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NEPAL

DELIVERY OF RURAL DEVELOMENT SERVICES:

A COMPARATIVE ASSESSMENT OF

ALTERNATIVE INSTITUTIONAL ARRANGEMENTS

WITH A FOCUS ON THE TARAI

October, 2000

TABLE OF CONTENTS

Table of Contents.........................................................................................................................................i

Foreword.....................................................................................................................................................ii

Acknowledgements……………………………………………………………………………………….iii

Acronyms...................................................................................................................................................iv

Summary and Conclusions………………………………………………………………………………..v

I. INTRODUCTION.........................................................................................................................................1

A. Background...................................................................................................................................1

B. Objectives and Scope of the Study...............................................................................................1

C. The Nepal Tarai...................................................................................................2

II. THE CONCEPTUAL FRAMEWORK..........................................................................................................6

A. Presentation of Conceptual Framework........................................................................................6

B. Provision and Production..............................................................................................................7

C. Polycentricity and Co-Production.................................................................................................7

D. Public vs. Private Nature of Goods and Services.........................................................................8

E. Social Capital Development.............................................................................................................10

III. STUDY METHODOLOGY........................................................................................................................11

A. Case Study Methodoloty.............................................................................................................11

B. Desk Study..................................................................................................................................11

C. Field Visit....................................................................................................................................12

D. Identification of Actors and Steps in the Delivery Process........................................................13

E. Efficiency Performance Evaluation............................................................................................14

F. Process Performance Evaluation.................................................................................................15

G. Limitations of the Study..............................................................................................................16

IV. DEFINITION AND CLASSIFICATION OF GOODS AND SERVICES..................................................17

A. Definition of Agricultural Technology Services.........................................................................17

B. Definition of Infrastructure Services..........................................................................................18

C. Classification of Services............................................................................................................20

V. INSTITUTIONAL MODELS......................................................................................................................22

A. Generic Models...........................................................................................................................22

B. Agricultural Technology Models................................................................................................23

C. Rural Infrastructure Models........................................................................................................24

VI. SUMMARY OF THE CASE STUDY ANALYSES...................................................................................28

A. Overview of Cases Studies.........................................................................................................28

B. Agricultural Technology Case Studies.......................................................................................28

C. Irrigation Case Studies................................................................................................................33

D. Drinking Water Supply Case Studies.........................................................................................39

E. Roads and Bridges Case Studies.................................................................................................42

F. Electricity Distribution Case Studies..........................................................................................45

G. Summary Findings......................................................................................................................48

VII. ASSESSMENT OF THE CAPACITY OF INSTITUTIONAL ACTORS...................................................51

A. Central Government Departments/Agencies..............................................................................51

B. Local Bodies...............................................................................................................................52

C. NGOs .........................................................................................................................................54

D. CBOs ..........................................................................................................................................55

VIII. RECOMMENDATIONS.............................................................................................................................56

A. General Recommendations.........................................................................................................56

B. Sector- Specific Recommendations............................................................................................57

C. Specialized Sectoral or Multi-Sectoral Funds.............................................................................64

References .............................................................................................................................................................65

Boxes:

Box 1: The Invisible Tubewells.................................................................................................................36

Box 2: Bhairahawa Lumbini Groundwater Irrigation Project...................................................................37

Box 3: Trying to Correct the Incorrigible..................................................................................................38

Box 4: Missing Infrastructure....................................................................................................................47

Box 5: Inefficient Resource Allocation.....................................................................................................49

Box 6: Apportioning 'black money'...........................................................................................................51

Box 7: Right-to-Information Act?.............................................................................................................57

Box 8: Seed Production and Multiplication..............................................................................................60

Box 9: The need for competitive funds.....................................................................................................64

Figures:Figure 1: A Polycentric Support Structure for Development Functions.........................................................8

Figure 2: Types of Goods................................................................................................................................9

Figure 3: Classification of Infrastructure Services........................................................................................21

Figure 4: Classification of Agricultural Technology Services......................................................................21

Tables:Table 1: List of Districts Visited by the Study Team.....................................................................................12Table 2: Number of Cases Studied by Sector.................................................................................................28Table 3: Efficiency Performance Ranking of Agricultural Research Models................................................29Table 4: Process Performance Ranking of Agricultural Research Models.....................................................29Table 5: Efficiency Performance Ranking of Agricultural Extension Models...............................................31Table 6: Process Performance Ranking of Agricultural Extension Models...................................................31Table 7: Efficiency Performance Ranking of Surface Irrigation Models.......................................................33Table 8: Process Ranking of Surface Irrigation Models.................................................................................34Table 9: Efficiency Performance Ranking of Institutional Models in Shallow Tubewell..............................35Table 10: Process Performance Ranking of Institutional Models in Shallow Tubewells.................................35Table 11: Efficiency Performance Ranking of Drinking Water Models..........................................................39Table 12: Process Performance Ranking of Drinking Water Models...............................................................39Table 13: Efficiency Performance Ranking of Rural Roads Models...............................................................43Table 14: Process Performance Ranking of Rural Road Models.....................................................................43Table 15: Efficiency Performance Ranking of Bridge Models........................................................................44Table 16: Process Performance Ranking of Bridge Models.............................................................................44Table 17: Norms Used in LCM and AM Type Models for Roads and Bridges...............................................45Table 18: Efficiency Performance Ranking of Electricity Distribution Models..............................................46Table 19: Process Performance Ranking of Electricity Distribution Models...................................................46Table 20: Summary of the Efficiency Performance Evaluation by Sector.......................................................48Table 21: Summary of the Process Performance Evaluation by Sector...........................................................48Table 22: Number of NGOs in Tarai, by Regions............................................................................................54Table 23: Involvement of NGOs in Various Sectors........................................................................................54

Maps:Map 1: Map of Nepal Showing Tarai Districts and the Study Districts.........................................................3Map 2: Map of Tarai Demarcating the Areas with Relatively low Social Capital.........................................5Annexes:Annex 1: The Tarai in the Context of Nepal....................................................................................................69Annex 2: Development Indicators and Ranking of Tarai Districts..................................................................70Annex 3: Population and Man/Land Ratio in Tarai Districts...........................................................................71Annex 4: Average Holding Size in Tarai Districts...........................................................................................72Annex 5: List of Peoples Contacted.................................................................................................................73Annex 6: List of the Case Studies....................................................................................................................77Annex 7: The Fund Setup.................................................................................................................................80Annex 8: Comparative Evaluation of Institutional Performance...................................................................104Annex 9: Main Fund Set-Up Orientations.....................................................................................................115

FOREWORD

In spite of five decades of development efforts supported by the international donor community, Nepal has only experienced limited economic and social progress. This is due to adverse physical constraints including the rugged terrain and severe difficulties of communications. It is also due to political instability and flawed development policies that have led in part to ineffective institutional arrangements to implement development programs. As a result, many areas of the countries, including the Tarai, have been unable to move out the vicious circle of low productivity subsistence agriculture and are trapped into poverty. Rural poverty remains a perennial problem with almost half the population currently living below poverty line.

In order to address the weaknesses of rural development, the Government prepared in 1996 the Agriculture Perspective Plan (APP), a 20 year strategic blueprint for development focused prominently on, but not limited to, agriculture development. The goal was to bring about a sweeping transformation of the rural economy while reducing poverty levels down to 14 percent by the year 2015. The experience of recent years, unfortunately, suggests that this goal is elusive. Rural producers (particularly the poorer ones) are neither given access to the required inputs, nor provided with the proper rural services. The deficiency in rural services is largely due to the failure of existing -- mostly government – controlled -- institutions. Hence the focus of the present study on Nepal’s experience with various institutional options for delivery of rural development services.

The study analyzes Nepal’s experience with various institutional options and seeks to identify those sustainable and cost-effective options that have the highest impact on growth and poverty reduction. One aspect taken into account in the analysis is the degree to which service delivery is decentralized. Hence the attention given to the recent government decentralization efforts. The study examines some 60 case studies covering agricultural technology support services (research and extension) and infrastructure services (irrigation, rural roads, water supply and rural electrification). These case studies cover twelve districts (out of 20) in all five Tarai development regions. The analysis shows that the state agency-managed service delivery system is largely inefficient and unsustainable. In contrast, the services managed by alternative institutions such as CBOs, NGOs and private sector operators have higher standards and are more cost-effective. In the latter case, evidence suggests that there is a high level of beneficiaries’ participation in project implementation and service delivery cycle. This permits a high cost sharing of both investment and O&M costs with end-users thereby creating a strong sense of ownership amongst them.

Important policy implications are derived from the above analysis. First and foremost, the study suggests the need for a changing role of the Government more aligned with changed circumstances. The Government should refrain from delivering services except if they concern public goods which non-government institutions have no incentives to handle. It should rather focus its efforts on assuming the required provisioning functions, including definition of the legislative and regulatory framework, planning and programming at national and regional level,

supply of funding resources and enforcement of safeguard and associated rules. Other policy recommendations include decentralization of service delivery, reform of the subsidy policy aligned with the need to create a ‘level playing field’ amongst development actors, development of social capital particularly in the southern Tarai, and establishment of sectoral funds. These recommendations are geared to promoting polycentricity (institutional pluralism with competition amongst institutional actors) as it is proven the best strategy for efficient, transparent, and sustainable service delivery arrangements. It can be safely argued that the findings from the case studies although they are based on the circumstances prevailing in the Tarai are broadly applicable to the country as a whole.

I believe that the findings and recommendations of the present study are both vital and timely as an input for the His Majesty’s Government to reorient its current rural development strategy, especially at the time when it is embracing decentralization and community driven development. What is needed at this juncture and without delay is to implement on a pilot scale the best performing models, i.e., those providing for participation of beneficiaries at the grassroots in the context of decentralization, and ‘scale up’ implementation as quickly as the required lessons are learnt from project implementation. The World Bank is certainly ready to contributing to this task starting with the projects that it is currently funding.

Hans M. RothenbuhlerCountry Director for Nepal

World Bank

ACKNOWLEDGEMENTS

The present study was commissioned by the World Bank to a Nepali NGO, SAPPROS (Support Activities to Poor Producers of Nepal). The SAPPROS team who carried out the study comprised the following professionals: Shree Krishna Upadhyay (Team Leader/Institutional Expert), Dr. Govind P. Koirala (Economist), P. P. Adhikari (Rural Energy Specialist), Hare Ram Shrestha (Rural Roads Specialist), Devendra B. Bajracharya (Irrigation Expert), Rajesh Bhattarai (Drinking Water Specialist), and Khadga J. Gurung (Agriculture Specialist). The Team was supported by Khop Narayan Shrestha, Badri Raman Sharma, Bimal Khatiwada, Ms. Pramita Bista (Khadka), Bidya Nath Bhattarai, and Jagadish Babu Tiwari. The logistical support was provided by Narendra Bahadur KC, and the secretarial work performed by Rabi Thapa and Raj Kumar Rupakheti. The entire SAPPROS team is to be commended for preparing the draft of this study particularly as regards the depth of the field work they conducted, their subsequent analysis of the data and drafting of the report, and their continuous readiness and availability for participating in consultations and discussions all along the study with the various authorities and stakeholders.

The World Bank staff core team headed by Jean-Claude Balcet (Task Team Leader, SASRD) comprised the following Bank staff members: Philippe Dongier (INFWS), Navin Rai (SASSD), Sugandha Shrestha (SASRD/SACNP) and Andrea Ryan (SASIN). This core team worked closely with SAPPROS all along the study. It provided SAPPROS technical and analytical guidance as well as editing support. It dealt with the organization of the various fora for discussion including three national seminars (February and June 1999, and June 2000). Other Bank staff members were closely associated to the core team both in the Bank Field Office and at Headquarters: Hans Rothenbuhler (Country Director for Nepal), Jeeva Perumalpillai-Essex (SASRD Team Leader for Nepal), Ohn Myint (SASRD), Robert Epworth (SASRD), Ram Chandra Mishra (SASRD/SACNP), Tashi Tenzing (SASIN/SACNP), Shyam Ranjitkar (SASRD/SACNP), Surendra Joshi (SASIN/SACNP), Guang Shen (SASIN), and Tjaarda Storm Van Leeuwen (SASEG). Prof. Christopher Garforth (Consultant, The University of Reading), as well as Anthony Willett (Technical Assistant MASDAR/AREP), provided support for the agricultural research and extension part of the study. The Peer Reviewers were Robert Thompson (Director RDV), Lynn Bennett (SASSD), Gotz Schreiber (ECARD) as well as Dr. Mohan Man Sainju (Institute of Integrated Development Studies-IIDS, Kathmandu).

Heartfelt thanks go to all the officials and professionals contacted during the preparation of this report. Amongst these are first and foremost the members of the Review Committee at the National Planning Commission (NPC) who assumed responsibility for the study review process under the guidance of Honorable Prithvi Raj Ligal, Vice-Chairman of NPC: Hari Shanker Tripathi (Member NPC/Head of the Review Committee), Jagdish Pokherel (Member NPC) and Shankar Sharma (Member NPC) and Champak Pokharel. Hari Upadhayaya (Consultant-CEAPRED) who provided technical support for the review process is also to be thanked. Heartfelt thanks go as well to the officials of the following ministries and agencies who devoted precious time to react to the study team questions and give precious feedback: Ministry of

Agriculture, Ministry of Local Development (DOLIDAR), Ministry of Water Resources, Nepal Agricultural Research Council (NARC), and Agriculture Development Bank of Nepal (ADBN).

A special debt of gratitude is owed to Dr. Mohan Man Sainju (IIDS) and to Dr. Yam Radav (Winrock International) for their valuable feedback on the various drafts of the report. Dr. Sainju, both personally and as an official Peer Reviewer for the study, was an inspiration all along the study preparation process.

Thanks go to the members of the donor community who reacted to early drafts of the report and were instrumental in organizing the June 1999 National Seminar: Richard Vokes (ADB), Henning Kracher (UNDP), Peter Rhode (GTZ), Sam Bickesteth (DIFID) and Winston Rudder (FAO).

Finally, the greatest debt of gratitude is owed to the farmers, producers and community leaders who were interviewed and consulted at grassroots level. They provided the wealth of information on which the findings of this report are based. This information has increased tremendously the knowledge base and understanding of the process of delivery of rural development services in the Tarai. It is hoped that, when they are applied, the recommendations of this study which are rooted on stakeholders’ perceptions and knowledge will go a long to empower them and in turn help raise the level of services provided to them and hence improve their well-being.

ACRONYMS

AAFMIS Agency Assisted Farmer Managed Irrigation System

ADB Asian Development Bank

ADB/N Agricultural Development Bank of Nepal

Agro-Vets Agriculture and Veterinary Services

AIC Agriculture Inputs Corporation

AM Agency Model

APP Agriculture Perspective Plan

AREP Agricultural Research and Extension Project

BLGIP Bhairahawa-Lumbili Groundwater Irrigation Project

CBO Community Based Organization

CDO Chief District Officer

CEAPRED Center for Agricultural Policy, Research, Extension and Development

CWSS Community Water Supply and Sanitation

DANIDA Danish International Development Agency

DCP Command Area Development Project

DDC District Development Committee

DDT Di-chloro Di-hexa Tetrachloride

DFID Department for International Development (UK)

DOI Department of Irrigation

DLS Department of Livestock Services

DOLIDAR Department of Local Infrastructure Development and Agriculture Road

DWSS Department of Water Supply and Sewerage

FUG Forestry Users Group

HARP Hill Agricultural Research Project

HH Household

HMG/N His Majesty's Government of Nepal

ICIMOD International Center for Integrated Mountain Development

IFAD International Fund for Agriculture Development

INGO International Non Governmental Organization

JMIS Joint Managed Irrigation System

LCM Local Bodies/CBO Model

LCM-D Local Bodies/CBO Model with Direct Influence of Donor Management Model

LGP Local Governance Program

LI-BIRD Local Initiatives for Biodiversity Research and Development

M&E Monitoring and Evaluation

MHPP Ministry of Housing and Physical Planning

MLD Ministry of Local Development

MOF Ministry of Finance

NARC National Agriculture Research Council

NCM NGO/CBO Model

NEA Nepal Electricity Authority

NGO Non Governmental Organization

NM NGO Model

NPC National Planning Commission

NZIDP Narayani Zone Irrigation Development Project

O&M Operation and Maintenance

PDDP Participatory District Development Program

PM Private Sector Model

RWSSFDB Rural Water Supply and Sanitation Fund Development Board

SEAN Seed Entrepreneurs Association of Nepal

SFCL Small Farmer Cooperative Limited

SFDP Small Farmer Development Program

SIF Sectoral Investment Fund

SMIP Sunsari Morang Irrigation Project

SNV Netherlands Development Agency

UG Users Group

UNDP United Nations Development Program

USAID United States Agency for International Development

VDC Village Development Committee

WFP World Food Program

WUC Water Users Committee

WUG Water User Group

SUMMARY AND CONCLUSIONS

1. Objective and Scope of the Study . The study examines recent experience with various institutional arrangements for delivery of rural development services in the Tarai and makes recommendations for the future development of cost-effective service delivery in the context of the ongoing process of decentralization. The services studied have traditionally been both funded and delivered by central government agencies. More recently, alternative arrangements have been introduced, mostly on a small and local scale, and it is timely to review this experience and learn from it. The services studied are: agricultural technology services (research and extension), irrigation (surface and groundwater), drinking water, rural roads and bridges, and rural electric power distribution.

2. The Nepal Tarai . The focus on the Tarai is consistent with the Agriculture Perspective Plan’s view that the region is a potential area for agriculture-led economic growth. APP identifies access to basic infrastructure as a constraint to growth. The Tarai is not homogenous. Population density and intensity of cultivation increases from west to east; levels of social capital are higher in the north than the south. These differences have implications for the types of investments and services that are required for development.

3. Conceptual framework . The framework of the study is based on four sets of concepts drawn from institutional and rural development theory:

the distinction between provisioning – decisions about what goods and services will be made available to a community, including decisions on the allocation of public funds, and production – the creation and delivery of the goods and services. Actions on both fronts need to be taken based on the subsidiarity principle, i.e., the closer to beneficiaries, the better the decision-making process

polycentricity – pluralism in the delivery of services, which creates competition on the supply side, and gives users choice on the demand side, and co-production – the participation of both government and other partners in the production of services

the distinction between private goods – which exhibit high excludability and high rivalry and are therefore likely to be supplied at appropriate levels by the private sector unless there are significant market distortions, and public goods – which are low on both parameters and are therefore unlikely to be supplied by the private sector because no profit can be secured from doing so. In between are toll goods and common property resources or community goods

social capital – the ability of people to work together for a common purpose, which is related to the degree of trust and reciprocity between them

4. Study methodology . The study methodology is based on a case study approach, i.e., an institutional analysis at the micro level. Sixty cases of service delivery were selected which were thought to represent the range of different delivery models tried in Tarai districts. For each case, the institutional model was conceptualized and the roles of key actors in the

various steps in the delivery process were identified. Data were collected through desk study and interviews with stakeholders during field visits to project sites. The strengths and weaknesses of the institutional model underlying each case were assessed in terms of efficiency performance (quality of physical construction and service, cost effectiveness, impact and sustainability), and process performance (user involvement and co-production index). Where appropriate, the models were compared.

5. Limitations of the study methodology . The sample is purposely selected to include a range of models deemed interesting both as ‘best’ or ‘not so best’ practices. However, the sample does not include all possible models, and is not statistically representative. The case study approach favors the depth of analysis of each case rather than the breadth of coverage. Cost estimates are not always available on model performance, so that subjective judgement is used in performance evaluation. The study does not purports to map out development strategy for the Tarai, but only identifies the best performing models and the policy framework for these models to work.

6. Generic models . Five generic institutional models are presented: Agency Model, Local

Bodies model, NGO model, CBO model and Private sector model. From these, various composite models were identified in the field, representing different combinations of actors in various roles.

7. Findings from model evaluation across sectors . The findings show that the traditional Agency model performs inefficiently in all sectors. Where NGOs, CBOs and the private sector are involved, the efficiency and impact are more promising. The study reveals a clear emergence of multiple and alternative sources of service delivery: polycentricity is already developing and is succeeding in bringing service delivery closer, and making it more accountable and responsive, to users. The report presents a summary analysis of the capacity of the various institutional actors.

8. Findings from model evaluation by sectors

Agricultural technology . The agricultural technology sector case studies include Agency, NGO, Private and Agency/Private collaborative models. Concerning research, the need for continued public funding for applied and adaptive research for crops other than industrial crops is highlighted, as this is essentially a public good. NGO involvement in conducting research facilitates higher levels of farmer participation. For industrial crops the private collaborative model is found to perform well. None of the models succeed in involving poorer farmers, however, so that research is not targeted on the problems faced by these poorer farmers face. In extension, the Agency model was assessed as poor in quality and coverage, and relatively expensive. Private sector extension delivery is effective for specific types of service, e.g., through a factory’s contract with the farmers who supply raw material, or through agro-vets who supply advice and information along with purchased inputs.

Surface irrigation . The NGO/CBO model was found to be the most efficient. It has low implementing and maintenance costs and high quality of construction, and it is sustainable because operation and maintenance costs are raised locally from users. Involvement of the

NGO provides training and assures a higher quality of construction than the pure CBO (farmer managed irrigation) model. The Agency involvement increases costs and tends to lead to performance below potential.

Groundwater (shallow and deep tubewells, and treadle pumps). The four models identified (Agency, Agency/CBO, Agency/Private sector, and NGO/Private sector) are not strictly comparable because they use different technologies for extraction. Overall, the Agency/Private sector model works well. The agency under this model is the Agricultural Development Bank of Nepal which provides funding and technical assistance. Public costs (including subsidy) are lower, and technical performance is higher, than for other agency models. Under all agency models, the subsidy has distorted investment, with expensive pumping equipment installed where lower cost alternatives would have been more appropriate. The NGO/private sector is another model that works; its performance is highly dependent on the technical capacity of the NGO. The findings of the study are broadly consistent with other recent reviews of irrigation in Nepal.

Drinking water . Four models were studied in the drinking water sector: Agency, Agency/CBO, NGO/CBO, and Fund/NGO/CBO. The pure Agency model performs least well. The Agency/CBO models represent instances of hand-over to a CBO of a facility constructed by the Agency, without capacity building or earlier involvement of the community in system design and construction. These models do not perform optimally either. The Fund/NGO/CBO model performs more effectively than the other models and also scores relatively high on process. Users are involved directly in procurement and in construction, leading to high transparency. However the Fund does not compensate for the higher costs incurred in more remote areas. This weakness should be remedied.

Roads and bridges . Five models were identified in this sector (Local bodies/CBO, Local bodies/CBO with direct donor influence, Agency, CBO, and NGO/CBO. For roads, the first two models give the lowest costs of construction and high transparency. Direct involvement of a donor in management improves performance because it is accompanied by support for training, technical supervision, and monitoring and evaluation. The local bodies and CBOs ensure maximum involvement of users, particularly where it is the VDC rather than the DDC, which has responsibility. For bridges, the NGO/CBO model is the most effective institutional arrangement.

Rural electric power . Three models for electricity distribution were studied: Agency, Agency/CBO and Private/CBO. The most effective is where the private sector works in conjunction with CBOs. It gives better technical supervision and low cost in system establishment, involvement of the users in planning and construction, and adequate provision for operation and maintenance. The pure Agency model has high cost. The monopoly position of the National Electric Agency (NEA) as sole generator of power contributes to high costs, as does the lack of control of power theft in distribution. The Agency/CBO model, where CBOs buy power in bulk and then distribute to users, has potential if the high cost of NEA power can be reduced through competition in generation.

9. Policy recommendations across sectors . The study offers the following general policy recommendations:

create a consistent ‘level playing field’ across models and actors, particularly with regard to subsidy levels: incentives tend to favor larger, more capital intensive investments, and more wealthy communities

decentralize service delivery, disengage line agencies and give CBOs the driving role define the Government’s ‘provisioning’ function; delineate precisely its ‘production’

function as justified in the case of public goods tailor institutional arrangements to local circumstances and sector conditions (with cross

sector coordination) align government budget with investment priorities as perceived by stakeholders in the

various sectors concerned focus social capital development on the southern Tarai to lay the appropriate base for

implementation of institutional models target models in the western Tarai given its higher level of poverty create sectoral funds as a means to promote polycentricity

10. Policy recommendations by sectors

Agricultural technology. For research, the study recommends that stakeholders be more closely involved in setting the research agenda, that public funding should be at least in part through an autonomous competitive fund, that public sector should recover some costs where research provides private benefit, and that a proper incentive framework be developed as basis to capacity building in the NGO and private sectors. In extension, the private sector should be allowed to cater for private goods. However, to develop the market in agricultural advice, agro-vets need access to credit, and a regulatory framework is needed to assure quality of service. For public goods extension, government should consider contracting service delivery to the private and NGO sector. This could be done in part under a competitive fund that would favor innovative institutional arrangements

For irrigation and drinking water, beneficiaries should be involved in project identification and also in project design and execution. Cost recovery levels should be based strictly on economic criteria. Sectoral funds should be established, which can legally receive resources from HMG/N and donors and contract a diverse set of actors on a competitive basis. The model for such sectoral funds is the Rural Water Supply and Sanitation (RWSS) Fund. For existing large and complex schemes, a shared management arrangement is recommended, with the agency managing headworks, main distribution canals, deep tubewells and accessories, and user groups managing all the lower elements of the system

In the rural roads/bridges and electricity distribution sectors, competent facilitators are needed to support the development of beneficiary groups who can take part in construction and be responsible for the maintenance of completed roads. Training is a key element in capacity building and sustainability. Sectoral funds are recommended for these sectors also.

CHAPTER I: INTRODUCTION

A. Background

1.01 Nepal is a country rich in natural beauty and locked in poverty. Despite billions of dollars of investment in Nepal’s development, almost half of the Nepalese population live below the poverty line. The failure of past development efforts to yield sustainable growth in Nepal can be linked to weak institutions and inappropriate government policies 1. In recognition of the importance of institutions to effective development, this study seeks to examine Nepal’s experience with various institutional options for growth- and poverty-related service delivery and to make recommendations on appropriate and realistic institutional arrangements that can be applied in the Tarai districts.

1.02 The Tarai region was chosen for the study because it was identified in the Agriculture Perspective Plan (APP) as a prime agricultural region, and potential candidate for a national green revolution. The comparative advantages of the Tarai region are: abundant irrigable land, high groundwater potential, scope for cost-effective infrastructure, capacity to adopt new technology, and access to domestic and international markets. However, the potential of the Tarai districts has not been realized, due largely to the lack of good roads to transport products to market, absence of well controlled year-round water for irrigation, land degradation due to poor soil management, ineffective extension systems, lack of proven technologies for the region, inadequate institutional support, absentee landlordism, and a lack of social capital in some areas.

1.03 If these obstacles are overcome the Tarai districts could reach a higher level of development, generating significant growth for Nepal and reducing national poverty. The first step towards realizing this potential is the identification, creation, and support of appropriate institutions for better rural development services.

B. Objectives and Scope of the Study

1.04 This study analyzes Nepal’s past experiences in rural development investments to make recommendations on institutional arrangements for the future. The review identifies sustainable and cost-effective arrangements that will have the highest impact on growth and poverty alleviation. In recommending institutional arrangements attempts have been made to build on recent decentralization efforts of His Majesty’s Government of Nepal (HMG/N).

1 This conclusion is supported by analysis of 43 countries that shows that growth rates are adversely affected by dubious policies and institutions (Devarajan, 1996). When policies and institutions faltered a negative relationship was found between public investments in capital and the national growth rate.

1.05 Five major sectors are covered in the study 2. These sectors and the sub-components within these sectors are outlined below:

(a) Agricultural technology: agricultural research and agricultural extension services;

(b) Irrigation development: both surface water irrigation as well as shallow and deep groundwater irrigation development;

(c) Drinking water: the components reviewed under this sector are gravity fed systems, shallow groundwater-based systems (including hand tubewells) and deep groundwater based systems;

(d) Rural roads: minor feeder roads comprising district roads, village-level roads, and corporate roads as well as bridges; and

(e) Rural electrification: power distribution was the only sub-sector considered for the purpose of this study;

1.05 Under each of these sectors and their sub-components (or sub-sectors), the key crosscutting themes or issues taken into consideration are: institutional pluralism, decentralization, and local governance, as well as the overarching theme/issue of sustainability.

C. The Nepal Tarai

1.06 The analysis was purposely focussed on the Tarai region of Nepal. Before beginning with the analysis, it is worthwhile to re-examine the reasons that have prevailed in the selection of the Tarai as the focal region for the study against this region’s comparative advantages for agricultural growth and poverty reduction. Regional variations in resources, services and the capacity of key actors are also reviewed, as they play an important role in determining the most appropriate institutional arrangements for Tarai’s different districts.

1.07 The Tarai is one of five physiographic zones in the country and is a part of the Indo-Gangetic plain comprising a tract of low flat land ranging in altitude from 22 m below sea-level to 600 m above. The Tarai stretches along the southern boundary of the country extending almost the entire length of the border with India. The Tarai’s soil is alluvial and fine to medium-textured. It is often deep and possesses good water holding capacity. The climate is subtropical with an annual rainfall ranging between 1,000 to 2,700 mm. The Tarai districts are presented in Map 1.

2 These sectors are those targeted by the Agricultural Perspective Plan, except drinking water.

1.08 The Tarai in the context of Nepal. The Tarai is Nepal’s grain basket and produces a sizeable surplus of rice. Compared to Nepal’s other regions, the Tarai has a comparative advantage for agriculture with its fertile soil, the proportion of cultivable land, topography, climate, availability of groundwater, and relatively well-developed economic infrastructure. The Tarai covers only 23 percent of Nepal’s surface area, yet holds 47 percent of its population, 53 percent of the cultivated area, and 68 percent of the irrigated area. The Tarai shares the 1,000 mile open border with India that facilitates informal cross-border trade (see Annex 1).

1.09 Geographical Trends in the Tarai. Within the Tarai there is significant regional variation with noticeable trends from West to East, and North to South.

Western to Eastern Tarai. Increase in population density. The eastern areas were settled first (with little migration today). These areas are more suitable for cultivation due to the good soil quality and reliable rainfall. A greater fraction of the land is cultivated. There is little cultivable land available, and the amount of land under forest has fallen.

Northern to Southern Tarai. Tarai’s northern regions were settled primarily by Hill migrants; and the southern regions are populated by native Tarai people. This has lead to distinctly different settlement patterns. Land distribution in the North is more equitable than in the South, and consequently the southern regions have a relatively lower level of social capital and income distribution is more skewed . Southern Tarai has more cities and urban centers; its proximity to the Indian border has resulted in greater economic integration with the Indian states of Bihar and Uttar Pradesh. In contrast Tarai’s northern regions are more integrated with Nepal’s Hill districts. The southern Tarai has better topographic and soil conditions, and greater groundwater resources.

1.10 Understanding these trends is important to design developmental activities, and to tailor institutional arrangements to specific circumstances. For example, the relatively lower level of social capital in some of Tarai’s southern parts will mean that priority activities there would include social mobilization to enhance social capital.

1.11 Level of affluence. A comparative study of Nepal’s 75 districts prepared by ICIMOD/SNV (1997) has assessed the relative level of affluence of each district using a composite index based on current and potential levels of development. This index is derived from the following base indicators: poverty and deprivation, women’s empowerment, natural resource endowment, socio-economic infrastructure development, educationally disadvantaged population, per capita food production, overall literacy, infant mortality, drinking water coverage, irrigated area, road density, forest using households, per capita forest area, health and development, and infrastructure development. These indicators and the composite index, compiled for each Tarai districts, are presented in Annex 2. According to the ranking, Jhapa is the most affluent district while Rautahat is the least. Additional data on population including land man ratios and average land holding size are presented in Annex 3 and 4 respectively.

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Map 1

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CHAPTER II: THE CONCEPTUAL FRAMEWORK

A. Presentation of Conceptual Framework

2.01 The present study is designed to examine the institutional arrangements (or institutional models) underlying a discrete number of case studies, identify the strengths and weaknesses of these models and whenever possible proceed with a comparative evaluation of the models as applied in any given sub-sector. The study does not aim to elaborate a development strategy for the Tarai. The socio-economic context at the macro level is taken as given (see para 2.04 below). The focus is purposely on institutional dimensions as they are applied at the micro level.

2.02 The study borrows from key concepts governing institutional analysis as they apply to the delivery of services. Institutional analysis, has evolved dramatically in recent years due in part to the recognition of the key relationship between institutions and development processes. Ostrom (1993) introduces institutions as the fourth implicit pillar of development, supplementing the other three pillars of neo-classical economic theory, e.g., endowments, technologies and preferences. Institutions, whether they are states, societies or groups are vital tools through which individual preferences are collected, channeled and transformed into actions, goods and services. This is aptly stated by North (dates?) who provides the following definition of institutions: “Institutions provide the framework within which human beings interact. They establish the cooperative and competitive relationships which constitute a society and more specifically an economic order. Institutions are a set of rules, compliance procedures and moral and ethical behavior norms designed to constrain the behavior of individuals”.

2.03 The key concepts of institutional theory on which the present study is based are: (a) provision and production; (b) pluralism and competition (‘polycentricity’ and ‘co-production’); (c) public vs. private nature of goods and services; and (d) participation and empowerment; the key role of social capital development .

2.04 Another premise upon which this study’s conceptual approach is based is that the policy and regulatory framework should be adequate if institutions are to work efficiently under any model. Providing an enabling environment in which beneficiaries can operate efficiently is a prerequisite for institutional arrangements to produce the desired results. Distortions arising from ill-conceived economic policies (as it will be seen in the case of tubewell subsidies) need to be removed. The management and preservation of environmental resources is also key to pave the way for the sustainability of institutional arrangements. A case in point is the overall availability of water resources for irrigation. In the absence of adequate water use

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regulations, overall water resources may be depleted, voiding any positive results from potentially efficient model at the micro-level.

B. Provisioning and Production

2.05 According to institutional theory, there are two key and separable concepts in the delivery of goods and/or services--namely provision and production (ACIR, 1987). Provisioning refers to the process whereby decisions are made regarding what goods and services will be made available to a community. In contrast, production refers to how these goods and services will be ‘produced’ . Provision criteria are concerned with how to satisfy the public’s preferences (through beneficiary responsive planning and funding), while production criteria involve, the efficient management of human and material resources.

2.06 This study questions how the provisioning and production functions can be implemented to maximize efficiency, equity, responsiveness, accountability, and sustainability in the delivery of rural goods and services. A key principle in determining responsibilities for provisioning and production is to assign these responsibilities to the most appropriate level of government, and to the most appropriate institutions or agency operating at that level (Martinussen, 1987). This is defined in terms of effectiveness (degree of objective achieved), efficiency (minimum cost without compromising quality) and responsiveness (degree of flexibility to accommodate the changing needs of beneficiaries as articulated by them). In Nepal’s case this will involve deciding on responsibilities between the three levels of government – the central government, DDCs, VDCs, or municipalities – as well as NGOs, the private sector and CBOs operating at these three levels.

2.06 Another consideration in determining the responsiveness of institutions is the ‘subsidiarity’ principle that shows improved accountability and transparency when functions are carried out at the lowest possible level, and as close to the beneficiaries as possible. If this principle is followed, the institutional set-up (and corresponding capacity for providing rural development services) will improve.

C. Polycentricity and Co-Production

2.07 Another guiding principle in task allocation between institutions, is a preference for pluralism and competition over hierarchy. In Nepal, User Groups (UGs) and CBOs have not been important sources of influence and power traditionally. The hierarchical approach is still ingrained in Nepal’s current democratic system of governance – a system often criticized for its adherence to tradition that tends to prevent a more responsive provisioning and production of services. In Nepal, the public functions of government are still typically implemented centrally, and with little participation from potential beneficiaries. The concept of institutional pluralism would introduce competition amongst institutional actors, and provide the public with a menu of options for accessing development resources. This important concept of polycentricity which underlies the analysis of this report refers to an environment where there are multiple providers of the same services. This creates competition and opportunities of synergies on the supply side, and permit to offer a

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range of options amongst which beneficiaries can select depending upon their own circumstances and preferences on the demand side. Figure 1 contains a diagram exemplifying how a polycentric institutional arrangement of the above type could be established for carrying out development functions in Nepal.

2.08 Another development model with tremendous scope and demonstrated success is the co-production model – an arrangement that allows substantial private and CBO participation in the delivery of public services. Co-production requires the government to relinquish some functions and join forces with the private sector to overcome public sector inefficiencies. In developing countries, rural infrastructure has often been produced in partnership between the government and private citizens – a co-production model (Cernea, 1985). If well-structured, co-production projects can achieve exceptional levels of efficiency and sustainability due to the public/private synergy. In particular, due to the market incentives introduced through private sector involvement there is little scope for corruption in the co-production model

2.09 One overall responsibility that government carries is that of creating a policy environment which supports any chosen set of institutional arrangements. Polycentricity and pluralism, for example, can only function if government introduces policies which creates space for and encourage alternative producers of services. Effective implementation of local government reform and deconcentration of central government functions creates an environment in which local CBOs and NGOs can have a voice in provisioning and a stake in the production of development services.

D. Public vs. Private Nature of Goods and Services

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Figure 1: A Polycentric Support Structure for Development Functions

USERS GROUP

ConsumersCitizens

DESIGN BUREAU

CONSTRUCTION SECTORAL MINISTRIESBUREAU

OPERATINGBUREAU

FIRMS

USERS GROUP

CONSUMERSLOCAL GOVT.

SECTORAL MINISTRIES

DESIGN BUREAU

CONSTRUCTION

REGIONAL GOVT.

SECTORAL MINISTRIES

NATIONAL GOVT.

SECTORAL MINISTRIES

DESIGN BUREAU

CONSTRUCTION BUREAU

OPERATING BUREAU

CONSTRUCTION BUREAU

OPERATING BUREAU

OPERATING BUREAU

CONSTRUCTION FIRMS

DESIGNERS BUILDERS OPERATORS

CITIZENS

BUREAU

DESIGN BUREAU

DESIGN BUREAU

Financial InstitutionsFinancial Institutions and Funds

Quality Monitors

2.10 The nature of the supplied good/service is an important factor when defining the most appropriate institutional arrangement for the delivery of goods and services. Goods and services can be private or public: pure private goods and services are characterized by complete exclusion (i.e., excludability) in consumption where one can be prevented from using the good/service; and pure public goods and services have shared uses/consumption (i.e., low rivalry) so one consumer does not inhibit the consumption of the good/service by another consumer. Between these two extremes are goods and services with varying degrees of rivalry and excludability (Ostrom, 1993) which render these goods and services to become toll goods or common property resources (community goods). Definitions of the key categories describing the nature of goods and services are provided below, and these classifications are presented in Figure 2.

Public goods exhibit joint use/consumption, or low rivalry (if ‘A’ consumes it, it is still available for ‘B’ to consume); and low excludability (it is difficult for ‘A’ to prevent ‘B’ from gaining access to it).

Private goods exhibit alternative use/consumption, or high rivalry (if ‘A’ consumes it, it is not available for ‘B’ to consume); and high excludability (‘A’ can easily prevent ‘B’ from using it).

Toll goods exhibit joint use/consumption, or low rivalry; and high excludability.

Common pool resources (referred to as ‘community goods’ in the text) exhibit alternative use/consumption, or high rivalry; and low excludability.

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Figure 2: Types of Goods

High

Low

2.11 The provision of private goods can best be managed by competition, a policy environment where market failure situations like monopolies, monopsonies, and cartels are avoided; this falls under the government’s regulatory function. Delivery of public goods and services poses more difficult problems. In this study the focus is more on the institutional models that characterize efficient delivery of such public goods and services for the development of rural areas. In public goods and services, voluntary effort will not work because potential users have incentives to hold out or act as free-riders. This is why the market cannot be relied on, and institutions, with a set of rules, are needed for the production, delivery and use of the public goods and services.

E. Social Capital Development

2.12 In addition to above considerations, the form of institutions that will be most effective under any given circumstances will depend largely upon the amount of social capital accumulated by a community. Social capital is defined as the degree of trust and reciprocity between members of the society or community. It is the ability of people to work together in groups and organizations for a common purpose. The greater the trust between members of the community, the greater likelihood of there being an effective

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(low) Sharing of Consumption (high)

Private Goods:Rice, shoes, bicycles, haircuts, books

Toll Goods:theaters, cinema halls, telephone service, toll roads, cable TV, electric power, libraries

Public Goods:peace and security of a community, national defense, mosquito abatement, air pollution control, fire protection, streets, weather forecasts, public TV

Common-Pool Resources:water pumped from a groundwater basin, fish taken from a river, crude oil extracted from an oil pool

Alternative Use Joint Use

Exclusion

Infeasible (Costly)

Feasible (Low Cost)

community institution for handling the development related public goods. Culture, religion, and pattern of income distribution have significant bearing on social capital which can vary widely between groups and regions. Where social capital levels are low, additional facilitation is required to allow the groups to become viable, otherwise groups exist only in name. There are several examples in Nepal of participation in organizations where members are nominated rather than elected, and where this adversely impact the delivery of development services.

2.13 As with all institutions, it is essential that the benefits from the creation of community groups are estimated. Group formation should be considered only where costs remain lower than the associated benefits (e.g., savings in infrastructure building, better O&M leading to increased production, etc.). If this cannot be proven then alternative options should be explored, such as private sector delivery. Such cost/benefit assessment of institutional options have rarely been carried out in Nepal. As a consequence, the fact that the delivery of goods and services (particularly those of a public good nature) has largely been inefficient and costly has been left unrecognized.

2.14 This study paves the way for analyzing the performance of the institutional options. With the above principles in mind, the study reviews and examines various models of delivering goods and services to the people and beneficiaries, and formulate recommendations as to what are the most appropriate models given the local circumstances for the development of the Tarai districts. The goal particularly is to improve the efficiency and equity in the execution of projects in the Tarai with the hope of greatly enhancing the welfare of the rural Nepali populations.

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CHAPTER III: STUDY METHODOLOGY

A. Case Study Methodology

3.01 This study has an operational focus–consequently the analysis draws primarily from case studies of on-the-ground experiences of different approaches to delivery of rural infrastructure and agricultural technology services in Nepal. The case study methodology aims at examining in-depth a discrete number of cases studies to identify the institutional models for rural services delivery underlying these case studies, and assess the strengths and weaknesses of these models. The methodology does not purport to make any statistical inferences or to be exhaustive in terms of its coverage of the range of models applicable to the delivery of rural development services. It aims rather at illustrating a discrete number models typically being applied in rural Nepal, based on the analysis of both ‘best’ and ‘not so best’ practices, and compare these models in terms of both performance and process outcome (see Section E and Section F below).

3.02 The case studies were carefully selected through desk studies and interviews in order be representative of the range of different delivery models that have been tested across the different Tarai districts in each of the sub-sectors reviewed. For each case study the institutional model was conceptualized, with particular attention paid to the roles and responsibilities of key actors, and the key steps in the delivery process (or in the ‘project cycle’). The information collected was then used to assess the efficiency and effectiveness of the different models – both in terms of process and performance outcomes. This gave the basis for determining the strengths and weaknesses of the model and allowed for a consistent comparison of performance across models when circumstances permitted such a comparison.3 Based on key findings derived from these evaluations, recommendations were developed for each sector. Wherever possible previous reviews were examined and supporting empirical research was checked to confirm findings. The institutional arrangements observed in the case studies are discussed in Chapter VI , the performance evaluation findings are presented in Chapter VII , and the final recommendations are made in Chapter IX .

B. Desk Study

3 The case study write-up and summarization are presented in the sector annexes (Volume II) of the present study. This includes the scoring description and performance evaluation for the models underlying the case studies.

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3.03 During the desk study information was collected from studies, reports, books and articles related to the sectors covered under the study. In addition to this initial review, discussions were held with relevant central-level stakeholders, local line agencies, and Non-Governmental Organizations (NGOs), etc., to jointly identify a range of case studies from across the Tarai districts that was representative of the different modes of service delivery for each sector. In most instances, several cases of each institutional model within each sub-sector were identified and information on these cases was summarized to maximize consistency of observations. The final list of cases is presented in Annex 5 .

C. Field Visits

3.04 Field visits consisted of visits to project sites, and interviews with stakeholders to collect detailed information for all selected case studies. At least one field visit was completed for each case study reviewed. During the field visit, the study team met with key stakeholders, including community members, community leaders, farmers, community based organizations, staff from project executing agencies (both local and regional offices), as well as representatives from line agencies, District Development Committees (DDCs), Village Development Committees (VDCs) , local NGOs, international NGOs (INGOs), and private sector operators. The list of institutions visited and persons met are presented in Annex 6.

3.05 In order to systematically elicit responses, sectoral and thematic checklists were prepared and formed the basis of interviews and site visits. These checklists were pre-tested and refined before use in the field. They served to collect information on the roles and responsibilities of key actors in the delivery cycle, i.e., project initiation, planning, facilitation (including technical support if needed), funding and resource allocation, implementation management, conflict resolution, monitoring and evaluation (M&E), and operation and maintenance (O&M). Data was also collected on project outcomes (or performance). This included observations and beneficiary feedback on the quality of the services provided (e.g., condition, relevance and delivery efficiency), the standard (e.g., reliability and level of service), the economic efficiency of service provision (e.g., capital cost/unit and capital cost/beneficiary). It was also based on evidence (sometime anecdotal) of project impact, observations on institutional and financial sustainability, and information on user commitment to project implementation as well as operation and maintenance. To facilitate comparison across case studies, background information on the case study was also gathered, including project type, project scale and complexity, project scope and coverage, and time since project completion.

3.06 By design, the districts in which case studies were selected had a relatively high level of government, donor and INGO/NGO involvement. As a whole, 13 out of the 20 Tarai districts were covered as part of the cases studies (Table 1). Some interesting institutional models not currently used in the Tarai, but with potential application in the Tarai, were also examined by taking case studies from the Hill districts. The Hill districts visited were Kavre in the central region (for the NGO model in agricultural extension),

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Syangja and Lamjung in the western region (for private sector and (Community-Based Organization - CBO models for electricity distribution), and Dailekh (for the NGO model in agricultural extension).

Table 1: List of Districts Visited by the Study Team

DevelopmentRegion

Districts visited

Eastern Jhapa, Morang, Saptari, Siraha, Sunsari

Central Bara, Chitwan, Parsa

Mid-western Banke, Dang

Western Kapilvastu, Nawal Parasi, Rupandehi,

D. Identification of Actors and Steps in the Delivery Process

3.07 Key institutional actors. The information gathered through the desk studies and field visits was synthesized to identify the roles and responsibilities of key actors in project development. For the purposes of this study, the following key institutional actors were identified as follows:

Individual end-users: end-users of services (rural dwellers in the broader sense, including farmers under differing land tenure arrangements: owner-operators, tenants, sharecroppers, etc.)

CBOs: including User Groups (UGs), and community associations;

NGOs: non-profit service organizations affiliated or not with the Social Welfare Council;

Private sector: individual private operators, companies or industry associations;

Local government bodies: decentralized governments in the districts (DDCs) and the villages (VDCs);

Agencies: government sectoral services/agencies with their field offices (this includes the Agricultural Development Bank (ADB/N) for shallow tubewells); and

Funds: autonomous investment funds.

3.08. Key steps. The roles and operating arrangements for these different actors were examined along the ‘delivery cycle’. It is worth noting that this delivery cycle differs markedly

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across sectors and across the range of goods and services that are delivered. The digging of boreholes and the installation of pumps for water supply for instance is performed typically along a project-type cycle, whereas extension services or road maintenance are typically undertaken as part of routine programs. The number and the nature of the process steps are also different (for details see Annex 7 presenting the individual models covered).

3.09 The key delivery steps considered in the study are subsumed under the two stages of the delivery cycle, i.e., the ‘provisioning’ stage and the ‘production’ stage:

(a) Provisioning Stage

Project/service initiation: formulation of demand, submission of project request;

Project/service planning: preparation and design, including facilitation, capacity building and provision of technical assistance services;

Funding: provision of funds and non-financial resources;

Resource allocation: allocation of funds and resources between projects/subprojects or primary/secondary services;

(b) Production Stage

Project execution/service delivery: project implementation, including construction management of infrastructure projects, or provision of project management services (e.g., for agricultural services)

O&M: funding, repair and operation of systems (not applicable for management services)

M&E: regular assessment of project implementation/service delivery (including financial monitoring), and project/service impact and outcomes

3.10 Case studies in each of the respective sectors (and sub-sectors) were often illustrative of the same model. This permitted the analysis of the same institutional arrangement in a variety of settings and project circumstances, thereby increasing the confidence and robustness of findings. The complete description of the institutional models identified and evaluated for each sector is presented in matrix and diagram format in Annex 3.

E. Efficiency Performance Evaluation

3.11 A key component of this study is the evaluation the efficiency of the models across the case studies reviewed. To this effect, the performance was measured according to pre-identified performance ‘criteria’.

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For the infrastructure sectors the five criteria were:

(a) infrastructure standard;

(b) service delivery standard;

(c) cost effectiveness;

(d) impact (descriptive only); and

(e) sustainability.

The agricultural technology services, since they possess slightly different characteristics, were rated based on the following four criteria only:

(a) service delivery standard;

(b) cost-effectiveness;

(c) sustainability; and

(d) impact (descriptive only).

3.12 After extensive consultation with sector specialists, several sets of easily measurable indicators that suitably (but not perfectly) captured the above performance criteria were developed 4. The list of indicators used varied according to the sector being examined (see complete list of indicators for each sector in Annex 8.) It is important to note that the relative values of indicators were compared only within sub-sectors for a given type of infrastructure or service (e.g., tubewell cases were compared to other tubewell cases only, and not to surface irrigation cases; dirt roads were compared to dirt roads and not to gravel roads). This ensured that comparisons were made across projects or services of similar design and/or service standards.

3.13 The indicators served two functions. They provided a tool for identifying particular strengths and weaknesses associated with each models. They permitted also, whenever circumstances were sufficiently similar, to proceed with the comparative evaluation of the different institutional arrangements in given sub-sectors.

3.14 For each case study, the performance was measured against the indicators on scale of 0 to 3 (0 reflecting lack of performance and 3 reflecting high performance,). By nature, many of these indicators had elements of subjectivity and therefore explicit statements justifying the scoring were provided next to the assigned values. Where quantitative values were applicable (e.g, cost per hectare or cost per beneficiary), the range of values reflected in a 0 to 3 score was given. These ranges are summarized for easy reference in the Annexes I-V, Volume II., which may available as reference document at the World Bank Kathmandu Office. Where there were several cases representing a single institutional arrangement, the score for each of the indicators was averaged across cases to obtain a single performance evaluation table for the overall institutional model presented.

3.15 For sub-sectors where roughly identical services are being produced, the comparative evaluation of the different institutional arrangements was then completed by comparing the average score (based on the values of the indicators) for each performance criterion. It should be emphasized that the compilation of a total aggregate value for each institutional arrangement was deliberately avoided, because it oversimplified

4 For example, to capture the relative cost effectiveness of different delivery arrangements in the provision of rural roads, dollar values for both capital cost/km and capital cost/beneficiary were compared between models for each sub-sector.

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the analysis, and implied an equal relative importance (weighting of 1) of the different performance dimensions. Instead the individual values of the different parameters were preserved, to illustrate the diversity existing across case studies and allow for a more effective evaluation and discussion of the various strengths and weaknesses of the different models. The ‘preferred’ model for each sector was identified by ranking the different arrangements based on an inspection of the profile across the parameters. The ranking was made easier by the fact that a better model often scored high in all or most indicators and criteria.

F. Process Performance Evaluation

3.16 To complement and cross-check the ‘efficiency’ performance evaluation described above, an additional ‘process-based’ evaluation was also completed for each institutional arrangement. This process-based review was designed to verify factors associated with the process of project implementation that have been identified in empirical investigations as important contributors to project success, i.e.: (a) the level of participation or beneficiary involvement in key project/service delivery steps (see para 3.08 above and (b) the total number of actors involved in the various project implementation steps (or co-production index). The process evaluation is also meant to measure the degree to which poor segments of the communities effectively participate in and benefit from the service delivery process, and in turn determine whether the models are likely to serve as instruments to reduce poverty. For the purpose of this ‘process’ ranking, a higher level of inclusion of beneficiaries is considered as preferable (in line with the ‘subsidiarity’ principle defined in the theoretical framework); similarly, a higher ‘co-production index’ is valued higher because of possible synergies that it may generate (see Chapter IV for a detailed discussion of these concepts.)

G. Limitations of the Study

3.17 It is important that the limitations of a study of this type be recognized at the onset and taken into account in the interpretations of the findings.

The sample of case studies is not intended to be representative in any statistical sense of the situation prevailing on the ground; rather it is illustrative of the main kinds of institutional arrangements that are used in the various sectors in rural Tarai; there are clearly other models (mostly composite or hybrid models) in operation which are not covered by the study

The study is not a review of best practices only; indeed, the intent has been to identify both ‘best’ and ‘not so best’ practices, and select case studies accordingly, the presumption being that it is useful also to identify what are the possible shortcomings of certain models and learn from cases that did not yield expected results. Here again the coverage of ‘best’ and ‘not so best’ practices is neither exhaustive nor representative in a statistical sense

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Whilst the scoring of the performance criteria was made as objectively as possible – including seeking the perceptions of the clients – subjective judgement had to be used to determine the final scoring for each model

Direct comparison between models within a given sector is not always appropriate because the models are used to deliver non-equivalent service or a different combination of services, or because the circumstances surrounding delivery are substantially different

Cost estimates (overall cost-effectiveness, cost per beneficiary or per ha) should be treated with caution because of the inherent difficulty (particularly in agricultural technology) in obtaining basic data and in identifying comparable cost data across models

The study is focussed on the assessment of the ‘efficiency’ of institutional arrangements – including from the viewpoint of beneficiary participation, accountability and transparency; however, although equity considerations are not systematically factored into the quantitative assessment, an attempt has been made to take these consideration into account in the overall model assessment each time the information gathered (including farmers’ perception) permitted to pass such a judgement

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CHAPTER IV: DEFINITION AND CLASSIFICATION OF GOODS AND SERVICES

4.01 The most appropriate arrangement for delivering the various goods and services examined in this study will differ depending on the nature of these goods and services -- whether they are public, toll, common pool, or private goods or services. For instance, a pure public good would have to be under the control of the government or a parastatal, otherwise it can result in serious under-investment or flawed delivery. However, institutional arrangements can also effectively change the nature of a good or service. In the same, way, an open access road can be turned into a toll good by charging people to use it; and a water tap which is a community good when anyone is free to use it becomes a toll good when a water user association controls access, and a private good when it is installed in a private house. Whenever institutional boundaries or controls are created to control access to a public good or community resource, it becomes either a toll or a private good or service. In this chapter, the goods and services are defined in terms of their ‘public’ or ‘private’ nature, and the above related issues are discussed piecemeal as each type of good and service is presented.

A. Definition of Agricultural Technology Services

4.02 The agricultural technology services which support farmers include:

the development of new knowledge

the development of new and adapted technologies which farmers can use to improve the productivity, sustainability and efficiency of their farming system

the provision of advice and information which farmers need in order to solve problems, realize opportunities and make appropriate decisions

the supply of material inputs which incorporate (new) knowledge and technology

4.03 The first two of these services are typically public goods, but can be turned into toll goods through legal protection of Intellectual Property Rights (IPRs), or by the new knowledge or technology being usable only by growers who market their crop through a single channel. The third service lies somewhere in between public and private, depending on the degree to which the advice and information is farm-specific. Soil test for instance is private because the results are only applicable to the single farm, while advice on plant spacing, and information on market prices, are public. The fourth service is intrinsically private.

4.04 In this study, agricultural technology services are grouped into two main categories, agricultural research and agricultural extension. The range of activities considered as part of the case studies, both for research and extension, is limited to farming. Within farming it is further limited to cropping activities (both field and home gardens). Other on-farm activities, such as forestry-related activities, livestock rearing, fish farming, etc., have been purposely left out of the scope of the study for lack of time and resources.

Agricultural research

4.05 Research activities include the generation of new scientific knowledge (basic research), generation of technologies which incorporate new scientific knowledge (including new and improved varieties of crops: applied research), and the adaptation of technologies to specific agro-ecological and farming system contexts (adaptive research). The production of breeder and foundation seeds is not a research activity per se, but is a necessary part of the sequence of activities in technology development. In the Nepalese context, basic research is done in the international agricultural research institutes and scientific institutions overseas. Research conducted within the country is mainly applied and adaptive in nature and is the focus of the

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present study. In this study, the research activities considered focus on crop variety selection and improvement, and production of breeder and foundation seeds.

Agricultural extension

4.06 Agricultural extension covers the provision of advice and information for farming activities in the broader sense. There is some extension also within the supply of material inputs, when suppliers provide information and advice to farmers who buy inputs from them. These activities therefore are also covered under the study. As was indicated in para 4.04 above, however, the analysis under this study is circumscribed to cropping activities, and do not touch upon other on-farm activities such as livestock activities.

4.07 Six types of services are considered under the study:

i. Farm technology information service

ii. Exposure to the performance of a new technology (e.g. through result demonstrations)

iii. Enhancement of practical or cognitive skills for increasing the efficiency with which producers use their resources (e.g. through method demonstrations and training)

iv. Identification of farm-specific problems and opportunities (e.g. diseases, pests, soil conditions)

v. Technical advice to solve farm-specific problems

vi. Marketing information (e.g. prices of inputs and produce).

Of the above, i, ii and iii are typically public goods; iv is a toll good; while v and vi are private goods. Extension is not simply the ‘dissemination of technology’: it is essentially a demand-driven activity which responds to farmers’ needs for information and advice.

B. Definition of Infrastructure Services

4.08 The infrastructure sectors examined in this study are: irrigation, drinking water, power, and roads. In Tarai, within each of these sectors, a number of services and technology options (or ‘sub-sectors’) are available. Since the nature of each subsector’s good or service has distinct properties they are reviewed and analyzed separately.

Irrigation

4.09 Both surface and groundwater irrigation technologies are examined; within the range of groundwater options, shallow tubewells, deep tubewells, and manual pumps are evaluated as they are the principal means of groundwater exploitation; a brief description of the these services is provided below.

i. Surface water irrigation systems sourced from water supply at ground surface, and supplied through network of channels to a group of beneficiaries;

ii. Groundwater irrigation: irrigation systems sourced from an underground water supply, including shallow tubewell and deep tubewell technologies.

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Shallow tubewell irrigation systems are sourced from shallow underground confined or unconfined aquifers using a divisible technology that benefits individuals/small groups; water is supplied through confined and unconfined shallow aquifers that can be pumped by centrifugal pumps; and

Deep tubewell irrigation systems are sourced from underground supply using a more ‘lumpy’ technology; water is supplied through confined and unconfined deep aquifers which require either vertical turbines or submersible pumps for pumping.

Drinking water

4.10 Both surface water gravity systems and groundwater sources of drinking water are commonly applied technologies in Tarai, making them the focus of this review; these services are defined below.

i. Gravity water supply systems: water supply network, sourced from ground level and supplied through a network of underground pipes to a group of beneficiaries;

ii. Groundwater supply systems: water supply network, sourced from underground aquifers, including shallow tubewell and deep tubewell technologies.

Shallow tubewells water supply systems are sourced from a shallow underground supply using a divisible technology typically benefiting individuals/small groups, powered by manual or mechanical pumps; and

Deep tubewells water supply systems are sourced from deeper underground supplies using a more lumpy technology typically benefiting individuals/small groups; requiring either vertical turbine or submersible pumps for extraction.

Roads

4.11 This study focuses on both minor feeder roads and bridges Within each of the road categories there are further technical distinctions–roads may be earthen, gravel, and/or asphalt. Bridges examined are single lane of varying lengths (10-100m) of either brick or reinforced concrete constructions.

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i. Minor feeder roads:. minor feeder roads which are local in nature and include district roads; village roads; and corporate roads described below.

District roads are defined as roads within the district which provide one or more villages with access to the nearest market or higher classes of roads;

Village roads are short nonthrough roads linking single villages directly to the district road; village roads are owned by VDCs. The lengths of road are typically short, normally less than ten kms.

Corporate roads are roads which are built for the exclusive use of a private entity or project e.g., the gravel roads built by Bhairahawa-Lumbili Groundwater Irrigation Project (BLGIP).

ii. Bridges: small bridges servicing local communities/populations.

Power

4.12 Grid distribution is the preferred option for expansion of electricity in Tarai, i.e., electricity distribution networks from a central substation or transformer fed from a central source, servicing a community. Existing operating diesel pumps are only partially used due to the lack of adequate distribution lines, and thus this subsector is a major constraint to the provision of electricity.

C. Classification of Services

4.13 The subcomponents defined above are classified in terms of their public or private goods characteristics, as defined in the analytical framework and presented in the following Figure 3 and Figure 4.

21

Figure 3: Classification of Infrastructure Services

Excludable Non-excludable

Rival

Non- rival

Private

Goods

Shallow

Tubewell

Deep Tubewell

Grid

Distribution

Gravity

water supply

Surface

Water

Irrigation

Corporate

Roads

Toll

Goods

Common property

Strategic Highways

Rural Road

(feeder; village roads)

Public

Goods

Figure 4: Classification of Agricultural Technology Services

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Excludable Non-excludable

Rival

Non- rival

Private

Goods

Input supply

Identification of farm

Level problem

Advice on solving a

problem or improving

production

assistance with

farmer experiments

skill enhancement

through training

exposure through

demonstration

Toll

Goods

Common

Property

Information on

new technology

marketing information

exposure through Public

mass media goods

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CHAPTER V: INSTITUTIONAL MODELS

5.01 This study examines a range of institutional models for delivering rural development services in each sector considered as they emerge from the case study analysis. These models are typically variations of five generic models (Agency, Local Body, NGO, CBO and Private Sector). This chapter first describes the generic models, and then presents how the models apply in the various sectors under consideration. Due to the differing nature of service delivery in each sector, it has not been found useful to proceed to any model aggregation across sectors. The models are therefore just categorized and described separately with the exception of extension and research models that are presented jointly. In Chapter VI, all these models are examined for their comparative efficiency and process (equity) performance under the varying circumstances likely to prevail in the Nepal Tarai as exemplified by the case studies.

5.02 In spite of efforts, through the sample selection, to cover a wide range of service delivery models as representative as possible of the situation prevailing in the Tarai, the study coverage is not exhaustive. Other models do exist. Reference to these models is made in the discussion of the case study results in Chapter VI to confirm, qualify or supplement the model assessment performed through the individual case studies, and when appropriate formulate propositions for supplementary investigation.

A. Generic Models

5.03-5.04 The five generic models are presented in detail in Annex 7. Their main characteristics are as follows.

(a) Agency Model (AM): In this model, the entire delivery process (i.e., both provisioning and production) is in the hands of the central government, either through a line ministry and/or a parastatal agency (Figure 5). Typically, the ‘provisioning’ (at least in part) comes under the line ministry. The services of the line ministry or the parastatal agency are now typically ‘deconcentrated’ to the local level, but they can remain centralized at least regionally (the case of large projects headquartered in the regions). The line ministry or parastatal services can either perform all the works themselves on ‘force account’, or they can contract out service delivery activities to NGOs, CBOs or private operators (outsourcing). They can also establish partnerships with local bodies to provide technical support to the latter in service delivery (typically through staff secondment or execution of specific tasks).

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Figure 5: Flow Chart for Project Execution/Service Delivery Agency Model (AM)

(b) Local bodies Model (LM): In this model service delivery comes completely under the responsibility of the local bodies, i.e., District Development Committees (DDCs) and Village Development Committees (VDCs). The local bodies are formally elected structures. They typically work with NGOs (formally or non-formally created), CBOs (typically informal structures) or private operators. To make up for their limited technical capabilities, the local bodies seek technical support from either government agencies or the NGOs/private sector operators. VDCs that typically have minimal capacity also seek DDC support for provision of technical assistance.

(c) Non-Governmental Organization Model (NM): In this model, the NGO (either local, national or international NGO) is contracted by the central or the local government, or directly by donors, either to take charge of entire program or to provide specific services within given programs. NGOs typically work in partnership with CBOs. They can also contract out services to private operators. International NGOs are generally financed by donors, and have strong technical and administrative expertise. The Nepali NGO community has expanded considerably in recent years, especially since the advent of the democracy at the beginning of the 1990s. Nepali NGOs exhibit wide differences in operational capability. A few national NGOs are well equipped technically. In contrast, the bulk of the local NGOs are still technically weak.

(d) Community-Based Organization Model (CM): CBOs are typically informal user groups created at grassroots level to perform, manage or oversee specific socio-economic activities of direct

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Agency

- Project initiation - Preparation and design- Construction & its monitoring

NPC

- Project approval.- Allocation of fund

- Monitoring and evalution

-

Ministry of Finance

Releases Fund

Project

Donor

operational relevance to local communities. The CBO executive committees, where they exist in the case of more formal CBOs, are selected by end-users belonging typically to the same community. In the pure CBO model, CBOs assume responsibility for all the steps in the service delivery cycle, including project planning, programming and execution (Figure 6). Typically, however, whilst CBOs are consulted and involved in upstream part of the delivery process, they only assume full responsibility when facilities are handed out to them. At that point, they have full control over operation and maintenance, and related cost-recovery.

Figure 6 : Flow Chart of Project Execution/Service Develivery

CBO Model (CM)

(e) Private Sector Model (PM): In this model, the private sector is fully in charge of service delivery. This typically happens in the case where private operators are able to pass the cost of the service to end-users either through the sale of inputs or the purchase of products. The end-users in turn are willing to pay for the service because of its private or ‘toll’ excludable nature. Private operators typically work in partnership with other actors in the delivery process (NGOs, government agencies, etc.), not only as contractors but also as technical assistants. They may also enter into partnership with other government or NGO actors for technical support.

B. Agricultural Technology Models

5.05 Four basic institutional models in the provision of agricultural technology services are identified under this study. These models are described in detail in Annex 7 , Appendix 1. They span the range of agricultural research and extension activities described in Chapter IV .

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Users

Beneficiaries form a User Group (UG)

User Group

UG mobilizes resources from users (including labor) for project construction and maintenance

and/or for acquisition of services. It monitors and supervises construction work.

Project construction and/or service delivery

(a) Agency Model: In this model technology generation and dissemination functions are carried out by the government. The agricultural research is carried out by Nepal Agricultural Research Council (NARC) through it research farms and outreach stations while the extension function is carried out by the Departments of Agriculture (DOA) and the Department of Livestock Services (DLS) through their network of district offices and service centers. The extension services are provided normally on demand from clients by Subject Matter Specialists (SMSs), Junior Technicians (JTs), Junior Technical Assistants (JTAs). All of these staff are government staff.

(b) NGO Model: There are some specialized NGOs, that carry out agricultural research activities. Local Initiatives for Biodiversity Research and Development (LI-BIRD), is an example. It is constituted by a group of professional agricultural researchers who carry out a range of applied and adaptive research activities using project funding from national and international sources. Similarly for agricultural extension some NGOs have evolved who have been providing technologies to the farmers in selected pockets of the country. The work of SAPPROS in Dailekh, Chitwan, Gorkha, Lamjung and that of Center for Agricultural Policy, Research, Extension, and Development (CEAPRED) in Koshi Hills, Kavre and Sindhupalchok are some notable examples. The services these NGOs provide are generally of a holistic nature: they aim at building social capital broadly prior to focussing on extension for key commercial cropping activities. They are typically financed by INGOs and/or bilateral donors.

(c) Agency/Private Sector Model: Under this model, the government associates with various commercial agro-processing establishments in the private sector such as sugar factories, tea estates, fruit and vegetable processing industries, etc., in producing the technologies for the latter on a cost-sharing basis.

(d) Private Sector Model: Many mid-level agricultural professionals in Nepal have begun to sell agricultural and livestock inputs to the farmers by opening small agriculture and veterinary services (agro-vet) shops. In some districts that have agricultural potential (such as Chitwan) wholesaling arrangements have also been developed within the private sector. These agro-vets have been providing some level of extension messages to their clients. Similarly, some agro-based industries in the private sector (such as sugar mills) have been providing extension services on their own to the contract farmers.

C. Rural Infrastructure models

Irrigation Models

5.06 Six institutional irrigation models were considered as part of this evaluation--these are described in Annex 7, Appendix 2. These models span the three irrigation technologies described in Chapter IV (surface water irrigation, shallow tubewell irrigation and deep tubewell irrigation).

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Surface irrigation model

(a) Agency Model: The DOI and its field offices (the agency) implement and manage their identified projects or those identified (demanded) by the communities. There is minimal beneficiary participation in the project cycle, except for the O&M of tertiary and farm-level canals. Project implementation is undertaken by the agency or through hired contractors.

(b) Joint Agency/CBO Model: Both the agency and CBOs are involved in the project cycle. Projects are identified and designed jointly by the agency and the users (CBOs); and the projects are executed by the agency with labor-based user contributions. O&M responsibility is shared between the agency and the CBOs, with the latter taking responsibility for the downstream part of the irrigation network (tertiary and farm-level canals).

(c) Agency/CBO Model: Several CBOs [UGs or water user committees (WUCs)] are formed to work with the line agency’s technical assistance and partial financial support. The complex technical functions are undertaken by the agency, so the agency relies on specialized contractors. The project is handed over to the CBOs after completion at which time CBOs take over management responsibility. The difference with the joint agency/CBO model is that the agency does not retain any management responsibility when the project is completed.

(d) CBO Model: The users are organized as CBOs and carry out the project cycle and once the project is completed, assume O&M responsibilities. They bear the cost or it is partially mobilized from external sources.

(e) NGO/CBO Model: The NGO mobilizes part of the resources, with the CBOs contributing a fraction of the funding required and the full labor requirements. The ownership of the infrastructure rests with the CBOs from the very beginning and hence there is no hand-over process. This model is favored by specialized CBOs.

(f) NGO/Private operators Model: The NGO assists private entrepreneurs with contacts and demonstrating equipment with individual users. The latter are involved in the design of the project, and formulate requests for custom-made equipment; they bear full capital and O&M costs (this model only applies to small sprinkler and drip systems)

Groundwater irrigation models

(a) Agency model: The DOI and its field offices (agency) implement and manage the identified projects or those demanded by the communities. There is minimal beneficiary participation in the project cycle, particularly before the hand-over, if any. Project implementation is undertaken by the agency or through hired contractors. This model is applied in the deep-tubewell cases studied.

(b) Agency/CBO model: The DOI and its field offices (agency) identify the farmers needing the irrigation and form the group of beneficiaries (minimum of three members per group). These

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groups drill the wells and upon submission of the well certification and the availability of minimum specified command area, the agency provides the pumping-set free of cost which represents the subsidy from the government. The group takes care of operation and maintenance afterwards. This model is applied in the provision of shallow tubewells as part of the Agriculture Perspective Plan (APP) program.

(c) Agency/Private sector model: In this model, the agency identified as the Agricultural Development Bank of Nepal (ADB/N) provides credit, technical support and monitoring of the shallow tubewells (both well and pumping equipment) to those individual farmers who demand these services. The individuals operate and maintain the system besides repaying the bank loan. This model is practiced in the provision of shallow tubewells to the individual farmers.

(d) NGO/Private sector model: In this model, the NGO, when it is required, develops small groundwater irrigation technology using shallow aquifer (such as treadle pump) and provides the technology prototype to the private entrepreneurs who manufacture and sell the products to the individual farmers. In this process, both NGO and the manufacturers are involved in the marketing of the products and providing technical support to the buyers. The system, upon installation, is operated and maintained by the individual farmers. This model is applied in the case of manual pumps which command a maximum of 0.25 ha per unit pump.

Drinking Water Supply Models

5.07 In the drinking water supply sector, four different institutional models were considered for evaluation. These models are briefly outlined below, and described in more detail in Annex 7 , Appendix 3. The models are found in practice for the three drinking water technologies described in Chapter IV (gravity water supply, shallow tubewells and deep tubewells).

(a) Agency Model: The Department of Water Supply and Sanitation (DWSS) and its field offices (the agency) implement and manage their identified projects, and/or those demanded by the communities. There is minimal (if any) beneficiary participation during the project cycle.

(b) Agency/CBO Model: Several CBOs are formed to work with the line technical assistance and partial financial support of the line agency. The complex technical functions are undertaken by the agency. For that purpose, the agency relies on specialized contractors. The primary distinction from the agency model is that the agency does not retain management responsibility on project completion, but hands it over to the CBOs who then assume responsibility for O&M.

(c) NGO/CBO Model: The NGO mobilizes part of the resources, with CBOs contributing a portion of the funding required and the full labor requirements. From the beginning, CBOs retain ownership of the infrastructure, so there is no hand-over. This model is favored by specialized CBOs.

(d) Fund/NGO/CBO Model: This is similar to the NGO/CBO model with NGOs facilitating and providing technical services to the CBOs who retain ownership of the infrastructure. The primary distinction is that resources are continuously made available from a single central fund that reviews communities’ applications against eligibility criteria.

Rural Roads and Bridges Models

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5.08 Five different institutional models of rural roads and bridges were considered in the evaluation of the rural roads and bridges case studies. Detailed descriptions of these models can be found in Annex 3, Appendix 4. These models span the different levels of minor feeder roads (district roads, village roads, corporate roads and bridges) described in Chapter IV.

(a) Local Bodies/CBO Model: DDCs and VDCs act as executing agencies. They mobilize the communities for the construction work. There are two variants of this model: (i) where the DDC hires a contractor to implement the works and nominates a user committee, and (ii) where the VDC mobilize a democratically formed user committee in construction organization without involving external contractors.

(b) Local bodies/CBO with direct influence of donor management model: Similar model to the one described above, except that donors play an active role in implementation through resource allocation decisions, strong capacity building requirements and regular monitoring and evaluation.

(c) Agency Model: The Department of Roads, parastatal organizations and field offices implement the projects identified by themselves or demanded by the communities with limited, if any participation of beneficiaries. The agency hires the contractors to build the infrastructure directly.

(d) CBO Model: Users organize as CBOs, implement the project and assume O&M responsibilities once the project is completed. The cost is either fully borne by the CBOs or partially mobilized from external sources.

(e) NGO Model: The NGO mobilizes part of the resource, with a contribution from the CBOs including a portion of the capital cost and the full labor requirement. The ownership of the infrastructure remains with the CBOs throughout the life of the project, and during operation and maintenance. This model is favored by specialized CBOs/UGs.

Electricity Distribution Models

5.09 Three different institutional models of electricity distribution have been considered for evaluation and are described in detail in Annex 3, Appendix 5. Brief outlines of the models are provided below.

(a) Agency Model: The Nepal Electricity Authority (NEA) and its field offices (the Agency) implement and manage the project identified by themselves and/or demanded by the communities. There is minimal participation of beneficiaries in the project cycle. Project execution is undertaken by the agency on force account or through hired contractors;

(b) Agency/CBO Model: CBOs are nominated by regional agency staff to work with the line agencies technical assistance and partial financial support. In reality the agency retains control and management of the project implementation in a similar manner to the AM model described above, with the exception that the project is

30

handed over to the CBOs after completion at which time the CBOs take over management responsibility; and

(c) Private/CBO Model: Private enterprises work directly with community organizations to jointly design and construct infrastructure. CBO contributes a portion of the capital cost, mobilizes labor and pays private operator a fee/tariff for ongoing operation of the system.

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CHAPTER VI: SUMMARY OF THE CASE STUDY ANALYSES

A. Overview of Cases Studies

6.01 Case studies were selected after comprehensive desk audits and interviews (for details of this process refer to discussion of study methodology in Chapter III). Sixty cases in different sectors and subsectors were covered. The list of cases by sector is presented in Annex 4. The number of cases studied by sector is as follows: (Table 2).

Table 2: No. of Cases Studies by Sector

Sector Number of casesAgricultural Technology Agricultural research Agricultural extension

9(3)(6)

Irrigation Surface irrigation Groundwater irrigation

26(11)(15)

Drinking water supply 11Rural roads and bridges 11Rural Electrification 3Total 60

6.02 A summary of analysis of the case studies was completed for each sector and is presented in the following pages. For more detailed information regarding the analysis refer to the relevant case study annexes in Volume II of the study which contains case write-ups, case evaluations and preliminary discussion of analysis.

Annex I Agricultural Technology (research and extension)

Annex II Irrigation

Annex III Water Supply

Annex IV Roads and Bridges

Annex V Power

B. Agricultural Technology Case Studies

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6.03 Four institutional models of agricultural technology are considered as part of the evaluation of the case studies and are described in detail in Annex 7, Appendix 1. These models, already been summarized in Chapter V (para 5.02) are the following:

Agency Model (AM)

NGO Model (NM)

Agency/Private Sector Model (APM)

Private Sector Model (PM)

(a) Agricultural Research Case Studies

Presentation of Case Studies6.04 The following case studies have been prepared:

(a) NARC research station (agency model): This case study covers applied and adaptive research, i.e., conducting on-station and on-farm trials of new wheat varieties, to test their suitability for farmers' conditions.

(b) LI-BIRD (NGO model) is adaptive research, including the selection of varieties,

adapting the seed priming technology to local conditions, etc.

(c) Eastern Sugar Factory/NARC collaboration in sugar research (agency/private sector model) is adaptive research; the factory takes breeder seed from NARC (the agency) and tests it under farmers' conditions. Because the benefits of the findings are experienced (at least in the short term) only by the factory contract farmers, this kind of research can be considered a toll good.

Evaluation of Models

6.05 The process and performance evaluation of the institutional models underlying the agricultural research case studies is presented in Figure 7 and Figure 8 below. Given the discrete and non-comparable nature of activities covered under the three case studies an attempt to provide an overall efficiency performance ranking would have been meaningless at best and misleading at worst. Such a ranking therefore has not been attempted. The overall process performance ranking has been kept since it provides a useful insight into the comparative merits of the models in terms of participation of the beneficiaries (Table 3).

6.06 The institutional comparison in efficiency performance shows the agency/private sector collaboration model to be particularly effective. However, the specific context makes the research more of a toll than a public good, which in turn makes it more attractive for the private sector to finance and produce it because they have a means to realize the benefit from the investment through the quality and quantity of farm produce that their contract growers supply. The model cannot therefore be used uniformly in applied and adaptive research, but can be regarded as particularly effective in similar conditions. Generally, however, relying on the private sector to invest in agricultural research will leads to sub-optimal levels of investment because of the public good nature of research and free-rider problems. Therefore, the government can identify those research areas which it can leave to the private sector, those where it can collaborate by financing important public good elements which the private sector will not, and concentrate its own research funding on those areas where the private sector will have no interest. Specifically, it can reduce its

33

cost liability for research by cost-sharing collaboration with agro-industry operators and commodity associations.

Table 3: Number and Ranking of Case Studies: Agricultural Research Models

AM NM APMNo. of case studies 1 1 1Efficiency ranking < ------------------------------ No ranking -------------------------------- >Process ranking 3 1 2

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6.07 The evaluation of the process performance shows that the NGO model proved successful in getting the participation of the beneficiaries (higher score in ‘process performance’ ranking). This is important in adaptive research across the board both for crops which are produced for subsistence and for the open market. The NGO model also performed well in terms of cost-effectiveness and impact, in comparison with the agency model. For this kind of adaptive research (seed variety selection and adaptation), which is a public good for which public funding is appropriate, the commissioning of NGOs to carry out the research might therefore represent better value for money and lead to greater impact than by carrying out the research through government research stations.

6.08 The analysis of the case studies further suggests that none of the models as currently implemented is effective at including poor and marginal farmers in research. In the Agency managed case, the research conducted was not focused on the problems faced by resource poor farmers, while even in the more efficient models those farmers directly involved in adaptive research (NGO model) or benefiting from it (agency/private sector model) tended to be the relatively better off members of the farming community.

(b) Agricultural Extension Case Studies

Presentation of Case Studies

6.09 Six case studies were reviewed for agricultural extension services:

(a) Two case studies representative of the agency model, i.e., agricultural extension through the Ministry of Agriculture’s Agricultural Service Centers, one each in district covered by the Agricultural Research and Extension Project (AREP) and a non-AREP district

(b) Two case studies representative of the NGO model, i.e., extension as part of a holistic service delivery program, and as part of an income generation program respectively.

(c) Two case studies representative of the private sector model, i.e., extension as part of input supply activities by agro-vets and as part of contract farming by private sugar processing company.

Evaluation of Models

6.10 The process and performance evaluation of the institutional models underlying these case studies is presented in Figure 9 and Figure 10 below. No attempt here has been made to provide an overall efficiency performance ranking for the various models given the differing nature of the services covered by the case studies (Table 4).

Table 4: Number and Ranking of Case Studies: Agricultural Extension Models

AM NM PMNo. of case studies 2 2 2Efficiency ranking < ------------------------------------- No ranking

-------------------------------------- >Process ranking 3 1 2

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6.11 The cases relating to agricultural extension cover a diverse range of activities and interventions, i.e., agricultural information and advice come as parts of very different packages. In the agency model, advice and information is no longer combined with material inputs. In the NGO model, advice and information is provided as part of a project intervention which includes marketing support, supply (though not necessarily with any subsidy) of inputs, and support for savings and credit. In the private sector (agro-vet) model, advice and information are provided alongside purchased inputs -- but are therefore likely to be restricted to information related to those inputs and not to farmers' problems which cannot be solved by purchased inputs. In the private sector (sugar factory) model, advice and information are related to the specific crop in which the factory has an interest. This diversity makes it inappropriate to make a simple overall comparison of the effectiveness of the different models underlying the case studies. These case studies however, certainly, do permit to identify and discuss the individual strengths and weaknesses of the models.

6.12 The NGO model, the cases of which were implemented in the hills, performed well in terms of both efficiency and process. The strength of this model lies in the full participation of the beneficiaries in all stages of project planning and implementation and in the more holistic type of intervention, which includes infrastructure and marketing support, than is possible within the mandate of government agencies. It also has a relatively low cost per beneficiary. The social mobilization of the community during the initial phase of the NGO involvement has also enhanced the social capital in the project areas. Weaker points in the model include lower coverage, focus on accessible areas, and high level of dependence for financial support from donors. The sustainability of the model is therefore in question until an assured model of funding is developed for this kind of holistic intervention. It was not possible to separate out the costs of the technology service from the overall project and intervention cost in either of the two cases. However, it is clear that the intervention as a whole covers public, toll and private goods. Therefore a mix of funding by central and local government, groups, and individuals would in principle be appropriate.

6.13 The agency model is rated by users as low in terms of efficiency performance. The case studies show that the quality and coverage is poor and costly. This is related in part to the inability of the agency to provide the services as a package, including not only extension advice but also supply inputs or credit. It is also

36

related to the lack of focus of the extension agency on problems and opportunities that are not particularly relevant to farmers in each local area. The process performance ranking is also rated as low. Farmers are much less closely involved in the planning and implementation of services than in the other models. This makes for consistent low overall performance of the agency model. The strengthening of local government bodies should help improve the functioning of this model by building in greater accountability and participation, making agency services more locally relevant and responsive to farmers' needs. However, greater use of NGO and private sector institutions to deliver publicly funded services should also be an appropriate option to consider. The case studies reveal the risks that farmers face in not being given the right advice. One of the case studies indicates that agency staff caused loss to farmers. However, in other models too, there is little to protect farmers against inaccurate information or inappropriate advice. Nonetheless, the farmers' perceptions of the government extension service are clearly poor compared to NGOs and agro-vets.

6.14 It appears from the evaluation of the case studies that (a) an individual model is particularly suited to the nature of the activity considered, for which in turn a service either of a public or a private nature is appropriate; and (b) that the models are not mutually-exclusive; depending on the activities performed by a given communities one or several different models can be used separately or in conjunction.

Further Considerations on the Performance of the Agricultural Technology Models

6.14 Upadhyay (1999), aptly summarizes the low effectiveness of the agency in agriculture extension by underscoring that it falls short of meeting the objectives of raising agricultural productivity and farm incomes. Concerning research, he stresses that there is no significant shift in the emphasis of research in terms of commodities, disciplines and problem areas relevant to farmers’ circumstances. The impact on crop yields therefore remains limited.

6.15 In extension, the example of the pocket-package program undertaken by the public agency illustrates the problem. The program covers only 0.4 percent of the households and 3 percent of the irrigated area, but it receives 60 percent of the total extension budget. On this basis, per household extension expenditure per farmer is about Rs.15,000 (average of the 5 districts visited). This tends to indicate that the APP program in these districts is not a mass production program but merely a demonstration program. Even with this massive investment, returns are far less than satisfactory.

6.16 A recent study (NPC, 1998) shows that at national level only three percent of households have been visited by an agriculture/livestock extension worker. Two third of the households contacted thought agricultural and livestock services were bad. In contrast, only three percent said they were good. Baidya (1999) reports that the absence of staff at the public facilities, especially health and agricultural facilities, is a pervasive problem all over rural Nepal. The average trek time required by rural dwellers to access agricultural centers in rural areas is reported to be 2.5 hours. He further says that more than one-half of public spending is not used in the proper way, the construction sector being cited as perhaps the worst in public sector financing .

C. Irrigation Case Studies

Evaluation of Surface Irrigation Models

6.17 Six institutional models are considered for the surface irrigation sub-sector as part of the evaluation of the case studies. They are described in detail in Annex 7, Appendix 2. These models, already been summarized in Chapter V (para 5.06), are the following:

Agency Model (AM)

Joint Agency/CBO Model (JACM)

Agency/CBO Model (ACM)

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CBO Model (CM)

NGO/CBO Model (NCM)

NGO/private operators Model (NPM)

6.18 Eleven case studies have been prepared on the models for surface irrigation. The evaluation of these models (based on efficiency and process performance) is presented in Figure 11 and Figure 12. The ranking is in Table 5 below.

Table 5: No. of Case Studies and Ranking of Surface Irrigation Models

AM JACM ACM CM NCM NPM

Number of case studies 1 1 6 1 1 1

Efficiency ranking 6 5 3 4 1 2

Process ranking 6 4 5 1 2 3

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6.19 The case study analysis indicates that the best performing model for the provision of surface water irrigation is the NGO/CBO model. This model was also ranked second, based on process, behind the pure CBO model, popularly known as farmer-managed irrigation system that out-performed all other models. The NCM model’s strengths are the low implementing and operating costs, quality of construction, and existence of adequate O&M resources. The users’ high level of participation at each stage of the project cycle is key for eliciting strong ownership. The NGO assistance–with a focus on farmers’ training in irrigation management–provides efficient participation that carries through to O&M.

6.20 Other findings of the case study analysis are:

(a) Under the agency/CBO model surface irrigation (cases I3 and I5), the agency’s intervention in existing community irrigation systems increases the cost of system development; also, the government’s inability to get into appropriate contract terms with CBOs leads to irrigation systems performing below potential; and

(b) Under the agency/CBO model shallow tubewell irrigation, analysis suggests caution in distributing the shallow tubewells as misuse of subsidy is evident.

Evaluation of Groundwater Irrigation Models

6.21 There are three more or less distinct technologies used in groundwater irrigation as defined in the classification (Chapter IV) namely manual pumps, shallow tubewells and deep tubewells. The choices of these technologies, in most cases, is determined by factors other than institutional such as the area to be irrigated, affordability, etc. For example, the smallholders choose manual pumps which are very inexpensive and adequate for their holdings. Shallow tubewells typically irrigate up to 6 ha (average 2 ha) and are chosen by those farmers who either have that much of their own land for irrigation or can sell the water to the neighbors. Deep tubewells, on the other hand, have high discharge and can cover more land under irrigation (typcically more than 50 ha)

6.22 Moreover, there are some areas in Tarai where shallow aquifers are not present or adequate and thus deep tubewell will be the only choice. Similarly, in many of the northern belt of Tarai, manual drilling is not feasible due to the presence of boulders. There, deep boring using the rig machine may be a better technology choice. The study has found that the average per hectare cost of shallow tubewell is much lower (Rs.20,131) compared to deep tubewells (Rs.145,135) which suggests that whenever the choice of shallow tubewell is feasible this will prove to be the more efficient choice. The shallow tubewell technology is divisible, more flexible and simpler, and therefore within the maintenance capacity of the farmers. The study has found evidences where the complex deep tubewell technology was applied by the agency in areas where shallow tubewells were clearly feasible.

6.23 Four institutional models were considered as part of the evaluation of case studies in gro3undwater irrigation sub-sector. They span into the above three different forms of groundwater irrigation namely manual pumps (such as treadle pumps), shallow tubewells and deep tubewells. These models, described in detail in Annex 7, Appendix 2 and summarized in Chapter V (para 5.06), are the following:

Agency model (AM) (Surface and deep tubewell irrigation)

Agency/CBO model (ACM) (Shallow tubewells)

Agency/Private sector model (APM) (Shallow tubewells)

NGO/Private sector model (NPM) (Treadle pumps)

6.23 In terms of model comparison, the deep tubewells are installed only by the agency and hence no performance comparison of institutional models is warranted. Similarly, the manual pumps (treadle pumps) are also implemented under a single NGO/private sector model. The only institutional performance comparison can be made in the case of shallow tubewells where two different models are applied namely agency/CBO model (ACM) and Agency/private sector model (APM).

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6.24 The evaluation of these models (based on performance and process) is presented in Figure 13 and Figure 14. The ranking is in Table 6 below.

Table 6: No. of Case Studies and Ranking of Groundwater Irrigation Models

Deep Tubewells

Shallow tubewells

ModelsACM NPM ACM APM

No. of case studies 5 1 4 5Efficiency ranking -- -- I IIProcess Ranking IV I II II

6.25 The above tables show that the NGO/private sector model is best in both efficiency and process performance. But the case studies concerned only treadle pumps cases. It remains to be checked whether this model has the potential to be applied also to shallow tubewells. For shallow tubewells, the comparison shows that, while both APM and ACM models are equivalent in process performance, the agency/private sector model outperforms the agency/CBO model in efficiency performance. The APM model is more cost effective and yields better impact. The ACM model has better physical infrastructure, but its performance is low on cost and impact. This model also involved more subsidy and sometimes a twofold subsidy to the farmers because free pumping sets were provided to the farmers having already subsidized wells from ADB/N. The farmer’s share of cost was therefore almost eliminated. For deep tubewells the ACM model yields poor results across the board. The possibility that the use of the APM model would result in better performance for this model also would need to be checked.

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Box 1: The Invisible TubewellsWhen the Agricultural Perspective Plan (APP) prescribed the expansion of shallow tubewells to achieve water control throughout the year in Tarai, the Government readily endorsed this policy. It promised to provide the required financing. It also established a subsidy and precise rules under which the subsidy should be granted, one of these rules being the constitution of user groups to manage the tubewells. The policy soon proved to be flawed and unsustainable: (a) the farmers established pseudo user groups to obtain the subsidy (60 percent); these groups of course disappeared rapidly, and the tubewell ownership soon couldn’t be identified anymore; and (b) the funding fell far short of total demand; therefore a large fraction of the requests were left unfunded or were funded with delays so long that they effectively cancelled out the benefit of the subsidy. On two counts therefore the tubewells became ‘invisible’, either because they just didn’t materialize for lack of funding or because the owners went underground.

6.26 The analysis of the case studies calls for the following general remarks:

(a) Subsidy: The model ranking shows that the performance is negatively correlated with the level of subsidy. The agency-managed systems are almost fully subsidized and performed poorly. Whereas the CBO or individually-managed systems with little or no subsidy, fared well. This is because the high level of subsidy leads to the selection of inadequate technology and over-sized projects.

(b) Technology: The choice of technology is found to have substantial bearing on cost effectiveness. The case studies indicate that groundwater irrigation systems are often over-designed (engines and pumps of excessive capacity) reducing the cost-effectiveness of both deep and shallow tubewells. Electrically operated shallow tubewells are cheaper to own and operate compared to the diesel driven-shallow tubewells. But the power supply is often nonexistent since the power grid is yet to be sufficiently extended. Also, in some cases, expensive deep tubewells are installed where cheaper substitutes, such as shallow tubewells or surface irrigation schemes, are possible. In fact, deep tubewells often run below capacity. Hence, in the long-term, tubewells end up being inferior with respect to O&M costs per hectare compared to surface water irrigation systems.

(c) Institutions: The institutional performance in surface water irrigation is found to be superior to groundwater systems. This is largely due to the fact that tubewell groups are often artificial, and therefore dysfunctional, as they were created to access the subsidy attached to community tubewells.

(d) Link with extension: A final finding is that very little coordination is recorded between irrigation and agricultural extension services. Hence, the impact of irrigation which is only one of the improved elements of the agricultural package is generally lower than expected.

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Box 2: Bhairawa-Lumbini Groundwater Irrigation ProjectThis project is claimed to be one of the most successful case of irrigation investment. A total of 178 deep-tubewells have been erected in 3 phases of the project out of which 12 have been abandoned due to undesirable tubewell location. The average cost per tubewell in this project has been around Rs 12.5 million which is claimed to cover an average command area of 120 hectares running an average of 1,800 hours per well per year.The study team found the following: Tubewells have been erected in sites where there were alternative irrigation mechanisms from the

surface system of Sorha-Mauja as well as the shallow-tubewells In one randomly selected tubewell command area, there were as many as 25 shallow tubewells in

operation One tubewell was found to have commanded a net area of only about 13 hectares Another tubewell was running for only 115 hours per year In the loop system of water distribution built in the third phase, farmers could not obtain the

required amount of irrigation in adequate time because at least three loops had to be opened, requiring three farmers with the same amount of land to come together. This is a difficult and questionable constraint because there is typically a large variation in plot size in any particular irrigation scheme

Some beneficiary farmers expressed “this is an insurance system for us and will use it whenever there is drought”. They were relying on the subsidized tubewells for back-up supply only

Cost per hectare was over Rs.100,000 compared to about Rs. 30,000 if it had been a shallow tubewell which was clearly feasible. Also the initial cost is a full loan liability to the government against the capital subsidy for shallow tubewells of only 9,000 per hectare

In many cases, the farmers reported that they could not use the system because NEA would disconnect the power without consultation with the farmers

The Staff Appraisal Report for this project states that “ small farmers represent a minority (page 101)” which means that this huge subsidy has not gone to the poor

The technology used is beyond the reach of the local farmers and therefore there is hesitation on their part in the hand-over process

Further Considerations on the Performance of Irrigation Models

6.27 To confirm the results of the analysis, the study findings were cross-checked with findings from other studies of institutional performance of irrigation models. These studies show that government-managed irrigation models invariably have higher capital and O&M cost per hectare and lower operating efficiency. If the actual net command area served by the systems is considered (in place of the claimed command area which is often inflated for official purposes) the difference in cost and efficiency is clearly even greater.

6.28 The following additional results, consistent with the findings of the present study, emerge from the above studies:

(a) In an evaluation of 150 irrigation systems in Nepal (Lam, 1997), the performance of CBO-managed systems was found to be higher than the agency-managed systems.

(b) A recent evaluation of the International Fund for Agricultural Development (IFAD) projects in Nepal produced the following conclusions: (i) the productivity of IFAD projects in Nepal that have used line agencies such as DOI and the Department of Forestry, is low and has not contributed to equity-oriented economic growth; and (ii) the technology for the Groundwater Irrigation and Flood Rehabilitation Project implemented by DOI was demonstrated at the outset to be too costly for any adequate cost-recovery from the farmers; hence, the perverse recommendation that subsidies be granted across the board to all farmers.

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(c) An NPC/UNDP study (1992) on the comparative evaluations of various irrigation systems found several infrastructure schemes built by the government as grossly ill-conceived. They exhibited very high cost, wrong technologies and lack of performance. The rate of subsidy which varies across agencies and across schemes was also identified as the root cause of such an outcome.

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Box 3: Trying to Correct the IncorrigibleThe Banganga Irrigation System in Kapilvastu district (see case I24) whose construction started about six decades ago, was completed about three decades ago by the agency. It has a potential command area of 6,200 ha which could benefit 13,000 farming households. In the last winter season, this system provided irrigation water for only 1,000 hectares. This is the first and probably the only storage type of irrigation system in the country. From the very beginning, several efforts were made to improve the efficiency of the system. The command area was expanded between 1970 and 1978 at a cost of Rs.22.3 million. This did not succeed and another project by the name of Command Area Development Project was applied with the loan and TA assistance of ADB, IFAD and UNDP in 1982. In 1991, USAID provided assistance of $0.5 million for improving irrigation management which was implemented by International Irrigation Management Institute. All these efforts proved futile as local people have destroyed the structures. Currently, an Irrigation Management Transfer Project is being implemented with a loan from ADB but there is least a hope of improvement.

D. Drinking Water Supply Case Studies6.29 A prerequisite for water supply for drinking purposes is that the source of supply should be permanent.

This is in contrast to water supply for irrigated agriculture since non-permanent sources of water can be used as well for irrigation given the seasonal water requirements of farming activities. This explains why different sources of drinking water at community level are rarely combined in the context of rural Tarai. In fact, the choice of the source of water (either surface or ground water) and the choice of the technology are made once and for all at the start of the project depending on circumstances prevailing locally, based on criteria such as water availability and costs. The decision about institutional arrangements is then reached independently once the technology has been selected. It is therefore it is possible to measure insitutional performance across the entire sector irrespective of the technology employed.

6.30 The following four institutional models are considered as part of the evaluation of the drinking water case studies. These models are described in detail in Annex 7, Appendix 3, and already summarized in Chapter V (para 5.07). Agency Model (AM) Agency/CBO Model (ACM) NGO/CBO Model (NCM) Fund/NGO/CBO Model (FNCM)

Evaluation of Drinking Water Supply Models

6.31 To assess the institutional performance of drinking water supply schemes, eleven case studies were reviewed. The evaluation of the models underlying the case studies (based on efficiency and process performance) is presented in Figure 15 and Figure 16 below. The ranking of the models is in Table 7.

Table 7: No. of Case Studies and Ranking of Drinking Water Models

AM ACM NCM FNCM

Number of case studies 3 5 1 2Efficiency ranking IV III II IProcess ranking IV III I II

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6.32 The evaluation indicates that the Fund/NGO/CBO model delivers drinking water supply more effectively relative to the other arrangements. This model was also ranked second based on process behind the NGO/CBO collaborative model which involves many more actors in the different project steps.

6.33 In the Fund/NGO/CBO model, users are totally involved from the beginning of project initiation and pre-feasibility, to the project’s completion and O&M. The NGO is the facilitator and the design of the system is undertaken with the users’ approval and coordination. In addition, the users procure materials (they either collect local materials and transport non local materials), and complete the entire construction work. In the case studies examined a health and sanitation program was incorporated in the project, resulting in improved community hygiene. The Fund/NGO/CBO is poor in terms of equity, however, because it provides a predetermined contribution that does not compensate for the higher project costs incurred in remote hilly areas. Also, the fund board has a centralized structure and there is no field office to provide regular assistance, monitoring and evaluation. Finally, the fund restricts financing to drinking water supply systems only, and provides no flexibility for users to upgrade their system to enhance water supply for other income generating and health related activities.

6.34 The second best model in terms of performance was the NGO/CBO model arrangement. This model stimulates local NGO and CBO development. Users are involved from the initiation and pre-feasibility stage, to the systems construction and O&M. The software

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components (community mobilization) of the projects implemented using this model were found to be strong and effective. Financing was delivered directly to users for construction which minimized delays and resulted in technically sound systems. In the cases examined a national NGO and local NGO jointly facilitated and provided technical support to the users who performed the construction work. There is no up-front cash contribution needed for the projects examined. A health and sanitation package is also linked with the system and it is effectively implemented.

6.35 Unlike the Fund/NGO/CBO model, this model had a centralized delivery system (in addition to financing). All procurement was completed by the national NGO leading to poor transparency at the local level and a slight increased in unit cost for each system 5. In the case reviewed the national NGO had not fully partnered with the local NGO, the local NGO were performing many of the functions that should have been undertaken by the CBO and thus capacity building of the CBO had been weak.

6.36 Many examples of the Agency/CBO model emerged after the policy change in the eighth plan requiring the hand-over of agency-managed projects to communities. In the project sites visited as part of the preparation of case studies of this model, the system had been constructed with the lead role of agency using contractors and subsequently handed over to the community after the formation of CBOs. The practice of involving communities in the project design and implementation had rarely been observed in reality. The model has very low transparency and users provide no contribution. The CBOs often had been formed artificially in a top-down basis under pressure of the agency, they are not prepared financially or technically to operate or maintain the project. The projects have not included software components that would enhance community capacity, and little consideration has been given to the affordability of O&M costs. The study team’s view is that this institutional arrangement has been used by government as an ‘escape’ to avoid accountability for the problems that typically emerge from agency managed systems by handing the systems over to the community. In many cases the community reluctantly went along with the hand-over as it was ‘forced’ into accepting; in certain cases, it just refused. Design details were rarely provided to the CBOs on hand-over, infrastructure quality was not considered adequate (systems were not always complete, or had already deteriorated). Due to the lack of accountability, project costs are very high under this model.

6.37 The Agency managed model is the poorest performing and least preferred. The agency solely implements and operates, and performs maintenance, without user involvement. The findings reveal that transparency throughout the life of the project is very low. Despite high levels of social capacity in the case studies reviewed (particularly Pithuwa DWS, Dalkebar DWS and Prithivinagar DWS), the agency water supply systems fare poorly due to negligence, lack of accountability, and transparency.

6.38 Other findings, relevant to gravity and groundwater systems respectively, drawn from the case study analysis, are:

5 Unit costs, however, although higher than in the Fund model, remained in the low range, and therefore leading to the same rating of ‘3’.

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(a) Surface-fed Systems:

A comparison of cases studies implemented over a long period of time (Case D4, D7 and D8) suggests an increase in the agency’s neglect of system construction in more recent years. The newer systems do not generally function as well as the older systems; and

Case D9 reveals the utter neglect of the government in operating the drinking water system. A dead monkey that fell in the RVT was removed only after three weeks. People are reported to have died of water-borne diseases due to very poor quality of water. Even the watchman of the system used alternative source of water for drinking and cooking.

(b) Groundwater-fed systems:

Case D4 shows that the agency has chosen complex and high cost technologies which was not possible to be easily maintained by the community. It was learned that such a selection of complex and high cost technology was induced by high rate of subsidy (60 percent to 85 percent) for the equipment and lack of accountability. These projects were initially justified by deflating costs and inflating benefits through showing fictitiously high numbers of beneficiaries.

Case D4 also reveals that the currently nonfunctioning system was not demanded by the users. Deep tubewells were implemented despite the users demand for shallow tube wells. The user committee still pays the base charge (‘demand’ charge) for electricity even though the system is not in operation.

Failed borings (D4, D7, D11) that produce either inadequate discharge (D7) or no discharge (D4) or discharge with high turbidity and iron content (D11) not suitable for drinking purpose are features in some of the agency model projects. Despite these risks, the implementing agencies have either handed over the project (D4) to the community or are trying to do so (D10, D11).

Case D11 also shows how the insufficient allocation of annual budget by the government leads to substantial delay in construction completion of infrastructure projects.

Further Considerations on the Performance of Drinking Water Supply Models

6.39 The finding that agency managed models perform poorly is further supported by two studies undertaken by NPC/UNDP which found the following about the DWSS agency managed schemes:

The target size (in terms of number of beneficiaries) was often inflated to justify the over-design of schemes (e.g., Kalyanpur, Pithuwa, Anandban, Dhulabari, and Prithvinagar). This had the following chain reaction: large targeted population; high potential water demand; requirement for large water supply; long distances to secure water sources; huge distribution network resulting in high cost; long completion time because of inadequate budget; O&M required even before the system was completed; revision needed in estimates; frequent staff turnover; WUCs reluctant to take over because schemes were large and complex.

Allocation of investment funds was highly susceptible to political pressures. The lack of transparency in funding allocation and accounting of costs was common.

Prototype designs were used with insufficient consideration to location specificity, and little recognition of indigenous knowledge.

Procurement delays occurred due to the cumbersome procedures and guidelines of both HMG/N and donors. This gave way to a tendency to over-design and over-procure. Many times, excess

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procurement was found easier, but clearly entailed higher costs and wastage of funds. Constructions were commonly oversized with for instance provision of lavish ‘chaukidar’ quarters (guard house). Contracting was made without strict technical standards and technical supervision of project execution was poor. This gave incentives for contractors to engage into cheap sub-contracting activities. Typically, there were several layers of subcontracting with clear adverse implications on construction quality.

E. Roads and Bridges Case Studies

6.40 Five institutional models of roads and bridges are considered as part of the evaluation of the case studies and are described in detail in Annex 7, Appendix 4. These models, already been summarized in Chapter V (para 5.08), are the following:

Local Bodies/CBO Model (LCM)

Local bodies/CBO with direct influence of donor management model (LCM-D)

Agency Model (AM)

CBO Model (CM)

NGO Model (NCM)

Evaluation of Rural Roads Models

6.41 Seven case studies of rural roads were investigated to determine the performance of the underlying service delivery models. The performance evaluation of these models (based on efficiency and process) is presented in Figure 17 and Figure 18. The ranking of the models based on this performance is in Table 8 below.

Table 8: No. of Case Studies and Ranking of Rural Roads Models

AM LCM CM LCM-DNumber of Case studies 2 1 3 1Performance ranking IV III II IProcess ranking IV II I II

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6.42 Based on the evaluation, the local bodies/CBO model with direct influence of donor in management (LCM-D) is found to be the highest performing model. A further breakdown between how the models is applied at DDC and VDC, demonstrate that the local bodies/CBO model with direct influence of donor in management model as applied at DDC level is the most performing. Direct influence in management by the donor appears to improve outcomes because it is accompanied by technical assistance support under which important activities like training/orientation, technical supervision, monitoring and evaluation are carried out 6. It also provides a public auditing system which greatly improves transparency. The LCM-D model maximizes the involvement of users which reduces costs. The model, however, carries the risks of not being fully sustainable since funds must be mobilized by the community for technical assistance and project auditing once the donor has left. This is one reason why this study advocates the establishment of autonomous funds as they would take over such a responsibility.

6.43 The LCM-D as applied at VDC level was ranked second for performance. Construction cost in this arrangement was the lowest of each of the models, and transparency is high. However other aspects like training, and social mobilization are lacking, and technical supervision is weak. In comparison to this model, work execution under the DDC/CBO (LCM) model without donor influence is found not to be transparent, with weak social mobilization, high costs, and pseudo-functioning UGs nominated by the DDC. As with other sectors, the agency model is characterized by high costs, without either social mobilization or involvement of users.

6.44 Other interesting findings from the case study analysis are: (a) local bodies, particularly VDCs, are successful at mobilizing communities to build village roads on a participatory basis (Case Nos. R1, R2, R3); and (b) among the local bodies, the performance of the DDC is almost similar to that of the agency (Case R4). This implies the need in looking at the local bodies model to differentiate between the DDC-driven and the VDC-driven sub-models, with the VDC-driven sub-model being far more effective. This is in line with the ‘subsidiarity’ concept which indicates that the lower the institution is located in the

6 This technical assistance is provided by local engineers and other specialized local staff (from NGOs or the private sector) and not by expatriate staff.

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institutional hierarchy, the more participation one can generate on the part of the beneficiaries and therefore the higher the performance of the model.

Evaluation of the Bridge Models

6.45 Four case studies were prepared involving bridges, representing three separate models: (a) DDC/CBO model (local/bodies CBO model, two cases); (b) NGO/CBO model (one case); and (c) CBO Model (one case). The efficiency and process evaluation of the institutional models of bridges drawn from the case studies are presented in Figure 19 and Figure 20 below. The ranking is in Table 9.

Table 9: No. of Case Studies and Ranking of Bridge Models

LCM NCM CMNo. of case studies 2 1 1Efficiency ranking III I IIProcess ranking III II I

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6.46 Based on the evaluation of case studies the NGO/CBO model is found to be the most effective institutional arrangement for delivery of bridges. The NGO involvement provides support for important activities like training/orientation, technical supervision, and monitoring and evaluation. The NGO in the case examined worked closely with communities so that transparency is strong and as a result the cost per meter of bridge is low.

6.47 The CBO model was the second strongest model. Construction cost is least in this arrangement, however other aspects such as training, and social mobilization are lacking and technical supervision is weak. Problems ensuring community access to funds is a real constraint under this arrangement, and in the case reviewed led to some delays to project implementation.

6.48 In contrast, the performance of works under the Local Bodies/CBO model at DDC level was found to be non-transparent, with low social mobilization and high costs. There is the provision for involvement of UGs in this model but oftentimes these UGs are artificial and not functional in a true sense as UG members are nominated by the DDC.

Further Considerations on the Performance of Road and Bridge Models

6.49 On a purely cost effectiveness level, a review of earlier studies depicts high per km cost differences between the agency models and the models with CBO participation. A significant contributor to this cost differential is the use of different standards. Conventional standards used for estimating construction work in agency-managed systems incorporate significantly higher margins – contractors are aware of these large cost allowances, and therefore ‘bid high’ on agency managed contracts which raises costs. The extent of this effect is illustrated in Table 10 which shows quoted rates for equivalent activities in a local bodies/CBO and agency managed projects.

Table 10: Norms Used in LCM and AM Type Models for Roads and Bridges

Work Item

Norm used in RCIW* Projects

(LCM) (person day/cu.m.)

Conventional Norms used for HMG/N projects (AM)

(person day/cu.m.) Earthwork excavation in

ordinary soil0.47 0.70

Earthwork excavation in hard soil

0.59 0.80

Earthwork excavation in soft rock

0.71 3.00

*Rural community infrastructure work

6.50 A final interesting finding from the case analysis is that CBOs can self-mobilize to build relatively complex, large span bridges. As shown in Cases R7 and R8 such bridges have been built at about one-tenth of the cost of a similar structure delivered by an agency under contract system.

F. Electricity Distribution Case Studies

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6.51 Three institutional models for electricity distribution are considered as part of the evaluation of the case studies and are described in detail in Annex 7, Appendix 5. These models, already been summarized in Chapter V (para 5.08), are the following:

Agency Model (AM)

Agency/CBO Model (ACM)

Private/CBO Model (PCM)

Evaluation of Electricity Distribution Models

6.52 These alternative models for provision of power distribution services are represented in three separate case studies. The process and performance evaluation of the institutional models in electricity distribution drawn from the case studies are presented in Figure 21 and Figure 22. The ranking of these models is in Table 11.

Table 11: No. of Case Studies and Ranking of Electricity Distribution Models

AM ACM PCM

No. of case studies 1 1 1Efficiency ranking III II IProcess ranking III I II

6.53 The evaluation suggests that for power distribution the private sector working in conjunction with CBOs (Private/CBO model) is the most effective institutional arrangement and thus is ranked best from a performance perspective. The reasons for better performance of the private sector model include improved technical supervision in system establishment, low costs of establishment, involvement of users in planning, construction and cost sharing, and adequate provision of O&M. The only area of weakness is the reliance on the monopoly for power supply of the National Electricity Authority (NEA) with occasional

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(programmed and non-programmed) interruptions of power supply. This prevents this model from being perfectly reliable.

6.54 The relatively new private sector/CBO PCM model compares very favorably with the Agency model currently in place. Almost all the electricity distribution lines in the country have been erected by the NEA which collects power tariffs through site offices (Case E1). NEA’s high cost in power generation and distribution systems have led to high power tariff rates in Nepal. This is caused, among other things, by up to 39 percent energy loss in transmission in the NEA distribution systems (as well as power theft, poor maintenance of lines, etc.) The cost of transmission per household is found up to Rs. 47,500 in the case of NEA compared to an average transmission cost of about Rs. 7,700 incurred by the private sector (Butwal Power Company-BPC).

6.55 The intermediary Agency/CBO model was ranked second in efficiency but first in process. In this model the electricity is sold on a wholesale basis to the CBOs which retail electricity to end-users. It is not as efficient as the private sector driven model because of the losses and high cost incurred by the agency-established distribution system. This model however has the potential to perform better than any other models if it is completely driven by the private sector, with the latter involved not only in establishing the distribution grid, but also in producing the electricity.

Box 4: Missing InfrastructureFamous economist and Nobel laureate Prof. Amartya Sen introduced the concept of missing women. He claimed that in India, the number of women should have been more than men since the human biology favors women’s greater longevity. In fact, the ratio of women to men historically has been 1.06 to 1. When the Indian women count fell short of men, Prof. Sen derived the difference between the number of women that should have been there according to the biological norm and the number actually counted and termed the difference in count as missing women.We apply this concept to the development of various infrastructure in Nepal. When a shallow tubewell can be installed in Rs.50,000 and the government spends 10 times as much to do the same under the banner of a donor project, 9 tubewells are clearly lost and these lost tubewells could be labeled as “missing”. The government has spent already Rs.140,000 per hectare in irrigation and Rs.3,400 per capita in drinking water supply in present value terms. Yet it has produced infrastructure which are functioning at a level of 30 percent in irrigation and 50 percent in drinking water. If the appropriate institutional model had been used, all the irrigable areas in Nepal could have been irrigated and all the people could be availed safe drinking water. These are clearly “missing” cases. The “missing” infrastructure can be attributed to the temptation of the line agency staffs to choose larger, complex and high cost technologies. This is due to perverse staff incentives, high levels of subsidy and the absence of beneficiary participation in the choice of technology.Another cause of the ‘missing women’ phenomena is inaccurate and inflated reporting. For example, about 2,000 km of graveled roads is reported to have been built as part of the community initiatives in Chitwan district, but the road statistics of the government reports only 500 km of roads in Chitwan.

G. Summary Findings

6.56 In the course of the institutional evaluation, the study team made several observations relating to the sectors covered under the study. These are presented under general and under sectoral headings:

Summary of Cross Sectoral Analysis

6.57 By compiling the results of the sectoral analysis we are able to observe consistent trends across sectors. Table 12 and Table 13 present the summary results of the efficiency and process performance evaluation for each sector.

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Table 12: Summary of the Efficiency Performance Evaluation by Sector

Sector Subsector Preferred modelAgricultural Technology Ag. Research -

Ag. Extension -Irrigation Surface CM

Groundwater ACMDrinking water Surface FNCM

Groundwater NCMRoads Rural Roads LCM

Bridges NCMElectricity PM

Table 13: Summary of the Process Performance Evaluation by Sector

Sector Sub-sector Preferred modelAgricultural Technology Ag. Research APM

Ag. Extension NM

Irrigation Surface CM

Groundwater ACM

Drinking water Surface FNCM

Groundwater NCM

Roads and bridges Rural Roads LCM

Bridges LCM

Electricity Power Distribution ACM

6.58 The preferred models have in most cases scored better in both process and performance. This implies that the adoption of the right process, i.e., the involvement of the beneficiaries and the incorporation of multiple actors in project steps, leads to better performance outcomes, both in term of efficiency and equity. The strengths of the preferred models were found to be strongly related to the participation of beneficiaries in almost all phases of project development, cost sharing arrangements, low overall costs, and high transparency and flexibility – attributes that jointly contribute to greater sustainability.

6.59 The analysis of institutional performance in service delivery further shows that the agency model involving the government departments and parastatal agencies does not perform satisfactorily. This model was consistently rated the lowest overall. Yet these departments and agencies continue to undertake the bulk of the activities in each sector. As part of their interventions, due to lack of transparency and the absence of proper monitoring in procurement, the use of private contractors -- in infrastructure projects particularly -- has resulted in financial leaks, poor quality infrastructure, and lack of accountability towards beneficiaries.

6.60 The analysis depicts a clear emergence of multiple and alternative actors who are performing better than the government in almost all sectors. Yet, thus far, this has failed to induce a sense of competition amongst government structures, and the bulk of the government development budget continues to be allocated to these structures although they are clearly shown as the most inefficient structures (see Box 5).

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Box 5: Inefficient Resource AllocationThe allocation of resources made in the 8th Five Year Plan (1992-1996) investment program is not consistent with the degree of institutional efficiency of implementing arrangements in targeted areas. For example, the Department of Irrigation (DOI), which operated (and still operates) largely under agency model (ranked lowest) and covered only 55 percent of targeted areas, received almost 90 percent of the irrigation development budget. In contrast, the Agricultural Development Bank of Nepal (ADB/N) with about 41 percent of the area targeted received only 6 percent of the budget. The 9 th Plan hardly corrected this situation. Despite the inefficiency of DOI’s agency model of intervention, the Government further increased the area targeted by the department to almost 66 percent, and allocated the department 95 percent of the total budget. Therefore the irrigation budget allocation per hectare is highly skewed in favor of DOI. This budget stands at about Rs.140,000/ha for DOI, vs. only Rs.12,500/ha for ADB/N and Rs.25,000/ha for NGOs.

6.61 In agency-managed programs, particularly in the irrigation sector, there has been also a clear tendency for government to choose larger and more complex project solutions. This has led to perverse incentives within the government agencies which financially (through enhanced rent seeking opportunities) and professionally (through wider recognition) reward government employees for larger scale construction works. This poses a clear challenge to communities: they have no alternative but to rely on high level subsidies to afford such schemes. Moreover, the cases studied showed that the level of subsidy is not consistent across agencies and between large and small projects (with larger projects enjoying higher levels of subsidies). There is also a clear lack of accountability and transparency on the part of agency staff. In that respect, the study team found at times that government offices were not forthcoming in disclosing information.

6.62 The study results clearly document the lack of performance of agency-managed systems. The logical conclusion is that government, whenever feasible alternatives exist, should retrench from the ‘production’ of services, clearly better handled by other actors in the delivery cycle. In contrast, there remain vital ‘provisioning’ functions that have not received sufficient attention on the part of the government, despite a clear need for government involvement in these functions. These include functions such as planning and programming at national and regional level, definition of the legislative and regulatory framework (e.g, enactment and enforcement of legislation for groundwater use, and more broadly for use of environmental resources, establishment and enforcement of norms and standards for inputs supply), and provision of funding and enforcement of associated rules and procedures.

6.63 Finally, it is clear also from the study results that the alternative community-based arrangements, although clearly more effective, are not a panacea. They do require selective application and must be carefully tailored to specific circumstances in order to perform well. This is illustrated by a case study (Case D4) where a community infrastructure program in the Southern Tarai is performing poorly due to low levels of social capital. In these instances, capacity constraints, and the ways of overcoming them, become a vital feature of the institutional design. The next chapter examines these issues in some detail.

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CHAPTER VII: ASSESSMENT OF THE CAPACITY OF INSTITUTIONAL ACTORS

7.01 A consistent finding that can be drawn from the analysis of each of the sectors is that central agencies/government departments in Nepal are under-performing local bodies, NGOs and CBOs in the delivery of goods and services to Tarai communities. This suggests that there is a need to redistribute the roles and responsibilities of actors – in particular shifting some of the direct production-related functions within the sectors from the government to the more efficient institutions. This transfer has started in recent years but at a very slow pace. The government still possesses the largest network of offices and staff in every sector and is allocated the lion’s share of the development budget.

A. Central Government Departments/Agencies

7.02 Despite a large organizational network of offices in all sectors, government employees have few incentives to perform up to the required standards. Low government salaries force staff in many places to resort to rent seeking to supplement income (Box 6).

Box 6: Apportioning ‘black money’A recent report prepared with the assistance of international donors referred to the amount received under a large scale public works program as ‘black money’. The distribution of ‘unofficial’ costs and related payments was reported as follows:

Local audit office 10% Local politicians,engineers and overseers 10% Direct overseer 25% District engineer 15% Overseeing accountant and above 35% District engineer 15% Entertainment costs 5%

Total 100%Source: World Bank, Combating Rural Public Works Corruption: Food-for-Works Programs in Nepal, May 1998.

7.03 A high-level administrative reform committee set up in 1991 after the restoration of multiparty democracy found many redundancies in positions and staff within the government and recommended a 25 percent reduction in staff. Overstaffing continues to be a problem. This clearly came out from the study team field observations – for example, the case study in the Saptari district drinking water offices (Case D11) showed that a total of 55 staff were employed to manage only two small-scale drinking water projects. The present government is keen to abide by the recommendations of the reform committee, and, as a first step, is currently planning to reduce the number of ministries from 27 to 21.

B. Local Bodies

7.04 A significant breakthrough in reducing administrative inefficiencies and promoting decentralization occurred in 1999 with the passage of the Local Self-Governance Act. This came about as a result of the lobbying of local bodies for the release of greater development, administrative and financial authority at their level. The Act represents a comprehensive legislative package for decentralized development and a milestone in the process of devolution of authority. Among its clauses are provisions enabling elected local bodies to establish sectoral units within DDCs, to collaborate with the private sector on joint ventures, to

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levy local taxes and to exercise judicial authority. But the required application by-laws and decrees are yet to be promulgated and the speed at which the related decentralization programs are implemented remains slow. The challenge now lies in giving local authorities the required resources and training to develop their institutional and managerial capacity. This is a prerequisite for local authorities to assume greater development functions effectively. Concomitantly, appropriate safeguard mechanisms for transparency and accountability need to developed and implemented.

7.05 Under the Local Self-Governance Act of 1999, local bodies are expected to function as self governing structures with full authority over local affairs. They are expected to gradually assume a greater role in setting program priorities, resource allocation, coordination and monitoring programs at both district and village level. Presently, both the revenue base and technical capability of local bodies is too limited to implement most programs at the scale required. Furthermore, a high-level commission on decentralization in Nepal has revealed that local bodies are highly dependent (90%) on the central government resources for development purposes. Therefore, local bodies need both to increase revenue collection at local level and establish effective partnerships with line agencies, CBOs, NGOs, and private operators in orders to leverage their resources and enhance their effectiveness. This study results suggest that the issue of implementation capacity at the district and village level, as well as the need to build partnerships between the different actors operating along the service delivery cycle, are key to the effective delivery of services and need to be squarely addressed. The study also provides strong evidence that the planning and coordination processes at the center, district and village level need to be strengthened if decentralization is to proceed effectively.

7.06 There are 75 DDCs and 3,913 VDCs in Nepal. Most DDCs now have their own technical unit to plan and supervise construction works of agency projects. However, this unit is headed not by DDC staff but by Ministry of Local Development (MLD) staff. This creates a dual accountability system clearly leaving more authority with MLD. This dual system dilutes responsibilities with attendant lack of transparency and creates a context propitious to conflicts. The situation is different at VDC level. VDCs have very limited, if any, technical capacity. They are generally totally dependent on on DDCs for technical support since MLD activities do not reach down to that level. In rare cases, wealthier VDCs can circumvent this problem by hiring private technicians for planning and construction supervision (Case R4).

7.07 The challenge of decentralization in the context of Nepal is to put in motion a real transfer of decision-making power closer to those most concerned by the exercise of this power. This goal is therefore not only to undertake an administrative deconcentration of line departments, but to set the stage for, and proceed with, a real devolution (or delegation 7) of power down to elected bodies at the local level. This requires the existence of minimal technical and administrative capacity. In this respect, the case studies demonstrate that whereas the required capacity rarely exists at local level when no real devolution has taken place, local actors – DDCs, VDCs, NGOs and CBOs – are able to develop their capacity and deliver effectively when they are given appropriate authority.

7.08 Field observation and anecdotal evidence regarding decentralization collected under this study point to the following observations and the need to address attendant issues to lay the groundwork for successful decentralization:

Each level of government believes that decentralization should stop at their level and are reticent to proceed to further devolution of power down the line. This is true as much for the line ministries and their deconcentrated structures, and as for the local bodies (DDC vs. VDCs, and these local bodies vs. other structures down the line);

There is great variation in the resource base of local bodies and in the level of support from the central government at local level;

7 Deconcentration involves the shifting of workload from the central line agencies to the local line agencies. Delegation refers to the transfer of authority outside the regular bureaucratic structure

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The allocation of central resources is skewed in favor of the more affluent local bodies. There is a clear positive correlation between central resource allocation and the degree of affluence at district level particularly. The plans and priorities passed by the local body councils, and therefore their financial requests, are not fully entertained by the central government;

Fiscal decentralization still lags behind administrative decentralization. For instance, the funding channeled through local bodies from the central government (‘block grants’) is only 6.7 percent of the development budget (3 percent of the total government budget). In parallel, the fiscal base of local bodies remains small. Thus far, only the easier sources of local taxes (such as indirect taxes) have typically been exploited by the local bodies. Finally, there is no consistent revenue sharing arrangement between the central government and the local bodies;

The capacity (technical, financial, and management) of the local bodies is very limited. The information base of the local bodies, in particular, is poor and not updated regularly. Key donor-funded operations (e.g., Planning District Development Program-PDDP and Local Government Program (LGP) are attempting to build up DDC capacity across the board; others are focussing on strengthening capacity in a particular sector (road sector for instance through DOLIDAR under the Road Infrastructure Project – RIP). These efforts represent a step in the right direction;

Heavy bureaucratic tendencies have emerged in DDCs activities with consequent high transaction costs. An income/expenditure analysis showed that overheads are far greater at DDC (47 percent) vs. VDC (7 percent) level.

C. NGOs

7.09 Successful decentralization relies on aligning the interests and capacities of the various actors at the grassroots, this means that local governments should be encouraged to work with NGOs and CBOs to complement their respective strengths and weaknesses and thus produce effective development outcomes in a synergistic way. In this regard, the interface between the ‘formal’ sector consisting of the local bodies and the largely ‘informal’ sector consisting of NGOs/CBOs should be strengthened.

7.10 Many NGOs have emerged in Nepal since the restoration of multiparty democracy at the beginning of the 1990s. Their estimated number at present is around 22,000. The distribution of the NGOs by region as well as their sectoral affiliations are shown below in Figure 23 and Figure 24.

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Source: Maskay, B. K., NGOs in Development: Search for a New Vision, Kathmandu, 1998.

Source: Maskay, B. K., NGOs in Development: Search for a New Vision, Kathmandu, 1998.

7.11 Although the total number of NGOs in Nepal is large, the number of active NGOs is considerably smaller since many NGOs are believed to be inactive due to lack of funding and technical support. The active NGO group is still a mix bag. Some NGOs have unfortunately shown opportunistic tendencies for misusing donor or government resources. On the other hand, there is a core group of strong and serious NGOs that have a demonstrated capacity and commitment to perform. It is therefore necessary to establish a stringent screening criteria for NGO involvement in the facilitation of development work. The strengths of NGOs in Nepal are their capacity to reach out to, and create awareness among, target constituencies at the grassroots and their flexibility of operation. They also generally provide a better overall working environment for their staff than that existing in the government.

7.12 A major constraint faced by NGOs and CBOs in Nepal is the restrictive legal regime in which they have to operate. The support to these organizations from the government is also very poor. Therefore, NGOs are currently highly dependent upon the International NGOs as well as bilateral and multilateral donors. This dependence has created uncertainties in the volume and sustainability of NGO operations. Indeed, donors rarely make long term funding commitments (projects typically do not exceeding five years, and therefore contracts are for three years or less). Furthermore, the changes in the policies among donor countries and institutions affects contract execution and renewal. Contracts at times are terminated not due to lack of performance, but in reaction to budget cuts from the donor government. To remedy this situation, this study proposes the establishment of general and sectoral funds so that NGOs are given a more secure operating environment and therefore the continuity in the development work can be assured.

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D. CBOs

7.13 Community-Based Organizations (CBOs) are informal user groups typically created at community level. CBOs have flourished in Nepal in recent years. They represent a key capital that should be mobilized to the fullest. A study shows that there are more than 17,000 CBOs involved in the irrigation sector alone 8. About 97 percent of the community forests in the Hills are also managed by the CBOs. Most of the existing rural infrastructure works such as roads, trails, suspension bridges, and drinking water supplies are built by the communities through their own CBOs. Where CBOs are truly involved, projects have been shown to be more successful. This is not surprising when, as the direct beneficiaries of the development projects, CBOs have the highest stake in the quality of the development works. Both the literature and the current case studies show that CBOs are in greater number and perform better in an environment where there is high level of overall social capital. Therefore, in areas where social capital is low (such as Southern Tarai), there is a need to enhance awareness and social mobilization so that CBOs are able to develop to their full potential, and be fully associated to development work.

8 These NGOs are involved mostly in managing community irrigation systems.

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Chapter VIII: RECOMMENDATIONS

8.01 Drawing from the analysis of the case studies as well as general field observations, anecdotal evidence and findings from relevant studies, this chapter makes general and sector-specific recommendations for delivery of rural development services in Tarai. These recommendations concern measures at the policy level that are a prerequisite to the implementation of the preferred models, and more specific recommendations focussing on key institutional aspects of service delivery as they have emerged from the case studies. The main cross-cutting theme in drawing up recommendation is decentralization. Most recommendations are therefore directly or indirectly linked to the current government decentralization policies. Another overarching conclusion is that the implementation of the preferred models, as a menu of competing options offered to rural end-users, is currently constrained by the overall lack of resources earmarked for rural services and the skewed way in which the funding is allocated, still in favor of inefficient government department and agencies. The study therefore advocates the creation of specialized autonomous funds (sector specific or multi-sectoral) that end-users will be able to access through a competitive and transparent selection process.

A. General Recommendations

8.02 The study’s main general recommendations are as follows:

Create more consistent incentive framework. This concerns mostly subsidies linked to cost recovery or to the purchase of inputs and equipment that are required for and impact service delivery. The level of subsidy built into service delivery provided by agencies varies significantly across sectors. Evidence suggests that the subsidy is typically skewed in favor of more wealthy communities, and that it biases community choices in favor of large scale and technically complex systems that operationally and financially less sustainable. Policies should be reviewed to alter this perverse incentive framework and reform it so as to ensure consistency both within and across sectors.

Decentralize service delivery. The government agency model has been shown to perform poorly in each sector as compared to local bodies. This points to a need to push the decentralization process, and, aligned with this push, a need to transfer government’s service delivery functions to the more efficient institutions identified in each sector. This implies the restructuring of line ministry services, including downsizing and better alignment of skill mix with technical requirements and relevant provisioning functions. Such a restructuring has also been suggested by the high level Administrative Reform Commission (1991). The government is currently intent to further consider the recommendations of this commission.

Align government budget with investment priorities. The case studies show that the public development budget allocated for rural infrastructure is grossly inadequate to cover the investment needs as assessed by communities. In fact, even those projects that have been approved as priorities under the public investment program are consistently under-funded – funding amounting to barely 10 percent of the estimated cost of completion of infrastructure projects is released yearly. Thus projects have to rely on several annual funding cycles in order to be completed. This leads to serious project delays, and prevents timely project completion. It is therefore recommended that government be more selective in its budgetary allocations, allocating full project budgets to fewer projects on an annual basis.

Develop social capital in Southern Tarai. The case analysis provides convincing evidence of the potential success of community based initiatives. However, this success relies heavily on the level of social capital and capacity at the local level. In the northern Tarai where levels of social capital

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are high, there is already substantial evidence of community organized and managed systems. In the southern Tarai however, social capital is relatively low and needs to be developed. For this reason, a program of initial social mobilization and capacity building is recommend on a massive scale in the southern parts of the Tarai. This could conceivably be achieved through the National Volunteer Service that is proposed to be established. Without such social mobilization, community infrastructure will not be properly operated and maintained.

Target development in the Western Tarai. In order to redress imbalances in the level of service delivery, priority should be given to investments in Western Tarai which is comparatively more agriculturally backward and under developed.

Box 7 Right-to-Information Act?The case study evaluation has shown that decisions within the government have been relatively non transparent. The study team also experienced difficulties getting government offices to release project information. It is therefore our recommendation that a ‘right to information act’ be considered that: (a) provides full disclosure of project documents; (b) makes it mandatory to prepare regular technical audits of all government administered projects so that project execution be fully transparent and project management is made fully accountable; and (c) establishes legal provisions that give dissatisfied beneficiaries the opportunity to sue and possibly penalize those agencies or individuals who deliberately engage in unethical, discriminatory or illegal practices leading to poor quality infrastructure.

B. Sector-Specific Recommendations

Agricultural Research

8.03 In agricultural research, the study indicates that the following issues need to be resolved: (a) research agenda setting procedure; (b) seed production and multiplication; and (c) financing and cost sharing.

(a) Research Agenda Setting

8.04 Research activities should be respond to the problems as identified by farmers and agricultural entrepreneurs at the grassroots. Hence, the research agenda must be set through wide consultations with these stakeholders. There is a need for regular interaction of the research personnel with the other actors in the delivery cycle starting with the end-users who are the ultimate clients of research:

End-users: farmers’ groups in the extended outreach sites, and irrigation user groups within irrigated schemes;

Representatives of agro-processing factories and commodity associations;

Agro-vet dealers, and representatives of the seed trade and production business (including the Seed Entrepreneur’s Association of Nepal-SEAN); and

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Government cadre and/or NGO agents in charge of agricultural extension work.

Other institutions (universities) and/or NGOs specialized in research activities.

8.05 These interactions would provide a large relevant researchable agenda on farmers’ and agricultural entrepreneurs’ problems. Additional data collection through agro-vets and extension agents to identifying agricultural problems may also supplement the establishment of the research agenda. These problems should be ranked systematically using the economic criteria (potential returns from research) in a way that fully take into account farmers’ perceptions of the risks and assessment of returns associated with the activities concerned. The number of research tasks to be carried out should be prioritize and aligned realistically with resource availability. This research agenda should also provide for potential research possibilities outside NARC. Institutions other than NARC should be able submit and obtain funding for research proposals on issues that they are best equipped to investigate as was demonstrated by the case studies, for vegetables production in the Hills (specialized NGOs) or production of industrial crops (sugar or tea factories).

(b) Financing and Cost Sharing of Agricultural Research

8.06 Since research is typically a public good, it needs to be financed to a large extent by the government. An exceptions to this rule is when access to research results can be restricted to a defined set of users, and/or when research results are fully incorporated as inputs into the production of private goods. In these situations, cost-sharing or privately- financed research activities are appropriate.

8.07 Bearing the above in mind, two major options to channel of public funds into research are proposed. The first option is through NARC core financing, either by the government from its own resources or with the help of donors. The purpose would be to carry out basic research activities of high priority and high potential returns. In that case, NARC will also be able to sub-contract part its research activities to the other research organizations that have demonstrated competence in agricultural research as documented by the cases under this present study (such as agricultural universities, agricultural farms, NARC and research-oriented NGOs).

8.08 The second option is the establishment of a completely autonomous research fund which would be legislatively eligible to receive funding from the same sources. This fund would award research contracts to the same set of organizations that have demonstrated capabilities for agricultural research on a competitive basis using predetermined criteria to evaluate research proposals. This approach has been initiated under the Hill Agricultural Research Project (HARP) funded by the Department For International Development (DFID). Government is considering to transform HARP into a ‘research fund’. A similar fund could be created for research activities related to Tarai agriculture. The donors providing resources to the fund would specify the commodities, activities, geographical areas and other conditions to be complied with in undertaking research, and research awards would be made accordingly. The fund would allow donors to carry out their regular monitoring of the status and impact of the activities performed from their respective resources. The fund would ensure cost efficiency in agricultural research. Equity issues in research need to be addressed as part of the provisioning function to be assumed by the government. The government would consider these issues during the negotiations with the donors.

8.09 As demonstrated by the case studies, the private sector organizations and the NGOs involved in agricultural research are still technically quite weak and would need to be strengthened. One way to achieve such capacity building of research organizations would be to hire experienced researchers, made available from NARC, universities and other government structures, as these structures are streamlined and downsized.

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These staff would be given the required incentives to first effect the move and then increase their performance.

8.10 In the case of collaborative research models, the participation and cost contribution should be sought from the private sector ‘collaborator’ depending on the magnitude of benefit that this collaborator derives from the research output. For example, the Association of Sugar Factories would collaborate with NARC or other research organizations for research on sugarcane varieties or cultural practices by contributing part of the research cost. Such a share in cost contribution would be negotiated and could change over time as research priorities evolve. In this regard, Case A3 has shown how a sugar mill has financed and conducted adaptive research on sugarcane with marginal support from NARC. Research on high-value crops similarly would be done on a collaborative basis with the respective commodity associations. This cost-sharing arrangement, coupled with the collection of one percent of seed sales revenue, would be important elements to relieve the government liability on agricultural research.

8.11 Building upon the analysis of the case studies, the main features of the proposed new system of research financing would be threefold:

Polycentricity in conducting and financing agricultural research should bring about competition and synergy between the different actors and consequently increased efficiency at all steps of the research cycle;

Client orientation and empowerment : research would be conducted on field level problems as perceived and prioritized by client farmers and entrepreneurs;

Cost-sharing : the cost of research would be shared and partially recovered depending of the nature of the research activities and the roles ascribed to the various actors.

Box 8: Seed Production and Multiplication Shortages of the required amount, quality and variety of seeds are commonly-reported problems in

Nepal. To remedy this problem, and lay the basis for implementation of better technology service delivery, this study suggests the following prescriptions along the seed production and delivery cycle spanning both research and extension activities:

Estimate the quantity of different varieties of seeds demanded by farmers using past trends, and new information from extension agents and sample surveys;

Produce the breeder seeds of these varieties in the NARC farms under strictest supervision by the breeder scientist;

Collaborate with SEAN to produce foundation seeds from the breeder seeds within the NARC farms, other farms or outside under the strict supervision of the scientist (this may require the change in legislation to allow the private sector like SEAN to have access to the breeders seed);

Provide the foundation seeds to SEAN, the Agricultural Input Corporation (AIC) or any other potential organization for multiplication through the seed-growers’ association members under strict technical supervision of the respective organization;

Obtain certification from the Seed Board; Sell seeds through AIC outlets and agro-vets; and Set aside one percent of the value of seed sold for research.

Agricultural Extension Services

8.12 The study has found that the preferred models depend on the local circumstances surrounding farming activities. In the case where extension is related to a technology embedded into a material input or equipment which farmers are willing to buy, the advice and information relating to that technology can efficiently be supplied at the point of sale. The cost can be passed to the end-users through the pricing of the input or the equipment, since it is then a pure private good producing benefits exclusively for the end-

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user. In this case, both provisioning and production of the service are done by the private sector, typically agri-business operators, such as the agro-vet establishments and the large scale processing units (sugar factories, tea estates, etc.) There is a role, however, for the public sector in establishing quality standards, and the framework in which agro-vets would be encouraged to expand and improve their technology service.

8.13 Agro-vets are currently constrained by two main factors: (a) the lack of technical knowledge in agriculture as most such establishments are owned and operated by the people with non-agricultural background; and (b) these establishments have currently no access to institutional credit for working capital. The agricultural graduates can be attracted in this growing business by providing them training in business management and practical field extension. Even the agricultural curriculum can be modified to include business management. Institutional credit can be arranged through the ADB/N. Government could further improve the capacity of these private sector providers through offering training, on a partially subsidized basis which recognizes the need to compensate for market failure. This would be backed up by developing an appropriate regulatory framework. For example, agro-vets should be able to show that they can provide appropriate advice in respect of the inputs that they sell, and be provided by the Government with some kind of certification to that effect. This will protect farmers from incompetent suppliers and help to increase overall confidence in the private sector.

8.14 For industrial commodities like sugar or tea, where it is in the interests on the part of the processing and marketing companies to ensure a regular supply of high quality produce from growers, both provisioning and production of extension services can be left to these companies. The cost of these services in this case is build into the pricing structure agreed with farmers as part of their production contracts with the factories. This cost is fully or partly passed over to end-users depending their respective negotiating positions, the farmers finding it equally advantageous to produce high quality products that will eventually fetch a premium on the market.

8.15 The NGO model works well where extension functions are integral parts of a holistic, integrated intervention at community or VDC level. The success of NGOs in engaging the active participation of users in all stages of the technology related interventions suggests that the weak accountability and quality of agency-managed services could be addressed by contracting out the production of extension services to NGOs and other non-government actors. Although the complete outsourcing of the extension function to the private and NGO sectors is not yet practiced in Nepal, it is being heavily debated. This option certainly should be experimented with. Some NGOs have been performing some extension functions under donor funding with considerable success as the two case studies concerning NGOs show. Such subcontracting could be funded under the proposed research and extension fund.

Irrigation and Drinking Water

8.16 The case studies prepared on irrigation and drinking water systems show invariably that the following key elements are found to result in low cost (both capital and O&M), functional and sustainable infrastructure: (a) the involvement of beneficiaries in all the step of the project/ service delivery cycle; (b) the development of local institutions (User Groups or CBOs) by catering to their needs for management support; and (c) a higher level of cost sharing by beneficiaries. The case studies reviewed showed that the management systems developed by government agencies (DOI, DWSS) did not incorporate these elements and consequently the infrastructures implemented under these systems were high cost, mostly non-functional and unsustainable.

8.17 The performance comparisons made under this study are convincing enough to set the stage for recommending the key following best practices concerning infrastructure construction or rehabilitation:

Involve beneficiaries in project identification. To that effect, identify the potential influence area (command) of the scheme and assign a competent facilitator (such as NGOs) for assisting in the creation of grassroots beneficiary institutions (CBOs) if these institutions are not in existence. The facilitation will involve social mobilization, development of the social capital, group organization, assistance in developing the regulatory framework and management rules, etc., in a

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way which enhances the capacity of the beneficiaries to build and maintain the given infrastructure.

Involve beneficiaries in project design and execution. All decisions relating to the technology to be used, selection and hiring of technical personnel, provision of materials, etc., in particular, will be made by the UG/CBO as legitimate representative of the beneficiaries. During the execution, the beneficiaries will provide labor for various activities, the magnitude of contribution of a household being based on mutually-agreed rules of the UG. If a household is willing to offer more labor than its due share, this household will receive the market wage, part of which could be retained as his/her savings in the form of labor certificate. The beneficiaries may also be required to contribute cash and materials besides labor, which they can obtain with loans from the financing institutions. The facilitator should help them develop such linkages with institutional partners.

Establish cost-recovery basis strictly on economic criteria. If it is deemed necessary to take equity considerations into account, the additional cost should be borne by the government as part of its provisioning function, and not by the beneficiaries. In all cases, the beneficiaries must be informed up-front in a transparent manner of the roles and contributions expected from them, as soon as the infrastructure is found technically feasible.

Set up sectoral funds (such as the Irrigation Development Fund) with legislative capabilities to receive resources from HMG/N and donors and subcontract infrastructure building functions to an array of diverse organizations on a competitive basis (in order to build a ‘polycentric’ arrangement). Decide precisely on the type and level of contribution that the Fund and the beneficiaries have to make for a particular type of infrastructure. This ratio of contribution will be the same for all organizations financing the same infrastructure unless, of course the government provides additional resources in particular circumstances on equity grounds. The government in such cases, should have a transparent formula for doing so. For example, the government may take up the additional cost of material transportation in the case of a remote area project.

Specific Recommendations for Existing Large and Complex Water Schemes

8.18 The evidence collected from the case studies on the large and complex systems indicate that these systems have neither demonstrated economies of scale nor performed satisfactorily based either on efficiency or process-based performance criteria. In hindsight, these systems should not have been built. Rather, alternative low cost and decentralized systems should have been considered as these latter systems have shown far greater potential in terms of efficiency, equity and sustainability. For example, in one case study (drinking water in Kalyanpur, Saptari), four shallow tubewells could have fulfilled the drinking water requirements of the local populations rather than the present complex and largely nonfunctional large overhead system.

8.19 When the wrong investments have been made -- like the complex infrastructures described in the case studies -- these investments represent a sunk cost that cannot (and should not) be recovered. The solution is therefore to operate these systems in the most efficient and cost-effective way. To that effect, this study proposes a ‘shared management’ arrangement. Under such an arrangement, the agency will manage the public service part of the system (often the most complex) such as the headwork, the main distribution canals, the deep tubewells and accessories, etc. The water distribution systems downwards will be fully managed by the beneficiary institutions. It is recommended that the agency and the UGs enter into contracts that will clearly delineate the roles and responsibilities of each other. In order to recover the full O&M costs, the agency will sell water at a wholesale rate at the point up to which the agency management holds. This is a prerequisite to avoid that the infrastructures deteriorates for lack of O&M funding. This arrangement is similar to the ‘joint management’ exemplified in some of the cases.

Rural Roads

8.20 Based on the case analysis the following recommendations are made for the rural road sector.

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Identify locations where the roads can be economically extended -- priorities should be determined in close liaison with local bodies through a participatory process;

Identify the potential beneficiaries or the influence zone of each road link or road segment;

Deploy a competent facilitator (such as NGOs) for developing the institution of the beneficiaries. The facilitation will involve social mobilization, enhancing social capital, group organization, helping form rules, etc., in a way which enhances the capacity of the beneficiaries to establish and maintain the rural road network serving their communities;

Apply a public auditing system through an independent audit organization during sub-project execution. As shown in Case R1, the use of a public audit organization is key in curbing corruption and thus reducing costs;

Train local people selected by the UG in the technical O&M of the subprojects; and

Set up a rural access fund with administrative and financial autonomy, and legislative capability to receive resources from HMG and donors to subcontract rural access related works such as roads, bridges, trails to a multitude of organizations on a competitive basis (polycentric arrangement).

Electricity Distribution

8.21 For the provision of power distribution, the case study of Lamjung district (Case E3) provides an interesting and convincing model, illustrating the major recommendations from the present study, i.e., how a group of users can organize themselves to buy electricity on a wholesale basis from a substation or a transformer, and manage the distribution by themselves including tariff fixation and fee collection. Since users are self-managing the electricity retailing, free-riding like power theft has been avoided. The profit margins built into the tariffs, as well as the gains from the absence of power theft, have been sufficient to provide the funding to employ several local staff. The conclusions of this case study have been corroborated by the other case studies.

8.22 Based on the above, the following recommendations are made for the rural electrification of the Tarai villages:

Identify the locations (dense settlements and clusters of tubewells) and the potential beneficiaries where the electricity grid can be economically extended;

Estimate the wholesale rate at which power can be sold to UGs at a local substation or transformer;

Deploy a competent facilitator (such as NGOs) to assist the community in the creation of beneficiary groups. The facilitation will involve social mobilization, enhancement social capital, group organization, helping form rules, etc., in a way which enhances the capacity of the beneficiaries to establish and maintain the rural energy related subprojects;

Train local people selected by the UG in the technical operation and maintenance of the subprojects; and

Set up a rural energy fund with legislative capability to receive resources from HMG and donors to sub-contract rural energy related works such as bio-gas, solar power, improved cooking stoves, micro-hydroelectrical schemes, to a multitude of organizations on a competitive basis (polycentric arrangement).

C. Specialized Sectoral or Multi-Sectoral Funds

8.22 A polycentric approach to development – involving ‘competing’ actors working in partnership – is the much advocated concept underlying this study. As was seen as part of the sector specific recommendations, the funding mechanism best suited to effectively implement institutional arrangements aligned with the polycentric concept, is one that can provide resources for development functions on a competitive basis. This can be achieved by setting up fully autonomous and independent specialized sectoral and multi-sectoral funds. The preliminary guidelines for the establishment and operation of such

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funds are presented in Annex 9. Box 9 summarizes the recommended approach to establish competitive funds.

Box 9: The need for competitive fundsThe cases analyzed under the present study have given clear evidence of the government's relative inefficiency in the delivery of rural development services in the sectors considered. This evidence is largely supported by other studies. In contrast, the study has demonstrated that the involvement of the other actors -- especially the CBOs and NGOs that are close to grassroots communities -- have led to the establishment of efficient, equitable and sustainable delivery systems.Against this realization, the study has shown that the bulk of the development resources are still being channelled through the government departments/agencies leaving only meager resources for the other, more efficient, actors. As a result, these actors have not been able to scale up their operations in want of resources and technical/managerial capacity. Some of these actors have received direct support from donors, but donor-funded projects have suffered from the uncertainty about the continuity of such a support. Hence, alternative (more permanent) sources of funding are required. The proposal made under this study relate to the creation of autonomous sectoral/multi-sectoral funds specially earmarked for development of service delivery in rural areas. These funds should support on a sustainable basis the better performing actors. This will be achieved by allocating the funding on a competitive basis though systematic and tranparent selection mechanisms. The Funds will provide the instruments for the government to channel part of the development resources away from the bureaucratic departments to other structures that are b etter placed and equipped to provide an effective delivery of services. The competitive funding system under which these funds will operate will be open to all actors, giving incentive even to the bureaucratic departments to perform better for their own survival.

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Adivory Commission on International Relations (ACIR), 1987. Organization of Local Public Economies, Washington D.C.

Baidya, B. G., 1999. Poverty Profile of Nepal, New Era, Kathmandu, Nepal.

Cernea, M., 1985. Putting People First: Sociological Variables in Rural Development, World Bank.

Central Bureau of Statistics, 1998. Report on the Labour Force Survey, His Majesty's Government of Nepal: Kathmandu, November.

Curtis Donald. 1991. Beyond Government: Organizations for Common Benefit, Development Studies, McMillan Press, Hong Kong.

Devarajan, 1996. Adjusting vs. Non-Adjusting Countries. World Bank Publication.

Fukuyama Francis. 1995. Trust: The Social Virtues and the Creation of Prosperity, The Free Press. USAHMG/N, 1991. A Report of the Administrative Reforms Commission, Kathmandu, Nepal

HMG/N, 1999. Local Self-Governance Act 1999, Kathmandu, Nepal

HMG/USAID, 1992. Cresting a Supportive Policy Environment for Irrigation System Turnover & Joint Management, Contract No. 367-0153-c-00-1235-00, Kathmandu, January.

IIMI. 1991. Process and Performance Evaluation of ADB/N Supported Irrigation Schemes, Vol I-IV, Kathmandu, Nepal

Lam W. Fung. 1998. Governing Irrigation Systems in Nepal: Institutions, Infrastructure, and Collective Action, USA

Lindsey Quentin W. 1986. Civilization, Nepal and the Structural Design of Society, North Carolina, USA.Maskay, B. K. 1998. Non-Governmental Organizations in Development: Search for a New Vision, Kathmandu,

Ministry of Finance, 1998. Budget Speech (FY 1998/99), His Majesty's Government of Nepal, Kathman

69

National Planning Commission, 1992. The Eighth Plan (1992-1997), His Majesty's Government of Nepal, June.

National Planning Commission, 1992. The Ninth Plan (1997-2001), His Majesty's Government of Nepal, June.

National Planning Commission, 1993. Case Studies of Water Supply Systems in the Central and Western Region: Project Status, Problems and Issues, His Majesty's Government of Nepal, Kathmandu.

NPC/UNDP, 1994. Irrigation Development in Retrospect: Search for a Breakthrough, Kathmandu, August.

Ostrom Elinor, Larry Schroeder and Susan Wynne. 1993. Institutional Incentives and Sustainable Development: Infrastructure Policies in Perspective, Westview Press

Ostrom Elinor. 1992. Crafting Institutions for Self-Governing Irrigation Systems, USA

Ostrom Vincent, David Feeny and Hartmut Picht. 1993. Rethinking Institutional Analysis and Development: Issues, Alternatives and Choices, USA. NPC, 1992. Review of Ongoing Development Projects: Irrigation Sector, Kathmandu, May.

Suzuki Satomi. 1999. Human Development and Self-Reliance: A Case Study of Small Farmer Development Program (SFDP) in Kumroj, Nepal, Cornell University, USA.

UNDP, 1999. Nepal: Common Country Assessment, Kathmandu.

Upadhyay, H., 1999. Poverty, Food security and agricultural Research in Nepal, Kathmandu.

Wade Robert. 1994. Village Republics: Economic Conditions for Collective Action in South India, USA.World Bank, 1999. "Nepal Rural Water Supply & Sanitation Project" Mid-Term Review Report (November 15 to December 30), Kathmandu, December

World Bank, 1999. Country Assistance Strategy (1999-2001), Kathmandu, Nepal.

70

ANNEX 1

The Tarai in the Context of Nepal

Indicators Tarai Rest of NepalNumber of Administrative Districts 20 55Proportion of Nepal’s Surface Area (%) 23 77

Proportion of Cultivated Area (%) 53 47Proportion of Irrigated Area (%) 68 32Proportion of Forest Area (%) 24 76Proportion of Population (%) 47 53Proportion of food grain Production (%) 60 40Annual Population Growth Rate (% 1971-1991) 3.5 1.3Population Density (Persons per sq km), 1991 264 91Road Network (km roads per sq km surface area) 0.13 0.04

Source: Agricultural Perspective Plan (APP, 1995), Central Bureau of Statistic (CBS, 1998)

71

ANNEX 2

Development Indicators and Ranking of Tarai Districts

S.N.

DistrictIndicators

Overall Composite Index Of Development

Poverty And Deprivation Index

Women's Empowerment Index

Natural Resources Endowment Index

Socioeconomic Infrastructure Dev. Index

Educationally Disadvantaged Population

Per Capita Food Production

Overall Literacy Rate

Infant Mortality Rate

Drinking Water Coverage(%)

Irrigateed Area(%)

Road Density(%)

Forestry Users H.H.(%)

Per Capita Forest Area

Health And Development Index

Infrastructure Development Index

Rank1. Jhapa 1 1 1 1 1 19 12 19 7 3 6 19 10 1 9 102. Morang 3 4 3 2 2 13 11 17 9 6 7 17 1 2 11 83. Sunsari 3 4 3 2 2 13 11 17 9 6 7 17 1 2 11 84. Saptari 13 13 12 12 9 9 6 12 19 4 4 18 17 7 14 15. Siraha 17 18 15 9 17 1 7 6 18 2 3 11 18 5 15 26. Dhanusha 16 16 11 13 15 5 2 8 16 9 10 14 11 3 8 77. Mahottari 18 17 18 10 11 6 4 2 15 19 15 12 19 4 1 68. Sarlahi 15 15 12 8 10 8 5 3 17 12 17 6 2 6 4 49. Rautahat 19 19 17 7 19 7 3 1 12 5 14 9 4 8 18 3

10. Bara 14 9 16 11 12 4 18 4 11 7 19 8 15 10 12 511. Parsa 10 11 14 4 6 10 17 10 10 10 18 1 5 12 10 912. Chitawan 2 2 2 17 3 18 16 18 8 1 16 15 13 15 17 1213. Nawalparasi 6 6 4 18 7 16 1 13 5 11 13 10 6 13 7 1314. Rupendehi 5 8 7 3 4 11 8 15 14 16 11 16 3 9 3 1115. KapilVastu 12 10 13 5 18 14 14 5 4 13 8 13 7 11 16 1616. Dang 7 5 5 19 14 12 15 14 1 8 5 3 12 17 19 1717. Banke 8 7 6 15 8 2 10 11 13 18 2 7 16 19 2 1418. Bardiya 9 12 9 14 13 3 9 7 6 17 1 5 14 16 5 1519. Kailali 11 14 10 16 16 15 13 9 2 15 9 4 9 18 13 1820. Kanchanpur 4 13 8 6 5 19 16 3 14 12 2 8 14 6 19

Source:- Nepal Districts Profile -1999 ( Publisher NRA)

72

ANNEX 3

Population and Man/Land Ratio in Tarai Districts

S.N. District Population Land area Ha. Man/Land Ratio

1. Jhapa 593737 160600 3.70

2. Morang 674823 185500 3.64

3. Sunsari 463481 125700 3.69

4. Saptri 465688 136300 3.42

5. Siraha 460746 118800 3.88

6. Dhanusha 543672 118000 4.61

7. Mahottari 440146 100200 4.39

8. Sarlahi 492798 125900 3.91

9. Rautahat 414005 112600 3.68

10. Bara 415718 119000 3.49

11. Parsa 372524 135300 2.75

12. Chitawan 354488 221800 1.60

13. Nawalparasi 436217 216200 2.02

14. Rupendehi 522150 136000 3.84

15. Kapalvastu 371778 173800 2.14

16. Dang 354413 295500 1.20

17. Banke 285604 233700 1.22

18. Bardiya 290313 202500 1.43

19. Kailali 417891 323500 1.29

20. Kanchanpur 257906 161000 1.60

Eastern 2658475 726900 3.66

Central 3033351 932800 3.25

Western 1330145 526000 2.53

Mid-Western 930330 731700 1.27Far-Western 675797 484500 1.39

TERAI 8628098 3401900 2.54ALL NEPAL 18491097TARAI % 46.7

Source: Statistical Year Book of Nepal 1999, Central Bureau of Statistics

73

ANNEX 4Average Holding Size in Tarai Districts

S.N. District No. of holdings Area of holdings Average holding size---------------------------- ha -------------------------------

1. Jhapa 74727 105121 1.41

2. Morang 77857 110912 1.42

3. Sunsari 43746 64197 1.47

4. Saptri 65211 83170 1.28

5. Siraha 65322 76991 1.18

6. Dhanusha 69956 73688 1.05

7. Mahottari 58019 63753 1.10

8. Sarlahi 65729 75196 1.14

9. Rautahat 63438 65995 1.04

10. Bara 53488 60981 1.14

11. Parsa 40529 43496 1.07

12. Chitawan 53428 42814 0.80

13. Nawalparasi 64187 71567 1.11

14. Rupendehi 67839 73197 1.08

15. Kapalvastu 51400 90415 1.76

16. Dang 48072 56456 1.17

17. Banke 35912 49073 1.37

18. Bardiya 31590 50727 1.61

19. Kailali 51931 70057 1.35

20. Kanchanpur 35237 46986 1.33

Eastern 326863 440391 1.35

Central 404587 425923 1.05

Western 183426 235179 1.28

Mid-Western 115574 156256 1.35Far-Western 87168 117043 1.34

TERAI 1117618 1374792 1.23ALL NEPAL 2736050 2597400 0.95TARAI % 40.8 52.9 129.6

74

ANNEX 5

List of Contacts

S.N. Name of Person / Agency Address1. Honble. Prithvi Raj Ligal Vice-Chairman National Planning Commission

2. Honble. Dr. Jagdish Pokharel Member, National Planning Commission

3. Honble. Hari Shanker Tripathi Member, National Planning Commission

4. Mr. Oye Mint World Bank

5. Dr. Chris World Bank

6. Mr. Jean Claude Blacet World Bank

7. Dr. Abdul Ghani World Bank, Bangladesh Dhaka Office

8. Ms. Andrea Ryan World Bank

9. Mr. Magdalena Manzo World Bank

10. Dr. Bhola Chalise Director, Nepal Electricity Authority

11. Dr. Narayan Gajurel Department of Irrigation

12. Mr. Arun Ranjitkar Director General, Department of Water Supply and Sewerage

13. Mr. Udaya Raj Soti Secretary, Ministry of Local Development

14. Mr. Sharada Prasad Sharma Joint Secretary, Ministry of Water Resources

15. Mr. Devendra Pratap Shah General Manager, Agriculture Development Bank of Nepal

16. Dr. Hari Krishna Upadhyay Executive Chairman, CERPED

17. Mr. Raj Babu Crests Executive Director, RWSSFDB

18. Mr. Jeeven Lal Shrestha Member Secretary, Ground Water Development Board

19. Mr. Suresh Uprety Project Coordinator, Community STW (IFAD)

20. Mr. Umesh Pandey Director, NEWAH

21. Mr. Dinesh Bajracharya Er. NEWAH

22. Mr. Prem Bahadur Karki Chief, Ground Water Development, Parsa District

23. Mr. Ram Krishna Uprety Chief, District Irrigation Office, Parsa District

24. Mr. Hari Gopal Gorkhali Controller, Supervision Office, Birgunj, ADB/N

25. Mr. Purushottam Shrestha Manager, Main Branch Office, Bharatpur, Chitwan District

26. Mr. Chaudhery Chairman, District Development Committee, Parsa District

27. Mr. Upendra Paneru Chairman, JMC-Nepal, Chitwan District

28. Mr. Deepak Khanal Khanal Poultry, Bharatpur

29. Mr. Indra Shrestha Avinash Poultry, Bharatpur

30. Mr. Netra Dhakal Proprietor, Nepal Agro Vets, Narayanghat

31. Mr. Tika Ram Pandey Chairman, Deep Tubewell WUG, Jamuniya

75

32. Mr. Hari Lall Shah Chairman, Deep Tubewell WUG, Rajbiraj

33. Mr. Bhesh Raj Panta Chairman, WUG, Budhi Rapti Community Irrigation

34. Mr. Prem Bahadur Shahi Senior Hydrologist, Kapilvastu Tubewell Project

35. Ms.Gomati Upadhyay Members, WUG, Devdaha, Nwalparasi

36. Mr. Surya Narayan Thakur Mechanical Engineer, Bhairahawa Lumbini Groundwater Project

37. Mr. Sukhdev Neupani Chairman, Chhattis Mauja Irrigation Project.

38. Mr. Hom Nath Gyawali Tubewell Operator, Jahada Tubewell, Jamuniya

39. Mr. Hom Bahadur Thapa Sub Branch Manager, ADB/N, Parasi

40. Mr. Shyam Krishna Sharma Pump Dealer, Bharatpur

41. Mr. Prakash Neupani Well Driller, Bharatpur

42. Mr. Shanker Sarawagi Pump Dealer, Narayagharh

43. Ms. Guan Prasad Sharma Manager, National Drilling Company, Gaidakot

44. Mr. Krishna Kumar Verma Chairman, Central Farmers Committee, Rajapur

45. Mr. Keshab Shyakya Chief, District Water Supply Office, Butwal.

46. Mr. Krishna Kumar Sharma Members, WAG, Pithuwa Irrigation System.

47. Ms. Pavitra Rajbhandari Member, WUG, Group Tubewell, Parvatipur.

48. Mr. Rishi Ram Tiwari Member, WUG, Group Tubewell, Gunjanagar

49. Mr. Banu Ram Chairman, Janakalyan Irrigation System.

50. Mr. D.R. Rana Butwal Power Company, Butwal.

51. Mr. Saroj Banskota Chief, District Water Supply Office, Butwal.

52. Mr. Phul Bahadur Ghising Chairman, Letang Community Irrigation System, Letang.

53. Mr. Nanda Lall Dhakal Chairman, Naubasta Irrigation System, Chisapani, Bankey.

54. Mr. Parasu Ram Mahoto Member, WUG, Group Tubewell, Phulkatti, Siraha.

55. Mr. Krishana Pathak Member, WUG, Group Tubewell, Latebari, Jhapa.

56. Mr. Tulsi Bahadur Khatri Chairman, Group Tubewell, Mahadevpuri, Bankey

57. Mr. Balaram Bhandari Communitity Development Center, Suarya Pattuwa, Bardia

58. Mr. Bhim Bhadur Oli Chairman, Group Tubewell, Sitapur L Gaoni, Bankey

59. Mr. Bhawani Upadhyaya Development Consultant Services

60. Ms. Samarathi Lodh Member, Tubewell WUG, Pakadi, Nawalparsi

61. Saroj Baskotota District Engineer, DWSO/Chitwan

62. Krishna Bahadur Tiwari, Chairman, user group committee, Pithuwa Drinking Water Supply Project (PDWSP)

63. Babu Ram Thapa Magar Peon, PDWSP

64. Damodar Bhatta Assistant Pump Operator ,DWSO/Chitwan, PDWSP

65. Buddhi Bahadur Rayamaji Site Incharge,DWSO/Chitwan, PDWSP

66. Ms. Manorama Sharma Motivator, NEWAH, Surya Patuwa Drinking Water Supply Project

76

(SPDWSP)

67. Mr. Santu Thapa Health Motivator, SBK, SPDWSP

68. Mr. Suresh Kumar Chaudari Health Motivator, SBK, SPDWSP

69. Mr. Keshav Lal Shakya District Engineer, DWSO/Rupandehi, Anandaban Drinking Water Supply Project (ADWSP)

70. Mr. Keshav Raj Neupane User group Committee Chairman, ADWSP

71. Mr. Hari Prashad Khanal VMW, Bhimshanti Drinking Water Supply Project (BDWSP)

72. Ms. Sarita Gurung, member User group committee, BDWSP

73. Mr. Manashree Gurung Member, User group committee, BDWSP

74. Mr. Thakur Pokharel Benificiaries, BDWSP

75. Mr. Upendra Panueru Director, JMC, BDWSP

76. Mr. Shree Ram Shrestha Chairman, User group committee, Dhulibari Drinking Water Supply (DDWS)

77. Mr. Mani Kumar Uperati Secretary, User group committee, DDWS

78. Mr. Madhav Bahadur Aryal District Engineer, DWSO/Saptari, Kalayanpur Drinking Water Supply Project (KDWSP)

79. Mr. Bali Chasudhari VDC Chairman, Kalyanpur, KDWSP

80. Mr. Ram krishna Shah VDC member, KDWSP

81. Mr. Toya Narayan Kharal Vice-Chairman, User group Committee, Batauli Drinking Water Supply project (BDWSP)

82. Mr. Tara Lamichane Team Leader,GYC, BDWSP

83. Mr. Hom Nath Acharya Field Coordinator, GYC, BDWSP

84. Mr. Rajesh Koirala Overseer, GYC, BDWSP

85. Mr. Dil Maya Kharal VHP, BDWSP

86. Mr. Bhakta Bhadur Gurung Secretary, User group Committee, BDWSP

87. Mr. Uma Nanda Kharal VMW, BDWSP

88. Mr. Bhojraj Nainabasti Beneficiaries, BDWSP

89. Mr. Nar Bahadur Lama Chairman, User group Committee, Letang Drinking Water Supply Project (LDWSP)

90. Mr. Dev Nath Yadav Operator, LDWSP

91. Mr. Rabindra Kumar Dev Assistant Engineer, Dhalkebar Drinking Water Supply Project (DDWSP)

92. Mr. Janaki Saran Bhagat Overseer, DDWSP

93. Mr. Ishor Nath Mishra Overseer, DDWSP

94. Mr. Buddhi Nath Paudel Chairman, user group committee, Kakarvitta Drinking Water Supply Project (KDWSP)

95. Mr. Ram Chandra Upreti Secratory,user group committee,KDWSP

96. Mr. Mishri Prasad Shrestha Consultant, Fourth Rural Water Supply Projects, ADB/M

97. Mr. Kumar Dhakal Consultant, Fourth Rural Water Supply Projects, ADB/M

98. Mr. R. P. Sapakota National Wheat Research Center, Bhairahawa, Rupandehi

77

99. Mr. R. Mishra Director Regional Agri-Research Station, Khajurah, Nepalgunj, Banke

100. Mr. K. Adhikari Chief National Maize Research Programme, Rampur, Chitawan

101. Mr. Govinda Koirala Chief, Regional Agriculture Research Station, Parawanipur, Bara

102. Mr. Madhav Joshi Co-ordinator, National Grain Legumes Research Programme, Rampur, Chitawan

103. Mr. Prakash Neupane Rijal ASC, Rupandehi

104. Mr. Lok Nath Devkota Chief, ADO, Bharatpur, Chitawan

105. Mr. Ramchandra Agrahari Chief, ADO, Saptari

106. Mr. Gaffar Mansoor Chief, Fish Farm, Lahan, Saptari

107. Dr. Hari Dahal Chief, ADO, Siraha

108. Mr. Purushottam Acharya Officer, ASC, Lahan, Siraha

109. Dr. Kamal Kantajha Chief, District Livestock Office, Rupandehi

110. Dr. Ram Kumar Mandal Asst., District Veterinary, Sunasari

111. Mr. Dev Raj Adhikari Chief, District Livestock Section, Bharatpur, Chitawan

112. Mr. Ratan Dhoj Shahi Chief, ADO, Rupandehi, Bhairahawa

113. Mr. Raghupati Kantha Asst. Agronomist, ADO, Chandragadhi, Jhapa

114. Mr. Purna Man Lawati Act. Chief, AIC, Bharatpur, Chitawan

115. Mr. Shiva Dutta Dhakal Co-officer, District Co-operative Office, Bharatpur, Chitawan

116. Mr. Madhav Bahadur Panta Chief, ADO, Dhanusha

117. Mr. Durga Prasad Adhikari Coordinator, SEAN, Kathmandu

118. Mr. Mitra Raj Duwadi President, SEAN, Chitawan

119. Dr. Hari Krishna Upadhyay Executive Chairman, CEPRED, Kathmandu

120. Dr. T. N. Shrestha Director, CEAPRED

121. Dr. R. K. Rawat Coordinator

122. Dr. Anil Subedi Executive Chairman, LIBIRD

123. Mr. Hari Ghimire Field Technician, PCI, LIBIRD, Chitawan

124. Dr. Maheswor Bharati Coordinator, Seed Sector Support Project

125. Mr. Hari Gopal Gorkhali ADB/N, Monitoring Supervision, Regional Office, Birganj

126. Mr Ramesh Lal Karna Chief, ADO, Bardiya

127. Mr. Chandra Kanta Devkota Estension Officer, DADO, Chitwan

78

ANNEX 6List of the Case Studies

Projects Name Type of System Location Remarks1. Pituwa Drinking Water Supply Project Agency Managed Shaktikhor VDC,

ChitawanDrinking Water

2. Surya Patuwa DW Supply, Health & Sanitation Project

NGO/CBO Managed Surya Patuwa VDC, Bardiya

Drinking Water

3. Kalayanpur Drinking Water Supply Project

Agency/CBO Managed Kalyanpur VDC, Saptari Drinking Water

4. Kakarvita Drinking Water Supply Project

Agency/CBO Managed Kakarvitta Municipality Drinking Water

5. Anandaban Drinking Water Supply Project

Agency/CBO Managed Shankarnagar VDC, Rupandehi

Drinking Water

6. Dhulabari Drinking Water Supply Project

Agency/CBO Managed Dhulabari VDC, Jhapa Drinking Water

7. Letang Drinking Water Supply Project Agency/CBO Managed Letang VDC Morang Drinking Water

8. Bhimshanti Drinking Water Supply Project

Fund/NGO/CBO Managed Shanrarnagar VDC, Chitawan

Drinking Water

9. Bataule Drinking Water Supply Project

Fund/NGO/CBO Managed Devghat VDC, Tanahu Drinking Water

10. Dhalkewar Drinking Water Supply Project

Agency Managed Dhalkewar, Dhanusha Drinking Water

11. Prithivinager Drinking Water Supply Project

Agency Managed Prithivinagar VDC, Jhapa

Drinking Water

12. Sorah Mauja Irrigation Farmer Managed Irrigation Rupandehi Irrigation

13. Rajapur Irrigation System Farmer Managed Irrigation Bardia Irrigation

14. Narayani Zone Irrigation Development Project

Agency Managed Parsa, Bara Irrigation

15. Banaganga Irrigation System Joint Managed Irrig. System

Irrigation

16. Bhairahawa Lumbini Ground Water Project I

Agency Assited Farmer Managed

Reupandehi Irrigation

17. Bhairahawa Lumbini Ground Water Project III

Agency Assited Farmer Managed

Rupandehi Irrigation

18. Jamuniya - Jahada Tubewell Agency Assited Farmer Managed

Nawalparasi Irrigation

19. Sunawal Tubewell Agency Assited Farmer Managed


20. Pithuwa Irrigation System Agency Assited Farmer Managed

Chitawan Irrigation

21. Kumroj Irrigation System Agency Assited Farmer Managed

Chitawan Irrigation

22. Anjna Irrigation System Agency Assited Farmer Managed

Chitawan Irrigation

79

23. Janakpur Irrigation System Agency Assited Farmer Managed

Chitawan Irrigation

24. Sunderpur Irrigation Project Agency Assited Farmer Managed

Morang Irrigation

25. Dahana Sing Irrigation Project Agency Assited Farmer Managed

Morang Irrigation

26. Sitapur Irrigation Agency Assited Farmer Managed

Bankey Irrigation

27. APP Shallow Tubewell Agency Assited Farmer Managed


28. APP Shallow Tubewell Agency Assited Farmer Managed

Bankey Irrigation

29. APP Tubewell Agency Assited Farmer Managed

Saptari Irrigation

30. ADB/N Shallow Tubewell Agency Assited Farmer Managed

Chitawan Irrigation

31 ADB/N Shallow Tubewell Agency Assited Farmer Managed

Chitawan Irrigation


Jhapa Irrigation


Jhapa Irrigation


Jhapa Irrigation

35. IFAD Tubewell Agency Assited Farmer Managed

Siraha Irrigation

36. Kalikhola Irrigation Project NGO/CBO Managed Citawan Irrigation

37. Treadle Pump NGO/Private Users Managed

Siraha Irrigation

38. Boteghat Bridge CBO Managed Model Kumroj, Chitwon Bridge

39. Harnary Bridge NGO/CBO Model Kumroj, Chitwon Bridge

40. Madhauliya Bridge in Kotihawa DDC/CBO Managed Model

Amuwa Road, Rupandehi.

Bridge

41. Jiba Khola Bridge DDC/CBO Managed Siraha Bridge

42. Kumroj Section of Parsa VDC Managed Model Kumroj – Sauraha Road Road

43. Manigram – Tinaue Road VDC Managed Rupandehi Road

44. VDC Roads in Parroha, Rupandehi VDC Managed Rupandehi Road

45. Roads built by Bhairahawa-Lumbini Ground WP

Agency Managed Model Bhairahawa, Rupandehi Road

46. Sitapur Rural Road, RCIW Donor /DDC/CBO Managed Model

Siraha Road

47. Siraha - Balan (Hulaki) Road, Siraha. (DoR)

Agency Managed Model Siraha Road

48. Ramnagar Mirchaiya Road VDC Managed Siraha Road

80

49. Basbiti - Maleth – Dighawa Agriculture Road

DDC/CBO Managed Saptari Road

50. National Wheat Research Program NARC Managed Bhairahawa, Rupandehi Agriculture

51. LIBIRD (NGO) LIBIRD Managed (NGO) Kaski Agriculture

52. Rupandehi District Department of Agriculture Rupandehi District Agriculture

53. CEPRED CEPRED Kathmandu Agriculture

54. SAPPROS SAPPROS Kathmandu Agriculture

55. BPC Butwal Power Company Butwal Electricity

56. NEA Nepal Electricity Authority Electricity

57. Gitanagar Service Centre of Chitawan Chitawan District Electricity

58. Lamjung Electricity Users Organization, Beshisahar

Lamajung Electricity

59. Private Company Users Group Managed System

Syangja Electricity

60. ADO, Dang Agency Managed Dang Agricultural

81

ANNEX 7

Model Description

Appendix 0 : Generic Models

Appendix 1 : Agricultural Technology

Appendix 2 : Irrigation

Appendix 3 : Water Supply

Appendix 4 : Roads

Appendix 5 : Power

82

ANNEX 7Appendix 1

Functions of Various Actors in Agricultural Technology Models

Agency Model (AM, Agricultural Extension )

Sub-projectcycle

Key actors

Agency CBO Users

Initiation Project initiation is done by the Agency and it is approved through line ministry. Program is prepared based on regional planning and budget workshop done in all five development regions.

Users are consulted

Planning Agency does all the preparatory works that include conducting of regional planning and budgetary workshop, and compilation of program and budget. Program and budget estimates are submitted to NPC through line ministry. No coordination with the CBO has been observed during the process.

Ag. Service Center (ASC) staff consult with CBOs before planning and budget workshop

Users express their demand

Funding NPC allocates annual budget However, submitted budget is not fully sanctioned by the NPC. In AREP districts, funding is done by the World Bank.

No involvement. CBO does not know amount of funds allocated to service centers.

Execution Ministry directs the DADO and then DADO instructs the ASC and ASSC to implement the project

CBO organizes the group formation to implement project.

Involvement in implementation activities

Monitoring & Evaluation

Monitoring & Evaluation of the project is done by the Agency.

No involvement No role

Financing NPC allocates the annual budget. MOF releases budget to Department which in turn releases budget to its regional and district offices

No involvement No role

83

NGO/CBO Model (NCM) ( Agricultural Extension )Sub-projectcycle

Key actorsNGO CBO Users

Initiation Project initiation and facilitation is provided by the NGO.

No involvement The users present their demand to the NGO

Planning NGO coordinates with the users after observing field conditions and plan accordingly in consultation with the users

CBO is formed that coordinates with the NGO and users to formulate the planning process

The users express their demands and ask the NGO to make plan according to their schedule.

Funding The Donor provides fund to NGO that will be used according to the plan

CBO takes responsibility to mobilize the users and collects the additional funds required from the users and VDC.

Users contribute the agreed amount for the implementation of the project

Execution NGO facilitates and provides technical support to the CBO and to the users.

CBO mobilizes the users and execute the project.

Users are directly involved on the implementation as directed by the CBO and NGO.


The NGO and CBO do monitoring & Evaluation of the project.

CBO checks the field activities. No role

Financing NGO releases funds phase by phase at the field as required

CBO is responsible to mobilize the users' contribution

The users put their agreed amount for the project.

Private operator Model (PM) ) (Sugarcane Mill, Agricultural Extension )Sub-projectcycle

Key actors Private firm User

Initiation Private firm examines the potential areas for cultivating sugarcane

Users express their interest to participate in sugarcane production

Planning The private firm consults with users about the area of production and the detailed planning

Users express their capacity and their demand, and show their commitment to the private firm and sign the agreement.

Funding Private firm provides the loan to the users for the purchase for planting materials and chemical fertilizer.

Users also contribute the labor and cash for the production.

Execution Private firm provides the technical assistance needed at the field.

Users follow the instruction of private firm and execute accordingly


Private firm frequently checks quality of product at the field and give instructions as necessary

No role

Financing Private firm provides loans to users No role

84

Agency Managed (AM) ( Agricultural Research)Sub-projectcycle

Key actorsAgency Users

Initiation Project initiation is done by the Project (AERP) and it is approved through line ministry.

The users are consulted.

Planning Agency (AERP) consults with the line ministry and the department. Subsequently, agency goes to the field and discusses with the users for planning.

The users express their demands at regional technical working group meetings

Funding Donor and the ministry provide the fund for the project. No role

Execution NARC and AREP direct regional agriculture research center and agriculture research center for the implementation of the project.

Users are involved in outreach research site


NARC and AREP performs project Monitoring & Evaluation

No involvement

Financing AREP provides funds to NARC and NARC releases budget to concerned centers and stations.

No involvement

Private agro-vet Model (PM) ( Agricultural Service delivery )Sub-project Cycle

Key actorsAgro-vet CBO Users

Initiation Identifies the potential location to establish the shop

Consult with already formed village-based CBO

Users present their demand to agro-vets

Planning Prepares plan keeping in view of client demand and potential of the area

CBO expresses its demand as per situation

Users express their demands to agro-vets

Funding Manages own funds No involvement No role

Execution Facilitates and provides technical support to the CBO and to the users.

CBO mobilizes the users and execute.

Users carryout as per suggestion provided by the agro-vet.


Monitors and supervises, take feedback from clients

No role No role

Financing Provides service delivery to users as a loan

CBO is responsible to mobilize resources for agro-vets.

No role

85

ANNEX 7Appendix 2

Functions of Various Actors in Irrigation Models

CBO-managed Model (CM)

Sub-ProjectCycle

Key actors

Agency Users

Project Initiation No role Users identify and initiate the project. Water Users Committee (WUC) formed

Preparation/Design No Role WUC after consultation prepare and design the project

Funding Allocation No role WUC raises funds from users and allocates these funds

Exec./Construction No role WUC executes project and construct facilities

Monitoring & Eval. No role WUC carries out monitoring & evaluation works

Op. & Maintenance No role. WUC is responsible to carry out O& M

Financing No role WUC allocates the resources.

Agency-managed Model (AM)

Sub-project cycle Key actors

Agency Users

Project Initiation Initiation done by agency. No role

Preparation/Design

Agency carries out project preparation and design No role

Funding Allocation

NPC approves the project and allocated fund. Funds disbursed by Ministry of Finance

No role

Execution/Construction

Construction carried out Agency No role


NPC responsible for monitoring and evaluation by apex level institute. However, agency often performs monitoring and evaluation

No role

Operation & Maintenance

Agency is responsible for O&M. Users involved at tertiary and farm level

Financing World Bank financed the project and Ministry of Finance arranged the counterpart fund.

Agency/CBO-managed Model (ACM)

Key actors

86

Sub-project cycle

Agency Users

Project Initiation

Agency sensitizes users through awareness campaign

Users initiate and demand project along with upfront cash contribution. In case of ADB/N implemented project loan has to be approved

Preparation/Design

Agency carries out project preparation and design

Users consulted during feasibility study and informed about cost sharing arrangement. However, users not involved in design. Users raise funds for capital contribution or they agree to labor contribution or both. In case of ADB/N implemented project, users to borrow money equivalent to some fraction of works costs as capital contribution, and to agree to contribute in kind too; users consulted during design phase.

Funding Allocation

NPC approves project and allocates funds. Funds are disbursed by Ministry of Finance.

Provide implementing agencies for cash and labor contribution as agreed at design stage


Construction carried out by Agency through contractors. In case of ADB/N implemented projects, no contractor for surface water

Contribution in kind provided. Involvement in the procurement of contractors

Monitoring & Evaluation(M&E)

NPC also responsible for M&E by apex level institute. However, in practice, agency does project M&E

No involvement of users except in some cases for supervision and monitoring


No involvement Users responsible for O&M

Financing Project financed by donors and counterpart funding arranged by Ministry of Finance

Capital cost and labor contribution provided by the users

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Joint Agency/CBO Model (JACM)

Sub-project cycle

Key actors

Agency Users

Project Initiation

Agency sensitizes users for joint management system.

Users involved in discussions with agency re the possibility of undertaking project under joint management.

Preparation/ Design

Agency carries out project preparation and design

Users were involved in the assessment of works to be carried out to keep system intact or improvement.

Funding Allocation

NPC approves project and allocates funds. Funds disbursed by Ministry of Finance.

Users assures implementing agencies for cash and labor contribution required

Execution/

Construction

Construction carried out by Agency using contractors.

Contribution in kind provided. Users Involved in procurement of services of contractors.

Monitoring & Evaluation (M&E)

NPC was also responsible (M&E) from apex level institute. However, in practice, agency does project (M&E).

Users also involved in monitoring and supervision construction


Jointly with users Jointly with Agency

Financing Project financed by donors and counterpart funds arranged by Ministry of Finance.

Capital cost and labor contribution provided by users

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NGO/CBO Model (NCM)

Sub-project cycle

Key actors

NGO Users

Project Initiation

NGO facilitates project identification by users

Users identify project and initiate implementation

Preparation/

Design

NGO conducts feasibility study. Preparation and Design is carried out in consultation of users

Users involved during in project preparation and design so as to confirm their requirements. Users assure labor contribution

Funding Allocation

Donor disburses funds to NGO Users take responsibility to collect local materials and provide other unskilled works

Execution/

Construction

Facilitates construction works by users Contribution in kind. Users are involved in construction


NGO conducts monitoring and evaluation.

Users also involved in construction monitoring and supervision


Provides training and facilitation. Users are responsible

Financing Project financed by donors. NGO facilitates for financing.

Sharing of capital cost in the kind

NGO/Private operators/CBO Model (NPCM)Sub-project cycle

Key actors

NGO Private Operator Users

Project Initiation

No role Sensitizes users If convinced user contract private

Preparation/Design

Provides technical services on demand

Provides technical services on demand

Users involved on design

Funding Allocation

No role No role Users have to bear entire cost of system


No role Arrange materials and technician

No role


No role No role Users involved on monitoring and supervision

Operation &Maintenance

No role. No role Users are responsible for O&M

Financing No role No role Users have to arrange for total financing

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ANNEX 7Appendix 3

Functions of Various Actors in Drinking Water Supply Models

Agency –CBO Managed Model (ACM)Sub-project cycle

Key actorsAgency CBO

Project Initiation

Project initiation is done by the Agency and it is approved through line ministry. It is largely based on either community demand or political demand depending upon the size of the project

Although CBO should work hand in hand with the Agency for the initiation of the project, it is observed that this is rarely the case

Preparation/ Design

The Agency does all the preparatory works including preliminary survey and design. The technical proposal with detailed cost estimates is submitted to NPC through line ministry

No consultations with CBO hence no say in the preparation and design processes.

Funding Allocation

NPC allocates annual budget to the sectors (DWSS). DWSS in turn allocates the budget for the respective sub-projects

No involvement. CBO does not know the total amount of funds allocated to their projects even after project completion


The Agency selects and uses the consultants/contractors through competitive bidding. The Agency use the contractors for project execution. Consultants/DWSS engineers manage and supervise construction, and contractors work under agency direction

No involvement. CBO is not involved during the procurement and execution of the project. However, in some projects, it is found that the contractors for minor excavation works use local labor

Monitoring & Evaluation (M&E)

Monitoring & Evaluation of the project is done by the Agency. Agency appoints consultants, monitors and supervises works during implementation (for smaller projects, supervision might be undertaken directly by the Agency)

Project Monitoring & Evaluation is done by the CBO only after the project is handed over to the community when CBO takes all the responsibility


Project Operation & maintenance is done by the Agency through branch/local offices only before the project is handed over to the community.

Operation & maintenance of the project is done by the CBO only after the project is handed over to the community and CBO takes over

Financing NPC allocates the annual budget. MOF releases the budget to DWSS. DWSS releases the budget to its district offices. The district offices use the contractor and the fund is released according to the contractual arrangement.

After the project is handed over to the community, CBO collects tariff to cover service charges from users. The revenues generated from tariff and others are used for system expansion, O&M and staff salaries.

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Agency Managed (AM)

Subproject cycle

Key actors

Agency Users

Project Initiation

Project initiation is done by the Agency and approves through line ministry. It is largely based on either community demand or political demand depending upon the size of the project

Although users should work hand in hand with the Agency for the initiation of the project, it is observed that the users are rarely involved

Preparation/

Design

Agency does all the preparatory works including preliminary survey and the design. Technical proposal with detailed cost estimates is submitted to NPC through line ministry

No involvement and no consultation with the users

Funding Allocation

NPC approves the program and allocates annual budget to the sectors (DWSS). DWSS in turn allocates the budget for the respective sub-projects.

No involvement


Agency selects and uses the consultants/contractors through competitive tender. Consultants/DWSS engineers manage and supervise construction, and contractors work under agency direction.

No involvement. However, in some projects, it is found that the contractors for minor excavation works use local labor.


Monitoring & Evaluation of the project is done by the Agency. Agency-appoints consultants monitors and supervises works during implementation (for smaller projects, projects supervision might be undertaken directly by the Agency).

No involvement


Operation & maintenance of the project is done by the Agency through branch/local offices.

No involvement

Financing NPC allocates the annual budget. MOF releases the budget to DWSS. DWSS releases the budget to its district offices. The district offices use contractors and funds are released according to the contractual arrangement. Govt/agency collects tariff to cover service charges from users through local offices

No involvement

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NGO/CBO Model (NCM)

Subproject cycle

Key actors

NGO CBO

Project Initiation

NGO facilitates involvement of local CBO/Users for the project initiation. NGO examines the project request from the Users/CBOs using demand responsive approach.

User/CBOs present the project request to the NGO either by themselves or by local government. NGO examines their demand and assesses commitment. It finally supports users for preparation of pre-feasibility study

Preparation/ Design

Facilitates pre-feasibility study, subproject planning and technical preparation. It coordinates with CBO for the design of the project and also negotiates with the CBO regarding their respective commitments and responsibilities

CBO undertakes the task of project preparation and work hand in hand with NGO in project preparation. The CBO has its say on the planning and design of the projects

Funding Allocation

NGO mobilizes the fund from various donors, INGOs, charity funds etc. NGO approves the sub-projects and allocates the fund. It disburses the funds and also provides the funds to local NGOs for community mobilization, health and sanitation works.

No involvement. The CBO might know the allocated fund to their project if they wish to know from the NGO

Execution/

Const,

NGO and local NGO facilitates the planning for execution and construction work. The INGO and the local NGO provide technical support and the non-local materials. The labor contribution is made by the CBO/users.

The CBO uses the users who provide the labor contribution for the execution of the project. All the non-local materials are provided by the NGO and the CBO are not involved on the procurement


NGO and local NGO does the monitoring and evaluation work at the initial stage of construction and during project period before it is handed over to the community.

CBO also does the monitoring and evaluation work during the construction and takes all the responsibility for the operation and maintenance of the project after it is handed over to them.

Operation & Maint.

No involvement. CBO takes the responsibility for project operation and maintenance. CBO collects tariffs for the operation and maintenance

Financing NGO mobilizes the funds from various donors, INGOs, charity funds etc. NGO also provides the fund to local NGOs for community mobilization, health and sanitation works

CBO mobilizes users for labor or cash contribution or sometimes even by both.

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Fund/NGO/CBO Model (FNCM)

Sub-project cycle

Key actors

Fund NGO CBO

Project Initiation

No involvement NGO facilitates the local CBO/Users for the project initiation. NGO examines the project request from the Users/CBOs using demand responsive approach.

User/CBOs present the project request to NGO either by themselves or by local government. The NGO assesses their commitment and finally carries out the pre-feasibility study

Preparation/ Design

Investigates the pre-feasibility study using the support agencies (SA). It approves the project and call the NGO to sign the contract, releases the fund to NGO. This permits to start the development phase based on the SA report and its own investigation.

After the pre-feasibility study, NGO facilitates Users/CBOs for sub-project planning and technical preparation. It coordinates with CBO for the design of the project and also negotiates with the CBO regarding mutual responsibilities

CBO undertakes the task of project preparation and prepares the layout plan. NGO facilitates CBO and work hand in hand in project preparation. The CBO has its say on the planning and design of the projects

Funding Allocation

NPC allocates annual budget to the Fund Board for sub-projects from the loan provided by the donor (World Bank-IDA) and Fund Board then provides the fund to approved projects

NGO mobilizes funds from fund board. Fund board approves the sub-projects and allocates funds. It disburses funds to NGOs’ account and CBOs’ account for the development and implement phases after a tri-party contract signed among Fund Board, NGO and the CBO

CBO collects the agreed amount (up front cash of 2.5% of the hardware cost + 3% of the total cost for maintenance) and deposits in bank as a commitment. Total funds for hardware (skilled labor + non local-material + other funds for health and sanitation) is then deposited on the same account by the Fund Board for the implementation

Execution/ Construction

No involvement NGO facilitates the planning for execution and construction work and provides technical support. The labor contribution is made by the CBO/users.

The CBO provides labor contribution for the execution of the project. All the non-local materials are procured by the CBO from the money provided in their account


Fund Board assigns the support agency for the Monitoring & Evaluation after the completion reports from the NGO are presented to the Board demanding for every part of payment

NGO does the Monitoring and Evaluation work at the initial stage of construction and during the project period before it is handed over to the community

CBO also does the Monitoring and Evaluation work during the construction and takes all the responsibility for the operation and maintenance of the project after it is handed over to them.

93


No involvement No involvement. CBO takes the responsibility for project O&M and collects corresponding tariffs

Financing NPC allocates the budget for the sub-projects requested by the Fund Board through line ministry. Fund board gets the fund from the loan (World Bank-IDA) and allocates the fund to approved projects

NGO mobilizes the fund from Fund Board.

CBO mobilizes the users for labor and cash contribution. CBO uses the provided fund deposited in its account by the Fund Board for the procurement of non-local materials, skilled labor cost and transportation cost for non-local materials up to the road head.

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ANNEX 7Appendix 4

Functions of the Various Actors in the Road and Bridge Models

Local body/CBO Model (LCM)Sub-Project Cycle

Key ActorsLocal body Donor CBO Users

Project Initiation

Local Body (DDC) identifies the project that is subsequently approved through the line ministry by NPC

Individuals or groups request Agency through VDC and start organizing CBO

Project Preparation Design

Once program approved in principle, DDC engineers, on their own or through consultants, survey site and submit technical project proposal with cost estimates through the line ministry to the NPC for approval and funding. Meantime facilitates CBO creation

Formation of CBO in progress

Funding Allocation

DDC gets the fund from the donor or by itself from its annual allocated budget and transfer to CBOs for the implementation of the project.

Donor allocates funds through government to DDC for the agriculture roads

Free labor contribution is mobilized by CBO

Free labor contribution is made by the users

Construction/ Execution

DDC provides the technical support, prepares design and cost estimate. Construction supervision is carried out by the Agency

CBO mobilizes users for road works, procures construction materials and award specific component of work to contractor

Users provide some free labor

Monitoring/ Evaluation

DDC on its own, monitors and supervises work during implementation for smaller projects.

Members of the CBO also monitor the physical progress of the work.

Operation and Maintenance (O&M)

Hand over O&M functions to VDC or CBO.

VDC takes over O&M functions

.

Financing Capital cost for implementation is arranged by mobilizing internal resources and donor support through annual budget

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Local bodies/CBO Model (DDC) with direct influence of donor (LCM-D)

Sub-Project Cycle

Key Actors

Donor DDC CBO

Project Initiation

No involvement DDC facilitates project initiation through VDC and local CBO/Users, examines project request from the Users/CBOs using demand responsive approach

User/CBOs present project request to DDC through VDC DDC examines demand and assesses commitment and finally carry out the pre-feasibility study

Preparation/ Design

Appoints the consultants/NGO to provide technical services to support the DDC. Assist DDC in preparing design and cost estimates of roads.

After the pre-feasibility study, DDC facilitates for subproject planning and technical preparation by Users/CBOs. It coordinates with CBO, with assistance of donor appointed consultants, for project design and also negotiates with the CBO regarding mutual commitments

CBO undertakes project preparation and prepare the layout plan and consultant TORs. DDC facilitates the CBO and work hand in hand in project preparation. The CBO has its say on the planning and design of the projects.

Funding Allocation

WFP provides the commodity (rice) or cash for the payment to the labors and donor (e.g., GTZ) provides the tools and equipment and bear the cost for training

DDC through MLD receives the fund for the procurement of construction material. and for the payment to the skilled labors.

CBO mobilizes the free labor contribution from the users

Execution/ Construction

Provides the management support to the DDC by appointing the consultants.

DDC facilitates the planning for execution and construction work and provides technical support by its own or with the technical assistance from donor. Labor contribution is made by the CBO/users.

The CBO uses the users who provide the labor contribution for the execution of the project. All the non-local materials are procured by the DDC.


Donor itself or assigns the support agency for the Monitoring & Evaluation.

DDC does M&E at the initial stage of construction and during the project period before it is handed over to the community.

CBO also does M&E work during the construction

96


No involvement as such. However it provides support for the first one year of operation and maintenance

CBO takes the responsibility for the operation and maintenance of the project. by itself or through VDC.

Financing NPC allocates the budget for sub-projects requested by DDC through line ministry. Ministry gets the fund from donors (WFP and GTZ) and allocates the fund to approved projects.

DDC mobilizes the funds from MLD.

CBO mobilizes the users for labor and cash contribution. CBO uses the funds (commodity or cash) provided to them.

Agency Model (AM)

Sub-Project Cycle

Key Actors

Agency Users

Project Initiation

Project initiation is done by the Agency and approved through line ministry. It is largely based on either community demand or political demand depending upon the size of the project.

Although users should be involved and work hand in hand with the Agency for project initiation, it is observed that users are rarely involved.

Preparation/

Design

Agency does all the preparatory works that includes preliminary survey and design. Technical proposal with detailed cost estimates is submitted to NPC through line ministry. No coordination with the CBO has been observed during the processes.

No involvement and no consultation with the users

Funding Allocation

NPC approves the program and allocates annual budget to the sectors (DoR, MLD). DoR in turn allocates the budget for the respective sub-projects.

No involvement

Execution/

Construction

Agency selects and uses the consultants/contractors through competitive tender. Consultants/DWSS engineers manage and supervise construction, and contractors work under agency direction.

No involvement. However, in some projects. At times, contractors for minor excavation works use local labor


Monitoring & Evaluation of the project is done by the Agency. Agency-appoints consultants monitor and supervise works during implementation (for smaller projects, projects supervision might be undertaken directly by the Agency.

No involvement


Operation & maintenance of the project is done by the Agency through branch/local offices (divisions).

No involvement

Financing NPC allocates the annual budget. MOF releases the budget to DoR. DoR releases the budget to its Divisional offices. The Divisional offices release funds to contractors according to the contractual arrangement.

No involvement

97

NGO/CBO Model (NCM)

Sub-Project Cycle

Key Actors

NGO CBO

Project Initiation

NGO facilitates participation of the the local CBO/Users in project initiation. NGO examines the project request from the Users/CBOs using demand responsive approach

User/CBOs present project request to the NGO either by themselves or thru local government. NGO examines their demand and assesses their commitment and facilitates pre-feasibility study by users

Preparation/ Design

Facilitates participation of CBO in pre-feasibility study, sub-project planning and technical preparation. Coordinates with CBO for project design and negotiates with CBO regarding mutual commitments for project execution.

CBO undertakes the task of project preparation hand in hand with NGO. The CBO has its say on the planning and design of the projects

Funding Allocation

NGO mobilizes the fund from various donors, INGOs, charity funds etc. NGO approves the sub-projects and allocates the fund. It disburses the fund and also provides the fund to local NGOs for community mobilization, health and sanitation works.

No involvement. The CBO might know the allocated fund to their project if they wish to know from the NGO


NGO and local NGO facilitate the planning for execution and construction. NGO and local NGO provide technical support and non-local materials/ equipment. The labor contribution is made by the CBO/users

The CBO provides labor contribution for project execution through users. All the non-local materials/ equipment provided by the NGO. CBO are not involved on the procurement.


NGO and local NGO do the monitoring and evaluation work at the initial stage of construction and during project period before it is handed over to the community.

CBO also does the monitoring and evaluation during the construction


No involvement. CBO takes responsibility for project O&M after project is handed over to them.. CBO collects fees to paid for O&M

Financing NGO mobilizes the fund from various donors, INGOs, charity funds etc. NGO also provides fundsto local NGOs for community mobilization, health and sanitation works.

CBO mobilizes the users for labor or cash contribution or sometimes even by both

CBO Model (CM)

Sub-Project Cycle Key Actors

Agency Users

Project Initiation No role Users identify and initiate the project. UC is formed among the Users.

Preparation/Design No Role Users themselves prepare after consultation and design the project.

Funding Allocation No role UC raises fund from the users and allocates.

Execution/Const. No role UC executes and construct project.

Monitoring & Ev. No role UC carries out monitoring and evaluation works.

98

Operation & Maint. No role. UC is responsible to carry out O& M of the project.

Financing No role UC allocates the resources.

Local bodies Model (LM) (VDC)

Sub-Project Cycle Key Actors

VDC Users

Project Initiation VDC based demand of local community identifies project. Projects are relatively small

Users identify and initiate the project. UC is formed among the Users

Preparation/Design VDC technicians prepare cost estimate. Receive DDC technical assistance

Users are consulted for the preparation of cost estimates

Funding Allocation VDC allocates fund from its annual grant

UC also raises fund from the users

Execution/

Construction

VDC directly hires the workers and mobilizes the work or it forms the UC for project execution.

UC executes and construct project


VDC itself, or sometime through DDC technical staff, does project M&E

Members of UC also carry out monitoring and evaluation works.

Operation &

Maintenance

VDC itself take the responsibility of O & M or hand over to the UC.

UC is responsible to carry out O& M of the project

Financing VDC allocates funds from its annual grant received by government through DDC

UC also raise the funds required to the project and mobilizes the free labor from the users

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ANNEX 7Appendix 5

Functions of Various Actors in Power Models

Agency Managed (AM)Sub-Project Cycle

Key ActorsAgency Donor Users

Project Initiation

Agency identifies the project and the program is approved through the line ministry by NPC

Users at times request Agency’ help

Project Prep.Design

Once the program is approved in principle, agency engineers, on their own or through consultants, survey site and submit technical project proposal with cost estimates through the line ministry to the NPC for approval and funding.

Donor’s appraisal may be needed

Funding Allocation

Ministry of Finance through annual budget allocates available funds across agencies/sectors programs, approved by NPC according to government priorities and sound donors for the funding possibilities

Considers proposal and,if accepted, provides matching funds


Smaller projects, agency engineers execute on their own strength. In bigger projects, agency selects consultants / contractors through competitive tender.Together with the consultants and contractors they supervise and manage the construction till commissioning.

Donors are usually involved in selection of consultants and contractors


Agency on its own, monitors and supervises work during implementation for smaller projects. In large projects agency is assisted by selected consultants for M&E as per financing agreements. Progress is reported on regular quarterly basis to NPC through line ministry for evaluation. After completion the project, consultants and contractors are released


O&M functions ( including revenue collection) are managed by Agency through its branch and local offices

Users pay monthly bill as per the existing tariff

Financing Both capital cost and O&M cost are financed through annual budget.

Donor provide matching funds

Agency/CBO Model (ACM)Sub-Project Key Actors

100

Cycle Agency Donor CBO UsersProject Initiation

Agency identifies the project and the program is approved through the line ministry by NPC.

Individuals or groups request Agency and start organizing CBO

Project Preparation Design

Once the program is approved in principle, agency engineers, on their own or through consultants, survey site and submit technical project proposal with cost estimates through the line ministry to the NPC for approval and funding. In the mean time motivate users to register CBO.

Appraisal by Donors may be needed.

Registration of CBO in progress

Funding Allocation

Ministry of Finance through annual budget allocates available funds across agencies/sectors programs, approved by NPC according to government priorities and sound donors for the funding possibilities

Considers proposal and if accepted provides the matching fund

CBO registered with the local authority


Smaller projects, agency engineers execute on their own strength. In bigger projects, agency selects consultants/ contractors through competitive bidding. Together with the consultants and contractors they supervise and manage the construction till commissioning. In the mean time, agreement for bulk supply of electricity is negotiated with CBO

CBO negotiates for rates and condition for bulk power purchase and sign agreement


Agency on its own, monitors and supervises work during implementation for smaller projects. In large projects agency is assisted by selected consultants for monitoring and supervision as per financing agreements. Progress is reported on regular 4 monthly basis to NPC through line ministry for evaluation. After completion and commissioning the project, consultants and contractors are released.


Hand-over the O&M functions to CBO as per the agreement

Take over the O&M functions including revenue collection and payment to agency as per the bulk purchase agreement

Users pay monthly bill to CBO as per tariff fixed by agency.

Financing Capital cost for implementation is arranged by mobilizing internal resources and donor support through annual budget

O&M budget is provided by CBO through portion of

101

revenue collected

102

Private operator Model (PM)

Sub-project Cycle

Key ActorsAgency Donor Pvt User

OrganizationUsers

Project Initiation

Company identifies project in consultation with community and facilitates organization of to user’s group

UO ad hoc committee requests cy to undertake project and initiate process of UO creation

Company motivators work with users to form UOs

Project Prep. & Design

Company engineers and technicians prepare project in consultation with UO to achieve project objectives as per technical standards

UOs involved in project layout and routing of lines and poles

License Receives applicat. and issues license

Company apply for license through line agency to the ministry and explore funding sources.

Funding Allocation

Gov. kept informed about progress regarding funding situation

Considers cy proposal and if accepted provides matching funds through gov.

Company makes informal approach to Donor/HMGN for possible funding and keeps the government informed of the progress

UOs make commitment for contribution (cash or kind)

Constr./ Execution

Company undertakes overall management of construction and procurement of materials and technical supervision. Company may hire skill labor and external experts, if required, for the supervision and construction in consultation with UOs.

Local material Collection/ transportation and supply of laborers for construction, erection and stringing of distrib. lines.

Contribute materials and laborers and local materials through CBOs


Company through its employees collects progress reports and reports to licensing authority and financing parties as required and monitors progress and service standards

Operation and Maint. (O&M)

Company provides power supply and technical support to UO

UOs manage O&M with technical support from company. UOs undertake to collect tariff and deposit in cy

Users pay monthly bill through UO to Company

103

a/c.

Financing Receives funds in its account directly and report to donor and others as per the financing agreement

104

ANNEX 8

Comparative Evaluation of Institutional Performance

The Terai Rural Development Options Study examines past experiences and develops recommendations regarding suitable institutional arrangements for future investments in the Terai. A key component of this analysis is the comparative evaluation of institutional performance across the case studies reviewed.To assist with this analysis a number of indicators have been developed to capture institutional performance.

For the infrastructure sector, indicators have been grouped according to the following five performance dimensions/parameters: (a) infrastructure standard ; (b) service delivery standard; (c) cost effectiveness; (d) impact (where directly measurable) 9; and (e) sustainability.

For the agricultural technology sector, alternative measures/emphasis are appropriate. Hence for this sector the first three dimensions are consolidated and represented in (a) service standard, with (b) impact, and (c) sustainability also evaluated.

The indicators serve a twofold function: (a) they allow comparative evaluation of the different institutional arrangements and (b) they provide a tool for identifying particular strengths and weaknesses associated with each model (e.g. dimensions with low scorings will illustrate areas of weaknesses). Appendix 1 outlines the proposed sector-specific performance indicators.

Measuring Performance. It is intended that for each case study, documented material be used to assign values (3-0) to each of the indicators. Where measurement of indicators is based on the subjective assessment of the research team, the basis on which the assessment is made is explicitly stated within accompanying remarks/comments.

Comparing Performance. The relative values assigned to these indicators then enables comparison of the performance of different arrangements within each subsector (e.g., shallow tube wells, deep tube wells and surface water irrigation technologies are compared independently).

For ease of comparison, indicators may be aggregated within each of the five measurement dimensions to provide a composite value based on % total score/total possible score. Although this score can be used for direct comparison of cases, the detailed comparative analysis should include an assessment of profile across each and all performance indicators.

The compilation of a total aggregate value for each institutional arrangement is avoided. This would lead to oversimplification, and implied assumptions on the relative importance of the different performance dimensions. There is greater value in maintaining separate measurements of the different dimensions, to allow evaluation of the various strengths and weaknesses of the different models.

As the preferred institutional arrangement is one where a minimum ‘satisfactory’ score is achieved for each measurement dimension, a minimum acceptable ‘cutoff’ score has been determined for each dimension. This cutoff score is used to exclude low performing models. The preferred models are then determined by inspecting the profile across parameters and/or indicators of the remaining options.

9 Within the infrastructure sectors direct measurement of impact cannot be quantified for the drinking water, power and road sectors.

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ANNEX 8Appendix 1

Sub-sector performance indicators

TABLE 1: IRRIGATION (comparisons of shallow tube wells, deep tube wells and surface water to be done separately)

CASE STUDY NAME:

Location: System Age: (yrs from completion)

No. Beneficiaries: System Size: (ha)

Level of Social Capital: (High, Med, Low) System Complexity: (High, Med, Low)

INDICATOR RATING/ REMARKS

A. Physical Infrastructure

i. Existing condition: overall standard of infrastructure

ii. Implementation

Delivery efficiency: years from inception to completion of construction

Appropriateness of design: does standard of infrastructure meet needs

Fully Operational (3); Partially operational (2-1); Not operational (0)

Actual value assigned, then rated as High (3); Medium (2); Low (1)

Fully appropriate (3); Partially under/over designed (2-1); Not appropriate (0)

B. Service Standard (water delivery)

i. Total water availability: average water delivery/hectare

ii. Water equity: (headend water delivery/ha – tailend water delivery/ha)

iii. Reliability: regularity of water supply

Actual value assigned, then rated as High (3); Medium (2); Low (1) or None (0)

Actual value assigned where possible, then rated as equitable (3); partially equitable (2-1); Not equitable (0)

Year round (3); Seasonal/regularly available (2-1); Not reliable (0)

C. Cost effectiveness [comparisons to remain within subsectors so that technology/ infrastructure standards are equivalent]

i. Economic efficiency:

Capital cost/hectare

O&M cost/hectare



106

D. Impact (productivity)

i. Increase yield/hectare

ii. Increase in cropping intensity

Actual value assigned, then rated as High (3); Medium (2); Low (1) or No increase (0)

Actual value assigned, then rated as High (3); Medium (2); Low (1) or No increase (0)

E. Sustainability

i. Institutional:

Transparency – do beneficiaries have knowledge of processes, are they conducted openly?

Accountability - can beneficiaries change outcomes/processes?

Flexibility – can institutional arrangement adapt to changing conditions?

ii. Financial:

O&M fund/arrangements

iii. User Commitment:

User contribution to capital cost (%)

User contribution to O&M (%)

High (3); Medium (2); Low (1); None (0)



Adequate (3); Partially Adequate (2-1); No arrangements in place (0)



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TABLE 2: DRINKING WATER(comparisons of shallow tube wells, deep tube wells, gravity fed systems to be completed separately)

CASE STUDY NAME:

Location: System Age: (yrs from completion)

No. Beneficiaries: System Size: (m2 service area)

Level of Social Capital: (High, Med, Low) System Complexity: (High, Med, Low)

INDICATOR RATING/REMARKS


i. Existing condition: overall service standard of infrastructure

ii. Implementation


Appropriateness of design: does standard of infrastructure meet needs

Complementarity: Is the service provided jointly with sanitation and other health related services?

Fully Operational (3); Partially operational (2-1); Not operational (0) (where possible measure % functioning/not functioning taps to assign comparative rating)

Actual value assigned, then rated as High (3); Medium (2); Low (1) on comparative scale


Yes (3); No (0)

B. Service standard (water delivery)

i. Total water availability: average water delivery/capita

ii. Water Quality: is the drinking water suitable for drinking

iii. Water equity: Is water equitably distributed amongst users within the command area?

iv. Reliability


Potable (3), Not potable (0)

Rated as High equity (3); Medium equity (2); Low equity (1); No equity (0)


C. Cost effectiveness [comparisons to remain within subsectors so that technology/infrastructure standards are equivalent]

i. Economic efficiency:

Capital cost/capita

O&M cost/capita



D. Impact (not directly measurable)

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E. Sustainability

i. Institutional:




ii. Financial: O&M fund/arrangements

iii. User commitment:









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TABLE 3: ROADS (comparisons of earth, gravel and pitch roads to be done separately)

CASE STUDY NAME:

Location: Age: (yrs from completion)

No. Beneficiaries: Road length: (m2 )

Level of Social Capital: (High, Med, Low) Road Complexity: (High, Med, Low)



i. Existing condition: overall service standard of infrastructure

ii. Implementation


Appropriateness of design: does standard of infrastructure meet needs?




B. Service standard (traffic level)

i. Total traffic serviced/yr

ii. Equity: proportion of poor in road service area

iii. Reliability


Actual % assigned, then rated as High equity (3); Medium equity (2); Low equity (1); No equity (0)



I Economic efficiency:

Capital cost/capita

O&M cost/capita



D. Impact – not directly measurable

E. Sustainability

i. Institutional:

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ii Financial: O&M fund/arrangements

iii User commitment:







Actual value assigned, then ranked High (3); Medium (2); Low (1); None (0)

Actual value assigned, then ranked High (3); Medium (2); Low (1); None (0)

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TABLE 4: POWER (comparison of grid distribution systems )

CASE STUDY NAME:Location: Age: (yrs from completion)No. Beneficiaries: Command Area: (m2 )Level of Social Capital: (High, Med, Low) System Complexity: (High, Med, Low)INDICATOR RATING/REMARKSA. Physical Infrastructure

i. Existing condition: overall condition of distribution/transmission network

ii. Implementation Delivery efficiency: years from mobilization

to completion of construction Appropriateness of design: does technical

standard of network meet needs?


Average of following two ratings:Actual value assigned, then rated as High (3); Medium (2); Low (1) on comparative scaleFully appropriate (3); Partially under/over designed (2-1); Not appropriate (0)

B. Power delivery (service standard) i. Total power demand serviced (kWh)

ii. Equity: Do regions serviced include those with a significant proportion of poor?

iii. Reliability

Actual value assigned, then rated as High (3); Medium (2); Low (1) or None (0) High targeting (3); Medium targeting (2); Low targeting (1); No poor serviced (0)Constant supply (3); Intermittent supply (2-1); No supply (0)


i. Economic efficiency: % energy losses in distribution


D. Impact – not directly measurable E. Sustainability

i. Institutional: Transparency – do beneficiaries have

knowledge of processes, are they conducted openly?



ii. Financial: Collection rates (%)iii. User commitment:

User contribution to capital cost (%) User contribution to O&M (%)




Adequate to cover costs (3); Partially Adequate (2-1); No collection (0)

High (3); Medium (2); Low (1); None (0)High (3); Medium (2); Low (1); None (0)

TABLE 5: AGRICULTURAL RESEARCH (seed technology)

CASE STUDY NAME:

Location: Time: (project duration)

No. Beneficiaries: Service Area: (m2 )

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Level of Social Capital: (High, Med, Low) Service Complexity: (High, Med, Low)


A. Research Standard

i. Appropriateness of research: in terms of content in relation to farmers needs and opportunities in the area. This is a qualitative indicator based on data on farmer perceptions and on research team assessments.

ii. Economic efficiency: cost/variety of seed developed

iii. Quality of service: beneficiary assessment of quality

iv. Equity: Does variety selection target needs of poor? This is a qualitative measure based on research team assessments of number of varieties addressing low input, secondary crop, stressed land constraints of the poor.

v. Reliability: germination %

Fully appropriate (3); Partially appropriate (2-1); Not appropriate(1)

Actual value assigned, then rated as High (3); Medium (2); Low (1) (i.e. “high efficiency” (3) = “low cost per beneficiary”)

Rated as High (3); Medium (2); Low (1)


Actual % assigned, then rated as High (3); Medium (2); Low (1)

B. Impact – not directly measurable

C. Sustainability

i. Institutional:

Evidence of agency plans to phase out and move to new crop or beneficiaries


Flexibility – can institutional arrangement adapt to changing conditions

High (3); Medium (2); Low (1)



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TABLE 6: AGRICULTURAL INPUT SUPPLY( seed , fertilizers)

CASE STUDY NAME:

Location: Time: (project duration)

No. Beneficiaries: Service Area: (m2 )

Level of Social Capital: (High, Med, Low) Service Complexity: (High, Med, Low)


A. Supply Standard

i. Adequacy and reliability: ability of supply to meet demand needs in terms of volume and timing. This is a qualitative indicator based on data on farmer perceptions and on research team assessments.

ii. Economic Efficiency: market cost/kg

iii. Quality of input: measured as germination % for seeds, and nutrient content for fertilizer.

iv. Quality of service: beneficiary assessment of service

v. Coverage: number of beneficiaries serviced per y ear

Fully adequate (3); Partially adequate (2-1); Not adequate (0)





B. Impact

C. Sustainability

i. Institutional:




ii. Financial: Are costs recovered




Costs fully recovered (3); Partial costs recovered (2-1); No costs recovered (0)

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TABLE 7: AGRICULTURAL EXTENSION SERVICES

CASE STUDY NAME:Location: Time: (project duration)No. Beneficiaries: Service Area: (m2 )Level of Social Capital: (High, Med, Low) Service Complexity: (High, Med, Low)

INDICATOR RATINGA. Service standard

i. Appropriateness of service: in terms of content and timing, in relation to farmer needs and opportunities in the area. This is a qualitative indicator based on data on farmer perceptions and on research team assessment.

ii. Economic efficiency: cost per beneficiary (e.g. per member of active group)

iii. Quality of service: frequency of contact between beneficiaries and

technical staff beneficiary assessment of quality

iv. Equity: proportion of women members of active groups

v. Coverage: number of beneficiaries serviced per year, per member of field staff

Fully appropriate (3); Partially appropriate (2-1); Not appropriate (0)

Actual value; then rated as High (3); Medium (2); Low (1) (i.e. “high efficiency” (3) = “low cost per beneficiary”)

% beneficiaries in contact at least monthly; then rated as High (3); Medium (2); Low (1)rated as High (3); Medium (2); Low (1)Actual % figure; then rated as High (3); Medium (2); Low (1)Actual number per field staff; then rated as High (3); Medium (2); Low (1)

B. Impact i. Increase in yield and/or income (where the

data are available – e.g. in the case of NGO projects and the public sector extension service available in irrigation command areas). [These data will have to be interpreted with care, because increases in yield and income are functions of several interacting factors – including the irrigation itself.]

% change in yield and/or income over two (?) year period

C. Sustainability i. Institutional

evidence of agency plans to phase out and move to new area or beneficiaries

accountability: can beneficiaries change outcomes/processes (e.g. get the field agent sacked or moved in case of poor performance; change focus of technical advice/training)

flexibility: can institutional arrangements adapt to changing circumstances?

ii. Financial: level of beneficiary contribution / cost recovery

Clear plan and strategy in place (3); intention but no strategy in place (2-1); none (0)High (3); Medium (2); Low (1)


Costs fully recovered (3); partial costs recovered (2-1); no costs recovered (0)

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ANNEX 9

MainFund Set-Up Orientations

A polycentric approach to development–involving ‘competing’ actors–is the much advocated theme of this study. To effectively execute this arrangement, an additional funding mechanism is needed which can provide resources for development functions on a competitive basis. This can be achieved by setting up a series of fully autonomous and independent general and sectoral funds. This annex presents the main orientations along which these funds can be set up.

The trusts funds or sectoral funds are not new institutional arrangements in Nepal. The Rural Water Supply and Sanitation Fund has been in existence for over three years and thus far has given clear evidence of the viability of this approach. This fund is performing well relative to the WSSD department and can serve as a model for other departments. The success of this approach is now reportedly leading some bilateral donors such as DFID and the Finnish International Development Agency to plan setting up other general and sectoral funds. The advantage of a fund arrangement is that it allows donors to change their financing mode from the traditional mode directed to specific projects to an alternative mode designed to finance programs concerning key investments in given sectors. The funding cover the entire range of investments required along the delivery cycle and this funding goes directly to the actors that are best placed to take informed project-related decisions because their represent or are mandated by the end-users. This approach has been well tested in over 20 countries where well established social investment funds have already materialized and brought about profound changes in donor/local organizations interactions.

Drawing from the experiences of Sectoral Investment Funds (SIF) approach and other fund arrangements from Nepal and elsewhere, this study makes the following specific proposals for the general structure and functioning of the fund:

The fund should have a board of directors comprised a limited number of individuals (9 to12 individuals representing NGOs, private sector operators, beneficiary CBOs and government departments/parastatal agencies). In order to maintain the independence of the fund, the representation of the government should not constitute the majority. This board would be the highest policy making body of the fund, with full authority to establish its own administrative and operating rules including staff incentive structure. The board will hire competent and professional staff from the market using transparent recruitment criteria;

The management team of the fund should be headed by an executive director recruited by the board. The divisional structure and staffing of the fund will be decided by the board as per needs. The transparency of the fund management and accounting is paramount and measures should be taken to ensure this is maintained. Well accepted business accounting principles will be followed for maintaining accounts which will be audited every six months by an independent chartered accountant approved by the board;

The fund should have transparent and scientific/objective eligibility criteria to evaluate the funding proposals received from various institutions and individuals for development works/activities. These criteria should include, technical and economic considerations, efficiency considerations, capability assessments, upper cost bounds, magnitude and nature of cost sharing by the beneficiaries, etc.

The fund should receive resources from the government, the donors and any other taxes levied out of the development projects financed by the Fund. For example, the Research and Extension Fund should receive the tax fee levied on the transaction of seeds. Similarly, the Rural Road Fund should receive a certain portion of the gasoline tax. We propose that the government should initiate the sectoral funds with the allocation of a certain proportion (say 10 percent, initially) of the sectoral budget from the government departments. The government could then review the relative performance of the sectoral funds vis a vis the departments on an annual basis, and from this review, increase or decrease the contribution depending on

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results. Such an approach would demonstrate the commitment of the government towards the sectoral funds and will thus prompt the donors to contribute to the funds;

Bilateral and multilateral donor resources should be made available to the fund as a grant through the government. Donors will be able to specify preferred geographical coverage and project components, allowing them to track disbursements, and carry out their regular project monitoring function. While the fund will only ensure cost-effectiveness and efficiency criteria, any equity consideration will be the sole responsibility of the government who could target poorer regions through subsidies as part of its provisioning function. For example, we showed in Cases D6 and D7 that the Drinking Water Fund Board, although very efficient in its operation, has not been able to reach to the remote and deprived areas simply because they have had common policies for accessible and remote areas. The government in such cases could provide additional material transportation cost and increased level of subsidy through the fund to ensure these regions are adequately covered;

In addition to the financial audit specified above, the completed subprojects financed by the fund should also be subjected to regular technical and operational audits. These audits will ensure accountability by identifying weaknesses, problems and areas for improvement, and should be enforced through a systems of performance rewards and penalties.

Under Nepal’s legislative structure, funds must be registered under the Development Committee Act or through special charter. This makes the registration process cumbersome and allows the government to have a majority on the board thus defeated the purpose of its autonomy and independence. Hence it is proposed to enact a general trust fund act under which, various types of funds can be easily registered and operated.

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