators, and generators for departmentalgrainages (US$1.9 million) would be procured by international competitivebidding, following Bank Group guidelines for procurement. A 15% preferenceon bids based on the CIF price of each item or the actual custom tariff,whichever is lower, would be granted to domestic manufacturers. However,contracts for these items of machinery and equipment costing less than$100,000, when grouped together, may be awarded in accordance with localcompetitive bidding procedures acceptable to the Association.

4.07 Other equipment would consist of furniture, silkworm rearing equip-ment, farm and laboratory equipment (US$9.1 million) to be purchased overfive years for use over a wide area. These items are not suitable for inter-national bidding and would be purchased by local competitive bidding procedures.Farmers and silk reelers drawing loans for mulberry planting, silkworm rearingequipment and cottage basins (US$8.0 million) would purchase materials andequipment individually from dealers of their choice and would also arrangeconstruction of rearing houses and reeling sheds locally. Technical assistanceand overseas study tours (US$2.4 million) and the project evaluation study(US$0.2 million) would be arranged on terms and conditions satisfactory to IDA.The balance of the project cost (US$30.7 million) would cover DOS incrementaloperating costs and staff salaries and those of participating research agencies,KSIC working capital and land purchase for the research cDmponent, which wouldnot involve procurement. The above figures include physical contingencies(US$4.4 million), but exclude price contingencies, which amount to US$18.4million.

4.08 Small, off-the-shelf items, costing less than US$10,000 and not morethan US$1 million in aggregate, which are required urgently for project execu-tion, would be purchased by prudent shopping, through normal commercial channels.For all contracts for civil works exceeding US$200,000 and for purchase ofequipment and supplies exceeding US$100,000, draft tender documents, proposalsfor advertising, bid evaluations and award proposals would be sent to IDA forreview before contract award. Copies of such contracts would be sent to IDAimmediately after award. Assurances were obtained that procedures outlinedin paras 4.04 through 4.08 would be observed.

Disbursement

4.09 Disbursements from the credit would cover:

(a) 55% of ARDC refinance of loans to farmers and reelers;

(b) 70% of loans to KSIC for civil works, machinery andequipment;

(c) 75% of civil works, vehicles, equipment, farm develop-ment and incremental staff costs for DOS and partici-pating research agencies; and

- 24 -

(d) 100% of the cost of technical assistance, training abroadand evaluation studies.

4.10 Disbursements under item (d) and for expenditures under item (b)and (c) exceeding Rs 50,000 for machinery, vehicles and equipment and for civilworks exceeding Rs 100,000 would be made against full documentation suppliedto IDA through GOI. Disbursements for item (a) would be made against certifi-cation by ARDC and for all other items against certificates of expendituresubmitted by implementing agencies including DOS, and research agencies. Sup-porting documents for these payments would not be submitted to IDA but wouldbe retained by the implementing agency and made available to IDA during thecourse of review missions. Certificates of expenditure would be audited atleast once every six months and a report submitted to IDA promptly thereafter.The cost of land purchases or working capital for KSIC would not qualify fordisbursement of IDA funds. A schedule of disbursements is shown in Annex 3.

V. ORGANIZATION AND MANAGEMENT

Department of Sericulture

5.01 The Department of Sericulture would implement all components con-nected with cocoon production, including development, grainages, TSC, communaland model hatcheries, training centers and cocoon markets. The Departmentwould cooperate close.y with credit agencies (para 5.12) which would carryout the lending progrim for silk farmers and reelers and finally, DOS wouldestablish and operate a filature in the new areas.

5.02 DOS is part of the State Ministry of Industries and is headed bythe Director of Sericulture, responsible to the Secretary of Industries. Atappraisal, DOS was essentially organized into four zones each under a DeputyDirector supervising about six Assistant Directors (ADS). There were alsoadequate administrative and finance staff at Headquarters as well as foursenior (Deputy Director and Joint Director Level) 1/ specialists for grainages,marketing, cooperatives and supervision of seed areas. The Department isdynamic and well organized and its staff responds well to its strong leader-ship. DOS is reorganizing in preparation for doubling its technical staffover the project period and the proposed organization and services that itwould operate are shown on Chart 21296. The field services would be organ-ized on a District basis with a Deputy Director in charge. Each District wouldhave divisions (5 in Mysore, 3 in Bangalore and 2 in all other Districts)headed by an ADS, whose primary task would be organization and supervision ofTSC and communal hatcheries. At Head Office, apart from a Senior TechnicalAdvisor, there would be five Joint Directors and a Joint Registrar of coopera-tives to broaden the specialities dealt with at Headquarters to include silkfarms and technical services. With the exception of the large new grainagesand a filature to be constructed under the project, which would be directed

1/ Ranking in most government departments in India is as follows in descend-ing order of seniority: Director, Additional Director, Joint Director,Deputy Director and Assistant Director.

- 25 -

by Head Office staff, all departmental facilities and services in the field

would be supervised by District staff. Other Head Office specialists would

provide services, guidance, standardization and coordination for their relevant

specialities and would supervise them on behalf of the Director. They can beregarded as senior subject matter specialists. Because of its size, each new

grainage would be headed by a Deputy Director who would report to the Joint

Director Grainages at headquarters.

5.03 The Department would also strengthen its administrative services at

headquarters adequately to deal with the extra workload caused by expansion

of staff and services. To carry out the heavy construction program under the

project, the Department would establish an engineering cell by secondment of

a superintending engineer supported by about five executive engineers and 20

assistant engineers from the State Public Works Department (PWD). Because the

project construction program has been planned to commence early during the

project period, assurances were obtained that the engineering cell would

be established by September 30, 1980.

Department of Agriculture

5.04 Village level workers of the Department of Agriculture would provide

extension for mulberry cultivation using T and,V extension methods. Subject

Matter Specialists to support extension staff would come from the Department

of Sericulture. There would be close liaison between the two departments at

state, district and taluk level.

Karnataka Silk Industries Corporation (KSIC)

5.05 The Government of Karnataka established the KSIC in early April 1980,

to take over the present DOS run filatures, twisting plant, weaving plant and

spun silk mill and implement the filature and spun silk mill modernization

program (paras 3.14-3.16) to be financed by the project. Main reasons for

forming the Corporation are to put operations on a more commercial basis,

relieve DOS from the task of operating the processing complex and let it con-

centrate on the silk production program; and provide access to institutional

credit, which is not available to the Department, particularly for financing

the modernization program.

5.06 The activities of the processing plants, each with its own manage-

ment, were coordinated by a small central staff at DOS Headquarters. The

Department had installed a satisfactory accounting and reporting system which

could serve as the basis of the Corporation's management control system.

Existing staff is expected to transfer to the Corporation and would provide

factory floor level staff and the core of management level staff. The weaving

and spun silk plants have been making profits over the last five years, but

overall results from all facilities showed deficits due to losses by filatures,

caused by obsolete equipment.

5.07 The Corporation would be controlled by a Board nominated by GOK.

The management team would be headed by a managing director, supported by a

finance director and a technical director responsible for all manufacturing

operations, research and development and centralized cocoon purchasing. Thesethree officers would be on the Corporation Board. Other senior staff to

- 26 -

assist the managing director would be the personnel and administration manager,

internal auditor, secretary and marketing manager (see Chart 21295). Eachplant would be headed by a general manager reporting to the technical director.As with the DOS program, an engineering unit would be deputed by the StatePublic Works Department to supervise project construction. Agreement was

obtained that the unit would be established before December 31, 1980.

5.08 The managing director of the Corporation has been appointed. Thetwo other directors, administration and personnel manager, and the chiefaccountant (who would report to the finance director) would be needed at anearly stage of the project, and assurances were obtained that they would beappointed before September 30, 1980. Recruitment of senior management andtechnical staff would be on a national basis. Some senior staff may bedeputed from GOI or GOK service. Since staff continuity would be importantfor the success of the Corporation, GOI and GOK would endeavor to ensure thatdeputed staff, unless unsatisfactory to the Corporation, would be retained intheir posts for a reasonably long period.

Research

5.09 The research component would be carried out by CSRTI, three univer-sities and by KSSDI. The latter had not yet been established at appraisaland assurances were obtained that it would be established before December 31,1980. Responsibility for research programs would rest with the head of eachparticipating institute--director CSRTI, the Vice Chancellor of each universityand the director of KSSDI. The latter had not yet been selected at appraisaland assurances were obtained that the director, head of KSSDI administrationunit and at least two of the proposed department heads would be appointedbefore December 31, 1980. Coordination of research programs is described in

para 5.21.

Credit for KSIC through the Industrial Development Bank of India (IDBI)

5.10 Project loan finance for the industrial component to be undertakenby KSIC would be channeled through IDBI. IDBI, established in 1964, had upto December 31, 1979 approved total financial assistance of Rs 46.1 billion(US$5.5 billion) for a large variety of industrial investments, either directlyor together with other financing agencies or as refinance for onlending agen-cies. IDBI has a large staff experienced in preparation, appraisal and super-vision of industrial projects including investments in textile industriessimilar to processing investments to be financed by IDBI for the project. TheBank Group has already been involved with IDBI through two lines of credit forState Finance Corporations, also for financing development of the fertilizerindustry, construction of an apple juice concentrate factory and through aloan for financing joint/public sector projects. IDBI is financially soundand well managed and well qualified for financing the KSIC development program. 1/

5.11 Under financial arrangements to be made between GOI and IDBI, GOIwould onlend part of the IDA credit to IDBI at an interest rate of 7.25% per

1/ Detailed description of IDBI is given in Report No. 1736A-IN of

January 15, 1978 updated by notes in Annex 6.

- 27 -

annum for periods between 5 and 9 years and at 7.75% per annum for periodsbetween 10 and 15 years, with a rebate of 0.25% for timely repayment in each

case. The repayment period would be the same as that of the IDBI subloan to

KSIC. Completion of the financial arrangements between GOI and IDBI satis-factory to IDA would be a condition of disbursing the relevant part of the

Credit. IDBI would lend up to 70% of construction, equipment and machinery

costs for a period up to 10 years, which would include a two-year grace period

for payment of capital and interest installments, the latter being capitalized.

Annual interest rate would be 9-1/2% for the first Rs 20 million and 11% for

the balance which would give IDBI a spread of 3.55%, which is satisfactory. A

1% commitment fee may be charged by IDBI on undrawn amounts. Repayment would

be in semiannual installments. These lending terms and conditions were dis-

cussed and agreed at negotiations. IDBI would appraise the KSIC modernizationproposals on the basis of a feasibility report prepared by Messrs. Tata Con-sulting Engineers (a local group with international experience) and would send

appraisal findings to IDA for review. Appraisal is in progress and is expected

to be completed before the end of June 1980.

Credit for Silk Farmers and Silk Reelers through ARDC

5.12 Under financial arrangements with ARDC, GOI would onlend part of the

credit to ARDC for refinancing participating banks which would provide loansto silk farmers and silk reelers. Completion of financial arrangements betweenGOI and ARDC would be a condition of disbursement of the ARDC refinance com-ponents of this Credit. To ensure adequate and suitable banking arrangements,

ARDC, in consultation with GOK and local banks, has prepared a draft bankingplan which was discussed at negotiations. The plan woull be completed andsent for IDA review by about September 30, 1980, and in any case before sub-mission of applications to IDA for disbursements against ARDC refinance forloans made to farmers and reelers. The final plan would include inter alia

a definition of ARDC's role in project implementation and proposals for:

banking coverage; preparation, supervision and monitoring of schemes; reha-bilitation or development of banks or branches as needed; recruitment and

training of staff, as necessary by participating banks; supporting servicesto be provided by DOS; and proposals for improving lending procedures where

possible. As already indicated (para 2.19) ARDC is endeavoring to improveperformance of ongoing schemes for cooperatives in traditional areas and would

also seek ways of making ARDC refinanced credit available to silk farmers who

are not members of cooperatives.

5.13 Project schemes would most likely be prepared on a district ratherthan on a bank by bank basis, a measure that should speed up preparations forproject lending. While banks would be allocated certain areas in which theywould canvass loans intensively, lending for project purposes by other banks

in that area, due to existing business connections, would also be refinancedfrom project funds. To ensure effectiveness of credit services, bankingarrangements would be reviewed at state level once a quarter and changes madeas necessary. With respect to ensuring recoveries, CB in particular were

interested in linking loan repayments to marketing. They would, therefore,together with DOS, explore possible procedures for effecting recovery in GOKregulated cocoon or silk markets. If successful, such an arrangement would

cover participating cooperative banks.

- 28 -

5.14 ARDC would also explore measures to improve burdensome and time con-suming lending procedures, particulary those connected with obtaining mortgages.Such measures may include possible substitution of a charge on land for mort-gages; or introduction of a credit passbook system which would also obviatethe need for mortgages. To speed up processing of loan applications, GOK isexperimenting with "camps" of all government staff involved in loan approvalprocedures to process all outstanding applications in the area during theduration of the camp. GOK is also considering amendment of cooperatives legis-lation, that would enable LDB to accept hypothecation of assets other than landas collateral instead of only mortgages as at present and would facilitategreater LDB participation in lending for rearing houses and cottage basins.

5.15 Through participation in about 40 projects, ARDC has ample experienceof Bank Group project execution. 1/ Lending terms and conditions for farmersand reelers are outlined in Schedule A and were discussed and agreed atnegotiations.

ARDC and IDBI Interest Rates

5.16 Interest charged to final borrowers in lending channeled throughARDC would be 9.5% for small farmers 2/ and 10.5% for other borrowers; and inthe case of lending through IDBI, 9.5% for up to Rs 20 million for investmentsin industrially backward areas and 11% for all other lending. Inflation inIndia between 1976 and 1979 averaged 2-1/2% annually. Inflation in Indiabetween 1974/75 and 1978/79 averaged only 1.5% per annum. With the sharpincrease in oil price, during 1979 coinciding with a severe drought, pricesspurted by almost 15% between April and December 1979 and are anticipated toincrease another 10% during 1980/81. Given past GOI determination and successin containing inflation, and the likelihood of a strong agricultural recoveryand improved supply of industrial inputs, the rate of price increase over theproject period is expected to average somewhat below 7% per annum. The pro-posed on-lending rates would be positive in real terms throughout the projectperiod and would compare favorably with real rates in other developing countries.

GOI Ministry of Industries

5.17 The Central Ministry of Industries would be the GOI agency respon-sible for the project. The Development Commissioner Handlooms, acting onbehalf of the Secretary of Industries would handle matters connected with theproject. The Ministry, through the Central Silk Board, would be responsiblefor the CSRTI research component and would also arrange technical assistanceand the overseas training programs. For this purpose the Ministry would enterinto discussions with representatives of Japan for obtaining assistance of theJapanese Ministry of Agriculture in selecting consultants and of the JapanInternational Cooperation Agency, which informed the appraisal mission thatit would be prepared to help arrange project training programs in Japan.

1/ Detailed description of ARDC is given in the Staff Appraisal Report ofthe Third Agricultural Refinance and Development Corporation Creditproject. Report No. 2404-IN of June 21, 1979.

2/ Defined in Schedule A.

- 29 -

Training

5.18 Training courses for SA are provided by CSRTI (9-15 months courses);

for sericulture inspectors by the University of Bangalore (6 months) and are

to be initiated by the University of Agricultural Sciences. Total capacity of

those courses would be about 150 trainees per batch. SD training is carried

out departmentally and includes courses at the departmental training center and

practical training which lasts at least six months at the 74 silk farms and 80

grainages. The project training program for almost 2,000 new technical staff

over five years would be formidable. While training facilities would be ade-

quate, particularly after completion of the training center development pro-

gram, a formal training program had not been drawn up for each staff category.

Assurances were therefore obtained that such program, including an implementa-tion timetable would be prepared for IDA review before September 30, 1980. In

addition, both GOI and GOK would ensure that adequate training facilities and

resources would be made available for the SA and sericulture inspectors project

training program at CSRTI and at participating universities. Training of KSIC

staff in use of new equipment would be conducted by equipment manufacturersand would also be supported by experts under the project technical assistanceprogram (para 3.20).

Project Coordination

5.19 State Level. Overall project organizational features are illustratedon Chart 21297. The GOK Ministry of Industries under the Development Commis-

sioner would be responsible for the project and has established the SericultureProject Committee to monitor and coordinate project implementation. GOK Ministry

of Finance and PWD representatives, a GOI representative, Director of Sericulture,

Director of Agriculture, Managing Director KSIC, a representative each of proj-

ect research services, ARDC, IDBI and of participating banks are members. The

Director of Sericulture would provide committee secretariat. The committee

would meet at least quarterly. The committee would, each year, approve the

annual project implementation plan and assurances were obtained that the plan

would be sent for IDA review by March 31 of each year during the project period,

starting March 31, 1981.

5.20 To support implementation of the silk production part of the project,

there would be a district level coordination committee in each project district.

Convenor and chairman would be the District Deputy Director of Sericulture and

membership would include the District Agricultural Officer, representativesof participating banks, inputs supply agencies, PWD and the District Adminis-tration. The Committee would meet quarterly or more frequently if necessary.In addition, as already indicated, ARDC would organize quarterly review of

banking arrangements at state level.

5.21 Research Coordination. A project Sericulture Research Committee has

been set up to coordinate research programs and development programs. The

head of CSRTI, KSSDI, Director of Sericulture and representatives of partici-pating universities are members. The Committee would review program proposalsfrom participating institutions and formulate an agreed annual program, based

after the initial year, on evaluation of results from previous and ongoing

work. Assurances were obtained that the committee would send the first annual

- 30 -

program for IDA review before March 31, 1981 and thereafter annually not laterthan the same date. The committee would also arrange to publish a consolidatedsummary annually of results of the year's trials.

Reporting Requirements and Evaluation

5.22 DOS as main project agency would prepare a quarterly progress sum-mary, and an annual report and, within six months after completion of theproject, a completion report acceptable to IDA which would deal with all proj-ect aspects; based on data collected by its own staff for DOS activities andon contributions of the other project agencies. Quarterly and annual reportformats would be mutually acceptable to GOK and IDA. Quarterly summarieswould reach IDA within two months after the end of each calendar quarter andannual reports within two months after the end of the reporting year. Theabove reporting procedures were discussed and agreed to at negotiations.

5.23 Quarterly and annual reports would constitute a monitoring systemof implementation progress both for project management and IDA. Progress ofthe industrial component would be apparent from statutory annual reports andaccounts, but measurement of the impact of the project and its individualcomponents on silk production, employment and rural income would requireseparate study that should also provide data for management decisions. TheDepartment of Sericulture has already initiated discussions with a localeconomic research institute and preliminary proposals for relevant studiesare broadly acceptable, but require refinement. Assurances were obtainedthat GOK would, by March 31, 1981, initiate an evaluation study satisfactoryto IDA. To ensure adequacy of study design and methodology, GOK would byJune 30, 1981, submit an inception report for IDA review, prepared by theinstitute which would conduct the study, which would detail the work plan,scope, methodology, data processing, analysis and reporting output and whichwould also include preliminary survey questionnaires.

Accounts and Audits

5.24 In accordance with commercial practice, KSIC would install andmaintain financial and cost accounting systems which would show the resultsof each of its factories separately and would allow effective internal control,including inventory management and internal audit. Its annual accounts wouldbe audited by independent auditors acceptable to IDA. Accounting and auditingprocedures of ARDC, IDBI and participating commercial and cooperative banksare satisfactory. They would maintain clearly identifiable accounts forproject loans.

5.25 GOI and GOK would cause participating research agencies and DOS tomaintain separate records of project expenditures, which would be audited,in the case of GOI agencies, according to GOI procedures and in cases of GOKdepartments and agencies according to GOK procedures, all of which are satis-factory. DOS and research agencies, within nine months after the end of eachfiscal year, would submit: (a) a statement of project expenditure during theyear certified correct by the Accountant General or other authorized accountingauthority; and (b) an account of such expenditures, classified according tothe components shown in Annex 2 of this report. Assurances were obtained

- 31 -

that accounting and auditing procedures outlined in this and the precedingparagraph would be followed and that audited accounts and audit reports ofKSIC, ARDC, IDBI, and participating banks would reach IDA headquarters withinnine months after the end of the financial year of each relevant project agency.

VI. PRODUCTION, MARKET AND PRICES

Yields and Production

6.01 GOK is planning to increase raw silk production in Karnataka from2,300 tons per year at present to about 4,500 tons. Of the total, productionof bivoltine silk is expected to increase from 100 to 1,700 tons. Out ofthose totals, project activities are projected to increase raw silk productionby 1,600 tons per year including about 1,000 tons bivoltine silk over a sevenyear period. The increase would result from about 17,000 tons additionalcocoon production per year and from improvement of silk recovery from cocoons,from about 7.3% at present to about 8.3% (from about 6.5% to 7% in rainfedareas and from about 8% to 9% from irrigated mulberry). Cocoon yields inrainfed areas are projected to increase from about 200 to 250 kg per hectaremulberry and those in irrigated areas from about 530 to 700 kg. Yields fromtraditional and new areas are likely to be similar. The traditional areas maybe climatically slightly more suitable and have experienced growers. However,silkworm disease problems may be more difficult to control there than in newareas and experience may not be a great advantage in tha. newcomers may adoptimproved practices more readily than established sericult:urists.

6.02 Several factors would be combined to raise silk production. Abouthalf the additional silk would come from the 14,000 ha irrigated mulberry ex-pansion in new areas. Also there would be the spread of improved M5 mulberryvariety to over 90% of the 24,000 ha mulberry to be covered by intensive proj-ect services in the existing irrigated areas. M5 not only has a 30% leafyield advantage over existing varieties, but has a more nutritious leafwhich in itself would result in greater silk output. Improved silkworm eggproduction and widespread use of hatcheries would lead to a better start ofthe rearing cycle which translates into higher silk production. In additionthere would be large-scale introduction of bivoltine silkworm varieties withhigher cocoon yield, better silk content and better quality than local varie-ties. One of the most important factors for improving production would beintensive advisory services both for mulberry cultivation and silkworm produc-tion. Because there would be five or more silkworm rearings per year, farmerswould have much greater opportunity for learning new practices than withnormal field crops. The assumption therefore, used in yield projections, thattarget yields would be achieved over three years (the equivalent of 15 crops)from the time that intensified services start in any area, is considered tobe reasonable.

World Production, Consumption and Trade

6.03 As a natural fiber, silk has been valued culturally for centuries,and continues to be rooted in social tradition of countries where national

- 32 -

dress and ceremonial occasions dictate an irreplacable role for it. Addi-tionally, Western European haute couture has contributed to establishing areliable market by consistently expressing fashion in silk.

6.04 Over the last five years, world cocoon production has fluctuatedbetween 300,000 to 400,000 tons with estimated raw silk production rangingfrom 47,000 to 50,000 tons (Annex 1, Table 6.1). Until the early 1960s, Japanwas the dominant silk producer and exporter. Since then, the People's Republicof China (PRC), from which information has become available only recently aboutthe extent of its productive capability and potential future supply to theworld market, has taken the lead in both respects. Because of the high sea-sonal labor input required in sericulture, former major producers and tradeleaders, notably Japan and Korea, are experiencing decreasing production dueto urbanization and relatively higher wage rates of industrialized economies.The comparative advantage has shifted to countries such as the PRC, India andBrazil that have labor available at competitive wage rates.

6.05 Global demand for raw silk is expanding, and with it, the export mar-ket. In the period from 1974-1978, total raw silk consumption in countries forwhich data is available rose from 36,000 to 40,100 tons, an increase of 11% overfive years, or about 2.2% annual increase (Annex 1, Table 6.2). Domestic con-sumption in Japan has gradually increased over the last fifty years to a cur-rent level of about 21,000 tons per year. Estimated consumption in the PRC hasincreased similary, to approximately 10,000 tons in 1978. Demand from manufac-turers in We!.tern Europe and the substantial domestic market within India eachhave increased to an .verage annual consumption level of about 4,000 tons.

6.06 Japan's imports represent typically 50-60% share of total traded rawsilk, two-thirds of which is supplied by the PRC, another 30% by South Korea,and a small portion by Brazil. Over the last five years, domestic raw silk pro-duction in Japan has decreased by 3,000 tons, approximately 18%, and relianceon relatively cheaper imports has been necessary to contain production costs ofsilk manufactures. The second largest share of imports goes to Western Europe,distributed among five countries with established silk manufacturing industries.These countries, notably Italy, imported 3,160 tons or about 37% of traded silkin 1978. The United States, although once the world's largest importer andprocessor of raw silk, is the third largest importer with typically about 3%of market share (Annex 1, Table 6.3).

Exports and the Domestic Market in India

6.07 According to available information, India currently ranks as theworld's third largest consumer and fifth largest producer of raw silk. Mul-berry silk production has increased steadily over the last two decades (Annex 1,Table 6.4); more rapid growth has taken place in the last five years due todevelopment and dissemination of improved varieties of mulberry and silkworms.Consumption of raw silk reached an estimated level of 4,200 tons in 1978, andby a small margin India was a net importer. Accurate statistics on the domes-tic market, reported as mill consumption and stocks in sericulturally advancedcountries, are not available due to the predominance of small-scale handloomweaving in India. Exports primarily in the form of fabrics and finished gar-ments have expanded considerably, however, registering an average annual

- 33 -

increase of 10.7% from 1960 to 1978 (Annex 1, Table 6.4). In 1978, foreigRexchange earnings from mulberry silk exports reached US$45 million from 10.5million m of silk finished goods and about 1,500 tons of silk waste. 1/ Atpresent, India's silk exports are confined to narrow markets, to a large extentsaris for Indians living abroad, because of low quality compared to the inter-national trade standard. Export trade in raw silk demands a quality standardsuitable for industrial powerloom finishing, such as the bivoltine Chinese,Korean or Japanese varieties. Two of the primary objectives of the projectwould be to increase production of bivoltine hybrid cocoons and to improvereeling techniques for production of silk meeting international qualitystandards.

World Raw Silk Price Projection

6.08 Prices for Japanese imported raw silk (standard 20/22 denier, mixedquality grades) for the last nine years in current and constant terms is pre-sented in Annex 1, Table 6.5. Although fluctuations occurred at the beginningof the decade, over the last three years prices have been stable, with anaverage weighted price of US$40.85/kg for a blend of qualities. If the presentsupply and demand trends for raw silk continue, and based on the current averageannual increase in world consumption, demand will out-pace supply within fiveto ten years. Assuming demand and supply elasticities of 0.5-1.0, the relativeprice increase would be 7-10% over the present level. A median range price ofUS$43.80/kg for good quality raw silk (standard 20/22 denier) which assumes arelative price increase of 7% has been used as the 1985 projected world marketprice (expressed in 1979 price levels), as illustrated in Annex 1, Table 6.6.

Indian Domestic Prices

6.09 Based on the best available information, cocoon and raw silk pricesin constant terms have risen over the last three years, despite increasing pro-duction. Quality standards are not in use, but ranges are roughly establishedfor cocoons suitable for charka, cottage basin and filature operations. Accord-ingly, raw silk produced by type of reeling process falls within a type of basicquality price range, although again, standard quality measurement such as thetesting systems used in sericulturally advanced countries has not yet been in-troduced. To ensure fair and stable prices to induce growth and quality improve-ment in the industry of Karnataka, GOK has taken the lead of other countries toestablish a raw silk exchange (a regulated raw silk market), and a Silk Market-ing Board which would be able to buy up part of raw silk market arrivals shouldintervention be necessary to stabilize prices. For the project, constant finan-cial prices for KSIC silk manufactures have been used based on domestic marketaverages for 1978/79, and are expressed in late 1979 price levels. For cocoonand raw silk prices, price levels have been used in the analysis that are upto 10% below current levels, based on DOS anticipation of trends with operationof the raw silk exchange. A summary of financial and economic prices is shownin Annex 5, Table 2.

1/ Indian controls exports of silk waste to protect supply to the domesticspun silk and noil yarn industry.

- 34 -

VII. FINANCIAL PROJECTIONS

Karnataka Silk Industries Corporation

7.01 Financial Structure and Operating Assumptions. KSIC is projected

to start operations by mid 1980. Authorized share capital would be Rs 150

million and two thirds of the plant modernization program would be financedby loans. To allow adequate debt servicing capacity assurances were obtained

that KSIC would operate within the debt equity ratio stipulated by IDBI.

Resulting from discussions during negotiations, agreement was reached that

KSIC would not exceed a debt equity ratio of 2:1 without IDBI approval, during

the period that loans for the capital works program are outstanding. The

assets (mainly current assets) of DOS run filatures, twisting unit, weaving

plant and spun silk mill would be transferred to KSIC at net book value.About Rs 10 million equity would be needed to establish the corporation, with

additional requirements to finance the project estimated at about Rs 5 mil-

lion, Rs 13 million and Rs 55 million in the first, second and third year

of the project.

7.02 Existing filatures and the twisting unit would be phased out over

a two-year period, starting April 1981, during which the new filature would

be built. The weaving plant would be operated on a two shift basis, starting

March 1980, instead of the present single shift. The present spun silk mill

would be reconditioned over a two-year period also starting April 1, 1981 and,

since only a few machines would be treated at a time, would continue to pro-duce. The new spun silk unit would become operative in mid 1983, and would

increase annual capacity to 150 tons of spun silk. All the raw silk needed

by the weaving plant would be supplied from the filature and all the waste

silk produced by the filature would be used by the spun silk mill.

7.03 Financial Results. The Corporation is projected to show an oper-

ating loss for three years before building up to an operating profit of Rs 35million (see Annex 4, Table 2). The cash flow projections (Annex 4, Table 1)

show that KSIC would be able to dispense with short-term borrowing in the

seventh year, start paying dividends in the eleventh and be able to expand

facilities thereafter.

7.04 Separate rates of return were calculated for filatures, spun silk

mill and total investments (Annex 4, Tables 1-5). A summary of results and

sensitivity tests is shown below in percent:

KSIC Financial AnalysisResults of Sensitivity Tests

Spun Silk TotalFilature Mill KSIC

Capital Cost (US$ million) 5.8 11 17.5

Base Rate of Return 20 15 16Investment up 10% 18 13 14

Revenue down 5% 18 13 15

Operating Cost up 10% 17 13 14

- 35 -

The rates of return are sensitive to changes in revenue and operating costsindicating the importance of management controlling the profit margins. Anyrisk involved is considered well worthwhile, in view of the pioneering natureof the proposed investments and the benefits to the Indian silk industry fromintroduction of modern technology (para 3.03).

Departmental Filature

7.05 Financial rates of return were calculated for investment in thedepartmentally operated semiautomatic filature to be established in the newsericulture area. Based on a 12-year analysis with full capacity operationsafter three years and conservative assumptions regarding cocoon procurementand silk yarn prices, the return is 14%. Sensitivity analysis indicates thatthe return is fairly vulnerable to changes in operating costs or benefits. Ifrevenue rises or operating costs drop by 5%, the rate of return rises to 18%;

conversely, the rate of return falls to 9-10% by a 5% change in the oppositedirection. As the unit would essentially be experimental and would alsoserve as a training center the conservatively estimated base rate of returnis acceptable; however, since the operation of the unit will serve to demon-strate financial viability in reeling for possible replication by privateentrepreneurs, DOS should adopt careful measures to curtail operating costs,and as planned, initiate piece-rate wages where possible to induce efficientproduction.

Cottage Basins for Private Reelers

7.06 Incremental analysis based on a charka operator upgrading to cottagebasin operation is presented in Annex 4, Table 7. The model is based on aRs 20,000 total investment in a 5-basin unit reaching full capacity of 910 kgsilk yarn (10 tons cocoon throughput) per year, after three years. Financingis calculated on the basis of 10% reeler equity contribution, Rs 4,000 govern-ment subsidy and the balance in a 7-year term loan at 10.5% interest with two-year grace period. Based on a three-year build-up to 250 operating days peryear, two years of operating deficit would occur before annual incrementalnet benefits of Rs 16,700 would be achieved, compared to a before developmentnet income of Rs 3,500. The financial rate of return to total investment over12 years is 32%. Sensitivity analysis indicates that small changes in oper-ating costs or revenues cause significant changes in the rate of return.However, widespread cottage basin operations in India indicate that entre-preneurs are sufficiently adroit to operate profitably. Additionally, withgovernment subsidy, the return to reeler equity is over 50% and is not sen-sitive to major changes in operating assumptions.

Farm Models

7.07 In general, farmers in Karnataka regard sericulture as the mostprofitable form of land use. The steady cash flow is as much an attractionas the high total returns. Since crops follow each other in rapid sequencethe farmer can quickly recoup losses from a crop failure by better resultsin the next silkworm rearing cycle. However, because of the number ofvariables manipulated by a sericulturist in producing farm income, farm models

- 36 -

were developed to test the most stringent combination of factors. Thus thebase cases presented in Annex 4, Tables 8.1-8.4, and summarized below repre-sent a high degree of conservatism.

7.08 The variables controlled by the sericulturist include the initialand subsequent area devoted to mulberry, the rapidity of planting or replant-ing with improved mulberry variety, the number and size of silkworm rearings,the silkworm variety and resulting cocoon quality and yield. General assump-tions for the models were based on well-managed farms producing alternativecrops under irrigation converting to sericulture with credit assistance forplantation, equipment and working capital for two rearings; average to good

sericulturists with irrigated farms upgrading to improved varieties with creditassistance for rearing houses; and improvements in rainfed sericulture due totechnical services to be initiated under the project. The models are presentedin constant prices (late 1979). While current cost levels have been used,longer-term price levels anticipated by the Department of Sericulture havebeen used that are up to 10% below current price levels for better qualitycocoons. Family labor has been included at the market wage rate. In allmodels, it has been assumed that full yield is not achieved until the thirdyear. For tropical sericulture where farmers have an average of five rearingsand gain experience rapidly, this is an extremely conservative assumption;however, this assumption adequately tests results if project implementationis delayed and production infrastructure and technical services do not becomeavailable as scheduled.

7.09 A 0.5 ha and a 1 ha farm model were prepared for sericulturists up-grading to improve muloerry and silkworm varieties with credit assistance,achieving different cocoon qualities (priced at Rs 23 and Rs 25/kg). Rearinghouse construction is financed with 10-15% farmer equity contribution and thebalance by five-year term loan at 10.5% interest. Incremental net benefitsat full development are Rs 1,345 and Rs 3,075 for 0.5 ha and 1 ha farms, res-pectively. Based on a 20-year analysis, the rate of return to total investmentis 15-16% for these models. Increasing revenues by 5%, possible with eitherslightly larger rearings or an additional rearing or improved yield, brings therate of return to 22%. Lowering operating costs by 5% or capital investmentcosts by 10% produces rates of return for both models between 17-20%.

7.10 For new sericulturists, a 0.5 ha farm model was prepared testing con-version to mulberry with credit assistance for planting, equipment and workingcapital for two rearings. Financing is based on 10% farmer equity contributionand a four-year term loan at 10.5% interest, with interest payments only in thefirst two years. Incremental net benefit at full development is Rs 1,265 com-pared to Rs 1,950 estimated net income from traditional crops (paddy, maize,cotton) before adoption of sericulture. Based on a 14-year analysis, returnto total investment and to the farmer's equity is 13%. An increase of 5% inrevenues, or assuming a 10% lower before development net income or 5% loweroperating costs results in a rate of return of 18-20%.

7.11 Returns to improved practices in rainfed sericulture are illustratedin a 1 ha farm model that assumes no credit assistance is required. A modestincremental yield of 35 kg cocoons per year and a Rs 1/kg added value in cocoonquality because of improved practices, produces an incremental net benefit ofRs 200 annually. Over seven years, the rate of return is over 50% and is not

- 37 -

sensitive to significant changes in parameters. This illustrates the greatpotential in improving rainfed sericulture, one of the important objectivesof the project.

Cost Recovery

7.12 About one third of the project cost would relate to credit foron-farm development, reeling and the KSIC modernization program and would befully recoverable. Another 35% of project cost would finance project technicalassistance, overseas training, research and extension programs for which costrecovery is not considered appropriate. The balance of project cost wouldfinance grainages, cocoon markets, the departmental filature and communalhatcheries. All these except the hatcheries (about 12% of project cost) wouldbe self-supporting from fees or sale of products and would generate financialreturns from 8% to 18% which are satisfactory for GOK facilities renderingservices to silk farmers. Communal hatcheries provide a service that reducesfarmers' costs and raises cocoon yields and represent an innovation wellproven on a pilot field scale, but not yet accepted by most silk farmers. GOKascribes importance to fostering widespread adoption of hatcheries by farmers.Based on experience abroad, where it took several years for farmers to adopthatcheries on a wide scale, GOK has provided full funding for hatcheries tocover establishment and operating costs over the project period. However, GOKplans that ultimately farmers themselves should operate the hatcheries and isconsidering ways in which those plans can be effected, including the possibi-lity of introducing service charges in future. GOK, in the third project yearwould exchange views with IDA on possible ways of recovering hatchery costs,once the benefits of hatcheries are understood by most silk farmers.

VIII. BENEFITS AND ECONOMIC EVALUATION

Benefits

8.01 The project would help to provide a sound technical basis forquality improvement and innovation at virtually every major stage of mulberrysericulture in India, and would assist Karnataka in increasing raw silk pro-duction, from 2,300 tons to 3,900 tons per year. In addition to incrementalraw silk and silk manufactures production with concomitant export earningsresulting from 14,000 ha new production area and improved yields from betterfarm practices and silkworm varieties, the project would demonstrate benefitsfrom improved reeling processes by introduction of modern units. Importantly,the project would seek to enhance research and exchange with experts in seri-culturally advanced countries to broaden and intensify the Indian researchestablishment to support long-term development of the industry. A significantnumber of employment opportunities -- an estimated 180,000 work-years annually-- would be created primarily among the rural population, and project activi-ties would contribute to increasing incomes of producers and processors aswell. Benefits from the project would be widely distributed and affectpositively the entire spectrum of the estimated two million persons engagedin sericulture and related activities in Karnataka.

8.02 Quantifiable benefits from the project include net incrementalincome to cocoon producers based on total incremental production of 17,000 tons

- 38 -

cocoons annually at full development, resulting in an annual incremental rawsilk and silk waste production of 1,600 tons and 480 tons, respectively,valued at about US$75 million. Additionally, benefits from KSIC spun silkmill operations have been taken at the added value in spun silk yarn and othermanufactures from processing raw silk and silk waste. Although not includedin the analysis, value from by-products of dead pupae (livestock feed), silk-worm litter (fertilizer), excess leaf, stem and sticks (fodder, fuel), allof which are recycled in some manner, form a considerable residual benefitfrom sericulture.

Economic Evaluation

8.03 Economic costs of the project would consist of capital investment andoperating costs for production and processing infrastructure, on-farm develop-ment and cottage basin capital and production costs, and KSIC net incrementalworking capital. No attempt has been made to quantify benefits from investmentin research, technical assistance and foreign training, or the project evalua-tion study, and costs for these components are not included in the analysis.All costs are net of duties, taxes, price contingencies, interest and othertransfer payments, but include physical contingencies of 5-10% for civil works,equipment, vehicles and incremental operating costs. Traded components in con-struction costs (15%), operating costs (10%), KSIC equipment (45%) and fertil-izer (15% of on-farm production costs) have been adjusted by estimated standardconversion factors of 0.82-0.84 to reflect more accurately the value to theeconomy of utilizing foreign exchange. 1/ Due to widespread unemployment inrural areas, the opportunity cost for unskilled and semiskilled labor, account-ing for approximately 65% of on-farm production costs and 35% of incrementalemployment generated by departmental infrastructure, was valued at 70% of themarket wage rate, corresponding to the upper limit of the 50-70% range typic-ally estimated for the economic cost of unskilled labor in various agriculturalprojects in India.

8.04 A summary of prices used in the economic and financial analysis isshown in Annex 5, Table 2. The export parity price for raw silk is derived fromJapanese imports of standard 20/22 denier, mixed grade quality. Japan importsabout 60% share of world trade in raw silk. The price for silk waste wasderived with reference to Japanese imports, but at lower quality grade. Theprice for raw silk and silk waste is expressed in domestic currency by conver-sion at Rs 10 = US$1, reflecting the estimated standard conversion factor forIndia of 0.8. Added value from KSIC manufactures is taken at domestic prices,because of the specialty nature of production for the domestic market and dif-ficulty in comparison with internationally traded fabrics that include a designelement.

8.05 In the future without the project, it has been assumed that 25% of thetargeted 14,000 ha for new production would convert to sericulture with exist-ing yield levels, producing about 200 tons raw silk for reeling by cottagebasins and charka units, and about 65 tons silk waste. The remaining area

1/ A conversion factor is the ratio of the world market (border) price tothe domestic market price, where the domestic price is expressed indollars converted at the market exchange rate.

39-

(10,500 ha) would remain under well-managed irrigated farms producing tradi-tional crops (paddy, maize, cotton, sugar cane) with an average annual netincome of Rs 3,900/ha. Area and yields for existing rainfed irrigated farmswere assumed to remain at current levels

8.06 The analysis was calculated for a 20-year period during which onemajor equipment replacement was assumed necessary. Yields and processing capa-city utilization were conservatively estimated to reach full levels only inthe third year after initiating operations (see discussion on farm models,para 7.07). Based on these assumptions, the estimated economic rate of returnto the project is 22% (Annex 5, Table 1). A separate rate of return calcula-tion to raw silk production or to processing was considered inappropriate dueto the direct linkages between stages of production and the supporting infra-structure which cannot be decomposed meaningfully.

8.07 Although the base estimate represents a stringent set of assumptions,sensitivity analysis was performed to test results under additional changesin major parameters. The most important of these was the assumption regardingthe projected raw silk price, but a 10% decrease resulted in a rate of returnof 17%, still an acceptable return to the economy particularly with the sub-stantial employment generation impact of the project. Combining a 10% decreasein all benefits with a 10% increase in either capital costs, on-farm productioncosts or operating costs, or with 10% increased benefits in the future withoutthe project resulted in 15-17% rates of return.

8.08 As an additional test, switching values were calculated for criticalvariables and are summarized below. The switching value of a variable is thatvalue at which the net present value of the project is zero (or, when the rateof return equals the opportunity cost of capital). The switching point is thepercentage change required over the discounted appraisal value to produce theswitching value. At an estimated opportunity cost of capital of 12%, theswitching point for total costs and total benefits is 44% and -19%, respec-tively, within acceptable boundaries (see para 8.07).

Switching Values of Critical Variables(OCC = 12%)

Appraisal Switching SwitchingVariable Value Value Point

-----Rs Million------Costs

Capital Costs 458 1,444 >100%On-Farm Production Costs 1,018 2,003 97%Operating Costs 756 1,741 >100%Total Costs 2,232 3,217 44%

BenefitsRaw Silk 3,288 2,302 -30%Total Benefits 5,155 4,170 -19%

Future Without Project Benefits 1,938 2,923 51%

- 40 -

Project Beneficiaries

8.09 In India, it is estimated that sericulture is practiced in nearly5% of all villages, engaging 3.8 million people in various activities, anestimated 30% of whom are from poorer sections of the population. Karnataka,which represents 60% of total Indian silk production and nearly two millionworkers, reflects the characteristics of the industry nationwide. In thestate, there are 6,300 villages where an estimated 90% of the farmers devoteat least a portion of their land to sericulture. In the traditional districts,approximately 80% of the sericulturists with about 60% of the total area cul-tivate less than 1 ha mulberry, and a similar pattern is expected to emergein the new districts, where the 14,000 ha target for new irrigated mulberryis estimated for adoption by approximately 25,000 farm families. However,virtually all wage earners, from field laborers to those involved in tradi-tional reeling and handloom weaving, would be from the poverty income targetgroup. The DOS estimate of annual incremental employment generated by theproject is given below:

Estimated Incremental EmploymentGenerated by the Project

Work-Years

Mulberry cultivation and silkworm rearing 57,300Fabrication of rearing implements 32,000Reeling 16,000Twisting 3,000Weaving - 80% by handlooms 66,000

20% by powerlooms 4,000Fabric finishing - 80% dyed and printed 2,000

Total 180,000

In addition, approximately 15,000 work-years of primarily unskilled labor wouldbe involved in construction of supporting infrastructure under the project,and approximately 9,000 incremental positions would be created in the Depart-ment of Sericulture to operate supporting infrastructure, about 65% of whichwould be opportunities for unskilled and semiskilled workers.

8.10 By converting to irrigated mulberry from traditional crops, a farmfamily would gain an estimated annual increment of Rs 1,265/0.5 ha, comparedto a Rs 1,950 estimated net income level before conversion. This incrementalincome is comparable to about US$300 per family on a 1 ha basis, or aboutUS$50 per capita for an average family of six members. Sericulturistsadopting improved silkworm varieties and practices would gain an estimatedRs 3,075/ha net incremental benefit, or about US$365 per family. An addi-tional attraction to sericulture is that the short crop cycle provides acontinuous cash flow from an average of five but up to 12 harvests annually.Experience is gained rapidly, improvements can be introduced at frequentintervals and any losses due to a reduced or failed crop can be recoveredwithin two months by better results in the next silkworm rearing.

- 41 -

Project Risks

8.11 Main project risks would be small response from silk farmers toadopt improved practices and disease damage to impioved silkworm varieties,which are more disease susceptible than traditional varieties. However, theproject has been specifically designed to minimize those risks, by providingexceptionally strong advisory services (para 3.06) and since silkworm eggscould become disease carriers, modern egg production facilities (para 3.08).Technical assistance (para 3.20) and overseas training programs (para 3.21)are also largely focussed on improving services to growers and on silkwormdisease prevention and control.

8.12 The project presents a difficult management task for the Departmentof Sericulture. To increase production and introduce incentives for qualityproduction, DOS staff will need to work efficiently to provide adequate tech-nical services and supporting infrastructure. Stepping up the scale of grainageoperations considerably and recruiting, training and managing the large numbersof technical staff needed for the project will present a formidable challengeto DOS. Management of KSIC will also have a challenging task in convertingdepartmental processing units into modern, commercially operated establishments.

However, given the priority placed on sericulture by GOK, and the high caliberof DOS staff, the chances for effective project management are good. In viewof the employment and income generating nature of the project, promisingmarket opportunities likely to arise from falling production abroad, favorableconditions for silk production in India and benefits for the industry and theIndian economy, project risks are considered well worth taking.

IX. RECOMMENDATIONS

9.01 Assurances were obtained at negotiations that:

(a) GOI would:

(i) by December 31, 1980 draw up a plan and timetablefor the technical assistance and overseas trainingprogram and would use its best endeavors to imple-ment the plan (para 3.22);

(ii) follow agreed procurement procedures (para 4.04 through4.08);

(iii) cause the Research Committee to submit annual programsfor participating research agencies by March 31, eachyear for IDA review (para 5.21);

(iv) cause its project agencies to observe project reportingrequirements (para 5.22); and

(v) cause its agencies to fulfill project accounting andaudit requirements (para 5.25);

- 42 -

(b) GOK would:

(i) by December 31, 1980 draw up rearing house specifications

(para 3.05);

(ii) follow agreed procurement procedures (para 4.04 through

4.08);

(iii) by September 30, 1980 establish one engineering cell in

DOS and by December 31, 1980 another in KSIC (paras 5.03

and 5.07);

(iv) ensure that KSIC by September 30, 1980 would appoint

its technical and finance directors, the personnel manager

and chief accountant (para 5.08);

(v) by December 31, 1980, establish KSSDI and appoint

the director and three senior staff (para 5.09);

(vi) by September 30, 1980, prepare a staff training

program (para 5.18);

(vii) prepare an annual project implementation plan to

reach IDA before March 31, 1981 and a similar

plan before the same date in each subsequent

year, during the project period (para 5.19);

(viii) cause its agencies to observe reporting requirements

(para 5.22);

(ix) by March 31, 1981, initiate an evaluation study

(para 5.23);

(x) cause its agencies to fulfill project accounting and

audit requirements (paras 5.24 and 5.25); and

(xi) ensure that KSIC would operate with a debt equity ratio

stipulated by IDBI during the period that loans for

capital development are outstanding (para 7.01).

(c) IDBI would observe agreed lending terms and conditions

(para 5.11).

(d) ARDC would ensure lending terms and conditions outlined

in Schedule A (para 5.15).

9.02 Completion of financial arrangements satisfactory to IDA between GOI

and IDBI and ARDC respectively would be conditions of credit disbursement for

IDBI and ARDC components respectively of the Credit (para 5.11 and 5.12).

- 43 -

Schedule APage 1

INDIA

KARNATAKA SERICULTURE PROJECT

Principal Lending Terms and Conditions

1. GOI to ARDC

(a) In respect of ARDC refinancing not exceeding 9 years:

(i) interest rate of 6.25% per annum, less 0.25% forprompt payment, and

(ii) repayment at the end of 9 years.

(b) In respect of ARDC refinancing in excess of 9, but not exceeding15 years:

(i) interest rate of 6.75% per annum, less 0.25% for promptpayment, and

(ii) repayment at the end of 15 years.

(c) The Borrower (GOI) shall bear the foreign exchange risk.

2. ARDC to Participating Banks

(a) Interest rate to be 6.5% per annum for lending to smallfarmers 1/ and 7.5% per annum for lending to otherborrowers;

(b) Installment repayments to coincide approximately withcollections from ultimate borrowers; and

(c) Refinancing to be by purchase of debentures or by loansup to 90% of individual loans.

3. Participating Banks to Ultimate Borrowers

(a) Interest rate to be 9.5% for small farmers 1/ and 10.5%for other borrowers;

(b) A once and for all evaluation fee of 0.5% of the cost ofinvestments may be charged. This fee may be waived withconcurrence of ARDC;

1/ "Small farmer" is defined as "any person primarily engaged in anactivity which provides a predevelopment net return to familyresources to such person and his family not exceeding Rs 2,000(based on 1972 prices) per year, and net return to family resourcesshall mean gross family income from the said activity less costactually incurred".

- 44 -

Schedule APage 2

(c) Farmer's contribution (including obligatory purchase of cooperativebank or society shares, own labor and other contributions in cash orkind):

(i) for lending to small farmers a minimum of 5% of investmentcost;

(ii) for farmers cultivating land providing a predevelopment netreturn to family resources to such farmers and his familyranging for Rs 2,001 to Rs 3,500 based on 1972 prices, aminimum of 10% of investment cost (for the purpose of determin-ing the net returns to family resources in the case of borrowersof reeling units, the criteria agreed to under Credit 947-IN(ARDC III) shall apply); and

(iii) for other farmers, a minimum of 15% of investment costs.

(d) Repayment periods to be based on the ultimate borrower's repayingcapacity, but generally not to exceed:

Ci) four years on loans for plantation and replantation of improvedmulberry;

(ii) three -,ears on loans for rearing equipment;

(iii) five years on loans for rearing houses; and

(iv) seven years on loans for reeling units.

Loan periods may be extended for up to two years in each case forsmall farmers, at the discretion of ARDC.

(e) Grace periods may be granted at the discretion of ARDC, providedthat the repayment period of such loans is not exceeded; and

(f) Technical standards, as agreed by ARDC and the GOK Department ofSericulture, taking into consideration IDA guidelines where applic-able, to be observed.

4. General

(a) Participating banks to maintain separate accounts for lending tosmall farmers;

(b) Security to be in accordance with arrangements between participatingbanks and ARDC;

- 45 -

Schedule APage 3

(c) ARDC shall refinance only sound schemes which, on the basis ofcareful study are considered to be financially and economically

viable, and are backed by satisfactory technical and administrativemanagement to be identified at the time of scheme approval;

(d) ARDC shall forward all applications for refinance of schemes

having total investment costs of US$500,000 equivalent or moretogether with appraisal reports and all other relevant data, to

IDA for its approval;

(e) Where necessary, ARDC may approve rescheduling of loans particularlywhen requests for rescheduling are from districts suffering from

adverse climatic conditions;

(f) Lending Terms and Conditions from ARDC to participating banks, and to

ultimate borrowers, for similar purposes to be identical irrespectiveof source of funds;

(g) Working capital for maintenance of mulberry growing and silkwormrearing expenditures for the first two rearing cycles as well as 10

days working capital requirements for reeling units to be mergedin the term loan under a composite limit;

(h) ARDC to apply eligibility criteria for financing institutions to

obtain refinance fom ARDC, such criteria to be acceptable to IDA.

5. These lending terms and conditions may be amended from time to time

as agreed between IDA and ARDC.

- 46 -ANNEX 1Table 3.1

INDIA

KARNATAKA SERICULTURE PROJECT

Implementation Schedule Major Items

ProjectActivity Total 80/81 81/82 82/83 83/84 84/85 85/86

Mulberry Area BenefittingFronm Project Services Per YearMulberry New Planting (Ha) 14,000 1,400 2,800 4,200 4,200 1,400 -Mulberry Replanting (Ha) 20,000 2,000 4,000 6,000 6,000 2,000 -Existing Irrigated Mulberry Improvement (Ha) 4,000 400 800 1,200 1,200 400 -

Rainifed Mulberry Improvement (Ha) 60,000 6,000 12,000 18,000 18,000 6,000 -

DOS FacilitiesGrainages Completions 10 - - 2 4 4 -Cocoon Markets Completions (Units) 30 - 10 1/ 10 10 - -Model Hatcheries Completions 20 -2 8 - 4 4 4 -Technical Service Centers Establishment/Improvement 150 60 - 30 35 25 - -Communal Hatcheries Establishment/Improvement 1,700 600 2/ 300 3/ 400 400 - -Training Centers Completions 3 - 2 - 1 - -Demonstration Vans Purchased 4 - 2 2 - - -

DOS Staff Recruitment and TrainingSericulture Assistants 270 4/ 100 70 70 30 - -Sericulture Inspectors 100 4/ 20 30 45 5 - -Sericulture Demonstrators 1,500 4/ 540 310 420 230 - -

Credit for Farmers and ReelersMulberry Planting Through Credit Program (Ha) 3,500 350 700 1,050 1,050 350 -No. of Rearing Houses Through Credit Program 1,400 140 280 420 420 140 -No. of Cottage Basins Through Credit Program 500 25 75 100 150 150 -

Processing FacilitiesDepartmental Filature Completion 1 - - - - 1 -KSIC Filature Completion 1 - - - 1 - -KSIC Spun Silk Factory Completion 1 - - - 1 - -KSIC Central Workshop Completion 1 - 1 - - - -

Consultants (Man-Months) 70 - 3 44 22 1 -For CSRTI 19 - 3 12 3 1 -For DOS 24 - - 14 10 - -For KSIC 27 - - 18 9 - -

Study Tours (Man-Months) 380 - 65 111 121 83 -For 6SRTI 120 - 6 42 48 24 -For DOS 260 - 59 69 73 59 -

ResearchLaboratories Completion 7 - 4 3 - - -

Staff Houses Completion 60 - - 40 20Hostel Completion 1 - 1 - - - -

Farm and Miscellaneous Buildings Completion 26 - 4 11 11 - -Farm Development Completion 13 - 1 7 5 - -Scientists Appointment 221 27 78 91 25 - -

1/ 4 in May 1981 and 4 in March 1982.2/ Improvement of existing TSC and Hatcheries.3/ One renovated, the other new.4/ A percentage has been allowed for attritUon. Actual staff required is 250 SA, 100 SI and 1450 SD.

- 47 -ANNEX 1Table 6. 1

INDIA

KARNATAKA SERICULTURE PROJECT

World Cocoon and Raw Silk Production(tons)

1/Cocoon Production 1938 1974 1975 1976 1977 1978

Japan 282,200 101,900 91,200 87,800 79,300 77,600China 65,500 160,000 163,000 165,000 166,000 170,000USSR 22,300 41,000 41,000 41,000 41,000 41,000South Korea 21,900 37,200 36,100 41,700 31,900 28,000India 9,400 36,500 33,400 37,900 44,400 48,600North Korea - 6,000 6,500 6,500 6,800 6,800Bulgaria 2,200 1,800 1,800 1,800 2,200 2,200Brazil 400 7,600 7,800 8,100 7,900 7,700Iran 3,000 3,000 3,000 3,400 3,500 3,500Turkey 2,300 1,800 1,600 1,700 1,400 1,300Others 2/ 29,800 3/ 3,200 4,600 3,600 5,600 5,300

Total 439,000 400,000 390,000 398,000 390,000 392,000

Raw Silk Production 4t

Japan 43,150 18,935 20,170 17,885 16,080 15,960China 4,855 15,600 15,780 16,320 17,760 19,000USSR 1,900 3,240 3,240 3,240 3,240 3,240South Korea 1,825 4,385 5,545 5,495 5,580 4,235India 690 2,445 2,375 2,8:i0 3,080 3,475Italy 2,740 90 60 45 25 20North Korea - 600 650 800 900 1,000Bulgaria 180 230 230 230 240 240Brazil 35 700 1,200 1,200 1,120 1,250Iran 210 380 380 420 430 430Turkey 215 170 150 160 125 120Others 2/ 700 240 340 265 415 390

Total 56,500 47,150 50,120 48,870 48,995 49,360

Source: Mission compilation. Principal references: statistics published by InternationalSilk Association, Government of Japan, Japan Raw Silk Corporation.

1/ Fresh cocoons ("green" weight). Best available estimates for China, USSR, North Korea,Bulgaria, Iran.

2/ Approximately 19 other countries.31 Of which Italy - approximately 19,900 tons.4/ Best available estimates for China, USSR, North Korea, Bulgaria, Iran.

- 48 -

ANNEX 1

Table 6.2

INDIA

KARNATAKA SERICULTURE PROJECT

World Raw Silk Consumption 1/(tons)

Raw Silk Consumption 1938 1974 1975 1976 1977 1978

Japan 15,000 21,815 23,355 21,435 17,605 21,155China n.a. 10,225 9,070 9,210 9,865 10,500 3/India 1,600 2,985 2,940 3,420 3,805 4,200Italy 765 n.a. n.a. n.a. 2,300 2/ 2,040 2/South Korea - 180 300 450 690 900France 2,430 335 430 560 765 705U.S.A. 23,150 145 275 305 225 255West Germany - 160 65 180 180 150Switzerland 200 75 150 165 135 150U.K. 2,)00 75 80 125 110 80

Total 45,145 35,995 36,665 35,850 35,680 40,135

Source: Mission compilation. Principal references: statistics published byInternational Silk Association, Government of Japan, Japan Raw SilkCorporation.

n.a. = not available.

1/ Excluding countries for which data not available.2I Best available estimate.3/ Mission estimate.

- 49- ANNEX I

Table 6.3

INDIA

KARNATAKA SERICULTURE PROJECT

World Raw Silk Exports and Imports(tons)

Exports 1938 1974 1975 1976 1977 1978

China 1/ n.a. 3,855 3,530 4,800 5,300 6,400South Korea - 1,955 680 370 1,150 1,485Brazil - 625 1,005 1,000 850 800Switzerland 70 20 35 45 40 45Italy 2,405 20 25 45 35 25France 130 20 15 10 15 15West Germany - 20 10 1 7 5U.K. - 1 - 4 3 5Japan 29,675 45 - - - -U.S.A. 1,255 1 - - - -

Total 33,535 6,562 5,300 6,275 7,400 8,780

Imports

Japan 1,295 5,920 2,465 2,150 3,355 5,030Italy 25 910 1,880 2,275 2,365 2,050France 2,455 320 460 575 800 680U.S.A 24,570 185 260 375 180 265Switzerland 270 95 185 210 180 190Germany - 180 75 180 190 155U.K. 2,650 75 80 130 110 85Spain - 5 5 30 35 30 1/India 1,100 15 20 45 135 25 1/Other Countries 680 n.a. n.a. n.a. n.a. n.a.

Total 33,045 7,705 5,430 5,970 7,350 8,510

Source: International Silk Association. Some temporary imports included(re-exported thrown yarn).

n.a. = not available.

1/ Best available estimate.

INDIA

KARNATAKA SERICULTURE PROJECT

Indian Mulberry Silk Production and Exports 1960-19781/

------- Production ------- --------------------Exports ------------- - -- --------Reeling Raw Silk ------ Quantity…--------- _-----Value------- Total

Year Area Cocoons Silk Waste Fabrics 2/ Silk Waste Fabrics Silk Waste Value(ha) --------- (tons) ---------- ('000 sq m) (tons) -------- (Rs mil) ----------

1960 82,950 21,635 1,154 581 920 524 8.1 3.4 11.51965 86,190 25,045 1,634 714 1,848 599 17.3 3.7 21.01970 98,250 34,280 2,258 939 7,827 745 121.3 7.3 128.61971 104,090 32,995 2,143 838 3,853 633 58.6 5.3 63.91972 104,885 34,255 2,119 824 3,901 794 62.4 6.1 68.51973 108,960 38,990 2,411 979 4,941 1,218 94.7 21.0 115.71974 120,570 36,535 2,445 997 4,669 430 108.1 6.4 114.51975 124,915 33,450 2,376 913 4,948 718 128.5 7.4 135.91976 125,045 37,890 2,812 1,044 5,935 1,214 176.3 13.8 190.11977 131,095 44,390 3,079 1,158 7,679 1,131 244.5 15.2 259.71978 135,000* 48,600* 3,473 1,200 10,479 1,471 335.9 31.7 367.6

I-,,

Average Annual Increase1960-78 2.7% 4.6% 6.3% 3.9% 10.7% 5.9%

Source: Central Silk Board Statistical Biennial 1978, International Silk Association, * = mission estimate.

1/ Mulberry fabric exports, minor portion of tasar included in silk waste. Value expressed in current terms.

2/ Sarees, scarves/stoles, dress materials, ready made garments, ties, other specialty items.

a Z

H M

?' H

INDIA

KARNATAKA SERICULTURE PROJECT

Japanese Imported Raw Silk and Silk Waste Prices 1971-1979

4/ 5/Year 1971 1972 1973 1974 1975 1976 1977 1978 1979

Raw Silk 20/22 Denier

Quantity Imported (MT) 1/ 4,777 6,881 4,967 4,211 1,685 834 1,746 2,620 761Value (Yen '000,000) 1/ 30,537 40,433 44,702 38,390 13,245 6,643 14,565 20,293 6,270

Price/kg in current Yen 6,393 5,876 8,999 9,117 7,861 7,965 8,342 7,745 8,233

Par Rate/Market Rate for Yen 2/ 350.74 308.00 271.22 291.51 296.80 296.55 268.51 210.47 210.56

Price/kg in current US$ 18.23 19.08 33.18 31.28 26.49 26.86 31.07 36.80 39.10

International Price Index 3/ 36.4 40.3 48.5 60.4 69.6 70.9 76.5 89.6 95.6 -(Average for 1979 = 100)

Price/kg in 1979 US$ 50.08 47.34 68.41 51.79 38.06 37.88 40.61 41.07 40.90

Silk Waste

Quantity Imported (MT) -/ 1,182 1,453 1,902 1,439 1,264 2,171 1,697 2,542 1,560 PValue (Yen '000,000) 1/ 972 1,049 1,958 1,785 927 1,582 1,375 1,911 2,027

Price/kg in current Yen 822 722 1,029 1,240 733 729 810 752 1,299

Par Rate/Market Rate for Yen 2/ 350.74 308.00 271.22 291.51 296.80 296.55 268.51 210.47 210.56

Price/kg in current US$ 2.34 2.34 3.79 4.25 2.47 2.46 3.02 3.57 6.17

International Price Index 36.4 40.3 48.5 60.4 69.6 70.9 76.5 89.6 95.6 6/(Average for 1979=100)

Price/kg in 1979 US$ 6.43 5.81 7.81 7.04 3.55 3.47 3.95 3.98 6.45

1/ CIF Japan. Japan Exports and Imports, Japan Tariff Association, various issues.2/ International Financial Statistics, IMF, January 1976 and March 1980.3/ Estimated by Economic Analysis and Projections Department, IBRD.4/ January through November.

5/ January through July.6/ The increase from 1978 was prorated for the first 7 months of 1979.

0%

-52-ANNEX 1

Table 6.6

INDIA

KARNATAKA SERICULTURE PROJECT1/

Financial Price Projection for Raw Silk(Price per kg)

Raw Silk 20/22 denie 2/ 1985

CIF Japan US$43.80Less: Freight, Insurance (3%) 1.30

FOB Bombay US$42.50Rs 357.00

Less: Inland Transport 3.00Factory Gate, Karnataka 3/ 354.00

Less: Processing Costs- 91.00Cost of Cocoons!/ 5/ 263.00

Silk Recovery (Renditta = 10.5)- 25.00Less? Cocoon Market Fee 0.50

Farmgate Cocoon Price6/ Rs 24.50

1/ Expressed in late 1979 constant price levels. Basedon international market projections. See Table 6.5and para 6.08.

2/ Average weighted price, mixed grades. See Table 6.5.3/ -Includes operating profit margin based on projected

KSIC filature operations. See Annex 4, Table 4.1.4/ Expressed in raw silk equivalent.5/ Silk recovery from good quality cocoon at improved

filature.6/ Median expected price within range for good quality

cocoons.

53 ~~~~~~~~~~ANNEX 2Table 1

INDIA

KARNATAKA SERICULTURE PROJECT

FPROJECT COST SUMMARY WITH PHASING

(RS '000)

1 2 3 4 5 TOTALS

ON.-FARM CREDIT

rLANTATION :1~.: 1400 2800 4200 4200 1400 14000

EQUIFPMENT .;:2'> 1750 3500 5250 5250 1750 l7100REARING HOUSES <3.3 1890 3780 5670 5670 1890 18900

CREDIT FOR REELING

COTTAGE BASINS <-4>: 800 2400 3200 4800 4800 16000

SUBTOTAL--CREDIT 5840 12480 18320 19920 9840 66400

DiEPTi OF SERICULTURE

GRAINAGES 2747 13701 24061 24426 21268 8620.3HIATCHERIUC> 9441 10693 16293 20290 16660 73377MOlIEL HATCHERIES 7107 863 1018 1174 1330 5092

TECH. SERVICE CENTERS 11736 14954 19774 21230 18090 85784

MOBILE tIEMO. UNITS 0 491 524 67 67 11.49TRAININ5 SCHOOLS 1058 3642 1004 1004 1004 7713

COCOON MARKETS 1124 6655 7071 7486 '2964 2-5700'

FI LATURE 0 0 20 1811 4122 559"35INC. ADIMIN. COST 5944 4619 5010 5010 5010 25593'

SUBTOTAL--DOS 32758 55618 74776 82498 70515 316164

KS IC

F ILAT URE 0 5042 37359 0 0 42401SPUN SILK MILL 0 102.63 72957 0 0 83220Ht'G(TRS. ANr' WORKSHOP, 400 570 0 0 0 0 61I0()NET INC. WORKING CAF'ITAL 0 0 0 0 3883 3 018,

SUBTOTAL---KSIC 400 21005 110316 0 3883 135604

RESEARCHi 4395 19642 18939 13417 10727 67:120

TECH.ASST./STUDiY TOURS 0 22~37 8707 6298 '2515 19,852

F'ROJECT EVALUAT'ION STUDY 290 300 300 310) 320 152-0

BASE COST ESTIMAT'E 43682' 111382 231358 12244.4 97800 6066607

PHYSICAL CONTINGENCIES 2184 6856 17304 6016 4662 3702.5

PFRICE CONTINGENCIES 22'72 16476 56956 39470 39599 154773

TOT'AL P'ROJECT COST 48138 134714 305618 167932 142061 798463

:1I 3,500 HA AT RS 4f000/HA.:23,500 HA AT RS 5,000/-HA.

:3.' 1.400 HOUSES AT RS9 13P500/HOUSE.:'4.: 500 UINI TS AT RS3 32r.000/UNII

- 54 - AIR=2Table 2.1

INDIa

KARNATAKA SERICULTURE PROJECT__________________________.,_._

GRAINAGES: ESTIMATED COSTS AND PHASINS-----------------------------------.-. _

(RS '000)

1 2 3 4 5 TOTALS

NO. OF GRAINAGES '<1> 2 4 4 0 0 t0

CIVIL WORKS

GRAINAGE BUILDING <2' 906 3989 6708 5439 1O88 18130AESTIVATION CHAMBERS 0 600 1200 600 0 240)

SUBTOIAL 906 4589 7908 6039 1088 20530FHYS. CONT. (10%) 91 459 791 604 109 20S3

TOTAL 997 5048 8699 6643 1197 22583

EQUIPMENT

COLt, STORAGE FLANT 3' 900 3900 4942 1733 0 11475GENERATORS <:4'- 240 1040 1307 438 0 3025WOODEN TRAYS 103 447 688 482 0 1/?0DOUBLE STANDS 103 447 688 482 0 1720CENTRIFUGES 3 12 18 12 0 45MICROSCOPES 34 148 228 160 0 5/0MOTH CRUSHING MACHINES 14 62 96 68 0 240REFRIGERATORS z,5> 28 120 184 128 0 460EGG CABINETS 4 18 28 20 0 70ACID TREATMENT EATHS 11 49 76 54 0 190

SUBTOTAL 1440 6243 8255 3577 0 19515FHYS. CONT. (5%) 72 312 413 179 0 976

TOTAL 1512 6555 8668 3756 0 20491

VEHICLES

SEDAN 96 192 192 0 0 480DIESEL MINIBUS 124 248 248 0 0 620

SUBTOTAL 220 440 440 0 0 1100PHYS. CONT. (5%) 11 22 22 0 0 55

lOTAL 231 462 462 0 0 1155

OFERATING COSTS

STAFF SALARIES ::6 101 1214 3238 5060 5060 14673SEED' COCOONS R7:> 0 850 3400 8500 13600 26350CHEMICALS ANDI SUPPLIES 0 45 185 450 720 1395UTILITIES 40 160 320 400 400 13200GM CW, VEH, EQUIF 40 160 320 400 400 13.U

SUBTOTAL 181 2429 7458 14810 20190 450S8FHYS. CONT. (5%) 9 121 373 741 1009 2253

TOTAL. 190 2550 7831 15551 21189 4733L

BASE COST ESTIMATE 2747 13701 24061 24426 21268 86203PHYSICAL CONTINSENCIES 183 915 1598 1523 iltl 5337

TOTAL 2930 14615 25659 25949 22386 91540

<1: CAF=10 MIL LAYINGS/UNIT/YR. AFTER 3 YRS., SUPFLYING 2000 HA..2> 4-LEVEL BLDG., 3020 sO. M 2 RS 600/SQO H.3.3> 238 SO. M, 12.5T CAF' IN 7 UNITS, 80 55. M. 2.5T CAF IN 3 UNITS.4.- TWO GEN. EACH 60 KVK CAP IN 7 UNITS, 1 GEN. 12 NVK CAP IN 3 UNITS.

<5'. IMPORTEII, 286 LITER CAPACITY.(6> FOR DETAILS, SEE ANNEX 4 TABLE 9.<7> 25 MIL BIVOL, COCOONS e RS 50/1000, 15 MIL MYSORE e RS 30/1000/YR.

- 55 ANNEX 2Table 2.2

INDIA

K(ARNATAKA SERICULTURE FPROJECT

HATCHERIES: ESTIMATEDi COSTS AND PHASING

(RS '000)

1 2 3 4 5 TO0T AL,

NO. OF HATCHERIES <:l> 600 300 400 400 0 1700

EQUIPMENT

WOODEN TRAYS 2340 1170 2343 2400 0 8253WOODEN STANDS 1537 769 1298 1318 0 4922LEAF CHAMBERS 65 60 80 80 0 285HYGROMETERS 33 30 40 40 0 143MICROSCOPES 660 330 440 440 0 1870GLASS SLIDESP COVERS 126 63 84 84 0 357MANUAL SPRAYERS 120 1 11 148 1 48 0 52 7

SUBTOTAL 4881 2533 4433 4510 0 16357PHYS. CONT. (5%) 244 127 222 226 0 81.8

TOTAL (:2>: 5125 2660 4655 4736 0 17175

OPERATING COST

BUILDtING RENTS <3'., 1080 1620 2340 3060 3060 11160FARMER HONORARIUMS4 720 .1800 2640 3600 4080 12040LABOR WAGES <5:, 2160 3240 4680 8120 612-0 22320PARAFFIN F'AFER, FOAM 300 750 1100 1500 1700 5350DISINFECTANTS 300 750 1100 1500 1700 5350

SUBTOTAL 4560 8160 11860 15780 16660 57020PHYS. CONT. (5%) 228 408 593 789 833 2851

IOTAL 4788 0568 12453 16569 17493 59871

BASE COST ESTIMATE 9441 10693 16293 2-0290 16660 73377PHYSICAL CONTINGENCIES 472 535 815 1015 833 3669

TOTAL 9913 112.28 17108 21305 17493 77046

<1:.CAPACITY APPROX. 100,000 LAYINGS/MO/HATCHERY.<2::~2, EQUIPMENT COST/HATCHERY=RS 10t100.<3)> RS 150/MO/HATCHERY.<;4>". RS 200/MO FOR MANAGEMENT SERVICES.<.5> TWO LABORERS PER HATCHERY ~ RS 150/MO/LABORER.

-56 -

ANINEX 2Table 2.3

IN iT IA

KARNATAKA SERICULTUR.E PROJECT

MODEL HATCHERIES: ESTIMATEDt COSTS AND PHASING

(RS '000)

I 23 4 5 TOTALS)

N.OF MODEL HATCHERIES 4 4 4 4 4 20

CIVIL WORKS

HATCHERY BUIULDING -'I'. 300 300 300 300 300 15-O00

S UPTO0T AL. 300 300 300 300 300 1.500PHYS. CONT. (5%) 15 15 15 15 15 75

TOTAL 315 315 .315 315 315 15 7 5

E GOU I FME N T

LJOODEN TRAYS 24 2 4 24 24 24 1 20W4OODEN STAND'S 13 13 13 13 1 3 66LEAF CHiAMBIE RS 2, 2 2 2 8HYGIROMETERS 1 I 1 1 1 4MICROSCOP"ES is 18 18 18 18 92GLASS SLIDES,COVERS 4 4 4 4 4 18P'OWER SPRAYER 29 29 29 29 29 146SMALL IMFPLEMENTS 4 4 4 4 4 1nINCUBATORS <-2::- 167 167 167 167 167 836

SU'LBTOTAL 262 262 262 262 262 1308P'HYS. FONT. (5%,,) 13 13 13 13 13 65

IOTAL <>275 275 275 275 275 1373

DF'ERATING COSTS

STAFF SALARIES <~4>~ 136 271 407 542 678 2034PARAFFIN PAPEP~ FORMALIN 2 6 10 14 18 50DISINFECT ANTS 6 20 34 48 62 170MiISC SUPPLIES, UTILITIES2 4 6 8 10 30

SUPTOTAL 1 46 301 457 612 768 2284PHYE. CONT. (5%) 7 15 23 31 38 114

TIOTAL. 153 316 400 643 806 23Z98

EPASE COST ESTIMATE 707 863 1018 1174 1330 5092PHYSICAL CONTINGENCIES 35; 43 51 59 66 2 55

TOTAL 7~~ ~ ~~~~~~~~~~~43 906 1069 1233 1396 53;47

1.~*110 SO, h e RS 640/'SO, h..7>4 810O. OXYGEN DEMANDI INCUBATORS/HATCHERYP AT- RS 10r440/INCUBATOR.i TOTAL EOUIPMENT COST PER HATCHEPY=RS 68,760.

4~ FOR DETAILS, SEE ANNEX 4 T'ABLE 9.

- 57 -

ANNEI 2Table Z.4

INDIA

KARNATAKA SERICULTURE PROJECI

A. TECHNICAL SERVICE CENTERS: ESTIMATED COSTS APT' 9HASINu,

B. MOBILE DEMONSTRATION UNITS: ESTIMATED COSTS AND' FHASIN6

(MS '000)

1 2 ~ ~ ~~~3 4 5 TOTALS

A. TECH SER CNTRS (150)

NO. IF TSC .1>, 61 30 35 24 0 150

EQUIPMENT

INCUBATORS 2> 1910 940 1096 752 0 4696POWER SF'RATER'S 628 438 512 3 51 0 1(79MICROSCOF'ES, SLIDIES III 75 87 60 0 33.TTYP'EWRITERS 293 144 168 115 0 720OFFICE FURNITURE 0 30 35 24 0 89

SUB'TOTAL 2942 1627 1898 1302 5 7769THYS. CONT. (5%) 1 47 81 95 65 0 393

TOTAL (3 3089 1708 1993 1367 -0 5)

VEHICLES

DIESEL JEEP'S (1/7SC) 3757 1848 2156 1470 0 9239MOPED'S (5/TSC) 915 450 525 360 2 2200(

jUETOTAL 4672 2298 2681 1838 0 11429FPHYS. CON7. (5%) 234 115 134 92 0 5714

TOTAL 4906 2413 2815 1930 0 12063

OPERATING COSTS

STAFF SALARIES :4 3233 9646 13356 15900 15900 5801)TBUILDING RENT 5> 219 327 453 540 540 20790DM VEHICLE 366 576 756 900 900 3193FORMALIN (1 TON/TIC/YR) 213 376 441 525 525 2040MISC SUPPFLIES, UTILITIES 91 144 189 225 225 874

SUBTOTAL 4122 11029 15195 18090 18090 66526FHYS. CONT. 155) 206 551 760 905 905 3326

TOTAL 4328 11580 15955 10995. 18995 -69052'

BASE COST ESTIMATE 11736 149?54 19774 21230 18090 85704PHYSICAL CONTINGENCIES 587 748 989 1062 905 4289

TOTAL 12323 15702 20763 22292 18995 90073

B. MOBILE DEMO UNITS (4)

4 DIESEL VANS (1,5 TON) 0 313 313 0 0 626

>HY5. COAT. (5%.) 5 16 16 0 0 31

TOTAL 0 329 329 0 0 658

EQUIPMENT

F'RIJE CTOINS 0 23 23 0 0 46FILMS 0 21 21 0 0 42EXHIBITS 0 100 100 0 0 200

SUBTOTAL 0 144 144 0 0 288PHYS. CONT. (5%) 07 7 0 0 14

TOTAL 0 151 151 0 0 302

OFERATING COSTS

STAFF SALARIES /3. 0 10 19 19 19 670DM VEHICLES 0 24 48 45 48 168

SUBTOTAL 0 34 67 67 67 235FPHYS. CONT. 15%) 0 2 3 3 3 12

TOTAL 0 35 71 71 71 247

BASE COST ESTIMATE 0 491 524 67 67 1149PHYSICAL CONTINGENCIES *05. 26 3 3 57

TOTAL 0 515 550 71 71 1207

,IAPPROX. 55 TSC IN RAINFED AREAS ANMD 95 TIC IN IRRIGATET' AREAS..2BIOLOGICAL OXYGEN DEMAND INCUBATORS, 3/TOC AT RS 10,441/UNIT,

.3' EQIUIPMENT COST PER TSC=RS 123,840.

.4, FOR DiETAILS, SEE ANNEX 4 TABLE 9.

.5 RS 300/M0.

ANNIX 2Table 2.5Page 1

INDIA

KARNATAKA SERICULTURE PROJECT

TRAINING SCHOOLS 1>: ESTIMATED COSTS AND PHASING--------------------------------------------------

(RS '000)

1 2 3 4 5 TOTALS

A. EXISTING SCHOOL (1)________________________

CIVIL WORKS

HOSTEL BUILDING <2> 728 0 0 0 0 728

SUBTOTAL 728 0 0 0 0 72BPHYS. CONT. (10%) 73 0 0 0 0 73

TOTAL 801 0 0 0 0 801

EQUIPMENT

HOSTEL FURNISHINGS 14 0 0 0 0 14PROJECTOR 12 0 0 0 0 12FILM PRINTS 10 0 0 0 0 10POWER SPRAYER 7 0 0 0 0 7MICROSCOPES 6 0 0 0 0 6TYPEWRITER 5 0 0 0 0 5LIBRARY EQUIPMENT 4 0 0 0 0 4BOOKS - 4 0 0 0 0 4

SUBTOTAL 61 0 0 0 0 61FHYS. CONT. (5X) 3 0 0 0 0 3

TOTAL 64 0 0 0 0 64

VEHICLES

DIESEL JEEPS 62 0 0 0 0 62

SUBTOTAL 62 0 0 0 0 62PHYS. CONT. (5%) 3 0 0 0 0 3

TOTAL 65 0 0 0 0 65

INC.OPERATING COSTS

STAFF SALARIES (3> 133 133 133 133 133 665TRAINEE STIFENDS 60 120 120 120 120 540OSM CW.VEH.,EQUIF. 10 50 50 50 50 210MISC SUPPLIES, UTILITIES 5 5 5 5 5 25

SUBTOTAL 208 308 308 308 308 1440F'HYS. CONT. (5%) 10 15 15 15 15 72

TOTAL 218 323 323 323 323 1512

BASE COST ESTIMATE 1058 300 308 308 308 2290PHYSICAL CONTINGENCIES 89 15 15 15 15 15L

TOTAL 1148 323 323 323 323 2441

L> CAPACITY 100 TRAINEES/MO/SCHOOL. 1-4 WEEK COURSES.-2 845 sO. M 2 RS 860/SO. M. ACCOMMODIATIONS FOR 50 TRAINEES.-3 FOR DETAILS, SEE ANNEX 4 TABLE 9.

-59 2 abe2.5

I NDIA

KARNATAKA SERICULTURE PROJECT

TRAINING SCHOOLS <1>1 ESTIMATED COSTS ANI' P'HASING

(RS '000)

1 2 3 4 5 TOTALS

B. NEW SCROOLS (2)

CIVIL WORKS

SCHOOL BtUILDtING <4> 0 952 0 0 0 952

HOSTEL BUILDING <:2>' 0 1456 0 0 0 1456

SUBTOTAL 0 2408 0 0 0 2408

PHYS, CONT. (10%) 0 241 0 0 0 2-41

TOTAL 0 2649 0 0 0 2649

EQUIPMENT

HOSTEL FURNISHINGS 0 60 0 0 0 60

PROJECTORS 0 23 0 0 0 2,3

FILM PRINTS 0 21 0 0 0 - 21

POWER SPRAYERS 0 15 0 0 0 15

MICROSCOPES 0 24 0 0 .024TYPEWRITERS 0 10 0 0 0 10

LIBRARY EQUIPMENT 0 60 0 0 0 60

BOOKS 0 110 0 0 0 110

SUBTOTAL 0 322 0 0 0 322

PHYS. CONT. (5%) 0 16 0 0 0 16

TOTAL 0 338 0 0 0 338

VEHICLES

DIESEL JEEP'S 0 123 0 0 0 123

SUBTOTAL 0 123 '1 0 0 123PHYS, CONT. (5%) 0 6 0 0 0 6

TOTAL 0 129 0 0 0 12 9

OP'ERATING COSTS

STAFF SALARIES <3> 0 266 266 266 266 1064

TRAINEE STIPENDS 0 120 240 240 240 840OSM CW,VEH.,EQUIP, 0 90 180 180 180 630MISC SUPPFLIES. UTILITIES 0 5 10 10 10 35

SUBTOTAL 0 481 696 696 696 2>-69

P'HYS. CONT. (5%) 0 24 35 35 35 120

TOTAL 0 505 731 731 731 2697

BASE COST ESTIMATE 0 3334 696 696 696 5422

PHYSICAL CONTINGENCIES 0 207 35 35 35 392

TOTAL 0 3621 731 731 731 5014

TOTAL COSTS--ALL SCHOOLS

BASE COST ESTIMATE 10S8 3642 1004 1004 1004 71713

PHYSICAL CONTINGENCIES 89 303 50 50 50 542

GRAND TOTAL 1148 3945 1054 1054 1054 8255

1: CAP'ACITY 100 TRAINEES/MO/SCHOOL, 1-4 WEEK COURSES.2;' 845 SO. M @ RS 860/SO. M. ACCOMMODtATIONS FOR 50 TRAINEES..3 FOR DETAILS, SEE ANNEX 4 TABLE 9.-4Ž% 550 S50. M 9 RS 860/SO, M.

- 60 -ANNEX 2Table 2.6

INDIA

KARNATAKA SERICULTURE PROJECT_____________________________

COCOON MARKETS: ESTIMATED COSTS AND PHASING--------------------------------------------

(RS '000)

1 2 3 4 5 TaTALS

NO. OF MARKET UNITS <1> 0 10 10 10 0 30

CIVIL WORKS__.__________

MRKT. BUILDING UNITS <2> 500 5000 5000 4500 0 15000

SUBTOTAL 500 5000 5000 4500 0 15000FHYS. CONT. (10%) 50 500 500 450 0 1500

TOTAL 550 5500 5500 4950 0 16500

EQUIPMENT

TICKET PRINTING MACHINES 0 400 200 110 0 710

WEIGHING SCALES 125 241 121 100 0 587TOP-PAN BALANCES 125 162 62 50 0 399

DENIER SCALES 19 39 21 15 0 94METAL CONTAINERS 85 177 54 50 0 366TYPEWRITERS 20 10 10 8 0 48

SUBTOTAL 374 1029 468 333 0 2204PHYS. CONT. (5%) 19 51 23 17 0 110

TOTAL 393 1080 491 350 0 2314

OPERATING COSTS

STAFF SALARIES 3> 250 520 1395 2320 2514 6989MISC. OFFICE EXPENSES 0 106 218 333 450 1107

5UBTOTAL 250 626 1603 2653 2964 8096FHYS. CONT. (5%) 13 31 90 133 148 405

TOTAL 263 657 1683 2786 3112 8501

BASE COST ESTIMATE 1124 6655 7071 7486 2964 25300

PHYSICAL CONTINGENCIES 81 583 604 599 148 2015

TOTAL 1205 7238 7675 8085 3112 27315========== ======= ns==a =-=====a====…====== =====

:- 30 UNITS e 23 SITES, 12 SITES=NEW MRKTS., 11 SITES=EXISTING MRKTS.2. UNIT=845 SO. M e RS 590/SQ. n.3 FOR DIETAILS, SEE ANNEX 4 TABLE 9.

41- ~~~~~~~ANNIEX2T510. 3.7

J NlDIA

KARNATAKA SERICULTURE P'ROJECT

DEPARTMENTAL FILATURE <1 1: ESTIMATED, COSTS AND P'HASING

(RS '000)

1 2 3 4 5 TOTALS

CIVIL WORKS

LANED

CITE-4 ACRES 0 0 20 0 0 20

SUBTOTAL 0 0 20 0 0 20

PHYS.CONT.410%) 0 0 2 0 0 2

TDTAL 0 0 22 0 0 22

CIVIL WORKS

SITE DEVELOPMENT 0 0 0 70 30 ,100COMP'OUNDI WALL - 0 0 0 50 0 50STAFF QUARTERS 42) 0 0 0 70 30 100MAIN BUILDING <3> 0 0 0 306 131 438

SUBTOTAL 0 0 0 496 191 608PHYS. CONT, (lOX) 0 0 0 50 19 69

TOTAL 0 0 0 546 210 756

EQUIPMENT

REELING UNIT (400 ENDS) 0 0 0 990 2310 3300RE-REELING UNITS <4> 0 0 0 11 16COCOON NOT AIR DRYER 0 0 0 6 14 20BOILER 0 0 0 28 12 40PRESSURIZED COOKING UNIT 0 0 0 36 84 120WOODEN COCOON TRAYS 0 0 0 0 5 5MISC, SMALL EQUIPMENT 0 0 0 0 7 7

SUBTOTAL 0 0 0 1065 2443 3508PHYS, CONT. (5%) 0 0 0 53 122 175

TOTAL 0 0 0 1118 2565 3e6-El,

VEHICLES

TRUCK (3-TON) 0 0 0 130 0 130DIESEL VAN 0 0 0 75 0 75

SUBTOTAL 0 0 0 205 0 205PHYS. CONT. (5Z) 0 0 0 10 0 10

TOTAL 0 00 215 0 215

OPERATING COSTS

STAFF SALARIES 5 0 0 0 0 283 263COCOONS 6&' 0 0 0 0 1035 10350tM CW, VEH, EQUIP' 0 0 0 20 120 140UTILITIES 0 0 0 25 50 70,

SUBTOTAL 0 0 0 45 1488 15,33PHYS, CONT. (5%) 0 0 0 2 74 7?

TOTAL I 0 0 47 1562 16-09

RiASE COST ESTIMATE 0 0 20 1811 4122 5Y53P,HysiCAL CONTINGENCIES 0 0 2 115 216 333

TOTAL 0 0 22 1927 4338 6286

~.1 SEMI-AUTOMATIC. CAP=400 KG COCOONSI/DAY WITH DOUBLE SHIFT OFEP.'2': HOUSING FOR GEN. MGR.PSECTION OFFICERS.,3.> 680 S0. M B RI 645/Sg. H..>4> TWO UNITS OF 10 MACHINES EACH..5> FOR DETAILS. SEE ANNEX 4 TABLE 9,6. 400 KS/D1AY AT RS 23/KG FOR 300 DAYS OPERATION/IKYP

- 62 -

ANNEX 2Table 2.8

INDIA

KARNATAKA SERICULTURE PROJECT_____________________________

DOS INCREMENTAL ADMINISTRATIVE COST <1i---------------------------------------

(RS '000)

1 2 3 4 5 TOTALS

VEHICLES <2> 1550 0 0 0 0 1550EQUIPMENT 1730 0 0 0 0 1730INC. STAFF SALARIES 1277 2874 3193 3193 3193 13730INC. OPERATING COSTS 287 645 717 717 717 3083ENGINEERING CELL <3 1100 1100 1100 1100 1100 5500

SUBTOTAL 5944 4619 5010 5010 5010 25593PHYS. CONT. (5%) 297 231 251 251 251 1280

TOTAL 6241 4850 5261 5261 5261 26873

<1> 4 JD, 9 DIST, 15 DIV. OFFICES, 1 MONITORING AND 1 ACCTS. UNIT.<2> 33 VEHICLES (SEDANS, JEEPS).-3> ENG. STAFF DEPUTED FROM STATE PWD FOR SUFERVISION OF CONSTRUCTION.

- 63 -

ANNEX 2T*bO 3. I

INDIA

KARNATAKA SERICULTURE PROJECT

KSIC FILATURE <1>: ESTIMATED COSTS AND FHASING

(RS '000)

1 2 3 4 5 TOTALS

CIVIL WORKS

SITE DEVELOF'MENT 0 15 0 0 0 15NEW REELING HALLS (2> 0 869 580 0 0 1449REMOD. FRESENT HALLS <3. 0 80 54 0 0 134AUXILIARY BUILDINGS <4.. 0 112 75 0 0 187ADMINISTRATIVE BLOCK (5> 0 250 166 0 0 416MISC. SMALL WORKS *6 0 151 100 0 0 251STAFF UUARTERS <7> 0 240 160 0 0 400

SUBTOTAL 0 1717 1135 0 0 2852PHYS. CONT. (10%) 0 172 114 0 0 285

TOTAL 0 1889 1249 0 0 3137

EQ UIPMENT

REELING MACHINES 8 0 1609 23037 0 0 24646COOKING UNIT <9> 0 706 10121 0 0 10827RE-REELING UNITS o10: 0 5 46 0 0 51COCOON HOT AIR DRY. 111 0 128 1149 0 0 1277STEAM GENERATORS 0 81 755 0 0 836ELECTRICAL EQUIFMENT 0 46 416 0 0 462FEES AND INSTALLATION 0 400 320 0 0 720FURN., OFFICE EQUIP. 0 0 250 0 0 250

SUBTOTAL 0 2975 36094 0 0 39069FHYS. CONT. (10%) 0 298 3609 0 0 3907

TOTAL 0 3273 39703 0 0 42976

VEHICLES

TRUCKS 0 350 90 0 0 440SEDANS 0 0 40 0 0 40

SUBTOTAL - 0 350 130 0 0 480PHYS. CONT. (5%) 0 18 7 0 0 24

TOTAL 0 368 137 0 0 504

BASE COST ESTIMATE 0 5042 37359 0 0 42401PHYSICAL CONTINGENCIES 0 487 3729 0 0 4216

TOTAL 0 5529 41088 0 0 46617

1- ANNUAL PRODUCTION CAPACITY=162 TONS RAW SILK.2- 2,318 SQ. M B RS 625/SQ. M.3 1,160 SQ. M B RS 116/SQ. M.:4-- 320 SQ. M t RS 585i'SO. M."5. 520 SQ. M B RS 0o0/SQ. M.-6 BOILER SHEDS. WATER TREATMENT, TRENCHES, ROADS, SOIL FIFING, EIC.

- S00 SCG. M t RS SOO/SQ. M.S 6 IMFOPFEtt mACHINES OF 400 ENDS, CAPACITY 5.6 KG/HR/MACHINE,-,?-. 3 IMPORTED BOILERS, CAFACITY 125 KG/HR/MACHINE.1' MACHINES. CAFACITY 6 KG/HR/MACHINE.IJ HOT AIR DRYERS, CAPACITY 375 KG/HR/MACHINE.

-64- AM= 2Table 3.2

IN ['IA

KARNATAKA SERICULTURE PM)JECT

KSIC SPUN SILK MILL <:4>?- ESTIMATED COSTS AND P'HASING

CR5 '000)

1 2 3 4 5 TOTALS

CIVIL WORKS

SITE DIEVELOP'MENT 0 15 0 0 0 15

NEW MILL <2>": 0 1500 1000 0 0 2500AUXILIARY BUILDING <3>- 0 86 57 0 0 143

ADMIN..BUILDING <,4> 0 194 130 0 0 324

STAFF QUARTERS <5> 0 143 95 0 0 238INFIRMARY <"'6> 0 65 43 0 0 108

MISC. SMALL WORKS 0 175 117 0 0 292

SUBTOTAL 0 2178 1442 0 0 3620

PHYS. CONT. (10%) 0 218 144 0 0 362

TOTAL 0 2396 1586 0 0 3982)

EQUIUPM EN T

IMP'ORTED, EQUIP'MENT 0 3954 61664 0 0 65618

LOCAL EQUIP'MENT 0 896 8065 0 0 8961

RE'CONDITIONING 7>0 2795 750 0 0 354 5

FEES AND, INSTALLATION 0 400 761 0 0 1161

FIJRN.v OFFICE EQIUIP. 0 0 '275 0 0 275

SUBTOTAL 0 8045 71515 0 0 79560P'HYS. CONT. (10%) 0 805 7 1521 0 0 7T5 6

TOTAL 0 8850 78667 0 0 87516

VE HIC LES

SE-DAN 0 4 0 0 0 0 40

SUBTOTAL 0 40 0 0 0 40

PHYS. CONT. (5%) 0 2 0 0 0

TOTAL 0 42 0 0 0 4-2

BASE COST ESTIMATE a 10263 72957 0 0 8,3220PHYSICAL CONTINGENCIES 0 1024 7296 0 0. 8320

TO TA L 0 11287 80253 0 0. 91510

<1ANNUAL PRODUCTION CAPACITY=150 TONS SPUN SILK YARN AND, BYP'RODIUCTS.

2 4,000 SQ. M ~ RS 625/SQ. M.:<:3>: 204 SQI. M @ RS 700/SO. M.::4:: 405 SQ. M 9 RS 800/SQ. M.

HOUSING FOR GEM MGRP WRKS MGRY O&M SPYVR. 29'7 SQ M 9 RS 800/SQ M.

S: 135 SQ. M 9 RS 800/SQ. M..'T;Or WHICH RS 2.5 MILLION FOR PARTS, RS 1.05 MILLION F'OR LAB3OR

--AG 2- 65 - Table 4

IND IA

KARNATAKA SERICULTURE PROJECT

RESEARCH: ESTIMATED COSTS ANti F'HASING

(RS '000)

1 2 3 4 5 TOT6i

GOVT. OF KARNATAKA

SERI. RESEARCH INSTITUTE

CIVIL WORKS 460 2388 700 0 0 3',4PEQUIFMENT 1000 6050 0 0 0 070'VEHICLES 120 480 0 0 0 60(OSTAFF SALARIES 448 896 1792 1792 1792 6'0OPERATING COSTS 30 210 342 342 342 126'.

SUBTOTAL 2058 10024 2834 2134 2134 191e4

UNIV. OF AGRIC. SCIENCES

CIVIL WORKS 165 1859 0 0 0 2024EQUIPMENT 491 675 1100 0 0 276 VEHICLES 64 0 0 0 0 64STAFF SALARIES 198 363 527 527 527 2142INC. OPER. COSTS 75 137 182 182 182 751

SUBTOTAL 993 3034 1809 709 709 7254

UNIV. OF BANGALORE

EOUIPMENT 471 1139 0 0 0 1610VEHICLES 310 0 0 0 0 310STAFF SALARIES 150 150 601 601 601 2103INC. OPER. COSTS 69 102 275 275 275 996

SUBTOTAL 1000 1391 876 876 876 5019

UNIV. OF MYSORE

CIVIL WORKS 60 424 0 0 0 484EQUIPMENT 100 229 0 0 0 329VEHICLES 64 0 0 0 0 64STAFF SALARIES 100 200 200 200 200 900INC. OPER. COSTS 20 40 40 40 40 1_0

SUBTOTAL 344 893 240 240 240 1957

CENTRAL SILK BOARD

CSRTI CENTRAL STATION

CIVIL WORKS 0 1500 1000 0 0 2'i00EQUIPMENT 0 0 1500 1000 1125 362'iVEHICLES 0 0 350 0 75 425STAFF SALARIES 0 0 2091 2091 2091 6273INC. OPER. COSTS 0 0 153 153 153 459

SUBTOTAL 0 1500 5094 3244 3444 13282

REGIONAL STATIONS (2)

LAND 0 800 0 0 0 800CIVIL WORKS 0 500 1322 1000 0 2022EQUIPMENT 0 0 510 240 150 900VEHICLES 0 0 130 0 0 130STAFF SALARIES 0 0 1052 1052 1052 3156OPERATING COSTS 0 0 344 344 344 1032

SUBTOTAL 0 1300 3358 2636 1546 8040

SUB-STATIONS (10)

LAND 0 1000 0 0 0 1000CIVIL WORKS 0 500 1500 1000 0 3000EQUIPMENT 0 0 800 800 0 1600VEHICLES 0 0 650 0 0 650STAFF SALARIES 0 0 1410 1410 1410 4230OF'ERATING COSTS 0 0 368 368 360 1104

SUBTOTAL 0 1500 4728 3578 1778 11504

GRAND TOTAL RESEARCH

LAND 0 1800 0 0 0 1800CIVIL WORKS 685 7171 4522 2000 0 14378EQUIPMENT 2062 8093 3910 2040 1275 17380VEHICLES 558 480 1130 0 75 2243STAFF SALARIES 896 1609 7673 7673 7673 25524INC. OPER. COSTS 194 489 1704 1704 1704 5795

BASE COST ESTIMATE 4395 19642 18939 13417 10727 671'0PHYSICAL CONTINGENCIES 439 1964 1894 1342 1073 6712

TOTAL 4834 21606 20833 14759 IISOO 73031

- 66 -ANIEX 2Table 5

INDIA

KARNATAKA SERICULTURE PROJECT_____________________________

TECH. ASSISTANCE AND STUDY TOURS: ESTIMATED COSTS AND PHASING

(US$ '000)

1 2 3 4 5 TOTALS

TECHNICAL ASSISTANCE___ ________________

NO. OF EXPERTS________________

DEPT. OF SERICULTURE 0 0 3 3 0 6KSIC 0 0 6 5 0 11CSRTI 0 1 2 2 1 6

TOTAL NO. OF EXPERTS 0 1 11 10 1 23

TOTAL NO. OF MONTHS 0 3 44 22 1 70

TRAVEL COST <1> 0 2 22 20 2 46MONTHLY RATE <2> 0 36 528 264 12 840LOCAL SUBSISTENCE <3> 0 7 106 53 2 168

TOTAL COST-TECH. ASST. 0 45 656 337 16 1054==s==swsssssss=s===c==. s=ss=z=.==s s======= … =s == =:======== …

STUDY TOURS

DEPT. OF SERICULTURE

NO. OF STUDY TOURS 0 17 20 21 17 75NO. OF MONTHS 0 59 69 73 59 260

CSRTI

NO. OF STUDY TOURS 0 2 4 4 0 10NO. OF MONTHS 0 6 42 48 24 120

TOTAL NO. OF STUDY TOURS 0 19 24 25 17 85TRAVEL COST <1> 0 38 48 50 34 170

TOTAL NO. OF MONTHS 0 65 111 121 83 380MONTHLY COST <4> 0 195 333 363 249 1140

TOTAL COST-STUDY TOURS 0 233 381 413 283 1310====== ===s======== ====== ============ = =====

GRAND TOTAL

USS '000 0 278 1037 750 299 2364RS '000 EQUIVALENT 0 2337 8707 6298 2515 19858

<1> USS 29000 FOR RT ECONOMY AIR TICKET..:2 USS 12000/MO. FEES..::3> 20% OF MONTHLY RATE.4 USS 39000/MO. TUITION AND EXF'ENSES.

- 67 -ANNEX 3

INDIA

KARNATAKA SERICULTURE PROJECT

Schedule of Estimated Disbursements .1/(IJS$ millions)

Cumulative Dis-IDA Fiscal Year Disbursements During bursements atand Quarter Quarter end of Quarter

1980/81

March 31 1.0 1.0June 30 2,0 3.0

1981/82

September 30 2.0 5.0December 31 2.0 7.0March 31 2.0 9.0June 30 2.0 11.0

1982/83

September 30 4.0 15.0December 31 3.0 18.0March 31 4,0 22.0June 30 5.0 27.0

1983/84

September 30 5,0 32.0December 31 3,0 35.0March 31 3.0 38.0June 30 3.0 41.0

1984/85

September 30 3,0 44.0December 31 3.0 47.0March 31 3.0 50.0June 30 3.0 53.0

1985/86

September 30 2/ 1.0 54.0

1/ Assumes Credit Effectiveness September 30, 1980.

2/ Assumes Project Completion by June 30, 1985 and Credit Closing onDecember 31, 1985.

INDIA

KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

CASH FLOW PROJECTIONS AND FINANCIAL RATE OF RETURN

(Rs 000's)

WITHOUT PROJECT WITS PROJECT _-IndEan FP.OY. 80 - 81

onward 80 - 81 81 - 82 82 - 83 83 - 84 84 - 85 85 -R 86 - 87 87 - 88 88 - 89 89 - 90 90 - 91 91 - 92 92 - 93

1. Cash Tfl.fow

(1) Reve-ne 75672 75672 74028 44796 74592 112234 112234 112234 112234 112234 112234 112234 112234 112234

Long term debt -/ - 15001 75591 - - - -

Incresse/(Decrease) in short termdebt - (248) (9822) 7202 - (10000) (6779)

Eqoity 4172 4945 13000 55000 - - - -

Total Cash Inflow 79844 80617 101781 E65565 81794 i12234 102234 105455 1122234 1122322 34 112234 112234 112234

Cash Oatf low

(2) Fixed As-et. - 400 19960 110316 _- - - - - - (4894)-/

(3) Increass/(Decrease) in workingcapital 3/ - 12 (276) (8452) 4356 8243 - - - - - - - (31034)1/

(4) Operating eT7eos-es 11 76897 77177 79164 60399 54106 77505 77505 77505 77505 77505 77505 77505 77505 77505

Income tax 3/ _- - - - - - - - - - 12588 17327 29314

lnterext on short tern debt 4/ 2947 2947 2928 2173 1977 2517 1767 508 - - - - - -

Long term debt sernice-Interest 5/ - - - - 10039 8743 7447 6151 4855 3559 2263 967

Long tern debt service-Priocipal 5t - _ - 12139 12139 12139 12139 12139 12139 12139 12136

Dividendst6 - - - - - - - - - - - 9825 9825 9825

Total Cash Outflow 798'+ 80536 101776 164436 826t7 109147 98858 96303 94499 93203 91907 113021 1U4657 80716

Net Cash Flow/(autflow) - 81 5 1129 (823) 3087 3376 9152 17730 19031 20327 (787) 7577 31518

Cumolative Net Cash Flow 81 86 1215 392 3479 6855 16007 33742 52773 73100 72313 78890 111408

IT. Financial Rate of Retain

Ixcreme-tal Net Besef its before PhvsIcal 8/ (692) (23595) (116242) 17355 27711 35954 35954 35954 35954 35954 35954 35954 447319-

( i)- ( 2 ) - ( 3) - (4) Continaancisc

Phyiacal Contingencies - (1511) (ilO25) - - -

Increemental Net Benefits Including Physical (692) T25106) (127267) 17355 27711 35954 35954 35954 35954 35954 35954 35954 44731

Contingencies FINANCIAL RATE OF RETURN 16%

1/ Se Table 4. 2. 4/ At 15% p.o. F/ Salnage value.

2/ 7/3 f Ee . .t t 5/ 10 year loan with 2 years grace period at 9.5%. p.a. op to RE 20 million, 8/ Net of Rs 1.225 million segati-e benefit in 5 bi

3/ Cash, tefore or-pl.s fonda, receivables, at 11% p.a. for the balsoce. "without project" case. -0

is-ent-ies l payahle. 6/ 12% of share capital see Table 3. 9/ Net of reco--ry of RE 27.151 million of workingcapital for "without project" case.

INDIA

RARNATARA ~E ICRU0LT U RIPROJ ECT

KARNATAKA S1ILK INDUSTRIII I;UK)RFUATIJN

CONSO)LIPATI) IOM ITTPETROJECTTONS2

(R. OGOs.)

WITTHOUT PEODJECT -________ WITH PROJECTTndian JUY. 80 - 81 0 90 1 91 2 92-3onward 80 - 81 81 - 82 82 - 83 83 - 84 84 - 85 85 - 86 86 - 8/ 87 - 88 88 - 69 85- 9 90- 9 91- 9 92- 9Revenue

Pilsiu-es 1/ 40134 40134 38490 15484 22800 47358 47338 47358 47358 47358 47358 47358 47358 47358Weav.ing ill 2/ 14712 14712 14712 14712 14712 14712 14752 14712 14712 14712 14712 14712 14712 14712Sp_t aili mIll 3/ 16420 16420 16420 14600 37080 50164 50164 30164 50164 53164 10164 50164 00164 50164Twisting mill L 4406 4406 4406 - - - -1124 f7 TT73 TTZ- TI2- T C 123Total Revenue 7T5672 4472 7U2 796 7S2 T23 tf7

Operting Expanse

C.~~~..rs I/ ~~~~44298 44298 42880 19757 23085 41553 41553 41953 41553 415453 453 453 4533114 Waste 3/ ~~~~~~6325 6325 6363 6101 10812 13987 13987 13987 13987 13987 13987 13987 13987 13987CSric i andt tnsn3 ls13 1739 i754 1602 2042 2354 2354 2354 2354 2354 2354 2354 2354 2354Sub Total 5202526 502 7b 5993Z 79 578942894 7894 T§9? 57894 3789 579

Other roots 3( 80 3O 8030 BO30 8030Iiaue / 13108 13168 13751 20156 2654 380 30 30580780 30 3800 3800 3800Weaving mill 2/ 4457 4457 4457 4457 4457 4457 4457 4457 4457 4452745 47 4745

p-c sill, mill 7/ 5266 5286 5525 6045 6785 9083 9083 9383 9083 9083 9083 9083 9083 9083Twitin c/l 4 9/ 924 2099 - - - - - -Worknlhcp 5/ 236 295 7501 750 750 751 150 750 750 750 750 750 750 750 Headquarters 6/ 484 705 1605 1531 1521 1521 1521 1521 1521 1571 1521 1521 1521 1921

Total Operating inpenses 76 89 7 77177 79164 60399 54106 77505 77505 77505 77505 77505 77905 77505 77505 77505

Opecaiicg 0t-fIlc/Lnoa (1225) 11505) (5136) (16033 20486 34729 34729 34729 34729 347228 34729 34729 34729 34729

Depreciation 2-' 664 664 664 826 13229 13228 13228 13228 1322 13228 13228 13227 13223 12228Inteest n shrt ten dbt A/ 2922947 2928 217 1973 2547 1767 508 - - -

Interest or 1L-ne tern debt 9,-- 10039 8741 7447 6151 485-5 239

Net profit/(L-s) brior taxe (4836) (SIlO) (8728) (18602) (4758) 10241 12287 14842 16646 17942 19230 20534 21501208

Irnrattflent allowance 10/ - - - - - - - - - - (19375) (5127) - 24502~~~~19375 (517) -2450income tax- ------ (12589 (17327) (29714)

6et Peafit(ne fte txs(4836) (5116) (6728) (18602) (4738) 13241 12287 14642 16646 17942 11377 2019 7.174 17273

1/ For detaIls ee talbles 4.4, 4.1. 5 Foe details see Table 5.1. 9/ 10 year loan with 2 years grace period on interet and principal, et 9.10. p.- up2/l Fur details see Table 4.3.6 Foe details see Table 5.2. to Rn 20 million, at 111. p.o. far the balnc..5/For details se fable 4.2. 7/ 30 yeats for civil weeks, 10 years foe l0/ 18.751%, oH nee fixed assts, revesd 10 year ft-r rho i,cv-tment.

T/ For detaile see Table 4.5. -ah-soy aed equipment, straight li-e Tii7 At the rate of 57.757. of taxai le income. Taxa.ble linsome in determined axing declining8/ At 151, p... balance deptecietion. Tax losnes are carried forward until absorbed by profits.Inet

meet credit of 253 of new fined assets lse and 204,~ tan rebate -vai ble far hank-ward oreas (T. Niarxslpor, Mysere).

INDIA

KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

BALANCE SHEET(Rs 000's)

March 80 March 81 March 82 March 83 March 84 March 85 March 86 March 87 March 88 March 89 March 90 March 91 March 92 March 93

AssetsCash 1,022 1,115 1,149 1,979 1,155 4,299 7,675 16,827 34,562 53,593 73,920 73,133 80,710 111,408

Receivables 6,306 6,306 6,169 3,733 6,216 9,352 9,352 9,352 9,352 9,352 9,352 9,352 9,352

Inventories 19,968 19968 -19,797 13,945 15,983 21,059 21,059 21 059 21,059 21,059 21,059 21,059 21 059

Subtotal current assets 27,296 27,389 27,115 19,657 23,354 34,710 38,086 47,238 64,973 84,004 104,331 103,544 111,121

Net Fixed Assets 1,551 1,287 21,382 136,590 123,362 110 134 96,906 83.678 70,450 57,222 43,994 30,766 17,538 -

Total Assets 28,847 28,676 48,497 156, 24 146,716 144844 1

34,992 130,916 135,423 141,226 148,325 i34,310 128.659 111,408

LiabilitiesPayables 145 145 142 133 171 197 197 197 197 197 197 197 197

Short term borrowings 19,647 19,647 19,399 9,577 16,779 16,779 6,779 - - - - - -

Current portion of long term debt - - - 12 1 2139 12,139 12 139 12 139 12,139 12 136 -

Subtotal current liabilities 19,792 19,792 19,541 21,849 29,089 29,115 19,115 12,336 12,336 12,336 12,333 197 197

Long term debt - - 15,800 84,970 72,831 60,692 48,553 36,414 24,275 12,136 - -

Investment allowance 19,375 24,502 24,502 -

Share capital 9,055 14,000 27,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000

Retained earnings - (5,116) (13,844) (32 446) (37,204) (26,963) (14.676) 166 16,812 34,754 34617 27,611 21,960 29 408

Net worth 9,055 8,884 13,156 49,554 44 796 55,037 67,324 82,166 98 812 116,754 116,617 109.,611 103960 111.408

Total Liabilities 28,847 28,676 48.497 156 373 146,716 144,844 134,992 130,916 135,423 141,226 148,325 134,310 128,659 111,408

1/ For purpose of rate of return analysis, (Table 1) sale of assets at net value is assumed.

ID

-71 - ANNEX 4Table 4.1

INDIA

KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

NEW FILATURE: ESTIMATED OPERATING PROFIT(Hs OOO's)

84 - 85

Indian F.Y. 81 - 82 82 - 83 83 - 84 onward

Raw Silk Production (t) - - 90 162

Raw Silk Revenue at 340 Rs/kg - - 30600 55080

Waste Silk -/ - - 563 1013

De&d Pupae - 100 178

Total Revenue - - 31263 56271

Raw Material

Cocoons -/ - - 23085 41553

Consumlt_ - - - 90 162

Sub-Total 23175 41715

Utilities

Pover-/ _ 15 78 106

Coal-/ - 10 95 171

Sub-Total - 25 173 277

Salaries & Wages 57 117 1771 2168

Overheads

Repairs & Maintenance - - - 110 220

Insurance & Other 25 35 115 135

Sub-Total 25 35 225 355

Selling Expenses-/ - - 485 1000

Training 55 105 - -

Total Operating Costs 137 282 25829 45515

Operating Profit/(Loss) (137) (282) 5434 .10756

1/ 252 of raw silk production at 25 Rs/kg.

2/ 552 of raw silk production at 2 Rs/kg.

3/ Silk yield 10%. Cost 25.65 Rs/kg including 0.4 Rs/kg for transportation.

4/ 1 Rs/kg of silk produced.

5/ 165 KVA at 264 Rs, 570 thousand units at 0.11 Rs/unit at full capacity.

6/ 855t at 200 Rs/t at full capacity.

7/ 1% of civil works. 0.5% of equipment starting in 84 - 85.

8/ Packing and Transportation at 0.34 Rs/kg, Silk Exchange Commission at 2% of raw silk sales,

excluding internal sales to weaving mill.

- 72 - ANNEX 4Table 4.2

INDIA

KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

SPUN SILK MILL: ESTIMATED OPERATING PROFIT(Rs 000's)

Indian F.Y. Without Project With Project -

80-81 81-82 82-83 83-84 84-85onward onward

Production (t) 2/Spun silk yarn 45 45 40 110 150

Noil yarn 45 45 40 63 80

Noils - Old process 11 .11 10 13 15

New process - - - 5 8

Revenue 3/ 16,420 16,420 14,600 37,080 50,164

Operating CostsRaw Material

Silk waste 4/ 7,500 7,500 6,625 11,375 15,000

Chemicals 5/ 270 270 240 660 900

Subtotal 7,770 7,770 6,865 12,035 15,900

UtilitiesPower 6/ 215 215 204 615 732

Coal 7/ 180 180 180 400 400

Subtotal 395 395 384 1,015 1,132

Salaries & wages 3,720 3,979 4,266 5,824 5,824

OverheadsRepairs & maintenance 8/ 700 700 700 1,000 1,300

Others 400 400 400 500 600

Subtotal 1,100 1,100 1,100 1,500 1,900

Selling expenses 9/ 51 51 45 196 227

Training - - 250 250 -

Total operatirg costs 13,036 13,295 12,910 20,820 24,983

Operating profit 3,384 3,125 1,690 16,260 25,181

1/ Year 80-81 same as without project.2/ Old process used for first three years. New process in operation in 1983-84 at 67%

capacity, from 1984-85 onward at 100% capacity, reconditioned equipment operating at

80% capacity in 1983-84,100% from 1984-85 onward.

3/ Selling prices: spun silk yarn300 Rs/kg, noil yarn 60 Rs/kg, noils 8 Rs/kg for new

process and 20 Rs/kg for old process.

4/ Yields: 15% for old process before reconditioning, 20% after reconditioning, 30% for

new process. Cost 25 Rs/kg.5/ 6 Rs/kg of spun silk yarn produced.

6/ 440 KVA at 264 Rs and 0.9 million units at 0.11 Rs/unit at full capacity for old pro-

cess; 1,210 KVA and 3.8 million units at 0.11 Rs/unit for new process.

7/ 900 t for old process, 1,100 t for new process at 200 Rs/kg.8/ 700,000 Rs for existing equipment plus 1% of civil works and new equipment after year 3.

9/ Packing at 0.5 Rs/kg, advertising 100,000 Rs starting third year.

- 73 -

ANNEX 4

INDIA Table 4.3

KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

WEAVING PLANT: ESTIMATED OPERATING PROFIT(Rs 000's)

WITHOUT PROJECT -80 - 81

Unit Selling Price onwardIndian F. Y. Rs/m Volume 21 Amount

Revenue

Plain Fabrics 60g/m 50 24 1200Plain Fabrics lOOg/m 75 96 6912Printed Fabrics 60g/m 60 40 2400Gold Lace lOOg/m 105 40 4200

Total 200 14712

Operating Costs

Raw materialRaw silk 3/ 7436Chemicals and dyes 4/ 100Gold for Gold Lace 5/ 1112Consumables 6/ 80

Subtotal 8728

UtilitiesPower 7/ 129Coal 8/ 36

Subtotal 165

Outside Printing Charges 9/ 400Salaries and wages 3091

OverheadsRepairs and maintenance 50Insurance and other 130

Subtotal 180

Selling ExpensesPacking 10/ 100Showroom expenses 11/ 144Discounts 12/ 230Advertising 13/ 147

Subtotal 621

Total Operating Costs 13185

Operating Profit 1527

1/ With project, profit will be Rs 1527 in 80-81 through 82-83, and Rs 1063 onward due to chansein raw silk price from 32D Rs/kg to 340 Rs/kg.

2/ In km.3/ Raw silk loss in degumming process 25%. Raw silk cost 320 Rs/kg without project and for

80-81 through 82-83 with project, 340 Rs/kg afterwards.4/ At 0.5 Rs/m of material produced.5/ 400 kg at 2780 Rs/kg.6/ 0.4 Rs/m of material produced.7/ Based on 200 KVA and 690,000 units at 264 Rs/KVA and 0.11 Rs/unit.8/ 180 t at 200 Rs/t at full capacity.9/ Outside charges at 10 Rs/m.10/ At 0.5 Rs/m.11/ Rent: 12,000 Rs/year/showroom for the 4 existing showrooms. Office expenses

24,000 Rs/year/showroom.12/ For bulk purchases: 6 1/4% on 25% of sales.13/ 1% of sales.

- 74 -

INDIA ANNEX 4

Table 4.4KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

EXISTING FILATURES ESTIMATED OPERATING PROFIT

(RS '000)

WITHOUT PROJECT WITH PROJECT-Indian F.Y. 80-81 81-82 82-83

Onward% Capacity Utilization 100 97

RevenueRaw Silk 2/ 50,240 48,632 22,407Silk Waste 3/ 1,175 1,137 524Dead Pupae 41 190 184 85Duppion Silk 5/ 960 930 428

Total Revenue 52,565 50,883 23,444

Operating Expenses

Raw MaterialCocoons 6/ 44,298 42,880 19,757ConsumabTes 7/ 157 152 70

Sub-total 44,455 43,032 19,827

UtilitiesPower 75 73 34

Coal 8/ 640 620 285Sub-total 715 693 319

Salaries & Wages 11,041 11,550 8/18,862 9/

OverheadsRepairs & Maintenance 58 55 35

Insurance & Other 445 440 335Sub-total 503 495 370

Selling Expenses 10/ 909 876 323

Total Operating Expenses 57,623 56,646 39,701

Operating Profit/(Loss) (5,058) (5,763) (16,257)

4 Year 80-81 same as without project.i/ 157T without project; 152t and 70t respectively for 81-82, 82-83 with

project. Selling price Rs 320/kg.3/ 30% of raw silk production. Selling price Rs 25/kg, All sales are internal

to Spun Silk Mill.4/ 60% of raw silk production. Selling price Rs 2/kg.35 5% of raw silk production. Selling price Rs 120/kg.6/ Silk yield 9%. Filature gate price Rs 25.65/kg.7/ Rs 1/kg of raw silk produced.8/ 3,200t at full capacity, at Rs 200/ton.9/ Includes provision for retired employes.10/ Packing and transporation at Rs-0.34/kg. Silk Exchange Commission at 2% of

raw silk sales, excluding internal sales to weaving plant and twisting mill.

- 75 -

ANNEX 4Table 4.5

INDIA

KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

TWISTING MILL: ESTIMATED OPERATING PROFIT(Rs 000's)

WITHOUT PROJECT WITH PROJECTV

Indian F.Y. 80 - 81onward 80 - 81 81 - 82

Revenue

Twisted silk, llt at 360 Rs/kg 3960 3960 3960

Fabrics, 16.5 km at 27 Rs/kg 446 446 446

Total 4406 4406 4406

Operating Expenses

Raw Material

Raw Silk 12t at 320 Rs/kg 3820 3820 3820

Chemicals & Consumables 20 20 20

Sub-Total 3840 3840 3840

Dyeing & Printing 125 125 125

Power & Coal 82 82 82

Salaries & Wages 585 585 1760 2/

Overheads 132 132 132

Total Operating Expenses 4764 4764 5939

Operating Profit (Loss) (358) (358) (1533)

1/ Twisting mill will be closed down in March 1982.2 Includes provision for retired employees.

- 76 I

ANNEX 4Table 5.1

INDIA

KARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATION

WORXSHOP: .ESTIMATED OPERATING COSTS(Rs 000's)

WITHOUT PROJECT WITH PROJECT

Indian F.Y. 80 - 81 81 - 82onward 80 - 81 onward

AnnualStaff No. Cost No. Salary No. Cost No. Cost

(,eneral Manager - - 1 30 - - 1 30

Works Manager - - 1 22.5 1 23 1 23

Design Engineer - - 2 19.5 1 20 2 39

Draftsman - - 1 9 1 9 1 9

Accounts Officer - - 1 13.5 - - 1 14

Administrative Assistant - - 1 11.3 - 1 11

Storekeepers - - 3 9 - - 3 27

Supervisors 9 2 9 1 9 2 18

Foremen - - 2 11.3 - - 2 23

Skilled Mechanics 18 162 41 9 18 162 41 369

Helpers/Peons - 10 45 19 4.5 10 45 19 86

Clerks, Typist, Cashier - - 7 7.5 1 7 7 52

Total 29 216 81 33 275 81 701

Consumables 20 20 49

Total operating costs 236 295 750

- 77 -

ANNEX ATal<5.2

INDIA

KARNATAKA SERICULTURE PROJECT

TARNATAKA SILK INDUSTRIES CORPORATION

HEADQUARTERS: ESTIMATED OPERATING COSTS(Rs 000's

WITHOUT PROJECT WITH PROJECT

Indian F.Y. 80 - 81 83 - 84onward 80 - 81 81 - 82 82 - 83 onward

AnnualStaff No. Cost No. Salary No. Cost No. Cost No. Cost No. Cost

Managing Director 1 30 1 45 1 45 1 45 1 45 1 45

Financial Director - - 1 45 1 23 1 45 1 45 1 45

Technical Director - - 1 45 1 23 1 45 1 45 ] 45

Secretary - - 1 22.5 1 17 1 23 1 23 1 23

Personnel Manager - - 1 30 1 23 1 30 1 30 1 0

Marketing Manager - - 1 30 - _- - 1 15 1 30

Purchase Manager - - 1 30 - _ _ _ 1 8 1 30

Internal Auditor - - 1 30 _ _ _ _ _ 1 30

Chief Account Officer - - 1 22.5 1 12 1 23 1 23 1 23

Purchasing Assistants - - 7 7.5 - - - - 2 15 7 53

Administrative Officer - - 1 13.5 1 11 1 14 1 14 1 IL

Technical Assistants - - 2 19.5 1 10 1 20 1 20 2 39

Cost Accountant 1 23 1 22.5 1 23 1 23 1 23 1 23

Accounts Officer 5 38 3 7.5 3 22 3 22 3 22 3 2,

Audit Assistants 3 22 3 7.5 3 22 3 22 3 22 3 .2

Personnel Assistants - - 6 9 2 18 4 36 6 54 6 54

Research & Development

Officer (Filature) - - 1 30 1 15 1 30 1 30 1 30

Market Economist - - 1 19.5 - - - - 1 10 1 2 0

Marketing Assistants - - 2 13.5 - - - - 1 7 2 2,

Civil Engineer - - 1 22.5 1 17 1 23 1 23

Clerks/Stenographer 2 15 15 7.5 4 30 8 60 15 113 )5 -1

Drivers/Peons 8 36 10 ;4.5 8 36 8 36 8 _36 _( 10

Total 20 164 62 31 347 37 497 52 623 61 76~

Other Expenses

Rent 20-/ 108 108-/ 108-1 1o8--

Travel 150 100 500 400 30

Administrative Expenses 150 150 500 400 'y

Total operating costs 484 705 1605 1531 1521

1/ 6000 sq ft at 18 Rs/year

2/ Assessment for occupied square space in Department of Sericulture

- 78-

ANNEX 4INDIA TABLE 6

KARNATAKA SERICULTURE PROJECT

DEPARTMENTAL FILATURE: ESTIMATED NET OPERATING PROFIT

AND FINANCIAL RATE OF RETURN(Re '000)

OPERATING YEAR PRE- 1 2 3-11 12C CAPACITY UTILIZATION OPERATION 37% 67% 100% 100%

SEMIAUTOMATIC FILATURECocoon Throughput (tons/yr)21 - 45 80 120 120Raw Silk Production (kg/yr)- - 4,285 7,805 12,000 12,000

Revenue

Raw Silk at Rs 340/kg 3/ - 1,457 2,654 4,080 4,080Silkwaste at Rs 25/kg- - 28 50 75 75

Total Revenue - 1,485 2,704 4,155 4,155

Operating CostsStaff Salaries - 115 190 283 283Cocoons - 1,035 1,840 2,760 2,760O&M CW, Veh., Equip. 20 70 100 150 150Utilities 25 25 50 60 60

Total Operating Costs 45 1,245 2,180 3,253 3,253

Operating Profit (Loss) (45) 240 524 902 902

Financial Rate of ReturnTotal Revenue - 1,485 2,704 4,155 4,155

Less: Capital Investment-/ 1,901 2,775 - - (720)Operating Costs 5/ 45 1,245 2,180 3,253 3,253Net Working Capital- - 52 - - (52)

Net Benefits (FRR = 14%) (1,946) _2,587) 524 902 1,674

1/ Calculation for semiautomatic filature with five machines of 40 ends each, processing at full capacity 400 kg cocoons perday with double shift operation 300 days per year.2/ Renditta assumed to improve from 10.5 in first year to 10.0 in third year.3/ Approx. 2.5% of cocoon throughput.4/ For details, see Annex 2, Table 2.7. Includes physical cunLingencies. Salvage value of land and assets in year 12.5/ Two weeks supply of cocoons. Recovered in year 12.

INDIA

KARNATAKA SERICULTURE PROJECT

Cottage Basins: Projected Reeler Income and Financial Returns(Rs )

Before l

YEAR Development - 1 2 3 4 5 6 7 8-11 12

Cocoon Throughput (kg/yr) - / 2,000 Z,000 6,000 8,000 10,000 10,000 10,000 10,000 10,000 10,000

Silk Yarn Production (kg/yr) - 167 167 510 695 910 910 910 910 910 910

CASH INFLOW 4Revenue from Silk Yarn - 40,000 40,000 137,700 187,650 245,700 245,700 245,700 245,700 245,700 245,700

Revenue from Silk Waste 5 900 900 2,500 3,600 4,500 4,500 4,500 4,500 4,500 4,500

CASH OUTFLOWCapital Investment 6 _ (20,000) - - - - - _ - 3,000

Operating Costs 2 8 (37,400) (37,400) (138,000) (184,000) (230,000) (230,000) (230,000) (230,000) (230,000) (230,000)

Inc. Working Capital - - - (12,000) - - - - - - 12,000

NET BENEFIT BEFORE FINANCINGTotal 3,500 (16,500) C 9,800) 7,250 20,200 20,200 20,200 20,200 20,200 35,200

Incremental - (20,000) (13,300) 3,750 16,700 16,700 16,700 16,700 16,700 31,700 1

INTERNAL RATE OF RETURN = 32b.

FINANCING 91OK Subsidy - 4,000 - _

Loan Receipt - 14,000 12,000Less: Debt Service - - - (9,375) (8,710) (8,045) (7,380) (6,705) - -

NET BENEFIT AFTER FINANCINGTotal 3,500 1,500 2,200 (2,125) 11,490 12,155 12,820 13,495 20,200

Incremental - (2,000) (1,300) (5,625) 7,990 8,655 9,320 9,995 16,700 31,700

RETURN TO REELER's EQUITY = 50+%

1/ Incremental analysis based on charka operator upgrading to cottage basin (five basin unit).

2/ Before development = 200 day operation per year; cottage basin operations build from 150 to 250 days per year in three years.

3/ Before development renditta of 12, improving to 11 in three years of cottage basin operation.

4/ Charka quality Rs 240/kg; cottage basin quality Rs 270/kg.

5/ Improving from 35% to 33% of silk yarn production, at Rs 15/kg.

6/ Cottage basin capital costs = reeling shed (40 sq m) @ Rs 10,000; reeling unit (five basins) I Rs 4,500; re-reeling machine, cleaning stand, skeining and bundling machine

@ Rs 1,500; denier scale, cooking vessels, boiler @ Rs 2,000; fees and installation @ 2,000; Total Rs 20,000. Salvage value in year 12.

7/ Before development operating costs = cocoons @ Rs 17/kg, labor at Rs 10/day (two workers) and fuel at Rs 4/day. Cottage basin operating costs 2 cocoons @ Rs 21/kg,

labor at Rs 50/day (10 workers) and utilities at Rs 30/day.

8/ Two weeks supply cocoon, recovered in year 12.9/ Farmer equity = 10%, contributed before subsidy and loan.

10/ 407 of equipment cost or Rs 4,000, whichever is lower.

11/ Inc. working capital included in long-term loan. Seven-year loan at 11%, two-year grace with interest capitalized.

ANNEX 4Table 8.1

INDIA

KARNATAKA SERICULTURE PROJECT

0.5 Ha Irrigated Farm Model: Projected Income and Financial Returns(Rs)

YEAR BEFOREPARAMETERS-I DEVELOPMENT 1 2 3 4 5 6-20Avg. No. of Rearings 5 5 5 5 5 5 5No. of Layings3/ 1,500 1,350 1,500 1,500 1,400 1,400 1,400Cocoon Yield (kg/0.5 ha) 260 235 305 330 350 350 350Cocoon Price (Rs/kg) 21 21 22.2/ 23 23 23 23

CASH INFLOW

Cocoon Revenue 4/ 5,460 4,935 6,710 7,590 8,050 8,050 8,050Byproduct Revenue- 655 590 740 760 805 805 805

Total 6,115 5.525 7.450 8,350 8,855 8,855 8,855

CASH OUTFLOW

Production Costs5Productiond Costsnr 45 45 45 45 45 45 45Land Tilling-4Fertil zer:6 800 975 1,175 1,305 1,305 1,305 1,305Power77 8 100 100 100 100 100 100 100Rearing Materials-/ - - 25 35 35 35 35Eggs29/ 10/ 375 335 450 525 490 490 490Field Labor - 425 450 480 540 540 540 540Rearing Laborll/ 2,500 2,000 2,810 3,125 3,125 3,125 3,125

Subtotal 12/ 4,245 3,905 5,085 5,675 5,640 5,640 5,640Capital Investment- - 6,750 - -- - _

Total 4,245 10,655 5,085 5,675 5,640 5,640 5,640

NET BENEFIT BEFOREFINANCING

Total 1,870 (5,130) 2,365 2,675 3,215 3,215 3,215Incremental - (7,000) 495 805 1,345 1,345 1,345FINANCING X/ INTERNAL RATE OF RETURN - 15%

Loan Receipt - 6,075 - - - - -Less: Debt Service - - 2,385 2,210 2,030 1,850 -

NET BENEFIT AFTERFINANCING

Total 1,870 945 (20) 465 1,185 1,365 3,215Incremental - (925) (1,890) (1,405) (685) (505) 1,345

RETURN TO FARMER'S EQUITY - 15%

1/ This model is based on a sericulturist producing average quality multivoltine cocoons whoupgrades to bivoltine cocoon production. Traditional mulberry variety is replaced withimproved variety over years 1 and 2 while multivoltine cocoon production continues at areduced-level. Credit assistance is taken (based on 10% farmer equity) for constructionof a rearing house in year 1, which is used for three rearings of bivoltine silkwormsin year 2. Family labor is included at the market wage rate (Rs 5/day).

2/ Cocoon production per 100 layings assumed to increase from 17 hg before development to 25kg at full development, reflecting improved quality of eggs and lower silkworm mortalitywith the project.

3/ Price based on two rearings multivoltine, three rearings bivoltine hybrid cocoons.41 Excess leaf, stems (for fodder), silkworm litter (for fertilizer): reduced from 12% to

10% of cocoon revenue over the period of development.5/ Bullock team ploughing for seven days at Rs 6/day.6/ At full development: 90 kg urea; 60 kg N,P,I (compound fertilizer); 10 tons FYM.

Approx. half dosage applied to traditional mulberry variety.7/ Electricity 500 kwh at Rs 0.20/kwh.8/ Foam, parafin paper, tray replacement, cocooning frame rental, etc.9/ Rs 25/100 layings before development, rising to Rs 35/100 layings at full development.1O/ 108 workdays at full development, at Rs 5/day11/ 125 workdays per rearing at full development, at Rs 5/day.12/ Rearing house (55 sq m).13/ Farmer equity = 10%. Five-year loan at 10.5% interest.

- 81 -

ANNEX 4Table 8.2

INDIA

KARNATAKA SERICULTURE PROJECT

1 Ha Irrigated Farm Model: Projected Income and Financial Returns

(Rs)

BeforeYEAR Development 1 2 3 4 5 6-20PARAMETERSAvg. No. of Rearings 5 5 5 5 5 5 5No. of Layings 2/ 3,000 2,300 2,975 3,000 2,800 2,800 2,800Cocoon Yield (kg/ha) 520 400 595 660 700 700 700Cocoon Price (Rs/kg) 23 23 25 25 25 25 25

CASH INFLOWCocoon Revenue 11,960 9,200 14,875 16,500 17,500 17,500 17,500Byproduct Revenue 3/ 1,435 l,100 1,635 1,650 1,750 1.750 1,750

Total 13,395 10,300 16,510 18,150 19,250 19,250 19,250

CASH OUTFLOWProduction Costs

Land Tilling 4/ 90 90 90 90 90 90 90Fertilizer 5/ 1,605 1,950 2,350 2,610 2,610 2,610 2,610Power 6/ 200 200 200 200 200 200 200Rearing Materials 7/ - 30 50 70 70 70 70Eggs 8/ 750 575 890 1,050 980 980 980Field Labor 9/ 850 900 965 1,075 1,075 1,075 1,075Rearing Labor 10/ 5,000 4,000 5,625 6,250 6.250 6,250 6,250

Subtotal 8,495 7,745 10,170 11,345 11,275 11,275 11,275Capita-l Investment 11/ - 13-500 - - - - -

Total 8,495 21,245 10,170 11,345 11,275 11,275 11,275

NET BENEFIT BEFORE FINANCINGTotal 4,900 (10,945) 6,340 6,805 7,975 7,975 7,975Incremental - (15,845) 1,440 1,905 3,075 3,075 3,075

INTERNAL RATE OF RETURN = 16%

FINANCING 12/Loan Receipt - 11,475 - - - - _

Less: Debt Service - - 4,500 4,170 3,835 3,500 -

NET BENEFIT AFTER FINANCINGTotal 4,900 530 1,840 2,635 4,140 4,475 7,975Incremental - (4,370) (3,060) (2,265) (760) (425) 3,075

RETURN TO FARMER'S EQUITY = 16%

1/ This model is based on an experienced sericulturist producing good quality multivoltinecocoons who upgrades to bivoltine cocoon production. In Year 1, total yield is temporarilyreduced while traditional mulberry variety is replaced with improved variety and creditassistance is taken (based on 15% farmer equity) for construction of a rearing house.Family labor is included at the market wage rate (Rs. 5/day).

2/ Cocoon production per 100 layings assumed to increase from 17 kg before development to25 kg at full development, reflecting improved quality of eggs and lower silkwormmortality with the project.

3/ Excess leaf,, stems (for fodder), silkworm litter (for fertilizer); reduced from 12% to107. of cocoon revenue over the period of development.

4/ Bullock team ploughing for 15 days at Rs. 6/day.5/ At full development: 180 kg urea; 120 kg N, P, K (coumpound fertilizer); 20 tons FYM.

Approx. half dosage applied to traditional mulberry variety.6/ Electricity 1,000 kwh at Rs. 0.20/kwh.7/ Foam, parrafin paper, tray replacement, cocooning frame rental, etc.8/ Rs. 25/100 layings before development, rising to Rs. 35/100 layings at full development.9/ 215 workdays at full development at Rs. 5/day.10/ 250 workdays per rearing at full development at Rs. 5/day.11/ Rearing house (95 sq m).

12/ Farmer equity = 15%. Five-year loan at 10.57. interest.

- 82 -

ANNEX 4INDIA Table 8.3

KARNATAKA SERICULTURE PROJECT

0.5 Ha New Irrigated Farm Model: Prolected Income and Financial Returns(Rs)

YEAR BEFORE

P1/A~TERSif DEVELOPMENT 1 2 3 4 5-13 14PAtRAMETERS=

Avg. No. of Rearings 2 5 5 5 5 5No. of Layings _ 250 680 1,200 1,400 1,400 1,400Cocoon Yield (kg/0.5 ha) ) 50 150 300 350 350 350Cocoon Price (Re/kg) - 23 23 23 23 23 23

CASH IN

Crop Revenue 3,150 1,575 - -- Cocoon Revenue u _ 1,150 3,450 6,900 8,050 3,050 8,050Byproduct RevenueO 125 345 690 805 805 805

TOTAL 3,150 2,850 3,795 7,590 8,855 8,855 8,855

CASH OUT

Capital Investment 3/ -Land Prep. and Planting- - 275 -Planting Material - 75 -Fertilizer4' - 715 -Equipment5' - 2,500 -Misc. - 125 -

Subtotal - 3,690 - - --

Production Cost4-' 1,200 600 -

Land Tilling - - 45 45 45 45 45Fertilizer - 260 975 1,175 1,305 1,305 1,305Power - 50 100 100 100 100 100Rearing Materials - - 20 35 35 35 35Eggs - 75 240 420 490 490 490Field Labor - 200 350 475 540 540 540Rearing Labor - 415 1,560 2,500 3,125 3,125 3,125

Subtotal 1,200 1,600 3,290 4,880 5,640 5,640 5,640Net Working Capital - 500 - - - (500)

TOTAL 1,200 2,100 3,290 4,880 5,640 5,640 5,140

NET BENEFIT BEFORE INTERNAL RATE OF RETURN = 13%FINANCING

Total 1,950 (2,940) 505 2,710 3,215 3,215 3,715Incremental - (4,890) (1,445) 760 1,265 1,265 1,765

FINANCING'Loan Receipt - 3,7708 8-Less: Debt Service - 395 395-' 2,280 2,080 - -

NET BENEFIT AFTERFINANCING

Total 1,950 435 110 430 1,135 3,215 3,715Incremental - (1,515) (1,840) (1,520) (815) 1,265 1,765

RETURN TO FARMER'S EQUITY = 13%

1/ This model is based on a well-managed irrigated farm converting to sericulture. Before development net benefits are anaverage of returns to paddy, maize and cotton production. In year 1, gradual replacement of traditional crop withmulberry allows single cropping plus two small silkworm rearings. Credit assistance (based on 10% farmer equity) istaken for plantation and equipment expenses and working capital for two rearings. Family labor is included at themarket wage rate (Rs 5/day).

2/ Excess leaf, stems (for fodder), silkworm litter (for fertilizer).3/ Approx. 55 workdays at Rs 5/day.4! 20 kg urea; 30 kg N,P,K; 10 tons FYM.5/ Rearing trays (60), stands (3), cocooning frame (70), small implements.6! See footnotes 5-11, Table 8.2.7/ Farmer eauity = 10%. Four-year loan at 10.5% interest.8 Interest payment only.

- 83 -

ANNEX 4INDIA Table R.4

KARNATAKA SERICULTURE PROJECT

1 Ha Rainfed Farm Model: Projected Income and Financial Returns(Rs)

BeforeYear Development 1 2 3-7

PARAMETERS 1/Avg. Nof of Rearings 5 4 3 3No. of Layings 2/ 1,175 1,190 1,210 1,175Cocoon Yield (kg/ha) 200 215 230 235Cocoon Price (Rs/kg) 17 17 18 18

CASH INFLOWCocoon Revenue 3,400 3,655 4,140 4,230Byproduct Revenue 3/ 680 680 680 680

Total 4,080 4,335 4,820 4,910

CASH OUTFLOWProduction CostsLand Tilling 4/ 70 70 70 70Fertilizer 5/ 525 955 1,030 1,050Rearing Materials 6/ - 20 20 20Eggs 7/ 235 240 265 295Field Labor 8/ 160 170 130 185Rearing Labor 9/ 1,575 1,575 1,575 1,575

Total 2,565 3,030 3,140 3,195

NET BENEFITTotal 1,515 1,305 1,680 1,715Incremental - (210) 165 200

INTERNAL RATE OF RETURN = 50+%

1/ This model is based on assumed improvements to a 1 ha rainfed mulberryfarm as a result of technical services with the project. Net benefitsare assumed to derive primarily from increased yield, with only minorquality improvement in cocoons (6% price increase). Family labor isincluded at the market wage rate (Rs. 5/day).

2/ Cocoon production per 100 layings assumed to increase from 17 kg beforedevelopment to 20 kg at full development, reflecting improved quality ofeggs and lower silkworm mortality with the project.

3/ Excess stems (for fodder), branches (for fuel), silkworm litter (forfertilizer).

4/ Bullock team ploughing for 12 days at Rs. 6/day.5/ At full development: 20 kg urea; 100 kg N; 50 kg P,K; 10 tons FYM.

Approx. half dosage applied before development.61 Equipment rental.7/ Rs 20/100 layings before development, increasing to Rs 25/100 layings

at full development.8/ 37 workdays per year at Rs. 5/day.9/ 315 workdays per year at Rs. 5/day.

INDIA

KARNATAKA SERICULTURE PROJECT

Departmental Facilities: Staff Salaries and Phasinge(Rs' 000

-- Per Facility--No. of Annual Indian FY 80/81 81/82 82,83 83/84 84/85 TOTAL

FACILITY Staff Salaries (No.) Cost (No.) Cost (No.) Cost (No.) Cost (No.) Cost COST

GRAINAGES (10)

Deputy Dir. 1 20.2 1 20.2 4 80.8 8 161.6 10 202.0 10 202.0 666.6

Asst. Dir 1 14.4 1 14.4 4 57.6 8 115.2 10 144.0 10 144.0 475.2

Seri. Asst. 5 62.0 5 62.0 20 248.0 40 496.0 50 620.0 50 620.0 2,046.0Seri Inap. 5 40.0 - - 20 160.0 40 320.0 50 400.0 50 400.0 1,280.0Serf. Demo. 10 68.4 - - 20 136.8 60 410.4 100 684.0 100 684.0 1,915.2

Seri. Oper. 10 58.9 - - 20 117.8 60 353.4 100 589.0 100 589.0 1,649.2Office Supt. 1 10.2 - - 4 40.8 6 61.2 10 102.0 10 102.0 306.0UD Clerks 2 1b.2 - - 8 64.8 12 97.2 20 162.0 20 162.0 486.0St-eographer 1 8.1 - 4 32.4 6 48.6 10 81.0 10 81.0 243.0LD Clerks 2 11.7 - - 8 46.8 12 70.2 20 117.0 20 117.0 351.0Typist 1 5.8 - - 4 23.2 6 34.8 10 58.0 10 58.0 174.0Drivers 2 9.6 - - 6 28.8 12 57.6 20 96.0 20 96.0 278.4Attendaots/W.tchmen 4 19.2 - - 16 76.8 24 115.2 40 192.0 40 192.0 576.0

Unskilled Labor 75 135.0 - - 30 54.0 400 720.0 750 1,350.0 750 1,350.0 3474.0Subtotal 120 479.7 7 96.6 168 1,168.6 694 3,061.4 1,200 4,797.0 1,200 4,79?.0 1Staff Allowances - 13.8 - 3.9 - 45.5 - 177.2 - 263.0 - 263.0 752.6

Total 120 493.5 7 100.5 168 1,214.1 694 3,238.6 1,200 5,060.0 1,200 5,0O0.0 14,673.2

MODEL HATCHERIES (20)

Seri. Demo. 1 6.8 4 27.2 8 54.4 12 81.6 16 108.8 20 136.0 408.0

Seri. Oper. 2 11.8 8 47.2 16 94.4 24 141.6 32 188.8 40 236.0 708.0Unskilled Labor 8 14.6 32 58.4 64 116.8 96 175.2 128 233.6 160 292.0 876.0

Subtotal 11 33.2 44 132.8 88 265.6 132 398.4 176 531.2 220 664.0 1,992.0Staff Allowances - 0.7 - 3.0 - 5.9 - 8.9 - 11.9 _ 14.9 44.6

Total 11 33-9 44 135.8 88 271.5 132 407.3 176 543.1 220 678.9 2,036.6

HATCHERIES (1,700)

Unskilled Labor 2 3.6 1,200 2 160.0 1.800 3.240.0 2.b00 4,680.0 3,400 6,120.0 3.400 6 120.0 22 320.0Total 2 3.6 1,200 2,160.0 1,800 3,240.0 2,600 4,680.0 3,400 6,120.0 3,400 6 120.0 22320.0

COCOON MARKETS (30) (All markets)

Asst. Dir. 10 144.0 2 14.4 2 28.8 5 72.0 10 144.0 10 144.0 403.2Seri. Asst. 13 161.2 1 6.2 1 12.4 8 99.2 13 161.2 13 161.2 440.2Seri. Insp. 37 296.0 4 16.0 4 32.0 27 216.0 37 296.0 37 296.0 856.0Seri. Demo. 133 904.4 15 51.0 15 102.0 60 409.3 110 749.0 133 904.4 2,215.7Seri. Oper. 66 389.4 10 59.0 10 118.0 42 247.8 66 389.4 66 389.4 1,203.6UD Clerks 10 87.0 2 8.7 2 17.4 5 43.5 10 87.0 10 87.0 243.6Typists 23 133.4 3 8.7 3 17.4 5 29.0 23 133.4 23 133.4 321.9Attendants/Watchmen 14 67.2 4 9.6 4 19.2 11 52.8 14 67.2 14 67.2 216.0Skilled Labor 60 132.0 30 36.0 30 84.0 40 88.0 55 121.0 60 132.0 461.0Unskilled Labor 60 108.0 30 30.4 30 68.8 40 72.0 55 99.0 60 108.0 378.2

Subtotal 426 2,422.6 101 240.0 101 500.0 243 1,329.6 393 2,247.2 426 2,422.6 6,739.4Staff Allowances - 91.4 - 9.6 - 20.0 I 55.4 _ 72.8 - 91.4 249.2

Total 426 2,514.0 101 249.6 101 520.0 243 1,385.0 393 2,320.0 426 2,514.0 6,988.6

MOBILE DEMO. UNITS (4)

Driver 1 4.8 - - 2 9.6 4 19.2 4 19.2 4 19.2 67.2Staff Allowance - 0.2 - _ - 0.4 - 0.8 - 0.8 - 0.8 2.8

Total 1 5.0 . - 2 10.0 4 20.0 4 20.0 4 20.0 70.0

1/ Based on project implementation schedule. Staff generally recr-ited four to sir months prior to opening of facility to all. time for trdlngand pr-operating activities. Thus, number of staff in each year represents total staff on board at close of year; salari-s are calculated r a

0x

for assumed staff months on board duriog year. Staff allowances calculated at approximately 47. of permanert staff salaries.

2/ "Per Facility" figures are totals for all markets.

INDIA

KARNATAKA SERICULTURE PROJECT

Departmental Facilities: Staff Salaries and Phasing(R. '000)

--Per Facility---No. of Annual Indian FY 80/81 81/82 82/83 83/84 84/85 TOTAL

FACILITY Staff Salaries (No.) Cost (No.) Cost (No.) Cost (No.) Cost (No.) Cost COST

TECH. SERVICE CNTRS (150)

Seri. Asst. 8 12.4 61 378.2 91 1,128.4 126 1,562.4 150 1,860.0 150 1,860.0 6,789.0Seri. Demo. 8 54.7 488 1,688.4 728 4,977.7 1,008 6,892.2 1,200 8,205.0 1,200 8,205.0 29,968.3Clerk Typist 1 5.8 61 176.9 91 527.8 126 730.8 150 870.0 150 870.0 3,175.5Attendant/Watctman 1 4.8 61 146.4 91 436.8 126 604.8 150 720.0 150 720.0 2,628.0Driver i 4.8 61 146.4 91 436.8 126 604.8 150 720.0 150 720.0 2,628.0Skilled Labor 12 26.3 488 533.8 1,592.5 1,008 2,205.0 1,200 2,625.0 1,200 2,625.0 9,581.3Subtotal 24 1C8.8 1,220 3,070.1 1,820 9,100.0 2,520 12,600.0 3,000 15,000.0 3,000 15,000.0 54,770.1Staff Allowances 3 3 - 163.0 - 546.0 - 756.0 - 900.0 - 900.0 3,265.0Total 24 112.1 1,220 3,233.1 1,820 9 ,646.0 2 13,356.0 3,OO0 15,900.0 3,000 15,900.0 58,035.1

TRAINING SCHOOLS (3)

Principals 1 20.2 1 20.2 3 60.6 3 60.6 3 60.6 3 60.6 262.6Lecturers 2 28.8 2 28.8 6 86.4 6 86.4 6 86.4 6 86.4 374.4Asst. Lecturers 3 24.0 3 24.0 9 72.0 9 72.0 9 72.0 9 72.0 312.0Managers - Supt. 1 10.2 1 10.2 3 30.6 3 30.6 3 30.6 3 30.6 132.6Stenographers 1 8.1 1 8.1 3 24.3 3 24.3 3 24.3 3 24.3 105.3LD Clerks, Typists 3 17.4 3 17.4 9 52.2 9 52.2 9 52.2 9 52.2 226.2Drivers 1 4.8 1 4.8 1 14.4 1 14.4 1 14.4 1 14.4 62.4Cooks/Attenders 3 14.4 3 14.4 9 43.2 9 43.2 9 43.2 9 43.2 187.2Subtotal 1 127.9 15 127.9 45 383.7 45 383.7 45 383.7 45 383.7 1,662.7Staff Allowances _ 5.1 - 5.1 - 15.3 - 15.3 - 15.3 _ 15.3 66.3Total 1 133.0 15 133.0 45 399.0 7; 399.0 45 399.0 45 399.0 1,729.0

FILATURE (1)

General Manager 1 13.5 - - -_ - 1 13.5 13.5Section Officer 1 11.8 - - _ _ _ _ - - 1 11.8 11.8Purchasing Asst. 1 11.8 - _ _ _ _ - - 1 11.8 11.8Accountant 1 9.7 - _ 1 9.7 9.7UD Clerk 1 7.8 - - 1 7.8 7.8LD Clerk 1 6.0 - - - - - 1 6.0 6.0Storekeepers 3 18.0 - - - 3 18.0 18.0Supervisor 1 6.0 - - - _ _ - - - 1 6.0 6.0Mechanic 1 6.0 - - - _ _ _ - - 1 6.0 6.0Drivers 2 12.0 - - - _ _ _ - - 2 12.0 12.0Cleaner 1 3.9 - - - - - _ - 1 3.9 3.9Attendants/Helpers 7 27.3 - - - _ _ - - - 7 27.3 27.3Operatives 20 72.0 - - - - - 20 72.0 72.0Re-reelers, Sorters 15 45.0 - - - - - 15 45.0 45.0Skeiners, Examiners 5 15.0 - - - - - 5 15.0 15.0Hot Air Drying Assts. 2 6.0 - - - _ - - - 2 6.0 6.0Subtotal 63 271.8 - - 63 271.8 271.8Staff Allowances _ 19 g _ _ - - - 10.9 10.9Total 63 282.7 - -_ 63 282.7 282.7

GRAND TOTAL ALL FACILITIES 2 587 6,012.0 4,024 15,300.6 6, 238 23,485.9 8,218 30 ,362.1 8,358 30,974.6 1lO6, 135. 2 &_______~~~~ ~ ~_ ______ a x r

- of which Casual Labor - Skilled 518 569.8 758 1,676.5 1,048 2,293.0 1,255 2,746.0 1,260 2,757.0 -0,042.3 .'. e- Unskilled 1,262 2,248.8 1,924 3,479.6 3,136 5,647.2 4,333 7,802.6 4,370 7,870.0 7,048.2

INDIA

KARNATAKA SERICULTURE PROJECT

ECONOMIC RATE OF RETURN TO THE PROJECT 1/(R. Million)

ProjectYear

1 2 3 4 5 6 7 8-10 11 12 13 14 15 16-19 20

COSTS

Capital InvestmentOn-Farm 2/ 39.3 78.7 118.3 118.3 39.3 - - - - - - - - - (18.0)

Cottage Basins 3/ 0.6 1.7 2.3 3.5 3.5 - - - 0.4 1.1 1.4 2.1 2.1 - (11.0)

DOS Infrastructure 4/ 17.3 27.4 31.9 24.2 4.2 - - - 13.0 16.4 15.9 10.9 2.2 - ( 5.0)

KSIC 1/ 0.4 21.1 86.2 - 3.9 - - - 4.4 0.7 - - - _ (10.6)

Subtotal 57.6 128.9 238.7 146.0 50.9 - - - 17.8 18.2 17.3 13.0 4.3 - (44.6)

On-Fare Production Costs 6/ 2.4 16.8 50.3 102.7 159.4 196.5 210.0 212.1 212.1 212.1 2U2.1 212.1 212.1 212.1 212.1

Incremental Operating CostsCottage Basins 7/ 0 2.4 10.8 24.9 47.1 72.7 86.0 92.6 92.6 92.6 92.6 92.6 92.6 92.6 92.6

DOS Incremental Admin. Cost 8/ 5.4 4.2 4.5 4.5 4.5 4.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5

DOS Infrastructure 4/ 8.6 21.2 34.2 48.1 55.5 61.6 61.6 61.6 61.6 61.6 61.6 61.6 61.6 61.6 61.6

KSIC 9/ 0.3 2.1 (15.3) (22.9) 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6

Subtotal 14.3 29.9 34.2 54.6 107.7 139.4 151.7 1158.3 .3 3 1.3 583 3 158.3 158.3 158.3

Total Costs 74.3 175.6 323.2 303.3 318.0 335.9 361.7 370.4 388.2 388.6 387.7 383.4 374.7 370.4 325.8

BENEFITS

On-Farm 10/ (5.7) I.5 39.2 119,9 236.3 327.8 365.5 372.2 372.2 372.2 372.2 372.2 372.2 372.2 372.2

ProductionRaw Silk 11/ 6.3 44.1 138.6 298.2 480.9 621.6 695.1 707.7 707.7 707.7 707.7 707.7 707.7 707.7 707.7

Silk Waste 12/ 0.1 1.1 3.5 7.5 12.0 15.5 17.4 17.7 17.7 17.7 17.7 17.7 17.7 17.7 17.7

KSIC 13/ 0 (1.6) (31.0) (1.1) 36.6 36.6 36.6 36.6 36.6 36.6 36.6 36.6 36.6 36.6 36.6

Subtotal 6.4 43.-6111.1 29.5 737 749.1 i6. 762.0 762.0 762.0 76-20 762.0 762.0 7 0

Total Benefits D.7 45.1 150.3 424.5 765.8 1,001.5 1,114.6 1,134.2 1.134.2 1.134.2 1,134.2 1,134.2 1,134.2 1,134.2 1,134.2

NET BENEFITS (73.6) (130.5) (172.9) 121.2 447.8 665.6 752.9 763.8 746.0 745.6 746.5 750.8 759.5 763.8 808.4

FUTURE BENEFITS WITHOUT PROJECTRaw Silk 14/ 0.2 0.9 2.6 5.7 9.4 12.5 14.2 14.7 14.7 14.7 14.7 14.7 14.7 14.7 14.7

Silk Waste 15/ - 0.1 0.3 0.6 1.0 1.3 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

Crop Incomse16/ 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5 249.5

Total 249.7 250.5 252.4 255.8 259.9 263.3 265.2 265.7 265.7 265.7 265.7 265.7 265.7 265.7 265.7

INCREMENTAL NET BENEFITS (323.3) (381.0) (425.3) (134.6) 187.9 402.3 487.7 498.1 480.3 479.9 480.8 485.1 493.8 498.1 542.7

ECONOMIC RATE OF RETURN = 227.

1/ Economic costs and benefits expressed in constant late 1979 Rupees. Year I = Indian FY80/81. Costs include physical contingencies, exclude duties, taxes, interest and other

transfer payments. Adjustments for economic analysis have been made for traded components by using conversion factors of 1.19-1.21 and for unskilled labor at 70% of the

market wage rate. Permanent working capital and salvage value recovered in year 20.

2/ Rearing houses, plantation and equipment.3/ 500 cottage basins for incremental raw silk production.

4/ For details, see Anne, 2, Tables 2.1-2.8, and footnote 1.

5/ For details, see Annex 2, Tables 3.1, 3.2 and footnote 1. Includes permanent (net incremental) working capital in year 5, recovered in year 20.

6/ For rainfed, traditional irrigated and new irrigated farms. For details, see farm models Annex 4, Tables 8.1-8.4.

7/ For details, see Annex 4, Table 7.

8/ For details, see Annex 2, Table 2.8.9/ For details, see Annex 4, Table 2.

10/ Incremental net benefit to cocoon producers.11/ Incremental raw silk production; valued at projected world market price. See Annex 1, Table 6.6, and Annex 5, Table 2.

12/ Based on 307. of raw silk production, at R. 35/kg.13/ Added value to raw silk and silk waste. See Annex 4, Tables 2 and 4.2.

14/ Future without project assumption. 257. of 14,000 ha new area would convert to sericulture, remainder producing traditional crops under irrigation. '

15/ Based on 33b of raw silk production, at Rs 30/kg.

16/ Net Benefits of R. 3,900/ha fron 10,500 ha traditional crops (see footnote 14); Rn 4,900/ha from 24,000 ha irrigated mulberry in traditional area; Rs 1,515/ha from

60,000 ha rainfed mulberry.

- 87 - ANNEX 5Table 2

INDIA

KARNATAKA SERICULTURE PROJECT

Price Summary for Financial and Economic Analysis

Financial Economic-

Raw Material ProductionRaw Silk (Rslkg)

Semi-automatic machine 340Filature 320 420-Cottage basin 270 -Charka 240 -

Silk Waste (Rs/kg) 15-25 30-35

Cocoons (Rs/kg)Good quality 23-25 2/Average quality 21-23 30-Poor quality 17-21

Silk Manufactures (KSIC)-3Silk Fabrics (Rs/m)Plain fabrics (60 g/m) 50 50Heavy plain fabrics (100 g/m) 75 75Printed fabrics (60 glm) 60 60Gold lace fabrics (100 g/m) 105 105Neckties, scarves (60 g/m) 77 77

Spun Silk Yarn (Rs/kg) 300 300Noil yarn (Rs/kg) 60 60

InputsFertilizer (Rs/kg)N 4.0 5.0P 3.5 4.2K 1.5 1.7

Labor (Rs/workday)Unskilled 4-5 2.0-2.5Semi-skilled 8-10 6.5-8.0

1/ Economic prices for traded commodities (raw silk, silk waste, fertilizer)based on world market projections adjusted by an estimated standardconversion factor for India. of 0.8 (Rs 10 = US$1).

2/ Average projected price for standard denier (20/22), mixed grades.3/ Based on average domestic market prices for 1978-1979.4/ For economic analysis, total unskilled and semi-skilled labor is valued

at 70%.

- 88 -

ANNEX 6Page 1

INDIA

KARNATAKA SERICULTURE PROJECT

Industrial Development Bank of India

1. The Industrial Development Bank of India (IDBI) was established in1964 and is now the largest single institutional source of industrial financein India, accounting for about 1.5% of annual total industrial investment. Itis wholly owned by GOI and, apart from its main role in providing direct andindirect finance for industry, it has two principal functions: (i) it actsas an apex institution for industrial finance, coordinating the activities ofthe other all-India and state-level institutions; and (ii) it undertakes pro-motional and technical assistance activities, including the preparation ofindustrial surveys and sponsoring the establishment of specialized institutionsto assist in project identification, preparation and appraisal. IDBI's financ-ing activities include: granting direct loans, rediscounting commercial bills,refinancing industrial loans made by State Financial Corporations and commer-cial banks, providing export finance, underwriting, equity investments andguarantee operations.

2. As of December 31, 1979, the total financial assistance approved byIDBI, excluding guarantees, amounted to Rs 46.1 billion (US$5.5 billion), ofwhich Rs 29 billion (US$3.5 billion), or 63%, was in refinance, rediscountingor export finance. O the total approvals, Rs 31.3 billion (US$3.7 billion)has been disbursed ant the total outstanding amounted to Rs 20.6 billion(US$2.5 billion). Approvals of direct assistance 1/ totalled 1,514 applica-tions involving Rs 15.4 billion (US$1.8 billion) or 33% of total approvals:Rs 9.3 billion (US$1.1 billion) had been disbursed and the total outstandingamounted to Rs 8.2 billion (US$1 billion). In 1978-79, IDBI approved 320applications for direct assistance totalling Rs 4 billion (US$0.5 billion),compared with 225 applications for Rs 2.7 billion (US$0.3 billion) in 1977-78.IDBI's direct assistance has been mainly to modern types of large industry,including fertilizers (17%), textiles (14%), chemicals (13%), cement (10%)and paper products (9%). The quality of IDBI's direct lending portfolio isreasonable with 4% of principal in arrears and total arrears of principaland interest of 8.6%. However, 36% of the portfolio is affected by arrears,largely due to substantial arrears in sugar and paper products.

3. IDBI has a reasonably sound financial structure: at June 30, 1979,it had a debt/equity ratio of 10.8:1. Its resources have been provided by:Reserve Bank of India loans (54%); bond issues (28%); equity (9%); GOI loans(7%) and deposits (2%). At its head office, five regional offices and elevenbranch offices throughout India, it has a large staff experienced in thepreparation, appraisal and supervision of industrial projects. Its appraisalstandards are satisfactory and it is a well managed institution. The Bankis already involved with IDBI through a credit and loan for the State Finan-cial Corporations, a loan for financing joint sector projects and a creditfor financing development of the fertilizer industry.

1/ Including underwriting and direct subscription to shares and debenturesof industrial concerns.

-89 - ANNEX 7

INDIA

KARNATAKA SERICULTURE PROJECT

Related Documents and Data Available in the Project Files

A. Reports Relating to the Project

1. "Sericulture Project - Karnataka" Joint Report of P.P.M. Cell(GOI) New Delhi and Government of Karnataka.

2. "Modernization of Silk Industries Units Feasibility Report" -Tata Consulting Engineers - 2 Volumes

3. Government of Karnataka "Sericulture Project Karnataka Researchand Development."

4. Government of India "World Bank Assisted Sericulture Project inKarnataka - Research Support to be provided by the Central SilkBoard (Revised Proposals)."

5. Government of Karnataka Blue Print Plans for: Grainages;Training School; Rearing Houses; Model Hatcheries; Small FilatureBuildings; Government Silk Farm Buildings.

B. Selected Working Papers

1. Moriculture in Karnataka and its Related Technological Problems.

2. Silkworm Rearing in Karnataka.

3. Technical Problems of Silk Reeling in Karnataka.

4. Marketing and Consumption of Silk.

5. Spun Silk Manufacturing Report.

6. Credit and Banking.

INDIAKARNATAKA SERICULTURE PROJECT

PROPOSED ORGANIZATION CHARTKARNATAKA DEPARTMENT OF SERICULTURE

DRCTOROF SERICULTURE

SUPENiNTENO DMOIRING aDS O JOS OJSCHIEF ACCOEJEITS JOS ~~~~ENGINEER CON- JOINT RED STRAR A ND EVALU ANTGION TEHIA O DS DEDS DDOFFICER ADMINISTRATION STRLUCTION COOP SOCIETIES CELL AD VISOR TEHIAL SEED PRODUCTION SEE AEAS CON MARKETS IL

SERVICES ~~~AND OUALITY AN RELNG FAM

ACcOUNTS ADMINISTRATION ENGINEERING ~~ASSISTANT REGISTRAR 13) 14)OTO| STAFF STAFF | STAFF COOP SOCIETIES .GRANAGE

I TRAINING MOIEDS MYSOE BIVOLTINE *FLTR CE NTERS 1 TRAININ

El 1101''' 121 -* .I

'----1 1 . ' ........................ ; IIDISTR ICTI _~j L I _I_

JDS - JOINT DIRECTOR OF SENICOLTORE ¢4 3} | 10 DOS - DEPUTY DIRECTOR OF SERICUJLTURE_ADADS -ASSISTANT DIRECTOR OF SERICULTURE SOL DVISIONZI COCOON ADMINISTRATION .

SA SERlcULT SA ADS MARKETS AND FINANCESD -- SERICULTURE DEMONSTRATOR_

CL5 NUMtBERS IN EARENTHESIZE INDICATE DISTRICTS DIVISIONS FACILITIES OR STAFF1/ THERE ARE 14 DISTRICTS IN THE PROJECT AREA BUT SERICULTURE ACTIVITIESr ....*

IN TWO OF THEM, GUL8ARGA AND BIDARI WILL BE SUPERVISED BY ONE 005 1131 1502/ THERE ARE S DIVISIONS IN MYSORE DISTRICT, 3 IN BANGALORE AND?2 EACR COCOON TECHNICAIl...

IN THE OTHER I1I DISTRICT UNITSMAKTSEVC ..... ii

_ _ _LIAISON ....... . .. ......... ..... SERVICES TO SILK FARMERS AND REELERS -- - - -i

50 ~~~~~.... .......... . .-.--- i

D. -.-.---- DEPUTYDIECTR ECLTUESILK REELERS

SLLK

ADS ASS STANT DiRECTOH OF SERICULTURE F r)IVISION?/ N~~~~~~~~~~~~~~~~~~~~~~~~~~~~~WldB~I - 229

INDIAKARNATAKA SERICULTURE PROJECT

KARNATAKA SILK INDUSTRIES CORPORATIONPROPOSED ORGANIZATION CHART

KABOARD

DIRECTORS

MANAGINGDIRECTOR

DIRECTOR NICALWNA MAKEINFINANCE PURHASNGANDOR

NGRESARCH PERSONNEL SECRETARY INFNAMRKTGMANAGER DEVELOPMENT MANAGER AUDITOR L MANAGER

CHIEF COTINDUSTRIAL

ACCOUNTS ACCOUNTANT ENGINEERINGOFFICER

T. NARASIPUR l MYSORE CHANNAPATNAfILATURE WEAVING PLANT SPUN SILK MILL

PLANT MANAGER PLANT MANAGER PLANT MANAGERl

CHANNAPATNACENTRAL

WORKSHOPMANAGER

World Bank -- 21295

INDIAKARNATAKA SERICULTURE PROJECT

PROJECT ORGANIZATION CHART

HEAD OFFICE HEAD OFFICE

FOR ~~~~~~~~~~~ ~TANN INSTITUREES

I~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~RJC IDB AT IONDC

REGIONAL_ _ _ _ _ _ 2 CENTRALi | ~~~~~~~SILK BOARD

OFF ICE-| CENTRALSERI

OFFICE|PARTICIPATING COM RGK GSE TR C U R

BANKS~ ~~~~~~~ ~O CMINDSTRIOES FOR AGRICULTURE | I

SERICULTURE NT AGRICULTURE I_ DEVLOMET

CMMSSIONER CHIEF ENG R PW S H A1SILK RESEARCH

[ DISTRICT | | 1I TECHNICAL INSMULERRARANCH | ~ COORDINATOR -- SERVICES - R PRODUCTION

BANKS | | COMMITTEE | 2. S LKWORM EGG A B

* | ~~~SUPPLY - -| DEPARTMENTAL|REGIONAL |ROJECT 3UNIVED3. MULBERRY PLANTING TANDV... REG L -- MATERIAL SUPPLY EXTENSION

4 COCOON MARKETING SERVICE

SILK INDUSTRIE…J~~~~~~~O IDUTRE FR GICLTR

KARNATAKA" i~~~~~~~~~~~~~~~~~~~KRATKSTT

' >; IREEL---ERS_______] ................................ DIRECTR . . . . . . . RICUTURjLj

| CORPORATION | | | * l l I

SILK PROCESSING.-w X91rSILK FARMERS |

SILK PRODUCTIONjJ SEE CHART 21295

2/ SEE CHART 21296

LINE OF CONTROL_ _ _LIAISON OR SERVICES

..... ...CREDIT FLOW ....... World Bank -2t297

INDIAKARNATAKA SERICULTURE PROJECT

DEPARTMENT OF SERICULTUREI mnplmntation Sdudule of Main Projoct Activitie

Xg9 | 190 111 i82 ISSW 111s4 198X

z i,, Aibn 2 3 4 10 213 4 1 2 3 4 1 2 3 4 1 3 4 1 2 3 4 _ 2 3 4_I. GRAINAGIES

Duign/Appo__._

T.nd.,

dr.qpn ._.- ___ _

2. COCOON MARKETS 23. L..dAq.I.doS. C.o.b,.uiw

Owssiro/ApproWsl| H ~ 2 - $ - | -

C-m'Vw .- I 1 IOU Bi t A,uliupm.mploo

Tdi...

3. TRAINING SCHOOL 3 r_._ _

b. Cwft-tio@

TOId...~~~~~~~~~~~~~~~~~S.

T.WR.lo .oi..

AND UQO4ATCHERIES 3TO"3T40S. plan kev tib

S. ConSuoIol4..11S1APm.,onT-od...

S. SMALEL FHATCHRIES.. Land AwwW 2 isW tAoab. CO.ldftOio

Tands./r.w

eu. sin.yEupn.

S. SMALFILAECRUTENTTANNSCLTUR ASSISTANT

* ).nrae.mt SalOSa

T. .n.W.Uo O.t,. Trting

M1I '.no ft w~EWp.*I St WOd -I

INDIAKARNATAKA SERICULTURE PROJECT

PROJECT INITIATION, KSIC, TECHNICAL ASSISTANCE AND OVERSEAS TRAININGImplmnentation Schedule of Main Project Activities

1_79 190 1iBi 1982 1963 1984 19ii

t 2 3 4 t 2 3 4 t 2 3 4 1 2 3 4 I 2 3 4 t 2 3 4 1 2 3 4EARLY PROJECT ACTIVITIES

i. EARLY PROJECT ACTIVITESo. lOl Awruiea of

KSIC Silk ProCeelneD-ielo,misrt PRons

b, Appoint H.d of KSICS'sFineloI.m, Techn"cAdniNImnmne. Penoflf41land Aooo,ont' Sectio

c. Est.W.1, EnOrneerins

Uni.WIn odutuI KIEYa,un,ntn A Pre 1 of DrtAini. Spcllmietono. Bid i Did Do-ente tnd Clsarens eiHh IDAd. PIIpI Ong Pln _ _O Bid Initationa. Estebish Ketrntka Stett C Twndtr Analysit sd IDA Ciereinet

Strieuhu OeIoP ntmtv t Deuiwry. Cons.u.tion or IntOmrtnt.rtionIPrituu Wtnd Appoint in E Intttil tionDiretor and Thm Key F Testing wd Corn'tn4.lonknStaff F_m G identification of sonrstant. or,t,tiningf ilitie.; IDA rw.W.end making

I. P.perttion of Tethnikt rW far cxsuxts,tmt' 46it Or tr.nstg; Japtnese Iangtap trainingAsiastsan mnd Ot.t fon ura oopd.TtrinLng Pl-ImGOBs ,di GOK_

I. P~prwtion of 00S Staff TraiSino Ron H Conw.ltoncv or t ntilgpodh. lnitiation of EnaksutonStudy t0091

KARNATAKA SILK INDUSTRIES COMPONENTS2. FILATURES313

a. CMWI Work. A Bi- C Db. LMehl l...y en Melo Eq.Ipenmrt A l .. Othew Eqolpnem tr r - I

3. SPUN SILK MILLEl a. CMI Wrks a 4b. MaVhIneE y ANd MaioR EqLps --II Gc. Other EquIpment A D

d. RIUTiUR of DEisting Machinery I P. D El/ F2 4. CENTRAL WORKSHOP A B

.. CMiW Worksb. Machinery m.d Major EQuslptnet AEF

TECHNICAL ASSISTANCE PROGRAM& CSRTI

Sllker. Breeder.

Solenteim BEhtnos Visit H6. SERICULTURE DEPARTMENT

2 Graintsss EepartaSHitchory Epoan

7, KSICaFlPimur.-Cocoon D.VIg end

2 Refllne ExpertsCcoonw Boiling 1d 2Qoulity Control Exertsl

b. Sp..n Silk Fectry 2

OVERSEAS TRAINING PROGRAM G 2 2

Fall.-hipse Ior Sd.nti.t. I r 1'* 29. SERICULTURE DEPARITMENT 21?1H

Senio ONfidel, 'H42

Seeiculsu. ApestseutH

11ElecrirOl end Mscharenil Equoiprnent Worki 8ock -21387V/ Tvpo st,d notc., of .. P.r", not detOrroind V.,. Thar -sold he -odod

ci.ro,g 1983/84

INDIAKARNAJAKA SERICULTURE PROJECT

RESEARCHImplementation Schedule of Main Project Activities

1980 1981 1982 1983 1984

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

1 CSRTI

MAIN STATION L

a. Civil Works A-

b. Equipmnent Local A _

c. Staff Appointment2' Imported A= _ B _

REGIONAL STATIONS AND SUB-STATIONSI Ia. Land Acquisition A A C

A .- -b. Land Developnent _ . A _ I***

c. Water Supplies I cd. Civil Works -A &C - -

a. Equipment (Only Local) A

f. Staff Appointmnent-'

C E 5-

2. KSSDI

a. Civil Works _A B C

b. Equipment Imported C.

c. Staff Appointmen2 D . I F201 I F22

3. UNIVERSITY OF AGRICULTURAL SCIENCE I I

a. Civil Works A CLocal C

b. Equipment Imported CA B

c. Staff Appointment D F14 I

4. UNIVERSITY OF BANGALORE

a. Civil Works A | C

b. Equipment Imported A I C

c. Staff Appointment F14

5 UNIVERSITY OF MYSORE

a. Civil Wo,ks A B C

bh Equipment A _ _ E|

c. Staff Appointment2

6 D_-_ E | E I| FS F

d. Land Development A C

e. Water Supplies C

A -Preparation of Designs, Drawing Specifications,Bid Douments, Surveys, Plans.

B - Tender ProceduresC - Construction PurchaseD - Obtaining GOK SanctionE - Advertising, SelectingF - Appointment

V/ Establishment ol two Regional Stations and improvement of five substation in first phase andestablishment ol five new sub-stations in the second phase. World Batk - 21629

2I Scientists

IBRD 14378RI N D IA A MAY ) I 1KARNATAKA SERICULTURE PROJECT IISTA);0 APei.Umi.

New areas under mulberry -PAKISTAN < >3

', _ Traditional areas under mulberry N -'0ROUTUN r

BIDAR Rods MAHA ASHTRA A SolIn B.Ri- n i s/oads azAeuG~oDt iJ

0 District heodquarters 20

MAHARASHTRA . Distr t boundar es -AK -.

GULBARGA K ~~~~~~~~~iLETES 0 0040 s 0 80 lOS

,0.- ' A 4t0 e n -.

.(( "J . BIJA PUR 5ANDHRA

j >,< j- J + , P R AD ES H t*2_ ). \PRADESH h2\ ~ j l ).S W Xl l r tMARKETING, PROCESSING AND RESEARCH

( .o .. | Ue ..,3 j. *\ 5 | Proposed cocoon markets

- [~~~~~~~~~~7fT\~~~~~~~~~~~~] ~~~~~~~ R ~~~~~~Raichur r' Eaisting cocoon market to Sn made-nied

PRODUCTION * . Existing cocoon morkets¢ BbIGAUM \> Z\ - | \ ? PROJECT COMPONENTS B e ._ C * PropoSed deIaturetbemn serzall ilatures

11 DAWRC-- whnsTeonnical ser-ce IV ( ~A, A S IC tilature roS mo dern aed

GOA r. H2R R r7 rO | 7 centers GOA). ) A Existing f latures to be c osed. ( .. . \ .I[ , . ' Proposed model hatcheries \ 20 c C Pruposed grains >hor,_ Ovr O f t k 0 Existing ce ntral uo,kshop tooe closed

0 .6 i e < RE /veBEL;ARY Silk tarms 74\ f-\ Tram ng centers KSIC spur silk mill to be modernized

2 ) .a. 11 -Number of proposed project coumponents \ . 0 Proposed KSIC central Aorkshop\ 0.) t 5 ixi~~~~~~~YLm"0n*.*~~~~~~A lO~- be,Oo ot enfiring project conpcseM

NORTH t Z \ be modern-en ra Kr E- g KSIC silk weing and twisting tactoryKANARA St15- Nimber ft H Sting pinject crp f,NRHCentral Ye- ultura Pese-ch andTrl-g no nsitute (C.SR T

A ~~~~~~~~(. O~~~~~~~-Th ... .. Om-//gn ouz Ko-oo kop E,0 niu rg main reseach Oat ot ' .CHITR'A_D ROGA nI bor /0 f /C- -// b n/csed euhn rb, 3P / . t posed negional reseorch sat ons

,S SHIMO.A j . ..... wen IcenonnonsAniecoreme Enisriri sub-stato.-cumr-ntersicn centers0 r,SSHIIMOGA '.J > ), | \ g \ | ( r R > ,05 _sed /a.gz grz_r zpzs baght OSZRZhOt \:t; V.. 5 % itradu gcf \ ® P roposed sub-stationi-cum-extens on centers

k X t ~~~~~ g-X <~~~~ or y | _ 0 < $; i j e a ( < 4_ 0 i/ (0 8un9 Oa: C Omp vs~~~~~~~~~~~~~~~Bagalre omp

CHIKMAGALUR ~ UMKOR / KOLAR Jn G | * - ® Uni-ers ty of Bango oreCKERAGAOe .5 / ® O~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~hga -ruxr ty of Mysore

~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~ ..~~~~~~~~~~~~~~~~~~~~~~~~L C Karnataka State Sericultura

HASSAN \. : K. Deceloperent InstitutD eproposed)SOUTH t j noloreBongo)rl/oKAAR MN A A AOR CCueHsson / '

Rb N.-

At7AB/AN SBA ' MYSORE ~ >+ t "9w * ? rs =Jne si: .niOor o,R Cin

KERALA TAM L NADU .ERALA$, TAMILNADUC~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~TMLND