World Bank Document

PA-54

Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations They do not accept responsibility for its accuracy or completeness The report may not be published nor may it be quoted as representing their views

INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT INTERNATIONAL DEVELOPMENTASSOCIATION Public Disclosure Authorized

AGRICULTURAL AVIATION PROJECT

INDIA Public Disclosure Authorized

October 7, 1970 Public Disclosure Authorized

Agriculture Projects Department CIRRENCYEQUIVALENTS

US$1 = Rs 7.50 Rs 1 = US$0.13 Rs 1,000 = US$133.33 Rs 1,000,000= US$133,333

WEIGHTS AND MEASURES

1 ft = 30.5 cm 1 yd = 3 ft = 91.44 cm 1 ac = 0.h07 ha 1 gal = b.5h6 1 1 oz = 28.3h9 gram 1 lb = 16 oz =0.45 kg 1 kg = 1000 gram = 2.205 lb 1 m ton = 1000 kg = 2,205 lb

ABBREVIATIONS

ARC---- AgriculturalRefinance Corporation DAA---- Directorate of AgriculturalAviation DDAA---DeputyDirector of AgriculturalAviation GOI----Government of India TC-----TrainingCenter INDIA

AGRICULTURALAVIATION PROJECT

TABLE OF CONTENTS

Page No.

SUNMMARY AND CONCLUSIONS ...... *...... i

I. INTRODUCTION ...... 1

II. BACKGROUND ...... o..*...... *. .*. .... 1.

A. Agricultural Sector ...... t. 1 B. Plant Protection in Iudia .2...... ** .... 2

Programs and Policies . . 2 Research and Training ...... 3 Legislation ...... 00 .. .. * 3 Agricultural Chemicals ...... 4

III. AGRICULTURAL AVIATION IN INDIA ...... 4

A. Scope for Aerial Application ...... 4 B. The Industry .... S.. .. .

GOI Aviation Unit . . 5 Private Operators.. 5 Operational Bases. . 5 Repairs, Maintenance and Spare Parts 6 Staffing.. .. . 6 Status of Private Operators ... 6

C. Project Areas, Crops and Spraying Seasons. . 7

IV. THE PROJECT.. 7

A. General Description ...... 0. 7 B. Detailed Features. . 8

Aircraft .. 8...... 8 Aircraft Spare Parts . .8 Vehicles and Ancillary Equipment. 8 Training .... o...... 9

This report is based on the findings of an IDA appraisal mission to India in November 1969 composed of Messrs. G. von Gontard, T. J. Davis, J. Zarandin, P. Courbois (IDA) and C. Voss (Agricultural Aviation Consultant). TABLE OF CONTENTS(Continued) Page No.

VII. BENEFITS ANDJUS TIFICATION...... 22

VIII. RECOMMENDATIONS...... 23

ANNEXES

1. Plant Protection in India 2. The Agricultural Aviation Industry 3. AgriculturalApplicator Aircraft 4. Training 5. Estimated Project Costs 6. Estimated Schedule of Disbursements 7. Credit and Banking System 8. OrganizationChart 9. Appraisal and Lending Policies 10. Returns to Aircraft Operators 11. Economic Justification 12. Farmers Benefits

MAP INDIA

AGRICULTURALAVIATION PROJECT

SUMMARYAND CONCLUSIONS

i. The Governmentof India (GOI) has requested an IDA credit to meet the foreign exchange costs of an agriculturalaviation project. The project ainms at better control of crop pests and diseases through expansion and improvement of aerial spraying services. The project would provide suitable credit to qualified private aviation operators for purchase of fixed and rotary wing aircraft specifically designed for agricultural work and strengthen GOI's agricultural aviation unit through fleet renovation and other measures. Finally, the project would provide training facilities for agriculturalpilots and aircraft engineers, including technicalassistance and overseas training of pilot instructors. ii. About 82 agriculturalaircraft would be financed under the project, 67 for commercialoperation by private companies and 15 for training, demonstration and commercial operation of a new Directorateof Agricultural Aviation (DAA), in the Ministry of Food, Agriculture,Co-operative and Com- munity Development.Specialized agriculturalequipment, spare parts, vehicles, ground support and safety equipment and aircraft tools would also be included. iii. The project is part of India's plant protection program for the current Five-Year Plan (1969-74). Increased demand for aerial spraying services springs from the intensificationof Indian agricultureresulting from increased and more timely irrigation,expanded fertilizerusage and the introduction and spreadof high yieldingcrop varieties. The same environment required for high crop yields increases the incidence and severity of crop pests and diseases. While ground application techniques would continue -to account for rDst plant protection needs, such methods are, in many cases, too slow and do not meet field crop requirements. The proposed project would complement ground techniques by expanding and improving India's agricultural fleet and skilled personnel. iv. Total project cost is estimated to be about US$8.8 million, including contingencies,69% of which would be in foreign exchange (US$6.0million) to be financed by the proposed IDA credit. Private operators, dealers, commercial banks and GOI would contribute the balance of project costs. In addition,GOI and state governments would provide budgetary resources for supporting ground services, pesticides and short-term credit to farmers. v. Proceeds from the IDA credit would be made available by GOI to DAA and the Agricultural Refinance Corporation (ARC). Credit to private operators would be provided by the ARC through commercial banks at current commercial rates. DAAwould be responsible for technical evaluation and supervision of subloans, pre-qualification of aircraft suppliers, coordination with plant protection agencics, market development and training. Disburse- - ii - ment of IDA funds would be against import documentation for imported goods or audited statements of expenditures. Aircraft procurement would be through normal trade channels. Adequate numbers of international makes of agricultural aircraft are represented in India and competition among them is keen.

vi. Although moderate subsidies to farmers would be continued to help promote aerial plant protection, these would be gradually reduced in line with the demonstration of the benefits of aerial spraying. Financial returns to private operators would be between 16X and 29%.

vii. At full development, the project would help control pests and diseases over 6 million acres of field crops, mostly rice, wheat, cotton, groundnuts and sugarcane. This is expected to increase yields and production of these crops significantly and thereby reduce the need to rely on imports. The economic rate of return of the project would exceed 100%.

viii. The project would be suitable for an IDA credit of US$6.0 million. The borrower would be the GOI and it would assume the foreign exchange risk. INDIA

AGRICULTURALAVIATION PROJECT

I. INTRODUCTION

1.01 The Government of India (GOI) has requestedan IDA credit of US$6.0 million to meet the foreign exchange costs of an agriculturalaviation project. The project would be an important part of India's plant protection program for the current Five-Year Plan (1969-74). At full development, the project would help control pests and diseases over 6 million acres planted in foodgrains and other crops, about 1.8% of India's total cropped area.

1.02 The proposed project would be the Bank Group's first operation in aerial plant protection. This is an essential custom service for farmers, including small landholders. In 1969, a project for increased production of Indian high yielding seed varieties was assisted by IBRD. Expanded plant protection would further encourage farmers to increase the use of such seeds. Other agricultural projects, either assisted by IDA or under consideration,are: in Gujarat State, the Kadana Irrigation Project and a credit project; in Tamil Nadu, a drainage and irrigation project and a credit project; in Andhra Pradesh, an irrigation and a credit project; and in Punjab, a credit project. Over the next several years, these projects as well as other agricultural development program of GOI and state governments now underway are expected to raise substantially the need for improved plant protection services.

1.03 This report is based on information furnished by GOI, as well as on two technical reports sponsored by the United States Agency for Inter- national Developmentin 1964 and 1968. In June 1969, an IDA mission discussed a possible project with interested agencies in India. In October 1969, the GOI submitted a proposal and in November 1969 an appraisalmis- sion, composed of Messrs. G. von Gontard, T. J. Davis, J. Zarandin, P. Courbois (IDA), and C. Voss (Agricultural Aviation Consultant) visited India.

II. BACKGROUND

A. Agricultural Sector-/

2.01 Agriculture is vital to the economy of India and will continue to be for many years to come. Its actual progress, however, has been disappoint- ing when compared with the country's needs and potential. During most of the

1/ A detailed discussion of the situation and prospects of agriculture in India is given in: Economic Situation and Prospects of India; Report No. SA-13a, April 24, 1970. -2- last decade, GNP increased at the rate of about 3.5%, but only at 1% per head annually. Agriculture,the largest industry, generating about half of GNP, grew at only 3% per annum during this period. While droughts, including those that occurred in 1965/66 and 1966/67, were partly responsible for this disappointingperformance, the reluctance of planners to give high priority to agriculturaldevelopment was of equal significance.

2.02 Since 1965, a higher priority has been given to agriculturein the country's developmentstrategy. Major efforts have been made to introduce new technology,increase the availabilityof farm inputs, and provide economic incentives to induce their rapid adoption and use in agriculture. The response has been encouraging. The introductionof new fertilizer-responsive foodgrainvarieties, in particularwheat, has already contributedto a record harvest in 1967/68 and again in 1968/69.

2.03 Continued success in raising cereal yields brings self-sufficiency in food within the reach of India in the 1970's. To achieve this, however, will require that continued emphasis be placed on research, especially for new rice varieties, maintenance of prices at a level high enough to encourage adoption of modern farming practices, improvements in grain storage and marketing facilities, increase in the supply and use of irrigation water and other complementary inputs such as improved seed and fertilizer, more agricultural credit to facilitate their purchase, and improvements of services that will enable the masses of small farmers to adopt the new technology. Finally, plant protection measures must be brought within reach of more Indian farmers.

B. Plant Protection in India

2.04 Plant protection is becoming increasingly important in India. The number and intensity of crop pests and disease outbreaks rise as a result of the intensification of agriculture. Increased regional specialization, stepped up cropping intensity and high levels of moisture and fertility, needed for high crop yields, encourage the spread of pests and diseases. In particular, more effective plant protection has become necessary if the high yielding varieties are to be used extensively and their full potential realized. Farmers are increasingly aware that, without adequate pest control, investment in high yielding varieties and associated inputs of water, fertilizer and labor can be risky. Further details on plant protection are in Annex 1.

Programs and Policies

2.05 Around 370 million acres of land are cropped each year in India, about 20% of which currently receives protection through some pest and disease control. It is proposed to increase the annual coverage gradually to more than half of the cropped area by the end of the current Five-Year Plan. This coverage includes seed treatment, field application of chemicals, -3- anti-rodent measures and chemical weed control. Intensive and preventive treatment, involving more than one application per crop in a season, is foreseen for all areas sown to high yielding food, commercial and plantation crops.

2.06 For state plant protectionprograms, as for agriculturein general, GOI acts mainly as an adviser and coordinator. GOI's influence on state programs derives-from-its financial support for developmentprograms of the states. An estimated Rs 134 million (US$17.9million) of this support would be used by the states for plant protection,30X in grants and 70X in loans, during the Plan period. GOI expects that states would contribute an equal amount. These funds, including subsidies, are expected to be used partly for aerial application work. A number of states have already discontinued subsidies for pesticides and aerial applicationcosts, except when infestations must be controlledon an emergencybasis.

2.07 High yielding seeds and fertilizerhave been successfullyintro- duced in many areas of India by providing supplies, know-how and incentives to individual farmers, receptive to change. By contrast, all cultivators in a village or district must treat their fields, if pest control is to be effective. This calls for a high degree of cooperation and group organization that rarely has been achieved without government intervention. Plant protection services of GOI and the states have adequate qualified staff to provide overall information on crop pests and diseases but they do not have the manpower and equipment to forecast and effectively check infestation in all areas before epidemic proportions are reached. The exceptions are four selected districts where intensive plant protection progras- are being set up with Ford Foundation assistance (see Map). Researchand Training

2.08 Research in plant protection is coordinatedby the Indian Council of Agricultural Research and executed by the Indian Agricultural Research Institute, a number of agriculturaluniversities and other institutes (see Map). In earlier years, emphasis was on breeding pest- and disease-resistant crop varieties. Current research programs include increasinglythe study of pest and disease evolution, control measures through chemicals, their impact on the crop environment and application methods. They also include the diagnosis of crop pests and diseases and the establishment of forecast services. Some research schemes are aided by technical assistance agreements. However, there is urgent need for more research on crop louses due to pests and diseases, their impact on production and economic implications. Field officers are trained at the GOI Plant Protection Institute in Hyderabad, where courses include aspects of aerial application. Several states maintain similar training facilitiesthat concentrateon specific state problems. Legislation 2.09 The InsecticideAct of 1968 regulates the manufacture and handling of insecticides,and specifir rules to implement its provisions are presently being formulated by GOIL Iso, nearly all states have enacted laws that permit them to perform preventive and epidemic pest control measures and to collect costs from farmers through state revenue -ervices. -4-

Agricultural Chemicals

2.10 Pesticide production in Indi- started in 1952 and has grown with consumption at about 3% per year. About 30 manufacturers, with an annual capacity of 36,000 tons, are producing technical chemicals that need to be mixed with other ingredients. This is being done oy a large number of small formulators. Production has been erratic due to market conditions -- 12,000 tons in 1965/66, 19,000 tons in 1967/68 and 13,000 tons in 1968/69. Most of the local production consists of insecticides and fungicides, including or- ganochlorines of the DDT family. Marketing problems existed in the past due to absence of collaboration among manufacturers and Indian farmers not being used to large scale preventive application of pesticides. Demand has been increasing lately, however, and production in 1970/71 is expected to reach 20,000 tons. Doirastic sales prices of Indian pesticides are competitive with prices of imported products. There is no import duty on pesticides. IDA's Sixth Industrial Imports Project Credit (182-IN) includes funds for import of materials required for domestic production of pesticides. No supply constraintsin chemicals are expected during the project period.

III. AGRICULTTRALAVIATION IN INDIA

A. Scope for Aerial Application

3.01 Through aerial application,urgently needed plant protection in India can be increased in an effective and organized manner. Aerial application is a highly versatile and flexible agriculturalcustom service, applicable in any farming structure provided terrain and cropping patterns are suitable. In particular, vast numbers of small farm units can benefit from it. When properly planned, treatment can be given over larger areas more rapidly from the air than from the ground during critical pest and disease periods.e Aerial application in India will be concentrated on areas and in instances most favorable to its use (Annex 2).

3.02 Improved agricultural practices change the ecological balance and natural checks against crop pests and diseases. Year-round plant hosts for insects are provided through continued cropping made possible with increased irrigation and fertilizer use. Further, some new high yielding varieties are susceptible to previously unknown pasts and diseases. The Indian farmer must, therefore, control these pests if high yields are to be achieved. The use of agricultural chemicals provides the only currently economical solution to most Indian crop pest problems. Much attention has been focused, in India as elsewhere, on side effects of pesticides, especially of DDYIsa long life organochlorine. Use of DDT will be restricted under this project to destroying pests where shorter lived chemicals are ineffective or unavailable. Also, aerial application offers an advantage over ground application because dosages of active chemical can be calibrated more accurately and less chemical is needed. Finally, the Insecticides Act of 1968, which GOI proposes to implement rigorously, contains detailed regulations to minimize hazards from handling and use of pesticides (Annex 1). - 5 -

3.03 About 35 million acres of cropped land susceptible to pests and diseases (about 10% of the area under cultivation)would be suitable for and could benefit from aerial applicationof plant protection chemicalsone or more times each year. The 1968/69 aerial crop treatment covered only 1.5 million acres (Annex 2, Table 1). Most of the crop pests and diseases des- cribed in Annex 1 can be efficientlycontrolled by the applicationof chemicals from the air. Most states have had experience in aerial treatment and have developed workable operating arrangements that would be the basis for increased aerial plant protection (Annex 2). There is substantial scope for extended use of agricultural applicator aircraft in the field of plant protection in India.

B. The Industry

GOI Aviation Unit

3.04 The GOI Aviation Unit, established in 1957, is part of the Director- ate of Plant Protection,Quarantine and Storage under the Secretary of Agri- culture. The unit is well managed and its personnel are highly qualified. Until a private aerial agriculture industry was established, the unit did most of the earlier spraying work (Annex 2, Table 2). Plans are to hold commercial operations at current levels and increase promotional spraying and method testing. The unit recently purchased three helicopters and intends to buy a fourth, retire all of its uneconomic fixed wing aircraft and replace them with modern equipment. The unit is stationed at Safdarjung Airport, New Delhi, where it has adequate hangar and office space and repair and maintenance facilities. GOI intends to upgrade the unit to Directorate of Agri- cultural Aviation so that it would have adequate operational autonomy and broader supervisory responsibilities.

Private Operators

3.05 Private agriculturalaircraft operators entered the field in 1959. They covered 4,100 acres at first and by 1968/69 had expanded to 1.2 million acres, with 30 aircraft owned by eight companies (Annex 2, Table 1). There will be 17 companiesin 1970, including several that are in the process of formation (Annex 2, Table 3). Acquisitionsof aircraft of differentmakes have generally been under bilateral arrangements, mainly in the last two years.

Operational Bases

3.06 Most operators are presently based at New Delhi and Bombay (Map). Lack of space and accoumodation has become acute in these locations and some operators may move to other bases. The GOI does not interfere in an operator's choice of location, which is influenced by availability of technical personnel and maintenance facilities. The concentration of operators in two or three regions is not a constraint in rendering prompt aerial service to the customer. Given two days' reaction time, aircraft may be positionedin any part of India. Also, since work allocationis mainly through public tenders, there is no -6- guarantee that a locally based operator would get an assignment. Airfield facilities throughout India are fully adeqcuate to provide the necessary operating bases for an enlarged fleet and to allow decentralization of existing operations,

Repairs, Maintenance and Spare Parts

3.07 Most operators have basic repair facilities and sufficient tools to keep their fleets operating. Although slow, their shops have been able to re- build wrecked aircraft completely with imported components. There are also several large facilities that do specialized repair and overhaul work, as well as about 30 other maintenance shops throughout India. While aircraft importers maintain some stocks of spare parts for their aircraft, spare parts services need improvement.

Staffing

3.08 The shortage of qualified agricultural pilots is a major problem, becausethere is no agricultural flight training facility. Until recently, retired pilots from the defense services were available (Annex 2), but they had no formal agricultural training and only a brief introduction to field work. This contributed to complaints about the quality of the work and to accidents due to pilot error. Licensed commercial fixed wing airplane pilots are available in sufficient numbers but they lack agricultural flight and groundtraining. The shortageof helicopterpilots, however, is acute. There are presentlymore agriculturalhelicopters in the countrythan pilotsto fly them. Similarly, there is a shortage of engineers, particularly those licensed in helicopter maintenance. Statusof PrivateOperators

3.09 Most companiesare aggressivelymanaged and have demonstratedability to operate their aircraft effectively. They have formed a professional association to foster good government and customer relations. Fleet utilization has improved,despite drought in 1965 and 1966,and delayedbudgetary support by GOI and state governmentsat the beginningof 1969/70. The industryhas the capacity to achieve greater fleet utilization and the ingredients are present for further improvement and expansion. All companies are keen to expand business and have expressed interest in acquiring new aircraft and ancillary equipment.

3.10 The industry is presently operatingwith funds generated from its agriculturaland non-agriculturalbusiness or borrowed from financial insti- tions,associated companies or individuals.Needs for operatingcapital would increasegradually as operationsexpand, and operatorshave indicated that they would draw on the same sourcesfor the necessaryadditional operating funds. More detailson the industryare in Annex 2. -7-

C. Project Areas, Crops and Spraying Seasons

3.11 Crop pests and diseases occur throughoutIndia, and operators have to service demands anywhere in the country (Map). The major activity of the fleet would be the treatment of epidemics, making it difficult to define specific project areas. A major shift towards increasedpreventive treatment would be possible only after GOI and state plant protectionservices have been considerablystrengthened with qualified manpower and effectivepest forecast organizations.

3.12 The states of Tamil Nadu, Maharashtra, Gujarat, Punjab, Haryana and, to some extent, Mysore, progressedwell in employing aircraft in epidemic and preventive plant protection in past years. They also have worked out satisfactory programs and budgets for both types of aerial work, have experienced plant protection personnel, suitable legislation for the organization of aerial campaigns and cost recovery from farmers, and extensive crop and area potential for increased aerial spraying. Probably 60% to 70% of the total acreage sprayed under the project would be in these six states.

3.13 Aerial treatment has been used on many different crops. Of the total acres sprayed from the air from 1964 to 1969, about 30% were in foodgrains - mainly rice - and 12% in other fooderops; 15% were in cotton, 19% in sugarcane and 5% in rubber. The balance was in a variety of other field crops (Annex 2, Table 2). 3.14 Crops in India are attacked by pests at all seasons. However, weather sometimes inhibits aerial operation at the height of the monsoon. With increased spraying of foodcrops in south India and of cotton in Punjab and Haryana, a better distribution of aerial spraying activity is expected.

IV. THE PROJECT

A. General De8scrip tion

4.01 The proposed project is an important part of India's plant protection program included in the current Five-Year Plan (1969-74). It aims at improving and expanding aerial spraying services to Indian farmers, mainly small holders, over a 3-year period, The project includes:

(a) provision of aircraft, spare parts and ancillary equipment to qualified private aviation operators for fleet renovation, expansion and operation;

(b) establishment of a Directorate of Agricultural Aviation (DAA) by GOI and provision of new aircraft, including spare parts and ancillary equipment to it; (c) provision of training facilities and programs for agricultural pilots and aircraft engineers, including technical assistance;and

(d) promotion and organizationof aerial plant protection in Indian states and evaluationof project performance.

B. Detailed Features

Aircraft

4.02 The project would provide about 82 aircraft - 35 helicopters and 47 fixed wing aircraft, DAA would receive 8 aircraft for flight training; and 9 would replace uneconomic aircraft, 6 with DAA and 3 with private operators. The strength of the commercial fleet woXald be increased from 73 to 138 aircraft. The proposed aircraft acquisition has been linked to the expected capacity of the training center (paras. 4.06-4.07) and is in line with GOIt'sand operators' demand for new aircraft,based on their fleet expansion and renovationplans received during appraisal (Annex 2, Table 3). Aircraft financed under the project would be designed specifically for agricultural work. They would incorporate features to enhance pilot safety, provide high performance with gross loads, allow easy control during slow low-altitude flight and resist chemical corrosion. Specifications of agricultural aircraft are detailed in Annex 3.

Aircraft Spare Parts

4.03 Adequate and timely supply of spare parts would be vital for continued and economic operation of the proposed project fleet. Funds for spare parts of aircraft imported under the project would be provided as follows: 5% of CIF value at the time of importation;5% of CIF value in the year following importation;and 10% of CIF value in the year thereafter,since major routine overhauls are expected to start in the third year of aircraft operation. See also paragraph 4.20.

Vehicles and Ancillary Equipment

4.04 Personnel and equipment carrierswould be required to enhance field work at the rate of one to two vehicles per aircraft in operation. Based on this estimate, 102 jeep-type vehicles would be provided. Ancillary equipment would include safety equipment for pilots; supporting ground equipment for preparing and loading chemicalsand refueling aircraft;specialized aircraft tools; and additional agricultural aircraft equipment for crop dusting, fertilizer spreading and seeding. -9-

Training

4.05 The pilot is the key to efficient and successful aerial application. He must be experienced with his aircraft and know the maneuvers he can perform safely and the limit of the load he can carry from short, rough, tea- porary airstrips; above all, he must know his own and the aircraft's limitations when he is operating at low levels. In addition, he must be trained in crop recognition, the effect of weather on the application, the use of chemicalsand how to handlethem safely;and the layoutand organization for aerial application using markers and flagmen.

4.06 - To increase numbers of pilots and engineers in the fleet and to improve their skills and competence, a training center would be established under the proposed DAA. A classroom building would be constructed on government land at Safdarjung Airport, New Delhi. Aircraft, vehicles, ancillary equipment and training aids would be provided, as well as funds to cover training costs, including costs of staff and operational and maintenance costs of trainer aircraft. The program would gradually increase pilot numbers to three pilots per two aircraft of the fleet. Similarly, one engineer would become available for every two aircraft. When these ratios have been reached, the annual training program would be paced to provide a constant supply of trained personnel to maintain fleet efficiency at high standards and allow fleet expansion after project termination. Further details on training are given in Annex 4. Assurances have been obtained that pilot and engineer training programs would be satisfactory to IDA.

Technical Assistance

4.07 To ensure that training is carried out efficiently, two qualified internationally recruited agricultural pilot instructors would be employed for the first 12 months to set up the training center and establish curricula (para. 5.06). In addition, four pilot instructorswould receive short-term overseas training (para. 5.05). Funds for this technical assistance and for overseas trainingof instructorswould be provided under the project.

Replacement of Aircraft and Overseas Insurance

4.08 The attrition rate of aerial equipment is substantially higher than that of other agricultural power equipment. The Indian attrition rate is at presentabout 7.5 agricultural aircraft, accidentally damaged, per 10,000 flying hours needing major repairs or replacement. The attrition rate should gradually decline to 5 aircraft per 10,000 flying hours as operation and efficiency improve. Based on expected attrition rates, the equivalent of about 25 aircraft may be severely damaged during the first 3 years of project operation. This would be equivalent to an averageannual decrease of spraying capacityby 10-15%. To maintainspraying capacity at the proposedlevel, adequate provisionsmust be made for prompt replacement,in part or in total, of aerialequipment that might be damaged in possible accidents. - 10 -

4.09 GOI's aircraft are not insured and Government would replace aircraft as and when needed. Provision for the estimated replacement need has been included in the project. Similar arrangements would not be practicable for private operators and they would be required to continue to insure their equipment, with 75% of the value insured overseas. In lieu of replacement of private aircraft, the project includes the provision of foreign exchange for premiums payable for overseas insurance during the development period. Assurances have been obtained from GOI that (a) aircraft of DAA damaged or lost by accident would be promptly replaced; (b) adequate foreign exchange funds would be provided for overseas insurance of aircraft of private operators throughout the useful life of such aircraft; and (c) in the event insurance compensation is paid, GOI would issue promptly as needed the licenses for import of replacement aircraft.

Project Performance Evaluation

4.10 Aerial application of chemicals is a highly versatile and specialized agricultural custom service requiring rapid adjustment to a fast prog- ressing technology and constantly changing pest patterns. Scientific study of the impact of the project, based on sample studies in project areas, would be essential for adjustingoperations to changing conditions and for planning further development of aerial plant protection after project termination. There are several qualified research institutes and universities in India which could execute the studies. Assurances have been obtained during negotiations that the GOI would arrange for one or more qualified institutions to carry out surveys of the development of aerial application, to keep development and cost structure under review, to identify constraints, to propose improvements, and to help prepare progress reports required by the Associa- tion.

C. Cost Estimates and Financing

Cost Estimates

4.11 Total cost of the project, including contingencies,is estimated at about Rs 65.8 million (US$8.8 million), of which Rs 45.2 million (US$6.0 million) would be in foreign exchange. This does not include costs of pesticides, labor and other recurrent expenditures for aerial protection services by the GOI and the states. Project costs are summarized in the following table. For further details, see Annex 5. - 11 -

Rs(thousands) US$(thousands) X Forgn. Item Local Foreign Total Local Foreign Total Exch.

A. Aircraft 2,307 26,573 28,880 308 3,543 3,851 92

B. Vehicles and Equipment 3,006 753 3,759 400 101 501 20

C. Replacementof Air- craft and Overseas Insurance 2,095 7,971 10,066 279 1,063 1,342 79

D. Aircraft Spare Parts 159 5,315 5,474 21 709 730 97

E. Training and Studies 4,446 483 4,929 593 64 657 9

F. Working Capital Increment 6,719 - 6,719 896 - 896 -

Sub-total 18,732 41,095 59,827 2,497 5,480 7,977 69

G. Contingency (10%) 1,873 4,110 5,983 250 548 798 69

Total Project Cost 20,605 45,205 65,810 2,747 6,028 8,775 69

4.12 Cost estimates for capital items are based on average manufacturers' prices. Aircraft costs are based on CIF and local transport costs and include air freight for helicopters and sea freight for fixed wing aircraft. Costs of constructing and equipping the training center are based on actual figures for similar government facilities; costs of the training operation reflect present government pay scales and actual current costs of operation and maintenance of trainer aircraft, vehicles and other training activities. Salaries and allowances quoted for technical assistance instructors are adequate to induce qualified and experienced personnel to live and work in New Delhi. - 12 -

Financing

4.13 The project would be financed as follows: IDA Contribution Project Cost (Foreign Exchange Cost) Private Comm. Entre- Through Through Through DAA ARC Banks preneurs Total DAA ARC GOI Total -- R- :T0…Rs'000 ------DAA: Aircraft 4,660 - - 4,660 4,632 - 4,632 Vehicles and Equip- ment 436 - - 436 157 - 157 Sub-total 5,096 - - 5,096 4,789 - 4,789 Provision for Aircraft Replacement1,725 - - 1,725 1,715 - 1,715 Training and Studies 4,929 - - 4,929 483 - 483 Total 11,750 - - - 11,750 6,987 - 6,987 Private Operators: Aircraft - 21,941 2,279 - 24,220 - 21,941 21,941 Vehicles and Equip- ment - 596 2,727 - 3,323 - 596 596 Working Cap- ital Incre- ment - - 2506 4,213 6,719 - _ - - Sub-total - 22,537 7,512 4,213 34,262 - 22,537 - 22,537 Provision for Aircraft Insurance - - - 8,341 8,341 - - 6,256 6,256 Total - 22,537 7,512 12,554 42,603 - 22,537 6,256 28,793 Aircraft Dealers: Aircraft Spare Parts - - - 5,474 5,474 - - 5,315 5,315 Contingency 1,175 2,254 751 1,803 5,983 699 2,254 1,157 4,110 Grand Total 128 65,810 7 686 24,791 12,728 Grand Total in US$'000 1,723 1102 2644 8775 1025 3306 697 6,028 Percentage of Project Cost 20 38 12 30 100 12 38 19 69 Percentage of IDA Credit - - - - 17 55 28 100 - 13 -

The IDA credit of US$6.0 million (Rs 45.2 million) would cover the total foreign exchange cost of the project, estimated at 69% of total project cost of about US$8.8 million (Rs 65.8 million). The credit would be made to GOI, which would assume the foreign exchange risk.

4.14 GOI would re-lend US$3.3 million (Rs 24.8 million) of the IDA credit to the AgriculturalRefinance Corporation (ARC) at the current lending rate of 5-1/2% interest per annum and at the official rate of exchange for 11 years, including a 4 year grace period (see projected cash flow, Annex 7, Table 3). ARC would on-lend these funds at an interest rate of 7% to the commercial banks which, in turn, would make the individual loans to private operators. Commercial banks would supplement the ARC funds from their own resources to cover loan commitments. The current commercial banks' lending rates are 8-1/2 to 9-1/2%.

4.15 Of the rest of proceeds of the IDA credit, DAA would use US$1.0 million (Rs 7.7 million) to finance the foreign exchange component of its aircraft and the training program. Assurances have been obtained from GOI that these funds would be made available to DAA during the project period and that in addition adequate GOI funds would be provided for training.

4.16 The remainderof the IDA credit (US$1.7 million) would cover the foreign exchange costs of spare parts to be stocked by dealers and the premiums for overseas insurance payable by private operators (see para. 4.09). This portion of the IDA Credit would not be on-lent to ARC. It would remain with GOI and help to defray the initial cost of preparing and implementing spraying programs (see para. 5.12).

4.17 Phasing of project expenditureswould be as follows (Annex 5, Appendix A):

Year 1 Year 2 Year 3 Total - - - - - Rupees (thousands) - - - - -

Local Cost 5,407 7,849 7,350 20,606 Foreign Exchange Cost (IDA Contribution) 8,451 15,965 20,788 45,204

Total 13,858 23,814 28 138 65,810

------US$ (thousands)------

Local Cost 721 1,046 980 2,747 Foreign Exchange Cost (IDA Contribution) 1,127 2,129 2,772 6,028

Total 1 848 3 175 3,752 8 775 - 14 -

D. Procurement

4.18 Agriculturalapplicator aircraft, presently not produced in India, would be imported, completewith spraying equipment. The internationalmar- ket for these goods is highly competitive. Two helicopter and eight fixed wing aircraft makes from four Bank group member countries (Federal Republic of Germany, New Zealand, United States of America, Yugoslavia)have well established dealerships in India and others have made arrangements to demon- strate their aircraft with the intention to enter the market. Local competition among establishedimporters is satisfactoryand should increase further as newcomers establish dealerships. As for most agriculturalcredit type projects, procurementof aircraft under internationalcompetitive bid- ding would not be suitable because of the difficulty of centralizingand standardizing requirements of private operators. Normal trade channels are expected to meet effectivelyindividual private operators' preferences for makes that have been proved satisfactoryunder Indian conditions and which pilots and engineersknow how to operate and service.

4.19 Aircraft procurementwould be based on GOI's and operators' demands for makes and models made available by suppliers prequalified by DAA. Pre- qualification would be based on proposals obtained through public advertise- ment, including aircraft specifications (Annex 3), spare parts, after-sales service, and shipping arrangements. After approval of subloans, ARC would request GOI to issue import licenses to private operators, who would be responsiblefor the importationof aircraft. Aircraft purchases by DAA would be the responsibilityof a procurement committee,including representatives of the Ministries of Finance and Agriculture and the Directorate of Civil Aviation and Supplies and Disposals. Assurances have been obtained from GOI that procurementof aircraft would be as set out in this paragraph.

4.20 Aircraft suppliers under the project would be required to organize spare parts inventories,either in or out of bonds, proportionateto the number of project aircraft in service. On recommendationof the DAA, suppliers would be issued import licenses. Dealers and makers would be responsible for timely importation, and finance would be through dealers' funds or commercial bank credit. Imported spare parts would be supplied to project par- ticipants, and sales and inventories would be checked regularly by DAA.

4.21 Imported ancillary equipment would be procured through existing channels. Overseas suppliers are well established in India, ensuring a satisfactory degree of international competition through local procurement.

4.22 On previous importations financed by bilateral aid in India, procurement of aircraft, aircraft spare parts and ancillary equipment was subject to delays because GOI failed to issue promptly necessary import licenses. Requests for items to be importedwere submitted to lengthy and repeated examinations to determine if such items could be manufactured in India. As- surances have been obtained during negotiations that import licenses for aircraft, aircraft spare parts and ancillary equipment would be issued on re- commendation of ARC, for private operators' requirements; of the government procurement committee for DAA requirements; or of DAA for spare parts. - 15 -

E. Disbursement

4.23 Proceeds of the IDA credit of US$6.0 million (Rs 45.2 million) would be disbursed on the evidence of supportingdocuments, showing the CIF cost of imported aircraft, aircraft spare parts and ancillary equipment at the port of entry. Disbursementsfor foreign exchange costs of training, aircraft replacement for DAA and overseas insurance premiums would be made against certified statements of foreign exchange expenditures and supported by bills and evidence of payment thereof. ARC disbursements, through comr mercial banks, to private operators would be made over 3 years. Allowing for possible delays, IDA disbursements for the project is expected to cover 3-1/4 years. Quarterly disbursement estimates are in Annex 6.

V. ORGANIZATIONAND MANAGEMENT

A. Project Management and Training

Directorate of Agricultural Aviation

5.01 The GOI proposes to set up a separate Directorate of Agricultural Aviation (DAA), which would take over staff, equipment and ground facilities of the GOI aviation unit (para. 3.04). The Director of DAAwould report to the Secretary of Agriculture, GOI. The objectives and responsibilities of DAA would be: control of locust invasions,aerial spraying demonstrations, testing and improvementof aerial equipment and work, advice to government and the industry, coordination of aerial programs and supervision of the industry. To the extent that its other obligations permit, DAAwould also engage in commercial plant protection in areas neglected by the private sector under terms similar to those obtained for private operators (para. 5.17). New responsibilities of DAAunder the project would be to train pilots and engineers, arrange pre-qualification of aircraft suppliers, and provide con- sulting services to ARC for the technical and operational appraisal and supervision of private operators participating in the lending program (para. 4.14). The signing of the credit documents would be subject to GOI setting up the proposed DAA.

Training Center

5.02 A Training Center (TC) would be established within DAA to organize and manage training courses in agricultural aviation for pilots and engineers and refresher courses for both (Annexes 4 and 8). The head of TC would be the Deputy Director of Agricultural Aviation (DDAA), appointed by the Sec- retary of Agriculture. Coordination of activities between TC and other departments,directorates, the Director General of Civil Aviation 1/, ARC and the industry would be through the Director of DAA.

1/ He is the licensing authority for civil aviation personnel and aircraft, and supervisor of flight activities and administratorof ground facilities. - 16 -

Staff

5.03 Tne Government intends to fill key positions in TC with experienced personnel of GOI's aviation unit or retired flight personnel of the services. The DDAA would be a qualified instructor pilot, preferably with rotary and fixed wing aircraft licenses,who has had operational and administrativeex- perience in agricultural work and a good knowledge of problems and techniques of plant protection. Under the authority of the Director of DAA, he would have full responsibility for training and would assist DAA in executing new project responsibilities(para. 5.01). The effectiveness of the credit would be subject to GOI appointing the Director of DAA and a Deputy Director of DAA in charge of training satisfactory to the Association.

5.04 The chief flight instructor would have qualifications similar to the DDAAand his major responsibility would be the organization and supervision of flight training. The chief ground instructor,preferably an ex- pilot of the agricultural fleet, would be experienced in teaching aviation- oriented ground subjects and would Plan and execute courses. Finally, the chief engineer instructor would be a qualified and licensed aviation engineer, experienced in teaching pilots and engineers and inspecting and overseeing the field maintenance and complete overhaul of rotary and fixed wing applicators and their agricultural accessories.

5.05 Further, seven flight instructors, one engineer and one agriculture ground instructor would assist the chief instructors and have similar qualifications. Four flight instructors would be given short-term overseas training in agricultural aviation in accordance with training programs agreed upon between GOI and IDA. The agriculture ground instructor would be a graduate in agricultural sciences, specialized in plant protection and qualified in teaching. Other staff, such as aviation engineers and aircraft maintenance and other personnel,would be availablein sufficient numbers. Assurances have been obtained during negotiationsthat overseas training programs of flight instructorswould be satisfactoryto IDA.

Technical Assistance

5.06 The TC would be assisted initially by two internationally recruited instructor pilots (para. 4.07), who would provide the requisite expertise in establishing agricultural flight courses and help to improve the proficiency of TC's flight instructors. They would report to the DDAA. One would be specialized in helicopter and the other in fixed wing pilot training and both would have extensive experience in agricultural flying. Assurances have been obtained during negotiations that qualifications of technical assistance personnel and conditions of their employment would be satisfactory to IDA. - 17 -

B. Lending Channels and Procedures

AgriculturalRefinance Corporation

5.07 The ARC (Annex 7) would be the refinancinginstitution of commercial banks and would have overall responsibilityfor financialappraisal and supervision standards for subloans, and the administration,disbursement and recovery of IDA funds under the lending program to private operators (para. 4.14). ARC has recently increased its staff and would be capable of handling the re- financing operation. Assurances have been obtained during negotiations that a qualified senior officer within ARC would be entrusted with the responsibility for the lending program throughout its life.

Commercial Banks

5.08 Commercial banks would be the primary lending agencies for private operators. They would assume the default risk and would be responsible for financial assessment and security arrangements for loans to private operators. As for past aircraft loans, operators would have to mortgage the aircraft and assign aircraft insurance policies. Commercial banks would supervise subloans and would report to ARC and DAA any measures they propose against possible defaulters.

On-Lending Policies and Procedures

5.09 Each subloan would be individually appraised and the appraisal pro- cedure would involve ARC, DAA and commercial banks. Loan applications received from private operators by commercial banks would be assessed by them and for- warded to ARC and DAA for review and approval. Assurances have been obtained during negotiations that ARC, assisted by DAA for technical and operational assessments,would work out and implement appropriateappraisal methods and arrangements for supervision of subborrowers (Annex 9).

5.10 Interest rates under the project would be 5-1/2% GOI to ARC, the current government rate for on-lending to commercial banks; 7% ARC to commercial banks; and about 8-1/2% to 9-1/2% commercial banks to private operators, the current rates chargedby banks on aircraft loans. Terms of subloans would be fixed in accordancewith operators' repaymentability. Anticipated loan terms may range from 7 to 9 years, on average 8 years, including a grace period of 4 years (Annex 10, Appendixes A to D).

C. Operating Arrangements

Aerial Spraying Programs

5.11 Aerial applicationof chemicals for pest and disease control in crops would be the major anticipated work under the project. Other agricultural work which is presently being tested is likely to increase and may include some application of solid and liquid fertilizer. Occasional mosquito control by health authorities could be an additional activity of commercial - 18 - aircraft. As indicated in paragraph 3.12, a major portion of the aerial spraying planned under the project is expected to be in the states of Tamil Nadu, Mysore, Maharashtra,Gujarat, Haryana and Punjab. To attain satisfactory fleet utilization,annual aerial plant protection programs and budgetary provisionswould be necessary for those states.

5.12 These annual programswould specify crops, acreage, districts, seasons, availabilityof state funds, financial support from GOI, subsidy policies, legal implications,organization of cost recovery from farmers and res- ponsibilitiesof the industry. GOI has submitted to IDA satisfactoryspray- ing programs in the above-namedstates for the first project year. These would be models for planning aerial spraying programs in subsequent years. Assurances have been obtained during negotiationsthat GOI would continue to assist states in drawing up annual spraying programs, and that GOI would use its best efforts to ensure that all funds required for the effective implementationof such programs would be made available.

Execution of Aerial Spraying

5.13 Based on a state's annual aerial spraying program, the state department of agriculture would assist local authorities in preparing detailed spraying schedules for districts or similar administrative units. It would bulk sprayorders and call for proposals and cost quotations from private operators through public tender. Based on these bids, the department would negotiate spraying contracts with individual operators. Commercial spraying by government aircraft would be arranged through direct negotiation with clients. A satisfactory model agreement, laying down conditions for spraying work, responsibilities of operators and customers, mode of payment and possible penal- ties has been prepared by GOI and would be used under the project. The spraying agreement with operators would be between the state department of agriculture on behalf of all interested local authorities, or directly between oper-. ators and local bodies, growers' cooperatives or other contracting parties.

5.14 Since large areas of crops are necessary to justify aerial application, local authorities must group contiguous landowners together to form spraying units. Generally, operations are organized around village panchayats (village councils). The panchayats forward resolutions and requirements to panchayat unions (at district level) which request that the Department of Agriculture contract with aerial operators on behalf of the panchayats re- questing the service.

5.15 Responsibilities of state and local authorities would include the provision of field landing strips and helicopter pads; detailed field maps; qualified supervising personnel, flagmen and loaders; chemicals and diluents at loading sites; specification of acre application dosages of chemicals according to crop and pest; and payment of operators upon satisfactory com- pletion of the contracted work. Operators would be responsible for providing aircraft, including spraying and loading equipment, fuel and lubricants, and qualified pilots and field maintenance services at the times and locations laid down in spraying agreements. - 19 -

Acre Rates and Cost Recovery

5.16 Rates of aerial application per acre for farmers' crops are currently set by GOI at Rs 10 per acre for helicopter work and Rs 8 per acre for fixed wing aircraft work. They have been based on 1967/68 costs and prices of equipment, spare parts, aircraft insurance and operation, and other costs in con- sultation with the industry. They are at present profitable to operators. However, to assure viability of fleet operation, aerial applicationrates would need continued adjustment to changing costs and prices. Assurances have been obtained during negotiations that maximum rates of aerial application set by GOI for comuercialspraying of farmers' crops would be reviewed in consultationwith the industry, and, as necessary, adjusted from time to time.

5.17 Presently, the GOI aviation unit charges acre rates that are below the rates set by GOI. These do not reflect actual spraying costs. Assurances have, therefore,been obtained during negotiationsthat in future, all government rates for aerial work would be no less than those set for private operators.

5.18 Under state plant protection or land improvement legislation,costs of aerial spraying can be recovered from farmers through state revenue services (para. 2.09). In some regions, and for crops such as cotton and sugarcane, it is possible to collect from farmers in advance of spraying, or through cooperativeservices thereafter. Costs should include chemical costs, spraying costs, interest of funds advanced by state or local authorities and costs for landing strip constructionand ground services. Assurances have been obtained during negotiationsthat GOI would ensure that, except for cases where subsidy is required to encourgage farmers' participation,acre rates charged to farmers for commercial services would reflect the full costs of aerial spraying services.

D. Accounts and Audit

Accounts and Records

5.19 DAM would maintain up-to-date records for the project. Its own operations under the project would be budgeted and recorded separately so as to be easily identifiable. Details of ARC's operations under the project would also be recorded separately and subsidiary accounts and statements would give the position of participatingcommercial banks as well as interest, commissionsand direct expenses paid, or earned, under the project. Partici- pating commercial banks would maintain appropriate accounts showing the status of subloans. - 20 -

Audit

5.20 Accounts of DAA would be certifiedby the Accountant General of GOI. This would permit adequate control of DAA's operations. Assurances to this effect have been obtained during negotiations.

5.21 ARC is liable to control by the Comptrollerand Auditor General of India, who may examine its accounts. Further, ARC is under the constant supervision of the Reserve Bank of India and also employs qualified chartered accountants,presently Messrs. K. S. Ayiar and Co., Bombay, who would be satisfactoryto the Association. Assurances have been obtained during negotiations that ARC's independentauditors would audit and certify accounts and statements of the project.

5.22 Audit of comercial banks by independent auditors is compulsory under the new Bank Companies Act, 1969, and commercial banks would have to furnish ARC with audited statements of operations under the project annually. Private operatorswould furnish their financial institutionswith an audited statement showing a complete inventory of aircraft, equipment and spares, indicating their book value and estimated market value and making a distinction between goods financed under the project and others. Assurances have been obtained from ARC that subsidiary loan agreements would include covenants requiring cormercial banks and private operators to maintain appropriate project accounts, which would be audited and certified by independent auditors.

VI. PRODUCTION,PRICES AND OPERATINGRETURNS

A. Production and Prices

Acreage

6.01 The proposed project would increase the annual gross area treated by aerial methods from 1.5 to 6.3 million acres (1.8% of India's total cropped area) as follows:

Year 5 Aircraft 1968/69 Year 1 Year 2 Year 3 Year 4 and later --- Acres (millions) ------

Rotary - 1.4 1.8 2.5 3.0 3.2

Fixed Wing - 1.4 1.8 2.4 2.9 3.1

Total 1.5 2.8 3.6 4.9 5.9 6.3 M_wx _ ~ ======

Incremental acreage would result from increased numbers of aircraft; increased annual spraying hours per aircraft and acres sprayed per hour through improved training of pilots, aircraft engineers and field officers, better organization and management; and improved market promotion. Assumptions of fleet growth and efficiency are discussed in Annexes 3, 10 and 11. - 21 -

Farm Production

6.02 Expected incremental crop yields due to aerial plant protection were based on response data of traditional crop varieties to ground treatment. These were adjusted to reflect greater effectiveness of aerial over ground treatment due to more even application of chemicals, better timing of pest control and coverage of large contiguous areas checking re-infestation, and, greater yield response of high yielding seeds to plant protection. Yield estimates are conservativeand are detailed in Annex 11. Increased acreage sprayed from the air would involve: foodcrops about 55% (rice, 30%; wheat, 7%; sorghum, 8%; groundnut, 10%); fibrecrops,mainly cotton, 25%; sugarcane, 14%; and other crops, 6% (potato, 1% and rubber, 5%).

Prices

6.03 Commodity prices in farm models are based on prevailing Indian averages. Prices for economic evaluation are current CIF values, held constant throughout project life. Details on commodityprice assumptions are in Annexes 11 and 12. Cost of aerial applicationin returns to aircraft operators and farmers are current rates set by GOI (para. 5.16). Based on prevailing chemical prices and recommendedfield dosages, an average chemical cost of Rs 10 per acre has been used.

B. Farm Benefits

6.04 Expected benefits to farmers are based on farm models comparing aerial plant protection with no plant protection and with plant protection by ground methods (Annex 12). These models take into account costs of aerial application of chemicals, harvesting, storing and handling additional farm output, and cost savings from replacing ground treatment. As shown below, the expected returns to farmers would be substantial and would therefore provide sufficient incentive for use of aerial plant protection services.

Aerial Treatment Aerial Treatment Over No Treatment Instead of Ground Treatment South North South North India India India India (5-acre (10-acre (5-acre (10-acre farm) farm) farm) farm) - …------Rupees ------… - - - - - Increments in: Gross Revenue 1,430 1,966 339 473 Cost 414 605 31 43 Net Profit 1,016 1 361 308 430 Net Profit per Acre 1/ 71 22 22 22 Ratio of Incremental Profit to Aerial Spraying Cost 3.7 3.3 1.1 1.1

1/ Due to multiple applications for some crops, like paddy and cotton, the effective number of acres sprayed per farm would be: 14.25 acres for the 5-acre farm and 21.50 acres for the 10-acre farm. - 22 -

C. Returns to Aircraft Operators

6.05 Existing and new firms of aircraft operatorswould participate in the project. To determine incentives to existing operators, the return on investment in one additional aircraft has been estimated. For a helicopter or for a fixed wing aircraft, the rate of return would exceed 26%. Total annual work hours per aircraft are most likely to fluctuate. Cuttingwork hours by 5%, 10% and 20% would reduce the rate of return from over 26% to 23%, 20% and 17%, respectively. Details of rates of return and break-even analysis appear in Annex 10. These returns explain the interest shown by existing firms in the project.

6.06 To estimate the financial viability of new firms, two models were used, representing the range of expected sizes of such firms under the project: a firm owning three helicopters and three fixed wing aircraft and a firm with five of each type of aircraft. Rates of return on total assets would be: 12.2% for the 6-aircraft firm and 18.4% for the 10-aircraft model. Assuming that all fixed assets are financed from equal amounts of equity capital and long term debt, returns on owners' equity would be around 16% for the small firm and 29% for the large firm. Average returns are satisfactoryand should encourage continued growth of the industry. Details of assumed operations, projected balance sheets, statements of income and sources and application of funds are in Annex 10.

D. Government Revenue Generation

6.07 The project would generate import duty revenues of about Rs 2.6 million in the project development period. Aircraft operators would contribute over Rs 20 million incremental revenues in income tax to GOI over the project's life. Sales taxes on aero-gasolinewould gradually increase revenue to about Rs 0.35 million per year at full development.

VII. BENEFITS AND JUSTIFICATION

7.01 Major project benefits would arise from higher crop yields on farms receiving aerial plant protection. Farms receiving aerial treatmentwere compared to farms receiving no plant protection and those receiving plant protection by ground application. The expected economic rate of return of the project would exceed 100% (Annex 11). If only half of expected benefits should materialize due to incremental yields falling short of expectations or acreage treated shifting to low benefit crops, the economic rate of return would still be about 44%. The use of aerial pest control protects farmers' investments against crop losses and leads to better utilization of complementary inputs such as improved seeds, fertilizer, water and others. The com- bination of relatively low cost aerial pest control with existing farmers' investments underlies the high rate of return on project investments. - 23 -

7.02 The project would strengthen an essential component of India's new agricultural strategy aiming at rapid technological change in rural areas. With the possibilityof treating large contiguousareas simultaneously,the establishmentof effective aerial spraying services under the project is likely to yield substantialbenefits to small and large farmers alike. With- in the agriculturalaviation industry, the project would give employment to different groups of skilled, semi-skilledand unskilledworkers, and provide valuable training and professionalexperience to operators, pilots, maintenance engineers and field officers for further expansion of the industry after project termination.

7.03 Most of the crops benefited are now being imported. Assuming that half of incremental output generated by the project would have to be imported without the project, India's gross foreign exchange savings would be at least US$1.3 million annually at full development. The project would play an important role in the country's overall program of achieving self-sufficiency in foodgrains and other field crops and make a major contribution to India's agricultural economy.

VIII. RECOMMENDATIONS

8.01 The project would be an important part of India's plant protection program, aimed at strengthening and expanding aerial spraying services to small farmers. The project is technically feasible. The financial rates of return to private operators and farm benefits indicate that the project is financially attractive. The economic rates of return are satisfactory.

8.02 Agreementswere reached with the Government on the following principal points during negotiations:

(a) adequate foreign exchange funds would be provided for overseas insurance of aircraft of private operators throughout the useful life of such aircraft; and in the event compensationis paid, GOI would issue promptly as needed the licenses for import of replacementaircraft (para. 4.09);

(b) satisfactoryarrangements would be made to carry out performance studies of the project (para. 4.10);

(c) two internationallyrecruited flight instructorswould be employed to assist initially the training program; and their qualificationsand conditions of employment would be satisfactoryto IDA (para. 5.06);

(d) continued assistancewould be given by GOI to state governmentsto prepare annual spraying programs; and GOI would use its best efforts to ensure that all funds required for the effective implementationof such programs be made available (para. 5.12); - 24 -

(e) acre rates charged by government aircraft to clients for commercial application would be no less than 4hose set for private operators (para. 5.17); and costs of commercial aerial services to farmers would be based on the full cost of application, except for cases where subsidy is required to encourage farmers' participation (para. 5.18).

8.03 The signing of the credit documentswould be subject to GOI setting up the proposed DAA (para. 5.01).

8.04 In addition to the customary provisions for effectivenessof the IDA credit, the appointmentof the Director of DAA and a Deputy Director of DAA (para. 5.03), both satisfactory to IDA, would also be conditions of effectiveness.

8.05 With the assurances obtained, the project would be suitable for an IDA credit of US$6.0 million.

October 7, 1970 ANNEX 1

rIDIA

AGRICULTURALAVIATION PROJECT

Plant Protection in India

Introduction

1. The recent breakthrough in food production in India has been possible because of the introduction of high yielding crop varieties and associated technology. More and more farmers are adopting these varieties and new cultural practices, and more fertilizers and water are used to exploit the high yield potential. When more fertilizer and water are given to a higher plant population, there is always a danger of more intense attacks by diseases and pests. tJWhenattempts are made to increase food production, there is a tendency to cultivate only new varieties, sometimes only a single one, over large contiguous areas. This poses the danger of sudden outbreaks of epidemics of diseases and pests. This annex high- lights the crop disease and pest problems in India in the context of the new technology.

Use of Agricultural Chemicals

2. By shifting to high yielding varieties of rice, wheat, corn, cotton and other crops an unnatural, but necessary, situation has been created on Indian farms. Cultivation of improved crops on large scale provides favorable conditions for insects and plant diseases. The increase in pests and diseases that follows could lose the struggle for increased agriculturalproduction. It is, therefore,necessary to control insects and diseases to keep the ecologicalmechanism working in favor of the farmer. For most pest problems, the use of chemicalsprovides the only currently economic solution to help India become more self-reliant in agricultural production.

3. The use of pesticideshas always presented problems. Their use creates two types of hazards (a) safety in handling and (b) long life residues which build up in animal and human tissue. Indian workers are aware of the first problem and dangers of spillage and skin contacts are minimized, by continuing training and information programs. The second problem must be met by selecting pesticides that have no long residual effects. DDT, a long life chemicalwould be used relatively little. BHC, dieldrin, aldrin, endrin, carbaryl, malathion and parathion would predom- inate. DDT would be used only for those crops where other shorter lived chemicals are ineffective or unavailable. GOI through the enforcement of the Insecticide Act, 1968 attempts to minimize hazards from both the handling and long-range use of pesticides, (see page 7). ANNEX1 Page 2

Pest and Diseases in High Yielding Varieties

4. In July, the GOI issued a special stamp comemorating the wheat revolution in the coumtry. The production of wheat went from 11.4 million tons in 1966 and 12.3 million tons in 1964/65, the earlier year of record production, to 16,6 million tons. This meant almost a 50% increase over 1966 totals and 33% over the 1964/65 record production. Much of this achievement has been attributed to the cultivation of new high yielding wheat varieties.

5. Breeders did their best to breed pest and disease resistant and tolerant strains, Nevertheless, all newi wheat varieties have disease and pest problems. The first two high yielding wheat varieties, introduced into India from IMIexicoin 1964, showed susceptibilityto loose smut by 1966. At some locations,more than 30% of loose smut was recorded in farmers fields decreasing crop yield. Consequently, the two initial varieties had to be replaced by other varieties, claimed to be disease resistant, especiallyto rust, However, by 1968, it became clear that, in certain regions, these were susceptibleto brown rust and black stem rust. These new varieties are being planted more and more each year, likely to contributeto a rust epidemic or some other disease outbreak. Another factor, likely to contributeto increased crop diseases is the delayed planting date of high yielding wheat varieties. Crops planted in October often escape infection, but the new varieties planted in the middle of November and onwards may be quite vulnerable.

6. Further, the lush growth of high yielding varieties attracts more insect pests. Thrips has become a threat to high yielding wheats, which if infested in early stages, are set back in growth. If no controlmeasures are adopted, yield losses could be serious, Other pests that attack new varieties are the cutworm, climbing cutworm and the shoot fly.

7. Rice is the most important fooderop of India and is a staple of more than half the population. The crop is groun extensively and covers about 84 million ac, According to an estimate in 1968/69, 8.5 million ac were in high-yieldingvarieties of rice, and by 1973/74, the area should increase to about 25 million ac.

8. The era of high yielding rice varieties began in India with the introduction of Taichung Native-l. The variety caught attention of the farmers because of high yields which were two to three times over the tall local types. This strain was soon followed by another high yielding variety, IR-8. In July 1966, a half ton of IR-8 was airfreightedfrom the Phillipines for seed increase, and one year later, India had 25O,OOO ac planted with this variety.

9. The major disease problem the Taichung Native-l faced was the bacterialblight. It is known to cause yield reductions of 20 to 30% after moderate infections and over 30% after severe ones. Bacterialblight was never widespread until Taichung Native-l was introduced in most of the AlSEX 1 Page 3

rice-growing states, Now the disease has become endemic all over the rice-growing areas of the country 0 A correlation, however, has already been established--the higher the nitrogen application, which is necessary to get more yields, the greater the susceptibility to bacterial blight.

10. IR-8 has withstood bactelial blight better than Taichung Native- le Though the incidence is fairly commonpit is much less severe than on Taichung Native-iL False smut has also been reported on IR-8. But the disease affecting IR-8 most, particularly in north India, is brown spot. *hiile IR-8 gives high yields, withstands other diseases like blast and, to some extent bacterial blight, it is quite susceptible to brown spot.

11. Viral diseases of rice also have to be watched carefully. Yellow dwarf has been observed in south India, Out of the three leafhopper species that are vectors of yellow dwarf, two are conmonly found. Another viral disease, tungro, has been observedat some locations. The leafhopperthat transmits tungro virus is commonin most parts of India. With susceptible varieties like Taichung Native-1 and IR-8 available, it would not be surprising if tungro occurred increasingly. 12. Taichung lNative-1 and IR-8, while moderately tolerant to stem borers, are susceptible to the rice gall midge and leafhoppers. A disease and insect survey was conducted in 1967 and revealed that IR-8 and Taichung Native-i were more heavily infested than vere local varieties. Infesta- tionswere severeenough in severalfields to causeup to 80% yield reductions, The pest was found in almostall the southand southeasternIndian states. The surveyteam also found white-blackplanthoppers and brown planthoppers to be more numerous than others, Agains lush vegetative growth of the new varieties as a result of heavy application of fertilizers has been considered conducive to the buildup of leafhoppers.

13. In 1954, G00 invited the Rockefeller Foundation to survey India to determine the potential for corn and to suggest a research program in corn improvem.ent. In 1957, a coordinated corn breeding program was initiated on a national scale 'bythe Indian Council of Agricultural Research, in cooperationwith variousstate governmentsand the Rockefeller Foundation. As a result of the work done, four hybrids were released in 1961. Subse- quently other high-yielding hybrids were also released. By 1964, the hybrids star-ted catching the attention of progressive farmers. According to estimates,more than 2e5 million ac have already been planted to hybrid corn and the area is expected to increase to about 5 million ac by 1974.

14. However, in addition to problems relating to agronomic practices, plant diseases have posed a threat to the spread of maize, particularly in north India. Since 1962, a disease characterized by severe leaf strip- ing has been observed in several corn growing areas. Brown stripe has sincebeen recognizedas a major diseaseproblem. Thoughattempts to breed resistanthybrids are continuing,none of the releasedones are highlyresistant, though some are tolerant. Corn hybridsand composites have theirpest problemstoo. The sorghumshoot fly has been foundto be ANNEX 1 Page .4

a new pest to all varieties of corn. Two others that have assumed importance are the stalk borer and the pink borer.

15, Sorghum is an important cereal crop in India, covering an area of about 46.5 million ac. The first hybrid,0 CHS-l-was developed and released in 1964 by the Coordinated Hybrid Sorghum Scheme in collaboration with the Rockefeller Foundation. This hybrid not only has a high yielding potential, but also produces grain of acceptable quality. Average yields of 2,000 lb per acre without irrigation and 4,000 lb per acre with irrigation are conmon. Under best agronomic practices, a yield of 6,000 lb can be obtained. Another hybrid, CHS-2,a long-duration type, was later released for late rainfall areas. 16. Sorghumhybrids have been highlysusceptible to sugarydisease which assumedimportance only after the releaseof thesehybrids. Another diseasesnot reportedearlier, became important in 1968. This is a leaf spot causedby a fungus,that has been a seriousproblem in Nqigeria, Both the hybrids are susceptible to pests which were consideredminor earlier, the shoot (stem) fly, earhead webbing caterpillar and gall midge. Government Policies

17. It should be evident that, in cultivated crops the disease and pest situation in relation to high-yielding varieties has already become serious, whereas in others there exists a real potential danger of heavy losses. In some cases, varieties have beenfound to be highly susceptible to hitherto unimportant diseases and pests. Since there is a tendency to grow those few varieties of crops that find general acceptability in large contiguous areas, the danger of disease and pest epidemics is a real one. It is therefore essential to plan the steps to be undertaken to meet the present situation and to ensure continued gains in food production.

18. Until recently, plant protection was not considered as important in India as agronomy and breeding. This attitude came from the notion that resistant varieties for all the major diseases and pests could be bred and improvements and alterations in cultivation practices could reduce their incidence.This notionis disappearingand there is developinga much betterrealization of the importanceof plant protectionand a deeper appreciationfor crop protectionmeasures by chemicals.

19. Among the stepsbeing taken is the initiationof a programfor expanded plant protection under the current Development Plan (1969-1974). In the last year of the Plan, it is proposed that about one half of the croppedarea will be coveredby various plant protection measures, such as seed treatment,ground and aerialpest and disease control of field crops and antirodentmeasures. Intensiveor preventivepest treatmentthat would involvemore than one applicationper cropand per seasonis foreseen for all areasunder the high-yielding crop varieties program and for plantation and commercial crops. The respective targets under the Plan are summarized in the following table: ANNEX1 Page 5

Treatment 1969/70 1970/71 1971/72 1972/73 1973/74 ------acres millions)o- ---

Seed treatment 50 62 7 86 99 Rat control 20 25 30 35 40 Generalpests 15 20 25 25 30 Intensive application 83 99 114 133 148 20, To support the targets for increased plant protection the GOI has introduced at the beginning of 1970 a subsidy scheme for areas declared endemic. It will pay Rs 7 towards operational aerial spraying charges. Ex- pected coverage for 1970/71under the schemeis 1.6 millionacres out of a total expected coverage of 4.0 million acres. The remaining 2.4 million acreswould be sprayedunder statesponsored schemes.

21. It is not possibleto determinethe budgetallocations for state sponsoredaerial spraying under the currentPlan becauseat the same time that GOI introduced the subsidy for endemic spraying, it abolished the specific subsidy for state sponsored spraying. State governments receive now bulk allocations (70% loan, 30% grant) earmarked for the agricultural sector and it is up to them to allocate these funds between all their agricultural programs. The amount of subsidy given in the past to farmers for plant protection, including aerial spraying, varied.widely from state to state and ranged from 50% of spraying costs to nothing. GovernmentOrganization 22. GO1s plant protection policies and programs are implemented through the Directorate of Plant Protection, Plant Quarantine and Storage. The Directorate staff totals 760. There is a field station in each state, manned by a Plant Protection Officer and a small staff. The primary function of the field stations is to run a survey and warning system to keep GOI informed about the current pest and disease situation and to coordinate state and union government efforts in arresting any potentially serious infestation before epidemic proportions are reached. The plant protection field officers provide support to the G0I'sagricultural aviation unit when it is operating in their area. The Directorate also runs 15 plant quarantine stations located at points of entry to India and 52 locust control outposts. 23. The plant protection organizations in the states are headedby a state Plant Protection Officer (PPO), who reports to the Director of Agriculture. The PPOs have staffs that include entomologists in different crops and pests* The state organizations often draw on research work being done by entomologists in agricultural universities.At districtand block levels,plant protection work is carriedout by districtPPOs, agricultural extensionofficers, block development officers and villagefieldmen. The stateplant protection programs provide advice and assistance in a number of activities,including seed treatmentto preventdisease, control of rats A1\NEX1 Page 6

and other rodents, and control of soil insects and plant disease on the ground and from the air. IMIoststates have plans to further build up these services, It is intended to phase out subsidiesby 1974. However, states realize that initial subsidy of aerial spraying is essential to introduce this modern method of applying pesticides among farmers.

Research and Training

24. Besides strengthening the breeding program of pest- and disease- resistant crop varieties, there is an urgent need for extended research in plant protection and development of forecasting services. This wjork should be directed toward solving field problems. The recent establishment of eight agricultural universities in India, oriented to practical agriculture has been a step towards intensifying practical research on disease and pest control. However, these institutions do not have enough qualified scientists and they lack funds for performing adequate crop pest and disease research and teaching. Because present research is concentrated mainly on solving the technical problems of plant protection, little information on crop losses has been gathered. Appraisal of plant pest and disease losses and their impact on agricultural production is the basis for planning any plant protection program.

25. There is also need for increased research in the use of chemicals for controlling diseases and pests and in methods of applying chemicals. Finding an effective chemical is not enough. Research would have to be continued until proper schedules were developed for making recommendations to farmers. Again, preferential and increased budget allocations to support practical, problem-solving research are called for.

26. In order to set up adequate forecast services, increased numbers of highly qualified plant pest and disease diagnosticians are needed. It has been learned that plant pathologists and entomologists do not always make good diagnosticians. Plant nutrient and other soil deficiency symptoms have been mistakenly analyzed as plant diseases, resulting in ineffective control measures. To diagnose properly, one needs a broad knowledge of biological}chemical and agricultural aspects.

27. The need for, and constraintsof, applied research are recognized by the Indian Agricultural Research Institute at Yew Delhi, Lhich coordi- nates all plant protection research and is taking steps to improve the situation on a long-term basis. Spectacular results, however, cannot be expected in the near future because of the tiue element involved in this kind of research. The establishlernt of an effective pest reporting system has also been undertaken in four selected districts wiith Ford Foundation assistance. Training of field officers is done at the GOI Plant Protection Institute at Hyderabad, which has plans for an expanded training program. Several states maintain similar training facilities, concentrating on specific state problems. All training institutes teach subjects related to aerial plant protection and intend to broaden activities in this field. Fuhther, research and extension is assisted by a number of expatriate Al'N2NEi1 Page 7

specialists attached to universities and institutions under various technical assistance agreements.

Legislation 28. All states,except IJest Bengal, have enactedsome form of agriculturalpest and diseaselegislation. Generally, this legislationfollows a model bill preparedand circulatedby the GOI. These acts providea systemby wihichthe state governmentsmay declarean emergencyWhen there is a threatof pest or diseaseepidemics and compelthe applicationof prescribedtreatment on a mass scale. The model act, which providesfor noticeand hearing, is somelihatcumbersome. Reports indicate that provisions of this legislationare rarelyutilized. But systemsfor voluntary control operations have been worked out under the provisions of other legislation and through local plant protection officers and agricultural extension officers at the panchayat 17 district and state levels. For instances the panchayat councils may pass resolutions authorizing and directing the panchayat union to contract for specific aerial operations and authorizing for the collection of the costs from benefited farmers through government revenue services. IIoststates have been experimenting with similar methods of organizing work and cost recovelry of aerial treatment and have developed wiorkable procedures. The Insecticide Act, 1968, passed by the GOI, is designed to regulate the import, manufacture, sale, transport, distribution and use of insecticideto providesafety to human and animallife and to ensure minimum standards of quality in the products offeredfor sale.

1/ Local elected bodies on village, multi-village and district levels. AITNEXT2

IiDIA

AGJICULTURALAVIATION PROJECT

The AgriculturalAviation Industry

Scope of Aerial Application

1. WTith the rapid progress of Indian agriculture the need for aviation services to control pests and diseases in an organized manner has become important. An increase in the aerial treatment of Indian crops with suitable pesticides would result in a substantial reduction of crop losses in the field.

2. Aerial application affords an opportunity for increasing urgently needed plant protection in India in an effective and organized mannero lD]henproperly organized it can cover larger areas more rapidly during critical pest periods than can be achieved by the use of ground methods of application. The acreage to be covered by aerial means is concentrated on areas, and in instances,most favorable to its use, specifically:

a) large contiguouscrop tracts attacked by pests and diseases requiring timely application and where groundmethods cannot be sufficiently and rapidly mobilized and crop losses would be great if delayed ground methods were applied;

b) areas with soft ground conditions as in rice, which are not accessible by ground methods;

c) tracts of luxuriant crop growth vhich would be damaged by ground methods since many people must enter the field;

d) crops in late growth stages. for example, sugarcanewhen it is no longer possible to effectivelycontrol pests from the ground.

3. There are approximately35 million ac of crops (approximately 10% of the area under cultivationin India), which are susceptibleto pests and would benefit from aerial treatment with pesticides one or more times each year. The 1968/69 aerial crop treatment involved only 1.5 million ac. The agriculturalaviation groups in India, both government and private, are exerting a creditableeffort in attemptingto treat the acreage infestations as they arise. They are, however, underequipped--in some cases using obsolete aircraft--and understaffed, with pilots who have never had formal agricultural training. Further, they face dii'ficult problems of work organization. The major features and constraints of the industry are set out in this annex. Al,M X 2 Page 2

GOI Aviation Unit

4. The use of aircraft for agriculturalpest control began in India in 1944 when a militaxy aircraft was employed for reconnaissanceto locate swarms of locust in the Rajasthan desert. The GOI consideredits aerial operationsagainst locust to have been successful,and a permanent agricultural aviation unit was establishedin 1957 under the GOI Directorate of Plant Protection, Quarantine and Storage. The unit was initially equipped with three fixed wing aircraft obtained with Colombo Plain aid. Additional aircraft were obtained up to 1964 when the GOI fleet was increased to its present strength of seven. The GOIts agricultural aviation unit t s head- quarters and operating base are at Safdarjang Airport, New Delhi.

5. Since 1964, GOI has taken several important steps to strengthen the management of its aviation unit, including the appointment of:

a) a full-time and well-qualified director;

b) an air operations officer;

c) a chief engineer; and

d) a chief stores officer.

In addition to operating the unit, these officers cooperate with the private companies in efforts to meet their needs and in promoting state-sponsored and centrally supported spraying programs. As a result, the coverage by the government planes increased from 42,735 ac in 1964 to 344,510 ac in 1969 (Table 1).

6. The unit depends on the employment of pilots and technical personnel released from the armed services. Pilots are given 25 hours of conversion and specialized flight training by the unit t s operations officer or chief pilot. Major air frame maintenance and routine maintenance is performed partly by the unit's own shops and partly under contract by a private company in Bombay. Ehgine overhaul is performed by the Govern- ment's Hindustan Aeronautics, Ltd. in Bangalore.

7. The aircraft operated by the GOI unit is a large, high-winged plane with a 450-hp engine. It is versatile and rugged, but it is not designed as an aerial applicator. Ihile its operating cost is high, its load capacity of 150 gal, or 1,200 lb, of chemicals is not much greater than that of the smaller aircraft in India. This equipment will need to be phased out and new, more specialized agricultural equipment brought in so as to update to current industry standards. The GOI unit has purchased three helicopters on the Exim Bank loan in 1969. They plan to add one more helicopter in order to bring the mixed fleet in balance with demand for aerial mork. ANNEX2 Page 3

Private Operators

8. Aerial treatment of crops in India by privately owned aircraft began in 1959 and was conducted largely from aircraft chartered from overseas for demonstration purposes by agricultural chemical companies or private aviation operators. In 1965, the GOI prohibited further payments of foreign exchange for charter of agriculturalaircraft from abroad or for paying foreign pilots. Private operators sprayed from 4,100 ac with three aircraft in 1959 to 1,175,632 ac with 30 aircraft in 1969. Growth in acreage, regional and seasonal distribution,crops sprayed and aircraft efficiency are analyzed in Tables 1 and 2.

9. Until 1968, there were seven active private agricultural aircraft companies (Table 3). Three more companies started operations in 1969, while seven others either have or are in the process of making arrangements for equipment and personnel to start operations. The private companies have formed an agricuLtural aircraft association in the hope of cooperating and working together on large-scale state programs.

Repair and Maintenance

10. The map shows that the operators t base locations are about equally divided between MiewDelhi and Bombay, with three in other areas. The reasons for concentrating around these major cities are because of the availability of facilities, hangars, shops, spare parts, technical labor, and better living conditions, The operators, however, send their equipment to any part of India where volume of work potential exists. Airplanes are flomn to assignmentsand helicoptersare generally trailered. Six Bombay operators are based on Juhu Airport, formerly the municipal airport, and one company is at the civil airport, Santa Cruz.

11. Table 3 lists the operators who are dealers for imported aircraft. These operators are well equipped to perform major maintenance on the aircraft they sell and they also do maintenance work for other operators who have no shop facilities. The manufacturers of the aircraft indicate a willingness to train maintenance personnel and to have a technical rep- resentative visit the operation periodically to give advice and to trouble- shoot any problems. Some of the spare parts are available from the dealers and arrangements need to be made to increase these supplies.

12. There are at least 30 other maintenance shops, many of them belonging to flying clubs, throughout india that,are able to handle maintenance of small aircraft. Among these are Airw-3orks India at Bombay, a large overhaul facility, and Associated Airworks and Air Survey Company at Calcutta. There are five instrument repair shops. The Government t s Hindustan. Aeronautics, Ltd. (HIAL)manufactures military and civilian aircraft and has extensive repair capability. HAL has in design an exper- imental agricultural applicator aircraft. According to their present projectedplans, this aircraft would not be available to the industry before 1974/75. Page 4

Airfields

13. The airfield facilities throughout India are fully adequate to provide operating bases for the enlarged fleet. Hangars are needed mostly for maintenancepurposes and are availableat most contemplated bases or can be constructedwithout much expense. Operating bases in the field need be only lov-grade earth strips, easily prepared in most flat areas. A field 1,500 x 100 ft with 200 ft clear on a 1:2 slope at each end can be leveled and compacted at low cost, and crude temporary strips have been successfully prepared by villagers working under supervision. Helicopter pads, 50 x 50 ft within field tracts, can be prepared with less effort, thereby constributing the helicopter's reputation for flexibility.

Aircraft

14. There is, at present, a mixture of helicoptersand airplanes in the fleet, as indicated in Table 3. Some of this equipment is outmoded, expensive to operate and should be replaced. Because of increased interest by growers and operators in helicopter work, a number were imported in 1969 wjith Exim Bank assistance, bringing the fleet to almost a half and half ratio. All over the world, the number of helicopters being used for agriculture has increased greatly in recent years and many airplane operations are adding rotary wing craft to their fleets. There is a place for both types of aircraft in India.

Aircraft Accidents

150 From 1965 through 1969, there was a total of 18 accidents listed as major damage. Of these, eight were airplane accidentsand all were associatedwith problems of airstrip landing or taking off procedures. Of the 10 helicopter accidents,half are listed as "cause undetermined", or "under investigation," Except for one that resulted from a tail rotor failure, the remainingwere caused by typical pilot errors. such as hitting obstructions or misusing controls during loaded takeoff. US accident statistics average 3.7 accidents per 10,000 flying hours. The accident record in India is based upon a smaIl number of aircraft and would be about double this figure. Improved training and supervision is expected to improve the situation,

Hull Insurance

16. A wrldwide problem is the purchase of adequate accident insurance coverage for low-flying agricultural aircraft at bearable cost. Premium rates may be the single highest item of operating expenditures. Indian operators pay presently between 15eland 27' of the aircraft value annually, including a 75; foreign exchange coverage which is insured in the London market, Newcomers to the business and inexperienced comapanies fall in the highest premium bracket. Each operator is individually assessed by the insurer and pilot experience is an important yardstick in determining premium rates, Improved training, followed by lo01 claims ltuld help the industry to obtain gradually more favorable insurance conditions, A1JI'EX2 Page 5

Staffing

17. The management abi-lity of the operators (first nine on Table 3) appear to be adequate for an expanded program. They have developed experience over the years, added personnel and equipment and presented a knowl- edgeable approachto the proposedproject. NTewoperators who are just starting had related business backgrounds in agriculture or aviation and appeared confident that they could secure personnel to begin operation. Observations, however, indicated that experienced people were in short supply, as reflected in "pirating" of employees among operators.

18. At first, the industry was able to secure enough retired airplane and helicopter pilots from the services, but no helicopter pilots have been released lately and the shortage is acute. Airplane pilots, however, are readily available from the ranks of commercial pilots trained by various flying clubs, All pilots need agricultural training and operators give them some training w-ithout providing formal instruction in agricultural subjects. Consequently, pilots presently with the fleet have limited understanding of the technical aspects of agricultural aviation. Better pilot training would help to bring down current rates for hull and liability insurance rates on agricultural flying.

19. IIaintenance personnel at present are adequate and sufficient for expansion. However, more licensed engineers must be trained each year to meet the desired ratio of one licensed engineer for every two aircraft. Again, personnel with fair experience are available from the servicesp but they are not licensed. Operating Arrangements 20. !,hile the GOI plant protection program provides assistance and advice to the states, the execution of aerial plant protection is basically the responsibility of state governments. A few plantations and growerst cooperativeswith such cropsas rubber,sugarcane and cottonor suffi- cientlylarge holdings or crop tractsindividually employ aircraft operators to spraytheir crops,but this lucrativeportion of the marketis small. For the bulk of the work, applicators have to rely on the agricultural authorities of the Indian states to arrange for the treatment of farmers crops. Because of the small size of farm holdings in India it is not possible to build an aerial plant protection industry based mainly on private negotiations between farmers and applicators. State governments must be involved to organize the demand into economically viable programs for a given area. IHost states have had experience with different methods of organizing demand for aerial treatment and have developed workable proceduresunder stateActs that make applicationon large areasand cost collection from farmers possible. Hethods of demand organization are. however, expected to go through further evolution as optional systems are developed. ANTE,X2 Pager

21L Generally, it is the responsibility oZ the state authorities to:

a) plan the amount of aerial spraying to be done;

b) budget for the program, including subsidies, and provide respective operational funds;

c) select the areas to be sprayed and determine time of application;

d) tender and arrange contracts with operators;

e) procure and make available appropriate pesticides at spraying sites as determinedby the state entomologists;

f) instruct plant protection personnel in the field, extension services, and village and district councils to get farmers interested;

g) locate and construct landing strips or helicopter pads;

h) prepare detailed field maps and provide qualified loaders and flagmen;

i) call in the aircraft at the proper time and pay the operators for the acres sprayed;

j) organize recovery of costs fron farmers through revenue services;

k) obtain reimbursement of plan funds from GOI; and

1) checlckrecord and report the results of aerial treatment.

22. Some organizationalweaknesses have curtailedaerial programs in the past. For example, in some cases. states used funds that had been allocatedto them by the GOI on the basis of their plans for aerial spraying for other program.s In order to improve operatingarrangements, GOI has changed the method of plan support of aerial plant protectionat the onset of the 1969/70 season. However, the response from states was slow, delaying aelial programs temporarily during the monsoon season of that year. GOI, in collaboration with the indust;y, took immediate steps to work out new operating arrangements with the states, -which nearly all have plans for extended aerial plant protection.

Safeguards in Aerial Application

23, Great care has been taken in the past to avoid spraying inhabited areas; village wells or -water supplies, rivers and ponds; cattle feed or other sensitive areas. Advance notice is given to the community before A.NNEX2 Page 7 spraying commences and restricted areas are clearly marked. Per acre application of active chemicals can be calibrated to the most economic rates more accurately in aerial than in ground equipment, thus minimizing undesirable side effects on the environment. ANREX2 Table 1

AGRICULTURALAVIATION PROJECT

Growth of Aerial Crop Treatment in India

A. Actual GOI Uhit Private Operators Total Fleet No. of No. of Average/ Year Aircraft Area Aircraft Area Area Aircraft (ac) (ac) (ac) (ac)

1951 3 3,260 -- 3,260 1,087 1952 3 18,520 -- -- 18s520 6,173 1953 3 2,850 -- -- 2,850 950 1954 3 2L4.2 -- -- 2,442 814 1955 1 650 -- -- 650 650 1956 1 100 -- -- 100 100 1957 3 19,159 -- -- 19,159 6,386 1958 3 22x135 -- -- 22,135 7,378 1959 3 20,700 3 4,113 24,813 4,136 1960 2 9,025 7 4ljl389 50,414 5,6o2 1961 3 46s,538 7 31,040 77,578 7,758 1962 4 213,586 10 71,667 285,253 20,375 1963 4 21,920 7 63,700 85,620 7,784 1964 7 42,9735 7 342265 77,000 5,5oo 1965 7 127#532 13 270s696 398,228 19,911 1966 7 182,914 16 224,733 407,647 17,724 1966/67 1/ 7 209,330 16 286,377 495,707 21t552 1967/68 7 204.,870 20 779,130 984,000 36,444 1968/69 7 344,S51o 30 1,l751632 1,520,142 41,o85

3. Projected / Helicopters Fixed Wing Total Fleet Project No. of No. of Area Average/ Year Aircraft Area Aircraft Area Treated Aircraft 1 37 1,394,719 46 1,402,200 2,796,919 37,987 2 48 10848,750 57 1,792,200 3,640,95o 38,734 3 63 2,537,737 75 2s433,750 4,971,487 40,918 4 63 3s024,000 75 2,925.000 5,949,0oo 43,109 5 63 39222,450 75 3,138,75o 60361,200 46,o96

1/ Records from this date on were computed on agricultural year basis, June to July. 2/ GOI and private operators. AGHICUITUF?ALAVIATION_ JC,0i3T

Pattern of Aerial Ppplication in Percent of Total Acreage sprayeJ193l through 1969

Regions and States Crops Crop Seasons and Months

A. South Percent A. Food Grains Percent A. Kharif (Monsoon) Percent-/ Andhra Pradesh l.9 Riceh/ -7-T - June - 3/ Kerala 5.4 WTheat 7.6 July 0.7 Mysore 2.7 Sorghum o.6 August 7.7 Tamil Nadu-/ 15.6 Subtotal 29.7 September 10.4 Subtotal 257 October 12.6 B. Pulses, Oilseeds Subtotal 31.7 B. West Groundnut4/ 5.1 Gujarat/ 2.9 Others 6.7 B. Rabi (0^.nter) Madhya Pradesh 8.6 Subtotal 11.8 November 18.1 Maharashtrai/ 22.,4 December 13.3 Subtotal 33.9 c. Fibre Crops January 1.1 Cotton4/ 15.1 February 26.7 C. North Jute 0.4 'March 6.7 Ta-rYana?/ 3.0 Subtotal 175 Subtotal 65.9 Punjab 7.14 1 Rajasthan 5.4 D. Mixed Crops5/ 17.8 C. Pre-!bnsoon Uttar Pradesh 21.6 April 1.5 Subtotal 37-4 '. Other Cash Crops May 1.2 Sugarcane 18.9 Subtotal 2.7 D. Sast Potato 0.5 Total 100.7 Assam _ 3/ Subtotal TlT Bihar 0.5 F. Plantations Orissa - 3/ Rubber 5,3 1/ States with consistentgrowth West Bengal 2.5 Coconut - 3/ in aerial application Subtotal 7T7 Subtotal 53 2/ Up to 1967/68 included in Punjab. Total 100.0 G. Other WorkY7 0.5 / Less than 0.1%. Total_Other Intor 100.0 G. °-5 :TT/Crops with consistent annual growth in aerial application. Total 100.0 5/ Fragmented crops sprayed at one time. 6/ Orchards, forestrywork and mosquito control. 7/ Percentagerefers to 1968/69 only. ANNEX 2 Tarble3 INDIA

AGRICULTURALAVIATION PROJECT

Expected Operational Fleet Strength as at June 30, 1970

Aircraft AcraSt Nos Based at Dealerships2Z i4 FW 47'otal

A. Government of India New Delhi - 3 7 10

B. Private Operators

1) Indamer Bombay 1 2 6 8 2) Cambata Aviation Bombay & 2 4 2 6 New Delhi 3) Helicopter Services Bombay 1 6 2 8 4) H.S. Sobha Singh Bombay - 2 2 4 5) Mathur Aviation Co. Bombay & 1 - 6 6 New Delhi 6) I4ahindra & Mahindra Ltd. Bombay 1 2 - 2 7) Avindia Bombay - 2 1 3 8) Naneckji Aviation Bombay 1 2 - 2 9) Kherka Aviation New Delhi - 2 2 4 10) Sanghi Aviation New Delhi - 2 2 4 & Indore 11) Rambahadur Thakur Co. New Delhi - 2 - 2 12) INarang Bishnol Co. New Delhi - - 2 2 13) Eharat Agro-Aviation Co. New Delhi - - 2 2 14) Agro-Engineering Ltd. New Delhi - - 2 2 15) Bharatair Ltd. Calcutta - 3 - 3 16) Push Paka Aviation Ltd. Madras - - - - 17) Punjab Cooperative Marketing Federation Ltd. Chandigarh - - - _

Subtotal 32 36 68

Unallocated - 10 10

Subtotal 32 46 78 Less: Replacements 6/

Total Fleet Strength 32 41 73

C. iequirement5 for Additional Aircraft _/ 48 52 100

1/ Based on information obtained from GOI, Exim Bank and operators. 2/ Dealerships of makes manufactured in 4 IDA member countries. 3/ Helicopters. 4/ Fixed idng aircraft 7/ Aircraftlikely to be importedfrom Yugoslaviaunder bilateralarrangement before June 1970. 6/ Expected replacement of five uneconomic aircraft of Polish-Russian origin by five Yugoslavianaircraft. 7/ Based on returns from GOI, including trainer aircraft, and listed private operators. T&k&b£ccUfft of needed replacements and assums that enterprises would build up fleet strength to 8-10 aircraft per unit. ANNEX 3

INDIA

AGRICULTURALAVIATION PROJECT

Agricultural Applicator Aircraft

A. Fixed Wing Aircraft

1. Agricultural aircraft procured under the project should be designed to fly close to the ground with heavy loads. This requires a specialized airplane with handling characteristics different than the average passenger or cargo carrying plane, which flies at high altitude and uses commercial airport runways.

Good Performance

2. Sufficient power should be available to cope with emergencies created by strong downdrafts or by the need to clear sudden obstacles involving steep climbs. To meet such requirements,the power loading of the engine should be low, about 10 to 12 lb/hp. The aircraft should have excellent short takeoff and landing (STOL) capabilities,so that it can unstick in about 150yd without any tendency to sink, and permit safe operation from 400-yd long airstrips from elevations of 2,000 ft. The aircraft should have a high initial rate of climb to permit operationfrom obstructedairstrips and possess a low stalling speed with the ailerons remaining partially effective, even in a stall. A spray speed of about 90 mph should be possible.

Safe Handling Qualities

3. The aircraft should handle well, without imposing any strain on the pilot or making unnecessary demand on his attention. For instance, there should be no increase in stickload in case the chemical load is dumped in an emergency. This is possible only if the hopper is located on the center of gravity. There should be no fuel management problem. The fuel system should have only an ON-OFF cock. Controlforces should not be too high and the aircraft should be easily maneuverable.

4. The aircraft should be made as proof as possible against unin- tentional stalls and spins. Spray flying sometimes involves unconventional techniques, such as crossing the controls and slipping and skidding around corners in order to cover otherwise inaccessibleplaces. If the pilot must use many unconventionalflying techniques,full control of the aircraft should be possible at low speeds without dropping a wing. Because the pilot must take many liberties with the aircraft to perform his task, it must be lightweight--l,500to 3,000 lb empty, with a payload capacity of about 1,500 to 2,000 lb. The low-wing monoplane configuration has advantages since an upper wing might blank out visibility in a turm. The cockpit should have a high perch for the pilot allowing undistorted visibility. AlThiiX3 Page 2

Pilot Protection

5. The fully specialized agricultural aircraft is specifically designed to afford good crash protection to the pilot. This may be ensured by constructing the fuselage so that it can absorb energy by progressive collapse,thereby dissipatingcrash forces to a considerableextent before they reach the cockpit. Also, the longeronsmay be given a slightly out- ward bulge, so that the cockpit disintegratesoutwards and away from the pilot. No heavy equipment should be installed aft of the cockpit so that, in the event of a crash, there is no possibility of the pilot being crushed between the engine and such equipment. The hopper should, therefore, be interposed between the engine and cockpit and not in the rear of the fuselage. The fuel tank should not be in the center section, but in the wings, Which minimizes fire hazards. The undercarriage legs should have knife edges in the front to cut any wires flown into inadvertently. A protective wire should also be strung from the top of the cockpit to the top of the rudder to deflect any obstructions accidently hit, The cockpit should have no protruding or jagged ends and be thickly padded in the front.

Other Features

6. The engineers prefer an aircraft that is easy to repair. For this reason, the fuselage construction should preferably be tubular rather than semi-monocoque. Since the agricultural aircraft operates from make- shift airstrips far away from its established home base, it is not possible to proceed on operationwith a full range of maintenance and servicing facilities, Hence, it is essentialthat the specializedagricultural aircraft be devoid of unnecessary sophistication. The maintenance burden on the ground crew should be as low as possible.

7. The undercarriage should be either of the spring steel cantilever type or the rubber-in-compression shock-absorption type. Large low-pressure tires, with disk brakes, attached on wide track wheels, are necessaryfor operation off soft ground and in crosswindconcitions., where effective braking may become necessary. The oil-and-airoleos are avoided because pressure leaks or oil leaks in the field would create maintenanceproblems. Oil and fuel should be drainablewithout the need of tools or manipulating locking wire and safety pins, and preferablywithout removal of cowlings. Cowlings should not be attached with screws, It should be possible to attach, open, close or remove air cleaners,batteries, cowlings,and booms with only the fingers.

8. In summary, the specialized agricultural aircraft should be a simple flying instrument. Illustrative operational specifications of airplanes are shown in Table 1. These are based on several specialized agricultural aircraft conforming in general to the requirements as indicated, There are dealers for each of these makes in India. ANMEX 3 Page 3

B. Helicopters

9, The helicopter equipment situation is somewhat different as far as choice is concerned. Currently, the most used and proven helicopter for agricultural work is the US Bell. Bell has maintained the commercial market lead in numbers of agricultural aircraft produced and sold, both domesticallyand overseas. l0o Economics of helicopter operation indicates that an agricultural machine should carry a payload of 80 to 100 gal of liquid and use a swath width of 100 to 120 ft. The helicopter should have adequate reserve of power to be relatively trouble-free in field operations, with at least 1,200 flight hours before an engine and ship overhaul period. Component partst life prior to required replacement should be high--2,500 to 5,00O flight hours if possible. 1Saintenance should be possible in the field or operatorts shop without returning parts to the factoxy for overhaul. Flight control should be easy so as not to increase pilot fatigue. The rotor system should be of sufficient inertia so as to allow easy emergency or autorotation landings. The blades should be of sufficient strength to withstand contact with wires and small objects such as tree twigs or bush encountered in agricultural flying.

C. Work Capacity

11. The operational production figures of agricultural applicators projected in this report will vary, dependingupon many factors. These include:

a) load carrying capacity of the aircraft. Load carrying capacity will depend not only upon horsepower of the equipment, but upon air density, heat and humidity, altitude and length of takeoff area,

b) Sped flowin. Speed is generally determined by manufacturer specifications for safe swath muns, except in the case of helicopters. Rotary wing craft can vary speed and achieve a desired result, depending upon crop density.

c) Swath width used. Swiathwidth is determTined by test for each aircraft. This should include sufficient overlap to ensure even coverage. One complaint was that pilots flew too high and tried to cover too wide a swnath.W^Jires, trees and other obstructions in the fields should dictate the height of flight.

d) Gallonage applied per acre. Gallonage per acre is determined by state officials or other technical personnel. IjIostwork in India is set at 1 to 2 gal per acre, with ultra low-volume spraying of 8 to 12 oz of technical chemical-per acre accounting for a small percentage. ANNEX3 Page 4

e) Distanceto ferryfrom loadingsite. This distance is dictatedby terrainor abilityto build airstripsclose to the prograrnarea. Helicopterspose no problemhere. f) Turn-around loading time, I-lost of the Indian operators have developed good loading facilities so as to keep the aircraft on the job without unreasonable delays. g) Size of fields being worked. The operator has no control over this factor, Proper organization of work to permit efficient flying patterns is quite important. Vhienmany small fields are to be covered, the operators fly a straight line for about 5 to 6 miles with flagmen stationed at 1/4- to 1/2-mile intervals. The spray is turned on each tnie the aircraft goes over one of the many small blocks to be sprayed and turned off when each has been passed. ANEX3 Table 1

INDIA

AG:ICULTUPALAVIATION PROJECT

Aircraft Specifications

A. Fixed Wing

Aircraft M4ake: 1 2 3 4 5 6

Price (us$) 1/ 23,000 21,000 38,500 43,000 21,000 32,300 IJorsepower 300 260 450 600 290 300 Smpty weight (lb) 1,845 1,540 2,690 3,700 1,775 2,200 Gross weight (nornal)(lb) 3,300 2,900 4,5oo 6,ooo 3,000 4,000 Gross weight (restricted) 4(b)4,000 3,0o40o 300 6,900 3,600 4,1470 UJseful load (normal) (lb) I 1,500 1,360 1,810 2,300 1,225 1,800 Useful load (restricted)(lb) 2,000 1,500 2,600 3,000 1,800 2,270 .ate of climb (ft/mnn) 940 685 1,080 900 850 1,000 ?akeoff run (ft) 610 740 750 775 650 750 Landing run (ft) 420 850 350 500 447 450 Hopper capacity (gal) 200 150 247 400 200 350

B. Helicopter

Aircraft Make 1 2 3

?rice (uss) 45,000 33,600 37,500 Sprayinggear (US$) 3,700 4,,200 14,200 HIorsepower 260 180 190 Emiptyweight (lb) 1i,640 958 1,025 Gross weight (lb) 2,850 1,670 1,900 Useful load (lb) 2 1,210 712 875 Hopper capacity (gal) 100 50 65

1/ Includesagricultural accessories. Variationin choice of equipment could cause sore differencein prices.

2/ Useful load includes weight of pilot, fuel and oil)and payload. ANMXX

INDI-

AGRICULTURALAVIATION PROJECT Trainin

Pilot Training

I. The training program included in the project ,wouldcover four categories:

a) helicopter conversion course for pilots with commercial license, including agricultural flight and ground training; b) agricultural flight and ground course for fixed wing pilots without agricultural experience; c) refresher courses for pilots currently flying agricultural work; and

d) refresher courses for pilots trained under the project to update their knowledge and ability. Flying experience requirements are listed in Appendix A and represent the minimnm acceptable. Cperators who hire trained pilots would have to let them work initially as apprentices, guided by experienced pilots, until they gain additional flight time and experience. An example of the helicopter flight and ground training curriculum is summarized in Appendix B.

2. To be eligible for the training program, a candidate would have to hold a valid commercial pilot license and have a minimumiflight experience of 200 hours3 selection of candidates would be the responsibility of the proposed Training Center (TC),under the Directorate of Agricultural Aviation (DAA). Iicensed pilots vould be available in sufficient numbers from training courses given by flying clubs and from personnel retiring from the forces. Because the training costs involved woluld be beyond the means of most potential candidates, such expenses under the project would be borne by Government.Operators or traineesthemselves wzould pawy for accidentinsurance and subsistenceduring the trainingperiod. Refresher coursetraining would be only for pilotsvho are employed. Employers vould pay their training costs, including insurance and subsistenceexpenses.

Engineer Training

3. The TC uould perform regular inspection, overhaul and maintenance on all trainer aircraft as well as be responsible for the training of engineers. This would include providing courses in performing field maintenance on agricultural aircraft belonging to DAA, as well as performing a complete overhaul. The course would help prepare an applicant to pass AiEX 4 Page 2

the Director General of Civil Aviation (DGCA) engineerst license requirements in both airplane and helicopter maintenance. Student applicants should be selected on the basis of aptitude, interest and background. The DGCArequires that an aircraft in the field be inspected by a licensed engineer every 25 hours. This could pose problems if there were not enough licensed engineers available. MTanufacturers of aircraft sold to India have expressed interest in assisting in training engineers to work on their equipment. This training, however, is generally available only to licensed engineers and would be given by technical representatives of the manufacturers in India.

Training Goals

4. The TC would have a fleet of four helicopters and four fixed wing aircraft; three of each type would be schedUled for training purposes and one of each type would be held on standby. With this equipment, the center could meet the pilot requirementsfor each project year. Small classes of 5 to 6 would create a favorable climate for individualinstruc- tion. Course output would be approximately 20 full course and 12 refresher course helicopter pilots per year; 30 full course and 18 refresher course fixed wing aircraft pilots; and 12 full course and 12 refresher course engineers per year. Each training aircraft would have to be flown around 450 to 500 hours per year in order to fill this requirement, which would warrant the investment. There could be four full courses and three refresher courses per year, allowing for some slack time between courses. Instruction in ground oriented subjects can be scheduled between training flights.

Overseas Training

5. Since the key to successful pilot training is the availability of qualified flight instructors, it would be necessary to immediately send two helicopter and two airplane pilots from the GOI aviation unit overseas for agricultural and instructor training. Cn return, they would be the nucleus for the proposed flight training instructor staff.

Technical Assistance

6. A technical assistance team would be engaged for a period of 12 months to provide guidance and help in getting the training program underway. It would consist of one experienced agricultural helicopter pilot instructor and one experienced agricultural airplane pilot instructor. This assistance would offset the need for sending more pilots overseas for instructor training. They would be responsible for setting up and starting the flight training courses and associated ground school, as well as for training more instructors. Active instruction, in both flight and ground courses, could be provided by the team until the Indian instructors were able to take over. ANNEX4 Appendix A

INDIA

AGRICULTU,ALLAVIATION PROJECT

Training Course Timing

------Training------CategorY -Flight Ground Total

A. Helicopter Pilot Course

Conversion (in hr) 30 50 80 Agriculture (in hr) L 0 100

Total Hours 80 100 180

Duration (in weeks) -- -- 10

B. Fixed Wing Pilot Full Course

Agriculture (in hr) 50 50 100 Duration (in weeks) -- -- 6

C. Pilot Refresher Courses

1) Helicopter pilots (in hr) 15 15 30 Duration (in w#eeks) -- -- 2

2) Fixed wing pilots (in hr) 10 15 25 Duration (in weeks) -- -- 1-1/2

D. Aircraft Engineer Courses

1) Full course (in weeks) -- -- 8 2) Refresher course I (in weeks) 2/ _4 _ 3) Refresher course II (in weeks)3/ -- -- 2

1/ For pilots currently flying agricultural work and pilots trained under the project.

2/ For engineers currently employed in agricultural work.

2/ For engineers trained under the project. Ah3SEX4 Appendix B

INDIA

AGRICULTURALAVIATION PROJECT

Helicopter Training Course

A. ConversionCourse (30 flight hours)

1. 10 hours basic maneuvers,pre-solo: preflight, check control movement, starting and stopping procedures, takeoffs, landings, attitude control, square patterns and hovering 3600 turns.

2. 10 hours intermediatemaneuvers, pre-solo: runningtakeoffs, running landings; quick stops; maximum performance takeoff; steep approach landings; "S" turns; auto rotations with 900, 1800, 3600 turns; unusual positions.

3. 5 hours solo practice: all maneuver as under 1 and 2.

4. 5 hours review of all maneuvers: advanced proficiencytech- niques} auto rotation and emergency practice,platform and slope landings and takeoffs,heavy load proceduresand introductionto night flying.

B. AgricultureFlight Training (50 flight hous)

1. Preflight check of aircraft,spray gear.

2. Checkout of acres to be sprayed, obstructions,landing spots, flight pattern.

3. Simulated spraying--empty.

4. Takeoff techniques--fullyloaded.

5, Simulated spraying--loaded.

6. Nlightflying procedures.

7. Hethods of working around obstructions.

8. Simulated completetreatment of fields with water load.

9. Simulated operation of other com,mercial work.

10. Simulatedemergency situations under field conditions. ANNEX 4 Appendix B Page 2

C, Ground Training (50 hours--tuition)

1. History of helicopter development.

2. Cockpit checkout, preflight inspection.

3. Flight rules.

4. Function of the control.

5. Methods of control: vertical, horizontal, directional.

6. Flight procecures: starting, stopping, taxiing, hovering.

7. Explanation of basic helicopter maneuvers, preliminary and advanced aerodynamics,

8. Rotocraft airworthiness and equipment performance, weight and balance., operational limitations.

9. Theory of flight applicable to helicopters,ground effect, resonance,vibrations, torque, power settling,autorotative forces.

10. Accident preventionand analysis.

11. Helicoptermaintenance, inspection.

12. Government air regulations, aircraft insurance.

13. Comprehensive review and lecture on safe flying habits, emergency situations, engine or other mechanical troubles, high tempera- ture, altitude and mountain operations.

D. Agriculture Training (50 hours-tuition)

1. Aircraft types.

2. Chemicals and chemical hazards,

3. Causes and preventionof poisoning. 4. Corrosion control.

5. Agriculturalcrop recognition.

6. Basic biologicalaspects of pests and diseases.

7. I-lodeof action of pesticides. ANiUE2a Appendix B Page 3

8. Sprays, dusts and granules.

9* Spraying: spray equipment and maintenance, spray formulations, dilution and handling of spray liquids, spray application, meteorologicaleffects, calculationof dosage rates, calibration methods.

10. Duhsting.

11. Granule spreading.

12. Special application problems, locust control.

13. The use and preparation of special maps for field flying.

1t4* Airstrips and helipads, ground organization.

15. Swath marking: flagmen, fixed beacons, flag poles, srioke, light.

16. Communications.

17. Ancillary equipment.

18. ieteorology.

19. Economic and logistic aspects of agriculturalaviation.

20. HIethodsof payment for aerial work.

21. Keeping records and stocks.

22e Human problems and relations. ANNEC4 Appendix C

INDIA

AGRICULTURALAVIATION PROJECT Pro,eted Pilot and Engineer Trgining

(in Numbers of Trainees)

Year Year Year Year 1 2 3 4 and thereafter

A. HelicopterPilots

Full course 10 20 20 20

Refresher course - 6 12 12 (8) Total Th 32 32 20

Cummulative - 48 80 l00 2/ Pilots without agricultural flighttraining 24 12 - -

B. Fixed Wing Pilots

Full course 1/ 8 30 30 30 Refresher course - 5 18 18 (10) Total 13 LT 178 30

Cunmmulative - 61 109 139 2/ Pilots without agricultural flight training 36 18 - -

C. Aircraft Engineers

Full course 1/ 9 12 12 12 Refresher course - 11 12 12 (4) Total 20 2_ 12

Cummulative - 44 68 80 3/ Engineers without agricultural training 24 12 - -

1/ Year 1 to year 3 for presently employed pilots and engineers;from year 4 and thereafter for personnel trained under the project.

2/ Desirable ratio of about 3 pilots per 2 aircraft of the fleet.

3/ One engineer available for about 2 aircraft of the fleet. INDIA

AGRICULTURALAVIATION PROJECT

Estixated Pro3ect Costs

(Rs I 00)

year 1 ~~~~~~~~~~Year2 Year 3 Total 1/ Local Foreign Looal Foreign Local Foreign Local Foreign Category Currency Exchange Total Currency Exchange Total Currenoy Exchange Total Currency Exchange Total A. Aircraftt

Helicopter 1,264.5 1,264.5 - 843.0 843.o - - 2,107.5 2,107.5 Fixed wing airoraft 16.8 1,516.5 1,~533. 11.2 10oo80 1 9. - - 28.0 2.524.5 2 55 .5 Sub-total 2161. 77E2,II7.71rT T o,5862.2 - - 632. 0 4;663.0 2. Private Operatora - Helicopter 316.1 2,107.5 2,423.6 632.3 4,215.0 4,847.3 948.4 6,322.5 7,270.9 1,896.8 12,645.0 14,541.8 Fixed wing aircraft 1. 1.7 1 3 517. 3662.2 186.1 i.22.5 08.6 82.5 2 6. 678.8 Sub-total 3, - 777,732.5 Tetal 384.6 6,14.> 6,529. 4 . 9,583.5 10,371.7 5 ,o3a4o 10,82l397 53 -2,307.32 2, B. Providion for Airoraft RMI,aammnt & Ovn'aa tInesur3morw 1. DkA - Aircraft replace ent - - - 3.8 914.8 918.6 5.7 800.4 806.1 9.5 1,715.2 1,724.7 2. Private Operators - Insurance 207.1 621.2 828. 645.0 3 1 280.1 1,2 3.699.2 4'.2_2 2 .1 6.255.5 8.340.6 hetal 207.1 5 137 3 2344,49.6 9 7 t 7 3 C. Aircraft Spare Parta 16.2 541.3 557.5 45.5 1,517.5 1,563.0 97.7 3,255.9 3,353.6 159.4 5,314.7 5,474.1

D. Land Vehiclese 1. I"a 88.0 - 88.0 ------88.0 - 88.0 2. Private Operators 330.3 _ 330 3 726.0 - 726.0 iaooo - 1.1000 2.i56_o __2_1_6_0 Total - 418.0 126.o 726. 1I0.5 - 1,100 2;244.7 02;24.Z0

E. Building - fLA Training Center 400.0 _ 400.0 100.0 _ 100.0 - - - 500.0 - 500.0

F. ElqiBat

Special agric. aircraft equip. - - 56.3 56.3 - 37.6 37.6 - - - - 93.9 93.9 Aircraft toole 23.3 23.3 46.6 ------23.3 23.3 46.6 Oround aupporting equIp. 12.0 12.0 ------12.0 - 12.0 Safety equipiat 3.2 5.9 9.1 2.1 3.9 6.o - - - 5.3 9.8 15.1 Fumiture and fittings 100.0 - 100.0 50.0 - 50.0 - - - 150.0 - 150.0 Training aids - 20.0 20.0 - 10.0 19.0 - - - - 30.0 30 Sub-tcotal 138.5 105.5 244.0 2. S1.S 103.6 - - - 190.6 7 347.6 2. Private Operators - Special agric. aircraft equip. 1.7 56.3 56.0 4.5 150.0 154.5 6.2 p1206.3 212.5 12.4 412.6 425.0 Aircraft tools 24.0 23.3 47.3 48.0 46.6 94.6 71.9 69.8 l1a.7 143.9 139.7 283.6 Gromd aupporticg equip. 60.0 - 60.0 132.0 - 132.0 198.0 - 198.0 390.0 - 390.0 Safety equip. 3.7 6.5 10.2 8 1 6 24.5 12.2 21.5 7 24.8 436 63 Stb-tatal 8 85 * s397 .6 I - -.1 167 Total 22 . 9 1 491. 2.2. 5 85 7 2. l;t4. G. Other Costs - DAA Training Center: 1. Salaries and allowencee - Local staff 49o.2 - 490.2 552.0 - 552.0 552.0 552.05 1,594.2 - 1,594.2 Technical assistance 35.8 99.7 135.5 107.4 299.1 406.5 _ - - 143.2 398.8 542.0 Overseas training 36.0 84.0 120.0 - - - - - 36.o 84.0 120.0 Sub-total 3562.0 -7 759.7 4 2 99.7 55lU - 17 -;5 2s2564 2 2. Operation and maintenance - Aircraft 160.0 - 160.0 400.0 - 400.0 390.0 - 390.0 950.0 - 950.0 Vehicles 12.0 - 12.0 12.0 12.0 12.0 - 12.0 36.0 _ 36.0 Sub-total T T 1/20 = - -27 -20T 2- 0 -90 J 3. Plant protection study - - - 150.0 _ 150.0 150.0 - 150.0 300.0 - 300.0 4. Miscellaneous Costs 281.0 _ 281.0 330.0 - 330.0 276.o _ 276.0 887.0 - 887.0 Total -t5. 18 3. 1,198.7 !7T1 299.1 1 1,380.0 - 1,360.0 03 7 -- 4 4,222 H. Incremental Working CapitalV/ 2,247.1 - 2. 247 .1 3.030.0 - 3.030.0 1,442.3 _ 1.442.3 6,719.4 - 6,719.4

Total Project Cost, before goptiagencies 4,915.9 7,682.6 12,598.5 7,135.4 14,513.7 21,649.1 6,681.5 18,898.1 25,579.6 18,732.8 41,094.4 59,827.2 I. Contingencies - 10% 491.6 768.3 1.259.9 713.5 1.451.4 2,164.9 668.2 1 889.8 2,558.0 1,873.3 4.109.5 5 982.7 Grand Total 0.4°75 8,450.9 13 .9 .9 5.1 23 .0 .7 2 .9 2b. 20. 203.9 05,O9.9 ..4

1/ Import duties are included under losal currency costs.

2/ Directorate of Agricultural Aviation.

3/ Private operc-trs. INDIA

AG2ICULTURALAVIATION PROJECT

Estimated Project Costs

Category Unit Cost Year I Year 2 Year 3 Total Projiect Local Foreign Total _- _- - upees - _ ------Numsers ------

I. Aircraft

A. Helicopters

Dir. of Agric. Aviation - 421,500 421,500 - 1 - 1 Private Operators - 421,500 421,500 5 10 15 30 Training Center - 421,500 421,500 3 1 - 4 Total 12_

B. Fixed Wing Aircraft

Dir. of Agric. Aviation 2,800 251,250 254,050 3 3 - 6 Private Operators 2,800 251,250 254,050 5 14 18 37 Commercial Fleet T 17 1 43 Training Center 2,800 254,250 257,050 3 1 -

(Total Aircraft) Total )(_) -)

II. Vehicles;

Private Operators 22,000 - 22,000 15 33 50 98 Training Center 22,000 22,000 4 - - .02 Total 19 102

IIT. Oround Supporting Equipment (Set)

Private 2perators/ 6,ooo - 6,oo0 10 22 33 65 Training Center 6,ooo - 6,000 2 3 Total = 2J

1 IV. Safety Equipmont (Set)2

Dir. of Agric. Aviation 350 650 1,000 3 4 - 7 Private Operators 350 650 1,000 10 24 33 67 Commercial Fleet 132 r 33- Training Center 350 650 1,000 _ 2 Total 30

V. Aircraft Tools (Set)

Private Operators 23,250 23,250 46,500 1 2 3 6 Training Center 23, 250 23,250 46,500 1 - _ 1 Total 2 2 7

VI. Specialized Agricultural Equipment 6 10 11 27 for Aircraft (Set)4/ _ 18,750 18,750 =e =M e=M

VII. Training Center ------Rupees - - - - - …- - _

Lecture and office Building 500,000 - 500,000 400,000 100,000 _ 500,000 Training Aids - 30,000 30,000 20,000 10,000 - 30,000 Furniture, Office Equipment 150,000 - 150,000 100,000 50,000 - 150,000

1/ 1.5 Jeep per aircraft which is added to fleet, except Aviation School. 2/ One set per aircraft which is added to fleet. Hr 3/ One set per aircraft procured under the project. / Inclades specialized equipment for ULV spraying, dusting, fertilizer spreading, weed control, etc.. One set for 3 aircraft. ANNEX~5 Appendix C

INDIA

AGRICULTURALAVIATION PROJECT

ESTIMATEDUNIT COSTS

I. AIRCRAFT

A. Helicopter

Basic aircraft US$ 45,000 Night lights (installed) " 880 2 shoulder harnesses ( " ) 390 Hour meter ( " ) 80 Dual controls (It 850 Sprayingequipment (not installed) " 3,000

Ex-factory US$ 50,200 Crating, insurance, airfreight " 6,ooo

CIF India US$ 56,200 Rs 421,500 B. Fixed Wing Aircraft

1. For AgriculturalOperation:

Basic Aircraft US$ 27,000 Spraying equipment (not installed) it 3,000

Ex-factory US$ 30,000 Crating, insurance, seafreight "' 3,500

CIF India US$ 33,50o Rs 251,250

Landing and Assembling:

Port charges and transport Rs 1,000 Unpacking, assembling (labor) " 1,500 Overheads " 300

Ready for ferrying Rs 25h,050 ANNEX 5 Appendix C Page 2 -2-

2. For Training:

Basic aircraft US$ 27,000 Dual controls (installed) if 400 Spraying equipment (not installed) it 3,000

Ex-factory US$ 30,400

Crating, insurance, freight " 3,500

CIF India US$ 33,900 Rs 254,250

Landingand assembling tt 2,800

Ready for ferrying Rs 257 050

II. SET OF TRAINING AIDS

Audio-visual equipment US$ 700 Course material It 2,800 Library " 500

Total US$ h,000 Rs 30,000

(100% foreign exchpnge cost)

III. SET OF GROUND SUPPORTING EQUIPMENT

500 gal water supply tank 135 gal chemical mix tank 2-in gasoline engine driven pump Fuel hand pump Accessory plumbing Hoses Rs 6000 (100% local cost)

IV. SET OF SAFETY EQUIPMENT

Pilot's crash helmet 2 Respirators Filter cartridges Rubber gloves Flight suit Rubber boots Rs l,O0O (65% foreign exchange cost)

V. SET OF AIRCRAFT TOOLS

Special aircraft tools US$ 3,200 Repair station shop tools " 3,000

US$ 6,2a) Rs 46,500 (505%foreign exchange cost) ANNEX 5 Appendix D

INDIA

AGRICULTuRALAVIATION PROJECT

Cost Estimates - Expatriate Flight Instructors

I. Cost per Instructor

Local Foreign Total - in Rupees

a) Base salary - 135,000 135,000 b) Quarters, allowance, at Rs 2,250/month 27,000 _ 27,000

c) Car allowance,at Rs 400/month 4,800 _ 4,800 d) Educationalallowance for one child, at US$ 750 equivalent 5,625 - 5,625 e) Round-tripair fare for family of three with 10 kg excess baggage 29,700 7,425 37,125

f) Shipment of personal effects to and from New Delhi 4,50o 3,000 7,500

g) Overhead on salary, 40% - 5,000 54,00 Total Cost per Instructor 71,625 199,425 271,050

US $ Equivalent 36,140

II. Cost for Two Instructors

Rupees US$

RupeeComponent 143,250 19,100 ForeignExchange Component 398 850 53,180

Total 542,100 72,280 ANNEX5 Appendix D Page 2

INDIA

AGRICULTURALAVIATION PROJECT

Cost Estimates - Overseas Training Program

I. Cost per Trainee

Local Foreign Total -in Rupees - - - - -

a.) Round-tripair fare 9,000 2,250 11,250

b) Additionaltravel in country of training - 2,250 2,250

c) Tuition fee / - 11,250 11,250

d) Subsistenceallowance: i) $10/day for six weeks, during training - 3,150 3,150 ii) $16/day for two weeks, during observationtour and travel - 1,680 1,61J0

e) Miscellaneousexpenses - 420 420

Total cost per trainee 9,000 21,000 30,000

US $ Equivalent 4,000

II. Cost of Training Four Flight Instructors

Rupees US$

Rupee component 36,000 4,8oo

Foreign exchange component 84,000 11,200

Total 120,000 16,000

1/ Average for rotary and fixed wing aircraft. Rates and hours of training are as follows:

Rotary - US$ 70/hr for 25 hrs = $ 1750, plus $ 250 for ground inst. Fixed wing - US$ hO/hr for 20 hrs = $ 800, plus $ 200 for ground inst. INDIA

AGRICULTURALAVIATION PROJECT

COST ESTIMATES- STAFF TRAININGCENTER

Unit Cost Year Year Year Category Local Foreign Total 1 2 3 - - Rs per Year ------

Project Manager 38,000 38,000 1 1 1 Chief Flight Instructor 34,000 34,000 1 1 1 Chief Engineer Instructor 24,000 2h,000 1 1 1 Chief Ground Instructor 28,000 - 28,000 1 1 1 Senior Flight Instructor (Helicopter) 32,000 _ 32,000 1 1 1 ft N (Fixed Wing) 32,000 - 32,000 1 1 1 FlightInstructor 30,000 - 30,000 4 5 5 EngineerInstructor 18,000 - 18,000 1 1 1 AgriculturalInstructor 15,000 - 15,000 1 1 1 LicensedEngineer 15,000 _ 15,000 2 3 3 Mechanic 6,000 - 6,000 8 10 10 Cleaner 2,400 - 2,400 8 10 10 OfficeStaff 7,000 - 7,000 4 4 4 Driver 3,000 - 3,000 4 4 4 Peon, Guard,Sweeper 2,000 - 2,000 6 6 6

>4 INA

AGRICULTURAL AVIATION PROJECT

Estimated Schedule of Disbursements

US$ (thousands) Rupees (thousands) Thru Thru Thrii Undis- Thru Thru Thru Uncdis- Year Quarter ARC DAA GOI Total bursed ARC DAA GOI Total bursed

1971 1st - _ _ _ 6,000 - - - - 45,000 2nd - - - - 6,000 - - - - 45,000 3rd - 11 - 11 5,989 - 83 - 83 44,917 4th - 314 35 349 5 640 - 2,355 262 2,617 42,300 Sub-total - 325 35 360 5,640 - 2,438 '262 2,700 42,300

1972 lst 500 125 125 750 4,890 3,750 938 935 5,626 36,674 2nd 290 14 101 405 4,485 2,175 105 758 3,038 33,636 3rd 290 285 105 680 3,805 2,175 2,137 787 5,099 28,537 4th 290 61 104 455 350 2,175 458 780 3,413 25,124 Sub-total 1,370 4535 2,290 3,350 10,275 3,63 3,263 17,176 25,12

1973 1st 291 66 188 545 2,805 2,182 495 1,410 4,087 21,037 2nd 408 - 237 645 2,160 3,060 - 1,777 4,837 16,200 3rd 408 - 242 650 1,510 3,060 - 1,815 4,875 11,325 4th 408 59 243 710 800 3,060 442 1 823 5,325 6 000 Sub-total 1,515 125 910 2,550 800 11,362 937 19,124 6,000

1974 1st 415 65 320 800 - 3,113 487 2,400 6,000 -

Total 3,300 1,000 700 6,000 - 24,750 7,500 1L2750 45,000 -

Note: Contingencieshave been spread evenly and aie included in estimated disbursements. AIMJTEX7

UTIA

AGRICULTURALAVIATIONI PROJECT

Credit and Banking System

Agricultural Refinance Corporation (ALRC)

1. In 1964, the Government of India created the Agricultural Refinance Corporation (ARC) to encourage agricultural development lending operations by providingadequate refinancefacilities to lending agencies--scheduled commercialbanks, cooperativebanks or land mortgage banks. After a slow start, ARC operationshave gained considerablemomentum over the years 1967/68 and 1968/69. As of October 21, 1969, ARC had sanctioned 286 schemes, involvinga total outlay of Rs 2,262 million; its commitmentsamounted to Rs 1,867 million and its disbursementsto Rs 39h million. Land mortgage banks have availed themselves of ARCIs facilitiesto a large extent in order to develop their oun operations. Facilities requested by commercial banks and cooperative banks have not been significant. This reflects the still small involvement of cooperative and commercial banks in development credit as well as the latters t satisfactory liquidity position over the last few years.

2. The recent development of ARCts operations is a result of the organization's efforts to build up a qualified staff, supplemented, when- ever necessany, by consultants and governmenttechnicians capable of working out and appraising agricultural development projects. ARC still has to acquire much experience and further strengthen its staff, both in quality and quantity, to be able to cope with agricultural developments anticipated by the Government of India during the current Plan period 0

3. lILile ARC has always made profits it was only in 1968/69 that it was first able to pay dividends on the paid up capital at the statutory rate of 4-1/4%. Its portfolio of loans, debentures and securities is sound. Governnent loans made at the present rate of 5-1/2% wlould enable it to meet its commitments. ARC's financial position is satisfactory, but as the cost of its resources is increasing,its refinance rate of 6% per annum has become inadequate. In addition,heavy income tax at the rate of 5510 on its net profits leaves little scope for strengtheningits financial position. AR,Cls summary profit and loss staternents, balance sheets and projected cashflo-w of project funds are appended, Tables 1 to 3.

Commercial Banks

4. As a result of the recent nationalization of the leading Indian commercial banks, the public sector commercial banks, which for over a decade consisted onl,y of the State Bank of India and its seven subsidiaries, have been enlarged considerably. On the basis of data as of December 31, 1968, the public sector banks have about 6,100 offices out of about 7,500 AMNEX7 Page 2

offices for all scheduled commercial banks; total deposits of the new public sector commercial banks stand at about Rs 41,000 million; advances are at Rs 27,000 million and investments at Rs 12,000 million, which account for about 85% of the overall business of commercial banks. Remaining non- nationalized scheduled commercial banks would account for about 13% and non-scheduled banks for about 2%vof the overall banking business.

5. The nationalization of commercial banks implies their compliance with government policy directives toward planned economic growth. First changes in their activities,as emphasizedby Government, will be an increasedtempo of their agriculturallendings, mostly to small farmers, and of their lendings to small industry and small business. At first, not much direct lending to small farmers is expected, but commercial banks would rather be called upon to finance and thereby strengthen the cooperative bank system and especially the primary credit cooperative societies. Implementationon a trial basis would start no later than March 1970 in such states as Andhra Pradesh, Itrsore,1-adhya Pradesh, Rajasthan, Haryana and Uttar Pradesh.

6. Niationalizationdoes not seem to have caused any disturbancein the organization,management and activities of banks concerned. The period of social control of banks has in fact been a transitional period, during wlhich the top management, mainly businessmen, has been replaced by professional bankers. The present situation is still an interim one. Boards have been abolished, but not yet replaced. Until new boards are appointed, each bank is in charge of a custodian, a professional banker, who may be the next chairman. According to the declarations made by the Prime 4i-nister, the Government would not interfere in the day-to-day operations of the nationalized banks, and these would continue to maintain their separate identities.

7. As of August 31, 1969, the amount of lendings to agricultureby commercial banks was at a record high of Rs 2,309 million, a result of the real efforts made over the last few years by many commercialbanks to develop their lending operations in agriculture. However, direct loans to farmers, numbering about 324,,000, amounted to only about Rs 7244,G000

8. During the 8 years ending December 31, 1968, there has been a remarkable annual rate of growth of nearly 14,/'in deposits received by scheduled banks, largely as a result of monetary expansion. The past rate may be difficult to sustain but the on-going branch expansion program in rural areas recommended by the Government may well enable the banking system to raise some additional .'s22,000 million over the current Five- Year Plan (1969-1974) up to a total amount of deposits of R's70,000 million. Owing to such developments, it is anticipated that commercial banks will not be confronted for some time wfith liquidity problems and that ther will be able to increase the availability of credit to agriculturev small industry and small business in accordance with the new lending policies without reducing their support to large-scale business and industry. INDIA

AGRICULTURAL AVIATION_ PROJECT

6 ARC - Balance Sheet as of June 30 1964-19 9 (in Rs tOO0)

Assets 161965 1966 1967 1968 1969 Cash in hand and banks 158 167 19 56 90 58 Loansby way of refinance - - 1,h70 3,030 7,349 25,495 Debentures - 4,500 47,531 66,729 119,038 278,554 Investmentsin GOI Securities 81, 854 99,091 55,209 35,793 8, 408 5,145 Interest accrued on investments 489 423 311 265 211 129 Other assets 20,310 594 2,033 3,117 6,247 13,451

Total Assets 102,811 104,775 106,573 108,990 141,343 322,832 Liabilities

Capital (paid-in)l/ 50,000 50,000 50,ooo 50,ooo 50,000 50,000 Reserves and surplus 1 2 3 4 5 16 Special deposit - 1,131 2,386 3,642 4,897 6,149 Payment by GOI in respect of guaranteed - 259 540 1,074 1,233 1,414 dividends Loans from the GOI 50,000 50,000 50,000 50,000 80,000 257,500 Provision for dividends 1,910 2,125 2,125 2,125 2,125 2,125 Provision for taxation 888 1,224 1,469 2,052 2,,426 2,026 Other liabilities 12 34 50 93 657 3,602 TotalLiabilities 102,811 104,775 106,573 108,990 141,343 322,832

1/ Authorized capital: 25,000 shares of 10,000 each Source: Annualreports of the ARC INDIA

AG9TCULTUIIALAVIATIOli PR4UJECT

ARC - Profit and Loss Accounts for the Years 1968 69 and Profit Appropriations (in RsrOOO)

Income 1963 64 1964 65 1965 66 1966 67 1967 68 1968 69 Interest received: on loans and debentures - 1 1,089 3,057 4,833 10,202 on investments 3,751 3,997 3,257 1,925 1,170 839

Total Income 3,751 3,998 4,346 4,982 6,003 11,042

Expenditurft

Interestpaid - - - - 446 4,419 Salaries, allowances, provident funds 203 279 365 475 913 1,433 Yiscellaneousexpenses 96 107 119 134 297 439 Provision for taxation 1,800 1,765 2,268 2,406 2,380 2,613 Total Expenditure 2,099 2,151 2,752 3,015 4,036 8,904

Net Profit 1,652 1,847 1,594 1,968 1,947 2,138 Total Expenditure and Profits 3,751 3,998 4,346 4,983 5,983 11,042

Profitappropriation Write-offs of preliminary expenses 2 2 2 2 2 2 Reserve funds 1 1 1 1 1 11 Dividend 1,652 1,844 1,591 1,965 1,94)4 2,125 TotalProfits 1,652 1,847 1,594 1,968 1,947 2,138

ro-4 INDIA

AGRICULTURAL AVIATION PROJECT

AgriculturalRefinance Corporation

Projected Cash Flow of IDA Funds

(In Rupees thousands)

Project Year: 2 3 4 5 6 7 8 9 10 11 Total Cash Inflow IDA Funds 10,275 11,362 3,113 - - 24,750 Collections: Principal - - - - 2,569 5,409 6,187 6,188 3,619 778 24,750 Interest (7%) 207 903 1,624 1,733 1,680 1 455 1,049 616 235 27 9,529 Sub-total 207 903 4 1,733 4,249 7,236 6,0 34 0 34,279 Total 10,482 12,265 4,737 1,733 4,249 6,864 7,236 6,804 3,854 805 59,029

Cash Outflow Disbursements 10,275 11,362 3,113 - - - - - _ - 24,750 Repayments:2/ Principal - - - - 2,569 5,409 6,187 6,188 3,619 778 24,750 Interest(5.5%) 163 709 1,276 1,361 1 320 1,143 824 484 184 21 7,485 Sub-total 163 709 1,276 1,361 389 6,5 7,011 67772 803 799 32,235 Total 10,438 12,071 4,389 1,361 3,889 6,552 7,011 6,672 3,803 799 56,95

Net Cash Inflow 44 194 348 372 360 312 225 132 51 6 2,044

1/ From participating coummercial banks.

2/ IDA funds to GOI. INDIA: AGRICULTURALAVIATION PROJECT

ORGANI ZATI ON CHART

…DIRECTORGENERAL AGRICULTURAL REFINANCE DOFCIVIL AVIATION I OF AGRICULTURE GOI I CORPORATION I

I ~~~~~~~~DIRECTORII - ______-_ -_ _ - -_ _- _ _- - _------OF AGRICULTURAL AVIATION

STORES OPFLRATION | IADMINISTRATION DEPUTY DIRECTORLPI OPERATION I/C TRAINING CENTER MAINTENANC SUPPLIS

PROJECT RECORDS CHIEF INSTRUCTORS I I I ACCOUNTS FLIGHT - GROUND - ENGINEER I I

1| I INSTRUCTORS I I I INFORMATION 7 FLIGHT I I I AGRICULTURE I ENGINEER I

3 LICENSED ENGINEERS _

I I I I 34 MAINTENANCE AND I

|I | OTHER PERSONNEL. I

--- PRIVATE OPERATORS COMMERCIAL BANKS

CONTROL. z I/ COMMERCIAL SPRAYING, TESTING OF NEW METHODS, STANDARDS AND SPECIFICATIONS, DEMONSTRATIONS, PROMOTION, LOCUST x

IBRD -4827(4R) AN,EKr 9

AGRICULTURALAVIATTON PROJECT

Appraisal and Lendin Policies

1. ARCwould employ DAAas consultants responsible for the technical and operational appraisal and supervision of subborrowers. No subloan 'would be sanctioned by AIRCwithout DAA's approval. DAAin collaboration with ARC, would -work out and implement appropriate methods for the technical and operational appraisal and supervision of subborrowers.

2. After analyzing DAAMsand the commercial bankstrecommendations ARCwould prepare individual appraisal reports for approval of subloans. Each subloan would involve a loan agreement between the commercial bank and the borrower laying down loan size, conditions, security and other relevant points and an agreement between ARCand the commercial bank fixing conditions of ARCIs refinance. 3. To help assure efficient and increased aerial plant protection, it 'would be a condition of subloans that, private operators at the time of appraisal, give satisfactory proof of empPloymentof trained and qualified agricultural pilots, in numbers adequate, to operate aircraft obtained under the projects. Further subloans would be suspended when aircraft were used mainly for other than project objectives neglecting agricultural work.

4. To help assure financial and operational viability and to protect aircraft investment under the project: (a) subborro'jers would purchase coraprehensive aircraft insurance coverage, and overseas insurance in foreign exchange at the present rate of 75 of aircraft value througlhout the lending period; (b) insurance policies would include a laoss payable clause" under which the commnercial bank holding the policy on the iunit would be reimbursed by the insurer; and (c) aircraft insurance policies would also include "'breach of warranty" insurance providing that, if an operator invalidates terms of the policy and would not be entitled to policy proceeds, the commercial bank would receive from the insurer the outstanding amount of the subloans on the damaged or destroyed equipment.

5e Disbursement on capital expenditures by operators would be through direct payments by commercial banks to suppliers against shipping or canmer- cial documents and as detailed in the refinance agreements betwtBeenARC and the commercial banks. The latter would be reimbursed by ARC on proof of payment thereof. Loan recovery from operators 'would be the responsibility of commercial banks,, who on receipt of repayment, would, without delay, repay to ARCthat part vwhichhad been refinanced by ARCunder the project. ANNEX10

INDIA

AGRICUJLTURALAVIATION PROJECT

Returns to Aircraft Operators

1. Existing as well as new firms are expected to participate in the project. It is important to make a distinction between the two because, for existing fir-s, the only incremental costs are those arising froma direct operation and maintenance of new aircraft and supporting equipmenit and iand vehicles. On the other hand, all costs of a new firm, including office overhead and other administrative expenses, are incremental costs.

2. Incremental revenues for both groups of firms are based on projected aircraft performancegrowth presented in Appendix A. Oper- ating costs are based on basic data supplied by the GOI Aviation Unit and private operators,on estimates of manpower requirementsand on the projected growth rate of aircraft operatingefficiency. Twenty percent of each aircraft'sannual flying hours would be devoted to ferrying, testing, training and other related activities. Thus, direct operating costs for actual aerial spraying have been raised by 25% to arrive at total direct aircraft operating costs. Aircraft depreciation and insurance are based on an estimated 10-year useful life. Insurance premiums are derived from existing averages in India of about 25% for helicoptersand 17% for fixed wing planes, based on aircraft book values. Both long-term and short-terminterest rates have been set at an average of 9%. Income tax provisions are at 33-1/3%, the average level reached after exemptionsand surcharges.

Returns. to Exiting. Firms

3. For existing firms, revenue and cost estimates per new aircraft are shown in section 1 of Appendix B. Based on these revenue and cost projections,internal rates of return per aircraft (and its ancillary equipment and land vehicles) would be: (a) helicopter,26.7%; and (b) fixed wing aircraft, 26.2%. These rates are for units acquired during project year 1; the rates for those acquired in later years should be higher because of expected improvement in the participating firms' operating efficiency.

4. Projected performancein terms of acres sprayed per hour should be easily reached by operators as a result of the training program. Annual operating or spraying hours, on the other hand, would be subjectto market fluctuationsarising from erratic weather and other environmental factors and governmentpolicy changes affectingtotal demand for plant protection services and each operator's share of that demand. To test the sensitivity of returns per aircraft to market fluctuations,operating hours have been varied by 5%, 10%, 15%, and 20% above and below the projected figures in Appendix A. This range (40% or about 124 hours/yearin the fifth year) should cover any probable fluctuation in demand. Within this range, the rate of return on a fixed wing aircraft would vary from 12.6% to 39.0%, and on a ANNEX10 Page 2

helicopter,from 15.2% to 37.6%. On the average, a 5% variationin operatinghours would directly change the rate of return by about 3%. Thus, for a fixed wing aircraft, cutting operating hours by 5% reduces the rate of return from about 26% to 23%; cutting them by 1% brings the rate down to 20%. A summary of rates of return for the assumed fluctuations are shown in section 2 of Appendix B.

5. Break-even analysis of one aircraft's annual operationindi- cates that during project year 1, required break-even operating hours would only be 95% of expected operating hours for helicopter and 97% for fixed wing aircraft. By the fourth year, these break-even points would fall to 76% for helicopter and 79% for fixed wing aircraft and provide more than enough allowance for the 20% maximum decline in annual operating hours expected under paragraph 4, above. Due to the gradual reduction in aircraft insurancepremiums, these percentageswould continue to fall until, at the end of the assets' useful lives, they would be as low as 52% for helicopter and 62% for fixed wing aircraft.

6. The foregoing analysis of rates of return and break-even points on new aircraft acquired by existing firms explain their manifest desires to expand their present fleet and thus assure their participation in the project.

Returns to New Firms

7. To test the financial viability of new entrants into the industry, two models of agricultural aviation firms have been developed. The first firm would own three helicopters, three fixed wing airplanes, a hangar and an office building. Its establishment would parallel project development (Appendix C); its first fixed wing airplane would be put into service at the beginning of the second project year and its first helicopter would earn revenue for 1.5 months during the first year. The second firm would acquire five helicopters and five fixed wing planes but rent hangar and office building spaces. It would have efficiency advantages over the first, both in terms of size and speed of development. One of its helicopters and one of its fixed wing planes would be acquired in the first year and operated for 3 months during that year. These two model firm sizes indicate the range within which most new entities participating in the project would fall. Their aircraft acquisition schedule would be: Project Year 1 Year 2 Year 3 Total 6-Aircraft Firm

Helicopters 1 1 1 3 Fixed wing planes 1 1 1 3 Total 2 2 2 E

10-Aircraft Firm

Helicopters 1 2 2 5 Fixed wing planes 1 2 2 5 Total 2 F F10 ANNEX 10 Page 3

8. AppendixesD to G show projected comparativeincome statements, statements of sources and application of funds and balance sheets for both model firms. All fixed assets purchased during the first 3 years (coinciding with the project's disbursement period) are assumed to be financed from equal amounts of equity contribution and long-term borrowing. Indian firms could currently maintain somewhat higher long- term debt/equity ratios. Thus, a 50:50ratio provides a conservative estimate for the return on owner's equity. Working capital requirements, financed through short-term credits, are based on an average annual business turnover of three.

9. On the basis of these assumptions and those cited in paragraph 2, the two firms would have the following rates of return during the 13-year project period:

On Total Assets On Equity

6-AircraftFirm 12.2% 16.0% 10-AircraftFirm 18.4% 28.6%

10. These rates of return, taken in conjunctionwith the year-to- year profit and cash-flowmovements indicatedin Appendixes D and F should provide adequate incentivesto new firms.

11. As a result of the project, the industry as a whole would benefit financially and gain operational and organizational experience for further expansion. ANNEX20 Appendix A

_3DTA

AGRICULTURALAVIATION PROJECT

Projected Performance Growth per Aircraft

Project Year: 1 2 3 4 5 and later

A. Helicopter

Operating hours per year 285 290 295 300 310

Acres per hour 150 150 155 160 165 Acres per year 42,750 43,500 45,725 48sooo 51,150 B. Fixed SingAircraft

Operating hours per year 285 290 295 300 310

Acres per hour 120 120 125 130 135

Acres per year 34,200 34,800 36,875 39,000 !1l850

Note:

Acres-per-hour and hours-per-year projections are based on Indian weather and crop conditions, including expected rates of multiple cropping, and on basic information from operators and exDeriences of other countries. These figures reflect the inclusion of ultra-low volume work, expected to comprise 10 to 2Go;of total operation, They further take account of work stoppages caused by accidents pr6jected on the basis of an initial attrition rate of 7.5 aircraft per 10,000 flying hours, declining to 5 aircraft/l0,000 hours at project maturity due to improved training. ANNEX10 Appendiz B INIDIA Page 1 AGRICULTURALAVILTMON PROJECT

Analyses of OperatingResults Per Aircraft

1. Revenue and Cost Projectionsby Selected Years (Rupees)

A. Helicopter Year 1 2 3 4 5 10

Investments1/ 531 183 1 020 1,020 Gross revenue 257,250 __10,87 435,000 480,ooo 511,500 51,500 Incrementalcurrent costs: Directflying coste 3/ 19,594 79,750 81,125 82,500 85,250 85,250 Salaries 24,425 97,700 97,700 97,700 97,70C- 97,700 0 & M, land vehicle 1,125 4,500 4,500 4,500 4,500 4,500 General insurance 1,401 5,605 5,605 5,605 5,6o5 5,605 Aircraftinsurance 4/ 30,295 118,151 106,034 93,915 81,798 21,206 Miscellaneous5/ 4,851 19,405 19,405 19,405 19,405 19,405 Incometaxes 67 148 5 483 17,093 28,258 42,518 74,826 Total 81,839 330,594 331,462 331,883 336,776 308,h92

Net profit before depreciationand i3nterest 25,036 104,406 125,788 148,117 174,724 203,008

Depreciationand interest7/ 24 740 93 441 91,601 91 601 89,689 53 356 Net profit ,9-65 3296l7 5616 85,035

B. Fixed Wing Aircraft

Investments 8/ 308,046 1,020 1 020 Gross revenue9/ 6 8,400 278,400 295,000 33l,8J00 334 30 IntrementalcuFrent costs: Direct flying 11,578 47,125 47,938 48,750 50,375 50,375 costs 10/ Salaries-,land vehicles 0 & M and 26,951 107,805 107,805 107,805 107,8n5 107,805 gen.insurance1V Aircraft insurance L 11,117 43,358 38,911 34,464 30,017 7,782 YNiscellaneous5/ 4,582 18,327 18,327 18,327 18,327 18,327 Income taxes 6/ (111) 2,472 9,623 16,502 25,411 39,523 Total 22,60874- 2-5488 31,935 221,ll5

Net profit before depreciationand interest 14,283 59,313 72,396 86,152 102 865 110,688 Depreciationand interest 7/ 14 506 54 369 53 149 53 149 52 043 31 043 Net profit (TIss) ) 4 9 4 4 -~- - - - LAE2YC10 Appendix B Page 2

Notes:

These tables are for aircraft acquired in project year 1. For those acquired in later years, gross revenue, direct flying costs and net profit (before and after depreciation and interest)would be higher due to increased efficiency of firm management and aircraft and field personnel.

1/ Helicopter, Rs 484,725; ancillaryequipment and land vehicle, Rs 46,458. Safety equipment, at Rs 1,020, would need replacementevery third year.

2/ Rs 10/acre.

3/ Rs 275 per spraying hour.

4/ 25% on book value.

5/ At 10% of all incrementalcosts, other than taxes, over the 10 year asset life, distributedevenly over those years. Project year 1 assumes 25% and project year 11, 75% of these costs.

6/ At 33 1/3% of taxable income. For fixed wing aircraft, there would be incone tax saving to the firm in the first year.

7/ Straight-line depreciation, based on 10-year life of all assets, except safety equipmen, which has 3-year life; interest rate at 9%.

8/ Fixed wing plane, Rs 261,588; ancillary equipment and land vehicle, Rs 46,458. Safety equipment, at Rs 1,020, need replacementevery third year.

9/ Rs 8/acre.

10/ Rs 162.50 per spraying hour.

11/ Same amounts as in helicopter.

12/ 17% on book value. ANNEX LO Appendix B Page 3

2. Rates of Return under Varying Assumptions on Effective Aircraft Operating Hours per Year

Annual Operating Hours Difference in as Percentage of Rate Rate of Return Basic Projectionsin of Compared to Basic Appendix A Return Projections A. Helicopter (%) (%) (%)

120 37.61 + 10.90 115 35.05 + 8.34 110 32.28 + 5.57 105 29.15 + 3.24 100 26.71 -

95 24.19 - 2.52 90 21.00 5.71 85 18.06 _ 8.65 80 15.24 - 11.47

B. Fixed Wing Aircraft

120 39.00 + 12.77 115 35.83 + 9.60 110 32.63 + 6.40 105 29.45 + 3.22 100 26.23 _ 95 22.93 - 3.30 90 19.59 - 6.64 85 16.13 - 10.10 80 12.57 - 13.66 ANEX 10 Appendix B Page 4

3. Break-Even Analysis

Required Break-Even Point Operating Hours Projected (Column A as at Operating Percentage Break-Even Point Hours of Column B) /

A B C

Helicopter

Year

1 (1/4 year) 68 71 Y5 4=6nu1.rate (272) (285) (95) 2 268 290 92 3 248 295 84 4 229 300 76 5 212 310 68 6 203 310 65 7 195 310 63 8 186 310 60 9 177 310 57 10 168 310 54 11 (3/4 year) 121 232 52 Annual rate (161) (310) (52) Average 68

Fixed Wing Aircraft

Year

1 (1/4 year) 69 71 97 Annual rate (276) (285) (97) 2 273 290 94 3 254 295 86 4 238 300 79 5 223 310 72 6 218 310 70 7 213 310 69 8 208 310 67 9 203 310 65 10 198 310 64 11 (3/4 year) 146 232 62 Anniualrate (195) (310) (62) Average 74

1/ These figures indicate the percentage of projected operatinghours that should be attained to enable an existing firm to recover all incremental costs related to the operation of a new aircraft acquired in project year 1. ANNEX10 Appendix C

INDIA

AGRICULTURALAVIATION PROJECT

Projected Build-Up of Commercial Aircraft Inventory

Project Summary Category Year 1 Year 2 Year 3 Years 1-3 *...... Aircraft,4umbers.,*,,****9,G0.

Helicopter

Opening ij.ventory 32 1/ 37 48 32

Net addition 5 11 15 31 Ending inventory 37 48 63 63

Fixed WIing Aircraft

Opening inventory 41 1/ 6 57 41

Net addition 5 11 18 34 Ending inventory 46 57 75 ?5

Total ending invientory 83 105 138 138

Total net addition 10 22 33 65

(Replacements)2/ (3) (6) (-) (9)

1/ Estimate as of June 30, 1970: 73 aircraft in operation.

2/ Fixed iLng aircraft only. I:.DIA - AGRICULTUiRALAVIATION PROJECT

Agricultural Aircraft Operator

Income Forecast

(New Firm: 3 Helicopters; 3 Fixed Ming Planes)

Project Year 1 2 3 4 5 6 7 8 9 10 11 12 13 Gross Revenue 53,438 1,070,100 1,880,625 2,376,000 2,538,900 2,538,900 2,538,900 2,538,900 2,538,900 2,538,900 2,474,962 1,269,450 423,150 Operating Costs: Fuel and lubrication 4,050 89,760 152,130 185,625 191,895 191,895 191,895 191,895 191,895 191,895 187,485 95,865 32,010 Maintenance, spares and overhaul 5,400 89,760 152,130 185,625 191,895 191,895 191,895 191,895 191,895 191,895 186,015 95,865 32,010 Outstation expenses 450 10,880 18,440 22,500 23,260 23,260 23,260 23,260 23,260 23,260 22,770 11,620 3,880 Salaries and mges 312,700 556,o00 748,300 819,000 819,000 819,000 819,000 819,000 819,000 819,000 819,000 545,400 215,600 Aircraft insurance 15,148 246,962 387,765 429,178 379, 483 329,788 280,093 230,397 180,702 131,006 81,313 33,130 10,506 Other insurance 7,352 20,590 31,615 35,370 35,370 35,370 35,370 35,370 35,370 35,370 35,130 20,105 8,080 Land vehicle 0 & M 6,ooo 21,000 28,500 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 21,000 12,000 Miscellaneous costs 35,110 103,535 151,888 171,030 167,390 162,421 157,451 152,482 147,512 142,543 136,471 82,298 31,409 Total aurrent operating cost 386,210 1,138,887 1,670,768 1,881,328 1,841,293 1,786,629 1,731,964 1,677,299 1,622,634 1,567,969 1,501,184 905,283 345,495 Net Oper. Profit (Loss) before Depreciation (332,772) (68,787) 209,857 494,672 697,607 752,271 806,936 861,601 916,266 970,931 973,778 364,167 77,655 Depreciation 27 7 17 633 231 5L2714.o964 27LL.096 2711.096 .- 2)4s06 6 ' 50j,77J2 Net Operating Profit (Loss) (359,848) (216,420) (21,717) 220,576 423,511 478,175 532,8140 587,55 642,170 696,83 710,21,204 26,88 Financial Costs: Interest on long-term loans 18,584 72,526 110,086 129,113 129,113 107,594 86,075 64,557 32,278 - Interest on short-term loans 17,379 63,836 94,572 97,740 71,298 46,623 11,964 -

Total financial cost 35,963 136,362 204,658 226.853 200,411 154,217 98,039 64,557 32,278 - -

Net Profit (Loss) before Tax (395,811) (352,782) (226,375) (6,277) 223,100 323,958 434,801 522,948 609,892 696,835 710,259 221,204 26,883 Provision for Income Tax- 174.316 203.297 232.278 236,753 73,735 8.961

Net Income (Loss) 95,811) (352,782) (226,375) (6t277) 223,100 323,958 434,801 348,632 406,595 464,557 473.506 147,469 17,22

Projected Sources and Application of Funds

Sources of Funds

Equity 566,927 444,831 422,832 - - Long-term loans 566,926 444,832 422,831 - - Short-term loans 422,173 508,411 264,976 Operating profit before depreciation 209,857 494,672 697,607 752,271 806,936 861,601 916,266 970,931 973,778 364,167 77.655

Total 1,556,026 1,398,074 1,328,496 494,672 697,607 752,271 806,936 861,601 916,266 970,931 973,778 364,167 77,655 Application of Funds

Investments in fixed assets 1,133,853 889,663 845,663 1,020 3,o60 2,040 1,020 3,060 2,040 1,020 1,020 Operating losses before depreciation 332,772 68,787 Income tax 174,316 203,297 232,278 236,753 73,735 8,961 Debt service - Long-term - repayment 239,098 239,098 239,098 358,648 358,647 interest 18,584 72,526 110,086 129,113 129,113 107,594 86,075 64,557 32,278 Short-term - repayment 101,674 200,738 356,916 468,779 67,453 - interest 17,379 63,836 94,572 97,740 71,298 46,623 11,964 - - Increase in cash and other current assets 53,438 303,262 270,175 165,125 54,300 - - 193,567 320,004 737,633 736,005 290,432 68,694

Total 1,556,026 1,398,074 1,320,496 494,672 697,607 752,271 8Q6,936 861,601 916,266 970,931 973,778 34,167 77,5 INDIA - AGRICULIURAB IJIAT1ON PROJECT

kgricultn*a1 Aircraft Operator Proj ected CmaaieBlneSet

(New Firm 3 Helicopters; 3 Fixed Wing Planes) (as of end of year)

Project Year 1 2 3 4 5 6 7 8 9 10 11 12 13

ASSETS 3,192,635 Current Assets 53,438 356,700 626,875 792,000 846,300 846,300 846,300 1,039,867 1,359,871 2,097,504 2,833,509 3,123,941

Fixed Assets - at Book Yaluie 1/ Helicopters 478,666 890,682 1,254,226 1,108,809 963,391 817,973 672,556 527,138 381,721 236,303 96,945 24,236 - 52,318 13,080 - FW planes 261,588 483,938 680,129 601,652 523,176 444,700 366,223 287,747 209,270 130,794 114,706 101,250 Other fixed assets 366,523 474,187 528,541 479,359 432,217 384,055 334,873 287,731 239,569 190,387 145,722

Total fixed assets 1,106.777 1,848,807 2,462,896 2,189,820 1,918,784 1,646,728 1,373,652 1,102,616 830,560 557,484 294,985 152,022 101,250

Total Assets 1.160,215 2,205,507 3.089,771 2,981.820 2,765,084 2,493,028 2,219,952 2.142.483 2,190.431 2,654,988 3,128,494 3,275,963 3,293,885

LIABILITIES ANDEQUITY

- Current Liabilities 422,173 930,584 1,195,560 1,093,886 893,148 536,232 67,453 - _- - - - Long-term Liabilities 566,926 1,011,758 1,434,589 1,434,589 1,195,491 956,393 717,295 358,647 - - Equity: 1,434,590 Capital stock 566,927 1,011,758 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,693,90k 1,8k1,373 1,859,295 Retained earnings (deficit) (395,811) (748,593) (974,968) (981,245) (758,145) (434,187) 614 349,246 755,841 1,220,398

Total or net eqaity 171,116 263,165 459,622 453,345 676,445 1,000,403 1,435,204 1,783,836 2,190,431 2,654,988 3,128,494 3,275,963 3,293,885

Total Liabilities and Equity 1,160,215 2,205,507 3,089,771 2,981,820 2,765,084 2,493,028 2,219,952 2,142,483 2,190,431 2,654,988 3,128,494 3,275,963 3,293,885

Schedule of Fixed Assets 484,725 a) Helicopters 484,725 969,450 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 969,450 484,725 Less: Allowance for Depr 6,059 78,768 199,949 345,366 490,784 636,202 781,619 927,037 1,072,454 1,217,872 1,357,230 945,214

Net Book Value 478,666 890,682 1,254,226 1,108,809 963,391 817,973 672,556 527,138 381,721 236,303 96,945 24,236 -

523,176 261,588 b) Fixed Wing Planes 261,588 523,176 784,764 7814,7614 784,764 784,764 784,764 784,764 784,764 784,764 784,764 Less: Allowance for Depr - 39,238 104,635 183,112 261,588 340,064 418,541 497,017 575,494 653,970 732,446 510,096 261,588

13,080 - Net Book Value 261,588 483,938 680,129 601,652 523,176 444,700 366,223 287,747 209,270 130,794 52,318

c) Other fixed assets: Safety equipment 2,040 4,080 6,120 6,120 6,120 6,120 6,120 6,120 6,120 6,120 6,120 4,080 2,040 36,000 36,000 36,000 Ground supporting equipment 12,000 24,000 36,000 36,ooo 36,ooo 36,000 36,ooo 36,ooo 36,0oo 36,000 19,310 Special agricultural equipt - 19,310 38,620 38,620 38,620 38,620 38,620 38,620 38,620 38,620 38,620 38,620 88,000 Land vehicles 66,0°0 176,000 242,000 242,000 242,000 242,000 242,000 242,000 242,000 242,000 242,000 154,000 Hangar 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 150,O0O 150,000 Office buildings 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Furniture and fixtures 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500

Total 387,540 530,890 630,240 630,240 630,240 630,240 630,240 630,240 630,240 630,240 630,240 540,200 452,850 Less: Allowance for Depr- 21,017 56,703 101,699 150,881 198,023 246,185 295,367 342,509 390,671 439,853 484,518 425,494 351,600

Net Book Value 366,523 474,187 528,541 479,359 432,217 384,055 334,873 287,731 239,569 190,387 145,722 114,706 101,250 INDIA - AGR'SUL7URAL AVIATION PROJECT

Agricultural Aircraft Operator

mncomeForecast (New Firm: 5 Helicopters; 5 Fixed Wing Planes)

Project Year 1 2 3 4 5 6 7 8 9 10 11 12

Gross Revenue 175,275 1,426,800 3,009,000 3,960,000 4,231,500 4J;231,500 4,231,500 4j231,500 4,231,500 4,231,500 4,019,625 2,538,900 846,300 Operating Costs: Fuel and lubrication 14,685 119,625 253,375 309,375 319,770 319,770 319,770 319,770 319,770 319,770 303,765 191,730 64,020 Maintenance, spares and overhaul 14,685 119,625 243,375 309,375 319,770 319,770 319,770 319,770 319,770 319,770 303,765 191,730 64,020 Outstation expenses to 1,780 14,500 29,500 37,500 38,760 38,760 38,760 38,760 38,760 38,760 36,820 23,240 7,760 Salaries arni wages 339,700 691,600 1,073,400 1,205,800 1,205,800 1,205,800 1,205,800 1,205,800 1,205,800 1,205,800 1,125,800 833,000 442,200 Aircraft insurance 41,413 327,161 625,333 724,724 641,898 559,073 476,247 393,421 310,596 227,771 144,945 66,260 16,565 Other insurance 9,110 29,585 51,880 57,790 57,790 57,790 57,790 57,790 57,790 57,790 52,493 35,620 13,200 Land vehicle O,M 5,250 24,000 42,000 51,000 51,000 51,000 51,000 51,000 51,000 51,000 49,500 33,000 15,000 Rental - bldg and hanger 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 6,750 Miscellaneous 44,012 133,960 232,236 270,906 264,829 256,546 248,264 239,981 231,699 223,416 203,059 138,808 62,952 Total current operating coat 484,135 1,I73,556 2,554,599 2,979,970 2,913,117 2,822,009 2,730,901 2,639,792 2,548,685 2,457,577 2,233,647 1,526,888 692,467 Net Oner. Profit (Loss) tefore Depreciation (308,860) ( 46,756) 454,401 980,030 1,318,383 1,409,491 1,500,599 1,591,708 1,682,815 1,773,923 1,785,978 1,012,012 153,833 Less: Depreciation 25,978 175,554 344,673 428,750 428,749 428,750 428,749 428,750 428,749 428,750 405,771 256,196 85,576 Net Operating Profit (Loss) (334,838) (222,310) 109,728 551,280 889,634 980,741 1,071,850 1,162,958 1,254,066 1,345,173 1,380,207 755,816 68,257 Financial Costs: Interest in long-term loans 11,974 78,908 154,583 192,204 192,204 153,763 115,322 76,881 38,441 - - - - Interest on short-term loans 21,786 71,239 110,468 101,490 39,942 6,320 - - -

Total financial cost 33,760 150,147 265,051 293,694 232,146 160,083 115,322 76,881 38,441 - - - Net Profit (Loss) before Tax (368,598) (372,457) (155,323) 257,586 657,488 820,658 956,528 1,086,077 1,215,625 1,345,173 1,380,207 755,816 68,257 Provision for Income Tax 6,232 273,553 318,843 362,026 405,208 448,391 460,069 251,939 22,752

Net Profit (Loss) (368,598) (372,457) (155,323) 257,586 651,256 547,105 637,685 724,051 810,417 896,782 920,138 503,877 45,505

Projected Sources and Application of Funds Sources of Funds

Equity 442,927 856,663 836,oo0 Long-term loans 442,926 856,663 836,008 Short-term loans 517,895 497,228 338,050 Operating profit before depreciation - - 4555,01 980,030 1,318,383 1,409,491 1,500,599 1,591,708 1,682,815 1,773,923 1,785,978 1,012,012 ',153,833

Total 1,403,748 2,210,554 2,464,467 980,030 1,318,383 1,409,591 1,500,599 1,591,708 1,682,815 1,773,923 1,785,978 1,012,012 153,833

Application of Funds

Investments in fixed assets 885,B53 1,713,326 1,672,016 2,040 4,080 L,080 2,0o0 5,080 4,o80 2,040 4,o80 - - Operatinglosses before depreciation 308,860 46,756 - - Incometax 6,232 273,553 318,85,3 362,026 405,208 44,391 46o,069 Debt servi,e 219 251,939 22,752 Long-term-repayment - - - - 427,120 527,120 427,119 127,119 427,119 interest 11,974 78,908 155,583 192,2015 192,2053 153,763 115,322 76,881 38,541 Short-term-repayment - - - 367,296 .58,305 527,572 - -- interest 21,786 71,239 110,!!68 101,590 39,952 6,320 - - Tncrease in cash and other current assets 175,275 300,325 527!400 317,000 90,500 1,373,083 637,275 721,602 807,967 1,323,492 1,321,829 760,073 131,081 ,0

Total 1,L03?8 2,10,L5551 ______26,467 ___ 9980,030_ 1,31,3813 3 1,509,5i91 1,800,599 1,691,70 ,6215 1,773,923 1,785,.978 1,012,01210212 153,833 INDIA - AIRIGULTURiLL AVI4T19N PR0JlT

Agricultural Aircraft Operator

Projected Comparative Balance Sheets

(as of end of year) (New Firm: 5 Helicopters; 5 Fixed Wing Planes)

Project Year 1 2 3 4 5 6 7 8 9 10 11 12 13

ASSETS

Current Assets 175,275 475,600 1,003,000 1,320,000 1,410,500 1,527,583 2,164,858 2,886,460 3,694,427 5,017,919 6,339,748 7,0u9,821 7,230,902

Fixed Assets - at Book Value 1/ Helicopt*rs 472,607 1,345,112 2,120,672 1,878,309 1,635,947 1,393,584 1,151,222 908,859 666,497 424,134 193,890 48,472 - FW planes 255,0B8 725,906 1,144,447 1,013,653 882,859 752,065 621,271 490.477 359,683 228,889 104 635 26159 - Other fixed assets 132,220 326,629 559,871 406,318 354,805 303,292 249,739 198,226 146,713 93,160 455,967 13 665 2,720

Total fid. assets 859,875 2,397,647 3,724,990 3,298,280 2,873,611 2,448,941 2,022,232 1,597,562 1,172,893 746,183 344,492 88,296 2,720

Total Assets 1,035,150 2,873,247 4,727,990 4,618,280 4,284,111 3,976,524 4,187,090 4,484,022 4,867,320 5,764,102 6,684,240 7,188,117 7,233,622

LIABILlTIES AND EQUITZ

Current Liabilities 517,895 1,015,123 1,353,173 985,877 427,572 ------Long-term Liabilities 442,926 1,299,589 2,135,597 2,135,597 1,708,477 1,281,357 854,238 427,119 - - - - - Equity: Capital stock 442,927 1,299,590 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 Retained earnings (deficit) (368,598) (741,055) (896,378) (638,792) 12,464 559,569 1,197,254 1,921,305 2,731,722 3,628,504 4,548,642 5,052,519 5,098,024

Total or net equity 74,329 558,535 1,239,220 1,496,806 2,148,062 2,695,167 3,332,852 4,056,903 4,867,320 5,764,102 6,684,240 7,188,117 7,233,622

Total Liabilities and gquity 1,035,150 2,873,247 4,727,990 4,618,280 4,284,111 3,976,524 4,187,090 41484,022 4,867,320 5,764,102 6,684,240 7,188,117 7,233,622

4/ Schedule of Rxed Assets:

a) Helicopters 484,725 1,454,175 2,523,625 2,423,625 2,523,625 2,523,625 2,423,625 2,423,625 2,523,625 2,423,625 2,423,625 1,938,900 969,450 Less: Allowance for depr 12,118 109,063 302,953 555,316 787,678 1,030,041 1,272,403 1,514,766 1,757,128 1i999,491 2,229,735 1,890,428 969,450

Net Book Value 472,607 1,3455112 2,120,672 1,878,309 1,635,947 1,393,584 1,151,222 908,859 666,497 424,134 193,890 48,472 - b) Fixed wing plane 261,588 784,764 1,307,940 1,307,940 1,307,940 1,307,950 1,307,950 1,307,950 1,307,940 1,307,940 1,307,940 1,046,352 523,176 Less:. Allowance for depr 6,540 58,858 163,493 294,287 425,081 555,875 686,669 817,463 948,257 1,079,051 1,203,305 1,020,193 523,176

Net Book Value 255,048 725,906 1,144,447 1,013,653 882,859 752,065 621,271 490,477 359,683 228,889 104,635 26,159 - c) Other fixed assets: Safety equipomnt 2,040 6,120 10,200 10,200 10,200 10,200 10,200 10,200 10,200 10,200 10,200 10,200 6,120 Ground support equipnmnt 12,000 36,o0o 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Special agr. equipment - 38,620 57,930 57,930 57,930 57,930 57,930 57,930 57,930 57,930 57,930 57,930 19,310 Land vehicles 88,000 242,000 374,000 374,000 374,000 374,000 374,000 374,000 374,000 375,000 374,000 252,000 110,000 Furniture, fixtures and tools 37,500 37,500 37,500 37,500 37,50o 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500

Total 139,550 360,240 539,630 539,630 539,630 539,630 539,630 539,630 539,630 539,630 539,630 407,630 232.930 Less: Allowance for depr 7,320 33,611 79,759 133,312 184,825 236,338 289,891 341,404 392,917 446,470 493,663 393,965 230,210 Net Book Value 132,220 326,629 459,871 406,318 354,805 303,292 249,739 198,226 246,713 93,160 45,967 13,665 2,720 ANE)l 11

INDIA

AGRICULTURALAVIATION1 PROJECT

EconDmic Justification

Project's Basic Features

1. Expansion and modernizationof India's agriculturalaviation fleet would quadrupletotal acreage aerially sprayed by the end of the 5-gear project developmentperiod, from 1.5 million acres (1968,/69)to 6.4 million acres (Annex 2, Table 1), of which about 3.4 million acres would be generated by new aircraft procured under the project (AppendixA). Aerial plant protectionwould improve crop yields through reductionin field losses caused by pests and diseases and, in cases where farms could receive ground treatment,increase effectivenessand reduce average cost of plant protection services.

2. The projected rise in total acreage aerially sprayed stems from two basic causes: (a) increase in the number of agriculturalaircraft and (b) improvementin the overall efficiencyof India's agricultural aviation industry. Increased efficiencywould result, first of all, from better organizationat three importantlevels of operation: private operators, GOI aviation unit and state governments. Improved coordination among these groups, a campaign to inform farmers of the availabilityand advantagesof aerial plant protection,and a realistic GOI policy aimed at translatingpotential markets into effectivedemand for these services should insure full utilizationof all aircraft acquired under the project as well as those comprising the present fleet. Efficiency improvement would also result from the project's training scheme fcr.agricultural pilots and maintenanceengineers by raising the acreage each aircraft can spray annually. It would further result from the greater competitiongenerated by the industry's expansion,by inducing fleet owners to seek new cost- saving methods of operation. In addition to increasing annual acreage, these efficiency factors would allow reduction in charges to farmers due to lower operators'costs.

India's Rising Need for Plant Protection

3. India's rising need for plant protection services has resulted, among other things, from the country'sgrowing adoption of new high-yielding grain varieties, intensivelycropped in larger and contiguoustracts, which provide insect pests greater food supplies in concentratedareas. These could significantlyraise insect populationsby improving their survival rates, as well as provide hospitable environment for disease growth.

4. Entomologists observe that if an insect specie has a 1->nonth life cycle, all progeny survive, and a 1:1 sex ratio exists, one female laying 200 eggs would generate 20,000 mature insects after 2 montis...In a year's time, this population would rise to two septillion (2 x 10 24) __ ANNEX11 Page 2 a swarm that could cover the earth's entire land surface at least 81 feet deepS Fortunately,this has never happened because normal death rates among insects generally keep pace with their birth rates, leaving their population relativelystable. '2'oodshortages and other environmentalconstraints usually keep survival rates at about 12$, just replacing the 200 eggs' parents and keeping down the number of adult insects.

5. Increasing food supplies would relax one of these environmental constraints and raise the progeny's overall survival rate'. Even if only 1% more progeny could survivethere would be a doubling of total adult population every month; at this geometric rate, insect population would rise over 2,000 times in 1 year. This explains how a relatively slight altera- tion in environmental constraints could result in severe epidemics within a short time.

6. Cultivationand cropping of once untilled lands are generallyac- companiedby destructionof natural wild flora. Consequently,some insects lose their natural hosts and move or perish while those that have depended upon the cultivatedcrops increase in number. Surviving species increase but nonethelesskeep their stable populationsat new plateaus so long as yields are low and intensivemultiple cropping is not adopted. But the introductionof new seeds and better irrigationfacilities have enabled farmers to grow several crops of the same high-yieldingbreeds continuouslyeach year, and greatly improve the environmentin which insect pests thrive. The once harsh dwelling area which kept population levels in check has become a very hospitablehome with abundancefor all, and more. Because insects are so prolific,this means an astronomicrise in their number -- an epidemic.

7. To offset the effects of this environmentalphenomenon and re- store the old equilibriumrequires specific action, such as application of chemicals,biological parasites or other agents to destroy pests or at least keep their populationat previous non-epidemiclevels.

Superiorityof Aerial to Ground Treatment

8. For plant protectionto be truly effective,it is often necessary to treat wide areas simultaneouslyand at certain appropriatetimes. If neighboringplots remain untreated,surviving pests from these tracts can migrate to treated areas once the chemicalstpotency wears off. In addition, plants respondbest to treatment at certain stages of growth. There- fore, unless ground equipment can be operated continuouslyon a massive scale, the effectivenessof ground treatmentis severely reduced. Avail- able evidence in India indicates that this continuousmassive ground operation is not only expensive but also currentlyunattainable because of shortage of equipment and trained workers required to do the task. Aerial treatment, on the other hand, can achieve these objectivesfaster, more cheaply and more evenly, resultingin better utilizationof available chemicals, manpower and capital resources. Page 3

9. In additionto the superiorityof aerialto ground treatment in cases where both can be used,there are areaswhere ground-operated equipment is not practicable.These areas ijclude those where plants have reached a luxuriant growth stage, with fruitsor flowersin bloom,so that to maneuver among them without doing much damageis ratherdifficult, if not completely impossible. Moreover, some crops cannot have their tops sprayed from the ground. In these instances, only aerial application is practicable.

Primary Benefits and Costs

10. The project'scontribution to India'seconomic welfare represents the streamof incrementalnet benefitsgenerated by aircraftfinanced under the project,over the project's13-year life. Thesenet benefitswould be due not only to the expanded acreage receiving aerial treatment but also to increases in per-acre yields of treated areas. Project acreage has been derived on the basis of efficiency growth assumptions shown in Appen- dix A, Annex 10.As a resultof systematicpilot and engineertraining and organizationalimprovements under the project,aircraft performance would rise, reachinga plateauin projectyear 5. By type of aircraft,these 5-yearincreases, in termsof annualacreage, would be: helicopter,19.6%, or compoundannual growth rate of 4.6%;fixed wing aircraft,22.4%, or compoundannual growth rate of 5.2%.

11. Net benefitper acre of aerialspraying depends on whetherantici- patedproject areas can be effectively sprayed from the ground or not. Net benefits from aerial spraying are greater where ground methods are not practicable. Totalproject benefits would, therefore, depend upon how much of total projectarea can possiblybe treatedfrom the ground.

12. Crop yieldestimates, with and withoutthe project,are based on experiments conducted by the National Council of Applied Economic Research (NCAER)!/on pesticideapplication by groundequipment. For projectevalu- ation purposes,these NCAER figures are conservativeinasmuch as (a) ab- soluteyields have increased following adoption of new improved seed varieties sincecompletion of the NCAERexperiments, (b) thesenew varieties are generally more vulnerable to pests and diseases, and (c) their more intensive cultivation has further increased this vulnerability. To derive yield estimates for aerial treatment, NCAER's ground-spraying yields were raised by 5%, a conservative estimate of the superiority of aerial over ground treatment, both in terms of international experience and of prevailing conditions in India (Appendix B).

13. Anotheradvantage of aerialover groundspraying is lower cost. This is mainly due to reduction in chemical cost per acre of about Rs 2.00 -- Rs 12/acrefor groundsprayinig vs. Rs 10/acrefor aerial spraying (Annex 12).

1/ Pesticidesin IndianAgriculture, New Delhi,1967, xiii and 146 pp. ANNEX 11 Page 4

Cost of application,exclusive of chemicals,would result in cost saving of about Rs 0.47 -- Rs 7.20/acre for ground methods and Rs 6.73/acrefor aerial application.

14. Labor costs are based on estimates submittedby the GOI aviation unit, private operators and the GOI Directorateof Economics and Statistics. It is possible that economic rents have been included in projected salaries of agricultural pilots since alternative employment opportunities would offer them lower remuneration. These alternative employments are the Indian Air Force and non-scheduledchartered flights, in both cases paying lower salaries than agricultural aviation. However, the unique training required for agricultural pilots makes their labor market a special one. In addition, India has an acute shortage of this skill due to the discouragingly high risk associated with the 'lo-altitudeflyinC required.

15. Other wage rates are based on India averages. For skilled workers, like maintenanceengineers, accountants,field officers,mechanics and operators of ground equipment, labor costs are based on estimated opportunity cost in alternativeemployments. For unskilled workers,like drivers, office helpers, flagmen and cooks, prevailingbasic wage rates have been used.

Quantitative Analysis

16. The project's economic rate of return tends to be high since, at present farming intensitylevels, the introduction of a single input -- in this case, aerial plant protection -- generates substantial incremental out- puts vis a vis incremental inputs. At the farm level, the evaluation of benefits to farmers has been expressed in increnc-nt2. profit; (Alnnex12, AppenCixesA and B). For the entire project, internal rates of return have been derived under assumptions of the most probable and most realisticallyconservative levels of benefits.

17. The most probable case would be for total acreage, crop yields and crop acreage allocationto be as projected, with half of the project acreage being accessible to ground treatment. The limiting, most conservative case would be where, as a result of project acreage falling short of basic projectionsand allocation of project acreage shifting in favor of lower,benefit crops (e.g.,paddy and cotton),only about 500, ox expectedbene- fits could be realized, and where as much as 80% of aerially treated acreage could be treated from the ground, further reducingbenefits.

18. Based on these assumptions,the project'smost probable economic rate of return would exceed 100%. At the conservative limit, the rate would be about 44% (detailsin AppendixesC and D). ANNEX11 Page5

Other Benefits

19. At the levelof privateoperators, the projectwould provide em- ploymentto differentgroups of skilled,semi-skilled and unskiUed workers. It would affordtraining and experienceto operators,pilots, maintenance engineersand field officersrequired for furtherexpansion of the industry after projecttermination. It would make farmersmore appreciativeof the financd;aladvantages of plantprotection in generaland aerialplant protection in particular, thus serving as catalyst for future market growth. 20. Most of the cropsbenefited are now being imported. If one assumesthat if therewere no project,about50% of incrementaloutput gene- ratedby the projectwould have to be imported,India's net 2oreignexchange savin;,s would be at least US$,1.3 millionannually at full projectdevelop- ment.

21. The projectis the first stageof a long-termprogram of plant protectionthroughout India and, in that context,should have strongcata- lytic effectson an importantagricultural input required for more efficient cultivationof new foodgrainand commercialcrop varieties.It shouldplay an importantpart in the country'soverall program of achievingself- - sufficiency in those crops,and thus make a major contributionto India's agriculturaleconomy. INDIA

AGRICULTURALAVIATI0LI PROJECT

Crop Allocation Project Yr. 1 3 4 5 to 10 11 12 13 ------TIOUSAND ACRESS-

Paddy (30%) 8.0 309.3 690.5 949.5 1,o15.6 1,006.0 647.3 228.1

Wheat (7%) 1.9 72.2 163.0 221.6 237.0 234.7 151.0 53.2

Jowar (8%) 2.1 82.5 186.3 253.2 270.8 268.3 172.6 60.8

Groundnuts (10%) 2.7 103.1 232.8 316.5 338.5 335.3 215.8 76.0

Cotton (25%) 6.7 257.7 582.1 791.2 846.3 838.3 539.4 190.1

Sugarcane (14%) 3.7 144.3 326.0 443.1 473.9 469.5 302.1 106.4

Potato (1%)- 0.3 10.3 23.3 31.6 33.9 33.5 21,6 7.6

Rubber (5%) 1.3 51.5 116.4 158.2 169.3 167.7 107.9 38.0

Total 26.7 1,030.9 2,328.3 3,165.0 3,385.2 3,353.2 2,157.6 760.3

NOTE: Columns may not exactly add up to total figures due to rounding off.

CDH ANIEX 11 Appendix B Page 1

INDIA

AGRICULTURALAVIATIIN PROJECT

Yields and Pricea

I. IncrementalYields due to One Aerial Treatment

Instead of Crops Over no Treatment Ground Treatment --- kg per acre------

Paddy 88.67 21.62 Wheat 192.00 47.00 Jowar (Sorghum) 118.00 37.00 Groundnut 129O0Q 28.00 Cotton 48.23 6.68 Sugarcane 2,924.00 900.45 Potato 243.00 46.23 Rubber 50.00

Sources: National Council of Applied Economic Research, Pesticidesin Indian Agriculture (New Delhi, 1967); Directorateof Economics.audStatistics, Ministry of Food, Agriculture,CD and Cooperation;Mission's estimates.

II. Prices US$ Rs -- per m ton------Rice (Paddy) 72.33 542.50 Wheat 65.00 487.50 Jowar 55.00 412.50 Groundnut 1140.0 713.70 Cotton 187.00 1,420.00 Sugarcane - 50.00 Potato - 7,800.00 Rubber 440.00 3,300.00 ANEX 11 Appendix B Page 2

These are based on the following basic sources:

Rice (milled) - CIF Bombay, US$ 110/~,ton and CIF Madras, US$ 107/m ton; average of US$ 108.50/r ton used. At clean rice/paddyconversion rate of 66-2/3%, and assuming that value of by- products pay for processing cost, this is equivalentto US$ 72.33/m ton of naddy.

Wheat - CIF Bombay, US$ 65/m ton.

Jowar - CIF Bombay, uS$ 55/m ton.

Groundnut (shelled)- CIF Europe - US$ 210/long ton, 1969; US$ 165/long ton, 1975; US$ 160/long ton, 1980; average of 1975 and 1980 used. Conversionrate: Shelled nuts = 70% of unshellednuts, by weight. Freight, handling and shell- ing costs estimated at 15% of -value,of unshellednuts.

Cotton - CIF Europe - US$ 0.258/lb,1973,used. Equivalentto US$ 189.20iaton. Conversion rate: lint - 33-1/3% of seed cotton, by weight. Seed assumed to cover processing and handling costs.

Sugarcane - Domestic average price.

Potato - Domestic average price.

Rubber - Internationalquotations of 24 ¢/lb for 1970 and 25.4 ¢/lb for 1969, scaled down to 20 ¢/lb to provide for declines and freight and handling costs. ANNEX11 Appendix C

INDIA

AGRICULTURALAVIATION PROJECT

Ben&fit-Cost S'treams

Benefits Net Benefits Most Very Most Very Project Probable Conservative Probable Conservative Year Costsl/ Case Case Case Case -Rs '000------

1 10,897 1,534 637 -9,363 -10,260 2 35,011 59,294 24,664 24.,283 -10,347 3 60,132 133,936 55,712 73,804 -4,420 h 59,832 182,048 75,725 122,216 15,893 5 62,000 194,737 81,Oo4 132,737 19,004 6 61,595 194h,737 81,004 133,142 19,409 7 61,180 194,737 81,004 133,557 19,824 8 60,596 194,737 81,004 13h,1i4 20,408 9 60,191 19h,737 81,oo4 134,546 20,813 10 59,716 19h,737 81,004 135,021 21,288 11 58,696 192,894 80,238 134,198 21,542 12 38,343 124,122 51,630 85,779 13,287 13 14.,969 43,726 18)188 28,757 3,219

Internal Rates of return: Most probable case -- over 100% Very conservativecase -- 44%

Assumptions on cases: Most probable -- Projected acreage, crop yields, and acreage allocation among crops are realized;50% of total acreage accessible to ground-operated equipment. Very conservative-- Projected acreage and crop yields fall short of expectationsand acreage allocationshifts to c-ropsgenerating lower benefits *(e.g.,cotton, paddy) so that only half of basic benefit projections would be realized. In addition,as much as 80% of this acreage could be treated from the ground, further lowering net benefit per acre.

1/ See Appendix D for more details. INDIA

AORICULTUIRALAVIATION PROJEET

Project Economic Costs

Project Year 1 2 3 4 5 6 7 8 9 10 11 12 13

------Ps 1000 ------

Investments - Aircraft 6,175.6 9,633.9 10,895.4 Land Vehicles - oper. 418.0 726.0 1,100.0 Equipment 416.5 502.5 576.8 19.0 30.0 33.0 19.0 30.0 33.0 19.0 30.0 33.0 19.0 Buildings 400.0 100.0

Other Tral.uit Costs 1,198.7 1,700.5 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 Adm. Vehicles M.0 44.0 44.0 Furniture and Fixtures 75-0 37.5 37.5

Provision for Aircraft - Replacement 1,053.8 3,310.9 5,318.5 4,880.3 4,254.5 3,846.6 3,445.8 2,850.0 2,442.1 1,981.1 1,505.8 767.2 315.5

Incremental Current Operating Costs - Operators'0 & M 750.6 6,584.6 12,990.5 15,722.4 15,863.3 15,863.3 15,863.3 15,863.3 15,863.3 15,863.3 15,691.9 10,421.8 4,281.5 Chseicals (Rs 10/acre) 267.2 10,309.9 23,282.9 31,650.0 33,852.0 33,852.0 33,852.0 33,852.0 33,852.0 33,852.0 33,532.3 21,576.0 7,602.8 Extension Eervices (Rs 2/acre) 53.4 2.061.9 4,656.6 6,330.0 6.770.4 6,17r.h 6,770.4 6,770.4 6770.o4 6,770.4 6,706.5 4,315.2 1,520.6

Total 10,896.8 35.011.3 60.132.2 59,831.7 62,000.2 61,595.3 61,180.5 60,595.7 60,190.8 59.715.8 58,696.5 38,3143.2 14.969.4

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t AIN?KEX12

LNDIA

AGRICULTURALAVIATION PROJECT

Farm Benefits

1. Farm benefits from the project would arise mainly from reduction in field losses due to pests and diseases, with consequentincreases in crop yields and farm incomes. Appendixes A and B illustratetwo models -- a 5-acre holding in southern India and a 10-acre farm in northern India -- reflecting regional differencesin cropping patterns, yields and degree of need for plant protection. In each model, two alternativesto aerial treatment are given: (a) the farm would receive no plant protection and (b) the farm would receive protection from ground-operated equipment. Yield increments would be higher under (a) than (b). It is expected that about 200,000 farms would receive aerial treatment under the project. Farm-gate prices used are national averages for India.

2. Yield figuresfor paddy,jowar, sugarcane, cotton and potato were derivedfrom the resultsof a studyby the NationalCouncil of AppliedEconomic Research (NCAER) in New Delhi. In the absenceof reliabledata for wheat, the average percentage yielddifferential for rice was appliedto a conservativebut realisticwheat yield level without plant protection. The figures on groundnuts were from a separate study by the Directorate of Plant Protection, Quarantine and Storage. Since all these studies apply to ground treatment, crop yields from protected plotswere uniformlyraised by 5%, a conservativeestimate in view of the many advantagesof aerialover groundtreatment (Annex 11), to derive yields for aerially-treated crops.

3. Some of the crops need more than one treatment to achievethe projected yield differentials. The following assumptions have been made on the number of treatments required by each crop per season: paddy, 3; jowar, 1; wheat,1; cotton,3; groundnut, 1; potato, 2; and sugarcane, 2.

4. Ground application costs are based on current estimates of operating a motorized mist blower costing approximately Rs 1,000 and having a useful life of 3 years, operated about 176 hours per year at an efficiency rate of 1 ac/hour. This mist blower is the most economical ground equipment under Indian conditions. Since other, more costly, equipment are also in use, cost savings would probably be greater than the following cost summary shows.

Plant Protection Cost by Ground Method Rs/ac Capital cost of equipment (at 9% interest rate) 2.25 Other fixed costs 3 12 Fuel 0.64 Operators'wages 0.85 Othervariable costs 0.34 Applicationcost 7.20 Chemicals 12.00 Total cost 19.20 ANNEX 12 Page 2

With aerial applicationcosting an average of Rs 19.00 per acre (Rs 9.00 for fee and Rs 10.00 for chemicals), a farmer saves about Rs 0.20 by shifting fromi ground to aerial treatment.l/ These figures indicate that farms which can be treated by ground methods would derive small cost savings in resorting to aerial treatment. The accompanying farm models show that under current price and wage structures,a 5-ac farm in southern India would only save Rs 2.90 and a 10-ac farm in northern India, Rs 4.40. But in terms of incrementalyields, benefits are quite large and, should, therefore, provide adequate incentives to farmers to participate in the project.

1/ These are financial savings to farmers. Cost savings in terms of real economic resourceswould be about Rs 2.47 (see Annex 11, para. 13). INDIA - AGRICULTURALAVIATION PROJECT

Farmer's Benefit - 5-acre Farm (Southern India)

Yield (kg/acre) Gross IncrementalProduction from jIncremental Gross Value With th Incr ment Cropped Aerial Application (m tons) Farm Gate of ProductiorLR-0 No plant ground aerial Area Over no plant Over ground Price Over no plant Over ground protection application application C-A= } C-B= (acres) protection application (Rs/m ton) protection application protection appliationappiatiD x F= E x F= G x I= H x I= A B C D E F G H I J _ K Crops

Paddy 1,164 1,377 1,445 281 68 3.25 0.913 0.224 950 867 213 Jowar (no spraying) - - - - - 1.25 - - - - - Sugarcane 48,000 54,900 57,645 9,645 2,745 -.5° 4.822 1.372 50 241 69 Seed cotton 276 401 421 145 20 0.75 0.108 0.015 1,500 162 22 Groundnut (in shell) 455 555 583 128 28 1.25 0.160 0.035 1,000 160 35 Pulses (no spraying) - - - - - 1.25 - - - - -

Total 8.25 1,430 339 Total Sprayed .

Summary of Benefits and Costs of Aer&al Application (Rs)

Over no Instead of Plant Ground Protection Application

Incremental Gross Value of Production 1,430 339

Incremental Costs 1. Cost of aerial application: t (a) Aircraft operators fee (Rs 9/acre) 128 (b) Chemicals (Rs 10/acre) 142

Sub-total 271 271

2. Harvesting, etc. 143 34

Total 414 105

Less: Cost savings on ground application (a) Fixed costs 77 (b) Wages 12 (c) Chemicals 171 (d) other materials 9 (e) Miscellaneous 5

Sub-total 274

Incremental Costs 414 31 x

Incremental Net Farm Profit 1 016 308 INDIA - AGRICULTUflALAVIATION PROJECT

Farmer's Benefit - 10-acre Farm (Northern India)

Incremental Production Incremental Gross Value Yield (kg/acre) Gross cropped from Aerial Application(m tons) Farm Gate of Production IR No plant With ground With aerial nent area Over no plant Over ground Price Over no plant Over ground protection application application C-A= C-B- (acres) protection application (Rs/m ton) protection application D x F= E x F= GxI= H x I= A B C 0 E F G N I J K Crops

Paddy 797 870 915 116 44 2.0 0.233 0.087 950 221 82 Wheat 800 945 992 192. 47 3.0 o.576 0.141 750 432 106 Jowar 667 747 785 118 37 2.0 0.236 0.075 60o 142 45 Sugarcane 25,900 29,500 30,975 5,075 1,475 1.0 5,075 1,475 50 254 74 Seed Cotton 276 401 421 145 20 1.5 0.217 0.030 1,500 326 45 Potato 1,456 1,849 1,942 486 93 1.0 0.486 0.092 680 330 63 Groundnuts 465 567 595 130 28 2.0 0.261 O.o57 1,009 261 57 Pulses (no spraying) - - - - - 2.0 _- - - Fodder (no spraying) _ _ _ _ LO

Total 15.5 1.196 473

Total Bprayed 12.5

Summary of Benefits and Costs of Aerial Application(Rs)

Over no Instead of Plant Ground Protection Application

Incremental Gross Value of Production 1,966 473

Incremental Costs 1. Costs of aerial application: (a) Aircraft operator's fee (Rs 9/acre) 194 (b) Chemicals (Rs 10/acre) 215

Sub-total 409 409

2. Harvesting, etc. 196 47

Total 605 456

Less: Cost savings on ground application (a) Fixed costs 116 (b) Wages 18 (c) Chemicals 258 (d) Other materials 14 (a) Miscellaneous 7

Sub-total _ 413

Incremei tal Costs 605 42

Incremental Net Farm Profit 1361 430 Toe5' $ 0,0 A0z ; 0 < t)AN ti T<0f000C$ , 0 Sr;

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