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The World Bank

FOR OFFICIAL USE ONLY

Report No. 4555

PROJECT PERFORMANCE AUDIT REPORT

PHILIPPINES AURORA-PENARANDA IRRIGATION PROJECT(LOAN 984/CREDIT 472-PH)

June 16, 1983

Operations Evaluation Department

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

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ABBREVIATIONS

APIP - Aurora-Penaranda Irrigation ProjectERR - Economic Rate of ReturnIDA - International Development AssociationISF - Irrigation Service FeesNIA - National Irrigation AdministrationMCM - Millions of Cubic Meters

PCR - Project Completion ReportPCRO - Project Completion Report'OverviewPENRIS - Penaranda River Irrigation SystemPPAM - Project Performance Audit MemorandumPPAR - Project Performance Audit ReportUPRP - Upper Pampanga River Irrigation Project

FOR OFFICIAL USE ONLY



TABLE OF CONTENTS

Page No.

Preface ............ iBasic Data Sheet ... ...... ....---o......... . . . . . . . . .. . . . iRighlights ........ o... . .to.............. to..... . . . ... .. ......

PROJECT PERFORMANCE AUDIT MEMORANDUM

I. SUMMARY o....... . . .. . . .. . . .. . . .. . . ......... 1

Background ... .... ............... " 1Project Design .................. .... . .......... 1Project Implementation ..................... . ......... 2Results .............................. o......*.......o..... 3

II. MAIN ISSUES .................... . . ..................... 3

A. Cropping Intensity and Water Supply Limitations ...... 3B. Size of Irrigation Service Area ...................... 5C. NIA's Performance in the Service Area ............... 6

D. Economic Rate of Return .............................. 7E. Irrigation Service Fees (ISF) ........................ 7

Attachment I - Borrower's Comments ................. ...... 10

PROJECT COMPLETION REPORT OVERVIEW

Project Objectives ... . . .. .o. .... ............. .... ..... 15

Description of Project Works .......................... .... 15

Project Execution Highlights ................................. 16

Variations in Irrigation Service Area ................. e....... 17

Inadequacy of Water Supply ................... .-. ....... . ... 17

Final Project Cost ........ .... ...... ....... ...... o .... o .... 18

Disbursement and Procurement Problems ........................ 18

Economic Revaluation ............ ......................... ... 19

Project Benefits ....... ............ . . ................. 19

Annexes

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


PHILIPPINES AURORA-PENARANDA IRRIGATION PROJECT

(LOAN 984/CREDIT 472-PH)

PREFACE

This is a performance audit of the Aurora-Penaranda IrrigationProject, for which Loan 984-PH and Credit 472-PH were approved in April1974 in the sum of US$9.5 million each. The credit was closed in 1977 and,after cancellation of US$62,595, the loan was closed in August 1982.

The audit report consists of a memorandum prepared by the Operations

Evaluation Department and a Project Completion Report Overview (PCRO) datedNovember 18, 1982 prepared by the East Asia and Pacific Regional Office;while the Project Completion Report (PCR) prepared by the borrower's executingagency, the National Irrigation Administration (NIA), also forms part of thereport, it is not attached due to its length and volume, but a copy isavailable in OED files.

An OED mission visited the Philippines in November 1982. The

mission held discussions with officials of NIA and other agencies of Govern-ment both at headquarters and at field sites. Farmer representatives wereinterviewed in addition to bankers and traders in the private sector. The

information obtained was used to test the validity of the analysis and

conclusions reached in the PCR and PCRO.

The audit memorandum is based on the discussions, on interviews with

Bank staff associated with the project, and on a review of the PCR; the PCRO;

the President's Report (No. P1419-PH) dated April 17, 1974; the Appraisal

Report (No. 348A-PH) dated April 1, 1974; the Loan and Credit Agreementsdated May 14, 1974; correspondence with the borrower; and internal Bank

memoranda on project issues as contained in relevant Bank files.

A copy of the draft report was sent to the Borrower on March 21,1983. Comments received from the National Irrigation Administration are

included in an Annex to the Project Performance Audit Memorandum (PPAM).

Attention is drawn to significant points through footnotes to the PPAM text.

The audit finds that the data and most of the analysis contained

in the PCR and the PCRO provides a generally accurate presentation of the

project's principal achievements and shortcomings. However, the audit is

unable to accept the rate of return in either document, and the basic data

sheet, presented herewith, reflects a re-estimation. The audit memorandum

consists of a summary of the project's salient design and performance fea-tures, and a discussion of a number of selected issues.

The valuable assistance provided by the Government of the Philip-

pines and the borrower's executing agency, the National Irrigation Administra-

tion (NIA), is gratefully acknowledged.

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PROJECT PERFORMANCE AUDIT BASIC DATA SHEET

PHILIPPINES AURORA-PENARANDA IRRIGATION PROJECT(LOAN 984-PR/CREDIT 472-PH)

KEY PROJECT DATAAppraisal Actual or Actual as 2 of

Item Estimate Estimated Actual Appraisal Estimate

Total Project Coste (US$ million) 40.0 57.6 144Loan Amount (US$ million) 9.5 9.4 La 9Credit Amount (US$ million) 9.5 9.5 100Date Board Approval - 04/30/74 -Date Effectiveness 08/14/74 08/22/74Date Physical Components CompleteL/b May 1978 December 1981 188L

Proportion completed by above date (%) 73 100Closing Date 06/30/79 08/82 161/cEconomic Rate of Return (2) 17 8.0Financial Performance - FairInstitutional Performance Fair

CUMULATIVE DISBURSEMENTS

FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82

Appraisal estimate (US$ million) 2.4 6.7 14.9 17.3 19.0 19.0 19.0 19.0Actual (US$ million) 2.5 7.2 11.2 13.5 15.8 17.4 18.5 18.9Actual as X of estimate 104 107 75 78 83 91 97 99.5

MISSION DATA

Date No. of Handaye Specializations Performance Types ofMission (mo./Yr.) Persons in Field Represented/d tTrend Problem..&

Identification 10/72 2 20 - - - -Preparation 11/73 n.a. n.a. - - - -Appraisal 10/73 3 51 - - - -Subtotal 71

Supervision i/h 04/74 2 10 - - - -Supervision 2 04/75 3 20 - - - -Supervision 3 03/76 5 15 - 1 1 HSupervision 4 01/77 3 10 - 1 1 0Supervision 5 10/77 2 10 - 1 1 -Supervision 6 02/79 1 10 e 1 2 -Supervision 7 03/80 2 10 d,e 2 1 -Supervision 8 12/80 2 10 - 2 - -Supervisioq 9 06/81 2 1 d,e 1 1 MCompletiouLi 07/82 - - - - - -

Total 186 - 37 manweeks

OTHER PROJECT DATA

Borrower Republic of the PhilippinesExecuting Agency National Irrigation Administration (NIA)Fiscal Year January 1 - December 31

Name of Currency (abbreviation) Peso (-)Currency Exchange Rate:

Appraisal Year Average 1974 US$ 1.00 - f6.729Intervening Years Average 1978 US$ 1.00 - P7.407Completion Year Average 1981 US$ 1.00 - f8.13

Follow-on Project:Name Balog Balog Casecnan, Lower Agnol

/a After payment of application number 140 on June 17, 1982, the unwithdrawn balance ofUS$62,595.74 was cancelled on July 1, 1982.

/b The project was substantially completed on December 31, 1980. An extension ofone year was allowed for the procurement of 0 & M equipment.

/c Calculated from date of loan approval.71 a - agriculturist; b - agricultural economist; c - financial analyst; d - engineer; a - irrigation

engineer./e 1 - problem-free or minor problems; 2 - moderate problems; and 3 - major problems.77 1 - improving; 2 - stationary; and 3 - deteriorating.

4 F -financial; M - managerial; T - technical; P - political; and 0 - other.h Supervision missions were joint missions involving other projects, the man-weeks

drawn are pro-rated./i The PCR was prepared by the National Irrigation Administration, the implementing agency.71 Project tentatively scheduled for 1985.

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HIGHLIGHTS

Through a variety of projects the Bank is supporting the Governmentof the Philippines in efforts to attain national self-sufficiency in grainproduction. This project is one of a series promoting new or improved irriga-tion, and specifically is a follow-on to the Upper Pampanga River IrrigationProject. Appraised in 1973/74 the project was expected to rehabilitate exist-ing structures and install new works to irrigate an area of 25,300 ha at anestimated total cost of US$40 million.

Physical completion was delayed by approximately three years dueprimarily to contracting problems in the irrigation service area compounded bysome very adverse weather conditions, and consequently costs rose by about44%.

While the project resulted in a substantial increase in rice produc-tion (estimated at 96,600 tons per annum) this was 20% below appraisal esti-mates due to the volume of available water being below expectation for the dryseason, and more serious flooding problems in the wet season than anticipated.Consequently, the estimated ERR will be below original estimates (PPAM, paras.14 and 26).

The main lesson of this project is the need to carefully relateproven volumes of water to optimal size irrigation service areas. Where dataon available water volume requires a high degree of judgemental interpreta-tion, it may be wise to split potential irrigation service areas into twoimplementation phases (PPAM, para. 22).

Other points of interest are:

- the design decision to transit water some 75 km when it couldpossibly have been utilized more economically in alternate servicearea(s) (PPAM, para. 20);

- some over optimism in realizable levels of water use efficiency(PPAM, para. 21);

- the adverse effects of poorly designed contracting procedures(PPAM, paras. 23-25);

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- problems of irrigation fee collection associated with farmerinability to dispose of crop production at reasonable prices duringcrucial periods (PPAM, para. 30);

- the need to be aware of the economic cost of irrigation fee collec-tion procedures and keeping this under review within nationalpolicies (PPAM, para. 32-33).

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PROJECT PERFORMANCE AUDIT MEMORANDUM


I. SUMMARY

Background

1. The Aurora-Penaranda Irrigation Project (APIP) forms part of aBank-supported effort by the Philippines Government to attain self-sufficiencyin rice production. Within the overall development effort investments havebeen, and are being, made in quality seed production, improved farm levelcredit facilities and agricultural advisory services; together with sub-stantial investments in necessary physical works - both new and of a rehabili-tation nature - to promote irrigation and hence double cropping.

2. This project, appraised if 1973/74, was a follow-on to the UpperPampanga River Irrigation Project I (Loan 637-PH). Estimated to cost US$40million, towards which the Bank approved a loan of US$9.5 million and a creditin like amount, the project was designed to provide for the construction ofnecessary civil works in rehabilitating and expanding an irrigation area of atotal of 25,300 ha adjoining and to the south of the earlier project.

3. The anticipated benefits derived from the expectation that croppingintensity on the 25,300 ha would rise from 143% to 200% and simultaneouslyimproved yields would be attained, resulting in an annual net increase of ricepaddy production of 120,000 tons.

Project Design

4. The project was prepared by Government's National Irrigation Admin-istration (NIA) with the assistance of consultants. To supplement water drawnfrom the Penaranda River to supply the proposed irrigation area, the designcalled for the construction of dams and canal diversion works in the AuroraRiver Basin to increase the volume of water stored in the Pantabagan Reser-voir, constructed under the earlier project and some 75 km north of theproposed irrigation service area. During the dry season water from thisstorage was to be channelled through the earlier project's irrigation area andultimately, via a conduit across the Penaranda River, joined with the mainirrigation water intake off the Penaranda River.

5. Organizational arrangements for project implementation were similarto, and in part a continuation of, those found satisfactory in the firstproject under the direction of NIA. Similarly arrangements covering comple-mentary action (not included directly in the project) by other agencies of

1/ See PPAR No. 3063, dated June 30, 1980.

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Government for such matters as agricultural advisory services, credit and landreform followed those established under the Upper Pampanga River IrrigationProject.

Project Implementation

6. Aprraisal estimated construction to be completed by May 1978, andthe loan closing date was established as June 1979. Construction, however,continued through December 1981 (the revised official loan closing date), andthe final disbursement against the loan occurred on June 17, 1982 - the credithaving been fully disbursed by March 1977.

7. There were no delays with civil works construction in the Aurorabasin; these works, estimated at 44% of base line estimated project cost,were completed slightly ahead of schedule with a cost overrun of 29%, whichwas attributable to weaker geological conditions than expected and some workdisruptions caused by typhoons. All the evidence indicates that this part ofthe project was carried out efficiently with high quality end results.

8. In contrast, there were substantial delays and a 76% cost overrun incarrying out the works in the irrigation service area and some delays ineffecting the intermediate connecting works between the Pantabagan Reservoirand the irrigation service area intake works some 75 km to the south.

9. At the end of 1982 certain necessary minor works had still not beencompleted (estimated cost US$1.5 million approximately), and in addition NIAhad decided that the diversion weirs on three minor rivers within the servicearea would not be cost-effective and would not be constructed.

10. Apart from delays, occasioned by the extended project period, therewere no significant problems with disbursements. The IDA credit of US$9.5million was fully disbursed by March 1977; however, in respect of the loanfollowing a lenient additional extension period of seven months some US$62,595was cancelled; the last disbursement occurred on June 17, 1982 and the loanwas closed in August 1982 in an amount of US$9.437 million. The originalclosing date was extended twice from June 1979 to eventually December 1981, itwas not officially extended to cover the final eight month period.

11. There were no significant design changes; minor changes included theadditional grouting necessary at the dam sites in the Aurora Basin and thedeletion of the three diversion weirs in the irrigation service area, whichhas some impact on the subsequent volume of water available. However, theratio between rehabilitation and new works in the service area changed fromappraisal estimates - similarly the site of some of the new works changed.

12. Final costs, as given in the PCR, are US$57.064 million or 144%of appraisal estimates excluding US$1.5 million estimated for essential workremaining and excluding compensation paid to contractors of US$0.28 millionapproximately.

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Results

13. Although there has been a change in ratio!/ between rehabili-tated and new irrigation works and although the sites of the new areas do notcorrespond to appraisal forecast, the gross area covered by the projectapproximates the 25,300 ha anticipated. However the appraisal estimates of200% crop intensity, i.e., 100% double cropping, is not possible. Some 5,000ha of the land flood in the wet season, reducing the irrigation potential, andin the dry season there is insufficient water within the system to takeadvantage of all the works carried out. On the positive side paddy yieldlevels on that land which can be irrigated have risen to approximately 4.6tons per ha - or 15% above appraisal estimates, and the value of the endproduct (rice) has increased proportional to farm input costs in economicterms.

14. Both the Borrower's PCR and the Region's PCRO documents acknowledgeflooding problems in the wet season and water limitation problems in the dryseason; both however calculate economic rates of return on the assumptionof 200% cropping intensity. The PCR calculates an ERR of 11.6% while theRegion's PCRO arrives at a 13.0% figure. These figures compare with anappraisal estimate of 17%. Audit concludes that the maximum cropping inten-sity possible in the average year would be 180%, and, as this would assumemaximum efficiency in water-use which is not currently in evidence, theprobable cropping intensity is unlikely to exceed 173% without substantialadditional investments in drainage and/or provision of additional water. Onthis basis and otherwise using the Region's methodology (which is closer tothat of appraisal than that used in the PCR) the audit ERR would be 8.55%.

II. MAIN ISSUES

A. Cropping Intensity and Water Supply Limitations

15. The appraisal document optimistically assumed a 200% cropping inten-

sity, i.e., 100% of the farmers employing 100% double cropping annually. This

would be optimistic even with adequate water supplies - the time needed for

farmers to adjust to a very strict cropping calendar and the implications for

working capital and credit are discussed in para. 25 of PPAR No. 30631/ ofJune 30, 1980. The most disappointing aspect of this project however is that

the volume of water available for dry season irrigation is much below expecta-

tion. In the event the volume of dry season water available to the servicearea is between 60% and 70% of that anticipated; thus the issue is whetherappraisal could or should have anticipated this end result.

1/ One reason for the change was an underestimation of the existing worksarea by appraisal - see Borrower comments (para. 3).

2/ The Upper Pampanga Irrigation Project (Loan 637-PH).

16. There are three contributing factors to the lower than expectedvolume: (a) less than previously recorded dry season flows in the PenarandaRiver, (b) the failure of NIA to install three small diversion works on minorrivers within the irrigation service area, and (c) less than anticipatedannual flow from the new Aurora diversion works.

17. The reasons for reduced dry season flows in the Pnaranda Riverhave not yet been determined; they are likely to have two causes, first thatthe applicable area of the Philippines is passing through a below normal flowperiod for all streams (this premise is borne out in part by the unexpectedlow levels in the Pantabagan storage reservoir 75 km to the north), and,second that empirical evidence suggests that a probable cause is steadilyincreasing dry season use of water along the upstream portions of thePenaranda River and its tributaries.!! Theoretically it should have beenpossible for appraisal to trace potential upstream water use, however, theincreased use of water may only be significant during the period since dataexamination in 1973.

18. With regard to the small diversions that NIA decided not to con-struct, it will be apparent that appraisal could not foresee lack of sub-sequent actions; however, detailed designs for these diversions were notprepared prior to implementation, and the rationale for them as an essentialcomponent was not specifically documented. Available documentation leavesthe impression that these works were desirable mainly for contingency supple-mentary water supply purposes. Within this context is not surprising that NIAdecided against construction when initial design detail indicated costs abovethose notionally available in project documents - especially within thecontext of overall project cost overruns. There are also indications thatflow in the three streams concerned is substantially less in the dry seasonthan perhaps anticipated by appraisal.

19. With respect to the flow from the diversion works in the AuroraBasin, the appraisal had to rely on only two years- flow data (and statedso). In brief, there was a known risk that flows could be below the 164 MGMused for calculation purposes in the project documents. .The decision toproceed, despite the risks, with the Aurora diversion works had more to dowith the unused storage capacity of the Pantabagan reservoir than the require-ment of the Penaranda irrigation system per se, i.e., additional water storedin the reservoir could be put to good and effective use irrespective of thePenaranda system. This judgement has proved valid, for, although flow fromAurora averaged only 127 MCM through 1981 and only 97 MCM in 1982, neverthe-less these limited amounts will allow some 10,000 ha of dry season irrigationper annum which otherwise could not have occurred within the total Pampangasystem. (It should be noted that the storage level in the Pantabagan reservoir

in November 1982 represented less than 67% of the Pampanga system's dry season

1/ An additional reason is watershed denudation - see para. 5 of Borrowercomments.

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requirement.) The resultant incremental output implies that the Aurora workswould have a satisfactory rate of return if taken in isolation from all otherproject activities.

B. Size of Irrigation Service Area

20. In view of the element of risk associated with water flows from theAurora Basin, the crucial design judgement concerned the size of the servicearea to be irrigated, i.e., the size of area over which civil works could beinstalled economically. The decision to assume that all the water from Aurora

should be transited 75 km and used in the Penaranda area, when, as discussedabove, at least a portion of it (and possibly all of it) could have been usedeconomically in the nearer existing systems is difficult to rationalize ineconomic terms, and there is no evidence to suggest that the trade-offsbetween using the water from Aurora within the existing system or within a newarea requiring new investments were seriously examined. This criticism is ofcourse made with the benefit of hindsight; it should be pointed out that inthe early 1970s, in the absence of firm data, empirical evidence suggested,and the weight of expert judgement considered, that there was more wateravailable to existing systems than in practice has proved to be the case.

21. Nevertheless, with the knowledge that certain parts of the proposedservice area contained potentially serious drainage problems!! allied to theknown limitations in the reliability of data on water flows intended for thesystem, the size of the area to be covered by investments was clearly opti-mistic. This optimism was also reflected in the assumption that water useefficiency at the farm level within the proposed service area would reach 58%(see Annex 5 of Appraisal Report) while the general level of efficiency in theUpper Pampanga project was only at the 43% level,2/ and further efforts wereneeded there also to raise efficiency to 48% to assure adequate water supplyover the intended gross area.

22. In summary, there was considerable optimism in the assessments ofwater volumes available, compounded by further optimism in the degree of water

use efficiency likely to be attained. The main lesson is the need to care-fully relate proven volumes of water to the optimal size of the service area(and/or to alternative service areas). Where judgemental factors indicatepossible water volumes above those actually proven it may be wise to splitcivil works into two implementation phases within the service area(s); initi-ating implementation of the second phase only when subsequent data provesinitial judgements to be correct. With the benefit of hindsight, it is clearthat had this approach been adopted in this project it is probable that theamount of civil works, and costs thereto, would have been reduced; without

1/ In practice a minimum of 5,000 ha of the service area floods badly,and considerably more within the boundaries of the originally anticipated

service area.

2/ However, the borrower states that efficiency is now at the 60% level -see para. 6 of Borrower comments.

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reducing the incremental production attained and thereby increasing theeconomic rate of return. In addition, it is probable that, consequentially,the stress on NIA's implementation capacity would have been reduced to theadvantage of both quality and work costs - see following paragraphs.

C. NIA's Performance in the Service Area

23. The National Irrigation Administration clearly handled the construc-tion of the civil works in the Aurora River Basin most satisfactorily; how-ever, this cannot be said of the less glamorous rehabilitation of irrigationfacilities and their extensions within the service area. The management ofinitial contracting procedures was so unsatisfactory as to require a completerevision of approach to bidding and size of contracts; 1 / further, the typeof contracts eventually entered into were quantity-price related and initiatedin the absence of pre-design or quantity survey applicable to the works to becarried out. The delays associated with the failure of the first set ofcontract procedures led to a decisionr12 by NIA to carry out more force accountwork than anticipated at the time of appraisal; this, in turn, resulted incertain areas being designated for force account work and the balance forcontract work; however, as the "quantity-price" type contracts had upper grosspayment ceilings and did not specify completion of all works of a specifictype or within a specific area, they created a number of situations whereworks were left in an incomplete state. In turn this inevitably led todifficult programming problems whereby force account staff had to pick up andcomplete a series of works previously unscheduled to themselves.

24. In brief the process of monitoring and planning controls for carry-ing out work schedules within the irrigation service area was clearly inade-quate to handle the situations which developed. However, notwithstanding themacro situation, there is no evidence which points to lack of responsibilityor endeavor on the part of individuals - on the contrary many individuals orgroups reacted with initiative on many occasions. The root problem appears tolie in the ill-designed contracting-procurement procedures, compounded byover-optimism concerning NIA's ability to retain high quality personnel forunglamorous force account works which carry little political support over anextended period, particularly during a time when high-profile civil worksoffered personnel alternative attractive and challenging tasks.

1/ The borrower believe that over ambitious construction schedules led toinsufficient time being alloted to pre- construction engineering design -see para. 7 of Borrower comments.

2/ There is evidence that Bank staff initially disagreed with this decision,but there were no recorded firm objections. However, the Bank did drawNIA's attention to limitations in the Loan Agreement (Schedule 3.B.2).Subsequently, the agreement was amended and the initial upper limit ofUS$2.2 million was raised to US$6 million.

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25. The intermix of partial contracting and partial force-account workin the irrigation service area allied with the absence of adequate monitoringcontrols created a situation where, instead of operations proceeding in aphased manner across the area according to priority criteria, civil worksoperations were taking place simultaneously in many different parts throughoutthe area. This precluded the possibility of deleting sections from the workprogram to reconcile gross area of coverage with reduced water availability asknowledge of the latter became established.

D. Economic Rate of Return

26. The original project design estimated end results with a grossincremental paddy production of 120,000 tons per annum, of which 95,210 tonswould be attributable to the project, i.e., the economic value of 95,210 tonsless production costs were taken as project benefits. It was assumed that thenet benefits from the 24,790 tons balance were attributable to other Govern-ment investment programs in, for example, improved seeds, agricultural ad-visory work and on farm credit. (See discussion in PPAR No. 3063 regardingallocation of benefits). On this basis the project was anticipated to have anERR of 16.65%.

27. Because of water flow and flood control constraints, but allowingfor a 15% increase in yields above that anticipated, audit recalculates theestimated incremental production as 96,580 tons (at maturity), of which (usingthe same methodology1 l used at appraisal and in Annex 2 of the PCRO) the neteconomic value less production costs of 59,380 tons2/ is taken as projectbenefits. Since appraisal, on-farm production costs have risen approximately60% while the economic product value has risen 111%. These factors togetherwith a rise in,investment cost result in an estimated ERR of 8.55%. It shouldbe noted, however, that this figure includes acceptance of favorable yieldlevel estimates early in project life which are extrapolated from some ques-tionable survey data.

28. Notwithstanding the disappointments and setbacks suffered duringproject execution overdue stress should not be placed on the indicative ERR.The project has resulted in a very substantial increase in rice production,and that portion of the increase not directly attributable to the projectbenefits could, in the main, not have occurred without the basic projectworks. In addition the infrastructural works now in place leave a potentialopen for possible works in drainage and/or provision of additional watersupply with a potentially high pay-off.

E. Irrigation Service Fees (ISF)

29. The ISF rate is set at the support price equivalent of 175 kg paddyin the dry season and 125 kg in the wet season or 300 per annum double crop-ping. In monetary terms, this currently equates with approximately 510 pesos

1/ Incremental production accruing in the "without-project" benefit streamis deducted from total incremental production.

2/ This figure would rise to about 62,000 tons (improving the ERR slightly)if a 50% over-assessment of area prone to flooding has been made. NIAdata on flood prone areas are conflicting.

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per ha and is more than adequate (if paid) to meet the current estimatedOH costs of 251 pesos/ha. However, the fee collection record is not favor-able; collections as a percentage of due amounted to 27% (1978), 33% (1979),31% (1980), and 44% (1981).

30. A central problem is that the farmers are often unable to find aready market for their produce at the official support price (during November1982, for example, farmers were selling to traders at 65% of the officialsupport price) this is particularly true of farmers in irrigation areas, whomust discipline their crop cycle and rapidly dispose of one season's assets toprovide investment needs for the next, i.e., they do not have the luxury ofbeing able to await a favorable market for their roduce. This is a macroproblem, dealt with more fully in other reports Y; however, it seriouslyaffects NIA's ability to collect fees due. On the one hand, setting ISF byreference to quantities of products provides a fairly realistic mechanismwhereby the fees (in monetary terms) are adjusted annually without having toresort to legislative, measures (and possible political connotations thereto),and this seems to present no problem if the farmer can indeed sell his productat the official price. On the other hand, when the farmer cannot sell atsupport prices he feels cheated if he pays full fees (i.e., more than he hasreceived for the norm quantity of product) and feels justified in avoidingpayment. To help overcome this reaction, NIA accepts rice paddy at sypportprice volumes instead of cash payment, should the farmer prefer this2 NIAhas to absorb handling costs and any shortfalls occurring through weight lossduring drying, processing, etc.

31. While this procedure by NIA has the theoretical advantage of helpingthe farmer, and undoubtedly has resulted in the collection of more funds insome years than would otherwise be the case, the audit doubts whether theprocedure is economic in the current project situation.

32. NIA has neither the technical expertise or the equipment and facili-ties, to handle efficiently grain collection, drying, storage and subsequentresale; the task of collecting and handling receipts of grain falls on tech-nical officers whose prime duties are associated with the maintenance ofirrigation works, and the programming of water flow through these works.There is an obvious trade-off between losses sustained through the staff notcarrying out their proper duties and in lieu thereof dealing with commodityprocessing, for which they have little expertise. The extent of foregonebenefits is currently a matter of wide speculation amongst concerned staffand an attempt by NIA towards quantifying them in the project area and withinthe wider field of NIA's operations might well provide another importantdimension to the on-going debate on how irrigation fees are established andcollected.

I/ See report of the Rice Processing Project - Loan 720-PH.

2/ The evidence suggests that farmers start to take up the option when"trade" prices are 15% below official suggested price levels - other-wise they prefer to deal with regular buyers to whom they are oftenindebted via unofficial credit.

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33. NIA has statutory responsibility for fee collection, and othermeasures result in NIA having to rely on fees to cover maintenance operations.This financial situation combined with the constraints (para. 30 above) mayoblige NIA to effect procedures which are sub-optimal in economic terms; inwhich case it is important to know to what extent they are sub-optimal and tokeep the matter under review within national policies.

34. Finally, while the audit raises matters critical of NIA in thecontext of this project, nevertheless on a broad front, the audit was favor-ably impressed by a general attitude of dynamism and strong committment; inparticular the audit observed, and the PCR indicates, that NIA contains ahealthy attitude of self criticism. New and improved approaches are con-stantly sought as exampled by substantive efforts to promote IrrigationAssociations; this effort is most commendable for, although it is too early tojudge the effectiveness of these Associations, if successful they will go along way towards solving the maintenance problem.

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Republika ng Pi11pina. BORROWER' S COMMENTS Page 1

PAMBANSANG PANGASIWAAN NG PATUBIG(NATIONAL IRRIGATION ADMINISTRATION)Tanggapan ng TagapangastwaLungeod ng Quezon

Tel. No. 97-60-71 to 78 Cable Addre8s: NIAPHIL

12 May 1983

MR. SHIV S. KAPURDirector, Operations Evaluation MAY 1 6

DepartmentInternational Bank for Reconstruction

and Development PT1818 H. Street, N.Y.Washington, D.C. 20433U.S.A

SUBJECT: Comments on the Draft of the Project PerformanceAudit Report for the Aurora-Pefiaranda IrrigationProject (Loan No. 984 PH and Credit No. 472 PH)

Dear Mr. Kapur:

Thank you for your letter of 21 March 1983 requesting ourcomments on the draft of the subject report prepared by theBank's Operation Evaluation Department.

we have reviewed the report in its entirety and we concurin general with the findings and conclusions of the AuditMission. However, we have prepared, hereto attached, somecomments/clarifications which we feel should be considered/incorporated in the report.

we are profoundly grateful for the opportunity given to usto review and comment on the report. Please be assured ofour continuing esteem.

Very truly yours,

CEStr to

) Adm n i stra to r

- 11 - Attachment rPaSe 2

CO)NTS ON THE PROJECT PERFORMANCE AUDIT REPORTAURORA-PERARANDA IRRIGATION PROJECT

1. Comments on Paragraph Nos. 7 and 8

We agree with the findings of the Audit Mission thatthere were cost overrun and considerable delays in the imple-mentation of the project. We would like to reiterate, however,that the major causes of these overruns and delays are attri-buted to additional works which were not properly identifiedduring project appraisal, adverse weather conditions thatprevailed during impelmentation of the project, irrigationwater delivery during the dry season add peso floating rateand U.S. dollar inflation. These major and other causes arepresented in piges 57-59 of the PCa.

2. Comments on Paragraph Mos. 9, 15 and 17

T he estimated remaining works of about US $1.5 m illionfurnished to the Audit Mission in November 1982 was fieldestimates only and subject to confirmation by Central Office.This is presently being verified by an inventory team whichwill also look into some additional works related to improvementof the drainage conditions in certain parts of the service area.

The decision not to construct the proposed cross drain interceptstructures at the Bulu, San Niguel and Garlang streams was a deli-berate move made by the NIA after further review and evaluationof the numerous factors that come into consideration during imple-mentation and anticipated during operation of the structures. Someof these factors are as follows:

A) These are vitually no flow in the three (3) streamsduring the dry season;

B) The'channels of the three (3) streams are relativelydeep that the structures that will be designed andconstructed to bring the water levels in the streamsto the operating level of the canals cannot be madecost effective.

C) The structures as conceived would also require considerablelength of protection dikes on both upstream banks of thestreams to prevent flooding of adjacent lands duringrainy season.

9 D) Alternatively,the operation of a pumping schemes would beprohibitively high not to mention the initial cost ofthe pumping stations,

3. Comments on Paragraph Nos. 11 and 12

We agree with the findings of the Audit Mission that the ratiobetween the rehabilitation and new works in the service area changedftgm appraisal estimates and similarly the site of the new workschanged. We would like to clarify, however, that the total servicearea of the PenRIS Proper is actually 18,200 hectares and not 16,700hectares as per appraisal. This was firmed-up after undertaking thenecessary lot survey in the area. The 1,500 hectares of new areaswhich are presently located in three different locations within thePenRIS Proper were developed to compensate for the areas deleted atthe PenRIS Extension area. This was resorted to after an exhaustivefield investigation.wherein it was eenfirmed that some 1,500 hectaresof the PenRIS Extension are seriously flooded during the rainy seasonand that it overlapped with the service area of the Angat-MasinIrrigation System.

- 12 - Attachment IPage 3

-2-

Presented hereunder is the breakdown of service are as appraisedand developeds

As Appraised As Developed

1. PenRIS Proper:Rehabilitation 16,700 Has. 18,200 Has.New Area - 1,500 "

2. PenRIS Extension(New Area) 8,600 Has. 5,600

TOTAL 25,300 Has. 25,300 Has.

4. Coments on Paragraph Nos. 13, 25, 26 & 27

Considering a cropping intensity of 180% which approximatesthe actual condition attainable, the Audit ERR of 8.55% is accep-tab6e to the Agency. This is very close to 8.4% which is the resultof re-calculation made by the PCR Committee using the same croppingintensity (180%) plus the additional cost not considered in theoriginal calculation at the time of Audit mission.

The NIA agrees to the Audit comment that "stress should notbe placed on the indicative ERR". In addition to the increased riceproduction due to the project which is the main basis of ERR computa-tion, the project has also brought a considerable degree of benefi-cial effects and impact on the socio-economic condition of the directbeneficiaries as well as to the other societal groups within andoutside the project area. One good example of u nquantified benefitsis the facility and ease of transporting farm inputs and produce causedby the construction of service roads and the resultant increase in thevolume of business activity.

5. Comments on Paragraph No. 16

An*her major reason for reduced dry season flows in the PeftarandaRiver and tributaries is the continuing watershed degration wherein thewater retention capacity in the watershed area has drastically changeddue to creeping deodation in the area.

6. Comments on Paragraph No. 20

Our record shows that the average water use efficiency at thefar* level within the UPRIIS is 60 per cent. This is computed using

the following formula:

WEIGHTED AVERAGE IRRIGATION EFFICIENCY

Irrigation Efficiency = Ave. CWR - ReTWS

Where:

Ave. CWR = LSIR (AULS) + LPIR (AULP) + FCIR (AUNIP)Total Area Under Irrigation

Re = Effective Rainfall

TWS = Total water supply (Reservoir supply + local flow)

Ave. CWR = Average crop water requirement

LSIR = Land soaking irrigation requirement

AULS = Area under land soaking

LPIR = Land preparation Irrigation Requirement

AULP = Area under land preparation

FCIR = Field crop irrigation requirement

AUNIP = Area under normal irrigation period

- 13 - Attachment IPage 4

-3-

7. Comments an Paraoraph Nos. 22, 23 and 24

In line No. 1, paragraph 22 kindly change "National Irrigation

Authority "to" National Ir*igation Administration."

We firmly believed that the root cause in some of the failures

and delays in the proseeson of foree account and contract works atthe service area was the limited time alloted for pre-construction

and detailed engineering works. to hasten implementation biddedquantities were only based on the density per hactare it other MIA

projects similarly situated and not on computed quantities as

designed. This peocess, resulted most of the time, to overrun

of bidded quauVities during contract implementation. Quantities

of work items which exceeded the limits called for in the contract

documents were prosecuted under force account. This was pointedout in the PCR as one of the lessons learned in the impelmenta-tion of this project.

When the first set of bidding for contract works at the servicearea failed due to very high bids, packaging of contract wprk into

smaller packages was resorted to in an effort of the MIA Management

to developed medium-sized contractors add effect more competitive

bidding. Along this line, incentives such as equipment financingwas adopted to attract more bidders.

8. Comments on Paragraph 31

Although it is not the usual practice of NIA-to collect irri-

gation fees alternatively in terms of palay, this move was one of

the innovations made by the NIA to improve efficiency in the

collection of irrigation fees. A tie-up arrangement with the

National Food Authority has been evolved precisely to suppprt

NIA's thrust particularly in the handling of palay. The MIA,however, realise that the scheme is not working as anticipated.

Considering that MIA is has been more involved in construction

and 0 & M of irrigation spstems, efforts have been made to develop

NIA's capability in handling Of collection in kind with the estab-lishment of post harvest facilities such as concrete sun driers,

weighing facilities and field warehouses.

9 Comments on the PCRO

We agree generally with the findings of the PCAD, however

we would like to make execeptions to its observations relative

to the implementation at the irrigation service area. Althoughthere have been some shortcomings in the imphementation and

some phypical deficiencies on the completed works, the overall

performance and quality of workmanship were generally satis-

factory considering the various implementation problemsencountered. These observations were shared by the various

Bank's Missions which periodically visited the work area and

oversaw the operations.

- 14 -

THE WORLD BANK



NOVEMBER 18, 1982

- 1-5 -

PHILIPPINES

AURORA-PENARANDA IRRIGATION PROJECT (LOAN 984/CREDIT 472-PH)


1. This overview is based on the Project Completion Report for the Aurora-Penaranda

Irrigation Project, prepared by the National Irrigation Administration (NIA),the implementing agency of the Government of the Philippines. The reportreflects the views and opinions of NIA. It has not, however, been cleared byother Government agencies. The report is a detailed document on the historyof implementation of the project from inception to completion. We have nomajor disagreement with the facts presented and support the principal con-clusions reached but some further points should be made and emphasis added.These are discussed below. Basic data on the project are summarized inAnnex 1, Table 1, the project costs are shown in Table 2 and the economicrevaluation is presented in Annex 2.

Project Objective

2. The project is the second Bank-assisted irrigation project to becompleted. The Upper Pampanga River Irrigation Project (UPRP), Loan 657-PH,of which the Aurora-Penaranda Irrigation Project may be regarded as anextension, was completed in 1975. The two projects benefit from thePantabangan Reservoir, share other irrigation facilities and services, andwere built and are being operated and maintained by the Upper PampangaIntegrated Irrigation System, a project implementation section of the NIAThe main project objective was to enable year-round cultivation of about25,300 ha of rice land in the Penaranda River Irrigation System, by divertingwater from the Aurora-Baler basin to the Pantabangan Reservoir and augmentingthe diversion and flow from the Pampanga River to the head works of thePenaranda River Irrigation System (PENRIS).

Description of Project Works

3. Two zoned earthfill dams were constructed on the Canili and DiayoRivers, including a transbasin channel to divert the impounded water from theAurora Basin into the Pantabangan Reservoir in order to supplement the dryseason flow in the Pampanga River. The existing Pampanga-Bongabon diversiondam was raised and the main conveyance canal to the Penaranda Dam wasdesilted, enlarged and extended and a closed conduit was built under thePenaranda river. Existing irrigation and drainage facilities were improvedin the Penaranda River Irrigation System covering about 16,500 ha and newirrigation and drainage facilities were constructed on an extension area ofabout 1,500 ha. About 485 km of access and irrigation service roads,including bridges, were constructed. Agricultural support services werestrengthened and equipment and vehicles were procured for force account

- 16 -

construction as well as for the operation and maintenance of the project.Comprehensive studies of the land and water resources were carried out inCentral Luzon in order to formulate irrigation development plans and evaluatethe potential uses of groundw.,ter resources. Thirty-four multi-purpose riverdevelopment projects were identified and evaluated of which the Balog-Balog,Casecnan and Lower Agno projects are under various stages of projectdesign and development.

Project Execution Highlights

4. The Transbasin Diversion Scheme.- Construction of the TransbasinDiversion Scheme was off to a good start during the visit of the firstsupervision mission in April 1974 which preceded the loan/credit effectivenessby about four months. The camp facilities were completed, good progress wasachieved in road construction, clearing of the dam sites, drilling andgrouting of the abutments and foundations of the two dams, and the excavationof the Canili connecting channel. These were carried out under force account.Construction contracts for the dans were scheduled for award toward the end ofthe year. The 96 YV transmission line from Pantabangan Dam was being designedand contracts were awarded for the aerial photography of about 80,000 ha inCentral Luzon.

5. This segment of the project was implemented by the UPRP DamDivision, which had successfully managed the construction of the PantabanganDam. They were ably assisted by Engineering Consultants International, Inc.,who prepared the designs and working drawings, rhe technical specificationsand coordinated the force account and contract works. Hydro ResourcesContractors Corporation, who also built the Pantabangan Dan, were the maincontractors for the dams. Construction activities continued to proceed aheadof schedule despite the extensive drilling and grouting required due to weakgeologic conditions and work disruptions caused by typhoons. The work wascompleted in mid-1976, about one year ahead of the appraisal schedule.

6. Pampanga-Bongabon Dam. The zaising of the Pampanga-Bongabon Dam,the widening, desilting and extension of the main canal of the irrigationsystem to the Penaranda Dam and the construction of the closed conduit at thePENRIS head works which was started in 1973 progressed intermittently underUPRP Division III. A new UPRP Division IV was established in 1974 to managethis section of the Project. In the Region's view progress in projectexecution was slow due to poor construction management as well as otherfactors implied by the PCR, which included: the scattered nature of projectworks, disputes with contractors, shortage of resources and equipment, andfrequent interruptions by typhoons and floods. The raising of the PBRIS Damwas completed in 1974 and the enlarging of the main canal was completed in1979, about two years behind the appraisal schedule.

7. Penaranda River IrriRation Svstem. The rehabilitation and extensionworks in the PENRIS area proceeded at a much slower rate. The first set ofbids were rejected on the grounds of lack of competition and excessively high

- 17 -

bids submitted. In our view, this was mainly due to NIA's underestimation ofconstruction costs and the difficulty of the workJng conditions. However,contract conditions were improved following discussions and consultationsbetween NIA Engineers and the Philippines Contractors Association which were

initiated by the Bank's April 1975 Supervision Mission. As a result morecontractors participated in the subsequent bid invitations. Contract workswere often disrupted by extended irrigation seasons which delayed resumptionof contract works. Frequent typhoons interrupted work progress and causedextensive damage, and floods rendered remote work areas inaccessible. As aresult many contractors failed to perform their obligations and about 55% ofthe work was completed under force account. The PCR makes no mention thatthe quality of workmanship was generally poor, and the rate of project imple-mentation was slow, because of the lack of experience of the implementationunit.

8. Due to the above difficulties, project completion was deferred toJune 1979, and further to Dece.ber 1980 when physical execution of the projectwas about 95% completed. The project closing date was extended to Dcember1981 to allow for the delivery of additional O&M equipment for the project andto repair the damages caused by the October 1980 typhoon as well as to makegood some works which were defective because of poor workmanship. The lastpayment under the loan was made on June 17, 1982 and the unwithdrawn balanceof $62,595.74 was cancelled on July 1, 1982.

Variations in Irrization Service Area

9. In the Penaranda River Irrigation System, the dry season_croppedarea at project completion in 1981 is shown on the PCR as 16,457 ha(14,975 ha rehabilitated and 1,500 extension), the wet season cropped areaas 18,020 ha (16,520 ha rehabilitated and 1,500 extension), and the croppingintensity 173%. These are considerably lower than the appraisal estimate of18,200 ha planned for rehabilitation and 7,100 ha planned to be extended anda cropping intensity of 200%. The Region has not been able to obtain clari-fication for the discrepancy. There is an unresolved difficulty in thedetermination of the yearly cropped areas under the project and indeedestimates of the project area itself varied from 23,500 ha to 28,000 ha dueto errors in surveying and land classification. The difficulty is furthercompounded because about 5,000 ha along the southeastern border of the projectarea adjoining the Candaba and San Antonio swamps are prone to severe floodingin the wet season and the dry season cropped areas vary directly with theavailable flow in the PENRIS system. NIA should give priority to improvingthe drainage facilities, particularly in the vicinity of the swamps, to extendthe service area to the full 7,000 ha set at appraisal.

Inadequacy of Water SuPDly

10. At appraisal the estimated annual flow available for diversion fromthe Aurora basin was estimated at 164 MCM. This was based on only a 24-monthflow record of the Canili and Diayo Rivers. Subsequent measurement from theflow recording structure on the Transbasin Channel averaged about 127 MCM. It

- 18 -

was also assumed at appraisal that there would be a significant return flowfrom conveyance losses in the upper reaches of the Fampanga River - from thePantabangan Dan to the Pampanga-Bongabon Diversion Dam - to the flow along thePBRIS main canal. However, the discharge capacity of the PBRIS main canalsiphon under the Pampanga River is now estimated to be about 20 OIS due tosiltation, compared to the initially estimated 34 CIS dry season supplementalflow to irrigate the dry season crop on 25,300 ha.

11. It was further anticipated at appraisal that diversion weirs on theBulu, San 1iguel and Garlang Rivers would augment the dry season flow in thePENRIS service area. This scheme was abandoned due to the expensive pumpinginstallations that would be required to raise water from the snall rivers intothe PENRIS distribution canals. NIA should reconsider this scheme or modi-fication thereof to augment the continuing shortage of water in the PENRIS,especially in the dry season. There is also considerable illegal pumping bylandowners adjacent to the main canals. A study conducted by NIA's ProjectDevelopment Department, at the request of the April 1979 Supervision Mission,indicated that the combined dry season water flow is adequate only to irrigateonly about 14,800 ha. The project attained a maximum of 17% cropping inten-sity over the dry season cropped area of 17,800 ha in 1979. With hindsightit seems that there should have been closer evaluation of water availabilityat the time of appraisal. The PCR does not comment on this.

Final Project Costs

12. The project cost estimate was revised in June 1975 to $61.5 million.The final as-built cost is $57.6 million about 44% above the appraisalestimate. The cost increases were mainly due to the extensive drilling andgrouting required by the weak geologic formations at the foundations andabutments of the Canili and Diayo Dams, increases in the quantities of someof the irrigation facilities unforeseen during project preparation, Uorkinterruption due to severe weather conditions and delays in the resumptionof construction due to extended irrigation seasons, which resulted in threeyears of delays in project completion, and the continuing escalation inconstruction costs as a result of the 1973/74 oil crisis and currencyrealignments. A comparison of the appraisal cost estimates with the actualproject cost is summarized in Annex 1, Table 2.

Disbursement and Procurement Problems

13. Disbursements were ahead of the appraisal forecast in the initialyears and lagged behind in the later part of the project implementation. Inthe Region's view, this is mainly due to NIA's complicated and cumbersomeprocurement procedures, requiring bidder prequalifications, involved technicalspecifications and lengthy evaluation procedures. Award of contracts wasoften only after negotiations to reduce responsive lowest bids to the level ofthe Government estimate, and this approach to contract administration by NIAdiscouraged contractor participation. Procurement of O&M equipment was soentangled with bureaucratic processes that US$62,595.74, intended for thepurchase of 0&M equipment was cancelled even after an extension of seven

- 19 -

months from the official loan closing date. The PCR does not bring out thesematters. The reallocation of loan and credit funds is summarized in Annex 1,Table 3.

Economic Revaluation

14. The project costs and benefits are not clearly quantified in thePCR. There are inconsistencies between the cost data and the schedules ofexpenditures, and production losses due to typhoon damage are not taken intoconsideration in the economic evaluation. labor requirements for variouscrops are not explicitly presented. The appraisal economic rate of return,(ERR) was 17%; the PCR derived 11.6%. The Region has recomputated the ERRusing the PCR data where available and assumptions employed in assumptionsthe economic evaluation of the Conmunal Irrigation Project (Loan 2173-PH).This results in a revised ERR of 13%. The recomputations are presented inAnnex 2, Tables 1-8.

Project Benefits.

15. The Aurora Transbasin Diversion Scheme is contributing about 127 MCMper year to the scarce water resources of the UPRIS. NIA has gained usefultechnical experience in dam construction and particularly grouting. Therehabilitation and extension works in the PENRIS have contributed towards thecontinued operation of the system through a series of devastating typhoons.Total agricultural development surveys conducted by the Project Input OutputMonitoring Unit indicate that substantial improvements in input applicationsby farmers resulted in gradual increase in rice production. The yieldsexceeded the targets set in the five-year Agricultural Development Plan as aresult of improved utilization of fertilizers and seed application rates. Asubstantial number of farmers shifted from transplanting to direct seeding tomitigate shortage of labor and followed more closely the recommended croppingcalendar. Rice production significantly increased from 59,700 tons/year in1975 to 143,600 tons/year in 1979, the peak year of production, when acropping intensity of 187.3 ha and a yield of 4.25 tons/ha were achieved on16,850 ha.

Attachments

Annex 1: Table 1 - Project Basic Data SheetTable 2 - Project Costs Appraisal/ActualTable 3 - Allocation of Credit and Loan Funds

Annex 2: Table 1 - Economic Rate of ReturnTable 2 - Net Value of Production 1978-79Table 3 - Net Value of Production in 1979Table 4 - Net Value of Production in 1980Table 5 - Net Value of Production in 1981Table 6 - Net Value of Production at Full DevelopmentTable 7 - Rice Production Cost at Full DevelopmentTable 8 - Labor Requirement for the Life of the Project

- 20 -

ANNEX 1Table 2

PHILIPPINES

AURORA-PENARANDA IRRIGATION PROJECT (LOAN/CREDIT 984/472-PH)


Project Cost

(US$000)

Actual Project Cost /b Appraisal estimate /aLocal Foreign Total Local Foreign Total

I. Civil Works

A. Aurora Diversion1. Contract works

- Aurora transbasindiversion 8,757 6,511 15,268 - - -

- Transmission line 1,908 - 1,908- Power substation 73 - 73

2. Force account works 2,722 1,178 3,900 - - -

Subtotal 13,460 7,689 21,149 7,320 6,030 13,350

B. Penaranda Irri.Facilities1. Contract works 6,654 3,292 9,9452. Force account works 8,879 3,314 12,194

Subtotal 15,534 6,605 22P139 6,840 4,15 11,025

II. Engineering SupervisionAdministration 4,586 - 4,586 - - -

III. Consulting services 696 317 1,013 150 650 800

I. Equipment, Construction O&M 1,229 2,130 3,359 25 425 450

V. Central Luzon study 3,192 1,878 5,069 2,195 2,180 4,375

VI. Interest & other charges - 321 321 - 2,000 2,000

VII. Expected price increase - - - 4,470 3,530 8,000

Total Project Cost 38,697 18,941 57,638 21,000 19,000 40,000

/a Conversion rates: Appraisal (1974); 7.8 (1975); 7.2 (1976).7.4 (1977-79); 7.5 (1980).

/b Actual Costs derived from NIA.

- 21 -

ANNEX 1Table 3

PHILIPPINES



Allocation of Credit and Loan Proceeds

Original Allocation atCategory allocation project completion

I. Civil works

(a) mobilization and construc-tion equipment for civilworks contractors 3,500,000.00 4,192,153.65

(b) other civil works 7,200,000.00 10,522,098.02

II. Construction and O&M equipment 2,300,000.00 2,625,335.05

III. Consulting services and over-seas training 1,500,000.00 1,276,796.78

IV. Interest and other charges onthe loan 2,000,000.00 321,020.76

V. Unallocated/cancelled /a 2,500,000.00 62,595.74

Total $19,000,000.00 $9,000,000.00

/a After payment of application number 140 on June 17, 1982 the unwithdrawnbalance of US$62,595.74 was cancelled on July 1, 1982.

ANNEX 2- 22 - Table

PHILIPPINES



Economic Rate of Return('000 Pesos)

Total O&M Project

Year benefits /a cost /b cost /c

1974 0 1,724 40,3611975 0 1,596 163,7081976 0 3,395 142,3701977 30,870 2,091 75,7691978 36,110 2,880 46,180

1979 57,419 4,405 41,2231980 29,239 8,141 42,0741981 26,500 3,631 21,6081982 51,775 3,6291983 77,050 3,6291984 102,325 3,6291985-2024 127,600 3,629

ERR = 13.1%

/a See Tables 2-8.

/b From PCR, Table 9.5.

/c Computed from the actual expenditure information given in the PCR.

Local cost is multiplied by conversion factor of 0.82. Project

cost does not include the Central Luzon study nor the interest

payments.

PHILIPPINES

AURORA-PENARANDA IRRIGATIOU PROJECT (LOAN/CREDIT 984/472-PH)


Economic Analysis - Net Value of Production (1978-79)

/b/a Faragate Gross value of Production Net value of Net return from

Area Paddy yield price production cost production projected area

(ha) (ton/ha) (P/ton) (P/ha) (P/ha) (P/ha) (P million)

1977 1978 1977 1978 1977 1978 1977 1978 1977 1978 1977 1978

Wet SeasonIrrigated V 16,700 16,700 2.27 1.30 1,500 3,405 1,950 833 886 2,572 1,064 42.9 17.8

W 15,501 10,628 2.80 1.75 1,500 4,200 2,625 883 939 3,317 1,686 51.4 17.9

Rainfed i 8,600 8,600 1.50 0.86 1,500 2,250 1,290 639 680 1,611 610 13.8 5.2

Dry SeasonIrrigated W 10,800 10,800 1.80 3.30 1,500 2,700 4,950 724 770 1,976 4,180 21.3 45.1

W 13,027 13,905 2.90 4.05 1,500 4,350 6,075 970 1,032 3,380 5,043 44.0 70.1

Total V 36,100 36,100 78.0 68.1 L

W 28,528 38,438 95.4 88.0

W - vith project; - vithout project. 1977 1978

/a From PCR, p. 109, Table 8.2a --- (P million) ----

/b Deflated by GDP. V w u7c See Table 8.

Total net value of productionbefore costing labor 78 95.40 68.1 88.00

Less imputed cost of labor /c 15 14.00 15.0 12.00

Total net value of production 63 81.40 53.1 76.00

Net incremental value of production 18.40 22.90

In constant 1981 prices 30.87 36.11

- 24 - ANNEX 2Table 3

PHILIPPINES



Economic Analysis - Net Value of Production, 1979

Netreturn

Paddy Gross Net fromyield Farm value Produc- value pro-

/a gate of pro- tion of pro- jectedArea /a (ton price duction cost/c duction area

(ha) /ha) (P/ton) (P/ha) (P/ha) (P/ha) (P m1n.)

Wet Season

Irrigated W 16,700 3.57 1,500 5,355 1,040 4,315 72.0W 15,845 4.25 1,500 6,375 1,102 5,273 83.5

Rainfed W 6,240 2.33 1,500 3,495 798 2,697 16.8

Dry Season

Irrigated W 10,800 3.66 1,500 5,490 904 4,586 49.5W 17,804 4.55 1,500 6,825 1,211 5,614 99.9

Total V1 33,740 - - - - - 138.3W 33,649 - - - - - 183.4

(P million)

Total net value of production before costing labor 138.30 183.40Less imputed cost of labor /b 14.08 16.46

Total Net Value of Production 124.22 166.94

Net incremental value of production 42.72In constant 1981 prices 57.42

/a From PCR pp. 109-110, Table 8.2.7- Shadow wage rate: W = 4.9, W = 4.4.7- Deflated by GDP index.

- 25 -

ANNEX 2Table 4

PHILIPPINES




Netreturn

Paddy Gross Net fromyield Farm value Produc- value pro-

/a gate of pro- tion of pro- jectedArea la (ton price duction cost /b duction area

(ha) /ha) (P/ton) (P/ha) (P/ha) (P/ha) (P m1n.)

Wet Season

Irrigated 15,667 2.40 1,500 3,600 1,195 2,405 37.7W 12,356 2.90 1,500 4,350 1,267 3,083 38.1

Rainfed W 8,600 2.30 1,500 3,450 917 2,533 21.8

Dry Season

Irrigated 10,800 3.10 1,500 4,650 1,039 3,611 39.0W 17,115 4.25 1,500 6,375 1,392 4,983 85.2

Total W 35,067 - - - - - 98.5W 29,471 - - - - - 123.3

i. W(P million)

Total net value of production before costing labor 98.5 123.3Less imputed cost of labor 14.6 14.4


Net incremental value of production 25.0

In constant 1981 prices 29.2

/a From PCR, pp. 109-110, Table 8.2.7T Deflated by the GDP index.

ANNEX 2-26 - Tab]e 5

PHILIPPINES




Net

return

Gross Net fromPaddy Farm value Produe- value pro-yield gate of pro- tion of projected

Area la (ton price duction cost /b duction area(ha) /ha) (-P/ton) (P/ha) (P/ha) (P/ha) (P m1n.)

Wet Season

Irrigated 16,700 3.20 1,500 4,800 1,397.60 3,402.40 56.8W 15,692 4.05 1,500 6,075 1,482.15 4,592.85 72.0

Rainfed *R 8,600 2.33 1,500 3,495 1,073.00 2,422.00 20.8

Dry Season

Irrigated 10,800 2.90 1,500 4,350 1,215.00 3,135.00 33.8

W 14,417 3.80 1,500 5,700 1,628.00 4,072.00 58.7

Total W 36,100 111.430,-I109f Tn-l.7

__ W

(P million)

Total net value of production before costing labor 111.4 130.7Less imputed cost of labor /c 15.1 14.75


Net incremental value of production 2.65

/a From PCR Table 8.2a7- See Table 8./c See attached table

- 27 - ANNEX 2

Table 6

PHILIPPINES



Economic Analysis - Net Value of Production at Full Development

Netreturn

Gross Net fromPaddy Farm value Produc- value pro-yield gate of pro- tion of projected

Area (ton price duction cost /a duction area(ha) /ha) (P/ton) (P/ha) (P/ha) (P/ha) (P m1n.)

Wet Season

Irrigated W 16,700 3.57 1,500 5,355 1,397.60 3,958.00 66.1W 25,300 4.40 1,500 6,600 1,482.15 5,117.85 129.5

Rainfed V 8,600 2.33 1,500 3,495 1,073.00 2,422.00 20.8

Dry Season

Irrigated 10,800 3.66 1,500 5,490 1,215.00 4,275.00 46.2W 25,300 4.80 1,500 7,200 1,628.30 5,572.00 140.9

Total V 36,100 - - - - - 133.1W 50,600 - - - - - 270.

(P million)

Total net value of production before costing labor 133.1 270.4Less imputed cost of labor /b 15.1 24.8


Net incremental value of production at full project development 127.6

/a Computations based on PCR data and basic assumptions employed in theevaluation of the Communal Irrigation Development Project (Loan )

/b See Table 8.

- 28 - ANNEX 2Table 7

PHILIPPINES



Rice - Production Cost at Full Development /a(P/ha)

/b

Wet season Dry season Wet season Dry seasonIrrigated Irrigated Rainfed Irrigated Irrigated

Cultivation 219.80 237.70 170.00 210.00 220.0

Seed 83.00 83.00 119.52 83.00 119.5

Fertilizer 538.35 625.65 538.50 538.35 625.6

Pesticides 245.00 250.00 245.00 245.00 250.0

Harvesting 396.00 432.00 209.70 321.30 329.4

Total 1,482.15 1,628.30 1,073.00 1,397.60 1,215.0

/a Based on the following assumptions at full development:

(a) Cultivation - Wet season - Mechanical 65% @ ? 261.60/haAnimal 35% @ F 142.10/ha

Dry season - Mechanical 80% @ P 261.60/haAnimal 20% @ P 142.10/ha

(b) Pesticides - Lump sum

(c) Harvesting - Mechanical threshing @ 6% of yield value

(d) Seed and fertilizer derived from appraisal report

/b W - with project; W - without project.

PHILIPPINES



Labor Requirement for the Life of the Project /a

Manday/b 1977 1978 1979 1980 1981 Full Developmentha Area Total Area Total Area Total Area Total Area Total Area Total

(ha) cost (ha) cost (ha) cost (ha) cost (ha) cost (ha) cost(P m1n) (P mln) (P mln) (P m1n) (P m1n) (P mln)

Wet SeasonIrrigated W 95 16,700 6.9 16,700 6.9 16,700 6.98 15,667 6.6 16,700 6.98 16,700 6.98 '

W 100 15,501 7.6 10,628 5.2 15,845 7.74 12,356 6.02 15,692 7.69 25,300 12.4

Rainfed W 95 8,600 3.6 8,600 3.6 6,240 2.64 8,600 3.56 8,600 3.6 8,600 3.6

Dry SeasonIrrigated W 95 10,800 4.5 10,800 4.5 10,800 4.48 10,800 4.48 10,800 4.51 10,800 4.51

W 100 13,027 6.4 13,905 6.8 17,804 8.72 17,115 8.38 14,417 7.06 25,300 12.4

Total W 15 15 14.08 14.3 15.1 15.1W 14 12 16.46 14.4 14.75 24.8

/a The shadow wage rate was taken as 4.9 P/md (W) "with" the project and 4.4 P/md (W) "without."7b From the Staff Appraisal Report. It was assumed that the labor requirement per ha did not change during the life of

the project.

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