Doument of The World Bank FOR OMaAL USE ONLY C K~ / //- LtA- Rieport No. P-4094-IN RE2ORT AND RECOMIDENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED IDA CREDIT IN AN AMOUNT OF SDR 166.1 MILLION US$165 MILLION EQUIVALENT TO INDIA FOR THE NATIONAL SOCIAL FORESTRY PROJECT May 22, 1985 This tocnMtma sde dsdhom and may be wed by eapkmt' oyin e peforc or d&olllUl d11s If otu ay not adrwke be disdesd witbhS Wodd Bakalhr zaoo, CURRENCY EQUIVALENTS US$1.00 = Rs 12 Rs 1.00 = US$0.08 Rs 1 million = US$80,000 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were, except as othervise noted, made at the rate of US$1.00 = Rs 12.00. FISCAL YEAR April 1 - March 31 Abbreviations and Acronyms ACF - Assistant Conservator of Forests Addl. CCF - Additional Chief Conservator of Forests Addl. IGF - Additional Inspector General of Forests CCF - Chief Conservator of Forests CF - Conservator of Forests DCF - Deputy Conservator of Forests DFO - Divisional Forest Officer DIGF - Deputy Inspector General of Forests FR - Forest Ranger FRI - Forest Research Institute COG - Government of Gujarat GOHP - Government of Himachal Pradesh GOR - Government of Rajasthan COUP - Government of Uttar Pradesh HP - Himachal Pradesh ICAR - Indian Council of Agriculture Research ICFRE - Indian Council of Forestry Research and Education ICRAF - International Center for Research on Agroforestry IGF - Inspector General of Forests NCA - National Commission on Agriculture NCAER - National Council of Applied Economic Research SAU - State Agricultural University VFW - Village Forestry Worker FOR OMCIAL USE ONLY INDIA NATIONAL SOCIAL FORESTRY PROJECT CREDIT AND PROJECT SUMMARY Borrower: India. Beneficiaries: The States of Gujarat, Himachal Pradesh, Rajasthan, and Uttar Pradesh and the Government of India's Ministry of Environment and Forests. Amount: SDR 166.1 Million (US$165 million equivalent). Terms: Standard. On-lending Terms: From GOI to the Governments of Gujarat, Himachal Pradesh, Rajasthan, and Uttar Pradesh as part of Central assistance for State development prbjects on terms and conditions applicable at the time, GOI would bear the foreign exchange risk. Project Description: The project would provide continuing assistance initiated under earlier credits to two states (Uttar Pradesh and Gujarat) to expand and improve their social forestry activities, and would initiate investment in two other states (Himachal Pradesh and Rajasthan). It would increase supplies of fuelwood, small timber, poles, bamboo, fodder and other minor forest products. It would also strengthen institu- tional capabilities including the strengthen- ing of the Central Social Forestry Support Office for better planning and management of forestry resources, through provision for additional staff, training of existing personnel, research and additional vehicles and equipment. Wood balance and other studies would be carried out, and programs would be conducted to promote fuel saving devices. There are no major project risks. However, shortage of funes could become a problem if the States over-extend themselves on forestry programs. To minimize this risk the States would inform the Association of any major developments concerning their social forestry programs to enable the Association to evaluate the impact, if any, This document has a restricted distribution and may be used by recipients only in the performance of their official dute Its contents may not otherwise be disclosed without World Bank authorization. which these developments might have on project-financed activities. An additional risk is that farmers may favour planting of and saturate the market for higher value products. However, wood balance studies to be undertaken and continuous monitoring, including the proposed mid-term review would effectively minimize this risk. (US$ Millions) Estimated Cost 1/ Local Foreign Total Project Component Incremental Staff 35.3 - 35.3 Civil Works 17.2 0.9 18.1 Vehicles and Equipment 8.1 1.6 9.7 Incremental Operating Costs 21.3 0.7 22.0 Training 3.8 0.4 4.1 Technical Assistance, Studies and Research 0.5 - 0.5 Plantation Activities 162.2 1.6 163.8 Total Baseline Costs 248.3 5.2 253.5 Physical Contingencies 11.2 0.3 11.5 Price Contingencies 61.8 0.9 62.8 Total Project Costs 321.3 6.4 327.8 Financing Plan: US$ Millions Local Foreign Total GOI/GOC/GOUP/GOHP/GOR 82.3 0.5 82.8 USAID 79.0 1.0 80.0 IDA 160.0 5.0 165.0 TOTAL 321.3 6.5 327.8 1/ Including taxes and duties of US$3.93 million equivalent. -iii- Estimated Disbursements: (US$ Millions) IDA FY FY86 FY87 FY88 FY89 FY90 FY91 Annual 17.1 25.9 32.4 37.0 36.1 16.5 Cumulative 17.1 43.0 75.4 112.4 148.5 165.0 Rate of Return: 27%. Appraisal Report: No. 559lb-IN, dated May 21, 1985. INTERNATIOZ.JY. DEVF.LOPKEPfT ASMOCIATION REPOLRT OF-THE. PLESIDEI1T TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE NlATIONAL SOCIAL FORESTRY PROJECT 1. I submit the following report and recommendation on a proposed credit to India for SDR 166.1 million (US$165 million equivalent) on standard IDA terms, to help finance a national social forestry project in order to increase supplies of fuelwood and other forest products to rural and semi-urban areas in the States of Gujarat, Himachal Pradesh, Rajasthan and Uttar Pradesh and to strengthen the Central government's capability to support social forestry activities in all States. The proceeds of the credit would be channeled to the Governments of the participating States in accordance with the Government of India's standard terms and arrangements for financing State deveLopment projects. The exchange risk would be borne by the Government of India. The United States Agency for International Development (USAID) is expected to support the project wit'h a grant of US$3.million and a loan of US*77 million on standard USAID terms. PART I - THE ECONOMY 1/ 2. An economic report, "India: Structural Change and Development Perspectives" (5593-IN, dated April 24, 1985), was distributed to the Executive Directors on Kay 1, 1984. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 750 mil- lion (in mid-1984) and an annual per capita income of US$260. The economy is dominated by agricuicure wnich empioys more than two-thirds of the labor force. However, rhe land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those who own little or no land. Growth of value-added in agriculture -- 2.2Z since 1950/51 -- has been slower than growth of industrial value-added (5.3% per annum). As a result, there has been a gradual decline in the share of agriculture in GDP (at factor cost) from 52% in 1950/51 to about 33% in 1981/82, while the share of industry rose from 20% to around 26%. But industrialization has not been rapid enough to absorb the growing labor force, or to bring about a rapid economic transformation, with significantly higher productivity and income levels. As a result economic growth has been slow over the past three decades, averaging about 3.6% per annum since 1950/51. 4. Nevertheless, there has been steady progress, with per capita income rising by about 1.4% aer year in the period 1950 to 1980. Despite the large population base and its relatively rapid growth, India has been able to eliminate persistent dependence on foodgrain imports through significant improvements in agricultural production. Savings and investment have increased I/ Parts I and II of the report are similar to Parts I and II of the President's Report for the Rihand Power Transmission Project (No. P-4062-IN), dated May 7, 1985. -2- markedly since 1950/51: the gross national savings rate more than doubled from 10.8X of GDP (at factor cost) to 22.7Z in 1983/84, while the gross domestic investment rate rose from 12.5Z of GDP to 24.8% in 1983184. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20Z was reached during the early 1960s. Currently, foreign savings account for about 8% of investment. External assistance has been low both as a percentage of GDP and in per'capita terms, never rising above 3Z of GDP and averaging below 1Z for the past five years. Net use of foreign savings has never risen above 3Z of GDP, and presently stands at 2.1%. 5. Before the 1970s, India placed relatively less emphasis on export promotion and more on import substitution. The volume growth of exports 'between 1950/51 and 1969/70 averaged only 2.2% per annum, while the volume growth of imports over the same period was 4.3%. In the early to mid-1970s, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.3% per annum for the 1970s as a whole, a performance which demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. 6. Moving into the second half of the 1970s, the Indian economy was buoyed by higher levels of investment and an expanding level of foodgrain output. As a result, growth in real CDP and in agricultural and industrial value-added substantially exceeded the historical 30-year trends (paragraph 3) averaging 5.3%, 3.3% and 8.1%, respectively, during the 1975/76 to 1978/79 period. In 1979/80, however, this momentum was broken when the worst drought in recent years, combined with a doubling of international oil prices and domestic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a relatively large trade deficit. Severe inflationary pres- sures also emerged after several years of virtual price stability. These setbacks coincided with the preparation of the Sixth Five-Year Plan which laid down a program of adjustment that aimed at improving the trade deficit, remov- ing infrastructural bottlenecks and ensuring price stability with an overall growth of the economy of 5.2Z per annum. Recent Trends 7. Despite the effects of two severe droughts in 1979/80 and 1982/83, India's economy in the early 1980s continued to grow at the faster pace of the second half of the 1970s. Between the two droughts (from 1979/80 to 1982/83), CDP growth averaged almost 5% per annum, while between the two recovery years (from 1980/81 to 1983/84), it was 4.5% per annum - substantially higher than India's long-term growth rate of 3.6Z. Continued rapid economic growth has resulted from a development strategy which includes higher investment levels and liberalized policies on imports, industrial licensing, prices, and commer- cial borrowing. These policies, by easing constraints on the supply of infrastructure and basic commodities, were a determining factor in the improved performance of the economy and the industrial sector. This overall improvement in performance, combined with a more restrictive monetary policy in 1981/82 and 1982183, resulted in a sharp decline in the rate of inflation. The growth rate of wholesale prices declined from over 18% in 1980181 to only 2.6% in 1982/83, 3- but rose to over 9% in 1983/84, mainly iluc to the cffect of the 1902/83 drought on food prices. Further improvmcmntn in the policy cnvironmcnt will be required to maintain these. higher level s of econrnimic growth and investmernt without putting undue pressure on the balance of paym-ants or revivinc infla- tionary expectations. 8. Economic growth in the early 1980s has not bccn steady, mainly because of the effect of uneven rainEall on agricultural production during the period. In 1980/81 and 1981/82, the economy substantially recovered from the 1979 drought, with real GDP growing by 7.6% and 5.3%, respectively. While industrial output expanded by 41 in 1980/81 and 8.62 in 1981/82, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15% and 5.5%, respectively. The- supply of power, coal, and rail transport, already improved in 1980/81, was further expanded in 1981/82, recording growth rates of about 10%, 9.6% and 12.5%, respectively. This over- all improvement in the Indian economy was halted in 1982/83 by a severe drought in mid-1982 which reduced agricultural production by 4%, brought down the GDP growth rate to 1.81, and put further srrains on the already difficuLt balance of payments and domestic resource situation. The timely implementation of various economic policies relating to foodgrain imports, procurement and distribution, and the allocation of power to irrigation pumps mitigated the otherwise very distressing effects of the poor monsoon. The economy recovered in 1983184, led by a robust agricultural sector - GDP grew by about 6.5% to 7% with agricultural production growth in the 91-10Z range and industrial growth of 4.5%. The major factors contributing to the good economic performance during 1983/84 were the excellent monsoon, combined with adequate agricultural policies and programs, and satisfactory performance of the coal and transport sectors. The power sector, however, emerged again as a constraint on higher growth, especially in industry. 9. Agricultural production 7ebawKded strongly in 1983/84 in response to the monsoon, improved use of inputs and continued expansion of irrigatioa. Overall foodgrain production rose by 10Z-121 over the previous year, reaching a new record of 142-144 million tons, a substantial increase over the previous peak of 133 million tons in 1981/82. Corrected for weather variations, foodgrain production continues to grow at a trend of 2.6% per annum-sufficient to maintain a broad balance between supply and steadily increasing domestic demand. Nonetheless, the balance remains delicate, and the need for foodgrain imports to maintain consumer supplies or adequate buffer stocks could arise from time to time. Thus, adequate management of foodgrain stocks and programs to expand irrigation, strengthen extension and encourage the efficient use of other agricultural inputs continue to receive high priority. 10. Basic infrastructure services had a mixed performance in 1983/84, partially because of sluggish demand from industry during the first half of the year but also due to a failure to maintain the productivity gains of 1980-82. Electricity generation grew only by about 3.7% due to low reservoir water levels during the first half of the year, delays in the commissioning of new capacity, and a deteriorati_n of capacity utilization in thermal plants. As a result, power generation was about 11.5X below requirements and con- stituted a major bottleneck in the economy. Key industries which were adver- sely affected by power constraints included steel, fertilizers, cement, and coal. To improve performance in the power sector, the Government recently increased incentives for higher labor and management productivity in thermal plants. Railway freight traffic, measured in ton-kms, grew by only 0.5% in -4- 19R3/84, reflecting sluggish demand. Coal production increased by about 6.5% in 1983/84 reaching 139 million tons. When combined with stocks already avail- able this level of production was sufficient to meet the relatively slow demand growth. Infrastructural constraints would have emerged much more sharply had the pace of industrial growth and demand been more rapid. It is therefore critically important that India maintain the pace of investmen- in these key sectors, mobilize sufficient resources to do so, and implement programs to * enhance productivity. 11. The Indian economy has reverted from a situation of resource surplus in the late 1970s to an aggregate resource deficit. The gap between gross invest- ment and national savings increased from negligible levels during the late 1970s to an average eoqlivalent to 2.1X of GDP in 1980-84. India's gross national savings rate, which averaged 22.6% of GDP in the last four years, is high by any standard, particularly considering India's low income and the large proportion of its population below the poverty line. The scope for a substan- tial increase in the savings rate is therefore quite limited. If India is to maintain investment at about 25% of CDP, a major effort will be required to raise additional domestic resources particularly in the public sector. Future increases in savings will depend heavily upon the enhanced profitability of public sector enterprises which would require better utilization of capacity, more efficient operations and adequate pricing policies. This would also allow a marginal decline in the use of foreign savings from the recent 2.1Z-2.3Z of GDP to 1.5%-1.8Z, to ensure a sustainable external debt service burden. 12. India's external resource position has changed notably since the late 1970s. The current account balance, which recorded surpluses from 1976/77 to 1978179, reverted to deficits averaging US$3.5 billion and 2.1% of GDP during 1980/81 to 1983/84. Several developments contributed to these relatively larger current account deficits. First, the terms of trade deteriorated sharply in 1979/80 due to the second round of oil price increases and continued to move against India during the first three years of the 1980s. Second, a more liberal import policy towards industrial inputs was pursued. Third, net invisibles declined as travel receipts fell off, workers' remittances stagnated (reflecting slower development activity in the Middle East), and payment of interest on higher levels of forei5n debt increased. Faced with severe infrastructural constraints and s deterioration in its balance of payments, India initiated an adjustment program in 1980/81 designed to raise the growth rate from its historical level of 3.6% to 5.2% while adjusting the country's external balance to the adverse price deveiopments in the world markets. The main elements of this strategy, which is being successfully implemented, are export promotion, import substitution where economically justifiable, implemen- tation of a coherent energy policy designed to meet the energy needs of the economy while curbing the growth of oil imports, and continued movement toward a more liberal import policy aimed at providing producers with access to inputs for higher capacity utilization, greater efficiency, improved technology and capacity expansion. 13. A positive development in India's balance of payments is the reduction in the trade deficit from US$7.; billion in 1980/81 to US$5.9 billion in 1983084 despite unfavorable world market conditions and import liberalization. Export volume growth and import substitution of oil and petroleum products, metals and fertilizers more than offset the substantial increase in "other" _.0 O-t. These "other" imports consist mainly of industrial imports and capi- taL gok;Is which historically have been in chronic short supply and which are of -5- critical importance to capacity utilization, product quality, and plant modern- ization and expansion. A major factor in the decline of the trade deficit was the lower net import bill for petroleum, which dropped from US$6.7 billion in 1980/81 to US$3.4 billion in 1983/84 in response to a ouccessful oil develop- ment program that reduced import needs and allowed crude oil exports, which totalled about US$1.5 billion in 1983/84. These structural changeB in the balance of payments are to a significant degree the result of India's develop- ment and adjustment efforts over the past three years. It is expected that the balance of payments will continue to be under strain for the next several years, since the adjustment strategy will continue to require high levels of imports. 14. Even assuming a favorable export performance, India will need external capital flows to augment its own resources for the foreseeable future, given the low per capita income level in the country, the already high savings rate, and the structural adjustment process. Faced with a growing need for external capital inflows and stagnation in the availability of concessional assistance, India decided at the start of the Sixth Plan to increase borrowings from the International Monetary Fund (IMF) and commercial banks to substantial levels. In the period covering the fiscal years 1981/82 to 1983/84, India drew SDR 3.9 billion from the Extended Fund Facility of the IMF. In addition, India bor- rowed significant amounts on commercial terms from the Euro-dollar market and increased the use of suppliers' and export credits. In the period 1980-84, India contracted commercial loans totalling over US$6,000 million and suppliers' credits of over US$1,000 million. The bulk of this borrowing has been used for specific development projects in the public and private sector (mostly for petroleum exploration and development, steel, power, aluminum and shipping). India's favorable debt service position and the nature of its borrowings, for project-related purposes instead of direct balance of payments support, enabled it to tap commercial capital markets at favorable spreads. This larger commercial borrowing and transfer of funds under the arrangement with the IMF has stemmed the use of foreign exchange reserves which had fallen to less than four months of import coverage in 1981/82. Development Prospects 15. The experience of recent years illustrates that India has thl capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufacturing a wide variety of consumer and capital goods. -Basic infrastructure -- irrigation, railways, telecommunications, power, roads and ports -- is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India also has a wide range of institutions capable of fostering development and is well- endowed with human resources. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and reasonable access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 16. The Government is currently preparing the Seventh Plan which will lay down the development strategy for 1985186-1989/90. This strategy is expected to continue the emphasis of the Sixth Plan on agriculture, energy development, export promotion, domestic import substitution where economically justifiable -6- and the removal of infrastructural bottlenecks. Overall Sixth Plan performance has been encouraging, with aggregate real investment projected to be about 30% higher than in the period 1975-80--a creditable performance indeed. The Sixth Plan expenditure targets, however, will not be fulfilled as resource mobi- lization by the pubLic sector will fall short of the financing requirements of planned publir investment. Actual aggregate real investment is projected to be about 7% below the original target for the period 1980-85, private investment being 5% to 10% higher and public investment about 20% lower in real terms than actually projected. In terms of meeting Plan expenditure targets, the perfor- mance of the Central Government is considerably better than that of the State Governments. The Central Government's Plan outlavs are likely to reach about 80% to 90% of the original Plan allocation in reai terms, while the States' will probably achieve only about 50% of their targets, due principally to shortfalls in resource generation. Bottlenecks in key sectors such as power, transport and irrigation are likely to persist as a consequence of real invest- ment shortfalls relative to original Plan allocations. 17. Although Sixth Plan expenditure targets will not be met, India's capi- tal formation rates have increased from 22.6% in 1975-80 to 24.7% of GDP in i980-84. Recent higher capital formation rates are encouraging for future income growth, but returns to investment have so far been relatively low. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investment has been needed to build up basic infrastructure services which have inherently high capital-output ratios. However. there is scope to reduce capital-output ratios through improvements in efficiency. As discussed in greater detail in our recent economic reports, performance in the basic service sectors can be improved through better plan- ning and management, thus leading to higher productivity and capacity utiliza- tion throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of tradeable commodities like coal, steel and cement, this is justified on the grounds of comparative advantage. For sectors such as irrigation, power and transportation, expansion of planned capacity in accordance with the requirements of the rest of the economy will be vital for sustained growth. 18. Under the Sixth Plan, India has an ambitious oil development program backed by substantial financial commitment. Performance under the program has been excellent with real investment and oil production levels running well ahead of Plan Targets. In 1981, and again in early 1983, resources for exploration and development were raised by successive price increases for domestic crude and products. Wlhile the gap between domestic consumption of petroleum and production remains large, India's dependence on oil imports dropped from 63% of consumption in 1979/80 to about 41% in 1983/84 and is expected to decrease to about 33Z of consumption by 1984(85. The rapidly expanding level of exploration activity, combined with the possibilities for accelerated offtake from known fields, offers much encouragement for India's longer-term energy prospects. At the same time, the increases in domestic petroleum prices have helped encourage conservation and slow demand growth. 19. India's development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and external balance, while at the same time achieving more rapid growth than in the past. This will require the continuation of the current development strategy which assigns high priority to export promotion, public finance discipline, improve- ment of economic etficiency, and investment in infrastructure, supported by -7- adequate flows of external borrowing and aid. In the short term, a relatively large level of external borrowing, including an increased emphasis on commer- cial borrowing, will be necessary to cope with the balance of payments conse- quences of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of conces- sional assistance since India is still a very poor country with a large rural sector and enormous investment requirements for human development and basic infrastructure. Although India is currently in a position to increase borrow- ing on commercial terms from the very low levels of the past, there are, of course, limits beyond which India will choose to sacrifice growth objectives rather than accept debt on unfavorable or unmanageable terms. Nevertheless, with a more open trade policy and expanded efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization of both foreign and domestic savings, India is demonstrating that it can sustain a rate of growth closer to 5.01 per annum than to the long-run trend of 3.6X per annum. If the rate of population growth can be brought to below 2.0Z per annum, a 5.0X growth rate would mean a doubling of the trend rate of growth of per capita income of 1.4% per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India. 20. A large and growing population and severe poverty underline the need to accelerate India's development efforts. The 1981 Census indicated there was no decline in the rate of population growth, which remained about 2.2% per annum in the 1970s despite a measurable decline in fertility rates. The population growth rate failed to decline in the past decade due to a reduction in the infant mortality rate and an increase in life expectancy, reflecting larger availability of food and health services. While this is a welcome development, it implies a greater strain on the economy and re-emphasizes the need for continuing efforts to strengthen the healh and family planning programs in a broad range of activities and services. These efforts are given high priority in the Sixth Plan, which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979/80 level of about 23% to over 35Z by 1984185. The Government is reviewing its population policy for the Seventh Plan, with indications of a determination to retain the emphasis on the implementation of family planning, health, education and literacy programs aimed at reducing fertility rates. 21. Reduction of poverty remains the central goal of Indian economic and social policy. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51Z of the rural population and 40% of the urban population subsist below the poverty line. Significant reductions in poverty will depend primarily on an acceleration of economic growth, particularly in agriculture, combined with effective implementation of poverty alleviation programs. India's poverty alleviation strategy appropriately recognizes that production-oriented programs, which aim at accelerating the overall pace of economic growth, and poverty alleviation programs, targetted at those least able to participate in the general growth of the economy, can be mutually reinforcing rather than substituting for each other. Major poverty programs operating on a nationwide basis at present include: the Minimum Needs Program (MNP), the Integrated Rural Development Program (IRDP), and the National Rural Employment Program (NREP). The IRDP and NREP are targeted programs aimed at increasing the incomes of the poor rapidly, either througb the transfer of productive assets or direct employment. The INP, aims at broadening the provi- sion of social infrastructure and basic services which enhance the human capi- -8- tal of the poor and improve living standards. These programs represent a vitally important commitment of the Government to address the needs of the poorest. The scale of the poverty problem in India, combined with the inherent difficulties in implementing poverty programs in any country, imply the need for continued efforts to enhance the effectiveness of these programs. PART II - BANK GROUP OPERATIONS IN INDIA 22. Since 1949, the Bank Group has made 84 loans and 174 development credits to India totalling US$6,818 million and US$12,934 million (both net of cancellation), respectively. Of these amounts, US$1,465 million has been repaid, and US$5,909 million was still undisbursed as of March 31, 1985. Bank Qroup disbursements to India in the current fiscal year through March 31, 1985 totalled US$787 million, representing a decrease of about 27 percent over the same period last year. Annex II contains a summary statement of disbursements as of March 31, 1985. 23. Since 1959, IFC has made 32 commitments in India totalling US$265 million, of which a total of US$145 million has been repaid, sold, terminated or cancelled. Of the balance of US120 million, US$113 million represents loans and US$7 million equity. A summary statement of IFC disbursements as of March 31, 1985, is also included in Annex II (page 4). 24. The thrust of Bank Group assistance to India has been consistent with the country's development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricultural productivity, and efforts to improve the availability of basic agricultural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of develop- ment finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 25. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the Sixth Plan and in the approach being taken by GOI in the preparation of the Seventh Plan. First, high priority will continue to be given to COI's agricultural program. While India has made significant progress in agriculture, productivity growth will have to be sus- tained to improve the balance between food demand and supply and to contribute to poverty alleviation and employment. Thus, the Bank Group will continue to support irrigation, fertilizer production and distribution, and agricultural extension and credit. Second, alongside GOI's efforts in promoting greater efficiency and faster development of the industrial sector, increased assis- tance will be provided for industrial development. Third, the review of per- formance under the Sixth Plan confirms the high priority that should continue ;- be given to the expansion and more efficient use of basic infrastructure cak-city and to the development of India's indigenous hydrocarbon resources. -9- Accordingly the Bank Group will. continue to support the development of the energy, transport and telecommunications sectors to alleviate critical shortages which constrain output in both agricultural and industrial sectors. Fourth, support of urban develo;_nt and other GOI basic social services programs for the poor will also continue in light of the growth in population which, despite successes in lowering birth and death rates, still increases by about 16 million each year. 26. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank'economic reports and of the discussions within the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, India continues to require a substantial level of foreign assistance both to offset the overall deterioration in the world trade environment, and to sustain the relatively higher investment and growth rates achieved during the first four years of the Sixth Plan. As in the past, Bank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture and irrigation. 27. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessional terms. Accordingly, the bulk of the Bank Group assistance to India in the past was provided from IDA. However, IDA lending to India is declining from a peak of US$1.6 billion in FY82, mostly due to funding constraints related to IDA. The amount of IDA funds available to India is likely to remain small in relation to India's needs for external support. Thus, this requirement for additional assistance will have &. bc met, in part, through larger Bank lending. Given its development prospects and policies, India is judged creditworthy for Bank lending to sup- plement IDA assistance. A continuation of efforts already underway to achieve growth in productive capacity, trade expansion, higher levels of savings, foodgrains self-sufficiency and a reduction in the rate of population growth should result in continued economic growth and improvement in the balance of payments. India's debt service ratio is estimated at about 15.2Z in 1984185. This ratio is projected to rise to around 20Z by 1989/90, mainly due to the hardening structure of India's debt; and to increase slightly over this level through the mid-1990's. Although the projected debt service ratios are con- siderably above historical levels, they are still manageable and will not adversely affect India's creditworthiness. 28. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with 62Z, 33% and 37Z, respectively, in 1983/84. In 1983/84, about 19.0% of India's total debt service payments were to the Bank Group. On March 31, 1984, India's outstanding and disbursed external public' debt was estimated to be about US$26.9 billion, of which the Bank Group's share was US$9.6 billion or 36% (IDA's US$7.8 billion and IBRD's US$1.8 billion). As of March 31, 1985 outstanding loans and credits to India held by the Bank totalled US$18,288 million, of which US$5,909 million remain to be disbursed, leaving a net amount outstanding of US$12,379 million. -10- PART III - FORESTRY IN INDIA 29. India's forest land--about 75 million hectares--covers 23Z of the total land area. Excessive pressure of human and cattle populations on forest lands nas resulted in rapid depletion and degradation of much of the natural forests. Consequently, only about 40Z of the forest lands is actually tree covered. Deforestation has occurred mostly because of the continuous decimation of trees to meet fuel and timber needs of the com- munity and industry. Demand for fuelwood, wood for industrial use, fodder and manure is expected to increase with increase in population. Shortage of fuelwood and other forestry products will become more critical unless the decline in forest resources is arrested and measures are taken to expand the forest resource base in the country. 30. Non-commercial energy sources, including fuelwood, agricultural wastes and animal dung, account for about 80% of rural and 50% of urban household energy consumption. Almost 55% of. non-commercial energy is obtained from fuelwood. About 20% of available labor in farm families is spent in fuelwood collection. Existing planting programs are inadequate for meeting demand for fuelwood. It is estimated that in the year 2000, annual demand for fuelwood and industrial wood, will be about 200 million m3 and 65 million m3 respectively; equivalent to about 20 to 30 million ha of mature plantation. GUI Policies and Social Forestry Program 31. The Government is focusing increasing attention on the development of fuelwood resources. It has concluded that firstly, the traditional management of forest development and resources is inadequate to meet the country's basic needs for forestry products; and secondly, that develop- ment of forest resources outside the traditional reserve forests, through active participation of local communities is required in order to overcome the shortage of fuelwood, small timber and fodder. From the First through the Fourth Five Year Plans, India allocated to social forestry only 9.1% of the total forest development investment. However, in the Fifth (1974-79) and Sixth (1980-85) Five Year Plans, social forestry was allo- cated 49% and 78%, respectively, of the total forestry planting targets. 32. Since early 1970s GOI has mobilized increasing domestic and exter- nal resources for implementing a national rural-afforestation program, and through a number of centrally sponsored schemes, State goverments are being assisted to implement their programs. In the Sixth Plan, these schemes covered 1.9 million ha out of the total of 4 million ha put under social forestry, accounting for expenditures of over Rs 2,164 million. In addition, state-wide projects are being implemented with external assis- tance in a number of States. These accounted for 0.68 million ha planted, and over Rs 2,500 million in expenditure during the Sixth Plan period. Finally, the States operate their own social forestry programs which accounted for 1.3 million ha planted, and over Rs 3,000 million in expen- diture during the Sixth Plan period. Of the present total India-wide tree -ll- planting of about one billion seedlings annually (about 0.67 ha million), nearly 50X is planted by farmers on their own land (farm forestry), and the rest by State forest departments in comuercial plantations (302) and social forestry plantations (20x). Under the Seventh Plan now being formulated, resource allocations for 3ocial forestry are expected to be substantially increased. The importance of forestry has recently been reemphasized by making it a separate portfolio directly under the Prime Minister, who has called for a substantial increase in social forestry activities over current levels, during the Seventh Plan period. The Bank Group Role in India's Social Forestry 33. The Bank Group's first forestry project in India, the Madhya Pradesh Forestry Technical Assistance Project (Cr. 609-IN, December 1975), assisted with the development of plantations for the pulp and paper industry. Subsequently, the Bank Group's assistance to forestry, through six projects covering seven States, has focussed on social forestry, with the objective of increasing the supply of fuelwood, poles, small timber, fodder and other minor forest products. Of these projects, one has been completed and two are about to be completed. In addition to the six projects, the Kandi Watershed and Area Development Project (Cr. 1897-IN) and the Himalayan Watershed Mhanagement Project (Lu. 2295-IN) also included large components for reforestation and pasture development. 34. Uttar Pradesh Social Forestry Project (Cr. 925-IN). The Uttar Pradesh Social Forestry Project was the Bank's first social forestry project in India. The project was completed as scheduled and the credit was closed December 31, 1984. A Project Completion Report is being prepared and will be issued later in 1985. It included the establishment of 8,000 ha of village woodlots, 22,000 ha of strip p'antations, thp rehabilitation of 13,600 ha of degraded forests and the provision of seedlings for 4,000 ha of farm forestry. The project was completed on schedule, and, overall, exceeded its physical appraisal targets. However, execution of the civil works program designed to support field activities was not satisfactory, procurement of vehicles for improving staff mobility fell short of the target and the village woodlots component lagged. The project did not effectively cover the eastern part of the State where small and marginal farmers and landless poor are concentrated. Other deficiencies related to management, extension, monitoring and evaluation and research all of which need strengthening. 35. Gujarat Community Forestry Project (Cr. 961-IN). The project provided for the establishment of 37,440 ha of village woodlots, 30,000 ha of reafforestation, afforestation of 1,000 ha of privately owned land, establishment of 37,000 ha of strip plantations, and provision of 30 mil- lion seedlings to farmers to plant on 20,000 ha of privately owned land. With the exception of the self-help village woodlot component, overall, the planting targets have been achieved and the credit is expected to be fully disbursed six months before the closing date. Although most of the wood produced is expected to be used for commercial and non-fuel purposes, the project will, nevertheless, relieve the pressure on existing forests -12- and increased fuelwood supply for the rural poor. The State has developed a network of decentralized nurseries, introduced low-cost methods for production of seedlings, and successfully promoted fuel-saving stoves and crematoria. 36. West Bengal Social Forestry Project (Cr. 1178-IN). The project is expected to finance establishment of 6,000 ha of village woodlots, plant- ing of 20,000 ha along roads, railways, and water courses, 52,000 ha of forests on private land, rehabilitation of 15,000 ha of degraded forests, construction of a forest training center and expansion of the West Bengal Forest School. Planting is already about 45Z above the appraisal estimates; however, for budgetary considerations, most of the planting has been carried out by the existing Forest Department Divisions rather than by expanding the Social Forestry Wing as had been envisaged at appraisal. Since the existing Divisions have their own housing, offices, facilities and equipment, disbursement for civil works and equipment as well as incremental staff is lagging. West Bengal has been innovative in promot- ing group farm forestry, where landless poor farmers can take up to one hectare of government wasteland for afforestation and are given rights to the product. It has also completed a wood balance study. Following a recent mid-term review a number of technical and institutional measures have been proposed for improving project implementation. 37. Jamuu and Kashmir and Haryana Social Forestry Project (Cr. 1286-IN). The project would establish 17,000 ha of village woodlots, 19,500 ha of plantations along roads, railways and watercourses, 49,000 ha of planting oan private land, 15 ha of plantations on sand dunes, 2,000 ha of planta- tions on wet lands, and 500 ha of plantations on alkali lands and to rehabilitate 17,000 ha of degraded forests. Both States have achieved their planting targets thus far; however, staff recruitment and provision of support services are lagging. The planting targets and staffing plans are currently being reassessed in a mid-term project review which may suggest that certain adjustments be made in the program. 38. Karnataka Social Forestry Project (Cr. 1432-IN). The project provides for the distribution of about 600 million seedlings for develop- ment of farm forestry (equivalent to 120,000 ha); and the establishment of departmental plantations comprising 20,000 ha on cultivable wasteland used as common grazing grounds and also on agriculturally unproductive govern- ment vastelands, 3,000 ha on foreshores of irrigation tanks; 4,000 ha of strip plantations along roads and canals, and 2,000 ha of bamboo plantations. During the first year, plantation programs exceeded appraisal estimates. The State has also made a good start in decentraliz- ing seedling production and distribution. 39. Kerala Social Forestry Project (Cr. 1514-IN). The project is expected to establish plantations on about 69,000 ha on private land, 12,000 ha on government land, 2,000 ha on strip areas and 2,100 ha for special tribal schemes. Progress has been good during the initial year of project implemntation. -13- 40. Lessons Learned. Although the Bank's experience with social forestry in India is relatively brief, a number of lessons have been learned for improving future social forestry programs. Organizational structures and staffing plans are being modified in light of this experience. To the extent possible, existing departments aze being used instead of establishing separate social forestry institutions. Instead of establishing a completely separate forestry extension cadre, forestry staff would be trained as StlS to work with the existing agricultural extension services. Under the proposed project, the States would review further institutional improvements that may be required. Non-government organizations and other voluntary groups are proving useful in promoting social forestry development. Lessons have also been learned with regarl to design of plantation models and focus of afforestation programs in order to enhance the achievement of the primary social objectives of social forestry-to increase supplies of fuelwood for the poor as well as to facilitate their participation in'social forestry activities. In this regard, there is need to improve distribution methods so that more of the benefits would effectively reach target groups. Generally, farmers are participating at a faster rate than originally had been anticipated. However to ensure maximum participation by small farmers and reduce costs, nurseries should be more widely dispersed. It is also necessary to review free seedling distribution policies, and to remove or reduce subsidies where these are no longer appropriate. Effective monitoring and evalua- tion has proved difficult to establish but is crucial for proper manage- ment in projects as innovative and large scale as social forestry and calls for constant reinforcement and support. Finally, there is need for a central organization to provide a more effective social forestry support and increase exchange of experience among States. Most of these matters are being addressed in this project (Paragraph 42). PART IV - THE PROJECT Background 41. The project was appraised in October/November 1984. Negotiations were held in Washington in May 1985 with the Indian delegation coordinated by Mr. P. Singh, Director of the Government of India's Department of Economic Affairs, Ministry of Finance. The Staff Appraisal Report (No. 5591b-IN) dated Hay 21, 1985 is being circulated separately. A supplementary data sheet is attached as Annex III. Project Objectives and Rationale 42. The project's primary objectives are to (i) increase production of fuelwood, small timber, poles and fodder; (ii) increase rural employment, farmers' incomes and opportunities for participation of land- less persons; (iii) afforest degraded areas and wasteland, and reduce soil erosion; and (iv) strengthen forestry institutions. The first phase social forestry projects have substantially contributed towards meeting commercial demand for poles and small timber, and raising incomes of land owners, but have fallen short of ensuring that the weaker sections of the -14- population benefit in terms of access-to wood products and increased community participation in social forestry development activities. The proposed project will help achieve these goals through: (i) refocusing operations (plantation types, choice of.species, dispersion of nurseries and seedling distribution policies) to increase the share of the benefits which would reach small and marginal farmers and the landless; and (ii) improving.operating efficiency, reducing costs and helping to ration- alize the organization of the forestry departments including the Central Organization, and strengthening support activities including research, training, and monitoring and evaluation; and (iii) reducing subsidies state-wide. Project Description 43. The project would comprise four State subprojects and a sub- projects for strengthening the central Social Forestry Support Office in the Ministry of Environment and Forests: Specifically, the project would consist of: (i) a plantation program in the four participating States including farm forestry, tree tenure schemes for landless persons and marginal farmers on government wastelands, community woodlots and depart- mental plantations on government wasteland; (ii) training; (iii) research and studies; (iv) institutional support; and (v) fuel saving devices. DETAILED FEATURES Plantation Program 44. Agroforestry (514,500 ha - 77Z of total planting program under the project). The project would provide funds for establishing 467,000 ha equivalent (UP-134,000 ha, Rajasthan-80,O00 ha, Gujarat-200,000 ha and HP-53,000 ha) of forestry on private marginal and submarginal land (farm forestry) and 43,500 ha (Cujarat-30,500 and EP--13,000 ha) on private wasteland, through development of additional nurseries, distribution of planting materials and provision of advisory services. Farm forestry provides substantial benefits to farmers and is of least direct cost to Forest Departmn4ts. The departments would assist with the establishment of plantations on seriously eroded private land and the implementation of a 4,000 ha pilot program for grafting of fruit bearing bushes in Rajasthan. 45. Plantations on Community Wastelands (95,000 ha-1l.OZ of the total planting under the project). The project would provide funds for estab- lishing rainfed woodlots on community-owned wastelands (UP-14,000 ha, Rajasthan-5,000 ha, Gujarat-20,000 ha and HP-41,000 ha) and about 5000 of irrigated woodlots and 10,000 ha of tree fodder plantations in Cujarat. Prior to planting, the communities and forest department would agree on plantation design, respective responsibilities and also disposal of products. Commumities would assume responsibility for protection and maintenance. The forest department would recover its direct costs by selling part of the product at harvest, and the balance of the product would go to the communities. -15- 46. Departmental Plantations on Government Wasteland (77,940 ha--9% of the total planting under the project). The project would provide for rehabilitation of degraded forests (Rajasthan--20,000 ha, Gujarat--32,900 ha and HP--5,000 ha). The Forest Departments would super- vise planting, maintenance, protection, harvesting and distribution of benefits. In addition, strip plantations (UP--740 ha, Rajasthan--4,300 ha and Gujarat 15,000 ha) would be established on government land along roads, railways, canals and embankments. Ditching, earth mounds, brush or wire, as appropriate, would be provided for protection in areas with heavy cattle presence, using the most cost effective alternative. 47. Tree Tenure Plantations (21,543 ha -- 3X of the total planting under the project). The project would support establishment of 19,333 ha of group farm plantations (UP--13,210 ha, Rajasthan--7,500 ha and HP--833 ha) by landless persons and marginal.farmers, on government wastelands unsuited to agricultural cultivation. The farmers would own the trees and have usufructuary rights to the land. 48. Nurseries. Over the five years of project implementation, the project would develop small and dispersed nurseries to produce some 700 mil- lion seedlings, mainly for farm forestry. The nurseries would be developed by individual families and institutions such as schools. Being near to the farmers, the nurseries would reduce the costs of seedling distribution and serve as focal points for extension advice. In order to ensure seedling quality, the nurseries would be supervised by the forest departments. Each of the participating States has its own policy with regard to seedling distribution. Under the project, each State would reduce free distribution of project seedlings in accordance with a phased schedule agreed with IDA. Seedlings above the free limit would be charged at rates also agreed with IDA, which would progressively cover the direct costs of production. The States have accepted the principle of full cost recovery for all seedlings distributed under all schemes state-wide. For that purpose, the States would, by March 31, 1988, undertake socio- economic studies to ascertain farmer response to different pricing strategies, as a basis for determining a program of action for implement- ing the principle of full cost recover- for seedlings under all soci;.l forestry schemes within the States. The States would consult the Association on the results of the study, and taking into account the Association's comments, they would implement programs state-wide for full cost recovery (Paragraph 11 of Schedule 2 to the draft Project Agreement). 49. Training. Under the project, funds would be provided for training to enhance the skills of social forestry staff through lectures, workshops, study tours or fellowships in India and abroad. In addition, modifications to training curricula would facilitate the acquisition of practical skills concerning social forestry. 50. Research and Studies. Silvicultural research would be strengthened through provision of funds for additional staff and technical assistance, and would focus on seed improvement, collection and handling, -16- nursery practices and increased productivity. The States would conduct wood balance studies which would help to determine approprtate planting programs, including species selection. Each State would revise and update its wood balance study every two years.. (Paragraph 4 of Schedule 2 to the draft Project Agreement). 51. Wood Saving Devices. The project would include programs for promoting efficient wood burning stoves and crematoria for which evalua- tion studies would be conducted under field conditions. Organization and Institutional Support .52. At the central level, the Department of Forests and Wildlife in the newly established Kinistry of Environment-and Forests is responsible for forestry activities in India. The Department is headed by the Special Secretary, assisted by Joint Secretary for general administration, an Additional Inspector General of Forest (}GF), six Deputy IGFs, and a Chief Project Economist. The staff oversees different activities including conservation, workplans for forestry development, project formulation, monitoring and evaluation, extension and training. However, since the Ministry has only recently been established, its internal organization is still incomplete. Accordingly, GOI would furnish to the Association the finalized organizational structure and staffing by April 30, 1986 (draft Development Credit Agreement, Section 3.04(a)). 53. At the State level, forest departments are responsible for forestry development and administration. Each department is headed by a Chief Conservator of Forests (CCF) or Principal Chief Conservator cf Forests (PCCF). Administratively, States are divided into circles or "regions" which are further subdivided into Divisions (5 or 6) under a Divisional Forest Officer, assisted by Assistant Conservators of Forests. The Divisions usually consist of four to six Ranges, each under a Range Forest Officer. The Range is further subdivided into four to siz Rounds, each under a Forester assisted by several Forest Guards. 54. Although forestry development is a State subject, there is need for an effective and strong central organization to oversee social forestry development in the country. It would provide leadership in formulating national social forestry policies and development strateay, assist States in project preparation, monitor progress, provide training and technical assistance to States, and promote cooperation and exchange of views among States. The project wocld provide funds for the estab- lishment of a Social Forestry Support Cffice, within the Office of the Special Secretary, to perform the above functions. For this purpose, 36 positions of key incremental staff would be created. GOI would sanction the new position of the head of the Central Social Forestry Support Office by April 30, 1986 and would fill it by October 31, 1986 (draft Development Credit Agreement, Section 3.04(b)). The Support Office would consist of cells for a project formulation, and monitoring and five regional support centers. -17- 55. The project would provide for incremental staff in the participat- ing states including Additional Chief Conservators, Conservators, Ranger Forest Officers, Deputy Rangers, Foresters and Social Forestry Workers. Support would also include rented office space, office furniture and equipment, vehicles, technical assistance, special studies and-preparation of future subprojects, and project completion reports. 56. At the State level, the forest department would have overall responsibility for implementation of the State subproject. It would enter into an agreement with the agricultural extension service to provide for effective forestry extension service (Paragraph 5 of Schedule 2 to the draft Project Agreement). To ensure field staff mobility, the States would provide adequate vehicles and travel allowances. Project Review 57. Since it is not possible to predict with certainty the response of farmers and panchayats to the proposed planting program, adequate flexibility would be maintained during project implementation, to allow shifting from one category of pLanting to another, taking into account reports of the Monitoring and Evaluation Cell of each State Forestry Department and the results of a mid-term review to be undertaken after the third years' planting. Each participating State would undertake this joint review involving COI, IDA and USAID by March 31, 1988 (Paragraph 2 of Schedule 2 to the draft Project Agreement). Cost Recovery 58. The primary objective of the proposed project is to meet the basic needs of rural and semi-urban people for fuelwood and other forestry products. Hitherto, the State Governments have viewed the associated investment as part of their normal program for the socio-economic uplift and welfare of the rural population, some costs of which traditionally are not recovered from beneficiaries. However, under the project, the States have accepted the principle of full cost recovery state-wide. Costs would be recovered for plantations on public lands by selling fuelwood and poles produced. in addition, as explained in paragraph 48, for seedlings to be produced under the project, free distribution of seedlings would be phased out, and costs of seedlings in excess of the agreed free limits would be progressively recovered. Following the proposed socio-economic studies, each State would implement a program for full cost recovery state-wide, for all the seedlings to be distributed within a State. Moreover, the project would aim to reduce the States' involvement in small nursery operations and thereby divesting themselves of the fiscal burden associated with seedling production. Project Costs and Financing 59. Total project cost is estimated at US$327.8 million, including taxes and duties estimated at US$3.9 million. The foreign expenditure component is estimated at US$6.4 million or 2Z of total project cost. -18- Physical contingencies at about US$J1.5 million were estimated at 10% of civil works, and 5Z of other costs (except salaries). Price contingencies at about US$62.8 million, were derived from projected local inflation rates of 8.5X during 1985-90, and foreign inflation rates of 5X in 1985, 7.5Z in 1986. and 8X in 1987-1990. 60. The credit of US$165 million would cover about 50% of total project cost net of taxes and duties. USAID is expected to contribute US$80 million or 24% of total project costs. GOI and the participating States would contribute the balance of project financing. The proposed IDA credit would be made to GOI on standard IDA terms. GOI would channel the proceeds to the Ministry of Environment and Forests and the par- ticipating States in accordance with GOI's terms and conditions for development assistance to constituent States. Of the USAID funds, US$3 million would be a grant and US$77 million would be a loan on USAID standard terms, and would similarly be channeled to the Ministry of Environment and Forests and the participating States. Procurement and Disbursement 61. Annex IV, attached, details the manner in which items will be procured under the project. Most civil works (US$24.5 million) would be for housing of standardized design, office and training facilities and small inspection huts which would be widely scattered geographically and constructed over time, for which international competitive bidding (ICB) would not be suitable. Contracts over US$100,000 would be awarded on the basis of competitive bidding following local advertisement, and in accord- ance with established State procedures which are satisfactory to IDA. The local contracting industry is sufficiently well developed to permit ade- quate competition. Small civil works in remote areas would be carried out departmentally by force account. Vehicles, equipment and furniture (US$11.7 million) are needed in small quantities and are available locally. As adequate maintenance facilities and availability of spare parts would be important, locally made vehicles of types already used by government departments would be procured by LCB following Government procedures which are cceptable to IDA. Usually items such as cars, motorcycles, bicycles, barbed wire and office furniture ard equipment would be purchased on rate contract approved by the Director General of Supplies and Disposals (DGSD), GOI, or otherwise sanctioned by the state government. Such purchases are made from firms with whom the state government's central ,urchasing organization, the Stores Purchase Department, has entered into a rate contract valid for a particular period, generally one year. The Stores Purchase Department calls for tenders, evaluates and enters into rate contract with the lowest evaluated bidder, following procedures adopted by DGSD. Other items (e.g., polythene bags) would be procured by field officers through local competitive bidding. 62. For all contracts for civil works, vehicles, equipment and furni- ture estimated to cost US$100,000 or more, before bids are invited, IDA would be furnished for its comments, the text of the invitations to bid -19- and the specification and other bidding and draft contract documents together with a description of the advertising procedures to be followed for the bidding. Orders for purchase of minor equipment, furniture and supplies would be bulked wherever possible and purchased according to established lacal bidding procedures, ezcept where valued at less than US$50,000 and not in the rate ontract list, when they would be purchased by prudent shopping through normal trade channels. The balance of project costs (US$291.6 million) would consist of plantation activities and fuel- saving devices, adaptive research, support to state agricultural univer- siti4s and special studies and evaluation, training, technical assistance, inzremental salaries and travel allowances, and incremental office and vehicles operating expenditure which would not involve procurement. All of the above figures include contingencies, which amount to US$62.8 million. Retroactive financing (US$14.5 million) of the proposed credit would be provided to enable the States to prepare for the initial year planting season, and would cover expenditures incurred after October 1, 198&, including nursery development, advance soil works, essen- tial vehicles and equipment and incremental staff associated with the 1985 planting season activities (para. 3 of Schedule 1 to the draft Credit Agreement). 63. The proceeds of the Credit would be disbursed as follows: (a) 60X of total costs of field activities and promotion of fuel saving devices; (b) 30% of total costs of incremental staff salaries; (c) 62% of total costs of travel allowances; (d) 100% of ex-factory price of vehicles or 75Z of purchase price if procured locally; (e) 50% of total costs of civil works; (f) 5GZ of total costs of vehicle operating costs; (g) for furni- ture and equipment, 100Z of c.i.f. costs if imported and 100% of ex- factory price if locally manufactured or 75% of purchase price of locally procured items; and (h) 50% of total costs for staff training, farmer training, central workshops, technical assistance, special stulies and research grants. The salaries of incremental staff, travel allowances and vehicle operating costs would be financed on the basis of declining percentages. 64. Disbursements against expenditures for the following items would be made against certified statements of expenditures, the documentation of which would not be submitted to IDA for review, but would be retained by the State Governments and GOI and made available to IDA review missions for their inspection: (a) staff salaries, operating costs, local training and plantation costs; (b) civil works contracts not exceeding Rs 300,000 and those carried out under force account; (c) locally procured vehicles, equipment and furniture costing Rs 150,000 or less; and (d) research, studies and local consultant costs. Disbursement against all other items would be contingent upon full and satisfactory documentation. The disbur- sement schedule has been based on the disbursement record for the ongoing IDA-financed social forestry projects in India. 65. The proposed USAID assistance of US$80.0 million would be dis- bursed as follows: (a) field activities, including farm forestry and nursery develcpment; tree ownership on government waste land; community -20- wasteland plantations; and reforestation of degraded forests and strips plantations on government land; promotion of fuel savings devices; 30% of total costs; (b) incremental staff salaries: 30Z of total costs; to be financed on a declining basis; (c) staff training, farmer training, central workshops, technical assistance, special studies and research grants: 502 of total costs. Accounts and Audit 66. The office of the Special Secretary (GOI) in the Ministry of Environment and Forests, and forest departments of participating States would maintain separate accounts for all project expenditures categorized by project component. Such accounts would be audited annually in accord- ance with sound auditing principles consistently applied, and the audit reports, together with certified copies of project accounts, submitted to IDA within nine months after the end of the fiscal year. Benefits, Justification and Risks 67. At full development, the project's production of forestry products comprising 8 million tons of fuelwood, 43.5 million poles, 0.13 million m3 of small timber, 7 million bamboo poles, 82.3 million tons of grass, 3.8 million tons of fodder, 0.52 million m3 of stemwood, 0.01 million tons of edible flower, 0.03 million tons of fruit, 0.06 million tons of seed pods, 0.1 million cocoons and other minor forestry products and tree by-products, would assist in reducing the growing shortage of these products. Direct beneficiaries would be about 6 to 8 million small and marginal farmers expected to participate in the project. Other beneficiaries would be the rural poor and semi-urban population who depend on such forest produce. Over the five years of project implementation, the plantation activities would generate a total of about 100 million labor days of work, and the small nurseries would provide employment for about 9,000 farmers and others involved in operating these nurseries. In addition, the project would generate about 10,00C direct incremental jobs for key field offices and support positions in the forest departments. Furthermore, the project would strengthen the Central Social Forestry Support Office and the forest departments of the participating States. The project would also help to improve the ecology, soil fertility and climatic conditions. 68. The overall economic rate of return is estimated at 27%. The individual rates of return for the subprojects range from 17% for Rajasthan to 34% for Himachal Pradesh. The sensitivity analysis carried out indicates that the benefits would have to decrease by 67% or costs increase by 201% for the project to be economically unattractive, and fall below the opportunity cost of capital of 12%. 69. The project faces no major risks. However, shortage of funds could become a problem if the States overextend themselves on other forestry programs. The risk would be minimized by an agreement that the States would inform the Association regarding any major developments -21- concerning their forestry programs over and above the project activities. There is also a risk that farmers may favour planting of higher value products other than fuelvood which could lead to oversupply of some products. The risk is highly unlikely, because of the critical shortage of forestry products of all types. In addition, the wood balance studies to be carried out under the project and the continuous monitoring and evaluation including the proposed mid-term review, would help to avoid over production of any product. PART V - LEGAL INSTRUMENTS AND AUTHORITY 70. The draft Development Credit Agreement between India and the Association, the draft Project Agreement between the Association and the States of Gujarat, Himachal Pradesh, Rajasthan, and Uttar Pradesh, and the Recommendations of the Comittee provided for in Article V, Section l(d), of the Articles of Agreement are being distributed to Executive Directors separately. Special conditions of the project are listed in Section III of Annex III. 71. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 72. I recommend that the Executive Directors approve the proposed credit. A.W. Clausen President May 22, 1985 ANN I Page 1 of 5 T A E L C 3 INDIA - SOCIAL INDICATB DATA SNEE INDIA REPERENM GROUPS (HICIID AVERAGES aI HOST (MST RECENT EBTIATE) fb 196Ob 19OLb RECET LOWJ lUCRE MID"L INCISE 197b1k I9iOLk ESTrIiATLb- siA 6 PAciFIC AStA & PACIFIC AnE (TROAED SQ. U.) TOTAL 3297.6 3Z87.6 3287.1 AGRICULTUAL 1763.5 2780.5 1812.3 CGP PR CAI;a (US) 60.0 100.0 260.0 276.6 1091.2 -IC COUUYII CAPT (KILOGRAMS OF OIL EQUIVALENT) 79.0 113.0 158.0 27Z.0 567.1 POATWnH A VTAL SNTIBTlCS POPUIAhION MID-VEAR (THOUSANDS) 434849.0 541364.0 716985.0 URBAN OPULATION t2 Or TOTAL) 18.0 19.8 24.1 21.7 34.7 POPULATION PROJECTIONS POPULATION IN YER 2000 (MILL) 994.4 STATIONAXI POPULATtON (RILL) 1707.2 POPULATION NEOMCN 1.7 POPUIATION DENSIm PER SQ. Ki. 132.3 166.6 213.4 166.6 261.9 PIZ- SQ. 1X. AGRI. LAZED 246.6 307.5 387.1 345.5 1735.1 POPULATION AGE ITRUCTURE (C 0-16 tItS 40.9 42.7 39.3 35.6 39.0 15-64 YTS 54.5 54.2 57.6 56.8 57.6 6S AMD AOVE 4.6 3.1 3.1 4.3 3.3 POPULATION GR0WTH RATE (2) TOTAL 1.8 2.3 2.2 1.9 2.3 URIBN 2.5 3.3 3.9 4.1 4.3 CRUDE 6IRI! RATE (PER THOUS) 47.7 41.4 34.2 27.7 30.1 CRUDE DEAr.: RATE (PEEt THOUS) 23.8 17.8 12.7 10.1 9.5 CROSS REPRODUCTION RATE 2.9 2.8 2.2 2.8 2.0 FAMILY PLANING ACCEPTORS, USUL ITHOCS) 64.0 3782.0 6826.0 USERS (t OF MARRIED lVCHEN) .. 11.7 28.0 .. 52.7 FOOD AS INEtlO0 INDEX OF FOOD PROD. PER CAPITA t1969-71-100) 98.0 102.0 101.0 112.8 123.0 Pa CAPITA SUPPY OF CALORIES (2 OF REQUIREMENTS) 96.0 91.0 86.0 97.7 114.4 PROTEINS (GRAMS PER DAY) 54.0 50.0 46.0 56.8 57.0 OF W311M ANMOS. AND PULSE 17.0 15.0 13.0 Ic 14.9 14.1 CtILD CACIGS 1-4) DLATh RALTK 26.2 20.7 11.0 9.8 7.Z LIFE EXPCT. AT BITH (YEARS) £2.5 £7.5 54.6 60.0 60.4 INFANT MORT. RATE (PER TOU) 165.0 139.0 94.0 83.8 66.3 ACCESS TO SAFE MATER (fPOP) TOTAL .. 17.0 33.0 ld 32.9 37.0 ,,BAN .. 60.0 83.0 Id 70.9 S4.8 RURAL .. 6.0 20.0 Id 22.1 26.4 ACCESS TO EICRETA DISPOSAL CZ OF POPULATION) TOTAL .. 18.0 20.0 le 15.1 *1.3 URBAN *- 85.0 87.0 7- 72.8 67.4 RURAL *- 1.0 2.0 Ie 4.6 33.3 POPULATION PER PHYSICALN 4850.0 4890.0 3690.0 If 348.2 7749.4 POP. PER NIRSINC PERSON 20980.0 ~ 7420.0 5460.0 F 4793.1 2460.4 POP. PER HOSPITAL BED TOTAL 2180.0 1650.0 1290.0 If 1066.5 1044.2 URBAN .. .- 370.0 Id 298.0 651.2 RURAL .. .. 104100 7' S"3. 294.6 AIHISSIONS PER HOSPITAL BED .. .. .. .. 27.0 BDIIIIC AVERAGE SU_2 OF HOlSEfOLD TOTAL 5.2 5.6 5.2 I. URBAN 5.2 5.6 4.8 7.. RURAL 5.2 5.6 5.3 Ie AVERACE NO. GF PEBSOMSIROGI TOTAL 2.6 2.8 URBAN 2.6 2.8 RURAL 2.6 2.8 . ACCESS TO ELEC. (C OF DVELLINCS) TOTAL .. .. UA .. .. RURAL .. .. . .. ANNEX I Page 2 of 5 T A I L I 3A i:w - OCIAUL ZNUICATU1 ( NOUT (IIS m10u" 381114263 UbC t Low ZNCOH KZODU 196Igo 10lk z XSfiAS 4 AS!A G PACIIC ASIA I PACIFIC ADJUSTED ENROLLMEIT RATIOI PaIKars TOTAL 6L.0 73.0 9.o 97.4 102.0 MAL 3o.0 90.0 93.0 110.3 105.9 FZKALZ 40.0 56.0 64.0 63.7 98.2 SECONDARYi TOTAL 20.0 26.0 30.0 35.9 46.0 MA1Z 30.0 36.0 39.0 44.6 48.7 ;1Z1AI 10.0 15.0 20.0 26.3 43.1 VOCATIONAL (Z 0 SECONDART) 2.8 1.0 0.7 /a 2.2 17.5 PIPUP.-TE&CNTR ATIO sW PRIKA4Y *6.0 41.0 54.0 38.3 31.S SECONDART 16.0 21.0 .. 18.7 23.5 ADULT LIrtlRCY RATE CZ) 27.8 34.1 36.2 33.4 72.9 COUU P*sSENCER CARS/TNOUSUAD POP 0.6 1.1 1.4 Ib 0.9 10.1 RAIO RzCCzVzRS/TEOUSAND POP 4.9 21.3 43.6 112.1 113.6 TV RECEIVERS/TUOUSAKD POP 0.0 0.0 1.7 15.7 50.1 NEISPAPEE ("DAILY CEREtAL zTERIST") CIRCULATION PER THOUSIAD POPULATIO 10.6 16.2 19.4 2L 16.2 53.9 CD1 ANNUL ATTMODAMCEICAflYA 3.2 6.2 3.7 j 3.6 3.4 LAM rami TOTAL lABOR FORCE (IIOUS) 185951.0 219194.0 282169.0 FIKAL (PERCENT) 30.7 32.5 31.8 33.3 33.5 AGRlCULTURZ (PERCENT) 74.0 74.0 71.0 69.6 52.2 INDUSTRY (PERCZNT) 11.0 11.0 13.2 15.8 17.9 PARTICIPATION RATE (PECUCE?) TOTAL 42.6 40.0 39.4 42.6 38.7 MALE 57.0 52.4 52.0 54.7 50.9 FEMALE 27.3 26.9 25.9 29.8 26.6 ECONOMIC DEPENDERCY RATIO 1.1 1.1 1.L 1.0 1.1 1Rg5 DrS_UEO PERCOIr OF PRVAE INCOIIZ RECEIVED UY RICHEST 5S or sousEDLS 26.7 26.3 A 22.2 1 22.2 22.2 RICHEST 20S 0F DOUSEWLDS 51.7 48.9 49.4 48.0 48.0 LOWEST 202 Or DOISEDULUS 4.1 6.k7 7.0 4.4 6.4 LOUEST 40S OF I1OUb"_D 13.6 17.2 Rf 16.2 Z2 15.5 15.5 NOV01? TAE CRA ESTMD ABSOLUTE POVEY INCOME LEVEL (USS R CAPIT) UR(Um .. .. 132.0 /b L33.9 188.6 RMtAL .. .. 114.0 i 111.6 152.0 ESTIMATED RELATIVE POVERTY IC LE9V1L CUSS PaR CAPITA) URAN .. .. .. .. 177.9 RURAL .. .. .. .. 164.6 ESTDIAUTD POP. BELOW ABSOLUE POVERTY IrICOE LEVEL CZ) URN" .. .. 40.3 43.8 23.4 RURAL .. .. 50.7 51.7 37.7 NOT AVAILABLE NOT APPLICABLE N O TES 5 la The gro?p av r~eag for each lndLcator ar population.emalhted arithmetic aeuna. Covariag of coutirlc samong eb ledicatorm depends on avallabillcy of date nd 1n not unifom lb Unless othebwia noted, "Data for 1960" relfr to any yar betwee 1959 and 1961; "Data for 1970" betweeu 1969 and 1971; and data for "Moet Recent Ztluata" be_tnn 1980 and 192. /c 1977; /d 1976; /a 197S; /f 1978; J 1962; /h 1979; A 1964-65. JUNE, 1984 ANNEX I Welcomed___ Pg~e 3 o~f 5 seenco httk.0 the dl. a do-t Fee at. a.nahtl adled th I ael Adna eaLtabi. is *tnt eta. h. Wna ch. f0ar d, - it aaaleat .a*ta at a aS t a.datdt taltan - .aan I? Ufsae nea.. I ettlata wb dcA.. I'a ., G ne . -coocAe. anta tA desie aed-t at tapttal. Admc,aftedoei. -A attaai.nete.e. dtttaenehat... atece. ua. -rc-.. mpa a.. "Ii li. ideeds aa."A.t ch. aadhJen fea Ode (a) . denact.aa..1 hre ee l.a.-.. tea. nbe anal.?.0 aaa 1 ale ..J ge"Act., t..eap ta' UK% tea us ftaaa.ea gang St.. ,111dols me beh Amee. d Uddsi IGat. I. ch... tn .t naneqd. lA-.atae arndda-...t. I. ale "" " " `ala.. ana.d.a 141na ca sttnntba tlatata - Wee all -1. ad at, k Ia. c an.-A. gene h.. ont. rae the 4taetleaaa U- the tare at anal. ale Strata daI d -tbaeaatlebltuleegateaad Ia- eitq..n* ~0aln -t ha A...,~.eeie. n- alS.-.ey k. -L- t- sat nata Ba tta -b ast. - a tad"...- . ttn - b. --L., -, -n-=Is.. - tattl attestaa s ngte.acdtatl, OFanat . ..0 Mel- atata ,tadb a. tattlen - p-a,-a. -Ah. -d kitAfa at.. C. - . S It. atAt.at Is". eatta A-a.tt-ate aa tta aaa sttn ta .0.% -d --0ea,aeta - attatatt ad - aeare..a.meeat - eeatemae...a aitakI. Ia pAtS. adm W - eI.aee- -a4 aesUtag IFta e.gr tea.. Ce Ola. 1ti dt.- he - na --tk L-te. Canaha-ain. palea e.tet tcd P"-I~~ -Oldd 41- -1 bl4ta - - tyemnn. e..Chaplee t... -aItdclack a an-en.enasatsl - astaaeaee..u ata-etuaaalaa.aa- eaeae,aaagotre hittaten (bta, dine a4pd aaehaet .1areddAtly) 1e kltaatan . .4L "a-al,na -ee aeptlt tea.. p-a4da t 'ltd tae at ndta.t Adet USt.. dCl etae. a nhtafiate. --de.haa am. r-~~~~~Aaf~ ta mn wa.d e I- aat.adeylaaane F-C ~ ~ eol~ 129 el IM. - aC.pA-. ae.eS itIat 51al.a na .edd wpcoc~ 1, " - ad bedal n-tettr ad latley dntltat. taaatasv kbittat anted ne,ma .tn. W."a. lI aran eapaA tttetti,ld 14en L-MSi -Lan t-enS. at e At. attn. ds tetat atl. Maetl nina deetn t lat -lIc atead-a. , neladt eadtn tat.?C-t- eltt.ata.. Itank e-aytun t-. naetd nA et tn *l inente St ett. ad eaftata Aetad Cat ttaooIfftta.snn jaeg.Ii .Es fIEi-Ca en -a sIn en-ad na-a ttit meettea. -;=Ite entet l at an..- -L te. atlag h. SIt,e 1 ataatea attya . al- qae *ff. W ametit-atn ttaae nen Aa at -tt aaaatnd ~ 1- A. teeee tae taaan.. aen-a, adtlfl.ae aeete al-a -r aeataaa. e caeaatt. entt. ae * altn Ce. hiteb raLe . -aata gat at adWae le. dataa t.- atahaa tale...-iatn tae - etat . ab daak eae.eleAt tnaea lefeS dt nea sIki A.ai ee a1.ne - matea yan 1ire aedSt te aetCe d Caeaetla-a eatanCat lan- yat. ait e - Casat ml a am.- e"'a sam-" ade me.adth re. ata -taalt~ .a eea.te tnt .aae tas`L a lnatie Lae t n.eaa tre-r asasgm 7eStatmta atana..lttli,b bnnhsd t nt -aiall del Ia tt a ea at aZ. t.taa... e ta te n tAr I . tetennet ma ea sly. lb. gmiyetdd niaStaeae.l t k a.e. t Ceeeaa n a-tl St tC naeAtertae e.e t.e.4et-C.atslnCat Sm.-. Itt ea. t.atC.ah, ec- etna d artaae e. .1.A -asnt -..n. -I.. C.Wa-e;es ~. A.M.adls at.kteate. Ca.. -a -dre. - Uaat eatntei a 5a .a -L- nun t-e -ten a-1 ant.W a-tea.. - - tc i iad kj.a acti tateneat Ct Sd. -elad-Ptaa A.. fa ta an."ata - Jaafte.esn e ORa mea- yAsteta la- . oft~aaC d- ..al-intga.h ae.a aalS- gtea nhat. NoaaehaC. ,'t.At-,.a eUa aa-aasstce a-taan--Iat- t L.a rrL-e at-ti P-LA..Cln &"D.bttaeatt.atn n aa ms tek 19 tee--T dad at taaat. aa.elin I ag ehi.tn ia)-an enb9b tCaa.atS-- nI tse n Ca. nasasty t -ea.my - =teaykt ata -in V, Ad-L au ie. eE, d a dle an ded .b-.t ite lleaaal.t.H taalttC anl: nafy taty. enn at.A761m Ce teas t eed. Wf-ateaa aa sa naa aet.;dta .aaata tea?. pbll-aeaa datesa t-1.t-1, . namd-yiaaae in. R-tC aa" aa tat lna - aeta eelba.dj.ati.tatpae - ha datlytt IIflaeeS tma Eay slca. a in.- yadtt rltn - taaee teae.en at asetiad eatft'. - -ae ,aeat at" -eeF-a- meat.%ate. -een at k .m ta t -eteeel1 bab a = e-tedt t tel-' edti-C ltite-Olta - Tat. lope betaIR tseeded . ttaat mee t-d, neta P-an. -meanSeeptt nt I0.atsa eatI eta, at- faa.d6emaaneadt anplage teata.aaSt. C.*a lada a rt aeeta -ay Cdc-tt - fttll7.n . "W. ge-eat at - ac. 'oLe,el-let. e- Cain n. ta-ylae -t Isa- t-dle afta. -ad a Wd salda rae. tAWAl.WeLla edL. m1r telt atdaCe ata-laa - teals P-.ne ta-e M.. tn- . tWea t-eAt P-o-. at-ayin tana at2 tAtl-tin a.mglhetbte IIad ae-de ata da eedal,ieai- edtt.ataa.aea.ee. setga adre. -ad am a- ca e Aadt pc. aata Wtadee -a t aa - ney -d- eteeaa.nt da aeet tesltt.yt. ia it tnad as enteni at t ae ne eal. n lsa: tiInt Cit ad- tnUmdtewr d.te.p ~ - A ' 1 - y.ed ejd Pbate tppenat - latet. IWO aS *amte yanllt-aft -e satanea. t tata e.aatSEeaatene -c,latala te.daat a ae tant.M M aMa ad taLa tr.eba at dar.tnlthSe enlle at --e-Ate atdtla nn ae eS it.a tteit dna.1-- - in e alt. aelyseeatlas t .sd,ettnmp d e End oadtio- "Acd " asaa dlatln I-gmen. Ca aalme a-- t _ nl _aet As..~ enlaty a lelal tdat.eaeat.2-2.e4. Ron es. lad.1 aeane_tt I .ant__lk atadan- tnitda =t-tatt. ad, diteaba C temst- - anatd laCe SCil. Ifea an dtan aeCIgoal Cl tee eatt ina attreela dea MeR-yaal na tta Iep ena t.aa.lee CekI et ditd -bln t elDat C rat . taede, tadae is acedma nbadh an ena a wdPt. atinidoe AllI Pa4e 4 Of 5 *USIC DEVEWBUT DATA CNP P CWTrA IN 191-5260 j/ CRSS DOI# IC PRODUCT in 1983184 hi ANNUAL tAIS oF aCm (E. Conatant Prtice) ss/56-59/60 60161-65 6566-69/70 70/71-74/75 75/76-79/80 80/m1-82/83 USS sin. 2 CDM at Market inca 18i.81 100.0 3.7 3.6 3.7 2.9 4.1 5.1 Gross Domstic Ineast 45.94 24.0 Gross National Saving 43.17 22.7 Current Accost blast -2.17 -1.5 OUTPu WOI PORCE AN D PRODUCrVf IN 1981 Value added (at factor cost) tIabor Force i/ V.. Per worker USS Uin. r Nil. 2 of rae iiona Average Agricultue 52.5 35.9 172.7 70.6 3046 S1 Ilidustry 34.5 23.6 31.6 12.9 1092 183 Services 59.2 40.5 40.3 16.5 1469 246 TotallAverage 146.2 100.0 2U4.6 100.0 598 0iO GOVERMET FINANC General Covonment e/ Central Cov ent Ra. in. I of COP Ra. Bin. =I of CU 1913/4 1983B4 1979/191983/a4 1983184 1979/80-1984 Current Receipte 378.54 19.3 19.5 201.67 10.3 10.3 urrant Expenditures 397.12 20.3 19.4 225.42 11.5 10.9 Current Surplus/Defict -18.58 -1.0 0.1 -23.75 -1.2 -0.6 Capital Expenditures f/ 149.64 7.7 8.0 114.12 5.8 5.8 External Assistance (net) dl 19.16 1.0 1.1 MM. CEEDIT AND CPRceS 1970/71 1975/76 1978/79 1979/80 1980181 1981182 1982183 1983184 January 1984 Januar 1985 C(R Billo outstandiug a end of period) Homey and Quest Nonay 109.8 224.8 401.1 472.3 557.7 627.5 728.7 860.9 835.1 993.9 lank Credit to Government (use) 54.6 106.3 159.3 200.1 257.2 306.3 353.8 407.7 403.1 483.9 fank Credit to Coercial Sector 64.6 156.2 255.3 310.1 366.4 434.6 517.1 612.7 575.5 685.0 (Percentage or Index Nusbers) , April-Jan 83/B8 April-Jan 86/85 Honey and Quasi Honey as a S of GDP 27.3 30.3 41.1 "4.1 43.7 42.5 44.5 44.0 Uholesale Price Index (1970/71 - 100) 100.0 173.0 185.8 217.6 257.3 281.4 288.6 315.2 313.6 336.7 Annual Percentage changes in: Wholesale Price Index 7.7 -1.1 - 17.1 18.2 9.4 2.6 9.2 9.2 7.4 lank Creit to Government (net) 15.0 22.7 16.0 25.6 28.5 19.1 15.1 15.3 16.9 W 23.2 hi lrak Credit to Co_aerial Sector 19.4 22.7 20.3 21.5 18.2 18.6 17.7 18.7 13.8 T 15.6 h / The per capita CUP estimte Is at earket prices, using World Bank Atlas methodology. base period 1981-83. All other conversolns to dollars in this table are at the average exchange rate prevailing during the period covered. b/ Quick Estimtes. Central Statistical Organizatio. - T/ Computed from trend lie of GUP at factor cost serles, inc,$ding one observetion before first year and one observation after lest year of listed period. d/ World lank estimtes of net disbursement of concessional aid and IWR. e/ Tranfers betwea Centre and States have been netted out. f| All loan end advances to third partias have bean netted out. * j/ Perentage change from end-March 1983 to end-Jan.84. h/ Percentage change from end-March 1984 to end-Jan.85. Ii Total labor Forte and percentage breakdown from 1981 Census. Excludes data for Ass_. ANNM I Pam 5 of 5 BALANCE OF PAHENTS 1981/82 1982/83 1983/84 1984/85 IOCHADISE EXPORTS (AmEUA 1980/81-1983/8&) jI (US KIn.) uSS lin. S Exports of Goods _j/ 8.519 8,290 8.355 8.724 Enginering Goods 1115 13 Iaports of Goods g/ -15.301 -14,290 -14.040 -14.501 Tea 469 6 Trad Balance - 6,782 - 6.000 - 5.685 - 5,777 Glms 1009 1Z NFS (net) 1,002 935 94B 1,098 Clothing 688 8 Leather and Leather Products 343 4 Resource Balance - 5,780 - 5.065 - 4.737 - 4,678 Jute llaufactures 269 3 1rm Ore 400 5 Interest Incos (net) k/ 350 - 302 - 664 - 785 Cotton Textiles 316 4 Net Transfers 1/ 2.317 2.504 2.880 2,930 Sugar 104 1 Others 3704 44 klance on Current Account - 3.113 - 2.863 - 2.521 -2,533 Direct Investmnt 10 65 62 61 Total 8417 1OD Offical Loas & Crants (net) 1.681 1,901 1.961 1,944 Gross Disbursements 2.269 2.513 2.578 2,585 ETERNAL EBT, MRCR 31. 1984 Amortization 588 612 617 641 US$ billion Private Borrowing (net) 338 366 528 844 Outstanding and Disbursed 21.5 Non-Resident Deposits 260 578 903 600 llndisbursed 10.4 Tr action with 1Fl (net) 690 1.980 1.295 70 Outstanding including Undisbursed 31.9 All other Item / - 2.264 - 1.522 - 1.347 - 683 Increase In Reserves (-) 2.398 - 504 - 582 - 303 DEBT SERVICE RATIO FOR 1983/84 I nI/ 13.6 per cent Gross Reserves (end year) pl 4.461 4.965 5.847 6.150 Net Reserves (end yer) s/ 3.497 2.089 1.697 2.250 IERD/IDA LENDDING. MARCH 31. 1985 1/ Fuel and Related Materials US 5 millon Imports (Petroleolm) 5.553 4,614 2.983 3,026 IBRD IDA of which: Crude 3,921 3,139 2.183 1.015 Products 1.632 1,475 00 2,010 Oustanding and Disbursed 2.158 8,902 Undisbureed 4,326 3.748 Outstanding including Undisbursed 6.484 12,650 RATE OF EXCHAEGE June 1966 to uid-December 1971 : US51.00 - RN 7.50 Rs 1.00 - U5SO.13333 Hid-December 1971 to end-June 1972: Ub51.OO - Ra 7.27927 Rs 1.00 - U5$0.137376 After end-June 1972 : Floating Rate Spot Rate end-March 1984 : USS1.00 - RH 10.7181 Rs 1.00 - US50.0933 Spot Rate end-March 1985 : US$1.00 - Rs 12.3457 Rs 1.00 - USSO.0810 | Estimted / Fures given cover all investmnt income (net). Major paymnte are interest on foreign loans and charges paid to IP. and major receipts is interest earned on foreiga assets. 1/ Figures given include workers' remittances but exclude offical grant assistance which is Included within official loans and grants. and non-resident deposits which ar shown separately. m/ Exclude net use of DI credit- _; Amortization and interest paymnts on foreign loans as a percentage of total current receipts. 0/ Includes exchange rate adjunstents to the valuation of reserves and fin ncing of imbalances in rupee trade. ril 5xcludia! gold. _/ Net of petroletn exports ANNEX II Page 1 of 4 TRE STATUS OF MMNK GROUP OPERATIONS IN INDIA A. STATCEKNT OF MANK LOANS AND IDA CREDITS (As of March 31, 1985) US$ million Loan or Fiscal (let of Cancellatioun) Credit Year of NRo. Avvrova, Pur2052 lAnk IDA 1i Udikbureed 3J 52 Loans/ 2,379.0 - - A 96 Credits fully disbursed - 5,589.2 - 482-IN 1974 Karnataka Dairy 30.0 6.06 610-IN 1976 Integrated Cotton Development - 18.0 0.01 1251-IN 1976 Andhra Prade;h Irrigation 145.0 - 14.17 1273-IN 1976 National Seeds I 25.0 - 3.66 680-IN 1977 Kerala Agric. Development - 30.0 8.05 682-IN 1977 Orissa Agric. Development - 20.0 1.32 690-IN 1977 West Bengal Agricultural Extension & Research - 12.0 6.34 1394-IN 1977 Gujarat Fisheries 14.0 - 1.90 747-IN 1978 Second Foodgrain Storage - 107.0 32.50 761-1U 1978 Bihar Agricultural Extension & Research - 8.0 .85 1511-IN 1978 IDBI Joint/Public Sector 25.0 - 1.37 1549-IN 1978 Third Trombay Thermal Power 105.0 - 0.02 788-IN 1978 Karnataka Irrigation - 117.6 30.30 793-IN 1978 Korba Thermal Power - 200.0 23.31 806-IN 1978 Jammu-Kashmir Borticulture - 14.0 9.12 815-IN 1978 Andhra Pradesh Fisheries - 17.5 7.91 816-IN 1978 National Seeds II - 16.0 2.29 1592-IN 1978 Telecommunications VII 120.0 - 7.21 824-IN 1978 National Dairy - 150.0 27.26 842-IN 1979 Bombay Water Supply II - 196.0 119.03 844-IN 1979 Railway Modernization 6 Maintenance - 190.0 14.50 848-IN 1979 Punjab Water Supply & Sewerage - 38.0 3.70 855-IN 1979 National Agricultural Research - 27.0 11.99 862-IN 1979 Composite Agricultural Extension - 25.0 0.40 871-IN 1979 National Cooperative Development Corporation - 30.0 0.18 ! 874-IN 1979 Ramagundam Thermal Pover - 200.0 0.06 1648-TB 1979 Ramagundam Thermal Power 50.0 - 45.98 889-IN 1979 Punjab Irrigation - 129.0 26.82 899-IN 1979 Maharashtra Water Supply - 48.0 0.45 911-IN 1979 Rural Electrification Corp. II - 175.0 3.25 954-IN 1980 Haharashtra Irrigation II - 210.0 25.86 961-IN 1980 Gujarat Community Forestry - 37.0 2.70 963-IN 1980 Inland Fisheries - 20.0 14.41 981-IN 1980 Population II - 46.0 23.27 1003-IN 1980 Tamil Nadu Nutrition - 32.0 16.81 1011-I.' 1980 Gujarat Irrigation II - 175.0 84.89 1012-IN 1980 Cashewnut - 22.0 14.74 1027-IN 1980 Singrauli Thermal II - 300.0 124.04 ANNEX II Page 2 of 4 US$ million Loan or Fiscal (Yet of Cancellations) Credit Year of No. Approval Purpose Bank IDA 1, lndisbursed 2/ 1028-I 1980 Kerala Agricultural Extensiou - 10.0 6.28 1033-IN 1980 Calcutta Urban Transport - 56.0 15.71 1034-IN 1980 Karnataka Sericulture - 54.0 24.87 1046-IN 1980 Rajasthan Water Supply & Beverage - 80.0 44.81 1843-IN 1980 Industry DFC XIII 99.2 - 3.96 1053-IN 1980 Farakka Thermal Power - 225.0 75.02 1887-IN 1980 Farakka Thermal Power 25.0 - 25.00 1897-IN 1981 Kandi Watershed and Area Development 30.0 - 18.40 1072-IN 1981 Bihar Rural Roads - 35.0 9.75 1078-IN 1981 Mahanadi Barrages - 83.0 35.99 1082-IN 1981 Madras Urban Development II - 42.0 19.31 1108-IN 1981 M.P. Medium Irrigation - 140.0 74.08 1112-IN 1981 Telecommunications VIII - 314.0 71.66 1116-IN 1981 Karnataka Tank Irrigation - 54.0 33.13 1125-IN 1981 Hazira Fertilizer Project - 399.1 77.24 1135-IN 1981 Haharashtra Agricultural Ext. - 23.0 8.96 1137-IN 1981 Tamil Nadu Agricultural Ext. - 28.0 14.27 1138-IN 1981 H.P. Agricultural Ext. II - 37.0 23.98 1146-IN 1981 National Cooperative Development Corp. II - 125.0 62.87 1172-fl 1982 Korba Thermal Power Project II - 400.0 243.01 1177-IN 1982 Madhya Pradesh Major Irrigation - 220.0 140.86 2050-IN 1982 Tamil Nadu Newsprint 100.0 - 8.60 1178-IN 1982 West Bengal Social Forestry - 29.0 18.21 1185-IN 1982 Kanpur Urban Development - 25.0 13.31 2051-IN 1982 ICICI XIV 150.0 - 44.73 2076-IN 1982 Ramagundam Thermal Power II 300.0 - 264.07 1219-1N 1982 Andhra Pradesh Agricultural Ext. - 6.0 4.36 2123-IN 1982 Refineries Rationalization 200.0 - 76.58 2165-IN 1982 Rural Electrification III 304.5 - 248.98 1269-fL 1982 Kallada Irrigation - 60.0 25.13 2186-IN 1982 Kallada Irrigation 20.3 - 20.00 1280-IN 1983 Gujarat Water Supply - 72.0 57.11 1286-IN 1983 Jasu/Kashmir and - Raryana Social Forestry - 33.0 22.45 1288-IN 1983 Chambal Madhya Pradesh - - Irrigation II - 31.0 17.87 1289-IN 1983 Subernarekha Irrigation - 127.0 101.25 2205-IN 1983 Krishna-Godavari Exploration 165.5 - 121.55 1299-IN 1983 Railways Modernization & Maintenance II - 200.0 167.25 2210-IN 1983 Railways Modernization & Maintenance II 200.0 - 197.04 2241-IN 1983 South Bassein Gas Development 139.3 - 133.71 1319-IN 1983 Haryana Irrigation II - 150.0 100.78 1332-IN 1983 U.P. Public Tubewells II - 101.0 87.73 1356-IN 1983 Upper Indravati Hydro Power - 170.0 142.99 2278-IN 1983 Upper Indravati Hydro Power 156.4 - 156.01 JZiNEX I I Page 3 of 4 Us$ sillion L_uJn or 7iucal (Net of Cancellations) Credit Year of Be.. _ AnovaLl Zuruos ^EDk 1/ Jndimbgul r / 1369-Il 1983 Calcutta Urban Development III - 147.0 128.60 1383-I?1 1983 Maharashtra Water Utilization - 32.0 24.45 2308-TI 1983 Maharashtra Water Utilization 22.7 - 22.64 2283-IN 19B3 Central Pover Transmission 250.7 - 250.07 2295-IN 1983 Himalayan Watershed Management 46.2 - 45.02 X 2329-ID 1983 Madhya Pradesh Urban 24.1 - 23.80 1397-TI 1984 Orissa Irrigation II - 105.0 76.24 1424-IN 1984 Rainfed Areas Watershed Dev. - 31.0 29.14 1426-IN 1984 Population III - 70.0 65.63 1432-ID 1984 Karnataka Social Forestry ' - 27.0 21.93 2387-IN 1984 Nbava Sheva Port 250.0 - 247.92 2393-IN 1984 Dudhichua Coal 151.0 - 150.62 24U3-IN 1984 Cambay Basin Petroleum 242.5 - 241.90 2415-ID 1984 Madhya Pradesh Fertilizer 203.6 - 200.18 1483-IN 1984 Upper Ganga Irrigation - 125.0 116.47 1496-IT 1984 Gujarat Medium Irrigation - 172.0 145.22 2417-IN 1984 Railways Electrification* 280.7 - 280.70 2442-IN 1984 Farakka II Thermal Power* 300.8 - 300.80 2416-IN 1984 Indira Sarovar Hydroelectric* 157.4 - 157.40 SF-20-IN 1984 Indira Sarovar Eydroelectric* - 129.8 129.80 2452-IN 1984 Fourth Trombay Thermal Power* 135.4 - 135.40 1454-IN 1984 Tamil Nadu Water Supply - 36.5 34.99 SF-12-ID 1984 Tamil Nadu Water Supply - 36.5 34.99 1468-IN 1984 Periyar Vaigai II irrigation - 17.5 16.46 SF-16-IN 1984 Periyar Vaigai II Irrigation - 17.5 16.46 1502-TB 1984 National Cooperative Development Corporation III - 220.0 205.99 1514-IN 1985 Kerala Social Forestry - 31.8 30.33 1523-TB 1985 National Agric. Extension I* - 39.1 .39.10 1544-IN 1985 Bombay Urban Development* - 138.0 138.00 Total 6,818.3 12,934.1 of which has been repaid 1.269.9 194.6 Total now outstanding 5,548.4 12,739.5 Amount Sold 133.8 of which has been repaid 133.8 - - Total nov held by Bank and IDA / 5,548.4 12,739.5 Total undisbursed (excluding *) 2,575.90 3,333.48 1, IDA Credit amounts for SDR-denominated Credits are expressed in terms of their US dollar equivalents, as established at the time of Credit negotiations and as subsequently presented to the Board. 2/ Undisbursed amounts for SDR-denominated IDA Credits are derived from cumulative disbursements converted to their US dollar equivalents at the SDR/US dollar exchange rate in effect on March 31, 1985. 3/ Prior to exchange adjustment. * Not yet effective. ANNEX II Page 4 of 4 B. STATEMENT OF IFC INVESTMENTS (As of March 31 1985) Amount (US$ million) Fiscal Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Rirloskar Oil Engines Ltd. 0.8 - 0.8 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 R.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.6 0.4 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 1964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.3 13.1 1964 Laksbmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.1 0.1 1.2 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 1978 Housing Development Finance Corporation 4.0 1.2 5.2 1980 Deepak Fertilizer and Petrochemicals Corporation Ltd. 7.5 1.2 8.7 1981 Coromandel Fertilizers Linited 15.9 - 15.9 1981 Tata Iron and Steel Company Ltd. 38.0 - 38.0 1981 Mahindra, Mahindra Limited 15.0 - 15.0 1981 Nagarjuna Coated Tubes Ltd. 2.9 0.3 3.2 1981 Nagarjuna Signode Limited 2.3 - 2.3 1981 Nagarjuna Steel: Limited 1.5 0.2 1.7 1982 Ashok Leyland Limited 28.0 - 28.0 1982 The Bombay Dyeing and Manufacturing Co. Ltd. 18.8 - 18.8 1982 Bharat Forge Company Ltd. 15.5 - 15.5 1982 The Indian Rayon Corp. Ltd. 8.1 - 8.1 1984 The Gvalior Rayon Silk Manu- facturing (Weaving) Co. Ltd. 3.5 - 3.5 1985 Bihar Sponge 8.9 0.8 9.7 1985 Bajaj Auto Ltd. 20.5 - 20.5 1985 Modi Cement 12.0 _ 12.0 TOTAL GROSS COMMITMENTS 251.9 12.9 264.8 Less: Cancellations, Terminations, Repayments and Sales 139.1 6.2 145.3 Now Held 112.8 6.7 119.5 _dsbuse 78 = 7=== Undisbursed 72.8 0.8 73.6 ANNE III Page 1 of 2 INDIA NATIONAL SOCIAL FORESTRY PROJECT SUPPLEMENTARY PROJECT DATA SEUET Section I: Timetable of Key Events (a) Time taken by the country to prepare the project 18 months. (b) The agency which has prepared the project COI, COG, GOHP, GOR and COUP assisted by the Association. (c) Date of first presentation to the Association and date of first mission to consider the project The project was first discussed by a joint Bank/USAID/IDA subsector review mission in February 1983. The first of the four States' preparation reports was 1984 (April). (d) Date of departure of appraisal mission October/November 1983. (e) Date of completion of negotiations May 1985. (f) Planned date of effectiveness September 1985. Section II: Special IDA Implementation Actions None. ANNEX III Page 2 of 2 Section III: Special Conditions (a) each State would limit free distribution of seedlings under the project, and sell the rest at prices estimated to cover most of direct production cost (para. 48); (b) By April 30, 1986, GOI would sanction the new position of the head of Social Forestry Support Office, and a Conservator of Forests for Planning, GOR would sanction the position of a Conservator for planning, monitoring and evaluation; and COUP, Additional Chief Conservators of Forests (para. 54); (c) each State would make adequate provision of vehicles and travel allowance for field staff (para. 56); and (d) each State would undertake a joint review of the project with GOI, IDA and USAID by Harch 31, 1988 (para. 57). Annex IV Procurement Arrangements (US$ Millions) --- Procurement Method --Total ICB LCB OTHER NA Cost Civil Works 5.9 18.6 - 24.5 (3.0) (9.3) (12.3) Vehicles and Equipment - - 11.7 - 11.7 - (1.9) (1.9) Training - - 5.4 5.4 (2.7) (2.7) Support to SAUs, Special - - - 0.7 0.7 Studies and Tech'l Ass'ce (0.3) (0.3) Plantation Activities and - - - 211.4 211.4 Fuel Saving Devices (126.8) (126.8) Salaries & Allowances - - - 53.8 53.8 (18.8) (18.8) Vehicle and Office O&M - - - 20.3 20.3 and Other Expenditures - - - (2.2) (2.2) 5.9 33.3 291.6 327.8 (3.0) (11.2) (150.8) (165.0) (Figures in parentheses are amounts to be financed by the credit) lii m u i I s NS4 I~~~~~~~~~~~~~~R r~~~ -1. r - i \Ml'*kL X L I E-: 'r E B t , g C