37231-013: Punjab Irrigated Agriculture Investment Program

Completion Report

Project Number: 37231-013 MFF Number: 0009 Loan Numbers: 2299, 2300, 2841, 2971, and 3351 September 2018

Pakistan: Punjab Irrigated Agriculture Investment

Program

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency unit – Pakistan rupee/s (PRe/PRs)

At Appraisal At Project Completion 15 November 2006 30 September 2017 PRe1.00 = $0.0164 $0.0095 $1.00 = PRs60.8 PRs105.4

ABBREVIATIONS

ADB – Asian Development Bank EAF – environmental assessment framework EIA – environmental impact assessment EMP – environmental management plan FFA – framework financing agreement GDP – gross domestic product GIS – geographic information system IEE – initial environmental examination IMU – irrigation management unit LAR – land acquisition and resettlement LBDC – Lower Bari Doab Canal MIS – management information system MFF multitranche financing facility O&M – operation and maintenance PFR – periodic financing request PID – Punjab Irrigation Department PIDA – Punjab Irrigation and Drainage Authority PIU – project implementation unit PMO – project management office

WEIGHTS AND MEASURES

m3/s – cubic meters per second km – kilometer ha – hectare mm – millimeter

GLOSSARY abiana – irrigation service fee barrage – gated hydraulic structure built across a river or other watercourse to control, regulate, and divert flows to canals or to facilitate navigation biraderi – clan conjunctive use – use of surface water and groundwater to meet water needs in the same geographic area rabi – crop growing season from about October to March

khal panchayat – water user association based on a common irrigation field outlet from the canal kharif – crop growing season from about April to September

NOTES

(i) The fiscal year (FY) of the Government of Pakistan ends on 30 June. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 30 June 2018. (ii) In this report, “$” refers to United States dollars

Vice-President Wencai Zhang, Operations 1 Director General Werner Liepach, Central and West Asia Department (CWRD) Director Xiaohong Yang, Pakistan Resident Mission, CWRD

Team leader Asad Zafar, Senior Project Officer (Water Resources), CWRD Team members Muzaffar Bukhari, Project Analyst, CWRD Noriko Sato, Natural Resources Specialist, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i MAP xiii I. PROGRAM DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 2 A. Program Design and Formulation 2 B. Program Outputs 3 C. Program Costs and Financing 6 D. Disbursements 8 E. Programe Schedule 8 F. Implementation Arrangements 8 G. Technical Assistance 9 H. Consultant Recruitment and Procurement 9 I. Safeguards 10 K. Monitoring and Reporting 11 III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness 12 C. Efficiency 13 D. Sustainability 14 E. Development Impact 15 F. Performance of the Borrower and the Executing Agency 15 G. Performance of the Asian Development Bank 16 H. Overall Assessment 16 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 17 A. Issues and Lessons 17 B. Recommendations 17

APPENDIXES 1. Design and Monitoring Framework 19 2. Program Cost at Appraisal and Actual 23 3. Program Cost by Financier 28 4. Disbursement of ADB Loan Proceeds 39 5. Implementation Schedule 41 6. Consultant Recruitment and Procurement 45 7. Contract Awards of ADB Loan Proceeds 48 8. Status of Compliance with Loan Covenants 49 9. Economic Reevaluation 61

BASIC DATA

A. Loan Identification 1. Country Islamic Republic of Pakistan 2. MFF number and financing sources M0009 (Loan 2299, 2300, 2841, 2971 and 3351)1 3. Project title Punjab Irrigated Agriculture Investment Program 4. Borrower Government of Pakistan 5. Executing agency Punjab Irrigation and Power Department2 6. Amount of loan $900 million 7. Project completion report number PAK 1717 8. Financing modality Multitranche financing facility

B. Loan Data 1. Appraisal – Date started 10 July 2006 – Date completed 04 August 2006

2. Loan negotiations Loan 2299–2300 – PFR1 – Date started 10 November 2006 – Date completed 11 November 2006 Loan 2841 – PFR 2 – Date started 18 November 2011 – Date completed 09 December 2011 Loan 2971– PFR 3 – Date started 26 November 2012 – Date completed 27 November 2012 Loan 3351– PFR 4 – Date started 12 November 2015 – Date completed 12 November 2015

3. Date of Board approval 13 December 2006

4. Date of loan agreement – Loan 2299–2300 – PFR 1 22 June 2007 – Loan 2841– PFR 2 18 January 2012 – Loan 2971– PFR 3 30 April 2013 – Loan 3351– PFR4 14 December 2015

5. Date of loan effectiveness Loan 2299–2300 – PFR 1 – In loan agreement 20 September 2007 – Actual 24 August 2007 – Number of extensions None

1 Loans 2300 and 2841 are financed from ADB’s Special Fund resources, while all other loans are financed through ADB’s Ordinary Capital Resources. 2 Renamed the Punjab Irrigation Department in July 2011

Loan 2841– PFR 2 – In loan agreement 17 February 2012 – Actual 17-February 2012 – Number of extensions None

Loan 2971 – PFR 3 – In loan agreement 29 July 2013 – Actual 06 June 2013 – Number of extensions None

Loan 3351 – PFR 4 – In loan agreement 13 March 2016 – Actual 11 January 2016 – Number of extensions None

6. Project completion date

Loan 2299 – PFR 1 – Appraisal 31 December 2016 – Actual 30 September 2017 Loan 2300 – PFR 1 – Appraisal 31 December 2016 – Actual 30 June 2017 Loan 2841 – PFR 2 – Appraisal 30 June 2016 – Actual 30 September 2017 Loan 2971 – PFR 3 – Appraisal 30 September 2016 – Actual 30 September 2017 Loan 3351 – PFR 4 – Appraisal 31 December 2016 – Actual 30 September 2017

7. Loan closing date

Loan 2299 – PFR 1 – In loan agreement 30 September 2007 – Actual 30 September 2017 – Number of extensions 4

Loan 2300 – PFR 1 – In loan agreement 30 September 2013 – Actual 30 June 2017 – Number of extensions 3

Loan 2841– PFR 2 – In loan agreement 31 December 2016 – Actual 30 September 2017 – Number of extensions 2

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Loan 2971 – PFR 3 – In loan agreement 31 March 2017 – Actual 30 September 2017 – Number of extensions 1

Loan 3351 – PFR 4 – In loan agreement 30 June 2017 – Actual 30 September 2017 – Number of extensions 1

8. Financial closing date – Actual Loan 2299 – PFR 1 05 January 2018 Loan 2300 – PFR 1 21 September 2017 Loan 2841 – PFR 2 8 May 2018 Loan 2971 – PFR 3 26 December 2017 Loan 3351 – PFR 4 28 December 2017

9. Terms of loan

Loan 2299 – PFR 1 – Interest rate LIBOR plus 0.60% per annum. – Commitment Charges 0.75% per annum – Maturity (number of years) 25 years – Grace period (number of years) 5 years

Loan 2300 – PFR 1 – Interest rate 1% per annum during the grace period and 1.5% per annum thereafter – Maturity (number of years) 32 years – Grace period (number of years) 8 years

Loan 2841 – PFR 2 – Interest rate 1% per annum during the grace period, and 1.5% per annum thereafter – Maturity (number of years) 32 years – Grace period (number of years) 8 years

Loan 2971 – PFR 3 – Interest rate LIBOR plus 0.60% per annum less a credit of 0.20% – Commitment Charges 0.15% per annum – Maturity premium 0.20% – Maturity (number of years) 20 years – Grace period (number of years) 5 years

Loan 3351 – PFR 4 – Interest rate LIBOR plus 0.60% less a credit of 0.10% – Commitment Charges 0.15% per annum – Maturity (number of years) 15 years – Grace period (number of years) 5 years

10. Terms of relending (if any) Not applicable

11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval PFR 1 (L2299) 01 December 2007 5 January 2018 121 months, 7 days PFR 1 (L2300) 19 May 2009 21 September 2017 62 months, 2 days PFR 2 (L2841) 3 May 2013 8 May 2018 60 months PFR 3 (L2971) 01 December 2013 26 December 2017 26 months, 26 days PFR 4 (L3351) 24 March 2016 28 December 2017 21 months, 20 days Effective Date Actual Closing Date Time Interval PFR 1 (L2299) 24 August 2007 5 January 2018 124 months, 15 days PFR 1 (L2300) 24 August 2007 21 September 2017 119 months, 26 days PFR 2 (L2841) 17 February 2012 8 May 2018 76 months PFR 3 (L2971) 06 June 2013 26 December 2017 53 months, 20 days PFR 4 (L3351) 11 January 2015 28 December 2017 21 Months, 17 days

b. Amount

(i) L2299-PAK – PFR 1 (¥ million) Increased during Last Undis- Original Imple- Canceled Revised Amount bursed Allocation mentation during Imple- Allocation Disbursed Balance Category (1) (2) mentation (3) a (4=1+2–3) (5) (6 = 4–5) Works 20,724.5 (8,788.3) 11,964.7 11,964.7 0 Equipment 194.0 (177.7) 6.3 16.3 0 Resettlement, 3.3 3.3 0 environmental mitigation 75.5 (72.2) Consulting services 2,203.1 (868.6) 1,371.8 1,371.8 0 Project management 3.0 (3.0) 0 Capacity development 583.5 (555.5) 28.1 28.1 0 Financing charges 1,460.2 (493.2) 967.0 967.0 0 Recurrent cost 327.7 (327.7) 0 Unallocated 66.3 (0.5) 0 Total 25,637.8 (11,286.6) 14,351.2 14,351.2 0 $ million equivalent 151.6 151.6 0 ( ) = negative number. a This includes the first partial cancellation of ¥4,363.4 million on 13 June 2011, and the conversion of loan currency for the undisbursed loan balance from ¥ to $ on 20 July 2015. Category allocation and disbursement status of the converted $ denominated loan are presented in item (ii).

(ii) L2299-PAK – PFR 1 ($ million) Increased Canceled Last Undis- Original during during Revised Amount bursed Allocation Implemen Implementation Allocation Disbursed Balance Category (1) tation (2) (3) (4=1+2–3) (5) (6 = 4–5) Works 39.950 (5.417) 45.366 45.366 0 Equipment 1.432 1.432 0 Land acquisition, resettlement, environmental mitigation 0.582 0.563 0.019 0.019 0 Consulting services 2.702 (4.206) 6.909 6.909 0 Project management 0.024 0.024 0 Capacity development 4.476 4.420 0.056 0.056 0

Increased Canceled Last Undis- Original during during Revised Amount bursed Allocation Implemen Implementation Allocation Disbursed Balance Category (1) tation (2) (3) (4=1+2–3) (5) (6 = 4–5) Financing charges 3.974 2.293 1.681 1.681 0 Recurrent cost 2.640 2.640 0 Unallocated 0.004 0.004 0 Total 55.784 1.752 54.031 54.031 0 ( ) = negative number.

(iii) L2300-PAK (COL) – PFR 1 (SDR million) Increased Canceled Last Undis- Original during during Revised Amount bursed Allocation Implemen Implementation Allocation Disbursed Balance Category (1) tation (2) (3) (4=1+2–3) (5) (6 = 4–5) Equipment 0.332 0.332 0 Consulting services 6.252 0.332 6.584 6.584 0 Financing charges 0.159 0.159 0.159 0 Total 6.743 0.332 0.332 6.743 6.743 0 $ million equivalent 10.000 10.075 10.075 0

(iv) L2841-PAK (COL) – PFR 2 (SDR million) Increased during Last Undis- Original Imple- Canceled Revised Amount bursed Allocation mentation during Imple- Allocation Disbursed Balance Category (1) (2) mentation (3) a (4=1+2–3) (5) (6 = 4–5)

Works 132.342 (4.221) 128.121 128.121 0 Vehicles, equipment and supplies 0.061 (0.014) 0.047 0.047 0 Resettlement 0.137 (0.035) 0.102 0.102 0 Consulting services 5.553 (0.640) 4.913 4.913 0 Project management 0.928 (0.579) 0.349 0.349 0 Interest charge 4.435 (2.052) 2.383 2.383 0 Unallocated 28.961 (28.961) 0 Total 172.417 (36.502) 135.915 135.915 0 $ million equivalent 270.040 195.905 195.905 0 ( ) = negative number. (v) Loan 2971-PAK – PFR 3 ($ million) Increased Canceled Last Undis- Original during during Revised Amount bursed Allocation Implementation Implementation Allocation Disbursed Balance Category (1) (2) (3) (4=1+2–3) (5) (6 = 4–5) Civil works 43.000 5.913 37.087 37.087 0 M&E works 7.950 7.950 0 PM office 1.440 1.217 0.223 0.223 0 operations Vehicles, equip. 0.320 0.309 0.011 0.011 0 Consulting 3.380 0.226 3.606 3.606 0 Resettlement 0.200 0.158 0.042 0.042 0 Interest charges 3.260 2.053 1.207 1.207 0 Unallocated 13.450 13.450 0 Total 73.000 0.226 31.050 42.175 42.175 0 Equip = equipment, M&E = mechanical and electrical, PM = project management.

(vi) Loan 3351-PAK – PFR 4 ($ million) Increased Last Undis- Original during Canceled Revised Amount bursed Allocation Implemen during Imple- Allocation Disbursed Balance Category (1) tation (2) mentation (3) (4=1+2–3) (5) (6 = 4–5) Civil works 23.457 0.864 22.593 22.593 0 Consulting 1.713 1.537 0.176 0.176 0 Services Financing charges 0.400 0.242 0.158 0.158 0 Unallocated 1.000 1.000 0 Total 26.570 – 3.643 22.927 22.927 0

C. Project Data 1. Project cost ($ million) Appraisal Cost Estimate Actual (i) Loan 2299-PAK, 2300-PAK (COL) – PFR 1, and Loan 3351 – PFR 4 Foreign exchange cost Not applicable Local currency cost Total 281.400 280.734

(ii) Loan 2841 – PFR 2 Foreign exchange cost Not applicable Local currency cost Total 309.160 227.605

(iii) Loan 2971– PFR 3 Foreign exchange cost Not applicable Local currency cost Total 85.430 50.875

2. Financing plan ($ million) (i) Loan 2299-PAK, Loan 2300-PAK (COL) – PFR 1, and Loan 3351-PAK – PFR 4a

Cost Appraisal Estimate Actual Implementation cost Borrower financed 53.583 42.093 ADB financed 227.816 225.962 Other external financing Total implementation cost 268.759 268.055 Interest during construction costs Borrower financed ADB financed 12.641 12.679 Other external financing Total interest during construction cost 12.641 12.679 ADB = Asian Development Bank a Tranche 4 was additional financing to meet cost over-runs of tranche 1. Hence, the borrower’s financed implementation covers both tranche 1 and 4.

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(ii) Loan 2841-PAK (COL) – PFR 2 Cost Appraisal Estimate Actual Implementation cost Borrower financed 39.100 31.700 ADB financed 263.100 192.567 Other external financing Total implementation cost 302.200 227.605 Interest during construction costs Borrower financed ADB financed 6.960 3.338 Other external financing Total interest during construction cost 6.960 3.338

(iii) Loan 2971-PAK – PFR 3 Cost Appraisal Estimate Actual Implementation cost Borrower financed 12.400 8.700 ADB financed 69.740 40.968 Other external financing Total implementation cost 82.170 49.668 Interest during construction costs Borrower financed ADB financed 3.260 1.207 Other external financing Total interest during construction cost 3.260 1.207

3. Cost breakdown by project component ($ million) (i) Loan 2299-PAK, 2300-PAK (COL) – PFR 1, and 3351-PAK – PFR 4 a Component Appraisal Estimate Actual A. Base component cost of the LBDCIP 1. R&U of the Balloki Barrage Complex 21.900 28.010 2. R&U of the LBDC Distribution Network 146.900 216.092 3. Groundwater management 2.600 1.349 4. OFWM and agriculture 6.500 1.873 5. Institutional strengthening and operation modernization 10.900 0.487 6. Project management 9.500 9.044 Subtotal (A) 198.300 256.855 B. Base cost for the PIAPPF 9.500 11.437 Subtotal (B) 9.500 11.437 C. Contingencies for the LBDCIP and PIAPPF 1. Physical contingencies 3.400 2. Price contingencies 57.500 Subtotal (C) 60.900 D. Financing charges during implementation 12.700 12.442 Total Cost (A+B+C+D) 281.400 280.734 LBDC = lower bari doab canal, LBDCIP = lower bari doab canal improvement project, OFWM = on-farm water management, PIAPPF = Punjab irrigated agriculture project preparation facility, R&U = rehabilitation and upgradation.]. a Tranche 4 is additional financing to meet cost over-runs of Tranche 1, hence not separately mentioned.

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(ii) Loan 2841 – PFR 2 Component Appraisal Estimate Actual A. Base cost Construction of New Khanki Barrage 238.210 214.600 Project management 11.640 9.667 Total base cost 249.850 224.267 B. Contingencies 52.360 C. Financing charges 6.950 3.338 Total cost (A+B+C) 309.160 227.605

(iii) Loan 2971-PAK – PFR 3 Component Appraisal Estimate Actual A. Base component cost 1. Civil, and mechanical & electrical 59.960 44.510 2. Vehicles, equipment, and supplies 0.390 0.016 3. PMO staff and operating cost 1.690 0.292 4. Consulting services 3.970 4.806 5. Land acquisition and resettlement 0.340 0.044 Total base cost 66.350 49.668 B. Contingencies 15.820 C. Financing charges during implementation 1. Interest during implementation 2.865 2. Commitment charges 0.410 Subtotal (C) 3.275 1.207 Total cost (A+B+C+D) 85.445 50.875 PMO = project management office 4. Project schedule (i) Loan 2299-PAK, 2300-PAK (COL) – PFR 1 Item Appraisal Estimate Actual Date of contract with consultant Package 01 30 June 2007 19 September 2008 Package 02 31 December 2007 19 September 2008 Package 03 30 June 2008 28 December 2010 Package 04 31 December 2007 28 December 2010 Package 05 31 December 2007 10 February 2010 Completion of engineering designs 31-December 2009 31 December 2011 Civil works contract Date of award LBDC/NCB-01 01 January 2008 10 February 2010 LBDC/NCB-02 01 January 2008 10 February 2010 LBDC/ICB-01 01 January 2008 17 January 2011 LBDC/ICB-02 01 January 2008 14 December 2010 LBDC/ICB-03 01 January 2008 08 March 2011 BB/ICB-01 01 January 2008 16 June 2011 LBDC/ICB-04 01 April 2008 06 February 2012 LBDC/ICB-05 01 April 2008 04 August 2012 LBDC/ICB-06A 01 April 2008 12 June 2015 LBDC/ICB-06B 01 April 2008 05 August 2013 Completion of work LBDC/NCB-01 31 December 2010 15 July 2012 LBDC/NCB-02 31 December 2010 06 April 2013 LBDC/ICB-01 31 December 2010 29 September 2013 LBDC/ICB-02 31 December 2010 10 September 2015 LBDC/ICB-03 31 December 2010 31 January 2015 BB/ICB-01 31 December 2010 30 June 2018

Item Appraisal Estimate Actual LBDC/ICB-04 30 June 2012 30 June 2018 LBDC/ICB-05 30 June 2012 30 June 2018 LBDC/ICB-06A 30 June 2012 30 June 2018 LBDC/ICB-06B 30 June 2012 31 January 2018 Equipment and supplies Dates First procurement 01 January 2007 01 January 2008 Last procurement 31 December 2008 30 June 2012 Completion of equipment installation Start of operations Completion of tests and commissioning 31 December 2010 15 August 2016 Beginning of start-up 31 December 2010 15 August 2016 Other milestones Partial cancelation of loan proceeds 13 June 2011 Conversion of loan currency from ¥ to $ 20 July 2015 Additional financing (tranche 4) approved to meet 14 December 2015 cost overrun

(ii) Loan 2841-PAK (COL) – PFR 2 Item Appraisal Estimate Actual

Consulting Services a Date of contract with consultant 1 Jul 2011 21 Feb 2013 Civil works contract Date of award 31 Mar 2012 2 May 2013 Completion of work 30 Jun 2016 25 Aug 2017 Equipment and supplies First procurement 15 Jan 2012 10 Jul 2013 Last procurement 20 May 2012 28 Sep 201 Beginning of barrage operations 30 Jun 2016 20 Oct 2016 a Detailed design was conducted by 2011, prior to the project start and financed by the Japan International Cooperation Agency.

(iii) Loan 2971-PAK – PFR 3 Item Appraisal Estimate Actual Date of contract with consultants July 2013 02 April 2014 Civil works contract Date of award R&U of Pakpattan Canal (ICB-01) June 2013 03 April 2014 R&U of Suleimanki Barrage (ICB-02) July 2013 10 June 2014 Completion of work R&U of Pakpattan Canal (ICB-01) September 2016 30 September 2017 R&U of Suleimanki Barrage (ICB-02) September 2016 30 September 2017 Equipment and supplies Dates First procurement June 2013 12 May 2016 Last procurement June 2013 12 May 2016 Completion of equipment installation Start of operations Completion of tests and commissioning September 2016 30 June 2018 Beginning of start-up October 2016 1 July 2018 Other milestones Minor change in implementation arrangements and reallocation of funds 31 July 2013 Minor change to an individual project under the MFF 19 January 2017 First partial cancelation of loan proceeds 08 May 2017 Second partial cancelation of undisbursed loan 26 December 2017

(iv) Loan 3351-PAK – PFR 4 Item Appraisal Estimate Actual Date of contract with consultants Package 01 30 June 2007 19 September 2008 Package 02 31 December 2007 19 September 2008 Completion of engineering designs 31 December 2009 31 December 2011 Civil works contract Date of award 01 April 2008 12 June 2015 Completion of work 31 December 2016 30 June 2018 Start of operations Completion of tests and commissioning 15 August 2016 31 March 2018 Beginning of start-up 15 August 2016 31 March 2018

5. Project performance report ratings (i) Loan 2299-PAK, 2300-PAK (COL) – PFR 1 Ratings Implementation Period Development Objectives Implementation Progress From 24 August 2007 to 31 Mar 2011 S S Single Project Rating a From 01 April 2011 to 30 June 2012 On Track From 01 July 2012 to 30 September 2012 Potential Problem From 01 October 2012 to 30 September 2013 On Track From 01 October 2013 to 31 December 2013 Potential Problem From 01 January 2014 to 30 June 2014 On Track From 01 July 2014 to 30 June 2015 Potential Problem From 01 July 2015 to 31 March 2018 On Track S = [insert explanation]. a After 2011, only one rating is available.

(ii) Loan 2841-PAK (COL) – PFR 2 Implementation Period Single Project Rating From 01 01 January 2012 to 30 June 2012 Actual Problem From 01 July 2012 to 31 December 2012 Potential Problem From 01 January 2013 to 31 March 2013 Actual Problem From 01 April 2013 to 30 June 2013 On Track From 01 July 2013 to 30 September 2013 Potential Problem From 01 October 2013 to 30 June 2017 On Track From 01 July 2017 to 30 September 2017 Potential Problem From 01 October 2017 to 30 June 2018 On Track

(iii) Loan 2941-PAK – PFR 3 Implementation Period Single Project Rating From 01 June 2013 – 31 December 2016 On Track From 01 January 2017 to 31 March 2017 Potential Problem From 01 April 2017 to 30 June 2017 On Track From 01 July 2017 to 31 December 2017 Potential Problem From 01 January 2018 to 31 March 2018 On Track

(iv) Loan 3351-PAK – PFR 4 Implementation Period Single Project Rating a From 01 January 2016 – 30 June 2017 On Track From 01 July 2017 to 30 September 2017 Potential Problem From 01 September 2017 to 31 March 2018 On Track

D. Data on Asian Development Bank Missions (i) Loan 2299-PAK, 2300-PAK (COL) – PFR 1 No. of No. of Specialization of Name of Mission Date Persons Person-Days Members Pre-appraisal a 13–30 Sep 2006 2 34 a, b, c Inception 29 Sep–5 Sep 2007 3 18 a, d, e Review 1 28 Jan–4 Feb 2008 1 7 a Review 2 10–19 Apr 2008 1 9 a Review 3 9–12 Feb 2009 3 9 a, d, f Review 4 28 Apr–5 May 2009 3 21 a, f, g Review 5 12–16 Aug 2009 2 8 a, f Safeguards review and orientation 20–24 Jul 2009 2 8 h, i Review 6 14–24 Feb 2010 9 64 f, j, k, l, m, n, o, p, q Midterm 2–12 May 2011 5 30 j, p, d, I, q Review 7 8–12 Feb 2012 1 4 j Review 8 8–22 Jul 2012 5 31 f, j, t, u, v Review 9 13–15 May 2012 2 4 r, w, x Review 10 3–12 Dec 2012 1 9 w Review 11 28 Feb 2013 1 1 r Review 12 22–29 Apr 2013 1 7 w Special loan administration 1 6–10 Feb 2014 2 7 r, s Special loan administration 2 21–24 Jul 2014 4 10 y, z, aa, ab Review 13 30 Mar–7 Apr 2015 4 32 ac, ad, n, d Review 14 26 Aug–8 Sep 2015 4 52 ac, v, ae, d Review 15 30 Nov–4 Dec 2015 1 5 ac Review 16 17–31 May 2016 5 70 ac, v, aft, n, d Review 17 15–22 Nov 2016 2 14 ac, ag Project completion review 25 Apr–9 May 2018 2 28 ac, ag a Upgraded to appraisal on 23 October 2006. a = senior water resources management specialist, b = consultant (irrigation specialist), c = staff consultant (economist), d = associate project analyst, e = workshop resource person, f = project implementation officer, g = impact evaluation specialist, h = principal social development specialist, i = resettlement officer, j = water resources management specialist, k = principal agricultural economist, l = natural resources economist, m = senior environmental specialist, n = consultant (environment specialist), o = consultant (SPPTA), p = senior project officer, q = consultant (resettlement specialist), r = senior water resources management specialist, s = principal water resources management specialist, t = natural resources and agriculture economist, u = environment specialist, v = senior social safeguards officer, w = senior project officer, x = associate project officer, y = principal natural resources and agriculture specialist, z = project officer, aa = procurement officer, ab = deputy country director, ac = senior project officer, ad = senior financial control officer, ae = senior economics officer, af = financial control officer, ag = project analyst.

(ii) Loan 2841-PAK (COL) – PFR 2 No. of No. of Specialization of Name of Mission Date Persons Person-Days Members Fact-finding 18–27 Jul 2011 3 26 a, b, f Inception 7–12 May 2012 3 17 a, b, k Special loan administration 27–29 Aug 2012 4 12 a, b, i, k Review 1 25–27 Feb 2013 1 3 a Review 2 11–19 Feb 2014 3 18 a, g, j Review 3 27–30 Apr 2015 2 8 a, k Midterm review 28 Sep–3 Oct 2015 4 14 a, g, h, i Review 4 23–28 Apr 2016 2 12 a, b, o Review 5 16–21 Oct 2016 3 17 a, b, f Review 6 24–27 Apr 2017 2 8 f, b Project completion review 30 Apr–5 May 2018 4 24 f, b, m, n a = water resources specialist, b = senior project officer, c = principal social safeguard specialist, d = environment specialist; e = director ; f = natural resources specialist; g = project officer; h = safeguards specialist (resettlement); i = consultant (environment specialist); j = safeguards specialist (social development); k = associate project officer; l = consultant (senior water resources specialist); m = consultant (water resources specialist); n = consultant (agricultural economist); o = financial management specialist.

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(iii) Loan 2971-PAK – PFR 3 No. of No. of Specialization of Name of Mission Date Persons Person-Days Members Fact-finding 8–22 Feb 2012 5 31 a, b, c, d, e Project consultation 11–20 Jul 2012 4 12 f, g, h, i Review 1 1 Mar 2013 1 1 f Inception 22–31 May 2013 7 22 f, g, h, I, j, k, l Review 2 27 Apr–11 May 2015 3 25 m, j, n Review 3 28 Sep–20 Oct 2015 4 88 o, g, p, l Midterm review 18–31 May 2016 5 14 g, e, k, l, q Review 19–27 Dec 2016 2 17 g. q Project completion review 25 Apr–9 May 2018 2 28 g, q a = water resources management specialist, b = project implementation officer, c = natural resources and agriculture economist, d = environment specialist, e = senior social +safeguards officer, f = senior water resources specialist, g = senior project officer, h = environmental specialist, I = senior safeguards officer, j = associate project officer, k = financial control officer, l - consultant (environmental specialist), m = principal water resources specialist, n = financial management specialist, o = senior social development specialist, p = project officer, project analyst.

(iv) Loan 3351– PFR 4 No. of No. of Specialization of Name of Mission Date Persons Person-Days Members Inception 18–31 May 2016 5 70 a, b, c, d, e Review 1 15–22 Nov 2016 2 14 a,f Project completion review 25 Apr–9 May 2018 2 28 a,f a = senior project officer (water resources), b = senior social safeguards officer; c = senior social safeguards officer, d = financial control officer, e = consultant (environment specialist), f = project analyst.

I. PROGRAM DESCRIPTION

1. Agriculture is central to economic growth in Punjab and to the incomes of poor rural households. Irrigated agriculture on 8.4 million hectares (ha) in Punjab accounts for more than 26% of Punjab’s gross domestic product, employs over 40% of its labor force, and uses more than 90% of the water resources.1 It accounts for 66% of the national agriculture gross domestic product. Thirteen barrages divert water through 24 canals system.2 The replacement cost for Punjab’s irrigation infrastructure, is estimated at PRs 1,600 billion (footnote 1). The Punjab Irrigation Department (PID) prioritized the rehabilitation of six barrages.3 Increasing irrigation demand in Punjab canal command areas is a result of increased cropping, growing population, and fragmentation of farms.4 Stagnant irrigation supplies are augmented through increased groundwater mining. The aim of the irrigation sector reforms in the late 1990s were the improvement in irrigation service delivery, better institutions, and beneficiary farmers participation.

2. In December 2006, the Asian Development Bank (ADB) approved a multitranche financing facility (MFF) for the Punjab Irrigated Agriculture Investment Program to finance $900 million in investments in Punjab’s irrigation infrastructure, with institutional reforms premised on eventual farmer management of the irrigation system for better irrigation water delivery. The MFF aimed to support economic growth, increase and improve the sustainability of water and land resources, management of water resources, and productivity of irrigated agriculture. The outcomes included (i) the rehabilitation and upgrade of irrigation infrastructure, (ii) improved practices and strengthened institutional frameworks for the management of ground and surface water, (iii) a modernized irrigation management system, (iv) reformed and restructured institutions for the management of water resources and delivery of irrigation service, (v) improved financial management and sustainability, and (vi) capacity development for institutional changes.

3. MFF had four tranches and three projects. ADB approved tranche 1 in 2006 ($227.8 million) for project 1 comprising the Lower Bari Doab Canal Improvement Project ($217.8 million) and the Punjab Irrigated Agriculture Project Preparation Facility ($10 million) to (i) improve the Balloki Barrage, the Lower Bari Doab Canal system, and distributary and minor canals, benefiting 700,000 hectares (ha), supporting institutional reforms, on-farm productivity, and improved groundwater management; and (ii) preparation of subsequent MFF projects. ADB approved tranche 2 ($270 million) in 2011 for the New Khanki Barrage Construction Project (project 2) to provide reliable irrigation water to 1.2 million ha. ADB approved tranche 3 ($73 million) in 2012 for the Pakpattan Canal and Suleimanki Barrage Improvement Project (project 3) to ensure reliable supply of barrage water to 1.01 million ha. In 2015, ADB approved tranche 4 as additional financing for project 1 ($26.57 million) to meet a financing shortfall.

4. The MFF implementation was completed on 30 September 2017. ADB closed loan accounts and fielded a project completion mission in April–May 2018. A few works are ongoing in projects 1 and 3, while supporting services, operational take over, and closure activities will generally continue in all projects during FY2019. The government will complete and finance the remaining activities (Section IV of this report). ADB conducted completion review missions of all projects and prepared three reports, one for each of the three projects with the facility completion report made part of the project 3 report.

1 Government of Punjab. 2017. Annual Development Program 2017–18. Lahore. 2 Total length is 38,160 kilometers. Government of Punjab, Punjab Irrigation Department. 2017. Annual Performance Report 2016-17. http://irrigation.punjab.gov.pk/data/ANNUAL%20PERFORMANCE%20REPORT%202016.pdf. 3 Balloki, Islam, Jinnah, Khanki, Suleimanki and Taunsa barrages. 4 The ‘command area’ is the area that can be irrigated from an irrigation scheme and is fit for cultivation.

II. DESIGN AND IMPLEMENTATION

A. Program Design and Formulation

5. The program was conceived in the context of ADB’s country strategy for Pakistan prepared in 2003, which proposed re-engagement in the water sector through province-focused projects on conservation, drought mitigation, rehabilitation of the irrigation infrastructure, and strengthening of institutional capacities through coordinated assistance with the World Bank for policy and water sector reforms.5 The project appraisal context in 2006 was (i) reforms progress after Punjab Irrigation and Drainage Authority Act was passed in July 1997; (ii) lessons drawn from the National Drainage Project funded by ADB, the Japan Bank for International Cooperation, and the World Bank; (iii) Punjab medium-term irrigation reform program in 2006, supported by the World Bank, and (iv) Punjab Irrigation Department priority projects for the rehabilitation of vital hydraulic structures (footnote 3).6 At appraisal, the government was effectively coordinating and leading the support of development partners around a common reform agenda and development investments. ADB financed a team of consultants to prepare a comprehensive sector assessment, the MFF, and project design.7 The design required long-term investments with sector reforms and continued government engagement for transformative changes in water service delivery. The MFF modality was the right financing instrument to select.

6. The program remained relevant with the sector priorities of ADB and the government until completion. ADB Strategy 2020 refocused on the key core area of infrastructure development, including water resources management and the delivery of efficient and sustainable irrigation.8 The program remained central to ADB’s country partnership strategy, 2009–2013 and 2015– 2019, which supported investments in the rehabilitation, upgrade, and expansion of the Indus Basin irrigation system with irrigation and water resources reform initiatives.9 The Government of Punjab’s Medium-Term Development Framework (2012–2015) aimed to modernize existing irrigation infrastructure and implement reforms to improve service delivery.10 The Punjab Growth Strategy 2018 acknowledged MFF-financed projects as a key investment in improving the irrigation infrastructure.11 The evaluation of the country assistance program viewed as appropriate ADB’s commitment in responding to rehabilitate and expand the Indus River irrigation system.12

7. Key changes to the MFF during implementation included (i) a reduction in the facility amount from $900 million to $700 million; (ii) increasing Asian Development Fund resources to $280 million; (iii) design, selection, sequencing, and prioritization of subsequent tranches by learning lessons from the progress and challenges of project 1; (iv) changing approach to institutional strengthening, harmonizing with other canal command areas; (v) improved engineering design, enhanced flood resilience, irrigation conveyance efficiencies, and barrage control; and (vi) the enhanced scope of the Punjab Irrigated Agriculture Project Preparation Facility prepared $1.7 billion in projects.

5 ADB. 2003. Country Strategy and Program Update, 2004-2006 Pakistan. Manila. 6 ADB. Islamic Republic of Pakistan. National Drainage Sector Project. https://www.adb.org/projects/ln1413/main. 7 ADB. 2005. Technical Assistance to the Islamic Republic of Pakistan for Preparing the Punjab Irrigated Agriculture Development Sector Project Manila. 8 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020. Manila. 9 ADB. 2009. Country Partnership Strategy: Pakistan, 2009–2013. Manila; and ADB. 2015. Country Partnership Strategy: Pakistan, 2015–2019. Manila. 10 Government of Punjab. 2012. Medium Term Development Framework (2012-15). Lahore. 11 Government of Punjab. 2015. Punjab Growth Strategy 2018. Accelerating Economic Growth and Improving Social Outcomes. Lahore. 12 ADB. 2013. Country Assistance Program Evaluation: Pakistan, 2002–2012. Manila.

8. ADB’s contribution was complemented by the support from the World Bank and Japan International Cooperation Agency (JICA) to on-farm agricultural enhancement and infrastructure upgrade. The institutional reforms and the committed investments in barrages amounted to about $800 million, and ensured sustainable irrigation supplies to 6.5 million ha in Punjab, covering 75% of Punjab’s irrigated area and 35% of Pakistan’s Indus Basin irrigated area, and benefits a population of about 25 million and some 3.5 million farming families. In addition, at program appraisal, $550 million of investments in main canals, distribution system, on-farm water management, groundwater, and reforms, and $200 million in policy loans were part of the ongoing or planned investments in Punjab irrigated agriculture sector by ADB, JICA, and the World Bank.

B. Program Outputs

9. The program delivered three projects. Project 1 included infrastructure rehabilitation, institutional reforms, on-farm water management and agricultural productivity, and improved groundwater management. The designs for projects 2 and 3 were simple and focused on infrastructure rehabilitation and upgrade. The MFF design and monitoring framework (DMF) was revised and updated in 2012 at tranche 3 approval.13 The program included improving PID project management efficiency and capacity as one of the projects 2 and 3 outputs. The DMF achievements are in Appendix 1. ADB and the government changed the selection, design, and sequencing of the projects based on the selection criteria under the framework financing agreement and prioritized New Khanki Barrage, Pakpattan Canal and Suleimanki Barrage over the Trimmu and Panjnad barrages and the Thal and Sidhnai canals, identified at appraisal.

10. Output 1. Irrigation infrastructure upgrade and rehabilitation. This output was achieved through the three projects. Project 1 rehabilitated and upgraded Balloki Barrage, Lower Bari Doab Canal (LBDC) head regulator, and Balloki Suleimanki Link Canal head regulator. At MFF appraisal, it was envisaged that an improved barrage with additional spillway would increase flood design capacity from 1 in 20 years to 1 in 50 years, and reduce the risk of damages to the barrage and breaching of flood levees. The project enhanced the design through physical model studies at the Irrigation Research Institute Nandipur. A larger spillway was designed and the safe capacity of the Balloki Barrage Complex increased from 1 in 20 years flood to 1 in 100 years flood. A new head regulator was added on the Balloki–Suleimanki link and barrage capacity to divert additional flow increased by 264 m3/s. The outstanding physical works are the electrification of a motorized gate link to the control room and minor works of buildings. The LBDC had a design sanctioned flow of 278 m3/s. However, due to the insufficient capacity of canals and structures, the maximum operational discharge remained at 244 m3/s. The LBDC and its structures was upgraded or rehabilitated under the MFF to take full sanctioned discharge of 278 m3/s in 201 km.

11. The rehabilitation and upgrade of the distribution system included 2,029 km channels of which 1,350 km had new lining and side protection, and the construction or rehabilitation of 1,109 structures and 2,334 outlet structures. Canal lining on 1.4 m3/s and below channels improved water flow in tail sections, and lowered maintenance costs of farmers organizations. The Montgomery–Pakpattan Link was rehabilitated to improve water supplies to the Islam Barrage via the Pakpattan Canal and Pakpattan Islam Link Canal and ensured benefits associated with the third MFF project and the proposed Islam Barrage rehabilitation project.14 The government is committed to completing remaining civil works amounting to $3–$4 million. PID has initiated the calibration of canal discharge data charts with new gauges, observing channel hydraulics, checking outlets parameters, withdrawals, and taking remedial measures. PID Programme

13 ADB. 2012. Punjab Irrigated Agriculture Investment Program, Periodic Financing Request Report Tranche 3. Manila. 14 ADB. 2017. Country Operations Business Plan, 2018–2020. Manila.

Monitoring and Implementation Unit has commenced discharge observations in selected channels. PID operations division has recommended 43 channels for hydraulic performance assessment as part of the operational takeover, citing variations in off-taking outlets. A detailed survey of selected 19 channels revealed that 229 outlets were drawing excessive and 101 outlets were drawing insufficient water. This represents about 7%–8% of 256 channels and 3,927 outlets.

12. Project 2 constructed the New Khanki Barrage. The designed flood capacity of the barrage increased from 1 in 50 to 1 in 100-year probable floods. During a big flood in the river in September 2014, about 26,759 m3/s passed through the under-construction barrage site with minor damages, which were rectified by the contractor. A supervisory control and data acquisition (SCADA) system was installed. The capacity of the Lower Chenab Canal head regulator was increased to 424 m3/s. Project 3 rehabilitated the Pakpattan Canal and Suleimanki Barrage. Works have been completed except for remaining smaller works expected to be completed in 2018–2019. The outputs achieved are (i) leakages from the barrage stopped; (ii) contracts completed within contingencies limit; (iii) Pakpattan Canal comprising Pakpattan Upper, Pakpattan Lower, Khadir Branch, and PI Link Canal improved; and (iv) PMO staff trained. Two indicators were achieved with revised scope: (i) the cumulative length of canal improved in project is 298 km against the length of 336 km, (ii) reduction of appurtenant structures from 319 at approval to 216 at completion, of which 200 are completed and 16 are at the final stages of construction as of 30 June 2018. Compared to the design at award, the Suleimanki Barrage design at completion has improved features, including improved stilling basins and glacis, new and improved undersluices and head regulator gates, new silt excluder, and additional operational support buildings. The PMO continued to enhance staff capacity in project administration, safeguards, financial management, and water resources management through multiple training courses in Project 2 and 3.

13. The command area of the Balloki Barrage received 102% of water supplies against entitlements for the cropping season of April–September (kharif) in 2017 and 89% for the cropping season October 2017–March 2018 (rabi). The New Khanki Barrage received 105% of water entitlements for kharif and 99% for rabi, while the Suleimanki Barrage received 93% of entitlements for kharif and 100% for rabi in 2017–2018.15 The program upgraded two major canals; the LBDC operated at a maximum of 263 m3/s against the design discharge of 278 m3/s (95%) in 2017, while Pakpattan Canal operated at a maximum of 149 m3/s against a design discharge of 156 m3/s (96%) in 2017. Leakages from barrages were eliminated. The program upgraded the LBDC, its distributaries and minors. The delivery performance ratio (DPR) in the LBDC system during kharif in the tail reaches have increased from 0.81 in 2006 to 0.95 in 2017 and the relative DPR from 0.94 to 1.00.16 Rabi flows are limited and canals generally flow at less than design discharge; however, the relative DPR remains the same as in kharif. In 2016 and 2017, water deliveries in June to October to the LBDC command area increased by an average 15% compared to the 5-year average during the same period in 2011–2015.

14. Output 2. Flood risks reduction. The target was to enhance the flood capacity of five barrages on the rivers Chenab, Ravi and Sutlej by 2017. The Balloki Barrage (River Ravi) safe flood capacity increased from 6,371 m3/s to 10,760 m3/s in project 1. The New Khanki Barrage (River Chenab) safe flood capacity increased from 22,654 m3/s to 31,149 m3/s under project 2. The Trimmu Barrage was designed with an increase in safe flood capacity from 12,743 m3/s to 24,777 m3/s. The Panjnad barrages (River Chenab) were designed with an increase in safe flood capacity from 19,822 m3/s to 24,495 m3/s.

15 Entitlements are calculated from the Indus River System Authority allocation and forecast of water availability. 16 Delivery performance ratio is the ratio of actual discharge to designed discharge. Relative Delivery Performance Ratio is an equity performance indicator. Manual of Irrigation Practice Volume – I (Revised 2017). Lahore.

15. Following the approval of project 3, the balance MFF amount was insufficient to finance the Trimmu and Panjnad barrages and, therefore, ADB approved a standalone project in September 2014 for the overall cost of $173 million.17 The Islam Barrage (River Sutlej) was designed for an increased flood capacity from 7,560 m3/s to 9,401 m3/s. Due to the small scale and lower risk of floods, the Islam Barrage remained low on the MFF priority list. Since the rehabilitation of all barrages has now been secured, financing for the Islam Barrage has been proposed by the government and ADB as additional financing to the ongoing Trimmu and Panjnad Barrages Improvement Project (footnote 14).

16. Output 3. Groundwater management. Project 1 provided groundwater knowledge and a research base in the LBDC command area through the development of a groundwater database, field surveys, modeling, and assessment of the command area water balance and resources. The database contained over 300 GIS data layers and 88 maps of salinity and groundwater status. The project strengthened groundwater resource management capacities of key government staff, drillers, equipment suppliers, and farmers. Project 1 prepared policy options, development framework, and a strategy for improving water resources management, reversing groundwater deterioration, sustainable management of land and water resources, and sustainable use of the aquifer. Project 1 provided a groundwater management plan, which supported provincial initiatives in groundwater management in line with the Punjab Canal and Drainage Act amendment in 2006. The government did not adopt and enforce groundwater regulation however, recently PID drafted the Punjab Groundwater (Protection, Regulation & Development) Act 2017, which is being discussed with stakeholders for approval in 2019.

17. Output 4. On-farm water management and agricultural support practices. Field programs in the Project 1 area identified about 40 ha in each of 54 farmers organizations’ service areas (a total of 2,000 ha) to act as demonstration centers for good practices. At completion, farmers received a demonstration on laser land leveling over 1,994 ha, and demonstration on improved field channels and layout design, crop water scheduling, and land and water management techniques such as raised bed plantation over 2,555 ha. Project 1 provided rabi- seed drill (50), seed graders (49), zero tillage machines (41), bed shapers (23), and turnouts and spray machines. Project 1 delivered 106 capacity building programs, including the formation of eleven rural women groups, and provided guidelines for conjunctive use practices. The Project aimed at installing a pilot high-efficiency irrigation system comprising drip irrigation on 2-ha plots in each demonstration center. The project installed systems on 34 ha and capped it in consultation with the Agriculture Department.18 Operational challenges in the installed systems included the lack of back-up supplier support and required skills, and high operational and maintenance cost.

18. Output 5. Water management institutions. In project 1, the program financed the creation of decentralized water management institutions, which proved challenging at the implementation stage. The government created a working group in 2008 for streamlining institutional reforms and addressing the implementation challenges. The program established an (i) area water board (AWB) at the main LBDC level, (ii) 53 farmer organizations at distributary level, and (iii) 3,779 water user associations (khal panchayat) at water course level.19 This completed the four-tier irrigation institutions in the project command area under the overall Punjab Irrigation and Drainage Authority. The number of farmers organizations was rationalized from 60–

17 ADB. 2014. Report and Recommendation of the President: Trimmu and Panjnad Barrages Improvement Project. Manila. 18 The demonstration of high efficiency irrigation systems was capped by the Agriculture Department to avoid duplication with a larger World Bank project. Punjab Irrigated Agriculture Productivity Improvement Program. 19 Khal panchayats are water user associations at water course level and recognized as legal entities.

70 at appraisal to 54 during implementation based on a reassessment of hydrologic boundaries and size of distributary canals. The operationalization of 53 farmers organizations was completed in 2012 with a 3 years tenure (2012–2015). This was a result of extensive social mobilization program, awareness campaigns, and elections. More than 16,000 familiarizations, rapport building, and consultation meetings were held.

19. The design of project 1 included the formation and financing of 12 irrigation management units (IMUs) in the LBDC command area. The envisaged role of the IMUs was to support farmers organizations in technical, administrative, and financial management. The institutional structure for supporting farmers organizations was changed from the program financed IMUs to the Punjab Irrigation and Drainage Authority (PIDA), PID, and PMU for three key reasons. First, under PIDA rules revised in 2010, services of PID staff were made available to the chief executive of the area water board and to support farmers’ organization. Second, this change was in line with devolved systems in canal command areas elsewhere in Punjab. Last, until farmers organizations become self-sustaining, government support was considered essential. Newly formed farmers organizations were grouped into 19 irrigation management transfer units supported by the government and, as such, staffing and financing of IMUs were excluded from project design.

20. Capacity building delivered (i) 24 sessions of training trainers, PID, and PIDA field staff; (ii) training for water user associations attended by 2,325 participants; (iii) on the job training for management committee members and staff of farmers organizations attended by 613 participants. After the first phase training, PID and PIDA moved slowly in delivering the rest of the training sessions in 2014–2015, by then, the 3-years’ tenure (2012–2015) of farmer organizations was completed. Elections for a second tenure had not commenced and training remained 30%– 40% short of the planned target. PID provided technical support to farmers organizations in small works from FOs share of the irrigation service fee (abiana). MFF improved PID, PMO, and PMU project management capacity through capacity enhancement training and project activities.

21. Punjab Irrigated Agriculture Project Preparation Facility: The facility delivered two projects; tranche 2 for the New Khanki Barrage ($309 million), approved in 2011, and tranche 3 for the Suleimanki Barrage and Pakpattan Canal Improvement Project ($85.4 million), approved in 2012. The facility prepared the Trimmu and Panjnad Barrages Improvement Project ($173 million), approved in 2014, as standalone ADB financing. In addition, the facility prepared multiple design-ready projects: the Pakpattan Canal Distribution System ($140 million) and the Thal Canal and Distribution System ($350 million). Feasibility studies were completed for irrigated agriculture development in Smaller Cholistan, including upgrading three inter-river transfer link canals ($450 million), water resources development in Greater Cholistan ($140 million), controlling seepage and waterlogging along the Trimmu–Sidhnai Link canal ($24 million), and reclaiming agricultural land affected by water logging in Bahawalnagar, Bahawalpur, and Rahimyar Khan Districts ($35 million). By the loan closing date of 30 June 2017, the detailed design for water resources development in Greater Cholistan remained in progress ($140 million). Overall, the facility delivered various services ranging from multiple studies, detailed designs, project approval documents, safeguard plans, economic analyses, bidding documents, updating designs, and bid evaluations for more than $1.7 billion in projects.

C. Program Costs and Financing

22. Multitranche financing facility. The MFF identified an indicative financing plan of $3.5 billion for ongoing projects and those in the pipeline by major development partners in Punjab irrigated agriculture sector. During the MFF period 2006-17, investments of $3 billion have been completed or are ongoing. At appraisal, the MFF financing plan was estimated at $1,125 million,

including $900 million (80%) to be financed by ADB, and the remaining $225 million (20%) by the government. ADB financing included $890 million from ADB ordinary capital resources and the remaining $10 million from ADB Special Fund Resources. On 15 December 2011, ADB approved an amendment to the MFF reducing the facility amount to $700 million and increasing Asian Development Fund resources to $280 million. The MFF was completed at a total cost of $559.2 million, with an ADB share of $476.7 million (85%) and government financing of $82.5 million (15%). ADB financing at completion included $270.7 million (48%) OCR and $206.0 million (37%) from ADB Special Fund Resources (Appendixes 2 and 3).20

23. Project 1: ADB OCR loan amount was $217.8 million (Appendix 3, Table A3.1). This increased to nearly $315 million by 2011 due to the appreciation of the Japanese yen (the loan currency). Upon the government’s request, surplus loan proceeds were canceled, reducing the loan to $258 million.21 By September 2015, the loan amount reduced by about $50 million due to the depreciation of the loan currency and became insufficient to complete the project. On 20 July 2015, the government converted unwithdrawn loan currency from yen to dollars to manage currency fluctuations. The government also requested additional financing, which was approved in December 2015, increasing ADB financing from $208.4 million to $235 million and overall ADB financing to $245 million. The project cost at completion was $280.7 million comprising ADB OCR financing of $228.6 million (81.4%), ADB concessional OCR financing of $10.1 million (3.6%), and the government contribution of $42.1 (15%).22 Appendix 3, Table A3.1 and A3.2.

24. Project 2: At appraisal, the cost was estimated at $309.2 million, including $270.1 million (87%) financed by ADB and a $39.1 million (13%) contribution from the government. The actual project cost at loan closing was $227.6 million, with ADB financing the equivalent of $195.9 million (86%), and the government share was the equivalent of $31.7 million (14%) (Appendix 3, Table A3.3 and A3.4). The actual cost was lower than the cost estimated at appraisal for (i) civil works, (ii) consulting services, and (iii) project management. In addition, the amount of contingency ($52 million, i.e., about 17% of the total project cost estimated at appraisal), was not used during implementation mainly because of the depreciation of the Pakistan rupees against the United States dollars. In December 2017, $40 million of the loan proceeds were canceled.

25. Project 3: At appraisal, the cost was estimated at $85.4 million, including $73 million (86%) financed by ADB and a $12.4 million (14%) contribution from the government. By the loan closing date of 30 September 2017, the cost was $50.9 million, which includes $42.2 million (82.9%) contributed by ADB, and $8.7 million (17.1%) by the government (Appendix 3, Table A3.5 and A3.6). Due to the reduction in the overall project cost resulting from changes in the design of civil works, ADB canceled the surplus unallocated loan amount of $14 million on 8 May 2017. The major change was the reduction in civil works cost from $60 million to $44.5 million. Following the approval of $73 million for project 3 on 13 December 2012, the balance MFF amount of $129 million still available, and the remaining period of about 4.5 years were not sufficient to finance the next prepared project. ADB and the government processed additional financing of $26.6 million to meet the financing gap for project 1. The Trimmu and Panjnad Barrages Improvement Project required $150 million and 6 years to complete. As a result, the proposed loan of $150 million was included in the subsequent country operations business plan.23

20 The MFF saving of $223.3 million was identified at a belated stage when it was not possible to process fifth tranche 21 The midterm review in 2011 observed that the original loan amount of $217.8 million increased by nearly $100 million equivalent due to the dollar–yen parity. Considering the increased amount, loan saving or surplus was identified in the review mission and subsequently, upon the government’s request, canceled on 13 June 2011. 22 The government committed to complete ongoing works from its own resources. The government contribution indicated is limited to the expenditure for works until the loan closing date of 30 September 2017. 23 ADB. 2014. Country Operations Business Plan, Pakistan, 2014–2016. Manila.

D. Disbursements

26. Disbursements followed ADB’s Loan Disbursement Handbook (2001, as amended from time to time). The direct payment procedure and advance funds were used. The advance fund was useful and was used to pay small expenses within the statement of expenditures limit. The unspent balance was refunded to ADB in a timely manner and project achieved early financial closure within the winding up period. Project 1 disbursement underwent continuous revisions due to cancellations, additional financing, and multiple extensions in loan closing dates. Project 2 disbursements partially followed initial projections and lagged due to procurement delays. Disbursements were revised twice during implementation. Project 3 disbursement was incorrectly projected at loan effectiveness. Savings occurred due to unallocated surplus, engineering design changes leading to cost reductions, and incomplete works at loan completion, later financed through the government’s development budget. Comparison of projected and actual disbursements under project 3 is provided in Appendix 4, Table A4.1.

E. Program Schedule

27. Project 1 planned completion was September 2013. It was extended first to 30 September 2015 and later extended a further three times to 30 September 2017 up to the MFF terminal date. Delays occurred throughout the entire project cycle. Initial delays were attributed to insufficient project readiness at approval, which prompted longer preparatory work for consultant recruitment, project design, and procurement. Civil works at the Balloki Barrage took longer than expected and the slow construction progress during implementation delayed completion further. Implementation was also delayed by the need to complete studies and detailed designs for additional sub-projects under the facility. Loan accounts were closed for all loans well within the 4-month winding up period. Project 2 implementation period at appraisal was 4.5 years. Contract award was delayed by about 1 year. The original loan closing date was extended twice - by 9 months in total, to cover the backlog of work caused by the initial delay. Project 3 implementation period at appraisal was 4 years. The loan was extended by six months to complete remaining civil works. A comparison of projects’ schedules at appraisal and actual is provided in Appendix 5.

F. Implementation Arrangements

28. Project 1 had multiple components and implementation arrangements were complex. At appraisal, PID was the executing agency for overall project implementation with a dedicated project management unit (PMU), project implementation units (PIUs), Investment Program Planning and Management Unit in PID Strategic Planning Cell, Directorate of On-Farm Water, Management, Punjab Irrigation and Drainage Authority (PIDA), PMO Barrages, and irrigation management units (IMUs). The government and ADB changed implementation arrangements during the life of the project to improve progress, coordination, and financial control, and strengthen capacities. Key changes were (i) reassigning the Balloki Barrage from the PMO Barrages to a PMU in 2010; (ii) reassigning PID field operation staff from Khanewal, Okara, and Sahiwal to divisional PIUs for improved coordination in operations and execution; (iii) assigning one director and seven deputy water management officers to Project 1 instead of creating dedicated project management office; and (iv) establishing a program management office in 2010 under the PMU instead of PIDA for institutional strengthening and operation modernization component. The facility’s administration shifted multiple times, from the Investment Program Planning and Management Unit in the Strategic Planning Cell to the PMO Barrages in 2011, PMU of the Lower Bari Doab Canal Improvement Project in 2013, back to the PMO Barrages in 2015, and to the PMU in 2015 until project completion on 30 June 2017.

29. PID administered projects 2 and 3 through the project management office (PMO) for Punjab Barrages, Rehabilitation & Modernization Projects. At approval of project 2, the PMO Barrages was implementing the Jinnah Barrage rehabilitation project, financed by the World Bank, and had adequate skills and staff resources, which were strengthened through 11 additional staff appointments for project 2. For project 3, PMO strengthening was delayed and, during the interim period, staff from Jinnah Barrage helped in implementation. The PMO’s experience gained in large projects with JICA and the World Bank helped in the award of the consultancy and civil works contracts. Construction supervision consultants supported the PMO. For project 3, ADB and PID agreed to attach project 3 to the PMO Barrages instead of the PMU for better project administration. By early 2015, the PMO had completed the recruitment of all staff.

G. Technical Assistance

30. ADB provided a project preparatory technical assistance (TA) grant for preparing the project (footnote 7). The TA was approved on 1 September 2005 and closed on 30 November 2007 after a 1-year extension. The total cost of the TA was $1.55 million. It was financed on a grant basis by the Japan Special Fund, funded by the Government of Japan ($595,000) and co- financed by the Government of the Netherlands ($557,000) and the Cooperation Fund for the Water Sector ($90,000). The government contributed $310,000. The TA utilized $1.14 million from ADB contribution. The TA consultants commenced services in January 2006 and submitted their report in July 2006. The TA design was based on extensive consultation with the government, farmer organizations, farmers, development partners, and other stakeholders. The TA undertook technical studies, institutional analyses, and capacity needs assessment for project investment preparation. During implementation, ADB also provided small-scale technical assistance to finalize the preparation and sequencing of periodic financing requests for Islam, Khanki, Suleimanki, and Trimmu barrages under the program.24 The TA was approved on 4 December 2009 for $225,000 and closed on 31 December 2012 with cumulative disbursements of $173,195.

H. Consultant Recruitment and Procurement

31. All consultants were recruited following the ADB Guidelines on the Use of Consultants (2006 as amended from time to time) and the projects’ procurement plans. Consulting firms were selected and engaged using ADB’s quality and cost-based selection method. All works and goods were procured in accordance with ADB Procurement Guidelines (2006 as amended from time to time). Project 1 planned six consultancy packages (Appendix 6, Table A6.1); one each for (i) design and construction supervision for infrastructure rehabilitation and upgrade, (ii) project preparation facility, (iii) PMU support, (iv) groundwater management, (v) on-farm water management and agriculture, and (vi) institutional strengthening and operation modernization. The consultant’s recruitment was slow and took about two years to contract award. During implementation, the services under the six packages were reduced, rationalized, or extended under agreement between ADB and PID. Works were divided into multiple packages: (i) two pilot packages; (ii) one package for Balloki Barrage; (iii) three packages for LBDC canal; (iv) two packages for the distribution system, one each for Okara and Sahiwal divisions; and (v) two for the Khanewal division distribution system (Appendix 6. Table A6.2). ADB pre-qualification process was used for packages (i) to (iv), and post qualification for package (v). Except for package (i), all packages were procured through international competitive bidding (ICB). Construction and contract management by contracting parties were weak, which led to slow progress.

24 ADB. 2005. Technical Assistance to the Islamic Republic of Pakistan to Ensure Due Diligence and Prepare PFRs for Islam, Khanki, Sulemanki, and Trimmu Barrages of MFF 2299/2300-PAK: Punjab Irrigated Agriculture Investment Program. Manila.

32. Project 2 procurement plan at appraisal had only three major contracts: one for consulting services and two civil works contracts; one ICB and one for national competitive bidding (NCB) – Appendix 6, Table A6.3. The consultancy contract award experienced startup delays. Civil works bidding was not successful in the first cycle. At appraisal, it was envisaged that the civil works would be executed through two contracts; NCB for construction of facilities and barrage preliminary works, and ICB for the barrage and its auxiliary works. The first round of bidding was unsuccessful despite roadshows in Beijing, Istanbul, and Manila. ADB and PID merged the two works packages into one ICB contract, and the contract was awarded in May 2013. The contractor demonstrated sound construction management, notably coping with high floods in 2014.

33. Project 3 had three major contracts, one for consultancy services and two for civil works. Consultancy services provided a total of 519 person-months including 307 person-months of key experts, and 212 person-months of non-key experts. Due to the extension in the civil works contracts, the consultants’ time-based contract was revised to 374 person-months of key and 705 of non-key experts (Appendix 6, Table A6.5). Civil works were grouped into two contracts, one for rehabilitation and upgradation of Pakpattan Canal and one for Suleimanki Barrage. Contracts were awarded in April 2014 through ICB post qualification basis, using single-stage, two-envelope bidding procedures. The award of both contracts was delayed by 9–12 months. Consultants performance was slow initially in finalizing construction drawings. Works contracts moved slowly as well due to weak construction management, revision, and rationalization of design and methodology, and delayed commencement of the barrage contract. Suleimanki Barrage divide wall failure occurred in March 2016, leading to a work stoppage, undertaking temporary measures, reevaluation of construction methodology and redesign of permanent works.

I. Safeguards

34. PID ensured compliance with applicable laws and regulations of the Government of Pakistan, the Government of Punjab, and ADB’s Safeguard Policy Statement (2009), including the safeguard frameworks agreed in the framework financing agreement, resettlement plans, environmental assessment, environmental management plans, the country’s Land Acquisition Act 1894, Pakistan Environmental Protection Act, and Pakistan Environmental Impact Assessments Review Regulations. All projects were categorized as B for the environment and involuntary resettlement, and C for indigenous peoples impacts.

35. Land acquisition and resettlement: Project 1 had nine land acquisition and resettlement plans (LARP) and identified 430 displaced persons affected by temporary and permanent land acquisition. Better construction rescheduling minimized temporary land acquisitions and spared 155 people from resettlement impacts, reducing the total number of displaced persons to 275. PID amended all resettlement plans through six addendums, compensated affected people validated through external monitoring reports and disclosed addendums to resettlement plans. Resettlement plans were swiftly implemented, except for the plan for the Balloki Barrage where the delay was concurrent with the slow progress of civil works, and a minor portion of works remained on hold until full implementation of and compliance with the LARP. At appraisal of project 2, the land acquisition and resettlement framework (LARF) was updated and a LARP was prepared following the country’s Land Acquisition Act 1894 and SPS and disclosed. The updated plan required the acquisition of about 2.5 ha of private land and relocation of 15 existing PID staff houses. The landowner and laborer families were fully compensated in line with compensation entitlements validated by the external monitor. The project 3 LARP required compensating a total of 80 affected persons. Better construction rescheduling and design changes avoided impact on 38 people and remaining 42 had been fully compensated.

36. Environment. Project 1 was rated category B for the environment. However, as a precautionary measure, a full environmental impact assessment was conducted. At appraisal of the facility, it was agreed to assess all subsequent tranches and their associated projects independently for environmental categorization. For project 2, the government conducted an initial environmental examination and submitted its report. For project 3, the government conducted an environmental impact assessment of the Suleimanki Barrage and an initial environmental examination of the Pakpattan Canal in 2010. Since the upgrading scope of the barrage was significantly reduced, due diligence was conducted, impacts were reduced significantly, and the project was rated category B for the environment. PID monitored the site-specific environment management plans. The projects did not have any major adverse environmental impact. The executing agency’s bi-annual environmental monitoring report was submitted to ADB.

J. Monitoring and Reporting

37. The overall compliance with the covenants for all projects was satisfactory, except for the project 1 covenants related to institutional strengthening and operation modernization. Project 3 covenants compliance remained satisfactory throughout the implementation period.25 At completion, the borrower had complied with 58 out of 62 covenants, complied with one with delays, partially complied with one, did not comply with one and one was not yet due. The covenant partly complied with related to the PID’s website being less informative than required. The only covenant not complied with related to the insurance of project facilities with a responsible insurer. The partial or non-compliance of the covenants did not negatively affect project performance. Details of compliance with covenants are in Appendix 8.

38. ADB received various periodic reports from PID, including quarterly progress reports based on the project performance monitoring system, bi-annual environmental monitoring reports, and internal and external social monitoring reports. The quality of reporting was acceptable and the reports provided regular updates on achievements against output targets. For project 1, all audit reports were received on time, except for the FY2010 report, received with a one-month delay. For Punjab Irrigated Agriculture Project Preparation Facility, a minor change was approved on 31 July 2015, requiring the PMU to have the accounts and related financial statements audited separately on a yearly basis. Projects 2 and 3 audit reports were submitted on time, except for two reports in project 2 and one in project 3. All audit reports received were unqualified and acceptable to ADB. The audit reports for FY2018 will become due on 30 December 2018.

III. EVALUATION OF PERFORMANCE

A. Relevance

39. The program is rated relevant. At appraisal, it was aligned with sector programs from ADB, the government, and major development partners. At completion, rehabilitation and upgrade of vital irrigation infrastructure with reforms initiatives, and agriculture productivity investments remained key strategic thrust in ADB’s country partnership strategy, 2009–2013 and 2015–2019 (footnote 9), the Government of Punjab’s Medium-Term Development Framework and Punjab Growth Strategy 2018 (para.6). Investments by ADB and key development partners in Punjab irrigated agriculture demonstrates their commitment to improving the infrastructure, institutions, and agricultural production to drive sustainable agricultural growth (para.8). Timely changes in design aligned the project with the overall reform environment in Punjab.

25 The compliance to covenants of Project 1 and 2 is given in detail in the respective project completion reports.

40. The MFF selection of the New Khanki Barrage as main project complemented JICA’s project for the improvement of canal, distribution system and command area, and the establishment of the area water board and farmers organizations. The World Bank supported the development of the command area of project 1 to improve the productivity of water use in irrigated agriculture (para. 8). Thus, the program had both upstream and downstream linkages with key development partners. The program provided a comprehensive groundwater knowledge base, strategic framework, and plan. This supported the government’s ongoing stakeholder’s consultation in drafting the Punjab Groundwater Protection, Regulation, and Development Act aimed for approval in 2019 (para.16). The act proposes the establishment of the Punjab Ground Water Commission to develop a groundwater management plan. The Punjab Irrigated Agriculture Project Preparation Facility design change enabled the preparation of projects worth more than $1.7 billion which reinforces ADB’s endeavor for better project readiness and, prompted the government and ADB consultation in 2017 for financing $10 million TA loan for future projects readiness (footnote 14). Project 3 was rated relevant as it was part of the Punjab Irrigation Department’s priority (para. 1, para. 5, and footnote 3) and relevant to the MFF program.

B. Effectiveness

41. The program is rated effective. The outputs of the three investment projects were broadly achieved (paras. 9–21). The program upgraded two major canals, LBDC and Pakpattan Canal, which operated at more than 95% of design discharge in 2017, confirming barrage diversions, offtake, and canal conveyance capacity (para. 13). The command area of the Balloki, New Khanki, and Suleimanki barrages received 90% and above water supplies against entitlements for kharif and rabi 2017–2018. The program upgraded distributary and minors in the LBDC and the DPR in kharif in tail reaches have increased from 0.81 in 2006 to 0.95 in 2017 and the relative DPR from 0.94 to 1. In 2016 and 2017, water deliveries in June to October to the LBDC command area increased by an average 15% compared to the 5-year average during the same period in 2011– 2015. The Balloki Barrage’s flood discharge capacity was increased from a 20-year probable flood and the Khanki Barrage from a 50-year probable flood to 1 in 100 years. The upgrade and rehabilitation constituted the main outputs of the approved program investments. Due to time and financing constraints, ADB and government decided to finance Trimmu and Panjnad barrages as stand-alone projects (paras.9,15, and 25). Islam Barrage is proposed as a pipeline project (para. 15). Project 3 was effective as most of the outputs were achieved with rationalized scope for the Pakpattan Canal and improved design for the Suleimanki Barrage (para. 13). Leakages from the Suleimanki barrage were eliminated and the Pakpattan Canal operated at the maximum discharge of 96% (para. 13). PID management capacity improved through training.

42. Low water availability across the province was well identified at appraisal and will continue until new Indus Basin water storages are increased. However, PID notifies or posts on its website updated channel information for head and tail discharges, water availability forecast with every 10-day canal withdrawal plan for a cropping season and actual withdrawals, and water rotational plan for distributaries and minors. It is likely that the outcome related to water delivery at outlets will be achieved with continued support and monitoring. The groundwater management component was delivered and the on-farm water management component completed, except for a few pilot demonstration technologies, which were later scaled up by the government in project command areas (para. 17). Envisaged institutional changes encountered challenges. Farmers organizations completed one tenure, from 2012 to 2015, which is a limited time for management change in a new and low-capacity environment. Generally, the transition period between successive farmers’ organizations remained longer across five area water boards (AWBs) in

Punjab.26 No elections have taken place since the first tenure and farmers’ organizations filed lawsuits against the government in 2015, which extended the transition period. Projects 2 and 3 did not have an institutional strengthening component. However, the entire command area of project 2 and a partial area of project 3 have AWBs and farmers organizations.

C. Efficiency

43. The program is rated efficient. The economic analysis takes the approach adopted at appraisal and factors in changes in the situation, delays, and costs variations.27 In the case of the three barrages (projects 1 to 3), the analysis assumed that without the project the barrages would fail at some stage in the future, thereby resulting in lost agricultural income over the following several years plus incur the additional capital and operating costs necessary to provide a temporary structure to restore irrigation supplies. The rehabilitation and upgrade of the barrages will not increase agricultural production or productivity, with the primary benefit being the elimination of the income foregone associated with failure. Similarly, in the case of Pakpattan Canal (project 3), it was assumed that the project would avoid the risk of failure associated with the poor condition and the associated loses due to limited irrigation supplies until restoration.

44. In the case of the LBDC and distribution system (project 1), the approach at appraisal in 2006, characterized continued degradation of the irrigation system, reduction in canal water, declining water table, increased pumping, and loss of access to water in the tail and saline- affected areas. In more than 10 years since the project approval and with the project substantially completed in 2018, the agriculture production increased as more groundwater was mined to meet shortages in canal supplies. The reevaluation factors in the changed situation since 2006, presents an updated analysis and confirms that the program investment remains economically viable, ensures farmers’ benefits, increased production, and reduced flood risks. The investments have a benefit–cost ratio of 4.3 against 1.96 at appraisal, corresponding to an economic internal rate of return (EIRR) of 23% against 19.1% at appraisal. The project was completed with delays within the approved loan amount. Cropping intensity was found to increase at a faster rate than envisaged at appraisal and early realization of benefits improved the EIRR. A benefit reduction scenario shows a reduction of 41% corresponding to a 12% EIRR. In the case of project 2, the recalculated EIRR is 19.5% against 21% at appraisal. A slightly lower EIRR at completion is due to the 1-year delay in the completion of civil works and the increased costs of agricultural inputs.

45. In the case of project 3, a risk analysis framework was used that accounted for variability in the time of barrage and canal failure without the project. The economic analysis derived a mean EIRR of 26.5%, mean economic net present value of PRs16,145 million, and mean economic benefit–cost ratio of 4.4:1.0. At appraisal, project 3 was envisaged to be completed in 2016 and loan closing was 2017. The delay in project implementation led to the extension of the loan until the MFF completion date on 30 September 2017; however, works continued into 2018. The benefits at appraisal were envisaged to accrue in 2016; this is now revised to 2018 in the reevaluation. Delayed benefits reduced the EIRR. The detailed economic reevaluation of project 3 shows it remains efficient (Appendix 9). Key program benefits not quantified include (i) the on- farm water management component in project 1; (ii) the new Khanki Barrage’s road transport links reducing traveling distance by 26 kilometers between Gujranwala and Gujrat cities; (iii) the construction of a basic health unit near the Khanki Barrage; and (iv) the improved road bridges on Balloki and Suleimanki barrages. A summary of all tranches is given in Table 1.

26 Five area water boards established in years; 2005, 2007, 2011, 2012 and 2013. Two tenures have completed for earliest farmers organization while three farmers organization completed one tenure each. 27 The economic reevaluation of projects 1 and 2 is provided in the respective project completion reports.

Table 1: Summary of Economic Benefits Appraisal Completion Projects NPV (PRs million) BCR EIRR NPV (PRs million) BCR EIRR Project 1 a 8,033 1.96 19.0% 14,939 4.3 23.0% Project 2 a 22,432 3.80 21.0% 17,472 3.2 19.6% Project 3 15,650 3.90 29.0% 16,145 4.4 26.0% BCR = benefit–cost ratio, EIRR = economic internal rate of return, NPV = net present value. a The economic reevaluation of projects 1 and 2 is provided in the respective project completion reports.

D. Sustainability

46. The program is rated likely sustainable. PID has 7 decades of experience in irrigation systems, including barrages, irrigation canals, and distribution systems. PID determines the maintenance and repair (M&R) requirements using criteria based on established asset parameters. Costs are revised based on market prices. Since 2007, the estimated M&R cost increased from PRs 2.3 billion to PRs 9.2 billion. The M&R budget allocation was increased with a cumulative allocation of PRs64 billion from FY2007 to FY2018. This equates nearly to the yearly estimated requirements with likely increase in flooding years for flood protection, strengthening, and repair. During the same period (FY2007–FY2018), PID operational budget (including nearly 40,000 staff) increased from PRs 4 billion to PRs 9.5 billion. PID utilized about 95% of the allocated budget for operations and maintenance.

47. The improvements in budgetary allocation, estimation and infrastructure upgrade projects was a result of the asset management plan for gradually reducing the maintenance backlog. PID has adopted a third party for the monitoring and evaluation of M&R works. The overall O&M allocation has relatively improved in consideration of the changing demand, and will likely continue to improve. The collected irrigation service fee (abiana) both by farmer organizations and PID administered areas as a percentage of the operations and maintenance (O&M) expenditures fell from 20% in 2007 to less than 10% in 2017. The reasons are (i) abiana rates remained flat and static at PRs333 per hectare, though the rates represent less than 0.4% of crop budget;28 and (ii) abiana recovery rates declined to about 60% of assessed abiana, which is attributable to collection weakness, farmers willingness to pay or dissatisfaction with the irrigation service. With this prevalent situation, it is likely that government will continue to provide O&M funds from budgetary allocation. PID’s operations manual provides comprehensive guidance on O&M for barrages and the program has further improved the technical sustainability, enhanced and sustained water diversions and conveyance capacity, and reducing maintenance requirements in the short to medium terms. A SCADA system was installed on the New Khanki Barrage, while the Balloki and Suleimanki barrages were installed with electronically operated gate controls with information access rooms. PID has sanctioned 74 new positions for SCADA and electro-mechanical systems of which 39 are recruited.

48. Project 3 is rated likely sustainable. The PID existing administrative units, the Nili Bar Circle, Western Bar, Eastern Bar, and Suleimanki Headworks divisions, are responsible for the Suleimanki Barrage and the Pakpattan Canal operations and maintenance. A sub-divisional officer of the Suleimanki Barrage Division was transferred to PMO Barrages during the construction period for coordination in operation, on-the-job training and operational division preparedness to take over facilities after completion. Overall, PID staff is in place, and the completed facilities will likely receive operation, maintenance, and repair funds according to the established criteria.

28 The average farm (2.75 ha) estimate is based on field survey carried out in LBDC command area in 2018.

49. Since the 1997 reforms, five AWBs comprising about 400 farmers organizations elected by more than 19,000 water user associations and administering 1,000 channels were established in Punjab while the remaining canal command area remained in the conventional PID- administered system. Until the devolved administration shows better results, it is likely that the government will continue to provide financial and technical support through budgetary allocation and existing staff. At the provincial level, there has been progress in the water sector. The government is working on the Punjab Water Policy and the Punjab Groundwater Act. ADB has approved technical assistance for a comprehensive policy and institutional review, and a complete transformation of PID into a responsive water resources department.29 The government has adopted disbursements-linked indicators for improving the sustainability and efficiency of irrigation, improvements in the area assessed for irrigation service fees, tracking collection rates, and water delivery performance ratios.30 PID road map identifies key challenges of improving service fees recovery and transparency in water entitlements and distribution (footnote 2).

E. Development Impact

50. The creation of a decentralized farmers management structure has provided an opportunity to remove binding constraints and test alternative mechanisms in water service delivery, local capacities and social norms in transformational engagement, evaluate alternative options for water service delivery and make a course correction. The momentum for streamlining institutional reforms in irrigation management was created in partnership with the government and development partners. The program delivered the upgraded flood capacity of the Khanki Barrage and the designs for the Trimmu and Panjnad barrages, currently under construction as of 2018. In line with the ADB result framework, the program improved land through irrigation services, and drainage and flood management in an area of 3 million hectares, benefitting 1.2 million farming families and some 8.8 million people, the majority of whom are farmers with limited income from small landholdings and subsistence farming. The program benefits 36% of Punjab’s irrigated area and 16% of Pakistan Indus Basin’s irrigated area. The cropping intensity and farm incomes have increased in the program area from 5% to 7% and 15% to 40% depending on the projects’ baselines.

F. Performance of the Borrower and the Executing Agency

51. Overall, the performance of the borrower and the executing agency is rated satisfactory. Both demonstrated commitment to the success of the program despite time overruns, complex implementation arrangements, design changes, force majeure situation at Khanki Barrage during construction, localized damaged at Suleimanki Barrage, repeat biddings, and slow construction progress. Project approval document was revised to incorporate changes for government approvals. The executing agency implemented the project following ADB’s guidelines on financial management, safeguards, disbursements, procurement, recruitment and contract management. PID consulted ADB for guidance on critical matters and prior approvals where needed. The government closed the loan accounts on time. The executing agency made efforts to ensure that the counterpart funds provided were sufficient and timely. The continuity of financing and implementation arrangements after the loan’s closure demonstrates the government’s resolve to complete the works. The executing agency implemented the financial management system and maintained separate and audited accounts. The preparation of site-specific safeguards plans and effective communication strategy helped in social issues and relations with local communities.

29 ADB. 2016. Institutional Transformation of the Punjab Irrigation Department to a Water Resources Department. Manila. 30 World Bank. 2017. Strengthening Markets for Agriculture and Rural Transformation Punjab Program. Pakistan.

52. The reforms in the canal command area did not fully follow design despite the government’s special assurances. The government missed an opportunity to maximize support to eligible farmers organizations through ADB financing and strengthen PIDA’s role. PID did not perform well with staffing issues, specifically with filling vacant posts, which affected project 1 since 2015.

G. Performance of the Asian Development Bank

53. ADB’s overall performance was satisfactory. ADB supported the program in a challenging, slow, and evolving reforms environment. ADB joined a working group with other development partners for streamlining institutional reforms and provided a way forward. ADB facilitated a timely loan cancellation avoiding commitment charges and loan currency changes preventing the declining loan trend, and providing additional funding for completing part of the project 1 works, which could have remained incomplete, creating disparity within the project area. ADB staff regularly reviewed progress, recommended actions, and helped the executing agency overcome implementation issues. ADB supported project extensions through project reviews and country portfolio reviews. Weaknesses in ADB’s performance during project implementation included changes in ADB project officers, affecting consistency in project administration and less attention to the progress on institutional strengthening. ADB supported the extended delivery of projects preparation through the facility. Where required, ADB extended procurement support by advising on the merger of packages, repeat bidding, and road shows. Special loan administration missions were carried out to address issues that required attention.

H. Overall Assessment

54. Overall, the program is rated successful. The physical infrastructure upgrade, improving water delivery, and involving beneficiary farmers, make the program relevant and highly aligned with the government’s and ADB’s development strategies and investment programs (para. 39). The program has improved 3 million hectares of land through irrigation services and flood management. The program is rated effective as most of the outputs were achieved (paras. 41– 42). Based on the economic reevaluation of the three projects, the program is rated efficient as EIRRs confirmed its economic viability (paras. 43–45). The program is likely sustainable. The government will continue to provide technical and financial support, and ADB has committed to engaging with government on policy and future programming. The program’s overall rating by rating category is summarized in Table 2.

Table 2: Overall Ratings

Criteria Rating Project 1 Project 2 Project 3 Tranche 1&4 Tranche 2 Tranche 3 MFF Relevance Relevant Highly Relevant Relevant Relevant Effectiveness Effective Effective Effective Effective Efficiency Efficient Efficient Efficient Efficient Sustainability Likely Sustainable Likely Sustainable Likely Sustainable Likely Sustainable Overall Assessment Successful Successful Successful Successful Development impact Satisfactory Satisfactory Satisfactory Satisfactory Borrower / PID Satisfactory Satisfactory Satisfactory Satisfactory Performance of ADB Satisfactory Satisfactory Satisfactory Satisfactory ADB = Asian Development Bank, MFF = multitranche financing facility, PID=Punjab Irrigation Department. Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

55. Specific lessons from unevenly implemented reforms and ADB experience working with farmers organizations were not fully internalized. The design for the modernization of operations and institutional strengthening was assertive. The design, however, proved to be more challenging at implementation and several issues had to be addressed. First, the project design had to be adapted to the institutional structure and legal framework prevalent across other devolved canal command areas. This change brought clarity to PIDA, PID, area water boards, and farmers organizations, and enabled PIDA to use the experience gained from older area water boards and farmer organizations. An example was the adoption of training materials in the LBDC command area prepared by PIDA and JICA in an earlier project.31 Second, in 2008, ADB joined the working group for streamlining institutional reforms in irrigation management and maintained a continuous dialogue with the government and key development partners. The recommendations from the working group facilitated PIDA revising area water boards and farmers organizations’ rules and regulations. Third, ADB maintained a strong follow up when reforms were on hold in 2008–2009.

56. The slow pace of development of the farmers organizations is a repeat lesson learned by ADB. The reforms experience and lesson learned at the project level informed the need for further evaluation of institutional transformation at the provincial and system levels. The design of the Project 1 implementation arrangements was complex with multiple implementing units, reporting lines, and use of funds. These were streamlined during implementation. Such changes should have preferably been concluded early in the life of the projects. Design consultants recruited after project approval finalized the civil works. The recruitment of consultants and detailed engineering design required longer preparatory work for a project of this scale and complexity than envisaged at appraisal. Based on the first tranche lessons, ADB and the government selected, sequenced, and prepared subsequent tranches well.

57. Contract packaging and implementation have also yielded lessons. Capacity assessment of the construction industry is important before rolling out contract packages. The executing agency and ADB made the right decision in combining the Balloki Barrage works into one contract, New Khanki Barrage into one contract, and the LBDC works into three packages. The Pakpattan Canal and LBDC distribution system packages were, however, large and appeared unmanageable due to the geographic spread, canal operational flow constraints, and short construction period. PID’s divisional staff from Balloki, Khanewal, Okara, and Sahiwal were not part of the implementation as per the design (project 1). This kept project implementation and canals operations disjointed. Later, in 2015, PID operations staff joined PMU and PIUs, which improved progress, oversight, brought increased ownership, and resolved operational take over issues.

B. Recommendations

58. The careful configuration and sequencing of reforms with appropriate time frames will provide stakeholders with the required flexibility and attainable project targets. Overly ambitious and complex designs should be avoided and consideration for designing implementable institutional reform measures is necessary. Third party comprehensive evaluation is needed to evaluate reforms, farmers’ willingness to pay irrigation surface fee, reallocating water, and

31 Punjab Irrigation System Improvement Project (2008-2015)

exploring the potential for cost recovery. Reviving institutional reform dialogue with governments and development partners is essential in changing water context. ADB’s ongoing technical assistance for a comprehensive policy and institutional review, and transformation of PID into a responsive water resources department is a timely intervention and coincided with the government’s formulation of the Punjab Water Policy and the Punjab Groundwater Act, and for revisiting the institutional architecture for water management with a holistic view of water resources.

59. New project designs should continue to strengthen the increased efficiency of water use and productivity through better collaboration with the agriculture department. It is recommended to improve the asset management system through a fresh reassessment to determine the status of infrastructure, estimate the backlog of maintenance, and to serve as a baseline for future projects. While reforms evolve, strong support of the provincial government is needed for enforcing the rules that are critical for effective local administration and strengthened area water boards to improve fee recovery, preventing water thefts and outlets tampering, imposition and collection of fines, and monitoring channels discharges.

60. Groundwater assessment at project level has demonstrated demand for a wider analysis at the basin level. The assessment reinforces groundwater qualitative and quantitative data monitoring for integrated management of hydrologically connected surface and groundwater, and the need for better conjunctive use and water reallocation.

61. Further action or follow-up. PID will complete unfinished works. Special attention is required for operationalizing the gate control electrification system of the Balloki and Suleimanki barrages and farmers organizations’ facilities before their next elections. PID will complete the LBDC system’s gauging and discharge data calibration for the rehabilitated structures and channels to ensure authorized discharge at channel heads and tails. PID will observe channel hydraulics, check outlets parameters, withdrawals, and take remedial measures. PID should strengthen water measurement at the outlet level for the assessment of water delivery performance. PID has assured administering and closing ongoing contracts’ during the defect liability periods and the continuity of lean project management. Tampered or defective outlets in LBDC command area will be repaired through project or maintenance and repair funds as appropriate. Outlets adjustments requires continuous regulation, enforcement, and maintenance, and should be prioritized.

62. Timing of the project performance evaluation report. It is highly recommended that ADB’s independent evaluation department prepare a program performance evaluation report, 2 years after the project completion report, preferably in 2020. This will allow for a better assessment especially of project 1 outcome and general progress on reforms.

Appendix 1 19

DESIGN AND MONITORING FRAMEWORK

Table A1.1 Design and Monitoring Framework – Multitranche financing Facility

Design Summary Performance Targets and Status and Achievements Indicators Impact Increased • 10% increase in cropping intensity • Project 1: Cropping intensity in the LBDC agricultural over 700,000 ha by 2017 Command Area of over 700,000 ha has increased production and • 10% increase in average farm from 162.4% in 2006 to 171.5% in 2017 which is 6% farm income in income of 275,000 farming families increase. Due to delay in Project 1 completion, the Punjab irrigated by 2017 target date was revised to 2021. Average farm agriculture income is US$ 1,649 in 2017 which is an increase program areas of 37% from 2006 a,b

• Project 2: Cropping intensity in the New Khanki Command Area of over 1.2 million ha has increased from 141.7% in 2011 to 148.2% in 2016 which implies that the cropping intensities in the project benefitted area has already been increased by more than 7%. Considering the average farm size as 2.26 ha, analysis reveals that the income of an average holding has been increased by 15.4% from 2012 to 2016 a,b

• Project 3: Cropping intensity in the Pakpattan Canal command area of over 500,000 ha has increased from 165% in 2011-12 to 174.3% in 2016 which implies that the cropping intensities in the project benefitted area has already been increased by more than 5%. The average farm size of 2.24 ha has cropped area of 3.58 ha annually and farm budget indicated the annual net farm income for average farm size as PKR 195,407 in 2011. In 2017, the annual net farm income for average farm size is estimated as PKR 250,079 which is 28% increase over baseline a,b

Outcome Punjab irrigated • Design water supplies available in • The command area of Balloki, New Khanki and agriculture all program’s distributary and minor Suleimanki Barrages received 102%, 105% and program areas canals throughout the year by 2017 93% of water supplies against entitlements for receives a Kharif 2017 and 89%, 99% and 100% for Rabi sustainably 2017-2018 respectively c improved delivery • In the Program, based on available flows, the water of water services delivery of upgraded infrastructure is; and management 1. LBDC operated at maximum of 263 m3/s against design discharge of 278 m3/s (95%) in 2017; c 2. Pakpattan Canal operated at maximum of 149 m3/s against design discharge of 156 m3/s (96%) in 2017; c

• Tail outlets deliver design water • The Delivery Performance Ratio (DPR) of kharif in supply throughout the year by 2017 LBDC command area in tail reaches have increased from 0.81 in 2006 to 0.95 in 2017 and the relative DPR from 0.94 to 1 d

20 Appendix 1

Design Summary Performance Targets and Status and Achievements Indicators Outputs

1. Irrigation • Rehabilitated barrages (Balloki, • Rehabilitated and upgraded Balloki, New Khanki infrastructure Suleimanki, Trimmu, Khanki and and Suleimanki Barrages are operational in 2018 upgraded and Panjnad) are operational by 2017 • Design of Trimmu and Panjnad Barrages rehabilitated completed. Rehabilitation and upgrading financing was excluded from the Program scope and approved as standalone projects g

• Rehabilitated canals and • Rehabilitated Pakpattan Canal and LBDC distribution systems (LBDC, distribution system are operational in 2018 Pakpattan) are operational by 2017

2. Flood risks in • Flood capacity of 5 barrages on • Flood capacity increased in to barrages, financed in the program area rivers Chenab, Ravi and Sutlej the Program as follows: are reduced enhanced by 2017 1. Balloki Barrage (River Ravi) safe flood capacity increased from 6,400 m3/s to 10,700 m3/s 2. New Khanki Barrage (River Chenab) safe flood capacity increased from 22,654 m3/s to 31,149 m3/s

• Design of two barrages completed in Program for increased flood capacities which is expected to increase by 2021 e

1. Trimmu Barrage (River Chenab) safe flood capacity from 12,743 m3/s to 24,777 m3/s. 2. Panjnad Barrage (River Chenab) from 19,822 m3/s to 24,495 m3/s

• Islam Barrage (River Sutlej) remained unfinanced. The proposed flood capacity increase is from 7,560 m3/s to 9,401 m3/s

3. Groundwater in • Government of Punjab endorsed • The Program supported (i) improving LBDC the program area groundwater use strategy and command area groundwater knowledge base and is used sustainably enforce groundwater regulation by research, (ii) multi stakeholders training, and (iii) 2017 policy options, development framework, strategy, and groundwater management plan. The result supported provincial initiatives on groundwater management and in line with Punjab Canal and Drainage Act 2006. Groundwater regulation was not adopted and enforced, instead PID drafted Punjab Groundwater (Protection, Regulation & Development) Act 2017 which is currently being discussed with stakeholders and aimed for approval in 2019.

4. Improved on- • Farmers use improved on-farm • Field demonstration centers measuring 2,000 ha farm water water management practices by (40 ha each) in LBDC command area established management and 2017 for 53 farmer organizations to demonstrate agricultural support improved field channel layouts, alternative water practices adopted application technologies, improving productivity of in the program water, laser-controlled land leveling, conjunctive- area use strategies and pilot high efficiency irrigation system on 34 ha.

Appendix 1 21

Design Summary Performance Targets and Status and Achievements Indicators 5. Water • AWB manages the main and • Program supported establishing (i) Area Water management branch canals and FOs manage Board Sahiwal which manages main and branch institutions operation and maintenance of canals, (ii) 53 farmers organizations which improved distributaries and minor canals by manages operation and maintenance of 2017 distributaries and minor canals, and (iii) 3,779 khan panchayats (water user associations) at water course level

AWB = area water board, DPR = delivery performance ratio, FO = formers organization, ha = hectare, LBDC = lower bari doab canal, PKR = Pak rupee, PID = Punjab Irrigation Department, a Government of Punjab. Directorate of Agriculture. Crop Reporting Service, Punjab – Rabi 2015-16 and Kharif 2016. 2016 b Government of Punjab (GOPb), Bureau of Statistics. 2012. Punjab Development Statistics. Lahore. c Punjab irrigation Department, Programme Monitoring and Implementation Unit Data. http://irrigation.punjab.gov.pk/pmiuindex.aspx. Lahore d Executing Agency. Project 1 Project Completion Report. Lahore e Financed as standalone projects by ADB through Loan 3159/3160-PAK and overall cost of $173 million. Source: Asian Development Bank

22 Appendix 1

DESIGN AND MONITORING FRAMEWORK Table A1.2 Design and Monitoring Framework – Tranche 3

Design Summary Performance Indicators and Status and Achievements Targets

Impact • On an average 10% increase in • Cropping intensity has increased from 165% Improved agricultural cropping intensity over 500,000 ha in 2011-12 to 174.3% in 2016 which implies production and farm over baseline (2011) by 2020 that the cropping intensities in the project income in Pakpattan Canal benefitted area has already been increased by command area (Okara, more than 5%. a Pakpattan, Vehari and Lodhran districts). • On an average 10% increase in • The average farm size of 2.24 ha has cropped average farm income of 367,000 area of 3.58 ha annually and farm budget farming families over baseline indicated the annual net farm income for (2011) by 2020 average farm size as PKR 195,407 in 2011. In 2017, the annual net farm income for average farm size is estimated as PKR 250,079 which is 28% increase over the baseline b

Outcome Improved and reliable • Designed water supplies up to 156 • Pakpattan Canal operated at 149 m3/s water supplies for irrigated m3/s diverted to the canal and (maximum indent) against design discharge of agriculture in Pakpattan distribution system for at least 156 m3/s (96%) in 2017 with no risk of failure c canal command areas 90% of the year by 2017 with no risk of failure compared to high risk of failure now

Outputs

1. Rehabilitation of • Improved barrage eliminated the • Leakages from barrage eliminated after Pakpattan canal and annual water leakage of 267 upgrading Suleimanki Barrage million cubic meter by 2017 completed on time and within the budget • Improved 336 km length of canals • 298 km length of canals were improved and and more than 319 appurtenant 216 appurtenant structures were finalized structures by 2017 after condition and joint surveys, for rehabilitation, reconstruction, new construction or repair. Work on 16 structures was ongoing and will likely complete in 2018 d

• All contracts are within • All contracts combined were within the contingencies limits at the time of contingencies limit award

2. EA’s improved project • PMO’s 14 senior staff trained • PMO continued to enhance staff capacity in management capacity project administration, safeguards, financial management and water resources management through multiple training courses. Key trainings were given to 18 staff ha = hectares, m3/s = cubic meter per second; PMO=Project Management Office a Government of Punjab. Directorate of Agriculture. Crop Reporting Service, Punjab – Rabi 2015-16 and Kharif 2016. b Government of Punjab (GOPb), Bureau of Statistics. 2012. Punjab Development Statistics. Lahore. c Punjab irrigation Department, Programme Monitoring and Implementation Unit Data, http://irrigation.punjab.gov.pk/pmiuindex.aspx. Lahore d Executing Agency. Project 3 Project Completion Report. Lahore Source: Asian Development Bank.

Appendix 2 23

PROGAM COST AT APPRAISAL AND ACTUAL

Table A2.1: Financing Plan at Appraisal and Actual ($ million)

Source At MFF Appraisal At MFF completion Amount Share (%) Amount Share % Asian Development Bank 900.0 26% 916.7 30% Japan Bank for International Cooperation 400.0 11% 350.0 11% World Bank 600.0 17% 1,148.6 38% Others 100.0 3% 249.5 8% Government of Punjab and Pakistan 200.0 6% 383.4 13% To be identified 1,300.0 37% 0% Total 3,500.0 100% 3,048.2 100% Source: Asian Development Bank

Table A2.2: Break up of Financing by Major Development Partners ($ million) Development Amount Partner Project Name Duration Approved ADB Punjab Irrigated Agriculture Investment Program Tranche 1–4 2006–2017 476.7 Trimmu and Panjnad Barrages Improvement Project 2014–2021 150.0 Jalalpur Irrigation Project – Project Design Advance 2016-2018 5.0 Jalalpur Irrigation Project 2016-2018 285.0 Taunsa Barrages Emergency Rehabilitation and JICA Modernization Project 2005 48.0 Punjab Irrigation System Improvement Project 2006–2015 195.0 Lower Chenab Canal System Rehabilitation Project 2008–2017 105.0 Strengthening Irrigation Management System Including Agriculture Extension through Farmers’ Participation in the Punjab Province 2009–2014 2.0 Taunsa Barrages Emergency Rehabilitation and World Bank Modernization Project 2005-2009 123.0 Punjab-Irrigation Sector Development Policy Loan 2006 100.0 Punjab-Irrigation Sector Development Policy Loan II 2007 100.0 Punjab Barrages Improvement Project, Phase II 2005 145.6 Punjab Irrigated Agriculture Productivity Improvement Program, Phase 1 2012–2018 250.0 Additional Financing for Punjab Irrigated Agriculture Productivity Program Project 2017 130.0 Punjab Agriculture and Rural Transformation P4R Program 2017 300.0 Total: 2,415.3 ADB = Asian Development Bank, JICA = Japan International Cooperation Agency. Source: Asian Development Bank

24 Appendix 2

Table A2.3: Overall MFF Cost at Appraisal and Actual ($ million)

At Completion At Appraisal Tranche 1 and 4 Tranche 2 Tranche 3 Subsequent Source Tranche 1 Tranches Total % L2299 L2300 L3351 Total L2841 L2971 Total % ADB Ordinary Capital Resources 217.8 672.2 890.0 79% 205.6 22.9 228.6 42.2 270.7 48% ADB Special Funds Resources 10.0 10.0 1% 10.1 10.1 195.9 206.0 37% ADB Total 227.8 672.2 900.0 80% 205.6 10.1 22.9 238.6 195.9 42.2 476.7 85% Government of Punjab 53.6 171.4 225.0 20% 36.0 1.4 4.8 42.1 31.7 8.7 82.5 15% Other Cofinanciers TBD - Total MFF 281.4 843.6 1,125.0 100.0% 241.6 11.4 27.7 280.7 227.6 50.9 559.2 100% ADB = Asian Development Bank, MFF = multi-tranche financing facility Source: Asian Development Bank, and EA’s financial record

Appendix 2 25

Table A2.4: Program 1 Cost at Appraisal and Actual ($ ‘000’)

Item At Appraisal At Completion1 % Change

A. Balloki Barrage Complex

1 R&U of the Balloki Barrage Complex 21,947.2 28,010.4

Subtotal Balloki Barrage Complex 21,947.2 28,010.4

B. R&U of LBDC Canal and Distribution System

1 Main Canal 70,474.1 85,271.9

2 Distribution Network

a. 15L Dulwan Distributary Canal 3,832.2 3,960.4

b. Jandraka Distributary Canal 1,551.3 1,615.1

c. Remaining Distribution Network and Minors 70,832.5 125,245.0

Subtotal LBDC Distribution Network 76,216.0 130,820.5

Subtotal LBDC Distribution System 146,690.1 216,092.4

Total R&U Works 168,637.3 244,102.8 44.8%

C. Ground water Management and Programme

1 Ground Water Studies and Resources Assessment 2,639.1 1,348.7 -48.9%

D. On Farm Water Management and Agriculture

1 OFWM and Agriculture Improvement Program 6,516.9 1,872.8 -71.3%

E. Institutional Strengthening and Operations Modernization

1 Institutional Support 10,872.6 486.6 -95.5%

F. Project Management

1 Project Management 9,475.7 9,043.7 -4.6%

G. Investment Program Planning and Management

1 IPPM Unit - Project Preparation Facility (next 2 canals) 9,392.6 11,200.2 19.2%

Total Base Cost 207,534.2 268,054.8 29.2%

Physical Contingencies 5,111.0

Price Contingencies 58,167.1

Total Project Costs 270,812.3 268,054.8 -1.0%

Financial Charges During Implementation 10,583.6 12,679.1 19.8% Total Disbursement 281,395.9 280,733.9 -0.24% LBDC = Lower Bari Doab Canal, IPPM = investment planning and project management, O&M = operations and maintenance, R&U = rehabilitation and upgrade. Sources: Asian Development Bank estimates, and EA’s financial record

1 Includes tranche 4 cost that was approved as additional financing to meet cost over-runs of the tranche 1.

26 Appendix 2

Table A2.5 Project 2 Cost at Appraisal and Actual ($ million)

Item At Appraisal At Completion % Change A. Investment Cost 1. Works 238.21 214.39 -10% 2. PMO – Vehicle, Equipment and Supplies 0.11 0.09 -18% 3. Consulting Services 9.50 8.98 -5% 4. PMO – Staff and Operating Cost 1.54 0.59 -62% 5. Land Acquisition and Resettlement 0.49 0.20 -59% Subtotal (A) 249.85 224.25 -10% B. Contingencies 1. Physical Price Contingencies 52.36 0.00 -100% Subtotal (B) 52.36 0.00 C. Financing Charges During Implementation 1. Interest During Implementation 6.95 3.34 -52% 2. Commitment Charge 0.00 0.00 Subtotal (C) 6.95 3.34 Total (A+B+C) 309.16 227.60 -26% PMO = project management office Note: Taxes and duties at completion amounted to $15.6 million against an appraisal estimate of $30.0 million. Source: Asian Development Bank estimates, and EA’s financial record

Appendix 2 27

Table A2.6: Project 3 Cost at Appraisal and Actual ($ million)

Project Cost ($ million) At Appraisal At Completion Variance from Appraisal Item Total Cost % of Base Cost Total Cost % of Base Cost Amount % A. Base Component Cost 1. Civil, and mechanical and electrical 59.960 90.4% 44.510 89.6% (15.450) -25.8% 2. Vehicles, equipment and supplies 0.390 0.6% 0.016 0.0% (0.374) -95.9% 3. PMO staff and operating cost 1.690 2.5% 0.292 0.6% (1.398) -82.7% 4. Consulting services 3.970 6.0% 4.806 9.7% 0.836 21.1% 5. Land acquisition and resettlement 0.340 0.5% 0.044 0.1% (0.296) -86.9% Total Base Cost 66.350 100.0% 49.668 100.0% (16.682) -25.1% B. Contingencies Physical and Price Contingencies 15.820 23.8% C Financing Charges 1. Interest during implementation 2.865 4.3% 2. Commitment charges 0.410 0.6% Subtotal (C) 3.275 4.9% 1.207 2.4% (2.068) -63.2% Total Cost (A+B+C) 85.445 50.875 (34.570) -40.5% PMO = project management office Sources: Asian Development Bank estimates, and EA’s financial record

28 Appendix 3

PROGRAM COST BY FINANCIER

Table A3.1: Project 1 Cost at Appraisal by Financier ($'000) ADB Loan $ of cost Gov't of $ of cost Item OCR COL Total category Punjab category Total I. Investment Costs A. Civil Works 1 R&U of the Balloki Barrage Complex 19,435.9 19,435.9 90% 2,159.5 10% 21,595.4 2 LBDC Main Canal 157,200.1 157,200.1 90% 18,123.7 10% 175,323.8 Subtotal (A) 176,636.0 176,636.0 90% 20,283.2 10% 196,919.2 B. Mechanical and Civil Works 1 Services 18.3 18.3 70% 7.8 30% 26.1 2 Equipment 386.2 27.6 413.8 41% 584.4 59% 998.2 3 Vehicles 1,243.8 150.4 1,394.2 46% 1,655.2 54% 3,049.4 4 Vehicles O&M (non-recurrent) - 314.6 314.6 70% 134.8 30% 449.4 Subtotal (B) 1,648.3 492.6 2,140.9 47% 2,382.2 53% 4,523.1 C. Environment and Social Mitigation 1 Land Acquisition, Resettlement/ 108.1 108.1 1% 8,254.9 99% 8,363.0 Compensation, and Environmental Management 2 Survey 533.4 533.4 70% 228.6 30% 762.0 Subtotal (C) 641.5 641.5 7% 8,483.5 93% 9,125.0 D. Consultants 1 International Consultants 6,783.1 6,783.1 80% 1,644.1 20% 8,427.2 2 National Consultants 11,936.5 11,936.5 82% 2,589.9 18% 14,526.4 3 Project Preparation Facility - 9,271.0 9,271.0 100% 0% 9,271.0 Subtotal (D) 18,719.6 9,271.0 27,990.6 87% 4,234.0 13% 32,224.6 E. Project Management 1 Project Management 25.2 25.2 100% 25.2 F. Capacity Development 1 Institutional Capacity Development 174.3 174.3 5% 3,354.5 95% 3,528.8 2 Groundwater Management Training 62.8 62.8 70% 26.9 30% 89.7 3 Agriculture Support and Training 532.1 532.1 100% 532.1 4 Demonstrations 4,188.2 4,188.2 100% 4,188.2 Subtotal (F) 4,957.4 4,957.4 59% 3,381.4 41% 8,338.8 Total Investment Costs 202,628.0 9,763.6 212,391.6 85% 38,764.3 15% 251,155.9

Appendix 3 29

ADB Loan % of cost Gov't of % of cost Item OCR ADF Total category Punjab category Total II. Recurrent Costs A. Incremental Salaries and Allowances 11,145.9 100% 11,145.9 B. Operations and Maintenance (O&M) 1 O&M Infrastructure 1,304.3 1,304.3 2 O&M Vehicles 236.3 236.3 17% 1,144.1 83% 1,380.4 3 Office O&M (Supplies and Consumables) 2,547.6 2,547.6 68% 1,224.5 32% 3,772.1 Subtotal (B) 2,783.9 2,783.9 43% 3,672.9 57% 6,456.8 Subtotal Recurrent Costs 2,783.9 2,783.9 16% 14,818.8 84% 17,602.7 Total Project Costs 205,411.9 9,763.6 215,175.5 80% 53,583.1 20% 268,758.6 Interest during Implementation 8,948.2 236.4 9,184.6 100% 9,184.6 Commitment Charges 3,456.0 3,456.0 100% 3,456.0 Total Disbursement 217,816.1 10,000.0 227,816.1 81% 53,583.1 19% 281,399.2 % Total Project Cost 81.0% 19.0% 100% ADB = Asian Development Bank, COL = concessional ordinary capital resources, LBDC = lower bari doab canal, O&M = operation and maintenance, OCR = ordinary capital resource, R&U = rehabilitation and upgradation Sources: Asian Development Bank, and EA’s financial record

30 Appendix 3

Table A3.2: Project 1 Cost at Completion by Financier1 ($'000) ADB Loan Govt. % of Tranche 1 Tranche 4 % of cost of cost Item L2299 L2300 Total L3351 Total category Punjab category Total I. Investment Costs A. Civil Works 1 R&U of the Balloki Barrage Complex 21,506.8 21,506.8 21,506.8 90% 2,471.0 10% 23,977.8 2 LBDC Main Canal 149,581.3 149,581.3 22,593.2 172,174.5 88% 24,315.1 12% 196,489.6 Subtotal (A) 171,088.1 171,088.1 22,593.2 193,681.3 98% 26,786.1 14% 197,874.2 B. Mechanical and Civil Works 1 Services 2 Equipment 3 Vehicles 154.2 154.2 154.2 35% 292.4 65% 446.6 4 Vehicles O&M (non-recurrent) - - - Subtotal (B) 154.2 154.2 154.2 35% 292.4 65% 446.6 C. Environment and Social Mitigation - 1 Land Acquisition, Resettlement/ 54.9 54.9 54.9 7% 753.9 93% 808.8 Compensation, and Environmental Management 2 Survey - Subtotal (C) 54.9 54.9 54.9 7% 753.9 93% 808.8 D. Consultants 1 International Consultants 3,691.1 3,691.1 3,691.1 80% 948.1 20% 4,639.2 2 National Consultants 17,945.1 17,945.1 176.3 18,121.4 73% 6,861.7 27% 24,983.0 3 Project Preparation Facility - 9,837.8 9,837.8 - 9,837.8 88% 1,362.4 12% 11,200.2 Subtotal (D) 21,636.2 9,837.8 31,474.0 176.3 31,650.3 78% 9,172.2 22% 40,822.4 E. Project Management 1 Project Management - F. Capacity Development 1 Institutional Capacity Development 44.2 44.2 44.2 43% 59.1 57% 103.2 2 Groundwater Management Training - 3 Agriculture Support and Training 377.0 377.0 377.0 56% 292.7 44% 669.7 4 Demonstrations Subtotal (F) 421.1 421.1 421.1 54% 351.8 46% 772.9 Total Investment Costs 193,354.5 9,837.8 203,192.3 22,769.5 225,961.8 86% 37,356.5 14% 263,318.2

1 Project 1 includes the tranche 1 (Loan 2299, and Loan 2300) originally approved as tranche 1, and tranche 4 (Loan 3351) that was approved as additional financing to meet cost over-runs of the tranche 1. The completion cost of Project 1 includes expenditure of both tranches i.e. tranche 1 and tranche 4.

Appendix 3 31

ADB Loan Tranche 1 Tranche 4 $ of cost Gov't of $ of cost Item LN 2299 L2300 Total L3351 Total category Punjab category Total II. Recurrent Costs A. Incremental Salaries and Allowances 3,402.4 100% 3,402.4 B. Operations and Maintenance (O&M) 1 O&M Infrastructure 2 O&M Vehicles 676.4 100% 676.4 Office O&M (Supplies and 3 Consumables) 657.8 100% 657.8 Subtotal (B) 1,334.2 100% 1,334.2 Subtotal Recurrent Costs 4,736.6 100% 4,736.6 Total Project Costs 193,354.5 9,837.8 203,192.3 22,769.5 225,961.8 84% 42,093.0 16% 268,054.8 Interest during Implementation 2,345.8 237.0 2,582.8 40.9 2,623.7 100% 0% 2,623.7 Commitment Charges 9,938.6 9,938.6 116.8 10,055.4 100% 0% 10,055.4 Total Disbursement 205,639.0 10,074.7 215,713.7 22,927.1 238,640.9 85% 42,093.0 15% 280,733.9 % Total Project Cost 85% 85% 15% 100% ADB = Asian Development Bank, COL = concessional ordinary capital resource, Govt. = government, LBDC = lower bari doab canal, O&M = operation and maintenance, OCR = ordinary capital resource, R&U = rehabilitation and upgradation Sources: Asian Development Bank, and EA’s financial record

32 Appendix 3

Table A3.3: Project 2 Cost By Financier at Appraisal ($ million)

ADB GOP Total Cost Item % of Cost % of Cost Taxes and Amount Category Amount Category Amount Duties A. Investment Costs 1. Civil works 207.24 87.00% 30.97 13.00% 238.21 29.215 Subtotal (A) 207.24 87.00% 30.97 13.00% 238.21 29.215 * Taxes and Duties 0.00 30.00 30.0 B. Recurrent Costs 1 PMO – Staff and Operating Cost 1.45 94.16% 0.09 5.84% 1.54 0.087 2 PMO – Vehicle, Equipment and Supplies 0.10 90.91% 0.02 18.18% 0.11 0.017 3 Consulting Services 8.70 91.58% 0.80 8.42% 9.50 69.000 4 Land Acquisition and Resettlement 0.21 42.86% 0.28 57.14% 0.49 0.000 Subtotal (B) 10.46 89.86% 1.19 10.22% 11.64 69.104 Total Base Cost (A+B) 217.70 87.13% 32.16 12.87% 249.85 93.319 C. Contingencies 1 Physical and Price Contingencies 45.45 86.80% 6.91 13.20% 52.36 6.327 Subtotal (C) 45.45 86.80% 6.91 13.20% 52.36 6.327 D. Financial Charges During Implementation 1 Interest during implementation 6.95 100.00% 0.00 0.00% 6.95 0.000 Subtotal (D) 6.95 100.00% 0.00 0.00% 6.95 0.000 Total Project Cost (A+B+C+D) 270.10 39.07 309.16 104.646 % Total Project Cost 87.37% 12.64% 100% ADB = Asian Development Bank, GOP = Government of Pakistan, PMO = project management office Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank, and EA’s financial record

Appendix 3 33

Table A3.4: Project 2 Cost at Completion by Financier ($ million)

ADB GOP Total Cost Item % of Cost % of Cost Taxes and Amount Category Amount Category Amount Duties A. Investment Costs 1. Civil works 184.84 86.22% 29.55 13.78% 214.39 14.289 Subtotal (A) 184.84 86.22% 29.55 13.78% 214.39 14.287 B. Recurrent Costs 1 PMO – Staff and Operating Cost 0.49 83.05% 0.10 16.95% 0.59 0.018 2 PMO – Vehicle, Equipment and Supplies 0.07 77.78% 0.02 22.22% 0.09 0.003 3 Consulting Services 7.01 78.06% 1.97 21.94% 8.98 1.276 4 Land Acquisition and Resettlement 0.15 75.00% 0.05 25.00% 0.20 0.00

Subtotal (B) 7.22 73.23% 2.14 21.70% 9.86 1.297 Total Base Cost (A+B) 192.56 85.87% 31.6 14.09% 224.25 15.584 C. Contingencies 1 Physical and Price Contingencies 0.00 0.00% 0.00 0.00% 0.00 0.00 Subtotal (C) 0.00 0.00% 0.00 0.00% 0.00 0.00 D. Financial Charges During Implementation 1 Interest during implementation 3.34 100.00% 0.00 0.00% 3.34 0.00 Subtotal (D) 3.34 100.00% 0.00 0.00% 3.34 0.00 Total Project Cost (A+B+C+D) 195.90 31.69 227.59 31.200 % Total Project Cost 86.08% 13.92% 100% ADB = Asian Development Bank, GOP = Government of Pakistan Note: Numbers may not sum precisely because of rounding. Sources: Asian Development Bank, and EA’s financial record

34 Appendix 3

Table A3.5: Project 3 Cost By Financier at Appraisal ($ million)

ADB Loan (OCR) GoPb share % of cost Amount % of cost category Amount category Total Duties Item (A) (A/C) (B) (B/C) (C) and taxes A. Civil Works 1 Civil Works 43.000 84.9% 7.65 15.1% 50.650 5.060 2 Mechanical & electrical works 7.950 85.4% 1.360 14.6% 9.310 0.930 Subtotal (A) 50.950 84.9% 9.010 15.0% 59.960 5.990 B. Project Management 1 PMO staff and operating costs 1.440 85.2% 0.250 14.8% 1.690 0.080 2 Vehicles, equipment and supplies 0.320 82.1% 0.070 17.9% 0.390 0.050 3 Consulting services 3.380 85.1% 0.590 14.9% 3.970 0.200 4 Land Acquisition and Resettlement - a. Land Acquisition 0.140 100.0% 0.140 b. Resettlement 0.200 100.0% 0.0% 0.200 Subtotal (B) 5.340 83.6% 1.050 16.4% 6.390 0.330 Total Base Cost (A+B) 56.290 84.8% 10.060 15.2% 66.350 6.320 C. Contingencies 1 Physical 1.530 85.0% 0.270 15.0% 1.800 2 Price 11.920 85.0% 2.100 15.0% 14.020 Subtotal (C) 13.450 85.0% 2.370 15.0% 15.820 D. Financing Charges 1 Interest during Implementation - - 2 Interest and commitment charges 3.260 100.0% - 0.0% 3.260 Total Project Cost (A+B+C+D) 73.000 85.5% 12.430 14.5% 85.430 6.320 % Total Project Cost 100% 85.5% 14.5% 100% ADB = Asian Development of Bank, GoPb = Government of Punjab Sources: Asian Development Bank, and EA’s financial record

Appendix 3 35

Table A3.6: Tranche 3 Cost at Completion by Financier ($ million)

ADB Loan (OCR) GoPb share % of cost Duties Amount % of cost category Amount category Total and Item (A) (A/C) (B) (B/C) (C) taxes A. Civil Works 1 Civil Works 37.087 83.3% 7.423 16.7% 44.510 2.710 2 Mechanical & electrical works Subtotal (A) 37.087 83.3% 7.423 16.7% 44.510 2.710 B. Project Management 1 PMO staff and operating costs 0.223 76.3% 0.069 23.7% 0.292 0.010 2 Vehicles, equipment and supplies 0.011 68.9% 0.005 31.1% 0.016 0.005 3 Consulting services 3.606 75.0% 1.201 25.0% 4.806 0.960 4 Land Acquisition and Resettlement #DIV/0! a. Land Acquisition 0.0% 0.002 100.0% 0.002 b. Resettlement 0.042 100.0% - 0.0% 0.042 Subtotal (B) 3.882 75.2% 1.277 24.8% 5.159 0.975 Total Base Cost (A+B) 40.968 82.5% 8.700 17.5% 49.668 3.685 C. Contingencies 1 Physical 2 Price Subtotal (C) D. Financing Charges 1 Interest during Implementation 2 Interest and commitment charges 1.207 100.0% 1.207 Total Project Cost (A+B+C+D) 42.175 82.9% 8.700 17.1% 50.875 3.685 % Total Project Cost 82.9% 17.1% 100.0% ADB = Asian Development of Bank, GoPb = Government of Punjab Source{s}: Asian Development Bank, and EA’s financial record

36 Appendix 3

Table A3.7: Project 3 Expenditure By Year (As Appraised and Actual) ($ million) At Appraisal At Completion Item Total 2013 2014 2015 2016 Total 2013 2014 2015 2016 2017 A. Construction Work A. Civil Works 1 Civil Works 50.650 6.850 14.410 21.540 7.850 44.510 - 12.523 12.967 11.921 7.099

2 Mechanical & electrical works 9.310 1.280 2.440 3.500 2.090 Subtotal (A) 59.960 8.130 16.850 25.040 9.940 44.510 - 12.523 12.967 11.921 7.099 B. Project Management 1 PMO staff and operating costs 1.690 0.260 0.440 0.550 0.440 0.292 - - 0.031 0.127 0.134 2 Vehicles, equipment and supplies 0.390 0.210 0.140 0.040 0.016 - - - 0.016 - 3 Consulting services 3.970 0.690 1.060 1.120 1.100 4.806 - 0.550 1.187 1.739 1.330 4 Land Acquisition and Resettlement 0.340 0.070 0.150 0.120 0.044 - - 0.034 - 0.010 Subtotal (B) 6.390 1.230 1.790 1.830 1.540 5.159 - 0.550 1.252 1.883 1.474 Total Base Cost (A+B) 66.350 9.360 18.640 26.870 11.480 49.668 - 13.073 14.219 13.804 8.573 C. Contingencies 1 Physical 1.800 0.240 0.510 0.750 0.300 ------2 Price 14.020 0.890 3.180 6.500 3.450 ------Subtotal (C) 15.820 1.130 3.690 7.250 3.750 ------D. Financing Charges 1 Interest and commitment charges 3.260 0.100 0.460 1.070 1.630 1.207 0.044 0.137 0.223 0.436 0.367 Total Project Cost (A+B+C+D) 85.430 10.590 22.790 35.190 16.860 50.875 0.044 13.210 14.442 14.240 8.940 Percent of Total Cost 100.000 12.396 26.677 41.192 19.735 100.000 0.086 25.966 28.387 27.989 17.572 PMO = project management office Source: Asian Development Bank, and EA’s financial record

Appendix 3 37

Table 3.8: Project 3 Financing Plan (At Appraisal and At Completion) ($ million)

At Appraisal At Completion Variance Source Amount % Amount % Amount % ADB’s Ordinary Capital Resources 73.000 85.5% 42.175 82.9% (30.825) -42.2% Government of Punjab 12.430 14.5% 8.700 17.1% (3.730) -30.0% Total 85.430 100.0% 50.875 100.0% (34.555) -40.4% ADB = Asian Development Bank

38 Appendix 3

Table 3.9 Utilization of Loan Proceeds for Project 3 ($) Original Revised At Variance from Loan Allocation Allocation Completion Original Cate- % of % of % of gory Item Amount total Amount total Amount total Amount % 01 Civil Works 43.000 58.9% 47.000 79.7% 37.087 87.9% (5.913) -13.8% 02 Mechanical and electrical works 7.950 10.9% - 0.0% - 0.0% (7.950) 100.0% 03 PMO staff and operating cost 1.440 2.0% 0.646 0.9% 0.223 0.5% (1.217) -84.5% 04 Vehicles, equipment and supplies 0.320 0.4% 0.013 0.0% 0.011 0.0% (0.309) -96.5% 05 Consulting services 3.380 4.6% 4.610 6.3% 3.606 8.5% 0.226 6.7% 06 Resettlement 0.200 0.3% 0.061 0.1% 0.042 0.1% (0.158) -78.8% 07 Interest and commitment charges 3.260 4.5% 3.260 4.5% 1.207 2.9% (2.053) -63.0% 08 Unallocated 13.450 18.4% 3.410 4.7% - 0.0% (13.450) 100.0% Total Loan Amount 73.000 100.0% 59.000 80.8% 42.175 100.0% (30.825) -42.2% PMO = project management office Source: Asian Development Bank

Appendix 4 39

DISBURSEMENT OF ADB LOAN PROCEEDS

Table 4.1: Annual and Cumulative Disbursement of ADB Loan Proceeds Annual Disbursement Cumulative Disbursement Amount % of Amount % of Year ($ million) Total ($ million) Total 2013 0.046 0.1% 0.046 0.1% 2014 11.431 27.1% 11.478 27.2% 2015 11.668 27.7% 23.145 54.9% 2016 14.365 34.1% 37.510 88.9% 2017 4.665 11.1% 42.175 100.0% Total 42.175 100.0% ADB = Asian Development Bank. a The approved loan amount was $73.0 million. However, PAM only projected disbursement of $70.080 million. The annual projections shown here are taken from the Baseline Projections in eOperations as of 31 December 2013. Source: Project Record in the Asian Development Bank Oracle-based database (eOperations)

Figure A4.1: Projection and Cumulative Disbursement of ADB Loan Proceeds ($ million)

Figure A4.1 Projected and Actual Loan Disbursement 75.0

57.69 59.55 60.0

45.0

42.18 30.0 23.15 37.51

$ million$ 11.48 15.0 18.43

0.00 2.37 0.0 0.05 2013 2014 2015 2016 2017

Projected for the year Actual for the year Projected - Cumulative Actual - Cumulative

Source: Project Administration Memorandum of the Tranche 3, and ADB’s Loan Financial Information System

40 Appendix 4

Table A4.2: Record of Changes in Disbursement Projections ($ million) Years No Revision in Disbursement 2013 2014 2015 2016 2017 Total Projections 1 First revision on first partial cancellation affected on 20 July 2017 0.046 11.431 11.668 14.365 21.490 59.000 2 Second Revision on second partial cancellation affected on 26 February 2018 0.050 11.430 11.670 14.360 4.670 42.175 Source: Asian Development Bank

Appendix 5 41

IMPLEMENTATION SCHEDULE

Table A5.1: Project 1 (Tranche 1 and 4) Schedule – At appraisal and Actual Design & Supervision 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. Balloki Barrage R&U a. Recruit D&S Consultants

b. Detailed Design

c. Resettlement Activities

d. Construction

2. LBDC & Dist System R&U a. Recruit D&S Consultants

b. Detailed Design LBDC

c. Construction LBDC

d. Detailed Design Dist Sys

e. Resettlement Activities

f. Construction Dist Sys

3. Groundwater Management a. Recruit Consultants

b. Design of Drilling Program

c. Drilling and Testing

d. Groundwater Modeling

e. Driller Training

f. Groundwater Management

4. OFWM and Agr Support a. Recruit Consultants

42 Appendix 5

Design & Supervision 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 b. Mobilize DOFWM

c. Select FP Water courses

d. Establish Field Programs

e. Operate Field Programs

5. Institutional Building a. Recruit Consultants

b. Mobilize and Form FOs

c. Train and Support FOs

d. Assist FOs, Establish IMUs

e. Train and Support IMUs

f. LBDC Operational Plan

g. Area Water Board Support

6. Project Management a. Consultant Recruitment

b. Procure Vehicles & Eqpt

c. Establish PPMS

d. Undertake PME

Agr = agriculture support, D&S = design and supervision, Dist = distribution, DOFWM = Directorate of On Farm Water Management, Eqpt = equipment, FO = farmer organization, FP = field program, IMU = irrigation management unit, LBDC = Lower Bari Doab Canal, PME = project monitoring and evaluation, PPMS = project performance management system, R&U = rehabilitation and upgrade, Sys = system

Legends: As Appraised Within the original loan closing First extension Second extension Third extension Fourth extension Post loan closing

Appendix 5 43

Table: A5.2 Project 2 Schedule – At appraisal and Actual Activities 2011 2012 2013 2014 2015 2016 2017 2018 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 A Detailed Design

1 Detailed Designa

B Procurement of Construction Supervision Procurement of Construction Supervision 1 Consultants C Civil Works Contract

1 Bidding of NCB Contractb

2 Bidding Document of ICBc

3 Bidding and Bid Evaluation of ICB and award

4 Signing of contract

D Construction

1 Construction of works

2 Defect notification

E Safeguards

1 Environmental Management Plan

2 Resettlement Plan

F Project Management

1 Establishment of PMOd

2 Staff Appointments

G Project Monitoring

1 Project Performance Management System

ICB = international competitive bidding, NCB = national competitive bidding, PMO = project management office. a Detailed design was conducted by 2011 prior to the project, and financed by Japan International Cooperation Agency. b NCB was merged with ICB after its bid failed. c The original ICB was merged with NCB after its bid failed. Revised ICB was tendered. d The New Khanki Barrage Project Office was established within the PMO Barrage, Punjab Irrigation Department. Legends: Planned Within original loan closing During first extension During second extension Post loan closing Sources: Asian Development Bank and Executing Agency’s record.

44 Appendix 5

Table A5.3: Project 3 Schedule – At appraisal and Actual

Activities Start Finish 2012 2013 2014 2015 2016 2017 2018 A. Project Management 1. Recruitment of staff Jan 2013 Jun 2013

2. Procurement of vehicles and Jan 2013 Jun 2013 Equipment B. Consultants Recruitment 3. Construction Supervision Oct 2012 Jul 2013 consultants C. Civil Works Contracts 1. BD preparation and approval Jul 2012 Sep 2012

2. Award of Contract for Pakpattan Oct 2012 Apr 2013 canal (ICB-01) 3. Contract signing ICB-01 May 2013 Jul 2013 and commencement 4. Bidding, BER and award of Dec 2012 Jul 2013 ICB-02 - Suleimanki barrage 5. Singing of contract ICB-02 Aug 2013 Oct 2013 and commencement of work D. Construction 1. Construction of Works Jul 2013 Sep 2016

E. Safeguards 1. Environmental Management Jul 2013 Jun 2016 Plan 2. Resettlement plan Aug 2012 Jun 2013

F. Project Monitoring 1. PPMS implementation Jul 2013 Dec 2016

BER = bid evaluation report, ICB = international competitive bidding, PPMS = project performance management system Legends: Source: Asian Development Bank

Legends: As Appraised Actual (executed within the original loan closing date) Work executed during the extended loan period – from 01 April – 30 September 2017 – financed through ADB loan Work executed after loan closing date and financed by Government of Punjab through its own resources.

Appendix 6 45

CONSULTANT RECRUITMENT AND PROCUREMENT

Table A6.1: Consultancy Packages under Project 1 (Tranche 1 and 4) No Contract Consulting Firm Currency Amount 1 Design & Construction Supervision of Joint venture of National £ 1,125,767 Balloki Barrage, LBDC Main Canal & Engineering Services Pakistan PRs 1,771,837,970 Distribution System (Pvt), Mott Macdonald International (Ltd), Mott Macdonald Pakistan, PRs 357,455,592 and ACE A$ 1,561,028

2 Support to PMU SMEC International Pvt Ltd. PRs 243,067,909 3 Institutional Strengthening, and Euroconsult Pakistan (Pvt) US$ 77,677 Improved Operation Limited PRs 26,397,322 4 Groundwater Monitoring Modelling & LAHEYER International GMBH EUR 563,292 Management PRs 55,940,370 5 On Farm Water Management and EGISBCEO Misbecome EUR 30,912 Agricultural Support Consultants International US$ 539,800 PRs 57,745,190 6 Facility planning and management NESPAK PRs 240,835,358 LBDC = lower bari doab canal, PMU = project management unit Source: Asian Development Bank

Table A6.2: List of Works Contracts under Project 1 (Tranche 1 and 4) Cost at Remarks No Contract Contractor Currency Completion 1 Upgrading and Rehabilitation of Hassan Sarwar PRs 372,358,253 Financed through 15-l distributary Associates tranche 1 2 Rehabilitation and Upgrading of Chaudhary PRs 142,924,153 Financed through Jandraka distributary system Engineers tranche 1 Associates Rehabilitation and Upgrading of M/s Saadullah US$ 9,160,653 Jointly financed 3 branch canals and distributary Khan and PRs 2,339,849,641 through tranche 1 system covering Balloki and Brothers (SKB) US$ 435,718 and 4 Okara PRs 891,216,118

Rehabilitation and Upgrading of M/S NEIE-LAC (JV), PRs 5,130,832,284 Jointly financed 4 branch canals and distributary LAC PRs 410,410,623 through tranche 1 system covering Sahiwal and 4 Upgrading of branch canals and M/s Sinohydro US$ 5,176,526 Financed through 6 distributary systems of Khanewal Corporation Ltd. PRs 1,143,522,621 tranche 1 canal division icb-06 (b) Rehabilitation and Upgrading of M/s.Ghulam US$ 247,875,117 Financed through 6 Lower Bari Doab Canal (RD Rasool & Co. PRs 1,878,037,555 tranche 1 0+000 to RD 227+454) (Pvt) Ltd 7 Rehabilitation and upgrading of M/s SPARCO- PRs 3,313,090,729 Financed through Lower Bari Doab Canal (RD CLIC (JV) tranche 1 227+454 to RD 526+111) 8 Rehabilitation & Upgrading of I. A. C. (Pvt) Ltd. PRs 823,924,694 Financed through Lower Bari Doab Canal from RD tranche 1 526+000 to 660+700

46 Appendix 6

Cost at Remarks No Contract Contractor Currency Completion Rehabilitation and Upgrading of M/s SKB-JME US$ 5,052,319 Financed through 9 Balloki barrage and canal head (JV) PRs 1,976,598,341 tranche 1 regulators 10 Rehabilitation and Upgrading of M/s RSL-CGC PRs 1,937,380,056 Financed through branch canals and distributary (joint venture) tranche 4 system covering Khanewal division Source: Asian Development Bank

Table A6.3: List of Contracts under Project 2

No Contract Consulting Firm Currency Amount 1 Construction Supervision Consultants A JV of ATKINS International, EGC A$ 1,835,562 PAK, and BARQAAB L 711,429 US$ 1,096,706 2 Construction of New Khanki Barrage M/s. DESCON Engineering Limited PKR 13,465,863,048 and Auxiliary Works USD 53,020,928 3 Suzuki Cultus (3 Units) M/s. Pak Suzuki Motors PKR 3,078,000

4 Toyota Corolla XLI (1300 cc) M/s. Indus Motors PKR 1,569,500 5 Planning and Construction Expert – Dr. Bagh Ali Shahid PKR 3,635,604 Individual Consultant 6 One Suzuki Cultus VXR Adil Zafar Motors PKR 883,036 7 Toyota Double Cabin Pick up Toyota Shaheen Motors PKR 3,110,268 8 M&E of LARP – Individual Consultant Abdul Hameed PKR 1,471,630 9 Vocational and Flood Risk TEVTA PKR 4,137,000 Management Training to local Community Source: Asian Development Bank

Table A6.4: List of Contracts under Project 3

No Contract Consulting Firm Currency Amount 1 Construction Supervision Consultant JV of NDC and NESPAK in PKR 384,460,392 for Pakpattan Canal and Suleimanki association with BARQAAB, DMC Barrage and EGC 2 Rehabilitation and Upgradation of SINOHYDRO – NEL JV PRs 3,002,948,444 Pakpattan Canal US$ 9,737,670

3 Rehabilitation and Upgrading of Sinohydro Corporation Limited PKR 1,799,600,973 Suleimanki Barrage USD 7,309,433 4 One 1300 CC Corolla Car M/s. Indus Motors PKR 1,660,500 Source: Asian Development Bank

Appendix 6 47

Table A6.5: Utilization of Consulting Input (Project 3)

(Person-months)

Person-month Variance Name of Expert At As At From From Appraisal revised completion Appraisal revised I. Key Experts A. Project Office Lahore 1. Project Manager 37.0 50.0 58.0 21.0 8.0 2. Contracts Specialist/DPM 37.0 47.0 53.0 16.0 6.0 3. Planning and Scheduling Engineer 12.0 12.0 11.9 (0.1) (0.1) 4. Principal Structural Design Engineer 18.0 19.8 19.8 1.8 5. Senior Engineer Design (Structures) 10.0 11.0 10.8 0.8 (0.2) 6. Senior Engineer Design (Hydraulic) 1 11.0 17.0 16.1 5.1 (0.9) 7. Senior Engineer Design (Hydraulic) 2 11.0 10.5 10.5 (0.5) 9. Senior Engineer Design Mechanical 7.0 11.0 10.0 3.0 (1.0) 10. Senior Engineer Design Electrical 7.0 1.0 (7.0) (1.0)

11. Grouting Specialist 3.0 (3.0) 12. Environmental/Resettlement Specialist 3.0 3.6 3.6 0.6 B. Field Office at Suleimanki Barrage 1. Chief Resident Engineer 31.0 28.0 28.0 (3.0) 2. Resident Engineer Civil 31.0 33.0 33.0 2.0 3. Resident Engineer Mech./ Electrical 12.0 20.3 20.3 8.3 4. Material Engineer Quality Control 12.0 11.5 11.0 (1.0) (0.5) C. Field Office at Pakpattan 5. Chief Resident Engineer 17.0 27.0 27.0 10.0 6. Resident Engineer (Canals) 31.0 40.0 42.6 11.6 2.6 7. Senior Engineer (Mechanical) 5.0 8.5 8.0 3.0 (0.5) 8. Material/Quality Control Specialist 20.0 (20.0) 9. Environmental/Resettlement Specialist 12.0 11.0 10.4 (1.6) (0.6) Sub-Total I 307.0 351.6 374.0 67.0 22.4 II. Non-Key Staff 212.0 649.7 704.8 492.8 55.1 Total (I+II) 519.0 1,001.3 1,078.8 559.8 77.4 DPM = deputy project manager Source: Asian Development Bank Project Completion Review Mission

48 Appendix 7

CONTRACT AWARDS OF ADB LOAN PROCEEDS

Table 7.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds Annual Contract Awards Cumulative Contract Awards Amount % of Amount % of Year ($ million) Total ($ million) Total 2013 2014 49.866 99.7% 49.87 99.3% 2015 0.048 0.1% 49.91 99.4% 2016 0.099 0.2% 50.01 99.6% 2017 0.217 0.4% 50.23 100.0% Total 50.013 100.0% Source: Asian Development Bank.

Figure 7.1: Projected and Actual Cumulative Contract Awards of ADB Loan Proceeds ($ million)

Figure A4.1 Projected and Actual Contract Awards

56.28 60.0 54.73 55.84 56.28 54.73 49.87 45.0 49.91 50.01 50.23

30.0 $ million $ 15.0

1.11 0.05 0.44 0.10 0.217 0.0 2013 2014 2015 2016 2017

Projected for the year Actual for the year Projected - Cumulative Actual - Cumulative

Source: Project Administration Memorandum of the Tranche 3, and ADB’s Loan Financial Information System

Appendix 8 49

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Assessment of compliance of covenants for Loans 2299, 2300 (PFR 1), Loan 3351 (PFR4), and Loan 2841 (PFR 2) are covered in the project completion reports of Tranche 1 and 4, and Tranche 2 respectively. The following Table provides update on compliance of the covenants related to Tranche 3.

Covenant Reference Status A. In Loan Agreement The proceeds of the Loan shall be allocated and withdrawn in Section 3.02 – Complied with accordance with the provisions of Schedule 3 to this Loan Article III Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and ADB.

Except as ADB may otherwise agree, the Borrower shall Section 3.03 – Complied with procure, or cause to be procured, the items of expenditure to Article III be financed out of the proceeds of the Loan in accordance with the provisions of Schedule 4 to this Loan Agreement. ADB may refuse to finance a contract where any such item has not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

Except as ADB may otherwise agree, the Borrower shall cause Section 3.04 – Complied with all items of expenditure financed out of the proceeds of the Article III Loan to be used exclusively in the carrying out of the Project.

The Borrower shall cause the Project to be carried out with due Section 4.01 Complied with diligence and efficiency and in conformity with sound (a) – Article IV applicable technical, financial, business, and development practices.

In the carrying out of the Project and operation of the Project Section 4.01 Complied with facilities, the Borrower shall perform, or cause to be (b) – Article IV performed, all obligations set forth in Schedule 5 to this Loan Agreement and the Project Agreement.

The Borrower shall make available, or cause to be made Section 4.02– Complied with available, promptly as needed, and on terms and conditions Article IV acceptable to ADB, the funds, facilities, services, land and other resources, as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

The Borrower shall enable ADB's representatives to inspect Section 4.03 – Complied with the Project, the Goods and Works, and any relevant records Article IV and documents.

The Borrower shall take all actions which shall be necessary Section 4.04 – Complied with on its part to enable Punjab to perform its obligations under the Article IV Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

50 Appendix 8

Covenant Reference Status The Borrower shall exercise its rights under the Relending Section 4.05 Complied with Agreement in such a manner as to protect the interests of the (a) – Article Borrower and ADB and to accomplish the purposes of the IV, LA Loan

No rights or obligations under the Relending Agreement shall Section 4.05 Complied with be assigned, amended, or waived without the prior (b) – Article IV concurrence of ADB.

General

The procurement of Goods, Works and Consulting Services Para. 1, Complied shall be subject to and governed by the Procurement Schedule 4 Guidelines, and the Consulting Guidelines, respectively. Goods and Works

Except as ADB may otherwise agree, Goods and Works shall Para. 3, Complied with only be procured on the basis of the methods of procurement Schedule 4 set forth below: (a) International Competitive Bidding; and (b) Shopping.

The methods of procurement are subject to, among other Para. 4, Completed with things, the detailed arrangements and threshold values set Schedule 4 forth in the Procurement Plan. The Borrower may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan.

Condition for Award of Contract

PID shall not award any Works contract which involves Para. 5, Complied with environmental impact until: (a) the IEE has been approved by Schedule 4 ADB; and (b) PID has incorporated relevant provisions from the EMP into the Works contract.

PID shall not award any Works contract which involves Para. 6, Completed with involuntary resettlement impact until PID has prepared and Schedule 4 submitted to ADB the final LARP based on the Project’s detailed design, and obtained ADB’s clearance of such LARP.

Consulting Services

Except as ADB may otherwise agree, and except as set forth Para. 7, Complied with in the paragraph below, PID shall apply quality- and cost- Schedule 4 based selection for selecting and engaging Consulting Services.

PID shall recruit the individual consultants for external Para. 8, Complied with safeguard monitoring and independent auditing of Schedule 4 procurement activities in accordance with procedures acceptable to ADB for recruiting individual consultants.

Appendix 8 51

Covenant Reference Status Industrial or Intellectual Property Rights

(a) PID shall ensure that all Goods and Works procured Para. 9 (a), Complied with (including without limitation all computer hardware, Schedule 4 software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party.

(b) PID shall ensure that all contracts for the procurement of Para. 9 (b), Complied with Goods and Works contain appropriate representations, Schedule 4 warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph.

PID shall ensure that all ADB-financed contracts with Para. 10, Complied with consultants contain appropriate representations, warranties Schedule 4 and, if appropriate, indemnities from the consultants to ensure that the Consulting Services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.

ADB’s Review of Procurement Decisions

Contracts procured under international competitive bidding Para. 11, Complied with procedures and contracts for Consulting Services shall be Schedule 4 to subject to prior review by ADB, unless otherwise agreed LA between the Borrower and ADB and set forth in the Procurement Plan.

In the case of a contract for Goods or Works which is subject Para. 12, Complied with to ADB’s prior review, PID shall seek ADB’s prior approval of Schedule 4 any modification or waiver of the terms and conditions of the contract, including: (a) granting an extension of the stipulated time for completion of a contract for a period of 1 month or more, or which is likely to require an extension of the Loan Closing Date, and (b) increases in aggregate the original price by more than 5% (for the avoidance of doubt, such increase shall take into account any previous change under such contract).

In the case of a contract for Goods or Works which is subject Para. 13, Complied with to ADB’s post review, ADB shall review the required contract Schedule 4 modification or waiver and respond to the PID as soon as practicable, but not later than 1 month after the receipt of the required document.

PID shall provide to ADB copies of all time extensions, Para. 14, Complied with modifications or waivers to the contracts (including change Schedule 4 orders) within 1 month following amendment of the contract

52 Appendix 8

Covenant Reference Status Implementation Arrangements

The Borrower shall ensure that the Project is implemented in Para. 1, Complied with accordance with the detailed arrangements set forth in the Schedule 5 PAM. Any subsequent change to the PAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the PAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.

Governance and Anticorruption

The Borrower shall (a) comply with ADB’s Anticorruption Para. 2, Complied with Policy (1998, as amended to date) and acknowledges that Schedule 5 ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Project; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.

B. In Project Agreement (a) Punjab shall cause PID to carry out the Project with due Section 2.01, Complied with diligence and efficiency, and in conformity with sound Article II applicable technical, financial, business, and development practices.

(b) In the carrying out of the Project and operation of the Project facilities, Punjab shall cause PID to perform all obligations set forth in the Loan Agreement to the extent that they are applicable to PID.

Punjab shall, or shall cause PID to, make available, promptly Section 2.02, Complied with as needed, and on terms and conditions acceptable to ADB, Article II the funds, facilities, services, land and other resources as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

(a) In the carrying out of the Project, Punjab shall cause PID Section 2.03, Complied with to employ competent and qualified consultants and Article II contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

(b) Except as ADB may otherwise agree, Punjab shall cause PID to procure all items of expenditures to be financed out of the proceeds of the Loan in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where any such item has not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

Appendix 8 53

Covenant Reference Status Punjab shall cause PID to carry out the Project in accordance Section 2.04, Complied with with plans, design standards, specifications, work schedules Article II and construction methods acceptable to ADB. Punjab shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

(a) Punjab shall cause PID to take out and maintain with Section 2.05, Not complied. responsible insurers, or make other arrangements Article II No insurance of satisfactory to ADB for, insurance of Project facilities to project facilities such extent and against such risks and in such amounts carried out. as shall be consistent with sound practice. This covenant is difficult to be complied within Pakistan where insurance of public assets, particularly vehicles, equipment, and infrastructure facilities is not a normal practice of the borrower. This should have been taken into account during project processing or a waiver should have been requested during the implementation which was not done. However, the partial or non-compliance of the covenants as discussed above, did not negatively affected project performance

(b) Without limiting the generality of the foregoing, Punjab Complied with undertakes to insure, or cause to be insured, the Goods to be imported for the Project against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.

Punjab shall cause PID to maintain, or cause to be maintained, Section 2.06, Complied with records and accounts adequate to identify the items of Article II expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

54 Appendix 8

Covenant Reference Status (a) ADB and Punjab shall cooperate fully to ensure that the Section 2.07, Complied with purposes of the Loan will be accomplished. Article II

(b) Punjab shall cause PID to promptly inform ADB of any Complied with condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the Relending Agreement, or the accomplishment of the purposes of the Loan.\ (c) ADB and Punjab shall from time to time, at the request of Complied with either party, exchange views through their representatives with regard to any matters relating to the Project, Punjab, PID and the Loan.

(a) Punjab shall cause PID to furnish to ADB all such reports Section 2.08, Complied with and information as ADB shall reasonably request Article II concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of PID; and (v) any other matters relating to the purposes of the Loan.

(b) Without limiting the generality of the foregoing, Punjab shall Complied with cause PID to furnish to ADB periodic reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the period under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following period.

(c) Promptly after physical completion of the Project, but in any Complied with delay of event not later than 3 months thereafter or such later date about three months as ADB may agree for this purpose, Punjab shall cause PID to prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by Punjab of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

(a) Punjab shall cause PID to (i) maintain separate accounts Section 2.09, Complied with and records for the Project; (ii) prepare annual financial Article II statements for the Project in accordance with accounting principles acceptable to ADB; (iii) have such financial statements for the Project audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international standards for auditing or the national equivalent acceptable to ADB; (iv) as part of each such audit, have the auditors prepare a report (which

Appendix 8 55

Covenant Reference Status includes the auditors’ opinion on the financial statements, the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreement as well as on the use of the procedures for the imprest account(s) and statement of expenditures) and a management letter (which sets out the deficiencies in the internal control of the Project that were identified in the course of the audit, if any); and (v) furnish to ADB, no later than 6 months after the close of the fiscal year to which they relate, copies of such audited financial statements, audit report and management letter, all in the English language, and such other information concerning these documents and the audit thereof as ADB shall from time to time reasonably request.

(b) ADB shall disclose the annual audited financial statements Complied with for the Project and the opinion of the auditors on the financial statements within 30 days of the date of their receipt by posting them on ADB’s website. (c) Punjab shall cause PID to enable ADB, upon ADB's Complied with request, to discuss the financial statements for the Project and its financial affairs where they relate to the Project with the auditors appointed by PID pursuant to subsection (a)(iii) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB. This is provided that such discussions shall be conducted only in the presence of an authorized officer of PID, unless PID shall otherwise agree.

Punjab shall cause PID to enable ADB's representatives to Section 2.10, Complied with inspect the Project, the Goods and Works and any relevant Article II records and documents.

(a) Punjab shall cause PID at all times to conduct its Section 2.11, Complied with operations in accordance with sound applicable Article II administrative, financial, engineering, environmental, social, maintenance and operational, and irrigated agriculture development practices, and under the supervision of competent and experienced management and personnel. (b) Punjab shall cause PID at all times to operate and maintain Not yet due. its plants, equipment and other property as they relate to Will become from July the Project, and from time to time, promptly as needed, 2018 onward, due make all necessary repairs and renewals thereof, all in upon completion of all accordance with sound applicable technical, financial, works. business, development, operational and maintenance practices.

Except as ADB may otherwise agree, Punjab shall cause PID Section 2.12, Complied with not to sell, lease or otherwise dispose of any of its irrigation Article II and water resources assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice Punjab’s ability to perform satisfactorily any of its obligations under this Project Agreement.

56 Appendix 8

Covenant Reference Status Except as ADB may otherwise agree, Punjab shall cause PID Section 2.13, Complied with to apply the proceeds of the Loan to the financing of Article II expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all items of expenditures financed out of such proceeds are used exclusively in the carrying out of the Project.

Except as ADB may otherwise agree, Punjab shall duly Section 2.14, Complied with perform all its obligations under the Relending Agreement, and Article II shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Relending Agreement.

Implementation Arrangements

Punjab shall cause PID to ensure that the Project is Para 1, Complied with implemented in accordance with the detailed arrangements Schedule to set forth in the PAM. Any subsequent change to the PAM shall Project become effective only after approval of such change by the Agreement Borrower and ADB. In the event of any discrepancy between (PA) the PAM and this Project Agreement, the provisions of this Project Agreement shall prevail.

Environment

Punjab shall cause PID to ensure that the preparation, design, Para 2, Complied with construction, implementation, operation and decommissioning Schedule to of the Project and all Project facilities comply with (a) all PA applicable laws and regulations of the Borrower relating to environment, health, and safety; (b) the Environmental Safeguards; (c) the EARF; and (d) all measures and requirements set forth in the respective IEE and EMP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

Land Acquisition and Involuntary Resettlement

Punjab shall, or shall cause PID to, ensure that all land and all Para 3, Complied with rights-of-way required for the Project and all Project facilities Schedule to are made available to the Works contractor in accordance with PA the schedule agreed under the related Works contract and all land acquisition and resettlement activities are implemented in compliance with (a) all applicable laws and regulations of the Borrower relating to land acquisition and involuntary resettlement; (b) the Involuntary Resettlement Safeguards; (c) the LARF; and (d) all measures and requirements set forth in the LARP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

Without limiting the application of the Involuntary Resettlement Para 4, Complied with Safeguards, the LARF or the LARP, Punjab shall cause PID to Schedule to ensure that (a) no land shall be acquired for the purposes of PA the Project under the emergency acquisition provisions of the

Appendix 8 57

Covenant Reference Status Borrower’s Land Acquisition Act (1984), as amended, and (b) no physical or economic displacement takes place in connection with the Project until: (i) compensation and other entitlements have been provided to affected people in accordance with the LARP; and (ii) a comprehensive income and livelihood restoration program has been established in accordance with the LARP.

Indigenous Peoples

Punjab shall cause PID to ensure that the Project does not Para 5, Complied with have any indigenous peoples impacts within the meaning of Schedule to the Safeguard Policy Statement. In the event that the Project PA does have any such impact, Punjab shall cause PID to take all steps required to ensure that the Project complies with the applicable laws and regulations of the Borrower and the Safeguard Policy Statement.

Human and Financial Resources to Implement Safeguards Requirements

Punjab shall, or shall cause PID to, make available necessary Para 6, Complied with budgetary and human resources to fully implement the EMP Schedule to and the LARP. PA

Safeguards – Related Provisions in Bidding Documents and Works Contracts

Punjab shall cause PID to ensure that all bidding documents Para 7, Complied with and contracts for Works contain provisions that require Schedule to contractors to: PA

(a) comply with the measures and requirements relevant to the contractor set forth in the IEE, the EMP and LARP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set out in a Safeguards Monitoring Report;

(b) make available a budget for all such environmental and social measures;

(c) provide PID with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP or the LARP;

(d) adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and

58 Appendix 8

Covenant Reference Status (e) fully reinstate pathways, other local infrastructure, and agricultural land to at least their pre-project condition upon the completion of construction.

Safeguards Monitoring and Reporting

Punjab shall cause PID to do the following: Para 8, Complied with Schedule to (a) submit semiannual Safeguards Monitoring Reports to PA ADB and disclose relevant information from such reports to affected persons promptly upon submission;

(b) if any unanticipated environmental and/or social risks and impacts arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP or the LARP, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan;

(c) no later than six months after the Effective Date, engage qualified, experienced and independent external experts or qualified NGOs under a selection process and terms of reference acceptable to ADB, to monitor implementation of each LARP, verify information relevant to the LARP produced through the Project monitoring process (including facilitating the carrying out of any verification activities by such external experts) and carry out post implementation evaluation of each LARP in accordance with the LARF; and

(d) report any actual or potential breach of compliance with the measures and requirements set forth in the EMP or the LARP promptly after becoming aware of the breach.

Prohibited List of Investments

Punjab shall cause PID to ensure that no proceeds of the Loan Para 9, Complied with are used to finance any activity included in the list of prohibited Schedule to investment activities provided in Appendix 5 of the SPS. PA

Health and Labor Standards

Punjab shall cause PID to ensure that all contractors: Para 10, Complied with Schedule to (a) comply with all laws and mandated provisions on labor, PA health, safety, sanitation and working conditions;

(b) use their best efforts to employ women and local people negatively affected by, or living in the vicinity of, the Project;

Appendix 8 59

Covenant Reference Status (c) disseminate information at worksites and campsites for those employed during construction on (i) the risks of sexually transmitted diseases and HIV/AIDS and (ii) the prevention of trafficking of women and children;

(d) are required not to differentiate between men and women’s wages or benefits for work of equal value;

(e) provide accommodation to construction workers at campsites during the construction period and ensure that all work sites and campsites are safe for all employees, service providers, the public and road users;

(f) eliminate all forms of forced or compulsory labor

(g) allow freedom of association and the right of assembly; and

(h) abstain from engaging persons below the legally employable age in Pakistan.

Operation and Maintenance (O&M)

Punjab shall ensure that adequate funds are allocated in its Para 11, Complied with. annual budgets and made available during Project Schedule to implementation and each fiscal year thereafter for the O&M of PA The GoPb has the Project facilities until such time that the farmer organization assured to provide and area water board responsible for the Project facilities adequate O&M funds become financially self-sustaining. Punjab shall further ensure post project that (i) an independent assessment and verification of the completion period. O&M works and (ii) an independent audit of the O&M expenditures, in each case is carried out annually, the expenses for which will be borne by Punjab. Governance and Anticorruption

Punjab shall, and shall cause PID to, (a) comply with ADB’s Para 12, Complied with Anticorruption Policy (1998, as amended to date) and Schedule to acknowledge that ADB reserves the right to investigate PA directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Project; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.

13. Punjab shall, and shall cause PID to, ensure that:

(a) the anticorruption provisions acceptable to ADB are Para 13, Complied with included in all bidding documents and contracts, including Schedule to provisions specifying the right of ADB to audit and PA examine the records and accounts of PID and all contractors, suppliers, consultants, and other service providers as they relate to the Project; and

60 Appendix 8

Covenant Reference Status (b) an independent audit of procurement activities is carried out at least twice during the implementation of the Project.

Punjab shall cause PID to use its existing website to present Para 14, Partly complied with. A financial statements and track procurement contract awards, Schedule to less informative and include information on, among other things, the list of PA website is maintained participating bidders, name of winning bidders, basic details with incomplete on bidding procedures adopted, amounts of the contracts information as awarded, the list of goods and/or services purchased, and their required. However, all intended and actual utilization. information as desired in the covenant is not put in the website. ADB = Asian Development Bank, EARF = environment and resettlement framework, EMP = environmental management plan, IEE = initial environmental examination, LA = loan agreement, LARP = land acquisition and resettlement plan, NGO = non-government organization, O&M = operations and maintenance, PA = project agreement, PAM = project administration manual, PID = Punjab Irrigation Department, SPS = safeguard policy statement, Source: Asian Development Bank

Appendix 9 61

ECONOMIC REEVALUATION A. Introduction

1. The economic analysis for Tranche 3 of the investment program was undertaken according to Asian Development Bank (ADB) guidelines and describes the economic rationale for public intervention.36 The analysis quantifies the benefits and costs of the investment in Pakpattan Canal and Suleimanki Barrage Improvement Project (PCSBIP) in economic terms. A financial analysis was not conducted as there are no productivity improvements associated with project, and consequently no direct increases in farm incomes measurable from impacts such as improved crop yields. The economic analysis measures the net worth of the project to the country. Financial values are converted to economic values by removing the effects of government intervention and market distortions. The analysis reports the key investment criteria; economic internal rate of return (EIRR), economic net present value (ENPV), and economic benefit-cost ratio (EBCR).

2. Methodology at appraisal in 2012 and completion in 2018 remains the same. The revaluation confirms that the overall project investment remains economically viable and ensures elimination of the income foregone associated with a barrage and canal failure. Two scenarios were compared to determine the economic net benefits of the investment program: without-project and with-project. The analysis assumes that without the project the barrage will fail at some stage in the future, thereby resulting in lost agricultural income over the following several years plus incur additional capital and operating costs necessary to provide a temporary structure to restore irrigation supplies. The project will not increase agricultural production or productivity, with the primary benefit being the elimination of the income foregone associated with a barrage failure. However, these benefits are dependent upon the year of failure (due to discounting), which is unknown.

3. A risk analysis framework was used which accounts for variability in the time of barrage and canal failure without the project. A cumulative probability distribution was identified for the year of Suleimanki Barrage failure being – year (5, 10, 15, 20, 25, 30) and cumulative probability (1%, 10%, 40%, 80%, 90%, 100%). Pakpattan Canal suffers from occasional breaches in the upper, middle and lower reaches, with differing agricultural effects. For the without-project scenario the probabilities of breaches in each reach increase from year 1 to year 30 as follows: (i) upper reach – 1 in 100 to 1 in 50 years; and (ii) middle reach – 1 in 30 to 1 in 5 years; (iii) lower reach – 1 in 30 to 1 in 5 years. Under the with-project scenario the probability of barrage failure and breaches of the canal are zero. A scalar is included to reflect uncertainty in the agricultural benefits from reducing leakage losses from the canal and barrage, with a triangular probability distribution being adopted with a minimum, median and maximum (0.6, 0.8, 1.0). The project capital costs were also treated as a random variable, with a capital cost scalar included represented by the triangular probability distribution values for minimum, median and maximum (1.0, 1.1, 1.3).

4. Failure of the Suleimainki Barrage will affect the areas serviced by Pakpattan, Fordwah and Eastern Siddiqui Canals – a combined crop area of 1,532,717 ha (3,787,345 acre). In the year following the barrage failure it is assumed that no water can be supplied to rabi crops. However, due to emergency measures, some water will be available to the following kharif season crops. In subsequent years, more water will become available until full production is restored within 7 years. The temporal scalars for rabi and kharif crops are given in Table A9.1. However,

36 Project 1 and Project 2 Economic Reevaluation is provided in the respective Project Completion Reports.

62 Appendix 9

barrage failure does not mean all crops will be affected as about 50% of the irrigable area uses groundwater. Future crop areas were assumed to be the same as current areas for kharif season (697,957 ha), rabi season (790,480 ha), and perennial and semi-perennial crops such as sugarcane and orchards 44,218 ha). Crop yields were assumed to remain at current levels. Economic gross margins were derived for each crop type.

Table A9.1: Crop Area Scalar and Emergency Costs Associated with Barrage Failure

Year after barrage Rabi crop Kharif crop Barrage emergency repair Failure scalar scalar costs (PRs million) 1 1.00 0.50 500 2 0.35 0.35 30 3 0.20 0.20 30 4 0.20 0.20 30 5 0.20 0.20 30 6 0.10 0.10 30 7 0.00 0.00 0 PRs = Pakistan rupee Source: Asian Development Bank estimates.

5. Barrage failure can occur naturally due to the high degree of erosion under the existing structure, or from a severe flood. If the failure is associated with a flood event then flooding losses of the kharif crop area (20%) can be expected.

6. Given the poor condition of the Pakpattan Canal and its associated structures, there is also a risk of failure of infrastructure (e.g. bank erosion/collapse) without refurbishment. This scenario would result in limited supplies of irrigation water being applied to rabi and kharif crops for the following season until emergency measures were able to restore supplies. Consequently, there would be an opportunity cost in terms of reduced agricultural income and increased repair costs. It is assumed that 20% of the rabi and kharif crops will be affected in the year following failure. Crop areas are expected to be restored following emergency repairs, which is estimated to cost Rs500 million.

7. The life of the project is 30 years; a discount rate of 12 percent was used for the economic analysis. The analysis uses shadow pricing and standard conversion factors to convert the financial costs and benefits into economic terms based on constant May 2018 prices.

8. Sensitivity analysis was not undertaken as the variability in key parameters was implicitly included in the risk analysis framework. The analysis was solved by Monte Carlo simulation (10,000 iterations), and the results presented in mean, standard deviation and percentiles.

B. Economic Values

9. The average exchange rate between $US and Pakistan PRs used was 115.59.37 A standard conversion factor (SCF) is used to convert domestic prices to economic equivalent prices. The SCF is approximated by the weighted average of import and export tariffs with subsidies excluded. An average SCF for the 4-year period 2012-13 to 2015-16 was obtained by the formula SCF = (M+X) / [(M+Tm)-(X-Tx)] where M is CIF value of imports, X is FOB value of exports, Tm is net value of taxes on imports, Tx is net value of taxes on exports. The calculated average SCF was 0.90.

37 Source: Asian Development Bank, Manila

Appendix 9 63

10. The economic analysis requires all inputs in the project to be charged to the opportunity cost. This applies to both skilled and unskilled labor. A shadow wage rate (SWR) factor is required to account for the fact that market wages for unskilled labor may not reflect the true labor opportunity cost due to under-employment within the economy. An average SWR of 0.78 has been estimated from SWR values for period 2012 to 2016.

11. In Pakistan there is little underemployment of skilled workers. Therefore, the market for skilled labor is likely to be in equilibrium and the opportunity cost is reflected by the domestic market skilled labor rate. Specific conversion factors are required for the adjustment of various non-traded inputs required in project costs. A specific conversion factor for cement of 0.6 was used in the calculation of investment costs.

12. Border prices of tradable commodities (e.g., wheat, rice, cotton) were computed from the latest available World Bank Commodity forecasts (June 2018). Border prices of major inputs (e.g., fertilizers, pesticides) were also derived from the same basis. All border prices were adjusted to account for transport and handling between port and market, and from market to farm- gate. The resulting values were expressed in terms of the domestic currency. The financial and economic values used in the analyses are given in Table A9.2.

Table A9.2: Financial and Economic Values

Item Unit Financial value Economic value

Crops: Cottona PRs/kg 78.83 82.73 Ricea PRs/kg 37.86 65.33 Maize PRs/kg 23.02 20.69 Chilli PRs/kg 96.61 86.86 Sesamum (oilseed) PRs/kg 100.68 90.52 Melons PRs/kg 50.25 45.18 Kharif fodder PRs/kg 4.77 4.28 Moong (pulse) PRs/kg 85.85 77.19 Wheata PRs/kg 28.55 30.68 Potatoes PRs/kg 24.68 22.19 Rabi oilseeds PRs/kg 57.06 51.35 Rabi fodder PRs/kg 4.49 4.04 Sugarcanea PRs/kg 3.77 4.16 Mango PRs/kg 49.36 44.38 Citrus PRs/kg 61.54 55.33 Fertilizers: N--(UREA) a PRs/kg 60.87 68.13 P--(DAP) a PRs/kg 139.13 115.70 Potasha PRs/kg 106.00 87.72 aborder prices used. kg = kilogram; PRs = Pakistan rupee Source: Asian Development Bank estimates.

13. The project economic costs were estimated as follows: Pakpattan Canal – PRs2,671 million ($23.1 million); Suleimanki Barrage – PRs3,089 million ($26.7 million); total investment cost PRs5,760 million ($49.8 million). The annual maintenance costs were estimated as Pakpattan Canal – PRs26.73 million ($0.23 million); Suleimanki Barrage – PRs30.89 million ($0.27 million); total maintenance cost PRs57.6 million ($0.50 million).

64 Appendix 9

C. Economic Analysis

14. The economic analysis derived a mean EIRR of 26.5% (standard deviation 7.6), mean ENPV of PRs16,145 million (standard deviation 6,187), and mean EBCR of 4.4:1 (standard deviation 1.3). The mean results suggest that the project is economically viable; however, they do not reflect the full variability in the outcomes. The percentiles resulting from the model simulation in Table A9.3 indicate the probability of achieving certain values for the economic performance criteria. The EIRR ranges from 21.1% (10th percentile) to 32.6% (90th percentile). The minimum estimated EIRR exceeded the 12% threshold, indicating the project has a high probability of being economically viable.

Table A9.3: Results of Economic Risk Analysis

Percentile EIRR (%) ENPV EBCR (PRs million) 0% 17.6 5,290 2.0 10% 21.1 9,590 3.0 20% 22.1 11,384 3.4 30% 23.0 12,591 3.6 40% 23.8 13,745 3.9 50% 24.8 14,939 4.2 60% 25.9 16,303 4.5 70% 27.3 18,067 4.8 80% 29.1 20,223 5.3 90% 32.6 23,688 6.1 100% 110.7 52,077 12.2 EBCR = economic benefit-cost ratio; EIRR = economic internal rate of return; ENPV = economic net present value; PRs = Pakistan rupee. Source: Asian Development Bank estimates.

15. At appraisal, project implementation period terminal year was 2016 and loan closing was 2017. The delay in project implementation led to extension of loan until MFF completion date on 30 September 2017 however works continued in 2018. The benefits at appraisal were envisaged to accrue in 2016 that is revised to year 2018 in revaluation. Delayed benefits reduced the EIRR. A comparison is provided in Table A9.4.

Table A9.4: Comparison of Economic Analysis at Appraisal and Completion

At Appraisal At Completion (PCR) Indicators ENPV ENPV EIRR % EBCR EIRR % EBCR (Rs M) (Rs M) Mean 29.1 15,650 3.9 26.5 16,145 4.4 Standard Deviation 10.9 4,426 0.8 7.6 6,187 1.3 EBCR = expected cost to benefit ratio, EIRR = economic internal rate of return, ENPV = economic net present value. Source: Asian Development Bank estimates.