World Bank Document

Document of FLE COPY The World Bank MLE |oP y FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 3136-NEP NEPAL Public Disclosure Authorized STAFF APPRAISAL REPORT OF THE HILL FOOD PRODUCTION PROJECT Public Disclosure Authorized January 5, 1981 Public Disclosure Authorized South Asia Projects Department Education and Agricultural Institutions Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS US$1.00 = Nepalese Rupee (NR) 12.00 WEIGHTS AND MEASURES Metric System FISCAL YEAR Nepal - July 16-July 15 IDA - July 1-June 30 ACRONYMS AND ABBREVIATIONS AA - Agricultural Assistant(s) AADO - Assistant Agricultural Development Officer(s) ADB - Asian Development Bank ADBN - Agricultural Development Bank of Nepal AIC - Agricultural Inputs Corporation APROSC - Agricultural Projects Service Center ASC - Agricultural Service Center(s) AU - Accounting Unit CDO - Chief District Officer(s) DADO - District Agricultural Development Officer(s) DCU - District Credit Union DDP - District Development Plan(s) DIHM - Department of Irrigation, Hydrology and Meteorology DOA - Department of Agriculture DTO - District Technical Office DU - Disbursement Unit GADP - Gandaki Anchal Agricultural Development Project FIWU - Farm Irrigation and Water Utilization HADP - Hill Agriculture Development Project HMG - His Majesty's Government HYV - High Yielding Variety (ies) JT - Junior Technician JTA - Junior Technical Assistant(s) MFA - Miniscry of Food and Agriculture MLD - Ministry of Local Development MOF - Ministry of Finance MOHP - Ministry of Home Panchayat MOWT - Ministry of Works and Transport MU - Monitoring Unit MWR - Ministry of Water Resources NFC - National Food Corporation PC - Project Coordinator PO - Program Officer(s) PDO - Panchayat Development Officer(s) RCC - Regional Coordinating Committee RDA - Regional Director of Agriculture SFDP - Small Farmers Development Program USAID - United States Agency for International Development FOR OFFICIALUSE ONLY NEPAL HILL FOOD PRODUCTION PROJECT Table of Contents Page No. I. INTRODUCTION .......................................... 1 II. BACKGROUND ...................... 1...................... A. The Country ...................................... 1 The Panchayat System ........................ 2 District Administration ..................... 2 B. The Development Scene ............................ 3 C. Agriculture in Nepal ............................. 3 Agricultural Performance .... ..............4 Agricultural Strategy ..................... 4 D. Hill Agriculture ................................. 4 Farming Systems ............................. 5 Food Balances and Nutrition .... .............5 E. Institutions ..................................... 6 Research and Extension ...................... 6 Agricultural Credit ......................... 6 Sajha ....................................... 7 Input Supply. 8 Marketing and Storage. 9 Irrigation .10 F. Foreign Assistance to Agriculture in the Hills ... 10 World Bank Assisted Projects . .11 The First Rural Development Project (Cr. 617-NEP) . .11 The Second Rural Development Project (Cr. 939-NEP) . .11 Other Hill Agricultural Development Projects .11 Gandaki Anchal Agricultural Develop- ment Project (GADP) .11 Hill Agricultural Development Project (HADP) .12 III. THE PROJECT AREA .. 12 A. General .12 Physical Characteristics .12 Population and Land Use .13 B. Agricultural Production in the Project Area .14 Crop Production .14 Cropping Patterns .15 Cultural Practices .15 Animal Production .16 Animal Health Services .16 This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties.Its contents may not otherwise be disclosedwithout World Bank authorization. - ii - Page No. IV. THE PROJECT ......... ..... ...................... 17 A. General Description .............................. 17 B. Detailed Features ................................ 18 Agricultural Service Centers (ASC) .... ...... 18 Agricultural Extension, Research and Training ........................... 19 Livestock Development and Animal Health .. 20 Staff Requirements ....................... 20 Agricultural Development Bank of Nepal ...... 21 Sajha ....................................... 21 Marketing ................................... 21 Input Procurement and Distribution .... ...... 22 Minor Irrigation ............................ 22 Trails and Bridges .......................... 23 Trails ................................... 23 Bridges .................................. 23 Project Monitoring and Evaluation .... ....... 23 Technical Assistance ........................ 24 V. COST ESTIMATES AND FINANCING .......................... 24 A. Cost Estimates .................................... 24 B. Proposed Financing ............................... 26 C. Procurement and Disbursement ..................... 26 D. Accounts and Audit ............................... 27 VI. ORGANIZATION AND MANAGEMENT ........... .. ..............28 A. Organization ..................................... 28 B. Management ....................................... 28 Project District Coordinators .... ...........28 Coordinating Committees ..................... 29 Project Staffing ............................ 30 VII. AGRICULTURAL PRODUCTION AND INCOMES ................... 30 Crops and Cropping Patterns ...................... 30 Farmers' Risk and Crop Failure ................... 31 Incremental Production ........................... 32 Marketing ........................................ 32 Farm Incomes ..................................... 32 Cost Recovery ............ 33 VIII. BENEFITS AND JUSTIFICATION ............................ 33 Economic Evaluation .............................. 34 Economic Rate of Return .......................... 34 Sensitivity Analysis ............................. 34 IX. AGREEMENTS REACHED AND RECOMMENDATIONS ................ 35 - Ill - ANNEX 1 - Crop and Animal Production and Food Balances Table 1 - Population, Adult Consumption Units and Caloric Requirements Table 2 - Food Grain Requirements for Average Family ANNEX 2 - Adaptive Research ANNEX 3 - Agricultural Credit, Input Supply, Marketing and Cooperatives Table 1 - Fertilizer Requirement Table 2 - Seed Requirements Table 3 - Pesticide Requirements ANNEX 4 - Irrigation Appendix 1, Table 1 - Irrigation Cost Estimates ANNEX 5 - Trails and Bridges ANNEX 6 - Basis for Economic Analysis Table 1 - Farm Inputs Requirements Table 2 - Summary of Economic & Financial Prices Table 3 - Cropping Area, Yield, Production & Value of Production Table 4 - Farm Input Costs Table 5 - Rate of Return Calculations Appendix 1- Model Farm Budgeting Assumptions Table 1 - Model Farm Budgets (0.2 ha) Table 2 - Model Farm Budgets (0.8 ha) ANNEX 7 - Estimated IDA Disbursements ANNEX 8 - Implementation Schedule ANNEX 9 - Project Costs and Charts Table 1 - Summary of Project Costs Table 2 - Agricultural Extension Service Table 3 - Livestock Development and Animal Health Table 4 - Agricultural Service Centers Table 5 - Agricultural Development Bank Table 6 - Fertilizer Table 7 - Training Table 8 - Trails and Bridges Table 9 - Minor Irrigation Table 10 - Technical Assistance CHART 1 - Organization of Principal Activities CHART 2 - Flow of Direct Costs and Credit ANNEX 10 - Refinance Materials Available in South Asia Regional Information Center MAP - IBRD 15049 NEPAL HILL FOOD PRODUCTION PROJECT I. INTRODUCTION 1.01 Ever growing population, mountainous terrain, limited irrigation, increasing cultivation of steep hillsides, overgrazing of pasture lands, and defoliation (for livestock fodder) and destruction of forests all contribute to declining standards of living for the residents of the Hill and Mountain regions of Nepal. In the Hills, food produced annually by the average farm family is now believed to cover only the equivalent of about 225 days of the family's minimum annual subsistence needs. The Agricultural Sector Review undertaken by IDA in 1978 (Report No. 2205-NEP) pointed out that despite decreasing crop yields of maize and wheat, past efforts to raise production in the Hills and Mountains had been few and of little success. Nevertheless, despite the generally moderate agricultural potential of these areas, consider- able opportunities exist for raising production in the short term. 1.02 As a follow-up to the sector review and in recognition of the aims of Nepal's Fifth Development Plan, FAO/World Bank Cooperative Program missions, headed by Mr. D. Muller-Praefcke, visited Nepal in March and October of 1979 to assist HMG in the identification and preparation of a project to increase food production in Hill areas. 1.03 This report is based on the findings of an IDA appraisal mission which visited Nepal in May/June 1980. The mission consisted of Messrs. J. H. Lindt (IDA), D. C. Finfrock (Agricultural Consultant), R. Issar (Agricul- tural Inputs Consultant) and T. B. Rawal (Agricultural Economics Consultant). II. BACKGROUND A. The Country 2.01 Nepal is landlocked between China and India. It is divided into three parallel ecological zones running east-west: the Terai Plain, an extension of the Gangetic Plain of India; the Hills, actually the foothills of the Himalayas, ranging from 500 m to 4,000 m in elevation; and the Himalayan Mountains to the north. These three zones account for 17%, 68% and 15% of the total area (140,800 sq km), respectively.

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