World Bank Document · This document has a restricted dishibution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be

Document of

The World Bank

F;OR OFFICIAL USE ONLY

Report No. 10040-IN

VAIN!D:PL' fO~ / oJ 0ui/A;'.A

STAFF APPRAISAL REPORT

INDIA

MAHARASHTRA FORESTRY PROJECT

DECEMBER 19, 1991

Agriculture Operations DivisionCountry Department IISouth Asia Regional Office

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

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(as of July 1, 1991)

Currency Unit = Rupees (Rs)US$ 1 = Rs. 26.0

WETH AND MEASURS

The metric system is used throughout the report

a~~y.A~'ONS aN ACRONS

FD - Forest Department

FDC - Foresi: Development Corporation

DSF - Direccorate of Social Forestry

GOI - Government of IndiaGOM - Government of MaharashtratP'AS - Integrated Protected Area System

LCB - Local Competitive Bidding

MOEF - Ministry of Environment and Forests

NWFP - Non-wood Forest Products

PA - Protected AreaPIV - Project Implementation VolumePCU - Project Coordinating UnitPMIU - Planning and Marketing Intelligence Unit

SOE - Statement of Expenditures

EISCAL YEAR

GOI, GOM - April 1 to March 31

The report is based on the findiags of a Bank Appraisal Mission which visited

India in June/July 1991. The mission consisted of Messrs./Mmes. B. van de

Poll (Task Manager), S. Ahmed, A. Contreras, G. Morgan, P. Guhathakurta,D'Silva (Bank), and K. Kadiresan, B. Poole, K. Shah (consultants). Assistance

was also provided by A. Molnar, S. Shen (ASTEN); H. Wagner and N. Jones

(ASTAG) and by Peer Reviewers Messrs. R. Slade and W. Magrath (Economics 7nd

Policies), R. Rowe (Forestry), and C. Rees (Biodiversity and Conservation) and

M. Guimaraes (Secretary). The report is endorsed by Mr. H. Vergin (Director)

and Mr. J. Wijnand (Division Chief).

FOR OFFICIAL USE ONLY

TBZ


STAFF APPRAT SAL REPORT

Table of Contants

Page No.

CREDIT AND PROJECT SUMAR ......................

I. t2HE FORESTRY SECTOR ...................... , 1

Forestry in the National Economy .................. 1Forestry Development in Maharashtra State. 2Lesson from Past Bank Lending. 6

II. THE PROJECT. 6Rationale for Bank Involvement and Origin. 6Project Area. 7Project Objectives, Design and Description. 7Detailed Features. 8Project Costs and Financing ..................... 13Procurement ................................. 14Disbursement ................................. 15

Accounts and Audit ............................. 16

III. PROJECT IMPLEMENTATION .................... ...... 16

Organization and Management ...................... 16Training, Publicity and Extension ................. 18Project Benefits and Justification ................ 22Institutional and Environmental Impact ............. 24Impact of the Project on Women ................... 25Project Risks ................................ 25

IV. AGREEMENTS REACHED AND RECOMMENDATIONS ............. 25

Annex 1: Proposed Sector ReformAnnex 2: Project Cost TablesAnnex 3: Financial and Economic AnalysisAnnex 4: Schedule of Estimated DisbursementsAnnex 5: Supervision PlanAnnex 6: Contents of Project Implementation VolumeAnnex 7: Documents Available in Project File

MAP : IBRD 23295

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

MAHARASHTR FORESTRY PROJECT

STAFF APPRAS OL EPORT

CaEDIT AND PROJECT SUMMARY

Borrower: India, Acting by its President

Executing Agency: The Forest Administration of the Government ofMaharasntra (GOM)

AmoUnt: IDA Credit of SDR 88.9 million (US$ 124.OM

equivalent)

Terms: Standard, with 35 years maturity

Qn-lending_Terms: Government of India (GOI) would onlend funds to GOMunder prevailing terms and conditions. GOI wouldassume the foreign exchange risk.

Beneficiaries: About 800,000 households comprising forest dwellers,tribals and smallholders.

Project Description: The main goal of the project would be to achieveinstitutional, economic and environmental improvementsin the forestry sector of Maharashtra. The projectwill therefore undertake a number of sector reformsthrough: (a) reorganization of the public forestadministration and seeking a more active r3le of theNGOs, village panchayats, cooperatives and the privatesector in the development of the sector; (b)improvement of the state's technical capabilityparticularly in the field of seed production, geneticplanting material, nursery and planting practices andplanning, management, including monitoring of theforest resource base and training; and (c)rationalization of the policies and regulationsconstraining the sector. The project would alsosupport five discrete investment activities related toland treatment: (a) village eco-development and jointmanagement; (b) rehabilitation of wasteland anddegraded lands; (c) production forestry; (d) bio-diversity and conservation; and (e) pasture and fodderdevelopment.

The main project risks would be related to GOM'swillingness to go ahead with the implementation of allthe appropriate institutional and policy reforms, andthat people's participation would not be effective inthe sustained management of common and public landsdeveloped under the project.

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Estimated roetCQata:1

- US$ Million --Local Foreign Total

A. Land TreatmentsPlantation Development 83.9 4.4 88.3

Eco and Tribal Development 7.5 0.5 8.0

Biodiversity Conservation 6.8 0.4 7.2

B. Technology and Project Impl. SupportTechnology Improvements 2.6 0.3 2.9

Project Implementation Support1. Project organization 7.3 0.5 7.82. Restructuring Forest Adm. 0.3 0.0 0.33. Specialized Support Services Za 0*2 ,Q

Total Base Cost 113.2 6.3 117.5

Physical Contingencies 6.0 0.3 6.3

Price Contingencies 1L.Q 1* 1.

Total Project Costs 134.2 7.8 142.0

Financing :-lan:Local Foreign Total… (US$) million---

Maharashtra Government 18.0 0 18.0IDA 116.2 7.8 124.0TOTAL 134.2 7.8 142.0

Estimated Disbursements:'US$ million)

FY93 FY94 F9 Exi1 x Zx EX2 r

Annual 2.0 6.7 10.6 18.0 24.7 27.7 32.9 1.4Cumulative 2.0 8.7 19.3 37.3 62.0 89.7 122.6 124.0

124.0

EcDnomic Rate of Retura: 15%

EX&: IBRD 233295

1 Including taxes and duties of about US$4.5 million.Sub-totals do not always match due to rounding.

I. THE EORESTRX SECTOR

£ortiy tjn th ?'at{gnal EconoMy.

1.1 Forestry is very important for village economies and pressure on forestlands is high. India's forest resources cover 64 million ha or about 19% ofthe country's land area. Due to their considerable geographical extension andthe large number of people depanding on them, forest resources play animportant role in the conservation of environmental quality, the welfare ofthe rural poor and the productivity of agricultucal lands. Forests are themain source of household energy in India and by xar the main depositories ofgenetic diversity. Forest resources protect water and soils and provide anumber of industrial materials. Although the contribution of the forestrysector to GNP often has been estimated at less than 2 percent, this figuredoes not take into account its numerous non-market and external benefits orthe vast amounts of fuelwood and timber that are harvested illegally and aretherefore unrecorded. The country's forest resources consist of tropicalmoist and dry deciduous forests. Only about one half of the forests have acrown density of over 40%. The average growing stock is about 65 m3/lha ahd theannual production of wood 0.5 m3/ha, compared to world averages of 110 m3/haand 2.1 m3/ha, respectively.

1.2 While India's forests are relatively rich in flora and fauna, theseresources are rapidly declining due to pressure from local populations, cattleand theft. Deforestation is believed to be in excess of one million ha/year.Wood demand was 264 million m3 in 1988, of which 90% was for fuelwood (46% ofIndia's household energy). Between 1980-88 forest product exports decreasedfrom US$ 26 to 16 million, while imports increased from US$ 204 to 300million. Forests are also a main source of fodder and non-wood forestproducts (NWFP), such as oils, medicinal plants, resins, dyes, fibers andleaves. About 75% of India's population live in rural areas, and manyparticularly women are employed in forestry or collection of NWFP.Deforestation and degradation is a subject of growing concern, with far--reaching environmental, social and economic consequences. Less than 1% oftotal public sector Plan outlay during 1951-90 was for forestry development.

1.3 The Government is addressing deforestation through legislation andafforestation. The Forest Conservation Act of 1980 restricts diversion offorest land for non-forestry purposes. During the 1980s country-widewasteland afforestation and social forestry programs were launched coveringabout 1.5 million ha/year (40-50% farm forestry). The National Forest Policywas revised in 1988 to improve environmental stability and maintenance ofecological balance. The Policy advocates increasing the forest or tree cover(to 33% of the land area) and allows use of forest areas to meet requirementsof rural and tribal populations for fuelwood, fodder, and NWFP, whileindustries as far as possible are to arrange for raw materials from farmforestry. In an attempt to force forest departments to pay attention tosocial concerns, the policy focusses heavily on such issues. With theintention of emphasizing social goals this policy resulted in neglect.ing theeconomic considerations. The draft Eighth Five Year Plan (1992-97) emphasizesinvestments for rehabilitation of degraded forests (10 million ha), includingfarm forestry and the promotion of NWFP, fuelwood and fodder. It alsosupports forest and wildlife management, research, extension and training.

1.4 GOI and state governments face major challenges in the sector. TheMaharashtra government has recognized that major changes in the forest sectoradministration are needed to meet these challenges. Existing forestrydepartments can no longer protect public forests in the traditional way.

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Instead, they must encourage local participation in forest management (jointmanagement). Forest departments need to improve their efficiency, developmore specialized manpower streams, and allow the private sector, NGOs and usergroups to move soon in forest development. Better technology is needed forsoil and moisture conservation, seed production, nursery development andbetter extension is needed to raise India's low level of growing stock andfodder production. Some legal restrictions and rights governing access toforest land and the handling of produce needs revision to promote forestrydevelopment. Benefit sharing arrangements need to be reformulated to encouragejoint management of forests with local populations.

Eorestry Deeo nt, inMhr tra State

1.5 Resource assessment. Apart from being the most industrialized state inthe country, Maharashtra has the second largest recorded forest area in India,estimated at about 6.4M ha or 20 % of the state's geographical area. But interms of actual forest cover Maharashtra is fifth among India's states. (Annex1 of Project Implementation Volume (PIV)). Increasint. iommercial and domesticdemands, including those of livestock, have left their toll in the form offorest and land degradation. It has been estimated that the area underwastelands in Maharashtra amounts to about 7M ha or about 23% of the totalgeographical area.

1.6 Economic Dimensions. Revenue in 1989-1990 from sales of timber,fuelwood, bamboo and a variety of NWFP has been estimated at Rs 1520 million,or about 2.4% of the state's total revenue. Forest revenue has, however,declined as the exploitation of the two main commercial species, jectonagAndija (teak) and bamboo has been sharply curtailed, following the 1987 banby GOI on clear-felling in natural forests. Bamboo production has come downfrom about 500,000 mt in 1985 to 180,000 mt. in 1990. while annual commercialand fuel wood demand for Maharashtra has been estimated at about 22M m3,current recorded supply has come down from about 3M m3 in 1984-85 to 0.8M m3

in 1990. Forest operations provide substantial employment, particularly forthe rural population and tribals living in and near the forest estate. It hasbeen estimated that about 33 million mandays mainly relating to forestplanting, maintenance and harvesting, were generated by the Forest Departmentin 1988-89. In addition processing of NWFP generates substantial employment,at least four times as much as collection. Annual revenue from NWFP isdifficult to assess, but has been estimated at about Rs 200M. Forest basedindustries (Annex 4 of PIV) are yet another major source of employment. Ithas been estimated that about 190,000 people are engaged in small to mediumscale enterprises, sucn as saw mill units of which there are about 4,600; orfurniture making which employs about 28,000 carpenters. The larger wood basedindustries in Maharashtra are mainly concerned with paper and pulp production,manufacture of veneer, particle board and pre-fabrication of door and windowframes. The current supply of raw materials for pulp and paper is mainlyderived from bamboo, veneer and particle board from teak, while doors andwindow frames are mainly made from lower grade boards. The pulp, paper andsaw milling industries in Maharashtra are supplied from the state's naturalresources, while other wood industries obtain supplies from outside the stateor from abroad. While the growth of forest based industries has to a largeextent been dependent on government forests and the state's commitment tosupply material at concessional prices, particularly teak and bamboo, mostindustries are now affected by supply shortages. Since no wood based industryin Maharashtra grows its own raw material, new policies and attitudes willhave to be adopted by both the government and the industries to overcome thelimited availability of wood supplies.

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1.7 While crop residues from private lands are one important source offodder, forest, revenue and village lands supply 60% of all fodder, throughbrowsing and lopping of trees and shrubs and from grazing of some rangelandgrass species and legumes. However, due to the unplanned nature of grazingpressures and excessive stocking rates on forest lands, grazing is one of themost serious causes of forest degradation in Maharashtra. Unfortunatelyneither the Agriculture/Livestock department nor the Forest Department havedone any comprehensive investigations for the improvement of fodder resourcesin Maharashtra, as fodder development has never been delegated as a specificresponsibility to any of the existing technical departments.

1.8 Policy J2mgnniqn=. The policy framework affecting the forestry sectoris inadequate and includes individual policies and legislation that lead toundesirable environmental, economic and equity impacts. The main policyrestrictions relate to: i) the use of species, harvesting of trees on privatelands and transit of forest produce; ii) price controls on seedlings andprimary forestry produce; iii) access of private enterprise to ownership orusufruct of land; iv) clear-felling of trees; v) absence of well definedworking mechanisms for joint management of forestry development undertakingswith ±ocal communities and NGOs. The environmental, economic and equityconsequences of these policies, including quantitative estimates of theirimpacts have not been adequately assessed. Some examples are: i) Governmentsupply of seedlings at subsidized prices, which provides a disincentive toseedling production and employment by private nurseries and leads to poorquality and waste in utilization; ii) underpricing of industrial raw materialswhich discourages their production by the private sector, substantiallydiminishes Government income and encourages waste; iii) restrictions on thespecies of trees that can be felled on private lands -- mainly applied to themost valuable species -- which generate a negative incentive to plant thosespecies of trees; iv) restr3.ctions of the free transportation of certainspecies of wood, which hinder planting of these species, divert governmentresources from potentially more productive uses to policing and artificiallyincrease transportation costs. An enhanced analytical base is needed in theprocess of designing structural and policy changes, including a more thoroughstudy of policy linkages and the potential impacts of such changes on multipledimensions of development including economic, environmental and equityaspects.

1.9 Social Dimension. Most of the rural population relies on the forestlands for a variety of goods and services, but sustainable arrangements forthis are not in place. Legally the public Forest Estate in Maharashtraconsists of about 67% reserved forests, the remainder being protected andunclassified forests. In most public forest areas, rights and privileges ofthe local people with respect to firewood, small timber, bamboo and grazing,are recognized. These arrangements have not been revised to reflect changingcircumstances, nor do they provide incentives for local people to assumeresponsibility for improving resource management. A combination of illicitfelling, overgrazing, intentional forest fires and agricultural encroachmentis degrading the forests rapidly. The protected and unclassified forests aremore degraded than reserved forests. Agricultural use of forest lands isincreasing, at a rate of about 20,000 ha per annum. About 9% of thepopulation in Maharashtra is tribal, of which 44% are agricultural laborers orurban dwellers. The remainder and bulk of the tribals live near forest areasrelying on the use of forests for their livelihood. If government focusses onbetter approaches to augmenting the income of tribal households throughforestry and forestry based vocations, particularly by involving tribalcommunities in forest protection and management, the current destruction offorests in tribal parts of the state can be reduced.

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1.10 Environmental limensionsa. The role of forests in stabilizing andprotecting the state's land and water resources has been much diminished byforest degradation. There is a need to introduce more conscious attention toenvironmental services in forest planning and management. Maharashtra has arich and diverse flora (about 3500 flowering plant species) and fauna (about85 mammal and 460 bird species), the bulk of which occurs in the forest areas.At present about 2.3% of the state's geographical area is protected for natureconservation (5 parks and 24 sanctuaries). These protected areas (PA) oftenlack the appropriate legal status. Only one area is fully notified and thelack of notification has been a major impediment to effective conservation andmanagement of existing PAS. In addition, many of the protected areas wereselected on an ad hoc basis, without an integrated conservation strategy, sothat many gaps in biogeographic coverage exist (e.g. coastal habitats, drygrassland, moist teak forest are lacking). C)nsequently many of the PAs arequestionable in terms of size, conservation value andc management viability.Management of PAs is presently weak. An integrated protected area system(IPAS) is needed which allows for the active participation of local people in

planning and management, including a strengthened wildlife wing to implementthe IPAS.

1.11 nAtitutional imansio=n. The public forest estate is managed by aforest administration, consisting of three units i) the Eorast DepartmeltIlD.; ii) The Fogggt Developrent CQrporation of Maharashtra Ltd.(FDC); and the

DirectQrate of Sgcial Forgstry(DSFL Presently a system is in place wherebysenior staff rotate across all three forestry units with little room forspecialized career development.

1.12 The FD is mainly responsible for protection, conservation, managementand development of the forest estate, including the national parks wildlifesanctuaries and game reserves in the state. Over the 7th Plan the FD alsoimplemented a yearly afforestation program of about 23,000 ha and a plantationprogram under the rural employment scheme of about 40,000 ha. In addition itwas concerned with extraction and sale of timber and other forest produce.Policy and resource assessment, strategic planning and monitoring andevaluation of the forestry sector are ill directed and weak. While there aresome overlapping functions with other units, some critical links with otherministries (livestock, agriculture, industry) and private organizations arepoorly developed or absent.

1.13 The E£, a wholly government owned company was registered under theIndian Companies' Act in 1974. The FDC was mainly established to convertmixed natural forest of low economic value into highly valuable teak foreststo help to meet industrial wood demand. With the ban on clear felling FDC'production oriented mandate has now turned to enrichment plantings andwasteland development. As a result, the present duties and responsibilitiesof FDC overlap to a considerable extent with the other forest units, requiringan immediate rationalization of FDC's functions.

1.14 To assist in meeting the needs of local communities in terms offuelwood, fodder, small timber etc, and the creation of employment for ruralpoor, the Forest Administration strengthened its Social Forestry Program in1981 by setting up an independent =. In 1982 a USAID assisted socialforestry project was started, to develop degraded public/communal land areasin non-forest public lands and to encourage farm forestry on private land. Theproject closed in 1990. Subsequent review has brought out two basicallyunresolved issues: a) whether there is a need for a separate and independentsocial forestry wing in the Department of Forestry to foster the level of

-.5-.

participation and sharing of benefits by individuals and village communitiesthat is now believed to be central to all forest development activity inIndia, b) the appropriateness of the institutional support structure for farmforestry. In Maharashtra as elsewhere in India, extension or appropriate landuse advice is extremely poor, except for mainstream agricultural extension(food crops and a few srecialized crops e.g. cotton and sugar cane). Thoughforestry extension was anticipated to be a key function of the social forestrywing, it never got off the ground. Public and private institutionsresponsible for forest development should reassess what type of institutionalframework is desirable to meet this need.

1.15 Lack of specialization within the forest service and the limited role ofrural institutions, NGOs and the private sector, in the development of theforestry sector are key institutional problems. While staffing levels in theforest administration are generally adequate, there is little room forspecialization in the current structure e.g. planning, research, extension,wildlife and protection.

1.16 Other Institutions. There are a number of other institutions outsidetise state government technical agencies who could play a significant role inthe protection of forests and development of tree cover on public and privatelands. The main ones are: i) villages, as functional, local social entities;ii) the village panchayats, the lowest level of local self government set upin 1962 to execute and maintain development works in rural areas, in 1990Maharashtra had 25,182 village panchayats, covering 41,654 villages; iii)cooperatives, such as the Forest Laborer's Cooperative Societies, AdivasiCooperative Societies and Tree Growers Cooperatives; and iv) a variety ofprivate or voluntary Non-Government Organizations (NGOs). While VillagePanchayats have not so far been effective in carrying out social forestryprograms, they are the only formal village level institutions covering theentire state. There is a need therefore to find other acceptable institutionalarrangements for village involvement in forestry and environmental programs.While Maharashtra has been one of the leading states in the propagation of thecooperative movement, the Tree Growers Cooperatives organized for privateplanting and harvesting, are weak, except in a few areas. They must becomebetter organized and gain expertise in marketing and processing before theycan play a significant role in overall forest development. There are a numberof NGOs involved in tree planting and associated activities in the state,about 25 of which have been given financial assistance by the NationalWasteland Development Board. While it appears that the majority of NGOs aretoo small to replace government as implementing agency, a number of them canundertake motivation and extension activities, and test some innovativeapproaches, particularly those related to integrated village development andjoint management of forest areas.

1.17 TechnologLoal Dimenaina. The provision of better planting stock is thekey technical need in Maharashtra forestry. (Annex 3 of PIV) Despite theidentified variation in agro-climatic conditions across Maharashtra, foresttree planting practices have a uniform pattern. The stock being planted in allforestry enterprises is remarkably uneven, of generally poor quality andhaving poor survival. Many of the silvicultural practices in Maharashtra havenot been reviewed or revised in decades. Improved recommendations are neededfor site preparation (land preparation, fertilizer application, weed control,thinning and vegetative soil conservation practices) and improved teakbreeding program and breeding investigations on other species are needed,including exotics to better suit the various land types in Maharashtra.Forestry research also falls under the Department is widely dispersed betweenthe Indian Council of Forestry Research and Education, the FD's own forestry's

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researchl set-up and the four agricultutal universities arnd other privateresearch programs in the state. Hence, research is uncoordinated and lacksany special development focus. In addition seed collection, certification,storage and plant material distribution are treated as research activitiesrather than as operational, management activities, despite the fact that theforest administration has a large annual planting program (75-100,000 ha).

1.10a Eorestry has accounted for US$ 350 million of the total. US$ 9.9billion of Bank lending for agriculture development in India. In all eightforestry projects have been supported. The Bankc has taken stock of experiencegained through PCRs and special reviews including a recent OED review of Bankexperience in forestry development. Problems of a general nature include:delays in project rmobilization: institutional weaknesses; and inadequate localfunding. The major lesson from forestry projects in India is that it is timeto move to a more comprehensive approach to the sector, based on in-depthcountry and state specific sector arnalysis. Other important lessons include aneed for: improved seed and extension services, more emphasis on the planning,environmental and management dimensions of plantations and existing naturalforests; solutions to deal with the problems of common property rights througha better local participatory process; and inter-agency coordination in theexecution of the various project components. Experience from the MaharashtraSocial Forestry Project (USAID) was discussed in para 1.14. Building on theState Forest Department's growing coimnitment to address these issues, theproject preparation process has entailed a comprehensive analysis of thesector, includin~j a review of needed institutional, technical and policyreforms.

BauIonale for 'arJk Invyolement and Origin

2.1 The strategy for Bank assistance to the agricultural sector 3n India isto support policies and investments that promote economic growth and socialdevelopment in the context of macro-economic res.-ucturing. The emphasis i-eon efficient resource allocation, increased efficiency in the public sectorand appropriate targeting and delivery of support systems to the poor. Theproposed project fits well within this framework. It also fits well with theBank's Forest Policy Paper and with the objectives of the Bank's new approachto forestry lending in the Asia Region, which emphasizes an ongoing policydialogue with our borrowers concerning key forestry issues coupled with majorinvestments in afforestation. There are significant opportunities in Indiato enhance people's participation, introduce appropriate technologies topermit better land use, redefine the role of government and revise therestrictive regulatory and pricing policies to pave the way for private andpublic investments in the forestry sector.

2.2 The project was identified in JTune 1989. A project preparation taskforce was created by Government in September 1990, which was assisted byconsultants, mainly financed by Japanese trust funds. The final Bankpreparation mission took place in April 1991, followed by appraisal inJuly 1991.

2.3 The project area (see map) would cover all of Maharashtra State. About4.7M ha or 70% of Maharashtra's forest area is under tree cover, but theamount of private forest is only 0.1M ha. Maharashtra consists of nAnedistinct agro-ecological regions (Annex 1 of PIV). Broadly speaking there arethree rainfall zones. The Western Ghats, with a relatively high yearlyrainfall of between 1.000-3000 mm, run parallel to the coast and serve as abarrier within the state to the advancing SW monsoon. East of the Ghats isthe rain shadow region where precipitation drops below 500 mm and which ischronically drought prone. Further to the East, the rain shadowing effectdecreases and rainfall increases from 1000 to 2500 mm. About 63% of theforest estate is classified as tropical dry de ,duous forests while 16% istropical moist deciduous forests. The average -. wing stock is low anddeclining and has been estimated at 50m3/ha, wh. is less than half the worldaverage. Increasing commercial and fuelwood demands (estimated at 27M m3

p.a.) on a fixed biomass area, grazing on 85% of the forest area therebygreatly reducing natural generation over most of the estate, is rapidlyincreasing. It has been estimated that about 1.8M ha of wastelands are areaswithin the existir.g forest estate.

oDeetsin and Descripin,

2.4 The overall objectives of the project are: (a) slowing environmentaldegradation; (b) maintaining and/or improving bio-diversity conservation; (c)increasing the productivity of forest 3-nds; (d) development of wastelands;(e) raising biomass self-sufficiency; and (f) generating rural income andimproving equity in rural areas through increased community participation. Tosupport these objectives and increase the effectiveness of project investmentssome fundamental institutional, technical and policy changes in the managementof the sector are needed. The project is designed to restructure andrationalize the organization of the forest administration. Many services andactivities now undertaken solely by the Forest Department can be shared orcarried out by other institutions, such as NGOs, village panchayats,cooperatives and the private sector. Another priority is to developsustainable management systems that foster appropriate participation andbenefit sl'>ring by individuals and village communities, particularly in forestareas that support tribal groups. Existing research, training and extensionactivities also need modification to provide more specialization and be moreresponsive to the varied demands on the sector. The Forest Department'stechnical capability must be increased by improving the tree plantingpractices, and the genetic planting material, particularly nursery .ractices,and the planning process and management strategies for plantations and naturalforests, including the monitoring of the forest estate. Finally, the projectwill also seek to rationalize key policies and regulations constraining thesector. The proposed forest sector reforms are detailed in Annex 1.

2.5 These proposed sector reforms will constitute the operational frameworkcfor the implementation of the project. Essentially, these reforms aim atintroducing viable institutional arrangements, technology improvements andeliminating policy constraints to the development of the forestry sector.These reforms were discussed and agreed with Government and a===w. xeDRQittin .. Al AgitiQn.s. that GOM will carry out the reforms as outlined inAnnex 1. Some of the changes can be made quickly, and independently of oneanother, others require detailed planning and evaluation of alternativearrangements and resolution of competing political priorities. The project istherefore designed so that the first phase will serve as a learning and

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demonstration phase to assure that government *an make the agreed andnecessary institutional and technioal corrections and that the operationalfine tuning of some of the most iAnovative development processes, such asvillage eco-development and joint management has taken place. Investmentactivities will take place throughout the six-year period, but some of themajor investment operations, such as plantation development on degraded forestland, and production forestry will only start full development in the PY3 toPY6 of the project contingent upon a favorable MTR (para 3.12). &aaUr==

-ne Qhl A LJ tiaLilna that progress in implementation of both theproject and the sector reforms will be reviewed by Government and IDA on anannual basis and during MTR. The MTR will include a thorough evaluation ofthe first phase performance and propose adjustments in strategy, as necessary,for the implementation of the second phase (para 3.2). A TOR of the MTR isincluded in the Implementation Volume.

2.6 The project will have 3 distinct investment activities relatdd to landtreatments, and activities for technology improvement and forest institutionaldevelopment, both to support investment activities as well as long-term needsof the sector. Land use treatment menus have been developed for public forestlands, marginal lands and wastelands for each of the ecological zones. ThelAptLr,e&tamgx& activities are: i) plantation development consisting of: (a)production forestry through pl.ntation development on public forest lands andprivate lands, and enrichment planting and management of natural forests; (b)wasteland development of degraded public and private lands, includingcatchment protection, horticulture and pastoral development options; and (c)fodder and pasture development; (ii) village eco and tribal development, astrategy for people's participation in the development of degraded public,communal and private land adjacent to villages, including tribal areas; and(iii) bio-diversity conservation and protected areas management. &chanoQ.gaDALJdQB¢!-2a$ELana-suRor activities are: (i) technology improvementin seed production and in nursery and fodder development; (ii) projectimplementation support, including restructuring of the forest administration;and (iii) development of specialized support services, including extension,research, training, strategic planning, personnel management and resourcemonitoring and marketing intelligence capabilities.

(a) LaD A_tments

2.7 PlLntstion DevexQtt (US$88.3M; 75.1% of total base costs). Theproject would support investments to treat about 360,000 ha of degraded publicforest and waste lands and 9,000 ha of private lands. The main treatmentswould be for a) production forestry and enrichment plantings; b)rehabilitation of degraded areas or wastelands; and c) pasture development.Treatments (technologies which address the various local specific fieldproblems) used would be selected from an eligible list of about 15 models.These are described in Annex 12 of PIV which include forestry, agro-forestry,horticulture, sylvi pasture and soil and moisture conservation technologies.In the eco-development models and joint management areas 9,000 ha of privatelands will be afforested. To promote private plantings, nurseries for TreeGrovwers Cooperative Societies will be supported by the Project. Fournurseries with a total productive capacity of 12 million seedlings will beestablished by the end of the project, and this may translate to another50,000 ha of farm forestry development. Most forestry s-ecies are indigenousand only a few, short rotation, exotic species have been included in thernodels because of their superior qlalities e.g. eucalyptus. While certaintreatment rmodels are ready for implementation, others will require fine tuning

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or further development (pasture). at atgatsona rsurances wexN DhtAjn.Afrom 5OM that the treatment models mentioned above would be used in theproject's plantation development program and that seedlings required for theimplementation of these treatment models before the planting stock and nurseryimprovements have talcen place will he suitably culled from existing nurseries.Further &% naQ we= ghtaing from GOM L_2t.iaLtQna that plantationdevelopment after March 31, 1995 would follow the tested forest plantation andmanagement models (see above) and would be carried out under suitableprocedures satisfactory to IDA for planning, land preparation and managermentand with improved planting stock.

2.8 rdtno aro-e lan . (165,000ha) would be established on better sites in the public degraded forest reserveand protected forest lands or on private lands. Some of the main species usedwould be teak, Dalbergia sissoc (sissoo) and Gmelina arborea (shiwan).However, extensive plantings of bamboo and the introduction of short rotationspecies, such as 2AsiA spp. and Albiaiga spp. are also proposed. Theplantings on private lands would be mainly directed at small farmers andwould iiiclude promotion of boundary plantings, agro-forestry and horticulture.

2.9 Treatentfo 1 rehabilitation of gradedforests and waste2nna wouldcover 195,000 ha on sites which are generally associated with marginal landsor lands with shallow soils or with excessive slopes and rocky outcrops. Inthese areas the project will promote the treatment of the natural drainagelines and associated gullies and plantings will therefore be accompanied byvegetative soil and moisture conservation practices. The rehabilitation ofdegraded lands would be carried out mainly on public forest, particularlyunclassed forest areas and revenue lands. In these areas the project wouldinitiate large scale demonstrations with JatT_Qp_2ha nuar~ to test itssuitability for rehabilitation of degraded soils and its potential as a sourcefor rural energy.

2.10 he pasture development component will support fodder research anddevelopment by the Forest Department in conjunction with the LivestockDepartment with particular focus on range de.velopment and managementimprovements for public degraded forest and revenue lands (10,000 ha).Important topics for applied research are the selection of suitable tree andshrub legumes and herbaceous legumes, pasture seed production, andestablishment and management of sylvi pastures. Aa5iuznr were 2bAian.a Aft.nea5oi&tjions that Government will select a suitable international consultantby March 31, 1993 to assist the Forest and Livestock departments torestructure the pasture development unit which would develop fodder andpasture treatment models, carry out pasture demonstrations and enhancement ofsylvi pasture management and development of seed production. Overallcoordination of this development program will be the responsibility of theForestry Department. Certain operations e.g. seed production, may becontracted to NGOs or private companies.

2.11 Village Eco-dever(US$8.0M; 6.8% of totalbase costs). Rehabilitation and sustainable management of the degradedprivate and public lands used by the village comnmunity will only occur whenrural people gain control over their own natural resource base and whenrehabilitation activities are tailored to the needs and options of specificsites. This component will provide aseistance to selected villages to enablethem to draw up and implement village plans for the rehabilitation of villageand surrounding lands. The main act .vities undertaken under this cormponentwould be land rehabilitation, water harvesting and biomass production tocontribute to the village fuel, fodder and tirber self-sufficiency. In tii

10 -

tribal areas of the state the project wi.ll focus on joint management ofdegraded natural forest lands (mainly government owned) through agreementsbetween the Forest Department and village forest protection and managementcoYmmittees. Some eco-development plans will also be implemented in tribalvillages adjacent to wildlife protected areas to improve the tribal economywhile reducing pressures on areas of unique bio-diversity. The initialmethodology for plan development and content will follow a participatoryprocess and will build on the experience gained from the rapid rural appraisaland participatory rapid appraisal methodologies mainly established by and inuse by the NGOs. A micro-planning methodology designed by a local NGO whichwill be adapted to identify several models for testing and refinement in 45villages in five districts. Replicable eco-development models will bedeveloped on the basis of this experience. A specialized unit in the forestadministratioxn will coordinate. It is envisaged that NGOs will take a leadrole in the planning and village organization process. It has been estimatedthat land in some 210 villages will be treated under the project, 165 in thesecond half of the project of which 60 will be in the periphery of WildlifePAs. The initial development of plans will go quite slowly, with an intensiveeffort to learn as much as possible from each experience and improve thecontent and process, particularly through workshops, before replicating themover wider village areas. at ne asurEa_nce were obtained that GOMwould implement the eco-development component with the participation of NGOsand local institutions acceptable to IDA. A list of appropriate NGOs andlocal institutions which will be involved in the implementation of theproject's eco-development component was discussed and agreed at negotiations.Project funds would be provided for NGOs, the FD and other entities to carryout functions such as planning, management, training and extension. Microwatersheds will be used to the extent possible, to establish the boundaries ofvillage plans. Treatment menus for degraded areas around villages have beenprepared for wasteland rehabilitation, horticulture, tree farming, fodder,soil and water conservation. (Annex 12 of PIV)

2.12 Many watershed and village sites provide opportunities for installingwater harvesting structures and other water bodies for purposes of soilconservation, groundwater recharge and social amenities. While these alliedkoji1ka are optional from a sectoral point of view, the need to maximizeemployment opportunities and provide alternative livelihoods for peopleis an important element in overall forestry protection. Such works can serveas important incentives for mobilizing community efforts. Since all areas donot provide similar resource development opportunities, provision has alsobeen included for drinking water supplies, pond excavation and relatedcormmunity works, including wood savJ,.g devices. Alausanc xe= pbtained a.ntUaUQt±,n& that the draw-down of funds for soil moisture conservation

measures will be limited to 25% of the costs of land rehabilitation and 10% ofthe combined cost of the rehabilitation and soil and moisture conservationactivities for other development activities.

2.13 Bao rtn and Proteted Aas Manaaement (US$7.2M; 6.1%of total base costs). This component will establish an integrated developmentstrategy to enhance the conservation and management of protected areas inMaharashtra (for details see annex 8 of the PIV). over the project period anintegrated protected area system will be established, covering the majorecosystems in the State and representing a wide range of habitats and uses.The project will rationalize the existing PA network, review and update themanagement plans of existing PAs, and also propose and develop clearly definedmanagement plans for new areas. While the IPAS will take many years toimplement, project investments are set aside to develop the state-wide IPAS,including improving the management of about 10 priority PAs. In addition,

since human and livestock pressures are a major cons.traint to successful PAmanagement, the project will link eco-development activities with existing PAsin selected districts through the coordinated efforts of the State wildlifewing, the FD's eco-development unit and local NGOs. The project will alsodevelop procedures to facilitate notification and legal settlement for thepriority PAs. The development of the IPAS depends upon a concomitantinvestment to strengthen wildlife wing, including some functional supportactivities for the IPAS, such as research and training. The strengthening ofthe wildlife wing will therefore be an essential part of this conponent asfurther outlined in Annex 8 of PIV. To improve the management of the PAs,assurances mg= .Qkb!AeA &r, aœsgLia5izal that the transfer of control of allthe ecologically-important PAs from the territorial staff of the FD to theWildlife wing would be completed before September 30, 1997. In addition,Aassuanceswa DgatAiai-ad &t nggLLŽna that the Head of the Wildlife wingwould not have other duties at any time.

(b) 5tLQZBS= is RlmlsLinSgt

2.14 Tehnoav IrnQyme s (US$2.8M; 2.5% of total base costs). Supportwill address deficiencies in seed sources harvesting and handling, plantpropagation, nursery practices and development, research and silviculturemanagement (Annex 3 of PIV). One of the main project priorities inMaharashtra would be to enhance the production of better-quality plantirngstock from nurseries, especially teak stumps and containerized plants. Tosupport the proposed state-wide planting program a seed unit will beestablished in the forest administration having the sole responsibility forselecting and developing suitable seed sources, organizing harvesting, storingand distributing adequate quantities of seed. In addition, nursery practiceswould be overhauled and nurseries would be gradually upgraded by installingoverhead irrigation and the development of root trainers. At negotiationassaurane y= QkbtAinmsd that GOM would establish a seed unit by March 31,1993 and that initially some five selected nurseries with overhead irrigationwould be developed for improved teak stump and containerized planting stock tobecome fully operat;onal by PY3. wearean As wn also QL.aled At

that th.- seed unit and selected nurseries would be set up andupgraded with assistance from international and local consultants to beemployed by March 31, 1993. The latter would introduce improved seedharvesting, handling procedures and a suitable production system forcontainerized planting stock and upgrade the quality of teak stump plants andinstall the overhead irrigation systems. In view of the anticipated changesin seed and stock quality, silvioultural changes need investigating. Theobjective is to promote greater productivity and keep costs of productiondown. A forestry research paper will be undertaken by PY2 reviewing thecurrent research program and identifying research priorities for the near andlong term as well as funding requirements. The paper will also outline theresearch responsibilities of GOI, the Forest Department and the fouragricultural universities in Maharashtra. Operational research funding isincluded in the project, but except for some high priority topics to be agreedwith IDA during supervision, release of these funds would be subject to anagreement between IDA and GOM on the research carried out based on the revie:of forestry research noted above. uQ= bjAj wie athat the research paper would be completed by March 31, 1994 and based on tlwrecommendations on suclh paper a research program, including a time table forimplementation will be carried out with agreement between GOM and IDA. Mostof the research would be done outside the FD and on a contract basis.

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2.15 Project IEmElmentatign Support (US$10.9M; 9.3% of total base costs). Toimprove project administration and implementation, offices, incremental staff,vehicles, equipment and operating expenses would be made available to thestate level agencies/departments responsible for project execution.Incremental staff would be kept to a minimum as the main task under theproject would be to reorient and develov the forest administration intospecialized operational units in an integrated manner, which can to a largeextent be carried out through staff transfer, specialized career developmentand training. Particular attention would thereby be given to the introductionof specialized units for strategic planning/MIS/GIS and monitoring, researchand extension, training, publicity, biodiversity and protection, village eco-development, pasture development and production forestry. For further detailssee para 3.2 and Annex 11 of PIV.

2.16 A number of studies will ' financed under the project to supportinstitutional, policy, and strategy changes being recommended and implementedunder the project. The key study to be financed is the fore*t adMinistration*retructuring study described in para 3.2. In addition, studies will befinanced to: a) assess the capacity in existing training institutions andfuture needs; b) analyze seedling pricing and demand; c) identifyinterventions on timber forest products; d) evaluate the current researchstructure; e) analyze the policy and incentives framework; and f) carry vatbio-diversity conservation studies for IPAS design. These studies aredescribed in more detail in the relevant components and draft TORs areincluded in the respective implementation volume annexes.

2.17 Training and Technigal Assistance. Because the institutional andtechnical changes required for the project's success are far reaching, theneed for training to enable staff to achieve these changes is important.Provisions have been made for strengthening in-service training for forestrystaff; for specialized training within and outside the state; and forworkshops for forestry staff, NGOs, village leaders, and others. The trainingprogram that has been designed is expected to benefit over 1,700 persons bythe end of the project period. Training will cover all levels of forestrystaff, particularly the lower level staff (forest guards), in technical,management, and social aspects of forestry. For the NGOs, training will focuson some of the technical aspects of forestry and on forestry laws and FDprocedures for village eco-development.

2.18 Technical assistance will be used to establish a small core staff ineach of the following units: (a) a publicity unit within FD to disseminateinformation to various audiences regarding nature conservation, alternativesto fuelwood ecodevelopment, and so forth; (b) a training unit to encouragespecialization, assess the training needs of FD, evaluate training programs,design curriculum, and help in the process of selecting candidates forexternal training. Regarding (a) that most of the publicity work would becontracted out to private agencies. Regarding (b), a detailed evaluationwould be conducted into the working of the four forestry traininginstitutions -- including physical facilities, administration, teachingmethodology, syllabus, teaching aids, relevance of training, etc -- todetermine their effectiveness in meeting the current and future needs of theForest Department.

2.19 At, negUqiaZina a assurancs wz 2bta&n=d that local and internationalconsultants would be recruited for assisting the project in carrying outtraining, workshops, and studies; evaluating the functioning of traininginstitutions; and reviewing the need for a personnel unit. See Annex 10 of PIVfor details.

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ProiAgt Crosts and Finarucdno

2.20 Projot Casts. Total project costs including physical and pricecontingencies are estimated at RS 4315.1 million (US$142.OM) of which US$7.8Mwould be in foreign exchange. Estimated duties and taxes amount to US$4.5Mand total project cost net of taxes is therefore US$137.5 M. The breakdown ofcosts by component is shown below and in Annex 2. Base costs have beencalculated with unit prices prevailing in July 1991. Physical contingencies of5% have been allowed for plantation works, 10% for civil works, equipment,materials and operating costs. Price contingencies are based on projectedannual Indian CY inflation rates for local costs of 7% in 1992; 6.5% in 1993,6% in 1994; 5.5% for the remaining project years; and for foreign costs 3.9%in 1992-9.

PROJECT COST SUMMARY a/

US$ million '. Foreign '. Total_ ~~~~Local Foreign Total Exohanos Base Costs

A. Land Treatments

Plantation Development1. Production Forestry, 41.0 2.i 43.1 5.0 37.3

Agro-Forestry and EnrichmentPlantings

2. Rehab. of Degraded Forest 31.4 1.6 33.0 5.0 28.03. Wasteland Afforestation 9.7 0.6 10.3 5.0 8.14. Pasture Development 1.8 0.1 1.9 5.0 1.7

Eco and Tribal Development 7.5 0.5 8.0 5.8 6.9Biodiversity Conservation 6.8 0.4 7.2 5.2 6.1

D. Technology and Project Implementation

Support

Technology Improvements1. Seed Unit 0.5 0.0 0.5 2.8 0.5

2. Nursery Unit 1.6 0.2 1.8 12.2 1.63. Pasture Development Unit 0.4 0.1 0.5 22.7 0.5

Project Implementation Support1. Project Organization 7.3 0.5 7.8 6.2 6.6

2. Restructuring Forest Admin. 0.3 0.0 0.3 5.0 0.3

3. Specialized Support Services 2.8 0.2 3.0 7.7 2.6(training and TA)

TOT"AL max LINW COST 111.2 6.3 117.5 5.4 100.0

Physical Contingencies 6.0 0.3 6.3 5.3 5.4Price Contingencies 17.0 1.1 18.1 6.3 15.5

TOTAL PAOfJlCT COST 134.2 7.8 142.0 5.5 120.9

a/ sub-total* do not always mtah due to rounding.

2.21 Einancing. The proposed IDA credit of SDR 88.9 million (US$124.0million equivalent) would finance about 90% of total project costs net oftaxes or 87% of total costs including taxes and be made available to GOI onstandard terms and conditions and on-lent by GOI to the state of Maharashtraunder standard terms and arrangements. The Credit would be on standard termswith 35 years' maturity. BS nngotiaticoa aRturaflea wara gbtA±ned from GOMthat it would make available to its implementing entities, including NGOs andlocal institutions all funds for project expenditures in a timely manner, inaccordance with the project requirements, satisfactory to IDA.

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2.22 The project supports 1ntatlo wrks valued at US$110.9M These workswould be carried out in small areas and scattered over the entire state andover the project period. Plantation works are normally carried out with labordrawn from local communities not only to improve the economic well being ofthe local people but also to facilitate greater participation. These workswould therefore be carried out under supervision of the forest administrationusing labor from local communities. oxrk_Isia, comprising mainly of office4uilding and housing, valued at US$11.7M are small and distributed over theentire state and project period and would not attract foreign bidders. Theseworks would be procured following local competitive bidding (LCB) proceduresor force account procedures as follows: (a) LCB civil works would be groupedinto appropriate packages for bidding and necessary land would be acquiredprior to bidding. All works contracts would be let using a standard LCBdocument acceptable to IDA and following procedures, satisfactory to IDA;(b) Force Account for all small civil works located in remote areas valued atUS$ 10,000 equivalent or less, would be undertaken by the line agencies.

2.23 Most of the yahiglaa valued at US$1.2M would be used in rural areaswhere ready availability of spare parts and maintenance is a necessity.Hence, operational efficiency, dictates vehicle types that are locallyavailable and in use by the implementing agencies and therefore all vehicleswould be procured by LCB procedures acceptable to IDA. E9il n a materialvalued at US$4.lM would be suitably bulked and packages costing more thanUS$200,000 equivalent would be procured by international competitive bidding(ICB). However, due to the variety of goods to be procured most goods may betoo small to attract international bidders, therefore they may be procured byLCB procedures acceptable to IDA. For small items that cannot be convenientlypackaged under LCB in amounts exceeding US$20,000 and up to an aggregate ofUS$ 1.0 million, local shopping procedures satisfactory to IDA would be used.Seed and planting material (US$O.1M) not available in India would be procuredthrough international shopping. Consult._v services (US$5.7M) would becontracted on terms and conditions in accordance with the Bank's Guidelinesfor Use of Consultants. All bidding documents, evaluation reports and relateddocuments would be retained by the implementing units for possible inspectionby annual IDA review missions.

2.24 The balance of project costs (US$8.4M would consist of incremental staffaalaiLi= (US$4.7M) and th:er operating costs (US$3.7M) and except for staffsalaries would be procured under local government procedures satisfactory toIDA. About 5% of the value of project procurement would be subject to priorreview. Since most of project procurement is related to plantationdevelopment (annual planting targets are reviewed by Bank missions prior toimplementation), prior IDA review would be low. The only prior review takingplace would be concerning the civil work contracts valued at US$100,000 andabove, contract for equipment valued at US$200,000 and above and consultantcontracts which would include the studies. At f tiatlona assurancea wieobtained that these procurement arrangements will be followed. Theprocurement arrangements are summarized below; figures in parentheses indicateamounts to be financed by IDA.

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Summgry of Proposed Prgaments

(USS million equivalent)

PRuour Mthod TotalProject Element ICB LCB Other Cost

1. Plantation Works 110.9 110.9(99.6) (99.6)

2. Civil Works 4.6 7.1 11.7(4.1) (6.4) (10.5)

3. Goods3.1 Vehicles 1.2 1.2

(1.0) (1.0)3.2. Equipment 2.0 1.3 0.8 4.1

(1.8) (0.9) (0.5) (3.2)3.3. Seeds 0.1 0.1

(0.1) (0.1)4. Consultancies

4.1 Technical Assist2nce 1.3 1.3(1.3) (1.3)

4.2. Studies 2.1 2.1(2.1) (2.1)

5. Miscellaneous5.1 Training 2.3 2.3

(2.3) (2.3)5.2 Incr. Salaries & 8.4 8.4

Operating Costs (3.9) (3.9)

Total 2.0 7.1 132.9 142.0(1.8) (6.0) (116.2) (124.0)

Note: "Other" methods include force account, including labor contracts withlocal communities, and local and international shopping.

Disbursements

2.25 The proceeds of the Credit would be disbursed against:

(a) 90% of expenditures on plantation costs;(b) 90% of expenditures on civil works;(c) 100% of foreign expenditures, 100% of local ex-factory costs or

80% for locally procured equipment, vehicles, seeds and plantingmaterials;

(d) 100% of expenditures on consultant services, training, andstudies; and

(e) expenditures on incremental staff salaries and otherincremental recurrent costs (operation and maintenance ofvehicles and offices) on a declining basis as follows: 50% unztilMarch 31,1994, 40% until March 31, 1996 and 30% thereafter.

2.26 Disbursements against civil works and equipment exceeding US$100,000equivalent would be fully documented as would disbursements for all vehicles,consultants' services, overseas training and study tours. Disbursements forother expenditure3, including all force account works would be made againstStatements of Expenditures (SOEs).

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Supporting documentation for SOEs would not be submitted to IDA, but would beretained by GOM and be made available to IDA staff during supervision.Plantation costs to be disbursed by IDA include: (i) cost of nurseries, landpreparation, including labor, inputs for tree plantations, maintenance andprotection; and (ii) direct supervision cost related thereto varying between5% to 10% of the total costs under (i) depending upon the treatment modelsapplied. Expenditures incurred from July 1, 1991 to the date of Creditsigning for project activities would be eligible for retroactive financing notexceeding the equivalent of SDR 3.6 million. The task force staff who becamepart of the project coordination unit are already initiating work on studiesand workshops (para 2.16) and the setting up of the necessary infrastructure.All contracts and items to be financed retroactively will have been procuredin a manner consistent with above arrangements and acceptable to IDA. Theproceeds of the Credit are expected to be disbursed over six years, which isless than the disbursement profile for previous agricultural projects in India(Annex 4). However, project activities are expected to gain momentum quicklysince the project's preparation task force has already begun with theproject's start-up activitiss and that FD has already shown over the lastyears that it is capable to implement a large annual planting program largereven than is envisaged under the proposed project. No disbursements would bemade against plantation costs after March 31, 1995 until the conditionsspecified in para 3.2 are met. A Special Account in US dollars would beestablished in the Reserve Bank of India with an initial deposit of up toUS$6.0 million. The project Completion Date would be March 31, 1998 and theClosing Date of the Credit would be September 30, 1998.

accounts and-AudIt

2.27 The participating entities would establish separate accounts for theproject. These accounts, together with supporting documentation, includingcontributions from the State Government, and the Credit, would provide acomprehensive record of project financing and expenditures. Agaprangas XQerg tained t negotiat;ions from GOM and GOI that: (a) these accounts would bemaintained and audited annually in accordance with sound auditing standardsconsistently applied by independent and qualified auditors acceptable to IDA;(b) certified copies of the annual financial statements and SOEs, togetherwith the auditor's report, which would comment separately on the SOEs, wouldbe submitted to IDA no later than nine months after the close of each fiscalyear; and (c) the Special Account would be audited annually and an auditedstatement of the account and the auditor's report would be submitted to IDA nolater than nine months after the close of each fiscal year.

III. PROJECT IMPLEMENTATION

oraanization and Manafement (see Annex 11 of PIV)

3.1 [anneral hutline. One of the main project objectives is to reorient theforest administration and to enhance the private sector, local governmentagencies and NGOs to make forest development and management more responsive tothe needs of the local people and the increasingly complex forest environment.Unless local governments, villagers, NGOs and private industries areintegrated in the forest development process, FD will be unable to arrest themassive biotic pressures on the forest estate. While there are many areaswhere institutional reforms should or may take place, the main areas in whichthis project will seek institutional reforms will be with respect to:

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a) The Forest administration:* the functional overlap within the Forest administration and

between different agencies;* the lack of specialization in the administration and the

noncommercial orientation of FDC in their plantation operations.b) The role of local institutions and the private sector:* increased involvement of NGOs in the design and implementation of

forest programs, particularly those related to village eco-development; and

* increased use of local institutions (e.g. Panchayats, informalvillage groups, cooperatives) for improving and sustaining the jointmanagement and eco-development process; and

c) Contracting the private sector, for:* organizing a publicity campaign to help revise the negative

perception of FD and to help to educate the general public oncorservation;

o imparting specialized training to forestry staff, NGOs, villageleaders etc; and

* doing special studies as outlined in this SAR.

3.2 rsed institutignal roforrisa. Because of the complicated andsensitive nature of these institutional reforms, the project proposes that thereorganization be undertaken in a number of steps. The first step in thereform process is to draft a TOR for a comprehensive study of forestinstitutions to identify public restructuring options within realisticpolitical, financial, and administrative parameters and identify the futurerole of the private sector. The draft TOR which was prepared by GOM has beendiscussed and agreed with IDA at negotiations. The second step in the processwill be a formal workshop to discuss the agreed TOR with GOM and privatesector representatives. The third step will be the actual carrying out of theoverall study. The fourth step will be a series of workshops to discussinterim findings and identify potential actions, including TORs if necessary,in the areas of career development, specialization within the ForestAdministration, linkages between the forest administration and the rest ofGOM, and policy measures required to remove constraints on private sectorparticipation. The final step will be the formulation of an action programbased on the recommendations of these workshops and the discussions thereto,including taking all necessary actions to implement the action plan, includinga timetable for implementation. A&suZange. were obtained at negotiations thatthe final step would be completed by March 31, 1995 and that the action planand timetable would be satisfactory to IDA and with the action planimplemented in accordance with such timetable. It was further agreed that thecondition QL disburamenl against further implementation of plantationdevelopment from March 31, 1995 onward, would be based on evidencesatisfactory to IDA that the action plan has been formulated and thatsatisfactory progress has been made in implementing such plan.

3.3 Prior to the implementation of the reforms the project will have aninterim management structure. A project coordinating unit(PCU) has alreadybeen established and has evolved from the project preparation task force. ThePCU will report directly to the Secretary of Forestry. A number of actionswill need to be undertaken by the PCU prior to the commencement of theproject. Activities related to office establishment, commissioning of specialconsultant reports, development of year 1 operational plans, and staffrecruitment, among other activities, should commence at least six months priorto the start of the project. During project implementation the majorfunctional tasks of the PCU will relate to both operational and strategicplanning. The PCU, in collaboration with heads of specialized units, will be

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responsible for formulating annual operational plans including target setting,allocation of staff and financial resources, and program assessment. Specialemphasis will be given to new work program areas such as villageeco-development, seed/nursery development, staff training, databasedevelopment, publicity and extension, and pasture improvement. The PCU willhave a particularly important role to play in new program areas, includingplanning and market intelligence (para 3.11). GOM will explore opportunitiesfor providing special pay or other financial incentives to attract and retainthe heads of newly established units. During the first phase of the projectthe PCU will also oversee the carrying out of planned studies and coordinateimplementation of findings. At the time of the mid-term review, the futurerole of the PCU will be reviewed and recommendations for its appropriate long-term functions will be made.

3.4 Before the reorganization each branch of the current administration(para 1.11) will appoint a small working team (of 2-3 professionals) tooversee, under a team leader the introduction and development of specializedoperating units. These units can begin to function before the reorganization,as they are critical to the success of the project. These operating units willinclude i) village eco-development; ii) technology improvement (nursery andseed); iii) biodiversity conservation; iv) pasture development; v) resourceassessment and management; and vi) forestry planning and market intelligence.These units will be helped by the creation of support units for i) training;ii) publicity and iii) personnel. The operating units will also play apivotal role in the reorganization process in each branch and closely liaisewith the coordinating unit in introducing the proposed organizational changes.In addition, the specialized units will finalize their annual programs incollaboration with the coordinating unit. Aggurances wege paLLiaa: Aneagotiatins that specialized units will be filled by suitably qualified Headsand that GOM will take all possible measures to maintain such personnel insuch positions during the implementation of the project. The personnel unit isparticularly important in helping manage human resources and promote careerdevelopment in light of expected restructural changes. During implementationof the organizational changes, both the coordinating and the specializedunits, will be gradually integrated into the new organization.

Training, Publicity and Extension

3.5 2Z§i.a.ing. This component has three elements:

a. The creation of a small training unit which will develop anoperational plan for implementing the findings of the training studyregarding specialization, staff training plans and curriculumdevelopment. In addition, the unit will select candidates forexternal training.

b. Upgrading the five training institutions. However before theupgrading of these institutions can take place, it is important thatthese institutions be evaluated to determine their effectiveness inmeeting the current and future needs of FD. AganUZA= were gbtaingdat negotiations that such evaluation will be completed before March31, 1993 and that such study will be carried out under contract bylocal consultants.

c. Project-related training program. This program will focus on: (i)management seminars for senior and middle-level managers to help themdeal with strategic planning issues in forestry, publicadministration, reform etc.; (ii) technical courses to promotespecialization in seed technology, remote sensing, and other fields;and (iii) social aspects of forestry to cover newer areas, such as

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ecodevelopment and joint management, to enable FD staff to workclosely with villagers, NGOs, and others. It is important that thosewho have undergone specialized training are not transferred for atleast three years after training. daaguaga to this effect werg

Q M;e at^

3.6 P1jbJJiJt. For the project to succeed, it is important that FD's poorimage be rebuilt, its successes publicized, and the public informed about theproject. Most of the publicity work will be entrusted to a private agencyunder contract but a small Publicity Unit would be established in FD. Thepublicity program should cover the internal audience (FD staff) as well as theexternal one (outside public, private companies, etc.) and include theproduction of newsletters, information booklets and vic.eos, advertising,promotional activities, and outreach. The publicity unit should: (i) makeFD's work known to schools, companies, farmers, women's groups, and otherselected audiences; (ii) inform potential beneficiaries in the project area onecodevelopment, joint management, etc.; and (iii) educate the rural public onthe alternatives to fuelwood, conservation practices, and other importantelements of the project. A variety of media (radio, TV, newspapers, etc.) anda variety of tools (news releases, press tours, posters, etc.) will be usedfor this purpose (see Annex 10 of PIV). To give the unit a clear mission, a"public awareness" study will be commissioned to determine the public'sperception of FD, its functions, and programs, and to recommend steps toimprove the image of FD, including its role to disseminate technology tofarmers. This study should be followed by a "media strategy paper" to developa longer-term strategy on the medium that should be used and the messages thatshould be put out to various audiences.

3.7 EYSSDQnJ. No separate staff are proposed in the project for thispurpose; instead, the project would rely on staff training, publicity work,and the outreach program tc reach important audiences, such as farmers.However, if these efforts are found inadequate during mid-term evaluation ofthe project, and if suitable technical packages have been developed by thenfor farm forestry, the need for specialized forestry extension staff could bereconsidered.

3.8 Natural resource assessmets and maagement. Within the forestadministration there currently exists limited capacity for planning,implementing and monitoring of large scale forestry investment programs. TheState requires incremental inputs with respect to equipment, physicalfacilities and trained staff to carry out basic surveys and to develop timelyand relevant working plans and other investment strategies. This isespecially true with respect to planning of large scale commercialplantations, management of natural forest areas, and the rehabilitation ofwasteland areas. The project intends to strengthen the current forestadministration with respect to planning and monitoring new program initiatives(Annex 9 of PIV). This capacity will be developed through an investmentcomponent which aims at improving the underlying knowledge base regarding theavailability and condition of Maharashtra's forest estate, its suitability forconservation and production purposes, the demand for forest resources, and thepotential for rehabilitation of wasteland areas. The project will providefinancial and technical assistance for improving physical facilities for datacollection, management and analysis. The project will take important stepstowards developing basic competencies in computer data processing and in theuse of aerial photography and satellite imagery for survey and mapping tosupport the development of divisional working plans. In addition, the projectwill provide funds for special surveys related to forest production on non-forest areas, plantation surveys which will include the newly developed

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Australia system of climate/site/species matching, and wildlife and protectedareas surveys. The forest resource assessment and management functions willbe closely linked to a new Forest Planning and Market Intelligence Unit (para3.12) which will be established to track and forecast commercial and domesticdemands for wood and NWFP throughout the state as well as to carry out long-range strategic sector studies on a periodic basis. Strategic and annualplanning carried out by this unit will be formulated, in part, upon analysisof information generated directly by the various resource assessment teams.The project will promote improved forest administration through theintroduction of up to date management information services to assist inprogram implementation, supervision and evaluation. The project will supportthe development and testing of methodologies to promote village levelparticipatory planning under the eco-development component. The project willprovide materials, field logistical support and training to address localplanning requirements. The initial coordination of this component will becarried out by the PCU (para. 3.3). A Project MIS will be established tofacilitate budgetary tracking, planning and project evaluation.

3.9 Poliies.. The project will support measures aimed at reducing negativepolicy influences (para 1.8) in the operation of markets by fostering a morecompr3hensive approach to policy making and increasing the efficiency ofresource allocation. Policy reforms to be supported by the project aredescribed in Annex 1 of the SAR and Annex 2 of PIV. Although the projectdoes not contemplate substantial use of exotic species, as=uran=A wereohtaianad &t npgotiations that GOM will issue by March 31, 1995 guidelinesconsistent with the National Forest Policy, 1988 and satisfactory to IDA,relating to the use of exotic species in forest plantations. In the meantimeto initiate species/provenance trials of identified species under the project,detailed designs will be prepared with mutual agreement between GOM and IDA.In these designs specific emphasis will be given to intensive literaturereviews to avoid unnecessary cost and time. A s rances w l= nhta4nidthat by MTR, GOM will have identified those species, satisfactory to IDA, withrespect to which felling restrictions in non-state lands and transitrestrictions for timber and other forest produce shall be eliminated and adopta timetable, satisfactory to IDA, for eliminating such restrictions for thosespecies identified. In addition, it was agreed to implement the eliminatingof such restrictions in accordance with such timetable. In view of thelimitations on private ownership of land, assurannes Ng= 2bt&An2d at

nagotiations from GOI with respect to the possibility of FDCM raising captiveplantations on forest lands other than reserve forests for industrialutilization to assure forest raw material supplies on a sustainable way andalso take advantage of economies of scale in forest plantations and managementschemes. GOI will review and discuss with IDA such possibilities by March 31,1995. This review will be based on a study of both the implications of theban on captive plantations on the attraction of private capital to increasethe availability of raw material for forest based industries and the effectwhich rescinding the restrictions on captive plantations would have on rawmaterial supply. After the results of these studies have been reviewed anddiscussed with IDA they will be implemented by GOM. Government policies alsorestrict the clear-felling of trees. Since, in certain circumstances, clear-felling is the right economic and environmental method of forest management,aaaau=n wae nhtaingd at neogotiations, that Government will process clear-felling of limited areas under the project in the utmost expeditious manner.It was agreed that FD would submit such proposals to the Ministry ofEnvironment and Forest (MOEF) not later than September 30, preceding the yearof plantation and that MOEF will process such proposals not later than 90 daysof receipt. With respect to private forestry activities supported by theproject, asaaannes xRAM obtained at nggotiationa that GOM will adopt all

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appropriate measures to ensure that private plantations supported under theproject will be exempt from vesting to the state under relevant laws andregulations. AgrecAnt was ala Obtine from GOI to provide all requiredclearances and approvals to enable GOM to carry out its activities under theproject.

3.10 _ricAs and Iarkgt ng. In Maharashtra the Government exerts adetermining influence on forest markets (Annex 6 of PIV). Seedlings fromgovernment nurseries are allocated to farmers at preferential prices. Bamboois sold at much lower than market rates to the paper industry. Wood fromGovernment plantations is also sold under contract at lower than market rates.Illegal harvesting of timber and fuelwood combines with this situation toseverely undercut private farmer's attempts to grow wood and other forestproducts for commercial markets at profitable margins. Marketing issues are

thus important for both private and public plantations and are linked to acomplex set of policies and supply and demand flows. The project will tacklethese issues in a comprehensive manner by improving market information,reallocating resources for Government planting operations and introducing thepertinent legal and policy reforms, particularly regarding pricing. To assistin improving these interventions a special unit will be set up, tentativelywithin the PCU.

3.11 This will be the Forest Planning and Marketing Intelligence Unit (PMIU).The PMIU will have two separate but interlinked functions. On one hand, PMIUwill undertake some strategic studies of key issues affecting long-rangeforest planning and policy making. These include: (i) analysis of policy andmarket failures leading to resource misallocation; (ii) impact of governmentsubsidies to public forest product sales from public lands; (iii) cost-sharingarrangements for forest development on private, communal and state-forestlands, including seedling pricing; (iv) the current and potential role of NWFPin the economy and plantation technology (Annex 5 of PIv); and (v) the impactof the project on price structures and profitability from the public andprivate perspective. On the other hand, the PMIU will prepare annualforecasts of plantation and forest management needs based on annual priceforecasts, demand projections, and supply information from the resourceassessment unit. Drawing upon both the strategic and annual studies, the PMIUwill prepare an annual strategy paper that will be used to shape the annualinvestment and plantation budget of the forest administration. AaurAaneawere obtafigd nggXtiatiana that these annual budgets will take intoconsideration PMIU's strategy recommendations. &ASAnC= Were alas obtained

Al ne got.iatina that GOM will set the administered price of public forestproduce, including seedling pricing, for a given year with due weight of thecalculation by PMIU of such prices which would be within 10% of the weightedaverage market price for that year.

3.12 RA*orring RBq4rQrmfnts. The forest administration will maintain recordsof tihe project's progress regarding implementation of physical and financialtargats to meet IDA reporting requirements. Annual progress reports would besubmitted to IDA within 90 days of the end of the financial year and woulddraw on information generated by the M&E cell in order to elaborate on theconstraints and problem solving aspects of the project. The detailedreporting requirements would be finalized during the project start-up mission.A mid-term review would be carried out after the end of three years of projectimplementation (March 31, 1995) to evaluate the experiences so farparticularly with respect to treatment technology, eco-development, data base

development and project monitoring, pasture development, wildlife andprotection and the results of the forest sector reforms. GOM would carry out

the agreed recommendations of such a review in a manner acceptable to IDA. A

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project completion report would be prepared by the M&E unit on the basis ofIDA guidelines within six months of the closii date of the Credit.

suaneas to this effect werg obtained at negotiation..

Project Be efits and Justificatjon

3.13 Project benefits relate to increased production, productivity andenvironmental quality, enhanced public administration efficiency anddevelopment opportunities for local participation, employment and income.Technological improvements and expanded investments are expected to increaseboth the quantity and quality of forest raw materials, while enhancing keyenvironmental aspects such as soil and moisture conservation. Such increasesin total output will reduce the rapidly increasing pressure on imports. Theproject is also expected to have an effect on slowing down the pace ofenvironmental degradation through wasteland rehabilitation, pasturedevelopment and afforestation activities in general, which will cover morethan 300,000 ha. It will also contribute to the protection of bio-diversityresources through the creation of an IPAS. Moreover, project components arealso aimed at achieving a greater degree of participation and self reliancefor the local population, including tribals, in the creation and management offorest resources, as well as improving the marzeting of forestry products,thus expanding opportunities for local employment and income. Some 80 millionman-days of direct employment will be generated by the project. Local incomeper person induced by the project is estimated to be about Rs 5000 per year,full-time employment equivalent. The project will encourage the participationof women in planning and implementing forest:y-related activities. Byrevamping the public administration, through the introduction of policy andadministrative reforms, the project will contribute to increased efficiencyin, and modernization of, the management of the forestry-based sector as awhole.

3.14 naal and Economic The overall economic rate of return forthe project has been estimated at about 15% (Annex 3). This rate issatisfactory, particularly given the strong environmental bias of the projectand the fact that this estimate does not include indirect benefits nor thepositive impacts derived from policy and administrative reforms. In additionto total project profitability, estimates of financial and economic benefitsand costs were derived for representative models developed for each one ofthe plantation components in forest production, rehabilitation of degradedforest land, and wasteland afforestation. Moreover, plantation models forhorticulture, farm forestry and forage development were used as a basis forprofitability calculations of the village ecodevelopment program. Results aredisplayed in the table below.

3.15 Financial rates of return for the different components are mostly inexcess of 18%. This indicates that the project will generate adequateincentives to local participation. Furthermore, in all cases the ERR ofproject components exceed 12%, the opportunity cost of capital. The economicrate of return of some of the most important components such as the root stockdevelopment plantation program, which covers 100,000 hectares, is high,reaching 18.6%. Similarly, the wasteland afforestation program is expected togenerate economic rates of return fluctuating between 17 and 37% and it isanticipated that the ecodevelopment program will yield 32%. Some of thecomponents of the production forestry program (FP components below) areexpected to yield lower economic returns due mainly to the higher opportunitycost of land, but even in this case projected rates of return exceed 12%.

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3.16 Economic returns are lower than financial returns because economicprofitability estimates include opportunity costs for public lands used in theproject. In contrast, the financial analysis has assumed that these lands haveno financial value as their sale is effectively negated by government policy.The detailed assumptions underlying the economic analysis are given inAnnex 3.

FATES QF RETUF?ET

AEn ERR Economig NPv(Rs in Million)

E_ duotion ForstLQrModel FP1 17.3 15.0 153Model FP2 18.4 15.7 32Model FP3 19.3 16.8 52Model FP4 16.1 13.4 73

Rehail4rtation of Degraded

Model RDF1 21.6 18.6 556Model RDF2 20.0 17.1 35Model RDF3 33.0 12.4 3Model RDF4 17.6 16.8 54WastelandAfosatnmodel WAI 18.5 17.0 41Model WA2 22.3 20.9 45Model WA3 38.5 36.9 167Forest and WqAsLelAnd_

F&W1 20.5 15.3 6

3.17 engitivity Analyia. The project economic viability is quite robustand relatively insensitive to changes in assumptions of costs and benefits.The sensitivity analysis tested the strength of the project by assuming -- inthree areas of uncertainty -- the following less favorable conditions: (i)the substantial increases in productivity expected under the project will notbe achieved fully; (ii) given the size of the project, output prices will fallin the future and (iii) plantation and forest management costs will be higherthan those assumed. Results show that if productivity gains were 50% belowthose assumed in the most probable scenario above, the project's ERR would be12.9%. If this unfavorable situation were compounded by a simultaneous 20%increase in forest plantation and management costs, the ERR would be 12.2%,still higher than the opportunity cost of capital of 12%. And if prices ofoutputs generated by the project were 20 percent below those initiallyassumed, the ERR would fall to 14.5%. Total economic costs would have toincrease by 148% or benefits decrease by about 60% for the ERR to drop to 12%.Changes of this magnitude are unlikely and, in any case, steps have been takento minimize the possibility of their occurrence.

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3.18 9=JxQ=Bi D noaS. In addition to specific proposals forbio-diversity conservation and PA management, the project is strongly orientedtoward environmental improvement. Fundamental to this cause is the need forprotection. Community investment iA protection is seen as the only realisticstrategy, and treatment options are, accordingly, geared heavily towardfactors that would foster a strong community stake in forest protection. Thesemust override other objectives, and the practical scope for full protection ofany forest land, whether for wildlife, bio-diversity or as cover forprotecting erosion prone areas, will depend much more on a contented fringepopulation than it will on legal prescriptions. Within the treatment areas,however, judgments on treatment options have been reviewed from differingstandpoints silvicultural, socic- economic, soil and moisture conservation,livestock and fodder, and wildlife and bio-diversity and a strong convergenceof viewpoints has emerged. A summary of the main features incorporated intothe treatment models are as follows:

<…- Beneficial Impacts from Alternative Standpoints - >

Silvi- Socio- Soil/Moisture Livestock Wildlife &KEY TREATMENT SPECIFICATIONS culture Economic Conservation & Fodder Biodiversity

Recommended spacing between pla,:ted Less More NWFP More ground More fodder Improvedseedlings has been increased competition Less Cost vegetation habitats

Greater variety of species, multi- Better use More NWFP More ground More fodder Improvedtier mixtures of tree, shrub and of light and Less Cost vegetation habitatsground story vegetation nutrients

Contour cultivation with installa- Better growth Fuelwood & Reduced soil Fodder from Improvedtion of vegetative contour bunds from moisture NWIFP from erosion, low vetiver and habitats

conservation shrub lines maintenance browse spp.

3.19 X Building on the foundation already established incertain parts of Maharashtra, the project will foster a major change inconventional forest policy, from one of policing and enforced protection, toorie of cooperation and joint venture with local communities. This is a majorchange to which the State is committed, and which is attracting major interestfrom elsewhere, within and outside of the country. This change is not withoutdifficulty, for it requires a major reorientation of long establishedprocedures, and the application of skills that have not been a conventionalpart of the forester's portfolio. Moves toward a major re-structuring ofservice organization and training are already underway, and will be furtherdeveloped during the course of the project.

3.20 An added institutional feature, of potentially great importance, is thatthe proj ct is supporting a coordinated programme of two departments, namelyForestry and Animal Resources Development. This is essentially a new ventureaddressing one of the more intractable problems in forest development. Thestrongly positive attitude of the concerned departments, is grounds forconfidence that these ventures will have a successful outcome, and althoughlocali2ed in terms of planned coverage during the project, the 1.onger-termpotential for expansion and spin-off is very high and would be of directrelev;Ance to many other areas in India.

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Impact of th p eDM_fl

3.21 The project would have a positive impact on women. Local villageorganizations that would be created or strengthened for management of forestand pasture resources would include village women as committee members,entitled to direct representation in decision-making and benefit distribution.Rehabilitation of degraded forest lands would increase the supply ofsubsistence and saleable non-timber forest products, reducing women's existingwork burden in fuel and fodder collection and increasing women's potential forincome-generation. In areas where village eco-development is undertaken,women would be represented in village organizations. In these village,revenue enhancing activities involving women to improve marketing andprocessing of NWFP will also be undertaken. Village women's groups would beallocated government wastelands for development on an experimental basis and avariety of models for organizing forest and pasture development on privatelands through women's groups would be tested under the program, with thesupport of NGOs. Forest training courses for male and female staff andfarmers would include currioula regarding women's present and potentala rolesin forestry.

Proiect Rizks

3.22 The main risks facing the project are related to the willingness of thegovernment to make the appropriate institutional and policy changes reflectedin Chapter 1. However, during the extended preparation process of thisproject governments favorable reaction and commitment is an indication thatthese risks would be overcome. Another risk is related to the fact thatsustained management of common and public lands depends on enhancing people'sparticipation in forest management and development. However, with theemergence of successful strategies relating to village eco-development andjoint management in other states and the presence of suitable NGOs inMaharashtra, it is felt that sustained management can be ensured. Given theinnovative nature of the project and the strategic changes being to beintroduced, it is felt that risks can be substantially reduced by allocatingdouble the supervision staff weeks, including a wider range of technicalexpertise than is normally made available (see Annex 5).

IV. AHR NA

4.1 At negotiations assurances were obtained that:

(a) GOM will implement the reforms outlined in the matrix of sectorreforms, its progress will be reviewed annually and by MTR by GOMand IDA (para 2.5);

(b) satisfactory treatment models would be used in plantationdevelopment programs as outlined in para 2.7, and seedlings to beused in such treatment models would have been suitably culledfrom existing nurseries; and plantation development on publicland carried out after March 31, 1995 would follow procedures andarrangements satisfactory to IDA as outlined in para 2.7 andAnnex 1 B (ii);

(c) suitable consultants qill lbe selected before March 31, 1993 to

assist in restructuring of the pasture development unit (para2.10);

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(d) Implement the eco-development component with the participation ofNGos and local institutions acceptable to IDA (para 2.11, Annex 1A 2 (i)):

(e) the provision of funds for allied works for village eco-development would be limited as outlined in para 2.12;

(f) the transfer of control of all ecologically important PAs fromterritorial staff to the wildlife wing will be completed beforeSeptember 30, 1997 and that the Head of Wildlife will not haveother duties (para 2.13);

(g) local and foreign consultants would be recruited before March 31,1993 for establishing-seed unit and upgrading selected nurseries(para 2.14, Annex 1 B (i));

(h) a research review and agreed research program will be carried outby March 31, 1994 as outlined in para 2.14 and Annex 1 B (iii).

(i) suitable local and international consultants be recruited toassist in training, workshops and studies (para 2.19);

(j) GOM would provide adequate funds to project entities as outlinedin para 2.21;

(k) GOM would follow the procurement arrangements outlined in para2.22 - 2.24;

(1) GOM would establish acceptable accounting and auditingarrangements as outlined in para 2.27;

(m) GOM would carry out the reorganization study according to agreedTOR and that the final step would be completed before March 31,1995 (para 3.2, Annex 1 A (i-v)).

(n) specialized project units to be filled with qualified Heads forthe duration of the project (para 3.4, Annex 1 B (i));

(o) evaluation of training institutes to be completed before March31, 1993 as outlined in para 3.5b and GOM agrees that FD staffsent for specialized training would not be transferred out oftheir jobs for at least three years after zeturn from training(para 3.5 c);

(p) policies such as those relating to exotic species, woodharvesting and transit, clear-felling etc. will be adjusted byGOM as outlined in para 3.9 and Annex 1 C (i-vii); furthermore,GOI to provide all required clearances and approvals to enableGOM to carry out its activities under the project;

(q) annual investment plan and plantation budget will reflect PMIUstrategy recommendations and sales of public forest produce,including seedlings, will be adjusted by GOM as outlined in para3.11 and Annex 1 C (ii); and

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(r) GOM would follow agreed reporting requirements and carry out MTRby March 31, 1995. In addition a project completion report wouldbe prepared (para 3.12).

4.2 As condition of Credit disbursements it was agreed that furtherimplementation of plantation development as from March 31, 1995 would besubject to an satisfactory evidence to IDA that the action plan has beenformulated and that satisfactory progress has been made in implementing suchplan. (para 3.2, Annex 1 A (v)).

4.3 With the above agreements and assurances, the project is suitable for anIDA Credit of SDR 88.9 million (US$124 million equivalent) to India onstandard IDA terms with 35 years maturity.

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AnnePage 1 of 8

SAAAHTRA FORSTRY PROJECT

PROPOSED SECTOR REFORMS

Projeet Strategy

1. Several institutional, technological and policy failures exist in theforestry sector that limit the state's ability to meet the challenges ofenvironmental degradation and the growing population's demand for subsistenceand commercial products. Project preparation has identified areas of keyreforms, both those that can be addressed immediately and those morecomplicated areas which require further study to pose effective solutions.These are summarized in the attached Matrix.

Areas of reform

(a) Institutio&al

2. The public forestry administration was created when both developmentpriorities/strategies and forest resources were markedly different and areorganization of units and responsibilities is timely. There is too muchoverlap of responsibility and authority within the administration, too littlecoordination with relevant outside government and non-governmental agencies,and no rational linkages to the private sector. Because of the more varieddemands placed on the public forest estate and the expansion of forestresources into the private sector, the administration needs new developmentstrategies and staff with more specialized skills to carry them out. Theproject will attempt a major overhaul of the State public forestry sector.The first step in modernizing the forestry administration will be an ovraellealuati2a of the structure and procedures of the public administration,followed by studies for the formulation of a reorganizatign plan which will becompleted by the end of the project year 3 and implemented during thesubsequent years of the project. These actions are described in more detail inAnnex 2, Forest Policies and Legislat and Annex 11, Organization andManaagent of the Implementation Volume.

(b) Tmihnologg rmrvement

3. Technology available, the focus and structure of research and technologydissemination is not adequate to current demand and changing environmentalneeds. As a result, seedlings and nursery practices are of poor quality.Existing silvicultural techniques and site management practices do not lead tothe desired level of productivity or generate the range of forest productsneeded by a changing society. Research support is inadequate to guidetechnological decisions for the wide range of ecological and socio-economiccondition on the public and private lands suitable for forestry.

4. The pro-ect will give priority to the introduction of technicalimprovements, particularly in the areas of (i) seed selection and production;(ii) nursery practices; (iii) plantation establishment and management; and(iv) research. These are described in detail in Annex 3, Technolngy. Reaaarchand Extension of the Implementation Volume.

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Ax 1Page 2 of 8

(c) PoiQg

5. Government policies affecting the forestry sector have commonly beendesigned according to a narrow set of sector-specific objectives, disregardingtheir impacts outside tthat sector. Distortions have arisen which (i) inhibitprivate investment in reforestation and forest management activities;(ii) limit the scope for local participation in forestry programs; (iii)create inconsistencies between local demand and supply; (iv) restrict marketcompetition and thus foster protected, monopolic and inefficient enterprises;(v) generate wrong price signals; (vi) promote misallocation of scarceresources, and (vii) often lead to negative equity and environmental results.

6. The main policy reforms will focus on the following aspects:

(a) Use of Species. The project will aim at liberalizing harvesting andtransit of forestry produce. It will prepare the operational norms forregulating the implementation of the Forestry Policy prescriptions onthe use of exotic species.

(b) Prlvate Enternrise and the Use of Land. The project will study andrecommend innovative ways to secure an adequate supply of industrialforest raw materials, for example by entrusting industry with the fullresponsibility for creating and managing their sources of supplyoutside the Government's forest lands; promoting closer links betweenindustries and private forest producers; creating captive plantationsunder the responsibility of the FDCM; or setting up joint venturesinvolving the FDCM, local people and the major industrial concerns.

(c) PrAce Controls. The project will promote a phased price liberalizationof both forestry produce and forest inputs such as seedlings. A marketIntelligence Unit will be created to facilitate the transition fromadministered to market prices as well as to determine marketpotentials for timber and non-timber products. Additional details areprovided in Annex 6, Marketing Arrangements of the ImplementationVolume.

(d) Clear-fellinc of Trees. Actions will be undertaken to realisticallyimplement prescriptions contained in the Forestry Policy bydetermining areas and silvicultural conditions under whichclearfelling is environmentally sound and can, therefore, be allowed.

MAARASHTRA FORESTRY PROJECT

PROPOSED FOREST SECTOR REFORMS

Area of Reform | Issue | Objective Action needed Responsible Timinglcovenant

II partyA. INSTflUTIOWAL MECHAN15HS OP TEE FOREST SECTOR

1. Reform of the Forestry Administration

Publie Public Forestry Administrative Car.y out analysis of the GOM (i) Draft TOR of the study toForestry Adminlstratlon needs reform to increase Public Forestry be agreed between GOM and IDAAdmLnistration to be modernized efficiency Administration including at negotiations; progress to be

through restructuring analysis of the role of reviewed annually between GOMNGO's, private sector and and IDA and at MTR; Completeother institutions. study by March 31, 1995. 0Identify areas forfurther analysis inaddition to those listedbelow.

Some functlons are Reduce or eliminate Carry out study of GOM (ii) Based on agreed TOR andconducted unnecessary overlap organizational overlap. after series of discussionsimultaneously by FD, between different workshops, formulate plan ofFDCM, DSF and agencies action before March 31, 1995.Departments ofHorticulture andAnimal Resourcesleading to inefficientallocation of scarceresources

Noncommercial Improve efficiency Carry out study of FDCM's GOM (iii) Based on agreed TGR andorientation of FDCM of establishment and performance and after series of discussion 0Q Pleads to low maintenance of high opportunities for workshops, formulate plan ofproductivity and poor value plantations. improving efficiency actlon before March 31, 1995. tfinancial results Improve quality of 0

planting stock Pe

I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~O

Area of Refonm Issue Objective Action needed Responsible Timinglcovenant

Lack of speclalized Develop staff Development of manpower GOM/GOI Civ) Based on agreed TOR andstaff in the expertise in areas policy which will allow after series of discussionmanagement of the requiring high specialized career workshops, formul.ate plan offorest estate. levels of training development. action before March 31, 1995.

and specialization,i.e. strategicplanning, manaementof wildlife andbiodiversityresources, GIS, M+E,research, extensionand operation ofcommercialplantations

Rationalize Based on the above GOMIGOI Cv) COM to review and agreestructure of the studies, draft with IDA, the details of theForest reorganization action reorganization action programAdministration to program. Implement action prepared by GOM, including aresolve above issues program. satisfactory timetable for

implementation. Disbursementsagainst plantation developmentafter March 31, 1995 will besubject to COM having prepared Ithe plan of action for theserefoms and has made progresssatisfactory to IDA inimplementing such plan-

PMIU to be established byCreate PMIU. September 30, 1992. Annual

investment and plantationbudget of the forestadministration to reflectstrategic priorities identifiedby the PMIU.

1D X

co

Area of Reform Issue Objective Action needed Responsible TimingleovenantI ~~~~~~~~~~~~~party2. Role of local Institations and the private aector in forestry

Linkages Insufficient use of Establish mechanisms Based on agreed criteria GOM (i) By negotiations.between the NGOs and local to involve NGOs and and mechanisms for Implement eco-development withPublic communities. Lack of local instltutions involvement, prepare list participation of NGOs and localForestry officlal mechanisms to and individuals in of NGOs and local institutions acceptable to IDA.Administration ensure their the design and lnstitutions withand the non- involvement implementation of potential for planningpublic sector. forestry sector and managing forestryPeoples' prosrams, including development schemesparticipation. ecodevelopment and

Joint managementschemes

Taking into account GOMIGOI (i1) By mid term review. At theresults of the study of start-up workshops in PFY, GOMthe reorganization of the will finalize fundingPublic Forest arrangements to participatingAdministration and NG05 and local institutions.ecodevelopmentexperience, designworking mechanisms forinvolving NGOs and localinstitutions andindividuals in plannlngand manasing forestrydevelopment schemes.

xLn

0

CD1

area of Reform Issue ObJective Action needed Responsible Timing/covenantI ~~~~~~~partyB. -EaH.mV D.R.vvf.T

Technology Low quality of inputs, Improve seed stock Establish Seed Unit. GOM (1) Qualified heads ofinadequate and nursery Establish Nursery Unit Specializedtechnological practices encompassing at least Units to be in position in yearknowledge and five nurseries for PY1 and to remain in positioninadequate application improved teak seedling at least for the duration ofof forest management production. Restructure the project. Employ consultantstechnology leading to pasture unit. to establish seed and nurserylow productivity and improvements, restructurenarrow range of

pasture unit starting by Marchbenefits 31, 1993. GOM agreed to the useof national and internationalconsultants. Five selectednurseries to become fullyoperational by PY3-

Improve process of Preparation of forest GOM (ii) Seedlings used in modelsdesigning and plantation/management to be suitably culled beforeapplying proper models including improved nurseries aretechnical models for procedures for planning established: application offorest plantation and implementation. agreed models for plantationand management development including use of

improved planting stock andprocedures for planning andimplementation after mid-termreview.

Research Inadequate research Organize research Develop state-level GOM/GOI (iii) Preparation of researchhampers productivity effort to orient research strategy. paper by March 31, 1994.and total production research to Research program and time-tableinnovation and for implementation to be agreedlocation-specific between GOM and IDA. Mostsolution of research to be done byoperational problems contractors outside FD.

CDO

xI-A

0o

Area of Reform Issue Objective Action needed Responsible TimingicovenantI I ~~~~~~~~~~~~party.POLICIES

Restrictions Negative economic Clear interpretation Norm providing GOMIGOI Ui) Para 4.33 of Nationalto the impact if exotics are of the rule operational procedures Forest Policy Paper 1988 laysintroduction more productive than including definition and criteria to apply the down in general terms policiesof exotic native species of what constitutes policy in introducing exotic speciesspecies a negative impact on and details can be issued by

native vegetation the State. GOM to provide byand environment March 31, 1995 guidelines

relating to use of exotic

species in forestryplantations. In the meantime,trials (speciestprovenance)will be carried out underproject satisfactory to IDA andsuch designs will be based onintensive literature reviewedta avoid unnecessary cost andtine.-

Supply of Loss of Governmen- Government supply Establish Planning and GOM (ii) Annual assessment offorest raw income. Waste of systems shouLd avoid Market Intelligence Unit market prices to be carried outmaterials at forest raw material. selling forest raw (PMIU). Assess market by the PMIJ according to alower than Reduction of material below prices annually and adopt methodology to be agreedmarket prices incentives for market prices policy changes aimed at between GOM and IDA.

afforestation and deregulating prices. Administered prices of publicforest magement forest produce for given year

will be given due weight to thecalculation of PMIU of suchprices which would be within10Z of the weighted averagemarket price for that year.

All forests Disincentive to Allow non-state Amendlabolish Maharashtra GOMIGOI (iii) Private forestryare property a:forestation. Loss of ownership of trees Private Forests supported under the projectof the state employment and forests Acquisition Act, 1975. shall be exempt from vesting to

opportunities and Alternatively GOM should the State under relevant lawsnegative environmental provide a policy and regulations.impact statement exempting

plantations under theproject from provisions I'Dof the Act. l 0

(DCD

Area of Reform Issue Objective Action needed Responsible Timingcovenant

Limits to Potential economies of Design alternative Seek clarification from G(OMIGOI (iv) GOI by March 31 1995 toprivate scale of large arrangements for GOI as to whether captive review and discuss with IDA theownership of industrial block access to large industrial plantations possibility of permitting FDCMland plantations are lost. scale supplies for could be raised by FDCM to raise captive plantations

Foregone opportunities industry for industrial utillization onfor land forest lands other than reserverehabilitation. forests.

Clear-felling Loss of economic Develop sustainable Permission from GOIIGOM GOIIGOM (v) FD to submlt proposals forrestriction output when clear- systems of forest to clear fell limited limited areas for clear-fellingfelling is the right mnagement areas of project to MOEF not later thansilvicultural plantations in accordance September 30 preceeding year oftreatment- Restriction- with sound management- plantation. MOEF to processof industrial supply practices. Clarify such proposals no later than 90

environmentally sound days from date of receipt ofoperational procedures proposal.and guidelines forapproval of clear fellingin these areas

Restrictions Disincentive for Liberalize tree Identify a limited number GOM (vi) By MTR agreement with IDAto felling of planting trees of the felling decisions in of species for which on the species with respect totrees ln species affected by non-state lands as restriction will be which felling restrictions forprivate lands regulation. Incentive well as transit of retained. timber and other forest produce tand to free for indiscriminate timber rules shall be eliminated and adopt ltransit of planting of exotic timetable for eliminating suchtimber species. High restrictions: implement

enforcement costs elimination of suchrestrictions according totimetable.

Government Disincentive to the Gradually reduce or Reduce seedling GOM (vii) As per covenant in Csupply of production of eliminate Government production subsidy with a (ii>.seesdllngs seedlings by private Intervention In view to complete

nurseries. Poor market elimination by PY6quality of plantingmaterial

I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

00e 0

Ph

INDIAMAHARASHTRA FORESTRY PROJECT

SUMMARY ACCOUNTS COST SUMMARY

Rs u S X Total...... . -. ----.. -..--------. ........................... X Foreign BaseLocal Foreign Total Local Foreign Total Exchange Costs

................ .............. ...................... _._...... __--------------------. ____ .......... ___ .___ 1. IUVSTIEII COSTS

A. Civil Vorke 233.4 12.3 245.7 9.0 0.5 9.5 5.0 8.13. Eqiulmnts aNd Mterials 79.5 8.8 88.3 3.1 0.3 3.4 10.0 2.9C. Vehicle 23.7 5.9 29.6 0.9 0.2 1.1 20.0 1.00. Csouultay1. Locat Consultany 22.5 1.2 23.7 0.9 0.0 0.9 5.0 0.82. ernas Cotltancy 0.0 6.4 6.4 0.0 0.2 0.2 100.0 0.2

....... ............... . .. ,. ................ ..... .......Stu-Totel 22.5 7.6 30.1 0.9 0.3 1.2 25.1 1.0E. Training & Tech Assist. ".5 5.2 51.7 1.8 0.2 2.0 10.0 1.7F. Plantation fstabishmnt 2247.4 118.3 2365.7 86.4 4.5 91.0 5.0 77.9G. Stidies 41.3 2.2 43.5 1.6 0.1 1.7 5.0 1.4

..... ... . .. .......... . .. .;; . ........ .......... ........... ---------------Total IWES T COSTS 2694.4 168.2 2854.6 103.6 6.2 109.8 5.6 93.9

...... ........... .... .... ..... .... ................... .. .. ... .... .. .. ........

1. REWItEST COSTS................... .....................

A. Saltris wd Alllow ces 107.5 0.0 107.5 4.1 0.0 4.1 0.0 3.53. Incrmentat Opert. Cost 72.5 3.8 76.4 2.8 0.1 2.9 5.0 2.5

...... iw.......... . ................. .... ......... .................... -------------Total REURiENT COSTS 10.0 3.8 183.9 6.9 0.1 7.1 2.1 6.1

.. .. ......... .............................. .. ............... ................. -------------------Total ASELINE COSTS 2874.4 164.0 3038.4 110.6 6.3 116.9 5.4 100.0

Physical ContingreNs 155.0 8.6- 163.7 6.0 0.3 6.3 5.3 5.4Price Contingenies 1048.9 64.1 1113.0 17.0 1.1 18.1 6.3 15.5... ... . ..... ... . .... .... ...... ------------------ ............--------------............

Total PROJECTS COSTS 4078.4 236.7 4315.1 133.5 7.8 141.3 5.5 120.9................. ..................................... ---._....... -_-....__._--._---_------------'-------...........

H as

INDIAMAHARASHTRA FORESTRY PROJECT

PROJECT COST SUMMARY

Rs US S X Total.............................. ........................... X Foreign BaseLocal Foreign Tota5 Local Foreign Totat Exchange Costs. ..... .... ................... .. _. ........ .................... . .................................. ......................... _A. Project Organization 188.7 12.5 Z01;1 7.3 0.5 7.7 6.2 6.69. Plantation Development

S. Forest Production 1072.2 56.4 1¶28.5 41.2 2.2 43.4 5.0 37.72. Reheb. of Degraded Forest 807.4 42.5 849.9 31.1 1.6 32.7 5.0 28.03. Vastetand Afforestation 233.2 12.3 245.4 9.0 0.5 9.4 5.0 8.14. Pasture Development 47.8 2.5 50.3 1.8 0.1 1.9 5.0 1.75. Agro-Forestry 5.1 0.3 5.4 0.2 0.0 0.2 5.0 C.2:-............ ....................... ................ ..... ........ .... X.............. ....... ... .Sub-Total 2165.7 114.0 2279.7 83.3 4.4 87.7 5.0 75.0C. Eco and Tribat Develop. 196.1 12.1 208.2 7.5 0.5 8.0 5.8 6.9D. Technology inprovewent1. Seed Unit 13.7 0.4 14.1 0.5 0.0 0.5 2.8 0.52. Nursery Unit 41.9 5.8 47.7 1.6 0.2 1.8 12.2 1.63. Pasture Development Unit 10.9 3.2 14.0 0.4 0.1 0.5 22.7 0.5.… - - .- ----------------- --Sub-Total 66.4 9.4 75.8 2.6 0.4 2.9 12.4 2.5E. Restructuring Forest Ada. 8.3 0.4 8.8 0.3 0.0 0.3 5.0 0.3F. Siodiversity Conservation 177.0 9.7 186.7 6.8 0.4 7.2 5.2 6.1C. Support Services1. Research 26.0 1.5 27.5 1.0 0.1 1.1 5.3 0.92. Data Base 18.3 2.1 20.3 0.7 0.1 0.8 10.2 0.73. Publicity & Extension 10.7 1.0 11.6 0.4 0.0 0.4 8.2 0.44. Trainina 17.2 1.5 18.7 0.? 0.1 0.7 B.3 0.6---------------- .. ..... . ............ ... ... ........ _. *. .... ...Stb-Total 72.2 6.0 78.2 2.8 0.2 3.0 7.7 2.6..... ............ . ... ...... .......... ..... -----------

Total BASELINE COSTS 2874.4 164.0 3038.4 110.6 6.3. 116.9, 5.4 100.0Physical Contingencies 155.0 8.6 163.7 6.0. 0.3 6.3 5.3 5.4Price Contingencies 1048.9 64.1 1113.0 17.0 1.1 18.1 6.3 15.5.- ._- . . .Totat PROJECTS COSTS 4078.4 236.7 4315.1 133.5 7.8 141.3 5.5 120.9 F

_._,....._______._._...................................___________.___.-___________--....--...-........--.....-...-------.......---...-..--..---....-..-..---.....- _ _---_---

( D( m

INDIAMAHARASETRA FORESTRY PROJECT

SUMMARY ACCOUNTS COST SUMMARY

Rs US S X Total.............................. ........................... X Foreign Base

Local Foreign Total Local Foreign Total Exchange Costs

1. IWESTRN COSTS

A. CIvil torks 233.4 12.3 245.7 9.0 0.5 9.5 5.0 8.1B. Equipments and Materials 79.5 8.8 88.3 3.1 0.3 3.4 10.0 2.9C. Vehicles 23.7 5.9 29.6 0.9 0.2 1.1 20.0 1.0D. Consultancy

1. LocaL Consultancy 22.5 1.2 23.7 0.9 0.0 0.9 5.0 0.82. Overseas Consultancy 0.0 6.4 6.4 0.0 0.2 0.2 100.0 0.2

.......... ;................. ;W .... ............ ..... ......... .... ...... .. . .. ..... .... ........ . ......

SubrTotal 22.5 7.6 30.1 0.9 0.3 1.2 25.1 1.0E. Training & Tech Assist. 46.5 5.2 51.7 1.8 0.2 2.0 10.0 1.7F. Plantation Establishment 2247.4 118.3 2365.7 86.4 4.5 91.0 5.0 77.9G. Studies 41.3 2.2 43.5 1.6 0.1 1.7 5.0 1.4

Total INVESTMENT COSTS 2694.4 160.2 2854.6 103.6 6.2 109.8 5.6 93.9 1.... ..... . .... ...... _ ...--------------------------- ..... ......... .....

It. RECURRENT COSTS

A. Salaries and Allouances 107.5 0.0 107.5 4.1 0.0 4.1 0.0 3.5B. Increoental Opert. Cost 72.5 3.8 76.4 2.8 0.1 2.9 5.0 2.5

Total RECURRENT COSTS 180.0 3.8 183.9 6.9 0.1 7.1 2.1 6.1_ .. ...........__.. _. ..... .. .... .... ....... --------------- ............. ...... ........... -----------

Total BASELINE COSTS 2874.4 164.0 3038.4 110.6 6.3 116.9 5.4 100.0Physical Contingencies 155.0 8.6 163.7 6.0 0.3 6.3 5.3 5.4Price Contingencies 1048.9 64.1 1113.0 17.0 1.1 18.1 6.3 15.5TotalROJECS--OSS---.23.7 3.1 ................. .......... .. ..... ....... ......

Totat PROJECTS COSTS 4078.4 236.7 4315.1 133.5 7.8 141.3 5.5 120.9==_= ==== =s= --- ----- -I--= =__ = = s:5_,_===== ==--- = = = = = =

. . ... .. ... .. ... .. ... .. ... .. .. --- -- --- -- --- -- --- -- - - -- --- --- -- --- -- --- -- --- -- --- --

H f:D

INDIA

MAHAXASHTRA FORESTRY PROJECT

PROJECT COST SUMMARY

Rs uS S X Total------------------------------ --------------------------- X Foreign Base

Locat Foreign Total Local Foreign Total Exchange Costs

A. Project Organization 188.7 12.5 201.1 7.3 0.5 7.7 6.2 6.6B. Plantation DeveLopment

1. forest Production 1072.2 56.4 1128.6 41.2 2.2 43.4 5.0 37.12. Rehab. of Degraded Fore 807.4 42.5 849.9 31.1 1.6 32.7 5.0 28.03. Wasteland Afforestation, 233.2 12.3 245.4 9.0 0.5 9.4 5.0 8.14. Pasture Development 47.8 2.5 50.3 1.8 0.1 1.9 5.0 1.75. Agro-Forestry 5.1 0.3 5.4 0.2 0.0 0.2 5.0 0.2

Sub-Total 2165.7 114.0 2279.7 83.3 4.4 87.7 5.0 75.0C. Eco and Tribal Develop. 196.1 12.1 208.2 7.5 0.5 8.0 5.8 6.9D. Technology Iuprovement

1. Seed Unit 13.7 0.4 14.1 0.5 0.0 0.5 2.8 0.5 52. Nursery Unit 41.9 5.8 47.7 1.6 0.2 1.8 12.2 1.63. Pasture Development Unit 10.9 3.2 14.0 0.4 0.1 0.5 22.7 0.5

Sub-Total 66.4 9.4 75.8 2.6 0.4 2.9 12.4 2.5E. Restructuring Forest Adm. 8.3 0.4 8.8 0.3 0.0 0.3 5.0 0.3F. Diodiversity Conservation 177.0 9.7 186.7 6.8 0.4 7.2 5.2 6.1G. Support Services

1. Research 26.0 1.5 27.5 1.0 0.1 1.1 5.3 0.92. Data Base 18.3 2.1 20.3 0.7 0.1 0.8 10.2 0.73. Pubticity & Extension 10.7 1.0 11.6 0.4 0.0 0.4 8.2 0.44. Training 17.2 1.5 158.7 0.7 0.1 0.7 &.3 0.6

Sub-Total 72.2 6.0 78.2 2.8 0.2 3.0 7.7 2.6

Total BASELINE COSTS 2874.4 164.0 3038.4 110.6 6.3. 116.9, 5.4 100.0Physical Contingencies 155.0 8.6 163.7 6.0. 0.3 6.3 5.3 5.4Price ContingencIes 1048.9 64.1 1113.0 17.0 1.1 18.1 6.3 15.5

Total PROJECTS COSTS 4078.4 236.7 4315.1 133.5 7.8 141.3 - 5.5 120.9.... .... .... ... .... .... ... ==.._2=. .... ... .... ... _..22..=. 2==2__... .. i. . .. . .. . . .. . .. . .,,,,.,,,_._ ______________.__ __.__ ____ __ __--;--- -----.-- '-._--- ====. -

(D

- 40 -

Anne3aPage I of 4

M&HARASHTRA FORESTE PROJECT

ECONOMIC ANALYSIS

NTRODUCT ION

1. Profitability estimates were based on the project's direct impacts,including expanded availability of timber, poles, bamboo, fuelwood, fodder andother non-timber forest products. In addition, the project will generate anumber of intangible and indirect impacts, such as increases in the futureproductivity of land, improvements in processing activities resulting fromincreased availability of and better forest raw materials, superior soil andwater conservation practices, enhanced capabilities in the publicadministration, more effective local participation, research, extension andtraining. These were not included in profitability calculations, with theexception of the opportunity cost of land. Thus, total project net benefitsare probably underestimated by a substantial amount. Benefit underestimationprovides a margin of safety against possible projection errors.

Jagntifyincr an esui Bnefits and Costs

2. Direct quantifiable benefits are from both plantation investments andthe village ecodevelopment afforestation program. Estimates of financial andeconomic benefits and costs from plantations investrments were derived frommodels developed for 12 representative types of plantations each onecorresponding to project components in forest production, rehabilitation ofdegraded forest land, and wasteland afforestation. In the case of the villageecodevelopment afforestation program, plantation models for horticulture,farm forestry and forage development were used as a basis for calculations.Shared costs such as extension, research and expenses related to thestrengthening of the public administration were not apportioned to componentmodels but instead included in the estimates of total project profitability.The planning horizon was 40 years. The technical details of the models aredescribed in Annex 12 of PIV. Financial cost and benefit streams used as abasis for the economic analysis can be found in Annex 13 of PIV.

Efficiency Pricing

3. The key assumptions and adjustments made in the economic analysis are asfollows:

(a) EconoMic Cost of Unskilled Labor.

4. Since the bulk of the project activities take place during the plantingand harvesting seasons, there is virtually full employment at this time. Inthese conditions, the prevailing market wage rate is a good basis forestimating the economic cost of labor. The market rate during this period isRs 20.9 per work/day. A standard conversion factor of 0.8 has been applied tothe market wage rate to arrive at the economic cost of labor.

5. Given the relatively large size of the project, there is a possibilitythat its increased demand of labor would induce an increase in wages rates.This possibility is low, given t;ie relative abundance of rural labor. However,

- 41 -

Annex 3Page 2 of 4

under the sensitivity analysis, increases in wages rates of an average 20%during the planning period have been assumed to test the economic soundnessof the project.

(b) Land Valu9oa.

6. Even the poorest of lands to be utilized by the project generate certainproducts which will now be foregone because of the project. The net benefits,derived from the harvest of grass, wood and other products were taken as theopportunity cost of land.

(C) OutDut Prices.

7. All product outputs in the project are non-tradables. The output pricesused in the analysis are market prices. The analysis also assumes that noGovernment sales will take place at below market prices. Since market pricesof all the outputs are considered a good estimate of their opportunity cost,they were taken as the basis for economic value calculations. With the fewexceptions, prices were assumed to remain unchanged in real terms during thenext 40 years, the project's planning horizon. This conservative assumptionwas adopted despite evidence of long term real price increases for woodproducts and the expectation that demand will continue to grow at a fast pacein the future, outstripping supplies (for details of demand projections, seeAnnex 4 of the PIV). The only exceptions to the constant prices assumptionwere in cases of clearly acute and growing scarcity such as poles, teak timberand bamboo, when price escalation was assumed. The details of future pricesutilized for the multiple products expected to be generated by the project aredescribed in Table 1 and in _harahtra r.39 SeGt0r =Jant-Reoaratien ag-ort, GOM June 1991 (Project File) .

8. On the other hand, it could also be argued that the size of the projectwill lead to substantial increases in supply in the future and therefore todecline in output prices. For the reasons above, this outcome is judged asunlikely but alternative calculations were carried out under the sensitivityanalysis. Due to the fact that no estimates of price-elasticity can berealistically derived for the next 40 years, the analysis simply asummed anaverage decline of output prices of 20% during the whole planning period.

Financial and __onomi' Profitability

9. The projects's financial and economic profitability rates aresatisfactory. Thus, under the highly conservative assumptions adopted, theproject economic rate of return is estimated at 15.2% The NPV of the projectusing a 12 percent discount rate -- the opportunity cost of capital -- is Rs.974 million. Benefit and cost flows for the project as a whole and for eachone of the programs are displayed in Table 2.

10. Financial and economic profitability rates were calculated for both theplantations and the village ecodevelopment components. The FRR and ERR for thedifferent plantation components as well as their Net Present Value aredisplayed in Table 3. In all cases the FRR and ERR exceed 12%, theopportunity cost of capital. The economic rates of return for teak and bambooplantations, which are the largest components in the commercial plantationprogram, are between 13% and 15%. The economic rate of return of the rootstock development plantation program, covering about 100,000 ha of degradedforest land, is expected to reach 18.6%. In the case of the ecodevelopmentprogram the estimated ERR is 32% with financial rates of returns for its

- 42 -

lAnnex 3.Page 3 of 4

multiple models ranging between 40 and 60%. The wasteland afforestationcomponent shows some of the highest ERR, ranging from 17 to 37%. Despite ofthis attractive result, this component has not been expanded further in theproject design. This is due to difficulties related to undetermined landtenure rights which complicate securing an increased area for plantation, andbecause the high returns mentioned have been achieved mainly on anexperimental basis, with no definitive evidence that they could be maintainedin larger-scale undertakings. However, the subject will be furtherinvestigated during project implementation. The lower average rate of returnfor the whole project derives mainly from the relatively modest results of theproduction forestry program but even in these components profitability ratesexceed 12%.

11. Given the large number of project components, details of calculations ofFRR and ERR have been relegated to the project file. However, examples of themost probable scenarios for two such components have been included as Tables 4and 5.

OthQr Econo mcnefita

12. As mentioned intangible benefits and externalities have not beenmeasured. Thse are likely to be substantial. By disposing of policydistorsions, the project is expected to lead to a more efficient allocation ofresources, particularly by eliminating administered prices when they are notjustifiable on equity of environmental objectives. Although the effects of theproject on market prices and efficiency in general have not been explored indetail, it is plausible that an increased reliance on market forces willenhance economic efficiency. The elimination of below miarket prices sales offorestry produce is also likely to increase Government income by a substantialamount without necessarily impairing the capacity of efficient industries toeffectively compete (See Annex 4 of the PIV, Foreatbas ndustrigs). Theseeffects will be studied and monitored during project implementation. Parallelactions leading to administrative restructuring of the Government agenciesdirectly involved in the sector is also expected to generate beneficialimpacts on economic efficiency, environment and equity.

13. The project will provide employment equivalent to some 80 millionworkdays and local income will be enhanced by about Rs 5,000 per person peryear when fully employed in the project. Indirect effects derived fromincreased local income are difficult to estimate but are likely to besubstantial. In addition, most of this additional income, both derived fromdirect and indirect employment, is expected to benefit some of the pooreststrata.

14. The reduction in the pace of deforestation and forest degradation willbring about beneficial effects on agricultural production by reducing soilerosion. The project will also result in substantial progress in managing anintegrated system of protected areas. While the benefits of biodiversity andecosystems protection and conservation are impossible to value in economicterms they are, no doubt, important.

Sensi a

15. The economic rate of return fluctuates within an acceptable range whensome of the key assumptions of the analysis are altered. Three main areas ofuncertainty are (i) forestry yields, (ii) prices of outputs and (iii) pricesof inputs, including labor.

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Page 4 of 4

16. The project implies a substantial increase in forestry yields derivedfrom better seeds, and from improved nursery, plantation and forest managementpractices. These may not be fully achieved. The sensitivity analysis indicatesthat if productivity gains were 50% below those assumed in the most probablescenario, the ERR would be 12.9%.

17. Furthermore, the project will eventually increase supply of a number offorest products. Projections of demand suggest that demand will continue toincrease at a very dynamic pace and therefore it is unlikely that theadditional supply originated by the project would depress prices. However, ifthis unlikely event took place, the sensitivity analysis indicates that withoutput prices 20% lower than those assumed in the most probable scenario, theERR wouled still be 14.5% (See Table 6).

18. Since the project will promote government sales of forestry produce atmarket prices instead of at lower, administered prices, it is important toestimate the effect of this policy change on the economic feasibility of theproject. Moving from administered prices to market sales will affect mostlythe bamboo production componeat. This is because sales of timber atpreferential prices have already virtually stopped. If bamboo continued to besold at preferential prices, say Rs. 280 per ton, the economic profitabilityof that project component would be negative for this component and the overallproject profitability would fall to 12.6%. This results illustrates theimportance, from the point of view of the Government and its revenues, ofmoving rapidly to market-valued sales of forestry produce from public lands.

19. Another general area of uncertainty is related to project costs. Asmentioned, labor and other costs may increase in real terms beyond presentlevels. If all input costs increased by 20% the ERR would be 14.6%.

20. As two or more of these unfavorable event could take placesimultaneously, the analysis explored the soundness of the project given acoincidental reduction in productivity or output prices of 50% an= an increasein costs of 20%. In this scenario, the ERR would be 12.2%, still marginallyhigher than the opportunity cost of capital of 12%. In fact, total costs wouldhave to increase by 148% or benefits decline by 60% for the ERR to fall to 12%. Changes of this magnitude are unlikely and steps have been taken tominimize these r'sks.

21. On the other hand, it is reasonable to assume that the Government wouldhave planted a certain amount in absence of the project and that thereforeonly the truly incremental output and not the full forestry output should beattributed to the project. If it is assumed that in absence of the project theGovernment would have planted 100 000 hectares (albeit at a 10% higher averagecost and with yields reaching only 60% of those expected to be generated bythe project, due to lower efficiency) the project's rate of return would be19.2%.

Annex 3

Table 1


PRTCFS USED IN PROJECT ANALXYSI(Rs)

Category Price Unit Financial Price Economic Price

Teak Poles Pole 18 14.4Teak Timber M3 4,000 3,200Teak Smallwood M3 1,000 800Bamboo Culm 3 2.4Gmellna Timber Cum 5,000 4,000GmelIna SmalIwood Cum 1,500 1,200Subhabul Poles Pole 10 8Shiras Poles Pole 15 16Babul Small Wood Cum 500 400Khair Timber Cum 3,000 2,400Firewood Cum 150 120Bhendl Pole 10 8Tamarindus Indica Kg 2 1.6Agave Ha 150 120Sabal Grass Ha 150 120Fodder Grass Ha 100 8.Leaves Ha 100 80Jatrohpa oil Kg 3 2.4Mango Frults Kg 2 1.6Moha Fruits/Flower Kg 2 1.6Neem Fruits Kg 1.50 1.2

S4urce: GOM, 1991. Despite proJect plantings, the shortage of teak, other hl value woods and baboo isnot ertetod to abate In the nxt few decades. Therefore, real price Increases wre assed for theseproduicts. For further detalls on prices used In the analysis, see Mharashtra Forestry Project.PreparatIon Rport, GO1, J 1991.

INDIA


PROJECT ECONOMIC RATE OF RETURN

t 2 3 4 57 9 9 le t

M.diul1 -X<O14633.0 -59.104.50w -23,920D -57.216.000 -24,704.000 15.36.0w0 -9.984.000 -30.0.000 -2,74.00 500,416.0W .9.534.0W 8.160.0MW 2M -3Z%0300 *14.776.0D -2.70.000 -3.5203 -9.334.0 .1.136.00 .4966 -1,896.000 -1,3bOO, IW.104.0 -2.496.0O 2.704.096"Mmdii?3X5600 -14.776K00 -2761.000 4.576.00D -9.67.00 -0 *.t,00-D 2496.0W -5.360 704.03 136.4,0D0 -449.oOD 3.440.003

MM -29X03W0 -633360 46.116.0, -29.232.00X -39.396.000 14132.OOD -22O.O 0 -24.730.500 195.1320WO -17".3 O -22ODS.0 O 395.=W0Mmii WI -*29.324060 -W0230.000 4J.440,0CO .24044DO -22.20.000 5S.0000 -19A.0000 -22.520.000 305.320.400 240.120.000 -19.330.000 433.030

M -lRM -3sXDO -7.46,8D,300 -X6D,Gow -3.2340O0 .3.420o.0 -996.A0 *2,596000 34.23.OW 21.332D000 15.332.000 19.532000 24.033000Meu n3 -36.090.560 9.s3.500 -3.4%96,a0 -3.2o,00 2.3 1.304.000 -1.09.0W -1.160.000 6.3.0o0 33.424.000 4.024.0DD 9.396.0WMmi 134 41544.000 .9.596.00o 45010W .2.452,00 0 .3.0D0 30.000 -1 0 -.1660.000 27.724.000 2.604.0O0 4.04.000 37500,0COU WAI c40.200 -46.30 -4.04.0O0 6.316.0 7.5000O -4.9s5oW -s.5s6.000 10.900.000 1.364.0OD X404.00D 1232..0O0 10o0oooMmidd W.A4 -21.714.OD -466oo0 -3A00 33m0W 2.434.000 30OO 3.z2.0W 15.210.000 6.042,.0 10.962,OW 15.24zoDD 3.2o7.OOMMWA3 -2604.32 -1l3l.10D 6S7.000 7".570 133.43.50 23.185.0W 3924s9.cW 39765.O0 37.03,C0W 39.765.000 39>9.000 39.715.000

"M|IiiFWI -31.5W0 s503. 6".27300 9.619.120 3323,20 3.716.00o 3.636.000 5.012.00W 157200D 5.012.000 3.636.0W0 3.613O20

Tab!r _ Nd hhuh -1.013.451.440 -257.013.380 -337.745.0 -97.627.330 -71.535.330 181.743.000 -23.021,000 38.099.000 614655.0DO 1.101.635.000 4137.0W 970.565.0

tL. F* uV y 0 0 0 0 6,300.0O 6300,00 630,040 6.3C.000 6.30.0oW 66300.000 6.300.OW 6.30W.OXftb Mm omo 0 0 0 0 0 0 0 0 0 0?tuaaWDnii 0 3.730.000 .3313.600 4.133.20 3.349.30 4*313.400 3.552.20 4.313.400 3.952.0 4.33.400 3.952.20 4.313.400 ;

PiA :?w wDod 0 11-4AOD0 11.440.30 12.549.400 11.547.5000 20 3131.6.0 12.940.20 11.356600 12.400 11.356.460 124MM=4kb:. WuiDhwd 0 0 9A4%0OD 13,#.1, a V.900. 47.791.30 53.306.O SU.300 5&3.0k S.43.300 53.306.500 53143303

T44iEDa U 0 12iO04000 19.70.530 22.61.00 32,477,760 57.6.36D 64.332.14o 65.921.52D 633240 65.921.520 64.332.2 32.049.520

TorTAL wm -1.013.453.440 -24.91733 -117.33 -74,73.730 -39.457A.i 2319,32D0 41.311.360 104.0D20.52 674,.37X0 1.167.556.520 106319.2o4 .52.614.520

h.j. 0f 36300D0 69900WO 72,700.00 5450OD. -6.0C0W 16.300.00 5.0Do0 5.O00D0 5,0.0PO0 S.=00.0 53.000.00 s.OW.OWhis Dmn,b~ia3 7.4a00 32.0o0 46300.0 S.00o.0 0I1O06OW I.000o 1,500.000 l.5o0. 1.0 .o so0o.50 .000 I.0.0 0J0

TuLh I6p 16500.000 3310.1000M P.50030 14.400.000 7.000.000 1.400.0W 0 0 0 0 0 03uaud.wL iAd. 5.400.000 .3 0 ,3eo S0 0 0 0 0 0 o 0 0 0

WiW 3.3000 27W.90D 33.102 71.10X00W 450UWC0W 42.700DW 0 0 0 0 0 0s twwuku 2230a000 14.9000 37.0w 13.300.000 1QO0 0 5.40 0 0 0 0 0 0

T4u 9ii 1.6178C0 145.Mo00 isu0.0 20.000 143 .0 4 O.0W= 5 0 m m0 5.20o 530.=0 5.200 S. I 0

Nil3Nlf -1.4l3133,440 .3 .370 -. 752023 -2746,570 -1.017.630 171^32D0 366111.240 10.5320 649.737.40 I.J6735550 1039.O 157,1520

EKR 15.2%

NPV Rs 974 million

INI

M-AHARASHTRA FORESTRY PROJECT

PROJECT ECONOMIC RATE OF RETURN

13 __ 14 _ i is 17 Is 1 2e 21 22 23 24 25 26 27

4,8000 -7,34.0 4.416,0 -.10.2400 .9t4.0M 0 17.260D0 9934.0D0 1.07.76000 14.116.0W0 -7 .0W -9.984.0 14.5W.0O -13.M4.000 -7.540DO 14.6O.W-3.I13. -1DOM I.104,0 .1. 0 -. 6MW 3.904.OM -2.4960 463.776.W0 0 0 0 0 0 0 0-.2.9U -. C6OW 2,504,00 -%2,60. -2.496,000 5.504.0 .2.496.000 2 82,12.0WD 4,704.00 -1.96.0DO -X496.OD0 4.64.000 -3.496.0WD -1.996.0DW 4.701W-22,000.000 D 17Xp0 4Mk32OD0 -24.7801300 -22.00.0D0 49.132.DO -2XA2S.00 -24.780OD0 40732.00 -17.OK800 -22.0.W 482360A1 -22.000.0 -17.A0 407332O..19*VDO *15,0 78120.000 -2Z CO -19.100 10232IOD -1980,m 44141W 959.72.0 -15.800 -1960.OD0 957.00 -19.40,0W -15M.80 959.7290W19.53Z.O0 A,132.00 61.4000 21.780.00 26144.000 33.Zt4.COO 2644.0W 51.740.000 0 0 0 0 0 0 04.014, 4000 9W 3.90.0 40m80 12.040 4,024.OD 7t.160W 13.624.0W 4.624.000 4.024.0OD 13-50.0O 4.024.000 4.624.00 13.624.0WD4.0 5.404b000 61^4,0 4.40.O00 4.141 72.4400 40.0O 1640 73.444.0W 5.404.0W 4.04.WO 71?1.OD 414.0W 5.404p0 72.044.0W012.364Do0 12964,A 1300414CO00 19.029.000 190.0 19.S4.tD 17.684Ow 19.020,0W 32.524.000 33J24.00C 31.124.000 3Z460.0W 32524.W 33.124.0 31124.0D15.24Z.00 1.Z.0 71. 2.2500W OD 2, 3,22.0D0 2D.2.0D0 9.45600W 1300D0 30.662.0 30,32OD 13.170.0D 3,362D0 30.62SODD 1320DO3.75. 3 .76 34V19.0 39,765M 3571.000 38.715.000 39.249,0 39.765.0W 39.765.0W 39.765.0WD 39A6.0 39.765.00 39.765.0D0 3927.W 39.765.0W

.72MA 5,012,00 22360M 50120 2.921o0 3.012.0W 3,636C00 5011, 0 0 0 0 0 0 0

44161,000 5.71000 18.115W 57531D0W 59f23,00 150361.000 59.659.00 3665 0W 1.633.131.0W 70.41 1.0D 55213.0 .69.975.000 52.1Il.WD 6t913.0DD 1.30.331.00

6.16O0 V400. 6.3t0 6.30R.000 6.33Q000 6D.300.0 630D0.000 6310 e 6.300. 6.30D.O00 63WW 630.0W 630 000 6I2413.000 2936000 2D0.10 2D.916600 20.1600 2160000 2D.160.0D 20.160,0 20.0W 29.160.000 2U60.0WD 2D.160.O0 216q.W 2D.160. 2D.160.0W

3.Xf2Co 4.313.4W0 3952,2C 4,313,4W 395X20 4.13.40D 3.95Z200 4.313.40D 0 0 0 0 0 0 011.156,6D 12,42W 11.156.010 IX0.290 11.6 1Z940.200 1 0 124912DO 0 0 0 0 0 0 05. 3065D StAW 5k306.50 848.30054 0 530 58.480 510S0 5N48.300 5.1.300 584.300 584S30 58.84.30 584830 5.848.30 58.300

60.460.0 8200952 84620 OZ.49.520 S14f60.240 819. 846D.2A0 83049.53 69.246640 626.60 6.244640 6S.246.640 698.4640 6.246.64 61.24640

1270621.0 140k43. 1.749.4.20 139.M 2 139.3.2AO 1 51.2102D 1419.240 Zo2595 1.701.37.40 13.657.40 123.459.640 1.98.10 120357.690 131.59.640 1.69.7.640

"M0DO 5.00.D sSn0 500 s,.a0 S.000 5.000.0W SAeW.0 SO 5.00D00 SJ0W00 0 51W000X S.ODO. 50.W 5.0,.XW SA.WAO

1two 00 I.500OW 500.0O 1.50D0 I.0 00 .50 1.500,0D.O0D 1.s50D 1D0AW 1.50QOD 11.500.0 1.5I WoD 1.SWXO 1.50.OD0

0 0 0 0 01 0 0 01 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 .0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 6 0 0 0 0 0 0 0 0 0 0 0

00 a :1

5s 523 o so. 0 200 1,210 5s20.000 2 S 0o0 5.200,000t 5.0000 5.2D.000 5.20.OD s.200.cWo s5 o0 5200 S s o CD X

115.421.20 135.53 1.744,445.20 13433.5 L14A.9 16.0I52 134.919.60 645.703.52 6177640 133.45740 118,259.640 1320A104 115.157.610 132,959.640 2.77ffO

4..

INDIA

MARHRASUTRA FORESTRY PROJECT

PROJECT ECONOMIC HUE OF RETURN

3, 3t, ._. 6 31 32 33 34 35 3X 37 3S 39

-3.5.US *3M. 1e 3.40%0 4..X0 -1402MD 146,000 -7ceo .131 OD l4.s- 0ooD -9.9"4.0 -7.34.000 141.0 ..*0 a 0 0 0 000

-as~is .. 486g00 17.54.00 0 0 0 0 0 0 00 004iblM .31~S.I00 43350= 0 000000 0 000.~A3P 49P009 3.56.22.000 0 0 0 0 0 0 0 00

* 0 0 ~~ ~~ ~~ ~~0 0 0 0 0 0 0 0 0 0

4.74w 4.UWO 446J24.U 000000 0 0 0 03M3 32.521100 D.w~~~m 0 0 00 0 0 0 0 0 C

34.400 3.0.90 1200 00 0 0 0 0 0 0003%um 3.4,00 39i,0 0 0 0 0 0 0 0 0 0l 0

* 00 00 0 0 0 0 0

*h.S 63510 43010 000 0 0 0 0 0 01 0

~~U4.U00 24.1~~~~~~Ub ~~16~~000 0 0 0 0 0-1$KW 109 09"A 07%4W 2401 0s KD

0 0k 0Mfi 0 0 0 00 00 0 0 01 00 0

0 0 ~~ ~~ ~ ~~0 00 00 00 0 0 00 00 0 00 03.94.300 S.S. 314.30 a 0 0 0 0 0 0 0 0 0

WO'MM .2

b'0 asuo a 0 0 0 0 0 0 0 0 0

139.40.14 12415614 ?j19".m4.I .9.94.00 -1024X%0 14116.000 .7.58410 -13$91.00 14.56)10 -9M.9840 -7.364.000 14.16.00 5.571.264.U0D

510.43 S1IMD0 510.90 5.00511 5.00010 5.00.00 510.0 5.00.00 5.00.00 5.00.00 SJ000.w S.0004 5.M0.0003.310 U03 1J.50090 3._i.00 1A0.W 1140511 U = 11400.0 .5001 J1400.00 1.sSLoO 2400M 000w 1.30.W0 .00D

*0 0 0 0 0 0 0 0 a 00o 0 0 0 0 0 0 0 0 0 00 0 00 0000 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 00 00 0 0

00 crSAIM 5=00D S.ZD.= S=wo S.Min S.ZDJM S=ODD 5=00D (D~~~~~~~~~~~~~~00 14 0

0114.3130 11.5.1 .1.4.4 1.610 -5.440.m 9.91.00 -12.78410 -19.184.000 9.300.4 -25.14O00 -12.7310 9.616.000 SOKOK.00 D 23

o o e o o o o o o o o o o~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t

- 48- Annex 3Table 3

INDA


RATL-s OE RnTTJR

COMPOQNENT/MODEL u En Economic NPV(Rs in Millions)

Production Forestry

Model FPI 17.3 15.0 153Model FP2 18.4 15.7 32Model FP3 19.3 16.8 52Model FP4 16.1 13.4 73

Rehabilitation of Degraded Forest Land

Model RDF1 21.6 18.6 556Model RDF2 20.0 17.1 35Model RDP3 13.0 12.4 3Model RDF4 17.6 16.8 54

Wasteland Afforestation

Model WAI 18.5 17.0 41Model WA2 22.3 20.9 45Model WA3 38.5 36.9 167

Forest and Wasteland Developnent

F&W1 20.5 15.3 6

INDIA


FINANCIAL ANALYSIS

2 3 4 5 6 7 a 9 10 11 12 13 14 15 16 17 iS 19 20 21 22

Lab. 5.54t 1.670 554 1.5 420 150 75 zo 142 767 75 183 75 100 158 100 75 183 75 933 158 t00IGmWM s5 2 2 85 2 177 2 85 177 2 2 260 2 2 177 85 2 377 2 85 177 2t _W i 0 0 0 SD 0 150 0 50 133 1.j83 0 217 0 50 167 S0 0 217 0 1.717 167 50o _dnb 260 122 31 S1 25 10 25 25 25 500 25 25 25 25 25 25 25 25 25 I.00O 25 25

Pa_ lW 0 0 0 0 1o 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10

Tlde 4A4 t794 XI7 Il 448 497 112 270 487 2662 112 095 112 187 537 210 112 612 112 3.745 537 187

ran 0 0 0 0 0 0 0 0 IIOD0 0 0 0 0 0 0 0 0 0 36.000 0 0Slwmi 0 O 0 0 0 600 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Ti. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0A" 0 0' * 1o 0 0 350 0 IU0 0 150 0 350 0 150 0 ISO 0 150 0 150 0 150

G= la0 100 1D00 150 150 I0 1501 I0 150I 150 15 0 ISO 150 150 ISO 150 150 150 150 150 150 00 0 0 0 0 450 0 0 6C0 0 0 1.010 0 0 1.000 0 0 La20 0 0 1.200 0

IM) 18 100 100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Tosum sr D mD 300 150 1.350 150 3a0 750 1.300 150 1.300 150 3w 1.150 300 150 1.500 150 363 1.350 350

IWrUUNUII *4343 4534 .337 *t.504 .253 853 3S 30 263 15.6 38 605 38 113 613 30 38 as 38 32555 813 113

EU 17*U

4183I o0

INDIA


ECONOMIC ANALYSIS

*_ . 2 3 4 5 6 7 * 9 30 11 12 13 14 i5 16 17 18

1*m 3.39 539 393 113 113 175 75 125 782 358 75 1.061 75 125 lx,s 125 7n 1,325d 437 2 2 as 2 176 1 4 176 1 1 259 1 1 176 84 3 176

T _ms 133 0 0 50 0 150 0 50 1.413 S17 0 1.924 0 50 2.300 50 0 2450KM w10 0 0 0 0 10 10 10 10 10 10 30 10 10 10 10 10 10

1 Wmeb 3"7 541 m3 261 115 Sl w6 269 2381 86 6 3.254 86 136 3.711 269 86 3.961

_ ~ :,*- 0 0 0 0 0 0 0 0 9C0 0 0 0 0 0 0 0 0Feb :.0 0 0 0 0 0 0 0 0 3.000 0 0 0 0 0 0 0 0

AWw 0 0 0 150 0 150 0 150 0 150 0 150 0 150 0 150 0 150 IG lOD310 0 1 300 ISO 150 150 150 150 150 IS0 150 150 150 150 IS0 150 ISO 150

0 0 0 0 0 450 0 0 6360 0 0 1.6W 0 0 13,800 0 0 14.0001MWBu 0 0 0 0 0 0 0 0 0 0 0 0 n 0 0 0 0 0

Told w mp = 700 100 IOD 300 W5 750 150 300 6.510 4.*20 150 8.9M0 150 300 13.950 300 150 14.300

Of3V~t(Wt El -2,S43 *.35 -. 4 42 2S 191 SI 25 3.3D3 2.651 51 45S1 51 91 B.191 25 51 5,271

?UsYB rw7(P) 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 25C 250

O%;}I1Tfl4 f *2,795 43 4D *- *59 -199 *225 3.053 2.401 -199 4.331 -199 -359 7,941 -225 *199 8.021

00 Or 0

CD

0O '3

INDIA

MAHARASHTRA FORES'¶RY PROJECT

ECONOMIC ANALYSIS

i9 :1 D a 2 a 24 ,5 2S a 2 29 3

7 51 3455 325 75 1,55 75 125 1J455 125 75 2X590I 66 374 1 1 259 1 3 176 *4 1 1760 96 270 D 0 2,410 0 50 2,790 5D 0 4,90

10 to 0 10 30 1 !0 10 30 t0 10 10 10

as 1A 440 in U UN a 186 4.401 269 S6 7,756

O 111 0 . 0 0 0 0 0 0 0 0 4.A3fi U'O E~W a 0 9 0 0 0 0 0 0 00 UO0 0 30 0 150 0 5D 0 150 0 150

,s 3 90 1S0 in 150 150 J50 I50 I50 I50 350o o lew o 0 l4w0

0 0 1W 0 0 5 0 0 16560*O 0 0 0 0 0 0 0 0 0 0 29,700

ISO 7.90 16i710 MD 350 lowD W 340 1.710 300 150 50.56

St 5. 93 1 9 53 90 51 91 n 25 51 34,47

2% SS lb 250 20 25 D 250 250 250 23D a2 2sD 250

1 4,35 9.9 .9 -1" 97 -1m9 .59 97 -20 -199 3397

0IDA)

INDIA


ECONOMIC ANALYSIS

23 2 U : 27 22 23 30 31 32 33 34 35 36 37 38 39 40

75 1to 73 10 153 n5 73 I.5 75 1O US IM 75 133 75 ID S 3."s

2 * 2 2 17 as 2 177 2 a5 177 2 2 28) 2 2 17m 35

0 217 0 so 167 50 0 2p5 0 50 161 50 0 217 0 50 167 7.746

25 25 2S 25 25 23 25 VW 25 25 25 23 25 25 25 25 25 1.0o

o 10 t 10 tO 10 10 10 1 0 10 10 10 10 10 10 10 10 10

112 - III la 3o 112 5= 512 270 5o 1IV 112 Wl 5 112 137 537 1279.94-n

a 0 0 0 0a0a 0 0 0 0

* * * o@ o 0 o 9 0 0 0 0 0 0 0 0 0 o 44.791

* 0 0 0 0 0 0 23.72 0 0 0 0 0 0 0 0 0 141,3w

0 13 0 13 0, I0 0 13 0 1 oD 0 1 e 0 13 0 15D 0 150

13 13 US 13 1 13 13 10 130 .1U 13 13O 1S0 ISO 15 150 ISO 150

O LO 0 0 2 0 0 .W 0 0 1.S 0 0 1,3W 0 0 132.0 0

0 0 0 0 0 0 0 0 0 a 0 0 0 0 0 0 0 0

US 1.35 JU 3m 1.33 35 13 55.521 11 3 1.3150 3c ISO 1, 1S 3W 1-350 1331

3 m 3 11U 313 30 3 49.919 38 30 t31 113 3 a5 38 113 313 173.35

(0 I-z 1¢0

iob

-53 - Annex 3iNnTa Table 6

MAHARASTHRA FORESTRY PROJECT

SENSITIVITY AALYSIS

Percent Cost Increase

0 10 20

Percent Benefit Decrease 0 15.2 14.9 14.620 14.5 14.2 13.950 12.9 12.5 12.2

Annex 4

INDIA


SCHEDULE OF DISBURSEMENTS

FY/Semester Disbursement Cumulative % of Total(US$ million) Disbursement Credit

(US$ million)

FY 92 - I 2.0 2.0 1.6

FY 93 - I 3.2 5.2 4.2

- II 3.5 8.7 7.0

FY 94 - I 3.5 12.2 9.8

- II 7.1 19.3 15.6

FY 95 - I 7.1 26.4 21.3

II 10.9 37.3 30.1

FY 96 - I 10.9 48.2 38.9

- II 13.8 62.0 50.0

FY 97 - I 13.8 75.8 61.1

- 1I 13.9 89.7 72.3

FY 98 - I 13.9 103.6 83.519.0 122.6 98.9

PY 99 - I 1.4 124.0 100.0

- 55 -

Page 1 of 4

MAMABASHTRA EOBESTRY PROJEC

SUPERVISION PLAN

1. Bank Su oervisLLk Inut. The supervision plan for the MaharashtraForestry project will be designed in a manner which recognizes that majorproject components (Nursery Improvement, Village Eco-development etc.) will beimplemented under a flexible time schedule. To a great extent each majorcomponent is an independent entity which varies with respect to critical datesand significant events. It is unrealistic to expect each major component tobe prepared for supervision missions simultaneously. Thus, a blueprintapproach to supervision based on site visits at pre-fixed intervals is likelyto be ineffective and is not recommended. Nevertheless, as a minimum anannual review of each project component will be prepared and both a mid-termproject review and project completion report will be prepared during thecourse of the project. Other specific periodic reports will be prepared inaccordance with guidelines laid down in the project start-u:p workshop. Anindicative supervision schedule and the staff inputs required are indicated inthe sections below which reflect the concern that supervision be carried outwith respect to the variable implementation schedule of each major component.(The staff inputs required for field supervision indicated are additional toregular supervision needs for the review of progress reports, procurementactions, correspondence etc.)

2. Borrowers Contxibution to SuR_xri_ion Periodic progress reports areto be prepared and submitted by the borrower. Overall responsibilities forproject monitoring and evaluation and progress reporting will reside with theProject Coordinating Unit (PCU). The forest administration will maintainrecords of the project's implementation progress regarding physical andfinancial targets. To assist in project reporting the PCU will establish acore team of specialists to oversee the development of a functional ManagementInformation System and to ensure the timely completion of project supervisionreports. The content and form of these supervision reports will be determinedduring the project start-up workshop. Timing of the report submissions willalso be finalized during the project start-up workshop. Input for monitoringand evaluation will be provided from directors of individual projectcomponents based on a management information system which will be establishedfor the project. The core staff team within the PCU will also overseecoordinate and facilitate supervision activities. The PCU will be responsiblefor coordinating arrangements for Bank supervision missions and for provdinginformation required by missions. Mission briefing meetings on arrival willnormally be carried out by the PCU whereas the wrap up meeting will be chairedby the Secretary of Forests.

- 56 -

MATIAASRAFOESTIRY PROJEC

Tble of ntts

Annex 1 Forestry in MaharashtraAnnex 2 Forest Policies and LegislationAnnex 3 Research, Extension and Technology ApplicationAnnex 4 Forest-based IndustriesAnnex 5 Non-wood Forest ProductsAnnex 6 Marketing ArrangementsAnnex 7 Village Eco-development and Joint Management of Degraded

Forest AreasAnnex 8 Biodiversity ConservationAnnex 9 Resource Assessment and MIS/GIS DevelopmentAnnex 10 Personnel, Training, Publicity and ExtensionAnnex 11 organization and ManagementAnnex 12 Proposed Treatment ModelsAnnex 13 Project Cost Tables

- 57 -

Annex 7Page 1 of 2

INDI

MAHIARSHTRA FORES:CTRY PRJEC

DOCUMZNTS AVAIT.ARLE IN PROJECT FILE

PROJECT IMPLEMENTCATTON VOLUIMS

Projecat graparation Working DgrAUWn.=:

- Maharashtra Forestry Sector Project (2 Volumes) - Preparation Report(Pune - June 1991).

- Plantation Aspects - July 1991, Prepared by B.R. Poole.

- Report on Forest Industries - Prepared by Karl H. Kerr.

- Study of Forest-based Industries in Maharashtra. Prepared byMaharashtra Industrial and Technical Consultancy organization Limited.March 1991.

- A Review of Timber Supplies Status and Trends of the Forest Industriesand a Recommended Role for the Training Center for Mechanical WoodIndustries. Draft October 1990. Prepared by Wendell P. Clark.

- Consultancy Report on Forest Resources and Forest Managemnent informationSystems. Prepared by INTERFOREST AB (J. Attebring), January 1991.

- Study Report on Wastelands Availability and Production Potential inMaharashtra. Prepared by Agricultural Finance Consultants Limited,April 1991. Two Volumes.

- A New Approach Ensuring Conversion of Wastelands into Productive Assetsof Renewable Energy. Prepared by Vinayak Patil and Kanwarjit Singh.Undated.

- Oil Gloom to Oil Boom. Jatropha Oil Pragmatic Alternative. Prepared byVinayak Patil and Kanwarjit Singh. Undated.

- Jatropha Curcas. Multi-Purpose Plant and Source of Energy for theFuture. Prepared by Edgar Munch and Joachim Kiefer. Undated.

- A Report on Monitoring Survey of Trainning and Visit Project inMaharashtra 1988-89. Prepared by M&E, Department of Agriculture. Pune.July 1990.

- Wildlife Protected Areas and Conservation Planning in Maharashtra. AConsultancy Report. Prepared by W. A. Rodgers. Undated.

- Report on the Workshop on the Role of NDOs and Women and JointManagement of the Greater Forest Areas and Village Eco-development.April 1991. Prepared by M4ITCOM.

- Role of Cooperatives in Social Forestry. Prepared by KirloskarConsultants Limited. Pune. September 1990.

- 58 -

anne2Page 2 of 2

Alternative Sources of Energy and Fuel Savings Devices. Prepared byKirloskar Consultants Limited. Pune. September 1990.

Availability of Marketing Avenues for Social Forestry Products.Prepared by Kirloskar Consultants Limited. Pune. September 1990.

Village Eco-development. A Strategy for Ecological Regeneration andForest Protection. April 1991. Prepared by the Institute for RuralDevelopment. Center for Development Studies and Activities. Pune.

Village Eco-development - Part II. A Methodology for Operationalizingthe Action Plan. June 1991. Prepared by the Institute for RuralDevelopment. Center for Development Studies and Activities. Pune.

Status on Forest Research on Maharashtra. Prepared by CCF (Research andEducation) Nagpur, 1990.

Background Paper on Activities of Directorate of Horticulture. Pune.Undated.

Background Paper on: a) Forest based Industries in Maharashtra; b)Colection of Minor Forest Produce in Maharashtra; and c) Wood and otherForest Products Substitution in Maharashtra. Prepared by PCCF. Nagpur.Undated.

Review of Forest Technology in Maharashtra. Prepared by G. F. Redhead.November 1990.

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