ASIAN DEVELOPMENT BANK

PPA: SRI 19025

PROJECT PERFORMANCE AUDIT REPORT

ON THE

KIRINDI OYA IRRIGATION AND SETTLEMENT PROJECT (Loans 324-SRI[SF], 612-SRI[SF], and 794-SRI[SF])

IN

SRI LANKA

December 2000

CURRENCY EQUIVALENTS Currency Unit - Sri Lankan Rupee/s (SLRe/SLRs)

At Appraisal At Appraisal Supplementary Loan (30 Sep 1982) $0.0478 SLRs20.91 At Appraisal Phase II (30 Sep 1986) $0.0357 SLRs28.05 At Project Completion (30 Jun 1995) $0.0200 SLRs49.95 At Operations Evaluation (31 Mar 1999) $0.0150 SLRs66.80

SLRe1.00 $1.00

= =

(30 Sep 1977) $0.116 SLRs8.61

ABBREVIATIONS ADB DOA EIRR ha ID IFAD IWMI KfW km OEM OFC O&M PCR t TA WUG Asian Development Bank Department of Agriculture economic internal rate of return hectare Irrigation Department International Fund for Agricultural Development International Water Management Institute Kreditanstalt fr Wiederaufbau kilometer Operations Evaluation Mission other field crops operation and maintenance project completion report ton technical assistance water user group

GLOSSARY Yala Maha Southwest (dry) monsoon season (approximately April to September) Northeast (wet) monsoon season (approximately October to March)

NOTES (i) (ii) The fiscal year (FY) of the Government ends on 31 December. In this report, $ refers to US dollars.

Operations Evaluation Office, PE-XXX

CONTENTS

Page
BASIC DATA EXECUTIVE SUMMARY MAP ii iv vi

I.

BACKGROUND A. B. C. D. E. F. Rationale Formulation Purpose and Outputs Cost, Financing, and Executing Arrangements Completion and Self-Evaluation Operations Evaluation Formulation and Design Achievement of Outputs Cost and Scheduling Procurement and Construction Organization and Management Operational Performance Performance of the Operating Entity Economic Reevaluation Sustainability Socioeconomic Impact Environmental Impact Impact on Institutions and Policy Relevance Efficacy Efficiency Sustainability Institutional Development and Other Impacts Overall Project Rating Assessment of ADB and Borrower Performance Key Issues for the Future Lessons Identified Follow-Up Actions

1 1 1 1 2 2 2 3 3 3 4 5 5 7 7 8 9 10 10 10 11 12 13 13 13 14 14 14 15 15 16 16 17 18 20

II.

PLANNING AND IMPLEMENTATION PERFORMANCE A. B. C. D. E.

III.

ACHIEVEMENT OF PROJECT PURPOSE A. B. C. D.

IV.

ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS A. B. C.

V.

OVERALL ASSESSMENT A. B. C. D. E. F. G.

VI.

ISSUES, LESSONS, AND FOLLOW-UP ACTIONS A. B. C.

APPENDIXES

ii BASIC DATA Kirindi Oya Irrigation and Settlement Project (Loans 324-SRI[SF], 612-SRI[SF], and 794-SRI[SF])
Project Preparation/Institution Building 2 TA No. Name 168-SRI 407-SRI 730-SRI
1

Type PPTA PPTA PPTA

Lunugamvehera Reservoir (Irrigation and Agriculture Development) Kirindi Oya Irrigation and Settlement Kirindi Oya Phase II

Amount ($) 49,000 50,000 75,000

Approval Date 7 Jul 1976 23 Jul 1981 9 Dec 1985

Key Project Data ($ million) 324-SRI 66.80 3 24.00 42.80 4.004 As per ADB Loan Documents 612-SRI 794-SRI 28.00 33.10 12.00 10.20 16.00 22.90 2.51 5 11.13 Total 127.90 46.20 81.70 17.64 Actual 93.40 43.10 50.30 17.64

Total Project Cost Foreign Exchange Cost Local Currency Cost Cancellation Funding Source Borrower ADB IFAD KfW Total Key Dates 324-SRI 42.80 24.00 66.80

Proposed 612-SRI 794-SRI 4.40 10.00 6.00 7.60 28.00 6.50 26.60 33.10

Total 53.70 60.60 6.00 7.60 127.90

324-SRI 6.50 20.00 12.00 13.30 51.80 6

Actual 612-SRI 794-SRI 5.86 9.47 4.06 3.04 22.43 3.65 15.48 19.13

Total 16.01 44.95 16.06 16.34 93.36

Appraisal Loan Negotiations Board Approval Loan Agreement - ADB - IFAD - KfW Loan Effectiveness (ADB) Loan Closing - In Loan Agreement - Actual - Number of Extensions Months (effectiveness to completion) - Original Project - Total Project

324-SRI 12-31 Aug 1977 26 Oct-3 Nov 1977 9 Dec 1977 25 Jan 1978 20 May 1978 19 Sep 1979 28 Apr 1978 31 Dec 1985 29 Jan 1987 1 92.0 200.5

612-SRI 794-SRI 16 Mar-3 Apr 1982 2-20 Jun 1986 11-15 Oct 1982 22-25 Sep 1986 9 Dec 1982 30 Oct 1986 17 Dec 1982 8 Dec 1982 7 Apr 1983 21 Apr 1983 30 Jun 1986 13 Oct 1989 4 24 Nov 1986 26 Feb 1987 30 Jun 1991 10 Jan 1995 3

(+ 118%)

1 2

4 5 6

Only the report on TA 730 is retained in ADBs records with the date of May 1986. = not applicable, ADB = Asian Development Bank, IFAD = International Fund for Agriculture Development, KfW = Kreditanstalt fr Wiederaufbau, PPTA = project preparatory technical assistance, TA = technical assistance. Includes $15.6 million equivalent in foreign exchange entitlement certificates (which have been abolished subsequently) and $1.38 million in customs duty. A major portion of the local cost has subsequently been financed by KfW and IFAD, at $13.3 million and $8.0 million, respectively. $4 million was cancelled from ADBs loan account when cofinancing from IFAD became available. Consisting of $0.53 million under IFAD funding and $1.98 million under KfW funding. Estimated by project cost established at reappraisal for the supplementary loan, less identified financing gap.

iii

Key Performance Indicators 324-SRI 17.6 5,925 3,852 8,409 12,934 Appraisal 612-SRI 11.0 18,528 8,919 4,200 8,725 794-SRI 13.6 13,363 8,648 8,409 12,934 PCR 6.3
7

Economic Internal Rate of Return (%) Cost - New Irrigation Only ($/ha) - New and Existing Irrigation ($/ha) Irrigation Area - New Irrigation (ha) - New and Existing Irrigation (ha) Borrower Executing Agency

PPAR 2.6 17,245 9,340 5,416 10,000

18,336 9,931 5,416 10,000

Government of the Republic of Sri Lanka Irrigation Department (lead agency)

8

Mission Data (No. of Persons/Person-Days ) Type of Mission 324-SRI 324/612-SRI Preappraisal 1/9 Appraisal 1/19 Reappraisal Inception/Review Fact-finding Project Administration Inception 1/16 Review 8/72 Reformulation Special Loan Administration 6/50 Project Completion Operations Evaluation

612-SRI

794-SRI

PCR/PPAR

4/44

1/10 2/18 1/9

10/143 1/17 1/15 1/10

7 8

PCR = project completion report, PPAR = project performance audit report, ha = hectare. Summarized from PCR.

iv EXECUTIVE SUMMARY The Kirindi Oya Irrigation and Settlement Project was intended to develop underutilized land in the dry zone of Sri Lanka. Its main objectives were to increase food and fiber crop production and create gainful livelihood for people barely covering their subsistence needs. The Project included the construction of the countrys largest earthfill dam with a gated spillway and canals to irrigate 8,400 hectares (ha) of newly developed command area. Additional water would allow cropping intensity to increase from about 135 to 200 percent on an existing area of about 4,600 ha irrigated from traditional reservoirs (tanks). With reliable irrigation, yields were expected to increase considerably. The 1977 feasibility study assembled the considerable preparatory work undertaken by the Government, supported by limited technical assistance from the Asian Development Bank (ADB). From the options considered by the Government over time, the one proposed under the feasibility study was driven by political expediency. It was the best prepared option and the Government wished to demonstrate its concern for peoples welfare in an economically depressed area that had recently experienced civil disturbance. The feasibility study terms of reference restricted analysis to the Governments specific request. Against that background, the study was more detailed than many from that era. It estimated the cost of the Project at $112.2 million of which irrigation development would absorb $75.3 million and the settlement component $14.3 million. The study drew attention to the high development cost ($7,150/ha in 1977 dollars) and to other key factors for successful development. The estimated economic internal rate of return (EIRR) for the option selected was 10.8 percent. ADBs original appraisal differed significantly from the feasibility study. Project cost was reduced to 60 percent of feasibility study estimates while the proposed new irrigation area increased by 30 percent. The EIRR consequently rose to 17.6 percent. Both the reduced cost and the expanded area proved optimistic and a supplementary loan was required in 1982 due to cost overruns. Phase II was approved in 1986 without change to the planned irrigation area and was reformulated in 1991. At physical completion in 1994, the area of new irrigation totaled 5,400 ha, about 85 percent of feasibility estimates and 64 percent of the appraisal target. With the reduction in new area development, the feasibility study cost estimate was also close to actual. The implementation period was more than double the 7.7 years originally envisaged, due to (i) delays in the commencement of major civil works, (ii) the effort required to obtain the additional funding needed to complete the project, and (iii) insufficient contractor capacity due to the demands of the large civil works program under the Accelerated Mahaweli Development Program. Political disturbances also disrupted work progress occasionally. Institutional constraints were increasingly noted and compensated for by provision of additional consultants. After a difficult period in the late 1980s and early 1990s, the irrigation scheme is performing better. Yields have averaged almost 4 tons/ha despite a number of dry years such as 1999. Cropping intensity has varied between 114 percent and 200 percent over the past 10 years, with an average of 171 percent since 1992 compared with the design target of 189 percent. Farmers have focused on rice production with less development of other field crops than envisaged, though banana areas are expanding. Annual crops are grown on a reasonable scale in drier years, though often without irrigation. A total of 4,924 families were settled under the Project. These included 1,450 families displaced by the dam and irrigation development with the balance selected from other areas of

southern Sri Lanka. Appropriate settlement infrastructure, including safe drinking water, was provided. For many farmers resident in the new irrigation area, family income remains low with a survey conducted for the Governments project completion report indicating an average income of $135 per capita in 1994, just below the $140/capita poverty line (in 1991 prices). However, in absolute terms their income has improved somewhat, particularly in the new irrigation areas. Malnutrition continues to be a severe problem in the project area, particularly for mothers and children. The environmental record is mixed with some significant disbenefits, notably a reduction in salinity of the ecologically valuable coastal lagoons. However, the human environment within the command area is now aesthetically attractive compared to adjoining slash and burn agricultural areas, while malaria incidence is reported to have fallen significantly. Project economic performance has been poor due to (i) implementation delays; (ii) high project cost; (iii) below target development of new land; and (iv) reduced cropping intensity, particularly on the new areas due to limited water availability. Both the livestock and forestry components, added in Phase II, performed poorly compared to target. The EIRR is estimated at 2.6 percent. While irrigation infrastructure is mainly being maintained by the Irrigation Department, water user groups will need to take more responsibility for scheme operation and maintenance. However, the main threat to sustainability comes from irrigation, agriculture, and human settlement development in the catchment above the dam. With the notable exception of the settlement component, the Project overall has performed below expectation, although it remains relevant to Sri Lankas development objectives. However, its relevance is reduced somewhat by the high cost and relatively small number of beneficiaries. Cost-effectiveness and implementation efficiency were low. The Project suffered from institutional problems and had little impact on institutional development. Although the Implementing Agencys accounting systems improved, project monitoring remains inadequate. Overall, the Project is rated less than successful. Aspects requiring particular attention in the future include (i) the threat to project sustainability due to upper catchment degradation and increasing use of water for irrigation upstream of the dam, which are reducing reservoir recharge and irrigation water availability; (ii) irrigation management, with improvements in this regard likely to have positive impacts on income, nutrition, and the environment (requiring significant sociocultural change on the part of the irrigation administration as well as the farmers); and (iii) settlement, with a need to allocate land titles to resident farmers and address nutritional problems in the project area and wider region.

vi

I. A. Rationale

BACKGROUND

1. The Kirindi Oya basin lies within Sri Lankas dry zone, which includes 70 percent of the countrys land area. At the time of project preparation in the 1970s, the zone included 30 percent of Sri Lankas cultivated land and 25 percent of its population. Opportunities were seen for more balanced development and improved land use in the zone, to increase agricultural production, reduce imports, and limit population pressure in higher rainfall areas. B. Formulation

2. Beginning with a reconnaissance report on the areas natural resources in 1956, the Government undertook a series of studies on the potential for development in the Kirindi Oya basin. Together with topographical surveys in 1973 and 1974, these studies provided the basis for preparation of an Asian Development Bank (ADB) loan1 supported by technical assistance (TA).2 The subsequent feasibility study prepared by the Government was completed in June 1977. The study included substantial information and assessed the technical and economic feasibility of a design proposed by the Irrigation Department (ID). ADBs limited TA supplemented the considerable preparatory work done by the Government. The original loan was approved by ADB in December 1977, with a supplementary loan approved in December 1982 and an extension, referred to as Phase II, in October 1986. Further small amounts of TA were used for the preparation of the supplementary loan3 and the formulation of Phase II.4 C. Purpose and Outputs

3. The Project was intended to increase rice and other field crop (OFC) production, generate employment, save foreign exchange, and use underutilized land resources. The scope of the Project closely followed the design requested by the Government and defined in the feasibility study. The main components were (i) the construction of a 5-kilometer (km) earthfill dam with sluiced spillway and gates, (ii) rehabilitation of the 3,675-hectare (ha) Ellegala irrigation system which was irrigated from a series of small traditional reservoirs (tanks) and improved water supply to the 850 ha Badagiriya system, (iii) development of new irrigation on 8,410 ha, and (iv) settlement of 8,320 families including 333 households from the reservoir area who would be given land for settlement and irrigation together with supporting infrastructure. Agricultural extension services were to be strengthened. The scope of the Project remained essentially unchanged over three appraisals, apart from the deferment of some of the irrigation implementation to a second phase and adding relatively small components for rural credit, social forestry, livestock, and marketing. Reformulation in May 1991 reduced the development of new irrigation by about 3,000 ha due to limited irrigation water availability and irrigation management problems. Details of the original scope and achievement by completion are given in Appendix 1. Cropping intensity on the existing irrigation areas was expected to increase from 153 to 200 percent and to reach 177 percent on the new areas, with 4,400 ha planted to cotton. The inclusion of cotton and other subsidiary field crops was intended to support the national

3 4

Loan 324-SRI(SF): Kirindi Oya Irrigation and Land Settlement Project, for $24 million, approved on 9 December 1977. TA 168-SRI: Lunugamvehera Reservoir (Irrigation and Agriculture Development), for $49,000, approved on 7 July 1976. TA 407-SRI: Kirindi Oya Irrigation and Settlement, for $50,000, approved on 23 July 1981. TA 730-SRI: Kirindi Oya Phase II, for $75,000, approved on 9 December 1985.

2 policy of promoting crop diversification and limit irrigation water demand on the large areas of permeable soils to be developed under the Project. However, due to problems experienced by other projects in establishing cotton, plans for the crop were dropped under the supplementary loan. D. Cost, Financing, and Executing Arrangements

4. ADB provided $20.0 million and $10.0 million, respectively, for the original and supplementary loans, to finance the direct and indirect foreign exchange costs. Due to ADBs restriction on financing local currency costs, the Government sought cofinancing with assistance from ADB. The International Fund for Agricultural Development (IFAD) provided loans of $12.0 million and SDR5.5 million ($6.0 million equivalent), administered by ADB.5 The German agency Kreditanstalt fr Wiederaufbau (KfW) financed $13.3 million and $7.6 million, respectively, under parallel cofinancing. Phase II was funded by ADB alone, which by that time was able to fund local currency costs and provided a loan of $26.6 million. The residual costs were borne by the Government and are estimated at $6.5 million for the original Project, $5.9 million for the supplementary phase, and $3.7 million for Phase II. All funding was provided under preferential terms, in the case of ADB from the Asian Development Fund resources. Appendix 2 gives details of project financing. Project cost estimates varied greatly over the course of design and implementation as discussed in Appendix 3. At the time of Phase II appraisal, total project cost was estimated at $113 million, of which the dam and associated structures accounted for 34 percent and irrigation development 15 percent. 5. Over the life of the Project were four executing agencies: (i) ID was responsible for dam construction and irrigation development; (ii) Land Commissioners Department for settlement, livestock and dairy development, and social forestry; (iii) Department of Agriculture (DOA) for agricultural support services; and (iv) Central Bank of Sri Lanka for the credit program through selected participating banks. E. Completion and Self-Evaluation

6. The Project, as reformulated in 1991, was completed in early 1995. The Government engaged the services of the International Water Management Institute (IWMI), based in Colombo, to prepare a project completion report (PCR). IWMI was familiar with the Project and prepared a comprehensive report based on available project data and a sample survey of 479 households. ADB undertook a PCR mission in June 1995, generally accepting the findings of the IWMI report, and adding information from ADB records. The Operations Evaluation Mission (OEM) confirms much of the information in both the Governments and ADBs PCRs as correct. However, the economic internal rate of return (EIRR) of 6.3 percent reported in the PCR is considered optimistic due to unrealistic rice yields and expectations of real rice price increases (discussed in Appendix 4). The PCR rated the Project partly successful. F. Operations Evaluation

7. This project performance audit report presents the findings of an OEM that visited Sri Lanka in March 1999 supported by a review of ADB files, records, and reports. These included appraisal reports, loan agreements, minutes of loan and TA committee meetings as well as the staff summaries of Board discussions, the PCR, missions back-to-office reports, and other

Including $4 million for foreign exchange costs cancelled from ADBs originally approved loan of $24 million.

3 reports by consultants and IWMI. Information was sought from ADB staff involved in the Project. Considerable time and effort were spent in obtaining key documents that could not be located within ADB, such as the original feasibility study and the report on the appraisal undertaken by KfW about one year after ADBs appraisal. Only the last of the three TA reports could be located. Copies of the draft project performance audit report were provided to the Borrower, the Executing Agencies, and ADB staff concerned for review. Their comments assisted in finalizing the report. II. A. PLANNING AND IMPLEMENTATION PERFORMANCE

Formulation and Design

8. At the time of formulation, a number of development options for the Kirindi Oya area had been debated for many years by irrigation engineers and local politicians. Alternatives ranged from small-scale projects with small reservoirs in various locations, to major schemes involving water transfer between river basins. Although much of this analysis was at the reconnaissance or conceptual stage, consideration of alternatives during project preparation might have defined a more cost-effective solution than the design selected by the Government and eventually implemented. For example, according to the Governments PCR the much-discussed decision about the dam location was apparently motivated by the need to maximize the new area to be brought under irrigation rather than by consideration of what would be the most cost-effective approach. The Lunugamvehera location required building a much larger dam than sites upstream would have required, thus greatly raising the cost. In the light of the low water inflows subsequently experienced, this proved to be a costly decision. 9. The terms of reference for the original project preparatory technical assistance study required the consultants to develop the project concept proposed by the Government. This was intended to demonstrate the Governments concern for an impoverished area that had previously faced serious civil unrest. ID engineers were also attracted by the challenge of building the largest earthfill dam in Sri Lanka. The feasibility study drew attention to aspects that warranted further assessment such as the high permeability of soils in most of the command area, the lack of experience in the production of crops other than rice, and potential problems with continuous flow water management. The option recommended (with new irrigation on 6,500 ha) yielded an EIRR of 10.8 percent. The feasibility study was well prepared within the limits set and generated a high level of ownership by the Government. 10. The appraisal mission adopted the design proposed in the feasibility study. However, the area to be developed for new irrigation was increased by 30 percent, which the feasibility study had deferred pending further study. More significant was a large reduction in project costs. The 1977 feasibility study had estimated investment cost at $90 million excluding transfer payments. The appraisal assessed the project cost at $50 million to fund an increased irrigation area. In practice, project unit costs exceeded feasibility study estimates. The feasibility study and appraisal estimates and actual expenditure are given in Appendix 3. The EIRR of the Project at appraisal improved to 17.6 percent due to the reduced costs and increased benefits. B. Achievement of Outputs

11. The Project was largely implemented as planned. The earthfill dam and a total of 51 km of main canal (10 km less than initially planned) were constructed. The main divergence from appraisal relates to the reduction in new irrigation development from 8,400 to 5,400 ha. The reduction resulted from overoptimism at appraisal and declining water inflows to the reservoir,

4 due to a reported decline in rainfall, increasing water use in the catchment area, and catchment degradation. Due to the reduced irrigation area, the number of families settled fell from 8,320 to 4,900 and construction of other settlement infrastructure was reduced in proportion (Appendix 1). The quality of infrastructure inspected by the OEM was generally satisfactory. However, because the design did not anticipate the water shortages experienced in the dry season, water regulation structures are not ideal and operation is labor intensive. Tree planting in woodlots and homelots under Phase II was about one third of target. The livestock component also experienced implementation difficulties and did not achieve its targets in relation to livestock distribution or the development of milk collection and marketing facilities. C. Cost and Scheduling

12. The total cost of the Project is estimated at $93.4 million or about 83 percent of the revised budget of $112 million (Appendix 2).6 In constant value terms, the project cost increased by about 53 percent over estimates of the original appraisal, reflecting (i) the reduction in project cost at appraisal over feasibility study estimates; (ii) the lack of contractor competition; (iii) increased costs due to inadequate maintenance of construction equipment; (iv) some increases in cost due to inadequate information at appraisal; and (v) the addition of social forestry, agricultural credit support, agricultural support services, and livestock development components valued at about $4.5 million under Phase II. The Government is estimated to have contributed $16.0 million (17 percent of total project costs) while ADB contributed $44.95 million (48 percent), IFAD $16.1 million (17 percent) and KfW $16.3 million (18 percent). Project costs are compared to appraisal estimates in Appendix 3. Joint cofinancing with IFAD functioned smoothly with loan administration delegated to ADB. For the parallel cofinancing with KfW, it was not always easy to keep informed of the status of procurement and disbursement, and difficulties arose in scheduling joint reviews. 13. Implementation took nearly 17 years from loan effectiveness compared with eight years expected at appraisal. The major delay related to construction of the dam, which was completed in 1986, four years behind schedule. The new irrigation area was to be progressively developed with the main canals completed one year after completion of the dam and the distribution system one year after that. The process of selection of settlers and their settlement was to start with the completion of the dam. This sequence of events was logical and could have been followed if more preparatory engineering work and investigation had been undertaken at feasibility study stage and if contractor performance could have been relied on, particularly in the area of construction management. The original schedule assumed a degree of coordination among various agencies that proved unattainable. 14. Many of the 3,950 settlers of Phase I were given their land allocations several years prior to the supply of irrigation water. This process is termed advanced alienation, a government policy designed to discourage squatters from occupying tracts of land earmarked for development. These settlers had to be sustained by food assistance under the World Food Program for longer than anticipated due to implementation delays. The first new tracts of the

Costs have been reestimated based on the ADB Controllers records for ADB and IFAD loans and from information obtained from KfW and ADB records on the government contribution. In the earlier years with the noted deficiencies in the accounting function of ID, advances may not have been fully liquidated or leases for ID equipment not fully deducted from progress payments. This may result in a minor overstatement of project costs. Records on KfWs parallel disbursements are incomplete. However, information has been received on loan utilization and cancellation. There is less information on government expenditure which includes food assistance from the World Food Program during the early years of settlement and system operation.

5 command area were irrigated in 1987 and the last from 1994. Implementation of the livestock, woodlot, and credit components continued until loan closing in January 1995, with targets not met. D. Procurement and Construction

15. A number of implementation problems were experienced. ID, the lead Executing Agency, had no experience in implementing ADB-financed projects and faced the complication of parallel cofinancing under the KfW loan. Both loans required departures from government procurement procedures. Limited English language capability at the field level also limited IDs ability to follow ADB procedures. However, the factor that most severely affected the competitive bidding process was the implementation of the Mahaweli Ganga development under the newly created and powerful Mahaweli Authority. Mahaweli was given priority in the allocation of financial resources and attracted the best contractors and qualified engineers from other agencies because of higher pay scales and benefits. The limited national contracting capacity for large-scale projects was stretched over a large number of civil and engineering works with reduced competition and increased prices. The shortage of qualified staff led to slow implementation. 16. These factors caused particular difficulties for construction of the damthe Projects largest civil works contract. Three contractors expressed interest in bidding, with two submitting bids, both significantly higher than IDs engineering estimate.7 The lower bidder finally declined to extend bid validity, while ADB was trying to impress on ID the need to include further technical specifications in the draft contract. This left the River Valley Development Board as the only bidder. The Board had been the Executing Agency for the Walawe Irrigation Project, the first ADB-assisted irrigation project in Sri Lanka, but had lost this status and become a government-owned contractor. Many of its qualified engineering staff had moved to the Mahaweli Authority and, at the same time, it was required to absorb workers from other government organizations. ID signed the contract with the Board before ADB had reviewed or approved the final draft contract. In the interest of making up for delays already incurred, ADB acquiesced in the absence of competition and compliance with its guidelines. For a number of smaller contracts, ADBs objections were respected, for example when award of contract was proposed to other than the lowest qualified bidder. With few exceptions, the quality of work was satisfactory. Most of the defects noted on some minor civil works and on land leveling have been corrected. All civil works were tendered under local competitive bidding. E. Organization and Management

17. ID staff performed satisfactorily in engineering design. The task of supervising contractors posed difficulties in an environment of institutional rivalry and divided loyalties, a situation in which ADB could provide little assistance. Reporting was weak with senior staff fluent in English needing to allocate their scarce time for other tasks. Project accounting was complicated, with procurement under three different lending agencies and the Government budget. Being experienced only in ordinary accounting for budgetary releases in local currency, ID staff encountered major problems. The first report by the Auditor General was prepared in 1984 for the years 1979-81 and contained many qualifications.

According to the KfW appraisal, only three Government-owned contractors had the capacity to undertake a contract of that magnitude.

6 18. Project coordination was complicated by the number of executing agencies, particularly after 1981 when responsibility for the provision of infrastructure and associated facilities for land settlement under the Project was passed to the Land Commissioners Department. The project coordination committee was encumbered by having two project managers, one for irrigation appointed by ID and one for settlementthe additional district government agentwith the latter acting as chairman. ID remained the lead Executing Agency at the national level, but was limited to irrigation at the project level resulting in implementation problems. 19. ADB fielded 36 missions in support of the Project, an average of two per year. Preappraisal, appraisal, fact-finding, and reappraisal totaling eight missions helped with adjusting the project funding and scope to increasingly difficult circumstances. The initial preappraisal and appraisal missions involved only 28 staff days (involving seven specializations during appraisal), which seems to reflect overconfidence in dealing with a new project in an untested institutional environment. Three reappraisal missions for the supplementary loan were conducted over a span of one year, again with a large number of staff but of short duration. A similar pattern is noted for the review missions prior to Phase II. Many of these missions were helpful in resolving specific difficulties in engineering design and in providing support in the struggle to adjust cost from the reduced levels accepted for appraisal. The six special loan administration missions assisted in resolving backlogs in withdrawal applications. With the approval of the Phase II loan, reviews changed from crisis management during Phase I to a mode of regular monitoring with fewer staff spending more time in the field on each mission. This led to reformulation in 1991 on the basis of a good understanding of project development and finally to its closing in 1995. 20. Most of the consulting services required for project implementation were financed under ADB and other donor loans. They related to the construction work undertaken in Phase I up to the end of 1986 and included (i) an international consulting firm for design and construction supervision funded by ADB; (ii) a team of project implementation consultants for aspects of the dam and irrigation development funded by KfW; and (iii) a specialist geotechnical service for spillway investigation, design, and construction supervision. Inputs totaled 425 person-months, almost four times the initial 112-month estimate. The project implementation support was useful in supplementing the capability of ID and the principal contractor. The expertise in geotechnical services and related spillway design features was essential in ensuring the integrity and safety of the dam. In general, the provision of international expertise has drawn greater attention to safety features. As in many projects, it proved difficult to achieve a lasting institutional impact from the consultant services provided. The efforts made in water management planning and operations, irrigation agronomy, and systems operation and maintenance (O&M) have only partly been institutionalized within ID. 21. Domestic consulting services costing $575,000 were provided under Phase II. The major portion was used for an accounting firm to upgrade IDs project accounting following earlier attempts that had not achieved the desired results. Project benefit monitoring was undertaken by the Agrarian Research and Training Institute, which undertook a baseline survey and several special studies. Lack of interest and motivation by the implementing agencies made this effort of limited value in contributing information for project management. IWMI undertook a project impact assessment, on which ADBs PCR was based. The study included analysis of an April 1994 survey and was comprehensive. Minor assistance was extended to the Land Commissioners Department on project programming and agricultural marketing. Advisory TAs

7 were also undertaken by IWMI to assist in improving irrigation management on the Kirindi Oya and Walawe schemes.8 22. A standard covenant of the loan agreement for Loan 324-SRI(SF) Section 4.01, states that the Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound administrative, financial, engineering, agricultural and land development practices. Overall project implementation performance and outcomes would suggest that this covenant was in practice not fully complied with. No detailed seasonal monitoring information is available, as required under the Loan Agreement, and DOA was not able to provide the required level of irrigated crop extension. Progress reports were infrequent and lacking in substance while financial reporting was much delayed and inadequate, particularly under Phase I. Slow progress was made to recover housing loans with SLRs1 million recovered by September 1999, against a total outstanding of SLRs11.5 million. Grants had been issued on 8,150 allotments out of the total of 9,660. The collection of irrigation service fees was replaced by agreement under the ADB-supported Agriculture Program Loan9 to establish and assist in the development of farmer organizations. III. A. ACHIEVEMENT OF PROJECT PURPOSE

Operational Performance

23. Irrigation was improved for the existing irrigation area and new irrigation was developed on 5,400 ha (64 percent of target). The reduction in area was necessitated by uncontrolled irrigation leading to high per hectare water use, and lower than expected inflows to the reservoir. Cropping intensity on the new irrigation area has averaged about 134 percent. Overall cropping intensity has averaged about 146 percent over the past 14 years though with a significant increase in the last few years (to 170 percent for the period 1993-1999). Estimates of irrigation efficiency (water used for plant growth as a proportion of water released from the reservoir) have varied. However, analysis by IWMI in 1997 suggests irrigation efficiency to be at a low 28 percent compared with 44 percent planned.10 Because farmers in the old (Ellegala) area claim prior water rights, supply restrictions are applied mainly to the new area farms. 24. Available data indicate rice yields in the wet (maha) season of about 4.0 tons (t)/ha and in the dry (yala) season 3.8 t/ha, which is close to the average expected at appraisal of 4.0 t/ha. OFCs occupied an average of about 9 percent of irrigated area including, in declining order, green gram, cow pea, groundnut, vegetables, chili and, more recently, banana. Banana smallholdings are now being established on part of the command area (about 400 ha in 1999/2000) with financing from Seylan Bank and government support through tissue culture and extension/research. As a substitute for rice, most OFCs are grown in situations of declining certainty of irrigation water supply. They are often grown on residual moisture from the previous rice crop, with limited or no irrigation. Their area has fluctuated between 50 and 1,860 ha of the total area, influenced by price volatility as well as by irrigation water availability. They have not established a firm place in the cropping pattern. Water availability has frequently been low in the dry season, resulting in a cropping intensity of only 72 percent from 1992 to 2000. Despite often

TA 846-SRI and TA 1480-SRI: Study of Irrigation Management and Crop Diversification, Phases I and II, for $350,000 and $750,000, approved on 16 January 1987 and 19 February 1991, respectively. 9 Loan 994-SRI(SF): Agriculture Program Loan, for $80 million, approved on 28 November 1989. 10 Kirindi Oya System Management Improvement: A Strategy to Achieve 200% Irrigation Intensity. Project proposal to ID. IWMI, Colombo, December 1997.

8 severe irrigation water deficits, water is treated as if plentifully available and the flow is inadequately controlled. 25. No account was taken of livestock under Phase I. According to the Government PCR since the emphasis of the Project was on settler-based crop production, about 1,800 ha of scrub used for grazing were cleared and a large number of irrigation tanks that provided drinking water and wallowing sites for cattle and buffalo were leveled. These activities had an adverse impact on the livestock husbandry practiced by herdsmen in the old area. No thought was given to these pervasive problems at the planning stage of the ProjectMost of the problems faced by herders today are the result of this negligence. 26. Phase II recognized the importance of livestock farming and included a number of livestock components. Most of these were unsuccessful, notably the cattle and buffalo upgrading program and the milk collection, processing, and marketing component. The former faced low demand for stock, while the latter could not compete with private milk companies. The Project planned to construct about 20 milk collection centers, a mini processing factory, and two sales centers for milk and dairy products. However, by project completion, the centers were only collecting around 6 percent of milk produced, and this was sold to the two private milk companies. Little incremental milk production resulted from the Project, and milk production in the area has declined, with total production from the Project area in 1994 estimated at 2.6 million liters as against the incremental milk production planned under the Project of 4.1 million liters. However, cattle and buffalo continue to play an important role in the regional agricultural economy. Within the irrigation area, they cause considerable damage to canals and crops, leading to conflict between herders and cultivators and frequent claims for compensation. Although it was planned to develop 1,100 ha for livestock grazing and agroforestry under Phase II, this has made not made much contribution to livestock production and little evidence of the intended production system could be located by the 1994 survey team. However, a good rate of tree planting was reported for the woodlots and along 36 km of roads. 27. Settlement infrastructure is operated and maintained adequately. The piped water supply system, roads, schools, clinics, police stations, and post offices are much appreciated by the settlers. The piped water supply is unique among land settlement schemes in Sri Lanka and viewed as greatly improving living conditions. Where service is fairly reliable, households generally pay their water feeswhich cover O&M costsand are keen to invest in individual metered household connections. Total cost at nearly $4.0 million (25 percent of land settlement cost) was high but appears to be a good investment in support of future semi-urban development. B. Performance of the Operating Entity

28. Many of the farmers who were relocated from the reservoir area (333 households) and from the new command area were shifting cultivators who had resided in the area for a number of years. Annual farm income from rain-fed subsidiary crops and, infrequently, a small area of rice grown during the rainy season with water from small local reservoirs, was estimated in the feasibility study at $100 (updated to 2000 dollars) with additional earnings of $35 from casual labor on rice farms. For the existing rice farmers drawing water from the large tanks of the Ellegala system or the separate Badagiriya tank, annual household income was estimated at $430 with no off-farm earnings. 29. The farm budgets developed for the OEMs economic reevaluation of the Project are given in Appendix 4, Table A4.12. In the with-project situation, an irrigated 1 ha farm in the old

9 Ellegala irrigation area could annually earn around $700 and a new area farm about $610. This difference is less than at project completion, due partly to the introduction of bananas to the cropping system combined with more reliable rainfall in the last few years. Without the Project, overall cropping intensity on an irrigated Ellegala farm is estimated at 128 percent, generating annual household earnings of $270. This level is less than the $430 estimated at appraisal due to the worsening terms of trade for rice. Average earnings per day worked are estimated to have risen from around $3.5 to $5.0 under the Project. 30. The drinking water supply system is expected to recover its O&M costs. According to system managers, this is accomplished by the threat of disconnection in the case of delayed payment of water dues. Others interviewed by the OEM were less positive about the level of cost recovery. Overall, the water supply system is performing reasonably well, with consumers willingness to pay seen in the context of reliability of service. 31. Cost recovery for irrigation, initially combining investment and O&M cost as covenanted in various loan agreements, could never have been implemented successfully. Settlers have generally not been prepared to meet even full O&M cost, since they consider this to be a government responsibility, and many lack the financial resources to make a cash contribution. The frequent lack of water in the dry season has limited settlers financial performance and thus their capacity to pay. Since completion of the Project in 1994, the Government has therefore attempted to provide sufficient funds to meet O&M requirements of the main structures and canals. The OEM observed some signs of delayed maintenance with slumping canal banks and deferred control of vegetation, but the system remains functional. Farmer groups are responsible for maintaining their field distribution system, largely by the provision of voluntary labor. The result is affected by the strength of water user group (WUG) leadership and the proportion of nonresident farmers who usually do not contribute. Again, the systems seen by the OEM remain functional, even though maintenance may be less than optimal. C. Economic Reevaluation

32. EIRR as reestimated by the OEM is 2.6 percent, including the investment in irrigation and half the agricultural research and extension, and land settlement costs (see Appendix 4). Inclusion of the entire land settlement cost would reduce the EIRR to 2.3 percent. The low rate of return reflects a higher project cost than initial estimates, the shortfall in area developed, and low cropping intensities. It also reflects the delay in generating benefits. If upstream water retention and diversion are not controlled, there is a risk that the targeted cropping intensities will not be realized, further reducing the EIRR. 33. The EIRR in the feasibility study was estimated at 10.2 percent, increasing to 17.6 percent shortly thereafter at appraisal. It went through a number of declines, namely 11 percent at Phase I extension, 8 percent (for the whole Project) at the time of approval for Phase II in 1986,11 and 6.3 percent in the PCR. The economic analysis presented in the original appraisal was weak and no supporting tables were presented. ADBs PCR reported the results of the economic analysis conducted by IWMI as part of the Governments PCR in 1994. While the analysis in the latter is detailed, it contains serious flaws including overestimation of rice yields and price. Modifying the PCRs analysis for these factors reduces the EIRR to a level close to that calculated by the OEM. Details are provided in Appendix 4 Section E.

11

On a sunk cost approach, 19 percent was computed for Phase II alone.

10 D. Sustainability

34. The main threat to long-term sustainability, at the time of the OEM, was lower than predicted river flows. Their initial effect was to reduce the planned area of new irrigation development and to limit cropping intensity, particularly in the new areas. During the 14 years since dam completion, flows have been erratic and generally low. In part, this was due to a change in rainfall patterns compared with earlier years, but the greatest impact has come from development that is upstream of the reservoir (see Box). Lower demand for water is, however, likely following restoration by ID of the Mau Ara reservoir and diversion of its waters to the Malala-Ara basin, which supplies to the 850 ha Badagariya irrigation system from Lunugamvehera.
Recent Developments in the Kirindi Oya Basin Rapid development is taking place in much of the Kirindi Oya basin, due to a huge influx of population. Many people settle by the road that follows the stream. Irrigation development is evident on each side of the river with large-scale pumping. Over five years, the number of pumps has increased from about 200 to around 2,000, due mainly to the ready availability of cheaper pumps and PVC (polyvinylchloride) pipe. Other major developments include the construction of many large (6-9 meter) diameter wells and the repair, rehabilitation, and new construction of small tanks (dams) within the catchment. It is estimated that around 150 tanks are in operation, each irrigating an average of 30 ha. Farmers mainly irrigate vegetables, especially high value capsicum, onions, and sugarcane. Numerous diversion weirs are being constructed and towns draw their water from the river. Land use is changing from scrub to settled agriculture where bunded fields also reduce runoff. Conversion of forested hill areas to pine plantation and vegetable farming is changing runoff characteristics. Overall, the watershed is undergoing quite rapid degradation with a marked effect on streamflow. Of 100 m3 of water emanating from the headwaters, only about 10 m3 on average reach the reservoir. In future, with the present rate of development, even this water may be lost. This has implications for project sustainability.
Source: Based on Success Story of Yala 1999 Paddy Irrigation in Kirindi Oya. October 1999. Peter Droogers et. al. IWMI.

35. The other key area affecting sustainability is the level of O&M. At present, ID is primarily responsible for this, though it is attempting to pass responsibility for scheme maintenance to WUGs in line with national policy and budget availability. Substantial further work is required to develop user-funding of scheme O&M. However, for the time being, scheme maintenance, though severely underfunded, is sufficient to prevent major operational problems. All structures that the OEM visited were adequately maintained, apart from some canal damage. Scheme management has adopted a firm attitude to unauthorized modification of irrigation structures (e.g., to increase water supply to a particular distributary). When evidence of modification is found, management has reported that water is cut off until the damage is repaired. In this way, project management has so far managed to minimize damage to the irrigation system (a cause of great problems to some other irrigation schemes). IV. A. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

Socioeconomic Impact

36. The Project has had a significant impact on poverty in the project area. Farm families, including both original Ellegala farmers and new settlers (but particularly the latter), have benefited from project investment in irrigation, village, and communication infrastructure. While delays occurred between settlement and first irrigation water release, food distribution under the World Food Program reduced hardship. A majority of settler families are likely to be better off

11 now than in the early days of settlement or before that, particularly the slash and burn farmers from the project area and the unemployed. However, poverty and malnutrition continue to be major problems in the project area, leading to stunted growth, often resulting from nutritional deficits or intestinal infections that start after weaning. Many preschool children demonstrate a high incidence of low weight for age and/or low weight for height. 37. At the time of the impact evaluation survey in March 1994, average income among the Ellegala farm families was SLRs5,566 per month. New area settlers were less well off with family incomes averaging just over SLRs3,000 per month. With an average new area family size of 5.6, this equated to an annual income of SLRs6,500 per capita or around $135 at the prevailing exchange rate of SLRs48/$.12 At this level, at least the bottom 50 percent of new area settlers were likely to be below the poverty line. Nonetheless, a striking feature of the area is the number of new houses that have been built and a dynamic economy, with active markets and transport services for example. The level of affluence that has been achieved, patchy though it is, can largely be attributed to the Project. 38. The provision of public services has significantly changed the living conditions of settlers residing in the project area. Where previously children were sent to stay with relatives for schooling, they can now attend local schools. Literacy, especially for girls, has improved to a high level. A health clinic close to the dam site operates effectively. The open spaces created have reportedly reduced the prevalence of malaria. Safe drinking water contributes to improved health, though other ailments due to unsanitary conditions and intestinal infections remain serious problems. Project road infrastructure facilitates interaction with surrounding areas for purchases and sales. All settlers met during the OEM acknowledged these benefits. Even so, there are some who continue to resent their relocation due to the Project. New communities with settlers from different locations take time to become cohesive. The large number of nonresident landholders does not help in this process. 39. Gender issues were not discussed at project design. However, the Project has led to a number of positive impacts on women. In particular, the piped water within easy walking distance or connected to the house saves time and effort in obtaining drinking water, which traditionally has been womens work. To a lesser extent, the establishment of woodlots has reduced the time spent on gathering fuelwood. Improved health care and reduction in malaria risk take some of the worries away from women who do most of the nursing of sick family members. B. Environmental Impact

40. No comprehensive environmental impact assessment was required when the original loan was prepared in 1977. Subsequent reports and the project impact evaluation study (the Governments PCR) drew attention to several environmental issues and impacts. The Project converted over 4,000 ha of land with soils and development potential similar to the soils found in the command area into a reservoir. Aside from secondary jungle and scrub (with the timber potential reportedly already exploited at feasibility stage), the reservoir area contained nine hamlets or villages, two minor tanks irrigating 35 ha of rice for one season, and 565 ha of shifting cultivation. The population in the reservoir area was estimated at feasibility stage at 1,400, living in 333 households. Two ruins of Buddhist temples, Rakingala and

12

The poverty line defined in the World Banks 1994 Sri Lanka Poverty Assessment was $140 per year in 1991 prices.

12 Digawapichettiya, were known to be located in the reservoir site. These had not been investigated by archeologists but were not considered significant by the Archeological Department. The inundation of the reservoir area somewhat reduced habitat for wildlife in the adjacent national park. On the positive side, the reservoir supports a substantial fishery with annual landings estimated at 1,300 t. The water from the reservoir also supplies the piped drinking water system. Anecdotal evidence suggests that the reservoir and the land clearing for command area development have led to or coincided with a reduction in the prevalence of malaria. 41. The operation of the reservoir has had a number of environmental consequences, some foreseen at feasibility stage, others not. Even with controlled irrigation water distribution, a risk was seen that drainage water would affect the brackish water lagoons and bird sanctuaries downstream. Appropriate diversion of drainage water was suggested. Free flow management, that is typical of irrigation practice in Sri Lanka, has aggravated the problem. The Embilikala and Malala Lagoons have effectively changed into fresh water lagoons due to excessive flow of drainage water. This has destroyed the environment for brackish water shrimp from which many residents in the area made a living and on which birds in the adjacent bird sanctuary depended. The shrimp fishermen had to change to less lucrative fishing for freshwater fish. Diversion of the flow of drainage water to restore the lagoons to their original state would be an expensive undertaking and a corresponding cost of the Project. 42. Changes in hydrology led to a temporary increase in salinity in irrigation water. Underground saline sediments became dissolved (the main reason for the non-feasibility of wells for villages at that time). Salinity in parts of the newly developed irrigation area peaked in the 1989 wet season. Salinity was recognized as a sufficiently serious problem for the projectsupported adaptive research station to place special emphasis on salinity-tolerant varieties and crops. However, since the wet season in 1993, soil salinity has been found only in small areas located adjacent to natural drainage lines. More serious complaints with regard to salinity have been made in the preexisting Ellegala irrigation system. Measurements of salinity were undertaken at biweekly intervals and, up to 1993, showed considerable variation in salinity. The cause was thought to be seepage from the left and right bank irrigation canals, which carried salt into the tanks forming the Ellegala system. Another view is that silt with soluble salts, deposited over many years at the bottom of the tanks, was disturbed with the increased throughput of water. Whatever the reason, the problem has gradually diminished over time and it is now a problem only in small areas in seasons with low availability of irrigation water. 43. The Project has reduced the grazing areas for herds of cattle and buffalo, while irrigation canals disrupt their movements from one area to another. As a consequence, livestock stray into rice fields and cause damage to canal embankments where grass is usually plentiful. Conflicts continue between the influential and fairly prosperous herdsmen and the settlers. With respect to wildlife, irrigation development has obstructed the established migratory pattern of elephants, whose habitat is increasingly encroached upon, leading to damage to crops and occasional injury or death of humans or elephants; both populations are large for their supporting environments. On the other hand, the Project has expanded the elephant habitat through the creation of the Lunugamvehera Park that is north of the reservoir and connected with the Yala Park. C. Impact on Institutions and Policy

44. The feasibility study did not include institutional analysis, nor did subsequent appraisals, beyond the presentation of organization charts and assessment of staffing levels. Institutional

13 development was largely treated as a by-product of project implementation rather than as a project objective or component. Performance weaknesses, as they emerged, were addressed by the assignment of more consultants, which assisted in completing the Project. However, the consultants had little sustained impact on institutional development, since they addressed specific technical problems rather than institutional issues. A number of local staff did benefit professionally from their association with consultants, though language barriers, different skill and experience levels, and time pressures often tended to limit benefits. All the institutions participating in the Project continue to suffer in various degrees from structural, budgetary, and motivational constraints. 45. WUGs have been established for the irrigation system. These have helped to articulate members concerns in the meetings preparing seasonal plans for cropping and irrigation water release. These plans are often overtaken by subsequent events such as less than anticipated rainfall and farmers cropping preferences at variance with plans. For the management of scarce water, cultural change is needed, involving the gathering and analytical interpretation of information, and publication and enforcement of firm guidelines in cooperation with WUGs. Many settlers brought in from outside the project area appear to have obtained their allotment by political influence. They have not established residence in the project area and only visit the area for plowing, sowing, and harvesting. This hampers the development of community spirit and the functioning of WUGs. ID staff report that gradually more nonresidents are moving permanently to the area, mainly due to improved reservoir performance. V. A. Relevance OVERALL ASSESSMENT

46. At the time of its design, the Project was afforded high priority by the Sri Lankan Government. The southern part of the dry zone was a focus of poverty and civil unrest, while irrigation development was seen as the optimal course for providing a living for southern area rural residents and minimizing urban drift. By postevaluation, the focus of both Sri Lankas and ADBs strategies had changed to private sector development, policy and institutional reform, human resource development, poverty reduction, and natural resource and environmental management. It is not surprising that strategic objectives have changed over the 22 years since project design and it is unlikely that the Project as designed would be approved today. The expenditure of close to $100 million to benefit a relatively small number of settlers can be considered of limited relevance in the context of overall development needs and poverty alleviation in the southern dry zone. With the benefit of hindsight, a different approach to irrigation and dryland development would have been more appropriate, including rehabilitation of existing tanks, development of small-scale pump or tank-based irrigation, and assistance to slash and burn and livestock farmers. This would have benefited a larger number of families at lower cost. Despite these reservations, the Project is classified as relevant. B. Efficacy

47. The Project overall has been reasonably effective in terms of developing irrigation within the command area. However, efficacy is significantly reduced by the limited area of new irrigation, which resulted in a greatly increased cost per hectare of new or upgraded irrigation. The Project has broadly achieved its objectives in terms of increasing rice production, with yields (4 t/ha) and cropping intensity (171 percent) close to design targets. However, OFC production has been less than expected, with areas averaging less than 20 percent of anticipated levels. The reduced area of new irrigation limited the number of settlers that could

14 be brought into the area by around 40 percent compared with appraisal, while many settlers have yet to take up residence, leading to a less than effective settlement outcome. The efficacy of livestock, forestry, and agricultural extension was low, contributing to an overall efficacy rating for the Project of less satisfactory. C. Efficiency

48. As noted in para. 8, considering alternative options at project preparation rather than basing the selected design on the desire to maximize the new area to be brought under irrigation could have led to a more cost-effective solution. The new irrigation area is only 64 percent of target (para. 23) due to lower than expected inflows into the reservoir combined with uncontrolled irrigation leading to high per hectare water usage. The shortage of qualified construction staff due to overstretched national building capacity led to substantial implementation delays (dam construction was four years behind schedule) and inflated costs due to lack of competition. The low EIRR of 2.6 percent (paras. 32-33) compares with a rate expected at appraisal of 17.6 percent. Overall, the Project is considered to have represented an inefficient use of resources. D. Sustainability

49. The irrigation system is now operating reasonably well, within the confines of a restricted water supply. The main threat to sustainability comes from developments in the catchment area and restricted water inflows to the reservoir. While water shortages over the past 14 years have been severe on many occasions, developments in the catchment suggest that increasing problems will be experienced. This will require great efforts on the part of scheme management and water users to develop water saving systems, such as increasing the area of upland crops, introducing rice transplanting, and improving irrigation efficiency. Substantial improvement is also required in catchment area planning and management. The second key area affecting sustainability is the level of, and responsibility for, O&M with the need to develop WUG funding of scheme O&M. Experience in the ADB-financed Walawe Irrigation Improvement Project13 suggests that development of fully effective user-funded O&M is a long-term undertaking requiring substantial outside assistance. In combination, these two major factors lead to a sustainability rating of less likely. E. Institutional Development and Other Impacts

50. The Project did not have explicit institutional strengthening objectives and consequently had little institutional impact. Implementation and funding structures were complex, making management difficult. Weaknesses continue to affect the project institutions in collecting, recording, and interpreting data for accounting, technical assessment, or monitoring. In relation to accounting, ID finally improved its performance and submitted audited statements that were accepted by ADB. All agencies suffer from severe deficiencies in monitoring their activities and evaluating impact. The occasional surveys and studies done by the Agrarian Research and Training Institute were no substitute for effective ongoing monitoring and evaluation by the institutions themselves. Information on agricultural production from the area remains sparse. WUGs have been formed and many are operating satisfactorily. However, the nonresidence of many farmers restricts their operation, and most have yet to take on responsibility for O&M. The Project is assessed as having little institutional development impact.

13

Loan 695-SRI(SF): Walawe irrigation Improvement Project, for $11 million, approved on 27 September 1984.

15 F. Overall Project Rating

51. Major parts of the Project have been built as originally designed, including the dam and most of the main canals. The new irrigation area fell one third short of target while water availability was reduced by an apparent decline in rainfall and significant irrigation development in the catchment, threatening project sustainability. While the past few years have seen improved rainfall and irrigation scheme management, the environment remains risky and limits innovation and farmers ability to pay for scheme O&M. Settlement infrastructure is well developed and appreciated by the settlers, in particular the piped supply of drinking water. In terms of family income, many settlers remain poor and malnutrition remains widespread in both new and old areas. Positive and negative environmental impacts are more or less balanced with some reasonable expectation that the remaining problems may be corrected. Significant cost overruns, time overruns, and benefits below expectation have resulted in poor economic performance. In spite of some positive achievements, the Project is considered less than successful based on the ratings in Table 1. Table 1: Assessment of Overall Project Performance
Criterion
a

Weight (%) 20 25 20 20 15

1. Relevance 2. Efficacy 3. Efficiency 4. Sustainability 5. Institutional and Other Development Impacts Overall rating
a

Rating Weighted (0-3) Rating Relevant 2 0.40 Less Satisfactory 1 0.25 Inefficient 0 0.00 Less Likely 1 0.20 Little 1 0.15 Less than Successful 0.6> <1.6 1.00

Assessment

Rating for relevance 3=Highly relevant; 2=Relevant; 1=Partly relevant; 0=Irrelevant Rating for efficacy 3=Highly satisfactory; 2=Satisfactory; 1=Less satisfactory; 0=Unsatisfactory Rating for efficiency 3=Highly efficient; 2=Efficient; 1=Less efficient; 0=Inefficient Rating for sustainability 3=Most likely; 2=Likely;1=Less likely;0=Unlikely Rating for institutional and other development impacts 3=Substantial; 2=Moderate; 1=Little; 0=Negligible Overall rating Highly Successful > 2.5 Successful 1.6 - 2.5 Less than Successful 0.6 - 1.6 Unsuccessful < 0.6

G.

Assessment of ADB and Borrower Performance

52. Overall, the performance of ADB was satisfactory, though with hindsight, it is clear that errors were made at the time of the original design. By combining an increase in expected irrigable area with a decrease in costs compared with feasibility study estimates, the appraisal artificially increased the level of expected performance to an unsupportable level, necessitating two additional loans to complete development. At the same time, the Governments preferred development option was accepted too readily; consideration of alternatives at the feasibility stage may have led to a more cost-effective solution. Following the poor initial design, ADB and the Government made major efforts to salvage the Project, by ensuring that sufficient finance was available to complete development. The negative impact of the initial project design on livestock herding was recognized in the Phase II appraisal, but the design of the livestock component did little to reduce problems and conflicts. 53. The performance of the Implementing Agencies was satisfactory. However, major deficiencies were evident in the accounting function in the early years with late submission of accounts and qualification of accounts by the Auditor General. Lack of familiarity with ADB procedures and a complex funding program caused implementation problems for ID. While in

16 most cases, ADB procedures were followed, the award of the major contract for dam construction was made without approval (para. 16). Project monitoring was unsatisfactory, and few useful data are available on irrigation system performance and agricultural production. In addition to making scheme management more difficult, the lack of data preclude objective evaluation. Local ID management has improved its communication with farmers and WUGs over the past few seasons. This factor, combined with a moderately successful rice crop grown with limited water in the 1999 dry season, suggests that some of the problems of the early years may have been overcome. VI. A. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

Key Issues for the Future 1. Reliability of Irrigation Water Supply and Equitable Distribution

54. Despite improvements in water management over the past few years, irrigation efficiency remains low. More effort is required to distribute water efficiently, to reduce deep percolation losses, and to recapture runoff and drainage water for irrigation use. This will require a major campaign to change attitudes among irrigation staff and farmers. Recapture of drainage losses is already being undertaken and may be expanded. 55. Much water could be saved on the more permeable soils by growing crops other than rice. However, farmers are unlikely to follow the recommendations of the extension service for yield-increasing production technology as long as the risk of drought is not brought under control and equitable water supplies are not assured. Neither ID and agricultural extension staff nor farmers have adequate experience to support the changes in irrigation management required by non-rice crops. Such a development will need a major change in attitudes, based on the necessary political will, incentives, and knowledge. A good start has been made with the establishment of bananas on about 400 ha, though the crop is presently experiencing marketing problems. Further diversification into OFCs is suggested for the porous soils in much of the new irrigation area. With the more efficient use of water on porous soil areas, more water could be made available to the lowland soils best suited to growing rice (including the old irrigation system and parts of the new system) allowing cultivation of two crops of rice per year as originally envisaged. Efficient management, based on regular data collection, monitoring, and transparent documentation is a key step in the process. This includes institutional support to enable local staff to resist pressures that currently restrict the efficient operation of the system. 56. If no water flows into the reservoir, the question of water management will become irrelevant, since there will be no water to manage. Irrigation development and degradation in the catchment area are thus major concerns to Kirindi Oya managers and farmers, requiring urgent action if the existence of the scheme is not to be placed in severe jeopardy. A number of suggestions are made for follow-up action in Section C. 2. Nutrition

57. Early childhood malnutrition continues to be a problem in Sri Lanka in general. It is of concern that this should also be a problem among all groups in the project area, according to the Governments PCR. This was confirmed by the OEM through discussions at the projectsupported clinic. Stunted child growth is the most obvious symptom of such malnutrition, often combined with intestinal infections or parasites. Less obvious is the negative impact on intellectual development. The observed lack of entrepreneurial spirit among farmers is a likely

17 cause for concern in this regard. Improved water management and higher incomes could go a long way to reducing the problem, at least for the next generation. The project-supported clinic should be placed in a position to support a child nutrition program, in particular in the critical phase of weaning and to expand preventive maternal and child health care. 3. Environment

58. Improved water management and reduced drainage water flows can reverse much of the environmental damage to coastal lagoons. Diversion of fresh water around the lagoons is also possible but would be expensive. A study of options for water reuse within the irrigation scheme and/or diversion of drainage water away from the lagoons is merited. With regard to the damage done by free-grazing herds of cattle, enforcement of existing laws, an incentive to reduce herd size (in favor of better yielding cattle), and a program of reintegration of cattle into the farming system may assist in resolving the conflict between settlers and herd owners. However, it is not easy to make changes to farming systems. Improvement in the medium term is likely be found through the formation of sufficiently strong WUGs that can negotiate and enforce agreements with the powerful herd owners in relation to seasonal grazing restrictions. The size of the elephant population needs to be controlled in line with the carrying capacity of their remaining habitat, either by birth control or by culling. 4. Irrigation Service Fees

59. Farmers cannot be expected to pay irrigation service fees as long as the service does not provide for a comparatively risk-free production environment. Under the circumstances in the Project (and in many other locations in Sri Lanka), the covenanted irrigation service fees had no chance of implementation. Improved irrigation management may change that prospect and ensure equitable treatment of resident and nonresident settlers, with nonresidents required to contribute in cash to compensate for the maintenance work that they do not undertake. Fee collection by the WUGs may in future allow O&M costs to be fully met, at least to the branch canals and eventually the main canals, if not the dam. 5. Land Ownership and Residence

60. At present, a majority of settlers have been provided with land grants that entitle them to reside on the land but not to subdivide it or sell it without permission. Around 1,500 out of 9,659 grants remain to be issued, mainly because of the nonresidence of the farmers. The question of nonresident settlers needs to be resolved as soon as possible and the remaining grants issued, or where necessary land reallocated. The granting of freehold title and development of a market for land is desirable, though this may need to await wider developments in Sri Lankan law. The issue of nonresident farmers is also important in the effective functioning of WUGs for the maintenance of irrigation systems and for developing a community spirit. It is equally relevant to the efficient operation of agricultural extension. B. Lessons Identified

61. Many of the developments observed during the project period would not happen the same way again. With the experience of much reduced rates of return for new irrigation projects, ADB is now focusing on the rehabilitation of existing schemes, adoption of participatory approaches from the outset, and early transfer of operation to water users. For new projects, an engineering loan would precede investment to ensure cost-effective design and reduce implementation delays due to design issues. Nonetheless, a number of lessons can be drawn:

18 (i) ADB has a special responsibility in approving projects. It should ensure that the optimal investment option has been selected. It must be transparent in explaining why major changes are made at appraisal relative to feasibility study analysis and when major assumptions are revised in subsequent economic evaluations. Substantial changes should not be made to costs or benefits unless supported by rigorous analysis. ADB must be able to challenge underlying assumptions and require that the proposed design reflects circumstances found in the target area. It should not be hurried into making politically driven decisions. Getting the design correct from the beginning, including institutional aspects, is a necessary condition for project success. This is particularly true because neither ADB nor a Government has a specific capacity to withdraw from a project if its design proves to be flawed. Where irrigation schemes include areas of existing irrigation, it is important to clarify existing formal and informal water rights, and to ensure that water allocation between new and existing users is equitable. The needs of existing livestock owners must also be taken into account. Particularly for schemes that are planned to utilize a significant proportion of total catchment water discharge, detailed analysis of catchment hydrology is essential, both at the time of design and thereafter at regular intervals. Improved stream gauging and rainfall recording may be required to support such analysis. Irrigation development must take a conservative view of future river flows, and recognize that water demand for all purposes is likely to increase over time. Schemes that use a high proportion of predicted seasonal or annual flow are inherently risky and should usually be avoided. Settlement schemes can be highly charged politically. Major efforts are warranted to ensure that settlers move to their allotments to promote both social development and user management of irrigation and agricultural development. Good record keeping is essential for management as well as facilitating the understanding of past developments. In particular, all details of economic evaluation should be electronically stored for greater accountability and future reference.

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

C.

Follow-Up Actions

62. A number of the issues raised invite follow-up action by the Government. Many require changes in institutional culture and incentive structures. The draft proposal for improved irrigation management, prepared by IWMI in late 1997 (ibid), is considered a good starting point, but should be expanded to capture sociocultural and institutional dimensions. The following actions in Table 2 should be considered to promote the further achievement of benefits and their sustainability.

19 Table 2: Follow-Up Actions

Measure/Action Responsible Unit 1. Watershed Management i. Prepare improved water balances for the catchment, irrigation system, and lower ID valley to define systems for efficient water allocation, minimization of drainage water wastage, and reduction of damage to the coastal lagoon environment. This will require improved measurement, recording, and analysis of climatic and hydrological data. ii. Control watershed and irrigation development upstream of the reservoir to secure ID, Agrarian water availability and project sustainability. A coordinated planning approach to Service river basin development is necessary given the range of agencies responsible for Department, development in the area. Agricultural Development Authority 2. Irrigation Scheme Management i. Review options for perennial crops (in addition to bananas) that may be DOA established by farmers on porous soils with a view to reducing irrigation water demand. Pursue this strategy and apply water savings to increase cropping intensity on both new and old irrigation areas. ID ii. Strengthen the authority of WUGs, empowering them to fine or withhold water releases from farmers who neither contribute their labor nor pay the equivalent in cash to undertake maintenance activities. iii. Promote more efficient irrigation scheme O&M. Continue to review operational ID procedures for water release in discussion with WUGs. iv. Control excess drainage flows by a more judicious release of water and improved ID on-farm management, and capture and reuse irrigation drainage water. Account will be taken of current water reuse by squatters and landholders outside the Project. v. Review, revise, and enforce rules, regulations, and procedures with regard to ID irrigation management, maintenance, role of WUGs, and dam disaster procedures. ID vi. Establish a monitoring system providing information on the different production environments of the Project (porous soils, lowland soils, old irrigation system, new irrigation area, areas reusing drainage water). Information should include cropping patterns and yields, and be supported by surveys assessing production technology, cost of production, use of labor, yields, and income derived. Information should allow irrigation management and extension service to make decisions on a sound basis rather than on assumptions or anecdotal evidence. vii. Reduce crop and canal damage by free-ranging cattle by preparing and ID supporting a program to improve livestock management, reduce herd sizes, and promote pasture and fodder development. Authorize and encourage farmers to harvest grass along irrigation canals for cut-and-carry livestock feeding. viii. Reorient adaptive agricultural research to aspects of direct relevance to intensive DOA and diversified farming in the project area. 3. Settlement i. Issue land titles to resident settlers and withhold titles from nonresident farmers, and provide for freeholding of farms when permitted by Sri Lankan land law. ii. Review the status of nonresident farmers and expropriate their land if they do not relocate to the settlement within a period of about two years. Reallocate land to poor people, from surrounding areas, with qualifications and credentials to be reviewed and approved by the relevant WUGs. Review nutrition data and medical records and develop strategy to combat malnutrition in the project area. Period 2001

Starting 2001

2001-2005

2001-2005

2001-2005 2001-2002

2001

2001-2002

2001

2001-2005

Land Commissioners Department Land Commissioners Department Department of Health

Starting 2001

2001-2002

iii.

2001

20 APPENDIXES

Number

Title

Page

Cited on (page, para.) 1, 3. 2, 4. 2, 4. 2, 6.

1 2 3 4

Project Scope and Accomplishments Project Financing Arrangements Comparison of Project Costs Economic Reevaluation

21 23 24 27

21 Appendix 1, page 1
PROJECT SCOPE AND ACCOMPLISHMENTS Original Scope Component A. Irrigation 1. Earthfill dam with Gated Spillway and Main Canal Gates
a 2. Reservoir (ha)

1977

Actual Accomplishme Approved 1982 Approved 1986 nt

Up to End of Phase I as

Up to End of Phase II as

5 km 25 m high 3,577 61.6

5 km 25 m high 3,577 47

5 km 25 m high 3,577 69.3

5 km 25 m high 3,577 51.4

3. Main Canal and Distribution System (km) 4. Rehabilitation of Existing Irrigation (ha) 5. Land Clearing, Leveling, and Field Distribution System for New Irrigation (ha) B. Agricultural Development 1. Rehabilitation of Existing Irrigation (ha) 2. New Irrigation Area (ha) 3. Cropping Intensity 4. Yields, Paddy (t/ha) Porous Soils (t/ha) Lowland Soils, Maha (t/ha) Lowland Soils, Yala (t/ha) 5. Agricultural Research Station (no.) 6. Farmer Training Center (no.)

3,675b 8,409

4,525c 4,346d

4,525c 8,454

4,525c 5,416

4,525

4,525

4,525

4,525

8,409 189 4.00

4,346 200 3.50 4.50 4.80

8,454 170 3.50 4.50 4.80 1 1

5,416 146d 3.9 3.8 3.8 4.0 1 1

= not applicable, ha = hectare, km = kilometer, m = meter, t = ton. a Other sources state 3,402 ha as the reservoir area. b According to appraisal report, page 15, para. 5, the Badagariya irrigation system (850 ha) fed from another catchment, did not require rehabilitation, and was excluded originally. c Badagariya system included. d Including about 9 percent of area grown with other field crops as a last resort in substitution of failed paddy or in view of known water shortage.

22

Appendix 1, page 2

Project Scope and Accomplishments (continued) Original Scope Component C. Land Settlement No. of Settlers No. of Hamlets No. of Village Centers Township Roads (km) Dug Wells Piped Water Supply System for about 5,000 Households Primary Schools Junior and Senior Secondary Schools Cooperative Stores Produce Stores/WFP Stores Community Centers Hospitals/Health Centers Post Offices Sales Centers Markets Agrarian Service Centers Police Station 8,320 28 4 1 200 420 28 5 28 28 33 5 5 1977

Actual Accomplishmen Approved 1982 Approved 1986 t

Up to End of Phase I as

Up to End of Phase II as

4,200 18 2 1 235 210 18 3 18 18 20 3 3

8,320 35 4 1 609 0 1 35 5 35 23 35 33 5 5 1 1 1

5,100 23 4 1 453e 37f 1 20 4 25 23 22g 4 4 4 1 3 1

= not applicable, km = kilometer; WFP = World Food Program. e Includes 165 km of field canal roads, 250 km of internal land settlement roads, and 38 km of link roads. f Well digging program failed due to salinity. g Better equipped clinics replaced basic village health center. Source: ADB and Irrigation Department documents and records.

23 Appendix 2
PROJECT FINANCING ARRANGEMENTS ($ '000) Government Contribution

Component

ADB

IFAD

KfW

Total

A. Loan Utilization 1. Phase I a. Irrigation b. Land Settlement c. Agricultural Development d. PBME e. Consultants/Training Subtotal 2. Phase II a. Irrigation b. Land Settlement c. Agricultural Development d. PBME e. Consultants/Training f. Service Charge Subtotal 3. Total Project a. Irrigation b. Land Settlement c. Agricultural Development d. PBME e. Consultants/Training f. Service Charge Total B. Loans Phase I Phase II Total Cancelled 34,000 26,600 60,600 15,654 a 16,589 0 16,589 530 18,320 0 18,320 1,980 10,291 b 6,500 16,791 777 b 79,200 33,100 112,300 18,941

27,597 757 84 0 1,035 29,473

15,957 0 0 102 0 16,059

10,168 3,867 0 0 2,300 16,335

9,612 2,582 13 0 155 12,362

63,334 7,206 97 102 3,490 74,229

7,163 4,822 2,363 188 443 494 15,473

0 0 0 0 0 0 0

0 0 0 0 0 0 0

197 3,237 218 0 0 0 3,652

7,360 8,059 2,581 188 443 494 19,125

34,760 5,579 2,447 188 1,478 494 44,946

15,957 0 0 102 0 0 16,059

10,168 3,867 0 0 2,300 0 16,335

9,809 5,819 231 0 155 0 16,014

70,694 15,265 2,678 290 3,933 494 93,354

ADB = Asian Development Bank, IFAD = International Fund for Agricultural Development, KfW = Kreditanstalt fr Wiederaufbau, PBME = project benefit monitoring and evaluation. a Includes $4 million from the original loan which was reallocated to forthcoming IFAD cofinancing and the balance from the Phase II loan. b Includes the originally envisaged transfer payments to foreign exchange entitlement certificates of $15.6 million, which were subsequently abolished. Source: ADB, IFAD, KfW, and Irrigation Department records.

24

Appendix 3, page 1

COMPARISON OF PROJECT COSTS 1. Comparison of project costs at different stages of the Project is shown in Table A3.1. Information on the cost estimates at feasibility stage is fragmentary due to the availability of an incomplete set of the study sourced from the Irrigation Department. Only construction cost estimates are available in considerable detail and for variations to the basic design. The base cost estimates are 168 percent higher than in the feasibility study for the main investment, the dam with appurtenances, and nearly twice the cost for the irrigation development relative to appraisal. Consultant services were also estimated to be more than twice the allocation at appraisal. No detailed cost estimates are available from the feasibility study on the procurement of heavy construction equipment and spares, although detailed estimates have been made of requirements for the civil works to be done. 2. Likewise, there is no information on assumed price escalation. To some extent, the difference in the cost estimates at feasibility study and appraisal may be explained by different ways of dealing with the two-tiered exchange rate system. The feasibility study accepted the official exchange rate for estimated foreign costs (at SLRs8.651 per dollar) and included the cost of the required purchase of foreign exchange entitlement certificates within the transfer charges estimated. For local cost conversion to dollar equivalents, the rate inclusive of the cost of such certificates was reflected in the exchange rate used (SLRs14.27 per dollar). The Operations Evaluation Mission finds this approach rational. 3. No information is available on how Asian Development Bank staff dealt with the currency duality. The currency was devalued shortly before Board presentation and staff appeared to have a rather limited understanding of the consequences of devaluation on project costs at that time. The significant observation, however, is that base costs varied much more than could possibly be explained by the inappropriate application of exchange rates. No explanation is available for this happening in the course of just three months between feasibility and appraisal.

Table A3.1: Comparison of Project Cost at Feasibility Stage (as revised 1970), Original Appraisal, and Actual ($ '000) Original Appraisal Estimate 1977 FC LC TC

Component Irrigation Development Dam and Appurtenances, Civil Works New Irrigation System, Civil Works Old Irrigation System, Rehabilitation & Civil Works Heavy Construction Equipment and Spares Major Construction Material Consultant Services and Training Operation and Maintenance -Equipment Pre-Construction and Engineering Administration Subtotal Land Settlement Subtotal inclusive of Land Settlement Agricultural Development Subtotal inclusive of Agricultural Development Project Benefit Monitoring and Evaluation (PBME) Subtotal inclusive of PBME Unallocated Total Transfer Charges Service Charge Total including Service Charge

Feasibility Study 1977 TC FC LC

FC

Actual Cost LC

TC

9,848 4,470 101 n.a. n.a. 2,569 0 0 16,988 2,705 n.a. n.a. 3,939 b 35,800 c 0 35,800 c

5,296 4,599 114 n.a. n.a. 0 0 2,319 12,328 5,452 n.a. n.a. 3,556 53,800 22,600
b c

15,144 9,069 215 n.a. n.a. 2,569 0 2,319 29,316 8,157 n.a. n.a. 7,495b 89,600c 22,600 112,200 c

1,625 865 a 9,370 5,948 710 0 660 18,313 250 18,563 490 19,053 0 19,053 9,082 28,135 0 28,135

4,012 3,982 a 84 2,088 109 0 1,240 7,533 1,149 8,682 19 8,701 0 8,701 10,117 18,818 0 18,818

5,637 4,847 a 9,454 8,036 819 0 1,900 25,846 1,399 27,245 509 27,754 0 27,754 19,199 46,953 0 46,953

15,753 4,232 209 11,979 289 3,305 1,136 289 37,190 4,465 41,655 937 42,592 26 42,618 0 42,618 494 43,112

18,448 9,736 742 964 0 628 243 6,675 37,437 10,799 48,236 1,741 49,977 264 50,241 0 50,241 0 50,241

34,201 13,968 951 12,942 289 3,933 1,379 6,963 74,626 15,264 89,890 2,678 92,568 290 92,858 0 92,858 494 93,353

25 Appendix 3, page 2

76,400 c

FC = foreign exchange cost, LC = local cost, n.a. = not applicable, TC = total cost. a Includes rehabilitation of existing system. b 20 percent physical contingencies, largely reflecting uncertainties in dam foundation and spillway design, does not include price escalation. c As stated in the Feasibility Study, Volume A, page 11-5, paras. 2.11 and 2.12.

TableA Project C 3.2: ost ($'000) O riginal A ppraisal Estim 1977 ate FC LC TC PhaseI A ppraisal Estim 1982 ate FC LC TC PhaseII A ppraisal Estim 1986 ate FC LC TC PhaseI &II Total FC LC TC

C ponent om

FC

A ctual C ost LC TC

evelopm ent IrrigationD D andA am ppurtenances, C W ivil orks 1,625 N IrrigationSystem C W ew , ivil orks 865 O IrrigationS ld ystem R , ehabilitationandC W ivil orks H C eavy onstructionEquipm andSpares ent 9,370 M C ajor onstructionM aterial 5,948 710 C onsultant Services andTraining O perationandM aintenance- Equipm ent 0 Adm inistrativeExpenses inistration 660 Pre-C onstructionandEngineeringAdm Subtotal 18,313 LandSettlem ent Subtotal inclusiveof LandSettlem ent evelopm ent Agricultural D evelopm ent Subtotal inclusiveof Agricultural D valuation(PBM E) Project B enefit M onitoringandE Subtotal inclusiveof PBM E d U nallocated Total ServiceC harge harge Total includingServiceC
a

4,012 3,982 84 2,088 109 0 1,240 7,533 1,149 8,682 19 8,701 0 8,701 10,117 18,818 0 18,818

5,637 4,847 9,454 8,036 819 0 1,900 25,846 1,399 27,245 509 27,754 0 27,754 19,199 46,953 0 46,953

23,927 3,682 464 0 0 1,533 409 1,133 31,148 927 32,075 265 32,340 78 32,418 5,382 37,800 0 37,800

b b

14,022 5,973 1,238 0 0 746 29 2,091 24,099 5,014 29,113 485 29,598 240 29,838 12,162 42,000 0 42,000

b b

37,949 9,655 1,702 0 0 2,279 438 3,224 55,247 5,941 61,188 750 61,938 318 62,256 17,544 79,800 0 79,800

b b

0 2,193 94 206 0 228 400 0 3,121 2,813 5,934 1,528 7,462 0 7,462 2,343 9,805 425 10,230

0 3,261 142 84 0 544 130 1,647 5,808 7,939 13,747 1,877 15,624 122 15,746 7,124 22,870 0 22,870

0 5,454 236 290 0 772 530 1,647 8,929 10,752 19,681 3,405 23,086 122 23,208 9,467 32,675 425 33,100

23,927 14,022 5,875 9,234 558 1,380 206 84 0 0 1,761 1,290 809 159 1,133 3,738 34,269 29,907 3,740 38,009 1,793 39,802 78 39,880 7,725 47,605 425 48,030

37,949 15,109 1,938 290 0 3,051 968 4,871 64,176

15,753 18,448 4,232 9,736 209 742 11,979 964 289 0 3,305 628 1,136 243 289 6,675 37,190 37,437 4,465 41,655 937 42,592 26 42,618 0 42,618 494 43,112 10,799 48,235 1,741 49,977 264 50,241 0 50,241 0 50,241

34,201 13,968 951 12,942 289 3,933 1,379

26

6,963 74,626 15,264 89,890 2,678 92,568 290 92,859 0 92,859 494 93,353

250 18,563 490 19,053 0 19,053 9,082 28,135 0 28,135

12,953 16,693 42,860 80,869 2,362 4,155 45,222 85,024 362 440 45,584 85,464 19,286 27,011 64,870 112,475 0 425 64,870 112,900

Appendix 3, page 3

FC=foreignexchangecost; LC=local cost; TC=total cost. Includes rehabilitationof existingsystem . b IncludedinIrrigationW orks. c Thephysical contingencies andpriceescalationunder theoriginal loanhas beenincludedintherevisedbasedcosts. U nallocatedshow for loan612is for thesupplem n entary
d

loanperiod. It shouldbenotedthat thecost reflects areducedscope(Phase1) for irrigationsystemanddevelopm andlandsettlem ent ent. Includes social forestry, livestock anddairy developm agricultural support services andagricultural credit. ent,

27

Appendix 4, page 1

ECONOMIC REEVALUATION A. Introduction

1. Project economic performance was reestimated based on available information contained in the government project completion report (PCR) (impact evaluation) and obtained from the Irrigation Management Division and the Department of Agriculture in the project area. It was not possible to apply the methodology used at PCR or appraisal since their tables are abbreviated and the supporting spreadsheets could not be located. 2. The major benefits from the Project comprise the increase in crop production resulting from increased water availability on the old irrigation area and from the development of new irrigation. Further benefits derive from the establishment of a culture-based capture fishery on the main reservoir, offset to some degree by the decline in the brackish water shrimp fishery in the downstream lagoons. In addition to project investment and operation and maintenance (O&M) costs, account is also taken of the loss in production from previous land use in the area flooded by the reservoir and newly developed for irrigation. This land was primarily used for slash-and-burn cropping, on an approximately five-year cycle. No opportunity cost was attributed to without-project production in the appraisal analysis. B. Methodology and Assumptions 1. Table A4.1: Project Financial Investment Cost

3. Project expenditure has been estimated from the disbursement records of the Asian Development Bank (ADB) for the International Fund for Agricultural Development (IFAD) joint cofinancing and the ADB loans. Information was also obtained from the Kreditanstalt fr Wiederaufbau (KfW) on the total utilization of its loans (parallel cofinancing) and cancellations. Adjustments were made to the timing of investments, taking note of the considerable time lag, in particular for Phase I, between work done and withdrawal applications. The contributions made by the Government remain estimates made on the best information available such as agreed withdrawal percentages. Other nonloan expenditures such as food assistance over seasons of distress due to drought are best estimates made by the Operations Evaluation Mission (OEM). Overall, this review has reduced project cost from $99.31 million given as actual cost at PCR to $93.35 million at OEM. The major difference is explained by a more conservative view taken with regard to the Government's contribution to incremental overheads in a situation of budgetary constraint, and the cancellation of $1.98 million equivalent from KfW's loans, under Phase I, which was not known at PCR. The reduction of project costs would have a minor positive impact on the recomputed economic internal rate of return (EIRR). For the purpose of EIRR calculation, project costs for 1978 ($56,000) and 1979 ($1.4 million) were included with 1980 costs ($3.2 million). 2. Table A4.2: Project Economic Investment and Operation and Maintenance Cost

4. Foreign investment costs are converted to 1999 constant dollar values by adjustments of the foreign cost by the manufacturing unit value index. Local costs were converted to current dollars by converting the estimated local costs to current rupees, adjusting them using Sri Lankas gross domestic product deflator and then to 1999 constant dollar values using the 1999 exchange rate. The investment in social forestry and in livestock and dairy is excluded from the analysis, as were the estimated benefits derived therefrom, because they are not directly relevant to the main irrigation investment and the reliability of these assessments is

28

Appendix 4, page 2

questionable. On the basis that extension and agricultural inputs represented around one third of agriculture-related expenditure (including wildlife) under Phase II, the same proportion of agriculture-related expenditure is included in project economic costs in Table A4.2. 5. The EIRR of the original appraisal excluded the cost of settlement. The subsequent two appraisals included part of the settlement cost but did not specify the proportion. There is no clearcut solution on how to deal with the investment under the land settlement component. Land settlement was required by the need to relocate some 2,800 families from within the project area (reservoir and downstream area) with their land needed for project investment. The balance of settlers brought in from outside the project area was needed to operate the new land developed for irrigation. The major investment under the settlement component, the piped water supply for settlers, was necessitated by saline groundwater from the initial program for dug wells and the only corrective action possible to cater to one of the basic needs of settlers. Roads serve the irrigation investment as well as non-related uses. Some investments in government infrastructure (schools, clinics, police station) may have been phased over a longer period without the Project, but are viewed as a necessary incentive to settlers, some of whom had to relocate without compensation for their pre-project livelihood. Hence, in contrast to the economic evaluations done from the first appraisal to PCR, the OEM finds the inclusion of the settlement cost justified, rather than treating it as a social transfer payment. However, in recognition of the inclusion of some non-project-related expenditure, 50 percent of settlement expenditure is included in the base case EIRR calculation. 3. Table A4.3: Irrigable and Irrigated Areas With and Without Project

6. Prior to the Project, irrigation was undertaken from a series of tanks in the Ellegala and Badagiriya areas totaling around 4,525 hectares (ha). New irrigation was developed on a total (cultivable) area of around 5,400 ha according to the Irrigation Management Division. Total irrigable area is thus estimated at about 9,925 ha at present. 4. Table A4.4: Cropped Area and Cropping Intensity With and Without Project

7. On the benefit side of the reevaluation, the absence of adequate monitoring required the use of best available information in many respects in lieu of data based on regular surveys or crop measurements. A reasonable record of area cultivated is available over the 13 years of partial or full operation and that record is illustrative of the considerable risks encountered by farmers in spite of irrigation. Cropping intensities are somewhat biased to the positive side by the inclusion of other field crops, which substitute for paddy in case of insufficient or no available irrigation and may include areas (uplands) without irrigation that have been allocated to some farmers. Much more uncertain are the yields reported, which vary significantly from farmer to farmer, depending on their location in the irrigation system (head end or tail end), whether in the new or the old system, and whether having access to drainage run-off or not. A major factor is the decision made on area retained for irrigation in a situation of water shortage and how well this is actually met by water supplies. 5. Table A4.5: Yields of Major Crops With and Without Project

8. Over the past four years, wet season unhusked rice yields (known as paddy) averaged 4.2 tons per hectare (t/ha) and dry season 3.65 t/ha based on Department of Agriculture records. Highyielding varieties had been adopted by most farmers prior to the start of the operation of the Project, with replacement from certified seed producers taking place in a three to four-year cycle, with absence of weed seed contamination a major reason for replacement of

29

Appendix 4, page 3

home grown seed. At PCR, rice yields were expected to increase to 6 t/ha by 2003, a highly optimistic assumption, which explains a large part of the difference in economic performance between PCR and OEM. 6. Table A4.6: Physical Inputs for Major Crops With and Without Project

9. The major inputs required for the crops budgeted with and without the Project are summarized. Transport to and from local market is assumed to be covered by the allowance for 2wheel tractor days. 7. Table A4.7: Estimated Economic Prices for Internationally Traded Outputs

10. The economic price of rice is calculated based on the estimated landed cost of Thai rice shipped from Bangkok. The cost of freight of milled rice from the project area to Colombo (the main rice deficit area in the country) is deducted from the Colombo price to derive the project area economic value of rice. Freight costs for bagged product from Kirindi Oya to Colombo were estimated by the Irrigation Department (ID) and Department of Agriculture staff at around $10 per ton or less and this rate is assumed. 8. Table A4.8: Estimated Economic Prices for Internationally Traded Inputs

11. Economic prices are estimated for urea, triple superphosphate, and muriate of potash, based on import parity price. 9. 10. Table A4.9: Summary of Economic Prices for Project Outputs and Inputs Table A4.10: Incremental Net Value of Production

12. Based on the areas, yields, prices, and input costs summarized in previous tables, the estimated incremental value of production, without and with the Project, is derived. The difference between the two is the change in economic value of production resulting from the Project. A shadow wage rate of 0.8 for labor is used for both family and hired labor as in the original appraisal reflecting the level of under- and unemployment in the country. This is largely done for reasons of comparability with previous analyses. Observations in the project area suggest that to some extent, underemployment may be a sociocultural preference rather than dictated by economic circumstances, with gainful opportunities for family labor only partly utilized. 11. 12. Table A4.11: Financial Crop Budgets Per Hectare With and Without Project Table A4.12: Financial Budgets for a Typical 1 ha Farm With and Without Project

13. The without project model assumes that the farm was within the old irrigation area and achieved a cropping intensity of 125 percent. With-project cropping intensity increases to around 178 percent, based on anticipated year 2000 cropping. This intensity is optimistic, and assumes that irrigation management improves significantly from its present level. 13. Table A4.13: Economic Internal Rate of Return

14. The EIRR is calculated over 59 years (19782036) with no residual value, based on a dam life of 50 years from closure.

30

Appendix 4, page 4

C.

Fisheries

15. The Lunugamvehera reservoir now supports a substantial fishery. A survey was conducted in order to value fisheries activities in Kirindi Oya, which provides the data for the estimate of fisheries benefits in the reservoir as shown in Table A4.14. In addition, there are some disbenefits to downstream prawn fisheries in the brackish water lagoons, due to reduced salinity levels. The PCR estimated these at SLRs8 million per year and this value is deducted from the value of carp/tilapia fisheries to derive an annual net benefit from fisheries. Table A4.14: Estimate of Net Benefits from Fisheries in Kirindi Oya
Lunugamvehera Reservoir Average catch per trip Trips per month Number of boats Annual yield Disposition of catch Home consumption Retailed Sold to wholesaler Total catch/revenue per boat per trip kg no. no. ton 50 25.4 87 1326 kg 1.6 15.8 32.6 50 SLRs/kg 15.0 32.8 20.5 24.2 SLRs/trip 24 518 668 1211

Revenue per boat Operating costs Maintenance Nets Net repair Other cash costs Labor days/y SLRs/day 610 150

SLRs/mo. SLRs'000/y 30,748 369 445 3,550 84 932 5 43 1 11

7,620 12,631 18,117

91 152 217 18,914 270 114 156

Economic margin/boat Aggregate economic margin for fleet SLRs'000 $'000 Estimated loss of prawn fishery in coastal lagoon Net gain from fisheries $'000

kg = kilogram, mo = month, y = year. D. Results

16. On assumptions applied, the EIRR is estimated at 2.6 percent. Assessment of the EIRR under a range of alternative assumptions gave the following results.

31

Appendix 4, page 5

Table A4.15: Summary of EIRR estimates

Case 1 2 3 4 5 6 7 8 Base case Base case without fisheries Cost including all settlement Cost excluding settlement No yield increase 2000-2004 No yield increase + full settlement cost 50 year life, + residual PCR rice yield (6 t/ha) EIRR (%) 2.6 2.5 2.3 3.0 1.9 1.6 2.3 4.2

17. The individual farm budgets with and without project developed in Table A4.12 indicate that net farm income under the Project is approximately $870 compared to around $320 without the Project due to increased cropping intensity and yield as well as the increased area of higher value crops. Returns per family labor-day increase from around $3.4 to $5.8 under the Project. E. Comparison with PCR

18. The Government PCR computed an EIRR for the Project of 6.2 percent. ADBs PCR accepted this rate and reproduced the cash flow tables with minimal alteration. It was not possible to analyze the PCRs estimate of economic performance in detail, since none of the spreadsheets supporting both the Government and ADB PCRs could be located. However, the main differences between the PCR and the project performance audit report estimates are (i) rice yields, and (ii) conversion between economic and financial prices. 19. Rice Yields. The Governments 1994 PCR predicted that unhusked rice (paddy) yields would increase by 0.2 t/ha/year from a base of 3.8 t/ha in 1993. Under this scenario, yields were predicted to reach 5.0 t/ha in 1999 and 6.0 t/ha in 2004. These estimates were not realistic, and the level of around 4.0 t/ha achieved in 1999 increasing to 4.5 t/ha in 2004 as assumed in the PPAR base case is considered more appropriate, if still optimistic. While technology and water management will improve, it is expected that water restrictions will increasingly apply as inflows to the reservoir are limited by upstream development. Under the more pessimistic scenarios of river basin development, it is unlikely that a dry season rice crop will be possible at all in the new areas in most years, which would result in a major decline in the EIRR. As a sensitivity test, the PCR yields were included in the PPAR analysis, and would on their own result in an increase in the EIRR to 4.2 percent. This highlights the sensitivity of the EIRR to changes in yield. 20. Economic and Financial Prices. A key area where the PCR is considered to be in error is in its calculation of the economic price of rice. The PCR estimated the economic price of unhusked rice at the farm gate in 1994 values increasing from SLRs6.27/kg in 1990 to SLRs10.61 in 2005. Over the same period the financial price is predicted to move from SLRs7.1/kg to SLRs7.5/kg. Given that the terms of trade normally move against agricultural products, there is no reason to expect any increase in the economic to financial price relativity. The 52 percent increase in economic price from 1992 to 2005 over a period when the financial price remains unchanged is excessive and not supported by World Bank Commodity Price projections at that time.1 Since an increase in price has a high positive impact on return, this

Current projections for the increase in real price over the same period are 15 percent.

32

Appendix 4, page 6

factor on its own is sufficient to explain most of the difference between the PCR and PPAR. Other areas in which the PCR analysis may be incorrect is in using a lower economic rice price (SLRs8.50/kg) without the project than with the project (SLRs10.61/kg) with no explanation, significantly favoring the with-project case. It is also notable that the without-project case in the PCR generates a negative financial cash flow from 1993 onwards, an unlikely outcome and one which accentuates the difference between with and without project, increasing reported EIRR. 21. A further factor where the Governments PCR analysis does not accord with convention is in its analysis period of 63 years (1978-2040) or 55 years from dam completion. While it is accepted that dam life may exceed 50 years, convention would normally limit the analysis period to a maximum of 50 years as in the case of the three ADB appraisals. 22. In many key areas, the Governments PCR analysis is considered to be seriously flawed, with the error in each case favoring the Project (Tables A4.16 and A4.17). If the problems identified in paragraphs 19 to 21 are corrected, the EIRR from the PCR declines to around 3.0 percent, similar to the level computed by the OEM. Table A4.16: Comparison of PCR and PPAR
Item Unit PCR PPAR Estimate 4.5 8.0 Overestimate by PCR (%) 33 32 Approx. Resulting Overestimate of Net Cash Flow (%) 36 35

Yields Economic price

t/ha SLRs/kg

6.0 10.6

ha = hectare, kg = kilogram, PCR = project completion report, PPAR = project performance audit report, t = ton.

33

Appendix 4, page 7

Table A4.17: PCR Cash Flow 1994 and as Modified by OEM SLRs '000 Year PCR Cash Flow Estimate OEM Cash Flow Reduction Factors Yield Price OEM Cash Flow

Old Area

New Area (368) (1,086) (3,905) (5,227) (7,546) (8,978) (11,594) (13,572) (6,437) (3,038) (1,371) 544 (1,291) 916 (335) (719) 648 1,824 2,209 2,409 2,614 2,815 3,542 5,601 4.0% 3.3%

Total

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001-40 approx EIRR 63 years EIRR 50 years

(96) (576) (2,094) 672 (1,096) (2,808) (5,204) (5,932) (1,951) (473) 764 1,072 1,170 2,226 536 526 886 2,288 2,778 3,105 3,432 3,758 4,612 6,974 10.7% 10.5%

(464) (1,662) (5,999) (4,555) (8,642) (11,786) (16,798) (19,504) (8,388) (3,511) (607) 1,616 (121) 3,142 201 (193) 1,534 4,112 4,987 5,514 6,046 6,573 8,154 12,575 6.2% 5.8%

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0.96 0.92 0.88 0.84 0.64

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0.97 0.95 0.92 0.89 0.87 0.84 0.81 0.78 0.65

(464) (1,662) (5,999) (4,555) (8,642) (11,786) (16,798) (19,504) (8,388) (3,511) (607) 1,616 (121) 3,142 201 (188) 1,451 3,780 4,450 4,581 4,664 4,694 5,374 5,231 3.6% 3.0%

0.64

0.65

EIRR = economic internal rate of return, OEM = operations evaluation mission, PCR = project completion report.

Table A4.1: Project Financial Investment Cost Current $'000

Item A. Investment Costs Foreign Dam, Irrigation, Roads IWMI TAsb Agriculture Settlement Total Irrigation Componentc Total Foreign Cost Local Dam, Irrigation, Roads Agriculture Settlement Total Irrigation Componentc Total Local Cost Total investment cost 1980a 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Total

3,743

6,056

2,883

4,458 1 118 4,518 4,577

5,699 11 149 5,779 5,859

5,651 1 339 5,821 5,991

2,517

2,915 88 100 587 3,346 3,690

1,252 88 153 1,201 2,017 2,694

280 158 531 625 969

633 81 253 800 967

471 150 230 136 804 987

143 150 80 106 386 479

245 75 64 541 623 925

267 59 368 481 694

37,213 34 550 938 4,466 40,465 43,167

2 3,744 3,745

4 6,058 6,060

46 2,906 2,929

85 2,560 2,602

910 10 915 920 4,665

3,525 16 3,533 3,541 9,601

2,814 226 2,927 3,040 5,969

4,793 3 606

4,889 2 465

6,486 2 633

3,649 2 468 3,884 4,119 6,721 228

2,460 37 1,807 3,382 4,304 7,994 216 8,209

1,921 207 1,968 3,009 4,096 6,790 279 7,068

395 276 1,168 1,117 1,839 2,808 264 3,072

917 171 711 1,358 1,799 2,766 304 3,070

1,419 264 507 1,805 2,190 3,177 354 3,531

440 139 462 741 1,041 1,520 160 1,680

710 365 965 1,375 2,040 2,965 346 3,311

679 271 623 1,126 1,573 2,267 273 2,540

24 111 80 135 135 261 396 249 249 237 237 225 225 189

36,031 1,739 10,746 42,274 48,516 91,683 2,685

5,098 5,123 6,804 5,402 5,356 7,121 9,979 11,215 13,112

B. Recurrent, Administrative, and O&M Total Costd

a

4,665

9,601

5,969

9,979 11,215 13,112

6,949

189 94,368

IWMI = International Irrigation Management Institute, O&M = operation and maintenance, PCR = project completion report, TA = technical assistance. 1980 costs include 1978 ($78,000) and 1979 costs ($1.39 million). b Annual allocation estimated. Fifty percent of cost allocated to Walawe Irrigation Improvement Project. c Dam, irrigation, roads, consultancy, benefit monitoring and evaluation, settlement, and half agriculture costs. d The only other estimate of annual investment cost is from the Phase II appraisal report (Table 5, Appendix 16). If these are converted to nominal costs, they suggest a cost in 1980 of about $76 million,

Appendix 4, page 8

Item Foreign Investment Cost Irrigation and Related Costs MUV Index (2000 = 1.00)a Constant Cost (2000 $) Local Investment Costb Irrigation and Related Costs Border Price Adjustmentb Local Cost in Current SLRs GDP deflator (2000=100)c Local Cost in 2000 SLRs Constant Cost (2000 $) Total Economic Investment Cost

Unit $'000

1980 3,744 0.66 70.23 5,659

1981 6,058 0.68 72.22 8,904

Table A4.2: Project Economic Investment and Operation and Maintenance Cost Constant 2000 $'000 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 2,906 4,518 0.67 0.65 71.17 69.49 4,334 6,900 5,779 0.64 68.03 9,018 5,821 0.65 68.55 9,014 2,560 0.76 80.92 3,358 3,346 0.84 88.89 3,996 2,017 0.90 95.28 2,247 625 0.89 94.65 700 800 0.94 100.00 849

1993

1994

1995

1996

1997

1998

1999

2000

$'000

804 386 623 481 0.96 1.00 1.00 1.04 1.12 1.08 1.02 0.98 0.98 1.00 102.20 106.60 106.29 110.16 119.18 114.15 108.38 104.19 103.56 106.15 835 384 622 463

$'000 $'000 million

million $'000 $'000

915 3,533 824 3,180 13.6 61.2 17 18 17 18 81.7 347.7 1,037 4,413 6,696 13,317

2,927 5,098 5,123 6,804 2,634 4,588 4,610 6,123 54.8 107.9 117.3 166.3 19 22 26 26 19 22 26 26 283.2 486.8 452.0 634.8 3,594 6,178 5,736 8,056 7,928 13,078 14,754 17,070

3,884 3,496 97.9 28 28 353.2 4,482 7,840 228 205 28 740

3,382 3,044 89.6 30 30 302.1 3,834 7,830 216 194 30 655 29

3,009 2,708 86.1 33 33 260.3 3,303 5,550 279 251 33 758 32

1,117 1,005 36.2 36 36 99.9 1,268 1,968 264 238 36 656 36

1,358 1,222 49.0 44 44 112.5 1,428 2,277 304 274 44 629 40

1,805 1,624 67.2 48 48 139.1 1,766 2,601 354 319 48 660 41

741 666 29.2 53 53 55.0 698 1,082 160 144 53 271 44

1,375 1,238 59.8 58 58 102.8 1,305 1,927 346 312 58 536 48

1,126 1,013 50.1 64 64 78.8 999 1,462 273 246 64 387 49

80 72 3.7 69 69 5.3 68 68 261 235 69 341 51

35

77 77

84 84

89 89

94 94

100 100

Recurrent, Administrative, and O&M $'000 Border Price Adjustmentb $'000 GDP deflator (2000=100)c Total Recurrent, Admin, and O&M $'000

15

18

19

22

26

26

249 224 77 290 55

237 213 84 254 59

225 203 89 228 65

189 171 94 181 70

100

Average Exchange Rate SLRs/$ 17 19 21 24 25 27 28 GDP = gross domestic product, MUV = manufacturing unit value, O&M = operation and maintenance. Source World Bank, Commodity Price Projections (Mar 1999). b Source ADB, Recent Conversion Factors for the Economic Analysis of Projects (Oct 1995) SCF = 0.90. c Source Central Bank of Sri Lanka, Annual Reports.
a

79

Appendix 4, page 9

Table A4.3: Irrigable and Irrigated Areas With and Without Project Item Irrigable Area Without Project Irrigable Area With Project Old area + Badagiriya Extension Areas Total Irrigable Area Unit ha ha ha ha 1980 4,525 4,525 4,525 1981 4,525 4,525 4,525 1982 1983 4,525 4,525 4,525 4,525 4,525 4,525 1984 4,525 4,525 4,525 1985 4,525 4,525 4,525 1986 4,525 4,525 4,525 1987 4,525 4,525 1,400 5,925 1988 4,525 4,525 4,200 8,725 1989 4,525 4,525 4,600 9,125 1990 4,525 4,525 5,222 9,747 1991 4,525 4,525 5,400 9,925 1992 4,525 4,525 5,400 9,925 1993 4,525 4,525 5,400 9,925 1994 4,525 4,525 5,400 9,925 1995 4,525 4,525 5,400 9,925 1996 4,525 4,525 5,400 9,925 1997 4,525 4,525 5,400 9,925 1998 4,525 4,525 5,400 9,925 1999 4,525 4,525 5,400 9,925 2000 4,525 4,525 5,400 9,925

Landuse Without Project a Rainfed Cropping ha 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Irrigated Area Wet Season ha 4,254 4,254 4,254 4,254 4,254 4,254 4,254 4,254 4,254 Dry Season ha 2,036 2,036 2,036 2,036 2,036 2,036 2,036 2,036 2,036 Landuse With Project Reservoir ha 2,500 3,500 Slash and Burn on Reservoir Area ha 3,500 3,500 3,500 3,500 3,500 3,500 3,500 1,000 Rainfed Slash and Burn ha 5,500 5,500 5,500 5,500 5,500 5,500 5,500 4,100 1,300 Rainfed Permanent Cropping ha 200 200 200 200 200 200 200 150 100 Total rainfed cropping ha 2,000 2,000 2,000 2,000 2,000 2,000 2,000 1,170 360 Irrigated Area Irrigated Area Wet Season ha 4,254 4,254 4,254 4,254 4,254 4,254 4,254 5,333 4,842 Dry Season ha 2,036 2,036 2,036 2,036 2,036 2,036 2,036 1,778 1,614 Total Irrigated Area ha 6,290 6,290 6,290 6,290 6,290 6,290 6,290 7,110 6,456 Cropping Intensity Wet Season % 94% 94% 94% 94% 94% 94% 94% 90% 55% Dry Season % 45% 45% 45% 45% 45% 45% 45% 30% 18% Average % 139% 139% 139% 139% 139% 139% 139% 120% 74% a 200 ha permanent cropping plus 1 in 5 year cropping on 3,500 ha reservoir and 5,500 ha irrigation extension area. Source: Department of Agriculture, Department of Irrigation. Without project landuse based on appraisal estimates.

36

2,000 4,254 2,036 3,500 900 50 230 5,145 1,681 6,826 56% 18% 75%

2,000 4,254 2,036 3,500 278 56 6,737 4,344 11,081 69% 45% 114%

2,000 4,254 2,036 3,500 100 20

2,000 4,254 2,036 3,500 100 20

2,000 4,254 2,036 3,500 100 20

2,000 4,254 2,036 3,500

2,000 4,254 2,036 3,500

2,000 4,254 2,036 3,500

2,000 4,254 2,036 3,500

2,000 4,254 2,036 3,500

2,000 4,254 2,036 3,500

2,000 4,254 2,036

10,341 10,454 9,886 9,616 10,809 11,273 8,574 8,893 9,646 9,261 4,542 1,278 4,090 10,022 9,009 5,336 7,434 9,743 9,772 7,970 14,883 11,732 13,976 19,638 19,818 16,609 16,008 18,636 19,418 17,231 104% 46% 150% 105% 13% 118% 100% 41% 141% 97% 101% 198% 109% 91% 200% 114% 54% 167% 86% 75% 161% 90% 98% 188% 97% 98% 196% 93% 80% 174%

Appendix 4, page 10

Table A4.4: Cropped Area and Cropping Intensity With and Without the Project
Cropped Area Without Project Rainfed Area Rice (wet season) Rice (dry season) Banana (wet season) Banana (dry season) Other (wet season) Other (dry season) Total Irrigated Area With Project Rainfed Area Rice (wet season) Rice (dry season) Banana (wet season) Banana (dry season) Other (wet season) Other (dry season) Total Irrigated Area Incremental Irrigation Unit ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 2,000 4,149 1,383 1991 2,000 3,380 1,127 1992 2,000 3,601 1,200 1993 2,000 3,561 1,187 1994 2,000 3,508 1,169 43 746 289 5,754 1995 2,000 3,898 600 44 48 313 907 5,808 1996 2,000 3,683 1,228 65 83 506 555 6,119 1997 2,000 3,232 1,077 90 95 932 850 6,276 1998 2,000 4,048 1,349 100 139 106 99 5,840 1999 2,000 4,016 1,339 185 200 53 59 5,851
2000 2,000 3,755 1,252 210 210 289 25 5,740

2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 4,254 4,254 4,254 4,254 4,254 4,254 4,254 4,254 4,254 4,254 1,418 1,418 1,418 1,418 1,418 1,418 1,418 1,418 1,418 1,418

5,671 5,671 5,671 5,671 5,671 5,671 5,671 5,671 5,671 5,671 2,000 2,000 2,000 2,000 2,000 2,000 2,000 1,170 360 230 4,254 4,254 4,254 4,254 4,254 4,254 4,254 5,333 4,842 4,842 2,036 2,036 2,036 2,036 2,036 2,036 2,036 1,778 1,614 1,614

105 124 5,761 56 6,528 4,096

874 119 5,499 20 8,594 4,304

653 104 5,558 20 9,148 1,070

693 560 6,001 20 8,501 2,970

37

303 209 67 248 6,290 6,290 6,290 6,290 6,290 6,290 6,290 7,110 6,456 6,826 11,081 618 618 618 618 618 618 618 1,439 785 1,155 5,321

8,125 10,097 10,131 6,530 8,481 9,170 8,264 9,360 7,100 4,060 5,544 9,268 9,255 7,500 420 87 130 180 200 370 420 85 95 166 190 277 400 577 1,747 1,306 1,385 1,491 625 1,012 1,864 212 106 50 238 208 1,120 577 1,814 1,110 1,700 198 117 14,883 12,842 10,892 18,550 20,864 13,812 14,191 18,636 19,336 17,231
17,368

9,384

7,284

4,892 12,796 15,056

7,693

7,915 12,796 13,486 11,491

Source: Irrigation Management Department, Appraisal for pre-project land use.

Appendix 4, page 11

Table A4.5: Yields of Major Crops Without & With the Project Item Without Projecta Rainfed Pulse Crops Wet Season Rice Dry Season Rice Banana (per season) OFC's Wet Season OFC's Dry Season With Projecta Rainfed Pulse Crops Wet Season Rice Dry Season Rice Banana (per season) Wet Season (gram) Dry Season (Chili)
b b b

Unit t/ha t/ha t/ha t/ha t/ha t/ha

1980 0.7 3.2 3.0 9.0 1.0 1.0 0.0 0.0 0.7 3.2 3.0 9.0 1.0 1.6

1981 0.7 4.0 3.8 9.0 1.0 1.0

1982 1983 0.7 4.5 4.3 9.0 1.0 1.0 0.7 4.1 3.9 9.0 1.0 1.0

1984 0.7 3.5 3.3 9.0 1.0 1.0

1985 0.7 4.1 3.9 9.0 1.0 1.0

1986 0.7 4.1 3.9 9.0 1.0 1.0

1987 0.7 2.9 2.7 9.0 1.0 1.0

1988 0.7 2.9 2.7 9.0 1.0 1.0

1989 0.7 2.9 2.7 9.0 1.0 1.0

1990 0.7 2.9 2.7 9.0 1.0 1.0

1991 0.7 2.9 2.7 9.0 1.0 1.0

1992 0.7 3.0 2.8 9.0 1.0 1.0

1993 0.7 3.0 2.8 9.0 1.0 1.0

1994 0.7 3.0 2.8 9.0 1.0 1.0

1995 0.7 3.0 2.8 9.0 1.0 1.0

1996 0.7 3.0 2.8 9.0 1.0 1.0

1997 0.7 3.0 2.8 9.0 1.0 1.0

1998 0.7 3.0 2.8 9.0 1.0 1.0

1999 0.7 3.0 2.8 9.0 1.0 1.0

2000 0.7 3.0 2.8 9.0 1.0 1.0 38

t/ha t/ha t/ha t/ha t/ha t/ha

0.7 4.0 3.8 9.0 1.0 1.6

0.7 4.5 4.3 9.0 1.0 1.6 8.0

0.7 4.1 3.9 9.0 1.0 1.6 8.0

0.7 3.5 3.3 9.0 1.0 1.6 8.0

0.7 4.1 3.9 9.0 1.0 1.6 8.0

0.7 4.1 3.9 9.0 1.0 1.6 8.0

0.7 4.2 4.0 9.0 1.1 1.6 8.0

0.7 4.1 3.9 10.0 1.2 1.6 8.0

0.7 4.2 4.0 10.0 1.3 1.6 8.0

0.7 4.3 4.1 10.0 1.4 1.6 8.0

0.7 4.5 4.3 10.0 1.4 1.6 8.0

0.7 3.4 3.2 10.0 1.4 1.6 8.0

0.7 3.8 3.4 10.0 1.4 1.6 8.0

0.7 3.6 3.4 10.0 1.4 1.6 8.0

0.7 4.3 3.7 10.0 1.4 1.6 8.0

0.7 4.1 3.9 10.0 1.4 1.6 8.0

0.7 4.2 3.8 10.0 1.4 1.6 8.0

0.7 4.2 4.0 10.0 1.4 1.6 8.0

0.7 4.2 4.1 10.0 1.4 1.6 8.0

0.7 3.9 3.6 10.0 1.4 1.6 8.0

Dry Season (Onion) t/ha 8.0 8.0 OFC = other field crop, t/ha = ton per hectare.
a

Actual yields dry season 1995 to dry season 2000 reported by Department of Agriculture. Earlier yields based on relative performance for Walawe scheme and Kirindi Oya for years for which yield data are available.

Examples of vegetables selected for costing purposes. Source: Department of Agriculture, International Water Management Institute Impact Evaluation report, and Operations Evaluation Mission estimates.

Appendix 4, page 12

Table A4.6: Physical Inputs for Major Crops With and Without the Project Rainfed Green gram 25 Without Project Rice Banana OFC With Project Rice Banana Green Chili gram Dry 125 1,500 130 130 180 1,000 2 4 2 4 2 200 260 6 40 70 12 230 277 12 240 200 30 80 60 700 100 100 250 100 75 40 1

Inputs Seed

Unit kg/ha plants/ha

Onion Dry 150

125 1,500

50

Fertilizer Urea kg/ha 200 130 30 240 Triple superphosphate kg/ha 60 130 50 60 Muriate of potash kg/ha 40 180 50 40 Organic kg/ha 1,000 Agrochemicals Insecticide kg/ha 2 2 2 Insecticide l/ha 2 2 Fungicide kg/ha Herbicide l/ha 4 6 Land Preparation Tractor 2-wheel days/ha 4 6 2 4 6 Labor Hired days/ha 10 30 200 10 48 Family days/ha 30 90 260 75 70 ha = hectare, kg = kilogram, l = liter, OFC = other field crop. Source: Impact Evaluation study and Operations Evaluation Mission estimates.

3 4 3

39 Appendix 4, page 13

Table A4.7: Estimated Economic Prices for Internationally Traded Outputs Item a Unhusked rice value Rice FOB Bangkok (1990 $) Rice FOB Bangkok (2000 $) b Less Quality Markdown FOB Bangkok (2000$) Unit $/t 1980 571 606 121 485 30 515 (10) 505 338 9 329 1981 669 710 142 568 30 598 (10) 588 394 9 385 1982 412 437 87 350 30 380 (10) 370 248 9 239 1983 399 423 85 338 30 368 (10) 358 240 9 231 1984 370 393 79 315 30 345 (10) 335 224 9 215 1985 287 305 61 244 30 274 (10) 264 177 9 168 1986 261 277 55 212 30 242 (10) 232 155 1987 259 275 55 227 30 257 (10) 247 165 1988 316 335 67 241 30 271 (10) 261 175 1989 338 359 72 256 30 286 (10) 276 185 1990 271 288 58 230 30 260 (10) 250 168 9 159 7,000 16,086 204 1991 308 327 65 262 30 292 (10) 282 189 1992 251 266 53 213 30 243 (10) 233 156 1993 221 235 47 188 30 218 (10) 208 139 1994 243 258 52 206 30 236 (10) 226 152 1995 269 286 57 229 30 259 (10) 249 167 1996 297 316 63 252 30 282 (10) 272 183 1997 281 298 60 238 30 268 (9) 259 174 1998 292 310 62 248 30 278 (10) 268 179 1999 240 255 51 204 30 234 (10) 224 150 2000 236 250 50 200 30 230 (10) 220 147

$/t

Shipping to Colombo $/t CIF Colombo $/t Transport from Project Area $/t Project Area Wholesale Value $/t c Unhusked Rice (paddy) Value $/t Less Processing, Bran Value, and Farm Transport $/t Economic Farmgate Price $/t d SLR/t Farmgate Financial Price converted to 2000 SLRs SLR/t Cost in 2000$ $/t

9 9 9 9 147 157 166 176 3,380 3,750 4,220 5,805 12,190 12,642 12,754 16,009 155 160 162 203

9 9 9 9 9 9 9 9 9 9 180 147 130 143 158 174 165 171 141 139 7,310 8,110 7,345 7,500 8,370 8,840 8,928 9,500 12,000 10,000 15,136 15,269 12,632 11,796 12,144 11,439 10,649 10,682 12,720 10,000 192 194 160 150 154 145 135 136 161 127

Soybean US CIF Rotterdam $/t 229 229 229 229 229 Economic Farmgate Price $/t 257 257 257 257 257 CIF = cost, insurance, freight; FOB = free on board; t = ton. a Thai, 5% broken, FOB Bangkok ($/t). b Average markdown for lower quality = 20% c Conversion rate of 67 percent to milled rice. d Data from IWMI (pers com). Source: International prices, World Bank Commodity Price Projections, April 2000.

229 257

229 257

233 261

238 266

242 270

247 275

240 268

236 264

255 283

252 280

259 287

304 332

295 323

243 271

230 258

235 263

40

Table A4.8: Estimated Economic Prices for Internationally Traded Inputs Item Unit 1980 1981 Urea a FOB Europe (bagged) 1990$ $/t 222 216 2000$ $/t 336 317 Shipping to Colombo $/t 45 45 CIF Colombo $/t 362 362 Local Transport Costs $/t 10 10 Economic Farmgate Price $/t 372 372 Triple Superphosphate a FOB US Gulf (bulk) current$ $/t 180 161 2000$ $/t 272 237 Economic Farmgate Price $/t 330 330 Muriate of Potash a FOB US Gulf (bulk) $/t 87 87 Economic Farmgate Price $/t 180 180 CIF = cost, insurance, freight; FOB = free on board; t = ton. a World Bank, Commodity Price Projections, March 1999 1982 159 237 45 282 10 292 138 206 299 87 180 1983 135 206 45 251 10 261 135 206 299 87 180 1984 171 267 45 312 10 322 131 204 297 87 180 1985 136 211 45 256 10 266 121 187 280 87 180 1986 107 140 45 185 10 195 121 159 252 87 180 1987 117 140 45 185 10 195 114 136 229 90 183 1988 155 173 45 218 10 228 158 176 269 92 185 1989 170 191 45 236 10 246 165 185 278 95 188 1990 220 234 45 279 10 289 132 140 233 98 191 1991 172 179 45 224 10 234 133 138 231 109 202 1992 140 139 45 184 10 194 121 120 213 112 205 1993 107 107 45 152 10 162 112 112 205 107 200 1994 148 143 45 188 10 198 132 127 220 106 199 1995 212 189 45 234 10 244 150 133 226 118 211 1996 205 191 45 236 10 246 176 163 256 118 211 1997 146 143 45 188 10 198 172 168 256 118 211 1998 103 105 45 150 10 160 173 176 256 118 211 1999 78 80 45 125 10 135 155 158 256 118 211 2000 90 90 45 125 10 135 142 142 251 118 211

Appendix 4, page 14

Table A4.9: Summary of Economic Prices for Project Outputs and Inputs Item Outputs Green gram Rice Banana Chili Dry Season Onion Dry Season OFC's Unit $/t $/t $/t $/t $/t $/t 1980 480 329 1,429 257 257 1981 480 385 1,429 257 257 1982 480 239 1983 480 231 1984 480 215 1,429 257 257 1985 480 168 1,429 257 257 1986 480 147 1,429 257 257 1987 486 157 1,429 257 261 1988 495 166 1,429 257 266 1989 503 176 1,429 257 270 1990 512 159 1,429 257 275 1991 595 180 1,429 257 268 1992 590 147 1,429 257 264 1993 492 130 1,429 257 283 1994 526 143 150 1,429 257 280 1995 543 158 150 1,429 257 287 1996 446 174 150 1,429 257 332 1997 602 165 150 1,429 257 323 1998 504 171 150 1,429 257 271 1999 480 141 150 1,429 257 258 2000 500 139 150 1,429 257 263

1,429 1,429 257 257 257 257

Inputs Seed Green gram $/t 600 600 600 600 600 600 600 608 619 629 Rice $/t 482 482 299 289 269 210 183 196 208 220 Banana plants $/'000 100 100 100 100 100 100 100 100 100 100 Gram Wet Season $/t 600 600 600 600 600 600 600 608 619 629 Chili Dry Season $/t 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Onion Dry Season $/t 571 571 571 571 571 571 571 571 571 571 OFC's $/t 283 283 283 283 283 283 283 287 293 297 Fertilizer Urea $/t 372 372 292 261 322 266 195 195 228 246 Triple Superphosphate $/t 330 330 299 299 297 280 252 229 269 278 Muriate of Potash $/t 180 180 180 180 180 180 180 183 185 188 Organic $/t 7 7 7 7 7 7 7 7 7 7 Agrochemicals Insecticide $/kg 1 1 1 1 1 1 1 1 1 1 Insecticide $/lit 11 11 11 11 11 11 11 11 11 11 Fungicide $/kg 6 6 6 6 6 6 6 6 6 6 Herbicide $/lit 1 1 1 1 1 1 1 1 1 1 Land Preparation Tractor 2-wheel $/day 9 9 9 9 9 9 9 9 9 9 Labor Hired $/day 2.29 2.29 2.29 2.29 2.29 2.29 2.29 2.29 2.29 2.29 Family $/day 2.29 2.29 2.29 2.29 2.29 2.29 2.29 2.29 2.29 2.29 Exchange Rate 2000 SLRs/$ 70.0 Shadow Labor Rate 80% kg = kilogram, lit = liter, OFC = other field crop, t = ton.

640 199 100 640 10,000 571 303 289 233 191 7 1 11 6 1 9 2.29 2.29

744 738 615 658 679 558 753 630 600 625 225 184 163 179 197 217 206 213 176 173 100 100 100 100 100 100 100 100 100 100 744 738 615 658 679 558 753 630 600 625 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 571 571 571 571 571 571 571 571 571 571 295 290 311 308 316 366 356 298 284 289

41

234 231 202 7 1 11 6 1 9 2.29 2.29

194 213 205 7 1 11 6 1 9 2.29 2.29

162 205 200 7 1 11 6 1 9 2.29 2.29

198 220 199 7 1 11 6 1 9 2.29 2.29

244 226 211 7 1 11 6 1 9 2.29 2.29

246 256 211 7 1 11 6 1 9 2.29 2.29

198 256 211 7 1 11 6 1 9 2.29 2.29

160 256 211 7 1 11 6 1 9 2.29 2.29

135 256 211 7 1 11 6 1 9 2.29 2.29

135 251 211 7 1 11 6 1 9 2.29 2.29

Appendix 4, page 15

Item Without Project Production Green gram (rainfed) Rice Banana OFCs Value of Production Green gram (rainfed) Rice Banana OFCs Total Value Production Costs Green gram (rainfed) Rice Banana OFCs Total Costs Net Value of Production With Project Production Green gram (rainfed) Rice Banana a OFCs Wet Season b OFCs Dry Season c OFCs Dry Season Value of Production Green gram (rainfed) Rice Banana OFC's Wet Season OFC's Dry Season OFC's Dry Season Total Value Production Costs Green gram (rainfed) Rice Banana OFC's Wet Season OFC's Dry Season OFC's Dry Season Total Costs

Unit t t t t $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

1980 1981

1982

1983

1984

Table A4.10: Incremental Net Value of Production 1985 1986 1987 1988 1989 1990 1991 1,400 15,766 457 717 2,504 126 3,346 287 2,611 63 2,961 385

1992

1993

1994

1995

1996

1997

1998

1999

2000

1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 22,402 22,402 25,237 22,969 19,566 22,969 22,969 16,163 16,163 16,163 370 672 8,629 672 8,629 672 672 6,030 5,317 672 4,216 672 3,858 672 3,370 680 2,534 693 2,686 704 2,848 100 3,652 286 2,593

1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 12,844 14,162 14,007 13,798 13,373 14,485 12,711 15,920 15,794 14,770 383 819 1,332 1,665 2,147 3,465 3,780 1,985 1,514 2,505 2,068 2,439 2,122 3,564 410 223 627 833 2,311 532 3,676 292 2,570 272 3,133 543 826 2,089 400 3,315 292 2,491 206 2,988 326 689 1,827 709 3,225 286 2,435 339 3,060 165 736 1,972 57 579 3,345 288 2,491 28 282 3,089 256 760 2,111 123 701 3,695 289 2,499 60 336 3,184 511 624 2,518 200 705 4,047 283 2,057 99 296 2,734 1,313 843 2,097 250 1,153 4,342 292 2,139 123 494 3,048 1,294 706 2,719 322 111 3,857 286 2,083 157 56 2,583 1,274 672 2,230 520 58 3,479 285 2,007 254 30 2,576 903 700 2,048 567 165 3,480 286 1,927 276 85 2,575 905

9,301 285 2,937

9,301 285 2,937

6,702

5,989

4,888 285 2,719

4,530 285 2,607

4,042 285 2,499

3,214 285 2,500

3,379 286 2,560

285 285 2,706 2,665

3,222 6,079

3,222 6,079

2,991 2,950 3,711 3,039

3,003 1,884

2,892 1,639

2,784 1,259

2,785 429

2,845 533

2,879 773

t t t t t t $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

1,400 1,400 1,400 1,400 1,400 1,400 1,400 819 252 161 24,752 24,752 27,897 25,381 21,607 25,381 25,381 29,507 26,039 26,792 394 54 268 672 8,155 672 9,534 672 672 6,665 5,875 672 4,655 672 4,264 672 3,724 398 4,626 125 4,327 81 4,721 198 77 69 5,146 33 2,998

39 44,864 293 198 992 20 7,125 150 283 255 7,834 8 4,987 46 82 85 5,209 2,625 2,239

14 14 14 57,180 34,515 42,402 61,074 69,671 57,462 48,739 73,097 76,910 58,999 850 1,820 2,960 3,700 4,770 7,700 8,400 2,446 1,828 1,939 2,087 875 1,417 2,610 297 148 808 190 166 896 462 1,451 888 1,360 158 94 40 952 832 4,480 2,308 7,256 4,440 6,800 792 468 200 8 10,289 1,455 272 245 12,269 3 5,931 0 45 672 81 6,732 5,536 4,994 8 5,091 1,079 238 214 6,630 3 4,541 0 39 493 70 5,146 1,483 1,157 7 5,530 954 1,280 1,152 8,923 3 4,970 0 206 515 375 6,068 2,855 2,690

42

8,827 10,206 285 3,335 285 3,335

7,337

6,547

5,327 285 3,080

4,936 285 2,942

4,396 285 2,804

5,024 167 3,171

4,451 51 2,956

8,730 10,998 9,989 8,040 12,483 10,858 128 273 444 555 716 1,155 1,098 475 632 1,571 150 71 659 2,073 1,269 1,943 226 134 593 1,866 1,142 1,749 204 120 11,209 15,685 13,476 13,857 13,778 12,339

8,182 1,260 404 57 51 9,954

285 285 3,059 3,005

3,620

3,620

3,343 3,993 283

3,290 3,257 218

3,365 1,963 78

3,227 1,709 70

3,089 1,307 48

3,338 1,686 1,257

3,007 1,444 911

3,031 2,114 1,341

7,775 28 107 564 195 8,669 2,540 2,284

7,892 89 340 242 618 9,181 6,504 120 5,993

6,580 142 207 393 379 7,700 5,775 140 4,463

5,443 182 322 707 576 7,231 6,626 120 5,332

7,856 224 37 79 67 8,262 5,515 105 4,241

7,959 375 22 39 39 8,434 3,905 90 3,002

6,798 415 9 213 17 7,451 2,503 75 1,598

Appendix 4, page 16

Net Value of Production $'000 6,586 6,586 Institutional Strengthening TA $'000 Net Incremental Value $'000 507 507 OFC = other field crop, t = ton, TA = technical assistance. a OFC's Wet Season - costed example - Green gram. b OFC's Dry Season - costed example Chili. c OFC's Dry Season - costed example Red Onion.

43

Appendix 4, page 17

Table A4.11: Financial Crop Budgets Per Hectare With and Without the Project Without Project Rice Banana NRC Dry Wet 2.8 152 426 18.0 150 2,700 1.0 258 258 With Project Rice Banana Gram Dry Wet 3.7 152 565 20.0 150 3,000 1.4 480 672

Item Outputs Yield Price Output Inputs Seed Fertilizer Urea Triple Superphosphate Muriate of Potash Organic Agrochemicals Insecticide Insecticide Fungicide Herbicide Land Preparation Tractor 2-wheel Labor Hired Family Total Costs Net Margin

Unit t/ha $/t $/ha

Rice Wet 3.0 152 457

NRC Dry 1.0 258 258

Rice Wet 4.3 152 653

Chili Onion Dry Dry 1.6 1,429 2,286 8.0 257 2,057

$/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha

23 27 15 8

23 27 15 8

35 18 33 38 7 2

12 4 13 11

12 4 13 11

23 27 15 8

23 27 15 8

35 18 33 38 7 2

22 4 20 13

9 94 25 21

76 34 25 16

2 20 12 48 69 224 233

2 20 12 48 69 224 203

2 20 18

2 20 18 48 110 271 294 70 4.2

40 10 12 16 457 605 2,395 260 9.2 48 91 211 461 70 6.6 96 526 821 1,465 277 5.3

3 40 15

16 457 605 2,095 260 8.1

32 23 94 164 75 2.2

32 23 94 164 75 2.2

48 110 271 382 70 5.5

96 549 853 1,204 200 6.0

Family Labor d/ha 90 90 Return per day $/day 2.6 2.3 ha = hectare, NRC = non-rice-crops, t = ton.

Table A4.12: Financial Budgets for a Typical One Hectare Farm With and Without the Project Without Project - Old Area Rice Banana NRC NRC Dry Wet Dry 13% 2% 7% 20% 0.13 0.01 0.07 0.20 57 27 18 52 3 7 5 6 9 30 27 1 2 2 2 7 11 2 5 6 5 18 34 With Project - Average Rice Banana Gram Chili Onion Dry Wet Dry Dry 61% 7% 8% 2% 2% 0.61 0.04 0.08 0.02 0.02 345 105 54 46 41 14 31 24 29 67 165 180 1 3 1 16 21 84 2 3 1 4 7 17 37 2 2 1 2 11 18 23

Item Cropping Intensity (%) Cropped Area Farm Output Farm Inputsa Seed Fertilizer Agrochemicals Land Preparation Hired Labor Total Inputs Net Farm Income Interestb Irrigation Fee Farm Income Family Labor Return / Day

Unit ha $/farm $/farm

Rice Wet 86% 0.86 393 20 43 29 41 59 192 201

Farm 128% 1.27 547 26 58 34 55 80 253 294 18 7 268 89 3.0

Rice Wet 94% 0.94 614 21 47 38 45 103 254 360

Farm 174% 1.71 1206 40 89 65 83 215 492 714 31 683 134 5.1

$/farm $ $/farm $ $ days/farm $/day

5 6 21

3 1 2 11 17 29

60

14

66

43

44

Item Cropping Intensity (%) Cropped Area Farm Output Farm Inputsa Seed Fertilizer Agrochemicals Land Preparation Hired Labor Total Inputs

Unit ha $/farm $/farm

Rice Wet 98% 0.98 640 22 49 40 47 107 265

With Project - Old Area Rice Banana Chili Onion Farm Dry Dry Dry 88% 4% 2% 2% 194% 0.88 0.02 0.02 0.02 1.92 497 60 46 41 1284 20 45 35 42 97 238 1 2 1 9 12 2 2 1 2 11 18 45 100 76 93 235 550

Rice Wet 90% 0.90 588 20 45 36 43 99 243 345

With Project - New Area Rice Banana Gram Chili Onion Dry Wet Dry Dry 32% 9% 15% 2% 2% 0.32 0.05 0.15 0.02 0.02 181 135 101 46 41 7 16 13 15 35 87 94 1 4 1 21 27 108 4 6 2 7 13 32 69 2 2 1 2 11 18 23

Farm 150% 1.46 1092 34 76 53 71 189 423 668 26 643 118 5.4

$/farm

3 1 2 11 17

3 1 2 11 17 29

Appendix 4, page 18

Net Farm Income $ 376 259 48 29 23 735 Interestb $/farm 35 Farm Income $ 700 Family Labor days/farm 69 62 5 6 4 146 Return / Day $/day 4.8 a Excluding any cost for family labor b Assuming short term production loan for fertilizer & agrochemicals at 10 percent interest.

63

22

12

11

45

Appendix 4, page 19

Calendar Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 EIRR

Table A4.13: Economic Internal Rate of Return (EIRR) Constant 1999 $'000 Project Investment O & M Total Incremental Fisheries Year Cost Cost Cost Benefit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 6,696 13,317 7,928 13,078 14,754 17,070 7,840 7,830 5,550 1,968 2,277 1,082 1,927 1,462 68 6,696 13,317 7,928 13,078 14,754 17,070 8,580 8,485 6,308 2,624 2,906 1,353 2,463 1,849 409 290 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 507 507 283 218 78 70 48 1,257 911 1,341 2,239 4,994 1,157 2,690 2,284 5,993 4,463 5,332 4,241 3,002 1,598 2,956 3,071 3,953 4,274 4,460 4,617 4,604 4,589 4,589 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644 4,644

Project Cash Flow (6,189) (12,810) (7,645) (12,860) (14,676) (17,000) (8,532) (7,228) (5,370) (1,227) (584) 3,752 (1,167) 980 2,014 5,841 4,347 5,216 4,125 2,886 1,482 2,840 2,956 3,837 4,158 4,344 4,501 4,488 4,473 4,473 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 4,528 2.6%

740 655 758 656 629 271 536 387 341 290 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254 254

28 55 83 111 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139 139