ReportNo. 521a-Pti FILE Copy Philippines RLASEQ FL COpy Appraisalof the TarlacIrrigation Public Disclosure Authorized SystemsImprovement Project December3, 1974 EastAsia and PacificProjects Department Irrigationand Area Development Division Not for PublicUse Public Disclosure Authorized Public Disclosure Authorized Document of the InternationalBank for Reconstructionand Development Public Disclosure Authorized InternationalDevelopment Association Thisreport was preparedfor officialuse only by the BankGroup. it may nol be published,quoted or citedwithout Bank Group authorization The Bank Group does not accept responsibilityfor the accuracyor completenessof the report. CURRENCYEQUIVALENTS US$1.00 = Pesos (t)6.72 1 1.00 = US$0.149 WEIGHTS AND MEASURES - METRIC SYSTEM 1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.62 miles 1 square kilometer (km2) 0.3886 square miles 1 meter (m) = 39.37 inches 1 square meter (m2 ) = 10.76 square feet 1 cubic meter (m3 ) 35.31 cubic feet 1 million cubic meters (Mm3) = 810.7 acre feet 1 millimeter (mm) = 0.039 inches 1 kilogram (kg) = 2.2 pounds 1 cavan (paddy) = 50 kg 20 cavans = 1 metric ton INITIALS AND ACRONYMS APIP Aurora Penaranda Irrigation Project BAE Bureau of AgriculturalExtension BPI = Bureau of Plant Industry CRIS = Camiling River Irrigation System DAR = Department of Agrarian Reform NIA = National IrrigationAdministration NISIS = National IrrigationSystems ImprovementStudy PDD Project DevelopmentDivision SM-ORIS San Mfiguel-O'Donnell River Irrigation System TRIS = Tarlac River Irrigation System UPRP = Upper Pampanga River Project PHILIPPINES APPRAISALOF THE TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS .....................- i I. INTRODUCTION... .... 1 II. BACKGROUND.. 1 General. ....................... , 1 The Agricultural Sector.. 2 The Critical Role of Water Development ....... P.... 2 Project Formulation . .e*...... 3 III. THE PROJECT AREA .................... 4 General ..................... 4 '.limate ........ ,. ...... 4 Topography, Drainage and Soils .... 5 Land Tenure and Farm Size . 5 Existing Irrigation Facilities . ......... 7 AgriculturalProduction .......................... 7 Transportation 7 IV. THE PROJECT...................................... 8 Project Works . .... ........ ... 8 Water Supply, Demand and Quality . 9 Status of Engineering ...................... ..., 10 Groundwater Pilot Project ....... 11 Water Management Training ... 12 National Irrigation Systems Improvement Study .... 12 Cost Estimates ... 13 Financing ... 14 Procurement . ................,.... .,. 14 Disbursements . .................. 15 Accounts and Audit ... 15 EnvironmentalEffects .. ....................15 This report is based on the findings of an appraisalmission composed of Messrs.E.G. Giglioli, R.L.P. Harris (Bank), S.J. Baker and H.R. MacDonald (Consultants). -2- V. ORGANIZATIONAND MANAGEMENT ...........................15 Project Management .............. ........ 15 Supporting AgriculturalServices ... ....... 17 Recovery of Cost ............... .. ........ 18 P- VI. PRODUCTION,MARKET PROSPECTS, PRICES AND FARM INCONES .................................................19 Production .... ...................................19 Market Prospects .................................20 Prices ... .......................................20 Farm Incomes .. ..................................20 VII. BENEFITS AND JUSTIFICATION ...... .....................21 VIII. AGREEMENTSREACHED AND RECOMMENDATION.. ..............22 ANNEXES 1. Central Luzon Irrigation Development 2. Climatological Data 3. Land Tenure and Reform 4. Project Works 5. Water Supply, Demand and Quality 6. Groundwater Pilot Project 7. Water Management Training 8. National Irrigation Systems Improvement Study 9. Cost Estimates 10. Equipment List 11. Schedule of Expenditure and Disbursements 12. Organization and Management 13. Supporting Agricultural Services 14. Present and Projected Cropping Patterns and Production 15. Marketing and Prices 16. Crop and Farm Budgets 17. Farm Labor Analysis 18. Economic Analysis CHARTS Implementation Schedule No. 8923 Proposed Organization for Project Construction No. 8921 Proposed Organization for Operation and MaintenanceNo. 8920 Proposed Organization for Loan Projects CoordinationNo. 8922 Proposed Cropping Calendars No. 8919 - 3 - MAPS Central Luzon Basin No. 10769R Project Area: SM-ORIS and TRIS No. 11137 Project Area: CRIS No. 11138 PHILIPPINES APPRAISAL OF THE TARLACIRRIGATION SYSTEMSIMPROVEMENT PROJECI SUMMARY i. The Government of the Philippines has requested Bank Group assistance to carry out the Tarlac Irrigation Systems Improvement E'roject located in Central Luzon. The project consists of the rehabilitation of three existing irrigation systems now serving a total area of 21,000 ha and the construction of new systems on some 13,000 ha. The project: also provides for a groundwater pilot project to assess the technical and economic feasibility of supplementing surface irrigation with groundwater - and a training program for water management staff. In addition the project includes provision for carrying out a study of the nationaL irriga- tion systems to prepare a pipeline of system improvement projects. ii. According to the Bank's Agriculture Sector Survey, an annual total of 50,000 ha of newly constructed or rehabilitated irrigation de- velopment on rice lands would have to be carried out over the remaiLnder of the decade to allow the country to achieve foodgrains self-suff:iciency. The modern high yielding rice varieties demand improved water control for optimum results. The proposed project would be the third in a ser:Les of Bank-assisted projects aimed at improving irrigation for rice cropping in Central Luzon, the largest rice producing region in the Philipp:Lnes. The first was the Upper Pampanga River Project (Loan 637-PH) and the second the Aurora-Penaranda Irrigation Project (Loan/Credit 984/472-PH). To date all Bank assisted irrigation projects in the Philippines have been aimed at providing greater water supplies for dry season irrigation by building storage dams. The proposed project would be the first Bank-assisted project to improve and expand existing run-of-the-river systems without providing additional water from storage. iii. Total project cost, including the groundwater and training elements together with the systems improvement study, is estimated at iP 228.5 million (US$ 34.0 million) of which US$12.7 million, or approximately 37%, would be in foreign exchange. The Bank would finance the foreign exchange com- ponent as well as US$4.3 million of local currency requirements. Civil works costing US$ 16.2 million would be carried out by contract. Because of their nature the works would not be suitable for international competi- tive bidding. The total cost of equipment to be put to international competitive bidding would be US$3.5 million. The Government's executing agency, the National Irrigation Administration (NIA), would employ consult- ants to provide general guidance and expertise and to assist with the training required for the groundwater pilot project, the systems improvement study and the water management training program. The project would take four years to execute. - ii - iv. The Governmentof the Philippineswould be the borrower and NIA would be the executing agency for the project. All elements of the project would be implementedby the Upper Pampanga River Project (UPRP) office. The UPRP is well staffed with competent personnel and with the employment of consultantswould be able to implement the project successfully. An Agricultural DevelopmentCoordinating Council (ADCC) would be established in the project area to ensure coordination of the Government agencies pro- viding agriculturalsupporting services to the farmers. v. At full development,nine years after project commencement,annual paddy production from the project area is expected to reach 155,000 tons compared with a current level of production of 94,000 tons. The increased productionwould make a contributionto the national campaign for self- sufficiency by providing enough rice to feed a third of a million people per year. vi. Under the Government'sagrarian reform program share cropping has been declared illegal and title to land in holdings of 24 ha or more is now being transferred to the cultivators. When the transfer is completed, ten- tatively the end of 1974, two thirds of the project area lands will be farmed by owner-operatorsand the rest by leasehold tenants of small landlords. The project area is cultivatedby some 17,700 farm familiesworking an average unit of 1.9 ha. The project would result in rises in annual per capita in- come on an average farm size from about US$95 at present to US$135 at full agriculturaldevelopment in 1983. These levels of income would still be low in comparisonwith the national average. vii. The project would require a tighter cropping timetable to allow for irrigationover a larger area and would not provide for any significant increase in cropping intensity or labor requirements. The economic rate of return of the project is expected to be about 15%. The rate of return is sensitive to increases in cost and delays in benefits. However, even under extremely adverse conditions,the rate of return would not fall below 11%. viii. The proposed project is suitable for a Bank Loan of US$17.0 million for a period of 25 years, including a 7-year grace period. The borrower would be the Republic of the Philippines. PHILIPPINES APPRAISAL OF