Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 60720-NP

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 14.9 MILLION (US$23.6 MILLION EQUIVALENT)

AND A

PROPOSED GRANT

IN THE AMOUNT OF SDR 12.3 MILLION (US$19.4 MILLION EQUIVALENT)

TO

NEPAL

FOR A

MODERNIZATION OF RANI JAMARA KULARIYA IRRIGATION SCHEME – PHASE I

June 3, 2011

Agriculture and Rural Development Sector

Sustainable Development Department

South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their

official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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ii

CURRENCY EQUIVALENTS

(Exchange Rate Effective February 2011)

Currency Unit = Nepalese Rupee (NPR)

NPR 72.00 = US$1

FISCAL YEAR

July 16 – July 15

ABBREVIATIONS AND ACRONYMS

ACP Agriculture Contact Point IPR Implementation Progress Report

ADB Asian Development Bank ISN Interim Strategy Note

ASC Agriculture Service Center MIS Management Information System

AWPB Annual Work Program and Budget MLE Monitoring, Learning, and Evaluation

CCA

DADO

Cultivable Command Area

District Agricultural Development

MoAC

MoF

Ministry of Agriculture and Cooperatives

Ministry of Finance

Office MoI Ministry of Irrigation

DoA Department of Agriculture NPC National Planning Commission

DoI Department of Irrigation O&M Operation and Maintenance

DTCO District Treasury Controller Office PEFA Public Expenditure and Financial

EMP

FFS

Environmental Management Plan

Farmers Field School

PFM

Accountability

Public Financial Management

FMIS Farmer Managed Irrigation System PIM Project Implementation Manual

GAAP Governance and Accountability PIO Project Implementation Office

Action Plan PMT Project management Team

GDP Gross Domestic Product PSC Project Steering Committee

GoN Government of Nepal RJK Rani Jamara Kulariya

IDA

IEE

International Development Association

Initial Environmental Examination

RJKIS Rani, Jamara and Kulariya Irrigation

Scheme

IPM Integrated Pest Management SA Social Assessment

IWMI International Water Management

Institute

SIMF

VDC

Social Impact Management Framework

Village Development Committee

IWRMP Irrigation and Water Resources

Management Project

WUA Water Users Association

Regional Vice President: Isabel M. Guerrero

Country Director: Susan G. Goldmark

Sector Director:

Sector Manager:

John Henry Stein

Simeon Kacou Ehui

Task Team Leader: Joop Stoutjesdijk

iii

NEPAL

Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

Table of Contents

I. Strategic Context ................................................................................................................................. 1

A. Country Context ........................................................................................................................... 1

B. Sectoral and Institutional Context ................................................................................................ 1

C. Higher Level Objectives to which the Project Contributes .......................................................... 3

II. Project Development Objectives ......................................................................................................... 5

III. Project Description ........................................................................................................................... 6

A. Project Components ..................................................................................................................... 6

B. Project Financing .......................................................................................................................... 8

C. Lessons Learned and Reflected in the Project Design ................................................................. 9

IV. Implementation .............................................................................................................................. 10

A. Institutional and Implementation Arrangements ........................................................................ 10

B. Results Monitoring and Evaluation ............................................................................................ 12

C. Sustainability .............................................................................................................................. 13

V. Appraisal Summary .......................................................................................................................... 13

A. Economic and Financial Analysis .............................................................................................. 13

B. Technical .................................................................................................................................... 14

C. Financial Management ............................................................................................................... 14

D. Procurement ............................................................................................................................... 15

E. Social .......................................................................................................................................... 15

F. Environment ............................................................................................................................... 16

G. Safeguard policies ...................................................................................................................... 17

Annex 1: Results Framework and Monitoring.......................................................................................... 19

Annex 2: Detailed Project Description .................................................................................................... 25

Annex 3: Overall Project Implementation Arrangement ......................................................................... 32

Annex 4: Operational Risk Assessment Framework (ORAF) .................................................................. 46

Annex 5: Implementation Support Plan .................................................................................................... 52

Annex 6: Team Composition .................................................................................................................... 55

Annex 7: Governance and Accountability Action Plan ............................................................................ 56

Annex 8: Economic and Financial Analysis ............................................................................................. 64

iv

Annex 9: Safeguards ................................................................................................................................. 72

Annex 10: Statement of Loans and Credits .............................................................................................. 77

Annex 11: Country at a Glance ................................................................................................................. 78

Annex 12: Map IBRD No. 38521 ............................................................................................................. 80

v

NEPAL

MODERNIZATION OF RANI JAMARA KULARIYA IRRIGATION SCHEME - PHASE 1

PROJECT APPRAISAL DOCUMENT

SOUTH ASIA

SASDA

Date: June 3, 2011 Team Leader: Joop Stoutjesdijk

Country Director: Susan G. Goldmark

Sector Director: John Henry Stein

Sector Manager: Simeon Kacou Ehui

Sectors: Irrigation and drainage (76%); Flood

protection (15%); General agriculture, fishing

and forestry sector (9%)

Themes: Rural services and infrastructure

(76%); Water resource management (16%);

Decentralization (8%)

Project ID: P118179 Environmental category: Partial Assessment

Lending Instrument: Specific Investment Loan Joint IFC:

Joint Level:

Project Financing Data

[ ] Loan [X] Credit [X] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others:

Total Bank financing (US$m.): 43.00

Proposed terms:

Financing Plan (US$m)

Source Local Foreign Total

BORROWER/RECIPIENT 5.00 0.00 5.00

International Development Association

(IDA)

28.00 15.00 43.00

Local Communities 1.00 0.00 1.00

Total: 34.00 15.00 49.00

Borrower:

Ministry of Finance

Singhdurbar

Kathmandu

Nepal

Tel: 977-1-4-259820

vi

Implementing Agency:

Department of Irrigation

Jawlakhel

Kathmandu

Nepal

Tel: (977-1) 553-5382 Fax: (977-1) 553-7169

Estimated disbursements (Bank FY/US$m)

FY 12 13 14 15 16 17

Annual 1.20 9.20 14.80 12.80 4.40 0.60

Cumulative 1.20 10.40 25.20 38.00 42.40 43.00

Project implementation period: Start - October 1, 2011 End - September 30, 2016

Expected effectiveness date: October 1, 2011

Expected closing date: September 30, 2016

Does the project depart from the CAS in content or other significant respects? [ ]Yes [X] No

Does the project require any exceptions from Bank policies?

Have these been approved by Bank management?

[ ]Yes [X] No

[ ]Yes [ ] No

Is approval for any policy exception sought from the Board? [ ]Yes [X] No

Does the project include any critical risks rated “substantial” or “high”? [X]Yes [ ] No

Does the project meet the Regional criteria for readiness for implementation? [X]Yes [ ] No

Project development objective:

The project development objective of the Modernization of Rani Jamara and Kulariya Irrigation

Scheme – Phase 1 is to improve irrigation water delivery to, and management in, the command

area.

Project description:

Component 1 - Scheme Modernization will construct and modernize the main canal system,

including hydraulic structures, feeder channels, and river bank protection works, and upgrading

of village roads.

Component 2 - Strengthening Water Users Associations (WUA) will strengthen WUAs to

assume full responsibility for the management, operation, and maintenance of the modernized

infrastructure.

Component 3 - Agricultural Production Support will carry out a series of agriculture-based

activities in the project area to start narrowing the existing productivity gaps and enhance land

and water resource uses through demonstrations, farmer field schools, and other adaptive

processes.

Component 4 - Project Management will ensure effective project management and coordination,

and monitoring and evaluation and impact assessments.

vii

Which safeguard policies are triggered, if any?

Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.04); Indigenous Peoples

(OP/BP 4.10); Involuntary Resettlement (OP/BP 4.12); Forests (OP/BP 4.36); Projects on

International Waterways (OP/BP 7.50).

Significant, non-standard conditions, if any, for:

Board presentation:

None.

Loan/credit effectiveness:

None.

Covenants applicable to project implementation:

The Recipient shall, by no later than November 15, 2011, establish, and thereafter maintain, the

Project Steering Committee to be chaired by the Secretary of the Recipient‟s Ministry of

Irrigation, and to consist of senior representatives from the Recipient‟s Ministry of Finance,

Ministry of Agriculture and Cooperatives, Ministry of Forests and Soil Conservation, Ministry of

Environment, National Planning Commission, Department of Irrigation (DoI) and Department of

Agriculture to provide overall policy guidance.

The Recipient shall take all measures necessary to ensure that DoI shall adopt and maintain a

Project Implementation Manual, in form and substance satisfactory to the Association, consisting

of various schedules setting forth rules, methods, guidelines, standard documents and procedures

for the carrying out of the Project.

The Recipient shall ensure that the Project is carried out in accordance with the provisions of the

Governance and Accountability Action Plan.

The Recipient shall carry out the Project in accordance with the Environmental Management

Plan and the Social Impact Management Framework.

1

I. Strategic Context

A. Country Context

1. Nepal has largely an agrarian-based economy with low labor productivity. Agriculture

contributes 33 percent to the Gross Domestic Product (GDP) and it employs about 80 percent

of the rural labor force. The share of services and industry in GDP is 50 and 16 percent,

respectively, and their share of labor force is 8 and 3 percent, respectively. Civil conflict and

political uncertainty have affected Nepal‟s economy for well over a decade. Real GDP grew

between 2001 and 2006 on average about 2.7 percent per annum. Official estimates suggest

that real GDP grew by 4.6 percent in FY10 (Central Bureau of Statistics (CBS) Nepal, 2010),

with the per capita GDP at around US$560.

2. Despite the difficult political situation, the incidence of poverty fell nationally from 42

to 32 percent between 1995 and 2004 (CBS, 2005). More recent estimates show that since

2004 the national poverty rate has declined further by another 10 percentage points (World

Bank, 2010). However, the percentage of the population living on less than US$1.25 a day

remains high at 55 percent (Asian Development Bank (ADB), 2009). The incidence of poverty

in rural areas declined from 43 percent to 35 percent. The structure of income appears to have

changed during the past ten years, with the share of income from remittances, non-agricultural

entrepreneurial activities, wages, and property rising. Although average income growth rates

were high, inequality also increased (the Gini coefficient rose from 34.2 to 41.4 since 1995)

and geographic disparities became more pronounced. Nepal faces the dual challenges of

further accelerating domestic growth and sharing this growth more broadly across the

population.

B. Sectoral and Institutional Context

3. Agriculture has made only modest contributions to improved living standards during

the past decades, which is in large part due to the poor performance of the crop sector.

Therefore, a pressing priority in this regard is to improve agricultural productivity and foster

diversification towards high-value products to secure food security for a growing population

and improve rural incomes.

4. Nepal‟s rural population comprises mainly smallholder farmers and about 80 percent of

the rural population aged fifteen and above is engaged in agriculture. The level of income

from agriculture is low by international standards. Yields of the major cereal crops produced

in Nepal are still well below their potential in many areas and therefore need improvement.

Farmers are generally unable to benefit from existing modern technologies and inputs.

5. A study, jointly undertaken by the Asian Development Bank (ADB) and the

International Water Management Institute (IWMI), entitled “Pro-Poor Intervention Strategies

in Irrigated Agriculture in Asia” (2005), has confirmed that poverty incidence is lower in

irrigated than rainfed areas and that access to adequate and timely irrigation water reduces the

2

severity of poverty. Irrigated agriculture reduces poverty through: (i) increased food output

(through improved productivity); (ii) higher demand for employment; and (iii) higher real

income. A recent study (2010) by Michigan State University and the World Bank on “The

Impact of Irrigation on Agricultural Productivity: Evidence from India” shows that irrigation

has a strong and significant impact on land productivity, cropping intensities, and land prices.

The study also finds that the impact of irrigation on productivity increases with the quality of

irrigation. The study makes the case for continuing support for investments in improving both

access and quality of irrigation in India. Considering the similarities, the two studies show that

the development of irrigation in Nepal will continue to be critical to increasing agricultural

productivity, incomes, and rural livelihoods.

6. The Government of Nepal (GoN) has recognized the lack of intensive cropping,

inadequate supply and use of basic agricultural inputs such as fertilizer and improved seeds,

and problems with deteriorated and inefficient irrigation systems. Nepal‟s agricultural sector

has become increasingly vulnerable in recent years due to erratic monsoon rains. Farmers are

experiencing unreliable rainfalls, with both droughts and high intensity rainfall often occurring

in the same season. In this context, efficient and well managed irrigation systems are of

critical importance for regulated supply of irrigation water for transformation and growth of the

agricultural sector. Only by assuring effective water control and management systems will

farmers focus more on other complementary investments, such as use of improved agricultural

techniques and inputs, and improvements in cropping intensity, which will help in

transforming farming to more profitable levels.

7. Irrigation is thus a critical input into agriculture both during the monsoon season to

overcome periods of dry spells and during the dry season when rainfall is negligible. Irrigation

systems in Nepal fall under four distinct different categories: (1) traditional farmer managed

irrigation systems (FMIS) developed and managed by the communities; (2) a range of small to

large-scale surface systems developed with full or partial support of the government;

(3) government developed tube well irrigation schemes; and (4) individually owned and

operated tube wells and pumps, mostly utilizing shallow aquifers, streams, ponds, and dug

wells.

8. The strategy and vision for irrigation development and management in Nepal is

reflected in the Water Resources Strategy (2002), National Water Plan (2005), and the

Irrigation Development Vision and Action Plan (2006). The main vision described in the

strategy and plans is to integrate agriculture and irrigation development in order to realize the

full benefits from investment in irrigation and provide sustainable services to the agriculture

sector through well-operating and well-managed irrigation facilities, based on local resource

mobilization through a partnership of the users and the government. In particular, the

emphasis is on: provision of year-round irrigation services to increase the productivity of

irrigated agriculture and extending the cropping seasons; the importance of a service-oriented

management approach as a means for providing more efficient, reliable, and flexible water

services to farmers; and the progressive shifting of operation and maintenance (O&M) costs to

water users to enhance efficiency, equity, and sustainability.

3

9. Nepal has a long tradition of farmer-managed irrigation systems in the hills, mountains,

and the Terai. The FMISs cover about 70 percent of the 1.2 million ha of land with some form

of irrigation infrastructure in the country. The hill FMISs are generally small in size compared

to the medium to large irrigation systems in the Terai. A strong sense of ownership and

hierarchical management system exists in the FMISs. Water users associations (WUA) in

some form are in most cases directly associated with the management of irrigation systems.

They are accountable for O&M of the schemes, most of which is done through labor

contributions.

10. The improvement of irrigation services in the existing command areas of FMISs needs

to be addressed through a combination of both “hardware” and “software” solutions. The

former involves rehabilitating and modernizing existing irrigation and drainage infrastructure

to improve reliability of supply and expand the system of secondary and tertiary canals. The

latter requires the development of more efficient mechanisms for management of irrigation

systems up to the field level through a clear delineation of responsibilities between the

government and the WUAs that are in charge of delivering irrigation services to farmers.

There is also the need to pool funding through government and users contributions for O&M

and asset replacement over time.

C. Higher Level Objectives to which the Project Contributes

11. The project will contribute to the Borrower‟s over-arching objective of sustainable

economic growth and reduction of poverty, in part to be achieved through improved reliability

of water resources for irrigation and increased agricultural production. GoN has adopted an

approach paper for the Three Year Interim Plan (TYIP; 2010-13), and work on the Plan itself is

in progress. One of the major thrust areas of the approach paper is the transformation to more

productive agriculture, in part to be achieved by providing more reliable irrigation water for

farming.

12. The approach paper for TYIP (2010-13) emphasizes agriculture and foresees an

increase in the growth of agricultural GDP from the current 3.3 percent to 3.9 percent in 2013.

Activities to promote agriculture will be guided by the Government‟s long-term Agricultural

Development Plan and the National Agricultural Development Policy. The approach paper

sees agriculture as important for food security, employment generation, and poverty

alleviation. The Agricultural Development Plan recognizes the importance of irrigation in

terms of improving agricultural productivity and intends to increase irrigation coverage by 16

percent in the next three years.

13. The proposed project is well aligned with the World Bank‟s assistance to Nepal as

described in various strategy documents. The Bank‟s Interim Strategy Note (ISN) of 2009 is

organized around three pillars. The second pillar focuses on the productive sectors by laying

the foundation for sustainable and inclusive economic growth, including Agriculture and

Irrigation. The proposed project will ultimately contribute towards both the Borrower‟s and

4

the Bank‟s objectives of generating broad-based sustainable growth and poverty alleviation

through increasing the productivity of irrigated agriculture.

14. The irrigation sector in Nepal has received significant investments, both from

government and donor agencies. GoN consistently allocates around 3 percent of its annual

budget to the irrigation sector. So far the World Bank has during the past four decades

extended 13 credits totaling US$387 million and the ADB has extended nine credits totaling

US$160 million to the irrigation sector. Several other international and bilateral agencies, such

as the Saudi Fund, Organization of Petroleum Exporting Countries (OPEC) Fund, Kuwait

Fund, and the European Union (EU) have also providing assistance to the sector. The Bank is

currently assisting GoN with an IDA Grant of US$50 million and an Additional Financing

Credit of US$14.3 million for the Irrigation and Water Resources Management Project

(IWRMP), involving a combination of investments and institutional and policy reforms. The

Bank also provides broader agricultural sector support through the Project on Agriculture

Commercialization and Trade (PACT) and Rural Access and Infrastructure Development

Project (RAIDP).

15. Given the Bank‟s long-standing role in the development of Nepal‟s irrigation and water

resources sector, including in command area development and rehabilitation and modernization

of higher-order irrigation systems, as well as developing WUAs and transferring improved

agricultural technologies to farmers, there is strong GoN interest in the Bank‟s continued

engagement with irrigation projects in Nepal. The Bank‟s funds and knowledge for the further

development of one of the largest FMISs in the country, the Rani Jamara Kulariya Irrigation

Scheme (RJKIS), will be a next step in Bank support towards Nepal‟s development of the

irrigation and agriculture sectors and addressing food security aspects in one of the poorest

parts of the country. Bank support for this project will also help in building synergies with

other Bank operations mentioned above.

16. Bank support for the Modernization of the Rani Jamara Kulariya Irrigation Scheme is

proposed in two phases. Phase 1 (which is being discussed in this PAD) will mainly focus on

modernization of the higher-order irrigation infrastructure (especially intakes and feeder and

branch canals), enhancing the capacity of the WUAs to operate and maintain the improved or

new irrigation infrastructure, and the preparation and initiation of an agricultural development

program. Phase 2 will mainly focus on the modernization of the lower-order irrigation

infrastructure (sub-branch and tertiary canals and water courses), continuation of the WUA

support program, and implementation of a comprehensive agricultural improvement program.

With good performance of implementation of the first phase, phase 2 could start around

January 2014, i.e. about two years after the start of phase 1, so that there will be maximum

overlap of the two phases. The main trigger for starting with the preparation of phase 2 will be

to have the construction works on the main branch canals and intake protection works ongoing.

The estimated value of these contracts is about 50 percent of the funds available for civil

works.

5

17. The option of using the funds of the proposed project to fully complete the irrigation

system of at least one of the three WUAs from the intake to the field channels was discussed

early during project preparation. Consultations with the WUAs and other stakeholders

revealed that this approach would contribute to increased tension and possibly conflict among

local beneficiaries. Consequently, a conflict sensitive approach was selected which consists of

developing the irrigation systems equally and equitably under the two project phases.

18. In addition to the proposed support provided by IDA, GoN will provide funds for

construction of a new abstraction works on the Karnali River, a main conveyance canal, and a

sediment basin. The contract for the construction of the abstraction works was signed in early

2011 and the preparatory works have started. It is expected that the construction of the

proposed new infrastructure will take some eight to ten years. This new infrastructure will

eventually connect with the feeder canal that will be constructed with IDA funds. However, all

infrastructure to be modernized under the IDA-funded project can operate fully independently

from any of the proposed investments to be made by GoN.

II. Project Development Objectives

19. The development objective of the phase 1 project is to improve irrigation water

delivery to, and management in, the command area. The command area is defined as the

agricultural lands to be irrigated using infrastructure to be modernized under the project. The

objective will be achieved through improving the performance of the irrigation systems and

strengthening community-based irrigation management. These activities are essentially about

building resilience through more efficient water delivery and management against water-

induced hazards such as droughts, floods, and changes in water availability during the

agricultural seasons. There will be some support to agricultural development that will result in

a modest increase in yields in especially the upper part of the command area, but the main aim

of the agricultural support during phase 1 is to prepare for a comprehensive agricultural

support program to be implemented during phase 2. The reason for this is that during phase 1

there will be no investments in the lower-order irrigation infrastructure and command area

development which make it premature to develop a full agricultural improvement program for

which reliable water availability has to be ensured.

20. The key outcome indicators are:

Irrigation service delivery by service providers (WUAs) assessed as satisfactory by

water users (measured in percentage of water users);

Resources generated by water users for the operation and maintenance of the

modernized irrigation systems (measured in percentage of required resources);

Increase in irrigated crop yields of main crops rice, wheat, and maize (in about 40

percent of the command area at the head of the canal systems; measured in tons/ha);

and

Number of female and male water users (defined as member of the WUA) provided

with improved water delivery services: (i) number of female water users; and

6

(ii) number of male water users (IDA core indicator). In addition, (iii) the

percentage of female WUA executive committee members will be measured.

III. Project Description

A. Project Components

21. Project Area and Beneficiaries. One of the most prominent FMISs in the Terai is the

Rani Jamara Kulariya Irrigation Scheme with a cultivable command area (CCA) of 14,300 ha

(the project area) of which about 11,000 ha is currently being irrigated. The scheme was

developed by the farmers between 1896 (Rani System) and 1915 (Kulariya System). The

Jamara System was developed from 1903 onwards. The scheme constitutes three independent

traditional irrigation systems constructed, operated, and managed by the farmers, with the

majority comprising people from the indigenous Tharu community. The scheme is located in

Kailali District of the Far Western Development Region, one of the least developed regions in

the country. The scheme area comprises of eight Village Development Committees (VDC),

which are the lowest political units working at grassroots level, and one Municipality, Tikapur

which is the main township and market center in the project area1. The geographical

coordinates of Tikapur are 28° 31' North and 81° 7' East.

22. Each of the systems has one intake point on the Karnali River (a tributary of the Ganga

River) and an extensive canal (kulo in Nepali) infrastructure with 3 branch and 41 sub-branch

canals that have a total length of about 230 km. The Karnali River is an aggressive and

unpredictable gravel bed river that often changes its course, as a result of which the scheme

regularly suffers from either shortage of water or severe flood damage.

23. The overall scheme lacks all necessary infrastructure such as permanent intake and

control structures, diversion and drop structures, flood protection works, and cross drainage

and escape structures. Typical problems in the scheme include difficulty of coping with

changes in the river morphology and in diverting water to the irrigation systems during low

river flows; uncontrolled flooding affecting the scheme during high river flow events and

frequent wash-out of temporary diversion works made by WUAs at the intake area; erosion of

canal banks from uncontrolled intake of water; sedimentation of canals; inability to manage the

water equitably and efficiently; and poor road connections that often become inaccessible

during the monsoon season. In order to improve this situation, the irrigation and drainage

systems will require substantial rehabilitation and modernization and training of WUAs will be

needed to improve their ability to manage the water and maintain the infrastructure.

24. Eighty percent of the land holdings are less than one ha, and the average land holding is

about 0.6 ha. About 25,000 households, comprising some 160,000 people, will benefit directly

from the project. The ethnic composition of the people in the project area includes the Tharu

as the dominant group with 48 percent of the population. Other main groups are Chhetri (17

1 The VDCs are Baliya, Dansinhapur, Durgauli, Janakinagar, Munuwa, Narainapur, Pathariya, and Pratapapur.

7

percent), Dalits (15 percent), Brahman (10 percent), and Magar (3 percent). There are three

WUAs, one for each of the main systems, and there is one central committee (WUA

Federation) that links the three WUAs together for overall management of especially the river

diversion channel.

25. Component 1: Scheme Modernization (US$38.6 million). The scheme modernization

will consist of: (i) construction of a feeder canal to link the three main canal systems;

(ii) rehabilitation and modernization of Rani (20 km), Jamara (16 km), and Kulariya (16 km)

branch canals, mainly focusing on intake structures, control structures, diversion structures,

and canal bank protection; (iii) command area protection works against flooding from adjacent

rivers such as Karnali, Mohana, and Patharaiya; and (iv) improving and upgrading about 61 km

of roads within the project area and construction of bridges and culverts. The component will

also finance engineering consultants to assist the Department of Irrigation (DoI) and the WUAs

with the remaining design tasks and especially third-party construction supervision and quality

assurance, as well as with a number of specific tasks such as engineering studies for the

preparation of the phase 2 project. About US$13 million (34 percent) of the funds under this

component are allocated for flood protection works and road improvements.

26. Component 2: Strengthening Water Users Associations (US$2.2 million). The

component will strengthen WUAs to assume full responsibility for the O&M of the

infrastructure constructed under component 1. This will require different skills than the WUAs

currently have. Most of the current experience of the WUAs is in mobilizing members to carry

out certain channel excavation and desilting works, but with the new structures, the WUAs will

have to carry out O&M in a more technical and professional manner. In particular, under this

component the project will finance: (i) training and support to WUAs, to be carried out by DoI,

assisted by specialized consultants and/or NGOs. WUAs will be trained in such aspects as the

development and implementation of adequate O&M plans, setting of irrigation service fees,

maintenance of records and accounts, participatory monitoring, conflict resolution, and

optimizing the higher-order system water management for the benefit of all users. There will

also be focus on ethnic and gender issues through awareness creation and training. For

example, there will be specific focus on encouraging female landholders to take up WUA

executive committee positions and train them in effective committee membership and

avoidance of exclusion by women and ethnic minorities in the running of WUAs;

(ii) construction of WUA offices in a central location of each of the WUA command areas;

(iii) office equipment; (iv) motorcycles, O&M equipment, and funds for the annual excavation

of the Jarahi Nala Channel for diversion of water from the Karnali River; (v) farmers study

tours to successful WUAs, e.g. Kankai WUA that is being supported under IWRMP; and

(vi) consulting services for special studies, e.g. to determine the actual cost of O&M after the

scheme improvements.

27. Component 3: Agricultural Production Support (US$2.9 million). The component will

carry out a series of agriculture production support activities in the project area through

demonstrations, farmer field schools (FFS), and other adaptive processes. The component will

also carry out several strategic studies on the options for agriculture diversification, value

8

addition, and institutional innovations that can be promoted during phase 2 of the project. It is

stressed that the main gains in production increases, diversification of cropping patterns, and

assistance to improve the marketing of crops will be made under phase 2 when the command

area gets improved. The following set of specific activities will be undertaken under the

project: (i) implementation of demonstration plots and adaptive research; (ii) organizing FFSs;

(iii) development of packages for the promotion under phase 2 of crop diversification,

integrated pest management (IPM), and integrated plant and soil nutrient management

(IPSNM) practices; (iv) strengthening the Agriculture Service Center (ASC) and Agriculture

Contact Points (ACP) within the project area; (v) initiation of support to the production of high

quality certified seeds through identification and training of interested private contract farmers

and community-based seed producing entities; and (vi) training of staff of the District

Agricultural Development Office (DADO) to improve the technical knowledge and the ability

to advise on innovative practices. Effort will be made to coordinate the project activities with

ongoing projects such as IWRMP and PACT to support community seed production, seed

storage initiatives, cash cropping, and value chain studies;

28. Component 4: Project Management (US$4.3 million). The component will support

overall project management, monitoring and evaluation (M&E), and reporting. A project

management team (PMT) with a project manager and necessary professional and support staff

will be based in Tikapur to manage and coordinate the project activities under components 1

and 2 on behalf of DoI. Component 3 will be managed and coordinated by DADO in

Dhangadhi on behalf of the Department of Agriculture (DoA). Dhangadhi is located about 90

km from Tikapur. The teams are to ensure smooth implementation of project activities,

monitoring of project implementation progress and outputs/outcomes achieved, learning from

project experiences, communication management, implementation of good safeguard practices,

and procurement and financial management. Activities to be financed under the project

include, but will not be limited to: (i) the operation of the PMT and a small liaison office in

Kathmandu for coordination with DoA, Ministry of Finance (MoF), and other relevant

agencies; (ii) design and establishment of a project specific Management Information System

(MIS); (iii) project monitoring, learning, and evaluation (MLE), including the services of

independent M&E organizations for specific surveys and other monitoring tasks;

(iv) documentation of the phase 1 project experience and its dissemination through a website,

brochures, articles in newspapers, etc.; and (v) overall preparation of phase 2, including

incorporating the results of phase 2 preparation studies carried out under component 1 and

work carried out under component 3 in the design of the phase 2 project.

B. Project Financing

29. The lending instrument is a Specific Investment Credit and Grant, with 55 percent as

credit. Specific investment lending is appropriate for the proposed project given that the

activities are well-defined and can be implemented over a finite time period. It is typically not

a quick-disbursing lending instrument and allows engagement with the implementing agencies

and WUAs over a longer period, which provides opportunities for comprehensive development

9

of sufficient institutional capacity to operate and maintain irrigation infrastructure in a

sustainable manner.

30. The project is estimated to cost around US$48 million, excluding a US$1 million

contribution by WUA members, mainly for in-kind labor for the annual excavation of the

channel for the diversion of water from the Karnali River. The IDA funding will be US$43

million. The implementation period is estimated at five years.

C. Lessons Learned and Reflected in the Project Design

31. The following lessons learned from evaluation of Bank-supported and other donor-

supported projects in Nepal and from stakeholder workshops and beneficiary impact analysis

carried out during project preparation have been incorporated in the design of this project.

32. Transparency and accountability in performance management and service delivery in

irrigation systems. To overcome chronic problems of poor maintenance and inadequate

service delivery in irrigation schemes it is important to have a clear agreement between the

WUA and DoI about respective roles and responsibilities, proper financing arrangements, and

transparency and accountability in monitoring compliance (by both parties) of the agreement.

As the Rani Jamara Kulariya Irrigation Scheme is inherently a farmer-managed and operated

irrigation scheme, it is important for government to empower as much as possible the users and

their WUAs and keep them in charge with minimum outside interference.

33. Meaningful community participation requires substantial capacity building. A separate

project component has been designed to support the necessary capacity building of the WUAs

to turn them into financially and technically sustainable organizations and to encourage

inclusion of ethnic minority groups and women.

34. Coordination between partner organizations is important to maximize project benefits.

In order to produce greater synergy and impact it is important to ensure coordinated program

planning and implementation, particularly between the main implementing partners of DoI and

DoA. In order to achieve this, a senior agriculture officer will be seconded to DoI‟s Project

Implementation Office (PIO) in Tikapur and all the components will be managed from the

field. Effort will be made to coordinate with similar projects such as IWRMP and PACT and

other government and private institutions to benefit from their experiences, particularly in areas

Component Total US$ million

(excluding US$1 million

WUA contribution)

Scheme modernization 38.6

Strengthening WUAs 2.2

Agriculture Production Support 2.9

Project Management 4.3

Total 48.0

10

of community seed multiplication, agricultural inputs supply, value chain studies and farmer

trainings.

35. Integrating agriculture and irrigation increase benefits. While it is important to

improve the irrigation systems, considering that irrigation is only one input into agriculture it is

equally important for extension agents and other agricultural specialists to work closely with

farmers to develop appropriate cropping patterns and identify high value crops that provide

better returns. The project has a component that starts addressing such agricultural support.

IV. Implementation

A. Institutional and Implementation Arrangements

36. Development in Nepal faces a number of institutional and implementation challenges

that can negatively affect project impact and sustainability. Some of the challenges foreseen

by the proposed project include: (i) low institutional capacity and performance; (ii) shortage of

adequately trained human resources at the grassroots level; (iii) weak coordination between

implementing partners, especially between the Ministry of Irrigation (MoI) and the Ministry of

Agriculture and Cooperatives (MoAC); (iv) frequent staff turnover; (v) exclusion of

marginalized communities; and (vi) gender disparity. Taking into account the results of the

various preparation studies, including peace and conflict analysis, a number of implementation

tools and mechanisms have been developed to ensure adequate implementation arrangements.

For example, a Social Impact Management Framework has been designed to ensure, among

others, inclusion of marginalized groups and women. To promote inclusion in decision-

making, WUAs will be encouraged through awareness creation and specific training to

implement the provisions of the Irrigation Regulations. A Governance and Accountability

Action Plan (GAAP) has been designed with as main objective to contribute towards

strengthening governance and accountability systems in the project and beyond. It will achieve

this objective by ensuring resources allocated by the project are spent for the intended purposes

and directed to the beneficiaries of the project; strengthening coordination between different

national and local agencies; and improving feedback mechanisms between beneficiaries, civil

society, and project authorities. Institutional mechanisms will be in place to handle grievances

so that any adverse impact of potential conflicts could be avoided (see Annex 7). The Project

Implementation Manual (PIM) will provide detailed guidance to address issues related to

procurement, financial management, resource governance, and implementation of planned

activities. A draft PIM is available and its finalization is a disbursement condition for the civil

works. The final PIM will be translated in Nepali and will be made available to project staff,

WUAs, and other interested parties. It will also be available on the project‟s website.

37. The apex body for the project is the Project Steering Committee (PSC) which will be

chaired by the Secretary of MoI. Members of the PSC will include senior representatives from

MoF, MoAC, Ministry of Forests and Soil Conservation (MoFSC), Ministry of Environment

(MoE), the National Planning Commission (NPC), DoI, and DoA. The PSC will provide

overall policy guidance to the implementing agencies and their project management teams.

11

38. The Department of Irrigation will have the main responsibility of implementing the

project. The Director General will be the focal person at the departmental level. The

Department of Agriculture will be the implementing agency for Component 3.

39. The Project Implementation Office at Tikapur will be the main office for the day-to-day

management and implementation of the project. A small liaison office will be established in

DoI in Kathmandu to liaise with related agencies and stakeholders on behalf of PIO. The PIO

will be headed by a Project Manager, based in Tikapur, who will be assisted by staff in Social,

Environmental, and Institutional; Technical; Procurement; and Financial Management Units.

The Social, Environmental, and Institutional Unit, headed by a sociologist who will be deputed

by DoI, will have direct linkages with the WUAs to implement the institutional and capacity

development program. A Local Environmental Monitoring Committee composed of local

protected area agency, forest authority, NGOs, etc. will visit the project area periodically for

inspecting environmental management and facilitating coordination. GoN will also engage an

independent party for regular monitoring of the environmental compliance, management, and

performance in the project. The frequency of these inputs may be revised during project

implementation, depending on actual requirements.

40. The agriculture program will be implemented by the District Agriculture Development

Office in Dhangadhi Town in Kailali District. While the head of DADO will be responsible

for guiding the agricultural component of the project, extension activities at the community

level will be supported through the Agricultural Service Center in Tikapur that is staffed with

Junior Technicians (JT). They will be supported on a regular basis by a subject matter

specialist (SMS) based in Dhangadhi. Directorates in DoA will also participate as required.

For example, the Plant Protection Directorate has responsibility for IPM training and

development and will be involved in work related to IPM. In order to maintain coordinated

planning and implementation of project activities and to ensure convergence, PIO will make

available office space for a DADO nodal officer, most likely the SMS referred to above, at its

Tikapur office. The project will fund consultants, such as social mobilizers and agricultural

specialists, as appropriate to assist the staff of the ASC and others with the implementation of

the component. The consultants will report mainly to DADO but also to PIO. There are at the

moment two Agriculture Contact Points within the project area that are supported by ASC,

Tikapur. Each ACP is supposed to be staffed with one Junior Technician, a certificate holder

in agriculture with a minimum of three years of work experience. These ACPs will bring

extension services and farmers closer together, in addition to serving as information hub.

41. GoN will ensure that the professional PIO and DADO teams working on the

modernization of the Rani Jamara Kulariya Irrigation Scheme will not be transferred to other

positions until completion of the project. Transparent mechanisms will be introduced for the

selection of staff for international study tours and exposure visits. GoN employees who have

participated in an international training course or study visit will be expected to remain in their

posts for the minimum period specified by Clause 40 (c) of the Civil Service Act, 2049 (1993).

12

42. At the local level, WUA membership of landholders in the irrigation scheme (that are

also water users) is compulsory. WUAs will be encouraged to promote representation and

inclusion of all communities participating in the project. Inclusion of women will be adopted

as a project principle, with a minimum target of 33 percent women in decision-making

processes. The project will undertake capacity building measures, including training, to make

the participation of women and other marginalized groups more effective. Experience has

shown that gender mainstreaming initiatives should cover both men and women, which the

project will take into account in its capacity building initiatives. In order to avoid conflicts

regarding ethnic representation and water allocation the project will develop implementation

guidelines on the basis of the GAAP, social management framework, and safeguards where

potential issues and concerns have been identified and mitigation measures outlined.

43. The project will interact with other development initiatives at the local level. For

example, seed multiplication activities supported by the Social Safety Net Project (SSNP) and

IWRMP will be explored for possible linkages. Value chain analysis provided by PACT may

also have relevance to the farmers in the project area. In addition, local government bodies

(District Development Committee (DDC) and VDC) will be briefed and consulted on project

activities. Information and experience will be exchanged with civil society organizations

operating at the local level to create synergy.

B. Results Monitoring and Evaluation

44. A project monitoring, learning, and evaluation framework will be designed to facilitate:

(a) results-based management; (b) learning and process enhancement, through process

monitoring by participatory methods, involving group self-ratings, reviews, score cards,

satisfaction surveys, etc.; and (c) impact evaluation, involving use of appropriate baseline and

controls.

45. The PIO will have a monitoring specialist who will have overall responsibility for

planning and coordinating MLE activities. This will take place mainly with three sets of

entities that will undertake the bulk of the data collection and analysis work: (i) the

implementing departments; (ii) an external M&E agency to be engaged during project

implementation for intermittent surveys and studies; and (iii) beneficiaries, primarily WUAs.

The PIO, supported by short-term consultants, will have overall responsibility for developing

systems and procedures for appropriate analysis and presentation of the collected monitoring

and learning (M&L) data to ensure appropriate use of the indicators for project management,

evaluation, and learning. The implementation of the GAAP will be monitored as well.

46. MLE activities will include: baseline studies; regular performance tracking of inputs

and outputs by concerned implementing departments; intermittent performance monitoring by

external M&E agency; systematic (“panel data” type) analysis of project impacts through

repeated monitoring of the same sample set of water users (farmers) through project lifetime;

and mid-term and final impact evaluations. Reports from these activities will be generated in

agreed format according to a set schedule.

13

C. Sustainability

47. Sustainability is a core project principle and has been factored into project design

through the following design features and/or expected measures.

48. Institutional Sustainability. WUAs will assume O&M responsibility during project

implementation and post implementation. WUA committees shall be permanent elected

entities under the charter of WUA constitution. Roles and responsibilities of DoI and WUA

will be specified by an agreement between these parties.

49. Financial Sustainability. WUAs will collect irrigation service fees for O&M purposes.

Project interventions that enhance irrigation-based livelihoods will eventually raise water

productivity and hence strengthen the incentive to pay fees. Training will be provided to

WUAs on financial management and indicators will monitor the level and collection rates of

the fees and WUAs‟ maintenance of financial records.

50. Technical Sustainability. Training will be provided to WUAs to carry out routine

O&M. Scheme operation and maintenance plans will list activities to be carried out as part of

routine O&M. A memorandum of understanding (MoU) will be signed between WUA and

DoI prior to undertaking scheme implementation activities which will commit government to

providing certain technical support services.

V. Appraisal Summary

A. Economic and Financial Analysis

ENPV= NRs. 415 million; ERR=16.9 percent. FNPV=NRs. 118 million; FRR=13.4 percent.

51. The project is expected to improve water service delivery to about 14,300 ha of which

around 11,000 ha are currently irrigated. The investments made during phase 1 of the project

are expected to generate only modest agricultural benefits attributable to improved off-farm

water availability, reduced risk of flooding, and some improved farm-level water management,

especially at the head of the canal systems. However, the investments for the improved water

control at off-farm level and reduced risk of flooding are essential for the phase 2 investments

to eventually generate substantial improvements in agricultural production. The main project

benefits from the phase 1 investments will derive from a set of rather conservative

assumptions: (i) a 10 percent yield increase and 27 percent increase in cropping intensity on

around 6,000 hectares of currently irrigated land at the head of the systems; (ii) a 30 percent

increase in cropping intensity on 5,000 hectares on currently irrigated area located in the

middle section of the system; and (iii) reduced 10 percent production losses of rainfed paddy

caused by uncontrolled flooding and 50 percent increase in cropping intensity on currently un-

irrigated area of about 3,300 ha located in the tail section of the irrigation systems.

14

52. The project investments generate incremental financial margins to about 25,000 farm

households, mostly operating less than one hectare of land, ranging from NRs. 14,854/ha to

NRs. 29,866/ha. The highest incremental margin at NRs. 29,866/ha is expected for farmers

located in the head section of the irrigation systems that will benefit from both improved

productivity and intensification of production. The middle section farmers, for whom the

project benefits will be in the form of increased cropping intensity only, will gain incremental

gross margins at NRs. 18,570/ha. The incremental gross margins to rainfed farmers at the tail

section, who are expected to avoid productivity losses caused by floods and benefit from

increased cropping intensity, is estimated at NRs. 14,854/ha. Financial and economic returns

to the project are modest with FRR of 13.4 percent and FNPV of NRs. 118 million and ERR of

16.9 percent and ENPV of NRs. 415 million.

53. Sensitivity analyses tested robustness of the project for three risk variables: an increase

in the project cost, a benefits decline, and a two-year delay in benefit accumulation. The

project is moderately sensitive to changes in the benefit declines and in the project cost. The

20 percent decline in benefits drops baseline levels of ERR and FRR to 13.6 and 10.1 percent,

respectively. The 20 percent project cost increase reduces baseline levels of the ERR and FRR

to 12.8 and 9.4 percent, respectively. The project is more sensitive to the two-year delay in

benefit accumulation with the ERR and FRR dropping to 11.3 and 8.6 percent, respectively.

54. In terms of sustainability of the investments in the irrigation infrastructure, the analysis

estimated the impact of the incremental O&M contribution on the farm household budgets.

The results suggest that the incremental O&M contribution will not be a financial burden for

farmers as its share in the incremental gross margins is insignificant and varies in the range of

2.3 to 4.5 percent.

B. Technical

55. Modernization of the irrigation scheme will focus on structural and non-structural

measures. There is a need to improve both the physical and management systems, as well as

institutional arrangements for system operation. Appropriate technologies will be used for the

design and construction of the needed physical interventions. It will be ensured that final

designs are sound, based on modern design standards, yet compatible with local conditions,

and that the proposed works will serve the intended purpose and will be sustainable with

acceptable level of O&M requirements. The works will be implemented by reputable

contractors under sufficient day-to-day and third-party construction supervision and quality

control. Based on a review of other irrigation modernization projects it is clear that activities

of similar nature have been carried out in Nepal, which gives support to the expectation that the

project works can be implemented without major difficulties.

C. Financial Management

56. The Government‟s Financial Administration Regulations will be used as the basis for

exercising appropriate controls over project transactions. The Regulations will be

15

supplemented by financial management guidelines that are described in the Project

Implementation Manual. Performance audits will be carried out around mid-term of the

project as part of additional assurance to identify areas for improvement. There will be strong

efforts in capacity building of the project staff in the areas of project management, including in

procurement and financial management. To address the gaps that have been identified during

the financial management (FM) assessment and in order to reduce the risks, an action plan was

prepared and agreed upon with DoI and PIO staff (see Annex 3). Overall, the FM

arrangements for the project as conceived will be adequate for the purpose of project

implementation.

57. From the financial management perspective, the overall risk currently is “Substantial”

and the residual risk is “Modest”. The risks will be reassessed as the mitigation measures are

being implemented. There are no outstanding audit reports under the sector.

D. Procurement

58. Procurement for the proposed project will be carried out in accordance with the World

Bank‟s “Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD

Loans and IDA Credits and Grants by World Bank Borrowers” published by the Bank in

January 2011, and “Guidelines: Selection and Employment of Consultants under IBRD Loans

and IDA Credits and Grants by World Bank Borrowers” published by the Bank in January

2011, and the provisions stipulated in the Financing Agreement. For each contract to be

financed under the Credit/Grant, the procurement methods or consultant selection methods, the

estimated costs, prior review requirements, and time frame are agreed between the Borrower

and the Bank in the Procurement Plan which was developed by the Borrower. The

Procurement Plan will be updated at least annually or as required to reflect the actual project

implementation needs and improvements in institutional capacity.

59. Most procurement activities will be carried out by the PIO in Tikapur. The

procurement under the Agricultural Production Support Component will be carried out by

DADO. An assessment of the capacity of the implementing agencies to implement

procurement actions for the project was carried out in February 2011. The assessment

reviewed the organizational structure for implementing the project and conducted interaction

with the proposed project staff, as well as reviewed the procurement documents of other

projects within the implementing agencies. Based on the assessed procurement capacity of the

implementing agencies, PIO being the major one, and provision of mitigating measures as

suggested, no major risks are identified for project procurement. Therefore, the overall project

risk for procurement is “moderate”.

E. Social

60. DoI conducted a Social Assessment as part of project preparation. This involved

developing a socio-economic profile of the project area, mapping out various stakeholders,

assessing the social, economic, and political factors that can affect project design and

16

implementation, and screening of possible social impacts of the project. Based on that

analysis, several recommendations have been made and incorporated in the project design to

address the possible adverse impacts of the project. A peace/conflict analysis was also carried

out and key findings related to WUA-specific conflicts and inclusiveness have been

incorporated in the project design.

61. The SA concludes that: (i) the majority of the population in the project areas relies on

agriculture and hence need to be regarded as direct project beneficiaries; (ii) there are many

ethnic and minority communities in the project areas, including Tharus, Magars, and Dalits,

who stand to benefit from the project, but pro-active measures are necessary to ensure that

benefits accrue to all of them; (iii) various factors need to be taken into consideration to avoid

conflict over resource use, which will require strong WUAs that fairly represent all water

users; (iv) women‟s participation is crucial in the irrigation governance structure and there is a

need to enhance this; (v) effective information dissemination and community participation is

important for project success; and (vi) the potential adverse impact of the project on such

aspects as land acquisition and resettlement is negligible and can be addressed through a

framework approach.

62. On the basis of the SA findings and recommendations and considering the approach

and progress of the engineering design which does not permit identification of all project

impacts at this stage, a Social Impact Management Framework (SIMF) has been developed to

guide planning and development of necessary mitigation measures to address possible adverse

social impacts and maximize project benefits. The SIMF covers involuntary resettlement in

compliance with World Bank OP 4.12 on Involuntary Resettlement, indigenous people issues

in compliance with OP 4.10 on Indigenous Peoples, gender and social inclusion, as well as

mechanisms for information, communication, consultation, and participation. The SIMF

contains a Land Acquisition and Resettlement Framework, a Vulnerable Community

Development Framework, a Gender Equality and Social Inclusion Strategy, and an

Information, Communication, and Participation Strategy.

F. Environment

63. Environmental concerns of the project are mainly related to the activities under

Component 1 (Scheme Modernization) and Component 3 (Agricultural Production Support).

The Borrower has prepared an Initial Environmental Examination (IEE) as required by national

environmental legislation and an Environmental Management Plan (EMP). The IEE is generic

and also covers activities for the overall modernization of the irrigation scheme that are beyond

the scope of proposed IDA support, while the EMP focuses on the activities proposed under

the IDA-funded project.

64. Bardiya National Park is located on the left bank of the Karnali River, across from the

project area. The protected and endangered species of Gangetic Dolphin, Marsh Mugger, and

Gharial Crocodile are known to exist in the Karnali River system. The Karnali River corridor

(stretches of forests) is also a wildlife movement route. Considering the nature of the project

17

activities, which are mainly improvement of the existing traditional irrigation systems, the IEE

and EMP concluded that the identified environmental risks are moderate and can be mitigated

through a number of mitigation measures. The overall environmental impact of the project is

expected to be small and the project has been assigned Category B.

65. The likely adverse environmental impacts of the project described in the EMP include:

(i) restriction to the wildlife movement during construction (mainly elephant, tiger, and rhino

during the main transit season from July through November); (ii) increased poaching and

logging risks in the forest areas close to the project area; (iii) adverse impacts on the protected

and endangered aquatic life (e.g. dolphin) such as from water diversion and fishing;

(iv) increased risks of flood damage resulting from extraction of sand and gravel from the

river; and (v) depositions of silt/sediment in the canal system and on farm land. Other

identified impacts include air and noise around active construction sites and labor camps,

sanitation and fuel pollution, and impact on patches of forests through possible loss of trees,

forest degradation, and encroachment.

66. The EMP has recommended mitigation measures for the identified impacts, which

include measures such as no major construction activities during the main wildlife movement

season from July to November; wildlife friendly canal side-slopes; provision of animal

crossings over the feeder canal; banning the project from collecting sand, gravel, and boulders

within 500 m of Karnali bridge and within 50 m of the right bank of the Karnali River and

ensuring that the extractions will be less than one meter deep; awareness against poaching and

logging as well as promoting coordination with other ongoing conservation activities/agencies;

canal intake and outlet/tail designs that include features that avoid dolphin entry; providing

sanitation and fuel facilities at workers camp; and prohibiting workers from fishing and

hunting.

67. Many of the risks and negative impacts described above, e.g. poaching, logging, and

gravel and sand extractions from the river bed, exist at present and are likely to continue

irrespective of the proposed project. Some environmental conservation activities are currently

ongoing, such as the Western Terai Landscape Complex Project and Terai Arc Landscape

Project. The World Bank supported regional project, Strengthening Regional Cooperation for

Wildlife Protection in Asia, was recently approved by IDA. This regional project aims to

enhance the capacity of the relevant agencies to carry out conservation based on a landscape

approach and also to address wildlife trafficking. In Nepal, the regional project‟s scope also

includes the protected area network in the southern Terai, bordering India. The Bardiya

National Park and the forests along the Karnali River are also part of this protected area

network. The coordinated efforts of the environmental protection and conservation work of

different agencies will have complementarities and positive synergy.

G. Safeguard policies

68. The Natural Habitats (OP/BP 4.04) is triggered because the Karnali River has protected

and endangered aquatic species, including the Gangetic Dolphin, Marsh Mugger, and Gharial

18

Crocodile. Also, the Karnali River corridor (forests) is a wildlife movement route for

especially elephant, tiger, and rhino. As some of the proposed works may be aligned along the

fringes of forest areas, the OP/BP 4.36 on Forests applies. Any issue will be addressed as part

of the Environmental Management Plan.

69. The scheme abstracts water from the Karnali River, a major left-bank tributary of the

Ganges River. The Karnali River has its source in China and flows through Western Nepal

into India (where it is called Ghaghara River before it joins the Ganges). The Karnali River is

thus an international waterway for purposes of OP 7.50. Due to uncontrolled diversion of the

Karnali River water into the main canals there is typically excessive water entry, while there is

no control of the water. The scheme in its current state has very low water use efficiency and

large water losses through seepage and water logging. The proposed project will result in a

reduction of water abstraction from the Karnali River, estimated at over 40 percent of the

current water abstraction. The exception to the notification requirement under OP 7.50 has

been received from South Asia‟s Regional Vice President on February 24, 2011.

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the

disputed areas

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment (OP/BP 4.01) [X] [ ]

Natural Habitats (OP/BP 4.04) [X] [ ]

Pest Management (OP 4.09) [ ] [X]

Indigenous Peoples (OP/BP 4.10) [X] [ ]

Physical Cultural Resources (OP/BP 4.11) [ ] [X]

Involuntary Resettlement (OP/BP 4.12) [X] [ ]

Forests (OP/BP 4.36) [X] [ ]

Safety of Dams (OP/BP 4.37) [ ] [X]

Projects on International Waterways (OP/BP 7.50) [X] [ ]

Projects in Disputed Areas (OP/BP 7.60)* [ ] [X]

19

Annex 1: Results Framework and Monitoring

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

Results Framework

Project Development Objective: to improve irrigation water delivery to, and management in, the command area.

PDO Level Results

Indicators Core

Unit of

Measure Baseline

Cumulative Target Values Frequency

Data Source/

Methodology

Responsibility

for Data

Collection

Description

(indicator

definition, etc.) YR 1 YR 2 YR3 YR 4 YR5

Irrigation service

delivery by service

providers (WUAs)

assessed as satisfactory

by water users (measured

in percentage of water

users).

%

8

8

8

30

40

50

Annually. Satisfaction

surveys, with a

number of sub-

questions to be

asked that

allow an

assessment of

the overall

indicator.

Detailed

baseline survey

of perception

will be

conducted.

PIO and M&E

Consultants

Survey of a

sample of

farmers (water

users) along the

sub-branches of

the three canals.

Resources generated by

water users for the

operation and

maintenance of the

modernized irrigation

systems (measured in

percentage of required

resources).

%

50

50

50

50

70

90

Annually. Records of

WUAs and

interviews with

a sample of

water users.

WUAs, PIO

and M&E

Consultant

The main

information,

related to cash,

materials, and

labor

contributions,

will come from

WUA records.

Current baseline

% is based on

existing

information, to

be refined after

the proposed

O&M study.

20

PDO Level Results

Indicators Core

Unit of

Measure Baseline Cumulative Target Values Frequency

Data Source/

Methodology

Responsibility

for Data

Collection

Description

(indicator

definition, etc.)

YR 1 YR2 YR3 YR4 YR5

Increase in irrigated crop

yields of main crops rice,

wheat, and maize in about

40 percent of the

command area, at the

head of the canal systems.

Paddy (winter)

Paddy (monsoon)

Wheat

Maize

Ton/ha

2.8

2.6

1.7

1.6

2.8

2.6

1.7

1.6

2.8

2.6

1.7

1.6

3.1

2.9

1.9

1.8

3.1

2.9

1.9

1.8

3.1

2.9

1.9

1.8

Annually. Farm records

and field

surveys.

DADO through

the ACS and

ACPs.

Crop cutting

samples, annual

assessments,

data provided by

farmers.

Baseline will be

refined in year

1.

Number of female and

male water users

(defined as member of

the WUA) provided

with improved water

delivery services:

(i) number of female

water users;

(ii) number of male

water users;

(iii) percentage of

female WUA Executive

Committee members.

Number

Number

%

0

0

19

0

0

19

0

0

19

2,000

5,000

33

4,000

12,000

33

6,000

19,000

33

Annually. Records of

WUAs and

surveys and

interviews.

WUA, PIO and

M&E

Consultant.

The main

information will

come from

WUA records

and surveys of a

sample of

farmers (water

users) along the

sub-branches of

the three canals.

21

INTERMEDIATE RESULTS

PDO Level Results

Indicators Core

Unit of

Measure Baseline Cumulative Target Values Frequency

Data Source/

Methodology

Responsibility

for Data

Collection

Description

(indicator

definition, etc.)

YR 1 YR2 YR3 YR4 YR5

Component 1: Scheme Modernization

Completed Structures:

Intake to branch canals

Road Bridges and Drops

on feeder

Control structures in

branch canals

Offtakes to sub-branch

canals

Road bridges on branch

canals and other water

courses

Number

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2

3

4

19

6

3

4

7

25

15

3

7

10

41

26

Annually. Progress

Reports by

contractors,

DoI staff, and

supervising

consultants.

PIO The definition

of completed

structure is

construction of

the structure

completed and

structure fully

operational.

Component 2: Strengthening Water Users Associations

Number of Executive

Committee meetings and

General Assembly

meetings held per WUA

(Annual, not cumulative).

Number 0 7 10 13 13 13 Annually. PIO‟s Social

Unit survey

reports.

PIO and

Executive

Committee of

WUA.

Minutes of the

meetings will

serve as written

record.

No of WUA members

trained (annual number).

Number of

partici-

pants

0 250 1,000 1,500 2,000 2,500 Annually. Training

records

prepared by

agencies that

provide

training.

PIO. Curriculum and

participants

attendance

records.

22

PDO Level Results

Indicators Core

Unit of

Measure Baseline Cumulative Target Values Frequency

Data Source/

Methodology

Responsibility

for Data

Collection

Description

(indicator

definition, etc.)

YR 1 YR2 YR3 YR4 YR4

Component 3: Agricultural Production Support

Agriculture Service

Center and Agriculture

Contact Points active and

providing advisory

services.

Number 3 3 3 3 3 3 Annually. Direct

observations,

progress

reports, photos.

PIO, DADO,

ASC, ACP.

Active is

defined as

serving at least

30 percent of the

farmers in the

command area

on a regular

basis and full

participation of

staff in

demonstrations

and farmers

field schools.

Number of farmer field

schools and

demonstrations

implemented (annual

number):

(i) Farmers field schools:

(ii) Demonstrations:

Number

0

0

0

0

8

30

25

70

50

130

90

200

Annually. Reports and

direct

observation

PIO, DADO,

ASC.

23

Arrangements for Results Monitoring

70. A project monitoring, learning, and evaluation framework has been designed to facilitate:

(i) results-based management through timely monitoring, analysis, and feedback of relevant

indicators; (ii) learning for process enhancement, through a mix of participatory assessments,

self-ratings and reviews, and special thematic studies; and (iii) impact evaluation, through

measurement of specific performance indicators, including use of appropriate baseline and

control data.

Institutional Arrangements

71. The PIO will have a dedicated M&E expert in the Social, Environmental, and

Institutional Unit with the overall responsibility for planning and coordinating MLE activities.

The PIO will work closely with the three sets of entities that will undertake the bulk of the data

collection and analysis work: (i) the implementing departmental agencies; (ii) an external M&E

agency; and (iii) beneficiaries, primarily WUAs. The PIO will have overall responsibility for

developing systems and procedures for appropriate analysis and presentation of the collected

monitoring data to ensure their use for project monitoring, management, learning, and

beneficiary capacity building. The data to be collected by DADO and other agricultural agencies

will feed into this system so that an overall understanding of the project outputs and outcomes

can be established.

Data Collection

72. Implementing agencies will be responsible for collecting and reporting information on

physical and financial input and output indicators as part of their regular implementation work.

This data will be fed into and assimilated by a computerized Management Information System

which will be set up and managed by the PIO. The MIS will be designed in such a way that it

can consolidate, analyze, and use the data for management feedback at different levels, from

project level to district, and central levels.

73. The external M&E agency will collect primary data about project implementation and

impact through four types of data collection exercises: (i) baseline survey; (ii) special monitoring

of implementation progress studies on relevant themes and in a format agreed in advance with

the PIO; (iii) an outcome-focused impact evaluation, with two rounds of data collection and

analysis – a Mid-Term Evaluation and Final Evaluation; and (iv) systematic („panel data‟ type)

evaluation of project impacts through repeated monitoring of the same sample set of water users

from the beginning to the end of the project.

74. A complementary set of information on quality and effectiveness of implementation

processes and on project impacts, from the beneficiaries‟ point of view, will be gathered through

a structured process of participatory MLE. The information will be monitored and used by

project management for improving: (i) effectiveness of project interventions and processes with

regard to the communities; and (ii) management and capacity building of the communities

themselves.

24

Data Reporting and Use

75. The focus of the project‟s MLE system is to enable appropriate oversight and

management, self-learning by project staff and beneficiaries, and full evaluation of project

experience. Management action at various levels will be guided by the following reports:

(i) monthly MIS reports produced by PIO on the status of implementation activities; (ii) regular

reports by external M&E agency on its concurrent monitoring activities; (iii) consolidated mid-

term implementation report by PIO and DADO and mid-term impact assessment report by the

external M&E agency, which will form the basis of the Mid-Term Review to be undertaken by

the Bank and GoN around March 2014; and (iv) consolidated project implementation and

assessment report by PIO and overall project evaluation report by the external M&E agency at

project completion, to be used for the preparation of the project Implementation Completion

Report (ICR).

76. The trimester progress report submitted by PIO and DADO to GoN and the Bank will

include, inter alia: (i) up-to-date physical and financial expenditure data compared to annual and

end-of-project targets; (ii) updated indicators of project performance compared to annual and

end-of-project targets; (iii) successes and problems encountered during the reporting period with

suggested remedial actions; and (iv) socio-economic and environmental impacts of the project.

Not all information may have to be reported in each trimester report. For example, during a

trimester with little construction activity there may be no need to report in detail on

environmental impacts related to construction. The actual reporting details will be discussed on

a regular basis between DoI/PIO and the Bank Task Team.

Learning and Knowledge Management

77. The project will have a dedicated website, within the website of DoI, where all relevant

information and data will be posted for a wider audience. The website will be designed to serve

as a one-stop information place with user friendly features on different aspects of the project. It

will be updated regularly to make the information as current as possible. Updating and

managing the information flow shall be the responsibility of the PIO. The website will also have

a mechanism to handle feedback from the audience, although this will not be the only

mechanism to get feedback. Simple methods, such as written feedback, will also be encouraged

by PIO. Dissemination of knowledge will also be provided to the larger community through

brochures, articles in newspapers, VDC information boards, etc.

25

Annex 2: Detailed Project Description

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

78. Project Area and the Beneficiaries. One of the most prominent FMISs in the Terai is the

Rani Jamara Kulariya Irrigation Scheme, with a total command area of 14,300 ha, although at the

moment the actual irrigated area is only about 11,000 ha. The scheme is located in the eastern

part of Kailali District of the Far Western Development Region. Within the command area there

are eight Village Development Committees and one municipality2. This municipality, Tikapur,

is the main township and market center in the project area. The scheme was developed by the

farmers between 1896 (Rani System) and 1915 (Kulariya System). The scheme comprises three

independent irrigation systems constructed, operated, and managed by the farmers, mainly by the

indigenous Tharu community which represents nearly 48 percent of the total local population.

The average land holding is about 0.6 ha, with 80 percent of the farmers having less than one ha.

About 25,000 households, comprising 157,000 people, are expected to benefit directly from the

project.

79. Each of the systems has one intake point on the Karnali River (a tributary of the Ganga

River) and extensive canal networks of branch canals and sub-branches with total length of about

230 km. The Karnali River is a braided multi-channel gravel based river with aggressive and

unpredictable ability to change its course, implicating often either shortage of water during the

dry period or severe periodic flood damage during the rainy seasons.

Summary of Canal Length and Command Area of

Rani, Jamara, and Kulariya Canal Systems

Canal System Branch Canal

Length (km)

Gross Command

Area (ha)*

Developed CCA

(ha)

Irrigated CCA

(ha)

Rani 20 5,820 5,300 4,228

Jamara 16 5,380 4,900 4,133

Kulariya 16 4,500 4,100 2,603

Total 52 15,700 14,300 10,964

* The gross command area is based on the digital topographic mapping of the command area, computed by PIO.

80. There are three WUAs, one for each of the main systems, and one central committee

(WUA federation) that coordinates the three systems, especially with regard to the abstraction of

water from the Karnali River. The scheme lacks all necessary infrastructures such as permanent

intake and control structures, drop structures, protection works, and cross drainage and escape

structures. The scheme suffers from frequent wash-out of temporary diversion works made by

WUAs at the intake sites and offtake sites from branch to sub-branch canals, and erosion of canal

banks from uncontrolled intake and management of water. As a result, typical problems include:

difficulty of abstracting water due to changes in the river morphology; uncontrolled flooding in

2 The VDCs are Baliya, Dansinhapur, Durgauli, Janakinagar, Munuwa, Narainapur, Pathariya, and Pratapapur.

26

scheme areas during high river flow events; sedimentation of canals; inability to manage the

water equitably and efficiently; and poor road connections that often become inaccessible during

the monsoon season. In order to improve this situation, the irrigation and drainage systems will

require substantial rehabilitation and modernization, while WUAs are to be trained to improve

their ability to manage the water and maintain the infrastructure.

81. The proposed IDA assistance will be used to rehabilitate and modernize the Rani Jamara

Kulariya irrigation systems through water abstraction, conveyance, and distribution

infrastructure; to provide support to the WUAs to enable them to manage, operate, and maintain

the infrastructure in a technically and financially sustainable manner; and to develop an

agricultural support services program. The project will have four components: (i) component 1

addresses the physical modernization of the three irrigation systems; (ii) component 2 will

strengthen WUAs to become fully inclusive organizations that assume full O&M responsibility

for the modernized systems and be able to divert sufficient water from the Karnali River to the

branch canal intakes; (iii) component 3 will prepare for a comprehensive agricultural program to

be implemented during phase 2 of the modernization of the scheme; and (iv) component 4 will

focus on overall project management, including monitoring and evaluation and reporting.

Component 1: Scheme Modernization (US$ 38.6 million)

82. The engineering requirements of scheme modernization are rather straightforward. The

project does not envisage constructing any structure in the Karnali River. The point where the

Karnali River waters are diverted (and channelized through Jarahi Nala) is at a location which is

close to the Karnali Bridge where the river banks are well defined. The water gets distributed

through the feeder canal and intake structures at the head of each of the branch canals, all to be

constructed under the project. The hydraulic design and the structural design of these intake

structures and other structures to be constructed are something DoI engineers and Nepalese

consultants are very familiar with. The scheme modernization in phase 1 of the project will

consist of:

i. Construction of a feeder canal to link the three main branch canal systems, which will

have direct link to the main Karnali course at Chisapani and will assure the water

availability for the three systems. It is noted that the project will not construct any

structure in the river, but will continue to rely on the annual excavation of a channel from

the river to the head of the feeder canal. Therefore there is no risk that a structure cannot

perform due to moving river beds;

ii. Rehabilitation and modernization of Rani (20 km), Jamara (16 km), and Kulariya (16 km)

branch canals by providing necessary control and regulating structures and canal bank

protection works;

iii. Command area protection works against flooding from Karnali, Mohana, Patharaiya

Rivers and some local streams within the command area;

iv. Improvement and upgrading of roads (61 km) and construction of bridges and culverts.

Six trunk roads linking the settlement areas of the command areas will be upgraded,

namely: (i) Rani Intake to Khariphant (8 km); (ii) Narayanpur to Durgauli (11.4 km);

Shivamandir to Milanchowk (4 km); (iv) Munuwa to Amarawati (12.6 km); (v) Tikapur

to Katase (10.5 km); and (vi) Khakaraulla to Tikapur (14.7 km). The subsequent

27

maintenance of the roads will be done by local government offices, namely the District

Development Committee and the Village Development Committees, as per their mandate.

Regular block grants will be received by these committees from central government;

v. Engineering consultancy services to assist DoI with the design and third-party

construction supervision and quality assurance of the works, as well as with specific tasks

such as engineering studies that will feed into the preparation of the phase 2 project; and

vi. Implementation of the Environment Management Plan and activities related to mitigation

measures as specified and costed in the plan.

83. The expected results of the component will be:

i. Assured and regulated irrigation delivery and distribution up to the sub-branch canal

level;

ii. Improved water management from the construction of the regulating and control

structures in the branch canals will provide opportunities to extend the irrigation area

coverage to its full available potential and will provide some opportunities for crop

intensification and productivity increases; and

iii. Flood control and regulated flow in the canals will ensure protection from the inundation

problems and wash-out of the planted crops.

Component 2: Strengthening Water Users Associations (US2.2 million)

84. Support will be provided to strengthen WUAs to assume full responsibility for the O&M

of the modernized infrastructure. This will require additional skills than the WUAs currently

have, as the O&M will have to be carried out in a more professional manner. Most of the current

experience of the WUAs is in mobilizing members to carry out digging channels for diverting

water from the Karnali River near Chisapani to the heads of the branch canals, desilting canals,

and constructing make-shift intakes from forest products. After modernization of the

infrastructure, different types of management and operation will be needed and WUAs will be

adequately trained. In order to carry out their functions well, the WUAs need offices, office

equipment, motorcycles, and key pieces of maintenance equipment, such as excavators. In

particular, the component will consist of:

i. Training to the members of WUAs. An awareness and training program will be

implemented for WUA executive committee members and selected WUA members in

different subject matters. Activities include management training to WUA officials,

training to WUA members to prepare more appropriate charters and by-laws, training of

technicians and water users on how to operate structures, and training in such aspects as

the development and implementation of adequate O&M plans, setting of irrigation

service fees, maintenance of records and accounts, participatory monitoring, conflict

resolution, and optimizing the higher-order system water management for the benefit of

all users. There will also be focus on ethnic and gender issues through awareness

creation and training. For example, there will be specific focus on encouraging female

landholders to take up WUA executive committee positions and train them in effective

committee membership and avoidance of exclusion by women and ethnic minorities in

the running of WUAs. Most of the training will be carried out by DoI, assisted by

28

specialized consultants and/or NGOs. About 2,500 farmers and staff of WUAs are

expected to participate in the various training activities;

ii. WUA Office Buildings. Physical facility improvement including the construction of small

multi-purpose WUA buildings for each of the three WUAs at centrally located places

within the command area and one small building for the WUA Central Committee.

These buildings will be used for multi-purpose activities, such as committee meetings

and skills training;

iii. Office equipment and field facilities. In order to make the WUA capable of operating

properly, office equipment will be made available. This will also allow the WUAs to

store information on membership records, landholding records, records of rules and

regulations, financial transaction records, and minutes of meetings. In order to facilitate

the movement of WUA officials and technicians, motor bikes will be provided to

effectively and efficiently manage the irrigation infrastructure;

iv. O&M Equipment for WUAs. Certain pieces of maintenance equipment, mainly

excavators, will be provided to enable WUAs to divert sufficient water from the Karnali

River and desilt the feeder and branch canals. At the initial stage, the equipment will be

placed under the management of PIO, but ownership of the equipment will be gradually

transferred to the WUAs during the course of the project when it has been ascertained

that WUAs are technically and financially capable of operating and maintaining the

equipment;

v. Study tours. WUA committee members and selected water users will be given the

opportunity to visit irrigation schemes in the Terai where WUAs are successfully

operating and maintaining more complex irrigation infrastructure. Selected DoI staff will

also be able to participate in such tours; and

vi. Operation and maintenance of Jarahi Nala Channel: The farmers have been diverting

river water for more than a century by digging the channel with their hands. The project

will improve on this by providing some equipment and empowering the WUAs to make

use of mechanical equipment in those areas along the channel where it involves moving

boulders and gravels and where there is deep channeling. This would enable the correct

sizing of the channel. The project has reserved some funds to pay for the operation of the

equipment procured for the excavation of the Jarahi Nala Channel from the Karnali River

to the head of the branch canals. The fund will be spent by PIO, based on a decision

between PIO and WUA Central Committee and reflected in a MoU signed by the two

parties, until such time the WUAs are fully ready to take over ownership of the

equipment.

85. The expected results from this component will be strengthened WUAs capable of

shouldering more responsibilities for the O&M of the modernized systems. This is expected to

lead to improved water conveyance and distribution from the Karnali River to the head of the

sub-branch canals. It is also expected that the WUAs become more democratic organizations

with adequate inclusion of ethnic minorities and women. Through addressing WUA governance

issues WUAs will be more credible.

29

Component 3: Agricultural Production Support (US$2.9 million)

86. Support will be provided to carry out a series of agriculture production support activities

in the project area through demonstrations, farmer field schools, and other adaptive processes.

The component will also carry out several strategic studies on the options for agriculture

diversification, value addition, and institutional innovations that can be promoted during phase 2

of the project. It is stressed that the main gains in production increases, diversification of

cropping patterns, and assistance to improve the marketing of crops will be made under phase 2

when the command area gets improved. The following set of specific activities will be

undertaken under the project:

i. Assessments: The project will early on carry out a: (i) cropping system analysis; (ii) soil

fertility analysis; and (iii) value chain analysis. The findings will form the basis for

developing: (i) soil fertility management plan; and (ii) identification of crops with best

potential for subsistence and cash income. Additional studies will also be carried out to

assess the feasibility of establishing cold storage and seed storage facilities, and assess

the necessary institutional support to strengthen the agriculture value chain, including

value addition and post harvest opportunities, all slated to be implemented during phase

2. All the assessments will be participatory, engaging key partners and beneficiaries;

ii. Strengthening agricultural support services. The Agriculture Service Center in Tikapur

will be strengthened commensurate with the demand the project will generate. The ASC

currently supports two Agriculture Contact Points which will also be strengthened (the

number of ASPs may have to be increased under phase 2 in order to adequately serve the

many farmers in the command area, but this is not envisaged under phase 1). The ACPs

will have an extension agent and will be equipped with teaching aids, communication

tools, and motorcycles. DADO and the ASC will also be provided with teaching aids and

communication tools, and also with a vehicle each to facilitate service delivery,

supervision, and monitoring;

iii. Demonstrations, adaptive research and farmers field schools. Once agriculture

development strategies have been developed, the extension team will work with farmers

to establish demonstration plots to show improved and proven farming techniques.

Farmer field schools will be established which will allow farmers to test and adopt new

ideas, including ICM and IPM. The FFSs are essentially 5-8 training sessions organized

around a demonstration plot. The training sessions cover all stages of crop production

from land preparation, sowing, application of fertilizers, weed and pest control, water

management, and harvesting of crop. A group of about 20 farmers attends these training

sessions which are held at the site of the demonstration. It is thus learning by doing and

seeing real and practical aspects of different stages in the production of a crop. On-farm

adaptive trials will help identify climate friendly varieties that can cope with drought or

major pest conditions in the project area. Packages for the promotion under phase 2 of

integrated pest management and integrated plant and soil nutrient management practices

will be developed;

iv. Training and visits. Training courses will be organized covering a range of topics from

soil fertility management to seed production and group dynamics. Participants of the

training are staff members from the District Agriculture Development Office and master

farmers. Details on topics, modality, curriculum and duration will be detailed in a

30

training plan to be developed following training needs assessments. As part of training

farmers and partner staff will be taken on cross visits within the country and in the

region. DADO staff and farmers will be able to improve their technical knowledge and

learn about innovative practices;

v. Towards quality inputs. Critical problems impeding agriculture development in the

project area is the lack of quality seeds and the precarious supply of fertilizers. Quality

seed can best be produced when there is a reliable irrigation water supply and good water

management at field level, which will be achieved under phase 2. Therefore under phase

1, support will be provided through identification and training of interested private

contract farmers and community-based seed producing entities. Effort will be made to

coordinate the project activities with ongoing projects such as IWRMP and PACT to

support community seed production, seed storage initiatives, cash cropping, and value

chain studies;

vi. Provision of specialist services to assist DADO. Services of specialist organizations or

individual consultants will be provided to support DADO in areas of need such as

development of agro-processing facilities and value chain studies; and

vii. Establishment of collection centres. Early during the first phase, the project will support

establishment of three collection centres, one each for Rani, Jamara, and Kulariya

command areas.

87. The expected results of this component will mainly be the identification and development

of packages of improved crop varieties that meet both subsistence and income needs of local

farmers and availability of improved and quality advisory services at the grassroots level.

Component 4: Project Management (US$4.3 million)

88. Support will be provided for effective overall project management, monitoring, and

evaluation, and reporting. A project management team with a project manager and necessary

technical and support staff will be based in Tikapur to manage and coordinate the project

activities under components 1 and 2 on behalf of DoI. Component 3 will be managed and

coordinated by the District Agricultural Development Office. The teams are to ensure smooth

implementation of project activities, monitoring of project implementation progress and

outputs/outcomes achieved, learning from project experiences, communication management,

implementation of good safeguard practices, and procurement and financial management.

Activities to be financed include, but will not be limited to:

i. the operation of the PIO and a small liaison office in Kathmandu for coordination with

DoI, DoA, MoF, and other relevant agencies;

ii. design and establishment of a project-specific Management Information System;

iii. project monitoring, learning, and evaluation, including the services of independent M&E

organizations for specific surveys and other monitoring tasks;

iv. support to DADO with the management of its project component;

v. documentation of the phase 1 project experience and its dissemination through a website,

brochures, articles in newspapers, etc.; and

31

vi. overall preparation of phase 2, including incorporating the results of phase 2 preparation

studies carried out under component 1 and work carried out under component 3 in the

design of the phase 2 project.

89. The expected results of this component will be efficient project management, including

adequate technical, fiduciary, safeguard, and M&E support. There will be quality financial

management, reporting, and procurement processing according to IDA guidelines. The

necessary preparation studies for phase 2 of the project will be conducted and completed.

32

Annex 3: Overall Project Implementation Arrangement

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

90. Development in Nepal faces a number of institutional and implementation challenges that

can negatively affect project impact and sustainability. Some of the challenges foreseen by the

proposed project include: (i) low institutional capacity and performance; (ii) shortage of

adequately trained human resources at the grassroots level; (iii) weak coordination between

implementing partners, especially between the Ministry of Irrigation (MoI) and the Ministry of

Agriculture and Cooperatives (MoAC); (iv) frequent staff turnover; (v) exclusion of

marginalized communities; and (vi) gender disparity. Taking into account the results of the

various preparation studies, including peace and conflict analysis, a number of implementation

tools and mechanisms have been developed to ensure adequate implementation arrangements.

For example, a Social Impact Management Framework has been designed to ensure, among

others, inclusion of marginalized groups and women. To promote inclusion in decision-making,

WUAs will be encouraged through awareness creation and specific training to implement the

provisions of the Irrigation Regulations. A Governance and Accountability Action Plan (GAAP)

has been designed with as main objective to contribute towards strengthening governance and

accountability systems in the project and beyond. It will achieve this objective by ensuring

resources allocated by the project are spent for the intended purposes and directed to the

beneficiaries of the project; strengthening coordination between different national and local

agencies; and improving feedback mechanisms between beneficiaries, civil society, and project

authorities. Institutional mechanisms will be in place to handle grievances so that any adverse

impact of potential conflicts could be avoided (see Annex 7). The Project Implementation

Manual (PIM) will provide detailed guidance to address issues related to procurement, financial

management, resource governance, and implementation of planned activities. A draft PIM is

available and its finalization is a disbursement condition for the civil works. The final PIM will

be translated in Nepali and will be made available to project staff, WUAs, and other interested

parties. It will also be available on the project‟s website.

91. The Department of Irrigation is the main implementing agency for the project. DoI has

gained considerable experience over the years implementing World Bank and ADB-financed

irrigation projects, including having experience with projects of similar nature such as the

Sunsari Morang Headworks Project and Mahakali Irrigation Project. In these projects, the

project management and implementation was through a decentralized setting, with the DoI

having an arrangement of liaison offices. These operations performed satisfactorily. Currently,

DoI is implementing the Irrigation and Water Resources Management Project which is

coordinated by the Office of the Project Director (OPD) located at DoI, with key activities being

undertaken in a number of districts. As compared to IWRMP which requires major coordination

efforts with division and subdivision offices and with other line agencies (Department of

Agriculture, Department of Hydrology and Meteorology, and Water Energy Commission

Secretariat), the proposed project requires coordination only with one DADO that implements

the agricultural component.

33

Project Management and Supervision

92. A Project Steering Committee, chaired by the Secretary of the Ministry of Irrigation, will

be formed. Membership will include senior management staff of the Ministry of Finance,

Ministry of Agriculture and Cooperative, Ministry of Forests and Soil Conservation, Ministry of

Environment, National Planning Commission, Department of Irrigation, and Department of

Agriculture. The steering committee will provide overall policy, guidance, and will ensure

necessary coordination between the related agencies to support the project activities.

93. The Department of Irrigation will have the main responsibility of implementing the

project. The Director General will be the focal person at the departmental level. The

Department of Agriculture will be the implementing agency for Component 3. The Deputy

Director General (DDG) for Planning at the Department of Agriculture in Kathmandu will be the

focal person.

94. Overall responsibility for day-to-day coordination and management of the project will

rest with DoI, through the Project Implementation Office that has been set up at Tikapur town,

located centrally in the command area. Component 1 (Scheme Modernization) and Component 2

(Strengthening Water Users Associations) will be implemented directly by DoI, while

Component 3 (Agricultural Production Support) will be implemented by the Department of

Agriculture through its district office and subsidiary units in the command area. Overall

financial reporting, budget allocation, and fiduciary transactions will be the responsibility of DoI

through the PIO, but this will be through information sharing with DoA/DADO that is

responsible for the financial management of its own activities.

95. The PIO will be responsible for overall contractual management of the civil works,

coordination with WUAs, agricultural agencies, forestry and environment departments, wildlife

conservation, local agencies for the roads, and district administration. Its main management

tasks will be:

Overall implementation of the project, including management of the annual work plan

and budget;

Maintaining financial accounts;

Day-to-day construction supervision and quality control activities;

Preparing periodic progress reports;

Monitoring WUA activities;

Monitoring and evaluating the progress and outcomes of the project; and

Supervising cross-cutting issues including gender, indigenous people, and other social

and environmental issues.

96. The Project Manager will be supported by: (i) a team of engineers (two Senior Divisional

Engineers, four Engineers, and eight assistant or sub-engineers with various skills, including

CAD and procurement; (ii) one social scientist and two Association Organizers (AO); (iii) one

environment specialist; (iv) one finance officer and one accountant; and (v) office administration

assistants. The composition of the PIO team will be reviewed by joint GoN/IDA teams on a

regular basis and will be adjusted based on the workload. The PIO will be supported by teams of

34

consultants, e.g. for third-party construction supervision, short-term tasks to strengthen the

project team on for instance procurement, and special preparation studies for the phase 2 project.

97. The PIO will have a monitoring specialist who will have overall responsibility for

planning and coordinating M&E activities. Coordination of M&E activities will take place

mainly with the entities that will undertake the bulk of the data collection and analysis work.

The PIO, supported by short-term consultants, will have overall responsibility for developing

systems and procedures for appropriate analysis and presentation of the collected M&E data to

ensure appropriate use of the indicators for project management, evaluation and learning.

98. The Social, Environmental, and Institutional Unit of the PIO, headed by a sociologist,

will have direct linkages with the WUAs to implement the institutional and capacity

development program. It will also monitor the implementation of the Environmental

Management Plan and coordinate closely with other agencies, NGOs, etc. that are working on

environmental aspects in and around the project area. There will be a Local Environmental

Monitoring Committee (composed of staff from local protected area agency, forest authority,

NGOs, and ongoing conservation projects) for periodic inspection of the implementation of

environmental management/mitigation activities and also for promoting local level coordination.

GoN will also engage an independent party for regular independent monitoring of project‟s

environmental compliance, management, and performance.

99. A liaison office will be set up within DoI‟s main office in Kathmandu to facilitate

approval processes, assist with the preparation of annual work plans, and communicate with

other agencies, as needed, on behalf of the PIO. DoI will post at least one officer in this liaison

office.

100. The District Agriculture Development Office in Dhangadhi will take the lead in

implementing the agricultural activities under component 3 through its Agriculture Services

Center and Agricultural Contact Points within the command area. While the head of DADO will

be responsible for guiding the agricultural component of the project, extension activities at the

community level will be supported through the Agricultural Service Center in Tikapur that is

staffed with Junior Technicians. They will be supported on a regular basis by a subject matter

specialist based in Dhangadhi. Directorates in DoA will also participate as required. For

example, the Plant Protection Directorate has responsibility for IPM training and development

and will be involved in work related to IPM. In order to maintain coordinated planning and

implementation of project activities and to ensure convergence, PIO will make available office

space for a DADO nodal officer, most likely the SMS referred to above, at its Tikapur office.

The project will fund consultants, such as social mobilizers and agricultural specialists, as

appropriate to assist the staff of the ASC and others with the implementation of the component.

The consultants will report mainly to DADO but also to PIO. There are at the moment two

Agriculture Contact Points within the project area that are supported by ASC, Tikapur. Each

ACP is supposed to be staffed with one Junior Technician, a certificate holder in agriculture with

a minimum of three years of work experience. These ACPs will bring extension services and

farmers closer together, in addition to serving as information hub. The following summarizes the

key functions of DADO, ASC, and ACPs.

35

101. GoN will ensure that as much as possible the core professional PIO team will not be

transferred to other positions until completion of the project. Transparent mechanisms will be

introduced for the selection of staff for international study tours and exposure visits. GoN

employees who have participated in an international training course or study visit will be

expected to remain in their posts for the minimum period specified by Clause 40 (c) of the Civil

Service Act, 2049 (1993).

102. The main functions of DADO are as follows:

Maintain coordination with PIO in order to ensure support to implement agricultural

activities;

Dedicate senior officers, e.g. SMS (Agronomy) and SMS (Horticulture) to provide

technical backstopping to the Agriculture Service Center and Agriculture Contact Points;

Contribute to annual workplans and progress reports; and

Carry out procurement and ensure that procurement procedure for agricultural inputs

comply with WB policy and procedures.

103. The main functions of ASC and ACPs are:

Ensure and maintain effective coordination with PIO and other agencies and firms

engaged in agriculture development in the project area;

Ensure timely implementation of planned activities;

Organize field based extension activities such as group organization, agricultural training,

setting up demonstration, establishment of farmer field schools, and cross learning visit

for farmers;

Assist in identifying and securing resource persons for training;

Manage information desks; and

Preparation and submission of progress reports (brief monthly and comprehensive semi-

annual) to DADO, with copies to PIO and DDG Planning, DoA.

104. At the local level, WUA membership of landholders in the irrigation scheme (that are

also water users) is compulsory. WUAs will be encouraged to promote representation and

inclusion of all communities participating in the project. Inclusion of women will be adopted as

a project principle, with a minimum target of 33 percent women in decision-making processes.

The project will undertake capacity building measures, including training, to make the

participation of women and other marginalized groups more substantial. Experience has shown

that gender mainstreaming initiatives should cover both men and women, which the project will

take into account in its capacity building initiatives. In order to avoid conflicts regarding ethnic

representation and water allocation the project will develop implementation guidelines on the

basis of the GAAP, social management framework, and safeguards where potential issues and

concerns have been identified and mitigation measures outlined.

105. The project will interact with other development initiatives at the local level. As part of

this, local government bodies (District Development Committee and Village Development

Committees) will be briefed and consulted on project activities. Information and experience will

be exchanged with civil society organizations operating at the local level to create synergy.

36

106. Disclosure of Information. Disclosure requirements will be complied with to make

information transparent and all information readily available for public disclosure. DoI will post

on its website all available guidelines, procedures, and other key information related to the

project. In particular, DoI will disclose the following through its website: AWPB, Budget

Allocation by Activity and Budget Line; Project Implementation Manual; Annual Procurement

Plan; Trimester Implementation Progress Reports (approved versions); and Annual Audited

Financial Statements.

107. All relevant information material developed for communication and outreach purposes

will be translated into Nepali. Surveys and focus group discussions with samples of

beneficiaries will be conducted periodically to obtain feedback on the effectiveness of

communication, quantity, quality and usefulness of training provided to the WUAs, and on

whether the water users are receiving equitable benefits from the project.

Financial Management and Disbursement Arrangements

108. Country Financial Management Environment. The Nepal Country Financial

Accountability Assessment (CFAA, 2002), updated in 2005, concluded that the failure to comply

with the legal and regulatory fiduciary framework makes the fiduciary risk in Nepal “high”, a

risk level that is similar to that in most developing countries. The situation has not significantly

changed during the past five years. The Public Financial Management (PFM) Review (May

2007) reaffirmed that the PFM system in Nepal is well designed but unevenly implemented. The

PFM benchmarks established in 2008 based on the Public Expenditure and Financial

Accountability (PEFA) framework prepared by the government with technical assistance of the

World Bank confirmed that the fiduciary risk remains “high”. A joint DfID/World Bank

progress review carried out between September 2008 and February 2009 showed little progress

in the implementation of the PEFA Action Plan. Some of the prevailing country level risks

include deteriorated control environment, insufficient monitoring, increased threat of collusion

and intimidation to bidders, and weakening of oversight agencies (absence of institutional

leaders which include the Auditor General and the Chief Commissioner of the CIAA). However,

improving overall financial accountability framework remains a high priority of the government.

Some of the actions undertaken such as promulgation of the Public Procurement Act and Public

Procurement Regulations in 2007, amendment of the Financial Administration Regulations in

2007, and the self-assessment of various PFM indicators as per PEFA Guidelines in 2007 are

some of the examples of government‟s continued commitment. Preparation of the PFM Strategy

Document paved the way for the implementation of action plans. A high level steering

committee chaired by the Finance Secretary provides necessary forum for close monitoring on

implementation with continuation of collaborative support from development partners.

109. Financial Management Arrangements and Risk Analysis. The Department of Irrigation is

the main implementing agency for the project. DoI has gained considerable experience over the

years implementing World Bank and ADB-financed irrigation projects. It typically implemented

the financial management arrangements in a satisfactory manner. As compared to IWRMP

which requires major coordination efforts with division and subdivision offices and with other

line agencies, the proposed project has only one cost center and requires coordination with one

37

DADO only. The capacity of DoI/PIO and DADO has been assessed and is found satisfactory.

Since the government financial procedures will be followed, DoI and DADO are capable of

handling financial management.

110. The Government‟s Financial Administration Regulations (FAR) which provide the basis

to exercise appropriate controls over project transactions will be used. It will be supplemented

by the Project Implementation Manual which will include a detailed description of the funds

flow, financial management guidelines, and reporting arrangements. There will be efforts in

capacity building for project management and WUAs in technical areas, as well as financial

management. Performance audits will be conducted to measure progress and timely

identification of areas of improvement, including for financial management. To address the

remaining gaps that have been identified during the assessment, a financial management action

plan has been agreed and the risks will be reduced as the action plan gets implemented (see later

in this Section). From the financial management perspective, the overall risk is currently

“Substantial” and the residual risk is “Modest”. Despite some residual risks, especially related to

continuity of staff and the remote location of the PIO office, the financial management

arrangements for the project are expected to be adequate for the purpose of project

implementation.

111. Planning and Budgeting. The central level budgeting procedures for preparation,

approval, implementation, and monitoring are elaborated in the Financial Procedures Rules

(FPR). The preparation of annual work program and budget (AWPB) will be coordinated by the

PIO, seeking input from the DADO for Component 3. The draft AWPB will be discussed at the

Project Steering Committee meeting. Following the endorsement of the PSC, the PIO will

submit the proposed annual work program and budget to the National Planning Commission and

the Ministry of Finance. Two dedicated budget codes – one for the irrigation components of the

project (components 1, 2, and part of 4) and the other for the agricultural component (component

3 and part of 4) - will be assigned in the Government‟s Budget (Red Book) for recurrent and

capital expenditures. The annual work program will be prepared based on the guidelines that

will be spelled out in the PIM and the budget preparation guidelines provided by NPC. MoF

releases authorization for expenditure to the Ministry of Irrigation, which in turn releases

authorization to DoI. The Director General of DoI will delegate spending authority to the Project

Manager.

112. For component 3, the District Agricultural Development Office will be responsible to

prepare the annual work program and budget based on the Ministry‟s directives and guidelines.

The DADO of Dhangadhi will provide its input to the PIO for activities to be implemented

through the project. Budget allocation for DADO will be reflected in a separate budget code

under the MoAC.

113. Funds Flow Arrangements. GoN releases the budget as per the approved work program

to the PIO in three tranches as per its fund release procedures. The budget approved by GoN

will be indicated in the government‟s budget (Red Book) under a separate budget head for MoI.

Prior to the approval of the work program and budget, one-third allocation based on the previous

year expenditures or projected expenditures for the first trimester, whichever is greater, will be

made to the PIO through the concerned District Treasury Controller Office (DTCO). Since the

38

treasury single account (TSA) has been implemented in Kailali District from January 2011, all

payment transactions upon the approval of the authorized offices in the district will be made

through the DTCO. With the TSA system, the cost centers will not handle any cash transaction,

but upon the approval by the cost centers, the payments will be made through the DTCO.

Subsequent second and third trimester authorizations are based on performance reflected by the

physical progress reports as required by Schedule 2 of the FPR.

114. For reimbursement of IDA‟s share of expenditures to GoN‟s consolidated fund and for

direct payments to beneficiaries, a Special Designated Account will be established at the Nepal

Rastra Bank in US Dollars. This will facilitate quick payments for activities under the project,

including the reimbursement under terms and conditions acceptable to IDA. DoI will designate

the Project Manager and Finance/Accounts Officer as the authorized signatories who will be

authorized to issue checks. Supporting documentation submitted for withdrawal of funds from

the Credit/Grant is comprised of summary reports (e.g. statements of expenditure, SoE) and

records (e.g. invoices, receipts). Reporting formats for Trimester Implementation Progress

Reports have been prepared and agreed.

115. Project Financial Accounting, Reporting and Internal Controls. Both implementing

agencies of the components (PIO and DADO) will maintain books of accounts and prepare

accounts on a cash basis. The PIO will coordinate activities under Components 1 (Scheme

Modernization), 2 (Strengthening Water Users Associations) and 4 (Project Management which

include Monitoring & Evaluation). The DADO, Dhangadhi will coordinate activities under

Component 3 (Agricultural Production Support) and will have some share under Component 4.

The PIO will provide overall coordination under all components. Implementation progress will

be monitored through the Implementation Progress Report which will be coordinated and

prepared by the PIO. Reporting arrangements from the DADO will be described in the PIM.

The DADO will send its statement of expenditures to the PIO which will be consolidated in the

report to be prepared by the PIO. The PIO will be adequately strengthened to maintain both

technical and accounting information using spreadsheet or appropriate software.

116. Accounting information will be regularly updated in the PIO system to timely generate

financial reports. As required by the government system, the PIO will maintain Main

Credit/Grant Ledger, Subsidiary Credit/Grant Ledger, Withdrawal Monitoring Register, Special

Designated Accounts Ledger, and other ledgers, as required. GoN‟s internal control system will

be applied to monitor the progress of the project in accordance with sound accounting practices.

Activity-based subsidiary records for monitoring the detail accounts/key indicators will also be

maintained by the PIO. The accounting systems contain the following features: (i) application of

consistent cash accounting principles for documenting, recording, and reporting its financial

transactions; (ii) a well-defined chart of accounts that allows meaningful summarization of

financial transactions for financial reporting purposes; (iii) maintenance of withdrawal

monitoring register, the record of Statement of Expenditures and Designated Accounts register;

(iv) the asset register; (v) monthly closing and reconciliation of accounts and statements; and (vi)

the production of annual financial statements.

117. Financial Management Staffing. As per the implementation arrangements, the PIO will

be the office to provide overall coordination of implementation and management of project

39

activities. In terms of financial staff, the PIO will have one dedicated Finance Officer and one

Accountant. DoI has ensured that the PIO will be staffed with an experienced and qualified

finance officer with experience in computer operations and having ability to provide leadership

to project financial activities. The DADO will designate an Accounts Officer to maintain the

records of the project activities as defined in the PIM.

118. Internal Audit. The District Treasury Controller Office, Dhangadhi, is responsible to

carry out the internal audits of both PIO and DADO. Internal audits are carried out on a

trimester basis. Each cost center is responsible to maintain its accounts by budget heads. The

Bank will also arrange for special reviews of financial management arrangements as part of its

implementation support.

119. Performance Audit. An arrangement will be made to carry out the performance audit of

the project about two years after the project implementation starts. The performance audit will

be carried out through the Office of the Auditor General (OAG) as mandated by the Interim

Constitution, and required resources will be provided by the Government of Nepal for this

purpose.

120. Interim Financial Reports. The Interim Financial Reports will be part of the Project

Implementation Progress Report will report total investments inclusive of IDA contribution,

government contribution, and beneficiaries‟ contribution, to be separated by specific activity so

that total investments as envisaged can be tracked and monitored. The PIO will produce the

progress reports, showing the sources and uses of funds, output monitoring report, procurement

management report, and narrative progress. To match the public sector planning and reporting

cycle, the IPR will be produced on a trimester basis and submitted within 45 days from the end

of the preceding trimester.

121. External Audit. Annual consolidated project financial statements and Designated

Accounts statement will be audited by the Office of the Auditor General, which is considered

acceptable by IDA for this purpose, and submitted to IDA within six months after the end of the

fiscal year, i.e. by January 15. The terms of reference for the external audit has been discussed

and agreed with the Office of the Auditor General. The following audit report will be monitored

in the Bank‟s Audit Report Compliance system (ARCS):

Implementing

Agency

Audit Auditors Audit Due Date

DoI Project Consolidated

Financial Statements

OAG 6 months after the end of

fiscal year (January 15th

)

122. Financial Management Action Plan. Required actions that link with financial

management and strengthening the financial management capacity under the project were agreed

between the Recipient and IDA as summarized below:

40

Action Plan

Action Responsibility Completion Date

1. Designate suitably qualified (with computer

experience) and competent team of

Finance/Accounts Staff at the PIO: One Finance

Officer and one Accountant.

MoI/DoI August 31, 2011

2. Finalization of the Project Implementation Manual

to describe overall operational and financial

management arrangements, satisfactory to IDA.

DoI/PIO Disbursement

Condition for

Category 1.

3. Provide extensive orientation and training to all

beneficiaries.

PIO

Starting one

month after the

approval of the

PIM and then on a

regular basis, as

needed. .

4. Develop a computerized system using appropriate

software to track project expenditures and produce

timely financial statements.

PIO December 31,

2011

123. Implementation Support Plan. Project implementation progress will be closely

monitored by the DoI, DoA, and IDA. IDA will supervise project implementation for the

purposes of supervision on fiduciary aspects of both procurement and financial management.

DoI through PIO will report on project implementation progress through a trimester report, the

IPR. The agreed action plan will be closely monitored to ensure appropriate actions are being

implemented. Key FM fiduciary work includes: (i) periodic visits to cost centers for ex-post

reviews; (ii) reviews of implementation progress reports and audit reports and preparing

summaries of such reports; and (c) participating in implementation support missions and keeping

the team informed of financial management issues or improvements. The initial focus will be on

the progress of implementation of agreed actions, and facilitating the PIO in maintaining sound

Financial Management arrangements throughout project implementation. From second year of

implementation, IDA will field from time to time an independent consultant or consulting firm

for ex-post review of financial management arrangements.

124. Allocation of Financing Proceeds. Disbursement under proposed financing will be made

as indicated in the next table, which indicates the percentage of financing for different categories

of expenditures of the project. It is expected that IDA funds will be disbursed over a period of

five years.

41

Allocation of Financing Proceeds

Category Amount of the

Credit Allocated

(expressed in US$

and SDR in

brackets)

Amount of the

Grant Allocated

(expressed in

US$ and SDR in

brackets)

Percentage of

Expenditures to

be Financed

(inclusive of

Taxes)

(1) Civil

works under

Components 1,

2, 3, and 4 of

the Project

US$23,600,000

(SDR14,900,000)

US$8,600,000

(SDR5,400,000)

87%

(2) Goods,

services,

training, and

incremental

operating costs

under

Components 1,

2 and 4 of the

Project

US$8,700,000

(SDR5,500,000)

100%

(3) Goods,

services,

training, and

incremental

operating costs

under

Component 3

of the Project

US$2,100,000

(SDR1,400,000)

100%

TOTAL

AMOUNT

US$23,600,000

(SDR14,900,000)

US$19,400,000

(SDR12,300,000)

125. Disbursement Arrangements. Disbursements from IDA will be made based on full

documentation for contracts above the Prior Review threshold or on the basis of SoEs. To

facilitate disbursements, Designated Accounts will be established. Program costs are

implemented through contractual services with firms or individuals and hence payments will be

made directly from the Designated Accounts. For large value contracts, direct payment method

for disbursements will be used. Small value contracts, goods of small values, training,

workshops, incremental operating costs, and project management costs will first be pre-financed

by the government, and once the accounts are consolidated and approved will be transferred

from the Designated Accounts to the government‟s consolidated fund.

42

126. Use of Statement of Expenditures. The applications for reimbursement and reporting use

of advance in the Designated Account should be supported by: (i) list of payments against

contracts that are subject to the Bank‟s prior review, together with records evidencing eligible

expenditures (e.g. copies of receipts, supplier invoices); and (ii) Statement of Expenditure for all

other expenditures/contracts. During implementation review missions, Bank staff will closely

review SoE claims to ensure that funds are utilized for the intended purposes. Any ineligible

expenditure identified during such reviews will need to be refunded to IDA.

127. Designated Accounts. A Designated Accounts in US Dollars will be established at the

Nepal Rastra Bank for utilization of IDA‟s share of project expenditures, on terms and

conditions satisfactory to IDA. The authorized allocation for Designated Accounts will be

US$5.0 million. The designated accounts will be operated under joint signatures of the Project

Manager and the Finance Officer.

128. The PIO will ensure that the bank/cash books are reconciled with bank statements every

month. They will separately submit applications documenting the expenditures from the

previous advance and requesting for additional advance based on cash forecast to be deposited in

the Designated Accounts on a trimester basis. The withdrawal application will be accompanied

by reconciled statements from the bank in which the account is maintained, showing Designated

Account transactions. Supporting documentation will be maintained by PIO for at least one

fiscal year after the year in which the last disbursement from the project took place, and will be

available for review by IDA staff and independent auditors.

Procurement

129. Procurement for the proposed project will be carried out in accordance with the World

Bank‟s “Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD

Loans and IDA Credits and Grants by World Bank Borrowers” published by the Bank in January

2011, and “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA

Credits and Grants by World Bank Borrowers” published by the Bank in January 2011, and the

provisions stipulated in the Financing Agreement. For each contract to be financed under the

Credit/Grant, the procurement methods or consultant selection methods, the estimated costs,

prior review requirements, and time frame are agreed between the Borrower and the Bank in the

Procurement Plan. The Procurement Plan will be updated at least annually or as required to

reflect the actual project implementation needs and improvements in institutional capacity.

130. Procurement of Works. Works procured under this project will include construction of a

feeder canal, rehabilitation of branch canals, construction of hydraulic structures, command area

flood protection works, upgrading of link roads, and environmental protection works.

Procurement of works also includes construction of a PIO office building and small WUA

buildings within the project‟s command area. Procurement of contracts for feeder canal, branch

canals, link roads, and canal bank and command area protection works are expected to be carried

out through ICB procedures, while other contracts will follow NCB procedures using the Bank‟s

Standard Bidding Documents (SBD) and as indicated in the procurement plan. Civil works

contracts estimated to cost the equivalent of US$3,000,000 or above shall be procured through

ICB following World Bank procedures.

43

131. Procurement of Goods. Goods procured under the project will include vehicles, office

equipment, and heavy equipment for system operation and maintenance. The procurement will

be carried out as indicated in the procurement plan. Goods contracts estimated to cost the

equivalent of US$500,000 or above shall be procured through ICB following World Bank

procedures.

132. Procurement of Non-consulting Services. The project entails field training to WUAs for

capacity building, training to DoI and DADO staff, study tours, etc. under this category of

procurement. These activities will be carried out as indicated in the procurement plan.

133. Selection of Consultants. The project will include procurement of small and medium

value contracts with consulting firms, individual consultants, and possibly NGOs. Shortlists of

consultants for services estimated to cost less than US$200,000 equivalent per contract may be

composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of

the Consultant Guidelines. The project also envisages limited services of international

consultants for some jobs requiring high level of professional expertise and experience including

services for quality control, design and supervision. International consultants may be either from

a foreign firm or international experts working on behalf of a Nepali firm.

134. Assessment of the Agency’s capacity to implement procurement. Most procurement

activities will be carried out by the PIO in Tikapur, Kailali District, under the management of a

project manager, with the support of a team of engineers and a procurement officer. An

assessment of the capacity of DoI/PIO to implement procurement actions for the project was

carried out on February 14, 2011. The assessment reviewed the organizational structure for

implementing the project and conducted interaction with the project manager and project staff.

Procurement documents of other projects, including IWRMP, were also reviewed during the

assessment.

135. Though the agency is headed by a senior official with adequate experience of IDA funded

procurement procedures and requirements and is assisted by a team of engineers, considering the

number of procurement jobs to be initiated in the first year and varieties of procurement

activities involved, support of an individual procurement consultant is deemed necessary as an

extended working hand for the PIO. Since the project procurement includes varieties of

activities including ICB, NCB, and selection of consultants, procurement training for project

staff, on a periodic basis, is recommended as per identified needs. Based on the assessed

procurement capacity of the PIO and provision of nominal mitigating measures as suggested, no

major risks are identified for project procurement. Therefore, the overall project risk for

procurement is „moderate‟.

136. For all NCB contracts, the implementing agencies may follow the Public Procurement

Act and Regulations of Nepal, which set out thresholds and clear procedures for making internal

procurement decisions. In order to ensure economy, efficiency, transparency, fairness and broad

consistency with the provisions of Section 1 of the Procurement Guidelines, the following

exceptions to local procedures shall apply in the case of National Competitive Bidding:

44

(i) bid documents shall be made available, by electronic means, mail or in person,

to all who are willing to pay the required fee;

(ii) foreign bidders shall not be precluded from bidding and no preference of any

kind shall be given to national bidders;

(iii) bids shall be opened in public in one place, immediately after the deadline for

submission of bids;

(iv) qualification criteria (in case pre-qualifications were not carried out) shall be

stated in the bidding documents, and if a registration process is required, a

foreign firm declared as the lowest evaluated bidder shall be given a reasonable

opportunity of registering, without let or hindrance;

(v) evaluation of bids shall be made in strict adherence to the criteria disclosed in

the bidding documents, in a format and specified period agreed with the

Association and contracts shall be awarded to the lowest evaluated bidders;

(vi) rebidding shall not be carried out without the prior concurrence of the

Association;

(vii) extension of bid validity shall not be allowed without the prior concurrence of

the Association (A) for the first request for extension if it is longer than four (4)

weeks and (B) for all subsequent requests for extension irrespective of the

period; and

(viii) there shall not be any restrictions on the means of delivery of the bids.

137. Procurement Plan. The Borrower has developed a procurement plan for project

implementation which provides the basis for the procurement methods. This plan has been

agreed between the Borrower and the IDA task team. It will be available in the project‟s

database and in the Bank‟s external website. The Procurement Plan, as prepared, includes for

now only the proposed procurement for Component 1 and 2, to be managed by DoI. For

Component 3, to be managed by DADO, the Procurement Plan will be developed based on

demand and detailed breakdown of program activities and will be reflected in the regularly

updated Procurement Plan of the project. The Procurement Plan will be updated in agreement

with IDA annually or as required to reflect the actual project implementation needs and

improvements in institutional capacity.

138. Procurement Supervision. In addition to the prior review to be carried out from the Bank

office, the capacity assessment recommends carrying out regular supervision reviews and post

review of procurement actions in the field.

139. Review by the IDA of Procurement Decisions. The Procurement Plan sets forth those

contracts which shall be subject to the Association‟s Prior Review. The following table is

presented to show the prior review requirement by the Association.

45

Procurement

Method

Threshold in US$ for contracts under prior review

Works Goods Services Non-

Consulting

Services

1 ICB contracts All All NA NA

2 NCB contracts Above

500,000

Above

300,000

NA NA

3 Shopping NA Above

20,000

NA NA

4 Community

participation

procedure

The first one

contract

NA NA NA

5 Direct contracting Above 10,000 Above

10,000

NA NA

6 Service contract with

a consulting firm

NA NA Above

200,000

NA

7 Individual consultant NA NA Above 25,000 NA

8 Training to WUA for

capacity building

NA NA NA The first

contract NA = Not Applicable. It is noted that not all procurement methods may eventually apply under the project.

46

Annex 4: Operational Risk Assessment Framework (ORAF)

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

Project Development Objective(s)

The project development objective is to improve irrigation water delivery to, and management in, the command area.

PDO Level Results

Indicators:

1. Irrigation service delivery by service providers (WUAs) assessed as satisfactory by water

users (measured in percentage of water users).

2. Resources generated by water users for the operation and maintenance of the modernized

irrigation systems (measured in percentage of required resources).

3. Increase in irrigated crop yields of main crops rice, wheat, and maize (in about 40 percent

of the command area at the head of the canal systems; measured in tons/hectare).

4. Number of female and male water users (defined as member of the WUA) provided with

improved water delivery services: (i) number of female water users; (ii) number of male water

users; and (iii) percentage of female WUA Executive Committee members.

47

Risk Category

Risk

Rating

Risk Description Proposed Mitigation Measures

Project Stakeholder

Risks

Low a) The project may not meet all the

expectations of the beneficiaries and

may not address all the infrastructural

issues of the existing irrigation

systems.

b) Different segments of the WUAs may

hold different views of the project with

regards to benefit sharing.

a) There are established WUAs that have

been in existence for a long time.

Regular consultations and information

sharing will be carried out on the project

design, scope, and implementation

aspects with these WUAs and their

members.

b) An assessment will be carried out to

improve understanding of the WUAs‟

organizational and operational

requirements as well as the need to

support their strengthening to manage

the improved irrigation system and

benefit sharing. Necessary steps will be

introduced in this regard under the

project design as part of the

implementation of especially component

2.

Implementing Agency

Risks

M-I a) Project Management weakened by

lack of timely mobilization of capable

and skilled staff or their untimely

transfer.

b) Inadequate procurement capacity and

the procurement process too lengthy.

a) A clause has been included in the IDA

Financing Agreement that specifies core

management team composition,

continuity in post requirements, and

understandings regarding consultations

with IDA prior to changes in core team.

b) Procurement officer is designated with

project management team and provided

adequate training. Frequent oversight

will be provided by the procurement unit

48

Risk Category

Risk

Rating

Risk Description Proposed Mitigation Measures

c) Inadequate staff capacity to manage

the financial aspect and agricultural

aspects of project implementation.

d) Institutional monitoring mechanism of

DoI is not adequate and lack of

effective complaint-handling and

grievance redress mechanisms.

e) The project contains capital-intensive

infrastructure components which

would involve inherent risks

associated with contracts and contract

management.

of the country office.

c) External FM consultant will be hired, if

needed. Staffing levels for agricultural

component will be addressed to include

privately hired staff, as needed.

d) External M&E mechanism as well as

complaint handling and grievance redress

system will be instituted.

e) To the extent possible ICB will be the

mode of procurement. Disclosure and

monitoring mechanisms, including

community and third-party construction

supervision and quality control will be

used to monitor contract management and

to increase transparency.

Project Risks

Design

M-L a) Design of the infrastructure not

conducive to the capacity of WUAs to

properly operate and maintain.

b) Design of the project does not focus

a) It will be ensured that final designs are

sound, based on modern design

standards yet compatible with local

conditions and that the proposed works

will serve the intended purpose and will

be sustainable with acceptable level of

O&M requirements.

b) WUAs have already been involved in

49

Risk Category

Risk

Rating

Risk Description Proposed Mitigation Measures

on lower-order and field-level

infrastructure that may dissatisfy

farmers.

the discussions in the project design and

there was unanimity that all WUAs

should benefit equally from the

proposed project (Phase I). There will

be continued stakeholder discussions to

ensure that every interested water

user/farmer is aware of the scope of the

project and the future proposals for a

phase 2 project that will lead to major

benefits.

Social and

Environmental

M-L a) Compliance with the safeguards

requirements remains inadequate

during implementation.

b) Elite capture of Users‟ group.

c) Environmental issues such as silting in

the canals may arise and water

availability from the river may be

reduced.

a) DoI has good experience in preparing

and implementing Social and

Environmental Management Plans based

on the developed framework. For the

current project, social assessment,

peace/conflict analysis, and

environmental studies have been carried

out and the frameworks and

management plans have been prepared.

Dedicated officers in the project

management team will work on social

and environmental issues. Training will

be provided to sensitize project

management staff. Regular monitoring

of the implementation of social and

environmental management plan will

take place.

b) Orientation and training of WUA office

bearers and the general WUA

50

Risk Category

Risk

Rating

Risk Description Proposed Mitigation Measures

membership will be carried out to make

them aware of their rights,

responsibilities and accountabilities.

Women and ethnic minorities will be

trained to increase their effectiveness

within WUAs.

c) Construction of regulating structures

will vastly reduce the uncontrolled flood

flows into the systems thereby reducing

the siltation in the canals.

Delivery Quality

M-I a) The civil works carried out

under the project will not be of

good quality, leading to

unsustainable works and

dissatisfaction among

beneficiaries.

b) Lacking defined roles of the

WUAs and Federation and the

DoI, proper functioning of the

irrigation systems and long-

term maintenance of the works

carried out under the project

will be in jeopardy.

a) Qualified contractors will be

selected through competitive

procurement methods.

Adequate day-to-day construction

supervision arrangements will be

made.

Third-party construction

supervision and quality assurance

consultants will be recruited

under the project.

b) The roles and functions of the

three individual WUAs and the

central committee (Federation)

and the DoI will be clearly spelled

out for the regular operation,

maintenance and management of

the irrigation systems in a MoU to

51

Risk Category

Risk

Rating

Risk Description Proposed Mitigation Measures

be signed by the WUAs and the

DoI. A detail WUA study will be

carried out to identify the current

WUA structure, reforms needed

in the current set up, skills

required to manage modernized

systems, enhancement of roles

and participation of female WUA

members, sensitization of the

members on gender issues, etc.

Overall Risk Rating at

Preparation

Overall Risk Rating During

Implementation Comments

M-I M-I

52

Annex 5: Implementation Support Plan

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

140. The implementation support strategy for the project is based on the nature of activities

supported by the project, the capacities of the implementation agencies, and the risks described

in the ORAF and GAAP. The implementation support strategy links the key project risks

identified in these and other documents with the mitigation measures that have been designed.

Along with regular implementation support described below, there will be continuous interaction

with the implementing agencies to provide support and guidance on issues and challenges that

may arise during implementation.

141. Project Implementation Office and Project Steering Committee. The PIO which is

responsible for the day-to-day implementation of the project will be staffed by dedicated and

full-time DoI staff who are assigned in their positions based on their professional skills and

experience as agreed with the Bank. Similarly, DoA will ensure that the needed district staff is

available to implement the agricultural component. The Bank implementation support team will

interact mainly with the PIO and DADO staff. The mandate of the PSC which will provide

policy guidance to the project will be clearly defined and agreed to. This will minimize the

likelihood of overlapping responsibilities occurring and hampering effective project

implementation. The Bank team will meet the chairman of the PSC and other members on a

regular basis to discuss the progress with and issues that affect project implementation.

142. Project Implementation Manual. A Project Implementation Manual will be used during

project implementation. The PIM will include details of roles and responsibilities of all

implementing agencies and the management structure, processes and procedures for the

implementation of the project. The PIM, that includes all other relevant documents, such as

GAAP, procurement plan, and cost tables, will be made available both in the English and Nepali

languages.

143. Supervision strategy. The supervision strategy for the project includes joint reviews by

the Bank and GoN on average every six months. These reviews will include field visits and

intensive discussions on project performance, and will be used as a forum for providing

constructive and corrective technical guidance. The findings of the joint reviews will also be

used to identify gaps constraining implementation and support will be provided to the

implementing agencies for the same.

144. Technical support to the PIO. Technical support will be provided by the Bank team to

the implementing agencies (PIO, DADO and its field offices) as needed to enable them to

implement all project activities, including support to WUAs, M&E, third-party construction

supervision, and specialized studies.

145. Monitoring and Evaluation. Capacity building of the implementing agencies in

monitoring and evaluation is a key aspect of supervision and implementation support to the key

agencies. The DoI/PIO and DADO will be supported with developing monitoring and reporting

formats for all components and activities to be undertaken by the project, and analysis of data

53

collected and presentation and use of findings. The PIO will be aided by independent monitoring

and verification mechanism undertaken by external consultants.

146. Financial Management. Training of staff on financial management procedures will take

place in the first six months of project implementation. Project level service standards will be

developed for disbursement against financial and results reporting. A Bank financial

management specialist will be part of the joint reviews to assess the quality of financial

management being followed in the project and recommend needed remedial actions.

147. Procurement. Training of PIO and DADO staff on procurement procedures will take

place in the first six months of project implementation. A procurement specialist will be part of

the joint reviews to assess procurement procedures being followed in the project and recommend

needed remedial actions.

148. Safeguards. The GoN has prepared an Environment Management Plan and Social Impact

Management Framework to guide environmental and social safeguard issues triggered by the

project. A Vulnerable Community Development Framework, Indigenous Peoples‟ Development

Plan, and Gender Action Plan have been prepared to ensure that the project will focus on

distributing the benefits to the indigenous people, vulnerable people, women, and other

disadvantaged groups. The Bank‟s environmental and social safeguard specialists will

participate regularly in the implementation review missions to provide technical support and to

assess the adequacy of the implementation of the social and environmental management

activities.

149. The Bank‟s implementation support requirements are summarized in the following table.

Time Focus Skills Needed Resource Estimate

First twelve

months of

project

implementation.

Technical support Expertise in irrigation,

hydraulic engineering,

agriculture, and

institutional

development

18 staff weeks

FM training and

support

Financial management 4 staff weeks

Procurement

training and support

Procurement 4 staff weeks

M&E and

Governance support

M&E and impact

evaluation expertise;

Governance

development

6 staff weeks for

M&E and 4 staff

weeks for

governance

54

Time Focus Skills Needed Resource Estimate

Environment and

Social Management

Support

Environment;

Social Development

3 staff weeks each

Team Leadership Operational

experience

8 staff weeks

12-48

months

Technical support Expertise in irrigation,

engineering,

agronomy, and

institutional

development

12 staff weeks/year

M&E and

Governance support

M&E and impact

evaluation expertise;

Governance

development

4 staff weeks for

M&E and 2 staff

weeks for

governance

Environment and

Social Management

Support

Environment;

Social Development

3 staff weeks

each/year

FM review Financial management 3 staff weeks/year

Procurement review Procurement 3 staff weeks/year

Team Leadership Operational

experience

6 staff weeks/year

55

Annex 6: Team Composition

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

150. World Bank staff and consultants who worked on the project are shown in the next table.

Name Title Unit

Joop Stoutjesdijk Lead Irrigation Engineer/Task Team Leader SASDA

Hiramani Ghimire Senior Governance Specialist SASGP

Shambhu Prasad Upreti Procurement Specialist SARPS

Bigyan Pradhan Senior Financial Management Specialist SARFM

Drona Raj Ghimire Environmental Specialist SASDI

Purna Chhetri Senior Rural Development Specialist SASDA

Chaohua Zhang Senior Social Sector Specialist SASDS

Mei Wang Senior Counsel LEGES

Akiko Ogawa Counsel LEGES

Tumurdavaa Bayarsaihan Senior Rural Development Specialist SASDA

Tara Shrestha Team Assistant SASDO

Kunduz Masylkanova Economist FAO

Shyam Ranjitkar Water Resources Development Specialist

(Consultant)

FAO

Prachanda Pradhan WUA Development Specialist (Consultant) FAO

Achyut Man Singh Engineer (Consultant) FAO

Ohn Myint Engineer (Consultant) SASDA

56

Annex 7: Governance and Accountability Action Plan

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

Key governance issues in the project

Government agencies

151. The key agencies involved in implementation of this project are the Department of

Irrigation under the Ministry of Irrigation, the Department of Agriculture under the Ministry of

Agriculture and Cooperatives, and locally based Water Users Associations. DoI will be the

project host. The Project Implementation Office in Tikapur in the center of the project area will

be responsible for the overall coordination of project activities. Both DoI and DoA have had

significant experience in the implementation of irrigation and agricultural development projects.

However, inter-departmental coordination and collaboration has been a major challenge in most

development projects in government and adequate arrangements have to be ensured under this

project. At the local level, the project will require cooperation between the project office, local

government bodies, and line agencies of government. This will also be a governance challenge.

Water Users Associations

152. Nepal has a long history of farmer-managed irrigation systems. Community management

of irrigation systems has been recognized by the government‟s Irrigation Policy. Local

communities owning the systems are fully responsible for managing resources. The more than

100 year old Rani Jamara Kulariya Irrigation Scheme has self-governance as its main principle.

In all three systems community-based WUAs are functional. They develop management rules

and regulations on their own and implement them based on community consensus. The three

WUAs have also taken initiatives to form an umbrella committee („federation‟).

153. The project area comprises eight VDCs in Kailali District. Tharus, who account for 48

percent of the population in these VDCs, lead the WUAs. WUA chairpersons (Chaudhary) often

„inherit‟ the leadership, with some of them being „third generation‟ leaders. Even though they

generally enjoy significant trust and confidence in the community, the desire to have proper

election of committee members is growing, and is something that will be encouraged under the

project.

154. Traditional systems such as the Rani Jamara Kulariya Irrigation Scheme are facing

certain challenges. First, communities have become more aware of their rights and entitlements.

Not all members of the community can be taken for granted in terms of traditional loyalty to

community leaders. For example, the system of Badghar (community volunteer for

communications with the population) has become less effective than it was in the past. In recent

years, the Badghar system is undergoing some changes. The once powerful Badghars no more

enjoy the power and prestige of the past. Recent surveys show that Badghars feel that people

have become "unruly" in recent years - they are not as loyal to the Badghars as in the past. With

increasing challenges of the job, many Badghars suggest that they be appropriately compensated.

Second, ethnic relations (mainly between Tharus and Pahadis) are affecting to a certain extent a

57

smooth functioning of the traditional system, although this is yet to be felt widely. Third, social

and political inclusion and the opportunities to participate are also emerging as new issues. The

role of women, for example, needs to be more openly recognized. Finally, the proposed

modernization of the systems under the project will require enhanced capacity of WUAs both in

terms of the handling of technology and use of innovative management practices.

155. The system of sharing of benefits and contributing labor needs to be understood better.

Most farmers in the project area have small holding size of less than one ha. Some families have

bigger holding but this needs to be seen in relation to the size of the household itself. An issue to

be addressed is the proportionality of family contributions (cash or labor) to operation and

maintenance of the systems.

156. The traditionally effective trust-based system is not fully prepared for disputes of various

kinds. Settlement of disputes and handling of grievances will be part of management

improvements in the project. Allocation of water between head and tail-enders is a constant

source of tension, as in many irrigation schemes, but is generally resolved at the local level and

by the Badghars themselves.

157. Although women‟s participation has increased in recent years, it is still only 19 percent in

the three WUAs combined. There are virtually no women Badghars. The major barriers that

women face in participating more equally include: rules governing membership and labor

contribution; lack of education and awareness; difficulties negotiating with multiple

responsibilities; and male-led information and communication channels.

158. The rules for the election of WUAs are similar in all three systems in that all three

committees follow an indirect system of representation. Water users do not directly elect the

executive committee. In Rani, Badghars elect the WUA committee members. Jamara and

Kulariya follow a different procedure. They elect a „branch committee‟ first and entrust it to

elect the WUA executive committee. All three systems include both Tharu and Pahadi members

in the WUAs. On a recent perception survey, many irrigation users (64 percent) did not rate the

performance of their WUAs highly. Only eight percent of the surveyed water users found

WUAs “fully capable” of delivering on their mandate.

159. The WUA positions are highly contested because the persons occupying them will have

considerable authority and influence over decisions related to governance of the irrigation

systems. They will also act as the major interlocutors between the users, on the one hand, and

the government, on the other. There is a growing assumption amongst committee members that

the umbrella WUA will have influence over the awarding of contracts under the project and

could be financially rewarded once donor and government funding comes through. These

expectations will have to be managed to avoid any future conflicts

160. Some community members are also raising the issue of growing political party interests

in the project, especially because the project involves large budget. The major political parties in

general and those advocating for Tharu rights in particular are very interested in the project, and

could play a role in politicizing the project and the WUAs for their political gains. At a focus

group discussion during project preparation, for example, one participant observed that a certain

58

political party wanted to monopolize construction works and raise "taxes" through them. Based

on experience elsewhere, this observation may not be very far from reality. The project will put

in place effective governance and accountability systems to make sure these apprehensions do

not materialize.

Objectives of the Governance and Accountability Action Plan

161. The Governance and Accountability Action Plan‟s main objective is to contribute

towards strengthening governance and accountability systems in the project and beyond. It will

achieve this objective by:

ensuring resources allocated by the project are spent for the intended purposes and

directed to the beneficiaries of the project;

strengthening coordination between different national and local agencies; and

improving feedback mechanisms between beneficiaries, civil society, and project

authorities.

Scope

162. Several areas for governance improvement have been identified: implementation

environment, organizational arrangements, procurement, monitoring, and accountability

arrangements. The GAAP proposes actions for each of these issues, timeline for each action, and

responsible agency for implementation. There are also some „early warning indicators‟ which, if

monitored properly, enable timely actions for course correction.

Monitoring arrangements

163. The GAAP will be monitored regularly against agreed actions which will be reflected in

the project‟s periodical progress reports and aide-memoires. This will be a joint responsibility of

DoI, DoA, WUAs, and the World Bank. The GAAP matrix will be used widely for monitoring

purposes. „Early warning‟ indicators of governance and accountability risks will be monitored

regularly so that corrective measures can take place in time. If any „early warning‟ is triggered,

DoI will initiate enhanced supervision through specific third-party audits, reviews by sector

experts, training workshops, and joint interim missions with the Bank, as required. If the

investigation confirms corrupt, fraudulent, or collusive practices at any stage of the project,

appropriate sanctions will be applied by the relevant agency, depending on the nature of the case.

164. While DoI will have the overall responsibility for this GAAP, the PIO will be responsible

for implementing program-specific actions included in the GAAP matrix and will also act as a

nodal point to coordinate with other agencies for effective implementation of the GAAP. The

key person in charge of this GAAP will be the Project Manager. The GAAP will also be

monitored as part of the Bank‟s implementation support missions.

59

Governance and Accountability Action Plan

Area of

work

Issues likely to affect

project performance

Actions to address the issues Responsi-

ble

agency

Timeline Early

warning

signs

Inter-departmental coordination and institutional performance

Effective

coordination

between

GoN

agencies at

different

levels

Weak coordination

between DoI and

DoA.

Coordination and cooperation

among GoN agencies at

national level will be

strengthened through better

communication and exchange

of information:

Project Steering

Committee headed by

MoI Secretary will meet

at least every six months

to make sure that relevant

GoN agencies coordinate

all departmental activities

with each other;

DoI will organize

workshops to establish

and review coordination

arrangements between

DoI, DoA, and other

related agencies;

The project will set up a

liaison office in

Kathmandu (based at DoI)

for coordination and

communications with the

on-site PIO.

MoI/

PSC

DoI/DoA

DoI/PIO

2 times a

year

January

2012

January

2012

Coordination

meetings do

not take place

in time or are

not

represented at

appropriate

level.

Poor coordination

between GoN

agencies and WUAs.

Project Implementation

Office will consult with

DADO and the WUAs and

their members on project

activities on a regular

basis;

The project

implementation manual

will be agreed with DoI,

DADO, and WUAs.

PIO

PIO/

DADO/

WUAs

At least

two times a

year

Ongoing

Poor

exchange of

information

between

project

entities over a

long period.

Capacity

building

Inadequate capacity at

DoI and DoA leading

to:

Delays in staff

deployment

Frequent transfer

of project staff

Delays in budget

disbursement

Poor use of staff

skills acquired

GoN employees will be

identified and deployed in

project soon after

effectiveness;

External expertise will be

procured and deployed in

project activities, as

needed;

DoI/MoI

PIO

January

2012 to be

completed

As

identified

by GoN and

IDA during

project

reviews.

Project

deadlines start

slipping.

60

Area of

work

Issues likely to affect

project performance

Actions to address the issues Responsi-

ble

agency

Timeline Early

warning

signs

through training

Weak monitoring

mechanisms

Provisions of Civil

Service Act will be

adhered to on transfer and

training of project staff;

Project includes adequate

resources for monitoring.

Continuous

Continuous

Water Users Associations

Weak institutional

WUA capacity A participatory

assessment of institutional

capacity of WUAs will be

undertaken to

strengthen/reorganize

their management

practices;

Preparation of improved

by-laws to provide

appropriate charter and

mandate to WUA;

Training and workshops

will be organized for

members of WUAs;

A training manual will be

developed for training

activities to be

implemented by WUAs.

WUAs/

PIO

PIO/

WUAs

PIO/

WUAs

PIO/

WUAs

June 2012

September

2012

August

2012

onwards

July 2012

WUAs are

not motivated

to undertake

self-

assessment

and not

interested in

participating

in training

activities.

Poor communication

and coordination

between WUAs of the

three systems

WUAs of the three

systems will maintain a

federation of WUAs

(“central committee”) at

the project level to

facilitate communication

and coordination. This

committee will represent

individual WUAs in their

interaction with external

agencies;

The main WUA will sign

an MoU with DoI on each

others‟ roles and

responsibilities in project

activities;

The PIO and the central

committee of WUA will

meet regularly to review

progress and issues in

project implementation;

The central committee of

WUA will meet with the

three systems-level

WUA

central

committee

and PIO

WUA, DoI

PIO,

WUA

WUA

CC/

WUAs

Ongoing

March

2012

Up to six

times per

year

Up to six

times per

year

Conflict

between the

WUAs

61

Area of

work

Issues likely to affect

project performance

Actions to address the issues Responsi-

ble

agency

Timeline Early

warning

signs

WUAs regularly to review

progress and issues in

project implementation.

Implementation environment

Conflict

management

Inequitable sharing of

water at intakes. Water allocation rules will

be agreed and enforced in

consultation with the

central committee.

WUA

CC/PIO

Continuous Complaints

on water

sharing.

Unequal labor

contribution to

maintain the systems

Labor and financial

contributions will be

based on landholding size;

Grievance handling

system will be put in place

and its use will be

monitored.

WUAs/

PIO

PIO/

WUA CC

January

2013

June 2012

Continued

absence (or

poor

compliance)

of labor

contribution

rules.

Project authorities not

used to pro-active

communication

(which limits the

transparency of the

process)

An information officer

will be designated

according to the

provisions of the RTI Act;

Guidance and

methodologies for

information disclosure are

captured in the operational

manual.

DoI/

PIO

PIO

January

2012

January

2012

Inclusion and

representation

Poor inclusion of

women and other

marginalized

communities in

project decision-

making systems

WUAs will be encouraged

to implement the

provisions of irrigation

regulation;

Capacity support will be

provided to women and

other marginalized

communities through

training programs to

achieve meaningful

participation.

PIO/

WUAs

PIO

March

2012

March

2012

onwards

Women‟s

representation

in WUAs

remains less

than 33

percent.

Procurement

Procurement

and contract

management

capacity

Weak bidding and

contracting systems Tender notices will be

disseminated widely (e.g.

publication in national

newspapers);

Pre-bidding conferences

will be held to provide

information about

sanctions to be undertaken

against contractors found

to be involved in corrupt

practices (collusion,

bribery, fraud, etc.);

Transparency will be

ensured in evaluating

DoI/

PIO

PIO/DoI

PIO/DoI

Based

on

procure-

ment

plan

Delays in

procurement

Reports about

poor

competition

in

procurement

62

Area of

work

Issues likely to affect

project performance

Actions to address the issues Responsi-

ble

agency

Timeline Early

warning

signs

bids.

Weak monitoring

arrangements for

procurement

Procurement training will

be provided to the PIO

staff engaged in the

project;

Procurement plan will be

prepared and monitored.

DoI/

PIO

PIO

January

2012

August

2011

onwards

Weak contract

management leading

to misuse of resources

Contract management

training will be provided

to relevant PIO staff

engaged in the project;

Users of irrigation

systems will be

encouraged for quality

control of the construction

works;

Quality inspection of

works will be carried out

by the PIO and third-party

construction supervision

consultants.

DoI/

PIO

WUAs/

PIO

PIO/

DoI

January

2012

Continuous

during

implement-

tation

Continuous

during

implement-

tation

Media reports

about misuse

of project

resources.

Monitoring and Evaluation

Results

frameworks

Results are

inadequately

disseminated

Project outcomes will be

publicized widely with

lessons learned (annually).

PIO September

every year,

starting in

2012

Media reports

about poor

performance

of project

activities.

Quality

assurance

systems

Weak quality

assurance

mechanisms

Project beneficiaries will be

involved in monitoring

project activities;

Third-party supervision.

PIO/

WUAs

Ongoing

Poor public

perception of

the

effectiveness

of third party

monitoring.

Transparency and accountability

Public access

to

information

Lack of transparency

and poor public

access to information

Relevant project

information made available

on project website;

Other media, including

newspapers and electronic

media, will publicize

information;

Brochures will be available

for the public in different

languages;

RTI-compliance will be

assessed every year.

DoI/PIO/

WUAs

PIO

Start by

January

2012 and

update

regularly

January

2013

onwards

Public

complaints

about lack of

adequate

information

on project

activities

63

Area of

work

Issues likely to affect

project performance

Actions to address the issues Responsi-

ble

agency

Timeline Early

warning

signs

Lack of user-friendly

information materials

at scheme level

Disclosure boards will be

put in place on all project

sites with information on

the project.

PIO/

WUAs

January

2012

Project authorities

not used to pro-

active

communication

An Information Officer

will be designated

according to the

provisions of the RTI Act

Guidance and

methodologies for

information disclosure are

captured in the project

operations manual.

DoI/

PIO

PIO

January

2012

January

2012

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Annex 8: Economic and Financial Analysis

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

Introduction

165. The Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1 aims to

improve water service delivery to and water management in the Rani, Jamara and Kulariya

irrigation systems. Phase 1 of the project will focus at off-farm level mainly through:

(i) modernization of feeder and branch canals and flood protection works; and (ii) strengthening

Water Users Associations. In addition, it will prepare for agricultural support services through

demonstrations, farmer field schools, and other adaptive processes. Trunk roads will also be

upgraded to improve accessibility. The second phase of the project will modernize irrigation

systems at on-farm level and support farmers with strengthened agricultural service delivery.

Accordingly, investments of the phase 1 project are expected to generate modest benefits.

However, its outcomes – secured water supply at the off-farm level, improved water

management of the off-farm systems, reduced risk of flooding, and farmers readiness to adopt

improved agricultural technologies - are critical for the phase 2 investments to generate

substantial improvements in agricultural productivity and rural income. The three systems have

a cultivable command area of 14,300 hectares, of which around 11,000 hectares are currently

irrigated, and about 3,300 hectares of lands suffer from annual uncontrolled flooding during

monsoon and lack of irrigation water during dry season.

Methodology

166. The economic and financial analyses examine the viability of the project on the basis of

detailed analysis of three farm models located in different sections of the irrigation systems and

exposed to different types and degrees of benefits. Field level data such as crop production,

cropping pattern, cropping intensity, and existing farm management practices was collected by

DoI‟s preparation team. In addition, monitoring and evaluation data collected for the ongoing

Irrigation Water Resources Management Project for the schemes located in the Terai area,

statistical data of the Ministry of Agriculture and Cooperatives, and findings of the Social

Assessment study conducted by DoI during the project preparation stage are used as well.

167. Incremental benefits are estimated by comparison of the without-project (WoP) and the

with-project (WiP) gross margins per hectare of a representative selection of typical irrigated and

rainfed crops for the project area. The overall project impact is calculated by aggregating

benefits to all farm models. The project benefits are assessed for a period of 25 years, a period

which corresponds to the expected technical life of the infrastructure to be constructed, at 2010

financial prices and using opportunity cost of capital at 12 percent.

168. Financial prices of locally traded outputs and inputs are converted into economic prices

by deducting direct agricultural subsidies and taxes. Economic prices for imported agricultural

inputs and outputs are calculated at their border parity prices. Financial cost of unskilled labor is

converted into economic one using a shadow wage rate conversion factor of 0.60.

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169. Sensitivity analysis is conducted to test robustness of economic and financial returns of

the project investments for three risks variables: a 20 percent increase in the project cost, a 20

percent decline in projected benefits, and a two year benefit delay. The risk variable on benefits

decline considers combination of: (i) a 20 percent decline in projected incremental yield

increases and a 20 percent decline in projected incremental cropping intensity for farm model 1;

(ii) a 20 percent decline in projected incremental cropping intensity for farm model 2; and (iii) a

reduction of eight percent yield losses for rainfed paddy instead of projected 10 percent and 20

percent decline in incremental cropping intensity.

Key Assumptions

170. Project Area. The project will directly benefit around 14,300 hectares of which

approximately 11,000 hectares of project lands are currently irrigated, although water availability

is unreliable and water volume is insufficient in many areas. The remaining 3,300 hectares of

lands within the CCA are rainfed and/or affected by floods that lead to yield reduction and/or

total production losses depending on the location of the land within the tail end section.

171. Project Beneficiaries. The project is expected to directly benefit 25,000 households or

about 157,000 people. Majority of project beneficiaries are marginal farmers, many of which

had landholdings less than 0.25 ha. The average landholding size in the project area is 0.6 ha.

Agriculture is a sole source of income for almost 50 percent of project beneficiaries, while

remaining beneficiaries rely on agriculture, seasonal male outmigration, and other off-farm

employment for their livelihood.

172. Project Benefits. The main quantifiable project benefits will derive from: (i) increased

production; (ii) intensification of production; and (iii) reduced productivity losses caused by

uncontrolled flooding. Exposure of project farmers to the above benefits depends on the location

of their lands along the irrigation system that will be illustrated in three farm models. To

simplify the analysis, the land holding size of one hectare is assumed for farm models. These

models are described below and details on area size, cropping patterns, intensity and yields are

presented in Tables 1, 2 and 3.

Table 1. Project Benefits

Farm Models Area, ha

Farm Model 1: Farmers located in the head section 5,964

Farm Model 2: Farmers located in the middle section 5,000

Farm Model 3: Farmers located in the tail-end section 3,336

Subtotal 5,964 5,000 3,336

Total 14,300

173. Farm Model 1. A combination of improved agricultural productivity and intensification

of production. This model represents benefits to irrigated farmers located in the top head section

of the irrigation systems and operating about 6,000 hectares. Currently, farmers suffer from

inadequate availability of water during the dry season leading to low productivity and cropping

intensity. In the without-project situation, the cropping pattern is dominated with monsoon

paddy (98 percent). In winter season, irrigated farmers under model 1 grow wheat (25 percent),

lentil (22 percent), oilseed (15 percent), maize (14 percent), and potato and vegetables on the

remaining area.

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174. Current yields for all crops are below potential levels. Yields for irrigated monsoon

paddy and winter paddy, for instance, are currently estimated at 2.6 t/ha and 2.8 t/ha,

respectively. Yields for irrigated wheat and maize are 1.7 t/ha and 1.6 t/ha, respectively. Most

of the crops grown in the project area are either of traditional varieties or improved varieties, but

with old generation seeds.

175. In the with-project situation, with some improvements in water availability and farm

management practices, farmers are expected to achieve a modest 10 percent yield increases for

all crops and increases in current level of cropping intensity from 180 to 207 percent. The

analysis assumes that production intensification will allow expansion of areas under wheat (50

percent), spring paddy (32 percent), potato (9 percent), and vegetables (9 percent). The analysis

assumes that no improved crop varieties will be adopted by the farmers during the phase 1.

Table 2. Cropping Pattern and Intensity

Crop Farm Model 1 Farm Model 2 Farm Model 3

WOP WP WOP WP WOP WP

Paddy (monsoon) 98% 80% 90% 93% 100% 98%

Paddy (winter) 0% 32% 0% 28% 0% 0%

Wheat 25% 50% 24% 40% 0% 40%

Maize 14% 5% 15% 5% 0% 2%

Oilseed 15% 8% 15% 5% 0% 1%

Lentil 22% 14% 24% 15% 0% 3%

Cauliflower 3% 9% 1% 7% 0% 3%

Potato 3% 9% 1% 7% 0% 3%

Cropping

intensity 180% 207% 170% 200% 100% 150%

176. Farm Model 2. Cropping intensification will be a main benefit for farmers located in the

middle section of the system operating about 5,000 hectares. Currently, water availability is

insufficient and due to the lack of controlled and regulated flow of water, yields are low and

repeated sowing of crops is often required. The WoP cropping pattern is dominated by monsoon

paddy (90 percent), followed by wheat (24 percent), lentil (24 percent), maize (15 percent),

oilseed (15 percent), and some potato (1 percent) and vegetables (1 percent). The WoP crop

yields received by the middle section farmers are similar to those received by the farmers

represented in the farm model 1 except for wheat (1.6 t/ha) and cauliflower (13 t/ha).

177. With the project, a modest improvement in water availability combined with improved

farm management practices is expected to result in increased cropping intensity from its current

level of 170 to 200 percent. The incremental production area is assumed to be used for

production of spring paddy (28 percent), wheat (40 percent), lentil (15 percent), potato (7

percent), and vegetables (7 percent). No incremental increases in crop yields and adoption of

improved crop varieties are expected.

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Table 3. Crop Yields

Crop Farm Model 1 Farm Model 2

WOP WP WOP WP

Paddy (monsoon) 2.60 2.86 2.60 2.60

Paddy (spring) 2.80 3.08 2.80 2.80

Wheat 1.70 1.87 1.60 1.60

Maize 1.60 1.76 1.60 1.60

Oilseed 0.50 0.55 0.50 0.50

Lentil 0.30 0.33 0.30 0.30

Cauliflower 15.00 16.50 13.00 13.00

Potato 5.00 5.50 5.00 5.00

178. Farm Model 3. A combination of reduction of productivity losses caused by uncontrolled

flooding and intensification of production are the key benefits expected for the tail-end farmers

operating around 3,300 hectares. The farmers suffer from floods during monsoon season that

result in, depending on the location of plots, either total production losses or productivity losses

of rainfed paddy which is the only crop grown in this area. According to estimates of farmers

and engineers, uncontrolled flooding leads on average to about 10-25 percent reduction in paddy

yield. The WoP yield for paddy is 1.98 t/ha.

179. With the project, it is assumed that annual productivity losses of rainfed paddy at 10

percent will be avoided as the flooding becomes more controllable. Additionally, with improved

water availability during dry season coupled with improved farm level water management

practices, cropping intensity is expected to increase from existing level of 100 percent to 150

percent. The incremental production area is assumed to be allocated for production of wheat (40

percent), lentil (3 percent), cauliflower (3 percent), potato (3 percent), and maize (2 percent).

The WiP yields are assumed to be similar to those received by the farmers in the middle section

in the WoP situation. No incremental yield is expected for rainfed paddy. Due to the lack of

reliable data on areas of rainfed paddy that are being washed away annually by floods, the

analysis excluded this type of potential benefit.

180. Benefit accumulation phases. The farmers are assumed to start reaping benefits in the

first season after completion of rehabilitation of the first sections of the irrigation systems and

flood protection structures. The percentage of project area receiving benefits in each year is

therefore based on the percentage of irrigation rehabilitation completed at the end of each year.

Annual incremental benefits will start to accumulate in project year 3 after 30 percent

rehabilitation works have been completed in project year 2. The project‟s full maturity will be

reached in project year 6 (see Table 4).

Table 4. Civil Works Implementation Plan

Units

Project Years

Total 1 2 3 4 5

A. Construction of Feeder Canal

and Flood Protection of Intakes km - 4.9 6.5 4.9 - 16.2

B. Modernization of Branch Canals

and Canal Bank Protection km - 15.6 20.8 15.6 - 52

C. Command Area Flood Protection

Works ha - 4,290.0 5,720.0 3,575.0 715.0 14,300.0

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181. Project costs. The financial base cost of the project in 2010 prices is estimated at NRs.

2.7 billion. Costs of project components are distributed in the following shares: Scheme

Modernization - 80 percent; Strengthening Water Users Associations - 5 percent; Agriculture

Production Support - 6 percent; and Project Management - 9 percent. The latter two components

include costs of activities that will also focus on preparation of the second phase of the project

and identification of farmers‟ needs for and delivery mechanisms of extension services that will

be delivered during phase 2. The economic cost of the project is estimated by removing price

contingencies and all taxes and duties from the financial cost.

Economic Analysis

182. Results. The economic rate of return to the project is modest at 16.9 percent, with a NPV

of NRs. 415.4 million, and benefit to cost ratio of 1.16. As mentioned in the introduction

section, such result is expected since the phase 1 investments will improve water availability

mainly at the off-farm level. However, for the investments of phase 2 to generate maximum

benefits, the improvement of the off-farm water availability is critical. This highlights not only

the importance of implementation of both phases of the project but also timely implementation of

phases for the investments to produce substantial improvements in agriculture productivity and

production. It is noted, however, the project is viable as a stand-alone operation. In addition, it

is expected that in the unlikely case that phase 2 does not materialize, the WUAs would improve

some of the lower-order systems over time by their own means and that part of the work done

under the Agricultural Production Support Component would in any case be utilized by DADO

for intensification of agriculture.

Table 5. Economic Results

Indicators Results

ERR 16.9%

NPV, million NRs. 415.4

B:C 1.16

183. Sensitivity Analysis. The project is moderately sensitive to the changes in benefit

declines and in the project cost. The 20 percent decline in benefits drops the baseline ERR to

13.6 percent and a 20 percent project cost increases reduces it to 12.8 percent. The project is

sensitive to the two-year delay in benefit accumulation with the ERR dropping to 11.3 percent.

Details of the sensitivity analysis are presented in Table 6.

Table 6. Sensitivity Analysis

Variables ERR FRR

Baseline results 16.9% 13.4%

Project cost increase by 20% 12.8% 9.4%

Benefit decline by 20%: 13.6% 10.1%

Two year delay in benefit

accumulation 11.3% 8.6%

Financial Analysis

184. Farm level analysis. Financial impact of the project on farm households varies

depending on the types of benefits they receive. Highest incremental gross margins at NRs.

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29,866 per hectare are expected for the farmers located at the head section benefiting from

increased productivity and improved cropping intensity. The middle section farmers, for whom

the project benefits will be in the form of increased cropping intensity only, will gain incremental

gross margins at NRs.18,570 per hectare. Incremental gross margins to rainfed farmers at the tail

section, who are expected to avoid productivity losses caused by floods and benefit from

increased cropping intensity, is estimated at NRs.14,854 per hectare.

Table 7. Financial Gross Margin

Farm Models Gross Margin, NRs./farm

WOP WP Incremental

Farm Model 1 40,244 70,110 29,866

Farm Model 2 36,459 55,030 18,570

Farm Model 3 18,190 33,044 14,854

185. Project level analysis. Annual incremental gross margin generated by the project is

estimated at NRs. 319 million, which corresponds to around NRs. 22,000 per hectare. Estimated

financial rate of return for the whole project is 13.4 percent, with FNPV of NRs. 118.2 million.

Benefit to cost ratio is estimated at 1.04.

Table 8. Financial Results

WoP WiP Incremental

Gross margin, million NRs. 484.5 803.5 319.0

Gross margin per hectare, NRs. 33,880 56,190 22,310

FRR 13.4%

FNPV, million NRs. 118.2

B:C ratio 1.04

186. Sensitivity analysis. The project is moderately sensitive to changes in the benefits and the

project cost. However, these changes will reduce already low baseline level of FRR at 13.4

percent to below 12 percent. The project‟s sensitivity to the two-year delay in benefit

accumulation is high, dropping FRR to 8.6 percent. For details, please refer to Table 6.

187. Sustainability. The analysis examines the impact of incremental O&M on the farm

household budgets. Farmers contribute to O&M of two different types of infrastructure (Table

9). An annual contribution to O&M of the diversion channel from the Karnali River to the

irrigation systems is estimated at NRs. 458 per hectare. Around five percent of this amount is

made in cash and used to cover costs associated with the O&M of machinery. The remaining 95

percent of contribution is made either in kind or cash. In addition to this, farmers contribute

around 22,880 mandays or the equivalent of NRs. 320 per hectare to the O&M of individual

intakes and sub-branch canals that serve the whole CCA. The total farm contribution to the

O&M of the whole irrigation scheme is estimated at NRs. 672 per hectare. Daily farm labor is

estimated at Rs.200.

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Table 9. WUAs’ Contribution to Operation and Maintenance of irrigation scheme

Details Unit Quantity Unit

Rate

(NRs)

Total cost

(NRs)

A. O&M of River Water Diversion*

a. Cash contributions to machinery O&M** lumpsum 1 239,000 239,000

b. Labor contribution manday 24,000 200 4,800,000

B. O&M of individual intakes and sub-branch canals and structures***

a. Labor contribution manday 22,880 200 4,576,000

Total WUAs contribution 9,615,000

Total O&M per ha 672

Notes:

*River Water Diversion serves 11,000 hectares.

**Machinery is provided by the Department of Irrigation for free.

*** These canals and structures serve 14,300 hectares.

Source: Department of Irrigation

188. To ensure an adequate O&M of the modernized infrastructure, farmers are expected to

double their current contribution. The increase is assumed to occur gradually in three years

starting from the project year 3. According to results demonstrated in Table 10, the incremental

O&M contribution will not be a financial burden for farmers as its share in the incremental gross

margins is insignificant and vary in the range of 2.3 to 4.5 percent.

Table 10. Impact of Incremental O&M on farm budget

Farm Models

Incremental

O&M,

NRs./ha

Incremental

O&M as % of incremental

gross margin (%)

Farm Model 1 672 2.3%

Farm Model 2 672 3.6%

Farm Model 3 672 4.5%

Benefits expected from the Phase 2

189. This section will briefly discuss benefits expected from phase 2. The phase 2 is expected

to substantially increase agricultural production in the entire CCA. These benefits are expected

to come from multiple sources as described below.

190. Significant improvements in crop yields. The current productivity levels for all crops in

the project area are much below the potential levels. As water supply becomes secure at the on-

farm level and farmers start applying better farm practices and technology, yields would increase

substantially for all crops grown on the entire CCA. Monitoring and evaluation data from the

completed irrigation schemes of the ongoing IWRMP shows that yields for local and improved

varieties of paddy, for instance, have increased by 28 percent and 32 percent, respectively, after

rehabilitation of irrigation schemes are completed and farmers are trained. While incremental

yields for maize, wheat and cauliflower could reach 75 percent, 41 percent and 42 percent,

respectively.

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Table 11. Baseline Crop Yields and With Project Crop Yields

achieved by IWRMP in Terai area

Crops WoP

(t/ha)

WiP

(t/ha) Incremental

Rice (local) 2.6 3.6 38%

Rice (improved) 3.4 4.5 32%

Maize 1.6 2.8 75%

Wheat 1.7 2.4 41%

Oilseed 0.5 0.8 60%

Cauliflower 12.0 17.0 42%

191. Production intensification. With timely and secure supply of water at the field level,

combined with improved agricultural practices and technology, the cropping intensity is

expected to increase further. The experience of IWRMP supports the projection that the phase 2

project activities could increase cropping intensity on the whole CCA up to at least 200 percent.

192. Diversification. Secured water supply and the project-led agriculture support services at

farm level would also lead to a diversification of production towards more lucrative crops such

as sugarcane, jute, and vegetables.

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Annex 9: Safeguards

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

Social Assessment

193. The Department of Irrigation conducted a Social Assessment (SA) as part of its project

preparation. This involved developing a socioeconomic profile of the project area, mapping out

various stakeholders, assessing the social, economic and political factors that would affect

project design and implementation, and screening of possible social impacts of the project. Based

on that analysis, several recommendations have been made to address the possible adverse

impacts of the project. These recommendations are also in line with relevant government and

World Bank policies.

194. Background. Rani, Jamara and Kulariya Kulos (or canals) were constructed by farmers

more than a hundred years go. These Kulos take water from Jarahi Naala, western sub-course of

the Karnali River. Each Kulo has many branches and sub-branches. Since construction, the

Kulo system has been traditionally operated, maintained and managed by traditional irrigation

user committees and headed by Kulo Chaudhary of each Kulo.

195. Ethnic and Minority Communities. The project area is home to the following ethnic

groups: Tharu, Bahun/Chettri, Hill Janajatis (including Magars), and Dalits. The Tharu

population is divided into two groups: those who are indigenous to the Kailali/Bardiya belt and

those who migrated from Dang. Mukta Kamaiyas, who are Tharus too, have also been resettled

in the project areas, although nearly 2,000 of them are still awaiting resettlement packages from

the government and have encroached along riverbanks and on government property. Migrant hill

communities started settling in area in the 1960s and when Tikapur town was being constructed.

196. Land tenure, land holding, and farming practices. The majority of the population in the

project areas relies on agriculture and seasonal male-outmigration. The sizes of landholdings are

small, especially since the Maoist Movement. The major forms of land tenure are „Battaya‟ (50 –

50 division between tenant and owner) followed by „Thekka‟ (pre-negotiated contract between

tenant and owner), and „Bandaki‟ (tenancy rights as collateral for financial obligations). Even

the relatively small landholding Pahadi households give land under the Battaya system to Tharu

tenants and prefer to migrate to India for employment opportunities. Such trends are also

growing amongst Tharu households. Farming practices vary depending on availability of

irrigation water.

197. Traditional irrigation management systems. The three Kulos have been historically

managed by indigenous Tharu systems of governance. Each Kulo is/was headed by a Kulo

Chaudhary and each settlement a Badghar/Sahek Chaudhary. Recent settlers have also adopted

and been integrated into such a system. Water Users Associations have been established in all

three systems. The major responsibility of the WUAs is to mobilize labor for the operation and

maintenance of the main source as well as to mediate between irrigation users and external

agencies, especially within government. There is considerable overlap between the WUAs and

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the traditional Kulo management system. Furthermore, the system is highly decentralized with

Badghars responsible for governing rules over allocation, appropriation, labor and cash

contributions, and monitoring and enforcement mechanisms in their respective settlements/sub-

branches. A central WUA Committee or an apex committee for the three Kulos was established

in 2010.

198. The irrigation water is scarce during the winter while the danger of flooding increases

during the monsoon. The majority of the users depend on irrigation from the three kulos. Use of

groundwater is rare and available to only the richer farmers. Allocation of water between head-

and tail-enders is a constant source of tension, but is generally resolved at the local level and by

Badghars themselves. Key sources of outstanding disputes are between Tharus and Non-Tharus

over labor contribution to source maintenance and accusations over lack of transparency between

users and committee members.

199. Stakeholder Analysis. The project team has held two orientation sessions where

Badghars and committee members were invited. Although many users have heard about the

project, only those who were able to attend the orientation sessions have understood it at any

depth. Even then, illiterate Badghars and committee members found the communication and

dissemination mechanisms difficult to follow. Women, in particular, had heard the least about

the project. Not all secondary stakeholders with a stake in the project, and who could play a role

in averting potential conflicts over project design as well as employment opportunities during

project construction have been informed formally about the project. The major political parties

in general and those advocating Tharu rights in particular were very interested in the project, and

could play a role in politicizing it for their own political interests. Stakeholder meetings and

communication with the broader population will continue during project implementation and

none of the major stages of project implementation will start without having conducted an

adequate information sharing campaign and without taking into account the views of the

beneficiary groups.

200. Gender and social inclusion assessment. The irrigation systems, although governed

primarily by Tharus, also included other ethnic groups as the Bahun/Chettri, Dalits and hill

Janajatis (the latter to a lesser extent). Instead, the major concerns were whether the Tharu-

dominated system would be able to endure in spite of the increasing migration of other ethnic

groups in the project areas, and meet the skills and capacities required to manage the modernized

and rehabilitated irrigation systems.

201. In comparison, although women‟s participation has increased in recent years, it is still

only 19 percent in the three committees combined. There were virtually no women Badghars.

The major barriers that women face in participating more equally include: rules governing

membership and labor contribution; lack of education and awareness; difficulties negotiating

with multiple responsibilities; and male-led information and communication channels.

202. Main recommendations. The Assessment recommends that: (i) since there are ethnic and

minority communities in the project areas who stand to benefit from the project specific

interventions are necessary to ensure that maximum project benefits accrue to them; (ii) various

factors specific to the area need to be taken into consideration to avoid conflict and maximize

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project benefit to all, particularly the vulnerable communities; (iii) women‟s participation is

critical in irrigation governance structures and irrigation benefit-sharing arrangements;

(iv) effective information dissemination and community participation is key to project success;

and (v) adverse project impacts due to land acquisition and resettlement is marginal and can be

addressed through a framework approach. The project has considered all these recommendations

and will work on these, especially through Component 2 – Strengthening of WUAs.

Environmental Safeguard

203. The proposed project is in the Western Terai (plain) area of Nepal. There are community

and state forests in and around the project area. The nearest protected area is the Bardiya

National Park, which is located across the source river Karnali, in the east of the project area.

The Karnali River corridor including adjoining forest stretches is a wildlife movement area. The

Karnali River system is known to have protected and endangered species of Gangetic dolphin,

Marsh mugger, and Gharial crocodile.

204. Environmental Assessment. In July 2010, the Borrower prepared an Initial

Environmental Examination (IEE)3 as required by national environmental legislation. The

original scope of the Rani Jamara Kulariya Irrigation Modernization was wider than the present

proposal to be financed by IDA. Hence, the IEE‟s scope was wider than current project

proposed for IDA support (Modernization of Rani Jamara Kulariya Irrigation Scheme-Phase I).

The IDA review concluded that additional consultations with the stakeholders and better clarity

on institutional arrangements/responsibilities for environmental management, mitigation, and

monitoring are needed. Accordingly, the Borrower prepared an Environmental Management

Plan (EMP) focusing on the proposed IDA supported scope of works under the Phase 1 project.

205. Environmental Impacts and Mitigations. Environmental concerns of the project are

mainly related to the activities under Component 1 (Scheme Modernization). The concern

related to increased use of pesticides is relevant in the Phase 2, which will be prepared during

Phase 1 implementation.

206. The main environmental impacts identified by the EMP of the proposed Modernization –

Phase 1 include: (i) restriction to the wildlife movement (mainly elephant, tiger, and rhino during

the main transit season from July through November); (ii) increased poaching and logging risks

in the forest areas close to the project area; (iii) adverse impacts on the protected and endangered

aquatic life (e.g. dolphin) such as from water diversion, fishing, and agriculture pesticides;

(iv) increased risks of flood damage resulting from extraction of sand and gravel from the river;

and (v) depositions of silt/sediment in the canal system and on farm land. Other identified

impacts include air and noise around active construction sites and labor camps, sanitation and

fuel pollution, and impact on patches of forests though possible loss of trees, forest degradation,

and encroachment.

207. Considering the nature of the project activities, which are mainly rehabilitation and

improvement of the existing traditional irrigation systems, the EMP concluded that the impacts

3 Initial Environmental Examination is the formal terminology used by the Nepal‟s environmental legislation for limited

Environmental Assessment (EA).

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identified are of moderate types, which are manageable and can be mitigated to an acceptable

level through mitigation measures. The overall environmental impact of the project is expected

to be moderate. Some of the risks and negative impacts described above, e.g. illegal poaching,

logging, and gravel/sand extractions, exist already at present and are likely to continue

irrespective of the proposed project.

208. The EMP has recommended mitigation measures for the identified impacts, which

include measures such as no major construction activities during the main wildlife movement

season from July to November; filling deep cut/excavation sites; wildlife friendly canal side-

slopes; provision of animal crossings over the feeder and main branch canals; banning the project

from collecting sand, gravel, and boulders within 500 m of Karnali bridge and within 50 m of the

right bank of the Karnali River and ensuring that the extractions will be less than one meter deep;

strengthening Karnali River bank against flood/erosion, compensatory plantation of lost tree (at

the ration of 1 lost: 25 planted) on the right bank of the Karnali river (50 m to 100 m wide) – this

is expected to enhance wildlife movement along the river corridor as well as contribute in river

bank protection against flood/erosion, awareness against illegal poaching and logging as well as

promoting coordination with other ongoing conservation activities/agencies; canal intake and

outlet/tail designs that include features that avoid dolphin entry; conducting dolphin conservation

awareness activities; use of air/dust pollution control measures at active construction sites,

providing sanitation and fuel facilities at workers camp; and prohibiting workers from fishing

and hunting.

209. Although the increased use of pesticide could be an indirect/ induced risk in the Phase 2

of the project and afterwards, the current EMP, as a precautionary step, includes an Initial

Framework for Pesticide Management, which will have to be revisited in light of the activities

proposed for Phase 2, associated risk will have to be re-assessed, and a detailed pesticide

management plan, if necessary, needs to be prepared during the preparation of Phase 2.

210. Ongoing environmental protection activities. Some environmental conservation

activities are currently ongoing in and around the project area, such as the Western Terai

Landscape Complex Project and Terai Arc Landscape Project. The World Bank supported

regional project, Strengthening Regional Cooperation for Wildlife Protection in Asia was

recently approved by IDA. This regional project aims to enhance the capacity of the relevant

agencies to carry out conservation based on landscape approach and also to address wildlife

trafficking. In Nepal, the regional project‟s scope also includes the protected area network in the

southern Terai, bordering India. The Bardiya National Park and the forests along the Karnali

River are also part of this protected area network. The coordinated efforts of the environmental

protection and conservation work of different agencies will have complementarities and positive

synergy. The project intends to promote coordination among all actors and activities for better

environmental safeguard in the project area.

211. Institutional Arrangement. For the implementation and monitoring of the environmental

mitigation measures, the project will have a full-time environmental specialist (on deputation

from DoI) responsible for regular support and supervision, and will report two-monthly. A Local

Environmental Monitoring Committee composed of local protected area agency, forest authority,

NGOs, etc. will visit the project area periodically for inspecting environmental management

76

activities and facilitating coordination. GoN will also engage an independent party for regular

monitoring of the environmental compliance, management, and performance in the project. The

frequency of these inputs will be determined during project implementation, depending on actual

requirements. The PIO Environmental Specialist will include the feedback/suggestions of the

Local Environmental Monitoring Committee in the progress reports.

212. The above monitoring reports will be made available to the Bank. The Bank‟s

environmental safeguard specialists, as part of six-monthly implementation review, will review

the progress, status as well as advise on the implementation of the environmental management

plans.

213. Stakeholder Consultation. During the IEE and EMP preparation, project area

communities and stakeholders including protected area authority, NTNC, DFO, WTLCP, TALP,

FCFUG, DCP, WUA were consulted, a public notice was published in a Nepali national

newspaper to inform residents of the project area as well as national stakeholders of intention to

upgrade/rehabilitate the irrigation project and to solicit concerns and suggestions with regard to

the proposed project. The public notice was also posted to each of the project area VDCs and

public deeds of inquiry were carried out. DoI has disclosed the IEE, draft EMP and SA through

its public website: www.doi.gov.np. DoI plans to inform and further consult local stakeholders

(affected people, Community Forest Users Groups, etc.) during the implementation of the

project.

77

Annex 10: Statement of Loans and Credits

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

Original Amount in US$ Millions

Difference between

expected and actual

disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev‟d

P120265 2011 NP: Emerging Towns Project 0.00 25.00 0.00 0.00 0.00 25.56 0.00 0.00

P112893 2011 NP: Kabeli Transmission Project 0.00 38.00 0.00 0.00 0.00 38.34 0.00 0.00

P104015 2011 NP: Enhanced Vocational Educ & Trng 0.00 50.00 0.00 0.00 0.00 51.24 0.00 0.00

P117417 2010 NP: Second HNP and HIV/AIDS Project 0.00 129.15 0.00 0.00 0.00 130.63 8.00 0.00

P113441 2010 NP: School Sector Reform Program 0.00 130.00 0.00 0.00 0.00 87.78 -11.75 0.00

P087140 2009 NP:Agriculture Commercialization & Trade 0.00 20.00 0.00 0.00 0.00 18.73 2.79 0.00

P113002 2009 NP: Social Safety Nets Project 0.00 64.47 0.00 0.00 0.00 17.35 -26.73 2.35

P110762 2008 NP: Peace Support Project 0.00 50.00 0.00 0.00 0.00 26.81 27.68 11.68

P095977 2008 NP: Road Sector Development Project 0.00 117.60 0.00 0.00 0.00 87.36 -10.22 6.88

P105860 2008 NP: PAF II 0.00 165.00 0.00 0.00 0.03 67.51 -2.40 0.00

P099296 2008 NP: Irrig & Water Res Mgmt Proj 0.00 64.30 0.00 0.00 0.00 49.29 19.38 15.30

P090967 2007 NP: Second Higher Education Project 0.00 60.00 0.00 0.00 0.00 42.45 7.65 1.35

P100342 2007 NP: Avian Flu 0.00 18.20 0.00 0.00 2.24 2.55 4.28 2.00

P083923 2005 NP: Rural Access Improve. & Decentraliza 0.00 77.00 0.00 0.00 0.00 46.95 2.54 4.86

P071285 2004 NP: Rural Water Supply & Sanitation Proj 0.00 52.30 0.00 0.00 0.00 8.49 -17.32 0.00

P071291 2003 NP: Fincl Sector Technical Assistance 0.00 16.00 0.00 0.00 7.50 0.73 5.31 0.00

P043311 2003 NP: POWER DEVELOPMENT PROJECT 0.00 164.80 0.00 0.00 0.76 124.22 19.49 56.39

Total: 0.00 1,241.82 0.00 0.00 10.53 825.99 28.70 100.81

NEPAL

STATEMENT OF IFC‟s

Held and Disbursed Portfolio

In Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

1996 Bhote Koshi 13.21 2.95 0.00 17.41 13.21 2.95 0.00 17.41

1998 Bhote Koshi 1.64 0.00 0.00 0.00 1.64 0.00 0.00 0.00

1994 Himal Power 18.17 0.00 2.54 0.00 18.17 0.00 2.25 0.00

2001 ILFC - Nepal 0.00 0.10 0.00 0.00 0.00 0.10 0.00 0.00

1998 Jomsom Resort 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00

Total portfolio: 37.02 3.05 2.54 17.41 37.02 3.05 2.25 17.41

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

78

Annex 11: Country at a Glance

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

79

80

Annex 12: Map IBRD No. 38521

NEPAL: Modernization of Rani Jamara Kulariya Irrigation Scheme – Phase 1

JANAKPUR

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C H I N A

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To Barga

To Ranikhet

To Shahajahanpur

To Lucknow

To Faizabad

To Faizabad

To Faizabad

To Faizabad

To Baruni

To Baruni

To Saidpur

To Xegar

To Jangipur

To Baruni

H

im

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Mt. Everest(8848 m)

30°N

28°N

30°N

28°N

26°N

82°E

80°E

84°E 86°E 88°E

82°E84°E

86°E 88°E

RANI JAMARA KULARIYAIRRIGATION SCHEME

NEPAL

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 25 50 75

0 25 50 75 Miles

100 Kilometers

IBRD 38521

APRIL 2011

NEPAL

MODERNIZATION OF RANI JAMARA KULARIYAIRRIGATION SCHEME – PHASE 1

RANI JAMARA KULARIYA IRRIGATION SCHEME

SELECTED CITIES AND TOWNS

ZONE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

ZONE BOUNDARIES

INTERNATIONAL BOUNDARIES