Punakha Wangdi Valley Development Project (1993)

Mid-term evaluation report summary

The project area is in the Inner Himalayan region in west-central Bhutan, with peaks ranging from 3 000 to 5 000 meters and includes many densely populated valleys. The area comprises mainly hilly land at elevations of 1 200/1 800 meters. It is connected by a 70 km all-weather tarmac road to Thimphu, which forms part of the main east-west highway of the country. It enjoys cool dry winters and wet warm summers, with rainfall averaging 600/800 mm, concentrated mainly in the summer (monsoon) months.

The soils are generally of good quality and the area under cropped agriculture is around 5 000 ha, of which irrigated terraces comprise 81%, and rainfed non-terraced cultivation 13%, with a further 3% under shifting cultivation, 1.5% under kitchen gardens and 1.3% in orchards. Pasture/grazing land is not included in the agricultural area estimates. The area under improved pasture is negligible. Almost 518 of the irrigated land is planted to paddy in the main summer cropping season and about 50% of this area is cropped with a winter crop of wheat, barley, mustard or other crops. The overall cropping intensity was about 150% at project commencement.

Project design and objectives

Target group

The target group originally was estimated to be 3 500 farm families, comprising 20 000 people. Later, with better data on average household size, the number of households was reduced to 3 200.

Although the original intention of the project was to include all households in the targeted "gewogs" (excluding the urban areas), project support was extended only to the households at elevations below 1 800 meters (except for the credit component).

The farmers in the project area operate, on average, holdings of 1.5 ha. About 75% of this area is irrigated, mainly paddy planted. Most farmers are small owner operators, but many of them (about 60%) are also part-tenants, renting some land to augment their holdings.

Small farmers represent 14% of households and operate 6% of total cultivated land. Smaller farmers are land poor but labour rich; they cultivate intensively and use their resources more efficiently than larger farmers.

Objectives and components

The main objectives of the project were to increase food-grain production, increase smallholder incomes and to strengthen agricultural institutions.

The project components were: (i) irrigation development, soil erosion control and rural infrastructure development; (ii) agricultural extension, adaptive research and training; (iii) animal husbandry and agroforestry; (iv) training; (v) rural credit; (vi) marketing; (vii) monitoring and evaluation; and (vii) Project Management Unit.

Expected effects and assumptions

The expected effects of the project were to: (i) improve agricultural production in the irrigated areas and crop production from the permanently cropped rainfed areas; (ii) increase productivity in the livestock sub-sector; (iii) strengthen supporting service institutions for the country as a whole and in the project area in particular; and (iv) protect the agricultural and natural environment through pilot activities in erosion control and village forestry.

The project objectives and expected output and effects are premised on the following assumptions: (i) an increase in rice production on irrigated land is economical, and/or in the best interests of the country. It is the most effective way of increasing food security and incomes of the farmers in the project area; (ii) the technologies disseminated by the project will be relevant to the farmers in terms of their preferences, needs, and resource capabilities, and will be adopted by them (including small farmers and tenants); (iii) the planned intensification/expansion of crop and livestock production will not adversely affect the land and environment; or if so the project's agroforestry and erosion control components can effectively counteract any such negative effects.

Evaluation

The MTE Mission was in Bhutan from April 9 to April 30 1993. It visited Thimphu and project sites. The report was written in Rome. In preparation for the evaluation, IFAD (OE/PI) had designed and funded a Rapid Diagnostic Survey that was conducted by the Planning and Policy Division (PPD) of the Ministry of Agriculture (MOA) in 1991.

Implementation context and evolution

The free trade policy and import of cheaper grains from India has affected negatively incentives for greater food production. On the other hand, this policy has allowed for cheaper imported agricultural inputs. The new emphasis on commodities in which the country has a comparative advantage (such as horticultural products) has introduced greater profitability into agriculture. The recent devaluation of the Ngultrum has contributed to a dramatic increase in agricultural exports over the last three years.

The objectives of improving institutions and supporting services are being satisfactorily achieved. The project has continued the role of its predecessor as path-finder and model for the design and development of institutions and services across Bhutan.

Project achievements

The project has succeeded in raising crop production and productivity on irrigated and rainfed lands through increases in yields and improved utilization of wetlands.

There has been an increase in paddy production, with area and yield increases well above the Staff Appraisal Report (SAR) estimates, achieved with traditional and improved varieties.

The project is beginning to move into technology mixes which are less costly, less dependent on imports and more sustainable (involving the greater use of traditional varieties, greater use of farmyard manure (FYM), green manure, etc.).

The project has completed ten schemes covering a total of 48 km of channels (of which three are new schemes), while a further 21 schemes are undergoing construction or rehabilitation.

The project has disbursed a total of Nu 6.76 million (USD 328 509) in rural credit. Since recoveries amounted to Nu 3.55 million, total net lending amounted to Nu 3.02 million (USD 151 077). Whereas the SAR had estimated that 40% of the lending would be for seasonal purposes and 60% for medium-term loans, the latter have absorbed 70% of all lending up to the end of 1991.

Effects, impact and sustainability

The project has improved food security and has also contributed to an increase in small farm incomes. In regard to livestock, the base has been laid for increasing productivity, through necessary infrastructure, veterinary and breeding services. The pilot activities in erosion control, agro- and social-forestry, should contribute (through appropriate methodology and technology) to environmental protection in Bhutan. The project is making a very positive contribution to agricultural development in Bhutan.

The irrigation technology, after initial testing, has been rapidly adopted. Water flow has improved and farmers' labour in maintaining channels has been substantially reduced.

About 90% of farmers have adopted the recommended practices for the paddy wheat rotation. There is little or no difference in adoption between men and women. The adoption rates for fodder development and fodder trees exceed 90%. For the other livestock-related activities, there is no single case where the proportion of adopters was less than 50%.

Farmers have adopted paddy double cropping (recommended and subsidized by the project) only to a limited extension. The number of farmers adopting the double paddy rotation has declined slightly, while the area planted has continued to increase. The latter is only 0.42 acres for the larger farmers and 0.28 acres for the small farmers, covering about 11%-16% of the total paddy areas. Most farmers plant only a few terraces of their wetland with double cropped paddy, while they use the rest of their farms for the traditional paddy-wheat combination supplemented by vegetables for cash.

Services such as extension and credit have reached women almost to the same extent as men. However, women bear a disproportionately larger share of the added labour burden of the project's intensification. Expansion of production has fallen mainly on the crops with which women are most engaged.

The subsistence orientation is gradually disappearing in the project area. Project activities and overall growth in Bhutan have made the peasant dominated sector more active, and enhanced monetization and market orientation.

The project intends to establish a pipe spinning plant in the area to produce necessary concrete pipes. Given the mountainous terrain and scarce sand and labour for timely channel construction/repair, this appears a justified use of scarce capital so as to ensure the sustainability of the technology introduced.

The sustainability of the trend towards a more equitable income distribution, in part, has been compromised because of the subsidy on power tillers. The greatest part of medium-term loans went for the purchase of power tillers, whose private and social profitability are doubtful, yet power tillers are subsidized at a rate of about 50%. This equipment in part is used for the purpose of transportation. But when used for tillage, it represents land augmenting technology and reduces the demand for labour, and work oxen teams, hired from smaller farmers.

On the other hand, there is a shift in the project towards greater sustainability, towards what can be realistically continued by the farmers without subsidies and support after project completion. For example, there is a greater stress on lower input systems, more emphasis on the use of farmyard manure/compost, introduction of multi-purpose green manure crops, the direct seeding of the first paddy crop (instead of using expensive plastic sheeting to cover seedlings), and generally a move towards a closer integration of crops and livestock and agroforestry, although there is much more to be done.

Effectiveness of the M&E system

Physical and financial progress under the project is monitored reasonably well, although, there is a need for beneficiary contact monitoring to provide an assessment of needs and constraints on a periodic basis. It is recommended that group or village level meetings/questionnaires be used for this purpose.

It is also necessary to emphasize the importance of special studies and diagnostic studies of particular problems as an aid to project planning and implementation as well as evaluation.

Main issues

In the rural credit activities there has been an impressive increase in lending between 1989 and 1991, but benefits to small farmers have been less than expected. The low uptake of seasonal credit is due to factors involving both demand and supply. Supply is limited because of long delays and difficulties in obtaining loans. Demand is limited because of feared inability to repay and insufficient collateral.

Far too liberal credit approval by the project (Bhutan Development Finance Corporation -BDFC), coupled with the large subsidy (see above), has permitted a rapid expansion of medium-term credit for power tillers. The most serious issue relating to credit is associated with this unwarranted and damaging increase in the number of power tillers (even though the subsidy is outside the project's domain). The SAR provided for four such tillers, but by April 1992 not less than 71 units had been provided. The power tiller issue touches on the very foundation for sustaining equity-oriented growth in the project area. Large farmers are the main purchasers and their purchase becomes profitable because of the subsidy. Until recently, tillers were financed at an interest rate of 10%, less than half the market interest rate, and less even than the rate of inflation (estimated at 12% per year). The promotion of labour-saving technology through mechanized plowing by power tillers impairs the project's equity orientation.

With prospects of declining labour productivity in cropping, farmers strive to expand their cattle population. With limited grazing areas, the biomass is not sustained. Yields and/or cropping intensity cannot be sustained in the longer run. Ultimately, the supply of Farmyard Manure (FYM) is falling. Maintaining soil fertility, and labour productivity, requires enough fodder and grazing resources to enable higher FYM application intensity.

Despite project vehicle provision, the mobility of extension workers has been impaired by unforseen scarcity of funds for fuel, staff travelling expenses and procurement of spare parts.

Recommendations

The tenancy situation must be reconsidered when selecting water channels for rehabilitation in order to avoid delayed implementation. In sites where tenancy rights are uncertain, where tenants are subjected to additional payments not permitted by the Land Act, voluntary labour contributions are not forthcoming for channel rehabilitation. Implementation is delayed and disputes need early arbitration. Other channels, not affected by unequal ownership patterns and/or disputes, should be given chronological priority. The project, as a matter of priority, needs to develop criteria for selecting irrigation channels for rehabilitation not subject to disputes and consequent delay.

It is time to see the double paddy rotation programme in a broader perspective. Firstly, its net financial returns are not necessarily higher than those of the traditional wheat-paddy rotation. The best strategy for extension workers is to encourage small farmers less towards more paddy cultivation (through double cropping), and more towards higher value production by exploiting market opportunities.

While the animal husbandry breeding programme is going well, it is necessary to articulate a strategy for reaching more farmers. Improved, locally adapted crosses should be developed (possibly 50% Jersey, 25% Mithun and 25% Siri) over a broader base of farmers. The breeding programme should be encouraged by incentives such as the concentration of veterinary and extension services in areas of relatively intensive dairy production, while preference in further incentives and credit be given to farmers prepared to adopt complementary measures in pasture improvement and reduction of unproductive animals.

Agricultural research must focus on innovations which fit farmers' resource availability; models of low input use need to be explored.

Technologies economizing on scarce labour during peak demand and providing opportunities at other times are appropriate.

Research should be targeted to seek a stabilized and improved supply of FYM and improved use of green manure. Efforts should also increase for research on low input (mineral fertilizer) use and on how to adapt dosages to farmers' cash constraints.

Women need to be specifically targeted for possible labour saving technology respecting their typical activities (e.g. seed selection, weeding, transplanting and FYM collection). Although one new female extension worker has been recruited (more should be recruited) this is no panacea for more effectively reaching women farmers. Male extension workers should be given more training in diagnosis and be re-trained also to assist women farmers and explore possible points of impact regarding the operations they perform. The possibility of using female farmer extension assistants at village level should also be explored.

A more affirmative and more comprehensive approach is required to safeguard the environment under the pressures of increasing human and animal populations, and project-induced agricultural intensification. Firstly, conservation efforts should deal not only with ad hoc cases by gully plugging, but also with the different types of erosion on given representative land use patterns including communal grazing lands. On lands that are not individually owned, group formation and training, as well as tenurial incentives (to encourage tree planting) and subsidies, become necessary.

Small farmers have benefitted from project-induced intensification, but with soil infertility and/or FYM constraints and reduced labour demand from larger farmers (the power tiller issue), their prospects are no longer bright. To counter these negative trends, it is necessary to focus more particularly on the smaller farmers, respecting their technological and institutional needs. They need to be specially targeted for shifting to higher value crops/products. This requires a re-channelling of extension and credit for these activities, so as to bring relevant technology within their reach.

Improved methodologies are required in research and in extension for identifying points of impact so as to support farmers in their efforts to intensify crop and animal husbandry practices. This need translates into use of (i) participatory methods in setting research and extension priorities, and in the design and verification of trials; and (ii) further economic analysis to understand farmers' decision making and to improve the allocation of scarce project resources.

The Government and the project should review the rationale of the double paddy programme. Adoption of double paddy cropping becomes less attractive once subsidies are eliminated on inputs.

Output prices will be kept low for the foreseeable future because of cheap imported Indian grain. Especially for the small farmers, the primary aim of the project should be to maximize their income and food security.

There is a case where modest subsidies promote soil conservation measures. There is little reason to expect small farmers, even in a group context, to undertake major soil conservation measures using credit. Subsidies should be targeted at smaller farmers.

Livestock productivity needs to be considered more carefully in project planning and implementation. The genetic quality of the herds has been upgraded through the provision of stud bulls and Artificial Insemination (AI) services.

Farmers in general, and particularly small farmers, need to be involved in planting fodder trees on their drylands and on leased forest lands. They need planting material, credit and extension advice.

The possibility of using radio as an instrument of extension for reaching farmers in more remote villages should be explored in order to improve outreach and improve cost-effectiveness. The experience elsewhere with radio listening groups, using a village appointed group leader (monitor) is worth emulating.

The BDFC needs to be more flexible in its credit appraisal, relying more on expected productivity of investment and less on individual collateral.

In terms of credit programme sustainability the high costs of credit delivery to a great number of scattered small farmers must be covered. Interest rates need to exceed prevailing rates of inflation.

The project should explore the feasibility of improving the marketing site in Wangdi by providing space, simple roofing, water and sanitation. Women from distant villages selling vegetables would benefit.

Any future project in this area should consider not only roads, but also foot-bridges and rope-ways to help the people with their transport and marketing needs.

The M&E System must firstly monitor labour demand and supply, by land-poor and land-rich households, secondly the incidence of technology adoption by farm size, and thirdly the nature of tenancy contracts and their impact on productivity and equity.

Relatively simple PC-based software is available for the monitoring of credit delivery, loan administration and repayment performance.

Such software should be installed both in Punakha and Wangdi; the credit officers should receive necessary training from the Office for Project Services (OPS) bureau in Bangkok which is familiar with relevant software and training possibilities.

Lessons learned

Lessons on extension activities

In view of the Government's financial constraints and the need for relevant feedback, present diffusion models need review. The possibility of using farmers as lower level extension workers (after necessary training) should also be explored. The use of village level extension workers offers promise in terms of a cheaper, more effective channel to encourage farmers' experimentation, relevant feedback, and dissemination of extension messages in the remote villages. Such farmer-extension agents would not be directly paid by Government, but could be assisted in kind through free inputs, training, etc., and villagers could compensate them for foregone earnings (labour lost).

Lessons on nutrition and food security

With a more diversified production, food security has improved, and this is not exclusively related to paddy production. The percentage of small farmers with a rice-deficit is, of course, larger than that of larger farmers. But, while much has been made of the importance of the double paddy crop for the food security of small farmers, these farmers obtain the necessary purchasing power through selling other crops. Their food security is not necessarily related to their degree of rice self sufficiency. The argument that paddy double cropping is necessary for the small farmers' food security can be justified only if it provides the small farmers with the highest returns on land and labour over the entire year, which available data do not show convincingly. In fact, net financial returns from paddy double cropping are not necessarily higher than those of the traditional wheat-paddy rotation. The best strategy to use for small farmers is to steer them less towards more paddy cultivation (through double cropping) and more towards higher value production exploiting market opportunities.

Lessons on beneficiary incomes

In the light of the tight feed situation, continued acquisition of more cattle (even if improved) gradually becomes counter-productive.

Compensating measures are needed to increase feed while reducing useless cattle units.

Lessons on beneficiary participation

In sites where tenancy rights are uncertain, voluntary labour contributions are not forthcoming for channel rehabilitation. Tenants were found to be reluctant to participate/contribute to channel rehabilitation since their short-term tenures precluded reaping their longer-term benefits.

Implementation is delayed and disputes need early arbitration. Other channels that are not affected by unequal ownership patterns and/or disputes should be given chronological priority.

The introduction of new water users' groups has often resulted in conflict and lack of participation, as has happened in some other Asian countries. Hence, all modifications must be done in close consultation with the farmers. Meanwhile, project inputs can be used as an incentive when working with farmers to modify existing organizations and water distribution practices with a view to improving their efficiency and equity.

Lessons on environmental impact

Farmer participation is essential for the successful introduction of erosion control measures, because of sharing of potential costs/benefits and the long-term nature of possible benefits.

Experience in other countries has shown the need: (i) for farmers to be aware and appreciate the erosion and soil loss; (ii) for a menu of technologies and practices from which they can choose according to their needs; and (iii) of flexibility in tailoring activities to meet the different location-specific requirements.

 

Date

15 September 1993

Countries

Bhutan

Languages

English