Document of The World Bank FOR OFFICIAL USE ONLY Report No. 17028 IMPLEMENTATION COMPLETION REPORT INDIA NATIONAL SERICULTURE PROJECT (LOAN 3065/CREDIT 2022-IN) SEPTEMBER 11, 1997 Rural Development Sector Unit South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Indian Rupees (Rs.) Rs. 14.6 = US$1.00 (Appraisal: 1989) Rs. 26.0 = US$1. 00 (Intervening years: 1988-96) Rs. 35.0 = US$1.00 (Completion Year: 1996) WEIGHTS AND MEASURES 1 hectare(ha) = (10,000m2) = 2.47 acres I kilogram (kg) 2.205 pounds 1 kilometer (km) = 0.6214 miles I meter(m) = 3.281 feet 1 square kilometer (ki2) 0.385 square miles FISCAL YEAR OF BORROWER April 1 to March 31 Vice President: Mieko Nishimizu Director: Edwin Lim Sector Managers: Ridwan Ali/Mchael Baxter Task Manager: M. Balasubramanian FOR OFFICIAL USE ONLY ABBREVIATIONS AND ACRONYMS BA Beneficiary Assessment CRC Chawki Rearing Center CSB Central Silk Board CSRTI Central Sericultural Research and Training Institute CSTRI Central Silk Technological Research Institute DFLs Disease-Free Layings DOS Department/Directorate of Sericulture EPC Enterprise Promotion Cell GOI Government of India ICR Implementation Completion Report IDBI Industrial Development Bank of India J & K Jammu and Kashmir KSSDI Karnataka State Sericulture Development Institute KSP-I Karnataka Sericulture Project (Cr. 1034-IN) LDB Land Development Bank LSP Licensed Seed Producers M&E Monitoring and Evaluation MIS Management Information System MOT Ministry of Textiles NABARD National Bank for Agriculture and Rural Development NGO Non-governmental organization NSP National Sericulture Project RSRS Regional Sericulture Research Station SAR Staff Appraisal Report SDC Swiss Development Cooperation TSC Technical Service Center WB World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. GLOSSARY Bivoltine Race of silkworm from temperate regions which breed twice a year and whose eggs go through hibernation (dormancy) period. Charka Simple, hand-driven silk reeling machine with one basin and four to six ends. Chawki Young silkworm up to the age of about 12 days after hatching. Filature Large-scale, modern reeling factory. Grainage Establishment where silkworm eggs are produced through mating of worms and multiplication process. Pl/P2/P3 Seed Farms Farms in which the first stages of multiplication of eggs is done from "parent seed." IMPLEMENTATION COMPLETION REPORT INDIA NATIONAL SERICULTURE PROJECT (Loan 3065/Credit 2022-IN) . TABLE OF CONTENTS PREFACE ....................................................... i EVALUATION SUMMARY ....................................................... ii PART I: PROJECT IMPLEMENTATION ASSESSMENT .......................................1 A. Project Objectives ........................................................1 B. Achievement of Project Objectives ........................................................ 3 C. Implementation Record .........................................................9 D. Project Sustainability ....................................................... 10 E. Bank and Co-Financier Performance ....................................................... 11 F. Borrower Performance ....................................................... 13 G. Assessment of Outcome ........................................................ 13 H. Future Operations ....................................................... 14 I. Key Lessons Learned ....................................................... 15 PART II: STATISTICAL TABLES Table 1: Summary of Assessments ................................................. 17 Table 2: Related Bank Loans/Credits ................................................. 19 Table 3: Project Timetable ................................................. 19 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual ........ 20 Table 5: Key Indicators for Project Implementation ...................................... 21 Table 6: Key Indicators for Project Operation ............................................... 22 Table 7: Studies Included in the Project .................................................. 22 Table 8A: Project Costs ................................................. 23 Table 8B: Project Financing ................................................. 24 Table 9: Economic Costs and Benefits ................................................. 25 Table 10: Status of Legal Covenants ................................................. 26 Table 11: Compliance with Operational Manual Statements .......................... 33 Table 12: Bank Resources: Staff Inputs ................................................. 33 Table 13: Bank Resources: Missions ................................................. 34 APPENDICES A. Mission's Aide Memoire B. Borrower's Evaluation Report on Project Completion i IMPLEMENTATION COMPLETION REPORT INDIA NATIONAL SERICULTURE PROJECT (Loan 3065/Credit 2022-IN) PREFACE This is an Implementation Completion Report (ICR) for the National Sericulture Project in India, for which Credit 2022-IN in the amount of SDR1 13.8 million (US$147 million equivalent) and Loan 3065-IN in the amount of US$30 rnillion were approved on May 18, 1989 and made effective on September 14, 1989. Co-financing for the project was provided by a grant from the Swiss Development Cooperation (SDC) in the amount of Sfr40 million (US$25 million equivalent). As part of the funds redeployment exercise, the full loan amount of US$30 million was canceled in December 1991 followed by three other cancellations of the IDA Credit: SDR10.570 million in May 1993; SDR6.425 million in July 1995; and SDR14.5 million in March 1997, for a total of SDR31.495 million (US$ 43.8 million equivalent). The Credit was closed on December 31, 1996 as scheduled. Final disbursement was made on June 12, 1997 and the revised Credit amount of SDR82.305 million (US$103.2 million equivalent) was fully disbursed. The ICR was prepared by an FAO/CP mission' which visited India in January/February 1997. It was finalized by M. Balasubramanian, Task Manager, Resident Staff in India, and reviewed by Herman van Wersch, Principal Operations Officer, and Ridley Nelson, Principal Agricultural Economist, Rural Development Sector Unit, South Asia Region, and incorporates changes resulting from internal Bank review. This ICR is based on a review of Staff Appraisal Report (SAR), legal documents, supervision reports and other material in the project file as well as field investigations, and discussions with a wide range of project participants. SDC expressed satisfaction that the ICR fully reflects their concern and did not feel the need for a separate contribution to the report. I Messrs. N.D. A. Hameed (Mission Leader), A. Morton (Sericulturist) and N. Storr (Economist). ii IMPLEMENTATION COMPLETION REPORT INDIA NATIONAL SERICULTURE PROJECT (Loan 3065-IN/Credit 2022-IN) Evaluation Summary Introduction. 1. The involvement of the Bank in the Indian Sericulture Sector began in 1980 when it approved the Kamataka Sericulture Project (KSP-Credit 1034-IN) for a Credit of US$54 million. The National Sericulture Project (NSP), which is the subject of this Implementation Completion Report (ICR), is a follow-up to the KSP, extending coverage to India's four other major sericulture states (Andhra Pradesh, Jammu and Kashmir, Tamil Nadu and West Bengal) and supporting pilot developments in twelve other states where sericulture is a relatively new activity. It has been implemented since 1989 with World Bank (WB) and Swiss Development Cooperation (SDC) assistance. Project Objectives. 2. The NSP aimed at assisting sericulture development in India by supporting an important expansion phase requiring improvements in productivity, product quality and support services and increased private sector involvement in the industry. As appraised, the project included seventeen components (para. 3 of main text) and the project area covered the five major silk producing States which together account for over 95% of raw silk production in the country as well as twelve other "pilot" States. 3. The project focus, addressing the main constraints that affect the sericulture sector in India, was appropriate. Overall, the quantitative targets were realistic. But the target for bivoltine silk production was based on over-optimistic assumptions of availability of proven technical packages which offered attractive returns to farmers. Inadequacies in post-cocoon operations warranted higher priority even at the time of identification and appraisal but the project objectives did not sufficiently address them. Implementation Experience and Results. 4. The project has contributed to a substantial increase in raw silk production, although the increase is not to the level estimated at appraisal; this increase has occurred largely through improvements in productivity; most of the infrastructure, equipment and skills base anticipated at appraisal are now in place to facilitate further increases in production and distribution of better quality silkworm seed in future; and the project has iii also contributed to generate additional employment for about half a million full-time workers (close to appraisal estimate) most of whom are women, and to enhance private sector participation in seed production. The cocoon market infrastructure established through the project has facilitated better marketing and increased market transparency. The main shortcomings have been the failure to bring about significant increase in commercial bivoltine cocoon production considered essential to improve the quality of Indian silk, and the disappointing outcome of pilot operations ambitiously planned for execution in twelve States of the country. 5. Given the strong and increasing domestic demand for silk, and comparative advantage features of sericulture including its potential to contribute more quickly to employment and income generation, the Government has expressed its commitment to provide continuing support for the sector through additional investments under the Ninth Five Year Plan and thereafter. However, an issue which needs to be addressed relates to the presently existing large number of central and state level staff positions which place considerable strain on Government resources. Consideration should be given to measures aimed at progressively devolving this public sector responsibility to the private sector. 6. There is considerable scope for further improvements in the productivity levels of mulbeny and cocoon production. Priority should be given to promote the adoption of already authorized improved mulberry varieties and silkworm races, and support the research needs of the sector to enable it to become more modern and competitive. To ensure environmental sustainability of the sector, attention must be paid to better management of water, soil and fuel resources. 7. The final cost of the project was estimated at Rs.7,014.5 million compared to Rs.5,548.7 million at appraisal. Due to the sharp decline in the exchange rate of the Rupee, US Dollar costs were significantly less than appraisal estimates - US$248.5 million compared to US$347.1 million. The re-estimated ERR for the project is 14% compared to 32% at appraisal. 8. The key factors which affected achievement of major objectives included the outbreak of the silkworm disease pebrine in 1991 and the fall in price of imported silk in 1992/93. These caused many farmers to suffer losses, and led to widespread uprooting of mulberry, decline in sericulture activity, and the consequent reduction in raw silk output. Factors subject to Government and implementing agencies control included failure to amend legislation to enable public sector grainages to achieve full recovery of the costs of the inputs and services provided. 9. The performance of the Bank in respect of identification was marginally satisfactory. Its preparation performance, as well as that of the Borrower's, was deficient. Appraisal is rated satisfactory and supervision was satisfactory in large part due to staff continuity by both the Bank and the co-financier. The Borrower's performance in implementation and covenant compliance was generally satisfactory. iv 10. The project contributed to the overall development of the sericulture sub-sector and has achieved a number of its intended objectives. The project's achievements are likely to be sustained. However, the major challenges will be to devolve some of the public sector responsibilities to the private sector including reduction of its present high recurrent costs e.g. staff salaries, and improvement of the financial performance of the public sector grainages. 11. The overall project outcome is assessed to be satisfactory. Summary of Findings, Future Operations and Key Lessons Learned 12. The support provided through the project has helped to establish a sound base for an expanded and sustainable sericulture development program in the country. Production infrastructure, equipment and human resources have been significantly upgraded through project assistance. Encouragement given to enhance private sector participation has contributed to the emergence of a large number of successful licensed private seed producers intending to re-invest for expansion of their seed production and distribution activities. High overhead costs and staff expenses, poor capacity utilization and unsatisfactory revenue collection are some of the key problems of public sector operated grainages which need to be addressed. Measures adopted to enhance the role of women in sericulture development (para. 18a), though successful, have covered only a small proportion of the project area population. There is a need to expand these programs in the operational period. The project experience has shown that while non-governmental organizations (NGOs) could make significant contribution for activities such as community mobilization, group formation, training, etc., the role that they could successfully play in projects which require technical expertise and business management experience is limited. 13. The main lessons learned (see Part I) are: (a) Future Operations. In the traditional silk producing States, a more cost effective way of increasing and sustaining raw silk production would be through raising productivity. In the States with potential for producing bivoltine silk2, expansion of mulberry area should receive greater attention combined with efforts to improve quality. (b) Project Design and Appraisal. The less than satisfactory performance ofsome sub-components (e.g. bivoltine production / pilot States program) of the project confirms the need for (i) greater involvement of stakeholders in all stages of project formulation and implementation to enhance ownership; and (ii) the availability of on-farm validated technologies to be promoted, to ensure setting of achievable production targets. 2 e.g. in UP and Kerala. v (c) Project Implementation and Supervision. There have been considerable delays in procurement and implementation of infrastructure components. To minimize such delays in future, the Bank and the Borrower should ensure that detailed equipment list and relevant designs, appropriate contract packages and tender documents are completed prior to Negotiations. Whilst the supervision missions identified and recommended measures to address key constraints, lack of prompt follow-up minimized their effectiveness. The project would have benefited considerably by having a concurrent Monitoring and Evaluation (M&E) system through a third part agency which would provide both qualitative and quantitative feed-back to project management based on project progress and implementation experience. (d) Extension. The project emphasis was on strengthening the existing sericulture extension system and its approach. The project experience has shown that the most effective extension agent is the progressive and successful farmer. Greater emphasis should therefore have been placed upon promoting farmer-to-farmer transfer of technologies. (e) Research. In addition to provision of infrastructure and equipment for research and development, it is necessary to provide project support (i) for improving/strengthening human resources for research management, and (ii) for the establishment of performance-related career structures. To maximize returns on investment in research infrastructure, it is necessary to pay greater attention to develop demand-driven research projects and timely deployment of research personnel. (f) NGOs. It is important to ensure that technical capabilities of participating NGOs are thoroughly assessed at appraisal. Adequate provision should be made in the project for imparting requisite training to such NGOs prior to their deployment. (g) Social Assessment. The project experiences reinforced the need for conducting social assessment prior to appraisal to identify issues such as child labor and develop appropriate strategy to address the relevant issues. IMPLEMENTATION COMPLETION REPORT INDIA NATIONAL SERICULTURE PROJECT (Loan 3065/Credit 2022-IN) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES Statement of Project Objectives 1. The National Sericulture Project (NSP), implemented since 1989 with World Bank (WB) and Swiss Development Cooperation (SDC) assistance, represents a major effort to support sericulture development in 17 States of India. It was designed to provide a basis for India to exploit its natural advantage in silk production and long-term potential for further growth, without incurring unsustainable demands on the state and central budgets. The project aimed at strengthening and expanding the sub-sector through increases in production, improvements in productivity, product quality, human resource base, support services and increased private sector involvement in selected aspects of the industry. Evaluation of Project Objectives 2. The focus of the project, addressing the main constraints that affect the Indian silk sub-sector, was appropriate. Overall, the quantitative targets were realistic, being obtainable through relatively modest improvements in productivity. But the target for bivoltine raw silk production (1,000 tons) was clearly based on the assumptions that (a) technical packages had been field validated; and (b) these packages offered an economic opportunity to which farmers could respond. There is evidence that neither of these assumptions was justified at the time of appraisal; in fact, the SAR made specific reference to the technical and market constraints which continue to inhibit the expansion of bivoltine sericulture in India. In addition, it is not clear that the implied focus on production of raw silk per se was appropriate. The alleviation of other constraints affecting the development of the Indian silk sub-sector, such as regulations which have negative impact on development, and the inadequacies in post-cocoon operations, may have warranted higher priority even at the time of identification and appraisal. 2 Project Components 3. As appraised, the project comprised seventeen components. In terms of base cost, the most significant components involved (a) financing of 53 new Commercial Seed (F1) Grainages and strengthening of 13 existing government grainages, augmented by measures designed to promote private sector grainages; (b) establishment and operation of 25 new Basic Seed (silkworm egg) farms and strengthening of 100 existing farms; (c) strengthening of extension services provided by the state Departments of Sericulture (DOS) through financing incremental extension staff, operating costs for a total of 441 Technical Service Centers; and (d) expansion, improvement and strengthening of research and development facilities at the Central Silk Board (CSB) and in the states of Karnataka and Andhra Pradesh. The remaining components included assistance to private mulberry nurseries and young silkworm (chawki) rearing centers; establishment of cocoon markets, cocoon drying chambers, silk exchanges and testing houses; expansion and strengthening of training facilities; provision for technical assistance; funds for advances to reelers and for equity participation in joint ventures; financing of women's groups and NGO activities in sericulture; promotion of smokeless stoves in reeling units; and financing of improved project administration facilities and incremental costs of implementing and supervising the project. 4. The project activities were planned for implementation over a seven-year period from 1989. Total project cost was estimated to be Rs.5.6 billion (US$347.1 million). Of this, 51% was to be financed by the IBRD and IDA, 7.2% by the Swiss Development Cooperation (SDC), 30% by commercial and cooperative banks with refinancing support from the National Bank for Agricultural Development (NABARD) and the Industrial Development Bank of India (IDBI), and 11.8% by the Government of India (GOI) and participating State Governments. It was estimated that the value of the additional raw silk produced as a result of the project would have an annual value of US$162 million in 1989 prices, and that the project would have an overall ERR of 32%. Project Design 5. Despite its complexity, the project design was generally appropriate. It built to a large extent on the experience gained from the Karnataka Sericulture Project (KSP-I, Credit 1034-IN, completed in 1988), extending coverage to India's four other major sericulture states and supporting pilot developments in an additional twelve states where sericulture is a comparatively new activity. However, in some respects, the project design did not take sufficient account of the lessons learned from KSP-1. These include (a) recognition of the inherent weakness of supply-side approach to the promotion of sericulture, especially bivoltine sericulture; (b) the need to identify and address the constraints affecting post-cocoon operations; (c) the need to prepare detailed specifications for equipment required before implementation and to closely monitor the procurement process to avoid implementation delays; and (d) that much longer time is required for the establishment of infrastructure, staff positioning, training and the 3 clearance and distribution of new varieties of mulberry and silkworms. Some of the potential risks (e.g. availability of proven technical packages and financial attractiveness of bivoltine silk production to farmers) were underestimated. Moreover, even at the time of appraisal, the historical volatility of the price of raw silk in the international markets and the consistent failure of established institutions to accurately predict the market dynamics were well known. The rapid increase in the international price of raw silk was clearly fueled by market speculation, and it would perhaps have been appropriate for the project design to have been based upon more conservative estimates of both the price of, and the demand for, bivoltine raw silk. B. ACHIEVEMENT OF PROJECT OBJECTIVES 1 Key Data and Indicators 6. The SAR specified the key data and indicators to be included in the progress reports of the participating states and the CSB. In addition, it specified that monitoring and evaluation under the project would consist of an extensive program of beneficiary assessment (BA) supplemented by benchmark socio-economic surveys undertaken in each of the participating states at the beginning, mid-project and at the end of the project. More than 80 BA studies were undertaken. Most of them had a qualitative focus providing insights into development issues. But their relationship and usefulness to the overall monitoring and evaluation of the program were not satisfactory. The benchmark surveys have not been undertaken. The absence of a comprehensive baseline survey and any systematic follow-up means that an objective and quantitative assessment of the changes that have occurred during the project period is extremely difficult. Identification of changes due to the project interventions and changes that were due to external circumstances is confounded by the lack of with-project and without-project sample frames in the design of the periodic reporting of key sericultural indicators. Moreover, since April 1991, successive supervision missions have commented on the apparent lack of reliability and internal consistency of these data. The ICR Mission had therefore based some of its findings and conclusions on supplementary information from: (a) the conclusions of a workshop organized with the assistance of SDC for providing a forum to discuss the project results (January 29-31, 1997); and (b) mission estimates derived from field investigations, discussions with a wide range of project participants and a review of relevant documents. Overall Achievement 7. Despite the reservations about the adequacy of quantitative data expressed in para. 6 above, the completion review has been able to establish that the project has contributed to the overall development of the sericulture sub-sector and has achieved a number of its intended objective. In particular, (a) most of the infrastructure, equipment and skills base anticipated at appraisal are now in place; (b) the project has contributed to an increase in raw silk production of 4,191 tons from 8,528 tons in 1988/89 to 12,719 tons by the end of 1996, which although substantially less than anticipated at appraisal (increasing from 9,220 tons to 17,140 tons) nonetheless represents a significant increase 4 particularly since international prices were less than half those projected at appraisal; and (c) the project has also contributed very substantially to employment associated with the increased raw silk production, of about 500,000 full-time workers most of whom are women (compared to 518,000 estimated at appraisal). Welfare has visibly improved in sericulture villages. The main shortcoming has been the failure of the project to bring about a significant increase in the production of the commercial bivoltine hybrid cocoons that were considered essential to improve the quality of Indian silk. Commercial Seed (F1) Grainages 8. At the beginning of the project, the production of commercial seed mostly took place in public sector grainages that lacked consistent standards of quality and disease control and failed to recover their operating costs. Owing to substantial delays in civil works and procurement, little improvement had occurred by 1991/92 when the incidence of pebrine increased alarmingly. The resulting crop losses were a cause of the mass uprooting of mulberry that occurred throughout the traditional silk producing states. This negated the horizontal expansion of sericulture brought about through the project and consequently depressed demand for silkworm eggs, especially in Tamil Nadu. However, with the completion of project implementation, most of the public sector grainages are now producing seed of an acceptable quality and some of those operated by the CSB, Andhra Pradesh and Tamil Nadu have generated profits. Although there remain concerns about poor capacity utilization and consequently high overhead and staff expenses, it seems clear that sufficient infrastructure and trained staff are now in place to facilitate a substantial increase in production and distribution of better quality silkworm seed during the operational phase of the project. 9. The establishment through the project of private sector grainages (licensed seed producers [LSPs]) appears to have been very successful: for example, there are more than 900 LSPs in Karnataka and at least 200 in West Bengal alone. In fact, because of the large number of LSPs it is probable that total seed production and distribution has been significantly under-recorded, The mission estimates that the total annual seed consumption is currently about 360 million disease-free layings (dfls), with license seed LSPs accounting for about 70% of the production and distribution of commercial crossbreed seed. Basic Seed Farms 10. During the early years of the project, little progress was made towards the establishment of new basic seed farms and the strengthening of existing farms, and the procedures for seed selection and disease control remained unsatisfactory. The massive pebrine outbreak of 1991/92 seemed to have stemmed mostly from these basic seed farms and demonstrated the urgent need to improve the physical infrastructure and operating standards at P3 and P2 farms, to prevent transovarian infection. By 1994 significant improvements had occurred at the basic seed farms but the quality of P1 seed cocoons produced by farmers in the designated seed areas was poor. Subsequently, further improvements in the quality of basic seed were achieved through (a) the CSB's decision to 5 entrust the breeders with basic stock (P4) maintenance to ensure regular infusion of fresh material; (b) the adoption of improved stock selection procedures focused on survival characteristics and stabilization of race cocoon characteristics; and (c) the introduction of systematic selection procedures based on multiple selection indices. Although there remain concerns over capacity utilization and coordinated disease monitoring (with pebrine recently reported in West Bengal), it is clear that the project has led to a significant upgrading of basic seed production. Technical Service Centers and Extension 11. Technical Service Centers (TSCs) are the basic units for sericulture extension in India and extension, directly or indirectly, accounts for about 80% of the state Departments of Sericulture costs. By 1993/94 most of the necessary infrastructure, extension staff and transport envisaged at appraisal were in place, but the effectiveness of extension and training appeared to be marginal. Substantial improvements in extension management were then brought about in Andhra Pradesh and Tamil Nadu through the installation of a management information system (MIS) to assist effective monitoring at the TSC, district and state headquarters levels. Extension methods such as organization of farmers' discussion groups, the lead farmer concept, credit workshops and productivity clubs for both on-farm and off-farm activities were widely adopted by 1995. Other positive developments included increased use of organic manure, disinfectants, drip irrigation, platform rearing and distribution of loose eggs. Farmer-to-farmer extension was an important feature that emerged during the project period. But these developments have not yet produced a generalized extension focus on upgrading productivity and quality, rather than expansion of mulberry area. During the project, about 133,000 ha of mulberry were planted but 109,000 ha were uprooted, so the modest net increase of 24,000 ha was obtained at considerable expense. The completion review estimates that the national average cocoon productivity has increased from about 400 kg / ha in 1988/89 to more than 500 kg / ha in 1996. Given the rather unsuccessful extension emphasis on horizontal growth, it seems unlikely that the improvements in productivity can be wholly attributed to the extension services. Post-Cocoon Interventions 12. The cocoon market infrastructure so far established has facilitated better marketing and increased market transparency and is sustainable through collection of market fees. A notable change generated through project intervention included introduction of a free market system in Kashmir to enable private buyers, including those from other states to purchase silk cocoons in Jammu and Kashmir (J&K). Similarly, silk exchanges and testing houses planned at appraisal have been established and are functioning satisfactorily. Research and Development 13. At the national level, the project financed the expansion and strengthening of three National Research Institutes and 13 supporting Regional Sericulture Stations; the 6 construction and operation of the Silkworm and Mulberry Germplasm Station, Hosur, and the Silkworm Seed Technology Laboratory, Kodathi; and the establishment of the Seribiotech Laboratory, Bangalore. At the state level, the project has financed improvements and strengthening of the Karnataka State Sericulture Development Institute established under the KSP-I project, and the establishment of a similar new institute for Andhra Pradesh. Significant slippage and cost overrun have occurred, but sufficient infrastructure including equipment is now in place to support the research needs of the sub-sector for at least the next five to ten years. 14. Few new improved mulberry varieties or silkworm races were generated and made available for commercial use by farmers during implementation of the project, but the process of selection and on-farm validation has been accelerated since 1994 and promising stocks are expected to become widely available by 1998. At present, however, even improved varieties developed prior to the implementation of the NSP are slow to reach the farmers. Mulberry varieties for rainfed (S13 and S34) and irrigated (S36 and S54) conditions were approved in 1991 but covered less than 1,000 ha. Similarly, thirteen silkworm races authorized in 1995/96 have yet to be widely intended and adopted by the states. 15. An important event attributable to the project but not planned at appraisal was the launching of the external Research Review in 1994. This is bringing about a long overdue re-orientation of the research system, focusing on the need to ensure that projects are relevant to the problems of the sub-sector and are properly coordinated to avoid duplication. In particular, there now appears to be increased awareness amongst research staff of the urgent need to undertake demand-driven multi-disciplinary studies. They have also become aware of the need to adopt experimental designs amenable to multivariate analysis of the factors associated with the wide variations in performance between agro- ecological zones and among farmers within these zones. Production of Bivoltine Silk 16. The production of about 1,000 tons per annum of bivoltine raw silk was envisaged at appraisal as a key factor for improving the quality of Indian silk. But as early as September 1989, detailed discussions with farmers, grainages, DOS staff and reelers revealed that there were doubts that the bivoltine targets were realistic. Thereafter, progress with commercial bivoltine sericulture remained unsatisfactory and bivoltine cocoon production remained orientated towards the seed cocoons that are essential for the synthesis of commercial F 1 bivoltine x polyvoltine crossbreed silkworm eggs. At the end of project implementation, the annual production of bivoltine silk was about 400 tons and a substantial proportion of this was from discarded seed cocoons which lack the genetic characteristics required for econornic reeling on multi-end basin filatures. Notwithstanding the possible introduction of improved commercial bivoltine hybrids during the next year or so, it is apparent that there is little prospect of attaining the SAR target even within the next five years. 7 Pilot States Program 17. The project made provision for the creation of basic infrastructure for bivoltine sericulture in 23 selected districts of twelve pilot states. Although meteorological data were taken into account when selecting the districts, it became apparent in early 1991 that many areas where mulberry was being promoted were unsuitable and had been selected on socio-economic rather than agro-climatic grounds. There were also problems with secondment of DOS staff to CSB, land availability for infrastructure development, lack of credit and conflicting state programs that were inconsistent with NSP in respect of subsidies and other production incentives. As a result, of the 8,600 ha planted with mulberry during the project, about 6,000 ha (almost 70%) were uprooted. Reported cocoon production at the end of project implementation was also less than 170 tons, of which only about 50 tons were commercial bivoltine hybrid cocoons. Despite this poor outcome, the project has established that selected districts in Kerala and Uttar Pradesh are suitable for bivoltine sericulture and has provided good indications of sustainable growth. 18. Social Dimensions. The project espoused enhancing women's role in sericulture development and engagement of NGOs, and has had to deal with the issue of child labor in the sericulture industry. (a) Participation of Women. The project has promoted several measures aimed at enhancing the role of women in sericulture development including training, study tours, promotion of access to institutional credit, participation in marketing, and deployment of senior and field level women officers and extension personnel. These interventions have resulted in an increased awareness of income-generating opportunities from sericulture amongst rural women in a number of project localities; enhanced skills, enabling the women to adopt improved techniques and so obtain higher cocoon yields and better quality; and attitudinal changes amongst personnel of the States' Departments of Sericulture, who now recognize the need for and value of concerted efforts to increase access by women to production resources and support services. However, these interventions have so far affected only a small proportion of the women in the project area and there is a need to sustain and expand these programs during the operational phase of the project. (b) NGOs. Provision was made under the project to engage NGOs with the possibility to use their services for a wide range of activities including promoting participation of women, landless and other underprivileged groups in sericulture; obtaining access to cultivable wasteland for mulberry cultivation; organizing groups to adopt improved rearing equipment; and other improved production practices and processing activities. This component was administered by CSB with the assistance of a central coordination committee composed of representative officers of CSB and the participating states. In all, the services of a large number of NGOs (125) were used during the project period, at an 8 estimated total expenditure of about Rs. 31 million (until end December 1996). Activities such as group formation, mobilization for mulberry production and training in self-help have been successfully undertaken by some of the NGOs. However, their achievements in technical sericultural activities have been less than satisfactory due to the lack of technical expertise and practical experience in silkworm rearing, cocoon production, reeling and other processing techniques. (c) Child Labor. As sericulture activities were to be carried out under local laws, labor issues, including child labor, were not identified for special attention during preparation and appraisal. However, starting in 1992, review missions recognized it as an important issue and addressed it as both an equity/poverty issue and as a threat to India's export potential. The Bank, in discussion with government, initiated a study in December 1992 to review the extent of the problem in Karnataka. The study was able to identify the scale and broad types of child labor and the fact that most of it was not 'bonded' in the same way as in some other industries. It identified the types of work undertaken and the hazards and made recommendations. Some progress has been achieved towards eliminating exploitative child labor from the post-cocoon sector by enlisting the cooperation of reelers, twisters and weavers through the active involvement of productivity clubs and trade associations. There was also a move towards some technology changes including motorized charka-turning. Reelers who employed children in Karnataka and Andhra Pradesh were threatened with non-renewal of licences. This proved quite effective, particularly in Andhra Pradesh. Publicity about the issue was given in the local languages. Work was initiated with several NGOs. However, it was found difficult to address the problem comprehensively as a retrofit strategy within a project that had not been designed to address the issue at the outset. Furthermore, as the studies identified, much of the child labor in the industry as a whole occurs within the home. Arising partly from the Sericulture Project experience, the South Asia Region is developing a strategy to address the issue of child labor more coherently. Institutional Credit 19. Institutional credit requirements estimated at US$104 million during appraisal were not financed under the project. These were to be met by commercial and cooperative banks from their sources under refinancing arrangements with NABARD/IDBI. The amount of credit disbursed by commercial and cooperative banks in support of the project was in accord with appraisal expectations. However, it was not possible to assess the recovery rates of sericulture credit because records of the on-farm loans are classified by the banks as general agricultural loans and no disaggregated data are available. One successful innovation initiated by the Bank was the introduction of the direct mail campaign for bankers to promote banking services to the poverty target group. 9 Economic Rate of Return 20. The economic rate of return (ERR) for the project at completion has been estimated at 14%, compared to 32% at appraisal. The major reason for the lower ERR is the drop in international prices of silk. At appraisal the international price of raw bivoltine silk was estimated at US$59/kg. This is equivalent to US$72.6/kg in late 1996 prices. Actual prices prevailing in late 1996 were US$32/kg. Lower prices and pebrine disease also effected the competitiveness of silk production and, as a result, increase in mulberry area was less than anticipated. Total mulberry area in 1996/97 reached 243,200 ha compared to the SAR target of 400,000 ha. C. IMPLEMENTATION RECORD Project Costs 21. Actual project costs in Rupees and US Dollars are shown in Appendix B, Tables 1-3. Total project costs were estimated at Rs.7,014.5 million compared to Rs.5,548.7 million estimated at appraisal. However, due to the sharp decline in the exchange rate of the Rupee, US Dollar costs were significantly less than anticipated at appraisal - US$248.5 million compared to US$347.1 million. Project Financing and Disbursement of Credit 22. The original IDA Credit of SDR1 13.8 million (equivalent of US$147 million) and IBRD Loan of US$30 million was to cover about 50.2% of total project cost of US$347.1 million. SDC's contribution was expected at US$25 million or 7.2%, with the balance of the cost being financed by the credit institutions (30.8%) and GOI/GOS (11.8%). The entire Loan of US$30 million and SDR31.5 million of the Credit was cancelled. Of the re-estimated project cost of US$248.5 million, the Credit financed about 46%. The final disbursement was made at close of business on June 12, 1997 (Table 4). SDC contributed US$17.4 million (7%), credit institutions US$64.4 million (26%), and GOVIGOS around US$52.3 million (21%) (Table 8B). External Factors Affecting Implementation 23. In 1991 there began a serious outbreak of the silkworm disease pebrine, originating from the public sector basic seed farms and grainages which caused many farmers to suffer large crop losses and which took more than two years to bring under control. Although the prices of cocoons and raw silk initially increased rapidly in response to shortages, farmers were unable or unwilling to risk further losses and widespread uprooting of mulberry took place, especially in Andhra Pradesh, Tamil Nadu and Karnataka. Had it not been for the delays in implementing the silkworm seed supply components of the project, the CSB and state DOSs would have been able to prevent or at least quickly contain the spread of the disease. Nevertheless, given that pebrine is generally endemic to India, it seems appropriate to regard this incident as an external factor affecting implementation. 10 24. In early 1992, the price of Chinese raw silk in the international and Bangalore markets fell by about 25%. When prices began to drift upwards again in late 1993, the China National Silk Import and Export Corporation, supported by 31 exporting companies, imposed a cap on Chinese raw silk prices and set the maximum price at about US$23 / kg in March 1994. This was designed to ensure the stable and low raw material prices needed to encourage continued growth of China's exports of silk garments, which accounted for 70 percent of all silk exports from China. Thus the international raw silk price assumed at appraisal (US$59/kg) was not sustained beyond 1991/92 and, as a result, the initial period of rapid inflation of domestic cocoon prices was followed by a sharp reversal to around the pre-project price levels. 25. As a result of these external factors, project implementation took place against a background of reductions in mulberry area and sericultural activity, and stagnation or reduction of raw silk output. Factors Subject to Government Control 26. Factors subject to the control of the Government and implementing agencies which affected project implementation include failure to amend legislation to enable public sector grainages to recover full costs and failure to achieve full cost recovery, respectively. D. PROJECT SUSTAINABILITY 27. The key achievements of the project are likely to be sustained in the operational phase. However, the following will be the major challenges. The total number of Central and State-level staff positions associated with sericulture is anticipated to remain at a very high level. Maintaining this level of commitment is likely to place a considerable strain on the public sector resources, and consideration should be given to measures aimed at progressively devolving this responsibility to the private sector. This issue was stressed by the Mid-Term Review (MTR) but apparently remains to be addressed by the concerned agencies. The Government has expressed its commitment to continue to support the sub-sector through additional investments under the Ninth Five- Year Plan but details have not yet been published. 28. The increased production of raw silk during the project period has been achieved through improved productivity per unit area. This is a more appropriate and sustainable approach than the horizontal expansion of mulberry area envisaged at appraisal. There remains considerable scope for further improvements in productivity in all the silk production sub-systems but especially in mulberry production, silkworm rearing and cocoon production, and in reeling. One of the reasons for the comparatively low productivity of mulberry in India, even under irrigated conditions, is that the potential of the existing varieties is not being achieved because most soils are deficient in organic matter. During its operational phase, the project's sustainability can be achieved through sustained improvements in productivity by giving higher priority for increased productivity under rainfed conditions and better management of soil and water resources under 11 irrigated conditions, i.e. through promotion of green manuring, mulching and low-cost micro-irrigation. 29. With regards to cocoon production, the average cocoon yield and quality are still significantly less than is required for a competitive and modern sericulture industry. This low productivity depresses farm incomes, inflates cocoon prices and constrains the development of an efficient reeling sub-system. Few analysts believe that the international price of raw silk will increase substantially above the rate of inflation during the next five to ten years. If the assumption of a significant shift in domestic demand towards bivoltine raw silk is confirmed, then the economic sustainability of the Indian sericulture sub-sector will be dependent upon securing better returns to farmers despite significantly lower prices. This can be achieved through significant, but readily attainable, improvements in sericultural productivity. However, attaining these improvements will most likely require Indian farmers to become more specialized and to make larger capital investments in improved rearing houses and equipment. Opportunities for under-capitalized, part-time farmers to obtain good incomes from sericulture will become limited. Therefore it may be predicted that the project will sustain improvements in productivity and employment, but that the income-generating opportunities from sericulture may shift away from returns to household labor in marginal smallholdings and towards wage labor for specialized silk farms. 30. The demand for fuelwood needed for cocoon drying, cooking and reeling gives rise to environmental concern. Whilst mulberry twigs and branches are themselves useful and significant fuel sources for household consumption, there is a need to reduce fuel demand through continued research into more efficient stoves at the reeling units. A private sector research institute has recently completed field testing of prototype gasifier- based ovens which demonstrated a 42% fuel saving over the conventional cottage basin ovens. Successful promotion and adoption of this or similar technology will enhance the environmental sustainability of post-cocoon operations. E. BANK AND CO-FINANCIER PERFORMANCE 31. Project Identification was undertaken within the context of the then ongoing KSP-I. Review missions had drawn attention to the deficiencies of the KSP-I design and implementation in terms of the unsatisfactory performance of the bivoltine sericulture component and the failure to turn around the loss-making parastatal operations. Despite this, the design of NSP mostly replicated the objectives and methodology of KSP-I. A fresh analysis of the opportunities and constraints affecting the sub-sector might have enhanced the design of NSP and thus the Bank's role in identification was marginally satisfactory. 32. Project Preparation was compromised by the absence of base-line technical, marketing and socio-economic surveys, and the studies introduced into the project design at the suggestion of the co-financier were obviously meant to correct this deficiency. The project working papers lacked a clear presentation of technical and financial coefficients, 12 and comprehensive models of the various enterprises were not prepared for a thorough appraisal of the financial and economic opportunities that would be made available to the proposed private sector participants. In this respect Bank's performance was deficient. 33. Project Appraisal. There was a need to establish a clear relationship between explicit objectives, expressed in an objectively verifiable form, and (a) the project components and activities that must be completed in order to achieve those objectives; (b) the key indicators and monitoring instruments used to determine the project's status and progress towards achieving the objectives. It was not clear from the SAR how the numerous components were meant to address the priority concerns of the sub-sector or of any target beneficiaries. Neither was it obvious how the activities undertaken within each component constitute the most effective and efficient ways of achieving the objectives. These fundamental design flaws should have been detected and corrected at appraisal. 34. The project component concerning the twelve pilot states was proposed by the Borrower at a late stage of project preparation. Despite their reservations, the Bank and the co-financier accepted the inclusion of this component. With the benefit of hindsight, it is obvious that the operations in the pilot states should have been planned in greater detail before incorporation into the project design. The appraisal mission also treated the bivoltine silk production component with similar lack of clarity and decision, by simply requesting the CSB to draw up an action plan. Likewise, insufficient critical assessment was made of the implication of duplicating production infrastructure and service functions at the CSB and state DOSs, whilst at the same time charging these institutions with responsibility for increasing private sector involvement. The Borrower was also burdened with monitoring and reporting an excessive number of legal covenants which could have been dealt with by a memorandum at negotiations. Unless the covenants focus clearly on substantive issues they are unlikely to be properly addressed by either the Borrower or the financiers, and this proved to be the case under NSP. On balance, however, the Bank's performance on appraisal was satisfactory. Project Supervision 35. As a rule, supervision missions were carried out twice a year and staff continuity by both the Bank and the co-financier was exceptionally good. Quality of the supervision reports was consistently good (One Bank region used them as a Best Practice example). These missions were generally over-optimistic in their ratings of project performance. Although the supervision missions produced sound and important recommendations, there was no satisfactory follow-up in several instances. Overall, the Bank and co-financier's performance in supervision was satisfactory. 36. The MTR in early 1993 addressed a number of issues which did not automatically derive from the SAR and the project design. In particular, the massive staff expansion of both the CSB and the DOS, with the associated problems of organizational development and avoidance of duplication of functions, was addressed for the first time. The problem of child labor in the sub-sector was highlighted and put on an agenda for immediate action. The constraints to implementation of the pilot states program were 13 analyzed and a substantial downwards revision of the mulberry area targets was recommended. The MTR concluded that the project needed to be refocused. Although no substantive financial reallocations were proposed at that time, final clearance of the MTR Aide-Memoire and supporting technical working papers took more than six months, by which time the implementing agencies' attention was no longer focused on the need to bring about significant reorientation of the project. F. BORROWER PERFORMANCE Project Preparation 37. Initial project preparation by the Borrower was deficient despite the local consultancy assistance. It was inadequate in respect of technical and economic criteria, and data on mulberry area, expansion, and the bivoltine and pilot states programs. Project Implementation 38. Project implementation was hampered by administrative delays. Some of the delays were caused by unforeseen problems over land availability for civil works and difficulties with procurement. Inspite of these, overall implementation by the Borrower was satisfactory. 39. The Borrower's response to review mission recommendations and requests for compliance with legal covenants was variable, but weak when studies and action plans with a high analytical content were required. Monitoring and evaluation of key sericultural indicators was generally unsatisfactory throughout the project period. Substantial revision of the estimates were done in December 1996 on the basis of a workshop consensus rather than data obtained from field studies undertaken earlier. Responsiveness to gender and social issues was initially good, but appeared to ebb away after 1994. For example, the concept of the Year of Women in Sericulture was proposed to the funding agencies by the Borrower and was supported through the project in 1993- 94, but was not completed until 1996. Similarly, the problem of child labor was effectively addressed by Andhra Pradesh through the threat of non-renewal of reeler's licenses, although this approach is not without its own negative social and financial impacts on the children and their families. Elsewhere, however, this problem is apparently perceived as being beyond the sphere of effective influence of the implementing agencies. G. ASSESSMENT OF OUTCOME 40. Although raw silk production has not increased to the level estimated at appraisal, the significant increase that has occurred was achieved through higher productivity per unit area and unit labor, not as a consequence of the anticipated expansion of mulberry area. Substantial scope remains for further improvements in productivity, which is still lower in India than in China or Thailand. However, the problems of food security for an expanding population, reduced water availability and increased competition for irrigated land will limit opportunities for increasing the area 14 under mulberry. Therefore it is clear that the improvement in productivity achieved during the project period is a more appropriate and sustainable approach than the expansion of mulberry area particularly in traditional silk-producing states as envisaged at appraisal. The precise extent to which this improvement can be attributed solely to the project is difficult to determine, owing to the absence of baseline and systematic benchmark studies, but the ICR mission's field investigations and anecdotal evidence suggested that the project has been a major factor for this change. In addition, the project made a significant contribution to employment and to the involvement of women and NGOs in the development process. Therefore, overall assessment of outcome is rated as satisfactory. H. FUTURE OPERATIONS Description of Plan 41. The CSB and the participating States have expressed their commitment to continue providing support for further expansion and improvement of the sector. The potential that could be achieved through greater use of the production infrastructure developed through the project, and approaches which need to be followed to upgrade quality and enhance value addition in the post-cocoon subsector, have already been defined by a group of experts at the national level set up to formulate development proposals outlined for the Ninth Five-Year Plan period. The key elements of the proposals outlined for future operations emphasize the Government plans to ensure availability and use of quality inputs, better facilities for processing, design and product development and further research support. The main silk-producing states primarily Karnataka, Andhra Pradesh, Tamil Nadu and West Bengal have also prepared their plans to consolidate the gains obtained, and continue the initiatives taken through NSP. These state plans envisage that the focus of their future operations would be on higher productivity and product quality, increased involvement of private sector in silkworm seed production, additional programs to enhance the role of women in sericulture, strengthening of the Technical Service Centers and cocoon market infrastructure established under the project, and increased attention to improve post-cocoon sector 42. The co-financier has agreed to continue to provide support to the Indian silk sub-sector for the period 1997-2002, through the SERI 2000 project. This project will not be a continuation of the NSP or of the bilateral projects which have been implemented by the CSB and the state DOSs. The developmental objective will be to generate employment and sustainable income opportunities primarily for the weaker sections of the population, including women, in rural and semi-urban areas. The program will adopt a demand-side approach with the objective of removing the constraints to increased productivity, improved quality and sustainability, especially in the post-cocoon operations. In operational terms, at least 50% of the total project financial resources will be allocated to private sector programs for support services (including research, extension and training) and input supplies. 15 I. KEY LESSONS LEARNED 43. The main lessons learned from the project experience include: (a) Future Operations. In the traditional silk producing States, a more cost- effective way of increasing and sustaining raw silk production would be through raising productivity. In the States with potential for producing bivoltine silk', expansion of mulberry area should receive greater attention combined with efforts to improve quality. (b) Project Design and Appraisal. The less than satisfactory performance of some sub-components (e.g. bivoltine production / pilot States program) of the project confirms the need for (i) greater involvement of stakeholders in all stages of project formulation and implementation to enhance ownership; and (ii) the availability of on-farm validated technologies to be promoted, to ensure setting of achievable production targets. (c) Project Implementation and Supervision. There have been considerable delays in procurement and implementation of infrastructure components. To minimize such delays in future, the Bank and the Borrower should ensure that detailed equipment list and relevant designs, appropriate contract packages and tender documents are completed prior to Negotiations. Whilst the supervision missions identified and recommended measures to address key constraints, lack of prompt follow-up minimized their effectiveness. The project would have benefited considerably by having a concurrent Monitoring and Evaluation (M&E) system through a third part agency which would provide both qualitative and quantitative feed-back to project management based on project progress and implementation experience. (d) Extension. The project emphasis was on strengthening the existing sericulture extension system and its approach. The project experience has shown that the most effective extension agent is the progressive and successful farmer. Greater emphasis should therefore have been placed upon promoting farmer-to-farmer transfer of technologies. (e) Research. In addition to provision of infrastructure and equipment for research and development, it is necessary to provide project support (i) for improving/strengthening human resources for research management, and (ii) for the establishment of performance-related career structures. - To maximize returns on investment in research infrastructure, it is necessary to pay greater attention to develop demand-driven research projects and timely deployment of research personnel. e.g. in UP and Kerala. 16 (f) NGOs. It is important to ensure that technical capabilities of participating NGOs are thoroughly assessed at appraisal. Adequate provision should be made in the project for imparting requisite training to such NGOs prior to their deployment. (g) Social Assessment. The project experiences reinforced the need for conducting social assessment prior to appraisal to identify issues such as child labor and develop appropriate strategy to address the relevant issues. 17 PART IH. STATISTICAL ANNEXES Table 1: Summary of Assessments A. Achievement ofobjectives Substantial Partial Negligible Not Applicable (V) (V) V) (V) Macro policies nI lI Sector policies El Li El El Financial objectives FJ Eli El Fl Institutional development Fl El El Physical objectives . El E1 El E Poverty reduction 3l El El Gender issues [l El El Other social objectives El El El FII Environmental objectives El El El Fl Public sector management El [f3 ED El Private sector development El El FI F Other (Human Resources Development) W E D B. Project sustainabilty Likel Unlikely Unceti (/) (/) ) High Marginally C. Bank performance satisactor Satisfactory Satusfactory Deficient (/) (/) (/~~~) (V) Identification O E EI Preparation assistance E E El E] Appraisal El El El El Supervision El Li] El El 18 D. Borrower performance satisfactory Satisfactory Deficient Preparation Implementation EI EC Covenant compliance ] E F Operation (if applicable) El E] E] Highly H E. Assessment of outcome satisfacton Satisfactorv Unsatisfactony unsatisfactory :~~ 19 Table 2: Related Bank Loans/Credits Loan/credit title Purpose Year of Status approval Preceding operations 1. Karnataka Sericulture Project To (a) increase raw silk production in Karnataka; (b) 1980 Completed (Cr. 1034-IN) introduce modem processing facilities and methods which would upgrade raw and spun silk to export quality; and (c) IC1isue introduce the latest technologies from leading silk producing 3/11/91 countries and expand local research for longer-term improvement of the industry. Table 3: Project Timetable Steps in project cycle | Date planned Date actual/ latest estimate Identification (Executive Project Summary) April 1, 1984 Preparation - December 1987 Appraisal September 1, 1988 October-November 1988 Negotiations February 15, 1989 April 3-7, 1989 Letter of development policy (if applicable) NA NA Board presentation March 28, 1989 May 18, 1989 Signing - June 16, 1989 Effectiveness Septembeir 14, 1989 First tranche release (if applicable) NA NA Midterm review (if applicable) Jan 11 to Feb. 24, 1993 Second (and third) tranche release (if applicable) NA NA Project completion NA June 30, 1996 Loan closing December 31, 1996 December 31, 1996 20 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ millions) IBRD/IDA FY FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 Appraisal Estimate Semesterl 0.0 10.6 31.9 56.7 81.5 115.1 150.5 177.0 Semester II 3.5 19.5 44.3 69.1 99.1 129.2 177.0 Actual Semester 1 13.6 14.6 19.1 44.7 60.8 81.2 99.8 105.3 Semester II 13.6 19.1 38.6 57.8 75.3 94.4 105.3 114.3* Actual as % of Estimate Semester l 151 66 87 74 71 56 60 Semester 11 108 93 84 76 73 60 64 Final Disbursement; June 12. 1997 21 Table 5: Key Indicators for Project Implementation Key Performance Indicators CFY End of Project Target Actual % Target Actal | 1. Commercial Seed Production Since the (DFLS-Lakhs) targets are a. Public Sector: 262 45 17 409 annual by i) Bivoltine hybrid 1220 445 37 3193 the end of ii) Crossbreed the project, b. Private Sector: 2 0 0 10 cumulative i) Bivoltine hybrid 2606 899 34 2628 achievements ii) Crossbreed 4090 1389 34 6240 are not Total Seed Production indicated 2. Cocoon Production: (MT)/Yr for even i) Bivoltine hybrid 5825 1415 24 9193 products at ii) Crossbreed 140784 41850 30 147911 serial no. I Total Cocoon Production 146609 43266 30 157104 to 2. 3. Raw Silk Production:(MT)/Yr i) Bivoltine 630 160 25 976 ii) Crossbred 14761 4764 32 14899 Total Raw Silk Production 15391 4924 32 15875 Actual % 4. Mulberry Planted: a. Irrigated (Ac) 31873 6374 20 113465 309536 b. Rainfed (Ac) 5210 1013 19 20141 28581 Total Mulberrry acreage 37083 7386 20 154106 338116 c. Uprooted d. Net standing acreage 207113 5. New Rearers (Nos.) i) Women 5837 978 17 25439 49910 ii) Men 26327 7869 30 109975 525010 TOTAL 32164 8847 28 135414 574950 6. New Reelers (Nos.) i) Women 55 2 4 810 449 ii) Men 473 30 6 1887 16666 TOTAL 528 40 8 2757 18159 7. Mulberry Saplings i) Extent of Kisan Nurseries 690 182 26 2800 2640 ii) No of saplings raised in Kisan 597 162 27 1289 2587 Nursury (lakhs) iii) Govt. Nurseries 35 4 11 113 126 Total No. of saps supplied to farmers 432 104 24 1865 1951 (Iscs) 8. Technical Service Center (TSC) i) No. of TSCs 450 442 98 ii) Women farmers trained 18806 7354 39 124595 144627 116 iii) Men farmers trained 14575 3053 21 110521 88076 80 Total farmers trained 33381 10407 31 235116 238730 102 9. Credit No. of rearers covered i) women 1445 160 11 18764 14770 79 ii) men 14130 2909 21 109208 144149 132 TOTAL 15575 3069 20 142972 160423 112 No. of reelers covered i) women 55 0 0 869 300 35 ii) men 470 173 37 2690 5059 189 TOTAL 525 173 37 3559 5359 151 10. Technical Assistance i) Consultancies (person-months) 0 0 0 136 74 54 ii) Training/study tours 0 0 0 963 849 88 (person-months) 11. Ass. to NGOs/Women Groups i) NGO projects approved (nos.) 0 0 0 none 125 ii) Women groups assisted (nos.) 0 4 none 53 12. BENEFICIARY ASSESSMENT i) No. of reports generated 3 I none 86 13. SOCIOECONOMIC SURVEY i) No. of states covered 2 2 100 17 17 100 * Data for A.P. is up to June 1996. Other data are at end of September 1996. 22 Table 6: Key Indicators for Project Operation (This table is not applicable to this project) Table 7: Studies Included in Project Purpose as defined Study at appraisal/redefined Status Impact of study 1. Beneficiary To gauge beneficiary values, More than 60 BA studies Most had qualitative Assessment (BA) Surveys preferences and reactions and were undertaken. focus. Their relationship (SAR - para 3.42) provide feedback reports and usefulness monitoring and evaluation were not satisfactory. 2. Socio-economic To assess in quantitative They were not NIL surveys in each of the terms the project impact. undertaken as planned in participatory states in 3 the early project stage stages (SAR para 3.44). and repeating twice. 23 Table 8A: Project Costs (Rs million) Component SAR-Project Additions Total approved Actual Overrun/(Saving) Total including approved until limits Expenditure contingencies date 1. Research & Development 429.3 586.0 1,015.3 878.4 (136.9) 2. Universities support 59.2 12.0 71.2 63.2 (8.0) 3. Basic seed production 513.5 232.9 746.3 820.4 74.0 4. Seed grainages 707.8 402.6 1,110.5 903.8 (206.7) 5. Seed CRC's (DOS) 46.2 19.3 65.5 44.5 (21.0) 6. Assistance to pvt. CRCs 202.3 (76.4) 125.9 46.4 (79.5) 7. Mulberry saplings 45.8 51.0 96.8 54.2 (42.6) 8. Cocoon markets 204.1 38.8 242.9 182.3 (60.6) 9. Cocoon drying 48.9 (21.6) 27.3 4.7 (22.6) 10. Silk exchange 9.9 9.0 18.9 14.1 (4.8) 11. Silk testing houses 140.0 (8.8) 131.3 86.4 (44.9) 12. Training Centers 419.4 225.6 645.0 404.0 (241.0) 13. TSCs 604.1 171.9 776.0 766.9 (9.0) 14. Joint venture participation 29.5 (14.9) 14.5 3.0 (11.6) 15. CSB/DOS administration 281.9 220.3 502.2 627.9 125.7 16. Asst. to NGOs 50.2 6.9 57.1 31.4 (25.7) 17. Promotion of new ovens 9.4 (2.1) 7.3 9.7 2.4 18. Asst. to reelers 71.9 (0.7) 71.2 62.1 (9.1) 19. Beneficiary Assessment 17.5 5.0 22.5 19.1 (3.4) 20. Socio-economic surveys 6.7 6.7 6.2 (0.5) 21. Growth centers/CFCs/etc. 121.0 121.0 53.4 (67.7) TOTAL 3,897.7 1,977.8 5,875.5 5,082.0 (793.6) Credit -On farm 1,016.7 1,016.7 1,425.5 408.8 - Processing 634.3 634.4 507.0 (127.3) Subtotal 1,651.0 1,651.0 1,932.5 281.5 Total Project Costs 5,548.7 1,977.8 7,526.6 7,014.5 (512.1) Note: Expenditures include actual expenditures until December 31, 1996 and estimated expenditures until April 30, 1997, except for Jammu & Kashmir, for which data are until December 31, 1996 only. 24 Table SB: Project Financing Source Appraisal Estimate Actual Estimate (US$ million) (US$ million) IBRD/IDA 177.0 114.4 Co-financing Institutions 25.0 17.4 (SDC) Other sources ------- Credit Institutions 104.0 64.4 Domestic contribution 41.0 52.3 GOI/States Total 347.0 248.5 25 Table 9: Economic Costs and Benefits Appraisal Estimate ICR Estimate Economic Rate of Return 32% 14% Major Assumptions Project life Standard Conversion Factor 0.8 0.9 International Price for Raw Silk US$59.00 (1989 Prices) US$72.60 (1996 prices) US$32.00 Project Life 20 years 20 years Physical Factors Increase in Raw Silk Production 8,140 tons 4,190 tons Increase in Raw Silk Yields 3 kgs/ha 2.2 kgs/ha Financial Results Incremental Gross Margins (0.4 ha Farm, 1996 prices) Karnataka (Irrigated) Rs18,000 Rs21,500 Andhra Pradesh (Irrigated) Rs'14,100 Rs7, 100 Tamil Nadu (Rainfed) Rs2,400 Rs4, 100 West Bengal (Rainfed) RsI4,500 Rs6,400 Jammu and Kashmir (Rainfed) Rs4,600 Rs500 Project Costs In Current Rupees Rs5,548.7 mill. Rs7,014.5 mill. In Current US Dollars US$347.1 mill. US$248.5 mili. 26 Table 10: Status of Legal Covenants Agreemenat Covenant Present Original Revised Description of Covenant Comments Section Type Status Fulfillment Fulfillment Date Date DCA I C The Borrower shall (a) have records & accounts for In compliance. 4.0 1(bXi) each FY audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association. DCA 1 C (b) Furnish to the Association, no later than 9 In compliance. 4.01(bXii) months after the end of each such year, a certified copy ofthe report of such audit by said auditors, of such scope an din such detail as the Association shall have reasonably requested. DCA 4.01(cXi) 3 C The Borrower shall: (a) Maintain or cause to be In compliance. maintained records and accounts reflecting expenditures with respect to wrhich withdrawals fom the Credit Account were made on the basis of statements of expenditure. DCA 1 C (b) Retain, until at least one year after the In compliance. 4.01(cXii) Association has receivedthe audit for the FY in which the last withdrawal from the Credit Account was made, all records evidencing such expenditures. DCA 1 C (c) Enable the Association's representatives to In compliance. 4.0 l(cXiii) exanmine such records as mentioned in 4.01 (cXii). DCA 1 C (d) Ensure SOE records & accts are included in the In compliance. 4.0l(cXiv) annual audit referred to in DCA 4.01(b) & thatthe report of such audit contains a separate opinion by the said auditors that SOE submitted during such FY can be relied upon to support related withdrawals. DCA 4.01(d) I C The Borrower shall have the Special Account for In compliance. each Fiscal Year audited and furnish the auditor's reports to the Association not later than 6 months after the end of each FY. PA 2.05 9 C CSB and the States shall carry out the provisions set In general, CSB and out in the Implementation Program set out in the states are in compliance. Schedule to this Agreement Refer to the following sections dealing with the individual provisions of the Implementation Program.L PA4.01a 2 C Each State & CSB shall maintain records & In compliance. accounts adequate to monitor and record the progress of the Project and reflect in accordance with sound accounting practices its operations & financial condition in respec of the Project PA4.01(bi) 1 C Each State shall: (a) have its records & accounts for Audited by the each FY audited, in accordance with appropriate Accountant General in all auditing principles consistently applied, by states. independent auditors acceptable to the Association. PA 4.01(bii) 1 NYD (b) Furnish to the Association, not later than 9 Audit Certificate for months after end of each such year a certified copy FY1997 (upto December of the report of such audit by said auditors, of such 31, 1996) due only by scope and in such detail as the Assoc. shall have December 31, 1997. reasonably requested 27 Agreement/ Covenant Present Original Revised Description of Covenant Comments Section Type Status Fulfillment Fulfillment Date Date PA 4.01(ci) 1 C CSB shall: (a) have its records, accounts & Audited by the Auditor financial statements for each FY audited in General. accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association PA 4.01(cii) I C (b) Furnish to the Association, not later than 9 In compliance. months after end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested. SCH 01(a) PA 5 C 12/31/89 States & CSB shall take necessary steps to In general compliance. identify and subsequently designate all staff positions in State Departments of Sericulture and CSB respectively which are responsible for carrying out sericulture research. SCH 01(b) PA 5 C States & CSB shall seek to ensure that all State In general compliance. Depts. of Sericulture & CSB staff appointed to research positions shall ordinarily have a minimum 3 year tenure in such positions except staff appointed to positions in breeding research for min. 5 year term. SCH 02(a)PA 9 C CSB shall ensure that each university or research In compliance. institution receiving funding under this project shall prepare annually a two-part report summarizing the main research work undertaken as well as setting out objectives & budget programs for next 3 years SCH 02(b)PA 9 C CSB shall cause AISRCC to review and make In compliance. recommendations on the reports referred to in para.2(a) above and shall fumish to the Assoc. a copy of the comments and recommendations of AISRCC.. SCH 03 PA 5 C States (except J&K) & CSB shall submit to the Plan prepared but Association a detailed action plan for bivoltine implementation is production indicating inter alia yearly targets, behind schedule. areas to be selected for bivoltine promotion and actions to strengthen extension service for bivoltine. SCH 04 PA 3 CP The States & CSB shall ensure that funds Several CSB and state provided under the project to grainages for grainages incurred a permanent working capital shall be retained by loss. However, many such grainages and replenished from sales earned a cash profit, revenues and to this extent, therefore, working capital was retained as expected. SCH 05 PA 2 CP The States & CSB shall ensure that public sector Many grainages are grainages set seed prices so as to recover full cost maintaining income and of production, including operating costs, expenditure accounts. depreciation of plant, equipment & other For some, only receipts infrastructure and for CSB, its HQ's and payments accounts administrative costs. are being maintained which are adjusted to yield income and expenditure accounts. 28 Agreemert/ Covenant Present Original Revised Description of Covenant Comments Section Type Status Fulfillment Fulfillment Date Date SCH 06 PA I The States & CSB shal maintain income & expenditure statements showing costs & revenues of their grainage operations, have such statements audited by independent auditors & submit audited accounts to the Assoc. with 9 months after end of each FY. SCH 07 PA 9 c The States (except J&K) and CSB shal submiit to In compliance. ope Asstoiation an action plan acceptable to the Association for promotion of private sector t grainages and take necessary steps to carry out such an action plao on a timely basis. SCH 08a PA 2 CP States (except J&K) implementin Part D of thke Cost recovery in case of Project & CSr shall collect a sale price for saplings varies across saplings, initiacy to cover at least 50% of the at rseries. Where these operating costs of production, to be mcreased to form a part of grainage recover fif cost of production by 4/30/94 complexes, the recovery is poor due ty high overhead allocation. The aggregate amouat involved is however t(o small for any significant coneern SCH 08b PA 2 C 3/31/95 Jammu & Kashall, b hall co. ect a sale price for In compliance. saplings which shall be adequate to recover at least 50% of the full cost of produceTon by end of the fioh year of project irmplementation (fiscal year mr94-1995). SCH 08c PA 2 C States & CSB shall submit to the Association a In compliance. plan, acceptable to the Associarwon, for sapling produciton S distribunw on (sacluding corection of sales price pursuant to suAmparagraphs 8(a) and (b) above this Schedule). SCH 09a PA 12 CP Karnataka shall, by Dec. 31, 1991, and Andhra A very large proportion Pradesh, Tamil Nadu, West Bengal, and CSB of the CRCs have been Che, by Dec. 3a , 1989, transfer alu to isting state soa. D ferred to private owned CRCs (excluding CRCs for seed rearers. The problem is production) tO private farmers of groups of that there is little private farmers o C demarrd in private sectorf or these facilities. SCH 09b PA 12 CP States & CSB shall ensure that private fapners to Criteria for trasferee whom CRCs are shalsfelred or who are assisted selection was not in establishing new CRCs shall saysfy criteria asered to m all cases. described in the Project Agreement. This is one of the reasons for poor performance of privatized CRCs. SCH 09c PA 12 CP 12131/89 The States and CSB shall furnish to the Assoc. Developing alternative financial &: organizational models and proposed models was attempted. schemes of assistance on the basis of which The fmancial viability assistance will be provided to CRCs under the for alternatives could Project not be fuUly assured. SCH 09d PA 2 CP States & CSB shall (i) take necessary steps to Many assisted CRCs are ensure that CRCs shall be capable of being not financially viable. financially viable at least by 5th year, of its operation, and (ii) enter into agreement with farmers receiving assistance re CRCs, setting out terms and conditions. 29 Agreement/ Covenant Present Original Revised Description of Covenant Comments Section Type Status Fulfillment Fulfillment Date Date SCH 09e PA 2 C The States and CSB shall not restrict the selling In compliance price that CRCs may charge for sale of chawkis. SCH 10 PA 2 CP The States & CSB shall ensure that all new W.B.introduced a levy. cocoon markets except seed cocoon markets shall Karnataka & J&K are levy a fee, which shall, not later than 4th year of in full compliance. TN operation of such market, amount to at least 1% levies a modest fee of the total transaction value of cocoons which is nowhere near marketed. the 1% levy requirement. There are legal issues in TN which are now being addressed by the DOS. SCH 11 PA 2 CP The States (except J&K) and CSB shall ensure In some cases the that the charges for using drying chambers set up drying chambers are under-rate Project would initially cover 50%, and being operated by by the fourth year of operation 100%, of their NGOs & private reeler operating costs. associations. Full cost recovery is effected in such cases. Some cocoon markets have these facilities too which are operated by the market staff without cost to user. SCH 12 PA 5 C The States and CSB shall ensure that labor In compliance. necessary for stove (chula) conversion is provided by the beneficiaries. SCH 13 PA 5 C States & CSB shall make reasonable efforts to In compliance. ensure (i) coord. amongst gen. agr. extension staff and ext. staff of depts. of sericulture at the field level and (ii) involvement of the general agricultural extension service in mulberry extension.. SCH 14 PA 5 C States & CSB shall ensure that mopeds provided In compliance. under Part I of the Project shall be issued exclusively to extn field staff and that the purchase of such mopeds by staff is financed through loans provided by the States or CSB. SCH 15 PA 5 C The States and CSB shall take necessary steps in In compliance/ consultation with credit institutions to facilitate the flow of credit to eligible borrowers under the project. SCH 16 PA 5 C The States and CSB shall take necessary steps to In compliance. enhance the role of women in sericulture institutions including increased participation in the production and marketing of silk SCH 17(a) PA 5 C Each State and CSB Shell by an agreed date with In compliance. the Bank, appoint one senior officer (who shall, for States, be a wcman & shall report directly to the director of the concerned DOS) as coordinator of assistance to women & NGOs under the Project. SCH 17(b) PA 5 C Each State shall appoint a state-level committee In compliance. with terms of reference and membership agreed with the Association, to coordinate the assistance provided to women and NGOs under the project. 30 Agreement! Covenant Present Original Revised Description of Covenant Comments Section Type Status Fulfillment Fulfillment Date Date SCH 17(c) PA 5 C CSB shal appoint a committee, with terms of In compliance. reference & membership agreed with the Assoc. and chaired by CSB, to coordinate the provision of assistance to women and NGOs under the project. SCH 17(d) PA 9 C The state level committees, referred to above, In compliance. with concurrence of CSB, shall select NGOs receiving assistance under the Project in accordance with appropriate criteria agreed with the Association. SCH 18 PA 9 C CSB shall submit to the Association every six In compliance. months a consolidated report on the progress of Project implementation. (States shall submit quarterly reports to CSB.) SCH 19 PA 9 C The States and CSB shall periodicaUy review with In compliance. the Association and revise the action plans and models referred to in paras 3,7,8c,9c, and 29a of this Schedule. SCH 20 PA 5 C Karnataka shall take necessary steps to ensure In compliance. that students from outside Karnataka shall have same access to sericulture teaching programs of the Shri Krishna Rajendra Silver Jubilee Technology Institute as students from Karnataka. SCH 21 PA 5 CP States shall ensure that, once silk testing houses Samples for all lots are have been established and have become not tested in all states operational, all yarn to be sold in the silk except Tamil Nadu exchanges within each State are first tested an where almost 100% lots classified in silk testing houses prior to such sale are tested. SCH 22 PA 2 C Andhra Pradesh, West Bengal and Jammu & Karnataka, TN and AP Kashmir shall introduce a fee on value of silk are in compliance. yam sold in silk exchanges and progressively increase the fee to reach at least one-half percent of such value by the 4th year of operation of such exchanges. SCH 23 PA 2 CP Each State implementing Part H(2) of the project The only attempt by AP shall take steps to ensure that its equity proved to be participation in share capital of joint venture unsuccessful and there reeling & twisting enterprises supported under the have been no further project does not exceed 25 % of such equity share attempts. capital. SCH 24 PA 2 CP Prior to investment of equity in any joint venture There was only one reeling & twisting enterprise, such State shall unsuccessful attempt. ensure that such enterprise (including concerned No further proposals investment proposal) is appraised in account with were made. procedures & criteria agreeable to the Association.. SCH 25(a)PA 2 NYD Prior to investment of equity in any joint See SCH 23 and 24 PA. venture reeling & twisting enterprise, such State shall ensure that such enterprise (including concerned investment proposal) is appraised in account with procedures & criteria agreeable to the Assoc. SCH 25(b) PA S C 3/31/90 J&K shall take necessary steps to remove all In compliance. regulatory restrictions (except licensing conditions) on the establishment of reeling enterprises in the state. 31 Agreement/ Covenant Present Original Revised Description of Covenant Comments Section Type Status Fulfillment Fulfillment Date Date SCH 25(c) PA 5 NYD 3/31/90 J&K shall take steps to operationalize a silk The silk exchange is not yet exchange for sale of silk yam produced in the ready. state through a self-regulated auction market in which outside buyers are eligible to participate on same terms as those from within the state. SCH 26 PA 5 C CSB shall ensure that all proposals for provision In compliance. of assistance for universities or technical institutes shall first be examined & approved by a sub- committee of AISRCC headed by its Chairman, & including reps. of CSB, states & qualified experts. SCH 27 PA 5 C 3/31/90 CSB shall carry out a review of selection criteria In compliance. used in basic seed multiplication and furnish to the Bank the results of such review including appropriate recommendations. SCH 28 PA 5 NC CSB shall ensure that at least 3 seed grainages to There is a good reason be established or strengthened in Kamataka, shall for non-compliance. be established by the private sector or undertaken Karnataka has already as a joint venture between CSB or Karnataka, or considerable unutilized both, of one part & private sector of the other. grainage capacity & it is not prudent to create additional capacity. SCH 29(a) PA 2 C CSB shall submit to Assoc. & thereafter carry out In compliance. a plan of operation satisfactory to the Assoc., specifying procedures, criteria, interest rates and repayment terms applicable to subloans to reelers under Part H(l) of the proj. (reelers revolving fund). SCH 29(b) PA 2 C Interest rates for loans to reelers under Part H(l) In compliance. of the project shall be at least 10% per annum. SCH 30(a) PA 5 C CSB shall establish a committee of Directors of In compliance. Sericulture of the States and the Member- Secretary of CSB to select candidates for overseas training. SCH 30(b) PA 4 C CSB shall obtain the concurrence of States prior In compliance. to any modification of the agreed state-wise allocation of funds for such training. SCH 30(c) PA 5 C CSB shall obtain prior concurrence of IDA before In compliance. awarding any contract for technical assistance or overseas training with a value about $200,000 and financed out of the proceeds of the Credit. SCH 31(a) 5 C CSB shall insure that institutions selected for In compliance. carrying out beneficiary assessment and socio- economic surveys under Part L of the Project shall have qualifications, experience and terms of reference agreed with the Association. SCH 31(bi) 5 C CSB shall submit terms of reference and a copy In compliance. PA of the proposed draft contract for the engagement of the institution that will carry out the beneficiary assessment. SCH 31(bii) 5 C CSB shall submit an overall program for In compliance. PA beneficiary assessment indicating the main elements for carrying out the assessment. SCH 32(a) PA 5 CP CSB shall establish pilot programs in the Pilot Based on the field States exclusively for the production of bivoltine experience, a revised silk. action plan is under implementation. 32 Agreement/ Covenant Present Original Revised Description of Covenant Comments Section Type Status Fulfillment Fulfillment Date Date SCH 32(b) PA 5 CP CSB to enter into agreement with concerned Pilot All pilot states agreed State for temp. secondments to CSB during but had problems in project period of adequate nos. of staff of that posting full staff.. Pilot State as may be necessary for carryout out CSB programs, such staff returning to such state after secondment. SCH 32(c) PA 5 CP CSB shall, by an agreed date, agree with each Cocoon markets are Pilot State on a timebound action plan for established in pilot establishing facilities & procedures for states and investment in operationalizing a free market in cocoons & silk reeling and grainage is yarn in such State, and investments in reeling, underway. grainages in private sect. SCH 32(d) PA 5 C CSB shall prepare and implement a timebound CSB has prepared & plan, agreed with each Pilot State, for handing agreed with the states a over to Pilot States seconded staff and facilities time bound action plan operating in the State. to handover most of the facilities operating in all pilot states except in two states for which discussion is on. SCH 33 PA 1 C CSB shall take necessary steps to adopt systems In compliance. for maintaining accounts & preparing annual financial statements in accordance with generally accepted accounting practices applied to companies (with due regard to legal status of CSB as statutory body). DCA I C The Borrower shall maintain records and In compliance. 4a.01(a)(i) accounts reflecting expenditures Status: C = Covenant complied with; CD = complied with after delay; CP = complied with partially. 33 Table 11: Compliance with Operational Manual Statements Statement number and title Describe and comment on lack of compliance 1. Not applicable 2. 3. Table 12: Bank Resources: Staff Inputs Stage of Planned Planned Revised Actual Actual project cycle Weeks US$ Weeks US$ Weeks US$ Through n.a n.a 102.9 242.3 appraisal Appraisal- n.a n.a 95.6 208.1 Board Board- n.a n.a 3.1 7.8 effectiveness Supervision _ n.a _ n.a 362.9 507.8 Completion r n.a _ n.a 21.1 81.2 TOTAL I T_I_T_ 585.6 1,047.2 Dollar budgeting only introduced in FY94 and therefore costs cannot be computed 34 Table 13: Bank Resources: Missions Stage of Month/year Number of Days in field Specialized Perform Rating project cycle persons staff skills Implement- Develop- Types of represented ation status ment problems Objectives Preappraisal Feb-Mar'88 5 +7 28 --- --- Japanese grant reps . Appraisal Oct-Nov'88 12+2 SDC 31 ---- reps Supervision I Aug-Sept'89 4+1 SDC 17 AGB,EC I I N _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ A G ,P_ _ _ _ _ 2 Jan-Feb'90 5+4 SDC 28 AGB. EC I I N AH,SL 3 July-Aug'90 5+2 SDC 30 EC, AGB I I N 4 Jan-Feb'91 7+4 SDC+I 30 EC,AH,S, 1 1 M UNDP M&E 5 Aug-Sep'91 5+4 SDC 28 EC, AG, S,B 1 1 M 6 Jan-Feb'92 5+4 SDC 35 EC,AG,S 1 I M 7 Aug-Oct'92 4+4 SDC 47 EC,AG.S I 1 P 8 (MTR) Jan-Feb'93 5+5 SDC 44 EC,AG,S 2 2 P+M 9 Feb'94 4+5 SDC 20 EC,AGB 2 2 M to Aug-Sep'94 2+4 SDC 30 EC,AG S S P+M 11 Feb-Mar'95 3+5 SDC 37 EC,AG,S S S P+M 12 Sep'95 2+5 SDC 17 AG,EC S S P+M 13 July-Aug'96 3+3 SDC 18 AG,EC,S S S P+M 14 Dec'96 3+3 SDC 18 AG,EC,S S S P+M Completion Jan-Feb'97 2 21 S,B,EC P+M +3FAOCP _________ ~+3SDC__ _ _ _ __ _ _ __ _ _ _ _ Skills represented EC= Economist, AG=Agriculturist, P= Procurement Specialist, AGB =Agriculturist Business Expert, S =Sociologist, M&E=Monitoring and Evaluation/BA Expert, B=Biologist Types of problems: N=No major problems, M=Management, P=Production 35 Am,endix A Page I of 11 IMPLEMENTATION COMPLETION REPORT INDIA NATIONAL SERICULTURE PROJECT (Loan 3065/Credit 2022-IN-IN) APPENDIX A MISSION'S AIDE MEMOIRE l. INTRODUCTION 1. INDIA The National Sericulture Project (NSP), implemented since 1989 with World Bank (WB) and Swiss Development Corporation (SDC) funding assistance, represents a major effort to support sericulture development in 17 states of India. Following its completion on 31st December 1996, the Project's experience, performance and results were assessed by an FAO/WB Implementation Completion Reporting (ICR) Mission' which visited India from 19 January to 9 February 1997. The SDC team2 and representatives from the World Bank3 India Resident Mission made significant contributions to the work of the mission. 2. The main findings of the mission, summarised below, are based on: (i) field investigations in different parts of the project area; (ii) discussions with a wide range of project participants comprising farmers, including women, engaged in mulberry cultivation and silk worm rearing, entrepreneurs in seed production, reeling and other silk processing activities, representatives of non- government organisations (NGOs), research and other institutions, officials and technicians of the Government of India (GOI) and participating states responsible for project implementation; (iii) a review of relevant documents; and (iv) conclusions of the workshop organized by SDC with the objective of providing a forum to discuss the project results (29-31 January 1997). 3. The mission wishes to express its gratitude to the Member Secretary and staff of the Central Silk Board (CSB) as well as the personnel of the Directorates of Sericulture (DOS) of the participating states for their support, hospitality and courtesy. lMission comprised N.D.A Hameed (Mission Leader), A.Morton (Sericulturist), and N. Storr (Economist). 2 Messrs. E.Schaltegger (Agronomist), H.A.Bertsch (Business Enterprise Specialist), Ms. F. Heierli (Sociologist) and Ms. Girija (Program Officer). 3 Messrs. M. Balasubramanian (Project Task Manager, NDO) and H. Singh (Economist, NDO) . 36 Avvendix A Page 2 of 11 II. PROJECT OBJECTIVES AND DESCRIPTION 4. The project was designed to strengthen and expand India's sericulture sub-sector through improvements in productivity, product quality and support services, and increased private sector involvement in specific aspects of the industry. It was anticipated that the success of this endeavor would provide the basis for India to exploit its natural advantage in silk production and long term potential for furtier growth, without incurring unsustainable demands on the state and central budgets 5. As appraised, the project included seventeen components. Its activities were planned to be implemented over a five year period starting in 1989. The total project costs were estimated to be Rs 5.6 billion (US$ 347.1 million). About 51% of this was to be financed by the IBRD and IDA, 7.2% by the Swiss Development Cooperation (SDC), 30% by commercial and co-operative banks with refinancing support from the National Bank for Agricultural Development (NABARD) and the Industrial Development Bank of India (IDBI); and 11.8% by the Government of India (GOI) and participating state governments. 6. The project area covered the five major silk producing states of Karnataka, West Bengal, Jammu & Kashmir, Andhra Pradesh and Tamil Nadu, which together account for over 95% of total raw silk production in the country, as well as 12 other pilot states which are considered as non-traditional sericulture areas. The CSB, under the overall responsibility of the Ministry of-Textiles, and the DOSs in the five participating traditional senrculture states were responsible for project implementation. III. IMPLEMENTATION 7. The project was implemented over a period of seven years instead of five years as planned at appraisal. A Mid-Term Review (MTR) of the project was undertaken in 1993. The MTR highlighted the need for addressing issues relating to product quality, project management, privatisation, programme in the pilot states, and research focus. No changes were recommended in the project components or targets, although some innovative new activities (e.g an entrepreneur development programme, productivity clubs, external research review) were added to the programme for implementation. 8. Overall, implementation has been satisfactory and most of the infrastructure and skills base anticipated at appraisal are now in place. The main constraint to more efficient implementation appears to have been the administrative delays which have affected all areas of the project, from civil works and procurement to the authorization of improved mulberry varieties and silkworm races for distribution to farmers. Improvements in implementation might have been achieved if specific provision had been made within the project for more effective monitoring and follow-up of (i) timely commissioning of civil works and procurement, (ii) decisive implementation or rejection of supervision mission recommendations, (iii) prompt and effective institutionalization of management information systems and gender issues within the CSB and DOSs management structures, and (iv) identification and elimination of the causes of variable performance between the main agencies responsible for implementation. 37 Aopendix A Page 3 of 11 IV. PRODUCTIVITY AND QUALITY A. Research and Development 9. At the national level, the prolect has financed the expansion and strengthening of the three National Research Institutes and 13 supporting Regional Sericulture Research Stations; the construction and operation of the Silkworm and Mulberry Germplasm Station, Hosur, and the Silkworm Seed Technology Laboratory, Kodathi; and the establishment of the Seribiotech Laboratory, Bangalore. At the State level, the project has financed improvements and strengthening of the Kamataka State Sericulture Development Institute (KSSDI) established under the KSP-1 project, and the establishment of a similar new institute for Andhra Pradesh. Significant slippage and cost overrun have occurred, but sufficient infrastructure and equipment are now in place to support the research needs of the subsector for at least the next 5-10 years. 10. An important event attributable to the project but unforeseen at appraisal was the launching of the external Research Review in 1994. This is bringing about a long overdue re-orientation of the research system, focusing on the need to ensure that projects are relevant to the problems of the subsector and are properly coordinated to avoid duplication. Only a couple of new improved mulberry varieties have been developed land even these were not made available for large scale commercial use by farmers during the project. However, the process of selection and on-farm validation has been accelerated since 1994. Progress in the development and release of new silk worm races has also been sIow.2 B. Silkworm Seed 11. To meet an expected increase in demand for high quality silkworm seed, the Project provided for the establishment and operation of 26 basic seed farms and 35 commercial grainages3, each with annual production capacities of 1.5-3.0 million dfls. Infrastructure and equipment have been significantly upgraded through the Project but the Mission is concerned about the continued delays in installing essential humidity-controlled cold storage facilities, poor capacity utilisation, and the efficiency and effectiveness of coordinated disease monitoring. 12. During 1995-1996, seven of the nine grainages in Tamil Nadu, seven of the ten grainages in West Bengal, three of the seven grainages in Andhra Pradesh, all ten grainages in Karnataka, and all 29 CSB grainages incurred losses and were unable to comply with the covenant of full cost recovery. The main reasons for these losses were high overhead and staff expenses; poor capacity utilisation; failure to charge for the dfils based on the cost of production; and unsatisfactory revenue collection. Mulberry varieties S13 and S34 for rainfed conditions and S36 and S54 for irrigated conditions were approved by the Research Committee in 1991. These varieties are reported to be grown in about 1,000 ha. 2 Thirteen new silk worm races are reported to have been authorized only by late 1995 and their adoption by the participating states have not yet picked up. 3 These figures do not include the basic seed farms and grainages of the States. 38 Appendix A Page 4 of 11 However, with the implementation of the CSB and DOSs recovery plans, improved performance is expected in 1997/1998. 13. The establishment through the Project of private sector grainages (licensed seed producers, LSPs) appears to have been very successful; for example, a large number of SSPs have come into operation, more than 900 LSPs are reported to be in Kamataka and at least 200 LSPs in West Bengal alone. Mission observations are that the LSPs are financially viable, with all the respondents expressing satisfaction and intending to re-invest for expansion of their businesses. This appears to reflect lower overhead costs, closer matching of supply to customer demand, and regular follow-up of customers to ensure satisfaction and facilitate revenue collection. C. Bivoltine Programme 14. The production of about 1,000 MT per annum of bivoltine raw silk was envisaged as a key factor in the objective of improving the quality of Indian silk. According to CSB estimates total bivoltine raw silk production for the year ending December 1996 was 394 MT. Notwithstanding the possible introduction of improved bivoltine hybrids within the next year or so, it is apparent that there is little prospect of attaining the SAR target within the next five years. 15. The reasons for the failure of the bivoltine programme are easily discernable and the Mission submits that the design of the project did not incorporate the lessons that should have been learned from the similar failure of the bivoltine component of the KSP. In summary, (1) bivoltine crop packages were not available for farmers of different capabilities working in different agro-ecological zones; (2) farmers generally prefer CB because these are less prone to crop failures; (3) the extra risk involved in bivoltine rearing is not compensated for by any price premium in the commercial cocoon markets (indeed prices for bivoltine cocoons are frequently lower than those for CB), so farmers have no financial incentive; and (4) there is anecdotal evidence that the dominant handloom sector prefers CB raw silk on account of its higher lustre and better capacity for deep dyes, whereas the powerloom sector remains content to utilise imported ungraded filature raw silk which is available at comparatively low cost. 16. The reasons for the failure of the bivoltine programme are not just technical but include market and institutional constraints. Therefore, the proposed integrated market study and the analysis of the regulatory framework of sericulture would have provided a valuable framework for a subsector policy to guide the industry through and beyond the forthcoming Ninth Five Year Plan. The delay in implementing these studies has made them less useful for the operational phase of the project. D. Pilot State Programme 17. The Project made provision for the creation of basic infrastructure for bivoltine sericulture in selected districts of twelve Pilot States. Although the selection of the districts took account of meteorological data, it seems that insufficient attention was paid to other likely constraints such as the prevailing farming systems, socio-economic conditions and the virtual absence of a vertically integrated 39 Avmendix A Page 5 of 11 marketing system for bivoltine cocoons. Consequently, of the 21,237 acres planted to mulberry during the project, 14,758 acres (almost 70%) was uprooted. 18. The MTR drew attention to the need to restrict mulberry area expansion to the most promising pilot districts and to concentrate on timely completion of civil works, upgrading of productivity, and better conditions for cocoon marketing, reeling and marketing of raw silk. From the information made available to the Mission, it is not clear that these recommendations were promptly acted upon. What is clear, however, is that the average cocoon yields obtained (15-41 kg/100 dfl) from bivoltine hybrids are far too low for competitive commercial production of bivoltine raw silk. Moreover, only Kerala and Uttar Pradesh show any indication of yield improvements during the project period. E. Civil Works and Equipment 19. Allocation for Civil Works and Equipment accounted for a significant proportion of the total cost, excluding credit financed by commercial and cooperative banks. Slippages occurred in the construction programme and equipment procurement during the initial years of the project. Lack of detailed and agreed specifications for specialized project equipment (e.g. for cold storage) at appraisal/project start resulted in additional expenditures, e.g for visit abroad and engaging consultants to identify equipment needs; less use of allocated funds; and poor capacity utilisation of the project equipment, some of which was not procured until a few months before project completion. It is of value to note that the decision to engage a procurement agent for construction/supervision and award composite tenders (for civil, electrical and water supply works) after year two onwards helped to speed up and complete most civil works. F. Key Sericulture Indicators 20. The Mission was disturbed by the continued lack of reliable and intemally consistent data on physical indicators. In particular, the lack of a thorough baseline survey and follow-up surveys (as specified in the SAR) makes it difficult to assess the changes that have occurred during the project period, whilst the absence of with-project and without-project sample frames precludes any possibility of objectively determining which changes, if any, are attributable to the project. 21. On the basis of the data produced by the Workshop, it appears that the mulberry area increased from 219,000 hectares in 1988/89 to reach a peak of 267,000 hectares in 1991/92 and subsequently declined to 244,000 hectares by the end of 1996. This represents a net increase of 11 percent as opposed to the 22% envisaged in the SAR (an increase from 241,000 ha to 400,000 ha, of which 52,000 ha would be attributable to the project). This reported net increase of mulberry area has been achieved at high cost, with the area expansion of 133,022 hectares being offset by concurrent uprooting of 109,239 hectares. Too much emphasis was placed on area expansion, rather than establishing sustainable production systems. 22. The consensus is that raw silk production increased from 8,528 MT in 1988/89 to 12,655 MT by the end of 1996, an increase of 48 percent. Although this is substantially less than the increase 40 Apa2ndixA Page 6 of 11 assumed in the SAR (from 9,220 MT to 17,140 NvT, or 86 percent), it nonetheless represents a significant achievement. 23. The Workshop attributed the increased raw silk production to higher cocoon yields and improved renditta. Average cocoons yields were estimated to have increased from about 29 kg /100 dfl in 1988/89 to 39 kg / 100 dfl by 1995/96. There appear to be no reliable farm survey data to support these estimates and, taking account of the still widespread crop failures, the Mission believes that the stated national average yield is unrealistically high. Mission observations indicate that (i) commercial seed production is under-reported; and (ii) the number of viable eggs per 100 dfl is variable and has possibly been increased by the suppliers by as much as 20 percent. Similarly, whereas the Workshop indicates that the average renditta has improved from 10.4 to 9.1, Mission observations on the price differentials between cocoons and raw silk suggest that reelers would probably be incurring substantial losses unless their renditta was 8.0 or better. It is therefore possible that the improvement in national average cocoon yield is rather modest, say from 29 kg / 100 dfl (or less) to about 32 kg /100 dfl. 24. Speculating to this extent is highly unsatisfactory, especially at the completion of the implementation phase of a project of this scope and complexity. Aggregate statistics on key sericultural indicators appear to be flawed by inaccuracies in data collection and processing (as demonstrated by the striking ex-post adjustments of mulberry area). Implementation of the detailed sample survey designs proposed in April 1991 would have alleviated this problem. V. HUMAN RESOURCE DEVELOPMENT, TRAINING & TA 25. The Project provided support for human resources development through strengthening of the existing training infrastructure, upgrading of skills of farmers and technicians, and domestic and overseas study tours. Overall, this component has been successfully implemented and has contributed to a significant enhancement of skills. 26. TSCs supported under the project have severed a useful purpose in expanding extension coverage and facilitating input supply to farmers. However, many of the extension staff employed in the TSCs have not undergone satisfactory training in extension techniques, and their lack of commercial sericulture experience has limited their ability to design and adapt integrated sericulture packages to suit site-specific needs. The Mission observation is that farmers seeking to improve productivity generally make first recourse to other, more advanced, farmers rather than to the TSCs. 27. Owing to the availability of technical assistance under Japanese grant during the project period, the TA inputs of the project were not fully utilized. VI. PROMOTION OF PRIVATE SECTOR PARTICIPATION 28. The Project sought to promote increased involvement of the private sector in key activities, especially (i) silkworm seed production; (ii) chawki rearing centres (CRCs); (iii) production of mulberry 41 Page 7 of 11 saplings; and (iv) reeling, through providing advances to reelers and through equity participation in Andlra Pradesh. 29. In all the States where chawki rearing centres have been privatized, the results have been most unsatisfactory and virtually all privatised CRCs are now dysfunctional. At current capacities and current prices, CRCs are simply not financially viable. On the one hand, it is evident that most farmers are not convinced that purchasing chawkis will give them higher returns. On the other, many prospective CRC entrepreneurs question the viability of chawki production as an exclusive operation, particularly in the face of competition from public sector operations selling chawkis at close to the cost of production. The non-viability of these enterprises would have been highlighted sooner but for the fact that the Project paid incentives in the early years to encourage the construction of the CRCs. Many private CRCs went out of production shortly after receiving the final incentive payment. Nevertheless, the Mission observed some instances where chawki rearing operations had evolved from task-sharing within the extended family or amongst neighbours, and grainages combined with CRCs appear to be viable in Kamataka. 30. The contracting of mulberry sapling production to the private sector was undertaken as planned, but met with reasonable success in only a few localities. The main constraint appears to be that farmers generally prefer to make use of locally available cuttings, which they can often obtain at very low cost. This reduces the market opportunities for mulberry nurseries and also constrains the dissemination of new varieties. 31. The programme to provide advances to reelers was not as successful as expected. Similarly, the component for encouraging joint venture participation in Andhra Pradesh did not prove attractive to the private sector and was terminated after two years. 32. In 1992 an Enterprise Promotion (EP) Cell was established within CSB, to facilitate EP activities. The thrust of EP programmes is to: (i) contribute to effective basic business, managerial and technical training for existing entrepreneurs and, through the medium of the newly-established EDPs (Enterprise Development Programmes), specifically assist potential new first generation entrepreneurs; (ii) assist the creation, expansion or modernization of small enterprises by funding feasibility studies and obtaining credit and access to land, equipment, power, permits, licenses, etc.; and (iii) promote productivity clubs, self help groups, women's groups and trade associations. The reach, impact and cost effectiveness of the EP programme appears to be very satisfac.tory, and the Mission is pleased to learn that the CSB and DOSs have decided to continue this programme. 33. In an associated initiative, the DOS in Karnataka has funded the development of "Growth Centers", which provide an integrated site where potential investors can install combined reeling, twisting and weaving facilities. This offers the prospect of improving the viability of post-cocoon operations through vertical integration, and the results are awaited with interest. 42 Appendix A Page 8 of 11 VII. POST-COCOON INTERVENTIONS A. Cocoon Markets and Drying 34. The cocoon market infrastructure so far established appears to have facilitated better marketing and increased transparency, and is sustainable through the collection of market fees. At the time of drafting this aide memoire, the Mission is still awaiting the requested data and this precludes further assessment. 35. The silk exchanges and testing houses envisaged at appraisal have been established and appear to be functioning in a satisfactory manner. At the time of drafting this aide memoire, the Mission is still awaiting the requested data and this precludes further assessment. 36. The Project did not specifically address technical interventions in post-cocoon operations. During implementation it became evident that a more vertically integrated and demand-driven approach would be beneficial. Accordingly, some useful ad hoc interventions were made towards the end of the project, mostly focusing on research, demonstrations, training, and better utilisation of by-products and silk waste. VIII. SOCIAL DIMENSIONS A. Participation of Women 37. The project has promoted several measures aimed at enhancing the role of women in sericulture development including training, study tours, promotion of access to institutional credit, participation in marketing, and deployment of senior and field level women officers and extension personnel. These interventions have resulted in an increased awareness of income generating opportunities from sericulture amongst rural women in a number of project localities; enhanced skills, enabling the women to adopt improved techniques and so obtain higher cocoons yields and better quality; and attitudinal changes amongst DOSs personnel, who now recognize the need for and value of concerted efforts to increase access by women to production resources and support services. However, these interventions have so far affected only a small proportion of the women in the project area and there is a need to sustain and expand these programmes during the operational phase of the project. B. NGOs 38. Provision was made under the project to engage NGOs with the possibility to use their services for a wide range of activities including promoting participation of women, landless and other underprivileged groups in sericulture; obtaining access to cultivable wasteland for mulberry cultivation; organizing groups to adopt improved rearing equipment; and other production practices and processing activities. This component was administered by CSB with the assistance of a central coordination committee composed of representative officers of CSB and the participating states. 43 Appendix A Page 9 of 11 39. In all, the services of a large number of NGOs (125) were used during the project period, at an estimated total expenditure of about Rs. 31 million (until end December 1996). Although activities such as group formation, mobilization for mulberry production and training in self-help have been successfully undertaken by some of the NGOs, their achievements in sericultural activities have been disappointing. Amongst other problems, the NGOs lacked technical expertise and practical experience in silkworm rearing, cocoon production, reeling and other processing techniques, and this limited their ability to organize and assist the participants. C. Child Labour 40. Consecutive review missions since 1992 flagged child labour not only as a serious equity issue but also as a threat to the export potential of India's silk industry. The employment of child labour appears to be prevalent throughout the reeling industry but is especially noticeable in Karnataka. Some progress has been achieved towards eliminating child labour from the post-cocoon sector by enlisting the co-operation of reelers, twisters and weavers through the active involvement of productivity clubs and trade associations. Although the threat of non-renewal of reelers' licenses has proved effective in Andhra Pradesh, this approach is not without its own negative social and financial impacts on the children and their families. Further efforts must be made to comprehensively address this issue during the operational phase of the project. IX. MONITORING AND EVALUATION 41. Monitoring and evaluation was one of the less successful aspects of the project. More than 80 BA surveys were undertaken, focusing on various aspects of the impact of the project on the beneficiaries lives, but their relationship to the overall programme for beneficiary assessment specified in the SAR has not been made clear. The studies provided some information that was utilized by the project management, but the qualitative focus of most of the studies did not result in the quantitative data and analyses envisaged in the SAR. 42. The beneficiary assessment was to be supplemented by three socio-economic surveys to be undertaken in the participating states, one at the early stage of project implementation and repeated twice during the project period. These requirements have not been met. The absence of a comprehensive baseline survey and any systematic follow-up means that an objective and quantitative assessment of the changes that have occurred during the project period is extremely difficult. Moreover, identification of changes due to the project interventions and changes that were due to external circumstances is confounded by the lack of with-project and without-project sample frames in the design of the periodic reporting of key sericultural indicators. X. INSTITUTIONAL CREDIT 43. Institutional credit was not financed under the project. The amount of credit disbursed by commercial and cooperative banks in support of the project was in accord with the appraisal 44 Adix A Page 10 of 11 expectations. However, it is not possible to assess the recovery rates of sericulture credit because records of the on-farm loans are classified by the banks as general agricultural loans and no dis- aggregated data are available. XI. PROJECT FINANCE 44. Of the originally improved IBRD/IDA funds equivalent to US$177 million, the IBRD of US$30 million was cancelled in 1991 as a part of a wider financing agreement between GOI and WB. Two other cancellations totalling US$24.9 million from the remaining IDA Credit were in subsequent years because of increases in the availability of rupee funds arising from exchange rate movements. 45. As of 4 February 1997, disbursements made under these funds amount to US$120.9 million (US$105.2 million IDA Credit and US$15.7 million SDC Grant). At the time of drafting this aide memoire, details on actual expenditures and commnitments made under the project up to February 1997 were not available. Therefore, recourse was made to the information available in the December 1996 Supervision Mission Report, wherein it has been estimated that the total expenditure incurred by CSB and the State Governments, as of December 1996, to be Rs 5,078 million or about 85 percent of the revised approved limits, and there could be a saving of about US$34 million. These estimates will be updated by the ICR Mission following receipt and analysis of the additional information requested from the relevant implementing agencies. XII. SUSTAINABILITY 46. The Government has expressed its commitment to continue to support the subsector through additional investments under the Ninth Five Year Plan. The publication of the Plan is awaited for details of this commitment. 47. The total number of Central and State level staff posts associated with sericulture is anticipated to remain at a very high level. Maintaining this level of commitment is likely to place a considerable strain on the public sector resources, and consideration should be given to measures aimed at progressively devolving this responsibility to the private sector. 48. To ensure the environmental sustainability of the Indian silk subsector, attention must be given to better management of water, soil and fuel resources. The most critical resource is water, because recent emphasis has been placed upon increasing the yield of irrigated mulberry even though many regions are experiencing falling groundwater levels. Mulberry is far more drought resistant than most agricultural crops and there is considerable scope for improving the yield and leaf quality of rainfed mulberry varieties. The development of highly productive moriculture for rainfed conditions should be given the highest priority in mulberry research if solutions are to be developed before field conditions become critical. 49. One of the reasons for the comparatively low productivity of mulberry in India, even under irrigated conditions, is the widespread deficiency of soil organic matter. The on-going research and 45 Am,endix A Page 11 of 11 extension programmes focused on green manuring, mulching, vormiculture, etc. should therefore be encouraged. 50. The demand for fuelwood needed for cocoon drying, cooking and reeling gives rise to environmental concern. Whilst mulberry twigs and branches are themselves useful and significant fuel sources for household consumption, there is a need to reduce fuel demand through continued research into more efficient stoves at the reeling units. The Mission has leamt that a private sector research institute has recently completed field testing of prototype gasifier-based ovens which demonstrated a 42 percent fuel saving over the conventional cottage basin ovens. The Mission therefore suggests that CSB and the DOSs make enquiries with a view to further development of these ovens. XIII. FOLLOW-UP 51. The ICR Mission will complete its analysis of data in Rome and will submit the draft final ICR Report and Technical Working Papers in May, 1997. Delhi February 9, 1997 (Revised in Rome on 6 May 1997) 46 Appendix B Page 1 of 6 IMPLEMENTATION COMPLETION REPORT NATIONAL SERICULTURE PROJECT (Loan 3065-In/Credit 2022-IN)) BORROWER'S EVALUATION REPORT ON PROJECT COMPLETION 1. INTRODUCTION: Sericulture in India is overwhelmingly a decentralized employment oriented agrarian enterprise in the cottage sector. As practiced by the majority of sericulturists, it offers relatively higher returns for a modest investment, and is propped up by the robust domestic demand for traditional handlooms. The five traditional States of Karnataka, Andhra Pradesh, West Bengal, Tamil Nadu and Jammu & Kashmir together account for over 98% of the mulberry raw silk production and about 92% of the total raw silk production. In the wake of the IDA funded Karnataka Sericulture Project which was implemented between June 1980 and September 1988, the Central Silk Board, and the Directorates of Sericulture of the five sericulturally traditional States proposed assistance for a multi-State National Sericulture Project for mulberry silk. This project was appraised in November 1988 and Project related agreements signed in June 1989. 2. PROJECT OBJECTIVES AND FINANCING: Project assistance was a part of the Bank strategy to support policies and investments which encourage economic growth and social development in context of macroeconomics stability. Broadly the NSP aimed to finance sericulture development through an important expansion phase requiring improvements in productivity, product quality and support services, with increased private sector involvement in specific aspects. The project aimed to raise the annual production of mulberry silk *fom about 9000 tons to about 17100 tons in the project period, of which 4200 tons was to be attributable to the project, together with incremental employment of about half a million person years, with a share of 60% for women. The total project provision was US$ 347.1 million (equivalent to Rs. 5555 million at a conversion rate of 1 US$=Rs. 16) financed by an IBRD loan of US$ 30 million, IDA credit of US $ 147 Million (equivalent to 113.8 million SDRs); counterpart contributions from GOIVStates of US $ 41.1 million, advances from Indian commercial banks and financial institutions of US $ 104 million and a grant from SDC of US $ 25 million (equivalent of S. Fr. 40 million). Later, the proposed IBRD Loan, and a portion of IDA Credit amounting to SDRs 17 million were canceled bringing the assistance line to 96.8 million SDRs from IDA and 40 million Swiss Francs from the SDC. The components and their percentage shares of the total project base cost of US$ 190.1 million were as below: 47 Appendix B Page 2 of 6 # Key Components % of Base Cost 1 Research and Development 13 2 Basic Seed Production 15 3 Seed Grainages 18 4 Assistance to Private CRCs 5 5 Mulberry Plantations 1 6 Cocoon Drying and Cocoon Markets 6 7 Silk Exchanges and Silk Conditioning and Testing Houses 4 8 Extension Services 15 9 Training Centres 7 10 Technical Assistance and Training 4 1 1 Administration 7 12 Advances to Reelers 1 13 Joint Venture Participation 1 14 Support to NGOs 1 15 Construction of Smokeless Ovens 1 16 Beneficiary Assessment and Socioeconomic Surveys I The project was approved as a seven year project with the understanding that the five traditional States and CSB would implement their respective components independently, with CSB coordinating and consolidating the reports. 3. Project Design: The project design was perhaps influenced by the KSP though the benefit of the Project Completion Report (PCR) of KSP was available much later. In retrospect, some aspects of project design perhaps deserved greater attention at the concept stage. It was optimistic even then to assume that the growth of the sector in the 1980s would continue into the 1990s when internationally, one country, namely China, could dictate world raw silk prices. The projections in the SAR on raw silk production without the project do not appear to be based on any statistical technique of rigor; regression with earlier data would have yielded a much lower figure. Greater clarity in the SAR on moot points like disaggregated productivity objectives and better analysis of the socio cultural features and support requirements new areas may have given a better perspective of the intervention strategies in a complex field as in sericulture. It is now difficult to sideline the feeling that while the emphasis on the improvement of quality through on farm bivoltine initiatives was to an extent justified, the impact of technology in post cocoon areas on quality was perhaps not adequately comprehended at the time of design. The sequel was perhaps an inadequate emphasis on the post cocoon supports needed, and the overlooking of the kind of investments required for technology development, demonstration and upgradation in a crucial area like reeling which the private sector cannot absorb or put in place with high cost commercial credit from financial institutions. The project particularly on the extension side, would perhaps have been more cost effective had most of the extension service personnel augmentations been 48 Appendix B Page 3 of 6 designed in the form of farmer technicians of the kind in China. Perhaps project design attempted to give a commercial and self balancing profile to certain necessary support activities which cannot, in general, be filly financed by any private interest group all by itself in sericulture. It may have been better at the design stage to have realistically identified such activities on the basis of experience and laid down the ultimate targeted limits of recurring support from Govt. or Govt. agencies. The goal that even in such activities institutional recurring support from State/State aided agencies should be totally tapered out or wished away, perhaps did not contribute to practicality of design or achievement of certain project objectives. Clarity on the strategies to be adopted to enhance quality on the one hand and to alleviate poverty through increased production on the other was perhaps inadequate. 4. Implementation and operation experience, evaluation of the borrowers experience and lessons learnt from the project. 4.1 The NSP was implemented by the CSB and the five States in respect of components identified for each participant. The project credit line closed on 31 December 1996 with an estimated overall expenditure by CSB and the States of 5112.2 million, against an approved component cost of Rs. 583.797 million, and the target of Rs. 1652 million for credit from financial institutions. As per the Aide Memoire of the ICR Mission confirmed by the World Bank on 7 May 1997, the unavailed assistance after disbursements of all credits due by IDA and grants by SDC would be of the order of US$ 34 million. It is likely this shortfall would have been averted had the extension sought by one year been sanctioned. 4.2 Operational experiences offered by the implementation of this largely rural based project with multiple secondary socioeconomic objectives were unique to CSB and the traditional states. The diversity of the components and the issues which arose over the year held out many lessons. 4.3 On macro basis the project resulted in an increase in mulberry area in the project period in the project area, and an increment of raw silk production as follows: State/Pilot Projects In the Project Area in Incremental Silk Prodn. the Project Period 1995-96 Hectares Tonnes Kamataka 26137 2947 Andhra Pradesh 21615 634 Tamil Nadu 809 365 West Bengal 5564 220 Jammu & Kashmir 3302 30 Pilot Districts In 2565 17 Sericulturally Non- Traditional States. Total 59992 4213 49 Appendix B Page 4 of 6 In the States of Andhra Pradesh and Tamil Nadu there was substantial uprooting of mulberry from pre-project or non project areas, due to the effects of the perbrine disease outbreak of 1991-92 which discouraged some new farmers, falling groundwater table, erratic prices of cocoons and silk in markets consequent to the slashing of the 1989 prices of silk (US $ 52) to around US$ 22 by china in 1992-93. In Pilot States though there was a net increase of area there was extensive uprooting of planted mulberry due to specific socio-cultural factors of certain districts, adverse seasonal conditions, competing crop economies, inadequate flow of credit in some area, absence of arms length markets which arise only when transactions reach a certain optimal level, and the inadequacy or timeliness of State sponsored procurement systems, whose support was not a project component. 4.4 That in the face of these handicaps the project was able to result in the increase in the production of 4213 tons of raw silk and in the process afford gainful income earning opportunities to over a million person years per annum, is significant. Productivity in terms of silk per hectare rose by over 35% on the average in traditional States. Bivoltine hybrids, evolved in the course of a JICA assisted program (where a part of the infrastructure was put up with NSP assistance) from 1991 and 1997 CSB research institutes released 1O varieties of mulberry. Between 1995 July and May 1997, 17 silkworm races have been authorized. Indenting of these by the States and facilitation to farmers to absorb these new technologies, accompanied by the increased use of infrastructure set up towards the end of the project will enable the early manifestation of those project results which inevitably have a gestation period. The project has substantially aided the upgradation of basic seed stock, and the supply of good basic seed for multiplication by infrastructure creation. The External Research Review of 1994 helped in a reappraisal of CSBs research systems and a reorientation towards more rapid transfer of technologies. There has been a definite increased sensitization of gender and socio-economic issues and a better perception of the role of NGOs in development. While the training in Chinese institutions of 315 technical staff has been a resource creation activity of considerable potential, the numerous studies the project has facilitated represent a fund of knowledge for policy guidance in future. 4.5 The lessons learnt are many but those relating to certain components like the CRCs, the interventions in the Pilot States and in respect of Project Management, deserve mention. It could be argued that in certain components the enthusiasm to move in a certain direction had a doctrinaire flavor and this led to the possible glossing over of certain realities. In respect of CRSs the model which found its way into the project probably pedistrianised a sophisticated technical supportive concept with poor results. Perhaps devotion of adequate consideration to the finer supportive details of CRCs which apppear to function viably in China or Japan would have helped in better design of this component. In the case of Pilot States more time could have been profitably spent at start on planning strategies of implementation and evolving a pattern under which CSB could have assisted the States to put up the micro projects, after a clear understanding on the ground rules to be followed in respect of support systems to operate as a part of the project till arms length markets are motivated to arise. The project presumption that 50 Appendix B Page 5 of 6 supply of saplings with progressive cost recovery, mere training of rearers and reelers, and motivation of bankers to advance credit would create sustainability in new areas was not well moored in reality. 4.6 Also, it does appear that for a project with so many components, decentralized construction and procurement responsibilities, creation of an empowered specific project implementation structure would have helped. A project Management Unit, separate from CSB and the States and explicitly empowered to monitor and control the implementation of the project (even though constituted by personnel drawn from CSB and States) would perhaps have been able to devote more focused attention to various issues and brought into operation a certain uniformity of delegation of powers and producers among the participant institutions, thereby assisting faster implementation. 5. Evaluation of Bank Performance, Relationship among Borrower and Financier, Lessons learnt. 5.1 The World Bank and the SDC fielded in the course of the project fourteen review Missions. All the Aide Memoirs except the one relating to the Mid-term Review were received promptly and had good guidance value. The Mid-term Aide Memoire took a few months to finalize. While data on disbursed and undisbursed balances were easily available in respect of IDA credit at any point of time, the case was not always so with the SDC grants. The relationship of the CSB and the five States with the Bank and the DSC was cordial throughout the project. Inputs from the Missions were mostly form the Bank staff in the case of the World Bank and mostly from consultants in the case of SDC. While the professional guidance of the Bank on the core issues of procurement, technical assistance were very useful, the SDC suggestions which were predominantly related to environment, gender, enterprise promotion and data management helped to increase the sensitivity of participants to these matters. Perhaps for a complex project of this size, the time spent on some Missions could have been more. 5.2 In retrospect certain issues relating to data systems, privatisation and procedure merit mention. In the case of data collection and presentation, suggestions in the Aide Memoires from time to time did lead over the project, to a crystallization of what could be best done in a decentralized sector of diverse markets and practices. Data presentation formats evolved over time, capturing data which were not a part of the earlier formats. Mission inputs in evolving comprehensive formats much earlier (for instance in the wake of the special workshop of 1991) would have helped. Also, the emphasis on the technical features of data collection could have been better complimented with the tow identified tools of the project for periodic evaluation namely, beneficiary assessment and socio- economic surveys. 5.3 In respect of privatisation, sericulture is almost totally a privatized sector with Govt./Govt. agencies providing support. Seed quality is a very important aspect of productivity and quality and while the Bank & SDC made the increased privatization of 51 Appendix B Page 6 of 6 the seed sector an important item of the agenda, one witnesses today the coexistence of many under utilized Govt. grianages capable of supply of quality seed with facilities funded by KSP or NSP, alongwith some good private sector producers and several underequiped poor quality private seed producers. Perhaps a major approach on expansion or strengthening of commercial seed production facilities in Govt., and emphasis on licensing only highly screened and capable private seed producer, could have increased seed quality to a greater extent and ensured better infrastructure. 5.4 The third point relates to the procedural aspects of the project. It may have been practical to discriminate between projects where construction and equipment procurement are geographically dispersed and where these are largely localized. A dispensation where it could have been possible to procure ready built floor area would have, in some items saved time and expenses. Adoption of the same procedure for award of works for construction of buildings in developed and rural areas does create difficulties and delays. Similarly, in the purchase of equipments, common procedures for the purchase of relatively low equipments made by only a few suppliers of limited capacity, and comparatively high-tech equipment made by standard suppliers create problems of poor response to bids, and/or delayed execution by the few suppliers. Greater restrictions on the escalation clauses in construction contracts, waiving of bid requirements when the equipment is covered by a government rate contract, permitting negotiations with the lowest bidder satisfying technical requirements could make procurement less expensive for the borrower and save project costs. 6. Conclusion 6.1 The lessons learnt from the project experience have been rich and varied and the CSB and the five traditional states are grateful to the World Bank and SDC for the assistance that was offered to this sector through the NSP. The robust domestic market demand, the evolution of new technologies, and the detailed planning for the post project phase hold out abundant hope for the sustainability of this sector as a safety net for those who rely on it in rural areas.