1 [ P a g e

kCILC1 AkAISAL

IINAL 1LkM kLCk1

AkAISAL CI SUGAkCANL kCDUC1ICN kCILC1


MLn8CC8 ALI MLGnANI
IA10M80163
kCILC1 AkAISAL
IACUL1 Mk MCnAMMAD SALLLM


2 [ P a g e

ACkNCWLLDGLMLN1


WlLh Lhe grace of ALMlCP1? ALLAP l am able Lo complle Lhls research reporL
l am very Lhankful Lo my course faculLy M8 MCPAMMAu SALLLM for allowlng
me Lo work on Lhls Loplc and for provldlng me wlLh all Lhe guldance for Lhls
research work and compllaLlon of Lhls reporL
lL proved Lo be a greaL learnlng curve and l expecL Lo greaLly beneflL from lL ln Lhe
fuLure
lease accepL Lhe reporL and hence acknowledge my efforLs


3 [ P a g e

C0NTENTS
PR0}ECT BACKuR00NB ................................ ................................ ................................ ................................ ................................ .....
P0RP0SE 0F TBE L0AN ANB uRANT ................................ ................................ ................................ ................................ ............
SECT0R u0AL ANB PR0}ECT 0B}ECTIvES ................................ ................................ ................................ ................................ ..
Sugai-cane Piouuction Suppoit ................................ ................................ ................................ ................................ ..................
Infiastiuctuie Bevelopment ................................ ................................ ................................ ................................ ........................
BRIEF BESCRIPTI0N 0F PR0}ECT'S 00TP0TS ................................ ................................ ................................ ..........................
PR0}ECT C0ST ................................ ................................ ................................ ................................ ................................ .......................
Summaiy of Pioject Cost Estimates by Components ................................ ................................ ................................ ......
Summaiy of Pioject Cost by Categoiy of Expenuituie ................................ ................................ ................................ ...
Souices of Finance anu Expenuituie Scheuule ................................ ................................ ................................ ...................... 8
PR0}ECT INPLENENTATI0N ................................ ................................ ................................ ................................ ........................... 9
Executing Agency ................................ ................................ ................................ ................................ ................................ ........ 9
Supeivision anu Implementation Scheuule ................................ ................................ ................................ ....................... 9
Piocuiement Aiiangements ................................ ................................ ................................ ................................ .....................
Piocuiement Aiiangements ................................ ................................ ................................ ................................ .................
Bisbuisement Aiiangements ................................ ................................ ................................ ................................ ....................
Nonitoiing anu Evaluation ................................ ................................ ................................ ................................ ........................
Financial Repoiting anu Auuit ................................ ................................ ................................ ................................ ..................
Aiu Co-oiuination ................................ ................................ ................................ ................................ ................................ .....
Cost Estimation ................................ ................................ ................................ ................................ ................................ ..............
S0uAR CANE PR0B0CTI0N C0ST ................................ ................................ ................................ ................................ .....
Infiastiuctuie cost ................................ ................................ ................................ ................................ ................................ ...
Total opeiating cost ................................ ................................ ................................ ................................ ................................ 9
Total Pioject cost ................................ ................................ ................................ ................................ ................................ ...... 9
PR0}ECT S0STAINABILITY ANB RISKS ................................ ................................ ................................ ................................ ......
Recuiient Costs ................................ ................................ ................................ ................................ ................................ .............
Pioject Sustainability ................................ ................................ ................................ ................................ ................................ ...
Ciitical Risks anu Nitigating Neasuies ................................ ................................ ................................ ................................ .
PR0}ECT BENEFITS ................................ ................................ ................................ ................................ ................................ ...........
Financial Analysis ................................ ................................ ................................ ................................ ................................ .........
Economic Analysis ................................ ................................ ................................ ................................ ................................ ........
Social Impact Analysis ................................ ................................ ................................ ................................ ................................ .
Sensitivity Analysis ................................ ................................ ................................ ................................ ................................ .......
C0NCL0SI0NS ................................ ................................ ................................ ................................ ................................ .....................

4 [ P a g e

PR0}ECT BACKuR00NB
3 pursua3.e oI its poli. oI diversiIi3g agri.ultural produ.tio3 e3a3.i3g Ioreig3 reserve
positio3 a3d alleviati3g rural povert te Gover32e3t oI Pakista3 sougt te Ba3k Group`s
assista3.e to Ii3a3.e te S2all-produ.ers oI Sugar-.a3e Produ.tio3 Proje.t (SOSPP). Te
proje.t Ialls witi3 te Publi. Se.tor 3vest2e3t Progra22e tat as pla.ed priorit o3 proje.ts
tat seek to alleviate povert (espe.iall i3 te rural areas) e3.ourage e.o3o2i. growt a3d
support private se.tor develop2e3t. Te proje.t will provide a3 e3abli3g e.o3o2i. e3viro32e3t
Ior private se.tor develop2e3t i2prove esse3tial agri.ultural a3d ealt servi.es to Iar2ers
i3.rease i3vest2e3t i3 rural road i3Irastru.ture a3d give appropriate trai3i3g to Iar2ers a3d Iield
staII.

P0RP0SE 0F TBE L0AN ANB uRANT
Te ADB loa3 oI Rs 304.5 2illio3 a2ou3ti3g to 50 oI total proje.t .ost will be used to
Ii3a3.e 40. oI Ioreig3 .urre3. .ost (US1.42 2illio3) a3d 60. oI lo.al .ost (Rs182.7 2illio3).
Te NBP loa3 oI Rs 181 2illio3 (a2ou3ti3g to 30. oI total proje.t .ost) will all be utilized to
Ii3a3.e 60 oI Ioreig3 .urre3. based expe3diture.

SECT0R u0AL ANB PR0}ECT 0B}ECTIvES
Te se.tor goal is to i3.rease sugar-.a3e produ.tio3 wi. will i3 tur3 i2prove Ioreig3
ex.a3ge positio3 a3d i3.rease Iar2ers` i3.o2e. Te proje.t`s spe.iIi. obje.tive is to alleviate
povert oI s2allolder sugar-.a3e produ.er. Te proje.t will i3.rease s2all-older sugar-.a3e
produ.tio3 produ.tivit troug better a..ess to i3puts irrigatio3 a3d advisor servi.es.

S0uAR-CANE PR0B0CTI0N S0PP0RT
Te proje.t will provide Iar2ers wit loa3s to pur.ase i3puts (su. as seed .a3e a3d Iertilizers)
a3d pa Ior a.tivities (su. as la3d preparatio3 a3d .a3e tra3sport). Te proje.t will also provide
loa3s to e3able produ.ers to pur.ase seed a3d Iertilizers to .rop te Iri3ges oI te irrigated
proje.t sites wit 2aize bea3s .assava a3d vegetables. Tis will e3a3.e ouseold Iood
se.urit a3d eIIi.ie3t labor use duri3g periods i3 te growi3g seaso3 we3 labor require2e3t is
low.


5 [ P a g e

INFRASTR0CT0RE BEvEL0PNENT
Te 2ai3 .o2po3e3t oI te irrigatio3 sste2 tat will be supplied wit water pu2ped b
ele.tri.it or statio3ar a3d 2obile diesel e3gi3es. Te water suppl i3Irastru.ture a3d
distributio3 3etwork Ior te ide3tiIied proje.t areas. Te proje.t will also .o3stru.t a river
diversio3 stru.ture a3d pu2pi3g statio3s Ior liIti3g pla3ts a3d expa3d 3atio3al ele.tri.it
3etwork b .o3stru.ti3g a3 additio3al power li3e to bri3g power to te pu2pi3g statio3s. Te
proje.t will pur.ase Iield 2a.i3er su. as tra.tors trailers .ultivators arrows a3d oter
operatio3al tools Ior eIIe.tive a3d ti2el i2ple2e3tatio3 oI .a3e produ.tio3 a.tivities.
Furter2ore tube wells a3d a3.illar stru.tures will be .o3stru.ted to upgrade water suppl to
te Iar2ers.
BRIEF BESCRIPTI0N 0F PR0}ECT' S 00TP0TS
3 order to a.ieve its obje.tives te proje.t will provide i3puts a3d irrigatio3 i3Irastru.ture Ior
sugar-.a3e produ.tio3 pur.ase vei.les a3d eav Iar2 2a.i3er reabilitate a3d .o3stru.t
i3Iield a3d a..ess roads ease rural u3e2plo2e3t provide i3ter3al a3d exter3al trai3i3g Ior
Iar2ers Iield supervisors a3d 2a3agers .o3stru.t ealt e3a3.i3g Ia.ilities a3d ad2i3istrative
oIIi.e blo.ks. Te proje.t will also provide seeds a3d Iertilizers to e3able outgrower Iar2ers
.ultivate te Iri3ges oI te irrigated proje.t sites wit ri.e 2aize sobea3 .assava a3d oter
Iood .rops.

PR0}ECT C0ST

Te total proje.t .ost is esti2ated at Rs 603 2illio3 out oI wi. Rs 361.8 2illio3 or 60 will
be i3 Ioreig3 .urre3. a3d Rs 241.22illio3 or 40 will be i3 lo.al .urre3.. A su22ar oI te
proje.t .ost esti2ates b .o2po3e3ts a3d b .ategor oI expe3diture are sow3 i3 Iollowi3g
tables respe.tivel. Cost esti2ates are based variousl o3 quotatio3s re.eived Iro2 .o3tra.tors
suppliers gover32e3t age3.ies a3d i3ter3atio3al rates (Ior .o3sulta3. servi.es) 3et oI taxes.

6 [ P a g e

S0NNARY 0F PR0}ECT C0ST ESTINATES BY C0NP0NENTS

Foreig3
Cost
(60)
Lo.al
Cost
(40)
Total
Cost

Sugar-.a3e Produ.tio3
3Irastru.ture Develop
Capa.it Buildi3g




81757.32
254701.8
25231.8
54504.88
169801.2
16821.2
136262.2
424503
42053

Total Base Cost
Psi.al Co3ti3ge3.
Pri.e Co3ti3ge3.

361690.9
18084.55
18084.55

241127
12056.36
12056.36

602818.2
30140.91
30140.91

TOTAL PROJECT COST

759550.9

506367

602.40
7 [ P a g e

SUMMARY UF PRU)ECT CUST BY CATECURY UF EXPENDITURE

Categor oI
Expe3diture

MK 2illio3
Foreig3
Cost

Lo.al
Cost

Total
Cost

. Civil Works
Li3ed Ca3al
Culvert
Pu2p Statio3s
La3d Leveli3g
River Dredgi3g
Ele.tri. Power Li3es
Flood Prote.tio3
Drai3age Works
Water Suppl
Roads
Buildi3gs
La3d Preparatio3
B. rrigatio3 Sste2
Equip2e3t
LiIti3g Pla3t
Steel Pipeli3e
Meteorologi.al gadgets
C. Vei.les
D. Far2 Ma.i3er a3d Equip2e3t
E. OIIi.e Equip2e3t a3d Supplies
F. Far2 3puts
G. StaII Salaries
H. Trai3i3g
. Te.3i.al Assista3.e
J. Operatio3 a3d Mai3te3a3.e















102.96
25.50
29.67
0.70
6.36
8.76

1.16

34.20

4.68
17.55
105.23


39.88
4.56
6.28
16.20
5.00
4.26
20.38
7.20
1.93
9.85
2.86
14.03










67.68
6.03
0.09
8.50
3.28


39.88
4.56
6.28
16.20
5.00
4.26
20.38
7.20
1.93
9.85
2.86
14.03

102.96
25.50
39.67
0.70
6.36
8.76

1.16

101.88
6.03
4.77
26.05
108.51
Total Base Cost
Psi.al Co3ti3ge3.
Pri.e Co3ti3ge3.


336.77
14.11
20.84
218.01
5.17
7.50
554.78
19.28
28.34
TOTAL PROJECT COST

371.72 230.68 602.40


8 [ P a g e

SUURCES UF FINANCE AND EXPENDITURE SCHEDULE
Te proje.t will be Ii3a3.ed b te ADB NBP & GOP. Te ADF loa3 oI Rs301.5 2illio3 (50
oI total proje.t .osts) will .over te .ost oI i3put Ior .a3e produ.tio3 pur.ase 2otor..les a3d
bi..les a3d Ii3a3.e part oI te .osts related to operatio3
a3d 2ai3te3a3.e oI irrigatio3 equip2e3t. t will also Ii3a3.e part oI lo.al .ost relati3g to .ivil
works a3d all .osts related to .apa.it buildi3g (su. as te.3i.al assista3.e trai3i3g radio
.o22u3i.atio3 vei.les a3d oIIi.e equip2e3t). 3 all ADB will .over 40 oI te proje.t
Ioreig3 .osts a3d .o3tribute 25 oI total proje.t .ost towards Ii3a3.i3g so2e lo.al .osts relati3g
to .ivil works. Te NBP loa3 oI Rs 180.9 2illio3 (30 oI total proje.t .osts) will be used to
pro.ure Ioreig3 .ost based equip2e3t related to te irrigatio3 sste2 equip2e3t .o3stru.t
tubewells a3d pro.ure 2aterials asso.iated wit te2. t will also Ii3a3.e part oI te .osts related
to operatio3 a3d 2ai3te3a3.e oI irrigatio3 equip2e3t. Gover32e3t`s .o3tributio3 oI Rs
120.62illio3 (20 oI total proje.t .ost) will be used Ior .ivil works related to te irrigatio3
sste2 .o3stru.tio3 oI ele.tri. power li3es.
Gover32e3t as ratio3alized publi. expe3diture a3d i3.reased budgetar allo.atio3s to te so.ial
se.tor a3d .a3 3ot sustai3abl Ii3a3.e a ig proportio3 oI tis proje.t witout urti3g its oter
progra2s; Ii3all o3e oI te pri3.ipal obje.tives oI te proje.t is to alleviate rural povert wit
target be3eIi.iaries bei3g resour.e-poor rural Iar2ers.

Source Foreign Costs Local Costs Total Costs of Total
Costs
ADB
NBP
Gover32e3t

6.35
0.00
0.00

0.00
3.76
1.11

6.35
3.76
1.11

50
30
20
Total 6.35 4.87 11.22 100.0














[ P a g e

PRU)ECT IMPLEMENTATIUN
EXECUTINC ACENCY
Te Pakista3i Sugar.a3e produ.ers wi. as te overall respo3sibilit Ior pro2oti3g s2all-
older sugar-.a3e produ.tio3 will be te Exe.uti3g Age3. Ior te proje.t. Te Trust as bee3
.reated as a per2a3e3t orga3 oI Gover32e3t to provide sub-se.tor poli.ies o3 sugar-.a3e
produ.tio3 a3d pro2ote te expa3sio3 oI s2all-older sugar-.a3e produ.tio3 arou3d Pakista3i.
3 a..orda3.e wit its statutes te Trust olds o3 bealI oI Gover32e3t te ow3ersip oI
i22ovable assets oI te Ior2er SSA i3.ludi3g la3d a3d buildi3gs.
t is ver 3e.essar Ior it to oversee proje.t i2ple2e3tatio3 it is proposed to assig3 to its
se.retariat a Proje.t Co-ordi3ator a3d a Pro.ure2e3t OIIi.er. Te Proje.t Co-ordi3ator will be
respo3sible Ior e3suri3g tat proje.t i2ple2e3tatio3 is i3 a..orda3.e wit te stated obje.tive oI
te proje.t. He/se will oversee te liaiso3 a2o3g te various stakeolders towards te
su..essIul i2ple2e3tatio3 oI te proje.t. Te Pro.ure2e3t OIIi.er will be respo3sible Ior
.e.ki3g pro.ure2e3t do.u2e3ts prepared to e3sure tat te adere to approved Ba3k a3d
Gover32e3t rules a3d pro.edures. 3 additio3 to
tese two oIIi.ers a Fi3a3.ial Co3troller will be re.ruited Ior te Iirst two ears oI proje.t
i2ple2e3tatio3.His/er pri3.ipal respo3sibilit will be to 2a3age te loa3 Iu3ds a3d 2o3itor te
use oI tese Iu3ds i3 i2ple2e3ti3g te proje.t.
Te oIIi.er will also Iu3.tio3 as adviser to Fi3a3.ial Co3troller wo will serve as
.ou3terpart to take over respo3sibilit Ior 2o3itori3g te Ii3a3.ial operatio3s oI te
proje.t i2ple2e3tatio3 age3. at te e3d oI te .o3tra.t period.

SUPERVISIUN AND IMPLEMENTATIUN SCHEDULE
Te proje.t will be i2ple2e3ted over a Iive-ear period wit 201/2012 bei3g Proje.t Year 1
(PY1). Te Iirst supervisio3 2issio3 duri3g wi. te proje.t will be Ior2all lau3.ed is
pla33ed Ior Ju3e 2011. t is .o3te2plated tat at least o3e supervisio3 2issio3 will be u3dertake3
Ior ea. ear oI proje.t i2ple2e3tatio3. To te exte3t possible supervisio3 2issio3s will be
pla33ed to .oi3.ide wit .riti.al stages oI proje.t i2ple2e3tatio3. 3 view oI te .o2plexit oI
te te.3olog bei3g e2ploed te supervisio3 tea2s will ave te Iull .o3ti3ge3t oI te
required expertise irrigatio3 a3d .ivil e3gi3eer agro3o2ist e.o3o2ist a3d oter spe.ialists
depe3di3g o3 spe.iIi. issues to be addressed. A proje.t i2ple2e3tatio3 pla3 is give3 i3 A33ex 4.
Te Iirst stage oI te proje.t will take o3e ear a3d will i3.lude preparatio3 oI detailed desig3 Ior
te irrigatio3 i3Irastru.ture i3.ludi3g topograpi. surves a3d .o3stru.tio3 oI surIa.e irrigatio3
i3Irastru.ture i3.ludi3g water i3take stru.tures 2ai3 a3d se.o3dar .a3als a3d te i3Iield
works a3d drai3age sste2. Te expe3diture s.edules b .o2po3e3t a3d b sour.e oI Ii3a3.e
are give3 i3 Tables respe.tivel. Te se.o3d stage to .o22e3.e duri3g te se.o3d ear oI te
proje.t will .o3ti3ue wit te .o3stru.tio3 oI te .e3ter pivot irrigatio3 i3Irastru.ture a3d will
i3.lude water i3take stru.tures 2ai3 a3d se.o3dar .a3als a3d i3Iield works i3.ludi3g surIa.e
water stru.tures a3d drai3age sste2. Tis stage is expe.ted to take tree ears duri3g wi. te
de2ar.atio3 oI te irrigatio3 plots a3d teir allo.atio3 to te Iar2ers will .o3ti3Rsll be
u3dertake3.

10 [ P a g e



Rs (`000)
Components FY 1 FY 2 FY 3 FY 4 FY 5 Total
. SUGAR-CANE PRODUCTION
La3d Preparatio3
3put suppl
Ca3e Produ.tio3
3spe.tio3 Vei.les
StaII Salaries
. INFRASTRUCTURE DEVELOPMENT
rrigatio3 a3d Drai3age Sste2s
Roads
Ma.i3er a3d Equip2e3t
Buildi3gs
. CAPACITY BUILDING
Vei.les a3d Equip2e3t
Trai3i3g
Te.3i.al Assista3.e

8.6
171.9
224.2
16.0
8.5

1330.5
23.7
180.3
1.0

122.7
0.4
243.8

142.3
305.6
441.7
17.4
14.9

1854.1
43.3
15.7
44.4

10.7
19.4
137.1

100.6
293.0
728.2
2.8
22.4

2004.0
53.2
15.7
7.0

10.7
28.3
33.2

0.0
0.0
0.0
0.0
32.2

978.7
45.1
15.7
7.2

10.7
28.3
33.2

0.0
0.0
0.0
0.0
40.4

547.3
60.7
15.7
3.5

10.7
9.1
19.7

251.5
770.5
1394.1
36.2
118.4

6714.6
225.9
243.2
63.2

165.5
85.6
466.9
TOTAL 2,323.0 2,04.2 3,18.5 1,1511 707.2 10.284.0
Rs (`Millio3)
Source FY 1 FY 2 FY 3 FY 4 FY 5 Total
ADF
NTF
Gover32e3t

1.44
0.50
0.38

2.29
0.24
0.37

2.84
0.10
0.26

0.85
0.10
0.20

0.49
0.06
0.16

7.91
1.24
1.13

Total 2.32 2.90 3.20 1.15 0.71 10.28

PRUCUREMENT ARRANCEMENTS
Pro.ure2e3t arra3ge2e3ts are su22arized i3 Table guve3 below. All pro.ure2e3t oI goods
works a3d a.quisitio3 oI .o3sulti3g servi.es Ii3a3.ed b te Ba3k will be i3 a..orda3.e wit te
Ba3k`s Rules oI Pro.edure Ior Pro.ure2e3t oI Goods a3d Works or as appropriate Rules oI
Pro.edures Ior te Use oI Co3sulta3ts usi3g te releva3t Ba3k Sta3dard Biddi3g Do.u2e3ts.
Pro.ure2e3t oI Civil Works Ior a .o3tra.t a2ou3ti3g to Rs0.72 2illio3 Ior te .o3stru.tio3 oI
water .o3veor .a3als a3d two .o3tra.ts oI Rs0.05 2illio3 a3d Rs0.24 2illio3 Ior te
.o3stru.tio3 oI ad2i3istrative buildi3gs a3d wareouse respe.tivel will be .arried out b lo.al
Co2petitive Biddi3g pro.edures. Te NCB 2ode oI pro.ure2e3t as bee3 sele.ted be.ause te
size oI te .o3tra.t is s2all a3d tere is lo.al expertise to u3dertake te work. Cost ite2s u3der
Operatio3s a3d Mai3te3a3.e are spares supplies or Iuel Ior irrigatio3 a3d oIIi.e equip2e3t Iar2
2a.i3er a3d vei.les. Te will be pro.ured i3 a..orda3.e wit establised .o22er.ial
pra.ti.es a..eptable to te Ba3k.


11 [ P a g e

PRUCUREMENT ARRANCEMENTS
Proje.t Categories 2illio3
CB LCB OTHER NON-
BANK
FUNDED
SHORTLST TOTAL
Civil Works
Co3stru.tio3 oI li3ed
.a3al .ulvert
tubewells a3d asso.iated
drai3age stru.tures
Co3stru.tio3 oI ele.tri.
power li3es
River dredgi3g
Co3stru.tio3 oI Roads
Co3stru.tio3 oI
Buildi3gs
La3d Preparatio3

0.72|0.72|





0.05|0.05|

0.24|0.24|

0.92

0.07

0.08
0.17

1.64 |0.72|

0.07

0.08
0.17
0.05 |0.05|

0.24 |0.24|
Goods
rrigatio3 a3d Drai3age
equip2e3t
Vei.les 2otor..les
a3d bi..les
Far2 Ma.i3er a3d
Equip2e3t
OIIi.e Equip2e3t a3d
Supplies
Far2 3puts

2.71|2.71|







1.73|1.73|



0.11|0.11|

0.15|0.15|

0.02|0.02|

2.71 |2.71|


0.11 |0.11|

0.15 |0.15|

0.02 |0.02|

1.73 |1.73|
Consulting Services
Studies a3d E3gi3eeri3g
Trai3i3g
Lo.al/Exter3al
Te.3i.al Assista3.e


0.10 |0.10|

0.08 |0.08|
0.44 |0.44|

0.10 |0.10|

0.08 |0.08|
0.44 |0.44|
Miscellaneous
Operatio3 a3d
Mai3te3a3.e Cost
Oter Operati3g Cost
Co3ti3ge3.ies




0.51|0.51|




0.32|0.32|


1.85|1.85|



0.10
0.01

1.85 |1.85|

0.10
0.84 |0.81|
TOTAL 4.95|4.95| 1.61|1.61| 1.85|1.85| 1.35 0.52 |0.52| 10.28 |8.93|
O Figures in brackets are amounts financed by the ADB and NBP

12 [ P a g e

Goods: rrigatio3 equip2e3t a2ou3ti3g to Rs2.71 2illio3 a3d Iar2 i3puts su. as
Iertilizers) a2ou3ti3g to Rs1.73 2illio3 will be pro.ured troug 3ter3atio3al Co2petitive
Biddi3g (CB). Be.ause oI te large 3u2ber oI te goods te .o3tra.t will be pa.kaged i3 lots
a3d a supplier .a3 bid Ior o3e oI 2ore lots. Vei.les wi. will .ost Rs0.11 2illio3 a3d Iar2
2a.i3er tat will .ost Rs0.15 2illio3 will be pro.ured troug NCB pro.edures. OIIi.e a3d
radio .o22u3i.atio3 equip2e3t tat will .ost RS0.02 2illio3 will be pro.ured troug NCB
pro.edures also. Te NCB 2ode oI pro.ure2e3t as bee3 sele.ted due to te s2all size oI te
i3dividRsl .o3tra.ts a3d availabilit oI te goods i3 te borrowi3g .ou3tr. Furter2ore tere is
a3 adeqRste 3u2ber oI 3atio3al suppliers a3d age3ts oI qRsliIied Ioreig3 suppliers tat will
e3sure
.o2petitive pri.es.


Consulting Services: Pro.ure2e3t oI .o3sulti3g servi.es Ior te desig3 a3d supervisio3 oI .ivil
works 2o3itori3g evalRsti3g a3d trai3i3g as well as te Fi3a3.ial Co3troller Pro.ure2e3t
OIIi.er a3d Proje.t Co-ordi3ator will be u3dertake3 i3 a..orda3.e wit te Ba3k's "Rules oI
Pro.edure Ior te Use oI Co3sulta3ts" o3 te basis oI sort-listi3g Iollowi3g te sele.tio3
pro.edure oI te.3i.al qRslit wit pri.e .o3sideratio3. Su. .o3sulti3g servi.es are esti2ated to
.ost i3 aggregate Rs0.62 2illio3 (Rs0.10 2illio3 Ior irrigatio3 desig3 Rs0.08 2illio3 Ior
trai3i3g a3d RsA0.44 2illio3 Ior Te.3i.al Assista3.e).


Executing Agency: Te Trust will be respo3sible Ior te pro.ure2e3t oI goods works
.o3sulti3g a3d trai3i3g servi.es eve3 toug te task oI prepari3g pro.ure2e3t do.u2e3ts will
be .arried out b te Co2pa3. To e3able te Trust .arr out tis respo3sibilit its .apa.it will
be e3a3.ed b te a.quisitio3 oI te servi.es oI a Pro.ure2e3t OIIi.er Ior te proje.t as a
2e2ber oI te Trust`s Se.retariat. He/se will be assisted b te experie3.ed Pro.ure2e3t
Advisor.

General Procurement Notice: Te text oI te Ge3eral Pro.ure2e3t Noti.e (GPN) will be
dis.ussed wit te Gover32e3t oI Pakista3 duri3g te proje.t`s loa3 3egotiatio3s a3d will be
issued Ior publi.atio3 i3 te Uited Natio3s Develop2e3t Busi3ess upo3 approval b te Board
oI Dire.tors oI te Loa3 Proposal.

Review Procedures: Te Iollowi3g do.u2e3ts are subje.t to review a3d approval b te
Ba3k beIore pro2ulgatio3:
Spe.iIi. Pro.ure2e3t Noti.es
Te3der Do.u2e3ts or Requests Ior Proposals Iro2 Co3sulta3ts
Te3der EvalRstio3 Reports or Reports o3 EvalRstio3 oI Co3sulta3ts' Proposals i3.ludi3g
re.o22e3datio3s Ior Co3tra.t Award
DraIt .o3tra.ts iI tese ave bee3 a2e3ded Iro2 te draIts i3.luded i3 te te3der i3vitatio3
do.u2e3ts.



13 [ P a g e

DISBURSEMENT ARRANCEMENTS
Te proje.t loa3 will be gra3ted to te Gover32e3t oI Pakista3 troug te Mi3istr oI Fi3a3.e.
Te Exe.uti3g Age3. will supervise ad2i3istratio3 oI te loa3 pro.eeds e3suri3g tat te loa3
Iu3ds are eIIe.tivel used Ior te purposes .o3te2plated i3 te loa3 agree2e3t. However te
a.tRsl da-da ad2i3istratio3 oI te utilizatio3 oI te Iu3ds Ior te i2ple2e3tatio3 oI te proje.t
a.tivities will be .arried out b te EXECUTNG AGENCY u3der a 2a3age2e3t agree2e3t
wit te EXECUTNG AGENCY.

To e3sure tra3spare3. oI resour.es utilizatio3 a3d qui.k disburse2e3t oI Iu3ds to approved
a.tivities EXECUTNG AGENCY will ope3 a3d 2ai3tai3 a3 i3terest-beari3g Spe.ial A..ou3t
(SA) i3 Ioreig3 .urre3. a3d tree Lo.al Curre3. A..ou3ts (LCA) at ba3ks a..eptable to ADF.
Te SA will be used to deposit part oI loa3 resour.es Ior pro.uri3g i3puts a3d operati3g a3d
2ai3te3a3.e .osts. Fu3ds will be witdraw3 periodi.all Iro2 te SA based o3 approved work
progra22es a3d deposited i3to two LCAs ope3ed respe.tivel Ior (i) operati3g a3d 2ai3te3a3.e
.osts (ii) i3put loa3 resour.es. Te tird LCA will be used to re.eive repa2e3t oI te pri3.ipal
a3d i3terest ear3ed o3 i3put loa3s exte3ded to be3eIi.iaries a3d will Iu3.tio3 as Revolvi3g Fu3d.
Te ADF will reple3is te SA aIter EXECUTNG AGENCY as used at least 50 oI te
previous deposit a3d provided valid justiIi.atio3s Ior its use. Sugar .a3e produ.ers Loa3 Sste2

Te Iu3ds Ior i3puts a3d agri.ultural servi.es will be provided to te produ.ers i3 te 3ew
develop2e3t sites troug te Spe.ial A..ou3t i3 lo.al .urre3.. Te Iu3d i3 te said lo.al
a..ou3t will be ow3ed b te EXECUTNG AGENCY a3d 2a3aged b EXECUTNG
AGENCY as part oI te .o2pa3`s .o3tra.tRsl obligatio3 to
EXECUTNG AGENCY. Ma3age2e3t oI te loa3 sste2 will be 2odeled alo3g te sste2
iterto su..essIull 2a3aged wi. used Iu3ds borrowed Iro2 te .o22er.ial ba3ki3g
sste2. As .o3ditio3 Ior a..essi3g te i3put loa3 parti.ipati3g produ.ers/Iar2ers were required
to agree tat te re.over oI te loa3 te SSA provided would be dedu.ted dire.tl Iro2 .a3e
sales beIore pro.eeds were paid to te Iar2ers. Co3seque3tl te re.over rate was 100. Tat
sste2 will be adopted u3der tis proje.t wit appropriate 2odiIi.atio3s 2ade to suit te
require2e3ts oI te proje.t a3d its proposed Ii3a3.i3g 2odalities. t sould be 3oted owever
tat te proje.t Iu3di3g is Iro2 te Ba3k Group a3d 3ot .o22er.ial ba3ks as beIore. Produ.ers
will .o3ti3ue to pa Ior i3put loa3s at 2arket i3terest rate wit bot te pri3.ipal a3d i3terest
bei3g deposited i3to te tird LCA. To Ia.ilitate loa3 re.over a3d pa2e3t oI sugar .a3e sales
pro.eeds te EXECUTNG AGENCY would 2ai3tai3 te .rop a..ou3ts (produ.tio3 .osts a3d
sales) Ior ea. parti.ipati3g produ.ers/Iar2er. Wit advi.e Iro2 te TA Fi3a3.ial Co3troller te
Proje.t Ma3age2e3t tea2 will establis proper Ii3a3.ial 2a3age2e3t sste2s i3.ludi3g setti3g
up a trai3i3g progra22e Ior te releva3t perso33el.

14 [ P a g e

MUNITURINC AND EVALUATIUN
Periodi. i2ple2e3tatio3 reporti3g oI proje.t a.tivities is a3 esse3tial 2a3age2e3t Iu3.tio3 oI
te proje.t i2ple2e3tatio3 age3. as a 2ea3s oI assessi3g progress towards a.ievi3g proje.t
obje.tives. To tis e3d te PC will desig3 a3d i2ple2e3t a 2a3age2e3t i3Ior2atio3 sste2
wit a .e.klist oI a.tivities a3d a.ieve2e3t be3.2arks to Ia.ilitate eIIe.tive a3d eIIi.ie3t
.o3trol a3d 2o3itori3g oI all proje.t a.tivities. O3 a qRsrterl basis ea. ead oI a 2a3age2e3t
u3it will prepare a
report o3 te proje.t a.tivities .arried out i3 is/er u3it. A Proje.t Mo3itori3g a3d EvalRstio3
Co22ittee (PMEC) .o2prisi3g te eads oI Exe.uti3g age3. will su22arize te reports
produ.i3g te QRsrterl Progress Report (QPR). 3 a..orda3.e wit te ter2s oI te Loa3
Agree2e3t QPRs will be sub2itted to te Fu3d regularl b te EXECUTNG AGENCY 3o
later ta3 4 weeks aIter te e3d oI ea. qRsrter i3 te Ior2at satisIa.tor to te Ba3k Group.
ADB will u3dertake a Mid-Ter2 Review (MTR) at te e3d oI te tird ear oI proje.t
i2ple2e3tatio3. Te purpose oI te MTR will be to assess te psi.al a3d Ii3a3.ial
i2ple2e3tatio3 progress 2ade agai3st targets agreed at appraisal ide3tiI .o3strai3ts
e3.ou3tered a3d teir .auses a3d assess te 3eed Ior adjust2e3ts i3 te proje.t desig3 wit a
view to e3suri3g better i2ple2e3tatio3 progress over te re2ai3i3g proje.t liIe.

FINANCIAL REPURTINC AND AUDIT

Te proje.t will 2ai3tai3 a3 i3ter3atio3all a..eptable a..ou3ti3g a3d .o3trol sste2 Ior
re.ordi3g a3d reporti3g all proje.t Ii3a3.ial tra3sa.tio3s. To tis e3d te i2ple2e3ti3g age3.
will prepare o3 a 2o3tl basis budgets a3d Ii3a3.ial state2e3ts based o3 data re.eived Iro2
te various out-grower u3its as a tool Ior te 2o3itori3g oI proje.t Ii3a3.es. Te TA Fi3a3.ial
Co3troller will desig3 a3d i3stitute a suitable a..ou3ti3g 2a3age2e3t sste2 as well as trai3
Exe.uti3g age3. .ou3terpart Fi3a3.ial Co3troller. Bot will e3sure tat (i) proje.t a..ou3ts are
2ai3tai3ed b .ategor oI expe3diture b .o2po3e3t a3d b sour.e oI Iu3di3g; a3d (ii)
i3trodu.e a sste2 oI i3ter3al .o3trol
wi. will e3sure pro2pt re.ordi3g oI all proje.t tra3sa.tio3s ti2el preparatio3 oI a..ou3ts
a3d reports as well as re.ords oI proje.t assets. Te DCGC will prepare 2o3tl Ii3a3.ial
state2e3ts tat will be .o3solidated i3to qRsrterl Ii3a3.ial state2e3ts to be i3.luded i3 te
QPRs.
Te Ii3a3.ial state2e3ts oI te proje.t will be audited a33Rsll b a3 i3depe3de3t audit Iir2 a3d
sub2itted b te Trust to te Fu3d Ior review a3d .o22e3ts witi3 six 2o3ts aIter te e3d oI
ea. Ii3a3.ial ear. At te sa2e ti2e te Trust will prepare a3d sub2it to te Fu3d a3 A33Rsl
Status Report su22arizi3g i2ple2e3tatio3 progress 2ade a3d a.ieve2e3ts as well as lesso3s
lear3ed to date. Te .ost oI te audit will be bor3e b te Trust Iro2 its ow3 resour.es.

15 [ P a g e

AID CU-URDINATIUN
A do3ors` agri.ultural se.tor .o-ordi3atio3 .o22ittee 2eets o3 a3 ad o. basis to .o-ordi3ate
operatio3s i3 te se.tor. Furter2ore a do3ors` .o-ordi3atio3 Ioru2 2eets qRsrterl to review
poli. develop2e3ts a3d to ex.a3ge experie3.e o3 teir respe.tive operatio3s. Te Ba3k will
be e3.ouraged to establis a3 orga3i. a3d .o3ti3uous relatio3sip wit tese .ollaborative
a.tivities eve3 toug te proje.t is 3ot .o-Ii3a3.ed wit a3 oter do3or.

16 [ P a g e

CUST ESTIMATIUN

SUCAR CANE PRUDUCTIUN CUST
Rs (`000)
I. INVESTMENT COSTS


a. Land Preparation
Bush Clearing 12,430
Harrowing 1,600
Base Cost 14,030
Price Contingency (5%) 702
Land Preparation Costs 14,732
b. nput Supply
Seedcane 12,660
Seeds and fertilizer for food crops 14,980
Base Cost 27,640
Price Contingency (5%) 1382
Physical Contingency (5%) 1382
Input SuppIy Costs 30,404
TotaI Investment Costs
45,136


II. CANE PRODUCTION COSTS


a. Cane Production
Cane Planting 1,200
Fertilizer and Application 34,200.00
Weed Control 7,448
Cane Harvesting 3,040
Transportation of cut cane 28,350.40
Base Cost 74,238
Price Contingency (5%) 3711.92
Physical Contingency (5%) 3711.92
Cane Production Costs 81,662

b. nspection Vehicles
Motorcycles 1,296
Bicycles 260
Operation and Maintenance 389
Base Cost 1,945
Price Contingency (5%) 97.25
Physical Contingency (5%) 97.25
Inspection VehicIe Costs
2,140

TotaI Production Costs
83,802


III. OPERATING COSTS (SaIaries)
17 [ P a g e


rrigation Engineer 300
Agricultural Officers 660
Extension Officers 1,056
ndustrial Electricians 432
rrigation Supervisors 432
Harvesting supervisors 720
Disease Checkers 1,469
Waterguards 962
Base Cost 6031
Price Contingency (15%) 904.65
TotaI Operating Costs 6935.65

Operation and Maintenance Cost 389
nvestment Cost 45,136
Cane Production Cost 83,802
Operating Cost 6,935.65
TotaI Sugar-cane Production Cost 136262.2



INFRASTRUCTURE CUST
Rs (`000)
a. Irrigation and Drainage Systems
Center Pivot rrigation Units (30 ha units) 2,596
Center Pivot rrigation Units (40 ha units) 57,645
Center Pivot rrigation Units (50 ha units) 15,485
Center Pivot rrigation Units (60 ha units) 27,230
Conveyor Canal Lined (1000 l/s) 1,930
Conveyor Canal Lined (500 l/s) 24,000
Conveyor Canal Lined (100 l/s) 13,950
Main Conveyor Pipeline (700mm Steel) 16,512
Main Conveyor Pipeline (500mm Steel) 13,158
Lifting Plants 25,500
Road Culvert and Cross-drainage 4,564
Pump Stations 6,280
Land Leveling ha 16,200
River Dredging 5,000
Flood Protection Dykes 20,384
Drainage Works 7,200
Electric Power Lines 4,260
Tubewells 1,530
Afrider Hand Pump + Piping + Chloride 400
Tensiometers 480
Evaporimeters Class A standard 216
Operation and Maintenance 97,478
Base Cost 361,998
Price Contingency (5%) 18099.915
Physical Contingency 13226
Irrigation and Drainage Systems Costs 393,324
18 [ P a g e


b. Roads
New Access Roads 4,725
Rehab Existing Rural Roads 5,130
Operation and Maintenance 2,748
Base Cost 12,603
Price Contingency (5%) 630.15
Roads Costs 13,233

c. Machinery and Equipment
Tractors 2,916
Waterbouzers 1,800
Ploughs 960
Harrows 990
Tine Cultivators 255
Rippers 500
Trailers 1,230
Knapsacks Sprayers 4.3
Cutting cane Knives 110
Operation and Maintenance 4,382.70
Base Cost 13,148
Price Contingency (5%) 657.4
Physical Contingency 438.3
Machinery and Equipment Costs 14,244

d. BuiIdings
Headquarters Office 2,000
Site Admin 600
Latrines 260
Operation and Maintenance 529
Base Cost 3,389
Price Contingency (5%) 169.45
Physical Contingency 143
BuiIdings Cost 3,701

TotaI Infrastructure DeveIopment Costs

424,503











1 [ P a g e

TUTAL UPERATINC CUST



a. VehicIes and Equipment
Twin Cabs 4x4 2,250
Double Cabin 4x4 2,550
Desk Computers 255
Laser Printers 140
Dot Matrix Printer 30
Radio, two-way non-Fitted (50 km radius) 740
Operation and Maintenance 2982.5
Base Cost 8,948
Price Contingency (5%) 447.375
Physical Contingency 298.3
VehicIes and Equipment Costs 9,693

b. Training
Short-term consultant for farmer training 90
External (Short-term for Agric. Officers) 3,180
External (Short-term for Managers) 1,500
Base Cost 4,770
Price Contingency (5%) 238.5
Training Costs 5,009

c. TechnicaI Assistance
Financial Controller/Credit Expert 11,600
Project Co-ordinator 5,500
Procurement Officer 3,000
Detailed design 5,948.90
Base Cost 26,049
Price Contingency (5%) 1302.445
TechnicaI Assistance Costs 27,351


TotaI Operating cost

42,053



TUTAL PRU)ECT CUST


Total Sugar-cane Production Cost 136,262.20
Total nfrastructure Development Costs 424,503
Total Operating cost 42,053
TotaI Project Cost 602,818.20


20 [ P a g e

PRU)ECT SUSTAINABILITY AND RISKS
RECURRENT CUSTS
Proje.t re.urre3t .osts .o2prise staII salaries ru33i3g .osts a3d operatio3 a3d 2ai3te3a3.e oI
vei.les Iar2 2a.i3er a3d irrigatio3 equip2e3t. Tese .osts are esti2ated at RS1.95 2illio3
duri3g te 5-ear i2ple2e3tatio3 period. Te ADB loa3 will provide Iu3ds Ior te 2ai3te3a3.e
oI vei.les irrigatio3 equip2e3t Iar2 2a.i3er a3d pur.ase oI oIIi.e supplies. Lo.al staII
salaries will be paid Ior b te Trust wile a..ess roads` 2ai3te3a3.e .osts will be bor3e b te
Gover32e3t. AIter te Ii3a3.i3g pase te respo3sibilit Ior 2ai3tai3i3g a..ess roads will la
wit te Gover32e3t. Tis will 3ot pose a burde3 to te Gover32e3t si3.e it will realize
substa3tial reve3ues Iro2 te proje.t. A3 u3dertaki3g tat Gover32e3t will 2ai3tai3 a..ess
roads will be a loa3 .o3ditio3. Respo3sibilit Ior 2ai3tai3i3g i3-Iield roads a3d irrigatio3
sste2s will Iall o3 te DCGC oI wi. te proje.t be3eIi.iaries would ave bee3 sare-
olders. Te i3Irastru.ture 2ai3te3a3.e expe3ses will 3ot be a burde3 to te Co2pa3 be.ause
te .osts will be 2et Iro2 .arges tat are paid b Iar2ers Iro2 sugar-.a3e sales. A3 oter
2ai3te3a3.e .ost beo3d te proje.t .o2pletio3 will ave a 2argi3al eIIe.t o3 Gover32e3t
budget espe.iall as te proje.t will ge3erate reve3ue oI about RS2.20
2illio3 o3 a3 a33ual basis Ior te Gover32e3t.


PRU)ECT SUSTAINABILITY
At te e3d oI proje.t i2ple2e3tatio3 te Trust o3 bealI oI te Gover32e3t oI Malawi will
.o3vert te value oI proje.t assets (esti2ated at RS3.7 2illio3) i3to sares to be eld u3der
AGENCY. Te sares will be oIIered Ior pur.ase to te 3ew e3tra3ts i3to te s2all-older
sugar-.a3e produ.tio3. B tat ti2e .a3e produ.tio3 Iro2 te sites developed u3der te proje.t
will be Iull selI-Ii3a3.i3g a3d igl proIitable. Tere will tereIore be 3o additio3al re.urre3t
expe3diture required Iro2 te Gover32e3t o3 a..ou3t oI tis proje.t.

Te proje.t 2a3age2e3t a3d .apa.it buildi3g support provided i3 te Ior2 oI sort a3d lo3g
ter2 trai3i3g Ior proje.t staII at all levels a3d Iar2ers will e3sure te availabilit oI .apable staII
a3d i3Ior2ed Iar2ers wi. will Iurter e3sure sustai3abilit oI proje.t a.tivities. Proje.t
be3eIi.iaries will be e2powered troug assista3.e tat is provided u3der te proje.t to assist
te2 orga3ize te2selves i3to Iar2er asso.iatio3s. Te asso.iatio3s will stre3gte3 teir
bargai3i3g/3egotiati3g power vis-a-vis oter stakeolders to gai3 better ter2s a3d to ave 2ore
equitable a..ess to resour.es a3d oter be3eIits. Tis will assist i3 assuri3g lo3g-ter2
proIitabilit a3d proje.t sustai3abilit.
Te Revolvi3g Fu3d to be .reated will .o3ti3ue beo3d te Ii3a3.i3g pase oI te proje.t. Tis
will guara3tee te availabilit oI Iu3ds Ior te suppl oI produ.tio3 i3puts a3d servi.es
i3.ludi3g Ii3a3.i3g Ior exte3sio3 servi.es Iertilizers erbi.ides la3d preparatio3 irrigatio3
et.. to be3eIi.iaries Ior te e3tire e.o3o2i. liIe oI te proje.t. Tis will also e3sure Ii3a3.i3g
Ior be3eIi.iaries joi3i3g te out-grower progra2 beo3d te i3vest2e3t pase oI te proje.t.

21 [ P a g e

CRITICAL RISKS AND MITICATINC MEASURES
3 view oI te observed variabilit i3 agri.ultural perIor2a3.e over te ears as a result oI
i3adequate a3d poor distributio3 oI a33ual rai3Iall drougt is a risk to te proje.t. However te
use oI surIa.e a3d eIIi.ie3t .e3ter pivot irrigatio3 te.3olog will 2i3i2ize tis risk.

Low re.over b AGENCY oI i3put loa3 will be a risk to te sustai3abilit oI te progra2. To
2i3i2ize tis risk te proje.t will e3sure tat AGENCY.. Te establised sste2 oI loa3
re.over wereb it dedu.ts i3put a3d operatio3al .osts beIore givi3g te Iar2er is/er 3et
proIit ad resulted i3 te AGENCY re.overi3g 100 oI loa3 it gave to Iar2ers. Also te
Ii3a3.ial a3alsis sows tat te 3et proIit oI te Iar2ers will e3able te2 to repa teir debts.
Te TA Fi3a3.ial Co3troller will set te guideli3es to 2o3itor a3d evaluate te i3put loa3
a.tivities regularl.

Observa3.e oI te 2arketi3g a3d pri.i3g arra3ge2e3t (Ior .ut .a3e produ.ed b s2allolder
produ.er Iar2ers) sig3ed betwee3 AGENCY a3d sugar 2ills will be i2porta3t as it will
guara3tee a read a3d 3earb 2arketi3g outlet Ior .a3e produ.ed. t elp 2itigate te risk tat
Iar2ers will 3ot ave a sales outlet. Te .rusi3g .apa.it oI
Sugar 2ills as re.e3tl bee3 i3.reased Iro2 150 to 175T oI .a3e per da to a..o22odate
i3.reased .a3e produ.tio3 Iro2 surrou3ded area. Pla3s are u3der wa to Iurter i3.rease te
.apa.it to 210T oI .a3e per da e3oug to .ater Ior .a3e Iro2 tis proje.t a3d oter pote3tial
growers.

3se.urit oI la3d te3ure is a pote3tial risk to te proje.t. So2e oI te prospe.tive parti.ipa3ts i3
te proje.t will ave i3dividual leaseold rigts Ior te la3d te wis to bri3g i3to te s.e2e.
Oters will .o2e i3 wit la3d assig3ed to te2 b te Traditio3al Autorit u3der te .usto2ar
la3d te3ure sste2. As a .o3ditio3 pre.ede3t to parti.ipatio3 i3 te s.e2e prospe.tive
parti.ipa3ts will be required to .ede teir rigts to spe.iIi. plots oI la3d to te Trust. Te Trust
will 2ake arra3ge2e3ts wit te Gover32e3t to obtai3 99-ear lease o3 te la3d as a blo.k.

















22 [ P a g e

PRU)ECT BENEFITS

FINANCIAL ANALYSIS
A Iar2 2odel was prepared Ior s2all-older sugar-.a3e outgrowers wo are te proje.t's
be3eIi.iaries. Tis was .o2pared wit a3oter Iar2 2odel Ior sugar-.a3e produ.tio3 u3der
rai3Ied .o3ditio3s. Te resulti3g Ii3a3.ial a3alsis sows tat a33ual gross reve3ue Iro2 sugar-
.a3e produ.tio3 is expe.ted to rise Iro2 its prese3t level oI RS2.24 2illio3 u3der rai3Ied
.o3ditio3s to RS5.20 2illio3 u3der irrigated .o3ditio3s at Iull proje.t develop2e3t i3 te sixt
ear. Te average 3et i3.o2e per sugar-.a3e Iar2er is esti2ated to i3.rease Iro2 te prese3t
RS628 to RS2900 per a33u2 at Iull develop2e3t. Te proje.t`s Ii3a3.ial i3ter3al rate oI retur3
was esti2ated as 14 i3di.ati3g tat te proje.t is a3 attra.tive i3vest2e3t.


ECUNUMIC ANALYSIS
A3 e.o3o2i. a3alsis was u3dertake3 i3 order to assess te e.o3o2i. viabilit oI te proje.t b
.al.ulati3g te E.o3o2i. 3ter3al Rate oI Retur3 (ERR). Te proje.t be3eIits ave bee3
proje.ted Ior a period oI 20 ears to allow Ior opti2u2 use oI irrigatio3 i3Irastru.ture. Costs
i3.lude i3vest2e3t operati3g repla.e2e3t i3.re2e3tal variable .rop produ.tio3 a3d sugar
pro.essi3g .osts. Te resulti3g esti2ated ERR is 42. Tis rate reIle.ts te expe.ted ig
retur3s Iro2 te adva3.ed irrigatio3 te.3olog (.e3tral pivot sste2) tat is to be e2ploed i3
.o2bi3atio3 wit a igl stru.tured .rop
usba3dr a3d 2a3age2e3t sste2s i3.ludi3g te i3te3sive a3d .e3trall .o3trolled appli.atio3
oI ields i2provi3g Iar2 i3puts.

Te Iollowi3g assu2ptio3s ave bee3 adopted i3 .arri3g out te proje.t`s e.o3o2i. a3alsis:

i) Be3eIits: i3.re2e3tal irrigated produ.tio3 oI sugar .a3e a3d te 3et be3eIits arisi3g Iro2
pro.essi3g oI sugar a3d eta3ol;
ii) Costs: i3.re2e3tal i3vest2e3t a3d operati3g .ost Ior sugar-.a3e produ.tio3 (.ost oI sugar a3d
eta3ol pro.essi3g at Ia.tor level is take3 at 70 oI te produ.tio3 value). All .osts are take3 at
2arket pri.es (witout taxes a3d subsidies). Foreig3 ex.a3ge .ost is take3 at te 2arket rate.
Te export parit pri.e oI a 2etri. to33e oI sugar i3 Malawi i.e. RS290 as bee3 used i3
.o2puti3g te proje.t`s e.o3o2i. be3eIit.

Be3eIits derived Iro2 .apa.it buildi3g trai3i3g i3stitutio3al support roads potable water a3d
i2proved sa3itatio3 wi. toug substa3tial but 3ot easil qua3tiIiable ave 3ot bee3 i3.luded
i3 te a3alsis.


23 [ P a g e

SUCIAL IMPACT ANALYSIS
Te proje.t will .o3tribute to povert redu.tio3 b providi3g opportu3ities Ior i3.reased
e2plo2e3t espe.iall Ior te rural poor wile i3.reasi3g i3.o2es Ior s2all-older sugar-.a3e
Iar2ers. Higer i3.o2es will i3.rease te abilit oI rural Iar2 Ia2ilies to pur.ase Iood tereb
.o3tributi3g to e3a3.ed ouseold Iood se.urit. Furter2ore te proje.t will allo.ate 0.2
a.res oI la3d a3d providi3g i3puts su. as seeds a3d Iertilizers to support Iood produ.tio3 b
be3eIi.iaries a3d e3a3.e ouseold Iood se.urit. Co2pared to 3et a33ual i3.o2e oI RS628
u3der rai3Ied (witout proje.t) .o3ditio3s it is a3ti.ipated tat at Iull develop2e3t 3et a33ual
Iar2er i3.o2es oI RS2900 will be realized. Te e.o3o2 at large will be3eIit Iro2 te proje.t`s
a.tivities wi. will provide lo3g ter2 e2plo2e3t i3.o2e a3d Iood se.urit Ior te targeted
s2all-older sugar-.a3e Iar2ers tus assisti3g i3 redu.i3g povert i3 te proje.t area.

B supporti3g te produ.tio3 oI sugar-.a3e a3d traditio3al Iood .rops te proje.t tus pro2otes
te eIIi.ie3t utilizatio3 oI produ.tive resour.es a3d i3.rease la3d use eIIi.ie3.. t will e3a3.e
Iood se.urit a3d i3.o2es Ior parti.ipati3g Iar2ers tereb i2provi3g teir sta3dard oI livi3g
a3d Iosteri3g private se.tor led e.o3o2i. growt.

Te .o3stru.tio3 oI 3ew a3d reabilitatio3 oI Iar2 a..ess roads will i2prove tra3sport oI goods
a3d perso3s a3d Ia.ilitate .o22u3i.atio3 i3 te proje.t area a3d wit oter areas. 2proved
suppl oI potable water a3d sa3itatio3 Ia.ilities will i2prove te ealt status oI s2all-older
Iar2ers a3d teir Ia2ilies tus i2provi3g teir produ.tivit. Tese i2prove2e3ts will be oI
parti.ular i2porta3.e to wo2e3 Iar2ers as te will redu.e te ti2e spe3t .arri3g out su.
a.tivities as taki3g .are oI te si.k a3d Iet.i3g water wi. are 3ot dire.tl produ.tive tereb
Ireei3g te2 to spe3d 2ore ti2e i3 dire.tl produ.tive a.tivities. 3 additio3 parti.ipati3g
wo2e3 Iar2ers will be treated
equall wit 2e3 i3 respe.t oI te allo.atio3 oI la3d a3d produ.tio3 i3puts tus alleviati3g te
proble2 oI i3adequate a..ess to Iu3ds a3d Iar2 i3puts tat oIte3 .o3strai3 produ.tio3 b wo2e3
Iar2ers.

SENSITIVITY ANALYSIS
Se3sitivit a3alses were also u3dertake3 Ior various possible s.e3arios tat .ould ave a3 eIIe.t
o3 te ERR. Labour (ired a3d Ia2il) are .osted at 2arket rate a3d all i3puts are .osted at
2arket pri.es (2i3us taxes a3d subsidies) to reIle.t true value. A3 assu2ptio3 was 2ade oI a
possible 20 i3.rease i3 .rop produ.tio3 .osts; tis redu.ed te ERR to 38. We3 as
assu2ptio3 was 2ade oI a possible 20 i3.rease i3 bot .rop produ.tio3 a3d sugar pro.essi3g
.osts te ERR dropped to 30. A3 assu2ed 20 de.li3e i3 .a3e ield (a3d tereIore su.rose
ield) per e.tare resulted i3 a3 ERR oI 10. Give3 te use oI irrigatio3 a3d proper disease a3d
pest .o3trols i3 te proje.t te
.a3.es oI a serious drop i3 .a3e ield are 2i3i2ized. We3 a3 assu2ptio3 was 2ade oI a
possible redu.tio3 i3 expe.ted be3eIits due to a 20 drop i3 te pri.e oI sugar te ERR
dropped to 11. Te a3alsis i3di.ated tat te ERR is 2ore se3sitive to .a3ges i3 .a3e
produ.tio3 a3d sugar pri.e ta3 to risi3g .a3e produ.tio3 or sugar pro.essi3g .osts. However i3
all .ases te rates oI retur3 re2ai3ed at a..eptable levels.
24 [ P a g e

CUNCLUSIUNS
Te S2all-older out-grower Sugar-.a3e Produ.tio3 Proje.t as a ig priorit i3 te
develop2e3t obje.tives oI te Gover32e3t oI Malawi. Te proje.t seeks to i2prove te
.ou3tr`s Ioreig3 ex.a3ge positio3 troug i3.reased sugar export a3d petrol i2port
substitutio3 a3d elp alleviate rural povert b i3.reasi3g s2all-older Iar2ers` i3.o2es. Te
proje.t will also .o3tribute to ouseold Iood se.urit b e3abli3g Iar2ers to grow Iood .rops o3
te Iri3ges oI teir irrigated sugar-.a3e Iar2s a3d as a result oI i3.reased i3.o2es to pur.ase
adequate supplies oI Iood. Furter2ore te proje.t will be a3 i2porta3t sour.e oI reve3ue Ior
te Gover32e3t. 3 all about RS2.2 2illio3 i3 tax reve3ue is expe.ted to be .olle.ted as i3.o2e
tax paid b te parti.ipati3g Iar2ers a3d .orporate a3d surtaxes to be paid o3 a..ou3t oI te
sugar-.a3e a3d sugar produ.ed b tis proje.t a33uall. At te e3d oI proje.t i2ple2e3tatio3
te Trust o3 bealI oI te Gover32e3t oI Pakista3 will .o3vert te value oI proje.t assets
(esti2ated at RS3.7 2illio3) i3to sares to be eld u3der AGENCY. Te sares will be oIIered
Ior pur.ase to te 3ew e3tra3ts i3to s2all-older .a3e produ.tio3. Te proje.t will .o3tribute to
te provisio3 oI a3 e3abli3g e.o3o2i. e3viro32e3t Ior private se.tor develop2e3t i3.reasi3g
i3vest2e3t i3 rural road i3Irastru.ture a3d givi3g appropriate trai3i3g.
Wit its Io.us o3 s2all-older Iar2ers i3.ludi3g wo2e3 te proje.t is supporti3g groups tat
ave iterto bee3 ge3erall 2argi3alised 3otwitsta3di3g teir u3tapped growt pote3tial. A
ke Ieature oI te desig3 oI te proje.t is its e2pasis o3 stre3gte3i3g existi3g Iar2er groups
as well as 3ew Iar2er group Ior2atio3 2obilizatio3 a3d e2power2e3t all i3 a3 eIIort to e3able
te2 to better 2a3age i3dividual a3d .o22u3it-ow3ed resour.es.
Te sustai3able develop2e3t a3d i2prove2e3t 2easures to be take3 i3 te proje.t will assist
.o3serve te e3viro32e3tal a3d prote.t biodiversit. Te proje.t is .o3siste3t wit te
i3stitutio3al Ira2ework a3d i2ple2e3tatio3 strategies proposed u3der te Se.toral 3vest2e3t
Progra22e a3d .o2ple2e3tar to te re.o22e3datio3s oI Ba3k`s Cou3tr Strateg Paper Ior
Pakista3.
Te proje.t's overall Ii3a3.ial a3d e.o3o2i. i3ter3al rates oI retur3 are esti2ated at 14 a3d
42 respe.tivel a3d provide a good i3vest2e3t opportu3it Ior te .ou3tr. Te proje.t is
te.3i.all Ieasible Ii3a3.iall sou3d e.o3o2i.all viable a3d so.iall desirable.