INTERNATIONAL BANK FOR RECONSTRUCTION AND …...would be 10%. The remaining finance would be provided by the Haryana State Cooperative Land Mortgage Bank (SLMB), participating commercial

C,c cZL41

FILE C1uW' R E T R I C T E D

Report No. PA-80a

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

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

HARYANA AGRICULTURAL CREDIT PROJECT

INDIA

May 13, 1971

Agricultural Projects Department

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CURRENCY EQUIVALENTS

US$1 - Rs 7.50;Rs 1 - US$0.13Rs 1,000 - US$133.33Es 1,000,000 - US$133,333

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS

ARC - Agricultural Refinance CorporationGO0 - Government of IndiaHAIC - Haryana Agro-Industries CorporationPLMB - Primary Land Mortgage BankREI - Reserve Bank of IndiaSCO - Soil Conservation Organization of the

Haryana Department of AgricultureSLMB - Haryana State Cooperative Land Mortgage

Bank Ltd.

INDIA

HARYAJIA AGRICULTURAL CREDIT PROJECT

Table of Contents

Page No.

SUIIUARY AND CONCLUSIONS ................................ i-ii

I. INTRODUCTION .......................................... I

II. BACKGROUND ............................................ 1

A. Ini.1A. India ........................................................ I

B. The State of Haryana ............................. 2

Area and Population ......................... 2

Agricultural Structure ...................... 3

Agricultural Inputs and Services .... ........ 4

Agricultural Development Priorities .... ..... 4

Introduction ................................ 4

Minor Irrigation ....................... 5

Mechanization .......................... 5

III. TIE PROJECT ........................................... 7

A. Brief Description ................................ 7

B. Detailed Features ................................ 9

Minor Irrigation ............................ 9

Mechanization ............................... 10

C. Cost Fstimates and Financing ..................... 11

Project Cost ................................ 11

Financing ................................... 11

D. Procurement and Disbursement ..................... 13

Procurement ................................. 13

Disbursement ................................ 14

This report is based on the findings of an appraisal mission which visited

India in November 1970 and was composed of Messrs. W.H. Spall and K.W. Berg

(IDIA), R.A. Crofts and H. MIcDonald (Consultants).

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Page No.

IV. ORGANIZATION AND MANAGEMENT ........................... 14

Introduction .14Agricultural Refinance Corporation (ARC) .14

Hlaryana State Cooperative Land Mortgage Bank (SL1IB) ... 15Commercial Bank .17Hlaryana Agro-Industries Corporation Ltd (IIAIC) .17Lending Policies and Terms .13

V. PRODUCTION, MARKETING, PRICES AND FARMERS' BENrEFITS.... 18

Production .18Marketing ................................... 18

Prices .19Farmers' Benefits .19

VI. BENEFITS AND JUSTIFICATION .20

VII. RECOMMENDATIONS .21

SCHEDULE A - General Lending Terms and Conditions

AN1NEXES

1. Minor Irrigation

Appendix 1-1 Cost Estimate for Tubewell1-2 List of Blocks Designated for Tubewell

Investments

2. Mechanization

Appendix 2-1 Agricultural Production Trend Indications2-2 Contractor's Rate of Return2-3 Changes in Irrigated and Cropped Areas2-4 Tractor Services Network in Haryana

3. Agricultural Refinance Corporation

Appendix 3-1 Condensed Statement of Net Income3-2 Projected Statement of Net Income3-3 Condensed Balance Sheets3-4 Projected Balance Sheets

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4. Haryana State Cooperative Land Mortgage Bank

Appendix 4-1 Condensed Statement of Net Income4-2 Projected Statement of Net Income4-3 Condensed Balance Sheets4-4 Projected Balance Sheets4-5 Loan Procedures and Policies

5. Commercial Banks in Haryana

6. MIechanization Procurement

7. Haryana Agro-Industries Corporation

8. Schedule of Disbursements

9. Estimated Increased in Cropped Area and Production

10. Investment Costs, Yields and Prices

11. Financial Rate of Return

12. Economic Rate of Return

Appendix 12-1 Economic Rates of Return to the EnterpriseAppendix 12-2 Detailed Investment Cost and Yield Assumption

FLAP

INDIA


SUMMARY AND CONCLUSIONS

i. This report appraises an Agricultural Credit Project in the Stateof Haryana for which an IDA credit of US$25.0 million equivalent is propnsed.It would support a three-year lending program for investments in minorirrigation and farm mechanization.

ii. Most of the land in Haryana is used for agricultural purposes,3.4 million ha out of a total area of 4.4 million ha. About 1.2 million hais cropped more than once annually, giving a total cropped area of some 4.6million ha. About 1.7 million ha (50%) is irrigated, two-thirds by canalsystems and the remainder by wells. In 1969 there were about 50,000 tube-wells and 90,000 dug wells. Minor irrigation has played an important partin the increased production in recent years; foodgrain production (Haryanaproduces a surplus) rose from about 2 million tons annually in the 1950'sto 4.5 million tons in 1969/70. Haryana generally has adequate groundwaterresources and the Project would finance an additional 11,000 tubewells andsome sprinkler irrigation equipment in areas of sandy and undulating land.

iii. Continuing growth of production depends upon increasing thedouble-cropped area, particularly under irrigated conditions, which enablesfarmers to make the best use of new high yielding varieties and fertilizers.Harvesting of the "kharif" crop (September/October), which is often riceor cotton, and land preparation for the "rabi" (November) wheat crop requireto be done speedily if optimum wheat yields are to be obtained. Under pre-vailing conditions in Haryana this requires mechanization of land preparationand cultivation. The State Government and the Haryana Agro-IndustriesCorporation (HAIC) estimated the demand at some 10,000 additional tractorsover the Project period. A careful analysis based on the planned increasein the double-cropped area, tractor use, and overall availability of tractorsshows that 6,000 tractors would be required and this is the number includedin the Project.

iv. The Project, therefore, consists of a three-year program whichwould assist in financing on-farm investments in minor irrigation (US$12.1million) and farm mechanization, tractors, harvesters, and spares (US$32.4million). The foreign exchange component is estimated at US$21.2 millionequivalent or about 48% of total Project costs. IDA would finance US$25.0million equivalent (56% of Project costs), being the foreign exchange com-ponent and about one-third of the local currency costs of minor irrigationinvestments. However, the transfer by GOI to ARC of the proceeds of the saleof initial tractor spares to dealers (US$2.7 million equivalent) would havethe effect of increasing IDA's contribution to local currency costs of minorirrigation to about 56%. Farmers' contributions would be 20% in the case ofminor irrigation and 25% for farm mechanization investments, with theexception of small farmers as defined by the Agricultural RefinanceCorporation (ARC), when the contribution in respect of tubewell investments

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would be 10%. The remaining finance would be provided by the Haryana StateCooperative Land Mortgage Bank (SLMB), participating commercial banks, andARC which would also be the channel for IDA finance. ARC is already actingin this capacity for three other IDA supported agricultural credit projectsin Gujarat, Punjab, and Andhra Pradesh.

v. The IDA credit to the Government of India (GOI) would be madeavailable to ARC at an effective interest rate of 4-3/4% per annum repayableover nine years. GOI would bear the exchange risk. ARC would superviseand refinance at 6-1/2% per annum the lending operations of SLMB and suchparticipating commercial banks as would meet the criteria laid down by ARC.Loans to individual borrowers would bear interest at 9% per annum and wouldbe repayable over periods up to seven years (nine years in the case of smallfarmers' investments in tubewells), including one year of grace in respectof minor irrigation loans, with the exception of loans for self-propelledcombines which would be up to five years.

vi. The implementation of the minor irrigation schemes would be bylocal contractors, or hired labor, using local materials. About 11,000individual on-farm investments would be made and international competitivebidding would not, therefore, be appropriate. Tractors to be procured underthe Project would be imported and sold to farmers through existing commercialchannels. Orders would be based on individual farmers' preferences andbulked in order to obtain quantity discounts using the same type of proce-dures which have already been approved for the Punjab and Andhra Pradeshprojects. At present five foreign tractor suppliers from Bank membercountries are eligible to supply and seven others are under consideration.Licenses would be issued for the import of an initial stock of tractor andharvesting machinery spare parts procured under the Project. Combines andtractor drawn harvesters would be procured through international competitivebidding. In the case of harvesters, Indian manufacturers would be entitledto bid with a 15% preference.

vii. ARC and SLMB have competent management and are in sound financialcondition. Financial returns to farmers, based on prevailing prices, areestimated to range from 39% to 66%. The rates of return to the economy basedon world market prices are estimated to be from 22 to 27% for minor irrigationand 15% for mechanization. The appropriate assurances having been obtainedthe Project is suitable for an IDA credit of US$25.0 million.

INDIA


I. INTRODUCTION

1.01 In 1968 an IDA mission, with assistance of the FAO/IBRD CooperativeProgram, reviewed agricultural credit institutions and on-farm investmentrequirements in selected parts of India and identified high priority agri-cultural credit projects. Three of these projects (Gujarat, Punjab andAndhra Pradesh) have been approved by IDA, totalling IDA financing of US$86.9million; in addition to the proposed project for Haryana a fifth agricul-tural credit project in Tamil Nadu is under consideration. Assisted throughinstitutional credit, farmers would make investments in minor irrigationand farm mechanization and thereby obtain increased production and otherbenefits from new high-yielding seed varieties, fertilizer use, and surfacewater irrigation facilities.

1.02 Bank Group lending for India's agriculture (excluding US$23 millionfor the Beas Equipment Project under the Indus Treaty) totals US$238 million.Past lending has been concentrated on water development and in continuationof this, two other irrigation projects are under appraisal. In support ofthe Government of India's (GOI) new agricultural strategy, the Bank Groupcontinues to give increased emphasis to on-farm investments, such as can beencouraged under agricultural credit projects.

1.03 This Project was prepared by the Haryana Government, with guidancefrom ARC, and follows closely the pattern established for this type of proj-ect by preparation assistance made available for earlier projects by theFAO/IBRD program. In November 1970, Messrs. W.H. Spall and K.W. Berg (IDA),R.A. Crofts and H. McDonald (consultants) appraised the project in the field.This report is based on the Government's project submission and the mission'sfindings.

II. BACKGROUND OF AGRICULTURE

A. India I/

2.01 Since 1965 India has changed the emphasis of its developmentefforts from industry to the agricultural sector. As a result, priorityhas been given in recent years to accelerating the introduction of the newagricultural technology, through increasing the availability of improvedinputs and by providing economic incentives to farmers. The new agriculturalstrategy has already brought encouraging results; emphasizing investments

1/ A detailed discussion of the present situation and prospects of agri-culture in India is given in "Economic Situation and Prospects ofIndia", Report No. SA-25a shortly to be circulated.

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in irrigation facilities and farm machinery to enable more multiple croppingand shifts to higher value crops. The increased use of high yielding seedvarieties and fertilizers have particularly contributed to a significantincrease in farm production.

2.02 Although 70% of India's labor force is engaged in agriculture(providing half India's GDP) only a small proportion of farmers have, so far,benefited from this agricultural advance. A vastly increased number offarmers could, however, take advantage of the new techniques if helped withcredit. If the momentum of agricultural growth is to be maintained, theavailability of credit for on-farm investment needs to be increased.

2.03 The Reserve Bank of India (RBI) has estimated that credit insti-tutions will require Rs 15,000 million (US$2,000 million) for agriculturalinvestment during the five years of the Fourth Plan. Taking an annualaverage of Rs 3,000 million, this compares with about Rs 600 million investedin 1966/67. Short-term credit demands are expected to amount to Rs 20,000million (US$2,666 million) in 1973/74, five times the level of currentadvances, and overall agricultural credit requirements are expected to in-crease five-fold from the mid-sixties to the end of the Plan period. Ifthese substantial credit demands are to be met, India will need to mobilizemore of its own, particularly rural, savings and increase external borrow-ings.

2.04 Farm mechanization for India as a whole is still at an early stage.Some aspects such as the use of pumps for shallow wells and tubewells havemoved ahead rapidly over the past decade and can be expected to continue onan expanded scale. Use of mechanical or powered threshers and sprayers hasalso expanded sharply. Total farm tractor population in India, now esti-mated at about 100,000, is expected to increase at a rate of about 15-25,000per year over the next several years. Government plans call for a substan-tial increase in tractor production moving from the present level of 17,000per year to a level of 60,000 tractors per year during the current planperiod. The Plan estimates annual tractor demand at 70,000 tractors peryear in 1973/74. Current high domestic prices for wheat, increasing wagerates and the relatively low price of tractors have encouraged this trend.The three previous IDA credit projects provide financing for 11,000 tractorsover the period 1971-74.

B. The State of Haryana

Area and Population

2.05 The State of Haryana came into existence in 1966 and is situatedin the northwest of India (see Map). With an area of 44,000 km2, it is thesecond smallest State in India, representing about 1.4% of total area,while its population is about 10 million or 1.8% of the country's total.About 83% of Haryana's population lives in villages depending largely onagriculture and 71% of the State's working force is engaged in agriculture.

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Only one city (Ambala Gantt) has more than 100,000 inhabitants. Adminis-tratively, the State is divided into seven districts which are subdividedinto 32 "tehsils".

2.06 The State is bounded by Punjab, Himachal Pradesh, Uttar Pradesh,Rajastan, and the city of Delhi. Except for some minor ridges in the south-west and north, Haryana forms a part of the Indo-Gangetic Plain with a meanheight of 300 m above sea level. Soils are alluvial in origin and mostlysandy, becoming slightly heavier and loamy in the eastern part of the State.The climate is of continental character, extremely hot in summer (49°C) andnear freezing in winter. The average annual rainfall is 660 mm, rangingfrom over 1,000 mm in the northeast to less than 300 mm in the southwest.About two-thirds of this falls during the monsoon months July to September.Light winter rains in December and January are of great value for springwheat.

Agricultural Structure

2.07 Out of the entire State area (4.4 million ha), 3.4 million ha or77% is used agriculturally. About 1.2 million ha is sown more than onceannually, giving a total cropped area of 4.6 million ha (1965/66-1968/69average) which is cultivated by about 650,000 holdings. There are 75,000farms (11% of holdings) of more than 12 ha in Haryana which together farmabout 1.1 million ha (32% of all agriculturally used land), while 160,000farms of 6-12 ha total 1.3 million ha (or 38%); the balance of 0.9 millionha comprises about 420,000 holdings of less than 6 ha each. In practice,however, operational holdings are much larger since several family holdingsare often farmed as one unit. Some land reform has taken place mainlyconcerned with protecting tenants' occupancy rights and assisting them tobecome land owners. Because of the transfer of population following parti-tion in 1947, owner occupancy and the limitation of size of individualholdings have proceeded further than in many other States. Land consolidationis almost completed and compact holdings, made up of a number of regularfields of about one acre (0.4 ha), predominate. In addition, out of about275,000 farmers with holdings of less than 4 ha, many of whom are atsubsistence level and economically submarginal, some 100,000 (36%) will becatered for by Haryana's Small Farmers Development Agency which will providesubsidies for on-farm development.

2.08 About 1.7 million ha, or 50%, of the State's agricultural land isirrigated. The most important sources for irrigation (70% of total) arethe western Yamuna and the Bhakra Canal systems, while the rest (30%) isirrigated by dug wells and tubewells. In 1969 there were about 50,000tubewells and 90,000 dug wells installed of which 28,000 were installedduring the past two years; approximately one-third of the dug wells isenergized. The present water utilized for irrigation in Haryana is about10 billion m3 a year from canals and 3.7 billion m3 a year from groundwatersources.

2.09 Haryana produces a surplus of foodgrains, the most important cropswithin the cropping pattern, which occupy about 77% of total cropped area;

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5% is under cotton, 4% under sugarcane, 2% under oilseeds and the rest (12%)is planted under other commercial and subsistence crops. There is anincreasing trend in planting cotton and sugarcane, while the area plantedto oilseeds is decreasing. Wheat is the most important single crop,occupying 22% of the toal cropped area; 20% is planted with millet, 5% withrice, 3% with barley, 2% with maize, and 25% with various pulses. Totalfoodgrain production rose impressively from about 2.0 million tons annuallyin the 1950's to 4.0 million tons in 1967/68 and, after a drop to 2.8 milliontons in 1968/69, to 4.5 million tons in 1969/70. Cropping intensity overthe last five years has averaged about 133%.

Agricultural Inputs and Services

2.10 Supply and use of improved seed and fertilizer have increasedconsiderably in recent years. Fertilizer consumption rose from 70,000 tonsin 1966/67 to 163,000 tons in 1967/68, 238,000 tons in 1968/69, and 270,000tons in 1969/70, representing about 77 kg per cultivated ha. Distributionwas, until recently, exclusively through village cooperatives, but privatedistributors now compete and supply is satisfactory. About 80% of Haryana'stotal grain area is planted with improved seeds, including high yieldingvarieties; the latter cover about 53% in case of wheat; 10% for rice andmaize; and 20% for millet. The low figure for rice is mainly due to thefact that lower yields from existing strains (particularly Basmati) areoffset by higher market prices.

2.11 Responsibility for agricultural research and education is vestedin the newly founded Haryana Agricultural University, Hissar, which, untilrecently, formed a part of Punjab Agricultural University. It has made animportant contribution to the development of Punjab's and Haryana's agricul-ture; in Ilaryana, particular emphasis is given to practical education inagriculture for young farmers at the University as well as at various otherplaces in the State. Selected courses are given in farm management, agri-cultural machinery, plant protection, horticulture and animal husbandry.It also aids the extension wing of the Agricultural Department of HaryanaGovernment through special seminars. Together, the University and Departmentof Agriculture provide an integrated research, education, and extensionservice. The latter is of satisfactory quality, but needs strengthening in

the field of hydrology (para 3.04).

Agricultural Development Priorities

Introduction

2.12 Possibilities for extension of the area under cultivation arelimited. Since most of Haryana's suitable lands are already used, furtherincreases in agricultural production will have to be attained by sustainedimprovements in land productivity. Land productivity is determined by theextent of double cropping, the crops in the rotation, and yield levels; itsimprovement requires three sets of inputs:

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(a) irri,ation facilities to sustain intensified land usebotlh in terms of higher croppilng intensities and moredvemanding croPping patterns:

(b) farming systemas and tools whicil ensure timely culti-vation cycles: and

(c) availability and application of the ingredients ofimproved techinology, i.e. seeds, fertilizer, pesticides,etc.

On-farm investments for minor irrigation (Annex 1), land development, and,where anpropriate, farm mechanization (Annex 2) thus assume a very highpriority - next in importance only to the availability of current productionrequisites.

Minor Irrigation

2.13 Minor irrigation is becoming increasingly important in Ilaryana.Out of the present 1.7 million ha of irrigated land (para 2.08), about 30%or 500,000 ha are irrigated from groundwater sources (dug wells and tube-wells). These wells have made an important contribution to the increasedproduction in recent years in Ilarvana. The ARC (Annex 3) and the HaryanaSLMTB (Annex 4) have played an important part in their financing. SLMB loansfor minor irrigation represented 69% of total lending during the last threeyears and the number of loans for sinking dug wells and tubewells increasedfrom 1,000 in 1966/67 to 3,000 in 1967/68 and 10,000 in 1968/69. ARC hasrefinanced so far (up to June 30, 1970) a total of 6,500 tubewells and 1,500dug wells in Haryana State with an ARC contribution of Rs 43 million (US$5.8million). The State is well supplied with groundwater (deriving consider-able benefit from the Himalayan watershed) and except in limited areas (in-cluding Rhotak district) large tracts are very suitable for minor irrigationexploitation (Annex 1). Because of the often high water table tubewellsare usually quite shallow, not exceeding 30 m in depth. The Soil Conserva-tion Organization of the Ministry of Agriculture (SCO) has established 150observation wells under ongoing ARC schemes which are monitored once amonth during the first year after sinking and quarterly thereafter. Anincrease in the number of tubewells would require an increase in the numberof observation wells to monitor adequately changes in the water table todetermine future water development (para 3.05). In regard to the energiz-ing of wells, Harvana is the most advanced State in India; all villagesare now electrified, the first State in India to achieve this. Electricityrates to farmers (Rs 0.15 per kwh) are among the highest in India. Whereland is undulating and sandy, sprinkler irrigation has become popular withprogressive farmers since levelling of existing sand dunes is costly andloss of water through seepage from surface irrigation is high (para 3.06).

Mechanization

2.14 Since most of the land in Haryana is used for agriculture, in-creased agricultural production depends upon whether more land can be

double cropped, particularly under irrigated conditions. Mechanizationfacilitates double cropping enabling the farmer to make better use ofirrigation facilites, of new high yielding varieties and of fertilizers.Harvesting of the "kharif" crop (September/October), which is often rice orcotton, and land preparation for the planting of the "rabi" crop (November),which is mostly wheat, must be done speedily. In order to get optimumyields, wheat has to be planted within about 39 days of the harvesting ofthe previous crops. Delay beyond this period results in a progressive fallingoff of yields. More bullock power can achieve a limited increase in doublecropping, but above a certain intensity a further increase is very difficultto achieve because of the amount of land lost to fodder production to main-tain draft animals. In practice, however, this and other physical factors(labor shortage during the crucial period) combined with economic factors(maintenance for the whole year of additional draft animals which would beeffectively used only during a short period) have made farmers in Haryana,where wheat is the most important crop, turn to the use of tractors andharvesters. The latter maciine becomes particularly important in areaswhere wheat planting follows rice harvest. Due to this increasing demandfor tractors and a shortage of supply and unrealistic low tractor prices,a second hand market premium of up to 50% over new tractor list prices hasdeveloped (Annex 2). IDA has discussed tractor pricing with the IndianAuthorities and has been informed that GOI is taking steps to be releasedfrom arrangements binding tractors at a zero import duty under GATT; success-ful conclusions are expected in the near future.

2.15 In 1969 there were about 10,000 tractors in use in Haryana, manyof them very old models. The State Government and HAIC estimated the demandover the next three years, at current prices and price relationships (para2.04), to be an additional 10,000 tractors over and above the share whichHaryana would receive from Indian tractor production and scheduled imports,and ignoring replacements for obsolescence in the existing tractor park.A rise in tractor prices, requiring higher levels of utilization and causinga reduction in speculative purchases, would reduce this demand substantiallv,probably by as much as 25%. An analysis (Annex 2) shows that about 6,000additional tractors (taking into account Indian production and imports andallowing for obsolescence) could be used economically over the next threeyears without serious risk of over-capitalization of Haryana farmers andthis number of tractors would be provided under the Project (para 3.07).

2.16 Existing tractor manufacturers in India maintain about 40 tractorservice workshops in Haryana, 34 of which belong to dealers appointed bymanufacturers. There is an adequate network of private dealers who arerequired by the firms they represent to maintain designated standards inregard to workshops, servicing, repair, and spare part facilities. Theyoffer free warranty inspections, post-warranty service schemes at fixedannual rates together withi on-farm training of tractor operators and farmers.In addition, the Haryana Agro-Industries Corporation (HAIC) handles withinthe State the distribution, maintenance, and spare part facilities oftractors imported from East European countries. It also assembles Zetortractors with technical assistance from the parent Czechoslovakian company.Despite the private dealer and HAIC network of servicing units there are

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many small village repair shops which provide on-the-spot service at reason-able rates. Existing sales, repair, and servicing facilities are consideredadequate.

2.17 Tractor implements are manufactured in Haryana to a large extent.While not of the latest design, their prices are reasonable; quality, ex-cept for some hard steel components, which have to be imported, is satis-factory, and there is a sufficient supply.

III. THE PROJECT

A. Brief Description

3.01 The Project, which would be part of the lending program of SLMBand its federated Primary Banks (PLMBs) and commercial banks, would helpfinance over a period of three years farmers' investments in minor irriga-tion (29% of total investments) and farm mechanization (71%) for farmersand contractors, totalling about US$44.5 million equivalent. It also in-cludes provision for an initial set of spare parts for tractors and harvest-ing machinery. The Project would be implemented through the Haryana SLMBand its federated PLMBs and commercial banks (Annex 5) under refinancearrangements with ARC. It would involve about 11,000 loans for shallowtubewells and sprinkler irrigation to farmers and 6,000 loans for importedtractors, together with suitable implements, and 120 grain harvesters tofarmers or contractors. Incremental production arising from these invest-ments would mainly be in foodgrains, particularly wheat, and seed cottonand sugarcane.

3.02 The following table shows the investments expected to be madeover the three-year period:

AverageArea Average

Cultivated Number of Invest- Total

or Investments Total ment Invest-

Harvested in Year Project Area per Farm mentNo. of in Rs

in ha 1 2 3 Farms ha in Rs Million

1. Minor Irrigation:

a) Shallow tube-well: 0.3cusecs 3 400 800 800 2,000 6,000 5,500 11.0

b) Shallow tube-well: 0.4cusecs 5 600 1,200 1,200 3,000 15,000 7,700 23.1

c) Shallow tube-well: 0.5cusecs 8 1,000 2,000 3,000 6,000 48,000 9,000 54.6

d) Sprinklerirrigation 10 15 30 30 75 750 25,300 1.9

2. Tractors 20 1,200 2,400 2,400 6,000 120,000 26,965 162.0

3. TractorImplements 20 - - - - - 9,295 55.8

4. Harvesters:

a) Self-propelledcombines 200 4 8 8 20 4,000 140,000 2.8

b) Tractor drawnharvesters 100 20 40 40 100 10,000 25,000 2.5

TotalInvestment: 3,239 6,478 7,478 17,195 203,750 313.7

5. Initial SpareParts for Trac-tor, Combines& Harvesters - - - - - - - 20.2

TOTAL: 31239 6,478 7,478 17,195 203,750 333.9

B. Detailed Features

Minor Irrigation

3.03 Investments in minor irrigation would involve sinking about11,000 shallow tubewells (costing about Rs 5,000 to 9,000 each) and instal-lation of 75 sprinkler irrigation sets (Rs 25,000 each) in specified areas(Appendix 1-2 and Map). Shallow tubewells would be of 0.3, 0.4 and 0.5cusecs capacity, supplying, respectively, irrigation for about 3 ha (on about2,000 farms), 5 ha (about 3,000 farms) and 8 ha (about 6,000 farms). Intotal, about 69,000 ha (para 3.02) would be irrigated by these shallow tube-wells with a depth generally not exceeding 30 m; all would be electrified.Previously, fanners were required to deposit with the Haryana ElectricityBoard Rs 2,500 which formed part of the loan to the farmer. Since elec-trification in Ilaryana is now complete (para 2.13) such a deposit is nolonger required and would be excluded from financing under this Projectwith the exception of Rs 500 per tubewell for statutory connection chargeswhich are considered as capital costs.

3.04 Well drilling is presently done by local contractors; adequateequipment and skill are available locally to carry out this portion of theprogran. The lending banks (para 4.01) would, in all cases seek the tech-nical approval of the SCO, which would be responsible for the technicalappraisal of wells to be sunk under the Project. The technical competenceof SCO is satisfactory, but an increase in staff would be necessary to copewith the additional work involved. SCO should, therefore, appoint moretechnicians with a bachelor degree in engineering or geology and preferablyspecialized in groundwater hydrology. During negotiations assurances wereobtained that the Haryana Government would ensure that at all times theSCO has sufficient qualified technical staff available to provide lendingbanks with the necessary advice and assistance.

3.05 In order to provide additional data for proper water managementand utilization, the SCO would establish and monitor three observation wells(or about 300 wells) for each 100 shallow tubewells sunk under the Project;these would be in addition to the 150 existing observation wells (para 2.13).Monitoring would be done once a month during the first year after sinkingand quarterly thereafter. During negotiations assurances were obtainedthat such observation wells would be established and monitored. Until theadditional data referred to above becomes available, it is recommended that,as a precautionary measure, the minimum distance between each shallow tube-well should be 300 m with the exception of Rohtak district (para 2.13) whereit should be 500 m.

3.06 The Project would also help finance about 75 sprinkler irrigationsets (Annex 1), for which IDA contribution would amount to about US$130,000.Progressive farmers, particularly in sandy soils with undulating topography,have pioneered in this development and the GOI and State Government arejointly financing a small project covering 25 sets in 1971. In these areasirrigation is essential, and can be done either by sprinkler or surface

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irrigation. Surface irrigarion would irivol]ve costly land levelling (up toRs 7,500 per ha) and because of the hiigh seepage loss would necessitateadditional wells (Rs 1,600 per ha), whereas sprinkler irrigation requires atotal investment of only Rs 2,500 per ha, The Project would be limited tospecially selected areas in Lhe southwest of the State (see Map). Financefor this part of the Project wqould be only through PLMBs because of itsspecial character. The SCO would specially train two officers for thisdevelopment and ar assurance to this effect was obtained.

Mechanization

3.07 Loans for mechanizationi would be for imported tractors (about6,000), tractor implements and trailers (about 21,000), self-propelledharvesting combines (about 20) and tractor drawn harvesters (about 100). Ithas been estimated that farmners' demand for tractors would be about two-thirds in the 25-45 hp range and one-third in the 46-55 hp range. Thehigher-powered tractor unit is included to meet the need for greater horse-power availability on farms with increasing mechanization requirements,particularly in those areas -where wheat planting follows rice harvestingand for farmers or cont-ractors using more sophisticated implements such astractor drawn harvesters.

3.08 In order to obtain the maximum economic use of tractors, ARCwould ensure that lending baaks would apply as a norm for appraisal, theapplicant's ability to denionstrate Lhat the tractor would be used to cropnot less than 40 ha per vJear oi for 1,000 hours of productive agriculturalwork per year. Such criteria would apply to the applicant's own land, orto the land of other farmers (through custom work) or a combination ofboth.

3.09 Investments in tractor implements would include disc harrows andploughs, mould-board ploughs, spri:ng-tine cuLtivators, seed and fertilizerdrills, levelling b4.ades, tractor-nmounted power sprayers and trailers.In order Lo ensure maxmunum ;ractor: utilization and economic benefits, itis essential -Chat tractor owners should also possess at least the basictillage implements.. Because oL the short period between the kharif harvestand rabi planting (para 2.14) the sharing of such implements is often notpracticable. Accordingly, under the Project, all farmers or contractorswould be required to have at least three implements for use with theirtractors and this would be part of the appraisal criteria to be applied(Schedule A). Applicants would also be required to purchase post-warrantyservice on tractors for the life oJf the loan.

3.1.0 Investments in harvesting machinery, comprising about 20 self-propelled combines and about 100 tractor drawn harvesters, would extendmechanized harvesting which recent Punjab pilot projects have proved tobe both practicable and beneficial. Loan applicants for self-propelledcombines would be required to give evidence of an assured workload of atleast 200 ha per unit per annum, and for tractor drawn harvesters of 100 haper annum. The total area harvested would therefore be a minimum of about14,000 ha out of a total cropped area of 5 million ha and even if this was

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doubled it would cause no major labor displacement. Prospective borrowerswould be farmers, contractors and HAIC; the last already provides farm customservices. In order to permit worthwhile participation by private contractors,it is envisaged that HAIC investment in these items would be limited to 10self-propelled combines and 50 tractor drawn harvesters and during negotia-tions an assurance to this effect was obtained.

3.11 The Project would also include provision for an initial spareparts set of 15% of CIF value for tractors, self-propelled combines andtractor drawn harvesters.

C. Cost Estimates and Financing

Project Cost

3.12 Total Project cost is estimated at Rs 333.9 million (US$44.5million) of which 48%, Rs 159.1 million (US$21.2 million) would be foreignexchange. Cost estimates and foreign exchange requirements are:

Percent-Rs Million US$ Million age

Local Foreign Total Local Foreign Total FE

1. Minor Irrigation 86.1 4.5 90.6 11.5 0.6 12.1 5%

2. Tractors 31.5 130.5 162.0 4.2 17.4 21.6 80%

3. Tractor Implements 55.8 - 55.8 7.4 - 7.4 -

4. Harvesting Machinery 1.4 3.9 5.3 0.2 0.5 0.7 74%

Total Investment: 174.8 138.9 313.7 23.3 18.5 41.8 44%

5. Initial Spare Partsfor Tractors, Com-bines and Harvest-ers - 20.2 20.2 - 2.7 2.7 100%

Total Project Cost: 174.8 159.1 333.9 23.3 21.2 44.5 48%

Details of the cost estimates are shown in Annex 10. Estimates are basedon present prices including a 10% allowance for cost increases.

Financing

3.13 The total Project cost of Rs 333.9 million would be financed fromthe following sources:

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Farmers/ TotalContractors/ SLMB and Project IDADealers Comm. Banks ARC Cost Credit Funds

Rs Z ofRs % of Rs % of Rs % of Rs Mil- Project

Million Total Million Total Million Total Million lion Cost

1. MinorIrrigation 18.1 20 7.2 8 65.3 72 90.6 33.1 37

2. Tractors 40.5 25 30.4 19 91.1 56 162.0 130.5 80

3. TractorImplements 14.0 25 10.4 19 31.4 56 55.8 - -

4. HarvestingMachinery 1.3 25 1.0 19 3.0 56 5.3 3.9 74

Total Invest-mentProgram: 73.9 24 49.0 16 190.8 60 313.7 167.5 53

5. InitialTractor /1 /2Spare Parts 20.2-- 100 - - - - 20.2 20.2-100

TotalFinanced: 94.1 28 49.0 15 190.8 57 333.9 187.7 56

/1 Shown as CIF value. In addition, farmers/contractors would bear

dealers' markup.

/2 Dealers pay in cash on delivery of spares. As a local currencycontribution for minor irrigation investments, GOI would make availableto ARC the equivalent in rupees of the amount disbursed by IDA in foreign

currency for spares.

IDA contribution would be US$25.0 million or Rs 187.7 million (56% of Project

cost) covering foreign exchange cost (US$21.2 million) and, in addition,about: one-third of local costs in case of minor irrigation (US$3.8 million).

The t:ransfer by GO0 to ARC of the amount for spare parts (Rs 20.2 million)would increase IDA contribution to local costs of minor irrigation to about

56%.

3.14 Farmers would contribute at least 20% of total investment cost incase of minor irrigation; with the exception of small farmers (as definedby ARC) who would contribute 10% for tubewell investments costing less than

Rs 10,000 each; 25% would be the down-payment for farmers or contractors in

case of mechanization investments. Repayment period of loans would notexceed seven years (including one year of grace in the case of minor irriga-tion) with the exceptions of self-propelled combines where the repayment

period would not exceed five years and tubewell loans for small farmers when

the repayment period would not exceed nine years. The IDA credit would be

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on normal terms to GOI which would make the proceeds available to ARC, repay-able at the end of nine years at an interest rate of 5% per annum less 1/4of 1% rebate for prompt payment. GOI would bear the exchange risk. ARCwould on-lend the proceeds of the credit to the SLMB and participating com-mercial banks (para 4.01) at an interest rate of 6-1/2% per annum computedon outstanding indebtness. SLMB would in turn on-lend to its federated PLMBsat 7-1/2% per annum which would lend, like commercial banks, to farmers andcontractors under the Project, at 9% per annum. Assurances on these arrange-ments were obtained during negotiations.

D. Procurement and Disbursement

Procurement

3.15 Sinking of shallow tubewells and installing of sprinkler irrigationsets would involve small and labor intensive work on individual farms andwould not, therefore, lend itself to international competitive bidding.Adequate well drilling contract services are available within the State.

3.16 Tractors, including an initial set of spare parts, would be imported,but imports of makes would be limited to those which are from Bank-membercountries (and Switzerland) and have either manufacturing facilities inIndia or have been licensed to manufacture by GOI. Five firms have beenapproved as eligible for importing under this Project and a further sevenapplications are under consideration (Annex 2).

3.17 The method of tractor procurement proposed follows the arrange-ments agreed for the Gujarat, Punjab and Andhra Pradesh credit projectsand would combine bulk purchase based on farmers' demands with sales effectedthrough the normal dealership system (Annex 6). Arrangements would includethe establishment of a committee with representatives of GOI, the StateGovernment and ARC which would, in consultation with IDA, direct theprocurement of tractors (and other goods - paras 3.18 and 3.19). Organi-zational responsibility would rest with Haryana Agro-Industries Corporation(HAIC) (Annex 7), working under the direction of this committee, and it wouldbe responsible for obtaining price quotations from overseas suppliers inBank-member countries and Switzerland representing firms authorized to manu-facture tractors in India at the time of procurement. During negotiations,assurances were obtained that tractors would be procured only in accord-ance with these procedures.

3.18 Self-propelled combines (which are presently not manufactured inIndia) and tractor drawn harvesters (which are) would be procured by inter-national competitive bidding, with a level of preference of 15% or prevailingcustom duties (presently 27-1/2%), whichever is lower, applying to Indiansuppliers. Bids would only be sought against approved loan applications forthese items which would then be bulked to a value of at least US$100,000equivalent for purchase by dealers (Annex 6). Assurances were obtained on thismatter during negotiations.

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3.19 Tractor implements, including trailers, would be supplied fromIndian manufacturers. Their capacity is considered adequate to meet Projectrequirements and prices are reasonable, but there is a shortage of certainimplement components requiring hard steel. Accordingly assurances wereobtained that GOI would make available in good time sufficient hard steelof the proper quality for use in manufacturing plough bottoms, discs andsprings needed for the implements required under the Project.

3.20 Initial spare parts for tractors and harvesters (at 15% of theCIF value) would be imported under the Project. Additionally, it wouldbe agreed that annually over the succeeding four years after disbursement,GOI would make available foreign exchange for spare parts for each make oftractor and harvester imported under the Project, equal to 10% of their CIFprices or such other percentage as agreed between GOI and IDA from time totime.

Disbursement

3.21 IDA disbursements are expected to extend over 3-1/2 years(Annex 8) and would cover the CIF cost of tractors, initial tractor spareparts, self-propelled combines and tractor drawn harvesters and initialspare parts. If tractor drawn harvesters were supplied by Indian firms,disbursement would cover ex-factory cost. Disbursements would be 46% ofloans disbursed for minor irrigation against appropriate statements.

IV. ORGANIZATION AND MANAGEMENT

Introduction

4.01 Several financing institutions would be involved in the Project(para 3.14). Primary responsibility for Project implementationwould restwith ARC which would control the lending operations of SLMB and participatingconmercial banks. Coordination and assistance at technical level are givenby a committee established by the State Government and by a project officer,supported by a staff of technicians, provided by the Government.

Agricultural Refinance Corporation (ARC)

4.02 ARC has been the channel for three IDA agricultural Credit proj-ects, in Gujarat, Punjab, and Andhra Pradesh. It is, therefore, well-knownto IDA and is considered a suitable institution for the overall administrationof this Project. It is described in detail in Annex 3.

4.03 The only major change in ARC's lending policy since the appraisalof the Andhra Pradesh Project has been an increase in its lending rate from6 to 6-1/2% per annum. There has been no change in the staffing position.A medium-term staff development program has been prepared by ARC at therequest of IDA.

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4.04 ARC would ensure that all lending banks follow policies andprocedures agreed with IDA (Schedule A). Loan agreements, acceptable toIDA, would be entered into between GOI and ARC (this agreement incorporat-ing the terms and conditions specified in para 3.14) and between ARC andSLMB (which would incorporate the revised SLMB lending procedures detailedin Appendix 4-5) and the execution of such agreements would be a conditionof credit effectiveness. ARC would also enter into loan agreements, accept-able to IDA, with participating commercial banks.

4.05 ARC would be responsible for selecting the commercial banks whichcould satisfy its criteria for participation in the Project. However, suchbanks would not participate in lending for sprinkler irrigation as thescheme is small and appraisal and supervision are closely related togovernment trained extension services. Assurances were obtained thatcommercial banks would be invited to participate in the Project.

4.06 ARC would instruct participating commercial banks to maintainseparate accounts for Project lending and would ensure that such accountswere audited by auditors acceptable to IDA (para 4.17). ARC's own auditor:;would continue to be subject to IDA approval.

Haryana State Cooperative Land Mortgage Bank (SLMB)

Organization and Management

4.07 The SLMB (Annex 4) was registered on October 17, 1966, on thecreation of the State of Haryana out of a reorganized State of Punjab. Itis an apex organization for a network of 23 Primary Land Mortgage Banks(PLMBs). Since PLMBs can only borrow from the SLMB, which also providesall PLMB staff on secondment, the SLMB and its federated primaries havean operational relationship similar to that of a bank head office to itsbranches.

4.08 SLMB's operations are regulated by the Cooperative Land MortgageBanks Act, 1957 and the Cooperative Societies Act, 1961. Its 15-memberBoard consists of 10 members elected by PLMBs, three nominated by the StateGovernment and one each nominated by the State Cooperative Bank and theRegistrar of Cooperatives. The Board, which works through a nine-manExecutive Committee, appoints the Secretary (subject to the approval of theRegistrar of Cooperatives), who is the chief executive. He is assisted bytwo assistant secretaries and a staff of 245, including those on secondmentto PLMBs. The PLMBs, with a total voting membership of some 40,000, alsoelect their own committees which control their operations whilst the managers(on secondment from SLMB) are the chief executive officers.

4.09 As elsewhere in India, SLMB's operations have previously beenconcerned with loans based on the value of collateral instead of on devel-opment criteria. A technical section is, therefore, being established inthe SLMB consisting of an agricultural economist, a chief inspecting officer,and two inspecting officers, to be responsible for the overall guidance,control, and training of the Land Valuation Officers (LVOs). The twoinspecting officers are already in post. In addition, each PLMB would be

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provided with a technical officer ( a graduate in economics or agriculture)who would be in overall charge of loan appraisals at primary level. ThePLMB managerial staff vwould also be strengthened and steps are being taken torecruit 17 more highly-qualified managers. Six such appointments havealready been made. Assurances were obtained that SLMB would appoint anagricultural economist and a chief inspecting officer and this would be acondition of Project effectiveness. Assurances were also obtained thateach PLMB (23) would be provided .with a qualified manager and a technicalofficer within 12 months of Project effectiveness.

Resources

4.10 The SLMB derives its resources from share capital contributed byPLMBs and the State Government; the issue of ordinary, rural and specialdebentures; and short-term borrowing from the State Cooperative Bank andcommercial banks (Annex 5). As at June 30, 1970: paid-up share capitalamounted to Rs 11.7 million (US$1.6 million) of which the State Government'scontribution was Rs 3.5 million (US$0.5 million) or about 30%; ordinarydebentures outstanding were Rs 90.4 million (US$12 million); rural debenturesRs 2.4 million (US$0.3 million); and special debentures Rs 64.9 million(US$8.6 million). Borrowings may not exceed 25 times the paid-up capitalplus reserves.

4.11 The main sources of funds of PLMBs are members' share capital(each borrower must own share capital equal to 5% of loans), loans fromthe SLMB, and undistributed profits. As at June 30, 1970, total sharecapital of all 23 PLMBs amounted to Rs 11 million (US$1.5 million) whilsttotal outstanding borrowings from SLMB amounted to Rs 156.6 million (US$21million). Borrowings may not exceed 25 times the paid-up share capital.

Operational Results

4.12 The SLMB's loan portfolio has increased from Rs 16 million (US$2million) as at June 30, 1967 to Rs 157 million (US$20 million as at June 30,1970 whilst the number of loans approved increased from 1,000 in 1966/67 to11,000 in 1969/70. Loans for minor irrigation represent about 69% of totalportfolio and farm machinery loans 25%. Since SLMB presently chargesPLMBs 6-3/4% per annum, its spread between borrowing and lending rates isvery narrow, averaging less than 3/4%. Nevertheless, it has made profits(RS 738,000 or US$100,000 for 1969/70) and as at June 30, 1970 reserves andundistributed profits amounted to Rs 1.5 million (1% of loan portfolio).ARC's lending rate to SLMB has recently been increased from 6% to 6-1/2% perannum and the lending rate to farmers will be increased from 8-1/4% to 9%per annum (para 4.03). The additional 1/4% resulting from these adjustmentswou:Ld accrue to SIMB (giving it a Spread of 1%) to help meet the expenses

of the newly established technical section (para 4.09). The collectionrate for loans to PLMBs is 100%.

4.13 Operating results of PLMBs vary according to their size and location,but all are profit earning. Collectively their profits are larger than thoseof SLMB (their lending margin is 1-1/2%), Rs 350,000 (US$50,000) in 1968/69compared with SLMB's Rs 275,000 (US$37,000). Loans are well secured andoverdues negligible, less than 1% overall.

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Accounts and Auditing

4.14 The accounting system has been adequate to cope with the volumeof business so far, but the increase envisaged would require some improve-ments to be made. The SLMB, in conjunction with the State Government, hasestablished a committee which is reviewing procedures and systems but inthe meantime, a post of Assistant Secretary (Accounts) has been created andrecruitment of a qualified accountant is underway. The accounts of the SLMBand PLMBs are audited by independent auditors from the State CooperativeDepartment, which is the usual Indian practice, and the audit is satisfactory.Assurances were obtained that the accounts of SLMB and PLMBs would con-tinue to be audited by independent auditors acceptable to IDA.

Commercial Banks

4.15 There are 20 commercial banks operating in Haryana of which 13are nationalized (Annex 5). Together they provide about 219 branchesthroughout the State, the most important being the State Bank of India(62 branches), the Punjab National Bank (45) and the Central Bank of India(37).

4.16 Until recently, as elsewhere in India, commercial bank lending toagriculture was very small. However, with the encouragement of GOI it issteadily increasing, and during 1968/69 twelve banks advanced between themRs 2 million (US$270,000) for agricultural inputs, Rs 2.2 million (US$290,000)for tractors, and Rs 4 million (US$540,000) for tubewells. Banks normallyrequire a downpayment by borrowers of between 25 and 33-1/3% and securityrequirements consist of a charge on equipment purchased and usually, thoughnot invariably, a mortgage over land to the extent of double the amount ofthe loan. Interest rates range from 8-1/2 to 9-1/2% per annum and repaymentis usually required within five years.

4.17 Commercial banks would be included among the lending institutionseligible for ARC refinancing under the Project with the exception ofinvestments in sprinkler irrigation (para 4.05). Commercial bank partici-pation would provide farmers with an alternative source of loans outsidethe PLMBs, thus giving a degree of competition in service, would increasethe number and coverage of banks available for Project lending and wouldutilize the services of the technical staffs which several of the banks arenow engaging. Such banks would, however, be required to agree that theywould accept the terms laid down by ARC for Project loans and would applythis same criteria and interest rates to all lending for similar purposes.They would also be required to agree to maintain separate accounts forProject funds and such accounts would be subject to audit by auditors accept-able to ARC and IDA (para 4.06).

Haryana Agro-Industries Corporation Ltd. (HAIC)

4.18 HAIC's organizational role in the Project would provide themechanism required to carry out the various procedures involved in establish-ing farmers' tractor requirements and arranging for the procurement ofgoods under the Project. In all deliberative matters, HAIC would be under

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the direction of the committee to be established for the purpose (para 3.17)and there would, therefore, be no conflict of interest if a tractor manu-facl:urer decided to use its facilities as distributing agent.

Lending Policies and Terms

4.19 Loans would conform with agreed terms and appraisal criteria(paras 3.03 through 3.10 and Schedule A) and investments would be evaluatedin terms of incremental returns resulting from the additional investmentsin accordance with evaluation methods developed by ARC. Interest rates,repayment periods, and farmers' contributions would be as specified inpara 3.14.

4.20) Assurances on the above were obtained. In addition, assuranceswere also obtained that for all similar types of lending participatingbanks (SLMB, PLMBs, and commercial banks) would apply the same criteria asfor Project loans and would not charge lower interest rates, except forschemes submitted tnder the aegis of the Small Farmers Development Agencyin Haryana.

V. PRODUCTION, MARKETING, PRICES AND FARMERS' BENEFITS

Procluction

5.01 Under the Project, about 69,000 ha would be irrigated which wouldenable about 11,000 farmers to increase their cropping intensity and obtainmore reliable yields from areas which presently depend on uncertain rainfall.Tractors supplied under the Project would increase cropping intensity onabout 120,000 ha, providing power needed for 200,000 - 300,000 ha of crops(including custom work). At prevailing prices farmers are likely to expandcrop acreages and production in the direction of foodgrains, cotton andsugaLrcane. On this basis the increase in production (at full development)could well be about 215,000 tons of foodgrains (mainly wheat), 67,500 tonsof seed cotton, and 780,000 tons of sugarcane (Annex 9). Price changes(para 5.03) could, however, alter the crop mix and consequently incrementalproduction.

Marketing

5.02 The Haryana Agricultural Marketing Board is mainly responsible forsurplus foodgrain storage and marketing in Haryana. It would handle mostof the incremental production of foodgrains arising out of the Project.This increment, estimated at full development at about 215,000 tons annually,is about 5% of the present production in Haryana of about 4.5 million tons(1969/70). As Haryana's production exceeds the State's domestic consumption,increased output would be consumed in foodgrain deficit States within India.In Haryana, 60 regulated markets have been established, which levy a fee of1%, but the farmer receives a regulated price and does not have to sell tomiddlemen. Considerable investments in storage facilities are plannedwithin the fourth Five-Year Plan; IDA is considering financial assistancefor a wheat storage project in India of which a large part would be in Har-yana. With the planned grain storage investments, the existing marketingorganizations would be able to handle estimated production increases.

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Prices

5.03 GOI expects that self-sufficiency in foodgrains in India would bereached within this decade. While it remains India's policy to encourageagricultural production through price incentives, a substantial increasein its foodgrain production would lead to a decline in prices. Predictedworld market prices of wheat in 1975, for example, are about 35% lower thanpresent prices in llaryana. 1/ Uncertainties over future food policy in Indiamake price forecasting in general very difficult, but the sensitivity offinancial returns to farmers of Project investments have been tested (para5.04).

Farmers' Benefits

5.04 On the basis of investment costs, estimated yields and presentprices, detailed in five models (Annex 10), farm family incomes excludingthe wages of family labor but after debt service would increase as follows:

MODEL I IT III IV VMIechanization

Shallow Shallow Shallow 35 hp TractorType of Tubewell Tubewell Tubewell Sprinkler Plus

Investment 0.3 cusecs 0.4 cusecs 0.5 cusecs Irrigation Three Implements

Irrigated Irrigated Irrigated Irrigated CultivatedArea Cultivated Area 3 ha Area 5 ha Area 8 ha Area 10 ha Area 20 ha

Investment Cost Rs 5,500 Rs 7,700 Rs 8,800 Rs 25,300 Rs 36,260

Net Income (in Rs)

At Present 425 627 1,067 1,261 7,183

At Full Develop-ment /1 2,636 4,378 5,910 10,025 19,601

Increment 2,211 3,751 4,843 8,764 12,418

Debt Service(Interest andPrincipal) 891 1,248 1,426 3,272 4,925

Increment AfterDebt Service 1,320 2,503 3,417 5,492 7,493

/1 In fourth year investment; yr 3 = 90%, yr 2 70%, yr 1 35%.

These five illustrative types of various farm enterprises show that substan-tial increases in the net incomes of such farmers or group of farmers wouldresult from the proposed investments when combined with the use of improved

1/ The world market prices are those projected by the Trade Policies andExport Projections Division of IBRD's Economics Department.

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seeds, fertilizer, assured water supply and other annual inputs at levelswhich can reasonably be expected. On moderately well-managed farms, thefinancial rate of return is estimated to range from 39 to 66% at presentprices and costs for minor irrigation investments, and to be about 40% inthe case of mechanization (Annex 11). At world market prices, the financialrate of return to farmers would drop sharply to a range of 22-27% for minorirrigation and 15% for tractors but would still be adequate. The key factoraccounting for this is the high current market price for wheat which is pricedat about 50% above world market prices.

5.05 At presently contemplated levels of mechanization (para 2.15),economic benefits would justify further investments in tractors. Possibili-ties for crop intensification could generate sufficient additional employ-merit to more than offset the labor displacing effects of proposed levels ofmechanization which would in turn result in a more even spread of employmentthrough the year. At prevailing prices the real danger is that individualfarmers may underutilize their tractors since they can achieve high financialreturns with low levels of utilization. Higher tractor prices would dis-courage investment in tractors unless high levels of utilization could beachieved (Annex 2). IDA has, therefore, made representations to GOI onseveral occasions and GOI is discussing with GATT possibilities of releasefrom arrangements binding tractors at a zero import duty. In the interimthere continues to be an active secondhand trade in tractors at premiumprices especially of tractors imported from Western countries.

5.06 Total government revenue from land tax and water charges in1969 averaged only Rs 2.01 (US$0.27) per ha. Since this is not related tofarmers' actual net income or water use the Project would not generate anyadditional direct tax. Indirect tax benefits would accrue to GOI and StateGovernment through a tax levied on tractor and machinery sales (at present6%) which is estimated to bring in about Rs 14 million.

VI. BENEFITS AND JUSTIFICATION

6.01 The Project would benefit at least 20,000 Haryana farmers invest-ing in minor irrigation and farm mechanization including many small farmerswho would be able to take advantage of tractor custom services and tubewellfacilities. Benefits to the Indian economy would be: first, a higher croppingintensity, resulting from investments in minor irrigation and mechanization,which would increase the production of foodgrains and other commercial crops(para 5.01); second, the availability of more water and power would resultin a shift in the cropping pattern toward more valuable and labor intensivecrops (e.g. pulses to wheat); third, higher yields would be obtained byapplying reliable irrigation facilities and timely cultivation practices(through mechanization) so enabling better use of available high yieldingvarieties and fertilizers. Since yields would no longer depend on uncertainrainfall, production would not fluctuate so widely as in the past. SinceIndia is at present not self-sufficient in foodgrains, vegetable oils andcotton increased production of these commodities would result in foreignexchange savings. Gross production value of crops at full production wouldincrease by about US$32 million equivalent annually.

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6.02 The rate of return to the economy would be high if the value offoodgrains is calculated on present prices, but these are high comparedwith world market prices and at the existing exchange rate. Wheat prices,for example, the main cash crop grown by Project farmers are 50% abovepredicted world market prices for 1975. Making the appropriate adjustmentsin respect of taxes, and taking expected world market prices, the overallrate of return to the economy would be in the range of 22 to 27% for irrigationand 15%". for mechanization. A sensitivity test using a rate of exchange whichreflects more closely the effective cost of imports (which normally bear aduty of 27.5%) gives economic rates of return ranging from 29 to 35% forirrigation and 17% for mechanization.

6.03 In calculating Project returns, secondary benefits such as thedomestic value added by processing project products have not been taken intoaccount. In addition, there would be other indirect benefits which aredifficult to quantify, such as incremental production from farm custom work,the demonstration effect on other farmers, the strengthening of lending ins-titutions and the Government Soil Conservation Organization, and reinvestmentsof farmers' income in agriculture. Further, increased double cropping andshifts to more labor intensive crops would mean more year-round employmentfor farm workers. Though not quantifiable, these factors would enhance theProject's already adequate economic justification.

VII. RECOMMENDATIONS

7.01 During negotiations, the following main assurances were obtained:

(a) tractors and their initial spare parts would be importedon the basis of farmers' choice and through arrangementsfor bulk procurement described in Annex 6 (para 3.17);

(b) self-propelled combines and tractor drawn harvesters andinitial spare parts would be procured through internationalcompetitive bidding (Indian suppliers having, in respectof harvesters, a 15% preference or prevailing custom dutieswhichever is lower), through arrangements for bulk procurementdescribed in Annex 6 (para 3.18);

(c) lending banks would follow agreed lending policies andprocedures as set out in Schedule A, (para 4.04); and

(d) the SLMB would provide each PLMB with a qualified managerand technical officer within 12 months of Project effectiveness(para 4.09).

7.02 Conditions of credit effectiveness would be:

(a) the execution of subsidiary loan agreements between GOIand ARC and ARC and SLMB acceptable to IDA (para 4.04); and

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(b) the appointment by SLMB of an agricultural economist anda chief inspecting office (para 4.09).

7.03 The proposed Project is suitable for an IDA credit of US$25.0million under normal IDA terms.

May 13, 1971

SCHEDULE APage 1

INDIA


GENERAL LENDING TERMS AND CONDITIONS

The following lending terms and conditions would be used inimplementing the Project and would not be altered without the prior agree-ment of IDA:

(a) loans for minor irrigation investments would include notmore than Rs 500 for electricity connections for eachtubewell (para 3.03);

(b) minor irrigation loans would be individually appraisedand would require the technical approval of the SoilConservation Organization (para 3.04);

(c) tractor loans would be made only to those applicantswho could demonstrate that the tractor would be usedto crop not less than 40 ha per year or for 1,000 hoursof productive agricultural work per year. Such criteriawould apply to the applicant's own land, or to the landof other farmers (through custom work) or a combinationof both (para 3.08),

(d) all borrowers for tractors under the Project would berequired to have at least three implements for use withtheir tractors and would also be required to purchasepost-warranty service on tractors for the life of theloan (para 3.09);

(e) loan applicants for self-propelled combines would berequired to demonstrate an assured workload of at least200 ha per unit per annum and for tractor drawn harvestersof 100 ha per unit per annum and not more than 10 combinesand 50 harvesters would be provided for HAIC (para 3.10);

(f) interest payable by ultimate borrowers would be at therate of 9% per annum (para 3.14);

(g) borrowers would be required to contribute 25% of totalcosts for tractors, implements, combines, and harvestersand 20% of other investments; provided however that smallfarmers as designated bv ARC would be required to contributeonly 10% of total costs in respect of tubewell investmentscosting less than Rs 10,000 each (para 3.14);

SCHEDULE APage 2

(h) repayment period for loans would not exceed seven years(including one year of grace in the case of minor irri-gation investments) with the exceptions of loans forself-propelled combines where the period would not exceedfive years and loans to small farmers for tubewell investmentswhen the period would not exceed nine years (para 3.14);

(i) investments would be evaluated in terms of incrementalreturns resulting from the additional investments inaccordance with evaluation methods developed by ARC(para 4.19); and

(j) for all similar types of lending participating bankswould apply the same criteria as for Project loans andwould not charge lower interest rates except for schemessubmitted under the aegis of the Small Farmers DevelopmentAgency in Haryana (para 4.20),

February 23, 1971

ANNEX 1Page 1

INDIA


MINOR IRRIGATION

A. Geologic and Hydrologic Conditions in Haryana

1. The State of Haryana is situated on the Indo-Gangetic plain formedby the deposition of alluvial sediments principally by streams draining theHimalaya Mountains on the north. The Himalayan uplift created a depressionbetween the mountains and the Deccan Plateau in the south; hence, streamsfrom both north and south have contributed to filling the depression. Geo-physical surveys indicate that the floor of the depression included irreg-ularities and ridges. A buried ridge with a northwest strike extends underthe plain in Haryana towards the Salt Range in West Pakistan. This ridgemay have obstructed the movement of groundwater from the high rainfall areasto the north thus contributing to saline and waterlogged conditions in someparts of the central plain. The Siwalik hills border the northeast portionof Harvana and streams draining this area undoubtedly provide a significantrecharge to the groundwater reservoir underlying the plain. The Aravallihills are composed of rocks of Pre-Cambrian age and outcrop in parts ofHissar, Mohindergarh and Gurgaon Districts. In some places these hills aredrained by streams running in a northeasterly direction.

2. The alluvial deposits range in age from Pleistocene to recent andvary in thickness up to 1,200 m 1/. The deposits consist of silts, sands andclays with occasional gravel beds. Irregular concretions of calcareousmatter which are found in the older deposits are referred to as Kankar.

3. Precipitation decreases from the northeast in Ambala District whereit averages about 1,200 mm annually to the southwest in Hissar Districtwhere in some places it is less than 300 mm. Over 70 percent of the rain-fall occurs during the moonsoon season of July, August, and September, althoughsome precipitation usually occurs during January and February. The follow-ing table gives the average annual precipitation for each District for theperiod 1942-48 to 1968-69:

1/ Physical Geography by Dr. S.L. Duggal, Haryana Agricultural University,Hissar, India.

ANNEX 1Page 2

District Precipitation (mm) District Precipitation (mm)

Ambala 1,201 Gurgaon 558Karnal 674 Rohtak 534Jind 610 Mohindergarh 527

Hissar 401

4. The Jamuna River forms the western boundary of the State andsupplies a large portion of the water used for irrigation. Together wiShthe Bhakra system these streams supply an average of about 10 billion mannually to the State. A substantial increase in the quantity of wateravailable for irrigation is anticipated when the Ravi-Beas diversion schemeis completed. The additional water supply will be diverted to Mohindergarhthrough the existing Dadri channels and Dadri Lift Scheme; to Gurgaon Dis-trcit: through the Gurgaon Canal and Rewari Lift Scheme; to Hissar Districtthrough the existing Bhakra Canal System, Jui Lift Scheme and Loharu LiftSchem.e. The additional canal water will provide an important new sourceof water for lands not presently irrigated and supplemental supply for landsnow short of water. In addition, the recharge to the groundwater reservoirwill be significantly increased.

5. The Ghaggar River forms the northern boundary of the State. Ithas a perennial flow in the upper reaches, but only in monsoon season doesits flows reach the western boundary. Nevertheless, it contributes signi-ficant quantities of water for irrigation as well as to groundwater rechargewhich is of good quality.

6. Except for two large tracts of .oam, most soils of the State areclassified as sandy loam or loamy sand. One tract of loam includes blocksof Mehan, Rohtak, Gohana, Mudlana and Kathura. The other includes blocksof Assandh, Rajaund, Pundri, Kaithal, Guhla, Nissong, Nilokheri, Thanesar,Shahabad, Ladwa, Karnal and Barara.

7. In the southiern part of the State, wind erosion is prevalent andin places sand dunes of varying magnitude have formed which make cultivationdifficult. In the sand dune areas gravity irrigation is especially diffi-cult as the light textured soils are conducive to high seepage losses fromwatercourses and from irrigation applications. Becausl of low waterholdingcapacity of the soils frequent applications are required.

B. Present Groundwater Development

8. In 1968/69, about 1.3 million ha were irrigated in laryana ofwhich 907,000 ha were supplied by canals and 405,000 ha from wells and otherminor sources. The following table gives details by District:

ANNEX 1Page 3

Irrigation Data in Tlaryana by DistrictsArea Irrigated 1968/69 in '000 ha

District Canals Wells/L Total % of Sown Area

Ilissar 444 9 453 45.3Rohtak 168 59 227 48.3Gurgaon 20 129 149 32.4Karnal 162 155 317 51.2Ambala 6 27 33 13.7Jind 97 4 101 46.5Molhindergarh 10 22 32 11.8

Total 907 405 1,312 40.1

/1 Source - Statistical Abstract of Haryana 1969/70./2 Including other minor sources.

9. Irrigation from wells is not new to Haryana. From time immemorialPersian wheels and "charsa" 1/ irrigation have been practiced, but the areairrigated in this manner was usually less than 0.4 ha per well. With theavailability of centrifugal pumps and electric or diesel power much moreland could be served. By 1970 some 50,000 tubewells were in operation,which utilized an estimated 3.9 billion m3 of groundwater.

10. The aquifers supplying the shallow tubewells in Haryana range intexture from fine to coarse sand. Two distinct types of tubewell construc-tion have, therefore, been developed. In one type a "coir" strainer, madeof coconut fiber, is used and in the other type no strainer is used but acavity is developed around the open end of the casing. Both are drilled byhand and are connected directly to a centrifugal pump. Wells are drilledby local "Mistries" who have gained considerable knowledge of local con-ditions and are skilled in the art of drilling under the prevailing condi-tions. Cost estimates of typical tubewells are given in Appendix 1-1. Welldischarge varies from 0.3 to 0.5 cusecs from depths ranging from about 20to 50 m. Where the well cannot be located on the highest point on the farmwater must be conveyed from the pump in a lined (or "pucca") channel orpipe to serve the commanded area. For this reason the cost of the "pucca"channel is included in the cost of the tubewell. The principal cause oftubewell failure in Haryana is inadequate length of blank casing in tubewellsequipped witlh strainers. The "coir" strainers function satisfactorily fora period exceeding 7 years if they are in the zone of saturation at alltimes. Deterioration seems to occur, however, if the strainers are subjectedalternately to saturated and unsaturated conditions. The SCO should adviseon placement of strainers and amount of blank casing needed for such wells.

1/ Shallow well from which water is lifted to surface in a leather bucketby bullock power.

ANNEX 1Page 4

C. Proposed Croundwater Development

Tubewells

11. The Project would increase minor irrigation facilities by theinstallation of about 11,000 tubewells together with electric pumps (in-cluding electrical connections not exceeding Fs 500 per well) and "pucca"channels where needed. These wells would irrigate about 69,000 ha. ThePrc,ject would also include financing for about 75 sprinkler irrigations setswhich is discussed below (para 12). The Project would include tubewells inall Districts of Haryana except Mohindergarh but this District is includedin the area to be irrigated by sprinkler. The following table shows thenup er of tue-T-Flls incl'ded in the Project by District:

Number of Tubewells

District Number

Jind 400Ambala 3,050Gurgaon 1,900Rohtak 1,500Hissar 1,160Karnal 2,990

Total 11,000

Sprinkler Irrigation

12. Over the last decade, there has been a progressive growth in theuse of sprinkler irrigation in India, but, until recently, its use has beenconfined mostly to orchard and plantation crops. Sprinkler irrigationequipment is manufactured in India by four firms. One of these firms(Premier Irrigation Equipment Ltd. Calcutta), is also the main source ofsearn-welded aluminum tubing, but extruded aluminum pipes are also producedby Indian Aluminum Company. Supplies are adequate and the quality of theequipment is satisfactory and prices reasonable by international standards.

13. Over large parts of Haryana, and in particular in the southwestof the State (Curgaon, Mohindergarh and Hissar districts - see map) con-ditions favor the use of sprinkler irrigation. In these areas, alluvialplains alternate with light sandy undulations, restricting the effectivecommand area of a tubewell under normal flow irrigation arrangements.

14. To explore alternative solutions to this type of problem area,GOT has established, with technical assistance from U.S.A.T.D., fourregional soil and water mnnagement pilot projects of which that at Patiala,Punjab, is operating under conditions similar to those of Haryana. In this

ANNEX 1Page 5

project, an attempt is being made to evaluate such alternative solutionsas land levelling, surface irrigation with channel lining, and/or under-ground low pressure pipes, and sprinkler irrigation systems.

15. Already, however, a few farmers in Haryana have installedsprinkler systems on their own account. For larger-scale demonstrationpurposes, during the three years 1971/72 to 1973/74 (financed partly byGOI and partly by State Government funds), 25 sprinkler irrigation setswill be installed, under the supervision of the SCO, in eight prescribedblocks of Hissar, Mohindergarh and Gurgaon districts, on farms of not lessthan 8 ha already possessing a tubewell. These are in addition to the75 sets proposed under the Project.

16. At the end of the demonstration period, the farmer will be giventhe option of purchasing the equipment installed by SCO and, where neces-sary, will be assisted in obtaining a loan from the SLMB for this purpose.If he does not wish to make this investment, the apparatus will be removedfor reuse on another farm.

Factors Favoring the Adoption of Sprinkler Irrigation in Haryana

17. Present indications are that, under characteristic topographicalconditions in Haryana, with slopes frequently exceeding 5%, land levellingcosts (up to Rs 7,500 per ha) exceed the investment costs of sprinkler irri-gation (Rs 2,500 per ha). Moreover, because of the permeability of thesoils water losses are less with sprinklers than with channel irrigation eventhough the channels are lined. Additional investments in wells would also berequired (Rs 1,600 per ha) to cover the same area by surface irrigation.Labor costs are lower under sprinkler irrigation systems and irrigationefficiency higher. This is partly due to the better uniformity of application(often resulting in higher yields) and the likelihood of less spillage loss.These conclusions are illustrated in Annex 9. The model shows that a holdingof 10 ha with a tubewell able to irrigate effectively only 3 ha by surfacewater, can cover the whole of the area under sprinklers because of the moreefficient use of the water. Costs have been conservatively calculated toinclude a reservoir to provide sufficient water as a safeguard againstvariations in tubewell discharge, together with a new pump to operate thesprinkler system.

18. Moreover, it has to be borne in mind that land levelling involvesa period of lower yields until the fertility of the top soil is built up,and flow irrigation involves loss of cultivated area for channelling pur-poses, unless underground piping is installed.

Special Considerations

19. Sprinkler irrigation is a relatively sophisticated type of irri-gation that calls for specialist advice as to the best design/layout,wlhich needs to be tailored to the requirements of an individual farm, andalso for its subsequent operation. Two officers of SCO would receive thenecessary additional technical training at the GOI Regional Soil and Watermanagement Pilot Project at Patiala.

ANNEX 1Page 6

D. Factors Affecting Project Formulation

Recharge of Groundwater

20. The amount of groundwater that can be developed in Hlaryana islimited mainly by the magnitude of recharge to the aquifers supplying thewells. The recharge is closely related to rainfall and canal irrigation.In the northeastern part of the State (Ambala District) the average annualprecipitation is about 1,200 mm and recharge is substantial both bvprecipitation directly on the area and by runoff from ,treams draining theSiwalik hills. The Cheturvedi formula, R 2(R-15) , where R = re-charge per annum and R = average annual rRinfall, gives an estimRte ofrecharge from precipitation. Recharge is also provided by such streamsas the Ghagger and Jamuna Rivers and other perennial and ephemeral streams.

21. Even though surface water supplies are insufficient to meet thefull irrigation requirements of the areas commanded, the recharge associatedwith canal irrigation is large. In most such areas waterlogging eitherhas already occurred or is imminent. Groundwater pumping in these areaswould not only provide water for irrigation, but would help prevent oralLeviate waterlogging. A decline of the water table in areas threatenedwith waterlogging would reduce nonbeneficial consumptive uses and therebymake additional water available for crops.

22. The total canal water presently available to Haryana is about10 billion m3 annually, which is estimated to provide about 5.8 billion mrecharge. Assuming that this quantity was pumped on the farms, theregenerated recharge would be about 2 billion m3. Thus, the total rechargefrom canal irrigation with one recycling would be 7.8 billion m3, only 3slightly less than the canal imports. Assuming an application of 6,000 mper ha for the 0.4 million ha irrigated by wells in 1968/69, there would beabout 5 billion m3 of groundwater annually available for development.

Local Overdevelopment

23. Local overdevelopment of the groundwater resources may occurwhen the total withdrawal in any area exceeds the total recharge. As-suaing an irrigation application of 24 inches (600 mm) of canal water anda farm application efficiency of 60%, the ground water depletion for eachwell serving 10 acres (4 ha) would be (24.0 - 9.6) x 10 = 12 acre feet

3 12(15,000m ). Wells spaced 300 m could have an effective drawdown area ofabout 7 ha and would require an annual recharge of about 2,000 m3 per ha toavoid some degree of groundwater mining. This could be provided by precipi-tation on the area and seepage losses from canals and distributaries. InRohtak District where canal irrigation is not so extensive, wells spaced at500 m could have an effective area of drawdown of about 16 lia.3 For a wellserving 4 ha the required recharge per ha would be about 370 m . This wouldbe provided by precipitation directly on the area and by infiltration fromephemeral streams during the monsoon.

ANNEX 1Page 7

24. Spacing of wells cannot be accurately determined for any specificarea without detailed study of the hydrologic conditions affecting re-charge and discharge of groundwater. For this reason, the SCO needsstrengthening which is discussed in section E of this Annex. The minimumspacing suggested above should be used pending the results of additionalstudies resulting from the establishment of 300 observation wells in addi-tion to the 150 or so being observed at present. A drawdown must be antici-pated during years of less than normal precipitation. Some detailed studieshave been made bv the Geological Survev of India at the request of ARC andsuchl assistance should be requested by the SCO in the Project areas if needed.

W4ater Qualitv

25. Data on quality of groundwater have been compiled by theHaryana Department of Agriculture. Areas where salinity occurs have beenidentified and no tubewells would be installed in such areas. 'The followingtable shows the rating scheme in current use in the Agricultural Department,which is satisfactory for the existing crop and soil conditions.

Water Quality Rating Scheme

Max. Permissible Limit Residual BoronTexture Conductivity in Microm- Sodium (ppm)

___ _hos/cm carbonateTolerant Semi-tolerant

Crops Crops

1. Clay 2,000 1,500 Less than 5.0 Less than 2.02. Clay Loam 3,000 2,000 i'3. Loam 4,000 3,000 It

4. Sandy Loam 6,000 4,0005. Sandy 8,000 6,000 " '

Note:

1. The texture as indicated above refers to the predominant texture atleast in the upper one meter of the soil.

2. If Residual Sodium Carbonate (RSC) is above 2.5 in clay loam soil,occasional application of gypsum will be needed.

3. The soil should have unimpeded drainage with no problem of waterlogging.

E. Soil Conservation Or anization (SCO)

26. The Department of Agriculture is divided into three parts: (i)Agricultural Extension; (ii) Soil and Water Conservation (of which the SCOis a part); and (iii) Special Services. The SCO is charged with the develop-ment of groundwater resources with the exception of deep tubewells which are

ANNEX 1Page 8

the responsibility of the Minor Irrigation Corporation. It is the SCO whichwill be concerned with the Project.

27. For soil and water conservation work the State is divided intotwo zones, each in charge of a Divisional Soil Conservation Officer each ofwhom is supported by four Assistant Soil Conservation Officers and technicalstaff. Total staff strength of SCO is presently about 200.

28. The technical competence of SCO is satisfactory but in view ofthe requirement to select 300 additional observation wells (making a total of450) the present staff will need to be strengthened by about 20 technicianswith a bachelor degree in engineering or geology and preferably specializedin groundwater hydrology. It would also be essential for at least twoofficers to be trained in sprinkler irrigation techniques. Facilities forsuch training are available at the GOI regional soil and water managementproject at Patiala in Punjab.

29. In view of abundant groundwater resources available in Hlaryanaand the often high water table, the SCO, suitably strengthened as proposed,would provide adequate services for the Project.

ANNEX 1Appendix 1-1

INDIA


Estimated Capital Cost of Tubewell(Represents Costs Outside of Karnal Area)

Rs

Boring 100 ft at 2 Rs/ft 200.00

Blind pipe 4" diamter 60 ft, 20 Rs/ft 1,200.00

Filter 40 ft, coir, 5.0 Rs/ft 200.00

Electric motor and centrifugal pump with 4" diameterdischarge including fittings for pump and installationcharges 2,500.00

Electrical connection charge 500.00

Pump house and stilling basin 1,200.00

Pump pit, 15 ft. deep with brick lining, 8 ft finished diameter15 ft excavation at 40 Rs/ft 600.00300 brick/ft depth = 4,500 at 50 Rs/1,000 225.00Cement, sand and labor 375.00

Total cost of well and associated equipment 7,000.00Pucca channels 500 ft at 2 Rs/ft 1,000.00

Average total cost 8,000.00

Estimated Capital Cost of Tubewell in Karnal Area(Cavity Type)

Boring 70 ft at 2 Rs/ft 140.00

Blind pipe 4" diameter 50 ft at 14 Rs/ft 750.00

Electric motor, centrifugal pump witlh 4" diameter discharge,including fittings for pump and electric switchgearinstallation charges 2,500.00

Electric connection charge 500.00

Pump house and stilling basin 1,110.00

Average total cost 5,000.00

February 16, 1971

ANNEX IAppendix 1-2

INDIA


Blocks Designated for Tubewell Investments

District Block District 'Block

Jind Safidon Karnal PundriJind AssandhKalayat Kaithal

KarnalAmbala Bilaspur Gharaunda

Barara NilokheriChachrauli ThanesarAmbala LadwaNaraingarhRaipur Rani Hissar Tohana

Ratia

Gurgaon Faridabad SirsaBallabgarh RaniaHodelPalwalGurgaonNuhKhulPalwalBawalHodelPataudi

Rohtak NaharSalawasGohanaMudlanaKathuraMchan

February 16, 1971

ANNEX ZPage 1

INDIA


FARM MECHANIZATION

A. TRACTOR ECONOMIC JUSTIFICATION

The Effects of Technological Changes in Agricultural Production

1. The traditional technological production processes in Haryanainvolved limited irrigation and the use of seeds that had little responseto fertilizer. Over a long period of operating under such constraints,the Haryana farmer had evolved cropping patterns and input uses thatapproached the optimum use of available resources, and his power require-ments were met by human and animal power.

2. This situation has been changed by the advent of the new tech-nology. Tubewells have given farmers an assured supply of water undertheir own control, i.e., applicable as and when they need it. With thenew high-yielding seed varieties come substantially increased productionopportunities, provided planting is timely and fertilizer is applied. Thenew technology calls for a greatly increased supply of power on the farm.

Alternative Power Sources

3. The Haryana farmer could meet this power need by increasing hisemployment of labor or bullocks or by turning to tractor power. Asregards labor, compared with India as a whole, Haryana has a lower propor-tion of agricultural laborers to cultivators - 1-10 against the all-Indiaaverage of 1-3, in spite of the fact that the net area sown per cultivatorin Haryana at 1.85 ha is higher than that for India as a whole (1.33 ha).In the past, at times of peak labor requirement, particularly during theharvest period, it was customary for gangs of laborers to come to Haryana,especially from Rajasthan. Recently, however, with increased opportunitiesfollowing the expansion of irrigation in Rajasthan, this supply has not beenadequate. An indication of the sharp rise in the demand for labor is givenby the increase in agricultural wage rates between 1966 and 1969, by 40%.Social constraints and the fact that times of peak demand for labor arethe same throughout northern India, severely limit the possibility of large-scale labor movements.

4. Increased animal power could be provided by breeding more bullocksor importing bullocks from other States. However, increased use of bullockpower requires additional fodder production to feed draft animals, cuttinginto marketable surpluses of fodder for dairy and livestock production orpreventing expansion of other higher value crops.

ANNEX 2Page 2

5. In practice the Haryana farmers have tried to meet their increasedlabor needs by using tractors. The main reasons advanced by farmers forthe extended use of mechanical power are that it permits timely planting ofrabi wheat after kharif crops (rice, cotton, and rape) and enables the areasown to both kharif and rabi crops to be increased, because the land canbe prepared more speedily. In critical periods, a tractor can be worked 24hours per day, whereas a pair of bullocks can only do 8 hours. The periodin which first crops must be harvested, land prepared and planting ofthe second crop completed is extremely short witil peak power demandsoccurring in May-June and October-December. With bullock power, it hasbeen possible to raise cropping intensities only by adding a short durationcrop or a crop requiring relatively little labor in the rotation 1/.These are usually low-value crops.

Effects of Tractor Cultivation

6. The argument against the introduction of mechanical power whereunemployment or underemployment exists is that it displaces labor with noalternative work opportunity, thus aggravating the employment problem.T'his argument is not valid in Haryana for a combination of reasons which areboth general in their application and peculiar to the situation there.Although labor inputs per operation are reduced by mechlanization, the double-cropping facilitated by speedier, more timely, preparation and harvesting,and--less certainly--the increased yields per hectare resulting from timelycultivation, help to counter any negative employment effect. This is furtheroffset by the changes in the cropping ratio towards higher value cropswhich tractor cultivation facilitates. The introduction of tractors hasmade it possible to shift cropping patterns to include a higher proportioncf high value commercial crops.

7. The extent to which cropping patterns have already changed inHaryana is shown in Appendix 2-1. Taking the average of 1960/61 and 1965/66as a base, and comparing this with the average for the three years 1966/67-1968/69 (to even out annual fluctuations), the following sionificant croppingpattern changes are apparent:

(a) The share of foodgrains went up from 43% to 47.4% ofthe cropped area;

(b) Wheat showed a rise from 15% to 13% of the cropped area;

(c) Cotton area increased from 3.3% to 4.6% of the totalreflecting increased irrigation possibilities particularlyin Hissar district; and

1/ For example millets, rape or pulses could be followed by wheat; andpaddy or cotton could be followed by pulses or fodder; but very littleland could be prepared in time for double-cropping and most farmersleft some fallow land.

ANNEX Page 3

(d) Pulses have declined from 28% to 20.3%.

8. In liaryana the observed unemplovment is seasonal in nature aris-ing from the uneven demand for labor for crop cultivation. In the peakcultivation periods there is an absolute shortage of labor. A review of themost likelv cropping patterns to evolve, coupled with an increase in crop-ping intensity from 140% to 180%, indicates that labor requirements wouldincrease by about 33%. If mechanized land preparation operations are takeninto account, it is estimated that the increase would still be of the orderof 25%. This effect clearly interacts with the intensification and cropratio effects noted above. In addition, there will be a number of indirectemployment effects in the agricultural and other sectors, but particularlyinfluencing overall employment. The need for tractor maintenance and supplyservices as well as increased factor and produce marketing facilities in usehave a positive influence on overall employment.

9. The net effect of mechanization on total labor use is difficultto quantify with any precision. At worst it is probably neutral in thellaryana case, and up to the time when mechanical harvesting is introduced--usually a late development--is likely to be positive. In Haryana thereis little risk of an unemployment and income distribution problem arisinghowever as 86% of farmers own all their farms or both own and rent, andonly 12% of the farm labor force is laborers. Should there be an increasein leisure time at any phase of the development of mechanical cultivationmost of this will be captured, along with the enhanced incomes, by theowner cultivators.

The Power Price Factor

10. The optimum mix of power resources depends not only on the totaldemand for power, but also on the relative prices of alternative powersources. In relation to current wheat prices in India, tractors are ingeneral under-priced, and because of importation of Eastern bloc tractorsunder trade agreements, normal hp/price relationships have been distorted.As a result, even when it is under-utilized, investment in a tractor canstill yield satisfactory financial results. But this means that capital- the most scarce resource - is being wasted. 1/

1/ The effect on scarce foreign exchange resources is not so marked.Under the project proposals, foreign exchange costs attributableto mechanization total US$20.9 million whereas net foreign exchangesavings because of increased wheat and rice production would run atabout US$18.0 million p.a. (all at current world price levels).

ANNEX 2Page 4

11. Any subsidization of the price of machinery will have twoimportant social effects. First it will tend to distort the farm power-mix to the detriment of labor; secondly, such subsidization would favorlarger farm operators as the main users of mechanized power.

Tractor Price and Tractor Utilization Considerations

12. The tractor model for this project (Farm Model V in Annex 10)gives a financial rate of return of 40% on the basis of 1,000 hours oftractor use per year on 40 cropped ha of irrigated land. If tractorprices were increased by 20%, the financial rate of return would fall toabout 25%. However, this return is not strictly attributable to the tractoralone, but reflects the better use of all inputs made possible by tractorpower.

13. Assuming that, instead of buying a tractor himself, the farmerhas all tractor services provided by a contractor, and that these arecharged at current rates for normal tillaRe operations of Rs 15 per hour,the financial rate of return on the tractor model goes up to more than 100%,reflecting in part the more intensive tractor utilization achieved by thecontractor - see para 14 below. In practice, because he cannot rely ongetting contracting services as and when he needs them, the farmer prefersto invest in a tractor himself in order to reduce uncertainty, just as heprefers to invest in a tubewell rather than rely on other uncertain watersupply.

14. The contractors'financial rate of return and on the assumptionthat service charges remain constant at current levels, under varying levelsof investment costs and intensity of tractor utilization, is shown inAppendix 2-2. This suggests that, at higher tractor prices, tractor utiliza-tion must be of the order of 1,500 hours p. a. to yield a reasonable returnto the contractor.

15. In order to prevent uneconomic utilization of scarce capitalresources, and to avoid artificially favouring mechanical power againstlabor and large farmers against small, a proper relationship between tractorand wheat prices is desirable. Since in the short run, until self-sufficiencyin foodgrain production is reached, it is unlikely that Indian wheat priceswill be reduced, there should be an increase in the selling price of tractorsto the farmer. Although, at present, under scarcity conditions, black market"premia" increase the investment cost of a tractor to many farmers, thiswill decrease as the supply position improves. Increases in the controlledprices of locally produced tractors are currently under consideration byGOI and negotiations are in train with GATT to permit import duties to belevied by GOI on tractor imports.

16. In the meantime, to avoid over-capitalization by farmers and promoteeconomic utilization of tractors, lending banks would be required under theProject to apply as a norm for appraisal, the applicant's ability to

ANNEX 2Page 5

demonstrate that the tractor would be used to crop not less than 40 ha peryear or for 1,000 hours of productive agricultural worlk per year. Suchcriteria would apply to the applicant's oWIn land, or to the land of otherfarmers (tlhrough custonm work) or a combination of both.

Tractor Supply

17. The following table sets out thie supply position over the pastthrec years, togethler with estimates of the tractor availability position inIndia durinig the next five years (1970/71 to 1974/75):

Indian Total grossYear Manufacture Imports /1 New Supply

1967/68 11,394 5,500 16,8941968/69 15,466 4,276 19,7421969/70 17,099 10,473 27,5771970/71 20,000 10,000 30,0001971/72 23,000 8,000 31,0001972/73 26,500 7,000 33,5001973/74 30,000 5,000 35,0001974/75 34,000 3,000 37,000

/1 Excluding imports under IDA credits, as these are earmarked forspecific States under credit projects. As at December, 1970,maximum limits for such tractor imports during 1971-74 amountedto 11,700 made up as follows;

Gujarat 2,200Punjab 8,000Andhra Pradesh 1,500

11,700

18. There are at present six Indian tractor plants, four of whichmanufacture in association with companies in Bank member countries. Inaddition, GOI has given approval for the establishment of one other manu-facturing plant involving association witlh a company in a Bank member coun-try, and was considering proposals for establishing further plants includingseven which would involve collaboration with Bank member countries, tobring the aggregate additional licensed capacity to over 100,000 tractorsper annum. Hitherto mainly because of component supply difficulties, Indiantractor output has lagged behind rated production capacity, reaching only17,099 in 1969/70, against a licensed capacity of 30,000 units. It is thusextremely difficult to forecast the expected future increase in Indianproduction, but it would appear that by 1974/75 total tractor output fromexisting and new plants might be of the order of 34,000 units per annum,or double the output achieved in 1969/70. Thereafter, as initial establishmentdifficulties are overcome, production might well increase at a faster rate.

ANNEX 2Page 6

19. In the last decade, most tractor imports have come from Easternbloc countries under trade agreements. Agreements negotiated during 1969/70covered a further 25,000 tractors expected to arrive during the next threeyears. Thereafter, such imports may be expected to decline, particularlysince the program of future Indian production envisages the manufacture ofCzechoslovakian, Hungarian, and Russian tractors at plants with a totallicensed capacity of 32,000.

20. On average, Haryana has been receiving about 10% of total Indiansupplies over the past three years. On the basis of this slhare remainingunchanged and the forecast supply position outlined above, Haryana wouldreceive about 17,000 tractors during the five years ending 1974/75.

Tractor Demand

21. Under its Fourth Five-Year Plan, Haryana plans by 1973/74 to increasethe gross irrigated area to 2.5 million ha and the area sown more than onceto 2.0 million ha. Between 1970/71 and 1974/75, the area sown more than oncecould increase by 0.8 million hectares (Appendix 2-3), and this extensionof the double cropped area will of itself require additional power on thefarm. Little increased availability of human and animal power can be ex-pected, so mechanical power must be provided if the full benefits in increasedoutput are to be achieved from the increase in cropping intensity.

22. The State Government and HAIC estimated the demand at current pricesto be about 10,000 additional tractors over the period. Assuming an increasein the area sown more than once of 0.8 million ha and a minimum coverage of40 ha for tractor under farm ownership, 20,000 tractors would be needed. Ascalculated in paragraph 20 above, Haryana's share of Indian general tractoravailability during the five years ending 1974/75 is estimated to total17,000. When deduction is made for replacements of the existing park, theadditional supply will amount to only 14,000. Importation of 6,000 tractorunits under the Project would thus be economically justified to enable theplanned expansion to take place.

23. On this basis, the tractor park in Haryana would grow from 10,000in 1969/70 (at 40 ha per tractor, representing coverage of 8% of the totalcropped area - 5 million ha) to 30,000 units in 1974/75 (representing coverageof 22% of the increased cropped area of 5.5 million ha). The increase inthe number of tractors would lead to improved service and spare partfacilities and would thus increase the efficiency of the existing park.

Future Trends

24. The trend towards greater cropping intensity and increasedp;roduction can be expected to continue, but at reduced rates. As apprecia-tion grows of tile tractor's potential and implements and equipment formore specialized operations are made available, mechanized farming is likely

ANNEX '

Page 7

to become progressively more labor saving. But at this second stage ofdevelopment, the growth of marketing, transport, storage, and processingservices for the higher level of output, coupled with the expansion ofmanufacturing repair and servicing industries for tractors and their moresophisticated equipment should create new employment in rural areas to offsetany labour displacement on the land.

25. There is, however, an urgent need to formulate and execute in-depth research programs for the study of the problems that follow in thewake of the present rapid spread of mechanization in the north-westernwheat belt, of which Haryana is a part. From such coordinated research,it should be possible to draw firmer conclusions as to the social effects ofthis development, as well as have more data as to the economics of futurefarm mechanization. Proposals have been made for such special studies to beundertaken with financial support from the Bank at both the Indian Instituteof Management, Ahmedabad, and Punjab Agricultural University, Ludhiana.

B. TRACTORS - TECHNICAL CONSIDERATIONS

Background

26. Basic conditions in Haryana favor the mechanization of farmingoperations. The soils over the bulk of the State are light and easilyworked. As a result of land consolidation, holdings consist of a varyingnumber of individual plots, rectangular in shape and about one acre insize, separated only by irrigation bunds - a layout that is conducive tomechanized farming.

27. The demand for more power for farming operations is reinforced bythe farmer's rapidly growing transport needs arising from the increase inhis marketable surpluses. Storing on the farm in traditional type containersonly a portion of his own requirements, the farmer continues to market thebulk of his output as and when it is harvested, because he has doubts asto the storing qualities of, for example, new wheat, and because there areno price incentives to compensate for on-farm storage costs and losses.Moreover, the fact that virtually all settlements are of the concentratedvillage type mean that there is naturally a considerable degree of movementfrom field to village. To this is added the movement from village to market- an average of 10 km - since most farmers prefer to sell al main markets(mundis), rather than through village intermediaries or cooperatives. Asa result, at the present time, a considerable proportion of a tractor'stotal working hours is spent on transportation.

28. The characteristic light, easily worked soils and small fieldsobtaining in Haryana make it possible for a case to be made out for theuse of tractors of 25 hp, especially since, more often than not, thetractor is being used mainly for preparatory tillage work and transport,limiting the present demands on its power. As more operations involving

ANNEX 2Page 8

more sophisticated implements are undertaken by the tractor, it may beexpected that as elsewhere, the trend in demand will be towards higherhorsepower tractors. In India, at present, however, artificially lowprices of small horsepower tractors imported under bilateral trade dealshave distorted normal price/hp relationship.

29. Future Indian production plans cover the manufacture of lowerhorsepower ranges and include the manufacture in India of a 25 hp modelwith collaboration from a U.K. firm (British Leyland).

30. Since the ultimate selection of tractors under the procedure willbe governed by "farmers' choice", and since this choice will in turn be basedon competitive price quotations from which a rational price/hp relationshipcan be expected to emerge, the hp range of tractors to be imported under theProject has been set at 25-55 hp.

231. In view of the present supply/demand position in India, tractorsrequired for the Project would need to be imported. The importation oftractor components which are either not manufactured in India or are inshort or unreliable supply would not meet the position as prompt delivery ofthe finished tractor could not under present conditions be assured. Moreover,this method of procurement would place an additional assembly burden onexisting manufacturers who have plans to expand their production.

Tractor Outlet, Repair, and Spare Part Facilities

32. Indian tractor manufacturers maintain in all over 40 tractor serviceworkshops in Haryana, 34 of which belong to dealers appointed by manufacturerswith technical collaborations in Bank member countries (Appendix 2-4) whoalso maintain regional technical and marketing representatives.

33. The private dealers are required by the firms they represent tomaintain designated standards of workshops, servicing, repair and sparepart facilities and are given assistance in staff training. They offerfree warranty inspections, past-warranty service schemnes at fixed annualrates, together with on-farm training of tractor operators and farmers.

34. Haryana Agro-Industries Corporation (HAIC) handles the distribu-tion within the State of tractors imported under bilateral trade arrangementswith East European countries, notably Czechoslovakian Zetor 2011, RussianDT-14B, Russian Bylarus, Bulgarian Bolgar TL 30A (crawler-type) and RumanianUniversal 650 models. In addition, at its main workshop at Nilokheri, 13AICoperates, with technical assistance from the Czechoslovakian company, awell-organized assembly line for Zetor tractors for distribuJtion not otliy InHaryana but also in other States.

35. To provide essential service, repair and spare part facilities forthe tractors it distributes, HAIC in addition to its base workshop atNilokheri, operates two other service stations ancd plans to establishshortly a service center in each district, with facilities, includingmobile service vans, of comparable standard to those provided by the private

ANNEX 2

Page 9

dealer network. Sub-centers would be provided by the appointment of agents,as it is HAIC's policy to supplement and not to supplant the private contrac-tor.

36. Despite the private dealer and HAIC network of servicing units,it is estimated that more than half of all tractor repairs and servicingis carried out in a multitude of village and small town shops, often runby former operators of tractor dealers. Operating with the sparest ofresources and often utilizing limited spare parts, these repair shopsprovide the farmers with on-the-spot service at reasonable rates. It islargely thanks to their ingenuity that the lives of many tractors havebeen extended long beyond the normal.

37. While existing repair and servicing facilities may, therefore,be considered adequate, tractor suppliers under the Project should berequired to demonstrate that their particular facilities in Haryana aresufficient to meet the increased demand. If such suppliers do not alreadyhave such an organization, it would be open to them to provide it eitherthrough the appointment of new dealers or by utilizing the existingservices of HAIC, or by a combination of both methods.

Tractor Implements

38. At the moment, a farmer acquiring a tractor for the first timebuys on average less than two implements, reflecting the restricted use beingmade of tractor power, and his lack of knowledge as to the utilization ofits full potential. The fact that under existing PLMB credit schemes thefarmer's contribution is represented by his cash purchase of implementsacts as a further disincentive. At the same time, as between tractor ownersthere appears to be a considerable amount of implement sharing; borrowingsbeing paid for by services rendered rather than in cash.

39. The most commonly used implements in Haryana are those requiredfor preparatory tillage work - mouldboard plows, disc plows, cultivatorsand disc harrows - together with trailers and levellers. There is agrowing demand for seed-cum-fertilizer drills, seeding attachments tocultivators, ridgers, inter-row cultivators and spraying equipment. Thereare two main sources of supply of implements, namely:

(a) Tractor manufacturers who either make themselves orthrough approved contractors implements designedespecially for use with their make of tractor; or

(b) small-scale manufacturers.

In both cases, the implements are mostly modified versions of modelsdeveloped in other countries. Mainly because of their higher specifications,those models made by or under the control of tractor manufacturers aredearer than implements made by small-scale manufacturers.

ANNEX 2Page 10

40. In Haryana, there are 78 implement manufacturers recognized bythe Department of Agriculture. Their output, together with that of aneven larger number of smaller scale manufacturers, is sold not onlywithin Haryana but also in neighboring States. In general, production isconsidered capable of expansion to meet Project needs, but difficulties havearisen from the shortage of hardened steel for plow bottoms and discs, whichhave been met by special imports of these components by HAIC for distributionto approved manufacturers.

41. Although adequate in quantity, more attention needs to be paid toresearch and development on the adaptation of overseas models to localconditions, and to quality improvement. At present, implement manufacturersare "approved" mainly for the purpose of distributing scarce materials. Thereis need for the progressive widening of this basis towards quality marketingof implements that have satisfied field tests and other trials. Thiswould involve the bringing together of many entities, such as the ilaryanaAgricultural University, HAIC, the Department of Agriculture, as well asrepresentatives of tractor and implement manufacturers. A start should bemade on these lines so that farmers can receive more and better guidance onthe selection and use of implements.

42. Under the Project, loans would he made to cover 75% of the combinedcost of a tractor and at least three implements in order to ensure maximumtractor utilization and economic benefits. The farmer should select theimplements he needs from those manufactured by approved firms and/or thosequalifying under a quality improvement scheme.

C. HAR1VESTING NACITITNERY

43. As in the case of Punjab, conditions in Haryana favour theintroduction of mechanized harvesting, particularlv for wheat, but alsofor rice. Labor shortages in the face of greatlv increased production haveresulted not onlv in rising costs but also in delays in completion of har-vesting operations. When, as in 1970, the monsoon rains came earlier thanusual, grain was damaged and farmers sustained losses because harvestingoperations had not been completed. Even without such special losses, delaysin the completion of harvesting operations are seriously prejudicing farmers'chances of achieving maximum results from douible cropoing. This applies toland preparation for the sowing of both Kharif crops after wheat and Rabiwheat after rice. TInder the Project 20 self-propelled combines and 100harvesters would be provided. These would harvest about 14,000 ha out of atotal cropped area of 5 million ha. They would not, therefore, cause anymajor labour displacement.

44. As of November 1970, HAIC had had only limited experience withone combine operating during this year's rice harvest. In the Punjab, however,

ANNEX 2Page 11

under basically similar conditions, the Punjab Agro-Industries Corporationimported 8 East European 14 ft cut combines (costing Rs 126,000 (US$16,800)- including import duty at 27-1/2%) and operated these on a custom servicebasis during the 1970 wheat harvest (April/May 1970). In all, these 8combines worked on 120 farms covering 1,800 ha, averaging 0.75 ha per hour.Average costs were Rs 153 (US$20) per ha (including depreciation at 12-1/2%).Farmers willingly paid the custom service rate of Rs 250 (US$33.3) per ha asmanual harvesting costs normally exceed Rs 300 (US$40) per ha; while 10% lowergrain losses would give additional savings, valued at current wheat yieldsand prices at Rs 275 (US$36.7) per ha. On this basis, total gains per hacould be of the order of Rs 425 (US$56.7).

45. Although somewhat lower than the preliminary forecasts of Rs 500(US$66.7) made on the basis of pilot project experience in the PunjabAgricultural Credit Project report (PA-48a of May 27, 1970), these gainsin only one season are impressive enough to justify the inclusion in theProject of provision for harvesting machinery. Because of the lack ofentrepreneurs with experience in this field and the relatively higherinvestment involved, the number of applicants for such loans may be limited,but HIAIC, which recognizes that it has a pioneering role to play in thedevelopment of custom services, should be regarded as eligible to applyfor up to 50% of the machines proposed under the Project.

February 22, 1971

APPENDIX 2-1

1'DTA

HARYAMA AGRTCUJTTTRPAL CUrDIT PROJECT

Ilaryina Acricultural Production:Trend Indicators

Average /1 Average of 3 years1960/61 and 1965/66 1966/67 - 1968/69

Area in Area in1. Cropin Pattern '000 ha Percenta_e '000 ha Percentage

l!he.7t 653 15.0 827 18.0Rice 174 4.0 212 4.6Jouwar 27Rf 6.0 257 5.6Bajra 790 l8.0 884 19.2Pulses 1,205 28.0 933 20.3Su,-arcane 155 3.6 143 3.1Cotton 144 3.3 212 4.6Other 930 22.1 1,132 24.6

Total: 4,329 100.0 4,600 100.0

Irr*iLatecl Area

Cross Area 1,344 - 1,793Net Area 1,116 - 1,245

3. Tractor Popilation

2,920 (1961/62) 8,446 (1968/69)

/1 Simple avera-c of years 1960/61 and 1965/66 taken as base because ofconsierable fluctuations from year to year.

February 17, 1971

INDIA

HARYANA AGRICULTIRAL CREDIT PROJECT

Contractorts Rate of Return at DifferingLevels of Tractor Utilization and Tractor Price

Tractor Utilizationin Hours Per Year 1,000 h 1,200 h 1,500 h 2,000 h

Tractor Price

1. Current Prices Rs 24,600 6% 16% 28% 39%

2. Current Prices+ 20% Rs 29,520 1% 9% 19% 27%

3. Current Prices+ 40% Rs 34,440 -3% 4% 13% 18%

February 22, 1971

INDIA


Haryana-Changes in Irrigated and Cropped Areas

Gross Net Net Area Soiwn TotalTotal Irrigated Irrigated Area More Than Cropped Cropping

Period Area Area Area Sown Once Area Intensity

1965/66-1968/69Average 4,4 1.75 1.2 3.4 1.2 4.6 135%

1973/74(Plan forecast) 4.4 2.5 1.9 3.5 2.0 5.5 157%

Increase - 0.75 0.7 0.1 0.8 0.9 22%

February 4, 1971

1,

INDIA

HARYANA ACRIGUL'T]URAL CREDIT PROJECT

Tractor Services Network in Haryana

Inter-national HaryanaTractor Hindustan Agro-Industries

Tractors & Farm Co.(Inter- Excorts (Ford Motokov CorporationEquipment (TAFE) national of U.K.) Motor (Czechoslo- Eicher (Tractors Imported

District (Massey Ferguson) Harvestor) Import (Poland) vakia) (Germany) Under Barter Trade)

Hissar 1 1 2 2 - 1

Sirsa 1 1 1 2 1

Rohtak 2 - 2 2 1

Gurgaon 2 1 1 1 1

Karnal 1 - 1 1 2

Ambala 1 - 2 2 1

Jind 2 - 2 2 1

M. Garh. - - 1 - --

Total 10 3 15 12 6 3

Source: Haryana Department of Agriculture and Development.

February 4, 1971

ANNEX 3Page 1

INDIA


THE AGRICULTURAL REFINANCE CORPORATION


1. The Agricultural Refinance Corporation (ARC) was established onJuly 1, 1963, with the objectives of providing medium- and long-term fi-nance to agricultural credit institutions and, at the same time, directingand guiding such institutions toward a development oriented approach intheir operations.

2. ARC's shareholders include the Reserve Bank of India (RBI),central and state-level land development and mortgage banks and coopera-tive banks and other institutions (scheduled banks, the Life InsuranceCorporation of India, insurance and investment companies, and others ap-proved by the Government of India). Of the initial 5,000 shares issued,the law provided that RBI shall subscribe to at least 50%, the centralland mortgage banks and state cooperative banks to no more than 30%, andother institutions to no more than 20% and future issues of shares wouldbe allocated in the same proportion. The initial shares issued wereguaranteed a dividend of 4-1/4% per annum.

3. ARC's management is vested in a Board of Directors of nine mem-bers, three of whom are elected and the rest nominated. Three directorsrepresent RBI (a Deputy-Governor is Chairman of the Board), three theGovernment of India (at present the Secretary, Department of Agriculture,and the Additional Secretary, Department of Cooperation of the Ministryof Food, Agriculture, Community Development and Cooperation; and a JointSecretary, Department of Banking of the Ministry of Finance), and threedirectors are elected one each by the central land development banks, bythe state cooperative banks, and by the Life Insurance Corporation ofIndia, scheduled banks, and other insurance and financing institutions.

4. The Managing Director is the chief executive officer and isassisted by a managerial staff of nearly 90 (as of October 1970) of whom65 are based at ARC's head office. Until early 1970, ARC did not employany specialists, instead relying on a panel of consultants for technicaladvice in appraisal and supervision work. To supplement consultants'advice, ARC has established a Technical Division which, as of October 1970comprised three agricultural specialists and an agricultural economist andto which ARC proposes to make further appointments. With the increasingvolume of lending, ARC recognizes the need to build up its staff at alllevels and is preparing a staff development plan to cover the period tothe end of 1973.

ANNEX 3Page 2

5. ARC's head office is in Bombay. It has 13 regional offices(Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Calcutta, Chandigarh,Hyderabad, Jaipur, Kanpur, Madras, New Delhi, Patna, and Trivandrum) whichassist banks and State Governments in formulating agricultural developmentprojects for financing, clarify ARC's policies and procedures when required,undertake pre-appraisal of projects submitted and supervise general executionof projects under ARC financing. About 25 managerial staff are employed inthe Regional Offices.

6. In general, ARC's charter provides that it shall be guided bysuch directions in matters of policy involving public interest as GOImay, after consulting RBI, give in writing. ARC can extend financial as-sistance only to central or state-level land development banks, state co-operative banks, and scheduled banks: in exceptional cases, and with RBIapproval, it can also lend directly to a primary cooperative at the farmlevel. Refinance is provided through purchases of special debenturesfloated by central or state-level land development banks and through loansto state cooperative banks and scheduled banks.

7. Until June 1966, it was not normally ARC's policy to refinanceconstruction and energization of wells by individuals unless the outlayinvolved was large and development was envisaged through a cooperativesociety organized for the purpose. In July 1966, however, ARC not onlyremoved this restriction, but also circulated a model scheme for minorirrigation development by farmers in compact areas. Thus, began ARC'spolicy of financing individual farmers on the basis of project models.

8. At the beginning, ARC's policy was to finance no more than 75%of a project, leaving the balance to be contributed by State Governments.However, the generally strained resources position of most State Govern-ments considerably restricted the extent to which land development bankscould avail themselves of refinance facilities from ARC. Accordingly,to stimulate investments in minor irrigation especially, ARC increasedits support of such investments to 90%, beginning with all projects sanc-tioned in 1967/68.

9. Special debentures purchased by ARC from central land developmentbanks must be guaranteed by the State Government concerned; in addition,debentures are backed by a charge on all mortgages resulting from loanstefinanced under the issue. In the case of debentures, ARC requires thatcollections from farmers be lodged in a sinking fund. The sinking fund isinvested in GOI securities and debentures of other land development banks.It may also be used to repurchase the land development bank's own debentures.Since from the view point of financial returns, the sinking fund arrangementsdo not benefit a land development bank as issuer of debentures, ARC hasdecided that repayments of its refinances under IDA supported projectsshould approximately match those of ultimate borrowers to lending banks.

ANNEX 3Page 3

10. ARC will refinance agricultural development schemes which aretechnically feasible, financially justified, and are within a reasonablycompact area for facility of loan evaluation and supervision. The schemecan involve just one farmer, a group of farmers, or an association offarmers. Preference, however, is given to schemes involving a large numberof farmers.

11. Technical evaluation of schemes is carried out by consultantsdrawn from a panel approved by the Government of India. Services of theCentral Ground Water Board (formerly the Exploratory Tubewells Organization),the Geological Survey of India and the various commodity boards are alsoused and ARC prescribes the terms of reference in every case. Some importantpoints examined in the case of schemes for minor irrigation include, anestimate of the quantum of water proposed to be tapped, annual water re-charge, annual water draft, taking into account the existing and proposedwells, and the type of pump sets needed. With the establishment of its ownTechnical Division, increasing back-up support is now available from ARC'sown specialist staff which will provide a foundation of technical expertisefor scheme appraisal and supervision throughout India.

12. Economic evaluation of schemes is performed by ARC staff. Someof the important aspects appraised include cost estimates, the suitabilityof the cropping pattern recommended, inputs available for development,farmer's repayment capacity, efficiency of the project executing agency, ar-rangements for the provision of short-term credits and marketing arrangements.Preappraisal is done generally by regional offices, but final evaluation ismade in Bombay.

13. Periods of refinance are determined after a study of the repaymentcapacity of farmers based on farm models. Refinance terms for medium-termprojects are 3 to 5 years and for long-term projects are now generally 12to 15 years.

14. With effect from November 1970 ARC's general lending rate wasraised from 6 to 6-1/2% per annum. Scheduled banks are required to chargetheir borrowers no more than an additional 2-1/2% per annum and while landdevelopment (and mortgage) banks are not bound by the same restriction,they nevertheless generally follow the same interest mark-up and noneexceeds it. ARC collects a commitment charge of 1/3 of 1% on the amountnot used in any one year according to a schedule of expected withdrawalsapproved for a scheme.

Lending (Refinancing) Operations

15. The following table shows the progress in ARC's lending (lesssubsequent cancellations) during the seven years of its existence:

ANNEX 3Page 4

Number ofSchemes Total Scheme ARC

Year Approved Costs CommitmentRs M Rs M

1963/64 3 22.30 20.101964/65 10 119.60 100.701965/66 23 136.50 108.501966/67 6 91.30 70.701967/68 86 616.10 537.201968/69 105 734.60 642.801969/70 138 874.70 668.90

Total 371 2,595.10 2,148.90

16. During the initial years, ARC transacted very little businessdue to the need for laying the groundwork and bases for its operationsand for building its staff. An important deterrent, however, was ARC'spolicy, at the time, of refinancing only projects in which developmentwas envisaged through a cooperative society organized for the purpose.In June 1966, this restriction was removed; furthermore, ARC agreed torefinance up to 90% of loans for minor irrigation, against 75% previously.Thus, during the last three years, projects approved for refinancing weremore than six times the number during the first four years.

17. As may be expected, most of the schemes sanctioned were forprojects financed by land development or mortage banks:

ARC CommitmentRs M Z of Total

(a) Land development banks 1,935.80 90.1

(b) State cooperative banks 93.30 4.3

(c) Scheduled commercial banks 119.80 5.6

Total 2,148.90 100.0

18. About 85% of the cost of projects approved for refinance werefor minor irrigation and land reclamation:

ANNEX 3Page 5

Total ARCSchemes Approved Commitment

Z of x ofNumber Total Rs M Total

(a) Minor irrigation 186 50.2 1,405.90 65.5(b) Land reclamation 39 10.5 423.70 19.8(c) Tractor & Power Tillers 9 2.4 41.40 1.9(d) Soil conservation 2 0.5 21.40 1.1(e) Plantations 115 31.0 176.00 8.3(f) Poultry 6 1.6 4.40 0.2(g) Fisheries 8 2.2 35.00 1.7(h) Dairying 2 0.5 3.10 0.1(i) Godowns 4 1.1 38.00 1.4

Total 371 100.0 2,148.90 100.0

Source of Funds

19. Apart from share capital, ARC can raise funds from the followingsources: (a) borrowings from GOI and from any entity approved by GOI; (b)issue and sale of debentures and bonds guaranteed by GOI; (c) borrowingsfrom RBI for periods not exceeding 18 months; and (d) deposits from GOI,the State Government, and local authorities for periods not less than 12months. Total borrowings and deposits received may not exceed 20 timesthe sum of ARC's capital and surplus reserves.

20. ARC's borrowings and receipts of deposits during the seven yearsof its existence are summarized as follows:

Year Borrowings Deposits ReceivedRs M Rs M

1963/64 50.000 _1964/65 - 1.1301965/66 - 1.2551966/67 - 1.2551967/68 30.000 1.2551968/69 177.500 1.2541969/70 299.377 1.251

Total 556.877 7.400

Of ARC borrowings during 1969/70, Rs 109,377,000 was raised by a publicissue of ARC 5-3/4% bonds 1982. The balance of borrowings (Rs 447.5 mil-lion) have been from GOI as follows:

ANNEX 3Page 6

Rs M Interest P.A. Repayment

50.000 None 30 years with 15-year grace30.000 5-1/2 At end of 15 years

100.000 5-1/2 At end of 15 years267.500 5 At end of 9 years

Since August 1968, ARC has been allowed a rebate of 1/4% on timely paymentsof interest. The larger loan of Rs 267.5 million was for a shorter term,since the proceeds were used to refinance, in the main, minor irrigationschemes, generally requiring refinance for nine years or less. The specialdeposits represent dividends payable on ARC's shares held by RBI which,under the law, must be held by ARC as special deposits. No interest ispaid on them.

21. A comparative statement of ARC's operating results since itsestablishment until 1969/70 is given in Appendix 3-1 and is summarizedbelow (in Rs million):

NetIncome Statutory Surplus

Gross Total Net Income Before Dividend orYear Income Expenses Income Tax Dividends Liability Deficit

1963/64 3.75 0.30 3.45 1.80 1.65 1.91 -0.261964/65 4.00 0.39 3.61 1.76 1.85 2.13 -0.281965/66 4.35 0.48 3.87 2.27 1.60 2.13 -0.531966/67 4.98 0.61 4.36 2.40 1.97 2.13 -0.161967/68 6.00 1.67 4.33 2.38 1.95 2.13 -0.181968/69 11.04 6.29 4.75 2.61 2.14 2.13 0.011969/70 27.28 20.55 6.75 3.70 3.05 2.13 0.92

22. In the first three years of ARC's operations, income was derivedmostly from interest on investments. Beginning 1966/67, this patternchanged when ARC began to expand rapidly its refinancing operations (para.15). In 1969/70, interest received from loans and debentures represented88% of total income received.

23. Benefitting from cost-free funds available to it during thefirst four years of its existence, ARC's main items of expense at thetime was salaries and employee benefits. Needing more funds for its ex-panded operation, interest paid on borrowed money has since 1967/68 beenan important item of expenses. In 1969/70, interest paid on borrowingsand salaries and employee benefits were 83% and 10%, respectively, oftotal expenses.

24. Until 1968/69 net income after taxes had not been sufficientto meet the statutory dividend liability of 4-1/4% payable annually toARC's initial shareholders (para. 2) and the annual deficiency had tobe made good by GOI in accordance with its guarantee under the law. ARCwill have to reimburse these amounts out of future profits. In 1968/69

INDIA

HARYkNL GRICULTULAL CREDIT OROJ. T

AGRICULTTElAL REFINAhUC CTPORATI0N

CONflNSEWD STATR5MES OF NET INCCM2

1963/64 to 2969/70

1963/6?4 1964/65 1965/66 166/67 1967/68 1968/69 1969/70Rs M %Of Rs M % of s R M % of RsM %of N %-of RLSN-% o£

Total Total Total Total Total Total Total

L= rm 'ICD- Incom. _ ncoe * Inc ane Income :ncore Incomn

INCOME

Interest Received on Loans and Debentures - - - - 1.09 25.1 3.o6 61.3 4.83 80.5 10.20 92.4 24.09 88.31Interest Received on Investrmerts 3.75 100.0 3.99 100.0 3.25 74.9 1.92 28.7 1.17 19.5 0.84 7.6 3.18 11.69

Total IncTjoe 3.75 100.0 3.99 100.0 4.34 100.0 4.98 100.0 6.oo loo.0 11.04 100.o 27.27 100.00

EXPENSES

Interest Paid - - - - - - 0.46 7.8 4.42 40.0 17.07 62.60Salaries, Allaoances, Ccnsultants' Fees, arn

Raployee Benefits 0.20 5.4 0.27 7.0 0.36 8.4 0.47 9.5 0.91 15.2 1.43 13.0 2.d4 7.48General and Administrative Expenses 0.09 2.5 0.10 2.6 0.11 2.6 0.13 2.6 0.29 4.8 0.43 3.9 1.42 5.21Depreciation of Assets 0.01 0.1 0.01 0.1 0.01 0.1 0.01 0.1 0.01 0.1 0.01 0.1 0.02 0.07

Total Expenses 0.30 8.0 o.38 9.7 0.48 1i.1 0.61 12.2 1.67 27.9 6.29 60.o 20.75 _5__

NET INCOME BEFORE TAXES 3.45 92.0 3.61 90.3 3.86 88.9 4.37 87.8 4.33 72.0 4.75 43.o 6.72 24.64

Taxes Paid or Payable 1.80 48.0 1.76 44.1 2.27 52.2 2.40 48.3 2.38 39.6 2.61 23.7 3.70 13.s6

NET INCOME AFTER TAXES 1.65 44.o 1.85 46.2 1.59 36.7 1.97 39.5 1.95 32.4 2.14 19.3 3.02 11.08

February 22, 1971

INDIA


AGRICULTURAL REFINANCE CCRP(RATION

PROJECTED STATENENTS CF NET INCOME

For Fiscal Years Indicated

1970/71 1971/72 1972/73 1973/74 1974/75Rs M %of Rs M % of Rs M % of Rs M % of Rs M % of

Total Income Total Income Total Income Total Income Total Income

INCGME

Interest Earned on 1/:IDA Projects 2/ 5.12 10.8 23.50 30.3 49.85 41.7 65.80 42.0 66.oo 36.2Other Loans 41.52 87.5 53.20 68.6 68.90 57.6 90.00 57.5 '15.70 63.4

Investment Interest 0.80 1.7 0.80 1.1 0.80 0.7 0.80 0.5 0.80 0.4Total Incomes M7.M 100.0 77.50 100.0 119.55 100.0 156.o I-Co10.0 00.50 lOO.

EXEFNSES

Interest Paid on:IDA Funds 3/ 3.49 7.4 15.25 19.7 31.00 25.9 42.50 27.1 46.oo 25.2Other Borrowings 4/ 33.52 70.7 40.50 52.3 51.75 43.3 66.75 42.6 86.50 47.4

Salaries and Con-sultants, Fees 3.50 7.4 6.oo 7.7 8.00 6.7 10.00 6.3 12.00 6.6

General Admin Expenses 1.30 2.7 2.00 2.6 3.00 2.5 3.50 2.2 4.00 2.2Depreciation of Assets 0.02 - 0.03 - O.05 - 0.05 - 0.05 -

Total Expenses 41.-83 __._ 6_._7 2 7d. 122.830 E78.2 1T8. TTTLT

INCOME BEFCRE TAMES 5.61 11.8 13.72 17.7 25.75 21.6 33.80 21.8 33.95 18.6Income Tax Due 3.08 6.5 7.55 9.7 14.40 11.9 18.60 11.9 18.70 10.2

NET INCOME AFTER TAXES 75 _.3__7 _.7 11.3 5 9- 7 15.20 9.9 15.25

l/ At 6-1/2% per annum on all loans made after July 1, 1970; 6% per annum on all earlier loansGujarat Punjab, Andhra Pradesh, Haryana, and Tamil Nadu ProjectsAt 4-3/A% per annum

WI An average of 5% per annum assumed

February 4, 1971

INDIA

hARliNA AGEICVUT L CREDIT HLOJECT

AGRICULTU-RAL REFINANCE CORPORATIDN

CONDENSED BALANCE SEEETS

At End of Fiscal Years Indicated

1963/64 1964/65 1965/66, 1966/67 19671/681 i968/69 1969/a70

Change from ~~~~Chang frChange from Cange fromi Ch,ne frcm change from

Rs M Es N Previous Data- Previous Date Rs M Previous Date Bg M Previous Date as N Proviuus Date Rs M Previous Jate

ASSETS

Cash on Hanxi and x-n Banks 0.16 0.16 0.01 0.02 (0.15) 0.o6 o.04 0.09 0.03 o.o6 (0.03) 0.04 (0-.02)

Investments 101.85. 99.09 (2.76) 55.21 (43°88) 35.79 (19-42) 8.40 (27.39) 5.15 (3.26) 24.99 19.84

Loans -- - 1.47 1.47 3.03 1.56 7.35 4.32 25.49 18.15 42.93 17.44

DebentLures Purchased - 4.50 4.50 47.53 43.03 66.73 19.20 119.04, 52.31 2/2~.55 159.52 546.0L 367.49

Other Assets 0.80 1.02 0.21 2.34 1.33 3.38 1l.4 6.46 3.08 13.58 7.12 17.31 3.73

Total Assets 102.81 104.77 1.96 106.57 1.80 108.99 2.42 141.34 32.35 32:.'33 181.49 631.31 308.48

LIABILITIES AND CAPITAL EQUITY

Loans from Gov't of India and others 50.00 50.00 - 50.00 - 50.00 - 80.00 30.00 257.50 177.50 556.8S 299.382/

Special Deposits - 1.13 1.13 2.39 1.26 3.64 1.26 4.90 1.26 6.15 1.25 7.40 1.25

Other Liabilities 2.81 3.64 0.83 4.]8 0.54 5.35 1.16 6.44 1.09 9.16 2.72 16.94 7.78

Total Liabilities 52.81 54.77 1.96 56.57 1.80 58.99 2.42 91.34 42.35 272.81 181.47 581.22 308.41

Capital - Paid-up 50.00 50.00 _ 50.00 - 50.00 - 50.00 - 50.00 - 50.00 -

Reserves and Surplus N N N N N N N N N 0.02 0.02 0.09 0.07

Total Capital Equity 50.00 50.00 N 50.00 N 50.00 N 50.00 N 50.02 0.02 50.09 0.07

Total Liabilities and Capital Equity 102.81 104.77 1.96 106.57 1.80 108.99 2.42 141.34 32.35 322.63 181.49 631.31 308.48

Note I/ includes Rs 110 million public bond issue made in Jaruary 1970 at 5 3/4% interest per annum repayable in 1982

N - Negligible

February 22, 1971

INDIA


AGRICULTURAL REFINANCE CORPORATION

PROJECTED BAIANCE SHEETS

As of Dates Indicated

June 30, 1971 June 30, 1972 June 30, 1973 June 30, 1974 June 30, 1975Rs M Change fro/-1 Rs M Change from Rs M Change from Rs M Change from Rs M Change from

Previous Date Previous Date PreviOUs Date Previous Date Previous Date

ASSETSCash on hand and in

Banks 0.10 0.06 0.10 - 0.15 0.05 o.15 - 0.20 0.05Investments 5.00 (19-99) 5.00 - 5.00 - 5.00 - 5.00 -Loans to Commercial

Banks:IDA Projects 2/ 20.00 20.00 100.00 80.00 195.00 95.oo 200.00 5.00 180.00 (20.00)Others 80.00 37.07 100.00 20.00 160.00 60.00 200.00 40.00 250.00 50.00

Lending to LMBs forIDA Projects 3/ 135.00 135.00 456.oo 321.00 735.00 279.00 790.00 55.00 700.00 (90.00)

LMB Debentures 700.00 153.96 840.00 140.00 1100.00 260.00 1400.00 300.00 1900.00 500.00Other Assets 15.00 (2.31) 20.00 5.oo 25.00 5.00 30.00 5.00 35.00 5.00

955.10 323.79 1V0 5660 2220.15 5699.05 2 405.500 3070.20 44.-0sLIABILITIES AND EQUITYLoans from GOI

(IDA Funds) 3/ 135.00 135.00 462.00 327.00 776.00 311h.00 935.00 159.00 935.00 -Other Loans from GOIand Other Sources 750.00 185.72 930.00 180.00 1256.00 326.00 1488.00 232.00 1920.00 432.00

Other Liabilities 19.60 2.66 26.68 7.08 30.75 4.07 35.92 5.17 40.09 4.17904.6o _3r373 1418. 2062675 644.07 2145.92 396.17 2595.09 Wb6.17

Capital Paid-up 50.00 - 100.00 50.00 150.00 50.00 150.00 - 150.00 -ReservesAt Beginning of Year 0.09 - 0.50 - 2.42 - 7.40 - 16.23 -Projected Net Income 2.53 - 6.17 - 11.35 - 15.20 - 15.25Total Available 2.62 6.67 - 13.77 - 22.60 - 31.48Mandatory Dividend

Due 4/ 2.12 4.25 - 6.37 - 6.37 - 6.37 -At End7of Year 0.50 0.141 2.42 1.92 7.40 4.98 16.23 8.83 25.11 8.88

Total Capital Equity 50.,50 - T 124 -T-5 157Z7.40 4.98 15W.T7 0.73 175.1 6.bTOTAL LIABILITIESAND EQUITY 955.10 323.79 1521.10 566.oo 2220.15 699.o5 2625.15 405.00 3070.20 445.05= _~r _

1/ See Appendix 3-3P/ unrjab, Andhra Pradesh, Haryana, and Tamil Nadu Projects

3/Gujarat, Punjab, Andhra Pradesh, Haryana, and Tamil Nadu Projects4/ Although mandatory dividend of 4-1/4% only applies to the initial Rs 50 million equity capital, this rate of dividend

has been included on all issued equity capital in the above table,February 4, 1971

ANNEX 4Page 1

INDIA


HARYANA STATE COOPERATIVE LAND MORTGAGE BANK LTD.

AND PRIMARY LAND MORTGAGE BANKS

A. The Structure of the Haryana Land Mortgage Bank System

1. The land mortgage banking structure in Haryana is federal incharacter with the Primary Banks (PLMBs) functioning at the tehsil level(sub-division of a district) federated into the State Land Mortgage Bank(SLMB). Although each PLMB is theoretically independent, SLMB, in fact,controls their operations since: (i) it is the only permitted source oftheir borrowings and can withhold funds from any bank which does not meetits requirements; and (ii) provides all PLMB staff on secondment (includingmanagers) which PLMBs are bound to accept.

2. For all practical purposes, therefore, SLMB and its federatedPLMBs can be considered as a single entity with an operational relationshipsimilar to that of a bank head office to its branches. The PLMBs (underSLMB direction and guidance) are responsible for making loans to their mem-bers, such lending being wholly re-financed by SLMB. As of June 30, 1970,the 23 PLMBs had a total membership of about 44,000.

3. In the following paragraphs the operations of SLMB and PLMBs areconsidered separately in regard to their organization, management, and re-sources. Their lending procedures being closely integrated are consideredtogether in further sections.

B. The Haryana State Cooperative Land Mortgage Bank Ltd.


4. SLMB was registered on October 17, 1966, on the creation of theState of Haryana out of a reorganized State of Punjab. It is an apexinstitution for a network of 23 PLMBs with its office in Chandigarh, theState capital. It operates under the Cooperative Land Mortgage Banks Act1957, and the Cooperative Society Act 1961.

5. Under the General Body, with powers equivalent to an AnnualGeneral Mleeting of shareholders in a joint stock company, SLIM's affairsare directed by a 15 member Board consisting of ten members elected by PLMBs,

ANNEX 4Page 2

three nominated by the State Government, and one each nominated by the StateCooperative Bank and the Registrar of Cooperatives. To facilitate admin-istration most of the Board's powers devolve to a nine man Executive Com-mittee. Both the Board and the Executive Committee have a three-year term.

6. The Secretary is SLMB's chief executive officer. He is appointedby the Board subject to the approval of the Registrar of Cooperatives. Heis assisted by an Additional Secretary, as his deputy, and two AssistantSecretaries responsible for administration, accounts, and the inspectionand supervision of PLIlBs. As at June 30, 1970, the staff numbered 254 outof which 43 were in the head office in Chandigarh and the remainder wereon secondment to PLMBs.

7. Whilst the staff includes many graduates in the arts and law ithas no specialists in agriculture and economics and basically it is deficientin credit experience. SLMB recognizes that in future it must re-orientateits lending policies to the developmental aspects of investments ratherthan the collateral aspects, and is taking steps, with the assistance ofARC, to train its staff accordingly. It will, however, need to recruitsome specialists and will establish a small technical cell at head office,consisting of an agricultural economist, a chief inspecting officer (anexperienced graduate in agriculture), and two inspecting officers (alsograduates). In addition, a technical officer (a graduate in agriculture oragricultural economics) will be stationed in each PLMB to advise and assistthe Land Valuation Officers (LVOs) with loan appraisals. More qualifiedand experienced managers for PLMBs (17) will also be recruited. SLMB alsoreceives technical support from the Project Officer (a Joint Director ofAgriculture), appointed by the State Government, and his staff which:Lncludes two Assistant Project Officers (secretary level), a Chief WellSupervisor, and soil conservation specialists.

Source of Funds

8. As an apex organization, SLMB's share capital is contributed bythe PLMBs (at a rate of 5% of borrowings from SLMB) and the Haryana State(,overnment. As of June 30, 1970, SLMB's total subscribed capital wasEls 11.7 million (US$1.6 million), as against Rs 100 million (US$13 million)authorized, of which the State Government's contribution was Rs 3.5 millionor about 30%. The following table shows the growth of SLNB's issued sharecapital divided as to the PLMBs' and State Government subscriptions as ofthe dates shown.

ANNEX 4Pag. 3

Rs Million

June 30 June 30 June 30 June 301967 1968 1969 1970

PLMBs 0.9 (43%) 2.0 ( 51%) 5.1 ( 66%) 8.2 (70%)

State Government 1.2 ( 57%) 1.9 ( 49%) 2.6 ( 34%) 3.5 ( 30%)

Total Issued 2.1 (100%) 3.9 (100%) 7.7 (100%) 11.7 (100%)

As at June 30, 1970, reserves and undistributed profits totalled Rs 1.5 mil-lion representing 1% of total loan portfolio.

9. Apart from short-term bridging finance provided by commercialbanks, SLMB's borrowings have derived from the issue of debentures. Theseare guaranteed by the State Government as to payment of interest and repay-ment of principal and are secured by the mortgages financed from the pro-ceeds of a particular debenture issue. As in the case of other State LandBanks in India, SLMB floats three types of debentures:

(a) ordinary debentures about 80% of which are purchased bythe Life Insurance Corporation of India, the State Bankof India, and RBI under pre-arranged quotas, the balancebeing sold on the open market but largely being takenup by sister institutions. Brokerage and underwritingcommission are fixed by RBI, the issue price beingdependent on the money market. In 1968/69 interest rateswere 6% per annum on debentures issued at 99-1/4% whichwas marginally higher than in previous years. As at June 30,1970, the amount of this type of debenture outstanding wasRs 90 million (US$12 million);

(b) rural debentures which are sold only to individuals sincetheir purpose is to encourage the mobilization of localsavings. To stimulate their sale, RBI subscribes in theratio of eight for every seven rural debetures sold andreceives interest at 1% less than the regular rate. Pre-sent rates are 6% on five-year and 5% on ten-year debenturesissued at par. No sales were made during 1969/70 because ofthe unattractive interest rates, which are below thoseoffered by commercial banks for deposits of similar term andnon-institutional borrowers. This matter is being examinedby RBI, ARC, and the land mortgage banks. The amount ofrural debentures outstanding as at June 30, 1970, was Rs 2million (US$300,000); and

(c) special debentures which are issued for financingagricultural projects approved by ARC. They aresubscribed by ARC and the State Government in

ANNEX 4Page 4

proportions decided by ARC and are currently inthe ratio of 9:1 for minor irrigation projects and3:1 for other projects. Interest paid on thesedebentures is also decided by ARC and the presentrate is 6-1/2% per annum. Special debentures out-standing at June 30, 1970, amounted to Rs 65 million(US$8.6 million).

SLMB's borrowings may not exceed 25 times paid-up capital and reserves.

C. Primary Land Mortgage Banks (PLMBs)

Organization and Membership

10. As of June 30, 1970, there were 23 PLMBs operating in Haryana.It is proposed to establish two more PLMBs during the next three years.All are presently profit-making and the overall default position is lessthan 1%.

11. The membership of PLMBs falls into two classes. First, theregular (or A class) membership open to individuals and cooperative farmingand tubewell irrigation societies. Such members must be landowners andthus be able to offer the security of land. Accordingly, only A classmembers are entitled to borrow. Second, there is B class membership madeup of individuals who are cosharers in the property of A class members.This class of membership exists to faciliate the execution of mortgageson farms of regular members who otherwise would have insufficient collateralto borrow. Only A class members have voting rights and are entitled to any(lividends which the PLMBs may declare. On June 30, 1970, the PLMBs had atotal regular membership of about 40,000 (compared with 34,000 a yearearlier) and the number of outstanding loans by all PLMBs totalled about28,000.

Management

12. Management of each PLMB follows the SLMB pattern with overallcontrol vested in the General Meeting and with a committee exercising thefunctions of a Board of Directors. The manager of each PLMB (who is asecondment from SLMB) is the chief executive. The main functions of PLMBsare the sanction, disbursement, and recovery of loans.

Source of Funds

13. The main sources of funds of PLMBs are members' silare capital,loans from the SLMB, and undistributed profits. Each PLB hlas its ownshare capital and borrowers are required to hold shiares to the value of 5;of a loan. Equally PLMBs must invest in SLMB shares to the extent of 5'of their borrowings. As at June 30, 1970, the total share capital of all

ANNEX, /Page D

23 PLMBs amounted to Rs 11 million (US$1.5 million) whilst total outstandingborrowings from SLMB amounted to Rs 156.6 million (US$21 million). PLMBborrowings may not exceed 25 times the paid-up share capital.

D. Overall Lending Policies and Procedures

Purposes of Loans

14. PLMBs lend for (and thus SLMB refinances) a wide range of agricul-tural purposes on long-term including:

(a) the construction, improvement, and repair of minorirrigation works;

(b) land drainage, levelling, reclamation, and improve-ment;

(c) purchase of farm machinerv including tractors andimplements;

(d) purchase of land occupancy rights and redemptionof mortgages; and

(e) such other purposes as the Board may determine to befor land improvement or agricultural production.

Lending Procedures

15. Applications for a loan have to be made to the PLMB of which theapplicant is a member. All applicants, who must be cultivators of the landto be mortgaged, are required to deposit a fee at the rate of Rs 0.5 perRs 100 of the proposed loan limit with a minimum of Rs 25. The final feeis determined in accordance with the amount of the loan finally sanctioned.

16. tJntil recently lending procedures have largely been based on thevalue of the security offered rather than to the economic benefits derivingfrom loans. This is historical inasmuch as the banks were founded, as theirtitles still imply, to take over mortgages which bore exorbitant interestrates thereby reducing the influence of money lenders. The change in therole of the land mortgage banks towards development banking will require achange in lending procedures and the SULM is well aware of this. Steps arebeing taken, with the help of ARC, to train staff in the techniques ofdevelopment banking. Additional specialist staff is being recruited (para7). In future loan applications will be individually appraised on the basisof the incremental benefits of the proposed investments. New proceduresare being introduced and these are given in detail at Appendix 4-5.

ANNEX 4Page 6

Lending Terms and Interest Rates

17. Borrowers are required to hold shares equivalent to 5% of loans.Farmers have been required to make a downpayment of 25% (which includesthe 5% shareholding) in respect of tractors and implements. In practice,however, a loan has been made for the purchase of a tractor and the farmerhas been expected to buy implements, the purchase price of which has beenregarded as his downpayment. This is not satisfactory as farmers havebeen inclined to purchase fewer implements than they needed to make effec-tive use of the tractor. Under the Project borrowers for tractors will berequired to purchase at least three approved implements (the cost of whichwill be included in the loan) and make a downpayment of 25% (includingshareholding) of the cost of tractor plus implements. The 25% downpaymentwill also apply to combines and harvesters. In the case of tubewells nodownpayment other than the 5% shareholding has been required. Under theProject it is proposed that a contribution of 20% (including shareholding)should be made in respect of all minor irrigation investment. This wouldalso include the value of any benefits in kind contributed by the farmer,including cost of labor.

18. Tractor and tubewell loans are repayable over a maximum of sevenyears including a one year grace period for tubewells. This is consideredsatisfactory for the Project and sprinkler irrigation loans would also berepayable on the same terms as for tubewells. Loans for combines have notpreviously been made. They would be repayable over a maximum period offive years with no grace period.

19. PLMBs presently lend to farmers at 8-1/4% per annum and arerefinanced by SLMB at 6-3/4% per annum, giving them a margin of 1-1/2%.This margin is considered adequate. Up until December 1970 ARC refinancedSLMB at 6% per annum, giving SLMB a margin of 3/4%. Taking SLMB's blendof funds, its overall margin was slightly less than 3/4%. ARC has nowraised its interest rate to 6-1/2% per annum which will necessiate a risein bank lending rates. It is considered that in view of the need tostrengthen SLMB's technical staff a continuing spread of 3/4% would beinsufficient to enable it to meet the additional costs involved and makeprofits and build up reserves. It is, therefore, proposed that PLMB'srate to farmers be raised to 9% per annum (which would bring it into linewith rates charged for similar lending under IDA projects in Cujarat,Punjab, and Andhra Pradesh) and that SLMB's rate to Pl.MBs be raised to7-1/2% per annum which would still give PLMBs a margin of 1-1/2%. SLMB'smargin would be raised to 1% which would enable it to meet its additionalexpenses.

E. Overall Operational Results

20. SLMB's lending operations have grown rapidly since its establish-ment in 1966. Total amount of loans outstanding as at June 30 each yearwere: 1967 - Rs 16 million (US82 million); 1968 - Rs 37 million (US$5

ANNEX 4Page 7

million); 1969 - Rs 96 million (US$13 million); and 1970 - Rs 157 million(USS20 million). The number of loans approved has similarly increased from1,000 in 1967 to 11,000 in 1970. Minor irrigation loans are the largestelement in the loan portfolio currently representing about 69%, followedby mechanization loans, 25%. The remainder (6%) are for miscellaneouspurposes such as land reclamation, farm improvements, grape cultivation,etc.

21. Despite the narrow margin between borrowing and lending rates(see para 19) SLMB has made small but increasing profits (Rs 275,000 in1968/69 and Ps 738,000 in 1969/70). In view of its short existence (onlyfive years) it has not declared any dividends preferring to retain un-distributed profits during its development period, although profits wouldhave enabled a modest dividend (about 5%) to be paid in 1969/7n. At least25% of profits must, by law, be transferred to a statutory reserve. Theincreased margin proposed in para 19 would enable SLMB to meet the addi-tional expenses incurred in strengthening its technical staff and increaseits profits and reserves. There are no loans in arrears.

22. The profits of PLNBs vary according to their size but all 23 areprofit making. In 1968/69 total PLB profits exceeded those of SLMB(Rs 350,000 against Rs 275,000). The increased expenses resulting frommore thorough appraisal of loan applications and the employment of addi-tional technical staff should not cause a significant decrease in profitstaking into account the increase in PLMBs' volume of lending. Repaymentrecords are good, the overall percentage of default does not exceed 17.

23. The accounts of SLMB and the PLMBs are audited by independentauditors from the Cooperative Department, which is the common practicethroughout India. The SLNB has recognized the need to revise its accountingprocedures in view of the increased volume of lending and the change inits type of business and a committee to examine the problems has beenestablished. ARC is also discussing improvements in the presentation ofLand Mortgage Bank accounts on an all-India basis.

INDIA

-W2YAUX AC- ICULTURAL CREDIT PROJECT

-:RYkA'4 STATE ILAND I4(TCGACE BANK LTD.

CCNDEITSD STAT:Ei4EIr OF HET ITCOIE

1966/67 1/ 1967/68 1968/69 1969/70 2/' of % of , of % of

Rs '000 Total Income ls '000 Total Income is '000 Total Income Rs '000 Total Income

ILACJ 1NE

Interest and fees 6.8 97 17.8 99 4o.7 98 87.5 99

Commission etc. 0.2 3 0.2 1 o.6 2 o.6 1

Total Income 7.0 100 18.0 100 41.3 100 88.1 100

EXPENSES

Interest paid on debenturesand loans 5.4 77 24.7 82 34.9 84 75.8 86

Rrokerage and underwritingcommission 0.2 3 o.6 3 1.2 3 1.6 2

Salaries and Allorances 0.5 7 1.3 7 1.7 4 1.7 2

Miscellaneous 0.2 3 0.7 4 0.7 2 1.6

Total Expenses 6.3 90 17.3 96 38.5 93 80.7 )I

BET I7CXX.E. 0.7 10 0.7 4 2.8 7 7.4 9

1/ For 8 months only (Bank came into existence on November 1, 1966).

2/ Unaudited.

February 4 , 1971

HARYAN& AGRICULTURAL CREDIT FROJECT

IaRYANk STATE LND MVRTGA0E BANK LTD.

CONDENSED PROJECTED STATEMENT OF NET INCOME

1971/72 1972/73 1973/74 1974/75 1975/76% Of % of % Of % Of % Of

Rs M Total Income Rs M Total Income Rs M Total Income Rs M Total Income Rs N Total Income

ncc,e

Interest received onsProject Loans 1/ 2.55 21.0 8.oo 40.0 12.90 38.3 11.00 22.2 9.00 16.5Other Loans anlInvestments 9.55 79.0 11.90 60.0 20.66 61.4 38.25 77.5 45.50 83.3

Brokerage andCommission 0.05 0.06 0.08 0.3 0.09 0.3 0.10 0.2

Total Income rI-5 lo 19.964 100.0IW .73 I- C Ib 51

EXPENSES

Interest paid on:Project Loans 2/ 2.20 18.1 7.00 35.0 11.20 33.2 9.60 19.4 7.90 14.5Other borrovings 8.30 68.3 10.38 52.0 17.60 52.3 32.94 66.7 38.63 70.8

Brokerage andCommission 0.27 2.2 0.27 1.4 0.29 0.9 0.30 o.6 0.32

Salaries and D

Allowances 3/ 0.27 2.2 0.35 1.8 0.38 1.1 0.41 0.9 0.44 0.8 IMiscellaneous 0.12 1.0 0.17 0.9 0.20 o.6 0.24 0.5 0.26 0.5 z

- ISM 291.T bI 7 -83T 070 75.1 75 8NET INCOME 0.99 8.2 1.79 8.9 3.97 11.9 5.85 11.9 7.o5 12.8y At 7-1/2% per annum

A/ At 6-1/2% per annu=I/ Includes additional staff required under the ProjectFebruary 4, 1,71

lTSI

HARYANA AGREICLTURAL CREDIT PROJECT

HARYANA STATE LIANI MORTGAGE BANK LTD.

CONDENSED FAIAXE S.ET AS OF DATES I?ICATED

June 30, 1967 June 30, 1968 June 30, 1969 June 30, 1970Change from Change from Change from

Rs M Rs M Previous Date Rs M Previous Date Rs M Previous Date

Cash on hand and with Banks 0.21 1.67 1.46 0.69 (0.98) 5.11s 4.

Investments 3.28 5.13 1.85 8.27 3.14 15.11 6.*-

Loanm to PLMB 16.63 36.50 19.87 96 .14 59.64 i56.6o 60 .6 it

Other Assets 2.23 1.73 (0.50) 3.88 2.15 4.41 Q-52

Tatal Assets _ 50 22.66 I0.7 6395 23 _ =, == -,

LIABILITIES AND EQUITY CAPITL

Debentures 19.18 39.33 20.15 97.57 58.214 156.67 59.10

Advances and Deposits 0.22 o.48 0.26 1.08 o.60 lo.61 9.53

Other Liabilitios o.62 1.03 o.4i1 2.13 1.10 o.69 (11414)=20.- 40.X! F599 127.67 6i7.I9

Capital: Paid-up Share Capital 2.09 3.87 1.78 7.68 3.81 11.69 4.01

Reserves and Net Incoae 0.24 0.32 0.08 G.52 0.20 1.60 1.08

Total Capital 2._33__ -f.lW 13.29 5.09

Total Liabilities &W EquityCapital 22.35 45.03 22.68 108.98 63.95 181.26 72.28

Ftwrary 4, 1971

INDIA

HAR!ANA. AGRICULTURAL CREDIT PROJECT

HARYALN STATE IAND MORTGAGE BANK LTD.

CONDENSED PROJECTED BAIAME SETS AS CF DATES INDICATED

June 30 June 30 June 30 June 30 June 301972 1973 19714 1975 1976

ASSETS Rs M Rs M Rs M Rs M Rs M

Cash on hand and with Banks 1.00 1.00 1.00 1.00 1.00Investments 1/ 29.60 49.62 77.00 114.60 170.60Loans to PLMBs:

Under the Project 2/ 34.00 107.00 172.00 1148.oo 121.00Others 190.95 243.86 367.80 572.40 638.20

Other Assets 8.45 13.52 19.20 19.00 14.20264.00 415.00 636.00 U59045.00

LIABILITIES AND EQUITY CAPITAL

Debentures 247.00 388.00 598.60 808.90 895.00Advamses and Deposit 1.00 0.20 0.25 0.25 0.30Other Liabilities 1.00 5.80 5.15 2.85 2.70

3.00 794.00 _04.00 d12.0 U98.0 m

CapitalPaid-up Share Capital 12.90 17.80 26.50 34.00 35.00Reserves and Net Income 2.10 3.20 5.50 9.00 12.00

15.00 21.00 32.00 43.00 _7rz__

Total Liabilities and Equity Capital 264.00 415.00 636.00 855.oo 945.00

1/ Includes Sinking Fund for debentures2/ Assumes about 20% of Project loans will be through commercial banksFebruary 4, 1971

APPENDIX 4-5Page

INDIA


PROPOSED LOAN POLICY OF

THE HARYANA STATE COOPERATIVE LAND MORTGAGE BANK LIMITED

LOAN PROCEDURES AND POLICIES

1. Procedure for Processing Loan Applications

(a) Applications for loans will be submitted to the Managerof a Primary Cooperative Land Mortgage Bank in the prescribedform along with the necessary documents.

(b) The applicant will also deposit a fee at Rs 0.5 per hundredrupees, subject to the minimum of Rs 25 when submittinghis application.

(c) After satisfying himself that the application is completein all respects, the Manager will forward the same to theLand Valuation Officer for scrutiny of the application inaccordance with the criteria laid down by the Bank.

(d) The Land Valuation Officer will evaluate the loan applicationand will submit his report in the form prescribed, alongwith his recommendations, to the Manager.

(e) On receipt of the loan application from the Land ValuationOfficer, the Manager will refer the case to the TechnicalOfficer for his advice from the point of view of economicviability and technical feasibility of the loan and also theamount of loan to be recommended. Applications for thepurchase of tractors will be personally evaluated by theTechnical Officer. The Technical Officer will also guideand supervise the work of Land Valuation Officers in regardto evaluation, etc.

(f) On receipt of the case from the Technical Officer, theManager of the Bank shall forward the same to the LegalAdvisor and obtain his advice in regard to the right, title,and interest of the applicant in the hypotheca.

(g) After the case is received from the Legal Advisor, theManager of the Bank shall certify that the case is fit foradvancement of the loan and place his recommendations before

APPENDIX 4-5Page 2

the Committee of the Bank. If the Manager is not satisfied,he will return the case to the Land Valuation Officer forremoval of the defects noted therein.

(h) After the loan is sanctioned by the Committee of the Bank,the loan sanction order will be issued by the Manager inthe prescribed form requiring the applicant to furnish thenecessary security by executing a mortgage deed in favorof the Bank.

(i) On execution of the mortgage deed, the loan shall be re-leased to the loanee by cheques drawn on Central CooperativeBanks or through its branch concerned.

2. Terms and Conditions

(a) All loans from the Primary Cooperative Land MIortgage Bankswill be at the rate of 9% p.a.

(b) The period of loan will normally be 7 years. However, ifthe incremental income of the applicant is found to besufficiently high, the period of the repayment of the loanwill be reduced suitably.

(c) There will be no ceiling on the loan admissible to anyindividual borrower.

(d) The borrowers will be required to contribute 25% of the costof tractors, implements, and harvesters and 20% of the costof the total investment in respect of other types of loans.

(e) The terms and conditions for loans for similar purposes willbe identical irrespective of the source from which the fundsare obtained.

(f) The loan will be advanced in two instalments for tubewellsand pumping sets. For tractor loans, payment will be madeto the dealers. The portion of the loan for purchase ofmachinery, etc. will be made directly to the dealer againsta proper receipt.

3. Security

Loans will be advanced against security of landed propertyand will be to the extent of 50% of the value of the hypotheca as determinedin the manner prescribed.

APPENDIX 4-5Page 3

4. Supervision

(a) Loans for purchase of pumping sets, machinery, etc. willbe given in two instalments. The second instalment forpurchase of machinery, etc. will be released after receiptof a utilization certificate from the Land Valuation Officerin regard to the first instalment.

(b) The Land Valuation Officer will check every case withina period of one month of the release of the secondinstalment. 20% of the utilization will be checked bythe Manager personally.

(c) The Land Valuation Officer will check the proper utilizationof the case every six months and submit a report to theManager which will be entered in the loan utilizationregister.

(d) Utilization of loans will also be checked by the ChiefInspecting Officer and two Inspecting Officers at theheadquarters.

(e) In the event of default, the entire loan amount will berecalled and recovered by distraint and sale of the produceand also by sale of the mortgaged property.

January 12, 1971

ANNEX 5Page 1

INDIA


COMMERCIAL BANKS OPERATING IN HARYANA

(As at June 30, 1970)

Nationalized Banks 1/

Allahabad Bank

Bank of Baroda

Bank of India

Canara Bank

Central Bank of India

Indian Overseas Bank

Punjab National Bank

State Bank of India

State Bank of Bikaner and Jaipur (subsidiary of State Bankof India)

State Bank of Patiala (subsidiary of State Bank of India)

Syndicate Bank

United Commercial Bank

Union Bank of India

Banks with Private Ownership (Scheduled) 1/

Haryana State Cooperative Bank Ltd.

Lakthi Commercial Bank Ltd.

New Bank of India Ltd.

1/ All these banks are scheduled, i.e., are included in the SecondSchedule to the Reserve Bank of India Act 1935. They have paid upcapital and reserves of at least Rs 5 million and are entitled tocertain borrowing facilities from the Reserve Bank of India.

ANNEX 5Page 2

Oriental Bank of Commerce Ltd

Punjab and Jind Bank Ltd.

Banks with Private Ownership (Unscheduled)

Postal and BMS Employees Cooperative Bank Ltd.

Sahukara Bank Ltd.

January 12, 1971

ANNEX uPage 1

INDIA


MECHANIZATION PROCUREMENT

1. The Project now proposed would be the fourth of a series ofagricultural credit projects in India which IDA is at present considering.As in the case of Gujarat, Punjab, and Andhra Pradesh Credit Projects whichit follows, this and subsequent projects in the series would involve sub-stantial tractor imports. Accordingly, in considering the earlier Projects,careful attention was given to the method of tractor procurement and theformula outlined below for Haryana substantially follows the previouslyagreed arrangements.

2. Farmers' purchase through existing dealerships would not befeasible as the necessary competition between dealerships would only beobtained by liberalizing import licensing to enable large scale tractorimports. In view of India's shortage of foreign exchange this would beinappropriate. Normal international competitive bidding could only beorganized through State entities. This would tend towards a Governmenttractor distribution monopoly and further weaken existing dealershipchannels and it would not take farmers' choice into account.

3. To meet this situation, a formula has been worked out with theGovernment of India (GOI), details of which would be as follows:

(a) GOI would establish a central committee (hereinafterreferred to as the Committee) for the purpose of directingthe procurement of goods under this Project. The Committeewould consist of representatives of GOI (one of whom wouldbe chairman), the Government of Haryana and the AgriculturalRefinance Corporation (ARC). Under the Committee's directions,the Haryana Agro-Industries Corporation (HAIC) would organize theprocurement of goods under the Project in accordance withthe following procedures:

(b) HAIC would obtain tractor quotations on unit prices atvarying quantities from suppliers in IDA member countriescurrently authorized to manufacture tractors in India.These are Eicher (Federal Republic of Germany), Interna-tional Harvester (USA) and Massey Ferguson (UK) withplants in production and Deutz (Federal Republic ofGermany), Ford (UK) with plants for manufacture approvedby GOI. Further companies may be expected to be addedto the list; GOI is currently considering seven additonal

ANNEX 6Page 2

proposals from firms in IDA member countries. Quotationswould be sought by public invitation and the form andsubstance of the bid requests would be subject to IDAconcurrence.

(c) HAIC would require all suppliers submitting quotationsto give full particulars as to proposed pre-sales andafter sales service arrangements, including provisionfor spare parts equal to 15% of the CIF price of tractorssupplied. Any supplier not providing satisfactory assur-ance as to service arrangements would, subject to IDAconcurrence, be disqualified by the Committee.

(d) HAIC would advertise through the Haryana State CooperativeLand Mortgage Bank (SLMB) and the participating commercialbanks, the quoted prices and service arrangements offeredby the different suppliers. Farmers would be requiredto state to the Primary Bank of SLMB or the participatingcommercial bank their first and second choice of tractorwhich they would be willing to buy and at the same time makeapplication for a loan.

(e) Farmers' tractor preferences would be sent to HAIC whichwould aggregate the orders received according to firsttractor choices. If the aggregate orders for the parti-cular model came to below the minimum acceptable order forthat manufacturer at the unit price quoted for varyingquantities, the Committee would discard the first choicefor those farmers and proceed on the basis of the secondor other choices as agreed by IDA. After approval by theCommittee, HAIC would send to IDA its analysis of bids andits recommendations for the placing of orders. IDA wouldthen promptly inform the Committee whether it had anyobjections to the recommended orders with its reasons.

(f) HAIC would subsequently place orders with the selectedsuppliers at the unit prices quoted. IIAIC would alsoenter into contracts with the selected suppliers whichwould specify service arrangements and performanceassurances including the supply of spare parts. Agentsrepresenting suppliers would be required to sell post-warranty service.

(g) HAIC would arrange through the suppliers' representativesin INDIA for the importation, insurance and transportationto Haryana of tractors. Subsequently, the tractors wouldbe distributed to agents designated by the suppliers whowould perform pre-sales services and sell the tractors tofarmers whose loan applications had been approved.

ANNEX 6Page 3

(h) Suppliers would be required to maintain stocks of spareparts by a designated representative in a central storeto be released through agents for tractors imported underthe Project.

(i) In the event of the Committee placing orders over thereasonable objections of IDA on the grotnds of inconsistencywith the procedures or, if the terms of such ordersmaterially differed from those on which quotations werebased, IDA would reserve the right to cancel from theCredit, such amount as it considered represented expen-ditures under such orders.

4. Tt is expected that the above tractor procurement method andprocedures would take account of individual preferences and tend to lowerprices while strengthening the services provided by manufacturers approvedagents which is considered essential to the Project.

HARVESTING MACHINEPRY

5. Hiarvesting machinery would be procured by international competitivebidding under arrangements to be made by the Committee. Bids would only besought against approved loan applications which would then be bulked to avalue of at least US$100,000 equivalent for purchase by dealers.

ANNEX 7Page 1

INDIA


HARYANA AGRO-INDUSTRIES CORPORATION


1. In accordance with the general policy of the Government ofIndia (GOI) to encourage the development of farm mechanization and agro-industries through the establishment of public sector corporations in eachState, the Haryana Agro-Industries Corporation (HAIC) was incorporated asa limited liability company on the March 31, 1967. It has an authorizedcapital of Rs 20 million (US$2.7 million), of which Rs 11.9 million(US$1.6 million) has been paid up, with equal subscriptions from GOI andthe Haryana Government.

2. The Board of Directors of HAIC numbers ten, made up of threerepresentatives of GOI, four of the State Government, the Vice-Chancellorof Haryana Agricultural University, one member of the State legislature asrepresentative of the farmers (who is also Chairman of the Board) andthe Managing Director, who is the Corporation's chief executive officer,and a member of the Indian Administrative Service seconded by the StateGovernment. The Corporation has suffered from unduly frequent changes inits top management - in the first three and a half years of its existence,there were six changes in the appointment of Chairman and five in that ofManaging Director. Despite this handicap, the Corporation has made agenerally sound start.

3. Like similar corporations in other States, HAIC is intended tooperate as a commercial organization. Under its Memorandum and Articlesof Association, the corporation has wide powers, including:

(a) the financing, manufacturing, and promotion ofagricultural machinery and equipment;

(b) the organization and management of engineering andrepair workshops;

(c) the purchase and sale of agricultural machines andappliances including hire-purchase sales and theprovision of farm custom and other services; and

(d) the promotion or conduct of any agricultural, commer-cial, or industrial enterprise.

ANNEX 7Page 2

4. The Corporation's head office is at Chandigarh, its main workshopand tractor assembly plant at Nilokheri, with two main sales and servicestations at Panipat and Hissar. As of March, 1970, staff of the Corporationtotalled 270, of whom about 40 were employed at the head office.

Operations

5. The main activities of HAIC have been concerned with tractorsimported under bilateral trade agreements with East European countries.It has a small, well-organized assembly plant for Zetor 2011 tractors atNilokheri, where, over the past two years, 1,853 tractors received in semi-knocked down condition have been assembled, with technical assistance fromthe parent Czechoslovakian organization. Only 327 of these were distributedin Haryana, the balance being made available to Punjab, Mladhya Pradesh,Rajasthan, Bihar and Jammu and Kashmir. During the same period, some1,400 tractors of various East European makes were distributed by theCorporation in Haryana.

6. Demand for tractors far exceeds supplies and HAIC invitesapplications from farmers owning not less than 12 ha for tractors of 50hp and above, and not less than 6 ha for others. Successful applicantsare then chosen by ballot.

7. The Corporation's future plans cover the establishment of onemain service center in each district. In addition to providing repair,spare part, and service facilities for tractors distributed by the Corpora-tion, these centers would have tractors, land levelling equipment andharvesting machinery, to be operated on a custom-service basis for farmers.It is the declared policy of the Corporation to supplement private enter-prise in the service and custom hiring fields, and to provide technicalfacilities and assistance to emerging private contractors.

Other Activities

8. HAIC has been the agency for the procurement and distributionto approved implement manufacturers of components in short supply, notablyhard-steel discs for plows and harrows. It also distributes the iron andsteel quota (totalling 4,543 in tonnes in 1968/69) to implement manufacturersin Haryana.

9. HAIC owns and operates five feed processing mills, but itsactivities in this field represented less than 5% of its turnover in1969/70.

Resources and Financial Operations

10. As of 30 June, 1969, HAIC's paid up capital and reservestotalled Rs 11.2 million (US$1.5 million). Its profit record since itsestablishment has been as follows:

ANNEX 7Page 3

FY Ended June 30 Net Profit after Taxation

Rs '000 US$'000

1968 83 11.0

1969 192 25.6

1970 (estimated) 800 106.7

January 12, 1971

AL ,

INDIA


Estimates of Disbursement

CumulativeIBRD/IDA Fiscal Year Disbursements Disbursements

and Quarter During Quarter Ending At End of Quarter---------------(in US$'000)---------------

1971/72:

December 31, 1971 800 800March 31, 1972 800 1,600June 30, 1972 800 2,400

1972/73:

September 30, 1972 800 3,200December 31, 1972 1,200 4,400March 31, 1973 1,200 5,600June 30, 1973 2,100 7,700

1973/74:

September 30, 1973 2,100 9,800December 31, 1973 2,400 12,200March 31, 1974 2,400 14,600June 30, 1974 2,400 17,000

1974/75:

September 30, 1974 2,400 19,400December 31, 1974 2,400 21,800March 31, 1975 2,500 24,300

February 11, 1971

INDIA


Estimated Increase In Cropped Area And Production(Three Years After Investment And Later)

Cropped Area ProductionArea Full Full

Project Crops Net ha Before Development Increase Before Development Increase- - - - - - ha - - - - - - - - - - -_ -_ -_ - - ton - - - - - - -

Wheat 54,225 117,600 63,375 119,790 328,100 208,310

Rice (paddy) 20,000 35,000 15,000 38,400 82,100 43,700

Bajra (millet) 57,150 12,150 (45,000) 58,725 39,920 (18,805)

Pulses 27,000 14,075 (12,925) 26,400 16,890 (9,510)

Barley 9,150 - (9,150) 8,920 _ (8,920)

Sub-Total Foodgrains: 167,525 178,825 11,300 252,235 467,010 2114,775

Seed Cotton 25,000 67,000 42,000 17,500 85,ooo 67,500

Rape 6,000 12,000 6,000 4,500 9,000 4,500

Sugarcane 6,000 18,000 12,000 390,000 1,170,000 780,000

Fodder 29,075 26,180 (2,895) 1,292,625 1,167,275 (125,350)

Sub-Total: 66,075 123,180 51,105 r___._____

Grand Total: 181,750 233,600 302,005 68,405

February 11, 1971

AdF33 11

.. 3 3 h.,eo.5 5 0 5 _ _ _ _ __ _ _ _ _

Riot (p.21051 1.0 1~~ ~ ~ ~ ~~.0 1.2 2.0 400 900 04 .000 050 4

Are l Ylld 30ta1Cost Frductlon b7;e de rrod;ct'7 w I_

5a35a 0.0 - 0.5 - 000 - 150 - 50 - 150)Poddes 0.5 0.5 25.0 35.0 55 125 512 055 37 312 5Costos - I1.0 I '.0 - 580 - I1,500 - 020 600

P,ises 1.0 - 0.8 - 150 - 640 - 490 - 149000arle U.0 - O0 - 75 - 505 - 203 - 1001

t7hess - 2 0 - 2.0 - 1,320 - 0,11 - 2,020 0.024podiso - 0.5 - 62.0 - 2003 - 950 _ 550 550

0.0 1.0 805250 0kO .711 1.025 4,126 2.001

45055505 00285510(1 Ill, 152, Oools.sOo3 Loss - 450 51501 510)

soOlo.k 4ost 5O .00 q 500 (1.200I 1404}

T-o051 i.03 02 5055 025 2.635 221

ngdel 11 1105SSP.255i 0 4o C,o, 4,dsooll Ii, 5.50011 72r2.ssd 555. 5h

Feed bobsa 2 0 ;. 0 5 1.0 500 2,b010 1,o050 4,500 550 1,860 1.58100FoOds. 0.5 0.5 25.0 35.0 125 125 302 057 IS7 512 125

Poles. 2.0 1 0 O .5 1.2 255 500 540 950 49o 050 so(

b,r;ey 1.0o - 1.0 - 150 1,9A0 550 -tZ14 400 , 400)Fo..so - 0 0 62.0 - 500G- 1 is 6 _ 156 1.560

5.4 03.5 2,525 5,045 0.15i7 2Z.0015 1,521 5,225 1,1..

rospoLss 1s5.s50051 1204 1700 10502.sOoo 00,41 - 4506 - (40) 140)

Bllook Cos1 1.200 0.400 (102001 2,400) 1 2000

500021 2 .5250 2,005 62? 437 05 505

MoOde 220 00.o.500e1 0.5 Coesso 5.,0.oll 05,8 ,80000 Ippla.sie OP.. 8 05

oslo. 4.0 - 2.5 - 800 - 1,200 - 4006 14008..2 CoKoto 0.2 . .0 4.0 07IG 1,000 3,520 2,100 0,000 1,100 2.o60 1,580

550. 0o521s -5 3.0 .32.5 - 2,d50 - 4,200 I ,6S0 1,500

VoIses 2.0 1 0 0.8 0.2 500 3002 0,290 550 900 000 5520)100... - 4.2 - 2.2 - 2,640 - 6,69d 0 ,045 4.043850lV455 1. - . G6.0 - 50 -0 5S ,50 - 4G00 (4000

95. 10.5 2.305 0,9505 5,442 2044 5,057 00,510 0,440

OoosoOos IoS.o.15o1 420i 1550 Ol5.54o5ige 001 - 000 6 (600) (600)

soilook Coso, 2G000 4-000 02000) (4.000) (2 0 )

50.21: 4.3 45 14,5,95 910 4,005

bwdel 19: 3usCtYnt: Sbr-kl-r 3rits 9 1(s2,3..), lisydA 10

5.2o. 100001520510. oht'id) 2.0 2.2 4.5 1.5 12.0 2,250 2,800 1,320 520 6oO 120podd.o I.0 1.5 05.0 55.2 250 275 825 1,022 505 950 5228 -20s b.i.fo.S d.I-) 4. .5 - 00 - 1,200 - 400 1 (400)

d- Z.4tWs - 0.0 - 2,584 - 7,20G - 4,216 4.216

khPOs.ooOisOg.5dl 3.0 9.0 2.2 2.0 1,980 5,250 55,06 14,552 3,G36 9,022 6,200

pods 0 1.0 6 52.0 0 -3 2 0 o 1,480 1,4505.00.5 (ps5p0n25 0,4 -0.8 - 300 - 020 _ 580 (5501

12.0 2,82 4,020 20,555 90771 20744 5,150 17,045 220b4

- .opoios - -osooly1: I227. 1507. -opLg.sooI 10541 30 0,222 15001 (1,220) 1520)

.llook 3, .. O 6.55000. (3. 15 2002,-) 2.400)

Sotos. 00210 11,020 1,261 22 020 05264

000

10s9:I4ioso.p 05 39 Spoop ZBP so2 T1o*e. SeI.os.r 15. 55.2502: h3O.tPh o Osso r 20 0* ps6

Sips 1oaddr0 5.0 20.0 2.0 2.2Y 32 5,2800O 2,880 5,800 5.5. 0 050 2,075 32

0.5d -oS-op 2.0 5.0 0.0 1.1 1,760 5.280 3.000 9.900 1,240 4,622 3.380oddep 2.0 1.0 95.0 35 0 400 1,550 875 950 475 (475)

Sogeooop 1.0 3.9 - 1 .- - .Ospo 1.0 2.0 0.05 210 540 015 0,950 705 1,410 '00

15,s55 9.0 14.0 1.2 2.5 5,940 5,240 1:5,08 6,6.00 9,108 17,060 82,20Z.0 1.0 1.2 2.2 000 000 1,020 060 4,520G 50 6600

Sodd.s 2.0 2.0 52.0 42.0 2,000 500 30720 1.660 2,522 1,360 ( )606wSiVc-=-4 S5.0 ~~~ ~ ~~~~~~~~~~~~~~~6S.0 1 7W9 5.1(10 4,79.0 14.571 3,M 921,11S6

29.G 76.0 05,020 20,525 29.303 62 556 21,182 36,705 45,565

. .oppO .. o50

nsi.10

4 54 16GV MWi.Ol 00.. 2,000 5,000 12.0000 18,000) 1 1.000

-ollo-k 00.01 12,000 4.800 (12,00G) 14.000 7,020

SOstoos 00.11 . 9_55 25 350) 19.J50)

loPs 52 02.120 02.675 7.1S) 18,502 12,415

Spoo_ fpo C_soo,w kopo _ 565 565

Ssboo.os 00. 1801

MNNRX 11

IND IA


Financial Rates of Return to The Etertpise(in Ra)

Year..............1 2 3 4 5 6 7-15

Model I: Inoeta ltoot Shallow Tubrusell - 0.3 Cosecs: iretoeted Area: 3 ho

Net Volue of Inarar-entol Prodoction - 774 1,548 1,990 2,211 2,211 2,211 2,211Capitol levo-teest 5.000 _ _ _ _ _ _

Net Inccoentol Flow: (4 226 1.548 1.990 2A.211 2,211 2.211 2A211

Financilo Rate of Ratuca 46%

Model II: Iavetent: Shallow Tobewell - 0.4 Csena: Irrigated Area 5 ho

Net VoIce of I-nre-eanal Production 1,313 2,626 3,376 3,751 3,751 3,751 3,751Capital Investmnt 7.000 - - - - -

Nat Inoremaurnl Flew: (.687) 2.626 3 376 3 751 3 1 3 751 3.751

Financial Rte of Return: 57%

Modal III: 1nveatet: Shallow Tubewell - 0.5 Cocs; Irrigated Area: 8 he

Net Vulue of I-oreeotal Production 1,695 3,390 4,359 4,843 4,843 4,843 4,843Capitol I-vestent 8,000 - - _- - -

Net Increental Flw: (f6305) 3.390 4,359 4b843 4,843 4,843 4,843

Financial Rate of Retan: 66%

Model IV Investent: sprinkler Irrigation Set: Irrigated Area 10 ha

Net Value of Inureeota1 Production 3,067 6,135 7,888 8,764 8,764 8,764 8,764

Capital Invrstent 23,000 - - -

Net Inn1 amatal Flow: 63_747) 6£4 8 764 8764

Financial Rote of Retan: 39%

Model V: Invetmest: 35 hp Tractor and Three Imples,nts Year 7 Only

Net Value of Increnental Prodaction 2 4,911 3 8,749 11,741 12,983 12,983 12,983 12,983Copitel Inve-tocnt 30,050 - - - 6 - - (6,610)

Not Iocree,enrol 'law: (25,1,39) 8 749 11 741 12 903 12 083 2 983 19393

Finascial Rate of Retrn: 40.

1/ Yeac I - 35%; year 2 - 70%; year 3 - 90%; year 4 onward fall valoe

2/ Includes oat raturn of Re 565/year out of castes work (R. 5l65/hour and 100 hoour/yeor)

3/ Leee proceede of sale of four pairs of bullotks (Ru 3,000).

Fhe--ary 17, 1971

ANNEY 12

INDIA

HARYANA ACRICULTURAL CREDIT PROJECT

ECONOMIC RATE OF RETURN

1. The rates of return from the Project to the economy have beencalculated as shown in the attached tables. The following assumptionshave been made:

(a) world market prices as projected by the Trade Policiesand Export Projections Division of IBRD's EconomicsDepartment have been used to estimate benefits;

(b) current price levels have been used for investmentsand allowance for cost increases has been excluded;

(c) labour has been costed at current off-season marketrates of Rs 5 per day; and

(d) a salvage value of 20% has been assumed at year 7 fortractors and implements.

2. Based on these assumptions, the economic rates of return overa project life of 15 years would be 22 to 27% for minor irrigation and15% for mechanization.

3. On the basis of the above assumptions a sensitivity testusing a rate of exchange which reflects more closely the effective costsof imports (which normally bear a duty of 27.5%) gives economic rates ofreturn of 29 to 35% for minor irrigation and 17% for mechanization. Inthe case of mechanization the heavy initial foreign exchange input isnevertheless offset by increased foreign exchange savings, particularlyfor wheat production, if such a rate of exchange is used.

ANNEr 12Aependix 12-1

INDIA

NARYANA AGRICULTURAL CREDIT PROJECT

Econoedb Rates of Return to The Enterpri$l(to Rs)

year. 1 2 3 4 5 6 7-15

Model I; Investeent; Shallow T.be.el - 0.3 tosees Irrluted Area; 3 ha

Nat V.l1e of foncenetol Prod..tLO.-/ 410 820 1,054 1,171 1,171 1,171 1,171

Capitol Invaet-.et 5.000 _ _ _ _ _ _

Nat Increetal Flow .590) 820 1 054 1.17 1 1171 1.171 1.171

Eco.o.i. Rate of Rturn- 227

Model II Invetent; Sh1llow Tubewell - 0.4 Cuco trloated Are- 5 ha

Net Value of Increeetal Prodctiton 637 1,264 1,625 1,805 1,805 1,805 1,805Capitol Invatanot 7.000

Net Increent-l Flow: (6363) 1,264 1.625 1.805 1.805 1 805 1.805

Ecooneom Rote of Return 25%

Model III, Inve1 t.et Shllow Tubewell - 0.5 Cusecs; Irrlgated Area 8 ha

Net Volue of ltrenental Production 760 1,522 1,957 2,174 2,174 2,174 2,174

Copitol Investent 8.000 - _ _ _ _ _

Net I-cre,etal Flow (7,24C) 1.522 1.957 22174 2.174 2 174

Eo.o..i. RAte of Return 27%

Model IV: Inve-toot: Sertikler IrrigatLon Set; Irrigated Are; 10 ha

Net Voloe of I Fcraeetal Prodoctioo 2,027 4,054 5,213 5,792 5,792 5,792 5,792

Capital Investent 23.000 _ _ _ _ _ _

Net Intrenwtal Plow (20,973) 4.054 5 213 5.792 5.792 5 792 5 792

Eoonoeei Rtte of RetUrn 247.

Model V: Iovstent 35 hp Trtctor and Three Impleente Year 7 Only

Net Vol.e of I..re entel Produ-tion 2 2,932 4,300 6,653 7,329 7,329 7,329 7,329Capitol Investent 30.050 3/ _ - _ (6_610)

Net InFrenetol Plow- (27 118) 4.300 6 653 7,329 7j 329 7.329 13.639

Efouoa-c Rote of Return 157

Y Year 1 - 35%; yeor 2 - 707; year 3 - 907; year 4 onword foil v-lue

2/ rocludes not rtutrn of RS 565/year -ot of co-ton work (Rt 5.6

5/hour ood 100 hooro/yeor)

3/ L.. proceedo of sole of foot pai-s of bllook. (R. 3,000).

February 17, 1971

----ha-.. 0I.. 03 -

Bore (peddy) 1.3 1.3 3.2 ~~~~ ~~~~ ~ ~~ ~ ~~~2.353 953 664 3,425 234 475 151

horror - 1.0 - 3.3 - 350 - 3,323~~~~~~~~~~~~~~~~~~~~~~~~~~~~14 4 440 44

Price. '.0 - 3.0 - IS~ ~ ~ ~ ~~~~ ~ ~ ~~~~ ~ ~ ~~~~~~~~~oo 3- 6943 - 30 (70Besie~~~~~~~r 0.3 - 5.3 -~~~~~~~~~~~.. .... 22 3 750 -30 (333)

lOreto - 3.0 - 2.2 - '~~~~~~~~~~~~~~~~~~~~~~~~~~~_.32. .3 -so 3,230 34.23

Fodder - 0.3 - 03.3 -~~~~~~~~~~~~~~~~~~~~~~~~" 3302 - 37- 00 3

~~ so 000 3.325 3 9'4 L&~~~~2 1,134 3.333 I .942'3,

33Be3: .50 334 1 045 1.

Oejre 5.0 - 0,5 -~~~~~~~~~~~~~~~~~~~~6. 40 -o 4I -(0

20(1,90000:~~~~~~~~~~~L ,31 , -l

23501 - 3.3 - 2~~~~~~~~~~~~~~~~~~B- .2 -o-o 12990 - 304- ,24 L.) 034M

la~- E~mL: o 3.0 -m uL u , 3.0 - 3 - IO 33-(3

Fode 9A. 62030 ,2 -o (.2 LIII5. . 1.2 3.343 2.3 30,431 145 1,336 045

3r3)ook Cret: 1222 0~~~2, 404 (.-2 ,4130) 02421

Tore 2.23 9.0 .. 01B 01 350 3 S

lodel .3S: IoOeeSecdO: 0. S1.,eere 5,Seeel 2 Ike 9050qj

4leeloecod Are. S4 he.31o 7

Sejrs 4.0 - 0.5 ~ ~ ~~~~ ~ ~ ~~~~ ~ ~ ~~~ ~ ~~- 000- 900 - 10 ,.6 1030)Seed horror 0~~~~~9. Q .05 . . 1,00 3,9320 3,340 5,290 2405 7,70 032,7

21.o (Sell> -~~~~~I '.6 . 1. - 2,50o4o3 - 4,40 1,42

Solde 1.3 - 62.0 2- m - 71.1- - 3 367 II0

9.3 30.3 2,333 ~~. 2 2.45,5350 390 9 iLi8 1.23 ,39 4,7

6rSokCoo0 2302 030 108330 1.4.03 (3.800

Oclro (lrri2ceed, hybSId) 3.2 2.0 1.3 1.5 ~~~~~~~~~~~4.1,25 1.293 1,353 22,44 78609

Fodder 1.0 1.5 2.853 5m5 3 1,302 605 9122' 002)

)ooloood,deel7 0.9 0.5 . 505~~~~~~~~~~~~~~~~L 500 300 .1.31)

Irorodrot 4.1 . 3.3~~~~~~~~~~~~~~~~~~~~ 1 B 253- _07293_- 1,30 1,016

klrceo 7 SeoosBtedO 3.1 0.0 3.2 2.4 3.934 5,~~~ ~ ~~~~~~ ~~~~~~29 3.4234 9,00 125 ,302,7r4leca OlrrSgeOedO -~3: 3.0 2 5 2,2 .. 30o 960- 404SodOcS OSorSBeS52l . 3.3 ~ ~ ~ ~~~~ ~ :- 62.0 300 3,3 - 3 3 .0Serley OrcIrOedo ~~~2.0 . 3. . 360 ___280 3260 -2 I20 3.41 420..

IBOrrIOS oteoeooy: 2120 1523 . 3r4505r0.0 377 1,21 (33) 1120)(00

- -1 ~~~~~OB.> 57 313 1091 34324439 375

SoSel 0 Boroecceos 33ho SO34rr er,dhIres IoIe.eoo 34 . 3 23. IaIrh9eorBeed Ore. 200.25.3,I 4

BIo 2poy .0 3,0 02.0 3,2: 2SC 0550 3, 3, 3,003. 5332 0)36 342.eese. 5~~~~~~~~-.0- 3.3 15.3 1.3 3,230 1,35 3,335 3,333 2335 01 0333Seed CoSoor 2~~~~~8.3 5 . 16.1 3,000 25,153 3,540 2,73 32590 23,432 3,35

doecereoc 3.0 3.3 ~~~~~~~~~~~~~~j) - -~I. 4- - 4.-I-

243cee 1.0 3.0 2.2 1.3 600~~~~~~~~~~~~~~~~~~~~-1 3004 3,23 56 332 6602 0663)

Soscoscre 3.0 5.3 05.0 05.3 I 000 5 '00 4 290 32.570 1 590 9 770 5 150~~~~~~~~~~~~~~~~~~U4 _32

I N D I A

H ARYANA AGRICULTURAL CREDIT PROJECT

; ( > HIMACHAL PRADESH

PA )'AM A

/ ' \ /- -.' -' s KARNALf/ Sprinkle Iri:tion Aroo

j: I .XI | ° C ff Mojor Slollow Tubowel Areas

i u X ' -- 4 aStote Boundary------- District Boundary

N a-~~~~~~~C. 0 District Headquarters

"A. :./ t.-} \\ () ' (~_OHISSAR ay 0 to 20 s o 40 Mileg

f - 4 ~~~~~~~~~~~~~~~~~~~opprox. stole

ViS7 0 ( 10 30 50 70 Kilometers-V9SiT 9 _ 1ROHTAK

0

7 -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

K. /~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-SA

-~~~~~~~~~~~~~~~~ J ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -W

MAY 1971 IBRI)-329.R

Documents

INTERNATIONAL BANK FOR RECONSTRUCTION AND …...would be 10%. The remaining finance would be provided by the Haryana State Cooperative Land Mortgage Bank (SLMB), participating commercial