Document of The World Bank

Report No: ICR0000372

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-29990)

ON A

CREDIT

IN THE AMOUNT OF SDR 198.4 MILLION

(US$ 126.6 MILLION EQUIVALENT)

TO

ISLAMIC REPUBLIC OF PAKISTAN

FOR A

NATIONAL DRAINAGE PROJECT

May 18, 2007

Sustainable Development Department Pakistan Country 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 Group authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Pakistan Rupees (Rs) At Appraisal (September 1997) US$1 = Rs 40.62

At ICR (December 2006) US$1 = Rs 60.97

FISCAL YEAR OF BORROWER

1 July to 30 June

ABBREVIATIONS AND ACRONYMS Abiana Water Charges IRC Institutional Reform Consultants ADB Asian Development Bank IWASRI International Waterlogging and Salinity

Research Institute AWB Area Water Board JBIC Japan Bank of International Cooperation Borrower Government of Pakistan km kilometre CAS Country Assistance Strategy LBOD Left Bank Outfall Drain DMP Drainage Master Plan M&E Monitoring and Evaluation DSEA Drainage Sector Environmental

Assessment Ma Million Acres

EIA Environmental Impact Assessment MTR Mid-term Review EPA Environmental Protection Agency MW&P Ministry of Water and Power ERR Economic Rate of Return NCB National Competitive Bidding FGW Fresh Groundwater NWFP North West Frontier Province FLAR Framework for Land Acquisition

and Resettlement O&M Operation and Maintenance

FO Farmers’ Organization OECF Overseas Economic Cooperation Fund (Japan)

FPCC Federal Project Coordination Committee

OFWM- On-Farm Water Management Directorate

FPSC Federal Project Steering Committee PA Participating Agency GCA Gross Commanded Area PAD Provincial Agriculture Department GOP Government of Pakistan (the

Borrower) PID Provincial Irrigation Department

Government Federal or Provincial Government PIDA Provincial Irrigation and Drainage Authority

IBIS Indus Basin Irrigation System PIM Participatory Irrigation Management ICB International Competitive Bidding RBM River Basin Management ICR Implementation Completion Report SAR Staff Appraisal Report IDA International Development

Association SGW Saline Groundwater

IDC Interest during Construction WAPDA Water and Power Development Authority IPOE International Panel of Experts

Vice President: Praful Patel Country Director: Yusupha B. Crookes Sector Director: Constance Bernard, SASSD Sector Manager: Adolfo Brizzi, SASSD Task Team Leaders: Manuel Contijoch, SASSD,

Usman Qamar, SASSD

iii

PAKISTAN

NATIONAL DRAINAGE PROGRAM (NDP) PROJECT

IMPLEMENTATION COMPLETION REPORT

(IDA Credit 2999-PAK)

TABLE OF CONTENTS

Abbreviations and Acronyms................................................................................................. ii

1. Project Data ......................................................................................................................... 1

2. Principal Performance Ratings.......................................................................................... 1

3. Assessment of Development Objective and Design, and of Quality at Entry ................ 2

4. Achievement of Objective and Outputs ............................................................................ 4

5. Major Factors Affecting Implementation and Outcome ............................................... 12

6. Sustainability ..................................................................................................................... 13

7. Assessment of Bank and Borrower Performance........................................................... 14

8. Lessons Learned ................................................................................................................ 15

9. Partners’ Comments ......................................................................................................... 16

10. Additional Information................................................................................................... 17

ANNEXES 1. Key Performance Indicators ........................................................................................... 20

2. Project Costs and Financing............................................................................................ 27

3. Economic Costs and Benefits .......................................................................................... 30

4. Bank Inputs....................................................................................................................... 36

5. Ratings for Achievement of Objectives/Outputs of Components ................................ 38

6. Ratings of Bank and Borrower Performance ................................................................ 38

7. List of Supporting Documents ........................................................................................ 39

8. Borrower’s Report ........................................................................................................... 41

Map #: IBRD 27854

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Project ID: P010500 Project Name: National Drainage Program

Project

Team Leader: Manuel Contijoch TL Unit: SASAR/SASSD ICR Type: Core ICR

Report Date: May 8, 2007

1. Project Data

Name: National Drainage Program (NDP) Project L/C/TF Number: Cr. 2999-PAK Country/Department: Pakistan/South Asia Sustainable Development Region: South Asia

Sector/sub-sector: Agriculture/Irrigation & Drainage KEY DATES

Original Revised/Actual PCD: 05/21/1993 Effective: 03/16/1998 02/25/1998

Appraisal 10/25/1995 MTR: 04/07/2000 04/06/2001 Approval 11/04/1997 Closing: 12/31/2004 12/31/2004

Borrower/Implementing Agency: Government of Pakistan – Water and Power Development Authority (WAPDA) and four Provincial Governments

Other Partners: Asian Development Bank; Japan Bank for International Cooperation (JBIC)

STAFF Current At Appraisal Vice President: Praful Patel Mieko Nishimizu Country Manager: John Wall Sadiq Ahmed Sector Manager: Adolfo Brizzi Ridwan Ali Team Leader at ICR: Manuel Contijoch M.J. Wambia ICR Primary Author Manuel Contijoch and Usman Qamar1 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: Unsatisfactory Sustainability: Uncertain

Institutional Development Impact: Modest Bank Performance: Unsatisfactory

Borrower Performance: Unsatisfactory

QAG (if available) ICR Quality at Entry: Satisfactory Unsatisfactory

Project at Risk at Any Time: Yes

1 Draft ICR was prepared by FAO/CP--Team lead by Mr. Azad Azad with the participation of Messrs. Fernando

Gonzalez and Aslam Rasheed.

2

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Background 3.1.1 The drainage crisis. The Indus Basin has flat topography, porous soils, and semi-arid climate with high evaporation. In such an environment, irrigation without drainage leads inevitably to rising water tables and eventual salinity. An effective drainage system is essential to sustain environmentally-sound irrigated agriculture. Yet even under these circumstances, it is possible, and economically rational, to postpone the provision of drainage while expanding the irrigation network. This is what Pakistan had chosen to do. Unlike the irrigation network, which is contiguous, Pakistan’s drainage network was by sharp contrast scanty and not interconnected. Much of the drainage effluent was either retained in the basin or disposed into the rivers and canals. The consequence of operating a vast and interconnected irrigation system for decades without adequate drainage had been the gradual rising of the water table and associated salinity. By the 1960s, the loss of agricultural land to water logging and salinity substantially exceeded the amount of new land brought under irrigation expansion schemes during the same period. Water logging and salinity became the principal threats to the sustainability of irrigated agriculture in Pakistan with 37.6 percent of the Gross Commanded Area (GCA) waterlogged2, of which 15 percent was severely waterlogged3. And, 14 percent of the surface was saline4, of which 6 percent was severely saline5. 3.1.2 Impact of Water logging and Salinity. The rise of groundwater table to near the surface in saline groundwater (SGW) areas, and the consequent soil salinization became serious environmental problems. The impact of salinity on agricultural productivity was severe: a 25 percent reduction in the production of Pakistan’s major crops was attributed by many experts and the Borrower to soil salinity alone. In the Sindh Province where the problem was much more severe, the Borrower estimated that the impact was closer to 40-60 percent in SGW areas. The critical threshold at which salinity begins to affect the productivity of agricultural land varies by crop. Similarly, the impacts of waterlogging on yields are startling. High groundwater tables inhibit root growth and reduce yields. As the depth to water table decreases to within 5 feet, yields of all major crops begin to decline rapidly. At 0 to 0.8 feet depth-to-water table, yields are only 2 percent of the normal for cotton, 9 percent for sugar, and 21 percent for wheat. In addition, there are serious environmental and poverty impacts associated with water logging and salinity. 3.2 Original Objective: 3.2.1 The goal of the NDP Project was to implement the first phase of the Government of Pakistan‘s (GOP’s) National Drainage Program, which was designed to minimize saline drainable surplus water and thereby facilitate the eventual evacuation of all saline drainable surplus water from the Indus Basin to the Arabian Sea, thus restoring environmentally sound irrigated agriculture in Pakistan. 3.2.2 The objectives of the project were to improve the efficiency of the irrigation and drainage system in Pakistan, and ensure its sustainability by: (i) establishing an appropriate policy environment and institutional framework, and strengthening the capacity of sector institutions (i.e. carrying out the first phase of policy and institutional reforms in the water sector); (ii) improving sector policies and planning; (iii) strengthening the technical foundations and knowledge base of irrigation and drainage; and (iv) improving the irrigation and drainage infrastructure. 3.2.3 The project was in line with GOP’s 8th Five-Year Plan (1993-1998) for the water sector, which emphasized protection of agricultural lands against the onslaught of water logging and salinity. In

2 Water table shallower than 10 feet. The critical threshold at which the water table begins to affect the productivity

of agricultural land is about 8 feet. 3 Water table shallower than 5 feet. Irrigated agriculture is only marginally viable at this water table. 4 Electrical conductivity of 8-15 ECe. 5 Electrical conductivity of above 15 ECe.

3

doing so the project sought to support the Country Assistance Strategy (CAS) objective of reducing poverty, in rural areas affected by water logging and salinity. The project also sought to implement GOP’s Irrigation and Drainage Strategy formulated in 19946 that envisaged establishing an efficient and self-sustaining irrigation and drainage service delivery system. 3.2.4 While the objectives were clear and central to socioeconomic development, they were overly ambitious. The project scope was also overly ambitious. Firstly, achieving the stated objectives entailed major governance, policy and institutional reforms and the transformation of a century-old irrigation governance system. Government water institutions in Pakistan (both at the Federal and Provincial levels) had not made the transition from the era of development and construction to the era where management of resources and services is the primary challenge. The formal service delivery structures for irrigation were exclusively large public sector agencies, which operated with little accountability to their users, and with little transparency. While starting the transition away from this old model to modern service delivery architecture was a high priority, accomplishing this within the life of a six year project, which also sought to support major investments in infrastructure, was a daunting task. The SAR correctly identified some project risks, but mitigation measures provide to be inadequate or too late. Methods for implementing key steps proved neither effective nor robust, being easily by-passed; and assessment of institutional preparedness was over-optimistic. 3.3 Revised Objective: 3.3.1 There was no revision of project objectives, which remained unchanged. 3.4 Original Components: 3.4.1 The project had four components as articulated in the staff appraisal report (SAR).

(i) Sector Planning and Research (US$26 million - 3.3% of total project cost). (ii) Institutional Reforms (US$57.7 million - 7.4% of total cost) of the Water and Power

Development Authority’s (WAPDA) Water Wing, and four Provincial Irrigation Departments. Despite the relatively small financial allocation this component was intended to be the most important of the project.

(iii) Investments (US$683 million - 87% of total) in (a) off-farm drainage; (b) on-farm

drainage including surface and tile drains, improvement of watercourses (2000), and transfer of existing tubewells to beneficiaries; (c) rehabilitation/modernization of irrigation systems; (d) O&M through performance contracts with the private sector; and (d) preparation of investment projects.

(iv) Program Coordination and Supervision (US$18.5 million - 2.3% of total) involving

establishment of: (a) an overall program coordination and monitoring unit (i.e. Federal Project Steering Committee); and (b) WAPDA and Provincial NDP cells.

3.5 Revised Components: 3.5.1 While there was no formal revision of the project components, the scope of the investment component, was substantially curtailed and the nature of drainage investments was limited to rehabilitation (with few new investments), primarily because the implementing agencies were reluctant to comply with the Framework for Land Acquisition and Resettlement (FLAR) agreed as part of the project. The emphasis of the project also shifted towards irrigation investments and one large canal remodelling projects was included in the project. Substantial amounts ($146.7 Million) from the

6 The strategy is summarized in Report No. 11884-PAK: Pakistan Irrigation and Drainage: Issues and Options; The World Bank, March 25, 1994.

4

IDA Credit and the ADB loan were diverted to the Drought Emergency Recovery Assistance (DERA) program. 3.5.2 The SAR monitoring indicators were inadequate to determine progress, particularly on institutional development. This reflects a lack of good Bank-wide guidance on appropriate indicators for the sector and for institutional development objectives. For this project, baseline values and better indicators were needed not only for physical progress (e.g. number of farmer organizations established), but also on the “software” aspects of the reform (e.g., changes in performance standards by project organization). 3.6 Quality at Entry 3.6.1 Overall quality at entry is considered unsatisfactory. While the project incorporated lessons from past drainage projects in Pakistan and advocated a “programmatic approach” as opposed to a “project approach” to drainage investments with a view to providing more flexibility in implementation, the overall project design was overly complex and ambitious and had several shortcomings. Firstly, the strategy of seeking to dispose the saline drainage effluent to the Arabian sea precluded focus on evolving solutions based on integrated irrigation and drainage management and identification of options for local disposal of drainage effluents (e.g. evaporation basins). This mode of drainage disposal was played down based on the experience under poorly designed and located evaporation ponds under one past project (SCARP VI). Successful experience elsewhere (e.g. Australia) was not taken into account and formulation of incentives for drainage management did not receive attention. Secondly, seeking to move forward an agenda of policy and institutional reforms as well as investments simultaneously in four provinces (each with widely varying degrees of absorptive capacity and commitment to the reforms) and in WAPDA, was a tall order. In retrospect, a drainage project envisaging a major civil works component was not the right vehicle for implementing reforms that sought to improve irrigation service delivery. A more focused irrigation project would probably have been a more appropriate vehicle for irrigation service delivery reform. Thirdly, some key features of the 1994 Strategy were not incorporated in the project design. The emphasis was on organizations (PIDAs, AWBs and FOs), not on incentives and instruments. Transparency of water entitlements and incentives for developing water markets advocated in the strategy was not explicitly included in the reform agenda. As a consequence, these important aspects did not receive the importance they deserved during implementation. Fourthly, the project design did not address issues of change management that should have accompanied interventions involving a major reduction in the role of the public sector entities (e.g. dealing with redundancies arising out of greater decentralization and handover of irrigation management to farmers). Fifthly, inadequate attention was given to preparing the investment component and bringing it to a state of readiness for the first two years of project implementation. When the project started the only investments ready for implementation were the incomplete canals remodelling contracts awarded under the LBOD Project. Sixthly, the absence of a country wide drainage master plan made the identification, preparation and design of sub-projects a difficult and slow process. Finally, the decision to categorize the project as a “B” rather than an “A” was questionable although this was in line with the prevailing practice of “big Bs” at that time.

4. Achievement of Objective and Outputs 4.1 Outcome/Achievement of Objective: 4.1.1 Overall achievement of objectives is rated as unsatisfactory. The assessment of achievement of each objective is summarized below. The performance indicators included in the SAR were not systematically monitored and there have been no independent evaluations that might have helped judge more precisely the project's achievements. Achievement of development objectives is summarized below.

5

Objectives/Components Relevance Outcome

■ Institutional reforms►WAPDA Water Wings► Provincial Irrigation Departments2 and 3. Improve sector policies and planning and strengthen the technical foundations of and knowledge base on irrigation and drainage■ Sector planing and research► Sector planing and policy studies► Research programs

■ Investments► Off-farm drainage► On-farm drainage► Irrigation systems► Operation and Maintenance

4. Improve the irrigation and drainage infrastructure network

1. Establish an appropriate policy environment and institutional framework, and strengthen capacity of sector institutions

High Unsatisfactory

Moderatly statisfactory

UnsatisfactoryHigh

High

4.1.2 Objective # 1. At ICR this objective was only partially achieved in the Sindh Province and not achieved in the other provinces, although all provinces had passed supporting legislation to transform and decentralize the irrigation service delivery architecture in to a three tier system of governance, comprising an autonomous irrigation and drainage authority at the provincial level, area water boards (AWBs) at the main canal level, and farmer organizations (FOs) at the distributary canal level. 4.1.3 Sindh established an autonomous Sindh Irrigation and Drainage Authority (SIDA), “notified” three AWBs, and established 150 FOs, with whom irrigation and drainage management transfer agreements were concluded. Subsequently Sindh also approved a Water Management Ordinance in 2002, which besides clarifying jurisdictions of each agency as well as composition, processes and procedures, also envisaged establishment of an Irrigation and Drainage Regulatory Authority. While these early actions represented GOSindh’s commitment to the reform, subsequently the required enabling environment for allowing these fledgling institutions to develop and operate smoothly was not established. SIDA remained more or less fully under the Irrigation and Power Department administrative control. Four out of five Managing Directors of SIDA were retired or current Chief Engineers of the IPD with little incentive to make SIDA a truly autonomous organization and move forward the reform process. Barring a few exceptions, where the AWBs acted in the true spirit of the reform (e.g. closing direct outlets and preparing water distribution plans in a consultation with FOs), the AWBs were only a new name for the IPD Circles with all staff and the institutional culture remaining under the direct control of the IPD. The FOs represented a major change in the irrigation service delivery setup and improved performance on collection of water charges and achieved improved equity in water distribution. However, the good performance was not sustained, primarily because IPD remained apprehensive about the impact of the reform on its own future. Efforts to build FO capacity remained weak. 4.1.4 In Punjab, a good start was made. Thanks to the existence of reform champions in IPD, when in Pakistan, the first ever IMT agreements were signed with three FOs in Bahawalnagar. However, following the last change in government and departure of reform champions from the scene, the new IPD leadership decided to fundamentally change the course of reform and in effect largely reversed earlier gains. Although the Punjab Irrigation and Drainage Authority had been established (at least on paper) its role was changed to that of a “facilitator” of reform rather than being the replacement of the IPD as envisaged in the PIDA Act. The Lower Chenab Canal AWB, which was initially intended to be

6

an autonomous body at the main canal level (comprising of an executive board of management, specialized professionals hired from the market, and a board comprising of FOs’ representatives to oversee and guide policies) was deemphasized and its operationalization was postponed till FOs were established on all distributary canals. However, the most fundamental change was the introduction of the concept of “joint management” of distributary canals by FOs and IPD, with key responsibilities resting with IPD. In effect this meant delaying actual IMTs indefinitely and keeping FOs largely ineffective. Although numerous Khaal panchayats-KPs (water users associations at the tertiary level) and Nehri panchayats-NPs (FOs or federations of NPs) at the distributary canal level were formed, there was no delegation of responsibilities for O&M or abiana collection. Abiana assessment and collection responsibility remained with the IPD and Revenue Department, making FOs largely meaningless7. 4.1.5 In NWFP, which traditionally mirrors developments in Punjab in the irrigation sector, the reforms followed a similar course as in Punjab. Although NWF PIDA (or FIDA), an AWB in the Lower Swat Canal command and some FOs were established, few real changes took place. Concerted efforts under the NWFP on Farm Water Management Project, which also supported NDP reform objectives, ultimately led to the first IMT agreement with FOs. However, responsibility for O&M and assessment and collection of abiana was not delegated to FOs during the currency of the IDA Credit. Unlike other provinces, Balochistan faced relatively limited drainage problems and had participated in NDP primarily to improve its irrigation infrastructure. Moreover, Balochistan’s drainage disposal depended on development of downstream drainage infrastructure in Sindh. Given the overall slow progress on NDP investments and initial reluctance by GOP to allow irrigation investments under the NDP, Balochistan opted out of the project. Subsequently, when Sindh agreed to receive drainage effluent from Balochistan and irrigation investments were accepted as part of NDP, Balochistan decided to rejoin the project. However, by then it was rather late to move forward the institutional reform agenda within the life of the IDA Credit. 4.1.6 Institutional reform of the WAPDA’s Water Wing envisaged under the Project consisted of: (a) strategic reorientation to focus on inter-Provincial (i.e. federal) roles, mandates, and functions, including river basin management; (b) streamlining to improve capacity utilization, operational efficiency and effectiveness; (c) capacity building, including aspects related to public participation, financial management, and information systems; and (d) training. The project implementation period coincided with the restructuring of WAPDA’s Power Wing, involving separation and decentralization of generation, transmission and distribution functions. The Water Wing was also charged with the task of preparing the future vision of water resources and hydro-power development – the Vision 2025. Consequently, the reforms envisaged under the NDP were side lined. However, as part of the overall restructuring the Water Wing under went a sizable reduction and the officer to staff ratio in the Water Wing was brought down from 1:18 in 1992 to 1:7 in 2004. WAPDA got out of the business of acting as the implementing agency for the Provinces for drainage projects with the exception of a few large intra-province projects. Other aspects of the reform program envisaged under the NDP were not pursued. 4.1.7 Objectives # 2 and 3: improving sector policies and planning; and strengthening the technical foundations and knowledge base of irrigation and drainage. These objectives have been partially achieved. Seven major sector planning and policy studies were completed, including two high profile outputs: a draft National Water Policy (NWP), and a Drainage Master Plan (DMP) for the country. However, the policy agenda addressed did not include some of the generic issues in the sector, for example, separation of institutional responsibilities for policy making and sector planning from regulation and service delivery. 4.1.8 The objective of strengthening the technical foundation and knowledge base of irrigation and drainage was largely met. About four hundred technical research papers covering a range of irrigation

7 Towards the end of 2004 (when the IDA Credit was about to close), however, a new reform minded leadership emerged

in Punjab and the irrigation reform process was revived in earnest with major achievements.

7

drainage issues were published, numerous workshops/symposia on key technical issues were held, study tours and visits were organized, and small grants were given to support students pursuing Ph.Ds in various water disciplines. 4.1.9 Objectives # 4: improving the irrigation and drainage infrastructure. While the progress in meeting this objective was modest, The objective of improving irrigation/drainage infrastructure has not been met due to the slow pace of investment. However, the project has generally improved the performance of schemes through: (i) extension of their useful life; and (ii) reduction of leakages and repair of water control structures. 4.1.10 The project is generating sizeable economic benefits which have a direct and significant impact on poverty. Average income in the project area (Pilot command areas in each province) has gone up by more than 6% in real terms during project implementation. The benefits are particularly noticeable in areas where the subprojects have been completed. By a conservative estimate, one million hectare of farmland has benefited. The subprojects have also indirectly benefited the neighbouring farmers by preventing their land from being waterlogged. 4.2 Outputs by Components: 4.2.1 Component 1 (Sector Planning and Research) is rated moderately satisfactory. The component provided capacity building and technical assistance for: (i) studies to improve sector policies; (ii) sector planning studies and (iii) feasibility studies for high priority projects to be financed under NDP or for other projects. The research subcomponent supported two broad initiatives: (i) major research programs; and (ii) small grants programs. It was envisaged that sector planning, policy and research studies would start early and be completed by December 2003, but most have been completed in December 2004. The Ministry of Water and Power (MW&P) is seeking approval of the Cabinet for formally adopting the NWP. The DMP is the major planning effort supported by the project and includes the preparation of drainage atlas. It was completed in 2006. The Pre-feasibility Study of National Surface Drainage System (NSDS) was prepared three years later than planned and reviewed by an International Panel of Experts (IPOE). The feasibility study of the NSDS was dropped at the IPOE’s recommendation. For the follow-up project GOP and the Bank have followed a different strategy and prepared a number of feasibility studies for projects to be implemented on provincial level. The soil salinity survey of 16.7 million ha has been completed. 4.2.2 The primary concern over the NWP and other policy statements is that they have not been translated into action. They are neither supported by institutional structures and mechanisms, such as enabling legislation, nor by supporting economic incentives. There are also a number of issues which are not touched by the policy statements. These include: (a) water entitlements, inter-sectoral and inter-provincial conflicts for water use - the extent to which these exist, their context, and the machinery for resolving them; (b) the quality of hydrological information and the extent to which it might need to be upgraded for conflict resolution purposes; and (c) environmental, social and poverty issues. While there are references to pollution problems, solutions are not mentioned; nor is there any discussion on poverty and social effects of the drainage effluent, environmental flows and sea water intrusion. 4.2.3 The research subcomponent largely achieved its objective, by a significant increase in the knowledge base and capacity building in land and water management. It provided a wide range of dissemination opportunities and outreach to staff, academics and farmers. Approved research proposals and Ph.D. grants mainly aimed at reduced drainable surplus and safe disposal of saline effluent. 4.2.4 Component 2 (Institutional Reforms) is rated unsatisfactory. The NDP launched a nationwide program of institutional and policy reforms to involve farmers and the private sector in operation, maintenance and management of irrigation and drainage infrastructure. The aim was (a) to establish autonomous organizations with a three-tiered decentralized institutional setup comprising

8

Provincial Irrigation and Drainage Authorities (PIDAs), Area Water Boards (AWBs) and Farmer Organization (FOs) in each province; (b) to turn the responsibility for irrigation O&M of distributaries and minor canals and Abiana collection over to FOs; and (c) to streamline and reduce the costs of the decentralized organization of PIDAs, AWBs, and FOs, and to improve their functioning and sustainability; and (d) to build up the capacity of the PIDAs, AWBs and FOs.

Provinces PIDAs created

Number of Area Water Boards and

Service Area

Number of FOs

established

IDMT signed with FOs;

Number and area (ha)

Collection of Water

charges in FO areas

with IDMTSindh 1998 3 (1.8 million ha) 196 164 (581,500) ImprovedPunjab 1998 1(660,000 ha) 23 23 (178,700) not doneNWFP 1997 1 (53,800 ha) 24 6 (7,000) not doneBalochistan 1998 - - - -

Total 5 (2.9 million ha) 243 193 (767,200) 4.2.5 The ICR finds that (a) most AWBs are not yet operational and there are no water allocation committees as per the legal instruments; (b) IDMT does not guarantee irrigation service to FOs; (c) AWBs and FOs do not have the authority to disburse Abiana collected by them on maintenance of their canals; (d) there is no integrated management responsibility and accountability is weak. The exception was in Sindh, where the active role of the NDP Cell and its institutional relation with the Planning and Development office helped to strengthen the role of the FOs and AWBs. 4.2.6 In Sindh the Left Bank Canals AWB, with the support of SIDA and the IPD, closed several illegal outlets in Akram Wah, which served an area of about 20,000 ha. For the first time in several years the tail end farmers have received water. Sindh the leading province under NDP is also consolidating the reform process under the Water Sector Improvement Project, presently under final stage of preparation. In Punjab progress initially was slow, but at the end of 2004 it has shown high commitment for implementing the institutional reforms. In 2005-06, Punjab has moved forward in the reform process through the Irrigation Sector Development Policy Loan. In Balochistan and NWFP there is little progress in the implementation of the institutional reform. 4.2.7 WAPDA has made some administrative restructuring in the Water Wing. Some capacity building has taken place in financial management, information systems, environmental monitoring and through acquisition of GIS capabilities. 4.2.8 Component 3 (Investments) is rated unsatisfactory. The component had only limited achievements, which include: (i) completion of remaining works of Left Bank Outfall Drain such as remodelling of Nara canal (capacity: 368 m3/s and a command area of one million hectares) and commissioning of Twin Jamaro canal (capacity: 162 m3/s and command area of 375,000 ha); (ii) rehabilitation of drainage in Sindh (command area 1.1 million ha); (iii) a crash program for desiltation of irrigation and drainage in Punjab, NWFP and Balochistan (command area of 435,000 ha); (iv) award of eight O&M performance contracts for various components of the drainage system in Sindh (command area 516,000 ha); and (v) preparation of a pipeline of subprojects in the off-farm investment category; a large number of the projects prepared under the project are being implemented under other programs and projects. The repair works have generally improved the performance of drainage and irrigation schemes.

4.2.9 No new off-farm projects were undertaken because of implementing agency reluctance to follow the Framework for Land Acquisition and Resettlement (FLAR) agreed at appraisal. On-farm drainage “could not be implemented due to absence of FOs in the affected areas”. The subcomponent for “modernization of irrigation systems” was not implemented. The investment component was

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delayed due to several factors including identification of new projects, surveys, government’s approval procedures, and the lengthy preparation of design and tender documents. The surveys were not included in the scope of work of the Engineering and Design Consultants and had to be arranged by the Implementing Agencies. Punjab relied on their in-house teams; Sindh used private contractors and NWFP contracted out the surveys to WAPDA’s P&I Division. The surveys were often delayed and at times inaccurate. Changing priorities and frequent additions and deletions of schemes by the provinces resulted in too many revisions of Rolling Plans and unproductive appraisal by the consultants and further delayed the implementation of the project. Quality of civil works has been generally satisfactory. It should be noted that for having such diverse small and large civil works contracts no reports were available on construction quality. 4.2.10 Out of 157 contracts of civil works, only 62 subprojects (39 percent) could be completed by the closing date of IDA Credit. The remaining 95 subprojects are likely to be completed with the assistance ADB, JBIC and from the government’s own sources before December 2006. 4.2.11 O&M through Performance Contracts. This subcomponent supported O&M of selected drainage facilities through five years’ contracts awarded to the private sector. Eight performance contracts were awarded for O&M of scavenger wells, interceptor drains, subsurface and surface drains of the LBOD Project in Sindh. The experience from these contracts has been reasonably satisfactory. The expenditure on all contracts except for those for Scavenger Wells Sanghar and Tile Drain Mirpurkhas was less than PID standard costs8. It was envisaged that costs would be recovered from the beneficiaries, but no such recovery has taken place. Other provinces did not award any O&M contract despite provision in the SAR. 4.2.12 Pipeline of investment projects. A total of 186 feasibility reports were prepared by the Consultants. About 158 of these subprojects either have been, are being, or are likely to be implemented in the remaining two years of NDP. The remaining 28 subprojects were either dropped or shifted to other programs. The new provincial projects prepared under NDP include (i) a project in Sindh for improvement of irrigation and drainage over an area of about 1.8 million ha,; (ii) a feasibility study for rehabilitation of the Taunsa Barrage in the Punjab; (iii) rehabilitation of LCC East Canal; and (iv) preparation of a Balochistan small irrigation schemes project for possible IDA funding. 4.2.13 Consultants. The project included heavy consultancy inputs (estimated at credit closure to be about 15,052 person-months, of which 942 person-months international), covering: (i) NDP Design and Engineering Supervision; (ii) sector planning and policy studies; (iii) financial management and information systems; (iv) assistance to the provinces in institutional reforms; (v) social design and environmental; (vi) monitoring and evaluation and (vii) other individual long- and short-term consultancies e.g. for training, development communications, editorial specialists, panels of experts, accounting and auditing. Overall the consultants suffered from the lack of counterpart agencies at provincial level. There was too much consultancy too soon, the tasks were too large, and there were frequent modifications to project design, to the topics to be covered and to the area to be covered, a lack of harmonisation between the review mission’s advice and instructions, donor’s expectations and release of funds. Work programme authorizations and consultant payments were sometimes delayed. 4.2.14 The Design and Engineering Supervision Consultants were assigned the responsibility to act as Engineer for all contracts on behalf of the employers. Planned inputs totalled 8,596 person months (672 international, 7,924 local including 2,000 person months of client-seconded staff from PIDs). By IDA credit closure about 11,242 person months (472 international and 11,183 local) were used. The works done under NDP primarily covered rehabilitation of canals, drains and structures through a large number of small contracts spread over the provinces. The nature of work i.e. "deferred maintenance of which mainly desilting works" did not warrant that the consultant act as Engineer and could have been more economically carried out by the concerned PIDs/PIDAs with the assistance of

8 This could be because of the competition in the private sector but it may also be partially due to reduction in drainable

surplus because of the drought conditions.

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the consultants. The consultancy assignment was complicated by not assigning the survey works to the consultants. 4.2.15 Land Acquisition and Resettlement. During negotiations WAPDA and the provinces confirmed that all land acquisition, involuntary displacement, subsequent resettlement and rehabilitation caused by the project, would be in accordance with the FLAR agreed between the Borrower, provinces and IDA. The implementing agencies proved reluctant to follow the agreed FLAR, whereas the Bank insisted on strict adherence to it. As a result no new projects were undertaken. 4.2.16 Environmental Impact Assessment. The project’s positive environmental impact was limited by the reduced investments in drainage/irrigation subprojects. It has helped reduce drainable surplus through drain rehabilitated and improvement of watercourses as well as allowing more equitable distribution of water through canal rehabilitation and watercourse improvement. Farmers have reduced pumping and use of saline water. Drainage and watercourse improvements will also have health benefits from less malaria and lower fly populations, since stagnant swampy areas have been drained. 4.2.17 Comprehensive guidelines for environmental scoping and screening of investment projects were prepared in 1998. The screening criteria included national laws and regulations, site environmental requirements, protection of natural and socio-cultural environment, and resettlement issues. All the subprojects (mainly deferred maintenance) implemented under NDP conformed to these criteria; and no subprojects were included without a disposal strategy for the drainage effluent. The sub-projects directly funded by IDA are limited to rehabilitation and remodelling of the existing drains and canals in Sindh and Punjab Provinces. Taking a wider view of environmental issues in the drainage sector, various studies and missions supported by the Bank have reviewed the NSDS therefore the NDP have adopted distributed drainage management options as opposed to reliance on trans-basin drainage highways. 4.2.18 Under NDP an Environmental Management Framework is being developed with ADB assistance. Implementation of the Environment Management Plans (EMPs) for the CRBIP and the LBOD projects has started. Stakeholder workshops were held on the EMPs of both CRBIP and LBOD, the EMPs revised, incorporating workshop recommendations and ADB has approved their implementation. The negative impacts on the coastal wetlands were not addressed by the project.

4.2.19 Net Present Value/Economic Rate of Return. Re-evaluation of economic benefits follows the methodology used at SAR. Actual project expenditures have been adjusted to 2005 constant prices, as detailed in Annex 3. In the SAR, the economic rate of return (ERR) was estimated at 21% for the overall project; surface drain; Sindh 29%, Punjab and NWFP 15%; and watercourse improvement in Sindh 30%. The revised estimates at ICR are overall project 15%; surface drain; NWFP 12%, Punjab 14% and Sindh 16%; and watercourse improvement in Punjab 15% and Sindh 13%. Net present value of the project comes to Rs 876 million as compared to Rs 7,775 million estimated at SAR (See Annex 3). 4.2.20 At IDA credit closure the benefited area is estimated at 1.053 million ha (2.6 million acres). The NDP so far created employment of about 330,000 person days per year at full development through increases in cropping area and related activities of growing and harvesting crops. In addition, during its implementation it provided employment directly to about 5,000 persons and indirectly to about 7,500 persons including short term employment for technical and non-technical personnel. Through the implementation of about 400 subprojects for de-silting of drains and canals, NDP has benefited mostly the poor sector of the farming community, which is concentrated in waterlogged and saline groundwater areas at the tail ends of schemes. A further positive impact on poverty will occur through more equitable distribution of irrigation water.

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4.2.21 Financial Rate of Return. SAR did a farm budget analysis for different types of projects on the basis of a one-hectare farm model only in Sindh. Cost of production, gross income, and net income per one-hectare farm have been re-estimated at ICR. Results of farm budget analysis suggest an increase in income of 5 to 8% in subprojects completed or likely to be completed. The impact of watercourse improvement results in a 5% farm income increase in Sindh against the 8% anticipated at appraisal. Increase in the farm income due to rapid rehabilitation and de-silting of canals is estimated as 5% in Punjab and 7% in NWFP and Balochistan. The model for calculating ERR has been replicated by replacing the benefits and costs with the financial values. The overall project FIRR is estimated as 13.5% and the NPV as Rs 475 million.

4.2.23 Institutional Development Impact is rated as modest. The main concept of NDP was to transfer I&D construction and O&M from the PIDs to a three-layered system of new autonomous entities and to transform WAPDA into a river basin management organization in charge of inter-provincial programs. NDP has created an environment for discussion of the problems of the IBIS and has helped reach a consensus at the highest government level on the need for reforms to support sustainable economic development. While these are encouraging reforms at the grass root level has been much slower than expected. The present status of the reforms is as follows:

• Regulatory acts. All provinces have passed legislation to enable formation of PIDAs as the prime agent of change and to promote the establishment of AWBs and the formation of FOs. The AWBs (at least one in each province) are to be established on a pilot basis and should achieve self-sufficiency over a 7-10 year period. The FOs are to operate and maintain the distributaries and minors within the pilot AWBs and collect water charges (abiana) from farmers. Contracts are to be made between AWB and FOs to regulate the water services. Sindh enacted a Water Management Ordinance in October 2002 that defines the roles and responsibilities of these organizations and in also makes provision for creation of a Regulatory Authority (i.e. not yet established) to regulate irrigation, drainage and flood protection.

• Changes in organizational structure. The main change proposed by NDP is replacing the PIDs vertical bureaucratic structure with the three-layer autonomous, self-sufficient, participatory structure. This change is slowly taking place in the provinces.

• Reform in the management process is mainly about the collection of abiana. At present provincial revenue departments collect the abiana and funds from the province treasury are made available to the PIDs. The NDP model empowers FOs to collect abiana, to retain 40% for O&M within its jurisdiction and to transfer the remaining 60% to the AWB. Sindh is the only province that started to use this model under NDP. Rules for spending funds collected are still pending.

• The incentive framework has had little attention in NDP. In fact the reform is creating insecurity, uncertainty, and concerns especially amongst PIDs staff. There is also resistance to social mobilization and formation of FOs.

• Skills development. NDP has provided a wide range of dissemination opportunities and outreach both to the professional community and farmers.

4.2.24 In spite of these achievements consistent delays and failure to take minimum required actions to have functional PIDAs and AWBs even in the pilot areas, raise serious doubts about the sense of ownership and the real commitment of PIDs to NDP’s basic strategy and reform program, and on the ability or willingness of the provinces and the PIDs to make the crucial moves to implement the reforms. PIDAs remain empty shells as they have few staff and PIDs remain in control of the systems, continuing to function as in the past. Opponents of reforms claim that the NDP reforms have failed, but it is also true that PIDs have failed to reform.

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5. Major Factors Affecting Implementation and Outcome 5.1 Factors Outside the Control of Government or Implementing Agency: A number of natural phenomena had a bearing on the project: (i) The record storms of a cyclone in 1998 and 2002 resulted in extensive flooding in the lower parts of the coastal areas; (ii) the persistent drought for over 4 years reduced the waterlogged area and emphasis shifted towards increasing irrigation supplies instead of drainage; (iii) following the change of government in 1999 the project virtually remained on hold for more than a year during its review and reformulation by the new government; and (iv) different modalities of donor funding and different closing dates of various donors negatively affected the project performance.

5.2 Factors Generally Subject to Government Control include: (i) provincial procurement procedures included preparation and approval of the PCI by their PDWP for each and every scheme/subproject, which was time consuming. Provincial governments use their Composite Schedule of Rates (CSR) as the basis for cost estimates when awarding contracts. This resulted in further delays in cases where bids which reflected current market prices were over 10 to 15% higher than the departmental estimates. In such cases the contracts were never awarded or delayed while the PC-1 was revised and a fresh approval sought. This issue was ultimately taken up by the Federal Program Steering Committee (FPSC) in mid-2003 when a premium above the CSR was recommended by FPSC and subsequently adopted by the Provinces to ease the situation; (ii) there was reluctance in government circles to follow the agreed FLAR, which delayed the subprojects requiring land acquisition, and in many cases precluded their implementation.

5.3 Factors Generally Subject to Implementing Agency Control: (i) Absence of a First Year’s Program in all provinces except Sindh. No projects, except the remaining works of Nara canal in Sindh, were ready for implementation in the initial stages of NDP. Project preparation activity started only in 1998 and initially only the leftover works could be implemented and no new subprojects could be implemented in the first year. (ii) Changing priorities and frequent additions and deletions of schemes by the Provinces resulted in too many revisions of "rolling plans", unproductive preparation of subprojects by consultants and implementation delays. (iii) Although commitment to institutional reform remains present at the highest level progress has remained slow. The PIDAs and AWBs are not functioning effectively and do not have administrative and financial authority to carry out their assigned tasks. Delayed formation of FOs slowed execution of on-farm works. (iv) Balochistan opted out of NDP in March 2001 as it did not have a proper outfall for its drainage effluent. The province rejoined in August 2003 when it was decided that the effluent from the Province will be disposed of through Sindh.

5.4 Costs and Financing: The table below provides a summary of the costs by main components. Further details are provided in Annex 2.

Project Cost by Component Appraisal Estimate

(US$ million)

Actual/Latest Estimate

(US$ million)***

Percentage of Appraisal

A. Sector Planning & Research 25.70 9.50 37 B. Institutional Reforms 57.70 16.69 29 C. Investments 683.10 173.45 25 D. Programme Coordination and Supervision* 18.50 26.88 145 Total Project Costs** 785.00 226.51 29 * It includes interest during construction

** Including all co-financiers, government and beneficiaries *** December 2004.

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5.5 Of the total expenditure IDA financed US$ 126.6 million. At closure about 99.9% of the Credit/Loan amount had been disbursed. An amount of US$ 146.7 million was disbursed to Drought Emergency Relief Assistance (DERA) Project9. 6. Sustainability

6.1 Rationale for Sustainability Rating: While sustainability of the project was dubious during implementation, at the end of the project Sindh and Punjab province have made significant commitments towards implementation of the reform process. In Punjab, the on-going programmatic development loan is supporting significant changes in the acid management, service delivery, and water distribution and entitlements as well as in on-farm irrigation activities. In Sindh, the consolidation of the three areas of the Water Board will be financed by the WSIP (Water Sector Improvement Project) which is presently at the negotiation stage. In conclusion, the sustainability of NDP is uncertain.

6.1.1 Sustainability is difficult to rate, particularly as the project is not yet complete. Sustainability will depend on a regular and systematic O&M program, cost recovery (especially, recovery of O&M10 cost) and institutional capabilities. At present, all these three seem uncertain and sustainability is therefore appears unlikely. Irrigation management transfer to FOs is only part of the sustainability equation - provision of adequate11 and timely funding for O&M of drainage and irrigation systems continues to be a problem and there are still few incentives for farmers to pay abiana because the irrigation and drainage systems are in bad condition and irrigation service delivery is generally unsatisfactory. 6.1.2 Pollution of both surface and groundwater is becoming a serious sustainability issue. The main sources of water pollution in order of their magnitude are the municipal effluent, industrial waste, fertilizer and pesticides, solid wastes, disposal of saline agricultural effluent and seawater intrusion. 6.1.3 To ensure sustainability the project rightly proposed addressing three interconnected aspects that threaten sustainability of the IBIS: (i) reduction of water logging and salinity, especially in Sindh (the most affected province), (ii) appropriate O&M and (iii) environmental management actions. Although there are encouraging results in several areas, (environmental management actions for example) water logging has only marginally declined, financial sustainability for O&M is not ensured and the organizations are not robust enough to continue working properly without the project. It is by no means clear what would the source of funding for the continued operation of the NDP cells. Consequently, future employment of the current personnel is not by any means guaranteed either. 6.1.4 An Environmental Management Plan (EMP) framework has been prepared by consultants financed by ADB. It provides a basis for developing a work plan (wetland protection, pollution and water resources management. There are some other positive actions that are bringing awareness and dissemination of information about the environmental problems and the need for Pakistan to address them now. New environmental cells are working in WAPDA and PIDAs in Sindh and Punjab. In Sindh the Water Sector Improvement Project will continue the IPOE review of the outfall system of LBOD and prepare a strategy to secure the functioning of the outfall system.

9 US$100 million in December 2001 and US$35 million in October 2004. Furthermore, at closure of the Credit

the unspent credit amount has been disbursed for DERA imports. 10 O&M cost: includes normal operation costs, normal maintenance costs, overheads of staff, space and vehicles and

equipment as well as depreciation to include costs of asset replacement/depreciation. 11 Pakistan Public Expenditure Management: Volume II Accelerated Development of Water Resources and Irrigated

Agriculture, April 2003, The World Bank.

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6.2 Transition Arrangement to Regular Operations:

6.2.1 Plans of Operation are needed for regular operation of the subprojects and institutions once the present funding from ADB and JBIC is no longer available. In Sindh the incremental costs of SIDA were being financed under IDA credit. The Government of Sindh has decided to finance the incremental costs of SIDA through Provincial ADP. In Punjab the PID has appointed consultants to supervise the ongoing contracts as well as any other works that are to be implemented in the future and it has also undertaken to finance the cost of the Provincial NDP Cell. In NWFP the IDA credit financed the incremental cost of the NWFPIDA. The NWFP government is considering seeking support from the ongoing IDA-assisted NWFP OFWM Project.

6.2.2 Punjab Government has made a significant effort to provide required O&M budget and has prepared a detailed asset management plan. The other provincial governments have not allocated adequate funds for O&M of irrigation and drainage infrastructure. Unless adequate funds are provided for O&M, sustainability of the irrigation and drainage systems will remain uncertain. If the current inadequate funding continues, the lives of the subprojects will shorten and a deferred-maintenance project will again be required in 5 years time.

6.2.3 Following Punjab’s example, there is a need to prepare an inventory of irrigation and drainage and a strategy for asset management, which should form part of the transfer agreements. It should be ensured that completion reports and as built drawings of civil works not yet submitted to AWB are made available to them. For the success of the institutional reforms and sustainability of the irrigation and drainage system it is necessary that plans of operation are prepared and implemented for all AWBs. 7. Assessment of Bank and Borrower Performance

Bank 7.1 Lending: NDP preparation process was focused mainly in bringing in the institutional reform to the irrigation sector in Pakistan. Project design and preparation process over an extended period helped build consensus. The project has absorbed over 220 staff weeks of Bank staff time to date and took almost four years to prepare. Bank performance in instituting and maintaining a dialogue with GOP on institutional reforms and water sector policy was timely. Subsequently, too much emphasis was given, both in design and initial supervision, to the urgency to carry out institutional reforms. Some of the risks involved in the project were correctly identified in the SAR but the mitigation measures have proved to be either inadequate or not taken in a timely manner. The preparation process overlook the legacy issues from the previous LBOD project and did not pay sufficient attention to consultation and environmental mitigation, particularly in the coastal areas. NDP was the major instrument to support the irrigation sector in Pakistan, but for almost ten years did not provide the investments urgently required to maintain the irrigation infrastructure in Pakistan. The name of the project did not contribute to communicate the real nature and objective of the project. 7.2 Supervision: Supervision missions were strong in technical, engineering, financial and institutional competence but ultimately ineffective in bringing the institutional component to a successful conclusion and so attaining the project’s primary development objective. The main problem was the institutional transformation of PIDs where the Bank team’s supervision task was made very difficult by an apparent lack of leadership and ownership of the institutional transformation by GOP, throughout the implementation period. With benefit of hindsight it would have helped to have had a legal specialist at the project start to find with the PIDs the best pragmatic way to provide the necessary legal basis for PIDAs. Bank performance in carrying out a lengthy and detailed MTR and launching two IPOEs to review the NSDS study and the DMP was fully satisfactory. More attention should have been given during supervision to monitoring and evaluation. Also, the supervision reports have been quite silent on construction quality. Having such diverse small and large civil works

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contracts construction quality is an important implementation issue with a significant bearing on the results. 7.3 Overall Bank Performance: Overall Bank performance is rated unsatisfactory. Borrower 7.4 Preparation: Ownership and commitment were clearly established at the federal level (e.g. MW&P and WAPDA) and at the highest political level, in part through the personal involvement of the President. Passage of the PIDA Acts in all four provinces demonstrates this commitment. 7.5 Government Implementation Performance: Implementation performance has been unsatisfactory due to lengthy approval and procurement procedures, use of CSR and reluctance to follow the agreed FLAR. 7.6 Implementing Agencies: Overall the performance of the implementing agencies has been unsatisfactory. WAPDA did not make use of the Project Preparation Facility to prepare a portfolio of projects for implementation in the initial stages. The frequent priority changes, additions and deletions of schemes by the provinces impeded successful implementation. Institutional reform moved at a very slow pace. The withdrawal of Balochistan and its subsequent re-entry into the project caused unnecessary confusion. Very little attention was paid throughout the project to M&E. Reasonable progress has been achieved in Sindh both in institutional reforms and investments through the efforts of the NDP Cell. Similarly the pace of reforms and investments has recently picked up in the Punjab. 7.7 Overall Borrower Performance: This is to be rated unsatisfactory. 8. Lessons Learned

8.1 The following lessons can be drawn from a review of the project implementation experience:

• Good sector work prior to appraisal and coordination between donors can be very valuable in assisting governments to embark on correct, but politically difficult sector policies. Planning processes must utilize a more consultative and participatory process in which all risks and options as well as tradeoffs are made explicit and considered by stakeholders and policy makers jointly. A broad planning framework that includes direct beneficiaries and those who could be potentially impacted by a project, or a series of projects, should be the basis for both consultation and plan formulation. Both planning and the subsequent operation and maintenance of drainage and flood management programs must be knowledge-based, with the acquisition and use of data, research and study central to the entire development process.

• Strong environmental work is needed for implementing complex projects. Environmental objectives and the intrinsic and human environmental values that are important for the livelihoods of direct and indirect beneficiaries need to be an integral part of the framework for formulating plans, designing projects and evaluating tradeoffs and risks.

• Keep it simple and I&D programs or projects should be handled at provincial level. The number of implementing or participating provinces, agencies and organizations with different conditions and political economies complicated implementation and made it difficult and time-consuming to reach agreements on key issues. The institutions that ultimately own the infrastructure and be responsible for its operation and maintenance must be the ones who manage the planning and design of the infrastructure.

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• Continuing government commitment is crucial for smooth project implementation. During implementation the commitment from different participants varied. The federal government stopped NDP implementation for a year and a half, Balochistan withdrew from NDP for more than a year and there was reluctance to follow the agreed FLAR, which delayed subprojects requiring land acquisition, and in many instances precluded their implementation. More realistic assessments and assurances are needed about long-term government commitment.

• Champions are needed for reforms. Experience from the project confirms previous Bank lessons about the importance of having a champion.

• Capacity building is essential. The project also showed the time and effort needed to build capacity of new as well as existing organizations. The extensive use of consultants cannot solve all the problems in the absence of clear counterparts. The works done under NDP primarily covered rehabilitation of canals, drains and structures through a large number of small contracts spread over the provinces. The nature of work i.e. "deferred maintenance of which mainly desilting works" did not warrant a consultant to act as Engineer and could have been more economically carried out by the concerned PIDs/PIDAs with the assistance of the consultants.

• Approval and procurement procedures should facilitate implementation. Preparation and approval of the PCI of each and every scheme/subproject took considerable time. Also the estimated costs on the basis of the Composite Schedule of Rates did not match market prices. The issues of the approval and procurement procedures need rationalization to facilitate smooth implementation of future projects.

• Better targeted and more quantity-oriented system of M&E is required. A baseline survey is needed to appreciate the incremental impact of project-induced changes. A better system of M&E can bring more timely adjustment to the implementation plan and more timely corrective action agreed with all stakeholders.

9. Partners’ Comments 9.1. Partners’ comments on NDP Performance were received from ADB and JBIC. ADB concurred on the assessment of the Project's outcome. Sustainability of interventions, including institutional reforms and investment components, is unlikely. The institutional reforms, which were the primary objective, will not be achieved under NDP. The institutional development impact is questionable, except in Sindh. The investment component was restricted to defer maintenance works, mostly desiltation of canals and drains. ADB decided to extend the closing period of the project to allow for the completion of environmental studies and mitigation plans. JBIC provided the following comment: "based on the fact of the slow progress of institutional reform, JBIC executed SAPI (Special Assistance for Project Implementation) in 2003. Since then, the reform has been accelerated, and 85 farmers’ organization and the Area Water Board in Lower Chenab Canal East have been created by December 2005.

(a) Borrower/implementing agency: Borrower’s contribution to the ICR is attached as Annex 8. (b) Cofinanciers: ADB and JBIC have extended the closing period of their NDP loans through 31th of December, 2006 and are presently preparing their ICRs.

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10. Additional Information 10.1 In September 2004 the Bank’s Inspection Panel received a request from a group of organized citizens of Sindh for inspection related to NDP on the following grounds:

a) Increased flooding due to collapse of Cholri Weir and damage to the Tidal Link causing ecological and environmental impacts in lower Badin District and resulting in livelihood impacts on fishing communities and damage to cultural properties.

b) Fear that extension of LBOD under the NDP project, through the construction of a National Surface Drainage System (NSDS), would result in excess flows with the potential risk of floods leading to loss of cultivated land and involuntary resettlement of the population.

c) Lack of attention paid to environmental issues and consultation with local communities during NDP project preparation and noncompliance with the Bank’s disclosure and environmental guidelines.

10.2 The Inspection Panel Report. The Panel reported that the NDP Project established the “groundwork for construction of a major northward extension of the LBOD,” and inherited the related task of responding to the environmental and social implications of LBOD. This was based in turn on the Panel’s finding that NDP depended on the functionality of LBOD because certain elements of the LBOD were completed under NDP. The Panel found shortcomings in the NDP environmental assessment (EA) and that NDP supervision failed to respond with timely corrective measures to the emerging problems of LBOD and its socio-economic impacts. The Panel found that the LBOD project failed and that its design was faulty, underestimating inherent and extreme meteorological risks. This contributed to the breakdown of the LBOD outfall system and the suffering of local people in lower Badin District. The Panel also found that the LBOD project paid little attention to impacts on the environmentally important coastal dhands. The Panel Report suggested that the Bank took only sporadic notice of these issues in its supervision reports, and was slow to respond to the eventual damage to the LBOD system and its impacts in part because it failed to assign appropriate expertise.

The Panel found that the Bank was not in compliance with several of its policies and procedures during the preparation and implementation of NDP, including Environmental Assessment (OD 4.01), Natural Habitats (OP/BP 4.04), Indigenous Peoples (OD 4.20), Involuntary Resettlement (OD 4.30), and Project Supervision (OD/OP/BP 13.05).

10.3 In Management’s view the Bank was diligent in the application of its policies and procedures during implementation of NDP. The Bank has endeavored to assist the Borrower to address two distinct problems with specific inherent complexities: the technical challenges of an outfall system in southern Sindh presented by LBOD, and the national reform process challenges taken up by NDP. Management has responded to the concerns of the Requesters, incorporating these concerns into its dialogue with Government of Sindh (GOS), formulating a comprehensive Action Plan and identifying suitable strategies and instruments through which timely implementation of the Action Plan can be undertaken. The lessons from the Bank’s long experience in the sector in Pakistan, and the LBOD and NDP projects, together with the strategic directions of the current Country Assistance Strategy (CAS), have been incorporated into the Action Plan. The Management response to the Inspection Panel report can be reviewed in report INSP/R2004-0007/4. The most relevant points raised are:

a) Many of the issues raised in the request relate to the Left Bank Outfall Drain (LBOD)

Stage 1 Project, which closed in 1997. NDP and LBOD projects are not directly linked and have different development objectives and outcomes.

b) No extension of the LBOD spinal drain to join a national surface drainage system was done under the NDP project. The NSDS concept was rejected following extensive studies and reviews. No investments under the NDP project have exacerbated flooding

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nor led to increased land loss due to erosion. No damage was caused to cultural properties and no involuntary resettlement was caused. The 2003 flood was an exceptional natural event which caused severe damage to the low areas of Sindh.

c) The Drainage Sector Environmental Assessment DSEA (1993) was accepted as Environmental Impact Assessment EIA for the NDP Project because it provides a strategic overview of the environmental issues of the drainage sector in line with the scope of the project. Further safeguards were built into the design of the subprojects involving robust social and environmental screening. Consultations were held during the project preparation phase with representative NGOs, FOs and Community Based Organizations to define the overall program and to outline the consultation and appraisal criteria and process for individual subprojects. During implementation the physical interventions were limited to rehabilitation of existing infrastructure. Management acknowledges that a full environmental assessment during the period 1994-1995 could have provided an added framework within which to consider the potential cumulative environmental impacts of the continued development of the drainage system.

While a poverty-targeted intervention is certainly needed in the lower Badin area, WB management believes that the implementation of the NDP project has neither worsened the plight of the people living near the dhands, nor is it the right instrument for such intervention.

10.4 Since the Request for Inspection was made in September 2004, the Bank has taken two important actions that established the foundation for the Action Plan:

• First, implementation of a USD18.0 million program to strengthen livelihoods in the coastal talukas of Badin and Thatta Districts has been launched through the PPAF, based on a Bank diagnostic study of livelihoods in the coastal areas of Sindh; and

• Second, at the request of the GOS, the Bank sent a POE mission to assess the various proposals and options to improve the security and performance of LBOD. This resulted in agreement with the GOS on a program of comprehensive flood and drainage management planning and feasibility studies that would lead to programs and projects suitable for support by the Bank and Sindh’s other donor partners.

10.5 Action Plan approved by the Board in October 31, 2006. The core issue in the Panel’s report is the continued vulnerability of and the adverse impacts on the population and livelihoods in lower Badin, particularly the poor and most vulnerable people in and near the dhands. The Bank’s short-term actions are selected to provide an immediate response to the plight of these people and to address the related issues.

• One of the actions under the PPAF livelihoods program is to review the social profile of the population in Badin and Thatta districts, with the aim of identifying specific nomadic and other vulnerable groups and addressing additional livelihood support issues.

• The Bank and Sindh authorities have discussed and agreed that the scope of the new WSIP12 will include a comprehensive flood and drainage management plan for the left bank of the Indus River in southern Sindh. Since the WSIP project will be the primary instrument for developing a specific flood management plan for the area of concern to the

12 This project would improve water productivity and water use efficiency by deepening and strengthening the

reform program, particularly the Farmers’ Organizations (FOs) and Area Water Boards (AWBs); undertake investments to rehabilitate and remodel irrigation and drainage facilities down to the watercourse level; build capacity; support the development of a knowledge base for water and flood management; and prepare a comprehensive flood management plan for the left bank of the Indus River in Sindh.

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Requesters, completion of the processing of the WSIP project has been made a high priority.

• A third immediate response is a socio-economic and environmental diagnostic study of the dhands area during the next dry season, similar to the socio-economic study in Badin and Thatta Districts. The aim will be to better understand the impacts on the dhands, and determine how the ongoing PPAF livelihoods program or other new interventions can be deployed to benefit the people and ecosystems in and near the dhands.

10.6 Medium-Term Actions. These include preparation of a comprehensive flood risk management and drainage plan for the left bank of the Indus River in Sindh encompassing Badin District, and planning studies leading to a program for the sustainable management of the coastal zone and Indus Delta, which face special problems ranging from sea water intrusion to global climate change and accelerated sea level rise. The delta is at the very tail end of the entire Indus system and modification of upstream flows, extractions for agriculture and urban supply, maintenance of flows for environmental purposes, inflows of drainage water and industrial and agricultural pollution have all had negative impacts on this sensitive area and its populations. These technical planning studies are intended to lead to specific projects and programs that are suitable for support by the Bank and Sindh’s other donor partners.

10.7 Long-Term Actions – Strategic Partnership with Pakistan in the Water Sector. The Bank’s strategic partnership with Pakistan in the water sector stretches back nearly 50 years. Both the CAS (2006-2009) and the CWRAS (2009-2016) (Annex 6) provide guidance for the Bank’s ongoing engagement. The Bank’s CWRAS articulates the major challenges for Pakistan if it is to achieve sustainable development in the water sector. These include developing a world-class knowledge-based capacity for adaptive resource management and service delivery; a financially feasible approach to maintaining and modernizing existing infrastructure and building needed new water infrastructure; establishing a modern institutional framework; and plotting a principled and pragmatic path for implementing this reform agenda over the coming decades.

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Annex 1. Key Performance Indicators

Outcome / Impact Indicators

Projected in SAR Actual/Latest Estimate

• Development of improved technology on irrigation and drainage: 12 Major Research Programs

completed by 6/2004 10 research proposals prepared

under Small Grants Program and approved by Research Advisory Committee by 6/2004

• 12 Major Research studies completed by 12/2004 Some of the Research topics included: 1. Use of brackish drainage water for agriculture and forestry 2. Dissemination of salinity and water management technologies 3. Collaborative on farm pipe drainage 4. Management of small-scale water logging and salinity problems. 5. Root zone salinity management with skimming wells. • 16 PhD grants given under Small Grants Program. 7 PhDs completed, 8 would continue beyond Jan 2005 one dropped.

• Increased awareness of improved technology and design issues and Wider application of improved technology and in design of new projects and operation of existing infrastructure: 20 research papers

disseminated (under Small Grants Program) to technical audiences by 6/2004

• About four hundred technical research papers were published and workshops and symposia were held, which included: 1. Three National drainage seminars. 2. Two National Drought Symposium and World Water Day 3. Six Regional Farmers Workshops 4. Two Training workshops on Model application 5. Twenty Four Farmers days in ongoing research studies. 6. Two Research Launching Workshops NDP helped to change the strategy of the Drainage Sector in Pakistan, which was initially focused in the NSDS. Now an integrated analysis will be adopted of water resource management issues in 20 drainage basins.

• Strengthen the technical foundations of and knowledge base on irrigation and drainage

• General Manager (Monitoring and Research) appointed

• General Manager (Monitoring and Research) not appointed.

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Outcome/Impact Indicators Projected in SAR Actual/Latest Estimate

• Improve sector policies and planning

• Policy reforms and master/sector strategies adopted by the Borrower and/or the Provinces and Improvement in policies, procedures, and planning for water sector projects: through satisfactory completion of 10 Sector Planning and Policy Studies by 6/2004

• Seven Sector Policy Studies and Six Sector Planning studies were completed/initiated under the Project. National Water Policy was prepared and submitted for approval to the federal cabinet. An apex body for the water sector is likely to be established to oversee the development of water sector. • Draft Drainage Master Plan was prepared and reviewed by International Panel of Experts. This would form the basis for a drainage sector strategy for the country. The Drainage Atlas is an excellent publication that may be of great help in investigating existing drainage, water logging and salinity situations.

• Pipeline of Investment Projects with satisfactory Feasibility studies and Pipeline of Investment Projects with satisfactory environmental, resettlement, social design, and IEC campaigns. Feasibility Study of

National surface Drainage System completed by 12/2002. 5 Feasibility studies

satisfactorily completed by 6/2004 Number of EIAs, RAPs, SAs,

IEC Campaigns commenced

• A Pre-feasibility Study of NSDS was prepared and reviewed by International Panel of Experts, Feasibility study was dropped on POE’s recommendations. The strategy of the Drainage Sector in Pakistan, which was initially focused in the NSDS will change to an integrated analysis of water resource management issues in 20 drainage basins. • 4 feasibility studies for major projects were prepared. In addition a large number of appraisal reports and tender documents were prepared, which would be implemented under other programs and projects. These include: 1. Water Sector Improvement Project Sindh 2. Small scale Irrigation Improvement Project in Balochistan. 3. Rehabilitation of Taunsa Barrage in the Punjab. 4. Rehabilitation of LCC east Canal in Punjab. • 188 Social and environmental screening reports sub projects were prepared. EIA of one big project of LCC east in Punjab was prepared. ADB is financing preparation of an Environmental Management Plan.

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Outcome/Impact Indicators Projected in SAR Actual/Latest Estimate

• Strategic reorientation, strengthen capacity and improve efficiency of WAPDA

• WAPDA’s progress on developing and managing the water resources of the Indus Basin beyond construction (e.g.: extent to which WAPDA has brought basin-focus on monitoring and evaluation, water resources planning, groundwater and surface water management, environmental management related to irrigation and drainage, participatory and social aspects relating to irrigation and drainage, financial planning for irrigation and drainage, etc.)

• Reforms for WAPDA's Water Wing have not been effectively implemented. The training component remained deficient. An Environmental Monitoring Cell has been established in WAPDA under the Project. Some capacity building has taken place in financial management, and information systems as well as through acquisition of GIS capabilities. WAPDA has undertaken some administrative restructuring in the Water Wing through an internal process.

• WAPDA’s withdrawal from intra-provincial irrigation and drainage

• WAPDA has not withdrawn completely from intra-provincial irrigation and drainage projects and is implementing some intra-provincial irrigation and drainage projects under its Vision 2025 Program e.g. Greater Thal Canal, Katchi Canal and Rainee Canal.

• Improvement of internal processes and procedures, including decentralization in WAPDA

• WAPDA has introduced limited internal processes and procedures including decentralization.

• Reduction in administrative costs of WAPDA (target not specified)

• WAPDA has undertaken administrative restructuring in the Water Wing through an internal process.

• Decentralization and management transfer of irrigation and drainage system in Provinces, and strengthen capacity and improve efficiency of decentralized institutions

• Area managed by decentralized institutions such as PIDAs, AWBs and FOs. 4 Area Water Boards (1 in each

Province) established and functioning by January 1 1999. (target area not specified) Increase in Farmers Organizations

formed and functional ((target number not specified)

• Performance has been mixed in different provinces. In December 2004, overall PIDAs have been established in all provinces; 5 AWBs (3 in Sindh, 1 each in Punjab and NWFP have been formed and 243 FOs established. The AWBs cover an area of 2.9 million ha; 193 FOs covering an area of 767,200 ha have signed IDMT. Sindh: SIDA was established in

1998 and at present has jurisdiction over 3 Area Water Boards (AWBs), which have a Culturable Command Area CCA of 1.8 Mha about 35% of the CCA in the province. 196 FOs covering an area of 645,000 ha have been registered. 164 FOs covering an area of 581,500 ha have taken over the responsibility for operation and maintenance of their distributaries and minors and collection of abiana. Punjab: PIDA was established in

1998. FOs covering an area of 178,700 ha have been established and management transferred to them. One

23

Outcome/Impact Indicators Projected in SAR Actual/Latest Estimate

Pilot Area Water Board (AWB) covering an area of 660,000 ha has been notified and would be functional by December 2005 by that time additional 69 FOs would be formed in the remaining area of AWB and take over management of the distributary/minor canals. NWFP: NWFPIDA was

established in 1997 and one Pilot AWB (CCA 53,800 ha) has been notified but is not fully functional. Against the target of 116 FOs in the Pilot AWB, 24 FOs have been established and transfer agreement signed with 19 FOs. Six FOs have taken over management of about 7,000 ha and are responsible for collection of abiana. Balochistan: An AWB for Pat

Feeder and Khirthar Canals was notified in August 1998 however it is not functional. No FOs were formed.

• Reduction in subsidies provided to PIDAs, AWBs, & FOs

• There is no visible reduction in subsidies to PIDAs, AWBs, & FOs.

• Cost reduction achieved by PIDAs, AWBs and FOs

• No visible cost reduction has been achieved by PIDAs, AWBs and FOs

• Increases in revenues achieved by PIDAs, AWBs and FOs

• Abiana collection has been undertaken by 116 FOs in Sindh and 23 FOs in Punjab and 6 FOs in NWFP. It is too early to draw any conclusions but it is reported by SIDA that the revenue assessment and collection has shown encouraging results.

• % of budget of PIDAs, AWBs and FOs spent on O&M works

• No significant change has taken place in increasing the budget spent on O&M works.

• % of budget of PIDAs, AWBs and FOs spend on staffing and establishment costs

• No significant change has taken place in spending on staffing and establishment costs, which still consume the highest percentage of O&M budgets.

• Extent of improvement in provision and quality of client services by PIDAs, AWBs and FOs. Indicators would include delivery efficiency of water, delivery of water to tail-enders, effective functioning of canals and drains (% performing to designed levels), extent of customer satisfaction with services provided, etc.

• Some improvement in service delivery is reported in some FO areas in Sindh. Some illegal outlets have been closed which served an area of about 20,000 ha. For the first time in three years the tail end farmers are reported have received water in some FOs in Left Bank Canal AWB in Sindh. A sense of frustration seems to be building up among the FOs; firstly because despite frequent promises no canal improvement works were undertaken and secondly on some FOs the large land holders

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Outcome/Impact Indicators Projected in SAR Actual/Latest Estimate

have not only not joined the FOs but also are making excessive withdrawals over and above their entitlements.

• Extent of transparency in financial and operational performance of PIDAs, AWBs and FOs

• The envisaged level of transparency in financial and operational performance of PIDAs, AWBs has not been achieved. In Sindh the rules for utilization of funds by the AWBs have been prepared and are awaiting approval of the Government of Sindh.

• Improvement of internal processes and procedures, including decentralization in PIDAs and AWBs

• The Provincial Irrigation and Drainage Authorities and Area Water Boards are not functioning effectively and do not have administrative and financial authority to carry out their assigned tasks and are dependent on the respective irrigation departments. The FOs need adequate capacity building to enable them to undertake their assigned responsibilities

• Improve irrigation and drainage infrastructure network

• Area of waterlogged land (i.e., watertable depth compared to baseline situation e.g., % of Area waterlogged, with watertable 0-5 feet, 5-10 feet, 10-15 feet, and more than 15 feet)

• The trends of annually increasing waterlogged areas have come to a halt and in large parts of the basin are even on the reverse mainly due to the prevailing drought conditions of the last 4 - 5 years. The water logging is mainly dependent on canal supplies and usually the effect of increased or decreased supplies is observed in the following year. Because of drought it is not possible to correctly estimate the effect of NDP in reducing waterlogging.

• Area of saline land • The saline area has reduced substantially in all Provinces due to better water distribution, operation of groundwater tubewells, accelerated program for drainage maintenance and particularly the extended drought.

• Area and % of land requiring drainage provided with adequate and functioning surface and sub-surface drainage.

• All the drainage sub-projects implemented under the Project mainly covered deferred maintenance and no new drainage projects were implemented due to IAs’ reluctance to follow the agreed FLAR. Under the Project following interventions were made:

• Km of off-farm surface drains constructed or rehabilitated (target length not specified)

• 6,368 km of surface drains (benefited area 789,600 ha) rehabilitated; 1,239 Km of surface drains were desilted (benefited area 176,300 ha)

• Km of on-farm surface drains constructed or rehabilitated(target

• 1 km

25

Outcome/Impact Indicators Projected in SAR Actual/Latest Estimate

length not specified) • 2000 watercourses improved • 527 watercourses improved; 500 in

Punjab and 27 in Sindh, which benefited an area of 87,300 ha.

• Area on which tile drains installed and functioning (target area not specified)

• Nil

• 5 canal commands modernized • No canals were modernized Km of canals rehabilitated (target length not specified)

• 2,008 km of canals (benefited area 729,000 ha) rehabilitated; 11,525 km of canals desilted (benefited area 176,300 ha); 9 km length of canals lined (benefited area 2,220 ha) and 76 canal structures rehabilitated.

• Area on which O&M was carried out efficiently through contracts awarded to the private sector (target area not specified)

• O&M provided through Performance contracts in an area of 516,000 ha;

• ERR of completed Investment Projects

• Overall 15% • Surface drain rehab 1. NWFP 12% 2. Punjab 14% 3. Sindh 16% • Watercourse Improvement 1. Punjab 15% 2. Sindh 13 % • Rapid rehabilitation/desilting of Canals 1. NWFP 13% 2. Punjab 13% 3. Balochistan 12%

• Increases in cropping intensities and yields resulting from reduced waterlogging and salinity

• Yield levels will be maintained. No increase in cropped area.

• Minimize drainable surplus; and facilitate eventual evacuation of saline drainable surplus from the Indus Basin to the sea

• Quantity of salt (and % of total drainable surplus) being drained to the sea (target % not specified)

• The additional works for evacuation of all saline drainable surpluses from the Indus Basin to the Arabian Sea have been constructed. DMP was prepared by the government where alternative options for the future needs of agricultural drainage as an integrated component of water management are being compared.

• Area and % of land requiring drainage connected to a proper and functioning outfall (target area not specified)

• No new drainage projects were implemented due to IAs’ reluctance to follow the agreed FLAR as such no additional area requiring drainage was connected to a proper and functioning outfall.

• Increased employment opportunities

• Many direct employment benefits during construction and employment for about 16,600 farmers after completion.

• The project is estimated to have created direct employment for about 5,000 people/per year and indirect employment for about 7,500 people/year during implementation

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Outcome/Impact Indicators Projected in SAR Actual/Latest Estimate

and would provide employment for about 1,300 farmers after completion.

• Assist in poverty reduction and distribution of benefits.

• Assist in poverty alleviation through increased agricultural production, farm incomes, and providing additional employment opportunities.

• The project is estimated to have provided 5.5% increase in the income of about 81,000 farm families. • Implementation of nearly 400 sub projects for desilting benefited mostly the poor who were at the tail end of the systems and were not getting irrigation supplies.

• Positive Fiscal Impact • Fiscal impacts were expected in capital and recurrent budgets at both provincial and federal levels.

• In Punjab 1,239 SCARP tubewells have been transferred to farmers, which result in saving of Rs 557 million /year in electricity bill of PID. • The additional annual revenue to the government is estimated as about Rs 20 million in Punjab, Rs56 million in Sindh, Rs 4 million in NWFP and Rs 2 million in Balochistan.

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Annex 2. Project Costs and Financing

2a. Project Cost by Component December 2004 (in US$ million equivalent)

Project Cost by Component Appraisal Estimate

Actual/Latest Estimate

Percentage of Appraisal

A. Sector Planning & Research Sector Planning and Policy Studies 10.40 7.04 68 Research Programs 15.30 2.46 16 Subtotal 25.70 9.50 37 B. Institutional Reforms Institutional Program for WAPDA Water Wing 31.40 0.09 0 Institutional Programme for PIDs 26.30 16.60 63 Subtotal 57.70 16.69 29 C. Investments Off-farm Drainage 426.60 31.22 7 On-farm Drainage 92.60 3.76 4 Irrigation system 91.80 95.15 104 Operation and maintenance 72.10 43.31 60 Subtotal 683.10 173.45 25 D. Programme Coordination and Supervision* 18.50 26.88 145 Total Project Costs** 785.00 226.51 29

* It includes interest during construction **Including all co-financiers, government and beneficiaries

2b. Project Costs by Procurement Arrangements (Appraisal Estimate) - US$ million equivalent

Expenditure Category1/ Procurement Method ICB NCB Other N.B.F. Total

1. Civil Works 123.1 66.6 17.3 323.7 530.7 (97.4) (47.5) (8.4) (0.0) (153.3) 2. Equipment and Vehicles 15.9 2.4 0.4 16.7 35.4 (12.7) (1.9) (0.3) (0.0) (14.9) 3. Consultants 78.6 8.2 86.8 (78.6) (0.0) (78.6) 4. Research 14.2 14.2 (14.2) (14.2) 5. Training 12.9 12.9 (0.0) (0.0) 6. Incremental Staff & Operating 26.6 10.2 36.8 (24.0) (0.0) (24.0) 7. Others2/ 68.2 68.2 (0.0) (0.0) Total 139.0 69.0 137.1 439.9 785.0 (110.1) (49.4) (125.5) (0.0) (285.0)

ICB = International Competitive Bidding; NCB = National Competitive Bidding; NBF = Not Bank Group Financed 1/ Figures in parentheses are the amounts financed by the IDA Credit. 2/ Includes land acquisition and interest during construction.

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Project Costs by Procurement Arrangements (December 2004 Estimate) - US$ million equivalent

Expenditure Category1/ Procurement Method

ICB NCB OTHER 2/ N.B.F. Total 1. Civil Works 33.4 102.6 0.0 136.0 (29.7) (31.9) (0.0) (61.6) 2. Equipment and Vehicles - - 1.31 1.3 - - (0.75) (0.7) 3. Consultants 30.10 - - 30.1 (29.03) - - (29.0) 4. Research3/ - 1.82 7.68 9.5 - (1.801) (7.339) (9.1) 5. Training 3/ - - 2.11 2.1 - - - - 6. Incremental Staff & - 4.14 29.55 33.7 - (3.734) (21.454) (25.2) 7. Others 4/ - - 13.83 13.8 - - (1.117) (1.1) Total 63.49 108.55 54.48 - 226.5

(58.75) (37.45) (30.67) - (126.9) ICB = International Competitive Bidding; NCB = National Competitive Bidding; NBF = Not Bank Group Financed

1/ Figures in parentheses are the amounts financed by the IDA Credit. 2/ Includes civil works, vehicles and equipment procured through national shopping, training and contract staff. 3/ Research and training include also some consultancy costs. 4/ Interest during construction. Note: Land acquisition did not take place.

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2c. Project Financing by Components (in US$ million equivalent) December 2004

Component Appraisal Estimate 1/ Actual/Latest Estimate Percentage of Appraisal

Govt. FOs IDA ADB OECF2/ Govt. FOs IDA ADB JBIC Govt. FOs IDA ADB JBIC Sector Planning & Research Sector Planning and Policy Studies - - 10.4 - - 0.10 0.00 6.64 0.00 0.00 - - 66.7 - - Research Programs - - 15.3 - - 0.05 0.00 2.20 0.21 0.00 - - 14.4 - - Subtotal - - 25.7 - - 0.2 - 8.84 0.2 - - - 35.6 - - Institutional Reforms Institutional Program for WAPDA Water Wing 2.6 - 19.0 6.7 3.1 0.01 0.00 0.08 0.00 0.00 0.4 - 0.4 - - Institutional Programme for PIDs 1.6 0.4 8.5 5.9 9.9 1.14 0.00 13.15 0.20 2.11 71.4 - 154.7 3.3 21.3 Subtotal 4.2 0.4 27.5 12.6 13.0 1.2 - 13.2 0.2 2.1 27.5 - 48.1 1.5 16.2 Investments Off-farm Drainage 178.9 - 89.4 87.2 71.1 4.64 0.00 13.25 4.07 9.26 2.6 - 14.8 4.7 13.0 On-farm Drainage 15.8 25.3 33.2 7.6 10.8 0.51 0.73 0.44 0.00 2.09 3.2 2.9 1.3 - 19.3 Irrigation system 17.4 2.3 57.3 9.6 5.2 14.16 0.60 46.56 2.14 31.69 81.4 26.2 81.3 22.3 609.4 Operation and maintenance 8.9 4.1 39.1 20.0 - 3.25 0.00 36.59 3.48 0.00 36.5 - 93.6 17.4 - Subtotal 221.0 31.7 219.0 124.4 87.1 22.5 1.3 96.8 9.7 43.0 10.2 4.2 44.2 7.8 49.4 Program Coordination and Supervision 3/ 2.7 - 12.7 3.0 - 18.33 0.00 7.65 0.47 0.43 678.9 - 60.2 15.7 - Total 227.9 32.1 284.9 140.0 100.1 42.2 1.3 126.6 10.6 45.6 18.5 4.2 44.5 7.5 45.5

1/ Out of the IDA NDP funds, firstly on December 6, 2201 US$100 million and secondly on October 13, 2004 US$35 million were transferred to Drought Emergency Relief Assistance (DERA) Project, the revised allocation for the NDP comes to US$136.928 million. 2/ OECF: Overseas Economic Cooperation Fund (Japan) is now JBIC: Japan Bank for International Cooperation.

Annex 3. Economic Costs and Benefits

A. Methodology and Expected Returns Foreseen at Appraisal 1. NDP has identified more than 38 projects of drainage tubewells, 9,939 km of different types of new drains and 13,706 km of rehabilitation and remodelling of exiting drains. Economic viability of the NDP was demonstrated by evaluating projects under different scenarios separately at micro and macro levels. The analysis has been done as an indicative type, assuming that a large number of similar-nature projects would be undertaken during the NDP implementation. The condition for selection of the project was that the projects with the EIRR equal or more than 15% would be funded under the NDP.

2. Based on the potential Investment Projects in the pipeline, the NDP was expected to benefit 16,660 farmers directly, and the entire irrigated agriculture sector indirectly, by reclaiming abandoned land, rehabilitating existing lands, and potentially improving drainage in about 13.5 million acres. Increase in the productivity was estimated by about 2% for the entire IBIS command areas, and by 20% for the tail end farmers.

3. The benefits were estimated by identifying the agro-climatic zones of the potential projects13 and classifying them with respect to watertable depth14. Analysis in the appraisal followed the standard methodology and determined the feasibility of different types of interventions, which are traditionally undertaken for addressing the drainage problems.

4. It was anticipated that yield per hectare per cropping season would increase for the same crop variety under the “with project” situation because of protection against intrusion of saline water and improved drainage conditions. The expected variation in the yields and cropping intensity was estimated on the past experience of drainage projects in Pakistan. Historical gross margins of crops for different watertable depth classes in different agro-climatic zones were used for computing the project benefits. The major economic benefits were considered as; (i) variations in cropping patterns and yield levels; (ii) degree of surface flooding and its frequency; (iii) extent of water logging; and (iv) available irrigation supplies. The incremental benefits were envisaged avoiding reduced loss in agricultural land, availability of increased cultivable land due to reduced salinity and water logging, lower crop losses due to reduced flooding, and improved crop yields.

5. The analysis was done under with and without Project conditions and period of analysis was taken as 30 years, including project implementation period as 5 years. O&M was considered on the basis of historical trends. The analysis was done at 1997 prices using a standard conversion factor of 0.9 and an opportunity cost of capital as 12%.

6. The ERRs of the various types of investment projects have a span of wide range. The economic internal rate of return (EIRR) for the potential projects was then estimated ranged from 9.5%% to above 50% (minimum as 9.5% for SCAR VI Evaporation Ponds and maximum above 50% for Transition of FGW Tubewells in Sindh and NWFP).

ICR Estimation Methodology 7. SAR methodology was applied to available data in order to update expected project returns. The analysis has been done at actual costs at the level of 2005 prices. A majority of the data used is obtained from the NDP Consultants and from the appraisal reports prepared by the project implementing agencies. The collected data has also been rationalized through a pilot visit of the ICR mission in the project area, by interviewing the beneficiaries and discussing the level of benefits with 13 The agro-climatic zones have been defined in all the provinces at Pakistan level: for Punjab, rice-wheat Zone; cotton-

wheat zone; Sindh, rice-wheat north, cotton-wheat south; NWFP mixed cropping zone. 14 The productivity of land is defined into four classes with respect to water table depth: Class I; over 150 cm, Class II =

120-150 cm, Class III = 75-120 cm, Class IV = 0-75 cm.

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the various stakeholders. Similar to the SAR, the financial and economic analysis has been done for the model drainage interventions rather than for the aggregated total:

− Surface Drainage − Lining Watercourses − Rapid Rehabilitation/De-silting of Canals and Drains

Quantifiable Benefits 8. Incremental crop production benefits attributable to the subprojects arise from: (a) lowering of the groundwatertable in the command area of the subprojects; (b) reduction in crop damages due to reduced surface flooding after rainfall events; (c) reduction in the extent of land abandoned due to water logging; (d) additional water availability resulting from on-farm schemes and off farm (watercourse improvement) subprojects (e) canal lining; and (f) strengthening of earthen embankments of unlined canals and drains.

Key Parameters 9. The analysis has adopted other key parameters including; (i) prices of outputs and inputs of an farm-gate prices prevailing in 2005 used at constant prices; (ii) opportunity cost of capital at 12%; (iii) economic life of 30 years; (iv) one year lag for incremental production with five year period of full development; (v) direct benefits accrue only from the new or reclaimed area; (vi) economic prices of agricultural commodities are derived on import parity basis for wheat, sugarcane and fertilizers, whereas export parity prices have been calculated for rice and cotton; (vii) duties and taxes are not accounted for in the calculation; (viii) standard conversion factor (SCF) of 0.9 has been used for eliminating the distortion factor in the project investment costs and the O&M costs.

B. Evaluation of Investment Projects Surface Drainage 10. Actual Watertable Depths. The table below shows the variation in the groundwater table during 1996-2002.

Actual Water Depth (% of land) Depths (m) 1995 1996 1997 1998 1999 2000 2001 2002

<1.5 m 29.9 29.9 31.3 29.6 26.6 19.3 15.1 4.1

1.5 – 3 m 25.5 27.3 27.3 25.0 23.7 21.4 17.4 16.6 > 3 m 44.6 42.7 41.4 45.3 49.7 59.4 67.4 79.0

Source: Borrowers’ Project Completion Report – Table A3-1. 11. It is clear from the above table that the rising trend of groundwater table in the project area continued unabated until 1998. The extent of highly waterlogged area (watertable 1.5 m) increased from 29.9% to 31.3% in 1997. Onwards, as the implementation of project components advanced, the watertable started to decline as a result of reduced groundwater recharge after rehabilitation of existing drains and construction of new drains- - groundwater intercepted by surface drains in areas with shallow watertable. Lower than average rainfall during 1998-2000 also contributed to the rapid decline of the watertable.

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12. Lowering of Groundwater Table. A number of research studies carried out under different projects, and the two studies undertaken for the NDP15 have clearly demonstrated that as the groundwater table rises and reaches depth of less than one meter, crop yields decreases substantially. The figure given here illustrates the affect of rising groundwater level on the volume of crop yields. The economic analysis presented in SAR also explains that the future yields may decline from their current levels to zero, under without project condition. A conservative approach has been taken at ICR assuming no increase in the cropping area and 50% reduction in the yield level occurs under the without project scenario. The present yield level is assumed to be maintained under with project situation.

Improvement of Watercourses 13. Only 27 watercourses in Sindh were improved against the target of 750 watercourses in SGW area of Nara Canal Command and Khairpur East. Besides, nearly 500 water watercourses were improved in Punjab. Benefits of lining of watercourses have yielded approximately equivalent to 25% increase in annual water availability compared to without project situation16. As such the additional water available will meet a higher proportion of full crop water requirements, resulting in higher yields. However, it has been generally observed that farmers tend to use additional water for planting more area. For the purpose of financial and economic analysis, a conservative assumption has been made in assuming 25% increase in water availability at the farm gate. It would lead to a 10 % increase in the annual cropping intensity17. No change in cropping pattern or yield has been assumed. Possible yield increases has also not been taken into account in the financial and economic analysis.

Rapid Rehabilitation/De-Silting of Canals and Drains

14. Except in Sindh, de-silting of canals and drains was done in all other three provinces. It covered CCA of 393,000 acres in NWFP, 750,000 acres in Punjab and 599,445 acres in Balochistan. De-silting of canals and drains was not anticipated at appraisal which resulted in better equity and enhanced irrigation water supply at farm gate particularly to the farms at tail end. For the financial and economic analysis, a ten percent increase in the cropped area of the one-fourth (farms at tail end) of the CCA is assumed.

Rehabilitation of Tubewells and Evaporation Ponds

15. None of such type of project, envisaged at appraisal, could be implemented during NDP period (of which the SAR estimated IRRs 9.5% to more than 50%).

15 The two studies undertaken for NDP were: (i) Efficacy of past Drainage Investment, and (ii) Promoting Private

Investment in Drainage Sector. 16 A number of studies have proved 20-35% increase in water availability after the lining of water courses. A study carried

out on crop yields by the International Water Management Institute (IWMI) indicates that after the project, various cops met 30% to 60% of their full water requirement.

17 ICR of FESS witnessed 10% increase in intensity in the Project area (IDA Credit 2410 Pak) due to improvement of watercourses.

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Rehabilitation and Modernization of Canal Commands

16. Except lining of 8.94 km of three canals, nothing was done out of the works anticipated at appraisal for the modernization of the canal commands. Thus the benefits of water saving, crop losses averted due to reduction in canal breaches as a result of lining and strengthening of earthen embankments have not been quantified.

Non Quantifiable Benefits 17. A number of benefits which could not be quantified due to lack of suitable data are obvious at the completion of ongoing part of the NDP. Firstly, the following non-quantifiable benefits are attributable to the project: (i) reduction in O&M costs for building and roads in low-lying areas that were prone to flooding after rainfall events; (ii) environmental improvements reflected by reduced water logging and surface flooding; (iii) improved equity of distribution of water; (iv) improved state of inspection paths along the drains and canals, which has improved access and reduced transport costs; and (v) expected improved O&M of canals where farmer organizations have been assigned this responsibility.

18. Secondly, there are number of other non-quantifiable benefits arising from the sector planning and policy studies conducted under the NDP. These include: (i) many guidelines and lessons learned that have been provided on how to improve the irrigation efficiency under waterlogged and rising soil salinity conditions; and (ii) the cost efficiencies in drainage and canal lining works that will be possible in future projects due to the findings assembled in the policy studies carried out under the NDP.

Investment and O&M Costs 19. These include the cost of major and minor civil works of the subprojects on actual basis and other administration and engineering costs on prorate basis. All costs except price contingencies, taxes and duties, are included in the analysis. Investment costs are converted to border prices using SCF. Average O&M costs have been assumed by the mission as Rs 165 per acre (Rs 457 per ha) in case of surface drains, Rs 100 per acre (Rs 250 per ha) in case of water course improvement and rehabilitation and de-silting of canals and drains.

20. The re-evaluation of the ERR for different type of investment projects/subprojects of NDP, comparing with SAR is summarized below:

Description Benefited Area

Investment Cost

O&M Cost

Ha Rs M Rs M Investment O&M SAR 1/ ICR SAR ICRSurface Drainage- NWFP 49,076 61.8 27.4 1,259 558 14.5 12.2 n.a. 2 - Punjab 288,672 1,326.7 132.0 4,596 457 14.5 14.4 179 242 - Sindh 451,791 1,086.5 206.5 2,405 457 20.0 16.3 1,194 525

Watercourse Improvement- Punjab 82,310 306.6 18.8 3,725 229 n.a 14.8 n.a. 71 - Sindh 4,917 20.2 1.3 4,107 274 29.8 12.5 2 1

Rapid Rehabilitation/De-Silting of Canals- NWFP 39,761 62.9 9.4 1,583 237 n.a 13.2 n.a 12 - Punjab 75,880 140.9 21.1 1,857 279 n.a 13.0 n.a 21 - Balochistan 60,648 82.7 12.4 1,364 205 n.a 12.3 n.a 3

Overall 1,053,056 3,088.4 429.0 2,933 407 21.3 15.0 7,775 876

Cost (Rs Per Ha) EIRR % NPV (Rs M)

1/ A list of EIRRs presented in SAR is illustrative and for the potential projects, most of which have not been

undertaken during the NDP implementation.

34

21. Differences between SAR and ICR estimates arise mainly due to the gap between the expected large quantum of physical works and consequently more quantifiable benefits considered at appraisal, whereas, comparatively small sized subprojects have been implemented under NDP, and many of the foreseen at appraisal have not been undertaken. Per hectare investment cost of surface drainage in Punjab is higher than the other two provinces, because Punjab has provided new structures in the subprojects of surface drains. The ERR in Sindh is lower as compared to SAR because SAR captured full benefits with structures and crossing on the drains. The ERR for the improvement of watercourses in Sindh is also lower because the anticipated benefits at SAR could not be materialized.

22. Out of 157 contracts of civil works, only 62 subprojects (39%) could be completed by the closing date of IDA Credit (December 31, 2004). The remaining 95 subprojects would be completed with the assistance of other financers, ADB, JBIC and from the government’s own sources18 before December 2006. The financial progress also remained very slow and only US$226 million (29%) are likely to be spent against total target of US$785 million, over the period of 8.5 years instead of planned period of 6.5 years, as was anticipated at appraisal (for US$785 million). Moreover, it is too early to assess the impact of works done under NDP, as a substantial part of the civil works is underway and would be completed up till December 2006, with the financing of balance amount through ADB, JBIC and from the borrower’s own sources.

Sensitivity Analysis 23. Following scenarios has been tested for the sensitivity analysis:

Scenario ERR 1. Benefits decrease by 10% 12.6% 2. O&M suspended 9.2% 3. Useful life of structure reduced to 30 years 13.8%

Financial Analysis 24. Financial Analysis of the project has been estimated by re-calculating the IRR using the values of costs and benefits in financial terms and by replicating the model used for the economic analysis. The Financial Rate of Return (FIRR) for the overall project comes to 13.5%. The NPV comes to Rs 475 million at 12% discount rate.

Farm Income Impact 25. At appraisal, illustrative farm budget analysis for one hectare farms were prepared for various types of investment projects only for Sindh province, indicating an increase in farm income by 6% in canal command areas, 8.5% in the area of watercourse lining and 128% in areas of surface drains. The ICR re-estimated one hectare typical farm budgets suggests average increase of about in the income of farmers in the areas of subprojects. The results are shown in the table below:

18 Source: Borrower’s Project Completion Report Annex-9.

35

DescriptionFwout Fwith Incr. % Incr. Fwout Fwith Incr. % Incr.

Watercourse Improvement

- Punjab n.a n.a n.a n.a 24,995 25,987 991 4.0 - Sindh 12,099 13,123 1,024 8.5 14,418 15,453 1,036 7.2

Rapid Rehabilitation/De-Silting of Canals

- NWFP n.a n.a n.a n.a 10,386 11,067 682 6.6 - Punjab n.a n.a n.a n.a 25,495 26,873 1,377 5.4 - Balochistan n.a n.a n.a n.a 13,230 14,110 880 6.7

ICR (Rs/ha)SAR (Rs/ha)

FWout =Future Without, FWith=Future With

Employment Impact 26. The project created employment of about 330,000 man days per year. During the implementation, the NDP provided employment directly to 5,000 people and indirectly to 7,500 people including short term employment to technical and non technical persons.

Poverty Reduction Impact 27. Farm level analysis indicates that NDP would provide an average increase of about 6% in the income of beneficiaries estimated about 81,000 farm families.

Distribution of Benefits 28. Implementing of nearly 400 subprojects for de-silting of drains and canals, NDP has benefited mostly the poor sector of farming community who are concentrated in waterlogged and saline groundwater areas and the tail ends.

Fiscal Impact 29. Punjab has transferred the O&M liability of 1,239 SCARP tubewells to the farmers and saved about Rs 557 million per annum. Out of these 849 tubewells were replaced by the farmers into small size of tubewells, as such the WAPDA would also save a substantial amount of electricity, which could be dispatched to other consumers increasing more economic activities. Reduction in abiana collection due to slippage of these tubewell from the public hands to the private farmers would have no significant effect on the estimated savings. In addition, with the increase of cropping area, revenue of government would be increased estimated for Punjab about Rs 21 million per annum, for Sindh Rs 56 million per annum, for Balochistan Rs 2 million and for NWFP Rs 4 million per annum.

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Annex 4. Bank Input (a) Missions:

Stage of Project Cycle No. of Persons and Specialty (e.g. 2 Economists, 1 FMS, etc.) Performance Rating

Month/Year Count Specialty Implementation Progress

Development Objective

Identification/Preparation 7/8/1993 7 2 Irr. Eng. FMS, Anthro, Proj

2/4/1994 6 2 Irr. Eng. FMS, Anthro, Agri. Econ. Irr. Advisor

5/15/1994 3 2 Irr. Eng. Water 7/28/1994 7 2 Irr. Eng. FMS, Anthro, Proj

Pre-Appraisal 12/22/1994 7 2 Irr. Eng. FMS, Anthro, Proj 7/20/1995 10 Joint WB/ADB/JBIC mission

Appraisal 11/23/1995 6 Irr. Eng. FMS, Legal, 2 Eco. Env.

Pre-Board Review

8/15/97 13 2 FMS, 3 Irr., Proj. Comm., Inst., Proc. NGO, Resett.

Supervision

3/3/1998 10 2 Irr. Eng., 3 FMS, 1 Proc., 1 Disb. 1 NGO, 1 Anthro., 1 Proj. S S

8/20/1998 6 2 Irr. Eng.1 Proj. 2 Resett., 1 FMS S HS

3/30/1999 8 2 Irr. Eng., 1 Agri Eco. 1 Social, 1 Drainage, 1 Disb. 1 Proj. Proc. S S

6/30/1999 4 1 FMS, 1 Agr. 1 Eco., 1 Proc. 1 Proj. S HS

6/5/2000 8 1 Agri. Eco., 1 Irr. Eng., 2 Proc., 1 Resett., 2 Disb., 1 FMS S S

4/6/2001 Joint WB/ADB/JBIC mission NA NA 4/7/2001 3 2 FMS, 1 Disb. NA NA 7/8/2001 1 Inst. S S

11/15/2002 Joint WB/ADB/JBIC mission S S

7/31/2003 8 2 Agri. Eco. 3 Irri. Eng. 2 FMS, 1 Water U U

6/24/2004 3 1 Water, 1 Rural, 1 Agri. U U 12/22/2004 9 2 Irr., Env., 3 FMS, 2 Proc., Water U U

ICR

5/20/2005 4 1 Irr. Eng., 1 Water, 1 Agr. Eco. 1 Inst.

NA = Not Available. Irr Eng = Irrigation Engineer, Disb = Disbursement Analyst, Agri. = Agriculturist, Agr. Eco = Agricultural Economist, Anthro = Anthropologist, Proj.= Project Analyst, NGO = NGO Specialist, Resett. = Resettlement Specialist, FMS = Financial Management Specialist, Drain = Drainage Advisor, Agri. Eco = Agricultural Economist, FMS = Financial Management Specialist, Water = Water Resources Specialist, Rural = Rural Dev. Specialist, Inst = Institutional Dev. Specialist, Ecolo = Ecologist, Env. = Environmental Specialist, Planner = Planner, Rural = Rural Development Specialist

37

(b) Staff

Actual/Latest Estimates Stage of Project Cycle No. Staff

Weeks US$’000

Identification/Preparation1/ 225 799 Appraisal/Negotiation n.av. n.av. Supervision 1/ 434 2,329 ICR 20 110 Total 679 3,238

Note 1/ there are many figures for the cost of identification/preparation and supervision. The budget was either not recorded or managed.

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies M Sector policies M Physical M Financial M Institutional Development M Environmental N Social Poverty Reduction

M

Gender N Private sector development M Public sector management M

Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending U Supervision S Overall U 6.2 Borrower performance Rating Preparation S Gov’t implementation performance U Implementing agency performance U Overall U

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Annex 7. List of Supporting Documents 1. Forms 590, PSRs and Aide Memoirs of Supervision Missions, 1998 to 2004. The World Bank.

Including the WB QAC reports on Quality at Entry Assessment and the report on quality of supervision.

2. National Drainage Program: Staff Appraisal Report, NDP September 1997, The World Bank 3. National Drainage Program: Implementation Volume I to Staff Appraisal Report, November

1997, The World Bank 4. National Drainage Program: Implementation Volume II to Staff Appraisal Report,

November 1997, The World Bank 5. National Drainage Program Project: Legal Documents, December 1997, The World Bank 6. Pakistan Public Expenditure Management: Volume II Accelerated Development of Water

Resources and Irrigated Agriculture, April 2003, The World Bank 7. National Drainage Program Project: Completion Report, April 2005, Pakistan Drainage

Consultants 8. National Drainage Program: Implementation Completion Report, April 2005, Provincial

Coordination Cell, NDP Punjab 9. National Drainage Program: Borrower Evaluation Report, May 2005, Provincial Coordination

Cell, NDP NWFP 10. Pakistan: Drainage Sector Environmental Assessment - National Drainage Programme,

June 1993 prepared by National Engineering Services Pakistan (Pvt.) Limited and Mott MacDonald International Limited

11. Feasibility Study, National Drainage Programme I, May 1995 prepared by National

Engineering Services Pakistan (Pvt.) Limited and Mott MacDonald International Limited 12. National Drainage Program: Impact Evaluation of Desilting of Canals and Rehabilitation of

Structures During Annual Canal Closure of 1998-1999, Pakistan Drainage Consultants 13. National Drainage Program: Draft Impact Evaluation Report for Desilting of Canals and

Drains Pat Feeder Canal and Drainage Circle, Dera Murad Jamali, 1999, Pakistan Drainage Consultants

14. Punjab Irrigation Systems Improvement Project: Draft Final Report, October 1999, Pakistan

Drainage Consultants 15. National Water Policy: Final Report, Background Information and the Policy, January 2003,

Associated Consulting Engineers and Halcrow 16. National Drainage Program: Executive Summary of Pre-feasibility Study of National

Surface Drainage System, May 2003, Indus Associated Consultants and Louis Berger International

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17. National Drainage Program Project: Special Assistance for Project Implementation, July 2003, The JBIC

18. Left Bank Outfall Drain Stage-I Project (CR. 1532-PAK): Implementation Completion

Report, June 1998, The World Bank 19. Effect of Direct Outlets on Water Distribution in the Nara Canal Command Area, November

2003, IRC Sindh 20. Pakistan: Sindh Water Resources Management, Issues and Options, December 2003, FAO

TCI. 21. Pakistan: National Drainage Program Project. Management Report and Recommendation

in Response to the Inspection Panel Investigation Report.

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Annex 8. Borrower’s Evaluation

BORROWERS EVALUATION

OF NATIONAL DRAINAGE PROGRAMME UNDER IDA CREDIT NO.2999-PAK

1. Project Data The Pakistan National Drainage Programme (NDP) Project is a mix of physical works, institutional and policy reforms, research and planning studies in drainage, and initiating changes in legal and regulatory framework to allow farmers’ participation. Some of these components are of a non-physical nature and indirectly affect the direct benefits that are expected to accrue from the investment component only. Interventions to be targeted under the investment component are expected to provide drainage relief to the irrigated areas by reducing flooding from excess surface water and controlling water logging and salinity, as well as secure better protection of adjacent wetlands.

In addition to direct benefits the programme will have substantial indirect benefits towards the improvement of environment and socio-economic conditions. The institutional reforms will also have positive long-term effect on sustainability of the irrigation and drainage systems. i) NDP Components

a. Sector Planning and Research Component b. Institutional Reforms Component c. Investment Component d. Programme Coordination and Supervision

Component Project activities commenced on January 01, 1998. The value of activities to be carried out during the first stage of the Project (1998 until 2004) was estimated to reach approximately US Dollars 785 million. A summary breakdown of this cost (estimates 1997) is given in the table below:

Component / Activity Estimated Cost in US$ Million

Percentage of Total Cost

1 2 3 4

Investment Component Institutional Reform Component Sector Planning and Research Component Programme Coordination & Supervision

699.21 34.88 26.60 24.31

89.1% 4.4% 3.4% 3.1%

Total Cost 785.00 100.0% The Sector Planning & Research Component, Institutional Reform Component, and the Investment Component are discussed under Item 2 below. ii) Project Consultants The services of following consultants were utilized:

a. Consultants for Engineering, Design and Supervision (EDS) Services b. Finance, Accounting and Information System (FAIS) Consultants

42

c. Institutional Reform Consultants. d. Research Studies Consultants (Research Advisors) e. Training Consultants f. External Auditors g. Policy and Planning Studies Consultants h. Individual Consultants

iii) Review of NDP by Special Committee A Special Committee constituted by GOP in 2001 extensively reviewed NDP and re-structured the Project at a revised/reduced outlay of Rs. 25,050 Million excluding Balochistan who opted out of NDP at that time owning to lack of drainage options available for the effluents of Balochistan. The President of Pakistan approved the recommendations of the Special Committee in September 2002 and the Project activities re-started. The re-structured Investment Component stood reduced from Rs. 25,060 Million to Rs. 19,800 Million for three provinces. Balochistan re-joined the NDP in September 2003. vi) Revised PC-I The revised PC-I proforma of the NDP was cleared by CDWP for approval of ECNEC at an overall cost of Rs. 29,374 Million. Since then following important changes have taken place:

• Closure of IDA Credit on 31-12-2004. • The investment component of the Programme has been revised/finalized by the Provinces

as per the direction of the FPSC and the Bank to make it realistic. The provinces have re-structured their investment portfolios, which can be completed during the remaining period of the Programme. The total cost of investment portfolios has been assessed at 17,724 Million.

• The Sector Planning and Research Component has completed on 31-12-2004. • The revised PC-I had the closing date of Programme as 31-12-2005. On the request of

Provinces, the FPSC has recommended the closing date as 31-12-2006. In view of the above, the cost of the Revised PC-I may reduce from Rs. 29,374 Million to Rs. 24,778.7 Million (or even lesser due to negligible/no physical activities so far this year in Sindh and Balochistan) for consideration and approval by ECNEC. v) Financial Progress at 31.12.2004 Million US$

InstitutionalReforms

Research &Sector

Planning Investment

Project Coordinatio

n and Supervision

NDP Escrow Account

Total Utilization

NDP Management Cell 2.024 7.034 30.172

4.349 0.048 43.627

Govt. of Punjab - P.C. Punjab 2.037 0.069 14.027

0.716 - 16.849

Govt. of Sindh - P.C. Sindh 9.220 - 43.755 0.834 - 53.809

Chief Engineer Wapda (W) South - - 6.623 - - 6.623

Govt. of NWFP - P.C. NWFP 0.267 - 1.037 0.418 - 1.722

Govt. of Balochistan - P.C. Balochistan 0.134 - 2.060 0.071 - 2.265

Federal Coordinator - Islamabad - 1.801 -

0.177 - 1.978

13.682 8.904 97.674 6.565 0.048 126.873

Percentage Utilization 11% 7% 77% 5%

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vi) Financial Progress Vs Actual Allocation In terms of loan provision versus loan utilization, as given below, the performance has been highly satisfactory in all four components. The physical targets of NDP-I are, however, yet to be accomplished. The disparity of financial allocations vis-à-vis physical targets is due to the reason that IDA had made minimal interim loan allocations against the huge & tentative physical targets. Besides, a large sum of US$212 million was put under the “Unallocated” category for future needs, as & when required. However, much of this amount (about US$158 million) was diverted during end of the year 2001 to the DERA Project.

Sr. # Agencies Million Rs. i GOP 1,130 ii Punjab 400 iii Sindh 537 iv NWFP 109 v Balochistan 78 vi ADB through adjustment in its existing portfolio 329 vii Diversion of funds from WB-funded WSIP (Water Sector

Improvement Project in Sindh) currently under negotiation

1,033

Total 3,616 *Savings transferred to DERA Project vii) Reprogramming of NDP due to Closure of IDA Credit The expiry of IDA Credit on 31-12-2004 affected following on-going NDP activities:Programme

Coordination b. Institutional Reforms. c. Investment Component in Sindh d. Consultants for EDS Services for Works e. Financial Consultants f. External Auditors

The overall impact of the above activities till completion of NDP-I on 31-12-2006 is estimated to be Rs. 3,616 million. A special meeting held on January 28, 2005 under the chairmanship of Secretary, Ministry of Water and Power, GOP, Islamabad with the provincial Secretaries of IPDs for Reprogramming of NDP decided to share the above cost in a following manner:

Sr. # Agencies Million Rs. i GOP 1,130 ii Punjab 400 iii Sindh 537 iv NWFP 109 v Balochistan 78 vi ADB through adjustment in its existing portfolio 329 vii Diversion of funds from WB-funded WSIP (Water Sector

Improvement Project in Sindh) currently under negotiation

1,033

Total 3,616

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2. Principal Performance Ratings i) Sector Planning and Research Component This component was designed for completion during early years of NDP-I so that results of the Planning, Policy and Research Studies could be applied for the preparation of a pipeline of high priority projects to be financed under NDP or other projects. Most of these Studies were delayed. As a result, the outcome/benefit of these Studies has not been applied so far appropriately. Moreover, the approval of “National Water Policy (NWP)” is still pending. Besides providing clear guidelines on important water issues, NWP will also advice for improving the existing insufficient cost recovery system. The feasibility study of National Surface Drainage System (NSDS) was converted into pre-feasibility on the advice of a province. Later, it was unanimously decided by the Borrower, the Bank and the provinces to prepare a Drainage Master Plan (DMP) of the Indus Basin, which will determine the need & effectiveness of NSDS. The study on DMP is still going on and it is expected for completion by December 2005. The initial results of DMP indicate that basin-wise NSDS is no more a good/feasible option for the disposal of drainage effluent. The DMP endorses disposal of effluent into sub-basins separately. Hence, the basic objective of NDP for carrying away the drainage effluent from the Indus basin into the sea looks illusive. ii) Institutional Reforms A. Institutional Reforms in WAPDA Water Wing It was agreed by the Borrower during the loan negotiations with the Donor that the role of WAPDA’s Water Wing would eventually be limited to inter-provincial functions. The progress of Water Wing on developing and managing the water resources of the Indus Basin beyond construction (inter-provincial functions) remained satisfactory. The sizable reduction in administrative costs was witnessed as the office-staff ratio was brought down from 1:18 in 1992 to 1:7 in 2004. Under Standard Operating Procedures (SOP) adopted by WAPDA in 2001, extensive training of Water Wing staff is being carried out every year (Figures given separately in the Performance Indicators Sheet). The capacity building of its departments through IDA Credit and own/other sources remained continued. B. Institutional Reforms in the Provinces The institutional reforms in the provinces were aimed at decentralization and management transfer of the irrigation and drainage system from PIDs to a multi-tier system of autonomous institutions with clearly defined roles and responsibilities within the system; and with a firm commitment to phase out subsidies for O&M in seven to ten years. It was also agreed between the Borrower and IDA that if the NDP-I is successfully implemented, it would be followed by the proposed National Irrigation Program (NIP) which is under preparation. On the other hand, if the pace of the reforms is slow due to the lack of government commitment, implementation constraints, or resistance for real change, the financial commitments under NDP would be scaled back or cancelled altogether after the MTR or 2-3 years. After the enactment of PIDAs by the provincial governments, the PIDAs and Pilot AWBs were notified/established and the process of formation of FOs started. Except Sindh, the process of decentralization and management transfer has remained slow in other provinces. Even the institutions formed in Sindh are far from being considered as real physical entities which are likely to remain sustainable in future. The progress under I/reforms was quite slow during early years of NDP-I. Eventually, IDA on the request of the Borrower diverted a large sum out of NDP Credit during end of the year 2001 to the DERA Project. It is unfortunate that despite considering NDP as a high-risk programme due to its complex nature, NDP-I was given a short period of 2-3 years to prove its success under I/reforms, notwithstanding the financial impact of I/reforms which is about 4% only. iii) Investment Component A huge outlay of US$699 million was earmarked for construction of physical works of irrigation and drainage in the following manner:

45

Million US$ Sr. No. DESCRIPTION Cost

1 Off-Farm Drainage 426.6

2 On-Farm Drainage 92.6

3 Rehabilitation and Modernization of Irrigation Systems 91.8

4 O&M through Performance Contracts 72.1

5 Others 16.1

Total Investment Component 699.2 The size of the investment portfolio was over-designed as compared with the capacity of the implementing agencies. Besides, it contains a tentative list of physical works for implementation, which is subject to changes/revisions in accordance with the requirements of the Provinces. In line with their changing requirements, the Provinces made revisions in the investment portfolios. Hence, a large number of the sub-projects at the various levels of design, appraisal and feasibility were dropped, and new sub-projects added to cater to the needs of the provinces. This exercise consumed considerable time in the preparation of new schemes by the EDS Consultants. In view of the low utilization of funds, the Bank supported the provinces to undertake non-core physical activities like Crash Programme and Incremental O&M Programme during 1998-99.Except On-Farm sub-component that is yet to be taken up, the pace of physical activities has gained momentum especially in the Punjab. Although the physical targets are not likely to be met, still substantial progress is foreseen by end of December 2006 in three provinces. Balochistan may succeed in executing a few small schemes. In view of the foregoing discussion, the Principal Performance Ratings of the Project under IDA Credit as on December 31, 2004 are summarized in the following table:

Element ORIGINAL ACTUAL COMMENTS

Outcome Satisfactory Satisfactory

Sustainability Likely Likely

Institutional Development Impact

Satisfactory Satisfactory

For attaining sustainability, extraordinary efforts & commitments of the concerned agencies are required. Cost recovery of O&M is also required to come into effect without further delay.

Bank Performance Satisfactory Satisfactory -

Borrower Performance Satisfactory Satisfactory -

Quality at Entry Satisfactory Un-Satisfactory

Programme approach did not prove successful. Linkage of progress under I/Reforms with the implementation of physical works under Invest. Component was also a deterrent factor.

Project at Risk at Any Time

Satisfactory Satisfactory -

3. Assessment of Development Objective & Design and Quality at Entry The objectives of the Project are to improve the efficiency of the irrigation and drainage system in Pakistan, and ensure its sustainability, through:

i. Establishing an appropriate policy environment and institutional framework, and strengthening capacity of sector institutions (i.e., carrying out the first phase of policy and institutional reforms in the water sector);

ii. Improving sector policies and planning; iii. Strengthening the technical foundations of and knowledge base on irrigation and drainage;

and iv. Improving the irrigation and drainage infrastructure network.

46

All these initial objectives and related Project Components remained unchanged. However, a number of new sub-components were added during the course of the Project to the original sub-components resulting from objective iv):

• Check / delay action Dams in Balochistan; • Lining of Canals in Balochistan to conserve irrigation water; • Drainage and irrigation rehabilitation works in FATA and Northern areas; • Incremental O&M works in all provinces; and • Environmental mitigation works to improve sub-basin environmental conditions by

recycling of drainage effluent by treatment or water management system modifications.

.1.1.1 Addition of new sub-components diluted the basic objective of the Project. The drought conditions prevailing in the country during 2000-2002 changed the priorities of the implementing agencies from the execution of drainage sub-projects to irrigation sub-projects.

.1.1.2 i. Quality At Entry (Project Design) The quality at entry i.e. Project design as set forth in SAR was ambitious. For example:

• Programme approach, which requires completion of inter-component activities before a physical work under the investment component can be initiated.

• Over-design of the Project is another major hurdle. Setting out a huge investment targets for newly notified/established PIDAs was even beyond the capacity of old & well-established IPDs.

• The provinces were not taken into confidence during design of the Project who are the main executing agencies.

• Linkage of progress under Reforms (4% of the Project Cost) with the implementation of physical works under Invest. Component (89% of the Project Cost) was a setback for the implementation agencies.

4. Achievement of Development Objectives and Outputs i) Sector Planning and Research The Sector Planning and Policy Studies have been completed under NDP. The most significant of these is the draft National Water Policy (NWP). The Ministry of Water and Power has submitted the NWP for approval to the Cabinet for formally adopting the NWP and establishing an apex body for the water sector. Another major planning effort supported under the NDP is the Master Drainage Plan (MDP). The draft final report of the MDP has been reviewed by a joint national and international panel of experts (POE), which has given guidance for revisions and further work. The DMP Drainage Master Plan was completed in December 2005 as agreed with the Government.

Altogether fourteen research contracts were awarded under the NDP. Ten of these contracts were completed by the credit closing date; three would be completed in 2005, and one has been dropped. Sixteen PhD research grants were awarded. Five have been completed, thesis for two are under review: eight would continue beyond January 2005 and one has been dropped. About four hundred technical research papers were published under NDP and eighteen workshops/symposia were held.

ii) Institutional Reforms The major reform program in NDP involves decentralization and management transfer of irrigation and drainage O&M responsibilities through the creation of autonomous and self-supporting irrigation and drainage entities. The Project was only partially successful in establishing an appropriate policy environment and institutional framework. The implementation of the institutional reforms has been quite slow.

47

Provincial Irrigation and Drainage Authorities have been established in all provinces and are functional in Sindh, Punjab and NWFP. Three Canal Area Water Boards have been established in Sindh; one has been notified in Punjab but is likely to become functional at the end of 2005 and one AWB is functional in NWFP. By the end of 2004, the project organized 223 FOs (196 in Sindh, 3 in Punjab and 24 in NWFP) covering an area of approximately two million ha in which farmers are now responsible for the operation and maintenance of the irrigation system. iii) Investment Against the SAR targets, the limited achievement of this component are: (i) completion of remaining works of Left Bank Outfall Drain such as remodeling of Nara canal and commissioning of Twin Jamrao canal: (ii) rehabilitation of drainage systems in Sindh: (iii) a crash program for desiltation of irrigation and drainage canal in Punjab, NWFP and Balochistan: (iv) award to eight O&M Performance contracts for various components of LBOD in Sindh; and (v) preparation of a substantial pipeline of sub projects in the off-farm investment category. The repair works have generally improved the performance of drainage and irrigation schemes through: (i) extension of the useful life of existing irrigation and drainage schemes; and (ii) reduction of leakages and repair of water control structures; Drainage improvements have also mitigated flooding caused by direct rainfall. 5. Major Factors Affecting Implementation and Outcome

i) The investment component of NDP contains a tentative list of physical works for implementation, which is subject to changes/revisions in accordance with the requirements of the Provinces. In line with their changing requirements, the Provinces made revisions in the investment portfolios. Hence, a large number of the sub-projects at the various levels of design, appraisal and feasibility were dropped, and new sub-projects added to cater to the needs of the provinces. This exercise consumed considerable time in the preparation of new schemes by the EDS Consultants.

ii) The persistent drought conditions during 2000 to 2002 lowered the ground watertable. Hence, the saline and waterlogged areas were brought under cultivation. Due to the drought conditions, the priorities from undertaking new drainage sub-projects to O&M of irrigation & drainage sub-projects (deferred O&M) were changed. This change required re-working of new sub-projects & delayed the implementation of physical works.

iii) The works under On-Farm sub-component could not be taken up due to slow process of formation & empowerment of Farmers Organizations (FOs).

iv) The size of the investment portfolio was over-designed as compared with the capacity of the implementing agencies.

v) The Provincial Governments use their Composite Schedule of Rates (CSR) as the basis for award of contracts. This resulted in delays in cases where the bids that reflected the current market prices were higher by 10-15 % of the departmental estimate (PC-Is). Subject matter was referred to the Federal Programme Steering Committee (FPSC) in mid 2003 when a premium above the CSR was recommended by FPSC and subsequently adopted by the provinces to ease the situation.

vi) Re-approval of sub-projects (already approved under umbrella PC-I of NDP) by the competent authorities in the provinces delayed the implementation of investment component. A committee was empowered to approve those sub-projects that were already approved & identified under umbrella PC-I of Flood Protection Sector Project (FPSP-I&II). Similar arrangements would have accelerated the implementation in NDP.

vii) NDP was designed for implementation in Indus Basin Irrigation System, which covers only 10% of the total irrigated area of Balochistan. Balochistan’s withdrawal from the Project and its re-entry after 2½ years adversely affected the progress in the province.

viii) The up front cost model for community cold not get support due to lack of information available with Project entities on benefits of investments.

ix) No uniformity among the Provinces regarding approval of sub-projects. x) Different and lengthy procurement policies of different Donors. xi) Significant differences between the land acquisition procedures proposed under FLAR

(Framework for Land Acquisition and Resettlement) and those adopted by the provinces. Delays in payment for land acquisition affected the implementation of sub-projects.

48

6. Sustainability i) Financial sustainability is yet to be termed as satisfactory for the Pakistan irrigation and

drainage sector as cost recovery of the O&M has remained inadequate in spite of periodic increases in abiana (water rate) collection. In line with the new strategy for water resources development, NDP aims to improve the efficiency of the irrigation and drainage system and ensure its sustainability through, inter alia, institutional reforms aimed at establishing decentralized, efficient and participatory institutions for financing, management and O&M.

ii) Keeping in view the fact that current project is Phase-1 of a 25-years programme, and that scheduled completion is 1 and 1/2 years from now, the extraordinary efforts & commitments of the concerned agencies are needed for attaining the targeted sustainability under the institutional reforms.

iii) The process of implementing of the restructured investment component has gained momentum, especially in the Punjab. It is expected that substantial completion of the physical works will be achieved by the end of NDP-I in December 2006.

iv) Major drainage works completed in Sindh have been maintained successfully through O&M Performance Contracts out of IDA Credit. There are no indications from either the provincial government or other donors for allocation of funds for continuity of O&M in future. The AWBs and FOs, formed and empowered to collect abiana, are still young to maintain the system and becoming self-sustaining. The situation in other provinces regarding sustainability of AWBs and FOs is even more precarious.

7. Bank and Borrower Performance 7A. Bank’s Performance i) The Staff Appraisal Report (SAR) rated the Project as “high reward-high risk”. The Bank’s

analysis in the SAR warranted Bank’s explicit support for at least during the initial years of implementation of NDP-I to mitigate the risks. On the contrary, the Bank categorized the Project as “Problematic” and its performance as “Unsatisfactory” within three years of its implementation because the overall achievements were much lower than originally envisaged. Much of the Credit was diverted to DERA.

ii) The major reason behind the slow progress was the linkage of Institutional reforms (4% of NDP Cost) with the investment component (89% of NDP Cost). This was the basic design flaw, and remained the detrimental factor during the life of NDP-I.

iii) The Bank on the request of the Borrower (GOP) transferred (without the consent of provincial governments i.e. the main stakeholders) SDR 78.5 Million out of SDR 198.6 Million NDP Credit during end of year 2001 to DERA Project. The Bank informed during its Mid-Term Review (MTR) Mission in November 2002 that IDA was unlikely to grant an extension in the Credit closing date. This decision must have been taken due to the fact that Bank did not foresee any balance/unspent amount left at the end of December 2004. Another Bank Mission that visited Pakistan in 2003 noted in its Aide-Memoire that while implementation has picked up in the last 6 months, the performance was still rated as “Unsatisfactory”. This rating actually sealed any hope for extension in the closure of IDA Credit on 31-12-2004 in spite of availability of un-spent amount of over US$30 million.

iv) The Bank supported the provinces to undertake non-core activities like Crash Programme and Incremental O&M Programme during 1998-99 due to the low utilization of funds in the beginning of NDP.

v) The NDP Project was designed on the guidelines of the Bank. Instead of allowing enough time to the newly established institutions to perform, the Bank put the Project under the category of ‘Unsatisfactory’ within three years of its start.

vi) The loan agreements of three donors envisage their coordination for smooth implementation of thickly knitted activities of the Project. No such coordinated effort from the donors was witnessed. While the other Donors (JBIC and ADB) having lesser stakes in the Project agreed to extend their loan closing dates till 31-12-2006, IDA went out of NDP on 31-12-2004.

vii) The Bank’s performance has been satisfactory as far as loan disbursement is concerned; however the non-uniform approach on the extension of the project completion date and the loan expiry falls short of Borrower’s expectation on co-ordination among donors.

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7B. Borrower’s Performance i) Programme Approach and Slow Progress under Institutional Reforms NDP is under execution on a Programme approach instead of a Project approach. This approach, first of its kind, required following actions:

• Establishment & functioning of the Provincial Coordination (PC) Cells in the Planning and Development Departments for smooth transitioning of Provincial Irrigation Departments (PIDs) into Provincial Irrigation & Drainage Authorities (PIDAs).

• Establishment & functioning of PIDAs, AWBs, FOs in the provinces. • Capacity building of these institutions, and Water Wing of WAPDA.

Initial years of the implementation of the Programme witnessed slow progress due to establishment of PC Cells & PIDAs, mobilization of Engineering, Design, and Supervision (EDS) Consultants and, Finance, Accounting and Information System (FAIS) Consultants. The progress picked up in the later half of the Project implementation period. ii) Over-Design of Investment Component The size of the investment portfolio was over-designed as compared with the capacity of the implementing agencies. It kept the implementation agencies under pressure because the progress achieved Vs targets always remained negligible and not appreciable. iii) Linkage of Implementation of On-Farm Works with Progress under I/Reforms The implementation of physical works of “On-Farm sub-component” was linked with the progress under the Institutional Reforms by the Provinces. Since the process of formation & empowerment of Farmers Organizations (FOs) remained slow, the works under On-Farm sub-component could not be taken up. iv) Reviews of NDP by Various Agencies including Special Committee The President of Pakistan put a hold on NDP activities during 2001 and constituted a Special Committee to probe the causes of slow implementation. The Special Committee presented its report in 2002, and the ban was lifted. The implementation of physical activities remained at standstill during the aforementioned period. v) Drought Conditions during 2000-2002 The persistent drought conditions during 2000 to 2002 lowered the ground watertable. Hence, the saline and waterlogged areas were brought under cultivation. Due to the drought conditions, the priorities from undertaking drainage sub-projects to irrigation sub-projects were made. This factor slowed down the implementation of physical works. vi) Non-Updating of Provincial Composite Schedule of Rates The Provincial P&D Departments use their Composite Schedule of Rates (CSR) as the basis for award of contracts. This resulted in delays in cases where the bids that reflected the current market prices were higher by more than 15 % of the departmental estimate. The process took considerable time. The matter was referred to the Federal Programme Steering Committee (FPSC) in mid 2003 when a premium above the CSR was recommended by FPSC and subsequently adopted by the provinces to ease the situation. vii) Non-uniform Approach on the Extension of the Project Completion Date Non-uniform approach on the extension of the Project completion date and the loans’ expiry falls short of the Borrower’s expectations on coordination among Donors, though Bank’s supervision of the Project as well as Overall Bank Performance has been satisfactory. viii) Balochistan Balochistan’s remaining out of NDP for about 2 years hampered progress in that area. ix) Future Arrangements Seen as the first phase of a 25-year Programme, the Borrower’s preparation has been satisfactory. The Government has effectively managed the Project through regular review and guidance by the Federal Programme Steering Committee. Progress on institutional reforms has been good in one

50

province. In others it varied from nothing to appreciable. The Project is still ongoing and will be completed in December 2006. Given the present impetus, the overall performance is likely to become satisfactory. 8. Relationship between the Borrower and the Bank The successful completion of any Project largely depends on the better relationship between the Borrower and the Bank. Under NDP Project, the relationship of the Borrower itself as well as its implementing agencies i.e. WAPDA & the provincial agencies with all three donors (IDA, JBIC and ADB) has remained very warm & cordial throughout the life of the Project. The regular Bank Missions that visited the Project provided guidelines for better performance as well as reminded the implementation agencies of possible risks involved, and their remedies. The Bank also came to the rescue of the Borrower during drought in the country from 2000 to 2002, and agreed to divert un-utilized funds out of NDP for DERA Project. However, the Bank did not accede to the Borrower’s request for extension of IDA Credit on at least two accounts; no further funds available under IDA Credit No. 2999-Pak for NDP, and in the Bank’s view, the performance of the Project was “un-satisfactory”. 9. Lessons Learnt

i) The centralized EDS Consultancy was engaged for the Investment Component to be implemented by the provinces. The centralized EDS Consultancy was amended on the behest of the provinces and the Consultant was made answerable to five clients, which made coordination and uniformity of sub-project preparation and design activities, vital in case of a programme approach, difficult. Separate EDS Consultants should have been in place for the provinces from the very start.

ii) Project approach with specific work plans, with implementation responsibility resting on a single entity, should be preferred.

iii) WAPDA should be brought back into the development of large intra-provincial irrigation & drainage projects in view of its expertise and experience.

iv) The demonstration of extraordinary efforts & commitments of the provincial governments is imperative for the success of PIDAs, AWBs and FOs. They should be empowered to work independently within their own jurisdictions, without the interference of IPDs.

v) Cost recovery of O&M is also required to come into effect without further delay for sustainability of the newly formed institutions.

vi) More cautious approach is required in introduction of the reforms. The institutional reforms under NDP were somewhat over ambitious and to some extent resulted in a slow down of investment. The process should preferably be gradual and started from the lower tiers instead of doing it from top in one go. Institutional Reforms may be accompanied by modest amount of investment package to act as catalyst for the formation of new institutional. Once the institutions are in place the pace of investment will be accelerated, as the new institutions will tap into new sources of financing.

vii) The decentralization of the operation and maintenance of distributaries and minor level irrigation systems to the FOs is a valid concept and is enthusiastically accepted by the FOs. NDP is an excellent demonstration of this concept.

viii) The Irrigation and Power Departments need to build their capacities to handle large water sector projects by themselves.

ix) The Project where change management is involved, a continuous and constant political commitment is necessary.

x) Social mobilization process may be undertaken through NGOs/reputed support organizations instead of government organizations.

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Faisalabad

Mianwali

ISLAMABAD

Lahore

Gujrat

Kohat

SEHWANBARRAGE

(PROPOSED)

GUDUBARRAGE

TAUNSABARRAGE

PUNJNADBARRAGE

ISLAMBARRAGE

SULEIMANKEBARRAGE

FEROZEPURBARRAGE

BALLOKIBARRAGE

TRIMMUBARRAGE

CHASHMABARRAGE

RASULBARRAGE

MARALABARRAGE

KHANKIHEADWORKS

MANGLADAM

TARBELADAM

SALALDAM

JINNAHBARRAGE

MAILSISYPHON

RAVISYPHON

KOTRIBARRAGE

SUKKURBARRAGE

Upper Swat Canal

Swat

River

Kabul R.

Low er Swat Canal

Kabul R.C.

Soan River

River

Upper JhelumC.

Lowe

rCh

enab

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Jhan

gBr

anch

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ab

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enab

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B. S. LinkII

B.S. LinkI

Dipalpur Canal

Lower Bari Canal

Thal

Can

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C. J. Link

Indu

s

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r

Beas

RIver

Sutlej

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Pakpattan

Canal

MailsiCanal

T.S.

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LinkHaveli

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naiC

anal

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wahCan

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ahBr.

Bahawal Canal

T.P.Lin k

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pur

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l

EvaporationPonds

EvaporationPonds

Punjn

adCan

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Kirthar

Canal

N.W. Canal

Watah Canal

Dad

uCa

nal

FuleliC

anal

Pinyari

Cana

l

KalriLake

ChotiariLake

ManchharLake

HamalLake

ARABIANSEA

Muzaffargarh

C

MAIN NARA VALLEYDRAIN (MNVD)

NATIONAL SURFACEDRAINAGE SYSTEM(NSDS)

DHANDS &COASTAL CREEKS

RANN OF KUTCH

JAMMU &KASHMIR

ApproximateLine of Control

I N D I A

THA

LD

ESER

T

SALTRANGE

KIR

THA

RR

AN

GE

THAR

DESERT

P U N J A B

S I N D H

BA

LO

CH

IST

AN

N . W . F . P .

67°

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68° 69° 70° 71° 72° 73° 74°

68° 69°

70° 71° 72° 73° 74°

PAKISTAN

NATIONAL DRAINAGEPROGRAM (NDP) PROJECT

IRRIGATED AREA PROVIDED WITHAND IN NEED OF DRAINAGE

IN THE INDUS BASIN

AREAS COVERED BY DRAINAGE:

SURFACE DRAINAGE

SUB SURFACE DRAINAGE

AREAS IN NEED OF DRAINAGE:

SURFACE DRAINAGE

SUB SURFACE DRAINAGE

AREAS WHERE DEPTH TO WATER TABLE <5 FEET

CANAL COMMAND AREAS

CANAL COMMAND AREA BOUNDARIES(PROSPECTIVE AREA WATER BOARDS)

MAJOR RIVERS

MAIN CANAL, BRANCHES AND RIVERS

OUTFALL DRAINS

OUTFALL DRAINS UNDER CONSTRUCTION

OUTFALL DRAINS PROPOSED

SYPHONS, BARRAGES

SELECTED CITIES

NATIONAL CAPITAL

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

20

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0

0 4020 60 80 100 Miles

20 40 60 80 100 Kilometers

PUNJAB

N.W.F.P.

CANAL COMMAND

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Upper Jhelum CanalLower Jhelum CanalMarala Ravi Link CanalUpper Chenab CanalLower Chenab CanalHaveli CanalDipalpur Link CanalRavi SyphonDipalpur Canal (Upper & Lower)Lower Bari Doab CanalPakpattan Above S.M. Link CanalSidhnai CanalMailsi Below S.M. Link CanalFordwah & Eastern SadiqiaQaim CanalBahawal CanalPanjnad & Abbasia CanalsD.G. Khan CanalMuzaffargarh CanalRangpur CanalThal CanalPaharpur Canal

Upper Swat CanalLower Swat & Doaba & SholgaraWarsak High LevelKabul RIver & Jui Shekh & Inundation

SINDHGhotkiDesert CanalNorth West CanalBegari Sind CanalRice CanalDadu CanalKhairpur West CanalKhairpur East CanalRohri CanalEastern Nara CanalPinyari CanalGaja Canal (Lined Channel)Fuleli CanalTando Bago (Lined Channel)Kalri Baghar

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BALOCHISTANPat Feeder CanalNorth West Canal

BALOCHISTAN

SINDH

PUNJABN.W

.F.P.

ArabianSea

P A K I S T A N

Areaof Map

ISLAMABAD

AFGHANISTAN

INDIA

CH

INA

TURKMENISTANUZBEKISTAN TAJIKISTAN

Approx.Line of Control

JAMMU AND

KASHMIR

62° 66° 70° 74°

24°

28°

32°

36°

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28°

32°

36°

74°

IBRD 27854

APRIL 1997