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PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Project Name Region Sector Project ID Borrower(s) Implementing Agency Environment Category Date PID Prepared Date of Appraisal Authorization Date of Board Approval Report No.: AB1859 Second Uttar Pradesh Diversified Agriculture Support Project SOUTH ASIA Agricultural marketing and trade (40%); Agricultural extension and research (35%);General agriculture, fisheries and forestry (25%) P089484 GOVERNMENT OF INDIA [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) December 22, 2006 January 5, 2006 April 27, 2006 1. Country and Sector Background The Tenth Five-Year Plan (2002/3 – 2006/7) establishes the country’s poverty and social development agenda by setting targets for poverty reduction (down 5 % by 2007), employment generation and human/social development, in addition to overall acceleration of GDP growth rate to 8% p.a. In contrast to earlier Plans which had focused more on industrial development, agriculture has been made a priority sector because of the dependence of the poor upon it and its potential to generate substantial employment opportunities. The development strategy for agriculture moves away from the earlier approach of securing increased production through subsidies in inputs such as fertiliser, water and power. Instead, it aims for a more efficient, sustainable and equitable approach with four elements: (i) raising cropping intensity; (ii) improved development and dissemination of technology; (iii) promoting agricultural diversification, postharvest technologies and marketing; and (iv) developing rural connectivity and other infrastructure that support expansion of the rural economy. Uttar Pradesh is a key arena in the country’s campaign against poverty. With 166 million people, it is home to one-sixth of the nation’s population and almost one-fifth of the country’s poor. It is ranks below the national average in a range of economic and social indicators. Agriculture is the dominant economic sector, employing 72% of the population and contributing 42% of the state’s GDP. But the sector exhibits weak and uneven growth, averaging less than 2% p.a. throughout the 1990s. The state’s prosperity gap is also widening – per capita income was 3% lower than national average in 1950-51, but had slipped to 38% lower by 1999-2000. The most significant constraints to Plan implementation relate to resources, composition of public expenditure, poor infrastructure, weak institutional and/or implement capacity, and restrictive regulatory frameworks. Significant additional resource mobilization would be required to fund Plan outlays which, in the case of UP, are forecast to double in size in the new Plan. Equally, improvements in public expenditure management are needed to reduce the proportion of public expenditure on wages, pension, interest, subsidy and on-going commitments, to allow an increase in capital spending, maintenance and social support activities. Governance and regulatory environment will need to be reformed to improve service delivery and facilitate productive private investments. The agriculture sector in UP is experiencing problems of worsening land-man ratio, land degradation and declining soil fertility in many areas, inefficient irrigation systems, stagnant yields, and lack of crop diversification and subsistence-oriented crop and livestock production systems. Public extension activities at the ground-level are negligible with little consequent acquisition of new technology or practices by the majority of farmers. Advice on post-harvest processing and management activities is largely absent and there are few backward/forward linkages with a primarily under-developed agribusiness sector. Marketing infrastructure is essentially organized around cereal crops and pulses, and does not cater very well to perishable and non-traditional products which, nevertheless, hold out substantial promise for both income expansion and employment generation. Although not a leading reformer, the state has made cumulative, if uneven, progress in a number of policy and institutional reform areas like cost recovery and private participation in input/services supply, especially in the context of the first Uttar Pradesh Diversified Agricultural Support Project and Sodic Lands Reclamation Project. Looking forward, the state intends to upscale and extend key reforms that have been piloted. The Agricultural Technology Management Agency (ATMA) model for rationalisation and reorientation of public extension services, developed under DASP, will be applied to all districts. Impetus for reform is also being provided by the central government which, under the Tenth Plan, links provision of additional earmarked funds to governance and institutional reforms. The central government has also launched a fully funded National Horticulture Mission to promote holistic growth through research; production and productivity improvement; processing and post-harvest management; and marketing. 2. Objectives The objective of the project would be to increase agricultural productivity and product diversity in UP; and enhance market opportunities and market access for the state’s farmers, fishers and livestock producers. In support of this objective, the project would foster increased private sector participation and investment in all facets of the agricultural and allied sectors; and to promote more effective use of government funds already allocated to these sectors, directly to line Departments and to private sector through government sponsored investment grant schemes. Key indicators of success would be (i) increased areas and yields of diversified field and tree crops, livestock products and fish - complemented by an increase in the proportion marketed as fresh produce or processed; (ii) more effective marketing of produce in project supported markets in terms lower transaction costs and reduced wastage; and (iii) increased private sector participation and investment in relevant areas of the sector. 3. Rationale for Bank Involvement The Bank’s engagement in Uttar Pradesh supports the India Country Assistance Strategy (CAS) which aligns itself with government attempts to bridge the widening gulf between the faster and slower growing states in India. The strategy identifies UP as one of the four target states in which the Bank would proactively try to build a productive development relationship. Further, enhancing rural livelihoods, which will be the higher level outcome of the proposed project, constitutes one of the three areas in which the CAS seeks to expand Bank lending. The Bank is well-placed to assist the government to implement its development program, which focuses on public sector reform, regulatory rationalization, private sector participation, demand-driven planning and allocation, and community-based implementation - with an emphasis on the quality of public investments. The Bank has a comparative advantage in combining analytical expertise, implementation experience and resource support to facilitate such an inter-related, deep, and cross-cutting agenda for change. This comparative advantage has been demonstrated during the recently completed Bank financed Uttar Pradesh Diversified Agricultural Support Project (UPDASP), to which the proposed project would be a follow-on operation, but with a broader sweep of activities. That initial project has provided useful experience and models for the next phase work on promoting greater diversification and commercialization of agriculture. Moreover, the policy reform dialogue promoted through the initial project has focused on themes currently being emphasized in state and GOI plans. This has enhanced both the credibility and capacity of the Bank to engage in agricultural/rural policy dialogue of both sectoral and cross-cutting nature. Finally, the Bank is the only significant bilateral or multilateral development partner working with GOUP to enhance rural livelihoods and develop the agricultural and rural sector through promoting productivity, product diversification, and market access to facilitate commercialization. 4. Description The project covers all 70 districts in the state (32 phase I districts from the first project, and 38 new phase II districts). Project activities would build on the successful initiatives of the initial project, but with the addition of new interventions to address emerging marketing issues – for both fresh and processed produce. Project activities are categorized into two components. (i) Promoting Intensification and Diversification of Agricultural Production – by making extension and adaptive research more relevant and accessible to farmers; encouraging the development and introduction of more effective agricultural production systems; and reducing the risk associated with change, especially for small operators. o Restructuring Extension and Adaptive Research Delivery. Introduction of a state-wide decentralized pluralistic extension and adaptive research system, through adoption and development of the ATMA management concept, which fosters farmer participation; public private partnerships; and collaboration between line Depts. – and focuses appropriately on marketing as well as production issues. o Upgrading Production Systems. Promotion of diversified, innovative agricultural, livestock and fish production systems, supported by an investment grant scheme specifically targeted at marginal landholders and the landless; along with livestock and fish up-grading programs, privatization of artificial insemination (AI) services, and improved livestock disease surveillance systems. o Piloting Risk Mitigation. Pilot testing of risk mitigation mechanisms for small and marginal farmers, involving concepts such as weather-based insurance and warehouse receipts, through MOUs with private sector providers. (ii) Expanding Market Opportunities and Increasing Access – by increasing market infrastructure and making market management more responsive to farmers needs; promoting private sector participation in agribusiness; and improving market access through more market information, a better regulatory framework and improving supply chain management; o Modernizing Market Infrastructure and Management Systems. Market-yard development and associated piloting of two market management models, involving: (i) partnership with the State Agricultural Marketing Board (Mandi Board) to construct one specialized market each for fish and fruits/vegetables, and upgrade/expand four more markets of each – to be operated as regulated markets, but with enhanced governance and market stakeholder participation in market design and operation, and outsourcing of selected market facilities to the private sector; and, (ii) establishment of new concept district agri-markets, under the auspices of local ATMAs, but managed by private sector entities, providing also a range of input supplies and general services to farmers on the same site. o Promoting Agribusiness Investment. Establishment of a professionally managed Agribusiness Development Facility (ABDF) to promote private sector involvement in agro-processing and services provision, by increasing access to finance from commercial banks and GOI schemes; increasing the availability of business development services to entrepreneurs; and fostering an enabling business environment. To finance selected innovative agribusiness ventures, a small Innovations Grant Fund would be established. o Facilitating Market Access. Through (i) an improved provision of market information on prices and volumes traded in the major outlets, product standards, certification, and regulatory policies and procedures; (ii) strengthened regulatory framework to improve the safety and quality assurance of domestic and export products; and (iii) development of both coordinated and uncoordinated supply chains by working with the private and cooperative sectors in market identification and promotion; and facilitating linkages between producers, traders and processors selected commodities, including milk and others to be identified during the project period. 5. Financing Source: BORROWER/RECIPIENT INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION ($m.) 50.0 78.0 Total 78.0 206.0 6. Implementation Proposed institutional arrangements reflect what was established for the initial UPDASP, and proved to be effective for that project. Overall responsibility for project execution would rest with the Agriculture Production Commissioner (APC) Branch of GOUP. The APC is the senior government official normally responsible for the operation of all the line Departments and agencies involved as implementing the project. Project oversight: Two committees exist at the state level to provide policy guidance and to oversee project implementation. The Project Steering Committee is headed by the Chief Secretary of GOUP, with other senior Departmental Secretaries and three non-officials representing farmers organization, NGOs and the private sector as members. This committee provides policy guidance and general oversight of the project in terms of achieving development impact. The Project Executive Committee, with the APC as the chairperson and Secretaries of the participating line departments as members, has overall responsibility for the management of the project. The EC approves annual work plans, and addresses all implementation issues including resolution of any inter-departmental conflicts that might arise. Project Coordination: This is the responsibility of the Project Coordination Unit (PCU) of the Diversified Agricultural Support Project (DASP) Society, established in 1996 to facilitate project preparation and implementation of the first project, supported by units in each district (DPCU). The role of the PCU is not to implement the project, but to coordinate and facilitates implementation by the line Departments and other implementing agencies. The Project Coordinator (PC) is a full-time officer at the level of Secretary/ Special Secretary to the APC Branch of GOUP. Technical experts and managerial and support staff are seconded to the PCU from line departments, universities/ institutes, or hired on contract for the project period. As a registered Society, DASP is a GOUP agency, but has a semi-autonomous status, with flexibility in administrative and financial procedures. Project Implementation is the direct responsibility of the Departments of Agriculture, Horticulture, Fisheries, Animal Husbandry, Dairy Development and Food Processing; along with other agencies such as the Agricultural Produce Marketing Board (Mandi Board), Uttar Pradesh Livestock development Board (UPLDB) and the Pradeshik Cooperative Development Federation (PCDF) – each operating in their area of responsibility. Line Departments have established dedicated project implementation units (PIUs) by deploying existing staff to focus attention on initiatives promoted by the project. To support implementing agencies, the PCU and DPCU would have an essential role in coordinating activities at the local level, especially with respect to the formation of community based groups, such as Farmer Interest Groups (FIGs), Self Help Groups (SHGs) and Commodity Associations (CAs), with the help of NGOs engaged under the project. To ensure good construction quality for any project funded civil works, technical audits would be undertaken by independent consultants. Concurrent monitoring and evaluation would be done by a reputed external agency. At district level, Agriculture Technology and Management Agency (ATMA) would be the primary vehicle for restructuring extension and adaptive research service delivery. Each district ATMA is established as a registered society, with membership made up of a full range of stakeholders, including district officers of line department; representative of zonal research station/ krishi vigyan Kendra; commercial banks; producer committees involving farmers, fishers, livestock producers, women self help groups, SC/ ST farmers; private sector input and service providers; and NGOs representatives. Each ATMA has a Governing Board chaired by the District Magistrate, to provide overall policy guidelines for district level intervention and maintain oversight and ensure coordination between line Departments; and a Management Committee chaired by the Chief Development Officer, with responsibility for operation and implementation of coordinated district extension and adaptive research initiatives. Implementation of the project Marketing activities ( market development and management, and market information systems) would involve marketing cells of different departments. PCU would place core marketing teams to collate, analyze trend in marketing and provide technical backstopping to marketing personnel in line Departments at the district level. The Mandi Board would be responsible for design and construction of the specialized fruits/vegetable and fish markets planned under the project, along with kisan sewa kendra in existing mandis. New post harvest handling and ancillary market facilities in new and existing markets would be outsourced to private operators. Agri Marts to be established and operated under the aegis of the local ATMA would be contracted to a private operator and managed in line with agreed performance indicators. E-kiosks backed by mobile phones connectivity as spokes of agriculture extension and marketing info-network would be established under an MOU between the PCU and selected mobile phone providers. The Agribusiness Development Facility (ABDF) would be administratively situated within the PCU, but operated by a team of externally recruited professionals who would have sufficient autonomy to manage and implement the program against agreed deliverables and milestones. A logical framework of inputs, outputs, expected outcomes would be established and monitored and periodically. An Advisory Panel would be established with representatives from the business community, commercial banks, farmer associations and the government. The panel would not have executive powers, but would operate in an advisory role only. In addition a committee would be established to screen applications to the Innovation Fund, and ensure grants are made in line with agreed selection criteria. 7. Sustainability Following a widely perceived successful initial DASP, government support for a second phase project that would extend coverage to the whole state, and add a crucial marketing dimension missing from the first project, has been very strong – evidenced by GOUP’s consistent request for the processing timetable to be advanced as much as possible. Project sustainability relates to institutional and operational reforms, post project budgetary implications and infrastructure maintenance arrangements. A number of aspects of the project design would enhance sustainability, such as: new institutional arrangements such as ATMAs and the paravet program have been widely piloted in the earlier phase of DASP or other project in India – and are now endorsed by GOI for scaling up throughout the country; wide stakeholder participation in project design and implementation; establishing a ABDF modeled on facilities successfully operated by IFC in many regions of the world; and partnering with, or outsourcing to, the private sector in livestock production and agribusiness development activities, and in the development and operation of new market facilities. In addition, implementation of most activities will be handled by line Depts and Government institutions using almost exclusively, existing staff – which means post-project fiscal impact will be manageable. Finally, sustainability will come about because the project encourages farmers to take a pro-active approach to finding new market opportunities for themselves, and then tuning their production to changing demands. Much of benefit is expected to come from improving existing marketing systems; but the project will also facilitate farmers taking up new opportunities and engaging with the new marketing systems that will emerge as a result of a liberalized marketing environment These marketing systems offer the prospects of a future where an increasing proportion of agricultural production will have embedded private sector support through provision of credit, inputs, technical advice and, above all, access to expanding food processing and formal retail sectors. 8. Lessons Learned from Past Operations in the Country/Sector o o o o Commercialization of agriculture and private sector involvement are necessary for raising rural incomes: in project areas where markets and market access were well developed, technical interventions had a magnified impact and higher outputs translated into higher incomes. Conversely, lack of adequate market linkages and of capacity to produce for the market (e.g. access to varieties, post harvest handling and quality control) have emerged as the biggest challenges to sustaining productivity enhancement and income diversification in SHGs assisted by the project. Therefore any follow-on project should promote greater market orientation of production, improved product handling, and stronger market linkages. Use of beneficiary groups as entry points for project activities improves participation and beneficiary capacity to absorb project-supported changes. Also, interventions based on beneficiary cost sharing generates more ownership, leading to improved design, complementary private investments and more responsible O&M Substantive reform of extension and research delivery systems is needed if farmers are to make best use of new market infrastructure and opportunities, including convergence between line Depts. and partnerships with the private sector; Innovative initiatives are needed to promote effective farmer organization with marketing linkages to commodity traders and agro-processors; o o Fisheries is a good source of income, especially for marginal farmers and the landless, but good extension and follow-up training is needed to nurture participants in the period after subsidized inputs cease; and, Adequate attention to animal nutrition and health, and to milk marketing is essential, without which, upgrading of cattle will bring only limited benefits to livestock producers. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Environmental Assessment (OP/BP/GP 4.01) Natural Habitats (OP/BP 4.04) Pest Management (OP 4.09) Cultural Property (OPN 11.03, being revised as OP 4.11) Involuntary Resettlement (OP/BP 4.12) Indigenous Peoples (OD 4.20, being revised as OP 4.10) Forests (OP/BP 4.36) Safety of Dams (OP/BP 4.37) Projects in Disputed Areas (OP/BP/GP 7.60)* Projects on International Waterways (OP/BP/GP 7.50) Yes [X] [] [X] [] [] [] [] [] [] [] No [] [X] [] [X ] [X ] [X ] [X ] [X ] [X ] [X] 10. List of Factual Technical Documents 11. Contact point Contact: Robert S. Epworth Title: Sr Agriculturist Tel: 5785+157 Fax: Email: [email protected] Location: New Delhi, India (IBRD) Implementation Agency Contact: Mrs. Archana Agrawal Government of Uttar Pradesh Lucknow 226010 Tel: 91 2238138/2720839/718 2720682 * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop