FL Copy Appraisalof the Tarlacirrigation

ReportNo. 521a-Pti FILE Copy Philippines RLASEQ FL COpy Appraisalof the TarlacIrrigation

Public Disclosure Authorized SystemsImprovement Project

December3, 1974 EastAsia and PacificProjects Department Irrigationand Area Development Division Not for PublicUse Public Disclosure Authorized Public Disclosure Authorized

Document of the InternationalBank for Reconstructionand Development

Public Disclosure Authorized InternationalDevelopment Association

Thisreport was prepared for officialuse only by the BankGroup. it maynol be published,quoted or citedwithout Bank Group authorization The Bank Group does not accept responsibilityfor the accuracyor completenessof the report. CURRENCYEQUIVALENTS

US$1.00 = Pesos (t)6.72 1 1.00 = US$0.149

WEIGHTS AND MEASURES - METRIC SYSTEM

1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.62 miles 1 square kilometer (km2) 0.3886 square miles 1 meter (m) = 39.37 inches 1 square meter (m2 ) = 10.76 square feet 1 cubic meter (m3 ) 35.31 cubic feet 1 million cubic meters (Mm3) = 810.7 acre feet 1 millimeter (mm) = 0.039 inches 1 kilogram (kg) = 2.2 pounds 1 cavan (paddy) = 50 kg 20 cavans = 1 metric ton

INITIALS AND ACRONYMS

APIP Aurora Penaranda Irrigation Project BAE Bureau of AgriculturalExtension BPI = Bureau of Plant Industry CRIS = Camiling River Irrigation System DAR = Department of Agrarian Reform NIA = National IrrigationAdministration NISIS = National IrrigationSystems ImprovementStudy PDD Project DevelopmentDivision SM-ORIS San Mfiguel-O'Donnell River Irrigation System TRIS = Tarlac River Irrigation System UPRP = Upper Pampanga River Project PHILIPPINES

APPRAISALOF THE TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Table of Contents

Page No.

SUMMARY AND CONCLUSIONS ...... - i

I. INTRODUCTION...... 1

II. BACKGROUND.. 1

General...... , 1 The Agricultural Sector.. . 2 The Critical Role of Water Development ...... P.... 2 Project Formulation . .e*...... 3

III. THE PROJECT AREA ...... 4

General ...... 4 '.limate ...... ,...... 4 Topography, Drainage and Soils .... 5 Land Tenure and Farm Size . . . 5 Existing Irrigation Facilities ...... 7 AgriculturalProduction ...... 7 Transportation 7

IV. THE PROJECT...... 8

Project Works ...... 8 Water Supply, Demand and Quality . . . 9 Status of Engineering ...... , 10 Groundwater Pilot Project ...... 11 Water Management Training ... 12 National Irrigation Systems Improvement Study .... 12 Cost Estimates ... 13 Financing ... 14 Procurement ...... ,...... ,. 14 Disbursements ...... 15 Accounts and Audit ... 15 EnvironmentalEffects ...... 15

This report is based on the findings of an appraisalmission composed of Messrs.E.G. Giglioli, R.L.P. Harris (Bank), S.J. Baker and H.R. MacDonald (Consultants). -2-

V. ORGANIZATIONAND MANAGEMENT ...... 15

Project Management ...... 15 Supporting AgriculturalServices ...... 17 Recovery of Cost ...... 18 P- VI. PRODUCTION,MARKET PROSPECTS, PRICES AND FARM INCONES ...... 19

Production ...... 19 Market Prospects ...... 20 Prices ...... 20 Farm Incomes ...... 20

VII. BENEFITS AND JUSTIFICATION ...... 21

VIII. AGREEMENTSREACHED AND RECOMMENDATION...... 22

ANNEXES

1. Central Luzon Irrigation Development 2. Climatological Data 3. Land Tenure and Reform 4. Project Works 5. Water Supply, Demand and Quality 6. Groundwater Pilot Project 7. Water Management Training 8. National Irrigation Systems Improvement Study 9. Cost Estimates 10. Equipment List 11. Schedule of Expenditure and Disbursements 12. Organization and Management 13. Supporting Agricultural Services 14. Present and Projected Cropping Patterns and Production 15. Marketing and Prices 16. Crop and Farm Budgets 17. Farm Labor Analysis 18. Economic Analysis

CHARTS

Implementation Schedule No. 8923 Proposed Organization for Project Construction No. 8921 Proposed Organization for Operation and MaintenanceNo. 8920 Proposed Organization for Loan Projects CoordinationNo. 8922 Proposed Cropping Calendars No. 8919 - 3 -

MAPS

Central Luzon Basin No. 10769R Project Area: SM-ORIS and TRIS No. 11137 Project Area: CRIS No. 11138

PHILIPPINES

APPRAISAL OF THE TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECI

SUMMARY i. The Government of the Philippines has requested Bank Group assistance to carry out the Tarlac Irrigation Systems Improvement E'roject located in Central Luzon. The project consists of the rehabilitation of three existing irrigation systems now serving a total area of 21,000 ha and the construction of new systems on some 13,000 ha. The project: also provides for a groundwater pilot project to assess the technical and economic feasibility of supplementing surface irrigation with groundwater - and a training program for water management staff. In addition the project includes provision for carrying out a study of the nationaL irrigation systems to prepare a pipeline of system improvement projects. ii. According to the Bank's Agriculture Sector Survey, an annual total of 50,000 ha of newly constructed or rehabilitated irrigation development on rice lands would have to be carried out over the remaiLnder of the decade to allow the country to achieve foodgrains self-suff:iciency. The modern high yielding rice varieties demand improved water control for optimum results. The proposed project would be the third in a ser:Les of Bank-assisted projects aimed at improving irrigation for rice cropping in Central Luzon, the largest rice producing region in the Philipp:Lnes. The first was the Upper Pampanga River Project (Loan 637-PH) and the second the Aurora-Penaranda Irrigation Project (Loan/Credit 984/472-PH). To date all Bank assisted irrigation projects in the Philippines have been aimed at providing greater water supplies for dry season irrigation by building storage dams. The proposed project would be the first Bank-assisted project to improve and expand existing run-of-the-river systems without providing additional water from storage. iii. Total project cost, including the groundwater and training elements together with the systems improvement study, is estimated at iP 228.5 million (US$ 34.0 million) of which US$12.7 million, or approximately 37%, would be in foreign exchange. The Bank would finance the foreign exchange component as well as US$4.3 million of local currency requirements. Civil works costing US$ 16.2 million would be carried out by contract. Because of their nature the works would not be suitable for international competitive bidding. The total cost of equipment to be put to international competitive bidding would be US$3.5 million. The Government's executing agency, the National Irrigation Administration (NIA), would employ consultants to provide general guidance and expertise and to assist with the training required for the groundwater pilot project, the systems improvement study and the water management training program. The project would take four years to execute. - ii -

iv. The Governmentof the Philippineswould be the borrower and NIA would be the executing agency for the project. All elements of the project would be implementedby the Upper Pampanga River Project (UPRP) office. The UPRP is well staffed with competent personnel and with the employment of consultantswould be able to implement the project successfully. An Agricultural DevelopmentCoordinating Council (ADCC) would be established in the project area to ensure coordination of the Government agencies providing agriculturalsupporting services to the farmers. v. At full development,nine years after project commencement,annual paddy production from the project area is expected to reach 155,000 tons compared with a current level of production of 94,000 tons. The increased productionwould make a contributionto the national campaign for self- sufficiency by providing enough rice to feed a third of a million people per year. vi. Under the Government'sagrarian reform program share cropping has been declared illegal and title to land in holdings of 24 ha or more is now being transferred to the cultivators. When the transfer is completed, ten- tatively the end of 1974, two thirds of the project area lands will be farmed by owner-operatorsand the rest by leasehold tenants of small landlords. The project area is cultivatedby some 17,700 farm familiesworking an average unit of 1.9 ha. The project would result in rises in annual per capita income on an average farm size from about US$95 at present to US$135 at full agriculturaldevelopment in 1983. These levels of income would still be low in comparisonwith the national average. vii. The project would require a tighter cropping timetable to allow for irrigationover a larger area and would not provide for any significant increase in cropping intensity or labor requirements. The economic rate of return of the project is expected to be about 15%. The rate of return is sensitive to increases in cost and delays in benefits. However, even under extremely adverse conditions,the rate of return would not fall below 11%. viii. The proposed project is suitable for a Bank Loan of US$17.0 million for a period of 25 years, including a 7-year grace period. The borrower would be the Republic of the Philippines. PHILIPPINES

APPRAISAL OF THE TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJEC'T

I. INTRODUCTION

1.01 The Government of the Philippines has requested Bank assLstance in financing the Tarlac Irrigation Systems Improvement Project in Central Luzon. The project would provide a dependable water supply to irr:Lgate about 34,000 ha of rice in the wet season and 6,200 ha in the dry season.

1.02 The National IrrigationAdministration (NIA) prepared the feasibility study for the project. This report is based on the findings of an appraisal mission which visited the Philippines in April/May 1974, composed of Messrs. E.G. Giglioli, R.L.P. Harris (Bank), S.J. Baker and H.R. MacDonald (Consultants).

II. BACKGROUND

General

2.01 The Philippines covers about 298,000 km2 scattered over more than 7,000 islands between the Pacific Ocean and the China Sea. The 45 largest islands account for 98% of the area. The populationis around 40 million (1973), growing at 3% per year. Real GNP grew at 5 to 6% during the last decade. Economic performance improved dramaticallyin 1973 when real GNP grew by 10% led by booming exports, strong recovery in agricultureafter the 1972 floods and an improved investment climate. 1974 shows similar buoyancy despite the adverse effects of the energy crisis. Major remaining economic problems are inflation,unemployment and unequal income distribution. Per capita GNP in 1972 was about US$220. 1/

2.02 Out of a total land area of some 30 million ha, more than half is in forests and about one-third under cultivationor in plantations. About 2.0 to 2.5 million ha of fairly level land is still available for growing crops, though some 1.0 million ha of this is cogon grasslandwhich would be hard to reclaim. Bringing this additionalland under cultivationwould be insufficientby itself to meet increasing food needs or to improve rural incomes significantly. These goals call for increasingproduction from currently cultivatedareas through yield improvementsand increased cropping intensitywhere water is available.

1/ World Bank Atlas, 1974. -2-

The Agricultural Sector

2.03 Agriculture accounts for about one-third of net domestic product, one-half of total employment and 70% of commodity export earnings. During the 1960s the rate of growth of agricultural output accelerated gradually and averaged 4.7% per year for the 1965-70 period, stimulated by the spread of improved rice varieties. Employment in agriculture, on the other hand, leveled off toward the end of the decade. Most of the increase in the labor force between 1965 and 1970 was in non-agricultural employment, and the unemployment rate in rural areas has remained high.

2.04 With the growth of agricultural output and little change in employment, productivity per worker in agriculture increased between 1965 and 1970, while non-agricultural labor productivity remained much the same. The result has been to narrow the gap in incomes between workers in agriculture and in other sectors, although agricultural incomes are still substantially lower. Farmers using improved technology, such as the new rice varieties, have shared in the higher incomes, but those continuing in traditional ways have been largely unaffected.

2.05 There is considerable pressure of people on land in the Philippines, where the population density is 131 people/km 2 compared with the Asian average of 86. Lowland areas best suited for rice have been fully occupied for over a decade. Migration is heavy from the overcrowded regions of Central Luzon and the Visayas to the Cagayan Valley in northeastern Luzon and Mindanao in the south.

2.06 Agricultural sector performance will be crucial in determining whether the drive towards a more rapid but more equitable income expansion succeeds. The major goals are self-sufficiency in cereals, particularly rice and corn; expansion of agricultural exports; intensification of agrarian reform; better conservation of natural resources; and strengthening of institutional support. Self-sufficiency in cereals is important not only to strengthen the balance of payments, but also to raise incomes for much of the rural population.

The Critical Role of Water Development

2.07 The Philippines cannot reach self-sufficiency in rice without substantial investment in irrigation expansion and improvement. Performance of irrigation systems in the country falls far short of their potential. The Sector Survey 1/ estimates that, out of a total of 960,000 ha which could be served by existing irrigation systems, only 630,000 ha are served in the rainy season and 254,000 ha in the dry season. Almost all of the irrigated area is devoted to rice. The NIA's gravity systems are the main component. In addition, NIA has constructed or rehabilitated a substantial

1/ IBRD Agricultural Sector Survey, Philippines, May 2, 1973 (Report No. 39a-PH). - 3 - part of the small privately operated communal systems, averaging 250-300 ha. The Irrigation Services Unit, now under NIA's administrative supervision, is responsible for pump irrigation schemes. The 104 NIA gravity systems, varying in size from 130 ha to 83,000 ha, are usually run-of-the- river schemes with insufficient control structures in the canals, inadequate drainage and little provision for access. Even when the systems are new, water distribution is uneven during the wet season and limited during the dry season. Maintenance has been minimal due to shortages of staff and funds and the lack of access roads for maintenance machinery. A vicious circle has developed by which lack of maintenance discourages farmers from paying operation and maintenance charges, which in turn precludes f-urther maintenance.

2.08 This unsatisfactorysituation began to change in the late 1960s. The NIA was reorganized,more advanced irrigation designs were introduced and much higher levels of water management aimed at. SimultaneousLythe need for intensifiedagricultural supporting services on irrigation projects was realized. The Bank-assisted Upper Pampanga River Irrigation Project (Loan 637-PH) (UPRP) and the Angat-Magat Integrated Agricultural Development Project, assisted by the Asian Development Bank, typify the new approach. The pattern of rehabilitation,new constructionand operation exemplified by these projects is essential for large-scalerice production. Indeed, to meet domestic rice demand in the 1970s, a program of rehabilitationand new constructionin the rice lands of 50,000 ha per year will be needed for the remainderof the decade. The proposed Tarlac Irrigation Systems Improve- ment Project would thus fit in well with Government objectives for water resourcesdevelopment.

Project Formulation

2.09 This would be the first Bank-assistedirrigation project in the Philippinesto improve existing run-of-the-riversystems without providing additionalwater to expand dry season cropping. As such it would be a prototype for future projects to be prepared under the proposed National Irrigation Systems ImprovementStudy (NISIS) (paras 4.18-4.19). Such projects are low-cost, quick-yielding, reach large numbers of small farmers and are therefore of widespread relevance for all regions of the Philippines. Although the Central Luzon Irrigation DevelopmentStudy (Loan/Credit984/ 472-PH) will establish investment priorities for irrigation development in the entire Central Luzon basin, it is reasonable to proceed with the Tarlac project at this time for the following reasons:

(a) the improved Tarlac systems would be able to handle additional dry season flows from either storage or groundwater sources. The proposed project would therefore be the logical next step towards intensifying rice production in the Tarlac area. Besides being tech- nically and economically justified in its own right, it would shorten the time to full developmentof future projects identifiedby the Central Luzon Study and/or the proposed groundwaterpilot project (paras 4.12-4.15); -4-

(b) in terms of soils, land use, farm size and existing level of irrigationfacilities, the project area is highly suitable for modernizationof rice cultivation, being similar to the various systems being rehabilitated and expanded under the UPRP;

(c) as an extension of an ongoing project, it would take full advantage of the organizationand facilitiesset up to constructand operate the UPRP. In particular, it would benefit from economiesof scale in operation and maintenanceand developmentof coordinatedagri- cultural supporting services.

III. THE PROJECT AREA

General

3.01 The project is located in CentralLuzon, the largest rice producing region in the Philippines,which contains about 20% of the area planted to rice annually and accounts for 27% of total national production. The mean rice yield in the region is about 30% above the national average. This is due to the existence of irrigation systems in the area and the rapid adoption of high yielding varieties developedby the InternationalRice Re- search Institute (IRRI) and the College of Agricultureof the University of the Philippinesat Los Banos. Irrigationdevelopment in Central Luzon and the role of the proposed project in that development are described in Annex 1.

3.02 The proposed project covers some 34,000 ha located mainly in the province of Tarlac with small portions in Nueva Ecija and Pangasinan, about 120 km northwest of Manila. The project area includes 21,000 ha of rice land in the existing Tarlac River Irrigation System (TRIS), the San Miguel- O'Donnell River Irrigation System (SM-ORIS) and the Camiling River Irri- gation System (CRIS). In addition, the systems would be expanded to include a further 13,000 ha of currently rainfed rice land (see Map 10769R).

3.03 There are a number of small towns scattered throughout the area with populations between 5,000 and 10,000. The larger towns, including the provincial capitalof Tarlac, provide banking, storage and processing facilitiesas well as supplies of inputs to the surroundingagricultural areas. A good highway network and a railroad connecting the project area with Manila ensure an easy inflow of supplies and outflow of produce.

Climate

3.04 The climate in the project area is tropical and monsoonal. Warm temperaturesthroughout the year allow a twelve-monthgrowing season with irrigation. About 80% of the average annual rainfall of 2,000 mm falls in the wet season from May through October, during which heavy rains occur, and typhoonal storms may pass through the area causing floods and some damage to crops and engineering works. The rainfall, together with river flows in the wet season, is generally adequate for a single rice crop. Dry season cropping, however, entails considerably more risk and suipple- mental irrigationsupply is essential for an assured crop. Further climatic details are presented in Annex 2.

Topography,Drainage and Soils

3.05 Lands in the TRIS and SM-ORIS portions of the project area are gently sloping to relativelyflat. The general slope of the land is from west to east. The whole area is dissectedby small creeks or channels serving as natural drainage ways, and, in some instances,as localized irrigationsources. Drainage is mainly to the Chico river forming the eastern boundary of the project. The Chico ultimately drains into the Pampanga basin. Areas adjacent to the O'Donnell and Tarlac rivers are subject to flooding during periods of heavy precipitationand high stream runoff. Lands in the CRIS portion of the project area are more undulating. Mountains flank the western side of the service area and there are several hilly areas within the CRIS boundaries. The flat irrigable area is dissected by a large number of creeks and channels draining to the north and northeast into the Agno basin.

3.06 Soils in the SM-ORIS and TRIS areas are light colored, structure- less, medium to fine textured with slightly acidic reactionsand slow internal drainage. Soils in the CRIS area are dark brown to black, compact, fine textured,with neutral to alkaline reactions,and slow internal drainage. All soils in the project area have good cation holding capacity and can retain appreciableamounts of nutrients for plant growth. The soils are well suited for rice, which has been grown for many years without problems in the project area.

Land Tenure and Farm Size

3.07 Since the beginning of the century successive governmenlsin the Philippineshave introduceda series of laws to improve the lot o.Etenant farmers. Until 1963 the main objectiveswere to define and regulate sharecropping, to restrict grounds for eviction and to encourage a change from sharecropping to cash tenancy. While these measures produced some improvements, inequitable sharecropping remained the main form of land tenture. Since 1963 under the Agricultural Reform Code, the aim has been to gradually transfer ownership of rice and corn lands to the tenant cultivators. The progressionwas to be from sharecropperto leaseholder,to amortizing owner 1/ to full owner-operator. Progress through 1971 was modest, with only about 5% of all sharecroppersaffected by the land reform.

1/ An ex-tenant during the period of purchase of his holding under the Agricultural Reform Code. -6-

3.08 Since the declarationof martial law in 1972, the Government has pursued a vigorous program of agrarian reform aimed at the rapid transfer of land ownership to tenant farmers on rice and corn lands. Presidential D,ecreeNo. 27, the basic legislation of the new program, provides for the immediate transfer to the tenant, whether sharecropper or leaseholder, of t1heland he tills up to 3 ha in an irrigated area and 5 ha in a rainfed area. The landlord may retain up to 7 ha if he tills the land himself. Since there are some 2 million rice and corn farmers on about 4 million ha, of which less than 1 million ha are irrigated, there is little prospect of achieving the 5 ha rainfed and 3 ha irrigated family farms nationwide. Furthermore, some 80% of the landlords have holdings of less than the 7 ha retention limit. The Government does not want to antagonize these small landowners and is looking for an equitable solution. The Department of Agrarian Reform (DAR) plans to complete the transfer to tenants of all land in holdings over 24 ha by December 31, 1974. The next category will most likely be the entire 7 to 24 ha range. In the meantime, to prevent abuses pending the issue of implementinglegislation, evictions are forbidden and sharecroppinghas been declared illegal and is being replaced by cash tenancy.

3.09 DAR surveys show that some 17,700 farm families, averaging six members for a total of 1062,000people, live in the project area. The average farm unit is 1.9 ha with about 60% of the farms, covering 64% of the area, falling between 1 and 3 ha. The farm size distributionis as follows:

Farm Size Farm Holdings Cultivated Area (ha)…_… % -

Less than 1 30 13 1-2 39 34 2-3 21 30 3-4 5 9 4-5 3 7

More than 5 2 7

100 100

As of December 1973 the land in the project area was owned by some 11,500 people, 95% of whom held less than 7 ha. However, this group accounted for only 40% of the area. Two percent of the landowners with 24 ha and above accounted for 13,000 ha or 38% of the land. Under the current phase of the agrarian reform this land is being transferred to some 6,000 tenant cultivators. When this phase is complete, 62% of the project area will be cultivated by about 9,700 owner operators, or 55% of the farmers. Until the Government reaches a decision on what to do with small landlords, it is not possible to determine the ultimate tenure picture. The most likely coutcomewould be a further increase in owner operators, the total dis- appearance of sharecroppingand its replacementby a better controlled and more equitable form of leaseholding. It is unlikely that there would be any significant change in farm size distribution (Annex 3).

Existing Irrigation Facilities

3.10 Approximately 21,000 ha of land in the project area fall within the existing CRIS, SM-ORIS, and TRIS operated by NIA. The three systems, portions of which were completedbetween 1913 and 1959, suffer from insufficient maintenanceand an inadequatenumber of control structures, leading to wasteful use of water in the higher reaches of canals and shortagesin the lower reaches. Only some 5,000 ha can be irrigated during the dry season because of low flows in the Camiling, O'Donnell and Tarlac rivers. Outside the three systems there are small areas served by privately owned pumps and communal irrigationsystems built by groups of farmers using their own funds, with or without financialassistance from the Government. These systems account for only a few hundred hectares and also suffer from water shortage in the dry season.

Agricultural Production

3.11 Rice grown by transplanting is by far the most important:crop in the area. There is some smallholder sugarcane grown in rainfed areas, but farmers switch to rice as soon as there is an assured water supply. In the irrigated areas most farmers have adopted high yielding rice varieties, while in the rainfed areas there is a much greater use of lower yielding but hardier traditionalvarieties. Fertilizer and agrochemicaluse is generally low, particularlyin the rainfed areas. In the irrigatedareas the average yield is 2.5 ton/ha of paddy for both the wet and dry seasons. The yield of rainfed paddy averages 2.3 ton/ha. The low yields are due partly to bad water management and partly to poor farming practices, such as inadequateweeding and insufficientuse of inputs.

3.12 Most farmers rely entirely on animal power for land preparation, but a few employ a combinationof animal drawn and mechanical equipment. Small power tillers are just being introduced. Use of machinery is more frequent in land preparation for the dry season crop where timing is important. Approximatelythree-fourths of the present crop is threshed mechanically. Nearly all mechanical equipment is operated by contractors.

Transportation

3.13 The project area is traversedby National Highway 3 from Manila to northern Luzon via the west coast and the national railroad from Manila to La Union. National Highway 13 runs northwest from Tarlac City through Camiling towards the Lingayen Gulf. An all-weather gravel road running parallel to and east of Highway 3 serves the low-lying rice producing area of TRIS. This road was severely damaged by the 1972 floods but has since been upgraded, and the former wooden bridges have been replacedwith per- manent concrete structures. There is a good network of provincial,municipal and feeder roads connecting the barrios to the municipal towns and - 8 - neighboring provinces. Under the project feeder roads would be rehabilitated and new roads constructed to handle the increased production.

IV. THE PROJECT

4.01 The project would upgrade to standards adopted in the UPRP the existing TRIS, SN-ORIS and CRIS and would extend these systems to include an additional13,000 ha of currently rainfed rice land. It would include:

(a) Rehabilitationof three existing irrigationand drainage systems now serving a total area of about 21,000 ha;

(b) Extension of these systems to serve an additional area of about 13,000 ha;

(d) Procurementof vehicles and equipment.

The project would also provide for a groundwaterirrigation pilot project, a National IrrigationSystems ImprovementStudy (NISIS) and a water management training program. Consultants would be engaged to assist the NIA with the groundwater pilot project, the NISIS and the water management training program. A detailed description of the project works is given in Annex 4.

Project Works

4.02 The TRIS, SM-ORIS and CRIS, now deliveringwater to about 21,000 ha, would be rehabilitatedand upgraded by repairing existing canals and structures and providing additional control structures and turnouts to manage water deliveries more effectively. New irrigation works would be constructedto serve about 13,000 ha of rainfed lands adjacent to the existing service areas. Adequate control structuresand turnoutswould be provided on the canal systems for efficientwater control and delivery.

4.03 The project would be brought to the same standardsof on-farm water distributionand drainage as the UPRP, which are the highest in the country. Rice has been grown in the project area for many years and the land is reasonably level and well laid out with little fragmentation of land holdings. Therefore, no land leveling, boundary realignment or land consolidation would be provided. The canal systems would have a turnout for each 10 ha from which farm ditchesbuilt as part of the project would provide direct delivery to about 80% of all holdings. Each 10 ha block would also be served by a collector drain. With minor exceptionswhere bank erosion now occurs annually, all canals would be unlined. Small buildingswould be provided for Water ManagementTechnologists operating 500 ha of irrigated land Apiece (para 5.04). Some roads would be improved and, where needed, new ones would be built. Road$ for operationand maintenance would be built along the majorcanals, Water S1Ply.Demand and Quality 4.04 lach of the three Tarlac irrigation system gets its water from a separate riversource using its own diversion and conveyance system. There is no regulatory storage azd only 182 of the project area would have water during the dry seaon. Rowever,additional dry season water supplies my be identified by the Central Luzon Irrigation Development Study end/or the proposed groundwater pilot project (para 4.12-4.15). 4.05 TheCRI getsits water supply from theCamiling river. Reliable stream flow records are available for a nine year period. These were extended to 23 years by correlation with the discharge record of thenearby Pilariver. The IN-OR getsIts water supply from theO'Donnell river. A discharge record also available for nine years was extended to 23 years by correlation with the Agnoriver. The Bulsa river is the main water soure for the TRZI. Disaharge records for 13 years were extended to 23 years by correlationwith the Camilingriver. In estimatingthe runoffat the TB divtersionda the eatimatedflow at the SM-ORISdivorsion dam upstroamon the O'onnell riverwee excluded. The recordsof discharge of the three riven are long enough to enoure that reliable syntheisied flows at the river diversions were obtained. 4.06 Water requirements for the project were b"ad on two rice crops Peryeaft Takinginto acunt thehigher fan irrigationofficioncies mPmeted after project development, anticipated conveyance and operational lossesad 1fetitv fatnfall,annual diversion requirements are estimated to total 1.75 a, of Which nearly1.5 a would be required in the dry season. The poposederepptag calendarwould maximise the use of rainfall for both Wet nd drYseason eps without exceedinglocal anpower constraints. 4,0? The atis of the projectarea was determinedfrom simulated PerationstUiAes UiIng the 23 year periodof synthesimeddischarge records al ash diversionand the esttmatedseasonal water requirementsfor rice. The itwigable reas seleeed for the projectand the currentlyirrigated areasare as lelloWnI

J3uGtlBkSSu IR_15 TOTAL 9eleetedIrtrlable Area (ha) WetReason 140000 9,800 10,200 34,000 Dryseason 2o000 2,300 1,900 6,200 urrently IrrigatedAra (ha) Wet feason l,500 4,800 7,350 20,650 Dry Reason i,soo 1,330 1,800 4,650 - 10 -

In sizing the project area, no account was taken of any diversions upstream of the system diversion dams. Such diversions are known to exist along the Tarlac, O'Donnell and Camiling rivers, but only a few of these have approved water rights. These rights do not pose a problem since most of them are applicable only during the rainy season when stream flows far exceed irrigation water requirements,and such rights are normally granted by the Government on condition that they may be canceled if the Government needs the water for water resources development projects. The only issue in- volving water rights concerns the SM-ORIS. The San Miguel main canal runs through the Hacienda Luisita sugar estate. Under I Contract signed in 1926 and amended in 1947, the estate has a right to 2 m /sec of water during the dry season for irrigation and the general needs of the sugar mill. For many years the water has been used only for operation of the sugar mill, and has been returned to the system for use by farmers downstream, outside the estate. Assurances were obtained that the Government would take the necessary action to ensure that irrigation water in the San Miguel irrigation system abstracted by the sugar estate would continue to be returned to the system for use by farmers downstream of Hacienda Luisita.

4.08 Tests of water samples from the Camiling, O'Donnell and Tarlac rivers and from the main canals of each system indicate good water quality with total dissolved solids under 200 ppm. The waters are of low salinity, slightly alkaline and are free of toxic elements. The O'Donnell river since 1913 and the Camiling and Tarlac rivers since the late 1950s have been used for irrigation in the project area without evidence of any harmful effects, and no difficultiesare expected from their continued use. Further details on water supply, demand and quality are presented in Annex 5.

Status of Engineering

4.09 Project planning studies and designs and estimates of the irrigation and drainage systems and associated works were carried out by NIA. Surveys were made of existing canals and laterals, and cross sections were taken at 20 to 100 m intervals to determine excavation quantities. Surveys of the proposed main canals in the extension areas were made to determine construction quantities and existing maps were used for lateral locations and cost estimates. A sample area of drainage requirementswas prepared for each irrigation system to determine unit drainage costs and these where applied to the total area. Farm ditch and drain requirementswithin the rotational areas were also prepared by the sample area method. Canal structure requirementsin the rehabilitationareas were determined in the field by NIA inspectors and costs were estimated for repair, replacement or additions. Structure requirementsin the extension areas were determined accordingto basic irrigation design practices. Operation and maintenance roads were based on canal capacity and needs within the service area, and were checked in the field to ensure that adequate access to project works would be provided. Needed work on river diversion structures was determined from field inspection of each structure. Sufficient investigations have - 11 -

been made to assure that suitable materials are available for construction of canal embankments and maintenance roadways.

4.10 Detailed mapping of the project area is currently underway. Aerial photography was completed in December 1973 and establishment of horizontal and vertical controls was nearing completionin mid-1974. De- tailed topographicmaps at a scale of 1 to 5000 and with a 1/2-m contour interval are being prepared. The topographicmaps of CRIS are scheduled for completionby January 1975 and those for TRIS and SM-ORIS by August 1975. Final designs and cost estimates for the irrigation and drainage systems will be prepared using the topographicmaps and from field surveys and investigations. Final designs are scheduled to begin in August 1975 as the topographicmaps are released.

4.11 The proposed constructionschedule is described in chart:No. 8923. Work on the TRIS and CRIS service areas would begin in 1975 and on the SM- ORIS service area in 1976. The groundwaterpilot project would be carried out in 3-1/2 years and the NISIS in three years. All project works are expected to be completedby June 1978. Water management training would continue through 1979.

GroundwaterPilot Project

4.12 The main problem facing agriculture in Tarlac province and in Central Luzon generally is the lack of a dependablewater supply for year round irrigation. A series of investigationshas been carried out in the Central Luzon basin to assess the possibilitiesof increasing the area under irrigationin both the wet and dry season. Although the main emphasis has been on potential surface water storage projects, some work has also been done on groundwater. The geology of the Philippines is generally favorable to the occurrence of groundwater and exploratory work has been going on both with assistance from the United Nations Development Program (UNDP) and as part of the Bank-assistedCentral Luzon IrrigationDevelopment Study.

4.13 The proposed groundwaterpilot project would follow from and supplement these two ongoing efforts. Its main objectiveswould be to investigate the aquifer system in each of the three Tarlac irrigationareas to evaluate recharge, discharge and storage capabilitiesas well as groundwater movement; to evaluate the technical and economic feasibilityof dry season irrigationby groundwaterpumping; to assess the potential for conjunctive use of surface and groundwater resources in the project area and prepare a preliminary developmentplan if such potential exists; and to provide training for NIA staff in groundwater hydrology and well drilling techniques.

4.14 There would be a 300 ha pilot area for each of the three irrigation systems, with about six productionwells per pilot area serving about 50 ha each. Project works would include the constructionof about 18 wells equipped with deep well turbine pumps and diesel motors, the necessary laterals and farm ditches to connect up with the gravity system, as well as specialized equipment for operating, monitoring and evaluating the pilot - 12 - project. Preliminaryinvestigations in the project area indicate that enough groundwaterof suitable quality is available to justify the proposed pilot investigation. NIA has sufficientdrilling rigs to undertakethe proposed drilling program. The wells would be constructed by NIA personnel and equipment under control of the UPRP organization.

4.15 The Project Development Division (PDD), which is also responsible for the Central Luzon Study, would evaluate results of the pilot project. Consultants would be employed to provide general guidance and expertise as needed to reinforce UPRP staff, and to assist in training selected NIA technical staff in groundwaterresource exploration,use, management and evaluation. After operating the pilot areas for two years, NIA, assisted by consultants,would prepare an evaluation report. Should the results of the pilot project warrant, the report would include a frameworkplan and preliminarycost estimate for the conjunctiveuse of surface and groundwater in the project area. Further details on the proposed groundwater pilot project are provided in Annex 6.

Water MlanagementTraining,

4.16 Irrigationefficiencies on NIA gravity systems are low due to lack of terminal facilities,poor maintenanceand inadequatestaff. NIA has recognized the need for more and better water management staff and is puttirg a Water Management Technologist (WMT) in charge of every 500 ha of irrigated land. The WMTsare all agricultural graduates. The newly recruited staff, including the graduates, is not well versed in water management, crop production aspects of irrigationor in methods of communicationwith farmers. The proposedwater managementtraining program would provide training facilitiesin each of the five UPRP operationaldistricts (para 5.04) to teach water management methods, rice production techniques and farmer organization, over a five year period, to about 300 WMTs required by the UPRP, Penaranda and Tarlac Projects.

4.17 The training program would be based on pilot water management units of 500 ha which would be established in each of the five operational districts. Theoretical training would be reinforced by putting every traintee through a range of field situations on the pilot units where he could apply his new knowledge. The training staff would be drawn mostly from regular NIA personnel with extensive technicalknowledge and field experience. Provisionwould be made for consultantassistance as required. The training facilitiescentered on the pilot units would continue to provide refresher training after the initial five year period and would produce WMTs for other national irrigationsystems. Further details on the proposed water managementtraining program are given in Annex 7.

National IrrigationSystems ImprovementStudy

4.18 The NIA operates about 100 gravity irrigationsystems covering some 400,000 ha and ranging in size from 130 ha to 83,000 ha. The systems are usually run-of-the-river schemes with insufficientcontrol structures in the canals, a marked lack of terminal facilities, inadequate drainage and little provision for access. Tfhe low efficiency of the systems has - 13 - been reduced further by lack of maintenance caused by a shortage of funds and equipment. With assistance from the Bank and the Asian Development Bank, NIA is currentlyupgrading and extending a number of systems in Central and Northern Luzon and in Mindanao. Despite this ambitiousprogram over half the area under the national systems remains untouched and continues to deteriorate.

4.19 The proposed National IrrigationSystems ImprovementStudy (NISIS) would inventory existing NIA systems and select a total of about 150,000 ha with the highest priority for improvement. In addition to economic factors consideration would be given to institution-building aspects and to the general poverty of the region. The area selected would be divided into convenient packages for the preparation of four feasibility grade studies. The first report would be completed by mid-1976 and would be followed at six month intervals by the remaining three studies. In addition to developing a pipeline of system improvement projects, NISIS would develop NIA's project preparation capabilityand review the organizationand implementationcapacity of NIA's regional offices. Further details are provided in Annex 8.

Cost Estimates

4.20 Total project costs are estimated at US$34.0 million, of which US$12.8 million or 37% is foreign exchange. Project costs are based on quantity estimates from feasibilitydesigns and unit prices prevailing in the UPRP area in May 1974. All unit prices were adjusted for inflation to a January 1975 level. Unit prices for equipment, materials and supplies are based on quotations received by NIA, adjusted for expected price increases to January 1975. NIA's costs for design and construction supervision are included under engineering while consultants' fees are included in the cost estimates for the groundwater pilot project, the water management training and the NISIS. A physical contingency factor of 20% was applied to the costs of the irrigation and drainage systems and a factor of 15% was applied to the groundwater pilot project, the water management training and the NISIS. Costs due to expected price increases equal 35% of the cost of the project, including physical contingencies(Annex 9).

4.21 Details of the project costs are presented in Annex 9 and are summarized below: - 14 -

Foreign Local Foreign Total Local Foreign Total Exchange --- Pesos Million------US$ Million------%----

Irrigation Systems 75.7 32.7 108.4 11.3 4.9 16.2 30 Operation & Maintenance Equipment 0.7 10.4 11.1 0.1 1.5 1.6 94 Groundwater Pilot Project 1.5 5.4 6.9 0.2 0.8 1.0 80 Water Management Training 1.8 2.6 4.4 0.3 0.4 0.7 57 NISIS 8.1 6.2 14.3 1.2 0.9 2.1 43 Base Cost Estimate 87.8 57.3 145.1 13.1 8.5 21.6 39

Physical Contingencies 15.3 8.3 23.6 2.3 1.2 3.5 34 Expected Price Increases 39.7 20.1 59.8 5.9 3.0 8.9 34

Total Project Cost 142.8 85.7 228.5 21.3 12.7 34.0 37

Financing

4.22 The proposed Bank loan of US$17 million would finance the full foreign exchange costs and about 20% of the local costs of the project. It would cover 50% of total project costs. The Government would provide the remaining P 114 million (US$17 million) to NIA out of annual budget a- propriations. To ensure the continuous and timely flow of funds, the Government has agreed to set up a special fund for the project and to replenish it at monthly intervals to a level equivalent to the estimated requirements for the next three months. The fund would help ensure rapid payment of civil works contractors, which would help attract small contractors. Establishment of the special fund would be a condition of effectiveness of the loan.

Procurement

4.23 Equipment and vehicles for force account construction, operation, maintenance, the groundwater pilot project, water management training and t:he NISIS, costing about US$3.5 million would be procured after international competitive bidding in accordance with Bank Group Guidelines. A preference limited to 15% of the cif price of imported goods, or the custom duty, which- ever is lower, would be extended to local manufacturers in the evaluation of bids. Procurement of off-the-shelf items costing less than US$10,000 each would be exempted from international competitive bidding and would be purchased through normal government procurement procedures which are satisfactory. The total for all such items would not exceed US$250,000. A detailed list of equipment requirements is given in Annex 10.

4.24 Works on the project service area (US$16.2 million) would be scattered over a large area and include a large proportion of rehabilitation works. These would have to be planned and executed on short notice to avoid the growing season and bad weather and would have to be phased with Lrrigation releases. When similar works were advertised under UPRP the NIA - 15 -

failed to attracteven local contractors. It is unrealistic,however, for NIA to expect to undertakeall of its planned constructionprogram in UPRP, the Aurora-PenarandaProject and the proposed projectby force account. An assurancewas obtained that NIA would investigateways of expanding the execution of civil works by contract, so that the amount of work done by force account would not exceed 20% of the total cost of the work. The balance would be tendered after advertisingaccording to contractingpro- cedures satisfactoryto the Bank.

Disbursements

4.25 Disbursementswould be made at the rate of 100% against the cif cost of directly imported equipment,100% against the ex-factory cost of locally manufactured equipment and 65% for imported equipmentprocured locally. For services of foreign consultants and for overseas training, disbursements would cover the actual foreign exchange cost, while for services of local consultantsdisbursements would be at 60% of total costs. Disbursementsfor civil works would be at the rate of 43% of certified monthly progress payments or expenditures. For civil works contractors' mobilizationand equipment, disbursementswould be at 100% of foreignex- change cost. It is expected that disbursements would be completed by June 30, 1980, approximatelyone year after the end of construction. An estimated schedule of expenditureson the project and a semi-annualdisbursement schedule are given in Annex 11.

Accounts and Audit

4.26 The NIA is a Government agency and its accounts are audited annually by the Government's Corporate Auditor's Office. Assurances were obtained that NIA would maintain separate accounts for the project, and that satisfactorily audited financial statements, together with the auditor s comments, would be sent to the Bank within four months of the close of each financialyear.

EnvironmentalEffects

4.27 There is no schistosomiasis in the project area or in the island of Luzon generally. Malaria is almost non-existent,except for about ten cases per year reported near Capas at the southwestern corner of SM-ORIS. The Government runs an effective control program based on house spraying with residual insecticides. The main health problems in the area are pro- tein deficiencies and enteric diseases. The proposed project would have little impact on these.

V. ORGANIZATIONAND MANAGEMENT

Proj.ect Management

5.01 NIA was created in 1964 and given responsibilityfor developing, operating and maintaining all national irrigation systems in the Philippines. - 16 -

NIA is also authorized by Government to levy and collect water rates from beneficiaries of the national irrigation systems to defray operation and maintenance (0&M) costs. The Government finances the NIA through the sale of bonds or from appropriations. A Board of Directors is responsible for the Agency, and the Administrator, who is appointed by the Board with the approval of the President of the Philippines, handles management.

5.02 A special project office under the direction of a Project Manager was established to carry out the UPRP. The organization has proved effective and NIA has decided to entrust construction of the proposed project to the UPRP. Construction in the three Tarlac systems would be carried out by a newly constitutedDivision, wholly similar to the four Divisionsnow engaged in the same kind of work in the Pampanga and Penaranda service areas.

5.03 The Project DevelopmentDivision (PDD) of UPRP would supervise and evaluate the groundwaterpilot project and would also carry the main bur- den of the NISIS. The PDD was recently created to enhance NIA's project preparation capability and was put into the UPIRPbecause its main task was the Central Luzon IrrigationDevelopment Study. NIA recognizes that the PDD's widening scope of activitiesmakes its position as part of the UPRP :Lncreasinglyanomalous. Assurances were obtained that NIA would review PDD's organizationallocation and consider alternativearrangements which would better integrate the planning and management of foreign assisted projects for which NIA is the executingagency. The reorganizationis expected to be completed by the end of 1975. In the meantime, the location of PDD in the UPRP organization would not impart a regional bias to the execution of the NISIS. The PDD currently consists of some 30 professionals and 80 ;sub-professionals. NIA would strengthen the Division to deal with its increased tasks, and would engage consultants under terms of reference already approved by the Bank to provide guidance, special technical services and training to the staff engaged in both the groundwater pilot project and the NISIS. Assurances were obtained that NIA would provide additional personnel as needed by PDD and that, within three months of loan signature, NIA would engage engineering consultants satisfactory to the Bank for the groundwater project and the NISIS.

5.04 A fifth Irrigation District would be set up within the UPRP organization to operate and maintain the Tarlac systems service area. The latter would be divided into 50 ha irrigationunits. A ditchtender would supervise two such units (100 ha) while a graduateWater ManagementTechnologist (WMT) would control five ditchtenders(500 ha). A Supervisorwould be responsible for a water management divisionwhich includes five WMTs (2,500 ha). Three to four divisionswould constitutea zone under a Superintendent. The proposed Tarlac IrrigationDistrict would consist of three zones. Details of the organization are given in Annex 12 and Charts No. 8920 and No. 8921.

5.05 NIA would appoint a Director to supervise and coordinate the water management training program (Annex 7). The Director would be responsible - 17 -

to the UPRP Project Manager. A Field Supervisor would be attached to each of the five Irrigation Districts to be in day-to-day charge of the program. Training personnelwould be drawn mainly from well qualified and experienced O&M staff and from specializedNIA units such as the AgriculturalDevelopment Division. Provision is made for consultant assistance,should it be required.

Supporting AgriculturalServices

5.06 An Agricultural Development CoordinatingCouncil (ADCC) has been set up in the UPRP to coordinate the work of the various agencies providing services to the farmers. The arrangement is still new, but it appears to be working well. The proposed Tarlac project would be managed as an integral part of the UPRP and should be brought under an ADCC. Since the Tarlac systems are in a different province, a separate ADCC based on Tarlac province would be set up for the proposed project. The UPRP and Tarlac: ADCCs would have some members in common, as both provinces are in the Central Luzon administrative region.

5.07 A number of Government agencies provide extension services in the project area. Under the "Masagana 99" program aimed at increasing rice production, a total of 130 agriculturaltechnicians was used in the project area municipalities. The technicians,all college graduates, came from various Government agencies with the Department of Agrarian Reform supplying the majority. The ratio of extensionworkers to farmers worked oul:at one to 300. Under the project the existing extension coveragewould be strength- ened by addition of the water management staff (para 5.04).

5.08 Current fertilizer consumption in the project area amounlts to less than 4,000 tons per year, with urea accounting for about half the t:otal. At full development the project area would require some 7,000 tons of fertilizer, on the basis of 60 kg/ha nitrogen and 30 kg/ha phosphate per crop season. Existing supply channels would handle the increased demand without difficulty. The certified rice seed requirement at full development would total 400 tons per year and no problems are expected in obtaining the amount.

5.09 The substantialincrease in the irrigated area, slightly higher cropping intensity and better farming practices resulting from the project would require a large increase in production credit. Under the agrarian reform and Masagana programs the Government has strengthend the credit institutionsand eased credit to small farmers, previously dependeat on the landlords for their requirements. A system of "supervised credit" is used which includes the provision of technical services to the borrower to ensure that recommendedpractices, such as variety, fertilizer and agrochemical inputs, are adopted. Under the system no collateral is required. The Rural Banks in the project area and the Philippine National Bank granted loans totalling p 22.3 million (US$3.4 million) for the 1973 wet season crop. At full project development,production credit requirementsare estimated at about P 36.0 million (US$5.4 million) annually. The existing credit institutions would be able to meet the requirement. - 18 -

5.10 The UPRP's Agricultural Development Division would be responsible for monitoring such aspects of the project's progress as: deploymentof extension and water-managementpersonnel, pace of land reform, cropping patterns, use of inputs and credit, incidence of pests and diseases, crop yields and farm incomes. The Division is already carrying out such work o UPRP.

Recovery of Cost

5.11 Republic Act No. 3601 establishing NIA gave it the authority to "collect from the users of each irrigation system constructedby it such fees as may be necessary to finance the continuous operation of the system and reimburse within a period of not less than twenty-five years the cost of construction thereof." NIA's record of irrigation fee collectionhas shown a steady improvement over the last five years. The total collection has risen from P 4.8 million in FY69 to P 7.9 million in FY73. Over the same period the collection rate as a percentage of fees charged has increased from 53% to 65%. The better recovery is attributed to improved and more timely billing, the use of more collectors, rehabilitation of some of the irrigation systems, withholding of water to delinquents and incentive collection bonuses.

5.12 Irrigation fees on the national irrigation schemes are now levied at the rate of P 25/ha for wet season rice and P 35/ha for dry season rice. The NIA Board approved an increase in fees equivalent to two cavans of paddy per ha in the wet season and three cavans in the dry season, to be applied uniformly to all national irrigation systems. At the existing Government support price for paddy the new fees would be equal to P 80 and P 120/ha, respectively. The existing irrigation fees account for about 4% of the current net income of a farmer in the Tarlac systems area, while the new rates would be equal to about 7% of the farmer's current income and about 5% of the estimated net farm income at full development. The O&M costs of the project are estimated P 95/ha/annum (US$14.1). The rates proposed by NIA would cover O&M costs, but would contribute almost nothing toward capital recovery.

5.13 As an exception to the uniform rate policy, the Governmenthas agreed to raise water rates on the UPRP and Aurora-Penarandaproject areas at full development to the equivalent of 3.5 cavans of paddy/ha in the wet season and 4.4 cavans in the dry season. Water rates for the proposed project would be the same as for the UPRP. This would be equivalent to P 140 and P 175/ha in the wet and dry seasons, respectively,at the current official support price, or a weighted average of IL 170/ha for a cropping intensity of 118% over the project area, to be reached gradually over a period of five years from completion of construction. Such a rate would be within the farmers' repayment capacities and yet permit NIA to recover a substantial amount of the investment in the project. At a discount rate of 10%, the present worth of such a charge over the 50-year life of the - 19 - project would be P 48 million. The present worth of the project cost 1/ plus 0 & M costs at 10% is P 130 million, indicating a recovery ratio of about 37%.

5.14 To ensure sound operation and maintenancepractices and an equitable contributionby the beneficiariestoward recovery of the capital cost of the project, the Government has agreed that:

(a) the NIA would make adequate annual budgetary provisions to supply the funds necessary for operation and maintenance of the project. Total annual expenditurefor operation and maintenance in 1974 constant prices is estimatedat P 1.3 million beginning in 1977, rising to P 3.2 million (US$0.5million) thereafter;

(b) irrigation fees would be levied to provide NIA with sufficient funds to maintain and operate the project and to allow for the recovery of investment cost within not more than 50 years, taking into account farmers' incentives and capacity to pay. A gradual increase in irrigation fees over a period of five years from completion of construction to a level equivalent to about 3.5 cavans of paddy per ha in the wet season and 4.4 cavans in the dry season would meet the requirement;and

VI. PRODUCTION,MARKET PROSPECTS, PRICES AND FARMINCOMES

Production

6.01 Upon completion of the project the area cropped would increase from about 38,600 ha per year at present, of which 13,000 ha are rainfed during the wet season, to 40,200 ha of irrigated land. Since the project would not provide additional dry season irrigation water, the cropping intensity would increase only slightly from 114% to 118%. Better water

1/ Cost of investments for the project service area of P 127.7 million excludingprice contingencies. In this analysis both costs and revenues are evaluated at constant prices. - 20 -

control, improved extension services and expanded credit facilitieswould encourage increasedplanting of high yielding rice varieties,heavier fertilizerapplications and greater use of crop protection chemicals. The use of machinery for land preparationand threshingwould increase to meet more exacting crop calendars. It is expected that at full agricultural developmentin 1983 almost all threshingwould be mechanicaland most farmerswould use a combinationof machineryand animal-drawnimplements for land preparation.

6.02 At full development, paddy yields from the wet and dry season crops are expected to average 3.8 and 4.1 ton/ha respectively. It is estimated that in the currently irrigated areas these yield levels would be achieved five years after the introductionof water control,while in the existing rainfed areas the projectedyield levels would be reached six years after the provision of water. Total paddy production from the project area would be about 155,000 tons at full development,compared with 94,000 tons at present and an estimated 104,000 tons in future without the project. Details of present and future yields and productionare given in Annex 14. rsarketProspects

6.03 One of the main goals of Governmentpolicy is to attain self- sufficiencyin basic foods, especiallyrice and corn. The deficit in rice, the main staple food crop, has been a persistentproblem for the Philippines. Based on population forecastsof 50 million in 1980 and assuming that present annual per capita absorptionof milled rice of about 100 kg would remain the same, total demand for rice in the Philippinesin 1980 would be around 5.0 million tons, equivalentto 7.2 million tons of paddy. To meet the higher demand, local production would have to increaseby about 4.5% to 5.0% per year between 1974 and 1980. While the Government'srecent campaign to increase rice productionhas met with considerablesuccess, there is still some doubt about the Philippines'ability to attain self-sufficiencyby the early 1980s. In any event the additionalproduction from the project area should be readily marketable.

Prices

6.04 The Bank projects the world market price of Thai 25%-35% broken rice normally imported by the Philippines to fall from US$450 per ton fob Bangkok in 1974 to around US$190 per ton (at constant 1974 prices) in the 1980-85period. These projectionshave been used to estimate the present and future farm gate prices of paddy in the economic analysis. The corre- sponding farm gate prices fall from P 2,000 per ton (P 100 per cavan) in 1974 to P 910 per ton (P 45 per cavan) in 1980 and beyond (Annex 15).

Farij Incomes

6.05 Farm models have been prepared for three typical farm sizes. The estimated present incomes and those projectedat full developmentfor the three differentmodels are presented in Annex 16 and summarizedbelow: - 21 -

Farm Income /a Present Future Farm Size Rainfed Irrigated Irrigated (ha) …(P)…------

1.0 1,800 2,000 2,800 2.0 3,400 4,100 5,500 3.0 4,700 5,700 7,600

/a Rounded to nearest P 100.

6.06 Taking the 2.0 ha farm as the average for the project area, present net farm incomes before making land amortizationpayments of between P 3,400 (US$505) on rainfed land and P 4,100 (US$610) on irrigated land would rise at full project development to P 5,500 (US$820). There is little informationon off-farm income in the project area, but observationsand interviews in the field indicate that such income is small relative to returns from farm work. Although comparisonsof farm incomes based on farm budgets with income data based on national accounts aggregates must be interpreted with caution, they do present a rough picture of the relative income position of project beneficiaries. The present per capita farm incomes in the project area, based on the farm budget for a 2.0 ha farm and family size of six, vary from P 570 (US$85) to P 680 (US$100),or about 40-45% of the.current per capita GNP of around US$220. At full developmentin 1983 per capita farm income on the same size farm in the project area would rise to P 920 (US$135)which would still be only about 40% of the per capita GNP, which is projected to rise to US$330 by 1983. These comparisonsindicate that the project would not do much to narrow the income gap between the project area and other parts of the country. It would, however, prevent the gap from widening and would set the stage for future improvementsin relative incomes of project beneficiariesif and when dry season irrigation water is available to serve the whole project area.

VII. BENEFITS AND JUSTIFICATION

7.01 The proposed project would increase yields on about 34,000 ha currently dependent on run-of-the-river irrigation and rainfed cultivation b'yproviding better water control, improved drainage and the necessary agricultural supporting services. Rice would be the only crop grown in the area. Assuming a 50-year project life, prices for rice and fertilizer based on the Bank's commodity price projections through 1985 and a seasonally variable shadow wage rate for unskilled farm labor, the economic rate of return on the project would be about 15%. (Annex 18).

7.02 Sensitivityof the rate of return to several of the basic assumptions made in the economic analysis was tested. These factors were chosen to test the project's sensitivity to cost overruns and delays in constructionsuch as - 22 -

those experienced in the development of the UTRP; to likely changes in the terms of trade between agriculturaland manufactured goods; to failure to achieve the project's ambitious cropping calendar; and to difficultiesin hiring additional farm labor in months of peak agriculturalactivity. In no case did the rate of return fall below 11%.

7.03 Improved water management and scheduling of inputs and supporting services throughout the project area would introduce a more taxing cropping calendar and farmers would have to replace some animal draft power by machinery for timely land preparation. Since the project would not provide additionalwater for substantiallyincreased double cropping, it would not give rise to substantiallyincreased use of farm labor. In fact, depending on the rate of mechanizationand adoption of the more intensive cropping calendar, the project might result in a slightly reduced demand for farm labor. On the other hand, the increased rice production would tend to generate additional jobs in the transport, processing,marketing and service sectors. The Government is aware of the employment effect of intensi- fied agriculturein run-of-riverirrigation systems and is doing all it can through the Central Luzon Study and the proposed groundwaterpilot project to identify dry season water supplies, to increase both production and employment. The improved farming practicesbrought about through the proposed project would make it easier to shift to full double cropping if and when dry season irrigationwater becomes available.

7.04 At full agriculturaldevelopment rice import savings due to the project would amount to US$7.2 million per year at the projected world market price cif Manila (in terms of constant 1974 prices). After deducting the incremental cost of imported fertilizersand chemicals, the net foreign exchange savings as a result of the project would amount to about US$6.0 million per year.

VIII. AGREEMENTSREACHED AND RECOMMENDATION

8.01 During negotiations, agreement with the Government was reached on the following principal points:

(a) irrigation water abstracted from the San Miguel section of SM-ORIS for use in the Hacienda Luisita sugar estate and mill would be returned to the systemifor use of farmers downstream of the estate (para 4.07);

(b) NIA would strengthen the PDD to deal with its increased responsibilities under the project and would review its organizational location because of the widening scope of PDD activities (para 5.03);

(c) NIA would make adequate annual budgetary provisions to supply the funds necessary for operation and maintenance of the project (para 5.14); - 23 -

(d) NIA would take all necessary action to ersure full and prompt collectionof irrigation fees; and would gradually increase the level of fees over a period of five years from completion of construction to a level equivalent to about 3.5 cavans of paddy/ha tn the wet season and 4.4 cavans/ha in the dry season (para 5.14).

8.02 A condition of effectiveness of the Loan would be the establishment of a special fund for the project. The Govenmment has agreed to establish the fund and to replenish it at monthly intervals to a level equivalent to the estimqted requirements for the next three months (Para 4.22),,

8.03 The proposed project would be suitable for a Bank loan of US$17.0 million, with a 25 year maturity and a grace period of seven years. The borrower would be the Republic of the Philippines.

ANNEX 1 Page 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Central Luzon IrrigationDevelopment

General

1. The Central Luzon basin covers approximately1,800,000 ha of land in eleven provinces of which about 87% or 1,570,000ha lie in the five provinces of Bulacan, Nueva Ecija, Pampanga, Pangasinan and Tarlac. Som,e 820,000ha are consideredpotentially suitable for irrigated agriculture.

2. Land is one of the main resources in the basin and agriculture, togetherwith agriculturallybased activities,is the major contributor to the region's economy. The principal problem facing agriculture in Central Luzon is the lack of dependable supplies of water for year round irrigation. Rainfall is usually sufficient to support crops during the wet season, but it is erratic as to time and place of occurrenceand is unquestionablyde- ficient during the dry season. In rainfed areas agricultureis limited to the wet season and the land is idle in the dry months. Even on the 190,000 ha of land served by national gravity irrigationsystems in the basilnduring the wet season, only about 30 to 40% are irrigated during the dry season.

3. Mean annual rainfall in the basin varies from 1,600 mm to 3,000 mm. About 90% occurs during June through November. The estimated annual runoff in the basin is over 21,000 Mm3, about 45% originating in the Pampanga river watershed, 50% in the Agno river basin and the remaining 5% from smaller coastal drainage areas.

4. In 1966, a water resources survey team from the U.S. Bureau of Re- clamation (USBR) prepared and submitted to the Government of the Philippines a report on the Central Luzon basin. The report identifiedpotential storage projects within the region, outlining the possible functions of each scheme. The report set the stage for a program of irrigationdevelopment in the basin in which the Bank Group has played a significantpart.

The Upper Pampanga River Project (UPRP)

5. A USBR team prepared the feasibilitystudy of the project which was appraisedby the Bank in late 1968, and financed under Loan No. 637-PH. The project includes the constructionof Pantabangan dam and reservoir on the Pampanga river, the rehabilitationof about 49,500 ha in existing Na- tional IrrigationAdministration (NIA) systems and the constructionof a ANNEX 1 Page 2

new system to serve 34,000 ha. The project will supply enough water to grow two rice crops per year on 78,500 ha, and a wet season crop on 5,000 ha, for a cropping intensity of 194%.

6. The UPRP is the first major irrigationproject in the Philippines with such a high cropping intensity. The degree of on-farm developmenton the project is also markedly in advance of traditionalNIA standards. Build- ing of the project has progressed well; work on the dam is finished and all construction work is expected to be completed by 1975. In the process of building and operating the UPRP, NIA has significantly increased its capa- bilities to deal with large and complex projects. The UPRP office of the NIA, created to carry out the project, has proved to be a highly effective organization.

The Aurora-PenarandaIrrigation Prolect (APIP)

7. The feasibilitystudy for the APIP was carried out by NIA with Bank Group assistance under Loan No. 637-PH. The project was appraised in late 1973 and receives Bank Group assistance under Loan/Credit984/472-PH. The project includes the constructionof two diversion dams to lead water from the Aurora basin through a transbasin diversion channel into the Pantabanganreservoir, the rehabilitationof 16,700 ha of the existing Penaranda river irrigation system and extensionof the system to serve an additional 8,600 ha. The entire 25,300 ha will be supplied with sufficient water to permit double cropping of rice. On-farm developmentwill be at the same level provided on UPRP.

8. The UPRP organization is executing the APIP which is expected to be completed by mid-1978. The project will be handled as an integral part of the UPRP both from the construction and operations points of view. At full development the UPRP-APIP complex will cover about 109,000 ha of irrigated land, supportingsome 45,000 farm families, comprising 250,000 people.

The Central Luzon IrrigationDevelopment Study

9. The APIP includes provision for carrying out an irrigation development study in Central Luzon with the followingobjectives:

(a) to undertakea comprehensiveinventory of the basin's land and water resources;

(b) to review the present status of water resources development in the basin and to determinepresent and future development needs in the light of current governmentplans and policies on irrigation,power, flood control, municipal and industrialwater supply, and other uses of water; ANNEX1 Page 3

(c) to formulatea plan of irrigationdevelopment for the region, giving thorough considerationto other potentia]L beneficialuses of the water resources;and

(d) to identify specific potentialprojects which would meet: immediateand future water requirementsin the basin.

10. The UPRP office of NIA, assistedby consultants,is responsible for carryingout the study, which is expected to be completedby mid-1977. The study will give particularattention to the potentialfor increasing dry season cropping in the basin by developmentof additionalsupplies of water, either from storage or from groundwater. The plan to be prepared under the study will provide guidelinesfor the integratedimplementation of irrigationprojects in a logicalsequence within the region.

The Tarlac Systems ImprovementProject

11. The three existing NIA gravitysystems in Tarlac province are fed by the O'Donnell,Tarlac and Camilingrivers which belong to the Agno basin. The Tarlac systems are the largest existing irrigationsystems in the western section of Central Luzon and their improvementto UPRP standards is an obvious need which does not require confirmation by the Central Luzon Study. The proposed project for improvement of the Tarlac systems would not preclude eventual additionsto the existingwater supplies from storage and/or groundwaterthat might be establishedby the Study. In fact, the substantialphysical improvementof the systems and the better water managementenvisaged in the projectwould facilitatethe effective use of any additionalsources of dry season water that might be developed later. PHILIPPINES

TARlAC IRRIGATION SYSTEMSIMPROVEMENT PROJECT

Climatological Data

Hacienda Luiaita TRainfall1J Jan Feb Mar Apr May Jun Jul A Sep Oct Nov Dee Total

Average (mm) 3.6 11.1 19.9 53.3 21,4.3294.1 333.5 441.2 355.5 163.1 96.8 34J8 2,021.2

Maximum (mm) 21.1 115.6 72.9 229.2 556.3 626.9 1588.8 889.0 640.1 339.1 315.9 156.2 3,449.1

Minimum (mm) 0.0 0.0 0.0 0.0 48.0 82.6 182.4 88.o 101.6 5.6 0.0 0.0 1,389.1 Number of rainy days2 J 2 1 3 5 15 18 24 23 22 10 6 4 133

Relative humidity?' (%) 82 79 73 71 78 85 89 86 89 85 81 83

Tarlac

Temperature2/ Minimum(OC) 19.5 19.9 21.2 22.3 23.0 23.2 23.1 22.9 22.7 22.6 21.2 20.0

Mean (0C) 25.2 26.2 27.1 29.9 28.6 27.0 27.2 27.0 27.1 27.4 26.2 24.4

Maximum (0C) 32.6 33.2 34.8 35.1 34.4 32.3 32.0 31.2 32.2 33.2 32.5 32.1 EvaporationkV (mm) 168 186 235 242 188 136 120 114 110 133 134 146 1,912

1 Period of observation 1951-1972. -/ Periodof obaervation1968-1972. Periodof observation1951-1970. Period of observation 1958-1970. V ANNEX 3 Page 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Land Tenure and Reform

Background

1. Since the beginning of the century successive Governments in the Philippineshave introduceda series of laws to improve the lot of tenant farmers. Until 1963 the principal objectiveswere to define and regulate sharecroppingarrangements by formalizingshare-tenancy contracts, to restrict grounds for eviction, and to encouragea change from sharecropping to cash tenancy or "leaseholding". While these measures produced some improvements,sharecropping remained the main form of tenure. The resulting inequitiesin the distributionof income from land continuedto produce sporadic agrarian unrest.

2. The AgriculturalReform Code (RA 3844) became law in 1963. The aim was to transfer ownership of rice and corn lands to the cultivators by a gradual process, leading to the ultimate abolitionof tenant farming. The first stage in the transitionwould be the replacementof sharecropping by cash tenancy or leaseholdingwith regulated land rentals. The second stage would be the purchase by Governmentof the land farmed by the lease- holders for resale to them, thus transformingthem into amortizingowner- cultivators. The third and final stage would be reached after the new owners had paid off for the land and become freeholders.

3. By 1971, little more than 50,000 sharecroppers,or about:5% of the total, had reached the first stage of leaseholding. The second stage of amortizingownership had been attained by only 3,400 former tenants. Since the declarationof martial law in 1972, the Governmenthas pursued a vigorous program of agrarian reform aimed at the rapid transfer of land ownershipto tenant farmers on rice and corn lands. PresidentialDecree No. 27 (PD 27), the basic piece of legislationof the new program, provides for the immediate transfer to the tenant,whether sharecropperor leaseholder, of the land he tills up to a total of 3 ha in an irrigated area and 5 ha in a rainfed area. The landlord is allowed to retain up to 7 ha providing he cultivatesthem himself. The Decree lays down a system of valuing the land and provides for the tenant to pay for it in 15&-equalannual instalments at an interest rate of 6% per annum.

4. In early May 1974 the Departmentof Agrarian Reform (DAR) had obtained informationon about 600,000 tenantson a little less than 1.0 million ha. While data gathering continues,it is estimated that the total ANNEX 3 Page 2 number of rice and corn tenants is about 1.1 million on some 1.3 million ha owned by about 220,000 landlords. Some 80% of these landlordshave holdings of less than 7 ha. In addition the total number of rice and corn farmers probably exceeds 2 million, while the total area of rice and corn lands is not much more than 4 million ha, of which less than 1 million ha are irrigated. There is therefore little prospect of achieving the objective of 5 ha rainfed or 3 ha irrigated family farms.

5. A recent survey by DAR reports that 38% of the tenants on 24% of the tenanted area are under landlords with holdings smaller than the 7 ha limit set by PD 27 for owner retention. This class of landowner accounts for 83% of all landlords. The Government is anxious not to antagonize the small landowners and is looking for a solution to the problem which would be equitable to both the tenants and the landlords. A possible outcome that is being investigatedwould be a tightly enforced leaseholdwith security of tenure and some form of cooperativeassociation between owner and tenant. To prevent abuses pending the issue of rules and regulations under the various decrees, evictions are forbiddenand sharecroppinghas been declared illegal and is being replaced by cash tenancy. In the meantime, DAR has proceeded vigorouslywith the transfer of land in holdings over 24 ha and by the beginning of May 1974 had issued land transfer certificates to 168,000 tenants covering 300,000 ha in 58 provinces of the Philippines. DAR expects to transfer to the tenants all land in holdings over 24 ha by the end of December 1974.

Situation in the Project Area

6. DAR surveys show that 11,500 people own 38,000 ha in the project area, including about 4,000 ha that are out of command. Some 80% of the owners have holdings of less than 3 ha and 95% have properties of less than the 7 ha limit for possible landlord retention set by PD 27. How- ever this group of owners accounts for only 40% of the area. Owners of holdings of 24 ha and over, the existing operational limit of land reform, account for only 2% of the landlordsbut occupy 38% of the land. The land ownership pattern in the project area by size of holding as of December 1973 was as follows:

Size of Holding Owners Area Owned (ha) No. % Ha

Less than 3 9,193 80 13,024 34 3- 7 1,779 15 5,916 16 7- 12 308 2 3,006 8 12- 24 85 1 1,368 4 24- 50 69 1 2,263 6 50-100 56 ) 1 3,858 10 More than 100 41 ) 1 8,379 22

Total 11,531 100 37,814 100 ANNEX 3 Page 3

There is considerable variation in the degree of skewness of land ownership in the three systems in the project area. The Camiling River Irrigation System (CRIS) shows the least inequalitywith the San Miguel-O'DonnellRiver IrrigationSystem (SM-ORIS)at the other extreme and the Tarlac River Irri- gation System (TRIS.)in the middle. The variations in land distribution between the three systems are as follows:

Size of Holding TRIS SM-ORIS CRIS (ha) % Owners % Area % Owners % Area % Owners' % Area

Less than 7 93 53 76 15 98 80 7-24 6 15 9 6 1 11 More than 24 1 32 15 79 1 9

Total 100 100 100 100 100 100

7. The average farm unit in the area is 1.9 ha with about 60% of the 17,700 farms, covering 64% of the area, falling between 1 and 3 ha. The farm size distribution is as follows:

Farm Size Farms Cultivated Area (ha) (% (,)

Less than 1 30 13 1-2 39 34 2-3 21 30 3-4 5 9 4-5 3 7 More than 5 2 7

Total 100 100

There is little differencebetween the mean CRIS farm size of 1.7 ha and the TRIS averageof 1.6 ha. However, the SM-ORIS average of 3.1 ha is considerablylarger.

8. The tenure situationwithin the project area at the timieof survey in December 1973 was as follows:

Tenure Farmers Area No. % Ha Z

Owner-Operator 3,840 22 7,910 23 Leaseholder 5,805 33 12,556 37 Sharecropper 8,100 45 13,534 40

To tal 17,745 100 34,000 100 ANNEX 3 Page 4

Owner operators accounted for a little more than 20% of the farmers and the remainderwere all tenants, of whom more than half were sharecroppers. The differencesin tenure between the three systems were as follows:

Tenure % Farmers TRIS SM-ORIS CRIS

Owner-Operator 15 36 23 Leaseholder 43 52 9 Sharecropper 42 12 68

Total 100 100 100

Conditions at SM-ORIS and CRIS once again tend to be at opposite ends of the range with TRIS falling between them. CRIS is more isolated than the other two systems, most of the landowners are small, many of the sharecroppers are members of the landlords' families; these factors seem to have produced a more cohesive and conservative attitude. The larger and more uniform farm sizes, higher incidence of owner-operatorsand lease- holders and unusually low proportion of sharecroppersat SM-ORIS are the result of conversionof a large part of the system from an estate to a land settlement after World War II.

9. The DAR plans to complete the issue of land transfer certificates to all tenants on land holdings of 24 ha and over by December 31, 1974. In the project area this would mean the transfer of about 13,000 ha, equivalent to about 40% of the project area, to just under 6,000 tenant cultivators. The attainmentof even such a limited objectivewould result in some 21,300 ha, or 62% of the project area, being cultivatedby 9,700 owner operators, equivalent to 55% of the farmers. Until a decision is reached on the issue of the small landlord it is not possible to determinewhat will be the ultimate tenure picture. The most probable outcome would be a further increase in the number of owner operators, the total disappearanceof sharecropping as a form of tenure and its replacementby a better controlledand more equitable form of leaseholding. However, it is unlikely that there would be any significantchange in the existing farm size distribution. ANNEX 4 Page 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIIIPROVEMENT PROJECT

Project Works

1. Service Area. The Tarlac Irrigation Systems Improvement: Project would improve three existing national irrigation systems currently built to serve 22,700 ha and would extend these systems to serve an additional 11,300 ha. 1/ The improvements would include new water regulating and delivery structures, the construction and/or enlargement of canals and drains and access and maintenance service roads. General features of the! improved irrigation systems would include additional canal structures such as checks, control structures and turnouts to more effectively control water deliveries and to provide water more efficiently to each field as needed. Constant head orifice turnouts to sub-laterals would be provided for water deliveries to rotational areas of about 50 ha. Turnouts would be provided fcor each 10 ha unit from which farm ditches, constructed as part of the project, would convey water directly to most farms. A few farms would still recetive water through their neighbors' fields. Canals, except where specific reaches are identified, would be unlined. Working stations for Water Management Tech- nologists (WMT) would be provided for about each 500 ha of irrigated land. The principal works are discussed separately for each irrigation system and are summarized in Table 1.

2. The Tarlac River Irrigation System (TRIS) was constructedin 1959 for an area of 8,600 ha, but only 8,500 are irrigated. The system would be improved by repairing canals and structures and constructing additional sub-laterals, farm ditches, turnouts, drains and associated works. New irrigation works would be constructed to serve extension areas of about 5,400 ha. Concrete lining would be provided for 1.2 km of the main canal in two reaches downstream from the canal headworkswhere bank erosion occurs annually. The intake structure and main canal would be rehabilitated but would not have to be enlarged to serve the extension area since they were designed to serve 18,000 ha. Extension area "A" would be served by extending the main canal 9.3 km and by enlarging Lateral F. Two new laterals branching from Lateral F, with a total length of 13 km, would also be constructed. Extension area "B" would be served by extending Lateral D 9.3 km. Additional laterals with a total length of 17 km would be constructed.

1/ For explanation of discrepancies between area irrigated of 21,000 ha and area "served" of 22m700 ha, see paras 2-4 below. ANNEX 4 Page 2

3. The San Miguel-O'DonnellRiver IrrigationSystem (SM-ORIS)is the oldest of the three systems. The San Miguel portion was completed in 1913 and the O'Donnellportion in 1927. The existing system covers 5,100 ha althoughonly 4,800 ha are currentlyirrigated. The system would be improved and new irrigationand drainage facilitieswould be constructedfor a 4,700 ha extension. The existing canal intake structure,which serves the main canals for both the San Uigueland O'Donnell sub-systems,would be replaced by a new intake structurewith a capacity of 19 m3/sec instead of the present 11 m3/sec. The sluice gates on the diversion dam would be repaired. Concrete lining would be placed in the San Miguel main canal for the first 5.6 km to stabilizethe canal banks. The O'Donnell main canal would be enlarged for the first 5 km. Laterals E and E-1 would also be enlarged for a combined distance of 6 kniT.

4. The Camiling, Piver Trrigation Systen (CRIS) was completed in 1957. Tlie existing system covers 9,000 ha, although only 7,350 ha are currently irrigated. The system would be improved in the same way as TRIS and new irrigation and drainage works would be provided for a 1,000 ha extension area. The concrete ogee weir section of the diversiondam would be resur- faced and the sluice gates in the dam would be repaired. The intake barrel at the head of the main canal would be desilted and rock excavation would be performed in the first 100 P. of the canal to lower the invert to design grade. The intake structure and canal would not lhave to be enlarged since they were designed to serve 10,000 ha. INo concrete lining would be required in the main canal. Lateral C would be enlarged from a capacity of 1.9 m3 /sec to 4.0 m3 /sec for a distance of 5 km. NIewcanals with a total length of 10 km would be constructed.

5. Roads. Roads would be constructedon the canal banks according ito the following criteria: for canals and laterals with a design capacity greater than 5.0 m3 /sec, operation and maintenance roadways would be provided on both banks; for canalswith capacitiesbetween 2.0 and 5.0 m /sec, a road would be provided on only one bank; and no roadwaywould be provided for waterwayswith capacitiesless than 2.0 n3 /sec. In addition,the existing roads in the irrigated areas would be improved by widening and gravel surfacing.

6. On-Farm Water Distributionand Drainage. The proposed level of on-farmwater distributionand drainage is similar to what is being implemnented on the UPRP and would be a substantial improvement over the existing system which makes no provision for access or for distributionbeyond the sub- lateral. Rice has been grown in the project area for many years and the land is reasonably level and well laid out with little fragmentation of land holdings. Therefore no land leveling, boundary realignment or land consolidation would be provided at this stage. The NIA is now building a 1,000 ha pilot scheme on the UPRP to test the feasibility, costs and local acceptability of full on-farm development, including land consolidation, ANNEX 4 Page 3 land levellingand individual farm access to irrigationand drainage. The pilot scheme will determine the effects of full on-farm development on yields, ease of operations and efficiencyof water use and the findingswould be applicableto the proposed project as well as the rest of the UPRP. ANNEX4 Table 1

PHILIPPINES

TARLACIRRIGATION SYSTDES IMPROVEMENT PROJECT

Summary of Irrigation Facilities to be Provided or Rehabilitated

TRIS SM-ORIS CRIS Total

Rehabilitation Area (ha) 8,600 5,100 9,000 22,700 Main Canal Kkm) Rehabilitation 17 21 28 66 nmlargement 0 5 0 5 Laterals (km) Rehabilitation 162 109 262 533 Enlargement 6 6 5 17 Drains (km) 143 113 238 494 Farm Ditches (km) 436 261 533 1,230 Farm Drains (km) 373 131 313 817 Cross Drainage Structures 2 4 12 18 0&M Roads w/Project (km) 112 92 138 342

Extension Area (ha) 5,400 4,700 1,200 11,300 Canals & Laterals (km) 60 49 10 119 Drains (km) 89 109 26 224 Farm Ditches (km) 335 304 62 701 Farm Drains (km) 234 125 35 394 Cross Drainage Structures 3 1 2 6 O&M Roads (km) 42 36 7 85 ANNEX4 Table 2

PHILIPPINES

TARLACIRRIGATION SYSTBKS IMPROVEMENT PROJECT

1/ IrrigationFacilities - Cost/Ha.7

System s TRIS a4-ORIS CRIS Average

------(US$/ha)------

1. REHABILITATION

a) Canal system 105 251 109 139 b) Drainage system 65 53 79 68 c) Road system 44 35 41 41 d) On-farm distribution 141 147 158 149 and drainage Sub-Total

2. EXTENSIONAREA

a) Canal system 140 268 192 199 b) Drainage syptem 63 55 66 60 c) Road system 26 58 25 39 d) On-farm distribution 180 187 150 180 and drainage Sub-Total 949 & im UR

TOTAL 4214

1/ Not including contingencies (20%) and engineering supervison and administration (10%). ANNEX 5 Page 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Water Supply, Demand, and Quality

1. Water Supply. Each of the three Tarlac irrigation systems gets its water supply from a separate river source using its own diversion and conveyance system. In the dry season some use is also made of return flows and water found in small localized ponds and tributary streams. There is no regulatory storage on any of the systems and none would be provided with the project. The project would not develop new irrigation supplies, but would improve and extend existing irrigation systems and, by using water more efficiently,would enable them to serve an expanded area. Only 18% of the project area would have water during the dry season. However, additionalwater supplies for expanding dry season irrigation may be identified for future developmentby the Central Luzon Irrigation Development Study (Loan/Credit984/472-PH) and/or the groundwaterpilot project (Annex 6).

2. The Camiling River Irrigation System (CRIS) gets its water supply from the Camiling river. Reliable streamflow records for the Camiling river at a gauging station about 3 km upstream of the Magsaysay Diversion dam are available from March 1964. The monthly discharge records of this station correlate closelywith monthly runoff of the Pila river, which has discharge records dating from 1946. Therefore, flows of the Camiling river at the gauging station were synthesized from the discharge record of the Pila river for the period 1946 to February 1964. The flows at the diversion dam were then correlated on an area basis with the actual and synthesizeddischarge at this station to obtain correlatedmonthly flows for project use.

3. The San Miguel-O'DonnellRiver Irrigation System (SM-ORIS) gets its water supply from the O'Donnell river at a diversion point downstream of the confluenceof the Bangat and O'Donnell rivers. The discharge records of the O'Donnell river at a gauging station between the confluence and the diversionpoint proved unreliable. Therefore, a discharge record at the diversionsite was developed on an area basis from the actual and synthesized discharge records at a gauging station on the O'Donnell river about 5 km upstream of the confluence. These records date from November 1958 to November 1967, and correlate closely with those of a gauging station on the Agno river which date from September 1945 to December 1971. The Agno river recordswere used to extend the O'Donnell records from 1946 to October 1958 and from December 1967 to December 1971. ANNEX 5 Page 2

4. The Bulsa river is the main source of water for the Tarlac River IrrigationSystem (TRIS). The diversion dam is located just downstreamof the confluenceof the Bulsa and O'Donnell rivers on the Tarlac river. Dis- charge records for the Bulsa river at a gauging station about 15 km upstream of the diversion dam are available from August 1960. This record was extended back to 1946 by correlationwith the Camiling river discharge record. The total flows at the diversion dam were then computed on an area basis using these recorded and synthesizedflows. In estimating the runoff at the TRIS diversion dam the estimated flow at the SM-ORIS diversion dam upstream on the O'Donnell river was excluded.

5. Water Demand. It was assumed that transplantedrice would be the only crop grown in the project area in both the wet and dry seasons, using 120-day, non photosensitivevarieties. Water requirementswere based on the following cropping calendar:

Dates Operation Wet Season Dry Season Land Preparation and Nursery mid-MIay - mid-Aug. end Sept. - end Nov. Transplanting early July - late Aug. end Oct. - early Dec. Harvesting late Sept. - late Nov. late Jan. - late Feb.

6. Land preparation and nursery were estimated to take 25 days with water requirementsfor saturation, flooding, evaporationand percolation of 280 mm in the wet season and 240 mm in the dry season. The consumptive water use for rice was estimated using the Class A Pan EvaporationMethod since previous studies by NIA and the United States Bureau of Reclamation in Central Luzon showed good correlationwith this method. Pan evaporation data are available in the project area from 1958. Field percolation losses were estimated to be 2.0 mm per day based on permeabilitystudies in repre- sentative parts of the project area. The effective rainfall was determined from observed daily rainfall records, allowing water depth to fluctuate with the growth of the rice plants and limiting maximum depth to 150 mm.

7. Overall irrigation efficiencywas estimated to be 39% in the wet season and 48% in the dry season at full development,based on farm irrigation wastes of 42% in the wet season and 30% in the dry season, system operation losses of 15% and canal seepage losses of 20%. Monthly project water requirementsand average river flows for each irrigationsystem are shown in Table 1. Seasonal and total annual diversion requirementsare developed in Table 2.

8. The size of the project area was determined from simulated operation studies using the 23-year period of synthesized discharge records at each diversion and the estimated seasonal water requirementsfor rice. The cropping calendar was chosen to maximize the use of rainfall without ANNEX5 Page 3 exceeding local manpower constraints. No use of return flow or other localized water sources was assumed, although as much as 10% of the area currently irrigated in the dry season uses water from these sources. This conservative 'assumption will offset lower farm irrigation efficiencies during the project development period. Irrigation losses were limited to a nominal 15% in each season for 20 out of the 23 years of study. The shortagesoccurred mainly in dry season months, although some shortages were indicatedin the wet season as well. The irrigable areas selected for the project and the currentlyirrigated areas are as follows:

IrriRation System TRIS SM-ORIS CRIS Total

Selected IrrigableArea (ha) Wet Season 14,000 9,800 10,200 34,000 Dry Season 2,000 2,300 1,900 6,200

CurrentlyIrrigated Area (ha) Wet Season 8,500 4,800 7,350 20,650 Dry Season 1,500 1,350 1,800 4,650

9. Water Quality. Tests of water samples from the Camiling, O'Donnell and Tarlac rivers and from the main canals of each system indicate good water quality with total dissolved solids under 200 ppm. The waters are of low salinity, slightly alkaline (pR 7-8) and are free of toxic elements. The O'Donnell river since 1913 and the Camiling and Tarlac rivers since the late 1950s have been used for irrigation in the project area without evidence of any harmful effects, and no difficultiesare expected from their continued use. ANNEX 5 Table 1 PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

EstimatedWater Requirement and Supply

Jan. Feb. Mar. Apr. May Jun. Jul. | Aug. Sep. Oct. Nov. Dec.

Wet Season paddy (34,000 ha) T+M H LP + N Drainage'

Dry Season paddy (6,200 ha) H _

LP = Land Preparation,N Nursery, T Transplanting,M = Management, H = Harvest Water Requirement

Land prep. & nursery (ita) 21 92 108 59 7 74 112 47 Consumptive use (mm) 175 53 43 114 130 104 92 169 Percolation (mm) 55 16 21 58 60 41 42 62 Crop water req'm't. (mm) 230 69 21 92 172 231 197 219 246 278 Effective rainfall (mm) 3 9 21 91 171 199 180 145 91 35 Water req'm't.at farm (m) 227 60 0 1 1 32 17 74 155 243 Overall irr. efficiency (%) 47.5 47.5 39 39 39 39 41 42 47 47.5 Diversion req'm't. (mm) 480 125 0 2 2 80 40 175 331 515 Cropped area (ha) TRIS _ - 14,000 . 2,000 SM-ORIS .,- - 9,800 - _ 2,300 - CRIS - 10,200 1,900 - Volume water req'd. (Mm3 ) . TRIS 9.6 2.5 0 0.3 0.3 11.2 5.6 16.6 10.2 10.3 SM-ORIS 11.0 2.9 0 0.2 0.2 7.8 3.8 12.2 9.8 11.8 CRIS 9.1 2.4 0 0.2 0.2 8.2 4.1 12.4 8.9 9.8 Diversion req'm't. (M3 /sec) TRIS 3.6 1.0 0 0.1 0.1 4.2 2.2 6.2 3.9 3s9 SM-ORIS 4.1 1.2 0 0.1 0.1 2.9 1.5 4.6 3,8 4.4 CRIS 3.4 1.0 0 0.1 0.1 3.1 1.6 4.7 3.4 3.7

Water Available (M3 /sec)

23-Year Average TRIS 9.5 8.0 6.5 6.8 16.7 44.5 75.0 137.4 134.2 56.9 28.0 | 17.j SM-ORIS 6.8 5.6 5.1 5.3 7.0 10.4 17.6 27.5 25.0 19.6 13.3 -'_ CRIS 6.0 4.9 4.2 4.1 7.4 23.0 39.7 58.0 58.9 30.6 17.8 11.6 5 Critical Year Average TRIS 5.7 5.0 4.2 4.8 4.9 6.5 28.7 46.5 75.5 39.3 16.2 10.0 SM-ORIS 7.2 5.4 4.7 4.5 4.5 5.2 10.5 13.4 17.4 11.5 8.9 5.8 CRIS 3.2 3.0 2.6 2.8 2.8 5.7 14.5 23.3 36.6 19.8 8.6 5.2

WVorldBank-891.' ANNEX5 Table 2

PHILIPPINES

TARLACIRRIGATIONS SYSTEMSIMPROVEMENT PROJECT

Project Water Requirements

Units: mm

Land Preparation (25 days) Wet season Dry season

Saturation & Flooding 130 77 Evaporation 100 113 Percolation 50 5 Sub-total 280 Annually 240 Total 520

Crop W4ater Requirement (92 days) (84 days)

Evapotranspiration 400 480 Percolation 185 170 Sub-total T 6 Total 1, 235

Total Crop Water Requirement 865 1,755 890 Less EffectiveRainfall 755 945 190 Farm Water Requirement 110 810 700 Farm IrrigationEfficiency 58% 70% Farm IrrigationReqmt (at turnout) 190 1,190 1,000 Seepage Losses (20%) 300 System Operation Losses (15%) 260

Total DiversionRequirement 280 1,750 1,)470 Overall IrrigationEfficiency 39% 46% ANNEX 6 Page1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Groundwater Pilot Proj ect

General

1. The main problem facing agriculture in Tarlac province and the CentralLuzon basin in generalis the lack of a dependablesupply of water for year round irrigation.Rainfall is usuallysuffici ent to supportcrops duringthe wet season,but it is erraticand deficientduring the dry sea- .son. Consequently,cropping is limitedto the wet seasonon rainfedareas and the land is idle duringthe dry season. Even in the irrigationsystems no more than 20% of the area can be irrigatedduring the dry seasonas a resultof low river flows.

2. A seriesof investigationshas been carriedout in the Central Luzon basin to assess the possibilities of increasing the area under irrigation in both wet and dry seasons. The main emphasis has been on potential storage proj ec-ts, but some work has also been done on evaluation of the groundwater potential. Five production wells have been drilled in the Guimbaarea with assistancefrom the UnitedNations Development Program (UNDP). The Bank assistedCentral Luzon IrrigationDevelopment Study (Loan/Credit984/472-PH) provides among other thingsfor a two year survey to assess the groundwater potential of the basin and to locate the areas of greatest promise. The groundwater element of the study would complement the investigationof storagepotentials.

3. The basin and range topographyand high monsoonrainfall, charac- teristicof the bigger islands in the Philippines, provide favorable conditions for the occurrenice of large volumes of groundwate'r. Volcanic activity, continuing through the late Quaternary period, resulted in a thick accumulation of sediments in the intermDntane basins and alluvial valleys. The permeability of the sediments varies greatly, but discrete, often highly permeable aquifersare found frequentlyat sufficientlyshallow depths to encouragedevelopment. Alternating periods of volcanicactivity and erosion have formeda sequenceof semi-confiningand more permeablehorizons. Most aquiferstherefore contain confined groundwater and free flowingwells are not uncommon.

4. As part of the CentralLuzon Study,UNDP is currentlycarrying out an explorationprogram with four heavy drillingrigs to determinethe occurrence,thickness and hydrologicproperties of the aquifersin the ANNEX6 Page 2 project area. Two of the proposed 19 wells have been completed and are yielding about 105 1/sec with drawdowns between 20 and 23 m. While the exploration program will make a valuable addition to the current knowledge of groundwaterin the area it will not provide any informationon the ex- ploitation potential of the resource. The proposed GroundwaterPilot Proj- ect would meet this requirement.

Objectives

5. The objectives of the pilot project would be to:

(a) stress the aquifer system in each of the three irrigation areas to evaluate recharge, discharge and storage capabili- ties as well as groundwater movement;

(b) evaluate the technical and economic feasibility of dry season rice irrigation by groundwater pumping;

(c) assess the potential for conjunctive use of the surface and groundwater resources of the project area and prepare a preliminary development plan; and

(d) provide special training for NIA staff in groundwater hydrology and well drilling techniques.

Project Works

6. The groundwater project would consist of one 300 ha pilot area for each of three irrigation systems. Each pilot area would be served by about six production wells, or one well to 50 ha. In the Guimba area, production wells were designed to serve 80 ha, but mutual interference reduced their yield and too little water was available for a dry season rice crop.

7. Project works would include the construction of about 18 wells equipped with deep well turbine pumps and diesel motors, together with the necessary laterals and farm ditches to connect up with the gravity system. The laterals would be provided with checks, turnouts and measuring devices. The production wells would be about 140 m deep with a pump chamber 45 cm in diameter and 40 m deep. The wells would be equipped with totalizing meters to determine total pumpage. In addition to the production wells, about nine observationwells would be drilled and equipped with automatic water stage recorders. A meteorological station would be established on each of the pilot areas to obtain data on rainfall, evaporationand temperature.

Water Supply, Demand and Quality

8. Effective rainfall during the dry season crop period is negligible and the project would be entirely dependent on the groundwaterpumped from the 18 deep wells. Water supply is calculated on the basis of a 50 ha ANNEX6 Page 3 service area per well and a yield of 100 1/sec. Water demand is based on the cropping calendar shown in Table 1, assuming a requirement of 258 mn for land preparation and nurseries over a 30 day period, a farm irrigation efficiency of 70% because of good management and limited water supply and a conveyance efficiency of 90% because of the closeness of the wells to the irrigated land. The water demand for the groundwater pilot project is atypical of that for the project area as a whole as presented in Annex 5. This is because the cropping calendar for the pilot area is designed to stress the groundwater aquifer, whereas the calendar for the rest of the irrigation system was designed to make maximum use of residual soil moisture and late season rainfall in October and November. The cropping calendar proposed for the pilot area would also leave little time for maintenance of the irrigation system. Water supply would meet the demand with a 16 hour pumping day, giving about 1800 hours of pump operationper year.

9. Groundwaterin the area is of the calcium-magnesiumtype and is suitable for rice irrigation. The total dissolvedsolids are below 340 ppm, with chloride concentrationat 40 ppm and pH 6.9. Continuous use of groundwater in the dry season is not likely to cause harmful accumulation of salts due to leaching during the wet season.

Implementation

10. The wells would be constructed by National Irrigation Administra- tion (NIA) personnel and equipment under the control of the Upper Pampanga River Project (UPRP) organization. Consultants would be employed to provide general guidance to the project and expertise as needed to reinforce the UPRP staff. Construction would be the responsibility of the Tarlac Division (No. 5) to be set up within the UPRP. The evaluation aspects of the project would be under the control of the UPRP Project Development Division (PDD), which is also responsible for the Central Luzon Study. The PDD is organized in five sections: Investigations,Economics and Land Resources, Hydrology, Plan Formulation,and Social and EnvironmentalAspects. The Division has a staff of approximately30 professionalsand 80 sub-professionals.With consultant assistance the PDD staff would be fully competentto execute the project satisfactorily.

11. In addition to data gatheringon the hydrological and geological aspects of the project, studies would also be made to optimize the use of expensive pumped water. Recordswould be kept of all production costs of groundwater irrigated crops, together with similar data from neighboring gravity irrigated farms growing only wet season rice and growing rice in both seasons.

12. The project would also include a training program for selected NIA technicalstaff. It would provide suitable technicians an opportunity to widen their knowledge in the fields of groundwater resource exploration, utilization, management and evaluation. The training would cover all aspects of the work and would include on-the-job training as well as academic ANNEX6 Page 4 courses. The consultants employed by NIA for the project would assist with the training, which would include both in-country and overseas training.

Consultants

13. NIA would employ under terms of reference already approved by the Bank a firm of consultants to assist with the project. NIA staff would carry out most of the data gathering,while the consultantswould provide guidance, review and special technicalservices as required. The consultants would recommend the location of the three pilot areas after considering the results of the exploration program. The consultants would be responsible for reviewing and evaluating the adequacy of all data, quantifying the amount of groundwater available for irrigation in the project area and determining the economics of groundwater use. They would ensure that work on the pilot project was coordinatedwith the needs of the Central Luzon Study. The consultants would also prepare a report giving the results of the pilot project, together with supporting background information. In addition they would assist with the training of NIA personnel in groundwater technology.

Report

14. After not less than two full years of operation of the pilot project, a report would be prepared which would include an evaluation of the groundwaterresource in the Tarlac systems area and an assessment of the economics of development and use of the resource. Should the results of the pilot project warrant, the report would include a framework plan and preliminary cost estimates for the conjunctiveuse of surface and groundwaterin the project area.

Costs

15. The pilot project is estimated to cost a total of US$1.2 million, including a foreign exchange component of US$0.9 million for the purchase of equipment, vehicles, materials and supplies, consultantservices and for training costs for NIA personnel. Details of the cost estimate are given in Annex 9 and a list and cost of the proposed equipment to be pur- c:hased is shown in Annex 10. PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROJECT

GROUNDWATER PILOT PROJECT

Estimated Dry Season Crop Irrigation Requirements

Oct. Nov. Dec. Jan. Feb. Mar. Ap. May

Dry Season Paddy (900 ha) LP T+M

___~~~~ 1 1IŽ~~ _

LP = Land Preparation, N = Nursery, T Transplanting, M = Management, H = Harvest

Total Land preparation and nursery (mm) 0 98 155 5 0 0 0 0 258 Croo Consumptive Use (mm) 0 0 58 175 218 247 66 0 764 Crop Water Requirements (mm) 0 98 213 180 210 247 66 0 1,014 Effective Rainfall (mm) 0 50 34 3 9 17 45 0 158 Crop Irrigation Requirements (mm) 0 48 177 177 201 230 21 0 854 Farm Delivery Requirement 70% Eff. (mm) 0 69 253 253 287 329 30 0 1,221 Diversion Requirements 10% Canal Loss (mm) 0 77 281 281 318 366 33 0 1,356 Cropped Area (ha) TRIS - 300 - SM-ORIS 300 CRIS 300 Vol. of Water Required (Mm3) 0 .69 2.53 2.53 2.86 2.84 .30 0 11.75 Vol. of Pumped Water Available (Mm3 ) * 0 3.11 3.21 3.21 2.90 3.21 3.11 0 18.75 Pump Operation (Hrs/Mo/Pump) 0 106 390 390 441 438 46 0 1,811

WorldBank-8917 * Assuming pump operates 16 hrs/day. ANNEX 7 Page 1

PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENTPROJECT

Water Management Training

Background

1. Irrigationefficiencies on the National IrrigationAdministra- tion's (NIA) gravitysystems are generallylowq. Lack of terminal facilities, poor maintenanceand inadequatestaff have contributedto wasteful use of water. Low efficiencies are particularly prevalent in the wet season when there is no perceivedneed to economizeon water. On most systems, dry season cropping,which relies almost entirely on irrigation, can only take place on about 307 of the wet season area. The Upper Pampanga River Project (UPEP)has made double croppingon the entire area possible by providingadditional water from storage and by greatly improvingthe degree of on-farm development. The same will be true of the Penarandaproject. The physical improvementsproposed for the Tarlac systemswould result in a 50% increase in the area irrigatedduring the wet season and in a smaller increasein the dry season area from the existing run-of-the-riversources. However, double croppingand the expansion of the area irrigatedwill not be feasiblewithout a substantialimprove- ment in irrigationefficiency.

2. On the UPRP and Penarandaprojects the physical prerequisites for high irrigationefficiencies and the subsequentincrease in cropping intensityare being provided. The NIA recognizes that improvementsin infrastructurecan only achieve their objective if accompaniedby more and better operationalstaff. The NIA proposes to base project operations on a 50 ha rotationalirrigation unit containingabout 20-25 farmers. Ten such units would be controlledby a Water Management Technologist(WMT) assisted by five ditchtenders(DT). The W2MTsare agriculturalgraduates, while the DTs have some secondaryeducation. The main function of the WMfTs will be to improvewater managementpractices, to educate the farmers to make better use of water and to graduallyprepare the farmers to assume more active roles in operationand maintenanceof the facilitiesat the field level.

3. At the present time, newly recruitedNIA personnel, including graduates,are not well versed in water managementor crop production aspects of irrigationor in methods of communicationwith farmers. The proposed Water ManagementTraining programwould meet this requirement. ANNEX 7 Page 2

ObJectives

4. The objectives of the program would be to:

(a) provide training facilitiesin each of the five UPRP operationaldistricts aimed at teachingwater management methods, rice production techniquesand farmer organization. The emphasis would be on learning by doing; and

(b) over a five-year period to train about 300 WMTsre- quired to staff a total of some 143,000 ha of irrigated land covered by the UPRP, Aurora-Penaranda and proposed Tarlac projects.

Pilot Units

5. The training program would be based on pilot water management units. Each of the five O&M districts covered by the UPRP organization, namely, San Jose, Talavera, Santa Rosa, Penaranda and Tarlac would set up a 500 ha pilot unit. The District Chiefs and the Head of the Agricultural DevelopmentDivision would thoroughlyevaluate the physical aspects of the pilot units to ensure that they are functionalfrom both the engineering and agriculturalpoints of view, as well as being typical of what the WMTs will have to handle after completionof training. Each pilot unit would have a field office with storage for supplies and equipment,as well as suitable facilitiesfor group discussions.

6. In addition to their training functions,the pilot units would also serve as channels for introducing and demonstrating inputs such as fertilizer,herbicides, the use of hand tractors and row seeders, etc. Each unit would be provided with a range of equipment and supplies to facilitiate demonstration. The concepts of water management would be crystallized through supervised field experience on the units.

Scope of Training

7. The principal emphasis of the training would be on water management. Training would include reading of flumes and other water measuring devices; computing the amount of water needed for a given area; simple data collectionof rainfall, evaporation,seepage and percolation rates; using water balance models to compute field needs; supervision of field deliveries of water; control of drainage and other surface losses, including sys- tematic checking of canals and laterals to achieve desired rates of water discharge. The training would be reinforced by putting every trainee through a range of field situations on the pilot units where he can apply his new knowledge. ANNEX 7 Page 3

8. The success of the WMT will be dependent on his relationshipwith the farmer who will come to him with production problems as well as with water problems. To be effective the WMT will have to be suitably equipped with the latest knowledge of rice technology. He should be in a positipn to help the farmer in such areas as a field identificationof insects and diseases, fertilizer application,weed control and other matters. The WMT would not usurp the function of the existing extension services but would reinforce them by taking advantage of his close and constant association with the farmer. To equip the WMTs for these activities the training program would arrange for trainees to take part in one of the crop production training programs available in the Philippines. One such program is the Rice Production Training Program of the InternationalRice Research Insti- tute, Los Banos, which has a two week and a six month course.

9. Irrigation,as an input, differs markedly in character from other inputs such as credit, fertilizer,machinery and agro-chemicals. It is a sustained activity. The farmer irrigates during land preparation,drains the field for transplanting,irrigates throughout the vegetative, reproduc- tive and grain ripening stages, and drains the fields two weeks before harvest. In the course of these activities the farmers interact with water management personnel throughout the cropping season. It is therefore logical to think of water as the major single commodity around which to organize farmers. The training program would teach the water management staff how to conduct farmers' meetings, how to distribute informationand how to keep simple records to evaluate what is happening. The trainingwould provide for the organization of farmers through NIA personnel, as ultimately both groups would be responsible for the routine running of the irrigation system.

Implementation

10. The UPRP, APIP and proposed Tarlac project would have a total requirement of some 300 WMTsand about 1,450 DTs. The training program would be aimed at producing the needed WMTsover five years. Allowing for attri- tion, there would be an annual intake of 65 trainees, or 13 candidates for training on each of the five pilot units.

11. The program would be under the control of a Director responsible to the UPRP Project Manager. The Director would administer the program, coordinate the field aspects, negotiate with outside institutions for specialized training or research inputs, and formulate and revise the content of the program in the light of experience within the pilot units and elsewhere in the project areas. There would be a Field Supervisor attached to each District Chief who would be responsible for day to day running of the program within the District. The training staff would be drawn mostly from regular NIA personnel such as District Chiefs and other O&M staff with extensive technical knowledge and field experience. SpecializedNIA units such as the Agricultural Development Division would contribute both staff ANNEX 7 Page 4 and facilitiesto the program. The training facilities centered on the pilot units would continue after the end of the five-yearperiod to provide refresher training and to produce WMTsfor other national irrigation systems.

12. The program would produce operation manuals for the WMTsand the DTs and would prepare training aids for use by the WMTsin development of group leaders among the farmers. Experienceon pilot projects on UPRP has shown that a cadre of group leaders is essential for spreading new ideas and technology as well as obtaining effective feedback. About three group leaders per 50 ha rotationalunit appears to be the right degree of coverage. On this basis some 8,500 group leaderswould have to be developedby the WMTs.

13. There is considerabletraining expertise in the Philippineswhich NIA could draw upon for assistance. However, consultant input might be required in some aspects of water management,crop production and training for group organization. As it is difficult to predeterminethe nature and amount of consultantservices that would be required, the possibility is covered by a lump sum provision in the cost estimates.

Costs

14. The training program is estimated to cost a total of US$0.75 million, including a foreign exchange component of US$0.44 million for the purchase of equipment, vehicles, materials, supplies and consultant services. Details of the estimate are given in Annex 9 and a list and cost of the proposed equipment to be purchased is shown in Annex 10. ANNEX 8 Page I

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

National Irrigation Systems ImprovementStudy

General

1. The National Irrigation Administration(NIA) operates about 100 gravity irrigation systems throughout the Philippines. They cover some 400,000 ha and range in size from 130 ha to 83,000 ha. Approximately65% of the systems are smaller than 3,000 ha and account for about 20% of the irrigated area. The national systems are usually run-of-the-riverschemes with insufficientcontrol structures in the canals, a marked lack of terminal facilities,inadequate drainage and little provision for access. The limited efficiency of the systems has been reduced further by lack of maintenance caused by a shortage of funds and equipment. The traditional form of rehabilitation, consisting of desilting of canals and repair of broken structures, is actually deferred maintenance and only restores the system tc its original unsatisfactory state.

2. With assistance from the Bank and the Asian Development Bank (ADB), NIA is currently upgrading and extending the Upper Pampanga, Penaranda and Angat-Magat systems in Luzon and the Davao del Norte system in Mindanao. Ali existing canals and structures are being rehabilitated, new ones are being added, drainage is being provided for, the road density is being increased and water management and rotational irrigation practices are being introduced. In addition the Pampanga, Penaranda and Angat systems have been supplied with year-roundwater through the provision of storage. Despite this ambitiousprogram over half of the area under the national systems remains untouched and continues to deteriorate.

3. The proposed National Irrigation Systems ImprovementStudy (NISIS) would inventory existing NIA systems and select a total of about 150,000 ha with the highest priority for improvement. In the process a pipeline of systems improvementprojects would be developed.

Objectives

4. The objectives of the study would be to:

(a) Compile an inventory of the national gravity systems, cataloguing all relevant data and material needed to give comprehensiveinformation on each system; ANNEX 8 Page 2

(b) Select from the inventory a total of about 150,000 ha of irrigationservice area for upgrading. In addition to economic factors considerationwould be given to institution-buildingaspects and to the general poverty of the region. The area selected would be divided into convenient packages for the preparation of feasibility grade studies;

(d) Review the organizationand implementationcapacity of the NIA regional field offices; and

(e) Provide special training to senior regional personnel in all aspects of systems improvement,through on-the- job and consultant assisted training programs in the Philippines and elsewhere.

Implementation

5. The Project Development Division (PDD) of the UPRP would be given the primary responsibility for carrying out the study. The PDD would obtain assistance from other specializedunits of NIA as needed and would work closely with the NIA regional offices throughout the Philippines. The PDD would be assisted by consultants, who would provide general guidance in the study and technical back-up as needed to reinforce NIA staff. The PDD is organized in five sections: InvestigationsEconomics and Land :Resources, Hydrology, Plan Formulation and Soil and Environmental Aspects. The staff consists of about 30 professionals and 80 subprofessionals for field work, drafting, transportation and administrative support. With support of consultants and assistancefrom other headquartersunits and the regional offices of NIA, the PDD staff would be competent to execute the study.

6. The first task of the study would be to collect data on the national irrigation systems and to assess their potentials for benefits after upgrading. The PDD would produce an inventory of the systems and would select systems for further study. It is anticipated that a total of about 150,000 ha of existing systems would be identifiedat this stage.

7. The second part of the study would consist of four feasibility surveys, each covering an irrigation system or package of systems totaling some 30,000 to 40,000 ha. For the feasibility studies informationwould be collected on rainfall, run-off, percolation, land classification and ownership, farm size and tenure, farming practices, cropping patterns, yields and incomes, together with data on the irrigationlayouts and their existing condition. The feasibilitysurveys would be expected to develop ANNEX 8 Page 3 parametersto justify the degree of rehabilitationor upgrading that is proposed for the selected systems. The level of facilitiesprovided in the UPRP would be taken as standard, but more or less sophisticatedsys- tems may be called for, dependingon factorswhich would vary from system to system.

8. The improvementstudy would take three years to complete. The first nine months would be devoted to compilationof the systems inventory and to selectionof systems for further study. The remaining 27 months would be allocated to the productionof the four feasibilityreports. Each report would require about nine months for preparation. The NIA proposes a stepped method of schedulingreport preparationby which each report would overlap the next report by three months. This schedule would enable NIA to speed up the flow of projects for appraisal and would also result in projects convenientlysized for a reasonable constructionperiod. Assuming the improvementstudy would start in early 1975, the sequence of events would be as follows:

Period Activity

January 1975 - September 1975 Inventory and system selection October 1975 - June 1976 FeasibilityReport No. 1 March 1976 - December 1976 FeasibilityReport No. 2 October 1976 - June 1977 FeasibilityReport No. 3 March 1977 - December 1977 FeasibilityReport No. 4

9. The study would also provide a training program for NIA technical personnel. The main objective of the trainingwould be to strengthenNIA's project preparationcapability. During the period of inventory compilation the consultantswould emphasize on-the-jobtraining of selected personnel both in the Philippinesand abroad. The proposed scheduling of report preparationwould also permit additional on-the-jobtraining, as partici- pants would be given increasingresponsibility with each subsequentreport.

Consultants

10. NIA would employ consultants,under terms of reference already approved by the Bank, to assist with the study. NIA staff would carry out most of the data gathering, while the consultants would furnish guidance, review and specialized technical services as required. The consultants would set up inventory check lists for all information needed to assess the present status and future potential of the systems, review the collected informationand assist in the selection of systems for upgrading. The consultantswould assist NIA personnel in preparing the feasibility reports and would be responsiblefor training NIA staff in project preparation. The consultantswould review the organizationof NIA's regional offices covered by the feasibilitystudies and make recommendationsfor changesneeded to implementthe proposed program of system improvement. They would also outline a training program for regional staff to execute the improvementprojects. ANNEX 8 Page 4

Costs

11. The study is estimated to cost a total of US$2.5 million including a foreign exchange component of UTS$1.0million for the purchase of equipment, vehicles, materials and supplies, consultant services and training for NIA personnel. Details of the cost estimate are given in Annex 9 and a list and cost of the proposed equipment to be purchased is shown in Annex 10. Annex 9 Table 1

PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROJECT

Cost Estimate

Local Foreign Total Local Foreign Votal Foreign ------(Pesos '000) ______-_ (US$ '000) ------Exchange

1. PROJECT SERVICE AREA

Rehabilitation - TRIS 13,370 7,130 20,500 1,990 1,060 3,050 35 Rehabilitation - SM-ORIS 11,290 5,380 16,670 1,680 800 2,480 32 Rehabilitation - CRTS 15,250 8,130 23,380 2,270 1,210 3,480 35 Extension Area - TRIS 10,080 4,770 14,850 1,500 710 2,210 32 Extension Area - SM-ORIS 11,830 6,120 17,950 1,760 910 2,670 34 2 Extension Area - CRIS ,350 1,140 3.490 350 170 520 33

Sub-Total 64,170 32,670 96,840 9,550 4,860 14,410 34

Contingencies 207, 12,830 6,450 19,280 1,910 960 2,870 34 Engineering Su,pervision & Adm. 10% 11,570 11,570 1,720 - 1,720 -

Sub-Total 88,570 39,120 127,690 13,180 5,820 19,000 30

2. OPERAT]ON & MAINTENANCE EQUIPMENT 670 10,420 11,090 100 1,550 1,650 94

3. GROUNDWATERPILOT PROJECT

Civil Works 940 505 1,445 140 75 215 35 Consulting Services 300 840 1,140 45 125 170 74 Equipment 170 3,730 3,900 25 555 580 96 Training 100 335 435 15 50 65 77 Contingencies 235 910 1,145 35 135 170 79

Sub-Total 1,745 6,320 8,065 260 940 1,200 78

4. WATER MANAGEMENTTRAINING

Project Personnel 1,345 605 1,950 200 90 290 31 Civil Works 135 35 170 20 5 25 20 Consulting Services 100 505 605 15 75 90 83 Equipment 235 1,445 1,680 35 215 250 86 Contingencies 270 370 640 40 55 95 58

Sua-Total 2,085 2,960 5,045 310 440 750 59

5. NATIONAL IRRIGATION SYSTEMS IMPROVEMENTSTUDY

Project Personnel 2,485 335 2,820 370 50 420 12 Contractual Services 4,535 4,705 9,240 675 700 1,375 51 Equipmenit 1,075 1,175 2,250 160 175 335 52 Contingencies 1985 505 2,490 _295 75 _70 20

Sub-Total 10,080 6,720 16,800 1,500 1.000 2,500 40

4 6 9 SUB-TOTILL PROJECT COST _032,50 655L 0Q 1 §, O 15,350 %750 25,100 39

ExPected Price Incresases 39,650 20,0 59,0 5,90058,900 3,000 34

TOTAL PROJECT COST 142,800 85,700 228,500 21,25 12,750 34,000 37

1/ Based on Annex 9 , Table 6 ANNEX9

PHILIPPINES

TARLACIRRIGATION SYSTEMS DMPROVEMENT Pi'OJECT PROJECTSERVICE AREA

Cost Estimate

Local Foreign Total ------(U$ Ooo)------1. REHABILITATION

a) TRIS Canal System 560 340 900 Drainage System 410 150 560 Road System 210 170 380 On-farm distribution & drainage 810 400 1210 Sub-Total 1990 1060 3050 b) SM-ORIS Canal System 880 4oo 1280 Drainage System 200 70 270 Road System 100 80 180 On-farm distribution & drainage 500 250 750 Sub-Total 1680 800 2480 c) CRIS Canal System 600 380 980 Drainage System 520 190 710 Road System 200 170 370 On-farm distribution & drainage 950 470 1420 Sub-Total 2270 1210 3480 Sub-Total Item 1 5940 3070 9010 2. EXTENSIONAREA

a) TRIS Canal System 520 240 760 Drainage System 250 90 340 Road System 80 60 140 On-farm distribution & drainage 650 320 970 Sub-Total 1500 710 2210 b) 9M-ORIS Canal System 830 430 1260 Drainage System 190 70 260 Road System 150 120 270 On-farm distribution& drainage 590 290 880 Sub-Total 1760 910 2670 c) CRIS Canal System 150 80 230 Drainage System 60 20 80 Road System 20 10 30 On-farm distribution & drainage 120 60 180 Sub-Total 350 170 520 Sub-Total Item 2 36'0 1790 5400 Project Area Total 9550 4860 14410

Contingencies 20% 1910 960 2870 Engineering Supervision & Adym.10% 1720 - 1720

TOTAL ?.3180 5820 19000 ANNEX9 Table j

PHILIPPINES

TARIAC IRRIGATIONSYSTEMS IMPROVEKENT PROJECT

GROUNDWATERPILOT PROJECT

Cost Estimate

Local Foreign Total ------(US$TI000------1. Civil Works a) Well construction 45 65 110 b) Irrigationworks 75 10 85 c) Engineeringsupervision 20 - 20

Sub-Total 140 75 215

2. Consultant Services 45 125 170

3. Equipment and Materials

a) Imported equipment - 365 365 b) Materials 25 190 215

Sub-Total 25 555 580

4. Training 15 50 65 Sub-Total Items 1-4 225 805 1,030

Contingencies 15% 35 135 170

Total 260 940 1_200 ANNEX9 Table4

PHILIPPINES

TARLACIRRIGATION SYSTEKS 3MPROV34ENTPROJECr

WATERMANAGEMENT TRAINING

Cost Estimate

Local Foreign Total -Loca (uniVm------

1. Project Personnel 200 90 290 2. Consulting Services 15 75 90 3. Buildingo 20 5 25 4. Equipment, Supplies and Materials a) Officesupplies, materials and furniture 25 20 45 b) Farmequipment 5 20 25 c) Vehicles - 55 55 d) Hydro-metequipment 20 20 e) Fuel,oil, spares 35 35 f) Fieldsupplies and materials - 50 50 g) Sundries 5 15 20 Sub-Total 35 215 250

Sub-TotalItems 1-4 270 385 655

Contingenciea 15% 40 55 95 Total 310 440 750 ANNEX9 Table 5

PHILIPPINES

TARLACIRRIGATION SYSTES DPROVEKIENTPROJUC

NATIONALIRRIGATION SYSTlKS 3IPROVWENT STUDY

Cost Estimate

Local Forign Total - (US$'o000)------1. Project pemel

a) Salaries 345 - 345 b) Traming 25 50 75

Sub-Total 370 50 420

2. Contractual Services

a) Survy &Kappig 525 _ 525 b) onsultant 700 8

Sab-Total 675 700 1,375

3. Equipment, Supplies & Materials

a) offiee & Field Supplies 120 - 120 b) Ixported puiment - 175 175 c) Sundries 40 - 40

Sub-Total 160 175 335

Sub-Total Item 1-3 1,205 925 2,130

Contingencies 15% 295 75 370

Total 1,500 1,000 2,500 PHILIPPINES

TARLAC IRRIGATIONSYSTEMS IMPROVEMENT PROJECT

Expected Price Inicreases

Calendar Year: 1976 8 im Total

1. Civil Works /

a) Foreign Exchange US $'000 580 1,190 2,720 1,865 - 6,355 Annual Inflation Rate % / 15 12 12 12 12 Expected Price IncreasesUSSOO0 45 260 990 985 - 2,280

b) Local Currency US $1000 2 1,375 2,805 6,410 ,390 50 15,030 Annual Inflation Rate % 2/ 20 12 12 12 12 Expected Price IncreasesUS$'00o 140 760 2,725 2,615 40 6,280

2. Equipment US $'000 / 2,455 1,185 25 25 25 3,715 AnnualInflation Rate % 2/ 11 7.5 7.5 7.5 7.5 Expected Price Increases US$'000 1j 5 180 10 10 240

Total US $'000 4,410 5,180 9,155 6,280 75 25,100

Expected Price Increases US$'000 320 1,200 3,720 3,610 50 8,900

1/ Based on Annex 9, Table 1.

2/ Calculatedby compoundingthe estimated rate of price increase in prior year and one half the rate of increase in the year concerned.

y/ Based on Annex1O, Tables 1-5 ANNEX 1 0 Table 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Equipment for Fbrce Account Work

Unit: US$ 1,000

Quantity Unit Total Items TRIS SM-ORIS CRIS Total Cost Cost Tractor, Crawlerp D-4 equivalent 1 1 1 3 29 87 Crane, Crawler, 18T w/ 3/4 yd bucket 1 1 1 3 70 210 Grader, Motorized 125 hp 1 1 1 3 41 123 Loader, Wheeled, 1-1/2 yd 1 1 1 3 29 87 Tractor., Industrial w/backhoe-loader 1 1 1 3 20 60 Truck, Dump 6 yd 2 2 2 6 14 84 Truck, Flatbed 6T 1 1 1 3 12 36 Truck, Pickup 3/4T 4xh 1 1 1 3 8 24 Jeep, Wagon jx4 2 2 2 6 8.5 51 Jeep, bx4 3 3 3 9 7.5 67.5 Mixer, Concrete 1 cu. yd. 2 1 1 4 12 48 Vibrator, Concrete 2 1 1 4 1 4 Pump, Water 4 in. 2 2 2 6 1 6 Radio Transceiver (Single side band) 2 2 2 6 3 18

Sub-total 905.5 Spare Parts 44.5

Total 950

-~~~~~~~~ Annex 10 Table 2

PHILIPPINES

TARLACIRRIGATION SYSTEM IMPROVEMENTPROJECT

Equipment for Operation and Maintenance

Unit: US$1,000

Quantity Unit Total Cost Items TRIS 1/CRIS Cost TRIS CRIS

Tractor, Crawler 180 hp 1 72 72 Tractor, Crawler 140 hp 1 1 56 56 56 Tractor,Crawler 90 hp 2 1 29 58 29 Crane, Crawler 18T with 3/4yd bucket 2 1 70 1&0 70 Loader, Crawler with 1/2 yd backhoe 1 1 40 40 40 Loader. Wheeled, 1-1/2 yd 2 1 29 58 29 Grader,Motorized 125 hp 2 1 41 82 41 Roller, Vibrating15T w/tractor 50 hp I 1 25 25 25 Truck,Tractor (w/25T trailer) IF 44 -44 Tractor, Industrialw/backhoe-loader 2 1 20 40 20 Truck.,Water i2J 16 16 Truck, Mbbile Repair & Lubrication 1?. 30 30 Truck,Dump 6 yd 6 4 14 84 56 Truck,Flatbed 6T 2 1 12 24 12 Truck, Pickup IT 2 1 9 18 9 Truck, Pickup 3/4T 4x4 1 1 8 8 8 Jeep, Wagon 4x4 2 1 8.5 17 8.5 Jeep, 4x4 6 3 7-5 45 22.5 Motor Bike 58 24 0.7 41 17 Mixer, Concrete 1 cu. yd. 2 1 12 24 12 Ptum, Water 4 in. 3 2 1 3 2 Radio Transceiver(single s.b.) 2 1 3 6 3 Weed Cutter 240 100 0.3 72 30 Miscellaneous Equipment (Compressor,Welder, Tools) lump sum 40 40

Sub-total 1,043 530

Spare Parts 4 7 30 Sub-total ______

Project Total 1,650

1/ Includes SM-ORIS 3/ Common Use. ANNE 10 -Table3

PHILIPPINES

TARLACIRRIGATION SYSTEKS 3MPROVEMENTPROJECT

GROUNIWATERPILOT PROJECT

Equip.ent, Materials & Supplies

Item Estimated Cost

I. Vehicles 2 - Wagons 4 x 4 18,000 3 - Pickups, half-ton 20 000 Sub-Total:

II. Well Materials Masing and screens for 18 production wells *85,ooo Miscellaneoua drilling chemicals 5 000 Sub-Totalt

III. Pumping Reluipnnt Pmp, turbine w/gear drive, 20 units 130,000 Engine, diesel, 60 hp, 20 units 130,000 Spare parts, lump 8Um 30,000 Sub_Totalt 290,000

IV. Instrumentation Meter, water totalising, 18 units 9,000 Recorder, gauges height, 24 units 20,000 Portable pH meters, conductivity meters and other instruments, lump sum 4,000 Meteorological instruments, including recording rain gauges, wind speed recorders, thermometers, wet & dry bulbs and evaporation pans, lump sum 4 000 Sub-Totalt

Total: 550,0ooo ANNEX10 Table 4 Page 1

PH:LIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

WATERMANAGEMENT TRAINING

List of Equipment and Vehicles

Item Estimated Cost - ~~~~~~~~~~~~~~~(US$) I. Office and Training Equipment Typewriter, 5 units 3,000 Mimeo machine, 5 units 4,00 Desk calculator, 10 units 1,000 Slide projector w/screen, 5 units 1,000- Camaera, 5 units 1,000 Movie projector, 1 unit 2,000 Pablic address system, 5 units 5,000 Tape recorder w/cassettes, 5 units 1P500 Moisture meter, 5 units 1,500

Sub-Total: 20,000

II. Fazmfeipoent Row seeder,5 units 1,000 Transplanter, 5 units 1P500 Rotary weeder, 50 units 15,oo Hand tractor w/attachements, 5 units 5,000 Boom sprayer,5 units 1,000 Thresher, 5 units 102000 Sub-Total: 20,000

III. Vehicles Bicycle,10 units 1,000 Motorcycle,10 units 6,0O0 Pickup,half-ton, 5 units 33,000 Bus, 40 seat, 1 unit 15,000 Sub-Total: 55,000 ANNEX10 Table 4 Page 2

Item Fotimated Goat

IV. Etudrmet lB to Portable FPrhill flues, water level recorders, raingauges and evaporation panas, lmp sum 20,000

V. Misc*1lane &!Umt PrOi'osiJotl for unilisted ite of eqtip4mnt, apparatw and inrtruenta, lump gm 10,000

Total: 125,00O ANNUX10 Table5

TL.AC IRIGATION S,T, I?ROVUW PROJET

MATI3IN.ALIIGATION S!STIAS MPROVM T STUDY

Equnt~, JIaor±a1a & SSaple

Estimaed CoBt

I. Vehicoes

Aircraft, twin engines,6 seatu,l unit 75,00O Jeep 4 s 4, 6 units )452000

Sub-Total: 120,000

II. &jiE mct

Survey & H drioftric Equ±pmut imup su 55iooo

Total: 175,000 PHILIPPINES TARIUCIRRIGATION SYSTEMS IMPROVEVENT PROJECT

Estimated Schedule of Expenditures

Total Item Cset FI751/ F176 F7 77 Pr 78 79FY ------7us$ °°°T------

Tarlac River Irrigation System 6,920 140 980 2,780 3,020 -

SK-O'Donne3lRiver Irrigation System 6,800 60 370 2,720 3,650 -

Ca,iling River Irrigation System 5,28o 60 1,180 2,040 2,000 -

O & M Equipment 1,650 - 1,65o - - _

Groundwater Pilot Project 1,200 50 905 170 75 -

Water Management Training 750 50 285 165 120 130 National Irrigation Systems Daprovoment Study 2,1%0 260 1,215 805 220 -

Sub-Total 25,100 620 6,585 8,680 9,085 130

Expected Price Increaaes 8,900 .220 2,330 3,o80 3,220 5 Total Project Coat 34O840 8490 12 , 3 10760So

l/ IBRDFiscal Years ANNEX 11 Table 2

PHILIPPINES

TARLACIRRIGATION SYSTEMS DMPROVEMENT PROJECT

Estimated Schedule of Disbursements

IBRD Fiscal Year Accumulated Disbursements and Semester US$ '000 Equivalent

Fiscal Year 1976

1st 800

2nd 2,500

Fiscal Year 1977 1st 4,500

2nd 7,700

Fiscal Year 1978

1st 10,200 2nd 14.,000

Fiscal Year 1979 1st 15,500

2nd 16,500

Fiscal Year 1980 1st 17,000 ANNEX 11 PHILIPPINES

TARLACIRRIGATION SYSTEMS IKPROVEYENT PROJECT

Proposed Allocation of Proceeds of Loan

Costs Proposed Total Foreign Loan/Credit ---- (U~ >Mllion)------Ct~e_gory I. Civil works: TRIS, SM-ORIS,ORtS 1/ 13.2 4.0 Grcm;indwater Pilot Project 2/ 0.4 0.3 Water Management Training 3/ 0.3 0.1 10.5 * Nat..Irrig.Systems Improvement Study 4/ 0.5 - rExpecd P:-iceincrease 5f 7.9 1.8 Sub-Toal 7a6

M(which (a) uS$1.6million for mobilization and contractors' equipment and (b) iS$SZi., million for other civilworks. Disbursement for (a) will be 100% of foroig,nexchange and for (b) 43% of total cost. II. Equipment 6/ 3.7 3.7 3.7 Disbursement will be 100% of foreign exchange

III. Consultants & Training:

Groundwater Pilot Project 0.2 0.2 'Water ManagementProject 0.1 0.1 Nat. Irrig. Systems Improvement Study 1.5 0.7 Sub-Total -51.0 1.0 Disbursement will be 100% of foreign exchange

IV. Unallocated: Physical Contingencies 7/ 3.5 1.2 Expected Price Increases 8/ 1.0 o.6 Sub-Total 4.5 l.6 1.8 (Admin. and Engineering) (1.7) Total 34.O 12.7 170

1/ Force account equipment, US$0.9 million (Annex 10, Table 1) excluded and transferred to Cat. II. 2/ Excludes cost of consultants & training (US$0.2 million) and equipment (US$0.5 million) Annex 9, Table 3). 3/ Excludescost of consultants and equipment (US$0.4 million) Annex 9, Table 4. 4/ Excludes cost of consultants, training & equipment (US$2.0 million) Annex 9, Table 5. 5/ Excludes price increases for equipment and consultants (US$1.0 million) Annex 9, Table 6 6/ Includes equipment for force account (US$0.9million) O&M (US$1.6 million) Groundwater (US$0.6 million) Water ManagementTraining (US$0.3 million) and Improvement Study (US$0.3 million) Annex 10, Tables 1-5. 7/ See Annex 9, Table 1. 8/ Includes price increases on equipment (US$0.3 million) and consultants (US$0.7 million) Annex 9, Table 6. ANNEX12 Page 1

PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENTPROJECT

Organizationand Management

1. Since 1964 the overall respcnsibilityfor the national irrigation systems in the Philippineshas been vested in the National Irrigation Administration(NIA). The NIA was set up under Republic Act No. 3601 to investigate,study, improve, construct and administer all national irrigation systems. It was given the power to carry out investigationsinto all available water resources in the country in order to utilize them for irrigatior. and to collect water rates from the beneficiaries of the national irrigation systems. The NIA is financed by the Government through the sale of bonds or from appropriations.

2. The governing body of the NIA is the Board of Directors, composed of a Chairman and six members. Its management is vested in an Administrator appointedby the Board, with the approval of the Presidentof the Philippines. The NIA is organized into five departmentsat headquarters,eight regional and two sub-regionaloffices managing the field services and a number of special projects offices. Consultantswere employed under the provisions of the Bank-assisted (Loan 637-PH) Upper Pampanga River Project (UPRP) to make recommendations for a program for the improvement of NIA's operations, organizationalstructure and financialmanagement. Most of the recommendations have been implementedor are in the course of being put into effect.

3. A special project office under the direction of a Project Manager was established to carry out the UPRP. The organization evolved both for construction and for maintenace has worked well. The UPRP now employs nearly 7,000 people of whom over 2,000 are engineers, agriculturists, economistsand other professionals. The NIA proposes to entrust execution and operationof the Tarlac project to the UPRP organization. A fifth engineeringDivision would be created to assume responsibilityfor constructionin the area covered by the three Tarlac systems (Chart No. 8921). The new Division would be completely similar to the four Divisions presently constructingthe UPRP service area.

4. The project DevelopmentDivision (PDD) of the UPRP would be responsiblefor supervisionand evaluation of the GroundwaterPilot Project, while drilling of the wells would be done by the GroundwaterSection of NIA. However, the irrigation infrastructurein the three groundwaterpilot areas would be built by the Tarlac EngineeringDivision. The PDD would also be ANNEX12 Page 2 responsiblefor implementationof the National IrrigationSystems Improve- ment Study (NISIS). The PDD will require assistance from other specialized NIA headquarters units as well as from the regional offices.

5. The PDD is a recently created unit set up to enhance NIA's project preparation capability. It was put into the UPRP organization because its main task was the Central Luzon Irrigation Development Study, which is a function of the UPRP. NIA recognizes that the PDD's widening scope of activitiesmakes its position as part of the UPRP increasinglyanomalous. NIA is also considering a closer integrationof the special organizations set up to implement foreign assisted projects (Chart 8922) to avoid duplica- tion and increase transfer of experience between projects. The on-going re-organization of NIA is due to be completed by the end of 1975. 6. The proposed organization for operation and maintenance (O&M) is shown in Chart No. 8920. The O&M of the three Tarlac systems would be catered for by creation of a fifth Irrigation District. The smallest physical sub-divisionin the system would be a 50 ha irrigation unit. Two such units would be the basic organizationalentity and would be supervised by a ditchtender. Five of the latter, or 500 ha, would form a water management section under a Water Management Technologist,who would be an agricultural engineering graduate. Five sections, or 2,500 ha, would make up a water management division under a Supervisor. Three to four divisions, 7,500 to 10,000 ha, would constitute a zone, under a Superintendent. The proposed Tarlac Irrigation District would be divided into three zones. AINNK12 Table 1

PHILIPPINES

TARIAC IRRIGATION SYSTEMSOMPROVEMENT PROJECT

Cost of Operation aid Maintenance

Annual Cost P/7ha

Salaries and ages 56.35 Equip nt Costs 36.35

Materials and Supplies 2.00

Total: 95 .0o ANNEX 13 Page 1

PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENTPROJECT

SupportingAgricultural Services

Extension

1. A number of Governmentorganizations currentlyhas dealings with the farmers. The principal agencies are:

(a) The Bureau of AgriculturalExtension (BAE);

(b) The Bureau of Plant Industry (BPI);

(d) The AgriculturalCredit Administration(ACA);

(e) The Department of Local Government and Community Development (DLGCD); and

(f) The National IrrigationAdministration (NIA).

In addition there are the non-GovernmentRural Banks (RB).

2. In the Upper Pampanga River Project (UPRP) the need for coordi- nating the various agencies providing services to the farmers was clearly felt. In September 1972, the respective heads of the NIA, the ACA, the DAR, the Central Bank of the Philippines,the National Food and Agricultural Council on behalf of the BAE and BPI and the Federation of Nueva Ecija Rural Bankers signed a memorandum of agreement. The latter set forth in detail the responsibilitiesof the various agencies within the UPRP and provided for coordinatingmachinery. Day-to-day control is exercisedby the AgriculturalDevelopment CoordinatingCouncil (ADCC) consistingof the ProvincialHeads of the participatingagencies. While the arrangementis still quite new, it seems to be working well. As the proposed Tarlac project would be operated as part of the UPRP, similar coordinatingarrangements would be made. The existing ADCC is organized on a provincial basis and is located in CabanatuanCity in Nueva Ecija province, some 40 km from Tarlac the capital of the province in which the proposed project is sited. A separate ADCC, based on Tarlac, would be set up for the project. The two Councilswould have some members in common, as both provinces are in the Central Luzon administrativeregion. ANNEX 13 Page 2

3. The BAE is mainly responsiblefor agriculturalextension, with technical back-up provided by the BPI. Under the "Masagana 99" program aimed at increasing rice production, a total of 130 agricultural technicians was used in the municipalities covering the project area. The technicians, all graduates, came from the BAE, DAR and BPI, with DAR providing some 60% of the total. This worked out to a ratio of one extensionworker to about 300 farmers.

4. The project would be organized on the basis of irrigation units of 50 ha in the same manner as the UPRP. The 20-25 farmers in such a unit would be given every incentive to work together as a group. The NIA would schedule irrigationon a rotationalbasis thus promoting a uniformity of operationswithin each unit at any given time. The rotationalarea would also be the basic unit for the provision of credit and the building block for the eventual organizationof irrigationassociations and cooperatives. In UPRP the NIA is assigning a Water ManagementTechnologist, who is an agriculturalgraduate, to every 10 units. The same staffing pattern would be applied to the Tarlac systems (see Annex 12). The water management staff, all of whom would be trained agriculturists,would supplement the existing extension personnel provided by the various governmentagencies and would help to increase density of extension coverage in the project area.

5. New extension work items to be emphasizedwould include improved irrigationand drainage practices; the importanceof scheduling of operations; the use of good quality seed and even planting; proper fertilizer application;weed and pest control; and the use of tillage and threshing machinery.

Research

6. There is no agricultural research station in Tarlac province but, the Maligaya Rice Research and Training Center is situated some 40 km northeast of Tarlac town and is within the UPRP boundaries. The Center is operated by the BPI and is engaged in selection and breeding, fertilizer application,weed control, crop protection,water management and storage and processing investigationson rice. It also works on possible rotation crops to rice, as well as being responsible for seed production, certifica- tion and testing for rice and other crops. The Center has training facilities and is being used by UPRP for training of staff. The Central Luzon State University,located at Munoz some 45 km northeast of Tarlac town, already works with UPRP on water management investigations. The UPRP also has good working relations with the InternationalRice Research Institute and the Agricultural College of the University of the Philippines. The project would be able through UPRP to draw on research back-up from all these sources. ANNEX13 Page 3

Fertilizer

7. Annual consumptionof fertilizer in the project currently amounts to less than 4,000 tons, of which about 50% is urea. Application rates for all fertilizers in the wet season run at a level of about 90 kg/ha. In the irrigated dry season crop the rate of application averages 130 kg/ha of which just under 45 kg/ha are nitrogen. At full development the project area would require some 7,000 tons of fertilizer annually, of which about 60% would be urea and the balance di-ammonium-phosphate.The average rate of applicationper crop season would be of 60 kg/ha nitrogen and 30 kg/ha phosphoric acid. There are six ACA fertilizer outlets in the project area in addition to 60 commercial distributors. The supply channels are adequate to handle the increased demand.

S;eed

8. Some 2,500 tons of rice seed per annum are presently used in the project area. Seeding rates tend to be unnecessarilyheavy as an insurance against the risk of seedling losses. Seed is obtained by retention from the farmers' commercial production and from seed-growingcooperatives. The Maligaya Center produces foundation and registered seed for bulking by selected seed-producingcooperatives. At full development the project would use approximately2,000 tons of rice seed per annum. The decrease over present consumption,would be achieved by a reduction in the seed rate to 50 kg/ha. On the assumption that rice seed would be renewed every five years, the estimated annual requirementof quality seed for the project area at full developmentwould amount to 400 tons. No difficultiesare envisaged in supplying this amount.

Farmers' Organizations

9. As part of the Land Reform program the Government through the DLGCDis promoting the formation of pre-cooperative farmers' organizations, based on the barrio or hamlet. The organizations would serve as a channel for the inflow of technical services, credit and inputs and as an assembly point for produce intended for market. It is hoped that at a future date the organizations would grow into full fledged, formally con- stituted cooperatives. This approach to cooperativeorganization fits in well with the 50 ha irrigation unit approach adopted by NIA in the existing UPRP. The organizationsare new and still unproven but they appear to hold out considerable promise and would be extended from the UPRP to include the project area.

10. The NIA is committed to the creation of irrigation associations amongst the farmers which would eventually assume a large part of the responsibilityfor the operation and maintenance of the national irrigation systems. Without losing sight of the ultimate objective, the main thrust ANNEX13 Page 4 of NIA's efforts in UJPRPhas been to organize the farmers within the 50 ha units primarily for productionand water management. The immediate aim is to demonstrate to the farmers that working together and using water efficiently is possible and profitable. Once this has been established a realistic framework for setting up irrigationassociations would exist. The project area would be expected to follow on the exmaple and gain from the experience of the UPRP.

Credit

11. Some 10-202 of the farmers in the project area finance their requirementof fanm inputs and hired labor from their own resources. The remainderuse some form of credit. The principal sources are:

(a) banks, notably the Rural Banks (RB), the Philippine National Bank (PNB), the DevelopmentBank of the Philippines (DBP) and private banks;

(b) the AgriculturalCredit Administration(ACA);

(d) money lenders.

Twelve of the 16 RBs in Tarlac province are within the project area.

12. To ensure the success of the accelerated Land Reform program set in motion by PresidentialDecree No. 27 of October 1972, the Government has proceeded to strengthenthe credit institutionsand to facilitatethe granting of production credit to small farmerswho previouslydepended on the landlords for their requirements. RBs have been authorized rediscounting privileges of 100%, Governmentguarantees of up to 85% of the loans made and low-cost money from the Central Bank. The easier credit thus made available is employed under a system of "supervised credit", which includes the provision of technical services to the borrower to ensure that recom- mended practices, includingvariety, fertilizerand agrochemicalinputs, are adopted. All loans granted under supervised credit are not secured by collateral, but are covered by a Government guarantee; the interest is at 12% per annum and the loan is for a period of 5 to 6 months. During the 1973 wet-season crop a total of P 22.8 million (US$3.4 million) was issued as production credit to rice farmers in the province. The RBs accounted for about 60% of the total, the PNB for 30% and the balance was contributed by the ACA. The area covered by the credit amounted up some 51,000 ha. ANNEX 13 Page 5

13. Under the "Masagana 99" program production credit was given at the rate of P 700/ha, made up of p 380 for inputs and P 320 for services, which iticludedan element of subsistence. The Government proposes to raise the rate to P 1,000/ha. Such an increase would be adequate to meet the greater production costs estimated at full development. Assuming that at full project development about 10% of the farmers in the project area would find their requirements of inputs and hired labor from their own resources, some 16,000 farmers would need credit from institutionalsources. Should a loan level of P 1,000/ha be used, the total annual credit requirement at full developmentwould amount to P 36.0 million (US$5.4 million). The existing credit institutionsare expected to be able to meet the requirement. ANNEX14 Page 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Present and Projected Cropping Patterns & Production

Present Cropping Pattern

1. Some 21,000 ha included in the three Tarlac systems are currently cultivated to rice in the wet season. During the dry season flows in the O'Donnell,Tarlac and Camiling rivers are only sufficientto permit cultivationon 4,650 ha, giving an overall cropping intensity on the existing systems of 120%. In the rainfed areas adjoining the three systems, that would be developed under the project, only a wet season rice crop is grown on 13,000 ha. The present overall cropping intensity in the project area is about 114%. Rice is by far the most important crop in the area. There is some small holder sugarcane grown in the rainfed areas, but farmers change to rice as soon as irrigationis provided. Annual paddy productionis estimated at 94,300 tons. The present cropping pattern and productionestimates and projected future conditionswithout the project are given in Table 1.

2. Wet season rice is grown between May and December. Transplanting is spread over a 12-weekperiod between July and September and harvesting takes place over a 12-week period between the beginning of October and the end of December. The dry season crop is grown between November and April, planting and harvesting is spread over an eight-weekperiod in December- February and harvesting takes place between February and April. All rice is transplantedfrom field nurseries on to previouslypuddled land. The extended period of transplantingis mainly due to the difficultiesexperi- enced in obtaining adequate and timely irrigation and consequentheavy reliance on rainfall.

3. Most of the farmers in the existing systems grow short-strawed high yielding varieties,while in the rainfed areas only about one-third of the farmers use the high yielding varieties, the majority relies on the lower yielding, but hardier traditionalvarieties. The average paddy yield in the rainfed areas is about 2.3 ton/ha, on the irrigated areas the yield in both wet and dry season is 2.5 ton/ha. The low yield levels are partly due to unsatisfactorywater management and partly to poor farming practices. The latter are exemplifiedby random transplanting,high weed infestations,insufficient use of fertilizersand agrochemicalsand untimeli- ness of operations. ANNEX 14 Page 2

Future Cropping Pattern

4. In the absence of the project the rate of increase in yield in the rainfed areas is estimated at 1.0% per annum and would most probably be due to a slow enlargementof the area under high yielding varieties. In the existing system the yields in both the wet and dry season crops are estimated to increase by some 1.3% per annum as a result of better cultivation, more weeding and improved plant protection. The use of inputs would be expected to increase with the availabilityof greater supplies of credit, and more extension effort as part of the Government'scampaign for national self-sufficiencyin rice. There would be no change in the existing cropping intensitydue to shortage of water in the dry season.

5. The expected changes in the cropping pattern and in crop production under the project are shown in Table 2. The project would provide wet season irrigationto the 13,000 ha of rice currently dependent on rainfall and would also allow for an increase of about 1,500 ha in the area irrigated during the dry season through better water managementand improved facilities. Cropping intensity in the project area would rise from the present 114% to about 118%. The proposed cropping pattern based solely on rice is consistentwith soils and topographyand with the customs of the local people.

Future Yields

6. With good water control, adequate supplies of credit and inputs and a strengthenedextension service, future paddy yields are expected to be 3.8 ton/ha and 4.1 ton/ha for the wet and dry season crops respectively (Table 2). In the presently irrigated area these yields would be achieved five years after the introductionof water control, while in the rainfed areas it is estimated that the projected yields would be reached six years after the provision of water, or nine years after the inception of construction.

7. The improved yields would be obtained from the introductionof high yielding varieties throughoutthe project area, better land preparation through greater use of machinery, certified seed, row planting, heavier fertilizerinput and greater expenditureon crop protectionand weed control. The improved road network envisaged under the project would allow better access to the farms, thus facilitatingthe inflow of inputs and outflow of produce. The projected yields are already being obtained by some farmers in the irrigated areas who are using good farming practices.

DevelopmentConstraints

8. The project would bring a change in the cropping calendar, a small decrease in labor requirement,a greater degree of mechanizationpartic- ularly in land preparation,and a demand for additional drying and storage facilities. The most important issues are examined briefly. ANNEX 14 Page 3

9. Cropping Calendars - To ensure efficient utilizationof resources and the avoidanceof technicaland organizationalbottlenecks, cropping calendarsmust be prepared as a basis for extension and water management activities. The attached Chart No. 8919 shows a provisional calendar. The main differencesbetween the proposed and existing practices are to be found in the shortening and bringing forward of the land preparationand transplanting periods of the wet season crop, which is reflected in an earlier harvest. In the dry season crop land preparationwould begin one month earlier, thus taking advantage of residual soil moisture. Transplanting would be brought forward to a six week period in October-Decemberfrom the current eight weeks in December-February. Harvestingwould be completedby February, leaving a period of sixty days in March-April during which the irrigationsystem would be shut off for maintenance. The main emphasis of the proposed crop calendar is on the maximum utilization of rainfall during the wet season.

10. Labor Availability. The supply and demand for labor with and without the project are examined in detail in Annex 17.

11. Mechanization- At present some 63% of the farmers rely entirely on animal drawn equipment for land preparation. About 7% use only mechanical equipment,usually small tillers, and the balance uses a combinationof animal drawn and mechanical equipment. There are no differencesbetween practices in the wet and dry season crops. With the improvementin water management, better access to the fields and the need for tighter schedulingof operations to maximize water use, it is estimated that the use of machinery would increase to the point that some 65% of land preparation in the wet season crop would be mechanical. It is anticipated that the machinery would be operated mainly by contractors,as is currently the practice.

12. Harvesting - The rice is harvested by sickle and the bundles may be left for a few days in the field to dry, depending on the weather. Threshing is either carried out manually by beating the panicles on a slatted table or by mechanical threshers. The latter are fairly large machines and need firm ground conditions. At present a surprisinglyhigh 75% of the crop is mechanically threshed. Under project conditionsof much better access to the fields and improved field drainage it is assumed that the entire crop would be threshed mechanically. This should not present any difficultiesas the existing contractors can be expected to meet the requirements.

13. Drying and Storage - At the present time the bulk of the threshed paddy is sun-dried on whatever suitable surfaces are available. A few of the rice mills own small artifical driers, but they are seldom used because of the high operating cost relative to sun-drying. Ail mills have sun-drying capacity. The arrangementsappear to be adequate for the present paddy crop of 94,000 tons. At full development the annual paddy production from the project would total 155,000 tons. Production of the wet season crop would ANNEX 14 Page 4

increase by about 60%, while the increase in the dry season crop would be over 100%. The harvest of the latter should present no problems as it would take place mainly in January-February,two of the driest months in the year. Some expansion of drying facilities,both solar and mechanical, would be required to deal with the increased output for the wet season crop harvest in the wetter October-Novemberperiod. No difficultiesare anticipatedin providing the additional facilitiesas the milling industry is enterprisingand is aware of the need for drying. Storage capacity within the project area is adequate for present production,but would need to be expanded to meet the increased crop yields. In addition to on-farm storage, there are public and private sector storage facilities. The latter are expected to increase storage space to meet rising paddy production from the project area.

Processing

14. There are 311 privately owned rice mills and hullers in Tarlac province. Assuming a 12-hour working day and a 200-day milling season, the mills have an annual capacity of about 345,000 tons of paddy, compared to the current provincial paddy production of some 230,000 tons. Millers are now importing paddy from Northern Luzon to utilize spare capacity. Under the circumstancesthere are unlikely to be any difficultiesin milling the additional production from the project area.

Marketing

15. The farmer has a choice of selling the paddy surplus to his requirementsto a middleman, storing it in a private or Governmentowned warehouse in the hope of obtaining a better price, having it milled and selling the rice to a trader or selling the paddy to the National Grains Authority at the Governmentsupport price. He may use all of the above methods of disposing of his crop. While Government is involved in the marketing sector, there is no authoritywith specific responsibilityfor marketing. The part played by Governmentagencies and farmers' marketing cooperativesis remarkablysmall. With the emphasis presently being placed on developmentof the cooperatives,as an essential support to the land reform program, it is likely that at the time of full project development farmers' cooperativeswould play a larger role in marketing of the paddy. PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROJECT

Present Production from the Project Ar-ea -1/

Gross Value Net Value Net Returns Area Paddy Farm Gate of Production of from Yield Price Production Cost Production Project Area

(ha) (ton/ha) (P/ton) --- …---(P/ha)…------(P million)

Wet Season

Irrigated Rice 20,650 2.5 2,000 5,000 935 4,065 83.9 (2.8) (900) (2,520) (545) (1,975) (40.8)

Rainfed Rice 13,350 2.3 2,000 4,600 810 3,790 50.6 (2.5) (900) (2,250) (465) (1,785) (23.8)

Drv Season

Irrigated Rice 4,650 2.5 2,000 5,000 1,045 3,955 18.4 (2.8) (900) (2,520) (615) (1,905) (8.8)

Total 38,650 152.9

Cropping Intensity 4/ 114%

1/ Projected future conditions without the project, wherever different from the present, are shown in parentheses.

2/ Based on Annex 16, Table 1. Excludes the cost of labor.

3/ Without accounting for labor.

4/ Based on a net irrigable area of 34,000 ha. PHILIPPINES

'AR-LAC IRRIGATION SYS TEMS IMPROVEMENT PROJECT

Production from the Project Area at Full Development

Gross Value Net Value Net Returns Area Paddy Farm Gate of Production of from Yield Price Production Costs Production Project Area

(ha) (lxn/ha) (P/ton) ------(P/ha)------(P million)

l/ 2/ Wet Season

Irrigated Rice 34,000 3.8 900 3,420 855 2,565 87,2

DUy Season

Irrigated Rice 6,200 4.1 900 3,690 890 2,800 17.4

Total: 40 200 104.6

Cropping Intensity-=18

1/ Based on Annex 16, Table 1. Excludes the cost of labor.

2/ Without accounting for labor.

3/ Based on a net irrigable area of 34,000 ha.

_ ANNEX14 Table 3

PH:LIPPINES

TAFfAACIRRIGATION SYSTEMSI4PROVEMENT PROJECT

Sumnar of Cropping Pattern & Production

Cropped Area Padcly Production Present Future Present Future - (ha) - - _00------tonsT---

WgetSeason

Irrigated Rice 20,65o 34,000 51.6 129.2

Rainfed Rice _-350 30.7

Sub-Total 2 h_SOOO 34,o00 02.3 129.2

Dry Season

Irrigated Rice 4,650 6,200 11.6 25_4 Sub-Total 4h,650 6,200 11.6 25.4

Total 3865o 00,200 _15.

3rcppingIntensity 114% 118% ANNEX 15 Page I

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Market Prospects and Prices

Market Prospects

1. One of the main goals of Governmentpolicy is to attain self- sufficiencyin basic foods, especiallyrice and corn. The deficit in rice, the main staple food crop, has been a persistent problem for the Philippines. Official figures show that for 1963-67 the Philippinesimported an average of about 300,000 tons of rice annually. Although there were no imports of rice in 1969 or 1970, rice stocks declined in those years. Rice imports were again over 300,000 tons in 1971, rose to 456,000 tons in 1972 due to the disastrous floods that year and were 336,000 tons in 1973.

2. Official estimates as of May 1974 indicate that paddy production was about 5.5 million tons for the fiscal year ending June 30, 1974. This is some 25% above the poor 1972/73 harvest and 3-4% over the previous high of 1970/71. With population around 40 million, convertingpaddy to milled rice at the official average recovery rate of 67% and adding 300,000 tons consumed out of imports, per capita absorptionof milled rice in 1973/74was about 100 kg. Based on the current population forecast of 50 million in 1980 and assuming that annual per capita absorption of milled rice remains at 100 kg, total demand for rice in the Philippinesin 1980 would be around 5.0 million tons, equivalent at the official average recovery rate to 7.2 million tons of paddy. To meet this demand, paddy output would have to increase by about 4.0% to 5.0% per year between 1974 and 1980. This is approximately the rate achieved during the late 1960s when high yielding rice varietieswere first introduced. While the Government'sMasagana campaign to increase rice production has met with considerablesuccess, there is still some doubt that the Philippines will be self-sufficient in rice by the early 1980s. In any case, no difficultiesin marketing the additional production from the project area are foreseen. The project area has tradi- tionally supplied milled rice for consumptionin Manila and neighboring Pangasinanprovince as well as locally, and it is expected that this pattern will continuewith the project.

Prices

3. Since 1957 the Government has set an annual farm gate support price for paddy to encourage production and to allow some purchasesof paddy by Government to build stabilizationstocks. Responsibilityfor operating ANNEX15 Page' 2

the system rested with an independentbody, the Rice and Corn Administra- tion, which operated unsatisfactorily. On September 28, 1972 the responsibility for rice and corn price stabilizationwas transferredto a National Grains Authority under the Secretary of Agriculture.

4. During the 1950s and early 1960s the support price remained virtually unchanged and was P 9.5 per cavan 1/ (P 216/ton) in 1961. There- after, it was gradually increased and by 1971 it reached P 20.0 per cavan (P 454/ton). Although no precise figures are available to compare the annual average market and support prices for paddy before 1965, the Sector Survey 2/ shows the market price about 10% higher in 1965, and the support price about 10% higher from 1966 to 1970. Since 1971 the market price has tended to exceed the support price.

5. The behavior of market prices in relation to the support price is consistent with the record of domestic paddy output during the past decade. In the early 1960s, domestic production was unable to meet the growing demand for rice and this tended to raise market prices abQve the support price. After the mid-1960s, increased productionas a result of the spread of high yielding varieties improved the balance between domestic production and consumptionand tended to depress market prices. During the last three to four years the trend has reversed and the support price has become increasingly less operative. As a result of continuing inflation and to encourage farmers to increase paddy production, the Government has continued to raise the official support price for paddy, which in mid-1974 was P 40 per cavan (P 800/ton). At the same time the market farm gate price in the project area was P 50-55 per cavan (P 1,000 - P 1,100/ton).

6. Through 1972, the farm gate support price for paddy and the domestic consumer price for rice kept pace with changes in the world market price for rice. Since then, however, in an attempt to keep domestic prices down in the face of unprecendentedly high world market prices for rice, the Governmenthas decided at least temporarilyto subsidize consumers in urban and rice deficit rural areas. The low official ceiling price for rice and the correspondinglylow farm gate price for paddy are maintained by Governmentsales of imported rice on the domestic market below cost. Although official figures on the amount of the subsidy are not available, and the transactionis obscured by a large proportion of government-to- governmentand barter arrangements,a rough calculationindicates the order of magnitude. The Bank's commodity analysts give the 1974 price for Thai 25Z'-35%broken rice typically imported by the Philippines as US$450 per ton.

1/ Before 1974 a "cavan" or sack of paddy was equivalent to 44 kg. Since 1974 the official weight of a cavan of paddy is set at 50 kg. 2/ IBRD AgriculturalSector Survey, Philippines,May 2, 1973 (ReportNo. 39a-PH). Annex 10, Table 13. ANNEX 15 Page 3

Adding US$40 ocean freight yields a cif Manila price of US$490 (P 3,290) per ton. The official domestic consumer price in mid-1974 was P 1.9 per kg or P 1,900 per ton, which represents a subsidy of P 1,390 (US$207) per ton. Assuming that 300,000 tons of imported rice are consumed in 1974, the total subsidy would be some US$60 million.

7. The Bank projects the world market price of Thai 25%-35% broken rice to fall (at constant 1974 prices) from US$450 per ton fob Bangkok in 1974 to around US$190 per ton in the 1980-85 period. These projections have been used to estimate the present and future farm gate prices of paddy in the economic analysis. The correspondingfarm gate prices fall from P 2,000 per ton (P 100 per eavan) in 1974 to P 900 per ton (P 45 per cavan) in 1980 and beyond. It is assumed that over this period the Govern- ment will maintain the current price ceiling for rice of P 1.9 per kg and support price for paddy of P 40 per cavan (at constant 1974 prices). This implies that by 1980 the subsidy to consumers will fall to zero and the market farm gate price will be about 10X above the support price for paddy. The projected price structure for rice from 1974 to 1980 and beyond as used in the economic analysis is presented in Table 1. PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROE CT

Price Structure for Rice, 1974-80 and beyond (f/ton at constant 1974 prices)

1974 1975 1976 1977 1978 1979 1980 and beyond Rice

Export price Thai ($450) ($345) ($300) ($252) ($216) ($196) ($190) 25%-35% broken fob Bangkok 3,024 2,318 2,016 1,693 1,452 1,317 1,277

Ocean freight ($40) ($40) ($40) ($40) ($40) ($40) ($402 269 269 269 269 269 269 269 Manila Handling Charges 30 30 30 30 30 30 30

Transport Tarlac to Manila -120 -120 -120 -120 -120 -120 -120

Price of rice ex-Mill, Tarlac 3,203 2,497 2,195 1,872 1,631 1,496 1,456

Milling Costs (equivalent to value of by-products) ------

Paddy

Paddy equivalent price, Tarlac (63% recovery) 2,018 1,573 1,383 1,178 1,028 943 918

Handling & transport costs, farm to mill - 18 - 18 - 18 - 18 - 18 - 18 -18

Farmgate price of paddy 2,000 1,555 1,365 1,160 1,010 925 900

(P/cavan) (100) (78) (68) (58) (50) (46) (45) ANNEX 16 Page 1

PIIILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENTPROJECT

Crop and Farm Budgets

1. The existing and proposed cropping patterns are given in Annex 14. This annex shows the following:

(a) Production costs for irrigatedand rainfed rice under present and future "with" and "without"project conditions (Table 1). Present costs are based on the results of a survey carried out by NIA and interviews in the area during appraisal. In the absence of the project little change in the level of inputs is expected in the rainfed areas. In the irrigated areas some improvement in husbandry is assumed. The input levels for future "with project" conditionsare based on recommendations by the Bureau of Soils and the Bureau of Plant Industry and the assumptionof increasedmechanization of land preparation and threshing.

(b) 'lonthlylabor requirementsfor the dry and wet season rice crops based on present and proposed cropping calendars (Table 2). It is assumed that under project conditions the labor requirement for land preparation and harvestingwould be reduced by the use of machinery while there would be an increase in the labor requirement for crop management,covering such activitiesas weeding, fertilizer and pesticide applicationand irrigation.

(d) Farm budgets for typical family farms of 1.0 ha, 2.0 ha and 3.0 ha (Table 4). The budgets are calculatedon a cash flow basis and only hired labor has been costed. The monthly requirementfor hired labor was calculatedby comparing the labor requirementwith the availabilityper farm of a maximum of 40 man-days/monthand a total of 480 man-days/year of family labor. Future water charges are at the level which ANNEX16 Page 2

NIA has agreed should be applied to the Pampanga and Penaranda projects at full development, namely 3.5 cavans of paddy/ha in the wet season and 4.4 cavans/ha in the dry season. Payment for land is calculated in accordance with PresidentialDecree No. 27 on the assumptionthat the majority of farmerswould be amortizingowners under the Agrarian Reform program. PHILIPPINES

TARLAC IRRIGATION SYSTEMSIMPROVEMENT PROJECT

Ricet ro Production Costs 1/

Present Future Without Proiet Future With Protect 2/ Wet Season Dry Season Wet Season Dry Season Wet Season Dry Season Cash Inputs P/ha) Rainfed ri ated Irriat R Irrited --- ted Irrirjated Irri&ated

Cultivation 110 110 110 115 120 120 130 130 Seed 140(70) 150(75) 185(95) 65 65 80 60 60 Fertilizer 150(95) 210(140) 275(180) 85 120 155 205 205 Agro-Chemicals 30 40 50 60 80 100 230 240 Harvesting 360(180) 400(200) 400(200) 110 125 125 170 185 Other 20 25 25 30 35 35 60 70 Interest (40) _ °u -_ (4Q). .j45Q1 _Z_ 70 855(925) 890(960) Total Cash Inputs 8I0(545 ) 935(640) 1,045(715) 465(505) 545 (590) 615(665)

Labor.Lnputs 3/ (man-days/ha)

Land Preparation 35 31 29 30 26 24 20 20 Planting 33 33 38 33 33 38 33 33 Crop Management 19 18 22 22 21 25 32 35 Harvesting 38 38 41 35 35 38 25 27

Total Labor Inputs 125 120 130 120 115 125 110 115

1/ Economic prices based on world market prices for rice and fertilizer for use in economic analysis. Figures in parentheses are financial prices prevailing at appraisal for use in farm budgets. Costs at present are higher than in future because world market prices for rice (seed) and fertilizers are projected to fall (at 1974 constant prices) and because threshing, which is now done in part hy hand on a crop-sharing basis is expected to become complctel7 mechanized bv the time of full development,with or without the project. 2/ Based on the following assumptions at full development a) Cultivation - Mechanical 65% @ P 150/ha Animal 35% @ P 100/ha b) Seed rate 1 cavan /ha @ P 60/cavan c) Fertilizer - Urea 110 kg/ha; DAP 65 kg/ha Urea @ P 1.10/kg; DAP P 1.30/kg d) Agro-Chemicals - Lump sum e) Harvesting - Mechanical threshing @ 5% of yield value f) Interest @ 12% per year on production credit for 9 months on 90% of cash inputs 3/ Excluding labor handling farm machinery, the cost of which is included tinder cash inputs. PHILIPPINES

TARLACIRRIGATION SYSTEMS DMPROVEMENTPROJECT

Monthly Labor Requirements for Various Rice Crops (man-days/ha) 1 ' 2'

Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec Total

Wet Season

Irrigated Rice P - - - - 6 6 18 24 22 16 16 12 120

W - - - - 6 6 17 24 21 16 16 9 115

W - - 2 7 30 32 11 14 14 - 110

Rainfed Rice P - - - - 3 8 19 25 25 17 16 12 125

_ - - - - 2 7 17 24 26 19 16 9 120

W - - _ - ______

Dry Season

Irrigated Rice P 34 38 21 5 _ _ _ _ _ - 10 22 130

Wt 29 39 23 2 _ - _ _ - - 10 22 125

W 18 17 - - _ _ _ _ 2 14 39 25 115

-/P - Present >3 W - Future Without Project W V Future With Project a

2/ Excluding Labor Handling Farm Machinery PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENTPROJECT

Rice Crop Budgets 1/

Present Future Without Project Future With Proivct Wet Season Dr-l_eason Wet Season Dr Season Wet Season Dry season Rainfed Irrigated Irri gated Rainfed Irrigated Irr&ated Irri&ated Irigated

Yield (ton/ha) 2.3 2.5 2,5 2.5 2.8 2.8 3.8 4.1

Farm Gate Price (P/ton) 1,000 1,000 1,000 900 900 900 900 900

Gross Value of Production (P/ha) 2,300 2,500 2,500 2,250 2,520 2,520 3,420 3,690

Production Costs, Excluding Labor (P/ha) 545 640 715 505 590 665 925 960

Net Value of Production Excluding Labor (P/ha) 1,755 1,860 1,785 1,745 1,930 1,855 2,495 2,730

Labor Requirements (man-days/ha) 125 120 130 120 115 125 110 115

1/ Financial costs and prices are used, based on Table 1 PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENTPROJECT

FamBdjits

----- 1.0 ha Farm------2.0 ha Farm------3.0 ha Farm------

Future Future Future Present with Present with Present with Prol S Pmjec t oJ Rainfed Irrijated IrriEted Rainfed Irriated IrriRated Rainfed Irr_jated Irriated

Transplanted Rice (ha) 1.0 1.1 1.2 2.0 2.3 2.4 3.0 3.4 3.5

Total Croped Area (ha) 1.0 11 1.2 2.0 2.3 2.4 3.0 3.4 3.5

Cropping Intensity (M) 100 114 118 100 114 118 100 114 118

Total Paddy ProductionL' (ton) 2.3 2.7 4.6 4.6 5.7 9.2 6.9 8.5 13.4

Gross Value of Production 1/(P) 2,300 2,700 4,140 4,600 5,700 8,280 6,900 8,500 12,060

Production Costs (Excluding Labor) (P) 545 710 1,115 1,090 1,495 2,235 1,635 2,205 3,255

Cost of Hired Farm Labor 2/(p) - - - 100 60 240 530 485 680

Net Value of Production (Before Water CharRes) (P) 1.755 1,990 3,025 3,410 4,145 5,805 4,735 5,810 8,125 Water Charges 3/ (P) - 30 175 - 60 350 - 90 510

Net Value of Production (After Water Charges) (P) 1,755 1,960 2,850 3,410 4,085 5,455 4,735 5,720 7,615

Annual Payment for Land 4/ (P) 475 515 785 950 1,030 1,570 1,425 1,545 2,355

Net Crop Income (P) 1,280 1,455 2,065 2,460 3,055 3,885 3,310 4,175 5,260 >

Farm Labor Requirement X X (man-days) 125 133 133 250 279 266 375 412 387 i s CN 1/ Based on Annex 16, Tables I & 3. 2/ Based on maximum of 40 man-days/month and a total of 480 man-days/year of family labor. 3t Based on present charges of P25/ha in the wet season and P35/ha in the dry season and proposed future charges of P140/ha and P175/ha for wet and dry seasons respectively. 4/ Based on amortizing owner with annual payments over 15 years @ 6% compound interest on the unpaid balance. ANNEX 17 Page 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Parm Labor Analysis

Labor Supply

1. Based on surveys conducted by the National Irrigation Administra- tion (NIA), and data from the Department of Agrarian Reform (DAR) and the 1970 Census of Population and Housing, it is estimated that at present about 17,700 farm families live in the project area. The average farm family containssix persons, three of whom are of working age (15 to 64 years). Prom this potential labor force, one person is usually assigned to domestic housework and is not available for farm work. Therefore, the currently available family farm labor supply is about 35,000 workers. Assuming 240 days per worker per year, the annual family farm labor supply would be 8.4 million man-days, or an average of 0.7 million man-days per month. Assuming a rural population groth rate of 1.0% per year in the project area (compared to an expectednational population growth rate of 3%), 1/ the family farm labor force would increase to about 38,000 workers at project full developmentin 1983. The annual family farm labor supply would be 9.2 million man-days, or an average of 0.8 million man-days per month.

2. In addition to the farm families in the project area, there is roughly an equal number of non-farm families engaged in commerce,transportation, local manufacturingindustries and a variety of services. These families are concentratedalong the major roads, and in the towns in the project area. During periods of peak agricultural activity, these families supply hired labor to supplement the family farm labor force. Assuming that each non-farm family supplies one farm worker at peak periods, the total monthly farm labor force in and around the project area in peak seasons is estimated to be about 50% greater than that supplied by farm families, or about 1.0 million man-days per month at present and 1.2 million man-days per month at the time of full project development.

1/ From 1960 to 1970, while total population in the Philippinesgrew by about 3% per year, urban population grew by some 11-12% and rural populationby less than 1% per year. Available data for the municipalities in the project area for the same period indicate similar results. Source: 1970 Census of Populationand Housing and E. M. Pascual, "Internal Migration in the Philippines,"First Conferenceon Population, 1965, pp. 344-345. It is assumed that these trends will continue through the 1980s. ANNEX 17 Page 2

Labor Demand

3. Estimates of average monthly and annual labor requirementsper ha for different rice crops are given in Annex 16, Table 2. At present the annual labor requirementper ha in the project area is about 25% higher than that in other parts of the Upper Pampanga River Project (UPRP) area because much less mechanical power is used in Tarlac for cultivation. Cropping calendars in the project area vary widely. Land preparationih particular is spread out over many months, dependingon the local availabilityof water and draft animals. The resultingdiversity makes water management and the schedulingof inputs and supportingservices difficult. In future without the project, it is assumed that some additionalmechanization would take place, thereby slightly reducing per ha labor requirements. With the project, scheduling would be essential to permit adequate irrigation of the whole area. This in turn would require the replacementof draft animals by small power tillers for most land preparation,and a correspondingreduction in labor requirementsmeasured in man-days. At the same time, it is expected that mechanical threshingon a custom hire basis would become more widespread. Labor requirementsat full project developmentare thereforeestimated to be about 20 man-days per ha less than at present.

4. Estimates of total monthly labor requirementsare given in Table 1. The present requirementis about 4.8 million man-days per year, or about 60% of the family labor supply. The demand for labor in the project area has a pronounced seasonal pattern. Peak monthly demand in August and Septemberuses all available family labor plus some hired labor, while dry season demand from January throughMay averages less than 20% of available manpower. In future without the project the total annual labor requirement would fall slightly to about 4.6 million man-days due to increased mechanization. The seasonal employment pattern would remain as at present. Since it would not provide additional irrigationwater for dry season cropping, the proposed project would not fully use the availablelabor force. In fact, in order to achieve the project's productionbenefits through improved water management and scheduling,the total demand for farm labor would fall from "without project" conditionsby about 170,000 man-days per year, or some 700 farm workers. The seasonal peak demand would shift to July and August and would be more pronounced than at present to reflect the proposed tighter cropping calendar. The dry season labor requirement would be pushed forward to make better use of late rains and residual soil moisture for land preparation, and to allow time for system maintenance in March and April under dry conditions.

5. It is difficult to evaluate the trade-offbetween this apparent loss of jobs and the need to increase rice output to feed the fast growing population. However, the labor situationwith the project is likely to be better than the foregoing figures indicate because the increased rice productionin the project area would generate additional jobs directly in the transport,handling, processing and marketing sectors, and indirectly ANNEX 17 Page 3

in the services sector as the result of increased farm incomes. Further- more, the improved agriculturalpractices brought about through small scale mechanization,improved cropping calendars,water management, inputs and supportingservices would make it easier to shift to full double cropping in the project area if and when supplementarydry season irrigationwater becomes available. Sources for such water will be evaluated as part of the Central Luzon IrrigationDevelopment Study (Loan/Credit984/472-PH) and the proposed Groundwater Pilot Project (Annex 6). If storage and/or groundwaterproves technicallyand economicallyfeasible for the Tarlac area, labor demand for 200% cropping intensitywould increase to some 7.6 million man-days per year (83% of family farm labor supply at the time of full development),and seasonal fluctuationsin employmentwould be much reduced.

Economic Cost of Farm Labor

6. Detailed informationon wages actually paid in the project area is limited. Most work is done by unpaid family labor and traditional "exchange"labor. Informationon off-farm employmentis even less reliable. The wage for hired labor in peak agriculturalseasons ranges around p 5 to 6 per man-day, which is assumed to reflect the opportunitycost of labor to the economy at such times. In months of high rural unemployment,which characterizemost of the year, the opportunitycost of labor would be much lower. The economic cost of farm labor in the project area was therefore estimatedby taking account of the generally prevailing rural unemployment and extreme seasonal fluctuationsin labor demand.

7. It is postulated that the marginal opportunity cost of farm labor in the project area can be approximatedby an S-shaped curve (Figure 1). The marginal opportunity cost is positive at all levels of labor demand and increases as more labor is employed in farm work. The increase is slow initially,reflecting the scarcity of alternativeproductive employment, but becomes more rapid as the labor supply becomes fully used. At the employment level correspondingto full employmentof available family labor in the project area, the marginal opportunity cost is assumed equal to the market wage of P 5 per man-day. The rural labor force in the Philippines is highly mobile, and it is expected that at the market wage of P 6 per man-day, large number of laborers could be attracted to the project area from nearby areas if needed.

8. It is reasonable to approximatethe S-shaped curve by three straight line segments. Three points determine the position of the curve. Point A represents the minimum opportunity cost of farm labor which is estimated to be P 2 per man-day, equal to P 1.5 as the economic value of alternativeemployment (casualnon-farm labor, fishing, house repairs, etc.) plus P 0.5 to supply the additionalfood requirementsof more strenuous farm work with the project. Point B indicates that at full employment ANNEX17 Page 4 of family labor the opportunity cost would equal the market wage of P 5 per man-day. The horizontal segment to the right of Point C indicates that at p 6 per man-day as many hired laborers as needed would be available for farm work in the project area.

9. The monthly marginal opportunitycost may be read directly from the curve at the correspondinglevel of labor demand. With the project, it varies from P 2.1 per man-day in dry season months of high unemployment to P 6.0 per man-day in the peak months of July and August. The total economic cost of farm labor is then the area under the curve up to the level of employment. Computed this way, the future economic cost of farm labor would be P 13.1 million with the project at full developmentand P 11.8 millionwithout the project, or an incrementalcost of P 1.3 million. The incrementalcost is positive despite the lower annual farm employment with the project because work would be slightlymore concentratedin the peak season when the marginal opportunitycost is higher. If all farm labor were priced at the peak season market wage of P 5 to P 6 per man-day, the incrementallabor cost would be negativebecause of the reduced total employment. PHILIPPINES

TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT

Total Monthly Labor Requirements ('000 man-days) -/

Area (ha) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Wet Season

Irrigated Rice P 21,000 - - - - 126 126 378 504 462 336 336 252 2,520

W 21,000 - - - - 126 126 357 504 441 336 336 189 2,415

W 34,000 - - - - 68 238 1,020 1,o88 374 476 476 - 3,740

RainfedRice P 13,000 - - - - 39 104 247 325 325 221 208 156 1,625

W 13,000 - - - - 26 91 221 312 338 247 208 117 1,560

W ------______

Dry Season

IrrigatedRice P 5,000 170 190 105 25 ------50 110 650

W 5,000 145 195 115 10 ------50 110 625

W 6,000 108 102 ------12 84 234 150 690

Total P 39,000 170 190 105 25 165 230 625 829 787 557 594 518 4,795 W 39,000 145 195 115 10 152 217 578 816 779 583 594 416 4,600

W 40,000 108 102 - - 68 238 1,020 1,088 386 560 710 150 4,430

J P - Present I - Future Without Project W - Future With ProJect PHILIPPINES TARLAC IRRIGATION SYSTEMSIMPROVEMENT PROJECT EstimatedOpportunity Cost Curve for Farm Labor

C 6.0

4. 0~~~~~~~~~~~~~~~~~

5.0______~l 1I 6 044

-- 0~

2 40

2.0 I

1 .C __: ______

0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

FARM LABOR DEMAND (MILLION MAN-DAYS/MONTH)

World Bank-8918 PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENTPROJECT

Economic Cost of Farm Labor at Full Project Development

Jan. Feb. Mar. Apr. My Jun. Jul. Aug. Sep. Oct. Nov. Dec. Total

Labor Requirement W1 / 0.1 0.1 - - 0.1 0.2 1.0 1.1 0.4 0.6 0.7 0.1 4.4 (million man-days) i/ 0.1 0.2 0.1 - 0.2 0.2 0.6 0.8 0.8 0.6 0.6 0.4 4.6

Marginal Opportunity W 2.1 2.1 - - 2.1 2.4 6,0 6.0 2.5 3.7 4.4 2.1 Cost (P man-days) W 2.1 2.4 2.1 - 2.4 2.4 3.7 5.0 5.0 3.7 3.7 2.5

Economic Cost of Farm Labor W 0.2 0.2 - - 0.2 0.4 3.5 4.1 0.9 1.5 1.9 0.2 13.1 (P million) 7 0.2 0.4 0.2 - 0.4 0.4 1.5 2.4 2.4 1.5 1.5 0.9 11.8

Incremental Economic Cost of Farm Labor (P million) W-W - -0.2 -0.2 - -0.2 - 2.0 1.7 -1.5 - 0.4 -0.7 1.3

1/ W = Future with project. 2/ W = Future without project. ANNEX 18 Page 1

PHILIPPINES

TARLACIRRIGATION SYSTEMSIITROVEMENT PROJECT

Economic Analysis

1. The following assumptions were made in evaluating the project's rate of return:

(a) Benefits - The expected paddy yields, prices, gross returns, production costs, net returns (without accounting for labor costs) and labor requirements per ha are shown in Annexes 14 and 16. Farm gate prices for paddy used in the economic analysis are based on the Bank's world market price projections for milled rice and are derived in Annex 15. Table 1 shows the expected project benefits at full agricultural development.

(b) Investment Costs - All investmentcosts except costs due to expected price increases (US$8.9 million), the costs of the Ground Water Pilot Project (US$1.2 million), the Water Management Training Program (US$0.8 million) and the National IrrigationSystems Improvement Study (US$2.5 million), have been included in the economic analysis. The incremental cost of the Water Management Technologistsis included under annual 0 & M costs.

(c) Development Period - According to the project implementation schedule, 40% of the currently irrigated areas would be improved in time for the main wet season 1977 crop, and the remaining improvement and extension areas would be completed in time for the wet season 1978 crop. It has been assumed that projected yield levels on the improvement areas would be achieved over five years in equal instalments from the year of completion (1977 or 1978) inclusive,while in the extension areas projected yields would be obtained over six years in equal instalmentsfrom 1978 inclusive. Full project benefits would be achieved in 1983.

(d) Pricing of Labor - Farm labor was evaluated at a shadow wage rate, which varies seasonallyand averages p 3.0 per man-day over the year under "with" project conditions at full development,compared to a full employmentmarket ANNEX18 Page 2

wage of P 5.0 per man-day. A detailed analysis is presented in Annex 17. The use of unskilled labor in constructionand developmentworks is limited and all labor employed in such works was valued at the market wage rate.

2. Using the foregoing assumptions and discountingproject benefits and costs over a 50 year project life, the economic rate of return is estimated to be 15% (Table 2).

SensitivityAnalysis

3. Several of the basic assumptionsmade in the economic analysis have been varied in order to examine their impact on the rate of return. These factors were chosen to test the project's sensitivity to cost overruns and delays in construction such as those experienced in the development of the Upper Pampanga River Project (UPRP); to likely changes in the terms of trade between agricultural and manufactured goods; to failure to achieve the project's ambitious cropping calendar; and to difficulties in hiring additional farm labor in months of peak agriculturalactivity. The effects of these assumptions on the rate of return are as follows:

Alternative Rate of Return (%) (a) a two-year delay in reaching full project benefits due to failure to complete construction on time 13

(b) a 20% increase in constructioncosts 13

(d) a 25% increase in the world market price of rice 19

(e) a combination of a 25% cost overrun and a 25% increase in the price of rice 16

(f) a 15% decrease in project benefits due to a combination of decreased yields and area resulting from failure of farmers to adopt fully the proposed cropping calendar 11

(g) a market wage (and opportunity cost) of P 8 instead of P 6/man-day to attract hired agricultural labor in peak season 14 PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROJECT

Economic Analysis - Net Value of Production

Gross Value Net Value Net Returns Area Paddy Farm Gate of Production of from Yield I/ Price , Production Costs 2/ Production Project Area

(ha) (ton/ha) (P/ton) ------(P/ha)------(P million)

Wet Season

Irrigated Rice W 20,650 2.8 900 2,520 545 1,975 40.8 W 34,000 3.8 900 3,420 855 2,565 87,2

Rainfed Rice W 13,350 2.5 900 2,250 465 1,785 23.8 W - - 900 - - -

Dr Season

Irrigated Rice W4 4,650 2.8 900 2,520 615 1,905 8,8 W 6,200 4.1 900 3,690 890 2,800 17.4

Total: W 38,650 W 40,200

W - with project - W without project W w --(P Million)-- 1/ From Annex 14, Tables I and 2 2/ From Annex 16, Table l Total Net Value of Production 73.4 104.6 3/ From Annex 17, Table 2 Before Costing Labor

Less Imputed Cost of Labor 3/ 11.8 13.1

Total Net Value of Production 61.6 91.5 X

Net Incremental Value of

Production at Full Project CD Development. 29.9 PHILIPPINES

TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROJECT

Economic Costs and Benefits (IuS$ '000)

Project Costs Incremental Year Capital 0 & M Total Pro ect Benefits

1 (1975) 2,480 0 2,480 0

2 (1976) 3,690 0 3,690 0

3 (1977) 8,340 190 8,530 61o

4 (1978) 6,140 480 6,620 1,920

5 (1979) 0 480 480 2,250

6 (1980) 0 480 480 3,090

7 (1981) 0 480 480 4'°50

8 (1982) 0 480 480 4,200

9-50 (1983-2024) 0 480 480 4,450

Economic Rate of Return 15%

IXID too PH-ILIPPINES TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROJECT Implementation Schedule

1975 1976 1977 1978 1979 WODRKITEM------J F MIAMIJ JA SOND JIFIMIAM J JAISIONODJ IMIAMIJ JA SON DJ F MA M J JA S 0N O FM A MJ J A S N D

TARLAC SYSTEM (TRIS)

Mobilization (for TRIS and SM-ORIS) Rehabilitation of existing systems(8,600 has.) Constr,ction of ness areas (9,400 has.) . Construction of roads - Irrigation service facilities

SAN MIGUEL-O'DONNELL SYSTEM (SM-ORIS)

Rehabilitation of existing systems 10,100 has.)l. %X Construction of ness areas (4,700 has.) Construction of roads Irrigation service facilitiesX

CAMILING SYSTEM (CR(S) X

Mobilization X Rehabdiiation of existing systems 19,000 has.)lX Construction of sass areas (1,200 has.) X Construction of roads . Irrigation service facilities "

GROUNDWATER PILOT PROJECT X

Mobilization I I System construction (900 has.)**** Operation and evaluation I EiI

WATER MANAGEMENTTRAINING********** ************

NATIONAL IRRIGATION SYSTEMS IMPROVEMENT STUDY * ****

NOTE: Shading indicates met seasonmonths

World Bank-8923 PHILIPPINES TARLAC IRRIGATION SYSTEMSIMPROVEMENT PROJECT ProposedOrganization for Project Construction

NIA BOARD

NIA ADMINISTRATOR

Z JTAUDITOR -MM- - - U - - -- CONSULTANTS

DIVISIOAMIITRTIENNGNERNG AGICLTR LD PROJREECT DEVELP.OIR PANN ASSISTAN T | PRJECT PROJECT MAPAGER MANAGER

DIVISION DIVIN D EEVELOTIEMEVNTDDVI

|ADMIN. OIV SERVICESZ | ADMIN. SERVICES

OFFICE ENGINEERING| FC ENGIINEERING|

FIELD ENGINEERING FIELD ENGINEERING

DIVISION 5 |

*|ADMIN. SERVICES

OFFICE ENGINEERING * Responsible for Grou..d-ater Pilot Project *Resp'onsible for Tarlac Irrigat-o Systems I mprovement Prol.ct

FIELD ENGINEERING|

OPERATION & MAINTENANCE World Bank-8921 PHILIPPINES TARLAC IRRIGATION SYSTEMS IMPROVEMENT PROJECT ProposedOrganization for Operation and Maintenance

NIA BOARD

NIA

ADMINISTRATOR

IUPRP I PROJC MANAGER

EQUIPMENT DEVELOPDAM-RESERVOIR DMINISTRATIVE DIVISION DIEVELOPMENT DIVISION DIVISION

DISTRICT1 DISTRICT 2 DISTRICT 3 DISTRICT4DITCT

SAN JOSE ~TALAVERA STA. ROSA PENARANDA TALG

DIVISION~ ~ ~ ~ DVIIO

I ZONE ii I SUPERINTENDENTS

-771

DIVISION SUPERVISOR I (14)I

rVV-ATER MANAGEMENT TECHNOLOGIST J(68)

1/ Personnel requirements shown in parentheses

r %Proposed addition to UPRP organizational chart for LJ operation and maintenance

DITCH TENDERS

(340)

World Bank-8920 PHILIPPINES TARLAC IRRIGATION SYSTEMSIMPROVEMENT PROJECT ProposedOrganization for Loan ProjectsCoordination

NIA BOARD 1

NIA ADMINISTRATOR

.~~~

LOAN PROJECTS COORDINATOR

World Bank-8922 PHILIPPINES TARLAC IRRIGATION SYSTEMSIMPROVEMENT PROJECT ProposedCropping Calendars

J F M A M J J A S 0 N D I I~~~

Wet Season Rice II T (34,000 Ha) l M

H System I Maintenance.. - - - -

I I ~~~~~~~N

Dry Season l I T R ice (6,200 Ha) I' I I

Rainfall mm 355 Notation:29 C: Cultivation N: Nursery21 T: Transplanting M: Management 163 H: Harvest

J F M A M J J A S 0 N D

World Bank-8919

120°30' 121=00= PHILIPPINES TARLACIRRIGATION SYSTEMS IMPROVEMENTPROJECT

_'. > >/C2ANt°° A ',CENTRAL LUZON BASIN

OF LW(ZJ . TARLAC, SYSTEMS IMPROVEMENT AREAS TARLACSYSTEMS EXTENSION AREAS UPPERPAMPANGA RIVER IRRIGATION PROJECT[LOAN637-P`H PROJECT(LOANCREDIT VItX0p / AURORAt PEPIARANDA IRRIGATIONA BOUNDARY OF CENTRALLUZON IRRIGATIONDEVELORPMENT LA UNION N ~~~~~~~~~~~~~STTDVILOAN/CREDIT984/472-PX) LA UN I N- 3- MAN ROADS 0 0 -1 330F SWAMPS 16F3T I - ~~~~~~~~~~~~~~EXISTINGTAME AND REXERVORS AMBULAX TAM PROVINCAL-j BOUNDARIES

,NAFA \rij N \ j

'7Co '- 'BEHOUET/n:V \i r 111 , ,, ' ,I''; ) 15= T, 5 FR0 2 25 30 / KILOMETERS

- S

04 (SAN ROQUE - N

D~~,,@C < 'I 4 cT > < S J \ .

0 16° 0' . ,0 t P vx \ V v 'i 16°00'

TONFTRUOIONI t\S0SXuPANTA'

4 CAM NG R4 RE N RRIGAT -SYSTEM _

DIVERSI TAMON ttXttenF-PERPpAN`CNt;_ 15o30- 15°30'/ TARAx <>

{7 SSNMIGUEL- ODONNE IRRIGATION <~~~~~~() / tt (levw

Ti a Fi o d / ( \ ' \

;~~~~- .L i- ' 20-XA , ! g ,' t IZi

ZAMBSATAAN

w X ) ~ ~~~~~~~~MMÆAT/AHTAY \'/

12103D so 120 30' / A IA

T. Monc-d) PHILIPPINES JULY1974 TARLACIRRIGATION SYSTEMS IMPROVEUENT PROJECT PAN)XI San Miguel-O'Donnell River Irrigation System (SM-ORIS) Tarlac River Irrigation System (TRIS)

Exisfing Main Canals New Main Canal

Lateral Canals

,_To/ Guimbo N.E. Propased Groandwater r\Irgation Pilot Area

Impravement Areas Extensian Areas

c*/ 4tp, _ /

- Diversian Dams

ToG,mbn N.E. -- Flaad Pratectian Dike AR4EA I tIA ~~~~~~~~~~~~~~~~~~NatianalHighways Other Raads

4 TTZ Rivers ar Creeks

Baundary between TRIS adSM-ORIS

-- - Municipal Baundaries Provincial Boundcries

KILOMETERS

AZ To ZorugornN.E.

2 SANMl~ ~ ~ ~ ~ L ,/ ~

GU EL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~h ~n~e~oe ~hsso i s 0 -ORIS~~~~~ b

120. l122 24-

CHINA LZO SEA LUO s ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~16'160

EXTEN'SJONARE r( PHILIPPINE ~~~> Copas ~~~~~~~~~~~~~~~~~~ ~MANILIAe I ~~ ~~~-4' 140 CONCEPCION 4

To Monilo ~~~~~~~~~~~~~~~~~~~~~~~~~~~1200 1220 ?4

IBRD-11 138 JULY1974 PHILIPPINES TARLACIRRIGATION SYSTEMS IMPROVEMENT PROJECT Comiling River Irrigation System (CRIS) To eugallon > Existing Main Canal _ Diversion Dam \\ \\- - New Main Canal =:= Rivers or Creeks \ > \ \ :**_Lateral Canals -- }-National Highways 1 rProposedGroendwaoer Other Roads

IrrigationPilotArea - Munic pal Boundaries Improv\\extensn Areas -ProvincialP- Boundaries

I TA\/N, !

STA.IGNAC ~AIA PthtPPNPSE

KIOETR

\r)/11bst Ii . T, I.c ______r .t. o 1gv A 3 4