Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) Report Number : ICRR0020638 1. Project Data Project ID Project Name P100789 IN: Andhra Pradesh and Telangana State C Country Practice Area(Lead) India Water L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IBRD-48570,IDA-42910 31-Dec-2012 217,800,000.00 Bank Approval Date Closing Date (Actual) 19-Apr-2007 31-Jul-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 189,000,000.00 0.00 Revised Commitment 158,124,109.28 0.00 Actual 158,184,875.04 0.00 Prepared by Reviewed by ICR Review Coordinator Group Hassan Wally John R. Eriksson Christopher David Nelson IEGSD (Unit 4) 2. Project Objectives and Components a. Objectives The Project Development Objective (PDO) as articulated in the Project Appraisal Document (PAD, p. 3) was: "for selected tank based producers to improve agricultural productivity and water user associations to manage tank systems effectively." The Project Development Objective (PDO) as articulated in Financing Agreement (FA, p. 4) was to: "assist the Project Implementing Entity in: (a) improving agricultural productivity with the assistance of selected tank-based producers; and (b) improving the management of tank systems with the assistance of selected WUAs." Page 1 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) This Review assesses the outcome of the project against the PDO as stated in the Financing Agreement. The Project focused on Andhra Pradesh State until the end of 2014 when Andhra Pradesh was bifurcated into two States --Andhra Pradesh and Telangana—and subsequently the Project focused on both States until closure. b. Were the project objectives/key associated outcome targets revised during implementation? No PHEVALUNDERTAKENLBL c. Will a split evaluation be undertaken? No d. Components The project had four components: 1. Institutional Strengthening (appraisal cost: US$16.4 million, actual cost: US$12.85 million). This component aimed to enable community-based institutions - Water User Associations (WAS), Fishing Cooperative Societies (FCSs), Farmer Interest Groups (FIGS) - assume greater responsibility for tank system management and for improvement of tank-based agricultural livelihoods. 2. Minor Irrigation Systems Improvements (appraisal cost: US$150.6 million, actual cost: US$144.46 million). This component aimed to enhance the efficiency of water use in tank areas selected under the project. It included two sub-components: 2.1. Tank Systems Improvements. This would support: (i) improving the physical and operational performance of selected tank systems (which includes feeder channels above the tank reservoir, the tank itself, and the irrigation channels in the command area) through a range of interventions identified and executed in partnership with tank WUAs ; (ii) secure the safety of the tank structure; and (iii) improve on- farm water management and water use efficiency. The sub-component would support the physical rehabilitation and modernization of tank systems with cultivated command area (CCA) of between 40-2000 hectares. About 3000 tanks with an estimated CCA of about 250,000 hectares, spread across 21 districts of the state, would be proposed to be rehabilitated under the project. 2.2. Participatory Groundwater Management. The aim of this sub-component would be to enable groundwater users in those tank systems that were subject to groundwater stress, to improve the management of their groundwater resources, and thereby enhance their agricultural productivity and livelihoods. 3. Agricultural Livelihoods Support Services (appraisal cost: US$25.2 million, actual cost: US$23.44 million). The aim of this component would be to enhance tank-based livelihoods by increasing production, productivity and profitability of agriculture, horticulture, fisheries, livestock and other significant productive activities. It included five sub-components: 3.1. Agriculture and Horticulture. The focus of this sub-component would be on increasing production and productivity of field, horticultural and fodder crops in tank command areas. 3.2. Livestock. The focus of this sub-component would be on increasing the production and productivity of Page 2 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) milk, meat and related animal products. 3.3. Fisheries. The focus of this sub-component would be on improving production and productivity of tank fisheries. 3.4. Foreshore Plantation. The focus of this sub-component would be on effective utilization of tank foreshore areas in selected locations. 3.5. Agri-Business and Marketing. The focus of this sub-component would be on increasing profitability and promoting product diversification and greater market orientation of production. 4. Project Management (appraisal cost: US$12.5 million, actual cost: US$11.68 million). The aim of this component would be to ensure smooth implementation of project activities, monitoring of project implementation progress and outputs/outcomes achieved, and learning from project experience. e. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost. The total project cost was estimated at US$217.80 million. Actual project cost reported by the ICR (Annex 1) was US$202.80 million. The difference stemmed from a lower disbursement amount of the IDA/IBRD Credit and a shortfall in counterpart funding as detailed below. Financing. The project was financed through a Specific Investment Loan worth US$189 million split into an IDA Credit worth US$94.50 million and an IBRD Credit worth US$94.50 million. These amounts were revised at restructuring to US$87.00 million for each loan. Actual amounts disbursed as reported by the ICR (Annex 1) were US$71.59 million for the IBRD loan and US$86.60 million for the IDA loan. Total amount disbursed was US$158.19 million. The ICR (para 38) reported that US$15.00 million were cancelled from the original loan amount due to currency devaluation; and an additional US$10.00 million was saved through savings within the project components; and due to discontinuation of the livestock and foreshore plantation sub-components at MTR. Borrower Contribution. The borrower was expected to contribute a total of US$28.80 million of counterpart funding, of which US$7.00 million were to be contributed by Water User Associations (WUAs). The actual amount contributed according to the ICR (Annex 1) was US$17.58. The ICR did not provide a breakdown of this sum into borrower and WUA contributions. Dates. The project was scheduled to close on December 31, 2012, however, it closed on July 31, 2016-- three years and seven months later than the expected date. This delay came on the heels of four project extensions that were needed to accommodate delays in the execution of works that resulted from political disturbances in the state. The project was restructured four times (all Level 2 restructuring) as follows: 1. On October 30, 2012 (amount disbursed US$87.85 million) in order to extend Closing Date from December 31, 2012 to September 30, 2014. 2. On February 28, 2014 (amount disbursed US$127.11 million) in order to approve the partial cancellation of savings resulting from the depreciation of INR. 3. On May 29, 2014 (amount disbursed US$129.10 million) in order to approve the cancellation of US$7.50 million under IBRD and extend of closing date from Sep 30, 2014 to July 31, 2016. 4. On December 22, 2014 (amount disbursed US$133.52 million) in order to accommodate the bifurcation Page 3 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) of the of the State of Andhra Pradesh into the State of Andhra Pradesh and State Telangana. The Midterm Review was carried out on September 13, 2010, however, the PAD did not include an exact date for conducting it. The Review resulted in canceling the Livestock and Foreshore Plantation sub- components. 3. Relevance of Objectives & Design a. Relevance of Objectives High. Andhra Pradesh is a middle income Indian state that accounts for 8.3% of India’s land mass, 7.3% of its population, and 7.1% of its GDP. Between 1999 and 2006, agriculture grew at 2.5% per annum with almost all of this growth coming from the livestock and fisheries sub-sectors while the crop sub-sector, which accounts for about 60% of state domestic product from agriculture, stagnated. Consecutive droughts and inadequate investments in irrigation were key factors attributed to the poor agricultural performance. Tank irrigation has historically played an important role with the state having the largest number of tanks (approximately 74,000) and the largest area irrigated by tanks in India. The area irrigated by tanks declined significantly in the last decade from about 1 million hectares in 1990 (24% of irrigated area at the time) to about 0.5 million hectares in 2004 (12% of irrigated area). This was mainly due to deficient maintenance and management of the tank system by government departments entrusted with the task, as a result of which most tanks were performing at well below capacity with the percentage of actual area irrigated to potential created varying between 35-55% depending on rainfall. At project appraisal objectives were highly relevant to the Government of Andhra Pradesh priorities and its emphasis on beneficiary participation for decentralized irrigation development in the state. By 2006/07 the state had allocated 84% of its capital budget for irrigation, up from an average of 36% between 2001/02- 2003/04. Also, in 2005 the Government of India initiated the ‘Bharat Nirman’ program that sought to increase irrigated area in the country by 10 million hectares. As part of this program, the Government of India included the restoration and renovation of tanks as a priority task for which a pilot scheme was launched in a number of states, including Andhra Pradesh, in 2005. In 2006/07 the Government of India budget announced the government’s intention to seek additional funding from multilateral agencies for further scaling up this task. Objectives were also in line with the World Bank Group India Country Assistance Strategy (CAS) for the period FY05-08 which aimed to increase efficiency of irrigation systems by increased productivity of irrigation water, and also sought to improve rural livelihoods using a community empowerment approach, among other things. At project completion objectives continue to be highly relevant to the priorities of the States of Andhra Pradesh and Telangana as well as for the Government of India. Objectives are in line with the Government of India's National Water Policy 2012 (NWP) which aimed to strengthen irrigated water resource management and increase agricultural productivity. Objectives were also in line with the World Bank’s Country Partnership Strategy for India (CPS, 2013-17) which highlighted the urgency of boosting India's agricultural productivity in the face of ongoing global food security concerns, pronounced food-price volatility, and concerns about climate change (CPS, p. 24, para 53). Page 4 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) Rating High b. Relevance of Design Substantial. Design included a clear and focused statement of objectives. The results framework was aligned with the PDO and reflected logical links between inputs, outputs and expected outcomes. To achieve the stated objectives, design featured a comprehensive approach that included the modernization of irrigation structures combined with institutional strengthening and livelihood improvement. These were to be achieved through tank rehabilitation and maintenance, boosting agricultural productivity and improving marketing. These activities were featured under three project components while the fourth focused on project management. The first component provided support to Water User Associations to improve their capacity to manage and maintain water tanks in the project area. The second component featured tank rehabilitation and improving groundwater management. Component 1 and 2 included relevant activities that were expected to improve water availability and enhance the efficiency of water use in project areas, hence directly contribute towards achieving the second part of the PDO. The third component featured activities that aimed to enhance tank- based livelihoods by increasing production, productivity and profitability of agriculture, horticulture, fisheries, and livestock. Also, design featured an agri-business and marketing sub-component to increase profitability through improving market linkages. These activities were relevant and would directly contribute towards achieving the first part of the PDO. Design could have benefitted from better marketing strategies and value chain analysis to complement diversification activities. Design also failed "to recognize climatic aberration such as severe droughts as potential threats to the achievement of expected outcomes (ICR, para 20)." Finally, design was overly ambitious and included multiple activities that were beyond the implementation capacity of the project; and consequently two of these (livestock and foreshore activities) had to be dropped after MTR. Rating Substantial 4. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective The PDO as stated includes two separate sub-objectives, (a) and (b), that will be assessed independently: (a) to improve agricultural productivity with the assistance of selected tank-based producers; and (b) to improve the management of tank systems with the assistance of selected WUAs. Page 5 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) Rationale Sub-objective (a) to improve agricultural productivity with the assistance of selected tank-based producers. Substantial. Outputs Tank Systems Improvements: aimed to improve physical and operational performance of selected tank systems, secure the safety of the tank structure, and improve water management and water use efficiency. • The project rehabilitated 2,157 minor irrigation tanks with a total area of 254,957 hectares (original target: 3,000 tanks, revised target at MTR: 2,157 tanks). This included 1182 tanks in Telangana with a design ayacut of 131,214 ha and 975 tanks in Andhra Pradesh with a design ayacut (area served by irrigation)of 122,116 ha (ICR, para 51). • 5,000 quality control tests were conducted by third party external consultants. The tests were performed on soil, building materials, concrete, mortar, and associated inputs to ensure that the correct construction materials and conditions conformed to the national standards (ICR, p. 34). Participatory Groundwater Management: aimed to enable groundwater users in the tank command areas to reduce groundwater stress and improve the sustainability of management of groundwater resources. • Participatory Groundwater management (PGM) was implemented in 314 tanks (172 tanks in Telangana and 142 tanks in Andhra Pradesh) in 13 districts with a tank command area of 25,000 hectares (ICR, p. 15, para 56). • 2,260 groundwater user groups (36,467 members) were formed (ICR, p. 35). • 9,337 farmers from 92% of the rehabilitated tanks received training on Participatory Hydrological Monitoring (PHM); and groundwater users from 75% of the tanks participated in the Crop Water Budgeting (CWB) workshops (ICR, p 35). Agriculture and Horticulture: aimed to improve production and productivity as well as the diversification (into non-paddy crops) of agriculture and horticulture commodities by upgrading technology and production practices, and training and capacity building of farmer groups. • 7,343 crop technology demonstrations were organized during the project implementation period and 42,000 farmers were trained under the project. These demonstrations and trainings enabled farmers to adopt improved cultivation and water management practices and crop and input choices. • By project completion project, the percentage of farmers in tank command areas who adopted the improved cultivation practices reached 57.4 %, which exceeded the original target of 20%; and the revised target of 44% (ICR, p. viii and p. 38). • 4,349 tank level farmer fairs and 12,015 farmer exposure visits were organized. The supply of farm implements such as power tillers, rotavators (rotary tillers), seed-cum-fertilizer drills, and multi-crop threshers reached 1,346 WUAs (ICR, p. 38). • By the project completion, the share of paddy rice was reduced to 74.6% of the rehabilitated tanks Page 6 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) command area, and the cultivation area increased for other crops. This meant that about 25% of the command area was under non-paddy crops, which was below the target of 34% (ICR, p. 37). Therefore, even though crop diversification was taking place in the command tank areas the share was still less than expected. Also, 223 shade net nurseries and 3,029 vermi-compost units were set up to provide quality seedlings to farmers (ICR, p. 38). Livestock: aimed to increase the production and productivity of milk, meat and related animal products, however, activities under this subcomponent were discontinued at the Midterm Review to allow for more focus on farm productivity enhancing activities(ICR, para 14). Foreshore Plantation: activities under this subcomponent were discontinued at the Midterm Review to allow for more focus on farm productivity enhancing activities Fisheries: aimed to improve production and productivity of fisheries in the tank command areas. • The project provided training and capacity development activities on improved feeding and harvesting techniques and fishery management practices provided to the fishermen and fish farmers. 1,126 Fisheries Cooperative Societies were organized for the fishermen. By project completion 100% of the tank fishing communities adopted improved fish production and harvesting techniques, which exceeded the target of 80% adoption rate (ICR, p. 39). Agri-Business and Marketing: aimed to increase profitability, promote crop diversification, and expand market opportunities. • 1,406 commodity interest groups (CIGs) were formed (target: 1500) during the project implementation, and a total of 22,154 members were part of the commodity interest groups at the end of the project. Out of the total commodity interest groups, notably 378 groups were women’s CIGs, and 77 groups were tribal farmers. In the project, CIGs were provided training on business plan development, production and marketing, packing, storage, drying and post-harvest management, and book keeping (ICR, p. 41). • 903 agribusiness plans by CIGs were approved, and 669 groups implemented their business plans; and 97 formal contractual marketing agreements (target:100) were reached by CIGs (ICR, p. 41). Outcome The evidence provided in the ICR including evidence from the impact evaluation study point to the success of the project in improving agricultural productivity for selected tank producers. This was achieved through rehabilitating and modernizing tank irrigation infrastructure, which was functioning at sub-optimal level prior to the project intervention and resulted in low overall productivity. The project also provided support to farmers to improve their productivity at the farm level, including improved production and irrigation technologies. The project direct beneficiaries reached 605,052 (target: 605,188). However, the project fell short on a number of targets including: system for rice intensification, diversification; and targets on sale value for two of its target crops (rice and groundnuts). Nevertheless, and based on the project's achievements below, outcome is rated substantial. Page 7 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) • Improving water availability, irrigation efficiency and water productivity in project areas. • The project-supported tank and irrigation improvements included strengthening reservoir embankments, renovating sluice/head regulators, and improving water distribution through field channels. Rehabilitation of tanks resulted in improved water storage in the reservoirs which contributed to a 28% increase in the tank command area (ICR para 51). • At the end of the project, 82% of the tank command areas were irrigated compared to a target of 75% and a baseline of 54%; and an additional area of 63,739 hectares was irrigated as a result of the project (ICR, p. 33). Also, 80% of the farmers having land in the middle and tail end of the tanks reported that the water availability increased during the course of the project, which exceeded the target of 75% (ICR, p. 33). The increment in water availability was due to the improvement of water conveyance efficiency that resulted from lining of canals which reduced seepage losses (ICR, para 52). • Over the project period, water productivity in the tank areas improved significantly to Indian Rupee 39,606 per hectare meter, which represented a 38% increase compared with the mid- term value of Indian Rupee 28,708 per hectare meter. According to the ICR (para 59) improved water use efficiency and decreased conveyance losses increased water productivity of kharif rice paddy from a baseline of 0.211 kg/m3 to 0.294 kg/m3. Also, cropping intensity at the end of the project increased by 33.4% (target:15%) from 103.3% at the baseline to 137.8 %. This increment in cropping intensity was a function of the shift to the short duration and low water requiring crops in conjunction with rehabilitation of tank systems (ICR, p. 36). • The project implemented a pilot for participatory ground water management (PGM) in 314 tanks (172 and 142 tanks in Telangana and AP, respectively) with a tank command area of 25,000 ha. According to the ICR (para 48) the project-supported PGM activity "enabled borewell owners to share their groundwater resources with neighboring farmers, thereby reducing the demand for additional borewells and sustaining the existing borewell yields." In addition, evidence provided by the ICR (para 58) showed that the rehabilitation of tanks had a positive effect on groundwater levels in several test sites when comparing measurement to the pre-project situation. • The ICR (p. 35) stated that the final Impact Assessment reported that the water productivity, which was calculated as crop outputs per unit of water from groundwater irrigation, increased by 38.9% at Indian Rupee 83,256 per ha meter exceeding both the revised target of 10% and the original target of 25%. The ICR (p. 16) noted that in Nalgonda district 30% of ground water users in the command area of 11 Tanks under PGM adopted efficient irrigation techniques, including drip irrigation and alternate furrow irrigation. • Also, the pilot ground water management approach encouraged farmers in particular in drought stricken areas to diversify to high value crops that were not as water intensive (such as sunflower, tomato, green gram, ground nut, finger millet, sesame, maize and mulberry). Such areas saw the area cultivated by these crops increase to 42% over a seven years period (09/10 to 15/16) while areas of paddy decreased by 85% (ICR, para 60). Page 8 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) • Improving productivity through farm-level support. • The project focused on the productivity growth of four key agriculture commodities predominantly grown in the project area: paddy, maize, groundnut, and vegetables. According to the ICR (para 59) higher crop productivity was achieved through project support including: extensive trainings, demonstrations, exposure visits, supply of implements to stakeholders, adoption of high yielding varieties, and improved techniques of integrated nutrient and pest management. • The ICR (p. 36) stated that the final impact assessment reported that the four targeted commodities saw an increase in yields attributable to the project, for example: rice paddy productivity increased by 36.3% from 44.3 quintal per hectare to 60.4 quintal per hectare, which exceeded the target of a 25% increase; maize productivity increased by 72.3% from 32.8 Quintal/ha to 56.5 Quintal/ha which also exceeded the target of 30%; also the productivity for groundnut and vegetables, such as tomatoes, increased significantly. The groundnuts productivity increased by 112.5% from 8.8 Quintal/ha to 18.7 Quintal/ha which was significantly higher than the project target of 25%. The yield for vegetables improved by 40% from 280 Quintal/ha to 392 Quintal/ha by the end of the project which was higher than the project target of 30%. • However, the project could not achieve its target area for the system of rice intensification (SRI) which only reached 0.88% at the end of the project compared to a target of 10% and a baseline of 1.2%.The ICR attributed the failure to achieve the SRI target to "to various factors such as labor limitations (ICR, p. 46)." By project completion about 25% of the tank command area was cultivated with other crops than rice paddy, however, this was below the project target of 34%. While the project succeeded in introducing diversification in the tank command areas, it fell short from achieving the target of 34% of the commend area under non-paddy crops. • Despite the discontinuation of the livestock activities at the MTR, the ICR (p. 39) stated that the final impact assessment reported that milk productivity increased up to 5.6 liters per day per cattle, which exceeded the target of 4.9 liters per day per cattle. This was achieved through "on-farm training and demonstrations (supported by this project) on improved nutrition through fodder development and production (ICR, p. 39)." However, it was not clear in the ICR whether this achievement was totally attributable to the project activities. • Fish productivity: according to ICR (p. 39) the final impact assessment reported that fish productivity increased by 324% from 1.25 quintal per hectare of Effective Water Spread to 5.3 quintal per hectare at the end of the project implementation in an Effective Water Spread area of 42,859 hectares in 1,146 tanks. The project also generated employment for 99,956 fishermen who were landless and belonged to weaker sections of society. • As a result of the project support to agribusiness activities, the final sale value of rice paddy increased by 9%; however, this was slightly lower than the target of a 10% increase. Also, the groundnut CIGs were able to increase the sales value by 8% from the baseline Page 9 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) which was less than the 10% target. On the other hand, the maize CIGs increased the final sales value by 17% exceeding the target of 10%. The ICR (p. 41) attributed missing some outcome indicator targets for this activity due to delays in initiating activities of this sub-component. Rating Substantial PHREVDELTBL PHEFFICACYTBL Objective 2 Objective (b) to improve the management of tank systems with the assistance of selected WUAs. Substantial. Rationale Outputs • By project completion 91% of the WUAs maintained the appropriate cash books, compared to a baseline of none and a target of 80% (ICR, p. vi). Also, 95% of WUAs were conducting general body meetings compared to a baseline of none and a target of 80% (ICR, p. vi); and 100% of WUAs had co-opted members from general public compared to a baseline of 4% and a target of 90% (ICR, p vii). • The water use tax collection rate reached 84% per cent, which exceeded the target of 80% of the total assessed water charge collected (ICR, p. vii). • By project completion, 90% of the WUAs received lease income from award of tank fishing rights compared with a target of 90% and a baseline of none (ICR, p. vii). • A Tank Improvement Management Plan (TIMP) was developed to outline and monitor the civil works undertaken by the WUAs, as well as capacity building activities and record maintenance (ICR para 41). Outcome • The project allocated about $10 million (5%) of the total project budget to contracting WUAs to undertake minor civil works. According to the ICR (para 64) this approach helped WUAs to build "sense of ownership over the tanks" and was expected to improve the prospects for O&M. WUAs managed to execute 86% of the budget allocated for civil works. The project introduced the 'OK' card which served as an inspection document for tank bunds, sluices, mechanical fixtures and other physical components of the rehabilitated tank systems. WUAs were responsible for filling out the OK cards and submitting theses to the project director. According to the ICR (para 66) 88% of the WUAs members agreed that the OK cards made it easier for them to understand the status of the institutional and technical aspects the tank. Page 10 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) • By project completion, 1791 tanks were handed over to WUAs for operation and maintenance; where 97% of these WUAs had O&M expenditure as per agreed in annual O&M plans compared to a target of 80%. The ICR (p. 18, table 3) reported that about 81% of water users in rehabilitated tank systems were satisfied with WUA operation and maintenance compared to a target of 75%. • The ICR (p. 16, para 67) reported that an ex-post evaluation of the impact of the project using a sample of 220 WUAs found significant progress on conducting General Body Meetings (an increase from 9% to 93%) and on the maintenance of appropriate cash books (an increase from 19% to 87%). Management Committee meetings were also undertaken in 95% of selected project tanks. The membership of WUAs was further expanded through the co-option of fishermen and groundwater users. • However, WUAs fell short on raising funds needed to mobilize their corpus (permanent) fund by project completion as they reached 2.5% compared to a target of 5.0%. The ICR (p. 19) highlighted the low representation of women members in WUAs and Management Committees where they occupied 14% and 16% of seats respectively. This was attributed to land tenure issues, as land owners and tenants in a tank command area are the only ones allowed to be represented in WUAs. Based on the afore mentioned evidence, the project was successful in improving the management of tank systems with the assistance of selected WUAs, hence outcome is rated substantial. Rating Substantial PHREVDELTBL PHREVISEDTBL 5. Efficiency Economic and Financial Efficiency ex ante • The analysis estimated the ex-ante Economic Rate of Return (ERR) to be 23.6% while the Financial Rate of Return (FRR) was estimated at 18.2%. Economic and financial analysis has been undertaken of the expected benefits generated from project investments in institutional strengthening, irrigation system improvement, and agricultural livelihood support services, which together account for 94% of the project costs. The project returns were estimated for a 25- year period calculated with the 2007 constant prices using the discount rate of 12%. • Expected project benefits included: (i) expansion in area benefiting from irrigation, which increases production and cropping intensity; (ii) diversification, which involves shift into higher value crops; (iii) improved agricultural technology and practices, which increases agricultural productivity; (iv) improved water security for production in irrigated areas, which reduces production losses in low rainfall years; (v) increased milk production through breed upgradation and improved animal husbandry; (vi) increased output Page 11 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) of fish through improvement in fish production techniques; and (vii) foreshore plantations, which are expected to produce commercial timber for the WUA. • Sensitivity analysis using different scenarios indicated that the project was able to absorb substantial negative impacts yet still generate robust returns (ERRs and FRRs). ex post • The ex-post Economic Internal Rate of Return (EIRR) in the ICR analysis was estimated to be 27.5% with a Net Present Value (NPV) of US$29.36 million at a discount rate of 12%. The Financial Internal Rate of Return was estimated to be 21.0% with the NPV of US$29.34 million. • The ex post economic analysis assessed the economic and financial returns to the project based on the PAD economic analysis with some modifications that reflected actual implementation results. These included: for the calculation of economic and financial analysis actual total project costs of $175.77 million was used; time frame used for the economic and financial analysis was 25 years, including 9 years of project implementation and 16 years of operation period; models of 8 crops and fishery were used for the ex-post analysis using a simple farm model applying 2007 farm gate constant prices, and any post- wholesale value creation activities were not considered in the analysis. The ICR economic and financial analysis did not include the benefits derived from sub-components of livestock and foreshore plantations (timber production) as both were dropped during the course of the project implementation. • Three factors contributed to the strong ERR of the project (compared to the appraisal estimate) and at the same time helped offset reduction in economic returns due to the delays in project implementation after state bifurcation. First, the project brought an additional 63,740 hectares of registered command areas into full irrigation status. Second, improved water availability enabled farmers to diversify by shifting to the non- paddy, higher value-added commodities such as maize and groundnuts. Third, productivities for the key crops were higher than projected at appraisal due to the adoption of improved technologies, such as hybrid seeds and better crop varieties, Integrated Pest Management (IPM) and Integrated Nutrient Management (INM), by farmers in the project areas (ICR, p. 19, para 69). • The robustness of the project’s incremental benefits against some unpredicted contingencies were examined through different sensitivity analysis. The results showed that that an increase of 25% in future recurring costs could maintain the ERR at 27.3%. While a reduction of 25% in incremental benefits of area expansion, diversification and technology adoption lowered the ERR levels to 18.7% per cent, 25.6% and 24.3%, respectively (ICR, p. 19, para 71). Administrative and Institutional efficiency The project closing date was extended from the original date of December 31, 2012 to June 30, 2016 (about 39 months). This extension came on the heels of political disturbances that led to the state bifurcation and caused delays in execution of works. The project also suffered from delays at the earlier stage of implementation where a "year after project effectiveness, none of the contractors had begun civil works (ICR, para 23)". There were also delays in releasing funds to implementing departments and that contributed to delays in starting the agricultural livelihoods component. According to the ICR (para 24) "an overall fiscal Page 12 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) crisis in Andhra Pradesh resulted in low project disbursement halfway through the project (19% by 2010), which picked up subsequently." Efficiency is rated substantial given the high ex post rate of return compared to appraisal estimate. However, project implementation suffered from significant implementation delays. Efficiency Rating Substantial a. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 94.00 Appraisal  23.60 Not Applicable 94.00 ICR Estimate  27.50 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome Relevance of objectives was rated high while relevance of design was rated substantial. Efficacy of the first sub- objective was rated substantial despite some shortcomings because the ICR provided convincing evidence that the project activities contributed to improving agricultural productivity for selected tank producers. Efficacy of the second objective was rated substantial because the project succeeded in improving the management of tank systems with the assistance of selected WUAs. Efficiency is rated substantial. a. Outcome Rating Satisfactory 7. Rationale for Risk to Development Outcome Rating The risk to the sustainability of development outcomes is rated modest. This rating reflects uncertainty around the availability of government funds for WUAs, low O&M cost recovery and concerns on climate change and limited market access in some project areas. The following areas impact the sustainability of the development outcome: • Sustainability of assets created by the project. The project financed assets were built using sound construction methods and ownership was transferred to farmers and Water User Associations after putting in Page 13 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) place suitable operation and maintenance arrangements. These assets were familiar to the users in the area and involved no complex parts (ICR, para 90). • Sustainability of institutions established or supported by the project. The project provided capacity building activities to support the institutions including the Minor Irrigation Department. Also, the role of Water User Associations is recognized by Andhra Pradesh and Telangana and water users have seen the benefit of functional WUAs, and it is likely that the water users and WUA members would continue to secure the functioning of WUAs. However, the bifurcation resulted in uncertainty over the legal framework of the WUAs, which was not fully addressed yet (ICR, para 91). • Financial sustainability of Water User Associations. According to the ICR (para 92) the Governments of the two states of Andhra Pradesh and Telangana intend to continue investing time and effort including allocation for minor repairs and maintenance support to WUAs. In addition, the majority of WUAs maintains appropriate cash books, collect annual assessed water charges and tank fishing rights. These revenue streams combined with State support provides reliable financial resources for WUAs in order to carry out operation and maintenance (ICR, para 92). However, there is a concern about the low O&M cost recovery which could hinder the role of WUAs in the future. In a further communication, the project team explained that "it is common practice in India for WUAs to be co-financed by user fees and state subsidies." • In addition to the above mentioned areas of concern, this review finds that climate change is a concern that will continue to impact the sustainability of the development outcome. Also, the limited market access in some project areas could negatively impact prices of agricultural products. In a further communication, the project team explained that "by promoting conjunctive water use, improving the management of groundwater resources, and investing in storage tanks, farmers in Andhra Pradesh and Telangana have already become more resilient to successive drought episodes." The team also noted that the PDO indicators were measured in terms of the increase in weight of crop per unit of water use (in kg/m3) and not in terms of farmer’s income, hence, the price risk of agricultural products is outside the scope of the risk to sustainability of the PDO. a. Risk to Development Outcome Rating Modest 8. Assessment of Bank Performance a. Quality-at-Entry • The Government of India sought additional funding from multilateral agencies for further scaling up irrigation development in response to a general slowdown in national agricultural growth. The restoration and renovation of tanks was a priority task for which a pilot scheme was launched in a number of states, including Andhra Pradesh. In response to this request the World Bank prepared this project. • The project design incorporated lessons on stakeholder participation and implementation effectiveness from the Bank-supported Andhra Pradesh Economic Restructuring Project and Karnataka Community- Page 14 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) Based Tank Management Project. Design integrated modernization of irrigation structures with institutional strengthening and livelihood improvement and the project components were well aligned with the PDO. • While the Project Management Unit was fully staffed, multi-sectoral coordination among the implementing agencies was not adequately addressed at entry, even though it was correctly identified as a substantial source of risk. • Six risks were identified at appraisal and relevant mitigation measures were included for most risks except for water charge collection. The PAD highlighted the risk of inadequate water charge collection and slow transfer of O&M funds to WUAs. This materialized during project implementation, however, mitigation measures were not successful in alleviating the risk. Also, the PAD also did not address the risk due to drought and climate variability. • M&E suffered from some weaknesses at implementation due to state bifurcation (see section 10 b for more details). Quality-at-Entry Rating Moderately Satisfactory b. Quality of supervision The project was implemented under a challenging political environment in particular around 2011 with the increase in political instability that led to State bifurcation. According to the ICR (para 94) "the Bank maintained a productive relationship with the client, the state government of Andhra Pradesh, and after bifurcation, the state government of Telangana as well." In 2011, the bank team demonstrated candor through downgrading the project ratings to moderately unsatisfactory due to implementation delays that stemmed from political instability prior to bifurcation of the State. The Bank team steadily guided the project during the challenging time of state bifurcation and successfully resumed project activities in 2012. The Bank was also supportive and facilitated restructuring the project to reflect the creation of two project management units in each state and ensure effective implementation of activities. The project benefited from experienced World Bank specialists who contributed to "high quality of engineering work being undertaken, as well as fiduciary, procurement and safeguards policies being put into place (ICR, para 94)." Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9. Assessment of Borrower Performance a. Government Performance At the preparation stage the Government of the State of Andhra Pradesh demonstrated leadership through decentralizing water resources development at community/farm level (ICR, para 96). This approach helped in strengthening water user associations and expanded their mandate beyond operation and maintenance Page 15 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) to ensuring equitable water distribution among its members. Following state bifurcation, another project monitoring unit (PMU) was created in the state of Telangana. The two PMUs benefitted from enough autonomy to effectively manage project activities. The governments of the two states supported project implementation and helped focus the vision of stakeholders to achieve the project outcomes. High level government officials continued to coordinate various agencies to cooperate in effectively implementing the project. At the state level, a Project Steering Committee (PSC) headed by the Chief Secretary coordinated the annual plans of the irrigation, agriculture, animal husbandry, fisheries and rural development departments. Government Performance Rating Satisfactory b. Implementing Agency Performance The overall responsibility for project implementation and coordination was with the Command Area Development in the Irrigation and Command Area Development Department of the Government of Andhra Pradesh. The project was managed through a Project Management Unit (PMU) established in the Command Area Development; and Corresponding District Project Units (DPUs) that were established at the district level with smaller multi-disciplinary dedicated teams. Implementation support, required primarily at the district level, was provided by the Departments of Agriculture, Horticulture, Animal Husbandry, Fisheries, Forestry, Rural Development, Groundwater, and various support organizations and private service providers. Following state bifurcation, a second PMU was created in the state of Telangana under the same institutional structure as the original one. According to the ICR (p. 28, para 98) "the PMUs carried out their duties in a timely and quality manner." However, the implementing agencies faced challenges due to state bifurcation which contributed to implementation delays. There were also some shortcomings including delays in the recruitment of a new external M&E agency as required by the legal covenant. This delay put the borrower out of compliance for twenty months. There were also delays in deploying some sector specialists by the PMUs (ICR, p. 26, para 99). The project suffered from implementation delays, some of which were beyond the control of the implementing agency, however, others could have been avoided. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 10. M&E Design, Implementation, & Utilization a. M&E Design The PMU, through a dedicated M&E unit comprising one M&E expert and one data analysis and documentation expert, had the overall responsibility for planning and coordinating M&E activities. Data collection and analysis Page 16 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) work involved: the implementing department agencies at the state and district levels; an external M&E agency (to be engaged as consultants for the duration of the project); and beneficiaries, primarily Water User Associations and various project-supported farmer interest groups (PAD, p. 31). The results framework included six outcome indicators, four to assess the first sub-objective and two to assess the second. These indicators were relevant and directly linked to the PDO and most importantly realistic and measurable. There were also sixteen intermediate outcome/output indicators to assess activities under the different project components. These indicators were also relevant and measurable. Design also called for a baseline survey; and two impact assessments of the project (Mid-term and end Project). A majority of indicators included targets at output and outcome levels, and several critical indicators also included baselines (e.g. cropping intensity, irrigated areas, and productivity of crops}. However, several indicators lacked targets and/or baselines that made it difficult to assess the significance of some achievements. b. M&E Implementation The baseline was conducted in the first year of the project. According to the ICR (para 29) the project outputs were regularly monitored and a good database for project activities was created by the PMU. However, the state bifurcation disrupted M&E activities and contributed to delays. Also, securing the services of the third part monitoring agency suffered from considerable delays. Despite these delays, the project delivered the final impact assessment in a timely manner (ICR, para 29). c. M&E Utilization The project’s Monitoring and Information System (MIS) generated data on the Results Framework and for Annual Action Plans. MIS reports including progress of project implementation, fund release, stakeholder details, and results of participatory assessments were regularly posted on the project website. External experts prepared two impact assessment reports with the project team. These highlighted the project’s achievements and reflected lessons learned from implementation. These reports benefitted from both qualitative and quantitative analysis of project activities. According to the ICR (para 30) "they (the two reports) were used extensively by the project team and World Bank staff, including the ICR preparation team." M&E Quality Rating Substantial 11. Other Issues a. Safeguards The project was an Environmental Category B. It triggered the following safeguards: Environmental Assessment (OPBP 4.01), Pest Management (OP4.09), Physical Cultural Resources (OPBP 4.11), Page 17 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) Indigenous Peoples (OPBP 4.10), Involuntary Resettlement (OPBP 4.12); and Safety of Dams (OPBP 4.37). Adverse environmental impacts, as a result of tank rehabilitation, identified during the preparation stage included: improper disposal of silt, loss of tree cover or biodiversity, increase in the use of pesticides and chemical fertilizers following tank rehabilitation, and potential impacts on cultural property. Environmental Assessment (OPBP 4.01). An Integrated Social and Environmental Assessment (ISEA) was prepared as part of project implementation. Also, a Social and Environmental Management Framework (SEMF) was developed in order to manage and mitigate the social and environmental risks identified in the initial assessment. According to the ICR (para 32) "there was full compliance with all environmental safeguard measures, including dam safety interventions." Indigenous Peoples (OPBP 4.10). A tribal development strategy and a tribal development plan at the tank level were developed to ensure that tribal groups in tank areas would equally benefit from the project interventions as other groups. The project supported training on sustainable water management practices, the formation of tribal commodity interest groups and exposure visits to progressive farms. These activities benefitted 42,151 tribal farmers (ICR, para 32). Safety of Dams (OPBP 4.37). Sixty-eight tanks with a bund height at or above 10 meters were inspected by the Dam Safety Panel (DSP). Pest Management (OP4.09). This safeguard was triggered because of the possibility of increased use of pesticides due to improved irrigation practices. The ICR did not provide further information on mitigation or impacts; and did not include a clear statement of compliance. Involuntary Resettlement (OPBP 4.12). Involuntary Resettlement was triggered because of the risk that the water spread area and feeder channels might be encroached. There were partial encroachments found in 643 tanks and seasonal cultivation in 243 tanks with 29 seasonal cultivators having temporary dwelling units in 2 tanks, "but in each of these tanks the seasonal cultivators with temporary dwellings willingly agreed to vacate/stop the encroachment/cultivation to help tank rehabilitation (ICR, p. 8)." Provisions were made for affected people to gain relief and rehabilitation entitlements and other project benefits in the event that resettlement was required. The ICR (para 31) reported that "project activities did not require any land acquisition or resettlement and rehabilitation." Physical Cultural Resources (OPBP 4.11). Cultural property was triggered because of the chance of finding some objects of cultural or archaeological value during civil works. According to the ICR (para 32) "there were minor cultural protection measures, such as ensuring that a temple near a bund in Rai Rao Cheruvu in Medak district that was being widened was not compromised." b. Fiduciary Compliance Financial Management. According to the ICR (para 35) the Project Management Unit (PMU) and the District Page 18 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) Project Units had "satisfactory financial management capacity". The Water User Associations benefitted from project activities and demonstrated their ability to successfully run a financial management system which included timely fund disbursement, regular monitoring and submission of expenditure statements. The internal audit mechanism was weak, therefore, the internal audit function was contracted to an independent chartered accountant firm which carried an internal audit annually. The ICR did not report on the status of the final audit reports for the project, but stated that "the internal audit review process was working satisfactorily (ICR, para 37)." Procurement. The World Bank's procurement specialist report on procurement assessment did not "suggest any serious lapses in procurement of goods, works and services (ICR para 39)." However, in March 2013, the project was found to be not in compliance with the legal covenant to appoint an external M&E agency. The lapse was rectified in December 2014 when an external consultant was contracted as the new M&E agency. According to the ICR (para 40) "here were no notable procurement problems during the course of the project." c. Unintended impacts (Positive or Negative) Positive. Drought Resilience. The project promoted several good practices that helped build climate resilience, although not intended by design. These included, participatory groundwater management (PGM) in 314 tanks which improved management of groundwater resources, WUAs and PGM groups were engaged in crop water budgeting, and made informed choices regarding crop selection and irrigation intensity, resulting in resource conservation and risk reduction to extreme weather events; and tank rehabilitation interventions in conjunction with demonstration of improved crop husbandry practices provided supplemental irrigation during critical stages of crop growth (ICR, para 84). Food Security. The project supported crop production system intensification and diversification. These approaches generated higher yields and could potentially have positive nutritional impacts on food security through increased production of vegetables, milk and fish products (ICR, para 85). d. Other --- 12. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Satisfactory Satisfactory --- Risk to Development Modest Modest --- Outcome Moderately QAE suffered from moderate Bank Performance Satisfactory Satisfactory shortcomings. Borrower Performance Moderately Moderately --- Page 19 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) Satisfactory Satisfactory Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate. 13. Lessons The ICR included seven lessons. The following two are emphasized with some adaptation of language: • To increase net economic benefits, diversification needs to be complemented with well-designed marketing strategies and value chain analysis. Diversification was a crucial part of the project where cultivating non-paddy crops were encouraged. While the project realized overall net economic benefits from diversification, there were cases where the market opportunities remained limited despite farmers’ allocating more areas under non-paddy crops. The project could have been more effective if a careful marketing analysis identified market opportunities, developed product strategies, pricing, distribution channels, and promotional methods were conducted during the course of implementation. • Simplifying the responsibilities of the WUAs so that they focus primarily on water distribution and agricultural activities ensures better performance. WUAs performed well on some issues, but to expect them to address a wide array of responsibilities is unrealistic. WUAs not only managed themselves in an organizational sense, but also had to carry out some minor civil works as well as O&M of rehabilitated tanks. The project's experience showed that WUA performance was much stronger on administrative matters than on the financial and technical aspects. There should also be a more stable and predictable flow of funds to WUAs, with assured governmental assistance in extreme weather events. 14. Assessment Recommended? No Page 20 of 21 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review IN: Andhra Pradesh and Telangana State C (P100789) 15. Comments on Quality of ICR The ICR provided thorough coverage of the project implementation and candidly reported on most shortcomings. The discussion of outcomes was logical and relied on evidence provided by the project data and the final impact evaluation study. The ICR included seven lessons that reflected the project's experience. However, the ICR did not discuss outcome indicators 7 and 8 which look very similar. It also downplayed the impact of the discontinuation of the livestock activities which directly contribute to agricultural productivity. The ICR could have improved on the following areas: • Ensure text consistency between the ICR summary, main text and Annexes. • Provide explicit statement of compliance for each of the triggered safeguard policies. • Report on the status of external audit reports. a. Quality of ICR Rating Substantial Page 21 of 21