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Report and Recommendation of the President to the Board of Directors

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Report and Recommendation of the President to the Board of Directors Report and Recommendation of the President to the Board of Directors Project Number: 38411 August 2008 Proposed Multitranche Financing Facility India: Orissa Integrated Irrigated Agriculture and Water Management Investment Program CURRENCY EQUIVALENTS (as of 1 August 2008) Currency Unit – Indian rupee(s) (Re/Rs) Rs1.00 = $0.0235 $1.00 = Rs42.49 ABBREVIATIONS ADB – Asian Development Bank AP – affected person CAD – command area development DOWR – Department of Water Resources EARF – environmental assessment and review framework EA – executing agency EIA – environmental impact assessment EIRR – economic internal rate of return FFA – framework financing agreement FYP – five-year plan GDP – gross domestic product ICB – international competitive bidding IEE – initial environmental examination IP – indigenous people ISPM – institutional strengthening and project management IWRM – integrated water resources management JBIC – Japan Bank for International Cooperation LIBOR – London interbank offered rate MCII – Mahanadi Chitropala Island Irrigation MFF – multitranche financing facility MIS – management information system MLI – minor lift irrigation MTFWFPF – Multi-Donor Trust Fund under the Water Financing Partnership Facility NCB – national competitive bidding NGO – nongovernment organization NIA – net irrigated area NWP – National Water Policy O&M – operation and maintenance OFID – OPEC Fund for International Development OPEC – Organization of the Petroleum Exporting Countries OSG – Orissa state government PFR – periodic financing request PIM – participatory irrigation management PMU – project management unit RF – resettlement framework RP – resettlement plan SGIA – second-generation imprest account SIO – subproject implementation office SIP – subproject implementation plan SOE – statement of expenditure TA – technical assistance WALMI – Water and Land Management Institute WUA – water user association NOTES (i) The fiscal year of the Government of India ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2007 ends on 31 March 2007. (ii) In this report, "$" refers to US dollars. Vice-President B. N. Lohani, Vice President-in-Charge (Operations 1) Director General K. Senga, South Asia Department Director F. Roche, Agriculture, Natural Resources, and Social Services Division, South Asia Department Team leader K. Yokoyama, Principal Water Resources Management Specialist, South Asia Department Team members J. Chatterji, Project Implementation Officer, South Asia Department S. Nebel, Rural Development Specialist, South Asia Department V. Samarasekara, Natural Resources Management Specialist, South Asia Department Y. Siddiqi, Water Resources Management Specialist, South Asia Department V. You, Senior Counsel, Office of the General Counsel CONTENTS Page MULTITRANCHE FINANCING FACILITY INVESTMENT PROGRAM SUMMARY i MAP I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 2 III. THE PROPOSED INVESTMENT PROGRAM 6 A. Impact and Outcome 6 B. Outputs 6 C. Special Features 9 D. Program Investment and Financing Plan 10 E. Implementation Arrangements 12 IV. TECHNICAL ASSISTANCE 17 V. INVESTMENT PROGRAM BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 17 A. Economic Impacts 17 B. Households and Poverty Reduction Impacts 18 C. Social and Gender Development Strategy 18 D. Indigenous Peoples 19 E. Resettlement 19 F. Environmental Impacts 20 G. Risks 20 VI. ASSURANCES 21 VII. RECOMMENDATION 23 APPENDIXES 1. Design and Monitoring Framework 24 2. Sector Assessment, Road Map, and Investment Program 28 3. External Assistance (1995–2007) 38 4. Lessons Learned 39 5. Cost Estimates and Financing Plan 42 6. Organizational Structure 45 7. Summary Subproject Selection Criteria and Approval Process 47 8. Subproject Implementation Procedure and Arrangements 49 9. Indicative Implementation Schedule 52 10. Procurement Plan (Project 1) 53 11. Summary Economic and Financial Analysis 56 12. Summary Poverty Reduction and Social Strategy 61 13. Summary Resettlement Framework 65 14. Summary Initial Environmental Examinations 67 SUPPLEMENTARY APPENDIXES (available on request) A. Chronology of Project Development and Processing B. Capacity Development Plan C. Detailed Cost Estimates and Financing Plan D. Detailed Implementation Arrangements E. Terms of Reference of Consultants and NGO Services F. Financial Management Assessment of the Executing Agency G. Technical Assistance for Institutional Development of Integrated Water Resources Management in Orissa H. Economic and Financial Analysis I. Poverty Reduction and Social Strategy J. Gender Action Plan K. Indigenous Peoples Development Framework L. Indigenous Peoples Specific Actions (Project 1) M. Resettlement Framework N. Resettlement Due Diligence Assessments (Project 1) O. Environmental Assessment and Review Framework P. Initial Environmental Examinations (Project 1) Q. Environmental Management Plan R. Recommendations on Refinement of Water User Association Act 2002 and Rules 2003 MULTITRANCHE FINANCING FACILITY INVESTMENT PROGRAM SUMMARY Borrower India Classification Targeting classification: General intervention Sector: Agriculture and natural resources Subsector: Irrigation and drainage Themes: Sustainable economic growth, governance, capacity development Subthemes: Developing rural areas, public governance, institutional development Environment Project 1 was classified as category B according to the Assessment Environment Policy (2002) of the Asian Development Bank (ADB). An initial environmental examination for Project 1 was undertaken for five major and medium-sized irrigation schemes, and two sample community-based minor lift irrigation schemes. An environmental assessment and review framework was also prepared to guide the environmental assessment of further subprojects. Sector Investment The proposed Orissa Integrated Irrigated Agriculture and Water Program Management Investment Program will enhance the productivity, water use efficiency, and sustainability of the existing major and medium-sized irrigation schemes and community-based minor lift irrigation systems in the four northern river basins and a part of the Mahanadi River Delta in Orissa state. The selected schemes are suffering from poor performance in irrigated agriculture due to inefficient operation, system deterioration, and limited integration with agriculture support services and marketing systems. The Investment Program will include (i) water user association (WUA) empowerment, (ii) renovation and extension of irrigation and associated infrastructure including field channels, (iii) agriculture and related support services including livelihood enhancement of the poor, and (iv) progressive transfer of the operation and maintenance (O&M) to WUAs. The Investment Program will also strengthen the institutional basis for participatory irrigation management (PIM) and integrated water resources management (IWRM) with management reforms and capacity strengthening of relevant institutions. Multitranche Financing The multitranche financing facility (MFF) will finance projects Facility under the Investment Program, provided the Government of India and the Orissa state government comply with the assurances to ADB and the constituent projects are in line with those assurances and with the criteria set out in the framework financing agreement (FFA). ADB will provide loans to finance projects under the MFF as soon as the projects are ready for financing upon submission of satisfactory related periodic financing request. Each loan will ii constitute a tranche and may carry terms different from the financing terms of previous or later loans. The choice of financing terms will depend on the project and ADB’s financing policies at the time the loan is documented in a legal document. Tranches may be provided in sequence or simultaneously, and may overlap. The projects corresponding to individual tranches may comprise individual subprojects, their subcomponents, and/or other physical and nonphysical components of the Investment Program that are packaged based on procurement and/or implementation years. Rationale Despite India’s rapid overall economic growth, development in agriculture and related rural nonfarm sectors has been stagnant, and the sector is making a slow transformation to more intensive and high-value production and processing systems. Bottlenecks in both rural and urban water resources are also increasingly seen as a major constraint to economic growth. In this context, irrigation is drawing major attention because of its high share (84%) of total water use, as well as its crucial importance for agriculture and rural growth. A significant part of the existing irrigation infrastructure remains underutilized, with low water-use efficiency and insufficient O&M. The Government of India is promoting state sector reforms through its National Water Policy (NWP) 1987 and 2002, which advocates PIM and IWRM to promote and sustain more efficient water use. Orissa is one of the poorest states in India. Despite recent acceleration of its annual economic growth rates, disparity against the national average is still widening. Agriculture is the backbone of the economy and is the central focus of the strategy of the Orissa state government (OSG) to reduce rural poverty. In this context, the low performance of existing irrigation infrastructure seriously constrains agricultural productivity and diversification.
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