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Implementation Completion Report (ICR) Review - Irrigation and Drainage Sector


  
1. Project Data:   
ES Date Posted:
06/19/2001   
PROJ ID:
P007667
Appraisal
Actual
Project Name:
Irrigation and Drainage Sector
Project Costs(US $M)
 1245  1483
Country:
Mexico
Loan/Credit (US $M)
 400  350
Sector, Major Sect.:
Irrigation & Drainage,
Agriculture
Cofinancing (US $M)
 200  200
L/C Number:
L3419      
   
Board Approval (FY)
  91
Partners involved
IDB 
Closing Date
12/31/1995 06/30/2000
         
Prepared by: Reviewed by: Group Manager: Group:  
Robert C. Varley
John R. Heath Alain A. Barbu OEDST

2. Project Objectives and Components:

a. Objectives
The objectives were: -

  1. Sustain the irrigation sector through rigorously selected and efficiently implemented investments.
  2. Decentralize irrigation funding and management, moving from a centralized grant-based funding mechanism towards a system based on Water User Organizations (WUOs), utilities/bulk water suppliers and cost-recovery.
  3. Fully utilize existing schemes by upgrading and rehabilitating systems affected by waterlogging, salinity and lack of maintenance.
  4. Improve water use efficiency by conjunctive use, volumetric measurement and O&M capacity building for technicians and WUOs.
  5. Strengthen the institutional capacity of the executing agency, the Federal Water Authority (CNA) and WUOs.
  6. Monitor and help prevent environmental and natural resource degradation.
  7. Optimize the use of land and water resources in the Irrigation Districts (IDs) and Units.

b. Components
There were 3 main components ($US planned/actual): -

  • Irrigation and Drainage Construction ($ US 1264/1100 million) - for construction, rehabilitation and modernization, deferred maintenance, O&M equipment and reuse of sewage waters.
  • Support Action Components ($ US 24/58 million) - including sub-components for Environmental Actions and Institutional Development.
  • Other Project Components ($ US 140/88 million) - including sub-components for Studies and Designs, Small River Training Works and Dam Safety.

  • c. Comments on Project Cost, Financing and Dates
    The original design fully financed the Government's irrigation, drainage and flood control program from 1991-1994, a time slice operation. The project was both extended in time and expanded in coverage. In 1995 $50 million of the Bank loan was cancelled as a result of Mexico's fiscal crisis. In addition an innovative 50/50 cost-sharing mechanism was introduced to match the expanded target coverage and extended implementation.


    3. Achievement of Relevant Objectives:

    Rigorous screening of investment proposals, in accordance with agreed criteria and methodology, was achieved. 74 of 82 IDs under the control of CNA were fully transferred and priority shifted from new construction towards rehabilitation during project implementation. Before the project (1982-89), irrigated agricultural production had increased at .4% per annum, since the transfer program has been in operation (1992-98) it has risen by 4.8% per annum. Some part of the increase may be attributed to improvement of irrigation services brought about by irrigation management transfer.
  • By October 2000 96% of a total of 3.4 million hectares in 72 IDs had been transferred to farmer managed O&M, exceeding SAR targets by 240%.) Fees paid by users increased from 20% to 90% of O&M costs, although only 70-80% of funds required for optimal O&M have been collected in recent drought years. The states and users now combine resources for investment under the Program Alianza para el Campo (PAC.) 10 Companies (LRS) have been created as federations of WUOs.
  • Targets for new irrigated land and rehabilitation/modernization were exceeded by 12% and 45% respectively. There was a shortfall of 27% and 52% in achievements for improved land and deferred maintenance.
  • The ICR notes that water use efficiency has improved and better management practices and technology have actually reduced O&M costs by 30-40% under WUO management. External observers from the International Water Management Institute have questioned the effect, if any, of the project on surface water allocation and distribution. Volumetric measurement was started but "leaves much to be desired...there is an important cultural component in it" (Borrower's Comments.)
  • A new and deconcentrated CNA has been established based on 13 regions and skills have been developed to manage participation in improving water use efficiency. WUOs have proven capable of both managing and funding O&M and have also financed most of the main canal O&M and land-leveling carried out by CNA .
  • Environmental issues flagged at appraisal have improved with proper maintenance in the IDs. Routine control of water quality, pesticide levels, drainage and soil salinity is performed in many IDs. However expenditure on environmental support actions was only 27% of the Appraisal estimate and little has been done about deforestation and erosion which cause silting of reservoirs and canals.
  • The re-estimated ERR of 31.5% exceeded the SAR target of 14%, and the efficiency of investments is reflected in increased funding of deferred maintenance and rehabilitation by the users themselves ("demands for modernization investments far exceed all optimistic expectations.")

  • 4. Significant Outcomes/Impacts:

    This is arguably the most significant and successful national irrigation reform that the Bank has been associated with, involving substantial policy changes, restructuring of agencies and transfer of management. It has had an important influence on the design of reforms in Turkey and India (Andar Pradesh.)
  • 431 WUOs and 10 LRS have fully taken over O&M functions and funding from the government, introducing modern technologies, including telecommunications, use of satellite GIS devices, modern maintenance machinery and chemical and biological methods for controlling weed growth in canals and drains. A counterpart national institution of WUOs (ANUR) has also been established.
  • Irrigation operations have been relieved of their dependence on timely operational budgets from government - there has been a decline in the Federal subsidy from 90% to 10% of O&M costs, but this excludes salaries, the main O&M cost category.
  • A new water law was passed, which allowed the sale of water use rights and addressed other changes needed for transition to a more commercial agriculture.

  • 5. Significant Shortcomings (include non-compliance with safeguard features):

  • The project was a top-down initiative and little authority has been transferred to watershed agencies and the states. Main canal management, water resources development and infrastructure construction functions remain under control of CNA. A more decisive decentralization of CNA, relinquishing infrastructure development functions and empowering users further through the establishment of river basin councils, will be necessary to establish truly integrated water management.
  • Groundwater is still being overexploited, primarily due to subsidized energy costs.
  • Little evidence is presented to substantiate claims that water use efficiency has increased through "better structures", "improved water management techniques" and "innovative technologies." Water productivity has increased but the liberalization of agriculture has as strong a claim as management transfer in explaining the increase.
  • Conjunctive use of surface and groundwater is still not well developed and practiced. Volumetric measurement was started but "leaves much to be desired... there is an important cultural component in it" (Borrower Comments.)
  • 6. Ratings:ICROED ReviewReason for Disagreement/Comments
    Outcome:
    Highly SatisfactoryHighly Satisfactory
    Institutional Dev.:
    SubstantialSubstantial
    Sustainability:
    Highly LikelyLikelyAlthough the 50/50 financing method for capital investments is very hopeful, the untidy but highly important issue of fiscal decentralization and river-basin/watershed management could have adverse fiscal ramifications. Also the commercialization of irrigated agriculture has a way to go.
    Bank Performance:
    Highly SatisfactoryHighly Satisfactory
    Borrower Perf.:
    SatisfactoryHighly SatisfactoryThe reform was initially championed within Mexico and the Bank became more strongly engaged in the reform after project approval. For consistency upgrading the Borrower is more appropriate than downgrading the Bank.
    Quality of ICR:
    Satisfactory

    7. Lessons of Broad Applicablity:

    External factors such as a) the transition from traditional cropping patterns to higher value crops required in the context of NAFTA; b) the timeliness of the Bank's macroeconomic dialogue on a distressed economy and c) the political imperatives of decentralization and economic liberalization, were powerful strategic factors facilitating rapid management transfer.
    1. A time-slice approach to irrigation program lending allows the Bank to conduct a broad dialogue and agreement on irrigation policy issues, including investment selection criteria, environmental safeguards, procurement, auditing, rules and M&E procedures.
    2. Just passing a law is of limited use if the legal system is not strong. Making new regulations and legislation effective requires continuous adaptation and learning by doing.
    3. In some countries, such as Mexico, a strong national agency can effectively use a top-down strategy to achieve rapid irrigation management transfer.
    4. Water fees require a two-step tariff to ensure that fixed costs are covered.

    8. Audit Recommended?  Yes

              Why?  This is a flagship project and there are many lessons that need to be consolidated and disseminated - a more thorough performance review and impact study are systematic ways of incorporating the experience in the OED's knowledge base.

    9. Comments on Quality of ICR:

    Satisfactory, although there are some inconsistencies - the ratings for achievement of 8 objectives (page 26) contain 6 "Substantial", 1 "Modest" and 1 "High " rating, while outcome is given the top grade of "Highly Satisfactory." The rating of "Modest" for achievement of environmental objectives is not adequately explained in the text.

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