World Bank Document€¦ · Contact Person: Mr. Muhammad Yousaf Khattak, Director Water Management Tel: 921-1939 Fax: 921-1933 Email: Other Agency(ies): Federally Administered Tribal

Document ofThe World Bank

Report No: 22098-PAK

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 16.6 MILLION

(US$21.35 MILLION EQUIVALENT)

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR A

NWFP ON-FARM WATER MANAGEMENT PROJECT

April 10, 2001

Rural Development Sector UnitSouth Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 27, 2001)

Currency Unit = Pakistani Rupee (Rs)Rs 1.0 = US$0.0165

US$1.0 = Rs 60.55

FISCAL YEARJuly I June 30

ABBREVIATIONS AND ACRONYMS

AWB - Area Water Board M&E - Monitoring and EvaluationBST - Baseline Survey Team NDP - National Drainage ProjectDESA - Distributary Environmental & Social Assessment NGO - Non-Government OrganizationCAS - Country Assistance Strategy NWFP - North West Frontier ProvinceCDSG - Conmmunity Development and Support Group OFWM - On-Farm Water ManagementEA - Environmental Assessment O&M - Operations and MaintenanceECNEC - Executive Comnmittee of National Economic PAMIS - Project Accounting and Management

Council Information SystemEMP - Environmental Management Plan PAS - Project Accounting StaffEPA - Environmental Protection Agency PCC - Project Coordination CommitteeERR - Economic Rate of Return PID - Provincial Irrigation DepartmentFATA - Federally Administered Tribal Areas PIDA - Provincial Irrigation & Drainage AuthorityFATADC - FATA Development Corporation PIMM - Participatory Irrigation Management ModelFIDA - NWFP Irrigation & Drainage Authority PMR - Project Management ReportFIMPS - Framework for Identifying, Preparing, and PPC - Provincial Policy Committee

Monitoring Sub-Projects SEA - Sector Environmental AssessmentFO - Farner Organization SOT - Social Organization TeamFWUA - Federation of Water User Associations TA - Technical AssistanceGOP - Government of Pakistan TMM - Transfer Management ModelIBIS - Indus Basin Irrigation System TST - Technical Support TeamISRP - Irrigation Systems Rehabilitation Projects WUA - Water User Association

Vice President: Mieko NishimizuCountry Director John W. Wall

Sector Director: Ridwan AliTask Team Leader/Task Manager: Rashed ul Qayyum

PAKISTANNWFP ON-FARM WATER MANAGEMENT PROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 22. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 22. Main sector issues and Government strategy 33. Sector issues to be addressed by the project and strategic choices 5

C. Project Description Summary

1. Project components 52. Key policy and institutional reforms supported by the project 73. Benefits and target population 84. Institutional and implementation arrangements 8

D. Project Rationale

1. Project alternatives considered and reasons for rejection 112. Major related projects financed by the Bank and other development agencies 113. Lessons learned and reflected in proposed project design 124. Indications of borrower commitment and ownership 135. Value added of Bank support in this project 13

E. Summary Project Analysis

1. Economic 132. Financial 143. Technical 154. Institutional 155. Environmental 166. Social 187. Safeguard Policies 21

F. Sustainability and Risks

1. Sustainability 222. Critical risks 223. Possible controversial aspects 25

G. Main Credit Conditions

1. Effectiveness Condition 262. Other 26

H. Readiness for Implementation 28

I. Compliance with Bank Policies 28

Annexes

Annex 1: Project Design Summary 29Annex 2: Detailed Project Description 33Annex 3: Estimated Project Costs 51Annex 4: Cost Benefit Analysis Summary, or Economic Analysis Summary 58Annex 5: Financial Summary 71Annex 6: Procurement and Disbursement Arrangements 77Annex 7: Project Processing Schedule 85Annex 8: Documents in the Project File 86Annex 9: Statement of Loans and Credits 87Annex 10: Country at a Glance 90Annex 11: Social and Environmental Assessment 92

MAP(S)IBRD 22655R

PAKISTAN

NWFP ON-FARM WATER MANAGEMENT PROJECT

Project Appraisal Document

South Asia Regional OfficeRural Development Sector Unit

South Asia Region

Date: April 10, 2001 Team Leader: Rashed U QayyumCountry Manager/Director: John W. Wall Sector Manager/Director: Ridwan AliProject ID: P071092 Sector(s): Al - Irrigation & Drainage, BD -

Decentralization, BI - Institutional DevelopmentLending Instrument: Specific Investment Loan (SIL) Theme(s): Rural Development; Water

Poverty Targeted Intervention: Y

Project Financing Data[ I Loan [X] Credit [ ] Grant [ ] Guarantee [ Other:

For LoanslCreditslOthers:Amount (US$m): $21.35 million (SDR 16.6 million)

Proposed Terms (IDA): Standard CreditGrace period (years): 5 Years to maturity: 20Commitment fee: 0.75% Service charge: 0.01%Financing Plan: Source Local Foreign TotalBORROWER 3.70 0.00 3.70IDA 19.60 1.75 21.35FARMER ORGANIZATIONS 6.70 0.30 7.00

Total: 30.00 2.05 32.05

Borrower: GOVT. OF PAKISTANResponsible agency: NWFP OFWM DIRECTORATE AND FATADC

Water Management Directorate, Agriculture Department, N.W.F.P.Address: 5th Floor, Benevolent Fund Building, Peshawar CanttContact Person: Mr. Muhammad Yousaf Khattak, Director Water ManagementTel: 921-1939 Fax: 921-1933 Email:

Other Agency(ies):Federally Administered Tribal Areas Development Corporation (FATADC)Address: Warsak Road, PeshawarContact Person: Mr. Taj M. Afridi, Executive DirectorTel: 921-2149 Fax: 921-2144 Email:

Estimated disbursements (Bank FYIUS$M):FY 2002 2003 2004 2005 2006 2007

Annual 1.50 1.50 6.00 7.00 4.00 1.35Cumulative 1.50 3.00 9.00 16.00 20.00 21.35

Project implementation period: 5 yearsExpected effectiveness date: 09/15/2001 Expected closing date: 06/30/2006

OCS PAD PamD Pmt Min 2O00

A. Project Development Objective

1. Project development objective: (see Annex 1)

A. 1.1 The North West Frontier Province On-Fann Water Management Project's (NWFP-OFWM)development objective is to reduce rural poverty through increased agricultural production leading toincreased farm incomes. This objective would be achieved by: (a) improving the reliability, efficiency andequity of distribution of available irrigation water; (b) increasing on-farm water use efficiency; and (c)enhancing long-term financial sustainability of the irrigation system by supporting the government's effortto foster self sustaining farmer organizations (FOs). The FOs will be responsible for: managing,operating, and maintaining the water distribution infrastructure; collecting revenue from water charges; andcontributing to the capital cost of investments in the water distribution system.

2. Key performance indicators: (see Annex 1)

A.2. 1 The key performance indicators are: higher agricultural productivity (increased crop yields andcropping intensities, and shift in the cropping pattern to higher value crops); formation of effective FOs andtheir participation in the operation and management of the irrigation systems at the distributary andwatercourse levels; reduction in public sector operations and maintenance (O&M) costs at the tertiarylevels; increase in water supply; and improved equity and timeliness of water distribution.

B. Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: 15115-PAK; and Progress Report of December 28, 1998

Date of latest CAS discussion: January 21, 1999

B. 1.1 The overall objective of the Bank's assistance strategy in Pakistan is to help reduce poverty. Toaddress this objective, the Bank's approach highlights two closely linked challenges: improving theinadequate basic social services and reducing constraints to sustained growth. Expanding access to andimproving the quality of basic social services are essential to improve living standards in Pakistan. Inaddition to assisting the completion of fiscal adjustment, the Bank's strategy is to support the growthobjectives by focusing on structural reforms, improving the enabling environment for the private sector,strengthening inadequate basic infrastructure, reducing constraints on agriculture productivity, andprotecting Pakistan's natural resource base. The Bank is assisting in the redefinition of the public andprivate sectors in Pakistan by focusing on public policy formulation, institutional development, criticalpublic investments for private sector led growth, and strengthening the basis for private investments.

B. 1.2 In the irrigation and drainage subsector, the government has adopted a completely new approachto address the irrigation system crisis (Pakistan-Irrigation and Drainage: Issues and Options, Report No.

11884-PAK, March 25, 1994), which the Bank is supporting through various operations. Consistent with theCAS, the goals of establishing an efficient, self-sustaining irrigation and drainage system are to be achievedby promoting the use of market-determined incentives for improving the supply and management ofirrigation and drainage services, and by giving the beneficiaries a greater stake in the system. Theirrigation service is being decentralized by developing commercially oriented area water boards (AWBs) ona canal command level, while the management at the, distributary/minor level would be transferred to FOs.Autonomous provincial irrigation and drainage authorities (PIDAs) have been established for waterdelivery to AWBs and for handling off-farm drainage and regulations. The ongoing National DrainageProgram (NDP) and subsequent proposed irrigation systems improvement projects are providing support

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for reinforcing PIDAs and establishing more AWBs. This project would enhance participation of farmingcommunities in irrigation management at the distributary/minor canal level.

B.1.3 The project supports the CAS goals for sustainable growth, poverty reduction, and enhancedefficiencies and private/beneficiary participation in the delivery of economic and social services through:(a) promoting agricultural growth and crop diversification by improving the reliability, timeliness andequity in the distribution of irrigation water at the farm level; (b) establishing a decentralized,self-sustaining and participatory institutional apparatus for the operation and management of the irrigationand drainage systems; and (c) the strategic focus on the participation of communities, NGOs and theprivate sector in the institutional arrangements and processes.

2. Main sector issues and Government strategy:

B.2.1 Agriculture is the backbone of Pakistan's economy, employing 47 percent of the labor force andearning 70 percent of export revenues. Total cultivated area is 22 million hectares (ha), with overallcropping intensity of 105 percent. Pakistan's agriculture is almost wholly dependent on irrigation; irrigatedland supports more than 90 percent of agricultural production. Agriculture in most areas is not possiblewithout irrigation because the climate is arid to semiarid with low and variable rainfall. However, there are

abundant surface water resources in the Indus Basin, which covers 566,000 kmI and is the major source ofPakistan's water. The Indus Basin Irrigation System (IBIS) commands about 14 million ha which accounts

for the bulk of the agriculturally productive land. Annual river inflows average about 180 billion m' of

which about 130 billion m are diverted to canals. The IBIS is composed of three major reservoirs(Chasma, Mangla, and Tarbela), 19 barrages, 12 link canals, 43 canal commands and about 135,000watercourses, one-third of which are already renovated.

B.2.2 The NWFP covers 13 percent (10.2 million ha) of the total country area. It has nearly 2 millionha cultivated land with an overall cropping intensity of 113 percent. The majority of people (85 percent)live in rural areas, compared to 68 percent for the rest of Pakistan. Consequently, agriculture in theprovince employs 4 percent more labor force than the country average of 47 percent. Irrigated agriculturewhich accounts for 51 percent of the cultivated area supports about 60 percent of the agriculturalproduction. While much of the irrigated area is outside the IBIS command, 83 percent of the irrigatedlands are supplied water by the canal systems, of which 13 percent of land is supplemented by groundwater(through tubewells and persian-wheel wells). About half the canal command area of 0.78 million ha isserved by government canals and the remaining half by the private canals, commonly known as civil canals.NWFP has about 20,400 watercourses, of which 31 percent are already renovated under the previouson-farm water management (OFWM) programs.

B.2.3 As is prevalent in Pakistan, the irrigation and drainage systems of the province are facing severeproblems. Despite the government's substantial budgetary input (the yearly allocations relative to othersectors may seem healthy but may have been grossly inadequate to effect the required maintenance), thesystems face shortage of resources and suffer from worsening operational problems. In addition to waterscarcity, the subsector faces major problems: inefficient management of water systems (low deliveryefficiency and inequitable distribution); waterlogging and salinity; over-exploitation of groundwater in freshgroundwater areas; inadequate O&M; and insufficient cost recovery. The average delivery efficiency isreported to be between 35 percent to 40 percent from the canal head to the root zone.

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B.2.4 The actual situation is even worse--most of the water losses occur in the unlined watercourses.Traditionally, the watercourses suffer from improper design, poor maintenance of channel banks, frequentsiltation, inadequate provision for culverts and animal drinking points, and nonstandard outlets forirrigating the fields. The loss of such a major part of surface water not only reduces the available water forcrops but also contributes to waterlogging and salinity. With reduced water availability, irrigators at thetail-end of watercourses, in particular, are exposed to greater risks of crop failures which provides adisincentive for them not to use other non-water inputs. In many instances, farmers are no longer keen toadopt measures which enhance the water application efficiency.

B.2.5 Another serious problem is inequitable water distribution, that arises from excessive losses in theconveyance system, and due to unauthorized outlets and illegal pumping from canals. Poorly maintainedwatercourses and minor canals have the highest incidence of illegal diversion. There are no effectiveforuns of the farmers to raise their concerns, therefore collective actions are rarely contemplated to checkthe inequities of water distribution. Moreover, the excessive role of the government in irrigationmanagement does not encourage meaningful beneficiary participation in the system management.

B.2.6 Pakistan has invested in rehabilitating the irrigation and drainage systems. At the tertiary level ofirrigation distribution system, the OFWM program started in 1976, when the government began improvingthe watercourses, constructing water storage tanks, and developing hill torrent based irrigation systems.Under this donor (i.e., IDA, USAID, ADB, OECF, and others) supported program, to date about 44,000watercourses have been improved. Under the Irrigation Systems Rehabilitation Projects (ISRP) whichstarted in 1982, an attempt was made to clear backlog in the maintenance of irrigation canals and surfacedrains. Both programs were highly successful in making physical improvements to the systems. However,these programs lacked the institutional changes needed for long-term sustainability of the systems.

B.2.7 Beneficiary participation is one of the key features of the OFWM program, and it is popularamong the fanming community. Under the three completed projects, the water users associations (WUAs)enthusiastically participated in implementing the projects and made considerable contributions to capitalcosts. However, after the improvement works were completed the WUAs became inactive. Therefore, thegains made by WUA involvement began to dissipate over time as the required maintenance works were nottended to routinely. After analyzing the reasons for inactivity (i.e., lack of partnership approach inirrigation management, continued inequities in water distribution), several pilots were implemented toorganize FOs at the distributary/minor level with clearly devolved roles for the operation and managementof the infrastructure, and more importantly, recovery of water rates.

B.2.8 In the past, various OFWM programs improved the supply of irrigation water below the mogha (adesignated water outlet in the minor or distributary canal) level, yet they fell short of addressing theproblems of an overly centralized and bureaucratic public sector institutional set-up to manage irrigationand drainage systems. In order to address this problem the federal and provincial governments are movingtowards major restructuring of the provincial departments, by establishing autonomous PIDAs,commercially oriented AWBs at the canal comnmands to operate the main and branch canals, andparticipatory FOs for the operation and management of the system at the distributary/minor level. Theproposed NWFP-OFWM would deepen the institutional reforms which aim at improving operationalefficiency at all tiers of the system. The project would focus at the tertiary level by establishing andsustaining effective FOs, and hence will form an important link in the chain of institutional reforms.

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3. Sector issues to be addressed by the project and strategic choices:

B.3. 1 Building on different pilot projects undertaken in the country, the project would broaden anddeepen the recent reform initiatives started under the National Drainage Project (NDP), and enhance theparticipation of farmers in irrigation management at the distributary/minor canal level. The project wouldhelp in establishing sustainable irrigation and drainage systems by rationalizing public expenditures onO&M of the irrigation and drainage systems, increasing recovery of public expenditures on irrigationinfrastructure, and improving the efficiency of water use. The strategic choices include: (a) establishingeffective organizations, supported by technical staff at the distributary/minor canal level; (b) creatingcapacity within these organizations to participate in the management of irrigation system on a sustainablebasis; (c) providing infrastructure improvements after they have demonstrated such capacity; and (d)enabling farmers' participation in planning, implementing, and maintaining project facilities withsubstantial contributions to capital cost.

B.3.2 A major part of the investments is off-farm as it relates to above mogha improvement works at thedistributary and minor canals. These investments are justified because they are instrumental in: (a)redefining the government's role through formation of comnnunity groups that would take over the system'sO&M; and (b) ensuring the equitable availability of water at the mogha. Equitable access to water by allusers would encourage the laggard WUAs to mobilize their resources for watercourse improvement as thecost sharing arrangement progressively shifts the responsibility to irrigators rather than the government.Moreover, these investments have high rates of return, usually above 30 percent, notwithstanding thecatalytic role they will play in bringing about a systemic change.

C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):

C.1.1 The project will cover an area of about 0.23 million ha [210,500 ha in NWFP, and 22,400 ha infederally administered tribal areas (FATA)], and it will be implemented over five years. Its majorcomponents are: (a) community development and support program to promote formation of FOs through awell structured social mobilization and support program; (b) distributary-level improvement proram toprovide rehabilitation of distributaries/minors; (c) watercourse and on-farn improvements program to helprenovating and/or constructing watercourses, field ditches, water storage tanks, as well as promoting othermeasures which enhance water application efficiency in the canal command and barani areas; (d)improvements in branch/distribution canals supplying water to secondary level channels managed byfarmers; (e) local/minor irrigation schemes development prorm outside the Indus Basin IrrigationSystem; and a (f) project management support component.

(a) Through the community development and support program, FOs will be developed at thedistributary/minor canal level, and will participate in sustainable management and O&M of theirrigation system. Two models will be followed to enhance the farmers participation in systemmanagement: (i) a transfer of management model (TMM) under which irrigation management wouldbe fully transferred to FOs after completing an agreed period ofjoint management. A transfer ofmanagement contract will be executed between the government agency and FO, and will define theterms of transfer and roles of all concerned parties. Under this model six FOs, covering an area ofabout 26,000 ha, will be formed; and (ii) a participatory irrigation management model (PIM1\ wherea federation of WUAs (FWUAs, where WUAs are organized at the watercourse level) will be formedat the distributary/minor canal level to participate in managing the irrigation system. Under thismodel, 16 FWUAs, covering an area of about 90,000 ha, will be forned. These FOs/FWUAs will be

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involved in the irrigation management, and in planning, designing, and implementing irrigationimprovement works proposed to be constructed under the project, and will be provided withagricultural support services. Alternate fonrs of the TMM and PIMM approaches, as appropriate(Annex 2), will also be evaluated.

(b) The distributary-level improvement program assistance will be provided to improve off-farmdistributary/minor canals where FOs/FWUAs have begun participating in the irrigation management.Twenty-two distributary canals within FO/FWUA areas (20 in NWFP and two in FATA) would berehabilitated/improved.

(c) In the watercourse and on-farm improvements program, about 1,380 watercourses (1,330 in NWFPand 50 in FATA) would be renovated, 350 water storage tanks would be built in the barani areas ofNWFP, precision land leveling would be done on 3,540 ha (3,034 ha in NWFP and 500 ha in FATA)of land, and 60 demonstration centers (48 in NWFP and 12 in FATA) would be established todisseminate the full range of water management practices and irrigation agronomy techniques. Thesedemonstration centers will be knowledge dissemination points. The project would prioritizeinvestments by focusing on areas that are relatively poor, beginning at the tail-end of the irrigationsystem in a proportionate manner. About 31,000 ha of canal irrigated and 15,000 ha of baraniirrigated area will benefit from improved irrigation.

(d) Improvements in branch/distributary canal systems (above FOs/FWUAs) are necessary to improvewater distribution to the distributary/minor canal network. The branch/distributary canals havedeteriorated over time due to over-use and inadequate maintenance for the lack of required funds. Theyoften carry discharges beyond the limits of safe operation. Under the ongoing reform process theprovincial supply agency [the North West Frontier Province Irrigation and Drainage Authority, orFIDAI will be mandated to supply the agreed amount of water to FOs/FWUAs, the project will providefor rehabilitation/improvement of another 20 branch/distributary canals leading to areas managed byFOs/FWUAs. It would cover an incremental area of about 45,000 ha.

(e) The local/minor irrigation schemes development program is envisaged, with active participationfrom farmers, for 25 sites in NWFP and three equivalent sites in FATA (six sites with smaller flows)where perennial/seasonal flows need to be tapped. It would cover an area of about 22,400 ha. Theintake structures would be improved to increase water captured from the sources and losses would bereduced in the main delivery channel supplying water to the service area. In flood schemes, simplerehabilitation would be carried out to improve efficiency and equity.

(f) The project management support component would provide assistance in project supervision, projectlaunch, mid-term review, impact evaluation, financial management and auditing, development of amanagement information system, and training.

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Indicative Bank- % ofComponent Sector Costs % of financing Bank-

(US$M) Total (US$M) financing(a) NWFP Institutional 2.32 7.2 1.80 8.4Community development and Developmentsupport programDistributary-level improvement Irrigation & 4.24 13.2 3.24 15.2program DrainageWatercourse and On-farm Irrigation & 9.26 28.9 4.60 21.5improvement program DrainageImprovements in branch/distributary Irrigation & 1.82 5.7 1.45 6.8canal systems DrainageLocal/minor irrigation schemes Irrigation & 11.06 34.5 7.87 36.9development program Drainage(b) FATA Institutional 0.54 1.7 0.34 1.6Community development and support DevelopmentprogramDistributary-level improvements Irrigation & 0.42 1.3 0.32 1.5program DrainageWatercourse and on-farm improvement Irrigation & 0.40 1.2 0.20 0.9program DrainageLocal/Minor irrigation schemes Irrigation & 1.38 4.3 1.00 4.7development program Drainage(c) M&E Wing project management Institutional 0.61 1.9 0.53 2.5support Development

Total Project Costs 32.05 100.0 21.35 100.0

Total Financing Required 32.05 100.0 21.35 100.0

2. Key policy and institutional reforms supported by the project:

C.2.1 The project will not seek new policies or institutional reforns but will support the ongoinginstitutional reforms involving the decentralization of the provincial irrigation and drainage departments,redefinition of the public sector's role and its interface with the private sector/beneficiary groups in themanagement, and O&M of the irrigation and drainage systems. The organization of beneficiary groupsinto viable administrative and financial entities would ensure better cost recovery in collecting watercharges and sharing capital costs for the construction/rehabilitation of the irrigation infrastructure.

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3. Benefits and target population:

C.3.1 A more efficient, productive, and sustainable irrigation and drainage system is capable of making agreater impact on development at less cost to the government's budget. Cost reduction and efficiencyenhancement would largely accrue as a result of participation of the farming community in irrigationmanagement at the distributary/minor canal level. In tangible terms, agricultural productivity gains wouldcome from improved water management practices. Equitable distribution of water would also encourage agreater number of irrigators to optimize use of other nonwater farm inputs, which in turn would lead tohigher farm productivity. It is generally expected that due to increased water supply at the farm-gate,cropping intensity would increase by 10 percent or more, and crop yields would increase by five to 10percent due to better use of inputs and by adopting more appropriate technologies. Moreover, a generaltrend would emerge for parts of the target area, as indicated by the sections of a few canal command areasthat have better access to physical and marketing infrastructure, to undergo a gradual shift fromsubsistence farming to higher value crops such as orchards and vegetable crops. A great degree ofconfidence in attaining project benefits is based on demonstrated effects of similar works in several earlieron-farm water management and irrigation system rehabilitation projects supported by IDA, and otherdonors, notably ADB and OECF.

C.3.2 Higher productivity and crop diversification are indicators that increased agricultural growthwould alleviate poverty in the rural areas of NWFP and FATA, where most of the poorest live--a targetpopulation of some 2.2 million people, constituting about 11 percent of the provincial (including FATA's)population. The project will yield economic benefits in termns of higher agricultural output, greater ruralemployment, equitable distribution of water, and stronger irrigation and drainage sector institutions.

4. Institutional and implementation arrangements:

C.4. 1 A provincial policy committee (PPC), synonymous to the projects review board (that already existsin the NWFP), would provide overall policy guidance and interdepartrnental coordination for the effectiveand timely implementation of the project. The PPC would be chaired by the Additional Chief Secretary(Development), and it's members would be the Secretaries of Irrigation, Agriculture, Planning andDevelopment/Enviromnent, Finance, and the Director General of the Environmental Protection Agency(EPA). The chairman of FATADC would be the nonprovincial member representing FATA. The DirectorOFWM would be the convener/secretary to the PPC. The PPC would meet at least every six months, orwhenever issues requiring resolution are submitted for its consideration. The PPC's main responsibilities ofthe PPC would be to: (a) resolve issues not settled by the PCC; (c) ensure provision of an adequate budgetfor project implementation, and O&M; (c) ensure that project management staffing is adequate andcontinuous; and (d) ensure that the project complies with the legal and financial covenants.

Project Coordination

C.4.2 A project coordination committee (PCC) would be responsible for ensuring coordination amongvarious agencies, and facilitating project implementation. The PCC would be chaired by Director, OFWMand it would have members from the provincial Irrigation Department/FIDA (the superintending engineersof concerned canal and drainage circles); Federally Administered Tribal Area Development Corporation(FATADC); provincial Agricultural Department (the relevant area coordinators of OFWM, and the deputydirectors of Agriculture); the relevant representatives of the district administration; and the FOs. The PCCwould meet quarterly, and its secretariat would compile quarterly monitoring reports and other specialreports to be submitted to PPC, federal government entities, and IDA.

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C.4.3 The Monitoring and Evaluation Wing (M&E Wing) at the Planning, Environment andDevelopment Department (NWFP) would carry out activities for project supervision, M&E, and specialstudies that would help to assess the project's effect. The Wing would: (a) appoint consultants (whererequired), for quality assurance, financial accounting, and auditing, who would work closely with therelevant agencies of NWFP/FATA; (b) coordinate the monitoring of key project performance indicators; (c)facilitate the project's impact evaluation; and (d) participate in project supervision by the Bank and theGovernment of Pakistan (GOP). Implementation arrangements are shown schematically in Annex 2,Charts 2.1 and 2.2.

Project Implementation

C.4.4 The project would be implemented by the: OFWM Directorate of the Agriculture Department;Irrigation Department/FIDA; FATADC; and the FOs with support from project implementationconsultants (PICs) and NGOs. The project management would have a minimum of staff for the duration ofthe project, and would be supported by the consultants and NGOs. The core management structure wouldconsist of Director OFWM, and two ex-officio members, one from the Irrigation Department/FIDA and theother from the Water Management Wing, and would be assisted by the Community Development andSupport Group (CDSG). The Director OFWM would have overall responsibility for the communitydevelopment and support program. CDSG would have offices at headquarters and in the field, as needed,where the social organization program would be launched. CDSG field teams would have multidisciplinarystaff consisting of social organizers, institutional development specialists, agriculturists, agriculturaleconomists, engineers, and surveyors.

C.4.5 The member (Irrigation), working through the Irrigation Department/FIDA's management and thecanal operation divisions would coordinate transfer/participation of FOs/FWUAs in irrigation management,including joint management and execution of management transfer/participation contracts, improving canalsystems leading to the FO/FWUA managed areas, local/minor irrigation schemes, and other supportrequired by FOs/FWUAs to improve canal systems in their areas. The member (OFWM) working with thewater management staff would be responsible for watercourse improvements in distributary-levelFO/FWUA areas as well as in barani areas, precision land leveling, and in development of demonstrationcenters.

C.4.6 The NGOs would form an integral part of CDSG and play roles at two levels. First, at theprovincial level they would assist in designing of the community organization progran, and in conductingstaff and farmers training. Second, working with local communities, service-oriented NGOs and othercommunity based organizations (CBOs) they would help in the development of FOs.

C.4.7 The FOs have a central role in project implementation. FOs/FWUAs would establish their offices,and progressively take over irrigation management from the government agencies. They would distributewater among users, collect water charges, maintain income and expenditure accounts, and carry out theroutine O&M and repairs of the irrigation and drainage infrastructure below, or both below and above, themogha-level (participatory irrigation management or transfer management models). Initially, FOs/FWUAswould carry out these activities with the support of CDSG staff. After completing the technical assistanceand training phase, ultimately the FOs/FWUAs would carry out their activities with the help of theirsupporting staff.

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Monitoring and Evaluation Arrangements

C.4.8 The PPC would be responsible for overall monitoring of the project. They would meet every sixmonths and review the overall progress of the project, and discuss major policy issues relating to transfer ofmanagement, social organization program, staffing, restructuring, project finance and other related matters.

C.4.9 The M&E Wing would monitor the physical and financial project progress, analyze data on keyperformance indicators on a regular basis and collate quarterly progress reports, for submission to thePPC, the federal government and its relevant entities, and to IDA by no later than January 31, April 30,July 31, and October 31 of each year for the preceding three months. The performance indicators wouldinclude project planning, programming and budgeting, consultant and contractor performance, costrecovery from users, effectiveness of operations, delivery of irrigation water and drainage services,beneficiary participation, and effectiveness of FOs/FWUAs. Key development objective indicators arepresented in Annex 1. Progress against these would be monitored as an integral part of projectimplementation.

C.4. 10 In addition to coordinating the project activities, the M&E Wing would collaborate with the otheragencies (NWFP government/FATADC, autonomous, NGOs, and other donors), as cleared by the PPC, tocarry out an in-depth quantitative and qualitative evaluation of the project's impact. The impact evaluationstudies would focus on: (a) agricultural growth and crop diversification; (b) income and employment, andsecondary effects on regional economy; (c) water use efficiency and on equity of distribution; (d)sustainability of irrigation and drainage systems; (e) analysis of O&M expenditures and revenue receipts;and (f) performance of FOs/FWUAs.

C.4. 11 The Bank would supervise the project, on an average, twice a year. Supervision would beundertaken more frequently (if needed) during the first two years to steer the project through the start-upstage. A project launch workshop would also be organized during the start-up stage. Relatively, higherBank supervision effort would be given to this project, because, unlike conventional irrigation projects, thisproject is "software" intensive rather than "hardware" intensive. Community organization and transfer ofirrigation management are central to the project, and are relatively new disciplines being applied to improvethe performance of Pakistan's irrigation projects. Environmental and social development specialists wouldbe included in at least two annual supervision missions and as an integral part of the mid-term review tomonitor the implementation environmental and social framework approach (Annex 11), with particularattention to early development of baseline survey instruments, checklists and screening guidelines, capacitybuilding and training programs, and extension programs.

C.4.12 A midterm review would be carried out before the end of the third year of project implementation(March 31, 2004), at which time the government would review the implementation of the project with IDAon the basis of supervision and monitoring program outcomes. The midterm review would: evaluate theoverall progress, assess the need for adjustments in the project design and scope, implementation approachand methodology, and revisit policy aspects to ensure timely completion of the project's activities in amanner that the outcome would be satisfactory and consistent with achieving the project developmentobjective. An implementation completion report (ICR) would be prepared within six months after theclosing date, and would focus on the lessons leamed, project outcomes, and the achievement ofdevelopment objective as reflected by the key indicators presented in Annex- 1.

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D. Project Rationale

1. Project alternatives considered and reasons for rejection:

D. 1.1 Over the last decade several approaches been have been tried, without much success, to stopdeterioration of the irrigation system and improve its performance. These approaches include: increasedwater charges, efforts to improve administrative controls and enhance O&M budgets, and technicalimprovements in carrying out O&M. Despite significant efforts collection of revenues did not increase, theprovincial government was unable to provide sufficient funds for O&M and consequently, there was anaccumulation of deferred maintenance. This resulted in decreased systems efficiency and heightenedinequities in the distribution of irrigation water. These approaches addressed only the problem's symptoms,but not the root cause--a pervasive public sector involvement without meaningful participation of the usersin managing and financing the operation of the system.

D. 1.2 The proposed approach is based on a thorough analysis of the sectoral issues jointly carried out bythe Bank and the GOP, the Bank's water resources management policy, and lessons learned fromimplementation of several projects and pilots in all of Pakistan's provinces, and in other countries.Beneficiary participation is central to all project activities. Before carrying out any civil works,FOs/FWUAs would be formed to participate in operation and management of the system on a sustainablebasis. The proposed approach of enhancing beneficiary participation in irrigation management isconsidered to be the best alternative for achieving these objectives. A flexible approach is proposed to suitthe local needs in forming FOslFWUAs, their structure, size, organization and to incorporate lessonslearned as the transfer of management proceeds.

2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).

Latest SupervisionSector Issue Project (PSR) Ratings

l _______________________________ I________________________ (Bank-financed projects only)Implementation Development

Bank-financed Progress (IP) Objective (DO)

Improving efficiency of water use and On-Farm Water Management S Scapital cost recovery Projects, I, II, III, and

Conmmand Water ManagementRehabilitation of irrigation systems and Irrigation System Rehabilitation S Simprovements in its O&M Projects I and IIRationalization of public expenditures Second SCARP Transition S Son O&M and community participation Project and Punjab Privatein irrigation management Sector Groundwater

Development ProjectIrrigation improvements, community Fordwah Eastern Sadiqia S Sparticipation, FOs pilot and research (South) ProjectSystem improvements, institutional Left Bank Outfall Drain Project S Schanges, cost recovery, and communitydevelopment

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Community participation, Balochistan Community Minor S Simprovements in irrigation facilities and Irrigation ProjectO&MInstitutional reforms, control of National Drainage Program S Swaterlogging and salinity, improvedwater managementDecentralization of management at the Proposed Punjab Irrigationcanal command level, improved water Systems Improvement --management Rating not available as the

project is in pipeline.

Other development agenciesImproving efficiency of irrigation ADB and OECF supportedsystems On-Farn Water Management

projects

IPJDO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

D.3. 1 The project was designed by taking into account the important lessons learned from the Bank'sinvolvement in Pakistan's irrigation and drainage sector, particularly, from the two pilot FWUAs on theparticipatory irrigation management organized at the Pabbi and Surizai minors in the NWFP, and in othercountries such as Argentina, Chile, the Dominican Republic, Mexico, the Philippines, and Turkey. Keylessons incorporated into the project's design are:

(a) Beneficiary participation is central to the project; and a social organization and support program isdesigned to develop sustainable FOs/FWUAs that can participate effectively in managing theirrigation system. In the case of the Pabbi/Surizai pilot, farmers initially perceived that managingirrigation was beyond their capacity, however, with reorganization they accepted that they couldundertake the task. Unlike in the past, the FOs/FWUAs would be responsible for crucial functionsin irrigation management, that is, distribution of water and collection of water charges. To carryout these functions effectively, they would be formed at the distributary/minor level, the pointwhere water control lies in Pakistan's irrigation system, and would have the authority to levy andcollect water charges. They would cover sufficiently large areas, with an average command areaof about 4,500 ha, and would generate sufficient revenues to support a team of technical staff, runan office, and to purchase the simple machinery needed to satisfactorily carry out the systemsO&M in a cost effective manner;

(b) A formal agreement would be executed between the irrigation agency and the FOs/FWUAs inwhich there would be a clear definition of the roles of both parties, and the procedures for theirparticipation in the system's management. The Pabbi/Surizai experience also reveals that it isessential for the minors to be transferred to FWUAs, the roles of farmers and govemment agenciesare clear, and there is agreement on working arrangements;

(c) FOs[FWUAs should function for a considerable period of time (while it took three years to federatethe WUAs at the minor level in Pabbi/Surizai, a key conclusion of the pilot was that theorganization process can be completed in much less time), carrying out the system's O&M. Inorder to receive assistance from the project FOs/FWUAs should be willing to participate inplanning, designing, and implementing improvements in the infrastructure and rehabilitation works;

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(d) FOs/FWUAs would make substantial (WUAs have demonstrated to pay 20 to 30 percent up-frontcost of materials, in addition to providing labor for the works) contributions towards the capitalcost of infrastructure improvements and construction works, thereby increasing their stakes in thesystem and enhancing their ownership of the project; and

(e) In order to optimize the benefits of equitably distributed water, an incisive package fordisseminating full range of water management practices and irrigation agronomy techniques at thefarm level has been included in the project (this was also a key lesson from the Pabbi/Surizai pilot).

4. Indications of borrower commitment and ownership:

D.4. 1 The borrower is strongly committed to the program and has requested the Bank to process thisproject on a priority basis. The project PC-I documents (government's equivalent of a project appraisaldocument) for NWFP and FATADC have already been approved by the respective govemments, as part ofa federal umbrella PC-I which was approved by the ECNEC in September 1999. The implementingagencies have provided support in preparing cost estimates, institutional structure, and implementationmethodology which are reflected in the project's design (details in Annex 2). The institutional reformprogram undertaken by the government under the NDP, and commitment to establish AVWBs under theIrrigation Systems Improvement Project clearly demonstrate the government's commitment to implementthe sector strategy and to restructure the irrigation and drainage sector, which have the main elements of thetransfer of management at the distributary/minor level, and farmers participation.

5. Value added of Bank support in this project:

D.5. 1 Of all the major donors, only IDA has a comprehensive view of sector development, a strategicfocus and the lessons of experience in implementing sector wide projects through out the world. IDA's roleis crucial to achieve the project objectives of reforming the institutional structure and implementing theelements of irrigation and drainage sector strategy. IDA's role is necessary to redefine the role of thegovernment in development of the irrigation sector with an emphasis on decentralization and beneficiaryparticipation.

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4):* Cost benefit NPV=US$ 16.5 million; ERR = 26.6 % (see Annex 4)O Cost effectivenessO Other (specify)

E.1.1 In Pakistan economic evaluation of similar works has been done more than 20 times over the lasttwo decades for project appraisal, completion and OED audits, and impact evaluation. The economic rateof return (ERR) of watercourse improvement projects has been higher than 20 percent (and as high as 35percent). The ERR of irrigation systems rehabilitation has been around 50 percent. The farmers'willingness to participate in managing and to make significant up-front contributions for capital cost of theproject works are clear indicators that returns from project investments are significant.

E. 1.2 The ERR of this project is estimated at 27 percent. The ERR is robust and not very sensitive tovariations in the project costs or benefits. It is highly unlikely that unfavorable developments would reducethe project ERR to less than the opportunity cost of capital, taken at 12 percent.

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2. Financial (see Annex 4 and Annex 5):NPV=US$ 14.5 million; FRR = 24.3 % (see Annex 4)

Fiscal Impact:

E.2. 1 The project would make the Provincial Irrigation Agency (PID)/Frontier Irrigation DrainageAuthority (FIDA) more financially sustainable and would have a positive impact on the governmentbudget. Participation of FOs/FWUAs in O&M at the distributary/minor level would result in a savings inthe government's recurrent budget, and generate more revenue due to improvements in the collection ofwater charges.

E.2.2 With approximately 22 percent of the total investment costs funded by farmers and 67 percent byIDA, the government will be required to finance only about I 1 percent of total project. When the taxes andduties that are estimated to accrue to the government due to project activities are taken into account ($2.4million which is about 7 percent of total costs), the net government contribution will amount to about 4percent of the total project costs. The fiscal impact of the project during implementation, therefore, is notexpected to place undue financial strain on the government.

E.2.3 Cost recovery:

(a) O&M costs. The FOs/FWUAs would be responsible for bearing O&M cost of the system in theirarea. Additionally, they would pay water charges to cover the O&M cost of the system in thecontrol of the irrigation water supply agency, FIDA. Therefore, in the future, the FOs/FWWUAswould bear the full cost of O&M. These arrangements would be finalized by executing amanagement contract between FOs/FWUAs and FIDA. The contract would be customized to suitlocal needs of each FO/FWtA. However, it would clearly indicate a schedule of water rights byvolume for each ten-day period, charges which would be payable for O&M of the upper tier of thesystem to FIDA, and other obligations of FOs/FWUAs and FIDA, including procedures forparticipatory management and transfer. The FOs would enact its bylaws by defining workingprocedures, methods of fund raising for capital works, and O&M of the systems in their command.

(b) Capital costs. The farmers would also share the cost of capital works. The proposedarrangements are:

(i) watercourse improvements and water storage tanks: the farmers, through WUAs, wouldprovide up-front the cost of skilled/unskilled labor and 25 percent of the cost ofmaterials--amounting to about 50 percent recovery of capital costs in real terms. The on-farmworks, such as precision land leveling, would be fully funded by the farmers;

(ii) distributay/minor rehabilitation/improvements: the farmers located in the canal commands ofthe pilot AWB would through their FOs, contribute up-front at least 10 percent of the capital.In other canal commands the farmers would be required to pay through the relevant FWUAs orFOs, at least 10 percent of the cost of such works, in 10 equal installments, over a period offive years, along with the water charge (abiana) payments; and

(iii) local/minor irrigation schemes: the farmers through the WUAs, would provide up-front (in thecase of cash) or commit (in the case of labor) 20 percent cost of such works.

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3. Technical:

E.3. l The proposed rehabilitation and improvement works are technically sound; the technology used iswell tested and suitable for local conditions. Sirnilar works have been carried out in the country underseveral IDA assisted projects. Efforts on further improvement, innovation, and reducing costs wouldcontinue during project implementation.

4. Institutional:

4.1 Executing agencies:

E.4. 1.1 The main effort under the project is to develop FOs/FWUAs capable of participating and/or takingover the irrigation management at the distributary/minor level. To achieve this objective a comprehensivesocial mobilization, technical support, and training program is part of the project implementation. Theduration and effort to form FOs/FWUAs and their capacity would vary over the project area. Ultimatelythe FOs/FWUAs would have an ongoing working relationship with the supply agency (FIDA/AWB), thatwould be determined under the transfer/participatory management agreement. During the transition period,the FOs/FWUAs would be supported by the CDSG under the overall direction of OFWM directorate. Thisdirectorate has been involved in formation of FOs/FWUAs at the distributary level, and WUAs at thewatercourse level and have significant experience in working with the fanmers. A training program tostrengthen the capacity of CDSG, the executing agencies and FOs/FWUAs in social organization andtechnical as well as extension support is part of the project. The OFWM Directorate has significantexperience in the proposed watercourse and on-farm works, while PID/FIDA has expertise in the operationand rehabilitation of the canals systemns.

4.2 Project management:

E.4.2. 1 As explained in Section C(4), the PPC would provide policy guidance and facilitate interagencycoordination. The project management would consist of the director, OFWM, with members fromIrrigation and Water Management. An internal/external monitoring program would monitor the progress ofimplementation, and the achievement of the development objectives. The project management andcoordination arrangements are satisfactory for proper implementation. The project management will becapable of detecting major issues during implementation, and of steering the project to achieve thedevelopment objective.

4.3 Procurement issues:

E.4.3.1 Procurement of works, goods and services would be carried out in accordance with the IDA/Bankprocedures (summarized in Annex-6). Standard procurement documents would be used for allprocurements. Progress in procurement of services, goods, and civil works would be given in progressreports every six months.

4.4 Financial management issues:

Accounting. Financial Reporting sand Auditing Arrangements (See Annex 5A for details)

E.4.4. 1 Since the departmental accounting staff do not have the required skills to meet the project's uniquefinancial management requirements, a team of professional accountants recruited by the NWFP as projectaccounting specialists (PAS) would advise, guide, and support the departmental accountants to carry outthe accounting and financial management reporting of the project. The PAS would train and assist thedepartmental staff to: (a) maintain a computerized project accounting system capable of generatingfinancial and procurement reports as required by IDA; (b) ensure that proper intemal controls are in place;

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(c) facilitate government and external audits; and (d) prepare periodic project financial managementreports. A computerized project accounting and management information system (PAMIS) would be usedto maintain project accounts, track the physical progress of each component, update procurementinformation, and review the status of major project activities. A financial manual (FM) documenting theproject financial management procedures would be formally adopted by the project implementing agenciesto ensure transparency, uniformity, clarity, and accountability. The FM covers: (a) flow of funds; (b)financial and accounting policies; (c) accounting system and internal control mechanisms includinginformation flow, and flow of documents; (d) chart of accounts; (e) financial reporting, including formatsof project monitoring reports; (f) auditing arrangements; (g) budgeting; (h) organization and staffing forfinancial management functions; and (i) terms of reference of accounting consultants and external auditors.The FM would be updated periodically and improved based on implementation experience. The projectprovides funding for recruiting financial management consultants, purchasing computers and software, andfor recruiting external auditors.

E.4.4.2 The selection of project accounting specialists, and nomination of counterpart government staff,would be completed before board presentation. It was agreed that: (a) the financial manual would beprepared and adopted by October 31, 2001; (b) the initial orientation and training of PAS and governmentcounterpart staff would be completed by August 31, 2001; and (c) a computerized financial managementsystem would be made fully operational not later than June 30, 2002.

E.4.4.3 Project financial statements would be audited annually by external auditors in accordance withauditing standards acceptable to IDA. The financial statements would be submitted to auditors within threemonths of the end of the each fiscal year (September 30), and the audit report and audited project accountswould be submitted to IDA within six months (December 31) of the end of the fiscal year.

E.4.4.4 Disbursements: Disbursements would initially be made on the traditional system (reimbursementswith full documentation and against statements of expenditure and direct payments) and would beconverted to the new procedure [i.e., based on project management reports (PMRs)] after the financialsystem is operating satisfactorily. The target date for this conversion is September 30, 2002.Disbursements are projected over a period of five years. Annex-6 provides allocation of credit proceeds.To facilitate disbursements, two special accounts (one each for NWFP and FATADC) would be openedwith the National Bank of Pakistan. The initial deposit into the special accounts would be $0.5 millionNWFP, and $0.25 million for FATADC. The special accounts under the project would be operated jointlyby two signatories.

5. Environmental: Enviroumental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) and the significant issues and their treatment emerging from this analysis.

E.5. .1 The project would have an overall positive impact on the enviromnent. As part of the preparationof a national OFWM project (OFWM-IV), which was designed to include institutional reform andrehabilitation/investment activities in all four provinces, a general review of potential environmental andsocial issues was conducted. This review also benefited from a detailed sector envirownental assessment(SEA) of drainage issues in Pakistan's IBIS which recommended that: (a) additional irrigation water, ifavailable, should not be supplied to areas where this could exacerbate the need for drainage; (b)undertaking major drainage schemes should be done in conjunction with improvement of irrigationmanagement at main and secondary levels and reduction of water losses at watercourse and field levels; and(c) the government should give special attention to beneficiary participation. These studies weresupplemented by a rapid appraisal mission and consultation with key stakeholders, in order to identify

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issues specific to the proposed NWFP-OFWM project and to propose a framework for mitigating potentialnegative impacts and enhancing positive ones.

E.5. 1.2 Given the nature of the issues identified, and the fact that the project involves mainly beneficialrehabilitation work and construction of minor irrigation schemes with low and easily manageableenvironmental impacts, the project was categorized as "B" under Bank/IDA Operational Policy OP 4.01. Itwas also agreed that as part the targeting/demand-driven approach proposed as the main vehicle foridentifying priority areas of intervention, environmental, and social issues would form an integral part ofthe overall framework for identifying, preparing, and monitoring subprojects (FIPMSP).

E.5. 1.3 The rapid screening and scoping exercise which was conducted (in December 2000) in consultationwith key stakeholders revealed no major issues which could not be mitigated durng project implementation.The main project related environmental issues include: (a) health risks from silt removal and disposal, andcontamination of water storage tanks, (b) water quality impairment, from agricultural runoff, desilting, andpotential increase in agrochemical use, and its potential impact on drinking water supply; (c) drainageimpact of improved and new irrigation schemes, including water storage tanks; (d) impact on groundwateravailability from potential changes to the water balance (e.g., reduced seepage); (e) construction relatedimpacts of rehabilitation works and new irrigation schemes; (f) impacts caused by intensification ofagrochemical use; (g) potential impacts on natural habitats; (h) availability of information andenviromnental and social spatial knowledge base; and (i) implementation capacity to adequately addresssocial and environmental issues.

E.5. 1.4 The overall result is that localized impacts of construction/rehabilitation works would not posemajor risks, and will be cared for by contractors as part of good engineering practice, and adequatemonitoring and quality control. These types of impacts are related to activities such as desilting, channellining, rehabilitation of gates and diversion structures, wall strengthening/ rebuilding, installation of watermeasuring structures and gages, watercourse realignment, improved culverts and outlets, animal wallowsand laundry sites, construction of small water storage tanks, precision land leveling, rehabilitation ofembankments, formation of berms, protection of structures, provision of gates at the cross regulators,minor irrigation schemes (involving water harvesting, and partial perennial flow diversion), and officebuildings for FOs/FWUAs. Drainage and salinity do not appear to be a major problem except in SalinityControl And Reclamation Project (SCARP) areas which are outside of the project scope. Water tanks arecompletely concrete-lined and are planned for barani areas where the water table is generally very deep;they are typically used to capture and store water for irrigation, and not for human consumption.

E.5 .1.5 A number of issues of more strategic importance and indirectly related to project activities, wereidentified: (a) despite major initiatives during the last 10 years there is weak institutional capacity andweak enforcement of environmental regulations, (b) wastewater discharge into the irrigation/canal systemand the resulting potential health impacts (people use irrigation water for various purposes includingdrinking); (c) groundwater monitoring (there is a need to consolidate and update information on the statusof groundwater resources, as some reports indicate potential mining and quality problems in some areas);(d) agrochemical use and pest management--despite relatively low levels of use; (e) natural habitats,because of very little awareness of this issue by the government and farmers; and (f) need for an adequatespatial knowledge-base and analytical capacity for effective environmental and social mainstreaming intoan integrated water resources management framework. The project would help to build awareness andcapacity over time within govemnment agencies and FOs to deal with these.

5.2 What are the main features of the EMP and are they adequate?

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E.5.2. 1 An environmental management plan (EMP) was not prepared because site specific interventionshave not been identified. These would be selected based on a screening process which would includeeligibility criteria related to poverty focus, readiness of FOs and FWUAs to assume distributarymanagement responsibilities, and hydrological factors. Such a process will be fornalized in the overallFIPMSP which would specifically cover environmental and social issues, and will be developed in moredetail based on overall framework outlined in Annex 11 by the PCC with technical support from the projectimplementation consultants. An outline of the key step of the FIPMSP is included in Annex 11.

5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: There was no stand-alone EA Report

for the project (see explanation below):

Explanation: (a) IDA and GONWFP, based on a rapid screening and scoping exercise with keystakeholders, agreed to a categorization of the project as "B" under OP 4.01 with a simple environmentalanalysis as part of the project preparation and no separate EA. However, the Environmental Data Sheet(EDS) was submitted to Infoshop and updated on 2/16/2001; (b) as stated in the EDS, there is nostand-alone EA Report. The sub-project screening framework (FIPMSP), as detailed in Annex 11, coversmanagement of social and environmental issues as an integral part of the project design andimplementation.

5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describe mechanismsof consultation that were used and which groups were consulted?

E.5.4. 1. During the rapid appraisal of environmental issues that substituted for the environmentalassessment (EA), field visits to the proposed project areas, and consultations were held with farmers,WUAs, government functionaries, and scientists working in the area of irrigation management wereconsulted.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?

E.5.5. 1 The implementation of mitigation measures and recommendations of distributary environmentaland social assessments would be monitored as part of the overall arrangements for the project. Theobjective of developing FIPMSP (Annex 11) earlier on is to ensure that a road mapis in place before project activities are initiated; this road map would have clear and measurable screeningcriteria, a transparent process and procedures, adequate technical and management capacity and financialresources, as well as a timetable and a monitoring system. The M&E expertise is available within theNWFP's M&E Wing and an action plan has been agreed with GONWFP to strengthen the Wing if certainshortfalls are identified.

6. Social:6.1 Summarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.

E.6. 1.1 The main project related social issues include: (a) equity and benefits in terms of timely andadequate delivery of irrigation water to poor farmers and tenants including those at the tail end of thewatercourse system; (b) inclusion of poor farmers in the WUAs/FOs; (c) govemance and transparency ofFOs regarding the formation and registration process (formally ensured by the new autonomous FIDA,financial management and decision making, as well as modes of representation and conflict resolution(which will continue to be based on traditional jirgas); (d gender issues, because due to cultural constraints

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women are not included as irrigators and do not have a direct role in the irrigation system; and (e) the socialmobilization capacity of government agencies and local NGOs/CBOs and their role in projectimplementation. The project will deal will all these issues as part of the process of forming andempowering FOs/FWUAs. Women and landless tenants will benefit indirectly from improved irrigationefficiency (e.g., increased household income, access to safer drinking water) and directly though targetedtraining and capacity building activities.

E.6. 1.2 Sites and specific interventions have not been identified. These would be selected based on ascreening process which would include eligibility criteria related to poverty focus, readiness of FOs andFWUAs to assume distributary management responsibilities, and hydrological factors. It was agreed that asuch a process will be formalized in an overall FIPMSP, which would specifically cover environmental andsocial issues (see Annex 11). This framework will be developed by the PCC with technical support fromthe PICs, and will be cleared by the PPC and IDA before selection and implementation of subprojects. Anoutline of the key step of this screening framework is described below.

E.6. 1.3 Initial screening and area targeting: The identification of priority implementation (geographic)areas where subprojects will be selected based on need, poverty, and willingness to participate should bedone throu a mapping and spatial analysis based on criteria such as: (a) areas where most of the landunder cultivation is rain fed, but with a potential for expansion or rehabilitation of irrigation coverage; (b)low concentration of land ownership, with most land held by owner operators; (c) other specific povertycriteria; (d) areas with the highest need for system rehabilitation improvement and quality of service; and(e) hydraulic/hydrologic/climatic factors (e.g., state of canal and drainage network, water availability,hydrologic independence).

E.6. 1.4 Dissemination of information and demand promotion: The project description and the requirementsfor participation (e.g., cost sharing, responsibility for O&M, water charge collection, equitable watermanagement, legal status, and governance requirements) should be disseminated in the areas identifiedthrough the initial screening and area targeting.

E.6.1 .5 Screening and identification of subproiects: Based on applications received from groups ofpotential beneficiaries, subprojects would be screened and selected for implementation. This screening willbe conducted by the PCC with the help of the PIC based on eligibility criteria such as: (a) need forrehabilitation or development of in 4gation infrastructure; (1) hydrologic eonViderationg (e.g., hydrologicallyindependent areas); (c) readiness of applicants to form FOs and FWUAs to assume distributarymanagement responsibilities demonstrated by an application; (d) poverty (e.g., measured through incomepoverty, low levels of land concentration, or other criteria to be defined); and (e) presence of environmental

and social impacts that cannot be mitigated. Thus, there will be no involuntary land acquisition, only casesof verifiable voluntary land acquisition would be eligible for support under the project.

E.6. 1.6 Baseline surveys and information system (distributary profile): Detailed baseline data will only becollected for subprojects selected for implementation (plus a number of representative control group areas

without project intetventiong). The data will be organized into a computerizcd information system(including georeferencing in a GIS) and will be used as the baseline for measuring project performance andachievement of outcomes. (The type of data collected for the baseline, and subsequently during monitoring,should therefore lend itself output and outcome monitoring).

E.6. 1.7 Mobilization, capacity building, and planning involving FOs/FWUAs: Using the baseline surveydata and the DESA and building on the initial interaction with farmers, before implementation a detailedmobilizing and organizing plan for FOs/FWUAs will be developed and reviewed by the PPC and IDA.

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This plan will include a timetable, and key milestones (initial meetings, agreements, election ofrepresentatives, legal notification, office setup, signature of contract transferring/sharing managementresponsibilities from FIDA/AWB, transfer of management of the irrigation system). In addition, the planwill include details of a training program for management, O&M, and environmental and social issues.

E.6. 1.8 Women play a significant role in the rural economy; and their workload is expected to increasewith the increases in irrigation and cropping. However, women are not considered irrigators because oflegal, social and cultural constraints. To make their participation a reality and enable them to benefit, theproject envisages to evolve gender specific interventions during project implementation. Subsequent toconducting a needs assessment, interventions will be formulated (see Annex 11).

E.6. 1.9 The ongoing institutional reform of the irrigation sector is expected to have significant impact onthe implementation strategy of this project. The project's social development outcome is social inclusionand empowerment through mobilization of FOs resulting in equitable distribution of water.

6.2 Participatory Approach: How are key stakeholders participating in the project?

A. Primary Beneficiaries and Other Affected Groups

E.6.2.l Within the areas identified on the basis of the screening process described (para E.6.1.3), selectionof subprojects will be demand-responsive (pura E6.1.5). The primary beneficiaries are the franers linkedwith subprojects that are selected on the basis of need, poverty, and willingness to participate. Followingformation of WUAs/FOs, the farmers will prepare and agree on an investment plan with technical supportfrom the PIC. The beneficiaries will contribute towards the capital costs (section E.2. 1), be involved in thesupervision of works, and the WUAs/FOs will assume fill

responsibility for O&M. Based on monitoring information, FIDA will provide follow-up support to thoseWUAs/FOs that experience problems with either govemance or irrigation system management.

B. Other Key Stakeholders

E. 6.2.2 The rigaion Dvpuntnt and On.farn Water Management Aeneies (PIDA and OWIM), localgovernment institutions (subsequent to devolution of power to district governments) and NGOs or CBOswould be the other stakeholders. The project design has built-in flexibility to accommodate allstakeholders. The project would be implemented in coordination with other major donors involved in thesector, such as FAO and ADB.

6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?

E.6.3.1 During project preparation, scoping sessions and consultations were held with several NGOs and&il society organizations in a1l provinces (prepratimn of OFWM-IV project), and later on in NWFP. Theproject is designed based on years of consultations and experience gained from working with farmers andtheir organizations under several on-farm water management, irrigation systems rehabilitation, SCARPtransition and drainage projects. The project also benefits from several pilot projects initiated in thecountry to promote FOs at the distributary/minor level. The project envisages NGOs being involved in anadvisory capacity on gender issues, social mobilization, and if required, to address other social issues.

6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?

E.6.4.1 The lead implementing agency is the OFWM Department supported by the PIC that will beresponsible for the social mobilization and technical assistance programs, such as: a core team, a number

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of baseline survey teams, social organization team, technical support team, and NGOs. The PIC willprovide all the necessary assistance to form FOs/ FWUAs, engineering support, and technical assistance.Based on the approach described in Section E.6. 1 and E.6.2, the FOs/FWUAs would be established togradually take over the management of watercourses, minors, and distributary canal systems. TheWUAs/FOs will receive training on management and O&M. Subsequent to the capacity development ofthe FOs, their performance will be measured by indicators and successful rating of these indicators wouldbe a prerequisite for irrigation management transfer. In addition, technical assistance [see Section C(a) and(e)] would also be provided to the implementing agencies to ensure that beneficiary participation remains atthe center stage.

6.5 How will the project monitor performance in terms of social development outcomes?

E.6.5. 1 Monitoring will be designed to provide for a continuous learning and adjustment of projectapproach and subproject plans, and will involve (a) participatory monitoring based on self-definedindicators (by focus groups of beneficiaries, and FOs/FWUAs), (b) monitoring data on inputs, outputs andimpacts/outcomes by the M&E Wing, and (c) IDA supervision. The implementation of mitigationmeasures and recommendations of distributory environmental and social assessments (DESAs) would bemonitored as part of the overall arrangements for monitoring project performance for use indecision-support. Early in project implementation, before the selection and implementation of subprojectsis started, a monitoring framework that includes institutional arrangements and indicators will be submittedto the IDA for clearance (see Annex 1 1 regarding monitoring indicators).

7. Safeguard Policies:7.1 Do any of the following safeguard policies apply to the project?

Policy ApplicabilityEnvironmental Assessment (OP 4.01, BP 4.01, GP 4.01) * Yes 0 NoNatural habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes 0 NoForestry (OP 4.36, GP 4.36) 0 Yes S NoPest Management (OP 4.09) 0 Yes 0 NoCultural Property (OPN 11.03) 0 Yes * NoIndigenous Peoples (OD 4.20) 0 Yes * NoInvoluntary Resettlement (OD 4.30) 0 Yes * NoSafety of Dams (OP 4.37, BP 4.37) 0 Yes * NoProjects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes 0 NoProjects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) 0 Yes 0 No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

E.7.2. 1 Because of weak capacity within the government to develop an environmental and social screeningframework independently, the PIC contract for social mobilization, technical support, and baseline surveyswould also cover the preparation of the framework and training needs assessment. Funds have beenprovided for the required expertise, as well as for the fees for the provincial EPA to monitor water quality.The PIC would be required to develop the FIPMSP, consistent with the framework described in Annex 1 1,as part of their inception report.

E.7.2.2 The project will not involve involuntary land acquisition, and only cases of verifiable voluntaryland acquisition or provision of government land would be eligible for support under the project. Regardingboth voluntary land donations by project beneficiaries and provision of government land, the project willensure that the land in question is free of squatters, and other claims or encumbrances. In the case of

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community land donations, the land will: (a) be identified by the beneficiary community and not by the lineagency or project authority (although the project should ensure that the land is appropriate for the intendedpurpose); (b) the voluntary nature of the donation will be verified from each person donating land; and (c)in case of loss of income or displacement, verification will be obtained from those affected that communitydevised mitigation measures are acceptable. The title to voluntary land donations will be vested with theWUAs/FOs; and a grievance redress mechanism will be established.

F. Sustainability and Risks

1. Sustainability:

F. 1.1 The project is inherently designed to ensure the sustainability of the irrigation system by developingeffective FOs/FWUAs that will be given the responsibility for the O&M; and redefining theover-centralized role of government in the irrigation system--which would pave the way for greater userparticipation. Enhanced cost sharing/recovery measures would increase beneficiary ownership of theproject facilities which, in turn, would reinforce the sustainability of the irrigation facilities.

F. 1.2 Based on the lessons learned from past operations, this project provides for effective andsustainable FOs/FWUAs capable of sharing the management responsibility at the secondary tier of theirrigation system. Contrary to the WUAs formed under previous OFWM projects, these FOs/FWUAswould have a key role in irrigation management at this tier, where WUAs had no role before. TheFOs/FWUAs be supported by technical staff, and would participate in day-to-day operation of the system,distribute water to its members, collect revenues. It is expected that the technical staff will be recruited bythe FO/FWUA after the technical support phase of the project is complete--two-years on an average. Withthis essential role assigned to the FOs/FWUAs, they are unlikely to become inactive. Furthermore,evidence from the field suggests that such organizations are sustainable in the long-term.

2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):

Risk Risk Rating Risk Mitigation MeasureFrom Outputs to ObjectiveIt may take longer to form effective M A well designed community mobilization andFOs/FWUAs and transfer of irrigation support program with support from local NGOsmanagement may be slower than will be implemented by the government but dulyexpected. assisted by expertise it lacks from outside the

government. The program would providetraining and technical assistance to farmers as itaims at building institutional capacity within theFOs. Despite these mitigation measures, amodest risk remains of the reform processslowing down at the higher government/politicallevel which may have under currents to theirrigation management transfer at thedistributary-level.

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Powerful rural elite may dominate the M In this phase of the project, activities wouldFOs/FWUAs and use these to expand concentrate in areas with relativelytheir influence. homogeneous land holdings and where number

of extremely large farms in not very high.Moreover, the selection criteria based on initialscreening would include those distributaries inthe project where chances of forming asuccessful FO/FWUA are highest and areaswhich are poorer. To further mitigate this risk,an independent monitoring program would be inplace to assess the effectiveness of FOs/FWUAsand make changes, as may be required, to theimplementation of the farmers participationplan. At the institutional level, FIDA ruleswould provide for these farmer bodies to bedemocratic.

Given that a sound social mobilization N Physical improvements in the water distributionprogram mitigates the risks mentioned systems in the past have consistently shownabove, better management would leads to increased availability of water as indicated byincreased water supply (key output higher cropping intensity, better yields, andindicator) when it acts in synergy with popularity of OFWM programs with the endoutputs from other components relating to users. Greater contribution from such users inphysical improvements. meeting the capital and operating costs mitigates

any risk that physical improvements may nottake place.

It is assumed that: (a) improved physical N Time and scale studies on watercoursesfacilities would lead to reduction in water improved earlier (10 years or more) indicatelosses; and (b) timely and equitable more than 50 percent reduction in water lossesdistribution of water would lead to due to conveyance, and farmers' participationefficient use of water only in an enabling mitigates the risk that such water savings wouldenvironment which promotes economic not be sustained. Furthermore, a stronggrowth. technical support program, demonstration

centers and orientation of public policies tomarket friendly approaches would ensure that anenabling environment is there to drive optimumbenefits of improved distribution of water.

Improved water supply would lead to N As stated above, farmers access to knowledgeincreased productivity and farmers' and technology is ensured through a technicalincome, assuming that the input/output support program and demonstration centers, inmarkets perform better, and farmers' addition to agricultural support services of theaccess to knowledge and technology is not public, non-government and private sectors.constrained.

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From Components to OutputsComponent 1: Community Development N An effective social mobilization phase, designedand Support Program. on the basis of pilots implemented earlier, wouldFarmers are not ready to form mitigate the risk of farmers being skeptical andOrganizations (FOs/FWIUAs). not ready. Assistance in project implementation

in the form of baseline survey teams, socialorganization teams and technical support teamsto build FO capacity would be arranged upfrontbefore implementation starts.

Component 2: Distributary-level M (a) The willingness of farmers to participate inImprovement Program or take over the management of irrigation(a) Farmers may not be willing to systems has been tested under several projectsparticipate in the management of the on pilot basis. Through component 1, FOssystem at the distributary-level, or do not would acquire capacity to dischargetake interest in planning and management functions and handle issues relatedimplementation of project works. They to O&M (of distributary govemance, equity,may be unwilling to make cash financial management, environmental awarenesscontributions. and mitigation.(b) While scaling up the number of farmer b) To mitigate this risk, only six FOs with fullorganizations from two pilots to 22, there management transfer would be raised in thoseis an inherent risk that institutional canal commands which have institutionalreforms in the irrigation sector do not infrastructure in place under the ongoing reformmove forward as anticipated. Therefore, process. In the case of 16 distributaries,farmers may lose interest in taking over FWUAs would be raised which would assumethe management of distributaries. joint management responsibility (farmers and(c) While there are no major Irrigation Authority) until such time lessonsenvironmental and socially adverse from the FO management transfer model areimpacts, awareness level of the incorporated into the joint management model.beneficiaries will have to be raised in FWUAs may then graduate to FOs.order to take mitigation measures, if (c) DESA would be carried out for everyneeded, to ensure sustainable use of and FO/FWUA. DESA includes a management planequitable access to all groups of natural and implementation arrangements for specificresources. mitigation measures.

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Component 3: Watercourse and On-Farm N The negligible risk of slowing down the on-farmImprovement Program irrigation improvement works are minimized byThere are no physical, social, financial, incorporating social mobilization and supportand environmental risks for this programs, and by prioritizing works in thosecomponent because the OFWM program areas which have homogeneous land holdingshas withstood about two decades time, is and where possibilities of forming successfulhighly popular among the farmers, has FOs/FWUAs are highest. Moreover, in the casehigh level of commitment form the of participatory irrigation management model,government, and financial contribution the lead time for starting on-farm works wouldfrom the beneficiaries have been reduce from 12 to 18 months, to less than half.increasing. There is a small risk that Such a model accounts for over 60 percent ofvested interests may try to slow down the the on-farm works.management transfer at thedistributary/minor level, which may slowdown on-farms works which have beenlinked to forming "effective FOs".

Component 4: Improvements in Branch N FIDA has adequate in-house expertise toCanals (Systems Supplying Water to prepare feasible canal rehabilitation programs.FOs/FWUAs). Technical and economic Technical assistance has been provided toviability of the proposed improvements ensure transparent construction supervision.should be certain. Furthermore, FIDA would consult the

established FOs/FWUAs, for the first time,regarding rehabilitation of branch canals leadingto their command areas.

Component 5: Local/Minor Irrigation N (i) Since this component will have full supportSchemes Development Program of the community development and support(a) All stakeholders may not participate group, mitigation measures applicable to thisequitably/effectively in all stages of component, as suggested for components I andscheme development. 2 will also be in play in this case.(b) Most minor irrigation schemes are in (ii) Innovative approaches to communitypoorer areas. Water discharges to be participation would be adopted. As experiencehamessed are relatively small as suggest from another IDA-assisted minorcompared to canal command areas. There irrigation project in Balochistan, farmers switchis some degree of risk that farmers' to higher value crops to augment their incomerepayment capacity may not prove to be and to pay for an equitable share in the capitaladequate. cost and O&M of works. Initially conmmunity

based savings and mobilization of humanresources to carry out smaller contracts providefor the required cost sharing arrangement.

Overall Risk Rating M

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

3. Possible Controversial Aspects:

None

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G. Main CreditConditions

1. Effectiveness Condition

None.

2. Other [classify according to covenant types used in the Legal Agreements.]

(a) NWFP shall ensure that its PPC shall be established, not later than September 30, 2001, andthereafter maintained throughout the project implementation period, with terms of reference,composition, staffing and other resources satisfactory to IDA.

(b) NWFP and FATADC shall, not later than December 31, 2001, obtain PPC's approval of an overallframework, satisfactory to IDA, for the selection of schemes including criteria as specified inSchedule 2 (2) of the Project Agreement.

(c) NWFP and FATADC shall, not later than March 31 in each year, furnish to IDA, for its reviewand concurrence, a draft annual plan of project activities, including a work program and proposedbudget, for the next following fiscal year, as approved by the PPC.

(d) NWFP and FATADC shall ensure that: (i) construction works under the project will be carriedout in accordance with design criteria and specifications satisfactory to IDA; and (ii) that, inparticular, the distributary/minor canals included in the project will be rehabilitated to achievesufficient capacity to deliver their full discharge entitlement determined on the basis of their shareof the diversions at the head of the main canal command system over the previous 10 years.

(e) NWFP and/or FATADC shall ensure that as a condition for obtaining assistance for renovation ofa watercourse or for improvement of a distributary/minor canal under the project:

(i) in a canal commanded area within the pilot AWB areas, the farmers of such area will have: (i)formed an FO at the distributary/minor canal level; (ii) acting through such FO reachedagreement with FIDA for the O&M of the facilities on which the particular project works areto be carried out; (iii) established that such FO has functioned well and operated andmaintained such facilities effectively for a minimum period of one-year thereafter; (iv)established that such FO has the technical capacity to participate in the carrying out of theparticular project works; and (v) acting through such FO reached agreement with FIDA tocarry out the particular project works and to share the costs thereof in accordance with theagreed provisions.

(ii) in a canal conimanded area outside the pilot AWB areas, the farmers of such area will have: (i)formed an FWUA at the distributary/minor level with the functions, powers and obligationsspecified for FWUAs; (ii) acting through such FWUA reached agreement with FIDA orFATADC, as the case may be, for O&M of the facilities on which the particular project worksare to be carried out; and (iii) acting through such FWUA reached agreement with FIDA orFATADC, as the case may be, for the carrying out of the particular project works and forsharing the costs thereof in accordance with the agreed provisions; and

(iii) an environmental and social assessment has been made for a distributary/minor canals.

(f) NWFP and/or FATADC shall ensure that as a condition to obtain assistance forconstruction of a water storage tank and associated works under the project, or to carryout a local/minor irrigation scheme under the project in any other area where anenvironmental and social assessment has been made, the farmers of such area will have:(i) formed a fully functioning WUA at the level of the particular project works; (ii)

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established that such WUA has the technical capacity to participate in the carrying out ofthe particular project works; and (iii) acting through such WUA reached agreement withOFWM Directorate or FATADC, as the case may be, to share the costs of the particularproject works in accordance with agreed provisions, and to carry out the particular projectworks and the O&M of the facilities on which the particular project works are to becarried out.

(g) NWFP and FATADC shall ensure that regarding works for: (i) renovation ofwatercourses and construction of water storage tanks and associated watercourses carriedout under the project, the farmers concerned will be required to contribute up-front,through their WUA, all of the skilled and unskilled labor together with at least 25 percentequivalent in value of the materials required for such works in NWFP and FATA; (ii) PLLcarried out under the project, the farmers concerned will be required to meet 100 percent ofthe cost of such works; (iii) works carried out under the project forrehabilitation/improvement of distributary/minor canals located within pilot AWB areas,the farmers concerned will be required to meet up-front, through their FO, at least 10percent of the cost of such works; (iv) carried out under the project forrehabilitation/improvement of distributary/minor canals located outside the pilot AWBareas, the farmers concerned will be required to pay, through their FWUA, at least 10percent of the cost of such works in 10 equal installments payable semiannually overfive-year period, along with the water charge (abiana) payments; (v) carrying outlocal/minor irrigation schemes under the project, the farmers concerned will be required tomeet up-front, through their WUA, at least 20 percent of the cost of such works; and (vi)priority is to be given to watercourses, water storage tanks, distributary/minor canals, andlocal/minor irrigation schemes located in the poorer regions with greater number of smallland holdings.

(h) NWFP and FATADC shall ensure that representatives of any FO/FWUA participating inthe carrying out of any project works, and in the O&M of the facilities on which suchworks are to be carried out, will be invited to participate in the procedures for inviting andevaluating bids, and awarding contracts for the procurement of civil works and materialsfor such project works.

(i) NWFP and FATADC shall ensure that: (a) procurement documentation and recordkeeping systems, all satisfactory to IDA, will be developed and adopted by the OFWMDirectorates and FATADC, not later than December 31, 2001; and (b) key procurementstaff of the OFWM Directorate and FATADC will be identified, trained in IDA'sprocurement procedures, and designated as focal points for procurement for the duration ofthe project, all not later than December 31, 2001.

(j) NWFP and FATADC shall conduct surveys every six months, to determine the prevailingmarket prices of construction materials used in the improvement of watercourses andconstruction of water storage tanks and associated watercourses under the project.

(k) NWFP and FATADC shall: (i) maintain policies and procedures adequate to enable themto monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory toIDA, the implementation of the project, and the achievement of the objectives thereof; (ii)prepare under terms of reference satisfactory to IDA, and furnish to IDA, by January 31,2004, reports integrating the results of the M&E activities on the progress achieved in theimplementation of the project during the period preceding the date of said reports andsetting out the measures recommended to ensure the efficient implementation of the project

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and the achievement of the objectives thereof during the period following such date; and(iii) review with IDA, by March 31, 2004, or such later date as IDA shall request, thereports and take all measures required to ensure the efficient completion of the project andthe achievement of the objectives thereof, based on the conclusions and recommendationsof the said reports and the IDA's views on the matter.

Covenants Related to Financial Management Requirements

(1) NWFP and FATADC shall ensure that, satisfactory to IDA, a financial manual will bedeveloped and adopted by October 31, 2001, and a computerized project accounting andmanagement information system will be made fully operational by June 30, 2002 by theOFWM Directorate and FATADC.

(m) NWFP and FATADC shall carry out a time bound action plan, acceptable to IDA, tostrengthen the financial management system not later than September 30, 2002, or suchlate date as IDA shall agree, to prepare quarterly PMRs, acceptable to IDA.

H. Readiness for Implementation

D 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.

X 1. b) Not applicable.

3 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

a 4. The following items are lacking and are discussed under loan conditions (Section G):

1. Compliance with Bank Policies

1 1. This project complies with all applicable Bank policies.O 2. The following exceptions to Bank policies are recommended for approval. The project complies with

all other applicable Bank policies.

Ra;hed r ayy XtidwanAi ivJ. WallT*am ader Sector Manager ountry Manager

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Annex 1: Project Design SummaryPAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

Key PerformanceHierarchy of Objctives Indicators Monitoring & Evaluation Critical Assumptions

Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)Faster economy wide growth Percent increase in GDP and Annual Reports of the State The Government might notand poverty reduction. reduction in share of Bank of Pakistan, and GOP's sustain and broaden the

population living in absolute Economic Survey. Household reform initiatives underway.poverty. Income and Expenditure

Surveys.Establish a more competitive Liberalization of output and Official reports, Bank's ESW. The critical assumption is thatenvironment for agricultural input markets. the government willgrowth and diversification. accelerate the structural

Orient research and extension Monitor agricultural reforms leading to fasterto farmers' needs and improve production of major crops growth than in 1995-96. Thefinancial intermediation for (annual updates from risk is that given the strengthagricultural producers, and Agricultural Statistics of of vested interests opposingsmall farmers. Pakistan), note trends of crop such reforms, the

diversification, and changes government's commitmentin access to rural credit by may falter.small farmers.

Redefine governmenfs role Number of farmers' Official reports, Bank's ESW, The critical assumption is thatand establish self sustaining organizations (FOs)/ Pubic Sector Expenditure the government would deepenefficient irrigation and Federation of Water Users' Reviews, through project's the reforms agreed under thedrainage systems by Associations (FWUAs) M&E system, and from the Irrigation and Drainagedecentralizing irrigation formed which are capable of supervision reports of various Sector Strategy and initiatedmanagement and enhancing participating in irrigation projects such as Punjab under several IDA assistedfarmers participation through management effectively and Private Sector Groundwater projects such as, Thirdfarmers organizations. number of distributaries Development, Fordwah On-Farm Water Management,

transferred. Eastern Sadiqia (South), and Fordwah, Punjab PrivateNational Drainage Program. Sector Groundwater

Increase in water supply at the Development, and mostfarm level. importantly under the

National Drainage Program.Increase in agriculturalproduction. The risks are the same as

above. However, farmers'willingness to participate inirrigation management hasbeen demonstrated underseveral projects and pilots.

Project Development Outcome / Impact Project reports: (from Objective to Goal)Objective: Indicators:To reduce rural poverty (a) Increase in agricultural Project monitoring and impact Reforns and investmentsthrough increased productivity through evaluation reports. supported by the projectagricultural production enhanced cropping intensities would facilitate an enablingleading to increased farm and crop yields in the target environment for agriculturalincomes. project area; and growth and development.

(b) Reduction in rural povertyThis objective would be through an increase of 5-10%achieved by: in farm incomes.

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(i) improving the reliability, Development of effective Project implementation The reforms would enableefficiency and equity of FOs/FWUAs which are progress reports, public small farmers to access inputsirrigation water distribution; capable of participating in sector expenditure reviews, (especially water and

managing the irrigation Bank's ESW and supervision drainage) and services.system. reports.

(ii) increasing on-farm The system would be run in As mentioned above. Farmers will make morewater use efficiency; and an efficient and sustainable productive investments to

manner. fully exploit the increasedwater availability.

(iii) enlhancing long term Same as stated above. As mentioned above. Government efforts remainfinancial sustainability of consistent and are not dilutedthe irrigation system by due to political changes andsupporting the government's macro-economic adjustments.

effort to foster selfsustaining farmer'sorganizations.

Output from each Output Indicators: Project reports: (from Outputs to Objective)Component:Component I (C-i1. About 5-10 percent increase Project monitoring reports, There are two main riskImproved irrigation in water supply will result and impact evaluation studies. elements: (a) It may takemanagement (22 FOs/FWUAs from improved management longer to form sustainablecommanding about 0.2 alone beginning third year of FOslFWUAs and theirmillion ha.) resulting from: the project. effective participation in the(a) equitable participation management of the systemfrom all stakeholders; (b) may be slower than expected;empowerment of grassroots and (b) powerful rural elitelevel FOs; and (c) efficiency may dominate the FOs orgains made possible better FWUAs and use these toO&M and cost reduction expand their influence.measures adopted by FOs.

Given that a sound socialmobilization programmitigates the risks mentionedabove, better managementleads to increased watersupply (key output indicator)when it acts in synergy withoutputs from othercomponents relating tophysical improvements (C-2to C-5).

C-2 through 5. Efficient (a) Improvements in equity, Project monitoring reports, (a) Improved physicalirrigation system resulting and timeliness in water and impact evaluation studies. facilities would lead tofrom improvements in distribution before the end of reduction in water losses.physical facilities, such as: the project (start in third(C-2) distributary/minor canal year, but would continue to beimprovement and construction effected after the project).of FO/FWJUA Offices in 22cases;

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(C-3) improvement of 1380 (b) Improved water supply (b) Timely and equitablewatercourses, construction of over a longer period of time distribution of water would350 water storage tanks, and for maturing crops. lead to efficient use of waterother on-farm improvements; only in an enabling(C-4) rehabilitation of 20 environment which promotesbranch and distributary canals economic growth.supplying water toFOs/FWUAs; and(C-5) development of 31minor irrigation schemes.Increased productivity and Increased yields (about 8 Project monitoring reports, Improved water supply wouldfarm income (C-6, as a percent), cropping intensity provincial and federal lead to increased productivitydependent variable of C-1 (10 percent), and cropping statistical reports and and farmers' income,through 5) in the target area. pattern (shift towards high bulletins. assuming that the

value crops orchard and input/output markets performvegetables). better, and farmers' access to

knowledge and technology isnot constrained.

Project Components / Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)(i) Community Development US$2.86 million. Baseline Project supervision and The assumption is that

and Support Program survey, social organization, monitoring reports. farmers are ready to formand technical support teams FOs/FWUAs to participate in:will organize and service (a) the management of theabout 22 FOs/FWUAs. system at the distributary

level; and (b) planning andimplementation of projectworks.

(ii) Distributary Level US$4.66 million. About 6 Annual provincial O&M Farmers' willingness toImprovement Program distributaries are improved in budgets for the irrigation participate in or take over the

the second project year, 8 by systems and revenue receipts. management of irrigationthird and 8 by the fourth systems has been tested underproject year. FOs'/FWUAs' Project supervision and several projects on pilot basis.contributions to O&M, and monitoring reports. They are willing to make cashcapital costs of improvement contributions also. A keyworks. assumption in scaling up

number of FOs/FWUAs isthat institutional reforms inthe irrigation sector moveforward as anticipated lestfarmers' willingness shouldwane away.

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(iii) Watercourse and US$9.66 million. About 100 Project supervision and In addition to the assumptionOn-Farm Improvement watercourses improved in monitoring reports. identified above, one risk isProgram second year, 360 by third, 570 that vested interests may try to

by fourth and 350 by fifth slow down the managementproject year. FOs'/FWUAs' transfer. Moreover, thecontributions to O&M, and powerful rural elite may try tocapital costs of improvement use these FOs/FWUAs toworks. expand their influence. These

risks are minimized byincorporating socialmobilization and supportprograms, and by prioritizingworks in those areas whichhave homogeneous landholdings and wherepossibilities of formingsuccessful FOslFWUAs arehighest.

(iv) Improvements in Branch US$1.82 million. About 20 Project monitoring and Technical and economicCanals and Systems branch/distributary canals supervision reports. viability of the proposedSupplying Water to rehabilitated improvements should beFOs/FWUAs. certain. It is assumed that

provision of case by casescrutiny by experts wouldensure viability.

(v) Local/Minor Irrigation US$12.44 million. Following Project monitoring and Development of minorSchemes Development rigorous inputs from supervision reports. irrigation systems is wellProgram social/technical teams (C-1) tested under several projects.

and design development and Since it has beenplanning phases in the first demonstrated that thesetwo years, about 11 schemes schemes improve waterare constructed in third supply, equity and timelinessproject year, 12 by fourth and to the local communities, a8 by fifth project year. key assumption is that all

stakeholders participateequitably/effectively in allstages of schemedevelopment.

(vi) Project Management US$0.61 million. Support for Project monitoring, Arrangements for socialSupport (Supervision, project implementation and supervision, and audit reports. mobilization and technicalMonitoring, Evaluation, and management to achieve its Reports of third party support, monitoring andTraining) targets, quality assurance, supervision. evaluation, and financial

financial controls, and staff management systems aretraining. concluded before project

implementation commences.

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Annex 2: Detailed Project Description

PAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

By Component:

Project Component I - US$2.86 million

Community Development and Support Program

2.01 One of the basic requirements for achieving the project development objective is to ensure effectivecommunity participation in all phases of the development process. For enhancing participation of farmersin system management two models would be followed: (a) a transfer of management model (TMM) underwhich irrigation management would be fully transferred to FOs after completing a period ofjointmanagement. A transfer of management contract would be executed between the government agency andFO defining the terms of transfer and roles of all parties concerned. About six FOs covering an area ofabout 26,000 ha would be formed under this model; and (b) a participatory irrigation management model(PIMM) where FWUAs (where WUAs are organized at the watercourse level) would be formed at thedistributary/minor canal level for participation in the management of the irrigation system. About 16FWUAs covering an area of about 90,000 ha. would be formed under this model. These FOs/FWUAswould be involved in the irrigation management, and in planning, designing, and implementing irrigationimprovement works proposed to be constructed under the project. Functions, powers and responsibilities ofFWUAs would be in accordance with provisions of Annex 2.1. An essential activity is to set up, train andtechnically support FOs/FWUAs, so that they can effectively participate in management and operation ofthe irrigation system on sustainable basis. In order to help achieve institutional sustainability which isessential to sustainable resource management and livelihoods, a few altemative institutional models beevaluated during the project implementation. For instance, different forms of TMM and PIMM would betried paying particular attention to the specific issue of water pricing in order to account for both scarcityand reliability of service. For this purpose, the PCC would seek guidelines from and approval of the of thePPC, after having collected baseline data from at least half of the proposed FOs/FWUAs, as to the numberand locations of alternate models to be evaluated.

2.02 The FO's structure would vary to cater to the local needs. However, in general FOs would beorganized as three-level organizations. First level would be the WUAs at the watercourse level. TheWUAs would then form a WUA group at the distributary/minor canal level or at one of its sections. TheWUA groups would then form an FO covering the whole or part of the distributary/minor. Similarly,FWUA would be two or three tiered organizations depending upon the size of the distributary/minor, wherethe watercourse level WUAs or their groups would be federated at the distributary/minor canal level.There are about 250 distributaries, minors or sub-minors in the canal irrigation system of NWFP whichconsist of about 10 major canals and several other miscellaneous canals. The command area of thesechannels vary significantly ranging from 200 ha to 100,000 ha. However, about 70 percent of the channelscommand less than 5,000 ha. It is estimated that about 22 distributary/minor level FOs/FWUAs would beformed under the project.

2.03 Minimum area covered by an FO/FWUA would be 2,000 ha, with and average size of 4,500 haexcept that of the two distributaries of the Bara canal system of Khyber Agency in FATA. The Bara canalcommands about 18,200 ha which will be covered by the two FATA based FOs. In the case of smallerdistributaries/minors, several would be combined to form an FO/FWUA with the minimum required area.If so, a group of WUAs (WUA groups) would be formed at each channel and these groups would be

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represented at the FO/FWUA level. In the case of larger distributaries, a group would be formed at eachminor or sub-minor or at a section of the distributary which would then participate in the FO/FWUA.Different likely structures of FOs/FWUA are shown schematically in Figures 2.1, 2.2 and 2.3. The size ofWUA group would vary throughout the project area. When formed at the section of a large distributary,the size is likely to be determined by the availability of water control structures at the head and the tailreach of the section. However, in such cases WUA group is likely to consist of about 20 watercourses.The number of watercourses in a WUA group for the local minor irrigation schemes would be far lesser,probably not exceeding 10 in most cases.

2.04 FOs/FWUAs and FIDA/AWB would sign contracts defining roles and responsibilities of bothparties. These contracts would cover essential aspects of irrigation management such as:

(a) Operation of the system. Water rights of the distributary/minor, where applicable, would bedetermined based on the actual historic flows at the head of the canal system during thepost-Tarbela period. These flows are the basis for acquiring provincial water shares from theIndus System River Authority (IRSA) and the 10-daily water allocations for each canal system arepart of the Water Apportionment Accord of 1991 (Clause 14) signed by all provinces. The waterright would be determined as the share of the distributary in the flow at the canal head. Theoperation of the distributary would be based on these flows and actual discharge received at thehead of the canal system. Given these factors and water requirements, the operation of thedistributary would be planned jointly by FIDA/AWB and FO/FWUA. Operation within thedistributary would be done by the FOs in case of TMM, and jointly with the FIDA/AWB in case ofPIMM;

(b) Collection of water charges. In case of TMM, FO and FIDA/AWB would agree to the totalamount of water charge to be paid by FO. The water charge would be linked with the volume ofwater delivered at the head of the distributary/minor system or FO area. FO would deposit thewater charge before the start of the season. The FO may levy addition water fees on its membersfor meeting the cost of maintenance, rehabilitation of the system or other water and non-waterrelated investments. In case of PIMM, FWUA and FIDA/AWB would jointly carry out theassessment and collection of the water charges;

(c) System maintenance. Under TMM, FOs would be responsible for maintenance of the channels,and structures. Under PIMM, maintenance would be done jointly by FWUA and FIDA/AWB.The annual maintenance plans, budget allocations and bid documents would be prepared inadvance and shared by both parties. As present, farmers would continue to maintain thewatercourses; and

(d) Rehabilitation/improvements works. The project rehabilitation/improvements works would beimplemented jointly by FOs/FWUAs and FIDA/AWB at the distributary level and OFWMdirectorates and WUAs at the watercourse level. FOs/FWUAs would be involved in planning,designing, contracting, and in implementation of these works.

2.05 For developing effective FOs/FWUAs, the project would support a social mobilization and supportprogram. The Directorate of On-Farm Water Management of NWFP and FATADC in their respectiveareas would have overall responsibility for social mobilization, working through a community developmentand support group (CDSG) recruited as consultancy services. The CDSG would consist of a core team atthe provincial level for training, managing and coordinating the community participation program, andbaseline survey teams (BSTs), social organization teams (SOTs) and technical support teams (TSTs)

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working in the field offices with the help of local NGOs and village level activists. In order to recruit socialorganization staff who would reside in project areas and maintain relationship with the farmers, they wouldbe recruited from local-level NGOs.

2.06 The CDSG would establish its headquarters offices at Peshawar (see Charts 2.1 to 2.4). Two AreaOffices would be established in NWFP and one in FATADC from where social mobilization/organizationactivities would be launched. Area Coordinators of Provincial Water Management Directorate/FATADCwould coordinate all CDSG activities in the area offices. The team leader of CDSG would be in charge ofthe headquarters office and responsible for overall FO program. Each area office would have a number ofBSTs, SOTs and TSTs depending upon the territorial coverage and intensity of activities at a given stage.Composition of each type of team is given in Table 3 for an average size distributary/minor. The numberof staff in each team would depend on the size of the distributary and the complexity of the system onwhich a particular tearn would be working at a given time. The approximate number of CDSG field teamsis summarized in Table 1 below.

Table 1: Number of Community Development and Support Teams by Subproject

NWFP FATA Total

Indus Basin and outside irrigation system

Baseline survey teams 2 1 3

Social organization teams 6 1 7

Technical assistance teams 20 2 22

Number of FOs/FWUAs formedTransfer of management model 6 0 6Participatory irrigation management 14 2 16model

Local/minor irrigation schemes

Baseline survey teams 1 1 2

Social organization teams 1 1 2

Technical assistance teams 1 1 2

Number of schemes 20 6 26

2.07 The community mobilization efforts would be carried out in three successive waves. First, abaseline survey of the area would be carried out by BSTs with support from SOTs. This informationwould cover physical features, agricultural aspects, condition of the irrigation and drainage system, surfaceand groundwater supplies, and socioeconomic factors. BST would develop a computerized databasecontaining this information and a (digitized) area map containing main features such as irrigation channels,drains, roads, location of villages, schools, markets, other civic centers etc. Based on this information,SOTs would prepare a suitable

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plan and initiate dialogue with the farmers for developing a suitable organization. The SOTs would makean initial visit followed by several return visits. It is estimated that each SOT would develop oneFO/FWUA on an average of six months.

2.08 After farmers of a distributary agree to form an FO/FWUA, the structure and membership of theWUA group [FO/FWUA] are determined and farmers'representatives elected, a TST would be assigned tothe FO/FWUA to provide technical assistance in its operations. The TST would be fielded by consultantsto support activities of each FO/FWUA for a period of 12 to 24 months. Sequencing of different socialmobilization, support, and irnprovement activities is given in Figure 2.4 in schematic form.

2.09 During the first year, the TST would:

(a) develop a register of water users;(b) working with the Hydrology unit (of headquarters office) and FIDA/AWB, determine a schedule of

water rights for the FOs/FWUAs, and based on these rights, define (and develop a register) waterrights of each WUA group within the FO/FWUA, each WUA and finally each member;

(c) develop a water distribution procedure in the FO/FWUA area;(d) determine the hydraulic condition of the system within the command of FOIFWUA with the help of

survey team and develop an operation and maintenance (O&M) program, and determine the O&Mcost of each unit within the FO/FWUA as well as each member's share;

(e) work with the supply agency (FIDA or AWB) and determine the contribution required for theO&M of system from the FO level to the barrage, as well as, above the barrage;

(f) develop the procedure for cost recovery, operation of bank accounts, and an accounting system forthe FO/FWUA;

(g) screen the environmental and social issues applicable to the command area and population of theFO/FWUA in accordance with the check-list (Annex 11), and prepare a social and environmentalmanagement plan;

(h) develop plans for distributary as well as watercourse improvements;(i) develop a contract between the FO/FWUA and the supply agency in defining the rights and

obligations of both parties in the management of the system; and(j) construct and establish an office for the operation of the FO/FWUA.

2.10 The transfer of management, in the case of TMM, would take place in two stages. In the firstphase, the irrigation system would be jointly managed by the FO and the supply agency for a period of sixmonths. During this time, the FO and the supply agency would jointly verify the infiastructure, understandthe operation of hydraulic structures including gates, gauges, etc., flow capacities at different points andprepare a water account and a social and environmental management plan. After completing the jointmanagement period, the management of the system would be transferred to the FO in accordance with theconditions stipulated in the contract between FO and the supply agency.

2.11 During the second year, the TST as well as the FO would concentrate on the preparation ofimprovementlrehabilitation plan of the system in the control of FO. The FO may retain the TST staff orrecruit new staff after fully taking over the management of the system. If FO decides to recruit new staff,the TST would provide assistance in recruitment and preparing employment contracts.

2.12 Initially, the FOs/FWUAs would be formed in areas with independent hydrologic unit (which areeasier to manage) and relatively homogeneous social conditions. As a result, areas on large distributariesmay be left to the supply agency to manage according to the present conditions. After the FOs/FWUAsbegin to work for a while and gain experience/confidence in managing the system, a consolidation and

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expansion phase would begin under which the FOs/FWUAs would merge to create larger FOs/FWUAs andexpand to include the remaining minors or sections of the distributary. The consolidation and expansionphase is expected to start after project completion, but would require support from the government.

2.13 Under the community development program, the project would provide support for BSTs, SOTsand TSTs in the field offices. Besides covering the core objective of FO/FWUA formation, the CSDG willprovide agricultural support services directly and through fostering linkages with the public, private andnongovernment entities which focus on sustainable promoting sustainable agriculture production systems.The core teams at the headquarters offices would consist of a team leader supported by a deputy teamleader, a social mobilization specialist, a training specialist, hydrologist/irrigation engineer, environmentalspecialist, agricultural economist, data and monitoring specialist, technical staff, and support staff. Strongback-up support would be provided for the field teams through a training program (one month) and expertadvice from the core team. The training specialist would help to develop training and promotional material,an appropriate bookkeeping system, and an implementation handbook. The project would also support twoweeks training of FOs/FWUAs and their representatives.

2.14 A gender subcomponent for about $0.1 m as part of the community development program aims atevolving appropriate program interventions during implementation as soon as needs assessment of a givencommunity group is carried out. Areas of particular focus for women include: involving women indecision making while framing the design of scheme in terms of location of washing points; awarenessraising for issues related to water use and hygiene, storage of pesticide/insecticide, etc. The PICs wouldinclude modalities and timetables for addressing gender issues and meeting women groups training needs intheir inception report.

Project Component 2 - US$4.66 million

Distributary Level Improvement Program

2.15 After the FOs/FWUAs are established, the project would provide support for operation of theiroffices. The size of the office building would vary, however, typically it would have a meeting hall, twooffices, a lobby area, a machine shed and a storage shed (godown). The land for the office building wouldnormally be provided by the FO/FWUA, or if an existing building of provincial Irrigation Department isfound suitable for FO's/FWUA office, it would be acquired and renovated within the estimated cost for anFO/FWUA office. The FO/FWUA would also contribute to the construction of the office building.

2.16 In addition to establishing offices, the project would provide assistance to improve the canal systemin the FOs/FWUAs area. This would include repair of distributary gates, rehabilitation of diversionstructures, desilting and improving of critical sections of the canal (including lining) and other adjustmentsto enable delivery of rightful discharge, water measuring structures and gauges, additional water controlstructures, and guide sections for the desilting of the canals. These works would not cover completeremodeling of distributaries and should cost below Rs 1,000 per ha. The works would be identified andproposed by FOs/FWUAs with the support of TSTs. In pilot AWB canal command areas, to be eligiblefor project assistance, an FO should have taken over the operation of the system and should have moneyavailable in its Bank account for its share of improvement costs. In other canal commands the FWUAsshould have been formed and the distributary/minor canal level and capable of participating the irrigationmanagement and implementation of project works. Depending upon their effectiveness, FOs/FWUAswould also be eligible for a package of machinery/equipment essential for the maintenance of the irrigationand drainage system. The FOs would provide 10 percent of the cost of distributary/minor improvementsup-front, while FWUAs would pay 10 percent of cost of such works in 10 installments over a period of 5

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year along with their water charge (Abiana). The province and FATADC would ensure that: (a)construction works under the project will be carried out in accordance with design criteria andspecifications satisfactory to IDA; and (b) in particular, the distributary/minor canals included in theproject will be rehabilitated to achieve sufficient capacity to deliver their full discharge determined on thebasis of the diversions at the head of the main canal system over the previous ten years.

Project Component 3 - US$ 9.66 million

Watercourse and On-Farm Improvements Program

2.17 Watercourses generally command an average area between 75 to 200 ha and serve about 25 to 75farmers. In NWFP, the average command area of a watercourse is around 50 ha. The communalwatercourse (sarkari khal) represent about 20 percent of the watercourse length with the remaining 80percent being farm branches and field ditches. The losses in watercourses are higher compared to the restof the conveyance system.

2.18 There are about 135,000 watercourses in Pakistan out of which about 44,000 watercourses arealready improved under the previous OFWMPs. NWFP and FATA have a little more than 20,000watercourses, of which about 6,250 watercourses have been improved. The project would have provisionfor improving more than 1,380 watercourses, of which 730 will be in canal commnanded and 625 inbaraniareas. Preliminary allocation is given in Table 2. The project would prioritize investments by initiallyfocusing on areas that are relatively poor and have been neglected in the past (for instance, those districtswhere less than 30 percent of watercourses, which is an overall average for NWFP, were improved beforethis project, where landholdings are smaller and poor are concentrated more would receive priority),beginning at the tail-end of the irrigation system in the case of canal command areas in a proportionatemanner.

2.19 The communal watercourse which conveys a large portion of the irrigation water would berealigned and rebuilt with clean compacted soil to improve conveyance of the canal or tubewell water.Precast outlets (pucca naccas) would be installed to reduce channel deterioration and water loss, andimprove water control. The critical sections of communal watercourse prone to speedy deterioration wouldbe lined with bricks, stone masonry, three-piece precast concrete slabs, or precast parabolic section. Thelining would be generally rectangular. Parabolic or trapezoidal sections may be used where found suitable.It would consist of double-brick masonry wall (23 cm) and a brick masonry bed (7 cm), plastered insideand on top of the wall. Stone masonry or three-piece precast slabs, costing about the same, could be asubstitute where good quality bricks are difficult to find. Bricks procured shall be of good quality (free offlaws, cracks and powdery crust of salts), well fired, and meet the following minimum standard: (a)standard size (23 cm x 11 cm x 7 cm) with square comers and parallel sides; (b) absorb nor more than 6percent of their weight after one hour soaking in water; and (c) withstand a crushing force of 250 kgs/cm2 .All masonry mortar shall have a cement sand mixture of 1:4 (one part cement to four parts of sand).Concrete for lining and structure shall have a mixture of 1:2:4 (1 part cement, two parts sand and fourparts aggregate). The lining material would be selected to suit the local conditions. Normally, headreaches of watercourses having maximum flows and hydraulic head would be lined. However, otherreaches having excessive water losses because of elevation, soil conditions, chronic sedimentationproblems, and high traffic areas around villages and along the roads would also be eligible for pucca lining.The lining would not exceed 15 percent of the total length of communal watercourse in canal commandareas and 20 percent in barani areas. However, greater flexibility would be allowed to FOs in selecting thesections for lining. Culverts would be installed at major crossings, and a limited number of check/dropstructures, animal wallows/buffalo baths and laundry sites would be provided as required.

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2.20 In pilot AWB canal commanded areas, the watercourse improvements would be undertaken afterthe FOs have successfully operated the system for at least one year. In other canal commands such workscould be started after WUAs are formed at the watercourse level, and FWUAs are formed at thedistributary/minor canal level who can participate in planning and implementation of project works at thedistnbutary/ninor level. For watercourse improvement farmers would provide unskilled and skilled laborcosts and contribute at least 25 percent of the material costs up-front. This would result in about 50percent of cost contribution by the farmers in real terms.

2.21 Water storage tanks. About 350 water storage tanks would be constructed in barani areas toconserve water by increasing volumetric flows through intermittent and timely releases. Since the yieldfrom many barani water sources is small and variable, high conveyance losses are encountered with directapplication of low discharges. The tanks would be designed to store about 8 to 12 hours of inflow from thewater source--the storage not exceeding the water requirements. Generally the storage capacity of tankwould be about 6,400 cubic feet (representing a size of length and width of 40 feet and depth of 4 feet)serving 5 to 10 farms. As in the case of watercourses, farmers would provide skilled and unsldlled laborand 25 percent of the material cost up-front.

Table 2: Preliminary Allocation of Project Works

Activity by category of project works NWFP FATA Total

Watercourse renovations

Canal command: fresh groundwater areas 600 25 625

Canal command: saline groundwater areas * *

Barani areas 730 25 755

Total (*targets for saline groundwater areas not specified; will be 1,330 50 1,380substituted with fresh groundwater areas)

Water storage tanks 350 - 350

On-farm package

Land leveling (ha) 3,034 500 3534

Demonstration centers 48 12 60

Distributary level improvements in FO/FWUA areastransfer of management model 6 - 6participatory irrigation management model 14 2 16

Total 20 2 22

Branch canals/distributary-level improvements above FO/FWUAarea 20 - 20

Local/minor irrigation schemes 25 6 31

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2.22 Precision land leveling. About 3,534 ha of irrigated land (3,034 in NWFP and 500 in FATA)would be precision land leveled in the canal command and barani area. The technical specification for landleveling would be the same as in previous programs, i.e., ± 60 mm in basins and a maximum of 0.4 percentslope on lands to be furrow irrigated. The provincial OFWM Directorate and FATADC would providetechnical assistance to farmers for surveying, plan preparation and design, layout and inspection. Anengineering plan, field and irrigation ditch layout will be made for each parcel of land or farm to receiveprecision land leveling. As practiced presently, the cost of precision land leveling would be paid by thefarmers.

2.23 Demonstration centers. One demonstration center would be provided for every 10 to 12renovated watercourses mainly in the canal command areas to demonstrate sustainable soil and watermanagement practices. These centers, up to 2 ha in size, are to be located near a village and should beeasily accessible. The site would be selected in consultation with FOs/FWUAs. They will operate for twoyears after which they would be transferred to FOs/FWUAs to continue these activities in the post-projectperiod. The centers will demonstrate a full range of water management practices and irrigation agronomytechniques. The project would provide technical assistance for the planning and design of watermanagement improvements, including materials and precision land leveling. Field days would be held atthese demonstration centers during each crop season. The extension personnel assigned to these centerswould receive specific training from the core team on sustainable agricultural practices. Furthermore,consideration should be given to using female extension personnel of government, NGOs, and the projectconsultant teams, as applicable to a given FO/FWUA, to insure that women also benefit from thedemonstration centers.

Project Component 4 - US$1.82 million

Improvements in Branch/Distributary Canal Systems Above FOs/FWUAs

2.24 Due to over use and inadequate O&M, canals have deteriorated over time and are carryingdischarge beyond the limits of safe operation. Many canals are operating with inadequate freeboard,eroded berms, inspection roads with inadequate widths, deteriorated outside embankments, severely reducedcapacity due to sedimentation, with many hydraulic structures in need of repair.

2.25 In order to improve water distribution, control and safe operation of the canal, and to ensure thatthe supply agency could provide the agreed amount of water to the FOs/FWUAs, the project would providefor rehabilitation/improvements in the canals leading to the FO/FWUA areas. This would include works atthe branch canals, larger distributaries, cross regulators, falls, rehabilitation of embankments, formation ofberms, protection of structures, provision of gates at the cross regulators, and motorization of regulatorgates where needed. These works would be carried out by the supply agency along the lines of IrrigationSystem Rehabilitation Project, with technical assistance from the consultants. The cost of such workswould be below Rs. 500 per ha of command area. Schemes above this cost parameter would berehabilitated/improved only if technical viability is assured and economic analysis done by theimplementing agencies and verified by supervisory consultants, and show an economic rate of return ofgreater than 15 percent. IDA would be consulted on all such schemes prior to starting the construction.

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Project Component 5 - US$12.4 millionLocal/Minor Irrigation Schemes Development Program

2.26 It is estimated that more than 2 million ha of land is located outside the Indus canal commandedarea of the country, scattered in relatively small parcels with water coming from open wells, tubewells, liftpumps, karezes, springs and small diversions. In the NWFP/FATA, such barani areas constitute morethan 60 percent of arable land. Water sources for perennial irrigation in such areas are limited. Someextension in partial irrigation is feasible by using flood flows and water harvesting. There are several small(100 to 1,000 ha) perennial surface irrigation schemes. These often consist of a mixture of community andgovernment built structures which usually are inefficient in capturing and transmitting irrigation supplies.Major losses occur in the main delivery channel from the source to the service area, and water intakestructures operate poorly. Some structures have reached the end of useful life and some are inadequatelybuilt using low cost technology.

2.27 In addition to perennial irrigation, flood plain irrigation ("sailaba" irrigation) has been practicedfor years by farmers in the barani areas of NWFP and FATA. Farmers construct temporary "katcha"diversion structures and off-taking channels to divert flood flows from the catchment area or small "nullahs/rod-kohis" (intermittent, nonperennial streams) to adjacent lands. However, the systems needproper designs. During periods of low runoffs, the "head enders" take all of the diverted flows. Duringflash floods, the "katcha" diversion structures wash out and no one receives irrigation water. Hence, thesystems are not dependable and also inequitable. Simple rehabilitation of these systems will improve theirperformance which in turn would have beneficial impact on the livelihood of farmers in these remote areas.

2.28 Under the ISRP-II, OFWM-III, and lately under the Balochistan Community Irzigation andAgricultural Project, low cost methods of sailaba irrigation, and diverting water for beneficial use havebeen explored. As shown in Table 1 above, the project would support about 25 localized/minor schemes inNWFP, and 6 in FATA. In all cases, WUAs or FWUAs would be formed before planning and designingthese schemes. The WUAs/FWUAs would be responsible for construction of on-farm works, and wouldshare 20 percent cost of the distribution system. The BCIAP model would be followed in communityparticipation and construction.

Project Component 6- US$0.61 million

Project Management Support Component(Project Supervision, M&E, and Training)

2.29 Supervision support. As described under the implementation arrangements, the province wouldbe responsible for bulk of activities in social mobilization and construction of civil works. The M&E Wingwould be responsible for over all project coordination, appointment of supervisory engineers who wouldwork closely with the relevant agencies of NWFP/FATA, monitoring and evaluation, project launchworkshops, mid-term review; assistance in financial management and auditing, supervision support toGOP, technical assistance/training and preparation of future project.

2.30 Monitoring and evaluation. Physical and financial monitoring of the project progress would bethe responsibility of the provincial implementation agencies. Data on key project indicators would becollected and analyzed regularly to assess progress, exercise control and identify possible problems. Thekey indicators would include project planning, programming and budgeting, performance of the consultantsand contractors, cost recovery from users, effectiveness of operations, mitigation measures and

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recommendation of canal/distributary environmental and social assessments (C/DESAs), delivery of waterand drainage services, water-logging and salinity, beneficiary participation and activities of theFOs/FWUAs.

2.31 Project impact evaluation. The project would also include a program for the overall monitoringof all sub-national OFWM programs and evaluation of the project impact. The M&E Wing would bestrengthened by outside experts, where needed, to carry out project impact studies. The project impactevaluation studies would focus on: (a) agricultural growth and crop diversification; (b) impact on incomeand employment, and secondary effects on regional economy; (c) impact on groundwater aquifers andwater quality; (d) impact on water use and equity in distribution; and (e) performance of FOs/FWUAs.Baseline surveys would be completed within one year of the start of the project. During projectimplementation, baseline data would be compared to on-going data collected in terms of the developmentindicators. The progress made towards achieving the project objective would be constantly monitored andperiodically evaluated.

2.32 Technical assistance and training. Technical assistance (TA) and training are an integral part ofthe project. Each component includes the required TA and training. In addition, the project would providefor national and international study tours, TA and training in beneficiary participation, communitydevelopment and strengthening, project planning and management, fnancial accounting and auditing, andmodem construction and contract administration techniques. The project would, therefore, provide fortechnical assistance in the following areas:

(a) community development/social organization and supporting technical services including those forsocial and environmental assessment;

(b) project management support;(c) engineering services for surveys, design, and construction supervision of civil works, including the

role of the engineer in contract management;(d) financial accounting, auditing, reporting and development of a management information system;(e) support for project supervision and mid-term review;(f) impact evaluation studies; and(g) services for detailed supervision of the project on behalf of the government.

2.33 The consulting services would be recruited in a single package, to be supplemented by individualconsultants to strengthen the M&E Wing, to: (a) provide project implementation support to NWFP/FATAincluding community development support, design and supervision of all civil works (distributary/minorand watercourse improvements, canal improvements, local/minor irrigation schemes); (b) superviseon-farm water management works, monitoring, and impact evaluation; and (c) provide financialmanagement support to the provincial implementing units. The consultants' recruitment would be finalizedbefore Board presentation. Extemal auditors will be recruited for conducting annual audits of the entireproject accounts, initially for a period of one year which would be further extended until a satisfactoryarrangement with the Auditors General of Pakistan is made. Action plan to recruit auditors was agreedduring negotiations.

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Table 3: Composition of Baseline Surveys,Social Mobilization, and Technical Support Teams

Number Contract TypeBaseline Survey Team (BST)

Engineer 1 ConsultantsAgriculturistlAgri. Economist 1 SecondedSurveyors/Patwaris* 2 ConsultantsTotal: 4

Social Org-anization Team (SOT)Social Coordinator 1 ConsultantsSocial Organizers * 2 ConsultantsInstitutional Specialist 1 SecondedTotal: 4

Technical Support Team (TST)Technical Coordinator (Engineer) 1 ConsultantsWater Management Specialist 1 SecondedAgriculturist 1 SecondedAccounting System Specialist 1 ConsultantsPatwari/Tapedar 1 ConsultantsTotal: 5* For an average size distributary/minor level FO. The number may be higher or lower for larger or smaller disbtributaries/minors.

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Annex 2.1

Powers and Functionsof

Federations of Water Users Associations (FWUAs)

2.1.1 FWUAs shall actively participate, along with the Provincial Irrigation Department (PID)/NWFPIrrigation and Drainage Authority (FIDA) or FATADC, in the improvement, O&M of distributaries/minorcanals located within their jurisdictions, and to that end, shall be:

(a) authorized, inter alia, to:

(i) make recommendations and requests to PID/FIDA and FATADC with regard to such mattersas: i. the distribution of water into a distributary/minor canal on a demand or fixed deliverybasis; and ii. the construction of facilities including bridges, regulators, drop structures, andnew minor canals on a cost-sharing or other basis;

(ii) enter into contracts with PID/FIDA and FATADC for the supply of canal water on a flat ratebasis at the outlet level, or on a volumetric rate basis at the distributary/minor canal level, asprovided in the relevant canal rules, or any other basis acceptable to IDA, instead of the croprate basis commonly used for this purpose, and for collecting and paying water charges at theagreed rate;

(iii) represent their members on issues and problems relating to a distributary/minor canal or morethan one distributary or the whole canal; and

(iv) generally represent their members in various forums, particularly govenmment departmentsincluding PID/FIDA, FATADC and provincial Agriculture Department, and serve as a channelof communication between such members and such department; and

(b) obligated, inter alia, to:

(i) obtain the approval of their members before committing or undertaking or participating in anymajor capital expenditures or improvements;

(ii) obtain the approval of the relevant canal officers before undertaking or participating in anyimprovement schemes, and carry out such schemes under the supervision of such officers;

(iii) maintain financial records and minutes of meetings; and

(iv) promulgate bye-laws and rules of operation.

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PakistanNWFP On Farm Water Munagement

Chart 2.1 Proposed Project Management

NWFP/FATADC

Provincial Policy Committee

Provincial Project Coordination Committee

M&E WinglPE&D | Provincial Project DirectorI ~~~~~~Director General, OFWM

Monitonnw, Evaluation and

- Monitoring of Project Impact- Reviewing Perforrnance of Fos- Construction Supervision Member- Quality Control Irrigation Water Management

Area AreaCoordinators Coordinators

Canal BaraniCommanded Areas

Proiect ImglementationConsultants

- Community Development Support- Irrigation Improvement Facilities- Branch Canal Improvements- Technical Assistance and Training

-45 -

PakistanNWFP On Farm Water Management Project

Chart 2.2 Proposed Organization for Community Development Support ProgramN.W.F.P. Province and FATA DC

Core TeamTeam Leader

Social Organization Expert (2)Training Specialist (2)

Hydrologist/liTigation EngineerAgricultural Economist

Data Monitoring SpecialistCAD/CAM Specialist, and

Technical Staff

Area Coordinator Minor Community Area Area AreaPabbi Irrigation Devetopment Coordinator Coordinator Coordinator

BST (I) Bannu Barani Areas FATASOT (l)TST (4)

Engineering Support- Design, Supervision of

Canal Works and HillSocial Mobilization & Social Existng Social TorLentslMmorTechnical Assistance Mobilization & OFWM Mobilization & Schemes

Field Teams Technical Staff Technical - ConstructionAssistance Assistance Management

Field Teams - Bidding DocumentsFATA

BST (l)SOT(2) BST(1) BST(I)TST (8) SOT (2) SOT (l)

l l ~~~~~~~~ ~~TST (7) ll TST (I) l

Note: Number of members in the social and technical teams will vary during the project depending on the project activities.BST = Baseline Survey Team, SOT = Social Organization Team, TST = Technical Support Team (See Appendix 2. 1,Table 2 for composition of each team).

- 46 -

PAKISTANNWFP On Farm Water Management Project

Figure 2.1 Schematic Diagram Showing Possible Layout ofFarmer's Organization (FO) or Federation of Water User Association (FWUA)

(About 20 watercourses)

Watercourses(WUA)

Distributary WUA

Farmer's Organization (FO)/Federation of Water UserAssociation (FWUA)

[WUAGI+WUAG2+WUAG3]

On large distributaries, Group of Water User Associations (WUAGs) formed at minor canals or on a section of a distributary would then forman FO/FWJA.

Note: In pilot Area Water Board (AWB) Canal Cormmand Areas, the Groups of Water user Associations (WUAGs) willfederate to form Farmer Organizations (FOs) and in other areas, they will federate to form Federation of Water UserAssociations (FWUAs).

-47 -

PAKISTANNWFP On Farm Water Management Project

Figure 2.2 Schematic Diagram Showing Possible Layout ofFarmer's Organization (FO) or Federation of Water User Association (FWUA)

Main

/(WUA) Water Userert o WUAt U sA nAssociation (W A

/ WUAG 1W + 2)

Sub-Minor _

S l d tate User Association F Farmer's Organization (FO)/

(WUA) ~ ~ ~ UA

fe t to inor O Federation of Water Users /sAssociation (FWUA)

8 (WUAG 1+WUAG 2)

Small distributaries merged in an FO/FWUA aftereach watercourse level. Watercourses flowing out of the main canal could

distributary level andWUAG

Note: In pilot Area Water Board (AWB) Canal Conunand Areas, the Groups of Water user Associations (WUJA groups) willfederate to form Farmer Organizations (FOs) and in other areas, they will federate to form Federation of Water UserAssociations (FWUAs).

- 48 -

PAKISTANNWFP On Farm Water Management ProjectFigure 2.3 Proposed Organizational Set up for

Farmer's Organizations (FOs)/Federation of Water User Associations (FWUAs)

| Exocutive Body l

Farmer's Organization (FOs)/ ._meFederation of Water User Associations

(FWUAs) General Bodyat Distributary 5 Elected Members from each

WUAG

Group of WUAs

General Body2 Member-s from each

Watercourse

F~~~~Water User's Executive Body 2 RepresentativesAssociations 2 Representatives(WUAs) at

WatercourseLevels General Body General Body

All Water Users All Water Users

Note: In pilot Area Water Board (AWB) Canal Command Areas, the Groups of Water user Associations (WUAGs) will federate to formFarmer Organizations (FOs) and in other areas, they will federate to form Federation of Water User Associations (FWUAs).

-49 -

PAKISTANNWFP On-Farm Water Management Project

Figure 2.4 Calendar of Activities

FY2002 FY2003 FY2004 FY2005 FY2006

Ql Q2 Q3 Q4 Ql Q2T. I .Q4 Ql Q2 Q3 Q4 QI Q2 iQ3 |Q4 QI Q2 Q3 Q4

I Baseline Survey (BSTI) Bi i. i

Social Mobilization (SMTI) S S S

TechnicalSurvey(TSTI) T T T T T T ,T T T T T

Joint Management J J . D .D |

Distributary Improvement D ID D D D

Watercourse Improvement i W W W W W W W W

2 Baseline Survey (BSTI) B

Social Mobilization (SMTI) S S S jTechnical Survey (TST2) T T T T T T T T T T IT

Joint Management J .

Distributary Improvement D D D D D

Watercourse Improvement W W W W W iW W iW

3 Baseline Survey (BSTI) B

Social Mobilization (SMTI) S S S

Technical Survey (TST3) T T T T T T T IT T T

Joint Management i J

Distributary Improvement D D D D D i

Watercourse Improvement W W lw w w W w

4 Baseline Survey (BST1) B

Social Mobilization (SMTI) S S S i

Technical Survey (TST4) i T T T T T T T T IT ITJoint Management J J

Distributary Improvement D D D ID D D

Watercourse Improvement W W W W

5 Baseline Survey (BSTI) B

Social Mobilization (SMTI) S S S

Technical Survey (TSTI) T T IT iT T iT T IT

Joint Management i i

Distributary Improvement i D iD D ID

Watercourse Improvement _W

50

Annex 3: Estimated Project Costs

PAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

Local Foreign TotalProject Cost By Component US $million US $rmllion US $million

Community Development and Support Program-NWFP 1.92 0.29 2.21Distributory Level Improvements Program-NWFP 3.37 0.27 3.64Watercourse and On-Farm Improvements Program-NWFP 7.78 0.29 8.07Improvement in Branch/Distribution Canals-NWFP 1.45 0.11 1.56Local/Minor Irrigation Schemes Dev. Program-NWFP 8.79 0.55 9.34

Community Development Support Program-FATA 0.41 0.11 0.52Distributory Level Improvements Program-FATA 0.34 0.03 0.37Watercourse and On-Farm Improvements Program-FATA 0.33 0.01 0.34Local/Minor krigation Schemes Dev. Prograrn-FATA 1.09 0.07 1.16Project Management Support-FCU 0.51 0.07 0.58Total Baseline Cost 25.99 1.80 27.79Physical Contingencies 1.82 0.12 1.94Price Contingencies 2.19 0.13 2.32

Total Project Costs 30.00 2.05 32.05Total Financing Required 30.00 2.05 32.05

Local Foreign Total_Prject Cost By Category US $miWlion US $million US $million

Goods 6.56 0.60 7.16Works 18.78 1.13 19.91Services 1.88 0.20 2.08Training 0.22 0.02 0.24Admn. & Operations 2.56 0.10 2.66

Total Project Costs 30.00 2.05 32.05Total Financing Required 30.00 2.05 32.05

Identifiable taxes and duties are 2.39 (US$m) and the total project cost, net of taxes, is 29.66 (US$m). Therefore, the project cost sharing ratio is72% of total project cost net of taxes.

Detailed Cost Tables

Summary Cost/Expenditure ............................... Tables (a), (b), and (c)Total Cost (including contingencies), NWFP ... ....... Table 1-5Total Cost (including contingencies), FATA .......... Table 6-9Total Cost (including contingencies), Spn/M&E ....... Table 10

- 51 -

PAKISTANNWFP ON-FARM WATER MANAGEMENT

Components Proiect Coat SummarySummary Cost Table (a)

# # Total(Re. Million) (1U8ii Millon) Forign Base

Local Foreign Total Local Foreln Total Exchanas Costs

A. NWFPCommunity Developmenl Support Program 111.61 16.61 128.21 1.924 0.286 2.211 13 8Distibutary Level Impronements Program 195.45 15.55 211.00 3.370 0.26B 3.638 7 13Walercourseeand On-Form Improrements Program 451.08 17.10 468.18 7.777 0.295 8.072 4 29Improvement in Branch Canals and Systems Sulpplying Waler to FOs/FWU 83.02 6.46 90.28 1.445 0.111 1.557 7 6Local/Minor Irrigation Schemes De,elopment Program 509.56 31.84 541.40 8.786 0.549 9.334 8 34

Subtotal NWFP 1,351.53 87.50 1,439.08 23.302 1.509 24.812 8 89B. FATADC

Community Development Support Program 23.45 6.60 30.06 0.404 0.114 0.510 22 2DistributaryLevel Improvement Program 19.50 1.55 21.10 0.337 0.027 0.364 7 1Watercourse and On-Farm Improvements Program 18.73 0.74 19.48 0.323 0.013 0.336 4 1Local/Minor Irrigation Schemes Development Program 63.16 3.85 67.00 1.089 0.066 1.155 6 4

Subtotal FATADC 124.80 12.75 137.83 2.153 0.220 2.373 0 9C. MSE Cell

Project Management Support (Spn., M&E, TA &Training) 29.83 3.77 33260 i0.14 0.085 0.079 11 2Subtotal M&E Cell 29.83 3.77 33.60 0.514 60D65 0.579 11 2Total EASELINE COSTS 1,506.24 104.07 1,610.31 25.970 1.794 27.764 6 100

Physical Contingencies 105.77 6.84 112860 1.824 0.118 1.941 6 7Price Contingencies 287.74 17.22 304.96 2.189 0.131 2.320 6 8

Total PROJECT COSTS 1,899.75 128.12 2,027.87 29.983 2.043 32.025 6 115

PAKiSTAMNWFP ON-FARM WATER MiANAGEMEtIT

Enpanditun A.ssaste by Compe-ests - Ttaln I.eludile Cantlneansla(R.. Miltiont

Summary Expendftre T.ble (b) PR.

Improvement MAE CallIn ir.ech FATADC Pretest

C.aas -nd L-el1fidar L.aetIMlnr Msnngem.ntCemmu1tty DlHulfasary Wnt .r.urna Sypetms Irdlgatlon Cammuelty DletrIbalay Watarsaurna srlatlsn Suppod

Devalepmaet Lavna and OG-Fam Supplying Schemes DanIapmant Lend and On.-Frm Oshbma (Spn..Support ImproevmentsIimpr-nt Water In Denaleprent sappwd Impronamele Impr-nmanl Delplpmnt M&E, TA AProarNm Program P FOnSFWUAn . ,eUEm Proeram Pr Peram Prsarnm P-m Trnelnta Tetal

1Innanb- et CentsA. Clvi Woron

1. Clv Worhk - 241.22 367.05 152 40 56.95? 23.02 14.94 78.07 1.465.142. Skilled Labor - - 40.30 . . - . 1.24 - . 50.S02. UnsMIlIed Labor - - 105.94 - - - - 4.25 - - 11t.19

Subtotl Cnlvl Werha - 241.22 523.80 103.48 655.97 - 23.02 20.43 78.87 , 1.,48.838. Adml.ilmtrlen S OpeatIons . 29.06 - 66.16 5.49 30.78 2.50 - 4.34 4.27 22.93 168.41C. ConsuOlog Serel..n 78.08 - - 3.30 17.80 20.55 - - 4.27 4.20 120.880. Eiqlpm-nt 7.18 25.85 - 2.74 . 1.54 2.46 - - 1.06 40.84E. Vehicles 18.51 - - - - 7,31 . . - 4.13 29.90F. Traning 8.34- - - 0.79 - - . 5.73 14.85

Totl PROJECT COSTS 142.67 207.07 590.11 114.99 704.53 32.7D 25.48 24.77 87.42 38.13 2,027.87

Taxes 30.11 24.99 21.21 12.65 37.90 8.07 2.38 0.88 5.01 5.74 149.54F.r.lgn Ecohu.go 17.01 19.43 22.40 0.17 41.51 8.93 1.00 0.00 5.03 4.20 128.12

PAKiSTANNWFP ON-FARM WATER MANAGEMENT

Espandlt.r A.s..n.t by Camp.anet. - Telale lesladlee Cnllnaen.eslaSummary Eependlltr Tabl- e uS0 (U50 Millin)

NWFPImpranamact MUE CnII

ri 5-runo FATADC Pce)ag tCnnl so 1 d LeaeUMtoar Lasa.lleMner Mdanagamant

CemmeeIty Dlatr1berry Watereore syptame Irdgadon Communety Olni1lbstary Watlr-sre 1ral,llse SuppartUsnolypment Lel ned On-Fnrm SepplYIna sehmon Dn-Inspmsmt Len-l sod On-Furr (sSnmsu 1p..

Seppert Imprenamoel. Impr..em.ntn Watarta De..lspme-t sapprd Impreements Impravaeetn Da...eIsPMet MtE, TA SPraram. Pr-.rnm Proa, FOdFWUAn Pr.a.' Pre'am Prer_a Proarm Preaom Tralnint) ToUt

1. Inneubonet CostsA. Cll WIrInk

1. CIvil Werks . 3.834 5.757 1.834 10.291 - 0.375 0.232 1.236 - 23.3592 Skilled Laber - - 0.773 - - - - 0.019 - - 0.7923. Unnkilled Labor - - 1.675 - . - 0.D55 - - 1741

Subtatal CllH Werkn - 3.034 8.204 1.34 10.291 - 0.375 0.310 1.232 - 25.892B. Admiis-talio- 5 Operations 0.483 1.050 0.008 0.487 0.040 - 0.000 0.068 0.307 2.65sC. Ceo-ulling Sroe... 1.274 - - 0.053 0.281 0.335 - - 0.000 0.no5 2.0770. Equipm-nl 0.120 0.409 - 0.046 - 0.020 0.040 - - 0.018 0,050E. Vehicles 0.31- - - - 0.124 . - - 0.009 0,503F. Tnining 0132 - - - D .013 .092 0.27

Total PROJECT COSTS 2.319 4.243 9.223 1.821 11.0A5 0.503 0.414 0.300 1.300 0.014 32.025

T..o. 0.494 0.390 0.333 0.201 0.595 0.144 0.039 0.014 0.070 0.094 2.380Fnraign Enohanga 0.294 0.308 0.351 0.130 0.501 0.110 0.030 0.015 0.079 0.000 2.043

- 52 -

PAKISTANNWFP ON-FARM WATER MANAGEMENT

T.biu 1 Conm,tty Oooprn adSPportProgram 9WFPDOtlnla Costs

(Ro. 000)

ParsI aar lin %)

QGcootloa Totals IolodlIVCooalossools Cot. Fr. GrossUol 2002 2003 2004 2005 2000 Total Unit Cost 2002 2000 2004 2605 2000 Total Rots Esoh. Tso Rst

A. Socsi Orgolsaldn Fisid TsaotI. Isalls Buro.y T.sma (BST) 1s

EngNrs slasn 2 2 2 - 06 480.0 9000 tOdOi 1.1024 - , 13z48 0 0 20SuaYPtts styos 2 2 2 * , 8 100.0 3728 3921 4127 t t 0 0 2o

aubftO N at l II.. o-oy T- (aOl) 1,3500 t.437.7 1.513,1 - 4,10 32 Sc.al GogolasN.on Ts-ms isoT l

SDcDIMc= Uttc nCctodoo afrt ryt n 2 2 2 8 4*0.0 900.8 13045. 1,100.4 .3,t.8 0 0 20Soolovrgar4rY e at 0 8 0 Ie t 36000 2,224

82.352,9 2.475,9 - - 7D033 0 20

.brttt lSoolat ogcotluo Ta-ot (SOT) 3,2t3 3.e 39 i6i .3 - - 1 0.0&3. Tolthlt opport T.acs (TNT) kt

Too oi =C.ootria (Englosr) ilot 00 0 0 0 I 0 0 4800 2396.4 2130. 3,301.2 3,408.3 3,839 10.0103 0 0 20Aoccootg Systam S"dNI Off y-a 2 2 2 2 2 tO 2400 498.4 322.9 550.2 577.7 806. 2,751.7 0 0 20

Subtotal Tach1oel appe T.s.o (TST) 3,400. 3,S9D 5 3,851.4 4,044.0 43246.2 19.26204. Oso dd t1 (frt.. GSd)

Agn EC= rbtVAdotiulto,1st(OST) aIsflfar 2 2 2 - 6 144.0 2960. 313.7 3301 - , 940O 0 7 5a0iu8oos SpcdcIilt (SOT) otlf ytta 4 4 4 A . 12 1900 741.0 184.3 825 3 3,351 I 0 7 I

W.8 le..oagoat OSp-fita l(TST) .arylpar 6 6 8 0 8 30 144.0 80.09 41.1 9904 1,039.9 1,091.9 4,9531 0 7 3Agriouocti (TST) IoIfyna 8 8 8 6 0 30 144,0 8.9. 941.1 990.4 1.039 _.810 4.83.1 0 7 5

Saft utl I- Socdad B0ttl (from G-ot2) 2.0101 2,980 0 3,1303 2 ,70.7 2,183.8 13.197 85. opootlm E,,posaB

FbId pNog ard o1aurrundngOb Amount 2.080,0 2,39002 2,83684 1_757 2 9968. 9,b42 0 7 5Scmotei Sooalsi rguatao slonFdTao- 12.912 130710 14,7124 7'iiiT S38083B. Locl- MIs4t1 81.d (1-hln) Fiald T-s

1. S-no y T...s (SOT)itnulcoat alatlynan 2 4800 , 0229 30.2 1073.0 0 0 20S-crt-c -to a 2 2 I - 4 180.0 - 092 410 7 80 7 0 0 23obtoDta Ssaios muony T- ma (BST) 034.9 9302.9 1.8777S.Socal OgsMlo.ts T7-m m 00S)Sol.I DC -rdln-ot- I I I - 3 4800 02208 3502 577.7 1 ,6507 0 0 20So-WaO 2nrUzcr utar 3 00 300.0 2 704.2 253 9.0s 2,4701 0 0 20

Oubtcs1 Sccu GOaccitlca T.acs (.O) 1,307.0 1,3755 1,444 3 - 4 i2I 83. TachoiS1 NBppoat T.sms (TST)

TacIcC Co -tralor (Engin-or) so 7801 , 1 I 1 3 4500 022.a 0 5352 577.7 - 1C007 0 0 20Accuono SytomS pd dat tffyo - 1 1 1 3 243.0 - 20.4 2751 2805 - 8234 0 0 20pHvd ist yns - i I I 3 1900 1950 3003 cisc - 000o 0 0 23

3uny./Rod-r oa e Y- I 1 1 3 1340 3808 1031 1733 - 493.2 0 0 20OaOtaOlT.aihol.ucl pPDAtTa.s.(TOT) , 1137,1 1,0987 1.258,3 - 3.000

4 codd Su Ifo Govt.)Agri EotcolaomAlhgtutloti(SST) a.llpr - 1 1 2 I440 a 1500 105.1 - 3219 0 0 5Wutor lecosgonnai 4SposicOast(TOT) olsifo, r - 3 1 1 3 144.0 150.0 105.1 1733 - 493.2 0 0 5Ag,cf.ttst (jST) fafyet - I 1 I - 3 144 0 - 350 005.1 173.3 - 493.2 0 0 5Foid Avbn -Sut-yot (TST) lsdlroer -Y I I - 3 U 0 - 91.5 96.3 101.1 2893 0 0 5

3ubtet0a toodod 0S84f0 from Govt) G50 593.5 447.7 -S. Opatatlo E.".sac

FPidcotgm od ko rsrtdg cols Amouni , 379.0 390.9 2698 032 1.11307 0 0 5s.bftfsl L-I0 Ml.., imigato (LNi) Flats T-sms - 4,3800 4,525.4 3,4181 83.2 136307C. Curs Ta.. Id

1. Coeoauot M.tTlom Ladtr sba lYos I I 1 1 I 5 1.9000 1,0840 1,905 2,0033 2.1804 2.274,7 101.3109 0 0 20S-1oic Otgoioetlcn £03 ntubt Mon9 0 4 12 32 880.0 5.091,7 3,4871 - -D 10.0706 0 80 20Trarlttog Spodeflatlco it. onrt 0 4 I , - 13 90.0 8404 3815 08 8 , 024,7 0 so 20Hyidoliagil E,r,ionsgl0 M TacYt I I 1 3 3,8o00.0 , 037 1,7109 1,0054 5 5,150,5 0 0 20A E--I.ulr Sl t Y.. I I I - 3 MD00 8535 007. 7001 - 3,0834 0 0 20hat Mczn8rlnc SpclOEat Sa,lIbo d' ' ' ' I 0 S 000. 8150 050.5 607.0 722,1 7580 3,430,0 0 0 20Tachnel sall rste Y.las 1 I 1 1 I 0 00 018.0 8005 087.0 722.1 758.2 3,439 6 0 0 30

Subctt. Con.cRct satcf io0,170 9,303 2 5,914,7 60130,2 0,7901 30,323 50' Secoedad *la vt aum Gowt.)

CADlCAMSA^Al sll alsO r . - - - I 1900 D 190 0 - - - 38o 0 0 5S. Opeostio Eapvdittu..s

FlWtd opotarog und zlct9rrnlnung cgtt Amouot 7198 701.1 8S01 6 41.0 003.3 4,00e1 0 7 0Subtota Coo Taco 1O,00.9 10,230.4 6.715,7 8,979.2 4,67 4 3ifliy6D. Tonolg (Cap.Wky BsadloiGaod.o I.ouu)

P.omodo sodTo1nigMulotr Atoi 309 436 573 60.2 63.3 255, 0 0 10Trclchtg 00 P414 Tacoc cod eras coccy aybooing obrottll k 23 25 20 , , 70 10.0 2575 272,0 2233 - - 750.0 0 0 0T.Icto folFOs aleak 1 0 1 tO 14 8 50 - 545 57.3 9003 80.5 296.5 0 0 0Goo dochc: Tn,,fta ,TA, 0NW0 Ukcag Aott 5150 1,0Y92 17194 1,8050 1,006. 7,020,5 0 0 0

OcOtoosa Tclitt (Cupecky Solldloit

sonda asasa) B3 i S9r 2:063 3 1 a9018 2.047 3 6353ZE. Vohitcl

4WD VaNls (4). V.co (4), PId Ups (tO). Motsoo.c (48) Aloot 10,000.0 7,04 2 , , , 18,5144 0 30 50r. FrIr. sod Eqolpmo Is Amou"t 38030 0380 - - - 71030 0 23 50

Tctcl T3I0 40,8424 28,0178 20,2401 14,2102 ti272f1

to Thstawould h o laihd oboe Esolte Soot cOls oid hens cooh051which could oomrplnaOSOOrt 0150 snrcc Moo Stobibiulry 02153 monthslb Tho stanol br lom omuld dapood on bn Furmn OturaolDeon (ffO) ci ha dtamtcutsymitrct whit bt tray nowcrblou On so soaae so S T wools maca cnoro TO tboU 041 moirito (TMM mo2dnl)

TST -Iwold 00kb l9t'e 70 to aboutlvcyara (T70M odt), cra -oont pd 0 12-18 moolh (J0 modo,).d Co- tea Wcii Dd topolbta to loatbo Soosoolo Repors hc asooo,Odi a ThI, rpftd rOil ab Inlltly ptcdctd by Urn TSTs

- 53 -

PAJKSrANNHWFPONFARM U" MNGEEN

Ta32 V *. W m mendFam b p Fwnriw 4ga1 - WN:PCdidoo(R CODO)

~~~~W0)P sM

Ph.Q.rin'Ub rLk* TOWS icwdng Cm*jwildh Coi Fo. Gus

Unk _2W 3 29t5 20D Tod Cod 2O2 2 0 4 2D6 To Ro EBdi Tax Rd

1. CM vfb No& - - 10 3C0 20D 699 224.4 - - 2B,294.3 89,1248 62389.7 17,8 10 6 5

Skla Labo - - 100 3C0 2C9 600 31.0 - - 3SS34 11,132 7,8352 22,881.8 0 0 0U d Labor No& - - 100 399 209 60D 727 8 264S 18.374S 5SE 0 0 0wst OAW - - 40181.0 1235S?9 8M,9 255i,34a7

1.CM4WwOwMaw No& - 1C0 25D 25D 13D 73D 133.3 - 1570.7 4201O0 44,11.9 24,038 1260195 10 6 5Sd3JLgbor Ns, - 100 250 25D 13) 73D 172 - 183 4,9 5,1754 2,8257 1433 0 0 0Urakl 1d Labor No5 - 1O 25 ) 25D 13D 73D 505 - 5002 14,4715 15,.1951 82%5 43,463.3 0 0 0

Subo'w C - 233443 61,419.4 64,4383 35,2121 184,455.1.WdgrxwpTadftk1. CM ik

WOWS NaK - 59 10D 19 I1O 350 113.7 -6,8112 14,333 150527 15A&O 52X06.2 10 6 5Skbdldr Km - 50 1000 100 3E0 283. - 1,564 3,3D12 3,4553 3MR6 11S755 0 0 0kddLabor Nos - 50 1W0 1W0 1 350 25.3 13 7.8 Z90 345 3,197.3 10S11 0 0 0

Sub. CMWa - 9,757.4 20S37.5 213,4.0 2,428 74,01.8.Laad Lea4 Fb- 34 559 559 1,100 700 3034 25 87.5 1,6317 1,7194 3,3098 2,211.6 86z0 0 3 0. CamCa no - 8 1515 10 48 120 - 104.6 206.3 2166 151.7 6792 0 3 0Ad* akdOp CA1. Fasn11U SWSWM

Ie abL& Id Aamrt 3399 39.4 3783 3972 417.0 1,891.8 0 0 5AmeTem3r1e Am t 675.5 MS 974.3 1,02S0 1,0742 4,8728 0 0 5: ITewm(12)A Amat 9,OSI7 9,576 10,075.6 10,57A4 11,1034 5D3S0.7 0 0 5Tes OCp sb Amul 1,I17.1 1J1Q0 1,79I 6 1,8816 1SB4.1 9,OC4 0 7 5

SUA01aw mnium s11S8s52 jl ~ 1256E9 132278 13,8892 14.5837 65,155.7I 1197367 474938 137291.4 23006.8 163401.7 5901125

# Hvctk=2Bdui,15% Fwde r8l sdd.i Wrgh= 1600 m, 20d do52OWdaze= 192a tim (6400 dQ

5wss3)+Spcitst5)hee Tefmv, nTEpe3 s aI 17B t falaiitm mwh and :4PUTeeFiddTean (3dku.+ 19 s.p* i hiT oLdam sa p blet3rc x*g22wt 6Air4,a d5D hadPlp er .Ad c9ear and c*e nzt casisL

- 54 -

PAKISTANNWFP ON-FARM WATER MANAGEMENT

Tebti 3. Dltfib.toy L.0.01 I m bofto Prog-on - NWFPDtatled Costs

(R6.000)

P.M.oota Ifn %nPhy.

Ouantttllb Unni Totals lncluding Contlnoanole. Co0t. For. Gr..UnN 2002 2003 2004 2005 2006 To0l Coat 2002 2003 2004 2005 2006 Tottl Rate E.oh. To. Rota

I.1 ..v..t lnt CosteA. Di.trtlboory L.-. O...

Land Cost Plot. 0 10 S - 20 10 824.0 1,742.6 917.0 3,483.6 0 0 5o0mc Conotrootlon OfM.. 5 10 5 20 1,290 7307B. 15N455. B.132.7 - D0B96.1 10 0 0

S.bto.ta Dl.trtb.tany L-oI Offl... 8,131.8 17,198.2 9,049.7 - - 34,379.7G Distibtany bnprn7omtnot ha

1 Joint Mao.g..rnt No.. - 1 6 6 1 14 B.000 - 9584.8 60,522.5 63,547.1 11,121.2 144,775.6 10 6 52. Man-go-nltTrTnaf.r No.. 1 2 2 1 b B.000 - 95U4.8 20174.2 21 102.4 11 121.2 02002.5 10 6 5

S.bi8t.1 Dit.ttbfatry tbpnoo.n- 19.180,7 80096.7 84720.5 22242.3 20663B.1C. Machilory and Eqipmolm No.. 2 8 8 2 20 1.100 2396.6 10087.2 10509.9 2700.5 25084.2 0 20 50

Total 8,131.6 38.764 99033.6 95319.4 25022.8 267072.1

Ut7840001 lotncludeso Ro 900.00 P.r distrib.tary fr EPA 0h0rg0. (.ater q00alty mnonllori%n bnoitonntat 000se60 dtaboso)

U.01 4 Irp--temOnt In Br..dlVDic4btary Canal ... ISy0t AbOca FOSIFWUA. - NWFPDetall0 Co..

(R. '000)

PonaatOn r! ln 10 _Phy.

0,00000 UnIt TouI. nottdIng COnanO.U.0l0 Con. For G-r0.UnIt 2002 2003 2004 2006 2006 Total Coat 2002 2063 2684 2005 2006 Total R.t. Erch. Ta. Rat.

1. tnvoatm CostaA. CIWI Work.

R.lh.bllItlaonWor. N.0 . 5 6 5 0 20 4.000 23,9622 25,217.7 28,477.8 27,8030 103.4808 10 7 10B Adrnin.tr.ao and Opatirn Coato Ano-nt 024.0 1,307.0 1,146.3 1.203,5 1,011.0 5,491.8 0 7 5C Super .oMo C-00ti001 A-0u00 494 4 784.2 S87 8 722.1 600 0 329501 a 0 200 ForrOtur .nd EqolpOon A.-011 106400 _10004 . . 2,737 0 a 20 50

Tot., 2,90 4 27,142.0 27,051 7 20,403.0 29,420 6 114 00 51

Table S. Loca1/MInor mgolatlon S0h0m.0 DoO-Io.n,-t Progro. - NWFPDetaltd Coot.

(R.. 000)

Parameters tIn #)Phy.

a.an.tlt. UoIt T

otal. ton.tdl.n Contt.ntle. Con!. For. Gro00Unlt 2002 2000 2004 2005 2006 Total Coat 2002 2003 2084 2065 2006 Total Rat. Eooh. To Rat

1. InvaOtab.at Co.!.A. Cl,l WoYoks NO.. 10 10 S 25 20,000 - - 252,177.1 264,779.6 139,014.0 650,971.2 10 6 SE Adlnitrtatin & Op.rationc .p n.o. Amount 5,446.0 10,318.3 9,628.3 5,371.0 30,761.6 0 7 SC. Con..ltirn Se-vie- Amount _ 2,014.0 6,2815 5,6009 3,222.0 17,798.9 0 0 20

Total - B,05909 268,774.9 280,080.0 147,600.1 704,531.7

ba Ac. minor irrgaton schoo- -oold h.. 800 h.. groso command 0100.

- 55 -

PAKISTANNWFP ON-FARM WATER MANAGEMENT

Tshs 6. C-a DoAlyOtstotlolmc, OSppodPgom n. FATAWItoSH Cott

lV,4000)

Pacoatsr 1600SlPhy.

Qoantlttas ~~~~Unit CTe.'. %wdM,h. Ctnllntnds Cant Far GrassUnit 2t02 20t7 264 N 0000 2050 Total Cast 2MM2 200t 2tl4 20S 2006 tot.' Eat Etch. s Ta. t.

1 Inoitrtt Coat.A. l Ocial tran 1td T.s. b.

1. StaIn su y TeeS .(D ST7m 1ST)lAnohmar aDff Onar 0.0- - - - 0. 460.0 247.2 0 47.2 0 0 20Agd. Eracor )AgrcioLaDi tlafyfst 00 -92 1440 74.2 42 0 0 200Nr P.aFstas atell Yn, 0.5 0.5 180.0 92.7 _ -927 0 20

St.Ptal ftaslc iturS.y Ts..oc 403T) 414.1 41412. Iitlal 0radtvttrn T-al (SOT) li

SoYt MocltsL cootlo.r aff 8.. . . . . . 1 460.0 40 4 D 4C4 0 0 20SO4sOrsnltarc C ..ffOyt7 '. . - - . 1 3000 3708 C 0704 0 2 20In0fLmt S.oAhlat slaffys 1 -. . . . . 1 1000 100 t - 1805 0 0 20

Sobtittl =ocial 0ro.itinnTars (SOT) 1.050 a - 100S.03 Tach.lcal itoB.op T-tatttST) Id

Tc40AcalCoit OSo00(Entlnsr 07 byt' l 1 2 - 4 400. 5Z25 1.1002 . . 1 2 0 0 20WoalsWM2 -toant5psthi.ol sbff - ' 2 - 0 14t0 - 1560 01 . 407. 0 0 20A40,l,M l adtaff ysr . 2 3 10 .0 - 15. M201 - - 4872 0 20

acunOnit Sln 0000 tatOffrs.' Y 1 2 - 0 2400 - 2i12 550.2 - 0100 90 0 20Palnoll acoftys.' - 1 2 ' 0 1800 - 10.0 4121 - _ 000s 0 0 20

So.t.AI TtamnlI O.p-.o TsTrin (70Z3 .T1.2930 2,720. .- 4 ,17.4

FM10 pntQ st olIsniomnoaste A- s2Z338. 24702 Z5D2 - - 7012 0 0 5,ctata Oc... OruaIcotta Fisld Tss..s 1,800.0 1.511 2.000 .0-

it.il MSorI Oi- atLaniL7 n Fl5d Tsm.58. icm. Scony Ts.... (500)tn(S,ssr staff..' n. 0. 5 1 - . -10 480J - 01.4 502 a - 8010 0 20

Ag1. EoonO9AWhItdi-lsi 001ff0 Y- 0.0 1 - 0. 1440 - 784 165.1 - 240 0 0 2001505

1'54F51it.05 stIf3y*ff - 1 2 - 3 0 0000 - 190.0 412.7 - 808.7 0 20

iuOtawel i S sy T ts (ST) - 1.01938S. Oral Orosnluittlit Ta-s [SOT)

S0 mdoatitOso,COOI siaff y - 1 00 0.5 - 2 4000 022. 2701 2880 P 1.0588 0 0 20SYD Oits ltf ys 2 2 2 2 b 3 0 _ 784.2 820.3 800.0 2* 491 9 0 20

Sotttl1Scal OrgaitaTac saT- (OT) 1007.0 1.-00 1.0-4 3.5Q253 T-,hnirt ap- a..m. (T0T)

Cscitnit CosniDtcso (Engi.9o-) alsO yaar I 0 1 1 3 400.0 522.8 5502 077 7 146.07 0 0 20WirM...t2t nttSa elal t yar IN - I I 1 0 4 . 1.0 1 I 81 1733 402 0 0 20

raOtO asffO -a 1 1 I I 0 040. 1008 0s001 073.3 495.2 0 0 20AocraLos so tyaiao OtsdaIl alsO yas' 7 1 0 1 30 2000 9 - 2134 2751 2000 - 8204 0 0 22PRO d0ar400070311005 aittfl ast - 0 1 1 3 0 9 00 09105 00 10101 - 208 0 0 20Pota ttaffomar - 1 1 1 - 3 0 0 _ 10960 2062 200 9010. 0 0 20

Sw,tatal Tao00o1 Sit-so T-om (tTO) . 100054 1.454 150.100 . 4,307444. op00000080 Ecpn,

4 d,,tstt g.ndoll.oot. raa D Ano.ni 32067 3439 2407 8712 t.58 0 0 0Su0tta Local anI lo- itit (LMI) Plidlamit- 3.0050 40302 2.9271 Er.2 10.5990C Cowa Tesm a

l. Ctona'20a StallTa.. L-,dr NrPV T... L.-) SDff r .- - - - 0 -

sOrnat Er OlffoM_Oon 3 0 0 MWs 0 2,4700 28153 50.d072 0 80 20Tsisr,g Sapmodo l Sff isOon 0 0 8 0 90 185 4 1060 38 10 80 20VrdChLntt C -tS7 2.07 28004 5117

Z Oparaitito Err antusm01014 07500000 altO o7Os lonliog 0000 Att,ooni _ 074.7 114.8 100 146.0 7593 0 7 5

SoctotslOom Iaitm 2.81730 0.1000 114.5 0002 14M.8 .2700S. TrIaodno (Copcty U-dl)gitandac Inoaee

P.t- m T.mln-ogMa.SlrDh Amoml 100 10 110 12C 447 0 0 10TotnoiS MF Tram and. ratoll a r ln .c00ffw n 10 I 2 6 10.0 - 100. 114 - 2t35 0 0 0T,thlorScF 3 3sff_& - 0 0 4 10 50 - 103 172 241 - 575 0 0 0Gandra.,I- Trining. 14. SNO Lhkcg. 5mo0.0 00.0 114.8 0202 122 460 0 0 0

ochbttDl Training (Cap.coy BEidiniOasdr s.-) 81. 0 0S0. 207 9 1000 16.4 7031E 9hdNl b

4-W.00 (sl 1). Vla (8 J), Mora-cyas (2) A-ooni 7.3128 7.3128 0 30 50F .F . Esma -ro 1qoIO,t7 Amoon 29 o0

Tot 132' 5.3 8042 2 T8 038600 02009 2002 32.000

Bs Osose Itol pt s 000th0 FATA00. e-nd-i of Grf lsO ff rot a - d.\bT7hs"ratcoieooa edtsoisrlito(.oTlOhhosotOdralbolasulscooa dlslOtstatrh o ts.OorOctt

cThn s1ira 91 onr solo spao o dndm OFanbraorinhauson (F03I 1Ia dhidholaylrmocdioltobh Aspa,.itolog On santg, 1ww nS07T i sojOotR ota 00. shoo tS rrOs.d TST soul

0d st , ftOh 0n FO fcoithra 18-24 msq.

Ia Comoso Dasill hi vmayrnla 12Oct10. oranaba Rmrhl0Radla rdicnIOcoGO.iI adonsmas mrofl cOO hcis ioaiyahponu 87W ott TOTE.

Tatac 7. Wal-oo-r c,,d OroFa- Irop-rsoa Poogoc -0610ADetalted Costa

(O. '0003

Far.nmdars Oin S1)Phy.

gtnTltlo- UnOt Totalsltcto6na Csnitt is .o.C. For. GOo.U05 2t002 2003 2004 2005 2008 Toa Catol R.8. Eooh. Tao Rota

1. Innastossot CoasbA. Frost,h Or-ndabto, Art- l

1t CIvl WoirksM4t00 N3os. - - 0 10 10 2 2038 - - 14077 3.0820 3.23d 3 7.76d0 10 6 5SklNd L-Yr Noa - - 0 10 10 2 274 .- 170 32908 3003 833t1 0 U.N00dl d LdbOT Soc - - 0 5 10 10 20 030 -3- 477.4 1,002.5 1OSZ7 Z532j 0 0 0

Sabtobtl ClIl Werlk 210 21 4414A4 4,635.2 11.151 7E. S.a. Ars.a

1. Ch0 WortkMMlo N - 5 10 10 5 16306 - 1,001. 2.16,9 2,2740 24710 190 5 S0l0lld Lgto Noi - - 5 10 10 20 13e4 - - 76. 1013 169 3 407.4 0 0 0U0n03id L.bo N.s - 5 10 10 2 0 4 -A 3 3.2 6070 7120a 1714 C 0 0

S30880.3 Coil Worar.k 1,4310 3,006.0 3,15 4 7593 08C. (mod Lfsoawnmg Sa . 100 200 200 50 2 6 - 200.0 601.8 6319 1,5202 0 3 0D OorNooolratlorcootoro no - 4 *4 4 * 12 12.0 5 023 000 070 - 0001 0 0 0E. Adntttilttr. and OpWtos Casts

1. SUnNt SlsrI.aField T-m (23)/b Amount _ 229 9674 1,015 8 266.7 247,7 0 0 5T...0Op g110 CoUstoc A4oun - 0.05 573.1 601.0 831.9 1.61,2 0 7 5

Total - 330 B05,415 090075 90322.0 24771 8

00 Tr Fie0l4 ngt. (0 CoOa. I0% 11 000ppO0s affgT bor h -oata) b000 lspo.ibltq fortrnsting 50 0 ,, aod 500 h. PLL In 3 po-rlC 01840 opafIrJ rn1 oOra rootmg rst. -N I

- 56 -

PAKISTANNWFP ON-FARM WATER MANAGEIENT

Table S. Loraieort u11oo Sob. D-Wlopa Program -FATADaled Cota

(R.. WO)

Par-eroter, In 5.%Phy.

QOuatla. Total. leladlig ContlWe s Coot For. GroosUnlt 2002 2003 2004 2005 2000 Tobt Udt Cod 2002 2003 2004 2005 2000 Total Rota Eroh. Tao Rate

1. tnv.at CocbA. CMI Works u Nos. * 1 1 2 2 6 10.000 - 11,981.0 12.008.9 2S.478.0 27,802.9 78,870.8 10 6 5B.AmLon&k8 5 rtA oneo erodP Amoant - 5 0731 1,80.3 1,895.7 4,274.1 0 7 5C. CoDleibog Swst A-out - 573.1 1.605A 10895.8 4274.1 0 0 20

Total - 11,981.0 13,755.1 30,088.6 31.594.2 87,419.0

b Av. mlinr rnooo ohomn wo4d cnd abort 400 ha. gosso ara.

PAt3STANNWFP ON-FARM WATER M1ANAGEMENT

Tabte t. Dtb1tbutry Lerel hmprovnabot Proonram - FATADetaled Cost

(Rs. 0WO)

Paramets (bi %)Phy.

OCedntto Total.steoledlog C-ottnggolsa, Coot. For. Gross,Un.t 2002 2003 2004 200 2000 Tobt Urit G.M 2002 2002 2004 2005 2006 Total Rate Eoch. Tao Rate

1. ivaboenl Coat.A. DItdrbutay L-t Offfoa.

LanJ Cosl Plots 1 1 - - 2 160 164.8 174.3 - - 339.1 0 0 5Ofike Consoctlo. Office 1 1 - - - 2 1,290 1,481.6 1,040.6 - - -, 3,007.1 10 6 5

Subtotal Dtitrbutary L-et Offls 1,626.4 1,719.8 - - 3346.2B. DistribLiorylmpro-n-rertIdntMarogorreont / Ncs. - I I - - 2 8,000 . 9,584.8 10,087.1 19,671.9 10 6 5C. Mactnery ad Equip.rect Nrs. - 1 1 - 2 1,100 --- 1,198.3 1,260.9 2,459.2 0 20 S0

rotd 1,626.4 12,003.0 11,348.0 - - 25,477.3

a The -ool includos Re 90,000 pr dibutry for EPA chargo. (ooto rquabity -r-noi1rnrmiroomll baeoore datbaos)

NwFP ON-FARM WATER MANEAGMENTTable 10. Projet Sup olo.., Nosdout E Evasttuec, ad Training .

Detallad Caata(R..00

Par-lrrr o . %tp07.

Q.oar,L9ee Unit Totals InoJudin Csn11n2-se Cont. For. GrossUnit 2002 2003 2004 2005 2000 Te CoGt 2002 2003 2004 2005 2006 Tot l Rt. Enoh. Ta Rate

t.hnt CoatsA. Suporvy Coneuoltbb lb

nrtton EogriEno t Spard .SpnArad 103A 217.8 229.3 240.7 2527 1,043.5 0 0 20B. Mooteodo ad E-ot-1tio to

AgrlEconoe0tlnd. Enh. AM-rar 103.0 217.8 228.3 240.7 252.7 1,D43.5 0 0 20C. Feot lMm- -t -nd Audio

PrdeeahaelAosIdngOSpelao I CA) Amo tnl 208.0 217.8 220.3 240.7 252.7 1,146.5 0 0 20S-CA.(sp."r t h . 0nbrg)121 Anort 103.0 217.8 229.3 240.T 252.T 1,043.5 0 0 20

SuIbebal Fbln laPl MaanndAudit 308.0 435.7 450.5 481.4 005.5 2,190.1D. Staff Traglrojd Lalnh Am..et 1,030.0 1,009.3 1,146.3 1,203.5 1.283.8 5,732.8 0 20 20E. AdMnieolrelo and Opa.neeg Eopeno

-anrdal 9 1f fdaritessnoo _ / d A.-ot 3,090.0 3287.6 3,438.8 3,610.0 3,791.3 17,198.3 0 7 0onta oarting ooMTRtl. Amoot 1.030.0 1,08 ,,2 1.146.3 1,203.5 1,2d3.8 5,732.8 0 7 0

Subtot Adml nlne, ln and Opoting Eo.n.se 4,120.0 4,356.8 4.5850 4,8142 6,055.1 22,931.0F. Elulp-tl A.rnl 5180 544.7 - - 1,059.7 0 20 50G. Vhke Arr-a 2.008.4 2.124j5 - - - 4.132.9 0 30 s0

Total 8,108.4 8,988.5 6,848.3 8,980.5 7,329.9 38,133.7

\n To bh base4 at M6E ClvWhq at at Plrrnh.g, Ero-no A Dwc. DGpt. GON PFFlb MAE Cell oD -daply 3 SBr. FlWd Ero.: 3 S,rsng; I So-hioglet and I DatgnrC.Ulo Er.Ic MAE Col to r-dope 1 Sr. kflgtim Er.: 1 SodolUAdopo1oti I Ag. Eooordst I Jr. "Ir. Enr.: 2 Capnpwtr AnulIt 004 2-4 FIed Enumatrd tote.*W aetff dapWyd ton Sop-rAoy, MAE. Sosadwm-. elsoeno adh.8 cotalrade alaS

Indda etaff a.Ad. and oW-le optg sa, ad handY for MITR

Identifiable taxes and duties are 2.39 (US$m) and the total project cost, net of taxes, is 29.66 (US$m). Therefore, the project cost sharing ratio is 7 1 .98%of total project cost net of taxes.

- 57 -

Annex 4: Cost Benefit Analysis SummaryPAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

Values are combined for NWFP and FATA

[For projects with benefits that are measured in monetary terms]

Present Value of Flow Fiscal AmpaXtEcono: fEmic 0 Financial Analysis'

______ Analysis Taxe 0 1 ;f:Xtt:0:tuE : : s Subsidies: TxBeneflts: 2341 2568 45 182PRs (million)

Costs: 1382 1727 280 66PRs (million)Net Beneflts: 959 841 (234) 116PRs (million).IRR: 26.6 24.3%

The taxes on agriculture are assumed to be 20% (includes usher at 10% of produce and income tax at 10% on landholdings above 5 ha),applied to about 10% of the project impact area because of low collection rates. The remaining difference in economic and financialbenefit flow is due to implicit subsidy on wheat and sugarcane. On the cost side, fertilizers (N and P) are subsidized (ranging from5%-20%), with a weighted average subsidy rate of about 4% for all farn inputs, and capital/O&M project costs. The tax rates on costs is

about 16% mainly due construction items (cement, steel), machinery/vehicles, fuel, services, and farm inputs.

If the difference between the present value of financial and economic flows is large and cannot be explained bytaxes and subsidies, a brief explanation of the difference is warranted, e.g. "The value of financial benefits is lessthan that of economic benefits because of controls on electricity tariffs."

Summary of Benefits and Costs:

4.01 The project would increase agricultural production, farm income and employment in some 201,200ha. of rural areas of the NWFP and the FATA. The project benefits would be due to improved watersupply resulting from: (a) better management of the system through enhanced farmers participation whichwould improve the sustainability of the system, increase cost recovery, and reduce the O&M as well asrehabilitation costs; and (b) improvements in the water delivery infrastructure. The other indirect projectbenefits from the improved water management include reduced drainage requirements which would help incontrolling water-logging, checking rise in water tables, improving water quality and reducing soil salinityrisks. It would also reduce the incidence of mosquito-borne diseases by reducing the habitat of mosquitoeswith reduction in stagnant water leaking from deteriorated water channels. Furthermore, it would reducelong-term negative effects of poor drainage on buildings, roads and utility lines; thereby reducing themaintenance cost of these facilities. These indirect, yet unquantified, benefits would contribute toimproving the living standard of the predominantly poor rural population. The change in management ofthe system and improved cost recovery would reduce the O&M burden on the government and allow it toredirect resources to improve O&M of larger irrigation infrastructure.

4.02 The economic rate of return (ERR) of the project is estimated at 27 percent. The project ERR isrobust and not very sensitive to variations in the project costs or benefits. It is highly unlikely thatunfavorable developments would reduce the project ERR to opportunity cost of capital taken as 12 percent.The impact on agricultural production, farm income, and economic and sensitivity analysis is summarizedbelow. The details are in the project file.

- 58 -

Main Assumptions:

A. Agricultural Production

4.03 The impact assessment of various infrastructure improvement and rehabilitation is based onmonitoring results of similar works undertaken under various projects and estimates of pre-appraisal andappraisal missions. Specific assumptions made in estimating the impact of various project components arebriefly described below.

4.04 Distributary/minor rehabilitation/improvements. Because of poor O&M, the irrigation waterdistribution system, both at the secondary (distributary/minor canal) and tertiary (on-farm watercourses)levels, has deteriorated to such an extent that the delivery of water, its reliability and equity in distributionhas been adversely affected. Monitoring results of IDA assisted Second System Rehabilitation Project (Cr.

1888-PAK) demonstrate that, unless the system is rehabilitated to catch up with the deferred O&M overthe years, the cropping intensity reduces by about 7 percent over a period of five years. The croppingintensity, however, remained unchanged on the channels which were rehabilitated. Therefore, it is assumedin the analysis that the future cropping intensity without the project would reduce by 7 percent while itwould remain unchanged in the with project situation.

(j/ "Agro-Economic Impact Study of the Venoi Distributary in Punjab", conducted by the Punjab Economic Research Institute,Lahore)

4.05 Watercourse improvements and water storage tanks. The post-evaluation of watercourseimprovement surveys conducted for the Third On-Farm Water Management Project (Third OFWM, Cr.2245-PAX/Ln. 3327-PAK). The Post-Evaluation of Watercourse Improvements Surveys' showed increase inirrigation efficiency by reducing spillage and operating losses, seepage, and evaporation. It was estimatedthat with watercourse improvement package the amount of water delivered to farms has increased by anaverage of 26 percent, ranging from 19 percent in Punjab/NWFP to 47 percent in Sindh and FATA.Additional water resulted in increased cropping intensity as well as there was shift towards higher valuecrops. Based on this data it is assumed that the cropping intensities would increase by 28 percent in thecanal irrigated areas of NWFP/FATA, 13 percent in barani spring/well irrigated areas where watercourseimprovements would take place, and 3 percent in the case of water storage tank construction. Overall cropyields would increase by about 5 percent for fruits, 10 percent for grains, 20 percent for sugarcane, 25percent for fodder, 16 percent for oilseeds, and 35 percent for vegetables.

(2/ Conducted by WAPDA's Watercourse Monitoring and Evaluation Directorate on 14 randomly selected watercourses in thecountry)

4.06 Local/minor irrigation schemes. Based on experience gained under the Balochistan MinorIrrigation and Agricultural Development Project (Cr. 1243-PAK), it is assumed that construction orrehabilitation of local/minor irrigation scheme would increase agricultural production through augmentedwater supplies to some existing irrigated areas (by meeting crop water requirements), and throughexpansion of irrigated area. On the basis of an average local/minor irrigation development model (formiddle altitude cropping pattern), the water flows are expected to increase by 2.5 cusec (from 1.5 cusec to4.0 cusec with project, and consequently the average cropped area on a 200 ha command area increasedfrom 131 ha to 437 ha on a 400 ha expanded command area. Increases in crop yields would be substantial,ranging from 25 to 50 percent for cash crops to 35 percent for fruits.

- 59 -

4.07 Improved management The change of system management, specifically the participation of FOsin the management at the distributary/minor level, would result in: (a) enhanced sustainability of thesystem, reduced O&M costs and improved cost recovery eliminating the need for periodic rehabilitation;and (b) increased agricultural production due to reliable and better managed water supply. However, thereis insufficient information to fully quantify the benefits of changing over the management from fullygovernment run system to the one with significant participation of FOs in joint management, and in somecases, full transfer of management. Benefit estimates of changing the management taken in the analysis arevery conservative. It is assumed that the anticipated increase in agricultural production would not beattributed to "management change" and there would be no reduction in O&M costs. In the presentsituation, the distributary/minor system requires rehabilitation every five years. It would not require anyrehabilitation if proper O&M is regularly carried out which is expected under the changed management.Therefore, it is assumed that the cost of rehabilitation every five years would be reduced to half i.e., Rs350/ha of cultivated command area (full cost for a typical branch canal in Punjab was Rs 600/ha in the mid90s).

4.08 Target impact area. Estimates of target impact area, by project component or type of investment,are given below:

impact area in ha.)Province/ Watercourse Watercourse Water Distributary Branch Local/minor

Entity (canal (barani Storage Canal' Canal irrigation' Totalirrigated) irrigated) Tanks' (Above FO)'

NWFP 30,400 14,600 10,500 90,000 450,000 20,000 180,100*

FATA 1,320 500 - 18,200 - 2,400 21,100*

Total 31,720 15,100 10,500 108,200 450,000 22,400 see belowNet impactarEa 31,720 15,100 10,500 NWFP: 59,600 45,000 22,400 201,200used for ERR FATA: 16,880 (WPcaculations Total: 76,450 (NWFP:0

FATA:_____________ _____________ _____________ ___________ ~~ ~~21,100)

1. Av. cultivated command area (CCA) of a watercourse (w/c), is assumed to be 50 ha. Additionally 7.5 ha. of PLL is treated as equivalent of onew/c.2. Av. CCA a barani watercourse and a storage tank is assumed to be 20 ha and 30 ha respectively.3. Av. CCA of a distributary canal is assumed to be 4,500 ha. Net impact area is the total CCA of all distributaries minus the command area ofwatercourse to be improved within those distributaries.4. Av. CCA of a branch canal supplying waterto systems above the FOs (FWUAs) is assumed to be CCA of 5 distributaries with only 10% benefitsattributable to investment in rehabilitation. Therefore, "equivalent impact area per branch canal' (with fill benefits) is taken as 5,000 ha.5. Av. CCA a local minor irrigation scheme is assumed to be 800 ha in NWFP and 400 ha. in FATA.

* Because of overap in the watercourse, distributaty and branch canal command areas, the row figures cannot be added.

4.09 Prices. Farm budget analysis is based on prevailing market prices (May 2000) which mayincrease in future as the Govemnent continues to align domestic and international prices. Economicevaluation is done using the economic prices. Both financial and economic prices used in the analysis aregiven in Table 4-1.

-60 -

4.10 Cropping intensities. Cropping intensities assumed to evaluate different scenarios aresummarized below:

Cropping Intensities (C.I.) Assumed for NWFP/FATA Areas, (%)(under various scenarios)

C.I. Canal Barani Water Local/minorScenario inigated irrigated Storage irrigation

areas areas Tanks

Present (command areas) 180 186 118 66

Without Project 173 186 118 66

With Distributary/Minor andother Systems Improvements 180 -

With Minor Irrigation schemes - - - 109

With watercourse Improvements 200 199 121 -

Incremental (over without project) 27 13 3 43

4.11 Methodology. Crop budgets and farm models in financial and economic prices were developedrepresenting different cropping and irrigation systems for, NWFP/FATA, Barani Areas, Water StorageTanks, and Minor/Local Irrigation Schemes. Net crop production values per hectare in with and withoutproject scenarios are given in Table 4-2, and net production values for different subproject areas (NWFPand FATA) are given in Table 4-3.

Agricultural Production

4.12 Based on the above production assumptions and phasing of systems and watercourseimprovements, water storage tank construction, barani areas improvement and local/minor irrigationdevelopment the incremental production due to the project is summarized below:

Annual Production (000 tons)

Crops Present Without With Project IncrementalProject

Wheat 31.3 30.9 35.5 4.6Maize 28.1 27.8 36.1 8.3Fodder (rabi+kh.) 43.0 42.5 74.9 32.4Tobacco 4.3 4.2 5.0 0.7Vegetables (rabi+kh.) 9.2 8.9 19.8 10.9Oilseeds 2.2 2.2 3.4 1.4Sugarcane 152.9 150.5 191.7 41.2Orchard 16.0 15.9 20.9 5.0

Total 287.0 282.5 386.2 103.7(36% increase)

- 61 -

B. Farm Incomes

4.13 The impact on farm incomes (in financial prices) based on seven farm models developed for theproject analysis is summarized below:

Annual Net Farm Incomes in NWFP/FATA (Rupees)

Canal Barani Local!Attribute Irrigated (Spring/well Minor Irrigation

irrigated)

Farm Size (ha) 1.8 2.2 1.8

Present 26,734 25,131 7,286

Without Project 26,577 26,035 7,535

With Project 32,339 34,494 22,579

Incremental 5,605 9,363 15,293

%Increase 21 37 210

1/ Increase with project situation over the present net farm income. Large increase for "minor irrigation" due to greater crop diversification infavor of high value crops (vegetables, orchards) and lower base farm income as experience from Balochistan Conmmunity Minor IrrigationProject suggests.

C. Economic Analysis

Returns by Types of Investments under the Project

4.14 ERR estimates for different types of investments under the project are summarized below, withdetails available in Tables 4.4 to 4.6. Separate models with one ha as unit cultivated area were constructedfor each type of investment because of differences in investment costs, commands areas, cropping pattemsand benefits. For the change management subcomponent, project benefits were assumed to be 50 percentof savings in the systems rehabilitation costs every five years as elaborated in para 4.7 above. For theremaining subcomponents, target impact areas (as shown in para 4.8) and net benefits per ha weremultiplied to arrive at the benefits.

Economic Rates of Return (%)

Subcompoonent/Scenarios NWFP FATA CombinedChange Management (TMM/PIMM) 12.0 0.0 9.5Distributary level improvement 34.4 47.6 36.5Branch canal improvement above FO 47.7 NA 47.7Watercourse (irrigated) Improvements 29.7 24.3 29.5Watercourse (barani) Improvements 21.6 18.5 21.5Water Storage Tanks 21.7 NA 21.7Local/Minor Irrigation Schemes 18.9 18.5 18.8

Overall ERR, % 26.6 26.5 26.6

- 62 -

4.15 The economic value of the project benefits has been calculated by evaluating incremental outputsand inputs at economic prices and, in the case of nontraded commodities, by using a standard conversionfactor (SCF) of 0.9. Economic costs have been calculated from total project costs, including physicalcontingencies, with the local costs components being adjusted by the SCF and excluding taxes and duties.Economic price derivations are presented in Table 4.7. The life of the project facilities is taken as 20 yearsexcept for local/minor schemes which is taken as 25 years.

Sensitivity analysis / Switching values of critical items:

4.16 The project ERR is robust and not very sensitive to variations in the project costs or benefits. It ishighly unlikely that unfavorable developments would reduce the project ERR to opportunity cost of capitalwhich is taken as 12 percent. Switching values have been computed to determine the effects of deviationsfrom the main assumptions on the economic viability of the subproject models: i.e., the value of thevariables tested which would reduce the present values of the net incremental benefits to zero whendiscounted at oppotunity cost of capital of 12 percent. The analysis shows that in all cases reduction inbenefits are more sensitive than increase in costs. The results indicate that the ERR for the models wouldfall to 12 percent if the cost increased by more than 255 percent for NWFP, 244 percent for FATA and254 percent for the combined model or the benefits decreased by more than 61 percent in NWFP andcombined models and by more than 59 percent in FATA as summarized below:

Switching Values at Present Discount Rate (Rs. Million)Project/subproject Total Costs Net Incremental Benefit

........... Rs, million ........................ ...Rs, million ......Base value Switching Change, % Base value Switching Change, %

l l I value valueNWFP 867 2,211 255 2,211 867 -0.61FATA 87 212 244 212 87 -0.59

Overall Project 954 2,423 254 2,423 954 -0.61

4.17 Risk Analysis. Various risk analyses have been carried out to test the different possible scenarios,such as institutional, implementation, financial and sustainability, etc. Inadequate use of farm inputs andineffective agricultural and water management extension services might reduce the expected croppingintensity and crop yields. The project might take longer time to form FOs thereby delaying and prolongingcompletion of project's civil works and generation of benefits. In addition, delays in the recruitment ofconsultants would delay project start-up and the mismanagement in civil works contracts thereby increasingthe investment costs and delaying projects benefits. Ineffective FOs to manage and sustain the irrigationsystems combined with low cost recovery, particularly the collection of water charges, would threaten thesustainability of the irrigation facilities thereby reducing project benefits as well as incurring unnecessaryrehabilitation investments. The results of the analyses indicate that in all cases ERR of NWFP, FATA andfor the combined model are still above the opportunity capital cost of 12 percent, as summarized below:

- 63 -

ERR (%) Response to Various Values

Scenarios NWFP FATA Whole Project

Base case 26.6 26.5 26.6

Total costs (+20%) 23.2 23.2 23.2

Incremental benefits (-30%) 20.2 20.3 20.1

Benefits lag by one year 22.6 22.6 22.5

Benefits lag by two years 19.5 19.6 19.5

Increase costs by 20% anddecrease benefits by 30% 17.2 17.4 17.2

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PakistanNWFP On Farm Water Management Project

Table 4.1 Summary of Financial and Economic Prices

...... as of Oct 2000-eepe U Fnnea Fennmie

Outputs:Kharif crops

Oilseeds Rslkg 12.00 10.80Vegetables Rs/kg 2.75 2.48Maize Rs/kg 5.65 5.09Sunflower Rs/kg 12.50 11.25Tobacco Rs/kg 28.70 25.83Kh. Fodder Rs/kg 0.50 0.45

Rabi cropsWheat Rsikg 7.35 7.90R. Fodder Rslkg 0.55 0.50Potato Rs/kg 2.25 2.03.Oilseeds Rs/kg 12.29 11.06Vegetables Rstkg 3.00 2.70Pulses (Gram) Rs/kg 9.50 8.55

Perenlal cropsSugarcane Rsikg 0.77 0.84Orchards Rslkg 2.60 2.34By-ProductsWheatstraw Rs/kg 1.31 1.18

Inputs:Seeds

Kharif cropsOilseeds .Rslkg 15.00 13.50Vegetables Rs/kg 900.00 810.00Maize Rs/kg 9.82 8.84Sunf1ower Rsr7g 18.75 16.88Tobacco Rslkg 67.45 60.70Kh. Fodder Rslkg 12.00 10.80Pulses (Gram) Rstkg 14.25 12.83

Rabi cropsWheat Rslkg 9.19 8.27R. Fodder Rs/kg 75.00 67.50Potato Rs/kg 6.25 5.63Oilseeds Rsikg 15.98 14.38Vegetables Rs/Acre 1,100.00 990.00

Perenial cropsSugarcane Rs/Acre 2,700.00 2,430.00Orchards Plants/yr 1,100.00 990.00FertilizersimanuresNitrogen (N) Rs/Nut.kg 19.63 15.65Phosphorus (P) Rs/Nut.kg 25.65 27.26Potash (K) RslNut.kg 6.83 14.42Farm Yard Manure Trolley 600.00 540.00Pesticides (materdals & application)Wheat Rs/Ac 667.17 600.45Vegetables RslAc 400.00 360.00Sugarcane Rs/Ac 370.65 333.59LaborTractor Labor Rs/Hour 150.00 135.00Manual Labour Rs/Day 65.00 48.75Purchased Groundwater Rs/Hour 120.00 108.00

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PakistanNWFP On Farm Water Management Project

Table 4.2 Net Production Values Based on Full CroD Budqets

(000 Rs)

CrODS F;nanc;l EconomiCWithout With Without WithProject Project Project Project

(present) (future) (present) (future)

Vegetables 17,807 36,504 16,026 32,853Maize 159,030 203,814 143,127 183,433Sunflower 4,421 13,364 3,979 12,028Tobacco 122,501 141,967 110,251 127,770Kh. Fodder 7,054 11,886 6,349 10,697Wheat 229,697 261,152 246,809 280,607R.Fodder 15,910 28,110 14,319 25,299Potato 16,041 24,541 14,437 22,087Oilseeds 23,371 28,979 21,034 26,081Vegetables 8,033 19,608 7,229 17,647Pulses (Gram) 8,606 9,037 7,746 8,133Sugarcane 117,735 147,598 128,738 161,390Orchards 41,704 54,288 37,534 48,859

Table 4.3 Net Cros Production Values (at nominal Drices)

(Rs Million)Prasent Wu; olUt W PCO;eC

Project/ Total Cropping Net Total Cropping Net Total Cropping Netsub-project Cropped Intensity Production Cropping Intensity Production Cropping Intensity Productionsub-project Area (Ha) (%) Value (Ha) 1%) Value (Ha) (%) Value

a. Economic Values

NWFP 295,746 164% 677.23 286,190 159% 667.24 312,361 173% 856.66FATA 35,274 167% 80.34 33,917 161% 80.12 36,632 174% 100.23

Overall 331,020 165% 757.58 320,108 159% 747.36 348,994 173% 956.89

b. Finacial Values

NWFP 295,746 164% 690.22 286,190 159% 680.10 312,361 173% 878.60FATA 35,274 167% 81.69 33,917 161% 81.37 36,632 174% 102.24

Overall 331,020 165% 771.91 320,108 159% 761.47 348,994 173% 980.85

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PakistanNWFP On Farm Water Manaaement Prolect

Table 4.4 Economic Analysis bV Sub-Prolect Areas

(Rs Million)NWFP Suibrolect EArA SP hroiect Who'e Proiect

Total Total Nt Total Total Net Total Total NetYears Costs efits Incremental Costs Benefits Incremental ot t Incremental

Coss enfis enfis oss enfiBe nefits enefitss Benefits

Year-1 54.61 11.35 (43.27) 11.97 1.33 (10.64) 66.59 12.68 (53.91)Year-2 121.60 11.35 (110.26) 24.45 1.33 (23.12) 146.05 12.68 (133.38)Year-3 396.33 11.35 . (384.99) 26.68 1.33 (25.35) 423.01 12.68 (410.34)Year-4 440.90 11.35 (429.56) 29.02 1.33 (27.69) 469.92 12.68 (457.25)Year-5 241.26 97.57 (143.70) 26.21 9.54 (16.67) 267.47 107.11 (160.37)Year-6 5.71 190.48 184.77 1.13 18.47 17.35 6.84 208.95 202.11Year-7 5.71 295.61 289.90 1.13 29,49 28.36 6.84 325.10 318.26Year-8 5.71 410.16 404.45 1.13 41.55 40.42 6.84 451.71 444.87Year-9 5.71 536.06 530.35 1.13 54.88 53.75 6.84 590.93 584.10Year-10 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-1i 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-12 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-13 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-14 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-15 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-16 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-17 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-18 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-19 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66Year-20 5.71 675.74 670.03 1.13 69.76 68.63 6.84 745.50 738.66

ERR 26.6% 26.5% 26.6%

Benefits which accrue early, assumed to be 50% savings in the O&Mof distributary/minors, are attributed to Change Management

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PakistanNWFP On Farm Water Manacement Project

Table 4.5: Economic Analysis by Investments (On-Farm Improvements) in Subproject Areas

(Rs Million)

Investment Incremental Total Watercourse, Watercourse, Water Net Inc. NetYears Costs O&M Costs Canal Barani Storage Benefits Benefits

Crrigation Irrigation Tanks

A. Watercourses/Water Storage Tanks -- NWFP

Year-i 10.46 - 10.46 - - - - (10.46)Year-2 37.42 - 37.42 - - - - (37.42)Year-3 101.66 - 101.66 - - - - (101.66)Year-4 161.80 (0.63) 161.17 - - (161.17)Year-5 109.65 (1.58) 108.07 16.58 8.63 3.72 28.92 (79.15)Year-6 (2.63) (2.63) 34.03 17.69 7.43 59.15 61.78Year-7 (2.63) (2.63) 53.70 27.83 11.53 93.06 95.69Year-8 (2.63) (2.63) 74.33 38.45 15.62 128.40 131.03Year-9 (2.63) (2.63) 95.98 49.55 19.71 165.24 167.87Year-10 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-11 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-12 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-13 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-14 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-15 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-16 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-17 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-18 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-19 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29Year-20 (2.63) (2.63) 118.70 61.17 23.80 203.66 206.29

ERR 25.56%

B. Watercourses - FATA

Year-I - - - - - - -Year-2 0.29 0.29 - - - - (0.29)Year-3 4.06 - 4.06 - - - - (4.06)Year-4 6.89 (0.03) 6.86 - - - - (6.86)Year-5 6.28 (0.07) 6.21 0.30 0.61 - 0.91 (5.30)Year-6 - (0.11) (0.11) 0.61 1.26 - 1.86 1.97Year-7 (0.11) (0.11) 0.95 1.99 - 2.94 3.05Year-8 (0.11) (0.11) 1.32 2.74 - 4.06 4.17Year-9 (0. 11) (0.11) 1.70 3.54 5.23 5.34Year-10 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-11 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-12 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-13 (0.11) (0.11) 2.09 4.36 6.46 6.57Year-14 (0.11) (0.11) 2.09 4.36 6.46 6.57Year-15 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-16 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-17 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-18 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-19 (0.11) (0.11) 2.09 4.36 - 6.46 6.57Year-20 (0.11) (0.11) 2.09 4.36 - 6.46 6.57

ERR 22.08%

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PakistanNWFP On Farm Water Management Prolect

Table 486: Economic Anatvsis bv Investments (Off-Farm Channels) In Suborolect Areas

(Rs Million)layasto,eat.costa IocameaetaLO&M Incremental-Beaafits Not I---t -3aallit

Branch Disty Local Branch Disty Local Branch Disty Local Branch Disty LocalCanal Canal Minor Canal Canal Minor Tot Canal Canal Minor Canal Canal MinorlmDrov. mProv. Imrriation ImDrov. Improv. Imrriqabon Costs Imonrv. lmProv. Irrinaton Imrov. Immrov. Inrriation

A. Branch Canals. Distributary Canals and Local Minor Irrigatlon Schemes - NWFP

Year-1 2.49 6.28 8.77 * - (2.49) (6.28) -Year-2 19.84 28.31 6.52 . (0.03) 54.64 . (19.84) (28.31) (6.49)Year-3 18.70 69.29 189.09 - - (0.98) 276.10 - - (18.70) (69.29) (188.11)Year4 18.70 63.02 187.53 - - (1.92) 267.33 - - - (18.70) (63.02) (185.62)Year-5 18.42 15.75 94.15 - . (3.03) 125.30 18.29 24.82 14.19 (0.13) 9.06 (76.94)Year-6 3.44 6.89 (3.03) 7.30 37.22 50.48 32.28 33.78 43.60 35.31Year-7 3.44 6.89 (3.03) 7.30 57.89 78.24 55.07 54.45 71.36 58.09Year-8 3.44 6.89 (3.03) 7.30 79.24 106.91 84.27 75.80 100.02 87.29Year-9 3.44 6.89 (3.03) 7.30 101.29 136.50 121.68 97.85 129.61 124.71Year-10 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-11 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-12 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-13 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 17284Year-14 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-15 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-16 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 17264Year-17 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-18 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-19 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64Year-20 3.44 6.89 (3.03) 7.30 124.06 167.05 169.61 120.62 160.17 172.64

ERR 47.7% 34.4% 18.9%

S. Branch Canals, Dlsilbutary Canals and Local Minor Irrigation Schemes - FATA

Inv_stmsnLCz ts I n± M ihcementaLEtBnets fjt In--fll -rum

Branch Disty Local Branch Disty Local Branch Disty Local Branch Disty LocalCanat Canal Minor Canal Canal Miror ota Canal Canal Minor Canal Canal MinorImprov. Improv. Irrigation Improv. Improv. Irrigation Improv. Improv. Irrigabon Improv. Improv. Irrigation

Year-1 * 1.26 - - - - 1.26 - - (1.26)Year-2 * 9.13 8.82 - - (0.04) 17.90 - - - - (9.13) (8.77)Year-3 * 7.88 9.70 - . (0.09) 17.48 - . (7.88) (9.61)Year-4 2 - 20.28 - - (0.19) 20.08 - - - - - (20.08)Year-5 * 20.28 (0.30) 19.98 * 5.60 1.70 - 5.60 (18.28)Year- - 1.29 (0.30) 1.00 - 11.41 3.87 - 10.12 4.17Year-7 - 1.29 (0.30) 1.00 - 18.62 6.61 - 17.32 6.90Year-8 - 1.29 (0.30) 1.00 - 26.05 10.11 - 24.76 10.41Year-9 - 1.29 (0.30) 1.00 - 33.71 14.60 - 32.42 14.90Year-10 - 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-1l - 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-12 - 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-13 - 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-14 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-15 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-16 - 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-17 * 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-18 * 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-19 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65Year-20 * 1.29 (0.30) 1.00 - 41.62 20.35 - 40.33 20.65

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PakistanNWFP On Farm Water Management Project

Table 4.7: Economic Price Derivation

PARITY (I) [U [El [E [EJ II] [1] [1] II]Unit Wheat Rice S/Cane S/Cane Maize (5) Urea (6) DAP(7) MOP(8)

PROJECTED WORLD MARKET PRICE (YEAR 2000)

In 1990 constant dollars (2) USS/MT 133.90 263.60 184.10 184.10 104.60 108.80 171.50 102.10Adj factor to 2000 dollars (3) 1.07 1.07 1.07 1.07 1.07 1.07 1.07 1.07In constant 2000 dollars US$/MT 143.27 282.05 196.99 196.99 111.92 116.42 183.51 109.25

QUALITY ADJUSTMENT % 85.00 105.00 100.00 97.00 90.00 100.00 100.00 100.00

WORLDMARKETEQUIVALENT USS/MT 121.78 296.15 196.99 191.08 100.73 116.42 183.51 109.25

International sbipping and insurance USS/MT 27.00 (35.00) 37.00 (37.00) 29.00 50.00 50.00 50.00

CIF/FOB Karachi USS/MT 148.78 261.15 233.99 154.08 129.73 166.42 233.51

EXCHANGERATE(4) Rs/USS 51.05 51.05 51.05 51.05 51.05 51.05 51.05 51.05

CIF/FOB Karachi Rs/MT 7,595.32 13,331.94 11,945.04 7,865.65 6,622.71 8,495.54 11,920.43 8,129.56

Portcharges Rs/MT 150.00 (150.00) 220.00 (220.00) 319.00 212.39 298.01 203.24

Storageandhandling Rs/MT 314.00 (314.00) 470.00 (470.00) 470.00 100.00 100.00 100.00

Transport to mill Rs/MT 63.00 (120.00) 800.00 (800.00) 1,352.00 120.00 120.00 120.00

PROCESSED VALUE Rs/MT 8,122.32 12,747.94 13,435.04 6,375.65 8,763.71 8,927.93 12,438.44 8,552.80

Processing ratio % 90.00 62.00 8.50 8.50 90.00 100.00 100.00 100.00Processing costs RstMT 162A5 (254.96) 3,000.00 (3,000.00) 150.00 - - -

WHOLESALE VALUE Rs/MT 7,472.54 7,648.77 1,396.98 286.93 8,037.34 8,927.93 12,438.44 8,552.80

Local marketingtransport Rs/MT 425.00 (425.00) 400.00 (400.00) 565.00 100.00 100.00 100.00

FARMGATE PRICE (9) Rs/MT 7,897.54 7,223.77 1,796.98 (113.07) 8,602.34 9,027.93 12,538.44 8,652.80

ECONOMIC FARMGATE PRICE Rs/KG 7.90 7.22 1.80 (0.11) 8.60 9.03 12.54 8.65FINANCIALFARMGATEPRICE Rsa/KG 7.35 7.29 0.77 0.77 5.65 7.20 11.80 4.10Value ofN in Case of Fertilizers ECO 19.63 27.26 14.42

FIN 15.65 25.65 6.83Av. for Sugarcane 0.84

(1) Parity: [1] Import [E] Export(2) World Bank price forecasts dated May 2000 for the year 2005(3) Inflated by MUV Index (average for 1995 and 1996, base 1990)

(4) Based on World Bank Office Memorandum dated 18 December 1996 re Exchange Rates and Price Contingencies for Project Analysisin Pakistan (Value for 1999)

(5) Assumed to be hybrids. Economic price of local varieties - Rs6.3/kg - financial price (see footnote (10)) adjusted by SCF(6) 46% nitrogen; (7) 18% nitrogen and 46Y% phosphorus; (8) 60% potassium(9) Bunch farm gate price

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Annex 5: Financial SummaryPAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

Years EndingJune 30

Year 1I Year 2 I Year 3 i Year 4 | Year 5 | Year 6 | Year 7Total Financing RequiredProject CostsInvestment Costs 1.5 3.4 9.7 11.0 6.5Recurrent Costs 0.0 0.0 0.0 0.0 0.0

Total ProjectCosts 1.5 3.4 9.7 11.0 6.5 0.0 0.0Total Financing 1.5 3.4 9.7 11.0 6.5 0.0 0.0

FinancingIBRD/IDA 1.1 2.4 6.5 7.2 4.2Government 0.4 0.5 1.1 1.1 0.6

Central 0.0 0.0 0.0 0.0 0.0Provincial 0.4 0.5 1.1 1.1 0.7

Co-financiersUser Fees/Beneficiaries 0.0 0.5 2.1 2.7 1.7Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Project Financing 1.5 3.4 9.7 11.0 6.5 0.0 0.0

Main assumptions:

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Annex 5A: Financial Management

NWFP On-Farm Water Management Project

Current Accounting Systems of Implementing Agencies

5.01 The provincial government accounts are maintained on a cash basis according to a chart ofaccounts prescribed by the Auditor General of Pakistan. The books of accounts are written up manuallyand are not computerized. Some of the common accounting records include the cash book, stock registerand a summary statement for operating expenses. In addition to the main cash book, a columnar cash bookis maintained which contains various columns with preprinted government account codes related to variousactivities. The present system of maintenance of accounts is not capable of generating reports on costsaccording to components and sub-components of the project. It also has no provision to bring into theproject books of account the value of contributions in kind from farners which needs to be reflected in thetotal project cost. An intemal control system also needs to be in place to clearly define and document theaccounting methodology to be followed for recording individual transactions.

Accounting Staff

5.02 Although the Accounts Officers and staff have been exposed to maintenance of special accounts ofdonors in prior projects, yet they are not accounting professionals nor have they had prior training inaccrual or computerized accounting. They need to be exposed to the new reporting format designed by theBank to comply with project management report (PMR) based disbursements. This type of reportingwould be easier with computerized accounting. So, the staff of the implementing agency will need externalprofessional support to set up and maintain computerized project accounting systems and to generatequarterly reports as required by the Bank. Initial orientation and training of Project Accounting Specialistsand Govemment staff would be completed by June 30. 2001 and refresher training by August 31. 2001.

Proposed Arrangements

5.03 Financial management system and financial manual. The project's financial managementprocedures as applicable to the national project have been documented in a draft Financial Manual (FM) .This would be customnized to the needs of NWFP-OFWM project and would be adopted before October 31,2001 by the OFWM Directorate. The FM would cover: (a) flow of funds; (b) financial and accountingpolicies; (c) accounting system and internal control mechanisms including information flow and flow ofdocuments; (d) chart of accounts; (v) financial reporting (including formats of PMRs); (d) auditingarrangements; (e) budgeting; (f) organization and staffing for financial management functions; and (g)terms of reference of external auditors. The FM would be periodically updated and improved based onimplementation experience.

5.04 Project accounting support. The project provides funding for financial management guidance andsupport to the implementing agency. This is being accomplished by the M&E Wing hiring a professionalaccounting firm as project accounting specialists (PAS) which shall place the required accountingprofessional in each unit. The recruitment of PAS is in advanced stage. The PAS team will haveresponsibility for the following:

(a) Provide a professional accountant for each implementing unit. The person placed in the NWFPprovincial M&E Wing would also be responsible for the accounts of the components in the linedepartments and in the FATADC. These professionals will provide guidance and support to thedepartmental accounting staff to set up and maintain a computerized project accounting system togenerate financial and procurement reports as required by IDA and the Government.

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(b) Provide input for updating the financial manual based on implementation experience and ensurethat proper internal controls are in place.

(c) Train the departmental staff on the job, on a regular basis, using the professionals posted at site.

(d) Advise and support the departmental staff in preparing periodic project financial statements foreach unit, consolidating these at the total project level, and providing annual accounts to theexternal and govermment auditors.

(e) Guide the departmental staff in facilitating government and external audit and providinginformation to IDA and the government departments as required.

Hardware and Project Accounting Software

5.05 The project provides for acquiring necessary hardware, software, and printers for the financialmanagement teams. The proposed credit will provide funds for acquiring suitable software and technicalsupport for installing a financial management system in each implementing unit with appropriate chart ofaccounts. The software providers will also impart on-site-training for the team members who will behandling the project accounts. There will be sufficient provision for continued technical andtroubleshooting support for the duration of the project. An integrated project accounting and managementinformation system (PAMIS) which has been developed as part of a pilot program in the South Asia regionof the Bank would be customized to the needs of this project and would facilitate double entry bookkeeping,generation of PMRs as required by IDA, and linking of physical details with financial transactions.

Project Accounting System

5.06 The designated departmental accounting staff under the guidance of the PAS team would beresponsible for overall project financial management and accounting. They would maintain books ofaccounts for the project, prepare and disseminate financial statements/PMRs and ensure timely audit offinancial statements. The overall principles for project accounting are outlined below:

(a) Books of accounts for the project would be maintained by the joint team of PAS and departmentalstaff on double entry bookkeeping principle. Project accounts would be maintained using PAMIS.

(b) Project accounting would cover all sources (including beneficiary contributions in cash or kind)and all uses of project funds. Disbursements made directly by the IDA or the beneficiaries(farmers) would also be included in the project accounts. Funds received from various sourceswould be identified separately and reflected in the project accounts and financial statements.

(c) An identifiable trial balance for the project capturing all project receipts, expenditures, and otherpayments under the project would be prepared. A chart of accounts for the project would beincorporated in the FM which conforns to the classification of expenditures and sources of fundsindicated in the project documents (project implementation plan, project appraisal document,COSTAB model). The chart of accounts enables data to be captured in a manner to facilitatefinancial reporting of project expenditures by: (i) project components and subcomponents; (ii)expenditure categories; (iii) disbursement categories; (iv) implementing agencies.

(d) Project financial statements and PMRs would be fully based on the project books of accounts andsubstantially generated from the PAWIS.

(e) Physical informnation on key performance indicators which can be readily linked to financial costswould be maintained as part of the project financial management system.

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Internal Controls

5.07 Internal control mechanisms would include the following:

(a) operation of a budgeting system, and regular monitoring of actual financial performance withbudgets and targets;

(b) adoption and operation of simple, clear and transparent financial and accounting policies whichwould govern financial management of and accounting for the project. These policies andprocedures are included in the FM. These would include identification of expenditures which canbe charged to the project and the categories under which the expenditures would be charged;

(c) at the transaction level, establishment and operation of policies, procedures and systems forensuring standard internal controls such as checking of expenditures, appropriate documentation,levels of authorization, bifurcation of duties, periodic reconciliation, physical verification, etc.These policies and procedures are given in the FM and would be reviewed and updatedperiodically;

(d) establishment and operation of a comprehensive audit mechanism, including concurrent audit; and

(e) establishment and operation of policies and procedures governing the transfer offunds/reimbursement of expenditures to the field offices and accounting of expenditures by theimplementing agencies (these policies are outlined in the FM). These include aspects such asdetermination of appropriate costs of activities which will be carried out; payment of expensesincurred by the field offices; the limnits for expenditures; time-scale for submission of expendituresand adjustment of advances; supporting documentation and verification procedures for suchexpenditures; information to be provided (including physical information wherever necessary),standard formats for providing this information; and actions in the event of defaults.

Project Management Reports

5.08 Ouarterly: Initially, simplified PMRs would be generated and after completion of installation ofthe computerized PAMIS system, the full set of PMRs would be generated and produced for eachimplementing agency and for the whole project. These reports would be management-oriented (i.e.,summaries rather than transactional details) and would be used for project management. The reports wouldinclude: (a) a comparison of budgeted and actual expenditure and analysis of major variances, includingsources and application of funds (by components and expenditure categories) and key physical parametersand unit rates for selected key items; (b) expenditures by disbursement categories; and (c) forecasts for thenext two quarters. The format of these reports conformiing to the Bank's LACI/FMI requirements havebeen agreed during negotiations.

5.09 Annuallv: Audited project financial statements (PFS) would be submitted to the IDA. PFS wouldinclude: (a) a summary of funds received (showing funds received from the provincial government (orfederal government in the case of FATADC), IDA and beneficiaries separately), and a summary ofexpenditures shown under the main project headings (i.e., project components) and by main categories ofexpenditures; (b) a balance sheet showing accumulated funds of the project, bank balances, other assets ofthe project, and liabilities, if any; (c) special account statements; and (d) statement of expenditure (SOE)listing. The audited PFS would be submitted to IDA not later than six months after the end of the fiscalyear (i.e., not later than December 31 for the fiscal year ended on June 30 of each year). Audit opinion tobe tracked in IDA/Bank's Audit Report Compliance System will compose: project/SOE; special account(NWFP); and special account (FATADC).

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Auditing Arrangements

5.10 The accounts and financial statements of the project would be eventually audited by the AuditorGeneral of Pakistan (following GOP's implementing of the new accounting model, or NAM, and IDAreviewing the situation to use AGP as auditors), but initially by a firm of chartered accountants(independent external auditors acceptable to IDA). The external auditors shall commence audit bySeptember 30 and submit the audited accounts and report before December 31 every year. The annualproject financial statements audited by the firm of chartered accountants would be submitted to IDA withinsix months of the close of GOP's fiscal year. The terms of reference and qualifications of the finn ofchartered accountants would be reviewed by the IDA. The cost of the firm of chartered accountants wouldbe eligible for financing from the IDA Credit. The Bank's Guidelines for selection of consultants wouldapply to the engagement of the finm of chartered accountants.

5.11 The audit by the firn of chartered accountants would be comprehensive and cover all aspects ofthe project (i.e., all sources and utilization of funds, and expenditures incurred by all implementingagencies). The audit will be carried out in accordance with international standards of auditing, and willinclude such tests and controls as the auditor considers necessary under the circumstances. The auditorwill be provided such information and access to project-related documents and records at all implementingagencies, which may be required by the auditor for the purposes of the audit. Terms of reference for thefirm of chartered accountants would be included in the financial manual.

Selection of Accountants and Auditors

5.12 Selection of the auditing firm will be done through national competitive bidding (NCB) and theevaluation done by a special selection committee of GONWFP. Project accounting specialists have beenidentified and will be selected on individual basis prior to the Board date and their recruitment will befinalized before the project implementation commences.

Readiness for Implementation and Next Steps

5.13 Financial management system. The design of the computerized financial management system isalmost complete. A draft financial management manual documenting the financial management system wasprepared for the national project and is being customized for this project. The Borrower would ensure thata customizedfinancial manualfor the NWFP project would be prepared and adopted by October 31,2001, and a computerized project accounting and management information system, satisfactory to IDA,will be made fully operational not later than June 30, 2002.

Disbursement Arrangements

5.14 Initially, the disbursements for the project will be under the traditional method through twoseparate special accounts (one each for NWFP and FATADC) that would be opened with the NationalBank of Pakistan. Both special accounts under the project would be operated by two signatories. Thefollowing action plan has been agreed with the government to enable it to switch to PMR baseddisbursements by September 30, 2002.

Sr. No. Action Target DateI Nominate counterpart departmental staff (Accountants). March 31, 20012 Finalize contract for appointing three Project Accounting Staff (PAS) June 7, 20013 Initial orientation/training of PAS and departmental staff (including AG Office June 30, 2001

staff)

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4 Install computerized PAMIS June 30, 20015 Adopt financial manual July 31, 20016 Refresh training of project accounting staff August 3, 20017 Submit first (QE September 30, 2001) transitional quarterly PMRs. Report November 15,

Nos l-A, 3-A, 3-B, 3-C and 3-D incorporating transactions effective July 1, 20012001

8 Submit books of accounts and financial statements to the Auditor General's Septemberoffice for audit. 30/year

9 Submit annual audit report to IDA December 3 1/year10 Full transfer from manual accounting system to computerization (PAMIS fully June 30, 2002

operational)11 Switching to PMR based disbursement and provision of full set of PMRs September 30,

2002

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Annex 6: Procurement and Disbursement ArrangementsPAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

Procurement

6.01 The Borrower and the implementing agencies, OFWM Directorate of NWFP's Department ofAgriculture, FATADC, NWFP Irrigation DepartmentlFIDA and FOs (at the watercourse/ distributarylevel) would be capable of carrying out procurement and contract administration envisaged under theproposed project. These entities have been involved in similar previous Bank-financed projects. Staff frommost of the implementing agencies have already completed or are expected to complete formal training onBank procurement procedures before project effectiveness. This trained staff will serve as focal pointwithin their respective agencies on procurement related matters during the course of the project. Theagencies would also be assisted by the project implementation consultants and additional training, ifneeded, would be given during the course of implementation.

6.02 The selection of major consultants has been made. The Bank has cleared the negotiated contractfor the PICs. The negotiated contract for the project supervision, monitoring and impact evaluationconsultants was commented upon by the Bank but is not likely to be processed further because the FederalCoordination Unit of MINFAL (the client) will not provide consultancy support to at least two of the fourprovinces; viz., Balochistan and the NWFP. The NWFP will use its existing M&E Wing to carry outactivities envisaged in this contract. Similarly, procurement of project accounting support consultants isalso not likely to process further, as the GONWFP decided to procure individual consultants for this kindof activity.

6.03 The development of FOs and FWUAs/WUAs, and building their capacity and ownership is themain objective of the project. Hence, in procurement of construction material and civil works, they wouldbe represented in the procurement committees which make recommendations for award of such contracts.

6.04 All procurement of works and goods financed by the World Bank would be carried out inaccordance with the Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995,revised January and August 1996 and in September 1997 and January 1999). The consulting servicesfinanced by the World Bank would be selected in accordance with procedures set forth in the Guidelinesfor Selection of Consultants by World Bank Borrowers (January 1997, revised September 1997 andJanuary 1999). In case of conflict between the Bank's procurement procedures and any national rules andregulations, Bank's procurement procedures would take precedence. To address shortcomings identified inthe past, in the national procurement procedures, the government has specifically agreed that:

(a) invitations to bid shall be advertised in at least one national newspaper with a wide circulation, atleast 30 days prior to the deadline for the submission of bids;

(b) bid documents shall be made available, by mail or in person, to all who are willing to pay therequired fee;

(c) foreign bidders shall not be precluded from bidding and no preference of any kind shall be given tonational bidders in the bidding process;

(d) bidding shall not be restricted to preregistered firms;

(e) qualification criteria shall be stated in the bidding documents;

(f) bids shall be opened in public, immediately after the deadline for submission of bids;

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(g) bids shall not be rejected merely on the basis of a comparison with an official estimate without theprior concurrence of the Association;

(h) before rejecting all bids and soliciting new bids, the Association's prior concurrence shall beobtained;

(i) bids shall be solicited and contracts shall be awarded on the basis of unit prices and not on thebasis of a composite schedule of rates (CSR);

(j) contracts shall not be awarded on the basis of nationally negotiated rates;

(k) contracts shall be awarded to the lowest evaluated and qualified bidders; and

(1) post-bidding negotiations shall not be allowed with the lowest evaluated or any other bidders.

Procurement Methods (Table A)

Specific procurement arrangements summarized in Table A, are as follows:

6.05 Works: Civil works under the project (watercourse, distributary, and branch canal improvements,FO/FWUA offices, storage tanks, and local/minor irrigation schemes) involve numerous small contractswidely dispersed over the project area. Such contracts are unlikely to attract the interest of foreign biddersand, therefore, International Competitive Bidding may not be suitable. These contracts would fall into thefollowing broad categories:

6.06 On-farm watercourse improvement and storage tanks category. The watercourse improvementsand construction of water storage tanks, representing about 33 percent by value of all works, would becarried out through community participation as a collaborative effort between the community organizations(FOs, FWUAs, WUAs), OFWM Directorate/FATADC, and technical assistance teams. FOs/FWUAs/WUAs would provide skilled and unskilled labor and contribute 25 percent percent, by value, of the totalconstruction material in kind. Construction material for these small works will be procured throughnational shopping procedures under one of the following arrangements: FOs/FWUAs/WUAs may eitherchoose to (a) provide their share of the construction material, and ask government to contribute its share ofthe material; or (b) procure all construction material themselves and receive payment in installments for thecost of government's share. Further explanation for both the cases is provided below:

* Regarding (a), in case the government is to provide it share of material, it would be procured bygovernment staff through national shopping procedures, with full and active participation ofFOs/FWUAs/WUAs at all stages of the procurement process. The OFWM staff, FOs/FWUAs/WUAs and the project consultants would carry out six monthly surveys of the prevailing market pricesof construction material in the field office area. A comparison of these prices with the actual pricespaid by the government would be prepared and provided to IDA on a quarterly basis.

* Regarding (b), if the government is to pay the cost of its share, the FOs/FWUAs/WUAs would procurethe material through national shopping procedures and get paid for the actual cost of material inworkable installments linked to progress of work. The total payment of the government's share foreach scheme would be limited to a pre-established aggregate ceiling amounting to 75 percent of thetotal estimated cost of material. The total estimated cost of material for each scheme would becalculated on the basis of prevailing market prices of construction material in each field office area andwould be jointly verified by OFWM staff, FOs/FWUAs/WtUAs and the project consultants. TheOFWM staff, FOs/FWUAs/WUAs and the project consultants would carry out six monthly surveys ofthe prevailing market prices of construction material in the field office area. A comparison of these

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prices with the actual prices of material procured by the FOs/FWUAs/WUAs would be prepared andprovided to IDA on a quarterly basis. The OFWM staff would certify the quality and quantity ofconstruction material and satisfactory completion of work at each stage, as a condition for payment ofeach installment.

6.07 The supervisory engineers from the M&E Wing (supervisory consultants) would spot-check thequality of works during construction of a minimum of 20 percent of works by value and 100 percent aftercompletion and before submission of final withdrawal application. The supervisory consultants would alsoverify and certify quantities and quality of the material procured and civil works completed.

6.08 Distributary canal improvement, and minor irrigation schemes category. Distributary improvementworks and construction of FO/FWUA offices (about 16 percent by value of all works) and local/minorschemes (about 45 percent by value of all works) would be carried out through national competitivebidding (NCB) procedures, acceptable to IDA. The FOsIFWUAs would be involved in planning anddesign, as well as contributing in the construction of these works with the assistance of technical supportteams.

6.09 Branch canal improvement category. The branch canal improvement works, representing about 6percent by value of all works, would also be carried out through NCB procedures, acceptable to IDA.Their construction schedule would vary depending on the progress in transfer of irrigation management toFOs/FWUAs at the distributary/minor level.

6.10 Goods. Procurement of goods involves vehicles, construction of materials for watercourses, waterstorage tanks and other on-farm improvement works, office and field equipment, fiunmiture, andmiscellaneous items. Of these categories of Goods, vehicles will be procured through intemationalcompetitive bidding (ICB). In addition, goods estimated to cost more than $200,000 per contract wouldalso be procured through ICB procedures. Contract packages would be designed to attract internationalbidders. Qualified domestic bidders competing under ICB would be eligible for domestic preference.

6.11 The remaining goods expected to be procured under the project include mainly: construction ofmaterials for watercourses, water storage tanks and other on-farm improvement works; office, survey andflow measuring equipment; furniture and machinery/implements for use of FOs/FWUAs. These would beprocured in numerous small packages as and when FOs/FWUAs are established over the span of theproject. The project implementation consultants would act as procurement agents. The projectmanagement will be responsible for ensuring that agreed procedures are followed. Such goods (other thanvehicles and construction materials) estimated to cost $200,000 equivalent or less per contract up to anaggregate amount not exceeding $570,000 may be procured through NCB procedures, acceptable to IDA.Goods (other than vehicles and construction materials) estimated to cost less than $10,000 per contract andnot exceeding $220,000 in aggregate may be procured through national shopping procedures.Construction materials may be procured through community participation following national shoppingprocedures.

6.12 Services. All consulting services requiring engagement of firms would be procured in accordancewith the quality and cost based selection (QCBS) method, except that services for implementation andsupervision of the project estimated to cost less than $100,000 equivalent per contract may be procuredunder the method of selection based on consultants'qualifications (SBCQ). Individual consultants wouldbe procured in accordance with the procedures outlined in Section V of the Consultants' guidelines.

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6.13 Training activities would involve small amounts and would be undertaken for the socialmobilization staff and community organizations. Government procedures in practice would be used forcarrying out these activities.

6.14 Miscellaneous. Administrative and operating expenditures would be according to the govemmentprocedures.

Procurement methods (Table A)

6.15 For procurement of goods under ICB procedures, the Bank's standard bidding cocuments forprocurement of goods would be used. For procurement of goods and works under NCB procedures, modelbidding documents would be agreed with the Bank based on the format of the sample NCB biddingdocuments being used on other Bank-financed projects in Pakistan. For procurement of consulting firms,the Bank's standard request for proposal document would be used. Procurement documentation and recordkeeping systems, satisfactory to the Association will be developed and adopted by the implementingagencies, by December 31, 2001.

Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

Procurement MethodExpenditur Category JCB Fther ; N.B.F, E G

1. Works 0.00 11.38 5.99 2.54 19.91(0.00) (8.05) (3.95) (0.00) (12.00)

2. Goods 0.50 0.66 6.00 0.00 7.16(0.25) (0.49) (3.90) (0.00) (4.64)

3. Services 0.00 0.00 2.32 0.00 2.32Consulting Services and (0.00) (0.00) (2.32) (0.00) (2.32)Training4. Miscellaneous 0.00 0.00 2.66 0.00 2.66Incr. administrative and (0.00) (0.00) (2.39) (0.00) (2.39)operating expenditure

Total 0.50 12.04 16.97 2.54 32.05(0.25) (8.54) (12.56) (0.00) (21.35)

"Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.

' Includes civil works and goods to be procured through national shopping, consulting services, services ofcontracted staff of the project management office, training, technical assistance services, and incrementaloperating costs related to (i) managing the project, and (ii) re-lending project funds to local governmentunits.

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Table Al: Consultant Selection Arrangements (optional)(US$ million equivalent)

Consultant $nrkefssEsXpendfture Categoy OCBS QaS SFB LCS CQ Other N.S.F. ToMtl Cost

A. Firms 2.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00(2.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (2.00)

B. Individuals 0.00 0.00 0.00 0.00 0.00 0.08 0.00 0.08(0.00) (0.00) (0.00) (0.00) (0.00) (0.08) (0.00) (0.08)

Total 2.00 0.00 0.00 0.00 0.00 0.08 0.00 2.08_ (2.00) (0.00) (0.00) (0.00) (0.00) (0.08) (0.00) (2.08)

1\ Including contingencies

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Setection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of Consultants Guidelines),Commercial Practices, etc.

N.B.F. = Not Bank-financedFigures in parenthesis are the amounts to be financed by the Bank Credit.

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Prior review thresholds (Table B)

6.16 Procurement planning. Prior to initiating any procurement of goods and works and consultants'services, procurement arrangements and plans shall be furnished to the Bank for its review and approval, inaccordance with the provisions of para I of Appendix 1 to the Guidelines. All procurement shall beundertaken in accordance with such procurement plan as shall have been approved by the Bank, and with

the provisions of para 1.

6.17 Works. The first NCB contract for works by each participating agency in each fiscal year and,thereafter, all NCB contracts for works exceeding $200,000 equivalent would be subject to prior review byIDA, in accordance with paras 2 and 3 of Appendix I to the Guidelines.

6.18 Goods. All ICB contracts and the first NCB contract for goods by each participating agency ineach fiscal year would be subject to prior review by IDA, in accordance with paras 2 and 3 of Appendix 1to the Guidelines.

6.19 Consultants' services. Contracts with consulting firms estimated to cost more than $100,000equivalent per contract and, individual consultants contracts estimated to cost more than $50,000equivalent per contract would be subject to prior review by IDA, in accordance with paras 2 and 3 ofAppendix I to the Guidelines.

6.20 Post review. All IDA-financed contracts which are not subject to prior review would be subject topost review on sample basis. With respect to each contract not governed by the preceding paragraph, theprocedures set forth in para 4 of Appendix 1 to the Guidelines shall apply.

Table B: Thresholds for Procurement Methods and Prior Review'

:T reshold Procurement Prior RviewExpenditure Category o(mS) Method i AJS$)

1. WorksCivil works Less than 200,000 NCB First contract by each PA

in each FYAbove 200,000 NCB All contracts

2. GoodsGoods: Construction Less than 200,000 Community Nonematerials for w/course, Participation/NStanks, etc. Above 200,000 AllGoods (including ICBvehicles)Goods (other than 10,000 to 200,000 First contract by each PAconstruction materials NCB in each FYand vehicles) Less than 10,000 NoneGoods (other than NSconstruction materialsand vehicles)

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3. Services(Consulting Services)Firms Above 100,000 QCBS All

Less than 100,000 SBCQ None

Individual Consultants Above 50,000 IC Guidelines All_ Less than 50,000 IC Guidelines None

Total value of contracts subject to prior review:

Overall Procurement Risk Assessment

Low

Frequency of procurement supervision missions proposed: One every 12 months (includes specialprocurement supervision for post-review/audits)

'Thresholds generally differ by country and project. Consult OD 11.04 "Review of ProcurementDocumentation" and contact the Regional Procurement Adviser for guidance.

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Disbursement

Allocation of credit proceeds (Table C)6.21 Initially, disbursements would be made under the traditional system and would be converted to thenew procedure of PMR based disbursements after two years. The target date is September 30, 2002.The IDA credit of SDRs 16.6 million ($21.35 million equivalent) would be disbursed over a period of fiveyears. The final disbursement is anticipated to be made by June 30, 2006. Allocation of credit proceedsby disbursement category and percentage financed are shown in Table C.

Table C: Allocation of Credit Proceeds

1. Civil works for: 6.95 60(a) local minor irrigation

(b) distributary/minor canals 2.96 70(c) main/branch canals 1.29 802. (a) Goods: construction materials for 3.86 65watercourses, water storage tanks, andother on-farm improvement works2. (b) equipment, vehicles, and office 0.64 100 (foreignlex-factory localfurniture expenditure)

50 (items procured locally)3. Consultants services and training 2.32 1004. Incremental administrative and 2.57 90operating costs _______

5. Unallocated 0.76Total credit amount: 21.35 0.00Goverment fnancin 3.70Farmers organizations financing 7.00

Total Project Costs 32.05

|Total 32.05

Use of statements of expenditures (SOEs):

6.22 The credit proceeds would be disbursed against certified statement of expenditures for: (a) civilwork contracts and goods costing less than $200,000 equivalent; (b) incremental staff salaries, allowances,and operating costs, and training services; and (c) consultant contracts less than $100,000 in the case offirms and contracts below $50,000 equivalent in the case of individual consultants. All other contractswould be fully documented. Supporting documentation for statements of expenditure would be retained bythe project management and made available to IDA staff during supervision.

Special account:6.23 To facilitate disbursements, two special accounts (one each for OFWM Directorate of NWFP andFATADC) would be opened with the National Bank of Pakistan. All eligible expenditures would be fundedthrough these special accounts. The initial deposit into the special accounts would be $0.5 million OFWMDirectorate and $0.2 million for FATADC.

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Annex 7: Project Processing SchedulePAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

Prect Schedule Plnn" AchatTime taken to prepare the project (months) 20 37First Bank mission (identification) 01/06/98 01/04/98Appraisal mission departure 06/25/98 06/25/98Negotiations 11/30/98 03/27/2001Planned Date of Effectiveness 09/15/2001

Prepared by:

Federal Coordination Unit in the Ministry of Food, Agriculture and Livestock (GOP); On-Farm WaterManagement Directorate, Agriculture Department (in collaboration with Irrigation Departmnent) ofGONWFP, and Federally Administered Tribal Areas Development Corporation (GOP).

Preparation assistance:

PHRD Grant (Trust Fund Number 029730)

Bank staff who worked on the project included:

Name SpecialityRashed ul Qayyum Task Team Leader, Sr. Agriculture SpecialistP.K. Subramanian Financial Management Specialist (Operations)

Masood Ahmad Irigation Engineer (former Task Team Leader)Usman Qamar Sr. Irrigation Engineer

Herve Plusquellec Participatory Irrigation Engineering Specialist (Consultant)

Ahsan Ali Sr. Procurement SpecialistZia Aljalaly/Asger Christensen Social Development Specialists

Aziz Bouzaher Sr. Environmental SpecialistAnwar Ali Bhatti Disbursement OfficerRobert J. Saum/Ken Miller Financial Management Specialists (Loans)Akhtar Hamid/Muhanmmad Nawaz Country CounselTasnim Beg Financial Management SpecialistAltaf Iqbal Economist (Consultant)T. Lohavisvapanich (FAO/CP) Sr. EconomistMeena Munshi NRM SpecialistGhulam Ali Progarm AssistantLilac Thomas Program AssistantAndrea Ruiz-Esparza Copy Editor

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Annex 8: Documents in the Project File*

PAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

A. Project Implementation Plan

A project implementation plan (PIP) was prepared for the Fourth OFWM project by the Borrower (FederalCoordinating Unit, MINFAL) during March-June 1999 period. It was appraised by the task team and wasfound to be satisfactory. Agreements reached during negotiations in April 1999 were reflected in the draftPIP in May/June 1999. The province specific PIP, i.e., a PIP for NWFP/FATA has been adapted from themain PIP, and will be further modified by May 31, 2001 based on the final PAD (expected by April 15,2001) as the 'NWFP OFWM Negotiations" with the Borrower were concluded on March 27, 2001.

B. Bank Staff Assessments

Social Assessment ReportRapid Appraisal of Social and Environmental Issues: Back to office reportsEconomic AnalysisCost Tables

C. Other

Terms of reference for: PIP preparation consultants; M&E consultants; and accounting and external auditconsultants*Including electronic files

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Annex 9: Statement of Loans and Credits

PAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECTMar-2001

Difference between expectedand actual

Original Arnount in US$ Millions disbursements'Project ID FY Purpose IBRD IDA Cancel. Undisb. Orig Fnm Rev'd

P049791 1999 POVERTY ALLEVIATION FUND 0.00 90.00 0.00 75.97 -1.69 0.00

P037835 1998 SOCIAL ACTION PRG II 0.00 250.00 0.00 126.36 38.65 0.00

P037834 1998 NORTHERN EDUCATION 0.00 22.80 0.09 18.33 13.86 0.00

P010500 1998 NATIONAL DRAINAGE PR 0.00 285.00 0.00 188.25 92.50 0.00

P036015 1997 IMPR FIN REP & AUDIT 0.00 28.80 0.00 20.52 16.75 0.00

P010501 1997 PVT SECTOR GROUND WA 0.00 56.00 25.34 13.15 39.17 3.72

P039281 1996 GHAZI BAROTHA HYDROP 350.00 0.00 0.00 112.39 98.09 53.37

P034101 1990 TELECOM REG & PRIVAT 35.00 000 10.00 12.45 22.45 12.45

P010478 1996 NWFP COMMUNITY INFRA 0.00 21.50 0.00 10.41 12.86 12.7

P010482 1996 BALOCHISTAN COMMUNITY IRRIGATION & AGRI. 0.00 26.70 0.00 6.87 8.48 3.28

P010481 1995 PUNJAB FOREST SECTOR 0.00 24.90 5.46 5.25 12.12 1.94

P010470 1995 FIN SECTOR DEEPENING & INTEGRATION 216.00 0.00 188.03 19.56 207.39 12.07

P010458 1994 POWER SECT. DEV. PRO 230.00 0.00 20.00 17.31 37.31 0.00

Total: 831.00 80s.70 248.92 626.82 597.95 99.22

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PAKISTANSTATEMENT OF IFC's

Held and Disbursed PortfolioMar-2001

In Millions US Dollars

Commiited DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1995 ABAMCO 0.00 0.29 0.00 0.00 0.00 0.29 0.00 0.001995 AES Lal Pir 35.20 9.50 0.00 0.00 35.20 9.50 0.00 0.001996 AES Pak Gen 17.43 9.50 0.00 34.88 17.43 9.50 0.00 34.881996 Atlas Inv Bank 3.75 0.00 0.00 0.00 3.75 0.00 0.00 0.001994 Atlas Lease 4.21 0.21 0.00 0.00 4.21 0.21 0.00 0.00

0 BRRIL 0.00 0.24 0.00 0.00 0.00 0.24 0.00 0.001991/94/95 BRRIM 0.00 0.00 5.00 0.00 0.00 0.00 5.00 0.001995 BSJS Fund 0.00 0.50 0.00 0.00 0.00 0.50 0.00 0.001995 Bank of Khyber 1.25 0.00 0.00 0.00 1.25 0.00 0.00 0.001993 CDCPL 0.00 0.16 0.00 0.00 0.00 0.16 0.00 0.001993/97 Crescent Greenwd 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.001996 Crescent IBank 9.00 0.00 0.00 0.00 9.00 0.00 0.00 0.001994/95/96 D.G. Khan 0.00 0.51 0.00 0.00 0.00 0.51 0.00 0.001998 Engro Asahi 14.25 0.00 0.00 0.00 8.00 0.00 0.00 0.001991/95/97 Engro Chemnical 7.07 0.00 0.00 6.00 7.07 0.00 0.00 6.001996 Engro Paktank 9.04 0.00 0.00 3.77 9.04 0.00 0.00 3.771990/91/96 FIIB 2.11 0.00 0.00 0.00 2.11 0.00 0.00 0.001993 Fauji Cement 22.40 5.00 0.00 17.50 22.40 5.00 0.00 17.501995 First Crescent 0.00 0.00 5.00 0.00 0.00 0.00 5.00 0.001994/96 First Leasing 0.00 0.69 0.00 0.00 0.00 0.69 0.00 0.001995 First UDL 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.001996 GulAhmed 22.95 4.10 0.00 26.38 22.95 4.10 0.00 26.381988 Hala Spinning 3.92 0.00 0.00 0.00 3.92 0.00 0.00 0.001991/95 IHFL 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.001992/96 JSCL 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.001995 Kohinoor 20.00 6.30 0.00 24.40 20.00 6.30 0.00 24.401994/95/97 Maple Leaf 0.00 0.52 0.00 0.00 0.00 0.52 0.00 0.001985/92 Mari Gas 2.86 0.00 0.00 0.00 2.86 0.00 0.00 0.001993 Muslim Comm Bank 2.81 0.00 0.00 0.00 2.81 0.00 0.00 0.001984/94 NDLC 4.92 1.25 0.00 0.00 4.92 1.25 0.00 0.001994 Orix Finance 0.00 0.58 0.00 0.00 0.00 0.58 0.00 0.001994 Orix Leasing 4.92 1.25 0.00 0.00 4.92 1.25 0.00 0.001994 PACRA 0.00 0.15 0.00 0.00 0.00 0.10 0.00 0.001994 PI&CL 2.19 0.00 0.00 0.00 2.19 0.00 0.00 0.001991/94/95 PILCO 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.001983/84/94 PPL 2.61 0.00 0.00 1.95 2.61 0.00 0.00 1.951965/80/82/87/91/94/9 Packages 9.07 2.50 0.00 1.25 9.07 2.50 0.00 1.255 Pakistan Service 5.00 3.00 0.00 0.00 5.00 3.00 0.00 0.001993 Pakistan Unit Tr 0.00 1.48 0.00 0.00 0.00 1.48 0.00 0.001995 Prudential 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.001991 RUPAFIL 1.24 0.00 0.31 0.00 1.24 0.00 0.31 0.001992 Regent Knitwear 5.83 0.00 0.00 2.80 5.83 0.00 0.00 2.801994 Rupafab 5.50 0.00 0.00 0.00 5.50 0.00 0.00 0.001995 Sarah Textiles 0.00 0.20 0.00 0.00 0.00 0.20 0.00 0.001993/96

Total Portfolio: 259.53 51.54 20.31 193.93 248.31 51.49 20.31 178.90

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Approvals Pending Comrmitment

FY Approval Corpany Loan Equity Quasi Partic

Total Pending Commitment: 0.00 0.00 0.00 0.00

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Annex 10: Country at a Glance

PAKISTAN: NWFP ON-FARM WATER MANAGEMENT PROJECT

POVERTY and SOCIAL South Low -:Pakistan Atia income Development diamond

Pnnutiaidn midi-vear (millions) 134 A 1 329 7 417 Life expectancyGNP ner caoita (Atlas method. US$) 450 440 410GNP (Atlas malhod. UJSS billions) 6 f 61 A A 5AA

Averag annua:l rowth. 199349.

Pnni,letion 1%1 4 1.9 1'9Labor force 1%) G2.9 2.9 2.3 NP Grary

ZQ 2,3 2,3 ~ per primarMoat recat08Stimae tefsteat Ver availabi. 1993-991 capita pnrnimrnyns

POVattv 1% Of goouletion below national oovertv line) capitaIirhAnnn""tifNrn (6 of lral oooualioni 2P 31

Life exoactancv at birflt (vears)J 62 62 60Inflnt!nrtjlitv foer 1.000 tlive births. A1 75 77

thlfd ,nannemrltlnn f% of children under 5) 3B 51 43 Access to sate waterAccess tlo lmroved: water source (% of DooWftion) 60 77 64IllitearaVY 1 of oolatio a0oa * 15*) Sr, 46 39Gross orlmarv enrolIment (6 of schoolsage ooouletionl 74 100 96 Pakistan

Male 0 :: : 101t 110 1n2 Low-income group: mf i 45 90 RR

KEY ECONOMIfC RATIOS and LONG-TERtA TRENDS

1979 198S 199S 1999

GOP fUSS bhions I 19.7 40.2 62.2 58.2 Economicratios:

irrnAdn"mest InvastmantlGnP 179 1fA 2 17 7 1StlFwnnrt* nf nnfs AndN Arvicj,,np 1n7 139 161 1 5 2 TradeGros domeasticsavinoslGDP: S. 11.0 13.2 10r1(irnss natinnatl savionsicflP 137 15.6 150n 11 2

Currant Account : 4.2 1 -2.7 Domestic 4I < 2 tnvestment : \Ine tnvinantalGftp Do11.m1eSaicg

Tntal dxht/RiP : 4.5_. 4S 7 fi1.ft :SRR4 Savings Inve1tmentTot debt servieslaxoorts. 1 85 24.2 23.6 27.4Prfesent vRbii on tiehtltiG.P 41 1Present value of debtlexoorts . .. 220.1

: i : I t~~~~~~~~~~~~~~ndebtedness1979-89 1989.9§ 199t 1999 19 99.ti3

(everoe annuvl arowthi("rip 6N7 .3 9 2. 2 7 .R1 PakistanGNP ner c-anitst A6 I .5 -1 4 03I 2 A Low-income groupExoots of roods amd serwIces 9.2 2.9 -57 -2.4 6.9

STRUCTURE of the ECONOMY1979 1989 1998 1999 Growth of inveatment and GDP %)

f% of GOP) 20

Anrdiltuirn 304 26.9 27 3 27 2Industrv 23.6 23.9 23.6 23.5 o ^

Mamifactujrlna 15.4 16.6 15.f 1566 0Services 46.0 49.2 48.9 49.4 _lo 0 4 go s 7 Be .

PrivatA c,nsnumntion R3. R 72 2 7S 5 76 4 -20(enerainrnvernmAnt r.nn.lmntion In,4 16.A 11.3 11.S - D ' GDPImoOrts of onods and services 22.8 21.7 20.6 20.1

1979-B9 1989-99 1998 1999 Growth of exports and imports (%)lovarace annual arowth)Anr,rlhiirt, 4.fi 4.4 4.5 1.9 20

Industrv 7.3 4.3 6.1 2.5Manilfacti,rinn 7.9 4.n .°9 4 2 It

Services 7.2 4.6 1.6 4 1

Private cnnsijmntinn 4 2 5.0 01 i 31Genaral novnrnmnnt r.nniermntinn 1n.S 0.4 6 . -fi.1Gross domestic investment 6.5 2.2 9.6 -11.8 .10tmnnrts of annds and Aervices 1 7 3.4 .R56 -6.2 Exports ltmposrGross national oroduct 6.6 4.0 1.0 2.B

Note: 1999 data are preliminary estimates.

The diamonds show four kev indicators in the countrv (in boldl comoared with its income-orouo averaoe. If data are missina. the diamond willha inmomnlte.

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Pakistan

PRICES and GOVERNMENT FINANCE1979 1989 1998 1999 Inflation (%)

Domestic pt1ces(16 change)Consumer prices .. .. 7.8 5.7 10Implicit GDP deflator 6.6 8.6 7.5 6.0

Govemment finance(% of GDP, includes current grants) 0

Current revenue .. 18.1 16.3 16.3 94 95 96 97 98 9

Current budget balance .. -1.8 -4.2 -2.6 - GDP deflator CPIOverall surplusideficit .. -7.7 -7.7 -6.1

TRADE

(USS millions)~ ~ ~ ~ ~ ~~~~97 1989 1998 1999 Export and irnport levels (US$ mill.)(US$ millions) 17 99 19 99 Epr n motlvl USml.Total exports (fob) .. 4,634 8,433 7,527 15,000

Cotton .. 930 126 2Rice .. 304 562 533 12.00

Manufactures .. 3,312 4,866 4,538 9s*,0Total imports (cf) .. 7,851 10,456 10,888 6

Food .. .. 1,685 1,622Fuel and energy .. 1,006 1,750 1,458 3.000Capital goods .. .. 2,288 3,027 0

593 94 96 9S 97 98 99ExDort DnCe index (1995=1001 .. 51 94 90Imoort oice index (1995=100) .. 45 91 102 U Exports *IrrportsTermsof trade (1995=100) .. 112 104 88

BALANCE of PAYMENTS1979 1989 1998 1999 Current account balance to GDP (#)

(US$ nuiffions)

Exports of goods and services 2,107 5,577 10,017 8,838 o_Imports of goods and services 4,485 8,736 12,819 11,688Resource balance -2,378 -3,159 -2,802 -2,850 2

Net income -233 -875 -2,330 -1,808Net current transfers 1,790 2,687 3,430 2,471 .11 1Current account balance -820 -1,347 -1,702 -2,187

Financing items (net) 515 1,347 1,554 3,441Changes in net reserves 305 0 148 -1,254 -8

Memo:

Reserves includino oold (USS millions) .. 1.237 1.464 2.228Conversion rate (DEC. locallUSSI 9.9 19.2 43.0 50.1

EXTERNAL DEBT and RESOURCE FLOWS1979 1989 1998 1999

fUSS millionsl Composition of 1999 debt (USS mill.)Total debt outstanding and disbursed 8,919 18,348 32,229 31,176

IBRD 339 1,428 3,262 3,175 G: 1.390 A: 3,17SIDA 751 1,915 3,732 3,857 F:3,028

Total debt service 658 1,841 2,743 2,743 B: 3,857IBRD 57 147 381 400IDA 9 30 70 81 _

Composition of net resource flows c:1,519Official grants 146 381 175 194Official creditors 561 931 891 1,642 E: 10,680Private creditors 23 -12 306 -316Foreign direct investment 58 210 500 428 - ,Portfolio equity .. . .. 28 D: 7,527

World Bank programCommitments 139 746 250 808 A - IBRD E - Bilateral

Disbursements 105 471 606 683 B - IDA 0 - Other multilateral F -PrivatePrincipal repayments 27 82 243 264 r lur rNetflows 79 389 363 419Interest payments 39 95 208 217Net transfers 39 294 155 202

Development Economics 8/25/00- 91 -

AdditionalAnnex 11

Environmental and Social Issues

Introduction

11.01 As part of the preparation of a fourth national OFWM project, which was designed to includeinstitutional reform and rehabilitation/investment activities in all four provinces, a general review ofpotential environmental and social issues was conducted. This review also benefited indirectly from adetailed sector environmental assessment of drainage issues in Pakistan. The Drainage SEA recommended astrategy to deal with the drainage and envirownental problems of the IBIS. Key recommendations of this strategyhave direct relevance to NWFP's OFWM program: (a) additional irrigation water, if available, should not besupplied to areas where this could exacerbate the need for drainage; (b) undertaking major drainage schemesshould be done in conjunction with improvement of irrigation management at main and secondary levels andreduction of water losses at watercourse and field levels; and (c) the government should give special attention tobeneficiary participation. These studies were supplemented by a rapid appraisal mission and consultationwith key stakeholders, in order to identify issues specific to the proposed NWFP-OFWM project and topropose a framework for mitigating potential negative impacts and enhancing positive ones.

11.02 Given the nature of the issues identified, and the fact that the project involves mainly beneficialrehabilitation work and construction of minor irrigation schemes with low and easily manageableenvironmnental imnpacts, IDA and GONWFP based on a rapid screening and scoping exercise with keystakeholders--agreed to a categorization of the project as "B" under Bank/IDA Operational Policy OP 4.01,but not requiring a separate EA or RAP/lPDP. The project's primary aim is to contribute to putting inplace far reaching institutional reforms, underpinned by the formation and empowertment of FOs andfederations of FWUAs. Farmer organizations and FWUAs will have clearly defined participatory roles for theO&M. In the first case, irrigation management (including recovery of water charges) would be fully transferred toFOs. In the second case, FWUAs, will jointly manage the irrigation system with government agencies.Therefore, it was agreed that as part the targeting/demand-driven approach proposed as the main vehiclefor identifying priority areas of intervention, environmental and social issues would form an integral part ofan overall FIPMSP. The key principles of such a framework are given below and would be developed indetail in the early part of project implementation, through the technical assistance component, and as partof the process of setting up and transferring management responsibilities to FOs/FWUAs.

11.03 This approach also allows enough flexibility to better target and adapt environmental and socialcapacity development needs throughout the reform process in conjunction with developments under theNDP (currently undergoing a midterm review expected to result in major restructuring to deal with environmentalmanagement issues) which focuses mainly on drainage rehabilitation throughout the entire Indus Basin. TheNDP is also underpinned by major institutional reforms of the irrigation departments and the setting up ofautonomous provincial rrigation and Drainage Authorities (PIDAs) and AWBs. Coherence is crucialamong OFWM, NDP and other proposed and ongoing complementary irrigation and drainage projectsbecause their common denominator, and key to success, is the social infrastructure and capacity forenvironmental management to be developed in a basin framework.

Project Setting

11.04 Because of the geographical location of NWFP, only about half of its cultivated area is irrigated,and much of it lies outside of the IBIS command area. NWFP's entire irrigated area consists of 10 major

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canals, 250 distributaries, minors, and subminors, most of them with a command area of 5,000 ha or less.Overall, 20 percent of the gross irrigated area in the province is affected by surface salinity and sodicity,which is half of the national average. In general salinity problems are confined to the southern part of theprovince in areas already covered by salinity control and reclamation projects.

11.05 After a long period of physical infrastructure development which focused on planning,construction, engineering, and financial management skills, the irrigation system is believed to becharacterized by a general breakdown in accountability at all levels and constrained by: (a) a generalshortage of good quality canal water, particularly during peak periods of crop water requirements; (b) amaintenance-related deterioration resulting in reduced water delivery efficiency, exacerbating watershortages and lack of fiscal sustainability; and (c) centralized administrative and management system whichcannot cope with operation and maintenance, as well as equitable water distribution. These problems arecompounded by fairly complex rural social system and property rights arrangements. The end result is astagnant, or sluggishly growing productivity of irrigated agriculture and a diminishing marginalproductivity of water and land resources.

11.06 The project's primary aim is to contribute to reforming the system and promoting equity andefficiency through a demand-driven comprehensive approach, thus breaking with the resource expansion orsupply-driven approach to irrigation management. In the NWFP and FATA (tribal areas are not subject to"indigenous people" or "displaced people" status because they are inhabited by the dominant tribes of the NWFPabout 10 percent of the irrigation area would benefit from the project through five main components, asdescribed in Section C of the PAD (see also Annex 2).

1 1.07. The lead implementing agency, the Directorate of OFWM (Department of Agriculture) supportedby PIC. The project will be implemented with the guidance of a technical interdepartmental PCC overseenby a PPC. The PCC will be chaired by the DG OFWM and will include representatives of the provincialIrrigation Department/FIDA, FATA, provincial Agricultural Department, District Administration, FOs,and NGOs. The PPC will be chaired by the additional chief secretary (Development) and will include thesecretaries of Irrigation, Agriculture, Planning and Development, Finance, and DG EnvironmentalProtection Agency. A federal coordination unit would coordinate monitoring and evaluation activities andassess project impacts across all provinces. Similar OFWM projects are proposed for other provinces. Theimplementation consultants will provide all the necessary assistance for formation of FOs/FWUAs,engineering support, and technical assistance. Close joint supervision by GOP/GONWFP and IDA (asreflected in the project supervision plan and budget) will ensure that the consultants have adequate capacityand experience to deal with social and environmental issues.

Key Environmental and Social Issues

11.08. A rapid screening and scoping exercise was conducted jointly with the NWFP/FATA and inconsultation with two farmner organizations. The main project related environmental issues reviewedinclude: (a) health risks from silt removal and disposal, and contamination of water storage tanks, (b) waterquality impairment, from agricultural runoff, desilting, and potential increase in agro-chemicals use, and itspotential impact on drinking water supply; (c) drainage impact of improved and new irrigation schemes,including water storage tanks; (d) impact on groundwater availability from potential changes to the waterbalance (e.g., reduced seepage); (e) construction related impacts of rehabilitation works and new irrigationschemes; (f) impacts caused by intensification of agrochemical use; (g) potential impacts on naturalhabitats; (h) availability of information and environmental and social spatial knowledge base; and (i)implementation capacity to adequately address social and environmental issues.

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11.9. The overall result of the review is that localized impacts of construction/rehabilitation works wouldnot pose major risks and will normally be taken care of as part of good engineering practice by contractorsand adequate monitoring and quality control (as described in framework below). These types of impactsare related to activities such as desilting, channel lining, rehabilitation of gates and diversion structures,wall strengthening/rebuilding, installation of water measuring structures and gauges, watercourserealignment, improved culverts and outlets, animal wallows and laundry sites, construction of small waterstorage tanks, precision land leveling, rehabilitation of embankments, formation of berms, protection ofstructures, provision of gates at the cross regulators, minor irrigation schemes (involving water harvesting,and partial perennial flow diversion), and office buildings for FOs/FWUAs. Drainage and salinity do notappear to be a major problem except in Salinity Control And Reclamation Project areas which are outsideof the project scope. Water tanks are completely concrete-lined and are planned for barani areas where thewater table is generally very deep. Moreover, these tanks are typically used to capture and store water for(in some cases supplemental) irrigation water and not for human consumption.

11.10. However, a number of issues of more strategic importance and indirectly related to projectactivities, were identified:

(a) institutional capacity: (i) weak institutional capacity and enforcement of environmental regulation,despite major initiatives during the last 10 years In addition to a National Conservation Strategy(NCS, 1992) supported by several donor initiatives, Environmental Protection and ResourcesConservation Project [EPRCP] (IDA credit 2383-Pak) supported: i. enactment of new environmentallegislation (1997 Environmental Act);, ii. development of national environmental quality standards(pollution emission standards) and environmental impact Assessment guidelines and regulation; iii.strengthening of provincial capacity (in the form of new environmental agencies (EPAs) and/orenvironmental sections in planning and development departments), and iv. provincial monitoringcapacity and training of staff;

(b) wastewater discharge into the irrigation/canal system and the resulting potential health impacts(people use irrigation water for various purposes including drinldng);

(c) groundwater monitoring (there is a need to consolidate and update information on the status ofgroundwater resources, as some reports indicate potential mining and quality problems in someareas);

(d) agrochemical use and pest management, despite relatively low levels of use: the weakness of theextension system, coupled with prevailing governance problems are such that farmers are generallyat the mercy of chemical dealers for product selection and management advice;

(e) natural habitats (because of very little awareness of this issues on the part of government officialsand farmers, and the fact that province is home to at least two Ramsar sites (Tanda Dam andThanedar Wala); and

(f) need for an adequate spatial knowledge-base and analytical capacity for effective environmentaland social mainstreaming into an integrated water resources management framework.

11.11 The project would help build awareness and capacity within government agencies and FOs to dealwith these issues over time.

11.12 The main project related social issues reviewed include: (a) equity and benefits to the poor, whoare either at the tail end of the watercourse system, or are landless tenants or own very little land (thus thekey role of initial screening and targeting); (b) inclusiveness of farmer organizations (WUAs andFOs/FWUAs) particularly in relation to poor framers (at the tail-end of the watercourses), tenants, and

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women who have no legal land ownership and irrigation rights; (c) governance and transparency of FOs,having to do with the formation and registration process fornally ensured by the FIDA, financialmanagement and decision making, as well as modes of representation and conflict resolution (which willcontinue to be based on traditionaljirga (traditional jirgas are a conflict resolution mechanism around specificissueslconflicts, and involve representatives of all concerned parties to the conflict along with respected communityelders and occasionally third party members. In NWFP, indications are that over 90 percent of conflicts related toirrigation water are solved through jirgas); (d) gender issues, because women are not included as irrigatorsand do not have a direct role in the irrigation system due to local constraints and culturally defined roleswhich determines activities they can perform in this sector; and (e) social mobilization capacity ofgovernment agencies and local NGOs/CBOs and their role in project implementation (e.g., socialinfrastructure development, training/awareness raising, and M&E). The project will deal will all theseissues directly as part of the process of forming and empowering FOs/FWUAs. Women and landlesstenants will benefit indirectly from improved irrigation efficiency (e.g., increased household income, accessto safer drinking water) and directly though targeted training and capacity building activities.

Framework for Identing and Mitigating Impacts

11.13 Sites and specific interventions have not been identified. These would be selected based on ascreening process with heavy technical assistance support--which would include eligibility criteria relatedto poverty focus, readiness of FOs and FWUAs to assume distributary management responsibilities, andhydrological factors. It was agreed that a such a process will be formalized in an overall FIPMSP, whichwould specifically cover environmental and social issues. This framework will be developed by the PCCwith technical support from the PIC, and will be cleared by the PPCe and approved by IDA beforeselection and implementation of subprojects. The objective of developing such a framework is to ensurethat a clear road map, with clear and measurable screening criteria, a transparent process and procedures,adequate technical and management capacity and financial resources, as well as a timetable and amonitoring system are in place before project activities are initiated.

11.14 An outline of the key step of the screening framework (FIPMSP), is described below, includingmnilestones which require IDA review and clearance:

A. Selection of Subprojects and Formation of FOs/FWUAs

1. Initial screening and area targeting: The identification of priority implementation (geographic)areas from which subprojects will be selected based on need, poverty, and willingness toparticipate, should be done through a mapping and spatial analysis based on criteria such as (to befurther refined):

(a) areas with predominant rainfed cultivation, but with a potential for expansion or rehabilitation ofirrigation coverage,

(b) low concentration of land ownership, with most land held by owner operators,(c) other specific poverty criteria,(d) areas with where system rehabilitation improvement and quality of service needs are highest,(e) hydraulic/hydrologic/climatic factors (e.g., state of canal and drainage network, water availability,

hydrologic independence), and(f) areas where most lessons could be learned for mainstreaming.

The project consultant will be urged to develop a global information system database as early as possibleto help in area targeting. If feasible, this should be done in collaboration with the global infonnationsystem's lab at Peshawar University's Department of Planning and Environmental Management.

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2. Information dissemination and demand promotion. This step, allowing a demand driven processwithin target areas, will help build ownership and ease the process of social mobilization downstream inthe process. The project description and the requirements for participation (e.g., cost sharing,responsibility for O&M, water charge collection, equitable water management, legal status andgovernance requirements) should be disseminated in the areas identified through the initialscreening and area targeting (Al). Since project implementation will have to be phased, theinformation dissemination and subsequent selection of subprojects should start in the areasidentified as being the poorest and in most need of irrigation improvement/development.Applications from potential beneficiary communities will be based on a predefined format whichrequires that specific types of infonnation are provided (e.g., land use, irrigation coverage, landholding, and land tenure). The infornation dissemination and support to groups of farmers toprepare an application will be done by the project's conmmunity development and support group.

3. Screening and identification of subproiects: based on applications received from groups ofpotential beneficiaries, subprojects would be screened and selected for implementation based oneligibility criteria such as (to befurther refined, including weights given to each criteria):

(a) need for rehabilitation or development of irrigation infrastructure;(b) hydrologic considerations (e.g., hydrologically independent areas);(c) readiness of applicants to form FOs and FWUAs to assume distributary management

responsibilities demonstrated by an application;(d) poverty (e.g., measured through income poverty, low levels of land concentration, or other

criteria to be defined); and(e) the presence of environmental and social impacts which cannot be mitigated. Impacts subject to

screening are as required by GOP/GONWFP regulation and Bank/IDA Safeguard Policies (OP/BP/GP4.01, OP 4.04, OP 4.07, OP/BP/GP 4.09, OD 4.20, and OD 4.30). The aim of these requirements is tohelp maximize environmental and social objectives while minimizing negative social and environmentalimpacts in addition to economic or other relevant criteria. Criteria should clearly specify that in thecase of subprojects requiring land acquisition, only cases of verifiable voluntary land acquisitionwould be eligible for support under the project.

This screening will be conducted by the PCC with the help of the PIC.

4. Baseline surveys and information system (distributary profile). Detailed baseline data will only becollected for subprojects selected for implementation (plus a number of representative controlgroup areas without project interventions)These data will be organized into a computerizedinfonnation system (including georeferencing in a global infonnation system) and will be used asthe baseline against which project performance and achievement of outcomes will be measured.The types of data collected for the baseline - and subsequently during monitoring should thereforelend themselves to output and outcome monitoring. Baseline data would be in three (related) parts:

(a) Socioeconomic data: Key household information, land ownership (size of landholdings), landtenure (owner operators, land given in tenancy, land held in tenancy), employment (agricultural andnon-agricultural), amount of irrigated and nonirrigated land, irrigation water supply (frequency,amount, and reliability), irrigation system maintenance (at different levels, by farmers and byFIDA), income from agriculture and other sources, agricultural production (types of crops andyields, cropping intensity). Where WUAs are already in place and functioning, data will also becollected on inclusiveness, performance in terms of water distribution and system maintenance, and

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transparency in financial management. The methodology for data collection (e.g., randomsampling versus complete enumeration, as well as approach to household data collection) should bespecified as part of the detailed framework.

(b) Distributary environmental and social assessment: From an environmental point of view, thedistributory environmental and social assessment would cover three areas:

* Issues (mainly construction) related to physical system improvements (e.g. in the distributarynetwork and the sub-asins that drain it) and requiring mitigation. These issues will require a duediligence process and a mitigation plan to be made part of and procured withengineering/construction services, and agreed upon before contractor RFPs are issued and physicalworks are undertaken.

* Issues related to potential induced impacts ofproject activities and requiring institutional andcapacity development. Although the project is expected to increase water use efficiency andprovide environmental benefits in the form of improved management of soil salinity and overallwater resources, the full benefits from improved irrigation efficiency would not be achievedwithout other improvements in crop management technologies in the form of intensification ofchemical and management use and changes in crop mix. A specific assessment of this issue willprovide recommendations for a pest management plan which will be incorporated (at least on apilot basis) into the demonstration centers' programs to be setup under the project, and used forgeneral training a awareness raising of farmers and women groups. In addition, the assessmentwill include an identification of "natural habitat" areas within the distributary, and propose specificrecommendations to alter subproject design to preserve the integrity or protect these areas.

* Baseline monitoring information. While the project cannot deal with the whole question ofenforcement of effluent emission and water quality regulation, baseline data will be collected aspart of the distributory environmental and social assessment to ascertain the quality of irrigationchannel water and ground water resources used by households. This will be complemented byselected monitoring of silt removed from irrigation channels and reportedly used by farmers as atop soil on their fields because of it high nutrient content. Appropriate participatory indicators willalso be developed for monitoring by the water users themselves. This baseline monitoring programwill be implemented in collaboration with the provincial EPA, and designed in such a way as to bereplicated at midterm review and at the time of project closing.

From a social point of view, the distibutory environmental and social assessment would cover twocategories of issues:

* Issues related to the formation, governance structure, and inclusive nature of FOs/FWUAs; mostof these issues are mitigated through the use of the present framework (FIPMSP). However, aspecific plan to insure that women and landless tenants can concretely benefit from projectactivities, will to be developed, approved by the Project Policy Committee and IDA and monitoredduring project implementation (e.g., access to water resources, training).

* Issues related to potential voluntary land acquisition stemming from new irrigation schemes,channel realigning, construction of animal wallows and laundry sites, establishment of FO offices,demonstration centers, and rehabilitation of inspection roads.

In addition to the assessment of the issues described above, the distributory environmental andsocial assessment will include a management plan with specific mitigation measures, an

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institutional assessment of existing FOs and CBOs, a gender development program, a budget,and implementation arrangement which wil be built into the development program of eachbeneficiary FO/distributary. TORsfor the distributory environmental and social assessment aswell as implementation of its recommendations will be reviewed and approved by the PPC andIDA.

5. Physical and hydrological data of the eligible distributaries. Basis data needed to help designscheme rehabilitation or development, can be collected separately or as part of the distributoryenvironmental and social assessment.

6. Mobilization. capacity building, and planning involving FOs/FWUAs:

(a) Using the baseline survey data and the distributory environmental and social assessment andbuilding on the initial interaction with farmers, a detailed plan of mobilization and organizingFOs/FWUAs will be developed and reviewed by the PPC and IDA before implementation. Thisplan will include a timetable, and key milestones (initial meetings, agreements, election ofrepresentatives, legal notification, office setup, signature of contract transferring/sharingmanagement responsibilities from FIDA/AWB, transfer of management of the irngation system).In addition, the plan will include details of a training program covering management, O&M,environmental, and social issues.

B. Preparation and implementation of subproject development plan

1. Initial walk through, jointly by FOs/FWUAs, PCC, AWB, PIDA, and the PIC.

2. Rehabilitation and improvement program (works). Established FOs/FWUAs, with technicalsupport from the PIC, will prepare an investment plan including:

(a) a distributary level improvement rehabilitation, and implementation arrangements,(b) watercourse and on-farm improvement program, and implementation arrangements, local/minor

irrigation schemes,(c) equipment/machinery needed for O&M, and budget, including beneficiary contributions towards

capital costs and O&M.(d) procurement and contractual procedures and arrangements.

In addition, established FOs/FWUAs will be consulted regarding rehabilitation of branch canalsleading to their command areas.

3. Implementation of the recommendations of the distributorv environmental and social assessmentmanagement plarL These will be incorporated and implemented as part of the investment plan andcapacity building and strengthening programs.

4. Agreement on final detailed plan by FOs/FWUAs.

Implementation of the agreed plan (detailed schedule will need to be developed).

5. Final walk through jointly by FOs/FWUAs, PCC, AWB, PIDA, and the PIC.

6. Commissioning and hand-over of completed works for FOs/FWUAs management.

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7. Follow-up support--based on monitoring information-- to FOs/FWUAs which experience problemswith governance or irrigation system management. Technical support teams

C. Capacity Building/Strengthening

1. Training and technical assistance programs will be developed in close consultation with the PPC,the PCC, FOslFWUAS, the Department of Extension, and NGOs with relevant expertise. Keyareas where capacity development is needed include: (a) environmental management andawareness skills (e.g., water-crop management, fertilizer and pest management, water quality,drainage, sanitation and related envirornental health issues, overall water resources management,and environmental assessment); (b) social skills (e.g., social mobilization, social assessment, andgender issues); (c) management skills (e.g., finance, procurement, O&M); and (d) informationmanagement and analysis skills (e.g. GIS use, use of analytical techniques, decision supportsystems, communication, etc.).

2. Target institutions/groups include: (a) the provincial Departments of Irrigation, On-Farm waterManagement, and Extension Wings. Because these departments will be undergoing major restructuringand personnel compression, preference would be given to training senior staff already on board (withinthe OFWM Department, an agricultural engineer with specialization in water management, within theIrrigation Department, a superintendent engineer within the Canal and Drainage Circle areas where theproject will be implemented, and within the Extension Department, a plant protection agronomistspecializing in integrated pest management). However, if such arrangement is notfeasible, externalexpertise will need to be recruited and in place by the time ofproject launch.These trained staff wouldserve as advisors to the PPC and members or advisors to the PCC; (b) the AWBs, eitherindependently or in as part of capacity development of the Irrigation Department and FIDA (beingundertaken under NDP); (c) the FOs/FWUAs to be formed; and (d) women and landless tenants (tobe specifically identified).

3. Implementation will be done in two phases: (a) a startup phase which will include key staffworking in or supporting the PPC and PCC, and the field staff which will conduct the initialscreening and targeting, baseline surveys, and social mobilization; and (b) a technical supportphase which will be mainly targeted to farmers, women and landless tenants, follow up support toFOs/FWUAS as required, and would extend all the way until the demonstration centers are inplace.

D. Monitoring and Evaluation

Monitoring will be designed to provide for a continuous leaming and adjustment of project approach andsubproject plans, and will involve: (a) participatory monitoring based on self-defined indicators (by focusgroups of beneficiaries, and FOs/FWUAs), (b) monitoring data on inputs, outputs and impacts/outcomesby the federal coordination unit through the M&E consultants, and (c) Bank supervision. Theimplementation of mitigation measures and recommendations of DESAs would be monitored as part of theoverall arrangements for monitoring project performance for use in decision-support. Early in projectimplementation, before the start of subproject selection and implementation, a monitoring frameworkincluding institutional arrangements and indicators will be submitted to the Bank for clearance.

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The indicators for measuring project achievement of development objectives will include:

* Process monitoring covering formation and institutional development of FOs/FWUAs, (e.g.,selection of farmer representatives, decision making within FOs/FWUAs, their involvement insubproject planning; and cost contribution);

* Capacity building of FOs/FWUAs for management of O&M (monitoring including self-evaluationis also needed for AWB and FIDA staff);

* Operation and maintenance performance of FOs/FWUAs, AWBs, and PIDA with regard tohydrologic, agronomic, institutional and social parameters (equity regarding timely and adequatewater supply throughout the system; inclusion of poor farmers; O&M performance; transparencyregarding decision making, resource mobilization and financial management; conflict resolution),based on both self-evaluation and external assessment by the M&E consultant.

* Impacts and outcomes in terms of: increased household incomes, and a sustainable, technicallyeffective institutional framework for O&M of irrigation works through FOs/FWUAs, AWE3s, andPIDA.

* Implementation of the distributary environmental management plans.

E. Institutional/Implementation Arrangements

Institutional arrangements. The PIC (responsible for the social mobilization and technical assistanceprograms and which includes a core teamn, and a number of baseline survey teams, social organizationsteams, and technical support teams, and NGOs) will have as part of its team at least an environmentalexpert and a social mobilization expert whose qualification and experience would be acceptable to IDA.Since there is little capacity within the govermnent to develop FIPMSP intemally, the PICs' contract forsocial mobilization, technical support, and baseline surveys would be appropriately amended to: (a)develop the FIPMSP consistent with the present annex (Annex 1 1) as part of their inception report, and (b)amend the consultant TORs to provide enviromnental and social development expertise required to developand implement FIPMSP.

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