06 Investment Drainage System

Guidelines for
Planning Irrigation
and Drainage
Investment Projects
Technical Paper 11
1996
FAO Investment Centre
Food and Agriculture Organization

of the United Nations
i
Table of Contents
Preface 1
Introduction 2
Why New Guidelines? 2
Objective and Organisation of the Guidelines 3
Complementarity with Previous Investment
Centre Guidelines and Papers 4
Part 1: Recent lessons and implications for planning 5

Irrigation in the Context of
Water Resources Management 5
Irrigation Types and the Issue of Scale 6
Irrigation Typologies 6
The Issue of Scale 9
Irrigation, Food Supply and Drought 11

Options and Alternatives for Food Supply 11
Rainfed Production of Food as an Alternative to Irrigation 11
New Irrigation Development 12
Intensification of Existing Irrigation Development 13
Low Cost Irrigation 14
Irrigation and Protection from Drought 15
Table of Contents ii
Effective Implementation 15
Implementation Capacity and External Technical Assistance 16
Participation, Ownership and Commitment 17
A Possible Role for Non-Governmental Organizations (NGOs)
in Participatory Development 19
Fiscal Sustainability 20
The Need for Cost Recovery 20
Cost Recovery, O&M and Water Charges 21
Users’ Contributions to Capital Costs 22
Water Users’ Associations 24

Water Users’ Associations and Transfer of O&M Responsibility 24
Conditions for Sustainability of Water Users’ Associations 25
Social and Environmental Aspects 28

Choice of Technology 29
The Drainage Dilemma 30
Implications for the Planning Process 31
To summarise, there is growing recognition that: 31
Part 2: The planning process 34

General 34
The Conventional Planning Process 34
Recent Trends: The Changing Investment Environment 34
The Changing Role of the Investment Centre 35
Table of Contents iii
Subsector Review and Strategy Formulation 36

Objectives, Approach and Staffing Required 36
Main Topics for a Subsector Review 37
Existing Irrigation Development, Structure and Performance 38
Land and Water Resources and Scope for Further Irrigation
or Drainage Development 38
Financial and Economic Viability of Irrigation 39
Government Policies, Priorities and Plans 41
Subsectoral Issues and Constraints 41
Strategy Formulation 45
Defining Strategic Options and Measures 45
Identifying Priority Actions and Projects 48
Building Commitment to the Strategy 49
The Irrigation Subsector Review and Strategy Paper 49
Conceptualising and Comparing the Investment Options 49

Objectives 49
General Approach to the Work and Staffing Required 50
Activities 51
Review of Available Database 51
Reconnaissance Field Visits 53
Topography, Soils and Land Capability Assessments 53
Preliminary Estimates of Irrigation Water Requirements
for Possible Crops 54
Preliminary Assessment of Available Water Resources 55
Preliminary Assessment of Drainage Requirements 56
Preliminary Assessment of “Without-Project”
Socio-Economic Situation 56
Table of Contents iv
Initial Environmental Evaluation 56

Preliminary Evaluation of Institutional Capacity 57
Comparisons of the Likely Costs and Benefits 58
Estimates of Project Benefits 59
Preliminary Cost Estimates 59
Preliminary Cost-Benefit Analysis 60
Initial Project Brief 60

Achieving Consensus on Investment Concepts and Options 61
Planning the Preferred Option 62

Objective and Approach 62
Activities for Planning the Preferred Option 67
Engineering Studies 67
Soils and Land Capability Studies 70
Agricultural and Marketing Studies and the SEPSS 70
Environmental Impact Assessment and Action Plans 72
Land Tenure and Water Rights Investigations 72
Institutional Capacity Assessment 73
Estimation of Project Costs and Benefits 78
Estimates of Project Benefits 78
Estimates of Project Costs 78
Economic Analysis 79
Economic Rate of Return 79
Risk and Sensitivity Analysis 81
Effect on Balance of Payments 82
Income Distribution, Social Impact and Poverty Alleviation 82
Fiscal Implications and Cost Recovery 82
Planning for Implementation 83
The Project Dossier 84
Achieving Consensus on the Project Proposal 86
Table of Contents v
Annex 1: Checklist for contents of an

irrigation subsector review and strategy paper 101
Introduction (1 to 2 pages) 101
National Background (2 to 3 pages) 101
The Resource Base (2 to 5 pages) 102
The Irrigation Subsector: Present Situation (10 to 15 pages) 102
Financial and Economic Viability of Irrigation (5 to 10 pages) 104
Opportunities and Constraints to
Irrigation Development (1 to 2 pages) 104
Government Priorities and Plans (1 to 3 pages) 105
Strategy for Irrigation Development (5 to 10 pages) 106
Development Proposals (1 to 4 pages) 109
Immediate Actions and Follow-up (1 to 3 pages) 110
Issuaes and Risks (1 to 2 pages) 111
Flow Charts and Logic Diagrams 111
Maps 111
Annexes 111
Annex 2: Outline of a typical

project document or dossier 112
Summary and Conclusions (2-4 pages) 113
Introduction (1 page) 113
Background (3-6 pages) 113
A. The Economy 114
B. The Agricultural Sector 114
Table of Contents vi
C. The Irrigation Subsector 114

D. Income Distribution and Poverty 115
E. Government Subsectoral Policies and Plans 115
F. The Financing Institution’s Previous
Operations and Experience 115
The Project Area (3 to 6 pages) 116

A. Location and Natural Resources 116
B. The Economy and People 117
C. Existing Agriculture, Land Use and Land Tenure 119
D. Rural Institutions, Support Services and Infrastructure 120
The (Name) Irrigation Scheme: Present Status (3-6 pages) 121
A. Location and Natural Resources 121

B. Description of Existing Facilities 121
C. The Economy and People 121
D. Rural Services, Infrastructure and Farmers’ Organisations 122
E. Present Irrigated Agricultural Production 122
F. Present Condition of Irrigation Facilities 122
G. Present Arrangements for O&M and Cost Recovery 123
H. Environmental Impact of the Existing Scheme 123
Table of Contents vii
Existing Institutions and Project

Implementation Capacity (3-6 pages) 123
Project Rationale and Planning Considerations (3-6 pages) 124
A. Project Rationale 125
B. Planning Considerations 125
The Project (Or Programme) (5-10 pages) 127

A. General Description 128
B. Detailed Features 128
C. Project Organisation, Management and Coordination 131
D. Cost Recovery and O&M 132
E. Institutional Capacity Building 133
F. Project Costs 134
G. Financing 138
Agricultural Production and Results (4-6 pages) 139

A. Agricultural Production 139
B. Market Prospects and Prices 139
C. Impact on Individual Producers 141
D. Impact at Project Level 143
Social and Environmental Implications (2-4 pages) 143

Economic Justification (3-6 pages) 144
A. Economic Costs and Benefits 145
B. Risk and Sensitivity Analysis 146
Table of Contents viii
C. Effect on Balance of Payments 146

D. Impact on Income Distribution and Poverty Alleviation 146
E. Fiscal Implications and Cost Recovery 147
Issues and Suggested Conditionalities (1-2 pages) 147

A. Issues 147
B. Commitments and Suggested Conditionalities 148
Implementation (3-6 pages) 149

A. Overall Implementation Schedule 149
B. Activities to Achieve Loan Effectiveness 150
C. Activities for Completion in Project Year One 150
D. Procurement 151
E. Accounting, Audit and Reporting 152
Maps, Figures, Tables and Annexes 152
Annex 3: Other documentation 160

The Preliminary Planning Brief 160
The Aide Mémoire 161
Back-to-Office Reports 162
Terms-of-Reference for Feasibility and Other Studies 163
Interim or Initial Project Briefs 164
Table of Contents ix
References and Bibliography 166
FAO Technical Papers 175

FAO Investment Centre Papers 175
Guidelines for Planning Irrigation and Drainage Investment Projects 1
Preface
This Investment Centre Technical Paper was prepared by Tony Peacock
(consultant), with technical and editorial guidance from Simon Hocombe
and Andrew MacMillan, Senior and Principal Advisers respectively in the
FAO Investment Centre Division. The paper benefited from consultations
with Volker Branscheid, Alice Carloni, Jacques Chabloz, Kingsley De
Alwis, Random DuBois, Michael Fitzpatrick, Paolo Lucani, Romano
Pantanali, Peter Smith, Michael Wales and several other staff of the
Investment Centre, as well as Hans Wolter of the Land and Water
Development Division of FAO. Constructive comments were made on the
draft by external reviewers including: staff of the Asian Development Bank,
coordinated by Robert May; Timothy Stephens, Senior Irrigation Engineer,
African Development Bank; staff of the Agriculture and Natural Resources
Department of the World Bank, coordinated by Hervé Plusquellec; Linden
Vincent, Lucas Horst and Frans Huibers of Wageningen Agricultural
University; Laurence Smith of Wye College, University of London; Brian
Albinson and Donald Campbell (consultants) on behalf of the International
Irrigation Management Institute; and James Dempster, Jan Doorenbos, Peris
Sinnett-Jones, Robert Rangeley and Tony Zagni (consultants). Orla White-
Natalizia, Janet Francis and Marilou Mechitarian formatted the final text.
The Investment Centre would like to gratefully acknowledge the

valuable contributions of the external reviewers. Any errors and omissions
remain, however, the responsibility of the Investment Centre.
Introduction
WHY NEW GUIDELINES?
Irrigated agriculture has made a major contribution to food production

and food security throughout the world: without irrigation much of the
impressive growth in agricultural productivity over the last 50 years could
not have been achieved. Nevertheless it is widely accepted that the overall
performance of irrigation and drainage1 investments has too often fallen
short of the expectations of planners, governments and financing
institutions alike (see Box 1).
Box 1 - The Performance of World Bank-Financed Irrigation Investment Projects
A recent World Bank review of its experience with irrigation investment projectsa
found that, of 208 Bank-funded irrigation projects evaluated, only two thirds had
satisfactory outcomes. Even those projects rated as satisfactory indicated a
substantially lower economic rate of return at evaluation (average 15%) than
expected at appraisal (average 22%). Twenty of the projects were later subjected to
impact evaluation by the Bank's Operations Evaluation Department (OED), and for
these the average outcomes were 17.7% at appraisal, 14.8% at project completion
audit, and only 9.3% at OED impact evaluation. The Bank concluded that the initial
assessment that two thirds of its projects had satisfactory outcomes may be too
sanguine, and that there is ample room for improvement.
In 1992, the World Bank’s Portfolio Management Task Force reported2

that major problems that constrain the performance of World Bank
financed investment projects in various sectors, are:
• inadequate consideration of institutional constraints and poor

planning for implementation; and
• a lack of commitment to the success of the project by governments
and users.
a: Report No 13676, A Review of World Bank Experience in Irrigation, Operations Evaluation Department,
World Bank, Washington DC, (1994).
1: For brevity, the single word "irrigation" is most often used for the rest of the text. However it should be
taken to include drainage as appropriate throughout; it may also imply reclamation or water control generally.
2: Effective Implementation: Key to Development Impact. Report of the World Bank's Portfolio Management
Task Force (often referred to as the Wapenhans Report). World Bank, Washington DC (1992).
In the case of irrigation investments these problems are manifested in

poor project management, both at implementation and thereafter, and
poor operation and maintenance resulting from inadequate budget
allocations or from rent seeking1 by the users. These core problems usually
give rise to, or are accompanied by, a host of other technical, social and
economic problems, such as:
• implementation delays and cost overruns;

• premature degeneration of civil works and equipment;
• unreliable water supplies, or over-irrigation, waterlogging and salinity;
• social problems, including problems of organisation, equity, land tenure;
• lower than expected output values, due to poor technical
performance or reflecting inaccurate price projections by planners.
The World Bank Task Force stressed that the ultimate success of a
project is to a significant degree determined by what happens in the
“upstream” planning process, and that many implementation problems can
clearly be traced to deficiencies here. These findings are now considered
generally valid by other international financing institutions and donors. The
lessons learned regarding these problems, and the new approaches that
have been developed to tackle them, therefore make new guidelines
essential and timely.
OBJECTIVE AND ORGANISATION OF THE GUIDELINES

The objective of these Guidelines is to summarise present thinking and
practice, and to assist practitioners to plan irrigation investment projects
and programmes that will realise and sustain their full potential. Guidance
covers the whole investment planning process, from formulation of
subsectoral strategies, to conceptualisation of project options, and detailed
planning of the preferred option(s). The intended users are FAO Investment
Centre staff, trainees and consultants, as well as local planning groups
(LPGs) set up by governments to prepare investment proposals. Some of
the material may also be useful to consulting firms and financing
institutions involved in planning or appraising such projects.
The Guidelines are divided into two main parts. Following this
introduction (white paper), the first part (blue paper) briefly discusses the
main lessons learned in recent years and their implications for the project
planning process. The second part (yellow paper) describes the process itself,
the roles of the borrowers, lenders and planning teams in it, and the
1: Economic rent is the income earned from the use of an input (in this case water) in excess of its cost.
Economic rent can be earned even in the case of an activity that is socially unprofitable, ie uneconomic,
if government subsidies relieve the farmer from the requirement to pay for part or all of the input.
activities and outputs expected. It deliberately focuses on new thinking and

new approaches to the planning process, rather than the now well-
established stock-in-trade technical aspects of irrigation planning, which are
covered in numerous FAO, World Bank and other papers1. The remainder of
the document (white paper) presents checklists which seek, however, to be
fully comprehensive, including both new and perennial issues in irrigation
planning. Thus Annex 1 gives a checklist for a typical report on an irrigation
and drainage subsector review/strategy formulation. Annex 2 provides an
outline for a typical project dossier, for use by a financing institution for
project appraisal. Brief descriptions of other documentation that might be
required during the planning process are given in Annex 3.
COMPLEMENTARITY WITH PREVIOUS INVESTMENT CENTRE

GUIDELINES AND PAPERS
These Guidelines update the 1984 paper Identification and Preparation
of Irrigation Projects produced by the FAO/World Bank Cooperative
Programme; most of the purely technical content of that document remains
valid and is repeated where appropriate in Annex 2 of these Guidelines.
The following Investment Centre Technical Papers complement and should
be read in conjunction with these Guidelines:
• Technical Paper 7: Guidelines for the Design of Agricultural

Investment Projects (1993, revised 1995);
• Technical Paper 8: Financial Analysis in Agricultural Project
Preparation (1991);
• Technical Paper 9: Guidelines on Sociological Analysis in Agricultural
Project Design (1992).
In addition, the reader’s attention is drawn to a forthcoming Investment

Centre publication Building Local Commitment During the Design of
Agricultural Investment Projects: The Experience of FAO’s Investment
Centre, a draft of which was circulated for comment in March 1995. With
regard to Investment Centre standards for report format, reference should be
made to the in-house Guidelines for Report Format, although if it is intended
to use any part of a report in an appraisal report of a financing institution, the
format may instead need to conform to that of the institution concerned.
Relevant technical papers produced by other FAO Divisions are referred

to where appropriate in the text.
1: For example Donald Campbell, World Bank Technical Paper 256, Design and Operation of Smallholder
Irrigation in South Asia. World Bank, Washington DC (1995) which addresses most of the technical and
operational issues and problems arising in irrigation/drainage system design. Numerous other sources are listed
in References and Bibliography, at the end of the document.
PART 1:
Recent lessons and
implications for planning
Since the ultimate success of an investment is largely determined by the
quality of the upstream process of planning, it is pertinent to examine
recent lessons learned from experience and their implications for future
planning. The main lessons are that water is an increasingly scarce resource
for which there are many competing demands that are more profitable,
socially and economically, than irrigation; also that low world prices for
basic food and fibre crops, together with typically high development costs,
have recently made new irrigation development increasingly difficult to
justify. Even so, world food supply will depend even more on irrigation in
the next century than in the present. Future irrigation investment must
therefore focus on lower cost solutions, both for new development and
rehabilitation, on making better use of existing irrigation facilities and on
increasing output value per unit of water used. Planners should seek to
establish the conditions that will promote this focus.
IRRIGATION IN THE CONTEXT OF

WATER RESOURCES MANAGEMENT
In recent years, water issues have been the focus of increasing
international concern and debate1. More than two thirds of the water
withdrawn from the earth’s rivers is used for irrigated agriculture; in
developing countries the proportion is even higher - more than 80 percent.
But agriculture is a relatively low-value and often highly subsidised water
user. Competition for water with other sectors is already constraining
economic development in many countries; as populations expand and
economies grow this competition will intensify, as will conflicts between
water users, or between countries where such competition transcends
international borders.
Cities and industries can afford to pay more for, and earn a higher
economic rate of return from, a unit of water than agriculture. Hence
governments and financing institutions are being forced to reconsider the
economic, social and environmental implications of investment in
irrigation. As a result, it is likely that in future the water sector will be less
1: The background to this is described, for example, in the World Bank Policy Paper Water Resources
Management, World Bank, Washington DC (1993) and in Land and Water Bulletin 3 Water Sector Policy
Review and Strategy Formulation: A General Framework (prepared jointly by the World Bank, UNDP and
FAO), FAO, Rome (1995).
dominated by irrigation, and in some countries water formerly used for

agriculture is already being reallocated for higher-value uses.
The 1993 World Bank policy paper Water Resources Management

crystallises much of the present thinking of governments and financing
institutions with regard to the overall management of water resources. It
calls for new approaches, including demand management, - that is to say
the use of economic, legal, institutional and other policy interventions to
influence the demand for water in order to improve the efficiency of its
use. In countries with significant water management problems, the
international financing institutions increasingly require the preparation of
water resources management strategies to guide the lending programme in
the water sector, as a precondition to lending for irrigation. The implication
is that loans for irrigation development will not be made where this will
prejudice other more profitable or socially desirable uses of water.
These Guidelines however start from the assumption that water policy
reviews have indicated that irrigation is a justifiable option within the
context of a country’s overall water resources management strategy, and
that investment finance could be made available for its development. The
Guidelines therefore do not cover the principles and processes involved in
water resources management strategy formulation, which are well covered
elsewhere1. The need for project planning to be in strict conformity with
such strategies nevertheless cannot be overemphasised.
IRRIGATION TYPES AND THE ISSUE OF SCALE
Irrigation Typologies
With about 250 million hectares irrigated throughout the world in vastly
different climatic and socio-political environments, some categorisation of
irrigation may be thought desirable. Numerous typologies are commonly
used, such as size, the nature of the water source, and whether schemes
are operated publicly or privately. Definition by size presents difficulties on
a global level, since, for example, what might be considered large-scale in
some countries in Sub-Saharan Africa would be considered as only small
or medium-scale in South Asia. Furthermore, many of the problems
confronting publicly financed irrigation transcend scale, and some
attempts at categorisation have confused “small-scale” with “traditional” or
“informal” irrigation.
1: See for example: Land and Water Bulletin 3, Water Sector Policy Review and Strategy Formulation: A
General Framework (prepared jointly by the World Bank, UNDP and FAO), FAO, Rome (1995); Water
Report 6 Methodology for Water Policy Review and Reform (Proceedings of the Expert Consultation on Water
Policy and Reform - Rome, January 1995), FAO, Rome (1995); Irrigation and Drainage Paper 52 Reforming
Water Resources Policy: A Guide to Methods, Processes and Practices, FAO, Rome (1995).
Definition by the type or nature of the water source does not recognise the
very different characteristics of major public surface water schemes based
on dams in the USA, for example, and small community-managed tank
irrigation schemes in Sri Lanka.
From the technical viewpoint, a further distinction can be made

between rice schemes, which comprise more than half of the world’s
irrigation, and non-rice schemes, because of their fundamentally different
characteristics. Since the rice plant tolerates waterlogging and needs much
more water to thrive than almost all other of the major irrigated crops, it is
dominant where water is cheap and plentiful, notably in the humid eastern
side of South Asia eastward through to Japan and Indonesia. Non-rice
projects are generally found in the drier or cooler parts of the developing
world. The design and operation of a rice-growing irrigation system is
significantly different from that for other crops: rice fields are waterlogged
to reduce the weeding requirements, whereas crops such as wheat, maize
and especially cotton will die under these conditions1. Once the crop is
established rice schemes usually receive a small but continuous flow to
maintain flooded conditions; field-to-field irrigation is acceptable because
a down-catchment farmer will often use what an up-catchment farmer
wastes. Irrigation systems designed for other crops do not usually suit rice
very well, and vice-versa.
For the purpose of these Guidelines, irrigation could perhaps be

categorised globally as either public or private, ie by the degree of end-
users’ commitment of resources to, and control over the operation of, the
system, rather than the usual categorisation by scale. Even this is difficult
to define precisely, since the share of public versus private resources can
vary widely between schemes. Nevertheless, public irrigation is defined
here as any irrigation in which government has the dominant financial
interest or management responsibility/control. Public irrigation may range
in size from schemes of hundreds of thousands of hectares, down to very
small schemes of 10 ha or less; but in each case these are initiated and
developed under public authority and control, and operated and
maintained in the same way. This definition includes for example state-
owned large-scale estates (e.g. for sugar cane production), joint ventures
between government and quasi-government financial institutions, and
large-scale through to small-scale smallholder irrigation schemes set up
under government authority.
Conversely, private irrigation can be defined as any irrigation in which

farmers (or a private sector group) have the dominant financial interest or
management responsibility/control.
1: Rice schemes nevertheless require adequate surface drainage, as total inundation of the crop leads to
significant yield losses.
It includes:
• Farmer-managed irrigation schemes (FMIS) of a few hundred square

metres to a several thousand hectares, developed, operated and
maintained by individuals, families, communities, or local rulers and
landowners, independently of government, and generally for the
production of basic food or fibre crops and vegetables for local markets.
Examples may be found throughout the world, from small plots of paddy
in South-East Asia, shallow tubewells in the Indo-Gangetic Plain, tank
irrigation systems elsewhere in South Asia, qanat systems in Iran,
Afghanistan and Pakistan, the swamp and flood recession areas with
partial water control in Sub-Saharan Africa, to spate irrigation systems in
Southern Arabia. Some of these systems are hundreds of years old, in
which case they are often referred to as traditional irrigation.
• Commercial irrigation, with units ranging in size from a few hectares to
several thousand hectares, financed, operated and managed by
individuals or privately owned companies. This category would include
for example localised1 irrigation systems of 1-2 ha in extent, for the
production of flowers, vegetables or fruit, to larger overhead or surface
irrigated schemes for the production high value field crops such as
tobacco, and privately owned sugar estates.
The most important differences between public and private irrigation as

defined above are that:
• in public irrigation it is the government that plans, finances and

implements, and in most cases farmers effectively receive a subsidised
service;
• in private irrigation, even though government may sometimes facilitate
development or provide incentives, farmers take their own investment
decisions, pay, implement, operate and maintain, and carry the risks.
Public irrigation therefore tends to be supply-driven and may incorporate

political or social objectives, while private irrigation is demand-driven and
reflects financial objectives or, at times, the survival strategy of the poor. These
characteristics impinge on many of the basic decisions for development planning
and imply fundamental influences on the investment approach. The features that
make successful private irrigation self-sustaining should if possible be emulated
in planning public irrigation investments. Thus farmers must be involved in the
planning decisions, contribute at least a part of the capital costs, and accept full
responsibility for operation and maintenance (O&M). As will be seen, the
planning and investment trend in publicly financed irrigation is to emulate those
characteristics of private irrigation that make it generally self-sustaining.
1: e.g. drip or micro-jet.

The Issue of Scale

According to a recent World Bank review of its experience in irrigation1,
there is no evidence to suggest that small-scale irrigation is more or less
likely than large-scale to achieve success, judged in terms of sustained
economic internal rate of return (ERR). Nevertheless, it can be argued that
where irrigation institutions - public or private - are still relatively weak,
where there is a lack of capacity to plan, implement, operate and manage
large schemes, attention should focus on smaller developments. Smaller
schemes are more conducive to farmer management and control, and
market limitations for the crops produced often make such schemes the
only viable choice. On the other hand, there are many examples of the
development of small public irrigation systems, scattered over a wide area,
that have overstretched the logistical and staffing capabilities of irrigation
agencies and have eventually failed. In theory, larger developments should
encourage more Government support, attract better management, be easier
to organise, and should therefore enjoy better prospects for sustainability.
There are numerous other arguments for and against large or small
irrigation schemes: for example, the obvious economies of scale and
multiplier effects of large schemes (see Box I-1). Many of the arguments are
valid in some countries, for certain irrigation types, but not in others. Thus,
generalisation should be avoided and the issue of scale should be
approached considering the individual circumstances of the project and
institutional capacities in the country concerned. As will be seen, there are
more important issues than scale: the overwhelming experience is that what
is important in predisposing irrigation to success is the extent to which it
enjoys the commitment of stakeholders2 to good engineering design, quality
construction, efficient operation and adequate and timely maintenance.
1: Report No 13676: A Review of World Bank Experience in Irrigation. Operations and Evaluation
Department, World Bank, Washington DC (1994).
2: The term stakeholders includes all individuals who may be positively or adversely affected by the project:
government planning agencies (planning units, senior decision-makers, Ministers); government implementing
and operating agencies (senior and middle level management of line ministries) who may be subsequently
responsible for project implementation, operation and management; community-based organisations,
including water users' associations (WUAs) or other farmers' organisations; individual farmers; public interest
groups; non-governmental organisations; (NGOs) and private sector companies; financing institutions; and
international project planning teams such as those provided by the Investment Centre.
Box I-1 - Large versus Small Irrigation Schemes
Large Scale Small Scale
For: For:
Engineering economies of scale usually Usually less exacting technical
possible, hence lower unit costs. demands for high level professional
skills for planning, implementing,
Borrowers more disposed to take the operating and maintaining.
actions necessary to ensure that project
succeeds. Greater opportunity for farmers to
participate in planning, financing,
Economies of scale result in cost- implementing, operating and
effective provision of extension services maintaining.
and social/economic infrastructure.
Better adapted to supplying local
Greater regional impact of secondary markets with (high value) horticultural
benefits. products without depressing prices.
Easier physical planning of contiguous Relatively simple organisation and

blocks than scattered areas. management.
Often quick yielding.

Against:
Demand for high level professional Smaller risk of irreversible adverse
skills and institutional capacity in environmental and social impacts
planning, implementing, operating and
maintaining.
Against:
Relatively complex organisation and Diseconomies of scale sometimes result
management requirements; scope for in relatively longer period required to
farmer management limited to tertiary plan and implement (per ha
system, hence greater recurrent cost developed).
burden to government or other central
authority. Fragmented distribution results in more
difficult logistics for implementation,
Longer period required to bring extension coverage and provision of
complete project into production. social and economic infrastructure.
Greater potential for irreversible

adverse environmental and social
impacts, such as displacement of
settlements or disruption of wildlife
habitats.
IRRIGATION, FOOD SUPPLY AND DROUGHT
Options and Alternatives for Food Supply

As populations in some developing countries continue to grow faster
than increases in food production, the options for meeting the
consequent incremental demand for food need to be considered.
These are discussed below.
Rainfed Production of Food as an Alternative to Irrigation

Although between 30 and 40 percent of the world’s food at present
comes from the irrigated 20 percent of total cultivated land, before
contemplating further irrigation development the potential for increased
food output from rainfed areas should be considered. There may be
prospects for obtaining sustainable production increases under rainfed
conditions through relatively simple low cost technologies: for example
improved in situ water conservation techniques1, and the adoption of
integrated pest management (IPM) and integrated plant nutrient
management (IPNM) strategies. However where land resources are scarce,
further area expansion of rainfed food production could increasingly
involve more marginal areas, with a risk of increased deforestation, soil
erosion and general land degradation. In the less well-endowed areas
particularly, the potential for stabilisation or intensification of existing
rainfed production by increased use of agrochemical inputs is also
technically limited: either the possible gains have already been achieved,
or they are unlikely to be achieved because of aversion by farmers to the
known risks of investing in improved inputs in marginal rainfall areas.
Hence, even though irrigation development cannot, and perhaps should

not, be relied upon to meet the entire future increase in demand for food,
supply can be expected to depend to an even larger extent on irrigation in
the next century than it has in this.
1: See Soils Bulletin 57: Soil and Water Conservation in Semi Arid Areas, Land and Water Division, FAO,
Rome (1987); Investment Centre Technical Paper 10: Agricultural Investment to Promote Improved Capture
and Use of Rainfall in Dryland Farming, FAO, Rome (1995); also Technical Paper 221: Conserving Soil
Moisture and Fertility in the Warm Seasonally Dry Tropics, World Bank, Washington DC (1993).
New Irrigation Development

Increased production through new irrigation development is
nevertheless increasingly difficult to justify economically for the
production of basic foods, because of the decline in world market prices
for these crops1 and typically high per hectare capital costs (see Box I-2,
also Annex 2 of Investment Centre Technical Paper 52). The situation may
change in the longer term if, as world population grows, the demand for
food begins to outstrip supply. In this case prices might reasonably be
expected to approach the marginal cost of irrigated production, and the
use of current World Bank price projections for project analyses may be
inappropriate3. Indeed, world market prices for basic food crops have
recently shown signs of recovery, and if this trend were to continue it
could significantly alter the profitability of production of such crops under
irrigation. Nevertheless, for the foreseeable future any expansion of
irrigation for the production of basic foods will only be possible if
substantial reductions in per hectare capital costs of new development can
be achieved.
In many countries however the better irrigation sites are already

developed, and new projects could be expected to cost even more per
hectare than those developed in the past. New irrigation development in
these countries may therefore increasingly be justified only for the
production of relatively high value crops - for which markets and
marketing are usually constraints - rather than for basic foods. In this
situation markets, as much as the availability of suitable sites, will
determine the pace of investment in new irrigation, unless lower cost
technologies can be devised and introduced. This is today’s challenge to
irrigation engineers.
1: Paradoxically perhaps, the expansion of irrigation over the last 50 years has been a major factor in the
decline in prices, since it has caused relatively strong growth in supply of rice and wheat compared with
growth in demand.
2: Investment Centre Technical Paper 5, Irrigation in Africa South of the Sahara, FAO, Rome (1986).
3: Doubts over the use of World Bank price forecasts for food and fibre crops have often been expressed.
However, in the absence of any better alternatives, the analyst can do no more than attempt best guesses
based on the Bank's forecasts, or explore possible future differences between forecast and actual prices
through sensitivity analysis.
Box I-2. Asian Food Production in the 1990s
The introduction and rapid spread of high-yielding rice and wheat varieties
combined with heavy investment in irrigation and rapid growth in fertiliser use in the
late 1960s and the 1970s resulted in strong growth in output of these crops in Asia.
For rice, the rate of growth of yields increased from 1.7% per annum during 1958-66
(before the spread of modern technology) to 2.9% during 1974-82. However, growth
in rice yield, the primary contributor to rice output growth throughout these periods,
has slowed to 1.9% annually since the early 1980s.
Area expansion contributed about one-third of Asian rice output growth during
1966-74, but little after that. The annual growth rate in rice output therefore declined
in the 1980s, from 3.1% in 1974-82, to 2.2% during the period beginning in 1982.
Similar trends have occurred with wheat output.
Reductions in the amounts of new investments in irrigation have been dramatic.

Aggregate lending and assistance for irrigation in Asia in the 1970s and 1980s by
four major financial institutionsa reached its peak in real terms in 1977-79. By the
mid-1980s it was less than 50% of the 1977-79 level. What has caused this decline
in investment? Contributing factors include the large public and foreign debt loads
carried by most of the agriculturally based economies in the region, the declining
share of unexploited irrigation development potential in many countries in the
region, and political resistance from environmental interests and those displaced or
otherwise negatively affected by irrigation development.
However, the main reasons for declining investment are the increasing real costs per
hectare of new irrigation development and decline in world rice and wheat prices.
Rosegrant and Svendsen presented real capital costs for construction of new
irrigation systems in five countries in South and SE Asia over the period 1966-88, the
unweighted average for which increased by a factor of 2.5, from US$1,744 to
US$4,385 per ha, over the period. The real price of rice and wheat over this period
was halved, representing a swing of a factor of 5 in the ratio of costs to benefits.
a: World Bank, Asian Development Bank, Japanese Overseas Economic Cooperation Fund, and US Agency
for International Development.
Source: Mark W Rosegrant and Mark Svendsen (1993), Asian Food Production
in the 1990s: Irrigation Investment and Management Policy,
“Food Policy”, February 1993.
Intensification of Existing Irrigation Development

Given that the cost of new irrigation development for food production
is increasingly difficult to justify, and that the tendency is for existing
irrigation systems to perform below potential, it is logical to consider
intensification and increased output from existing systems. The investment

emphasis in recent years has therefore shifted towards improving the
latter, taking advantage of sunk costs to achieve incremental production at
low incremental cost. It is important here to note the important distinction
that has been made between an endless cycle of rehabilitation, which is
simply deferred maintenance, and upgrading, which involves making
existing schemes work better. Upgrading usually calls for engineering,
economic and sociological analysis to arrive at solutions. Sectoral loans
aimed at such improvements have become an important part of the
portfolios of the financing institutions, often linked to management
transfer to the users (see Chapter 7).
Low Cost Irrigation

The above discussion focuses on irrigation development in formal
systems and takes no account of the existence, in various parts of the
world, of large areas of informal or traditional irrigation.
These, by definition, have been developed on the initiative of farmers

rather than governments, and have continued their existence in the same
way. Traditional irrigation systems are often characterised by poor water
control, and consequent low cropping intensities and yields. In many cases
improved water control can be achieved at comparatively low cost, and is
often easily justified by the incremental production that can be achieved as
a result. Thus, given that in some countries the area under traditional
irrigation far exceeds the area under formal irrigation, the scope for
obtaining increased food production from these systems could be
significant. The identification of opportunities for such improvements may
therefore be a priority for planners. However, it must also be noted that the
most important feature of these systems is local initiative, responsibility
and control; proposed improvements should avoid inadvertent transfer of
responsibility to government.
Apart from traditional irrigation systems, other opportunities exist for

low cost irrigation, particularly for localised irrigation, including systems
based on the use of clay pots for the storage and gradual release of
irrigation water. These, and other similar devices, are often nutritionally
important for local communities because they are generally used for fruit
and vegetable production. They make efficient use of scarce water, but are
in general unsuited to large scale food production1.
1: There are exceptions to this rule: one such system has been satisfactorily demonstrated for the irrigation of
cassava in some Sahelian countries.
Irrigation and Protection from Drought

In many regions of the world the major river systems have their
headwaters in high rainfall or snowmelt areas and flows are relatively
insensitive to droughts in agricultural areas downstream. Here the value of
irrigation in “drought-proofing”, by creating greater yield stability and out-
of-season food production, is undoubted.
In other areas subject to repeated and prolonged droughts, such as the

Sahel, northeast Brazil or southern and eastern Africa, although at first
sight there would appear to be no apparent alternative for improving local
food security, irrigation does not always provide full insurance against
drought. In much of Sub-Saharan Africa for example rivers and dams dry
out and groundwater levels drop in years of recurrent drought. It could
therefore be argued that in these circumstances irrigated agriculture is
more vulnerable to drought than some less intensive forms of agriculture.
Moreover, even where irrigation potential remains unexploited in these
areas, its development cost nowadays will often only be justified by high
value crops. These have limited markets and will bring primary benefits to
only a few of the people normally at risk. Thus, despite its superficial
appeal, irrigation development in these areas may not be a fully effective
means to combat recurrent drought, rural poverty and food insecurity.
There are unfortunately no easy, quick fixes for these problems. Further
research is necessary, aimed at developing viable technical packages that
consider the recurrent drought cycle, including opportunities for non-farm
rural employment. Policy assumptions that automatically equate irrigation
development with the elimination of drought risks in such areas should be
regarded with caution.
EFFECTIVE IMPLEMENTATION
Experience to date, well summarised in the 1992 report of the World
Bank’s Portfolio Management Task Force referred to earlier, makes it clear
that a key condition for sustainable development impact from irrigation
investments is implementability. This requires:
• that the implementation requirements of the project are matched to

local institutional capacity;
• commitment to the project, built on stakeholder participation and
local ownership.
Other factors, such as good technical design, sound construction and

financial viability for the users are of course equally important. But experience
indicates that in the past irrigation professionals have often underestimated the
attention which also needs to be given to implementability.
Implementation Capacity and External Technical Assistance

The conventional identification/preparation approach of the past has
often resulted in arriving at a project plan only to find a mismatch with
local capacity to implement it. Money and technical assistance is then
provided to bridge the gap. Technical assistance frequently then crowds out
any local capacity, and in effect substitutes for local management rather
than strengthens it, bringing no sustainable improvement (see Box I-3).
In the conventional planning process, detailed start-up and

implementation plans have generally been considered as beyond the ambit
of the identification/preparation teams’ work. That this was inappropriate is
now clear and a new approach has been found necessary: projects should
be planned to match local capacity for implementation, which implies that
planning teams should first acquire a thorough appreciation of this
capacity. If necessary the project scope and content may be reduced to
match existing implementation capacity. Technical assistance can then be
applied selectively, rather than indiscriminately as often in the past, for
genuinely sustainable capacity to be built. The planning process should
therefore give specific attention to an analysis of institutional capacity, and
to providing a detailed plan to enable the implementers to prepare
themselves for carrying out the tasks expected of them.
Box I-3 - The World Bank and Capacity Building

(Extract from The Financial Gazette, Harare, 27 May 1993)
International donors, including the World Bank, are fast destroying the development
capacity of Africa due to conditionalities tied to their aid, Mr Edward Jaycox, the World
Bank vice-president for Africa region has said and warned that this could defeat the
continent’s economic recovery programmes. “The donors and African governments together
have, in effect, undermined capacity building in Africa. They are undermining it faster than
they are building it, or at least as fast. This has got to stop, otherwise we are not going to
succeed in the development effort in Africa,” Mr Jaycox said in Washington last week.
He charged that resident expatriate technical assistance officials were systematic destructive
forces, undermining the development capacity in Africa because most of their technical
assistance was imposed. “It (technical assistance) is not welcome, there is no demand for it
really, except on the donor side. When I talk about donors, I am including the World Bank
... I, for one, would like to see this changed,” he said.
He said very scant attention was paid to appropriate project design. “We design a project
and then we find a big mismatch between the project design and the local capacity to carry
it out. So we throw money and technical assistance at this, thinking that will bridge the gap.
Well, it has not and I do not think it will ... This is in fact, an endemic problem in the donor
community - expatriate management substituting for domestic management”. Mr Jaycox
said to alleviate Africa’s capacity building problems, there was a need to create a demand
for professionalism on the continent.
Participation, Ownership and Commitment

Successful implementation requires participation in the planning and
implementation process by all stakeholders, in order to create a sense of
ownership of, and consequent commitment to, the project. This requires
that the project planning process should allow time for the borrower and
users to participate in, or preferably drive, the planning process, and any
potential losers to have a substantive influence on decisions that affect
their future. Ownership and commitment by the users are unlikely to be
achieved unless they consider that the project would meet their felt needs1
and they have a stake in the equity - that is, they share in or bear all of the
investment costs.
Building ownership and commitment through participation has often

been difficult to achieve in the past. The conventional sequence of
identification/preparation, carried out against tight deadlines by external
planning teams, has seldom allowed time for genuine participation (which
should go beyond mere consultation), either by government staff or
farmers. On implementation, government irrigation engineers, for their
part, have usually seen irrigation only from an engineering, rather than a
farming or social, perspective. They have been reluctant to adopt
participatory approaches with farmers, mainly because of a misplaced
belief that farmers are unable to understand or make any contribution to
technical matters, or because of concerns that participation might delay
implementation or result in design changes that compromise the quality of
the final product.
Undue delays in project approval and implementation are undesirable,

not least for the farmers; but taking time over stakeholders’ participation in
planning does not necessarily mean delay. It can often pay dividends, by
preparing the implementers, ensuring smooth start-up, building farmers’
committment to change, and ultimately lead to more rapid implementation
and a more sustainable development impact. Experience has shown that
the ultimate scheme design almost always benefits from involving the users
in the planning process. Farmers, or at least those with some experience or
knowledge of irrigation, from the poorest illiterate smallholder to the
richest well-educated commercial farmer, usually have practical ideas of
what works and what does not, from their detailed local knowledge of
weather patterns, hydrology, soils, markets, and so on. Communities often
have strong preferences regarding the nature and location of development
that would influence planning, such as aligning a canal to avoid
excavation in sacred ground.
1: This is the basis of genuine demand-driven development. Soliciting or orchestrating requests from farmers
for government investments in irrigation is not - even if the prospective users promise or agree to make a
contribution at some later date. Often farmers are driven by other motives in these circumstances, such as
temporary wage employment on scheme construction, and they later lose interest in the irrigation scheme.
Participatory or consultative planning is essential in rehabilitation

projects or the upgrading of traditional farmer-managed irrigation systems,
to take advantage of the invaluable store of cross-disciplinary knowledge
that farmers possess about the existing system. Projects that involve the
displacement and resettlement of people can only be planned and
implemented effectively if those affected are involved in the planning
process and their suggestions and concerns taken fully into account.
As will be seen from Chapter 5, involving farmers in system design can

also often result in significant cost savings, particularly if the farmers
themselves are expected to take a share in the equity by contributing to
the investment costs. Sound engineering is essential, but it can nonetheless
take account of the farmers’ experiences and preferences. Yet farmers, as a
possible source of system design input, are still usually ignored, and as a
result schemes are often inappropriately planned (see Box I-4).
Box I-4 - Second Approximations: Unplanned Farmer Contributions to Irrigation Design
Farmers interviewed on the Kosinggolan Scheme of the Dumoga Irrigation Project in

North Sulawesi, Indonesia frequently reported that during construction they had
approached construction labourers or supervisors in the field to suggest changes and
were usually told that the design had been established by the government and could
not be changed. Often farmers relocated the construction markers when the crews had
left. Others waited until construction was finished and the contractors had moved on
before altering the structures. Altogether, 27 design alterations were identified in the
sample blocks. Many cases involved multiple alterations which were interconnected.
The most common kinds of alterations observed were channels being relocated,
streams being diverted or ponded, project channels being abolished or not used, and
channel offtakes or division points being relocated. Other actions included redirecting
project channels into drains or streams, making new channels, adjusting division box
gates to alter water divisions, making new flumes, destroying project flumes and lining
channels. Several cases involved relocating channels to follow farm boundaries, to
accommodate low water requirement crops or to continue to make use of pre-existing
farmer-built structures such as small weirs, channels and ponds.
The most frequent reasons reported by farmers for making design changes related to
questions of conveyance and distribution efficiencies, farm boundaries and the
conjunctive use of alternative water sources (in this case from natural waterways or
from return flow).
Source: Vermillion D.L., in Design Issues in Farmer-Managed Irrigation Systems,

Proceedings of an International Workshop of the Farmer-Managed
Irrigation Systems Network held at Chiang Mai, Thailand, December
1989. IIMI, Colombo, Sri Lanka (1990).
A Possible Role for Non-Governmental Organizations (NGOs)1

in Participatory Development
Farmers may be as uninterested in participation as government
irrigation bureaucracies, especially if in the past farmers have received
free, though possibly unreliable, irrigation services and are now expected
to bear more of the costs. They may often be suspicious of government
officials, especially if they have been the losers as a result of incompetent
or corrupt practices. Farmers may therefore require considerable
persuasion to commit themselves to participate.
Participation usually also requires behavioural change in irrigation

bureaucracies, and until this is achieved they may not be in a position to
implement participatory development. Some bureaucracies have
successfully employed young graduates in social science to work directly
with farmers to assist the latter to mobilise and organise themselves to
participate in project planning and construction2. However, for various
reasons it is often difficult for irrigation bureaucracies to attract and retain
such staff. Even if such staff can be recruited, farmers may still hesitate to
cooperate fully with persons they regard as government agents. In this case
what is often required is a non-governmental intermediary, to identify
community needs and voice them on behalf of the otherwise voiceless.
While non-governmental organisations vary in their ability to work with
the poor and to cooperate with government agencies, several of them have
undertaken this role successfully.
However, caution is necessary to avoid any suggestion that NGOs

should replace local institutions: to do so would generally be counter-
productive. Instead, suitably qualified and motivated NGOs may be sub-
contracted, either by local government3 or through the farmers’ own
administrative structures4, to provide technical assistance services to
animate participation. They may also often assist in capacity building by
training government staff in this role.
1: Some reports define all groups which operate outside the public sector as NGOs. In the context of these
Guidelines the acronym NGO is used in a narrower sense, to mean a charitable, non-profit making
organization, generally working at the grassroots level.
2: For example, the National Irrigation Administration in the Philippines. See An Evaluation of NIA's
Participatory Communal Programme, Public Intervention in Farmer-Managed Irrigation Systems, IIMI,
Colombo (1987).
3: e.g. village or district councils.
4: e.g. water users' associations.

FISCAL SUSTAINABILITY
The Need for Cost Recovery

Economic efficiency and fiscal sustainability demand that the capital
costs of irrigation infrastructure should eventually be recovered from the
users, in order to permit longer term replication of investments. In practice
few countries have ever succeeded in recovering much more than the
O&M costs of public irrigation directly, although indirect recoveries in the
form of agricultural taxes or generally negative terms of trade for the
subsector have in some cases been important (see Box I-5).
Box I-5 - Cost Recovery: Setting the Appropriate Level
A 1986 World Bank Operations Evaluation Department (OED) report described

serious cost recovery problems on the Muda project in Malaysia, where at the time
of audit, water charges and land taxes remained far short of meeting O&M costs. The
prospects for raising direct cost recoveries were considered poor, partly because of
the heavy burden on farmers of zakat, a religious tithe, and a substantial sales tax
collected from produce in the region. However, the audit report concluded that if the
zakat, estimated in an FAO study to be 5-7 percent of gross farm income, as well as
the indirect return to the government resulting from controlled prices were taken into
account, the Muda farmers’ combined payment of water charges, taxes, and the
production tithe covered all the O&M costs plus 20 percent of capital costs (at 10
percent annual interest).
Source: OED Report No 6233, World Bank Lending Conditionality:

A Review of Cost Recovery in Irrigation Projects. World Bank,
Washington DC, June 1986.
It has also been argued that the complexity of some irrigation and
drainage schemes justifies state intervention and subsidising of part of the
investment costs, without which some worthwhile projects may not have
been constructed. In these cases capital costs not recovered may not really
be subsidies if all the secondary benefits of irrigation development are
taken into account. In a case study of the Muda Irrigation Project in
Malaysia, for example, it was found that for every dollar of value added
generated directly by the project, another 80 cents were generated
downstream1.
1: Bell, Clive, Peter Hazell and Roger Slade, Project Evaluation in Regional Perspective. Johns Hopkins
University Press (1982).
Moreover, other researchers have argued that the multiplier effects of

investment in agriculture in developing countries are generally greater than
those associated with investment in other sectors1. Nevertheless, the
governments of many developing countries faced fiscal crises during the
1980s that focused their attention on the shortcomings of existing policies
for financing irrigation, particularly with regard to the O&M costs. The
general consensus now, among governments and financing institutions, is
that users should pay all of the O&M costs and as much as possible of the
capital costs.
Cost Recovery, O&M and Water Charges

Problems with cost recovery and O&M form a vicious circle. Irrigators
on public schemes are commonly reluctant to pay any charges that they
are not forced to: poor collections lead to poor O&M, and an even greater
reluctance to pay. It is also generally accepted that the standard tactic for
dealing with poor O&M in the past - that of relying only on raising water
charges - does not usually work, mainly because revenue from water
charges (if they are collected) is often returned to the general treasury
instead of being allocated to O&M. There are exceptions to this rule, for
example on public schemes in Morocco, but in these cases increased
water charges have been accompanied by improved service, hence greater
willingness to pay on the part of the farmer.
Any suggestion that irrigators on a public irrigation scheme cannot afford

to pay even the O&M costs needs to be examined very critically. If irrigators
cannot pay it can only be assumed that the scheme is either unviable - in
which case the question should be asked why it was built or what can be
done to make it viable - or unreliable, in which case measures should be
taken to correct the situation. Moreover, there is an issue of equity involved
in subsidising some members of society by way of artificially cheap
irrigation: in principle it may be a praiseworthy social objective, but with
typically high unit costs for irrigation development, the social impact would
in most cases be greater if any subsidy was spread more thinly over a
higher proportion of the rural poor. Fiscal constraints in many developing
countries simply do not permit subsidies of this kind anyway.
The application and collection of water charges can be further

complicated by various factors, including for example local customary law,
or a fundamental belief in some countries that water should be free. There
is also the difficulty of volumetric measurement. The first of these can be
overcome to a certain extent by charging a “service” fee for irrigation. But
this usually takes the form of an area or crop-based fee that provides no
1: See Vollrath T.L., The Role of Agriculture and its Prerequisites in Economic Development: A Vision for
Foreign Development Assistance. In: Food Policy 1994 19 (5) 469-478.
incentive for the efficient use of water and may thus contribute to wasteful
usage. Even if it were possible to charge individual farmers for water on a
volumetric basis, which it seldom is for most surface irrigation systems
involving smallholders, setting an appropriate charge may present some
difficulty because of local economic distortions (see Box I-5 above).
Nevertheless, without some form of volumetric charging, individual
irrigators have little incentive to make more efficient use of water.
One solution to the problem of water charges is to devolve financial

autonomy for O&M to users’ groups, or to irrigation agencies dependent
upon the users for finance. Metering of water supplied to larger groups,
even if only approximate, is usually more technically feasible, and the
group as a whole can then be charged. It becomes the group’s
responsibility to allocate water amongst its members and to recover the
charges; the experience is that users’ groups are more effective collectors
of fees than government agencies. However, this solution will depend for
success entirely on the cohesion of the group involved. Conditions for the
sustainability of users’ groups are discussed later.
Users’ Contributions to Capital Costs

Apart from the obvious fiscal advantage, a contribution by users
towards the capital cost of a new or rehabilitated scheme is an indication
of demand and commitment. In effect, this is an investment in equity and
hence the scheme becomes to some extent private, enhancing prospects
for sustainability. For this to happen it requires that the users will be in a
position to make such a contribution, and that there are no economic
distortions in place that make it impossible for them to do so.
It also presupposes that government is committed to recovering costs.

Yet there are many examples around the developing world where
governments and donors have adopted the view that users are too poor to
make any capital contribution. In these cases the construction or
rehabilitation of an irrigation scheme is often seen as a welfare project
rather than as an investment project, and farmers are paid in cash or food
to contribute labour to the construction of the scheme. There are no signs
that such an approach engenders any sense of ownership or responsibility.
Farmers are more likely to view construction simply as a source of off-farm
employment, to regard the scheme as government infrastructure and
ultimately to show little subsequent commitment to it. Moreover, the
injection of large amounts of food into an area under food-for-work
programmes can sometimes depress agricultural prices and affect other
farmers’ incomes.
Even among very poor populations, individuals and communities have

been willing and able to invest substantial amounts in cash and kind for
projects that they consider are worthwhile. If nothing else, irrigators or
prospective irrigators can contribute labour, even if only for a few hours a
day, and provide locally available materials for construction. Unwillingness
to contribute implies a lack of demand for the irrigation development
proposed, hence a lack of commitment, which invariably leads to
unwillingness to accept O&M costs. Thus IFAD’s current irrigation and
drainage investment strategy1 requires that users should “contribute
between 10-20 percent to the direct costs, preferably in kind or labour”,
and that they should “pay for the cost of irrigation equipment
(cash/loans)”. Experience suggests that this is not unreasonable, if the
development proposed is an appropriate response to local demand for
irrigation. On some public systems in Morocco, for example, up to 40
percent of the initial capital costs are recovered from farmers, and private
irrigators throughout the world - including those on traditional farmer-
managed irrigation schemes - are willing to pay up to 100 percent of the
cost of their schemes.
As mentioned, case studies have shown that requiring a capital cost

contribution from farmers can result in significant overall savings if farmers
themselves are involved in system design. For example, in the IFAD/World
Bank-funded Communal Irrigation Development Project in the Philippines,
actual costs were US$ 4,100 per hectare compared with the originally
estimated US$ 7,000, not only because of the farmers’ contribution of
labour and materials, but also because of farmer-led design changes2.
Farmers will invariably seek the least cost solutions if they have to pay
even a part of the costs.
Land tenure problems can however be a constraint to users’

participation in capital costs. Where farmers are unable to gain legal or
even customary title to their land they are not normally willing to invest,
unless they have confidence in long term usufructuary rights. Legislation
may therefore be necessary in order that freehold tenure or long leases can
be granted - for which reason, among others, government commitment to
the proposed investment is essential.
1: Drawn from Irrigation and Drainage Cluster - Module: The Role of Water User’s Associations, IFAD, Rome
(Draft 20/10/94).
2: From An Evaluation of NIA’s Participatory Communal Programme : Public Intervention in Farmer-

Managed Irrigation Irrigation Systems, IIMI, Colombo (1987). Other experiences from different countries are
summarised in Robert Yoder and Juanita Thurston (eds), Design Issues in Farmer-Managed Irrigation Systems,
IIMI, Colombo (1990).
WATER USERS’ ASSOCIATIONS
Water Users’ Associations and Transfer of O&M Responsibility

Fiscal crises have in many cases forced governments to devolve
financial and managerial responsibility for existing irrigation systems to the
users - in effect to privatise them - and to ensure that users’ groups on new
schemes accept full responsibility for O&M from the outset.
The degree of responsibility which water users’ associations (WUAs)

can be given for management of a system depends on its scale. It is
obviously unrealistic to expect a WUA to take over full responsibility for a
system that serves hundreds of thousands of hectares and which was
previously operated (even if poorly) by a large irrigation agency. On the
other hand there are other options available, such as users’ representation,
either directly or indirectly through apex WUA organisations, on the board
of a financially autonomous irrigation authority, or for WUAs or their apex
organisations to contract out irrigation services to the private sector.
Smaller schemes, including their main water supply infrastructure, might
on the other hand be managed entirely by a WUA. The objective in either
case is greater user commitment, which can lead to more efficient use of
the resources by helping to overcome many of the problems that public
irrigation systems face, such as inequitable water distribution, corruption
(see Box I-6), inefficiency and poor O&M. Attention is nowadays being
focused on how to achieve this commitment, and to what extent WUAs
can be assisted to form and to manage their own affairs.
Box I-6 - Corruption in Public Irrigation Schemes
Social research and experience have shown that irrigation projects in some
developing countries provide irrigation engineers and other operational personnel
with opportunities to raise significant amounts of illicit revenue from the distribution
of water and contracts, some of which is redistributed to superior officers and
politicians. Thus, in return for financial inducements, irrigation engineers will award
contracts to high-priced or unqualified, incompetent contractors, and “turn a blind
eye” to substandard work that saves costs for the contractor and increases his profit.
The results of such corruption are not usually immediately apparent, but substandard
work obviously has a detrimental impact on subsequent maintenance requirements
and costs, contributes to the vicious circle of poor maintenance-poor cost recovery-
poor maintenance, and hence has an obvious bearing on sustainability. Financial
inducements may also be used to bribe ditch-riders and other operational personnel
to enhance water supplies to one farmer, or a group of farmers, at the expense of
others, usually the poorest and least powerful, which often means tailenders.
Corruption of this kind is considered to be one of the most important supply-side

factors in the poor performance of public irrigation. It has been very difficult to
control in the past because of lack of financial discipline and accountability within
irrigation bureaucracies.
Source: Wade R, The System of Administrative and Political Corruption:

Canal Irrigation in South India. Journal of Development Studies
18(3): 287-328.
Conditions for Sustainability of Water Users’ Associations

Experience to date in the formation of WUAs and the transfer of
irrigation O&M responsibilities to them has been uneven. The 1994 World
Bank review of its experience in irrigation, referred to earlier, concluded
that some WUAs have been stillborn, some have died in infancy, and some
have lived on but performed no useful function. Byrnes1 concluded that
most WUAs in World Bank-assisted projects in Pakistan remain relatively
weak. Meinzen-Dick et al.,2 reached a number of conclusions regarding
what leads to strong WUAs, the policy factors that can assist in the
development of such organisations, and the implications for constructive
interaction between irrigation agencies and WUAs, particularly for the
transfer of irrigation responsibilities. These were summarised as follows.
1: Kerry J Byrnes, World Bank Technical Paper Number 173, Water Users Associations in World Bank-Assisted
Irrigation Projects in Pakistan, World Bank, Washington DC, 1992.
2: Meinzen-Dick R. et al., Sustainable Water User Associations: Lessons from a Literature Review.
Paper prepared for World Bank Water Resources Seminar, 1994.
• WUAs are stronger if they can build upon existing “social capital”, or
patterns of cooperation. It is therefore advantageous to work with
existing successful organisations wherever possible. Whether existing
or new organisations are involved in irrigation management, the
organisations should be adaptable - to their local conditions and to
changes over time. WUAs are also likely to be stronger if they are
relatively homogenous in terms of members’ background, and assets.
However, heterogeneity is manageable (or even, in some instances,
desirable), and defining membership to include all stakeholders -
including tenants and women - improves equity.
• There is no single “optimal size” for WUAs. As size increases,
transaction costs increase and it becomes more difficult for members
to monitor each other. However, larger WUAs can achieve
economies of scale, and take on more tasks in irrigation
management. Federation allows WUAs to expand and operate on a
larger scale, while still maintaining manageable interactions among
members of base-level groups.
• The structure and role of WUAs depend on their degree of
commercialisation. Greater commercialisation allows WUAs to
replace direct labour or in-kind participation of members by hiring
specialists, and allows them to expand in size. However, it also
creates a much greater need for accountability of leaders and
employees to the membership.
• The range of WUAs shows great variability, but two broad models can
be identified. The first, (or “Asian model”) typically relies on direct
participation of all members, with smaller base units. These are often
socially based, multipurpose organisations and are likely to be most
appropriate in socially cohesive societies with smaller land holdings,
low market penetration and simpler irrigation technology. The second,
(or “American model”) is a more specialised organisation based on
hydraulic boundaries, and the organisations are focused on irrigation
rather than multiple activities. Such organisations are appropriate to
situations of larger land holdings, greater market development, and
more complex technology.
• In any type of WUA, the benefits to farmers should outweigh the cost
of membership. The benefits of improved water supply, increased
farm income, and conflict resolution obtained through WUAs should
offset the substantial time, materials, cash, and interpersonal
transaction costs of being involved in the WUA. This implies that
irrigated agriculture should be profitable enough to create a demand
for water, and WUAs should have a demonstrable effect in improving
farmers’ control over water.
• Organised farmers in WUAs can manage more advanced technology,
and higher levels of irrigation systems. Their expanded role in main
system management can provide a greater degree of control over
water supplies, which is a major incentive for farmers to participate
in WUAs.
• Where agencies retain operation and maintenance responsibilities at

higher levels of the system, they need to carry out these roles
effectively so that farmers will feel it is worthwhile for WUAs to carry
out their functions at lower levels. Developing a service orientation
among agency staff and a collaborative attitude between agencies and
WUAs is essential for successful joint management of irrigation
systems and for management transfer programs. Strengthening agency
accountability to users through public information of irrigation plans
and programs and providing financial autonomy for irrigation
agencies to rely on user fees for their budgets are strong incentives for
the agency to foster WUAs.
• A supportive policy and legal environment is crucial to the
sustainability of WUAs. State policies of administrative and financial
decentralisation have provided the impetus for many management
transfer programs which contract the role of the state and expand the
role of WUAs. A facilitating legal framework is critical to give WUAs
the ability to deal effectively with external groups, operate bank
accounts and undertake other activities. However, the legal
framework should be flexible enough to allow members to adapt their
organisations to local circumstances. It should also balance rights
with responsibilities for WUAs in order to ensure that members have
sufficient incentive to participate. Clear assignment of property rights
over water and over the physical infrastructure of irrigation systems to
WUAs can be a potent tool for strengthening the organisations, and
should be given greater attention, particularly in programs which aim
to transfer responsibilities and costs of irrigation system management
from the state to users.
• There is a changed but essential continuing role for the state in
ensuring long-run sustainability of WUAs. Particularly important
roles for the state are establishing and adjudicating water rights,
monitoring and regulating externalities and third party effects of
irrigation, maintaining a supportive legal framework, providing
technical and organisational training and support to WUAs, and
occasionally providing design, construction, or financial support for
major rehabilitation.
However, turning over management of public irrigation schemes is not

merely a matter of consultation and forming WUAs, with government
continuing to act as the prime mover. Power struggles, collusion and
corruption may not always be eliminated by user participation and the
creation of WUAs. Not too much should be expected from them,
especially in the short term. Their creation requires a re-orientation of
irrigation bureaucracies towards providing a service and creating an
environment that facilitates the formation, by the users themselves, of
sustainable WUAs.
Sound social engineering is as necessary as good technical engineering.

The ease with which sustainable WUAs will form, and successful transfer
of responsibilities will then take place, will vary according to different
physical, social and financial circumstances. There is no magic solution,
no one set of rules can be applied, and considerable time and resources
will have to be invested in learning how best to approach the process in
each case. Investment project designs which provide flexibility and a
progressive or pilot-led approach to transfer are more more likely to lead
to eventual success1
SOCIAL AND ENVIRONMENTAL ASPECTS

Adverse social and environmental impacts of irrigation investments
have been many and varied. They include health impacts (malaria and
schistosomiasis), and waterlogging and induced salinisation2. Land
acquisition and resettlement requirements have often caused delays to
implementation or even cancellation of loan agreements. Although some
would argue that on the whole the social and environmental disbenefits of
irrigation are far outweighed by the benefits, there are a number of
irrigation projects around the world that possibly would not have been
built had the disbenefits been foreseen, costed and entered into a cost
benefit analysis.
Despite the years of experience and the lessons learned - and despite
the existence of clear operational guidelines for dealing with social and
environmental issues - governments, financing institutions, project planners
and implementers have in the past often paid only lip service to the need
for systematic problem identification, assessment and mitigation. In the
past one of the reasons for this was that promoters and implementers of
irrigation projects found that addressing such issues was an inconvenience,
as well as a likely source of project delays or cancellations. And even
though environmental legislation existed, environmental agencies
generally did not have the teeth to implement regulations; if planners
wished to strengthen these agencies in parallel with the formulation of
irrigation investment proposals, it was already too late.
1: Practitioners are referred to Orstrom, E., Crafting Institutions - Self-Governing Irrigation Systems, ICS Press,
San Francisco, California (1992) which covers some practical planning principles which can be applied in most
cases. Also Yoder, R., Locally Managed Irrigation Systems - Essential Tasks for Assistance, Management
Transfer and Turnover Programmes, IIMI, Colombo, Sri Lanka (1994).
2: According to the 1990 FAO report An International Action Programme for Water and Sustainable
Agricultural Development: A Strategy for the Implementation of the Mar del Plata Action Plan of the 1990s,
20 to 30 million hectares (or about 10 percent of the world's irrigation) is severely affected by salinity and an
additional 60-80 million hectares are affected to some extent.
Box I-7 - Some Social and Environmental Issues in World Bank-Financed Irrigation
Project Planning
The 1994 World Bank review of its irrigation experience commented as follows on
the coverage of gender issues in its sector work:
“Irrigation affects men and women differently. Even if they have equal roles in
agriculture, which they usually do not, women almost always have primary
responsibility for such household tasks as food preparation, washing and
providing drinking water. However, except for the most recent studies on
Mexico and India, none of those (sector reports) analysed was found to have
addressed the subject.”
and on organisation and management:

“Coverage of management and organisation was broad but generally superficial.
It focused on management and organisation of government institutions,
occasionally on their relations with irrigators’ organisations, and never on the
irrigators’ organisations themselves.”
and on broader environmental issues:

“Coverage of special areas of environmental impact has been poor and is still
quite weak. This is the case for drainage, an important source of environmental
troubles in numerous countries, and especially so for aquifer management, and
the various dimensions of catchment management: deforestation, overgrazing,
inappropriate farming, soil degradation, erosion, and silting.”
Source: Report No 13676: A Review of World Bank Experience in Irrigation.

Operations and Evaluation Department, World Bank,
Washington DC (1994).
The approaches and attitudes of governments and financial institutions

have changed more recently. The consensus now is that social and
environmental impact assessment is essential, and as important as
economic analysis in the planning process.
CHOICE OF TECHNOLOGY
Commonsense dictates that the choice of technology for irrigation
should be based on its appropriateness for the cropping patterns intended
and should also consider cost-effectiveness. Irrigation engineers have in
the past tended to overlook an additional need: for the technology also to
be matched to the level of sophistication or operational capacity of the
users. It has become increasingly obvious that the design process must
start from a consideration of how the users will operate the system; this
should then be designed to provide the optimum combination of efficiency
in water use and cost effective operation and maintenance.
Equally important, the designer must consider how the user will cultivate
his land, and the implications that this may have for scheme layout. Thus it
may be that the design which involves the lowest investment cost per
hectare may not be the most cost effective solution if it also involves large
numbers of staff for its operation, or if, because of operational difficulty, it
cannot be utilised to capacity. On the other hand, a design to improve
water use efficiency on a traditional irrigation system by the introduction
of “modern” water control structures may not result in overall efficiency
gains if the users reject the modern controls in favour of their traditional
proportional dividers.
The choice of technology, whether for new development or

rehabilitation of existing schemes, has been the subject of much debate
over the years. While most irrigation engineers would now agree that the
starting point for design must be ease of operation, they however still tend
to polarise into two camps. One sees the problem largely as overcoming
the hydraulic instability of extensively-gated manually operated systems; it
sees the solution as the modernisation of these systems, adding automatic
downstream control structures and other feedback mechanisms designed
to achieve hydraulic stability. The other accepts the reality of farmer
damage in wet season drought and so favours designs based on cruder and
more robust structures; the possibility of just-on-time, demand-based,
delivery of water to crops is foregone, in the hope of preserving the civil
works from interference1.
Discussion of this issue is well covered elsewhere2 and need not be

continued here except to note the conclusion of the World Bank in its
1994 review of its experience in irrigation, that there is inconclusive
evidence to favour one camp or the other. Both would agree on the need
to eliminate anarchy and on the importance of flexibility of operation.
THE DRAINAGE DILEMMA

The world is faced with a huge backlog in drainage requirements. Over
the last quarter of a century water usage for irrigation has more or less
doubled without a comparable increase in drainage capacity. In the longer
run poor drainage is one of the most significant causes of reduced yields
and of irrigated land going out of production, as shown, for instance, by
the extent of saline and waterlogged areas in Pakistan. The stage has now
been reached when it is necessary to correct the drainage omissions of the
1: Burns R., Irrigated Rice Culture in Monsoon Asia: The Search for an Effective Water Control Technology,
World Development XXI, (May 1993), pp771-789.
2: e.g. in World Bank Technical Paper 246, Modern Water Control in Irrigation (1994) by Plusqullec et al.,
World Bank Technical Paper 256, Design and Operation of Smallholder Irrigation in South Asia (1995) by
Donald Campbell, and numerous IIMI publications.
past. At the same time there is a need to improve water use efficiency to
reduce the drainage demands of the future.
It is necessary however to consider why, even where provision for

drainage has been made in the past, it has often survived for only the first
few years of a project’s life. In most cases of poor scheme maintenace it is
the drains that are allowed to deteriorate first. One of the main reasons is
that within a year or two of construction tertiary drains are often cultivated
over by the irrigators who are theoretically responsible for them.
Secondary drains, which are usually the responsibility of the irrigation
agency, are often also partially filled in by farmers to provide crossings or
to pond water for other purposes. The main drains are therefore quickly
rendered redundant.
To improve the sustainability of drainage systems, channels should be

limited to those which are essential; but these should be adequately
maintained and defended against encroachment. Provision of crossings,
each with adequate culvert capacity, is essential or obstruction by informal
cultivator-constructed crossings will inevitably result1. The challenge is to
persuade farmers to accept the importance of drainage and to take
responsibility for its maintenance. This further reinforces the need to
promote participation and ownership by the users.
IMPLICATIONS FOR THE PLANNING PROCESS
To summarise, there is growing recognition that:

• Water is a scarce and valuable finite resource with many competing
demands for its use. Where such competing demands exist, charges
for irrigation use should at least reflect its scarcity value. International
funding is unlikely to be made available for irrigation if the use of
water for this purpose prejudices other more profitable uses.
• There are more important issues in irrigation than that of scale - for
example the degree of users’ demand and commitment to subsequent
O&M. The issue of scale should be approached with an open mind, in
each case considering the circumstances of the country and project
opportunities concerned.
1: Campbell D., Design and Operation of Smallholder Irrigation in South Asia, World Bank Technical Paper
256, World Bank, Washington DC (1995).
• Although world food supply will depend even more on irrigation in the
next century than it has in the past, the per hectare capital costs of
typical new irrigation development may be difficult to justify by the
returns from basic food crops alone. Until lower cost solutions can be
found, or demand forces the price of basic food crops up, irrigation
investment to achieve incremental food production may be limited to
upgrading existing formal and traditional irrigation systems.
• Apart from the obvious technical and financial conditions, the key
condition for sustainable development impact from an irrigation
investment project is its implementability. This requires that the
institutional demands of the project are matched to local institutional
capacity, and that stakeholders are genuinely committed to the project
through participation and local ownership. The conventional project
identifiation/preparation approach of the past has militated against these
requirements being met.
• Economic efficiency and fiscal sustainability demand that the O&M
costs and at least a part of the capital costs of irrigation should be
recovered from the users. However, in practice this is rarely achieved.
Fiscal crises in many developing countries are now forcing
governments to devolve responsibility for existing schemes to the
users or private companies, and to ensure that users of new schemes
accept responsibilty for O&M from the outset. This often requires
institutional reorientation of irrigation bureaucracies, the formation of
users’ groups or WUAs, and an even greater need for participation
and local ownership.
• Adverse social and environmental impacts are significant contributors to
project failures. Despite past mistakes, governments, financing
institutions, planners and implementaers continue to pay only lip service
to the need for impact assessment. The consensus now is that social and
environmental impact assessment is as essential and important a tool as
economic analysis in planning successful projects and programmes.
• Drainage should be given much more prominence than in the past, in
both strategy formulation and the planning of individual projects.
The implications of these lessons for the planning process are that:
• Project planning needs to centre more on the borrower and the users,
and less on the requirements of the lender, and to emphasise
participation and capacity-building features. Whilst project planning has
always been a government responsibility, there needs to be even greater
insistence on international project planning teams, such as those
provided by the Investment Centre, facilitating and assisting in the
planning process by complementing and supporting local preparation
groups, and even greater reluctance to give outside teams direct
responsibility for the tasks involved. Increasingly therefore, external
technical support should involve providing inputs and support to a
process that is driven by the borrower and involves contributions from
many, diverse local stakeholders.
• Given this diversity of contributors, the planning process will continue to

evolve away from conventional identification and preparation to one
that is less compartmentalised. Analysis and reporting are more likely to
build up a dossier of reports, working papers and other documentation,
that may not necessarily be neatly a wrapped and packaged document
that can be presented as an “identification” or “preparation” report.
• Instead of producing comprehensive stand-alone preparation reports,
international project planning teams will be required to produce
working papers that can be used to support a project proposal or
appraisal, or they may simply be required to review such papers
produced by local preparation groups.
• Due to the importance now attached to social and environmental
impacts the evaluation of these must be given as much prominance as
economic evaluation in the planning process.
• In some cases the planning process may become as important an end
as the ultimate project plan, since it will be the main means of
building local commitment and capacity. When successfully
executed, this approach should be exploited to reduce the time spent
in bringing about readiness for implementation, and to ensure smooth
start-up, rapid implementation and ultimately sustainable
development impact from investments.
• Given the importance now paid to increasing implementation capacity,
multilateral lending for irrigation and drainage is likely to continue to
favour sectoral loans for this purpose, most often linked to upgrading of
schemes and facilitating greater involvement of irrigators themselves,
NGOs and the private sector in project implementation. Long-term
technical assistance will be financed only as a last resort, with
specialised short-term inputs that will focus more on institutional,
environmental, social or organisational issues.
PART 2:
The planning process
GENERAL
The Conventional Planning Process

The conventional approach to planning irrigation investments consists
of identification of project options followed by preparation of the
preferred option(s), for subsequent appraisal by the financing institution.
It is normally preceded by an irrigation and drainage subsector review and
the formulation of a country subsectoral strategy. The scope of this type of
project preparation, as generally carried out for irrigation in the past, was
dictated by the project-specific nature of investments. Financing
institutions usually required that, among other things, full engineering
feasibility studies and detailed designs for at least the major components
were completed before appraisal. Although identification and preparation
have always been the responsibility of the borrower, where national
capacity has been inadequate external support teams, such as international
consulting companies or the Investment Centre, have often been requested
to assist with this work.
Recent Trends: The Changing Investment Environment

As indicated in Part I, it is now generally accepted that project success
depends, in addition to the more obvious factors of good engineering
design, sound construction, financial and economic viability, and
environmental sustainability, also on implementability. This in turn
requires:
• that the institutional requirements of the project are matched to local

institutional capacity;
• commitment to the project, built on stakeholder participation and
local ownership.
It is also acknowledged that building institutional capacity and

stakeholders’ commitment has not, until quite recently, been a sufficiently
explicit aim of the conventional planning process. Meanwhile, there is
increased awareness of competition in demand for scarce water resources,
and the high cost of new irrigation development is increasingly difficult to
justify, given the prevailing low prices for basic food and fibre crops.
Together, these factors have led to modified approaches to lending in the
subsector: most financing institutions have become more concerned with
the objectives of participation, ownership and capacity building than they
have been in the past. Lending has increasingly tended to take the form of
sectoral loans, to support these objectives and to finance more efficient
investments in terms of costs, benefits and water use. Projects tend to
favour rehabilitation and/or modernisation of existing schemes, and the
transfer of part or all of the management responsibility to the users.
Investments may be made on a national or regional basis, at a pace that is
matched to local capacity for implementation.
As a result of these changes in focus, the project planning process has

also undergone change: subsector reviews are now more concerned with
the place of irrigation within national water resources management
strategies, the role of irrigation in food supply, the comparative advantages
of irrigated versus rainfed crops, and the formulation of strategies for
improving the performance of the subsector. The steps of identification and
preparation have become blurred: they are being replaced by a process
that is intended to avoid unnecessary duplication of effort at each
successive stage, to create preparedness in those responsible for
implementation, so that they are ready to move quickly and effectively
into implementation once financing has been approved. Thus the process
is becoming much more operationally focused, to ensure that institutions
(and if necessary, policies and legislation) are in place, staff appointed and
trained, and budgets approved for the year in which operations are to start.
Ideally, fundamental aspects of project planning are reviewed and
approved as the work involved is completed, in a participatory process
that involves all stakeholders, including those responsible for appraisal.
The Changing Role of the Investment Centre

Because of these changes in approach, increasing emphasis is being
given to the Investment Centre’s role in facilitation, by providing inputs
and support to a process that is undertaken by the borrower, rather than by
accepting direct responsibility for the tasks involved. In some cases the
process is becoming almost as important an end as the ultimate project,
when its principal objectives are building local commitment and capacity.
Because of this change of emphasis, the Investment Centre’s

involvement is tending towards the provision of somewhat different
services from those previously required for the conventional planning
process. Assistance increasingly tends to be provided to the borrower by
more frequent, smaller and shorter missions than hitherto,
intended to:
• facilitate the building of local consensus and commitment, through

consultation, workshops and participatory planning with the
institution(s) and stakeholders concerned;
• prepare local planning groups (LPGs) and institutions for the activities
to be carried out, including defining the objectives and drafting terms
of reference;
• assist in arranging for the necessary prerequisites, including pre-
financing, for project planning;
• provide ad hoc specialist technical support and guidance as required
to complement the skill-mix available from LPGs;
• train LPGs in participatory rural appraisal and planning techniques,
some of which may be carried out as a later project activity during
implementation; and
• gear-up implementing institutions so that they are fully prepared to
start project implementation once financing is approved.
An Investment Centre mission, or programme of support, may not be

needed for all aspects of the process: some may be already adequately
covered, some irrelevant, and others dealt with by different groups, such as
consulting firms or LPGs. In sectoral investment projects or programmes, in
which subprojects are selected and planned during loan implementation,
the financing institution may require an independent appraisal of these, as
well as other quality control measures, which may also involve Investment
Centre staff. Thus, whereas in the past the Investment Centre’s involvement
in project planning usually ended with the submission of a project
preparation report, today it may extend into and beyond appraisal - for
example, by providing an input to screening and selection of demand-
based sub-projects - as the planning process continues during
implementation.
SUBSECTOR REVIEW AND STRATEGY FORMULATION
Objectives, Approach and Staffing Required

Subsector review and strategy formulation remains the essential first
step in the planning process, and may be carried out either as a stand-
alone activity, or as part of a wider agricultural sector review. If a water
resources policy review and strategy formulation has decided that
irrigation is a justifiable option for use of available water, the irrigation and
drainage subsector review should provide the government and potential
financing institutions with recommendations for improving the
performance of, and profitable future investment in, the irrigation
subsector. It should address not only technical and economic, but also
social, institutional, environmental and policy issues. It will be based

largely on existing information, rather than any new investigation. It should
consolidate and expand knowledge of the subsector, concentrating on
major accomplishments, implementation capacity, lessons learned, key
issues and information gaps. It should then guide irrigation policy and
suggest the strategy for meeting proposed policy objectives, with realistic
planning horizons and mechanisms for periodic updating. The strategy
should be investment-oriented. It may identify investment projects or
programmes that can proceed directly to detailed planning and appraisal,
and in this case might be compared with identification in the conventional
planning process.
If the subsector review and strategy formulation is carried out with

external assistance, such as that provided by an Investment Centre mission,
it will usually be done over a period of 1-2 months by a small team
comprising a water resources/irrigation engineer, economist, agronomist
and sociologist, working with a national team of similar composition.
Budget permitting, it may also be desirable for an environmental specialist
to participate in order to identify major sectoral environmental issues that
may influence the strategy. It may be useful for the team leader, prior to the
main programme of work, to make a brief preliminary country visit to
discuss and agree with government the scope and purpose of the
review/strategy formulation process and the outcome expected by potential
financing institutions. Such a visit should also provide an opportunity to
establish the composition of an LPG, assess its capacity to undertake some
or all of the necessary tasks, and brief its members and prepare terms of
reference and notes for their guidance.
It is usually appropriate to initiate the review/strategy formulation

process by holding a round-table meeting with senior representatives of
the ministry or department(s) responsible for water resources and irrigation
development, preferably at permanent secretary or director level. It may
also be appropriate for a representative of the ministry of finance to attend
this meeting. Regular subsequent contact between the team and
government decision-makers should encourage an exchange of ideas and
contribute to the quality and validity of the final subsector review and
strategy report.
Main Topics for a Subsector Review

A checklist for the contents of an Irrigation Subsector Review and
Strategy Paper is given as Annex 1. The main items are discussed below.
Existing Irrigation Development, Structure and Performance

From a desk study of available documentation and limited field visits,
the following should be reviewed:
• the location, extent and nature of existing irrigation and drainage

systems, by administrative boundary and river basin;
• their development history, organisation and management, and the
respective roles played by the public and private sectors;
• past and present performance versus technical potential, in terms of
command area developed, area utilised, water use efficiency,
cropping intensities and patterns, and yields; if lower than expected,
the reasons for this;
• the contribution of irrigation to GDP and to agricultural output, and any
macro-economic distortions with specific impacts on the subsector;
• typical capital and operating costs;
• whether water supply arrangements and O&M have been satisfactory,
and if not, why;
• marketing arrangements and prices;
• the social impact of existing development, with particular regard to
wellbeing and associated gender issues for direct and indirect
beneficiaries and oustees, health, and employment opportunities
created or foregone;
• Environmental impacts, particularly erosion and sedimentation,
waterlogging, salinisation, pollution or depletion of surface or
groundwater supplies and loss of biodiversity;
• measures taken to mitigate negative impacts and their degree of success.
Land and Water Resources and Scope for Further Irrigation or

Drainage Development
Assuming that a strategy for water resources management has been
prepared in advance of the irrigation subsector review, this should have
taken account of competing water demands, plans for further exploitation
and the opportunity cost, and should have provided an indication of water
availability for irrigation1. This should be compared with estimates of
suitable arable land resources and, using generalised estimates of per
hectare gross annual water requirements for typical cropping patterns
applicable to the country or region, the scope for further irrigation should
be estimated. Area estimates should, so far as practically possible, be
qualified by taking account of physical or economic limitations to full
development. In line with recent thinking on water resources management,
estimates should also adopt a basin approach, rather than following
administrative boundaries.
1: If a water resources management strategy has not yet been prepared, it will be necessary for the subsector
review team to make its own assessment of potential and competing demands. The opportunity cost of water
should have been determined in the water resources strategy study; if not, in view of the complexity of the
issues involved, it is unlikely to be possible to determine this within the time frame of a subsector review, so
that this may need to be the subject of a separate supporting study.
Particular attention should be paid at this stage to any limitations that

might be imposed by international water rights issues, which should be
identified and flagged. The international financing institutions generally
require that the country proposing a project on an international waterway
should formally notify other riparian states of its intention to do so, in
order to give such states an opportunity of consenting or objecting to the
proposals1. In any event, the financing institution will generally require that
appropriate agreements are reached between riparian states on the use of
international water before any new project (as opposed to rehabilitation,
provided this does not involve increased abstraction) can be financed. It is
therefore as well to overcome such hurdles early on in the planning
process, to avoid subsequent delays in implementation or even
cancellation of the project.
Financial and Economic Viability of Irrigation

From the available data on irrigation costs and benefits, a rapid
financial analysis of crop production should be prepared for each of the
existing categories of irrigation and main crops under each system, to
demonstrate the typical returns to land, water and labour, compared with
rainfed crops. A similar analysis should be prepared in economic terms, ie
with all taxes and subsidies removed, including any in the cost of water,
using border prices and any necessary shadow pricing of currency.
The object of this work should be to indicate, for comparative purposes:
• the profitability to irrigators of the different types of on-farm investments,

or ability to cover the costs from crop production after deduction of all
variable costs, including that for water supply to the farm;
• an approximate cost-benefit analysis and indication of comparative
advantage for the main crops under different types of irrigation
systems, ownership or management; and
• approximate investment ceilings for future developments, to yield an
acceptable internal rate of return (IRR - likely to be a minimum of 12
percent), for typical cropping patterns.
1: An international waterway can be defined as any river, canal, lake or similar body of water that forms a
boundary between or flows through, two or more states, and can include any tributary of these. However, an
exception would be any tributary of an international waterway that runs exclusively in one state and the state
is the lowest downstream riparian. See Operational Policy OP 7.50 (October 1994) from the World Bank’s
Operational Manual for further details of the Bank’s definition and its policy on this matter.
If time and staff resources permit, the opportunity should be taken here to
assess the scarcity value of water to farmers, ie the price that they would be
prepared to pay for water in a competitive market. This may be considerably
more than they are actually paying at present, particularly if they are
irrigating high value crops, and may have a bearing on fixing the appropriate
water charge where improved water use efficiency is being sought1.
Domestic resource cost coefficient (DRC) analysis has been found to be a

useful tool for the above analyses. Data requirements are: average crop yields
under the various farming systems (irrigated, non-irrigated, public smallholder
scheme, large privately-owned commercial farm, surface irrigation, sprinkler
irrigation, and so on); financial and economic crop prices; average input
requirements and production costs for each of the crop/farming system
options; average irrigation costs, including capital and O&M costs of storage
and conveyance works, distribution and in-field works, for each of the
categories involved. It is however unnecessary or even undesirable to spend
much time and effort in collecting and preparing new data during strategy
formulation. Ideally the review team should work with existing data which
should be already available from the planning branch of the irrigation agency;
alternatively the agency should be requested to assemble the data in advance
of the review/strategy formulation work. Approximations can be made, as the
purpose is to provide a quick comparison between crop and farming system
options, rather than to prepare a final economic cost-benefit analysis. A
simple spreadsheet can be used to model various crops, irrigation and
production systems (eg borehole/sprinkler, versus dam sprinkler, versus
dam/surface, versus dryland; private versus public) and crops can be ranked
by DRC. By the additional input of data on average gross irrigation water
requirements, crops and irrigation systems can also be ranked by net margin
per unit of water consumed, to compare the water use efficiency of different
crop and irrigation options2.
Such an analysis can help to identify any crops for which there may be
comparative advantage under the various options for irrigation
development, although possible market constraints should be clearly
flagged, particularly when considering high-value crops.
1: See Ronald G Cummings and Vahram Nercissiantz, The Use of Water Pricing to Enhance Water Use
Efficiency in Irrigation: Case Studies from Mexico and the United States, in World Bank Technical Paper No
249, Water Policy and Water Markets. Eds. Le Moigne et al., World Bank, Washington DC, (1994).
2: A good example is given in Jansen D J, Economics of Irrigation: A Modular Methodology for Comparing
the Benefits with the Costs. Background Paper prepared for the Planning and Research Unit, Ministry of Lands
Agriculture and Water Development, Government of Zimbabwe, as an input to the National Irrigation Policy
(1993). Also Working Paper: Estimating the Economic Efficiency of Irrigation: The Case of Brazil.
FAO/World Bank Cooperative Programme, Rome (1989).
Government Policies, Priorities and Plans

The review should continue with an analysis of government’s policies,
priorities and plans. This should establish what government sees as the
main national benefits of irrigation, whether this be food self-sufficiency,
export earnings, employment creation, income distribution, poverty
alleviation or some other. Also whether there are political obligations, for
instance to particular regions or interest groups, to which the government
is under pressure to respond by means of irrigation development. The
connection with, and importance of, growth in food demand, availability
of markets, macro-economic policy and prices to the government’s
subsectoral objectives should be assessed.
Subsectoral Issues and Constraints

Identification of the key subsectoral issues and constraints may best be
undertaken through a round of discussions with the key individuals
directly or indirectly involved in subsectoral development. These may
include representatives of government departments - including those
responsible for social development, environmental protection and local
government - as well as farmers’ organisations, NGOs and other private
sector groups. The role of irrigation as seen by farmers should be
examined, to expose any mis-matches between what they want from it and
how the government sees it. For example, do small farmers really want or
need irrigation for food self-sufficiency, or could irrigation conflict with
other activities, such as dryland farming?1. Would government’s objectives
for, say, export earnings and employment creation be better met by private
sector irrigation development, which could be in the form of privately-
financed development by either small or large-scale commercial farmers?
The issues that will arise could include those described below, but the
importance of each will differ from country to country. The planning team
should take care to focus on those that are relevant and not waste effort on
those that are not.
Economic and Fiscal Policy Issues, such as:
• the compatibility of government’s present commitments and future

plans for irrigation with its present macroeconomic circumstances;
• the sustainability of development in the present or likely future
fiscal setting;
• the opportunity cost and scarcity value of water, the ability of farmers
to pay, and water pricing (see Box II-1);
• water charges and cost recovery issues, including:
• government policy regarding cost recovery; its approach (eg direct
water charges, betterment levies, land taxes, agricultural product
taxes and price controls) and how effectively this is implemented;
1: This is a common constraint in many parts of Sub-Saharan Africa for example, where family labour shortages
oblige farmers to consider agricultural activities in terms of the returns to labour rather than unit of land.
Returns to labour in dryland farming can often be greater than for irrigation, and in these circumstances when
family labour is short farmers may neglect irrigated plots in favour of dryland crops.
• the willingness of farmers to pay (which is usually conditioned by

farmers’ perceptions of service standards);
• whether fees should be project specific or uniform across projects;
• whether rates should differ among users within a single
irrigation project;
• how to maintain the real value of irrigation fees in the face of inflation;
• the extent to which existing economic policies discourage
sustainable private or public sector irrigation development, and the
willingness or ability of government to adopt new policies and
introduce new legislation.
Marketing Issues, such as:
• the domestic and export demand and market prospects for irrigated
crops and the extent to which limited demand, especially for high
value crops, could set a ceiling on the area of new irrigation which
might feasibly be developed; and
• the extent to which the country or region enjoys a comparative
advantage in the production of specific irrigated commodities.
Legal and Institutional Issues, such as:
• insecurity of land tenure and the constraint that this may place on
private sector investment, by both large and small-scale farmers;
• constraints to irrigation development posed by land fragmentation,
and obstacles to land consolidation;
• legal and administrative problems of land re-distribution and
restitution to previous owners, for example in Central and Eastern
European countries and in others where individual tenure was not
previously allowed;
• similar problems related to consolidation of fragmented land1;
• provision for legal establishment of users’ groups, and implications for
subsequent operation and maintenance; and
• security of water rights, tradeability, equitable compensation for rights
rescinded, and impact on private sector investment;
• equity considerations, especially if farmers do not pay for land on
public irrigation schemes;
• the effect of all the above on users’ commitment to the proposed
development and O&M;
• regulations and controls on environmental impacts, and the existing
institutional capacity and legal framework for enforcement;
• dam safety regulations and means of enforcement;
1: For detailed treatment of this topic see forthcoming FAO Irrigation and Drainage Paper Land Consolidation
in Irrigation and Drainage Projects.
Box II-1 - Fixing Appropriate Water Charges
Whether it is practical to apply nationally uniform water charges depends on the

financial and organisational structure that exists for the delivery of irrigation services.
In a situation of separate, decentralised financially autonomous irrigation
associations, a single national fee structure would be incompatible with autonomy
and with the different standards of service likely to be provided. However, an issue
of equity arises if inflation results in "investors" in newer schemes having to pay more
than those in older schemes. Linking their loan repayments to a measure of inflation,
using some mechanism such as indexation, is one possibility to avoid this situation.
A further issue of equity arises where there is the possibility for users who have the
capacity to pay more to cross-subsidise those who are less well endowed. For
example, in Zimbabwe it has been suggested that large-scale commercial farmers
should pay more for their water than small-scale farmers in the communal lands, and
under the existing socio-political situation there would appear to be some merit in
this suggestion. However, caution is necessary to avoid creating distortions that
remove incentives to efficient water use on the one hand, while placing barriers to
increased production on the other.
Where a single, centralised financially autonomous irrigation agency exists, fees can
be either project-specific or uniform. If there is no inherent reason for project-
specific fees, the administrative simplicity of uniform fees is an attractive option; the
question of charging different rates among different water users does not arise. There
may however be a logical basis for charging different fees to different users between
or within projects if the costs of providing water to them are different. It can be
argued that each set of water users should pay the cost of providing water to them,
and not some average, possibly subsidised, cost; higher fees should be charged to
those for whom the cost of providing water is greater. In practice, however, the
administrative burden of collecting differential fees is usually too great to warrant
such an approach.
The question of the “right” charge for irrigation water therefore needs to be put in
perspective in formulating strategy: in reality, true water pricing is seldom practised.
In situations where pricing is possible, the establishment of the price system itself -
giving water a positive marginal cost to the users - may be more important than the
precise level at which the price is set. Nevertheless, if financial autonomy is a real
possibility, then it will be essential to design a pricing system which generates
sufficient revenues to cover the irrigation agency’s recurrent O&M costs.
Based on Leslie Small and Ian Carruthers, Farmer-Financed Irrigation: The

Economics of Reform. Cambridge University Press, Cambridge (1991)
• the existing institutional framework and its capacity for irrigation

development, operation and maintenance; the degree of participation
of users’ groups; the role of the private sector (eg NGOs, consultants,
consulting companies and contractors), and implications for future
development; the need for institutional capacity building;
• the adequacy of coordination between the various organisations
involved in irrigation development, and the need for rationalization or
new organisation;
• the need, or scope, to adjust the government’s overall role or
institutions for irrigation; whether this could result in greater
participation of users in the planning, construction and O&M of works;
• the extent to which the private sector, including NGOs and local
consulting and contracting companies, can assist irrigation
development, and the capacity of government to oversee this;
• the availability of trained manpower for irrigation planning and
implementation and the extent to which this could constitute an
overriding constraint to irrigation development; the need for human
resource development and training;
• the success or otherwise of existing management and O&M of public
schemes; whether scheme management reorganisations, such as
devolving financial autonomy to the existing management
organisation, decentralisation, transfer to water users associations,
joint management etc., would improve O&M, viability and
sustainability;
• constraints to the takeover of greater responsibility for development
and O&M by users’ groups;
• issues related to resource allocation, cost recovery, community or
social organisation, and corruption;
• the extent to which government is able or committed to make any
necessary legal or institutional changes.
Social and Environmental Issues, such as:
• the role of democratically elected WUAs and apex organisations in

conflict resolution;
• the adequacy of compensation for oustees, including nomadic
graziers formerly dependent on land identified for irrigation
development, and whether such groups have been net losers as a
result of past developments;
• whether women are or will be disadvantaged by the introduction of
irrigation; if so whether mitigation is possible, and how;
• whether targeting the beneficiaries or clients should be a matter of
policy, and if so how1;
1: Settlement schemes for example can influence who benefits by setting criteria for settler selection.
• equity and plot size on public smallholder schemes: smaller plot

size obviously means that more households can benefit and there is
more chance of including the poor, but this may be at the cost of
technical efficiency;
• the integration of irrigation with other farming activities;
• government’s attitude towards farmers’ participation in construction,
employment generation, food-for-work or self-help labour;
• positive and negative impacts on human health, such as improved
nutrition or increased incidence of water-borne disease;
• environmental impact of past development, particularly erosion and
sedimentation, waterlogging and induced salinisation, groundwater
depletion, pollution from saline return flows and agrochemicals, other
effects on vulnerable ecosystems and biodiversity, and the success or
otherwise of mitigation measures taken;
• the compatibility of existing policies with social and environmental
goals for future development.
Strategy Formulation
Defining Strategic Options and Measures
On the basis of the review of the topics discussed above it should first
be decided whether there are more cost effective alternatives than
irrigation for meeting government’s objectives, such as intensified rainfed
production. If not, the most appropriate type and scale of support for
irrigation and drainage development should be identified, and the options,
physical and other, for achieving this in a sustainable way considered.
These may consist of improving the performance of existing irrigation
development; new development, where this can be achieved
economically. The key elements are: average crop yields under the various
farming systems (irrigated, non-irrigated, public smallholder scheme, large
privately-owned commercial farm, surface irrigation, sprinkler irrigation,
and so on); financial and economic crop prices; average input
requirements and production costs for each of the crop/farming system
options; average irrigation costs, including capital and O&M costs of
storage and conveyance works, distribution and in-field works, for each of
the categories involved. It is however unnecessary or even undesirable to
spend much time and effort in collecting and preparing new data during
strategy formulation. Ideally the review team should work with existing
data which should be already available from the planning branch of the
irrigation agency; alternatively the agency should be requested to assemble
the data in advance of the review/strategy formulation work.
Approximations can be made, as the purpose is to provide a quick
comparison between crop and farming system optio encouraged by
financial disincentives to wasteful use, such as charging for water at or
near its scarcity value. In some countries significant gains can be made by
simple improvements to water control on traditional irrigation systems,

provided these do not disrupt traditional organisation and management
structures or inadvertently transfer responsibility from the farmers to a
public irrigation agency.
Other improvements could include institutional or fiscal measures, such

as improved organisation and management, increased budgetary allowances
for O&M, or transfer of responsibility for O&M to users’ groups or financially
autonomous bodies that are dependent on the users for finance1. Policy and
legal measures could include crop price deregulation and enforceable water
charges - provided the quality of O&M service is adequate.
Cost recovery will be a major strategic concern, in view of the fiscal

constraints faced by most governments. The options for cost recovery range
between the extremes of none at all, which is unlikely to be acceptable
either to governments or financing institutions under the present fiscal
constraints, to full recovery of capital and recurrent costs, which is likely to
be possible only in certain private sector developments. The general
consensus is that water charges should, as a minimum, aim to recover all
the O&M plus at least a part of the capital costs. The perennial problem of
how to charge and collect fees will remain, but if water users’ associations
assume greater responsibility for O&M, or irrigation agencies become
financially autonomous and dependent on the users for finance, the levels
of collection and reliability of deliveries are likely to improve.
Where improving the performance of existing loss-making public

schemes is not economically viable, consideration should be given to
whether such schemes should be recognised as components of a social
programme, to be financed from government’s welfare budget, rather than
being treated as free-standing investment projects.
The options for new irrigation development could include different

categories of irrigation, types of farmers and crops. For example:
• Expansion through new public large-scale irrigation, based on

development of surface or groundwater, for the settlement of small
farmers and production of basic foods/fibres. As noted earlier, this
may however be difficult to justify economically in many cases.
• In potentially irrigable areas that have surplus water resources but no
infrastructure, limiting government’s role to the provision of basic
infrastructure (eg dams, main canals, roads, electricity distribution)
1: In many cases, investment in system rehabilitation may be a precondition for transfer.

and services, and encouraging demand-driven development of

distribution and in-field systems by the farmers1. This might be
achieved by creating an enabling environment (eg by the provision of
medium term credit) which encourages large or small-scale farmers to
develop irrigation at low incremental cost.
• Encouraging private sector development only.
• New drainage only, to expand or restore productivity on a previously
irrigated or rainfed area.
Whatever form of new development is decided upon, it will be

important to encourage greater ownership and commitment by users
through their participation in planning - for example, choosing the type
and location of distribution works - and in construction - for instance by
providing labour and naturally occurring or locally available materials at
their own cost2.
Given the seriousness with which governments and financial

institutions regard potential social and environmental problems, special
attention should be given to strategic options for reducing the risk of
future adverse impacts and mitigating possible effects. A pre-emptive,
pre-planned approach to adverse impacts arising from environmentally
risky projects is likely to be more effective than attempting to mitigate
problems in a piecemeal fashion as they are identified or occur. It is best
to approach the problems at the subsector level through appropriate
policy measures, including:
• strengthening existing legislation/regulation for environmental

protection as appropriate for future irrigation development;
• establishing or strengthening the agencies responsible for enforcing
environmental legislation, including training and the preparation of
guidelines for categorising projects, for environmental assessment,
clearance, and monitoring;
• preparing or strengthening legislation/regulation on involuntary
resettlement and compensation, and preparing guidelines for land
acquisition assessments;
• recommendations for engineering designs to address common
diseases, such as improved drainage to combat malaria and
schistosomiasis;
1: This does not mean merely soliciting requests for more government investments from farmers.
2: Farmers are unlikely to contribute to capital costs without security of land tenure and water rights.
Commitment can be enhanced by allowing farmers to pay for irrigated land, either on a freehold or leasehold
basis. Thus land tenure policy changes, legislation, and provision for cadastral mapping may be required. An
alternative to the provision of free labour might be to employ prospective users as labour on a wage basis at
the market rate, but to make an agreed deduction from wages to cover the required contribution to
construction costs.
• similar recommendations on other measures to improve public health

on irrigation schemes, such as improved water supply and sanitation
(for example, protected wells and improved ventilated pit latrines).
Identifying Priority Actions and Projects

The strategy formulation process may result in identification and
approximate costing of investments covering a time-slice of government’s
irrigation or institutional development programme, that can proceed
directly to detailed planning and appraisal. Alternatively or in addition,
attention may be drawn to project-specific opportunities.
In addition to recommendations for the elaboration of specific irrigation

or drainage projects or programmes, the strategy may recommend a range
of other immediate actions or studies; these actions might include:
• Crisis management within the sector: for example in some Central

and Eastern European Countries, where short-term bridging
arrangements are needed for rehabilitation and upgrading of public
systems during the transition from centrally planned to market-based
economies, and from collective to individual land ownership.
• Pilot basin-management exercises and studies, to develop and test
methodologies, including participatory planning, for long term
watershed/basin management.
• On-scheme trials to develop and test low-cost technologies - for
example on improvements to traditional irrigation schemes.
• Further assessment of market potential for high valued irrigated
agricultural products and of the prospects for meeting this potential at
acceptable cost.
• Further assessment of the needs, number of, and selection criteria for
sites for scheme modernization or completion; procedures for the
involvement of users’ groups in operation and maintenance, and the
costs involved.
• Cadastral surveys.
• Field surveys to identify the development works and complementary
public investments required to promote new private sector led irrigation.
• Additional legal studies, especially on water rights, land tenure and
land reform.
• Price liberalisation and other policy changes.
Terms of reference, activity schedules, budgets and, where necessary,

detailed guidance, should be prepared for the work to be carried out by
LPGs, supported if necessary by specialised consultants. Possible sources
of funds for pre-investment studies, such as trust funds or retroactive
financing by the potential lender, should be identified.
Building Commitment to the Strategy

The output from the work carried out so far may consist of a series of
brief working papers and an outline of a draft strategy. These should
preferably be presented and discussed at a workshop attended by all major
stakeholders, including potential financing institutions, donors and
possibly NGOs1. The result of this consultation, and of any participatory
events held during the strategy formulation process, should be a
convergence of views between the stakeholders on the most appropriate
strategy for the sound development of the subsector, to which all should be
consequently committed.
The Irrigation Subsector Review and Strategy Paper

The resulting draft irrigation subsector review and strategy paper should
reflect the degree of consensus so far achieved. There may nevertheless be
unresolved conflicts or issues, which should be flagged along with possible
solutions. The draft should usually be submitted to government and the
potential financing institution for discussion prior to issuing the final
version, which would take account of comments made upon the draft.
Annex 1 provides a checklist for the contents of a typical irrigation

subsector review and strategy paper.
CONCEPTUALISING AND COMPARING

THE INVESTMENT OPTIONS
Objectives
The main objective of this part of the planning process, which may be
compared with identification in the conventional sequence, is the
conceptualisation and preliminary examination of one or more investment
options that conform with subsector priorities. Alternatively, if options have
already been suggested as part of a subsector review and strategy
formulation, they should be explored further. In either case, the intention is
to assist the government in selecting its preferred option, to plan next
steps, and to promote rapid progression to the final stage of the planning
process. Experience has shown that this is the most crucial and sensitive
stage of planning because it leads to the critical decisions on project
1: For methodologies see De Alwis K and Sonn L, Workshops as a Means of Promoting Ownership in Policy
Formulation and Project Preparation. Draft. FAO Investment Centre, Rome (1994).
choice, concept and content on which all subsequent planning work is

based, and which are very difficult to alter later1.
As before, wherever practicable procedures should be followed from

the outset that contribute to ownership of and commitment to the ultimate
project, and to building local capacity for implementation and
sustainability of developments.
General Approach to the Work and Staffing Required

The aim should be to arrive in the shortest possible time at conclusions
that will guide planning, carrying out the minimum amount of work
necessary to underpin the recommendations but yet to ensure that they are
soundly based. Analysis will be geared to arriving at selection of the best
choice from a range of options, balancing technical, economic,
institutional, social and environmental considerations. The extent of
surveys, engineering and other technical investigations that may be needed
at this stage will vary widely according to the type of investment that is
being considered: for some project-specific investments, pre-feasibility
investigations may need to be performed, in others experienced
engineering judgement may be all that is required. Appendix 1 gives an
indication of typical requirements for a conventional investment in a new
irrigation development.
The work may be carried out entirely by the borrower or its LPGs,
including local consultants or local consulting companies. Alternatively
there may be a need for external support from the Investment Centre or
international consultants; involvement will depend on the complexity of
the investment options and the capacity of the borrower and LPGs to
undertake the work within the required timeframe. Where the work is to
be carried out with external support, in most cases it will be advantageous
for the leader of the support team to make a brief preliminary visit to the
country concerned in advance of the main work, to:
• explain the objective of this part of the planning process, what may
be expected from government, and the need for building consensus
among all stakeholders;
• make a preliminary assessment of the available database for the
project, identify any gaps in knowledge and possible sources of ready
additional information, and make arrangements for obtaining it;
• plan the work, including arrangements for field visits;
1: Investment Centre Technical Paper No 6, The Design of Agricultural Investment Projects: Lessons from
Experience. FAO Rome (1989).
• discuss the appointment of a high-level Steering Committee or senior

technocrat to oversee the planning process and provide policy
guidance on how to address the key issues.
Experience suggests that teams assigned to support the process of

investment conceptualisation and comparison are best kept small and will
probably consist of a water resources/irrigation engineer, agronomist and
economist. However, given the seriousness with which institutional, social
and environmental concerns are regarded by governments and financial
institutions, team members will need to have sufficient breadth of experience
to consider these aspects and to identify potential hazards and constraints.
It is usually appropriate to initiate the process of conceptualising and

comparing the options by holding a round-table meeting with senior
representatives of the ministry or department(s) responsible for water
resources and irrigation development, preferably at permanent secretary or
director level. The participation of the potential financing agency’s project
controller or task manager, especially towards the end of team’s in-country
work, is usually a great advantage since it encourages stakeholder
commitment and should avoid any “false starts”.
Although the process should involve close contact and continuous

exchanges of ideas between the stakeholders and local team members, it is
often desirable to conclude the process by holding a wider workshop to
achieve, or at least advance towards, consensus on the preferred option(s).
It is essential that in advance of this workshop the participants are
provided with a brief which summarises the options, confirms that they are
in line with subsectoral strategy, and gives reasoned arguments for the
selection of the preferred option. If it is impractical for the team to prepare
this before completion of its in-country work, then the workshop may have
to be held later, once the team’s draft report has been submitted to
government and the financing institution.
Activities
Review of Available Database
The level of information required for the purpose of conceptualisation
and comparison of options will vary widely according to the scale and
nature of the development. Appendix 1 (at the end of Part II of the
Guidelines) gives an indication of typical requirements. However, sound
professional judgement is required to decide on the needs and to avoid
unnecessary detail.
For new development, this may include some (but is unlikely to include all,
unless in exceptional circumstances) of the following:
• any pre-feasibility reports already prepared by local or international

consulting firms, including outline or preliminary designs, preliminary
cost estimates and/or basic cost estimating data for each of the options;
• local and site specific climate data;
• relevant time-series surface water resources data;
• groundwater and well inventories and monitoring data;
• aerial photography and topographic mapping at an appropriate scale
for reconnaissance purposes (see Appendix 1 for suitable scales);
• soils and irrigation suitability mapping (preferably according to
internationally recognised legends and classification systems such as
that adopted by the US Bureau of Reclamation1);
• details of existing land use, farm size, land tenure and water rights;
• demographic data;
• local agricultural and livestock production systems data, including
crop yields (for rainfed and irrigated crops) and technologies used;
• assessments of market and price prospects for the main commodities
to be produced.
In the case of an existing project for rehabilitation and upgrading,

copies of the original designs and layouts for the existing infrastructure
would be required in addition to the above, together with details of:
• the construction history of the scheme, present O&M

arrangements, current state of the infrastructure and an indication
of rehabilitation needs;
• the environmental performance of the scheme, with regard to
sedimentation, waterlogging, salinisation, pollution and human health;
• the social history of the scheme, with regard to resettlement,
treatment of oustees and conflict resolution;
• existing cropping patterns, yields and trends;
• existing allocation of land within the scheme;
• water allocation to, and use within, the scheme, with an assessment
of efficiency;
• farm income and off-farm employment data;
• production support services and their performance;
• organisation and management structure; and
• cost recovery and O&M history.
In most cases there will be large gaps in the above, and only a part of
this information is likely to be available; it may require specific studies and
surveys to obtain it. Cases may occasionally occur in which the lack of
data makes it impossible to achieve the objective of guiding a decision on
1: See Soils Bulletin 42, Soil Survey Investigations for Irrigation. FAO, Rome (1979).
the options. In this case, arrangements should be made to fill the gaps, and
for specialist(s) to return later to assess the new information and form an
opinion on how the new information affects choices open to the
government. What is important is that the process should be kept moving
forward, to avoid unnecessary delay in eventual implementation.
Reconnaissance Field Visits

If an external support team is assigned responsibility for conceptualising
and comparing the options it is likely to need at least a week to carry out
reconnaissance field visits to the project site(s) to gain first-hand
impressions of physical features, problems and issues as perceived by
farmers, the coverage and effectiveness of supporting services, and so on.
It is important to appreciate that the information gained at this stage will
be no more than impressions and its value will depend heavily on the
experience, intuition and common sense of the team members: it will have
to be backed up subsequently by firm data.
During the field visits the team should always involve government
representatives and members of any LPG. Provided the external team
meets in the evenings for an exchange of information and ideas,
operationally it is usually more practical for the various members to work
independently of the others during the day’s field work, to make the best
use of the time available. The engineer for example may be too busy with
investigations to spend time listening to the agronomist carrying out
interviews. However if there is a sociologist on the team it is usually
appropriate for him/her to work closely with the agronomist, to avoid
duplication not only of their own efforts but also those of the interviewees.
Topography, Soils and Land Capability Assessments

For rehabilitation projects the topography should be shown on the
layouts and designs for the main structures, but this may need to be
verified. If suitable topographic mapping is not available, it will need to be
prepared so that preliminary engineering designs can be drafted in
advance of final project planning and appraisal. All but the smallest
developments can usually be mapped satisfactorily from aerial
photography (see Appendix 1 for scales). Manual survey may also be
necessary for the sites of the main structures, for canal and drain
alignments, and possibly for a sample of the distribution and in-field
system. If this is not already available the team should prepare
specifications for the work to be carried out, either by government or by
private contractors.
Depending on the magnitude of the proposed development(s), there is

likely to be little that the team will be able to achieve in the way of
verification of previous soils and land capability assessments, other than to
judge whether or not the work carried out to date is adequate for the
purpose in terms of scale and detail. If it is not, the team should prepare
terms of reference for upgrading this information to the required standard.
The main focus of attention for new development is likely to be the

assessment of land suitability for the type of irrigation proposed, and any
potential drainage problems associated with this. Soil surveys often tend to
concentrate on pedological aspects and to ignore soil physics and the
factors that influence drainage; if the drainage aspect is not yet adequately
covered, it will need to be addressed by further studies. There may also be
a need for drainage studies on rehabilitation projects even where there is
no evidence yet of a problem, since upgrading could in some cases result
in more water being applied than in the past.
For any major structures there will be a need for geological and/or
geotechnical investigations for foundation design, seepage predictions,
slope stability analysis and availability of naturally occurring construction
materials. If not already available, these investigations will have to be
provided for and completed prior to final design.
Preliminary Estimates of Irrigation Water Requirements

for Possible Crops
For new irrigation developments, the team should assess the climate
database and local estimates of irrigation requirements for the range of
possible crops and planting dates being considered. If necessary, these can
be verified using the FAO computer programme CROPWAT1 in
conjunction with the climate database CLIMWAT2. However although
CROPWAT is quick and easy to use, and this work should take no more
than an hour or so (provided data are readily available or assumptions can
be made on local planting and harvesting dates), judgement should be
exercised to avoid duplication of effort; local estimates should be adopted
where these are considered to be of reasonable validity. The point to bear
in mind is that the requirement at this stage is a comparison of options
rather than absolute figures.
For the purpose of these preliminary estimates, system capacity and

overall peak project water requirements can probably be based on using the
80 percent probability of exceedance effective rainfall for the nearest
representative rainfall station to the project area, as derived from CLIMWAT.
1: Developed by the FAO Land and Water Development Division, and presented in FAO Irrigation and
Drainage Paper 46 (1992).
2: A climatic data base, in diskette form, of 3,261 stations in 144 countries in Asia, Africa, the Near East, South
Europe, Middle and South America, presented in FAO Irrigation and Drainage Paper 49. Most planning teams
will find this of practical use.
Conversion from net water requirements to gross should be on the basis of

empirical local data for efficiency of the types of irrigation systems under
consideration, or from FAO Irrigation and Drainage Paper 241. Data needs
for future refinement of the estimates should be identified, and will depend
on the anticipated method of estimation envisaged.
A similar approach should be adopted for rehabilitation projects, to

arrive at estimates of theoretical system demand/capacity for comparison
with reality, and to identify system constraints.
Preliminary Assessment of Available Water Resources

After confirming at a preliminary level the gross irrigation water
requirements per hectare, the volume of water reliably available on an
annual or seasonal basis should be determined from the available data, so
that the various technical options can be conceptualised and compared.
The availability of data on water resources will vary widely between
projects and countries, but in general larger projects tend to have been
under consideration for a longer period of time so that the degree of
sophistication of the hydrometeorlogical and hydrogeological network is
usually higher than for smaller projects. The required depth of analysis of
time-series data will also vary according to the scale of the project(s), and
the existence of other irrigation or competing interests within the basin,
within or across international borders.
If the scale of the proposed development or the complexity of the basin

hydrology warrants it, government or its LPGs (including consulting
companies) will probably have already analysed the data to establish the
availability of water for the project(s) at a given risk of failure in supply
(usually 20 percent). Otherwise, for small projects generalised estimates of
mean annual basin run-off may have to used, with empirical forecasting
methods. The irrigation engineer should judge whether the database is
adequate and whether the methodology adopted is soundly based and
applied, and appropriate for the particular circumstances of the project. If
not, the engineer should define the further work required to determine the
feasibility of the proposals.
Projects on international waterways require special consideration

because, as already mentioned, an international financing institution will
not finance a project that would prejudice other riparian states. Instead it
will normally require a prospective borrower to enter into international
agreements with the other riparian states for the efficient and equitable use
of the entire waterway system, prior to taking the further steps of project
planning and appraisal.
1: Irrigation and Drainage Paper 24: Crop Water Requirements, FAO Rome (as revised 1992).
Preliminary Assessment of Drainage Requirements

In view of the lessons learned, drainage considerations should form an
important part of the process of considering the investment options. For the
options being considered, preliminary estimates should be made of surface
run-off and drainage from known rainfall data. From similar - in terms of
rainfall, topography and soils - existing schemes to that proposed, and
from available data from existing wells and boreholes, an assessment
should also be made of subsoil drainage, water table depth and the
drainable surplus.
On the basis of these preliminary assessments, the drainage

requirements for each of the options should be compared.
Preliminary Assessment of “Without-Project”

Socio-Economic Situation
From limited field visits, the team should gain a preliminary impression
of the present, “without project”, situation, and particularly how farmers
who would be affected by, or perceive, the potential investment. Although
these reconnaissance visits may not be an effective substitute for a
subsequent socio-economic and production systems survey (SEPSS), by
widening the range of initial contacts to include not just local government
staff but also persons working with NGOs and religious organisations,
politicians, traditional leaders, traders, members of formal and informal
groups, as well as farmers and their wives, the value of such
reconnaissance is greatly enhanced. The visits, together with the review of
the available data, should enable the team to decide on the need for
further socio-economic studies and their scope and focus.
Initial Environmental Evaluation

This part of the planning process requires screening of the possible
environmental impacts of the investment options under consideration. The
approach to the screening process varies somewhat between governments
and financing institutions, but that of the World Bank is typical. The Bank’s
Operational Directive (OD) 4.01 requires that projects should be screened
for environmental issues and assigned to one of three categories: A, B or C
(see Box II-2).
The team should use field visits and review available databases to
screen the investment options, preferably using the ICID Environmental
Checklist, or an alternative checklist that may be preferred by government
or the financing institution1. Should it be obvious at this stage that any of
1: The ICID checklist, recommended in FAO/ODA Irrigation and Drainage Paper 53, Environmental Impact
Assessment of Irrigation and Drainage Projects, is intended for non-specialists and enables otherwise time-
consuming work to be carried out in advance of expert input. Its simple layout enables an overview of impacts
to be presented clearly, which is of particular value for scoping the subsequent EIA (if one is required) and it
can also be used as a management tool for monitoring purposes at different stages of the EIA, with varying
levels of detail. The ICID checklist is also available as a WINDOWS-based software package, which enables
rapid production of a report directly from the field study.
the project options would result in quantifiable negative impacts, or that

land acquisition and resettlement would be required, the likely impacts
should be clearly identified and approximate costs estimated for
consideration in the comparison of the options. If, as a result of the
screening process, an environmental impact assessment (EIA), social
impact assessment (SIA) or a Land Acquisition Assessment (LAA), are
required, these should be performed as components of the subsequent
feasibility investigations for the chosen option(s).
It is emphasised that the purpose of the initial environmental

assessment, like the preliminary evaluation of institutional capacity and the
preliminary cost-benefit analysis (see below) is not to rule project
proposals out of hand. These assessments are to assist planners to select
the better options and ultimately arrive at the best project proposals.
Preliminary Evaluation of Institutional Capacity

A preliminary evaluation should be made of the capacity of existing
institutions to undertake and sustain the specific development being
considered, and of any adaptations to investment options that would be
needed to match the scale of investment to institutional capacities for
implementation. Institutions to be assessed include government agencies
responsible for irrigation development and environmental protection,
private sector groups such as contractors and consulting companies,
NGOs, water users’ associations (WUAs) and their apex organisations, if
they exist.
The evaluation should establish:
• The goals and objectives of the government institutions responsible for

irrigation, whether they are still valid or whether there is a need for
redefinition - perhaps through new legislation - or reorientation, taking
account of the new requirements of the project or project options.
• The resources of the concerned institutions, in terms of staff, physical
facilities and budget, and whether there are areas of weakness,
imbalances and inconsistencies.
• The performance of the institution in being able to fulfil its objectives
in a timely and efficient manner, and whether there are any significant
operational problems: for example delays in decision-making, late
release of funds, problems over procurement of goods, and so on.
One indication of capacity is precedent, ie how successful institutions

have been in developing, operating and maintaining schemes in the past1.
At the government level an indication of motivation and commitment will
be the rate of staff turnover, which is most likely to be strongly related to
1: For previous internationally financed projects valuable information can be obtained from project or
implementation completion reports, supervision reports, etc.
their terms of service. Although structure, staff numbers and their

qualifications, facilities and equipment are important, it is equally
important for the team to gain an insight into management systems and
style, in order to detect any management constraints, such as reluctance to
delegate. The state of the institution’s infrastructure and facilities might
indicate the importance given to it by government: for example, are
buildings in good repair, or are vehicles available, and how many of them
are on the road or in the workshop? What is the balance between capital
and operating costs, and what proportion of expenditure is made up of
salaries and wages? Organisational charts can be useful in indicating the
degree of complexity of the organisational structures and might give a clue
to problems of management, especially span of control and the critical
responsibilities for decision-making.
At the scheme level, the farmers attitude to change, such as willingness

to contribute to capital costs and acceptance of the responsibility for (and
cost of) O&M, should be assessed. Again, precedent may be the most
useful indicator. The commitment and performance of existing WUAs, in
terms of their current involvement in O&M, levels of cost recovery and
whether they have achieved any success in improving the lot of tail-
enders, should therefore form the basis of an assessment of the
opportunities and constraints for establishing new WUAs for new or
rehabilitated schemes.
It is important to note that in the changing investment environment of

recent years, with emphasis being placed on participatory planning and
implementation and management transfer, the role of many irrigation
institutions is in a state of flux: from being executing and O&M agencies
they are now often expected to adopt a coordinating and facilitating role.
The assessment of ability or willingness to undergo this transformation will
require subtle analytical skills. Matching project objectives with
institutional capacity is a crucial element in conceptualisation, and if there
are doubts regarding the capacity of the key institutions to adapt to change
and fulfil their new responsibilities, expert advice should be sought from
an institutional specialist or management consultants, who could be
engaged during the subsequent final planning stage.
Comparisons of the Likely Costs and Benefits

The main aim at this stage is to compare the likely financial and
economic performance of the available options, to confirm that these are
likely to be attractive to, and adoptable by, farmers, and to support the
selection of the preferred options.
Box II-2 - Categorisation of Irrigation Projects According to the

Need for Environmental Assessment
The World Bank’s approach, as set out in its Operational Directive 4.01, is to
categorise and act upon projects, or project components, under three headings:
Category A Projects/Components. These are likely to have significant adverse

impacts that may be sensitive, irreversible, and diverse. The impacts are likely to be
comprehensive, broad, sectorwide, or precedent-setting. Impacts generally result
from a major component of the project and affect the area as a whole or an entire
sector. A full environmental impact assessment (EIA) is required.
Category B Projects/Components. There may be adverse environmental impacts but

these are less significant than category A impacts. Few if any impacts are irreversible.
They are not as sensitive, numerous, major, or diverse as category A impacts;
remedial measures can be more easily planned. Preparation of a mitigation plan
suffices for many category B projects. Few category B projects would have a separate
environmental report; most may be discussed in a separate chapter of the project
document or feasibility study.
Category C Projects/Components. Professional judgement finds the project to have

negligible, insignificant, or minimal negative environmental impacts. An EA or
environmental analysis is normally not required.
Estimates of Project Benefits

Assessments should be made of the key parameters of yield
expectations, cropping intensities, and prices for inputs and outputs, on
the basis of which outline budgets for key crops and perhaps simple farm
models should be prepared. Initial estimates should be made of the
incremental benefits, in terms of those accruing to the farmer and the
overall project, in financial and economic terms, for comparative
purposes. Assumptions that a high proportion of the land will be planted to
high value (ie mainly horticultural) crops should be regarded with caution
and even some scepticism, because of the likely need for specialised
farming skills and potentially restricted market size or difficult access.
Preliminary Cost Estimates

Previous estimates of capital cost should be reviewed to the extent
possible with the level of detail available. The level of engineering design
detail upon which these estimates will be based will vary, but in most cases
estimates will be based on outline designs only, and it will be necessary to
make an allowance for physical contingencies of at least 15-20 percent to
allow for unforeseen costs that may be added as more detailed engineering
designs are prepared.
Annual operating costs should be estimated on the basis of energy costs

for water delivery, salaries and other benefits for an assumed operating staff
complement, their vehicle operation costs and office running expenses.
Annual maintenance costs should usually be based on a fixed percentage
of the capital cost (see Annex 2 for examples).
Preliminary Cost-Benefit Analysis

A simple cost-benefit analysis, in financial and economic terms1, can
then be carried out on each of the options. This can take either or both of
the following forms:
• net present value (NPV); or

• internal rate of return (IRR).
If the practitioner is more comfortable with this, the analysis could be

performed using COSTBEN, the PC-COMPASS module for cost benefit
analysis2. It should be emphasised however that a high degree of accuracy
in cost-benefit analysis at this stage is unnecessary, as all that is intended is
a rapid comparative analysis of the options, so that government can better
decide on a preferred course of action.
Initial Project Brief

On completion of these studies the team, in liaison with any LPG, may
prepare an initial project brief (IPB - see Annex 3), or sometimes a formal
identification report. This will be presented in draft form to government
and the financing institution and will be the basis for discussion at a
consensus-seeking workshop (see below).
The IPB should contain the team’s conclusions and recommendations

with regard to the preferred option(s), supported by reasoned arguments
and highlighting any outstanding issues. Because the intention is that the
planning process should be streamlined, the main text should be very
concise and should as far as possible refer to, rather than quote, previous
work, such as the subsector review and strategy formulation report. It
should however contain, in appendices, draft terms of reference and cost
estimates for the various detailed studies and other activities that need to
be carried out to complete the planning process3. It should also suggest the
proposed allocation of responsibility between government, contractors
(including contracted NGOs) and any external technical assistants, and
1: i.e, using border prices for inputs and outputs, deducting any subsidies or taxes, and shadow pricing local
currency and - if appropriate - labour.
2: This software is available from FAO to staff and consultants of FAO and the World Bank, FAO member
government institutions, other multilateral financing institutions and universities at no cost.
3: See Annex 3 for suggested contents and coverage of typical terms of reference.
provide a tentative programme, in the form of a bar chart, for achieving

these tasks1.
It will usually be unnecessary to prepare technical annexes for the IPB,

since technical work so far will have been limited and will be superseded
by more detailed investigations. However any relevant working papers can
be separately bound and presented to government and the financing
institution if necessary.
Achieving Consensus on Investment Concepts and Options

It is often desirable to conclude the conceptualisation process by
holding a workshop, which should be attended by as many as possible of
the stakeholders or their representatives, including those of the financing
institution, LPGs, and, if possible, the farmers. In some cases it may also
be worth inviting interested NGOs and/or representatives of private sector
interests. Although it might seem preferable to hold this towards the end of
the team’s in-country work, this is usually impractical for operational
reasons and because in many cases the team will not yet have completely
formulated its ideas. Thus the workshop is more often held sometime after
completion of the in-country work, and the draft initial project brief or
identification report can be used as the basis of discussion. Depending on
the available budget, various members of the conceptualisation study team
may attend, or they may be represented by the team leader only.
The workshop should usually commence with a verbal presentation by

the team to all participants, preferably supported by visual aids. The
workshop may then be broken down into smaller discussion groups. The
objective should be to:
• seek opinions from the stakeholders, to arrive at or advance towards a

consensus on the preferred project option(s);
• discuss the work involved in further planning, the responsibilities for
undertaking this, and to agree a timeframe for the work.
On completion of the workshop, an account of the proceedings should

be prepared, probably in the form of a brief aide mémoire (for guidance
on content see Annex 3) agreed with the senior representative of
government attending the workshop. This should highlight any remaining
issues that need to be resolved, and actions required, before proceeding
with further planning. The draft IPB or identification report may then if
necessary be finalised taking account of the deliberations of the workshop,
1: The use of WINDOWS-based proprietary software, such as Microsoft Project greatly facilitates this and
subsequent progress monitoring, although the use of squared paper and pencil may be more appropriate in
some circumstances.
although this may not be strictly necessary if an aide mémoire has been
produced: the object should be to move to the next stage of planning as
quickly as possible, rather than redrafting earlier work.
PLANNING THE PREFERRED OPTION
Objective and Approach

Once a recommended project option has been selected and agreed
between the government and financing institution, detailed planning
should be put in hand. The purpose of this part of the process is to make
the proposed project ready for appraisal by the financing institution. The
outcome should be a project dossier or document that is in many respects
a feasibility report: ideally it should define the project in all respects, so
that the task of appraisal is one of merely passing judgement on it, without
the need for any repetition of earlier work. The project dossier should
therefore demonstrate that the project is:
• in conformity with the country’s subsectoral objectives and priorities;

• consistent with the felt needs of the intended users;
• technically sound and the best of the available alternatives under
existing technical and economic constraints;
• institutionally workable;
• unlikely to result in any adverse social impacts without adequate
compensation;
• technically, environmentally and fiscally sustainable;
• economically and financially viable; and
• ready for implementation.
As discussed in Part I, the “project” may comprise a conventional

investment in a specific major item of new irrigation infrastructure.
Increasingly however it is likely to comprise investment in a subsectoral
programme (see Box II-3). This has a significant influence on the extent to
which planning must be completed prior to appraisal. In the conventional
project approach it is usually necessary to complete all planning and
much of the engineering design before appraisal; in the programme
approach subprojects are selected and planned in detail after appraisal
and loan approval, on the basis of criteria agreed at appraisal.
The conventional project approach is usually adopted for investments in

major infrastructure development. In this case the level of accuracy
desirable in cost estimates at appraisal is important, to avoid cost overruns
in project execution which may arise as a result of insufficiently detailed
designs or inadequate site exploration. The conventional approach is rarely
compatible with demand-led development, and not often compatible with
Box II-3 - Mexico: Sectoral Investment in Irrigation
The World Bank-financed Irrigation and Drainage Sector Project in Mexico, prepared
with Investment Centre assistance, is intended to help Government to:
• sustain the irrigation and drainage sector through investments selected on the basis
of rigorous economic and technical criteria, procured competitively and
implemented efficiently;
• decentralise irrigation funding and management through institutional reforms that
would gradually move funding of irrigation and drainage investments from a
centrally managed system of government grants towards a system based on
regional and local public utilities which would help to recover costs through
user charges and collection instruments, and thus help sustain the investments by
the beneficiaries;
• fully utilise existing irrigation schemes by finishing uncompleted works, upgrading
deteriorated infrastructure, and rehabilitating irrigated land affected by
waterlogging, salinity problems and lack of maintenance;
• improve water use efficiency by introducing better water management techniques,
the conjunctive use of surface and ground water, volumetric measurement of
water, providing more adaptive research results, and training of technicians and
farmers in better operation and maintenance of irrigation infrastructure;
• strengthen the institutional capacity of the National Water Commission (CNA) and
user organisations to implement policy programmes, investments and maintenance;
• monitor and help prevent environmental and natural resource degradation; and
• optimise the use of land and water resources in the Irrigation Districts and Units.
The project was designed to be the Government’s investment programme for

irrigation and drainage covering FY 1991 through 1994, totalling about US$ 1.2
billion. It provided for rehabilitation, modernisation and transfer to users of 21
Irrigation Districts representing about 60 percent of total irrigated districts, deferred
maintenance of the remaining Districts, repair and acquisition of maintenance
equipment, completion of 23 on-going investments and construction of 3 new
investments. In support of these investments the project also included environmental
studies and actions, institutional development assistance for CNA and User
Organisations, and other studies and designs.
Source: Staff Appraisal Report: Mexico - Irrigation and Drainage Sector Project.
Agriculture Operations Division, World Bank, (1991).
institutional capacity building, because, as mentioned earlier, planning and

design are carried out against tight deadlines. Nevertheless, there are and
will be many cases when there is no alternative to this approach.
The programme approach is often preferable to the conventional project

approach, for the following reasons:
• it can allow for development to be demand-driven, is therefore more

amenable to participatory design and construction, hence greater
ownership by the users and improved prospects for successful
implementation and sustainability;
• it can allow the implementing agency to proceed with the design
work at its own pace, which may be limited initially by institutional
capacity, but can be gradually accelerated as capacity is built through
learning by doing;
• it can also present the great advantage of minimising the delay
between completing design (thus raising farmers’ expectations) and
starting construction.
The programme approach can be adopted for a wide range of irrigation

and drainage investment types, but is generally more suited to small-scale
irrigation or to discrete command areas within larger scale schemes. It can
be applied to both new development and rehabilitation. In a programme
approach it is usually inappropriate to carry out feasibility studies and
detailed designs for specific schemes prior to appraisal of the overall
project proposal, since this implies pre-selection by planners rather than
farmers, in contradiction of the intention of demand-led development. For
this type of approach, provided studies, designs and costing of a sample of
typical schemes have shown them to be viable, an assumption can be
made on the viability of other similar schemes. Discrete developments can
then be treated as subprojects within an overall investment programme,
and investigation and designs for these schemes can be done on a rolling
basis during loan implementation. To bring such programmes to a state of
readiness for appraisal the following are necessary:
• Firm evidence that there is scope, demand and institutional capacity

for investment in subprojects.
• A detailed implementation plan.
• A set of criteria against which subprojects can be screened during
programme implementation. These might include for example a
maximum cost per hectare, minimum economic rate of return (ERR),
agreed levels for farmers’ contributions to capital costs and
acceptance of O&M costs, absence of adverse social and
environmental impacts, and so on (see Box II-4).
Box II-4 - Suggested Procedure for Screening and Appraisal of Small Dams
for The Highlands Horticultural Development Project, Eritreaa
The Highlands Horticultural Development Project in Eritrea includes a programme

for the construction of a number of dams for small-scale vegetable production, for
which potential export markets exist. However, although the project area offers
numerous potential dam sites, not all of these would justify the investment costs.
Following detailed analysis of the costs and performance of a number of existing dams
in the project area, a methodology was developed for the rapid screening of potential
dam sites and subsequent appraisal of the more promising sites. This consists of:
• First stage screening based on rapid survey using reconnaissance equipment and
techniques, including altimeter readings for dam height, and “Abbey level” and
rangefinder measurements for dam crest length and reservoir throwback. From this,
the estimated dam height, embankment volume and storage capacity is estimated
using formulae developed for the purpose. The information derived is then
evaluated against criteria for maximum and minimum required storage ratio (ie the
ratio of mean annual inflow to storage capacity) and the ratio of storage capacity
to embankment volume.
• Second stage screening of those sites passing the first stage, to confirm that
irrigable land is available downstream within 1 km of the proposed dam, that the
area of land to be inundated does not greatly exceed the irrigable area, and that
there is a demand for the dam from the community, evidenced by declared
willingness to contribute towards capital cost.
Once screening has indicated that a dam site is worthy of further consideration for
development it is elevated from the status of “potential” to “promising”, and
prepared for appraisal by carrying out topographic surveys, detailed designs,
estimation of the reliable annual availability of water (using standard formulae
developed for the purpose) and potentially irrigable area (assuming standard
cropping patterns and generalised irrigation requirements based thereon). From this
information investment costs per ha are compared with a budget investment ceiling
that has been determined from cost-benefit analysis, assuming the standard cropping
pattern, typical yields and prices. Provided estimated costs are below the ceiling, and
farmers are still prepared to contribute to the cost, investment is approved.
a: Source: Document No 122/94 TCP-ERI 6 WP2: Eritrea: Agricultural Development Project in Seraye
Province - Working Paper 2: Investigation of Water Resources Development Options in High Potential
Areas of Seraye Province. Investment Centre, FAO, Rome (1995).
The physical nature of the project, local institutional capacity, and

whether a conventional project approach or the alternative of a
programme approach is adopted will influence how planning is carried
out. Planning may be a single integrated operation, or it may be broken
down into several parts, such as the Environmental Impact Assessment
(EIA), Socioeconomic and Production Systems Survey (SEPSS), engineering
feasibility studies, and so on. Some or all of the work may be carried out
by local planning groups, including government irrigation agencies, local
consulting companies and NGOs; or it may be done by external support
teams, including consulting companies or the Investment Centre. If the
work is broken down into a number of separate studies, the Investment
Centre might be required to provide a team to review the various results,
prepare the economic analysis, integrate the various reports and working
papers, and draft or compile the required project dossier.
Such a review may involve further field work to confirm earlier

impressions and to visit sites of particular importance - for instance those
for major structures or main canal alignments - also to inspect particular
problems such as areas of poor drainage, shallow soils, or operational
difficulties that have been revealed by the work to date. An Investment
Centre mission for a review and consolidation of planning work and
preparation of a project dossier is likely to comprise four to six specialists,
including the following:
• water resources/irrigation engineer;

• irrigation agronomist;
• economist/project analyst; and
• institutional specialist;
plus specialists in topics specific to the type of development being

proposed, eg credit, agro-processing, marketing, rural infrastructure,
legislation, WUAs, and so on. In general, the team should spend about
four weeks in-country, with a similar period afterwards for finalising
analyses and documentation. Provided a SEPSS and environmental/social
impact assessment/mitigation plan have already been prepared as a part
of the planning process, neither a sociologist nor an environmental
specialist would be required unless outstanding issues still needed to be
resolved at this stage.
The detailed planning process should continue the participatory

approaches adopted during earlier work, aimed at further strengthening
stakeholder commitment to the project. Thus if an external support team
is involved, its work will often begin with a round-table meeting with the
senior representatives of the ministry or department(s) responsible for
water resources and irrigation development, and thereafter close contact
should be maintained with all other stakeholders, including if possible
any representatives of the users and any losers.
As elsewhere in the planning process, the participation of the financing

institution’s project controller or task manager towards the end of the
team’s in-country work is usually a great advantage, since it further
encourages stakeholder commitment. It also helps to promote a sense of
ownership among the stakeholders if a concluding workshop is arranged
to discuss the draft project dossier, at which all stakeholders are given an
opportunity to influence the final version.
The work involved and level of detail required for planning the
preferred option will vary, depending on the nature of the project or
programme, its information needs, and what has already been achieved in
terms of data collection, analysis and engineering design. For example
there are obvious differences between a project using groundwater and
sprinklers for the intensive production of vegetables by commercial
farmers, and one using a simple river diversion for surface irrigation of rice
by small farmers. These projects are not only different physically, but also
in terms of organisation, markets, need for credit, extension, and so on.
Whether a conventional project approach or the alternative of a
programme approach is adopted, it will still be necessary before funds are
finally committed to demonstrate that individual investments can satisfy
the technical, social, environmental, financial and economic criteria for
viability. What will vary is the timing of the various planning activities in
relation to appraisal. The list of activities which follows should be read
with that in mind - as should Appendix 1, which gives a suggested outline
for a typical project dossier.
Activities for Planning the Preferred Option

Engineering Studies
Engineering studies will be necessary for most irrigation and drainage
investment projects, whether for new development or rehabilitation, to
define the physical infrastructure to be developed or type of
improvements intended. The degree of detail required will depend on the
scale of the works; repetitive works can be based on sample type designs.
The object of the engineering studies is to provide the necessary technical
information to permit the preparation of preliminary designs upon which
estimates of quantities, accurate to plus or minus 15 percent, and project
cost estimates, can be based. Such studies should include some or all of
the following:
• Interpretation of satellite imagery.

• Aerial photography and mapping; manual site surveys (see Appendix
1 for indicative scales).
• Surface water resources studies, including a correlation of rainfall

with run-off to extend or infill records of surface flows. Where
practicable, water availability should be simulated to provide an
indication of likely availability to meet demand over the period of
analysis of the project (eg 25 years). This should permit the prediction
of the likely year-by-year cropping intensity, rather than assuming one
based on the area that it would be possible to irrigate if the 80
percent probability (say) flows occurred each year1. For small
ungauged catchments a synthesis of rainfall, catchment area and
assumed run-off coefficients may be acceptable.
• Groundwater studies to investigate water table depth, the nature of
recharge and sustainable yield of aquifers.
• Water quality analyses.
• Studies of present utilisation and future demand for surface and
underground water and the prospects for other developments within
the same catchment that could affect water availability. Assessment of
the emergence of competing demands for water for urban and
industrial uses that could influence availability for irrigation.
Conversely, consideration may be given to the use of agricultural
drainage water and municipal waste water for irrigation2. In any case
it will be necessary to assess water quality and any aspects that could
limit its use for irrigation.
• Estimates of water demand for the existing and proposed cropping
patterns, based on the use of the FAO CROPWAT and its computer
database CLIMWAT or an alternative locally developed method of
estimating cropwater requirements if this is appropriate3. These studies
may include a consideration of the possibility of designing for deficit
irrigation (see Box II-5). Consideration should also be given to the
possible crop sequencing and rotation that farmers might adopt, and
cropping patterns that avoid unreasonable peaks in water demand.
• Estimates of surface and subsurface drainage requirements, based on
a design storm of selected return period and locally obtained data on
subsoil drainage and water table depth.
1: For an example of a spreadsheet for doing this, see Paper No 78 in Branscheid V, Irrigation Water
Management Briefs: 100 Collected Papers, Investment Centre, FAO, Rome.
2: See: FAO Irrigation and Drainage Paper 29, Water Quality for Agriculture (revised 1985), and FAO
Irrigation and Drainage Paper 48, The Use of Saline Waters for Crop Production (1993).
3: For example the use of locally developed Et/Eo ratios and US Class A pan evaporation data, as is the
widespread practice in Southern Africa.
Box II-5 - Water Scarcity and Deficit Irrigation
FAO Irrigation and Drainage Paper 33a provides a detailed exposition of the
relationship between water supply and yield for various crops. Drought tolerance
varies considerably between species and stage of growth, but the yield/water response
curves of most field crops, with the exception of rice, have flat peaks around the
maximum evapotranspiration. The point at which the response curve flattens out
marks the beginning of diminishing marginal returns to additional water: small
reductions in water supply below that required for maximum evapotranspiration
therefore tend to result in only marginal reductions in yield, and maximum yield is
unlikely to be the optimum yield per unit volume of water applied.
The social and economic efficiency implications of deficit irrigation are obvious:
commercial operators apply the concept to increase farm profit; on public schemes
more people benefit when water is spread over a larger area; in any case the ratio of
the value of goods produced to the amount of water consumed is increased.
Planning for deficit irrigation can lead to substantial capital cost savings, as peak
irrigation requirements and canal discharges are reduced, and this can sometimes
mean the difference between viability or otherwise, provided the cost of developing
the incremental area is low. Deficit irrigation can also lead to even greater economic
gains than maximising yields per unit of water for a given crop: farmers are more
inclined to use water more efficiently and returns can be optimized through more
water-efficient cash crop selection, for example by planting cotton rather than
sugarcane or rice.
However, before taking a decision to design for deficit irrigation, careful

consideration should be given to whether such a decision could lead to greater
inequity in the supply to tail-enders, or perhaps greater than usual reluctance to pay
for O&M. Furthermore deficit irrigation usually implies sophisticated water controls
and accurate water management that may be inappropriate for smallholders.
a: FAO Irrigation and Drainage Paper 33, Yield Response to Water, FAO, Rome (1979).
• For schemes being considered for rehabilitation and upgrading, a

detailed diagnostic operational study to identify the present condition of
the infrastructure, constraints, sources of inefficiency and the scope for
efficiency gains. Supplementary topographic survey may also be
required to verify original construction drawings and to provide
additional technical information. This is the time to enlist the support of
farmers, to obtain details of the past performance of the scheme and
what brought about the need for rehabilitation, other than simply “old
age”. It is also the time to encourage demand-led investment by
establishing what farmers would like to see improved and the extent to
which they are willing or able to contribute to the cost of improvements.
The modalities for achieving this will vary from case to case, but the best
channel of communication with farmers is usually through an elected
committee of a water users’ association or similar body. As in the SEPSS

(see below), suitably experienced NGOs can be contracted to assist in
the process, often to considerable advantage.
• Geological and/or geotechnical investigations for foundation design,
seepage predictions (which are of particular importance in decisions on
whether or not to line canals), slope stability analysis and creep ratios.
• Operational hydrology studies on the proposed new or rehabilitated
distribution system, to establish practical operating schedules (for
which the FAO SIMIS programme1 may be found useful).
• Preliminary engineering designs for the scheme layout, main
structures and water supply/drainage system, focusing particularly on
water saving measures and ease of farmer operation and
management, including automatic controls if these are considered to
be an appropriate technology.
• Preliminary engineering designs for roads and other infrastructure.
• Detailed cost estimates for the civil works and their operation and
maintenance, broken down into foreign and local costs.
Soils and Land Capability Studies

If the available soils and land capability mapping are found to be
inadequate, arrangements should be made to upgrade this to an acceptable
scale and standard (see Appendix 1), with special attention paid to drainage
aspects, bearing in mind that rehabilitation might accelerate waterlogging and
salinisation by making more water available, thus contributing to over-
irrigation. Soil type, as it affects infiltration and permeability and water-
holding capacity, is of special importance for the estimation of irrigation
scheduling and irrigation water requirements, particularly for rice.
This time consuming activity should be carried out by the government

soil survey or private contractors/consultants, depending on which is likely
to deliver the quickest result. FAO Soils Bulletin 422 provides indicative
estimates of output rates for soil survey teams.
Agricultural and Marketing Studies and the SEPSS

Depending on the nature and complexity of the proposed project and the
availability of detailed information regarding the without-project situation, it
may be necessary to organise a socio-economic and production systems
survey (SEPSS). This is usually carried out by LPGs, including local consultants
or consulting companies, and local university groups. Specialised briefing and
support for field work is often given by staff of the Investment Centre.
The SEPSS is used to verify the assumptions underlying the project concept,
as well as any perceived problems, priorities and areas of convergence/
divergence between government and the intended users.
1: SIMIS (Scheme Irrigation Management Information System). FAO, Rome (forthcoming).
2: Soils Bulletin 42: Soil Survey Investigations for Irrigation. FAO Rome (1979).
The investigation may employ rapid rural appraisal techniques, but

should in any case continue or expand upon the process of participatory
appraisal and planning that may have been initiated during the engineering
studies. It should assist in assessing farmers’ perceptions and likely
response to the opportunities that the project is expected to offer, as well
as the demands that the project will place on them - for example their
possible contribution towards capital costs and subsequent O&M costs.
Techniques for carrying out the work required are suggested in Investment
Centre Technical Paper No. 91.
The investigations should be designed to establish:
• present land use, farm size, farming systems and practices, crop
varieties and yields, use of inputs, and availability of draught power;
• extent and methods of existing irrigation, if any, in the project area;
• if irrigation already exists, past and present irrigated cropping
patterns, yields and trends, on-farm irrigation practices compared
with expectations at initial project planning; an explanation for any
differences, and the reasons for any decline in areas planted or yields
obtained under irrigation;
• for farmers in development schemes similar to those proposed, an
indication of yields and production;
• the existence of any group activities within the area (eg for marketing
and input supply, irrigation O&M) that might have a bearing on the
potential for management transfer to irrigators;
• people’s aspirations and expectations, especially the extent of farmer
interest in the project and implications for project planning;
problems, constraints and means of overcoming them, from the
farmers’ perspective;
• intra-household dynamics; gender relations and disaggregation of
labour; access to and control over land, labour and capital; control of
crops and income from their sale, and the responsibilities of husband
and wife as family providers;
• the household economy, and alternative sources of income from off-
farm employment, on-farm production, petty trading and remittances,
time available for crop and livestock production and other activities;
• any conflicting or competing demands for labour;
• the likely impact of the project on any of the above;
• market opportunities and the implications for potential cropping patterns;
• the respective roles of the public and private sectors in input supply
and marketing;
• the scope for cost recovery, including contributions towards capital
costs and recovery of O&M costs.
1: FAO Investment Centre Technical Paper 9: Sociological Analysis in Agricultural Investment Project Design,
FAO Rome (1992).
Depending on the intended cropping pattern and whether the viability

of the project relies on the inclusion of high value crops, it may be
necessary to carry out marketing studies within the country, or overseas if
export crops are proposed.
Environmental Impact Assessment and Action Plans

If, at the stage of conceptualisation, the project has been placed in
environmental category “A” (according to the World Bank’s classification
or the equivalent - see Box II-2), a full environmental impact assessment
(EIA) and possibly also a land acquisition assessment (LAA) will be
required. The EIA/LAA should consider inter alia potential erosion and
sedimentation hazards, waterlogging and salinisation, pollution1 or
depletion of groundwater supplies, displacement of human settlements and
the impact on oustees, and health aspects. It should propose an
environmental action plan (EAP) and if necessary a land acquisition plan
(LAP) which will include measures such as compensation for oustees,
proposed legal provisions and regulatory mechanisms for minimising
adverse impacts, and provision for systematic monitoring and evaluation,
possibly based on the ICID’s environmental checklist referred to earlier. All
identifiable costs should be itemised for inclusion in the cost stream of the
proposed project. The EIA/LAA may be carried out by government or its
LPG, or a consulting company.
For category “B” projects, although a separate EIA or LAA will not
usually be required, it will normally be necessary to prepare a mitigation
plan for reversible impacts, which may include a monitoring and
evaluation system, again possibly based on the ICID checklist.
Land Tenure and Water Rights Investigations

The existing arrangements, customary or otherwise, for land tenure and
water rights should be examined in detail. This should establish whether
there might be any obstacles to successful implementation, such as a lack
of secure tenure or water rights, which could inhibit participatory
development and capital cost contributions by the users.
Depending on the circumstances of the project and its location, it may be

necessary to arrange for a cadastral survey to establish the existing land
tenure pattern and its implications for project planning. This should provide
data on the size and distribution of properties and farms, degrees of
fragmentation, the proportion of owner and tenant-operated farms, and type
of tenure. Data should be interpreted in terms of farmer interest in
developing irrigation.
1: eg as a result of increasing use of pesticides and fertilizers.

Recommendations for land titling, redistribution or consolidation to facilitate

irrigation development should be approached with caution, and the views of
the present users taken fully into account. Where customary rights exist,
unless there are very good reasons to do otherwise, it is usually best to leave
decisions on redistribution to customary or traditional authorities.
There may also be a corresponding need to examine and inventorise

water rights, and to identify those whose means of livelihood might be
affected favourably or unfavourably by the investment. Although the issue
of international water rights should have been dealt with in earlier
consideration of the project options, it should be reconfirmed that this
issue is not likely to prejudice the proposed project.
Institutional Capacity Assessment

A key condition for sustainable development impact is that the
implementation requirements of the project should be matched to local
institutional capacity. The assessment of institutional capacity to
implement, organise and manage the proposed project therefore demands
particularly detailed and careful study. It should cover rural institutions and
support services operating in the project area, including extension,
research and credit, as well as the government departments or authorities
responsible for irrigation development, operation and maintenance.
Special attention should be given to evaluating farmers’ organisations,
including WUAs or savings and credit clubs and/or marketing and supply
cooperatives, as well as local systems of village administration, customary
or otherwise, that could form the basis of future WUAs. Any other
initiatives towards promoting communities’ management of their own
affairs and resources should also be assessed. Successes and failures and
the lessons learned - ie which institutional arrangements are working
satisfactorily and which would need improvement or reorientation under
the project - should be noted. These should all be considered in deciding
on project scope, and in framing proposals for implementation,
organisation and management.
Institutional capacity assessment may be carried out by government as a

form of self-analysis but it is likely to benefit from an independent external
review. Recent thinking in management science suggests that the
conventional mechanistic approach to institutional analysis may no longer
be appropriate. This is because although outwardly similar organisations may
in the past have been assumed to behave in similar ways, this expectation
ignores the influence of individual styles of management and behaviour (see
Box II-6). It is now realised that much deeper analysis is required. Should
planners have any doubts about the capacity of key institutions to fulfil their
responsibilities, or their own ability to analyse them, expert advice should be
sought from a management/institutions specialist.
In assessing the capacity of an institution to take part in a proposed

project or programme a number of questions need to be asked:
• Are the formal aspects of the situation right - ie are legislation or

administrative changes needed to enable the institution to carry out
the tasks proposed, to rectify obvious configurational problems, or to
expedite execution?
• Is the organisation quantitatively capable of executing what is
proposed, in terms of workloads on suitably qualified staff and
availability of other resources to permit the performance of the tasks
to be undertaken?
• How likely is it that the perceptions and behaviour of those in and
around the organisation will frustrate the proposed activity?
• What effective methods can be identified to overcome negative
behaviours and perceptions?
The remit and formal structure of an institution, and any restrictions or

obligations placed on it, may be assessed through interviews with senior
staff and a review of written regulations and procedures. When assessing
manpower resources, judgements should be made on the level of technical
skills: for example are the qualifications and experience of the staff
adequate for the tasks assigned to them? The staffing structure can be
examined by looking at the ratio of staff to clients at different levels, and
the ratio of senior to supervisory to field staff, for example.
Most of the foregoing relates to qualitative aspects of understanding

particular organisations. In addition, there is the quantitative question of
workload, ie whether, at “normal” rates of working, additional proposed
activities can be handled by the available staff. Estimating incremental
workload from proposed additional activities can be usefully done by
critical path analysis and resource scheduling methods, using project
management computer software. However, the size and timing of peaks in
the workload can be sensitive to guesswork about workrates. The other
part of the equation, assessing numerical capacity, is more difficult, and
most of the standard techniques from work study are usually impossible to
apply to implementation of irrigation and drainage projects in developing
countries. Activity sampling and short runs of diary keeping by staff may
help, but the temptations on those being analysed to manipulate the
results are strong. In many cases, subjective estimates by those likely to
be involved of the percentage of their time currently utilized will be the
best available measure; however this kind of enquiry needs caution, as
the information could be damaging to people who offer frank assessments
of current underloads.
Even more difficult, but important to quantify, is the likely response to

changes in incentives and workload that could be implied by the proposed
project. This part of the assessment may also be approached by structured
interviews with staff in the strata affected, focusing on perceptions of what

needs are currently satisfied by their work and how far extra input of effort
is seen as likely to yield relevant rewards.
Organisational charts can be useful in indicating the degree of

complexity of the organisational structures. Features to look for might
include whether lines of authority conflict with lines of consultation. It is
important to know who makes the ground rules and key decisions in the
institution, how these are made, how work is orchestrated, and whether
the institution has a defective configuration. Questions of centralized
versus decentralised structure often emerge, and it is important to
understand the relationship between national, provincial and lower-level
organisational structures. For example does the flow of funds support the
degree of decentralization required, or actually impede it? The position of
the institution within the organisational structure of the agriculture and
water sectors can also be crucial - for example, with respect to other
related ministries, the central planning agency, or parastatals.
Box II-6 - Institutional Capacity Analysis
The following are some essential considerations for institutional capacity analysis.
Objective: To understand the way the institution currently behaves, and to attempt to
anticipate its reaction to possible alternative interventions, additions and restrictions.
This should enable the planner to understand its likely relationship with a new
project, and if necessary to redesign working arrangements.
Approach: The conventional approach to institutional analysis has tended to rely

strongly on defining the formal aspects, such as remit, budget, staffing, organigram,
job descriptions, vacancy and turnover rates, qualifications in relation to
specifications, and so on. This approach has been driven by a number of
assumptions, not always recognized as such.
• That the “rational actor model” of organisations is the most appropriate. According to
this, organisations should behave like a very clear-headed individual, pursuing some
line of action with an unambiguous intention, using the best available approach.
• That all reasonable people share the same view of the working situation, ie what
the task is, what is sound managerial practice, what strategy and tactics will best
achieve a given end, etc.
• That there is something called leadership, and if it is exercised, it will lead to high
productivity from a given set of staff and resources, by “motivating” staff.
• That there is something called morale, a general mood affecting the quantity and
quality of effort put into work.
Box II-6 - Institutional Capacity Analysis (cont’d)
The above approach is part of an orientation towards management that goes back to
the early part of the 20th century, and which emphasises what people should do, as
governed by “logic” (and some set of assumptions, such as those above). More
recently, the emphasis in management science has moved towards examining what
managers (and other inhabitants of organisations) actually do, and using these data to
construct the conceptual framework for the subject. This is a more radical change
than may appear: from the analytic approach, which assumes it is normally possible
to work out the basic structure of a problematic situation by reason alone, to a
synthetic one, which implies that uncovering the most potent ideas about the basic
structure and phenomena in a situation may require field investigation.
The synthetic approach has called into question all the assumptions listed above.
First, it suggests that real organisations typically behave as coalitions of individuals
and interest groups, which may compete for control of policy and other parts of the
action, and which may be subject to partly contradictory pressures from the external
coalition, ie parent bodies, regulators, the public, etc. It accepts that organisational
politics are real - and their effects can be anticipated. From this perspective, an
organisation’s configuration - the fit between its task load, the way its internal
activities are orchestrated, and the nature of its external coalition - is very important.
Secondly, it suggests that different institutions may come to very different
understandings of how best to get things done, ie organisational cultures are part of
the situation; among other things, these define “reasonable” working roles and
behaviour. Finally, it has produced very different models of leadership and
motivation. Most importantly, it has suggested that the knowledge of the formal
structure alone is not enough to indicate whether or not a particular institution will
fulfil some intended function.
The outcome of the assessment should be the basis of an institutional

plan for the project. This may be to strengthen existing resources to match
the implementation requirements of the project, or to scale-down the
project to suit realistic expectations of the implementation ability of
existing institutions. In either case, the proposals will have to address the
functional problems referred to above, and the project is likely to involve
measures for building sustainable institutional capacity.
In the past the implementation of a project often created demands for

skills which were either in short supply in the concerned country as a
whole or inaccessible to the involved institutions. It was common,
therefore, for investment projects to fund the temporary hiring of outsiders
who had the skills needed to fill these gaps. Experience has shown that,
while such technical assistance may successfully ease some project
implementation problems, it does not provide a ready recipe for project
success. If project management and services are heavily dependent on

outside technical assistance the sustainability of the project is likely to be
in doubt, because of the lack of experienced persons to assume the roles
of the external technical assistance experts once they have left. Problems
also arise with the selection of technical assistance staff who may not
fulfil expectations, and with the understandable tensions which occur
when foreigners occupy senior and well-paid posts denied to the
nationals of the country.
The planning of a technical assistance element of a project, therefore, has

to be done with great care. Proposals for technical assistance should be based
on rigorous analysis of manpower needs and skill gaps and should only be
put forward as a last resort, with the full agreement of all concerned parties
that recourse to outside assistance is essential. Reference should be made to
the preferred sources for the particular types of technical assistance required,
taking into account both local and international consulting firms, bilateral and
multilateral agencies (such as FAO and other UN specialised agencies) and
NGOs. So as to avoid subsequent misunderstandings, terms of reference for
each technical assistance assignment should spell out as precisely as possible
the functions and reporting arrangements, as well as the minimum
qualifications, for candidates. If the technical assistance is not for the
completion of a finite task, such as the completion of engineering designs, it
should be explained how it would be phased out and how the functions
would be subsequently assumed by local staff.
The key to reducing dependence on technical assistance is a good training

programme for national staff; but one of the dilemmas is how to combine
academic and on-the-job training in the most effective manner1. Many
technical assistance staff find themselves so busy fulfilling their routine
functions that they give insufficient attention to training the staff who should
succeed them. Problems also occur when their intended successors are
absent on training for a large part of the assignment period of technical
assistance, thus limiting the opportunity for side-by-side work. Training
arrangements must be planned to ensure maximum benefit to local
counterparts and a smooth transition after the end of any technical assistance.
Training should go beyond merely equipping people to take over the

role of technical assistance staff. An important part of project design is the
projection of wider manpower and skills needs, and the planning of training
components aimed at satisfying these. The choice has to be made between
national training and training in overseas academic institutions. Sometimes
these can be combined when, for instance, a post-graduate student at a
foreign university does the field work for a thesis in his/her own country, or
when a foreign university is “twinned” with a local institution.
1: For guidance on this aspect, see the World Bank/USAID Irrigation Training in the Public Sector: Guidelines for
Preparing Strategies and Programs. Economic Development Institute of the World Bank, Washington DC, 1989.
If a training programme is to be effective in building institutional capacity,

project support for training of individuals may have to be linked to their
agreement to work in the sponsoring implementing agencies for a
reasonable length of time after the completion of their studies. However, this
may not necessarily be essential if there is a reasonable chance that trainees
will remain in the country, but working in the private sector or for NGOs.
Estimation of Project Costs and Benefits

Estimates of Project Benefits
Prices of inputs and outputs should be prepared and entered into the
PC-COMPASS suite of programmes to generate crop budgets, farm models
and estimates of the incremental benefits, in terms of the users and the
overall project.
Estimates of Project Costs

Cost estimates should be prepared for the various project components,
which may include:
• Irrigation and Drainage Infrastructure

• Institutional Support
• Crop Development
• Training
• Research Support
• Input Supplies
• Road Development
• Water Supply, Sanitation and Other Social Infrastructure
• Project Coordination
Components should be further broken down by expenditure categories,

or summary accounts, to classify the items against which disbursements
will be made under the project. Thus, for each objective or component of
a project, there are likely to be several categories of expenditure, such as:
• Civil Works
• Equipment
• Technical Assistance
• Training
• Incremental Operating Costs
Depending on whether it is intended to construct the civil works by

direct labour/force account or by contractor, the costs should be broken
down either into plant, materials and labour, or into quantities of the
various categories of work with unit costs. Skilled and unskilled labour
components should be separately identified, and all costs broken down
into foreign exchange costs, local costs and taxes and duties. Separate
tables should also show the expected sources of finance, including
anticipated users’ contributions, which might include the provision of
construction labour, locally available construction materials (such as sand
and stone) and/or cash.
Annual operating costs should be estimated on the basis of energy

costs for water delivery, salaries and other benefits for the proposed
operating staff complement, their vehicle operation and office running
expenses. Estimates of annual maintenance costs should usually be based
on a fixed percentage of the capital cost (see Annex 2 for details). Both
O&M costs and operating costs should be broken down in a similar way
to capital costs, and costs should be entered into the PC-COSTAB module
of PC-COMPASS.
Economic Analysis
Economic Rate of Return
There are several measures that can be used to demonstrate the
economic feasibility of the project: each has its own advantages and
disadvantages. However, attention here is confined to the Economic Rate
of Return (ERR) which may be defined as “the rate of discount at which
the total present value of costs incurred during the life of the project is
equal to the total present value of benefits accruing during the same
period”. For most investment projects, including irrigation and drainage
projects in particular, costs are bunched at the beginning of the project,
while benefits only begin to accrue after a lapse of time. Consequently
benefits earned and costs incurred in the near future have higher values
than similar benefits or costs arising several years hence. The application
of a discount factor enables these costs and benefits to be compared on a
present value basis, taking into account differences in the timing of
expenditure and income.
The cost streams used in the construction of the COSTAB tables referred
to above should, as mentioned, include the capital costs of the project
(including physical - but not price - contingencies) plus the operating,
maintenance and replacement costs1 of project works, and any
quantifiable social - such as land acquisition and resettlement - or
environmental costs. They should also include the operating costs incurred
by the farmers, as well as those arising from providing services and
running the organisation and management system for the project.
Operating costs for participating farmers may be derived from the crop
budgets and representative farm models aggregated to give the overall
project estimates. Residual values of project-funded assets should be taken
into account as benefits, usually at the end of the project life, although in
some cases - for example when equipment used in construction is
transferred to another project - a residual value may be applied earlier in
the project life and attributed to project income. The life of the project is
usually taken as the period corresponding with the useful life of the major
investment components, and typically ranges from around 15 to 25 years
for irrigation and drainage investments.
1: If the life of certain project-financed investments is less than the assumed life of the project (which is nearly
always the case), provision should be made for the cost of their replacement when this is needed.
The benefit stream will normally consist of the value of the

incremental output of the project. To establish this value it is necessary to
compare what would happen without the project with what would occur
with the project. In most cases it is possible to assume that, without the
project, the present (ie pre-project) situation would persist. In other cases
however there may be historical evidence to suggest that, even in the
absence of any intervention, production would continue either to rise (as
a result perhaps of spontaneous small scale irrigation development) or to
fall (perhaps because of progressive increases in soil salinity in the
absence of drainage).
All costs and benefits should be expressed in economic terms. For those
inputs which could have a significant bearing on the viability of the
project, a distinction must be made between traded and non-traded goods,
and a decision must be taken as to whether to compensate for distortions
in the pricing of foreign exchange through the use of a shadow exchange
rate or through the application of conversion factors to the price of non-
traded goods. However, the use of conversion factors is to be preferred
since it allows for differentiated treatment of different categories of traded
goods1. In the case of internationally traded commodities such as fertiliser,
grains or oilseeds, prices are usually derived from forecasts prepared
periodically by the World Bank. The accuracy of these forecasts and the
related assumptions on inflation have often been questioned on the basis
of retrospective assessments of earlier forecasts, but no better series has
been developed and their use has the advantage of ensuring a measure of
consistency in pricing between projects and countries. Nevertheless they
should be interpreted with caution. Before use, the forecast prices should
be converted to constant prices for, say, the date of compilation of the
project dossier or appraisal. It is then usually necessary to convert these
figures to farm-gate prices by working backwards from the international
forecast price, making adjustments for the cost of shipping, handling,
internal transport and distribution, and making allowances if necessary for
quality differences. Direct and indirect transfers (such as taxes or subsidies)
are eliminated in the calculation.
For non-traded goods, such as farm labour, locally-made materials or

many fruits and vegetables, the aim is to set prices which reflect their
opportunity costs. The market price equals the opportunity cost in a truly
competitive market; but in practice, distortions (for example official
minimum wages, value-added tax etc.) exist in some cases, which require
that adjustments be made to the financial price. It should be borne in mind
that for non-traded goods, derivation of economic prices requires two
steps: first, assessing the opportunity cost of the goods, which may be
higher or lower than the nominal price (but may be equal to it where
competitive markets exist); secondly, applying to the opportunity cost the
1: If the analyses are carried out correctly, the final result should be the same.
appropriate conversion factor. Guidance on appropriate conversion factors

can usually be obtained from economics staff of national planning
agencies or of the financing agencies.
Unskilled labour is the most important non-traded commodity in most

projects. It used to be customary to assume opportunity costs well below
wage levels. However, experience has shown that the real opportunity cost
is generally much closer to actual wage levels. Seasonality is often a key
factor here: in seasons of peak activity, when the total rural labour force
may be occupied, the opportunity cost is likely to be close to the
prevailing daily wage rate, whereas in the slack season it may fall
considerably below the amount actually paid to farm workers. Caution and
close scrutiny are therefore indicated before assigning low opportunity
costs for labour. All incremental unskilled labour employed at a particular
time, whether paid in cash or kind or contributed free of charge by
farmers, should be valued at the same opportunity cost. If possible a
distinction should be made between the opportunity costs of the labour of
men, women and children, since in some cases this may be important.
The rate of return can be calculated using the COSTBEN module of PC-
COMPASS. This may then be judged against criteria such as the
opportunity cost of capital in the particular country where the project is to
be implemented. As a very rough rule of thumb, the project analyst might
recognise that the project is in the “danger zone” if the rate arrived at is
less than about 10 to 12% - the minimum ERR conventionally acceptable
to many financing institutions (but one which is probably still considerably
above the long-term opportunity cost of capital).
Risk and Sensitivity Analysis

An assessment should be made of the extent to which the proposed
investment implies risks for the country and for the project. Risks should
be explicitly identified and their possible impact on the economic viability
of the investment and on its sustainability examined. Possible sources of
risk include the danger of cost over-runs stemming from inaccurate
estimation of quantities in civil works construction, or from delays in
implementation due perhaps to staffing, land acquisition or procurement
problems. Such delays, in turn, may result in a slower build up of
production attributable to irrigation and hence to reduced benefit streams.
Reductions in benefits could also result from lower than expected yields,
slowness of mastering methods of irrigated farming, or the effects of a
succession of years with lower than expected water availability. Risks may
also be derived from exogenous factors such as unexpectedly large rises in
input prices or falls in commodity prices.
There are also risks that do not lend themselves to quantitative analysis.
The case of government commitment is one. The efficiency of the public
administration (unless it can be linked to a quantifiable determinant of
output such as irrigation efficiency) is another. Availability of domestic
financial resources to cover the government share of project costs is a third
example. Securing beneficiaries’ participation is a fourth one, and several
other examples could be quoted. The discussion of the risk factors should
not be limited to quantitative analysis, but expand to cover the other major
areas of concern, drawing attention to the possible need to take corrective
measures before or during project implementation.
Risks of an environmental nature should be addressed as part of the

assessment of the project’s environmental impact.
Effect on Balance of Payments

Where this is relevant to the justification of the project, an estimate
should be made of the net impact of the proposed irrigation development
on the country’s balance of payments. This implies estimating the foreign
exchange component of both investment and operating costs, then
comparing this with the foreign exchange gained by using the incremental
project output either to increase exports or to substitute for imports.
Income Distribution, Social Impact and Poverty Alleviation

The expected impact of the irrigation investment on the distribution of
incomes and poverty alleviation in the project area should be assessed.
Other benefits may include improved water supply and sanitation, health,
nutrition and education. If the project is intended to bring special benefits
to women, these benefits should if possible be quantified. The relative
weight which is given to social versus economic criteria in deciding on the
balance between components is often important. If the overriding
consideration in project planning is the economic return on investment,
the options that spread the benefits most widely and equitably should be
chosen from those showing the highest ERR. On the other hand the aim
might be to maximise the number of beneficiaries subject only to each
component exceeding a minimum ERR. It should be shown that these
impacts are consistent with the subsectoral strategy.
Fiscal Implications and Cost Recovery

Estimates should be made of the net cost of the project to the
government fiscal balance. The extent to which cost recovery rates and
mechanisms - for example contribution of free labour for construction, or
irrigation water charges - would cover the capital and operating costs of
the project should be examined. If there are significant government
revenues from taxes on agricultural output, trading, processing or export,
these should also be quantified and taken into account. Given the
catalogue of irrigation projects which have gone into decline upon
conclusion of the disbursement period, the extent of a continuing net call
on government funds - for example an on-going commitment to scheme

O&M costs or subsidies on inputs - should be quantified. An assessment
should then be made as to whether the government would be in a position
to sustain these obligations once external funding ceases.
Further guidance on economic analysis is given in Investment Centre

Technical Paper 7.
Planning for Implementation

One of the most common reasons for delays and defects in
implementation is difficulty by the implementers in taking all the steps
needed for loan effectiveness and disbursement, and to initiate project
activities. To encourage smooth and rapid progression from appraisal by
the financing institution to project start-up and loan disbursements, it is
essential to prepare a detailed implementation plan for the period leading
to start-up and extending through at least Project Year 1 (PY1). This should
contain step-by-step guidance, as appropriate to the level of experience
and capacity of the implementing institution, on all activities to be
undertaken. It should also clearly identify who is responsible for each
activity. All activities should be scheduled, giving their estimated duration
and earliest and latest dates for achieving both project start-up and the
targets for PY1. Scheduling should preferably be based on critical path
analysis, for which project management software may be used1. If the
practitioner is not familiar with this, it is better to use a pencil and squared
paper rather than not preparing a schedule at all: the act of committing
thoughts to paper or a computer screen often surprises even the most
experienced practitioner when it is discovered how many activities are
involved, and how much time is required to achieve them.
With the participation of the institutions concerned, the preparation of

an implementation plan should enable them to gear up for a start to
implementation as soon as funding has been approved. Many of the
actions required as a condition for loan effectiveness will require
administrative steps involving no significant expenditure; others may
require some budget outlay, either from the financing institution’s project
preparation facility and/or government budget. They may include:
• preparing an annual work plan and budget for the first year of the
project, and entering this into government’s budget for the financial year;
• opening a special bank account to receive project funds for local
disbursement;
• arranging staffing for project implementation, including recruiting or
redeploying staff with the required skills and experience, and training
staff for new functions that they will have to perform;
• initiating necessary institutional reforms;
1: Such as Microsoft Project.

• drafting and initiating the enactment of legal provisions (eg for WUAs,
creation of autonomous authorities for bulk irrigation water supply);
• preparing operational and accounting manuals, setting out procedures
to be followed in project implementation, and allocating
responsibilities to the different categories of implementer (eg the
ministry of finance, irrigation agency, NGOs and farmers);
• informing intended beneficiaries of the impending availability of
funds for community-based or individual demand-driven
developments and creating the conditions for them to generate
proposals that meet their own aspirations and qualify for assistance;
• preparing procurement packages for plant and equipment, satellite
imagery, aerial photography and mapping;
• drafting requests for proposals/bids for external technical assistance
(eg from NGOs or consultants);
• carrying out topographic surveys, engineering investigations and
designs for initial construction work.
It is often useful, if government is unfamiliar with the requirements of

the financing or cooperating institution1, for the implementation plan to
suggest the scope and content of the annual work plan, and to briefly
describe the laid down procurement procedures2.
The Project Dossier

The project dossier or document should facilitate appraisal, so that,
once the investment proposals have been approved by government,
appraisal can focus on issues remaining and need not go over old ground.
Annex 2 provides details of the content and scope of a typical project
dossier or document. It is emphasised however that it will generally
facilitate appraisal if the format used matches that required by the
financing institution concerned, and if necessary permits reproduction of
entire sections for inclusion in the appraisal report. The requirements will
vary between financing institutions: for IFAD-funded projects, for
example, which are aimed deliberately at reducing poverty, targeting
usually receives special importance and a separate chapter on the target
group justifying their selection will be necessary. Thus the proposed
content and layout should if possible be discussed with the project
controller or task manager of the financing institution concerned before
drafting commences.
1: In the case of IFAD-financed projects a cooperating institution is appointed to provide supervision.
2: For this purpose, reference may be made to the various guidelines that may be issued from time to time by
the financing institutions, eg the World Bank’s Procurement Under IBRD Loans and IDA Credits, and Use of
Consultants by World Bank Borrowers and by the World Bank as Executing Agency, as well as their sample
bidding documents if necessary.
The project dossier should usually contain a description of the project

rationale and planning considerations, which is likely to repeat the
arguments developed first when the investment was being conceptualised,
but modified and deepened to reflect the findings of later investigations. In
particular, in view of the emphasis now placed on the requirements for
implementation, the document should clearly demonstrate the
compatibility of the proposed project with existing capacity to implement,
operate and maintain it.
The project dossier should describe:
• The irrigation and drainage works and other hardware which are
proposed for financing.
• The expected phasing of this development.
• Institutional responsibilities and staffing requirements for project
implementation, with job descriptions, for project coordination and
each of the project components.
• The implementation plan.
• Mechanisms adopted for users’ participation in design or proposals
for participation in implementation.
• Procedures and criteria for screening subprojects for selection within
sectoral programmes, for quality control of design and construction, and
the administrative mechanisms for a rolling annual expenditure plan and
the flow of funds - with particular attention to funding channels if
expenditure is to be made by local or regional administrations.
• Details of expected supervision of implementation by the financing or
cooperating institution, including any special supervision
requirements for subproject approvals within a programme of support.
• The organisational structure decided upon for O&M, which may
include allocating or transferring responsibility to the users1, or to a
financially autonomous irrigation authority dependent on the users for
financing, and/or participatory joint management.
• The suggested legislative and regulatory framework for WUAs and
other management organisations proposed.
• The proposals for water charges and cost recovery mechanisms,
reflecting subsectoral strategy.
• Technical assistance and training requirements.
• The estimated changes in cropping patterns and yields expected as a
result of the development, and the rate at which these are expected
to occur.
• Marketing possibilities and forecast prices.
1: Practitioners are referred to Water Report 5, Irrigation Management Transfer, published by FAO with IIMI,
which contains selected papers from the International Conference on Irrigation Management Transfer held in
Wuhan, China in September 1994. This provides a useful source book on management transfer.
• The financial returns to farmers and economic benefit to the country,

taking account of all social and environmental costs, with sensitivity
and risk analysis.
• A list of suggested conditionalities for loan effectiveness.
The dossier or document should normally incorporate or be supported

by the working papers that have been generated at various stages of the
planning process. These should either be presented separately or
attached to the project document as annexes, depending on the form
that best facilitates subsequent appraisal (see Annex 2 for a typical list of
working papers).
Achieving Consensus on the Project Proposal

The project dossier or document should preferably be presented in draft
form to government and the financing institution, for discussion at a
concluding workshop. This should, like all other workshops held as part of
the planning process, be attended by concerned stakeholders or their
representatives, including senior representatives of the ministry or
department(s) responsible for water resources and irrigation, preferably in
this case at permanent secretary or director level. Senior representatives of
the national finance, and if appropriate planning, institutions should be
present to inform them of the final shape and cost of the proposed
investment. The event should also be attended by the task manager or
project controller from the financing institution, the LPG(s), and any NGOs
who might be involved in implementation (eg for training WUAs). It is
essential that the views of the users and any losers under the proposed
project should be sought and expressed at the workshop, preferably by
elected representatives. The objective of the workshop should be to reach
consensus on all aspects of the project proposal.
On completion of the workshop, an aide mémoire should be prepared

which should summarise the proceedings and note any matters that still need
to be clarified or corrected in the project dossier. It should also highlight any
outstanding issues that need to be resolved before appraisal and define the
actions required to do so. The aide mémoire should be agreed with the senior
representative of government in attendance at the workshop.
The final version of the project dossier should then be prepared on the
basis of the consensus or conclusions reached.
APPENDIX 1 - Activities to be completed and level of detail required at successive stages of the planning process
Project process/subject Conceptualising/comparing Planning the preferred Appraisal Loan effectiveness

investment options option1
1 2 3 4
A. Hydrological Identify main water As 1, reworking data if Further refinement of 2 if All outstanding issues
Aspects of Major sources, collect available necessary. Revise basin necessary to resolve resolved. On-going data
Works data on basin rainfall and water balance or outstanding issues. collection for future
flows. Review data and if hydrological model. If updating of water
necessary visit stations to necessary generate availability and sediment
assess data quality. sequences of daily, yield.
Recommend any monthly and annual
necessary improvements flows, with probability
to network or processing analysis. Simulate annual
of data. Note details of water availability over life
recorded floods and of project using
compare with regional spreadsheet analysis.
envelopes. Analyse flows Confirm design flood(s)
and frequency of floods. and carry out flood
Sample and test quality routing. Refine estimates
for use for irrigation of sediment yield. Install
purposes. Estimate additional measuring
sediment yields. Prepare devices if this will
preliminary estimate of usefully add to
basin water balance and hydrological knowledge
round-figure estimates of (which it will only in
area each source will certain circumstances, eg
irrigate, power potential for measuring annual
or other use. Prepare floods).
indicative basin plan for
optimum water use.
1: Note that in a programme approach, eg under a sectoral loan, feasibility activities for subprojects may be deferred until after appraisal (see Part II, Chapter 4).

1 2 3 4
B. Hydrogeological Collect and study As 1, plus geophysical Further refinement of 2 if All outstanding issues
Aspects of Major available data on surveys drilling test wells, necessary to resolve resolved. Establish
Groundwater groundwater occurrence pump tests, and outstanding issues. groundwater monitoring
Development and use. From desk study preparation of simple programme.
identify areas worthy of model of aquifer
further exploration. recharge, storage,
Review well logs and transmissivity and yield.
existing yields. Sample Design of wells, specify
and test water quality. pumps and drilling
Map preliminary methods. Define
assessment of monitoring system.
groundwater potential.

1 2 3 4
C. Topography of Sites Obtain satellite imagery As 1 plus orthophoto As 2 plus maps of larger Further survey and setting
of Major Structures at 1:100,000 for mapping (preferably, scales for selected out for construction
and Scheme Area catchment area and at otherwise line mapping) structures. If necessary, purposes.
1:50,000 of command for the command area at additional survey of in-
area for reconnaissance. 1:10,000 with 1 m field, to permit designs of
Mapping of catchment contour interval, or better. at least the first year's
and command areas at 1:2,500 scale mapping work.
1:50,000 with 10 m with 1 m contour interval
contour interval, or better. or better for main canals
Uncontrolled, or better and major structures.
controlled, air-photo
mosaics of sites of major Manual survey (at least
structures and main canal 10% of command area) of
alignments, at a scale of a sample of the infield
1:10,000. Better still, area for designing sample
orthophoto or line in-field layout and land
mapping at this scale with levelling requirements.
2 m contour interval.

1 2 3 4
D. Land Capability Review of following data: As 1 plus interpretation of More intensive soil survey Establish monitoring
for Irrigation LANDSAT/SPOT imagery new air photography. with observation in system for potential
at 1:100,000 or larger; air Identify and quantify soils representative areas of 1 waterlogging and salinity
photography at 1:50,000 and land forms. Define observation per 10 ha build-up.
or larger; geological and crop-specific land average, to confirm
soil maps at 1:250,000 or utilization types. Soil boundaries, and to further
better; and land use maps survey at 1 observation per investigate any drainage
at 1:50,000 or better. 25-50 ha. Consider erosion problems.
Review reports and maps hazard, fertility, toxicity,
of soil survey institutions, drainage.
universities, consultants,
etc. Hence identify
principal land systems.
Interpretation of available
air photographs at
1:25,000 or better.
Reconnaissance soil survey
at observation density of 1
sample per 100-200 ha
(depending on magnitude
of scheme and mapping
scale) plus sampling and
testing for physical and
chemical properties; 10%
of observations consisting
of deep pitting to check
drainage.

1 2 3 4
E. Geotechnical From a review of Drilling, pitting for dams, Further confirmatory As 3.

Aspects of Major available air photography other structures and investigation if required
Structures and geological and topo canals. Confirm during detailed
maps, assess areas availability of borrow engineering design.
suitable for dams, canals, material, concrete
structures. Carry out field aggregates etc.
visits to selected sites.
Field classification of
geological formations and
soil types. Decide on
requirements for
geotechnical
investigations for dams,
other structures and
canals, and prepare
programme for 2.

1 2 3 4
F. Civil and Irrigation Outline main water Refine estimates of Detailed designs, Continue with detailed
Engineering sources and irrigable project water construction drawings, designs. Arrange for
land. Define areas of requirements for the bills of quantities, tendering of works if
swamp or seasonal preferred option and specifications and tender financing institution has
inundation. likely cropping pattern. documents, or operational approved.
Prepare preliminary Carry out plans for direct labour
estimates of irrigation operational/simulation construction with farmer
water requirements for studies to optimise participation.
possible typical cropping dam/reservoir/ scheme
patterns. Link present or area. Prepare feasibility
potential irrigation level preliminary designs
demands with possible for the system, to the
water sources. Hence level of detail that ensures
identify possible schemes that no significant
for irrigation, drainage, or changes will be necessary
flood control. Prepare later.
outline designs of the
options.

1 2 3 4
G. Civil and Irrigation Preliminary cost estimates Refine quantities and cost Refine quantities and Arrange for farmers'
Infrastructure Costs (including O&M) for estimates, accurate to say costs in the light of further contribution to be made.
engineering works, on- 15%. Tabulate investigations and
farm development and foreign/local costs and designs, with schedule of
any land acquisition. programme of disbursements.
expenditure for
engineering works, land
development, land
acquisition etc. Identify
scope for and nature of
farmers' contribution to
capital costs.

1 2 3 4
H. Agricultural Review general policies for Carry out SEPSS if required Refine recommendations Arrange for tendering for
Development and irrigated crops, rainfed and from this prepare in 2. Refine quantities and supply of plant and
Marketing crops, food versus recommendations on costs for agricultural equipment, storage
industrial crops, general possible or likely cropping development and facilities etc. if financing
assumptions on crop patterns, estimates of yields marketing in the light of agency has approved.
yields, cropping intensity. with and without project. final planning of
List local crops. Note Jointly with component, with schedule
development constraints engineering/hydrology of disbursements. Prepare
(lack of water, seeds, study, refine estimates of tender documents for plant
O&M, extension, research, crop water requirements. and equipment (including
finance, markets etc.). Make more detailed marketing plant and
Preliminary agronomic equipment) storage
recommendations on recommendations and on facilities etc.
strategy for irrigated marketing, storage, credit
agricultural development: and technical support.
cropping patterns, Refine cost estimates,
intensity, needs for accurate to say 15%.
extension and other Tabulate foreign/local costs
services. and programme of
Design SEPSS if considered expenditure for works.
necessary.
Preliminary cost estimates
(including O&M) for any
likely marketing
infrastructure, eg storage
and grading sheds,
covered markets etc., and
any land acquisition costs..

1 2 3 4
I. Incremental Preliminary estimates of From SEPSS, and other Further refinement if

Agricultural incremental benefits from local data collected, necessary or if additional
Production Benefits irrigation, on the basis of refine crop selection, data become available.
representative models for cropping patterns, crop Develop proposals for
the typical crops and and farm models. treatment of gender
cropping patterns. Estimate incremental related constraints, eg in
benefits per household extension approaches.
and at project level.
Assess social constraints
to intensified production,
and need for separate
treatment of gender
related constraints.

1 2 3 4
J. Generation, Testing Identify institutions Define institutional Fine-tune cost estimates. Complete recruitment and
and Transfer of currently involved in responsibilities for Prepare tender documents first round of
Agricultural research or extension agricultural research, for key items. Initiate training/PRAs. Initiate
Production related to irrigated technology testing and recruitment of extra staff monitoring and
Technology agriculture (public, extension. Plan means to and/or pre-implementation evaluation. Maintain
private sector, farmers' link their activities, and to training for new roles. training and re-training,
organisations, NGOs, ensure adequate Organise pre-project M&E.
technical assistance participation of irrigators seminars or PRA for
agencies). Assess the to ensure client-oriented existing field-level
relevance of their present approach. Define field extension and research
organisation, programmes modus operandi of staff.
and field deployment to services, extra resources
supporting the irrigation needed for them to
project alternatives under operate as defined, and
consideration. Make estimate costs. Define
preliminary classification monitoring and
of strengths and evaluation system. Ensure
weaknesses. Review key researchers or
options for improving extensionists who will be
relevance or impact of involved in
their work and possible implementation
roles for investment in participate in SEPSS.
achieving such
improvements.

1 2 3 4
K. Participation and Involvement of Consultations with Finalisation of project Prepare farmers for
Water Users' stakeholders in evolution farmers directly or planning with all making contribution to
Associations of development concepts through local stakeholders, from capital costs. Obtain
and comparison of authorities/village farmers' representatives to written commitment to
investment options councils etc. and SEPSS. financing institution at provide construction
through interviews and Establish demand for concluding workshop. If labour and to accept
participative project or subprojects, necessary, assist farmers O&M responsibility.
approaches/workshops. preferably by example (eg with electoral formalities
demonstrations of for WUA committee and
previous farmer drafting constitution.
commitment on other
demand-led development
such as community
contribution to school
buildings). Assess need
for/feasibility/prospects for
success of WUA.
Consultation with farmers
with regard to scope and
layout of scheme.

1 2 3 4
L. Environmental Initial environmental If recommended by the Refine actions plans in Establish environmental
Impact evaluation (IEE) using IEE, carry out EIA, the light of further monitoring system.
ICID checklist to assess including if required land information collected or
the need for acquisition assessment received. Specify
environmental impact (LAA), and prepare any indicators, organisation
assessment (EIA). necessary environmental and responsibilities for
action plans (EAPs) and environmental
resettlement action plans monitoring. Enact any
(RAPs). Otherwise prepare necessary legislation to
mitigation plan. Modify enable plans to be
project planning implemented.
necessary to
accommodate
recommendations.

1 2 3 4
M. Institutions, Initial institutional Carry out ICA covering Finalise arrangements or Implement any
Organisation and evaluation (IIE). Describe assessment of concerned any organisation organisational changes
Management, Cost institutional framework departments/private sector initiatives/institutional necessary; establish
Recovery, Operation for irrigation, organisations, their reforms. Enact any project entity if necessary.
and Maintenance environmental protection staffing and capacity, necessary legislation to Appoint key project staff.
and, if appropriate, social morale, internal culture enable changes to be Set up accounts and
welfare. Preliminary and performance. Match implemented, including procurement
assessment of institutional project design to capacity legal establishment of arrangements. Arrange
strengths and weaknesses to implement, allowing WUAs. Plan any pre- bidding and contracts
(ability, capacity and for proposed implementation training with NGOs and
funding). Relate to strengthening or or seminars. consultants if required.
possible project(s) being adjustments. Prepare Implement training and
identified. Decide on proposals for institutional start-up seminars or
needs for institutional development/strengthenin workshops.
capacity assessment (ICA). g, including TA and
training needs, and
contracting out to private
sector. Recommendations
for project organisation
and management,
including formation of
WUAs if appropriate.
Specify
arrangements/pricing for
water charges and
collection. Specify
arrangements for O&M.

1 2 3 4
N. Economic Analysis Ranking of alternatives Estimation of economic Finalise financial

according to simple and financial returns. Risk requirements, loan details
financial cost/benefit and sensitivity analysis. and disbursement
analyses using data from Effect on balance of schedule.
rapid assessments. payments and government
budget. Impact on
income distribution and
poverty alleviation. Fiscal
implications and cost
recovery.
ANNEX 1: Checklist for contents

of an irrigation subsector review
and strategy paper
Note: Not everything listed below will be relevant in a given case.
Users must be selective in coverage.
Currency Equivalents
Acronyms
SUMMARY (3 to 5 pages)
INTRODUCTION (1 TO 2 PAGES)
Objectives of strategy formulation: including whether intended to
update an existing subsector review, or to support an existing or proposed
Agricultural Sector Review or Water Resources Management
Strategy/Strategy Study.
Origin and authorship: origin of request and reasons for review and
strategy formulation, and details of the review/strategy formulation team.
Methodology employed: particularly the methodology employed to

achieve a consensus of views with government (workshops/participatory
planning/joint review). Use of databases.
Intended readership
NATIONAL BACKGROUND (2 TO 3 PAGES)

(OR REGIONAL BACKGROUND IF LIMITS DO NOT COINCIDE WITH NATIONAL BOUNDARIES).
Country (Region): location, size, other key geographic features,

population and its rate of growth.
Country (Region) economy and trends: main features of economy, GDP,

GDP per caput, inflation, balance of payments, public sector finances,
balance of trade and other macro-economic issues; agriculture and
irrigation in the economy, its contribution to GDP, employment, food
supply and self-sufficiency, and export earnings.
Demand and supply of agricultural products: estimates of future

demand or markets for agricultural products versus expected supply.
Consider food staples, other commodities for local consumption and
export products, concentrating on crops that might profitably be irrigated,
taking account of demographic trends or world markets as appropriate.
Government’s overall development aims and priorities: main relevant

thrusts of economic policy or recent adjustments, eg fiscal retrenchment,
limits on external borrowing, market liberalisation, export growth versus
import substitution, privatisation; key features/objectives/targets of national
plans or policy commitments.
THE RESOURCE BASE (2 TO 5 PAGES)

Climate: highlight rainfall amount and variability versus crop
requirements, any seasonal temperature limitations to plant growth, and
hazards (such as hail); on this basis categorise agro-climatic zones for which
irrigation strategies should be evolved (or irrigation declared unnecessary).
Land Resources: total arable land resources of the country (region), the
limitations (eg soils and topography) for irrigation suitability; significant
salinity or drainage problems, whether man-made or natural, and whether
they offer potential for reclamation and development.
Water Resources: summarise, as appropriate, available data on surface

and groundwater sources, taking account of any limitations imposed by
any international water rights issues, availability for agriculture or
competition with other sectors, location relative to potentially irrigable
land, quality, flood regimes, etc.
THE IRRIGATION SUBSECTOR: PRESENT SITUATION

(10 TO 15 PAGES)
This key chapter should combine a minimum of essential description
with a critical assessment of the performance and relevance of the
subsector, alerting the reader to strengths, weaknesses and areas
needing attention.
Existing Irrigation and Drainage: the main categories (eg public large-
scale/small-scale, private large-scale/small-scale, traditional water control
systems etc.), and types (eg surface/sprinkler/drip, drainage only etc.);
history of development and areas of each category developed/cropped;
crops grown, production systems, productivity, water use efficiency,
present condition; responsibilities for/adequacy of O&M, and levels of cost
recovery on public schemes; farmers experiences with irrigation;
interactions, mixing or conflicts (if any) between irrigated agriculture and

rainfed cropping, livestock, fisheries, etc.; social and environmental
impacts of existing irrigation to date and future implications; for each agro-
ecological zone defined above, the types of production or crops for which
irrigation is technically justified or necessary, either to obtain any
significant output, for growth in certain seasons of the year, for
security/supplementary/survival purposes, or to take commercial advantage
of a climate which is comparatively favourable (eg for seed production or
expansion of high-value horticulture in places with good market
connections); limitations to development imposed by physical factors such
as porous soils or pumping lifts, or markets.
Irrigation costs and benefits: typical capital and O&M costs for the
various categories and types of irrigation, and typical crop budgets/farm
models.
Socio-Economics: current socio-economic situation on existing

schemes, including land tenure and water rights aspects, land holding
sizes, and information regarding disadvantaged groups.
Current developments: irrigation developments under construction, or

about to be constructed; anticipated social and environmental impacts;
proposed, on-going or recent studies (refer to main relevant work, flagging
databases/findings taken into account by the team in reaching their
conclusions; cross-reference to full lists of references and bibliography,
which should be annexed).
Institutions: describe and assess key government institutions in the sub-

sector (responsibilities, budgets, staffing, internal culture, track record) and
their main strengths and weaknesses; role of the private and cooperative
sector - the main actors (NGOs, companies, individual entrepreneurs,
water users’ associations, irrigation equipment suppliers, consulting firms
and contractors) involved in planning and construction, scheme O&M,
agricultural production, supply of goods, or services to irrigators, and
purchase/processing/marketing of output; other external technical
assistance support and the degree of government dependency on this;
beneficiary participation and performance in public irrigation planning,
development, operation or maintenance.
The legal framework: summary of relevant legislation affecting land

tenure, water abstraction and use; legal basis on which institutional
structures for irrigation are founded; adequacy of existing provisions and
need for change.
Subsectoral finances: the main sources of finance for public and private
irrigation, cost recovery and taxation regimes, and the fiscal sustainability
of present arrangements or levels of application or regulations.
Potential for further development: quote available statistics, compared

with review team’s estimates, making clear whether they refer only to
technical potential or whether some economic criteria (especially limits to
costs of development or operation) have been applied; place irrigation in
the context of overall water resources management, indicating underlying
assumptions in deriving overall availability of water, allocation for other
sectors and re-use (cascades of tanks; conjunctive use of surface and
groundwater; agricultural use of urban/industrial waste water).
FINANCIAL AND ECONOMIC VIABILITY OF IRRIGATION

(5 TO 10 PAGES)
Financial analysis of crop production: for each of the main crops under
the various categories of irrigation, the returns to the most constraining
production factors (eg land, water and labour) compared with rainfed crops.
Economic analysis of crop production: similar figures but with all

subsidies removed, including any in the cost of water, using border prices
and any necessary shadow pricing of currency, again compared with
rainfed crops.
Economic analysis of irrigation investments: cost-benefit analysis in

economic terms , with sensitivity analysis, for the major representative
categories and types of irrigation system, using typical cropping patterns. It
may be appropriate to carry out a DRC analysis (see Part II, Chapter 2), for
which results may be attached in an annex.
Investment ceilings for future developments: for each of the main

crops/typical cropping patterns, the maximum justifiable investment cost
per hectare to yield an assumed ERR (likely minimum 12 percent)1.
OPPORTUNITIES AND CONSTRAINTS TO

IRRIGATION DEVELOPMENT (1 TO 2 PAGES)
In this chapter the physical opportunities for irrigation and drainage
development should be reviewed in comparison with market opportunities
or constraints, to identify the implications for the possible scale, type and
pace of future development.
Opportunities: from the previous chapters identify the potential for new
irrigation or for improvements to existing irrigation; assess the value of
existing development as a model for future development; flag any key
1: For an example, see Annex 2 in Investment Centre Technical Paper 5, Irrigation in Africa South of the
Sahara, FAO, Rome (1986)
products for which there is, or is not, local comparative advantage;

quantify future supply gaps or market dimensions for key commodities if
possible, distinguishing cases where irrigated production would be
appropriate.
Constraints to future development: from lessons learned, distilled from

previous chapters, summarise the main points that need to be taken into
account in evolving any proposals for subsectoral development. These
might include limitations/problems of existing development; adverse social
and environmental impacts; land tenure/water rights issues (including any
international issues) affecting public or private irrigation/drainage;
inadequate cost recovery, O&M, or commitment by farmers on public
irrigation; lack of adequate legislation; lack of institutional capacity for
public or private irrigation.
GOVERNMENT PRIORITIES AND PLANS (1 TO 3 PAGES)

Main government objectives for irrigation/drainage development,
giving figures, targets, dates, etc. where possible, from previous policy
documents/statements, as modified (if at all) in a workshop1 attended by
the stakeholders. Contents may cover:
• a brief recapitulation from Chapter 2 of the main macro-economic

constraints or opportunities on which the government’s development
policy is founded, and hence its broad development goals.
• the main commodities (food/non-food) and markets (self-
sufficiency/exports) which are the objectives of government irrigation
development priorities or plans;
• the irrigation/drainage types or categories of producer to be favoured
or the overall social/political objectives which irrigation/drainage is
intended to serve;
• the government’s technical strategy for development
(rehabilitate/exploit sunk costs/new construction, etc.);
• government’s strategy for minimising the risk/mitigating adverse social
and environmental impacts (legislation, institutional reform,
strengthening/forming environmental protection agency);
• specific facets of government policy such as:
• the priority given to agricultural use of available water resources;
• expected contribution of the sub-sector to social objectives or
employment creation;
• future roles of public and private sectors in irrigation/drainage
development;
• the promotion of participatory planning and development;
1: A workshop is often held for the purpose of reaching a consensus on the options before finalisation of the
strategy paper (see Part II, Chapter 2).
• legal or institutional changes affecting the subsector to which the

government is committed;
• future intentions on fiscal measures, cost recovery, credit or
subsidies for irrigation;
• anticipated sources of capital and recurrent funding for the sub-
sector (government contribution, irrigators’ contribution,
extent/sources of external funding envisaged);
• decentralisation of institutional responsibility;
• regulation of water rights or reform of tenure arrangements for
irrigated land;
• environmental protection;
• subsectoral projects, programmes or plans to which the government
is committed.
STRATEGY FOR IRRIGATION DEVELOPMENT (5 TO 10 PAGES)

(PREFACE WITH “PROPOSED”, “POSSIBLE” OR “SOME ELEMENTS OF” ETC., DEPENDING ON STATUS
OF ELABORATION OF WORK).
To set the scene for this, the most important chapter of the Paper, it is
useful to set out the main sub-sectoral issues to which the strategy being
proposed is intended to respond. Issues will often echo those first raised at
the Preliminary Brief stage (see Annex 3), but now refined or modified in
the light of the review/strategy formulation (in which government has fully
participated through the medium of workshops and other activities).
Most of the rest of this chapter will be so specific to the country/area

concerned that no detailed checklist can be offered. However, three
general questions are likely to need addressing in almost every case:
“Irrigation/drainage development for what?”, “How, when and by whom?”
and “What should government do about it?”
Irrigation/drainage for what? Drawing on earlier background, a

rationale is needed to spell out the main national needs, opportunities or
priorities to which irrigation or drainage development should respond,
distinguishing if appropriate between short, medium and longer-term
needs or objectives. Depending on the setting, economic, social, political
or environmental criteria will need to be considered.
How, when and by whom? Following on from the above, a rationale

needs to be derived to justify the irrigation scale, technology/production
systems and the types of irrigator that should be favoured, in order to meet
the stated priority objectives, and the pace of development that would fit
with existing development capacity.
These two sections should be closely linked and will tend to integrate a
wide variety of previous information - for instance on food supply and
demand, local or export markets, the comparative advantage of various
forms of irrigation (both nationally and versus rainfed opportunities),
availability of or competition for natural resources, adverse social and
environmental impacts, under-used or neglected infrastructure, farmer
motivation, social needs, labour demand or supply, agro-processing, road
access, power supplies, and so on. They should take full account of the
lessons of experience or precedent regarding the ease or difficulty of
exploiting particular opportunities, or of overcoming key sub-sectoral
constraints - especially those relating to institutional capacity for
development. The government’s future intentions, commitments or
priorities as well as its real capacity to influence or undertake irrigation
development must also be taken into account. If strategic choices centre
on production under rainfed versus irrigated conditions, or under
alternative systems or different scales of irrigation, arguments can be
supported with the simple production models developed in Chapter 5 to
demonstrate likely economic efficiency, comparative advantage or
financial attractiveness of growing alternative commodities by different
means. The models may also be used to compare economic returns per
unit volume of water - usually the limiting resource - per hectare
developed, or per labour day. In many countries a balance may need to
be struck between new construction and the rehabilitation of existing
facilities: illustrative summary tables of relative costs and benefits can also
be given for each of these, to guide national decision-makers. The
principles that should orient future institutional and social arrangements
for irrigation planning, construction, operation and management should
also be set out, indicating whether a participatory approach is appropriate.
A strategy will need to be included to prevent rehabilitated systems, once
repaired, from degenerating again.
The third question - The government’s role? - needs to be a logical

response to the forms of development and future organisation of irrigation
advocated under the two previous headings. It may help to start by
clarifying some principles.
First, construction of civil works and supporting public infrastructure:

what irrigation/drainage works should the government design and finance
under the various categories of development suggested for priority, and
where would the irrigators take over (“public” versus “private” is seldom
an all-or-nothing destination; many gradations exist depending on how
close government works come to the farmer’s plot). If a public/private
partnership is envisaged, what prior commitments and financial
contribution should be required of each partner before development starts?
Should future development strategy include improvements to power
supplies or access roads? If government’s capacity to plan, implement
operate and maintain is limited, to what extent is it appropriate to rely on
external technical assistance to strengthen its capacity, bearing in mind

past success/failure of this kind of assistance, or to contract out to the
private sector for these services?
Second, system operation and maintenance: how should costs and

responsibilities be divided in future between the various public and private
interests involved? If changes are proposed - for instance for greater
participation of communities, water users’ associations or individual
irrigators - how could this be made attractive to them and how should
transfer from public authorities be organised? Assuming that the full cost of
O&M is recovered, what levels of capital cost recovery should be aimed
for and how should recovery be made?
Third, production support and marketing: what should be done by the

private sector, entrepreneurs, contracted agencies, associations or
individual producers, as opposed to government agencies? Topics to cover
may include extension and research, credit, machinery services,
privatisation of the supply of production inputs and materials, and
arrangements for agro-processing and marketing.
A fourth general principle to clarify is the broader guardianship of the

public interest: this normally devolves to government but concerns
subsectoral matters which are often inadequately attended to, such as
inter-sectoral and longer-term allocations of water, protecting or
monitoring environmental impacts, sustainability (of aquifers and land
use), and riparian rights; suggestions here should be founded on earlier
references to the main legal, institutional, organisational and fiscal issues
of the sub-sector.
Fifth, there may be some spill-over into macro-economic questions

which the government would need to attend to if subsectoral
developments of the sorts indicated are to become realities.
Whether or not to go into details on specific government services in the

strategy chapter is an open point. Having clarified the principles which it is
suggested should guide future strategy, it may seem appropriate then to
flag the main topics to which government should give attention - eg
improving extension, research or training; upgrading the quality of scheme
O&M; collecting more water charges; promoting and “nursing” WUAs;
sorting out the credit system; recovering urban wastewater for agricultural
use; or encouraging more local manufacture of irrigation equipment.
The final section of the strategy chapter will often compare the strategic
suggestions just given to the present policies and plans of the government.
Treatment is likely to be partly reassuring (“...... strategic proposals are in
line with government’s thinking, as elucidated at the concluding workshop
.....”) and partly a matter of foreshadowing the issues which should be
picked up at the end of the report (“.....would, however, imply consistent

application of laws on water abstraction and strengthening of present
environmental protection/enforcement capacity .....”).
DEVELOPMENT PROPOSALS (1 TO 4 PAGES)

Here the team should present its ideas on specific actions which the
government could take in support of the strategy which has been
proposed. Again, content will depend greatly on circumstances.
• It may be possible to pinpoint specific, existing, project ideas which

can be taken up forthwith because they match the proposed strategy,
or perhaps suggest an investment programme of - for instance -
progressive rehabilitation of works serving the favoured types of
producer in areas of comparative advantage.
• It may be possible to make proposals for practical interventions which
transcend individual locations and span the sub-sector; for example
to re-cast research and extension on irrigation to respond to an
oncoming need to generate more production from a now fully-used
water supply; or a national campaign for improved operation and
maintenance of existing facilities based perhaps on higher cost
recovery, or perhaps on budgetary allocations which better reflect an
important current contribution of irrigation to the national economy
and development goals.
• If the team has found so few reliable data that it has been able only to
make provisional strategy suggestions based on broad estimates or
working hypotheses, then proposals may give priority to the studies
which are needed before further progress can be made - for instance of
surface water resources, extent of waterlogging, groundwater reserves,
the present condition of existing works, institutional performance,
relationships between irrigation and rainfed farming, farmer attitudes
and motivation, the profitability of different forms of irrigation, credit
overdues, market opportunities, etc., etc. Immediate needs may be for
technical assistance funds rather than investment finance.
• Finally, it may have been concluded that sub-sectoral progress is
impeded mainly by macro-economic or other trans-sectoral issues,
the easing of which may often have few cost implications of any sort
for the government. In this case the team’s proposals may focus on
the government creating the pre-conditions in which the development
of the subsector could be expected to accelerate largely on the basis
of private initiatives, for instance through making changes in macro-
economic or pricing policy, fiscal reforms, institutional changes or
enacting new laws.
Frequently there will be proposals under several of these general

headings, or a sectoral approach may be suggested with a view to
identifying a project to finance a time-slice of government’s irrigation
investment programme and to concentrate on capacity-building. Where
possible and appropriate, proposals should be amplified to indicate in
outline their possible components, scale, location and timing, followed by
costs, likely needs for internal and external financing, external technical
assistance, and possible sources of these external ingredients. Issues,
however, may be best left until later (Chapter 11). Alternative scales or
development scenarios can be discussed, particularly if they can be used
to illustrate different trade-offs between objectives - eg technical efficiency
versus equity, or small/quick versus larger/slower increases in output of
certain commodities.
IMMEDIATE ACTIONS AND FOLLOW-UP (1 TO 3 PAGES)

A strategy formulation team is likely to have raised local expectations,
and the previous chapter will probably contain a miscellany of
recommendations or ideas ranging from specific physical interventions,
through strengthened services, to studies or institutional and policy
changes. Some of these may require external finance or assistance, others
can be locally funded and for others the cost to the government may be
political rather than monetary. Some will be quick, others will be slow. The
purpose of this chapter should be to show the government and potential
financing agencies that the strategic proposals can lead, within a
reasonable time, to action and tangible subsectoral benefits. To this end
the chapter should establish sequences or priorities among the various
proposals given earlier. Overall, the paths which it sets out should help the
government to do two things:
• improve on existing subsectoral performance in the short term; and

• prepare for further irrigation and drainage development over the
longer term, according to the strategy proposed.
Insofar as either path requires external assistance, needs and possible

sources should be suggested and spelled out.
ISSUES AND RISKS (1 TO 2 PAGES)

The final chapter should summarise the issues and risks associated with
the proposed strategy. The team should:
• list the major subsectoral issues requiring decisions either by the

government or potential financing agencies, if the development
strategy or options proposed by the concluding workshop are to be
implemented (it may be appropriate to give preferred alternatives if
the concluding workshop has not resulted in consensus); it should
always be indicated by whom, how and by when decisions need to
be taken;
• list the main externalities or risks to which the development strategy
or different options could be subject (macro-economic factors, world
market trends, disputed riparian rights, floods, etc.).
FLOW CHARTS AND LOGIC DIAGRAMS

Using simple graphics software (such as that included in word
processing, spreadsheet or data base packages) flow charts and logic
diagrams can be prepared and presented to help the reader.
MAPS
Maps included might be:
1. Agro-ecological Zones and Land Use
2. Hydrological Zones and Rainfall Isohyets
3. Groundwater Potential
4. Location of Existing and Proposed/Possible Irrigation Development
ANNEXES
Annexes might include:
1. Existing Irrigation Database
2. Basis of Estimates of Typical Irrigation Costs
3. Marketing and Prices of Agricultural Products
4. Typical Crop Budgets for Irrigated Crops
5. Financial and Economic Viability of Irrigation
BIBLIOGRAPHY
ANNEX 2:
Outline of a typical project
document or dossier
This annex, read in conjunction with Investment Centre Technical Paper
7 , seeks to cover the great majority of the topics likely to be dealt with in
1
planning any irrigation or drainage investment. It is intended to be used as

a checklist, to be consulted as necessary by planning teams in the course
of documenting the proposal and to give direction and purpose to the
overall planning process described in Part II. Note that the layout described
is adapted to project-specific investments, but alternative presentations are
suggested where necessary to allow for the case of subsectoral or
programme investments, in view of the trend towards these.
The main text of a final project document or dossier may have up to

eleven chapters, plus annexes that may be bound into the document or left
as separate working papers. The annexes may have been prepared by local
planning groups (LPGs), including university groups, local consultants or
consulting firms, or international consulting firms. Investment Centre
missions may also have been involved. Some of the investigations, such as
engineering feasibility studies carried out by consulting companies, may
have been performed independently of other work. As a result, the various
annexes may not necessarily be fully consistent with each other, nor with
the main text, even though every effort should have been made to achieve
this. However, in the interests of streamlining the planning and appraisal
process, repetition of earlier report writing should be avoided. Any
inconsistencies between the various annexes or working papers should
therefore simply be acknowledged and explained in the main text; no
attempt should be made to rewrite them unless this is essential for clarity
or is requested by the financing institution.
Depending on its complexity, anticipated environmental impact and the

implementation arrangements for the proposed investment, the main text of
the project document should be no more than 60 pages long and
preferably less than 50. The inside of the front cover should usually contain
details of currency equivalents, a list of acronyms and abbreviations, and
any other local weights or measures that need explanation. If appropriate,
selected country statistics may also be given.
1: Investment Centre Technical Paper 7: Guidelines for the Design of Agricultural Investment Projects.
FAO, Rome (1993).
SUMMARY AND CONCLUSIONS (2-4 PAGES)

The main report should be preceded by a summary which briefly
describes:
• the proposed project, its location, size and main components;

• the reasons for its selection, and its relation to government policies
and plans;
• estimated costs and disbursement period;
• the proposed organisation for implementation and subsequent O&M,
and the implications for existing institutions;
• the people who will use the project and the expected impact on their
incomes;
• the arrangements for fiscal sustainability;
• any adverse social and environmental impacts;
• the expected economic results;
• the main issues to be resolved before appraisal;
• the implementation plan.
The summary should normally cover topics in the order in which they
are treated in the main text of the document, with one paragraph for each
chapter of the main text. The summary can usually only be written after
the main report has been completed. It should not exceed four pages or
ten percent of the length of the main report, whichever is the shorter.
INTRODUCTION (1 PAGE)
This chapter is administrative and should state the purpose of the report
and to whom it is addressed. It should indicate how, when and by whom
(eg LPGs, consulting firms, individuals and/or FAO Investment Centre
missions) the project has been prepared. It should also state the origin of
the project, ie whether in a national development plan, from subsectoral
strategy formulation, or from previous examination of the available options.
BACKGROUND (3-6 PAGES)

The background chapter should refer the reader to other published
reports (eg the irrigation subsector review and strategy paper - see Annex
1) as far as possible. However, a well thought out and presented
background chapter is essential to establish the framework for the project
rationale and the planning considerations described in later chapters.
It usually includes the following:
A. The Economy
This should describe the contribution of agriculture and irrigated
agriculture to GDP, per caput income, national dependence on particular
imports and exports, balance of payment considerations, inflation,
indebtedness, exchange rate adjustments, public investment programme,
adequacy of revenue to meet recurrent funding requirements, macro-
economic distortions and other features of economic development that have
a bearing on the project. Recent changes and trends should be highlighted.
B. The Agricultural Sector

The main characteristics of the sector should be summarised, including
brief references to main forms of land use, farm size and land tenure,
dominant farming systems, production, input availability and utilization,
and constraints to overall development. Present and future estimates of
supply and demand for specific commodities and the country’s
comparative advantage for their production should also be briefly
mentioned. Specific treatment of market prospects is desirable where these
might have an important bearing on project planning, for example on the
scale of irrigation development.
C. The Irrigation Subsector

This section should be included in the case of project-specific
investments only: for subsectoral investments the irrigation subsector
should be accorded a chapter in its own right, broadly following the
content of the irrigation subsector strategy paper. In any case it should
draw heavily on the strategy paper, assuming one has been written;
otherwise on other available reports and data. It should briefly describe the
location, extent and nature of existing irrigation and drainage, its historical
development, organisation and management, past and present
performance in terms of command area developed, area utilised, cropping
intensities and patterns, and average yields achieved.
From water resources investigations and water resources management

strategies already defined, water use for irrigation should be placed in the
context of the country’s overall water availability and usage, as well as that
for the basin in which it will be situated. The scope for further irrigation
development should then be described, taking account of competing
demands. If the project is a part of an overall river basin plan, that plan
should be explained. Other on-going irrigation developments, or those in
the pipeline, should also be noted.
The social and environmental impacts of previous developments,

including resettlement, health, erosion and sedimentation, waterlogging,
salinisation, pollution or depletion of surface or groundwater supplies, and
measures taken to mitigate them should also be briefly referred to. The
lessons learned should be highlighted. Similarly, any other problems which
have a direct bearing on the project should also be highlighted, such as
cost recovery and O&M or water rights agreements for international rivers.
D. Income Distribution and Poverty

These topics should be given special mention when the project is
intended to benefit a particular target group of the rural poor, and should
discuss related indicators (eg access to land, water or services, nutrition,
health etc.), and the factors contributing to differentiation that might have
affected the decision to select the particular project or region.
E. Government Subsectoral Policies and Plans

Again drawing on the subsector review and strategy paper, government
priorities and plans should be reviewed in terms of what government sees
as the main national aims and benefits of irrigation - whether these be
food self-sufficiency, export earnings, employment creation, income
distribution, poverty alleviation or some other. Subsectoral objectives for
food and fibre supply, exports, social equity, targets for rural income,
nutritional goals and so on may be mentioned.
In particular, government policy regarding water pricing and cost

recovery, in what form (eg direct water charges, betterment levies, land
taxes, agricultural product taxes and price controls) and how effectively
this is implemented, should be reviewed, as should the appropriateness of
environmental policy.
F. The Financing Institution’s Previous Operations and Experience

This should summarise the financing institution’s previous lending
operations in the country, with particular regard to irrigation and drainage
investments and the lessons learned. It should give details of the numbers
and amounts of previous loans to the subsector, their completion dates and
achievements in terms of new or rehabilitated hectares irrigated and
numbers of users. It should also describe any problems or difficulties
encountered, such as local funding constraints, lengthy procurement
procedures, poor performance of contractors, poor planning, poor O&M
and so on. The lessons of experience that need to be taken account of in
planning future investments should be listed.
THE PROJECT AREA (3 TO 6 PAGES)

This chapter will only be required for project-specific investment in
new irrigation or drainage. It should be replaced with a detailed review
of the subsector in the case of subsectoral investments, or a suggested
alternative Chapter 3 for project-specific investment in rehabilitation (see
Chapter 3(a) below).
Together with its supporting annexes and maps, this chapter should
describe the features of the project area that have implications for the
planning of the proposed investment. It should evaluate the development
opportunities and potential as well as the limitations, focusing throughout
on the investment which is being proposed. It is likely to contain the
sections described below.
A. Location and Natural Resources

This section should summarise the location of the project area and its
land and water resources, highlighting any physical constraints that would
have to be overcome (eg soil erosion and reservoir/canal sedimentation,
poor drainage). The reliability of data (eg scale of soil surveys, length of
rainfall or streamflow records) should be assessed and the need for any
further data collection (eg for additional surveys, tests or hydrological
observations) before construction should be mentioned. Detailed technical
data should be consigned to annexes. Topics to be covered should include
the following:
Location. The location of the project in relation to important features

(the capital, provincial/state capital, administrative boundaries, major
rivers, and transport connections to main markets). The project area might
be a province/state, watershed, the command area of a dam, or a
combination of these. The relevant features should be shown on maps.
Geology, Soils and Land Capability for Irrigation. Land in the project
area should be described with reference to topographic, geological, soil or
land classification surveys and maps. Limiting factors should be
highlighted. The degree of detail required in land evaluation surveys will
vary between projects depending on the characteristics (soil variability,
salinity problems, etc.) of the project lands: guidelines are available in the
FAO Guidelines: Land Evaluation for Irrigated Agriculture1 (see also
Appendix 1 to the main text of these Guidelines). The use of remote
sensing methods and geographic information systems to evaluate the
1: FAO, Rome (1985). See also FAO Soils Bulletin 42: Soil Survey Investigations for Irrigation,
FAO Rome (1979).
resource base, monitor trends (for example in the irrigated/cropped area

over a number of years) and to produce maps can also be considered1 .
Climate. The purpose here is not to describe the climate in detail but to
demonstrate its influence on and importance to the project concept. It
should deal with the main climatic features2 affecting irrigation
requirements and system design: ie rainfall (monthly, annual and its
probability) temperature, sunshine hours, humidity and wind, as well as
reference evapotranspiration. Data should be summarised in tables, with
detailed analysis consigned to an annex. This section should summarise
the agronomic justification for irrigated, as opposed to rainfed, cropping.
Any serious climatic hazards (eg frosts, hail, typhoons) should be noted.
Water resources. Surface and underground water resources should be

described, with reference to hydrological data, geophysical studies and
simulation models. Reliable long term hydrological records normally will
be required if the project involves surface water diversion or storage, and
these should annexed. Where hydrological records are inadequate, it may
be possible to carry out a correlation of rainfall with run-off to extend or
in-fill the record, by employing proprietary hydrological models. In
justifying minor works a synthesis of rainfall, catchment area and assumed
run-off coefficients may be acceptable. Evidence on the nature, recharge
and sustainable yield of aquifers will be necessary if groundwater
development is envisaged. Water quality should be examined and any
aspects that could limit its use for irrigation should be highlighted. Water
resources should be dealt with on a region or basin-wide basis, to
demonstrate the sectoral context of the existing scheme. The present
utilisation and future demand for surface and underground water, and the
prospects for other developments within the same catchment that could
affect water availability for the project, should also be discussed.
B. The Economy and People

The Local Economy. What can be achieved by a project is strongly
influenced by the immediate local environment in which it is set. A brief
overview of the economy of the project area should be presented, focusing
on the importance of agriculture relative to other activities. The emphasis
should be on those aspects that would influence the planning of the
project: for example urban population and income growth expectations,
1: See FAO Remote Sensing Centre, Remote Sensing and its Application to Investment Project Identification
and Preparation: A Study With Special Reference to the FAO Investment Centre, FAO Rome (1993). Modern
computer graphics packages, such as CorelDraw, used in conjunction with flatbed or even hand scanners can
be most useful.
2: Long term data for many climate stations throughout the world are available in FAO's computerised
CLIMWAT database (FAO Irrigation and Drainage Paper 49, 1993), but these can be updated with the most
recent data if necessary.
their impact on demand for basic foods or horticultural crops, the effects of
growth in the industrial sector on the demand for labour and the extent to
which this affects labour availability and wage rates in rural areas, or the
emergence of competing demands for water for urban and industrial uses
that could reduce availability for irrigation.
The People. The people of the project area should be described and
their expected reaction to the project should be assessed. The description
of the socio-economic situation should give special attention to those
aspects that could affect the rate at which the target population for the
project will accept changes.
The report should provide information on the number of people in the

project area, their types of settlement, ethnic origin and their occupations.
An explanation should be given of the way in which resources are at
present managed in the project area, distinguishing between the roles of the
household (and members within it), the extended family, different ethnic
groups and the community as a whole. Intra-household dynamics should be
discussed in detail, particularly gender relations as they influence
disaggregation of labour, access and control over land, labour and capital,
control of crops and income from their sale, and the responsibilities of
husband and wife as family providers. The household economy - alternative
sources of income from off-farm employment, on-farm production, petty
trading and remittances, time available for crop and livestock production
and other activities - should be described. Any conflicting or competing
demands for labour should also be identified. The relative power of different
groups and the extent of influence on individual behaviour and resource
management exercised by traditional leaders should be examined. Special
mention should be made of any cultural or political factors which could
impede the acceptability of the project proposals.
Particular attention should be given to identifying any people whose

way of life could be disturbed by the proposed project, particularly those
who could be displaced, for example families in areas to be flooded by the
construction of a dam.
For IFAD-funded projects aimed deliberately at reducing poverty,

targeting usually receives special importance and a separate chapter on the
target group justifying their selection will be necessary. Special emphasis
should be given to analysing income and wealth distribution and to
explaining the causes of differentiation1.
1: For methods of Rapid Rural Appraisal see FAO Investment Centre Technical Paper No 9, Sociological
Analysis in Agricultural Investment Project Design. FAO Rome (1992).
Factors that might affect the community’s response to the project or the
strategy to be adopted should also be reviewed. These might include
nutritional standards and food security, land tenure and the availability of
labour during the various seasons of the year. In particular, any experience
of group activities within the area (eg for marketing and input supply,
irrigation system O&M), that might have a bearing on the potential for
future cooperation in scheme organisation and management and O&M,
should be rigorously analysed. The socio-economic studies that may have
been conducted in the project area, their findings on people’s aspirations,
especially the extent of farmer interest in the project, should be
summarised, and conclusions drawn on their implications for project
planning. The full findings of the studies may be presented in an annex.
C. Existing Agriculture, Land Use and Land Tenure

Land Use and Farming Systems. This should describe present land use,
farm size, farming systems and practices, crop varieties, yields and use of
inputs, as well as the extent, methods, performance and state of
maintenance of any existing irrigation schemes. The existence of irrigated
experimental stations and demonstration centres in the area should be
mentioned, and their programmes and results summarised. The
performance of farmers in development schemes similar to those proposed
should be described, as an indication of potential yields and production
under the project. Any spontaneous development of irrigation or other
local initiatives that indicate the potential for farmers’ commitment to a
possible new irrigation development should be assessed. Much of the
above information could come from a SEPSS, if this has been carried out
as part of the planning process.
Sustainability of Land Use. This should focus on the sustainability of

land use in the project area. It should point to any particular areas of
environmental concern, such as waterlogging and salinity problems in
irrigated areas, erosion and sedimentation, groundwater depletion, and so
on. Areas affected should if possible be quantified, the economic and
social cost assessed (if this is feasible) and trends identified. Of particular
importance is the identification of the underlying causes of any
degradation, such as population growth, climatic deterioration, excessive
ground or surface water abstraction, pollution, current farming practices,
the construction of new roads, land tenure arrangements, or pricing and
subsidy policies. Competition for natural resources, for instance between
irrigators and pastoralists, or between irrigators and urban users, should be
noted and the effectiveness of any existing regulatory measures discussed.
Land Tenure. The rules or customs for land tenure should be described.
The size and distribution of properties and farms, degrees of fragmentation,
proportion of owner and tenant-operated farms, type of tenure, etc. should
be summarised. The basis for, and reliability of the figures should be given
with reference to cadastral surveys and maps. Dynamic factors in the
situation (trends in tenure arrangements, increasing fragmentation,
consolidation, etc.) should be described. The situation should be evaluated
in terms of development opportunities and obstacles (eg would land titling,
redistribution or consolidation be necessary and practicable?).
D. Rural Institutions, Support Services and Infrastructure

Input Supply, Marketing and Processing. Attention should be given to
the arrangements and their effectiveness, as perceived by farmers, for
supplying inputs and marketing farm produce. Any particular impact of
government agricultural policies (price supports, subsidies on inputs, taxes
on products, etc.) in the project area should also be described and
evaluated. Note should be made of the adequacy of distribution and
storage facilities, as well as of the presence, capacity and current
utilisation of agro-industries. The respective roles of the public and private
sectors in input supply and marketing should be examined.
Infrastructure. The extent and state of communications infrastructure

(roads, railways, airports), and their impact on the accessibility of the
project area should be examined, particularly from the viewpoint of their
relevance to the supply of farm inputs and the marketing of output.
Availability of electricity (especially for powering pumps) should be noted.
Administration, Support Services and Farmers’ Organisations. This

should briefly describe and evaluate the local activities of extension,
research and credit services, the system of local government
administration, and special institutions (such as NGOs) operating in the
project area, to the extent that these are relevant to the project. Special
attention should be given to evaluating farmers’ organisations, including
WUAs, savings and credit clubs, marketing and supply cooperatives and/or
local systems of village administration, customary or otherwise, that could
form the basis of future WUAs. Any other initiatives towards communities’
management of their own affairs and resources should also be mentioned.
Successes and failures, and the lessons learned, should be highlighted.
THE (NAME) IRRIGATION SCHEME: PRESENT STATUS

(3-6 PAGES) (ALTERNATIVE CHAPTER 3 FOR REHABILITATION PROJECT)
The following describes the typical contents of an alternative to Chapter
3 above, to cater for an investment in the rehabilitation and upgrading of
an existing scheme. The actual sequence of subchapters will depend on
the circumstances involved. The chapter should be diagnostic in its
approach. It should for example explain the reasons for water shortages or
poor O&M, rather than simply stating that these problems exist, and
thereby point the reader towards possible solutions to be taken up in the
planning of the investment.
A. Location and Natural Resources

This section should be similar in content to that in Chapter 3 above,
except that if the existing scheme has resulted in any significant adverse
environmental impacts, such as waterlogging and salinisation, these should
be described under a separate heading later in this chapter. Water
resources should be dealt with on a region or basin-wide basis, to
demonstrate the sectoral context of the existing scheme.
B. Description of Existing Facilities

This should summarise the development history of the existing system
(when and by whom planned, constructed, operated and maintained), and
compare its original objectives with reality in terms of:
• intended and actual command area;

• intended and actual settlement patterns and numbers of beneficiaries;
• intended cropping patterns and means of disposal of output (ie local
markets, export, etc.)
• intended and actual land tenure arrangements
A brief technical description of the existing water supply, conveyance

and distribution facilities should be given, supported by maps and figures,
together with a description of the on-farm irrigation technology.
C. The Economy and People

This should be similar to the corresponding section in Chapter 3 above,
except that the description of the people should, if appropriate, distinguish
between those people of the project area who are involved in irrigation on
the areas to be rehabilitated and those who are not.
The analysis will in some cases be based on a diagnosis of the existing

situation carried out as part of a SEPSS. This may have included an
examination of the impact of the project on the local economy, on household
incomes, intra-household dynamics (gender relations, disaggregation of
labour, access and control over land, labour and capital, control of crops and
income from their sale), health and nutrition, on farmers’ aspirations and felt
needs, especially the extent of farmer interest in the project and implications
for project planning. Group activities for O&M should be dealt with in a later
subchapter, but any experience that is relevant to farmers’ participation in the
scheme, now or for the proposed rehabilitation, should be highlighted.
D. Rural Services, Infrastructure and Farmers’ Organisations

This should contain much of the information listed in the corresponding
section in Chapter 3 above.
E. Present Irrigated Agricultural Production

This will be one of the most important parts of a project document for a
rehabilitation/upgrading proposal, since it should review the present
agricultural performance of the scheme. It should preferably be based on
detailed diagnosis from a SEPSS, if resources have allowed the latter to be
performed. It should cover:
• on-farm irrigation practices, compared with the original project

concept, and an explanation for any differences;
• past and present cropping patterns and yields and current trends;
• the reasons for any decline in areas planted or yields obtained;
• any conflicts or competing demands for labour;
• problems and constraints from the farmers’ perspective.
F. Present Condition of Irrigation Facilities

This section will also be important. Depending on the scale of the
project and the extent of operational data available, it should summarise
the results of detailed surveys and diagnostic operational studies that
should have been carried out on the existing system1. It should examine
water availability and demand for the originally intended cropping pattern,
based on the use of FAO’s computer model CROPWAT2 and its computer
1: FAO's forthcoming computer model SIMIS (Scheme Irrigation Management Information System) will play
an increasingly useful role in such work.
2: FAO Irrigation and Drainage Paper 46: CROPWAT - A Computer Program for Irrigation Planning and
Management. FAO Rome (1992).
database CLIMWAT1 (or an alternative locally developed method of

estimating crop water requirements if this is appropriate), and the present
use of the available water. The efficiency of water use and the condition
and design of the existing facilities should be described with a view to
demonstrating the scope and opportunities for improvements through
rehabilitation and possibly modernization. These should, in particular,
focus on measures that facilitate O&M by farmers and achieve more
efficient and equitable water distribution and use.
G. Present Arrangements for O&M and Cost Recovery

The present arrangements for O&M and cost recovery should be
described and their effectiveness assessed. Causes of decline in the
operational condition of the scheme should be listed, and practical
recommendations given for making O&M self financing.
H. Environmental Impact of the Existing Scheme

Significant adverse impacts as a result of the scheme should be
summarised, as derived from an environmental impact assessment of the
scheme which would normally have been made earlier in the planning
process.
EXISTING INSTITUTIONS AND PROJECT

IMPLEMENTATION CAPACITY (3-6 PAGES)
This chapter should highlight any institutional gaps or shortcomings that
may form a constraint to implementation. It should lead the reader to
conclusions on what must be taken into consideration in the project
planning. Relevant institutions are likely to include:
• central government institutions;

• local government institutions;
• private sector organisations and NGOs;
• traditional authorities and farmers organisations (possibly including
WUAs on existing schemes).
1: FAO Irrigation and Drainage Paper 49: CLIMWAT for CROPWAT. FAO Rome (1993).
An institutional capacity analysis, carried out earlier in the planning

process and detailed in an attached annex or working paper, should have
established:
• The goals and objectives of the institutions concerned, whether they

are still valid or whether there is a need for redefinition (eg through
new legislation) or reorientation, taking account of the requirements
of the project.
• The resources of the concerned institutions, in terms of staff, physical
facilities and budget, and whether there are areas of weakness,
imbalances and inconsistencies.
• The performance of the institutions in fulfilling their objectives in a
timely and efficient manner, and whether there are any significant
operational problems, for example delays in decision-making, late
release of funds, problems over procurement of goods, and so on.
The analysis should in particular have resulted in an assessment of the

capacity of the institutions concerned to implement the proposed project.
As a result it should have led to recommendations to achieve sustainable
improvements in existing capacity that will enable the institutions
concerned to successfully implement, operate and maintain the proposed
project. The analysis may also have resulted in conclusions that affected
the choice of project concept or scale, and planning the proposed
investment. This should therefore lead into the project rationale and design
considerations covered in the next Chapter, and the proposals for project
organisation and management, cost recovery, O&M and institutional
capacity building which follow in Chapter 6.
PROJECT RATIONALE AND PLANNING CONSIDERATIONS

(3-6 PAGES)
This chapter leads to the point at which the overall needs, justification
and feasibility of the project proposals that are to be made can be
appreciated. It is the part of the project document which is most likely to
repeat arguments developed first when the project was being
conceptualised, but modified and deepened to reflect the findings of
further thinking or studies. It may briefly refer to options that were
discarded or adjusted at earlier stages, but should then explain the reasons
why the particular project concept which is now being brought forward for
financing was chosen. Based on the information already given in the
background sections of the report, its purpose is to complete the
explanation of why an irrigation or drainage investment is needed, define
its overall objectives, and indicate what kind and scale of project would be
best suited to the existing circumstances. However it is not the purpose of
this chapter to present the actual project proposals: that function is left to
Chapter 6, and anticipation at this point should be avoided.
A. Project Rationale
Against the background of the previous chapter, this should discuss the
objectives of government’s strategy for the irrigation subsector, the criteria
which have led to the selection of the type (eg subsectoral investment, new
irrigation, rehabilitation, drainage) and/or location of the project, and the
constraints imposed by existing institutional capacity or fiscal
arrangements. It may also explain how the proposed project meets the
financing criteria of the financing institution, for example targeting small
farmers in a project proposed for IFAD financing.
B. Planning Considerations
Once the conceptual case for a project has been made under the
section on project rationale, attention needs to be directed to defining the
specific form that it should assume and to explaining this to the reader.
As indicated in Part II of the Guidelines, the process of project planning

usually involves the establishment of broad objectives, a review of the
options for achieving these objectives and a progressive narrowing down
of these options. This leads to decisions on the strategy which, as a
consequence, should be built into the project. This section on design
considerations is the place to present the results of that process, focusing
on the considerations which have led the concept outlined in the rationale
to evolve into the project and its main components in their final proposed
form. In particular, it should address questions such as :
• selection of the target population for the project and any special
targeting measures required to ensure that the project really does
benefit these people (the complex issue of how to prevent project
resources bringing undue benefits to persons outside the target group,
but without whose influence the project might nevertheless not
succeed, needs special treatment);
• the demand for the project, expressed in terms of demonstrable
willingness of the potential users to commit themselves to
contributing towards the capital cost and acceptance of responsibility
for O&M, and in terms of markets for irrigated crops of sufficient
value to justify the investment costs incurred by government and
farmers;
• the commitment and capacity of government to implement the
project;
• the justification for a programme approach, where the aim is build
demand for subproject investments and to encourage participation in
planning, design, construction and O&M;
• the appropriate scale for the project: this should give special
importance to an analysis of the scale and success of any precedents,
to assessments of institutional capabilities and to matching the project
scale with these; it should also examine the implications on project
size of market possibilities, economic and financial viability,
environmental concerns and risk exposure;
• the scope for achieving efficiency gains at low incremental cost by
rehabilitating and upgrading existing irrigation systems, including
traditional irrigation systems;
• the choice of technical strategy and technology to match O&M capacity
(eg upstream versus downstream control, automation etc.) and/or
traditional water rights and methods of distribution (eg division structures
that maintain traditional rights and farmers’ operational preferences);
• the selection of organisational arrangements for the project: for
example whether to reinforce the existing entity to run the project
(on financially autonomous lines), to create a new organisation or to
privatise it; the strategy for eliciting and sustaining the commitment of
the intended beneficiaries to the project, particularly the means of
securing their effective participation in project management and costs
through WUAs and/or apex organisations; whether WUAs should be
built on existing structures, traditional or other;
• the appropriate time frame for the project and phasing within this;
and
• the need for any ancillary adjustments in laws, regulatory
mechanisms, policies and institutions.
This is also the place to mention to the need to build flexibility into the
project, to accommodate capacity-building measures, and to say how this
could be done in ways which are consistent with the funding practices of
the financing agency. There is often little scope for flexibility in “hard”
projects centering on, for instance, the construction of major civil works;
but there are many advantages in planning “soft” projects - for demand-
driven development - so that these can readily respond to new information
or opportunities that arise in the course of implementation.
Where flexibility is being sought, a very important element of the

section on planning considerations should be a discussion of the possible
mechanisms to be used to provide it and of the safeguards to prevent its
abuse. If flexibility is to be attained, as is often the case, by the creation of
a Development Fund, the technical and economic criteria to be used in
approving releases for subprojects, and the managerial and supervision
arrangements, should be foreshadowed under planning considerations,
though dealt with in detail in subsequent sections of the report.
In the case of repeater projects, reference should be made to the

performance of previous phases, and it should be explained how the
lessons learnt from their evaluation would be taken up in the planning of
the later project.
THE PROJECT (OR PROGRAMME) (5-10 PAGES)

The previous chapters will have set the framework of constraints and
opportunities for investment, and so derived a project rationale and
objectives, with considerations for planning. This chapter, and its
supporting annexes, maps and figures, defines the project works and
activities, their phasing, costs and how they will be financed. In describing
the project it is convenient to distinguish between project objectives and
their related components on the one hand, and expenditure categories on
the other (see Box 2-1).
Box 2-1 - Project Objectives, Components and Expenditure Categories
A project normally has specific objectives that can be expressed in relatively simple
terms, such as:
• to restore to full productive capacity around 1,550 ha of existing irrigation

schemes previously operated as state farms;
• to build the capacity of government and private institutions involved in irrigation
development;
• to form water users’ associations (WUAs) and to train farmers in operation and
maintenance of irrigation systems and irrigated crop production;
• to develop irrigated crop production technologies adapted to smallholders, and to
identify and promote new irrigated crops.
Components, for example could include
• rehabilitation of 1,550 ha distributed among 14 existing schemes;

• farm development, including equipment for surface and sprinkler irrigation, small-
scale farm machinery, greenhouses and seasonal inputs;
• capacity building of irrigation subsector institutions
• research and extension
• project management and implementation
Expenditure Categories (known as summary accounts in COSTAB terminology) are

used to classify the items against which disbursements will be made under the
project. Thus, for each objective or component of a project there are likely to be
several categories of expenditure, such as:
• Civil Works (with users’ contributions separately shown)

• Equipment
• Technical Assistance
• Training
• Incremental Operating Costs (with users contributions separately shown)
Each of the above may in turn be broken down into a series of items and ultimately
into a set of detailed specifications for goods and services.
A. General Description
This section, which generally should be no longer than one page,
presents the reader with a brief overview of the proposed project or
programme. It can often be quoted more or less intact in the Summary and
Conclusions at the beginning of the Report. The usual content is:
• a brief description of the project or programme’s overall and

immediate objectives;
• its location and size (if a project-specific investment);
• a brief summary of each main component;
• costs and phasing;
• organisational arrangements for implementation and subsequent O&M.
B. Detailed Features
The aim of this section is to describe the project in more detail so that
the reader acquires a fuller understanding of each of its components and
the inter-relationships between them. The nature and scope of project
actions should be described in sufficient detail for the general reader to
appreciate their relevance and technical soundness, but lengthy
descriptions, specifications, engineering design details and cost estimates
should remain in annexes or working papers.
The section usually contains a separate résumé for each of the project
components, quantifying the main physical items that are proposed for
financing, grouped under expenditure categories if appropriate. Although
the cost estimates are only presented in detail in Section F of this chapter,
it often helps to note in brackets at the start of the component description
its total cost and the percentage of project base cost which this represents.
Increasingly, also, financing agencies prefer each component résumé to
end with brief reference to the field level implementation arrangements,
leaving the description of the broader (not component-specific)
institutional arrangements for section C of this chapter.
Component résumés might cover the following:
• Main civil works (dams, major structures, pumping stations, canals,

drains, feeder roads, tubewells, power distribution lines).
• On-farm works (land clearing, levelling, on-farm canals, farm drains,
wells and pumps).
• Ancillary works and buildings (offices, workshops, experimental
farms, houses for project staff, stores, warehouses, market facilities,
packing and processing plants, etc.).
• Provision of equipment for operation and maintenance, (workshop
equipment, agricultural machinery for hire, vehicles for extension
staff, etc.).
• Farm equipment (the provision of farm facilities, agricultural

implements and machinery; livestock and the establishment of
permanent crops).
• Measures to improve the agrarian setting (changes in land tenure or
ownership, land settlement and land consolidation).
• Land acquisition, resettlement and rehabilitation.
• Institutional development, for the main implementing institutions as
well as for supporting services, such as research, extension and training.
• The credit programme required to enable the private components of
the project to be financed.
• The provision of training and expatriate technical assistance
(eg consulting firms).
For a sectoral project the components may include some of the above
as well as:
• Technical assistance for diagnostic studies of existing irrigation schemes.

• Rehabilitation and modernization of existing irrigation schemes, for
subsequent management transfer.
• Environmental studies and actions
• Institutional development assistance for government institutions
and WUAs.
Level of Detail Required. While only a summary description is required

of each component in the main text of the report, this must normally be
derived from more detailed specifications and estimates given in annexes,
working papers or separate studies, to which reference should be made. A
summary of the extent of detail and degree of accuracy appropriate at
each step in the design is given as Appendix 1 (at the end of Part II).
However, the level of design required for appraisal of civil works and
machinery is a matter of engineering judgement, and treatment will
depend on the nature of the investments, ie whether project specific, or
programmatic within a subsectoral project. Project specific investments
may be considered in three broad groups:
• Important major works, such as dams, main canals, specialised

processing plants or main roads. Detailed site investigations are
normally required, and at least preliminary designs and specifications
should be completed to a sufficient degree of detail to demonstrate
that they should not need appreciable alterations at a later design
stage, and to permit the significant engineering work quantities to be
estimated to an accuracy of some 15% as a basis for cost estimates of
the same order of accuracy. All multilateral financing agencies have
strict procedures to be followed in engineering studies and designs for
major dams and for major resettlement of people displaced by
reservoirs or other major works (see Parts I and II of the Guidelines),
which should always be consulted.
• Relatively homogenous repetitive works, such as tertiary and

quaternary irrigation channels and drains. For these it is necessary to
complete surveys and prepare detailed designs and quantity estimates
for representative sample areas, and, in all cases, for the area to be
covered in the first year of the project. Total quantities and costs for
the whole component can then be derived by extrapolation. On-farm
works are usually adequately designed on a “model” farm basis,
although in areas of irregular topography it may be necessary to
design on the basis on large-scale sample surveys. Typical designs
should be prepared for the main farm or land types. Where a
significant amount of land levelling is required, detailed sample
topographical surveys are needed to calculate quantities. A properly
designed land classification can do much to help estimate costs of
land clearance, levelling and farm drains.
• For minor works, such as small structures, farm access roads, etc.,
estimates can be derived from standard type designs.
Most financing institutions accept that preliminary design standards

form a satisfactory basis for appraisal, except that the World Bank requires
that “by the time of appraisal/negotiation, engineering work (field
investigation and detailed design) should be well advanced so that bidding
documents are available about the time of Board approval, to facilitate
tendering, to shorten the project cycle and provide accurate project costs”.
In the absence of specific instructions from the financing agency,
engineering designs should not proceed beyond the point of completing
the work and studies necessary to provide an adequate basis for appraisal.
Nevertheless, where the degree of accuracy of the preliminary estimates is
difficult to determine because of lack of adequate engineering or survey
data, or where the extent of possible error is greater than that considered
tolerable - and particularly in respect of those projects with borderline
economic rates of return - it normally would be necessary to commission
detailed engineering studies. This is often the case, for example, for the
main canals or storage structures of an irrigation project.
In contrast, subsectoral investment projects often involve numerous

subprojects that might be widely distributed throughout a given region or
country. If participatory planning, construction and O&M is envisaged it is
usually undesirable to complete investigations and cost estimates for each
subproject prior to appraisal. In this case it is usually acceptable to
specify design criteria and per hectare cost ceilings. These govern
subsequent selection, investigation and engineering design of subprojects
that are to be carried out during the project. In this case it is the clear
definition of the rules and procedures for the selection process that is
important at appraisal, rather than the level of engineering work that has
been completed.
Where works are to be constructed by a government agency rather than

by contractors, and the proposed loan would directly finance the capital
and annually recurring costs of construction equipment, the equipment
should be justified and itemised.
If farmers require credit for on-farm development, pumps and so on, as

well as for subsequent operations, the requirements should be estimated.
These should be in the form of a lending programme with estimates year-
by-year of the numbers of loans to be made to farmers, the size of loan,
and the type of loan and purpose. A distinction should be made between
long, medium and short term credit, according to whether the loan is for
fixed improvements, for purchase of machinery and equipment of for
annual operations. For short term credit, requirements per farm should be
estimated on the basis of data presented in crop budgets and farm models.
Longer term credit needs should be assessed from investment models. In
any case provision for credit should take account of the repayment
capacity of the farmers in relation to the terms and conditions suggested
for the loans, and previous response to credit facilities.
C. Project Organisation, Management and Coordination

The entity or entities which will be responsible for the various aspects
of project execution should be identified. How they would carry out their
responsibilities should be explained. The aim should be to show that they
are the most appropriate bodies to assume the particular assignments; that
they have the powers, structure, staffing, equipment, finance and
motivation to undertake their respective functions; that they are capable of
carrying them out effectively; and that there are satisfactory arrangements
for coordination between (or within) entities responsible for each of the
various project activities. Where deficiencies in any of the foregoing
respects have been noted in earlier background material, the changes and
improvements which the project would introduce to overcome them
should be stated clearly and prominently. In some cases it may be
necessary to consider reductions in project scope to conform with
institutional capacities.
Should any new institution have to be created for the management of

the project, it is necessary to give, usually in an annex, details of its
proposed legal status, functions and powers, internal organisation,
operating procedures, staffing and budget. If the entity is not a government
department, particulars should be given of its legal charter (basic law) and
direction (Board of Directors; how appointed; extent to which subject to
political directives, etc.) and any special provisions concerning its funding.
If there is more than one entity involved in project management (such

as a project authority, a government department and a credit institution),
arrangements for coordination in such areas as joint representation boards,
commissions and committees, and in field activities should be described.
A distinction should be made between policy, advisory or coordinating

bodies, and those with executive powers. Bodies in the former categories
may decide or make recommendations on overall policy, distribute
assignments between different participating entities, approve plans,
budgets, accounts or reports, authorise major expenditures or contracts, or
hire and fire top-level staff. Executive bodies, on the other hand, supply
the former entities with the basis - usually information - on which to
exercise these responsibilities; they then implement their decisions and
report back on results. Often there are executive and non-executive entities
at various levels - for instance national, regional and in the field.
For projects for which significant changes in organisation are required,

it may be useful to supplement the overall description of organisational
arrangements with a more detailed treatment of the specific aspects which
are critical for project success, particularly if these are new or changed
and have not been fully addressed in the description of project
components. This would be the case, for instance, if a new system for
participative planning was to be developed and introduced under the
project, or if modified organisational measures were to be incorporated in
the project with the aim of improving on-farm water management in
irrigation schemes. The steps to be taken to privatise or divest activities
previously performed by government would also be appropriately
described here, together with any related measures to improve the overall
environment for an expanded private sector role.
D. Cost Recovery and O&M

This important section should identify overall institutional responsibility
for O&M in the short, medium and longer term. As it is likely that the
project will involve devolution of at least some responsibility for O&M to
the users, the extent to which this is expected and over what period of
time should be clearly explained, with well defined targets over the
disbursement period. Proposals should be made for the formation or
strengthening of all institutions involved or likely to be involved in O&M,
including autonomous or semi-autonomous irrigation agencies, WUAs or
combinations in joint management. The responsibilities, staffing and
annual operating budgets required for each should be defined.
Estimates should be presented for water charges for a range of cost

recovery scenarios, from full cost recovery of all capital and O&M costs
(taking account of any contribution from the farmers), to O&M plus a
percentage of capital costs, to O&M only. These should be cross-

referenced to the considerations of water pricing, vis-à-vis the cost of
supply, scarcity value and opportunity cost of water which should have
been presented in the subsector review and strategy paper.
Recommendations should then be made for setting an appropriate water
charge that is affordable, yet covers the cost of supply to the extent
required by policy and induces efficient water use. Practical procedures for
collection of water charges should be described, perhaps involving a pilot
scheme initially to test the proposed system.
E. Institutional Capacity Building

This section should present proposals for building capacity to implement
the project, in terms of staff recruitment, technical assistance, training, and
supply of office, and possibly construction, equipment. In a sectoral
programme institution building often forms a component in its own right,
since the objective is to build capacity that will continue to be available for
subsequent developments once the present project is completed.
As an aid to subsequent supervision and evaluation missions, as well as

for good project management, it is essential that the intended use - and
place of use, for a project or programme extending over more than one
region - of equipment be clearly identified. Mechanisms by which
government can replace all equipment once its useful life has expired and
the project has been completed should be spelled out. The initiation of
such mechanisms should if possible be incorporated in to the project.
Similarly the intended location of all project staff and the expected
duration of their assignments should be clearly indicated. If technical
assistance is proposed, draft terms of reference (see Annex 3) should be
given and functions, objectives, measurable performance indicators and
reporting arrangements specified. The minimum qualifications for
candidates should be defined as precisely as possible. If the technical
assistance is not for the completion of a finite task, such as the completion
of engineering designs, it should be explained how it would be phased out
and how the functions would be subsequently assumed by regular staff.
Training or re-training arrangements should be described in detail,

giving numbers of trainees, their expected place of training - which may be
at home or overseas - and the duration of training. Clear targets and
performance indicators should be set, such as numbers of staff to be
trained at certificate level in water management, numbers expected to be
involved in practising their new skills and their location; or, for further
example, the numbers of staff to study for an MSc degree, the practical
experience to be acquired afterwards, and their expected work locations
on completion of this training.
F. Project Costs
The importance of sound cost estimates cannot be over-emphasised:
they provide the basis of determining the project’s economic and financial
viability and also its funding. Estimates should include all capital costs and
incremental operating costs incurred by government during the
disbursement period and for the subsequent operation of the project. In
principle the engineering cost estimates should include all incremental
goods and services required to complete the planned works. Cost estimates
for the main civil engineering works should be based on bills of quantities,
derived from preliminary designs and justified unit rates. Costs of major
equipment items are normally based on recent quotations from potential
suppliers. Costs of on-farm development may be drawn from an
aggregation of representative farm models but it should be clearly
indicated whether or not these include cash or non-cash contributions
(eg in the form of family labour or locally available materials) by farmers.
Projects have long ceased to be regarded as vehicles for financing

capital investments only. Most financing agencies have broadened the
definition of eligible cost items to include such items as :
• Incremental operating costs - ie. recurrent costs over and above the
“normal” running costs of the concerned agencies - incurred during
the disbursement period specifically for the implementation,
management and monitoring of the project.
• Technical cooperation, either foreign or national, aimed at increasing
the capacity of concerned institutions to implement the project. Note
that such technical assistance is often treated as a category of
investment expenditure, related to specific project components such
as “project management”, rather than as a project component in its
own right. This may not be the case however if capacity building
becomes one of the major objectives.
• Training, both overseas and local, aimed at improving staff
capabilities: most frequently training is related to meeting the staffing
requirements for implementing the project, but usually training aimed
at more general institutional strengthening also qualifies for project
financing.
• Feasibility study and project planning costs, if these have been
financed by reimbursable loans from the financing agency, for
instance under the World Bank’s Project Preparation Facility.
• Engineering costs and fees that would be incurred during the
disbursement period.
• Interest during construction: some financing agencies are prepared
to consider as a project cost interest payable during the disbursement
period of the loan. Amounts, however, can only be calculated once a
financing plan has been finalised.
• Working capital, to cover the projected incremental operating costs

required to bring a project-funded enterprise to the point at which it
reaches steady-state operation.
• Land acquisition, resettlement and rehabilitation costs, where
substantial numbers of people are displaced, for example by a new dam.
Items conventionally excluded from project costs are:
• Sunk costs: costs which have been incurred prior to the

commencement of a project (eg in constructing a dam prior to a
project which wold complete the irrigation water distribution
network) are conventionally excluded from project cost estimates, but
the amounts already invested should be noted if these are known.
• Taxes and duties: duties and other taxes on imported goods are
usually excluded from project cost estimates, especially if the
government has agreed to waive these. Should they be included, rates
and amounts should be indicated so that appropriate adjustments can
be made in the economic evaluation.
• Land: the value of the farm land required for the project is normally
excluded from project costs, except in cases where a significant area
has to be acquired by government for project implementation
purposes (eg for construction of main canals in an irrigation system or
for siting of a wholesale market).
Project Costs. The text of the main report conventionally refers to the
total costs implied by the project proposal (ie to all incremental
expenditures which should be incurred during the course of the proposed
disbursement period). Up to five summary project cost estimate tables can
usefully be included in the main report.
• A project cost summary by component, expressed in local and

foreign currency equivalents.
• A project cost summary by component and year of disbursement.
• A project cost summary by expenditure category, expressed in local
and foreign currency, showing the proportion of total costs
attributable to each category.
• A project cost summary by expenditure category classified by year of
disbursement.
• A summary breakdown of project costs, classified by component and
expenditure category.
Examples of the above, prepared using PC-COSTAB, from the PC-

COMPASS suite of programmes, are appended to this Annex.
For projects being prepared for financing by IFAD, additional cost tables
are required to show a cost breakdown which separates out direct support
to farmers (eg. credit, inputs) from funding for government institutions
(vehicles, buildings, salaries, operating costs); a cost breakdown which

allows IFAD to distinguish the percentage of the base cost which goes to
targetable versus untargetable components; and an analysis of the cost per
farmer of each component (or the cost per household of each credit
module to be taken up by farmers).
The text of this section of the document is usually “written around” the
tables. It should :
• indicate the sources (and dates) of unit costs from which the estimates
are derived, giving an indication of their accuracy;
• highlight the importance of any major elements;
• provide an estimate of the total costs of the foreign exchange
component of project costs: this includes both the outlay on fully
imported items and the estimated import content of goods and
services paid for in local currency (eg. the imported elements of
locally-assembled pumps);
• distinguish between capital costs and those recurrent costs (eg for
training) which have been treated, for the purposes of estimating
project costs, as investment costs;
• explain assumptions on physical and price contingency rates.
An indication should be given as to the accuracy of the cost estimates

and how these have been derived. Baseline costs are expressed in market
prices in constant terms; if the costs of any payable taxes and duties are
included, the value should be clearly identifiable. Estimates should all relate
to the same date, which should be specified and is usually around the time
of the compilation of final project dossier or appraisal. Special problems
arise when preparing cost estimates for projects in countries which suffer
from rapid inflation and regularly devalue their currency. Here it is advisable
to “freeze” all unit values in local currency at an indicated date and
exchange rate, and from then on quote all values in US dollar equivalents.
Contingencies should be added to the base-line costs at rates specific to

each category of expenditure to determine total project costs, as follows:
• Physical contingencies are included in the project costs to allow for

uncertainties and to compensate for possible inaccuracies in the
estimates of work quantities. They should not, however, be treated as a
miscellaneous category of costs to cover items either overlooked by the
planners. Nor should they be added to give a project greater flexibility.
In the latter case, the amounts allocated should be identifiable (eg. as
an “unallocated” component). The rate of physical contingencies to
apply varies according to the degree of confidence placed in the
estimates but, for civil works, commonly lies between 10 and 15
percent by the time the project dossier is completed. Under exceptional
circumstances it may be greater if local conditions preclude accurate
estimates. Assumptions should be explained.
• Price contingencies may also be estimated (on phased base-line costs

plus physical contingencies) to demonstrate the probable escalating
effect of inflation on project costs and hence the magnitude of
financing required. Assumptions on price contingency rates (which
may be different for foreign exchange and local costs) should be
noted, together with those on the assumed period between the date of
the base-line cost estimates and project effectiveness. The economics
staff of financing agencies are usually in a position to provide project
analysts with forecasts of inflation in borrowing countries, as well as
standard assumptions on international rates. It should be noted,
however, that in countries which operate floating exchange policies,
rates of inflation tend to be matched with corresponding devaluations
of the currency. In such cases, so as to avoid possible over-financing
in dollar terms, probable countervailing movements of the exchange
rate should be taken into account in establishing the dollar equivalent
of domestic inflation.
Operating Costs. For projects that lead to substantial increases in

recurrent costs to be borne by government, a table projecting operating
and replacement costs after the close of the disbursement period should be
prepared. The table should show by categories the continued cost of
running, maintaining and replacing the assets created by the project, and
the cost of operating services at the levels necessary to achieve project
objectives. It may be desirable to comment on the government’s capacity
to continue to meet the implied financial commitments, and on any steps
that would be taken to improve fiscal sustainability, such as increased cost
recovery from beneficiaries or privatisation of services.
Annual cost estimates, both for the economic analysis of the project
and also for setting water charges, should include inter alia the following:
• salaries and allowances of O&M staff.

• maintenance of buildings, offices, stores and housing.
• running costs of O&M vehicles and plant.
• costs of special repairs.
• where applicable, running costs of pumping plant.
Maintenance costs should be calculated in detail wherever possible,

but estimates of the annual cost based on a percentage of the capital
costs are sometimes appropriate. Typical values for developing countries
are given below.
Annual Maintenance
Cost as Percentage of
Type of Works Initial Capital Cost
Diversion structure/weir 1.5

Main canal (unlined) 2.0
Main canal (lined) 1.0
Pipelines (AC and PVC, underground) 0.5
Buildings 1.5
Electric powered pumps 3.0
Diesel powered pumps 5.0
Night storage reservoir 2.0
Piped distribution systems 1.0
Portable pipes and sprinklers 6.0
Field canals and structures 2.0
Land grading 2.0
Fences 1.0
Drains (sub-surface) 1.5
Drains (open) 2.0
Replacement costs are forecast for the year in which they are expected
to occur, but using constant prices, ie similar to those used in the initial
capital cost estimates.
Other annual recurring costs may include the incremental annual costs
of other public services, eg extension services.
G. Financing
Some financing agencies, but not the World Bank or IFAD, expect a
preliminary financing plan to be proposed by the country submitting the
project before appraisal. Such a plan, in the form of a table, would indicate
for each main expenditure category the amount proposed for financing by
external financing agencies, the government, implementing agencies (from
their own resources), credit institutions and beneficiaries. Since the final
plan will be a matter for negotiation between the financing agencies and
the country concerned, and in any case it is the prerogative of the financing
agency to determine what it will or will not finance, care must be taken not
to imply a commitment of the agencies to the proposal. It is perhaps
pertinent to point out that some financing agencies restrict financing to the
direct and indirect foreign exchange component of the project. More
frequently, however, a proportion of local costs may also be financed.
Assurances of government capacity to meet its proposed share of project
costs should be sought, especially for projects in countries which have a
record of failure to meet counterpart funding obligations in earlier projects.
Assumptions on the beneficiaries’ contribution - in cash or kind - to

project financing may need discussion. Particularly for disadvantaged
groups, the proportion of incremental capital and recurrent costs which
they are assumed to meet from either their own resources, unofficial
borrowing or from project-funded credit, may need to be justified.
For all projects an explanation should be given either here or in

Chapter 11 as to how funds would flow and be monitored, and how
reimbursements would be made. For projects with a substantial credit
element, the terms and conditions under which loans would be made to
farmers and other borrowers should be given. Reference should be made
to eligibility criteria (including any special measures for improving access
of women, the landless or other disadvantaged groups), sub-loan periods,
grace periods, interest rates in both nominal and real terms, and to ceilings
and conditions for financing. Special note should be made if any of these
differ significantly from standard loan terms in the country.
AGRICULTURAL PRODUCTION AND RESULTS (4-6 PAGES)

The purpose of this chapter is to describe agricultural development and
production proposed under the project, and the expected results. Each of
the proposed irrigation categories or types should be briefly described,
with particular attention being given to the technological changes which
would be introduced by the project, and their impact on input
requirements and yields. The proposals should be supported by reference
to research data and the actual performance of farmers.
A. Agricultural Production
The chapter usually starts with a review of the cropping patterns it is
assumed will be introduced, followed by an assessment, drawing on crop
budgets and farm models, of the impact on the output and income of
typical participants. It should explain the assumptions made on the rates at
which yields and cropping intensities will rise and, derived from these and
the models, arrive at estimates of the overall impact of the project on farm
development and output.
B. Market Prospects and Prices

The financial attractiveness to farmers of the proposed developments
normally depends on the relationship between the input costs and the
prices for the commodities which they intend to produce. In turn, the
behaviour of costs and prices, especially for farm outputs, may respond to
changes in the supply and demand situation, provided that this is not
masked by the presence of price controls or subsidies. This chapter should
review the market prospects for the products on which the viability of the
project is most dependent and justify the price assumptions used in
financial and economic analyses of the project.
Markets and Marketing. The report should demonstrate that market

openings exist or can be opened up (at the financial prices assumed) for
the incremental output expected to result from the project. In many cases,
as is usually the situation for non-perishable staple foods in grain deficit
countries, no market problems exist. In such situations there is no need to
dwell in the report on market issues. However, where the viability of a
project depends on access to export markets or on sales of perishable
commodities or of items of particularly high unit value, a careful review of
market prospects and of possible means of improving these (eg lengthening
of production season), is an essential element in project planning. The
adequacy of back-up services (eg availability of transport, packaging
materials) and infrastructure (eg. roads) also needs to be examined.
A main purpose of this review is to demonstrate that, in the absence of

the project, there would be a shortfall in production vis-à-vis demand at
the assumed prices in the target market, or alternatively that the project
area (or country) is competitive in serving the market vis-à-vis other
potential suppliers. Growth in domestic demand can be estimated on the
basis of projections of population and income, and of assessments of
income elasticity of demand. For most major traded commodities, reviews
have been made by FAO, ITC and other agencies of the world market
prospects, and reference should be made to these and their conclusions.
Occasionally, for highly specialised products, some specific market
research may have to be carried out as part of the planning process.
Prices. It is conventional practice to use prevailing, normal input and

output prices in the financial evaluation of crop budgets, farm models or
agribusiness enterprises. Farm-gate prices for farm-level analysis are
usually derived from interviews with farmers or from wholesale and retail
market price reports, adjusted for transport costs and traders’ margins. The
analyst, however, should explain the nature of any key factors affecting
price formation, assess the extent to which the assumed prices are likely to
be sustainable and, if there are doubts on this, test the sensitivity of the
models to price changes.
It is usual to make projections of prices in constant money terms,

eliminating the effects of inflation which are implicitly assumed to affect
input and output prices equally. Consequently it is important that all prices
and costs refer to the same point in time, which must be clearly stated.
Financial price assumptions for the main inputs and outputs should be
summarised in a text table.
C. Impact on Individual Producers

This section should show, largely through reference to farm models, or
through household models if non-farm income is significant, what would
be the expected impact of the project on the income and welfare of typical
individual producers, or in some cases, communities. Models should be
developed for each major beneficiary type, an attempt being made to
ensure that each model represents a typical situation in terms of farm size,
or in some cases tenure status.
Earlier sections should have indicated the nature of the constraints and
needs faced by each type of producer, the opportunities for increased
production, and the technical strategy by which it is intended to open
these opportunities to them. The results summarised at this point should
focus on the same strategy and opportunities but express the expected
results in financial terms, using estimated prices justified in Chapter 9 or
an attached table or annex.
Farm models also provide the basis for estimating the likely long and
short term credit needs of project participants, and for forecasting their
debt service obligations. Particular care needs to be taken by the analyst in
estimating working capital requirements and the means by which these
can be financed1 .
The cost and return implications derived from the financial analysis of
the crop or enterprise budgets can usefully be summarised in a short text
table which may also compare financial return per unit of land, labour,
cash expenditure, cubic metre of water etc., without and with the project.
Only after it is clear that all activities amongst the building blocks of
models are financially viable is it justified to proceed to an analysis of a
financial model of the complete farm or enterprise over time. A further
summary table or tables should be given for the key results from the
analysis of the annexed financial models.
Financial models should assume constant financial unit costs and prices
over the period of analysis, unless there is any special reason to depart
from such assumptions - for instance, if the expected output from the
project would be big enough to depress product prices. If, as is the case in
inflationary situations, there is a major discrepancy between nominal and
real interest rates, it is appropriate to adopt the real rate in calculating debt
service obligations, while at the same time also holding prices constant.
The basic models that are analysed in annexes and summarised in the
main text should aim to represent average situations. In practice however,
1: Chapter X, FAO Investment Centre Technical Paper No 8 Financial Analysis in Agricultural Project
Preparation, FAO Rome (1991).
results are likely to vary significantly from one year to another, often
because of variations in water availability. It is for this reason that, where
available data permit, fluctuations in water supply should be simulated for
the period of intended economic analysis, rather than simply assuming that
the 80 percent exceedance probability flows would be available in all
years1. For such reasons, a series of variants on the basic financial models
may need to be run to demonstrate the extent of their sensitivity to risk or
changes. The purpose of these variants is to show whether or not the
project’s technical strategy is robust enough to sustain project beneficiaries
through misfortunes such as a series of consecutive years of unfavourable
weather or a drought falling in the first year of their project participation.
The variants may also be used to assess the implications for project
participants of alternative pricing policies or market scenarios, or of partial
adoption of technology. Such financial examinations of risk and uncertainty
are now relatively easy to run using computer programs such as the
FARMOD module of PC-COMPASS; the FAO Investment Centre Design
Study2 suggests that many cases of under-performance could have been
anticipated if these analyses had been made. Additional tests for risk and
sensitivity which can be applied in financial analysis are discussed below.
The results of any financial model must be interpreted with

considerable care. The mere calculation of an attractive financial rate of
return on investment should not be taken to imply that the proposed
technical changes would necessarily capture the interest of all farmers.
For a small-scale farmer the most attractive opportunity may be to earn
more per day of family labour, or perhaps to generate more of the family’s
needs for subsistence food with less cash outlay, labour or risk, so that
resources can be freed for more profitable (perhaps off-farm) use. For small
farmers, concerns over the risks implied by innovation are particularly
likely to affect the response to project opportunities. For the specialist
vegetable grower who is restricted to a small irrigated area, yield per
hectare (or return per cubic metre of scarce water) may be the most
important criterion to examine. On the other hand for large-scale
commercial farming or processing, net production cost per ton, a balanced
cash flow or the financial return on equity capital may be the critical
parameters. The analysis should always be made in those terms which are
thought - or ideally have been shown through diagnostic studies - to be
those most relevant to the people whom the project is intended to benefit.
Tests for Sensitivity. Some simple tests can be made on the financial results
of enterprise budgets or farm models summarised earlier. The overall aim of
1: For details of possible techniques, see Paper 81 A Methodology of Irrigation Water Budgeting, in
Branscheid V, Irrigation Water Management Briefs: 100 Collected Papers, FAO Investment Centre,
Rome 1989.
2: FAO Investment Centre Technical Paper 6 The Design of Agricultural Investment Projects: Lessons from
Experience, FAO Rome (1989).
such tests should be to confirm the plausibility of the planning team’s

assumptions on technological change, from the producer’s point of view. Tests
should therefore be made only on the parameters previously identified as
being crucial to the decision-making of the operators. The necessary
calculations can be made using the FARMOD Programme.
D. Impact at Project Level

The remainder of this chapter should briefly summarise the aggregate
impact of the project over time in generating extra output, increasing
demand for items such as seeds, machinery, equipment etc., creating new
employment, and raising the demand for credit.
For a new irrigation scheme, where a predictable number of farmers is

assumed to move into a formerly virgin project area each year, output and
input demand streams should start at zero and can be readily calculated
by aggregation of one or more standard models using FARMOD. It is
important to avoid over-optimism on the pace of entry. A similar
aggregation approach is possible if farmers are already present on the land
to be developed but, for example, are expected to change progressively
from rainfed to irrigated production, or if the existing irrigation practices
are to be upgraded as new main works benefit their farms. Clearly the
entry pattern must match assumptions elsewhere on the rate at which
works would be built and become operational.
The text of this final section of the chapter should indicate briefly the
approach to aggregation which has been used. Short text tables should
then summarise estimates of total and incremental physical quantities for
inputs and outputs, plus their financial values where appropriate.
SOCIAL AND ENVIRONMENTAL IMPLICATIONS (2-4 PAGES)

As a reflection of the seriousness with which environmental issues are
regarded, the environmental impact of the project should be described in a
separate chapter, regardless of whether the project is rated as Category A, B or
C according to the World Bank or similar classification (see Box II-2 in Part II).
Irrigation and drainage projects usually have a substantial effect on the
ecology of the area in which they are located, and a forecast should be given
in the report of the principal changes expected to take place. This chapter
should therefore describe all adverse environmental impacts. Particular care
should be taken to identify any effects on downstream fisheries, on
endangered wildlife, and on the prevalence of water-borne disease, for
instance malaria or schistosomiasis. For groundwater irrigation schemes, the
probable effects on the depth and quality of the aquifer should be noted.
The above information can be presented using the ICID checklist. All
negative impacts identified should be highlighted in the text. Action plans
for mitigation, such as resettlement and rehabilitation plans or special
designs for structures, should be briefly described. The costs of such action
plans should be presented, as should estimates of the environmental costs1
for inclusion in the economic analysis of the project.
Under social implications, the numbers of beneficiaries and any losers

should be indicated, and details given of their “with” and “without”
project incomes. Changes in access to productive resources that could
have an impact - positive or negative - on the poor should be described.
Reference should also be made to expected effects of the project on other
factors affecting living standards, especially nutrition, education and the
role of women.
ECONOMIC JUSTIFICATION (3-6 PAGES)

This chapter is intended to provide decision-makers in the government
and potential financing agency with an appreciation of the advantages,
disadvantages and risks of embarking on the proposed project, from a
national point of view. Convention requires that considerable weight be
given to demonstrating the economic viability of the proposed actions, but
economic soundness alone, as measured by the rate of return on capital
employed, is seldom a sufficient justification for going ahead with a project.
This chapter should seek to show that, apart from being economically
viable in their own right, the proposed irrigation or drainage investments
are also justifiable in the broader context of national resource availability,
are consistent with the economic and fiscal policies of the government
concerned and compatible with the funding policies of the intended
financing agency. Thus, for example, it is not enough simply to demonstrate
that an irrigation project would generate satisfactory economic rate of
return if there are, within the same country, opportunities for producing the
same level of output at a lower cost from rainfed farming.
The point must also be emphasised that economic analysis should not
be used simply to provide a proof of project viability. Rather it should be
used as a tool in the planning process to arrive at the option that is likely
to produce the best all-round results from all the choices considered. It
should also illuminate the strengths - and reveal any weaknesses - of the
project. The use of sensitivity analysis techniques is important in showing
the nature and extent of risk to which the project is exposed and to point
to possible means for improving robustness.
1: For guidance see Dixon J A et al, Economic Analysis of Environmental Impacts. Earthscan Publications,
London (1994).
In writing this chapter it is important to bear in mind that the people

who have to take decisions on whether or not to fund the project may not
be trained economists or technicians; care should therefore be taken to
avoid jargon and the use of excessively complex analytical techniques
which may confuse rather than illuminate the basis for decision making.
What is required is a clear and objective appraisal of all those factors that
should be taken into account in arriving at well-informed decisions on the
future of the project.
It may be useful to include an introductory section which summarises

the broad justification for the project in qualitative terms and guides the
reader on the approaches adopted in analysing its expected impact. In the
planning of any project, compromises and trade-offs have to be made: for
instance, the cost of providing agricultural support services may rise
substantially in response to a policy decision to increase the proportion of
poor farmers amongst the project beneficiaries; or immediate potential
benefits may be foregone in the interests of long term sustainability. The
nature of such trade-offs and the extent to which they have been captured
in the analysis which follows should be explained.
A. Economic Costs and Benefits

The project’s economic benefits, consisting of the net incremental value
of production attributable to the investments being financed by the project,
should be expressed in economic prices. For those inputs which could
have a significant bearing on the viability of the project, an explanation
must be given of the assumptions underlying the forecasts of economic
prices used in project evaluation. The distinction must be made between
traded and non-traded goods, and it should be made clear whether
distortions in the pricing of foreign exchange have been compensated for
by the use of a shadow exchange rate or by the application of conversion
factors to the price of non-traded goods.
The table constructed to calculate the economic rate of return should

be given in an annex and should show the forecast streams of incremental
costs and benefits, and the resulting incremental net balances, as they
accrue each year during the life of the project. Cost streams should include
the capital costs of the project (including physical - but not price -
contingencies) plus the operating, maintenance and replacement costs of
project works expressed in economic prices; they should also include the
operating costs incurred by the farmers, as well as in providing services
and running the project’s management system. The economic benefits
stream should include the value of the incremental output of the project.
B. Risk and Sensitivity Analysis

The report should systematically examine each major potential source of
risk to which the project is exposed and explore its possible impact. Risks
of an environmental nature however should be described in Chapter 8.
C. Effect on Balance of Payments

To the extent that irrigation development has import substitution or
export goals, the chapter should include a review of its impact on the
national balance of payments. It is usually sufficient simply to indicate the
annual level of net receipts once the project has reached full production,
but it should be made clear that the net foreign exchange gains are not an
additional benefit over and above those taken into account in the
calculation of ERRs or NPVs (if these use a correct shadow price for
foreign exchange). Thus the impact of irrigation development on the
balance of payments should be mentioned only as a favourable side effect,
for countries where this would be a particularly attractive feature.
D. Impact on Income Distribution and Poverty Alleviation

The relationship between the anticipated impacts of irrigation
development on income distribution and poverty alleviation and the
policies and priorities of the government and the lending agency should be
discussed here. The point to illustrate here concerns the relative weight
which has been given to social versus economic criteria in deciding on the
balance between components. If the overriding consideration in project
planning has been economic return on investment it should nevertheless
be shown that, among outcomes giving a high ERR, the option has been
chosen which is also best able to spread benefits widely and equitably. If,
in contrast, the aim has been to maximise the number of beneficiaries
subject only to each component exceeding a minimum ERR, this should
also be explained.
For projects aimed explicitly at alleviating poverty, the chapter should

provide the reader with estimates of the without and with-project income
distribution situation and any other indicators of the project’s expected
impact on rural poverty. These might include changes in access to drinking
water, health, nutrition and education. The costs per beneficiary and the
expected earnings of the beneficiaries vis-à-vis wages in other sectors
would also be relevant measures. If the project is intended to bring special
benefits to women, these benefits should also be highlighted, and if
possible, quantified. Beyond these specific analyses any more general
impacts that the project may have on the poorer members of the rural
population should be mentioned.
The above should of course be consistent with statements on the

project’s overall objectives made earlier under Project Rationale and
Planning Considerations in Chapter 5.
E. Fiscal Implications and Cost Recovery

This is the place to explain assumptions on cost recovery rates and
mechanisms (eg contribution of free labour for construction or irrigation
water charges) and the extent to which they would cover the capital and
operating costs of the project.
ISSUES AND SUGGESTED CONDITIONALITIES (1-2 PAGES)
A. Issues
As a project moves through the planning process to appraisal and
negotiation, various problems or issues usually arise which need to be
resolved by decisions of the government and/or the financing institution.
Those concerned should be alerted to problems which - if not resolved in
due time - would delay or materially influence the successful
implementation of the project. It is most important to bring such issues out
into the open as early as possible in the planning process and to
encourage their rapid resolution, especially if they could have a major
bearing on the feasibility of the eventual project. To gloss over fundamental
issues in the hope that they will disappear may simply raise false
expectations. It is equally important, however, not to overload this section
with trivial matters which can be readily resolved in the normal course of
appraisal and subsequent project processing.
At the early stages of the planning process main issues frequently

concern choices - of scale, implementing agency, technology and so on -
which have a bearing on the project concept. Later in the process, issues
tend to be related either to preconditions for project success or to points of
possible incompatibility between the project proposals and the funding
policies of the financing agency. Thus, an issue of the former type might
concern the need to endow an agency with the necessary powers to
manage the project. Amongst the latter issues could be the requirement of
the financing agency that full costs of operating and maintaining public
irrigation systems be recovered from the users, with an advance payment
in cash or kind to demonstrate commitment. Other issues of a similar
nature which arise frequently in irrigation investment planning relate to
criteria for screening and selection of subprojects, water rights, land
acquisition and land resettlement plans, compensation for oustees, action
for environmental protection, water pricing, pricing arrangements for farm
outputs, levels of subsidy on inputs, interest rates on loans to farmers,
legislation for water users’ associations, and means of ensuring the users’
involvement in design and construction.
In reporting on issues which remain to be resolved, it is useful to :
• explain in simple, direct terms the substance of what is at issue;

• point out alternative solutions (to the extent that these exist) and
outline the probable consequences of each course of action; if
appropriate, the planning team may indicate which it considers to be
the most desirable solution;
• indicate the process by which the issue might be resolved - for
example, by collecting and analysing additional pertinent
information, through meetings between various involved parties etc., -
and by whom a final decision would need to be made;
• propose a timetable for arriving at decisions on the issue.
B. Commitments and Suggested Conditionalities

Increasingly, projects are associated with, or at times predicated on, the
introduction of changes in government policies. It is therefore important to
explain any changes in policy which the Government is committed to
introduce, either before the launching of the project or during its
implementation. Policy changes may be aimed at addressing specific
problems (identified in the Background and Rationale chapters of the report)
which would otherwise prevent the successful operation of the proposed
project. In this case the interdependence of the project and the policy
adjustments should be made explicit. In other cases policy adjustments may
be of a broader sectoral or macro-economic nature and not specific to the
project, but nonetheless essential prerequisites for its success.
Policy changes of direct relevance to irrigation and drainage

investments typically concern such issues as :
• land tenure, fragmentation and consolidation;

• cost recovery levels and mechanisms;
• management and scheme ownership transfer;
• the respective roles of the public and private sector in development or
the provision of services;
• enabling legislation for the formation of water users’ associations;
• the role of NGOs in relation to public sector services.
For each main policy change of this sort, it is useful to explain:
• the nature of the intended reform and its objectives;

• the measures through which the policy change would be adopted : in

some cases these might simply involve changes in procedures (for
example, in approaches to consulting farmers on irrigation system
design) while in others changes in legislation may be required; draft
legislation, if available, should be annexed to the report;
• the level of present commitment to the proposed change, the
intended timetable, and the organisational responsibility for bringing
it about;
• possible side-effects of policy changes (eg. redundancy in state
enterprises, the functions of which have been privatised) and
measures adopted to mitigate these.
Although conditionalities are usually the prerogative of the concerned

financing institution, their careful consideration during project planning
will assist those responsible for appraisal and implementation to approach
their respective tasks in a state of readiness. From the above,
conditionalities might include:
• preparation of a draft timetable for introducing new legislation or

changes in administrative procedures;
• appointing specified senior project staff;
• opening of a Special Account;
• preparation of a draft agreement with NGOs, for example for
community animation or support to WUAs;
• preparation of a list of qualified consultants and contractors for civil
works;
• appointment of auditors;
• preparation of the necessary documentation for inclusion of the
project in the government budget.
IMPLEMENTATION (3-6 PAGES)

As discussed in Part I, planning must now be increasingly focused on
matching proposals for investment in irrigation and drainage with capacity
for implementation. This final chapter should provide a clear statement on
how the project can be effectively implemented. It is a crucial part of the
investment proposal, and careful thought is required in its drafting.
A. Overall Implementation Schedule

For most irrigation projects there is considerable interdependence
between activities and components. The use of formal scheduling tools
such as critical path analysis, now facilitated by project management
computer software, is recommended for the preparation and monitoring of
an overall implementation schedule. This should list all steps that have to
be taken to execute the main components of the project, place them in

operational sequence, identify the critical activities, list demands on
management staff or skills in potentially short supply and note other
potential constraints or risks.
B. Activities to Achieve Loan Effectiveness

This section should provide crucial information for the gearing-up
process for the project implementers. With the aid of the overall
implementation schedule it should:
• identify the tasks to be completed in order to satisfy the suggested

loan conditionalities;
• define the time required to achieve these, and earliest and latest
start/completion dates;
• hence define the earliest date for project start-up;
• identify the individuals required to perform the necessary tasks,
annexing brief responsibility and job descriptions;
• explain the need for and approach to preparation of annual work
plan and budget.
C. Activities for Completion in Project Year One

This section should identify and bring to the government’s attention all
the essential tasks to be undertaken during the first year of the project. These
activities usually form the subject of the first annual work plan and budget,
and their listing in the project document can be of great assistance in getting
the project off to a flying start. Whenever possible they should have been
defined and agreed at a workshop with the intended implementers during
final planning, before this chapter comes to be written. If not, they should
be discussed at a subsequent review of the draft project dossier, or at a start-
up workshop as soon as the loan has been negotiated. The following are
tasks that often fall within the first project year.
• Preparation of terms of reference for technical assistance services

from NGOs (for demand animation or training of WUAs), consulting
companies (for engineering design work), training and research
institutions (assistance with training and extension programmes).
Invitations to bid and bidding, bid evaluation, contract negotiation,
award of contracts and mobilization of staff.
• Preparation of procurement packages for project vehicles,
construction plant and equipment, and possibly temporary site
accommodation. Invitations to bid and bidding, bid evaluation and
award of contracts.
• Initiation of information campaigns and animation procedures for

demand-driven development.
• Negotiation of agreements with communities on their labour or other
contributions to project implementation and subsequent O&M.
• Participatory planning with farmers for irrigation water
delivery/distribution systems and in-field works.
• Preparation of bidding documents for aerial photography and
mapping. Invitations to bid, bidding, bid evaluation and award of
contract.
• Cadastral surveys.
• Additional site investigations and topographic surveys.
• Detailed engineering designs and cost estimates for subsequent year’s
construction work.
• Initiation of farmer training and extension programmes.
• Initiation of a staff training programme.
• Six-monthly interdepartmental review/planning workshops.
D. Procurement
Most multilateral and bilateral financing institutions have their own
requirements for procurement that are set out in guidelines issued for
borrowers1. These should be referred to and their applicability to the items
to be procured under the project should be explained. The major financing
institutions usually require that borrowers obtain goods above a certain
value and contract major civil works through international competitive
bidding (ICB) open to suppliers and contractors in all of their member
countries. Under prescribed conditions preference may however be
permitted for local and regional manufacturers and, where appropriate,
local contractors. Programmatic work consisting of many small scattered
subprojects is not generally attractive to international companies and does
not usually require ICB. However, the principle of competitive bidding will
still apply for local purchases or the use of local contractors. Whatever the
expected procurement procedures they should be summarised here, with,
if appropriate, an assessment of local capacity to supply different
categories of goods or services.
An estimate should also be given of the likely time requirements to

undertake the various procurement procedures for the main project items.
This should be reflected in the overall implementation schedule and
phasing of the project costs.
1: See, for example, World Bank and Inter-American Development Bank, Sample Bidding Documents:
Procurement of Goods and Procurement of Works, (1985, 1986).
E. Accounting, Audit and Reporting

This section should explain the arrangements necessary for establishing
and keeping project-related accounts and their annual audit.
MAPS, FIGURES, TABLES AND ANNEXES

Appended to the report should be the maps, figures, tables and annexes
needed to give the detailed background to the main text and to assist the
appraisal team and project implementing agencies. Annexes should, to the
extent possible, be organised along similar lines to the main text to
facilitate extraction of information; frequent cross-referencing should be
made to the annexes in the main text. A typical set of annexes for a project
document covering a new irrigation investment project might be:
1. Sociological Analysis and Definition of the Target Group

2. Soils and Land Capability
3. Climate and Water Resources
4. Water Rights and Land Tenure
5. Irrigation Agronomy (including crop water requirements)
6. Irrigation and Drainage Engineering
7. Marketing and Input Supply
8. Rural Financial Services
9. Roads and Other Infrastructure Development
10. Institutional Capacity Assessment
11. Organisation, Management and Institutional Development Plan
12. Social and Environmental Impact Assessments
(for Category A projects; Mitigation Plan for Category B)
13. Financial and Economic Analysis
14. Detailed Project Cost Tables
15. Implementation Plan
(containing GANTT/critical path analysis charts)
The list of annexes required for a rehabilitation project would be similar

to those above, but the scope and content of some of them will be
different. For example, Annexes 1 to 9 should describe the existing
situation, but 4 to 9 should also describe proposals for improvements.
Annex 6 should contain a detailed diagnosis of the existing system, and
analysis and design for upgrading, including details of expected
improvements to operational hydrology.
The annexes required for a sectoral investment project, in addition to

those required for background for such topics as those above, would cover
the operation of the proposed project in detail and could include the
following :
1. Operational Regulations (including investment selection criteria)

2. Institutional Development Plan
3. Action Plan for Rehabilitation and Transfer of Irrigation Schemes
4. Cost Recovery Action Plan
5. Environmental Action Plan
6. Investment Costs and Disbursement Schedule
7. Bidding Packages
8. Implementation Plan
(containing GANTT/critical path analysis charts)
Example: Project Cost Summari by Componet
% % Total
(Pesos Million) (US$ ‘000) Foreign Base
Local Foreign Total Local Foreign Total Exchange Costs
A. Natural Resources Management
1. Sustainable Agriculture 3.694,2 - 3.694,2 9.352,4 - 3.352,4 - 29
2. Small Irrigation Schemes 1.844,0 - 1.844,0 4.668,4 - 4.668,4 - 14
3. SIGMA 103,5 4,8 108,3 262,0 12,2 274, 4 1
Subtotal Natural Resources Management 5.641,7 4,8 5.646,5 14.282,8 12,2 14.295,0 - 44
B. Poverty Alleviation Activities
1. Processing and production diversification 1.765,8 94,6 1.860,4 4.470,3 239,4 4.709,8 5 15
2. Economic Rural Infrastructure
Rural Roads 651,3 127,7 779,0 1.648,9 323,3 1.972,1 16 6
Rural Marketing Infrastructure 118,5 39,5 158,0 300,0 100,0 400,0 25 1
Subtotal Economic Rural Infrastructure 769,8 167,2 937,0 1.948,9 423,3 2.372,1 18 7
Subtotal Poverty Alleviation Activities 2.535,6 261,8 2.797,4 6.419,2 662,7 7.081,9 9 22
C. Technical Assistance and Training
1. Technical Assistance Services 393,1 37,3 430,4 995,1 94,5 1.089,6 9 3
2. Institutional Strengthening 337,0 8,6 345,6 853,2 21,7 875,0 2 3
3. Training 347,7 - 347,7 880,2 - 880,2 - 3
Subtotal Technical Assistance and Training 1.077,8 45,9 1.123,7 2.728,5 116,2 2.844,8 4 9
D. Support Services
Technology Transfer 712,4 - 712,4 1.803,6 - 1.803,6 - 6
Research 1.697,3 - 1.697,3 4.297,0 - 4.297,0 - 13
Subtotal Support Services 2.409,7 - 2.409,7 6.100,6 - 6.100,6 - 19
E. Project Technical Unit 422,3 10,4 432,7 1.069,1 26,4 1.095,5 2 3
F. Studies 221,2 94,8 316,0 560,0 240,0 800,0 30 2
Total BASELINE COSTS 12.308,3 417,7 12.726,0 31.160,2 1.057,6 32.217, 3 100
Physical Contingencies 385,4 16,0 401,4 975,7 40,5 1.016,2 4 3
Price Contingencies - - - - - - - -
Tolaal PROJECT COSTS 12.693,7 433,7 13.127,4 32.135,8 1.098,1 33.233,9 3 103
Example: Project Cost Summari and Year
Base Cost (Pesos Million) Base Cost (US$ ‘000)
1995 1996 1997 1998 1999 Total 1995 1996 1997 1998 1999 Total
A. Natural Resources Management
1. Sustainable Agriculture 214,8 601,8 1.073,4 1.184,4 619,9 3.694,2 543,7 1.523,5 2.717,5 2.998,4 1.569,3 9.352,4
2. Small Irrigation Schemes 361,8 522,6 414,5 366,5 178,6 1.844,0 916,0 1.322,9 1.049,4 927,9 452,2 4.668,4
3. SIGMA 52,9 34,5 9,9 11,1 - 108,3 133,8 87,4 25,0 28,0 - 274,2
Subtotal Natural Resources Management 629,4 1.158,9 1.497,8 1.561,9 798,5 5.646,5 1.593,5 2.933,8 3.791,9 3.954,3 2.021,5 14.295,0
B. Poverty Alleviation Activities
1. Processing and production diversification 765,8 326,5 341,9 341,9 84,2 1.860,4 1.938,7 826,6 865,7 865,7 213,2 4.709,8
2. Economic Rural Infrastructure
Rural Roads 135,7 168,3 210,5 187,8 76,6 779,0 343,6 426,1 532,9 475,5 194,0 1.972,1
Rural Marketing Infrastructure 31,6 31,6 31,6 31,6 31,6 158,0 80,0 80,0 80,0 80,0 80,0 400,0
Subtotal Economic Rural Infrastructure 167,3 199,9 242,1 219,4 108,2 937,0 423,6 506,1 612,9 555,5 274,0 2.372,1
Subtotal Poverty Alleviation Activities 933,1 526,4 584,0 561,4 192,4 2.797,4 2.362,3 1.332,7 1.478,6 1.421,2 487,2 7.081,9
C. Technical Assistance and Training
1. Technical Assistance Services 80,7 161,2 119,9 65,1 3,4 430,4 204,3 408,2 303,6 164,8 8,7 1.089,6
2. Institutional Strengthening 99,4 82,1 62,4 55,0 46,7 345,6 251,6 207,9 157,9 139,3 118,3 875,0
3. Training 154,3 144,4 24,5 24,5 - 347,7 390,6 365,7 62,0 62,0 - 880,2
Subtotal Technical Assistance and Training 334,3 387,8 206,8 144,6 50,2 1.123,7 846,4 981,8 523,5 366,1 127,0 2.844,8
D. Support Services
Technology Transfer 120,6 155,9 215,1 220,8 - 712,4 305,3 394,6 544,7 559,1 - 1.803,6
Research 650,6 461,8 330,6 254,4 - 1.697,3 1.647,0 1.169,0 837,0 644,0 - 4.297,0
Subtotal Support Services 771,2 617,6 545,8 475,2 - 2.409,7 1.952,3 1.563,6 1.381,7 1.203,1 - 6.100,6
E. Project Technical Unit 126,5 90,6 90,5 62,6 62,4 432,7 320,4 229,4 229,2 158,4 158,1 1.095,5
F. Studies 131,1 47,4 - 68,7 68,7 316,0 332,0 120,0 - 174,0 174,0 800,0
Total BASELINE COSTOS 2.925,7 2.828,7 2.924,9 2.874,4 1.172,3 12.726,0 7.406,8 7.161,3 7.404,8 7.277,0 2.967,8 32.217,7
Physical Contingencies 101,3 109,0 92,6 85,0 13,4 401,4 256,5 276,0 234,5 215,3 33,9 1.016,2
Total PROJECT COSTOS 3.027,0 2.937,7 3.017,5 2.959,5 1.185,7 13.127,4 7.663,3 7.437,2 7.639,3 7.492,3 3.001,7 33.233,9
Taxes 221,7 179,8 168,0 145,7 54,4 769,5 561,2 455,1 425,2 368,7 137,7 1.948,0
Foreign Exchange 206,9 72,5 56,1 66,4 31,8 433,7 523,9 183,6 141,9 168,0 80,6 1.098,1
Example: Project Cost Summari by Expenditure Category
% % Total
(Pesos Million) (US$ ‘000) Foreign Base
Local Foreign Total Local Foreign Total Exchange Costs
I. Investment Costs
A. Equipment 823,6 62,2 885,7 2.085,0 157,3 2.242,4 7 7
B. Civil Works 1.525,2 202,1 1.727,3 3.861,2 511,7 4.372,8 12 14
C. Technical Assistance (local) 1.682,4 - 1.682,4 4.259,2 - 4.259,2 - 13
D. Technical Assistance (external) 4,1 37,3 41,5 10,5 94,5 105,0 90 -
E. Training 352,2 3,0 355,2 891,6 7,6 899,2 1 3
F. Studies 221,2 94,8 316,0 560,0 240,0 800,0 30 2
G. Vehicles 31,2 6,3 37,5 79,0 16,0 95,0 17 -
H. Off-farm Investment 701,5 - 701,5 1.775,8 - 1.775,8 - 6
I. Supplies 75,1 - 75,1 190,1 - 190,1 - 1
J. Research 1.697,3 - 1.697,3 4.297,0 - 4.297,0 - 13
K. On-Farm Investment /a 3.694,2 - 3.694,2 9.352,4 - 9.352,4 - 29
Total Investment Costs 10.807,9 405,7 11.213,6 27.361,8 1.027,1 28.388,9 4 88
II. Recurrent Costs
A. Operation & Maintenance
O&M Works 268,2 - 268,2 679,0 - 679,0 - 2
O&M Equipment 537,4 - 537,4 1.360,5 - 1.360,5 - 4
Subtotal Operation & Maintenance 805,6 - 805,6 2.039,5 - 2.039,5 - 6
B. Vehicles O & M 18,0 12,0 30,1 45,7 30,5 76,2 40 -
C. Supplies 10,0 - 10,0 25,3 - 25,3 - -
D. Staff 315,7 - 315,7 799,2 - 799,2 - 2
E. Other 192,5 - 192,5 487,4 - 487,4 - 2
F. Gasoline 22,9 - 22,9 57,9 - 57,9 - -
G. Travel 135,6 - 135,6 343,3 - 343,3 - 1
Total Recurrent Costs 1.500,3 12,0 1.512,4 3.798,3 30,5 3.828,8 1 12
Total BASELINE COSTOS 12.308,3 417,7 12.726,0 31.160,2 1.057,6 32.217,7 3 100
Physical Contingencies 385,4 16,0 401,4 975,7 40,5 1.016,2 4 3
Price Contingencies - - - - - - - -
Total PROJECT COSTOS 12.693,7 433,7 13.127,4 32.135,8 1.098,1 33.233,9 3 103
\a Includes: improved rainfed farming and on-farm erosion control (US$ 5.5 Mill.); pasture and livestock improvement (US$ 3.7 Mill.); and forestry (US$ 2.9 Mill.).
Example: Project Cost Summari and Year
Base Cost (Pesos Million) Base Cost (US$ ‘000) Foreign Exchange
1995 1996 1997 1998 1999 Total 1995 1996 1997 1998 1999 Total % Amount
I. Investment Costs
A. Equipment 552,6 62,4 88,9 110,7 71,2 885,7 1.398,9 158,0 225,0 280,2 180,2 2.242,4 7,0 157,3
B. Civil Works 495,1 509,0 400,3 291,2 31,6 1.727,3 1.253,4 1.288,6 1.013,5 737,2 80,0 4.372,8 11,7 511,7
C. Technical Assistance (local) 336,7 443,2 451,9 368,9 81,6 1.682,4 852,4 1.122,0 1.144,1 933,9 206,7 4.259,2 - -
D. Technical Assistance (external) 17,8 11,9 5,9 5,9 - 41,5 45,0 30,0 15,0 15,0 - 105,0 90,0 94,5
E. Training 157,0 149,2 24,5 24,5 - 355,2 397,6 377,7 62,0 62,0 - 899,2 0,8 7,6
F. Studies 131,1 47,4 - 68,7 68,7 316,0 332,0 120,0 - 174,0 174,0 800,0 30,0 240,0
G. Vehicles 37,5 - - - - 37,5 95,0 - - - - 95,0 16,8 16,0
H. Off-farm Investment 12,6 233,8 227,5 227,5 - 701,5 32,0 591,9 576,0 576,0 - 1.775,8 - -
I. Supplies 75,1 - - - - 75,1 190,1 - - - - 190,1 - -
J. Research 650,6 461,8 330,6 254,4 - 1.697,3 1.647,0 1.169,0 837,0 644,0 - 4.297,0 - -
K. On-Farm Investment /a 214,8 601,8 1.073,4 1.184,4 619,9 3.694,2 543,7 1.523,5 2.717,5 2.998,4 1.569,3 9.352,4 - -
Total Investment Costs 2.680,9 2.520,4 2.603,1 2.536,2 873,0 11.213,6 6.787,1 6.380,7 6.590,2 6.420,8 2.210,2 28.388,9 3,6 1.027,1
II. Recurrent Costs
O&M Works 17,7 37,4 59,9 76,6 76,6 268,2 44,8 94,6 151,7 194,0 194,0 679,0 - -
O&M Equipment 107,4 107,5 107,5 107,5 107,4 537,4 272,0 272,1 272,2 272,2 272,0 1.360,5 - -
Subtotal Operation & Maintenance 125,1 144,8 167,4 184,1 184,1 805,6 316,8 366,7 423,9 466,1 466,0 2.039,5 - -
B. Vehicles O & M 5,9 6,0 6,0 6,1 6,1 30,1 15,0 15,1 15,3 15,4 15,4 76,2 40,0 30,5
C. Supplies - 2,0 4,0 4,0 - 10,0 - 5,1 10,1 10,1 - 25,3 - -
D. Staff 43,2 74,7 69,3 69,3 59,3 315,7 109,3 189,0 175,4 175,4 150,0 799,2 - -
E. Other 34,2 43,9 42,6 43,4 28,5 192,5 86,5 111,1 107,8 109,9 72,3 487,4 - -
F. Gasoline - 7,6 7,6 7,6 - 22,9 - 19,3 19,3 19,3 - 57,9 - -
G. Travel 36,4 29,4 24,8 23,7 21,3 135,6 92,2 74,4 62,8 60,0 53,9 343,3 - -
Total Recurrent Costs 244,8 308,3 321,8 338,2 299,2 1.512,4 619,7 780,6 814,6 856,3 757,6 3.828,8 0,8 30,5
Total BASELINE COSTOS 2.925,7 2.828,7 2.924,9 2.874,4 1.172,3 12.726,0 7.406,8 7.161,3 7.404,8 7.277,0 2.967,8 32.217,7 3,3 1.057,6
Physical Contingencies 101,3 109,0 92,6 85,0 13,4 401,4 256,5 276,0 234,5 215,3 33,9 1.016,2 4,0 40,5
Total PROJECT COSTOS 3.027,0 2.937,7 3.017,5 2.959,5 1.185,7 13.127,4 7.663,3 7.437,2 7.639,3 7.492,3 3.001,7 33.233,9 3,3 1.098,1
Taxes 221,7 179,8 168,0 145,7 54,4 769,5 561,2 455,1 425,2 368,7 137,7 1.948,0 - -
Foreign Exchange 206,9 72,5 56,1 66,4 31,8 433,7 523,9 183,6 141,9 168,0 80,6 1.098,1 - -
Example: Breakdown of Expenditure Categories, Local Currency
Physical
Cont.
Plus
Base Cost Physical Contingencies Total Incl. Cont. Base Costs Price
Local Local Local + Price Cont. on
For. (Excl. Duties & For. (Excl. Duties & For. (Excl. Duties & Cont. on Physical
Exch. Taxes) Taxes Total Exch. Taxes) Taxes Total Exch. Taxes) Taxes Total Base Costs Cont.
I. Investment Costs
A. Equipment 62,2 712,1 111,5 885,7 3,1 50,7 8,9 62,7 65,3 762,8 120,4 948,5 885,7 62,7
B. Civil Works 202,1 1.214,2 310,9 1.727,3 12,1 102,9 25,2 140,2 214,2 1.317,1 336,1 1.867,5 1.727,3 140,2
C. Technical Assistance (local) - 1.514,1 168,2 1.682,4 - 77,6 8,6 86,2 - 1.591,8 176,9 1.768,6 1.682,4 86,2
D. Technical Assistance (external) 37,3 4,1 - 41,5 - - - - 37,3 4,1 - 41,5 41,5 -
E. Training 3,0 352,2 - 355,2 0,3 35,2 - 35,5 3,3 387,4 - 390,7 355,2 35,5
F. Studies 94,8 221,2 - 316,0 - - - - 94,8 221,2 - 316,0 316,0 -
G. Vehicles 6,3 24,5 6,8 37,5 - 1,2 0,3 1,5 6,3 25,7 7,0 39,0 37,5 1,5
H. Off-farm Investment - 698,1 3,4 701,5 - 69,8 0,3 70,1 - 767,9 3,7 771,6 701,5 70,1
I. Supplies - 63,4 11,7 75,1 - - - - - 63,4 11,7 75,1 75,1 -
J. Research - 1.697,3 - 1.697,3 - - - - - 1.697,3 - 1.697,3 1.697,3 -
K. On-Farm Investment /a - 3.694,2 - 3.694,2 - - - - - 3.694,2 - 3.694,2 3.694,2 -
Total Investment Costs 405,7 10.195,4 612,5 11.213,6 15,5 337,5 43,4 396,3 421,2 10.532,9 655,9 11.609,9 11.213,6 396,3
II. Recurrent Costs
O&M Works - 219,9 48,3 268,2 - - - - - 219,9 48,3 268,2 268,2 -
O&M Equipment - 483,7 53,7 537,4 - - - - - 483,7 53,7 537,4 537,4 -
Subtotal Operation & Maintenance - 703,6 102,0 805,6 - - - - - 703,6 102,0 805,6 805,6 -
B. Vehicles O & M 12,0 12,6 5,4 30,1 0,5 0,5 0,2 1,3 12,6 13,2 5,6 31,4 30,1 1,3
C. Supplies - 8,2 1,8 10,0 - - - - - 8,2 1,8 10,0 10,0 -
D. Staff - 315,7 - 315,7 - - - - - 315,7 - 315,7 315,7 -
E. Other - 192,5 - 192,5 - 0,3 - 0,3 - 192,8 - 192,8 192,5 0,3
F. Gasoline - 18,8 4,1 22,9 - - - - - 18,8 4,1 22,9 22,9 -
G. Travel - 135,6 - 135,6 - 3,5 - 3,5 - 139,1 - 139,1 135,6 3,5
Total Recurrent Costs 12,0 1.387,0 113,3 1.512,4 0,5 4,3 0,2 5,1 12,6 1.391,3 113,6 1.517,5 1.512,4 5,1
Total 417,7 11.582,4 725,9 12.726,0 16,0 341,8 43,6 401,4 433,7 11.924,2 769,5 13.127,4 12.726,0 401,4
Example: Breakdown of Expenditure Categories, US$000
Physical
Cont.
Plus
Base Cost Physical Contingencies Total Incl. Cont. Base Costs Price
Local Local Local + Price Cont. on
For. (Excl. Duties & For. (Excl. Duties & For. (Excl. Duties & Cont. on Physical
Exch. Taxes) Taxes Total Exch. Taxes) Taxes Total Exch. Taxes) Taxes Total Base Costs Cont.
I. Investment Costs
A. Equipment 157,3 1.802,8 282,2 2.242,4 7,9 128,4 22,5 158,8 165,2 1.931,2 304,8 2.401,2 2.242,4 158,8
B. Civil Works 511,7 3.074,0 787,1 4.372,8 30,6 260,5 63,9 354,9 542,2 3.334,5 851,0 4.727,8 4.372,8 354,9
C. Technical Assistance (local) - 3.833,3 425,9 4.259,2 - 196,5 21,8 218,3 - 4.029,7 447,7 4.477,5 4.259,2 218,3
D. Technical Assistance (external) 94,5 10,5 - 105,0 - - - - 94,5 10,5 - 105,0 105,0 -
E. Training 7,6 891,6 - 899,2 0,8 89,2 - 89,9 8,4 980,8 - 989,1 899,2 89,9
F. Studies 240,0 560,0 - 800,0 - - - - 240,0 560,0 - 800,0 800,0 -
G. Vehicles 16,0 61,9 17,1 95,0 - 3,1 0,7 3,8 16,0 65,0 17,8 98,8 95,0 3,8
H. Off-farm Investment - 1.767,2 8,6 1.775,8 - 176,7 0,9 177,6 - 1.943,9 9,5 1.953,4 1.775,8 177,6
I. Supplies - 160,4 29,7 190,1 - - - - - 160,4 29,7 190,1 190,1 -
J. Research - 4.297,0 - 4.297,0 - - - - - 4.297,0 - 4.297,0 4.297,0 -
K. On-Farm Investment /a - 9.352,4 - 9.352,4 - - - - - 9.352,4 - 9.352,4 9.352,4 -
Total Investment Costs 1.027,1 25.811,1 1.550,7 28.388,9 39,2 854,4 109,8 1.003,4 1.066,3 26.665,5 1.660,5 29.392,3 28.388,9 1.003,4
II. Recurrent Costs
O&M Works - 556,8 122,2 679,0 - - - - - 556,8 122,2 679,0 679,0 -
O&M Equipment - 1.224,5 136,0 1.360,5 - - - - - 1.224,5 136,0 1.360,5 1.360,5 -
Subtotal Operation & Maintenance - 1.781,3 258,2 2.039,5 - - - - - 1.781,3 258,2 2.039,5 2.039,5 -
B. Vehicles O & M 30,5 32,0 13,7 76,2 1,3 1,4 0,6 3,3 31,8 33,4 14,3 79,5 76,2 3,3
C. Supplies - 20,8 4,6 25,3 - - - - - 20,8 4,6 25,3 25,3 -
D. Staff - 799,2 - 799,2 - - - - - 799,2 - 799,2 799,2 -
E. Other - 487,4 - 487,4 - 0,6 - 0,6 - 488,1 - 488,1 487,4 0,6
F. Gasoline - 47,5 10,4 57,9 - - - - - 47,5 10,4 57,9 57,9 -
G. Travel - 343,3 - 343,3 - 8,9 - 8,9 - 352,2 - 352,2 343,3 8,9
Total Recurrent Costs 30,5 3.511,4 286,9 3.828,8 1,3 10,9 0,6 12,8 31,8 3.522,4 287,5 3.841,6 3.828,8 12,8
Total 1.057,6 29.322,5 1.837,6 32.217,7 40,5 865,3 110,4 1.016,2 1.098,1 30.187,8 1.948,0 33.233,9 32.217,7 1.016,2
ANNEX 3:
Other documentation
THE PRELIMINARY PLANNING BRIEF
As a prelude to the planning process and before commencing any
studies or field work, it will generally be found useful to produce a
preliminary planning brief (PPB) as an aid to focusing the team’s thinking
on the tasks that await it. The PPB is a short (3-5 page), ephemeral
document covering the main topics or issues that the forthcoming work is
expected to address, explains how it is proposed to tackle them, and
indicates the intended outcome. As such, a PPB may be little more than a
listing of tasks which the team leader might in any case note informally
before departure. However, committing thoughts to paper encourages more
focused and deeper thinking, and allows the sharing of ideas with others,
both inside and outside the team, who should be stimulated to provide
additional thoughts of their own and to guide the team towards relevant
reference material.
The PPB is thus a document which the team leader uses mainly to pick
the brains of others and to ensure that team members have a common
starting point. The team leader should be both the author and the ultimate
judge of what the PPB should contain.
Background material, although it may refer briefly to many topics (eg

the country and sector situation, policy, social and environmental issues,
institutions, past project lending experience, existing irrigation
development, potential and constraints, or the current status of project
elaboration), needs to be highly selective and should be limited only to
that which is strictly relevant. It should relate directly to the tasks,
questions or issues to which the team proposes to give priority. The content
of the PPB is likely to cover:
• a brief background to the forthcoming field work, highlighting any

initiatives or precedents relevant to the planning of the project:
• a concise summary of the highest priority tasks or issues, including
social and environmental issues, to be dealt with;
• the team leader’s views on how these should be addressed and the
implications for staffing the team;
• an indication of outcomes which the team should aim for, either as an
ideal, or any second-best or fallback positions that could still be
accepted if the ideal proves unattainable in practice.
Draft terms-of-reference (TOR) for the work should be attached to the

PPB. The content of the TOR and the proposed allocation of work among
team members should be fully consistent with the PPB. The PPB may also
contain a list of background documentation, plans and maps1.
The PPB should be drafted as early as possible before the team

commences work, so that it can be discussed with other colleagues with
relevant experience or knowledge, sufficiently far in advance of the team’s
departure to allow adjustment of objectives, field programme, or even its
composition if this is considered necessary. It will also be useful to seek
comments on the PPB from the financing institution.
If resources allow, in most cases it is advantageous for the team leader

to make a brief visit to the concerned country prior to preparing the PPB.
Such a visit can be helpful in generating up-to-date information, in giving
government staff advance notice of the team’s objectives and in setting up
administrative and logistical arrangements. In these cases the PPB is likely
to be a more substantive document, and may serve as a useful basis for
subsequent discussions with the government and financing institution.
THE AIDE MÉMOIRE

Before leaving a country it is routine for an external planning team to
prepare, discuss and leave with its counterpart institution an aide
mémoire. Ideally, this should be prepared following a workshop arranged
to reach consensus on the team’s findings and should reflect this
consensus. The aide mémoire should briefly summarize the stage that
project planning or strategy formulation has reached, indicate the main
features or outcomes as they appear at that time, list the topics, questions
or issues which next require attention, and explain possible follow-up
actions. In some respects it resembles the back-to-office report (see below)
which Investment Centre missions issue after their return to base, but with
two important differences:
• An aide mémoire is the team’s own view, and does not represent an
official position of either the government or the external assistance
organisation: this is inevitable for a document written under time
pressure in the field and without consultation with the
organisation’s management. As a result, views presented in the aide
mémoire, and in particular the commitment of further resources to
follow-up action, must be provisional, and clearly stated as being
subject to subsequent agreement.
1: This may be aided through bibliographic searches using FAO's AGRIS (International Information System for
agricultural Sciences and Technology) or other computerised bibliographies.
• An aide mémoire is targeted only at the government, hence should

always stress the specific information which the government and its
affiliates need, and point to required decisions or follow-up
commitments on the government side.
The main points to cover in an aide mémoire are likely to be:
• A brief recapitulation of the team’s terms of reference.

• Who the team worked with or met, where it went, what it did and an
expression of thanks for courtesies extended to the planning team.
• A résumé (preferably no more than three single-spaced pages) of the
current status of work. Depending on the stage reached in subsectoral
review or the planning of specific investments, this may be a
description or comparison of strategic options, some alternative
project concepts, or an outline of a single possible project giving
provisional costs, organisational arrangements and likely benefits.
• A listing of the main questions, problems or issues which still have to
be resolved before project planning can advance further, focusing
mainly on those aspects which are the responsibility of the
government and, to the extent that this is appropriate or possible,
indicating the sort of outcome considered most likely to be endorsed
by the prospective financing agency.
• A clear indication of follow-up (what remains to be done, by whom,
by when) for the government and any other individuals or
institutions with a role in, or contracted for, further planning. Steps
to be taken to mobilize funding for follow-up work, if required,
should be listed. Where detailed terms of reference and schedules
for further work have been prepared, these should be attached as
annexes to the aide mémoire.
It is not appropriate to include much background information in an aide

mémoire since this should usually be known to the government.
BACK-TO-OFFICE REPORTS
The back-to-office report (BTOR) is the vehicle through which
Investment Centre teams present their broad findings to their own
management and the concerned financing institution within a few days of
their return to headquarters. While still in draft, the BTOR provides the
written material on which the team’s debriefing is based. The BTOR also
informs other staff of work which may be relevant to their assignments,
and serves to attract comments from a peer review.
The content of the BTOR will vary according to the type of assignment,
but should be broadly similar to that of an aide mémoire, although slanted to
address the information requirements of the Investment Centre management.
As a rule it should cover:
• the purpose of the work undertaken, duration, team composition,

main contacts, relationship to other activities;
• brief national background information, to place the project in context;
• summary of the team’s findings: as in the case of the aide mémoire,
content should depend on the stage of strategy formulation or
investment elaboration; it may cover alternatives or concepts, or it
may summarise the justification for a specific proposed project,
noting its location, components and approximate costs;
• the status of strategy formulation/project planning so far achieved and
issues resolved by the team;
• issues still outstanding and the solutions proposed by the team;
• the scope of follow-up work, its timing and manpower requirements;
• requirements for external technical assistance during project
implementation.
All BTORs should also include a brief section which explains how the
mission has examined and addressed the possible social and
environmental impact of the project. BTORs should be succinct and
generally not more than four pages in length. If no other reports are to be
issued by the team, however, a BTOR may not have such a restriction on
its length.
TERMS-OF-REFERENCE FOR FEASIBILITY AND OTHER STUDIES

Institutions or individuals will often need to be contracted to work
under the general guidance of government or its LDG, on specialised
surveys, mapping or engineering designs which provide the detailed
supporting data needed to define investment options or specific projects.
The degree of detail to be given in the terms-of-reference for such studies
will depend, in particular, on whether they will be done by people with
whom the project planning team will work directly, or by someone else -
for example local or international consultants or a locally-contracted
university team. If the work concerned is simply an expansion of the tasks
of a local team which an external team is assisting, much can be achieved
by verbal briefing before the team leaves the country, and written
instructions may be kept brief. On the other hand, if a new group is to
become involved and the individuals concerned are unfamiliar with the
project or with the aims of the specific assignment, more comprehensive
terms-of-reference will be needed. If a legally binding contract is to be
made, the terms-of-reference will become the technical specification
underpinning the legal agreement, and need to be carefully worded.
Comprehensive terms-of-reference for further studies1 are likely to cover

the following aspects:
• background and objectives: the main objectives or concept of the

investments or specific project being planned and principal
components;
• contribution expected from the work to be done: how the work
covered by the terms-of-reference is to contribute to the provision of
base data, the elaboration of project ideas, quantification of
components, costs, benefits, etc.;
• particular points to receive attention in the work (e.g. training of
national staff) and how they are to be approached;
• specific information to be provided or gathered, the general means by
which data should be collected and the expected level of accuracy,
results to be generated, proposals to be elaborated, quantities to be
estimated, costs to be calculated, and so on;
• the level of detail, format, documentation, scales of final
presentations, maps or designs, as well as indications of the length of
any textual material;
• deadlines for delivery, with interim review or reporting dates if
appropriate;
• manpower and other inputs or equipment to be used to complete the
work, costed if appropriate; the ownership of equipment after
completion of the studies;
• the disciplines, minimum qualifications or experience of key
individuals to be involved;
• the supporting services, materials and facilities to be provided by the
government.
INTERIM OR INITIAL PROJECT BRIEFS

Interim or Initial Project Briefs (IPBs), are used as a convenient form of
communication at any stage of investment planning; for example, when a
planning team has reached the stage of reporting on project options and
issues on which feedback is required, or during various stages of execution
of a programme of work including feasibility studies, when progress
reporting is necessary. IPBs are relatively short (10 to 15 pages), issues-
oriented, operational documents. They summarise the status reached and
the actions to be taken or decisions to be made to complete the planning
process. They may, therefore, be up-dated at various times.
1: Further guidance on preparation of terms of reference may be found in The Investment Centre and
Consulting Firms: A Guideline. FAO Investment Centre, Rome (1983)
The content of a project brief varies according to the stage of strategy

formulation or project formulation, with the emphasis changing as work
moves towards final project planning. When prepared at the stage of
completion of conceptualising and comparing the investment options, as
suggested in Part II, the IPB may be compared with the Identification
Report of the conventional planning process, although the IPB will be
much briefer. A suggested format is given in Investment Centre Technical
Paper No 71. As planning is nearing completion, the focus should shift
from a review of options and a summary of the next steps, to fuller details
of the project itself - components, costs, implementation arrangements,
and financial and economic returns. Working papers or annexes attached
to a project brief tend, similarly, to be interim statements, which may be
expanded and completed later, perhaps eventually becoming attachments
to a final project document or dossier.
However it is the intended audience and the tone, rather than the
content, which principally distinguishes the project brief from other
planning documents. Project briefs are usually aimed at keeping the
responsible task managers or project controllers in the financing institution
informed of progress, and to focus on facts and issues as they are
understood at the time, rather than leaving these to the end of the stage
concerned, when it may be inconveniently late to take account of other
views. Rather than building the logical case for a project brick-by-brick for
a wide audience, they therefore aim more to respond to the management
question “Where have you got to?”. They are also intended to allow
management to respond to the planning team’s question “Are we on the
right track?”. Since a degree of prior knowledge can generally be assumed,
background information and scene-setting can usually be much truncated.
Project briefs should involve the planning team in just as much careful
thought as a final project document, but they should generally be briefer,
and quicker to write. As a general rule, if the planning team has reached
an in-between stage in its work and is thinking of issuing a “preliminary”
or “interim” report, it should consider writing a project brief instead. At
such a stage it may be a more cost-effective use of reporting time.
1: Investment Centre Technical Paper No 7: Guidelines for the Design of Agricultural Investment Projects.
FAO Investment Centre, Rome (1993).
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FAO Technical Papers

FAO INVESTMENT CENTRE PAPERS
1 Preparing agricultural investment project, 1985 (Ar C E F S)*
(Now replaced by No. 7)
2 Using data processing tools for preparing agricultural
development project, 1985 (E)
3/1 Design and operation of the irrigation systems for smallholder
agriculture in South Asia - Vol. 1, 1986 (E)
3/2 Design and operation of the irrigation systems for smallholder
agriculture in South Asia - Vol. 2, 1986 (E)
4 The project cycle, 1986 (Multil)
5 Irrigation in Africa south of the Sahara, 1986 (E F)
6 The design of agricultural investment projects -
lessons from experience, 1989 (E* F S*)
7 Guidelines for the design of agricultural investment projects,
1993, (E F S)
7 Rev 1 Guidelines for the design of agricultural investment projects,
1995, (E F S)
8 Financial analysis in agricultural project preparation, 1991 (E)
9 Guidelines on sociological analysis in agricultural investment
project design (E F)
10 Agricultural investment to promote improved capture and use
of rainfall in dryland farming, 1995 (E)
11 Guidelines for planning irrigation and drainage investment
projects, 1996 (E**)
Availability: April 1996

Ar - Arabic
C- Chinese
E- English
F- French
P- Portuguese
S- Spanish
Multil - Multilingual
*- Out of print
**- In preparation
The FAO Technical Papers are available through the authorized

FAO Sales Agents or directly from Distribution and Sales Section,
FAO, Viale delle Terme di Caracalla, 00100 Rome, Italy.

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06 Investment Drainage System

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Guidelines for

Food and Agriculture Organization

Part 1: Recent lessons and implications for planning 5

Irrigation, Food Supply and Drought 11

Water Users’ Associations 24

Social and Environmental Aspects 28

Part 2: The planning process 34

Subsector Review and Strategy Formulation 36

Conceptualising and Comparing the Investment Options 49

Initial Environmental Evaluation 56

Initial Project Brief 60

Planning the Preferred Option 62

Annex 1: Checklist for contents of an

Annex 2: Outline of a typical

C. The Irrigation Subsector 114

The Project Area (3 to 6 pages) 116

The (Name) Irrigation Scheme: Present Status (3-6 pages) 121

A. Location and Natural Resources 121

Existing Institutions and Project

The Project (Or Programme) (5-10 pages) 127

Agricultural Production and Results (4-6 pages) 139

Social and Environmental Implications (2-4 pages) 143

C. Effect on Balance of Payments 146

Issues and Suggested Conditionalities (1-2 pages) 147

Implementation (3-6 pages) 149

Maps, Figures, Tables and Annexes 152

Annex 3: Other documentation 160

References and Bibliography 166

FAO Technical Papers 175

The Investment Centre would like to gratefully acknowledge the

Irrigated agriculture has made a major contribution to food production

Box 1 - The Performance of World Bank-Financed Irrigation Investment Projects

In 1992, the World Bank’s Portfolio Management Task Force reported2

• inadequate consideration of institutional constraints and poor

In the case of irrigation investments these problems are manifested in

• implementation delays and cost overruns;

OBJECTIVE AND ORGANISATION OF THE GUIDELINES

activities and outputs expected. It deliberately focuses on new thinking and

COMPLEMENTARITY WITH PREVIOUS INVESTMENT CENTRE

• Technical Paper 7: Guidelines for the Design of Agricultural

In addition, the reader’s attention is drawn to a forthcoming Investment

Relevant technical papers produced by other FAO Divisions are referred

IRRIGATION IN THE CONTEXT OF

dominated by irrigation, and in some countries water formerly used for

The 1993 World Bank policy paper Water Resources Management

IRRIGATION TYPES AND THE ISSUE OF SCALE

From the technical viewpoint, a further distinction can be made

For the purpose of these Guidelines, irrigation could perhaps be

Conversely, private irrigation can be defined as any irrigation in which

• Farmer-managed irrigation schemes (FMIS) of a few hundred square

The most important differences between public and private irrigation as

• in public irrigation it is the government that plans, finances and

Public irrigation therefore tends to be supply-driven and may incorporate

1: e.g. drip or micro-jet.

The Issue of Scale

Box I-1 - Large versus Small Irrigation Schemes

Large Scale Small Scale

Easier physical planning of contiguous Relatively simple organisation and

Often quick yielding.

Greater potential for irreversible

IRRIGATION, FOOD SUPPLY AND DROUGHT

Options and Alternatives for Food Supply

Rainfed Production of Food as an Alternative to Irrigation

Hence, even though irrigation development cannot, and perhaps should