Docment of

The World Bank

FOR OmCAL USE ONLY

Report No. 14160

PROJECT COMPLETION REPORT

INDIA

NARMADA RIVER DEVELOPMENT - GUJARATWATER DELIVERY AND DRAINAGE PROJECT

(CREDIT 1553-IN)

MARCH 29, 1995

Agricultural Operations DivisionCountry Department IISouth Asia Regional Office

This document has a restricted distribution and may be used by recipients ondy in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Currency Equivalents

Name of Currency: - Rupee (RpJRs.)

Rate of Exchange: - At Appraisal (August 1984) USS 1.00 = Rs. 12.00- During Implementation,

(FY 1988 - FY 1993) US$ 1.00 = Rs. 18.72- At Completion (Closing

Date July 1,1992) USS 1.00=Rs. 25.60

Fiscal Year of Borrower: April I to March 31

Abbreviations

NCA Narmada Control AuthorityBOC Board of Consultants NDD Narmada Development DepartmentCAD Command Area Development NPG Narmada Planning GroupCADA Command Area Development Authority NRD Narmada River DevelopmentCCA Cultivable Command Area NWDT Narmada Water Disputes TribunalCHPH Canal Head Powerhouse OD Operational DirectivesCWC Central Water Commission ODA Overseas Development AgencyCPU Central Procurement Unit OMS Operational Manual StatementDCA Development Credit Agreement O&M Operations and MaintenanceD,M&I Domestic Municipal and Industrial ORG Operations Research GroupDOA Department of Agriculture PCR Project Completion ReportED Executive Director of the Bank PFP "Planning for Prosperity" by SSNNLEIA Environmental Impact Assessment QC/QA Quality Control/Quality AssuranceERR Economic Rate of Retum RWS Rotational Water SupplyEL Elevation SA Service AreaFSL Full Supply Level SAR Staff Appraisal ReportGAU Gujarat Agriculture University SDR Special Drawing RightsGDP Gross Domestic Product SDV Supplementary Data Volumes of the SARGOG Govemment of Gujarat SMS Subject Matter SpecialistGOI Government of India SSP Sardar Sarovar ProjectGOMP Government of Madhya Pradesh SSNNL Sardar Sarovar Narmnada Nigam LimitedGOM Government of Maharashtra TDS Total Dissolved SaltsGOR Government of Rajasthan' UK United KingdomICA Irrigated Command Area UNDP United Nations Development ProgramICB Internal Competitive Bidding VEW Village Extension WorkerMAF Million Acre Feet (1,235 Mm3) VSA Village Service AreaMIS Management Information System WALMI Water and Land Management InstituteMOEF Ministry of Environment and Forests WUA Water Users' Association

Glossary

Chak - Irrigation service area of about 40 ha in size below the outlet from the minorDistributary - Irrigation channel, offRaking from the main or branch canal, with capacity greater than 700 liters/secondField Channel - Irrigation channel offlaking from a minor to irrigation farms in the chakHa - Hectare (approx. 2.5 acres)Hot Season - April to JuneKharif - Wet season; June to OctoberMinor - Irrigation channels with capacity less than 700 I/s and serving chaksNigam - Sardar Sarovar Narmada Nigan LimitedRabi - Winter season/dry season; November to MarchTaluka - Sub-division of a district

FOR OMCIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluation

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

Subject: Project Completion Report on India - Narmada River Development (Gujarat)Water Delivery and Drainage Project (Credit 1553-IN)

1. Attached are Parts I and II of the Project Completion Report (PCR) on the NarmadaRiver Development (Gujarat) Water Delivery and Drainage Project (Credit 1553-IN). Part I wasprepared by the South Asia Regional Office. The Borrower contributed Part II; in addition, many ofthe Borrower's comments on Part I are recorded as footnotes to the relevant paragraphs. Foursupporting annexes and Part III (133 additional pages) are not included but are available on request.This PCR should be read in conjunction with the PCR on the parallel Sardar Sarovar Dam and PowerProject-SSDPP (Credit 1552-iN/Loan 2497-IN).

2. This project and SSDPP form part of the Narmada River Development Plan (NRDP)which aims to harness the Narmada River through a series of dams and associated investments forirrigation, energy and domestic/municipal/industrial (DMI) benefits, largely in three states-Gujarat,Maharashtra and Madhya Pradesh. Through the deliberations of the Narmada Water Dispute Tribunal(NWDT) in December 1979, the Government of Gujarat (GOG) would have a 32 percent share of thewater, receive nearly all of the NRDP irrigation benefits (Rajasthan receiving a minor allocation at thenorthwest extreme of the main irrigation canal), and correspondingly assume most of the directirrigation and DMI development costs, as well as 50 percent of the Sardar Sarovar Dam costs. Theproject encompasses a three-year time slice of the development program which includes main canalexcavation and lining, installation of a water regulation system, seven river cross-drainage structures,construction of 13 branch canals, and development of 12 land blocks with associated distributorycanals and drainage. Partial construction of most of these investments was envisaged in the time slice.Training and technical assistance components were also included. The credit was approved in March1985 and closed in July 1992, 39 months behind schedule.

3. Initial implementation was delayed by lack of GOI forestry and environmental clearances.By the final closing date, the planned construction of the main canal had been realized and installationof regulators had met 88 percent of target. However, branch canal construction was less than 60percent of target, and hydraulic structures only 35 percent of target. Construction in the developmentblocks had not begun due to delayed designs and high-priced tenders. A comprehensive operation andmaintenance manual for the canal operation was prepared; bids were invited for the detailed design,

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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installation and commissioning of a remote control monitoring system (financing of this wastransferred to the continuing SSDPP Loan, but this too was canceled prior to contract financing); and apractical computerized management information system (MIS) was developed and used (as forSSDPP). The project set fully satisfactory engineering and construction standards for all major works.However, project implementation delays continue to this day (see Memorandum on SSDPP).

4. The 1979 NWDT made no reference to canal-affected families (CAFs). During projectpreparation and appraisal, both the Borrower and the Bank apparently assumed that CAFs would betreated as in previous Bank-financed infrastructure projects, i.e. through cash compensation for lostassets in accordance with the Land Acquisition Act, as amended in 1984. Accordingly, no referencewas made to CAFs in either the SAR or legal documents. However, during implementation it becameclear that in many cases the compensation paid to CAFs did not fully cover the cost of new land (withland value appreciating due to prospects for irrigation access) let alone the value of lost fixed assets.A Bank mission in 1989 confirmed that the existing arrangements would not ensure that all CAFswould be able to recover a living standard at least equal to that before displacement (as required bythe 1980 OMS 2.33). In 1991, the GOG, in response to Bank recommendations, engaged a localmanagement institute to assess the number of CAFs and their needs. This report indicated that a veryhigh number of persons would be affected, and recommended a compensation policy which was morethan GOG had considered. In response, GOG undertook to do its own in-house investigation ratherthan accept the consultant's report.

5. An independent review (IR) of SSDPP and this project was commissioned by thePresident of the Bank in 1991 in response to serious criticisms of resettlement (R&R) andenvironmental aspects of the projects by non-governmental organizations. The ensuing June 1992report criticized the Bank for its lack of adherence to OMS 2.33 and the GOG for lack of a reliabledatabase and inadequate compensation arrangements. A Bank mission in July 1992 confirmed thesefindings and proposed a number of measures to address the R&R problems. Arrangements fortreatment of CAFs became part of the action plan stipulated by the Bank in October 1993 as acondition for continued funding of SSDPP (see Memorandum on SSDPP). The requiredsocioeconomic survey of CAFs has been completed and will firm up final figures when published.Indications are that 68,000 people have so far been affected by canal construction; 230,000 people arelikely to be affected (about 7 percent of the command area population) by the total program (whichcompares with about 130,000 persons to be affected by SSDPP). An interim R&R policy has beenissued providing market value compensation and allocation of a 0.5 ha of replacement irrigated landfor those losing more than 50 percent of their land and who are left with less than 1.0 ha.

6. It is clear that the Bank did not follow its own environmental guidelines, which cameinto existence before the final appraisal mission in August 1984 (OMS 2.36 of May 1984). The 1984OMS was explicit in its requirement that, at appraisal, staff should assess environmental findings,evaluate the magnitude and timing of any adverse effects of the project, and specify environmentalmeasures to be undertaken during the project; legal agreements would covenant these actions to meetthe objectives of OMS 2.36. A number of ad hoc environmental studies on the possible effects of theirrigation and drainage networks were undertaken by GOG in preparation for the required GOIclearance. Based on these findings, the SAR referred to the need to prepare, during implementation, acomprehensive environmental assessment and an action plan for any necessary mitigatory measures.In the Project Agreement with GOG, action on the health measures was covenanted, but specificreference was not made to the overall environmental plan which was an obligation under the Project

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Agreement with GOG for SSDPP, where an overall plan was to be produced by December 1985. Theabsence of an environmental plan by Board presentation meant that OMS 2.36 was not satisfied. Inpractice, the plan was not submitted in December 1985, nor by an extended deadline in 1989. As inthe case of SSDPP, the GOI forestry clearance was still pending at Credit approval; GOIenvironmental and forestry clearances were obtained in 1987, conditional on specific enviromnentalstudies and plans being completed by 1989 (see Memorandum on SSDPP). Ultimately, the requiredplan was submitted in August 1993.

7. Coordination by the Narmada Control Authority of the environmental work under the twoparallel projects was weak. Bank staff gave more emphasis to environmental issues after 1987 buteven then health issues and environmental training programs did not receive adequate attention. The1992 IR report criticized the lack of compliance with GOI and Bank environmental guidelines andregulations and the futility of the Bank's "incremental" approach. It expressed concem about theprobability of soil and water-logging problems in coastal areas and the lack of adequate studies tosupport the assumptions on soil and drainage conditions. It also maintained that the Bank and GOGhad not adequately addressed the public health issue. The Bank agreed with the criticisms on theabsence of environmental plans and slow progress on health issues, but asserted that the long gestationperiod of the project meant that any identified untoward effects could be managed, and contended thatthe concerns regarding waterlogging and salinity were not as serious as suggested.

8. The July 1992 Bank mission confirmed that delays in environmental plans and actionshad not caused serious consequences to date, but reported that GOG was cognizant of the urgent needfor action as identified by earlier Bank missions and the IR. The completion of an EnvironmentalImpact Assessment for the command area and adequate implementation of Gujarat's malaria controlprogram were subsequently included as benchmarks to be achieved by March 31, 1993 to enablecontinued funding of SSDPP (para. 5). With the help of ODA-funded consultants a plan wasproduced, but GOG in September 1993 indicated that the final product for the command area wouldnot be available until December 1994 as studies on ground water modelling, drainage and secondarysalinization still had to be completed; this plan is only now nearing completion. Staffing and fundingof the general health program operations continued to be problematical.

9. The IR also raised questions regarding the project's hydrological asumptions. Theserelated to the validity of river flow calculations used to allocate water shares among the states, and thecapacity of the system to meet the planned water requirements of the command area The Borrower'sCentral Water Commission (CWC) and a Bank consultant subsequently reviewed the project'shydrology. Both the CWC and the consultant confirmed the adequacy of the flow series used in themodel. However, a 1994 review by an independent team of experts appointed by the GOI could notcome to a firm conclusion on the hydrology and recommended a reexanination of the "dependablewater availability" issue. Thus, apart from reduced energy considerations, there remains concern aboutthe reliability of the estimates for water availability for the intended irrigation program in thecommand areas. In a simplified operational study, the consultant projected that, although the risk ofshortages increased in drier years after the year 2000, dependability was high for DM1 and irigationrequirements until the year 2024 when the NWDT would revisit awards to the riparian states; adoptinga lower level in the irrigation by-pass tunnel in the Sardar Sarovar dam would ensure demands weremet in full to 2024 (but this has not yet been agreed by Madhya Pradesh - see SSDPP Memorandum);and after 2024 dependability would be significantly reduced, with dry season crop requirements beingmet only in 50 to 60 percent of years. Bank staff, however, consider the consultant has overestimated

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water availability and underestimated crop water requirements, and therefore the PCR analysis uses thecoefficients assumed at project appraisal. The PCR concludes that, in practice, it is likely that theavailable water for irrigation will not permit the complete coverage of the command area as planned,and recommends that the best option would be to proceed in a step-by-step fashion, giving priority tothe development of irrigation in areas yielding better agricultural returns, and the delivery of only DMIwater to the areas less suited to irrigation. A detailed updating of the operational model is beingundertaken by an Indian consultancy.

10. An economic rate of return (ERR) was not calculated separately for the Water Deliveryand Drainage Project, but was estimated for the combined irrigation, power and DMI investments inthe first phase of the NRDP (see Memorandum on SSDPP). The reestimated ERR in the PCR was 12percent and a series of sensitivity calculations, including the impact of substantial delays in thecompletion of works and commencement of benefits and reductions in command area irrigation,continued to yield an ERR in excess of 10 percent. The analysis shows that the economic benefitsresulting from power are higher than from irrigation, and the benefits from DMI will be higher thaninitially anticipated. If less water than originally projected is available for irrigation in the commandarea, this should lead to a more rational program of irrigation which avoids high cost development ormaintenance options associated with difficult drainage or existing or potential salinity. It is alsoplausible that the areas which initially receive irrigation will adopt a higher irrigation intensity and ahigher-value cropping pattern than assumed in the extensive, thinly spread distribution envisaged in theGOG plan. Although this would increase incremental crop production, and hence the ERR, the GOGcontinues to place very high value on the social/equity benefits of the extensive plan and remainscommitted to that design. Water availability and farmer responses, however, may dictate otherwise.When all ongoing studies and the Environmental Impact Assessment are completed, an updatedeconomic analysis of practical options in the command area would be beneficial to guide furthercommand area development and avoid unnecessary investment expenditure.

I1. Taking account of initial conditions, the institution-building aspects of the project havebeen substantial. To be sure, a capacity to implement the designed operation, maintenance and watermanagement plans (para. 3) has yet to be developed. But as for SSDPP, the improvement inengineering design and construction quality control standards in local institutions has been a majoraccomplishment. In R&R, GOG has been ahead of the other participating states in adopting andimplementing enhanced R&R policies. Despite a piecemeal approach to environmental studies beforeand during most of the project period, capability in integrated environmental impact assessment andplanning is now emerging. GOG is committed to mitigating any unfavorable health effects, althoughstaffing and funding need to be improved.

12. In sum, achievements have been mixed, and many uncertainties regarding final outcomeremain. Fiscal constraints could be binding. Engineering and institutional accomplishments aresubstantial, but the project is still in its initial construction stage and no productive components havebeen put into operation, while the ultimate command area program is likely to be modified.Nevertheless, the project promises to have a major impact on most of the 30 million people in thecommand area through irrigation and DMI water or DMI alone. A marginally satisfactory ratingappears warranted for the expected outcome of the project based on the PCR analysis and theassumption that, despite the delays, SSDPP will be implemented, funding will be secured and thesocial and environmental aspects will finally be mastered.

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13. Project sustainability is rated as uncertain. O&M has not had a good history in India,and the O&M wing of the development corporation will have to be strengthened in staffing, training,equipping and funding if O&M plans are to be effectively implemented. Implementation of thefindings of the pending Environmental Impact Assessment will be crucial to sustainable irrigationdevelopment, both in its impact on decisions concerning the extent of irrigation coverage and in themanagement of mitigatory measures.

14. Bank appraisal and supervision performance has been unsatisfactory. Quality atentry was weak with respect to the social and environmental dimensions and hydrological parametersmay not have been assessed with sufficient rigor.

15. The PCR is comprehensive and provides a detailed review of the project from the designphase, through implementation to the situation existing in 1994. The PCR correctly reports on thescrutiny exercised by the Board at project presentation, frankly points out the deficiencies of the Bankin not adhering to its own operational guidelines and those of the Borrower in not meeting legalcovenants, and records the mixed results of a Bank-specified remedial action plan undertaken in1992/1993.

16. In Part 11 of the PCR the Borrower insists that, although Bank guidelines onenvironmental planning may not have been fully met, GOI guidelines were applied, and acomprehensive environmental management plan is nearing completion and will provide for anynecessary mitigatory measures. The inadequacy of the compensation for CAFs is contested, and theland consolidation around the canal-affected areas which is suggested in Part I is not consideredfeasible. The high social benefits of providing water for irrigation and DMI in the drought-pronezones of Gujarat are reiterated, and the future problems in supplying DMI water caused by a decline inthe water table that would occur in the absence of the scheme are emphasized.

17. An extraordinary amount of retrospective evaluation and lesson learning has alreadytaken place in connection with the environmental and resettlement aspects of the project. As indicatedin the Memorandum on SSDP, a performance audit is planned to assess the realism and the sensitivityto risks of the reestimation in the PCR of the total scheme costs and benefits. Once the energy andwater distribution systems are in operation, and irrigation has commenced, OED also plans toundertake an impact evaluation of selected aspects of the projects. This is likely to be directed at theproject's socioeconomic impact (including health aspects) on non-CAF families receiving irrigation, onfamilies receiving only domestic water supplies, and on CAFs. It will be linked with an impactevaluation on the SSDPP which is expected to focus on the oustees from the dam construction andsubmergence areas.

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Note on the Calculation of Economic Rate of Returns for Investments Under the FilrstPhase of the Narmada Development Plan

1. PCR base case seenano. A. Yielding 12 percent ERR

Actual costs for completed investments are used, and projected costs and benefits are revised.Seventeen percent of the costs of the upstream Narmada Sagar Dam are included, as at appraisal. A1989 revision of the construction schedule was further adjusted to allow for the consequences ofdelays which were apparent in 1993 at the time of the recalculation of the ERR. The projectionassumes some irrigation and DM1 will commence in 1995 in a small area, with full development ofthe 1.79 million hectares of irrigation in the command area program by 2006. Significant powerbenefits would commence in 1997. In view of existing and likely delays in the construction of theNarmada Sagar dam, a 25 percent reduction in power supply for the first five years is introduced tocompensate for reduced flows available to the riverbed power house (RBPH).

Comment: At least one more year (after 1995) will be needed before irrigation commences, sothat part of the sensitivity calculation for irrigation delay (see below) must beconsumed in the actual base case. The 25 percent reduction in power for five years islikely to be on the low side considering the progress in construction of the SardarSarovar and anticipated future constraints. On the positive side, however, energy andDMI values could be conservative (see below), and the Bank commodity priceprojections for the 1995-2000 period are higher than that assumed in the PCRanalysis.

2. Scenario B

This examines the impact on Scenario A of delaying the RBPH for up to four years. Assuming thatinvestment costs in the RBPH and transmission systems are delayed accordingly, this reduces the ERRby less than one percentage point.

Comment: Delays may occur in the RBPH as financing of the necessary turbines is still inquestion.

3. Scenaro C

This assumes that the Narmada Sagar Dam is substantially delayed (or not completed) so that it doesnot contribute to the scheme. In this event, some suboptimal alternative investments in upstreamstorage would probably occur, requiring a new hydrological modelling exercise to determine wateravailabilities. In the absence of this, a proxy was used: the 25 percent reduction in power generationwhich is assumed for the first five years in the base case scenario is extended through the project life;similarly, the command area irrigation/DMI benefits are reduced by 30 percent, with the main canalbeing fully costed but with branch canals and other development investments being reduced by 15percent and 25 percent respectively. The 17 percent of the Narmada Sagar costs previously allocatedto the project is removed. This reduces the ERR by a little over 1 percent.

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Comunent: Although construction of the Narmada Sagar Dam has commenced, there are manyuncertainties (in funding and resettlement requirements) concerning its progress,despite the government's stated commitment to its completion. Construction costs arelikely to be progressively incurred but any benefits may be seriously delayed. Therationale for the proxy assumption is not explained in the PCR: the same proxy at thetime of appraisal was apparently based on simulation studies. While planning forresettlement related to Narmada Sagar has been elaborate, implementation problemsmay well arise given the sheer scale of the effort needed.

4. Scenario D

This examines delays in the command area development compared to scenario A, with simultaneousreduction in benefits and costs, but with the main canal being completed as planned. A two yeardelay reduces the ERR by 0.7 percentage points, a four-year delay by 1.4 percentage points, and asix-year delay by 2 percentage points.

Comment: Significant delays in the command area development appear likely, and at least a one-year delay in the commencement of irrigation development is certain. The total plan,however, envisages development of some areas with a poor benefit/cost ratio (forsocial/equity reasons) and a relatively traditional cropping pattern. In practice,restricted water availability (see below) and farmer practices may force moreprofitable investmnent and water use than envisaged in the model.

5. Scenario E

This assumes that the command area would be reduced by up to 40 percent. On the assumption thatthis makes the equivalent amount of water available for power, this increases the rate of returnslightly, again allowing for reduced command area development costs excepting the main canal.

Comment: A reduced availability of water for irrigationlDMI need not make the equivalent wateravailable for energy. First, there is still some doubt about the total water availabilityin the system, and second the actual water consumed by irrigators is likely to be morethan anticipated in the plan.

Concerning total water availability, the most recent hydrological model (in 1993 by theCentral Water Commission-CWC) estimates a 75 percent dependable flow of 27 MAF.This is based on "observed' flows in the basin from 1948 to 1990 (43 years) and"generated" flows from 1891 to 1947 (56 years). Although CWC insists on the validity ofthese calculations, there is some question concerning the reliability of 'hindcasting' togenerate flow data from available rainfall records in the period to 1947. Use of only theperiod with 'observed' flows lowers the 75 percent dependable volume by about 18percent.

Within Madhya Pradesh, there is politial pressure not to fill the reservoir to its 'fullreservoir level'-FRL of 138.7m by some groups who will lose good cropping land whenthis level is reached; this, despite the NWDT agreement to the 138.7m FRL. This issuewas heavily debated and eventually resolved during the NWDT proceedings. Recently,

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however, renewed pressure for review of the FRL has been very strong in MadhyaPradesh, in part encouraged by a Supreme Court Bench of Justices, which accused theGOI of not responding adequately to a review at the project by the expert Patil Committee.

For the volume of water actually diverted at Sardar Sarovar for irrigation and DMI, theplanned water use per hectare may not eventuate, and more water is likely to be used onless hectares than intended in the plan. The PCR calculation assumes reasonable cropyields (e.g. 4 tons paddy HYV and 3.5 tons wheat HYV on irrigated higher potentialsoils), an average cropping intensity of 1.37, an irrigation intensity of 1.06, an irrigationefficiency of 48 percent at headworks, and a five-year adoption curve for enhanced inputsand outputs on each block to receive irrigation; all of these coefficients are acceptableconsidering experience in India. However, the PCR (and the SAR) assumes that the cropwater requirement will be reduced by 10 percent 'because of water scarcity;" in practice,this is unlikely, as farmers in the earlier serviced areas are likely to assume higherirrigation intensity and use much more water than envisaged in the plan. This implies thatless of the command area will be irrigated, but it also suggests that investment in the leastproductive areas may be avoided. The latter is made even more likely in the Rann ofKutch where a recent study by the Wildlife Institute of India has indicated that theproposed irrigation canals would endanger the habitat of the wild ass (an endangeredmammal), particularly in waterlogged and saline areas. A more rational irrigation planand the adoption of a higher-value cropping pattern would be conducive to increasing therate of return.

Consequently, while reduced total water availability would have a negative effect on thescheme benefits through reduced energy generation (scenario C), the likely pattern ofdevelopment and water use in the command area under circumstances of reduced supplymay not reduce the returns to irrigation investment.

6. Unit Value of Benefits

DMI water values can decrease by 19 percent or power energy values by 6.6 percent without takingscenario A to below 10 percent ERR.

Comment: The economic price of power (at about 4.6 US cents/kWh) is conservative and isbased on a 'willingness to pay" concept using a methodology which adds theeconomic value of the average tariff for each consumer category to half the additionalcost of the alternative of private supply to account for a consumer surplus. Thismethodology appears somewhat arbitrary, but is said to be conservative and has beenused in the appraisal of other recent projects in India. Account is not taken of thehigher peaking power value which would increase the ERR if it were included.

The DMI value at about 15 US cents/mi is 60 percent higher than that assumed atappraisal. With one exception, the SAR methodology was adopted, in which demand fromdifferent categories of consumers was calculated and the DMI water was valued as thesavings in cost realized by supplying estimated demand from the project rather than othersources; the latter were individual water facility investments, except for some moredifficult areas in the later stages of development where the cost of trucked water was used.

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The PCR assumed one third of the alternative source water would have to come fromdesalinization (which causes the increased DMI value) on the grounds that the valuepreviously ascribed was extremely conservative considering the impact of recent droughtsin the command area. Although appearing reasonable, this valuation warrants furtherinvestigation, as the contribution of DMI to the benefit stream in the first 15 years afterDMI commences increases from 4 percent at appraisal to 11 percent in the PCR ERRanalysis.

7. Component Analysis

The PCR states that the ERR (using scenario A assumptions) for investment in power alone is 14.2percent, in irrigation alone is 10.8 percent and in irrigation and DMI is 12.4 percent.

Comment: The methodology used to separate out benefits and costs to attain these estimates isnot presented, but it is assumed that the PCR uses the same dissections as those madeat the time of appraisal.

PROJECT COMPLETION REPORTINDIA

NARMADA RIVER DEVELOPMENT - GUJARATWATER DELIVERY AND DRAINAGE PROJECr

(Credit 1553-IN)

TABLE OF CONTENTS

PREFACE ................................................................. iEVALUATION SUMMARY ................................................................ iii

PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE ....................... ..................... 1

1. Project Identity .12. Background .13. Project Objectives and Description .24. Project Area .45. Project Design and Organization .56. Project Implementation .147. Environment .188. Canal Affected Families ................ 279. Project Achievements 2910. Project Sustainability .3411. Bank Performance .3512. Borrower Performance .3713. Project Relationships .3814. Consulting Services .3815. Project Documentation and Data .3816. Lessons Learned .39

PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .............. ................. 42

The above parts of the PCR have been distributed to the Board and to the President. Thefollowving partsare available to authorized persons on request. This measure hzas been adopted because of the length ofthe report. Thefour annexes pertain to Part I.

ANNEX 1: Hydrology and Water Management ................................................................ 67ANNEX 2: Environmental Impacts and Management ....................................................... 77ANNEX 3: Resettlement & Rehabilitation of Canal Affected Persons .............. ............... 99ANNEX 4: Revised Cost-Benefits Analysis ................................................................ Ill

PART m. STATISTICAL TABLES ................................................................ 183

1. Related Bank Loans and Credits .1842. Project Time Table .1903. Schedule of Cumulative Disbursements .1914. Project Implementation .1925. Project Costs .1946. Project Financing .1957. Status of Covenants .1978. Staff Inputs .2019. Bank Missions .202

MAPS (IBRD 17939,17940)

PROJECT COMPLETION REPORTINDIA

NARMADA RIVER DEVELOPMENT - GUJARATWATER DELIVERY AND DRAINAGE PROJECr

(Credit 1553-IN)

PREFACE

This is the Project Completion Report (PCR) for the Narmada (Gujarat) Water Deliveryand Drainage Project for which Credit 1553-IN for SDR 149.5 million (US$150 millionequivalent) was approved on March 7,1985. An amount of SDR 4.8 million was canceled fromthe Credit on December 5, 1991. The Credit closed on July 1, 1992, 39 months behind schedule,after an initial 3-month extension followed by three extensions of one year each. The Creditwas fully disbursed on September 17,1992.

The PCR was prepared by the New Delhi Agriculture Unit of the AgricultureOperations Division of the India Department, South Asia Regional Office (Preface, EvaluationSummary, Parts I and IE). The Borrower has submitted Part II, and also provided extensivecomments on the draft PCR which were incorporated in Parts I and III of the present documentWhenever there was a major disagreement between the PCR and the Borrower's comments,these were flagged in form of footnotes in Part I.

Preparation of this PCR was initiated during the Bank's supervision mnission in January1992. However, its completion was delayed on several occasions pending the submission inJune 1992 of an Independent Review Report comnmissioned by the Bank, the findings of a Bankreview mission in July 1992, discussion of these two reviews by the Board on October 23, 1992,and GOI's compliance with benchmarks that were to be fulfilled on March 31, 1993 but thatwere actually submitted on August 5, 1993. The present PCR is based, inter alia on the StaffAppraisal Report (SAR), legal documents, supervision reports, correspondence between theBank and the Borrower, discussions with the Sardar Sarovar Narmada Nigam (SSNNL)engineers, the Independent Review Report, Government of India's (GOI) compliance with thebenchmarks internal Bank memoranda and reports, and various non-Bank documents.

..

PROJECT COMPLETION REPORT

INDIA

NARMADA RIVER DEVELOPMENT - GUJARATWATER DELIVERY AND DRAINAGE PROJECT

(Credit 1553-IN)

EVALUATION SUMMARY

Background and Objectives

1. The Gujarat Water Delivery and Drainage Project and the Gujarat Dam and Power Projectform part of the Narmada River Development Plan, whose overall objective is to harness theNarmada River through a series of dams, for irrigation, water supply and energy. Thearrangements for sharing and utilizing water by the four benefitting states (Madhya Pradesh,Gujarat, Maharashtra and Rajasthan) were defined by the Narmada Water Dispute Tribunal(NWDT) in December 1979. Under this award, Gujarat was allocated 11,100 Mm3 (9 million acrefeet [MAF]) representing about one third of the annual water flow, and was authorized toimplement a project comprising: (i) the Sardar Sarovar Dam, (ii) a 1,200 megawatt (MW) riverbedpowerhouse (RBPH), (iii) a 250 MW canal head powerhouse (CHPH), (iv) a canal system toirrigate 1.87 M ha in Gujarat and 70,000 ha in Rajasthan, and (v) a water supply system for about30 millon people in the command area with emphasis in the drought-prone areas of Saurashtra andKutch. On that basis, Gujarat prepared the Sardar Sarovar Project in 1980, which was to beimplemented in various phases over a period of about 20 years. Phase I comprised: (a) the SardarSarovar Dam, (b) the RBPH, (c) the CHPH, (d) the first 144 kcm of the main canal up to the MahiRiver, and (e) a network of branch and distribution canals and drainage system to irrigate about450,000 ha.

2. The Water Delivery and Drainage Project (Credit 1553-IN) encompassed a 3-year time sliceof the Phase I Sardar Sarovar Project, including partial construction of: (i) the main canal up toMahi; (ii) seven major hydraulic structures (aqueducts and syphons) on the main canal, (iii) thirteenbranch canals; and (iv) twelve irrigation and drainage blocks representing about 96,900 ha. Inaddition, the project was to: (v) install a state-of-the-art remote control and communication system;(vi) provide technical assistance and training for the implementing agency; and (vii) promoteconjunctive use of surface and underground water within the irrigation and drainage blocks.

3. The Dam and Power Project (Credit 1552-IN/Loan 2947-IN) for the Sardar Sarovar Damwas processed in parallel, and is the subject of a separate Loan/Credit Completion Report. Thetwo projects were presented to the Board concurrendy on March 7, 1985. The Staff presentationhighlighted the R&R program for the projects. The Directors queried the institutional arrangementsfor that program and the relatively undefined state of the environmental studies. Their otherconcerns related to the project size, future Narmada Basin development, and being kept informed(during implementation) about the projects' social and environmental effects. Taken together,these Board concerns revealed the early exposure of all parties in the Bank to the R&R andenvironmental issues, and the attention given to them by the EDs. Management agreed andcomplied to a specific Board request to keep it informed of the projects' progress on social andenvironmental issues through many written responses to questions and a number of briefings ofEDs.

Project Design and Organization

4. Project preparation took four years from identification in 1979 to pre-appraisal in 1983.The project was prepared by the Narmada Planning Group (NPG) with assistance from the UnitedNations Development Program (UNDP) and the Bank. Project concept and design closely followsthe NWDT award. NPG conducted supporting studies and analyzed the project's financial andeconomic benefits. The Narmada Development Department (NDD), in charge of projectimplementation, prepared detailed designs and cost estimates for the major project structures.

5. Appraisal took a lengthy 17 months (March 1983 to August 1984) and several Bankmissions, due to the scope and complexity of the twin Canal and Dam Projects, and the need foragreement on treatment of persons affected by the Dam Project. Negotiations took place inNovember 1984 and Board approval, in March 1985. The SAR noted the need to prepare anEnvironmental Impact Assessment (EIA) during implementation, but the LegalAgreementsspecified only the need to minimize the risk of malaria and provide training inenvironmental sciences.

6. In May 1988 responsibility for project implementation was transferred from the NarmadaDevelopment Department, a government agency, to the Sardar Sarovar Narmada Nigam Ltd.(SSNNL), a parastatal corporation organized along functional lines.

Hydrology

7. The mean water availability created by the project was estimated at 17,700 Mm3 (14.3MAF) per year, while the average irrigation requirements of the 1.87 M ha command area and theD,M&I requirements were estimated at about 17,100 Mm3 (13.9 MAF). Little or no shortage ofwater is anticipated until 2024 when the NWDT water allocation may be revised. However, there issome risk that the project may need more than the present 9.0 MAF allocation before that date.1

Project Implementation

8. The Credit became effective in January 1986, nine months after Board approval, butconstruction was delayed until July 1987 when the Ministry of Environment and Forests (MOEF)gave environmental clearance for the project. Because the project timetable was soon deemed tooambitious, in December 1989 a more realistic schedule was established for completing the worksby July 1992.

9. The project's slow start was caused by transition to new management under the SSNNLand unavoidable delays related to the introduction of new construction technologies. In aMemorandum of Understanding (March 1989) the Borrower agreed to remedial measuresidentified by a GOT-appointed Team of Experts, and thereafter project performance improved.

10. The Credit closed on July 1, 1992 after four extensions totalling 39 months.

Civil Engineering

11. The civil works component began slowly but gained momentum as govemment officialsand contractors became more familiar with the advanced technologies introduced by this project.Initial implementation delays were not viewed as criticaL given the need to set high administrative

I 'nw Borower is Of the opinion that the project water requirements will not exceed the allocated 9.0MAF.

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and engineering standards for the project's duration. Ultimately, due in part to the establishment ofa computerized management information system, the project conformed to intemational standards.

Environment

12. The Board approved the project in 1985 in the absence of formal forest clearance fromIndia's MOEF, which had requested additional environmental studies. In June 1987, the MOEFissued a conditional environmental clearance, pending still further studies.

13. By March 1991 serious difficulties in the environmental and R&R components of bothprojects led the Bank to commission an Independent Review. The Review was critical of Bankand Borrower handling of environmental, health and R&R matters, charging that the completedstudies did not constitute a full EIA, that the Borrower's approach to environmental protection wasincremental rather than preventive, and that serious waterlogging, soil and health problems wouldresult from the project.

14. Accepting some, though not all, conclusions of the Independent Review, the Bank securedthe Borrower's assurance that a comprehensive environmental action plan would be prepared, thatGOI would promptly correct weaknesses in its environmental program, and that the Governmentof Gujarat (GOG) would implement Bank recommendations on health issues. In October 1992 theBoard agreed to continue support to both projects, subject to Borrower's compliance by March 31,1993 with benchmarks related to both environmental issues and resettlement of canal affectedpersons (though the Water Delivery and Drainage project had been closed since July 1, 1992).

15. On March 29, 1993, shortly before the benchmarks were to be met, the Borrowerrequested the Bank to cancel the Loan for the Dam and Power project. In its statement to theBoard, however, the Borrower reaffirmed its commitment to sound environmental and R&Rpractices. In August 1993, the Narmada Control Authority (NCA) requested and the Bank agreedto extend the date of completion of the command area EIA to December 31, 1994 as severalimportant studies remained to be carried out.

Canal-Affected Families

16. The SAR and Legal Documents described no special R&R needs for canal-affected families(CAFs). As in previous irrigation projects, these were to receive cash compensations under theLand Acquisition Act of 1894. During implementation, however, it became clear that thiscompensation level would not cover the replacement cost of land nor the additional costs ofdeveloping replacement land.

17. In addition to analyzing general environmental and R&R aspects of the Sardar SarovarProject (SSP), the Independent Review criticized the Bank for failing to address the displacementof CAFs during appraisal and to introduce provisions for CAFs in the legal documents. It alsowas critical of the incremental approach followed by the Bank for not yielding the expected resultsin a timely manner. GOG was criticized for not having prepared a reliable database for failing toadequately compensate and rehabilitate the CAFs, and for failing to prepare a policy regarding theirdisplacement. The Bank's Management response acknowledged that adequate resettlement planshad not been prepared by the Borrower or appraised by the Bank under the project. Managementalso agreed that the strategy for incremental progress on balance had yielded results too slowly.

18. The Bank mission of July 1992 reviewed the status of R&R implementation and proposeda number of actions to be taken by the Borrower in light of the Independent Review report and theprevailing situation. The mission's findings and the Bank's Management response were discussedby the Bank's Board during their meeting of October 23, 1992. The Board agreed with theManagement's assessment and established 19 benchmarks relating to R&R, including one that

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addressed the CAF issue specifically. The Board requested that by March 31, 1993, GOG should:(i) conduct a socioeconomic survey of CAFs and formulate a final policy package, (ii) identify theCAFs who had been made landless, marginal farmers, and those who had lost more than 25% oftheir land, and (iii) announce an interim policy for small and marginal farmers whose land hadalready been acquired. Though these benchmarks were established after the closure of the WaterDelivery and Drainage project, the extent of compliance with them would have an effect on theDam and Power project which was still continuing at that time.

19. In September 1992, shortly after the return of the Bank review mission, GOG produced adocument in which the number of CAFs was reassessed at 169,500, of whom only 24,000 wouldbe losing more than 25% of their land (with most of these actually benefitting from the irrigation).At the same time, GOG issued an interim R&R policy for CAFs stipulating that: (i) compensationfor land lost would be based on market value determined by Land Purchase Committees, and (ii)CAFs who had lost more than 50% of their land and were left with less than 1.0 ha in thecommand area would be allocated 0.5 ha in addition to compensation. On August 5, 1993, theBorrower indicated that it was implementing a socioeconomic survey of CAFs and that a finalpolicy would be based on the findings of the survey. The Borrower has recently informed theBank that the survey of CAFs had been completed and that the results together with a final policywould be issued shortly.

Project Achievements

20. The project achieved nearly all objectives regarding construction of the main canal andstructures, setting standards that are now a model for other projects in India. Other SAR targetswere met to varying degrees: 88% on the construction of main canal head regulator and the gatedcross regulators; 35% on seven major hydraulic structures; and 60% on branch canals. The twelveirrigation and drainage blocks were not constructed because design worzk was delayed and SSNNLthen rejected all bids on account of high cost. Terms of Reference (TORs) were finalized and bidsinvited for the design, installation and commissioning of a remote control and monitoring systemfor canal operation down to the 8.5 m3/s level. A three-volume Plan of Operation and Maintenance(POM) for the canal system and headworks was prepared.

21. Notwithstanding some shortfalls in SAR targets, the project set excellent engineering,construction, and management standards by introducing many innovative features. Highlightsinclude the mechanization of canal lining and construction of major structures; guidelines for thedesign of distribution systems using the principles of rotational water supply (RWS); acomprehensive operation and maintenance (O&M) manual; development and implementation of acomprehensive computerized management information system (MIS); use of a Board ofConsultants to review the plans, drawings and construction techniques of major structures; and amaster plan for a state-of-the art remote control and monitoring system, using a fiber opticscommunication technology, to operate the canal system.

22. At appraisal the total project cost up to Orsang Aqueduct, including physical and pricecontingencies, was estimated at Rs. 6,251 million (US$ 520.9 M). The three-year time slice wasto be Rs 3,059 M (USS 254.86 M), or about 50% of total cost. At project closure, the revisedestimate for total costs had risen to about Rs. 13,720 million, and the Borrower had spent Rs.6,613.35 M (USS 289.60 M) or 48% of the total revised cost for completing about 60% of allphysical targets for the three-year time slice. Thus, price escalation was about 100% over theestimated total cost at appraisal, but this escalation was offset by the larger than expecteddevaluation of the Rupee against the US Dollar.

23. The SDR 149.5 M Credit disbursed slowly during the first four years. During the last twoyears, however, the sum of SDR 101.5 M, representing 70% of the revised Credit amount, wasdisbursed. Due to the Rupee's devaluation against the US Dollar, SDR 4.8 M were canceled from

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the Credit in 1992. At project closure, the revised Credit amount of SDR 144.7 M (USS 196.6 Mequivalent) was fully disbursed. If the same level of funding could be maintained after Creditclosure, the main canal as well as distribution works up to Orsang (km 49 of main canal) could becompleted and 30,000 ha could be ready for irrigation by July 1, 1995, the scheduled date for therelease of water from Sardar Sarovar Dam into the main canal.

Revised Economic Analysis

24. The revised analysis covers the project's irrigation, power and the domestic, municipal andindustrial (D,M&I) components. It reflects changes in quantities, prices and phasing since 1984,and pays particular attention to environmental costs and benefits (such as estuary changes, fisheriescosts and benefits, fuelwood, and wildlife) which might have been underestimated or omitted inthe original analysis. The revised analysis has an Economic Rate of Return (ERR) of 12% --marginally lower than the 13% in the original SAR, but within the acceptable range for a project ofthis type. The scale of benefits is large relative to any feasible alternatives, with substantialmultiplier effects as well. Had the SSP been conceived as a power project alone, the ERR wouldhave been 14%. The command area alone exhibits a somewhat marginal ERR. If expenditure todate is treated as a sunk cost, the ERR is 17%.2

25. The economic analysis indicates that power generation produces greater economic benefitsthan irrigation and that extensive irrigation -- while raising equity and social benefits - yields amarginal ERR. Conversely, the benefits from domestic and industrial water are likely to be moresubstantial than anticipated initially.

Sustainability

26. As construction standards were good to excellent during implementation, the irrigationinfrastructure created so far should provide long and reliable service. If infrastructure quality ismaintained, project sustainability appears guaranteed for 40 to 50 years. However, even if fundingconstraints force the adoption of lower construction standards, ultimate sustainability dependsheavily on ensuring adequate O&M for the irrigation and drainage systems. Though India's trackrecord on O&M is not good, the exceptional standard of excellence developed by SSNNL may beable to set a new trend in O&M, for this project.

27. The detailed EIA that is now underway will further improve the project's prospects forenvironmental sustainability. Waterlogging and salinity will be mitigated through drainage andconjunctive use, and is not expected to develop on a large scale. The Borrower's EnvironmentalManagement Plan should prevent the degradation observed in some other projects.

28. To minimize the risk of exceeding NWDT water allocations in later years, the Borrowershould monitor water utilization closely and consider limiting the size of the command area initiallyto the more profitable branches and shift to more efficient irrigation methods such as sprinkler anddrip irrigation thereafter. Final size of the command area could then be based on actual usages andefficiencies.3 This approach would substantially improve the project's economic viability andlong-term sustainability.

2 lIh Borrower notes that SSP wu designed as a muiti-pupose project, therefore, a separate onOmicanalysis of the power nd irrigSation components is not wrantod.

3 In line with footnote (1), the Borrower empauizes that there is no question of reducing the commanarea.

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Bank Performance

29. Overall, the Bank's performance was excellent in the engineering fields, where highstandards of construction were developed and implemented. In the R&R, environmental andhealth fields, however, Bank performance was mixed or poor particularly in the early stages. Thisinitial wealness continued during project implementation, and the Bank iniially failed to take themeasures required to assist the Borrower in preparing an environmental management plan for thecommand area. When it finally did so in 1992, it was too late to act within the framework of thisprojecL

30. The Banlk demonstrated its willingness to respond to outside criticism when it appointed anIndependent Review of the project. This unprecedented decision has had positive repercussions inthe way business is conducted within the Bank particularly with regard to monitoring andevaluation of R&R and environmental activities and also on the Bank's policy on disclosure ofinformation. Although the findings and recommendations of the Independent Review were notfully accepted by either the Bank or the Borrower, both recognized a number of shortcomings intheir actions and did their best to address problems that had been identified.

31. Throughout the project cycle from preparation to completion, the Bank made a largecommitment of staff. Project appraisal required 191 staff weeks and supervision 269 staff weeks,i.e., an average of 38.4 staff weeks per year for portfolio management This latter figure may beunderestimated in view of the large staff input that was required following the publication of theIndependent Review report and the various actions to monitor the implementation of the bench-marks after project closure. With this high level of staff input, the Bank has had a positive impacton project formulation, planning and implementation in many fields such as hydrology andhydraulics, structural designs, irrigation and drainage system design, institutional planning, costestimates, R&R, environment and health. However, it should be noted that throughout the projectcycle, Bank missions showed some bias, largely shared by the Borrower as well, toward theengineering aspects of the project To be sure, many supervision missions included an environ-mentalist and eventually both R&R and malaria specialists. However, their recommendationsnever achieved as much impact as those of the engineers.4

32. In retrospect, the Bank may have been over-ambitious in attempting to finance a project ofsuch scope and complexity. In its eagerness to proceed quickly with this large project, the Bankconsidered the project in its entirety, as it resulted from the NDWIr, without making a sufficientlycritical review of shorter term viable sub-projects. The Bank was unrealistic in thinking that thepartial completion of Phase I could be accomplished in only three years. The overall job was largeand complex, not only by Indian standards, but by any standards.5

Borrower' Performance

33. Overall, the Borrower's performance was satisfactory in the engineering and irrigationworks, but much less satisfactory in implementation of the R&R of CAFs, environmental and

4 The Borrower observes that the last three sentences of this para give a distorted image of enviromentaland R&R implementation when compared to progress in the engineering aspects of the project.

5 The Borovwer indicat the Bank bad no ason to consider shortwer term viable projects since the NWDTbd reviewed all project development optioos before giving its rnal decsions.

6 In actual facts, 001 is the Borrower, Gujat is the impkmenting State nd SSNNL ir the implementingAgency. Rather than to differentiate the roles played by eaco entity, the generic term 'Borrower' wuusd io this Sectio.

yi.

health aspects of the project. With regard to these latter project components, however, theBorrower has argued that it can not be accused of doing an improper job since these aspects werenot adequately described in the original project and legal documents. Throughout the project cycle,the Borrower was over-optimistic about its capacity to implement the project within the proposedtime frame. Even after the two-year delay due to Indian environmental clearance and the otherimplementation impediments, the Borrower was stiWl optimistic about completing the whole projectby the year 2000. At present, the Borrower may have revised its optimism in light of currentfinancial constraints, and may realize that the completion of this large project will take many moreyears. During project implementation, the Borrower took a number of positive decisions whichhelped project implementation. Among the most noteworthy was the creation of the SardarSarovar Narmada Nigam, a public corporation with considerable flexibility in dealing withadministrative, personnel and financial matters.

34. Throughout project implementation, the Borrower was responsive to the Bank'ssuggestions regarding the engineering aspects of the project and at a later date to those relating tothe environmental, R&R and health aspects of the project. When the Independent Review missionwas in the field, the Borrower did its utmost to satisfy its demands in all respects and with genuineopenness. The Borrower was disappointed by the Independent Review report and, althoughpublicly muted in its response, felt that this report was biased. Nevertheless, the Borrowerresponded positively to the Independent Review's findings and recommendations by recognizingmany shortcomings and doing its best to meet the benchmarks set by the Board of Directors.However, at the end of March 1993 the Borrower requested the cancellation of the remaining Damand Power Loan.

Lessons Learned

A General Lessons

35. The fit lesson is the need to set realistic implementation schedules: not according to themost desirable implementation pace but according to the most probable pace - one that assumesday-to-day difficulties and innumerable physical, administrative and financial setbacks. The Bankappraisal team was unrealistic in estimating the Borrower's ability to complete the project workswithin three years. The Borrower was also unrealistic in agreeing to such a tight work schedule,lnowing the likelihood of frequent administrative and financial difficulties. In addition, in adrought-prone area like Gujarat, the occurrence of severe droughts usually upsets any pre-established implementation plans. The appraisal team did not make sufficient allowance forpredictable delays in the finalization of designs, procurement, non-performing contractors, re-bidding, land acquisition, and introduction of new technologies.

36. The second lesson is one that applies to many irrigation and drainage projects: the need tocomplete the final designs for all major structures and distribution networks as early as possible inthe project cycle so the irrigation system can be substantially constructed by the time the dam iscompleted and water becomes available. In the case of this project, the designs of some majorstructures, as well as those of the irrigation and drainage blocks, were not ready until several yearsafter project inception. Due to procurement and other delays, the basic field irrigation systemswere not started during project implementation and therefore only a marginal area will be ready forirrigation. The failure to prioritize designs and construction of lower level irrigation systems willhave a negative impact on the economic returns of the project's irrigation component

37. The tird.j though not a direct lesson from project implementation (since irrigation has notyet started), relates to the need to be cautious in the design of extensive irrigation schemes, becauseof their special managerial requirements and marginal ERR. Tbough the design of SSP reflects adeliberate decision aimed at increasing equity and meeting widespread needs for domestic water,higher retums would probably be achieved through the use of more intensive irrigation within a

ix

smaller command area. As there is still time to make this adjustment, a gradual approach todeveloping the command area would be wise, given the uncertainties about ultimate efficiencylevels, the unknowns about upstream storage and utilization and the fact that the economics do notrequire rapid establishment of the full command area. Fifteen years after the project was originallyconceived, a mid-term review of the initial assumptions should be conducted and adjustments madeto the present project design, consistent with current Bank practice.7 Such adjustments shouldintegrate the findings of the ongoing environmental impact assessment which is due in December1994.

38. The fourth lesson concerns the need for the Bank to rely on the Borrower's commitmentand capacity for effective implementation of the R&R and environmental components of majorprojects. Assessment of these aspects should be given the highest attention during appraisal. Noproject should go to the Board unless the Bank is satisfied beforehand that the Borrower has fullydeveloped sound strategies and policies for dealing with key issues like R&R and environment.The implementation of the SSP projects has clearly demonstrated the Bank's limited ability to makeup for the wealnesses of the Borrower in these fields in spite of a supervision input about tentimes the Bank average.

B. Lessons on Environment

39. The fLk lesson relates to the need for ensuring that all the Government clearances havebeen obtained before negotiations, particularly in such sensitive areas as environmenL The lack ofenvironmental clearance by the MOEF led to a two-year delay in project implementation. Thissituation has damaged the project's image considerably, although it has not affected the possibilityof ameliorative action in the future.

40. The eond lesson relates to the need for projects with environmental ramifications to havea proper Environmental Impact Assessment as part of the normal feasibility studies, and to ensurethat corresponding mitigative measures are adequately integrated in the project design. One of themajor criticisms that emerged from the Independent Review Report was that the project wasapproved without a proper Environmental Impact Assessment for the command area. Undertakingan EIA, as required under the present more rigorous Bank guidelines, and including a separateenvironmental component in the project's design are the best ways of ensuring that the requisifeenvironmental mitigating measyres will be implemented in an adequate and timely manner.

41. The ihid lesson relates to the need for the Bank to use highly qualified environmentalspecialists to supervise the environmental component and, as needed, to provide guidance to theBorrower in the resolution of special environmental issues.

42. The fQUr lesson relates to the need for a separate health component in large irrigation anddrainage projects. Though this aspect was covered to some extent in the SAR and legaldocuments, it is essential for the Bank and the Borrower to consider the inclusion of a separatehealth component and employ qualified health specialists to supervise, monitor and evaluate itsimplementation.

C. Lessons on Canal-Affected Families

43. The flmx lesson is that projects involving R&R require considerable preparatory effort,including affected persons' involvement, a sound policy base, adequate budgeting and financing,good R&R component design, precise and detailed legal document conditionality and consistently

7 As indicted previously, the Borrower reiteaes its position that it would not be posible to reduce thecommand sa as al upects mentioned in the PCR have been considezd while fusing its size.

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good supervision to increase the chances of success. Particular attention should be given to theapplication of the prevailing Bank guidelines during preparation, appraisal and negotiatons of largemulti-purpose projects (and others). If the guidelines change during project implementation andsupervision, the Bank should approach the Borrower to see in what way the new guidelines can beapplied.

44. The second lesson is that canal-affected persons need to be adequately compensated andprovided with the additional resources for purchasing land to replace what they have lost Specialattention should be given to the impacts of canals, drains or roads on the viability of farm holdings.Finally, alternative solutions such as land consolidation and field boundary realignment should beconsidered, at least in a pilot form, to minimize land acquisition and facilitate access of holdings toirrigation, drainage and roads.

45. The thir lesson is that there are some differences between canal-affected and reservoir-affected persons. In the canal-affected case, persons are usually partially affected and villagesoften not at aL. whereas in the reservoir-affected case, persons and villages are fully affected andmust be relocated often in a completely different environment and habitaL Though the basicobjectives and principles should remain the same in each case, the substance of such policies maydiffer.

I

PROJECT COMPLETION REPORT

INDIA

NARMADA RIVER DEVELOPMENT - GUJARATWATER DELIVERY AND DRAINAGE PROJECT

(Credit 1553-IN)

PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity

Project Name : Narmada (Gujarat) Water Delivery and Drainage ProjectCredit NoiLoan.No. : Credit 1553-INRVP Unit : South Asia RegionCountry : IndiaState : GujaratSector : AgricultureSubsector : Irrigation

2. Background

2.1 When this project was apprised in August 1984, India had a population of over 700 M,growing at an annual rate of about 2.4%. Although more than two-thirds of the labor force wasemployed in agriculture, which accounted for about 40% of gross domestic product (GDP),agricultural growth averaged only a sluggish 2.3% a year. Accordingly, agricultural growth andthe expansion of irrigation, along with the development of energy and infrastructure facilities toraise economic growth and alleviate poverty, became the comerstones of India's developmentstrategy, as reflected in the nation's Five Year Economic Development Plans. More specificdevelopment objectives flowing from this strategy included investment in irrigation systems,storage reservoirs, extension and on-farm developmenL Special emphasis was put on making thewater conveyance systems more efficient, to ensure reliable delivery to fields, and on strengtheningthe ability of water management systems to respond to water demand in the command areas.Finally, investment in the development of large river basins was considered essential for theexpansion of irrigation.

2.2 Today, almost ten years later, India's population has increased to about 870 M and theannual rate of population growth has decreased to 2.0%. Agriculture's share in GDP has fallen toabout 30%, while agricultural growth has risen to 3.2 % per year. However, per capita foodproduction is still sluggish at 1.6 %, and India's top development priorities continue to be toagriculture, irrigation, rural development and energy. As indicated in the India Irrigation SectorReview (Report No. 9518-IN) of December 20, 1991, however, emphasis within the irrigationsub-sector has shifted from the development of new and particularly large schemes, to thecompletion and rehabilitation of existing schemes. There is also a new trend toward greaterinvolvement of beneficiaries in irrigation schemes through the privatization of groundwater and, toa lesser extent, of the lower sections of irrigation distribution networks.

2.3 The state of Gujarat covers an area of 19.6 M ha and, at Appraisal, had a population ofabout 36 M that was growing at an annual rate of 2.5%. Although Gujarat was relativelyurbanized and had a large manufacturing sector, its economy was also highly influenced byagriculture. In a normal rainfall year, agriculture contributed some 33-35% of the state's incomeand employed about 60% of its labor force. With many regions experiencing low and highlyvariable rainfall and with only about 18-20% of the cultivated area under irrigation, Gujarat hadlong been susceptible to drought and famines. For example, from 1900 to project Appraisal(1983/84), the state suffered at least 25 severe food shortages and water scarcity due to drought.

2

In 1983, drought affected some 30 million people with serious economic, social and healthimplications. People and livestock often depended on water trucked in by the state, and manydiseases endemic to the rural population were traceable to malnutrition and unsafe drinking water.In addition, the economic costs of dealing with these droughts, constituted an increasing drain onGujarat's budget

2.4 The combined demand for industrial, irrigation, livestock, ruraL and municipal water inGujarat, one of India's fastest-growing industrial states, was simply outstripping groundwaterresources and existing reservoirs. At the same time, investments in irrigation began to decline asolder projects were coming to completion, and new areas for agricultural development - except forthe vast, unexploited areas of the Narmada Basin - were becoming scarce. However, even as thepopulation continued to grow, the share of labor force employed in agriculture was declining, thusallowing some consolidation of holdings and the release of some land for resettlement activities.

2.5 At Appraisal, the Government of Gujarat (GOG) estimated that it would exhaust thepotential for all further surface water irrigation schemes, with the exception of the Narmada Basin,within the next ten years or so. Thereafter, the development of the Narmada Basin would becomethe only feasible means of simultaneously assuring sustainable agricultural growth, and meetingthe pressing domestic, municipal and industrial needs for water. Consequently, GOG accordedhigh priority to irrigation development programs, including construction of storage reservoirsthrough the implementation of major and medium projects, in line with the priorities fixed by GOI.

2.6 It was against this background that GOG embarked upon the planning of the NannadaRiver Development (NRD), one of the most ambitious water resources development project everattempted. It accorded the highest priority to beginning with the Sardar Sarovar Projects (SSP)which comprised the construction of the Sardar Sarovar dam, power complex and canal network.In view of the immensity and complexity of SSP, the Government of India (GOI) sought BankGroup assistance in financing the first stage of SSP. These projects were to be among the first in aseries of some 30 major projects planned to develop the Narmada Basin. Given the projects'potential for benefitting the basin region and the entire nation, the Bank agreed to financesimultaneously two key components of SSP:

a. an IBRD LoanIDA Credit of USS 300 M towards the cost of constructing the damand power complex; and

b. an IDA Credit of USS lS0 M towards the cost of constructing the canal network inthe 3 year time-slice.

3. Project Objecdves and Description

3.1 The Narmada (Gujarat) Water Delivery and Drainage Project (Credit 1553-IN), Phase I isinterdependent with the Narmada (Gujarat) Dam and Power Project (Credit 1552-IN/Loan 2497-IN). The overall long-term objectives of these projects, together with the subsequent phases of theWater Delivery and Drainage project up to the Rajasthan border, are to create a modernmultipurpose agricultwal and power production system to benefit the growing rural population andassist the economic growth of Gujarat as a whole. More precisely, the objectives of the NarmadaSardar Sarovar Projects are to provide storage and regulation of Narmada River flows for:

L establishing an efficient, reliable, and equitable supply of irrigation water, coupledwith conjunctive use of groundwater and effective drainage services, over about1.79 M ha of command area in Gujarat, (ii) supplying municipal, industrial anddomestic water to a population of about 30 M people in Gujarat, and (iii) creatingthe potential to irrigate about 70,000 ha and provide domestic, municipal andindustrial water supplies in Rajasthan; and

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b. establishing an efficient and reliable power generation capacity of 1,450 MWthrough the Riverbed Powerhouse (1,200 MW) and the Canal Head Powerhouse(250 MW), and (ii) distributing hydro-electric energy, including peaking capacity,to the western region power grid serving the States of Gujarat, Madhya Pradeshand Maharashtra.

3.2 The Water Delivery and Drainage Project (Cr.1553-IN) was conceived as a systemencompassing one main canal and three major branch canals. Its objectives were to: (i) finance athree-year time slice of the Phase I water delivery and drainage project through partialimplementation of irrigation infrastructure between the Main Canal head and the Mahi River, and(ii) establish the institutional framework required for project implementation and operation. Thedetailed project components as per the DCA, Schedule 2 are:

Part [Conveyance, Delivery and Conveyance Systems),

(i) Lining of the section of the Narmada Main Canal between km 9 and 21.4 [fullcompletion in time slice];

(ii) Partial construction of the section of the Narmada Main Canal between km 21.4 and143.7 including earthworks, lining and related structures [55% completion in timeslice];

(iii) Partial construction of the Main Canal head regulator and of about ten gated cross-regulators to be located between the Narmada Main Canal head and Km 143.7t70% completion in time slice];

(iv) Partial construction of seven major cross drainage structures to be located on theHeran, Orsang, Deo, Karad, Meshri, Kun and Mahi Rivers [55% completion intime slice];

(v) Partial construction of the Miyagam Branch Canal between Ikm 0 and 72 [70%completion in time slice];

(vi) Partial construction of the Por, Khundela, Untiya, Amleshwar, Sinor, Luwara,Dora, Mandwa, Jamnbusar, Sakarda, and Ranoli Branch Canals [40% completion intime slice];

(vii) Partial construction of the Vadodara Branch Canal between kan 0.0 and 102 [35%completion in time slice];

(viii) Partial construction of about twelve distribution and drainage system developmentblocks (blocks 6A-1, 6A-2, 6A-3, 6A-4, 6b,6C, 7C, 9A-1, 9B-1, 9B-2, 9C-1 and9C-2) located in the command area between the Sardar Sarovar Dam and the MahiRiver, including conveyance channels, surface drains and service roads within eachblock [25% completion in time slice]2;

Ihe wording In between bracketa [..J is from the SAR pan. 5.02 and 5.03 andlor from the AgeedMinutes of Negotiations pwa. 6.

2 Mhe twelve development blodus reprent a cultivable commad Aea (CCA) of 96,900 he out of a totaof fity-two blocks of 448,190 ha CCA cAded between the Main Canal hed and the Mahi River. 25%completion repesents about 24,100 ha to be implemented during the project period.

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(ix) Partial construction of the Distributaries to service each of the twelve distributionand drainage development blocks under Part A (viii) of the Project [45% completionin time slice].

part B. [Training]

(i) Implementation of a suitable training program for the project staff in: (a)environmental sciences and related mitigating measures; (b) field survey, layout,design and estimating activities for block development of minor irrigation anddrainage networks; and (c) operation and maintenance of the facilities under theProject, including computer based centralized data information systems, andcommunication and remote control operation and maintenance systems;

(ii) Establishment of a training facility for operation and maintenance, includingconstruction of the required buildings and provision of training equipment.

part r. Provision of technical assistance for.

(i) the overall design, construction and quality control of the works under Part A of theProject, including computer based centralized data and information systems;

(ii) the planning and design of a system for the operation and maintenance of the waterdelivery and drainage project components of the Sardar Sarovar Project, includingplans and studies needed for annual, seasonal and daily operation and technicalevaluations to support design requirements; and

(iii) the selection, design and installation of the communication and centralizedcomputer-based remote control systems for the operation and maintenance of thewater delivery and drainage project components of the Sardar Sarovar Project.

3.3 As per the SAR (para. 3.27 and Table 1) the preparation of a work plan including studiesand investigations of the project's effects on the environment and project affected persons was tobe carried out and fmanced directly by the Borrower with the Bank's technical assistance. Inparticular, Table I specified that the following studies, among others, were to be carried by NPG:

(i) Rehabilitation and resettlement plan for the Sardar Sarovar Reservoir and otheroustees in the command (emphasis added);

(ii) Detailed environmental assessment and necessary actions for protective measuresfor the command area; and

(iii) Afforestation plan for the command area, including special use zones.

3.4 In addition to the construction of the twelve blocks mentioned in Part A (viii), partialconstruction of seven additional distribution and drainage development blocks (CCA = 52,600 ha)in the initial 49 Ikm reach of Narmada Main Canal up to Orsang Aqueduct were also included in theproject scope through the September 29, 1991 amendment of Development Credit Agreement1553-IN.

4 . Project Area

4.1 The irrigation scheme starts in the lower south-eastem part of the state where the SardarSarovar Dam is located across the Narmada River, about 150 km upstream of the Gulf of

5

Khambat. The main canal takes off at a right angle from the Narmada River and runs northwardsover 460 km until it reaches the border with Rajasthan. The first major branch canal will irrigatethe fertile plains of Vadodara where the annual rainfall varies between 700 and 800 mm. Thebranch canals of this region will also provide water to the coastal lands along the Gulf of Khambat,known for their salinity. The second major branch canal will take water to the central part of theSaurashtra Peninsula through a series of lifts. The Saurashtra Branch Canal will then continuetoward the Arabian Sea to provide domestic, municipal and industrial water to towns, industrialcenters and villages through a system of pipe lines. The Saurashtra Peninsula is semi-arid, withannual rainfalls ranging from 400 to 600 mm, and has relatively fertile soils except in the low landsalong the Gulf of Khambat. The third major branch canal will lead the Narmada waters over anarrow strip of land located between the Rann of Kutch (desert with saline soils) and the Gulf ofKutch. This region is known for its arid climate, with rainfall around 200 mm per year, and itsrelatively poor soils. The main canal will then continue in northern Gujarat toward the Rajasthanborder, across patches of fertile and saline soils. The climate is also arid, with an annual rainfallaround 200 mm. (See Map IBRD 17940.)

5. Project Design and Organization

Origins of Proiect Design - The Narmada Water Dispute Tribunal

5.1 The project's design and organization were affected by various political and social as wellas technical considerations. In 1965, GOI appointed a committee to prepare a master plan for thedevelopment of the Narmada Basin, which included sections of four Indian states: Gujarat,Madhya Pradesh (MP), Maharashtra, and Rajasthan. When the riparian states failed to accept theCommission's recommendations, GOI -- in accordance with the provisions of the "Inter-StateWater Dispute Act of 1956" -- appointed the Narmada Water Dispute Tribunal (NWDT) toadjudicate. Following ten years of deliberations, the NWDT gave its final award in December1979. According to the data then available, the annual 75% dependable quantum of water availablefor the project was estimated at 28 million acre feet (MAF), of which approximately two-thirds(18.25 MAF, or 22,500 MxM3) was allocated to MP, and most of the remainder (9.0 MAF, or1 1,100 Mm3) to Gujarat. Rajasthan and Maharashtra were allocated minor amounts (0.5 MAF, or600 Mm3 and 0.25 MAF, or 300 Mm3. respectively). The NWDT also issued orders regardingthe major characteristics of the projects to be developed, including:

a. proportionate sharing of water in surplus and deficit years;

b. elevation of the full reservoir level (FRL) of the Sardar Sarovar Dam;

c. elevation of the main canal at the Rajasthan boarder,

d. sharing of power benefits from Sardar Sarovar among Gujarat, MP andMaharashtra;

e. resettlement and rehabilitation of the people living in the reservoir,

f. concurrent construction of the Narmada Sagar Dam in MP;

g. regulated releases from the Narmada Sagar Dam in MP;

h. sharing of costs for the Sardar Sarovar and Narmada Sagar dams, Sardar Sarovarriverbed and canalhead hydropower plants, and Narmada main canal; and

i. setting up of the NarTnada Control Authority (NCA) to coordinate the implemen-tation of the NWDT award.

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5.2 It apepars from the Project design that Gujarat's &f objective was to ensure the projectwould benefit the maximum number of people by spreading water over the largest command areapossible. This strategy, which gave higher priority to the project's equity and social aspects thanto economic considerations, was accepted by the Bank as consistent with the goal of reducingpoverty. It was also consistent with India's long tradition of building irrigation systems primarilyfor famine relief, rather than for productive and commercial purposes.

5.3 Gujarat's second objective appears to have been its desire to be awarded the largest amountof water possible since its share of the Narmada Basin is relatively small when compared to that ofMadhya Pradesh. Gujarat's strategy, therefore, appears to have been to present the largest multi-purpose project possible including a very large command area of 1.79 million hectares net, anambitious water supply scheme for domestic, municipal and industrial uses for 30 million people,and a power generation component of 1,450 Megawatts. In addition, to satisfy the waterrequirements of such a large project, a second large reservoir, known as the Narrnada Sagar Dam,was to be constructed simultaneously upstream in MP. The concept of a large multi-purposeproject prevailed during the NWDT proceedings, and was finally accepted after the distribution ofwater, costs and benefits satisfied the party states.

EProi Preplaration and Apprabial

5.4 When the NWDT finally rendered its decision, the major characteristics of project designhad already been deternined directly or indirectly by the NWDT, or were part of the basicassumptions. These included such matters as water allocation, height and storage capacity of theSardar Sarovar Dam, power generation, length and elevation of the main canal, expected size of thecommand area, and number of beneficiaries. These questions had already been settled through theconsiderable discussions and technical work (for example, on various dam sizes, dam locations,and water usage) that had been carried out during the NWDT's ten-year deliberations.

5.5 Project preparation took four years from project identification in 1979 to preappraisal in1983, well after the NWDT decision. The Narmada Planning Group (NPG) and the Bank'sappraisal team did not attempt to change the basic concept, scope and design of the project. Inretrospect, smaller viable sub-projects within the framework of the NWDT award might have beenconsidered at this stage. For instance, financing the Sardar Sarovar Dam for power generation onlyor the funding of a smaller command area which initially did not rely on the construction of theNarmada Sagar dam upstream. Because the appraisal team took for granted the concept of waterspreading which prevailed at that time for social reasons, it did not consider the more intensiveirrigation options which were known to yield higher rates of return. Critics have often raised theissue of options. Alternative options such as constructing a large number of small reservoirs or togive more emphasis to groundwater development - to minimize the impact on affected persons andthe environment - have not been comparable in terms of scale of benefits and generally have beenvery weak technically and economically.3 In addition, there does not appear to be any suitablealtemative especially for the D, M&I water in northern part of GujaraL

5.6 The NPG comprised a multi-disciplinary team of national experts to which UNDP and theBank provided extensive technical and financial assistance. Emphasis was placed on studies forPhase I (450,000 ha up to Mahi) which were carried out at feasibility level, while those of thesubsequent Phases (1.4 million ha up to the Rajasthan boarder) were carried out at reconnaissance

3 lbe Bonowe indicates th the Bank had no reao to consider sborter Wmn viable projects since theNWD bad reviewed al project development options before giving its final decision. In addition,priect auLborities had stU;ed cropping patterns aN water requimments to malch the NWDT award aNd,terefome, there wa no reaon to consider a smaller command are.

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stage. The Narmada Development Department (NDD), in charge of project implementation, hadthe task of preparing the detailed designs and cost estimates of the major structures, in associationwith the Central Water Commission, such as the Sardar Sarovar Dam and its powerhouse, themain canal and its appurtenant structures, the branch canals and the distribution systems. Anotherimportant task for NPG, to which the Bank staff contributed actively, was the analysis of thefinancial and economic benefits of the project. In addition to this enormous task, both the NPGand the NDD devoted some time to the study of environmental and resettlement concems.

5.7 Appraisal was carried out in 17 months, from March 1983 to August 1984, by severalBank missions. The protracted period of appraisal was due to the scope and complexity of thetwin Canal and Dam Projects, and also to the need to reach agreement on the treatment of peopleaffected by the Dam Project Negotiations took place in November 1984 and Board approval inMarch 1985. The SAR and its two Supplementary Data Volumes give a detailed and exhaustivedescription of the Sardar Sarovar Project as a whole, and of the 3-year time-slice of the WaterDelivery and Drainage project in particular. There are also large quantities of unpublished back-upmaterial. The project documents give a good description of the various components eligible forfinancing, with particular emphasis on the irrigation and drainage aspects, as well as theinstitutional and training requirements, for implementing this large and innovative project. TheSAR also addressed the risk of water-borne diseases due to the project. However, by the timeappraisal was completed, it became apparent that more detailed studies would have to be preparedduring project implementation by the NPG. The SAR, in its Table 1, gives a list of additionalpriority studies which relate to hydrology, groundwater, soils, crop water requirements, drainagerequirements, agricultural production, management information systems, and also the modeling ofthe Narmada River flows under various development options and the modeling of groundwaterabstraction. Among these studies, the most important was the preparation of a resettlement andrehabilitation (R&R) plan for the persons affected within the command area. The list also indicatedthe need to prepare: (i) a detailed Environmental Impact Assessment (EA) and necessary actions forprotective measures for the command area; and (ii) an afforestation plan for the command area.The project concept and design were well understood by the Borrower.

5.8 The legal documents also gave a thorough description of the project and componentseligible for financing. The covenants covered the usual conditionalities, including availability offunds, timely implementation even after Credit closure, adequate staffing, proper O&M, need forwater charges, training of staff, and maintenance of the NPG and other inter-state institutions.Among the 23 covenants of the Development Credit Agreement (DCA), one required that land forcanal construction and structures should be acquired in a timely manner, and another requiredGOG to undertake all measures considered necessary to minimize the risk of malaria, filaria,schistosomiasis and other water-related diseases. However, no covenants covered the preparationof an R&R plan for canal oustees, or a command area EA. The Legal Agreements spoke only of asuitable training program in environmental sciences and mitigating measures.

Board Presentation

5.9 On March 7, 1985 Bank staff presented the Water Delivery and Drainage Project inconjunction with the Dam and Power Project to the Board, referring to them as one of the largestmulti-purpose schemes ever planned and designed as one unit, and making special note of theR&R program for Sardar Sarovar Dam and Reservoir. They argued that the objectives andprinciples embodied in this R&R program were a significant improvement on standard Indianpractice: (i) the program's intended provision of land and employment was superior to the practiceof cash compensation; (ii) its emphasis on resettling communities au communities wouldaccelerate oustees' rehabilitation; and (iii) its planned intensive follow-up M&E by independentagencies would set the standard for similar schemes in the future. Staff pointed out how well thetwo projects supported the Bank's lending strategy for India and how their innovative concepts in

8

design, construction, and management practices would serve to catalyze progress in these areas aswell.

5.10 Four Executive Directors spoke and raised issues, though each supported the proposals.Their main issues related to project size, the prospects for Bank involvement in future Narmadacatchment projects, and social and environmental effects.

5.11 Regarding Wtsize, one Director asked why the Bank had divided an obviously unifiedinvestment into two projects? Was it because of the customary limit of US$300 M on Bankloans/credits? Management's response assured the Board that the preference for two projects hadnothing to do with such limits which were in any case, flexible. A single project would havesimplified Board documentation, but would have complicated implementation, which involveddifferent agencies. Staff added that a further consideration in the choice of two projects was thedistribution of benefits among the states. The set of beneficiary- states for power differed fromthat for irrigation.

5.12 Regarding future Narmada Basin Development, a question was asked whether the Bankwas considering additional projects, given the large size of these first two. Staff responded byreferring to one large and two smaller dams then under appraisal in Madhya Pradesh; only theconstruction of the large Narmada Sagar reservoir in Madhya Pradesh upstream would optimize thepower benefits of Sardar Sarovar. In addition, the Bank was considering involvements in powertransmission and in the canal network.

5.13 Regarding social and environmental effects, a Director queried: (i) whether there were stillany ill-defined areas of responsibility among states and GOI for implementing and monitoringresettlement that could cause delays in resolving problems; and (ii) whether the relatively undefinedenvironmental studies and potential problems arising made future consideration and implementationof study recommendations too uncertain. He also asked if the Bank's semi-annual reports onproject status and execution could note the state of progress with these aspects. Another Directorsupported this sentiment to keep the Board informed. Yet another Director, voicing similarconcerns about social and environmental effects, expressed concern that the Bank was payinginsufficient attention to issues like resettlement at the earlier stages of project preparation.

5.14 Management responded that each state had established a resettlement wing, staffed withresponsible and experienced officers, to conduct the program. The states were also expected tocontract with independent research institutions that would monitor and evaluate its implementation.Furthermore, the Central Government and the interstate Narmada Control Authority wouldcoordinate overall monitoring and evaluation of the resettlement plan. Management also indicatedthat although a full environmental impact assessment had not been completed, a comprehensivefirst-stage assessment had been conducted by the University of Baroda and then examined bymembers of the Bank appraisal team. That study had covered public health, flora and fauna,fisheries, wildlife and archeology and had determined that there were no endangered species in thearea. Management said that by the end of the calendar year, each state govermment was expected toprepare an environmental work program, which would be submitted to the Bank for approval.Under covenants in the Loan/Credit Agreements, these programs would include training forenvironmental staff. Sufficient time (15-18 months) would be available before the commencementof construction to remedy any defects in the environmental work program.

5.15 Management also promised to cover the social and environmental aspects explicitly in thesemi-annual reports and to keep the Board informed of progress - especially if difficulties in needof remedy emerged'. Staff expressed the view that institutional arrangements and responsibilities

4 Reference to this promise was found in the verbatim trmnscript of the March 7. 1985 Board meeting, butwa not specifically indicated in the Summary of Board Discussions (SD85-10) of March 21, 1985)

9

for resettlement were firm enough at that pointL They admitted that there was no full environmentalimpact assessment, but they felt that legal covenants covered these aspects adequately. In thisview, there was sufficient time to complete studies before construction commenced.

5.16 Other issues discussed were electricity tariffs for satisfactory ERRs, financial analysis ofpower projects and the sensitivity of the economic analysis to cost estimates. After a thoroughdiscussion by Board members, the two projects were approved unanimously. The discussionflagged significant concerns about R&R and the environmenL

5.17 In sum, these Board concerns are important because they reveal the early exposure of allparties in the Bank to the R&R and environmental issues, and the attention afforded to them. TheBank not only kept the Board informed through regular semi-annual reports, but as critics werebecoming more vocal, it held briefing meetings from 1990 onwards at the request of the mostconcerned EDs, in particular those of Netherlands, UK, US and Germany. In addition, Bank staffresponded to a large number of queries by many EDs throughout implementation.

Organization

5.18 Initially, the Narmada Development Department, a GOG agency, was responsible forproject implementation. In May 1988, however, this responsibility was transferred to a para-statalcorporation called the Sardar Sarovar Narmada Nigam Ltd. (SSNNL) to deal more efficiently withthe complex technical, financial and administrative requirements of the project, and to allow thenecessary funds to be raised in the financial markets. SSNNL was organized on a functionalbasis: under the Chairman there was a Director for the Dam, a Director for Canals, and a Directorof Administration for personnel and finance. Procurement was centralized in a CentralProcurement Unit, and designs of all canals, concrete structures and mechanical installations werecentralized under an Engineer-in-Chief for Designs. A separate R&R wing was created with aGeneral Manager to oversee the R&R of project-affected persons. SSNNL also established acomprehensive computer-based Management Information System (MIS) that allowed efficientcontrol and monitoring of all operations, including contractors' performance. Finally, SSNNLturned over the operation and maintenance (O&M) of village service areas to water users'associations with the objective of having these associations construct the distribution and drainagesystems on behalf of SSNNL to give their members a sense of participation and ownership.

5.19 In view of the unusual magnitude, complexity and highly specialized nature of the waterdelivery and drainage project, involving special design and construction problems, the GOGaccepted a Bank recommendation to create a Board of Consultants (BOC) to review technicaldesigns, criteria, standards and specifications prepared by the Central Designs Organization . TheBOC utilized both local and foreign consultants and held meetings at regular intervals, toindependently review and resolve special technical issues.

5.20 In view of the multi-state nature of the project, and in accordance with the rulings of theNWDT, a number of multi-state agencies were also established: the Narmada Control Authority(NCA), to ensure compliance with the decisions of NWDT and coordinate the SSP projectactivities among the party states; the Sardar Sarovar Construction Advisory Committee (SSCAC),to supervise the planning, design and construction of the dam and power complex; andthe Narmada Review Committee (NRC), comprising the Chief Ministers of the four stategovernments, to rule on any decisions taken by NCA.

Design of the Irrigation System

5.21 The entire project was divided into 13 agro-climatic zones, with each zone sub-divided inturn into irrigation and drainage development blocks ranging from 4,000 ha to 10,000 ha. Therewere 52 development blocks in Phase I which were sub-divided into village service areas (VSAs)

10

of about 500 ha each, the VSAs were then divided into Chaks of about 40 ha each. A key featureof project design was the integration of various components such as irrigation, drainage and roadnetworks within development blocks, in order to improve agricultural productivity and minimizeconstruction works. The project design envisioned a canal system that would be lined from theheadworks down to the 8 ha sub-chak, to minimize water losses in the conveyance system. Inaddition, the plan was to operate the main canal, branch canals and distributaries down to the 8.5m3/sec level on the concept of control volume, which automatically balances inflows withoutflows. For that purpose, the conveyance system was to be equipped with cross-regulators andcontrol gates operated by a state-of-the-art remote control and monitoring system, involving acentral control unit linked through a fiber optic communication system to a large number of remotecontrol units distributed throughout the command area. In a second phase, the plan was to extendthe remote control system from the 8.5 m3/sec level down to the heads of the village service areas.Within the VSA, a system of rotational water supply (RWS) was to allocate water to farmers byturn and in proportion to the size of individual holdings. Under this system, the distributory andminor canals were to be ungated and operate "On" and "Ofr under a free flowing concept. Waterusers associations at the VSA level were also to be formed.

Hydology and Water Availabilityl

5.22 The mean water availability for irrigation and D,M&I water was estimated at 17,900 Mm3

(14.5 MAF) per year of which 13,800 Mm3 (11.2 MAF) from the Narmada River, 3,700 Mm3(3.0 MAF) from groundwater in the command area, and 400 Mm 3 (0.3 MAF) from en route riversin the command ara The average water requirements were estimated at 17,100 Mm3 (13.9 MAF)per year of which 15,800 Mm3 (12.8 MAF) for irrigation and 1,300 Mm3 (1.1 MAF) for D,M&I.The irrigation water requirements were based on an irrigation intensity of 106% -- i.e., theirrigation of about 52% of the total CCA in kharif (monsoon season), and 54% in rabi (winter dryseason). Overall irrigation water use efficiency was estimated at 48% for surface water and 60%for groundwater irrigation. As indicated previously, the size of the command area of 1.79 M hawas determined in accord with the objective of spreading project benefits as widely as possible.Consequently, at no time will the full CCA be irrigated. Overall, the amount of water will not belarge in relation to the area and the number of persons to be served at full development -- about8,450 m3/ha on average for the kharif and rabi crops, and about 95 I/day per inhabitant fordomestic and municipal uses at head works.

5.23 A number of questions relating to the project hydrology were raised by the Report of theIndependent Review6 commissioned by the Bank. These questions concerned: (i) the accuracy offlow measurements and the integrity of flow records, both measured and hindcast series; (ii) theaccuracy of dependable flows derived from the flow series and used by the NWDT in 1979 forallocating water shares among the four states; and (iii) the ability to meet the planned waterrequirements of the SSP command area

5.24 In response, the Borrower requested the Central Water Commission (CWC) to review theproject's hydrology and the Bank engaged in consultation with and on behalf of the Borrower aconsultant firm to prepare a status note on the validity of the questions raised by the Independent

5 See Annex I on Hydrology and Wte Manage.nnt for more details.

6 See Section on Environmot below for deails on the events that pvceded nd followed the publicationof the Independent Review Repost in June 1992.

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Review, and their likely impact on the project performance7. This step was taken even though areview of the project hydrology and water resources was not part of the benchmarks; the consultantworked in conjunction with the CWC. The findings of the consultants, which do not agree with allthe findings and recommendations of the Independent Review, are summarized below.

5.25 With respect to questions (i) and (ii), the consultant's report noted that the NarTnada Riverhas been gauged at Garudeshwar, a few kilometers below the Sardar Sarovar Dam since 1948, andat 32 other gauging stations upstream set up after 1948. It concludes that the primary flow recordsare sound overall and adequate for the project. This conclusion is based on a comparison ofhindcast and actual flows series and tests of the data sets to check inferred water balance in nearbycatchments. The CWC has also analyzed the data set, including both measured flows from 1948 to1990 and the series of hindcast from 1891 to 1948. The 42 year-long measured series yieldsvalues slightly lower than the combined hindcast/measured 100 year series. An analysis of therainfall records shows that the lower flows since 1948 do not constitute an emerging trend but are aconsequence of natural variability. The 100 year series is, therefore, considered representative ofthe Narmada River flows and yields a 75% dependable annual flow of 32,900 Mm3 (26.6 MAF),which confirms the value of 27 MAF used by the NWDT.

5.26 Question (iii) concerned the SAR estimates for the SSP project, which were based onoperational studies carried out by an Indian consultant firm working for NPG in 1983. Theconsultants carried out simplified operational studies to verify the match between demand andsupply during the 1948-1990 period of observed flow records. Their findings can be summarizedas follows:

5.27 From 1995 to 2005 i.e., between the early years of development and completion of theSSP command area as currently planned, the Sardar Sarovar Dam alone will be sufficient toprovide the necessary regulation and storage to supply the irrigation and D,M&I demands of theproject. However, from about 2000, as the SSP and upstream demands build up, the risk ofshortages in the drier years increases progressively. A ten-year delay in the construction of theNarmada Sagar Dam, which assumes completion by 2002, will have little impact on irrigation andD,M&I but will reduce power generation. Provision of a lower level Irrigation By-Pass Tunnel(IBPT)s, as recommended by the Bank to increase live storage, will allow increased flexibilityduring the dry years. Beyond year 2005, the Narmada Sagar reservoir becomes a necessity, if thecommand area develops to the size planned.

5.28 From 2005 to 2024 i.e., between completion of the SSP command area and the date atwhich the Tribunal award may be revised, the increase in demand comes primarily from upstreamdevelopment in MP and Maharashtra. At this level of development: (i) the DM&I demands can bemet every year, except in the severest droughts such as that of 1899/1900; (ii) the demand of kharifcrops will be met with a 100% dependability except in the severest drought year; and (iii) thedemand of rabi crops will be met with a 90% dependability. The lower level EBPT would ensurethat these demands are met in full.

5.29 By 2024, i.e., the date at which the NWDT award may be revised, the kharif cropsdemand will be met with a 80% dependability and that of rabi crops with a 85% dependability.However, in the long tern, if MP and Maharashtra make use of their full allocation, the frequency

7 Ihe consullay was fiance out of an Oversu Development Agency (ODA) of United KGngdom TrustFund managed by the Bank. Its purpose was to usist the Borrower in meedng the benchmarks set bythe Board by March 31. 1993.

S Refer to the Dam and Power PCR for mom details on the IEPT.

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impact on the kharif crop will remain about the same but the proportion of years in which the rabidemand can be met in fuU falls to between 50 and 60%.

5.30 In their simplified operational studies, the consultants made some reasonable assumptionswith regard to water availability. In particular, they assumed that, by 2024 - the date at which theNWDT award may be revised - the demand from MP is likely to lie between 12,000 and 18,000Mm3 (10 and 15 MAF) as against 18.25 MAF assumed by the NWDT. The consultants havetherefore used the figure of 16,000 Mm3 (13 MAF) or about 70% of the NWDT aUlocation.However, with regard to water availability and water requirements in the command area, theconsultants were clearly over optimistic for various reasons: (i) they assumed that the invert levelof the IBPT would be fixed at its lowest elevation; (ii) they used NPG figures which are based onan irrigation intensity of 84.5% and an overall irrigation efficiency of 60%, as against morerealistic assumptions of 106% and 48%, respectively, made in the SAR; (iii) they used the averagemonthly crop water requirements by region instead of actual requirements; and (iv) they assumedthat groundwater was uniformly distributed over the entire command area and could be mined tomeet annual deficits. As a result, the consultants have overestimated water availability andunderestimated crop water requirements, and in the end, Gujarat is likely to require more waterthan its allocation under the NWDT unless certain steps described in para. 5.23 below are taken. Asensitivity analysis carried out by the consultant shows that, with a possible 20% increase in waterrequirements, by 2005 there will be insufficient water in an average year without Nannada Sagar,and with the Narmada Sagar Dam, the 75% dependability would not be meL However, it shouldbe noted that these assumptions are only of relevance if it is assumed that Gujarat is limited to 9.0MAF regardless of flow, whereas the reality will be that for many years a much larger flow will beavailablc. Recognizing the limitations of their rapid analysis, the consultants have recommendedthat these defects be redressed in the detailed updating of the operational model that an Indianconsultant firm is undertaking on behalf of NPG.

5.31 There are several reasons to assume that actual irrigation water requirements will be higherthan those estimated by the NPG and the SAR. Ei= the crop water requirements were based, inboth cases, on averages rather than on actual requirements calculated upon a monthly analysis ofeffective rainfall and consumption as recommended by FAO; second the gross water requirementsat headworks estimated by NPG were based on an overall irrigation efficiency of 60%, whereasthe usual estimate for such projects is less than 50% as in the SAR; 1hidb in the case of the SAR,crop water requirements were reduced by 10% on the assumption that fanners will use lessirrigation water than the estimated amount, due to the limited quantities of water to be supplied;fourihb due to the fact that the main canal and also the Saurashtra and Kutch branch canals will beflowing across hundreds of kilometers of drought-prone areas, it will be very difficult - if notimpossible - to control authorized and unauthorized diversions of water to irrigate areas outside thecultivable command area. To remedy this problem it would have been advisable to increase theestimated irrigation water requirements by 10%, as has been done in many other projects in India;fiLh, and most importantly, experience shows that irrigation projects, designed for a low irrigationintensity and for which construction is not completed when water becomes available, tend toconsume more water in the initial years than the design allocation. Thereafter, it is difficult toreduce water allocations when the project becomes fully developed. This difficulty stems from thefact that farmers want to continue to apply water to the areas designed for rainfed crops - 30% inthe case of SSP - and any reduction in water allocations automatically results in a loss of income.9

9 The Borrower notes that the possibility of higher irrigation water requirements is a practical problemwing not only in this project but also in other projects in India. However, with the controlled volumeconcept of water supply, the lining of canals, involving farmen in tbe uLilization of water, the projectefficiency (60%) can be achieved and upsuram abstraction, misuse, etc. can be controlled to a greatextent. The actual requirement could be contained well within the designed requirements.

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5.32 When taking into account the above observations, the project as currently designed to thefull command area is likely to require more water than the share allocated to Gujarat by the NWDTbefore year 2024.10 Since Madhya Pradesh is not likely to use its fullwater allocation, before thatdate some arrangements could be made between Gujarat and MP on the use of excess waters. IfGujarat is forced to limit its demands to its present allocation, the SSP command area will faceincreasing significant shortages as water demand builds up. The options for Gujarat will be to: (i)hope for an increased allocation when the Water Tribunal is reopened; (ii) cut back on the irrigationof rabi crops and give more importance to the kharif irrigated crops; (iii) reduce the size of thecommand area; or (iv) gradually pursue greater water use efficiency through the adoption ofmodern on-farm water application methods, and a shift toward less water-demanding crops.Since cutting back on irrigation is likely to be resisted by farmers, the best option initially, which isimmediately feasible, would be to develop the command area step-by-step by giving priority to thedevelopment of irrigation in the areas yielding the best returns, and the development of D,M&I inthe areas less suited for irrigation. Given the low rate of return from the least economic parts of thecommand and the high value of D,M&I water, this option is likely to improve the returns.However, in the long run, the best option would be to develop sprinkler and drip irrigation andpromote less water-demanding crops through additional investments and agricultural extension.

Groundwater and Cogjunctive Use

5.33 At full development, groundwater is expected to contribute about 3,700 Mm3 or about 25%of the total water availability for the project This amount is based on the natural annual rechargefrom rainfall and the additional recharge from irrigation. The Phase I areas around the Vadodarabranch have a good aquifer, except for zone 4 along the Gulf of Khambat. The areas around theSaurashtra branch have an average aquifer, with some patches of brackish water (particularly inzone 7 along the Gulf of Khambat). The tail end of the main canal and the Kutch branch have poorand generally brackish aquifers. Groundwater is not uniformly distributed throughout thecommand area, and it is estimated that about 40% of the groundwater is slightly brackish and willhave to be blended with fresh canal water to be useable for irrigation.

5.34 Groundwater development is expected to be implemented by private and public sectorenterprises. The private sector is expected to represent about 60% of all groundwaterdevelopment It will develop mostly the fresh water aquifers. The public sector will develop theremaining 40% of mostly brackish waters through augmentation tubewells. Public wells will alsobe developed for drainage purposes, in areas where the groundwater table rises within 5.0 m of theground level. Groundwater development is expected to take place progressively over a period of10 years, beginning about 5 years after the first irrigation.

5.35 The Gujarat Groundwater Development Corporation (GWRDC) is the government agencyin charge of investigations and monitoring of groundwater development. It has preparedgroundwater models with the assistance of local consultants for various parts of the command areaThe model for Phase I area is the most detailed. However, the various existing groundwatermodels need to be consolidated into one general model, as Bank consultants have recommended,using the same methodologies, recharge principles and boundary conditions. This new model isbeing developed and should become available by December 1994.

5.36 Though the theory of conjunctive use and vertical drainage has been well thought out, itmust now be translated into specific guidelines for the design and construction of the irrigationblocks. The PCR mission noted that groundwater development was not yet integrated in thedesign of the initial 52 irrigation blocks. This omission needs to be redressed soon through a

10 Ibe Borrower is of the opinion that the unau(orized ure of water in excess of the volume allocatd bythe NWDT to Gujarat would not arie since NCA is to monitor the allocation of water to each state.

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detailed groundwater survey of each of the initial blocks, indicating where private and publicgroundwater developments are expected to take place and the amounts of water which are expectedto be extracted.

Conclusion

5.37 The above points demonstrate the need to further refine and adjust the initial assumptionsand basic data used by the project designers and the appraisal team some 15 years ago. Therevision of the initial studies is all the more needed when taking into consideration: (i) the slowerdevelopment of water resources upstream of the SSP dam than anticipated by the NWDT, (ii) thechanging attitudes of farmers toward more intensive and remunerative agriculture than initiallyanticipated, (iii) the need to reduce water use to remain within the frame work of the NWDTaward, unless some special arrangements are negotiated with the riparian states, and (iv) the needto build into the project design the results of the Environmental Impact Assessment which isexpected to be completed by December 1994. These points will require the preparation of morerefined simulation studies to establish the magnitude of regulated flows obtainable from the SardarSarovar reservoir, the groundwater availability in various locations, the en route rivers, and also tomake better estimates of actual water requirements. These studies should: (a) adjust the waterallocations policies among the various users in accordance with any subsequent agreement that maybe reached among the riparian states; (b) define the groundwater development and conjunctive usepolicies in the various regions of the command; (c) refine the groundwater models to determine thequantity of groundwater usable and amount of mining possible for each project location; (d) refinethe river flow and dam operation simulation model, based on realistic development scenariosupstream, realistic return flows and updated water flow, groundwater availability and waterrequirements; (e) review the water use policies and the design of the distribution networks on thebasis of findings of the simulation model; (f) proceed with the required adjustments in the initialproject design wherever still possible; and (g) revise the economic analysis on the basis of theproposed adjustments. Most of these measures and studies are underway or being considered.

6. Project Implementation

General6.1 The Credit became effective in January 1986, nine months after Board approval, butconstruction could start only in July 1987 after G01 released its environmental clearance for theprojecL This delay of about two years resulted in a late award of contracts for the initial reaches ofboth the main canal and the major branch canals, and it soon became apparent that the projecttargets could not be completed within the expected three-year period. Therefore, a more realisticimplementation schedule was drawn up in December 1989, with a completion date of July 1992.Subsequently, the Credit closed on July 1, 1992 after being extended 39 months, first through anextension of 3 months, followed by three extensions of one year each. These successiveextensions were used as leverage to improve overall project performance not only of the irrigationand drainage components, but also of the R&R component implemented under the Dam & Powerproject. For example, one of the main conditions for extensions in July 1989 and July 1990 wasthe release of about 2,700 ha of forest lands for the resettlement and rehabilitation of project-affected people from Maharashtra at Taloda.

Civil Eng ng

6.2 The project experienced serious start-up problems relating to quality and constructionslippages. On August 31, 1988, the Bank communicated to GOG and GOI a list of 'criticalimplementation steps' that were to be taken by NDD to meet the project objectives. Theseincluded:

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a. implementing a comprehensive Management Plan to demonstrate SSNNL'sinstitutional and technical capability for caffying out SSP;

b. establishing an adequately staffed and computerized MIS, including a fullyoperational multi-calendar scheduling package;

c. preparing a master PERT-type Revised Implementation Schedule (RIS) for theentire SSP, reflecting realistic physical and financial implementation schedules;

d. strengthening the independent technical review capability of the BOC to address thecanal design and constuction deficiencies;

e. completing an independent and comprehensive review of the present designs ofmajor canals and related structures;

f. undertaking a complete review of all works to determine their acceptability in termsof relevant contract provisions, and initiating actions to remove contractors whosework was found in violation of contract specifications;

g. reviewing the suitability of contractors' acquisitions of equipment and theirequipment planning; and

h. enforcing all existing contract requirements on the contractors.

6.3 In October 1988, the Ministry of Water Resources (MOWR) set up a six-member Team ofIndian Experts (TOE) to review and address the serious technical, organizational, iuplemenationaland quality control problems highlighted by the Bank Thereafter, in December 1988 a Bankteam met with officials of GOI (MOWR, CWC, DEA, and NCA), GOG, GOMP and SSNNL toreview the actions taken by the Borrower. This meeting resulted in a Memorandum ofUnderstanding (MOU) on additional steps to be taken by the Borrower. Another importantoutcome of the MOU was a GOI agreement to add three expatriate consultants to the TOE. TheTOE's terms of reference were to:

a. examine construction quality, adequacy of quality control and supervisionarrangements;

b. review construction methods and the adequacy of construction equipment withcontractors, and their overall capability of achieving the desired progress;

c. identify bottlenecks and suggest measures for accelerating progress;

d. examine the fulfillment of stipulations made in the Bank's letter of August 31,1988;

e. recommend organizational and institutional improvements;

f. review and evaluate all aspects of construction supervision; and

g. examine the project's planning and design for the canals and distribution system,with particular reference to, inter alia, the design of a selected number of majorcanal structures, sizing and operational control of the water delivery and drainagesystem, altemative types of structures for major river crossings of the main canaland branch canals, the practicability of designs and sequencing of construction,uniformity of design standards, and procedures for intemal checking of designs.

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6.4 On March 23, 1989, the nine-member TOE finalized its report after visiting the projectareas. The TOE found construction of the main canal to be substantially behind schedule becauseof "teething problems" encountered with the machine lining equipment. However, it expressedhope that such problems would soon be resolved, and felt that the recently expanded SSNNLwould be able to handle the increased work load. The team also declared that work quality on thecanal structures was generally satisfactory and that the quality of canal lining had been improvedconsiderably. The team concluded that the Nigam staff had the necessary capability to implementthe project, and made a number of recommendations to further enhance project implementation.

6.5 From 1990 onwards, after the initial start-up problems were overcome and the TOErecommendations were implemented, construction quality improved significantly and high qualitystandards were maintained for the construction of the main canal and major concrete structures,including bridges, regulators, cross-regulators and aqueducts. Construction quality on branchcanals also improved substantially over time, and could be considered good at the time of the PCR.The introduction of mechanized concrete lining for the main and branch canals, along with PVCinsertion in the longitudinal and transverse contraction joints concurrent with concrete placement,helped to achieve good progress and excellent quality. Mechanizing the construction of the majorhydraulic structures also helped to accelerate the pace of implementation. Because hand placementof concrete was eliminated, the quality of concrete lining on the main canal and the quality of cons-truction on major hydraulic structures were both higher than normal for Indian irrigation schemesand could meet international standards.

6.6 By the time of the PCR mission, the performance of the Borrower was encouraging.Performance of contractors had improved considerably, the overall pace of implementation wasgood in relation to Indian standards, and the institutional arrangements for quality control andquality assurance were in place and staffed by competent engineers. These achievements were dueto the introduction of several innovative features relating to:

a. the mechanization of canal lining, which included the use of: (i) cement in bulk,conforming to upgraded standards recommended by an Experts Committee onCement and Concrete (ECCC), (ii) centralized concrete batching plants, (iii) transitmixers, (iv) paver machines, (v) PVC water stops in contraction joints, and (vi)chemical compounds to ensure the proper curing of concrete;

b. the construction of major hydraulic structures, which benefitted also frominnovative and state-of-the-art technologies;

c. the establishment of a competent Quality Control and Quality Assuranceorganization with well equipped laboratories to supervise and control the use ofthese technologies; and

d. the development of an MIS that allowed tight control of operations and contractperformance.

6.7 In September 1991, the Credit Agreement was amended to include the partial constructionof 7 additional blocks (52,600 ha) within the initial reach of the main canal. This was donebecause of concem that the 12 irrigation and drainage blocks financed by the Bank might notreceive water when completed, due to delays in the construction of the Orsang Aqueduct.Although construction work could not be initiated by the Nigam before the Credit closed, inFebruary 1993 the PCR mission leamed that the Nigam had let the contracts for the construction ofboth the 7 additional and 12 original blocks, representing 52,462 ha out of a total CCA of9,900 ha.

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6.8 The pace of project implementation was reduced somewhat after the Credit closed, due toshortage of funds, it was further reduced after the Borrower requested the Bank, on March 29,1993 to cancel the undisbursed balance of the Loan for the Dam and Power project. In any case,the record pace of construction achieved in 1992 could not be maintained, and many ongoingcontracts began to suffer from lack of payment. Only a few essential contracts were kept active onthe main and branch canals and in the development blocks, in order to have a minimum of 15,000to 20,000 ha ready for irrigation by June 1995, when water is expected to be released for the firsttime in the main canal. All contracts on the main canal beyond the Mahi River (kam 144) and on theSaurashtra branch, which were to form part of the project's Phase lI, were suspended. Thesecontracts were in the process of being reinstated in February 1994, after the Nigam was able toraise additional funds from the financial markets.

6.9 The SSNNL was timely in its preparation of the 3-volume draft plans of operation andmaintenance (POM) for the canal system and head works. In addition, the drafts of this document,compiled in loose binding, were periodically revised and updated by the Nigam through theincorporation of Bank comments, review and comments of Engineer-in-Chief Designs, andsuggestions given by BOC from time to time. The Nigam's Mechanical Consultant estimated theequipment and personnel requirements for establishing workshops in the various areas of the canalsystem. Once the remote control and monitoring system for canal operation is fixed, the NigamwilU need to update the POM again to incorporate al the specifications of this state-of-the-artsystem involving fiber-optic telecommunications, computers operating in real time, sensors, andelectrical equipment for gate operation. This would include the establishment of a special O&Mwing within the O&M unit, and intensive training for specialized Nigam staff.

Procurement

6.10 There were no major procurement issues during project implementation. The SAR gave aclear description of the packaging of works, and there was clear agreement regarding theprequalification of contractors. Initially, there were some problems in finalizing the model biddingdocuments, but these were discussed and resolved satisfactorily. The Borrower followed theBank's guidelines diligently and most contracts progressed well, with two exceptions ( Main Canalfrom 58 to 82 km, and 4 Main Canal Structures). In these cases, the contracts were foreciosed andalternate contractors were hired.

6.11 Local shopping was provided for in the Credit Agreement but force account was notcontemplated. For future irrigation projects, it would be better to provide for force account for atleast 10 to 15% of civil works. The reason being that, in India, the Irrigation Departments aregeared to carry out some of the civil works departmentally. The Irrigation Departments can inmany cases implement special works for which contractors have no experience or are notresponsive, or complete works on behalf of contractors when these fail. Natural calamities, suchas floods during the monsoon season, may require emergency works to be carried out at shortnotice with departmental equipment and staff.

Project Cost Budgeting and Financing

6.12 The project cost estimates and expenditures, component-wise, are presented in Part m,Table S. At appraisal, the total project cost - including the completion of the Main Canal up toMahi Aqueduct, branch canals, and the 12 irrigation and development blocks (96,900 ha), as wellas physical and price contingencies -- was estimated at Rs. 6,251 million, the cost of the 3-yeartime slice was Rs. 3,059 M, or about 50% of total costL At Credit closure, the revised estimate fortotal project costs had increased to about Rs. 13,720 million, a 220% increase over the appraisalestimates. By the Credit Closing Date, the sum of Rs. 6,613.35 million had been spent, 48% ofthe revised total cost, to complete about 60% of the SAR physical targets for the 3-year time slice.

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A balance of Rs. 7,106.65 M remains to be spent for achieving the SAR physical targets. In dollarterms, the revised project cost is estimated at US$486.4 M, compared to the appraisal cost ofUSS520.9 M. This reduction in dollar costs is due to the devaluation of the rupee against thedollar, from Rs.12 at appraisal to about Rs.36 expected at completion in June 1995.

6.13 Financial implementation of the project, component-wise, is indicated in Table 6, Part Im.An IDA Credit of SDR149.5 M (US$150.0 M) was signed on May 10, 1985 and became effectiveon January 6, 1986, to finance about 30% of total project cost, net of taxes and duties. No co-financing arrangements were made for the canal project. On December 5, 1991, the Credit amountwas reduced to SDR 144.7 M, through the cancellation of SDR 4.8 M. On September 17, 1992,the Credit balance was fully disbursed. An expenditure of Rs. 6,613.35 M (approx. US$289.60M) was incurred by the Credit Closing Date, compared to the SAR estimate of Rs. 3,058.72 M(USS254.86 M). Though in rupee terms this expenditure represented an increase of 116% as aresult of the higher cost of project components mostly due to the high quality standards applied incivil works. The effect in dollar terms was small - an increase of only 13.5% - due to continueddepreciation of the rupee against the dollar. On September 1, 1990, the disbursement percentagefor the civil works category was increased from 60% to 90%. Actual disbursements for otherCredit categories are given in Part Ell, Table 6. The civil works category was fully drawn down,but only 36% of the technical assistance category was spent. This under-utilization was duechiefly to the Borroweres administrative difficulties in recruiting international consultants, and alsoto the fact that the major consultancy for the design and installation of a remote control andmonitoring system for canal operation could not be implemented during the Credit disbursementperiod. The financing of this consultancy was then transferred to the Dam and Power Project,because of its importance for the project's overall operation. However, on March 30, 1993, just afew days after the technical and financial proposals were evaluated and submitted to the Bank, theBorrower decided to cancel the Dam and Power Loan. The training component was not adequatelydisbursed, due to delays in finalizing the training programs, the construction of buildings, theprocurement of training equipment for O&M (including the remote control and monitoring system),and in implementing the R&R and environmental project components.

6.14 Disbursements were slow during the first four years of project implementation but pickedup at the end of the project. In fact, during the last two years SDR 101.5 M was disbursed,representing 70% of the revised Credit amount. However, the fast pace of implementation couldnot be maintained for lack of funds, particularly once the Dam and Power Loan was closed. Inview of this shortage of funds, the Borrower appears to have given priority to the completion ofthe Sardar Sarovar Dam and, therefore, only 20,000 to 40,000 ha will be ready for irrigation byJuly 1995, the scheduled date for the release of water from Sardar Sarovar Dam into the maincanal. In October 1993, after a long delay, the SSNNL issued bonds at an attractive rate of 17.5%over 30 years on the local market. The bond issue succeeded in raising Rs. 3,700 M (USS 120M).This amount, though small when compared to total requirements, should alleviate the shortage offunds and allow project implementation to regain momentum in the short-term. In view of thesuccess of its first fund raising operation, SSNNL intends to issue bonds on a yearly basis.

7. Environment

Backgtound

7.1 The environmental aspects of this project received an unusual amount of attention from itsinception and particularly from 1989 onwards. More specifically, the project came under heavycriticism by advocacy groups and NGOs, first within India and then from abroad, who charged theBank with failing to address important environmental concerns or to satisfy the R&R needs ofproject-affected people.

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7.2 At the time the project was being prepared and appraised, forest clearance was requiredunder the Indian Forest Conservation Act of 1980. Shortly after the Board approved the project,India passed the Environmental Protection Act of 1986 which required that an EnvironmentalImpact Assessment be prepared as part of the environmental clearance process. During the periodleading to project approval by the Bank in March 1985, a number of environmental studies wereprepared by the Borrower to obtain the required environmental clearancell. During the protractedidentification phase of the project and for most of its preparation stage, Bank environmentalguidelines were practically non-existent. The Guidelines prevailing at the time of projectNegotiations (November 1984) and Board Presentation (March 1985) were those contained inOperational Manual Statement (OMS) 2.36 issued in May 1984 entitled "Environmental Aspects ofBank Work".

Evolution of Bank Environmental Policies

7.3 OMS 2.36 recognized that the Bank's environmental policy was still evolving.Nevertheless, the basic environmental concerns and principles for processing projects were wellcovered. In particular, OMS 2.36 required that projects with unavoidable adverse effects on theenvironment should contain a compensatory component adequate to mitigate these effects. Itindicated that at the identification stage, such projects should be identified and the investigationsneeded to prevent or mitigate the adverse effects should be determined. During preparation, theBorrower was to carry out the necessary enquiries, and Bank staff was to outline in the ProjectBrief the measures needed to avoid or mitigate serious environmental risks or enhanceenvironmental benefits and point out any problems that merited further studies at this stage. Atappraisal, Staff was to assess the environmental findings, evaluate the future magnitude and timingof adverse effects, and assess whether the preventive, mitigatory or remedial measuresrecommended were adequate. The SAR was to describe the environmental measures beingprovided. At Negotiations, the environmental aspects were to be discussed with the Borrower andthe legal agreements could contain covenants or other provisions concerned with these aspects.Finally, OMS 2.36 indicated that supervision missions were to routinely review the environmentalaspects with the Borrower and must ensure that the measures agreed upon were adequately andresponsibly administered.

7.4 Thereafter, the Bank issued in October 1989 Operational Directive 4.00 with an Annex Aon "Environmental Assessment". Annex A outlines the Bank's policy and procedures for theenvironmental assessment (EA) lending operations, and related types of environmental analysis.The purpose of EA is to ensure that the development options under consideration areenvironmentally sound and sustainable, and that any environmental consequences are recognizedearly in the project cycle and taken into account in the project design. The Annex states that thedetail and sophistication of the analysis should be commensurate with the expected impacts and thatthere could be either project-specific EAs or regional and sectoral EAs. It recommends institutionalstrengthening, staff training, involvement of affected groups and NGOs, and for major projectswith serious multi-dimensional environmental concerns, the recruitment of an EnvironmentalAdvisory Panel of independent, internationally recognized, environmental specialists to review andadvise on, inter-alia, the TOR and findings of the EA. Each project is to be screened in fourcategories (from A to D) based upon the nature, magnitude, and sensitivity of environmentalissues. Category A, under which the SSP falls, requires the preparation of a detailed EA prior toappraisal and the inclusion of an environmental annex in the SAR summarizing the EA. TheAnnex specifis that the detailed EA should comprise, inter alia, a mitigation plan and a monitoringplan to be carried out during project implementation. Furtlhermore, Category A projects requires aformal clearance from the Regional Environment Division before Negotiations can proceed

11 The lst of envirnmental studies cuned out by the Bonower is outlined in the EnvironmentalInlormation Volume prepuWd by T.P. Whittington, July 1992.

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7.5 In July 1991, the Bank published an Environmental Assessment Source Book in threevolumes to provide guidance throughout the EA process described in OD 4.00. This Source Bookis comprehensive and provides checklists, outlines and samples for a number of typicalenvironmental studies and EAs. FinaUy, on October 1991 the Bank issued Operational Directive4.01 to replace OMS 2.36 that confirms the policies and guidelines provided in Annex A of OD4.00 and the Source Boolc

7.6 Thus, the Bank policies and procedures became more stringent between Board Presentationand Project Completion of the project. In a sense, the SAR was ahead of its time when itspecifiedl2 that the Borrower (NPG) was to prepare, during project implementation, a detailedenvironmental assessment and necessary actions for protective measures for the command area aswell as an afforestation plan for the command area, including special zone use. However, theLegal Documents failed to mention the need to prepare a detailed EA within a fixed time-frame butrequired that Gujarat should take all such measures as shall be necessary to minimize the risk ofmalaria, filaria, schistosomiasis, and other water-related diseases that may result from theimplementation of the project"3

Thme Boffowers Environmental Cearce

7.7 The Water Delivery and Drainage project and the Dam and Power project were approvedtogether in March 1985 and became effective on January 6, 1986, without the Borrower's formalforest clearance as per the stipulations of the Forest Conservation AcL Thereafter, the Ministry ofEnvironment and Forests (MOEF) gave a conditional environmental clearance for the canal andDam Projects on June 24, 1987, while noting at the same time that existing surveys wereincomplete and that full details would have to be submitted by 1989 as per an agreed schedule.The additional studies related to the preparation of a: (i) rehabilitation master plan, (ii) phased areacatchment treatment scheme, (iii) compensatory afforestation plan, (iv) command areaenvironmental assessment, (v) survey of flora and fauna, (vi) report on the carrying capacity ofsurrounding areas, (vi) report on seismicity, and (vii) report on health aspects. The clearance alsoindicated that the Narmada Control Authority (NCA) "will ensure that environmental safeguardsmeasures are planned and implemented pari pasu with progress of work on projects". SSNNL,NCA and NPG interpreted this to mean that all further environmental studies needed were to befinished as and when required and in any case not later than the dam's completion date. Finally,the clearance emphasized that it did not cover the release of forest lands, which would be subject toa separate clearance in line with the Forest Conservation Act of 1980.

7.8 Subsequently, on September 8, 1987 the MOEF gave the requisite forest clearance for thesubmergence of 13,385 ha by the Sardar Sarovar Dam, subject to the following conditions: (i)detailed compensatory afforestation plans would be submitted by September 30, 1987; (ii)compensatory afforestation would be double the area affected in degraded forest and once the areain non forest areas; (iii) a catchment area treatment plan would be prepared by November 30, 1987;and (iv) no forest lands would be utilized for the resettlement of project-affected people -- eventhough this condition contradicted Legal Agreements with the Bank under the project stipulatingthat forest lands could be released for the settlement of people forced to relocate. Finally, inOctober 1988, te Government of India Planning Commission also gave its formal endorsement tothe project, again subject to several conditions relating to envirounment and R&R.

12 See pam. 3.3 above

13 Gujat Project Ageement. Section 2.16 of May 10. 1935.

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7.9 The Borrower's coordination of environmental work, under the aegis of NCA, remainedweak through-out project implementation. Many individual studies and plans were completed bythe Impact Division of MOEF and the implementing agencies and were reviewed by theEnvironmental Sub-group of NCA. These studies concerned compensatory afforestation,catchment area treatment, fisheries, wildlife and archaeology in the upstream part of the project,and groundwater modeling and drainage in the first phase command area up to Mahi'4. However,these efforts were not directed in a coherent manner towards the preparation of a detailed EA asrequested in Table 1 of the SAR. As a result, there exists at present a provisional EA preparedwith the assistance of consultants as part of the benchmarks that were to be met by March 31,1993. However, the final detailed EA is expected to be completed by December 31, 1994.

7.10 In 1987, the Bank commissioned an Overview of the environmental aspects of the project,leading to a report and recommendations published in 1989 Is. The Bank's Consultant recommen-ded, in particular, that the Bank intensify its supervision and enter into supplemental agreements tostrengthen the environmental aspects of the project. The report also stressed the need to betterdefine the usable groundwater resources, determine the recharge quantities, develop techniques tosuccessfully manage water table levels (to mitigate the potential impacts of surface water irrigationincluding the effects of water logging), and sharpen the policies for conjunctive use.

7.11 Bank supervision missions concentrated their reviews on upstream and downstreamimpacts, and also on the waterlogging, salinity and drainage problems in the command area. Theyrepeatedly stressed the need to recruit technical assistance in the environmental field and tostrengthen the NCA. The missions also noted that the lack of an environmental work plan washampering the monitoring of environmental studies. Initially, little attention was paid to healthimpacts or to environmental training programs. In these two areas, the Bank missions reliedheavily on the reports of the Borrower. It was only at the end of the project that the Bank engageda malaria specialist, who concluded that this component had not been treated adequately and maderecommendations to correct the problem.

7.12 In response to project critics, the Bank staff answered a large volume of queries fromNGOs as well as from member-countries through the Bank's EDs. The Staff also organizedregular briefing meetings with the Bank's EDs and participated in a number of hearings in the USand abroad to give an account of the situation. Despite such efforts, pressure mounted. Finally in1991, the Bank commissioned an Independent Review of the project, directing an IndependentReview team to provide an objective account of project implementation in the R&R, environmentaland health fields.

The Indendent Review

7.13 The Independent Review team, headed by Mr. Bradford Morse, ex-Administrator of theUnited Nations Development Program (UNDP), initiated its field work in September 1991 andsubmitted its report in June 1992. With regard to the Water Delivery and Drainage project, theReview Team's report made a number of points. First, it noted that by the time of the review,most of the Bank's 1985 legal requirements and most of the conditions attached to MOEF's 1987

14 [bese studies with their date of publication ae listed in the Sadw Savw PFoject EnvironmetalOverview and Priondzed Action Plan ppaed by the Narnada Control AntAidty with the uasiae ofEnvironmental Resoumes Limrited, Marc 1993.

15 Overview Evironmental Aswessment Serdar Sovwr and Nsmna Sagw Pojcts, Nams River BasinIndia by a Consultant to the World Bank 1919.

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environmental clearance had not been met. This situation was unacceptable by any standards, andexisted despite the fact that by late 1988, all required agreements had been reached between theGOI, the States, the implementing agencies including NCA, and the Bank to ensure that anadequat assessment of the environmental impact of the Sardar Sarovar Projects would be made by1989. Second, the report criticized the "pari pasu" approach, on grounds that it subverted anyacceptable notion of environmental planning and defeated the purpose of preparing environmentalassessments, namely, to anticipate negative impacts and prevent them by incorporating remedialmeasures in the project design. Third, with respect to technical studies made under the project, thereport noted that several good studies had been prepared by consultants worling on the first reachof the main canal up to the Mahi River - but that pre-feasibility studies beyond the Mahi indicatedthat serious soil and water-logging problems will be encountered in the coastal Bhal areas, in thenorth Gujarat areas as well as along the Saurashtra and Kutch branches. It also indicated that water-logging, salinity and drainage problems had not yet been addressed through adequate drainage andgroundwater studies, as indicated by the Bank's own supervision mission reports. The reportadded that though conjunctive use is proposed to be one of the most important mitigative measuresto counteract water logging in the command area, the detailed information needed (relating to waterquality, mixing regimes and private sector pumping) was not yet available. Fourth, the teamconcluded that some good work had been done on specific topics in Phase I of the command area,but that it fell short of the requirements of a good environmental assessment. Finally, the reportexpected this project to replicate the deficiencies of previous projects in India.

7.14 On health aspects, the report stated that at the time of the project appraisal, the dangers ofwater-borne diseases in irrigation projects were well known and documented, particularly thoserelated to malaria and schistosomiasis. The report quotes a status report on malaria and otherhealth-related aspects prepared by the Bank's consultant in January 1992, stating that the projecthad been planned, designed and executed without incorporation of health safeguards and that theincidence of malaria in villages near the dam site was nearly double that of the other villages servedby the health center in that area The report concludes that the Bank and the state governments hadfailed to adequately address the issue of public health.

Management's and Borrower's Response

7.15 On June 23, 1992 the Bank issued a Management Response to the Independent ReviewRepor. The Management agreed with the Independent Review report on the description of thedelays in completing the mandated environmental studies, and on the need for a more effectivecentral management and coordination function in the Narmada Basin on environmental impactstudies and mitigation programs. The Management also agreed on the need to accelerate work onhealth matters in Gujarat. However, there were major points of disagreement as well. TheManagement did not share the conclusions about the severe environmental consequences of thestudy delays. In particular, the Management noted that the pari-pasu approach to environmentalassessment was adequate in view of the long gestation period of the project and the difficulty ofassessing impacts that will develop over time. The Management believed that, with adequateenvironmental monitoring systems, most impacts would be identified and mitigated long beforereaching significant dimensions. Bank staff also rejected the idea that black cotton soils wouldinevitably lead to water logging and salinity, and noted that the Independent Review team appearedto be unaware that water logging problems had been tackled successfully in the neighboring Mahicommand area. As for the saline soils of regions 3, 7, 10, 11 and 12, Bank staff believed thatthese could be developed adequately through leaching and drainage, and if the more detailedsurveys revealed particular problem areas, that these areas could still be omitted. On healthaspects, Bank staff argued that there was still adequate time to deal with health aspects beforeirrigation began.

7.16 Thereafter, the Bank mounted a major mission in July 1992 to review the status ofimplementation and compliance with the Bank's Legal Agreements, in light of the Independent

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Review findings. The mission reported that the Borrower had completed 22 environmentalstudies prior to the MOEF environmental clearance in 1987, that 11 had been completed since then,and that 15 more were underway or proposed. The mission concluded that the study delays hadnot caused severe environmental consequences to date. Nevertheless, the mission provided termsof reference and recommended that a detailed Environmental Management Plan be produced assoon as possible. It also noted that the SSNNL was embarling on an Environmental ImpactAssessment for the command area, in accordance with Bank current guidelines, in view of apossible Phase II Canal project. On health aspects, the mission noted that the Government ofGujarat had accepted the findings and recommendations of the January 1992 mission, whichincluded setting up a Health Planning and Monitoring Cell in SSNNL, preparing an environmentalhealth management plan, and setting up an anti-malaria unit at the dam site (Kevadia), to befollowed by others in the command area later.

7.17 The Borrower, in a letter of September 1, 1992, ensured the Bank it would address withurgency the concerns raised by the Independent Review and Bank missions, and that managementand organizational weaknesses in the R&R program would be corrected. The attachment to theletter indicated that a comprehensive environmental action plan had been prepared and wascurrently under review by NCA. Also attached was a bar chart showing a list of environmentalstudies completed, ongoing and proposed. However, the preparation of an EA specifically for thecommand area was not mentioned at that stage.

ne Benchmarks

7.18 The Management Response, the mission's findings, and the Borrower's action plan werepresented to the Board, together with three options for action, in a document entitled Review ofCurrent Status and Next Steps. On October 23, 1992 the Board discussed this document andagreed with the analysis of the Independent Review, which had identified a number of deficienciesin the Bank's appraisal and the Borrower's implementation of the projects. The Board also agreedto Management's third option of continuing to support the projects, subject to the Borrower'scompliance with a series of benchmarks by March 31, 1993. Though the Water Delivery andDrainage project had been closed since July 1, 1992, the Board fixed three benchmarks relating tothe environmental aspects of this project: (i) completion of a prioritized environmental overiewreport for the Sardar Sarovar Projects; (ii) satisfactory progress in completing an EnvironmentalImpact Assessment for the Gujarat command area; and (iii) adequate implementation of Gujamt'smalaria control program at the SSP project site, in line with the specific recommendations of theJuly 1992 Bank mission. The Board also requested that a special review mission visit India duringApril 1993 to assess progress in implementing the agreed action plan, and indicated thatcontinuation of the Bank's support after April 1993 would depend on meeting the agreedbenchmarks.

7.19 The Overseas Development Agency (ODA) of UK then opened a Trust Fund with the Bankof £ 1.0 million to assist the Borrower in meeting the benchmarks. Two consulting firms wererecruited by the Bank and completed their work by mid-March 1993. On March 29, 1993, theGOI requested the Bank to cancel the remaining portion of the Dam and Power Loan, thusterminating the Bank's lending for the Sardar Sarovar Projects. By that time, the Bank consultantshad completed their field work and submitted the major part of their draft reports to NCA.However, NCA did not send the Bank its final response to the benchmarks until August 5, 1993.After reviewing this document, the Bank was satisfied that the Borrower had met all threebenchmarks. Shordy after, NCA requested and the Bank agrmed to extend the completion date forthe command area EA to December 31, 1994 as several important studies remained to be carriedout with regard to groundwater modelling, water logging, secondary salinization, conjunctive use,and quantity and quality of agricultural drainage water.

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Major Imnpacts and Mitigating Measures

7.20 The project will provide irrigation water to about 5 million direct beneficiaries, as well asdomestic and industrial water to about 30 million people in the most drought-prone areas of Guja-rat. Water supply and agricultural intensification is expected to have an overall positive impact byreducing the effects of drought on the command area and on the health of the rural populations.The enhanced agricultural production will also generate employment opportunities and therebyreduce population encroachment on sensitive and critical areas. Larger quantities of fodder derivedfrom crop residues will reduce over-grazing. rree plantings along canals, roads and farrns willimprove the permanent vegetative cover and reduce wind erosion, while the construction of adrainage system will somewhat reduce sheet and gully erosion during heavy monsoon downpours.However, the project will also have some negative impacts on water quality, soils, groundwater,forest and other aspects which will need to be mitigated in ways described below.

7.21 Health. The advent of irrigation and improved access to domestic water supplies can yieldsubstantial public health benefits, particularly by reducing the incidence of diseases such asdysentery and diarrhoea that are related to poor hygiene, poor sanitation and lack of drinlingwater. However, there are health risks as well, because without proper control, the transport andstorage of water can lead to increased incidence of water-related diseases such as malaria, filariaand schistosomiasis. These aspects have been reviewed in a number of studies carried out between1986 and 1992 (see list in Annex 2). The overall conclusion is that schistosomiasis is confined toone location outside of the command area, while filaria is confined primarily to the coastal areas.Therefore, these two diseases do not appear to be a threat in the project area.

7.22 However, several studies have identfied malaria and Japanese encephalitis as the greatestpotential health threat in the project area. Though the incidence of these diseases is alreadyrelatively high in Gujarat, special measures will be required to control their spread. To that end,the Borrower has informed the Bank that the Gujarat Health Department has prepared an ActionPlan for surveillance and control of malaria, encompassing the creation of additional anti-malariaunits at district level, the appointment of additional staff, and an increase in spray operations. Inaddition to these measures, sound engineering practices will be needed to limit canal seepage,water logging, and pools of all kinds. In view of Gujarat's relatively poor track record in thesefields, the incidence of water-related diseases, particularly malaria, will have to be closelymonitored. As the command area will not receive water before 1995, at the earliest, there is stilltime for Gujarat to implement the measures required and to establish an efficient monitoringsystem.

7.23 Water Quality. Water quality in the Narmada River is good (200 mg/l to 400 mg/l TDS).However, the rivers flowing through the command area such as the Dhardhar, Mahi andSabarmati, tend to be polluted by agriculture, urban and industrial waste. This is so in their down-stream reaches, and during the dry season when flows are reduced due to upstrearn uses. Thequality of groundwater varies substantially from reasonable (1,000 mgfl TDS) in the southem partof the command area near Vadodara, to bad -- with salinity levels increasing towards the north-west and towards the coats (3,000 mg/l to 30,000 mg/l TDS). The use of agricultural inputs suchas fertilizers and pesticides is not expected to have a significant impact in view of the type ofextensive irrigation which will be practiced, except in the northern arid areas where natural leachingwill be limited.

7.24 The impact of irigation and drainage on water quality in the rivers traversing the commandarea will be negligible during the rainy season, and may even have beneficial effects during the dryseason through the increase of return flows. However, the major impact of irrigation on waterquality will be in those areas where irrigation will be used to leach saline soils and where surfacewater will be mixed with groundwater to mitigate salinity. In those areas, particularly near thecoast and towards the Rajasthan border, special measures will be required to dispose of drainage

25

water and to ensure that salinity is not transferred to other locations within or outside the commandarea, as in the case of the Rann of Kutch.

7.25 The Borrower is aware of these anticipated impacts. Consequently, surface water quality isbeing monitored on a regular basis by the Gujarat Pollution Control Board, and groundwaterquality by the Gujarat Water Resources Development Corporation. Additional studies are currentlyunderway with the assistance of Bank consultants, to determine the levels of salinity resulting fromirrigation in various parts of the command area. Procedures for conjunctive use and water qualitycontrol are yet to be spelled out and integrated in project design.

Soils and Salini

7.26 The upper reaches of the command area up to Mahi generally have heavy black clay soils,which have excellent potential for agricultural production and respond well to irrigation with certainprecautions. The soils of the Saurashtra Branch are lighter, their suitability for irrigation isdemonstrated by the fact that most of the land is already dry farmed, and some areas have beenirrigated for many years. The soils of the northern part of the main canal and of the Kutch Branch(Regions 10, 11, and 12) are more problematic and often affected by salinity. Nevertheless, thesesoils have been developed wherever irrigation water was available and have been able to producesalt-tolerant crops such as wheat, cotton, sorghum and maize, as well as special crops like cuminwith adequate leaching from irrigation water. The soils most affected by salt are located in the lowlands and along the coastal line of the Gulfs of Khambat and Kutch (Regions 3 and 7). Theproductivity of these soils is marginal, and their development will require substantial drainageworks.

7.27 The Borrower has carried out detailed soil surveys up to Mahi (Phase I, about 450,000 ha),and a rapid reconnaissance soil survey for the rest of the area. An integrated review of soilsstudies is being carried out by a leading soil scientist to determine more precisely the critical areasand mitigating measures needed. Should water availability become a limiting factor, the bestsolution would be to limit some of the areas affected by saline soils in Regions 3,7,10,11, and 12.

Groundwater and Waterlogging

7.28 The aquifer system underlying most of the Command Area, except for Regions 8,9 and alarge part of Region 1, consists of a layered complex of alluvial sands and clays. Over much of thearea, the alluvium is more than 100 m thick Broadly, the system may be said to comprise an upperphreatic aquifer overlying a lower confined aquifer, with the clay that separates the two aquifersbecoming progressively less permeable towards the northwest. Yields of shallow wells tappingthe alluvial aquifer are reported to range up to 15 liters per second while yields from tubewellstapping the confined aquifer range up to 30 liters per second or more. Gross abstraction for watersupply and irrigation in the command area is estimated by the Gujarat Water ResourceDevelopment Corporation to have totalled 2,100 Mm3 in 1991. Sections of the command areawhere the water table rises within 5 m of the ground surface are at present rare, and are foundmainly in lower lying tracts adjacent to the sea and to the Rann of Kutch. In addition, there is alsosome surface waterlogging in inland areas where heavy clay soils occur. The major impact ofirrigation on groundwater will be a substantial increase in recharge of about 1,600 Mm3 per year(75%), and a resulting rise of the water table in critical areas.

7.29 To examine project impact on groundwater, the Borrower has developed four mathematicalmodels. Although there are some inconsistencies with regard to input parameters and borderconditions, the models do provide reasonable indications of which areas are potentially vulnerableto waterlogging and where pumped drainage may be required in the future. With the help of Bankconsultants, the Borrower is now establishing an overall groundwater model which will determinewith improved accuracy both the groundwater availability and the boundaries of critical areas in

26

which pumping will be required to control water levels through vertical drainage. A drainagespecialist will also be employed to review current plans for surface and subsurface drainage.

Forest. Flora and Fauna

7.30 The total forested area directly affected by canal alignments is unlikely to exceed 100 ha,according to SSNNL estimates, the planned afforestation program far exceeds this figure. Becausethe affected forest area is so small, no baseline studies have been produced. However, theForestry Department has sufficient information on species and related forestry issues to carry outsuch a study, determine the exact project impact, and recommend appropriate remedial measures.SSNNL, in conjunction with the Forestry Department, should now fill this gap by preparing astudy of forest areas directly and indirectly affected by the advent of irrigation. This study shouldbe based on a "land-cover/land-use map" showing the forest areas, the canal alignments, and thecommand areas, among other things.

7.31 Two designated wildlife reserves lie within the Command Area: the Nal Sarovar BirdSanctuary and the Velavadar Black Buck Sanctuary. The adjacent Little Rann of Kutch has beendesignated a Wild Ass Sanctuary, and the Great Rann the Kutch Desert Wildlife Sanctuary. Theadjacent Kutch Desert Wildlife Sanctuary in the Great Rann also holds wild ass, but is particularlynoted as the breeding site (Pacham Island) of perhaps one-half the world's population of GreaterFlamingo. The now rare Great Indian Bustard is reported to inhabit the plains of Kutch, wherecompensatory afforestation has created a suitable habitat for this bird, and Saurashtra which isoutside the Command Area. During the winter months there is a wide diversity of bird life in thecommand area, particularly in irrigated fields (especially paddy rice) and other small water bodies.This type of habitat will be expanded by the projecL

7.32 The major impact of irrigation on flora and fauna is the possible restriction of animalmovements due to canal and drain alignments. This concem is relevant to the Wild Ass Sanctuary,where the Kutch Branch Canal crosses the passage between the two Ranns, and to the VelavadarSanctuary which will be traversed by canal systems served by the Vallabhipur Branch.Consideration may be needed for providing crossing points or changing the alignment of canalsand drains where feasible. Fertilizers and pesticides are unlikely to increase pollution byagricultural runoff and drainage, but this topic is the subject of a separate study. Also requiringcareful consideration is the proposal to link Nal Sarovar to the irrigation system to allow it to beused as a storage pond. However, the ability to provide permanent water over a limited areathroughout the year could be beneficial to the reserve.

7.33 Four studies relating specifically to the command area have been prepared: a general studyof the Command Area as a whole (which also includes floristic aspects of the sanctuaries), anddetailed studies on the Nal Sarovar, Velvadar and Wild Ass Sanctuaries. The studies are requiredto determine the baseline situation, possible impacts, mitigation measures if required, and plans formonitoring and management. A detailed study now needs to be made of the existing runoff anddrainage systems over the Nal Sarovar catchment. Monitoring of the quality of the water in anddraining to the lake should be started as soon as possible to determine the baseline situation, andalso to detect possible impacts from adjacent ongoing irrigated and rainfed agriculture. The designof the proposed surface drainage network for the region should also be advanced to the point atwhich its impact on the pattern of drainage into and out of Nal Sarovar can be determined andmodified if necessary. Information on water quality from other studies must also be provided tothe agencies and groups that are doing the various flora and fauna studies.

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8. Canal-Affected Families

Backgrnd

8.1 At project inception, there was little data regarding the number of families to be affected bythe canals and other infrastructure of the project, or any assessment of the exact manner in whichsuch families would be affected by the projecL As the NWDT had made no reference to canal-affected families (CAFs), the Borrower considered that the CAFs in this project would be treatedsimilarly to those in previous Indian infrastructure projects. The usual practice consisted incompensating those affected by the construction of canal systems in accordance with theprocedures of the Land Acquisition Act of 1894, as amended in 1984. The Borrower assumed thatcash compensation provided under the Act would be sufficient for CAFs. The Bank's OMS 2.33of February 1980 specified that the Bank's policy on R&R applied to canals (para. 3, sub-parae),and that the number of affected people, the adequacy of land acquisition and compensationprocedures, and the preparation of a resettlement plan agreed with the Borrower throughnegotiations (para. 26), were all part of the project cycle. As neither the SAR nor the LegalDocuments of the Water Delivery and Drainage project made any special provision for the treatmentof CAFs, Bank staff also assumed that the provisions of the Land Acquisition Act of 1894 forcompensating CAFs were adequate.

8.2 During implementation, it became clear that in many cases the compensation paid to CAFsdid not fully cover the cost of buying new land, nor did it include an adequate value for the fixedassets required to develop replacement land and regain the previous standard of living. Althoughthere was a legal appeal procedure for redressing inadequate compensation, with lawyers oftenmoving into villages ahead of the survey teams, it became clear that the Land Acquisition Act wasinadequate for the proper R&R of CAFs and that a new policy would have to be developed.

Implementation

8.3 As a result of NGOs' increasing criticism of R&R implementation in the Sardar Sarovarsubmergence area, a Bank supervision mission raised, for the first time in December 1989 theissue of adequate R&R planning and compensation of CAFs in the command area This missionrecommended that a survey be carried out to determine the socio-economic impacts of landacquisition on CAFs and examine the need for related R&R measures. From that moment onwardsan awareness was created and GOG hired an Indian management institute in 1991 to assess thenumber of CAFs and their needs. The institution's report gave what appeared to be an excessivefigure of 222,786 persons affected and made a number of recommendations for establishing anR&R policy that went far beyond the GOG's intentions. As a result, GOG did not publish thestudy and proceeded to explore the issue on its own.

8.4 Since then, the impact of canal construction has been estimated with greater accuracy byGOG and the Bank. According to present estimates, about 170,000 persons will be affected andthe area to be acquired will be about 73,910 ha (about 4% of the 1.87 million ha of the commandarea). This.figure is likely to further increase when the land required for drains, roads, quarriesand other such needs is taken into consideration. These figures may be compared with the 37,590ha of land that will be submerged by the Sardar Sarovar Dam and the 127,500 persons to beaffected by it. Based on present surveys, it is estimated that about 24,000 CAFs (or 15% of thetotal number) will be losing more than 25% of their land. More accurate figures are expected whenGOG publishes the results of a socio-economic survey which was completed in July 1994.

8.5 The studies of CAFs carried out so far have stressed the difference between the personsaffected by the Sardar Sarovar Dam and those affected by the construction of the canal system. Inthe first case, relocated families lose all their land and are often resettled in a totally differenthabitat They must be provided with a rehabilitation package th enabls them to regain a standard

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of living at least equal to that enjoyed before the move. In contrast, the majority of CAFs remain intheir usual habitat and their land receives the benefits of irrigation. As a consequence, GOG haslong resisted giving special benefits to such families, apart from paying them under the LandAcquisition Act for lost property. However, in light of the socio-economic studies and outsidepressure, GOG has now revised this position, recognizing that CAFs can be affected not only bythe loss of land but also by the disruption created by the division of their holdings into one or moreuneconomical parcels. Often, land holdings are not viable even though they are of adequate size,because some parts of the holding are on the other side of the canal and not easily accessible.

'Me Indepndent Review

8.6 In addition to analyzing general environmental and R&R aspects of SSP, the IndependentReview also addressed the issue of CAFs. It criticized the Bank for failing to adequately addressthe displacement of CAFs during appraisal and to introduce provisions for CAFs in the legaldocuments. It also was critical of the incremental approach followed by the Bank for not yieldingthe expected results in a timely manner. GOG was criticized for not having prepared a reliabledatabase and for not adequately compensating and rehabilitating the CAFs.

The Bank's and the Borrower's Response

8.7 The Bank's Management response acknowledged that adequate resettlement plans had notbeen prepared by the Borrower or appraised by the Bank under the project Management alsoagreed that the strategy for incremental progress had, on balance, yielded results too slowly. TheBank's major mission of July 1992 reviewed the status of R&R implementation and proposed anumber of actions to be taken by the Borrower in light of the Independent Review report and theprevailing situation. The mission's findings and the Bank's Management response were discussedby the Bank's Board during their meeting of October 23, 1992. The Board agreed with theManagement's assessment and established 19 benchmarks relating to R&R. including one thataddressed the CAF issue specifically. The Board requested that by March 31, ' )3, GOG should:(i) conduct a socioeconomic survey of CAFs and formulate a final policy packa, , (ii) identify theCAFs who had been made landless, marginal farmers, and those who had lost more than 25% oftheir land, and (iii) announce an interim policy for small and marginal farmers whose land hadalready been acquired. Though these benchmarks were established after the closure of the WaterDelivery and Drainage project, the extent of compliance with them would have an effect on theDam and Power project which was still continuing at that time.

8.8 In September 1992, shortly after the return of the Bank review mission, GOG produced adocument in which the number of CAFs was reassessed at 169,500 (excluding those affected bydrains, roads, quarries, etc.), of whom only 24,000 would be losing more than 25% of their land(with most of these actually benefitting from the irrigation). At the same time, GOG issued aninterim R&R policy for CAFs stipulating that: (i) compensation for land lost would be based onmarket value determined by Land Purchase Committees, and (ii) CAFs who had lost more than50% of their land and were left with less than 1.0 ha in the command area would be allocated 0.5ha in addition to compensation.

Current Status

8.9 On March 29, 1993, the GOI requested the Bank to cancel the remaining portion of theDam and Power Loan. By that time, the Bank had determined that, while most of the benchmarkswould be met, the socio-economic survey of CAFs would not be completed. At the time of thisPCR, NCA reported that the socio-economic survey of CAFs had been completed and that acomprehensive report, including a proposal for a final CAF R&R policy would be submittedshortly. According to the latest NCA estimates, about 68,000 persons have so far been affected bythe construction of canals. Until the results of the socio-economic survey are published, it is

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difficult to say precisely how these families have been affected. However, it can be presumed thata large number of CAFs have filed court petitions for additional compensation. Because only afew such court cases are likely to be resolved before a final policy on CAFs is issued, theremaining CAFs probably have not yet regained living standards equal to those before landacquisition. The 15% of CAFs who lost more than 25% of their land are the most adverselyaffected. This situation is provisional and is likely to improve as soon as the policy is issued, andto improve still further when irrigation is ultimately provided. In some cases, the lag time beforereceiving irrigation will be less than five years, but in other cases it may be more than ten years.

8.10 The experience gained under this and other projects suggests that the final policy shouldconsider the acquisition of land by consent award based on market price, together with theallocation of an ex-gratia amount for the purchase of replacement land by the CAFs The ex-gratiaamount is required because the land value is bound to increase with the advent of irrigation. It canbe deposited in a managed account so that it becomes available to the CAF only when it hasidentified the replacement land. This procedure is recommended because it avoids litigation andprovides the CAFs with the financial resources required for purchasing replacement land. It alsorelieves the Borrower of the burden of finding and allocating replacement land on behalf of theCAFs.

8.11 One other aspect that should be explored in developing the final CAF policy is thepossibility of reducing the impact of land acquisition through a system of land consolidation.With land consolidation, aD beneficiaries contribute a smal percentage of their land toward the arearequired for the acquisition of rights of way. There would be no need for payment ofcompensation or provision of replacement land. In addition, the process would allow farmboundaries to be realigned to give each holding access to a canal for irrigation, a drain for disposalof excess water, and a farm road for transporL Land consolidation provides the optimum layout atthe minimum infrastructure cost. The main drawback is the time usualy required for updating theland records and redistributing the land. Farners also initially tend to resist this operation, butwith appropriate incentives, they can be convinced of the benefits of having a farm properly laidout with direct access to irrigation, drainage and roads. Land consolidation has been implementedon a large scale in Punjab and Haryana, and in Orissa more recently. It has also been usedsystematically for the development of modem irrigation schemes in North and West Africa andThailand.

9. Project Achievements

9.1 Project achievements are shown in Part m, Table 4. Overall, the achievements of thisproject were good in some components, and average to less than satisfactory in others. Withregard to the construction of the main canal up to Mahi River (144 kIm), the project achievedpractically all of its objectives and also set high quality standards for machine- placed concretelining. With regard to the construction of seven major cross drainage structures, overallperformance was much below expectations with about 35% achievement of objectives, due to thedelays and poor performance of one contractor. For the Mabi and Orsang Aqueducts, the contractswere awarded late in March 1991 but works progressed well right from the start However, forfour other hydraulic structures, though the contract was awarded prompdy in October 1989, thecontractor did not perform satisfactorily and the Nigam had to retender the works. Performancewas also below expectations on the construction of branch canals, where about 60% of theappraisal targets were met.

9.2 The most severe lag occurred in the construction of the 12 irrigation and drainagedevelopment blocks (96,900 ha). The SAR had anticipated that 45% of the distribution networkand 25% of the village level service areas of these blocks would be completed. However, noconstruction had started by the time the Credit was closed. This was due, &a,. to delays infmalizing the designs, even though the Nigam had engaged 23 local consultants for that purpose;

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segond to the time taken by an independent consultant to rectify design deficiencies in therotational water supply (RWS) to which the consultants were not accustomed; and, ihd, to therejection of the local competitive bids due to what the Nigam considered excessive cost. Thepositive aspect was that the Nigam was able to complete the layout, planning and designs of macroand micro distribution networks in line with SAR standards. However, the negative aspect is thatthe Nigam may not be able to maintain high quality standards for the construction of the irrigationand drainage blocks if technical specifications are changed to obtain lower costs.16

9.3 Regarding the design, installation and commissioning of a remote control and monitoringsystem for canal operation down to the 8.5 m3/sec level, the Borrower finalized the terms ofreference and invited bids, but could not appoint the consultants for lack of time. The NarmadaPlanning Group has also prepared a 3-volume Plan of Operation and Maintenance for the canalsystem and headworks, which is periodically revised and updated.

9.4 Even though the project failed to accomplish all of its objectives by the extended CreditClosing Date, it achieved many positive results and set new standards in India, particularly in thefields of engineering and construction management:

a. Machine-placed concrete lining on the main canal and branch canals, supported withfull mechanization of back-up operations, has been successfully introduced for thefirst time in India. This innovation resulted in a high level of construction quality aswell as accelerated progress, and is now being used as a model for other irrigationprojects in India. In addition, technology transfer was successfully implementedthrough the introduction of PVC insertion in both the longitudinal and transversecontraction joints of canal lining, and use of membrane-forming curing compoundto enhance progress and quality.

b. Technical specifications of works were upgraded; improvements were made in thedesigns of hydraulic structures; O&M features were incorporated at the designstage; improved technical specifications on construction planning, use ofconstrucion equipment, and definition of milestones were introduced in the biddingdocuments. The Nigam made and continues to make optimum use of the Board ofConsultants for timely resolution of design, construction and O&M problems.

c. The designs of the main canal complex (including concrete structures, hydraulicstructures, and mechanical installations) as well as the branch canal complex werecentralized under one head through the posting of an Engineer-in-Chief for Designsin the Central Designs Organization. This arrangement was especially helpful forintroducing improved design and drawing standards, and for adjusting designstandards to facilitate O&M and structural safety. In addition, it also helped instandardizing sizes and capacities of gates to facilitate the inter-changeability ofparts and accessories. Another notable achievement was the production ofcomprehensive and high-quality technical memos by the Nigam's Central DesignsOrganization, based on the BOCs recommendations, with regard to a wide varietyof issues including investigations, planning, materials, studies, designs,constrction, operation and maintenance.

d. The Nigam has prepared consolidated guidelines on the planning, design and layoutof distribution networks folowing the basic principles of RWS. The CentralDesigns Organization has also developed and made use of computer-aided design

16 Mh Boonower feels that the rejection of bids due to high cost does not affect the quality nd that ifspecifications w changed these would remain within the project equirements.

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systems for preparing standard designs of escapes, head regulators, crossregulators, cross regulators cum falls, syphons, drainage culverts, road andbridges. In addition, a stability analysis of splaywaaUs and retaining walls, transientstudies, simulation models, and cement and steel requirements for multi-barrelcross drainage structures have been computerized.

e. An excellent computer-based management information system (MIS) has beenestablished by the Nigam, through the operation of 15 computer centers for both theWater Delivery and Drainage Project and the Dam & Power Project. The MISmakes it possible to obtain tabular and graphical displays as well as printouts ofphysical and financial progress of all works in progress. Besides the preparation ofan overall SSP construction schedule and detailed implementation schedules forrespective project components, the MIS has also introduced procurement andcontract implementation schedules which are updated every month. Mostimportantly, the MIS allows feedback on critical points that require specific actionsby the construction staff as well as the contractors. The MIS has proved useful andhas had a significant impact on project performance since it became operational in1991. It enabled the Nigam engineers at all levels to focus attention on anyshortfalls, deficiencies and bottlenecks in project implementation. More activitiesincluding finance, administration and R&R are being brought within the frameworkof MIS.

f. Te Nigam-appointed Experts Committee on Cement and Concrete (ECCC) made avaluable contribution in all aspects of quality control and quality assurance on theproject, including the on-job training and training in the National Council forCement and Building Materials (NCCB) laboratories near Delhi. Based on theguidelines framed by ECCC, the NCCB prepared a comprehensive documententitled, 'Guidelines for Management of Quality Control and Quality AssuranceSystem for Concrete in Sardar Sarovar Project." This is an excellent document andcan serve as a model for use on other irrigation and power projects in India. Themanagement of Nathpa Jhakri Power Project (Loan 3024-IN) has already takenaction to base its QC/QA set-up on this document.

9.5 Barring funding constraints, the project has now progressed to a stage where all works leftunfinished on July 1, 1992 could possibly be completed by June 1996. To achieve this result, theBorrower should now prioritize the completion of the conveyance and distribution systems in theinitial seven blocks (CCA 52,600 ha) up to Orsang Aqueduct (km 49 of main canal). This wouldallow the supply of irrigation water through the completed canal head powerhouse when the dam isexpected to reach elevation 112.50 m by June 1995 if no further delays occur due to R&Rimplementation. The Nigam should also strengthen its Command Area Development Wing andimprove co-ordination with the Water and Land Management Institute to train the motivatorsrequired to establish about 100 water users associations in the initial 50,000 ha by July 1996.However, a major commitment on the part of the Command Area Development Wing will beneeded to get this done.

Project Benefits and Revised Economic Analys

9.6 The project is still in its initial construction stage and no components have yet been put intooperation. At full development, with current project objectives and scope, nearly 5 million peoplewill benefit directly from the irrigation of about 1.87 M ha, and about 30 million people from theD,M&I componenL The appraisal team considered the cropping pattern proposed by NPG tooconservative and therefore modified it to introduce more cash crops and a higher irrigation intensity(106%). The main crops under the SAR cropping pattern are wheat 22.3%, cotton 24.4%,sorghum 13.0%, paddy 10.9%, groundnut 7.4%, pulses 5.2% and other crops such as tobacco,

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vegetables (potatoes and onions), oilseeds (mustard and castor), bananas, fodder, chilies andsugarcane, the latter being minimal with only 0.5%. This cropping pattern appears realistic andexpected yields of irrigated crops have been reasonably estimated at paddy 4.0 tons per hectare(tlha), wheat 3.5 tlha, cotton 2.4 t/ha and sorghum (rabi) 3.1 tlha. The annual food grainproduction is expected to increase by about 2.5 million tons within 25 years. It should be notedthat this rather large increase represents only 1.3% of India's current annual food grain productionof about 188 millon tons, and less than one-half of the present annual incremental production ofabout 2.5%.

9.7 The revised analysis, which was completed in April 1993 as part of the benchmarks set bythe Board, is based on the incremental agricultural benefits outlined above and the hydropowerbenefits described in the Dam and Power Loan/Credit Completion Report (LJCCR). Adjustmentswere made to the SAR economic analysis to take into account changes in quantities, prices andphasing, since it was originally done in 1984. The base year of the analysis has been brought to1992 prices. The revised analysis has paid particular attention to the environmental costs orbenefits which might have been under-estimated or omitted in the original analysis, such as estuarychanges, fisheres costs and benefits, fuelwood, wildlife, etc. The Economic Rate of Retum (ERR)of the revised analysis is 12%. This is marginally lower than the 13% found in the original SARanalysis, but falls within the range of acceptable ERRs for a project of this type. It represents alarge scale of benefits relative to any feasible altematives, and has substantial multiplier effects. Itshould be noted that had the SSP been conceived as a power project alone, its ERR would havebeen 14%. The command area, if analyzed by itself, shows a somewhat uneconomical ERR ofi 1% relative to the 12% Opportunity Cost of Capital for India; in fact, parts of the command areawould be lower than this. If expenditure to date is treated as a sunk cost, the ERR is 17%.

9.8 Because the project is an integral part of the larger SSP in Gujarat, the assessment ofbenefits resulting from irrigation, D,M&I water supply and power generation would cover the SSPin its entirety since all functions are interdependent through their joint reliance on the SardarSarovar Reservoir. The benefits would accrue in stages over a 15 year period from 1995 to 2010,upon phased completion of the dam, phased commissioning of respective units of canal headpowerhouse (CHPH) and riverbed powerhouse (RBPH), and phased completion of the waterdelivery and drainage systems including the command area development, D,M&I water supplyschemes and upstream development. Irnigation and agricultural benefits are expected to begin inJuly 1995, with the partial release of water from the Sardar Sarovar Dam through the canal headpowerhouse. Initially, not more than about 50,000 ha of distribution system is likely to be readyto receive water for irrigation. Power benefits would also start flowing from July 1995 uponcommissioning of the first unit of CHPH and diversion of water to the main canal for irrigationafter generating power. However, as the Dam and Power IJCCR and this report have indicated,there is a strong likelihood that dam and irrigation development will not be completed within theeconomic analysis time frame because of slow R&R implementation in Maharashtra and MP, aswell as delays in finalizing the financing arrangement for the riverbed powerhouse turbinegenerating sets and in the construction of the irrigation and drainage systems. Under thesecircumstances, irrigation and power benefits may not start before July 1997. The sensitivityanalysis shows that a 5 year delay in the development of irrigation would reduce the ERR to 10%and a 10 year delay to 9%.

9.9 Although one of the principal objectives of the project is to supply D,M&I water to about30 million people in 135 urban centers and 8,215 rural villages, the Gujarat Water Supply andSewerage Board (GWSSB) and the State Industries Department have prepared only preliminaryplans. These plans are based on national norms and show the major offtake points along the mainand branch canals, the layout of the distribution systems and location of booster stations. Atpresent, there are no detailed plans or cost estimates for the Phase I of the project up to Mahi and,although water supply will benefit particularly the drought-prone Saurashtra and Kutch areas,water supply in those areas will be possible only after the branch canals of these areas are

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completed in 1997 and 2002, respectively, under the most favorable circumstances. Because thereappears to be no realistic alternative to D, M&I water supply on the scale provided by the project, ithas therefore been difficult to put a value on this water component. The other options, such asdesalinization or out-migration and resettlement, are more theoretical than realistic. Consequently,the benefits of DM&I water may still be substantially underestimated.

9.10 The revised economic analysis has been based on the SAR cropping pattem and waterrequirements for a CCA of 1.79 M ha. However, as explained in the section on Hydrology andWater Resources above, for various reasons the project as currently designed may exceed theestimated water requirements by at least 20%. At full development, the project may need morethan the 9.0 MAF allocated by the NWDT. The question, therefore, arises as to whether someadjustment should be made to the cropping pattern by giving more emphasis to kharif irrigatedcrops or to the scope of the irrigation component or to more efficient water application methodssuch as sprinkler and drip irrigation. In the initial years, enough water will be available to satisfythe total SSP requirements, but this situation may not hold by year 2024 when the NWDT is to berevised. However, it is also probable that water usage upstream will be lower than projected, andtherefore the NWDT award can be revised accordingly. Given the satisfactory flexibility permittedby the multipurpose nature of this project, it would be wise to handle these uncertainties by 'undershooting" initially on the size of the command area rather than "over shooting," and approach thefal command area size gradually on the basis of emerging actual performance"'.

9.11 The economic analysis indicates that extensive irrigation yields a marginal ERR and there-fore may not be the best economic solution. However, this approach was chosen deliberately atthe outset. Part of the Saurashtra branch and the whole of the Kutch branch were included largelyfor social reasons. The economic analysis shows that the economic benefits resulting from powergeneration are higher than those derived from irrigation, while the lack of any alternative suggeststhat economic benefits derived from municipal and industrial water supply are likely to be moresubstantial than initially anticipated. As the main canal and command area are still in their initialstages of construction, it may be worthwhile to readjust the irrigation and water supply compo-nents so that the project could become more profitable economically by reducing the command areain the higher cost and/or lower benefit zones and giving more importance to the DM&I aspects ofthe project, It is reasonable to expect that the demand for D,M&I water will continue to increaseover time and the SSP could become a major water supply project. This is a world-wide trend. Inthis context it would be prudent to consider reducing irrigation water requirements and eannarlingmore water for the high value D,M&I needs. Various options are available:

a. use less water demanding crops, by giving more importance to Kharif crops;

b. improve water use efficiencies by promoting sprinkler and drip irrigation; and

c. limit the command area to the most economically viable areas.

9.12 As suggested above, once further studies have refined some of the data, attention should beturned towards how far to develop the final phases of the command area. At that point, an updatedeconomic analysis should be made on the basis of the refined studies that are currently underway.These include the revised operational studies, the groundwater modeling, the drainage water

17 See following footnote.

18 lbe Borrower emphasizes that the question of reducing the command ae in the higher costlowerbenefit zones does not arisc since the objective is to make adequate water available to the drought pronereas.

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quality and quantity studies, the downstream water requirements, and the detailed EnvironmentalImpact Assessment which is expected to be completed by December 1994.

10. Project Sustainability

10.1 Because the construction standards were good to excellent during project implementationthe irrigation infrastructure created so far is expected to provide reliable service and ensure aproductive life for the project. Government officials are committed to maintaining the presentconstruction standards for the major canal and structures. However, funding constraints after theclosure of the Credit, as exemplifid by the rejection of construction bids for the irrigation anddrainage blocks on account of high cost, may lead to lower construction standards. If the qualityof existing infrastructure is maintained, the sustainability of the project appears to be guaranteed forthe next 40 to 50 years. However, the ultimate sustainability of the project will, of course, dependon the adequacy of its operation and maintenance for which India, as many other developingcountries, does not have a good track recordl9. It is believed that the exceptional nature of thisproject and the standard of excellence developed by the SSNNL staff will enable new trends to beset for O&M.

10.2 At Credit closure, SSNNL had established a core O&M wing. Moreover, its 3-VolumePlan of Operation and Maintenance provides a good assessment of O&M services and budgetingrequirements, based on the enhanced funding norms sanctioned through GOG Resolution ofDecember 20, 1988. SSNNL has also determined the procedures for filling the canal system,which are critical to its longevity. On this matter, SSNNL should follow the Bank'srecommendation not to close the main, branch and distributory canals annually, as initiallycontemplated, because such action would inevitably accelerate the deterioration of the linings of thelarger canals. For the macro-distribution system, SSNNL has until July 1995 - when water isexpected to be released for the first time - to strengthen its O&M wing by providing adequate staff,equipment, funds and training. An Action Plan to this effect is under preparation. For the micro-distribution networks, SSNNL intends to transfer the O&M responsibilities to water usersassociations and there is every reason to believe that these associations, acting in their own interest,will keep the irrigation and drainage systems in good operation and repair. However, to achievethis result and in view of the proposed diversion of water in July 1995 WALMI and CAD staffmust give more emphasis to motivating and training the farmers who will have to establish the 100WUAs required for the first 50,000 ha to be inigated. This will be a daunting task

10.3 The detailed Environmental Impact Assessment, which is currently underway with theassistance of international consultants, will enable the Borrower to further improve theenvironmental sustainability of the project. Experience shows that irrigation schemes in India arenever allowed to degrade to the point of becoming unproductive. Waterlogging and salinity hasaffected parts of some systems and reduced productivity, but remedial measures have usually beentaken (as in the case of the adjoining Mahi command). The implementation of the EnvironmentalManagement Plan, to which the Borrower is committed, should prevent even the partialdegradation which is observed in some other projects.

10.4 Though much more needs to be done on health issues, the Borrower has agreed with therecommendations of the July 1992 Bank mission. These require strengthening existing healthservices and opening new anti-malaria units, first, near the Sardar Sarovar Dam site and,thereafter, in the command area. The Environmental Overview prepared by the Borrower, with theassistance of intemational consultants, states that the increased availability of fresh water supply inthe drought prone-project area is likely to have a positive net impact on the health of its inhabitants.

19 The BoIOwer does not believe O&M may be affected by fuDding constraints and disagres that India hasa poor O&M track record.

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10.5 Financial sustainability, which was a serious issue, appears now to have been at leastprovisionally resolved. Enough funds have been recently raised to complete the 1993-94 workprogram for both the canal and dam components. However, should funding become scarce again,there is considerable flexibility in the rate of development within the command area. From theeconomic point of view, priority should then be given to the power component, because a slowerrate of command area development gives a somewhat higher ERR. However, this aspect conflictswith the NWDT award which gives priority to irrigation over power generation, and would causefurther hardship on CAFs dependent on forthcoming irrigation to regain their prior standards ofliving.

10.6 This PCR has suggested that the project may use more than the NWDT water allocations.This risk could be reduced by strictly enforcing rotational water supply, or by adjusting thecropping pattern to less water demanding crops, or by using more efficient water applicationmethods such as sprinlder and drip irrigation. However, the latter measures will require additionalinvestments which do not form part of the project design at present. The alternative would be toreduce the size of the command area to limit the excessive spreading of water. This approachwould improve the project's economic viability and long-term sustainability2D.

11. Bank Performance

11.1 Overall, the Bank's performance was excellent in the engineering fields, where highstandards of construction were developed and implemented. In the R&R, environmental andhealth fields, however, Bank performance was mixed or poor particularly in the early stages.With regard to the environment, the Bank failed to: (a) ensure that the project had been adequatelycleared by the Government before proceeding with the financing; and (b) adequately assessenvironmental effects. This initial weakness continued during project implementation, and theBank initially failed to take the measures required to assist the Borrower in preparing anenvironmental management plan for the command area. When it finally did so in 1992, it was toolate to act within the framework of this project Accordingly, it was decided that the preparation ofproper EA and Environmental Management Plans for the command area would be consideredunder the then-proposed Canal Phase n1 project which has since been postponed to an unspecifieddate.

11.2 The Bank demonstrated its willingness to respond to outside criticism when it appointed anIndependent Review of the project. This unprecedented decision has had beneficial repercussionsin the way business is conducted within the Bank. Although the findings and recommendations ofthe Independent Review were not fully accepted by either the Bank or the Borrower, bothrecognized a number of shortcomings in their actions and strove to address problems that had beenidentified.

11.3 Throughout the project cycle from preparation to completion, the Bank made a largecommitment of staff. Tables 8 and 9 of Part III show that project appraisal required 191 staffweeks and supervision 269 staff weeks, i.e., an average of 38.4 staff weeks per year for portfoliomanagement. This latter figure may be underestimated in view of the large staff input that wasrequired following the publication of the Independent Review report and the various actions tomonitor the implementation of the benchmarks after project closure. With this high level of staffinput, the Bank has had a constructive impact on project formulation, planning and implementationin many fields such as hydrology and hydraulics, structural designs, irrigation and drainagesystem design, institutional planning, cost estimates, R&R, environment and health. However, itshould be noted that throughout the project cycle, Bank missions showed some bias, largelyshared by the Borrower as well, toward the engineering aspects of the project. To be sure, many

20 Mm Bomwower reatas that the question of reducing the command we does not e snce the objctiveof the project is to rechb the lrgest number of prsos in the drought pron maw.

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supervision missions included an environmentalist and eventually both R&R and malariaspecialists. However, their recommendations never achieved as much impact as those of theengineers.

11.4 Bank supervision missions provided valuable technical assistance and contributed toestablishing high standards in a number of engineering fields. Bank missions also had an impacton institutional, environmental and R&R aspects of the project. It was at the Bank's insistence thata number of committees were established: (i) the high level Narmada Planning Group, which madea significant contribution to the project design; (ii) a Team of Experts, which led to the drafting of aMemorandum of Understanding in December 1988; and (iii) the Board of Consultants and theExpert Committee on Cement and Concrete, which allowed improvements in the quality of cementand concrete structures. The Bank also had a large impact on the Borrower's overall awareness ofenvironmental, health and R&R aspects, which led to the drafting of an interim policy on CAFs,the initiation of the command area EA, and the creation of malaria control units.

11.5 In retrospect, the Bank may have been over-ambitious in attempting to finance a project ofsuch scope and complexity. In its eagerness to proceed quickly with this large project, the Bankconsidered the project in its entirety, as it resulted from the NDWT, without making a sufficientlycritical review of shorter term viable sub-projects. Smaller scale options such as financing theSardar Sarovar Dam for power generation only, or funding a smaller irrigation scheme whichinitially did not rely on the construction of the Narmada Sagar Dam, were not given enoughattention. The Bank could have considered the expansion of the command area in stages if andwhen other investments upstream (such as the Narmada Sagar Dam) were made. Rather thandivide the project into separate economically viable subprojects, the Bank preferred to consider theeconomics of the project as a whole, in spite of the possibility that ultimately it may not beimplemented as originally planned. This uncertainty is still alive because of Gujarat's presentfinancial constraints, and also because of MP's reluctance so far to share certain project costs andallow Gujarat to construct the irrigation bypass tunnel at a lower level or allow the dam to beconstructed to the full height. Fortunately, adjustments can sti}l be made in the project design andsize to improve the project's performance and viability2l.

11.6 The wisdom foi splitting of the project into two interlinked loans with only one economicanalysis appears debatable. It has created some confusion in the application of conditionalities but.above all, has increased the paper work and demand on staff resources throughout the projectcycle. When an ED raised the splitting issue during Board Presentation, Management respondedthat it was not because of a financial limit on the amount of Bank loans/credits but because differentagencies were involved in the implementation of each project. This answer needs to be qualified.In fact, SSNNL (previously the Nannada Development Department), a Government of Gujaratundertaking, was the sole agency for implementing the civil works of both projects, whereas theR&R and environmental components were to be implemented by each of the participating states.However, a more important issue is whether it was justified for the Bank to consider the SSP in itsentirety as planned by the Borrower or whether different planning approaches should have beenconsidered. From the Bank's point of view, the best solution would have been to finance a self-contained Dam and Power project with an independent economic analysis - which would haveyielded a higher rate of retum - and a smaller and more intensive self-contained Water Delivery andDrainage project - which also would have yielded a higher rate of retum. However, this view wasnot shared by the Borrower who wanted the Bank to consider the SSP project in its entirety as perthe ruling of the NWDT. The Bank ultimately accepted the Borrower's comprehensive plan as apackage.

21 The BorwwoLs of the rnu opunon that the w no rmaon for the Bark to review sborter tem oranDer sub-projet or to finace only the power component sine al tbaee upects had already beenomosidcd by tbe NWDT.

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11.7 The Bank was unrealistic in thinking that the partial completion of Phase I could beaccomplished in only three years. The overall job was large and complex, not only by Indianstandards, but by any standards. The design of the main canal, which is the size of a large river,made it the largest canal in the world. Machine-placed lining was introduced for the first time inIndia on this canal. Despite international competitive bidding (ICB) procurement, no foreigncompany even participated in bidding, because of the special conditions and difficulties ofimplementing large civil works in remote parts of India. This was perhaps not predictable, but asa result, Indian contractors new to such technology needed two to three working seasons (viz.,more than half the original time slice) to experiment with and perfect the technique of usingmachines for the placement of lining. The machines initially imported by the contractors, on thebasis of their performance in industrialized countries, were not adequate and had to be replaced byheavier ones with higher capacities. To achieve 55% physical completion of such a large canal --from km 21 to 144 including excavation, embankments and lining -- in just three working seasons,as stipulated in the SAR and DCA, was too ambitious. It was also unrealistic to expect GOG toensure 55% completion of seven major cross-drainage structures in three years. Each of thesestructures is a project in itself. Some are large and require complex foundations, with associatedproblems. In addition, inadequate time was provided for finalizing designs, and most of all forimplementing the BOC's recommendation. In fact, in the case of the Orsang Aqueduct, the designfor pre-stressed concrete was not accepted by the BOC and had to be entirely redone on the basisof reinforced concrete. The redesign led to a delay of more than one year for this particularstructure.

11.8 The time required for ICB procurement procedures was also misjudged by the appraisalteam. Despite strict pre-qualification standards, some of the construction agencies did not perfonnsatisfactorily, such as the contractor engaged to build km 58-82 of the main canal, and anotherresponsible for the construction of four major cross drainage structures on the main canal. Boththese contractors had to be terminated and actions taken to award these works to other contractors.In the case of branch canals as well, the prescribed time frame and completion schedule were over-optimistic. Similarly, it was not feasible to meet the SAR criteria and standards for the planning,design and implementation of the twelve distribution and drainage development blocks, within athree-year time frame.

12. Borrower2z Performance

12.1 Overall, the Borrower's performance was satisfactory in the engineering and irrigationworks, but much less satisfactory in implementation of the R&R of CAFs, environmental andhealth aspects of the project. With regard to these latter project components, however, theBorrower has argued that it can not be accused of doing an improper job since these aspects werenot adequately described in the original project and legal documents. Throughout the project cycle,the Borrower was over-optimistic about its capacity to implement the project within the proposedtime frame. Even after the two-year delay due to Indian environmental clearance and the otherimplementation impediments, the Borrower was still optimistic about completing the whole projectby the year 2000. At present, the Borrower may have revised its optimism in light of currentfinancial constraints, and may realize that the completion of this large project will take many moreyears. During project implementation, the Borrower took a number of positive decisions whichhelped project implementation. Among the most noteworthy was the creation of the SardarSarovar Narmada Nigam, a public corporation with considerable flexibility in dealing withadministrative, personnel and financial matters.

22 In actual fact, 001 is the Borrower. Gujarat is the implenenting State and SSNNL is the implementingAgency. Rather than to differentiate the roles played by each cntity, the gencric term 'Borrowera wuused in this Section.

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12.2 Throughout project implementation, the Borrower was responsive to the Bank'ssuggestions regarding the engineering aspects of the project and at a later date to those relating tothe environmental, R&R and health aspects of the project. When the Independent Review missionwas in the field, the Borrower did its utmost to satisfy its demands in all respects and with genuineopenness. The Borrower was disappointed by the Independent Review report and, althoughpublicly muted in its response, felt that this report was biased. Nevertheless, the Borrowerresponded positively to the Independent Review's findings and recommendations by recognizingmany shortcomings and doing its best to meet the benchmarks set by the Board of Directors.However, at the end of March 1993 the Borrower requested the cancellation of the remaining Damand Power Loan.

12.3 In conclusion, the Borrower's performance for the SSP project, particularly in the field ofengineering, has been superior to that of any other irrigation project in India. Its performance withregard to canal-affected families and some aspects of environment and health was weak, but is nowimproving to a large extent.

13. Project Relationships

13.1 The relationships between the Bank and the Borrower's implementing agencies, includingMOWR, NPG, NCA, SSNNL and the state governments, were good at all times - even duringthe most difficult periods following the publication of the Independent Review report and thecreation of benchmarks by the Board. The Bank's and the Borrower's project staff havemaintained excellent professional, amicable and open relations all through the project cycle, therebyenabling frank discussions and presentation of each other's viewpoints. The Borrower wasalways diligent and open in responding to the Bank's technical suggestions, as well as thenumerous requests relating to R&R implementation and other sensitive aspects such as theBorrower's dealings with critics of the project. Project management continued to give fullconsideration and highly encouraging response to the Bank's observations and suggestions,though these were not always consistent with the Borrower's view. Notwithstanding some minorstresses and strains, strong professional ties between the Bank, Gujarat and SSNNL existedthroughout the operation of the project, allowing the satisfactory resolution of many issues.

14. Consulting Services

14.1 The Borrower made extensive use of local consultants, as well as of local researchinstitutes and consulting firms, for planning, studies, and designs in the engineering, socio-economic and environmental fields. Individual foreign consultants were also recruited from time totime, though with some difficulty, to serve on the BOC and advise on some high-tech aspects ofthe project. The Borrower initiated the recruitment of a foreign consultant firm to work with localfirms on the remote control and monitoring of canal operation. However, the Credit closed beforethis consultancy could materialize. The services of National Council of Cement and BuildingMaterials (NCB) were also used for training Nigam engineers and technicians in NCB laboratorieson QCIQA aspects. The other major consultancies related to: (i) the recruitment of 23 localconsultant firms for the design of the irrigation and drainage development blocks; (ii) therecruitment of an independent consultant to review the work of those 23 consultants; and (iii) theestablishment of an integrated MIS to monitor project implementation. It should be noted that theconsultancy under (i) was not financed under the Credit, due to a failure to follow the Bank'sguidelines. At Credit closure an amount of SDR 0.298 million was disbursed under the TechnicalAssistance Category of the Development Credit Agreement, against an allocation of SDR 0.850 M.

15. Project Documentation And Data

1.1 Tlhe SAR, with its two Supplementary Data Volumes, gave a good description of theproject as planned and served as a good basis and reference document for project implementation.

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However, because the Water Delivery and Drainage project was closely associated with the Damand Power project, the SAR documents failed to differentiate adequately what belonged to eachproject - particularly with regard to the sensitive areas of resettlement, environment, and health.In addition, within the Water Delivery and Drainage SAR, it has been difficult to separate clearlywhat was part of Phase I up to Mahi, and what was part of the three-year time slice that was toreceive only partial financing from IDA. For example, it was difficult to determine whether theproject actually achieved the target of constructing 55% of a large structure, when the works weresubdivided into excavation, concrete and masonry for foundations and superstructure. Each sub-component progressed at a different pace and no average could be calculated. In retrospect, itwould have been preferable to finance entire structures within the framework of a longerdisbursement period.

15.2 Another defect of the SAR concerns the lack of clarity on the crop water requirementcalculations. The supplementary data volume does not include an annex on irrigation. The figureson water requirements are spread out in parts of the SAR and annexes dealing with surface waterresources, groundwater resources, project criteria and plan of operation, and even in the economicanalysis. The conjunctive use component has not been well explained and, except for economiccalculations, little detail was given on the important DM&I component.

15.3 As indicated, the legal documents of the Water Delivery and Drainage project were quitecomprehensive on the irrigation and institutional aspects of the project. However, they were weakon the R&R, environmental and health aspects. Some confusion arose because these aspects weredealt with separately in the legal documents of the Dam and Power project

15.4 The Borrower produced quarterly progress reports which gave a clear picture of projectimplementation. The Borrower also produced all the necessary information and latest data for thepreparation of this PCR.

16. Lessons Learned

General Lessons

16.1 The fi= lesson is the need to set realistic implementation schedules: not according to themost desirable implementation pace but according to the most probable pace -- one that assumesday-to-day difficulties and innumerable physical, administrative and financial setbacks. The Bankappraisal team was unrealistic in estimating the Borrower's ability to complete the project workswithin three years. The Borrower was also unrealistic in agreeing to such a tight work schedule,knowing the likelihood of frequent administrative and financial difficulties. In addition, in adrought-prone area like Gujarat, the occurrence of severe droughts usually upsets any pre-established implementation plans. The appraisal team did not make sufficient allowance forpredictable delays in the finalization of designs, procurement, non-performing contractors, re-bidding, land acquisition, and introduction of new technologies.

16.2 The W&ond lesson is one that applies to many irrigation and drainage projects: the need tocomplete the final designs for all major structures and distribution networks as early as possible inthe project cycle so the irrigation system can be substantially constructed by the time the dam iscompleted and water becomes available. In the case of this project, the designs of some majorstructures, as well as those of the irrigation and drainage blocks, were not ready until several yearsafter project inception. Due to procurement and other delays, the basic field irrigation systemswere not started during project implementation and therefore only a marginal area will be ready forirrigation. The failure to prioritize designs and construction of lower level irrigation systems willhave a negative impact on the economic returns of the project's irrigation component.

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16.3 The lbiM though not a direct lesson from project implementation (since irrigation has notyet started), relates to the marginal ERR from the irrigation component. This rate is lower than itmight be primarily because of the extensive nature of the irrigation design. Though the designreflects a deliberate decision aimed at increasing equity and meeting widespread needs for domesticwater, higher returns would probably be achieved through the use of more intensive irrigationwithin a smaller command area. As there is still time to make this adjustment, a gradual approachto developing the command area would be wise, given the uncertainties about ultimate efficiencylevels, the unknowns about upstream storage and utilization and the fact that the economics do notrequire rapid establishment of the full command area. Fifteen years after the project was originallyconceived, a mid-term review of the initial assumptions should be conducted and adjustments madeto the present project design, consistent with current Bank practice. Such adjustments shouldintegrate the findings of the ongoing environmental impact assessment which is due in December199423.

16.4 The fourh lesson concerns the need for the Bank to rely on the Borrower's commitmentand capacity for effective implementation of the R&R and environmental components of majorprojects. Assessment of these aspects should be given the highest attention during appraisal. Noproject should go to the Board unless the Bank is satisfied beforehand that the Borrower has fullydeveloped sound strategies and policies for dealing with key issues like R&R and environment.The implementation of the SSP projects has clearly demonstrated the Bank's limited ability to makeup for the weaknesses of the Borrower in these fields in spite of a supervision input about tentimes the Bank average.

Lessons on Environment

16.5 The fa lesson relates to the need for ensuring that all the Government clearances havebeen obtained before negotiations, particularly in such sensitive areas as environment. The lack ofenvironmental clearance by the MOEF led to a two-year delay in project implementation. Thissituation has damaged the project's image considerably, although it has not affected the possibilityof arneliorative action in the future.

16.6 The second lesson relates to the need for projects with environmental ramifications to havea proper Environmental Impact Assessment as part of the normal feasibility studies, and to ensurethat corresponding mitigative measures are adequately integrated in the project design. One of themajor criticisms that emerged from the Independent Review Report was that the project wasapproved without a proper Environmental Impact Assessment for the command area. Undertakingan EA, as required under the present more rigorous Bank guidelines, and including a separateenvironmental component in the project's design are the best ways of ensuring that the requisiteenvironmental mitigating measures will be implemented in an adequate and timely manner.

16.7 The iCilid lesson relates to the need for the Bank to use highly qualified environmentalspecialists to supervise the environmental component and, as needed, to provide guidance to theBorrower in the resolution of special environmental issues.

16.8 The h lesson relates to the need for a separate health component in large irrigation anddrainage projects. Though this aspect was covered to some extent in the SAR and legaldocuments, it is essential for the Bank and the Borrower to consider the inclusion of a separatehealth component and employ qualified health specialists to supervise, monitor and evaluate itsimplementation.

23 In addition to the points made in pevious footnotes, the Bomwower states that the ERR cannot be theonly yard stick for deciding the size of the command area, particularly under Indian conditions.

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Lesons on Canal-Affected Persons

16.9 The fi lesson is that projects involving R&R require considerable preparatory effort,including affected persons' involvement, a sound policy base, adequate budgeting and financing,good R&R component design, precise and detailed legal document conditionality and consistentlygood supervision to increase the chances of success. Particular attention should be given to theapplication of the prevailing Bank guidelines during preparation, appraisal and negotiations of largemuli-purpose projects (and others). If the guidelines change during project implementation andsupervision, the Bank should approach the Borrower to see in what way the new guidelines can beapplied.

16.10 Th second lesson is that canal-affected persons need to be adequately compensated andprovided with the additional resources for purchasing land to replace what they have lost. Specialattention should be given to the impacts of canals, drains or roads on the viability of farm holdings.Finally, alternative solutions such as land consolidation and field boundary realignment should beconsidered, at least in a pilot fonn, to minimize land acquisition and facilitate access of holdings toirrigation, dminage and roads.

16.11 The liir lesson is that there are some differences between canal-affected and reservoir-affected persons. In the canal-affected case, persons are usually partially affected and villagesoften not at all, whereas in the reservoir-affected case, persons and villages arm fully affected andmust be relocated often in a completely different enviromnent and habitat. Though the basicobjectives and principles should remain the same in each case, the substance of such policies maydiffer.

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PROJECT COMPLETION REPORT FOR THE SARDAR SAROVARPROJECT FOR WATER DELIVERY AND DRAINAGE PROJECT(CREDIT 1553-IN)

PART-II PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

(A) Adequacy and accuracy of factual infornation in Part-r. -

Information contained in Part-im of the PCR is adequate and accurate.

(B) Comments on analysis contained in part-I of the PCR

The comments on the paras other than those on which NCA has given theconmments to commissioner (PP), Ministry of water resources vide letter No.D-19(2)/93-94/dtd. 24/27 october 1994, and on the paras on which GOG like to reactare as under:

Evaluation Summry

Environment:-

Para-12 to 14 (Piv)

With reference to para 12 to 14 of the PCR this is to inform that the concern of theSSP authorities for assessment of environmental impacts was demonstrated by the factthat in 1983, i.e., long before the loan agreement withthe World Bank was signed, andclearance by the Ministry of Environment and Forest were considered, a preliminayimpact assessment study was completed through the M.S. University, Baroda. Thisstudy was commissioned by the Narmada Planning Group.

The bank credit and loan agreement in 1985 for SSP covered certain envionmentalissues. Based on this, the Government agreed to prepare a work plan by December,1985 dealing with enviommental issues. Consequently, GOG had prepared the workplan in February, 1986 and were fumished to MOE&F and World Banl.

Themafter, the clearance for the project was received from MOE&F and PlanningCommission. Since the work plans for environment related mitigative measures wereready, Gujarat was able to launch immediate implementation of these.

While implementing these measures in re spirit, main thrust was laid to fulfil theconditions stipulated by GOI, so that these are implemented pari-passu with engineering

44

components of the project.

Canal Affected Families:

Para-16(P.iv):

Regarding para-16 it is to inform that land acquistion procedure is governed by L.A.act. compensation for the land to be acquired is determined as provided by section 23of the act. This section provides not only simple market price of the land but alsoprovide cushion against inflation in form of 12% increase per year compulsion ofacquision in form of 30% soletium, compensation for structures such as well,buildings, pipelines etc. It also provides compensation for severing the land andcompensation for the expense incidental to change of residence or business.

Therefore, sufficient provisions are made in L.A. Act, so that the compensationdeterminedunder these provisionscan cover the replacement cost and additinal cost ofdeveloping relacement land.

Lessons leamt:

A. General Lessons:

Para- 35 (P. viii)

Regarding Para -35,several reasons can be ascribed for the delay in implementation ofthe project within specified time schedule. Of course, fact remains that the time schedulefor implementatin itself was over ambitious considering the nature of work involved.Most of the other reasons for delay were extraneous in nature and generally beyond thecontrol of the project authorities or the bank and in certain cases arose out of proceduralrequirements which could have been curtailed. Some of them are listed below:-

(a) The environmental clearance for the project took unduly long time. Not only that butas compared to any other river valley projects in the country, this project was made aspecial target for requirement conceming enviommental measures. The enviornmentalclearance was obtained in April 1987 only.

(b) Even after environmental clearance to the project in the instances where some forestarea was required for canal, large delays occured in release of such land required for thepurpose.

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(c) The construction work mainly involved earthwork, lining and construction ofstructures. The earthwork could be done at the desired speed. However, the lining hadto be done by using mechanical equipments. There was no previous experience ofmechanised lining on such a large scale in the country. Naturally, formulation of theequipments most suited to the project needs took some time. In the initial stage theproblem arose out of the fact that there was a considerable gap between rated capacityand the actual output of the machine. There were also problem of mis-matching ofinputs in the form of labour requirements, preparation of subgrade for lining, transitmixers for the transportation of the concrete from the batching plant etc. There werecertain other problems of comparatively minor nature like treatment of contraction jointsetc. However, with the joint efforts of the bank the project officials and the agenciesimplementing the construction, all these problems have now been overcome. Althoughin this particular slice of the project the above problems led to the delays, satisfactorysolutions of the problems led to an all round improvement in the ability of the projectauthorities and the contractors to achieve progress consistent with high quality in theremaining part of the work of the project.

(d) The problems relating to land acquisition were not as acute as in case of the dams.However, as mentioned earlier the transfer of forest land required for the purposeremains a bottleneck. Even though the land classified as forest is forest in the name sakeonly.

(e) Procurement procedure -

The present practice of procurement involves several steps in pre-qualifying the bidder,invitation of bids, evaluation of bids and awards of contract. It is felt that there is scopefor some improvement in this area so as to curtail the time required. Atleast in case ofcritical works some flexibility is needed.

Para-36 (P. viii)

Regarding pam -36 it is to inforn that in this project, due to large capacity of canal,some of the structures on river crossing are un-precedented in size. Finalisation of theDesigns of such structures some times take nore than expected time. Examples can becited of Orsang and Unch river crossing structures. In the case of aqueduct on Orsangriver doubts were expressed about the advisability of going in for prestressed concretefor such a huge hydraulic structure. It was ultimately decided to go in for RCCstructure. Similarly the type of foundation was changed from well type foundation topile foundation. Not only that, at a later date dynamic analysis of the structure had to becarried out which is generally done for large dams only in irrigation projects. In case ofUnch, doubts about the ability of foundation to take imposed load without un-due

46

settlement which can result in distress of structure were expressed. In case of bothstructurtes opinion of expert of repute had to be obtained. Certain field studies and samespecified studies were required to be carried out, as also changes in designs. Instancescan be cited about changes in design for other structures as well.

B. Iessons on Environment:-

Para-39 (P.ID):

Regarding para-39 there were some delays because of the nature of basic workchanging EIA guidelines which made the work much more detailed, a development inpost-Morse Berger Review period and other factors.

Para-40 (P.IX):

Regarding para -40, it is to inform that a work plan for the environemental aspects wasprepared soon after the agreement with the World Bank and this was finalised and madeavailable to the World Bank and the Ministxy of Environment & Forest in February,1986. These work plans did not follow an impact assessmnent in the sense being talkednow since the procedures for environmental impact assessment were in a state ofdevelopment and for example, the Guide lines of the World Bank came later but, thework plans were prepared by the experts in the respective fields. The database wasfurther strenghtaned by detailed studies by a multi- discriplinary team of scientists ofeminence belonging to M.S. University, Baroda.

In fact downstream impacts could not have been appreciated in depth withoutassessments by NPG/SSNNL/CICFRI and M/s. HR Wallingford. Most of thecommand area studies are nearing completion and infact, impacts and broadmanagement approaches have already been documented in the EIA Interim Reportpreparedd by NPG in April, 1993 and fumished to GOI, NCA etc. The said reportisnow published in one volume by Mr.Y.K. Alagh - Mr.Mahesh Pathak - Mr.D.T. Buchand is a priced publication. There were some delays because of the nature of basic workchanging EIA guidelines which made the work much more detailed, developments inpost Morse Berger Review period and other factors. Detailed management plans arebeing framed and these will be ready well before irrigation commences under SSP inconformity with the pari- passu clause governing the clearance of the project. It is alsoto be noted that reports of M/s HR. Wallingford on agrochemical pollution and moredetailed ground water modeling are yet to be received.

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Para - 41 (P. ix):

Regarding Bank's comments in para 41, it can be said that contribution of M.S.University team in Environment impact study has been acknowledged by severalknowledgeable intemational experts on environment. A multi-disciplinary team of abouta dozen professional experts worked for almost two years to produce an authenticreport on the environmental impact on the submergence area

Para -42 (P-ix)

The work plan on health have already been prepared in 1986, which covers monitoringof the malaria also. The state apex body viz. Commissionerate of Health and Medicalservices is inplementing the preventive measures and also monitoring the malaria andother water related deseases. The infrastructure at commissionerate level wil bestrengthend before the irrigation commence as requirement. SSNNL has already createdprevertive Health organisation at Kewadia.

C. Lessons on Canal Affected Families.

Para-44 (p.x):

Regarding para-44 comments are given in para-16. Further it is to state that it is otpossible to apply consolidation system at this stage because most of the lands forphase-I are already acquired and more than 25% of the lands for phase-Il are alsoacquired. Holdings of lands in phase-I are very big and are spread over large areas.Therefore the suggetion is not feasible for implementation.

Part - I Project Review from Bank's perspective:

5. Project Design and organisation:

Para- 5.36

In Para 5.36, it has been mentioned that ground water development was yet notintegrated in the design of initial 52 irrigation blocks and the omission needs to beredressed by carrying out detailed groundwater survey of each of the initial blocksindicating where private and public ground water development is expected to take placeand the quantum to be extracted. This statement does not consider the basic fact thatgroundwater studies are done for reasonably large aquifer systems (in this particularcase, the acquifer underlying parts of region 1, 2 and 3). Further, it has been made clearto the World Bank that for flexibility and decentralised progressive development, the

48

Govt. of Gujarat has decided to leave ground water development to the farmersthemselves without avoidable carrage of groundwater to VSA heads. The Nigam/Govt.of Gujarat would intervene in the form of public development only when theconjunctive use has not come up as expected and water tables have reached a level 5mbelow the ground levels. Obviously this would take a long time and in any case not lessthan 10 to 15 years. Specially the present scenario of overdrawal of groundwater and alarge ground water use in the command area already developed (over 1.0 MAF) has tobe appreciated. The borrower, therefore, does not consider that such a scheme ofadvance blockwise planning is feasible or required before actual irrigation hascommenced. After irrigation has commenced and ground water assessment made isfully validated, it would be certainly possible to operationalise ground water use.Farmers intending to drill tubewells very early will be certainly permitted to do sowithin overall constraints of sustainable recharge estimates already available. In ourknowledge, there is no project in the World, where such advance planning is attempted.Even vertical drainage measures (pumping out unusable saline water), would arise onlyafter the experience of irrigation.That is why we have an elaborate groundwatermonitoring network or piezometeres in the command area.

Para -7.9

Report does not take note of fact that the GOG/NPG with assistance from SSNNL hasalready produced EIA Interim Report for the command area of SSP in April, 1993. Thisis a comprehensive document based on discussions with the world Bank experts, initialassistance from Dr. Whitington , technical assistance from M/s HRW and many otherdepartments and institutes of Gujarat. Part-I of the Report may note that M/s HRW arerefining drainage study and are also doing agro- Chemical impact study for thecommand area. After the receipt of the outcomes of more detailed ground water andother impact studies (through M/s HRW ) and after completion of EI A studies on floraan fauna, fisheries, public health integrated command area development (all in advancestage of completion ), GOG and the Nigam will produce an Environmental Managementplan which will be ready well before the commencement of irrigation.

Para 7. 10

Even regional ground water studies themselves are being further refined through M/s.H.R. Wallingford. Obviously, the environmental implementation can be tuned up afterirrigatin has conmenced With the aid of vigilant monitoring, it would be moremeaningfull to operationalise environment - oriented water management so that mostappropriate and targetted measures are taken- Given the basic documented planning,designs and the commitment on the part of GOG/Nigamn, how can we conclude that theborrower would wait for unexpected levels of groundwater rise? Also, when surface

49

drainage systems are being constructed side by side with irrigation network, how canwe conclude that we are waiting for unacceptable outcomes? we feel that suchconclusions are premature, though we certainly agree that very careful monitoring andanalysis will have to be pursued on an annual basis for the first 5,10 or 15 years to plansustainable withdrawals required based on actual water use and ground waterbehaviour.

Para- 7.14

Basically the health plan for the project was formulated as early as in 1986 and the costis provided as early as in 1986 and the cost is provided in the basis project Secondly,Dr. Kalra's observation that level of malaria in villages near the darn site were nearlydouble that of other villages was clearly refuted by Gujarat because in that year almostall Gujarat areas had experience increased incidence of malaria in a characteristic cyclicfluctuations as observed in India & Gujarat. Besdes Kevadia Hospital has the basicinfrastructure for malarial control & prevention and more posts for strengthening werealso approved.

Para-7.22

The work plan on Health has been prepared in 1986 and it covers monitoring andcontrol of malaria. The state apex body viz. CHMS is implementing the preventivemeasures and also monitoring the malaria and other water related deseases. Theinfrastructure at comnissionerate level will be strengthened before the irrigationcommences as per requirement. SSNNL has created preventive Health organisation atKewadia.

Para- 7.24

After irrigation has commenced and ground water assessments made are fully validatedit would be certainly possible to operation alise the ground water use. Farmersintending to drill tubewells very early will be certainly permitted to do so within overallconstraint of sustainable reacharge estimates already available. In our knowledge, thereis no project in the world, where such advance planning "by microsystem " isattempted Even vertical drainage measures (pumping out unusable saline water), wouldarise only after having obtained the experience of irrigation. That is why we have anelaborate groundwater monitoring network or piezometers in the command area.

Para -7.29

After comletion of review studies being carried out by MIs. HR Wallingford. It would

50

be possible to operationalise surface and subsurface drainage plan. A drainage specialistwill be employed to review surface and subsurface drainage after getting reports fromM/s HR Wallingford.

Para- 7.32

Special studies for Environmental Impact Assessment on following three sanctuaries/National Park have been undertaken by GEER foundation(i) Nal Sarovar Bird Sanctuary(ii) Velavadar National Park(iii)Wild Ass Sanctuary.

The report on above studies are likely to come in March 1996. After getting thesestudies completed necessary mitigatory measures will be taken up and accordingly theplans for monitoring and management will be prepared.

8.0 Canal Affected Families

Para- 8.2

Regarding para 8.2 of PCR, The land acquisition for canal is governed by the LandAcquisition Act, enacted by the Government of India, and applicable all over thecountry for roads, canals, drains & other public purposes. Compensation for land andstructures, if any acquired has normally to be determiined strictly according to this Act.

Compensation of the land to be acquired is paid taking into consideration provisionsmade in L.A. Act. vide section -23. According to Section-15 of the L.A. Act, LandAcquisition officer has to consider these provisions while determining the amount ofcompensation. Section-23 of the L.A. Act. reads as under:

"Matters to be considered in determining compensation- (1) in determining theamount of compensation to be awarded for land acquired under this Act, theCourt shall take into consideration:first, the market-value of the land at the date of the publication of notificationunder section 4, sub- section (1).

secondly, the damage sustained by the persons interested, by reason of thetaking of any standing crops or trees which may be on the land at the time of theCollector taking possession thereof;

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thirdly, the damage (if any), sustained by the person interested, at the time ofthe Collector's taking possession of the land, by reasons of serving such landfrom his other land;

fourthly, the damage, (if any) sustained by the person interested, at the time ofthe Collector's taking possession of the land, by reason of the acquisitioninjuriously affecting his other property, moveable or immoveable, in any othermanner,or his earnings; and where the person interested is a tenant of the land,only the damage sustained by him by reasons of the acquisition injuriouslyaffecting his right as a tenant;

fifthly, if, in consequence of the acquisition of the land by the Collector, theperson interested is compelled to change his residence or place of business, thereasonable expenses (if any) incidental to such change;

sixthly, the damage (If any) bonafide resulting from diminution of the profits ofthe land between the time of the publication of the declaration under section 6and the time of the Collector's taking possession of the land;

and

Seventhly, in the case of any land which according to the terms of the tenure onwhich it is held is not transferable or partible by metes and bounds without thesanction of the state Govemment or any competent officer, the market value ofsimilar land held without such restriction.

(IA) In addition to the market value of the land, as above provided , the Court shallin every case award an amount calculated at the rate of twelve percent per annumon such market value for the period commencing on from the date of thepublication of the notification under section 4, sub- section (1), in respect ofsuch land to the date of the award of the Collector or the date of takingpossession of the land, whichever is earlier.Explanation-In computing the period referred to in this sub-section any periodor periods during which the proceedings for the acquisition of the land wereheld up on account of any stay or injuction by the order of any court shall beexcluded.(2) In addition to the market-value of the land, as above provided, the Courtshall in every case award a sum of thirty percent on such market value inconsideration of the compulsoury nature of the acquisition.

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Thus it is not true that the compensation paid to CAFs does not fully cover thecost of land. It is clear that an adequate value of the fixed assests acquired, is also paid.

However land- loosers are free to approach courts of law for enhancement ofcompensation. Thus fair dealing is always assured to the land-loosers

Para-8.3

Regarding para 8.3 of PCR, the Nigam (and not Govt. of Gujarat as mentioned)had hired DIM for study of canal affected people. It was found that full scaleextrapolation was made from the limited data available. This was prima facie unrealisticdue to widely different characteristics of sample area from related area on the full scaleproject area. Obviously, more comprehensive and representative data were required tohave as large and representative sample as possible. A detailed report explaining whythe IIM's findings and recommendations are not acceptable was forwarded to the WorldBanks representative Mr. Don Gamble vide a Fax message

Para- 8.4

Regarding para-8.4 of PCR, the figure of the canal affected persons and that ofland to be acquired for the whole canal system are not likely to be higher in future,because the works of drains, roads etc. are carried out simultaneously with the canalworks and hence these figures includes such works also.

Para-8.5

Regarding para 8.5 of PCR, It is strong belief of the Nigam and Govt. of Gujaratthat the persons affected by dam & those affected by the canal system are notcomparable. Therefore the question for revising this stand does not arise. Means andways are provided at the canal sites for accessing the canals at certain distance. Thus aperson having land on both the sides of canal can cultivate his whole holding easily.Therefore the question of disruption created by Division of holdings into uneconomicalparallel does not arise. Moreover there is a provision of paying severance chargesinsection-23 of the L.A. Act.

Para-8.9

Regarding para 8.9 of PCR, it is the stand of the Nigam and Govt. of Gujaratthat only those persons loosing more than 75% of their land should be consideredseverely affected persons and those loosing less than 25% of holding should not beconsidered severely affected, because most of the canal affected people will get benefit

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of the irrigation directly or indirectly.

Para-8.10

Regarding para 8.10 of PCR, it is emphasized by the Nigam that more and moreacquisition cases are disposed off by consent award . Govt. of Gujarat has alreadyresolved that if land holders give consent for a certain market price, incentive upto 35%of the maket price can be added to the compensation.Nigam has formed tier committeesto determine the compensation to be paid in such cases, and Nigam has been fortunateto get consent from land holders in many cases, avoiding court-references.

Para-8.1 1

Regarding para 8.11 of PCR, Land acquisition work in phase-I (i.e. in Bharuch,Baroda & Panchmahal districts ) is mostly completed. Most of the lands fordistributories & Minors in phase-I are acquired through private negotiation. Thereforethe question of applying a system of land consolidation in phase-I does not arise. Inphase-lI also, most of the lands (in Kheda, Ahmedabad, Gandhinagar, Surendranagar& Mehsana districts) are acquired either by awards or by private negotiation. Moreoverin the rest of the area of the canal system, the holdings of the land are very big and arespread over large areas. Therefore it would not be possible to apply a system of landconsolidation as suggested.

9.0 Project Achievement

Para-9.6

Regarding para-9.6, crop requirements were worked out on effective rainfall andnot on average rainfall. Further, work done by WALIH, Maharashtra and othersindicates that, if at all, the modified Penmen method in many situaions overstimates thecrop water requirements then those that would be actually needed. There is thus, nounderestimate of water requirements either on account of rainfall considerations or usesof Penman's approach. In fact practical limited experience in the country indicates thatwith volumetric supplies and even with good RWS, farmers would better optimiserainfall contributions and also prepare their fields better for efficient surface waterapplication.

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12.0 Borrower's performance -

Para- 12.3

Regarding para-12.3, Gujarat is well ahead in implementation of compensatoryafforestation plans, catchment area treatment plans and formulating fisheries and publichealth plans, apart from the need to update some of these in light of more detailedassessments. Command area impacts are also clearly identified now & managementplans are under preparation as discussed hereafter. Before irrigation commences, all therequired management interventions are being worked out fully in conformity with the'pari passu' approach. For R&R, Gujarat plans are now being considered as models inthe country & the party states of Maharashtra & Madhya Pradesh are also gearing up.

16.0 Lessons Learned

Comments are given under "Lessons Learned " of 'Evaluation Summary.'

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Annexure - 1:

Hydrology and water Management:

Risk Analys:

Para-28

In Para-28, the PCR states that even assuming that the water availability and size ofcommand area have been matched, to reduce the risk of SSP not operating as plannedstrict water use policies must be established, closely monitored and enforced by NCA.As the NCA has been constituted for close monitoring of all such aspects there is noquestion of SSP not operating as planned and the availability of water not matchingwith the size of command area. These, being assumptions made by the PCR mission,should be excluded from this para. It is stated in the PCR that the detailed rules forconjunctive use have not yet been worked out or ground water integrated in the designof the initial 52 irrigation blocks. This statement doesnot consider the basic fact thatgroundwater studies are done for reasonable large aquifer systems (in this particularcase, the acquifer underlying parts of region 1,2 and 3). Further, it has been made clearto the World Bank that for flexibility and decentralised progressive development, theGovt. of Gujarat has decided to leave ground water development to the farmersthemselves without avoidable carriage of groundwater to VSA heads. The Nigamn/Govt.of Gujarat would intervene in the form of public development only when theconjunctive use has not come up as expected and water tables have reached a level 5m.below the ground levels. Obviously this would take a long time and in any case not lessthan 10 to 15 years. Specially the present scenario of overdrawal of groundwater and alarge ground water use the command area already developed (over 1.0 MAF) has to beappreciated. The borrower, therefore, does not consider that such a scheme of advanceblockwise planning is feasible or required before actual irrigation has commenced. Afterirrigation has commenced and ground water assessment made is fully validated, itwould be certainly possible to operationalise the ground water use. Farmers intendingto drill tubewells very early will be certainly permitted to do so within overlallconstraints of sustainable recharge estimates already available. In our knowledge, thereis no project in the World, where such advance planning "by microsystems" isattempted. Even vertical drainage measures (pumping out unusable saline water), wouldarise only after the experience of irrigation.That is why we have an elaborategroundwater monitoring network or piezometeres in the command area.

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Annexure-2:

Evironnrnental im=aats and Maagrnient:

Independent Review Report

Para-21

In para 21, the view of the IRR is reflected stating that prefeasibility studies beyondMahi have indicated that serious soil and waterlogging problems will be ecnountered inthe costal Bhal areas, in north Gujarat areas as well as along the Saurashtra and Kutchbranches. This paragraph may clearly bring out that under assumptions of matchingconjunctive use, the waterlogtging shown by the models is not large and in theculturable command area this would be manageable even using conservativeassumptions of related parametres. We have clearly brought out in the interim EIAreport now available in the form of a book entitled "Namnada & Envimonment : AnAssessment" - Har-Anand Publishers, New Delhi. prepared in April, 1993 of thecommand area (Chapter No.5) that overall, the waterlogging in CCA is not likely toexceed about 5 to 7 percent with conjunctive use of ground water and with verticaldrainage measures. Banks management response may also indicate that M/s.H.R.Wallingford is further refining the modelling studies in a composite command areamodel using more consistent and realistic sets of parameters in respect of rainfall,irrigation recharges, transmitivity and storage coefficients etc. Infact in absence of theproject, the watertable would continue to decline and thereby create serious problemsfor domestic water supply and irrigation as presently occurring in the northern part ofthe command area. We totally agree with the assessment. Management response, thus,to IRR may include this aspect.

Para-22

Para-22 reflect the concerns of the IRR on health aspects stating that the project hasbeen planned, designed and executed without incorporation of health safeguards andthat the levels of malaraia in villages near the dam site were nearaly double that of theother villages served by the health centre in that area: Gujarat had also at that stage givenits response to IRR. Basically the Health Plan for the project was formnulated as early asin 1986 and the cost is provided in the basic project. Secondly, Dr. Kalra's

57

in 1986 and the cost is provided in the basic project. Secondly, Dr. Kala'sobservations that level of malaria in villages near the dam site were nearly double that ofother villages was clearly refuted by Gujarat because in that year almost all Gujaratareas had increased incidences of malaria in a characteristic cyclic fluctuation asobserved in India & Gujarat Besides Kevadia Hospital has the basic infrastructure formalarial control & prevention and more posts for strengthening are also approved. Thebank response, thus, in para-28 may be suitably amplified to reflect the real situation.

Para - 42

Para 42 of Annexure-2 of part-I discusses the borrower's performance. It says thatwith modem computer simulation and remote sensing technology, it is possible andnecessary to study atleast the most critical impacts so that the project design canincorporate the most likely impacts. This statement once again does not take note offact that based on soil surveys and existing data, the project design does identify thevulnerable areas from productivity and waterlogging considerations e.g. region 4, 7, 11and already therein. For these areas, the water allowances are about 70% of normal.Groundwater modelling grids are already set up. There is also definite built-inprovision for tubewells for vertical drainage and pumping out unusable water,Obviously the planning and design have considered these aspects. For a developingcountry deficient in resources, anticipatory structures cannot be put in before seeingsustainable actual irrigation recharges and actual groundwater behaviour as discussed inthe preceding paragraph. Even regional ground water studies themselves are beingfurther refined through MWs. H.R. Wallingford. Obviously, the environmentalimplementation can be tuned up after irrigation has commenced. With the aid of vigilantmonitoring, it would be more meaningful to operationalise environment-oriented watermanagement then. So that most appropriate and targetted measures can be taken.Given the basic documented planning, designs and the commitment on the part ofGOG\Nigam, how can we conclude that the borrower would wait for unexpected levelsof groundwater rise? Also, when surface drainage systems are being constructed sideby side with irrigation network, how can we conclude that we are waiting forunacceptable outcomes? We feel that such conclusions are premature, though wecertainly agree that very careful monitoring and analysis will have to be pursued on anannual basis for the first 10 or 15 years to plan sustainable withdrawals required basedon actual water use and groundwater behaviour.

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Annexure-3

Resettlement of Rehabilitation of canal afffected Families.

Para4

Regarding para-4, It is to inform that the figure of the canal affected persons andthat of land to be acquird for the whole canal system are not likely to be higher infuture, because the works of drains, roads etc. are carried out simultaneously with thecanal works & hence these figures include such works also.

Para-6

Regarding para-6, it is not true that Normialy the value of land is based on theR.D's records of past transactions to determine appropriate compensation. Only thetransactions of the land width just similiar in many repects and just near the acquiredland are considered for valuation of acquired land moreover factors like potentialitytowards non- agricultural development, availability of irrigation, fruitility etc. are alsoconsidered.

Para-7

Regarding para-7, it is to inform that in Gujarat there is nothing like 'Collective'land ownereship. It is not true that many people in a village may share a piece of land.Any act cannot discriminate among different socio-Economic classes.

Para-8

Regarding para-8, it is to inform that Means and ways are provided at the canalsites for accessing the canals at certain distance. Thus a person having land on both thesides of canal can cultivate his whole holdig easily. Therefore the question of disruptioncreated by division of holdings into uneconomical parallel does not arise. Moreoverthere is a provision of paying severance charges in Section-23 of the L.A. Act.

Para-36

Regading para-36, it is not true that the issue of CAFS surfaced in 1987 onlywhen non-tribal land was acquired alongwith tribal land. GOG & Nigam have always

59

taken more care for tribal people.

Para-38

Regarding para-38, it is to inform that the land acquisition for canal is governed bythe Land Acquisiton Act, which is enacted by the Government of India, which isapplicable all over the country for roads, canals, drains and other public purposes.Compensation for land and structures, if any, acqquired has normaly to be determinedstrictly according to this Act. No exception can, therefore, be made for canals for aparticular project except for special, features, which are not common to other canals,roads etc.

The Nigam has been quite liberal in determining compensation for land and otherproperties, if any, to be acquired. Nigam has been fortunate to get willing cooperationof land holders in handing over possession of land to enable canal works to proceed.NO doubt, the land holders are free to apporoach Courts of Law for enhancement ofcompensation. Thus, fair dealiing is always assured to the land holders.

Para-39 & 40

Any policy that may finally emerge for compensation to CAPs must be firstlyimplementable and secondly it should not hinder the progress of obtaing land byprivate negotiations as is being done today. Government of Gujarat and the Nigam areopen on this issue, but it would be difficult to accept recommendations of IIM in totosince some of them have State and Nationwise implications. We believe that for branchcanals and distribution net work no change in policy is called for as the impact ofacquisition is negligible. Only in the cases of main canal some few hard cases may haveto be considered on merits. It is only for main canal and SBC where the land width isgreater and so the policy may have to be evolved after collecting data regardingaltemative source of income for total or near total land losses.

Para-49

Regarding para-49, it is emphasized by the Nigam that more & more acquisitioncases are disposed off by consent award. G.O.G. has already resolved that iflandholders give consent for a certain market price, incentive upto 35% of the marketprice can be added to the compensation. Nigam has formed two-tiered committees todetermine the compesation to be paid in such cases, and Nigan has been fortunate toget consent from landholders in many cases, avoiding court references.

60

Para-50

Regarding Para-50, land acquisition work in phase-I (i.e. in Bharuch, Baroda &Panchmahal districts) is mostly completed. Most of the lands for distributories andminors in phase-I are already acquired through private negotiation. Therefore thequestion of applying a system of land consolidation in phase-I does not arise. Inphase-IH also, most of the lands (In Kheda, Ahmedabad, Gandhinagar, Surendranager& Mehsana districts) are acquired either by awards or by private negotiation.Moreoverin the rest of the area of the canal system the holding of the land are very big and arespread over large areas. Therefore it would not be possiblee to apply a system of landconsolidation as suggested.

Annexure-4

Revised Cost-Benefit Analysis:

Para-6

Though in theory and in narrow economic terms, ERR would improve withrestirction of commnand area and more intensive irrigation as mentioned under para 6,GOG would not like to curtail the command area. Narmada waters provide the lastdependable opportunity for the backward and drought prone areas of the commandlocated in North Gujarat, Saurashtra and Kutch. The social objectives of SSP can notbe diluted merely on the score of narrow economic cost benefit analysis. It is clear thatsocial benefits to these distant areas in the form of human misery during consecutivedrought spells, large scale migration of cattle population, health problems arising fromlack of drinking water or from drinidng non-potable or saline water by people cannot beevaluated in economic terms. Even after inclusion of these areas in the command, theoverall ERR and benefit cost ratio are favourable (ERR 12%, B/C ratio 2.0). Ourstudies indicate that many of these areas may need only 2 to 3 watering for irigation(overall depth not exceeding 12") and even in economic terms, the gains or the benefitswould be very high per unit of water supply in terns of yield increments of cereals,fodder and fiber crops. Local water harvestng will also be integrated as recentlydecided. The views of NCA on this issue, forwarded separately to the Bank, are alsoon these lines.

61

The social objectives of SSP are equally sacrosant. As regarad ERR with power projectalone, it may be stated that irrigation is the primaray objective of SSP and powergeneration is a necessary adjunct in a multipurpose frame work, "Power alone" optiononly strengthens the case of completing hydro-power component on priority.

Para-7

GOG does not agree that with the firm scheme of advance water allocations andmanagement through farmers organisations, the efficiency of water use would be loweras brought out under para 7. With the quality work of lining being implemented (as alsodocumented by the World Bank), there is no apprehension that the efficiency of watertransmission will be lower than planned. In fact the seepage norms considered havemuch higher values for lined Canals compared to these under California Aqueduct.USA. We fully agree that the seepages that may occur would be available for conjuctiveuse by farmers. Regeneration waters in streams and rivers will be utilised to the extentneeded by the farmers bodies with GOG and SSNNL providing full support.

(C) Evaluation of Bank's performance and lessons learnt -

(i) Bank Personnel were recognised as Professional in all respects. MissionMembers, were always highly qualified in their respective fields. Theyhave made extremely useful suggestions for improvement inimplementation of project.

(ii) Involvement of the bank has led to several steps being taken in the areasof Planning, Design and Construction of the project. Some of theimportant achievement are listed as under:

a) The involvement of the bank led to the formation of the NarmadaPlanning Group (NPG) for project formulation and preparation of thebackground to achieve the targetted objectives of socio economicdevelopment using State of the art techniques and standards for'modernization' of the concepts of the project planning. In many wayssome of these studies carried out by the NPG were taken up for the firsttime in the river valley development projects in the country.

b) Management Information System (MIS)

At the instance of the bank efficient MIS has been established. This has

62

helped in objective evaluation and monitoring of the various aspectsrelating to the implementation of the project. This has also helped inidentifying the grey areas requiring special attention.

(c) Designs:

A Board of Consultant was established on the recommendation of thebank. The formation of such a board helped the project in properscrutiny of the design carried out by the project authorities. For thisboard, services of consultants of repute have become available to theproject.

(d) Quality Control:

In the field of quality control, during initial stages bank expressedcertain concems. The project authorities promptly reacted to theseconcerns and established a committee of experts on cement and concrete.For this purpose also renown experts were drawn from the country. Thecommittee has made extremely useful suggetions in the area of use ofcement, manufacture and placement of concrete, testing of concrete andhas also led to formations of quality control standards and prroceduresto be adopted on work. The committee also helped in arranging trainingof project personnel in concrete testing and related topics.

(e) Introduction of new technologies:

For achieving speed in construction consistant with adherence to thequality, for the first time in the country mechanised concrete lining ofcanal on a large scale was taken up. Use of curing compound and PVCinduced crack joints are other areas which can legitimately claim to bepioneering achievements so far as this country is concerned.

(f) The involvement of bank also led to better appreciation of the role ofequipment planning. Earlier, this area did not receive adequate attention.However, gradually, procedures were evolved under which at the timeof evoluation of bid itself this aspect is given its due importance.

(iii) Involvement of the Bank has acted as a catalyst for attractingintemational contractors and financers from outside sources. It has alsohelped in adopting latest technical know-how as well better practicesbeing followed the world over.

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(iv) The following lessons have been learnt from the experience:

a) The time schedule required has to be a little bit realistic. In certain casesthe problems can be complex; e.g. Design and construction of majorcross drainage works. They are bound to be some surprises when theactual work of such structures is taken up. The problems might requireconsultancy at the highest level. It might also be necessary to carry outsome special study which in turn takes its own time. These factors needto be considered in the time schedule. Another point is the procurementprocedures. The time required for fmxing agencies is always more thananticipated at the time of formulation of the project

b) To avoid delays and surprises during implementation, it is necessary thatsurvey, investigations and designs are carried out with utmost care. Ifthis has been done it can be of great help in the future.

c) The resources required should be commensurate with the quantitiesinvolved. This applies to physical, financial as well as human resources.

d) The pre-qualification for the bidders has to be very stringent. There werecertain examples when the agencies could not measure up to theexpected requirements. In certain cases the contracts were required to beterminated resulting in delays as well as other complexities.

e) It is also felt by the project authorities that no new major conditions maybe imposed after the agreement is signed. This creates lot of problems incertain cases. Moreover, once the agreement is signed there should notbe any doubts about its implementation particularly at the instance ofoutside forces.

f) The project authorities feel that there is need for flexibility of approachon the part of the bank to change mutual procurement closed to suit thelocal conditions. Some of the suggestions are listed as under :-

1) Price escalation on key materials like cement, steel, etc. shall be co-related withthe base price of material and not with the price indices of the material, since theindices do not reflect truly the fluctuations in the prices.

2) Security for performance in civil work contracts shall be reduced from 10% to6% as provided in non-world Bank aided contracts.

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3) Clause for paying secured advance on materials shall be included to avoidblockage of cash flow of contractors.

4) To convert security deposits recovered from intermediate bills into interestbearing GovtlSSNNL securities or interest bearing deposits with scheduledIndian bank taken out in the name of Engineer-in-Charge or into Bank guaranteein installments of Rs.10 lacs each.

5) Drawal of mobilisation advance shall be allowed upto six months from the dateof notice to proceed with the work. This period may be extended further forthree months if considered reasonable by the Engineer-in-charge.

6) Recovery of advance and interest there on shall be made at a suitable percentagenot exceeding 30% of each bill including price escalation.

7) Recovery of advance with interest shall be completed by the time work equal to90% of the tender amount is completed instead of 80%.

(D) Evaluation of borrower's own performance and lessons learned.

i) The overall performance in project planning, design, execution andimplementation is good. Training rquired as suggested by Mission hasbeen well organised by the Nigam. For efficient managementinformation system of canal, computer centres are established.

ii) Project Consultants provided valuable assistance in projectimplementation. A good relationship existed between the consultants andthe NiganL

iii) The work of surveying, design, planning and estimation (SDPE) for thedistribution network upto 40 ha. was entrusted to 23 private consultantsduring 1989-90. The output given by most of the consultants was as perthe guidelines given by the Nigam. Submission by some of theconsultants was not upto the mark. However, due to the changes in theconcepts of planning finalised after discussions with the World Bankreview/supervision missions and the previous consultants, the reportsprepared by private consultants for SDPE are subsequently modified byNigam's in-house team.

65

iv) The work of SDPE for the channels down to 40 ha. has been entrustedto private consultants in 1991 and the submission of reports therefore bythem is underway at present. The planning to be done for this has alsobeen discussed at length with World Bank recommended Independentreview consultant, and his suggestions are being implemented.

v) Procurement procedure for distribution and drainage for 12 blocks asincluded in SAR and subsequently added seven initial reach blocks wasstarted in Sept'92 and the bid documents therefore have been cleared bythe Bank by June'1992. However, the formalities of invitation of bidsand fixing of agencies therefore could not be completed till the expiry ofextended date for the credit No.1553-48N.

vi) It will be necessary to create the infrastructure in advance, especially for"distribution and drainage" so that targets set forth may be achieved.

E) Effectiveness of the relationship between the Bank and Borrower during theevaluation and im=lementation of the proiect :-

The overall relationship with the bank was quite good and cordial during theevaluation and implementation of the project.

(F) The performance of co-financiers. and assess the effectiveness of theirrelationship with the Borrower during the evaluation and implementation

There was no co-financing agency, no comments are offered.

IBRD 17939FESRUAY 1984

I N DIA

R 4 NARMADA RIVER DEVELOPMENTP A K I S T A N ,- J W GUJARAT

WATER QUALITY AND AQUIFER TYPE

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mo or mray not be present-~~~~~~~~~ Pr*~~~~~~~~~~~~~~3,l "Oto, at all lene1s in all-val

isAll.qvtal aq.ifer ,ith poor q,,ality .. t.,.~~~~~~~~~~~~~~~~~~~~~~~~~~ / *1 i n upper layersSnIton.* au.i., with fresh .. IS, at

KUTcH NA 9 . ..... Hordrock que,r with fresh ate,

GAR| SAARAANTHA

Projecl Area Boundary

H RAIKUOT r7t Mahi Commo,nd -} - Destric I Boundjaries

JAMNIAGARP ', !-- , rS -~- - State Bou/ndariesJ -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L

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( ,.. AMREl/II r- r

JUNAGADY L N J

\ > 4 \ ~~~~~~~SU/RAT X

AMREL/DMAN >5/ /45,~ I N D t A e

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??W mmo t.e beon prerpared or The Borl* Bwd 0 O euck.e lor St conn*wtce or rto

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MD 17940R

I N D I A

R A NARMADA RIVER DEVELOPMENTP A K I S T A N GUJARAT

t 4. .. g S DEPTH TO WATER TABLE

jX'l _ F-' y '_.y X AA~~~NAStAANHA -"/Y

ANASKANr.1JA " '" tDEPTH TO WATER TABLE:

v \" rs ' g ~~ >> t n han S meters

5 - 10 moters

HURCW 26 sAESANA 2 \ * Greater thon 10 moters

- n._P:il;I~~AGAR S/A8APANrHA

Project Area Boundary

ti -/ L PANCAIMAHALSV r = Dom Site MProposed Mi oo

s ' hSUR/Vt R >- Lu ,_ __ Proposed Branch Conals.. .. ..... ~~~ 10Rivers

H ) RAjO - fx 2Mor7 C l 4 - - District Boundaries

L M,h Crm d neiogs13,,d,,]AMNAGAA' A j ~~~~~~~~~~~~~4 eStat. Boundaries

f ~~~~~~~~~~~~~~~~~International Boundaries

r W 7 5 0IA7UCH DHA

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) -b h SURA r .

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