This internal working paper is prepared for STAFF USE ONLY. The views expressed are not necessarily those of the World Bank. r ACldeP Mvision Working Paper No. 129 ECONOMIC ANALYSIS OF IRRIGATION REHABILITATION FBOJECTS J. Olivares R. Wieland Economics and Policy Division Agriculture and Rural Development Department A p r i l 1987 The Economic Evaluation of A g r i c u l t u r a l P r o j e c t s i n Gene* Host of the p r o j e c t s a l a r g e multinational f i n a n c i a l agency is i ~ v i t e dt o finance consist of a well defined, bulky set of infra- s t r u c t u r e works o r o t h e r m j o r investment components, whose eventual implementation and commissioning w i l l generate a p r e d i c t a b l e !stream of benef f t s , associated with an equally predictable flow of recurrent c o s t s . The s i t u a t i o n which can be predicted t o e x i s t i f and when the p r o j e c t is carried out (usually r e f e r r e d t o as t h e "with-project" s i t u a t i o n ) w i l l be d i f f e r e n t from the one expected t o exist i f t h i s is not carried out ( t h e ."without-project" s i t u a t i o n ) . The economic assessment of a p r o j e c t c o n s i s t s of comparing the one with the other t o determine whether t h e ~ l t h - p r o j e c t s i t u a t i o n is significant1.y b e t t e r than the without-project cne, and vhether t h e d i f f e r e n c e between t h e two is large enough t o pay f o r the cost of the i n i t i a l investinent plus t h e b e n r f i t s t h a t the resources required f o r the investment vould have generated elsewhere i f the project is not c a r r i e d art. The c r i t i c a l word here is a d d i t i o n a l i t y : what g e t s compared is the additional b e n e f i t s the p r o j e c t is expected t o generate (i.e., the w l t l r p r o j e c t s i t u a t i o n minus tne without-project one) with t h e a d d i t i o n a l costs it implies. To c a r r y out t h a t compariscn, i.e., t o assess a p r o j e c t ' s worthiness, s e v e r a l a c t i v i t i e s must be performed. In very brotd terms, these can be lumped i n t o three groups: ( 1 ) t o i d e n t i f y a l l c o s t s and a l l b e n e f i t s associated with the proposed p r o j e c t , ( i i ) t o define t h e without-project s i t u a t i o n , and (111) t o s e l e c t a proper way of comparing the c o s t s and the beneff.ts over time. The i d e n t i f i c a t ~ o nof a l l relevant project c o s t s and b e n e f i t s must be c a r r i e d out systematically, going through the network of p r o j e c t a c t i v i t i e s i n order not t o overlook any s i g n i f i c a n t item. Both d i r e c t and i n d i r e c t c o s t s and b e n e f i t s must be included, both on-site and elsewhere - p a r t i c u l a r l y downstream, and those l i k e l y t o occur i n the present a s well a s those l i k e l y t o occur i n the future. Pa.rticular care must be taken t o i d e n t i f y items which a r e not q u i t e v i s i b l e , hidden or otherwise not r e a d i l y apparent. Provision for physical contingencies must always be included, as well as contingencies f o r p r i c e v a r i a t i o n s whenever appropriate. Costs imposed on, and benefits accruing t o , persons and a c t i v i t i e s o t h e r than those d i r e c t l y linked t o the p r o j e c t -- t h e so-called e x t e r n a l i t i e s - must be explicitly i d e n t i f i e d and included. Financial c o s t s and b e n e f i t s , as w e l l as t a x e s , s u b s i d i e s , and t r a n s f e r payments, must be included i n t h e a n a l y .s a t m a r ~ e tp r i c e s (which the Bank c a l l s "financial" a n a l y s i s ) , - - icluded i n t h e a n a l y s i s a t s o c i a l p r i c e s j"economica anaiysis). In sb-A very c ~ m p l i c a t e dcases (e-g., an estuary c l o s i n g d&n oil a s o f t sediment a r e a ) , the Bank has requested a c t u a l bid estimates f o r the coat of major i n d i v i d u a l items. Production foregone because of p r o j e c t implementation o r operation a c t i v i t i e s (such as t h e suspension of annual c r o ~ p i n g a c t i v i t i e s while land is leveled) must always be included a s p r o j e c t c o s t s ( o r as a reduction i n p r o j e c t b e n e f i t s ) . The d e f i n i t i o n of the without-project s i t u a t i o n is usually easy, but may be one of the t r i c k i e s t parzs i n the evaluation of p r o j e c t s involving a c t i v i t i e s such as soil conservation and i r r i g a t i o n . ~t is usually easier t o forecast what will happen if a certain invest- ment a c t i v i t y is c a r r i e d out than what would i f it is not. Algain, a systematic approach is the most h e l p f u l hint. A more detailed d i s c u s s i o n on t h i s item is presented below i n the context of i r r i g a t i o n r e h a b i l i t a t i o n p r o j e c t s . A p r o j e c t ' s investment c o s t s a r e incurred i n the f i r s t years of its l i f e ; its recurrent c o s t s a s w e l l ae its b e n e f i t s atow up l a t e r . In almost every p r o j e c t i n t h e a g r i c u l t u r a l f i e l d , t h i r ~l e a d s t o a cash flow with Large negative entrier i n t h e f i r s t few years, which then becomes progressively smaller and eventually p o s i t i v e , t o then i n c r e a s e up t o t h e p r o j e c t ' s ' f u l l development" year, when the flow of b e n e f i t s a t t r i b u t a b l e t o the p r o j e c t reaches its peak. Im most c a s e s but not all, it remains at t h a t l e v e l f o r the r e s t of the p r o j e c t l i f e . Figure 1 shovs t h e t y p i c a l shape of an a g r i c u l t u r a l p r o j e c t ' s c o s t and b e n e f i t curves. But the worth of money now is larger than t h a t of' money sometime i n the f u t u r e ; the discount r a t e is t h e t o o l u t i l i z e d 'to make them comparable. Two main groups of lnethods a r e u t i l i z e d to perform the comparison. F i r s t , t h e r e are methods which r e l y on an e x t ~ e r n a l l y determined r a t e of discount: cost-benef it r a t i o , n e t present worth, and the l i k e . The main problem with these methods is t h a t t h e r e is no "independent" source t o determine t h e proper rate of discount to be used i n a p a r t i c u l a r case; d i f f e r e n t economists can present s i ~ m i l a r l y convincing arguaents t o j u s t i f y d i f f e r e n t razes. or r a t h e r marginal p r o j e c t s , the d i f f e r e n c e between say, a n 8% and a 10% r a t e of discount may be the d i f f e r e n c e between acceptance and r e j e c t i o n . And second, t h e r e a r e methods - b a s i c a l l y the i n t e r n a i r a t e of r e t u r n --which compute t h e " i n t r i n s i c " r a t e of discount of a p r o j e c t ' s cash1 flow, i.e., t h e r a t e which equates over time the negative and the piositive e n t r i e s i n the flow.&/ - The Economic Svaluation of I r r i g a t i o n P r o j e c t s I r r i g a t i o n p r o j e c t s a r e assessed following t h e general proce- dure b r i e f l y o u t l i n e d above. As any p a r t i c u l a r subsector, though, the assessme3t process has sorae p e c u l i a r i t i e s . Some worth mencionilng a r e : ( i ) they usually include p r e t t y massive i n i t i a l investments; (i:L) they r e q u i r e s i g n i f i c a n t recurrent expenditures t o remain operation~al a t design l e v e l s ; ( i i i ) t h e i r b e n e f i t s accrue progressively, as new a r e a s a r e served by t h e canal system being b u i l t under the p r o j e c t ; ( i ~ such ) b e n e f i t s a r e normally coa~puted on a "per hectare' b a s i s , r a t h e r than on a ' t y p i c a l farm' b a s i s , and ( v ) t h e i r c o s t s a r e determined almost e x c l u s i v e l y by t h e p r o j e c t ' s engineers, while t h e b e n e f i t s a r e estimated by those responsible f o r a g r i c u l t u r a l development. -- - 41 A detai:Led d i s c u s s i o n of the procedures outlined above can be found i n J . P r i c e G i t t i n g e r , Economic Analysis of A g r i c u l t u r a l P r o j e c t s , -- ED1 S e r i e s i n Economic Development (The World Bank). Johns lHopkins - . L'nivers l t y P r e s s , 1982. Flgure 4. Typical Shapes of C3ort and lkndlt C u m for an WcuIhrral Ro)et 4 Olivares The Economic Evaluation of I r r i g a t i o n R e h a b i l i t a t i o n P r o j e c E I n p r i n c i p l e , i r r i g a t i o n r e h a b i l i t a t i o n p r o j e c t s a r e evaluated as any o t h e r i r r i g a t i o n p r o j e c t - a c t u a l l y , as any other a g r i c u l t u r a l project. They have, however, some f e a t u r e s which make t h e i r a n a l y s i s d i f f e r e n t from t h a t t o vhich most a n a l y s t s are accustomed. The main such f e a t u r e s r e f e r t o the following elements: ( i ) t h e cost of not rehabilita.ting: - d e c l i n i n g b e n e f i t s - i n c r e a s i n g 06H c o s t s - r i s k of catas:iaphic f a i l u r e (11) assessment of r e h a b i l i t a e i o n c o s t s : - construction/repair/replacement and upgrading costs - foregone b e n e f i t s during r e h a b i l i t a t i o n ( i i i ) assessment of r e h a b i l i t a t i o n b e n e f i t s : - prevention of fnzther declines i n b e n e f i t s - reduction of negative e x t e r n a l i t i e s - avoidance of cataztrophic f a i l u r e - t h e b e n e f i t s of nndernization/expansioa p r o j e c t s These elements a r e discussed i n t h e following paragraphs. a ) The c o s t of not r e h a b i l i t a t i n g One of the most unusual f e a t u r e s of i r r i g a t i o n r e h a b i l l t a t i o n p r o j e c t s f o r a n a l y s t s used t o more standard types of p r o j e c t s is t h e shape of the "benefit" curve. Most o t h e r p r o j e c t s a r e conceiveti of as somet h i n g whose implementation w i l l i n c r e a s e the flow of goods and s e r v i c e s t o the economy. Benefits a r e thus envisaged as so~nething a d d i t i o n a l t o what you already have and see. The implication l.s t h a t t h e 'without-project" s f t u a t i o n is visualized as constant (1.e.. without the p r o j e c t the economy would continue having b a s i c a l l y t h e same amount of goods and s e r v i c e s a v a i l a b l e ) . I r r i g a t i o n systems i n need of rehabiliteition do not comply with t h i s expectation. I.£ they a r e not r e h a b i l i t,rted, e i t h e r the volume of production generated w i l l progressively (and o f t e n , a c c e l e r a t e d l y ) decline, t h e operation and maintenance c o s t s w i l l increase, o r both. The "benefit" of a rehabili- t a t i o n p r o j e c t -- a s is a l s o the case with s o i l conservation o r water- shed p r o t e c t i o n p r o j e c t s - i s then the avoidance of such a decline. More production w i l l not be generated; it is f u t u r e losses t h a t vf.11 be avoided. Ln project assessment terms, then, the "with-project" net benaf it curve is b a s i c a l l y f l a t , while t h e "without-project" one would be decreasing. The p r o j e c t ' s net b e n e f i t s a r e "additional" i n the same sense discussed i n paragraph 3 above, namely, a d d i t i o n a l to, and over, t h e net b e n e f i t s l i k e l y t o be achieved without the project. Again, the e v a l u a t o r s u b t r a c t s the without-project s i t u a t i o n from t h e with-project s i t u a t i o n . Olivares The t e x t above may give t h e impression t h a t t h e decline i n production r e h a b i l i t a t i o n w i l l alvays be smooth and progrc s s i v r .without There a r e cases, however, where t h e lack of r e h a b i l i t a t i o n may lead t o t h e c a t a s t r o p h i c f a i l u r e of a major p r o j e c t etruct.ure - such a s a major pump, a ueir o r other diversion struicture, or a flume, syphon o r overpass. In such an event, most o r all of t h e a g r i c u l t u r a l production i n t h e "project' a r e a may be affected. Production, income, and emplopment l o s s e s may be s u b s t a n t i a l . Different sub-types of r e h a b i l i t a t i o n p r o j e c t s show d i f f e r e n t r e s u l t s . The s i t u a t i o n described i n t h e preceding paragraph is that of ia standard r e h a b i l i t a t i o n p r o j e c t , whose aim is t o r e s t o r e the project t o its design condition. A modernization p r o j e c t , i n s t e a d , w i l l show an increasing net benefit curve. Figure 2 displays t h e t y p i c a l curves f o r such projects. b) The a s s e s s r r n t of r e h a b i l i t a t i o n c o s t s The identification and quantification of t h e c o s t s af an i r r i g a t i o n r e h a b i l i t a t i o n project do not d i f f e r from t h a t of a nev one. There is only one item whicn, although not d i f f e r e n t i n subs tanc-. is quantitatively much more important both i n abealute amount and i n its importance i n determining whether t h e project w i l l i n the event prove t o be vorthirhile o r not. This is t h e prod~uction foregone while t h e r e h a b i l i t a t i o n o r m ~ d e r n i z a t i o n p r o j e c t is being implemented. While new p r o j e c t s usually add an i r r i g a t i o n system t o an h e r e t o f o r e rainfed a r a a , whose productive capacity is only a frisction of the productivity it w i l l achieve a f t e r being i r r i g a t e d , r e h a b l l i t a - t l o n p r o j e c t s , t n -st cases, require the p a r t i a l o r t o t a l shut ~ ~ off f t h e system, r ~ t hi n t e r r u p t i o n of t h e ongoing . i r r i g a t e d cropping. Foregone b e n e f i t s may be s u b s t a n t i a l . c ) The assessment of r e h a b i l i t a t i o n b e n e f i t s Again, the - i d e n t i f i c a t i o n and q u a n t i f i c a t i o n of the b e n e f i t s l i k e l y t o accrue from an i r r i g a t i o n r e h a b i l i t a t i o n p r o j e c t dlo not d i f f e r i n substance of what is done f o r new projects. The only unusual f e a t u r e , as described above, is that vith-project b e n e f i t s w i l l look f l a t o r s l i g h t l y i n c r e a s i n g , while those f o r t h e without-project s i t u a t i o n w i l l be decreasing. This means t h a t i n t h e assessment of r e h a b i l i r a t i o n p r o j e c t s it is much more d i f f i c u l t , and c a l l s for more e x p e r t i s e , t o forecast what would happen i f the project is not c e ~ r r i e d out than t o f o r e c a s t the vfth-project s i t u a t i o n . Examples of t h i s a r e provided below. Usually t h e r e a r e sonre other b e n e f i t s t o be credited t o r e h a b i l i t a t i o n p r o j e c t s , vnich may not be easy to i d e n t i f y unless one looks f o r then. The two rr~ost important cases are: b e n e f i t s doun- stream, and b e n e f i t s I n a r e a s v i t h which engineers, a g r i c u l t u r a . l i s t s and economists are not u s u a l l y conversant. Among the former, reha.bili- t a t ion p r o j e c t s of t e n reduce the incidence of water-logging downstream and improve conditions f o r f i s h e r i e s development ( o r even e x p l i c i t l y c a t e r t o them). Among t h e l a t t e r , r e h a b i l i t a t i o n p r o j e c t s may reduce the prevalence o r incidence of water-borne d i s e a s e s , increase municipal 6 Olivares Flgure 2. Typccal Sham o( Cort ond kru(lt Gurvbc lor Dlnerent Types d Rehabllltdlon Rojecrr Olivares supply, improve t h e a e s t h e t i c c h a r a c t e r i s t i c s of the Landscape, provide a d d i t i o n a l tourism services, o r b e t t e r p r o t e c t w i l d l i f e . A l l such beaef its must be i d e n t i f l e d and quantif led. The computation of the b e n e f i t s t o bc generated by avoiding the c a t a s t r o p h i c f a i l u r e of a major s t r u c t u r e is l i k e t h e assessaent of an!y o t h e r kind of foregone production. There is a t w i s t to it, though; the! r i s k of f a i l u r e m u s t be quantified, and while most engineers vill agree t h a t a c e r t a i n s t r u c t u r e is i n danger o f , say, collapsing,, t o as:~t..se a p r c b e b i l i t y of occurrence t o such collapse f o r each one of the forthcoming yeare is q u i t e a d l f f e r e n t game. In some caeea, infoma- t i o n on t h e s t a t u s of t h e s t r u c t u r e i n question vlll be adequate t o att:empt t h e a s a e s a m n t of a risk r a t i o a t the present -meat and,, i n sage of these, f o r t h e forthcoming years. In other cases, an educrited guehsstimate would be t h e best which can be achieved. A couple of exa~mplesa r e provided belov. The computation of the b e n e f i t s of modernization p r o j e c t s mag a l s o be q u i t e complex. Such p r o j e c t s aim a t improving i r r i g a t i o n systems so t h a t these can meet enhanced operating c r i t e r i a . U 8 d l . y . t h a t iniplies increased water capture, conveyance, d i s t r i b u t i o n o r a p p l i c a t i o n e f f i c i e n c i e s . These, i n t u r n , may require t h e re-dimensioning of some s t r u c t u r e s and, i f enough water is expected to be saved and a d d i t i o n a l land is a v a i l a b l e nearby, may lead t o a n expansion project. A l l associated c o s t s and benefits m e t be quaatti- f i e d and, then, compared. Some Experiences Four examples which represent the most frequeat types o f irrigation r e h a b i l i t a t i o n and modernization p r o j e c t s the Bank is i n v i t e d t o finance and t h e methods f o r assessing t h e i r c o s t s and b e n e f i t s a r e discussed i n t h i s section. Summaries of the case s t u d i e s h i g h l i g h t i n g s i g n i f i c a a t a s p e c t s of each attached. The Sudan Blue N i l e Pump Schemes R e h a b i l i t a t i o n p r o j e c t was undertaken t o improve the operating e f f i c i e n c y of pump schemes supplying 22,050 ha of land. Primary irnprovecuents included svitching f rocm d i e s e l t o e l e c t r i c a l pumping s t a t i o n s , remodeling of canal and cont:rol s t r u c t u r e s , arrd building a drainage system. T o t a l p r o j ~ e r t c0st.s were approximately 67 m i l l i o n d o l l a r s of which IDA financed 32 million. Project b e n e f i t s were t o r e s u l t £ran both increases i n crop y i e l d s and i n cropped area. The net incremental income per farm tenancy per year at f u l l development vas estimated t o be 136 d o l l a r s , a g a i n s t a witnout p r o j e c t average annual income of 102.5 d o l l a r s . ' h e r a t e of r e t u r n f o r the p r o j e c t was estimared a t 32%. The case of Sudan i l l u s t r a t e s the r e h a b i l i t a t i o n of electro- mechanical vorks. The two main decisions r e f e r r e d t o t h e p o s s i b i 1 i t f . e ~ and advantages of consolidating some of t h e pumping s t a t i o n s (from 4 t o 2 ) and of changing t h e energy source (from d i e s e l to e l e c t r i c power). The a n a l y s i s of both kinds of change resemble more the techniques commonly u t i l i z e d to a s s e s s t r a n s p o r t a t i o n p r o j e c t s than those used i n a g r i c u l t u r e . In both cases non-action was noc a f e a s i b l e a l t e r n a t i v e 8 Olivares andl, t h e z r f o r e , no f u l l y l e g i t i m a t e without-project s i t u a t i o n can, be defined. Rather, two a l t e r n a t i v e s o l u t i o n s ( e , p r o j e c t s ) are defined and compared v i t h each other. This case a l s o i l l u s t r a t e s w o o t h e r important f e a t u r e s of most i r r i g a t i o n r e h a b i l i t a t i o n p r o j e c t s , which w i l l b discussed in more detail below: t h e need t o c a r r y out coa~plementarychanges i n the d i e t r i b u t i o n system downstream of the new o r improved pumping s t a t i o n s t o accommodate the new water flow vol.ume and regime, and the need t o upgrade p r o j e c t nranagement t o p r o t e c t t h e r e h a b i l i t a t e d vorks and prevent t h e i r recurring d e t e r i o r a t i o n ( t h e case a l s o i l l u e t r a t e s w e l l t h e d i f f i c u l t i e s t o be confronted i n implrmenting such management upgrading undertakings). The Peru I Irrigation Rehabilitation project was aimed at r e h a b i l i t a t i n g d e l i v e r y , d i s t r i b u t i o n and drainage components of i r r i g a t i o n f a c i l i t i e s i n six of Peru's c o a s t a l valleys. Approximately 33,000 h a were t o b e n e f i t f r m the improvement of system s t r u c t u r e s out of *vhich 19,000 ha of s a l i n i z e d a r e a s were to be reclaimed. Improve- ments included c o n s t r u c t i o n of new r i v e r intaka systems, c o n s t r u c t i o n of 340 km of new canals, r e h a b i l i t a t i o n of 65 km of existing canals, construction and r e h a b i l i t a t i o n of drainage canals, construction of drainage pumping p l a n t s , and construction of bridges and culverts. '[he t o t a l c o s t of the p r o j e c t was expected t o be 40.91 m i l l i o n d o l l a r s , of which the Bank financed 25 n i l l i o n d o l l a r s . Approximately 4,000 f a m i l i e s would k l e f i t from the major project investments, plus 13,000 f a m i l i e s who w e r e expected t o b e n e f i t from other p r o j e c t invest- ments. The expected i n t e r n a l r a t e of r e t u r n f o r the p r o j e c t w a s 18%. The Peru case i s a q u i t e straightforward, " ~ l a s s i c ~ a l " r e h a b i l i t a t i o n project involving c i v i l works. Original s t r u c t u r e s for water capture, s t o r a g e and d i s t r i b u t i o n had severely d e t e r i o r a t e d , jeopardizing the operation of many systems along t h e Peruvian Coast vallleys. S t r a i g h t f o r v a r d r e p a i r work and economfc a n a l y s i s along t h e line!s discussed above were the case. The case a l s o i l l u s t r a t e s another comnion f e a t u r e of many, i f not most, r e h a b i l i t a t i o n p r o j e c t s , namelly, t h e need t o add t o the systems elements which had not been p a r t of I:he o r i g i n a l design. In t h i s p a r t i c u l a r case, s a l i n i t y occurred t o various degrees i n extensive a r e a s along the lower reache4 of the sysrecns' cornrand a r e a s ; the p r o j e c t constructed buried or,-£ arm d r a i n s , open drainage canals and four drainage pumping s t a t i o n s t o rec1a~I.m 19,OlOO ha. 57% of the t o t a l project area. The Greece East Vermion R e h a b i l i t a t i o n and Moderaizati.on p r o j e c t was t o provide f o r r e h a b i l i t a t i o n and upgraiing of i r r i g a t i o n f a c i l i t i e s t o ensure an adequate and s t a b i l i z e d supply of i r r i g a t i o n water t o 18,000 ha of cropland, and t o expand the e x i s t i n g f a c i l i t i e s t o knclude 6,000 ha of u n i r r i g a t e d but highly productive croplantd. P r o j e c t works included c o n s t r u c t i o n of 140 km of new Uned canals and r e h a b i l i t a t i o n of 42 km of prim~rjr and 1,490 km of secondary and t e r t i a r y canal:. The canal system was t o be equipped with sutorratic l e v e l c o n t r o l s and gates. In addition, nine small r e s e r v o i r s were t o be constructed a t c r i t i c a l locations t o improve water deliveries. Total p r o j e c t c o s t s were estimated ro be 83 million d o l l a r s , with t h e Bank providing a 40 m i l l t o n d o l l a r loan. The benefits accruing to the p r o j e c t a r e a include i n c r e a ~ e d a g r i c u l t u r a l production, foreign 9 Olivares I J exchange earnings, and employment. The r a t e of return t o proj~ect investments was estimated a t 18.45%. Very r a r e l y one s e e s pure r e h a b i l i t a t i o n p r o j e c t s , naniely p r o j e c t s aiming at j u s t r e s t o r i n g s t r u c t u r e s t o t h e i r o r i g i n a l design s t a t u s . I n almost every case advantage is taken of the opportunity t o enhance t h e systems ' design standard, modernize and, i n s o m e occasia~ns , expand it. In s m cases, however, a p r o j e c t may be designed with t h e so11e purpose of modernizing and expanding a rystem irhich was not n e c ~ e s s a r i l y i n need of r e h a b i l i t a t i o n . That wan nearly t h e case of ~ h eGreek system, which Gas io provide basically for t h e upgrading of e x i s t i n g i r r i g a t i o n f a c i l i t i e s , and t h e augmentation and s t a b i l i z a t i o n of t h e area's v a t e r s u p p l i e e ( r e h a b i l l t a t i o n vorkr =re a l s o included under the project). The e c o n o d c assessment of the worth of such a p r o j e c t is t h e o r e t i c a l l y simple, being e s s e o c i a l l y s i m i l a r t o what was discussed i n the introductory p a r t of t h e paper. The Tndia Upper Ganga I r r i g a t i o n Modernization project seeks t o r e h a b i l i t a t e some 270,000 ha within the Upper Ganga Canal system, which has a net command a r e a of 0.98 m i l l i o n h., The o b j e c t i v e s of the profect include a v e r t i n g t h e r i s k of c a t a r t r o p h i c f a i l u r e of four prlrnary canal s t r u c t u r e s , supplenrenting water supply through conjlmc- t i v e use of ground v a t e r and surface v a t e r s u p p l i e s , and improving the S t a t e ' s c a p a b i l i t y for planning, designing and managing irrigation schemes. Total project c o s t s a r e estimated t o be 231 m i l l i o n d o l l a r s , of which I D A is financing 125 m i l l i o n d o l l a r s . P r o j e c t b e n e f i t s include increasing area planted and y i e l d s of g r a i n , sugar cane and loll seecl crops, and a v e r t i n g c a t a s t r o p h i c f a i l u r e of any of four canal s t r u c t u r e s deemed l i k e l y t o f a i l within the next tuenty years. The Indian u s e presents a more r a r e , and a n a l y t i c a l l y more demanding, type of r e h a b i l i t a t i o n project. It a l l began as a straight- forward r e h a b i l i t a t i o n p r o j e c t of a q u i t e extensive surface irrigatJLon system ( t h e p r o j e c t was t o r e h a b i l i t a t e 270,000 ha out of t h e 1 d . l l i o n ha of the system). During ~ r o j e c tpreparation, however, it was discovered t h a t four major overpass s t r u c t u r e s i n t h e head canal were i n bad shape and risked collapsing. The project therefore tws expanded t o include the r e h a b i l i t a t i o n of those s t r u c t u r e s . h discussed above, the economic assessment of such investments require t h e es:lmation of one constant and t h r e e f a c t o r s . The constant is t:he c o s t of r e p a i r i n g o r re-building each o' the s t r u c t u r e s . Tc-e three f a c t o r s a r e the wortn of t h e immediate Car-ge t h e collapse of each of them would e n t a i l , t h e production and o t h e r b e n e f i t s which would he forsgonc! i f each of the s t r u c t u r e s were t o f a i l , and the r i s k of them doing so e , tha t h r e e elements needed to compute t h e withou~t- project "benefit" stream). Ln assessing t h e f i r s t two it vaa a s s u a ~ d t h a t were the s t r u c t u r e s t o f a i l they would do so during the mnsalon season; the l o s s due t o foregone production vas estimated a t one y e a r ' s a g r i c u l t u r a l production. The assessment of the r i s k of f a i l u r e was much more complex, f o r the b a s i c engineering d a t a required tr, rtake a otrong estimate vas j u s t noe a v a i l a b l e . There vas agreement among the engineers, though, t h a t the p r o b a b i l i t y of a l l four of them surviving i n t a c t over the next 20 years was v i r t u a l l y zero. [There is another project i n I n d i a , the repla~cement of the century-old Mahanadi River weirs i n the s t a t e of . l r i s s a , vhere a more d e t a i l e d assessment could be made. Eventually, the f i s k of immediate collapse was assessed a t 15%, f i g u r e vhich would be i n c r e a s i n g annually by 5 percent points t k e r e a f t e r ] . The b e n d its a t t r i b u t a b l e t o the r e p a i r o r reconstruction p r o j e c t is t h e addition of t h e discounted value8 of t h e products of t h e r i s k of f a i l u r e times the value of the foregone production vere the s t r u c t u r e s t o collapse and the value of t h e ilsnediate damage involved. In the case of the Upper Ganga p r o j e c t the addition of both products v a s larger :han the cost of repairing o r rebuilding a l l four s t r u c t u r e s , i.e., the p r o j e c t was p r o f i t a b l e and, thus, was financed bly the Bank and implemented. Some F i n a l Commente The cases s e l e c t e d f o r t h i s paper i l l u s t r a t e a l s o some addi- t i o n a l requirements of i r r i g a t i o n r e h a b i l i t a t i o n Lf one does not wadc t o have t o re pea^ the r e h a b i l i t a t i o n a few years down the road. F i r s t , many systems d e t e r i o r a t e k c a u s e of the lack of adequate funding f o r maintenance. Therefore, most r e h a b i l i t a t i o n projects include as (a component o r a s a covenant t h e establishment of an e f f e c t i v e cost recovery system, the raFsing of water charges o r whatever other i n s t r u - ment used f o r such purposes t o l e v e l s vhich would permit the adequate financzing of maintenance a c t i v i t i e s , and rcfonna o r procedures f o r improving c s l l e c t i o n rates. Second, and independent from funding requirements, poor prs-jec:t management o r system management may a l s o be a f a c t o r t h a t jeopardizes s y s t e a maintenance. Many p r o j e c t s , thus, provide resource13 f o r i n s t i t u t i o n building a c t i v i t i e s . B e t t e r management and wrc? e f f e c r i v e i n s t i t u t i o n a l s t r u c t u r e may be instrumental i n having thrs system properly maintained a f t e r r e h a b i l i t a t i o n i n c a r r i e d out. Third, r e h a b i l i t a t i o n most o f t e n c a l l 3 f o r investmentsi a d d i t i o n a l t o those required f o r t h e r e h a b i l i t a t i o n i t s e l f . In some! cases, important elements t h a t had not been included i n the originai. p r o j e c t ?say be added, such a s drainage on t h e coast of Peru. In o t h e r > , a d d i t i o n a l investments may be included to adapt the original. system t o the performance of the r e h a b i l i t a t e d elements, such 3s canal design and in-system s t o r a b e i n Sudan, o r t o take advantage of the improved performance of these, such a s the construction t f canal systems t o expand the a r e a i r r i g a t e d a s more wafer becomes ;wailable due t o t h e r e h a b i l i t a t i o n works. Last, r e h a b i l i t a t i o n provides an. opportunity t o improve, expand o r modernize system design and performance. Olivares Tq3 CASE STUDIES 1. SUDAN: The Blue Nile Pump Schemes Rehabilitation Project The f u l l r e h a b i l i t a t i o n of tile Shasheina Region :52,500 fd}l/ was t o s e r v e a s a model f o r t h e r e h a b i l i t a t i o n of :he pump schemes .alcng t h e Blue Nile. As the l a r g e r Blue Nile 4 g r i c u l t u r a l Corporation (ENAC) a r e a was equally i n need of Lnvestments , a g r i c u l t u r a l r?.ach'-nery and workshops were also t o be )rovided t o t h e BNAC zre= o u t s i d e of t h e Shasheica Region. Wbile the Shasheina Region wou~ldbe se~rvedby new e l e c t r i c pumping s t a t i o n s under :he p r o j e c t , t h e remaining IlNAC a r e a would continue t o depend on t h e : x i s t i n g dir?sel-driven pump s e t s . Repairs and replacements f o r those xmp sets would be \made p o s s i b l e through funds from a concurrent Bank s r o j e c t (The AgricuXtural Rehabilitatior. Program, Credit SU-1000). At 1 l a t e r s t a g e new e l e c t r i c a l . ~urcping s t a c i o n s were planned t o replace :?e existing installztions under a full rehabilitation and regrouping ~ r o j e c c . . The average s i z e of t h e RNAC schemes is about 5,000 fd each, ~ i t h i na vide o v e r a l l range. The t o t a l n e t c u l t i v a b l e .area of the ? x i s t i n g BNAC pump schemes is about 200,000 fd. The Shasheiua Region >f BNAC, vhich would be f u l l y r e h a b i l i t a t e d under the project, would be srganized t o cover t h e Shasheina, Suki and Wad Salman schemes, t o t a l i n g 52,500 f d a t f u l l development. A l l che schemes were developed privately between 1950 and 1965. I n 1958 they were n a t i o n a l i z e d and administered by BNAC:. The BNAC a r a a is p a r t of the c e n t r a l clay p l a i n 3f Sudan. Land slopes a r e generally between 20 and 40 d k m , sloping b u n from south t o north. The topography is uneven with szlu.11 ridges cunnirg south-north, and numerous o l d r i v e r channels n shallow depressions. This unevenness accounts f o r t h e fragmente-- l a y m t CI t h e =anal system i n s e v e r a l schemes. S u b s t a n r i a l a r e a s of abandaned land exiss.22 - 3 311 tho, schemes. The reaso:ls f o r t h i s were i n s u f f i c i e n t cot-, 312 !7 rb.s L-J:cr . courses, i r r e g u l a r water supply and i n s u f f i c i e n t pumb ..ig c.:~ec:P:p. J r s k 3f a g r i c u l t u r a l equipment and inadequate drainage. >.e ' -in e;fective drainage system had very s e r i o u s conseqitences, p ; l r t ~ ~ u i s ? l y Fr a storm followecl s h o r t l y a f t e r an i r r i g a t i o n and i f ri3gkng wars poorly c a r r i e d out SO t h a t p l a n t s a r e completely submerged. - - L / !feddan = 0.4? :;lectares. O l i v a r e s P r o j e c t Description Under t h e p r o j e c t , four e x i s t i n ? pump schemes, Shaaheina, Suki, Wad Salman North and Wad Salman South, would be grouped t o g e t h e r into the new Shasheina region of BNAC. The i r r i g a t i o n system would be f u l l y rehatbilitated and a uniform tenancy s i z e of 10.5 fd would be introduced. The srmlller tenancy s i z e would i n z r e a s e the number of t e n a n t s from 3,800 t o 5,000, whose income would be f u l l y compensated by more interlsive c u l t i v a t i o n through a two-crop r t t a t i o n . Under t h e proposed r o t a t i o n , 50% of the p r o j e c t area would be c u l t i v a t e d with long-sea?lc co;toc and 50X with groundnuts and sorghcn, Two nev e l e c t r i c a l pamping s t a t i o n s , replacing t h e f o u r e x i s t i n g ones, would be b u i l t t o pump water from t h e Blue Nile d i r e c t l y i n t o t h e canal system. These pumps would have maximum supply c a p a c i t i e s of 15.6 and 12.4 m 1s. 3 The e x i s t i n g canal systim would be r e t a i n e d e! no d i f f i c u l t y i n recovering f u i l 0iW c o s t s because of the farmers' d e s i r e t o g e t irrigation water a s a nk!ans of improving t h e i r income. O l i v a r e s 4. INDIA: The Upper Ganga I r r i g a t i o n %dernization P r o j e c t -Pr o j e c t Background The Upper Ganga Canal (UGC) system l i e s between the Canga acid Yamuna Rivers i n the western p a r t of t h e Uttar Pradesh S t a t e (UP), lctdia. It has a gross comaand area of about 1.95 million hectarerp, of wh~ich the net commandable a r e a is about 0.98 million hectares. The Ga.nga Basin, within vhich the command area i c contained, is one of the wa~rld's l a r g e s t watersheds. The topography of t h e UGC arcs is gently undulating, except f o r t h e northern p a r t here streams are deeply incised. S o i l s are a l l u v i a l and f e r t i l i t y l e v e l s range f r m medium t o high. The climate is sub-tropical mnsoon characterized by wet, hot summers and r e l a t i v e l y warm, dry winters. 'Iha average annual rairrfall v a r i e s from about 1,050 mm i n the n o r t h to about 650 mm i n the southwest. The a r e a is underlain by a s u b s t a n t i a l a q u i f e r system with good ( l e s s than 700 ppm dissolved s o l i d s ) water. Mean annual rech~arge of the groundwater system is estimated at 6,200 h3against a net e x t r a c t i o n r a t e of 3,800 b3. - P r o j e c t Description The p r o j e c t would finance a six-year time slice to rehabi- litate and modernize the UGC system. The e n t i r e development program i s l i k e l y t o taka some 30 years t o complete, depending on f i n a n c i a l resources a v a i l a b l e t o GOUP and ,..e r e l a t i v e importance of o t h e r works i n the S t a t e ' s i r r i g a t i o n sector. P r o j e c t planning has been confined t o a fi:st phase development (about 18 years) which is within a p r ~ i i c t a b l eplanning horizon. The work program has been scheduled t o give maximum benefi ts/investment returns. I n addition, t h e p r o j e c t has been formulated with ~rraximumf l e x i b i l i t y so t h a t GOUP can evaluate and amend, i f necessary, t h e l e v e l of modernization which would be applropriate and affordable, given competing demand f o r s e c t o r finance. The main p r o j e c t objectives ace: ( I ) a v e r t i n g the risk of f a i l u r e i n primary canal s t r u c t u r e s ; ( i i ) supplementing water supply through conjunct ivr use of groundwater and surf ace water supplies, and ( i i i ) improving the S t a t e ' s c a p a b i l i t y to plan, design and manage i ~ r r i g a t i o n schemes. An additional objective is t o amximize benefits from the investment sunk i n the Madhya Ganga ( I ) Caaal system, which p h y s i c a l l y i n t e r r e l a t e s with t h e UCC system. A g r i e g l t u r a l develapment needed t o r e a l i z e p r o j e c t b e n e f i t s have been i d e n t i f i e d and would be implemented o u t s i d e the project. COUP would carry out the planning, des Lgn, const ruct3 rr., and operation ad aaintenance of t h e project vor\-a ir accordance -&th standards and c r i t e r i a ricceptable to Bank. The project gives p r i o r i t y to r i s k aversion works, which are interided t o protect e x i s t i n g b e n e f i t s of i r r i g a t i o n as w e l l as benefits i h a t would accrue under the modernization and r e h a b i l i t a t i o n program. Four critical s t r a c t u r e s were i d e n t i f i e d each of &.ich, i f they were t o f a i l , would cause s u b s t a n t i a l l o s s of b e n e f i t s f o r users of the UGC systskm. A l l four s t r u c t u r e s l i e above the f i r s t main off-take of the systc!m a t Deobawd Branch (mile 2 2 ) . The s t r u c t u r e s and t h e i r respe!ctive problems vere as follows: (i) R a n i p u r Rao 3uperpassagc ( m i l e 5) - conatrucrion of a power p l a n t downstream and the concomitant f l a t t e n i n g of the main canal 's grade betveen t h e plant and Eanipur caused backvatst r t o encroach on t h e arches so that the s t r u c t u r e was operating under p a r t i a l syphon conditions; (11) Patttri Rao superpassage (mil- 9 ) -acute aggradation on the t o r r e n t chancel r e s u l t e d i n r i l t - l a d e n wcrter overtopping the parapet of the super passage troughs under flood conditioner. The build up of sediment on the super passage bed m..bjectr!!d t h e supporting arches t o more s t r e s s than they had been designed t o bear and evidence of cracking m a found i n two of the arches; ( i i i ) Ratmau Rzo l e v e l crossing ( m i l e 13) - the sediment pick up of t h i s crossing created severe operational problees i n t h e main canal, and the s p i l l apron had required r e p a i r s on three occasiona before the r e h a b i l i t a t i o n project; ( i v ) Solani Aqueduct (mile 18) - t h e arch design was assessed am being inadequate f o r t h e increased discharge (from 182 m3/sec a t design :o 238 m3/sec a t evalrsation) that i t was being asked t o carry. Lime was being washed out of the morters i n t h e arches, r e s u l t i n g i n r e d ~ c t i o ni n strength of the arch masonary and making the s t r u c t u r e still more unsafe. The s t r u c t u r e s vere deemeu l i k e l y to f a i l because of t h e i r age and because of damage caused by high floods i n the t o r r e n t atreaus which they cross. -4lthough the d e t e r i o r a t i o n of the s t r u c t u r e s was obvious, the r a t e of d e t e r i o r a t i o n and the probability of f a i l u r e a t any point i n time could not be quantified. However, it was predicted t h a t f a i l u r e of a t l e a s t one of these s t r u c t u r e s would occur within I the ntsxt 20 years. The S o l a d aquaduct w a s t h e most c r i t i c a l since its I f a i l u r e would cloae the e n t i r e system for s e v e r a l years. Moreover, it i is the system's bottleneck since its carrying capacity determines th~e extent: of possible r i v e r diversions. I n a.ssessing the l i k e l y costs of these s t r u c t u r e s ' f a i l u r e i t was aesumed t h a t should they f a i l they would do ao during the aeasona.1 h a l f of the monsoon, by which t i m e increasingly frequent floods uoultl have weakened them t o the point of collapse. A t t h i s assumed ti= o.f f a i l u r e , most wet season crops would be well established and wu1.d probatlly not s u f f e r more than a 10% decrease i n yield. The exce@tion here would be r i c e which, due I:O its higher irrigation needs, would l o s e about 60% of its yield. In the following dry season, the area plan'ted t o uheat would dr?cline by 4.0% and f i e l d s on t h a t reduced acreage would f a l l by 50%. Sugarccne plantinga would be seriouslly c u r t r i l e d because heavy pre-planting and Immediately post-planting water requirements could not be m e t from wella. There would be no hLot season (March t o May) cropping at all s i n c e any we11 water would he needed t o s u s t a i n t h e (diminished) scgarcane area. Livestock would a l s o s u f f e r because t h e r e would be no green fodder and less than normal amou~lteof wheat and barley straw. The i > s s of a year's a g r i c u l t u r a l production w a s estimated a t Ks. 850 million. l/ In addition, failure of the structures m u l d cause catastrophic pro-blems f o r farmers i n t h e command area. A l a r g e n-:-her of a l r e a d y poor farm f a m i l i e s would s u f f e r d i A n i s h e d incomes, res.1 '.lg i n g r e a t e r poverty and s o c i a l unrest. The latter is p a r t ~ . ~ ~ l a rl il kye l y s i n c e t h e extent of the r i s k has become cowon local. knowledge. A f i n a l j u s t i f i c a t i o n f o r the replac-ment of t h e s t r u c t u r e s at r i s k vas that t h e m u e r n i z a t i o a of the canal d i s t r i b u t i o n system would involve major investments and resalt i n Farmers adopti~ng agric:ulturel o b j e c t i v e s requiring g r e a t e r investments i n inputs and which1 assume 2. more r e l i a b l e , timely i r r i g a t i o n service. Clearly, .Lf r h e UGC s y s t e n ~w a s t o be modernized, a p r e r e q u i s i t e was :be removal oE the r i s k of f a i l u r e i n the main canal. Apart from the r i s k of f a i l u r e , a basic problem with t h e UGC system is its low o p e r a t i o n a l and conveyance e f f i c i e n c y . It :LY estimateu t h a r ori average from every cubic meter of v a t e r dia:erred at the Rardwar headwork.;, only abollt 0 .2m3 reaches the farmers' f ielde. The modernization of ;he main canal would r e s u l t i n a s i g n i f i c a n t improvement: i n the o v e r a l l conveyance ~ f f i c i e n c y . Seepage l o s s e s i n the main canal would be reduced from 11% a t present t o about 2%. N e w contro; s t r u c t u r e s and a canal. c o ~ u a i c a t i o nsystem would reduce t h e presently high o p e r a t i o n a l losses. The o v e r a l l conveyance e f f i c i e ~ c > ~ of the main canal would i n c r e a s e from the present 72% t o about go:.. As i n most Indian i r r i g a t i o n schemes, the 3-rigiition d i s t r i b u t i o n system below the water course o u t l e t (commendi.:: abaut 50 ha) is ale0 i n e f f i c i e n t . The water savings r e s u l t i ~ n gfran higher conveyance e f f 1cienc.y of a modernized main canal voald be used i n the lower p s r t of the GGC system (belov the sugarcane zone) co-ndiig about 600,000 ha* This w i l l i n c r e a s e the q u z r ~ c i t y of water i n the t a i l ecd of the d e l i v e r y system and improve the r e i i a b i l i t y and predictability of t h e i r r i g a t i o n s e r v i c e there. The impact of the vorks is assumed to be proportionate t o the r a t e of progress i n l i n i n g the main canal. It ha8 been fxrther assume!d t h a t the i ~ ~ c r e m e nitn t h e o v e r a l l conveyance e f f i c i e n c y w i l l transl.ate i n t o a concomitant increase i n i r r i g a t e d area w i ~ h the cropping p a t t e r n s and y i e l d l e v e l s unchanged. Table 1 d e s c r i b e s the c o s t s among pr2ject components and type of investment. The Bank's loan share of the t o t a l p r o j e c t c o s t s amount t o USS125 m i l l i o n o r 54% of the o v e r a l l c o s t s . Ollvares Olivares