Documcnt of

The World Bank

FOR OFCAL USE ONLY

Report No. 10444

PROJECT COMPLETION REPORT

PAKISTAN

GRAIN STORAGE PROJECT(CREDIT 1157-PAK)

MARCH 26, 1992

MICROFICHE COPY

Report No. 10444-PAK Type: (PCR)

PANTON, M./ X31680 / T9 032/ OEDDI

Agriculture Operations DivisionCountry Department IIISouth Asia Regional Office

This document has a restricted distribution and may be used bv recipiei s only In the performance of

their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCIES

Pakistan Rupee (Rs)United States Dollar (US$)

Swiss Franc (SF)Special Drawing Right (SDR)

ANNUAL AVERAGE EXCHANGE RATES

iff. 1 1983 198 5 1986 1987 1988 98-9 1990US$t .- Rs 9.900 11.847 13.117 14.046 15.928 16.648 17.399 18.003 20.541 21.707US$ 1. - SF 1.964 2.030 2.099 2.350 2.457 1.7s9 1.491 1.463 1.636 1.389

WEIGHTS AND MEASURES

I metric ton (tonnes) - 1,000 kg

ABBREVIATIONS

ERR Internal Economic Rate of ReturnGOP Government of PakistanMFAC Ministry of Food, Agriculture and CooperativeNWFP North West Frontier ProvinceOBH Open BulkheadPARC Pakistan Agricultural Research CouncilPASSCO Pakistan Agricultural Storage and Services CorporationPCR Project Completion ReportPFD Provincial Food DepartmentPMCC Project Management and Coordination CommitteeRECP Rice Export Corporation of PakistanSAR Staff Appraisal ReportSDC Swiss Development Corporation

FISCAL YEAR

July I to June 30

FOR OFFCIAL USE ONLYTHE WORLD BANK

Washington. D.C. 20433U.S.A.

Ofke of ir.ctar-CuewaiOpeatiom tEahatkn

March 26, 1992

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Pakistan -Grain Storage Proiect (Credit 1157-PAR)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on Pakistan - Grain Storage Project (Credit 1157-PAR)" preparedby the FAO/CP mission and finalized by the South Asia Regional Office with PartII of the report contributed by the Borrower. No audit of this project has beenmade by the Operations Evaluation Department at this time.

Attachment

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

FOR OFFICIAL USE ONLY

PROJECT COMPLETION REPORT

PAKISTAN

GRAIN STORAGE PROJECT(CREDIT 1157-PAK)

CONTENTS

PREFACE . . . . . . . . . . . . . . . . . . . . . . .

EVALUATION SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . .iii

PARTI .1.... . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Project Identity . . . . . .. . . . . . . . . . . . . . . . . . .12. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13. Project Objectives and Description . . . . . . . . . . . . . . . . . 24. Project Design and Organization .... . . . . . . . . . . . . . . . 35. Project Implementation .... . . . . . . . . . . . . . . . . . . . 46. Project Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

7. Project Sustainability .... . . . . . . . . . . . . . . . . . . . 98. Bank Performance .... . . . . . . . . . . . . . . . . . . . . . . 99. Borrower Performance .... . . . . . . . . . . . . . . . . . . . . 11

10. Project Relationship .... . . . . . . . . . . . . . . . . . . . . 13

11. Consulting Services .... . . . . . . . . . . . . . . . . . . . . . 13

12. Project Documentation and Data .... . . . . . . . . . . . . . . . 13

PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

PART III.. ...................... 17

1. Related Bank Credits ........ . ........... 17

2. Project Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3. Credit Disbursements .... . . . . . ...... . . . . . . . . . . 19

4. Project Implementation .... . . . . . ...... . . . . . . . . 20

5. Project Cost and Financing .... . . . . ..... . . . . . . . . 21

A. Project Cost .... . . . . . . . . . . . . . . . . . . . . . . 21B. Project Financing .... . . . . . . . . . . . . . . . . . . . 21

6. Project Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

A. Direct Benefits .22B. Economic Impact . . . . . . . . . . . . . . . . . . . . . . . . 23

C. Financial Impact .24D. Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

7. Status of Covenants .... . . . . . . ...... . . . . . . . . . 25

8. Use of Bank Resources .... . . . . . . ..... . . . . . . . . . 27

A. Staff Inputs .... . . . . . . . . . . . . . . . . . . . . . 27

B. Missions .27C. Costs .28

This document has a restricted distribution and may be used by recipients only in the performance |of their official duties. Its contents may not otherwise be disclosed without Wor;d Bank authorization.

PROJECT COMPLETION REPORT

PAKISTAN

GRAIN STORAGE PROJECTCREDIT 1157-PAK

PREFACE

This is the Project Completion Report (PCR) for the Grain Storage Projectin Pakistan costing a total of US$68.0 million and for which Credit 1157-PAK inthe amount of SDR 26.1 million (in 1981, US$32.0 million equivalent) was approvedon May 26, 1981. The credit was closed on December 31, 1989, four years behindschedule. The project was co-financed by the Government of Switzerland throughthe Swiss Development Corporation (SDC) with a grant of SF 15.0 million (in 1981,US$7.7 million equivalent). Neither the credit nor the grant were fullydisbursed; first SDR 7.0 million and eventually an unspent balance of aboutSDR 3.,8 million out of the Credit and about SF 1.66 million out of the grantwere cancelled. The last disbursement from the Credit was in October 1988 andfrom the grant in April 1991.

This PCR was prepared in accordance with the guidelines issued in June1989. Parts I and III were initially prepared by an FAO/CP mission and furtherreviewed and finalized by the Bank. It is based, inter alia, on a visit toPakistan in April/May 1991; the Staff Appraisal Report (SAR); the Credit andProject Agreements; supervision reports; correspondence between the Bank, SDC andthe Borrower; and internal Bank memoranda. It was further reviewed and finalizedby the Bank.

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EAISETAN

GRAIN STORAGE PROJECT

CREDIT 1157-PAK

EVALUATION SUMMARY

Oblectives

1. The main objectives of the project were to assist Government of Pakistan(GOP) in the implementation of its foodgrain policy by providing additional grainstorage facilities to Rice Export Corporation of Pakistan (RECP), PakistanAgricultural Storage and Services Corporation (PASSCO) and Provincial FoodDepartments (PFDs); improving the operational efficiency of the last two, andstrengthening the relevant sections in MFAC. In brief this inferred attainingof a relatively short-term aim (construction of godowns to avoid losses due toopen storage) and a relatively complex and long-term objective (strengthening ofthe institutional capacities particularly MFAC, i.e. improving planning and-oordination in storage of foodgrain). All this was to be achieved through theco-struction of 500,000 tonnes of godowns for wheat and 40,000 tonnes for ricev-'-age; provision of storage equipment; technical assittance; and research,ti, llng and studies.

lmglementation Experience

2. Although the construction component of the project was carried out rathersuccessfu.ly it was completed one year later than as planned at appraisal. Thiswas mainly due to ielays in disbursements of funds by the Ministry of Finance toPASSCO and RECP which were responsible for the actual construction program. Hadit not been for the drive and resources of PASSCO and RECP, the implementationof the component vould have taken much more time. Pakistan Agricultural ResearchCouncil's (PARC) program of research and training was also delayed for the samereasons. The problems of the project implementation also perhaps emerged due toan ambiguity in the SAR regarding the Storage Cell. While the Cell, in additionto managing and coordinating actual project activities, was established todevelop, plan and put in place a grain storage policy and strategy system withinMFAC, it was seen by the GOP as a project execution unit. Thus, the role of theCell and the long-term benefits that were to result from its establishment werenot properly understood.

3. During implementation several pilot trials were undertaken for mechanicalloading of hexbins as well as godowns. Unfortunately each trial was carried outover too short a period and the conclusions can therefore be considered asindicative only. However, one of these pilot trials, which was proposed onlyduring project implementation and concerned bulk handling and storage in OpenBulk Heads (OBHs), was carried out over a longer period and considered sosuccessful that the project undertook to finance (from savings that occurredmainly because of favorable foreign exchange rate movements) the construction ofanother 150,000 tonnes of OBH and the provision of some bulk handling equipment.This OBH component was dovetailed into a USAID project that covered technicalassistance mainly for experimenting with loading and offloading of wheat in bulk,

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from farmers to mills through OBH. To do this effectively, the project had tobe extended twice for one year.

Results

4. Although the project had in all to be extended for five years to enablecompletion of the pilot OBH program, it ought to be classified as a successfulproject in terms of achievement of physical targets. The construction of the540,000 tonnes godowns were completed within an acceptable time frame. Theproject godowns have been integrated into the system and are fully used. The ex-post ERRs estimated for the wheat godown models are almost similar to the onesestimated in the SAR. For the overall wheat component the re-estimated ERR is25X, while the ERR in the SAR for tk' r-e component was estimated at 26%. TheERR for the overall project coul.' -vt estimated due to unavailability of dataon RECP's operations.

5. That part of the project that was less successful, but A4d not affect theERR, concerned the institutional strengthening component t.. -g others theStorage Cell) which for a large part waS not properly unders-. The trainingand studies were carried out, but without any follow-up on .- -raining wasdiscontinued after project completion and the studies which wtre zst-!.buted tothe PFDs have so far not been acted upon.

Sustainability

6. Sustainability of the effective use of the project godowns will dep -{.mainly on two factors: (i) formulation and implementation by GOP ox' asatisfactory maintenance and repairs program for the godowns; and (ii)continuation of or follow-up on warehouse training and studies concerningavoidance of wheat losses through effective warehouse management, undertakenunder the project. Without these, the long-term sustainability of the projectwould be in jeopardy.

Findings and Lessons Learned

7. The project design was well conceived and, except for the part on therole of the Storage Cell, clear and understandable. Main lessons learned arethat the Bank should in future: (i) examine beforehand whether the actionproposed to be taken to substitute for non-compliance of a covenant would fullyserve the desired purpose (see para 8.6); (ii) spell out clearly and give moreprominence at appraisal to the "software" component of a -reject, particularlywhen this component is intended to have a sustainable im t on the sector andeven though it may be far less costly than the "hardware" component (see para8.7); (iii) ensure a prior commitment of the Government to sustain theinstitutional capability developed after the expiry of the project period (aeepara 8.8); (iv) assess the social and legal framework in which the project is tobe executed before incorporating under the project proposals which a priori wouldhave little meaning (see para 8.9). A lesson of experience for GOP is that itshould in future clearly understand a project's short and long-term objectivesas well as its financial implications, and also the need for a total commitmentto its successful undertaking (see para 9.8).

PROJECT COMPLETION REPORT

PAKISTAN

GRAIN STORAGE PROJECT

CREDIT 1157-PAK

PART I

1. Project Identity

Project Name : Grain Storage ProjectCredit No. 1157-PAKRVP Unit : EMENACountry : PakistanSector : AgricultureSub-sector : Food Grain Storage

2. Background

2.1 Pakistan's foodgrain production, mainly wheat and rice, accounted forabout 55% of the total cropped area and 36% of the sector's value added in1980. Wheat, which constituted the major portion of the Pakistani diet,covered 65% of the total foodgrain area and contributed about 70% to the totalfoodgrain production. It is mainly grown under irrigation in the wheat surplusareas, Punjab and northern Sind. The deficit wheat areas, NWFP andBaluchistan, where only some rainfed wheat is grown, obtain their needs fromPunjab and Sind and from imports. Although Pakistan's wheat productionincreased over ti'e last ten years it is still dependent on imports (on averageabout 0.7 million tonnes per year) to meet the national demand. The PakistanAgricultural Storage and Services Corporation (PASSCO) has been in charge ofprocuring (at Government fixed prices) and storing wheat in the warehouses ithas constructed in the surplus areas and reselling it (at Government fixedprices) mainly to the Provincial Food Departments (PFDs) of the deficit areas.The imported wheat is sold directly from the port by Federal Government toProvincial Governments.

2.2 GOP's wheat policy has been to increase production mainly throughprice incentives. As the GOP has applied a "no-loss" policy, decrease ofpost-harvest losses (due to poor operational warehouse management and thepractice of open storage) was an issue not seriously addressed, even thoughGOP on several occasions had tc stop wheat procurement since it consideredrick of losses due to further open storage too large. The discontinuation ofthis procurement caused farmgate prices to drop, production to slow down andGovernment's foodgrain policy to fall into disrepute.

2.3 Rice, Pakistan's second most important crop in 1980, was in contrastto wheat, a major foreign exchange earner (over 1/3 of 1980's production wasexported), covering about 19% of the foodgrain area and contributing about 20%to the country's foodgrain production. Like wheat, rice was mainly producedin Punjab and Sind (95% of total production of 1980) and its production was toincrease also through price incentives (fixed by Government). With theintention to fully exploit the rice export potential, GOP established the Rice

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Export Corporation of Pakistan (RECP) in 1974 and granted it a rice exportmonopoly. At the time of appraisal (1980) RECP had seven rice mills in Punjabwhich could not be fully utilized due to lack of storage facilities on thespot. Also, increaso in rice pr_duction through producer price incentiveswould have lead to increased storage losses and to an adverse effect on thepotential of foreign exchange earnings.

2.4 The Gra!n Storage Project therefore intended to support the GOPfoodgrain (wheat and rice) policies by providing project inputs which were tobetter the warehouse operational management for wheat and provide thenecessary warehouse facilities to decrease the wheat and rice storage losses.This would avoid any possible discontinuation of wheat procurement andconsequent disillusionment of wheat producers.

3. Prolect Obiectives and DescriRtion

3.1 The main objectives of the project were to assist GOP in theimplementation of its foodgrain policy by providing additional grain storagefacilities to RECP, PASSCO and PFDs; improving the operational efficiency ofthe last two; and strengthening the relevant sections in MFAC. Through theseactions the project intended to enable these institutions to: (i) meet theirfoodgrain procurement, distribution and export requirements more effectively;(ii) reduce their quantitative and qualitative storage losses; and (iii)improve their planning and coordination in storage of foodgrain (includingconstruction, multifarious grain testing, storage quality control, graintransportation and multi-purpose storage utilization).

3.2 The project was designed and formulated in 1979-80, immediatelyfollowing the poor 1977/78 wheat crop which was 8.5% below production of theprevious year, which made it necessary for GOP to import 2.1 million tons ofwheat. GOP at that time was giving serious consideration to the establishmentof a strategic food security reserve that would be adequate to make up forproduction shortfalls. The size of the reserve was established as theproduction shortfall of two consecutive poor wheat crops. In addition, thesize of the reserve was to be expanded by the thousands of Afghan refugees whowere moving across the border into Pakistan and whose numbers were expected toincrease dramatically. Foodgrain policy in Pakistan at that time had theobjective of increasing food grain production by providing price incentives toproducers; ensuring t. 'table distribution and consumption by providing foodgrains at reasonable prices and stabilizing consumer prices. Against thisbackground of a food deficit and an uncertain production and politicalenvironment, the project appears to have been designed to build additionalpublic sector storage to cater to the needs for a strategic food securityreserve and the equitable distribution of subsidized food to the consumer.

3.3 Technical issues such as the appropriate storage design and locationwere given due consideration in project formulation. However, wider issuessuch as the role of the private sector in storage, the budgetary costs of theconsumer subsidy on wheat, the cost to government of storage and transport ofwheat and issues of producer pricing and subsidies and its impact onproduction were considered to be outside the scope of the project. It is,however, clear that these issues were clearly recognized by the Bank at thetime of project preparation as the Grain Storage and Processing Study providedfor under the project had the objective of examining alternative government

3

policies regarding; (i) grain procurement and pricing; and (ii) private sectorInvolvement in grain marketing and processing and credit provisions for theprivAte trade. Although the studies were undertaken, GOP did not take anyaction on the recommendations (para 6.8). Given the more prersing needs andpriorities of GOP at that time, which was to establish a strategic foodsecurity reserve, the project emphasis was on providing ths additional storagerequired in the public sector.

3.4 The project comprised construction of 500,000 tonnes of bagged grainstorage facilities in the four provinces and 40,000 tonnes of rice storagefacilities at the RECP mills in Punjab. Further project inputs concerned graintesting and quality control equipment; mechanical grain handling facilitiesfor pilot trials; funds for research, extension aiid training; technicalassistance for carrying out studies; and funds for study tours andundertaking a study in further storage and processing requirements.

3.5 The overall responsibility for project execution was to rest withNFAC. To facilitate coordination of project activities a Project Managementand Coordination Committee (PMCC) was to be set up comprising all institutionsinvolved in the project. In MFAC a Storage Cell was to be established to bestaffed with four administrative professionals and two technical staff (onefor transport and another for quality control) were to be engaged. The Cellwas the principal project execution unit and was to "be responsible forproject matters as well as for the preparation of recommendations on futurestorage construction programs, storage maintenance, multi-purpose storageutilization, grain storage management and grain handling methods". The Cellwas basically to be the administrative/executive arm of PMOC; its head was tobe PMCC's secretary. Although the Storage Cell was to coordinate theconstruction program, procure the equipment, and direct the pilot trials theactual design and construction of the wheat and rice storage facilities wereto be carried out by PASSCO and RECP respectively. The Pakistan AgriculturalResearch Council (PARC) was to look after the grain storage, research andextension programs including training.

3.6 Total project cost was US$68.0 million for which an IDA Credit ofSDR 26.1 million (in 1981 equivalent to US$32.0 million) and a grant from theSwiss Government through SDC of SF 15.0 million (in 1981 equivalent to US$7.7million) were approved. Project duration was planned for four years, but wasextended five times by a one-year period and although all intended projectexpenditures were aetually carried out only about half of the credit and abou'90% of the grant wer:' disbursed due to savings resulting from exchange ratevariations and lower ̂ onstruction costs. The balance of credit of about SDR10.98 million and grant of about SF 1.66 million, were cancelled.

4. Project Design and Organization

4.1 Constraints of the grain storage sector were well identified andproject approach and dimension appropriately planned. Although project designand organization were also well conceived, they were not properly understoodby GOP largely due to ambiguity in the SAR regarding the role of the StorageCell. The project was designed and organized with an immediate as well as along-terim aim in mind. Only the immediate aim of the project was clearlyunderstood i.e. construction of warehouses to support GOP's overall foodgrainpolicy and reduce food grain losses mainly due to open storage. The long-term

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aim of strengthening relevant institutional capacity of MFAC was essentiallythe more important part of the project in spite of its relstively low cost(about 10% of project cost). This was to be achieved mainly through theestablishment of the Storage Cell, which was to undertake effective planningand coordination of multi-purpose grain storage in the country in addition toits activities mentioned above (see para 3.3). Had the SAR given theestublishment of the Storage Cell perhaps more prominence, by treating it as aseparate project Zeature or component, and had the Storage Cell been staffedwith technical rather than with administrative personnel and had relevanttechnical assistance been provided to the Cell, its value may have been fullycomprehended, the long-term aim of its establishment obtained and the benefitst accrue might have been much more rather than just satisfactory.

:P. .roie. t Implementation

5.1 Storage Cell. The establishment of the Storage Cell was not onlycrucial to the project implementation but also to the overall development ofthe food grain storage sub-sector. The Cell was intended to manage andcoordinate project activities whici' it did, but in addition to serve somelong-term objectives (future strategy for storage construction, maintenance,multi-purpose storage utilization, grain storage management and grain handlingmethods) which it did not. Although the Cell was created at the beginning ofthe project, recruitment of staff including its Head was not completed until1984, one year before the project waS originally due to terminate anL aftersome 50% of the construction program had already been completed. As a resultthe effectiveness of the Cell was seriously undermined even in providing theintended project management support.

5.2 Disbursement of funds by the Ministry of Finance to the agenciesconcerned with the execution of the various project components suffered fromcontinual delays. Funding for PASSCO was provided through a "Project RevolvingFwi.d"IL, initially set-up with Rs 50 million. Into this fund six-monthlydeposits were to be made to cover the costs of PASSCO's agreed work schedulefor the next six months. On several occasions this fund was exhausted, due toinadequate provision or delays in effecting the transfers, causing theconstruction program to slow down. Subsequently PASSCO made some fundsavailable and increased the six supervisory staff resources originallyallocated to its construction program to eight to regain lost time and toachieve construction deadlines. RECP, which was to receive the project fundsfrom the Kinistry of Finance through MFAC, had to finance its entireconstruction program from its own resources and did not receive payment untilsome three years after it was completed. PARC's program, which was to receiveproject funds through a similar arrangement, was slow in getting started, alsobasically due to payment delays, which eventually resulted in the projectbeing extended by one year so that PARC could complete its training and wheatloss assessment programs. Although several supervision missions took thisissue up with Ministry of Finance and MFAC it was never satisfactorilyresolved and remained a problem throughout the life of the project.

5.3 PFDs were required to make available suitable premises for theestablishment of grain testing laboratories to be equipped by the project.

I./ A misnomer; should have appropriately been "Project Replenishment Fund".

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Although all the equipment was provided, iaboral;ories were not made availablein Sind (3) and NWFP (1). In Baluchistan the laboratory was set up andequipped but has, so far, not been used, while in Punjab the equipment wasprovided to an existing laboratory. Other grain testing and quality controlequipment designa,ed for use in both existing and newly constructed godownshas not been distributed as intended by the PFDs and little if any is inregular use.

5.4 Pilot Projects were intended to test alternative methods ofmechanically loading hexbins and mechanical bag handling in godownsa This wassubsequently expanded to include mechanical bulk loading of house typegG4owns. At the request of NFAC/PASSCO the scope of the pilot projectcomponent was expanded in early 1984 to enable the construction of threeexperimental open bulkheads (OBH) for trials of hulk handling and storage ofwheat. Following the promising results obtained, permission was again sought,and given in late 1984, for the purchase of a limited quantity o'f bulktransport and handling equipment to extend the trials to bulk collection fromprocurement points to the OBHs and for bulk delivery to mills. This ledeventually to the successful construction of an additional 150,000 tonnes ofOBH under the project and financed by the savings obtained mainly throughfavorable foreign exchange rates.

6. Proiect Results

6.1 Warehouse Construction. The storage capacity built (500,000 tonnesfor wheat and 40,000 tonnes for rice) was intended to cover 47% of theadditional 1.07 million tonnes of the wheat storage project'.d needs by 1985/86and 48% of the additional 84,000 tonnes of paddy/rice storage immediate (in1980) needs as estimated in the SAR. Some 80% of the projected wheat storagewas concentrated in the main procurement areas, with the remainder in thedeficit areas of NWFP and Baluchistan. Projected rice storage was located atexisting RECP mills in Punjab. With some minor exceptions, the constructionhas been undertaken in accordance with the program set ,ut in the SAR, andcompleted only one year later than estimated in the SAR, mainly due to delaysin disbursement of funds by the Ministry of Finance. The quality of theconstruction is generally good and most godowns have been in regular use sincecompletion. Monthly stocks of wheat held by the PFDs continue to exceed theavailable storage capacity for several months each year implying a continuanceof the open storage practice when needed; in Punjab this averages some 5-6months. This suggests that the godowns built under the project are wellutilized. The mission estimated, on the basis of data obtained in Punjab andNWPP, that utilization rate would be about 80% over a five-month period.

6.2 Reduction of Storage Losses. An inferred objective of the project wasto reduce the level of losses incurred due to: (i) poor operational managementand (ii) open storage. As Government policy has not recognized the existenceof storage and handling losses in their records (the "no loss" system),reliable estimates of the achieved reduction of losses resulting from theproject cannot be made. It is also not possible to determine the utilizationof each godown built under the project as they are operationally fullyintegrated into the overall storage network.

6.3 The EAR assumed that over a six-month period losses would be 1.25-1.50% in quantity terms for godowns and 3.50-3.75% for storage in the open.

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The storage facilities to be built under the project were to diminish theselosses to a maximum of 0.75%. Based on these assumptions and improvedhandling/storage management, the SAR estimated that the project would cause areduction in wheat losses of some 28,000 tonnes per year. Subsequent surveysundertaken by PARC IL imply that the actual level of losses in the godownswould be some 3.5X over a five-month period, and not 1,25-1.5% over a six-month period as assumed in the SAR. The study does not provide estimates oflosses for open storage nor for different types of storage. However, informedopinion suggests that losses for grain stored in the open are some 2.5-3.0times larger than those for godown storage, thus signifying that such losseswould be equivalent to 8.5-10.5%. Based on these estimates and the mission'sestimate of the project's wheat godowns capacity use of 80% ovar a five-monthperiod (see para 6.1), the reduction in storage losses brought about by theproject would be 21,000-28,000 tonnes per year.2> Although computed on adifferent basis it happens that this estimate is more or less in line with theone made in the SAR. Nevertheless the mission wishes to stress that thisestimate is a mere guesstimate and should therefore be used prudently.

6.' Throughput of the RECP mills has increased substantially since theconstruction of the mill storage facilities (see Table below). It is notclear however, whether these increases are a direct result of the availabilityof storage or of other factors such as improved procurement prices orincreased use of a higher yielding Basmati variety. Also the increasedquantities of paddy procured by the rice mills are still in excess of thestorage capacity constructed with the result that substantial quantities ofpaddy still have to be stored in the open. However, finished rice can now beheld in the godowns until such time as shipment to Karachi can be arranged,reducing the likelihood of losses and quality deterioration. RECP, which isalso forced to adopt the "no loss" system, uas unable to provide anyinformation concerning losses. Unlike for wheat, no loss assessment study wasundertaken for paddy/rice. Estimates of reduction in rice/paddy storage lossesbrought about by the project can therefore not be made. However, the standardof warehouse management currently practiced by RECP is so inadequate that anyreduction in losses, thanks to the storage now available, is expected to bemarginal (see para 6.10).

]/ Losses in Public Sector Storage in Pakistan, PARC 1986.

.2/ (0.8 x 500,000 x 0.052) - (0.8 x 500,000 x 0.07).

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Paddy Procurement by Rice Mills(tonnes)

84/85 85/86 86/87 87/88 88/89 89/90 90/91

Dhaunkal 33,561 12,799 30,564 25,670 30,672 25,547 25,978

Eminabad 2,275 4,269 8,309 9,661 10,653 9,752 10,128

Siranwali 3,722 4,000 9,125 9,506 11,240 10,201 9,899

Sheikupura 4,138 5,397 9,243 10,516 11,710 9,509 9,995

Faizabad 2,052 4,628 8,071 10,353 10,151 9,156 10,027

Mubarakpur 2,473 3,273 8,531 10,026 11,763 9,002 9,718

Hafizabad 4,092 8.754 9.763 10,841 11.117 10.287 10.466

Total 52,313 43,120 83,606 86,573 97,306 83,450 86,211

Source: RECP.

6.5 Mechanized Loading Trials of Hexbins. While the trials showed the

practicality of mechanized loading operations, the period for which they were

run, one week, was too short to make a full assessment and it is disappointing

to find that the equipment has not been used by the Punjab FD since its

handover in 1986. Nevertheless the results, which should be considered as

indicative only, are interesting: mechanized wheat loading trials on the

hexbins in Khanewal demonstrated that the bins could be loaded satisfactorily

using mechanical means and at a lower cost than the current practice of manual

loading (see table below).

Indicative Results of Mechanization Trials on Hexbins

Operating Cost(Rs/tonne)

Manual handling (present system) 18.85

Pneumatic conveyor 19.45Elevator and augers 12.14Elevator and barrow 14.00

Pneumatic conveyor and augers 17.08

Source: PASSCO.

6.6 Open Bulkheads. The construction of OBHs initially for pilot trials

and, following their success, the expansion to full-scale trials (150,000

tons) was a significant change to the scope of the project demonstrating for

the first time the practicality of bulk handling from farmer through storage

to the mills. OBHs are substantially cheaper to construct than traditional

godowns (Rs *q' per tonne compared with Rs 620 per tonne), and have been shown

to be suitable under Pakistani conditions with the grain remaining in good

condition for periods of up to six months. Initial responses from both farmers

and millers have been promising.

6.7 The dovetailing of the full-scale bulk handling operation with atechnical assistance project supported by USAID is proving tc be highlysuccessful in the development of practical operational methods and for thepromotion of the system. During the 1991 procurement season it is planned toliandle some 60,000 tonnes of wheat through the OBHs. If this operation issuccessful, it is to be expected that the bulk handling of wheat would beexsanded in the future and result in lower marketing costs to farmers, lowerhandling and storage costs to the PFDs and lower handling costs to themillers.

6.8 Studies. Four studies undertaken under the auspices of the project,were completed and the reports distributed by the Storage Cell to the PFDs.None of the PFDs seemed to be aware of these reports and, so far as could bediscerned, no fcllow-up discussion nor action has been taken. The StorageCell claimed that the studies have made the Government more aware of theimportance of the grain storage/logistics sub-sector and have assisted withthe development of future policy. However, there is little evidence to supportthis claim. The Grain Quality, Grain Testing and Quality Control study shouldhave provided an operational manual for distribution to procurement andstorage staff; this manual was never prepared.

6.9 Storage Management and Quality Control. PARC established six researchlaboratories&L which conducted the grain loss study and the godown trainingprogram. A total of 1,050 staff from the PFDs and PASSCO received one week oftraining by six staff from PARC, who were trained overseas under the projectand employed in the research laboratories. This has reportedly led toimprovements in general warehouse management, but, due to the "no loss" systemwhich discourages the use of quality meas.rement, has not had the intendedimpact on improving quality control during procurement or storage. Oncompletion of the project five of the PARC trained staff had to be released asGovernment did not have the resources to finance their posts in the researchlaboratories.

6.10 Surprisingly the project did not make provision for training RECPstorage staff in warehouse management and quality control. The generalstandard of storage management at the RECP mill godowns visited was e::tremelyinadequate with apparently little or no management interest in raisingstandards. Losses incurred at these sites can therefore be expected to beunacceptably high (see para 6.4).

6.11 Financial and Economical Benefits. Although RECP's actual benefitsunder the project could not be estimated (see Part III 6-C), they mostcertainly will be significantly lower than the ones estimated in the SAR.There are two reasons for this: (i) the RECP warehouse management has been

/ Food Grain Transport Economics and Logistics, Grain Quality Testing and GrainQuality Control, Food Grain Storage and Processing, Losses in Public SectorStorage in Pakistan.

Z/ National Agricultural Research Center, Islamabad; Tropical AgriculturalResearch Institute, Karachi; Agriculture University, Peshawar; AgricultureUniversity, Faisalabad; Agriculture University, Hyderabad; AgriculturalResearch Institute, Quetta.

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far below than what is required; and (ii) the savings to be derived by RECP,as estimated in the SAR, were over-optimistic to the extent that they couldnot even be achieved under a relatively effective level of warehousemanagement. The internal economic rate of return for the entire project couldnot be re-estimated due to lack of RECP data (see above), while the re-estimated ERR of the wheat storage component, which covered more than 90% ofthe total project cost, was similar to the one estimated in the SAR i.e. 25%(SAR: 26X). The ERRs estimated for each individual model o. godowns, at thetime of the PCR, show that they are almost similar to the ones estimated inSAR except that the larger godowns have a slightly less favorable ERR thanthat estimated at appraisal, particularly for Model D (see Part III 6-B). Thesavings to be derived through a reduction in the warehouse operating cost forthe larger godowns were somewhat overestimated at appraisal.

7. Project Sustainability

7.1 Since the long-term aim of the project has not really been achievedthe sustainability of the project should be considered only in relation to theshort-term aim, the construction of the godowns. Although most projectgodowns are well utilized they are poorly maintained and hardly repa!.red.GOP's repairs and maintenance program has beeni an unresolvable issuethroughout the project. Only after USAID financed a godown rehabilitationprogram (which was to cover repair and maintenance) was the issue no longertaken up by the Bank supervision mission. Nevertheless the USAID project willbe terminated this year and there are no visible signs of change in GOP'sattitude towards maintenance and repairs, since it apparently considers suchexpenses a last priority. Sustainability of the effective use of the projectgodowns will depend on two factors: (i) formulation and implementation by GOPof a satisfactory maintenance and repairs program for the godowns; and (ii)continuation of or follow-up on training and studies concerning avoidance ofwheat losses through effective warehouse management, undertaken under theproject (paras. 6.8 and 6.9). Without these, the long-term sustainability ofthe project would be in jeopardy.

8. Bank Performance

8.1 Storage Cell. The creation of a Storage Cell to manage the project andto provide a focal point for coordinating anw developing future storage andlogistics strategies, should have considerably strengthened MFAC. However, theintended roles of the Cell, particularly oith respect to development andcoordination aspects (long-term aim) although inferred, were not clearlyspecified nor given the needed prominence in the SAR. The result has been thatthe Cell's activities have concentrated essentially on project managementwhich, for other reasons, was not too strong either (see para 5.1). TheStorage Cell should also have been staffed with technical rather thanadministrative personnel. Moreover the Cell should have been provided withtechnical assistance since little know-how on the grain storage sub-sector hasbeen available in Pakistan, particularly at the time of appraisal. This wasthe only weakness in the SAR, which otherwise was an excellent document.

8.2 Rice Godown Design. Significantly different designs were adopted bythe Bank for the rice and wheat godowns with the rice godowns being inherentlymore expensive both at appraisal and on completion (see table below). Whilethe rice godowns needed to be somewhat higher than those for wheat to allow

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for the higher paddy stacks, this would not account r the large differencein cost. Also, given the operational weaknesses of ..e design of the ricegodowns (para 9.4), it is not clear why the Bank during implementation agreadto select the more expensive design.

Compnarative Cost of Wheat and Rice Godowns

Cost per tonne capacity (Rs)Wheat Rice

Appraisal 860 1,050Actual /a 741 1,186

_a Source: PASSCO and RECP.

8.3 SuRervision Missions. Throughout the life of the project the standardof Bank supervision was high with problem areas clearly identified andcorrective follow-up action suggested to Government which, however, was notnecessarily followed through. A typical example of such a case has been therelentless insistence of the supervision mission on the compliance of thecovenant regarding the repairs and maintenance backlog of the godowns.Unfortunately the Bank removed this pressure once it became clear that USAIDIntended to take this up under a godown rehabilitation project. The USAIDproject has not solved the issue but rather delayed its solution.

8.4 Flexibility was shown with respect to recommending adjustments to thescope of the project to meet changing circumstances. Of particular relevancewere the recommendations to support bulk handling trials and subsequently theconstruction of OBHs which necessitated several extensions to the life of theproject. The decision taken by the Bank to dovetail the trials of the OBHs(which had been limited only to mechanized loading of bagged grain), with thedevelopment of the continuous bulk handling system (from farmer throughstorage to mill) being undertaken with USAID assistance was opportune andsound.

8.5 RECP Storage. As RECP was able to finance the total constructioncosts for the 40,000 tonnes of storage capacity built in Punjab from its ownresources, the Bank's rationale for the inclusion of this component in theproject would in retrospect appear questionable. While training of warehousestaff in storage management and quality control was included under the projectfor the PFDs and PASSCO, no provision was made for training RECP staff. Withthe exceptionally low standards of storage management seen in RECP godowns,this need should have been identified at appraisal. RECP needs wereapparently more software rather than hardware oriented.

8.6 Lessons Learned. Recognizing the underlying specific and importantreasons for which covenants are included in the project documents, the Bankshould examine beforehand whether the action to be substituted for non-compliance of a covenant, is actually realistic and would serve the desiredpurposes. Regarding this specific covenant on repai-s and maintenance theBank could have instead put in a component for repairs and maintenance toremove the backlog. This may have been a better solution, but whether

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sustainability in that case would have improved is still questionable (para7.1).

8.7 While the concept of establishing a Storage Cell in the MFAC wassound, its failure to achieve its intended role resulted from ambiguity in theSAR. With hindsight the responsibilities and role of the Cell should havebeen more clearly spelled out and given more prominence in the SAR. Further,as the technical capabilities of government staff (particularly with respectto analytical work in the sub-sector) have been limited to the extreme,technical assistance should have been provided to develop the Cell's role andtrain its staff. In future, institutional weaknesses should be consideredmore seriously as, once strengthened, the institlntions can have a much moresustainable impact on the sector.

8.8 The Bank supported the establishment of a training capability in PARCfor warehouse management and quality control. On termination of the projectGovernment was unable, or unwilling, to make the necessary resources availableto sustain this capability. As a result almost all the PARC trainers who weretrained overseas have been lost. Although it was presumably intended thatthere would be a continuing need to provide training to warehouse staff, theBank did not require Government to make the necessary provisions forsustainability. In future the Bank should require a prior comnitment fromGovernment to sustain the institutional capability developed after expiry of

the project period.

8.9 To improve grain storage management in the country the projectprovided a substantial amount of weighing and quality control equipment. While

the regular use of this equipment would enable better standards to beachieved, there was a lack of appreciation of the difficulties in bringingabout the necessary operational and attitude changes, e.g. discontinuation of

the "no loss" system, as well as greater control over undesirable practices.As a result virtually none of the equipment has been used. In designing futureprojects the Bank should assess the social framework in which the project isto be executed, before incorporating under the project proposals which apriori would have little meaning.

9. Borrower Performance

9.1 Project Execution. While the construction or "hardware" component of

the project though with some delay was completed satisfactorily and withrelatively few problems, the "software" components have not achieved theexpected impact, and although the SAR was not fully explicit on this (role ofStorage Cell), Government should have realized the shortcomings in the grainstorage sector. Government inertia was mainly to blame for this, although its

lack of awareness of the importance of having an effective storage managementand logistics system in place could also have been the reason. Besides, thedelays in borrower's disbursements of funds to the project entities wereundoubtedly due to inertia and lack of full commitment to establish efficientprocedures. Had it not been for the drive of and the resources put in by

PASSCO and RECP the construction program would have suffered serious delaysand the project would most probably have become a problem project.

9.2 Godown Construction. Construction by PASSCO and RECP was generally of

a good standard. However, problems have arisen with the godowns built by

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PASSCO in Baluchistan where the quality of construction was markedly belowthat in other parts of the country. The main ptoblem lies with the roofexpansion joint in the middle of the 2200 tonne module godowns which have beendesigned to withstand seismic conditions. Water seepage through the joint some4-5 years after construction, due either to a design weakness in the severeclimatic conditions or to the generally lower standard of constructionprevailing in the area,1L is causing damage to the fabric of the building andleading to operational problems. Inadequate quality of construction is alsoevidenced in the gaps which bave developed between the dividing wall and thesupporting columns, where a "mastic" seal should have been uised, and waterseepage through the base of the side walls due to water lying on the externalloading platform.

9.3 The original design of the PASSCO godowns called for three sets ofdouble steel doors on each side of each 1,100 ton module. Due to problems ofsealing.the doors during fumigation the design was modified, with the approvalof the Bank, at an early stage to a single door, 4'-0"x 7'-4". This size ofdoor is proving to be rather too narrow for ease of bag handling operationsand for mechanization, either for bags or for on-floor bulk storage. Thedesign of the godowns would have been improved if internal screen doors hadbeen included in the design to prevent birds entering the buildings and toimprove security when godowns are being ventilated.

9.4 While construction of the paddy/rice godowns built by RECP is to asatisfactory standard the approved design has had several operationalweaknesses. Ventilation of the godowns is generally poor, due in part toinadequate windows at roof level and the ineffectiveness of the shutteredwindows in the walls for providing cross flows of air when grain is stacked inthe godown. It is also difficult to seal these shuttered windowssatisfactorily for fumigation operations. The design did not call for anyroof insulation with the result that high temperatures are reached inside thegodowns during the summer months,

9.5 In siting the godowns on the rice mill sites, insufficient attentionwas given to simplifying the movement of grain into and out of the godowns toand from the paddy driers and rice mills. As a result movements have requiredexcessive manual operations and any future move towards mechanized handlingrendered more difficult.

9.6 Godown Repairs and Maintenance. The regular maintenance and repairsof godowns continues to be a problem. Assurances were given at the time ofloan negotiation that adequate budgetary provision would be made by theProvincial Governments to cover godown repair and maintenance, but this hasnot been done. Although the Bank has insisted continuously on Borrower'scompliance to the covenant concerned, it was not complied with. This thornyissue was really never resolved. The Bank finally considered the covenantcomplied with after USAID provided the funds for a rehabilitation program of

PASSCO has now developed a modified design for the expansion joint whichhas been adopted for the godown rehabilitation project being undertakenunder a USAID project for older godowns.

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godowns. Although the Bank accepted this a; a compliance, it should mostcertainly not be considered within the spirit of the agreement.

9.7 Storage Management and Quality Control Training. There has been anongoing need to provide regular training to warehouse staff in storagemanagement and quality control since standards are to be raised to anacceptable level and losses reduced. Although six people were trained asinstructors under the project, only one person could be retained after projectclosure due to lack of government resources. The much needed training programhas now been discontinued.

9.8 Lessons Learned. The principal lesson to be learned by the Borroweris of a totally different nature than any of those to be learned by the Bank.Before undertaking the responsibility of project implementation the Borrowershould clearly understand the project's short as well as long-term objectivesas well as its financial implications, and also the need for a totalcommitment to its successful undertaking. Throughout the project'simplementation the Borrower has shown some inertia to tackle problems and wereit not for the drive and resources of RECP and PASSCO, the project's outcomewould have been far less favorable.

10. Project Relationship

10.1 Project relationship concerned those of the Borrower and the Bank, theBorrower and SDC and SDC and the Bank. The Borrower/SDC as well as theBorrower/Bank relationships were excellent, although the results of theserelationships were not as one would have expected. Again this was mainly dueto the Borrower's inertia. The SDC/Bank's relationship was generally soundexcept that on some occasions SDC was not informed on time of certain eventsin which it wanted to participate. Otherwise the relationship was excellent.When SDC foresaw that not all of its grant would be utilized by the end of theproject, it proposed to fund more than merely part of the constructioncomponent, as originally agreed. The Bank readily consented. All projectfunds disbursed since 1988 were therefore debited to SDC's grant only.

11. Consulting Services

11.1 With the lack of technical resources and expertise within MFAC theconsulting services provided under the project were essential for theundertaking of the studies and for providing training to PARC. For the studiesa combination of international and local consultancy firms was used which hashelped develop local consulting capabilities.

12. Proiect Documentation and Data

1. The SAR provided a useful framewcrk for the Bank as well as for theBorrower during implementation, except where the institutional strengtheningwas concerned. The legal agreements were also clearly understood andfollowed, with the exception of the covenant on repairs and maintenance.

2. PCR data were not readily available. Except for the Punjab FD allother PFDs promised to gather and provide the data requested, but neverfollowed through. Likewise the Storage Cell which was supposed to be theadministrative/executive arm of PMCC had few data readily available.

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PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

The information contained in Part III of the PCR is correct and theanalysis contained in Part 1 is substantially objective. However, our viewsare as follows:

The PARC component of the project made a significanr contribution in notonly determining loss causing agents but the loss was also quantified. TheSurvey Report of 1984-85 provides information on :.osses in various types ofstorage for different periods of ti. The report does not contain informationon losses in open storage.

The supervision missions discussed the philosophy that could lead tolarger scale trials (150,000 tons) after results from initial small pilottrials have been collected. This approach was suggested by the Bank despitethe fact that additional funds in the form of savings from the project wereavailable for such large scale expansion of open bulk storage. This has notbeen mentioned in the PCR.

The Grain Storage Study undertaken under the project indicated a futuregap in storage requirements. The government request to build additionalstorage facilities to fill this gap out of savings from this project was notacceded to by the Bank.

Except for the above comments, the Banks performance has been correctlyand adequately depicted in the PCR and the guidelines for the futurerealistically outlined. The Borrower's performance has also been adequatelydepicted and lessons learnt adequately identified in the PCR.

The co-financier in this case was the Swiss Government. The SwissGovernment representatives in Pakistan effectively participated duringsupervision missions and both the World Bank and the Swiss Embassy in Pakistanremained accessible and open for discussions and consultations during theentire project period.

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PART III

1. Related Bank Credits

Credit/Loan Title Purpose Approval Status Comments

1. Salinity To increase agricultural 12 June Most of the works The GovernmentControl and productivity of about 1.27 miLlion 1977 are completed should take overReclamation acres in Bahawalpur Civil Division (85%) the completedProject-VI (Cr. of PunJab by (a) lowering the drainage works and754-PAK) ground water table and providing provide adequate

safe disposal of saline ground 0&M funds on awater, and (b) providing increased continuing basis.water supplies.

2. Salinity To (a) increase agricultural 23 January Expected projectControl and production on about 123,000 acres 1979 completion ofRecltnation of the project area, (b) provide a December 1991.Project MARDAN more reliable and equitable water(Cr. 877-PAK) supply, and (c) strengthen the

Provincial irrigation Department'scapability for efficient 0&M ofthe irrigation system.

3. Baluchistan To (a) increase agricultural 1982 Expected projectMinor Irrigation production, (b) improve the completion of& Agricultural institutional capacity of 1992.Development Irrigation and AgriculturalProject (Cr. Development, and (c) introduce1243-PAK) appropriate forms of local

participation in project cycles.

4. Fourth To (a) increase agricultural 31 May Except for the WAPDA s',ould takeDrainage Project productivity of about 295,000 ac 1983 sub-surface drain actions to speed-(Cr. 1375-PAK) in Faisalabad Division of Punjab installation which up the completion

and (b) strengthen the capability has been slower of the unfinishedof WAPDA and Punjab's Departments than targetted sub-surface works.of Irrigation and Agriculture. (only 25% of

pipeline workcompleted), theproject isprogressing at asatisfactory rateand expectedcompletion date ofDecember 1991.

5. Left Bank To increase agricultural 1985 ExpectedOutfall Drain - I production in the left bank of completion date of(Cr. 1532-PAK) river Indus in Sind by providing 1993

surface and sub-surface drainagerelief to about 578,000 ha and392,000 ha respectively.

6. Baluchistan To (a) strengthen and reorganize 13 Expected The Goverrwnent (a)Agricultural the extension service, and (b) December completion date of to provideExtension and widespread adoption of proven 1984 31 December 1991. adequate projectAdaptive Research improved farming system in four revenue budget,Project (Cr. districts of Baluchistan province. and (b) to reduce1533-PAK) high turn-over of

trained projectstaff.

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7. On-Farm Uater To increase agricultural 6 June Physical progress Government to (a)Management II production through (a) effective 1985 ahead of targets inmprove quality ofProject (Cr. use of Irrigation water, and (b) and expected civil works in1603-PAK) adoption oi improved on-farm water completion date of renovating water

management practices by farmers. 31 December 1991. courses, (b)establish on-farmwater managementrevolving funds ineach provinceusing the costrecovery fromrenovated watercourses.

Credit/Loan Title Purpose Approval Status Comments

8. Punjab and To achieve sustainable increases 24 Except civil works Construction ofSind Agricultural in agricultural production by February where progress is civil works shouldExtension II (AG completing the introduction of the 1987 very slow, the be accelerated.Extension IV) T&V extension system throughout project is makingProject (Cr. the provinces of Punjab and Sind. good progress in1762-PAK) Punjab. In Sind,

the progress isunsatisfactory.Expectedcompletion date of31 December 1992.

9. Second To (a) increase agriculturaL 29 MarchIrrigation production by providing a more 1988Systems reliable and equitable waterRehabilitation supply, (b) reduce crop losses,(Cr. 1888-PAK) and (c) strengthen the Provincial

Irrigation Department'scapabilities for O&M.

2. Project Timetable

Item Date Planned Date Revised Actual Date

Identification - April 1980

Preparation June 1980 - June 1980

Appraisal October 1980 - October/November 1980

Credit Negotiations April 6, 1981 - April 22, 1981

Board Approval I/ May 26, 1981 - June 2, 1981

Credit S±_nature V - - October 21, 1981

Credit Effectiveness January 19. 1982 - March 15. 1982

Credit Closing December 31, 1985 Dec. 1986, '87, '88, December 31. 198989,

Credit Completion June 30. 1985 June 1986, '87. '88, June 30, 1990'89, *9C.

L/ Switzerland/Govt. of Pakistan Agreement on Financial Cooperation, September 30, 1981.

/ Letter of Understanding Co-financing, Switzerland/World Bank, November 17, 1981.

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Comments: The first one-year extension (to 1986) of the project was granted to enable PARC tocomplete its training and wheat loss assessment programs which were delayed due to delaysin disbursement by GOP. The second one-year extension (to 1987) was granted to enablePARC to undertake an expanded training program for warehouse staff and PASSCO tocontinue with bulk handling trials and complete the weighbridges which were delayed due toshipment delays. The next three one-year extensions were granted basically due to theinability of GOP to timely proceed with the necessary approval of constructing 150,000 tonnesof OBH storage; delays in construction of the OBHs and in the delivery of equipment; anddovetailing this OBH component to a USAID bulk grain handling program which started cnd1990.

Before preparation an issue raised was whether bulk storage should be introduced inPakistan. After long defiberation it was decided not to, for the following reasons. Bulkstorage would entail: i) a 50% higher construction cost than for bag storage and ii) far-reaching modifications in the transport system would be required to permit bulk movement ofgrain. GOP agreed, but suggested that at least a pilot trial in bulk storage should be includedand at preparation the pilot project idea was accepted provided a suitable scheme could beidentified during appraisal. However, at appraisal stage the pilot scheme was eliminated fromthe project since it was considered premature under Pakistan conditions due to high capilaloutlays required and an expected high degree of labor displacement.

Lack of storage maintenance was raised as an issue throughout the project cycle and arelevant covenant was included in the Credit Agreement, but to no avail.

3. Credit Disbursements

Cumulative Estimated and Actual Disbursements

IDA in USS'000 1982 1983 1984 1985 1986 1987 1988 1989 1990

Appraisal estimate 3,000 12,890 24,260 31,540 32,000 32,000 32,000 32,000 32,000

Actual 0 1,480 4,550 10,891 13,906 15,703 15,816 15,889 15,889

Actual as S of estimate 0 11.48 18.76 34.53 43.46 49.07 49.43 49.65 49.651/

SDC in SF '000

Appraisal estimate &' 1,000 4,500 8,500 13,000 15,000 15,000 15,000 15,000 15,000

Actual 1,159 2,489 4,520 9,554 9,968 9,968 10,153 11,839 13,3443/

Actual as Z of estimate 115.90 55.31 53.18 73.49 66.45 66.45 67.69 78.93 88.96

1/ The undisbursed balance of about US$16.11 million (SDR 10.98 million) was cancelled

Z/ Appraisal was based on calendar years: here it is assumed that the calendar year 1981 is equal to the Bank's fiscal ye1982, etc.

I/ Equal to US$5.5 million when based on the exchange rates at the time of each disbursement; the unspent balance wascancelled.

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4. Prolect IMglemontation

;0tY IndicatoraUnit. Appraisal Revised Actual

Itmn Estimate EstimateWheat StoragesLand Aoquiuition 000 mt 500 - 500Award of Contract 000 mt SOO - 500Construction completed 000 mt 500 - 500

Paddy/Rioe StoragesAward of Contraot 000 mt 40 40 40Construction completed 000 mt 40 40 40

Equipment ProcurementWarehouse, Quality Control and

Laboratories Re Million 22 36 36Researob and Extension Rs Million 2 1 1Mechanical Grain Handling Rs Million 6 8 8Pilot Project- OBH Rs Million - 7.870 7,870

Vehicles (PARC)Cars No. 12 66 66Motorcycles No. 19 16 16

Technical Assistance man-months 54 69 69Training

Local training- storage No. 1,000 1,050 1,050Overseas study tours No, 7 22 22Foreign training- research No. 9 6 6MUc Fellowships No. 35 35 35

Consultant Studies No. 3 3 3Additional Staff- PIU

Chief Engineer No. 1 1 1Deputy Geniral Managers No. 2 2 2Executive Engineers No. 9 9 9Assistant Engineers No. 17 14 14Sub-engineers No. 32 25 25Draftsmen/tracers No. 5 4 4Accounts Officer No. 1 1 1AOccuntant No. 13 8 8

PARC Coordination UnitCoordinator No. 1 1 1Field Officer No. 1 1 1Office Manager No. 1 1 1Accountant No. 1 1 1

MFACDirector Storage Cell No. 1 1 1Section/Accounts Officers No. 3 22 22Technical Officers No. 2 11 11Research Officer No. - 11 11

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5. Project Cost and Financing

A. Project Cost 1/(US$ million)

Appraisal PCREstimate 2/ Estimate

Local Fore jn Total Local ioreian Total

Wheat storage facilities 47.1 12.3 59.4 32.1 0.3 32.4Paddy/rice storage facilities 4.1 1.3 5.4 3.1 - 3,1Pilot projects 0.3 0.4 0.7 0.3 0.2 0.5Open bulk head project - - - 2 6 1.0 3.6Grain storage research andextension 0.6 0.1 0.7 0.2 0.1 0.3Technical assistance,training and study 0.9 0.8 1.7 - 0.2 0.2

TOTAL 53 0 15.0 68,0 38.3 1840,1

1/ Discrepancies due to rounding.^/ Including all contingencies.

B. Project Financing(US$ million)

Source AD-raisal Estimate PCR Estimate

IDA 32.0 (47%) 15.9 (39.7%)SDC 7.7 (11%) 5.5 (13.7%)Domestic 28.3 (42%) 18.7 (46.6%)

Total 68.0 (100%) 40.1 (100%)

Comments: Less funds were required since the Pakistan Rupee devalued sharply during theproject period (from Rs 9.90 per US$1, at appraisal 1981, to R, 21.83 per US$1in 1990) and the foreign exchange expenditures were minimal.

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6. Pro1ect Results

A. Direct Benefits

Indicators Apnraisal Estimate PCR Estimate

1. Reduced Grain Storage Losses 26,000 tonnes wheat per year 21.000-28,000 tonnes per year

2,500 tonnes paddy per year Not possible to estimate onthe information available /

2. Reduced Handling Losses 2,000 tonnes wheat per yea.: Included in 1 above

100 tonnes paddy per year Not possible to estimate onthe information available

3. Savings in Operational and US$2.0 million per year Operational savings areTransport Expenditure estimated to be some

US$250,000 per year 21

Y Reduced wheat storage and handling losses are based on estimates made in Section 6 of Part 1 (see para 6.3).RECP was unable to provide any information on the reduction of storage losses due to the project.

/ Operational savings were based on an estimated average reduction of Rs 12 per tonne storagecapacity. Savings on transport costs attributable to the project are not available in the PFDs.

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B. Economic Impact

Economic Rate of Return

Godowns Appraisal Estimate PCR Estimate

Model A 250 MT 26 251,100 MT 36 369,900 MT 31 Not built under the project

Model B 1,100 MT 24 263,300 MT 23 2522,000 MT 24 18

Model C 1,100 MT 24 234,400 MT 24 21

17,600 MT 25 17

Model D 1,100 MT 30 264,400 MT 30 229,900 MT 32 18

Wheat Storage 26 25Component

Comnents

The wheat storages constructed are grouped into four models. Model A and B are applicable to project storagewhich were constructed at existing storage locations; models C and D are for new storage locations. ERRs werecalculated for each of these models on the same basis as at appraisal.

The economic rate of return estimated for the models were based on data provided by PASSCO, the Punjab FoodDepartment, and the mission's estimate on the possible savings of losses, which is based on PARC's report "Lossesin Public Sector Storage in Pakistan, PARC 1986". GOP could not provide the mission with any estimate on lossessaved, due to the 'no-loss" policy.

The economic rate of return of the wheat storage component is about the same as the one estimated at appraisal.This was due to lower construction costs, higher import parity price for wheat, but significantly lower savings inoperating costs than were estimated in the SAR. All other data have been assumed similar to those in the SM.

.he SAR estimated al5o the economic rate of return for the pilot projects that were to be carried out forseveral seasons. In actuality, they were in operation for a period not longer than a week each. No ex-postestimates of the economic rate of return was therefore made.

The overall economic rate of return of the project could not be estimated due to a severe lack of data fromRECP. The data that was provided by RECP were too unrealistic to be used for any possible interpolation (seecomments under Section C).

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C. Financial Impact

Financial Rate of Return

Entity Aporaisal Estimate PCR Estimate

RECP 37X n.a. see comments

CooMents

No PCR estimate could be made since: i) RECP was unable to provide realistic operating costs for the project(it is difficult to separate the operating costs of the godowns from those of the rice mills; no fumigation andmaintenance have been carried out and the cost of these were therefore considered to be zero by RECP); (ii) due tothe "no-loss" system, RECP was unable to provide the mission with any reliable storage and handling losses(however, from visits to the godown, the mission believes that the savings have been marginal because of poorwarehouse management).

Two factors may also be of interest to note: (i) RECP constructed the entire operation out of its ownresources and only in the third year of operation received the total amount from the Ministry of Finance but it hadto repay 50 inmediately to coincide with the repayment period planned in the SAR (11 years); (ii) the savingsprojected by the SAR were over-optimistic even if a relatively effective level of warehouse management would havebeen applied.

D. Studies

Studies Purpose as Deri"ned at Appraisal Status Impact of Study

1. Grain Storage and Processing Estimate future storage and processing Completed Report available. Minimal awarcness.needs No action taken. Rcportedly used for

refercnce by Storage Cell.

2. Grain Quality, Grain Testing and Develop practical grading standards for Completed Report available, but did not includcQuality Control wheat and rice operational manual. Minimal

awarcness. No action takcn.

3. Foodgeain, Transport, Economics Develop plans for improving foodgrain Completed Report available. Minimal awarcncss.and Logistics transport operations. No action taken.

4. Losses in Public Sectc, Storage in To evaluate storage losses Completed Rcport availablc. Minimal awarcncss.Pakistan No action taken.

7. Status of CDvenanis

Document Section OriginaL Date Descriotion of Covenant Status

Devetopment Credit Agreement (DCA) 4.01 (c) Subsidiary Loan Agreement Complied with.

* 4.02 (a) GOP to establish and maintain a Complied with; PNCC has regularProject Management and Coordination meetings.Committee (PMCC).

a 4.02 (b) (i) GOP to establish a storage cell in Crmplied with.MINFAC Food Wing.

* 4.02(b) (ii) 12/31/81 MINFAC to employ Head of Storage Complied with in 1984. However, noCell/Grain Quality and Grain Transport grain transport technical officersand technician officers. were employed.

u 4.03(a) PARC to establish program coordination Complied with.unit.

a 4.03 (b) PARC to prepare grain storage research Complied with.and related extension trainingprogram.

a 4.03 (c) 3/31/82 PARC to arrange for foreign training. Complied with. Six research officers Itrained. N)

a 4.03 (d) 3/31/82 GOP to arrange overseas study tours. Complied with. 22 officials fromMINFAC, PFDs, PASSCO, RECP, and PARCtravelled overseas.

a 4.04 (a) 1/31/82 PARC to employ consultants. Complied with. Consultants appointedSeptember. 1983.

a 4.04(b) 1/31/82 NINFAC to employ consultants for grain Complied with. Studies completed mid-transport. 1986.

n 4.04 (c) 3/31/82 MINFAC to employ consultants for Grain Complied with. Consultants finalizedStorage needs and Food Processing study mid-1987.Study.

DCA 4.07 3/31/82 MINFAC to prepare report on resutts of Not complied with.studies on grain transportation andgrain inspection; provide IDArecommendations to improve graintransport, inspection and quatity.

n 4.08 (a) 7/31/81 CGOP to prepare annual program for Complied with.b,heat storage construction.

4.08 Cb? rOP to consult annually with IDA on Complied with in 198a and 1985.timing and extent of foodgrain storageprograms.

U 4.09 8/31/82 GOP to acquire land for construction Complied with.of 500,000 tons wheat storages.

U 4.11 (a) GOP to furnish annual project Not complied with.evaluation reports to IDA and GOSwitzerland.

co 5.02 GOP to supply IDA audit reports six Comptied with.months after end of FY.

5.03 (a) GOP shalt cause Provinces to Not cc Aied witb.effectively repair and maintain theirgrain storages.

5.03 tb) GOP to survey grain storage to Complied with.estimate repair and maintenancerequirements, and prepare a phasedrepair program satisfactory to IDA by12/31/85.

5.04 (a) HINFAC to establish a revolving fund. Complied with.

5.04 Cb) HINFAC to make initial deposit into Complied with.revolving fund.

PASSCO Project Agreement 2.01 (b) ti) PASSCO to establish Project Complied with.Implementation Unit (PIU).

U 2.01 (b) (ii) PASSCO to employ in PIU a chief Complied with.engineer and two Deputy-GeneralManagers.u 2.02 1/31/82 PASSCO to employ an engineering Complied with.consultant.

2.03 (b) PASSCO to inctude provisions for Complied with.training in contracts for weighbridges/grain cleaners.

U 4.01 PASSCO to submit audited reports to Complied with.IDA by six months after e'd of FY.

RECP Project Agreement 2.02 RECP to employ consultants. Complied with.

U 4.01 RECP to submit audited reports to IDA Complied with. Audit Report for FY86by six months after end of FY. received. No report required for later

years as no operations.

8 Use of Bank Resourms

A. Staff Innuts (In Staff Weeks)

StaSe of Pro;ect CYcle Planned Revised Final Ccoments

Through AppraisaL 85.3

Appraisal through Board Approval 64.6

Board Approval through Effectiveness 9.5

Supervision 133.9

B. Missions

StaLe Month/Year No. of Persons Days in Field Soecialization Performance Rating Type of Problems

Identification Harch 1980 3 12 Co/CEJE

Preparation June 1980 5 22 Co/CE/AE/GSS/AI

Appraisal Oct/Nov 1980 5 19 Co/CE/AE/GSS/AI

Supervision 1 October 1981 2 10 FA/AI 1

Supervision 2 Septeiber 1982 2 9 FA/AE I

Supervision 3 April/May 1983 2 10 FA/AI 1 -4_

Supervision 4 February 1984 1 13 Al 2

Supervision 5 October 1984 2 10 E/AI 2 F/M

Supervision 6 may 1985 1 6 A 2 F/H

Supervision 7 Feb/March 1986 2 26 A/FA 2 F/H

Supervision 8 Sep/Oct 1986 2 15 E/A 2 F/M

Supervision 9 April/May 1987 2 9 FAWA 2 F/M

Supervision 10 June/July 1988 2 12 E/AI 2 F/M

Supervision 11 Feb/March 1989 1 13 E 2 F/M

Supervision 12 March/April 1990 2 3 E/A 2 F/M

A = Agronomist; Al = Agric. Industries Specialist; AE Agric. Economist; Co Commodity Specialist; CE Civil Engineer; E = Economist; FA Financial Analyst;GSS = Grain Storage Specialist.

C. Costs

Stage of Proiect CYcle Total USS Cost of Staff Inputs Average USS Cost of HQ Activities Average USSl Cost of Fieldper Mission Member Activities cer Mission Member

Through appraisal

DATA NOT AVAILABLE

Appraisal through Board Approval

Board Approval through Effectiveness

Supervision

OD