international bank for reconstruction and...

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This report was prepared for use within the Bank and its affiliated organizationsThey do not accept responsibility for its accuracy or completeness The report maynot be published nor may it be quoted as representing their views

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

AGRICULTURAL AVIATION PROJECT

INDIA

October 7, 1970

Agriculture Projects Department

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CIRRENCY EQUIVALENTS

US$1 = Rs 7.50Rs 1 = US$0.13Rs 1,000 = US$133.33Rs 1,000,000 = US$133,333

WEIGHTS AND MEASURES

1 ft = 30.5 cm1 yd = 3 ft = 91.44 cm1 ac = 0.h07 ha1 gal = b.5h6 11 oz = 28.3h9 gram1 lb = 16 oz = 0.45 kg1 kg = 1000 gram = 2.205 lb1 m ton = 1000 kg = 2,205 lb

ABBREVIATIONS

ARC ---- Agricultural Refinance CorporationDAA ---- Directorate of Agricultural AviationDDAA---Deputy Director of Agricultural AviationGOI--- -Government of IndiaTC-----Training Center

INDIA


TABLE OF CONTENTS

Page No.

SUNMMARY AND CONCLUSIONS .... ................. .* ... .. ... .. ... i

I. INTRODUCTION .......... .............................. . 1

II. BACKGROUND ...... o..*....... *. .* . .... .1

A. Agricultural Sector .......................... .t. 1B. Plant Protection in Iudia .2......** .... 2

Programs and Policies . . 2Research and Training ....... 3Legislation ....... 00 .. .. * 3Agricultural Chemicals ............ 4

III. AGRICULTURAL AVIATION IN INDIA ...... 4

A. Scope for Aerial Application . ....... 4B. The Industry .... S.. .. .

GOI Aviation Unit . . 5Private Operators.. 5Operational Bases. . 5Repairs, Maintenance and Spare Parts 6Staffing.. .. . 6Status of Private Operators ... 6

C. Project Areas, Crops and Spraying Seasons. . 7

IV. THE PROJECT.. 7

A. General Description .......... ............ 0. 7B. Detailed Features. . 8

Aircraft .. 8... . ... 8Aircraft Spare Parts . .8

Vehicles and Ancillary Equipment. 8Training .... o.. .... ...... 9

This report is based on the findings of an IDA appraisal mission to Indiain November 1969 composed of Messrs. G. von Gontard, T. J. Davis, J. Zarandin,P. Courbois (IDA) and C. Voss (Agricultural Aviation Consultant).

TABLE OF CONTENTS (Continued) Page No.

VII. BENEFITS AND JUS TIFICATION ......................... 22

VIII. RECOMMENDATIONS.. ... ......... .. 23

ANNEXES

1. Plant Protection in India2. The Agricultural Aviation Industry3. Agricultural Applicator Aircraft4. Training5. Estimated Project Costs6. Estimated Schedule of Disbursements7. Credit and Banking System8. Organization Chart9. Appraisal and Lending Policies

10. Returns to Aircraft Operators11. Economic Justification12. Farmers Benefits

MAP

INDIA


SUMMARY AND CONCLUSIONS

i. The Government of India (GOI) has requested an IDA credit to meetthe foreign exchange costs of an agricultural aviation project. The projectainms at better control of crop pests and diseases through expansion and im-provement of aerial spraying services. The project would provide suitablecredit to qualified private aviation operators for purchase of fixed androtary wing aircraft specifically designed for agricultural work andstrengthen GOI's agricultural aviation unit through fleet renovation andother measures. Finally, the project would provide training facilities foragricultural pilots and aircraft engineers, including technical assistanceand overseas training of pilot instructors.

ii. About 82 agricultural aircraft would be financed under the project,67 for commercial operation by private companies and 15 for training, demon-stration and commercial operation of a new Directorate of AgriculturalAviation (DAA), in the Ministry of Food, Agriculture, Co-operative and Com-munity Development. Specialized agricultural equipment, spare parts, vehi-cles, ground support and safety equipment and aircraft tools would also beincluded.

iii. The project is part of India's plant protection program for thecurrent Five-Year Plan (1969-74). Increased demand for aerial sprayingservices springs from the intensification of Indian agriculture resultingfrom increased and more timely irrigation, expanded fertilizer usage and theintroduction and spread of high yielding crop varieties. The same environ-ment required for high crop yields increases the incidence and severity ofcrop pests and diseases. While ground application techniques would continue

-to account for rDst plant protection needs, such methods are, in many cases,too slow and do not meet field crop requirements. The proposed projectwould complement ground techniques by expanding and improving India's agri-cultural fleet and skilled personnel.

iv. Total project cost is estimated to be about US$8.8 million, includ-ing contingencies, 69% of which would be in foreign exchange (US$6.0 million)to be financed by the proposed IDA credit. Private operators, dealers, com-mercial banks and GOI would contribute the balance of project costs. Inaddition, GOI and state governments would provide budgetary resources forsupporting ground services, pesticides and short-term credit to farmers.

v. Proceeds from the IDA credit would be made available by GOI to DAAand the Agricultural Refinance Corporation (ARC). Credit to private opera-tors would be provided by the ARC through commercial banks at current com-mercial rates. DAA would be responsible for technical evaluation and super-vision of subloans, pre-qualification of aircraft suppliers, coordinationwith plant protection agencics, market development and training. Disburse-

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ment of IDA funds would be against import documentation for imported goodsor audited statements of expenditures. Aircraft procurement would be throughnormal trade channels. Adequate numbers of international makes of agricul-tural aircraft are represented in India and competition among them is keen.

vi. Although moderate subsidies to farmers would be continued to helppromote aerial plant protection, these would be gradually reduced in linewith the demonstration of the benefits of aerial spraying. Financial returnsto private operators would be between 16X and 29%.

vii. At full development, the project would help control pests anddiseases over 6 million acres of field crops, mostly rice, wheat, cotton,groundnuts and sugarcane. This is expected to increase yields and productionof these crops significantly and thereby reduce the need to rely on imports.The economic rate of return of the project would exceed 100%.

viii. The project would be suitable for an IDA credit of US$6.0 million.The borrower would be the GOI and it would assume the foreign exchange risk.

INDIA


I. INTRODUCTION

1.01 The Government of India (GOI) has requested an IDA credit of US$6.0million to meet the foreign exchange costs of an agricultural aviation project.The project would be an important part of India's plant protection programfor the current Five-Year Plan (1969-74). At full development, the projectwould help control pests and diseases over 6 million acres planted in food-grains and other crops, about 1.8% of India's total cropped area.

1.02 The proposed project would be the Bank Group's first operation inaerial plant protection. This is an essential custom service for farmers,including small landholders. In 1969, a project for increased productionof Indian high yielding seed varieties was assisted by IBRD. Expandedplant protection would further encourage farmers to increase the use ofsuch seeds. Other agricultural projects, either assisted by IDA or underconsideration, are: in Gujarat State, the Kadana Irrigation Project and acredit project; in Tamil Nadu, a drainage and irrigation project and acredit project; in Andhra Pradesh, an irrigation and a credit project; andin Punjab, a credit project. Over the next several years, these projectsas well as other agricultural development program of GOI and state govern-ments now underway are expected to raise substantially the need for improvedplant protection services.

1.03 This report is based on information furnished by GOI, as well ason two technical reports sponsored by the United States Agency for Inter-national Development in 1964 and 1968. In June 1969, an IDA mission dis-cussed a possible project with interested agencies in India. In October1969, the GOI submitted a proposal and in November 1969 an appraisal mis-sion, composed of Messrs. G. von Gontard, T. J. Davis, J. Zarandin, P.Courbois (IDA), and C. Voss (Agricultural Aviation Consultant) visitedIndia.

II. BACKGROUND

A. Agricultural Sector-/

2.01 Agriculture is vital to the economy of India and will continue tobe for many years to come. Its actual progress, however, has been disappoint-ing when compared with the country's needs and potential. During most of the

1/ A detailed discussion of the situation and prospects of agriculturein India is given in: Economic Situation and Prospects of India;Report No. SA-13a, April 24, 1970.

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last decade, GNP increased at the rate of about 3.5%, but only at 1% perhead annually. Agriculture, the largest industry, generating about half ofGNP, grew at only 3% per annum during this period. While droughts, includingthose that occurred in 1965/66 and 1966/67, were partly responsible for thisdisappointing performance, the reluctance of planners to give high priorityto agricultural development was of equal significance.

2.02 Since 1965, a higher priority has been given to agriculture in thecountry's development strategy. Major efforts have been made to introducenew technology, increase the availability of farm inputs, and provide eco-nomic incentives to induce their rapid adoption and use in agriculture. Theresponse has been encouraging. The introduction of new fertilizer-responsivefoodgrain varieties, in particular wheat, has already contributed to a recordharvest in 1967/68 and again in 1968/69.

2.03 Continued success in raising cereal yields brings self-sufficiencyin food within the reach of India in the 1970's. To achieve this, however,will require that continued emphasis be placed on research, especially fornew rice varieties, maintenance of prices at a level high enough to encour-age adoption of modern farming practices, improvements in grain storage andmarketing facilities, increase in the supply and use of irrigation waterand other complementary inputs such as improved seed and fertilizer, moreagricultural credit to facilitate their purchase, and improvements of serv-ices that will enable the masses of small farmers to adopt the new techno-logy. Finally, plant protection measures must be brought within reach ofmore Indian farmers.

B. Plant Protection in India

2.04 Plant protection is becoming increasingly important in India. Thenumber and intensity of crop pests and disease outbreaks rise as a resultof the intensification of agriculture. Increased regional specialization,stepped up cropping intensity and high levels of moisture and fertility,needed for high crop yields, encourage the spread of pests and diseases. Inparticular, more effective plant protection has become necessary if the highyielding varieties are to be used extensively and their full potential real-ized. Farmers are increasingly aware that, without adequate pest control,investment in high yielding varieties and associated inputs of water, fertil-izer and labor can be risky. Further details on plant protection are inAnnex 1.

Programs and Policies

2.05 Around 370 million acres of land are cropped each year in India,about 20% of which currently receives protection through some pest anddisease control. It is proposed to increase the annual coverage graduallyto more than half of the cropped area by the end of the current Five-YearPlan. This coverage includes seed treatment, field application of chemicals,

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anti-rodent measures and chemical weed control. Intensive and preventivetreatment, involving more than one application per crop in a season, is fore-seen for all areas sown to high yielding food, commercial and plantationcrops.

2.06 For state plant protection programs, as for agriculture in general,GOI acts mainly as an adviser and coordinator. GOI's influence on stateprograms derives -from-its financial support for development programs of thestates. An estimated Rs 134 million (US$17.9 million) of this support wouldbe used by the states for plant protection, 30X in grants and 70X in loans,during the Plan period. GOI expects that states would contribute an equalamount. These funds, including subsidies, are expected to be used partlyfor aerial application work. A number of states have already discontinuedsubsidies for pesticides and aerial application costs, except when infesta-tions must be controlled on an emergency basis.

2.07 High yielding seeds and fertilizer have been successfully intro-duced in many areas of India by providing supplies, know-how and incentivesto individual farmers, receptive to change. By contrast, all cultivatorsin a village or district must treat their fields, if pest control is to beeffective. This calls for a high degree of cooperation and group organiza-tion that rarely has been achieved without government intervention. Plantprotection services of GOI and the states have adequate qualified staff toprovide overall information on crop pests and diseases but they do not havethe manpower and equipment to forecast and effectively check infestation inall areas before epidemic proportions are reached. The exceptions are fourselected districts where intensive plant protection progras- are being setup with Ford Foundation assistance (see Map).

Research and Training

2.08 Research in plant protection is coordinated by the Indian Councilof Agricultural Research and executed by the Indian Agricultural ResearchInstitute, a number of agricultural universities and other institutes (seeMap). In earlier years, emphasis was on breeding pest- and disease-resistantcrop varieties. Current research programs include increasingly the studyof pest and disease evolution, control measures through chemicals, their im-pact on the crop environment and application methods. They also include thediagnosis of crop pests and diseases and the establishment of forecast serv-ices. Some research schemes are aided by technical assistance agreements.However, there is urgent need for more research on crop louses due to pestsand diseases, their impact on production and economic implications. Fieldofficers are trained at the GOI Plant Protection Institute in Hyderabad,where courses include aspects of aerial application. Several states maintainsimilar training facilities that concentrate on specific state problems.

Legislation

2.09 The Insecticide Act of 1968 regulates the manufacture and handlingof insecticides, and specifir rules to implement its provisions are present-ly being formulated by GOIL Iso, nearly all states have enacted laws thatpermit them to perform preventive and epidemic pest control measures and tocollect costs from farmers through state revenue -ervices.

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Agricultural Chemicals

2.10 Pesticide production in Indi- started in 1952 and has grown withconsumption at about 3% per year. About 30 manufacturers, with an annualcapacity of 36,000 tons, are producing technical chemicals that need to bemixed with other ingredients. This is being done oy a large number of smallformulators. Production has been erratic due to market conditions -- 12,000tons in 1965/66, 19,000 tons in 1967/68 and 13,000 tons in 1968/69. Most ofthe local production consists of insecticides and fungicides, including or-ganochlorines of the DDT family. Marketing problems existed in the past dueto absence of collaboration among manufacturers and Indian farmers not beingused to large scale preventive application of pesticides. Demand has beenincreasing lately, however, and production in 1970/71 is expected to reach20,000 tons. Doirastic sales prices of Indian pesticides are competitive withprices of imported products. There is no import duty on pesticides. IDA'sSixth Industrial Imports Project Credit (182-IN) includes funds for importof materials required for domestic production of pesticides. No supplyconstraints in chemicals are expected during the project period.

III. AGRICULTTRAL AVIATION IN INDIA

A. Scope for Aerial Application

3.01 Through aerial application, urgently needed plant protection inIndia can be increased in an effective and organized manner. Aerial appli-cation is a highly versatile and flexible agricultural custom service, appli-cable in any farming structure provided terrain and cropping patterns aresuitable. In particular, vast numbers of small farm units can benefit fromit. When properly planned, treatment can be given over larger areas morerapidly from the air than from the ground during critical pest and diseaseperiods.e Aerial application in India will be concentrated on areas and ininstances most favorable to its use (Annex 2).

3.02 Improved agricultural practices change the ecological balance andnatural checks against crop pests and diseases. Year-round plant hosts forinsects are provided through continued cropping made possible with increasedirrigation and fertilizer use. Further, some new high yielding varietiesare susceptible to previously unknown pasts and diseases. The Indian farm-er must, therefore, control these pests if high yields are to be achieved.The use of agricultural chemicals provides the only currently economicalsolution to most Indian crop pest problems. Much attention has been focused,in India as elsewhere, on side effects of pesticides, especially of DDYIs along life organochlorine. Use of DDT will be restricted under this projectto destroying pests where shorter lived chemicals are ineffective or unavail-able. Also, aerial application offers an advantage over ground applicationbecause dosages of active chemical can be calibrated more accurately and lesschemical is needed. Finally, the Insecticides Act of 1968, which GOI pro-poses to implement rigorously, contains detailed regulations to minimizehazards from handling and use of pesticides (Annex 1).

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3.03 About 35 million acres of cropped land susceptible to pests anddiseases (about 10% of the area under cultivation) would be suitable for andcould benefit from aerial application of plant protection chemicals one ormore times each year. The 1968/69 aerial crop treatment covered only 1.5million acres (Annex 2, Table 1). Most of the crop pests and diseases des-cribed in Annex 1 can be efficiently controlled by the application of chem-icals from the air. Most states have had experience in aerial treatment andhave developed workable operating arrangements that would be the basis forincreased aerial plant protection (Annex 2). There is substantial scope forextended use of agricultural applicator aircraft in the field of plant pro-tection in India.

B. The Industry

GOI Aviation Unit

3.04 The GOI Aviation Unit, established in 1957, is part of the Director-ate of Plant Protection, Quarantine and Storage under the Secretary of Agri-culture. The unit is well managed and its personnel are highly qualified.Until a private aerial agriculture industry was established, the unit didmost of the earlier spraying work (Annex 2, Table 2). Plans are to holdcommercial operations at current levels and increase promotional spraying andmethod testing. The unit recently purchased three helicopters and intends tobuy a fourth, retire all of its uneconomic fixed wing aircraft and replacethem with modern equipment. The unit is stationed at Safdarjung Airport,New Delhi, where it has adequate hangar and office space and repair and main-tenance facilities. GOI intends to upgrade the unit to Directorate of Agri-cultural Aviation so that it would have adequate operational autonomy andbroader supervisory responsibilities.

Private Operators

3.05 Private agricultural aircraft operators entered the field in 1959.They covered 4,100 acres at first and by 1968/69 had expanded to 1.2 millionacres, with 30 aircraft owned by eight companies (Annex 2, Table 1). Therewill be 17 companies in 1970, including several that are in the process offormation (Annex 2, Table 3). Acquisitions of aircraft of different makeshave generally been under bilateral arrangements, mainly in the last twoyears.

Operational Bases

3.06 Most operators are presently based at New Delhi and Bombay (Map).Lack of space and accoumodation has become acute in these locations and someoperators may move to other bases. The GOI does not interfere in an operator'schoice of location, which is influenced by availability of technical personneland maintenance facilities. The concentration of operators in two or threeregions is not a constraint in rendering prompt aerial service to the customer.Given two days' reaction time, aircraft may be positioned in any part of India.Also, since work allocation is mainly through public tenders, there is no

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guarantee that a locally based operator would get an assignment. Airfieldfacilities throughout India are fully adeqcuate to provide the necessary oper-ating bases for an enlarged fleet and to allow decentralization of existingoperations,

Repairs, Maintenance and Spare Parts

3.07 Most operators have basic repair facilities and sufficient tools tokeep their fleets operating. Although slow, their shops have been able to re-build wrecked aircraft completely with imported components. There are alsoseveral large facilities that do specialized repair and overhaul work, as wellas about 30 other maintenance shops throughout India. While aircraft importersmaintain some stocks of spare parts for their aircraft, spare parts servicesneed improvement.

Staffing

3.08 The shortage of qualified agricultural pilots is a major problem,because there is no agricultural flight training facility. Until recently,retired pilots from the defense services were available (Annex 2), but theyhad no formal agricultural training and only a brief introduction to fieldwork. This contributed to complaints about the quality of the work and toaccidents due to pilot error. Licensed commercial fixed wing airplane pilotsare available in sufficient numbers but they lack agricultural flight andground training. The shortage of helicopter pilots, however, is acute. Thereare presently more agricultural helicopters in the country than pilots to flythem. Similarly, there is a shortage of engineers, particularly those licensedin helicopter maintenance.

Status of Private Operators

3.09 Most companies are aggressively managed and have demonstrated abilityto operate their aircraft effectively. They have formed a professional asso-ciation to foster good government and customer relations. Fleet utilizationhas improved, despite drought in 1965 and 1966, and delayed budgetary supportby GOI and state governments at the beginning of 1969/70. The industry hasthe capacity to achieve greater fleet utilization and the ingredients arepresent for further improvement and expansion. All companies are keen to ex-pand business and have expressed interest in acquiring new aircraft and ancil-lary equipment.

3.10 The industry is presently operating with funds generated from itsagricultural and non-agricultural business or borrowed from financial insti-tions, associated companies or individuals. Needs for operating capitalwould increase gradually as operations expand, and operators have indicatedthat they would draw on the same sources for the necessary additional operat-ing funds. More details on the industry are in Annex 2.

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C. Project Areas, Crops and Spraying Seasons

3.11 Crop pests and diseases occur throughout India, and operators haveto service demands anywhere in the country (Map). The major activity of thefleet would be the treatment of epidemics, making it difficult to definespecific project areas. A major shift towards increased preventive treatmentwould be possible only after GOI and state plant protection services havebeen considerably strengthened with qualified manpower and effective pestforecast organizations.

3.12 The states of Tamil Nadu, Maharashtra, Gujarat, Punjab, Haryana and,to some extent, Mysore, progressed well in employing aircraft in epidemic andpreventive plant protection in past years. They also have worked out satis-factory programs and budgets for both types of aerial work, have experiencedplant protection personnel, suitable legislation for the organization ofaerial campaigns and cost recovery from farmers, and extensive crop and areapotential for increased aerial spraying. Probably 60% to 70% of the totalacreage sprayed under the project would be in these six states.

3.13 Aerial treatment has been used on many different crops. Of thetotal acres sprayed from the air from 1964 to 1969, about 30% were in food-grains - mainly rice - and 12% in other fooderops; 15% were in cotton, 19%in sugarcane and 5% in rubber. The balance was in a variety of other fieldcrops (Annex 2, Table 2).

3.14 Crops in India are attacked by pests at all seasons. However,weather sometimes inhibits aerial operation at the height of the monsoon.With increased spraying of foodcrops in south India and of cotton in Punjaband Haryana, a better distribution of aerial spraying activity is expected.

IV. THE PROJECT

A. General De8scrip tion

4.01 The proposed project is an important part of India's plant protec-tion program included in the current Five-Year Plan (1969-74). It aims atimproving and expanding aerial spraying services to Indian farmers, mainlysmall holders, over a 3-year period, The project includes:

(a) provision of aircraft, spare parts and ancillary equip-ment to qualified private aviation operators for fleetrenovation, expansion and operation;

(b) establishment of a Directorate of Agricultural Aviation(DAA) by GOI and provision of new aircraft, includingspare parts and ancillary equipment to it;

(c) provision of training facilities and programs for agri-cultural pilots and aircraft engineers, including tech-nical assistance; and

(d) promotion and organization of aerial plant protection inIndian states and evaluation of project performance.

B. Detailed Features

Aircraft

4.02 The project would provide about 82 aircraft - 35 helicopters and47 fixed wing aircraft, DAA would receive 8 aircraft for flight training;and 9 would replace uneconomic aircraft, 6 with DAA and 3 with private oper-ators. The strength of the commercial fleet woXald be increased from 73 to138 aircraft. The proposed aircraft acquisition has been linked to the ex-pected capacity of the training center (paras. 4.06-4.07) and is in linewith GOIt's and operators' demand for new aircraft, based on their fleet ex-pansion and renovation plans received during appraisal (Annex 2, Table 3).Aircraft financed under the project would be designed specifically for agri-cultural work. They would incorporate features to enhance pilot safety,provide high performance with gross loads, allow easy control during slowlow-altitude flight and resist chemical corrosion. Specifications of agri-cultural aircraft are detailed in Annex 3.

Aircraft Spare Parts

4.03 Adequate and timely supply of spare parts would be vital for con-tinued and economic operation of the proposed project fleet. Funds for spareparts of aircraft imported under the project would be provided as follows:5% of CIF value at the time of importation; 5% of CIF value in the year fol-lowing importation; and 10% of CIF value in the year thereafter, since majorroutine overhauls are expected to start in the third year of aircraft operation.See also paragraph 4.20.

Vehicles and Ancillary Equipment

4.04 Personnel and equipment carriers would be required to enhance fieldwork at the rate of one to two vehicles per aircraft in operation. Based onthis estimate, 102 jeep-type vehicles would be provided. Ancillary equipmentwould include safety equipment for pilots; supporting ground equipment forpreparing and loading chemicals and refueling aircraft; specialized aircrafttools; and additional agricultural aircraft equipment for crop dusting, fer-tilizer spreading and seeding.

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Training

4.05 The pilot is the key to efficient and successful aerial application.He must be experienced with his aircraft and know the maneuvers he can per-form safely and the limit of the load he can carry from short, rough, tea-porary airstrips; above all, he must know his own and the aircraft's limita-tions when he is operating at low levels. In addition, he must be trainedin crop recognition, the effect of weather on the application, the use ofchemicals and how to handle them safely; and the layout and organizationfor aerial application using markers and flagmen.

4.06 - To increase numbers of pilots and engineers in the fleet and toimprove their skills and competence, a training center would be establishedunder the proposed DAA. A classroom building would be constructed on govern-ment land at Safdarjung Airport, New Delhi. Aircraft, vehicles, ancillaryequipment and training aids would be provided, as well as funds to cover train-ing costs, including costs of staff and operational and maintenance costs oftrainer aircraft. The program would gradually increase pilot numbers tothree pilots per two aircraft of the fleet. Similarly, one engineer wouldbecome available for every two aircraft. When these ratios have been reached,the annual training program would be paced to provide a constant supply oftrained personnel to maintain fleet efficiency at high standards and allowfleet expansion after project termination. Further details on training aregiven in Annex 4. Assurances have been obtained that pilot and engineertraining programs would be satisfactory to IDA.

Technical Assistance

4.07 To ensure that training is carried out efficiently, two qualifiedinternationally recruited agricultural pilot instructors would be employedfor the first 12 months to set up the training center and establish curricula(para. 5.06). In addition, four pilot instructors would receive short-termoverseas training (para. 5.05). Funds for this technical assistance and foroverseas training of instructors would be provided under the project.

Replacement of Aircraft and Overseas Insurance

4.08 The attrition rate of aerial equipment is substantially higher thanthat of other agricultural power equipment. The Indian attrition rate is atpresent about 7.5 agricultural aircraft, accidentally damaged, per 10,000flying hours needing major repairs or replacement. The attrition rate shouldgradually decline to 5 aircraft per 10,000 flying hours as operation andefficiency improve. Based on expected attrition rates, the equivalent ofabout 25 aircraft may be severely damaged during the first 3 years of projectoperation. This would be equivalent to an average annual decrease of spray-ing capacity by 10-15%. To maintain spraying capacity at the proposed level,adequate provisions must be made for prompt replacement, in part or in total,of aerial equipment that might be damaged in possible accidents.

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4.09 GOI's aircraft are not insured and Government would replace air-craft as and when needed. Provision for the estimated replacement need hasbeen included in the project. Similar arrangements would not be practicablefor private operators and they would be required to continue to insure theirequipment, with 75% of the value insured overseas. In lieu of replacementof private aircraft, the project includes the provision of foreign exchangefor premiums payable for overseas insurance during the development period.Assurances have been obtained from GOI that (a) aircraft of DAA damaged orlost by accident would be promptly replaced; (b) adequate foreign exchangefunds would be provided for overseas insurance of aircraft of private oper-ators throughout the useful life of such aircraft; and (c) in the eventinsurance compensation is paid, GOI would issue promptly as needed thelicenses for import of replacement aircraft.

Project Performance Evaluation

4.10 Aerial application of chemicals is a highly versatile and special-ized agricultural custom service requiring rapid adjustment to a fast prog-ressing technology and constantly changing pest patterns. Scientific studyof the impact of the project, based on sample studies in project areas, wouldbe essential for adjusting operations to changing conditions and for planningfurther development of aerial plant protection after project termination.There are several qualified research institutes and universities in Indiawhich could execute the studies. Assurances have been obtained during nego-tiations that the GOI would arrange for one or more qualified institutionsto carry out surveys of the development of aerial application, to keep dev-elopment and cost structure under review, to identify constraints, to proposeimprovements, and to help prepare progress reports required by the Associa-tion.

C. Cost Estimates and Financing

Cost Estimates

4.11 Total cost of the project, including contingencies, is estimated atabout Rs 65.8 million (US$8.8 million), of which Rs 45.2 million (US$6.0 mil-lion) would be in foreign exchange. This does not include costs of pesticides,labor and other recurrent expenditures for aerial protection services by theGOI and the states. Project costs are summarized in the following table. Forfurther details, see Annex 5.

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Rs(thousands) US$(thousands) XForgn.

Item Local Foreign Total Local Foreign Total Exch.

A. Aircraft 2,307 26,573 28,880 308 3,543 3,851 92

B. Vehicles and Equipment 3,006 753 3,759 400 101 501 20

C. Replacement of Air-craft and OverseasInsurance 2,095 7,971 10,066 279 1,063 1,342 79

D. Aircraft Spare Parts 159 5,315 5,474 21 709 730 97

E. Training and Studies 4,446 483 4,929 593 64 657 9

F. Working CapitalIncrement 6,719 - 6,719 896 - 896 -

Sub-total 18,732 41,095 59,827 2,497 5,480 7,977 69

G. Contingency (10%) 1,873 4,110 5,983 250 548 798 69

Total Project Cost 20,605 45,205 65,810 2,747 6,028 8,775 69

4.12 Cost estimates for capital items are based on average manufacturers'prices. Aircraft costs are based on CIF and local transport costs and in-clude air freight for helicopters and sea freight for fixed wing aircraft.Costs of constructing and equipping the training center are based on actualfigures for similar government facilities; costs of the training operationreflect present government pay scales and actual current costs of operationand maintenance of trainer aircraft, vehicles and other training activities.Salaries and allowances quoted for technical assistance instructors are ade-quate to induce qualified and experienced personnel to live and work in NewDelhi.

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Financing

4.13 The project would be financed as follows:

IDA ContributionProject Cost (Foreign Exchange Cost)

PrivateComm. Entre- Through Through Through

DAA ARC Banks preneurs Total DAA ARC GOI Total-- R- :T0…Rs'000 ----------

DAA:Aircraft 4,660 - - 4,660 4,632 - 4,632Vehicles

and Equip-ment 436 - - 436 157 - 157Sub-total 5,096 - - 5,096 4,789 - 4,789

Provisionfor AircraftReplacement 1,725 - - 1,725 1,715 - 1,715Training andStudies 4,929 - - 4,929 483 - 483Total 11,750 - - - 11,750 6,987 - 6,987

PrivateOperators:Aircraft - 21,941 2,279 - 24,220 - 21,941 21,941Vehiclesand Equip-ment - 596 2,727 - 3,323 - 596 596Working Cap-ital Incre-ment - - 2506 4,213 6,719 - _ - -Sub-total - 22,537 7,512 4,213 34,262 - 22,537 - 22,537

Provisionfor AircraftInsurance - - - 8,341 8,341 - - 6,256 6,256Total - 22,537 7,512 12,554 42,603 - 22,537 6,256 28,793

AircraftDealers:AircraftSpareParts - - - 5,474 5,474 - - 5,315 5,315

Contingency 1,175 2,254 751 1,803 5,983 699 2,254 1,157 4,110

Grand Total 128 65,810 7 686 24,791 12,728

Grand Totalin US$'000 1,723 1102 2644 8775 1025 3306 697 6,028

Percentageof ProjectCost 20 38 12 30 100 12 38 19 69

Percentageof IDACredit - - - - 17 55 28 100

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The IDA credit of US$6.0 million (Rs 45.2 million) would cover the totalforeign exchange cost of the project, estimated at 69% of total projectcost of about US$8.8 million (Rs 65.8 million). The credit would be madeto GOI, which would assume the foreign exchange risk.

4.14 GOI would re-lend US$3.3 million (Rs 24.8 million) of the IDAcredit to the Agricultural Refinance Corporation (ARC) at the current lend-ing rate of 5-1/2% interest per annum and at the official rate of exchangefor 11 years, including a 4 year grace period (see projected cash flow,Annex 7, Table 3). ARC would on-lend these funds at an interest rate of 7%to the commercial banks which, in turn, would make the individual loans toprivate operators. Commercial banks would supplement the ARC funds fromtheir own resources to cover loan commitments. The current commercial banks'lending rates are 8-1/2 to 9-1/2%.

4.15 Of the rest of proceeds of the IDA credit, DAA would use US$1.0million (Rs 7.7 million) to finance the foreign exchange component of itsaircraft and the training program. Assurances have been obtained from GOIthat these funds would be made available to DAA during the project periodand that in addition adequate GOI funds would be provided for training.

4.16 The remainder of the IDA credit (US$1.7 million) would cover theforeign exchange costs of spare parts to be stocked by dealers and the pre-miums for overseas insurance payable by private operators (see para. 4.09).This portion of the IDA Credit would not be on-lent to ARC. It would remainwith GOI and help to defray the initial cost of preparing and implementingspraying programs (see para. 5.12).

4.17 Phasing of project expenditures would be as follows (Annex 5,Appendix A):

Year 1 Year 2 Year 3 Total- - - - - Rupees (thousands) - - - - -

Local Cost 5,407 7,849 7,350 20,606Foreign Exchange Cost(IDA Contribution) 8,451 15,965 20,788 45,204

Total 13,858 23,814 28 138 65,810

- - - - - - -US$ (thousands)- - - - - - -

Local Cost 721 1,046 980 2,747Foreign Exchange Cost(IDA Contribution) 1,127 2,129 2,772 6,028

Total 1 848 3 175 3,752 8 775

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D. Procurement

4.18 Agricultural applicator aircraft, presently not produced in India,would be imported, complete with spraying equipment. The international mar-ket for these goods is highly competitive. Two helicopter and eight fixedwing aircraft makes from four Bank group member countries (Federal Republicof Germany, New Zealand, United States of America, Yugoslavia) have wellestablished dealerships in India and others have made arrangements to demon-strate their aircraft with the intention to enter the market. Local compe-tition among established importers is satisfactory and should increase fur-ther as newcomers establish dealerships. As for most agricultural credittype projects, procurement of aircraft under international competitive bid-ding would not be suitable because of the difficulty of centralizing andstandardizing requirements of private operators. Normal trade channels areexpected to meet effectively individual private operators' preferences formakes that have been proved satisfactory under Indian conditions and whichpilots and engineers know how to operate and service.

4.19 Aircraft procurement would be based on GOI's and operators' demandsfor makes and models made available by suppliers prequalified by DAA. Pre-qualification would be based on proposals obtained through public advertise-ment, including aircraft specifications (Annex 3), spare parts, after-salesservice, and shipping arrangements. After approval of subloans, ARC wouldrequest GOI to issue import licenses to private operators, who would beresponsible for the importation of aircraft. Aircraft purchases by DAAwould be the responsibility of a procurement committee, including represen-tatives of the Ministries of Finance and Agriculture and the Directorate ofCivil Aviation and Supplies and Disposals. Assurances have been obtainedfrom GOI that procurement of aircraft would be as set out in this paragraph.

4.20 Aircraft suppliers under the project would be required to organizespare parts inventories, either in or out of bonds, proportionate to the num-ber of project aircraft in service. On recommendation of the DAA, supplierswould be issued import licenses. Dealers and makers would be responsiblefor timely importation, and finance would be through dealers' funds or com-mercial bank credit. Imported spare parts would be supplied to project par-ticipants, and sales and inventories would be checked regularly by DAA.

4.21 Imported ancillary equipment would be procured through existingchannels. Overseas suppliers are well established in India, ensuring a satis-factory degree of international competition through local procurement.

4.22 On previous importations financed by bilateral aid in India, pro-curement of aircraft, aircraft spare parts and ancillary equipment was subjectto delays because GOI failed to issue promptly necessary import licenses.Requests for items to be imported were submitted to lengthy and repeatedexaminations to determine if such items could be manufactured in India. As-surances have been obtained during negotiations that import licenses for air-craft, aircraft spare parts and ancillary equipment would be issued on re-commendation of ARC, for private operators' requirements; of the governmentprocurement committee for DAA requirements; or of DAA for spare parts.

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E. Disbursement

4.23 Proceeds of the IDA credit of US$6.0 million (Rs 45.2 million)would be disbursed on the evidence of supporting documents, showing the CIFcost of imported aircraft, aircraft spare parts and ancillary equipment atthe port of entry. Disbursements for foreign exchange costs of training,aircraft replacement for DAA and overseas insurance premiums would be madeagainst certified statements of foreign exchange expenditures and supportedby bills and evidence of payment thereof. ARC disbursements, through comrmercial banks, to private operators would be made over 3 years. Allowingfor possible delays, IDA disbursements for the project is expected to cover3-1/4 years. Quarterly disbursement estimates are in Annex 6.

V. ORGANIZATION AND MANAGEMENT

A. Project Management and Training

Directorate of Agricultural Aviation

5.01 The GOI proposes to set up a separate Directorate of AgriculturalAviation (DAA), which would take over staff, equipment and ground facilitiesof the GOI aviation unit (para. 3.04). The Director of DAA would report tothe Secretary of Agriculture, GOI. The objectives and responsibilities ofDAA would be: control of locust invasions, aerial spraying demonstrations,testing and improvement of aerial equipment and work, advice to governmentand the industry, coordination of aerial programs and supervision of theindustry. To the extent that its other obligations permit, DAA would alsoengage in commercial plant protection in areas neglected by the private sec-tor under terms similar to those obtained for private operators (para. 5.17).New responsibilities of DAA under the project would be to train pilots andengineers, arrange pre-qualification of aircraft suppliers, and provide con-sulting services to ARC for the technical and operational appraisal and super-vision of private operators participating in the lending program (para. 4.14).The signing of the credit documents would be subject to GOI setting up theproposed DAA.

Training Center

5.02 A Training Center (TC) would be established within DAA to organizeand manage training courses in agricultural aviation for pilots and engineersand refresher courses for both (Annexes 4 and 8). The head of TC would bethe Deputy Director of Agricultural Aviation (DDAA), appointed by the Sec-retary of Agriculture. Coordination of activities between TC and otherdepartments, directorates, the Director General of Civil Aviation 1/, ARCand the industry would be through the Director of DAA.

1/ He is the licensing authority for civil aviation personnel and aircraft,and supervisor of flight activities and administrator of ground facil-ities.

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Staff

5.03 Tne Government intends to fill key positions in TC with experiencedpersonnel of GOI's aviation unit or retired flight personnel of the services.The DDAA would be a qualified instructor pilot, preferably with rotary andfixed wing aircraft licenses, who has had operational and administrative ex-perience in agricultural work and a good knowledge of problems and techniquesof plant protection. Under the authority of the Director of DAA, he would havefull responsibility for training and would assist DAA in executing new projectresponsibilities (para. 5.01). The effectiveness of the credit would besubject to GOI appointing the Director of DAA and a Deputy Director of DAAin charge of training satisfactory to the Association.

5.04 The chief flight instructor would have qualifications similar tothe DDAA and his major responsibility would be the organization and super-vision of flight training. The chief ground instructor, preferably an ex-pilot of the agricultural fleet, would be experienced in teaching aviation-oriented ground subjects and would Plan and execute courses. Finally, thechief engineer instructor would be a qualified and licensed aviation engineer,experienced in teaching pilots and engineers and inspecting and overseeingthe field maintenance and complete overhaul of rotary and fixed wing appli-cators and their agricultural accessories.

5.05 Further, seven flight instructors, one engineer and one agricultureground instructor would assist the chief instructors and have similar quali-fications. Four flight instructors would be given short-term overseas train-ing in agricultural aviation in accordance with training programs agreed uponbetween GOI and IDA. The agriculture ground instructor would be a graduatein agricultural sciences, specialized in plant protection and qualified inteaching. Other staff, such as aviation engineers and aircraft maintenanceand other personnel, would be available in sufficient numbers. Assuranceshave been obtained during negotiations that overseas training programs offlight instructors would be satisfactory to IDA.


5.06 The TC would be assisted initially by two internationally recruitedinstructor pilots (para. 4.07), who would provide the requisite expertise inestablishing agricultural flight courses and help to improve the proficiencyof TC's flight instructors. They would report to the DDAA. One would bespecialized in helicopter and the other in fixed wing pilot training and bothwould have extensive experience in agricultural flying. Assurances havebeen obtained during negotiations that qualifications of technical assistancepersonnel and conditions of their employment would be satisfactory to IDA.

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B. Lending Channels and Procedures

Agricultural Refinance Corporation

5.07 The ARC (Annex 7) would be the refinancing institution of commercialbanks and would have overall responsibility for financial appraisal and super-vision standards for subloans, and the administration, disbursement and re-covery of IDA funds under the lending program to private operators (para. 4.14).ARC has recently increased its staff and would be capable of handling the re-financing operation. Assurances have been obtained during negotiations thata qualified senior officer within ARC would be entrusted with the responsi-bility for the lending program throughout its life.

Commercial Banks

5.08 Commercial banks would be the primary lending agencies for privateoperators. They would assume the default risk and would be responsible forfinancial assessment and security arrangements for loans to private operators.As for past aircraft loans, operators would have to mortgage the aircraft andassign aircraft insurance policies. Commercial banks would supervise sub-loans and would report to ARC and DAA any measures they propose againstpossible defaulters.

On-Lending Policies and Procedures

5.09 Each subloan would be individually appraised and the appraisal pro-cedure would involve ARC, DAA and commercial banks. Loan applications receivedfrom private operators by commercial banks would be assessed by them and for-warded to ARC and DAA for review and approval. Assurances have been obtainedduring negotiations that ARC, assisted by DAA for technical and operationalassessments, would work out and implement appropriate appraisal methods andarrangements for supervision of subborrowers (Annex 9).

5.10 Interest rates under the project would be 5-1/2% GOI to ARC, thecurrent government rate for on-lending to commercial banks; 7% ARC to commer-cial banks; and about 8-1/2% to 9-1/2% commercial banks to private operators,the current rates charged by banks on aircraft loans. Terms of subloanswould be fixed in accordance with operators' repayment ability. Anticipatedloan terms may range from 7 to 9 years, on average 8 years, including a graceperiod of 4 years (Annex 10, Appendixes A to D).

C. Operating Arrangements

Aerial Spraying Programs

5.11 Aerial application of chemicals for pest and disease control incrops would be the major anticipated work under the project. Other agricul-tural work which is presently being tested is likely to increase and mayinclude some application of solid and liquid fertilizer. Occasional mosquitocontrol by health authorities could be an additional activity of commercial

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aircraft. As indicated in paragraph 3.12, a major portion of the aerialspraying planned under the project is expected to be in the states of TamilNadu, Mysore, Maharashtra, Gujarat, Haryana and Punjab. To attain satisfac-tory fleet utilization, annual aerial plant protection programs and budgetaryprovisions would be necessary for those states.

5.12 These annual programs would specify crops, acreage, districts, sea-sons, availability of state funds, financial support from GOI, subsidy poli-cies, legal implications, organization of cost recovery from farmers and res-ponsibilities of the industry. GOI has submitted to IDA satisfactory spray-ing programs in the above-named states for the first project year. Thesewould be models for planning aerial spraying programs in subsequent years.Assurances have been obtained during negotiations that GOI would continueto assist states in drawing up annual spraying programs, and that GOI woulduse its best efforts to ensure that all funds required for the effectiveimplementation of such programs would be made available.

Execution of Aerial Spraying

5.13 Based on a state's annual aerial spraying program, the state depart-ment of agriculture would assist local authorities in preparing detailed spray-ing schedules for districts or similar administrative units. It would bulksprayorders and call for proposals and cost quotations from private operatorsthrough public tender. Based on these bids, the department would negotiatespraying contracts with individual operators. Commercial spraying by govern-ment aircraft would be arranged through direct negotiation with clients. Asatisfactory model agreement, laying down conditions for spraying work, res-ponsibilities of operators and customers, mode of payment and possible penal-ties has been prepared by GOI and would be used under the project. The spray-ing agreement with operators would be between the state department of agricul-ture on behalf of all interested local authorities, or directly between oper-.ators and local bodies, growers' cooperatives or other contracting parties.

5.14 Since large areas of crops are necessary to justify aerial appli-cation, local authorities must group contiguous landowners together to formspraying units. Generally, operations are organized around village panchayats(village councils). The panchayats forward resolutions and requirements topanchayat unions (at district level) which request that the Department ofAgriculture contract with aerial operators on behalf of the panchayats re-questing the service.

5.15 Responsibilities of state and local authorities would include theprovision of field landing strips and helicopter pads; detailed field maps;qualified supervising personnel, flagmen and loaders; chemicals and diluentsat loading sites; specification of acre application dosages of chemicalsaccording to crop and pest; and payment of operators upon satisfactory com-pletion of the contracted work. Operators would be responsible for provid-ing aircraft, including spraying and loading equipment, fuel and lubricants,and qualified pilots and field maintenance services at the times and locationslaid down in spraying agreements.

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Acre Rates and Cost Recovery

5.16 Rates of aerial application per acre for farmers' crops are currentlyset by GOI at Rs 10 per acre for helicopter work and Rs 8 per acre for fixedwing aircraft work. They have been based on 1967/68 costs and prices of equip-ment, spare parts, aircraft insurance and operation, and other costs in con-sultation with the industry. They are at present profitable to operators.However, to assure viability of fleet operation, aerial application rateswould need continued adjustment to changing costs and prices. Assuranceshave been obtained during negotiations that maximum rates of aerial applica-tion set by GOI for comuercial spraying of farmers' crops would be reviewedin consultation with the industry, and, as necessary, adjusted from time totime.

5.17 Presently, the GOI aviation unit charges acre rates that are belowthe rates set by GOI. These do not reflect actual spraying costs. Assuranceshave, therefore, been obtained during negotiations that in future, all govern-ment rates for aerial work would be no less than those set for private oper-ators.

5.18 Under state plant protection or land improvement legislation, costsof aerial spraying can be recovered from farmers through state revenue serv-ices (para. 2.09). In some regions, and for crops such as cotton and sugar-cane, it is possible to collect from farmers in advance of spraying, orthrough cooperative services thereafter. Costs should include chemical costs,spraying costs, interest of funds advanced by state or local authorities andcosts for landing strip construction and ground services. Assurances havebeen obtained during negotiations that GOI would ensure that, except for caseswhere subsidy is required to encourgage farmers' participation, acre ratescharged to farmers for commercial services would reflect the full costs ofaerial spraying services.

D. Accounts and Audit

Accounts and Records

5.19 DAM would maintain up-to-date records for the project. Its ownoperations under the project would be budgeted and recorded separately so asto be easily identifiable. Details of ARC's operations under the projectwould also be recorded separately and subsidiary accounts and statementswould give the position of participating commercial banks as well as interest,commissions and direct expenses paid, or earned, under the project. Partici-pating commercial banks would maintain appropriate accounts showing the statusof subloans.

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Audit

5.20 Accounts of DAA would be certified by the Accountant General of GOI.This would permit adequate control of DAA's operations. Assurances to thiseffect have been obtained during negotiations.

5.21 ARC is liable to control by the Comptroller and Auditor General ofIndia, who may examine its accounts. Further, ARC is under the constant su-pervision of the Reserve Bank of India and also employs qualified charteredaccountants, presently Messrs. K. S. Ayiar and Co., Bombay, who would besatisfactory to the Association. Assurances have been obtained during nego-tiations that ARC's independent auditors would audit and certify accountsand statements of the project.

5.22 Audit of comercial banks by independent auditors is compulsoryunder the new Bank Companies Act, 1969, and commercial banks would have tofurnish ARC with audited statements of operations under the project annually.Private operators would furnish their financial institutions with an auditedstatement showing a complete inventory of aircraft, equipment and spares,indicating their book value and estimated market value and making a distinc-tion between goods financed under the project and others. Assurances havebeen obtained from ARC that subsidiary loan agreements would include covenantsrequiring cormercial banks and private operators to maintain appropriateproject accounts, which would be audited and certified by independent auditors.

VI. PRODUCTION, PRICES AND OPERATING RETURNS

A. Production and Prices

Acreage

6.01 The proposed project would increase the annual gross area treatedby aerial methods from 1.5 to 6.3 million acres (1.8% of India's total croppedarea) as follows:

Year 5Aircraft 1968/69 Year 1 Year 2 Year 3 Year 4 and later

--- Acres (millions) -------------------

Rotary - 1.4 1.8 2.5 3.0 3.2

Fixed Wing - 1.4 1.8 2.4 2.9 3.1

Total 1.5 2.8 3.6 4.9 5.9 6.3M_wx _ ~ === ===

Incremental acreage would result from increased numbers of aircraft; increasedannual spraying hours per aircraft and acres sprayed per hour through improvedtraining of pilots, aircraft engineers and field officers, better organizationand management; and improved market promotion. Assumptions of fleet growthand efficiency are discussed in Annexes 3, 10 and 11.

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Farm Production

6.02 Expected incremental crop yields due to aerial plant protection werebased on response data of traditional crop varieties to ground treatment. Thesewere adjusted to reflect greater effectiveness of aerial over ground treatmentdue to more even application of chemicals, better timing of pest control andcoverage of large contiguous areas checking re-infestation, and, greater yieldresponse of high yielding seeds to plant protection. Yield estimates areconservative and are detailed in Annex 11. Increased acreage sprayed fromthe air would involve: foodcrops about 55% (rice, 30%; wheat, 7%; sorghum,8%; groundnut, 10%); fibrecrops, mainly cotton, 25%; sugarcane, 14%; andother crops, 6% (potato, 1% and rubber, 5%).

Prices

6.03 Commodity prices in farm models are based on prevailing Indianaverages. Prices for economic evaluation are current CIF values, held constantthroughout project life. Details on commodity price assumptions are inAnnexes 11 and 12. Cost of aerial application in returns to aircraft oper-ators and farmers are current rates set by GOI (para. 5.16). Based onprevailing chemical prices and recommended field dosages, an averagechemical cost of Rs 10 per acre has been used.

B. Farm Benefits

6.04 Expected benefits to farmers are based on farm models comparingaerial plant protection with no plant protection and with plant protectionby ground methods (Annex 12). These models take into account costs of aerialapplication of chemicals, harvesting, storing and handling additional farmoutput, and cost savings from replacing ground treatment. As shown below,the expected returns to farmers would be substantial and would thereforeprovide sufficient incentive for use of aerial plant protection services.

Aerial Treatment Aerial TreatmentOver No Treatment Instead of Ground TreatmentSouth North South NorthIndia India India India(5-acre (10-acre (5-acre (10-acre

farm) farm) farm) farm)… - - - - - - - - - Rupees - - - - - - - - -… - -

Increments in:Gross Revenue 1,430 1,966 339 473Cost 414 605 31 43

Net Profit 1,016 1 361 308 430

Net Profit per Acre 1/ 71 22 22 22

Ratio of IncrementalProfit to Aerial

Spraying Cost 3.7 3.3 1.1 1.1

1/ Due to multiple applications for some crops, like paddy and cotton, theeffective number of acres sprayed per farm would be: 14.25 acres forthe 5-acre farm and 21.50 acres for the 10-acre farm.

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C. Returns to Aircraft Operators

6.05 Existing and new firms of aircraft operators would participate inthe project. To determine incentives to existing operators, the return oninvestment in one additional aircraft has been estimated. For a helicopteror for a fixed wing aircraft, the rate of return would exceed 26%. Totalannual work hours per aircraft are most likely to fluctuate. Cutting workhours by 5%, 10% and 20% would reduce the rate of return from over 26% to23%, 20% and 17%, respectively. Details of rates of return and break-evenanalysis appear in Annex 10. These returns explain the interest shown byexisting firms in the project.

6.06 To estimate the financial viability of new firms, two models wereused, representing the range of expected sizes of such firms under the project:a firm owning three helicopters and three fixed wing aircraft and a firm withfive of each type of aircraft. Rates of return on total assets would be: 12.2%for the 6-aircraft firm and 18.4% for the 10-aircraft model. Assuming thatall fixed assets are financed from equal amounts of equity capital and longterm debt, returns on owners' equity would be around 16% for the small firmand 29% for the large firm. Average returns are satisfactory and should en-courage continued growth of the industry. Details of assumed operations, pro-jected balance sheets, statements of income and sources and application offunds are in Annex 10.

D. Government Revenue Generation

6.07 The project would generate import duty revenues of about Rs 2.6million in the project development period. Aircraft operators would contrib-ute over Rs 20 million incremental revenues in income tax to GOI over theproject's life. Sales taxes on aero-gasoline would gradually increase rev-enue to about Rs 0.35 million per year at full development.

VII. BENEFITS AND JUSTIFICATION

7.01 Major project benefits would arise from higher crop yields on farmsreceiving aerial plant protection. Farms receiving aerial treatment werecompared to farms receiving no plant protection and those receiving plantprotection by ground application. The expected economic rate of return ofthe project would exceed 100% (Annex 11). If only half of expected benefitsshould materialize due to incremental yields falling short of expectationsor acreage treated shifting to low benefit crops, the economic rate of returnwould still be about 44%. The use of aerial pest control protects farmers'investments against crop losses and leads to better utilization of complemen-tary inputs such as improved seeds, fertilizer, water and others. The com-bination of relatively low cost aerial pest control with existing farmers'investments underlies the high rate of return on project investments.

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7.02 The project would strengthen an essential component of India's newagricultural strategy aiming at rapid technological change in rural areas.With the possibility of treating large contiguous areas simultaneously, theestablishment of effective aerial spraying services under the project islikely to yield substantial benefits to small and large farmers alike. With-in the agricultural aviation industry, the project would give employment todifferent groups of skilled, semi-skilled and unskilled workers, and providevaluable training and professional experience to operators, pilots, mainte-nance engineers and field officers for further expansion of the industryafter project termination.

7.03 Most of the crops benefited are now being imported. Assuming thathalf of incremental output generated by the project would have to be importedwithout the project, India's gross foreign exchange savings would be at leastUS$1.3 million annually at full development. The project would play an im-portant role in the country's overall program of achieving self-sufficiencyin foodgrains and other field crops and make a major contribution to India'sagricultural economy.

VIII. RECOMMENDATIONS

8.01 The project would be an important part of India's plant protectionprogram, aimed at strengthening and expanding aerial spraying services tosmall farmers. The project is technically feasible. The financial rates ofreturn to private operators and farm benefits indicate that the project isfinancially attractive. The economic rates of return are satisfactory.

8.02 Agreements were reached with the Government on the followingprincipal points during negotiations:

(a) adequate foreign exchange funds would be provided foroverseas insurance of aircraft of private operators throughoutthe useful life of such aircraft; and in the eventcompensation is paid, GOI would issue promptly as neededthe licenses for import of replacement aircraft (para. 4.09);

(b) satisfactory arrangements would be made to carry out per-formance studies of the project (para. 4.10);

(c) two internationally recruited flight instructors would beemployed to assist initially the training program; andtheir qualifications and conditions of employment would besatisfactory to IDA (para. 5.06);

(d) continued assistance would be given by GOI to stategovernments to prepare annual spraying programs; and GOIwould use its best efforts to ensure that all fundsrequired for the effective implementation of such programsbe made available (para. 5.12);

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(e) acre rates charged by government aircraft to clientsfor commercial application would be no less than 4hoseset for private operators (para. 5.17); and costs ofcommercial aerial services to farmers would be basedon the full cost of application, except for caseswhere subsidy is required to encourage farmers' parti-cipation (para. 5.18).

8.03 The signing of the credit documents would be subject to GOI set-ting up the proposed DAA (para. 5.01).

8.04 In addition to the customary provisions for effectiveness of theIDA credit, the appointment of the Director of DAA and a Deputy Directorof DAA (para. 5.03), both satisfactory to IDA, would also be conditionsof effectiveness.

8.05 With the assurances obtained, the project would be suitable foran IDA credit of US$6.0 million.

October 7, 1970

ANNEX 1

rIDIA


Plant Protection in India

Introduction

1. The recent breakthrough in food production in India has beenpossible because of the introduction of high yielding crop varieties andassociated technology. More and more farmers are adopting these varietiesand new cultural practices, and more fertilizers and water are used toexploit the high yield potential. When more fertilizer and water are givento a higher plant population, there is always a danger of more intenseattacks by diseases and pests. tJWhen attempts are made to increase foodproduction, there is a tendency to cultivate only new varieties, sometimesonly a single one, over large contiguous areas. This poses the danger ofsudden outbreaks of epidemics of diseases and pests. This annex high-lights the crop disease and pest problems in India in the context of thenew technology.

Use of Agricultural Chemicals

2. By shifting to high yielding varieties of rice, wheat, corn,cotton and other crops an unnatural, but necessary, situation has beencreated on Indian farms. Cultivation of improved crops on large scaleprovides favorable conditions for insects and plant diseases. The increasein pests and diseases that follows could lose the struggle for increasedagricultural production. It is, therefore, necessary to control insectsand diseases to keep the ecological mechanism working in favor of thefarmer. For most pest problems, the use of chemicals provides the onlycurrently economic solution to help India become more self-reliant inagricultural production.

3. The use of pesticides has always presented problems. Their usecreates two types of hazards (a) safety in handling and (b) long liferesidues which build up in animal and human tissue. Indian workers areaware of the first problem and dangers of spillage and skin contacts areminimized, by continuing training and information programs. The secondproblem must be met by selecting pesticides that have no long residualeffects. DDT, a long life chemical would be used relatively little. BHC,dieldrin, aldrin, endrin, carbaryl, malathion and parathion would predom-inate. DDT would be used only for those crops where other shorter livedchemicals are ineffective or unavailable. GOI through the enforcement ofthe Insecticide Act, 1968 attempts to minimize hazards from both thehandling and long-range use of pesticides, (see page 7).

ANNEX 1Page 2

Pest and Diseases in High Yielding Varieties

4. In July, the GOI issued a special stamp comemorating the wheatrevolution in the coumtry. The production of wheat went from 11.4 milliontons in 1966 and 12.3 million tons in 1964/65, the earlier year of recordproduction, to 16,6 million tons. This meant almost a 50% increase over1966 totals and 33% over the 1964/65 record production. Much of thisachievement has been attributed to the cultivation of new high yieldingwheat varieties.

5. Breeders did their best to breed pest and disease resistantand tolerant strains, Nevertheless, all newi wheat varieties have diseaseand pest problems. The first two high yielding wheat varieties, introducedinto India from IMIexico in 1964, showed susceptibility to loose smut by1966. At some locations, more than 30% of loose smut was recorded infarmers fields decreasing crop yield. Consequently, the two initialvarieties had to be replaced by other varieties, claimed to be diseaseresistant, especially to rust, However, by 1968, it became clear that,in certain regions, these were susceptible to brown rust and black stemrust. These new varieties are being planted more and more each year,likely to contribute to a rust epidemic or some other disease outbreak.Another factor, likely to contribute to increased crop diseases is thedelayed planting date of high yielding wheat varieties. Crops plantedin October often escape infection, but the new varieties planted in themiddle of November and onwards may be quite vulnerable.

6. Further, the lush growth of high yielding varieties attracts moreinsect pests. Thrips has become a threat to high yielding wheats, whichif infested in early stages, are set back in growth. If no control measuresare adopted, yield losses could be serious, Other pests that attack newvarieties are the cutworm, climbing cutworm and the shoot fly.

7. Rice is the most important fooderop of India and is a staple ofmore than half the population. The crop is groun extensively and coversabout 84 million ac, According to an estimate in 1968/69, 8.5 million acwere in high-yielding varieties of rice, and by 1973/74, the area shouldincrease to about 25 million ac.

8. The era of high yielding rice varieties began in India with theintroduction of Taichung Native-l. The variety caught attention of thefarmers because of high yields which were two to three times over the talllocal types. This strain was soon followed by another high yielding variety,IR-8. In July 1966, a half ton of IR-8 was airfreighted from the Phillipinesfor seed increase, and one year later, India had 25O,OOO ac planted withthis variety.

9. The major disease problem the Taichung Native-l faced was thebacterial blight. It is known to cause yield reductions of 20 to 30% aftermoderate infections and over 30% after severe ones. Bacterial blight wasnever widespread until Taichung Native-l was introduced in most of the

AlSEX 1Page 3

rice-growing states, Now the disease has become endemic all over therice-growing areas of the country 0 A correlation, however, has alreadybeen established--the higher the nitrogen application, which is necessaryto get more yields, the greater the susceptibility to bacterial blight.

10. IR-8 has withstood bactelial blight better than Taichung Native-le Though the incidence is fairly commonp it is much less severe than onTaichung Native-iL False smut has also been reported on IR-8. But thedisease affecting IR-8 most, particularly in north India, is brown spot.*hiile IR-8 gives high yields, withstands other diseases like blast and,

to some extent bacterial blight, it is quite susceptible to brown spot.

11. Viral diseases of rice also have to be watched carefully. Yellowdwarf has been observed in south India, Out of the three leafhopper speciesthat are vectors of yellow dwarf, two are conmonly found. Another viraldisease, tungro, has been observed at some locations. The leafhopper thattransmits tungro virus is common in most parts of India. With susceptiblevarieties like Taichung Native-1 and IR-8 available, it would not besurprising if tungro occurred increasingly.

12. Taichung lNative-1 and IR-8, while moderately tolerant to stemborers, are susceptible to the rice gall midge and leafhoppers. A diseaseand insect survey was conducted in 1967 and revealed that IR-8 and TaichungNative-i were more heavily infested than vere local varieties. Infesta-tions were severe enough in several fields to cause up to 80% yield reduc-tions, The pest was found in almost all the south and southeastern Indianstates. The survey team also found white-black planthoppers and brownplanthoppers to be more numerous than others, Agains lush vegetativegrowth of the new varieties as a result of heavy application of fertilizershas been considered conducive to the buildup of leafhoppers.

13. In 1954, G00 invited the Rockefeller Foundation to survey Indiato determine the potential for corn and to suggest a research program incorn improvem.ent. In 1957, a coordinated corn breeding program was initiatedon a national scale 'by the Indian Council of Agricultural Research, incooperation with various state governments and the Rockefeller Foundation.As a result of the work done, four hybrids were released in 1961. Subse-quently other high-yielding hybrids were also released. By 1964, thehybrids star-ted catching the attention of progressive farmers. Accordingto estimates, more than 2e5 million ac have already been planted to hybridcorn and the area is expected to increase to about 5 million ac by 1974.

14. However, in addition to problems relating to agronomic practices,plant diseases have posed a threat to the spread of maize, particularlyin north India. Since 1962, a disease characterized by severe leaf strip-ing has been observed in several corn growing areas. Brown stripe hassince been recognized as a major disease problem. Though attempts tobreed resistant hybrids are continuing, none of the released ones arehighly resistant, though some are tolerant. Corn hybrids and compositeshave their pest problems too. The sorghum shoot fly has been found to be

ANNEX 1Page .4

a new pest to all varieties of corn. Two others that have assumed importanceare the stalk borer and the pink borer.

15, Sorghum is an important cereal crop in India, covering an areaof about 46.5 million ac. The first hybrid,0 CHS-l- was developed andreleased in 1964 by the Coordinated Hybrid Sorghum Scheme in collaborationwith the Rockefeller Foundation. This hybrid not only has a high yieldingpotential, but also produces grain of acceptable quality. Average yieldsof 2,000 lb per acre without irrigation and 4,000 lb per acre with irriga-tion are conmon. Under best agronomic practices, a yield of 6,000 lb canbe obtained. Another hybrid, CHS-2, a long-duration type, was laterreleased for late rainfall areas.

16. Sorghum hybrids have been highly susceptible to sugary diseasewhich assumed importance only after the release of these hybrids. Anotherdiseases not reported earlier, became important in 1968. This is a leafspot caused by a fungus, that has been a serious problem in Nqigeria, Boththe hybrids are susceptible to pests which were considered minor earlier,the shoot (stem) fly, earhead webbing caterpillar and gall midge.

Government Policies

17. It should be evident that, in cultivated crops the disease andpest situation in relation to high-yielding varieties has already becomeserious, whereas in others there exists a real potential danger of heavylosses. In some cases, varieties have beenfound to be highly susceptibleto hitherto unimportant diseases and pests. Since there is a tendency togrow those few varieties of crops that find general acceptability in largecontiguous areas, the danger of disease and pest epidemics is a real one.It is therefore essential to plan the steps to be undertaken to meet thepresent situation and to ensure continued gains in food production.

18. Until recently, plant protection was not considered as importantin India as agronomy and breeding. This attitude came from the notion thatresistant varieties for all the major diseases and pests could be bred andimprovements and alterations in cultivation practices could reduce theirincidence. This notion is disappearing and there is developing a muchbetter realization of the importance of plant protection and a deeperappreciation for crop protection measures by chemicals.

19. Among the steps being taken is the initiation of a program forexpanded plant protection under the current Development Plan (1969-1974).In the last year of the Plan, it is proposed that about one half of thecropped area will be covered by various plant protection measures, suchas seed treatment, ground and aerial pest and disease control of fieldcrops and antirodent measures. Intensive or preventive pest treatment thatwould involve more than one application per crop and per season is foreseenfor all areas under the high-yielding crop varieties program and forplantation and commercial crops. The respective targets under the Plan aresummarized in the following table:

ANNEX 1Page 5

Treatment 1969/70 1970/71 1971/72 1972/73 1973/74- - - -- - - acres millions)o - ---

Seed treatment 50 62 7 86 99Rat control 20 25 30 35 40General pests 15 20 25 25 30Intensive application 83 99 114 133 148

20, To support the targets for increased plant protection the GOI hasintroduced at the beginning of 1970 a subsidy scheme for areas declaredendemic. It will pay Rs 7 towards operational aerial spraying charges. Ex-pected coverage for 1970/71 under the scheme is 1.6 million acres out of atotal expected coverage of 4.0 million acres. The remaining 2.4 millionacres would be sprayed under state sponsored schemes.

21. It is not possible to determine the budget allocations for statesponsored aerial spraying under the current Plan because at the same timethat GOI introduced the subsidy for endemic spraying, it abolished thespecific subsidy for state sponsored spraying. State governments receivenow bulk allocations (70% loan, 30% grant) earmarked for the agriculturalsector and it is up to them to allocate these funds between all theiragricultural programs. The amount of subsidy given in the past to farmersfor plant protection, including aerial spraying, varied. widely from stateto state and ranged from 50% of spraying costs to nothing.

Government Organization

22. GO1s plant protection policies and programs are implementedthrough the Directorate of Plant Protection, Plant Quarantine and Storage.The Directorate staff totals 760. There is a field station in each state,manned by a Plant Protection Officer and a small staff. The primary func-tion of the field stations is to run a survey and warning system to keepGOI informed about the current pest and disease situation and to coordinatestate and union government efforts in arresting any potentially seriousinfestation before epidemic proportions are reached. The plant protectionfield officers provide support to the G0I's agricultural aviation unit whenit is operating in their area. The Directorate also runs 15 plant quarantinestations located at points of entry to India and 52 locust control outposts.

23. The plant protection organizations in the states are headed bya state Plant Protection Officer (PPO), who reports to the Director ofAgriculture. The PPOs have staffs that include entomologists in differentcrops and pests* The state organizations often draw on research work beingdone by entomologists in agricultural universities. At district and blocklevels, plant protection work is carried out by district PPOs, agriculturalextension officers, block development officers and village fieldmen. Thestate plant protection programs provide advice and assistance in a numberof activities, including seed treatment to prevent disease, control of rats

A1\NEX 1Page 6

and other rodents, and control of soil insects and plant disease on theground and from the air. IMIost states have plans to further build up theseservices, It is intended to phase out subsidies by 1974. However, statesrealize that initial subsidy of aerial spraying is essential to introducethis modern method of applying pesticides among farmers.

Research and Training

24. Besides strengthening the breeding program of pest- and disease-resistant crop varieties, there is an urgent need for extended researchin plant protection and development of forecasting services. This wjorkshould be directed toward solving field problems. The recent establishmentof eight agricultural universities in India, oriented to practical agricul-ture has been a step towards intensifying practical research on diseaseand pest control. However, these institutions do not have enough qualifiedscientists and they lack funds for performing adequate crop pest and diseaseresearch and teaching. Because present research is concentrated mainly onsolving the technical problems of plant protection, little information oncrop losses has been gathered. Appraisal of plant pest and disease lossesand their impact on agricultural production is the basis for planning anyplant protection program.

25. There is also need for increased research in the use of chemicalsfor controlling diseases and pests and in methods of applying chemicals.Finding an effective chemical is not enough. Research would have to becontinued until proper schedules were developed for making recommendationsto farmers. Again, preferential and increased budget allocations to supportpractical, problem-solving research are called for.

26. In order to set up adequate forecast services, increased numbersof highly qualified plant pest and disease diagnosticians are needed. Ithas been learned that plant pathologists and entomologists do not alwaysmake good diagnosticians. Plant nutrient and other soil deficiency symptomshave been mistakenly analyzed as plant diseases, resulting in ineffectivecontrol measures. To diagnose properly, one needs a broad knowledge ofbiological} chemical and agricultural aspects.

27. The need for, and constraints of, applied research are recognizedby the Indian Agricultural Research Institute at Yew Delhi, Lhich coordi-nates all plant protection research and is taking steps to improve thesituation on a long-term basis. Spectacular results, however, cannot beexpected in the near future because of the tiue element involved in thiskind of research. The establishlernt of an effective pest reporting systemhas also been undertaken in four selected districts wiith Ford Foundationassistance. Training of field officers is done at the GOI Plant ProtectionInstitute at Hyderabad, which has plans for an expanded training program.Several states maintain similar training facilities, concentrating onspecific state problems. All training institutes teach subjects relatedto aerial plant protection and intend to broaden activities in this field.Fuhther, research and extension is assisted by a number of expatriate

Al'N2NEi 1Page 7

specialists attached to universities and institutions under various tech-nical assistance agreements.

Legislation

28. All states, except IJest Bengal, have enacted some form of agri-cultural pest and disease legislation. Generally, this legislation followsa model bill prepared and circulated by the GOI. These acts provide asystem by wihich the state governments may declare an emergency When thereis a threat of pest or disease epidemics and compel the application ofprescribed treatment on a mass scale. The model act, which provides fornotice and hearing, is somelihat cumbersome. Reports indicate that provi-sions of this legislation are rarely utilized. But systems for voluntarycontrol operations have been worked out under the provisions of other leg-islation and through local plant protection officers and agriculturalextension officers at the panchayat 17 district and state levels. Forinstances the panchayat councils may pass resolutions authorizing anddirecting the panchayat union to contract for specific aerial operationsand authorizing for the collection of the costs from benefited farmersthrough government revenue services. IIost states have been experimentingwith similar methods of organizing work and cost recovelry of aerial treat-ment and have developed wiorkable procedures. The Insecticide Act, 1968,passed by the GOI, is designed to regulate the import, manufacture, sale,transport, distribution and use of insecticide to provide safety to humanand animal life and to ensure minimum standards of quality in the productsoffered for sale.

1/ Local elected bodies on village, multi-village and district levels.

AITNEXT 2

IiDIA

AGJICULTURAL AVIATION PROJECT

The Agricultural Aviation Industry

Scope of Aerial Application

1. WTith the rapid progress of Indian agriculture the need for avia-tion services to control pests and diseases in an organized manner hasbecome important. An increase in the aerial treatment of Indian cropswith suitable pesticides would result in a substantial reduction of croplosses in the field.

2. Aerial application affords an opportunity for increasing urgentlyneeded plant protection in India in an effective and organized mannerolD]hen properly organized it can cover larger areas more rapidly duringcritical pest periods than can be achieved by the use of ground methodsof application. The acreage to be covered by aerial means is concentratedon areas, and in instances, most favorable to its use, specifically:

a) large contiguous crop tracts attacked by pests and diseasesrequiring timely application and where ground methods cannotbe sufficiently and rapidly mobilized and crop losses wouldbe great if delayed ground methods were applied;

b) areas with soft ground conditions as in rice, which are notaccessible by ground methods;

c) tracts of luxuriant crop growth vhich would be damaged byground methods since many people must enter the field;

d) crops in late growth stages. for example, sugarcane whenit is no longer possible to effectively control pests fromthe ground.

3. There are approximately 35 million ac of crops (approximately10% of the area under cultivation in India), which are susceptible topests and would benefit from aerial treatment with pesticides one or moretimes each year. The 1968/69 aerial crop treatment involved only 1.5 mil-lion ac. The agricultural aviation groups in India, both government andprivate, are exerting a creditable effort in attempting to treat the acreageinfestations as they arise. They are, however, underequipped--in some casesusing obsolete aircraft--and understaffed, with pilots who have never hadformal agricultural training. Further, they face dii'ficult problems ofwork organization. The major features and constraints of the industry areset out in this annex.

Al, M X 2Page 2

GOI Aviation Unit

4. The use of aircraft for agricultural pest control began in Indiain 1944 when a militaxy aircraft was employed for reconnaissance to locateswarms of locust in the Rajasthan desert. The GOI considered its aerialoperations against locust to have been successful, and a permanent agri-cultural aviation unit was established in 1957 under the GOI Directorateof Plant Protection, Quarantine and Storage. The unit was initially equippedwith three fixed wing aircraft obtained with Colombo Plain aid. Additionalaircraft were obtained up to 1964 when the GOI fleet was increased to itspresent strength of seven. The GOIts agricultural aviation unit t s head-quarters and operating base are at Safdarjang Airport, New Delhi.

5. Since 1964, GOI has taken several important steps to strengthenthe management of its aviation unit, including the appointment of:

a) a full-time and well-qualified director;

b) an air operations officer;

c) a chief engineer; and

d) a chief stores officer.

In addition to operating the unit, these officers cooperate with the privatecompanies in efforts to meet their needs and in promoting state-sponsoredand centrally supported spraying programs. As a result, the coverage bythe government planes increased from 42,735 ac in 1964 to 344,510 ac in1969 (Table 1).

6. The unit depends on the employment of pilots and technical person-nel released from the armed services. Pilots are given 25 hours of con-version and specialized flight training by the unit t s operations officeror chief pilot. Major air frame maintenance and routine maintenance isperformed partly by the unit's own shops and partly under contract by aprivate company in Bombay. Ehgine overhaul is performed by the Govern-ment's Hindustan Aeronautics, Ltd. in Bangalore.

7. The aircraft operated by the GOI unit is a large, high-wingedplane with a 450-hp engine. It is versatile and rugged, but it is notdesigned as an aerial applicator. Ihile its operating cost is high, itsload capacity of 150 gal, or 1,200 lb, of chemicals is not much greaterthan that of the smaller aircraft in India. This equipment will need tobe phased out and new, more specialized agricultural equipment brought inso as to update to current industry standards. The GOI unit has purchasedthree helicopters on the Exim Bank loan in 1969. They plan to add onemore helicopter in order to bring the mixed fleet in balance with demandfor aerial mork.

ANNEX 2Page 3

Private Operators

8. Aerial treatment of crops in India by privately owned aircraftbegan in 1959 and was conducted largely from aircraft chartered from over-seas for demonstration purposes by agricultural chemical companies orprivate aviation operators. In 1965, the GOI prohibited further paymentsof foreign exchange for charter of agricultural aircraft from abroad or forpaying foreign pilots. Private operators sprayed from 4,100 ac with threeaircraft in 1959 to 1,175,632 ac with 30 aircraft in 1969. Growth inacreage, regional and seasonal distribution, crops sprayed and aircraftefficiency are analyzed in Tables 1 and 2.

9. Until 1968, there were seven active private agricultural aircraftcompanies (Table 3). Three more companies started operations in 1969,while seven others either have or are in the process of making arrangementsfor equipment and personnel to start operations. The private companieshave formed an agricuLtural aircraft association in the hope of cooperatingand working together on large-scale state programs.

Repair and Maintenance

10. The map shows that the operators t base locations are aboutequally divided between Miew Delhi and Bombay, with three in other areas.The reasons for concentrating around these major cities are because ofthe availability of facilities, hangars, shops, spare parts, technicallabor, and better living conditions, The operators, however, send theirequipment to any part of India where volume of work potential exists.Airplanes are flomn to assignments and helicopters are generally trailered.Six Bombay operators are based on Juhu Airport, formerly the municipalairport, and one company is at the civil airport, Santa Cruz.

11. Table 3 lists the operators who are dealers for imported aircraft.These operators are well equipped to perform major maintenance on theaircraft they sell and they also do maintenance work for other operatorswho have no shop facilities. The manufacturers of the aircraft indicatea willingness to train maintenance personnel and to have a technical rep-resentative visit the operation periodically to give advice and to trouble-shoot any problems. Some of the spare parts are available from the dealersand arrangements need to be made to increase these supplies.

12. There are at least 30 other maintenance shops, many of thembelonging to flying clubs, throughout india that,are able to handle main-tenance of small aircraft. Among these are Airw-3orks India at Bombay, alarge overhaul facility, and Associated Airworks and Air Survey Companyat Calcutta. There are five instrument repair shops. The Government t sHindustan. Aeronautics, Ltd. (HIAL) manufactures military and civilianaircraft and has extensive repair capability. HAL has in design an exper-imental agricultural applicator aircraft. According to their presentprojected plans, this aircraft would not be available to the industrybefore 1974/75.

Airfields

13. The airfield facilities throughout India are fully adequate toprovide operating bases for the enlarged fleet. Hangars are needed mostlyfor maintenance purposes and are available at most contemplated bases orcan be constructed without much expense. Operating bases in the field needbe only lov-grade earth strips, easily prepared in most flat areas. Afield 1,500 x 100 ft with 200 ft clear on a 1:2 slope at each end can beleveled and compacted at low cost, and crude temporary strips have beensuccessfully prepared by villagers working under supervision. Helicopterpads, 50 x 50 ft within field tracts, can be prepared with less effort,thereby constributing the helicopter's reputation for flexibility.

Aircraft

14. There is, at present, a mixture of helicopters and airplanes inthe fleet, as indicated in Table 3. Some of this equipment is outmoded,expensive to operate and should be replaced. Because of increased interestby growers and operators in helicopter work, a number were imported in1969 wjith Exim Bank assistance, bringing the fleet to almost a half andhalf ratio. All over the world, the number of helicopters being used foragriculture has increased greatly in recent years and many airplane oper-ations are adding rotary wing craft to their fleets. There is a place forboth types of aircraft in India.

Aircraft Accidents

150 From 1965 through 1969, there was a total of 18 accidents listedas major damage. Of these, eight were airplane accidents and all wereassociated with problems of airstrip landing or taking off procedures. Ofthe 10 helicopter accidents, half are listed as "cause undetermined", or"under investigation," Except for one that resulted from a tail rotorfailure, the remaining were caused by typical pilot errors. such as hittingobstructions or misusing controls during loaded takeoff. US accidentstatistics average 3.7 accidents per 10,000 flying hours. The accidentrecord in India is based upon a smaIl number of aircraft and would beabout double this figure. Improved training and supervision is expectedto improve the situation,

Hull Insurance

16. A wrldwide problem is the purchase of adequate accident insurancecoverage for low-flying agricultural aircraft at bearable cost. Premiumrates may be the single highest item of operating expenditures. Indianoperators pay presently between 15el and 27' of the aircraft value annually,including a 75; foreign exchange coverage which is insured in the Londonmarket, Newcomers to the business and inexperienced comapanies fall inthe highest premium bracket. Each operator is individually assessed bythe insurer and pilot experience is an important yardstick in determiningpremium rates, Improved training, followed by lo01 claims ltuld help theindustry to obtain gradually more favorable insurance conditions,

A1JI'EX 2Page 5

Staffing

17. The management abi-lity of the operators (first nine on Table 3)appear to be adequate for an expanded program. They have developed experi-ence over the years, added personnel and equipment and presented a knowl-edgeable approach to the proposed project. NTew operators who are juststarting had related business backgrounds in agriculture or aviation andappeared confident that they could secure personnel to begin operation.Observations, however, indicated that experienced people were in shortsupply, as reflected in "pirating" of employees among operators.

18. At first, the industry was able to secure enough retired air-plane and helicopter pilots from the services, but no helicopter pilotshave been released lately and the shortage is acute. Airplane pilots, how-ever, are readily available from the ranks of commercial pilots trainedby various flying clubs, All pilots need agricultural training andoperators give them some training w-ithout providing formal instruction inagricultural subjects. Consequently, pilots presently with the fleet havelimited understanding of the technical aspects of agricultural aviation.Better pilot training would help to bring down current rates for hull andliability insurance rates on agricultural flying.

19. IIaintenance personnel at present are adequate and sufficient forexpansion. However, more licensed engineers must be trained each year tomeet the desired ratio of one licensed engineer for every two aircraft.Again, personnel with fair experience are available from the servicespbut they are not licensed.

Operating Arrangements

20. !,hile the GOI plant protection program provides assistance andadvice to the states, the execution of aerial plant protection is basicallythe responsibility of state governments. A few plantations and growerstcooperatives with such crops as rubber, sugarcane and cotton or suffi-ciently large holdings or crop tracts individually employ aircraft operatorsto spray their crops, but this lucrative portion of the market is small.For the bulk of the work, applicators have to rely on the agriculturalauthorities of the Indian states to arrange for the treatment of farmerscrops. Because of the small size of farm holdings in India it is notpossible to build an aerial plant protection industry based mainly onprivate negotiations between farmers and applicators. State governmentsmust be involved to organize the demand into economically viable programsfor a given area. IHost states have had experience with different methodsof organizing demand for aerial treatment and have developed workableprocedures under state Acts that make application on large areas and costcollection from farmers possible. Hethods of demand organization are.however, expected to go through further evolution as optional systems aredeveloped.

ANTE,X 2Page r

21L Generally, it is the responsibility oZ the state authorities to:

a) plan the amount of aerial spraying to be done;

b) budget for the program, including subsidies, and providerespective operational funds;

c) select the areas to be sprayed and determine time of appli-cation;

d) tender and arrange contracts with operators;

e) procure and make available appropriate pesticides at spray-ing sites as determined by the state entomologists;

f) instruct plant protection personnel in the field, exten-sion services, and village and district councils to getfarmers interested;

g) locate and construct landing strips or helicopter pads;

h) prepare detailed field maps and provide qualified loadersand flagmen;

i) call in the aircraft at the proper time and pay the operatorsfor the acres sprayed;

j) organize recovery of costs fron farmers through revenueservices;

k) obtain reimbursement of plan funds from GOI; and

1) checlck record and report the results of aerial treatment.

22. Some organizational weaknesses have curtailed aerial programsin the past. For example, in some cases. states used funds that had beenallocated to them by the GOI on the basis of their plans for aerialspraying for other program.s In order to improve operating arrangements,GOI has changed the method of plan support of aerial plant protection atthe onset of the 1969/70 season. However, the response from states wasslow, delaying aelial programs temporarily during the monsoon season ofthat year. GOI, in collaboration with the indust;y, took immediate stepsto work out new operating arrangements with the states, -which nearly allhave plans for extended aerial plant protection.

Safeguards in Aerial Application

23, Great care has been taken in the past to avoid spraying inhabitedareas; village wells or -water supplies, rivers and ponds; cattle feed orother sensitive areas. Advance notice is given to the community before

A.NNEX 2Page 7

spraying commences and restricted areas are clearly marked. Per acreapplication of active chemicals can be calibrated to the most economicrates more accurately in aerial than in ground equipment, thus minimizingundesirable side effects on the environment.

ANREX 2Table 1


Growth of Aerial Crop Treatment in India

A. Actual

GOI Uhit Private Operators Total FleetNo. of No. of Average/

Year Aircraft Area Aircraft Area Area Aircraft(ac) (ac) (ac) (ac)

1951 3 3,260 -- 3,260 1,0871952 3 18,520 -- -- 18s520 6,1731953 3 2,850 -- -- 2,850 9501954 3 2L4.2 -- -- 2,442 8141955 1 650 -- -- 650 6501956 1 100 -- -- 100 1001957 3 19,159 -- -- 19,159 6,3861958 3 22x135 -- -- 22,135 7,3781959 3 20,700 3 4,113 24,813 4,1361960 2 9,025 7 4ljl389 50,414 5,6o21961 3 46s,538 7 31,040 77,578 7,7581962 4 213,586 10 71,667 285,253 20,3751963 4 21,920 7 63,700 85,620 7,7841964 7 42,9735 7 342265 77,000 5,5oo1965 7 127#532 13 270s696 398,228 19,9111966 7 182,914 16 224,733 407,647 17,7241966/67 1/ 7 209,330 16 286,377 495,707 21t5521967/68 7 204.,870 20 779,130 984,000 36,4441968/69 7 344,S51o 30 1,l751632 1,520,142 41,o85

3. Projected /

Helicopters Fixed Wing Total FleetProject No. of No. of Area Average/Year Aircraft Area Aircraft Area Treated Aircraft

1 37 1,394,719 46 1,402,200 2,796,919 37,9872 48 10848,750 57 1,792,200 3,640,95o 38,7343 63 2,537,737 75 2s433,750 4,971,487 40,9184 63 3s024,000 75 2,925.000 5,949,0oo 43,1095 63 39222,450 75 3,138,75o 60361,200 46,o96

1/ Records from this date on were computed on agricultural year basis, June to July.

2/ GOI and private operators.

AGHICUITUF?AL AVIATION_ JC,0i3T

Pattern of Aerial Ppplicationin Percent of Total Acreage sprayeJ193 l through 1969

Regions and States Crops Crop Seasons and Months

A. South Percent A. Food Grains Percent A. Kharif (Monsoon) Percent-/

Andhra Pradesh l.9 Riceh/ -7- T - June - 3/

Kerala 5.4 WTheat 7.6 July 0.7

Mysore 2.7 Sorghum o.6 August 7.7

Tamil Nadu-/ 15.6 Subtotal 29.7 September 10.4

Subtotal 257 October 12.6B. Pulses, Oilseeds Subtotal 31.7

B. West Groundnut4/ 5.1

Gujarat/ 2.9 Others 6.7 B. Rabi (0^.nter)Madhya Pradesh 8.6 Subtotal 11.8 November 18.1

Maharashtrai/ 22.,4 December 13.3

Subtotal 33.9 c. Fibre Crops January 1.1Cotton4/ 15.1 February 26.7

C. North Jute 0.4 'March 6.7

Ta-rYana?/ 3.0 Subtotal 175 Subtotal 65.9

Punjab 7.14Rajasthan 5.4 D. Mixed Crops5/ 17.8 C. Pre-1!bnsoonUttar Pradesh 21.6 April 1.5

Subtotal 37-4 '. Other Cash Crops May 1.2Sugarcane 18.9 Subtotal 2.7

D. Sast Potato 0.5 Total 100.7

Assam _ 3/ Subtotal TlTBihar 0.5 F. PlantationsOrissa - 3/ Rubber 5,3 1/ States with consistent growth

West Bengal 2.5 Coconut - 3/ in aerial application

Subtotal 7T7 Subtotal 53 2/ Up to 1967/68 included in Punjab.

Total 100.0 G. Other WorkY7 0.5 / Less than 0.1%.Total_ 100.0 G. Other Intor °-5 :TT/ Crops with consistent annual

growth in aerial application.Total 100.0 5/ Fragmented crops sprayed at one

time.6/ Orchards, forestry work and mos-

quito control.7/ Percentage refers to 1968/69 only.

ANNEX 2Tarble 3

INDIA


Expected Operational Fleet Strength as at June 30, 1970

Aircraft AcraSt NosBased at Dealerships2Z i4 FW 47'otal

A. Government of India New Delhi - 3 7 10

B. Private Operators

1) Indamer Bombay 1 2 6 82) Cambata Aviation Bombay & 2 4 2 6

New Delhi3) Helicopter Services Bombay 1 6 2 84) H.S. Sobha Singh Bombay - 2 2 45) Mathur Aviation Co. Bombay & 1 - 6 6

New Delhi6) I4ahindra & Mahindra Ltd. Bombay 1 2 - 27) Avindia Bombay - 2 1 38) Naneckji Aviation Bombay 1 2 - 29) Kherka Aviation New Delhi - 2 2 4

10) Sanghi Aviation New Delhi - 2 2 4& Indore

11) Rambahadur Thakur Co. New Delhi - 2 - 212) INarang Bishnol Co. New Delhi - - 2 213) Eharat Agro-Aviation Co. New Delhi - - 2 214) Agro-Engineering Ltd. New Delhi - - 2 215) Bharatair Ltd. Calcutta - 3 - 316) Push Paka Aviation Ltd. Madras - - - -17) Punjab Cooperative Marketing

Federation Ltd. Chandigarh - - - _

Subtotal 32 36 68

Unallocated - 10 10

Subtotal 32 46 78

Less: Replacements 6/

Total Fleet Strength 32 41 73

C. iequirement5 for AdditionalAircraft _/ 48 52 100

1/ Based on information obtained from GOI, Exim Bank and operators.2/ Dealerships of makes manufactured in 4 IDA member countries.3/ Helicopters.4/ Fixed idng aircraft7/ Aircraft likely to be imported from Yugoslavia under bilateral arrangement before

June 1970.6/ Expected replacement of five uneconomic aircraft of Polish-Russian origin by five

Yugoslavian aircraft.7/ Based on returns from GOI, including trainer aircraft, and listed private

operators. T&k&b £ccUfft of needed replacements and assums that enterpriseswould build up fleet strength to 8-10 aircraft per unit.

ANNEX 3

INDIA


Agricultural Applicator Aircraft

A. Fixed Wing Aircraft

1. Agricultural aircraft procured under the project should bedesigned to fly close to the ground with heavy loads. This requires aspecialized airplane with handling characteristics different than theaverage passenger or cargo carrying plane, which flies at high altitudeand uses commercial airport runways.

Good Performance

2. Sufficient power should be available to cope with emergenciescreated by strong downdrafts or by the need to clear sudden obstaclesinvolving steep climbs. To meet such requirements, the power loading ofthe engine should be low, about 10 to 12 lb/hp. The aircraft should haveexcellent short takeoff and landing (STOL) capabilities, so that it canunstick in about 150 yd without any tendency to sink, and permit safeoperation from 400-yd long airstrips from elevations of 2,000 ft. Theaircraft should have a high initial rate of climb to permit operation fromobstructed airstrips and possess a low stalling speed with the aileronsremaining partially effective, even in a stall. A spray speed of about90 mph should be possible.

Safe Handling Qualities

3. The aircraft should handle well, without imposing any strain onthe pilot or making unnecessary demand on his attention. For instance,there should be no increase in stickload in case the chemical load isdumped in an emergency. This is possible only if the hopper is locatedon the center of gravity. There should be no fuel management problem.The fuel system should have only an ON-OFF cock. Control forces shouldnot be too high and the aircraft should be easily maneuverable.

4. The aircraft should be made as proof as possible against unin-tentional stalls and spins. Spray flying sometimes involves unconventionaltechniques, such as crossing the controls and slipping and skidding aroundcorners in order to cover otherwise inaccessible places. If the pilotmust use many unconventional flying techniques, full control of the air-craft should be possible at low speeds without dropping a wing. Becausethe pilot must take many liberties with the aircraft to perform his task,it must be lightweight--l,500 to 3,000 lb empty, with a payload capacityof about 1,500 to 2,000 lb. The low-wing monoplane configuration hasadvantages since an upper wing might blank out visibility in a turm. Thecockpit should have a high perch for the pilot allowing undistorted visibility.

AlThiiX 3Page 2

Pilot Protection

5. The fully specialized agricultural aircraft is specificallydesigned to afford good crash protection to the pilot. This may be ensuredby constructing the fuselage so that it can absorb energy by progressivecollapse, thereby dissipating crash forces to a considerable extent beforethey reach the cockpit. Also, the longerons may be given a slightly out-ward bulge, so that the cockpit disintegrates outwards and away from thepilot. No heavy equipment should be installed aft of the cockpit so that,in the event of a crash, there is no possibility of the pilot being crushedbetween the engine and such equipment. The hopper should, therefore, beinterposed between the engine and cockpit and not in the rear of the fuselage.The fuel tank should not be in the center section, but in the wings, Whichminimizes fire hazards. The undercarriage legs should have knife edges inthe front to cut any wires flown into inadvertently. A protective wireshould also be strung from the top of the cockpit to the top of the rudderto deflect any obstructions accidently hit, The cockpit should have noprotruding or jagged ends and be thickly padded in the front.

Other Features

6. The engineers prefer an aircraft that is easy to repair. Forthis reason, the fuselage construction should preferably be tubular ratherthan semi-monocoque. Since the agricultural aircraft operates from make-shift airstrips far away from its established home base, it is not possibleto proceed on operation with a full range of maintenance and servicingfacilities, Hence, it is essential that the specialized agricultural air-craft be devoid of unnecessary sophistication. The maintenance burden onthe ground crew should be as low as possible.

7. The undercarriage should be either of the spring steel cantilevertype or the rubber-in-compression shock-absorption type. Large low-pressuretires, with disk brakes, attached on wide track wheels, are necessary foroperation off soft ground and in crosswind concitions., where effectivebraking may become necessary. The oil-and-air oleos are avoided becausepressure leaks or oil leaks in the field would create maintenance problems.Oil and fuel should be drainable without the need of tools or manipulatinglocking wire and safety pins, and preferably without removal of cowlings.Cowlings should not be attached with screws, It should be possible toattach, open, close or remove air cleaners, batteries, cowlings, and boomswith only the fingers.

8. In summary, the specialized agricultural aircraft should be asimple flying instrument. Illustrative operational specifications ofairplanes are shown in Table 1. These are based on several specializedagricultural aircraft conforming in general to the requirements as indicated,There are dealers for each of these makes in India.

ANMEX 3Page 3

B. Helicopters

9, The helicopter equipment situation is somewhat different as faras choice is concerned. Currently, the most used and proven helicopterfor agricultural work is the US Bell. Bell has maintained the commercialmarket lead in numbers of agricultural aircraft produced and sold, bothdomestically and overseas.

l0o Economics of helicopter operation indicates that an agriculturalmachine should carry a payload of 80 to 100 gal of liquid and use a swathwidth of 100 to 120 ft. The helicopter should have adequate reserve ofpower to be relatively trouble-free in field operations, with at least1,200 flight hours before an engine and ship overhaul period. Componentpartst life prior to required replacement should be high--2,500 to 5,00Oflight hours if possible. 1Saintenance should be possible in the field oroperatorts shop without returning parts to the factoxy for overhaul.Flight control should be easy so as not to increase pilot fatigue. Therotor system should be of sufficient inertia so as to allow easy emergencyor autorotation landings. The blades should be of sufficient strengthto withstand contact with wires and small objects such as tree twigs orbush encountered in agricultural flying.

C. Work Capacity

11. The operational production figures of agricultural applicatorsprojected in this report will vary, depending upon many factors. Theseinclude:

a) load carrying capacity of the aircraft. Load carryingcapacity will depend not only upon horsepower of theequipment, but upon air density, heat and humidity, altitudeand length of takeoff area,

b) Sped flowin. Speed is generally determined by manufacturerspecifications for safe swath muns, except in the case ofhelicopters. Rotary wing craft can vary speed and achievea desired result, depending upon crop density.

c) Swath width used. Swiath width is determTined by test foreach aircraft. This should include sufficient overlap toensure even coverage. One complaint was that pilots flewtoo high and tried to cover too wide a swnath. W^Jires, treesand other obstructions in the fields should dictate theheight of flight.

d) Gallonage applied per acre. Gallonage per acre is determinedby state officials or other technical personnel. IjIost workin India is set at 1 to 2 gal per acre, with ultra low-volumespraying of 8 to 12 oz of technical chemical-per acre accountingfor a small percentage.

ANNEX 3Page 4

e) Distance to ferry from loading site. This distance isdictated by terrain or ability to build airstrips close tothe prograrn area. Helicopters pose no problem here.

f) Turn-around loading time, I-lost of the Indian operatorshave developed good loading facilities so as to keep theaircraft on the job without unreasonable delays.

g) Size of fields being worked. The operator has no controlover this factor, Proper organization of work to permitefficient flying patterns is quite important. Vhien manysmall fields are to be covered, the operators fly a straightline for about 5 to 6 miles with flagmen stationed at 1/4-to 1/2-mile intervals. The spray is turned on each tniethe aircraft goes over one of the many small blocks to besprayed and turned off when each has been passed.

ANEX3Table 1

INDIA

AG:ICULTUPAL AVIATION PROJECT

Aircraft Specifications

A. Fixed Wing

Aircraft M4ake: 1 2 3 4 5 6

Price (us$) 1/ 23,000 21,000 38,500 43,000 21,000 32,300IJorsepower 300 260 450 600 290 300Smpty weight (lb) 1,845 1,540 2,690 3,700 1,775 2,200

Gross weight (nornal) (lb) 3,300 2,900 4,5oo 6,ooo 3,000 4,000Gross weight (restricted) 4(b) 4,000 3,0o40 o 300 6,900 3,600 4,1470UJseful load (normal) (lb) I 1,500 1,360 1,810 2,300 1,225 1,800Useful load (restricted) (lb) 2,000 1,500 2,600 3,000 1,800 2,270.ate of climb (ft/mnn) 940 685 1,080 900 850 1,000?akeoff run (ft) 610 740 750 775 650 750Landing run (ft) 420 850 350 500 447 450Hopper capacity (gal) 200 150 247 400 200 350

B. Helicopter

Aircraft Make 1 2 3

?rice (uss) 45,000 33,600 37,500Spraying gear (US$) 3,700 4,,200 14,200HIorsepower 260 180 190Emipty weight (lb) 1i,640 958 1,025Gross weight (lb) 2,850 1,670 1,900Useful load (lb) 2 1,210 712 875Hopper capacity (gal) 100 50 65

1/ Includes agricultural accessories. Variation in choice of equipment could causesore difference in prices.

2/ Useful load includes weight of pilot, fuel and oil)and payload.

ANMX X

INDI-


Trainin

Pilot Training

I. The training program included in the project ,would cover fourcategories:

a) helicopter conversion course for pilots with commerciallicense, including agricultural flight and ground training;

b) agricultural flight and ground course for fixed wing pilotswithout agricultural experience;

c) refresher courses for pilots currently flying agriculturalwork; and

d) refresher courses for pilots trained under the project toupdate their knowledge and ability.

Flying experience requirements are listed in Appendix A and represent theminimnm acceptable. Cperators who hire trained pilots would have to letthem work initially as apprentices, guided by experienced pilots, untilthey gain additional flight time and experience. An example of the heli-copter flight and ground training curriculum is summarized in Appendix B.

2. To be eligible for the training program, a candidate would haveto hold a valid commercial pilot license and have a minimumi flight exper-ience of 200 hours3 selection of candidates would be the responsibilityof the proposed Training Center (TC), under the Directorate of AgriculturalAviation (DAA). Iicensed pilots vould be available in sufficient numbersfrom training courses given by flying clubs and from personnel retiring fromthe forces. Because the training costs involved woluld be beyond the meansof most potential candidates, such expenses under the project would beborne by Government. Operators or trainees themselves wzould pawy foraccident insurance and subsistence during the training period. Refreshercourse training would be only for pilots vho are employed. Employersvould pay their training costs, including insurance and subsistence expenses.

Engineer Training

3. The TC uould perform regular inspection, overhaul and maintenanceon all trainer aircraft as well as be responsible for the training ofengineers. This would include providing courses in performing field main-tenance on agricultural aircraft belonging to DAA, as well as performinga complete overhaul. The course would help prepare an applicant to pass

AiEX 4Page 2

the Director General of Civil Aviation (DGCA) engineerst license require-ments in both airplane and helicopter maintenance. Student applicantsshould be selected on the basis of aptitude, interest and background. TheDGCA requires that an aircraft in the field be inspected by a licensedengineer every 25 hours. This could pose problems if there were notenough licensed engineers available. MTanufacturers of aircraft sold toIndia have expressed interest in assisting in training engineers to workon their equipment. This training, however, is generally available onlyto licensed engineers and would be given by technical representatives ofthe manufacturers in India.

Training Goals

4. The TC would have a fleet of four helicopters and four fixedwing aircraft; three of each type would be schedUled for training purposesand one of each type would be held on standby. With this equipment, thecenter could meet the pilot requirements for each project year. Smallclasses of 5 to 6 would create a favorable climate for individual instruc-tion. Course output would be approximately 20 full course and 12 refreshercourse helicopter pilots per year; 30 full course and 18 refresher coursefixed wing aircraft pilots; and 12 full course and 12 refresher courseengineers per year. Each training aircraft would have to be flown around450 to 500 hours per year in order to fill this requirement, which wouldwarrant the investment. There could be four full courses and threerefresher courses per year, allowing for some slack time between courses.Instruction in ground oriented subjects can be scheduled between trainingflights.

Overseas Training

5. Since the key to successful pilot training is the availabilityof qualified flight instructors, it would be necessary to immediately sendtwo helicopter and two airplane pilots from the GOI aviation unit overseasfor agricultural and instructor training. Cn return, they would be thenucleus for the proposed flight training instructor staff.


6. A technical assistance team would be engaged for a period of 12months to provide guidance and help in getting the training program under-way. It would consist of one experienced agricultural helicopter pilotinstructor and one experienced agricultural airplane pilot instructor.This assistance would offset the need for sending more pilots overseas forinstructor training. They would be responsible for setting up and startingthe flight training courses and associated ground school, as well as fortraining more instructors. Active instruction, in both flight and groundcourses, could be provided by the team until the Indian instructors wereable to take over.

ANNEX 4Appendix A

INDIA

AGRICULTU,ALL AVIATION PROJECT

Training Course Timing

-----------Training----------CategorY -Flight Ground Total

A. Helicopter Pilot Course

Conversion (in hr) 30 50 80Agriculture (in hr) L 0 100

Total Hours 80 100 180

Duration (in weeks) -- -- 10

B. Fixed Wing Pilot Full Course

Agriculture (in hr) 50 50 100Duration (in weeks) -- -- 6

C. Pilot Refresher Courses

1) Helicopter pilots (in hr) 15 15 30Duration (in w#eeks) -- -- 2

2) Fixed wing pilots (in hr) 10 15 25Duration (in weeks) -- -- 1-1/2

D. Aircraft Engineer Courses

1) Full course (in weeks) -- -- 82) Refresher course I (in weeks) 2/ _4 _3) Refresher course II (in weeks)3/ -- -- 2

1/ For pilots currently flying agricultural work and pilots trainedunder the project.

2/ For engineers currently employed in agricultural work.

2/ For engineers trained under the project.

Ah3SEX 4Appendix B

INDIA


Helicopter Training Course

A. Conversion Course (30 flight hours)

1. 10 hours basic maneuvers, pre-solo: preflight, check controlmovement, starting and stopping procedures, takeoffs, landings,attitude control, square patterns and hovering 3600 turns.

2. 10 hours intermediate maneuvers, pre-solo: running takeoffs,running landings; quick stops; maximum performance takeoff;steep approach landings; "S" turns; auto rotations with 900,1800, 3600 turns; unusual positions.

3. 5 hours solo practice: all maneuver as under 1 and 2.

4. 5 hours review of all maneuvers: advanced proficiency tech-niques} auto rotation and emergency practice, platform and slopelandings and takeoffs, heavy load procedures and introduction tonight flying.

B. Agriculture Flight Training (50 flight hous)

1. Preflight check of aircraft, spray gear.

2. Checkout of acres to be sprayed, obstructions, landing spots,flight pattern.

3. Simulated spraying--empty.

4. Takeoff techniques--fully loaded.

5, Simulated spraying--loaded.

6. Nlight flying procedures.

7. Hethods of working around obstructions.

8. Simulated complete treatment of fields with water load.

9. Simulated operation of other com,mercial work.

10. Simulated emergency situations under field conditions.

ANNEX 4Appendix BPage 2

C, Ground Training (50 hours--tuition)

1. History of helicopter development.

2. Cockpit checkout, preflight inspection.

3. Flight rules.

4. Function of the control.

5. Methods of control: vertical, horizontal, directional.

6. Flight procecures: starting, stopping, taxiing, hovering.

7. Explanation of basic helicopter maneuvers, preliminary andadvanced aerodynamics,

8. Rotocraft airworthiness and equipment performance, weight andbalance., operational limitations.

9. Theory of flight applicable to helicopters, ground effect,resonance, vibrations, torque, power settling, autorotativeforces.

10. Accident prevention and analysis.

11. Helicopter maintenance, inspection.

12. Government air regulations, aircraft insurance.

13. Comprehensive review and lecture on safe flying habits, emergencysituations, engine or other mechanical troubles, high tempera-ture, altitude and mountain operations.

D. Agriculture Training (50 hours-tuition)

1. Aircraft types.

2. Chemicals and chemical hazards,

3. Causes and prevention of poisoning.

4. Corrosion control.

5. Agricultural crop recognition.

6. Basic biological aspects of pests and diseases.

7. I-lode of action of pesticides.

ANiUE2 aAppendix BPage 3

8. Sprays, dusts and granules.

9* Spraying: spray equipment and maintenance, spray formulations,dilution and handling of spray liquids, spray application,meteorological effects, calculation of dosage rates, calibrationmethods.

10. Duhsting.

11. Granule spreading.

12. Special application problems, locust control.

13. The use and preparation of special maps for field flying.

1t4* Airstrips and helipads, ground organization.

15. Swath marking: flagmen, fixed beacons, flag poles, srioke, light.

16. Communications.

17. Ancillary equipment.

18. ieteorology.

19. Economic and logistic aspects of agricultural aviation.

20. HIethods of payment for aerial work.

21. Keeping records and stocks.

22e Human problems and relations.

ANNEC 4Appendix C

INDIA

AGRICULTURAL AVIATION PROJECTPro,eted Pilot and Engineer Trgining

(in Numbers of Trainees)

Year Year Year Year1 2 3 4 and thereafter

A. Helicopter Pilots

Full course 10 20 20 20Refresher course - 6 12 12 (8)

Total Th 32 32 20

Cummulative - 48 80 l00 2/Pilots without agriculturalflight training 24 12 - -

B. Fixed Wing Pilots

Full course 1/ 8 30 30 30Refresher course - 5 18 18 (10)

Total 13 LT 178 30

Cunmmulative - 61 109 139 2/Pilots without agriculturalflight training 36 18 - -

C. Aircraft Engineers

Full course 1/ 9 12 12 12Refresher course - 11 12 12 (4)

Total 20 2_ 12

Cummulative - 44 68 80 3/Engineers without agriculturaltraining 24 12 - -

1/ Year 1 to year 3 for presently employed pilots and engineers; fromyear 4 and thereafter for personnel trained under the project.

2/ Desirable ratio of about 3 pilots per 2 aircraft of the fleet.

3/ One engineer available for about 2 aircraft of the fleet.

INDIA


Estixated Pro3ect Costs

(Rs I 00)

year 1 ~~~~~~~~~~Year 2 Year 3 Total1/ Local Foreign Looal Foreign Local Foreign Local Foreign

Category Currency Exchange Total Currency Exchange Total Currenoy Exchange Total Currency Exchange Total

A. Aircraftt

Helicopter 1,264.5 1,264.5 - 843.0 843.o - - 2,107.5 2,107.5Fixed wing airoraft 16.8 1,516.5 1,~533. 11.2 10oo80 1 9. - - 28.0 2.524.5 2 55 .5

Sub-total 2161. 77E T 2,II7. 71rT o,5862.2 - - 632. 0 4;663.02. Private Operatora -

Helicopter 316.1 2,107.5 2,423.6 632.3 4,215.0 4,847.3 948.4 6,322.5 7,270.9 1,896.8 12,645.0 14,541.8Fixed wing aircraft 1. 1 1.7 3 517. 3662.2 186.1 i.22.5 08.6 82.5 2 6. 678.8

Sub-total 3, 777,732.5 -Tetal 384.6 6,14.> 6,529. 4 . 9,583.5 10,371.7 5 ,o3a4o 10,82l397 53 -2,307.32 2,

B. Providion for AiroraftRMI,aammnt & Ovn'aa tInesur3morw1. DkA - Aircraft replace ent - - - 3.8 914.8 918.6 5.7 800.4 806.1 9.5 1,715.2 1,724.72. Private Operators - Insurance 207.1 621.2 828. 645.0 3 1 280.1 1,2 3.699.2 4'.2_2 2 .1 6.255.5 8.340.6

hetal 207.1 9 13 7 4,49.6 5 7 3 234 t 7 3

C. Aircraft Spare Parta 16.2 541.3 557.5 45.5 1,517.5 1,563.0 97.7 3,255.9 3,353.6 159.4 5,314.7 5,474.1

D. Land Vehiclese1. I"a 88.0 - 88.0 - - - - - - 88.0 - 88.02. Private Operators 330.3 _ 330 3 726.0 - 726.0 iaooo - 1.1000 2.i56_o __2_1_6_0

Total - 418.0 126.o 726. 1I0.5 - 1, 100 2;244.7 02;24.Z0

E. Building - fLA Training Center 400.0 _ 400.0 100.0 _ 100.0 - - - 500.0 - 500.0

F. ElqiBat

Special agric. aircraft equip. - - 56.3 56.3 - 37.6 37.6 - - - - 93.9 93.9Aircraft toole 23.3 23.3 46.6 - - - - - - 23.3 23.3 46.6Oround aupporting equIp. 12.0 12.0 - - - - - - 12.0 - 12.0

Safety equipiat 3.2 5.9 9.1 2.1 3.9 6.o - - - 5.3 9.8 15.1Fumiture and fittings 100.0 - 100.0 50.0 - 50.0 - - - 150.0 - 150.0Training aids - 20.0 20.0 - 10.0 19.0 - - - - 30.0 30

Sub-tcotal 138.5 105.5 244.0 2. S1.S 103.6 - - - 190.6 7 347.62. Private Operators -

Special agric. aircraft equip. 1.7 56.3 56.0 4.5 150.0 154.5 6.2 p1206.3 212.5 12.4 412.6 425.0Aircraft tools 24.0 23.3 47.3 48.0 46.6 94.6 71.9 69.8 l1a.7 143.9 139.7 283.6Gromd aupporticg equip. 60.0 - 60.0 132.0 - 132.0 198.0 - 198.0 390.0 - 390.0Safety equip. 3.7 6.5 10.2 8 1 6 24.5 12.2 21.5 7 24.8 436 63

Stb-tatal 8 85 .6 * s397 I - -.1 167 Total 22 . 9 1 491. 2.2 . 5 85 7 2. l;t4.

G. Other Costs - DAA Training Center:1. Salaries and allowencee -

Local staff 49o.2 - 490.2 552.0 - 552.0 552.0 5 552.0 1,594.2 - 1,594.2Technical assistance 35.8 99.7 135.5 107.4 299.1 406.5 _ - - 143.2 398.8 542.0Overseas training 36.0 84.0 120.0 - - - - - 36.o 84.0 120.0

Sub-total 3562.0 -7 759.7 4 2 99. 7 55lU -;5 - 17 4 2s256 22. Operation and maintenance -

Aircraft 160.0 - 160.0 400.0 - 400.0 390.0 - 390.0 950.0 - 950.0Vehicles 12.0 - 12.0 12.0 12.0 12.0 - 12.0 36.0 _ 36.0

Sub-total T T 1/20 = - -27 -20T -2 -90 0 J

3. Plant protection study - - - 150.0 _ 150.0 150.0 - 150.0 300.0 - 300.04. Miscellaneous Costs 281.0 _ 281.0 330.0 - 330.0 276.o _ 276.0 887.0 - 887.0

Total -t5. 18 3. 1,198.7 !7T1 299.1 1 1,380.0 - 1,360.0 03 7 -- 4 4,222

H. Incremental Working CapitalV/ 2,247.1 - 2. 247 .1 3.030.0 - 3.030.0 1,442.3 _ 1.442.3 6,719.4 - 6,719.4

Total Project Cost, beforegoptiagencies 4,915.9 7,682.6 12,598.5 7,135.4 14,513.7 21,649.1 6,681.5 18,898.1 25,579.6 18,732.8 41,094.4 59,827.2

I. Contingencies - 10% 491.6 768.3 1.259.9 713.5 1.451.4 2,164.9 668.2 1 889.8 2,558.0 1,873.3 4.109.5 5 982.7Grand Total 0.4°7 5 8,450.9 13 .9 .9 5.1 23 .0 .7 2 .9 2b. 20. 203.9 05,O9.9 ..4

1/ Import duties are included under losal currency costs.

2/ Directorate of Agricultural Aviation.

3/ Private operc-trs.

INDIA

AG2ICULTURAL AVIATION PROJECT

Estimated Project Costs

Category Unit Cost Year I Year 2 Year 3 Total ProjiectLocal Foreign Total

_ _ - - - upees - _ -- - - - - - - - - - - Numsers - - - - - - - - - - - - --

I. Aircraft

A. Helicopters

Dir. of Agric. Aviation - 421,500 421,500 - 1 - 1Private Operators - 421,500 421,500 5 10 15 30Training Center - 421,500 421,500 3 1 - 4

Total 12_

B. Fixed Wing Aircraft

Dir. of Agric. Aviation 2,800 251,250 254,050 3 3 - 6Private Operators 2,800 251,250 254,050 5 14 18 37

Commercial Fleet T 17 1 43Training Center 2,800 254,250 257,050 3 1 -

(Total Aircraft) Total )(_) -)

II. Vehicles;

Private Operators 22,000 - 22,000 15 33 50 98Training Center 22,000 22,000 4 - - .02

Total 19 102

IIT. Oround Supporting Equipment (Set)

Private 2perators/ 6,ooo - 6,oo0 10 22 33 65Training Center 6,ooo - 6,000 2 3

Total = 2J

IV. Safety Equipmont (Set)21

Dir. of Agric. Aviation 350 650 1,000 3 4 - 7Private Operators 350 650 1,000 10 24 33 67

Commercial Fleet 132 33- rTraining Center 350 650 1,000 2 _ 2

Total 30

V. Aircraft Tools (Set)

Private Operators 23,250 23,250 46,500 1 2 3 6

Training Center 23, 250 23,250 46,500 1 - _ 1Total 2 2 7

VI. Specialized Agricultural Equipmentfor Aircraft (Set)4/ _ 18,750 18,750 6 10 11 27

=e =M e=M

VII. Training Center - - - - - - - - - - Rupees - - … - - - - - _

Lecture and office Building 500,000 - 500,000 400,000 100,000 _ 500,000Training Aids - 30,000 30,000 20,000 10,000 - 30,000Furniture, Office Equipment 150,000 - 150,000 100,000 50,000 - 150,000

1/ 1.5 Jeep per aircraft which is added to fleet, except Aviation School.2/ One set per aircraft which is added to fleet. Hr3/ One set per aircraft procured under the project./ Inclades specialized equipment for ULV spraying, dusting, fertilizer spreading,

weed control, etc.. One set for 3 aircraft.

ANNEX~5Appendix C

INDIA


ESTIMATED UNIT COSTS

I. AIRCRAFT

A. Helicopter

Basic aircraft US$ 45,000Night lights (installed) " 8802 shoulder harnesses ( " ) 390Hour meter ( " ) 80Dual controls (It 850Spraying equipment (not installed) " 3,000

Ex-factory US$ 50,200Crating, insurance, airfreight " 6,ooo

CIF India US$ 56,200Rs 421,500


1. For Agricultural Operation:

Basic Aircraft US$ 27,000Spraying equipment (not installed) it 3,000

Ex-factory US$ 30,000Crating, insurance, seafreight "' 3,500

CIF India US$ 33,50oRs 251,250

Landing and Assembling:

Port charges and transport Rs 1,000Unpacking, assembling (labor) " 1,500Overheads " 300

Ready for ferrying Rs 25h,050

ANNEX 5Appendix CPage 2

-2-

2. For Training:

Basic aircraft US$ 27,000Dual controls (installed) if 400Spraying equipment (not installed) it 3,000

Ex-factory US$ 30,400

Crating, insurance, freight " 3,500

CIF India US$ 33,900Rs 254,250

Landing and assembling tt 2,800

Ready for ferrying Rs 257 050

II. SET OF TRAINING AIDS

Audio-visual equipment US$ 700Course material It 2,800Library " 500

Total US$ h,000Rs 30,000

(100% foreign exchpngecost)

III. SET OF GROUND SUPPORTING EQUIPMENT

500 gal water supply tank135 gal chemical mix tank2-in gasoline engine driven pumpFuel hand pumpAccessory plumbingHoses Rs 6000

(100% local cost)

IV. SET OF SAFETY EQUIPMENT

Pilot's crash helmet2 RespiratorsFilter cartridgesRubber glovesFlight suitRubber boots Rs l,O0O

(65% foreign exchangecost)

V. SET OF AIRCRAFT TOOLS

Special aircraft tools US$ 3,200Repair station shop tools " 3,000

US$ 6,2a)Rs 46,500

(505% foreign exchange cost)

ANNEX 5Appendix D

INDIA

AGRICULTuRAL AVIATION PROJECT

Cost Estimates - Expatriate Flight Instructors

I. Cost per Instructor

Local Foreign Total- in Rupees

a) Base salary - 135,000 135,000

b) Quarters, allowance, atRs 2,250/month 27,000 _ 27,000

c) Car allowance, at Rs 400/month 4,800 _ 4,800

d) Educational allowance for onechild, at US$ 750 equivalent 5,625 - 5,625

e) Round-trip air fare for familyof three with 10 kg excessbaggage 29,700 7,425 37,125

f) Shipment of personal effectsto and from New Delhi 4,50o 3,000 7,500

g) Overhead on salary, 40% - 5,000 54,00

Total Cost per Instructor 71,625 199,425 271,050

US $ Equivalent 36,140

II. Cost for Two Instructors

Rupees US$

Rupee Component 143,250 19,100

Foreign Exchange Component 398 850 53,180

Total 542,100 72,280

ANNEX 5Appendix DPage 2

INDIA


Cost Estimates - Overseas Training Program

I. Cost per Trainee

Local Foreign Total-in Rupees - - - - -

a.) Round-trip air fare 9,000 2,250 11,250

b) Additional travel in countryof training - 2,250 2,250

c) Tuition fee / - 11,250 11,250

d) Subsistence allowance:i) $10/day for six weeks,

during training - 3,150 3,150ii) $16/day for two weeks,

during observation tourand travel - 1,680 1,61J0

e) Miscellaneous expenses - 420 420

Total cost per trainee 9,000 21,000 30,000

US $ Equivalent 4,000

II. Cost of Training Four Flight Instructors

Rupees US$

Rupee component 36,000 4,8oo

Foreign exchange component 84,000 11,200

Total 120,000 16,000

1/ Average for rotary and fixed wing aircraft. Rates and hours oftraining are as follows:

Rotary - US$ 70/hr for 25 hrs = $ 1750, plus $ 250 for ground inst.Fixed wing - US$ hO/hr for 20 hrs = $ 800, plus $ 200 for ground inst.

INDIA


COST ESTIMATES - STAFF TRAINING CENTER

Unit Cost Year Year YearCategory Local Foreign Total 1 2 3

- - Rs per Year - - - - - - - - - - - - -

Project Manager 38,000 38,000 1 1 1Chief Flight Instructor 34,000 34,000 1 1 1Chief Engineer Instructor 24,000 2h,000 1 1 1Chief Ground Instructor 28,000 - 28,000 1 1 1Senior Flight Instructor (Helicopter) 32,000 _ 32,000 1 1 1

ft N (Fixed Wing) 32,000 - 32,000 1 1 1Flight Instructor 30,000 - 30,000 4 5 5Engineer Instructor 18,000 - 18,000 1 1 1Agricultural Instructor 15,000 - 15,000 1 1 1Licensed Engineer 15,000 _ 15,000 2 3 3Mechanic 6,000 - 6,000 8 10 10Cleaner 2,400 - 2,400 8 10 10Office Staff 7,000 - 7,000 4 4 4Driver 3,000 - 3,000 4 4 4Peon, Guard, Sweeper 2,000 - 2,000 6 6 6

>4

INA


Estimated Schedule of Disbursements

US$ (thousands) Rupees (thousands)Thru Thru Thrii Undis- Thru Thru Thru Uncdis-

Year Quarter ARC DAA GOI Total bursed ARC DAA GOI Total bursed

1971 1st - _ _ _ 6,000 - - - - 45,0002nd - - - - 6,000 - - - - 45,0003rd - 11 - 11 5,989 - 83 - 83 44,9174th - 314 35 349 5 640 - 2,355 262 2,617 42,300

Sub-total - 325 35 360 5,640 - 2,438 '262 2,700 42,300

1972 lst 500 125 125 750 4,890 3,750 938 935 5,626 36,6742nd 290 14 101 405 4,485 2,175 105 758 3,038 33,6363rd 290 285 105 680 3,805 2,175 2,137 787 5,099 28,5374th 290 61 104 455 350 2,175 458 780 3,413 25,124

Sub-total 1,370 45 35 2,290 3,350 10,275 3,63 3,263 17,176 25,12

1973 1st 291 66 188 545 2,805 2,182 495 1,410 4,087 21,0372nd 408 - 237 645 2,160 3,060 - 1,777 4,837 16,2003rd 408 - 242 650 1,510 3,060 - 1,815 4,875 11,3254th 408 59 243 710 800 3,060 442 1 823 5,325 6 000

Sub-total 1,515 125 910 2,550 800 11,362 937 19,124 6,000

1974 1st 415 65 320 800 - 3,113 487 2,400 6,000 -

Total 3,300 1,000 700 6,000 - 24,750 7,500 1L2750 45,000 -

Note: Contingencies have been spread evenly and aie included in estimated disbursements.

AIMJTEX 7

UTIA

AGRICULTURAL AVIATIONI PROJECT

Credit and Banking System

Agricultural Refinance Corporation (ALRC)

1. In 1964, the Government of India created the Agricultural RefinanceCorporation (ARC) to encourage agricultural development lending operationsby providing adequate refinance facilities to lending agencies--scheduledcommercial banks, cooperative banks or land mortgage banks. After a slowstart, ARC operations have gained considerable momentum over the years1967/68 and 1968/69. As of October 21, 1969, ARC had sanctioned 286 schemes,involving a total outlay of Rs 2,262 million; its commitments amounted toRs 1,867 million and its disbursements to Rs 39h million. Land mortgagebanks have availed themselves of ARCIs facilities to a large extent inorder to develop their oun operations. Facilities requested by commercialbanks and cooperative banks have not been significant. This reflects thestill small involvement of cooperative and commercial banks in developmentcredit as well as the latters t satisfactory liquidity position over thelast few years.

2. The recent development of ARCts operations is a result of theorganization's efforts to build up a qualified staff, supplemented, when-ever necessany, by consultants and government technicians capable ofworking out and appraising agricultural development projects. ARC stillhas to acquire much experience and further strengthen its staff, both inquality and quantity, to be able to cope with agricultural developmentsanticipated by the Government of India during the current Plan period 0

3. lILile ARC has always made profits it was only in 1968/69 thatit was first able to pay dividends on the paid up capital at the statutoryrate of 4-1/4%. Its portfolio of loans, debentures and securities issound. Governnent loans made at the present rate of 5-1/2% wlould enableit to meet its commitments. ARC's financial position is satisfactory,but as the cost of its resources is increasing, its refinance rate of 6%per annum has become inadequate. In addition, heavy income tax at therate of 5510 on its net profits leaves little scope for strengthening itsfinancial position. AR,Cls summary profit and loss staternents, balance sheetsand projected cashflo-w of project funds are appended, Tables 1 to 3.

Commercial Banks

4. As a result of the recent nationalization of the leading Indiancommercial banks, the public sector commercial banks, which for over adecade consisted onl,y of the State Bank of India and its seven subsidiaries,have been enlarged considerably. On the basis of data as of December 31,1968, the public sector banks have about 6,100 offices out of about 7,500

AMNEX 7Page 2

offices for all scheduled commercial banks; total deposits of the new publicsector commercial banks stand at about Rs 41,000 million; advances are atRs 27,000 million and investments at Rs 12,000 million, which account forabout 85% of the overall business of commercial banks. Remaining non-nationalized scheduled commercial banks would account for about 13% andnon-scheduled banks for about 2%v of the overall banking business.

5. The nationalization of commercial banks implies their compliancewith government policy directives toward planned economic growth. Firstchanges in their activities, as emphasized by Government, will be anincreased tempo of their agricultural lendings, mostly to small farmers,and of their lendings to small industry and small business. At first,not much direct lending to small farmers is expected, but commercial bankswould rather be called upon to finance and thereby strengthen the cooper-ative bank system and especially the primary credit cooperative societies.Implementation on a trial basis would start no later than March 1970 insuch states as Andhra Pradesh, Itrsore, 1-adhya Pradesh, Rajasthan, Haryanaand Uttar Pradesh.

6. Niationalization does not seem to have caused any disturbance inthe organization, management and activities of banks concerned. The periodof social control of banks has in fact been a transitional period, duringwlhich the top management, mainly businessmen, has been replaced by profes-sional bankers. The present situation is still an interim one. Boardshave been abolished, but not yet replaced. Until new boards are appointed,each bank is in charge of a custodian, a professional banker, who may bethe next chairman. According to the declarations made by the Prime 4i-nister,the Government would not interfere in the day-to-day operations of thenationalized banks, and these would continue to maintain their separateidentities.

7. As of August 31, 1969, the amount of lendings to agriculture bycommercial banks was at a record high of Rs 2,309 million, a result of thereal efforts made over the last few years by many commercial banks todevelop their lending operations in agriculture. However, direct loansto farmers, numbering about 324,,000, amounted to only about Rs 7244,G000

8. During the 8 years ending December 31, 1968, there has been aremarkable annual rate of growth of nearly 14,/' in deposits received byscheduled banks, largely as a result of monetary expansion. The past ratemay be difficult to sustain but the on-going branch expansion program inrural areas recommended by the Government may well enable the bankingsystem to raise some additional .'s 22,000 million over the current Five-Year Plan (1969-1974) up to a total amount of deposits of R's 70,000 million.Owing to such developments, it is anticipated that commercial banks willnot be confronted for some time wfith liquidity problems and that ther willbe able to increase the availability of credit to agriculturev smallindustry and small business in accordance with the new lending policieswithout reducing their support to large-scale business and industry.

INDIA

AGRICULTURAL AVIATION_ PROJECT

ARC - Balance Sheet as of June 30 1964-196 9 (in Rs tOO0)

Assets 161965 1966 1967 1968 1969

Cash in hand and banks 158 167 19 56 90 58Loans by way of refinance - - 1,h70 3,030 7,349 25,495Debentures - 4,500 47,531 66,729 119,038 278,554Investments in GOI

Securities 81, 854 99,091 55,209 35,793 8, 408 5,145Interest accrued on investments 489 423 311 265 211 129Other assets 20,310 594 2,033 3,117 6,247 13,451

Total Assets 102,811 104,775 106,573 108,990 141,343 322,832

Liabilities

Capital (paid-in)l/ 50,000 50,000 50,ooo 50,ooo 50,000 50,000Reserves and surplus 1 2 3 4 5 16Special deposit - 1,131 2,386 3,642 4,897 6,149Payment by GOI

in respect of guaranteed - 259 540 1,074 1,233 1,414dividends

Loans from the GOI 50,000 50,000 50,000 50,000 80,000 257,500Provision for dividends 1,910 2,125 2,125 2,125 2,125 2,125Provision for taxation 888 1,224 1,469 2,052 2,,426 2,026Other liabilities 12 34 50 93 657 3,602

Total Liabilities 102,811 104,775 106,573 108,990 141,343 322,832

1/ Authorized capital: 25,000 shares of 10,000 each

Source: Annual reports of the ARC

INDIA

AG9TCULTUIIAL AVIATIOli PR4UJ ECT

ARC - Profit and Loss Accounts for the Years 1968 69 and Profit Appropriations(in RsrOOO)

Income 1963 64 1964 65 1965 66 1966 67 1967 68 1968 69Interest received:

on loans and debentures - 1 1,089 3,057 4,833 10,202on investments 3,751 3,997 3,257 1,925 1,170 839

Total Income 3,751 3,998 4,346 4,982 6,003 11,042

Expenditurft

Interest paid - - - - 446 4,419Salaries, allowances, provident

funds 203 279 365 475 913 1,433Yiscellaneous expenses 96 107 119 134 297 439Provision for taxation 1,800 1,765 2,268 2,406 2,380 2,613

Total Expenditure 2,099 2,151 2,752 3,015 4,036 8,904

Net Profit 1,652 1,847 1,594 1,968 1,947 2,138

Total Expenditure and Profits 3,751 3,998 4,346 4,983 5,983 11,042

Profit appropriationWrite-offs of preliminary expenses 2 2 2 2 2 2Reserve funds 1 1 1 1 1 11Dividend 1,652 1,844 1,591 1,965 1,94)4 2,125

Total Profits 1,652 1,847 1,594 1,968 1,947 2,138

ro-4

INDIA


Agricultural Refinance Corporation

Projected Cash Flow of IDA Funds

(In Rupees thousands)

Project Year: 2 3 4 5 6 7 8 9 10 11 Total

Cash InflowIDA Funds 10,275 11,362 3,113 - - 24,750

Collections:Principal - - - - 2,569 5,409 6,187 6,188 3,619 778 24,750

Interest (7%) 207 903 1,624 1,733 1,680 1 455 1,049 616 235 27 9,529Sub-total 207 903 4 1,733 4,249 7,236 6,0 34 0 34,279

Total 10,482 12,265 4,737 1,733 4,249 6,864 7,236 6,804 3,854 805 59,029

Cash OutflowDisbursements 10,275 11,362 3,113 - - - - - _ - 24,750Repayments: 2/

Principal - - - - 2,569 5,409 6,187 6,188 3,619 778 24,750

Interest (5.5%) 163 709 1,276 1,361 1 320 1,143 824 484 184 21 7,485Sub-total 163 709 1,276 1,361 389 6,5 7,011 67772 803 799 32,235

Total 10,438 12,071 4,389 1,361 3,889 6,552 7,011 6,672 3,803 799 56,9 5

Net Cash Inflow 44 194 348 372 360 312 225 132 51 6 2,044

1/ From participating coummercial banks.

2/ IDA funds to GOI.

INDIA: AGRICULTURAL AVIATION PROJECTORGANI ZATI ON CHART

…DIRECTOR GENERAL AGRICULTURAL REFINANCE

DOF CIVIL AVIATION I OF AGRICULTURE GOI I CORPORATION I

I ~~~~~~~~DIRECTORII- _ _ _ _ _ _ _ _ _ _ _ _ _ -_ -_ _ - -_ _- _ _- - _-- - - - - - -

OF AGRICULTURAL AVIATION

OPFLRATION | IADMINISTRATION DEPUTY DIRECTOR LPI STORES

OPERATION I/C TRAINING CENTER MAINTENANC SUPPLIS

PROJECT RECORDS CHIEF INSTRUCTORS I I I

ACCOUNTS FLIGHT - GROUND - ENGINEER I I

1 | I INSTRUCTORS I

I I INFORMATION 7 FLIGHT I I

I AGRICULTURE

I ENGINEER I

3 LICENSED ENGINEERS _

I II I 34 MAINTENANCE AND I

|I | OTHER PERSONNEL. I

--- PRIVATE OPERATORS COMMERCIAL BANKS

I/ COMMERCIAL SPRAYING, TESTING OF NEW METHODS, STANDARDS AND SPECIFICATIONS, DEMONSTRATIONS, PROMOTION, LOCUST CONTROL. z

x

IBRD -4827(4R)

AN,EKr 9

AGRICULTURAL AVIATTON PROJECT

Appraisal and Lendin Policies

1. ARC would employ DAA as consultants responsible for the technicaland operational appraisal and supervision of subborrowers. No subloan'would be sanctioned by AIRC without DAA's approval. DAA in collaborationwith ARC, would -work out and implement appropriate methods for the techni-cal and operational appraisal and supervision of subborrowers.

2. After analyzing DAAMs and the commercial bankst recommendationsARC would prepare individual appraisal reports for approval of subloans.Each subloan would involve a loan agreement between the commercial bankand the borrower laying down loan size, conditions, security and otherrelevant points and an agreement between ARC and the commercial bank fixingconditions of ARCIs refinance.

3. To help assure efficient and increased aerial plant protection,it 'would be a condition of subloans that, private operators at the time ofappraisal, give satisfactory proof of empPloyment of trained and qualifiedagricultural pilots, in numbers adequate, to operate aircraft obtainedunder the projects. Further subloans would be suspended when aircraftwere used mainly for other than project objectives neglecting agriculturalwork.

4. To help assure financial and operational viability and to protectaircraft investment under the project: (a) subborro'jers would purchasecoraprehensive aircraft insurance coverage, and overseas insurance in foreignexchange at the present rate of 75 of aircraft value througlhout the lend-ing period; (b) insurance policies would include a laoss payable clause"under which the commnercial bank holding the policy on the iunit would bereimbursed by the insurer; and (c) aircraft insurance policies would alsoinclude "'breach of warranty" insurance providing that, if an operatorinvalidates terms of the policy and would not be entitled to policy proceeds,the commercial bank would receive from the insurer the outstanding amountof the subloans on the damaged or destroyed equipment.

5e Disbursement on capital expenditures by operators would be throughdirect payments by commercial banks to suppliers against shipping or canmer-cial documents and as detailed in the refinance agreements betwtBeen ARC andthe commercial banks. The latter would be reimbursed by ARC on proof ofpayment thereof. Loan recovery from operators 'would be the responsibilityof commercial banks,, who on receipt of repayment, would, without delay,repay to ARC that part vwhich had been refinanced by ARC under the project.

ANNEX 10

INDIA

AGRICUJLTURAL AVIATION PROJECT

Returns to Aircraft Operators

1. Existing as well as new firms are expected to participatein the project. It is important to make a distinction between thetwo because, for existing fir-s, the only incremental costs are thosearising froma direct operation and maintenance of new aircraft andsupporting equipmenit and iand vehicles. On the other hand, all costsof a new firm, including office overhead and other administrative ex-penses, are incremental costs.

2. Incremental revenues for both groups of firms are based onprojected aircraft performance growth presented in Appendix A. Oper-ating costs are based on basic data supplied by the GOI Aviation Unitand private operators, on estimates of manpower requirements and on theprojected growth rate of aircraft operating efficiency. Twenty percentof each aircraft's annual flying hours would be devoted to ferrying,testing, training and other related activities. Thus, direct operatingcosts for actual aerial spraying have been raised by 25% to arrive attotal direct aircraft operating costs. Aircraft depreciation and in-surance are based on an estimated 10-year useful life. Insurancepremiums are derived from existing averages in India of about 25% forhelicopters and 17% for fixed wing planes, based on aircraft book values.Both long-term and short-term interest rates have been set at an averageof 9%. Income tax provisions are at 33-1/3%, the average level reachedafter exemptions and surcharges.

Returns. to Exiting. Firms

3. For existing firms, revenue and cost estimates per new aircraftare shown in section 1 of Appendix B. Based on these revenue andcost projections, internal rates of return per aircraft (and its ancil-lary equipment and land vehicles) would be: (a) helicopter, 26.7%; and(b) fixed wing aircraft, 26.2%. These rates are for units acquiredduring project year 1; the rates for those acquired in later yearsshould be higher because of expected improvement in the participatingfirms' operating efficiency.

4. Projected performance in terms of acres sprayed per hourshould be easily reached by operators as a result of the training pro-gram. Annual operating or spraying hours, on the other hand, would besubject to market fluctuations arising from erratic weather and otherenvironmental factors and government policy changes affecting totaldemand for plant protection services and each operator's share of thatdemand. To test the sensitivity of returns per aircraft to marketfluctuations, operating hours have been varied by 5%, 10%, 15%, and20% above and below the projected figures in Appendix A. This range(40% or about 124 hours/year in the fifth year) should cover anyprobable fluctuation in demand. Within this range, the rate of returnon a fixed wing aircraft would vary from 12.6% to 39.0%, and on a

ANNEX 10Page 2

helicopter, from 15.2% to 37.6%. On the average, a 5% variation inoperating hours would directly change the rate of return by about 3%.Thus, for a fixed wing aircraft, cutting operating hours by 5% reducesthe rate of return from about 26% to 23%; cutting them by 1% bringsthe rate down to 20%. A summary of rates of return for the assumedfluctuations are shown in section 2 of Appendix B.

5. Break-even analysis of one aircraft's annual operation indi-cates that during project year 1, required break-even operating hours wouldonly be 95% of expected operating hours for helicopter and 97% for fixedwing aircraft. By the fourth year, these break-even points would fallto 76% for helicopter and 79% for fixed wing aircraft and provide morethan enough allowance for the 20% maximum decline in annual operatinghours expected under paragraph 4, above. Due to the gradual reductionin aircraft insurance premiums, these percentages would continue to falluntil, at the end of the assets' useful lives, they would be as low as52% for helicopter and 62% for fixed wing aircraft.

6. The foregoing analysis of rates of return and break-even pointson new aircraft acquired by existing firms explain their manifest desiresto expand their present fleet and thus assure their participation in theproject.

Returns to New Firms

7. To test the financial viability of new entrants into the indus-try, two models of agricultural aviation firms have been developed. Thefirst firm would own three helicopters, three fixed wing airplanes, ahangar and an office building. Its establishment would parallel projectdevelopment (Appendix C); its first fixed wing airplane would be put intoservice at the beginning of the second project year and its first heli-copter would earn revenue for 1.5 months during the first year. Thesecond firm would acquire five helicopters and five fixed wing planesbut rent hangar and office building spaces. It would have efficiencyadvantages over the first, both in terms of size and speed of development.One of its helicopters and one of its fixed wing planes would beacquired in the first year and operated for 3 months during that year. Thesetwo model firm sizes indicate the range within which most new entitiesparticipating in the project would fall. Their aircraft acquisitionschedule would be:

ProjectYear 1 Year 2 Year 3 Total

6-Aircraft Firm

Helicopters 1 1 1 3Fixed wing planes 1 1 1 3

Total 2 2 2 E

10-Aircraft Firm

Helicopters 1 2 2 5Fixed wing planes 1 2 2 5

Total 2 F F10

ANNEX 10Page 3

8. Appendixes D to G show projected comparative income statements,statements of sources and application of funds and balance sheets forboth model firms. All fixed assets purchased during the first 3 years(coinciding with the project's disbursement period) are assumed to befinanced from equal amounts of equity contribution and long-termborrowing. Indian firms could currently maintain somewhat higher long-term debt/equity ratios. Thus, a 50:50 ratio provides a conservativeestimate for the return on owner's equity. Working capital requirements,financed through short-term credits, are based on an average annualbusiness turnover of three.

9. On the basis of these assumptions and those cited in paragraph 2,the two firms would have the following rates of return during the 13-yearproject period:

On Total Assets On Equity

6-Aircraft Firm 12.2% 16.0%10-Aircraft Firm 18.4% 28.6%

10. These rates of return, taken in conjunction with the year-to-year profit and cash-flow movements indicated in Appendixes D and F shouldprovide adequate incentives to new firms.

11. As a result of the project, the industry as a whole would benefitfinancially and gain operational and organizational experience for furtherexpansion.

ANNEX 20Appendix A

_3DTA


Projected Performance Growth per Aircraft

Project Year:1 2 3 4 5 and later

A. Helicopter

Operating hours per year 285 290 295 300 310

Acres per hour 150 150 155 160 165

Acres per year 42,750 43,500 45,725 48sooo 51,150

B. Fixed Sing Aircraft

Operating hours per year 285 290 295 300 310

Acres per hour 120 120 125 130 135

Acres per year 34,200 34,800 36,875 39,000 !1l850

Note:

Acres-per-hour and hours-per-year projections are basedon Indian weather and crop conditions, including expected rates ofmultiple cropping, and on basic information from operators andexDeriences of other countries. These figures reflect the inclusionof ultra-low volume work, expected to comprise 10 to 2Go; of total oper-ation, They further take account of work stoppages caused by accidentspr6jected on the basis of an initial attrition rate of 7.5 aircraft per10,000 flying hours, declining to 5 aircraft/l0,000 hours at projectmaturity due to improved training.

ANNEX 10Appendiz B

INIDIA Page 1

AGRICULTURAL AVILTMON PROJECT

Analyses of Operating Results Per Aircraft

1. Revenue and Cost Projections by Selected Years(Rupees)

A. Helicopter Year 1 2 3 4 5 10

Investments 1/ 531 183 1 020 1,020Gross revenue __10,87 435,000 257,250 480,ooo 511,500 51,500Incremental current

costs:Direct flying coste 3/ 19,594 79,750 81,125 82,500 85,250 85,250Salaries 24,425 97,700 97,700 97,700 97,70C- 97,7000 & M, land vehicle 1,125 4,500 4,500 4,500 4,500 4,500General insurance 1,401 5,605 5,605 5,605 5,6o5 5,605Aircraft insurance 4/ 30,295 118,151 106,034 93,915 81,798 21,206Miscellaneous 5/ 4,851 19,405 19,405 19,405 19,405 19,405Income taxes 67 148 5 483 17,093 28,258 42,518 74,826

Total 81,839 330,594 331,462 331,883 336,776 308,h92

Net profit beforedepreciation andi3nterest 25,036 104,406 125,788 148,117 174,724 203,008

Depreciation andinterest 7/ 24 740 93 441 91,601 91 601 89,689 53 356

Net profit 3296 ,9-65 l7 5616 85,035


Investments 8/ 308,046 1,020 1 020Gross revenue 9/ 6 8,400 278,400 295,000 33l,8J00 334 30Intremental cuFrent costs:

Direct flying 11,578 47,125 47,938 48,750 50,375 50,375costs 10/

Salaries-,landvehicles 0 & M and 26,951 107,805 107,805 107,805 107,8n5 107,805gen.insurance 1V

Aircraft insurance L 11,117 43,358 38,911 34,464 30,017 7,782YNiscellaneous 5/ 4,582 18,327 18,327 18,327 18,327 18,327Income taxes 6/ (111) 2,472 9,623 16,502 25,411 39,523

Total 22,6087 4- 2-5488 31,935 221,ll5

Net profit beforedepreciation andinterest 14,283 59,313 72,396 86,152 102 865 110,688

Depreciation andinterest 7/ 14 506 54 369 53 149 53 149 52 043 31 043

Net profit (TIss) ) 4 9 4 4-~- - - -

LAE2YC 10Appendix BPage 2

Notes:

These tables are for aircraft acquired in project year 1. For thoseacquired in later years, gross revenue, direct flying costs and net profit(before and after depreciation and interest) would be higher due to in-creased efficiency of firm management and aircraft and field personnel.

1/ Helicopter, Rs 484,725; ancillary equipment and land vehicle, Rs 46,458.Safety equipment, at Rs 1,020, would need replacement every third year.

2/ Rs 10/acre.

3/ Rs 275 per spraying hour.

4/ 25% on book value.

5/ At 10% of all incremental costs, other than taxes, over the 10 yearasset life, distributed evenly over those years. Project year 1 assumes25% and project year 11, 75% of these costs.

6/ At 33 1/3% of taxable income. For fixed wing aircraft, there would beincone tax saving to the firm in the first year.

7/ Straight-line depreciation, based on 10-year life of all assets, exceptsafety equipmen, which has 3-year life; interest rate at 9%.

8/ Fixed wing plane, Rs 261,588; ancillary equipment and land vehicle,Rs 46,458. Safety equipment, at Rs 1,020, need replacement everythird year.

9/ Rs 8/acre.

10/ Rs 162.50 per spraying hour.

11/ Same amounts as in helicopter.

12/ 17% on book value.

ANNEX LOAppendix BPage 3

2. Rates of Return under Varying Assumptions onEffective Aircraft Operating Hours per Year

Annual Operating Hours Difference inas Percentage of Rate Rate of ReturnBasic Projections in of Compared to BasicAppendix A Return Projections

A. Helicopter (%) (%) (%)

120 37.61 + 10.90115 35.05 + 8.34110 32.28 + 5.57105 29.15 + 3.24100 26.71 -95 24.19 - 2.5290 21.00 5.7185 18.06 _ 8.6580 15.24 - 11.47


120 39.00 + 12.77115 35.83 + 9.60110 32.63 + 6.40105 29.45 + 3.22100 26.23 _

95 22.93 - 3.3090 19.59 - 6.6485 16.13 - 10.1080 12.57 - 13.66

ANEX 10Appendix BPage 4

3. Break-Even Analysis

Required Break-Even PointOperating Hours Projected (Column A as

at Operating PercentageBreak-Even Point Hours of Column B) /

A B C

Helicopter

Year

1 (1/4 year) 68 71 Y54=6nu1. rate (272) (285) (95)

2 268 290 923 248 295 844 229 300 765 212 310 686 203 310 657 195 310 638 186 310 609 177 310 5710 168 310 5411 (3/4 year) 121 232 52Annual rate (161) (310) (52)

Average 68

Fixed Wing Aircraft

Year

1 (1/4 year) 69 71 97Annual rate (276) (285) (97)

2 273 290 943 254 295 864 238 300 795 223 310 726 218 310 707 213 310 698 208 310 679 203 310 6510 198 310 6411 (3/4 year) 146 232 62

Anniual rate (195) (310) (62)Average 74

1/ These figures indicate the percentage of projected operating hoursthat should be attained to enable an existing firm to recover allincremental costs related to the operation of a new aircraft acquiredin project year 1.

ANNEX 10

Appendix C

INDIA


Projected Build-Up of Commercial Aircraft Inventory

Project Summary

Category Year 1 Year 2 Year 3 Years 1-3

*...........Aircraft ,4umbers.,*,,****9,G0.

Helicopter

Opening ij.ventory 32 1/ 37 48 32

Net addition 5 11 15 31

Ending inventory 37 48 63 63

Fixed WIing Aircraft

Opening inventory 41 1/ 6 57 41

Net addition 5 11 18 34

Ending inventory 46 57 75 ?5

Total ending invientory 83 105 138 138

Total net addition 10 22 33 65

(Replacements) 2/ (3) (6) (-) (9)

1/ Estimate as of June 30, 1970: 73 aircraft in operation.

2/ Fixed iLng aircraft only.

I:.DIA - AGRICULTUiRAL AVIATION PROJECT

Agricultural Aircraft Operator

Income Forecast

(New Firm: 3 Helicopters; 3 Fixed Ming Planes)

ProjectYear1 2 3 4 5 6 7 8 9 10 11 12 13

Gross Revenue 53,438 1,070,100 1,880,625 2,376,000 2,538,900 2,538,900 2,538,900 2,538,900 2,538,900 2,538,900 2,474,962 1,269,450 423,150Operating Costs:

Fuel and lubrication 4,050 89,760 152,130 185,625 191,895 191,895 191,895 191,895 191,895 191,895 187,485 95,865 32,010Maintenance, spares and overhaul 5,400 89,760 152,130 185,625 191,895 191,895 191,895 191,895 191,895 191,895 186,015 95,865 32,010Outstation expenses 450 10,880 18,440 22,500 23,260 23,260 23,260 23,260 23,260 23,260 22,770 11,620 3,880

Salaries and mges 312,700 556,o00 748,300 819,000 819,000 819,000 819,000 819,000 819,000 819,000 819,000 545,400 215,600Aircraft insurance 15,148 246,962 387,765 429,178 379, 483 329,788 280,093 230,397 180,702 131,006 81,313 33,130 10,506Other insurance 7,352 20,590 31,615 35,370 35,370 35,370 35,370 35,370 35,370 35,370 35,130 20,105 8,080Land vehicle 0 & M 6,ooo 21,000 28,500 33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 21,000 12,000Miscellaneous costs 35,110 103,535 151,888 171,030 167,390 162,421 157,451 152,482 147,512 142,543 136,471 82,298 31,409

Total aurrent operating cost 386,210 1,138,887 1,670,768 1,881,328 1,841,293 1,786,629 1,731,964 1,677,299 1,622,634 1,567,969 1,501,184 905,283 345,495

Net Oper. Profit (Loss) beforeDepreciation (332,772) (68,787) 209,857 494,672 697,607 752,271 806,936 861,601 916,266 970,931 973,778 364,167 77,655

Depreciation 27 7 17 633 231 45L2714.o96 27LL. 096 2711.096 6 .- 2)4s06 ' 50j,77J 2Net Operating Profit (Loss) (359,848) (216,420) (21,717) 220,576 423,511 478,175 532,8140 587,55 642,170 696, 83 710,21,204 26,88Financial Costs:

Interest on long-term loans 18,584 72,526 110,086 129,113 129,113 107,594 86,075 64,557 32,278 -Interest on short-term loans 17,379 63,836 94,572 97,740 71,298 46,623 11,964 -

Total financial cost 35,963 136,362 204,658 226.853 200,411 154,217 98,039 64,557 32,278 - -

Net Profit (Loss) before Tax (395,811) (352,782) (226,375) (6,277) 223,100 323,958 434,801 522,948 609,892 696,835 710,259 221,204 26,883Provision for Income Tax- 174.316 203.297 232.278 236,753 73,735 8.961

Net Income (Loss) 95,811) (352,782) (226,375) (6t277) 223,100 323,958 434,801 348,632 406,595 464,557 473.506 147,469 17,22

Projected Sources and Application of Funds

Sources of Funds

Equity 566,927 444,831 422,832 - -Long-term loans 566,926 444,832 422,831 - -Short-term loans 422,173 508,411 264,976Operating profit before depreciation 209,857 494,672 697,607 752,271 806,936 861,601 916,266 970,931 973,778 364,167 77.655

Total 1,556,026 1,398,074 1,328,496 494,672 697,607 752,271 806,936 861,601 916,266 970,931 973,778 364,167 77,655

Application of Funds

Investments in fixed assets 1,133,853 889,663 845,663 1,020 3,o60 2,040 1,020 3,060 2,040 1,020 1,020Operating losses before depreciation 332,772 68,787Income tax 174,316 203,297 232,278 236,753 73,735 8,961Debt service -

Long-term - repayment 239,098 239,098 239,098 358,648 358,647interest 18,584 72,526 110,086 129,113 129,113 107,594 86,075 64,557 32,278

Short-term - repayment 101,674 200,738 356,916 468,779 67,453 -interest 17,379 63,836 94,572 97,740 71,298 46,623 11,964 - -

Increase in cash and othercurrent assets 53,438 303,262 270,175 165,125 54,300 - - 193,567 320,004 737,633 736,005 290,432 68,694

Total 1,556,026 1,398,074 1,320,496 494,672 697,607 752,271 8Q6,936 861,601 916,266 970,931 973,778 34,167 77,5

INDIA - AGRICULIURAB IJIAT1ON PROJECT

kgricultn*a1 Aircraft Operator

Proj ected CmaaieBlneSet

(New Firm 3 Helicopters; 3 Fixed Wing Planes) (as of end of year)

ProjectYear

1 2 3 4 5 6 7 8 9 10 11 12 13

ASSETS

Current Assets 53,438 356,700 626,875 792,000 846,300 846,300 846,300 1,039,867 1,359,871 2,097,504 2,833,509 3,123,941 3,192,635

Fixed Assets - at Book Yaluie 1/Helicopters 478,666 890,682 1,254,226 1,108,809 963,391 817,973 672,556 527,138 381,721 236,303 96,945 24,236 -

FW planes 261,588 483,938 680,129 601,652 523,176 444,700 366,223 287,747 209,270 130,794 52,318 13,080 -

Other fixed assets 366,523 474,187 528,541 479,359 432,217 384,055 334,873 287,731 239,569 190,387 145,722 114,706 101,250

Total fixed assets 1,106.777 1,848,807 2,462,896 2,189,820 1,918,784 1,646,728 1,373,652 1,102,616 830,560 557,484 294,985 152,022 101,250

Total Assets 1.160,215 2,205,507 3.089,771 2,981.820 2,765,084 2,493,028 2,219,952 2.142.483 2,190.431 2,654,988 3,128,494 3,275,963 3,293,885

LIABILITIES AND EQUITY

Current Liabilities 422,173 930,584 1,195,560 1,093,886 893,148 536,232 67,453 - _- - -

Long-term Liabilities 566,926 1,011,758 1,434,589 1,434,589 1,195,491 956,393 717,295 358,647 - - - -

Equity:Capital stock 566,927 1,011,758 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590 1,434,590

Retained earnings (deficit) (395,811) (748,593) (974,968) (981,245) (758,145) (434,187) 614 349,246 755,841 1,220,398 1,693,90k 1,8k1,373 1,859,295

Total or net eqaity 171,116 263,165 459,622 453,345 676,445 1,000,403 1,435,204 1,783,836 2,190,431 2,654,988 3,128,494 3,275,963 3,293,885

Total Liabilities and Equity 1,160,215 2,205,507 3,089,771 2,981,820 2,765,084 2,493,028 2,219,952 2,142,483 2,190,431 2,654,988 3,128,494 3,275,963 3,293,885

Schedule of Fixed Assetsa) Helicopters 484,725 969,450 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 1,454,175 969,450 484,725

Less: Allowance for Depr 6,059 78,768 199,949 345,366 490,784 636,202 781,619 927,037 1,072,454 1,217,872 1,357,230 945,214 484,725

Net Book Value 478,666 890,682 1,254,226 1,108,809 963,391 817,973 672,556 527,138 381,721 236,303 96,945 24,236 -

b) Fixed Wing Planes 261,588 523,176 784,764 7814,7614 784,764 784,764 784,764 784,764 784,764 784,764 784,764 523,176 261,588

Less: Allowance for Depr - 39,238 104,635 183,112 261,588 340,064 418,541 497,017 575,494 653,970 732,446 510,096 261,588

Net Book Value 261,588 483,938 680,129 601,652 523,176 444,700 366,223 287,747 209,270 130,794 52,318 13,080 -

c) Other fixed assets:Safety equipment 2,040 4,080 6,120 6,120 6,120 6,120 6,120 6,120 6,120 6,120 6,120 4,080 2,040

Ground supporting equipment 12,000 24,000 36,000 36,ooo 36,ooo 36,000 36,ooo 36,ooo 36,0oo 36,000 36,000 36,000 36,000

Special agricultural equipt - 19,310 38,620 38,620 38,620 38,620 38,620 38,620 38,620 38,620 38,620 38,620 19,310

Land vehicles 66,0°0 176,000 242,000 242,000 242,000 242,000 242,000 242,000 242,000 242,000 242,000 154,000 88,000

Hangar 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000

Office buildings 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,O0O 150,000

Furniture and fixtures 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500

Total 387,540 530,890 630,240 630,240 630,240 630,240 630,240 630,240 630,240 630,240 630,240 540,200 452,850

Less: Allowance for Depr- 21,017 56,703 101,699 150,881 198,023 246,185 295,367 342,509 390,671 439,853 484,518 425,494 351,600

Net Book Value 366,523 474,187 528,541 479,359 432,217 384,055 334,873 287,731 239,569 190,387 145,722 114,706 101,250

INDIA - AGR'SUL7URAL AVIATION PROJECT


mncome Forecast

(New Firm: 5 Helicopters; 5 Fixed Wing Planes)

ProjectYear

1 2 3 4 5 6 7 8 9 10 11 12

Gross Revenue 175,275 1,426,800 3,009,000 3,960,000 4,231,500 4J;231,500 4,231,500 4j231,500 4,231,500 4,231,500 4,019,625 2,538,900 846,300Operating Costs:

Fuel and lubrication 14,685 119,625 253,375 309,375 319,770 319,770 319,770 319,770 319,770 319,770 303,765 191,730 64,020Maintenance, spares

and overhaul 14,685 119,625 243,375 309,375 319,770 319,770 319,770 319,770 319,770 319,770 303,765 191,730 64,020Outstation expenses

to 1,780 14,500 29,500 37,500 38,760 38,760 38,760 38,760 38,760 38,760 36,820 23,240 7,760Salaries arni wages 339,700 691,600 1,073,400 1,205,800 1,205,800 1,205,800 1,205,800 1,205,800 1,205,800 1,205,800 1,125,800 833,000 442,200Aircraft insurance 41,413 327,161 625,333 724,724 641,898 559,073 476,247 393,421 310,596 227,771 144,945 66,260 16,565Other insurance 9,110 29,585 51,880 57,790 57,790 57,790 57,790 57,790 57,790 57,790 52,493 35,620 13,200Land vehicle O,M 5,250 24,000 42,000 51,000 51,000 51,000 51,000 51,000 51,000 51, 000 49,500 33,000 15,000Rental - bldg and hanger 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13, 500 13,500 13,500 13,500 6,750Miscellaneous 44,012 133,960 232,236 270,906 264,829 256,546 248,264 239,981 231,699 223,416 203,059 138,808 62,952

Total currentoperating coat 484,135 1,I73,556 2,554,599 2,979,970 2,913,117 2,822,009 2,730,901 2,639,792 2,548,685 2,457,577 2,233,647 1,526,888 692,467

Net Oner. Profit (Loss)tefore Depreciation (308,860) ( 46,756) 454,401 980,030 1,318,383 1,409,491 1,500,599 1,591,708 1,682,815 1,773,923 1,785,978 1,012,012 153,833Less: Depreciation 25,978 175,554 344,673 428,750 428,749 428,750 428,749 428,750 428,749 428,750 405,771 256,196 85,576

Net Operating Profit (Loss) (334,838) (222,310) 109,728 551,280 889,634 980,741 1,071,850 1,162,958 1,254,066 1,345,173 1,380,207 755,816 68,257Financial Costs:

Interest in long-termloans 11,974 78,908 154,583 192,204 192,204 153,763 115,322 76,881 38,441 - - - -

Interest on short-termloans 21,786 71,239 110,468 101,490 39,942 6,320 - - -

Total financial cost 33,760 150,147 265,051 293,694 232,146 160,083 115,322 76,881 38,441 - - -

Net Profit (Loss) beforeTax (368,598) (372,457) (155,323) 257,586 657,488 820,658 956,528 1,086,077 1,215,625 1,345,173 1,380,207 755,816 68,257

Provision for Income Tax 6,232 273,553 318,843 362,026 405,208 448,391 460,069 251,939 22,752

Net Profit (Loss) (368,598) (372,457) (155,323) 257,586 651,256 547,105 637,685 724,051 810,417 896,782 920,138 503,877 45,505

Projected Sources and Application of FundsSources of Funds

Equity 442,927 856,663 836,oo0Long-term loans 442,926 856,663 836,008Short-term loans 517,895 497,228 338,050Operating profit

before depreciation - - 4555,01 980,030 1,318,383 1,409,491 1,500,599 1,591,708 1,682,815 1,773,923 1,785,978 1,012,012 ',153,833

Total 1,403,748 2,210,554 2,464,467 980,030 1,318,383 1,409,591 1,500,599 1,591,708 1,682,815 1,773,923 1,785,978 1,012,012 153,833

Application of Funds

Investments in fixed assets 885,B53 1,713,326 1,672,016 2,040 4,080 L,080 2,0o0 5,080 4,o80 2,040 4,o80 - -Operating losses before

depreciation 308,860 46,756 - -

Income tax 6,232 273,553 318,85,3 362,026 405,208 44,391 46o,069 251,939 22,752Debt servi,e 219Long-term-repayment - - - - 427,120 527,120 427,119 127,119 427,119

interest 11,974 78,908 155,583 192,2015 192,2053 153,763 115,322 76,881 38,541Short-term-repayment - - - 367,296 .58,305 527,572 - --

interest 21,786 71,239 110,!!68 101,590 39,952 6,320 - -Tncrease in cash and

other current assets 175,275 300,325 527!400 317,000 90,500 1,373,083 637,275 721,602 807,967 1,323,492 1,321,829 760,073 131,081 ,0

Total 1,L03?8 2,10,L5551 26,467 9 1,31,381 1,012,012_____________________ ___ 980,030_ 3 3 1,509,5i91 1,800,599 1,691,70 ,6215 1,773,923 1,785,.978 10212 153,833

INDIA - AIRIGULTURiLL AVI4T19N PR0JlT


Projected Comparative Balance Sheets

(as of end of year)

(New Firm: 5 Helicopters; 5 Fixed Wing Planes)

ProjectYear

1 2 3 4 5 6 7 8 9 10 11 12 13

ASSETS

Current Assets 175,275 475,600 1,003,000 1,320,000 1,410,500 1,527,583 2,164,858 2,886,460 3,694,427 5,017,919 6,339,748 7,0u9,821 7,230,902

Fixed Assets - at Book Value 1/Helicopt*rs 472,607 1,345,112 2,120,672 1,878,309 1,635,947 1,393,584 1,151,222 908,859 666,497 424,134 193,890 48,472 -FW planes 255,0B8 725,906 1,144,447 1,013,653 882,859 752,065 621,271 490.477 359,683 228,889 104 635 26159 -Other fixed assets 132,220 326,629 559,871 406,318 354,805 303,292 249,739 198,226 146,713 93,160 455,967 13 665 2,720

Total fid. assets 859,875 2,397,647 3,724,990 3,298,280 2,873,611 2,448,941 2,022,232 1,597,562 1,172,893 746,183 344,492 88,296 2,720

Total Assets 1,035,150 2,873,247 4,727,990 4,618,280 4,284,111 3,976,524 4,187,090 4,484,022 4,867,320 5,764,102 6,684,240 7,188,117 7,233,622

LIABILlTIES AND EQUITZ

Current Liabilities 517,895 1,015,123 1,353,173 985,877 427,572 - - - - - - -Long-term Liabilities 442,926 1,299,589 2,135,597 2,135,597 1,708,477 1,281,357 854,238 427,119 - - - - -Equity:

Capital stock 442,927 1,299,590 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598 2,135,598Retained earnings

(deficit) (368,598) (741,055) (896,378) (638,792) 12,464 559,569 1,197,254 1,921,305 2,731,722 3,628,504 4,548,642 5,052,519 5,098,024

Total or net equity 74,329 558,535 1,239,220 1,496,806 2,148,062 2,695,167 3,332,852 4,056,903 4,867,320 5,764,102 6,684,240 7,188,117 7,233,622

Total Liabilities and gquity 1,035,150 2,873,247 4,727,990 4,618,280 4,284,111 3,976,524 4,187,090 41484,022 4,867,320 5,764,102 6,684,240 7,188,117 7,233,622

4/ Schedule of Rxed Assets:

a) Helicopters 484,725 1,454,175 2,523,625 2,423,625 2,523,625 2,523,625 2,423,625 2,423,625 2,523,625 2,423,625 2,423,625 1,938,900 969,450Less: Allowance for depr 12,118 109,063 302,953 555,316 787,678 1,030,041 1,272,403 1,514,766 1,757,128 1i999,491 2,229,735 1,890,428 969,450

Net Book Value 472,607 1,3455112 2,120,672 1,878,309 1,635,947 1,393,584 1,151,222 908,859 666,497 424,134 193,890 48,472 -

b) Fixed wing plane 261,588 784,764 1,307,940 1,307,940 1,307,940 1,307,950 1,307,950 1,307,950 1,307,940 1,307,940 1,307,940 1,046,352 523,176Less:. Allowance for depr 6,540 58,858 163,493 294,287 425,081 555,875 686,669 817,463 948,257 1,079,051 1,203,305 1,020,193 523,176

Net Book Value 255,048 725,906 1,144,447 1,013,653 882,859 752,065 621,271 490,477 359,683 228,889 104,635 26,159 -

c) Other fixed assets:Safety equipomnt 2,040 6,120 10,200 10,200 10,200 10,200 10,200 10,200 10,200 10,200 10,200 10,200 6,120Ground support equipnmnt 12,000 36,o0o 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000Special agr. equipment - 38,620 57,930 57,930 57,930 57,930 57,930 57,930 57,930 57,930 57,930 57,930 19,310Land vehicles 88,000 242,000 374,000 374,000 374,000 374,000 374,000 374,000 374,000 375,000 374,000 252,000 110,000Furniture, fixtures

and tools 37,500 37,500 37,500 37,500 37,50o 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500

Total 139,550 360,240 539,630 539,630 539,630 539,630 539,630 539,630 539,630 539,630 539,630 407,630 232.930Less: Allowance for depr 7,320 33,611 79,759 133,312 184,825 236,338 289,891 341,404 392,917 446,470 493,663 393,965 230,210

Net Book Value 132,220 326,629 459,871 406,318 354,805 303,292 249,739 198,226 246,713 93,160 45,967 13,665 2,720

ANE)l 11

INDIA

AGRICULTURAL AVIATION1 PROJECT

EconDmic Justification

Project's Basic Features

1. Expansion and modernization of India's agricultural aviation fleetwould quadruple total acreage aerially sprayed by the end of the 5-gearproject development period, from 1.5 million acres (1968,/69) to 6.4 millionacres (Annex 2, Table 1), of which about 3.4 million acres would be gener-ated by new aircraft procured under the project (Appendix A). Aerial plantprotection would improve crop yields through reduction in field lossescaused by pests and diseases and, in cases where farms could receive groundtreatment, increase effectiveness and reduce average cost of plant protec-tion services.

2. The projected rise in total acreage aerially sprayed stems fromtwo basic causes: (a) increase in the number of agricultural aircraftand (b) improvement in the overall efficiency of India's agriculturalaviation industry. Increased efficiency would result, first of all, frombetter organization at three important levels of operation: private op-erators, GOI aviation unit and state governments. Improved coordinationamong these groups, a campaign to inform farmers of the availability andadvantages of aerial plant protection, and a realistic GOI policy aimedat translating potential markets into effective demand for these servicesshould insure full utilization of all aircraft acquired under the projectas well as those comprising the present fleet. Efficiency improvementwould also result from the project's training scheme fcr. agricultural pilotsand maintenance engineers by raising the acreage each aircraft can sprayannually. It would further result from the greater competition generatedby the industry's expansion, by inducing fleet owners to seek new cost-saving methods of operation. In addition to increasing annual acreage,these efficiency factors would allow reduction in charges to farmers dueto lower operators'costs.

India's Rising Need for Plant Protection

3. India's rising need for plant protection services has resulted,among other things, from the country's growing adoption of new high-yieldinggrain varieties, intensively cropped in larger and contiguous tracts, whichprovide insect pests greater food supplies in concentrated areas. Thesecould significantly raise insect populations by improving their survivalrates, as well as provide hospitable environment for disease growth.

4. Entomologists observe that if an insect specie has a 1->nonthlife cycle, all progeny survive, and a 1:1 sex ratio exists, one femalelaying 200 eggs would generate 20,000 mature insects after 2 montis... Ina year's time, this population would rise to two septillion (2 x 10 24) __

ANNEX 11Page 2

a swarm that could cover the earth's entire land surface at least 81 feetdeepS Fortunately, this has never happened because normal death rates amonginsects generally keep pace with their birth rates, leaving their popula-tion relatively stable. '2'ood shortages and other environmental constraintsusually keep survival rates at about 12$, just replacing the200 eggs' parents and keeping down the number of adult insects.

5. Increasing food supplies would relax one of these environmentalconstraints and raise the progeny's overall survival rate'. Even if only1% more progeny could survivethere would be a doubling of total adult popu-lation every month; at this geometric rate, insect population would riseover 2,000 times in 1 year. This explains how a relatively slight altera-tion in environmental constraints could result in severe epidemics withina short time.

6. Cultivation and cropping of once untilled lands are generally ac-companied by destruction of natural wild flora. Consequently, some insectslose their natural hosts and move or perish while those that have dependedupon the cultivated crops increase in number. Surviving speciesincrease but nonetheless keep their stable populations at new plateaus solong as yields are low and intensive multiple cropping is not adopted.But the introduction of new seeds and better irrigation facilities haveenabled farmers to grow several crops of the same high-yielding breedscontinuously each year, and greatly improve the environment in which in-sect pests thrive. The once harsh dwelling area which kept populationlevels in check has become a very hospitable home with abundance for all,and more. Because insects are so prolific, this means an astronomic risein their number -- an epidemic.

7. To offset the effects of this environmental phenomenon and re-store the old equilibrium requires specific action, such as applicationof chemicals, biological parasites or other agents to destroy pests or atleast keep their population at previous non-epidemic levels.

Superiority of Aerial to Ground Treatment

8. For plant protection to be truly effective, it is often necessaryto treat wide areas simultaneously and at certain appropriate times. Ifneighboring plots remain untreated, surviving pests from these tracts canmigrate to treated areas once the chemicalst potency wears off. In addi-tion, plants respond best to treatment at certain stages of growth. There-fore, unless ground equipment can be operated continuously on a massivescale, the effectiveness of ground treatment is severely reduced. Avail-able evidence in India indicates that this continuous massive ground opera-tion is not only expensive but also currently unattainable because of short-age of equipment and trained workers required to do the task. Aerial treat-ment, on the other hand, can achieve these objectives faster, more cheaplyand more evenly, resulting in better utilization of available chemicals,manpower and capital resources.

9. In addition to the superiority of aerial to ground treatment incases where both can be used, there are areas where ground-operated equip-ment is not practicable. These areas ijclude those where plants have reacheda luxuriant growth stage, with fruits or flowers in bloom, so that to maneu-ver among them without doing much damage is rather difficult, if not com-pletely impossible. Moreover, some crops cannot have their tops sprayedfrom the ground. In these instances, only aerial application is practicable.

Primary Benefits and Costs

10. The project's contribution to India's economic welfare representsthe stream of incremental net benefits generated by aircraft financed underthe project, over the project's 13-year life. These net benefits would bedue not only to the expanded acreage receiving aerial treatment but alsoto increases in per-acre yields of treated areas. Project acreage hasbeen derived on the basis of efficiency growth assumptions shown in Appen-dix A, Annex 10. As a result of systematic pilot and engineer training andorganizational improvements under the project, aircraft performance wouldrise, reaching a plateau in project year 5. By type of aircraft, these5-year increases, in terms of annual acreage, would be: helicopter, 19.6%,or compound annual growth rate of 4.6%; fixed wing aircraft, 22.4%, or com-pound annual growth rate of 5.2%.

11. Net benefit per acre of aerial spraying depends on whether antici-pated project areas can be effectively sprayed from the ground or not. Netbenefits from aerial spraying are greater where ground methods are not prac-ticable. Total project benefits would, therefore, depend upon how much oftotal project area can possibly be treated from the ground.

12. Crop yield estimates, with and without the project, are based onexperiments conducted by the National Council of Applied Economic Research(NCAER)!/ on pesticide application by ground equipment. For project evalu-ation purposes, these NCAER figures are conservative inasmuch as (a) ab-solute yields have increased following adoption of new improved seed vari-eties since completion of the NCAER experiments, (b) these new varietiesare generally more vulnerable to pests and diseases, and (c) their moreintensive cultivation has further increased this vulnerability. To deriveyield estimates for aerial treatment, NCAER's ground-spraying yields wereraised by 5%, a conservative estimate of the superiority of aerial overground treatment, both in terms of international experience and of prevail-ing conditions in India (Appendix B).

13. Another advantage of aerial over ground spraying is lower cost.This is mainly due to reduction in chemical cost per acre of about Rs 2.00 --Rs 12/acre for ground sprayinig vs. Rs 10/acre for aerial spraying (Annex 12).

1/ Pesticides in Indian Agriculture, New Delhi, 1967, xiii and 146 pp.

ANNEX 11Page 4

Cost of application, exclusive of chemicals, would result in cost savingof about Rs 0.47 -- Rs 7.20/acre for ground methods and Rs 6.73/acre foraerial application.

14. Labor costs are based on estimates submitted by the GOI aviationunit, private operators and the GOI Directorate of Economics and Statistics.It is possible that economic rents have been included in projected salariesof agricultural pilots since alternative employment opportunities wouldoffer them lower remuneration. These alternative employments are the IndianAir Force and non-scheduled chartered flights, in both cases paying lowersalaries than agricultural aviation. However, the unique training requiredfor agricultural pilots makes their labor market a special one. In addition,India has an acute shortage of this skill due to the discouragingly high riskassociated with the 'lo-altitude flyinC required.

15. Other wage rates are based on India averages. For skilled workers,like maintenance engineers, accountants, field officers, mechanics and op-erators of ground equipment, labor costs are based on estimated opportunitycost in alternative employments. For unskilled workers, like drivers, officehelpers, flagmen and cooks, prevailing basic wage rates have been used.

Quantitative Analysis

16. The project's economic rate of return tends to be high since, atpresent farming intensity levels, the introduction of a single input -- inthis case, aerial plant protection -- generates substantial incremental out-puts vis a vis incremental inputs. At the farm level, the evaluation ofbenefits to farmers has been expressed in increnc-nt2. profit;(Alnnex 12, AppenCixes A and B). For the entireproject, internal rates of return have been derived under assumptions ofthe most probable and most realistically conservative levels of benefits.

17. The most probable case would be for total acreage, crop yieldsand crop acreage allocation to be as projected, with half of the projectacreage being accessible to ground treatment. The limiting, most conserva-tive case would be where, as a result of project acreage falling short ofbasic projections and allocation of project acreage shifting in favor oflower, benefit crops (e.g., paddy and cotton), only about 500, ox expected bene-fits could be realized, and where as much as 80% of aerially treated acreagecould be treated from the ground, further reducing benefits.

18. Based on these assumptions, the project's most probable economicrate of return would exceed 100%. At the conservative limit, the rate wouldbe about 44% (details in Appendixes C and D).

ANNEX 11Page5

Other Benefits

19. At the level of private operators, the project would provide em-ployment to different groups of skilled, semi-skilled and unskiUed workers.It would afford training and experience to operators, pilots, maintenanceengineers and field officers required for further expansion of the industryafter project termination. It would make farmers more appreciative of thefinancd;al advantages of plant protection in general and aerial plant pro-tection in particular, thus serving as catalyst for future market growth.

20. Most of the crops benefited are now being imported. If oneassumes that if there were no project,about 50% of incremental output gene-rated by the project would have to be imported, India's net 2oreign exchangesavin;,s would be at least US$, 1.3 million annually at full project develop-ment.

21. The project is the first stage of a long-term program of plantprotection throughout India and, in that context, should have strong cata-lytic effects on an important agricultural input required for more efficientcultivation of new foodgrain and commercial crop varieties. It should playan important part in the country's overall program of achieving self- -sufficiency in those crops, and thus make a major contribution to India'sagricultural economy.

INDIA

AGRICULTURAL AVIATI0LI PROJECT

Crop Allocation

ProjectYr. 1 3 4 5 to 10 11 12 13

--- ------------ TIOUSAND ACRESS-

Paddy (30%) 8.0 309.3 690.5 949.5 1,o15.6 1,006.0 647.3 228.1

Wheat (7%) 1.9 72.2 163.0 221.6 237.0 234.7 151.0 53.2

Jowar (8%) 2.1 82.5 186.3 253.2 270.8 268.3 172.6 60.8

Groundnuts (10%) 2.7 103.1 232.8 316.5 338.5 335.3 215.8 76.0

Cotton (25%) 6.7 257.7 582.1 791.2 846.3 838.3 539.4 190.1

Sugarcane (14%) 3.7 144.3 326.0 443.1 473.9 469.5 302.1 106.4

Potato (1%)- 0.3 10.3 23.3 31.6 33.9 33.5 21,6 7.6

Rubber (5%) 1.3 51.5 116.4 158.2 169.3 167.7 107.9 38.0

Total 26.7 1,030.9 2,328.3 3,165.0 3,385.2 3,353.2 2,157.6 760.3

NOTE: Columns may not exactly add up to total figures due to rounding off.

CDH

ANIEX 11Appendix BPage 1

INDIA

AGRICULTURAL AVIATIIN PROJECT

Yields and Pricea

I. Incremental Yields due to One Aerial Treatment

Instead ofCrops Over no Treatment Ground Treatment

--- kg per acre---------------

Paddy 88.67 21.62Wheat 192.00 47.00Jowar (Sorghum) 118.00 37.00Groundnut 129O0Q 28.00Cotton 48.23 6.68Sugarcane 2,924.00 900.45Potato 243.00 46.23Rubber 50.00

Sources: National Council of Applied Economic Research,Pesticides in Indian Agriculture (New Delhi, 1967);Directorate of Economics.aud Statistics, Ministryof Food, Agriculture, CD and Cooperation; Mission'sestimates.

II. Prices

US$ Rs-- per m ton-----------

Rice (Paddy) 72.33 542.50Wheat 65.00 487.50Jowar 55.00 412.50Groundnut 1140.0 713.70Cotton 187.00 1,420.00Sugarcane - 50.00Potato - 7,800.00Rubber 440.00 3,300.00

ANEX 11Appendix BPage 2

These are based on the following basic sources:

Rice (milled) - CIF Bombay, US$ 110/~, ton and CIF Madras,US$ 107/m ton; average of US$ 108.50/r tonused. At clean rice/paddy conversion rateof 66-2/3%, and assuming that value of by-products pay for processing cost, this isequivalent to US$ 72.33/m ton of naddy.

Wheat - CIF Bombay, US$ 65/m ton.

Jowar - CIF Bombay, uS$ 55/m ton.

Groundnut (shelled) - CIF Europe - US$ 210/long ton, 1969;US$ 165/long ton, 1975; US$ 160/long ton,1980; average of 1975 and 1980 used.Conversion rate:Shelled nuts = 70% of unshelled nuts,by weight. Freight, handling and shell-ing costs estimated at 15% of -value, ofunshelled nuts.

Cotton - CIF Europe - US$ 0.258/lb, 1973,used.Equivalent to US$ 189.20ia ton.Conversion rate: lint - 33-1/3% of seedcotton, by weight. Seed assumed tocover processing and handling costs.

Sugarcane - Domestic average price.

Potato - Domestic average price.

Rubber - International quotations of 24 ¢/lb for1970 and 25.4 ¢/lb for 1969, scaled downto 20 ¢/lb to provide for declines andfreight and handling costs.

ANNEX 11Appendix C

INDIA


Ben&fit-Cost S'treams

Benefits Net BenefitsMost Very Most Very

Project Probable Conservative Probable ConservativeYear Costsl/ Case Case Case Case

-Rs '000-----------------------------

1 10,897 1,534 637 -9,363 -10,2602 35,011 59,294 24,664 24.,283 -10,3473 60,132 133,936 55,712 73,804 -4,420h 59,832 182,048 75,725 122,216 15,8935 62,000 194,737 81,Oo4 132,737 19,0046 61,595 194h,737 81,004 133,142 19,4097 61,180 194,737 81,004 133,557 19,8248 60,596 194,737 81,004 13h,1i4 20,4089 60,191 19h,737 81,oo4 134,546 20,81310 59,716 19h,737 81,004 135,021 21,28811 58,696 192,894 80,238 134,198 21,54212 38,343 124,122 51,630 85,779 13,28713 14.,969 43,726 18)188 28,757 3,219

Internal Rates of return:Most probable case -- over 100%Very conservative case -- 44%

Assumptions on cases:Most probable -- Projected acreage, crop yields, and acreage

allocation among crops are realized; 50% of totalacreage accessible to ground-operated equipment.

Very conservative -- Projected acreage and crop yields fallshort of expectations and acreage allocation shiftsto c-rops generating lower benefits *(e.g., cotton,paddy) so that only half of basic benefit projectionswould be realized. In addition, as much as 80% of thisacreage could be treated from the ground, further loweringnet benefit per acre.

1/ See Appendix D for more details.

INDIA

AORICULTUIRAL AVIATION PROJEET

Project Economic Costs

ProjectYear 1 2 3 4 5 6 7 8 9 10 11 12 13

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Ps 1000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Investments -Aircraft 6,175.6 9,633.9 10,895.4Land Vehicles - oper. 418.0 726.0 1,100.0Equipment 416.5 502.5 576.8 19.0 30.0 33.0 19.0 30.0 33.0 19.0 30.0 33.0 19.0

Buildings 400.0 100.0

Other Tral.uit Costs 1,198.7 1,700.5 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0 1,230.0Adm. Vehicles M.0 44.0 44.0Furniture and Fixtures 75-0 37.5 37.5

Provision for Aircraft -Replacement 1,053.8 3,310.9 5,318.5 4,880.3 4,254.5 3,846.6 3,445.8 2,850.0 2,442.1 1,981.1 1,505.8 767.2 315.5

Incremental Current Operating Costs -Operators'0 & M 750.6 6,584.6 12,990.5 15,722.4 15,863.3 15,863.3 15,863.3 15,863.3 15,863.3 15,863.3 15,691.9 10,421.8 4,281.5

Chseicals (Rs 10/acre) 267.2 10,309.9 23,282.9 31,650.0 33,852.0 33,852.0 33,852.0 33,852.0 33,852.0 33,852.0 33,532.3 21,576.0 7,602.8

Extension Eervices (Rs 2/acre) 53.4 2.061.9 4,656.6 6,330.0 6.770.4 6,17r.h 6,770.4 6,770.4 6770.o4 6,770.4 6,706.5 4,315.2 1,520.6

Total 10,896.8 35.011.3 60.132.2 59,831.7 62,000.2 61,595.3 61,180.5 60,595.7 60,190.8 59.715.8 58,696.5 38,3143.2 14.969.4

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t

AIN?KEX 12

LNDIA


Farm Benefits

1. Farm benefits from the project would arise mainly from reduc-tion in field losses due to pests and diseases, with consequent increasesin crop yields and farm incomes. Appendixes A and B illustrate twomodels -- a 5-acre holding in southern India and a 10-acre farm in north-ern India -- reflecting regional differences in cropping patterns,yields and degree of need for plant protection. In each model, twoalternatives to aerial treatment are given: (a) the farm would receiveno plant protection and (b) the farm would receive protection fromground-operated equipment. Yield increments would be higher under (a)than (b). It is expected that about 200,000 farms would receive aerialtreatment under the project. Farm-gate prices used are national aver-ages for India.

2. Yield figures for paddy, jowar, sugarcane, cotton and potatowere derived from the results of a study by the National Council ofApplied Economic Research (NCAER) in New Delhi. In the absence ofreliable data for wheat, the average percentage yield differential forrice was applied to a conservative but realistic wheat yield level with-out plant protection. The figures on groundnuts were from a separatestudy by the Directorate of Plant Protection, Quarantine and Storage.Since all these studies apply to ground treatment, crop yields from protectedplots were uniformly raised by 5%, a conservative estimate in view ofthe many advantages of aerial over ground treatment (Annex 11), to deriveyields for aerially-treated crops.

3. Some of the crops need more than one treatment to achieve theprojected yield differentials. The following assumptions have been madeon the number of treatments required by each crop per season: paddy, 3;jowar, 1; wheat, 1; cotton, 3; groundnut, 1; potato, 2; and sugarcane, 2.

4. Ground application costs are based on current estimates ofoperating a motorized mist blower costing approximately Rs 1,000 andhaving a useful life of 3 years, operated about 176 hours per yearat an efficiency rate of 1 ac/hour. This mist blower is the most eco-nomical ground equipment under Indian conditions. Since other, morecostly, equipment are also in use, cost savings would probably begreater than the following cost summary shows.

Plant Protection Cost by Ground MethodRs/ac

Capital cost of equipment (at 9% interest rate) 2.25Other fixed costs 3 12Fuel 0.64Operators' wages 0.85Other variable costs 0.34

Application cost 7.20Chemicals 12.00

Total cost 19.20

ANNEX 12Page 2

With aerial application costing an average of Rs 19.00 per acre (Rs 9.00for fee and Rs 10.00 for chemicals), a farmer saves about Rs 0.20 byshifting fromi ground to aerial treatment.l/ These figures indicate thatfarms which can be treated by ground methods would derive small costsavings in resorting to aerial treatment. The accompanying farm modelsshow that under current price and wage structures, a 5-ac farm in south-ern India would only save Rs 2.90 and a 10-ac farm in northern India,Rs 4.40. But in terms of incremental yields, benefits are quite largeand, should, therefore, provide adequate incentives to farmers to partic-ipate in the project.

1/ These are financial savings to farmers. Cost savings in terms ofreal economic resources would be about Rs 2.47 (see Annex 11,para. 13).

INDIA - AGRICULTURAL AVIATION PROJECT

Farmer's Benefit - 5-acre Farm (Southern India)

Yield (kg/ acre) Gross Incremental Production from jIncremental Gross ValueWith th Incr ment Cropped Aerial Application (m tons) Farm Gate of ProductiorL R-0

No plant ground aerial Area Over no plant Over ground Price Over no plant Over groundprotection application application C-A= } C-B= (acres) protection application (Rs/m ton) protection application

protection appliation appiatiD x F= E x F= G x I= H x I=A B C D E F G H I J _ K

Crops

Paddy 1,164 1,377 1,445 281 68 3.25 0.913 0.224 950 867 213Jowar (no spraying) - - - - - 1.25 - - - - -Sugarcane 48,000 54,900 57,645 9,645 2,745 -.5° 4.822 1.372 50 241 69Seed cotton 276 401 421 145 20 0.75 0.108 0.015 1,500 162 22Groundnut (in shell) 455 555 583 128 28 1.25 0.160 0.035 1,000 160 35Pulses (no spraying) - - - - - 1.25 - - - - -

Total 8.25 1,430 339

Total Sprayed .

Summary of Benefits and Costs of Aer&al Application (Rs)

Over no Instead ofPlant GroundProtection Application

Incremental Gross Value of Production 1,430 339

Incremental Costs1. Cost of aerial application:

(a) Aircraft operatorts fee (Rs 9/acre) 128

(b) Chemicals (Rs 10/acre) 142

Sub-total 271 271

2. Harvesting, etc. 143 34

Total 414 105

Less: Cost savings onground application

(a) Fixed costs 77(b) Wages 12(c) Chemicals 171(d) other materials 9(e) Miscellaneous 5

Sub-total 274

Incremental Costs 414 31 x

Incremental Net Farm Profit 1 016 308

INDIA - AGRICULTUflAL AVIATION PROJECT

Farmer's Benefit - 10-acre Farm (Northern India)

Incremental Production Incremental Gross ValueYield (kg/acre) Gross cropped from Aerial Application(m tons) Farm Gate of Production IR

No plant With ground With aerial nent area Over no plant Over ground Price Over no plant Over groundprotection application application C-A= C-B- (acres) protection application (Rs/m ton) protection application

D x F= E x F= GxI= H x I=A B C 0 E F G N I J K

Crops

Paddy 797 870 915 116 44 2.0 0.233 0.087 950 221 82Wheat 800 945 992 192. 47 3.0 o.576 0.141 750 432 106Jowar 667 747 785 118 37 2.0 0.236 0.075 60o 142 45Sugarcane 25,900 29,500 30,975 5,075 1,475 1.0 5,075 1,475 50 254 74Seed Cotton 276 401 421 145 20 1.5 0.217 0.030 1,500 326 45

Potato 1,456 1,849 1,942 486 93 1.0 0.486 0.092 680 330 63Groundnuts 465 567 595 130 28 2.0 0.261 O.o57 1,009 261 57Pulses (no spraying) - - - - - 2.0 _- - -

Fodder (no spraying) _ _ _ _ LO

Total 15.5 1.196 473

Total Bprayed 12.5

Summary of Benefits and Costs of Aerial Application(Rs)

Over no Instead ofPlant GroundProtection Application

Incremental Gross Value of Production 1,966 473

Incremental Costs1. Costs of aerial application:

(a) Aircraft operator's fee (Rs 9/acre) 194(b) Chemicals (Rs 10/acre) 215

Sub-total 409 409

2. Harvesting, etc. 196 47

Total 605 456

Less: Cost savings onground application

(a) Fixed costs 116(b) Wages 18(c) Chemicals 258(d) Other materials 14(a) Miscellaneous 7

Sub-total _ 413

Incremei tal Costs 605 42

Incremental Net Farm Profit 1361 430

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