RESTRICTED It BEW3M M WY This report is restricted to use within the Banki INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INDIA APPRAISAL OF THE AGRICULTURAL MACHINERY PROJECT September 22, 1949 Loan Department INDIA Appraisal of the Agricultural Machinery Project CONTENTS Pages Paragra-Qhs P.iap showing location of Reclamation Projects . IrITRODUCTION . . . . . . . . . . . . . . . . . . 1 1 - 2 I-CLAi.ATION OF KANS-IIET7STTD LNDS . . . . . . 1 - 11 3 - 47 Description of the Project. . . . . . . . . . 3 - 25 Cost of the Project . . . . . . , . . . . . . 26 - 33 Returns from the Project. . * . . . . . . . e 34 - 40 Conclusions . . . . . . . . . .1 - 47 RSCLA: ATION OF JUNGLI4A LADS . . . . ... . 12 - 14 h2 - 50 Description of the ProjeCt# . . . . . . . . h8 OGost of the Project . . . . . . .4 v*+ 0+a Conclusions . . . . . . . . . . . . . . . . . 50 Attached: Brief Survey of the Food Situation in India (prepared by the Economip Department INDIA bh. ~~~~~LOCATION OF RECLAMATION PROJECTS J J A M L A-~~~~~~~~~~ 4 ~~~~~~~~~~JUNGLE ~~~~~cl t ~~~~~~~~~~~~~~~~LANDS T4AP~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 'NCESS WA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~s KAN0SMTHYDERABAR~ AREAS LOCATION ACRES I & III Central Provinces 600,000 II Madhya Bharat 1,700,000 IV United Provinces 300,000 ODUIP aeW~ dA~,A . v Bhopal V00,00 I H.Q. Central Tractor organization &, Central Workshop P I Re~~~~~~~~~gional Workahop ~~ 'i~~~ ,~~~ '~~.i. ~ ~ ~ ~ Operational Camp Sites INDIA INTRODUCTION 1. Cereals are the basic food of the Indians. In the decade pre- ceding World ~,Tar II, Indian grain imports ranged between one and two million long tons annually. After the wrar the combined effects of par- tition, a series of bad monsoons, and an increase in population of approxi- mately 3,500,000 yearly have increased the grain deficit and the Government has had to import annually between 2 and 3 million long tons of grain since 1947. 2. In order to eliminate the need for imports of grain, the G,overn- ment has devised short, medium and long term programs through which it piLans to increase food grain production by about ten million long tons by 1960. W4ith this additional production, domestic crops should sutisf,y the consumption needs of the population expected in that year. BECLAMATION OF KANS-INFESTED LANDS De criPtion of the Prolec 3. One of the medium term projects involves reclamation of land, the cuitivation of which, owing to infestation by a weed knowrn as kans crass (Saccharum Spontaneum), has been discontinued or reduced to a low level. 4.. BeLonging to the same family of grass as the sugurcane, kans -rass is found in India up to an elevation of 4,000 feet. It thrives on wet, heavy clay soils and its rnass of matted roots make it a difficult weed to eradicate., After an area is infested, the weed grows and spreads rapidly and the land gradually becomes uncultivable writh the ordinary means available to the average Indian farmer. Kans flov.rers appear about the end of August and the seeds are scattered by the winds. Any crop more than 3 feet high acts as a windbreak to intercept the seeds which drop to the root of the windbreak. The soil, climate and moisture being favorable for goermination during September, the seeds quickly take root. 5q. The total acreage of kans-infested land in India is not known. The Government is surveying for possible reclam.ation 10,000,000 acres in central India. This area is shown on the accompanying reap. Of this 4rea about 3 million acres in the Hadhya Bharat Union of States, the Central Provincee, Bhopal, and the United Provinces have already been surveved and selected for the first phase of reclamation. Madhya Bharat and the United Provinces are normally self-sufficient in grain production, the Central Provinces a surplus area and Bhonal a deficit area. The land is at present owmed by farmers who are now cultivating those tracts which are tree or partly free of infestation. 6. The main soil in these lands is a heavy clay loam which sets hard during the hot weather after N.urch. The depth of the top soil in kans-infested lands is not less than 24 inches and often it is 36 inches, or more. During the monsoon which lasts from the middle of June until the end of September, the soil becomnes very soggy and sticky and land pre- paration by either animal or tractor power is impossible. 7. In the area'to be reclaimed normally only one crop is raised. Ploughing for cultivation takes pl%ce from Yarch through June after whlich the land lies fallow during tne monsoon. Following the monsoon, the usual method of cultivation is by means of a blade harrow which does not pene- trate more than twlo inches into the soil; wheat or legume is sowM by a country drill on the wet clay below the top two inches of soil. 8. The normal annual rainfall varies from 35 inches to 50 inches, most of it being received during the monsoon. In the cold weather an aver- age of 2 inches of rainfall is received. The landslope is about 2,'; con- sequently the surface runof'f is not more than 5A' and mDuch of the rainfall during the monsoon is thus retained by the clay soil. The moisture stcred is more than enough to ensure the proper germination and growth of wheat or legume and the rain in December, January, and February is sufficient to ensure the maturing of the crop. 9. The reclamation of kans-infested land has been the object of studies for over twenty years. Mt.ethods involving the use of chemicals, long periods of lying, fallow, smother crops and other devices have been tried, but they have proved to be either ineffective or uneconomical. After the end of the war the Indian Governrient acquired some 200 heavy Caterpillar HD-7 tractors from U.S. Arrmy surpluses. At the same time, it acquired a number of machine tools and other essential equipment and also spare parts for the tractors from the same source. iJworlcshop was set up to rehabilitate these tractors. When reclamation work be,an in 1947, more than a hundred tractors had been repaired and they were put into the operation of reclaim- in, kans lands. During 1948, about 32,300 acres of waste or kans-infested lands were cleared. Clearing was done wzith a mould board plough by cutting off the roots of the kans at a depth of about 16 inches and exposing them then to the dessicating effect of the sun during the hot weather. Since most of the kans lands wrere privately ovned, the land was cultivated 'oy the farmers themselves with native cultivation facilities already available. 10. aOing to the hardness of the soil, the deepploughing can be done only with heavy track-laying tractors; it must be completed by Irav in order that the last furrow turned may be dried by the sun and all kans roots de- stroyed before the monsoon starts in the middle of June. Ploughing to a depth of 16 inches or more is possible because of the depth of the top soil. A serious limitation of this method is thWt it is uneconomical unless the lands to be reclaimed lie in blocks of at least 5C0 acres. 11. The results obtained demonstrated that this method of eradication is the most effective and economical so far known; some kans lands which were reclaimed in 1948 have produced 1,200 lbs. of wheat per acre per annum and more, and the reappearance of kans grass has been insignificant (.1 - 3%) after the deep ploughin-. It is contended that the application of mechanical cultivation to those lands vhere kans grass reappears will eradicate the weed completely. 12. Because of the success obtained from the eradication of kans grass by the deep plouglhing method described above, the Government of India decided to apply this method on a large scale. Since its application involves a -3- substantial dollar-investment, the Government applied to the Bank for a medium t erm loan to finance the cost of heavy tractors and equipment to be pur- chased in the U.S.A. 13.. The project before the Dlank involves (a) reclamation over a period of seven years of about 3,000,000 acres located in the areas marked I to V on the accompanying map; (b) mechanical preparation of a fifth of the re- claimed land owing to the expected shortage of drauZht animals; and (c) re- ploughing every fourth year of any land where Icans grass reappears. 14. Reclamation will be carried out by the Central Tractor Or,-anizution, a subordinate organization of Ministry of i.griculture of the Central Govern- ment, while mechanical cultivation and reploughing with cultivating tractors will be undertaken by the appropriate agencies of the Provincial Governments. 15. The CTO was formed in 1946. At its head is a chairmxan who enjoys the administrative and financial powers delegated to all heads of Deoart.nents. It is the policy of the Government to operate OTO on a "no-profit no loss" basis. 16t CTO has now 360 trained operators to operate the first 180 heavy tractors which are expected to arrive in India before the end of 1949. Train- in; of other operators is proceeding in accordance w-ith a plan laid down by the CTO. There is also a nucleus of trained mechanics and superintendents, and more are being trained. It is proposed to fill the posts of Chief E.gineer and one of the superintending engineers with U.S. or European engineers. 17. After assembly of the tractors in the regional workshop, units of fifteen tractors each with necessary land clearing and plou-hing equipment will be alloctted to the specific areas scheduled for reclamation. Each unit will have attached to it a molile workshop to render field service to tractors in operation. Other equipment for each unit vill consist of two ser- vice trucks, one mobile lubricator, one mobile crane, and two or three trailers. 18, According to the experience gained with reconditioned tractors one new traptor should reclaim one acre of weed-infested land in one hour. The target fixed by CTO for a unit of fifteen tractors is 20,000 acres in a season of 1400 hours. 19. Before the beginning of the reclamation season, the Provincial Governments will map the areas to be reclaimed, and on the basis of special authority conferred upon them by the K_ns 7radication acts, turn over the land to the CTO for reclamation, after marking the boundaries of the indi- vidual farms. 20. The reclaimed land will be turned back to the farmers for animal cultivation. Mechanical cultivation will be provided where needed and me- chatnical reploughing assured at intervals of four years to eradicate any kans reappearing in the reclaimed areas. As the reploughing can be done with culti- vating tractora from early in l4arch through May, the use of cultivating trac- tors for this purpose will not interfere with the normal l rork of land pre- paration which extends from October 15 through December 15. -4- 21. The fuels and lubricant3 to be used by CTO irill be pro- cured by the Government out of its owrn resources. The Government will also assure the supply of fuels and lubricants to the ?'ro- vincial Governments for cultivation tractors. Their trans)ort has been afforded high priority. 22. The main crop to be produced in the reclJimed area is wheat w-hich will be rotdted writh a i)ulse called gram in the pro- portion of 2:1. 23. The Governiment proposed to leave to the farmer his present -rain production. It will collect annually from the increase in production at the official procurement pric6 the eouivalent of the cost of reclarmiation spread over ssven years fron the time of re- clamation and the annual cost of mechanical cultivation. Further- more, it will purchase 60% of the balance of the grain incrernent under compulsory p3rocurement. 24. The grain obtained frorm the reclaimed lands will be used for distribution mostly in the same or adjoining areas -nd will re- pl..ce grain which was formerly iinported fro-i other areas. The trans- port and storage facilities for this grain will be provided by the Governments concerned. 25. There wrill be sufficient trained operatin; personnel in 1950 to operate 23 units of 15 tractors. Since each unit of the 23 units of heavy tractors will reclaim 20,000 acres per season, the total land reclaimed annually will be 460,000 acres. as all the tractors will not arrive at the site at the beginning of the first season, it is estimated that only 290,000 acres -till be reclaimed in 1950. At this rate, the reclamation of 3,000,000 acres will take seven years. By the end of that period each tractor will have operated for 10,000 hqurs and its useful life will be ended. The estimated total acreage reclaimed at the end of each of the seven years is shown below: 1950 1951 1952 12195 1955 L9ff 290,000 750,000 1,210,000 1,670,000 2,1305000 2,590,000 3,050,000 1/ Cost of the Project 26. The capital cost of the reclamation phase of the project in- volves the acquisition by the Central Government of buildings, heavy 1/ Dollar equivalents have been calculated in this appraisal at the following rates: Ri = $ .21 $2.80 tractors, ancillary equipment and spare parts at the outset of the project, and of additional spare parts for tractors in the fourth year of operation. The capital cost of mechanical cultivation in- volves the acquisition by the Provincial ^nd State Governmdents of buildings, cultivating tractors and ancillary equipment in the course of each of the seven years at a rate corresponding approximately to the acreage reclaiTied. The estimated annual capital investment for reclamation and cultivation and the breakdown of this investment by currencies are showm below: Capital Investment in Dollar Equivalent in Mlillions By years 1950 1951 1952 1953 194 1955 1956 Totals Reclamation 12.2 -- -- 1.7 -- - -- 13.9 Cultivation 1.4 1.6 1j6 1.6 1.6 1.6 j1± 11.0 Totals 13.6 1.6 1.6 3.3 1.6 1.6 1.6 24.9 Bv currencies U. S. Dollars t cterlinZ Runees T0olls Reclamation 8.8 2.3 2.8 13.9 Cultivation - 9,1 Totals 8.8 114 4.7 24.9 * About half of this amount will be spent in 1949. 27. The dollar investment ifor which a loan of '8,750,000 is requested from the BanIk represents the cost of the 345 heavy tractors (110 H,P. on the drawbar and more), part of the ancillary equipment, spare parts and ocean freight. The strˇrling expenditures represent a part of the ancillary equipment for reclamation, 2,000 cultivating tractors (betwJeen 30 and 40 H.P. on the drawTbar), cultivating equip- ment, spare parts and ocean freight. The rupee expenditures represent the Cost of the buildings, vehicles, inland freight in India End the local distributorst commission on the tractors and equipment purchased in the U.S.A. and U.K. The sterling and rupee expenditures will be financed by India. 28. The cost per hour (and per acre) of fuel, lubricants, oil, labor, overhead, insurance on the heavy tractors and interest calculated at 3 i% per annum are estimated to amount to Rs, 30($ equivalent $6.30) including a provision for unforeseen expenses. Since the useful life of the tractors and implements will be seven years (that is, 10,000 hours of operation, the amortization charge per hour (and per acre) of tractors and equinment as well as buildings calculated on a seven-year basis amounts to Rs 22 ( equivalent 4.62), so that the total operating cost per hour (and per acre) amounts to Rs 52 (' equivalent ':10.92). 29. The annual cost of reclamation wrill be apportioned and charged by the 'entral Government to the Provincial Governments. The latter will pay the Central Government at the end of each oreratin7 year the cost of recla- mation done in that year and -.ill charfge the cost to the farmers vwhose land was reclaimed. The repayment by the farmers -ill be nrorated, over seven years, the first installment becomin- duie after the sale of the first cT' O, i.e. in the year following reclamation. The installments will be payable to.ether with and w,ill be subject to the same collection Droceeures as land taxes. Thus, ,hile each year the Central Government irill recover the costs of reclamation performed in that year, the Provincial Governments will re- coup such amount over a period of ei^ht years from the date of payment to the Central Government. 30. The table on page 7 shows the operating costs of reclamation and their recovery by the Central Government (CTO) -from the Provincial Governments and by the Provincial Governments from the farmers. 31. The cost ner acre of fuel, lubricatin- oil, labor, insurance and over-head on the cultivating tractors, and interest calcul2teO at 3A< an- nually is estimated to amount to BLs 1!4.4 ( equivalent 3.02), including a provision for unforeseen exnenditures. Total onerating cost Per acre includ- ing amortization of tractors, imole'ents and buildings over a seven-year period is estimated to amount to -7vs 27 ($ equivalent ;5.67). The costs in- curred each year for nartial mechanical cultivation including amortization of tractors and equipment will be recouped by the Provincial Governments from the farmers in the year followinc cultivation and will also be subject to the same collection procedures as land taxes. 32. "'he cost ner acre of renloughin- the land with cultivating trac- tors to eradicate kans grass if it reanears has been estimated at RLs 7 ([ equivalent "l.7) which w,rill be paid by the farmers in the year follow- ing replou-hing. 33. Thus nayments per acre to be made by the farmers will be as fol- lows: Rs 52 ( equivalent 10.92) for reclamation, .s 27 (i; equivalent 5.67) for partial mechanical cultivation (if $uch cultivation is reouired by the farmer), and Rs 7 ( equivalent "1.h7) for additional reploughing of land there kans grass reappears. Returns from the Project 34. The yields from those kans lands w,hich are still cultivable are not more than 250 pounds of wvheat or gram per acre as compared with an average of about 750 lbs. obtained from the same types of soils elsewhere in India. In 19149 yields of 1,200 to 1,500 lbs. were obtained from lands reclaimed by tractors in the preceding year. 's a result of tVe long per- iod of idleness of the lands, the effect of deen ploughing and the organic fertility provided by the plou7hed-up kans grass, yields are expected to remain at an average of 1,000 lbs. per acre over a seven-year period. - 7 - Estimated Cost of Reclamation and Recovery (in dollar e$pivalent in millions) Totals 1957 1950 1251 1952 1953 1954 1955 1956 thru thru 1956 1963 Costs of Reclamation Borne by the Central Government- 1. Anortization of capital investment within the proposed 7-yr period @ $4.62 per hour (acre) / 1.3 2.1 2.1 2.1 2.1 2.1 2.1 13.9 - 2. Cost of operations s $6.30 per hour (acre) including interest 3.% 1.8 2.9 2.9 2.9 2z9 2.9 2.9 19.2 3, Total operating cost @ $10.92 per 3.1 5.0 5.0 5.0 5.0 5.0 5.0 33.1 hour (acre) _ Recovery of Costs of Reclamation by the Central Government 4. Payments by Provincial Govts for acres reclaimed annually at $10.92 per acre 3.1 5.0 5.0 5.0 5.0 5.0 5.0 33.1 Recovery of Costs of Reclamation by Provincial Governments 5. Payments by farmers annually beginning the year following reclamation @ $1.56 per acre ($10.92 4 7) .5 1.2 1.9 2.6 3.3 4,0 13.5 19.6 jJ The amortization of the proposed dollar loan of $8,750,000 is to begin in June 1952. - 8 - 35. Under the International Wheat Agreement the averar.e price of vrheat landed in Bombay from 1951 through 1953 (when the agreement expires) is 73.20 or Ps 350 per long ton. 1his is anproximately equivalent to the Cov- ernment nrocurerent prices naid prior to devaluation for wheat in Central India. It is about R.s 175 less than recent wheat prices in free Indian wholesale markets. As a result of devaluation, it is likely that future Indian grain prices in runees will tend to mnove u-ryare, rather than dmoMnard. Hence, the IP nrices are taken as a basis for estimating rorospective pri- mary market prices for wrheat in India durin- the period of reclamation. After allowTing for a spread of 7s 50 betwreen prices at the farm and in nrimaryJ markets, the exnected nrice to the farmer on this basis would be aromnd Rs 300 per long ton for wheat. G.ram prices at the farm have been taken at about PRs 2 less per maund than wheat or at Rs 250 per long ton. On the assumption that the production ratio of wheat to gram 1/Till be 2:1 the com- bined price of grain viould, therefore, be I?s 283 or say Rs 285 per long ton. 36. As the costs of animal cultivation and the farmerts labor in India are not readily available, no comnarison can be made of the total cost orf production wi*th the estimated returns from reclaimed lands. To indicate the size of the returns wshich the farmer will obtain from this project, estimates have been made on the basis of average cash receipts and cash expenditures of a reclaimed farm (excluding the farmer's own labor, deDreciation of imple- ments and buildings, replacement of bullocks, interest on mortgage or rent, etc.). It is to be note6 that, at least durin- the first seven years, it is intended to raise a crop a year on the entire reclaimed land. The table on the follo fing pagb gives the expected annual return to an avera 4e farn of 20 acres. This table shmors that, with a yield of 1,000 lbs, of grain ner acre, an animal cultivated farm of 20 acres wtrill have (at Rs 285 ner long ton of grain) an annual cash income of about Rs 1660 after fixed payments and nrovision for the farmer's own and his family's food, fodder for his bullocks, and seed. This sum wuill be avcilable to recompense the farmer for his o-n and his family's labor and to provide for depreciation of implements and animals, interest on the mortgage, rent, and return on investment. The cash income from a mechanically cultivated farm would be about Rs 1305. Should the yield drop to 500 lbs. ner acre anc, at the same tire the urice of grain decline to R.1 per lb. (Rs 22L or L7 per long ton) an animal cultivated farm vwoulc still show. some cash income. Lt this vield and price level a rechan- ically cultivated farm would be deprived of cash income, 37. Other important benefits to the Indian economy wrould derive from the increased grain production. The surplus grain from the reclaimed farms which w-ill reach the markets through the government procurement system and through direct sales by farmers .(see paragraph 23) will decrease the grain deficit. The table on page 1D gives an estimate of the volume and 'value of marketable grain excluding existing production on unreclaimed areas. 38. As .shoavn in the table, if the annual yield of 1,000 lbs. per acre is maintained over the seven-year neriod, the volume of grain available to the markets is estimated to range from 96,000 long tons in the first year of marketing, i.e. 1951, to 1,020,000 long tons in the seventh year, i.e. 1957. One million tons of grain reDresents about 2t of the averagfe annual grain production in India. On the basis of the above estimate the value of the grain available to the markets (not the total riroduction) over the seven- year Deriod, i.e. from 1951 through 1957 at Rs 285 per long ton would amount to Rs 1,112 million (equivalent to i231i. million). During the same period -9- Estimated Receipts. Fixed Payments and Cash Income of an Average Reclaimed Farm Basic Data and Assumptions Average farm: 20 acres Average family: 5 people Grain consumption per head: 365 lbs. p.a. Grain for seeds: 82 lbs. per acre p.a. Grain for fod.der: 1,460 lbs. p.a. per pair of buZlocks Annual charge for reclamation: (Rs 52 i 7) Ro 7.5 per acre Annual charge for cultivation: Rs 27 per acre Charges for reploughing every 4th yr: Rs 7 per acre Partially mechanically cultivated area: 4 acres (1/5 of total) Animal cultivated area: 16 acres (4/5 of total) Annual tax: Rs 3 per acre Average expected yield: 1,000 lbs. per annum per acre Wheat area: 14 acres Gram area: 6 acres Assumed average price of wheat: Rs 300 per long ton = Rs .134 per lb. Assumed average price of gram: Rs 250 per long ton = Rs .112 ner lb. Assumed average combined price of wheat and gram: Rs 285 per long ton : Rs .127 per lb. Receipts: Yield: 1,000 lbs. of grain per acre x 20 acres ~ 20,000 lbs. Less: Grain for food; 5 persons x 365 lbs. = 1,825 lbs. Fodder, 2 bullocks = 1,460 lbs. Seeds: 82 lbs. x 20 acres 1. 6L0 lbs. 4,925 lbs. Say: 5,000 lbs. Available for Govt procurement and marketing. . . . . . . . . 15,000 lbs. A. Total Receipts @ Rs .127 per lb. ....... . . . . . . Rs 10905 Fixed Paymentp: Repayment for reclamation (20 acres x Rs 7.5) Rs 150 Repayment for reploughing (every 4th year) (20 acres x Rs 7 . 4) Rs 35 'rax (20 acres x Rs 3) Rs 60 B. Total Fixed Payments . . . . . . . . . . . . . .... Rs 245 C. Cash Income for an animal cultivated farm . . . . . . . . . Rs 1,660 Similar calculation for lower yields and prices give the following results: Yield Per acre (lbs Price er lb. A B C 750 Rs .127 (2.67¢) Rs 1,270 Rs 245 Rs 1,025 750 Rs .1 (2¢) Rs 1,000 Rs 245 Rs 755 500 Rs .127 Rs 635 Rs 245 Rs 390 500 Rs .1 Rs 500 Rs 245 Rs 255 2/ For a mechanically cultivated farm, fixed payments rill be increased by Rs 540 (20 acres x Rs 27) and receipts by Rs 185 (value of 1,460 lbs. of fodder), leaving a cash income of Rs 1,305. -10- Estimated Production of Grain and iMlarketable Surpluses (In thousands of long toils and millions of' Rupees) 1951 19S2 95 22254 izi ,1,957 Totals in the period 1951-57 T RS T Rs T Rs T Rs T Rs T Rs T Rs T Rs Estimated Tonnare and Value of Production r 129 37.0 334 95.0 539 154- 744 212 949 270 1155 329 1360 388 5210 1485 Estimated Tonnage and Value of Grain Procured by Governments 9J 64 18 167 48 269 77 372 106 474 135 577 164 680 194 2603 742 Estimated Tonnage and Value of Farmers' Surplus Grain Unprocured by Governments / 32 9 83 24 134 38 186 53 237 68 288 82 340 97 1300 371 ,s;timated Total Marketable Grain 96 27 250 71 403 115 558 159 711 203 865 247 1020 291 3903 1112 2/ Grain production per acre: 1,000 lbs per acre at Rs 285 per long ton (composite price for wheat and gram) U/ Procurement per acre: 500 lbs at Rs 285 per long ton. a/ Unprocured surplus per acre: 250 lbs at Rs 285 per long ton. -li- the cost of reclamation, cultivation and reploughing incurred at the Govern- mentls initiative to obtain this production (not the total cost of production) is estimated at '0h8.6 million (reclamation - 't33.1 million; partial mechanical cultivation -- 4`13 million; and additional reploughing - S2.5 million). This comparison i].lustrates the magnitude of the anticipated benefits to the Indian econony. 39. Even if the yield should drop to 500 lbs. per acre over the entire pr'oject, resulting in a decrease of marketable grain to 250 lbs. per acre, and at the same time the average price to Rs 224 (;h7) per long ton, the value ol grain marketed during the seven years, Rs 291 million (equivalent to :61 million) would still exceed the combined cost of reclamation, cultivation and reploughing during the same period. W0. From the balance of payments point of view, in addition to canital investments in machinery and equinment, the Government will import fuel and lubricants. It is estimated that the total cost of fuel and lubricants w:ill amount to -1,2 million. The total foreign exchange cost of the project over the seven-year period will amount to (in dollar equivalent): 21.9 million for capital investment and interest payaole in foreign echange 11.2 million for fuel and lubricants Total 7;33.1 million At the average Ir`'A wheat price of :73.20 per long ton, this sum is equal to the cost of about 1J50,000 long tons of wheat. If the Annual yield per acre'averages 1.000!lbs., as much as 750,000 tons of grain (vwhe6t and rran) m.ay be made available tq'the market from the Trroject by the (nd of 1953. Thus, t4n the-fQurth year of the Project, 'the value of the marketable grain may ex- ceed the foreign exchange cost estimated for the seven year period. Conclusions 41. Thew method proposed to reclaim kans-infested lands is relatively new. Tests made over a period of twvo years by expert Indian agronomists have demonstrated that (i) the kans arass eradicated by this method has not re- appeared to any significant degree; (ii) the yields from the lands have been almost twice as large as yields from similar kans free soils. It is possi1ble that over a period of more than two years from the time of reclamation kans grass may reappear and the yields may decrease, T-he proposed application of mechanical preparation of the land and the provision for reploughing of the lands every fourth year where the grass reappears is believed to provide satis- factory means to prevent reinfestation. Through further research, vrhich the Indian Government intends to carry on, better and perhaps less expensive methods to eradicate kans grass may be found. Howeverj since the reduction of food deficits is an urgent Problem and the project is remunerative even if the returns fail to reach the estimates by more than a third, and costs increase by about a third, the acceptance of the proposed method is justi- fied. 42. The CT0, a Government departrert, is head]ed by an agricultural engineer with long experience in farming who has directed the Government research in the eradication of kans grass through deep ploughing. The available technical personnel and the training profram for additional - 12 - personnel give sufficient assurance that the nroject will be carried out with satisfactory efficiency. The tractors and equipment selected for the proj- ect and the provision for spare Darts are considered bv the Bankts experts as a-p'ropriate for operating conditions prevailing in India. The detailed plans of operations laid dorn by CTO are also consieered sound and efficient. The Central Government has obtained from the Provincial Governments concerned assurances of cooperation in the production and cultivation phases of the project and the procurement of grain. hI3. The cost estimates have been based on the assumntions that labor wages will not increase. The cost of fuel and lubricants has been adjus_ed to reflect the recent devaluation. The decreciation of tractors and machninery as well as buildings has been calculated on a seven-year basis, i.e. over t,he duration of the project. IMoreover, a small contingency reserve of total operating cost has been included. Since at this time it is not possible to foresee the effects of devaluation on the operating costs of the pDrcject, the method of cost calculation used in the annraisal is believed to be the only practical one. U.!. The expected averaae yields of 1000 lbs. per acre for the seven year period are considered to be justified. 1h5. The nrice estimates are based on the average International'l-heat hgreement prices and recent Government nrocurement nrices. Recent r'ree whole- sale market prices of wheat in the interior of India are about 50d- hi,her than the prices used in the estimated.) itesults calculated at considerably lowier urices indicate tha-t the project will still leave a satisfactor,y margin of profit. The nrofit to the farmers cannot be estimated because o-f the lack of data. Hlowever, estinates of cash profits indicate that the farmers, -hose nresent returns in the kans grass area are negligible, irill obtain satisfactory returns. aesults calculated at considerably low,er nrices and vields incOicate that the project will stiLl leave a satisfactory margin of profit. L6. The advantag7es -to the econorW as a whole will be sizeable. In ad- diition to the imnroved position of the farmers in the kans-infested area) the markets will receive additional domestic grain, beginning in the second year of the project. The annual marketable grain may amount to as ruch as one million tons in the seventh year. This would be equal, at the existing rations, to the amount of grain needed to feed about 8 million people. The long term benefits of the project will depend on the success of the proposed method in keeping the lands free from reinfestation. But even if after the seventh year from reclamation the lands again become infested, the benefits of the project obtained during the seven years would justify the invrestment. 47. The grain deficit in India is a major factor in her balance of nay- ments deficit. It is estimated that the Droject wvill increape the domestic production well above its foreign exchange cost and, if the .argets of produc- tion are reached7 its value will be equal in the fourth year to the total for- eign exchange cost. Thus, the proposed investment in foreign exchange is also justified. -13- RECLA'ATTON OF JUNGLE L,INDS Description of the Project L8. The Indian Governmientts plans for reclamation are not limited to the eradication of kans grass; they include also the reclamation of scrub jungle lands covering 2.2 million acres where the heavy brush and under-romth and other factors have made cultivation impossible. From experiments con- ducted by the CTO on a small scale in the United Provinces with old eqtaip3ent obtained from U.S. Army surpluses it has been learned that the time requlred to reclaim jungle land is about 2z hours per acre as compared vrith one hour per acre required for the reclamation of kans lands. In addition, the domes- tic currency costs involved in the reclamation of jungle lands are high since provision must be made for drainage, malaria control and colonization. In spite of the hiPiher costs involved, the results of the experiments have been sufficiently encouraging to warrant the undertaking of a pilot project. Ac- cordingly, the Government has requested the Bank to finance the dollar com- ponent of the canital investment required for a pilot -roject to be under- taken .wTith modern equipment. Two units of 15 heavy tractors each and ancil- lary equipment would be sufficient to determine the practicability of large scale reclamation of scrub jungle lands with modern equinment. The initial dollar investment for the heavy tractors, sDecial tools, other equipment, the initial orders of spare parts and freight within the U.S. is estimated at $&1.2 million. The initial sterling investment is estimated at the dollar equivalent of about P;200,000 to cover the cost of additional equipment. The CTO which will carry out the reclamation of the kans infested lands will also undertake this nilot nroject. The area of about 100,000 acres where the ex- periment will he conducted is indicated on the accompanying map. It consists mostly of land where two crops can be raised annually. Since it is ovned by the Government of the United Provinces, cultivation *.Till be carried out for the first two or three years by that Brovincial Government. Full mechanical cultivation will be provided for one-half of the reclaimed land while partial mechanical cultivation w,rill be a-plied to the other half. It is proposed that, after two or three years, the land will be sold in units of 10 to 20 acres to individual farmers. The cost of the fuel and lubricants which the Govern- ment wrill have to import annually will be urovided out of India's own resources. In accordance rith the Bank's requirements, the CTO will maintain records and install an appropriate accounting system to show the results achieved under the pilot project. Cost of the Project b9. The Bank is requested to grant a seven-year loan for this project in the amount of -1,20, 000. Repayment of nrincipal is propoqed to start in June, 1952, at the rate of about :?250,000 annually. Conclusions 50e T1hile the financing of a large scale project of jungle clearance could not be considered at this time owing to high costs, the slow rate of reclamation and complex problems of colonization, the financing of a pilot project is justified. Under a project of this size, no serious problems of internal financing will arise, wrhile the clearing of 100,000 acres of new land *on which two crops v111 be raised. annually v.ill contribute towrards the reduction of the land shortage and food deficit. In view of the land shortage the clearing, of nevw lands is an important undertaking. The pilot project wiill enable the Indian 'overnment to assess the costs anO returns of such clearing on a large scale vith rmoeern equipment. BRIYF ,uRVQZ C1T THEF.OCD -rIUiTIONI D: IND IA India has placsd the highest priority on increased production and more effective utilization of fcoodstufffs. The country has organized a nation=Tide campaign with the inmediate objective of food self-sufficiency by 1952 and with the longer range target of a gradual improvement in the dietary standards of the population. The urgency of the food problem has been emphasized by a combination of recent circumstances. Hiarvests have been poor since 1946, Food surplus areas were separated from India by Partition. The marketable proportion o- domestic crops has been reduced by a larger consumption on the farm as a result of higher rtral income. Mieanwhile Indials requirements have been constantly increasing with the growrth in pooulation at the rate of more than 3 million persons per year. I) spite this situation the new Indian Government has assumed the obligation to assure the entire population or at leasu some daily allowance of grain. Pursuit of thisF policy has meant an increasing dependence on food imports. Foreign food purchases rose consistently from under a million tons in 1945 to 2.8 million tons in ]-948. 1SIn 1949 they are expected to total over 3 million tons. It is this situation which bears a major responsibility for India's recent balance of payments difficulties, especially in its hard currency accounts, In 1948, for exanple, Goverament food imports represented about 20' of tQtal and hard currency imForts, Elimination of fQod imports would have all but wsiped out the current deficit in Indiats hard currency balance of payments and wou.ld have turnedc the over-all balance of payments deficit on current accoumt into a surplus. Recent improvements in the food supply position of soft cu-rency areas will now permit India to obtain a larger proportion of food imports outside the hard currency area than has been possible in the past few years. However., the rapid deterioration in Indiats soft cur>rency balance of payments position since the latter part of 1948 emphasizes the necessity for over-all economies in imports as well as a reduction in those from hard currency countries. Furthermore, to the extent that India remains dependent on consumption goods imports, its ability to purchase foreign equipment for urgent development pulrposes is curtailed, Theoretically, the potentialities for increased food production are enormous. Present yields are extremely low even by Asiatic standards. How.ever, the baclkwiardness and ignorance Qf the typical cultivator and scarcity of the necessities for improved techniques makes the realization of Indials agricultural potentialities a most difficult task. 2/ Grain imports represented about 69o of the estimated total supply of approximately 45 million tons of cereals and pulses available for consumption in India in 1948. -2- To cope writh this taskl the Central Government, with the cooperation of Provincial agricultural administrations, has organized a three phase program of agricultural develonment. Jt includest (1) Short term measures to improve yields on areas now under cultivation where adequate supplies of moisttue are assured. These aim at an increase in annual grain production by 4 million tons over a five year period. (2) Medium term measures, extending over two to seven years, including reclamation oft weed infested and virgin lands and deep wiell irrigation. An annual acldition of 3 million tons is anticipated from these projects. (3) Long range multi-purpose river developmnent projects, irrigation from which is espectcd to add 4 - 5 million tons annually to the grain supplies by the end o0 a 10 to 15 year period. Other phases of the food program inclurle addiitional attention to high nutritional non-cereal crops, diversion of non-food crop areas to food production, improvement in the handling and storage of foods, emphasis on agricultural experiment projects, and an extension and improvement in controlled grain procurement and distribution. Special emphasis is placed on the procurement and distribution phase of the program as a means o^ short run self-suff;iciency. Through an extension of compulsory collections of grain production in excess of farm consumption and seed requirements, the Gov^rnment hopes that by 1952 the system will provide sufficient grain to meet rationing commit- iaents without resort to imports. The Government foresees a subsequent additional expansion in supplies for rationing purposes through its plan to procure at least 609 of the additional grain resulting from measures taken under the program for increased agricultural output. Realization of the established targets under the food production campaign wQuld add upwsards of 10 million tons to Indiats grain supply over a decade, while the procurement scheme would permit the present population under rationing to be increased by more than 50,a at existing ration standards during the same period. This would not onily eliminate the necessity for imports but would permit a significant increase in consumption levels. The extent to which actual results of the food campaign will approach the announced objectives is of course impossible to determine. Judging by past "tgrow more food" programs it is probable that anticipated gains are unduly optimistic. Nevertheless, the present campaign for food self-suf"iciency exceeds anything previously attempted in its scope, priority of importance, and in the energy being devoted to agricultural improvement at all administrative levels. -3- Self-sufficiency at present consumption standards over the next decade wtould rec:uire additions to India's average annual grain output in normal crop years of the order of about 6 million tons (or Little more than half of the objectives of the present campaign). Such an achievement does not seem unreasonable. By conservative estimates at least 3.5 million tons of additional grain per year should be realized from the present reclamation progrcm? the additional fertilizer available from the new ammonium sulphate plant at Sindri,, and the various river development projects. It is reesonable to expect that tubewell irrigation and the numerous other mea.sures now being taken by the Provinces to raise the lowr productivity of exist- ing farms will, at the minimum, add another 2,5 million tons of grain per year within a decade. In years of adverse weather, crop failures could of course offset these gains and again necessitate supplementary supplies from abroad. However, as irrigation facilities are extended the conse- quences of unfavorable monsoons will be correspondingly diminished. And the ability to meet consumption needs from given grain supplies will be erihanced as storage and transport facilities are improved, as production and consumption of non-cereal foodstuffs is increased, and as the system of conitrolled distribution is extended.