Reference 1 aichi irrigation project appraisal report by world bank

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized E ST R I CT E D ~~~~~~~~~~~~~~~n \ wrREpTS1 nFS}niques necessary for a new system of farming can be d-_ veloped to the extent that a production respcnse can be obtained which would warrant further investment in upl^nd' irrigtion, a AJtLa.mo significant contribution will have been made towards solution of the SUT-3-pobem food na4t-on's FLLL4 LJ n L U_LJI U - U yJV L prLovisio ±L1.1± 4.The pLJble WoVf1 i s U al wc,MUater and electric power will represent incidental benefits resulting from the construction wit r_,c~ ,tv el L of' an irrigatilon da andi' canals., which will be obteained"_u1 small additional cost III T nz rsiOCnn The law establishing the hichi Corporation gives the Corporation broad responsibility and authority to plan, construct and operate a regional irrigatuion system and acessory works The Corporation'3 program will bring irrigation water to 33,000 hectares of farm land, supply 45 million cuDiC meters of water to munœcipalities anrd adL about 100 million kWh per annum to the existing regional network The proposed loan from the Bank would cover the foreign exchenge 10 needs of essential facilities included in the program and specifically for construction of a dam, a main canal, a regulating reservoir and a system of secondary or distritution canals The Bank's interest, however, goes beyond the immediate project to the farm operations and the municipal water and power supplies resulting from the project since these represent the benefits coming from the program The Bank, therefore, will need to be kept informed concerning the progress of the program as a whole and has obtained satisfactory assurances in this regard - The dam located at Makio Bridge on the Ctaki River, will be 3of 11 rock-fill construction 264 m lon-g Al a high imrounding 75 million m of water and with an effective capacity of 69 million m A site will be provded for a power house near the darn From an existing barrage 120 km down river a main canal, 114 km long and with maximum capacity of 30 m /sec will be constructed soauthward along the ridge of the Chita Peninsula to its Owing to rough terrain, construction of this canal will require 35 km end of tunnels, aqueducts, siphonls and pipes From the main canal, about 1300 km of secondary canals will branch out over the urea to points from which and hectares of farm lanu will be irrigated A main regula+ ng MreSer places, appropriate At several small ones will regulate flow in the cenals Canals will be water will be diverted from the canals for municipal use will be land of concrete-lined where needed Reclamation and leveling undertaken as necessary The dam and main canal will be constructed by the Aichi Corporatin 12 under design and surervision of the Erik Floor Company The Corporation will also design and construct the secondary canals and will later operate the entire system from the dam to the terminals of the secondary canals Ditches (or sprinkler irrigation mE.ins) leading from the encs of the secondary canals to 22,000 farms will be designed, built and operated by legally constituted Farmers Associations A power house of 10,000 kw capacity and muil-cipal water supvlv systems will be constructed by the Kensei Power Company (a beneficiary under a previous Bank loan) End the Aichi Prefecture respectively with loans from the Corporation These facilities will be operated by those agencies under contracts with the Corporation Heavy earth and rock-moving and canal-buildine machinery required 13 the dam, canals, and reservoirs will be imported under the constructing for be purchased under international competitive bidding will It Bank loan and equipping the power house, water supply system building for Machinery necessary for construction of the secondary machinery the of and the bulk work is to be rurchased in Japan development land for canals and IV THE BENEFICIARIES Agriculture 33,000 hectares will receive up to 100 million m of irrigation 14 water depending on rainfall actually received during the growing season 17,000 hectares of rice paddies require water throughout the summer and 16,000 hectares of upland or ridRe land used for growing vegetables, fruits, winter cereals and upland rice, require irrigation during the very dry months of July and August Most of the 22,000 farms involved already exist but new farms will be established on land not now occupied Many paddy fields in Aichi maist now be used in wrinter to store water but with the coming of irrigation these will be available for growing winter vegetables and cereals On the uplnuds, increased nroduction will come from a wider cropping pettern and from higher yields of crops now damaged by severe drought in late summer - 4Paddy rice farming is an ancient and highly developed skill in Japan and the paddy farmers should have no diffic-ulty obtaining maximum benefit from the project almost immediately The rapidity with which farmers can -pl-neds is more difficult master the intricacies of irr-iguaon on rolliHowever, Japanese to estimate as this is a new kind of agriculture in Japan they can be and farmers are renownred for their compete.nce and diligence in applying gained expected to obtain maximum yields after experience is acquiring in water under these conditions They will receive guidance irrigation upland the necessary skills from the results of research into Special Irrigation which has already commenced under the auspices of an Aichi Investigation Committee organized by the Ministry of Agriculture 15 At the Bank's suggestion and under the guidance of Professor Bishop, 16 plan of developing these lands by extuensive arnd costly land original the leveling has been changed The area to be leveled has been substantially reduced in favor of the less costly and more manageable plan of irrigation by contour furrows Cn slopes too steep for furrows and on fields above the canal level, sprinkler irrigation, also an innovation in Japan, will ue employed The operation of an irrigation system as complex as this is also 17 without precedent in Japan To study irrigation project operations and also to observe details of irrigation farming, the Corporation proposes to send qualified technicians to the United States and elsewhere for periods of about six months, at least one year in advance of comp]etion of the project It will also employ foreign irrigation consultants as needed 18 Municipal Water 360,000 people living in 24 towns and villages along the Chita Peninsula are dependent on unreliable and often brackish wells for water The project will supply annually about 18 million m3 of water suitable for drinking Factories in expand because water The project will add and assure continued 19 three industrial cities, including Nagoya, cannot consumption is limited to 63 million m' annually 27 million m3 of raw water annually to this supply growth of industry Electric Power The Hydro-electric potential of the Otaki and Kiso rivers is almost ccmpletelv utilized bv 16 existing power plants but construction of the dam will permit the addition of a small 10,000 }w plant at the dam site Power will he generated from water released for consumptive use in irrigation and water supply and from special releases for power when storage is surplus to consumptive use requirements The project, through water regulation, will also increase the generating capacity of the existing plants and the net annual energy increase is estimated at about 100 million kWh This would add about 1.4% to the regional output of the Kansai Power Company -520 Water Supplv Hydrological calculations are based on 10 years of flow recordings data The calculations show that requirements for irrigation and municipal water can be met in average seasons from the naturaL flow of the Otaki River, in, excess of existing requiremerts, supplemented by 15 million m released from the regLlating reservoirs and 20 million m3 from the dam storage This wo-uld leave a reser-,e capacity in the dam of 49 million m3 to take care of emergencies in dry years and and a further 44 years of ranfall' for power generattoni a.fter irrigati±on ad iacpal water requirements _re assured aftl%t_ Ul Z A v fun sT Pnb T qfu ibl7aI Ur, L ME 'U.G1'il JAND TT T,,;AATTt The Aichi Irrigation Public Corporation The Aichi irrigation PUDiic Corporation Law estabDlished the 21 Corporation as a governmental agency under the general jurisdiction of the Ministry of Agriculture and Forestry The President of the Corporation is appointed by the Minister of Agriculture and Forestry and up to five Directors are appointed by the President after authorization of the Minister The staff is appointed by the President The executive and technical staff are well qualified and competent Subject to a power of control by the Ministry, the Corporation has 22 sufficient powers for carrying out its program It is authorized to borrow from the International Bank and from the Central Government or other banking institutions The Corporation maintains separate financial accounts and its 23 anmual budget must be approved in advance by the Ministry It is expected to be non-profit making and self-liquidating through an elaborate system It is empowered to impose and collect or repayments by beneficiaries suoh repayments Consultants The engineering consultants, Erik Floor and Associates, Inc., have 24 been employed with the concurrence of the Bank They are competent and their terms of reference are adequate for proper execution of the works under their supervision The irrigation consultant, Professor Bishop, was also employed with the concurrence of the Bank He is well qualified for this work Arrangements for the employment of additional irrigation consultants have not yet been completed but are being negotiated Contracts Works The works under the project will be contracted on the basis 25 of competitive bidding and after evaluation and recommendations of the consultant engineers These works, which comprise the facilities down to the discharge points of the secondary canals, will subsequently be operated by the Cornoration - Municipal Water Supply Arrangements for the Aichi Prefecture to 26 construct (with funds provided by the Corporation) and operate potable and industrial water Lacilities are made under a contract of March 19, 1956 between the Corporation and the Prefecture This provides for reimbursement of the proportionate share of the Corporation's investment (at 6.5% over 20 years), and operating and maintenance expenses Electric Power A contract of December 24, 1956 between the 27 Corporation and the Kansai Power Company makes similar arrangements in regard to electric power except that interest on the Corporationts investment is at 7.*5 Irrigation Legallv binding arrangements for construction and 28 operation of irrigation facilities beyond the ends of the secondary canals taRke the form of Articles of Association for the Aichi Irrigation Land Improvement District and two smaller districts covering the area benefited The-se Associations, formed under the Land Improvement Law, have compulsory powers over all farmers as more than the necessary two thirds majority have given th.eir written- consent to cooperate The Associations are liable to the Corporation for payment of annual water charges The charges are apportioned to farmers and payments so levied are collected under compulsory powers The Associations will constr,ct, maintain and operate the facilities 29 beyond the ends of the secondary canals This will be under the direction and techn-ical supervision of the Prefect-iura! Government through its Aichi Irrigation Section The Corporation will assist the Prefecture on technical aspects and the Ministry of Agiculture and Forestry will exercise overall supervision of the irrigation program A special Committee of representatives of these bodies has been esta"biihed to coordinate the work VI COSTS Detailed cost estimates for the Makio Danm, spillway and main canal were prepared 'by Erik Floor and Associates The estimates for the regulating reservoirs were prepared jointly by the Consultants and the Corporation Those for the secondary canals -were prepared b- the Corporation it have been checked by the Consultants All estimates were based on unit costs and prices in Japan on comparable work and were reviewed and checked detail by the Japanese engineers We believe the estimates to be realistic The estimated cost of the project, including interest during 31 construction, is Yen 36,500 million ($101 million equival'ent) There is a dollar component of $7 million, which represents machinery ($4.4 million) foreign consultants ($1.54 million) ar,d interest during construction (1.06 million) Details are given in Annex B The estimates include a contingency allowance of Yen 3800 million 32 ($10.5 million equivalent) This covers margins of 4% against possible increases in local currency price levels plus 12% on works items against unexpected construction difficulties - 33 Project costs hate been allocated by Cabinet order to the three sectorsagric lture, water -upply &nd pr T-is n "Jocation Is based on the concept of "justifiable investment" or ability to pay Under this cost of the project, municipal water 12.3% and power 6.3% RErT UIRT1 IAR7 1TIM C' A C' fQ.TTnflfTIC' KT fTl 1'r'TAW! A T.¶ ' 34 The cash requirements of the Corporation during the construction period, which ends December 1960 and prior to realization of the residual va"lue of the construction equipment, are estimated at Yen 38,398 million ($106.6 equivalent) The fund procurement plan provides for only Yen 36,415 million ($101.1 equivalent) This is because the Government is not prepared to commit funds in advance to cover the full margin for contingencies which the Bank considers prudent (paragraph 32) It is proposed, therefore, to obtain the undertaking of the Government that such funds as are necessary to complete the project will be provided 35 Funds are to be provided as follows: en Subsidy from National Government Figares in Millions $ Equivalent 8,600 23.9 2,520 7.0 18,919 6j286 90 52.6 17 L Loans IBRD National Trust Fund Bureau and others P.L L80 Counternart Funds Outside Revenue 101.1 36.41-5 36 The Government will contribute Yen 13,750 million as subsidy but only Yen A-6nO million of this amount will he prrvided during the construction period 37 The Aichi Corporation is eligible to borrow from the National Trust T.bmnl Pairpnii ir1por t.P-nm of t.hni Tt Winln Tsaw n+ C 9A i ntp-rp-q+ rt-nAnnrhl a over 20 years from 1961 This source of funds seems assured of Finnnnce reserves the right, h-wever, to provide money from if needed The Minister nother soure" 38 In the original calculations most of the local currency requirement, outide~ , o~fs bsidy, Aw iQ to- h.aver ber m.e fwrom ,'rviteypa+ e ndsv~ available at 4% interest from U.S P.L 480 surplus commodity transactions Decision of the Japanese Goverrent, ear-ly in 1957, to disconti-nue the pP.T 402 agreement reduced the amount which could be allocated to this project to ,-, 6f m-1 illion vYen - VIII BENEFITS AND JUTSTIFICATION Municiral Water Benefits to users of potable and industrial water are not directly 39 calculable but additional supplies are badly needed and demnnd should be firm Benefit to the Corporation takes the form of annual repayments by the MUrncipalities, under contract, of prr=ortior.o sh ares of the costs of the facilities provided Estimates of net returns to the municipalities show that their participation n the project w1old be profitable .Wlectric Power Th1e electric pwer added to the eisting network b this project 40is relatively small but needed Chief benefit will come from regulating water flow in the Xiso River, thus enablhng the 16 existing plants to maintain a steadier output Benefit to the Corporation will be through water and annual repayments under contract as in the case of nicip to profitable be estimates show that participation in the project would the Kansai Power Company Agriculture Estimated market value of increased agricultural production is 41 approximately Yen 4,800 million ($13 million equivalent) a year This would represent an increase of more than 60% above present production of the area Nearly 90% of the increase would come from rice, vegetables and fruit and a welcome contribution would be made to food supplies (Annex 'DI) There is a firm basis for the estimate of increased production 42, from 17,000 hectares of rice paddies but potential yield data for upland insufficient for the estimate for the remaining 16,000 irrigation are still hectares of upland country to be regarded as firm This is because upland i-rigation is new to Japan The yield estimates taken are reasonable in relation to experimental evidence gained during the last year or two However, only time can tell what yields the otherwise efficient Japanese farmers will be able to attain under commercial conditions and how long it will be before they have gained the experience necessary for maximum yields Estimates of benefits to the various types of farmers have been 43 analyzed very thoroughly by the Japanese but are subject to this same reservation concerning the future level of upland crop yields and the timing of its attainment Assuming that the estimated yields are achieved, farmers' net cash incomes per hectare after meeting all production costs including labor but prior to water charges - would be increased by from about Yen 45,000 ($125 ) to Yen 150,000 ($410 ) according to the type of farming undertaken This increase would be almost twice the proposed water charges, which are to be levied according to ability to pay Farmers will also have to meet the costs of the Land Improvement District Associations which represent an additional 8% or so of the expected increase in net cash income prior to water charges The Corporation is to repay allocated project costs (see paragraph 33) 44 by 1980 and is budgeting for a cash surplus of Len 2800 million at that date Costs allocated to power and municipal water are to be amortized over 20 years commencing 1961 Approximately half of the cost allocated to agriculture will be met by Government subsidy The balance will be repaid over 10 years and in part over 15 years Collections from farmers will be heaviest during the first ten 45 years This will impose special difficulties on the upland farmers whose yields will be low at first but will improve later as skills increase The Corporation is not disposed to alter the plan since the scale of charges has been fixed by Cabinet order They are confident that the charges will be met because each farmer's levy will be assessed according to ability to pay; the farmers were aware of the scale of charges when they agreed to cooperate and were prepared to make sacrifices aver the early years for the sake of substantial long term gains However, since it seems not unlikely that the early charges will prove to be too high, the Government has undertaken to subsidize the Corporation's operations if this should be necessary The substantial level of Government subsidy of this project is 46 common to all agricultural development projects in Japan, and indeed, in many other countries With this subsidy as a btse, the income position of the Corporation is satisfactory The Government believes thet this slubsidy is warranted by the special need of Japan to increase food production, but as indicated in paragraph 7, the project's experimental nature gives added and much wider Juistif i cation 47 IX CONCLUSIONS AND RECOIRNDATIONS The Aichi nroiect would help to satisfy an urgent need in the 4R Aichi Prefecture for food, water and electric power, but in a broader way it would contribute import.ntly to Japanese knowledge of upland irriOwing to the project's experinental nature, agriculgation techniques tural benefits cannot be firmly assessed but there will certainly be a material increase in production In view of the competence of Japenese farmers and technini8ans the chances seem to be th.t an increase in crop yields sufficiently high to warrant the expenditure will be obtained If so, the way will be opened for snbseouent development of upland irrigation which would much more significently reduce the national food deficit The Aichi C6rporation is well organized end is staffed with 49 competent executi-es a-nd techniciens, who are assisted by well qualified consultants Operational income of the Corporation may at first be lower than 50 estimtetd dependAing on how raridly the newly irrigated farms get into full production, bLt with assistance from the National Treasury if needed, the Corior.tion would be able to meet all current obligations - 10 - The machinery proposed to be purchased, both abroad and in Japan 51 chosen and is appropriate for the project well been has The project forms a suitable basis for a Bank loan of about 52 $7,000,000 equivalent with a term of 20 years, including years' grace 53 The kichi Irrigation Public Corporation is a suitable borrower I 1- I N I t0 I5 20 HaOUS it f ~~~~~~~~~~~~~~~~~~ _ _ _ -_ _ _ _ _ _ _ _ -_ _ DAM _'_ 25 KM RIVER [KANEYAMA / ~INTAKEJAP $y N JAPAN Ivomo A:': 141IW1-111 : RR I6 :^I RR%p I iU %fI 'DROJ'C V"% *- NAGOYA K/SO R*o8~A Catchment Areo R fit Ar Kom u Main i X Ka|- Secondory Canal | AIN REGULATING Town* @ Not all shown 30 t o o s @ Canal hi *s0 ia h 4~~~~0 \ HONSH) \ NAREA COV/ERI f MAY 1957 ,E s, u d , , I 132A / 738 X~~~~~~~~~~-"SHIKOKU\ IBRD-329 I kNDEI Bi - pasg COST E-ST_MTES in T, A11." ~ri'1rala-~, w.p Cost estimate expressed in Yen and in dollar equivlents are as follows:Finures in Millions $ 1uixralent Eressed in Yen item Dam and Spillway Main canal Secondary canals Regulating Reservoirs Land Reclamation Power Plant Municipal Water Rights of Way Corporationis overhead and expenses Engineering, field expenses and supervision Contingencies 4,246 9,630 4,038 1,363 1,540 650 26.8 11.2 3.8 4.3 1.8 2,542 2,300 8.1 7.1 6.3 2,540 3,796* 7.0 10.5* 2,920 35,565 Interest during construction 11.8 2,833 * 98.7 7.9 * Total cost of construction Residual value of plant 38,398 1,887 106.6 5.2 Net cost of Project 36,511 101.4 Dollar expenditure included in these items represents machinery for construction of the dam and spillway, main canal, regulating reservoirs and land reclamation ($+.4 million), foreign engineering and irrigation consultants and associated services ($1.54 million) and interest during construction ($1.06 million), a total of $7 million * (Explanatory notes attached) ANNEX 'B' - - - page Notes Contingencies The estimates cover a reserve of 4% on all local currency u- ielvl n loca.l crec items agir,st pssibe ireases construction; 2% on foreign exchange items and 12% on all works items agairslt -unepetedUU ± U fi ltles duringL Iti±UIi coUstou tL shoU-UU Utb niotuu that the cost estimate from which the Japanese have bksed the fund procurement plan incluces a continge-ncy item of or.ly 4.2% nowever, we have considered it unnecessary to negotiEte a higher reserve because of the Government assurance that all Iunds necessary wiLi be provided interest during construction Interest during construction has been calculated up to Decem-ber 31, 1960 at the followine rates: Bank Loan Counterpart Fund Trust Fund Bureau and other loans 5-3/4% plus commitment chErge 3/4% 4% 6.5% A^Thl.M>,V lC ! page FOREIGN CONSTRUCTION EQUIPMENT of construction machinery The following is the agreed list LA Liu ±LL11JULJLU L± U1 L ±U U 2eLi Dollar equivalents U.S Dollar Eqiuivalent FOR DAM & SPILLWAY No Item C.I.F C.I.F $130,000 $650,000 11,500 23,000 c.y Power shovels c;y Crane booms c.y Dragline bucket 4,750 4,750 c.y Clamshell bucket 6,500 6,500 12 c.y MKotor scrapers 45,200 316,400 10 20-ton Tractor dozers 36,900 369,000 16 22-ton Dump trucks 48,000 768,000 16-ton Automatic compactor 30,600 30,600 50-ton Tire Roller 14,700 14,700 Diamond grout drills 2,000 16,000 500 g.p.M Monitors 3,000 12,000 55-65 c.y Pumperete machines 47,500 95,000 21 g.p.m Grout devices (Pumps & attachments) 9,600 48,000 Subtotal $2,353,950 Spare Parts, 10% Contingeney 235,400 $2,589,350 25,650 TOTAL DAM & SPILLWAY $2.615,000 -2- ANNF X U.S Dollar Equivalent Total Unit C.I.F C.I.F FOR MU.IN WATERWAY No _ Item $45,200 $316,400 12 c.y Carryall scrapers 14,000 84,000 20-tor, Tractor dozers 36,900 442,800 25-ton Autcmatic tire rollers 13,800 55,200 25 c.y Pumperete machines 14,600 29,,200 12 c.y ilotor scrapers 12 Subtotal $ 927,600 !#n l95.400 $,2,nnn 12.000 Spare Parts 20% Contingency TOTAL, MAIN J-ATER1.JAY $1,135,000 ANNEX IC1 - page - - U.S Dollar Equivalent Total Unit C.I.F C.I.F FOR REGULATING RESERVOIR Item No $ 45,200 $271,200 20-ton Tractor dozers 36,900 73,800 25-ton Automatic tire rollers 13,80041,400 12 c.y Motor scrapers Subtotal $386,400 Spare Parts 19.4% 75.000 $461,400 4,600 Contingency TOThL, REGULTING RESERVOIR $466,000 U.S Dollar Equivalent Total Unit C.I.F C.I.F FOR RECLA'.k,TION No Item 20-ton Tractor dozers Sets Plows and harrows $36,900 $110,700 13,500 40,500 Subtotal $151,200 Spare Parts 20.4% Contingency 30,8CO $182-000 1,000 TOTAL, RECLAMATION $183,000 RSTT1VU.TF.D GOST OF ALL TTPORTEfl ERTITPNENT Main Waterway 1,135,000 pegulating Reseroir 46,000-n Reclamation 183,000 TCTAL - $4,399,000 ANNEX 'D' - ANTICIPATED INCRLASE IN AGRICULTURAL PR'DUCTION C rheors+;+sr 232,00 Pdyrice oWshels Upland rice 700,00 Barley 270,000 !! 'wnea; 260,coo !1o68,COO - io0,OO Beans - 19,000 - Sweet Potatoes 17,000,000 pounds i; Vegetables Fruits SMlberry leaves is,uuv,OOO Vegetable seeds 1,22,0 t fCif 650,000 - 40,000 - 100,000 143,000 323,000 " 272,0u0,000 " 3,350,000 LZ,000,000 i 3,200,000 is - - 107,000 - 7,400 bushels 1,600 64,000 1S,000 55,000 ea Rape seed -Rcarcnilp 36,7 Minor Cereals White nc nQ is - 26,000 13,000 $13,065,000 page ... $36,900 $11 0,700 13 ,500 40,500 Subtotal $15 1,200 Spare Parts 20.4% Contingency 30,8CO $18 2-000 1, 000 TOTAL, RECLAMATION $18 3,000 RSTT1VU.TF.D GOST OF ALL TTPORTEfl ERTITPNENT Main Waterway 1, 135,000... Contingencies 4,246 9,630 4,038 1, 363 1, 540 650 26.8 11 .2 3.8 4.3 1. 8 2,542 2,300 8 .1 7 .1 6.3 2,540 3,796* 7.0 10 .5* 2,920 35,565 Interest during construction 11 .8 2,833 * 98.7 7.9 * Total cost... rollers 13 ,800 55,200 25 c.y Pumperete machines 14 ,600 29,,200 12 c.y ilotor scrapers 12 Subtotal $ 927,600 !#n l95.400 $,2,nnn 12 .000 Spare Parts 20% Contingency TOTAL, MAIN J-ATER1.JAY $1, 135,000