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The World Bank

FOR OFFICIAL USE ONLY

Repor No. 8458

PROJECT COMPLETION REPORT

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT(CREDIT 1146-IN)

MARCH 15, 1990

Agriculture Operations DivisionCountry Department IVAsia Regional Office

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ABBREVIATIONS AND ACRONYMS

ACSTI - Agricultural Cooperative Society Training InstituteAFCOP = Andhra Pradesh Cooperative BankAP = Andhra PradeshBISOMAUN - Bihar State Cooperative Marketing UnionDA - Daily AllowanceERR = Internal Economic Rate of ReturnFCI = Food Corporation of IndiaFRR = Financial Rate of ReturnGOI - Government of IndiaHP Himachal PradeshIDA = International Development AssociationMIS - Management Information SystemMP = Madhya PradeshMT = Metric TonneNCDC = National Cooperative Development CorporationNCDC I a National Cooperative Development Corporation ProjectNCDC I1 - The Second National Cooperative Development Corporation ProjectNPC = National Productivity CouncilOED - Operations Evaluation DepartmentPAC Primary Agricultural CooperativePACS Primary Agricultural Cooperative SocietyPACSFED - Uttar Pradesh Processing and Cold Storage FederationPAMS - Primary Agricultural Marketing SocietyPCC - Project Coordinating CommitteePCF - Uttar Pradesh Cooperative FederationPCR Project Completion ReportPCS Primary Cooperative SocietiesRBI Reserve lank of IndiaRCC Reinfor-ed Cement ConcreteRCM = Regional Cooperative MarketSAR - Staff Appraisal ReportSCB - State Cooperative BankSCF - Standard Conversion FactorSCMD - State Cooperative Marketing Development PotatoeSCMF = State Cooperative Marketing FederationSDR = Standard Drawing RightSLDB State Land Development BankSUC - Space Utilization ChartTA = Travel AllowanceTOPIC - Training for Personnel in CooperativesUP = Uttar PradeshWB = West Bengal

CONVERSION TABLE

1 quintal - 100 kgs1 hectare (ha) - 2.47 acres1 lakh - 100,00010 lakhs - 1 million1 crore - 10 million

FMR OfiCiaL VW ONLYTHE WORLD OANK

Washiton. DC 043USA.

00k*eoft Okdcta.CsmwiOpm.wuuo &Aahati

March 15, 1990

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECTs Project Completion Report on IndiaSecond National Cooperative Development Corporation Project(Credit 1146-INE

Attached, for information, is a copy of a report entitled 'ProjectCompletion Report on India$ Second National Ceoperative DevelopmentCorporation Project (Credit 1146-IN)t prepared by the Borrower with anOverview prepared by the Asia Regional Office. No audit of this projecthas been made by the Operations Evaluation Department at this time.

Attachment

This doument hs a nstdted distdbutiond may be ed by uNCnts onl th pedomaof thdke ofcid dueL Its content may ot otbfwlse be diclsed wthout Wodd Bank aubdmtlon

FOR OFMCL USK ONLY

-*QOJECT COMPLETION REPORT

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

(CREDIT 1146-IN)

Table of Contents

PageNo.

Preface ................................... iBasic Data Sheet .............. ...................... . .

Evaluation Sutmamry .. iv

OVERVIEW vi

Introduction ...... viProject Costs, Financing and Disbursements .... vIProject Implementation ......................................... viiProject Impact ...................... viiiInstitutional Performance ............ ............. .. .. ..... xiiIDA Supervision ........... ................................... xiiLessons Learned ............... .. xiii

I. Background ................................................... 1

Introduction ................... . . . ................ 1Genesis of the Project ...................................... 1Rationale of Rural and Marketing Godowns .... ................. 2Specific Economic Criteria ........ *. . * * * * ............... ..... 3Rationale of Cold Storage 3................................... 3

II. Project Fomulation ....................... .................... 5

Cooperative Storage Project ....... ......................... to 5Project Components ........... . ..........................*...... 7Financial Component ........ ........ .............. 7Technical Component ..... ................................ 8Implementation Organization see ... .99 * ............. ... ... ....... 8Godowns Designs, Specifications and Procurement Procedures ... 9Lending Terms .. * .........................*..*................ 9Financing Pattern ........ ............ ........ 10Procedure for Lending ......... 10Project Coordination ................................... 11Subproject Preparation and Appraisal ......................... 11Training and Manpower ... *..........*.......... ........ 11Monitoring and Evaluation ...................... ......... . 11Financial Projections ...... **........................... 12

This document has a restricted distribution and may be used by recipients ony in the petformanceof theit official dutie Its contents may not otherwise be disclosed without World Bank authodzation.

PageNo.

Economic Rate of Return ...... ...................... ......... 12Project Beneficiaries . ........................... ........... 13Potato Storage-Cum-Marketing Cooperative Project .......... .... 13Project Area . .*.. **. ***0 *****. * ........................ ; 14Physical Component ...................... ............... 14Marketing Component ....... *...*................ .... ....... 14Research and Development Component ........................... 15Phasing of the Project .......................... ....... ...... 15Project Cost .......... .................................. 15Desig2 and Construction of Cold Storage ...... ................ 15Procurement Procedures .... *........*....* ......... ........ 16Manpower Requirements .................................. ... 16Financial Viability .......................................... 16Economic Rate of Return ........*............................. 17Other Benefits ........................................... 18Project Risks ........................................... 18

_III* IMPLEMENTATION .... ... . #.. o................... 19

Cooperative Storage Project .................. ...... ...... .. ... 19Physical Progress ............... ......... .. ..... 19Construction of Godowns ................. 20Rural and Marketing Godowns .... ..... .. ...................... 21Non-Availability of Technical Staff .......................... 23Non-Availability of Construction Materials ... ................ 23Lack of Response from ProcessionAl Contractors ............... 24Other Problems ........... **..*............................ 25Marketing Godowns .......................... ................. 26Cost Escalation ....................... 26Learning Experience ........ *..*............................ 29Implementation-Cold Storage .. ................................ 30Physical Component .*........................................ 30Marketing Component .* .... ........ 32Research and Development Component ........................... 32Cold Storages ..... ...... ...-........ ...... 32Project Funding .......... ....... ........ ....... 35Cold Storage Component ......................... *......... 36Total Project Cost o.o.. ..............o ................ 37Disbursement of IDA Credit .................. .. *..* ... #*.*. 37Project Monitoring of NCDC-II Project .................. o. 39Institution Building ................. 39Institution Building of NCDC ................................. 40Training . ........................... .......... 40Training of IB Category Staff ............................ 41Mobile Guides .. .........$.*. .................... 42Institution Building of Implementing Agencies in the States... 43Organization and Methods Study .............................. 44Efficiency in Operation ............................ 44

PageNo.

IV. IMPACT ASSESSMENT ............ ..................... 45

Methods of Impact Measurement ............................... 45Impact Indicatocs ......... ........ 46Marketing Godowns ....................... 46Evaluation Studies ................ . 47Methodology ...... . . .... 47Godown Component ......... * ...... 47Cold Storage Component ................ 47Rural Godown ................ 48Disbursement of Credit ................. 49Distribution of Inputs ........... ..... 50Distribution of Consumer Goods ................ 52Marketing of Agricultural Produce ............................ 53Index of Contribution .................... ............... 56Other Financial Indicators *. * * * ........................ 56Growth of Share Capital ..... .............................. 56Growth of Working Capital ............. ................... 56Deposit Mobilization ................................... 57Employment Effect ............................ *..... * 57Financial Viability ................... *............... 59Financial Rate of Return ... ***...*.**.. .................... 59Repayment of Loans ......... .............................. 59Economic Rate of Return ..... *e............................. 61Capacity Utilization of Rural Godowns ........................ 63Impact of Rural Godowns on Farming Community ................. 64Suggested Line of Action .................................... 65Preparation of Utilization Plan .............................. 67Marketing Godownas ............**........................... 67First Order Impact ..... ..... ........ .... ....... ....... .. 68Capacity Utilization ......................... 69Operational Methodology .............. ........ .. ... ..... ... .. . 69Business Turnover of State Marketing Federations ............. 70PCMS Godowns in Maharashtra ............... . .. ..... ... ..... ... 71Impact of PCMS Godowns .... ****..*.....e... *............ 72Capacity Utilization *..........*........*** ....... 72Business Turnover ................................ ........ *.. 73Profitability ................ ... *....................... 73PCMS/DOMS Godowns in Andhra Pradesh .......................... 74Capacity Utilization ........................... 74Business Turnover ..... **...................... .. ..... .... 75Profitability .......................... 75Cold Storage Component ....... *............................... 76Rationale of Cold Storages ................ . ........ .. .. ..... . 77Cold Storage Operation .... .. 79Marketing and Rental Component ............................... 80Financial Operation of the Cold Storages ..... ................ 81Expenditure Analysis ...... ................................. 82Financial Viability .........................."............. *.. 84

PageNo.

Management and Employment ........ ....... .................. 86Comparison of SAR Projections and Results of Evaluation

Study ............................ 8Project Investment ........................................... 91Operating Costs ........ 92Cold Storage - Suggestions 93

V. CONCLUSIONS ............. ........ 101

Annexes

1 Technical and Developmental Staff Targeted and ActuallyPosted by the Implemented Agencies ....................... 105

2 Financial Indicators ...... ......................*....... 1063 Membership ............................ 1114 Disbursement of Credit ............ ......................... 1135 Distribution of Fertilizers, Seeds and Pesticides .......... 1176 Distribution of Consumer Goods ............................. 1207 Percentage of Non-credit Turnover to Total Turnover ........ 1238 Growth of Share Capital ........ .* ....................**. 1249 Growth of Working Capital .. .................. ... .... ...... . 12610 Deposit Mobilization by Ssmple Societies ...... ............. 12811 Cash Flows .,.....,.*........ ... *.. 130

12 Financial Rates of Return ................ ... ....... 13513 Economic Rate of Return .... * ...... 00...*. 14114 Business Turnover ....................... 14215 Actual and Projected Rental Rates ........................ 14716 Model Scheme for Ice Plant and Debt Servicing ......0........ 148

MAP IBRD 15430R

INDIA

SECOND RATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

tCREDIT 1146-IN)


PREFACE

This is the Project Completion Report (PCR) for the SecondNational Cooperative Development Corporation Project (NCDC II) in India,for which Credit 1146-IN in the amount of SDR 101.8 million equivalent wasmade to the Goverment of India in February 1979 for onlending to NCDC.The credit was closed on June 30, 1987. It was fully disbursed and thelast disbursement was April 1988.

The PCR was prepared by NCDC, the executing agency. An ovevviwsumariztg fimportant observations and providing additional comments wasprepared by the Asia Technical Staff - Agriculture, Asia Regional Office.

This PCR was read by the Operations Evaluation Department (ORD).The draft PCR was sent to the Borrower on January 5, 1990, for comuents byFebruary 23, 1990, but none were received.

M. -

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT

(CREDIT 1148-IN)

PROJECT COWLETION REPORT

BASIC DATA SHEET

KEY PRIJECT DATA

Appralal Actu l or Acturl sEstimate Es1 Etimt I of

Totl P olt Cost (US d 24 1.Total Project Cost QRs) 2186 2868 l.UEligible ,or IDA Ftnancing (USE m) 126 199 H.07Eligible for IDA Financing (Rn. M 1969 1216 1.23Credit Amount (US$ a) 126 109 .087Date of Credit Agreement W7/21/81Cloaing Date 06/80/8t7 96/3/87Economlc Rate of Return (t)

Godown Component 16 10- 28Cold Storage a Marketing Component S4 8 s8

Combined Component 28Financial Rate of Return (I)

of Godown Component .17 12-.26Number of Direct Se.iietarios (a) 8.2 6.4 1.09

CUiMULTIVE DT eURSEEENTS

FY62 FY88 FY14 FY65 FY60 FY67 FY88AppralIal Estimate (U. .) 3El a-.# 83^- 104 in- 126 13 FA= Iual (US$ m) 7.5 17.0 28 45.2 72.6 89.6 19Actual as X of Estimate .82 6.84 6.84 0.48 0.60 0.72 6.87Date of Final Dsbursoemet 94/19/60

STAFF VVM (Staff Weeks)

F79 F FY61 FY82 FY68 fY84 FY8S FY86 FY87 FY88 Tot I

Prappralsal .1 48.8 8.9 47.8Appraisal 55.5 56.5Nbeotlatio.i 6.9 6.9Su"prvislon 8.4 9.8 9.9 12.8 0.8 26.5 16.9 11.8 1U9.6Other 4.0 4.0

TOTAL .1 48.8 76.6 9.8 9.9 12.8 6.8 26.5 16.9 11.8 214.8

- III -

MISSION DATA

Date, macday(Month/ No. of In th Spclalzatione Performance Rating Type of

Mission Sent Year) Persons Feld Sesresentod */ Sta*ue b/ Trond c/ Problem d/

Preparatlon' HQ 10/79 6 1e C,E,F,G,,$S - - -

Appraisal HQ 10/0 7 24S C,E,F,G,U,S,T - - -

Supervision 1 HQ 0/el 2 as C,! 1 2 1,0Supervision 2 HQ 11-12/61 1 14 C,E 1 2 1,0Supervision 8 HQ 6/82 2 21 F,U 2 2 1,0Supervision 4 HQ 1/83 2 21 F,! 2 1 M,0Supervision 5 HQ 19-11/68 2 16 E,U 2 2 M,0

Supervision 6 HQ 4-5/94 2 18 E,U 2 2 1,0Supervision ? HQ 11/64 1 7 F 2 2 1,0Supervision 8 HQ 6/85 2 21 E,I,U 2 2 1,0Supervision 9 HQ 1/8 5 so E,F,I 2 2 F,M,0Supervision 10 HQ 10/68 2 20 F,I 2 2 F,M,0Supervloon 11 HQ 4/67 2 24 F,I 2 2 1,0Supervision 12 HQ 11/87 a a8 E,F,I 2 2 1,0

Total Manda)ys 08e

*Rovlw by IDA of project pr peration work done by COC.

9/ AuAgriculturlt; CuCooperatives Specialist; EnEconomist;FaPinancial Analyst; cEngineer; IwAgro-Induetry Specialist;Mllarketing Specialist; SuCold Storage Specialist;T=Tralningjanpower Specialist; UtAgric. Credit Specialist.

y lsproblem-frw or minor problem; ftmoderate problem; Umajor problem.

e/ leimproving; 2tationary

/ FaFinancial; 1=Management; TaTechnical; OnOther.

OTHER PROJECT DATA

Borrowr - Government of IndioExecuting Ageacy - National Cooperative Development CorporationFiscal Year of Borrower - April 1 - March 81

Follow-on Project - NCDC IIICredit No. - 102-INCredit Amount - US$220.0 mBoard Approval - June 19, 1984

Nme of Currency - Indian Rupee (Re.)Appraisal yer avorage - US$1.00 * Re. 9.80Intervening years' *verage - USS1.00 Re. 19.15Completion yerns average - US$1.00 = Re. 13.40

- iv -

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORrORATION PROJECT (NCDC II)

CREDIT 1146-IN


EVALUATION SUMMARY

Overall, the project was a success, substantially achieving projectobjectives to improve services to farmers. Physical targets for rural andmarketing godowns were exceeded by about 70% capacity, however, that for coldstores targeted were reduced by about 401. While project costs exceededappraisal estimates including contingencies by 302, because of foreignexchange variations, the IDA credit (SDR 101.8M) was not fully *-ilizedresulting in a cancellation of SDR 6.2M.

Implementation Experience

While the project began slowly it was completed on time. Delayswere experienced in the early stages of implementation in the acquisition ofsub-project sites, the engagement of technical staff and suitable contrac-tors. Materials and labor costs increased during the project period by anaverage of about 80Z, with some materials projected for preferential purchase(levy system) having to be purchased on the open market at higher prices.Participating agencies benefited from organizational reviews, the provisionof vehicles to improve mobility for sub-project supervision, and engineeringInstruments. The proposed trainlug pxogram was expanded to include infra-structure for training centers, trainers were trained, and a very effectivemobile guide program introduced to provide on the Job training and consul-tancy to the primary level cooperatives (PACs). The very important marketingsupport component for the cold stores was not implemented.

Results

The rural godown component influenced the growth of the relatedPACs. Membership and equity grew by 20Z to 70% in the participating states,agricultural productivity for farmers concerned grew by 16% mainly because ofincreased fertilizer availability, and farmers income grew correspondingly.Additional employment for the construction stages grew as projected, butpermanent employment associated with operations only grew about 20% of pro-jections as the majority of PACs financed were already operating in rentedpremises with existing staff. The godowns did not result in increased mar-keting activity by the PACs as they remained outside the already establishedcooperative marketing system. It is the general feeling that PACs alreadyhave sufficient responsibilities and would require more expertise and re-sources to become significantly involved in marketing. In the short term,their best role would be to work in cooperation with the marketing agencies,offering their excess godown space when available and to undertake agencyfunctions. Studies indicated ERR ranging from 121 to 26X achieved, comparedto 13% to 172 projected. Sub-loan recoveries averaged 88% of repayments dueto date.

v

Additional capacity of 2316m tons of marketing godowns w4* created,mainly to state marketing federations. As these godowns mainly represented aswall part of much larger operations it was dift4cult to indlIvidually assesstheir full impact. A review of capacity utilization showed a range from alow of 53% in Bihar to a high of 942 in Punjab. The profitability of Statemarketing federations tend to fluctuate widely from year to year and state tostate mainly because of their role as procurement agents for government.

Sustainability

As mentioned above, the number of potato cold stores was decreased.It is believed that the majority of those financed will not be able to serv-ice their indebtedness without government support until some real changes(e.g. increase in rental rates, the introduction of marketing and diversifi-cation) are implemented. While investment cost almost doubled, rental ratesvaried at levels almost equal to those required at their expected lower in-vestment cost. At the same time farmers storing potatoes made profits suffi-cient to have supported the higher rates required. In addition, marketingopportunities were not pursued because of a lack of will, expertise and re-sources. Diversification to include other commodities is also necessary.Possibly the greatest weakness was the farmers lack of real identity in theownership of these stores and in their planning and management. They weremore perceived as a government fa4ility for the benefit of the farmers.While they were not financial successes they were economic successes as thefarmers benefited financially, and storage losses and transportation costsreduced. ERR were estimated at 30X.

NCDC, the executing agency, performed well and has shown much devel-opment during the project. Participating banks have improved their appraisalprocedures and their support to PACs through the mobile guide program hasbeen one of the main successes. Institutional development is being continuedunder the ongoing NCDC III project where outstanding weaknesses are beingtargeted.

Findinas and Lessons Learned

Lessons learned under this project ares

(a) adequate planning will reduce implementation delays. Manyactions should be initiated from when the project is under preparation andthe date of 'effectiveness' shovld not be the starting off point;

(b) for cooperatives to be effective, farmers must be involved fromthe planning stage in the management of the facility; it is important thatthey believe in their ownership and responsibility to the cooperative;

(c) PACs will not be able to play a significant role in the shortterm in the storage and marketing of agricultural produce and should concen-trate on how they can work with marketing societies In a secondary role; and

(d) IDA/Bank need to address the issue of the cooperative's role inIndia with particular reference -6o those cooperatives which operate more asgovernment entities, with little or no farmer involvement and for which thecommercial goal is not of prime importance.

- vi -

INDIA

SECOND NATIONAL COOPERATIm DEVELOPMENT CORPORATION PROJECT (NCDC II)

CREDIT 1146 - IN


OVERVIEW

1. The attached Project Completion Report (PCR) on the NCDC II Project wasprepared by the National Cooperative Development Corporation (NCDC), theproject executing agency. The (Yerview, prepared by Asia Technical Department- Agriculture, susmarizes specific observations warranting special attentionand points not fully covered by the attached PCR.

INTRODUCTION

2. The Second National Cooperative Development Project (NCDC II) wouldextend support begun under the First Project (NCDC I) to cooperatives for theconstruction of godowns, adding finance for potato cold stores and relatedmarketing facilities. The Project would support investments in nineparticipating states (Maharashtra, Punjab, Andhra Pradesh (AP), HimachalPradesh (HP), Bihar, Uttar Pradesh (UP), West Bengal (WB), Haryana, and MadhyaPradesh (MP). The Project was appraised in October 1980, became efWective inOctober 1981 and was completed on time on January 31, 1988. It overlappedNCDC I wh.ch financed rural godowns in three states and which was completed inmid-1985, with the PCR completed in September 1986. NCDC I was considered asuccess having contributed to a substantially increased turnover of farminputs, mainly fertilizer, and consumer goods. However, contrary toexpectations, there was little use of the godowns for the storage andmarketing of surplus farm produce. Also, the project brought out the need foran examination of the level of government's intervention affectingcooperatives and how it affected the overall administrative and businessenvironment, and the need for greater commercial and managerial autonomy forprofitable operations.

3. The Project would conform to GOI's cooperative policy to improveservices to farmers, with the godowne facilitating the Primary AgriculturalCooperatives (PACs) in the provision of basic consumer goods, and in theconvenient delivery of fertilizer and other farm inputs resulting in reducedstorage losses and transportation costs. Also, the units would provideconvenient delivery points for farmers produce and facilitate marketing. Thecold storage component and related marketing component would improve theefficiency of marketing practices of potatoes, allowing the farmers to avoidglut prices at harvest time. Storage losses and transportation costs wouldalso be reduced including that of seed potatoes.

PROJECT COSTS, FINANCING AND DISBURSEMENTS

4. The attached table (Table 1) compares actual project costs with thatestimated at appraisal showing an infreased cost of Rs 720m. However,

- vii -

the IDA credit was not fully utilized as only $1d9m equal to SDR 95.7m wasdisbursed necessitating a cancellation of SDR 6.2m. This reflected the largevariations in exchange rates during the life of the project. IDA financed 45Xof project costs compared to 47? estimated at appraisal. As the table shows,physical targets for godowns were surpassed by about 13? reflecting anincrer , demand for marketing godowns. However, the cold stores financedwere reduced from 127 to 85. Also noticeable was the non - utilization of themarketing support services for cold stores.

5. But for the fact that the physical increase in godowns related to thelarger marketing godowns at a lower cost per ton capacity, project costs wouldhave been higher. Project cost suffered from material and labor costsincreasing by about 8OZ during the project period, compared to a pricecontingency of 20? built into the project. In addition to the normalescalation of prices, estimates had anticipated the full use of governmentlevy (preferential prices) for items such as cement and steel and as thesebecame unavailable some were acquired on the open market at higher prices.The estimated physical contingency of 5? took care of site preparation costrequired in some instances for which there was no provision in the costing.

PROJECT IMPLEMENTATION

6. Project implementaLion began slowly, running at about 34? of target forthe first three years. The coverage of the Project over nine states requiredthe involvement of many more participating agencies than that of the previousproject, many of which only began to identify suitable and available sites,the procurement of which was frequently time consuming with site preparationsometimes necessary before construction could begin, after the project becameeffective. Also, there were delays in the identification and arrangementsfor the technical staff needed, whether for permanent employment or forengagement on deputation. On average, planning by the implementing agenciesfor sub-projects implementation was inadequate.

7. As also noted under NCDC I, insufficient thought was given at projectpreparation and appraisal to the availability and engagement of contractorswho on average showed less than anticipated response to tenders for ruralgodowns, due to their being individually small, scattered - sometimes indifficult locations, and an insufficiency in the related areas of the Class Acontractors required. At NCDC's request IDA agreed to relax procurementprocedures in extreme circumstances where contractor's response was notforthcoming, to allow PAC's to build their own godowns under the supervisionof participating agencies' technical staff. This worked quite well.Contractors for the larger sized marketing godowns and the cold stores was alesser problem than that for the rural godowns. For cold stores, GOI'sdecision to increase excise duty by 7? on refrigerated equipment contributedto their additional costs. In general, the delays to project implementationalso contributed to the higher costs experienced on all components.

8. While the construction of godowns and cold stores followed traditionaldesigns agreed at appraisal, IDA supervision missions observed that incomparison with other cold stores built by private traders and by some non-project cooperatives, designs of cold stores were inefficient with outdated

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technology and with cumbersome handling procedures. A 4000 MT cold store onlyhad an effective storage capacity of 3600 MT.

9. Under support services provided under the project, consultants wereappointed in four states to carry out Organization and Management studies ofweak participating agencies, resulting in recommendations for restructuredstaffing patterns, induction of technical staff, improved control andreporting systems and the identification of training needs. In addition,vehicles to improve staff mobility and engineering instruments were financed.Sub-project appraisals of rural godowns were mainly based on models ofrepresentative size godowns with the provision that the borrowing cooperativeswere viable, viability more so based on its repayment record rather than on abusiness plan/projection of their specific future operations. Very littleconcern was sbown to determine the viability of the borrowing marketingfederations, where the godowns financed only formed an insignificant part oftheir operations.

10. The proposed marketing support to develop marketing intelligence and toemploy and train marketing specialist in support of the cold stores componentwas not implemented. It was not until January 1985 at a national workshop onpotato marketing that the urgency for equipping the implementing cooperativeswas fully recognized and a decision taken by the concerned states to takeaction. Marketing expertize is now being introduced in some states, with UPbeing in the forefront. Research and Development initiatives in support ofcold stores operations were financed including a cold store based on gravitycoolirg, a scientific preservation unit for jaggery, and the establishment of60 small potato cool stores.

11. The proposed training program for godown operations was implemented withIDA increasing its support to finance infrastructure for training centers.During the project period, NCDC developed the TOPIC program (Training forPersonnel in Cooperatives) which program concentrated on the determination oftraining needs, the development of training programs, and the training oftrainers. An important feature emanating from this program was thedevelopment of mobile guides, who after being trained were each given theresponsibility as advisers/consultants to a designated group of PACs,providing on the spot training to PAC managers, officers and to the farmermembers.

PROJECT IMPACT

12. Rural Godowns - The impact of the rural godown component supported GOI'sand IDA's position that a rural cooperative with a godown facility would bebetter suited to service tne needs of farmers than one without a godown. Therequirement for a 5? contribution from PAC members for financing the godowns'cost resulted in an increase in membership and in the total equityparticipation of farmers in the PACs. Membership in PACs increased between20X to 70? in the states concerned, and farm families expected to utilize theservices of the godowns was estimated at 5.4m compared to 3.9m estimated atappraisal. As rural godowns were built, the convenient availability of farminputs increased resulting in the increase usage of fertilizer which thenbecam the main trigger for increased credit. This increase was however, not

always consistent as rainfall conditions also have a large influence on thelise of inputs. A review of sample farmers showed productivity to haveincreased by about 162 because of the increased fertilizer usage, with acorresponding increase in farmers' income. An area of significant impact wasthe significant increase in trading of consumer goods by the PACs as more"fair price shops" were opened, and expansion achieved for existing shops asrented godowns were replaced by significantly improved facilities. Actualturnover was estimated to have nearly doubled that estimated at appraisal.While projected new employment was achieved during construction of godowns,employment generation was below appraisal expectations for the operatingstage, only increasing by about 20X of expectation. The appraisal overlookedthe fact that the majority of godowns financed were for existing PACsutilizing rented premises with existing credit business and staff.

13. As in NCDC I, the godownr did not increase the role of the PACs in themarketing of agricultural produce and they are not integrated in thecooperative marketing system. Marketing by PACs only amounted to about 132 ofthat estimated at appraisal. The procurement of most basic commoditiesthrough government price support programs are through the State MarketingFederations and their related District/Primary Marketing Societies. Theseorganizations have their own purchasing arrangements and storage facilitiesand tend to feel that the PACs already have enough responsibilities withcredit, handling of inputs and consumer goods, and would not be able toefficiently manage the more sophisticated aspects of marketing. The currenttendency is for farmers to market their produce directly to theseorganizations and to the open market. It is true that for the PACs toundertake marketing in any large way, they would require much training andshould only move into this direction slowly, preferably in partnership withthe marketing federations to begin with, offering any excess storage capacitythey have available. Also, marketing will involve the need for increasedworking capital to finance advances to farmers where necessary.

14. The FRR of the sample studied showed a range of 12Z to 26Z achieved,compared to 17? without manager's residence and 13Z with manager's residenceprojected. The ERR ranged from 16? to 282. However, the real test ofviability will be for each PAC to be able to service its indebtedness on atimely basis and earning a reasonable return on their own equity. Indicationswere that most PACs will be able to achieve this by the end of the three yearsgrace period with some weak ones taking longer. While it is early to obtain aclear picture on subloan recoveries as first payments are only now beginningto fall due for a few PACs under the project, recoveries are currentlyaveraging 88? of demand. A recent review of subloan recoveries under theprevious NCDC I shows similar recovery levels for two states but with Orissaonly averaging 5? of demand. As a result, IDA and NCDC agreed that no furtherPACs in that state will be financed until recoveries rise above 55Z of demand.It is understood that this position is now being significantly improved.While the PACs themselves service their group indebtedness on a reasonablebasis, recoveries of individual credit does not appear to have improved. Ofcourse this project does not tackle this problem. Also noted was asignificant increase in fund mobilization by PACs after they received godowns.

15. Through the expansion of the training component discussed in para.llabove and continued under NCDC III, the expanded training of PAC managersfollowed up by on the job training by mobile guides has been very successful.PACs are now paying much greater attention to the introduction of annualbusiness plans, looking at possible opportunities for increased activities.They have already been able to obtain increased margins on fertilizerdistribution more in line with that paid to private traders, and on consumergoods. Also, the more enterprising PACs are examining other areas ofactivities including the rent of agricultural implements, distribution ofseeds, group transportation, and marketing where possible. Most important isfor PACs to realize that the godowns belong to them as a group and that thegodowns are not facilities of the government put there for their convenience.The membership needs to increase their involvement in all aspects from theconstruction of the godowns through to their operations.

16. Marketing Godowns - This component contributed to the significantincrease in available storage space for State, District and Primary levelmarketing cooperatives, with the underlying contribution to reduced losses oninputs and agricultural products. and the reduced transportation costs alliedto more convenient storage locations. The project added 2316m tons ofstorage, of which 1696m tons was for State level federations. It wasimpossible to separately quantify the full contribution of the godowns fromthe total operations of the marketing federations on a whole, as theirperformance was complicated by their role in the procurement of produce undergovernment price support schemes, which schemes do not always provide anadequate margin for the federations. These marketing federations/societiesprove to more of a government facility in both ownership and management thantrue cooperatives owned and managed by farmers with viability being of primaryimportance. In practice, the government's guarantee for subloan repaymentseems to have been the primary aspect relied on, particularly in Bihar wherethe federation has consistently suffered losses. The PCR also shows that somemarketing godowns, in UP and 4 in Haharashtra were given on rent to othercooperative organizations.

17. Taking the above into consideration, capacity utilization is the mostreliable barometer to measure the impact of these investments. Capacityutilization for marketing federations have ranged from a low of 53Z in Biharto 942 in Punjab with business turnover following this pattern. There was noreliable information showing the profitability of these federations. For theDistrict/Primary societies, capacity utilization has also been low, however,turnover has been increasing and these societies are said to show profits.

18. Cold Stores - The PCR rightly concluded that this component helped toreduce potato losses, increased value added, sustained a larger area underpotato cultivation, and marginally increased employment. While theinvestments proved to be economically successful (ERR of about 30X), the PCRalso highlights the financial failures of cold stores as their currentoperations denote. Because of these failures the program was reduced from 127cold stores to 85 which were in progress at the time of an interim review ofthe program by IDA and NCDC. A review of cold stores financed show that theyhave suffered losses in all three years of their operation and that they willnot be able to service their indebtedness without government support and/or

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with significant changes in their operations. The spirit of their operations

so far has been that of a Government facility providing below cost rental

rates, allowing the farmers to obtain the full benefit of value added.

19. The appraisal projected cold stores to be viable operations based on

1002 rental plus a fee for marketing services to its members and a margin to

be earned on monies advanced to farmers. At sanctioning of the individualinvestments NCDC assumed a 50:50 mix of rental and marketing to be the more

viable mix. Also, capacity utilization was projected at 902 in the beginningrising to 982 in three years. While capacity utilization did in,rease to

nearly 902, it was only about S02 in the first year with Bihar at a low of

282. The most significant feature however, was the increased investment cost

whereby cold stores cost was almost twice that projected with rental rates

averaging close to that initially envisioned. But for WB, where the

government contrary to its conmitment at negotiations restricted any movementsto rates, rates were allowed to vary. However, rates did not vary

significantly because of competition with other existing cold storesconstructed earlier at much lower cost. IDA supervision mission felt that the

restriction on rates increase Wa8 a wrong perception as there was a genuineshortage of storage space and competing cold stores limited the amount theywould store on rental, preferring to buy and store for themselves for future

trading. To prove this concept, supervision missions encouraged cold stores

cooperatives to obtain marketing expertise and to begin trading forthemselves. However, they did not obtain the necessary expertise and were notprovided the necessary resources to advance the farmers or to buy forthemselves. As mentioned in para. 10 the project component to providemarketing support had not been implemented. (Some marketing was carried out

at three locations in WB at a loss because of their lack of expertise andguidance). As a result the cold stores mainly relied on rental income which

averaged about Rs 240 MT (as estimated at appraisal), while the farmers madetheir own marketing arrangements with benefits ranging from Rs 250 MT to Rs500 MT.

20. It is important to note that the Boards of these cold stores are mainly

government nominated boards without elected representation and that staffingdid not include any marketing personnel. While over 1000 families benefited

from these investments the farmers had no incentive for their viability. ThePCP. also observed that salaries paid to employees were significantly higher

than that paid to cold stores operated by competing marketing societies. ThePCR makes the case that cold storage capacity is still inadequate in many

areas but accepts that much higher rentals would be necessary to make themviable. The experience of the Project shows that there need to be a mix of

rental and marketing with the farmers involvement, special training inmarketing with supporting market intelligence as was initially envisioned by

the project, working capital for farmers advance, and very important, thereshould be diversification of the commodities to be stored avoiding completereliance on potatoes. During drought periods there is no surplus potato tostore. Recent IDA missions in meetings with state representatives haveobtained a commitment for more diversification and improved management andtraining for cold storage operations, with some success already being seen.

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The PCR has not mentioned any benefits derived from the Research andDevelopment investments under the project (para. 10), and this aspect will befollowed up under the ongoing NCDC III project.

INSTITUTION4L PERFORMANCES

21. Participating implementing agencies have benefited from the consultants'reviews carried out and they have implemented most of the recommendationsmade. Unfortunately, the performance of the implementing agencies themselvesare dependent on aspects outside the scope of this project as their mainbusiness is credit, and they are affected by the adequacy of margins and theapproach to institutional credit in general. Overall credit recovery fromindividual farmers have not shown any real Improvement. This is currently thesubject of a comprehensive review under the NABARD project. However, there isdefinite progress in their implementation of godown financing and the recoveryof related subloans. The adoption of business plans/projections areprogressively being introduced in subloan appraisals, and with the mobileguide program subloans are better monitored with practical consultancy beinggiven. Greater emphasis is now being given in the appraisal of marketinggodowns and the viability of Marketing Federations. Again, this iscomplicated by aspects outside the project as these federations assume roleson behalf of the government which tend to affect efficient commercialoperations. Reporting procedures to NCDC on project implementation tend toemphasize the physical progress of projects with less said about theoperational aspects of turnover, profitability, credit recovery etc. Throughthe help of NCDC the quality of these reports are progressively beingimproved. An area of weakness is the need to develop more meaningfulplanning and programming which would help to reduce implementation delays.Also, there is the need to quicken responsiveness and flexibility to resolveproblems when they arise. This is of course difficult in a public sectorenvironment.

22. NCDC has continued to strengthen its operations as begun under NCDC I,with more decentralization to its regional offices and closer contact tosubproject operations. The benefits of its evaluation studies have been welldemonstrated in the information and analysis included in the PCR. Ofparticular mention is the development of TOPIC and the progress under themobile guide program. NCDC has complied with the covenants of the projectand audited accounts and reports have been timely and of acceptable quality.

IDA SUPERVISION

23. IDA supervision missions were regular averaging six monthly intervalswith a fairly good continuity in supervision staffing. Supervision missionsconcentrated on key issues and were responsive to problems, recommending andsupporting appropriate actions necessary for successful projectimplementation.

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LESSONS LEARNED

24. Adequate planning by implementing agencies would have reduced theconstruction delays and therefore project costs. The acquisition of land is atime consuming process particular where several small pieces are involved andthis should have been more vigorously put in progress from project preparationand appraisal. There is a shortage of adequately qualified contractors andskilled labor in rural areas. A total reliance on levy materials and itsrelated costs is dangerous as these materials are not always available whenneeded, resulting in delays and the need for some purchases on the open marketat higher prices.

25. It is important that the farmer members are involved in theircooperatives from the planning stage through construction and operation ifthey are to have a feeling of identify and responsibility for its success orfailure. They need to see Government as a partner in financing not as theprovider of a facility for exploitation, as was evident in the cold storesprogram. Also, in agri-business marketing is a key factor, frequentlyignored. It is much better to be market driven instead of being productiondriven in making the investment decision.

26. IDA support should only be given where commercial principles aredominant and Marketing Federations to be supported should be restricted tothose allowed to operate as viable operations with adequate margins. Socialresponsibilities, where unavoidable, should be separately determined andfinanced.

27. In general, PACs will not be able to play a significant role in thestorage and marketing of agricultural produce unless they upgrade theirmanagement capabilities and mobilize the necessary resources. In the shortterm they should concentrate on improving their ongoing operations of handlinginputs, delivering and mobilizing credit, consumer goods and relatedactivities. Where possible, they should work with the marketing societies andspecial commodity organizations (such as the ujlseeds Growers) in offering theuse of available godown capacity.

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T bl*_ I Second National Cooperative Devolopeent Crporatioan (CC 11)

Credit 1146-lN

Project Cost huueay

SAR Estaaates Actual

Number Capacity Cost NudMr Capacity Cost000 Tons Rs n 000 tons RAs

6adtrn Cmponent

Rural godomns 7000 1052 744 331 1011 2240larketing godons in95 65 3i 1611 2268SBppwtinq invetnnts 6 6

7098 1917 1316 0942 3279 2246

Cold Storageobrnkting Component

Cold Store 127 5S 05 65 326 593hrketing facilities 2Supporting investmets 2 1

127 508 609 95 326 594echnical hdistacnlTraining 6 9

Rarchaao Dev lopet a 9

14 to

Total SasCst 1739 20Physicallprice Contingencies 396

Total Cost 2135 288

US 4 Equivalent 27 244

DIA to fiance US *125.0 a (472) US t109.0 s 144U)SDR 101.3 a SDR 97 a

Financing

Cot ID IDA

Rural and arieting godoens 2240 f4 42.6Spporting invetunts 6 6 100

2246 960

Cold Stores 5*3 307 51.1Narketing facilitiesSupporting invetmnts I 1 100

594 309

Tehncical AssistanceTraining 9 9 100Rswch and Denelnt 9 0 -

39 9 100

Total 289 1276 44.6

UsS 109.0 e90 95.7 ailliah


INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PR'OJECT(Credit 1146-IN)

National Cooperative Development Corporation(Evaluation Division)

Ministry of AgricultureDepartment of Agriculture & Cooperation4, Sir Institutional Area, Hauz ehas,

New Delhi-110016

February 29, 1988

3 3-

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT(CREDIT 1146-IN)


I. Background

Introduction

1.1 The successful formulation and latmching of NCDC-I in February 1979spawned NCDC-II which aimed at extending the godown project to several othe:States and to finance construction of potato cold storage and marketingfacility in the main potato producing States. The NCDC-II World BankCooperative Project was appraised in September-October 19b) became effectivein October 1S81 and reached completion on Decembe.r 31, 1987.

1.2 The godown component of the project s-, formulated on the pattern ofNCDC-I with the basic objectives of development of an integrated network ofstorage facility at the three levels with PACS' godowns at the village level,marketing societies' godowns at the mandi level and marketing federations'godowns at the State level in Punjab, Himachal Pradesh, Maharashtra, Bihar andAndhra Pradesh. Uttar Pradesh was also added after being transferred fromNCDC-11I to NCDC-II. The godown facilities were designed to act as decentra-lized and coordinated service centers through performance of activity-mixconsisting of provision of agricultural credit, storage and supply of fertili-zers and other farm inputs, procurement and marketing of agricultural outputand supply of essential consumer goods.

1.3 The potato cold storage-cum-marketing component of the projectcovered six major potato producing States; Uttar Pradesh, West Bengal, Bihar,Punjab, Madhya Pradesh and Haryana. The project envisaged the creation ofadequate cold storage capacity, establishment of marketing services andcentralized technical services. The incorporation of storage, marketing andresearch and development in a single integrated project provided institutionalmechanism to balance continuous demand of potato with discrere supply, cutdown storage losses, increase the production of potatoes and protect theinterest of farmers and consumers through scientific development, cold storageand marketing intervention.

Genesis of the Proiect

1.4 The development of agriculture has been the main theme of India'sFive Year Plan after independence. Agricultural seczor provides livelihood to60X of the total working force, contributes nearly 40X of the net nationalproduct and accounts for 35Z of the country's exports. In the models ofdevelopment of agriculture, the Five Year Plan recognized the cooperativesector as a balancing factor between the private and public sector. Theadvent of Plamxing with its toorings in democracy and socialism, the thrust ongrowth with social justice and adoption of socialistic pattern of society haveadded a new significant and positive role to cooperatives in supporting the

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farmer, the worker, the artisan, and the consumer. The democratic characterof the movement combined with its federal structure in which an individualmember of the primary society in a village could draw support from a nationallevel cooperative organization, renders the movement an effective Instrumentfor decentralized planning and implementation of various economic activitiesby the people involved in these activities. Cooperatives offer a countervail-ing force against the exploitative propensities that develop in the economy,and thus protect and promote the interest of the weaker sections. It has beenthe deliberate policy of the GOI to foster and develop strong and viablecooperative nucleus in every village of the country radiating a vast networkof services to the farmers.

1.5 There were 0.315 million cooperative societies in the country with atotal membership of 145 million by the end of 1985-86. A wide range ofeconomic activities have been organized on cooperative basis. These includerural credit, supply of inputs and services for agriculture, agro-basedcottage and small industries, creation of economic infrastructure for process-ing, storage and marketing of agricultural and minor forest produce, animalhusbandry, dairy and fisheries, construction labor, housing and public distri-bution system. Recent years have witnessed successful diversification ofactivities of cooperatives including fertilizer manufacture.

1.6 The total agricultural credit disbursed by the cooperatives increasedfrom Rs 2,140 million in 1960-61 to nearly Rs 32,061 million in 1985-86. Thevalue of agricultural produce marketed by cooperatives during 1985-86 was overRS 41,930 million as against RS 1,690 million in 1960-61. In the distributionof fertilizers, cooperatives have trossed the mark of 3.6 million tons of NPKduring 1984-85 accounting for nearly 44Z of the distribution of fertilizers inthe country. The cooperatives have emerged as a major sector in the sugarindustry accounting for 59.1 of national production of sugar in 1985-86. Indairy program of 'Operational Flood', cooperatives are playing a significantrole. The Indian Fanmers Cooperative Limited is the largest single producerof fertilizer in India and its contribution to the country's total productionof nitrogenous and phosphatic fertilizer materials during the financial year1985-86 was 10.71 and 24.61 respectively.

Rationale of Rural and Marketing Godowns

1.7 The integration of credit, distribution of inputs and marketing ofagricultural produce at the grass root level requires the development ofviable, autonomous and self-reliant cooperative enclaves responsive to theneeds of farmers. Cooperative storage has, therefore, become an essentialinfrastructural requirement and an integral part of multi-functional baselevel cooperative societies.

1.8 The marketing godowns have the same importance to the marketingsocieties and Apes federations as rural godowns to the village societies. Themarketing of agricultural produce is a crucial link in the network of servicesrequired by the farmers. The marketing aspect does not tantamount to merelypurchase and sale of goods but covers a large spectrum of services involved inbringing the goods from producers to consumers. The flow of agriculturaloutput is discontinuous, being concentrated during certain periods whereas theconsumption of agricultural produce is continuous necessitating stocking after

the harvest and releasing in a regulated manner throughout the year. Theproblems of the marketing are also compounded due to unequal economic conflictbetween the farmers and the traders. Cooperative marketing not onlystrengthens the position of the farmers vis-a-vis the traders but helps in theintegration of marketing and productions. Strong and viable cooperativemarketing societies can provide sufficient counteracting power to the farmersto compete with the traders. In the past, it has been experienced that lackof godowns has been one of the constraining factors inhibiting the growth ofcooperative marketing in the country.

Specific Economic Criteria

1.9 The cooperative storage godowns confer certain direct and indirectbenefits to the society in general and the farmers in particular. Cooperativestorage godowns are real, tangible and durable assets of the economy giving along stream of benefits over the economic life of the godowns. They add tothe nation's wealth and capital. Being instruments of production (services),they yield returns to the farmers in many forms, some of which are discussedbelow. It is a well known fact that substantial quantity of agriculturalproduce during post-harvest period is being wasted in the country due to lackof proper and scientific storage facilities. The quantity of loss of food-grains in unscientific storage is estimated at 6.5; which is reduced to 12 inproper storage. Moreover, unscientific storage results in qualitative deteri-oration of the produce which can be avoided with proper storc-t.

1.10 Another quantifiable benefit of storage godowns is savings intransport cost on account of bulk deliveries of inputs and bulk collection offarm produce. These benefits would result from a switch-over from the use ofbullock carts used for small loads to the motor transport that would bejustified by larger volumes. Storage godofns bring economies of scaleresulting in reduction in overhead costs. Rural godowns at the village leveland marketing godovus at the mandi and district level also enable the farmersto store their produce after the harvest and sell during the lean season atremunerative prices. This leads to redistribution of income from traders andmiddlemen to small and marginal farmers. Such redistribution of incomesubserves the goals of equity. The coope:ative storage facilities alsoperform the job of buffer stocking, i.e., of dampening the fluctuation ininter and intra-seasonal prices and ensuring better returns to the primaryproducers without adversely affpcting the interest of the consumers.

1.11 Thus, the economic rationale of cooperative storage godowns stemsfrom the economies of scale, reduction in quantitative and qualitative losses,savings in transport cost, increase in real income of the farmers--all thesewill be instrumental in enabling the farmers to move to higher consumptionfrontier than would be possible in the absence of the storage facilities,

Rationale of Cold Storage

1.12 Cold storages offer refrigerated storage facilities for commoditieswhich are peLishable in nature such as potatoes, fruit and vegetable, eggs,etc. In case of some coimodities there is no substitute for cold storage.These commodities have to be stored and there is no trade-off between coldstorage and other types of storage in the case of these commodities. Produc-

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tion of comodities like potatoes require to be kept in the cold storage ismostly discontinuous with specific period of sowing, harvesting and marketing,while consumption on the other hand is continuous throughout the season. Dueto this imbalance between production and consumption, storage is essential tobring equilibrium in demand and supply throughout the year. It has been esti-mated that spoilage destroys, on an average, more than 252 of all potatoeswhich are not kept in the cold storage. In major potato proJucing statesabout sOa of the potatoes need to be kept in cold storage in order to savefrom spoilage. The cold storage reduces the losses from 25Z to 5 yieldingnet savings of 20Z. Cold storage increase the post harvest value of potatoesby preserving them so that they can be marketed during the off-season. Thedifference between harvest value of the potatoes and off-season value may betaken as value-added due to storage. The availability of cold storagefacilities nearby to the farm houses also enable the farmers to grow their ownseed potatoes and store them in the cold storage resulting in reduction ofseed potatoes transport cost.

1.13 At the formulation of NCDC-II Project, the share of the cooperativesin the total cold storage capacity in the country was only around 5. Torectify sectoral imbalances and to help the producer members of the coopera-tives in storing and marketing of the potatoes, there had been a demand forcomprehensive project in the cooperative sector.

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II. PROJECT FORMULATION

2.1 The Project was prepared by the NCDC in association with the StateGovernments and concerned cooperative organizations in the form of two ProjectReports:

1. Cooperative Storage Project - NCDC-II

2, Potato Storage-Cum-Marketing Cooperative Project - NCDC-II.

2.2 These project reports were appraised by IDA Appraisal Mission whichvisited India in October 1980. On the basis of these two project reports, IDAMission brought out 'Staff Appraisal Report, Second National CooperativeDevelopment Project" on April 17, 1981.

Cooperative Storage Project

Demand Estimates

2.3 Demand for storage in the beneficiary States was worked out on thebasis of actual production of main crops during 1976-77 and 1978-79 and theprojections during 1982-83 and 1984-85, the actual and projected use of ferti-lizers (material), storage requirement, existing storage and storage shortage,cooperative marketing storage and village level cooperative godowns. Thefollowing table gives actual and projected data on the main parametersmentioned above.

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S3COND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECTAGRICULTURAL PRODUCTION, FERTILIZER USE AND STORAGE CAPACITY

IN PROJECT STATES (1976-85)(Quantities in million tons)

Actual Proiected1976-77 1978-79 1982-83 1984-85

Production of Main CropsMaharashtra 13.50 15.90 17.50 18.50Punjab 9.70 11.00 ;2.00 12.70Andhra Pradesh 9.30 10.00 11.80 12.30Bihar 9.90 10.10 10.80 11.10Himachal Pradesh n.a. 1.10 1.20 1.30

Use of Fertilizers (material)Maharashtra 0.76 0.91 1.20 1.36Punjab 1.27 1.44 1.87 2.09Andhra Pradesh 0.93 1.24 1.97 2.45Bihar 0.38 0.47 0.62 0.75Himachal Pradesh n.a. 0.03 0.06 0.08

Estimated Storage/TransportationRequirementMaharashtra 4.35 5.13 5.73 6.09Punjab 5.36 6.07 6.75 7.18Andhra Pradesh 3.16 3.50 4.33 4.67Bihar 2.13 2.21 2.41 2.52Himachal Pradesh n.a. 0.24 0.27 0.31

Existing Storage and Storage gap plus CAP of 1979Storage ShortageMaharashtra n.a. 1.80 3.65 3.98Punjab n.a. 6.06 0.77 1.40Andhra Pradesh n.a. 3.16 1.64 1.80Bihar n.a. 1.60 0.96 1.05Himachal Pradesh n.a. n.a. n.a. n.a.

Cooperative Marketing Storage ProjectionsMaharashtra n.a. 0.47 0.65 0.70Punjab n.a. 1.33 1.57 1.73Andhra Pradesh n.a. 0.48 0.49 0.50Bihar n.a. 0.35 0.45 0.55H4machal Pradesh n.a. 0.06 0.07 0.08

Village Level Cooperative GodownsMaharashtra n.a. 0.24 0.42 0.56Punjab n.a. 0.27 0.51 0.67Andhra Pradesh n.a. 0.08 0.26 0.38Bihar n.a. 0.12 0.12 0.12Himachal Pradesh n.a. 0.06 0.10 0.12

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Project Components

Physical Component

2.4 The physical component of the project consisted of construction of7,000 rural and 898 marketing godowns with a total storage capacity of 19.178lakh tons in the project states of Andhra Pradesh, Bihar, Himachal Pradesh,Maharashtra and Punjab. The details of the program covered in the originalproject are given in the table below.

COOPERATIVE GODOWN PROGRAM(Capacitys 000 tons)

No. of Godowns CapacitySt&te Rural Marketing Total Rural Marketing Total

Andhra Pradesh 3,000 100 3,100 300.00 25.00 325.00Bihar - 149 149 - 215.00 215.00Himachal Pradesh 1,100 87 1,187 82.50 21.75 104.25Maharashtra 1,350 413 1,763 203.00 270.50 473.50Punjab 1,550 149 1,699 400.00 400.00 800.00

Total 7.000 898 7,898 985.50 932.25 1,917.75

2.5 The Project was deemed to have commenced with effect October 1, 1981.The year 1980-81 was treated as the pre-project year. Project had a time spanof 5 years for completion from 1981-82 to 1985-86. The phasing of the godownsconstruction program from pre-project year 1980-81 onwards up to 1985-86 wasalso given in the SAR report.

Financial Component

2.6 The cost of the project was assessed at Rs 1,410.52 million inclusiveof technical assistance, supporting investment and physical and price contin-gencies. Statewise details of the project cost are given below:

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PROJECT COST(Re in crores)

Andhra HimachalCost components Pradesh Bihar Pradesh Maharashtra Punjab Total

Cost of godownsRural 22.470 - 6.482 18.495 26.905 74.352Marketing 1.370 8.643 1.191 9.440 16.000 36.644

Subtotal 23.840 8.643 7.673 27.935 42.905 110.996

Technical assistance 0.065 0.024 0.021 0.076 0.117 0.303

Supporting investment 0.130 0.047 0.042 0.153 0.235 0.607

Base Cost 24.035 8.714 7.736 28.164 43.257 111.906

Physical contingencies 1.371 0.497 0.441 1.606 2.467 6.382

Price contingencies 4.889 1.773 1.574 5.729 8.799 22.764

Total Proiect Cost 30.295 10.984 9.751 35.499 54.523 141.052

2.7 The project made separate allocation for technical and supportinginvestment and also provided for physical contingencies of over 5 and pricecontingencies of over 202 over the base cost of the project.

Technical Component

2.8 The project also embodied a technical component to help the partici-pating agencies develop their operations to meet the expanded tasks satisfac-torily. Technical assistance was provided for consultancy services to assisteach of the banks in strengthening its long term finance department andsetting up a new organization and method department. It also included thecost of reviewing the banks' staffing, accounting procedures and managementinformation system with a view towards improving them by making suitablerecommendations. In addition, provision was also made for purchase ofvehicles to help the mobility of staff at various levels who would implementand monitor tne project. The technical assistance component also provided forsupply of engineering instruments for the use of the technical staff of theBanks.

Implementation Organization

2.9 As in the NCDC-I Project, NCDC would be the major project agency andwould coordinate implementation activities of all participants in the projectstates. The State Cooperative Bank designated as the implementing agency inAndhra Pradesh; Bihar State Cooperative Marketing Union (BISCOMAUN) in Bihar;

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H.P. State Cooperative Bank for rural godowns, H.P. State CooperativeMarketing Federation for marketing godowas in Himachal Pradesh, MaharashtraState Land Development Bank for rural godowns and Maharashtra State Coopera-tive Marketing Federation for marketing godowns in Maharashtra; Punjab StateCooperative Bank for rural godowns and MARKFED for marketing godowns inPunjab.

Godowns Desitns, Specifications and Procurement Procedures

2.10 According to SAR, buildings would be constructed to standard designof four capacities--S0, 100, 200 and 500 tons for use of PACS and 250 and1,000 tons for RCMs and SCMF. Facilities provided for PACS would includestorage space for fertilizers, separate from space for farm produce, space forconsumer goods, storage dnd sales, societies office, drinking water supply,W.C. facilities, veranda, patio for meeting and parking yard. The storagespace of PAC godowns was designed for bagged storage of foodgrains and ferti-lizers with adequate ventilation and space for workers to move about forhandling. Roofing of godowns owned by PAC would be mainly of reinforcedcement concrete (RCC). The project would involve relatively small expenditureat any one point of time incurred by several individual cooperatives.Contracts for godowns would be individually small and geographically welldispersed and would be let on local competitive bidding in accordance withprocedures satisfactory to IDA.

Lending Terms

2.11 The loan assistance to the implementing agencies for construction ofgodowne would be made available for a period of 15 years with a moratorium onrepayment of principal amount and interest for the first three years. Theloan and interest would be repayable in 12 equal annual installments commenc-ing from the fourth anniversary of the loan. Besides, there was also aprovision for physical contingencies and price contingencies. Loan assistancewas provided for purchase of vehicles, engineering instruments, appointment ofconsultants for O&M studies, appointment of engineering and general staff,research and development etc.

2.12 The rates of interest and the margins to the financial institutionswere as followss

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Borrowing Lendingrate (Z) Margin rate (Z) la

Government of India IDA funds -- -- 6.75

NKCDC 6.75 0.50 7.25

State Coop. Land Development Bank 7.25 2.25 9.50

Society 9.50 -- __

la 0.25X rebate will be admissible at all levels for timely repayment ofloan.

2.13 The NCDC loan assistance for the program would be routed through theState Cooperative Bank except in the case of Maharashtra and Bihar. All loansto designated agencies would be given against State Government's guarantee.

Financing Pattern

2.14 According to financing pattern of the NCDC-1I Cooperative StorageProject, NCDC would provide 75? of the cost of construction of godowns asloans. 50S will be provided to the participating banks and 25Z to StateGovernments for equity contribution. The State Governments would provide 201of the cost of construction from state budgets and 5? would be provided by thebeneficiary societies as their own contributions.

Procedure for Lending

2.15 As soon as a subproject was recommended by the Registrar ofCooperative Societies and sanctioned by the implementing agency and the landwas acquired by the society, the bank would release 50 loan in one lump-sumin favor of the selected societies as ways and means advances so that theconstruction was taken without delay. The balance of 50? loan assistancewould be released as soon as the godown construction reached the plinth leveland after the release of full share capital by the State Government. TheState Government would also sanction and release the share capital (45Z)assistance to the societies soon after the Project was sanctioned. The entireloan assistance to the society would be kept with the implementing agencyresponsible for construction of the rural godowns. The implezenting agencywould, imiediately after release of loan installment, request the NCDC forreimbursement of the assistance released to the selected societies.Similarly, the State Government would request the NCDC for reimbursement ofthe loan portion (25Z) of the share capital released to the societies.

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Prolect Coordination

2.16 A Project Coordination Committee (PCC) would be established in eachof the Project States for coordination and monitoring purposes. The PCC wouldbe headed by the Agricultural Production/Development Commissioner. Themembers of the PCC would include the State Registrar of Cooperative Societies,representatives from the participating banks and SCMF and officers of theAbricultural/Iorticulture Department.

Subproiect Preparation and Appraisal

2.17 The subproject appraisal of the godowns would be carried out on thebasis of detailed guidelines given by the World Bank. RCC's staff and bank'sDevelopment Officers would guide PAC Managers in preparing subprojectproposals and loan applications. All subprojects would be appraised by thebanks. All godowns of 1,000 tons and above capacities and first five godownsof each of other capacities would be subject to NCDC full appraisal andapproval. All the subsequent subprojects appraised by the banks would bereviewed by the NCDC on a sample basis. The performance for subproject appli-cations for PAC, Marketing Societies and State Marketing Federations wereprescribed.

2.18 Appraisal of SCBs/SLDBs would include a detailed review on technical,managerial and financial aspects and involve field investigation by its tech-nical and banking staff. The subproject appraisal would be based on criteriaestablished in agreement between NCDC and IDA.

Training and Manpower

2.19 The NCDC-II Cooperative Storage Project laid considerable emphasis ontraining and manpower development. According to SAR, effective education ofsociety members and Committee members in cooperative affairs and serviceswould improve the utilization of project-sponsored facilities. The majorareas of responsibility would be to ensure that the job specific training isavailable to all personnel prior to assumption of their duties. It would alsobe essential that the task of overall project manpower provision and projecteducation coordination be allocated to suitable State level units.Cooperative Training Centers located at Andhra Pradesh, Bihar, HimachalPradesh, Maharashtra and Punjab would provide training for godowns managers.A modular course structure would be most appropriate for godowns staffingneeds with courses offered in management and accounting, credit, supply offarm inputs, crop storage and marketing and consumer services.

Monitoring and Evaluation

2.20 NCDC would have the overall responsibility for project monitoring andevaluation. The monitoring functions would be carried out by its StorageDivision. At the State level, monitoring would be the responsibility of theSCBs/SLDBs. They would send the progress reports to NCDC and copies of allthe reports to the Project Coordination Committee which would follow up andsupervise implementation in the States. The SAR discussed practicalmonitoring arrangements on the basis of their operational efficiency duringthe implementation of NCDC-I Project.

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Financial Proiections

2.21 The SAR does not provide financial projections for godowns for thedifferent participating states. For utilization purposes business models havebeen prepared of a typical PAC operating in a 100 ton rural godown and forSCMP investing in a 2,000 ton marketing godown. In the models the growth ofoperations of first six years is based on the observations of actual perfor-mance of existing societies with godowns. From year 7 onward the growth ofactivities is assumed to stabilize at an annual growth of 6-72. Based on themargins currently earned on different PAC activities, the FRR for the PACsinvestment would be 17S for a godown without managers' residence and about 132with a manager's residence. The model of SCMF investing in 2,000 tons godownindicated a FRR of about 13S.

2.22 A sensitivity analysis was performed to ascertain which variableswere most crucial for the success of the above investments. The test showedthat overall the godown component was stable and generally insensitive to themoderately adverse assumptions. The financial viability was most sensitive tothe volume of fertilizer sales and credit turnover, which may be reduced over402 of the base cost without making the investment unacceptable at 122 oppor-tunity cost. A grouped sensitivity analysis indicated that a 102 change inany of the streams or their combinations would entail a change of only 1-2percentage points in the FRR.

2.23 Cash flows were prepared for the three models described above. Atypical PAC without manager's residence would become profitable from year 3onwards and its annual cash flow would be negative until then, but thecumulative cash flow therefore would remain always positive and allow paymentof interest on the project loan during this period. Comencement of loanrepayment seems possible in years 4 to 5 justifying the proposed three yearsgrace period. A PACS godown with Manager's residence would achieve a positiveannual cash flow beginning in years 5 to 6.

Economic Rate of Return

2.24 SAR works out Economic Rate of Return on the godown and cold storagecomponents of the Project. In estimating economic values, Standard ConversionFactors (SCF) of 0.8 has been applied for domestic expenses and non-tradedgoods and service. To reflect the difference between international anddomestic prices for steel and cement a conversion factor of 1.2 has been usedfor the cost of steel and 1.6 of cement. A shadow wage rate of 602 of marketrates for unskilled labor and 802 for semi-skilled labor has been used to takeinto account the high rural unskilled; technical and administrative personnelare costed at market prices. The economic prices for trading goods are basedon their border prices at the official exchange rate. The analysis is for a20-year period which is the estimate of the productive lives of the principalassets created.

2.25 Two principal tangible benefits would accrue from the operation ofthe godowns. These benefits ares

(a) Reduction of storage losses in farm inputs and produce that wouldoccur otherwise in the absence of project facilities.

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(b) Savings in transport costs as a result of bulk deliveries of inputsand bulk collection of farm produce that project financed godownswill permit.

2.26 SAR estimates rediuction in storage losses at 22 of all the farmproduce and fertilizer expected to be handled and savings in transport cost ofabout Rs 15 per ton. These benefits were included in the calculation of theeconomic rate of return for the godown component. The estimated cost andbenefit streams in the godown component were estimated as follows:

COSTS(Rs million)

Years1 2 3 4 5 6-20

Project investments 223.8 242.8 242.7 241.1 257.9 --

Incremental operating costs 16.5 22.3 28.9 36.1 43.3 36.6

Benefits

Reduction in storage losses 20.2 45.3 72.5 103.9 137.4 200.0

Transport cost savings 7.4 16.0 26.0 37.0 48.9 71.0

Economic rate of return 16 percent

2.27 The sensitivity tests showed that the godown component was relativelyinsensitive to variations in the cost and benefit streams. The reduction instorage losses, which was the most sensitive parameter, could fall from the 2%assumed to 1.5S before this component would become unacceptable at 12? oppor-tunity cost of capital. In the grouped sensitivity analysis, a 10? variationin any of the stream or their meaningful combinations would cause only twopercentage points change in the ERR. One year's lag in attaining all theprojected benefits would result in a decline in the ERR from 16? to 13?.

Proiect Beneficiaries

2.28 The project would primarily benefit the mertbers of participating PAC.About 3.2 million farm families are expected to utilize services of PACgodowns. A large percentage of the project participants would be part of the482 of India's rural population that are considered by GOI to live below thepoverty line.

Potato Storape-Cum-Marketing Cooperative Proiect

2.29 The Potato Storage-cum-Marketing Cooperative Project was a part ofSecond National Cooperative Development Corporation Project which was posed to

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the World Bank for the purpose of financing the rural godoun project inseveral States and construction of Potato Cold Storage and MarketingFacilities in the main potato producing States of Bihar, Haryana, MadhyaPradesh, Punjab, Uttar Pradesh and West Bengal.

Project Area

2.30 Six main potato growing States as already mentioned above wereselected for construction of cold storages. These six States accounted forabout 902 of the total production of potato in the country.

Physical Component

4.31 The physical component of the Project consisted of construction of127 cold storages of 4,000 tons capacity each. Statewise break-up of thenumber of cold storages along with capacity is given in the following table:

PHYSICAL COMPONENT OF THE PROJECT

Total ProaramS1. No. State No. Capacity lakh tons

(i) Bihar 17 0.68(ii) Haryana 7 0.28(iii) Madhya Pradesh 4 0.16

UiV) Punjab 8 0.32(v) Uttar Pradesh 69 2.76(vi) West Bengal 22 0.88

Total 127 5.08

Marketing Com2onent

2.32 The Project provided that the SCKD would develop their own marketingmechanism under the project and establish offices and recruit specializedstaff to gradually increase cooperative penetration in overall marketing ofpotatoes. Once the marketing cells of the SCMF have developed their marketingintelligence and have hired qualified staff to provide expert assistance andadvice, PCS may also be able to enter direct marketing, although in thebeginning the PCS cold stores would have rental activity as their primaryfunction. NAFED, as the principal exporter of potato in the cooperativesector, would develop marketing intelligence services for the SCNF and carryout research and experiments in potato marketing. Sufficient funds would beprovided under the project to finance establishment of the marketing officeswith necessary ancillaries.

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Research and Development Component

2.33 Closely related to the cold storage component was the research anddevelopment component which would be promoted through the project. NCDC wouldprovide loans from the total amount of Re 8 million to suitable organizations,one of which could be NAPED, for purposes which promoted experimental coldstorage development and related activities. Each of these would be a subpro-ject, prepared separately, appraised by NCDC and reviewed by IDA.

Phasing of the Proiect

2.34 The project envisaged the completion of proposed capacity over a timespan of four years from 1981-82 to 1984-85; the year 1980-82 would be treatedas pre-project year.

Project Cost

2.35 The total project cost consisted of cost of construction of coldstores, cost of providing marketing facilities and supporting investments.research and development and physical and price contingencies. The break-upof the project cost is given belows

STATEWISE PROJECT COST(Rs in crores)

Base Physical Price Totalstate Cost Contingencies Contingencies Cost

Bihar 8.21 0.42 1.02 9.64Haryana 3.41 0.18 0.41 4.00Madhya Pradesh 2.00 0.11 0.25 2.36Punjab 3.88 0.20 0.47 4.55Uttar Pradesh 33.06 1.65 4.00 38.71West Bengal 10.65 0.54 1.28 12.48

Subtotal 61.21 3.10 7.43 71.74

Research and development assistance 0.80 0.80

Total Proiect Cost 72.54

Design and Construction of Cold Storages

2.36 The construction of cold storage building of 4,000 tons capacity,consisting of two 2,000 ton chambers was in accordance with the standarddesigns approved by NCDC in consultation with IDA. With the rising cost ofsteel, most of the stores under the project were designed to have an internallattice of RCC beams and columns, with wooden slatted storage floors to take

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the potatoes and slated RCC or gangva)s. The cold storages were built withRCC flat roofs. Drawings and designs of cold storage buildings were sent tothe participating states along with specification for refrigeration plant andinsulation.

Procurement Procedures

2.37 Since the contracts for cold storages were individually small anddispersed in time and place these were based on local competitive biddingadvertised locally in accordance with the procedures satisfactory to NCDC andIDA. International bidding was not considered necessary. Contracts for coldstorages are generally awarded in four parts--structural civil works,electrical installation, refrigeration plant, and insulation system. Standbygenerators required or cold storages in locations with erratic electricsupply would be procared under local competitive bidding procedures.Contracts for plant and machinery would be awarded by a committee which wouldinclude a representative of NCDC.

Manpower Requirements

2.38 over the duration of the project it was estimated that there would bea requirement of over 1,700 personnel to be recruited and trained to fill theposts of managers, accountants, marketing specialists, refrigeration mechanicsand plant operators in the cold stores. Training would be accorded priorityin project implementation and planned carefully in advance. Cold storagestaff would receive training in three or four training colleges located inHaryana, Punjab, Uttar Pradesh, West Bengal and Bihar.

Financial Viability

2.39 The financial viability has been evaluated for a 4,000 ton model ofcold storage on the following assumptions:

(a) Operations would start at 90o utilization and reach the level of 982utilization by year 5.

(b) The entire capacity would be used for rental at the rate of Rs 2401-per ton with one storage season.

(c) 502 of customers would use marketing services offered by the coldstores for a fee of Rs 37.50 per ton.

(d) The credit advances against the potatoes were estimated to be atRs 150/- per ton providing 1X margin to the cold storage.

2.40 Based on the above assumptions the actual operating cost of coldstorages the FPR of the cold storage marketing component of the Project wasestimated at 21X.

2.41 The financial viability of the cold storage and marketing componentswas found stable and not likely to be seriously affected by moderate variationin costs. The changes in costs and benefits required to reduce the presentvalue to zero at the 12? discount rate would have to be a fall in rental

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receipts by 66S or an increase in project investment costs of about 42Z. Theproject would remain viable even if the benefits were greatly reduced. Thegrouped Sensitivity Analysis indicated that with a 1OX change in any of thestream or their meaningful combination the FRR would remain within the 32range of the base case.

2.42 The cold storage would have comfortable annual cash flow throughoutthe project period except the investment year. when payment of interest on theinvestments loans would require short term borrowing.


2.43 The World Bank has identified two tangible benefits flowing from theoperation of cold storage and marketing components of the project, Firstlythe cold storage would reduce the spoilage losses on potatoes to only 5Z inthe average season. They would enable farmers to keep their potatoes freefrom spoilage in the cold storage during peak season and sell them during leanseason and earn profit Jn the shape of value added to the tune of Rs 6501- perton. This was calculated by assuming that in the without project situationthe average farmers would sell 75a of the surplus potatoes at the depressedpost-harvest price, with the remaining 252 being spoiled; in the with projectsituation, 52 only would spoil and 952 would be sold at the premium price inthe off-season. The second benefit to the farmers would be saving in seedtransport cost. By using cold storage facility in the growing areas thefarmers can preserve their own seed potatoes until sowing time. Local produc-tion and storage of seed potatoes would reduce transportation of seed potatoesprimarily from Himachal Pradesh and yield an estimated benefit of aboutRS 0.50 per ton per km for the seed potato.

2.44 Cost and benefit system stresses on the basis of above assumptionsare as followss

Years1 2 3 4 5-20

(Rs million)

Costs

Project investments 233.4 218.3 179.5 - -Incremental operating costs 36.0 61.0 88.0 88.0 88.0

BenefitsValue added 25.0 121.9 219.0 315.9 315.9Saving in seed transport cost 0.7 3.5 6.3 9.1 9.1

Economic Rate of Return 342

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2.45 Sensitivity tests have shown that value added would have to bereduced to almost half of the figures employed before the economic rate ofreturn for the cold storage component fall below the 122 opportunity cost ofcapital. A 102 reduction in benefits would reduce the economic rate of returnto 291; a lag of one year in benefits to 272.

Other Benefits

2.46 It was estimated that each cold storage would be manned by 8-9 peoplecreating permanent employment for over 1,000 persons. Besides, it would giveemployment to a large number of casual workers for handling and sorting theagricultural produce. About 125,000 - 150,000 potatoes farm families areexpected to utilize the new cold storage facilities. The potato growers' netbenefits of storing and marketing through cooperatives were estimated to beRs 150/- per ton for table potatoes and Rs 350/- seed potatoes. There wouldbe additional benefits arising from the potatoes saved from rotting bypreserving them in cold stores. An average potato growing member wouldreceive benefits estimated at Rs 1,300-1,500 annually. Over 65t of the potatogrowing members who will be utilizing the services of the cold storage wouldbelong to a category of small and marginal farmers having less than 5 hectaresof unirrigated land or 2.5 hectares of irrigated land.

2.47 The cold storage and marketing components of the project wouldgreatly reduce the risk associated with potato growing and the smaller farmersvho have been neglected by private cold storage owners would have opportunityto store their potato crop of only a few bags.

2.48 The establishment of cold storage would also give direct employmentto the women. Women would be employed in the cold storage as potato sortersand graders. Some women will also obtain employment during the constructionphase of the projeet.

Project Risks

2.49 The Project has identified two possible risks. Firstly, there couldbe shortage of cement which would delay the implementation of the project andalso result in cost escalation due to construction delays. In this event thenumber of cold stores that can actually be financed out of the project fundsmight be smaller than proposed in the project. Another risk may arise fromthe limited experience of the cooperative sector in managing potato coldstores.

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III. IMPLEMENTATION

3.1 The implementation phase of the World Bank NCDC II Project has beendivided into two partss Part I details the achievements of the physicaltargets and expenditure on godown and cold storage components of the projectand problems experienced during the process of implementation and Part IIdwells on the institution building of the participating agencies.

Cooperative Storage Proiect

NCDC Policy Circular

3.2 NCDC issued a comprehensive policy circular to State GovernmentAuthorities, Implementation Agencies and other connected officials onFebruary 6, 1981 incorporatiag major features of the NCDC-II World BankCooperative Storage Project and the operating procedures for theimplementation of the Project. The circular defined the project period,indicated pattern of financing, and made guidelines for release of funds andfor subprojct appraisal. The policy circular set in motion the process ofproject implementation of the Cooperative Storage Project.

Physical Progress

Revision of Proiect Targets

3.3 In the SAR, the physical component of the project consisted ofconstruction of 7,000 rural and 898 marketing godowns with a total storagecapacity of 19.178 lakh tons in the Project States of Andhra Pradesh, Bihar,Himachal Pradesh, Maharashtra and Punjab. The SAR targets the number of ruralgodowas and marketing godowns, their capacities were revised many times duringthe implementation of the project. With the transfer of U.P. from NCDC-IIIProject to NCDC-II Project, the net program sanctioned by the NCDC and adoptedas targets stood at 7,331 rural and 1,611 marketing godowns with a capacity of32.787 lakhs tons. The statewise implementation of the storage program isgiven below:

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SAR AND REVISED TARGETS OF RURAL AND MARKETING GODOWNS(Capacity in lakh tons)

SAR Target Revised TargetNo. of godowns Total No. of godowns Total

State Rural Marketing Capacity Rural Marketing Capacity

Andhra Pradesh 3,000 100 3.250 2,831 100 3.5935Bihar - 149 2.150 - 184 2.1500Himachal Pradesh 1,100 87 1.042 733 86 0.7935Maharashtra 1,350 413 4.735 936 415 7.3185Punjab 1,550 149 8.000 1,234 361 10.1355Uttar Pradesh(a) Marketing - - - - 419 5.7000(b) Transferred

from NCDC-III 1,597 46 3.096 1,597 46 3.096to NCDC-1I

Total 8,597 944 22.273 7,331 1,611 32.7870

Construction of Godowns

3.4 The construction phase of the Cooperative Storage Project in most ofthe Project states started in the 1981-82 and the respective StateCooperatives Banks were the agencies responsible for its implementation.However, in Bihar, since all the godowns proposed to be constructed under theproject were to be allotted to Bihar State Cooperative Bank Marketing Union itwas made an implementing agency. In Maharashtra, the State Cooperative LandDevelopment Bank was identified as the implementing agency. In U.P., theconstruction of rural and marketing godowne was taken up in the year 1984-85.Cooperative storage program envisaged earlier under NCDC III in the state wasalso transferred to NCDC II. Yearvise number of godowns completed in theproject states and capacity created may be seen from the table below.

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NO. OF GODOWNS AND CAPACITY CREATED

Year Punjab UP Bihar AP Maharashtra HP Total100.00

1981-82 No. - - 124 2 - 126Cap. - 12.40 11.00 23.40

1982-83 No. 469 44 210 33 23 979Cap. - 57.00 43.55 17.20 3.50 121.25

1983-84 No. 433 29 129 145 133 868Cap. 432.10 46.00 14.05 22.00 7.50 522.15

1984-85 No. 299 350 29 429 254 211 1,572Cap. 119.00 32.80 39.75 46.80 61.90 15.95 316.20

1985-86 No. 258 767 7 665 173 105 1975Cap. 219.90 94.10 10.00 73.10 113.80 9.20 520.10

1986-87 No. 119 347 13 1,057 291 118 1,945Cap. 3.82.40 64.30 19.50 152.50 174.60 9.35 602.65

1987-88 No. 2 71 2 65 69 135 344Cap. 2.75 54.80 5.25 9.45 59.10 17.20 148.55

Total No. 1,580 1,535 123 2,879 967 725 7,809Cap. 956.15 246.00 177.50 352.35 459.60 62.70 2,254.30

3.5 It would be seen from the table that by October/November 1987 7,809rural and marketing godowns with total capacity of 22.543 lakh tons werecompleted. The remaining construction program is scheduled to be completed byproject closing date.

Rural and Marketing Godowns

Problems During Implementation

3.6 The implementing agencies in the Project States faced two sets ofproblems. The first set of problems related to the completion of godownsaccording to phased yearwise schedules. These problems pertained to settingup of implementing agency, recruitment of technical and engineering staff,acquisition of land, tendering, arrangement of building materials,supervision, etc. The first set of problems led to delays and slippage inimplementation. Once the delays occurred irrespective of the source of delay,the outcome was enhanced prices of inputs and cost escalation. Increase incost could be considered a function of time in a country which is in theprocess of development and inflation has become the inevitable derivation ofthe process of development itself. Increase in prices of constructionmaterials is the result of a large number of factors operating on the demandside at aggregate level. An implementing agency has no control over theprices of inputs. It should avoid delays and cost escalation would beminimized. These two sets of problems are dipcussed below:

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Availability of Land

3.7 In most of the project States considerable difficulties wereencountered in finding suitable land for construction of rural godowns. InHimachal Pradesh, due to paucity of land in the hilly area, appropriate siteswere not immediately available and considerable time was spent in arrangingsuitable sites in the area. Moreover, the land provided by the StateGovernment was not even and required development before the layout was givento the contractors. Since in the cost estimates of the godowns, no provisionwas made for levelling of the sites, work was required to be done by theconcerned societies within their own resources. Arranging the funds for thelevelling work by the societies on their own delayed the construction of ruralgodowns in Himachal Pradesh.

3.8 In Andhra Pradesh the main problem in the construction of ruralgodowns in the beginning of project was acquisition of suitable sites. Due torigid rules prevailing in the State, alienation of land by District Collectorcould not be done in time in many districts resulting in the delay in theimplementation of the project.

3.9 In Punjab, lands offered by the societies in some cases were notsuitable for economical construction within the sanctioned amount due tovarious factors like low lying areas, unapproachable land, land in thecongested area in the village and plot of dimension less than that required asper drawing and specification.

3.10 In Maharashtra also Revenue Department in many cases was not able tomake available land from the Gram Panchayat. The World Bank Mission whichvisited Maharashtra in November 1984 recommended that tenders should not beawarded for sites where physical possession has not been obtained.Accordingly, the Bank issued instructions to all the District Branch Managersto the effect that only such proposals where land was available and thepossession of which was expected to be transferred to the beneficiarysocieties shortly should be sent to the Head Office for sanction.

3.11 Considerable problems were faced by the BISCOMAUN in Bihar inobtaining suitable sites for the construction of the godowns. In many placesBISCOMAUN could not obtain clear titles for the land and Government land hadto be arranged by issuing orders by the District Collectors for the transferof land in favor of BISCOMAUN. Besides this, locations of various godownswere required to be shifted in view of the change in the business turnover atdifferent locations and need to re-allocate the capacity in the tribal sub-plan areas. In the project formulation, it was stipulated that the land forthe marketing godonns wvuld be available by the Government at BlockHeadquarters. However, State Government could not provide land and BISCOMAUNhad to arrange private land at much higher cost.

3.12 In U.P. also, in some villages the land for the construction of ruralgodowns was not available easily. In many cases, construction was delayed.

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Non-Availability of Technical Staff

3.13 During the initial years of the implementation of the project, theimplementing agencies experienced shortage of technical staff. Since theproject was for a specific period, it was not possible to recruit entire staffon permanent basis. Andhra Pradesh Cooperative Bank (APCOB), theimplementation agency for rural godowns, obtained officers on deputation tolook after 2-3 districts each. However, the staff deputed were quiteinadequate in number to tackle the works. The bank recruited 54 staffengineers and supervisors on contractual basis in different districts.Nevertheless, the recruitment of technical staff at different level tookconsiderable time and delayed the implementation of the project.

3.14 In Himachal Pradesh, the administrative and engineering cell underproject could not be set up earlier. The bank decided to obtain technicalpersons from different Departments. Many times the departments were notprepared to send the technical persons due to paucity of staff. Engineeringand Administrative Cell could, therefore, function with full complement ofstaff only from 1983-84.

3.15 In Bihar also BISCOMAUN indicated that the Staff provided for in tneStaff Appraisal Report was highly inadequate particularly for the State insuch a wide area with very bad communication conditions. BISCOMAUN recruitedstaff in excess of the Staff Appraisal estimates in order to provide effectivesupervision.

3.16 In Masharashtra the Bank could not recruit adequate staff to cope withthe target of construction of rural and marketing godowns under the project.Even after 2X years of the project, the full complement of the staff requiredfor the project was not in position. The Bank tried to tap all sources ofengineering staff from the open market and through deputation of Governmentstaff. The bank was still not able to recruit adequate staff.

3.17 In U.P. and Punjab, problem of recruitment and positioning ofadequate staff was not felt acutely.

Non-Availability of Construction Materials

3.18 The construction materials during the course of implementation of theproject was not available in time and adequate quantity for the constructionof godowns.

3.19 In Andhra Pradesh the APCOB and APSCMF faced various problems inobtaining the materials for construction such as cement, steel and bricks. Inearlier stage of construction levy cement allotted by State Government wasvery just sufficient to completed 25t of the targeted works. The problem waslater resolved by authorizing the use of non-levy cement to the extent of 50?of the requirements which was subsequently raised to 75? of the totalrequirement for construction. The godowns were to be constructed in villages.The bricks were not readily available in villages of Andhra Pradesh. Inmonsoon season also, the construction work was hampered. For doing thecentering works to rural godowns slabs, the caserina posts beyond a length of10 feet were also not readily available. Seasoned country wood was not

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available. As an alternative steel doors were used wherever such difficultieswere faced.

3.20 In Bihar, BISCOMAUN initially faced the non-availability of adequatequantity of levy cement. Problem was, however, sorted out by authorizing theuse of the open market cement to the extent there was shortfall in theavailability of levy cement from State Government.

3.21 In Himachal Pradesh and neighboring States, there was a protractedstrike by brick-kiln owners from February 1983 to December 1983, as such theworks which were awarded in brick masonry could not progress. Shortage ofbricks was also experienced even after the strike as the back-log of demandwas to be met. Some of the works were also re-awarded in stone masonry, butconsiderable time was taken in the re-awarding of these works. Due toinsufficiency of levy cement, non-levy cement was used which led to theincrease in the cost of construction.

3.22 In U.P. the Implementation Agency resolved the problems ofavailability of sufficient quantity of cement and steel in time through use ofnon-levy cement and purchase of steel from open market. However, in somecases the work was delayed.

Lack of Response from Professional Contractors

3.23 Lack of adequate response from professional contractors for tenderingfor rural godowns was recorded in most of the project States. Inadequacy ofresponse from the professional contractors was mainly due to:

(a) Low margin of profits on rural godowns as compared to construction ofroads, irrigation works;

(b) Difficult and interior locations of the godowns resulting in logisticproblems;

lc) Small and scattered nature of works; and

(d) Insufficient availability of 'A' Class contractors.

3.24 In Andhra Pradesh due to reasons mentioned above, the implementingagency was constrained to encourage the local people only in taking up thecontracts. These local contractors lacked the expertise and also the finan-cial resources. They were not able to follow drawings or specifications whichresulted in delayed execution of works.

3.25 In Bihar, the implementing agency did not face any difficulties inattracting good response from the contractors for godowns of capacity of1,000 tons and above. However, in the interior and tribal areas where theaverage size of the godowns was 500 tons only the response from contractorswas not favorable and construction had to be completed by establishingDistrict Local Construction Committees. Flexible strategies were adopted forconstruction of the godowns.

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3.26 In Maharashtra, rural godowns proposed to be constructed underNCDC-II were earmarked at different scattered locations which were situated inwide distances over the vast areas. It was difficult for a few contractors tobid for the works and supervise the construction of the godowns. The responseof the contractors was poor as the construction materials were required to betransported from considerable distances. Hence, the Bank entrusted the worksin many cases to the societies.

3.27 In Himachal Pradesh, there was not enough competition amongst thecontractors in tendering for the construction works particularly for ruralgodowns. Some of the contractors quoted very low raLes which were later foundto be unworkable. Due to unworkability of these rates many contractors lefttheir works after completing the construction up to plinth level. Theypreferred to forfeit the earnest money deposited. The contractors mostlyregistered in 'D' category came for taking the construction works. The finan-cial position of these contractors was not very sound wh!.ch staggered theconstruction for 10 to 12 months as against the stipulated period of the 4 to5 months for rural godowns of 50 tons capacity.

3.28 Keeping in view the inadequate response from the contractors, thebank decided to award the works to the interested PACS under the supervisionof its engineering staff.

Other Problems

3.29 There were also specific problems pertaining to one or two projectStates which delayed the completion of the project. In Punjab, there was somedelay in finalizing the implementation agency for rural godowns. Initially,MARKXPD was entrusted with the responsibility of the supervising the totalconstruction program. Subsequently however, the State Cooperative Bank wasappointed as the Implementing Agency responsible for supervising the construc-tion of rural godowns. Because of this change of program, construction ofrural godowns in the first two years could not pick up. The problem infinalizing the agency also delayed the appointment of technical staff in thebank to supervise the construction work.

3.30 In Maharashtra in many subprojects, the construction of godowns washeld up due to non-availability of funds with the concerned Rural and PrimaryMarketing Societies. As the works were awarded on higher cost, Societies hadto meet the deficit amount from their own resources in addition to contribu-tion towards own payment. As the societies were unable to find resources, thefurther construction work could not proceed. However, the problem was solvedafter the revision of cost by NCDC applicable to subprojects of suchsocieties.

3.31 In Himachal Pradesh, the weather problem hampered the constructionprogram as many districts are covered with snow and construction work cannotbe taken up for about 6-7 months in a year. In Himachal Pradesh, the Bankalso experienced the problems of inadequate facilities of vehicles. Thesupervision expenses at 72 of the actual construction cost was found to beinadequate by Project States.

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Marketing Godownh

3.32 Unlike the construction of rural godowns, the implementation scheduleof marketing godowns did not face any serious problem. In Andhra Pradesh,A.P. State Cooperative Marketing Federation did not face serious problemsparticularly with regard to personnel to manage the construction. With thehelp of their existing technical staff, the Marketing Federation was able toundertake the construction of all the 100 marketing godowns within the stipu-lated cost ceiling as approved by NCDC from time to time. In Maharashtra, theFederation also did not face any major difficulty during the constructionphase of project. According to the Federation, almost in all the cases, theconstruction of godowns was completed within the stipulated time period.There was no difficulty in transportation of construction materials. Due toadequate staff provided for at the field level as well as headquarters levelno administrative difficult was experienced. However, there were some diffi-culties in acquisition of plots required for the construction of marketinggodowns.

3.33 In Himachal Pradesh also no major problem was faced during theconstruction of marketing godowns.

3.34 Similarly, in case of marketing gadowns in Punjab, MARRFED did notface any problem except the cost escalati m in implementing the constructionprogram. Problems faced by BISCOMAUN ir construction of marketing godowns inBihar have already been discussed.

Cost Escalation

3.35 The project had provided for price and physical contingencies.However, the cost escalation of rural and marketing has been mainly due toprice contingencies.

3.36 One of the major effects of delayed implementation of the godowasproject has been escalation in the cost of construction materials like cement,steel, bricks, sand, lime and paint etc. and services of mason, blacksmith,carpenter, skilled and unskilled laborers. The cost escalation led torevision in NCDC approved cost of construction of godowns of various dimen-sions from time to time. The increase in the prices of construction materialsvaried marginally from State to State. The following table traces thebehavior of representative prices of major construction materials from 1981-82to 1987-88z

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DECRASE IN PRtICES OF CMONUCON MATRIALS(a Rupee)

escription ofS.No. ateriels 1981-52 1992-93 N8-"4 1064-8 190-90 1987 109748

1. Cmnt, (lovy perton) etc. lncluding 00 s00 1,000 1,100 1,200 ,00 1,200carrae to site

2. Steel materialsper too 4,000 5,000 5,000 7,000 6,600 0,600 ,620

S. Bricks per1,000 Non. 850 400 460 600 25 625 6560

4. Lim per Qntl. S2 50 66 so so 76 100S. Ordinary building

timber pevcum. 4,000 4,600 6,600 6,000 6,500 8,600 10,0006. AC het per qm 50 48 52 64 70 70 707. Pints per liter 80 85 40 42 46 so 66S. Sd per cuam 0 e6 96 96 100 100 120

3.37 Most of the rural and marketing godowms were constructed between1981-82 and 1986-87. The data in the above table reveals that during thisperiod prices of cement increased by 100?, steel by 70?, bricks by S0X, limeby 134?, timber by 1122, A.C. Sheets by 48S, Paints by 87?, sand by 25?.Besides, there was steep increase in the cost of services of mason, carpenter,blacksmith, skilled and unskilled laborers. The wages per day of mason,carpenter and blacksmith in Andhra Pradesh increased to over 83? betweenJanuary 1982 and January 1986, between 100-125? in Himachal Pradesh, 78.6? to96.2? in Bihar. The increase in other States was also similar.

3.38 The Increase in the cost of building materials as well as servicesled to increase in the cost of construction of godowns in the project Statesas shown in the next page.

3.39 The data in the table shown below reveals that there have beencontinuous cost escalation of the rural and marketing godowns of differencecapacities. For instance, cost of a rural godown of 100 tons capacity withresidence in Andhra Pradesh increased from Re 0.8310.90 lakh in 1981 toRs 1.4111.71 lakhs in 1985. The cost of 1,000 tons capacity marketing godownin Bihar escalated from Rs 3.70 lakhs in 1981 to Rs 6.04/8.31 lakhs in 1987.

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ESCALATION TN THE COST OF CONSTRUCTION OF GODOWNS UNDER NCDC-II PROJECTS(Capacity: Tons)(Rs in Lakhs)

State/Godowns 1981 1982 1983 1984 1985 1986 1987

Punjab100(WR) - 0.75 - - 0.99 - -

100(R) 0.83 0.97 - - - - -200 1.11 1.25 - - 1.45 - -500 2.17 2.50 - - 2.98 - -

1,000 3.55 3.55 - 3.55 5.08 - -

Bihar500 - - - - - 2.96 3.31/3.87750 - _ _ _ - 4.72 5.0216.79

1,000 3.70 4.10/4.50 - - - 5.27 6.04/8.312,000 7.50 7.8018.00 - - - - 8.05/9.87

Andhra Pradesh100(R) 0.8310.90 1.05/1.25 1.15/1.32 1.35/1.50 1.41/1.71 - -100(WR) - - - - 1.05/1.33 - -

500 _ _ - 3.15 - -

Himachal Pradesh50(WR) - 0.60/0.91 } 0.94 }

0.70/0.91 } - 0.80 1.11 ) -

0.72/0.97 }250 1.55 2.62 - 3.6 3.743

3.80/484 - -

500 - 4.06 - - 5.72 - -

1,000 3.7+45ZLa 5.75 - - - - -

2,000 7.00+45ZXa 9.40 - - - - -

Maharashtra100(R) 0.83 0.83 0.86/0.98 - 1.33/1.48 - -200 1.11 1.26 1.33/1.44 - 1.42/1.57 - -500 2.17 - 2.27 - 2.40/2.60 - -

1,000 3.70 4.50 5.90 - 6.1516.23 - -

/a Depending upon the soil, foundation etc.

R - Residence. WR - Without residence.

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Learning ExPerience

3.40 The Project States in the process of implementation of NCDC-IICooperative Storage Project has received some diagnostic messages and lessonswhich can provide policy parameters for working out the construction phase ofthe cooperative storage project in the country.

3.41 The learning experience pertains to different aspects and phases ofthe implementation schedule of the project. Some of the important outcome ofthe NCDC-II Cooperative Storage Project are highlighted below:

3.42 There are three agencies which could be entrusted with the work ofconstruction of godowns. The works could be completed by full timecontractors or by the societies on Amani Basis or undertaken by LaborCooperatives. According to the Implementing Agency of the project in A.P.,the construction of godowas should be through contractors as there was nosaving either in time or cost from other agencies employed for construction.

3.43 In Maharashtra, about 300 rural godowns were constructed by thebeneficiary societies. In respect of marketing godowns. almost all godounswere completed through private contractors. According to the ImplementingAgency in Maharashtra, although societies took longer time to get the godownsconstruction on Amani basis, it was fourd that the quality of godowneconstructed by the societies was better than the quality of godowns construc-ted by the contractors. However, the societies are not equipped everywhere toundertake construction works.

3.44 Most of the Project States have been handicapped due to inability torecruit engineering and technical staff required for the completion of therural and marketing godowns. Since the project was for only five years andtimebound it was difficult to recruit persons on permanent basis. Theexperience of the implementing agencies has brought out that staffing of thetechnical persons is a difficult task unless the Implementing AGency is ableto get series of projects one after the other. It is also difficult to getthe technical persons on deputation from Allied Organizations. Under thesecircumstances, the Implementing Agencies may have to recruit or depute onlyskeleton staff and depend on some outside agencies like other retiredengineers and tecbnical personnel for day to day supervision and inspection ofthe works.

3.45 Acquisition of land is time consuming process. The ImplementingAgencies have emphasized that land free from dispute and litigation should beacquired to avoid delay in starting the construction. Relevant rulesregarding alienation of land may be suitably modified or relaxed for makingavailable on priority basis suitable Goverment land for construction ofgodowus.

3.46 Timely availability of construction materials in adequate quantity isessential element in any construction program. The Implementing Agencies havesuggested that there should be advance planning for stocking of constructionmaterials before the starting of the works in different locations so that theconstruction work is not hampered on account of non-availability of buildingmaterials. In some cases original designs and specifications may be adjusted

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to suit the local construction traditions to minimize the use of materialswhich are not locally available.

3.47 Implementation strategies have to be evolved in different projectStates in order to speed up the construction. It may be possible to chalk outa timewise and geographic plan, where all the godown. in a cluster ofdistricts are constructed simultaneously, with extensive use of buildingmaterials available from factories located in those districts. In thisimplementation strategy, works are tendered for quantitatively large sectionsso that city-baced contractors could find it attractive to operate in theinterior areas.

Implementation-Cold Storage

3.48 Under the NCDC-II Project, 127 cold storages of 4,000 tons capacityeach were envisaged to be set up in major potato producing states, namely,Uttar Pradesh, West Bengal, Madhya Pradesh, Haryana, Bihar and Punjab. TheState Cooperative Marketing Federations in Bihar, Haryana, Madhya Pradesh andPunjab were designated as the Implementation Agencies for the construction ofcold storages in their respective States. In Uttar Pradesh the constructionof cold storages was allotted to Uttar Pradesh Cooperative Federation (PCF),Uttar Pradesh Processing and Cold Storage Federation (PACSFED), Uttar PradeshShram and Nirman Sahakari Snagh Ltd. (Laborfed) and State Cooperative Bank.In West Bengal, State Marketing Federation and State Land Development BanksWere responsible for the construction of the cold storages.

Physical Component

SAR and Revised Tarsets

3.49 The Project envisaged the construction of 127 cold storages of thetotal capacity of 5.08 lakh tons at a total cost of Rs 72.54 crores. Theconstruction of cold storages was taken up in the year 1981-82. Punjab optedout of the project in view of the surplus cold storage capacity available inthe State. Due to certain constraints which are spelled out in detall in thesucceeding sections, the original SAR target of construction of 127 coldstorages was scaled down to 103 cold storage units. The following table givesthe SAR target, revised targets of 103 units and thereafter, 85 units.

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PHYSICAL TARGET OF COLD STORAGES(Capacity in Lakh tons)

State SAR Target Revised Taraet tl) Revised Target (II)No. Capacity No. Capacity NO. Capacity

Bihar 17 0.68 17 0.66 16 0.62Uttar Pradesh 69 2.76 55 2.08 47 1.76West Bengal 22 0.88 22 0.88 16 0.64Haryana 7 0.28 5 0.20 3 0.12Madhya Pradesh 4 0.16 4 0.14 3 0.12Punjab 8 0.32 (Opted out of the Project)

Total 127 5.08 103 3.96 85 3.26

3.50 NCDC has sanctioned a net program of 8S5 cold storages with a capacityof 3.26 lakh tons in five participating States of Bihar, Haryana, MadhyaPradesh, Uttar Pradesh and West Bengal. As against this 57 cold storages witha capacity of 2.18 lakh tons have been completed up to October 1987. Another28 cold storages with a capacity of 1.08 baht tons are under construction, ofwhich 12 are located in Bihar, 7 in Uttar Pradesh, 6 in West Bengal, 1 inHaryana and 2 in Madbya Pradesh. The following table gives State-wisesanctioned and completed cold storages up to October 30, 1987s

SACMONED AND COWLETD COLD STORAOES

Other Hnrsac Uedhb Predeb Uttar Pradesh West 8on IC.upratlv. Senn- Comple- Sen- Cowle- Sane- Cuple- Senc- Cople- Sanc- Couple-

Year tioned ted tiome ted tioned ted tierad ted tioned ted

1901-f 8 - 2 - 2 - 24 - 6 -

18-2 10 - 1 - 1 - 20 6 6 -19644 8 - - - - - a 4 8 21964 - 2 - - - - - 7 - -

1956 - 2 - - 1 - 7 - 610647 - - - 1 - - - 14 - B17-uUp to - - - - 2 - -Oct. 1067

To. I 16 4 a 1 47 18 10

3.51 The reduction of target of cold storages from 127 to 103 was first onaccount of escalation in the expected cost of construction, and from 103 to 85due to slow implementation and lack of financial viability of some of the coldstorages on completion. By the end of October 1987, 57 cold storages werecompleted.

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Marketing Component

3.52 The first National workshop on Potato Marketing held in January 1985discussed in detail various aspects of marketing operations and recognized theurgency of equipping the SCMFs with the independent potato marketing divisionsably manned by competent personnel at key positions, The NCDC has beenencouraging the project States to expedite creation of indepeudent potatomarketing divisions. The project states, in consultation with the NCDC havetaken various steps to deploy professionals for cold stores. A common cadreof cold store managers has been created in U.?. which has the largest program.The project states have also been exposing their managers for trainingprograms being organized by manual on the administrative, financialoperational and maintenance aspects, which was commissioned by the NCDC, hasbeen prepared by the National Productivity Council (NPC) based on fieldvisits, in depth study of the present infrastructure and discussions withvarious key personnel of the cold stores in operation. A high level committeehas also been constituted in U.P. to look into various aspects of potatoemarketing s0 as to ensure that cold storage program taken up under the Projectis implemented successfully. NCDC is in constant touch with the implementingagencies of the State.

Research and Development Component

3.53 The research and development component of the project is makingsteady progress. Following areas of Research and Development were identifiedand NCDC has sanctioned financial assistance for the establishment of:

(a) A 4,000 ton cold storage at Barasat by West Bengal State MarketingFederation Ltd. based on gravity cooling system at an estimated blockcost of Rs 7.8 million of which NCDC has sanctioned is 7.410 million.

(b) A 1,000 ton capacity scientific preservation unit for Jaggery,capable of maintaining low relative humidity has been set up byDistrict Cooperative Marketing Federation Ltd., Muzzaffarnagar, U.P.at an estimated block cost of Rs 1.35 million. NCDC has sanctionedand released the entire amount of RS 1.35 million.

(c) NCDC has sanctioned RS 0.78 million under R&D Component to NAFED forestablishment of 60 Cool-Stores for potatoes run on passive evapora-tive cooling for small potatoes stores of 10-20 tons capacity each.

3.54 In all NCDC has sanctioned RS 9.54 million under R&D of which Rs 4.53million have been released by the end of January 1988.

Cold Storages

Problems in Implementation

3.55 The construction of cold storages in the Project States also sufferedfrom many slippages. According to &AR, the entire process of implementationschedule from the land acquisition to final payment to contractor wasenvisaged to be completed in about 400 days. The pre-construction phase would

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end in about 80 days. The construction period of individual cold storages wasestimated to be about 12-18 months. It was envisaged that the entire coldstorage component including marketing and research component would becompleted during the first three years of the project.

3.56 The review of the progress of the construction of cold storages indifferent States reveals that cold storage component of NCDC-II project alsosuffered un account of delays in construction as well as significant enhancedcost of construction per unit.

3.57 Delays in construction of cold storage were result of many factors--procedural, financial, administrative and physical. According to World BankReview Mission (May 1982), adequate preparations were not made in time byProject Implementing Agencies after the project was appraised. There was atime lag of 12-18 months in the implementation of the project States.

3.58 There were many causes of delays in the implementation of the coldstorage program. The implementing agencies in the Project States werefinalized by March 9, 1981. However, the Implementing Agencies working werenot able to set up fully equipped engineering cell to oversee the constructionof the cold storage. Initially experienced and qualified technical staff wasnot available. The field level staff was also inadequate during the initialyears.

3.59 The implementing authorities encountered many difficulties in findingsuitable and resourceful contractors necessitating retendering of works. Thecontractors were also hesitant to deal with new implementing agencies and inthe initial years, the response generation from the contractors was slow andcautious.

Cost Escalation

3.60 During the currency of the Project, there has been sharp upward move-ment in the prices of basic construction materials like cement, steel, bricksand other inputs used for the construction of cold storage.

3.61 The price behavior of the key construction inputs have already beengiven. Apart from price contingencies, there were other factors pertaining tocertain specific cold storages particularly in Uttar Pradesh which contributedto the increase in the cost of construction. Some of the factors were asfollows:

(a) In case of some cold storages e.g. Tajpur, Jaunpur in Uttar Pradesh,the soil was found to be of lower bearing capacity which could notbear the load of 6-tier building structure. As such the design hadto be modified and construction of the building of chambers had to berestricted to 4th tier leading to coverage of larger floor area.

(b) The foundation depth had to be increased to 2.0 meters withconsequent rise in the cost of construction.

(c) The quantity of steel reinforcement varies by about 20 M.T. on thehigher side due to overlaps and substitution.

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(d) The cost of plant and machinery also increased considerably becauseof increase in excise duty on refrigeration machinery.

(e) Instead of barbed wire fencing, some cold storage in Bihar have gonefor brick masonry boundary.

3.62 Increase in cost of construction materials resulted in steep increasein the cost of construction of Cold Storage as may be seen from the tablebelow.

REVISED BLOCK COST OF COLD STORAGE OF 4,000 TONS(Rs in lakhs)

Pre-projectItem year cost 1981 1982 1983 1984 1985 1986 1987

Land and 0.80 0.80 1.00 1.80 1.00 }development )

Building, racks, 23.10 23.20 24.50 34.00 37.00 ) 36.50 41.65 48.65water supplydrainage, fencingroads etc.

Refrigeration 13.90 14.00 14.50 16.00 15.80 )plant and Iinsulation ) 25.75 27.15 28.15

Electric feeder 1.75 2.40 2.80 6.00 6.00 }line, trans-former etc.

Engineering 0.70 0.70 0.70 1.50 1.50 2.50 1.50 1.50supervision

Other fixed 0.20 0.20 0.20 0.20 0.20 )assets } 2.75 2.70 2.70

Pre-operative 2.30 2.30 2.30 2.50 2.50 }expenses tobe capitalized

Margin money 4.00 4.00 4.00 6.00 6.00 6.00 6.00 6.00for workingcapital

Total 46.75 47.60la50.00 68.00 70.00 73.50 79.00 87.00

la Without generator.

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3.63 It would be seen from the above table that the cost of constructionwhich was assumed at Re 46.75 lakhs increased to Rs 87 lakhs in 1987-88.Prolect Fundina

Godown Component

3.64 The project cost for NCDC-II Cooperative Storage Project for a periodof five years for the construction of 7,331 rural and 1,611 marketing godowns,technical assistance, physical and price contingencies was estimated atRe 223.98 crores by the end of December 1987. The following table gives thecumulative financial assistance sanctioned, loan assistance released and totalcost approved in the six Project States.

CUMULATIVE FINANCIAL ASSISTANCE UP TO DECEMBER 31, 1987(Rs in million)

Loan assistance Loan assistance Total costState sanctioned sanctioned approved

Andhra Pradesh 303.9216 291.6520 405.2290Bihar 80.0781 65.8360 106.7707 la_imachal Pradesh 79.2177 78.6534 105.6235Maharashtra 267.3688 26k.6808 356.4887 LaPunjab 161.1829 356.9322 481.5772Uttar Pradesh 588.0799 588.0799 784.1065

Total 1,679.8490 1,645.8343 2,239.7956

La Provisional.

3.65 It would be seen from the above table that NCDC up to December 31,1987 sanctioned Re 1,679.849 million of which Rs 1,645.8343 million wasreleased. NCDC-I1 Cooperative Storage Project also embodied technical assis-tance component under which NCDC was to give financial assistance for thepurchase of vehicle, engineering instruments and undertaking of O&M studiesfor improving the operational efficiency of the implementing agencies. Thefollowing table gives cumulative financial assistance under the technicalcomponent up to December 31, 1987.

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SUMMARY TABLE OF SANCTION AND RELEASES UP TO DECEMBER 31, 1987NCDC-II TECHNICAL ASSISTANCE COMPONENT (STORAGE)

(Rs in million)

AssistanceCapital sanctioned Amountcost as NCDC's released

Head State approved share to SCB to SCBs

Vehicle Andhra Pradesh 1.1589 0.8692 0.8526Bihar 1.0636 0.7977 0.7977Himachal Pradesh 0.9637 0.7228 0.7228Maharashtra 1.4831 1.1124 1.1124Punjab 2.1496 1.6122 1.6122

Total 6.8189 5.1143 5.0977

Engineering Andhra Pradesh 0.0144 0.0144 0.0144instruments Punjab 3.2460 3.2460 3.2460

Himachal Pradesh 0.0177 0.0177 0.0177

Total 3.2781 3.2781 3.2781

O&M Andhra Pradesh 0.1800 0.1800 0.1800Himachal Pradesh 0.2750 0.2750 0.2750 /aPunjab 0.2000 0.2000 0.2000

Total 0.6550 0.6550 0.6550

Grand Total 10.7520 9.0474 9.0308

la Half of this amount i.e. Rs 0.1375 million has been released as subsidyfrom the Corporation Fund.

In addition to the above mentioned technical assistance, NCDC has purchasedfour 4-wheel vehicles for its project offices at a cost of Re 0.3345 million,making total approved cost under this head at Rs 11.0865 million. Totalamount released under this head up to December 31, 1987 stood at Rs 9.3653million. The financial assistance under the technical component is limited to752 of the total approved cost in case of vehicles and lOOX of the approvedcost in case of engineering instruments and O&M studies.

Cold Storage Coemonent

3.66 The table indicates block cost, sanctioned and released amount underNCDC-I1 Cooperative Cold Storage Project in Project States up to December 31,1987

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SANCTIONED, RELEASED AMOUNT UNDER NCDC-II COLD STORAGE PROJECTUP TO DECEMBER 12, 1987

(Rs in million)

States Block cost Sanctioned Released

A. Construction ComponentsBihar 127.120 95.340 93.7215Haryana 22.250 16.687 15.6000Madhya Pradesh 20.600 15.450 14.5800Uttar Pradesh 303.870 227.902 225.8684West Bengal 119.220 89.415 88.1295

Total 593.060 444.795 437.8994

B. Other Components 11.676 10.502 4.3983

Total 604.736 455.297 442.2977

Total Project Cost

3.67 The SAR estimated total project cost of storage and cold storageprogram under NCDC-I1 project at RS 2,136 million inclusive of supportinginvestment, technical assistance and physical and price contingencies with IDAcomponent of 101.8 million SDRs. The approved block cost of both the programsincluding supporting investment and technical assistance stood at Rs 2,856million.

Disbursement of IDA Credit

3.68 Based on the expenditure incurred by NCDC by way of reimbursement offinancial assistance to the project agencies under NCDC-II Project, thefollowing year-wise claims vere filed by NCDC up to December 31, 1987:

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CLAIMS FILED AGAINST IDA CREDIT(Rs in Million)

Year mount of Claims

1981-82 69.0601982-83 94.3091983-84 163.2471984-85 157.8111985-86 154.3111986-87 219.3311987-88 418.188 la

Total 1,276.257

la Includes an amount of Rs 126.731 million claimed in respect of programtransferred from NCDC-II to NCDC-II.

3.69 The financial status of NCDC-II Project by the end of December 1987was as followss

1. Date of Credit Agreement (1146-IN) July 21, 1981

2. Credit closing date December 31, 1987

Rs SDRs3. Total Credit as per Development Credit Agreement --- (million) ---

(expressed in items of SDRs) 101.800

4. I. Withdrawals(i) Claims admitted by IDA 907.848 70.433

(up to application No. 36)(ii) Add transferred from NCDC-III 126.713 9.563

(application No. 41) not yetadjusted by IDA.

(iii) Claims in pipeline 241.690 14.631 la(application No. 37 to 48 except 41)

Grand Total 1,276.257 94.627

/a Calculated at the exchange rate of Rs 16.52 per SDR.

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Project Monitoring of NCDC-II Proiect

3.70 Under NCDC-II Project it was envisaged that the monitoring would be acontinuous process beginning from the start-up of the project and continuingto the Post Construction Phase. All the constituents in the Project had adefinite role in the monitoring of the project. NCDC Headquarters and itsRegional Offices, Government of India through Ministry of Finance, beneficiaryStates through State level Coordination Committees, implementing agenciesthrough separate project cells and returns to NCDC and World Bank throughSupervision Missions have been closely monitoring the Cooperative StorageProject.

3.71 The NCDC reviewed the progress of the Project regularly by callingmeetings and by way of visits to the Banks and field. Apart from themeetings, a system of information reporting was also developed. Theparticipating banks submitted monthly and quarterly progress reports, AnnualWork Program of the Project to NCDC and other agencies and the same were alsomade available to World Bank. On the basis of these reports and returns,future actionlschedules were drawn and corrective measures wherever necessaryinitiated. The State Cooperative Department created a separate cell to lookafter the progress of the Storage Project. The RCS and other concernedofficials invariably reviewed the progress made under the project. Inaddition, State Level Coordination Committees in each project State wereconstituted to coordinate and resolve the problems of consttuction of godownsin their respective States. These Committees met at regular intervals toreview the progress.

3.72 Main implementing agencies in each project State created a separateproject cell headed by the project officers for execution and monitoring.This cell consisted of both Technical and general line officers with theirfunctions clearly defined. Whereas the technical personnel were responsiblefor monitoring the execution of the construction program, the general lineofficers watched the overall progress, coordinated the project activities, andwere also responsible for financial and other administrative duties. Themobility provided to the project cell by sanction of vehicles made timelymonitoring possible and effective.

3.73 IDA Supervision Mission visited India at an average of six monthlyintervals. They held discussions at the State levels and also made fieldvisits. Their impressions and findings indicating the corrective measureswere sent to the State Governments and the implementing agencies and followedup by the NCDC till the action was completed.

Institution Building

3.74 Institution Building is an important aspect of the NCDC-II GodownProject. The rationale of strengthening the institutional infrastructure ofthe participating agencies is to make them grow into more effective and viableinstitutions for servicing the needs of the farmers in respect of agriculturalinputs, consumer goods and marketing of surplus ag.icultural produce.

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Institution Building of NCDC

3.75 Institution Building of NCDC started with the implementation of WorldBank Assisted NCDC-I Cooperative Storage Project when it was identified as theprime implementing agency for externally aided projects to assist, coordinateand monitor the activities of the participating agencies in the States at allphases of project implementation and maintain active liaison with StateGovernments and Government of India.

3.76 The major steps taken by NCDC to develop itself into an effective on-lending institution were as followss

(a) Restructuring and staffing of various Divisions at Headquartersgiving greater emphasis to investment appraisal, godown constructionand monitoring.

(b) Reorganizing and upgrading its regional offices into Zonal Offices tofunction as NCDC branches with adequate delegation of powers to thezonal managers.

(c) Appointment of Project Officers at Zonal Offices especially to helpthe implementation of externally aided projects.

(d) Formulation of Organization and Methods (O&M) department at theHeadquarters.

(e) Setting up of Evaluation and Statistics Division to assist theCorporation in making the periodic assessment of performance of thescheme/projects taken by NCDC in different States.

(f) Setting up of the MIS Division with the facilities of an inhousecomputer system (ECL System-4) for planning and monitoring of themultifarious activities of NCDC and to establish a centralized database to meet the information needs of various Program Divisions.

Training

3.77 The training of managers of the societies involved in setting up ofthe godowns under NCDC-II, originally, did not form part of the project. TheNCDC, however, started 'Project TOPIC' (Training of personnel in cooperatives)covering the States where the NCDC-I, NCDC-I1 and EEC Rural Storage Projectswere underway. The Project TOPIC was set up with the main objective ofidentifying training needs, design training programs, training the trainersand producing training materials for personnel working in cooperatives.However, on account of financial constraints and lack of infrastructuralfacilities like training colleges, training centers, and working funds, theimpact of Project TOPIC was limited.

3.78 A detailed training plan was included under the NCDC-11 project,formulated on the lines similar to that already agreed for NCDC-III whichenvisaged to provide training to the Managers/Secretaries of PACs through theagriculture Coop. Training Institutes/designated coop. training colleges ineach State. At the society level, intensive guidance and member education wasenvisaged through Mobile Guides.

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3.79 The State-vise financial assistance sanctioned by the NCDC and theassistance released under the program up to January 31, 1988 is given belows

(Re in lakhs)

S.No. Name of the State Amount sanctioned Amount released

1. Andhra Pradesh 184.455 19.6712. Himachal Pradesh 66.787 3.5923. Maharashtra 77.380 9.935 La4. Punjab 110.548 14.213

439.170 47.411

/a Includes an amount of Re 1.87 lakhs for renovation of the building ofACSTI. The amount has been given out of the provision of National Center.

Training of 'B' Category Staff

3.80 This includes two types of societies viz. PACS and PAMS. TheManagers/Secretaries of PACS trained at the Agriculture Cooperative TrainingInstitutes set up in each State under the NCDC-II Project. For training ofPAMS staff in Maharashtra only, the existing Cooperative Training College atPure has been designated. The proposed faculty of the Pure Institute includes1 principal and 4 instructors specialized in agricultural credit, management,agricultural marketing, storage, grading end warehousing, consumer distribu-tion, accounts and bookkeeping. Trainer's manual for training in Managementof Operational Services for PACS was prepared by the National Center. Theinstitute provides practical skill formation training through specializedcourses. The duration of the course is one month. NCDC provides assistancetowards tuition cost, TA/DA/boarding and lodging expenses and trainingmaterial. The targets set out for 'B' category training and the achievementsup to January 31, 1988 are as under:

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Target for training No. trained up toS.No. Name of the State of 'B' category staff January 1, 1988

1. Andhra Pradesh 1,401 4072. Himachal Pradesh 793 563. Maharashtra 950 (332) 251 (116)4. Punjab 1.195 400

4,339 1,114

Figures in bracket indicate the target and achievement of PAMS trainingprogram.

Mobile Guides

3.81 'While the State Agriculture Cooperative Staff Training Instituteswill provide institutional training for practical skill formation, the MobileGuides act as advisers and guide not only to the managers of the Primarysocieties and the staff below them but also as general consultants to thenon-official directors also. These mobile guides are given specializedtraining of three months duration at the National Center at New Delhi. Thisprogram includes classroom teaching as well as field attachment.

3.82 The number of mobile guides required for each state have been calcu-lated on 'Mobile Guides PACS Godowns' ratio of 125 in the first year and1:25, 1s:O, 1s75 and 1slOO in the subsequent four years. The target andachievement are as unders

No. of mobile guides No. of mobileSl.No. Name of the State to be 'recruited guides recruited

1. Andhra Pradesh 79 372. Himachal Pradesh 22 193. Maharashtra 29 204. Punjab 50 32

180 108

The training of IC' Category staff would be conducted by the Mobile Guides.

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Institution Building of Implementing Agencies in the States

Strengthening of Staff

3.83 Under NCDC-II Project, each implementing agency in the State was toset up a separate Special Loan Department to be responsible for Project Imple-mentation. These agencies were also to set up Engineering Divisions withsufficient technical staff for technical supervision of the construction work.The implementing agencies in the States have established the separate SpecialLoan Departments as envisaged in the project and appointed required technicalpersons at different levels. The appointment of technical staff by the imple-menting agencies in the project States was, however, made according to theirrequirements with a view to complete the project targets within the stipulatedtime and stipulated costs. In all project States viz. Maharashtra, U.P.,Punjab, A.P. and H.P. more technical staff was recruited at the levels ofEngineering Supervisors and Asstt. Engineers for effective supervision of theconstruction work. None of the project States, however, appointed site super-visors as envisaged in the project. In Maharashtra, the day to day monitoringof construction of godowns was handed over to societies themselves under theoverall supervision of Junior Engineers of the bank. The State establishedDistrict Monitoring and Evaluation Cowmittees under the chairmanship of DeputyRegistrars of Cooperative Societies to undertake periodical review of matterslike finalization of tender document, awards of tenders, supervision of actualconstruction work and supply of cement and other building materials.

3.84 In A.P., H.P. and Punjab the construction control committees wereconstituted at district level, comprising representatives from the PACs, StateCooperative Bank, the Central Cooperative Bank and Cooperative Department.These committees were provided with necessary technical guidelines regardingconstruction work and gave the feeling of involvement of the PACs managementIn the actual construction program. In A.P., on the recommendations of Statelevel coordination committee special incentives were sanctioned to AssistantRegistrars for looking after the project work such as preparation ofsubprojects, arrangement of godown-site, execution of tender documents andsorting out the other problems. The incentive scheme was subsequently revisedand modified to include secretaries of PACS and other staff of cooperativedepartment. A.P. also followed a geographically dispersed constructionprogram to reduce the requirement of technical staff.

3.85 In Bihar, entire construction program was carried out by the BiharState Cooperative Marketing Union which already had a technical cell.BISCOMAUN strengthened this cell with appointment of more technical personnel.Since the program consisted of construction of marketing godowns at blocklevel and district levels only staff at base level such as site supervisorsand others were envisaged and appointed.

3.86 In U.P., the U.P. State Cooperative Bans established the World BankProject Division while implementing NCDC-I Storage Project in 1978-79. TheDivision had sufficient technical staff and experience for executing such typeof projects. No further staff was, therefore, appointed in NCDC-II.

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Orianization and Methods Study

3.87 The implementing agencies in project States in Bihar, Punjab, H.P.and A.P. appointed consultants to undertake Organization & Methods study oftheir institutions. Consultants made various suggestions with regard tostrengthening of their organization, staffing pattern, training and manpawerdevelopment, methods and procedures to be adopted with particular reference tolong term lending and investment finance, new codified accounting system,introduction of new management information system and other operationalissues.

3.88 However, in case of Maharashtra, a comprehensive study ofOrganization and Management of State Land Development Bank was undertaken byan Expert Group appointed by State Government and RBI in consultation with theWorld Bank in 1981. The terms of reference of this Expert Group were similarto the studies initiated under NCDC-II and no separate study was, therefore,necessary. Similarly, in U.P. the Organization and Methods study of the bankhad already been undertaken by UPDESCO while implementing NCDC-I Project.Since NCDC-II was an extension of the earlier program, no separate study wascalled for.

3.89 The implementing agencies in all States had incorporated the sugges-tions given by the Consultants to streamline their operations. Their staffingpattern has been restructured with the induction of more technical staff, newreporting and control system based on a complete set of codified periodicalreturns have been adopted, monitoring, e valuation and planning cells havebeen set up, training needs have been identified and delegation of powers havebeen effected and rationalized to achieve the efficiency in their operations.

Efficiency in Operation

3.90 The ultimate objective of Institution Building is to improve theoperational efficiency of the organization. The important financial andoperational indicators of the implementing agencies of the project States aregiven in Annex 2, Table 2 to 5.

3.91 Skills and expertise of the functionarJes at the level of PACS andmarketing societies are being continuously upgraded to incorporate the newmanagement culture required. The major gaps in the training have already beenidentified and have been incorporated in the new training courses. With theintegration of training and institution building and its becoming an integralpart of project itself the implementing agencies in the Project States havebecome more effective on-lending channels of funds for various developmentalprograms.

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IV. IMPACT ASSESSMENT

4.1 Impact evaluation of a program is a highly intricate task beset withmany conceptual, analytical and operational problems. Impact evaluationcovers a wide spectrum of effects which are directly or indirectly derivativeof the deliberate intervention in the existing technical, economic, social,political and institutional set up.

Methods of Impact Measurement

4.2 In quantifying the impact of rural godowns on the cooperative insti-tutions and on the farming community, 3 methods have been used, namely'Before' and 'After' Method 'With' and 'Without' Method and 'Comparison ofActual with Projects' Method.

4.3 The first method quantifies the impact of the godown on the workingof the society by comparing the movement of certain impact indicators, e.g.,membership, credit disbursement, input distribution, distribution of consumergoods, share capital, income, expenditure and profitability, sale of agricul-tural produce, etc., before and after the operation of the induction of therural godown in the working of the societies. High rate of inflation, abnorm-al drought or favorable weather condition, government policies, change ofmanagement, increase in margins are some of the factors which are likely toinvalidate the before and after comparisons. Nevertheless, this method ofimpact quantification brings out the extent of non-credit turnover of thesocieties in the total turnover. The non-credit performance of the societycould be attributed to the operation of the godown with the society. More-over, this method has another added advantage of comparing the performance ofthe same entity before and after intervention. The entity itself does notundergo any fundamental change in terms of geographical area, coverage ofpopulation, etc.

4.4 The comparison of societies with godowns with societies without go-downs is beset with many operational difficulties. In a district, most of theviable societies are covered under some Cooperative Storage SchemelProject.Only non-viable societies are left out. Thus the comparison will not be fullyvalid as the societies to whom godown are allotted and societies which are notgiven godowns differed in performance. Logically, the addition of godown tothe viable society will enable it to perform non-credit functions. Thesocieties without godown will have zero growth in its non-turnover business.Thus, the comparison becomes more lopsided. The third method quantifies theextent to which targets have been achieved in terms of credit and non-creditbusiness turnover, income, expenditure and profitability. Use of an appro-priate deflator would make comparison more useful.

4.5 In the application of these three methods, it has been assumed thatthe rural godowns are deliberate intervention to improve upon the operationalperformance of the village and higher level of cooperative institutions.These cooperative economic entities perform certain well-defined functionswhich can be measured with the help of certain impact indicators.

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Impact Indicators

4.6 Different impact indicators have been designed to measure the impactof rural godowns. Rural godonn can impact at three inter-linked levels. Thefirst is the direct impact or first-order impact which enables the societywith rural godown to disburse short and medium-term credit and undertakesupply of agro-inputs such as seeds, fertilizers, pesticides, agriculturalimplements, distribute essential commodities and other consumer articles inrural areas, act as procurement agency for higher level of cooperative insti-tutions, assist the farmers in getting remunerative prices for their agricul-tural produce by storing their produce and function as growth center for theentire catchment area of the society.

4.7 The second-order impact would measure the incremental change in agri-cultural production as a result of first order impact. To use productionchange as surrogate for all other changes due to rural godowns is rathertempting. However, production change will not satisfy the tests of reliabi-lity and validity. Agricultural production in India is resultant of a largenumber of endogenous and exogenous factors like adequate and timely rainfall,farmers' expectation regarding prices, in addition to availability of inputsand use of modern agricultural practices. Disaggregation of a large number offactors into two separate categories derived from the use of rural godowns andnon-rural godowns is difficult.

4.8 The third-order impact measures the changes in the incomes of theultimate beneficiaries as a result of rural godowns. The assessment of third-order impact suffers from the same difficulties as the first order impact.

Marketint Godowns

4.9 In case of marketing godowns, it is difficult to separate the perfor-mance of the Federation from the performance of marketing godowns which havebeen allotted to them.

The mid-1985 IDA Review Mission which carried out the review of the NCDC I, IIand III Projects supported the following variables for evaluating the perform-ance of the marketing godowns, as follows:

(a) Turnover - quantum and value of major business items.

(b) Utilization of capacity - suitably defined and broken down by commo-dity stored.

(c) Storage losses in project godowns.

(d) Storage losses in non-project godowns in the area.

(e) Profitability of godown operations - by commodity handled.

4.10 In consonance with the parameters of evaluation of marketing godownssuggested by IDA, the impact studies combine technical concept of capacityutilization usually defined with inventory-turnover ratio in order to opera-tionalise the economics of godowns. The reduction in storage losses in

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project godowns as compared to the non-project godowns is difficult to quan-tify as before the construction of compact and large sized godowns under NCDC-II, FederPtion had been operating a large number of small hired godowns in thevicinity of the newly constructed large godown. The economics of scale havebeen secured by the Federation on account of reduction in cost of loading andunloading of the stocks in different small godowne apart from reduction instorage losses which cannot be estimated with precision except under con-trolled conditions. Thus, the straight comparison of project godown with non-project godown is not !ully valid.

Evaluation Studies

4.11 In order to quantify the impact of NCDC-II Project on the beneficiarycooperative institutions as well as the farming community, the EvaluationDivision of the Corporation has completed evaluation studies of rural andmarketing godowns and cold storages completed under NCDC-II Project in all theproject States. Evaluation studies have been completed in line with the keyparameters specified in SAR.

Methodology

Godown Component

4.12 For undertaking impact and evaluation studies of cooperative storagecomponent of NCDC-II, representative districts in consultation with StateGovernments were selected. The selected districts reflected the diversifiedagro-climatic and economic conditions prevailing in the project States. Inevery project State, at least one developed district, one underdevelopeddistrict and one hilly (wherever applicable) district was inc-luded in thesample. All the rural godowns in the selected districts which were completedup to June 30, 1984 were included in the analysis. In two States viz.Maharashtra and Andhra Pradesh, the working of PACS without godowns wasstudied in order to have a comparative picture of the operational economics ofPACS with and without godowns. In case of marketing godowns, all the godownsin the State irrespective of the district which were completed up to a cut-offdate were included in the completed sample. To assess the impact of the go-downs on farming community, a cross-section of farmers attached to each of thesampled societies was selected. Detailed instruments of observations wereprepared for study, separately for the farmers, PACS, RCMS and State Coopera-tive Marketing Federations. Information on key areas of operation of thegodowns was collected by the field staff of the Evaluation Division of theCorporation.

Cold Storage Component

4.13 In accordance with the recommendation of the IDA Mission, microstudies on 15 cold storages completed and in operation for at least one seasonwere commissioned in U.P. (10), West Bengal (3) and Bihar (2). Data was col-lected by the field staff of the Evaluation Division of the Corporation instructured proformae on operational and efficiency parameters, and financialand economic viability.

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Rural Godowns

Membership

4.14 The sample societies in the Project States have been able to addsizeable number of new members after the allotment of godowns under theNCDC-II Project. Reference Table No. 1 and 2 in Annex 4. The average member-ship per sample society has recorded significant increase in all the projectStates. Taking two years of comparison, 1979-80 and 1985-86, the averagemembership per society in Andhra Pradesh increased from 538 to 936,Maharashtra from 367 to 438, Himachal Pradesh from 255 to 314, Punjab from 414to 504, and U.P. from 853 in 1982-83 to 952 in 1986-87. The details of aver-age membership given in Annex 4 also reveals that there is a significant dif-ference between average membership of society with godown and without godown.For instance, in Andhra Pradesh the average membership of a society with go-down during 1985-86 was 936 as compared to the average membership per societywithout godown at 670. In Maharashtra, the comparative figures were 438 and210. The empirical evidence has demonstrated that a society with godown is ina better position to service the needs of the farmers and attract more membersas compared to the society without godown. In fact the strength of thesociety should be measured by its membership. The SAR had estimated thatabout 3.2 million farm families were expected to utilize the services of PACSgodowns. Assuming that revised net program sanctioned by NCDC would be fullyachieved and taking average membership of sampled societies in Project Statesduring 1985-86, the following table quantifies the total membership in theProject Statest

TOTAL MEMBERSHIP IN PROJECTS STATES

MembershipTotal (Families) Total Membership

State Societies Per Sample Society (Families)

Andhra Pradesh 2,831 936 2,649,816Maharashtra 936 438 409,968Himachal Pradesh 733 314 230,162Punjab 1,234 504 621,936

Total 5,734 - 3,911,882

Uttar Pradesh 1,597 952 1,520,344

Grand Total 7.331 5,432,226

4.15 It would be seen from the above table that the estimated farm fam-ilies which are likely to be benefited from NCDC-II Project in four benefi-ciary States project is likely to be 3.91 million. Adding the farm familieslikely to be benefitted in U.P. the total farm families expected to utilizethe services of PACS in five Project States has been estimated at 5.43 mil-lion.

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Disbursement of Credit

4.16 The induction of rural godowns of the sampled societies in theproject States has an expansionary effect on the credit creation. The data inTable 1 of Annex 4brings that in all the project States, the credit disburse-ment by sample societies after the project year was substantially higher thanthe credit disbursement during the pre-project years. However, except inMaharashtra and Himachal Pradesh, the actual credit disbursement has fallenshort of the projected credit disbursement as envisaged in the loanapplications of the sample societies due to varying effects of drought in theStates. The actual credit disbursement during 1985-86 when all the samplesocieties were in operation was of the order of Rs 192.5 million as againstthe projected credit turnover of Rs 235.9 millions (reference Table 2 ofAnnex 4).

4.17 The average credit disbursed per sample society increased fromRs 0.30 million in Andhra Pradesh in 1979-80 to Rs 0.49 million in 1983-84then declined due to successive drought years. In Maharashtra, the averagecredit disbursed per sample society increased from Rs 0.27 million in 1979-80to Rs 0.77 million in 1985-86; in Himachal Pradesh, it increased from Rs 0.06million to Rs 0.12 million, Punjab from Rs 0.76 million to Rs 1.37 millionsduring the same period. A comparison of societies with and without ruralgodown in Table 3 of Annex 4, shows that in Andhra Pradesh and Maharashtrathat average disbursement of credit of a sample society with godown is signif-icantly higher than that of a society without godown. For instance, in1985-86, the average disbursement per society with godown in Andhra Pradeshwas Rs 0.35 million as against average disbursement of a society withoutgodown at Rs 0.23 million.

4.18 SAR has envisaged incremental credit creation of the order ofRs 1,750 million by the end of the project period in the beneficiary so-cieties. Taking incremental credit equal to highest credit achieved duringany of the postproject years minus credit disbursed during the year precedingthe project year, and further assuming that net program sanctioned by NCDCwould be fully implemented, the incremental credit creation by project socie-ties under NCDC-II project would be as followrs

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INCREMENTAL CREDIT(Rs in lakhs)

Incremental Total estimatedcredit per Total No. of incremental

State sample society societies turnover

Andhra Pradesh 0.11 2,831 311.41Maharashtra 0.42 936 393.12Himachal Pradesh 0.04 733 29.32Punjab 0.67 1,234 826.78

Total 5,734 1,560.63

Uttar Pradesh 0.05 1,597 79.85

Grand Total- 7,331 1,640.48

4.19 It may be mentioned that SAR target of incremental cred4t disburse-ment of Rs 1,750 million was based on completion of 7,000 rural godownsagainst realized target of 5,734 rural godowns. According to SAR, theprojected incremental credit disbursement per beneficiary would work outRs 0.25 million as against realized credit disbursement of Rs 0.27 million.

Distribution of Inputs

4.20 Distribution of inputs like fertilizers, insecticides/pesticides,seeds etc., is related to availability of adequate irrigational facilities.The country has been in the grip of drought for the last three years. The useof inputs has been adversely affected in all states especially those stateswhich depend on rainfall for irrigation. Rural godowns are basic infrastruc-tural facilities for making easy availability of fertilizers. They can meetthe demand for inputs but they cannot create demand for them. Data on distri-bution of fertilizers by sample societies is given in Table 1 of Annex 6.Data reveals that post-project consumption of fertilizers has been higher thanthe pre-project consumption in all project states. The increase in distribu-tion of fertilizers by sample societies was more pronounced in Maharashtra andPunjab, erratic in Andhra Pradesh and consistent in Uttar Pradesh and HimachalPradesh. The distribution of fertilizers in Andhra Pradesh by sample socie-ties increased from Rs 4.86 millions (Preproject year) to Rs 9.17 millions in1983-84 and thereafter staged some decline to Rs 8.41 millions in 1984-85 andRs 6.75 millions in 1985-86. In Maharashtra, the distribution of fertilizersby sample societies increased from Rs 11.41 millions in the preproject year toRs 23.88 millions in 1984-85 and declined to Rs 20.82 million in 1985-86. InHimachal Pradesh, the distribution of fertilizers also registered increasefrom Rs 1.59 million during preproject year to Rs 1.90 millions in 1984-85then declined to Rs 1.80 million during 1985-86. In Punjab, there has beensignificant increase in the distribution of fertilizers from Rs 65.01 millionduring preproject year to Rs 91.55 millions during 1985-86. In U.P. there has

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been continuous increase in the distribution of fertilizers from preprojectyear onwards from Re 7.58 millions to Rs 8.87 million during 1986-87.

4.21 The comparison of actual and projected turnover of fertilizers givenin Table 2 in Annex 6 shows that on the whole projected data has been higherthan the actual figure due to reasons given above, except in Maharashtrawhereas the projected distribution of fertilizers has been close to the actualdistribution. In Andhra Pradesh the projected distribution of fertilizers bysample societies was significantly lower than the realized distribution offertilizers. According to SAR, the incremental turnover of fertilizers wasexpected to be Rs 2,890 millions. The actual turnover of fertilizers workedout on the basis of methodology given above was estimated as follows:

ESTIMATED DISTRIBUTION OF FERTILIZERS BY SOCIETIES UNDER NCDC-II(Rs in million)

Estimated value ofSate No. of Societies Fertilizer Distribution

Andhra Pradesh 2,831 383.67MNharashtra 936 573.12Himachal Pradesh 733 29.63Punjab 1,234 1,313.64Bihar - 236.62

Total 5.734 2,536.68

Uttar Pradesh 1,597 295.11

Grand Total 7,331 2,831.79

4.22 In the above table Bihar has been included as one of the projectStates as in this State BISCOMAUN directly distributes fertilizers, pesti-cides/insecticides seeds to the farmers. The estimated value of distributionthrough marketing godowns allotted to BISCOMAUN under NCDC-II have been workedout on the basis of total capacity of godowns completed under NCDC-11 to totalowned capacity of BISCONAUN. It may be mentioned that realized turnover oftarget at Re 2,536.68 millions is lower than the estimated turnover of Rs2,890 millions due to reduced number of rural completed godowns and droughtconditions in the beneficiary States etc. However, the average turnover persample society works out to Re 0.4129 million of fertilizers projected in theSAR.

4.23 Distribution of seeds, pesticides/insecticides is not a regularfeature of most of the PACS in India. There are certain problems regardingtvailability of quality seeds, shelf life of pesticides/insecticides and alarge number of varieties of pesticides/insecticides required by the farmerswhich PACS are unable to store, resulting in lower off-take of these items bythe farmers. Some of the societies in the Project States have been

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distributing seeds and pesticideslinsecticides, details of which are given inTable 3 of Annex 5. It would be seen from the data given in the table that onthe whole, post-project distribution of these inputs wac higher than thepreproject distribution of inputs. Nevertheless, the value of distribution ofthree inputs did not form significant portion of the total turnover of thesocieties. According to SAR, the incremental business turnover at primarylevel units in seeds and pesticides would be Rs 410 millions. The followingtable gives estimates of the business turnover of societies covered underNCDC-II in seeds and pesticides.

ESTIHATED DISTRIBUTION OF SEEDS AND INSECTICIDES/PESTICIDESBY SOCIETIES UNDER NCDC-II

(Rs in lakhs)

State No. of Societies Estimated Value

Andhra Pradesh 2,831 46.56Maharashtra 936 41.76Himachal Pradesh 733 101.37Punjab 1,234 8.32Bihar - 8.90

Total 5,734 206.91


Grand Total 7.331 208.57

4.24 It would be seen from the above table that the incremental turnoverof the societies covered under NCDC-I1 has been estimated at Rs 206.91millions which is almost 50% of the incremental turnover projected in SAR.Addition of U.P. to be beneficiary States etc. does not make much difference.

Distribution of Consumer Goods

4.25 Rural Consumer Scheme forms an integral part of the ConsumerCooperative Hovement in the country. The very idea behind the ConsumerCooperative Movement is distribution of essential consumer goods to the commonman at reasonable prices. Distribution of consumer goods in rural areas isthree tier system - the State Consumer Federations at the Apex level,wholesale consumer stores and marketing societies at the middle level, primarystores, PACS/FSS/LAMPS as retail distribution agencies to the consumers.

4.26 The achievement of the PACS in the distribution of consumer goods inthe Project States has been significant as the consumer goods sold by the PACSare essential items which are not affected, to a large extent, by droughts.Tables 1 to 3 in Annex 6 give details of the turnover of consumer goods bysample societies before and after allotment of godowns under NCDC-II, actualand projected turnover of consumer goods, and turnover of consumer goods in

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Andhra Pradesh and Maharashtra of sample societies with godowns and withoutgodowns. It may be mentioned that even societies without regular godownsdistribute consumer goods within the space available to them. By and large,as the data reveals that there has been continuous upward trend in the valueof consumer goods distributed by some societies. There has been somefluctuations in the value of distribution of consumer goods in Punjab due todisturbed conditions. The value of consumer goods distributed in AndhraPradesh increased from Rs 1.46 millions in the preproject year to Rs 10.55million in 1985-86, Maharashtra from Rs 4.59 millions to Rs 6.78 millions,Himachal Pradesh from Rs 6.53 millions to Rs 9.83 millions, in U.P. from Rs5.14 millions to Rs 6.1 millions.

4.27 Comparison of actual and projected turnover of consumer goods bysample societies in project States reveals that actual turnover of consumergoods has been higher than the projected turnover in Maharashtra and HimachalPradesh, and lower in Andhra Pradesh, Punjab and U.P. The average turnover ofconsumer goods per sample society with or without godown indicates that thesociety with a godown is in a better position to store and display a largenumber of consumer items as compared to the society without godown. Theturnover in consumer goods of society with godown has been higher than theturnover of society without godown. For instance, in Andhra Pradesh theturnover of a society with godown was of the order of Rs 0.14 million ascompared to the turnover of a society without godown at Rs 0.081 million. SARhas projected turnover of Rs 420 millions as a result of implementation ofNCDC-II Project in the Project States. The following estimates give approxi-mate turnover of the societies which would be operating with godowns underNCDC-II in the Project States.

ESTIMATED DISTRIBUTION OF CONSUMER GOODS BY SOCIETIES UNDER NCDC-II(Rs in million)

State No. of Societies Estimated Value

Andhra Pradesh 2,831 392.99Maharashtra 936 162.72Himachal Pradesh 733 153.31Punjab 1,234 93.41

Total 5,734 802.43


Grand Total 7,331 1,004.38

Marketing of Agricultural Produce

4.28 Marketing of agricultural produce of the farmers by PACS has not beenfully incorporated into the agricultural Cooperative Marketing System in thecountry due to various reasons. The cooperative marketing is a three tier

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system in the country Primary Agricultural Marketing Societies at the blocklevel, District Cooperative Marketing Societies at District level and StateMarketing Federation at the State level. The Primary Agricultural MarketingSocieties operate at assembling centers or regulated markets and procure theagricultural produce both under price support operation and under commercialpurposes directly from the farmers. In some cases, the Primary AgriculturalMarketing Societies are weak and are unable to operate without the support ofthe State Marketing Federation. There has been no permanent linkage betweenPACS and Primary Marketing Societies for the marketing of agricultural producefrom the farmers.

4.29 In Punjab, it has been stated by the State authority that PACS arealready overburdened with multiple functions viz. disbursement of credit,distribution of inputs, distribution of consumer goods etc. It would be verydifficult for PACS to perform the function of procurement of agriculturalproduce of the farmers effectively and efficiently. Moreover, in PunjabMARKFED has opened offices at the mandi level which purchase agriculturalproduce directly from the farmers. In Punjab, most of the farmers generatelarge agricultural surplus which makes it economically viable for individualfarmers to have their own marketing arrangements including transportation toregulated markets and dealing directly with the purchase agencies. InHimachal Pradesh, agricultural surplus consists of mainly potatoes some ofwhich is absorbed by the Federation through its own offices. In AndhraPradesh, some of the PACS undertake the procurement of agricultural produce oftheir own or as agents of the marketing societies but they are very few innumber.

4.30 In Maharashtra, sugarcane, cotton millets and oilseeds are majorcrops in which the substantial surpluses are generated. All these crops aremarketed in the state with the established line of marketing institutions inwhich PACS do not play a major role. For procurement of sugarcane, sugarfactories have their own arrangement and they procure sugarcane directly fromthe farmers through assembling centers established by them at convenientplaces from where cane is transported to the mills. In case of cotton thereis monopoly procurement scheme of Cotton Growers' Federation which acts assingle procurement agent throughout the State operating at mandi level andprocuring cotton directly from the farmers. The farmers also prefer to selltheir cotton directly to the Federation instead of routing through the PACS asthe prices paid by the federation are fixed and farmers are not able to takeadvantage of the fluctuation in the prices by storing in the PACS' godownsduring the peak season and selling during the lean season. The State has alsoestablished an Oilseed Growers' Federation which has its own institutionalarrangements for purchase of oilseeds at district, Mandi and village levels.The involvement of PACS in Maharashtra has so far remained restricted toprocurement of paddy, wheat, millets under price support operation. Even incase of these comodities PACS has been functioning only in the surplus areas.

4.31 In U.P. agricultural surpluses are generated in case of sugarcane,wheat and oilseeds. Oilseeds' Federation purchase mainly for its own process-ing units under price support operations and commercial purposes. In thisprocess, it does not involve PACs or marketing societies. For sugar mills,the farmers directly transport sugarcane to the sugar mills. For otheragricultural produce such as wheat and paddy, Federation has involved primary

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agricultural societies and also cooperative primary marketing societies forpurchase of wheat and paddy under price support operations. The involvementof PACS in procurement of these crops has, therefore, been to some extent inthe surplus areas of Western U.P. for paddy. The following table givesagricultural produce marketed by sample PACS in the Project State.

VALUE OF AGRICULTURAL PRODUCE MARKETED BY SAMPLE SOCIETIES(Rs in million)

Year A.P. Maharashtra U.P.

1982-83 0.420 - 4.691983-84 0.570 0.008 5.431984-85 0.066 5.630 5.451985-86 0.080 0.680 3.281986-87 - - 5.33

4.32 It would be revealed from the above table that procurement of agri-cultural produce by sample PACS has been erratic except in U.P. and no trendcan be established. SAR has estimated incremental turnover in farm produce at2,700 million. It is not clear from SAR whether this turnover includes onlythe turnover of the PACS or also the turnover of the primary marketing socie-ties operating at mandi level. IF the SAR projection pertains only to theturnover of agricultural produce by PACS the estimates appear to be on thehigh side. The following table gives the turnover of all the beneficiarysocieties in the Project States.

ESTIMATED MARRETING OF AGRICULTURAL PRODUCE BY SOCIETIES UNDER NCDC-II(Rs in million)

Value ofState No. of Societies Agricultural Produce

Andhra Pradesh 2,831 21.23Maharashtra 936 135.12Bihar - 24.58

Total 3.767 180.93


Grand Total 5.364 362.25

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Index of Contribution

4.33 Percentage of non-credit business turnover to total turnover can beequated with the contribution of rural godowns in the operation of PACS. Asociety without godown can mainly disburse credit whereas a society withgodown can undertake non-credit business like distribution of inputs sale ofconsumer goods, marketing of agricultural produce. etc. The table in Annex 8gives percentage of non-credit business turnover to total turnover of thesample societies in the project states. During 1985-86, the non-credit busi-ness turnover accounted for 40.7Z of the total turnover in Andhra Pradesh,49.22 in Maharashtra, 67.5 in Himachal Pradesh, 41.4Z in Punjab, and 632 inU.P. (during 1986-87).

Other Financial Indicators

Growth of Share Capital

4.34 Growth of share capital is an important variable of the working ofthe society as it indicates the involvement of the members at the grass rootlevel. The growth of share capital of sample societies in the Project Statesis given in Table 1, in Annex 8. It would be seen from the table that theselected societies in the Project States have been able to increase theirshare capital considerably as a result of allotment of rural godowns. Thetotal share capital of sample societies in Andhra Pradesh has increased fromRs 4.67 millions in 1979-80 to Re 7.65 millions in 1985186, Maharashtra fromRs 3.52 millions to Rs 10.13 millions, Himachal Pradesh from Re 1.21 millionsto Rs 2.92 millions, Punjab from Rs 8.59 millions to Rs 20.58 millions andU.P. from Rs 3.38 millions to Rs 4.58 millions (1986-87). Table 2 in Annex 8brings out comparison between share capital per sample society with and with-out godown in Andhra Pradesh and Maharashtra. It would be seen from the tablethat a society with godown is able to attract more members and consequentlymore share capital as compared to society without godown. For instance,during 1985-86 in Andhra Pradesh share capital per sample society with godownwas Re 1 million as compared to Re 0.55 million of a sample society withoutgodown. In Maharashtra, the share capital of a sample society with godown wasRe 0.26 million as compared to Re 0.07 million of a sample society withoutgodown.

Growth of Working Capital

4.35 The working capital is essential for growth and health of the PACS.The shortage of working capital handicaps the societies in increasing businessturnover and undertaking diversification. Growth of working capital of samplesocieties in the Project States is given in Table 1 of Annex 9.. It would beseen from the table that the sample societies have been able to increase theirworking capital year after year consistently. Working c.apital per samplesociety with and without godown reveals that society with godown would havedefinite advantage over the society without godown. During 1985-86, theworking capital of a sample society in Andhra Pradesh was Rs 0.82 million ascompared to working capital of Rs 0.39 million of a sample society withoutgodown. (Reference Table 2 of Annex 8).

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Deroslt Mobilization

4.36 One of the long term effects of induction of rural godowne in theworking of PACS would be increase in the deposit mobilization of the societiesfrom members as well as non-members. Table 1 given in Annex 8 gives depositmobilization of sample societies In project states. It would be seen from thetable that over the years societies have been able to increase deposit mobili-zation from Rs 0.52 million in 1979-80 to Rs 1.57 millions in 1985-86 inAndhra Pradesh, from Rs 0.032 millions to Rs 0.122 millionsa in Maharashtra,from Rs 1.57 millions in Rs 3.05 millions in Himachal Pradesh, from Rs 5.89millions to Rs 14.39 millions in Punjab and from Rs 0.53 million in 1982-83 toRs 0.62 millions in 1986-87 in U.P. A comparison of deposit mobilization persample society with and without godown reveals that deposit mobilization by asociety with godown has been significantly higher than the depositmobilization of a society without godown. Thus, deposit mobilization of asample society with godown was about 5.3 times the deposit mobilization of asample society without godown in Maharashtra. (Reference Table 2 of Annex 2).

Employment Effect

4.37 The IDA Staff Appraisal Report on the working of NCDC-11 CooperativeStorage Project has quantified the impact of the project on the creation ofemployment as a result of enhancement business operation of the societies asfollows:

Employees Numbers

Managers/Secretaries 7,000Storekeeper/Assistants 7,500Watchmen/Peon 3,860

Total 18,360

4.38 The above table shows that IDA has assumed that once construction wascompleted, each participating PACs would need a minimum of one PACs Manager,1.07 Storekeepers/Assistants, 0.55 other staff. This would be the directimpact of the Project on the employment creation at the grass root levelinstitutions. In estimating the mrn-year requirements of the PACs, IDA hasassumed that all the PACs which would be allotted rural godownh would eitherbe new ones or would not be having any staff before the allotment of thegodowns. This assumption is not correct. Most of the societies with orwithout godown8 employ one full time paid Secretary/Manager to manage thecredit business of the societies. In addition, if the Society had beenoperating in hired godown it would be employing also Storekeeperlwatebman.Most of the societies were operating in hired godowns before they wereallotted rural godowas under NCDC-II Cooperative Storage Project. Thesesocieties in a large number of cases did not require any additional staff tomanage their business. In case of other societies which were only undertakingcredit business, additional staff was required only at the level of salesmanand accountant. In many societies, jobs of salesman and accountant are beingdone by one person. The following table gives employment effect of Project onsample societies in Project State.

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EMPLOYMENT EFFECTS ON SAMPLE SOCIETIES IN PROJECT STATES

SalesmanState Secretary & others Total

A.P.Pre-Project Year 1980-81 76 63 139Post Project Year 1985-86 76 99 175Z change - 57.1 25.9

MaharashtraPre-Project Year 1981-82 39 72 111Post Project Year 1985-86 39 100 139Z change - 38.9 25.2

H.P.Pre-Project Year 1982-83 47 27 74Post Project Year 1985-86 47 50 972 change - 85.2 31.1

PunjabPre-Project Year 1979-80 86 213 299Post Project Year 1985-86 86 254 3403 change - 19.2 13.7

U.P.Pre-Project Year 1983-84 48 35 83Post Project Year 1986-87 48 52 1003 change - 48.6 20.5

TotalPre-Project Year 296 410 706Post Project Year 296 555 851Z change - 35.4 20.5

4.39 It would be seen from the table that there has been no effect of theProject on the employment of Managers/Secretaries. The total number ofSecretaries/Managers during pre-project year remained the same during thepost-project period. Employment effect has only been mainly in case of sales-man, accountant and others. In Andhra Pradesh, Salesmen/other have increasedby 57.1Z, in Maharashtra 38.9Z, Himachal Pradesh 85.2Z, Punjab 19.2?, U.P.48.6?. On the whole, the impact of rural godowns has been on the order of20.5Z. In Maharashtra and Andhra Pradesh, whsre the study was undertaken ofthe societies operating without godowns, during the period under referencethere was addition of one salesman both in Andhra Pradesh and Maharashtraraising the strength of the total staff from 20 to 21 in Mbharashtra and 11 to20 in Andhra Pradesh, thus, recording growth of 5? in Maharashtra, and 9.1? inAndhra Pradesh.

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Financial Viability

4.40 Fifty percent of the total investment on the construction of ruralgodowns have been given to the beneficiary societies in the shape ,f loan at9.5Z rate of interest. Every beneficiary society after a three yearmoratorium period on payment of principal and Interest will have to dischargefinancial liability in 12 years from 4th year onward to 15th year. PACS needsto generate sufficient cash flow over the economic life of the rural godownsso that they are able to pay their principal and interest within thestipulated period and also, after providing depreciation, show positive netcash flow in their balance sheets.

4.41 Financial viability of sample societies has been worked out takinginto account extra financial burden on the beneficiary societies to payprincipal and interest on the loan component of the godowns. Tables 1 to 5 inAnnex 11 give cash flow of sample societies which indicates that samplesocieties as a group would be in a position to service debt obligations fromthe 4th year of the operation of the godowns. However, there would be somesocieties which due to weak financial positions may have to take extra effortsto service the debt obligations.

Financial Rate of Return

4.42 The SAR has quantified the financial rate of return (FRR) for atypical PAC using a 100 ton rural godown at 172 for the godown withoutmanager's residence, and about 132 for godowns with Manager's residence.Table 1 in Annex 12 gives the FRR of the project investment on the basis ofthe sample socieites. The summary table indicating the financial rate ofreturn in the Project States is given belows

FINANCIAL RATE OF RETURN

FRR (percent)

Maharashtra 15.539Andhra Pradesh 12.044Himachal Pradesh 14.103Punjab 26.914Uttar Pradesh 12.033All project states 17.804

Repayment of Loans

4.43 The following table depicts the status of the repayment of loancoWponent under NCDC-II Project from PACs, PCMs and Federations in the Projectstates%

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RECOVERY PERFORMANCE OF PROJECT LOAN UNDER WORLD BANRK-I STORAGE PROJECT(Amount Re in lakhs)

Quarter Cumulative Cumulative Percentage ofState ending demand recovery recovery

Andhra Pradesh Sept. 1987(a) PACS 50.04 35.75 71.44(b) PCMS 4.54 2.58 56.83

Total 54.58 38.33 70.23

Mihar June 1987MARXFED 64.09 64.09 100.00

fimachal Pradesh Sept. 1987(a) PACS 0.05 0.06 100.0(b) PCHS - - -(c) MARXPED 3.50 3.12 89.14

Total 3.55 3.17 89.30

Punjab June 1987(a) PACS 107.29 91.92 85.67(b) MARRPED 60.43 60.43 100.00

Total 167.72 152.35 90.84

Maharashtra June 1987(a) PACS 16.29 10.85 66.61(b) PCMS 7.16 5.24 73.18(C) MARKFED 13.07 13.07 100.00

Total 36.52 29.16 79.85

Grand Total 326.46 287.10 87.94

It would been seen from the above table that 1OOX recovery has been achievedfrom Marketing Federation in Bihar, PACS in Himachal Pradesh, MarketingFederations in Punjab and Maharashtra. The percentage of recovery has beenlow in Maharashtra in case of PACS and PC14S in Andhra Pradesh and moderate tosatisfactory from PACS in Andhra Pradesh, PCMS in Maharashtra. Due to severedrought, almost all the States have been affected adversely although intensityand breath differ from state to state. The recovery is likely to pick upsharply during 1988-89.

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4.44 According to SAR the induction of rural godowns in the working of thePACS would result in two tangible benefits, viz. reduction in storage lossesand savings in transport costs. The Evaluation Team interviewed a largenumber of farmers, PACS Managers in order to find basis for quantifying thereduction in storage losses and savings in transport cost. Discussions withthe farmers and Secretaries of the societies revealed that reduction instorage losses occurs at the society level, as well as the farmer's level.The society is able to reduce storage losses as a result of storage in moremodern project facilities. The farmers are able to purchase smaller quanti-ties of inputs and other items at a time with the result that the change ofstorage losses are reduced at their residences. The availability of inputsand consumer goods in the vicinity of their farm houses has enabled thefarmers to make more frequent trips to societies' godowns and purchase smallerlots of inputs and consumer goods at a time. Savings in transport costsoccurs as farmers are able to purchase inputs and large number of essentialitems from the societies instead of purchasing these items from Mandi. Thetotal reduction in storage losses and savings in tranoport cost of the samplesocieties in the selected districts of the Project States is given below.

AVERAGE REDUCTION IN STORAGE LOSSES AND SAVINGS IN TRANSPORT COSTS(Percentage)

Reduction in Savings in Total economicState District storage losses transport costs benefits

Maharashtra Jalgaon 2.75 2.26 5.01Sangli 2.35 1.66 4.01Chanderpur 3.31 1.36 4.67Latur 2.50 1.51 4.01

Andhra Pradesh Vest Godavari 2.50 1.62 4.12Warangal 2.75 1.86 4.61Chittoor 3.50 2.12 5.62

Himachal Pradesh Shimla 2.63 1.58 4.21Sirmour 2.25 1.55 3.80Bilaspur 2.75 1.38 4.13Hamirpur 2.25 1.36 3.61

Punjab Patiala 1.65 1.12 2.77Bhatinda 2.00 1.30 3.30Jalandhar 1.50 1.25 2.75

Uttar Pradesh Aligarh 2.20 0.91 3.11Gonda 2.35 1.09 3.44Deoria 2.30 1.16 3.46Tehri 1.65 1.44 3.09

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4.45 The benefits have been worked out on the basis of above estimates inthe calculation of economic rate of return fcr the rural godowns component ofNCDC-II instead of using estimates given in SAR. In the calculation ofeconomic investment cost, SAR has applied a standard conversion factor of 0.8to domestic expenses and non-traded goods and services, 1.2 for price of steeland 1.6 for that of cement. A shadow rate of 60? of market rates forunskilied laborers ad 802 for semi-skilled laborers has been used to take intoaccount hhb level of rural unemployment and under-employment in ProjectStates. Bowever, in the calculation of shadow investment, in the EvaluationStudies cement prices have been computed with conversion factor of 1.2 insteadof 1.6 as given in the SAR. Due to partial decontrol of cement the prices ofboth levy and non-levy cement have increased sharply over the years, thedifference between international and domestic price has been considerablynarrowed down. The actual cost of construction of rural godowns has beenbifurcated into cost of different categories of construction materials andservices such as steel, cement, skilled and unskilled labor etc. The esti-mated cost of land, cement, steel, unskilled, skilled laborers etc. fordifferent capacities of godowns viz. 50. '30, 200, 500 tons of godowns hasbeen converted into economic costs by use of conversion factors. The economiccosts have been calculated net of taxes at 6? on materials.

4.46 The incremental operating costs includes cost on salaries/establish-ment in the proportion of non-credit business turnover to total turnover ofthe sample societies, 2? of the shadow investment cost as cost of maintainingadditional staff at the implementing agencies level, Re 100 per PACS per annumat NCDC level, 1.5? cost of shadow investment for maintenance and other over-heads. The operating cost also includes the cost of mobile guides andtraining of B&C category of staff. The salaries/establishment costs have beengiven SCF of 1.0. Costs and benefits have been projected from the last yearoperation for uhich the data is available to the 20th year of operation on thebasis of feasible rate of growth and also informed judgement about the devel-opment of cooperative sector in the Project States.

4.47 In Andhra Pradesh, Primary Agricultural Cooperative Societies haverecently been reorganized under the new integrated single window deliverysystem to make them truly multi-functional. Each reorganized PACS now cover10,000 to 20,000 population and a gross cropped area of approximately 4,000hectares in a compact area of 5 to 10 villages to provide an eventual businesspotential of Re 3 to 5 millions to be reached in a period of two or threeyears. Under this reorganization, Primary Cooperative Marketing Societiesalso would either be amalgamated with the PACs or liquidated. As a result ofthis reoganization, the business turnover of the PACS in the first two yearsis expected to more than double. Keeping this in view, the benefits have beenprojected to grow by 50? per annum in the 6th and 7th year and thereafterannually at the rate of 20? to stabilize in the 10th year. In Maharashtra,the existing turnover of the sample PAC is reasonably high. The benefitshave, therefore, been assumed to grow at a modest rate of 10? per annum and tostabilize in 9th year. In H.P., the existing turnover of the PACsparticularly with regard to agricultural inputs is quite low. However,fertilizers in the State are now distributed at subsidized rates and thecooperatives virtually have monopoly in the distribution of fertilizers. Thetotal turnover of PACs, particularly with regard to agricultural inputs is,therefore, expected to increase significantly. Increase in sales of consumer

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articles is also expected to be significant. Benefits have, therefore, beenassumed to grow at the rate of 202 from 4th year onwards to stabilize in the10th year. In Punjab, though the existing turnover of sample PACS is quitehigh, it can be further increased significantly as the potential is very vast.To further improve the competitive position of PACS so that they can carve outa sizeable share in the incremental inputs demand, State Government hasrecently issued guidelines enhancing the margins of PACS for all kinds offertilizers. It has, therefore, been assumed that the benefits would recordan annual increase of 15? from 6th year onwards and would stabilize in the10th year. In Uttar Pradesh, the existing turnover of the sample PACS isquite low. To increase the input sales of the PACs, the State has recentlyintroduced a direct delivery fertilizer distribution system which hasincreased the margins of PACs and has improved the supply position. With theintroduction of new system, all PACS are expected to substantially enlargetheir fertilizer sales. Procurement of agricultural produce and sale ofconsumer articles are also expected to record significant increases. Keepingthis in view, the benefits have been assumed to grow at the rate of 252 perannum from the 4th to 6th year and 202 thereafter to stabilize in the 10thyear. Table 1 in Annex 13 gives details of the economic rate of return in theProject States. The following table gives a seumary of the economic rate ofreturns

ECONOMIC RATE OF RETURN(Percentage)

State ERR

1. Maharashtra 28.5192. Andhra Pradesh 15.1983. Punjab 21.2224. Himachal Pradesh 21.1345. Uttar Pradesh 15.7466. Group as a whole 19.474

Capacity Utilization of Rural Godowns

4.48 In the evaluation of rural godowns constructed under NCDC-ICooperative Storage Project, the capacity utilization was quantified on thebasis of norms adopted by the Central Warehousing Corporation and it wasmeasured in terms of storage space created and utilized in terms of wheat.For this purpose, a standard bag of wheat occupying 6 sq ft of space andweighing one quintal is taken as standard of reference. The space occupied byother commodities is converted into wheat equivalent by using standardconversion ratios. The concept of capacity utilization used in the Evaluationof NCDC-I Cooperative Storage Project had certain limitations. The ruralgodowne are of the nature of infrastructural facilities required for servicingthe needs of the farmers for fertilizers, pesticides, seeds, consumer goods,procurement of agricultural produce and credit disbursement. Thus, the ruralgodowns are designed to cater to the non-credit requirements of the farming

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community. The capacity utilization of rural godowns cannot be equated withthe concept of capacity utilization used in large warehouses. In the courseof discussion with the IDA Mission, it was suggested by the Mission that theNCDC should introduce more relevant conceptis of capacity utilization whichwould reflect the utilization of godowns at grass root level. The World BankMission suggested that the non-credit turnover zf the PACS may be convertedinto wheat equivalent and turnover-storage ratio may be computed forquantifying the utilization of rural godowns.

4.49 In accordance with the concept of capacity utilization suggested byIDA, the non-credit turnover of the sample societies has been converted intowheat and turnover-storage ratios have been calculated. The following tablegives turnover of storage ratios of the sample societies during the years ofoperation. It would be seen from the following table that capacityutilization in term of Turnover-Storage capacity ratio has been positiveexcept in Andhra Pradesh where the ratio has been below.

TURNOVER-STORAGE RATIOS

State 1982-83 1983-84 1984-85 1985-86 1986-87

Maharashtra 1.62 2.19 2.93 2.25 -Andhra Pradesh 0.70 1.28 1.11 1.09 -Himachal Pradesh - 1.78 2.16 2.48 -P-unjab 1.86 2.17 1.99 -Uttar Pradesh - - 1.00 1.72 2.02

Impact of Rural Godowns on Farming Coummuit

4.50 2,211 farmers were interviewed, in the Project States of HimachalPradesh (408), Andhra Pradesh (705), Punjab (410), Maharashtra (366), UttarPradesh (322) for quantifying the !mpact of rural godowns on the productionand income of the farming community. Apart from theoretical and conceptualdifficulties of impact measurement, there are certain operational difficultieswhich limit the application of impact measurement of rural godowns on thefarming community. It was not possible to take a scientific random sample ofthe farmers due to absence of list of the population and farm households, asit would have been time-consuming too. The farmers were also not willing topart with information regarding increase in income, production etc. There wasalso a problem of recall lapses as the pre-project in some States pertained to1981-82. It may be mentioned that the samples in the Project States werelimited to the members who availed facilities with the societies.Some of the results derived from the data aret

(a) Comparison of the loans borrowed by the sample farmers during pre-project and post-project period reveals that loans received by thesample farmers from the PACS has increased by 25.s5 as compared to anincrease of only 1.8? in case of loans taken from the money lenders.

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(b) Increase in the borrowers by the farmers from the PACS together withavailability of fertilizers at appropriate time resulted inimprovement of off-take of fertilizers by the sample farmers from 557tons in the pre-project year to 900.53 tons in the post projectperiod

(c) With the introduction of godowns, most of the societies obtainedlicenses for Fair Price Shops and started distributing controlled aswell as non-controlled items. PACs now use up 25Z of the expenditurein consumer goods by the farmers which average about R 494 per month.

(d) The farming community have also gained as a result of reduction instorage losses of inputs and consumer goods. There has also beensavings in their transportation cost as a result of the availabilityof these items nearer to their farm houses.

(e) Taking the change in agricultural production has been taken as proxyand surrogate for measuring the second order impact of rural godowneindicate that agricultural production of the sample farmers hasrecounted an increase of 16.63Z average. The increase in the produc-tion in different states has ranged from 29.92 in Maharashtra to9.582 in UP.

4.51 The income of the sample farmers on average has also increased fromRs 6.590/ in the pre-project period to Rs 7,6801- in the post-project periodin real terms. This assessment is based on the responses of the samplefarmers.

4.52 The farmers also identified the following areas in order ofimportance where they would like the PACs to intervenet

(a) Sale of more items of consumer goods (1,569);

(b) Marketing of agricultural produce (1,513);

(c) Sale and hiring of agricultural implements (1,186);

(d) Storage facility for surplus agricultural (1,093) produce;

(e) Sale of cattle-feed (976);

(f) Sale of seedslpesticides (774);

(g) Timely availability of agricultural requisites (237).

SuaRested Line of Action

4.53 The prioritization of the services provided by PACS to the farmerstabulated above should be treated as blue-print for effecting improvement inthe working of grass root level societies. It has been reported by thesocieties that the margins currently available on distribution of consumergoods are not attractive; the assortment of goods provided to the farmers is

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not adequate; the supply lines from the lead to link societies are not firmlyestablished, the margin money is insufficient to meet the enhanced require-ments of the farmers; rate of interest is high as compared to the marginsreceived by the societies. Action on the points is being taken and need to betaken by the concerned authorities.

4.54 In the sphere of procurement and marketing of agricultural produce,the relation of the PACS with the farming community for marketing purposescould be of three types. The PACS may arrange for the transportation of thesurplus agricultural produce of the members through trucks to the regulatedmarket or to the godowns of the marketing societies instead of individualfarmers transporting the same through separate arrangements. This wouldresult in savings in transport cost as suggested by IDA. The societiespremises can serve as the assembling place for the surplus agriculturalproduce of the farmers or society can hire trucks which can load the farmers'produce it different convenient points. The society may arrange for storageof the farmers produce at the regulated market if need be offer its marketingfacilities in cooperation with the marketing societies so that the farmers getrenumerative prices for their agricultural produce. Alternatively, farmerscan bring their surplus agricultural produce to the PACS godowns and societiescan advance pledge loan on such produce delivered. This scheme would be ofparticular interest to farmers who require some urgent cash immediately afterharvest. PACS can, therefore, provide 70 to 80Z of the total value of produceat the time of delivery and adjust the remaining 20 to 302 after the disposalof produce based on the actual price realized. In the third type of relation-ship, the PACS can purchase the agricultural produce from farmers on outrightbasis either as the agents of marketing federation or on their own account.

4.55 The establishment of any of these relationships would, however,depend on the support which the Primary Agricultural Credit Societies wouldget from Primary Cooperative Marketing Societies and State Federation. Forensuring optimum utilization of rural godowns, it would be necessary that themarketing societies clearly follow the idea of making PACS as profit centers.The Apex Cooperative Societies should enroll PAC$ as their agents for procure-ment of all types of agricultural produce. The commodity specific marketingsocieties should also enroll PACS as their collectionlprocurement agentswherever possible. The involvement of PACS in the procurement of agriculturalproduce should be total and should cover all parts of the state and all com-modities. Commodity and area specific strategy should be adopted for maximumprocurement and optimum utilization of the infrastructural base created at thebase level. This system of having PACS as exclusive collection centers orprocurement agents would not only be cost effective but would also be in theinterest of the cooperative structure. This system would improve the verticallinkages of the Primary Societies with Apex Cooperative Federations whichwould be firm, durable and financially profitable to all. Member-Societyrelations at the base would also improve as it would be in the interest offarmers. It has now been clearly recognized that only by strengthening thePACs at the base level, cooperatives would emerge as an effective alternativemarketinR channel benefitting both the producers and the consumers.

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Preparation of Utilization Plan

4.56 The rural godowns allotted to cooperative societies should be finan-cially profitable propositions on self-supporting basis to the societies. Thesocieties, operating vith the rural godowns should, therefore, prepare amonthwise space utilization chart (SUC) indicating the agricultural commodi-ties, inputs and consumer goods which would be stored for meeting the require-ments. The chart should clearly indicate the quantity to be stored on theaccount of the farmers and other institutional agencies in each month. Itshould not be difficult for the society to estimate monthwise expenditure onoperation of godown and work out the income and rental that would be requiredto achieve the breakeven point. The optimum utilization of rural godowns andthe strategy to be adopted for the same was also discussed with officers ofRCS, State Cooperative Banks, Marketing Societies, Federation and the PrimaryAgricultural Cooperative Societies in the Project States. During thediscussions, following other measures were suggested for improving theutilization of rural godowns.

(a) Encouraging the storage of agricultural produce of the farmers inrural godowns ani introduction of pledge loan scheme on such stores.

(b) Utilization of godowns for warehousing purposes for storage offertilizers, seeds and other produce.

(c) To rent out the godowns to public and cooperative agencies forprocurement of agricultural produce both under price support opera-tion as agents of State Government and on outright basis.

(d) To provide the godowne for opening the purchase centers on rent.

(e) Achieve diversification of the PACS activities by covering sale ofagricultural implements, diesel, controlled cement, cattlefeed andother essential consumer articles.

(f) To encourage farmers to use rural godown for keeping their foodgrainsfor seeds and for self consumption purposes.

4.57 With the issue of new guidelines for sharing of margins forfertilizers in different States, the long felt need of PACS with regard to thefinancial viability of fertilizer distribution has by and large been met. Thenew scheme has already become operational in the States of U.P., Punjab,Andhra Pradesh, and Bihar. The fertilizers sales should, therefore, increasesubstantially as the PACS would now be able to compete with private tradersmore effectively.

Marketing Godowns

4.58 The assessment of the impact of the marketing godowns on the opera-tions of the State Marketing Federations and other marketing societies isdifficult. The casual relationships between the marketing godowne and otherobservable parameters at marketing societies' federations' level is complexand tenuous due to problems in disaggregation of the contribution of themarketing godowns from the total physical and financial performance of thefederations and marketing societies.

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First Order Impact

4.59 The first order impact of the marketing godowns would consist ofaddition to storage space of federations and marketing societies to facilitatetheir general business activities. The NCDC-II Cooperative Storage projecthave added or would be adding 2.316 million tons of additional owned storagecapacity to the State Cooperative Marketing Federations in the states ofBihar, Uttar Pralesh, Punjab, Maharashtra and Himachal Pradesh, Primary/District Cooperative Marketing Societivs in Andhra Pradesh and Maharashtra,sugar cooperatives in Punjab and Uttar Pradesh State Cooperative ConsumersFederation in Uttar Pradesh. Of the 2.316 million tons of additional storagecreated under the project, 1.696 million tons would be for State CooperativeMarketing Federations 0.498 million tons for Primary/District marketingsocieties and 0.121 for other marketing cooperatives. The marketing godownsto the Federations would provide them with the basic infrastructure to storemore inputs like fertilizers, seeds, pesticides, agricultural outputs, agri-cultural raw materials for processing and consumer articles. The total addi-tional owned storage capacity that would be created by the project and thetotal storage capacity that would be available to Federations in projectstates would be as follows:

INCREASE IN THE OWNED STORAGE CAPACITY WITHSTATE COOPERATIVE MARKETING FEDERATIONS

('000 tons)

Total ownedOwned storage Capacity storagecapacity prior created under capacity after

Organization/State to NCDC-II NCDC-II NCDC-II

Biscomaun (Bihar) 64.00 215.00 279.00P.C.F. (Uttar Pradesh) 188.75 658.00 846.75Markefed (Maharashtra) 63.90 119.00 182.90Himfed (Himachal Pradesh) 0.25 42.65 42.90Markfed (Punjab) 454.00 661.45 1,115.45

Total 770.90 1,696.10 2,467.00

4.60 The benefits derived from the marketing godowne by the federationswould clearly depend upon the extent of utilization of the storage capacitycreated under the Project. Capacity utilization of marketing godowns may betaken as the most important empirical indicator for quantifying the firstorder impact of these godowns. The Evaluation Studies conducted by NCDC hasprovided data on operations of seven marketing godowns with PCF in U.P., sevenmarketing godowns with MARRPED, Maharashtra, 45 marketing godowns withBiscomaun, Bihar, 19 marketing godowns with MARRPED Punjab and 22 marketinggodowna with HDMPED H.P. These Federations' godowne were completed byJune 30. 1984 (June 30, 1985 in case of U.P.) and were covered for the

valuation studies. However, all the godowns in U.P. and four godowns in

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Maharashtra were given on the rent by the Federations to other cooperativeorganizations. The capacity utilization of the remaining godowns has beenestimated.

Cavacity Utilization

4.61 Capacity utilization of space is a two-dimensional concept volumetricand gravimetric. The volumetric concept expresses capacity utilization interms of storage space created and utilized, the gravimetric concept expressesthe capacity of godowns in terms of tonnage. Generally, the concept of capa-city of a godown is considered volumetric and it is translated into gravi-metric in relation to a particular commodity. The capacity of a given size ofgodown varies from commodity to commodity as the same tonnage of all thecommodities cannot be stored in a given storage. To obviate the difficultiesof comparing capacities for different commodities in the same godown, it isconvenient to express the capacity of a godown in terms of a single commodity,say, wheat, as has been done in case of godowns constructed under the Project.For this purpose, a standard bag of wheat occupying 6 sq ft (0.75 sq meters)of space and weighing one quintal is taken as the standard of reference. Thecapacity of any godown can be converted in comparison to the standard bags ofwheat that could be stored in the godown.

Operational Methodology

4.62 The following methodology has been used in estimating the extent ofthe capacity utilization of Federations' godowne constructed under NCDC-IIProjects

(a) Month-wise data on maximum stock, minimum stock and average stock ofdifferent commodities stored in godowns have been collected.

(b) All the commodities, viz. fertilizers, sugar, rice etc. stored ingodowne have been converted into wheat by using standard conversionratios.

(c) Godown-wise mAximum, minimum and average capacity utilization havebeen computed.

(d) Godown-wise capacity utilization has been aggregated into overallcapacity utilization for the state as a whole.

The table below gives the capacity utilization of marketing godowns allottedto federations in the project states.

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CAPACITY UTILIZATION(in percent)

1983-84 1984-85 1985-86Max. Min. Avg. Max. Min. Avg. Max. Min. Avg.

Bihar 39.85 31.73 35.79 33.19 26.46 29.82 55.48 50.97 53.22Punjab - - - 100.00 69.00 84.50 100.00 88.00 94.00Maharashtra - - - 84.50 59.40 72.00 64.60 51.90 58.30H.P. - - - 71.97 44.88 58.42 97.75 67.75 82.75

4.63 The percentage capacity utilization of the federation godowns inPunjab has been higher than the capacity utilization in H.P., Mabarashtra andBihar. The percentage utilization has increased in 1985-86 as compared to1984-85 in Bihar, H.P. and Punjab. The decline in percentage capacity utili-zation in Maharashtra in 1985-86 as compared to 1984-85 was reported to be dueto drought conditions prevailing in the state which reduced the demand forfertilizers. The drought conditions also affected the procurement of agricul-tural produce under price support and open market as the market arrivals werelimited and prices generally ruled higher.

Business Turnover of State Marketing Federations

4.64 The marketing federations are the apex organization of cooperativemarketing societies and mostly perform the following functions:

1. Supply, storage and distribution of agricultural inputs to thefarmers for boosting farm production.

2. Marketing of farm produce for ensuring the most remunerative pricesto the farmers.

3. Processing of agricultural produce and inputs for bringing thetrading and manufacturing gains to the farmers.

4. Distribution of essential consumer articles to ensure the qualityproducts at reasonable prices.

4.65 The following summary table gives the annual turnover of the StateCooperative Marketing Federations in the beneficiary states. Detailed Infor-mation is given in Tables 1 to 5 in Annex 14.

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BUSINESS TURNOVER OF STATE COOPERATIVE MARXETING FEDERATIONS(Rs in millions)

Year Punjab H.P. Maharashtra Bihar U.P.

1981-82 - 84.69 1,596.54 608.99 4,144.801982-83 3,894.65 93.50 1,329.85 652.60 4,571.801983-84 4,029.21 127.36 1,193.35 608.04 5,159.581984-85 4,630.49 135.87 1,548.16 561.32 5,424.201985-86 5,960.47 183.49 1,758.93 468.93 5,765.101986-87 6,090.00 230.00 1,527.86 n.a. 5,478.50

4.66 It would be seen from above that the State Cooperative MarketingFederations in Punjab and B.P. have recorded continuous increase in the turn-over. The Marketing Federations in Maharashtra and U.P. have recorded contin-uous increase in turnover up tc 1984-85. Turnover in 1985-86 of theseFederations has declined because of the drought conditions prevailing in thesestates. In Bihar, the business turnover of the Biscomaun has declined from1982-83 onwards. However, the union has been under reorganization which hasonly recently been completed. Business turnover in 1986-87 is expected to besignificantly larger than the turnover level achieved in 1985-86. Whileanalyzing the total turnover, no attempt has, however, been made to establishco-relations between availability of storage space and expansion in businessactivities. The table below gives the annual profitiloss of the MarketingFederations from 1981-82 onwards. However, no attempt has been made toquantify the effect of marketing godowns on profitability of the federations.

PROFITILOSS OF STATE COOP. MARRETING FEDERATIONS(Rs in millions)

Year Punjab H.P. Maharashtra Bihar U.P.

1981-82 (-) 83.50 0.87 6.87 2.59 11.661982-83 (-) 84.96 0.93 2.16 (-) 150.52 10.411983-84 5-) 55.24 0.31 1.46 (-) 114.05 7.101984-85 (-) 72.46 ( ) 0.67 2.73 (-) 114.06 C-) 48.601985-86 11.99 C-) 2.45 3.96 C-) 177.13 9.901986-87 104.17 4.57 4.71 n.a. n.a.

PCMS Godowns in Maharashtra

4.67 Primary Cooperative Marketing Societies (PCMS) have been organized InMaharashtra at the Block level. Besides, these general purpose marketingsocieties, commodity specific marketing societies have also been organized todeal with specific commodities such as cotton, oilseeds, etc. The total

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number of these societies is 672 and they have a membership of 0.53 million.Broad dimensions of the business turnover of these societies may be seen frombelows

WsINS rROER OF PCM IN MAHARASHTRA(Re In millIons)

Activity 1980-81 1981-42 1982-8 193-844 194-65 19S8-8U 1980-87(Estmate)

Agielulturel produce 06.2 951.3 1,712.0 1,659.2 1,589.0 8,060.2 S,500.0Agrleilturl Inputs(a) FertilIIers 881.0 1,120.1 1,510.8 1,009.6 1,120.7 1,221.1 1,200.0(b) Seeda 88.8 98.5 121.4 162.6 156.2 117.6 180.0(e) Postcliesn 47.4 86.2 47.9 50.3 88.8 88. La(d) Agric. Implement. 41.2 84.4 80.5 89.0 81.4 lo /Consumer goods 794.2 764.2 769.8 824.6 614.1 97.7 1,010.0other. 110.6 99.8 122.4 142.9 106.0 808.2 280.0

Total Bualnesurnor 2.929.4 8.100.0 4.815.1 8.880.? S.86L.7 56.87.8 0l200.0

/ Ineluded In others.

4.68 It would be seen from the above that main business of PCMS has beenthe procurement of agricultural produce and distribution of agriculturalrequisites. These two activities together have accounted for over 70? of thetotal business turnover of PCMS.

Impact of PCMS Godowns

4.69 A sample of 10 marketing godowns with total storage capacity of 2,900tons in operation with eight PCMS were selected for the impact assessment.These godowns were completed before June 30, 1984. As a result of inductionof project godowns in the working of sample PCMS, the total storage capacityavailable with them has increased from 7,200 tons in 1979-80 to 12,250 tons in1985-86 NCDC-II godowns accounted for 36? of the total storage capacity avail-able with these societies in 1985-86.

Capacity Utilization

4.70 The capacity utilization of sample PCMS godowns has been worked outon similar lines to that of Federations' godowns already discussed. Capacityutilization has, however, been worked out in respect of five godowne withtotal capacity of 1,000 tons in operation with four PCMS only, as the remain-ing godowns were given on rent to State Warehousing Corporation and cottongrowers Federation. The yearwise masimum, minimum and average capacity utili-zation of these godowns for 1984-85 and 1985-86 may be seen from the tablebelow:

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CAPACITY UTILIZATION OF SAMPLES PCMS(in percent)

Year Maximum Minimum Average

1984-85 68.00 31.85 49.921985-86 72.90 35.45 54.17

Business Turnover

4.71 The following table gives the broad dimensions of the businessturnover of sample PCMS:

ACTUAL BUSINESS TURNOVER OF SAMPLES PCMS IN MABARASHTRA(Rs in millions)

Agricultural Agricultural Consumer MiscellaneousYear produce inputs goods and others Total

1979-80 9.43 30.84 35.65 9.11 85.031980-81 16.06 55.10 47.95 19.60 138.711981-82 15.01 51.83 43.55 13.78 124.171982-83 21.19 44.58 40.48 12.97 119.221983-84 21.05 63.65 43.62 12.19 140.511984-85 22.92 58.07 43.88 10.84 135.711985-86 11.79 59.46 40.88 15.36 126.51

Profitability

4.72 The following table gives income, expenditure and profitiloss ofeight sample PCMS as shown in their balance sheets;

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INCOME, EXPENDITURE AID PROFITILOSS OF SAMPLBD PCMS IN MABAEASUThA(Rs in '000)

Year Income Expenditure Profit/Loss

1979-80 5,919 5,321 5981980-81 6,815 6,501 3141981-82 7,302 7,068 2341982-83 7,380 7,104 2761983-84 8,439 8.821 (-)3821984-85 9,031 8,724 3071985-86 10,016 9,609 407

4.73 The perusal of above data brings Ohrt that the sample PCNS as a grosnphave been earning continuous profits all these years except during 1983-84.In 1983-84, sample PCMS sustained losses despite their record turnover due tolower realized margins on their various business activities and higher over-head expenses.

PCMS/DOMS Godowns in Andhra Pradesh

4.74 In Andhra Pradesh, prior to the reorganization of Cooperative creditand marketing structure, there were 22 District and 392 Primary CooperativeMarketing Societies. However, with reorganization the Cooperative marketingstructure has become a two tier one and erstwhile PCM have either beenamalgamated with PACS/DOMS or have been liquidated. Under NCDC-II Project,100 marketing godowus of 250 tons capacity each were constructed for theerstwhile PC$S. For assessment of impact of these godonns on the working ofPCMS, 22 godowns in operation vith 12 PCHSIVOMS reported to have beencompleted before June 30, 1984 were selected. During the evaluation study, itwas observed that five godowns in operation with four societies have beenrented out to other cooperative organization. Assessment of impact of themarketing godowns has, therefore, been restricted to 17 godowns in operationwith 8 PCMS/DOMS. As a result of induction of godowns in the working ofsample PCNSIDOMS, the total storage capacity available with them has increasedfrom 6,820 tons in 1979-80 to 17,970 tons in 1985-86. The owned storagecapacity with these societies has also increased from 4,320 tons in 1979-80 to11,620 tons in 1985-86. NCDC-II godowne accounted for 242 of the totalstorage capacity available with these societies in 1985-86.

Capacity Utilization

4.75 The capacity utilization of sample PCMS/DONS godowns has been workedout on the simtlar lines to that of Federations" godowns already discussed.The maximu, minimum and average capacity utilization of these godowns in1983-84, 1984-85 and 1985-86 may be seen from belows

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CAPACITY UTILIZATION OP SAMPLE PCMSIDOMS GODOiNS(Percent)

Year Maximum Mlnimum Average

1983-84 88.29 33.55 60.921984-85 e9.98 48.94 69.461985-86 55.60 29.96 42.78

4.76 It would be observed from the above data that the average capacityutilization has declined in 1985-86 as compared to 1983-84 and 1984-85. Thedecline in the percentage capacity utilization was mainly due to the proposedreorganization of cooperative credit and marketing structure which wasinitiated during that year.

Business Turnover

4.77 The following table gives the broad dimensions of business turnoverof sample PCMSIDOM$.

BUSINSS TURNOVER OF SAMPLE PClIDOMS(Rs in millions)

Agricultural Agricultural Consumer goodsYear produce requisites and others Total

1979-80 3.98 13.87 6.25 24.101980-81 5.09 17.25 10.86 33.201981-82 5.01 16.02 15.22 36.251982-83 3.51 24.13 22.87 50.511983-84 7.04 15.69 52.53 75.261984-85 9.70 15.16 86.02 110.881985-86 8.02 16.98 76.01 101.01

ProfitabilitY

4.78 The following table gives income, expenditure and profit/loss ofsample PCMSIDCMS as shown in their balance sheetss

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PROFITABILITY OF SAMPLE PCNSIDCMS(Rs in '000)

Year Income Expenditure Profit/Loss

1979-80 1,148 1,111 371980-81 1,410 1,547 (-)1371981-82 :,845 1,475 3701982-83 2,346 2,138 2081983-84 3,907 2,493 1,4141984-85 2,841 2,754 871985-86 3,142 2,958 184

4.79 The perusal of above data brings out that the sample PCMS/DCMS havebeen earning continuous profits all these years except 1980-81. These so-cieties earned a record profit of Rs. 1.414 million in 1983-84. The declinein profits subsequently has been due to decline in the realized margins ontheir various business activities and higher overhead expenses.

Cold Storage Component

4.80 In order to quantify the impact of cold storage in the beneficiarystates, case studies of 15 cold storages; in West Bengal (3), Bihar (2), andUttar Pradesh (10) were prepared starting from the rationale of setting up ofthe cold storages in a particular area on the basis of financial viability,economic and social benefits, assumptions of appraisal reports, actual andprojected financial parameters etc. The results obtained from micro studieswere scrutinized in order to pinpoint major areas of concern, suggest line ofaction and most feasible growth path in the economic environment under whichthese cold storages are/would be operating. The following table gives loca-tions of the cold storages, ownership, total capacity, year of completion andblock cost.

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PARTICULARS OF SAMPLE COLD STORAGES(Rs in millions)

Location of the Capacity Year ofcold storage Ownership tons completion Cost

West BengalMemari BENFED 4,000 1985 6.75Tarkeswar PCMS 4,000 1986 7.07Nadia FSS 4,000 1985 7.37

BiharSaharsa BISCOMAUN 4,000 1986 7.15Forbesganj 4,000 1985 7.79

Uttar PradeshKopaganj PCF 4,000 1982 4.46Pratapgarh 4,000 1982 4.46Soraun 4,000 1982 4.46Jaswantnagar Marketing Society 2,000 1986 3.73Jahangirabad District

Cooperative 2,000 1985 3.41Federation

Sikandarabad DistrictCooperative 4,000 1985 6.98Federation

Anola Marketing Society 4,000 1985 6.49Sabungodam Marketing Society 4,000 1986 7.35Kharkhoda a 4,000 1985 6.00Vashi (Bombay) PCF 4,000 1987 9.20

Total 92.67

4.81 The sample of 15 cold storages included in the study covered coldstorages operated by marketing federations like BENFED of West Bengal, PCF ofUttar Pradesh, BISCOMAUN of Bihar, Dot. Cooperative Federations (Dist. levelSociety) and Primary Marketing Societies. All the storages except two hadcapacity of 4,000 tons each. Of 15 cold storages, 3 cold storages were com-pleted in 1982 and 7 in 1985, 4 in 1986 and 1 in 1987. Thus sample was fairlyrepresentative of types of agencies operating the cold storage, year of com-pletion and number of project states.

Rationale of Cold Storages

4.82 All the above cold storages and even those which have not beenbrought within the ambit of the study were set up on the basis of certainarguments and facts. Generally the genesis of setting of the cold storageswere as follows:

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(a) The total production of potatoes within the area of operation of theproposed cold storage unit was significantly higher than that of thecold storage capacity available within the area. There was scope forcreation of additional cold storage capacity in the cooperativesector.

(b) The Federation/Society had already acquired suitable site for cons-truction of cold storage which was very near to the availability ofinfrastructures like high-voltage electric grid, railway station,main road, markets etc.

(c) The farmers of the areas were not able to get remunerative prices forpotatoes and setting up of cold storage would enable them to storetheir surplus potatoes in the cold storage during the peak period andsell the same during lean season.

(d) The cold storage would also reduce storage losses, increase value-added of potatoes, create more employment and increase potato produc-tion.

(e) The operation of the cold storage would be financially viable, com-mercially profitable and economically and socially useful to themembers.

4.83 These cold storages were appraised by Technical Appraisal Teams. Themain premises, arguments, assumptions on which these cold storages were sanc-tioned were as tollows:

(a) The Society/Federation would undertake marketing of potatoes in theirown account which would be at least in the ratio of 50:50 of thepotato stored.

(b) Assumptions were a)^o made on minimum storage charges and net market-ing margin accruing to the Society/Federation.

(c) Income from the operation of the cold storage was estimated on thebasis of (a) IOOZ rental, (b) 752 rental and 25Z marketing of potato,and (c) 50 rental and 502 marketing. The inference was drawn thatthe most profitable combination will be 5OS marketing and 502 rental.

(d) Depreciation was calculated on the block cost at the rate of 10 incase of plant and machinery, 5? in case of building, racks and insul-ation. Interest on block cost was taken at 10 per annum on 60S ofthe block cost. Interest on bank borrowing was worked at 15? perannum on the amount required for marketing of potato for average ofeight months. It was assumed that bank would be able to provide 60?of the amount required on hypothecation and balance would be met fromthe margin money.

4.84 The cash flow for each cold storage showed that if the cold storageworked at 502 rental and 50 marketing, the cash accruals would be sufficientto pay back the loan bstallment after meeting Interest burden and other oper-ational expenses but not depreciation cost. The unit ceased to be financiallyviable if it was utilized 1002 and 75? on rental basis.

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Cold Storage Operation

4.85 The total cold storage capacity of 15 sample cold storages was 56,000tons of which 54,000 tons was completed by the end of 1986-87. One coldstorage, i.e., Saharsa in Bihar was still to complete one chamber of 2,000tons by the end of 1986-87. In all other states, the total target capacitywas created. The following table gives capacity of the sample cold storagesby the end of 1984-85, 1985-86, 1986-87 and capacity utilization for thecorresponding years.

CAPACITY CREATED AND CAPACITY UTILIZED BY THE SAMPLE COLD STORAGE UNITS(Percentage)

Name of the Capacity (000 tons) Capacity UtilizationCold Storage Unit 1984-85 1985-86 1986-87 1984-85 1985-86 1986-87

West BengalKemari 4 4 4 56.38 48.80 97.50Tarkeswar - 2 4 - 55.95 91.14Nadia 4 4 4 27.40 42.35 87.45

Total West Bengal 8 10 12 41.89 47.65 92.03

BiharSaharesa - 2 2 - 18.5 43.76Forbesganj 4 4 4 2.44 2.53 19.73

Total Bihar 4 6 6 2.44 7.85 27.74

Uttar PradeshKopaganj 4 4 4 69.15 60.00 93.77Pratapgarh 4 4 4 85.77 62.02 89.00Soraun 4 4 4 93.75 70.75 96.75Jasvantnagar - - 2 - - 92.50Jahangirabad 2 2 2 53.80 38.10 100.00Sikandarabad 4 4 4 17.15 11.75 74.22Anola - 4 4 - 18.87 87.70Sabungodam - - 4 - - 69.75Kharkhoda 2 2 4 90.00 16.25 90.00Vashi (Bombay) - - 4 - - (a)82.93

for potatola (b)77.92

othercommodities

Total Uttar Pradesh 20 24 36 67.55 41.76 86.71

Total of All thethree States 32 40 54 52.99 38.15 81.34

La It was not included in the calculation of average capacity utilization.

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4.86 The capacity utilization of the sample cold storages reveals that inWest Bengal, capacity utilization has recorded significant increase during1986-87 as compared to capacity utilization during 1984-85 and 1985-86. Allthe three sample cold storages have registered the capacity utilization above90? during 1986-87. In Bihar, the capacity utilizatLom of both the samplecold storages has not been satisfactory so far due to problems of managementand insufficient contact with the farmers etc. In Uttar Pradesh, the capacityutilization of all the sample cold storages during 1986-87 has been satisfac-tory. The cold storage at Vashi in Bombay is able to store multiple commodi-ties and achieve better capacity utilization in respect of potato, as well asother coumodities. Due to a steep fall in the production of potato during1985-86, the capacity utilization of the sample cold storages has declinedfrom 52.92 during 1984-85 to 38.15? during 1985-86. The Year 1986-87 wit-nessed a bumper potato crop; the capacity utilization of all the cold storagesincluding cold storages set up in Bihar increased significantly.

Marketing and Rental Component

4.87 Almost all the cold storages were sanctioned on the assumption thateach of the cold storages would undertake marketing of potatoes to the tune of502 of the total potatoes stored in the cold storages. Gross marketing marginexcluding rental were assumed which was significantly higher than the actualand projected rental rate of the cold storages. Of the 15 sample cold stor-ages, only three cf those operating in West Bengal undertook some marketing ofpotato. The following table gives the marketing component of three cold stor-ages in West Bengals

M-MKEI CWONENtuantity: Tons

For For Forcold Total marketing Percentage Total marketing Percntage Total marketing Percentagetorage storoge purpose share storage purpoe share storage purpos share

Tarke_r - - - 1,119 - - 8,645.5 81.6 2.2Wadli 1,098 572 52.2 1,64 242 14.8 8,497.0 18.6 0.4Memar 2,255 1,459 94.7 1,951 1,72? 68.5 8358.0 1,980.0 50.9

To," I LiA1 L2,01 60.0 4.784 1.889 41.8 11.041.1 2.0.2 18.0

4.88 It would be seen from the above table that cold storage at Tarkeswarmarketed 81.6 tons constituting 2.2? of the total potatoes stored in the coldstorage. The marketing component in case of Nadia cold storage was 52.2?during 1984-85 which declined to 14.32 during 1985-86 and further to 0.4Zduring 1986-87. Benfed which is operating Memari Cold Storage marketed 64.7Zof the total potatoes stored during 1985-86, 88.52 during 1985-86 and 50.9?during 1986-87. On the whole, in case of these three units the potatoesstored for marketing purposes constituted 60.6S of the total potato storedduring 1984-85, 41.3? during 1985-86 and 18.8? during 1986-87. The financial

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results of the operation of cold storages for marketing purposes are given inthe next section.

Financial Operation of the Cold Storages

4.89 Income of the cold storage is derived from two sources viz. rentaland other charges and net trading margin. The expenditure on the operation ofcold storage consists of variable expenses like electricity and captive power,loading and unloading, interest on working capital and fixed expenses viz.salary/establishment, maintenance/repairs, insurance, interest on blockcapital, depreciation and others. The classification of expenditure intofixed and variable is to some extent arbitrary. For instance, expenditure onelectricity is both fixed expenditure as well as variable expenditure as someminimum charges ass levied irrespective of the quantum of electricity used.The following table gives unit-wise actual and projected income during1984-85, 1985-86 and 1986-87s

ACTUAL AND PROJECTED INCOME(Rs. in lakhs)

1984-85 1985-86 1986-87Cold storage Actual Projected Actual Projected Actual Projected

west BengalTarkeswar - - 3.08 1'.36 10.49 12.78Nadia 2.53 12.78 4.35 14.20 9.06 14.20Memari 6.22 11.36 5.99 12.78 11.77 14.20

Total 8.75 24.14 13.42 38.34 31.32 41.18

BiharSaharsa - - 0.97 12.00 2.57 13.50Forbesganj 0.24 12.00 0.27 13.50 2.53 15.00

Total 0.24 12.00 1.24 25.50 5.10 28.50

Uttar PradeshUopaganj 6.64 13.80 6.48 13.80 10.13 13.80Pratapgarh 6.52 13.80 6.70 13.80 9.61 13.80Soraun 10.12 13.80 7.64 13.80 10.45 13.80Jaswantnagar - - - - 4.33 6.90Jahangirabad 2.40 5.52 1.60 6.21 4.60 6.90Sikandarabad 1.44 11.04 1.08 12.42 7.72 13.80Anola - - 1.95 12.42 8.07 13.80Sabungodam - - - - 7.12 11.04Xharkhoda 3.43 11.04 0.75 12.42 8.28 13.80Vashi (Bombay) - - - - 18.15 28.90

Total 30.55 69.00 26.20 84.87 88.46 136.54

Grand Total 39.54 103.72 40.86 147.29 124.88 206.22

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4.90 The Appraisal Report has assumed certain rental rates per ton andremoval of ceiling. In almost all the states ceilings were removed and rentalrates were allowed to settle on the basis of free play of demand and supplyforces. A table giving actual and projected rental rates in the ProjectStates is given in Table 1 in Annex 15.

Expenditure Analysis

4.91 The following table gives the actual and projected expenditure of the15 sample cold storages during 1984-85, 1985-86 and 1986-87.

ACTUAL AND PROJECTED EXPENDITURE OF SAMPLE COLD STORAGE(Rs in lakhs)

Name of the 1984-85 1985-86 1986-87 (estimated)Cold Storage Actual Projected Actual Projected Actual Projected

West BenaalMemari 12.32 12.17 11.50 12.53 15.59 12.93Tarkeswar - - 8.88 12.57 12.58 13.66Nadia 10.17 13.51 11.11 13.23 13.64 13.27

TotalWest Bengal 22.49 25.68 31.49 38.23 41.71 39.86

BiharSaharsa - - 10.74 13.44 12.32 13.67Forbesganj 9.50 13.01 10.21 13.19 10.42 13.03

Total Bihar 9.50 13.01 20.95 26.64 22.74 26.70

Uttar PradeshKopaganj 9.68 10.89 10.40 10.78 11.66 10.67Pratapgarh 12.15 10.89 12.24 10.78 12.39 10.67Soraun 10.91 10.89 10.82 10.78 11.01 10.67Jaswantnagar - - - - 6.80 7.27

Jahangirabad 6.24 6.81 6.90 7.29 7.46 7.80Sikandarabad 7.74 11.74 8.31 11.76 11.11 12.52Anola 0 0 9.68 12.98 12.19 13.59Sabungodam - - - - 15.31 14.19mharkhoda 9.45 11.84 9.88 12.36 14.07 12.77Vashi (Bombay) - - - - 17.01 18.06

TotalUttar Pradesh 56.18 63.06 68.23 76.73 119.01 118.11

Total 88.17 101.75 120.67 141.59 183.46 184.67

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4.92 The Projected expenditure differs from the actual expenditure becauseof decreased expenditure in electricity, salary and establishments and hand-ling of potatoes. There is no difference between actual and projected expend-iture on interest and depreciation as both the items are derived ones. Thereare four items of expenditure which constitute near 901 of the total expend-iture. These items are expenditure on electricity, interest, depreciation andestablishment. The following table gives the percentage of these four itemsto total expenditure during 1986-87.

PERCENTAGE TO TOTAL EXPENDITURE, 1986-87(Percentage)

Neme of the Electricity & Salary/ Interest onCold Storage Captive Power Establishment block capital Depreciation

West BengalMemari 31.23 10.00 20.85 20.59Tarkeewar 22.44 5.45 29.65 29.41Nadia 30.42 4.40 29.47 24.05

Total West Bengal 28.34 6.81 26.30 24.36

BiharSaharsa 15.91 13.72 29.87 29.46Forbesganj 18.04 7.77 28.79 34.26

Total Bihar 16.89 10.55 29.38 31.66

Uttar PradeshKopaganj 39.54 15.44 22.98 13.12Pratapgarh 37.93 16.95 21.63 12.35Boraun 36.33 15.53 24.34 13.90Jaswantuagar 27.50 9.11 26.91 31.15Jahangirabad 30.83 14.07 26.41 19.57Sikandarabad 28.35 9.00 26.10 28.44Anols 30.51 5.25 30.43 26.41Sabungodam 35.14 2.68 26.19 26.45Kharkhoda 43.99 4.12 21.61 20.04Vashi (Bombay) 32.92 9.40 21.93 27.04

TotalUttar Pradesh 34.04 9.67 24.56 21.89

Grand Total 30.62 9.12 25.55 23.73

4.93 It would be seen from the above table that on the whole, expenditureon electricity and captive power, interest on block capital and depreciationconstitute 23-302 each of the total expenditure on the operation of the coldstorages. There are certain inter cold storages variation due to difference

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in cost of construction accounting for difference in interest on block capitaland depreciation, difference in electricity rates resulting in differentexpenditure on electricity and difference in total number of staff employedand their salaries level explaining any difference in percentage share ofbalariesJestablishment to the total expenditure. Moreover, those cold storagewhich operate one chamber would have higher percentage of fixed expenditure tototal expenditure as compared to cold storage which operate both chambers.Expenditure on salaries/establishment, interest on block capital and deprecia-tion could be taken as fixed expenditure which do not vary with the scale ofoperation of the cold storages whereas the expenditure on electricity andcaptive power is to a large extent variable factor which moves in discreteunits when a cold storage starts utilizing second chamber. Expenditure onelectricity would remain the same even though capacity utilization remainsnegligible.

Financial Viability

4.94 Profitability of the 15 sample cold storages has been measured on thebasis of standard accounting procedure in two stages. In the first stage,actual and projected profitability has been worked. Three variants of profit-ability have been used, namely (a) profits as the difference between totalincome and expenditure. Expenditure includes expenditure on depreciation andpayment of interest; (b) cash accrua'ls consisting of depreciation and profitin order to quantity the cash losses of the sample cold storages; and (c) to-tal cash accruals compriging of profits plus depreciation plus interest. Inthe second stage, the financial ability of the sample cold storages to dis-charge debt obligation of principal and interest has been worked on the basisof certain assumptions. In this section, first stage has been dealt with(Annex 16, Tables 1-14). The following table gives actual and projectedincome and expenditure of 15 sample societies from 1984-85 to 1986-87:

ACTUAL AND PROJECTED INCOME AND EXPENDITURE(Rs. in lakhs)

Actual ProiectedYear Income Expenditure Profit/Loss Income Expenditure Profit/Loss

1984-85 39.54 88.17 (-)48.63 103.72 101.75 1.971985-86 40.86 120.67 (-)79.81 147.29 141.59 5.701986-87 124.88 183.46 (-)58.58 206.22 164.67 21.55

4.95 The financial results of the sample cold storages reveals that duringall the three years of operation, the cold storages as a group have sufferedlosses as against the projected profits during the period. The macro picturedepicted in the above table does not reveal the financial results of operationof individual sample cold storages. The following table gives profit andloss, cash accruals - 1 (Profit + Depreciation) and cash accrual - 2 (Profit +Depreciation + Interest).

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(Re. in lakhs)

Nme of the 1984-65 Acturl 1906-86 Actual 1687 ActualCold Storage Profits Accrual-i Acerual-2 Profit Accrunl-I Accrual-2 Proflt Accrual-i Accruat -2

Yarl (-).1 -2.8 .0.1 -5.6 -2.0 +0.7 -a8' -0.6 +2.6Tarkwr - - - -5.6 -2.1 .0.6 -2.0 *1.7 .5.4Ndia (s)7.6 -8.7 -0.7 -. 8 -8.2 +0.1 -4.6 -1.8 +2.7

TotllWest Sen-L0 (18.7 -6.0 -06 -7.8 1.4 -10.4 -0.2 +10.7

Sahara - - - -9.8 -5.9 -2.6 -9.8 -6.1 -2.4Forbsani -9.8 -I.1 -26 -9.9 -6.1 -8.1 -7.9 -4.8 -1.8

Total Bihar -9.8 -5.1 -2.6 -19. -12.0 -5.7 -17.7 -10.4 -8.7

Utter PradeshKopaganj -8.0 -1.8 *1.4 -8.9 -2.8 40.4 -1.5 0 +2.7Pratpparh -5.8 -8.9 -1.2 -6.5 -8.9 -1.2 -2.8 -1.2 +1.4Sore. -0.8 40.9 .*8. -8.2 -1.6 +1.1 -0.6 .0.9 +3.6Jasuanteagar - - - - - - -2.5 -0.4 +1.4S8kanderabod -6.8 -2.6 -0.7 -7.2 -8.8 -1.8 -8.4 -0.2 +2.7Anola - - - -7.7 -4.8 -1.1 -4.1 -0.9 +2.6Sebugod.. - - ° - - - -4.2 -4.1 -0.1Sebungodam - - - - - - -4.2 -4.1 -0.1Kharkhaod -6.0 -2.7 -0.8 -9.1 .4.0 -8.8 -6.8 -8.0 +0.1Vashi (Iubay) - - - - - - +1.1 +.S. +9.6

TOtal U.P -2.6 2. +1.7 -41.9 -26.5 -8.1 -80.7 -4.6 24.?

Tota -46.6 -22.8 -1.4 -79.7 -44.8 -12.4 -69.6 -16.2 +31.?

Note: (a) Cash Accruals-i a ProfIts plus deprciation(b) CAsh Accruals-2 a Profits plus depreciation plus Interest.

4.96 The table btings out the following featurest

(a) All the cold storages in Project States except cold storages at Vashi(bombay) have been running into losses continuously from 1984-85 to1986-87. Thus, profits as the difference between total income andtotal expenditure in case of all sample cold storages except (Vashi)had been negative. the micro data confirms the results of macrodata. What was applicable to the group as a whole is also applicableto individual cold storage units. The data on cash accrual-l bringsout that during 1984-85. there was only one cold storage at Soraun inUttar Pradesh which did not suffer cash losses. In the case of other

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cold storages, cash accruals-I were negative. During 1985-86, allthe cold storages showed negative cash accrual-i. During 1986-87,Tarkeswar, Soraun and Vashi recorded positive cash accrual-i.

(b) Data on cash accrual-2 brings out that if the cold storages do notprovide for interest and depreciation charges during 1984-85, onlythree cold storages at Memari in West Bengal, Kopaganj and Soraun inUttar Pradesh would show marginal positive cash accrual-2. During1985-86, there were five cold storages at Memari, Tarkeswar,Kopaganj, Nadia and Soraun which registered some marginal positivecash accrual-2. Cash accruals consisting of profit, depreciation andinterest were positive in case of 12 cold storages out of 15.

4.97 Even if it is assumed the capacity utilization would increase signif-icantly and reach a level of 100l and only the variable cost of operation ofcold storages would change in accordance witb the scale of operation, none ofthe sample cold storages except Vashi in Bombay would be able to service thedebt obligations. Debt servicing would not be possible for cold storageswhich would generate sufficient positive cash inflows during the moratoriumperiod. The cooperative cold storage located at Vashi would, however, be in aposition to service the debt and would be financially viable because of itsnearness to consumption center. This location has contributed to its finan-cial viability in three different ways.

(a) It has enabled ColdStorage to adopt a multi-comodity storageapproach storing diverse items such as potato, fresh fruits andvegetables, dry fruits and other grocery items.

(b) The multi-commodity storage has facilitated year around operation ofthe cold storage.

(c) Because of nearness of the urban market, commodities are stored forcomparatively shorter duration resulting in more rotatiol 1 andlarger turnover capacity.

Management and Employment

4.98 The SAR indicated tnat the project would have substantial employmentimpact both during the construction and operational phase. Though the employ-ment impact during construction phase has not been estimated, attempts havebeen made to quantify impact on employment during the operation of coldstores. IDA indicated that each cold storage would be manned by eight to ninepeople creating permanent employment for over 1,000 persons. The study of 15sample cold storage in three project states indicates that they employed on anaverage, nine people as managers, assistant managers, accountants, operatingstaff and others in 1986-87 which corresponds to the SAR target. The detailsof the persons employed by the sample cold stores and the total emolumentspaid in 1986-87 may be seen from the table belows

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PER80NS EMPLOYED AID EMOLUMENTS PAID BY SAMPLE COLD STORAGES IN 1986-87(Rs. in Lakhs)

AssistantName of the managers/ IE:alumentsCold Storage Managers Accountavts Operators Others Total paid

West BenpalMemari 1 2 3 6 12 1.56Tarkeswat _ - 3 3 6 0.68Nadia 1 1 4 2 8 0.40

Total West Bengal 2 3 10 11 26 2.64

Bih&rSaharsa 1 2 2 4 9 1.69Forbesganj 1 - 2 2 5 0.81

Total Bihar 2 2 4 6 14 2.50

Uttar PradeshKopaganj 1 2 2 5 10 1.80Pratapgarh l£ 2 5 10 2.10Soraun 1 3 2 4 10 1.71Jaswantnagar 1 - 3 3 7 0.62Jahangirabad 1 - 4 4 9 1.05Sikandarabad 1 2 3 5 11 1.00Anola 1 1 3 3 8 0.41Sabungodam 1 1 3 3 8 ).58Kharkhoda 1 1 3 3 8 0.93Vashi (Bombay) 1 1 3 3 8 1.60

TotalUttar Pradesh 10 13 28 38 89 11.51

Total 14 18 42 55 129 16.65

4.99 It would be seen from the table on pre-page that the cold storagehave employed 5 to 12 people but none of them have employed marketing managersas envisaged because the marketing component has been almost nil. Even theMemari cold store operated by the BENPED (West Bengal) marketing has been doneby the federation from the Lead office without any involvement of the coldstorage staff. Out of the 15 sample cold storages, 7 are being operated byState Cooperative Marketing Federations and their operational policies aredecided from their head office. In the remaining eight cold store, only twoin Vest Bengal have elected Board of Management and the remaining six in U.P.have nominated Boards. Due to non-Implementation of marketing component ofthe Project so far, the marketing societies have not been able to undertakemarketing of potato in their account. Even in the case of cold storages run

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by Federations in Bihar and U.P., marketing staff has not been appointed sofar. It would also be seen from above that salary paid to the staff of coldstorages operated by federations in U.P. and West Bengal is significantlyhigher as compared to other cold stores being operated by the marketingsocieties.

Comparison of SAR Projections and Results of Evaluation Study

4.100 SAR had assumed that operation of the cold storages would start at90? utilization increasing to 982 by year five. the actual data on capacityutilization of 15 sample cold storages has revealed that the capacity utiliza-tion in the first year has been, by and large, below 501, increasing to 80-90?during the third year. SAR assumption of capacity utilization by 981 by yearfive appears to be valid. SAR had assumed that the entire capacity would beutilized for rental at the rate of Rs. 240/per ton for one storage season.Data on rental for the three Project States showa that the realized rental inWest Bengal was Re. 260/per ton fixed by the State government which was higherthan the level assumed by SAR; in Bihar, there was no ceiling on rental andrealized rent ranged from Re. 260 to Re. 3001per ton per season. In U.P.,ceiling on rental on cold storages constructed under NCDC-II was removed;realized rent at Re. 260-270/per ton in case of some cold storages was abovethe rental assumed by SAR. However, in some cold storages at Jaswant Nagar,Jahangirabad, Anola and Rharkhoda, rental in some years was around Rs. 230lower than the level assumed in SAR.

4.101 SAR had assumed that 501 of the customers would use marketing ser-vices offered by the cold storages at a fee of Re. 37.50 per ton. None of thecold storages offered marketing services to the members and the income fromthis source was nil. It was also assumed in the SAR that the credit advancesagainst potatoes would be at least Re. 1501- per ton providing 1Z marginincome to the cold storages. None of the cold storages offered credit advan-ces against potatoes, and the income from disbursement of credit was also nil.The data of the 15 sample cold storages show that on an average 1,037 potatofamilies have use the new cold storage facilities which is comparable witth theSAR average level of 984 to 1,181 potato families. SAR also estimated the netbenefits of storing and marketing through cooperatives at Re. 150/per ton fortable potato and at Rs. 300 for seed potato. Evaluation study, however, showsthat farmers nave made their own arraugements for marketing of potato andtheir benefits are estimated to be more for both table and seed potato rangingfrom Re. 250 per ton to Re. 500 per ton.


4.102 Economic rate of return of the cold storage component of the projecthas been calculated by estimating economic benefits and costs. Three tangiblebenefits are likely to flow from the operation of Cold Storage. These ben-efits are:

(a) Reduction in storage losses

(b) Increase in value-added of the potatoes

(c) Savings in the seed transport cost.

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4.103 SAR has estimated the reduction in storage losses at 202; 252 withoutcold storage and 52 with cold storage. The value of the savings in storagelosses has been worked out on the basis of prices derived from average exportprice of potato from India in 1977-78 and U.S. wholesale price during mid-season of 1980-81 adjusted by deducting 50 percent value for quality differ-ence and Rs. 420 for international shipping and handling costs. The FOB priceobtained by everaging these two prices has been converted into domestic priceby subtracting domestic transport and handling costs. SAR has worked out thevalue-added by storing potatoes in two parts. The potatoes stored for market-ing purpose have been separately considered from the potatoes stored for seedpurposes. It has been assumed that storage capacity would be equally dividedbetween potatoes stored for marketing and potato stored for seed purpose.Each cold store of 4,000 tons capacity operating at an assumed 952 capacityutilization level would be storing 1,500 tons of potatoes for seed and market-ing purposes separately after subtractLag the capacity association with reduc-tion in storage losses. Value added has been worked out as the differencebetween off-season price and harvest price. The price of seed potatoes forvalue-added purpose has been taken at Rs. 200 per ton higher than the pricesof table potatoes. SAR has assumed that half of the potatoes stored for seedpurposes in the cold stores would come from H.P. with a lead distance of anaverage 500 km and half of that would consist of locally produced potatoes.The local potato stored for seed purpose would reduce the volume of seedpotato formerly obtained from H.P. and would result in transport cost savings.SAR has also applied a standard conversion factor of 0.8 for all domesticprices to convert them into economic prices as an adjustment called for theover-valuation of the local currency.

4.104 In estimating the benefits from the sample cold stores, the followingoperational methoaology has been used.

(a) The survey data has revealed that the net reduction in storage losseswould be 25-302 without cold storage and 52 with cold storage.

(b) Potato in India is at present almost an internationally non-tradedcommodity. The domestic prices of potatoes reflect the fully play ofdemand and supply forces not being controlled by any outside agency.For purpose of computation of economic value of quantity saved instorage, the average wholesale prices of potatoes calculated fromaverage post harvest prices from January to March in the potatoproducing areas relevant for each cold store and off-season pricesfrom July to October in the nearest consuming center have been taken.The average prices of the relevant months in order to obtain pricesin real terms with 1984-85 as the base year.

(c) Empirical data collected from the operation of cold stores hasrevealed that farmers in West Bengal and Bihar have, on an average,been storing 202 of the potato in the cold stores for seed purposesand remaining 802 for marketing during the lean season to gain fromthe price differences. In Uttar Pradesh, empirical data has revealedthat farmers, on an average, store about 172 of potato for seedpurposes and rest for marketing. Storage component for marketing andseed purposes has been taken accordingly after subtracting thecapacity associated with reduction in storage losses.

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(d) Value-added of the stored table potato has been taken as the differ-ence between the post harvest price and off-season price duly ad-justed by the relevant wholesale price indices with 1984-85 as thebase year to obtain value added in real tenms. The price of seedpotati has been taken as 20S higher than the adjusted prices of tablepr -.oes.

(e) Responses of the farmers in the catcbment area of sample stores hasindicated that tney have not stored seed potatoes purchased fromHimachal Pradesh. In view of this, no transport cost savings of seedpotatoes has been taken for estimating economic benefits from thecold stores.

(f) No conversion factor has been used to convert domestic prices Intoeconomic values.

4.105 Based on above assumption savings in storage losses and value addedhas been worked out for the sample cold storage as may be seen from tablebelows

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ECONOMIC BENEFITS(Re. in millions)

Name of the Reduction TotalCold Storage in Storage Losses Value-Added Ecoomic Benefits

84-85 85-86 86-87 84-85 85-86 86-87 84-85 85-86 86-87

Vest BengalMemari 0.59 0.90 1.30 1.41 2.00 2.02 2.00 2.90 3.32Tarkesmar - 0.52 1.23 - 1.22 1.94 - 1.74 3.17NasIa 0.43 0.65 1.18 0.40 0.50 1.86 0.83 1.15 3.04

TotalWest Bengal 1.02 2.07 3.71 1.81 3.72 5.82 2.83 5.79 9.53

BiharSaharia - 0.20 0.28 - 0.18 0.35 - 0.38 0.63Forbeaganj 0.03 0.05 0.26 0.06 0.09 0.35 0.07 0.14 0.61

Total Bihar 0.03 0.25 0.54 0.05 0.27 0.70 0.08 0.52 1.24

Uttar PradeshKopaganj 0.61 0.88 0.85 1.08 1.76 0.91 1.69 2.64 1.76Pratapgarh 0.75 0.91 0.81 1.34 1.82 0.86 2.09 2.73 1.67Soraun 0.82 1.04 0.88 1.46 2.08 1.34 2.28 3.12 2.22Jasvantnagar - - 0.60 - - 0.57 - - 1.17Sikandarabad 0.15 0.16 0.67 0.30 0.27 0.89 0.45 0.43 1.56Anola - 0.21 0.96 - 0.44 1.99 - 0.65 2.96Sabungodam - - 0.64 - - 0.83 - - 1.47Uharkhoma 0.39 0.10 0.82 0.61 0.20 1.07 1.00 0.30 1.89Vashi (Bombay) - - 2.40 - - 4.50 - - 6.90

TotalUttar Pradesh 2.96 3.57 9.09 5.26 6.98 13.56 8.22 10.55 22.65

Grand Total 4.01 5.89 13.34 7.12 10.97 20.08 11.13 16.86 33.42

Project Investment

4.106 The actual cost of constrz-ction of cold stores and the installationof machinery has been bifurcated into the cost of different categories ofconstruction material such as cement, steel, local construction material,services and machinery. The estimated cost of land, construction materials,services and machinery has been converted Into economic cost by using conver-sion factors. The conversion factors for cement and steel has been taken as1.2 of the market costs, while land and supervision expenses hav* been costedat the market rates. The conversion factor for skilled labor and local cons-truction material has been taken as 0.8 of market costs and that of unskilledlabor as 0.6 of the going wage rate. In case of machinery, keeping in view

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the steel component of 25Z conversion factor of 1.2 of the market rate hasbeen applied for that part of the cost and the rest has been costed at themarket rates. From the economic cost, taxes and duties totalling 71 of theeconomic cost of construction materials and machinery has been deducted toarrive at the total economic project cost.

Operating Costs

4.107 Operating costs of the cold stores include salary to the staff ofcold stores, electricity and power, maintenance and insurance. These costshave been taken as reported by the sample cold stores. Incremental operatingcosts for the marketing of the potato stored in the cold stores has beenworked out on the basis of following operational methodology.

(a) Loading and transportation cost to the cold stores and to the regul-ated market has been calculated at the rate of Rs. 1.40 per tonlkm.for the potatoes stored in ̂ old stores. Loading and transportationcost only to regulated markets that would otherwise have alsooccurred has been taken as costs in a situation where cold storage isnot in operation.

(b) Loading and unloading charges at the cold store has been calculatedat the rate of Rs. 18.50 per ton. Since these operations areperformed by unskilled labor, a conversion factor of 0.6 has beenapplied to arrive at the economic cost.

(c) Drying and sorting at the cold stores has been calculated at the rateof 22 of average adjusted price of potatoes.

(d) Market fee of Rs. 5.00 (five) per ton and sale commission at the rateof 21 on the adjusted off-season prices has been taken as marketingcosts. In without cold storage situation market fee @ Rs. 5.00 perton and sale coauission at the rate of 22 on the post harvest pricehas been taken as marketing costs.

(e) Interest on working capital has been calculated at the rate of 152per annum for holding the stocks for a period of 7 months.

4.108 Based on these, marketing costs with and without cold storage hasbeen computed and incremental marketing costs has been attributed to the oper-ation of cold stores. Economic benefits and operating costs have been assumedto stabilize for each sample cold store after recording optimum capacity util-ization level. These capacity utilization levels and years in which theselevels are expected to be achieved has already been indicated. Based on theoperational methodology as indicated above, economic rate of return for allsample cold stores shows that the economic rate of return of sample cold stor-ages as a group is less than the SAR economic rate of return of 34Z for thecold storage component of the project. See the table belows

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ECONOMIC RATE OF RETURN(Percent)

West Ben&al

1. Memari 34.522. Tarkeswar 38.203. Nadia 31.17

Bihar

1. Saharsa 16.522. Forbesganj 13.39

Uttar Pradesh

1. Kopaganj 35.822. Pratapgarh 35.823. Soraun 47.164. Jasvantnagar 25.555. Jahantgirabad 14.336. Sikandarabad 13.297. Anola 33.578. Sabungodam 15.289. Kharkhoma 14.8810. Vashi (Bombay) 81.47

Total 29.73

Cold Storage

Suggestions

4.109 The empirical evidence collected and analyzed in case of 15 samplecold storages selected from West Bengal, Bihar and Uttar Pradesh has conclu-sively brought out that except the cold storage which has been set up in thebiggest consuming center at Bombay, other cold storages would not be able topay back principal and interest after the moratorium period of 5 years. Inmost of the cases the carry forward cash accruals consisting of profit, depre-ciation and interest would be negative which would further handicap the coldstorage units in breaking even and attaining financial viability in the yearsto come. The broad conclusion has been drawn on the fundamental assumptionsthat the cooperative cold storage units would use the entire space on rentalbasis: the marketing component would be nil; there would be no charge infixed and variable costs of operations; the cold storages would operate at themaximum feasible capacities in the next 10 years; the debt-equity ratio wouldbe 60:40; there would be no change in rentals. In this section some of theassumptions are relaxed to provide for deliberate intervention in order toimprove the operational efficiency of the cold storage units and make themviable. Assuming block cost for Rs. 75 lakhs per cold storage the cost ofrunning a typical cold storage may be approximated as follows:

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(Re. in Lakhs)

Item of Cost Annual Expenditure

Electricity 3.50Salaries/Establishment 1.25Interest 4.50Loading and Unloading 0.60Insurance 0.50Maintenance and Repairs 0.20Others 0.20Depreciation 3.00

Total 13.75

4.110 Assuming block investment of Rs. 75 lakhs and loan component at 60?and capacity utilization of 100, the following table summarizes the rentalper ton to secure different level of cash generation starting from case-Ivhere the unit covers only operating costs to case-S where unit covers all thecost and also able to pay loan installments.

(Rs. in lakhs)

Case Total Cost Rental per ton (Re.)

Without interest and depreciation 6.25 156.25

Vith interest and without 10.75 268.75depreciation

With interest and 13.75 343.75depreciation both

Principal and interest without 10.75 381.25without depreciation +4.50

(Principal)

Principal and interest with 13.75 456.25depreciation +4.50

(Principal)

4.111 The implication of the above analysis is that no cold storage wouldbe able to service principal and interest at the existing level of rent. Therentals will have to be increased substantially to cover full payments of

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principal and interest. At present there are no ceiling on rental on coldstorages constructed under NCDC-II in U.P. and Bihar. However, there isceiling of Rs. 260 per ton in West Bengal. Ceiling on rental is avoidable andunnecessary constrain on the working of cold storages which should be removedfor all type of cold storages in U.P. and West Bengal and the rate should beallowed to settle as in the free market. The free play of demand and supplyforces in Bihar has demonstrated the rates after removal of ceiling mayincrease to Rs. 290 - Rs. 300 per ton depending upon the situation. The rateof Rs. 3001 per ton is not exorbitant and the farmers will be able to affordit in U.P. and West 8engal if they can afford it in Bihar.

4.112 On the expenditure side the major items of expenditure are: (a) In-terest on block capital; (b) Depreciation; (c) Electricity and captive power;and (d) Salary/Establishment. Interest and depreciation are derived expend-iture from the total block cost. Depreciation is a flexible item of expend-iture which could be manipulated by the society/federation. However, interestcan be reduced from 60:40 to 40s60 and/or followed by reduction in rate ofinterest. There is no scope for reduction in the rate of interest. Expend-iture on electricity and captive power can be reduced if continuous supply ofpower is assured to the cold storage units which would minimize the use ofcaptive power which is costly. Expenditure on salary/establishment need to bereduced in case of cold storages run by State Federations. There is no scopefor reduction of expenditure on loading and unloading charges, insurance,maintenance etc. However, in case of those cold storages which have recordedadequate cumulative cash inflow at the end of the moratorium period canimprove their financial position by investing the cash inflow in suitablesecurities or through advance repayment of principal. In our study only twosocieties viz. Tarkeawar and Soraun have registered sufficient positive netcumulative cash inflow at the end of the moratorium period.

4.113 Marketing component was a crucial link for the successful implementa-tion of the project. The project provided that the SCMP would envelope theirown marketing mechanism under the project and establish offices and recruitthe specialist staff and gradually increase cooperative penetration for mar-keting of potatoes. The SCMF would develop marketing intelligence and hirequalified staff for expert assistance in marketing which would be available atthe primary level. NAMED would develop marketing intelligence service for theSCM? and carry out the research and experiment in potatoes marketing system.So far none of the project States have implemented marketing component in theway in the way it was envisaged to be implemented in the project. It isessential that marketing component should be implemented by all the projectStates so that marketing of potatoes by cooperative cold storages which isalmost negligible at present would take definite shape and direction. How-ever, in implementing marketing component it is necessary to understand thetotal economic environment under which marketing of potatoes is done in thecountry. The following table gives production of potatoes in 3 Project Statesviz. West Bengal, Bihar and Uttar Pradesh and all India level during 1983-84,1984-85 and 1985-86 and cold storages capacity in operation by the end of1985-86 in the 3 Project States and in the country as whole.

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PRODUCTION OF POTATO AND COLD STORAGECAPACITY IN THE PROJECT STATES DURING 1985-86

Production: 000 tonsCapacity s 000 tons

Production of Potato Cold Storage CapacityName of the State 1983-85 1984-85 1985-86 (1985-86)

West Bengal 3,064 3,135 2,758 1,405Bihar 1,288 1,353 1,314 351Uttar Pradesh 5,557 5,800 4,073 2,310

Total 9,909 10,288 8,145 4,066

All India 12,152 12,570 10,420 5,099

4.114 It would be seen from the above table that 1985-86 was a drought yearwhich recorded lower production as compared to the production in the precedingtwo years. The capacity created by the end of 1985-86 was sufficient to meetthe requirement of the production of the level of 1985-86. Huwever, coldstorages capacity by the end of 1985-86 appears to be inadequate in the lightof production during 1983-84 and 1984-85. Complete balance between potatoproduction and cold storage capacity cannot be achieved because there arelarge number of marginal cases where it would be uneconomic to have more thanone cold storage or the production is scattered over the vast area which wouldmake it difficult to set up cold storage meeting the requirements of theentire area; in some areas the production is too low to justify establishmentof cold storage. Nevertheless, there are areas in the country which requiremore cold storages. Increase in the cold storage capacity has reduced theprice-spread between harvest and lean season prices resulting in some levelingdown in the inter-seasonal price difference. Potatoes stored in the coldstorage during the peak period perform the functions of buffer stocking akinto the buffer stock operations undertaken by FCI. Coid storages mop up theexcess potato during the peak period manifesting in reduction of marketarrivals and increase in prices and, during the lean months the releases fromthe cold storages which may be as high as 50Z of the total production dampenthe rise in the prices of potato. The following table gives coefficient ofvariation of month-erd wholesale prices during 1985, 1986, and 1987 at import-ant producing and consuming centers in the country.

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COEFPICIET OF VARIATION

Center 1985 1986 1987

Bombay 27.08 25.15 28.35Bangalore 28.20 29.03 22.48Calcutta 31.37 26.89 15.20Delhi 35.70 29.13 20.58Kanpur 48.35 38.59 38.58Farrukhabad 44.29 37.51 32.88

Except Bombay vhich is the biggest deficit consumption center, coefficients ofvariation have tended to decline in all centers indicating statistical proofof reduction in inter-seasonal price-spread.

4.115 Another important aspect of operation of cold storage is the correla-tion of rental with production and prices of potato. During the year ofbumper crop, the prices of potato decline. However, there is a scramble forcold storage space which increases rental. The decline in price of potatoincrease in rental make storing and marketing of potato less profitable duringthe year of bumper crop. Coefficient of variation also declines during bumpercrop. Coefficient of variation also declines during bumper year. Duringdrought year, rentals decline, prices of increase end storing and marketing ofpotato is an attractive proposition. Coefficient of variation increasesduring drought year. A cold storage unit has to incur two types of cost formarketing of potato: (i) cost of handling, transportation and incidentalcharges, market fee, interest on working capital (ii) opportunity cost ofrental. The sale prices of potato should cover, besides purchase price, bothtypes of costs mentioned above and in addition provide some reasonable marginon turnover. The following table indicates the average peak and lean seasonwholesale prices of potatoes in selected centers from 1983 to 1987.

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AVERAGE PEAR AND LEAN SEASON WHOLESALE PRICES OF POTATO IN SELECTED CENTRESRe. per quintal

1983 1984 1985 1986 1987Center P L P L P L P L P L

Karnal 97 176 85 94 51 128 213 261 92 135

Jalandhar 88 149 88 91 70 110 147 262 101 160

Delhi 110 175 73 103 52 130 181 273 98 145

Farrukhabad 91 174 48 76 36 108 152 234 84 160

Kanpur 90 171 70 103 42 143 156 230 91 177

Bombay 153 246 107 116 85 138 235 323 137 233

Calcutta 97 192 80 141 77 162 191 280 119 167

4.116 The peak season prices is the average of month-end wholesale pricesin February, March and April and lean season price is average of month-endwholesale prices in August, September, October and November. Due to localfactors peak and lean season during the year may differ slightly from centreto centre. The data in the above table reveals the following main features:Farrukhabad, Xanpur, Calcutta and Jalandhar may be regarded producing centresof potato; Karnal, Delhi, Bombay may be treated as the consuming centres.Prices in Bombay are out of alignment with the general level of prices duringthe peak and lean season as it is the biggest consuming centre in the country.For instance, during 1983, the peak season price in Bombay was Rs. 153 perquintal which was higher than the general level of prices obtaining in othercentres. Prices in consuming centres are generally higher than the prices inproducing centres.

4.117 India achieved a major break-through in the production of potatoesduring 1984 when the production increased from 9.96 million tons during1982-83 to 12.15 million tons in 1983-84. Due to bumper crop, the differencebetween peak and lean season prices narrowed down. The production remained athigh level during 1985 also. However, the difference between peak and leanprices increased during 1985. Nevertheless, during the bumper crop as wit-nessed 1984 it was not profitable to purchase, store and marketing of pota-toes. Such operations would have resulted in considerable loss. During 1986the production declined to 10.7 million tons and in the process the differencebetween peak and lean season price accentuated. During 1987, production agaivincreased which again narrowed down the difference between peak and leanseason prices. The main conclusions which can be drawn from this analysis areas follows:

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(a) The difference between peak and lean season price increases duringdrought year and declines during bumper year.

(b) Marketing would be more profitable during drought year than duringbumper year.

(c) The potatoes prices witness wide swings due to fluctuations in annualproduction. The index of wholesale price of potatoes which was 14S.7in 1982, increased to 203.6 during 1983, declined sharply to 181during 1984 and further to 162.8 during 1985, again jumped to 355.7during 1986 and stood at 272.5 during 1987.

(d) It is advisable to have continuous feed back from the local growersabout the forecast of produetion of potatoes before the marketingstrategy is worked out. If the forecast indicated bumper crop andhigh market arrivals then it would be profitable to rent out thespace as the rental are likely to increase and price-spread decline.

(e) It also leads to the conclusion that. marketi ; of potatoes cannot bea permanent feature of cold storage.

4.118 Assuming that the forecast indicates reduced production of potatoes,the marketing societies/federation operating the cold storages should imme-diately put into commission a well though-out marketing plan based on thefollowing parameters.

(a) Arrangements of funds from DCCB.

(b) Firm tie-up purchase arrangements with the members/growers.

(c) Arrangements for market intelligence reports, tie-up arrangementsthrough federation or otherwise for timely disposal of stock inphased manner.

(d) Preparation of standard marketing budget for the cold storage unit.

4.119 The movement of prices of potato brings out that it will be moreprofitable for the society to sell in the deficit States than sell in thenearest consuming centre where the difference in prices can be accounted fordue to difference in transportation costs leaving little margins for thesociety/federation. Selling in the deficit states would require setting up amarketing cell in the Federation, gathering of market intelligence, transpor-tation of potatoes to deficit states, storage of potatoes in certain cases,etc. Societies are not equipped to undertake inter-State marketing of potato.Federation of each project state should fill in the marketitg gaps. It is inthis context that the market component of the project has to be implemented.It is not necessary for each cold storage unit to undertake full-fledgedmarketing of potato in their own account during the initial years. The fullmarketing component cvn be built up over the years, gradually in discretesteps. In the initial stages, the cooperative cold storage unit could performcertain functions connected with the marketing such transporting of potato tothe regulated market, grading of potatoes, bringing growers and buyers to-gether. For the services rendered they can charge reasonable commission from

- 102 -

the farmers. Gradually the cooperative storage units would also start actingas procurement centres after forgoing linkages with the farmers. They wouldprocure potatoes in their account. The actual marketing of potato will bedone by the Federation. In the marketing strategy they would always be somerisks which would result in losses to the societies. To cover these risks thecooperative societies may set up Price Fluctuation Fund, out of profit earnedfrom the marketing.

4.120 Besides the marketing of potatoes the financial and economic viabi-lity of the cold storages can also be improved by sanctioning ice plant asadjuncts to the cold storage wherever there is scope. A model scheme for iceplant of 15 tons per day has been prepared by NCDC and placed in annex 18.The model plan brings out that the cooperative cold storage unit would be ableto earn approximately Rs. 1.08 lakhs per annum from sale of ice. Since mostof the cold storages are located near urban centres, almost all of them havescope for sale of ice and setting up of ice plants. However, this suggestionhas to be evaluated with all its ramifications including demand and supplyschedule of ice facing each and every cold storage otherwise the investmentmay be financially unviable. The working of Cooperative Cold Storage at Vashihas clearly indicated that a multi-commodity storage approach can also improvetheir financial viability. To facilitate the adoption of such a storagepolicy, cold storages can follow a flexible price policy with regard to therentals and various items such as dry-fruits, fresh fruits and vegetable andother miscellaneous grocery items can be stored for comparatively shorterduration. Such as approach would also increase the rotations of cold storagesand enlarge their turnover levels. Howetsr, preference may be given to produ-cers of potato and consumer cooperatives so that the benefits of cold storageflow to the target group. The study of the sample cold storages has indicatedthat most of the cold storages have reached a fairly high level of capacityutilization over the years. There is a scope for creating additional coldstorage capacity in some areas. It is, therefore, suggested that the addi-tional capacity should be sanctioned only to the existing cold stores. Thecold storages will then be able to operate higher capacities with existingstaff and would be able to economize on the fixed expenses of salary andestablishment.

- 103 -

V. CONCLUSIONS

5.1 The empirical evidence supplemented by findings of the EvaluationReports of NCDC-II Cooperative Storag.e Project in Maharashtra, Andhra Pradesh,Bimachal Pradesh, Punjab, Bihar and Uttar Pradesh has brought out in boldrelief that the objectives of the Project have been fully achieved. The stor-age facilities at Federations, PCMS and PACS level have been crea,sed in con-sonance with the targets; the Implementing Agencies have established thenecessary institution framework to carry out the imperatives of the projectapproach. Increase in the non-credit business turnover of the societies,benefits derived by the members in terms of easy availability of inputs andconsumer goods, reduction in storage losses and savings in transport cost beartestimony ti the significant impact of the storage project on beneficiaryinst4tutions and farming community. The beneficiary institutions will, by andlarge, be able to pay back principal and interest from the incremental genera-tion of income as a result of godowns. Thus NCDC-II Storage Project hasproved useful to the farmers, financially viable to the cooperative institu-tions and socially desirable. The State authorities are alive to the need forfurther improving the utilization of the storage facilitiee and are in theprocess of implementing action program to make godowns as growth centres forthe rural development.

5.2 Creation of cold storage capacity under NCDC-II has been in line withthe trend in production of potatoes; it has helped to reduce potato losses,increase value added, create employment effect and sustain larger area underpotato cultivation. They have also proved to be economically viable. How-ever, due to heavy cost escalations, the operating costs have increasedresulting in strains on generation of adequate cash flow. The project statesare taking measures to gear up their operations to improve their financialviability. On the whole, cold storages are indispensable infrastructurals forthe economy.

-105- ANNEX 1

INDIA

SECOND NATIONAL COOPERATIME DEVELOPMENT CORPORATION PROJECT (CRE5IT 1146-IN)


Technical and DevelopyMental Staff Tarteted and Actually Postedby the ImPlementing Agencies

ExecutiveProject Project Engineers/ EngineeringOfficer/ Devel- Deputy Supervisor/ Site

State/Orga- Project opment Executive Assistant Junior Super-nization Manager Officer Engineers Engineer Engineers visor

State Coop. 2 16 1 12 45 15Bank (AP) (3) - (13) (29) (51) _

BISCOMAUN 1 2 1 4 8 30(Bihar) - (1) - (6) (11) (13) _

State Coop. 2 8 1 2 4 1SBank (HP) (1) - (1) (7) (24)

State Land 2 8 1 6 22 200Development (1) (23) (2) (14) (38) (67)JaBank (Maha-rashtra)

State Coop. 2 9 1 2 4 20Bank (Punjab) (2) (2) (2) (7) (30) _

Stite Coop. - - - - -

Bank (UP) (2) (10) (4) (26) (72)

la Architects.

Notess (1) Figures in parentheses indicate the technical persornel actuallyposted.

(2) In Uttar Pradesh (UP), additional technical personnel were notenvisaged to be posted.

106 ~~~~~~~~~ANNEX 2Table 1

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


Financial Indicators of Maharashtra State Land Development Bank(Re million)

1979/80 1980/81 1981/82 1982/83 1983/84 1984185 1985/86 1986/87

Share capital 300.54 326.81 338.89 363.33 372.67 387.02 393.11 400.20

Reserves 144.50 151.60 195.62 236.31 266.12 289.82 312.37 318.94

Deposits 0.46 0.52 0.03 1.21 00S 0.21 0.76 0.71

Borrowings 1,948.00 2,183.30 2,512.20 2,852.70 3,214.40 3,393.40 3,548.00 3,953.40

Loans disbursed(long-term) 413.20 541.70 412.50 617.60 585.10 492.70 572.20 641.40

Loans overdue 191.20 553.30 330.00 357.70 421.00 494.90 438.50 509.00

Overdue as 2 todemand 46.00 65.00 42.00 45.00 49.00 48.00 n.a. 51.00

Profit/loss 15.46 6.47 5.09 6.98 -8.60 16.38 0.67 1.73

-107- ANNEX 2Table 2

INDIA

SECOND NATIONAL COOPERASTVE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


Financial Indicators of Andhra Pradesh (AP) State Cooperative Bank(Rs million)

1980/81 1981/82 1982/83 1983184 1984/85 1985/86 1986187

Share capital 110.20 115.90 129.40 139.20 154.10 163.63 174.71

Reserves 171.90 206.11 233.32 270.58 287.55 296.80 318.68

Deposits 1,043.90 1,063.50 1,177.62 1,331.00 1,361.31 1,547.10 1,719.23

Borrowings 519.70 982.60 1,246.10 1,153.80 i,357.50 1,515.80 1,625.90

Loans disbursed

Short-term 800.26 940.93 1,195.01 1,439.79 1,449.74 1,693.63 1,883.98

Medium-term 483.61 644.90 741.45 766.57 1,060.64 1,074.43 1,121.57

Long-term 46.14 65.53 258.12 41.75 71.21 229.86 135.39

Loans overdue 149.64 93.41 153.20 188.72 356.71 612.73 823.80

Overdue as 1 todemand 13.60 7.60 12.40 12.69 18.61 24.30 32.67

Profit/loss 11.86 12.18 16.05 11.26 3.50 12.34 12.80

- 108 - -Table 3

INDIA



Financial Indicators of Uttar Pradesh (UP) State Cooperative Bank(R9 million)

1980/81 1981182 1982/83 1983184 1984/85 1985186 1986187

Share capital 125.70 141.60 158.10 178.40 184.90 195.80 200.00

Reserves 277.80 321.30 381.57 476.47 503.86 538.92 564.61

Deposits 1,959.40 2,311.20 2,553.80 3,046.00 3,401.40 3,897.50 4,414.80

Borrowings 1,125.08 1,526.10 1,742.20 1,791.70 1,804.20 2,106.00 2,237.50

Loans disbursed

Short-term 1,358.70 1,414.30 1,459.00 1,668.60 1,527.00 1,854.40 1,703.70

Medium-/long-term n.a. 195.50 621.80 542.40 260.50 406.30 311.70

Others n.a. 4,305.70 4,542.80 5,071.70 5,906.20 8,367.70 8,302.40

Total 5,577.30 5,915.50 6,623.60 7,282.70 7.693.70 10,628.40 10,317.80

Loans overdue 89.50 217.20 141.30 237.00 322.40 409.30 720.40

Overdue as Z todemand 6.01 14.37 6.65 11.20 15.29 14.06 24.10

Profit/loss 30.6 32.2 36.3 36.4 36.5 31.3 5.5

ANNEX 2- 109 - Table 4

INDIA



Financial Indicators of Puniab State Cooperative Bank(Rs million)

1980/81 1981/82 1982183 1983184 1984/85 1985/86 1986187

Share capital 67.80 76.30 105.40 110.80 117.90 118.20 116.70

Reserves 50.30 52.10 95.40 105.10 102.50 112.90 120.90

Deposits 938.60 990.80 1,078.10 1,192.80 1,454.20 1,568.00 1,382.90

Borrowings 484.50 451.10 484.10 1,380.90 280.80 300.30 783.60

Loans disbursed

Short-term 3,385.80 5,186.80 5,743.90 5,498.50 6,812.60 6,348.50 5,890.00

Medium-term 4.50 21.70 3.20 132.30 13.20 38.20 48.80

Long-term 12.10 41.20 60.60 76.90 96.90 74.20 35.50

Loans overdue 57.40 60.80 6.10 6.10 1.90 1.60 4.10

Overdue as 2 todemand 2.67 1.50 0.14 0.36 0.10 0.03 0.80

Profit/loss 8.1 20.1 10.1 3.5 -9.4 -14.6 -4.7

- 110- ANNEX 2Table 5

INDIA


PROJECT COMPLETION REP0RT

Financial Indicators of Himachal Pradesh (HP) State Cooperative Bank(Rs million)

1980/81 1981/82 1982/83 1983184 1984/85 1985/86 1986/87

.Share capital 9.60 10.10 10.60 11.40 12.50 12.80 14.20

Reserves 9.10 12.30 17.10 20.60 23.10 38.90 44.80

Deposits 154.30 139.70 227.70 27.10 323.40 419.10 524.80

Borrowings 2.30 4.10 7.90 21.60 29.20 33.30 53.30

Loans disbursed

Short-term 0.80 0.90 1.80 12.20 7.50 10.60 12.20

Medium-term 2.90 3.60 17.00 9.90 19.10 24.40 40.10

Long-term -2.80 2.20 10.20 11.20 11.60 20.00

Loans overdue 16.60 16.60 10.20 9.10 13.50 14.60 21.30

Overdue as I todemand 79.38 82.20 49.70 54.40 48.07 49.90 50.70

Profit/loss 0.30 2.70 4.50 4.90 4.80 4.70 2.90


INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMKNT CORPORATION PROJECT (CREDIT 1146-IN)


Growth of Membership of Sampled Societies in Project Statess"Before" and "After" Comwarison

('000)

Andhra Himachal UttarPradesh I4aharashtra Pradesh Punjab Pradesh(76) (39) (47) (86) (48)

1979/80 40.9 14.3 12.0 35.6 -

1980/81 45.1 15.0 12.3 37.7

1981182 59.0/a 15.5 12.8 3 9 .1/a -

1982/83 63.8 15.6La 13.8 40.2 40.9

1983/84 67.4 16.0 14.O0a 42.0 41.7

1984/85 68.8 16.4 14.4 42.8 42.9La

1985186 71.4 17.1 14.8 43.4 44.3

1986/87 - - - - 45.7

la First year of Project.

Notes Figures in parentheses indicate number of sample societies.

Note: Annex 3 deleted.

- 112 - ANNEX 3Table 2

INDIA



AvexRage Membership per Sample Society in the Project Statet'With" and 'Withoat" Comparison

(Numbers)

Andhra Pradesh MaharashtraWith Without With Without Himachal UttarGodown Godown Godown Godown Pradesh Punjab Pradesh

1979180 538 423 367 175 255 414

1980181 594 437 385 179 261 439

1981182 776 575 396 187 272 454 -

1982/83 840 609 400 189 291 467 853

1983/84 887 645 410 196 297 488 868

1984185 906 652 421 204 307 497 895

1985/86 936 670 438 210 314 504 929

1986187 - - - - - - 952


INDIA

SECOND NATIONAL COOPERATIYE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


Disbursement of Credit bD Sample Societiess*Before' and "After' Comparison

(Re million)

Andhra Himachal UttarPradesh Maharashtra Pradesh Punjab Pradesh

1979180 22.8 10.9 2.2 85.0

1980181 28.6 13.9 2.6 72.0

1981182 26.9 a 13.7 2.9 93.6la -

1982183 28.4 iS.5/a 3.6 125.0 10.4

1983184 37.1 18.0 4.1L& 104.2 10.0

1984185 32.1 28.1 4.9 129.2 9.3LA

1985186 26.7 30.1 5.6 117.5 12.5

1986187 - - - - 11.9

/a Project year.


INDIA



Disbursement of Credit by Sample Societiess"Actual" and *P_oiected ComDarison

(Rs million)

1981182 1982/83 1983/84 1984185 1985/86 1986/87

Andhra Pradesh

Actual 6.7 26.7 37.1 32.1 26.7 -Projected 7.8 27.9 37.6 41.3 45.5 -

Maharashtra

Actual - 6.7 16.2 28.1 30.1 -Projected - 7.3 14.6 18.2 21.3 -

Himachal Pradesh

Actual - - 2.5 4.8 5.7 -Projected - - 2.6 4.9 5.6 -

Punjab

Actual 19.3 98.5 104.2 129.2 117.5 -Projected 16.5 72.0 104.1 125.4 147.3 -

Uttar Pradesh

Actual - - - 3.6 12.5 11.9Projected - - - 9.3 16.2 18.7

Total

Actual 26.0 131.9 160.0 197.8 192.5 11.9Projected 24.3 107.2 158.9 199.1 235.9 18.7

-115 - ANNEX 4

Table 3

INDIA

SECOND NATIONAL COOPERATIVE DtYELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


Average Credit Disbursement ner Sample Society in Proiect Statest"With" and 'Withoutg Comparison

(Rs million)

Andhra Pradesh MaharashtraWith Without With Without Himachal Uttar

godoun godown godown godown Pradesh Punjab Pradesh

1979180 0.30 0.12 0.27 0.08 0.06 0.76 -

1980181 0.38 0.14 0.36 0.15 0.07 0.84 -

1981/82 0.35/a 0.19a, 0.35 0.14 0.08 1. 9La -

1982183 0.37 0.24 0.40.! 0.14la 0.10 1.45 0.22

1983184 0.49 0.25 0.46 0.17 0.10La 1.21 0.21

1984185 0.42 0.25 0.72 0.27 0.14 1.50 0.19La

1985186 0.35 0.23 0.77 0.33 0.12 1.37 0.26

1986187 - - - - - - 0.25

la Project year.

-116 - Table 4

INDIA

SECOND NATIONAL COOPEM'AA+IVE DEVELOPME CORPORATION PROJECT (CREDIT 1146-IN)


Percentase of Loanees to Total Membershi,(Z)

Andhra Pradesh MaharashtraWith Without With Without Himachal Uttar

godown godown godown godown Pradesh Punjab Pradesh

1979180 28.2 18.4 41.1 32.2 20.00 35.53 -

1980/81 29.7 20.6 41.0 42.0 19.27 40.46 -

1981182 25.7La 19.4la 44.2 37.2 19.68 42.63la -

1982183 30.5 16.9 43.5la 38.Sa 21.49 51.27 24.26

1983/84 31.6 17.6 45.1 36.8 22.16/a 44.84 24.56

1984183 27.2 16.4 48.0 39.3 23.27 51.39 21.02/a

1985/86 23.0 13.3 43.6 40.4 24.09 50.55 24.32

1986/87 - - - - - - 24.86

/a Project year.

- 117 - ANNEX

Table 1

INDIA



Distribution of Fertilizers bY Sample Societies in Project States:"Before' and "After" Comparison

(Rs million)


1979180 5.2S 4.40 0.75 40.43 _

1980181 4.86 8.79 0.71 52.50 -

1981/82 6.51La 11.41 0.92 6S.Ol/a -

1982/83 6.19 16.04La 1.59 87.01 6.85

1983/84 9.17 17.81 1.77/a 76.77 7.97

1984/85 7.49 23.88 1.90 91.55 7.58/a

1985186 6.75 20.82 1.80 83.15 8.33

1986/87 - - - - 8.87

la Project year.

- 118 ~~~~~~ANNEX 5- 118 - -l Table 2

INDIA



Distribution of Fartilizers by Sample Societies in Proiect Statess*Actual" and "Projected" Comparison

(Rs million)

1981/82 1982/83 1983/84 1984185 1985186 1986/87

Andhra Pradesh

Actual 1.66 5.75 9.17 7.49 6.75 -

Projected 2.92 9.81 14.36 16.09 18.22 -

Maharashtre

Actual - 6.81 17.34 23.88 20.82 -

Projected - 7.12 16.29 19.36 21.07 -

Himachal Pradesh

Actual - - 1.14 1.83 1.80 -

Projected - - 0.92 1.88 2.28 -

Punjab

Actual 14.37 69.10 76.77 91.55 83.15 -

Projected 16.25 56.20 80.19 96.64 112.14 -

Uttar Pradesh

Actual - - - 2.33 8.33 8.87

Projected - - - 4.10 8.70 11.01

ANNEX 5119 Table 3

INDIA

SECOND RATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


Distribution of Seeds and Pesticides by Sample Societies in Project States:"Before* and "After" Comparison

(Rs million)


1979180 0.72 0.54 1.72 -

1980181 0.66 0.67 1.13 0.007 -

1981182 0.89id 0.87 2.03 O.l5La -

1982183 0.84 0.92La 5.37 0.24 0.07

1983184 1.25 0.91 5.54La 0.31 0.06

1984/85 1.02 1.74 6.50 0.58 0.OC3/a

1985186 0.92 0.88 4.10 0.53 0.05

1986187 - - - - 0.05

Lt Project year.

- 120 - ~~~~~ANNEX 6-120 - Table 1

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (CrEDIT 1146-IN)


Distribution of Consumer Goods by Sample Societies in Prolect Statess'Before' and 'After' Comparison

(Re million)


1979180 0.73 2.73 1.78 5.53 -

1980181 1.46 4.85 3.17 6.67 -

1981182 1.59/a 4.59 4.00 5.44/a -

1982183 4.17 4.51la 6.53 6.02 4.62

1983184 8.49 5.17 6.78La 5.33 5.14

1984/85 9.99 5.24 d.17 6.10 5.30/a

1985/86 10.55 6.78 9.83 6.51 5.59

1986/87 - - - - 6.07

/a Project year.

-ANNEX 6- 121 - Table 2

INDIA



Distribution of Consumer Goods by Sample Societies in Project Statest*Actual" and Proiectedm Comparison

(Re million)

1981182 1982183 1983184 1984/85 1985/86 1986/87

Andhra Pradesh

Actual 0.48 4.17 8.49 9.99 10.55 -

Projected 3.07 9.09 12.19 14.74 17.54 -

Maharashtra

Actual - 1.02 4.80 5.24 6.78 -

Projected - 0.75 4.37 5.22 5.92 -

Himachal Pradesh

Actual - - 3.29 7.57 9.83 -

Projected - - 2.59 5.30 6.76 -

Puniab

Actual 0.90 4.55 5.33 6.11 6.51 -

Projected 1.18 6.59 10.10 12.69 15.51 -

Uttar Pradesh

Actual - - - 2.75 5.59 6.07

Projected - - - 4.10 8.02 9.99

-122 - ANNEX 6Table 3

INDIA



Average Turnover of Consumer Goods per Sample SocietytWith" and "Without Comparison

(Rs million)

Andhra Pradesh MaharashtraWith Without With Without

Godown Godovn Godown Godown

1979/80 0.10 0.039

1980181 - _ 0.16 0.056

1981/82 0.023 0.015 0.15 0.067

1982/83 0.077 0.018 0.14 0.050

1983/84 0.11 0.085 0.16 0.069

1984185 0.13 0.074 0.17 0.059

1985/86 0.14 0.081 0.21 0.058

-123 ANNEX 7Table 1

INIDIA



Percentage of Non-credit Turnover to Total Turnover(Z)

Andhra Himachal UttarPradesb Maharashtra Pradesh Punjab Pradesh

1979180 22.69 41.27 53.35 42.09 -

1980181 19.60 50.69 60.34 45.12 -

1981182 25.08 55.20 71.75 42.99 -

1982/83 29.05 58.17 69.18 42.74 60.98

1983/84 34.44 56.98 67.98 44.14 65.06

1984185 36.68 56.07 67.32 43.19 66.30

1985/86 40.72 49.20 67.50 43.42 57.98

1986187 - - - - 63.02

12U4 -ANE Table 1

INDIA



Growth of Share Cspital of Sample Societies in Proiect States."Before' and 'After" Comparison

(Rs million)


1979180 4.67 3.52 1.21 8.59 -

1980181 5.15 4.22 1.33 11.12 -

1981/82 6.05/a 4.66 1.64 12.57la -

1982/83 6.26 5.75j 1.98 14.27 3.38

1983184 6.85 6.85 2.38/a 15.47 3.83

1984/85 7.32 8.71 2.67 17.56 3.94/a

1985/86 7.65 10.13 2.92 20.58 4.37

1986187 - - - - 4.58

la Project year.

-125 -ANNE 8Table 2

MAD



Growth of Share Capital in SamDle Societies in Prolect 8tatess"With" and "Without" Comparison

(Re million)


godown godown godown godown

1979180 0.61 0.40 0.09 0.04

1980181 0.68 0.41 0.11 0.04

1981182 0.80 0.45 0.12 0.05

1982183 0.83 0.49 0.15 0.05

1983184 0.90 0.51 0.18 0.05

1984185 0.96 0.52 0.22 0.06

1985186 1.00 0.55 0.26 0.07


INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-1N)


Growth of Working Capital of Sample Societies in ProJect Statess,Before* and "After' Comgarison

(Rs million)


1979180 33.61 16.02 5.93 37.15 -

1980/81 38.28 19.83 6.70 64.68 -

1981182 46.321a 20.99 8.30 64.17la -

1982/83 52.12 2 5. 85 a 9.59 79.51 21.36

1983184 56.07 27.87 12.22/a 120.07 23.35L&

1984/85 61.58 37.68 14.38 110.94 25.14

1985/86 62.21 43.94 17.04 121.95 27.24

1986/87 - - - - 31.55

/a Project year.

ANNE 9- 127 - Table 2

INDTA



Growth of Working Capital of Sample Societies in Proiect Statest"With" and *Without' Godown Comparison

(Rs million)


godown godown godown godown

1979180 0.42 0.12 0.41 0.18

1980181 0.50 0.20 0.51 0.22

1981182 0.61 0.21 0.54 0.23

1982183 0.69 0.29 0.61 0.22

1983184 0.74 0.33 0.72 0.27

1984185 0.81 0.33 0.97 0.37

1985186 0.82 0.39 1.13 0.44


INDIA



Deposit Mobilization by Sample Societies in Project Statess"Before' and 'After' Comparison

(Re million)


1979180 0.52 0.032 - 5.89 -

1980181 0.79 0.018 1.57 6.84 -

1981/82 1.24/a 0.105 1.77 8.50ta -

1982/83 1.22 0.1381a 1.88 9.88 0.53

1983/84 1.60 0.087 2.031a 13.49 0.64

1984185 1.47 0.106 2.53 13.92 0.68La

1985/86 1.57 0.122 3.05 14.39 0.54

1986187 - - - - 0.62

/a Project year.


ItLDA



Deposit Mobilization by Samyle Societies in Project States:VWithg and 'WithoutO Godown Comparison

(Re)

MaharashtraWith Godown Without Godown

1979/80 3,150 805

1980/81 2,001 1,652

1981/82 11,633 7,242

1982183 12,557 5,374

1983/84 7,214 2,270

1984/85 8,860 3,110

1985/86 10,205 1,913

- 130 - ANNEX 11- 130 - ~~~~~Table 1

INDIA



Uttar Pradeshs Cash Flow of Sample Societies(Rs in lakhs)

1984/85 1985/86 1986/87

Number of societies operatingwith rural godown 32 48 48

capacity (tons) 2,950 4,350 4,350

Investment in rural godowns 44.66 65.38 65.38

Loan component 22.33 32.69 32.69

Income 3.82 9.23 10.68

Expenditure 4.07 6.69 6.80

Profi.t/loss (before interest anddepreciation) -0.25 2.54 3.88

Depreciation 1.34 1.96 1.96

Profit/loss (after depreciation) -1.59 0.58 1.92

Repayment of

Interest La 2.23 3.27 3.27

Principal - - -

Net cash flow -1.59 0.58 1.92

la Interest for the first three years is built into the cost of the godown;hence, it has not been deducted while calculating net cash flow.

ANNEX 11-131 - Table 2

INDIA



Puniabs Cash Fla! Statement of Sawled Societies(Rs in lakhs)

1981/82 1982183 1983/84 1984185 1985186

Total number of societies operat-ing with rural godownas 17 66 86 86 86

Capacity (tons) 4,200 18,400 24,600 24,600 24,600

Investment in rural godowna 21.82 95.44 127.66 127.66 127.66

Loan component (502 of theinvestment) 10.91 47.72 63.83 63.83 63.83

Income 10.47 47.68 59.93 79.28 73.79

Expenditure 5.84 24.06 38.96 37.20 39.52

Operating profits 4.63 23.62 20.97 42.08 34.27

Depreciation 8 3Z of investment 0.65 2.86 3.83 3.83 3.83

Interest on loan component - - - 1.30 5.58

Net profit 3.98 20.76 17.14 36.95 24.86

Repayment of principal - - - 0.91 3.98

Net cash flow 3.98 20.76 17.14 36.04 20.88

- 132'- ~~~~ANNEX 11- 132'- Table 3

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN2


Maharashtra* Cash Flow of Sample Societies(Rs in lakhb)

1982183 1983184 1984/85 1985/86

Total number of societies operating withrural godowns 12 30 39 39

Capacity (tons) 2,400 5,100 6,400 6,400

Investment in rural godowns 19.92 46.75 56.99 56.99

Loan component (501 of investment) 9.96 23.38 28.50 28.50

Income 7.80 15.16 21.36 23.46

Expenditure 4.42 11.75 16.44 19.38

operating profits 3.38 3.41 4.92 4.08

Depreciation (3Z of investment) 0.60 1.40 1.71 1.71

Interest on loan component at 9.5Z p.a. - . - 1.18

Net profit 2.78 2.01 3.21 1.19

Repayment of principal - - - 0.83

Net cash flow 2.78 2.01 3.21 0.36

133- ANNEX 11- 133 - Table 4

INDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-INU

IROJECT COMPLETION REPORT

Andhra Pradeshs Cash Flow of Samiple Societies(Re in lakhe)

1981182 1982183 1983184 1984185 1985/86

Total number of societies operat-ing rural godowns 21 64 76 76 76

Capacity (tons) 2,100 6,400 7,600 7,600 7,600

Investment in rural godouns 18.14 65.52 79.32 79.32 79.32

Loan component (502 of invest-ment) 9.07 32.76 39.66 39.66 39.66

Income 3.41 9.63 22.78 17.27 19.18

Expenditure 3.34 11.84 13.42 14.39 11.62

Operating profit/loss 0.07 -2.22 9.36 2.88 7.56

Depreciation (3S of investment) 0.54 1.97 2.38 2.38 2.38

Interest on loan component (9.5) - - - 1.08 3.82

Net profitiloss -0.47 -4.18 6.98 -0.58 1.36

Repayment of principal - - - 0.76 2.73

Net cash flow -0.47 -4.18 6.98 -1.34 -1.37

- 134 - a mTable 5

INDIA



Himachal Pradesh: Cash Flow of Sample Societies(Re in lakhs)

1983/84 1984/85 1985/86

Total number of societies operatingwith rural godowns 26 45 47

Capacity (tons) 1,300 2,250 2,350

Investment in rural godowns 17.75 30.26 31.49

Loan component 8.875 15.13 15.745

Income 3.98 7.13 8.48

Expenditure 2.76 5.24 5.87

Operating profits 1.22 1.89 2.61

Depreciation e 32 of investment 0.533 0.908 0.945

Interest on loan component j - - -

Net profit 0.687 0.982 1.665

Repayment of principal la - - -

Net cash flow 0.687 0.982 1.665

a Payment of interest and repayment of principal has not yet commenced.


NDIA

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (GREDIT 1146-IN)


Maharashtra: Financial Rate of Return(Rs'000)

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yrs 5-20jL

100 mt Godown With ResidenceProject investment 428 572 - - - -Operating costs - 47 228 333 368 70Income - 100 270 405 476 103FRR - 18.2622

100 mt Godown Without ResidenceProject investment 468 447 - - - -Operating costs - 175 280 368 456 88Income - 210 189 373 483 110FRR - 10.182?

200 mt Godown With ResidenceProject investment 733 1,309 - - - -Operating costs - 95 423 487 548 64Income - 199 610 723 699 113FRR - 15.522Z

200 mt Godown Without ResidenceProject investment 604 344 577 - --

Operating costs - 210 274 457 532 75Income - 327 312 663 586 110FRR - 13.312?

500 mt Godown Without ResidenceProject investment 227 - - - - -Operating costs - 90 75 87 122 35Income - 154 114 156 212 40FRR - 33.703?

All Sample GodownsProject investment 1,992 2,683 1,024 - - -Operating costs - 442 1,175 1,644 1,938 332Income - 780 1,516 2,136 2,346 476FRR = 15.539?

la Assumed annual increase.

- 136 ~~~~~ANNEX 12- 136 - Table 2

INDIA


PROJECT CONPLETION REPORT

Andhra Pradeshs Financial Rate of Return(Rs 000)

Yr O Yr I Yr 2 Yr 3 Yr 4 Yr 5 Yrs 6-20/a

100 mt Godown WithRes.idence

Project investment 1,814 4,738 1,380 - - - -

Operating costs - 334 1,184 1,342 1,439 1,162 92

Income - 341 963 2,278 1,727 1,918 228

PR - 12.044Z



INDIA



Punlab: Financial Rate of Return(Rs'OOO)

Yr O Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yrs 6-2OLa

100 mt Godown WithResidenceProject investment 73 322 163 - - - -Operating costs - 31 138 197 234 268 30Income - 37 155 224 315 327 40PRR - 14.113S

200 mt Godown WithoutResidenceProject investment 1,430 3,220 1,148 - - - -Operating costs - 491 1,474 2,148 1,948 2,459 210Income - 764 2,366 3,143 4,261 4,041 300FRR - 27.55S

500 at Godown WithoutResidenceProject investment 679 3,820 1,911 - - -Operating costs - 62 794 1,551 1,540 1,225 130Incme - 246 2,247 2,626 3,352 3,011 180FRR - 27.6172

All Sample GodownsProject investment 2,182 7,362 3,222 - - - -Operating costs - 584 2,406 3,896 3,720 3,952 370Income - 1,047 4,768 5,993 7,928 7,379 520nRI - 26.9142

/a Assumed annual Increase.

-138- ARMNZ 12- 138 - ~~~~~Table 4

INDIA



Himachal Pradeshs Financial Rate of Return(Ru'000)

Yr O Yr 1 Yr 2 Yr 3 Yrs 4-201a

50 mt Godown Without Residence

Project investment 1,775 1,251 123 - -

Operating costs - 276 524 587 47

Income - 398 713 848 102

FRR = 14.1031



INDIA

SECOND NATIONAL COOPERATIV DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


Uttar Pradesh: Financial Rate of Return(R8'000)

Yr 0 Yr 1 Yr 2 Yr 3 Yrs 4-20/a

50 at Godown Vithout Residence

Project investment 575 435 - - -


Income - 49 72 121 36

FRR - 11.716!

100 mt Godonm With Residence

Project investment 3,891 1,637 - - -


Income - 333 851 947 156

FRR - 12.093!

All Sample Godowns

Project investment 4,466 2,072 - - -


Income - 382 923 1,068 192

FRR - 12.033Z

La Assumed annual increase.


INDIA

SECOND NATIONAL COOPERATIE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


All Project States: Financial Rate of Return(Rs'000)

Yr O Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yrs 7-20/a

Project investment 3,996 14,092 9,060 6,741 2,195 - - -

Operating costs - 918 4,032 6,689 7,734 8,308 9,260 913

Income - 1,388 6,511 10,185 12,886 13,414 14,885 1,518

FRR = 17.804Z

/a Assumed annual increase.

- 141 - ANNEX 13

INDA



Economic Rate of Return(Rs9000)

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yrs 10-20

MaharashtraProject investment 1,818 2,261 900 - - - - - -

Incremental operat-ing costs 195 433 527 498 493 483 483 483 483 483

Benefits 417 1,097 1,675 1,377 1,515 1.866 1,833 2,016 2.217 2,217ERR - 28.5192

Andhra PradeshProject investment 1,724 4,514 1,321 - - - - - - -


Benefits 144 432 860 819 810 1.215 1,822 2,186 2,624 3,148ERR - 15.1981

PuniabProject investment 1,969 6.623 2,894 - - - - - -

Incremental operat-ing costs 214 908 1,300 1,530 1,539 1,411 1,411 1,363 1,363 1,363

Benefits 448 2,143 2,388 2,849 2,615 3,007 3,458 3,977 4,574 5,260ERR - 21.222z

Himachal PradeshProject investment 1,586 1,117 109 - - - - - -


Benefits 193 394 475 570 684 821 985 1,182 1.418 1,702EUR = 21.134Z

Uttar PradeshProject investment 3,990 1,851 - - - _ _ _ _ _Incremental operat-ing costs 378 593 579 505 502 477 477 477 477 477

Benefits 176 559 654 818 1,022 1,277 1,532 1,839 2,207 2,648ERR 15.746Z

All Project StatesProject investment 3,693 12,955 8,062 6,007 1,960 - - - - -Incremental operat-

ing costs 378 1,613 2,475 3,287 3,645 3,476 3,373 3,302 3,275 3,255Benefits 592 2,992 4,538 5,913 5,836 6,961 8,448 9,839 11,476 13.339ERR - 19.474?


INDIA



Business Turnover of Puniab State Cooperative Supp1yand Marketing Federation

(Rs million)

Agricultural produceOutright and Price Agricultural Consumer goodscommercial support inputs and others Total

1982183 169.17 2,193.79 1,088.34 443.35 3,894.65

1983184 131.99 2,296.03 1,082.77 518.42 4,029.21

1984/85 323.30 1,678.11 2,063.01 566.07 4,630.49

1985186 318.56 3,196.40 1,856.62 588.89 5,960.47

1986/87 410.48 3,667.62 1,294.00 717.90 6,090.00


INDIA

SECOND NATIONAL COOPERATIVE DEVELOPM$NT CORPF,RATION PROJECT (CREDIT 1146-IN)


Business Turnover of BISCOMAUN (Bihar)(Re million)

Agricultural Agricultural Consumer goods andproduce inputs processed produce Total

1981182 49.02 536.80 23.17 608.99

1982183 8.86 622.30 21.44 652.60

1983184 10.60 569.20 28.24 608.04

1984185 4.20 527.30 29.82 561.32

1985186 57.67 375.30 35.96 468.93

1986187 n.a. 584.20 n.a. n.a.

ANNEX Z4-144 - Table 3



Business Turnover of Himachal Pradesh State CooperativeMarketing and Consumer Federation

(Rs million)

Fertilizers/ Consumer goodsother requisites and others Total

1981/82 69.30 15.39 84.69

1982/83 75.55 17.95 93.50

1983/84 111.48 15.86 127.36

1984/85 109.68 26.19 135.87

1985/86 125.45 58.04 183.49

1986/87 138.50 91.50 230.00


INDIA

SECOND NATIONAL COOPERATIVE DEVELOPNENT CORPORATION PROJECT (CREDIT 1146-IN)


Business Turnover of Maharashtra State CooperativeMarketing Federation

(Re million)

Agriculturalproduce procured Consumer goods,

Outright and Price Agricultural processed prod-comnercial support inputs ucts and others Total

1979180 72.911 105.210 602.169 68.855 849.135

1980/81 49.085 277.089 1.028.408 73.295 1,427.877

1981/82 29.680 218.632 1,270.107 78.126 1,596.545

1982/83 289.325 260.240 931.124 83.377 1,329.850

1983184 126.220 34.834 932.143 100.150 1,193.347

1984/85 43.186 292.345 1,060.613 152.013 1,548.157

1985/86 47.300 337.456 1,182.891 191.283 1,758.930

1986187La 36.300 103.920 1,077.123 310.517 1,527.860

La Estimate.

- 146 - Table 5

INDIA



Business Turnover of Uttar Pradesh CooperativeMarketins Pederation

(Rs million)

Agriculturalproduce Procured Consumer goods,

Outright and Price Agricultural processed prod-commercial support inputs ucts and others Total

1979180 61.613 4.980 955.190 207.260 1,229.043

1980/81 72.810 953.430 1,312.650 756.050 3,094.940

1981182 37.160 916.600 1,327.570 1,663.470 4,144.800

1982183 50.296 1,118.380 1,174.660 2,228.464 4,571.800

1983184 56.046 1,303.040 1,367.170 2,433.324 5,159.580

1984185 37.870 1,600.890 1,264.110 2,521.330 5,424.200

1985186 87.580 1,434.430 1,334.040 2,909.050 5,765.100

1986187La 98.530 831.020 1,119.400 3,429.550 5,478.500

la Estimated.

- 147 - ANNzX 15

INDIA



Actual and Proiected Rental Rates(Rs per ton)

Name of 1984185 1985186 1986187cold storage Actual Projected Actual Projected Actual Projected

West Bengal

Memari - - 260.00 260.00 260.00 260.00

Tarkeawar - - 260.00 260.00 260.00 260.00

Nadia - - 260.00 260.00 260.00 260.00

Bihar

Saharsa - - 260.47 300.00 292.00 300.00

Forbeeganj 250.69 300.00 264.00 300.00 321.85 300.00

Uttar Pradesh

Kopaganj 240.00 240.00 270.00 240.00 270.00 240.00

Pratapgarh 190.00 240.00 270.00 240.00 270.00 240.00

Soraun 270.00 240.00 270.00 240.00 270.00 240.00

Jaswantnagar - - - - 230.00 240.00

Jahangirabad 223.00 240.00 210.00 240.00 230.00 240.00

Sikandarabad 210.00 240.00 230.00 240.00 260.00 240.00

Anola - 240.00 258.00 240.00 230.00 240.00

Sabungodsm - - - - 260.00 240.00

Rharkhoda 190.00 270.00 190.00 270.00 230.00 270.00

Vashi (Bombay) - - - - 360.00 375.00

- 148 - aNNe 1Table I

INDIA



Model Scheme for Ice Plant of 15 tons/day Clear Ice-Making Capacityas Adjunct to Cold Storage of 4,000/2,000-ton Capacity

1. Additional buildingOne chamber of size 50' x 25' x 15' high Rs 100,000

2. Machinery(a) Cost of machinery (including taxes and freight) Rs 550,000(b) Other miscellaneous expenses Re 50,000

Total for (1) and (2) Rs 700,000

3. Additional staff

Designation No. of posts Salary (yearly)

Semiskilled workers atRe 400/month (for six monthsonly) 4 Rs 9,600

Add 1OX 960

Total Rs 10560say, O.Il Iatns

4. Additional electric power requirement 50 kV

5. Yearl running expenditure (Rs in lakhs)(a) Electricitye Rs 0.91kWh (assuming that the

plant will operate for 180 days 1.62(b) Rater (since own tube well is to be sunk, there

will not be any substantial expenses on water) 0.10(c) Establishment 0.11S dI Depreciation on machinery e the rate of 1OX 0.55e Depreciation on building e 101 0.50f Anual repairs gas oil, salt etc. 0.15g Interest on block loan of Rs 7.0O lakhs (assuming

60X loan) at the rate of 13.251 p.a. 0.56(h) Other miscellaneous expenses 0.10

Total 3.24

6. Production of ice and its sale proceeds (assuming that theice factory will run for 180 days during a year and willproduce a total of 2,700 tons of ice)(a) Its sale proceeds at Rs 200/ton (taking 802) sale of

the produced quantity) 4.32(b) Less yearly expenses 3.24(c) Yearly profit contribution of ice plant 1.08td Add back depreciation 0.60(e Cash accruals 1.68

f Total loan (601 of Rs 7.00 lakhs) repayable in 14 years 4.20g Annual installment of loan 0.30

Assu tionss1. Adeq!uate demand exists for the daily sale of 15 tons of ice for 6

months at an average price of Rs 200/ton.2. Additional 4 workers would be employed for a period of 6 months only

at a total salary of Rs 11 000 only.3. Additional electricity will cost Re 0.90/kWh.

Notes Cash flow will have to be accordingly adjusted forlower/hiaher demandas well as sale price, electricity cnarges and other variables.

149 ~~~~~~~~ANNE 16- 149 - Table 2

INDIA



Debt Servicins - Nadia Unit(Re in lakhs)

Total Cumulative Cash Cumulative Net cumulativePrincipal Interest debt debt inflow cash inflow cash inflow

1987188 4.422 5.769 10.191 10.191 6.06 6.06 -4.131

1988/89 4.422 5.327 9.749 19.940 3.96 10.02 -9.920

1989/90 4.422 4.885 9.307 29.247 3.96 13.98 -15.267

1990/91 4.422 4.443 8.865 38.112 3.96 17.94 -20.172

1991/92 4.422 4.001 8.423 46.535 3.96 21.90 -24.635

1992/93 4.422 3.559 7.981 54.516 3.96 25.86 -28.656

1993194 4.422 3.117 7.539 62.055 3.96 29.82 -32.235

1994/95 4.422 2.675 7.097 69.152 3.96 33.78 -35.372

1995/96 4.422 2.233 6.655 75.807 3.96 37.74 -38.067

1996/97 4.422 1.791 6.213 82.020 3.96 41.70 -40.320

ANNEX 16- 15Q~ -l

- ~~~~~~~~Table S

INDIA



Debt 3ervicinx - Saharsa Unit(Rs in lakhs)

Tota. Cumulative Cash Cumulative Net cumulativePrincipal Interest debt debt inflow cash inflow cash inflow

1987188 - - - - +0.70 -4.33LJ -4.33

1988189 4.11 5.62 9.73 9.73 +1.47 -2.86 -12.59

1989/90 4.11 5.21 9.32 19.05 +3.71 +0.85 -18.20

1990/91 4.11 4.80 8.91 27.96 +3.71 +4.56 -23.40

1991/92 4.11 4.39 8.50 36.46 +3.71 +8.27 -28.19

1992/93 4.11 3.98 8.09 44.55 +3.71 +11.98 -32.57

1993194 4.11 3.57 7.68 52.23 +3.71 +15.69 -36.54

1994/95 4.11 3.15 7.26 59.49 +3.71 +19.40 -40.09

1995/96 4.11 2.74 6.85 66.34 +3.71 +23.11 -43.23

1996/97 4.11 2.33 6.44 72.78 +3.71 +26.82 -45.96

1997/98 4.11 1.92 6.03 78.81 +3.71 +30.53 -48.28

la Inclusive of cash flow carried forward from earlier years.

-151- ANNEX 16- lSl - S~~~~~~able 4

INDIA



Debt Servicina - Forbespani Unit(Rs in lakhs)


1987188 - - - - +1.12 -5.79L -5.79

1988189 4.49 5.94 10.43 10.43 +2.06 -3.73 -14.16

1989/90 4.49 5.49 9.98 20.41 +4.47 +0.74 -19.67

1990/91 4.49 5.05 8.54 29.95 +4.47 +5.21 -24.74

1991192 4.49 4.60 9.09 39.04 +4.47 +9.68 -29.56

1992/93 4.49 4.15 8.64 47.68 +4.47 +14.15 -33.53

1993/94 4.49 3.70 8.19 55.87 +4.47 +18.62 -37.25

1994/95 4.49 3.25 7.74 63.61 +4.47 +23.09 -40.52

1995/96 4.49 2.80 7.29 70.90 +4.47 +27.56 -43.36

1996/97 4.49 2.35 6.84 77.74 +4.47 +32.03 -45.71

1997/98 4.49 1.90 6.39 84.13 +4.47 +36.50 -47.63

la Inclusive of cash flow carried forward from earlier years.

152 ANNEX 16

Table 5

INDIA



Debt Servicing - Kopatani Unit(Re in lakhs)


1987/88 2.68 4.10 6.78 6.78 10.03/a 10.03/a +3.25

1988/89 2.68 3.83 6.51 13.29 3.33 13.36 +0.07

1989190 2.68 3.56 6.24 19.53 3.33 16.69 -2.84

1990/91 2.68 3.29 5.97 25.50 3.33 20.02 -5.48

1991192 2.68 3.02 5.70 31.20 3.33 23.35 -7.85

1992193 2.68 2.75 5.43 36.63 3.33 26.68 -9.95

1993/94 2.68 2.48 5.16 41.79 3.33 30.01 -11.78

1994/95 2.68 2.21 4.89 46.68 3.33 33.34 -13.34

1995/96 2.68 1.94 4.62 51.30 3.33 36.67 -14.63

1996/97 2.68 1.67 4.35 55.65 3.33 40.00 -15.65

/a Inclusive of cash accruals carried forward from previous years.

153- ANNEX 16Table 6

INDIA



Debt Servicing - Pratapaarh Unit(Rs in lakhs)


1987/88 2.68 4.10 6.78 6.78 +0.15/a +0.15/a -6.63

1988/89 2.68 3.83 6.51 13.29 2.97 3.12 -10.17

1989/90 2.68 3.56 6.24 19.53 2.97 6.09 -13.44

1990191 2.68 3.29 5.97 25.50 2.97 9.06 -16.44

1991/92 2.68 3.02 5.70 31.20 2.97 12.03 -19.17

1992/93 2.68 2.75 5.43 36.63 2.97 15.00 -21.63

1993/94 2.68 2.46 5.16 41.79 2.97 17.97 -23.82

1994195 2.68 2.21 4.89 46.68 2.97 20.94 -25.74

1995/96 2.68 1.94 4.62 51.30 2.97 23.91 -27.39

1996197 2.68 1.67 4.35 55.65 2.97 26.88 -28.77

La Inclusive of cash accruals carried forward from previous years.

-154- ANNE% 16

Table 7

INDI

SECOND NATIONAL COOPERUTISV DEVELOPMENT CORPOtATION PROJECT (CREDIT 1146-IN)


Debt Servicing - Soraun Unit(Re in lakhs)


1987/88 2.68 4.09 6.77 6.77 17.52La l7.52La +10.75

1988/89 2.68 3.82 6.50 13.27 3.99 21.51 +8.24

1989/90 2.68 3.55 6.23 19.50 3.99 25.50 +6.00

1990/91 2.68 3.28 5.96 25.46 3.99 29.49 +4.03

1991/92 2.68 3.01 5.69 31.15 3.99 33.48 +2.33

1992193 2.68 2.74 5.42 36.57 3.99 37.47 +0.90

1993/94 2.68 2.47 5.15 41.72 3.99 41.46 -0.26

1994/95 2.68 2.20 4.88 46.60 3.99 45.45 -1.15

1995/96 2.68 1.93 4.61 51.21 3.99 49.44 -1.77

1996197 2.68 1.66 4.34 55.55 3.99 53.43 -2.12

la Inclusive of cash accruals carried forward from previous years.

- 155 -Table 8

INDIA



Debt Servicing - Jasntnagar Unit(Re in lakhs)


1989/90 2.30 3.17 5.47 5.47 4.58/a 4.58/a -0.89

1990/91 2.30 2.94 5.24 10.71 1.13 5.71 -5.00

1991/92 2.30 2.71 5.01 15.72 1.13 6.84 -8.88

1992/93 2.30 2.48 4.78 20.50 1.13 7.97 -12.53

1993/94 2.30 2.25 4.55 25.05 1.13 9.10 -15.95

1994195 2.30 2.02 4.32 29.37 1.13 10.23 -19.14

1995196 2.30 1.79 4.09 33.46 1.13 11.36 -22.10

1996197 2.30 1.56 3.86 37.32 1.13 12.49 -24.83

1997/98 2.30 1.33 3.63 40.95 1.13 13.62 -27.33

1998199 2.30 1.10 3.40 44.35 1.13 14.75 -29.60


-156 - ANNEX 16

Table 9

INDA



Debt Servicing - JahanRirabad Unit(Re in lakhs)


1989/90 2.04 2.86 4.90 4.90 -1.181a -1.18/a -6.08

1990/91 2.04 2.65 4.69 9.59 +0.80 -0.38 -9.97

1991/92 2.04 2.45 4.49 14.08 +0.80 +0.42 -13.66

1992/93 2.04 2.24 4.28 18.36 0.80 +1.22 -17.14

1993/94 2.04 2.04 4.08 22.44 0.80 +2.02 -20.42

1994/95 2.04 1.84 3.88 26.32 0.80 +2.82 -23.50

1995/96 2.04 1.63 3.67 29.99 0.80 +3.62 -26.37

1996/97 2.04 1.43 3.47 33.46 0.80 +4.42 -29.09

1997/98 2.04 1.22 3.26 36.72 0.80 +5.22 -31.50

1998/99 2.04 1.02 3.06 39.78 0.80 +6.02 -33.76


- 157 - ANNtX 16Table 10

INDIA



Debt Servicinx - Sikandarabad Unit(Re in lakhs)

Total Cumulative Cash Clumulative Net cumulativePrincipal Interest debt debt inflow cash inflow cash inflow

1987188 2.97 3.90 6.87 6.87 2.80/a 2.80/a -4.07

1988/89 2.97 3.60 6.57 13.44 3.58 6.38 -7.06

1989190 2.97 3.30 6.27 19.71 4.64 11.02 -8.69

1990/91 2.97 3.00 5.97 25.68 4.64 15.66 -10.02

1991192 2.97 2.71 5.68 31.36 4.64 20.30 -11.06

1992193 2.97 2.41 5.38 36.74 4.64 24.94 -11.80

1993/94 2.97 2.11 5.08 41.82 4.64 29.58 -12.24

1994195 2.97 1.82 4.79 46.61 4.64 34.22 -12.39

1995/96 2.97 1.52 4.49 51.10 4.64 38.86 -12.24

1996197 2.97 1.22 4.19 55.29 4.64 43.50 -11.79

I Inclusive of cash accruals carried forward from previous years.


INDIA



Debt Servicing - Anola Unit(Re in lakhs)


1987188 3.71 4.91 8.62 8.62 4.85/a 4.85/a -3.77

1988189 3.71 4.54 8.25 16.87 4.12 8.97 -7.90

1989)90 3.71 4.17 7.88 24.75 4.12 13.09 -11.66

1990/91 3.71 3.80 7.51 32.26 4.12 17.21 -15.05

1991/92 3.71 3.43 7.14 39.40 4.12 21.33 -18.07

1992/93 3.71 3.06 6.77 46.17 4.12 25.45 -20.72

1993/94 3.71 2.69 6.40 52.57 4.12 29.57 -23.00

1994/95 3.71 2.32 6.03 58.60 4.12 33.69 -24.91

1995/96 3.71 1.95 5.66 64.26 4.12 37.81 -26.45

1996/97 3.71 1.58 5.29 69.55 4.12 41.93 -27.62


- 159 - ANNEX 16

Table 12

SECOND NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (CRZDIT 1146-IN)


Debt Servicini - Sabuntodam Unit(Rs in lakhs)


1988189 4.41 5.98 10.39 01.39 2.78/a 2.78/a -7.61

1989190 4.41 5.51 9.92 20.31 2.91 5.69 -14.62

1990/91 4.41 5.07 9.48 29.79 2.91 8.60 -21.19

1991/92 4.41 4.63 9.04 38.83 2.91 11.51 -27.32

1992193 4.41 4.19 8.60 47.43 2.91 14.42 -33.01

1993/94 4.41 3.74 8.15 55.58 2.91 17.33 -38.25

1994/95 4.41 3.30 7.71 63.29 2.91 20.24 -43.05

1995196 4.41 2.86 7.27 70.35 2.91 23.15 -47.41

1996/97 4.41 2.42 6.83 77.39 2.91 26.06 -51.33

1997198 4.41 1.98 6.39 83.78 2.91 28.97 -54.81


- 160- ANNEX 16

Table 13

INDIA

SECOND NATIONAL COOPENATIVE DEVELOPMENT CORPORATION PROJECT (CREDIT 1146-IN)


Debt Servicing - Kharkhoda Unit(Re in lakhs)


1987188 3.659 4.684 8.343 8.343 -1.41/a -1.41/a .9.753

1988/89 3.659 4.317 7.976 16.319 2.09 +0.68 -15.639

1989190 3.659 3.951 7.610 13.929 2.09 2.77 -21.159

1990/91 3.659 3.585 7.244 31.173 2.09 4.86 -26.313

1991192 3.659 3.219 6.878 28.051 2.09 6.95 -31.101

1992193 3.659 2.853 6.512 44.563 2.09 9.04 -35.523

1993/94 3.659 2.488 6.147 50.710 2.09 11.13 -39.580

1994195 3.659 2.122 5.781 56.491 2.09 13.22 -43.271

1995/96 3.659 1.756 5.415 61.906 2.09 15.31 -46.596

1996/97 3.659. 1.390 5.049 66.955 2.09 17.40 -49.555


MAP SECTION

IBRD 15430R

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FEBRUAtY 1990

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