Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 8366

PROJECT COMPLETION REPORT

INDIA

KANDI WATERSHED AND AREA DEVELOPMENT PROJECT (PUNJAB)(LOAN 1897-IN)

FEBRUARY 9, 1990

Agriculture Operations DivisionCountry Department IVAsia Regional Office

This document has a restricted distribudon and may be used by recipients only in the performance oftheir offciad duties. Its contents may not otherwise be disclosed without World Bank authorization.

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EXCHANGE RATES

Currency Unit s Indian Rupee (Rs)Appraisal Year Average (1981) i Rs 9.1 - US$1.00Completion Year Average (1988): Rs 14.9 - US$1.00

WEIGHTS AND MEASURESMetric System

ABBREVIATIONS

AD s Agricultural DepartmentERR Economic Rate of ReturnFAOICP F Food and Agriculture Organization Cooperative

ProgramFD s Department of ForestryGOP s Government of PunjabID : Irrigation DepartmentPAU s Punjab Agricultural UniversityPCR : Project Completion ReportPSTC s Punjab State Tubewell CorporationSAR S Staff Appraisal ReportSCD s SoiI Conservation and Engineering Department

FISCAL YEAR

April 1 - March 31

FOR OICIL US ONLYTHE WORLD BANK

Washington, D.C. 20433US.A.

O1k* ni OivetqrGwCisaIOpfatinm Evstatatm

February 9, 1990

MEIORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on India Kandi Watershedand Area Development Project (Punlab) (Loan 1897-IN)

Attached, for information, is a copy of a report entitlednProject Completion Report on India - Kandi Watershed and Area DevelopmentProject (Punjab) (Loan 1897-IN)" prepared by FAO/CP with Part II of thereport contributed by the Borrower, and the Evaluation Summary prepared bythe Asia Regional Office. No audit of this project has been made by theOperations Evaluation Department at this time.

Attachment

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This docunment 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 Dank authofization.

FOR OMCUL USE ONLY

INDIA

KANDI WATERSHED AND AREA DEVELOPMENT PROJECT (PUNJAB) (LOAN 1897-IN)

PROJECT COMPLETION REPORT

Table of Contents

Pane No.

Preface ....... ...... ......... .* ........ , *

EVALUATION SUMMARY................ .................. -l

PART I - PROJECT REVIEW FROM BANK PERSPECTIVE

A. Project Background ....... . ....................................... l

Genoral ........ ..... ............ ..... ........... 1Project Foneulatlon ..................... .........*.. ...... I

R. Implemhntation ......... tc....t .............................. 2

General ....... Rse.c............................................. 2Rehabilitation of Upper Catcbments ............... 0000.*000*0. .................... 3Animal usbandry ........................................................ 3trrigation and Flood Control .............................. 4

F a rm Developmet .......................................... 0 ... 8Agricultural Rsearch .......................................... 6BTraining Perf.r.anc.................................. 6.Costsi Fins, ncng and Disbursemen ts ............................. 7

C. Pesults ......... . ......... a

Agricultural and Enviroremntal Impacto ......... .o .........................o .......... 8Economic Rate of Return ... oo.o... o... .0.O..0... 0404........................... 9

Borrowers' Performance .....o.......... o..... o.... o........ .o.................. llBank Performance ..................................o............ 13

D. Conclusions, Lessons Learned and Issues .... .................. . ....................... lS

Lessons Learned ...... ....................... o................. oo..... 15Issues ....... . ...................................... 19

PART II - PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

|

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

(ront) Pate No.

PART III - STATISTICAL INFORMATION

Basic Data Tables ................... . 25

Table 1 Project Identity1 Project Timetable1 Cumulative Annual Disbursement of Loan1 Disbursement by Category2 Project Implementation - Physical Targets3 Targe,s and Achievements of Irrigation Component4 Project Costs5 Project Financing6 Economic Impact7 Status of Covenants8 Supervision Detail

INDIA

KANDI WATERSHED AND AREA DEVELOPMENT PROJECT (PUNJAB) (LOAN 1897 -IN)

PROJECT COMPLETION REPORT

Preface

This is a Project Completion Report of the Kandi Watershed and AreaD-%velopment Project (Punjab) in India for which Lodn 1897-IN in the amount ofUS$30.0 million was approved on July 20, 1980. The loan was closed onMarch 31*, 1988 after a delay of 24 months. The final disbursement was made onSeptember 30, 1988.

The Project Completion Report (PCR) comprises a report prepared bystaff of FAO/World Bank Cooperative Program (FAO/CP), a report prepared by theGovernment of Punjab's project coordination office and an evaluation summaryprepared by regional staff. The FAO/CP report was prepared followingconsultation with Bank staff and based on Staff Appraisal Report (No. 2174a-IN), Loan Agreement dated September 20, 1980, supervision reports, a finalreport of a consultancy team engaged under the project and a final evaluationreport prepared by Punjab Agricultural University, department of economics andsociology, who were engaged for the purposes of monitoring and evaluating theproject. The evaluation summary has been prepared on the basis of the samedocuments, the FAO/CP report and visits to the area in connection withidentification and preparations of a follow-up project.

The PCR was read by the Operations Evaluation Department. The draftPCR was sent to the Borrower on August 11, 1989, for comments by September 29,1989, but none was received.

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INDIA

RAND! WATERSHED AND AREA DEVELOPMENT PROJECT (PUNJAB) (LOAN 1897-IN)

PROJECT COMPLETION REPORT

Evaluation Summary

ITtroduction

1. The Kandi Watershed and Area Development Project (Loan 1897-IN) wasappraised June 1978, approved July 1980 and became effective November 1980.It represented the first attempt to tackle, in an integrated way, theecological degradation problems of the Himalayan sub-mountainous zone in thestate of Punjab, known as the Kandi tract. Various state governmentdepartments had previously undertaken, with disappointing results, programs toaddress some of the severe problems that fell in their purview. The projectprovided for investments in upper catchment rehabilitation, flood control andirrigation, farm development, technical assistance, research and training andproject administration.

Obiectives

2. The primary objective in this and other watershed projects has to dowith slowing down or if possible reversing the so-called man made degradationwhich is mostly manifest in accelerated run-off usually with sedimentation,reduced agricultural productivity on what is essentially marginal land tobegin with, and progressive removal of vegetative cover on non arable land.The project intended to address an additional problem having Lo do vithflooding from a large number of seasonal torrents which each year destroyedfarm land on the plains.

Implementation Experience

3. A substantial proportion (53Z) of the total project cost andactivity, as the project was originally conceived, was allocated for floodcontrol and irrigation. One of five proposals which involved construction ofa dam, irrigation distribution infrastructure and flood protection work, wasprepared ready for implementation at appraisal and four more were to beprepared. When a consultant team required under the project was eventuallyhired and feasibility reports prepared, it was clear that the potential forthis activity was much less than estimated at appraisal. This, together withslow progress in implementing the one plan that was ready, resulted inrecasting of the project to reduce this activity and instead include two smallscale irrigation initiatives as well as increasing the number of watersheds tobe treated. These changes upset the line department responsible forimplementing the irrigation related components and this consternation pervadesthe Government's completion report. There is some doubt about whetherbuilding dams of the size envisaged in this geologically unstable area is wisefrom an engineering standpoint and considerably more doubt about it from thestandpoint of integrated watershed development. This in a sense reflectspoorly on project identification.

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4. The notion of integration was important in the concept of the projectand remains important for watershed development. Yet is was not achieved inany sense. There are two significant stages in which integration is essentia'.namely, planning and implementation. In both respects, she line agenciesresponsible for conceiving and implementing the measures r4quired to addressthe problems must work together with each other and with the beneficiaries.This did not happen. Individual line agencies undertook their separate agendaaccording to their own priorities. Except for the irrigation subcomponents(para. 3) they attained their targets rather easily yet not one watershed wascompletely treated so as to affect some degree of control of run-off and itsconcomitant effects.

5. Furthermore, lack of coordination negated these achievements. Astriking example of this, but by no means the only one, has to do with thelivestock component which had as one objective the replacement of poor qualitycattle and buffalo with a lesser number of higher quality to improve incomeand reduce pressure of grazing on land to be revegetated. The replacementtarget was attained but the supportive actions to develop feed sources did notdogelop so that many beneficiaries sold their animals after milk yields beganto decline in successive lactations through inadequate nutrition.

Resuits

6. The major expectations entertained for the project were not achievedmainly because of undue emphasis on the irrigation component, and lack ofcoordination between line agencies both in planning and implementation. None-theless, the necessity of continuing action, to regenerate the Kandi tract andlike areas is not in question. Valuable experience was gained in the courseof the project and many of the lessons have already been taken into account inthe preparation of subsequent watershed projects. The estimated economic rateof return for the project overall, calculated at completion, was 81, rangingfrom 2-222 for separate analysis of five components. The lowest rate whichwas for the irrigation component, resulted from delayed implementation andcertainly depressed the overall ERR.

Findings and Lessons

7. The project was accepted as a learning experience and indeed it was.Rehabilitation of fragile hilly areas such as the Kandi tract requiressubstantial shifts in thinking towards the promotion of rainfed agriculture inmarginal areas away from heavy emphasis on irrigated agriculture, towards lowcost stabilization of non arable land away from establishment of conventionalforest plantation,. Furthermore, it required a new managenent strategy forapplying the resources of the line agencies. The following significantlessons were lesrneds

(a) Management. If implementation is best carried out by linedepartments, and in Punjab it is, then a mechanism is required tocoordinated their activities and induce them to coordinate with oneanother. This was arranged by using a project ccordination officewhose head is a competent administrator with a technical backgroundbut without the civil service seniority to be able to effect thecooperation and without control over the budget which went directly

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to line departments. The shortcomings have already been recognizedand proposals to overcome them have incorporated into new projectdesigns.

(b) Time frame. A normal five year time table is too short forintegrated watershed development especially if its a first timeproject. Apart from the lag required to set up the administrationand organize the field level planning, many of the project activitiesneed to be implemented sequentially and ought not to start beforeothers are complete. At the same time, watershed development is acontinuing process and not a discreet rehabilitation operation.Awareness and acceptance by both government officials and the ruralpopulation are only built up by participation. Within the overallobjectives, short term goals are constantly evolving and managementrequires regular interactive planning. A project such as this is infact a time-slice of a long term process. The optimum length of thetime-slice is about seven years.

(c) Sequential Implementation. The project provided valuable experiencein assessing the efficacy of treatments from a technical view pointand their appropriateness from an investment standpoint as well as agood lesson in sequencing. Cattle exchange, if it can be ajustifiable investment, should only begin when the beneficiaries havetaken the necessary steps to provide regular sources of fodder;revegetation of forest areas ought not to start until the areas havebeen stabilized and the grazing pressure reduced; and check damsbuilt only after vegetative measures for erosion control put inplace. Sequencing involves coordination of line agencies,interactive planning with both the line agencies and thebeneficiaries and following a critical path plan.

Cd) Sustainability. Sustainability of conservation activities which wereimplemented with considerable success and the positive environmentalimpact will depend on the availability of funds for maintenance andthe incentives the population have to protect them. Neither isabsolutely assured. Production activities that were only partiallyimplemented are expected to be sustained.

(e) Other Lessons and Issues. The PCR draws out several other lessons ofwhich perhaps the most valuable is that in-situ moisture conservationas the basis of rainfed farming should be the *central tactic' offuture interventions rather than undue emphasis on small scaleirrigation where likely benefits have been overestimated.Significant issues requiring consideration have to do with thewatershed as a planning unit, economic rate of return as aninvestment criteria, and the policy relating to subsidies and costrecovery in this and like projects.

INDTA

KANDI WATZRSBED AND AREA DEViLOPHENM PROJECT (PUNJAB) (LOAN 1897-IN)

PROJECT COMPLETION REPORT

PART I - PROJECT REVIEW FROM BAAK'S PERSPECTIVE

A. Proiect Backaround

General

1. The Kandi Watershed and Area Development Project constitutes thefirst attempt to tackle the problem of the Himalayan sub-mountainous zone inPunjab. The project was initially appraised in May/June 1978 but it wasreviewed and cost tables were up-dated in April 1980. An agreement for a lo&nof US$30 million was signed in September 1980. The project, with a totalestimated cost of US$60.8 million, to be implemented over a five-year period,became effective in November 1980 and was completed in March 1988 after athree-year extension.

I.. An initial draft project completion report (PCR) prepared by the?roject authorities for the Government of Punjab (GOP) together withevaluation reports by the Punjab Agricultural University, Ludhiana, andconsultant reports form the basis for this PCR. In addition this report isbased on the review of the Staff Appraisal Report (SAR), the DevelopmentCredit Agreement, supervision mission reports and project files, and fieldvisits in February 1989 by an FAO/World Bank Cooperative Program mission.

Proiect Formulation

3. The Kandi tract, identified as the most economically backward area ofthe Punjab, includes all land within the Punjab Shiwalik Hills, - foothillrange of the Himalayas, together with a narrow band of largely under-developedfarmland immediately below the hills. The tract covers a total aree of about4,600 km2 which is 92 of the State, and contains 6Z of Punjab's population.Early concern about ecological d-gradation in this area led to thepromulgation of the Punjab Land Preservation (Choes) Act in 1900,1/ whichallowed areas to be closed to grazing, controlled the type of livestockpermitted within grazing areas and could prohibit tree felling, cultivationand quarrying. Unfortunately the Act was not implemented with any vigor untilthe late 19309 and even then only for a few years and in a small number ofupper catchments.

4. Over the years a number of gove2rnment departments have undertakenprograms aimed at developing the Kandi Tract and tackling some of the moresevere problems. These have been carried out, however, without reference toother dependent or parallel problems, and their impact has been disappointing.One of the engineering proposals was to construct a number of dams acrossselected choes just within the hills to act as sediment and flood control

/1 A choe is a seasonal sandy river, dry for most of the year.

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structures as well as providing irrigatio.i supplies. Another proposal was to pchannelize all the major choes as a means ef minimizing damage caused by spateflows. Both these proposals gave rise to concern as to whether they mighthave an undesirable effect on the groundwater regime, which was already beingplaceI under some strain by the rapid increase in the number of privatetubewells.

5. The concept of linking the proposed irrigation and flood controldevelopment with improvements in the hill watersheds was formed inconsultation between the Government of Punjab and the World Bank. The primaryobjective of the project as appraised was to lay the basis for soundinvestment on a large scale to: (a) reverse man-made ecological degradationand (b) protect and develop agricultural land that was subject to seriouserosion and flooding. The project therefore was to focus on institution-building, in particular strengthening GOP's capability to plan, implement andmonitor similar projects in the sub-mountainous zone. It vas designed as apilot project, comprising a package of complementary investments and was tointroduce technical and social improvements that, through their replicability,would have an impact far beyond the project itself. The project was to selectfive watersheds out of a much larger number covering the entire Kandi trac.Project interventions includeds (a) rehabilitation of upper catchments,(b) flood protection and irrigation of farm lands below the hills, and*c) development of farm land protected from floods. The project was preparedby the concerned line departments in 1977/78. Feasibility-level planning wascompleted prior to appraisal by the GOP who had limited planning capabilityfor only one of the five watersheds, leaving the remainder to be identifiedand planned during the first years of project implementation (para. 7).

6. The project was to be implemented jointly by the Department ofForestry (FD), Soil Conservation and Engineering (SCD), Irrigation (ID),Agriculture (AD), Animal Husbandry, Fisheries, and by the Punjab AgriculturalUniversity (PAU). Coordination was to be achieved at Secretary level througha Policy Review Committee and inter-departmental coordination was to beexercised by an Implementation Committee under She Financial Covuissioner vhowould also appoint the Project Coordinator.

B. Proiect Implementation

General

7. With only one of five watershed development plans (Dholbaha) readyfor implementation the foremost task after project effectiveness was toprepare similar development plans for the four other watersheds. Although GOPhad alreody preliminarily identified these watersheds, the SAR rightlyprovided for feasibility level studies for a total of ten watersheds, in orderto broaden the base from which to select four representative and feasible sub-projects. Reaching agreement on the need for assistance from internationalconsultants in this planning exercise was difficult and prolonged. When aconsultant team was eventutllv hired and feasibility reports prepared, itbecame clear that the potenti.- for project activities for catcbmentrehabilitation, irrigation, flood control and farm development components wasconsiderably less than estimated at appraisal. A major disappointment was therevelation that storage and flood attenuation dams with associated irrigation

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development similar to the Dholbaha model would be economically feasibly onlyin two of the ter. watersheds (Janauri and Haili) in addition to Dholbaha.

a, nae reduced irrigation-cum-flood control development potentialtogether with slow progress in the implementation of Dholbaha dam andirrigation system, provoked a reorientation of the project, as expressed inthe mid-term review of December 1982. There the strategy was changed from theDholbaha model, to groundwater development, water harvesting tanks andcoverage of more waters'neds with corresponding upward revision of projectcomponents other than dam building. The Bank thus agreed to extend projectactivities from five to eleven watersheds, thereby accelerating thereafforestation and protection of the upper catchments and previding on-farmdevelopment and livestock development to other beneficiaries within the Kanditact.

9. While at appraisal no groundwater development was included under theproject, the findings of the consultant studies indicated some potential and,probably as a trade-off for the much reduced surface irrigation development,the Bank agreed to the installation of 15 tubewells of which 13 were actuallyimplemented.

Rehabilitation of Uoyer Catchments

10. Rehabilitation was composed of revegetation using indigenous as wellas imported tree and shrub species, and grasses (Bhabbar and Vetiver). Since1985 shrubs and grasses have been planted to form vegstative hedges (screens)for erosion control and moisture conservation. Cor=ercially remunerativespecies such as eucalyptus and teak and fodder trees were also planted onprivately owned land. These vegetarive methods were reinforced through checkdams, silt detention basins, anl closure to grazing.

11. In response to expansion of activities over an additional sixwatersheds the Forestry Department established new targets for rehabilitationsubstantially above SAR provisions. Yet, in the final balance, these targetswere again exceeded by a comfortable margin (Table 2). It is noted, however,that areas quoted as rehabilitatcd are consistently larger than thecorresponding watersheds, suggesting repeated rehabilitation efforts incertain areas, probably in response to high plant mortality due to continuedgrazing, drought, fire and other causes. It also reflects the u satisfactorymaintenance provision of only two years, and indicates that closAre to grazinghas been ineffective.

Animal Husbandry

12. Under the livestock program nearly 3,000 head of improved buffalowere exchanged for low-yielding cows and buffaloes. Artificial inseminationof over 15,000 cattle units is also reported achieved. However, the AnimalHusbandry Department did not succeed in its ultimate objective ofsubstantially reducing grazing in the upper watersheds. PAU estimates thatthe cattle population grazing in the upper watershed was reduced by only 15z.This failure can be ascribed to:

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(a) lack of fodder and feed provision which should have come fromirrigated land as well as from fodder harvesting in the upperwatersheds. This led ;o declining milk yields and consequently thesale of the improved cattle;2/

(b) lack of marketing facilities for surplus dairy production, and henceinadequate incentive for farmers to exchange their traditional animalhusbandry for stall-feeding of improved animals;

(c) lack of understanding by project authorities of the social andcultural factors inhibiting adoption of the proposed technology, andweakness of livestock extension staff in the Kandi area.

Irrigation and Flood Control Works

13. Prior to the project the ID was represented in the Kandi tract byonly a small tubewell section and a drainage division. For the implementationof the dams and related works the ID established a new construction divisionand a division for carrying out the hydrological and groundwaterinvestigations. Both are being maintained in operation for completion ofspill-over works as well as for planning and implementation of further damprojects. At the outset little experience with the construction of earth damswas available, which contributed .o a slow start. Also, ID had littleexperience with contractual work as irrigation and flood control works weregenerally carried out departmentally on force account. Meanwhile constructionof a fourth dam. although entirely GOP-financed, is also being undertakenthrough a contractor.

14. Construction of Dholbaha dam and irrigation system was started inmid-1981 and was intended to be completed in two to three years. Instead.completion took over eight years, and most of the tertiary irrigation systemis still not operational. The main cause of delay was the inadequateperformance of the initial contractor, whose contract was eventuallycancelled, land acquisition problems, delays in budgetary provision,inadequate project preparation and poor timing between dam raising andirrigation infrastructure were other causes as well as lack of staffcontinuity. An important factor in the non-completion of the tertiary systemhas been the omission of the AD services under the project, which wererequired in order to undertake, with farmer participation, the implementationof the farm distribution systems in the chaks 31 below the outlets from the IDimplemented system. The uncertain law and order situation in the State overthe last several years has certainly also contributed to slower progress thananticipated.

2/ It is estimated that at least 50? of cattle supplied under the exchangescheme were sold out of the project area within four years.

3/ Lowest order or sub-division of irrigation command, here about 8 ha.

15. Implementation experience with the Janauri and Maili sub-projects hasby and large been encouragingly positive, although even here theimplementation of the tertiary irrigation systems is lagging behind for theabovementioned reason.

16. The need for flood control works and corresponding provisions underthe project had been greatly over-estimated at appraisal. The proposed3diversion embankments" t'f 80 km length were entirely dropped from theimplementation plans while *channelization' was also greatly reduced. Onlysome reinforcement of the left bank flood protection levee on Dholbaha Choe,with a total length of 5.2 km, was included. Flood protection works under theproject on other choes have not been reported.

17. Implementation of the tubewell sub-component through the Punjab StateTubewell Corporation (PSTC), civering four watersheds, proceeded without majordelays. However, at Maili only one of two wells was drilled and later thiswas abandoned because of insufficient yield.

18. The SAR rightly had made provision for a five-year program ofextensive groundwater investigations, which was outlined to include theestablishment of an observation network (wells plus stream runoff stations),recharge experiments, pumping tests, groundwater mapping, and relatedmonitoring activities. The urgent need for such a program was reaffirmed bythe consultant team in connection with their advocation of a hydrogeologicalmaster plan for the Kandi tract in particular, but also for the entire *8istDoabl, between the Beas and the Sutlej river systems. The importance of suchstudies was subsequently reiterated by at least one supervision mission.However, implementation of the program was slow, due to lack of budgetsupport, shortage of staff and general lack of commitment. It is quiteobvious that the latter was in inverse proportion to the attention given tothe promotion and support of dam building. The surface hydrology monitoringappears to have been geared to providing necessary data for further surfacestorage feasibility studies. To date no report on groundwater-related studiesand interpretations has been prepared.

Farm Development

19. In the land development sub-component implementation proceeded muchin line with SAR expectations through conventional high-cost bench terracingand block levelling, with emphasis on Dholbaha watershed where nearly half ofthe total coverage of 10,800 ha (Table 2) was concentrated. The remainder wasshared approximately evenly between the ten other watersheds. Low-costvegetative methods and contour hedging for in-situ moisture conservation wereonly applied in the last two years of the project on a trial scale.

20. Fruit tree planting, predominantly citrus, was achieved on about2,300 ha of which 90Z was irrigated land and over half was located outside theproject area on more appropriate soils that were irrigated. Some plantspacing and fertilizer problems indicate lack of adequate extension coverage.

21. Two fish seed farms were established by the project and havesubstantially boosted fingerling production for statewide use, althoughstocking quantities in the project area have not reached expected levels.

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This was mainly due to reduced and delayed reservoir construction and lesserthan expected numbers of village and f&rm ponds. Because of marketingproblems 4/ most of the fish produced was marketed outside the Kandi tract, asfar away as Calcutta. Fish harvesting was auctioned away and benefits seem tohave largely by-passed the targetted beneficiaries.

Agricultural Research

22. Under the project a new agricultural research station designed togenerate region-specific technology was established in 1981 at BallowalSaunkhri. With most of the planned infrastructure installed the 120 ha farm,which is operated by the PAU, is performing very useful work on all importantaspects of rainfed cultivation. Activities initiated under the projectinclude:

(a) research on suitable field crops and green fodder crops;

(b) horticultural experiments;

(c) testing of tree and shrub species under conditions of the Kanditract;

(d) development of more remunerative farming and land management systems,including development of trees and tree products;

(e) soil and moisture conservation and land development practices; and

(f) water harvesting techniques.

Experimental results indicate substantial scope for technological improvementsbut have not yet matured into replicable models and further work is thusrequired and deserves support under any future project.

Training

23. Various training activities were undertaken under the provisions ofthe project. These includet

(a) nine senior officers (1 from the Animal Husbandry Department, 2 fromFD, 5 from ID and the Joint Development Commissioner) attendedColorado State University for 3-5 month courses;

(b) during the project approximately 20 middle-level officers attendedshort courses at the Central Arid Zone Research Institute, Jodphur,and the Indian Fodder and Grassland Research Institute, Jhansi;

(c) in-service training was given to junior FD staff at the ForestTraining School, Hoshiarpur; and

4/ Local people dislike the bony carp variety which was predominantlystocked in the reservoirs.

(d) in the latter years of the project bi-annual farmer fairs were heldat the Ballowal Research Station.

Costs. Financing and Disbursement

24. Total project costs for the originally-envisaged implementationperiod of five years were estimated at Rs 510.5 million (US$60.8 million atthe exchange rate prevailing at the time of appraisal). Of these costs over50? were to be allocated to irrigation and flood control work.

25. Revised cost estimates (resulting from the extension of the projectperiod to seven years (later extended to eight) and the extension of projectscope from the rehabilitation of five to eleven watersheds) totalled Rs 598.8million. The proportion of total costs allocated to irrigation/flood controlcomponents remained constant at over 502, even though it was already clear atthe time of revieion that this component was failing to meet designatedtargets.

26. Actual project costs totalled Rs 595 million, very slightly below therevised estimated of Rs 599 million. Most components' expenditure slightlyexceeded revised estimates, with the exception of animal husbandry,horticulture and irrigation. The irrigation component absorbed over 50? oftotal costs. It will be noted that had five dams been constructed, asoriginally envisaged, rather than thre-. there would have been a veryconsiderable cost over-run. Cost details are given in Table 4.

27. Due to the low proportion of foreign exchange costs in relation tototal costs (estimated at 9? at appraisal), it was considered appropriate forthe Bank to assist in financing part of the project's local currencyexpenditure. Hence it was agreed that the Bank would finance some 45? oflocal costs in addition to all foreign exchange costs. Remaining financingrequirements were to be met, according to the standard formula, 70? by theGovernment of India and 30? by the Government of Punjab.

28. The IBRD loan finally accounted for 54? of total project financing asopposed to the 49? envisaged at appraisal, in spite of the non-di3bursement ofnearly US$4 million. This was because of the falling value of the rupee asagainst the US dollar. It should be noted that the figure of US$48.4 millionfor the total dollar cost of the project is only approximate, again because ofthe shifting exchange rate. Financing details are given in Table 5.

29. Disbursements were to be made for:

(a) 100? of the cost of overseas training and consultancy services,including project evaluation undertaken by PAU;

(b) soil conservation, land levelling and revegetation works in the uppercatchments at the rate of Rs 2.300/ha;

(c) 70? of other civil works expenditures;

(d) 1002 of the cost of locally manufactured goods procured ex-factory or702 of the cost of other locally procured goods,

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(e) 702 of the cost of cattle and sheep; and

(f) 502 of the cost of salaries for incremental project staff.

30. These disbursement provisions were not altered when the projecttimetable and targets were revised. Details of planned and actualdisbursement are given in Table 1.

31. Final disbursement from the IBRD loan was US$26.1 million,considerably less than the agreed US$30 million. This shortfall can beattributed to two factorst

(a) Irrigation expenditure was Rs 24 million less than the revisedestimates. At the exchange rates prevailing in the latter years ofthe project and with 702 IBRD financing it can be assumed thereforethat less than estimated irrigation expenditure accounted for overUS$1 million of the undisbursed amount;

(b) In a context where foreign exchange costs were relatively low, the USdollar appreciated by nearly 90X in relation to the rupee overproject lifetime. Largely because of tardy implementation over 502of loan disbursement took place in the last three years of theproject.

C. Proiect Results

Agricultural and Environmental Imnact

32. The primary objective of the project was to reverse, on a pilotscale, man-made ecological degradation in the Shiwalik hills. This, whenreplicated, would generate beneficial effects for the population fringing thehills, as well as for a much larger section of the farmer population in theplains south-west of the Kandi tract. The former were supposed to be theactual target group of beneficiaries under the project. Their temporarysacrifices through foregone grazing and other uses of the watersheds were tobe compensated by profit-generating farm development programs as well asreforestation and afforestation in privately-owned land (902 of Shiwaliks).However, soliciting farmers' cooperation, with the limited set of incentivesavailable was a formidable task, requiring strong department coordination/cooperation. This was not achieved (para. 47). A major shortcoming was thatproposed interventions were too dependently linked to irrigated rather thanrainfed farming, and that irrigation development suffered both delays andreduction in scope.

33. It is worth noting that the prospect of dam construction not onlystrongly influenced watershed selection but also provided the rational formuch intardepartmental coordination. This was particularly true in the caseof the Forestry and Irrigation Departments because of the obvious priorityneed to stabilize those watersheds where dams were to be built. In fact thewatersheds selected for dam constructions possessed a relatively densevegetative cover already at project inception. There is some indication thatFD woul. have given priority to more denuded watersheds, had it not been forthe sake of lending support to the dam projects.

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34. Nevertheless FD was able to undertake substantial rehabilitation workin all 11 watersheds. The long-term effect of these efforts will howevergreatly depend on the extent to which maintenance operations can be sustained.Severe financial resources constraints clearly point to the need for wideradoption of contour aligned vegetative screens (vetiver grass, shrub species)and related low-cost in-situ moisture conservation methods.

35. The dependence of dams on relatively stable w-tersheds does notappear to have been sufficiently analyzed. Since watershed stabilization hasto be achieved to such an extent that siltation rates of the reservoirs arereduced to economically acceptable levels, it follows that the torrential,sediment-prone nature of floods would already have been moderated sosubstantially through rehabilitation that little room is left for justifyingadditional flood attenuation through dams. Apart from initial and runningcosts, the possible benefits of such dam storage ought to be weighed againstthe likely negative effects (e.g. evaporation) on the natura'. regime of floodwater infiltration along the sand rivers (choes) as an effective means ofgroundwater recharge for irrigating the fertile plains. It therefore appearsthat watershed rehabilitation without intervening storage may constitute theecologically most appropriate, technically least risky and economically mostviable solution in the context of most watersheds of the Kandi tract. As faras gravity irrigation from dams is concerned the project has provided littleevidence to suggest that it is economically viable on its own merits(paras. 38 and 39). The main thrust of future agricultural development on themarginal soils adjacent to the Shilwaliks therefore should be on rainfedfarming and adapted animal husbandry, even at the price of heavy subsidy. Theprospects for a moderate further groundwater development were considered quitegood by the project's consultant team. However, the relevant studies providedfor under the project have not yet yielded conclusive results (para. 18).

36. While the production-related objectives of the project have been onlypartially ach.eved, the conservation-oriented activities (para. 10) have beenimplemented with considerable success. On balance, therefore, theenvironmental, impact of the project has been highly positive, although scopefor further improvement remains and continuous vigilance will be required.

The Economic Rate of Return

37. The economic rate of return (ERR) estimated at appraisal was based onDholbaha alone. On this basis the ERR was estimated at 16Z. A lessoptimistic model assuming few project benefits to the south of the Chandigarh-Hoshiarpur road yielded an ERR of 13Z. A separate analysis was undertaken,estimating the ERR on reforestation and soil conservation measures in theupper catchments--taken as a self-contained activity--as 12Z.

38. A more refined economic analysis was produced by the consultancy teamengaged under the project to make feasibility studies of other watersheds.Apart from Dholbaha, which might be suitable for early rehabilitation, ERRswere calculated by major component and by watershed. For the forestrycomponent the ERR averaged 182 over 10 watersheds. The ERRs for the cattleexchange program were exceedingly high. Irtigation and flood control with

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dams were found to have ERRs of less than 71 in all watersheds except Mailiand Janauri (201 and 132 respectively), while on the other hand deep tubewellirrigation was found to generate satisfactory ERRs in the majority ofwatersheds. On the basis of these findings dam construction under the projectwas thereafter confined to Dholbaha, Maili and Janauri.

39. The PCR estimate S/ of an overall project ERR of 82 thereforerepresents a substantial shortfall from earlier expectations. Separate ERRshave been estimated for each component, as follows:

Forestry 12SAnimal husbandry 9SSoil conservation 10lHorticulture 221Irrigation 2S

40. The reasons for the poor performance of the irrigation component,notably delayed implementation and restricted area actually brought underirrigation, have already been discussed. The less than satisfactoryperformance of the soil conservation component is largely due to the failureof the irrigation component, since the full benefits of many of the soilconservation activities undertaken were dependent on the availability oftimely irrigation.

41. The poor performance of the animal husbandry component, particularlyin relation to estimates by the consultant team, is ascribed to the exodus ofhigh-quality cattle provided under the project (only 601 of these animals wereretained in the project area from the 4th year onwards) and to a sharp drop inpredicted milk yields. Both these negative factors relate, in turn, todefective provision of fodder and feed, inadequate extension services, andlack of marketing facilities for surplus milk production.

42. The forestry component, based on a sample area evaluation, achievedthe same ERR as estimated at appraisal. It is now acknowledged that resultsfrom this component could have been considerably better had adequate provisionbeen made for maintenance, so that high tree mortality rates could have beensignificantly reduced. The occurrence of a severe drought in 1987 must alsobe considered.

43. The horticultural component yielded by far the highest ERR.Satisfaction at this result should, however, be moderated by the considerationthat a very high proportion of horticultural activity took place on alreadyirrigated land on the fringes of and outside the project area, and thereforecontributed little towards the achievement of project objectives.

5/ The PCR estimate is largely based on a cost-benefit analysis undertakenby the evaluation unit at PAU and a supplementary evaluation undertakenat the Delhi Office of the Bank.

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44. No ERR was calculated for the fisheries component since data on thiscomponent were scanty and fishery development played a minor role in theproject as a whole.

45. It is relevant to make the following two observations in connectionwith procedures for calculating the ERR which appear to have considerablebearing on the design, implementation and outcome of the project:

(a) Although the project was primarily addressed to the arrest of soilerosion and environmental deterioration, no coefficients of decliningyields in a without-project situation were calculated. This wasjustified on the grounds that the assumption of no decline in yieldswould, although unrealistic, make the economic analysis moreconservative and hence more robust. Furthermore, little reliableinformation was available on which to base estimates of decliningyields. Finally, declining yields without project interventionwould, in the long term, be most damaging outside the project area,that is in the plains below the Shivaliks, as a result ofdeterioration of water resources, sedimentation, etc. Nevertheless,as a partial consequence of this procedure, hcavy emphasis was laidon the achievement of economic benefits through production-orientedactivities and the primary objective--to reverse man-made ecologicaldegradation in the area--was to a large extent lost from view. Giventhe nature of the project and the importance of the externalitiesinvolved, the Bank's insistence at the time of project formulationthat an ERR of not l8ss than 12Z should be achieved was perhapsinappropriate. If a more robust estimate of the opportunity cost ofcapital were accepted in this context (e.g. 8Z), the project'sfailure to achieve the predicted ERR would not be an indicator ofoverall failure, as long as the problr-' of ecological degradation hadbeen tackled in any substantive way.

(b) In the SAR ERRs were calculated separately for the irrigation andforestry components. Subsequently the consultants' report calculatedERRs separately for each component in each watershed, a procedurewhich was maintained at the component level throughout monitoring andevaluation. While this is a useful practice and can constitute avaluable check against excessive investment in only marginallybeneficial activities, there is a danger that in a project wherecomponents are mutually interdependent it can promote a fragmentedapproach to project implementation. Indeed, this appears to havebecome the case in the Kandi project; the calculation of separateERRs for each component reinforced a tendency for line departments topurs:te their separate agendas with little reference to otherdepartments' plans or activities.

Borrower's Performance

46. Overall, borrower performance was characterized by a high degree oftechnical competence. With the exception of irrigation, most line departmentsultimately achieved the targets assigned to them, in spite of a slow start.As shown in Table 2 most departments came very close to their financial

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targets and the majority exceeded their physical targets, as expressed incrudely quantitative terms.61

47. The most disappointing feature of borrower performance was thefailure to achieve significant coordination or even communication betweendepartments, and thus the lack of an integrated or coherent approach towardsproject implementation. Individual departments undertook their separateagendas with varying degrees of energy and according to their own priorities.This resulted, in some cases, in inadequate participation in projectactivities; it is clear, for example, that the installation of deep tubewellsin the Kandi area was not a high priority for the Punjab State TubewellCorporation, although it is acknowledged that these could have been highlybeneficial in many watersheds.

48. In other cases poor coordination between departments seriouslyreducea the effectiveness of project activities. As an example, the provisionof fodder harvested from the upper catchments was essential to the success ofthe cattle exchange program's objective to substitute stall-feeding foruncontrolled grazing. Yet the FD merely auctioned fodder harvesting rights tothe highest bidder, with the result that fodder from the upper catchmentsrarely found its way to the intended beneficiaries. Similarly, additionalfodder was to be grown in the lower watersheds, yet AD contribution to thisactivity (as in other aspects of the project, with the exception ofhorticulture) appears to have been minimal.

49. In yet other cases, an individual department energetically fulfilledtargets assigned to it, without significant reference to overall projectobjectives. So, for example, horticultural targets expressed in crude termsof hectares to be planted were over-achieved, but planting under rainfedconditions in the upper regions watershed were almost non-existent. Lack ofinterdepartmental coordination led, then, to a situation where projectobjectives were translated into department targets, which then came to obscurethose very objectives. Furthermore, activities which were not clearly theresponsibility of one single department were, in general, not initiated. So,for example, the consultants' report recommended that establishment of small-scale agro-industries in the upper watersheds as supplementary forms ofincome-generation, but no steps along these lines were taken.

50. in short, while the technical competence of the executing agencieswas of high order, coordinating and planning capacity and the ability torespond flexibly to a developing situation were limited. In cannot be claimedthat such capacity was significantly enhanced during project implementation.Although general monitoring and evaluation was undertaken satisfactorily byPAU, there appears to have been poor dialogue between PAU and the technicalagencies involved, indicating a lack of monitoring and evaluation capabilitywithin the technical agencies themselves, as well as shortage of staff withinthe evaluation cell of PAU. Discontinuity of project personnel hampered the

6/ The physical target and achievement of the forestry component, forexample, specifies trees to be planted and actually planted, but doesnot take mortality rates into account.

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development of planning and coordination capability. To take one example,there were reported to have been four different superintendent engineers atthe Dholbaha dam over a 3-year period.

51. In gene.al, individual departments administered their budgetallocation efficiently, although it was reported that within departments fundswere not always channelled promptly down to field implementation level.Financing did not--with the exception of provision for forestry maintenance--set a significant constraint on successful project implementation. Theprovision of separate budgets did, however, in addition to reinforcingdepartment autonomies, inhibit the transfer of funds from underperformingcomponents to components which could have been developed on a more ambitiousscale.

52. In one sense, however, the financial climate prevailing in the Pubjabdid contain successful project implementation. As part of a GOP austerityprogram, from 1985186 all government and civil service posts were frozen.This freeze included incremental project staff, even though 502 of incrementalsalaries were to be financed by the World Bank loan. Precise figures were notavailable on incremental staff to be assigned and actually assigned to theproject by departments. Nevertheless, the acknowledged inadequacy of theextension effort in agriculture and animal husbandry may well have been due ina large measure to the freeze on addit_'onal staffing.

Bank Performance

53. PrAect Desizn and Anpraisal. An integrated approach to the problemsof environmental degradation in the Kandi tract was long overdue, and the Bankplayed a valuable role as a catalyst in setting in motion through this largelypilot project a large-scale remedial program which will take many years tocomplete. Many of the problems encountered in the course of projectimplementation can be attributed directly or indirectly to faulty design andappraisal. Design and appraisal features vhich appear, with hindsight, lessthan satisfactory are listed below:

(a) a central weakness of project design, particularly in view of thepredictable difficulties in interdepartmental coordination describedin the preceding sections, was the lack of clear definition ofdifferent departments' roles and responsibilities. This lack ofdefinition is eloquently illustrated in the confusing and elaborateorganizational chart (SAR p. 93);

(b) closely related to the above was the lack of any effective controlmechanisms vested in the Joint Development Commissioner's (ProjectCoordination) office; since budgetary allocations were made directlyto concerned departments no institutional or budgetary check wascreated against their inherent autonomist or even separatisttendencies;

(c) preparation and appraisal were constrained by data availability,largely confined to the Dholbaha watershed. It was, perhaps,therefore inevitable that surface-water irrigation should have cometo appear the dominant component of the project, although with

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hindsight it is clear that reforestation and stabilization of theupper catchments supported by farm development should have been giventhe highest prioritys

(d) as already discussed, the techniques of economic appraisal employedtended to emphasize directly production-oriented activities at theexpense of an integrated remedial program;

(e) given the long-term nature of the activities to be undertaken, theslow-maturing nature of many of the benefits, the lack ofinstitutional experience in this type of project and the paucity ofdata available at the planning stage, it would have been morerealistic to have phased project activities over a longer period,planning for a seven-year project from the outset;

(f) insufficient attention was given to potential marketing problems, Inparticular in respect to input supply (fodder for livestock) but alsoin respect to output (milk, and possibly also citrus and eucalyptus);

(g) the assumption that existing levels of extension staffing wereadequate to meet project needs proved unjustified;

(h) only perfunctory attention was paid to socio-economic and income-distribution effects of project intervention. Likely winners andlosers under the project were not clearly identified. Thus, asalready mentioned, livestock owners who received fodder harvestedfrom the upper catchments were not necessarily those who hadpreviously grazed their cattle there. The livestock exchange schemeenabled cattled-owners to exchange two inferior animals for oneimproved animal. Owners of only one animal were thus excluded fromthe scheme. Planting material and credit at subsidized rates wereprovided under the horticultural component to farmer whose land wasalready irrigated. The value of lands to be irrigated increasedsharply, without necessarily benefitting the local population. It isreported that some 10-15S of the most fertile land to be irrigatedfollowing construction of the Dholbaha dam was bought up by outsidersbefore land values began to rise. Many of these eocio-economicproblems are admittedly, more associated with project implementationthan with design. Nevertheless, a more formal socio-economic inputat the appraisal stage could have predicted them and recommendedappropriate policies;7/ and

(i) finally, as already mentioned, provision for forestry upkeep andmaintenance costs were inadequate.

54. Supervision. The mission was unable to locate formal supervisionreports either in the Bank Delhi office or at project headquarters for theperiod up to June 1983. It would appear that up to that date supervisionswere conducted on a relatively informal one-man basis, with observations andrecommendations presented in the form of memoranda. Thenceforth, however,

7/ It should be noted that the post of sociologist at the JointDevelopment Commissioner's office provided for under the project wasnever filled.

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supervisions were undertaken more rigorously and formal supervision reportswere presented. Insufficient attention was paid however to verifying thesuitability of technology adopted for the livestock sub-component.

55. The Bank's decision to limit dam construction under the project tothree watersheds rather than five and to encourage greater emphasis onvegetative methods of soil conservation and in situ moisture conservation was,in the view of the PCR mission, correct and in keeping with the consultancyteam's recommendations. It was also consistent with the SAR's proviso (p. 23)that dam construction would only take place where ERas of not less than 122were foreseen. Nevertheless, it should be noted that this decision wasperceived by many involved in project implementation as a capricious change ofpolicy. It would seem that on this point communication between the Bank andproject authorities, in other respects both cordial and effective, was notcompletely satisfactory.

D. Conclusions. Lessons Learned avi Issues

56. Although shortcomings in project design and implementation are amplydocumented in the preceding pages, as well as implicitly summarized in thefollowing section, "Lessons Learned', it should be recalled that the projectwas conceived as being pilot and therefore largely experimental in nature.Given the complerity, scale and necessarily long-term character of anysystematic program to halt or reverse man-made degradation of the Shilwalikrange and the lack of experience in planning and implementing multi-disciplinary interventions of the type required, lessons learned or learnablefrom the Kandi project can be seen as positive project benefits. The candorwith which those involved are prepared to acknowledge planning andimplementation errors augurs well for the success of future interventions inthe Shiwaliks.

57. Rehabilitation of the Shiwaliks requires a very considerable shift inthe conceptual framework that has dominated agricultural development in thePunjab over the last two decades--a shift from the belief that technicalsolutions devised at departmental level are necessarily the most appropriate,a shift from the emphasis on capital-intensive irrigation and earth-movingworks towards more emphasis on improvements to rainfed agriculture and,finally, a shift from the belief that effective interventions of anenvironmentally conservationist or remedial nature must be justifiable byshort-term production targets alone. It would have been unrealistic to expectmore than the beginnings of such a shift during the course of this singleproject. Nevertheless, it achieved a significant first step in reversing thelong-estrblished mismanagement of the Shiwaliks

Lessons Learned

58. As already mentioned, one of the benefits of the project was that itgenerated a great number of lessons highly relevant for any furtherinterventions of this type. The principal ones are summarized below.

(a) Ortanization, Management and Financina. The core problem throughoutproject implementation was the failure of the different agenciesinvolved to coordinate their plans or their programs or even,

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frequently, to communicat%. effectively. The Joint DevelopmentCommissioner's office, charged with the role of coordinating projectactivities, did not posses the institutional or financial powernecessary to do so; it was not, for example, automatically givenaccess to departmental files. It is widely acknowledged that infuture projects of this type, "one-window" financing (in which theproject coordinating unit is responsible for disbursement todepartments) would enhance the status of coordination and reduce thetendency of departments to pursue separate agendas. However, thismay have its price in increased bureaucracy and some loss ofinitiativelenthusiasm in the department.

(b) General Proiect Design. The long-term nature of the activitiesembarked upon by the project, the necessity of feasibility studies aspreliminary to many project activities and the need to phase outinterdependent activities mean that a project such as this cannot beeffectively compressed into a five-year span. A project period of7-8 years, with a mid -term review, would be more appropriate.Departmental targets frequently come to obscure overall projectobjectives. These objectives should be more clearly defined atproject formulation and kept in view throughout implementation. Astrengthened coordination unit would assist this. Insufficientattention was focussed during both formulation and implementation onproject beneficiaries and losers. A project of this nature,requiring radical departures from traditional rural practice (e.g.livestock grazing in upper watersheds), demands a more formal andsustained socio-economic input than was made. Little thought appearsto have been given to small-scale agro-industry which might offer analternative source oi ircome for farmers who traditionall) grazedtheir cattle in the upper watersheds. The viability of suchactivities should be assessed before implementation of furtherprojects of this kind.

(c) Irriaation and Flood Control. This project ccmponent has clearly.been the least successful, absorbing over 50Z of project costs inexchange for less than 102 of benefits. In addition to problemsarising from delays in dam construction, it appears that the benefitsto be derived from surface water irrigation were overestimated, andthat the damage caused by floods was overestimated too, so that thebenefits to be derived from flood attenuation were alsocorrespondingly overestimated. Accordingly, in future projects a keyrole should not automatically be assigned to surface water irrigationand flood control. Instead, a more pragmatic case by case approachshould be adopted, working from the assumption that, unless firmlyindicated to the contrary, the soundest procedure would be to:

(i) attenuate floods through watershed rehabilitation;

(ii) recharge as much as possible of the small and medium floods tothe groundwater along the sand beds of the choes, and;

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(iii) exploit the water resource thus harnessed through groundwaterdevelopment and rainfed cultivation in and around theShilvaliks.

(d) Forestry. It follows from the above that in-situ moistureconservation as the key to successful rainfed farming should be thecentral tactic in future interventions in the area, and thereforethat reforestation and afforestation and revegetation of the upperwatersheds should be given the highest priority. This could infavorable cases include water harvesting tanks. Although significantactivity took place under the forestry component, tree planting waslargely concentrated in watersheds were dams were to be built. Thesewere also the watersheds where vegetation cover was already fairlysatisfactory. In future projects efforts could be directed towardsthe more severely denuded watersheds, where the marginal benefitsfrom investment are likely to be more significant. The impact offorestry activities under the Kandi project was limited by the highmortality rate of trees planted. It is now appreciated that infuture projects maintenance costs should be more realisticallyestimated both in terms of magnitude and duration. It should berecalled that 902 of forest land in the Kandi tract is under privateownership. The Forestry Department responded with commendablepragmatism to this situation by balancing long-term conservationistplantings with the planting of economic species (e.g. eucalyptus)offering a relatively early financial return to farmers. Futureprojects in the Shiwaliks should bear in mind the necessity of somesuch trade-off.

(e) Soil Conservation. As in the case of forestry, soil conservationactivities were excessively linked, particularly in the lowerwatersheds, to irrigated farming conditions. Thus, the emphasis wason conventional high-cost methods of bench terracing and blocklevelling. It should be recognized that agricultural production inmost areas of the Shiwaliks will remain rainfed and, therefore, thatthere is a distinct need for large-scale application of low-costvegetative methods of soil conservation and contour hedging. "Modernapproaches' based on protection of soil surface from rain-splash andimprovement of internal drainage should also be applied.

(f) Livestock Development. It is clear that a significant reduction inthe numbers of livestock grazing on the Shiwaliks is an essentialcondition for improvement of their vegetative cover. The PCR missiondoes not, however, share the view that more rigorous enforcement ofthe grazing ban would be the solution to the problem. Such policingwould merely aggravate social tensions, while the ban would continueto be flouted as long as alternative sources of low-cost fodder (andfuel) were not forthcoming. It would therefore appear that anyfurther projects in the Shilwaliks would need to include somelivestock component along the lines of that attempted in the Kandiproject, but it would need to be reinforced by:

(i) improved fodder and feed supply and distribution, based mainlyon rainfed production;

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(ii) inclusion within the scheme of poorer livestock owners and non.landowners:

(iii) strengthened facilities for marketing surplus production; and

(iv) a vigorous educational program geared to farmers' socio-economicand cultural conditions and accompanied by a more effectiveextension message.

(g) Farm Development and Extension. Project achievements in establishingcitrus orchards contributed little to development either of thetarget area or the welfare of target farmers. Very little wasachieved under the project in terms of farm development under rainfedconditions. In this context the total absence of women extensionofficers in the area is to be noted. This is particularly damagingwhere off-farm employment is available to men and consequently farmsare managed by women. How far the livestock component was affectedby this could not be verified.

(h) Fisheries. Fishery development was of little relevance to the Kandiproject, largely because of the lower than expected level ofreservoir and farm pond construction. This should not automaticallybe taken to suggest that fishery development should automatically beexcluded as a useful component of any future project in theShiwaliks. Such a component should, however, not be dependent on damconstruction under the ID, and careful study of marketing constraintswould be required.

'i) Research. The establishment of the PAU research station at Ballowalwas, in the view of the PCR mission, an outstanding project success.Progress in determining appropriate technologies for rainfedagriculture in the region is very promising, and will ultimately bebeneficial to a much larger area than the Kandi tract alone. Futureinterventions in the Shiwaliks should sustain and strengthen ongoingresearch activities at Ballowal (para. 22). Suggested improvementsfor the future include:

(i) better infrastructure (in particular access) to ensure thecontinued commitment of high-calibre personnel;

(ii) imoroving the technology of vegetation establishment andmaintenance for soil and water conservation;

(iii) attachment of a sociologist to identify factors constraining theadoption of new technologies and to devise appropriatestrategies for overcoming these constraints; and

(iv) strengthening links with both extension staff and the farmingpopulation.

(j) Monitoring and Evaluation. Project evaluation was very competentlycarried out by the evaluatien cell at PAU, Ludhiana. Input into theproject during implementation was, however, limited as a result of

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lack of staff and poor communication with and between linedepartments. It is, again, to be hoped that improved coordinationwould remedy this situation in any future project. It should also bestressed that the existence of a project evaluation cell should notbe taken as a reason for line departments to neglect their owntechnical monitoring function.

Issues

59. Under this heading we refer to lessons derived from the Kandi projectwhich could be but have not entirely been learned, or to areas where thenature of the lesson to be learned is not yet clear.

(a) The Watershed as Planning Unit. The consultants' report made thepoint that the watershed did not constitute an entirely satisfactoryunit as a basis for planning, a point taken up by the PAU evaluationreport. This is because in the watershtd, -s a purely physicalunit--and one that in the Shivaliks, furthermore, is frequently notclearly delineated--cuts across more widely recognized social andadministrative boundaries. It is thus suggested that the village orgroup of villages would constitute a more realistic unit on which tobase planning and future interventions. Such a strategy would havethe additional advantage of encouraging active participation byaffected communities (something notably lacking hitherto). There islittle evidence that detailed study of how such a strategy mightoperate is being undertaken. The consultants' report also notedthat watershed planning and interventions were being undertaken inthe absence of a master plan for the Kandi tract. Futureinterventions in the Shiwaliks should be carried out in the contextof an overall long-term strategy for resource management andinvestment in the area as a whole, taking into account physical andhuman resources, tourist and industrial potential.

(b) Continuity of Proiect Personnel. The planning and implementation ofthe Kandi Project was harmed to some extent within the coordinatingunit, but in particular at departmentai level, by frequent changes ofstaff involved with the project. If project planning andimplementation capacity is to be strengthened it is important todevise a method of attracting and retaining high-calibre staff,without jeopardizing their career prospects and position within their'mother departments.

(c) The Economic Rate of Return as an Investment Criterion in theShiwaliks. As already argued (para. 45), inflexible use of the ERRas measure of investment profitability is not appropriate in projectssuch as the Kandi one. This is because no systematic methodology hasbeen elaborated for incorporating into the economic analysisdeclining yields and other costs of non-intervention which are likelyto be incurred outside as well as inside the project area. If theERR is to be used in appraising projects of this type it would beadvisable to estimate the opportunity cost of capital atsignificantly less than 12X.

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(d) Subsidies and Cost Recovery. Under the Kandi project policiesregarding subsidies to and cost recovery from beneficiaries were inline with policies applying in the rest of the Pubjab. Thesecorrespond, in general, to conditions of high-yielding irrigatedagriculture. The extent to which such policies are appropriate inrainfed and relatively unfavorable conditions needs to be reviewed.

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PART II - PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

Operational Perform ce

1. Physical and financial achievements of the components indicate thatthe operational performance of the project is quite satisfactory. However,there are short-comings which need to be improved upon in a follow up. Thelessons learnt from the implementation of the Project and the shortcomingswould be noted for future guidance. More emphasis would be laid on soilmoisture conservation in-situ and as such, further research development inrainfed practices for agriculture, horticulture and forests. Obviously,agriculture is to play a key dominant role during a second phase project andas such, has been included in the proposals.

Proiect Justification and Obiective

2. In the light of circumstances, the assessment of components and theirpriorities and problems are relevant to the project and are appropriate.However, a subsequent change in the reinforcement of the irrigation component(construction of dams) has affected this component in respect of validity ofits original emphasis. The reasons for it are technical.

Proiect Contents and Scheduling

3. The size, scheduling and complexities of the project were appropriateand balanced. It is obvious from the results under all the componentsinvolved.

Proiect ImDlementation and Ol'eratina Outcomes

4. Project Design i.e. integrated multidisciplinary, interdependent,multifarious development approach has proved quite successful in achieving theultimate goal of scoio-economic development of the Kandi Tract, the mostbackward area of the State of Punjab.

5. The implementation capacity of the executing agencies has beenstrengthened to their entire satisfaction. There is a little required forstrengthening the esecuting agencies under a second phase project.

6. Scheduling of Civil Works and procurement do not tally with the timeschedule proposed. It needs some structural changes so that works (dams andcivil works) must be completed as per schedule and the procurement is also tothe desired extent.

7. The implementation of schedules of the irrigation component werelagging behind due to some administrative/policy decisions by the lendingagency.

8. Operating forecasts proved to be reasonable to a greater extent. Theresponsibility of the participating components though specifically laid out inthe SAR of the Bank, but the role of Forestry and Animal Husbandry componentswas not clear. This resulted in some confusion concerning development of

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fodder for the livestock. Similarly, planting of vegetative hedges along thecontour, etc., to check soil erosion, surface run-off, etc., were not clearlyspelled out and aS such, these practices were not carried out adequately bythe components of Forestry and Soils. However, the planting of vegetativehedges--Vetiver Grass (Vetiveria zizanioides) was resorted to by thesecomponents on the recommendations of the World Bank supervision mission visitsto the area at a later stage. As such, most of the shortfall were remediedand in this connection visits of the World Bank Review Mission were quitehelpful. There has been a major shortfall in case of irrigation componentwhere dam construction activity was not done completely in accordance withearlier proposals. Irrigation component was to construct 10 dams whereas,only three have been constructed. In case of irrigation, it cannot be saidthat the shortfall occurred due to inadequate provision or specifications.Part B of Schedule 2 of the Loan Agreement (IN-1897) is very clear on thisissue and reproduced hereundert

Part Bs Flood protection, dams, irrigation works and construction andremodeling of bridges, to control and utilize run-off in Dholbaha andabout four other watersheds to be selected;

The shortfalls in case of irrigation as such, could not be remedied even at alater stage even in spite of administrative sanctions given by the GOP forconstruction.

9. The role of external aid agency--in the present case--financed withexternal assistance of IBRD (World Bank) has been laudable. But for theBank's assistance and guidance--this sort of a Project and programimplementation may not have become possible. From time to time World BankSupervision Mission has been visiting the Project area for periodic reviews ofProject implementation. The visits have been as a matter of fact biannual(six monthly) and were generally conducted every year in the months of Marchand September. The timings of the reviews were very appropriate keeping inview the climatic conditions of the region and such reviews were very helpfulin the achievement of Project goals expeditiously. Reviewing staff has beenfound to be much experienced and familiar wita the Project. The reportingrequirements and the reports were quite reasonable and useful to the executingagency, as already stated above, and also to the Government.

Evaluation of Project Implementation and Outcome

10. The Project implementation has been satisfactory and the targets asenvisaged at the planning stage, were accomplished. Now there is no questionof any degree of uncertainty since the PCR is prepared after the closure ofProject on March 31, 1988. The benefit cost ratio and the financial internalrate of return of the Project (overall--li watersheds), as assessed by thePAU, has been 1.70 and 16.73Z respectively (excluding Irrigation andFisheries). Even though the role of irrigation has been controversial, butthe construction of dams in Dholbaha, Janauri and Maili watersheds broughtabout a visible change in the area, not by way of merely as big structures,but by way of facilitating conservation of water for irrigation purposes,drinking, enriching flora and fauna, flood attenuation, containing seasonalhill torrents. Thus, as was originally envisaged, irrigation has a major roleto play to check flood onslaught in the area by not only containing water in

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the larger watersheds, but also to take flood protection measures alongriversibigger choes, etc., and providing improved drainage facilities andthereby improving In the drainage system as well. The conservation of wateris all the more vital keeping in view of the fact that the rains in the regionare seasonal and occur only during two months in a year's time--average meanrainfall varying 900 to 1,100 mm. To check the havoc of floods constructionof a few bigger dams is necessitated, specially where the upper catchments arewell stabil. zed.

11. Moreover, as has been discussed in the Feasibility Reports preparedby Messrs. Halcrow--MacDonald Consultancy Team and others, the benefits ofdams constructed by the irrigation component, are to accrue at a later stagewhen the irrigation channel system is fully developed, people trained andwater for irrigation properly channelized. During the last two years therewere unprecedented drought in the history of the country and not in Punjabalone and as such, water could not be collected te full capacity in the built-up reservoirs of the three dams for irrigation purposes, etc. This obviouslyresulted in lesser irrigation facilities in the command area--and hence,apparently the causative factor of lesser rates of return by the irrigationcomponent.

12. Due to non-construction of dams, the role of Fisheries also remainedrestricted. Fish fingerlings were to be released in the built-up dams--whichcould not take place due to obvious reasons--non-construction of dams.However, it is anticipated that fisheries have still a role to play byreleasing fish fingerling in the water harvesting tanks (IWHTs) constructed bythe soils component and in other village ponds. But, unfortunately fisheriescomponent has also been excluded in the future proposed Project.

13. At this stage it cannot be said that the Project was not well enoughidentified or prepared because the formal start of the Project in July, 1980was marked by the arrival of small team of international consultants, drawnfrom the two Firms of Sir M. MacDonald and Partners, and Sir. W. Halcrow andPartners, at the behest of the Bank, to assist the GOP during the first twoyears to prepare integrated development plans and feasibility reports for 10selected watersheds. Eventually the international consultants did prepare thefeasibility reports of the watersheds undertaken for development andconstruction of dams in 10 out of 11 watersheds was prescribed. Messrs.Halcrow-MacDonald also prepared a Final Report in 1983 for the on-goingprogram of implementation of the Project. As regards shifting of the Project--too quickly to easier goals, is concerned, it is mentioned that at muchbelated stage, construction of dams by irrigation component was not allowedand this resulted consequently in non-utilization of loan money (US dollars)whereas a major part of the proceeds of the loan (US$30 million) wasattributable to civil works (Dams) as per Schedule I of the Loan Agreement.The unspent amount of the loan money could not have been utilized by the othercomponents because of their lesser role. For instance, forestry componentcould not have covered more than 30,000 ha through vegetation-revegetation andsoil conservation programs and they did achieve this figure of about 30,000 haduring the Project period. The que'tion of such a shift whether it wascorrect or not, could be assessed in view of the position already explained.For maximizing the benefits of the Project in future, there is no denial ofthe fact that the additional training (overseas), improving supplementary

- 24 -

services, better maintenance standards, progress monitoring followed withphysical checks, reviews, time-bound framing of program implementation, arevery essential and key to success. For early and time-bound programimplementation, it is all the more necessary that procurement of staff andvehicles should be provided at the very commencement of the Project in orderto achieve better results. Without staff and vehicles particularly, nophysical monitoring is possible in such a sub-mountainous terrain ofShiwaliks.

14. In the last, needless to mention that the Project area is nearly4,600 sq kms and during implementation of the Project, only 78,000 ha of thearea has been tackled. There are nearly 58 major watersheds which have beenidentified whereas only 11 watersheds have been treated so far duringimplementation and as such, continuation of the Project is very essential inorder to reverse ecological degradatLon, stabilization of upper catcbments,prevention of floods and in elevating soclo-economic status of the people ofthis backward area of the Punjab State.

- 25 -

Table 1INDIA

RANDI WATERSHED AND AREA DEVELOPMENT PROJECT (PUNJAB) (LOAN 1897-73)

PART III - STATISTICAL INfORMATION

Project Identity

Project Names Kandi Watershed and Area Development Project (Punjab)Loan Numbers 1897-INCountry: IndiaSectors IrrigationOriginal Loan Amount: US$30 millionCancellationss US$3.9 millionNet Loan Amountt US$26.1 million

Proiect Timetable

Date of Appraisal Missiont May/June 1978Date of Board Approval: 20 July 1980Date of Loan Negotiations: October 1978Date of Signatures 12 September 1980Date of Effectiveness: 18 November 1980Date of Mid-Term Review: December 1982Planned Credit Closing Date: 31 March 1986Actual Credit Closing Date: 31 March 1988Planned Date of Completion: September 1986Actual Date of Completion: September 1988Planned Credit Completion: September 2000

Cumulative Annual Disbursement of Loan

Fiscal Year: 1981 1982 1983 1984 1985 1986 1987 1988------------------(US$ million)--------------------

Appraisal Estimate 1.8 6.8 14.4 22.4 30.0 30.0 30.0 30.0Actual 1.0 2.6 6.3 9.3 12.7 16.6 21.1 26.1Actual as Z ofappraisal Estimate 56 38 44 42 42 55 70 87

Disbursement by Category

Planned 1/ Actual

Soil Conservation and Revegetation 3.7 7.1Civil Works 16.4 15.1Well Drilling. etc. 0.7Equipment and Vehicles 1.3 0.4Cattle and Sheep 2.9 0.8Consultants and Overseas Training 2.8 1.4Salaries for Incremental Project Staff 2.9 0.6U3disbursed 3.9

1/ Figures under planned disbursement categories represent very approximateestimates. This is because categories of expenditures used at appraisalwere not those used during implementation.

Protect 1w5.mtatton - hw%icai aot

au IO vised for Emi f . J AcpulJ

£tfrestatlo. & re oreststloo a 5.500 MINDS OSOl0 11USell coeservatlos ha 24.000 31.300 39.40B. IIluildiags so. 01 110 I1t 100S-a4s m lsO 141 141 100

SS cooserwat oLaod deweloWpet works lu Ia. O 10.000 a0."D l00Mater harvest*ag taks no. o.a. 4 to 2SO

Anal HusbandryCow/haflalo e*"ha so. 2S,000 I 2.5S0 2.606 110Crossbreediog M. 0 13.300 1S.60 1Supply of teed/baylmInerals Otis. n.e. 11.0 143Constrsctso o0 Al . itsItodd.r so. a II * 41

hubs

lrrt.atioa L Flood ControlEarth dms so. S Il 3 3 10

* iheIs* so. * 55 53 Iisesidiags so. pa 6 5giabas&aet protectloa Me S .6 S.2 93

Private elaatatloes ha 5.1 11 .1 2.310 531Supply of soplsigs M000 .. 3110 4S1 150Nurseries so. .3 3 IN00eVIldiogs Mo. 0.4. 16 54 So

Fish cam so. 1 2 tOoIgildiogs so. a.*. IS t o1Fingrilugs r.ductiloa sIlliem a.. 4 31S

Pemib Aoricultural mv.st*esoarch statsm ha fi t3 51 100Sui dlg so. ma. 5 20 531Mater brwvestiag tubs sm. 300 1!J 11so pysical targets speatted at to the SACI So" 0"o 20.01)0 sheep

f ourt oer dom were PropoweE for *Opoew at6fHs *beject to 4*6sibiSSty.

I-

LA'SMIEISL D LIfSE AU OIQI ^ tPIOJICI IPUJSI

lareets and Acbhevau.aIs of Irri eation Cta_mt

1Scm au im eised Pi Atallz LALJ 0 sb£ iJied tn. lriI £aiL

Surface aiber Develmoent ibasb

I. bolbaba 1 CCt 3.1S0 3.64S 3.64S 11 Uoo 21S 6

2. Jaaurt ha CCL 492 300 6I 1,11 3S

I R*&$s 6e CCL n 944 944 to 290 21

Sub-tolal S,O 4.I89 96 S21 s0

6rA.er Deweloeuea Ilubeabelish

1. Jaari ro. 0 3 11 be CCt 33I n.e.2 61

2. PMII me. 0 2 0O)JI 0 0b4 CCL IIJ I.. -

3. Cho_l o0. 0 S (So ibe CCL 240 *.4. tll 13

4. IibbaI 1"gal De. 0 S £1S 1ha CCL 2i6 *.4. *1 "

Sub-tot3l (61M be CC 0 5SO 3501 my1 4f SS

Total ISM * cil ba CCA 3.10 5.3 3.38 392 93S 36

11 Itos et o bts is stsil not orreable due to lJc& of sagrastructure below dlStrlbtarieSs.J Se works still to. be coap1etedJ Oen lulbecell drilled but Abandoned due tu very low yield

39 WeC Se resei.B5f %Sofdr

KAROl MAIEISND AUO AREA AlV[&0P"I 1PIOJICI IPII"JAi

FEl ecd Ces,ts

Agaraisal Ctstirate Actual Cogsnnel AsimaI is I of Actual as I GI

aricinal Pewased txeenaesre as I of Oreae;al Nevis&e

............ (Is eis4oJ . ......................

lorestrp 7Z.1 111.1 12$.0 21 160 112

Sol$ coeservalaoa 38.6 S0.3 63.0 is 163 300

Lasmol busb.edrp S2.0 29.9 28.2 S 54 94

fUsser*es 1.3 13.4 16.1 3 220 120

Morticultlre S.4 11.) 9.4 2 1/4 B0

" 11 * .1 IS3.4 31.1 3 203 3is

Irragati o.19o3d ceatrol 2)1.1 32S.9 101 6 Sl 396 91

P1amaag and design studies 36.5 29.4 34 4 S3 103

ilechoscal assist&ace)PP&CoZ &I . ._ iZ

530.5 S.a Sf9 .2 102 A 1 9

11 Pubjab Agriculural University.ZI Program Plaaaimg &ad Coords.at*oa Unit.Al 0.scregaacy due to rendag up.

I.

- 29 -

E _ ~~~~~~~~~~~IblL S -i

KAf4I IATERSHFD AND AlREa OEEWLgPNNT-PROJECT IPUftJAR)

Prnj.ct Finacn

Sures EJAnned ([*LA Ei9hI

USI mlillioQ US minllion 8

ISRO 30 49 26.1 54

Government of India 21.6 36 15.6 32

Government of Punjab 9 2 _a1 _.7 -a

.Ia±a1 60.8 100 46.4 100

1. The decrease in the dollar cost of the project from original estimates,and hence the greater proportion of project costs borne by IBRO in spiteof unallocated funds of USS3.9 million, is due to the fall in the valueof the rupee relative to the dollar (from USSI a Rs9.1 in 1981 to USSIRsl4.9 in 1988).

2. Final project costs in dollar terms are computed by converting annualexpenditure at the average exchange rate for each year.

- 30 -

NI~

ICDNOt WATERSHFD AND AREA (WVFLnPNEI PROJECT taUNJAU

Eennnic I=Anc

hm aLu Estimae

FCnnnmiLcrate of rsturn (Z) 16/13 1/ 7-8

Selected miajfr &Ssumntionne

- Area irrigated by 1989 (ha) <4,000 a1 935 31- Milk production at full development ('000 1) 10,700 3,500- Timber production at full development (m3) 320,000 250,000

I/ The rate of return was based on Ohalbaha Watershed alone, sinceinsufficient data was available on other watersheds at the time ofappraisal. 16X was the ERR derived from the model considered mostlikely, 132 from a more conservative model which assumed no irrigationsouth of the road.

1 It was assumed that 3,000 ha would receive surface water irrigation inOholbaha watershed alone.

3/ Includes groundwater irrigation. At full development the area isexpected to increase to 5,831 ha (Table 3).

- 31 -

~a0

c^am WATE3sRO AO tri-OPUIT [OJICT (PUNJABI

Itatums af Cavuna,

hSLUM-

2.03 Pu,S 1-ulll carry out the proj et describeo -i 1oallp compliedeScheule 2 to the tooL Agreomet with dilt"nceand .111 provide neCessary tunds end factlities.

2.06A fuornsh proptly to the Sanok, plas. *oecifceatioss. O ta1led plaw for lind Rond#repts, contract 4Ocs. and work and procurement CMnal atSin throwg project

schedules for the project. area ^t to so furmished by

60. lot w1i1 not c under

this project.

2.053 Maintain records A procedure on project orogress. I I Compile"£nable lnk's represlntative to visit sit*s &facilities and eanino records. furnish projet

report at regular intervals.

2.10* Punja shOll. for Works other thoa holbaho. 03131/6 Complied

select about 10 rpresentatives of watersheds topropere feasibility plans for the sald tan

watersheds.

2?.1c Punjab shall. for Works other than Ohmolbao. I I See PCselect aout 4 watersheds for tiplemntation on

basis that each watershed be technically fessible

and will havw an *eonomic rate of return not less

than 123.

2.100 Furnish to the lank detalled I.plemontation plans I I Plans for Maui Om & Oholmba*for watersheds selected togethtr with reasons for received.

selection.

2.12 S Con t coatinuins evaluation of the eonomic and 031311t/l e 6rally compiedt

social effects of the project on the beneficiaries

ad furnish relts to the Bank oan " annual basis.

3.02 Furnish acets. & financial statemnfts not later 1 I Complied

than 9 months after and of year *ad Audit Reoprt.

I_nditely upon finalittion.

3.03A Punjab to cause Independent pOWel of eaperts to I I Compld

periodically esmine concepts. design &

construction of da & spillways.

3.030 Periodically inSpect d*s. spillways. Irrigatlo I Partially compted

canals and flood channels

- 32 .Table 8

INDIA

KANDI WATERSHED AND AREA DEVELOPMENT PROJECT (PUNJAB)

Supervision Detail

Mission No of Specializations Days in PerformanceNo. Date Persons Represented /a Field Rating

1 March 81 lb2 Oct. 81 /b3 March 82 /b4 Oct. 82 2 5 25 June 83 1 A 3 26 Oct. 83 2 A + ? 5 /c 27 March 84 1 A 3 /c 28 Oct. 84 3 A, F, I 10 29 July 85 5 A, 31, W 5 210 March 86 4 2A, I,W 5 211 Sept. 86 4 2A. I, S 5 212 March 87 2A. I, F, S 4 213 Oct. 87 5 3A, 21 5 1-214 Apr. 88 4 2A, I, X 5 1-215 Feb. 89 /d 3 E, I, W 10

/a A - Agriculturalist/soil conservationistE - EconomistF = ForesterI - Irrigation EngineerS - Soil ConservationistW = Watershed Management SpecialistX - Extension Specialist

/b No SPN reports on file prior to June 1983./c For reasons of security mission went only to Delhi./d PCR mission

Stff Inouta(Staff Wk)

Preappraseal FY75 FY76 FY7? FY78 FY79 FY80 FY81 FY62 FY83 FY64 FY86 FY66 FY87 FY66 Total

Preappraisal 1.8 16.6 7.2 85.9 - - - - - - - - - - 61.1Appraisal - - - 64.9 27.5 7.6 .9 - - - - - - - 100.4Negottation - - - - 6.6 7.3 1.0 - - - - - - - 14.9Supervision - - - - - 12.5 11.9 14.6 13.4 14.0 87.2 28.0 27.0 158.8Other - - - .2 .2 - - - - - - .9

Total 1.8 16.6 7.2 100.9 84.6 14.9 14.8 12.1 14.8 13.4 14.0 37.2 28.0 27.0 836.6