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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICLAL USE ONLY IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Credit 1952-IN) May 5, 1997 Agriculture and Water Operations Division Country Department II South Asia Region Report No This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS Currency Unit = Indian Rupees (Rs.) Rs = US$1 00 (Appraisal: June 1987) Rs US$1.00 (Intervening years: ) Rs.35.0 = US$1.00 (Completion Year: 1996) WEIGHTS AND MEASURES 1 hectare (ha) = ( 0,000 mi ) = 2.47 acres 1 kilogram (kg) pounds 1 kilometer (km) = miles I meter (m) feet I square kilometer (km 2 ) square miles FISCAL YEAR OF THE BORROWER April I to March 31 Vice President Director Division Chief/Manager Staff Member M Nishimizu R Drysdale S Barghouti Harideep Singh, Financial Analyst

3 FOR OFFICIAL USE ONLY ABBREVIATIONS AND ACRONYMS AICCIP APIA CSTL DAC DCA ERR GOI HYV ICAR ICR MOA NABARD NSC NSP I NSP II NSP m OP OPV PB PC PMC PMU SAR SAU SFCI SSC SSCA TDC All India Coordinated Crop Improvement Project Action Plan Implementation Agreement Central Seed Testing Laboratory Department of Agriculture and Cooperatives Development Credit Agreement Economic Rate of Return Govemment of India High Yielding Variety Indian Council for Agricultural Research Implementation Completion Report Ministry of Agriculture National Bank for Agnrculture and Rural Development National Seeds Corporation First National Seeds Project Second National Seeds Project Third National Seeds Project Operational Consultants Open Pollinated Varieties Participating Bank Principal Consultants Project Monitoring Committee Project Management Unit Staff Appraisal Report State Agricultural University State Farms Corporation of India State Seed Corporation State Seed Certification Agency Terai Development Corporation This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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5 IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr IN) Table of Contents PREFACE... EVALUATION SUMMARY... i ii PART I: PROJECT IMPLEMENTATION ASSESSMENT... 1 A. PROJECT OBJECTIVES... I Statement of Project Objectives... I Evaluation of Project objectives... 2 B. ACHIEVEMENT OF PROJECT OBJECTIVES... 2 Overall Achievement... 2 Physical Objectives... 3 Investment Credit Component... 3 Productive Support Component... 6 Program Component... 8 Project Impact... 9 C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT D PROJECT SUSTAINABILITY E. BANK PERFORMANCE F. BORROWER PERFORMANCE G. ASSESSMENT OF OUTCOME H. FUTURE OPERATIONS I. KEY LESSONS LEARNED.1

6 PART II: STATISTICAL TABLES Table 1: Summary of Assessments Table 2: Related Bank Loans/Credits..., 20 Table 3: Project Timetable Table 4: Credit Disbursements: Cumulative Estimated and Actual Table 5: Key Indicators for Project Implementation Table 6: Key Indicators for Project Preparation Table 7: Studies Included in Project Table 8A: Project Costs.25 Table 8B: Project Financing..26 Table 9: Economic Costs and Benefits. 27 Table 10: Status of Legal Covenants.28 Table 11: Compliance with Operational Manual Statements.30 Table 12: Bank Resources: Staff Inputs 30 Table 13: Bank Resources: Missions.31 APPENDICES A. Aide Memoire.32 B. Borrower's Completion Report.39

7 IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr IN) PREFACE This is the Implementation Completion Report (ICR) for the Third National Seeds Project (NSP III) in India, for which Credit 1952-IN in the amount of SDR million (US$150.0 million equivalent) was approved on August 25, 1988 and made effective on September 28, The Credit was closed on June 30, 1996, after a one-year extension of the original closing date. Final disbursement from the Credit, which was fully disbursed, took place on December 13, A sum of SDR2.0 million (US$2.8 million equivalent) was canceled in May The ICR was prepared by an FAO/CP mission' which visited India in October It was revised by Harideep Singh (Agriculture and Water Operations Unit, Resident Mission, India), and reviewed by Hermnan van Wersch (Acting Chief Agriculture and Water Operations, Division II) and K. Uchimura (Project Adviser). The Borrower contributed to the preparation of the ICR through its views reflected in the mnission's Aide-Memoire and the draft ICR, and through the Borrower's Completion Report prepared by the Ministry of Agriculture, Government of India (MOA). Comments on the draft ICR were also received from National Bank for Agriculture and Rural Development (NABARD) and Indian Council of Agricultural Research (ICAR). The ICR is based on a review of the Staff Appraisal Report, legal documents, supervision reports and project files, as well as field investigations and discussions with Bank staff, Government of India (GOI), NABARD, ICAR, and participating organizations. C.J. Bevan, Mission Leader, M. Lemonius, Seed Industry Specialist, and A. Lieberg, Economist.

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9 ii IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr IN) Evaluation Summary Introduction 1. The World Bank has been associated with the seed industry in India since 1969 when it approved the Terai Seeds Project which established the Terai Development Corporation (TDC). The TDC served as a model for the two follow-on Bank-supported projects that established State Seed Corporations (SSCs) in nine states to take over responsibility for production and distribution of seed from the State Departments of Agriculture and the National Seeds Corporation (NSC). Project Objectives and Components 2. The Third National Seeds Project (NSP III) was designed to support GOI's effort to ensure timely and adequate availability of quality seeds of suitable varieties at economical prices. The objectives of NSP III were to: (a) reorient the operations of national and state level public sector seed corporations along commercial lines; (b) stimulate greater private sector investment (including in research and development); (c) improve the management of public sector variety development programs, and increase the quantity and improve the quality of breeder seeds produced; and (d) make seed industry regulation and control more effective. 3. These were to be achieved by: (a) reforming the SSCs based on a comprehensive review of their strategy and operations by management consultants; (b) providing a line of credit for refinancing by the National Bank for Agriculture and Rural Development (NABARD) of term loans provided by Participating Banks (PBs) to private seed companies and SSCs, (c) supporting investment to telescope variety development effort and enhance breeder seed production - implemented by the Indian Council for Agricultural Research (ICAR); and (d) providing equipment to seed regulation and quality control agencies. 4. Special Legal Covenants. Special legal covenants or agreements that were expected to promote the achievement of project objectives included the following: (a) reflecting the key principles of autonomy to SSCs in pricing and operational aspects, rightsizing staff levels, and reducing dependence on government funding in the reform Action Plan Implementation Agreement (APIA) that each SSC was committed to implementing; (b) linking releases of over 75 percent of the Credit in three installments to reform progress; (c) detailing the prerequisites of a comprehensive appraisal of the investment proposal by the PBs and a minimal return on equity of twelve percent for sub-loans to be refinanced by NABARD; and (d) requiring the 10 participating states to commit themselves to duly carry out the APIA.

10 Evaluation of Project Objectives. The project's objectives were generally appropriate, given the benefits that derive from the use of better seed, the scope for increasing the uptake of quality seed, the less than adequate performance of many SSCs, and a rather limited private sector participation in the seed industry with the prospects of only a modest expansion in the short term. 6. The project design was generally appropriate and adequately reflected the objectives. However, it was ambitious in assuming ICAR participation with the modest funds provided under the project, and in assuming that the Ministry of Agriculture (MOA) would succeed in reforming SSCs without any financial contribution from GOI. Both these inadequacies were addressed in the initial years of project implementation. The ICAR share was increased by Rs. 192 million, financed through project savings, and GOI passed on about US$55 million of the program component to the MOA to finance the SSC reform program. 7. A key project objective - that of reforming SSCs organizationally and financially - required considerable adjustment on the part of state governments and also called for high quality management staff which many SSCs found difficult to command given the recruitment and compensation scale restrictions. The Staff Appraisal Report (SAR) highlighted these as major risks. A longer-than-normal implementation period was therefore regarded as acceptable if it helped promote institutional changes to ensure the long-term viability of the reforming institutions. Implementation Experience and Results 8. Implementation of the project was delayed by almost 18 months due to start-up problems. At Credit closure, the project had partially achieved its objectives. Of the thirteen participating national and state seed corporations, only three have been fully financially restructured and appear to be profitable and financially independent. Four more corporations are expected to make a small profit in 1996 although they still have substantial debts and have not yet generated the required return on equity. The other six corporations, where Action Plans were finalized not long before Credit closing, still have to implement the reforms fully. 9. The project was more successful in facilitating private sector participation in the seed industry. Some 95 percent of project funds for refinancing by NABARD of term loans has been utilized by private companies. The project has also provided participating banks with training in appraisal of investment proposals from seed companies, together with first hand experience of lending to the private seed industry. Seed companies now report that there is no difficulty in raising capital for investments. 10. Investments to increase breeder seed production and generate new varieties have been carried out more or less as intended, although implementation was slow and, in a number of cases, was completed after Credit closure. There has been a substantial increase in the production of breeder and quality seed on the whole, and truthfully labeled seed by the private sector. However, as a result of delays in implementation, the 5-6 year timeframe for developing a new variety, and the normal two year timeframe for multiplication of breeder into certified seeds, any development of new improved varieties achieved to date or increase in the production of certified seeds during the project period cannot be directly attributed to the project. It is expected that the investment in research facilities by both the

11 iv public and private sectors will lead to the development of a number of new and improved seed varieties. In the near future, the increased breeder seed production should result in an increase in the production of certified seed. At full development, the private investment in quality seed production facilities is expected to yield an annual incremental production valued at about US$50 million. 11. Investments in quality control and regulation have been made more or less as envisaged; however, state seed certification agencies generally have limited staffing and operational autonomy, and there still is scope to improve their efficiency. 12. The current estimate of the project's economic rate of return (ERR) is 23 percent, down 9 percent from the appraisal estimate of 32 percent. The ERR is quite robust - even with an assumption of a 30 percent decline in seed production, it stands at 15 percent. 13. Project Sustainability. The ERR of the project is sufficiently robust to suggest sustainable economic performance. Given the number of SSCs expected to become commercially oriented, the success of private sector, apparent sufficiency of breeder seeds, and expected development of new/improved seed varieties, most of the project achievements are likely to be sustained. 14. More than half of the 13 participating SSCs are expected to become commercially independent as a result of the project. However, long-term SSC reform program sustainability, as measured by the full reform of all 13 participating SSCs, is not yet assured, depending on continued GOI and state government commitment to implement reforms. This commitment may not be forthcoming in the absence of GOI financial contribution to capital restructuring in states where APIA implementation is delayed and where state finances are in poor shape. 15. The continued development and expansion of the private sector seems assured, providing current policies are maintained. The pace of private sector expansion could, however, be increased by removal of seeds from the provisions of the Essential Commodities Act, and by either the removal of subsidies paid on open-pollinated varieties (OPV) of seeds to SSCs, or the extension of these subsidies to the private sector as well. 16. Increased production of breeder seeds is expected to be maintained. The sustainability of the initiatives to strengthen and develop new varieties is assured with ICAR having committed funds to maintain the facilities and meet the operating costs. Private investment in research facilities is also expected to yield new and improved seed varieties. Six of the ten assisted certification agencies are now free of government subvention and enjoy viable operations. To ensure their sustainability in the long run, state governments would need to commit themselves to the organizational reform of the agencies and particularly their autonomy to adjust prices of certification to reflect the true cost of the service provided. 17. Actual Costs, Financing and Implementation Timetable. At appraisal, the total cost of the project was estimated at Rs.2,396 million (US$177.5 million equivalent); and the amount of the Credit available was SDR108.6 million (US$150 million equivalent). Actual expenditure at the close ofthe Credit amounted to Rs. 5,212 million (US$181.8 million equivalent at historical exchange rates). The

12 v cost overrun in Rupee terms was due to devaluation of the US dollar against SDR, and of the Rupee against the US dollar. The magnitude of the overrun is largely a function of the Program Component of SDR 79.6 million which was to be disbursed in three installments, upon satisfactory progress in implementing financial and managerial reforms in the SSCs. In May 1993, at GOI's request, SDR 2.0 million was canceled. The reduced Credit of SDR million was fully disbursed. The Credit financed about 83 percent of the total actual expenditure compared to 85 percent at appraisal. It was estimated that the project would be completed by December 31, 1994 and the Credit would close on June 30, Current estimates indicate that the final completion is not likely to be before June 30, 1997, although the Credit was closed on June 30, 1996 with a one-year extension. 18. Key Factors Affecting Achievement of the Major Project Objectives. These can be classified into: * Factors not generally subject to Government control. The Principal Consultants initially appointed were not able to carry out the assignment, as they did not have staff with appropriate financial experience. This delayed project startup. Another negative factor was employee unrest (though short-lived) in National Seeds Corporation as a consequence of an effort to rationalize staffing levels. * Factors generafly subject to Government control. Of special mention is the promulgation of a new seed policy in 1988 that inter alia liberalized the seed import regime, permitted provisional notification and marketing of varieties/hybrids already registered in another country provided the material was introduced for official notification into the ICAR system, and facilitated the post-entry quarantine check process by allowing private importers to establish their own laboratories certified by a Designated Inspection Agency. More recently, ICAR has also extended sponsored breedership to the private sector. All these measures provided positive stimuli to private participation. * Factors generally subject to implementing agency control. These included inadequate staffing to monitor and report on the implementation of the productive support component by ICAR, and inadequate quality of, and consequent delays by PBs and NABARD in appraising, private sector sub-projects. 19. Performance of the Bank and Borrower. The Bank supervised the project competently, although it settled for less than full compliance with the conditions for the release of the third installment of the program component. At that time, a thorough review was undertaken of the progress made by all first and second batch SSCs. This demonstrated that although a small minority of SSCs had not fully implemented their APIAs, overall most of the conditions for the release of the third installment had been satisfactorily met. In the circumstances, it was considered that the whole project should not be prejudiced by the less than adequate performance of a minority of SSCs and the third installment was released. As for the Borrower, a project management unit (PMU) was established within the Department of Agriculture and Cooperation (DAC) after considerable initial delay. Technical progress reporting from the participating [CAR institutions was inadequate.

13 vi 20. Project Outcome Assessment. The project outcome is rated satisfactory in that the project has partly achieved its objectives, and there is good reason for believing that it will substantially achieve most objectives within the next five years. Summary of Findings, Future Operations, and Key Lessons Learned 21. Findings. The institutional, managerial, technical and financial adjustments promoted under the project have helped SSCs to improve their performance and set the stage for sustaine development of a competitive commercially-oriented public sector seed sector. It has also helped in the development of a vigorous research-based private sector that is estimated to currently Y%ipply some 60 percent of all quality seed. The project has contributed to a substantial increase in the quantity of breeder seed produced and there has been an increase in the volume of quality seed produced. Although at this juncture, it is not possible to directly attribute any increase in the production of certified seeds or the development of new improved varieties to the project, in the near future, an increase in certified seed production and development of new improved varieties is expected. The project's re-estimated economic rate of return is a robust 23 percent. Long-term sustainability of project effort to commercialize SSC operations, as measured by full reform of all participating public sector seed corporations, is however not yet assured, and will depend on continued GOI and state government commitment to implement reforms in remaining SSCs. This commitment may not be forthcoming in the absence of Bank funding and given the poor financial situation in many states. 22. Future Operations. The DAC intends to maintain its support for the National Seed Program, and for the continued reform of the public sector seed corporations. In particular, through the involvement of staff of the Seed Division Cell who sit on the Boards of SSCs, it expects to be able to supervise completion of the reforms already initiated. Together with the cooperating ICAR units, Department of Agriculture and Cooperation will also ensure regular supplies of breeder seed. NABARD intends to maintain its program for seed sector development by continuing to extend refinance assistance to PBs to finance on-farm development activities such as minor irrigation and drainage works, and farm mechanization, in areas where there are a large number of contract seed growers. 23. Given the recent achievements of the private sector, and the limited opportunities for further investment in the public sector, there appears little justification for a future free-standing seed project. In some states, especially where implementing SSC reform was delayed, and where there is a clear need for continued public sector provision of quality seed, there might be scope for a seed component within a more comprehensive crop or unified diversification project. 24. Key Lessons Learned for Future Projects. The main lessons learned during project implementation are as follows: (a) Public Sector Reform. The project has demonstrated that it is possible to commercialize the operations of public sector enterprises providing it is well planned and there is government commitmento change. It has also shown that both public and private seed companies can co-exist and profitably produce and sell

14 vii seed of OPVs, at seed prices only 50 percent higher than grain prices. However, the experiences of both SSCs and certification agencies clearly indicate that reform, leading to the commercialization of public sector organizations, is less effective when the chief executive of an organization is deputed from another government department or agency. In contrast such reforms are noticeably more effective and sustainable when the chief executive has a tenured post for a period of not less than three, and preferably five years. In addition, it is essential that the chief executive has overall autonomy in the management of operations, especially in matters related to staffing and choice of activities/operations, and pricing decisions. (b) (c) (d) Importance of Private Sector. The project has demonstrated the importance of the private sector. Farmers have benefited from the regular introduction of new and better varieties by the private sector and competition has prevented exploitation of the market. In particular, the research-based private sector has come to dominate the high value-added hybrid seed market. The government should maintain the current policies for the seed sector and ensure that there are no unnecessary barriers to entry of private firms, no restrictions that inhibit the efficient operation of the private sector, and the private sector should continue to have equal access to improved germplasm produced by the research system. These aspects should be specifically addressed by the New Seed Policy on which preparatory work is underway. Impact of Market Distortions. Subsidies could discourage private participation and could easily miss the target groups. Subsidies are currently paid only to SSCs for the supply of certified seed of new varieties (up to 10 years) of OPV such as rice and wheat. This has clearly kept efficient private companies from producing and selling such seed, and has provided a degree of protection for the more inefficient SSCs. Although intended as a subsidy for farmers, in practice, the experience of the project shows that it is a form of subsidy for SSCs as it helps maintain their business volume. If a subsidy needs to be paid on OPV seed, although there is no evidence that it is in fact needed, it should be paid to both private seed companies and SSCs to create a level playing field. Similarly, the present pricing system for breeder seed will have to be liberalized in order to enable production units to recover their costs in full. This will also encourage the development of efficient specialized private breeder seed producers. Public Sector Involvement in the Supply of Quality OPV Seed. In a less than mature industry, the public sector may have to stand ready to fulfill roles not adequately performed by the private sector. Given the need to introduce new varieties of the main cereals to contain pest and disease pressure and improve yields, and the marginal profit from OPVs, it would appear that the public sector will have to continue to play a major role in developing and popularizing new varieties of OPV crops in the foreseeable future. The public sector will also remain

15 viii the principal supplier of quality seed in remote areas where transport costs absorb any marginal profit from producing such seed.

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17 IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr IN) Statement of Project Objectives PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES 1. The Third National Seeds Project (NSP III) was designed to support GOrs effort to ensure timely and adequate availability of quality seeds of suitable varieties at economical prices. The objectives of NSP III were to: (a) reorienthe operations of national and state level public sector seed corporations along commercial lines; (b) stimulate greater private sector investment (including in research and development); (c) improve the management of public sector variety development programs, and increase the quantity and improve the quality of breeder seeds produced; and (d) make seed industry regulation and control more effective. 2. These were to be achieved by: (a) reforming the SSCs based on a comprehensive review of their strategy and operations by management consultants; (b) providing a line of credit for refinancing by the National Bank for Agriculture and Rural Development (NABARD) of term loans provided by Participating Banks (PBs) to private seed companies and SSCs; (c) supporting investment to telescope variety development effort and enhance breeder seed production - implemented by the Indian Council for Agricultural Research (ICAR); and (d) providing equipment to seed regulation and quality control agencies. 3. Project Cost. The project was to be implemented over seven years from August 1988 to June 1995, and the total project cost was estimated at US$177 million (Rs.2,396 million). The IDA credit of SDR108.6 million (equivalent of US$150 million) was to finance about 83 percent of the project costs. 4. Special Legal Covenants. Specialegal covenants or agreements that were expected to promote the achievement of project objectives included reflecting the key principles of autonomy to SSCs in pricing and operational aspects, rightsizing staff levels, and reducing dependence on government funding in the reform Action Plan Implementation Agreement (APIA) that each SSC was committed to implementing, linking releases of over 75 percent of the Credit in three installments to reform progress, detailing the prerequisites of a comprehensive appraisal of the investment proposal by the PBs and a minimal return on equity of twelve percent for sub-loans to be refinanced by NABARD, and requiring the 10 participating states to commithemselves to duly carry out the APIA.

18 2 Evaluation of Project Objectives 5. Clarity. The basic concept of the project - timely and adequate availability of quality seeds of suitable varieties at economical prices - was clearly important for increasing agricultural production in India. The first and last objective of the project, namely, a clear need to improve the efficiency of public sector corporations and quality control procedures, were relatively straightforward. The linkage between the second and third objectives - promoting private sector participation and managing varietal development programs through ICAR - and proposed investments were less well defined, depended on factors that were beyond the direct control of the project, and assumed that private companies, PBs, the Indian Council of Agricultural Research (ICAR) agencies and State Agricultural Universities (SAUs) were aware of and committed to achieving project objectives. 6. Realism. All four objectives were relevant for the development of the seed industry, and were based on the lessons learned in previous Bank-assisted seed projects in India. However, the appraisal mission was overoptimistic in its assessment of the commitment of state governments to commercially reorient the seed corporations. The project design was generally appropriate and adequately reflected the objectives. However, it was ambitious in assuming ICAR participation with the modest funds provided under the project, and in assuming that the Ministry of Agriculture (MOA) would succeed in reforming SSCs without any financial contribution from GOI. Both these inadequacies were addressed in the initial years of project implementation. The ICAR share was increased by Rs. 192 million, financed through savings, and GOI agreed to pass on about US$55 million of the program component to the MOA to finance the SSC reform program. 7. Complexity. A key project objective - that of reforming SSCs organizationally and financially - was unusually complex, required considerable adjustment on the part of state governments and also called for high quality management staff which many SSCs found difficulto command given the recruitment and compensation scale restrictions. The SAR highlighted these as major risks. A longer-than-normal implementation period was therefore regarded as acceptable if it helped promote institutional changes to ensure the long-term viability of the reforming institutions. 8. Responsiveness to Borrower's circumstances. The project responded well to GOI's strategy to develop a strong seed industry. 9. Risks. The main risk was associated with the failure of participating SSCs to implement reforms satisfactorily, thereby jeopardizing the success of the reform program and releases of the program funds. Overall Achievement B. ACHIEVEMENT OF PROJECT OBJECTIVES 10. Though the Credit was fully disbursed, due to delays in implementation, it is too early to fully assess the achievement of the project's physical and institutional development objectives. Apart from this reservation, the project would appear to have contributed to the overall development of the seed industry and is considered to have partially achieved its major objectives. In particular, it has assisted a number of SSCs to commercialize their operations, helped the

19 development of a vigorous research-based private sector seed industry that is currently estimated to supply some 60 percent (on a value basis) of all certified and truthfully labeled seed, and has contributed to an increase in the annual production of breeder seed. Physical Objectives It is not possible at this point in time to quantify the increase in certified seed and quality seed (truthfully labeled seed) production attributable to the project. The project has contributed to a substantial increase in the amount of breeder seed produced annually, most of this increase taking place in the last three years of the project. Given that it takes 2-3 cropping seasons for breeder seed to be multiplied into certified seed, the effects of this increase will only begin to become manifest in the next year or so. Furthermore, any sustained increase in the production of seed will depend on continued progress being made with financial and managerial reform of the SSCs. It is also too early to attribute the development of any new crop varieties to project activity as it takes five to seven years for public sector research agencies to develop and release a new variety. Most private sector investment of project funds in research facilities commenced within the last eighteen months and has not yet been fully completed. Investment Credit Component 12. This component was intended to promote the expansion and modernization of the seed industry. Enterprises eligible to borrow were NSC, SFCI, SSCs, and private seed companies. At appraisal, it was envisaged that most of the investments would be made by public sector corporations once they had undertaken the essential financial and management reforms detailed in the APIA. However the PBs insisted, in addition, on government guarantees for any loans extended to public corporations. The central and state governments were not prepared to give such guarantees, unless the corporations were profitable (in which case they would have been able to access commercial loan funds according to normal bank procedures and criteria). Furthermore, some of the financial restructuring of the SSCs enabled them to use their own resources for essential investment. As a result, there was virtually no demand from public corporations for investment credit funds. 13. Initially demand was low from the private sector too. The main reasons for this were the relatively high cost of the NABARD refinance facility (it was only 4 percent less than the prime lending rate), and PB's unfamiliarity with the special demands of the seed industry, especially the high working capital requirement associated with investment loans. To familiarize bankers and seed industry entrepreneurs with the requirements of the industry, and the advantages of using the NABARD refinance facility, a number of workshops were organized at NABARD regional offices. In addition, a number of measures, such as including Cooperative Banks and enlarging the definition of sub-borrowers to include partnerships, were taken to widen the scope and appeal of the NABARD facility. The workshops and the promotional measures were generally quite successful and the number of loans sanctioned increased in the later years of the project as shown in the table on the next page.

20 4 Investment Credit - Yearwise Sanction and Disbursement (in Rs. million) Year No.m of TO FA RAA Actual % :schemes Refinance *: : Sanctioned :..... Disbursement t:10: 115.7: ,-92.1 : : : 26 : : :17.2: :161.6 i W : L * : TO8TAL:- tt:5: T:FO = Total Financial utlay VA: Financia li Assistance R;A 000jRe-ince Assisance *up3to4340no 1996 In total, 149 loans (of which four were withdrawn) were sanctioned, of which only seven, equal to some 5 percent of the total, were for public sector corporations as shown in the table below. Investment Credit - Public Sector (in Rs. million) No.Of NNme oflthet 1 Date of Sanctions Disbursements Schemes Corporation 0Sanctio _:: TFO FA RA TFQOFA HAI 1 - AndhraPrades:SDC: U P AtTarPsh&TDC: :A : 3: StateFarms:,C.I. (SFCI) : - - 4,: 0 WestBengalSSC i IKar a kssc : HarH nsdc : Madh Pradesh SSDC : GRANDUTOTAL : TF,O Ttli nancialutlay.a : :: A;$t Finhancal 4Assistance.: 0:: Re-00f0;$0inance iassistance.::;:::x:; 14. The total financial outlay (off-take) of the investment credit was Rs. 1,623 million, with a total refinancing by NABARD equal to Rs.940 million. Of the total refinance commitment, some

21 5 50 percent was disbursed during the last fifteen months of the project. The refinance (SAR) target equivalent of US$30.0 million was almost fully met by the close of the Credit. Most of the sanctioned schemes were for research, production and processing facilities. The principal crops supported were maize, millets and pulses with some 20 percent of schemes for tissue culture facilities. The bulk of investment expenditures financed were for equipment and machinery (39 percent), and for civil works (35 percent). Less than 3 percent of expenditure was on land development. A major problem with the NABARD-refinanced loans was the time taken for approval. Analysis of the loan portfolio reveals that, on average, there was a delay of 9-10 months from the time of loan request to the date of sanction. This was due to the lack of expertise within the PBs to assess loans and their need to refer back to NABARD for assistance in loan scrutiny. This is reported to have caused some additional problems as loan requests did not always conform with NABARD appraisal standards, and there had to be frequent referrals. An analysis of the investments by states is given in the table below. Investment Credit - Statewise Sanction and Disbursement (as of 30/6/1996) (in Rs. million) State Sanctioned Cumul. Up to 30 June 1996 l No. of TFO FA RA TFO FA RA Schemes Andhra Pradesh Gujarat Haryana Kerala Karnataka Maharashtra Madhya Pradesh New Delhi Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal AssamtI I GRAND 149 3, , , , , TOTAL: TFO = Total Financial Outlay FA = Financial Assistance RtA = Refinance Assistance Note: Number of schemes include 54 plantation and horticulture nursery schemes. 19 l 15. While it is too early to assess the effect of these investments on quality seed production, there can be little doubt that total investments by the private sector of over US$50

22 million will lead to the generation and production of significant volumes of new and improved seed, and that much of this investment can be attributed to the project investment initiative. Productive Support Component Variety Development and Breeder and Foundation Seed Production. At appraisal, US$3.9 million (Rs.53.3 million) was assigned for variety development support, and US$1.1 million (Rs million) for breeder and foundation seed production. Subsequently (June 1992) the support for these activities was increased by Rs. 192 million. Some 70 ICAR units and SAUs received funds to invest in improvements of germplasm storage facilities; development of field lot machinery, breeder seed farms and off-season nurseries; provision of farm, seed processing and testing equipment; and to support variety improvements and monitoring of the work. Disbursement of funds for these purposes was slow initially. As investments had not yet been fully completed, the full impact will only materialize later. The project has, however, contributed to the overall recent increase in breeder seed production. ICAR reports indicate that the production of breeder seed between 1990/1991 and 1995/1996 increased from 1,959 tons to 2,625 tons. At the same time, the indent' more than doubled from 1,237 tons to 2,739 tons. Most corporations and private companies using ICAR-produced breeder seed expressed satisfaction with the current overall genetic and analytical quality of the breeder seed which is reported to have improved as a result of the project. Although total breeder seed production corresponds fairly well with the indent requirements, problems have occurred with some crops. In particular, in the case of oilseeds (mainly groundnut) breeder seed production in the last two years has, as anticipated, only been able to partially meet demands. It was noted that not all breeder seed is being multiplied in an efficient manner through foundation seed to certified seed. It was reported that some foundation seed is being planted to produce commercial crops rather than certified seed. 17. A total of some 360 varieties were released or identified during the project period, of which about 50 were hybrids mostly of cotton, pearl millet and rice. Only a small percentage of these varieties can, however, be directly attributed to the project, and a substantial number of released varieties are not being commercialized. Reasons for this include varieties being of no particular merit, the programs to promote new varieties (mini kits, front line demonstrations and others) not being effective; and seed corporations' tendency to be conservative in their uptake of new varieties. Nevertheless, the project has contributed substantially towards improved coordination and linkage between AICCIP programs and breeder seed production units. In particular, the development of a single point for the collation and dispatch of breeder seed indented by SSC (single window system) has improved efficiencies considerably. 18. It was envisaged that during the life of the project commercial responsibility for both breeder and foundation seed production would gradually be transferred from the SAUs to the seed corporations/companies and that the limited investments in university facilities associated with these activities would be considered as transitional measures. At the time of project closure, foundation seed production is, in most cases, carried outside the agricultural universities. However, the universities still produce breeder seed. Only limited quantities of breeder seed are produced by some SSCs under ICAR supervision. More emphasis should have been placed on 1 That is the quantity of breeders seed ordered each year by SSCs.

23 7 expanding facilities used for breeder seed production of groundnut and other oilseeds and on strengthening the contact between breeder, extension services, seed end-users, and corporations to support commercialization of new varieties, in particular, in rainfed areas. 19. A requirement in the SAR that project funds would finance four man-months of consultancies to review the system of variety trials and notification was not pursued. Instead, the project supported a symposium in 1992 on the management of change in AICCIPs, that covered varietal release. This was held early in the project so that recommendations could be implemented during the project period. 20. Seed Industry Regulation and Ouality Control. Under the project, ten SSCAs were strengthened through the establishment or improvement of seed testing laboratories and equipment, grow-out-test farms, vehicles to improve staff mobility, and office equipment. In total Rs rnillion (SAR Rs.55.2 million) was sanctioned for the ten certification agencies. The total area of seed production certified by the agencies increased from 380,000 hectares to 521,000 hectares, and the volume of seed certified increased from 423,500 tons to 578,100 tons over the project period In addition, improvements in operational efficiencies and changes in fees for certification services have enabled most of the agencies to reduce their financial dependence on the state governments. However, while the physical facilities in place are now generally good, concerns remain about the autonomy of the agencies (almost all of which are headed by a director on deputation from the State Department of Agriculture and staffed with technologists who in several cases are also on deputation), difficulties in disciplining staff, inadequate staff training programs, and lack of data publication and exchange that would facilitate improvement in seed sector performance. The resulting variation in the overall quality of seed certification is reflected in the fact that several SCAs conduct grow-out tests for selected seed crops before certification tags are released, that a number of SSCs have felt it necessary to establish or expand their own internal quality control, and that the reputation of seed certification, in particular among some larger private seed companies, is low. 21. The project also included a budget of Rs.6.35 million or US$470,000 equivalent to establish a new Central Seed Testing Laboratory (CSTL) in New Delhi which would replace temporary ICAR facilities. However, a new CSTL was not built in New Delhi. Instead, the existing ICAR laboratory was strengthened with various equipment costing Rs.3.4 million. However, this effort has not developed the CSTL to a level where it can perform the required functions for the industry such as staff training and testing of 25,000 samples annually from SSCAs laboratories. During the project period, a total of only 32,200 samples were tested for this purpose, or 6,000-7,000 samples per year. It is reported that DAC has acquired land in Uttar Pradesh to construct a new CSTL, and that construction should start soon. It is, however, not clear how good the communication will be between the new CSTL and the rest of India. 22. Mobile Seed Cleaners. Twenty-six seed cleaners, with a total value of Rs.6.75 million (SAR Rs.3.1 million), were provided to seven states for use in remote areas. Each cleaner has a capacity of one ton per hour, and is used to process farmers' seed on site. Contrary to original plans that called for the cleaners to be provided to the state extension service, the cleaners, with the exception of Uttar Pradesh, were supplied to the SSCs. This was because State Departments of Agriculture cannot charge for services provided, and it was considered that SSCs are better able

24 to operate and maintain the equipment. It is reported that the program has worked well, and that the DAC has sanctioned the release of funds to purchase an additional three units for use in the remote parts of Andhra Pradesh Study Tours. A total of 56 (SAR 50) senior government officials and representatives of seed corporations and companies visited Australia, Canada, China, France, Japan, Indonesia, Israel, Italy (FAO), Mexico (CIMMYT), the Netherlands, Philippines (IRRI), South Africa, South Korea, Switzerland, United Kingdom, USA, and Vietnam, in nine groups. The main areas of study were: seed policy, plant breeders rights, varietal registration, seed certification, seed marketing and distribution and hybrid seed production. Most of the participants were involved in the seed sector at the time of their visits and considered the visits helpful. In total the cost of the tours, including service charges to FAO for arranging the tours, was US$378,000 (SAR US$460,000). Program Component 24. Institutional Development. Reform of the public sector seed corporations was the principal institutional development objective of the project, which was closely tied to the release of the program component funds. Disbursement of these funds were to be made in three installments according to the following conditions: (a) at the start of the project on appointment of Principal Consultants (PC) who were to assist the PMU develop guidelines for review of the corporations, commencement of consultant reviews by Operational Consultants' of the first batch corporations (NSC and at least three SSCs) and preparation of related Action Plan Implementation Agreements; (b) approximately eighteen months later, on completion of reviews and implementation of APIAs by first batch corporations, in a manner satisfactory to IDA; and commencement of reviews of at least five additional second batch SSCs; and (c) approximately eighteen months later on completion of consultant reviews for all second batch corporations, satisfactory progress in the implementation of all APIAs; and commencement of consultant reviews for third batch corporations. Progress in implementing the APIAs was to be assessed according to agreed evaluation criteria, the key elements being: completion of planned financial restructuring; operational autonomy in corporation management; reduced dependence on public sector funds; and reduction in staffing. 25. All three installments of the program component have been released 2 for a total amount of US$113.3 million. This is a little more than anticipated at appraisal due to a slight devaluation of the US dollar against the SDR. The release of the second and third installments were considerably delayed, and the conditions for the final installment release were substantially fulfilled. The first batch of corporations consisted of the NSC, the SFCI, and the SSCs in Andhra Pradesh, Gujarat, and Uttar Pradesh. The APIAs for the three state corporations have been implemented, and terminal reports have been accepted by the project review committee. Of the second batch corporations, substantial progress has been made with respect to the implementation Each SSC had its operations and financial situation reviewed by a firm of management consultants, generally referred to as Operational Consultants. The outcome of each review being the production of an agreed action plan formally known as an APIA. 2 First installment November 1990, US$41.7 million; second installment March 1993, US$34.7 million and third installment, April 1996, US$36.9 million.

25 9 of the APIAs by SSCs in Haryana, Karnataka, and Maharashtra, and some progress has been made in Madhya Pradesh and West Bengal. As far as third batch corporations are concerned, consultant reviews have only been completed for the SSCs in Orissa and Rajasthan. The SSC in Bihar failed to provide audited accounts in time and was not able to participate, and the initial consultant review in Assam was not accepted. 26. Financial and Policy Objectives. At appraisal, financial projections were prepared for NSC and two representative SSCs. These were based on the assumption that: (a) there would be full implementation of the APIA; and (b) a program of investments using the line of credit would be undertaken by the corporations. The main features of the financial projections were: a financial return on equity of 15 percent for NSC; 18 percent for new SSCs and 24 percent for existing SSCs; a change in output mix to 75 percent OPVs and 25 percent hybrids; and enhanced ability to service indebtedness. Only one SSC availed of the line of credit and investments by the corporations were relatively modest. A number of corporations demonstrated substantial progress in improving financial and operational performance. Whilst no data is available for NSC and SFCI, three SSCs report returns on equity ranging from 2.5 percent to over 100 percent for Most corporations have improved their product mix, although none have yet achieved the anticipated 25 percent of sales from hybrids. It is not possible at this stage to assess whether or not corporations are able to service their debt entirely from their own resources. However, profit for all the corporations has improved over the project period. Furthermore, five of the 12 corporations involved in the program no longer receive any concessional funds from state governments, and the three first batch SSCs expect to pay a dividend to shareholders for the first time this financial year. Although these indicators are impressive, a further period of at least four years operation is needed before it will be possible to assess whether the reforms undertaken by the first batch corporations are fully sustainable, and that the corporations have achieved real commercial and managerial autonomy. It is similarly far too early to assess the success of the reforms of the second batch corporations, which have only participated in the project since 1993/94 Project Impact 27. It is too early to quantify the achievements of the project in terms of increased physical output or production (para 11). Nevertheless, it is likely that the project will have contributed to an overall increase in crop production, as and when the benefits from the uptake of improved quality seed are manifest. To assess the likely benefits that can be attributed to the project, an analysis of anticipated crop production increases has been undertaken. This analysis differs in one important way from that undertaken at appraisal in that it is based on the project-derived performance of the private seed sector. This is because the private sector was the only sub-sector that undertook substantial production-related investments under the investment credit subcomponent. With respect to the project's impact on agricultural production, the major benefits are assumed to result from the incremental crop yields obtained by farmers through the use of projectgenerated quality seed'. As at appraisal, it has been assumed that the incremental quality seed produced would replace seeds currently used in areas already sown with high yielding varieties 1 Includes certified and truthfully labeled seed.

26 10 (HYVs), and that there would be no genetic impact' on yield. It is also assumed that the use of project derived seed would not lead to any changes in cultural practices or use of inputs. All benefits in terms of incremental yield would thus come from the use of higher quality seed. The yield increase for self pollinated crops such as wheat and rice are expected to be about 5 percent, while that for grams and oilseeds, and for hybrids, (maize, jowar and bajra), around 10 percent. At full development, the estimated annual incremental crop production derived from the incremental quality seed produced as a result of the project is indicated below: [;i i 0-;Wheat Rice I Maize :1 Jowar Bajra Grams Grou Soya Mustard -004;f00; 0 I ri L { I fi;xi d u -f ('0000 metictons c X ii dsar : f0icr =01 : :39 20 j The production mix used in the analysis at appraisal and project completion are not directly comparable as the private sector traditionally invests more in higher value crops, including vegetables. However, even excluding significant, but not quantified, benefits from such crops, the estimated incremental economic value of crop production due to the project amounts to US$50 million annually, compared to US$45 million at project appraisal. 29. It is estimated that the incremental volume of project-derived seed should be adequate to plant about 1.9 million hectares (SAR: 2.2 million ha). Given the average size of farm holdings in India of 2 ha, this means about 0.95 million farm families (SAR: 1.1 million) should benefit directly from the project. Allowing for an average of 5 members per farming family in total about 4.75 million persons (SAR 5.5 million) 2 should benefit. Moreover, about 9,500 person-years of seasonal employment would be created for harvesting (SAR: 11,000 persons-years). These estimates are considered to be conservative, as they are based on the assumption that the projectderived seed is sown directly to a commercial crop. If, however, the analysis had included farmer's saved seed sold to neighbors, the impact would be greater with a much larger number of farmers benefiting from the use of improved seeds. 30. In addition to these direct beneficiaries, it is expected that private and public sector initiatives in the seed industry will continue, providing the general operating environment continues to improve. The sub-sector has already gained, and will certainly further benefit from, the general awareness raised by NSP III with respect to the potential of the seed industry and of quality seed. In particular, the banks have come to recognize the potential of the seed industry and how to assist through appropriate lending instruments. The improving institutional and operating industry framework promoted under the project should also allow the benefits from earlier investments under NSP I and NSP II to be more fully realized. Yield increases would not come from new genetic material, but from using seed with better germination, genetic uniformity and vigor. 2 Assuming five members per fanring family.

27 I 31. Economic Rate of Return. The re-estimated economic rate of return is 23 percent. This is based on the projected incremental value of crop production and project costs, assuming (a) constant 1996 Rupee values and (b) an 18-year project life. The ICR estimated project ERR of 23 percent compares with the appraisal estimate of 32 percent. Taking a 16-year analysis period, as at appraisal, the ERR drops by one percentage point, to 22 percent. A sensitivity analysis assuming a 30 percent reduction in seed production annually still yields an acceptable ERR of 15 percent. C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 32. Implementation Record. The institutional, managerial, technical and financial adjustments promoted under the project have helped SSCs to improve their performance and set the stage for sustained development of a competitive commercially-oriented public sector seed sector. It has also helped in the development of a vigorous research-based private sector that is estimated to currently supply some 60 percent of all quality seed. The project has contributed to a substantial increase in the quantity of breeder seed produced and there has been an increase in the volume of quality seed produced (mainly truthfully labeled produced by the private sector). Although at this juncture, it is not possible to specifically attribute any increase in the production of certified seeds or the development of new improved varieties to the project, in the near future, the increased breeder seed should result in an increase in the production of certified seed. It is also expected that the investment in research facilities by both the public and private sectors will lead to the development of a number of new and improved varieties. The project's re-estimated economic rate of return is a robust 23 percent. Long-term sustainability of project effort to commercialize SSC operations, as measured by full reforrn of all participating public sector seed corporations is however not assured, and will depend on continued GOI and state government commitment to implement reforms in remaining SSCs. This commitment may not be forthcoming in the absence of Bank funding. 33. Proiect Costs. The total cost of the project was originally estimated at Rs.2,396 million (US$177.5 million; at an historical exchange rate of Rs = US$1.0) against Credit availability of SDR108.6 million (US$150 million equivalent). Actual costs at project completion amount to Rs.5,212 million (US$181.8 million at historical exchange rates). The cost overrun in Rupee terms is mainly due to the devaluation of the domestic currency (Table 8A, Part II), and delays in disbursements of the second and third installments of the Program Component. 34. Project Financing and Disbursement of Credit. The original IDA Credit of SDR108.6 million was to cover 100 percent of the program component (US$110 million) and 60 percent of the project component (US$40 million, of which US$30 million were earmarked for the investment credit component) or about 84 percent of total project costs. In May 1993, in the context of a broader dialogue between the Bank and GOI covering the entire Indian agriculture portfolio, SDR2 million of the project Credit was canceled. Despite the very slow pace of disbursement during the first two years of the project, the reduced Credit of SDR106.6 million (equivalent of US$151.5 million) was fully disbursed at close of business (December 13, 1996) (Table 4, Part II). GOI contributed around US$8.3 million to the productive support subcomponent. Domestic Banks participating in the investment credit scheme financed around US$7.7 million, and private seed companies, another US$14.2 million (Table 8B, Part II).

28 Key Factors Affecting Achievement of Major Project Objectives. These can be classified into: Factors not generally subject to Government control The Principal Consultants initially appointed were not able to carry out the assignment, as they did not have staff with appropriate financial experience. This delayed project start-up. Another negative factor was employee unrest (though short-lived) in National Seeds Corporation as a consequence of an effort to rationalize staffing levels. Factors generally subject to Government control Of special mention is the promulgation of a new seed policy in 1988 that inter alia liberalized the seed import regime, permitted provisional notification and marketing of varieties/hybrids already registered in another country provided the material was introduced for official notification into the ICAR system, and facilitated the post-entry quarantine check process by allowing private importers to establish their own laboratories certified by a Designated Inspection Agency. More recently, ICAR has extended sponsored breedership too to private sector. All these measures provided positive stimuli to private participation. Factors generally subject to implementing agency control. These included inadequate staffing to monitor and report on the implementation of the productive support component by ICAR, and inadequate quality of, and consequent delays by PBs and NABARD in appraising, private sector sub-projects. D. PROJECT SUSTAINABILITY 36. Given the success of the private sector, the apparent sufficiency in breeder seeds production, and the number of SSCs expected to become commercial as a result of the project, it is considered that most of its major achievements are likely to be sustained. 37. In the first place, the continued development and expansion of the private sector seems assured, providing current policies are maintained. The pace of private sector expansion could, however, be increased by removal of seeds from the provisions of the Essential Commodities Act, and by either the removal of subsidies paid on OPV seeds or the application of these subsidies to all seed producers and not just SSCs. 38. It also seems likely that the system for the production of breeders and foundation seed is generally sustainable. Thus the single window indenting procedure has streamlined breeder seed requisitioning, and the SAUs and ICAR units are now equipped to produce adequate quantities of breeders seed. There is, however, a risk that unless these agencies are given more freedom to establish economic prices for the breeders seed produced, they may have difficulties in maintaining facilities provided by the project, and in raising working capital. 39. As far as the public sector corporations are concerned, the sustainability of the reforms they have undertaken will most probably vary considerably from one organization to another. At the national level, there is no substantive evidence that the project has contributed to sustainable

29 13 reform of the SFCI. There is also some doubt about the long-term financial viability of the NSC, given that it has been unable to reduce staffing as originally planned and it is facing increasing competition from other SSCs and the private sector. Within the states, the corporations in Andhra Pradesh, Gujarat and Uttar Pradesh should continue as viable entities. As far as the other states are concerned, it is difficult to predict which seed corporations will complete the reform process as this will now depend upon the commitment of the individual state governments and the determination of the respective seed corporation chief executives. However, there is good reason to believe, from recent financial results, that SSCs in Maharashtra, Karnataka, West Bengal, Rajasthan and Haryana will become commercially viable. Thus, it seems likely that overall more than half of the participating SSCs will become commercially independent. 40. Similarly, the sustainability of the SSCAs will depend upon the commitment of the state governments to their reform and particularly their autonomy. At present most, if not all, SSCAs chief executives are on deputation from the state Department of Agriculture, and the organizations do not have the freedom to appoint or dismiss staff, or adjust the prices of certification to reflect the true cost of the service provided. The sustainability of the ICAR initiatives to strengthen and develop new varieties is somewhat assured with ICAR committing funds to maintain facilities and meet operating costs. E. BANK PERFORMANCE 41. Identification, preparation and appraisal The Bank played a crucial role in finalizing the design of the project, in particular its scope and scale, which was based on the lessons learned from earlier projects, and recognized the needs of the industry at the time of appraisal. The Bank's performance in project identification, preparation and appraisal was satisfactory. 42. Supervision. Project supervision was carried out regularly and diligently by appropriately qualified staff. Initially the supervision missions had three members (a financial specialist and two agriculturists) and this enabled an in-depth coverage of the project, especially the very geographically dispersed ICAR and other productive support components. Since the autumn of 1992, however, supervision was undertaken by a financial specialist and one agriculturist. In order to cover the priorities of the project, they tended to divide their responsibilities along distinct technical lines with the result that there was insufficient technical appreciation of the reforms implemented. It would have been better if the original supervision mission staffing could have been maintained throughout the project as this would have enabled closer monitoring of the technical progress being made by the SSCs and SSCAs, and of the investments refinanced by NABARD. 43. Major supervision mission contributions include the identification of the possibility of sub-contracting the PC consultancy to a firm of accountants, re-allocation of savings arising from contingencies (following devaluation of the Indian Rupee) to ICAR to increase investment in research activities, and close monitoring of progress of the program component. Towards the end of the project, the Bank took a flexible and pragmatic approach with respect to the conditions for the release of the third installment of the program funding. A thorough review was undertaken of the progress made by all first and second batch SSCs. This demonstrated that although a small minority of SSC had not implemented their APIAs, overall most of the conditions had been met.

30 In the circumstances, it was considered that the whole project should not be prejudiced by the poor performance of a minority of SSCs and the third installment was released. 14 F. BORROWER PERFORMANCE 44. Preparation. Initial project preparation by the borrower was weak and the investment proposals received from the 12 states, NSC and SFCI, were overly optimistic in terms of production and sales targets for certified seed. The early proposals also failed to address the need to: (a) improve the cost effectiveness of public sector crop breeding programs; (b) introduce better varietal release systems; (c) make SSCs operationally and financially viable; and (d) promote and expand private sector involvement in seed production by improving access to finance, especially working capital, and removing market distortions that favored the public sector. Subsequently a revised composite report was prepared in consultation with the NSC and the Bank that was based on more realistic projections. Negotiations took place over quite a long period of time, with the GOI insisting that the proposed NSP III was too small. Eventually it was agreed to increase the size of the project by introducing the US$1 10 million program component. 45. Implementation. Project implementation was initially very slow, largely because the consultancy firm recruited to design and monitor the program of SSC reviews did not have the right expertise. This improved considerably when this firm sub-contracted the assignment to a firm of accountants. With a few exceptions, this aspect of the project subsequently worked quite well, although the individual SSC operational consultants were not able to influence the speed of APIA implementation which was unduly slow in some cases. 46. The establishment of the Project Management Unit (PMU) was considerably delayed, but once adequately staffed and operational, it appears to have carried out its responsibilities conscientiously. It has not been able to fully monitor the project because of the large number of participating units spread over the country. Despite having representation on the Boards of the SSCs, through the seed division of the DAC, the PMU was unable to influence the rate of implementation of the APIAs. 47. The ICAR was consistently behind with its technical reporting of progress of the productive support component for which it was responsible. This is largely attributed to a failure of ICAR to allocate these duties to a single officer or administrative unit. 48. NABARD performance was also somewhat mixed. A number of private companies reported delays of up to 15 months before loans were approved, which discouraged up-take of the line of credit. These delays can be attributed to the reluctance of PBs to participate because of their lack of familiarity with the seed sector, and to inadequate preparation of investment proposals by many private sub-borrowers. The implementation pace improved considerably towards the end of the project, following an effective series of promotional workshops organized by NABARD. G. ASSESSMENT OF OUTCOME 49. The project's outcome is rated as satisfactory. At appraisal, it was anticipated that the project would lead to a substantial increase in the use of quality seed of improved varieties, and

31 15 that this in turn would lead to a substantial increase in crop production. At the time of project completion, it was too early to quantify the amount of increased quality seed produced (see para 11). However, given the increase in production of breeder seeds, and the likely increase in output from the investments made by the private sector, the mission considers that within the next two/three years there will be a substantial increase in the use of quality seed, and that a significant proportion of this can be attributed to the project. Based on the projected increases in production that will be derived from the increased quality seed produced, it is estimated that the ERR of the project at full development will be 23 percent compared with an estimate of 32 percent at appraisal. Despite this drop in ERR, given the likely sustainability of a large proportion of the major achievements of the project, its overall outcome is considered to be satisfactory. H. FUTURE OPERATIONS 50. The DAC intends to maintain its support for the National Seed Program, and for the continued reform of the public sector seed corporations. In particular, through the involvement of staff of the Seed Division Cell who sit on the Boards of SSCs, it expects to be able to supervise completion of the reforms already initiated. Together with the cooperating ICAR units, DAC will also ensure regular supplies of breeder seed. NABARD intends to maintain its program for the seed sector development by continuing to extend refinance assistance to PBs for the purpose of financing on-farm development activities such as minor irrigation and drainage works and farm mechanization, in areas where there are a large number of contract seed growers. 51. Given the recent achievements of the private sector, and the limited opportunities for further investment in the public sector, there appears little justification for a future free-standing seed project. In some states, especially where implementing SSC reform was delayed, and there is a clear need for continued public sector provision of quality seed, there might be scope for a seed component within a more comprehensive crop or unified diversification project. I. KEY LESSONS LEARNED 52. The main lessons learned during project implementation are as follows: (a) Public Sector Reform. The project has demonstrated that it is possible to commercialize the operations of public sector enterprises providing it is well planned and there is government commitment to change. It has also shown that both public and private seed companies can co-exist and profitably produce and sell seed of OPVs, at seed prices only 50 percent higher than grain prices. However, the experiences of both SSCs and certification agencies clearly indicate that reform, leading to the commercialization of public sector organizations, is less effective when the chief executive of an organization is deputed from another government department or agency. In contrast such reforms are noticeably more effective and sustainable when the chief executive has a tenured post for a period of not less than three, and preferably five years. In addition, it is essential that the chief executive has overall autonomy in the management of operations, especially in matters related to staffing and choice of activities/operations, and pricing decisions.

32 16 (b) (c) (d) Importance of Private Sector. The project has demonstrated the importance of the private sector. Farmers have benefited from the regular introduction of new and better varieties by the private sector and competition has prevented exploitation of the market. In particular, the research-based private sector has come to dominate the high value-added hybrid seed market. The government should maintain the current policies for the seed sector and ensure that there are no unnecessary barriers to entry of private firms, no restrictions that inhibit the efficient operation of the private sector, and the private sector should continue to have equal access to improved germplasm produced by the research system. These aspects should be specifically addressed by the New Seed Policy on which preparatory work is underway. Impact of Market Distortions. Subsidies could discourage private participation and could easily miss the target groups. Subsidies are currently paid only to SSCs for the supply of certified seed of new varieties (up to 10 years) of OPV such as rice and wheat. This has clearly kept efficient private companies from producing and selling such seed, and has provided a degree of protection for the more inefficient SSCs. Although intended as a subsidy for farmers, in practice, the experience of the project shows that it is a form of subsidy for SSCs as it helps maintain their business volume. If a subsidy needs to be paid on OPV seed, although there is no evidence that it is in fact needed, it should be paid to both private seed companies and SSCs to create a level playing field. Public Sector Involvement in the Supply of Quality OPV Seed. In a less than mature industry, the public sector may have to stand ready to fulfill roles not adequately performed by the private sector. Given the need to introduce new varieties of the main cereals to contain pest and disease pressure and improve yields, and the marginal profit from OPVs, it would appear that the public sector will have to continue to play a major role in developing and popularizing new varieties of OPV crops in the foreseeable future. The public sector will also remain the principal supplier of quality seed in remote areas where transport costs absorb any marginal profit from producing such seed. (e) Seed Regulations and Central Seed Testing Laboratory (CST). The present system of voluntary certification of notified varieties (i.e. those released officially through the variety release system), and truthful labeling of hybrids and other seed produced by the private sector provides adequate protection to consumers without unduly inhibiting producers. This system should be retained. However, further steps need to be taken to strengthen the certification agencies. In particular, a well equipped and staffed CSTL is needed. Such a facility would provide staff training, referee testing of all other seed laboratories, and monitoring other laboratories to identify areas for improvement. (f) Breeder Seed Production. The improvement of SAU and ICAR agency facilities for breeder seed production, and the introduction of the single window system for indenting breeder seed have been successful, and should be continued. However

33 17 the present pricing system for breeder seed will have to be liberalized in order to enable production units to recover their costs in full. This will also encourage the development of efficient specialized breeder seed producers.

34 18 PART II: STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of obiectives Substantial Partial Negligible Not Applicable (4) (4) (4) (4) Macro policies L][ i [ Sector policies LI [ LII EL] Financial objectives El [FT El F1 Institutional development EII LII El Physical objectives [ L L LI Poverty reduction LI [2] LI L] Gender issues LI] LI I Other social objectives L1I LI EI FT Environmental objectives L [I] LI ] Public sector management L[ LI] L Private sector development [] L[I L Regulation and quality control Ln] LI LI B. Proiect sustainability Likelv Unlikely Uncertain (4) (4) (4) Public sector I LI E Private sector [II LI L Highlv C. Bank performance satisfactory Satisfactory Deficient (4 (4) (4) Identification L L L Preparation assistance LI m LI Appraisal I L I Supervision LI m LI

35 19 HlihII D. Borrower performance satisfactory Satisfactor Deficient (4) (4)( Preparation W L ] L E Implementation Li ] Li Covenant compliance Ei m []i Operation (if applicable) Li m ED] Hghly hy E. Assessment of outcome satisfactory Satisfactory Unsatisfactory unsatisfacton Li ]Li Li

36 20 Table 2: Related Bank Loans/Credits Loan/credit title Purpose Year of approval Status Preceding operations 1. The National Seeds Project (Loan 1273-IN) To develop State Seed Corporations able 1976 Closed to produce certified seeds, and stimulation of private sector involvement through the provision of a line of credit. 2. Second National Seeds Project (Cr. 816-IN) Same as above 1978 Closed Following operations Nil

37 21 Table 3: Project Timetable Steps in project cycle Date planned Date actual Identification.. Aug./Sept Preparation (1) Sept./Oct Preparation (2).. September 1986 Pre-appraisal.. Jan./Feb Appraisal June 1987 July/Aug Negotiations January 1988 April/May 1988 Board presentation February 1988 August 25, 1988 Signing September 1988 December 22, 1988 Effectiveness March 1989 October 28, 1989 First installment release November 1989 November 1990 Second installment release April 1992 March 1993 Third installment release November 1994 April 1996 Project Completion June 1995 June 1997 Credit closing June 30, 1995 June 30, 1996

38 22 Table 4: Credit Disbursements: Cumulative Estimated and Actual (SDR million) FY 1989 FY 199O FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 (8U89) (89190) (90/91) (91/92) (92/93) (93/94) (94/95) (95/96) Appraisal Estimate Actual Actual as%ofreduced credit of SDR nillion" Credit Closing Date: June 30, " Of the total credit of SDR million, SDR 2.0 million was canceled in May " Final disbursement (December 13, 1996).

39 23 Table 5: Key Indicators for Project Implementation 1. Key Implementation Indicators in SAR Estimated Actual President's Report A. Program Component 1. Review of public sector seed corporation APIAL/ implementation commenced APIA implementation completed 13 5 B. Investment Credit Component 1. Refinanced by NABARD US$30.0 M US$29.75 M Total Value of Investments 2/ US$39.9 M" US$ M C. Productive Support Component l l. Variety development & breeders seeds US$5.0 M US$9.2 M 2. Certification (Regulation& Quality Control) US$4.2 M US$4.6 M 3. On-farm seed cleaning units US$0.2(36) M US$0.2 M 4. Training/institutional strengthening US$ 1.0 M US$0.7 M 5. Project Management US$ n.a. US$0.17 M l Action Plan Implementation Agreement. v Includes NABARD refinance, Participating Bank and sub-borrower contributions. 31 Funding of ICAR increased following review mission in October Table 6: Key Indicators for Project Preparation (NOT IDENTIFIED A TAPPRAISAL)

40 24 Table 7: Studies Included in Project Study Purpose as defined Status Impact of study at appraisal/redefined I Review of 13 Seed To review financial All but one review In general APIA provided Corporations by organizational and completed. good basis for reform of management consultants operating procedures of SSC. (150 man-months) SSC; prepare APIA; and supervision of implementation of APIA. 2. Variety Evaluation & To review existing Not undertaken ". N/A Release Consultancy procedures, and make (16 man-weeks) recommendations for improving efficiencies of these procedures. 3. Study Tours by 50 senior To cover critical aspects of Visits completed by 56 Beneficial but difficult to seed managers to USA; seed processing, production participants. assess as not all participants Europe, Japan, Australia/ and marketing. were seed managers. New Zealand Instead the project supported an ICAR Group Discussion on "Management of change in All India Coordinated Crop Improvement Projects" held in Hyderabad in February 1992 that considered inter alba varietal evaluation and release procedures.

41 25 Table 8A: Project Costs (in Rs. million/us$ million) Appraisal Estimate (SAR) Actual (ICR) 3/ (Rs. million) (US$ million) (Rs. million) (USS million)" A. Investment Credit Component , B. Productive Support Component 1. ICAR/SAUs - Variety Development & Breeders Seed SSACs - Regulation & Quality Control Informal on-farm Seed Processing Facilities Institutional Strengthening 2' Project Management (PMU) n.a. n.a Sub-Total PROJECT COMPONENT (A+B) , PROGRAM COMPONENT (C) 1, Physical Contingencies (project comp.) n.a. n.a. Price Contingencies (project comp.) n.a. n.a. TOTAL PROJECT COSTS (A+B+C) 2, , " At historical exchange rates. 2/ Includes consultancies, training, and study tours. 3/ Local CostlForeign Cost breakdown not available. Note: The substantial increase of project costs in Rupee value reflects the devaluation of the currency towards the US$.

42 26 Table 8B: Project Financing Source Appraisal Estimate (SAR) Actual (ICR)i/ l (US$ million) (US$ million) IDA GOI Participating Banks* Sub-borrowers TOTAL: i/ Local Cost/Foreign Cost breakdown not available. * Domestic Banks (investment credit component). ** Private and Public sub-borrowers (investment credit component).

43 27 Table 9: Economic Costs and Benefits Parameters Appraisal ICR Estimate Estimate Incremental Crop Production ('000 mt/year) - Wheat Rice Maize Jowar Bajra Grams Groundnut Soya Mustard Incremental Economic Value (USS million/year) Area Planted with Incremental Seed (million ha) Beneficiaries (million households) Incremental Employment (person-years) 11,000 9,500 Economic Rate of Return (%) 32 23(22)* Assumed Project Life (years) 16 18(16) Figure in parenthesis relates to 16 years project life. Note: For details see Appendix..

44 28 Table 10: Status of Legal Covenants Original Revised AgreemenV Covenant Present fulfillment fulfillment Description of Section type status date date covenant Comments DCA.3.01 a 5 C // // Borrower shall carry out the In compliance. project with due diligence. DCA.3.01b 5 C 11 I Borrower shall cause the States & Bihar failed to comply and NABARD to perform all did not participate in the obligations set forth and shall not project. take, or permit to be taken, any action which would interfere with such performance. DCA.3.01c 3 C H1 1 Borrower shall make available In compliance. SDR 3,400,000 equiv. Out of proceeds of the Credit to the States, to be passed on by them to their respective Departments as agreed between the Borrower, Assoc. & each respective State in ace. With standard agreements. DCA.3.Old 3 C 11 I/ Borrower shall re-lend NABARD sanctioned SDR 21,647,000 equiv. To proposals with refinance NABARD out of proceeds of the commitment of around Rs 1.6 Credit under a subsidiary loan billion; but actually released agreement between the Borrower Rs940 million to & NABARD on terms satisfactory participating banks as to the Assoc., including those set refinance assistance. forth in Schedule 5 of this Agreement. DCA.3.03a 5, 9 CD // 11 Borrower shall establish a Project Complied with after delay. Management Unit (PMU) which shall bear responsibility for the coordination and monitoring of project implementation. DCA, 3,03b 5, 10 CP 1/ // Borrower shall cause ICAR to Implementation of ICAR carry out part B(I) of the Project. component of the project suffered due to inadequate supervision and reporting by ICAR. DCA, 3,04i 12 C /1 11 Borrower shall cause NSC & SFCI Action plans (APIA) for 10 to take steps (i) to carry out the SSCs finalized. Overall Action Plan Implementation progress in preparing APIA Agreement & to cause each SSC and implementation to implement Action Plan satisfactory in 4 corporations, Implementation Agreement, adequate in 5, but less than particularly key elements set out in adequate in 4 corporations. Schedule 4 of this Agreement. DCA, 4.01 b&c I CD 1/ II Borrower to have records and Project accounts and audits accounts for each fiscal year have been received from audited and fumish, not later than NABARD and 9 months after end of each year, a implementation agencies. certified copy of report of such PMU has submitted a audit, including separate opinion consolidated audit certificate on SOEs. for all project expenditures up to 30/6/96. DCA,4.01d I C // / Borrower to have Special Account In compliance. for each fiscal year audited and fumish, not later than 6 months after end of each year, a certified copy of report of such audit.

45 29 Original Revised Agreement/ Covenant Present fulfillment fulfillment Description of Section type status date date covenant Comments DCA, CP Borrower shall encourage growth Managing Directors of NSC of a viable seed industry by and SFCI continue to be continuing to provide NSC & senior IAS officers. Several SFCI with adequate managerial & operational and investment financial autonomy. matters still require govemment approval and action. PA, NAB C NABARD to submit reports of Evaluation reports were such appraisals of sub-projects by requested from NABARD for participating Banks as may three audited units. Three reasonably be requested by the such reports have been Association from time to time. received. PA, NAB2.07a 2, 12 C 11 1 NABARD to cause sub-borrowers In compliance. to have their accounts audited each Fiscal Year and fumish the Audit Report to NABARD not later than 6 months after end of each such year. PA,NAB4.Olb I C NABARD to have its records & In compliance. accounts audited by independent auditors for each FY in accordance with appropriate auditing principles & fumish to the Association, not later than 6 months after end of each FY, a certified copy of Audit Report. PA2.01(a) 5, 10 C Each State to carry out project In compliance. with appropriate administrative, financial, engineering & agr. Practices and provide funds, facilities, services required for the project. PA C Each State shall continue to In compliance. implement its policy to encourage growth of a viable seed industry including private sector. PA C Each State to carry out seed In compliance. quality inspection to enforce minimum seed quality control standards. PA2.06 5, 9 C 11 1 Each State to cause its SSC, SSCA Done in case of most states as & Agr. Universities to fumish to part of their investment the Association an annual work proposals justification. program at the start of Fiscal Year and bi-annual progress reports within two months of the close of each semester. PA3.01(b) I CD Each State shall have its records See DCA, 4.01b&c. and accounts and those of the concemed SSC, SSCA & Agr. Univ. Audited for each FY by independent auditors, and fumish an Audit Report not later than 6 months after end of each FY. Status: C = Complied with CD = Compliance after delay CP = Complied with partially NC = Not yet complied with NYD = Not yet due SOON = Compliance expected in reasonably short time

46 30 Table 11: Compliance with Operational Manual Statements (NOTAPPLICABLE FOR THIS PROJEC7) Table 12: Bank Resources: Staff Inputs Stage of Planned Revised Actual project cycle Weeks US$ Weeks USS Weeks US$'OOO Through appraisal Appraisal - Board Supervision Completion TOTAL - =

47 31 Table 13: Bank Resources: Missions Perfornance rating Stage of Number o Specialized Implement Developproject cycle MontWv year of persons Days in field staff skills represented ation status ment objectives Types of problems Identification First preparation Sept/Oct 6 28 EC (2), AG (2), SS (2), l 1985 Local Cons. (2) Second preparation Sept EC; AG Pre-appraisal Jan./Feb. 5 EC; AG; SS; AC 1987 Appraisal July/Aug EC; AG; AG; FA; AC l 1987 Negotiation Apr EC; AG; LG Supervision la April Very slow implementation; lb June/July 3 21 FA; AG; AG 2 2 only USS4.0 M disbursed to Special Account. 2 April AG; FA; AG 2 2 Some progress in program and investment credit component; poor progress in productive support component. Poor management, no head of PMU, Principal Consultants not functioning. (M) 3 Aug-Oct. 3 n.a. EC; FA; AG 2 2 Management improved, but 1991 serious delays experienced with implementation of program component. [CAR proposals modified and funding increased. 4 Mar.-May 3 n.a. EC; FA; AG 2 2 Release of 2nd installment 1992 delayed. 5 Sept.-Oct FA; AG 2 2 Release of 2nd installment 1992 delayed. 6 Feb.-Apr FA; AG 2 2 Third installment jeopardized 1993 by failure of Bihar to meet audited account requirements PMU director departed. 7 Sept.-Oct FA; AG 2 2 As above; ICAR delayed 1993 submission of accounts. 8 Apr.- May 2 21 FA; AG 2 2 As above; drawdown of 1994 Investment credit reduced as banks had adequate liquidity. ICAR reporting still poor. 9 Dec FA; AG 2 2 As above. l Feb Dec FA; AG 2 2 Third installment still not Jan released. Investment Component improved. ICAR W reporting still weak. EC = Economist. SS = Seed Specialist. LG = Lawyers.. FA = Financial Analyst. F = Financial. AG = Agriculturist. It Reviews by NDO staff August/September 1984 to look at farmer adoption of certified seeds.. 2" Informal field trips by NDO staff in December 1989 and April Review mission over period Aug-Oct by RMI Staff.

48 32 IMPLEMENTATION COMPLETION REPORT Appendix A Page I of 7 INDIA THIRD NATIONAL SEEDS PROJECT (Cr IN) AIDE MEMOIRE Introduction 1. Following closure of the credit on 30th June 1996 an FAO/World Bank Co-operative Program (CP) mission' visited India from 6th October to 1st November 1996 to undertake field work for the preparation of the Implementation Completion Report (ICR). The CP mission was joined part time, by Messrs. H. Singh and M. Balasubramanian of the World Bank Resident Mission India, and was accompanied during field visits by senior staff of the Project Management Unit (PMU) of the Ministry of Agriculture and by the National Seeds Project Co-ordinator of ICAR. 2. After initiation meetings with the Director General of the Indian Council for Agriculture Research (ICAR),the Secretary (Agriculture) and the Joint Secretary (seeds and fertilizers) in New Delhi the mission commenced field work. Visits were paid to the National Seed Corporation (NSC), State Farms Corporation of India (SFCI), the Indian Agricultural Research Institute (IARI), the Central Seed Testing Laboratory (CSTL), the National Bureau of Plant Genetic Resources (NBPGR) and the Directorate of Maize (IARI) in New Delhi. Representatives from the Gujarat State Seed Corporation and State Seed Certification Agency; the Haryana State Seed Corporation and State Seed Certification Agency; and the Rajasthan State Seed Corporation and State Seed Certification Agency were met in the World Bank office, New Delhi. 3. Field visits or meetings were held with: the Directorate of Wheat (IARI), the IARI Farm and Haryana Agricultural University at Karnal; the Maharashtra State Seed Corporation and State Seed Certification Agency, and the Vice Chancellor of the University, in Akola; leading private seed companies in Jalna; NABARD and private sector seed companies in Bombay; the Karnataka State Seed Corporation and State Seed Certification Agency; the University of Agricultural Sciences (GKVK) and the University of Agricultural Sciences Dharwad, the Indian Institute of Horticultural Research, the All India Co-ordinator- Small Millets, the Additional Secretary (Agriculture), and private seed companies at Bangalore; the Andhra Pradesh State Seed Corporation, State Seed Certification Agency, the Vice- Chancellor and Breeders Seed Unit of the Andhra Pradesh Agricultural University, the ICAR Directorates for Oilseeds and Rice, the project co-ordinators for Sunflower and Castor, the National Research Center for Sorghum and private seed companies in Hyderabad; the Uttar Pradesh Seed and Terai Development Corporation and UP State Seed Certification Agency in Haldi. Mr Balasubramnanian visited the Tamil Nadu Agricultural University, the Sugarcane Breeding Institute, and the Central Institute of Cotton Research in Coimbatore and the regional station of IARI at Wellington. 1 C. J. Bevan, Mission Leader, M. Lemonius, Seed Industry Specialist; and A. Lieberg, Economist.

49 Appendix A Page 2 of 7 4. A wrap-up meeting was held in ICAR on 30th October 1996, and with the MOA and DEA on 1st November at which this Aide-Memoire was discussed. The mission would like to thank all those staff from Central and State Govemments, and representatives of the private sector who ably assisted the mission and provided hospitality. This Aide-Memoire provides a summary of the mission' s findings on completion of field work. These must be considered as preliminary, and subject to change as a result of more detailed analysis of the data supplied to the mission. Background 5. The objective ofthis project, which became effective in September 1989, was to support GOI efforts to assist farmers by ensuring the timely availability of quality seed of suitable varieties at economical prices, by the expansion and modernization of the seed industry. This was to be achieved by (a) financial reforms and strengthening the management of public sector seed corporations, (b) encouraging the private sector, (c) improving management of public sector variety development programs and (d) ensuring development of adequate industry regulations and quality control. 6. The project consisted of related, but distinct Project Components and a Program Component. The project component consisted of two sub-components the first being a line of credit (80% of project component funds) for refinancing by NABARD of term loans provided by Participating Banks. The credit was to be available to both public corporations and private seed companies for investment programs. The second component (20% of project component funds) was for Productive Support including: Variety Development and Breeder Seed production; strengthening of Seed Regulation and Quality Control, informal On -Farm Seed Processing, and Institutional Strengthening including consultancy studies and study tours. The Program Component consisted of US $1 lom, payable in three installments linked to satisfactory progress in reforms of the public sector seed corporations. 7. Although conceptually relatively straight forward, it was recognized that implementation of the project would be complex. Accordingly a PMU was to be established within the MOA (DAC) to strengthen the Seed Division Cell. The PMU was directly responsible for implementing the Productive Support components, with assistance from ICAR for the variety development and breeders seed. The line of credit was to be managed by NABARD. The PMU was also responsible for the selection of a firm of management consultants or Principal Consultants (PC) to oversee the program component. Operational Consultants (OCs) were appointed to review the State Seed Corporations (SSC), and make recommendations for their reforms. 8. At appraisal the project credit had a total value of US$150 million (Rs.2 billion), of which US$40.0 rnillion was for the Project Component, and US$110 million was for the Program Component. The project had a total cost of US$177.5 million (Rs.2.4 billion) of which US$39.9 million was for the Investment Credit, US $10.4 was for the Productive Support Component, US$17.2 million was for contingencies and US$110.0 was for the program component. It was estimated that the incremental value of the crops that would be provided as a result of the seed produced by seed corporations under the project would be US$45.0 million per annum, or that the incremental seed produced as a result of the project would be sufficient to plant some 2.2 million hectares.

50 34 Appendix A Page 3 of 7 Mission Findings 9. Disbursements. After a slow start the project gathered momentum, and by the credit closing date US$150 million was disbursed, equal to 97% of the US$154.5 million available due to devaluation of the US dollar against SDRs during the project life. Of the balance of US$4.5 million, US$2.9 million was canceled in 1993, and US$1.0 million remained undisbursed at the closure. The Investment Credit of the project component, and the Program Component of the IDA credit were fully disbursed. Savings due to substantial devaluation of the Indian Rupee against the US dollar during the project and contingency funds enabled expenditure on the Productive Support component, and especially the support to ICAR agencies to substantially exceed appraisal estimates. Overall the project expenditure, including contributions from IDA, GOI, State Governments and Participating Banks, Seed Companies and Corporations, amounts to some US$170 million (Rs5.1 billion) slightly less than the US$177.5 million estimated at appraisal; but almost twice the amount in Rupees. 10. Project Management. There were delays in establishing the PMU, and the PC initially appointed did not have sufficient and adequately experienced staff to handle the assignment. These factors contributed to delays experienced with the Program Component, and at one stage there were suggestions that the project be terminated. Subsequently a second firm of management consultants was sub-contracted by the PC, and things improved considerably. Apart from difficulties in the selection of the OC for Assam, the OCs appointed to assist with the reforms of the SSC appear to have carried out their assignments well. The PMU has performed satisfactorily since it was established, although it has very limiited staffing, and has not been able to closely monitor and supervise all aspects of the project. A Project Monitoring Committee was established which met twice a year for most years of the project. The World Bank supervised the project regularly and advised GOI of actions needed to improve project performance, which were passed on by the PMU. It is not clear, however, whether the PMU was able to follow up and secure the necessary action needed. Difficulties were experienced throughout the project in getting timely and up-to-date information from ICAR regarding the physical and technical progress of the investments made by participating ICAR units. 11. Project Component - Investment Credit. Under the project 1491 schemes were sanctioned by NABARD, although by the end of the project only 145 schemes had been refinanced. The total value of the investments supported was Rs. 1,623 million, with NABARD refinance totaling Rs.940 million (equal to US$27.1 million). In the original project design it was envisaged that the bulk of the Investment Credit would be utilized by SSCs. In fact only 7 corporations used the facility, utilizing only 5% of the refinance assistance. This is attributed partly to the reluctance of PBs to sanction schemes to SSC without State Government guarantees, and the refusal of the State Governments to provide such guarantees, and partly to the use of GOI grants by some SSCs to finance investments made during the project period. 12. The major beneficiaries have been private sector companies who have used the funding to invest in research facilities, farmn development, and processing equipment largely related to the development of nurseries and production of hybrids. Whilst the line of credit has undoubtedly helped the private sector during a period when private banks had little experience of lending for seed activities, Four schemes were canceled before the start of disbursement.

51 35 Appendix A Page 4 of 7 and there have been liquidity shortages, a number of companies reported that the time taken to process a loan proposal was too long (in some cases over 12 months). Productive Support Component Varietal Development and Breeder's Seed Production 13. In total some 70 ICAR units and SAUs received support for a total expenditure of US$10.4 million (Rs million). Originally the total funding for varietal development was for US$3.9 rmillion (Rs.50.6 million), and for Breeder and Foundation Seed US$1.1 million (Rs million). Savings enabled an additional second installment of funding totaling US$5.4 million (Rs.192 million) to be made available through ICAR and DAC. Reports from recipients indicates that by and large funds for varietal development and research have been used for the purposes intended. These include development of "off season" nurseries, and germplasm storage facilities, strengthening of selected ICAR Institutes and SAUs research and Breeder Seed production facilities, development of field plot machinery, and provision of travel allowances for monitoring of varietal development and breeder seed production. Since 1990 some 340 new varieties have been developed by the system. However only about one third of these varieties have been commercialized. It is too early to attribute the generation of new varieties specifically to support received under the project. 14. Investments to expand the production of Breeder Seed included farm development and provision of processing equipment for dedicated units at the SAUs and ICAR agencies, and travel funds for monitoring. Overall it is reported by both SSCs and private seed companies that the volume of Breeder Seed produced annually has increased over the project period. There is, however, reported to be scope for further improving the quality of Breeder Seed for some crops, and shortages are reported for crops like groundnut. The project envisaged that this kind of support would be of a transitional nature whilst responsibility for Breeder and Foundation seed would pass to SSCs. In fact responsibility for Breeder Seed has remained with the ICAR coordinated agencies, although SSCs are now producing most of the Foundation Seed. Breeder Seed production by these agencies has been further consolidated by the establishment by ICAR of revolving funds to provide working capital for ICAR and SAU seed units, and steps have been taken to create a single window system to co-ordinate indents. Regulation and Quality Control 15. The project provided Rs. 130 million to strengthen and develop 10 of the 19 State Seed Certification Agencies (SSCAs) and the Central Seed Testing Laboratory (CSTL) in New Delhi. By and large funds appear to have been spent as intended on new laboratories, equipment and facilities, including motorcycles to provide staff with mobility. Whilst the physical facilities in place are now generally good, some concern exists regarding the efficacy of some SSCAs. In particular there are concerns about the real autonomy of the agencies, all of which are headed by a director on deputation, difficulties in disciplining staff, inadequate staff training programs, and a lack of data publication and exchange that would facilitate quality control comparisons. It was originally envisaged that a new CSTL would be constructed and equipped in New Delhi. This has not been done. Instead the existing laboratory in the LARI Division of Seed Science and Technology has been strengthened, and there are plans to build a new CSTL at Varanasi in Uttar Pradesh.

52 36 Appendix A Page 5 of 7 Seed Cleaning on Farmers Fields 16. Under the project 26 mobile cleaning plants, with a total value of Rs.6.75 million have been supplied for use in remote areas. With the exception of Uttar Pradesh these are operated by the SSCs, and not the state Departments of Agriculture as originally intended. Institutional Strengthening 17. Under this sub-component some Rs million was spent on providing the consultancy services of the PC and OCs for SSC reform and for operation of the PMU, and NABARD initiated training of SSC and PB in the operation of the line of credit. It was originally expected that the project would also fund a consultancy to review the system of variety trials and notification used by ICAR. In the event this was not undertaken, although the system was considered at a group discussion' held in A number of very relevant and pertinent suggestions were made at the symposium as to how it could be improved. However to date there has been no formal statement regarding the recommendations to be adopted. In the circumstances it would have been preferable to have had a more structured consultancy study. The study tours were completed as planned at a cost of US$0.38 million. However, it is reported that a number of the 56 participants are no longer active in seed production. Program Component 18. With the exception of Bihar all the SSCs, together with the NSC and the SFCI participated in the project as envisaged. The achievement of the program as measured by reform of the corporations into viable commercial entities is very mixed, and has been much slower than anticipated. Three of the first batch SCCs are now reported to be profitable, and are expected to pay a dividend to shareholders this year for the first time. At the other extreme are SCCs that are only just beginning to implement reform plans. Reform of the SSCs has been achieved largely by financial restructuring involving debt rescheduling/cancellation and the injection of one off grants from GOI, together with the granting of more autonomy in the operation of the corporations and measures to improve the efficiency of the business operations. (e.g. change of product mix, staff reductions and the introduction of computerized data recording). Whilst most of the SSCs have now been financially restructured profit margins remain very thin, and many SSCs depend heavily on the subsidy paid to growers for certified seed to ensure adequate sale volumes. Of perhaps greater concern is the continued dependence on deputed staff to manage the corporations and the frequent transfer of senior managers. Despite these concems there appears to have been an increase in the quantity of certified seed produced by the participating SSCs over the past six years. "I Managernent of Change in all India Coordinated Crop Improvement Projects" Hyderabad February 1992

53 37 Appendix A Page 6 of 7 Conclusions 19. With respect to disbursement, implementation although somewhat delayed, has been more or less as envisaged at appraisal, in terms of activities and the level of support. However, this has only been achieved by some relaxation of the conditions for release of the third installment of the Program Component. In particular the requirement that all first and second batch SSCs should have implemented their Agreed Action Plans to the satisfaction of IDA was partially waived. This was necessary to ensure that the project as a whole was not prejudiced by the actions of a few SSC that were experiencing difficulties in full implementation of the AAP. Delays in project implementation mean that it is too early to attribute any significant increase in certified seed and quality seed (truthfully labeled seed) production to the project. Thus although the project has contributed to an increase in the annual amount of Breeder Seed produced most of this increase has taken place in the last three years of the project. Given that it takes 2-3 cropping seasons for Breeder Seed to be multiplied into Certified Seed the effects of this increase will only begin to become manifest in the future. Furthermore any sustained increase in the production of Certified Seed of open pollinated varieties (OPV) will depend on continued progress being made with financial and managerial reform of the SSCs. It is too early to assess whether the reforms currently being implemented will be consolidated, and that all the SSCs will become financially independent. Implementation of the reforms calls for very strong commitment by central and state governments to make sure that all aspects of the Agreed Action Plans for participating SSCs are carried out. Institutional reform in India however takes time and in response to incentives. This is clearly demonstrated by the fact that only those corporations that were amongst the first batch show healthy balance sheets, and have achieved a significant degree of autonomy in production, pricing and management decisions. In the absence of a follow-up project (or as components of other future lending operations) it is not clear where the determination to pursue and complete the necessary reforms of the other SSCs will come from. 20. The project has contributed to the strengthening of seed regulation and quality control. There has been a substantial increase in the amount of seed certified by the SSCAs annually for both public and private seed producers. However, before an entirely reliable certification system is in place considerable further improvement in the management and operation of the SSCAs is needed. Until this happens it is vital that certification remains voluntary and that a parallel system of truthful labeling remains in force. Concerns about the quality of seed produced by small OPV seed producers can best be laid to rest by improving the operational performance of certification agencies, and in the case of truthfully labeled seed strengthen seed law enforcement. Making certification mandatory would protect the inefficiencies of some certification staff, and would only serve to further devalue the whole concept. 21. Apart from these reservations the project would appear to have contributed to the overall development of the seed industry. In particular it has led to an increase in the annual production of Breeders Seed and has helped a number of SSCs to commercialize their operations. It has also helped in the development of a vigorous research based private sector seed industry that is estimated to currently supply some 60% of all certified and truthfully labeled seed. These developments are in line with the overall objectives of the 1988 Seed Policy, and in this regard it is important to record that at present there is generally very good co-operation, and in some cases partnerships between the private and public sectors.

54 38 Appendix A Page 7 of 7 Follow-Up 22. The MOA has been asked, by letter dated 21 July 1996, to prepare its own Completion Report together with a ten page executive summary for annexation to the World Bank ICR. It is anticipated that this will be forwarded to the World Bank before the end of November. The CP mission will compile the ICR in Rome for dispatch to the World Bank by the middle of December 1996.

55 Appendix B 39 Page I of 12 IMPLEMENTATION COMPLETION REPORT INDIA THIRD NATIONAL SEEDS PROJECT (Cr IN) BORROWER'S COMPLETION REPORT 1. Background. The NSP-1II represents the World Bank's involvement in the development of the Indian seed industry for the fourth time. The previous involvement of the Bank in the seed sector was through the UPS&TDC Project NSP-I and NSP-II which were mainly aimed at creation of infrastructure facilities for seed production and distribution. 2. The IDA Agreement for NSP-III was signed in May, The total amount of World Bank assistance initially envisaged under the Project was SDR million then equivalent to US$150 million. Later on SDR 2 million were canceled and the final figure of World Bank assistance came to US$106.6 million. At the then prevailing exchange rate of US$1 = Rsl3.5) the total project cost was estimated to be Rs2,360 million of which World Bank assistance was estimated at Rs2,020 million. However, owing to the substantial depreciation of the rupee in the project period, the total assistance available in rupee terms was nearly Rs4,300 million. 3. The Public Investment Board of Govt. of India approved the Project in March, The Project got off to a slow start because several activities had to be completed before implementation could begin. Some of these activities were time consuming. These activities included appointment of a Principal Consultant through competitive bidding procedures, updation of audited accounts by participating Seed Corporations, setting up of a Project Management Unit (PMU) in Ministry of Agriculture etc. The Project got real momentum from when the PMU became fully functional and various procedural requirements were fulfilled. 4. Objectives of NSP IIL The main objective of the Project was to support GOI's efforts to assist Indian farmers by ensuring the timely availability of quality seeds of suitable varieties at economical prices, by expansion and modernization of the seed industry. These objectives were to be achieved by: (a) Reorienting the operations of national and state level public sector seed corporations including those financed under NSP-I & 11 along commercial lines, with emphasis on strengthening management and ensuring the exercise of autonomy in production, pricing and management decisions; (b) stimulating greater private sector investment in the industry; (c) improving the management of public sector variety development program; and (d) ensuring that adequate facilities are developed for seed industry regulation and quality control. PERFORMANCE UINDER PROGRAM & PROJECT COMPONENTS 5. Program Component. The Program Component was mainly aimed at supporting key institutional reforms in public sector seed corporations. These reforms would focus on reorienting the operations of public sector seed corporations to make them commercially oriented, financially viable and self-sustaining institutions, exercising autonomy in management and progressively reducing their dependence on Government financial support. The Program Component also aimed to promote investments in the private sector in order to expand and modemize the seed industry. 6. A Principal Consultant was appointed to assist the PMU in the implementation of the Program Component. Similarly for conducting diagnostic studies in participating corporations, Operating Consultants were appointed for each participating State Seed Corporation. The Operating Consultants submitted detailed reports on following areas: (a) Business Strategy; (b) Organization and Management; (c) Operations Review; (d) Accounting and Financial Management; (e) Autonomy of Operations; and (f) Financial Health. 7. Based on the above reports, a business strategy and restructuring program was developed for each corporation in consultation with the State Governments and the corporations. Agreed Action Plans (AAP) were

56 40 Annex B Page 2 of 12 developed to implement the identified business strategy for each corporation. The State Governments were fully involved in restructuring of the seed corporations, and wherever any specific contribution/participation was required, the explicit commitment of the State Government was obtained. In financial restructuring of the seed corporations, the State Governments mainly contributed towards reducing the corporations' loan by rescheduling/writing off of loans, converting loans into equity, waiving penal interest etc. and reimbursing some of the cash losses of the corporations. To ensure the participation of the State Governments in the restructuring programs a Memorandum of Undertaking (MOU) was also signed between Govt. of India, the concerned State Government and the Corporation. Under the Project, assistance was provided to the participating Seed Corporations only for key financial restructuring components. The release of funds to the corporations was linked to the completion of identified trigger actions in the Action Plan. For capital investment, the corporations were asked to raise loans from commercial banks with refinance from NABARD. Only margin money for raising such loans was provided as assistance under the Project. Similarly, the corporations were also encouraged to meet their working capital requirement by getting cash credit limits from commercial banks. 8. Key Elements of Restructuring Program of the Seed Corporations. The Action Plans drawn up after review of the corporations by the Operating Consultants addressed specific areas of weakness. The Action Plans identified the targets to be achieved in key functional areas and the time-frame within which specific actions were to be completed. The key adjustments undertaken for restructuring the corporations were as under:- (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) financial restructuring of the corporations which would ensure that the debt equity ratio of the institution concerned would not exceed 70:30; remedial measures to allow the seed corporations achieve financial self-sufficiency and generate a rate of return of 12.5% on equity; introduction of appropriate seed procurement and pricing policies in the corporations. The prices were expected to reflect the complete cost of seed procured, processing cost and other expenditures including depreciation and interest costs and also provide an adequate margin for achieving financial self-sufficiency; cost reduction measures particularly in transportation, processing, packaging; reduction in administrative and organizational expenditure through cost reduction measures including reduction in manpower through voluntary retirement schemes; introduction of profit center concepts at area/regional/unit level; adoption of proper accounting procedures and updation of annual accounts; procedures to ensure proper budgeting and planning and control over inventory. Introduction of Management Information System(MIS) in the corporations; reorganization of the corporations by closing/shifting of uneconomic units; and stable tenures for the Chief Executives of the corporations to provide continuity in management. 9. Implementation of Program Component - State Seed Corporations. All the 13 participating seed corporations under the Project were not taken up for management study together because they were at different stages of updation of their audited accounts which was a pre-requisite for participation in the Project. In the first batch, five seed corporations namely, NSC, SFCI and State Seed Corporation of AP, UP and Gujarat were taken up during as they were first to update their audited accounts. In the second batch, seed corporations of Maharashtra, West Bengal, Karnataka, Madhya Pradesh and Haryana were taken up in In the third batch, SSCs of Orissa, Rajasthan and Assam were taken up during The status of the implementation of Action Plans is provided below.

57 41 Annex B Page 3 of First Batch Seed Corporations. The implementation of Agreed Action Plans for the first batch seed corporations has almost been completed. The Terminal Reports on implementation of Action Plans for these corporations has been submitted by the operating consultants and accepted by the PMU. Only in the case of APSSDC, NSC and SFCI, some of the actions of the AAP are still pending. For instance, in the case of AP Seed Corporation, the reconciliation of accounts with the State Govt. and adjustment of various dues are still under process. In the case of SFCI, its capital investment proposal has not yet been sanctioned by its commercial banks. However, a part of the capital investment activities like purchase of tractors and implements have been completed by the Corporation. In the case of NSC, posting of accountants at regional offices and filling up of the key posts in marketing and costing areas are pending. 11. Second Batch Seed Corporations. In the case of second batch seed corporations, Action Plans have been substantially implemented by MSSC and HSDC. The only pending actions in the case of MSSC are completion of some capital investments and implementation of a Voluntary Retirement scheme. In the case of HSDC, capital investment activities have not yet been completed. The MPSS&FDC has delayed the implementation of the Action Plan which has started in earnest only recently. The major pending areas for the Corporation are participation of State Govt. in the financial restructuring of the Corporation and sanction of loan for various capital investment activities. The Corporation has also to take action on various areas like distribution of seeds through a dealers network, return of unviable farms to the State Govt., reorganizing market network etc. The WBSSC and KSSC Action Plans are under implementation. The major items to be completed are capital investments and contribution of the State Governments. in financial restructuring of the corporations. The MOUs for implementation of Action Plans by all five second batch corporations have been signed between GOI and the respective State Governments. and seed corporations. 12. Third Batch Seed Corporations. In the case of third batch seed corporations, diagnostic studies have been completed for Orissa and Rajasthan seed corporations and the Action Plans for these corporations are under implementation. The MOU for OSSC for implementation of the Action Plan has been signed with the State Govt. and Seed Corporation. In case of RSSC, the execution of MOU is under process. In the case of ASC, the diagnostic study of the Corporation has been completed and the AAP is being finalized. 13. Other Corporations. The Bihar State Seed Corporation which was initially intended to be a beneficiary corporation under NSP-III could not participate in the Project because of its inability to update its audited annual accounts. The Punjab State Seed Corporation which was not inclined to participate in the Project at the initial stage, later requested for participating in the Project. However, as their request was received very late, it could not be acceded to. 14. As against total sanctions of Rsl,438.5 million, a sum of Rsl, million has been released to the corporations. As on the corporations had utilized a sum of Rsl, million. Certain amounts released to the Corporations were kept frozen pending implementation of 'trigger actions' identified in the Action Plans. 15. Implementation of Program Component - NABARD. Under Program Component, funds amounting to SDR 39.8 million (50% of the outlay for the Program Component) were made available to NABARD for providing credit for seed development. Accordingly, NABARD provided refinance of Rs l,610.3 million through State Land Development Banks, Regional Rural Banks and Commercial Banks during the year and for on-farm development activities like minor irrigation, drainage systems, farm mechanization etc. in the States of Tamil Nadu, Karnataka, Gujarat, Madhya Pradesh, Andhra Pradesh and Maharashtra. 16. Project Component. The Project Component aimed at providing support for institutional strengthening for varietal development and quality control. This component also provided a line of credit to the seed sector for investment. Funds under the line of credit were made available to the public sector seed corporations and private seed companies through NABARD. The eligible expenditure for financing included civil works associated with farm development, processing plants, storage buildings, equipment for harvesting, cleaning, storing, bagging, vehicles, etc. The research and development activities of private companies were included under the Project. The NABARD entered into a subsidiary loan agreement with IDA for providing credit to the seed sector. The NABARD refinanced 80% of loans made by eligible participating banks at an interest rate of 8% per annum with repayment over a maximum period of 15 years including a of maximum 3 years grace period (moratorium) for principal and interest.

58 42 Annex B Page 4 of 12 The participating banks financed both private and public sector borrowers up to a maximum of 80% of investment cost of properly appraised and approved projects. 17. Under the productive support sub-component, ICAR/State Agriculture University institutions directly received assistance under the Project to improve the management of public sector variety development activities, farm development and breeder seed production. 18. Project funds were also made available to State Seed Certification Agencies to strengthen them to deal with seed industry regulations and quality control measures. The Project Component also envisaged provision of small mobile seed processing plants to States to promote on-farm seed cleaning and treatments, consultancy services to the Project Management Unit for institutional development of participating Seed Corporations and training to expand and update management and technical skills of managers in the seed industry. 19. Performance of NABARD under Project Component Assistance for providing investment credit of US$29.9 million under the Project Component was routed through the National Bank for Agricultural and Rural Development (NABARD) for the purpose of refinancing "scheduled" commercial and cooperative banks providing investment credit for expansion and modernization of the seed industry in the public and private sectors. 20. As on , the total off take of finance under the sanctioned projects was to the tune of Rs940.5 million as against the original target of Rs900 million. In respect of 6 public sector companies, the refinance availment by banks was to the tune of Rs346.6 million. The low off take of finance by public sector companies was mainly on account of the fact that bankers were reluctant to sanction loans to these corporations in the absence of State Government guarantees. 21. Performance of State Seed Certifcation Agencies (SSCAs) under Project Component. The Indian Seeds Act, 1966 provides the legislative framework for regulation of quality of seeds sold in the country. The Act provides for a system of notification of kinds/varieties which enables the seeds of the notified/kinds or varieties to be brought under the purview of quality control provisions. The Act also provides for a system of certification of seeds of notified kind/varieties as an assurance of quality. Certification of seeds is, however, not mandatory under the provisions of the Act and is provided for on a voluntary basis. The Central Seed Certification Board is apex body set up under the Act to deal with all the matters relating to administration of the Act and quality of seeds. Seed Certification Agencies have been set up in different states to ensure the quality of seeds by conducting field and laboratory tests particularly for genetic purity, physical purity, germination, pest & disease infestation etc. 22. To carry out the above functions efficiently, the Seed Certification Agencies require infrastructure like fully equipped Seed Testing Laboratories, Grow-out-Test Farms, mobility for field inspection and other office equipment including computers etc. Considering the above needs, funds have been provided to the Certification Agencies for development of infrastructure under National Seeds Project-Ill. 23. Ten SSCAs namely, Andhra Pradesh SSCA, Assam SSCA, Gujarat SSCA, Haryana SSCA, Karnataka SSCA, Madhya Pradesh SSCA, MPSSCA, Maharashtra SSCA, Orissa SSCA, Rajasthan SSCA, Uttar Pradesh SSCA received assistance under the project for improvement of their technical and administrative capabilities. The assistance was mainly provided for establishmentlmodernization of Seed Testing Laboratories, development of GOT farms, mobility, and equipment for office automation, training/teaching aids, etc. 24. Under Project Component, the total funds sanctioned and released to various Seed Certification Agencies were Rsl35.6 million. As on the SSCAs had utilized a sum of RslO7.33 million. 25. Performance of Indian Council of Agricultural Research (ICAR) and State Agricultural Universities (SA Us) under Project Component. Under the Project Component of NSP-III, substantial assistance was provided to institutions of the Indian Council of Agricultural Research/State Agriculture Universities, for breeder seed production and varietal development activities. The major activities envisaged under the Project were: (a) Development of offseason nurseries; (b) Procurement of field plot machinery; (c) Setting up of support services for breeding new resistant varieties; (d) Farm development and certain associated facilities for varietal development, nucleus and breeder seed production; (e) Seed processing and packaging facilities; (f) Traveling allowance for monitoring of nucleus and

59 43 Annex B Page 5 of 12 breeder seed plots to ensure seed quality; and (g) Strengthening of the Central Seed Testing Laboratory (Indian Agricultural Research Institute) for seed quality control and training. 26. It was envisaged that the assistance provided to ICAR/SAU institutions would provide a fillip to the development of new varieties. The assistance was also expected to put breeder seed production on a sound fooling. Seventy ICAR/SAU institutions received assistance under the Project. 27. Initially, at the time of preparation of Staff Appraisal Report of NSP-III, ICAR had submitted proposals for Rs5O.8 million for breeder seed production activities. However, later on at the time of the review of the Project by the World Bank Mission during , the ICAR submitted proposals for additional assistance of Rsl92.3 million for varietal development activities and breeder seed production by various ICAR/SAU institutions. The World Bank concurred in the additional proposal of ICAR and thus their total proposals for assistance under NSP-III rose to Rs243.1 million. Against the total sanctioned proposal of Rs243.1 million, the amount released to various ICAR/SAU institutions was of Rs242.8 million. 28. Mobile Seed Processing Plants (MPPs) under Project Component. The Staff Appraisal Report of NSP-III envisaged providing small mobile seed cleaning plants to Departments of Agriculture of participating States to complement the efforts of extension services to promote informal on-farm seed multiplication. The participating States under the Project requested that the MPPs may be provided to their seed corporations which were undertaking seed production and distribution activities. The recurring expenditure for maintenance of these MPPs would be borne by the seed corporations as these were commercial organizations. Accordingly, 21 MPPs were provided to 6 SSCs and 5 MPPs to the Department of Agriculture of one State. The capacity of the MPPs is one ton per hour. 29. Overseas Study Tours Under Project Component. The Staff Appraisal Report of the NSP-III visualized institutional strengthening as a part of the Project Component at two levels. One level consisted of financing consultancies and the other envisaged financing study tours by the line managers of the seed industry. It was proposed that the participants would visit various developed countries to study seed development activities in these countries. A provision of US$4,60,500 was made under the Project for study tours. Against this, the approximate amount spent on study tours for 56 persons was US$3,78, In view of the need for professional organization of the overseas study tours, the Department entered into an agreement with FAO who were paid service charges for arranging the study tours. Initially, it was envisaged the study tour for each Group would be for a period of three weeks. Later, the period was reduced to 2 weeks. Thus, instead of 50 persons (as envisaged in Staff Appraisal Report), a total of 56 persons participated in the overseas study tours. The Department of Agriculture and Cooperation organized the study tours in different Groups in two batches. The first batch of 23 persons undertook study tours in four Groups in the year The second batch of 33 persons undertook study tours in five Groups in The Group visited countries like UK, USA, Mexico, Italy, Israel, New Zealand, Australia, South Africa, Netherlands, China, South Korea, Japan, Canada, Indonesia and Vietnam. 31. Institutional Strengthening Under Project Component. Professional consultancy firms were engaged for consultancy work to assist PMU/PC and to conduct diagnostic studies for SSCs. PROJECT MANAGEMENT UNIT 32. The staff appraisal report of NSP-III envisaged the establishment of a Project Management Unit (PMU) in the Ministry of Agriculture for coordination, monitoring and reporting of Project implementation. Accordingly, the Ministry of Agriculture set up a PMU in its Seeds Division with a total staff strength of 13. The PMU was headed by an officer of the rank of Director/Deputy Secretary who was exclusively designated as National Director for implementation of the Project. A technical officer of the Department of Agriculture & Cooperation was designated as Officer on Special Duty to coordinate the functioning of PMU. In PMU 11 officials including technical officers and supporting staff were drawn from NSC to handle the routine work. The salaries of these officials of NSC were reimbursed to NSC under the Project.

60 44 Annex B Page 6 of In the PMU two apex committees namely (a) Project Monitoring Committee and (b) Project Funding Committee were constituted under the Chairmanship of Secretary (Agriculture and Cooperation). The members of the Committees were representatives from various Ministries/Departments including Ministry of Finance, Planning Commission and ICAR. The Project Monitoring Committee monitored the progress of implementation of Project by the beneficiary institutions. It convened meetings twice a year. The Project Funding Committee scrutinized and sanctioned proposals for providing financial assistance to various beneficiary institutions under the Project. It met as and when required. The PMUJ provided secretariat services to these two apex committees. CREDIT DISBURSEMENT BY WORLD BANK 34. The assistance under the Project was to be shared between the Department of Agriculture and Corporation and NABARD. The break up of the assistance between the Program Component and Project Components and between DAC and NABARD was as follows: TIotal World Bank Credit SDR US$ million: DAC's Share NABARD's Share 1. Project CoMponent (40) Program CoMponent (110) :To$tal ;::f;x 0 0 t: (150) A total of Rs million was sanctioned under the Project Component to Seed Certification Agencies, ICAR/SAUs institutions etc. for improvement of their administrative and technical capabilities. In the Program Component an amount of Rsl,438.5 million was sanctioned to seeds corporations for financial and organizational restructuring. The entire credit of SDR million was fully drawn. IMPACT OF THE PROJECT 36. The Project has contributed substantially to the development of a sound seed industry in the country. It has provided infrastructural, technical and managerial support to the Indian seed program. The financial and organizational restructuring of participating public sector seed corporations has enabled them to develop a sense of competitiveness and a commercial orientation. 37. As a result of participating in the Project, the Seed Certification Agencies have improved their administrative and technical capabilities and are now discharging their statutory functions of seed certification and seed quality control in more efficient and prompt manner. As a result of strengthening of ICAR and SAU research centers, the quality and availability of breeder seed has substantially improved. The Project has encouraged investment in the seed sector by private sector companies, some of whom have developed world class research facilities. 38. State Seeds Corporations. All the five first batch seed corporations earned profits during The National Seeds Corporation which was running into losses for the last 7-8 years, has now turned around and earned a profit of Rs9.6 million in the year Similarly, in the case of UPS&TDC, profits have increased from Rs3.7 million in to Rs68.2 million in The GSSC earned a profit of Rs27.5 million in the year as against Rs7.5 million in The profits of APSSDC which were RsO.65 million in have increased to Rs4.0 million in The SFCI which incurred losses to the tune of Rs6O million in the year has earned a profit of Rs32.5 million in The 3 first batch seed corporations namely UPS&TDC, GSSC and APSSDC paid dividends for the first time in the year after achieving the rate of return envisaged in the Project.

61 45 Annex B Page 7 ofl2 39. As regards the second batch seed corporations, the MSSC earned a profit of Rs97.5 million in as against profit of Rs69 million in Similarly, the profit of KSSC has increased from Rs3.9 million in to Rs6.7 million in The profit of WBSSC has also increased from Rs5.7 million in to Rs9.6 million in However, the profit of HSDC and MPSS&FDC remained constant at around Rsl 1.6 million and Rs6 million respectively during the last 3 years. Among the third batch seed corporations, RSSC earned profits of Rsl3.3 million and Rs39 million during the years and respectively. However, OSSC incurred losses of Rsl4 million and Rs9.8 million during and respectively. Similarly, ASC also had a loss of Rs32.7 million in Their accounts for and are under preparation. Details of SSC performance are provided in Annexure I. 40. Production of certified/quality seeds by the 10 first and second batch seed corporations namely, NSC, SFCI, GSSC, UPS&TDC, APSSDC, MSSC, WBSSC, MPSS&FDC, HSDC and KSSC has increased from million quintals in to million quintals in The distribution of certified and quality seeds in 9 participating States namely, Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Uttar Pradesh and Haryana has increased from million quintals in to 3.37 million quintals in The production of breeder seed has increased from 33,890 quintals in to 43,363 quintals in The production of foundation seeds in the country increased from 0.37 million quintals in to 0.47 million quintals in However, it may be noted that the entire increase in production of breeder and foundation seed can not be attributed to NSP-III. Moreover, the development of infrastructure in ICARISAU institutions would have an impact on production levels only with a time lag. 42. The total seed processing capacity of 10 first and second batch participating seed corporations increased from 3.64 million quintals in to 4.33 million quintals in In order to maintain continuity of reforms initiated under the Project in the participating seed corporations, the tenure of the Chief Executives of all participating seed corporations has been ensured for a minimum period of 3 years. 44. Various cost reduction measures have been undertaken by participating seed corporations particularly in the areas of production, processing, certification, packing, storage, transportation etc. For instance, in the case of NSC, the transportation cost has been reduced to Rs61 per quintal as against Rs84 per quintal in The condemnation losses of NSC have also been brought down to negligible levels in as against 45,706 quintals in Before participating in NSP-III, many seed corporations were solely dependent on the State Govermnents' schemes/channels for distribution of their seeds. However, alternative channels of seed distributions have now been developed by many seed corporations. For example, APSSDC's sale of seeds through the State Government and its institutions which was 62% of the total sales in declined to 12% in Sale of seeds through dealers' network which was 16% in increased to 67% in Similarly, in 91-92, NSC was selling 61% of its seeds through Governmental channels which was reduced to 43% in At the same time, NSC's their sale of seeds through dealers' network has increased from 36% in to 52% in In respect of MSSC, sale of seeds through Government which was 29% in has reduced to 6.59% in and sales through dealers' network has increased from 70% to 93% in The sales of UPS&TDC through Government channels which amounted to 91% declined to 84% in and the sales through private network increased from 8% in to 16% in

62 46 Annex B Page 8 of The total processing and storage capacities added by the participating seed corporations are as under: S. Name of Nol.of Total No. or Storage Machinery Vegetable No. Seed Processing Processing Storages Capacity Purchased: Seed Corporatio Plants Capacity Constd. (Qtls.) (Rs Processing ns (Nos.) (Qtls.) (Nos.) million) Units l :: (Nos,) 1. UPS&TDC 1,35,00 1,55, GSSC 4 96, ,32,00G APSSDC 6 70, , MSSC 6 96, , MPSSFDC 3 3 : 6. HSDC 3 40, l 7. :KSSC 3 99, , :WBSSC MTH5 90,000-9;.: lossc :7 1 : 2,00, : Seed Certification Agencies. Many participating State Seed Certification Agencies, have become financially self-reliant after participating in the Project. For example, the Seed Certification Agencies of Uttar Pradesh, Andhra Pradesh, Karnataka, Haryana, Rajasthan and Gujarat which were earlier dependent on the State Government grants for meeting their expenses have now completely stopped taking any grants from the State Governments and have become self-reliant by increasing seed certification fees and by reducing their administrative expenditures. 48. The total area under seed certification of 10 participating Seed Certification Agencies namely, ASSCA, APSSCA, KSSCA, GSSCA, MPSSCA, MSSCA, OSSCA, RSSCA, UPSSCA and HSSCA has increased from 3,79,360 ha in to 5,21,039 ha. in The total quantity of seeds certified by these agencies has also increased from 4.23 million quintals in to 5.78 million quintals in The seed testing capacity of participating Seed Certification Agencies has increased from 1,22,000 samples in to 2,45,000 samples in With the assistance under the Project, 13 Seed Testing Laboratories were constructed/strengthened and 9 Grow-out-Test farms were developed by participating Seed Certification Agencies. The Agencies have also procured about 45 vehicles and financed purchase of 383 motorcycles which have improved the mobility of field inspectors facilitating timely inspection of seed plots. 50. With the help of audio-visual training facilities provided under the project, the Seed Certification Agencies have started refresher courses training centers for their technical personnel to keep them acquainted with recent development in seeds, particularly those relating to development of new varieties. 51. The development of Grow-out-Test farms by Seed Certification Agencies has helped in ensuring the genetic purity of foundation seed (and ultimately of certified seeds) as many of these agencies are now subjecting foundation seeds of all crops to Grow-out-Tests. 52. The Seed Certification Agencies specially KSSCA, APSSCA and UPSSCA have connected their seed testing laboratories through a computer network which has enabled them to convey seed testing results within the minimum possible time to seed growers which in turn helps in timely packaging and transportation of seeds. 53. ICAR/SAUs - Varietal Development. A large number of improved varieties were released/notified/identifieduring the Project period. A total number of 282 notified varieties released were during the period 1991 to In case of forage crops alone, 28 cultivars were evolved in 13 different crops. The above figures

63 47 Annex B Page 9 of 12 are intended only to given an idea of the progress achieved during this period. It is not the intention to suggest that the development of these new varieties was the direct outcome of NSP-III. 54. Germplasm Related Activities. During the project period, a large number of accessions were made to the gene banks. Seed lots of 857 varieties were stored in the gene bank which include cereals (254), pulses (131), oilseeds (163), narcotics (66), medicinal crops (1) and vegetables (55). 55. Breeder Seed Production. The production of breeder seed increased from nillion quintals in to million quintals in The quality of the breeder seed has also improved considerably. 56. Off-Season Nurseries. Off-season nurseries were developed at Wellington (wheat, barley, sugarcane, mustard), Lahaul (winter cereals, oilseeds and pulses, forages and buckwheat), Coimbatore (pearl millet, finger-millet, soybean, cotton, pulses, oilseeds), Cuttack, Hyderabad (rice), Amberpet (maize) and Warrangal (sorghum). Besides, other need based off-season facilities were also strengthened. 57. Farm Development, Seed Processing and Packaging Facilities. Several centers have procured seed cleaning and seed processing plants and utilized them for obtaining cleaned and graded breeder seed. Farm development, provision of wells and other irrigation sources, drainage facilities, fencing, threshing floors, drying yards and other related facilities along with procurement of farm equipment like tractors, space planters, thresher and other field equipment were undertaken to augment breeder seed production. Other seed processing equipment such as minipetcus type seed cleaner-cum-grader, automatic sealer with conveyer belt for seed packing and bag closer were procured at several centers. Various field plot and other machinery like land plane, tractor-mounted sprayer, sprinkler system, balances, computers, precision seed cleaner- cum grader, electricity heated batch dryer, spares for the equipment were procured at several centers. 58. Strengthening of Central Seed Testing Laboratory (CSTL). The CSTL at IARI, New Delhi was strengthened through new equipment at a total cost of Rs4.0 million. This was intended to enable the laboratory to carry out the various duties and responsibilities assigned to it under the Seeds Act, Monitoring. A monitoring discipline team consisting of representatives of ICAR, NSC, and the breeder was constituted for overseeing the production of breeder and nucleus seed at different centers. 60. NABARD. More than 140 projects of private seed companies for creation of infrastructural facilities for R&D and production and distribution of seeds were taken up for financing under the Project. It is still early to assess the overall impact of these private sector investments as many of them are still under way. Several private sector companies which have availed themselves of investment credit have established a significant presence in market for seeds of sorghum, maize, sunflower, vegetables etc. 61. Mobile Processing Plants (MPPs). The participating seed corporations/state Governments procured about 26 MPPs to encourage on-fann seed processing by farners. The response of farmers to these MPPs is overwhelming particularly in the case of tribal farmers of the country as hitherto they were unable to bring their seeds to the established processing plants. 62. Coinciding with the Project implementation period, Indian agriculture witnessed a quantum jump in the production of a number of commodities. The total food-grain production has risen from a level of MT in to MT in An impressive increase has also been recorded in the production of oilseeds and cotton. New varieties and cultivars have been developed for many crops which have enhanced the potential for increase in agricultural production. The real impact of NSP-III would perhaps be seen in the next 4-5 years when certified/quality seeds of newly varieties developed during the Project period become available to the farmers in adequate quantity for commercial cultivation. By that time, the structural reform of third batch seed corporations would also have been completed. Together with improved performance with first and second batch seed corporations and the impact of private sector investment, a significant impact on the availability of quality seeds can be visualized.

64 48 Annex B PROBLEMS EXPERIENCE DURING IMPLEMENTATION OF THE PROJECT Page 10 of Project Management Unit. The initial delay in implementation of the Project is attributable to two main reasons: (a) Though the IDA Credit Agreement was signed in 1988 the Public Investment Board (P1B) of GOl approved the Project only in March, (b) The pre-requisites for implementation of the Project like setting up of a Project Management Unit, appointment of Principal Consultant/Operating Consultants, updation of audited accounts by participating Seed Corporations etc. took considerable time. 64. State Governments. As State Governments were the majority shareholders in seed corporations, their conunitment for structural reform of the corporations was absolutely necessary. During implementation, it was observed that in some states the State Govenunent took a lot of time in committing themselves to the restructuring programs of seed corporations. They also delayed in contributing their share in the financial package for revamping of seed corporations. A few State Governments also took much time in giving approval for implementation of certain structural reforms like VRS/VSS, filling up of the key posts in the corporations, ensuring continuity in the tenure of Chief Executive of the Corporation for a minimum period of 3 years etc. 65. Seed Corporations. Some of the seed corporations took considerable time for completion and updation of their annual audited accounts which was a pre-requisite for participation under in the Project. The third batch seed corporations completed their audited accounts only during as a result of which diagnostic studies by consultants started very late. The Bihar State Seed Corporation could not participate in the Project because of noncompletion of audited accounts. 66. Performance of Consultants. The appointment of operating consultants for preparing diagnostic reports and Action Plans for institutional reform was extremely useful in providing a professional and objective analysis of problems and options. The consultants were also able to analyze the problems of the Corporation in considerable depth.. The role of the Principal Consultant in reviewing the reports and recommendations of the operating consultants was also extremely fruitful. However, the performance of all operating consultants was not uniform. While the large established consultants performed well,the performance of partnership firms was generally not up to expectations. Some consultants were characterized by high turnover of staff which created a number of problems. The operating consultants often had problems in eliciting meaningful responses and commitments from the State Governments and at time even from the corporations themselves. It is, perhaps, necessary to review that selection procedures for consultants to ensure that only established consultants (specializing in management consultancy) having the capability and resources to carry out an assignment over 3-4 years are selected for such projects. 67. Bank's Procurement Procedures. Initially, the staff in the PMU and in beneficiary institutions were not acquainted with the World Bank procurement procedures and it took some time for them to familiarize themselves with the Bank's procedures. Delays were also experienced in certain cases where a deviation from the Bank's prescribed procedure (like retendering or purchase of equipment on single- tender basis or procurement on DGS&D rates) required the approval of the Bank. Contracts above Rs2 million pre-scrutiny of required documents by the Bank which was time consuming. This procedure could have been cut short by allowing the concerned Ministry/Departmento handle such cases based on clear guidelines. 68. Monitoring the ICAR Component. Funds were disbursed to about 70 ICAR/SAU institutions scattered all over the country and effective monitoring for utilization of funds by these institutions was quite difficult and problematic. There was also considerable delay in submission of progress report by some of the institutions. 69. NABARD. In some of the cases, NABARD took time in sanctioning project proposals for providing credit under the Project. The main reasons were incomplete reports furnished by the borrowers and also nonavailability of technical experts in the participating banks for appraisal of the projects. The NABARD overcame this problem by adopting a joint appraisal system with commercial banks i.e. through a joint team of NABARD and participating banks. In certain cases, it was also noticed that after getting the loan sanctioned, funds was not drawn by borrowers because they felt that the rate of interest was too high. It was originally envisaged that availability of

65 49 Annex B Page 11 of 12 NABARD refinance would enable commercial banks to lend at a concessional rate for seed sector projects. In actual practice, owing to deregulation of interest rates by the RBI, there was no element of concessionality in the loans given. WORLD BANK 'S ROLE 70. During the entire project period, the support, guidance and assistance of the Bank was excellent. The Bank monitored the Project effectively. Twice in a year, the Bank mounted Review Missions for field visits and for appraising the progress of the Project. The Aide-Memoire furnished by the Review Missions was very comprehensive and provided useful guidance to the Ministry of Agriculture. These Aide-Memoires enabled mid-course corrections and a flexible deployment of resources. The Bank's technical comments during preparation of the Action Plans for various seed corporations were also helpful to PMU. The World Bank project managers were very cooperative and adopted a flexible and problem solving approach. There was, perhaps, a problem with the way the Project was structured. While the entire responsibility for implementation was with the PMU in the Ministry of Agriculture, the onus of implementation was mainly on the seed corporations and the beneficiary institutions. MAJOR DEVIATIONS FROM THE STAFF APPRAISAL REPORT 71. Mobile Seed Processing Plants (MPPs). In the Staff Appraisal Report, there was a mention that Mobile Processing Plants (MPPs) to encourage on-farm seed processing by the farmers, would be supplied to the State Governments which are responsible for extension work. However, during project implementation, it was felt that instead of giving these MPPs to the Agriculture Departments of the State Governments, they could be supplied to the State Seed Corporations which were the main agencies in the states for production and distribution of seeds Being commercial organizations, these corporations would also be able to bear the running cost of these MPPs. In view of this, MPPs were supplied to 6 corporations and 1 State Government. These seed corporations are now effectively operating the MPPs in remote areas of states giving seed processing services to farmers. 72. Central Seed Testing Laboratory (CSTL). In the Staff Appraisal Report, it was mentioned that under the Project Component, assistance would be provided for construction and strengthening of a CSTL. As construction of the new Central Seed Testing Laboratory( as a part of the proposed National Seed Training Center) was delayed during the Project period because of various unforeseen reasons, it was decided to provide assistance to the Seed Testing Laboratory of IARI which was discharging the functions of CSTL. The latest position about construction of CSTL is that the GOI has taken possession of 10 ha. land at Varanasi, UP and construction work is about to begin. 73. Breeder Seed Production. In the Staff Appraisal Report, it was envisaged that the responsibility for production of breeder seed would be gradually transferred to the seed corporations during the project period. However, this could not be implemented fully because of the following reasons: (a) Many seed corporations did not have the necessary technical expertise to undertake breeder seed production work; and (b) Many Universities had big farms to undertake breeder seed production work and it would have been difficult for them to utilize these farms if breeder seed production was discontinued. However, some of the seed corporations like GSSC, APSSDC, NSC etc. have started undertaking breeder seed production during the Project period. CONCERNS FOR THE FUTURE 74. There is no doubt that the implementation of NSP-III has given a commercial orientation to the seeds corporations in the public sector and has also cleaned up their balance sheets substantially. Many public sector seed corporations have substantially reduced their dependence on State Governments and have begun to exercise autonomy in management and pricing decisions. It remains to be seen whether the public sector seeds corporations are able to sustain these changes without regressing to previous practices. There is a need for a monitoring mechanism to ensure that institutional and financial reform in these corporation is maintained. 75. It would be necessary to ensure that the corporations continue to have autonomy in their operations. This is being emphasized because State Governments continue to command substantial influence over the operations of these corporations. Apart from being majority shareholders, the State Governments have a significant role in the

66 50 Annex B Page 12 of 12 appointment of top personnel, in the marketing of seeds and in providing emergency financial support. The corporations are still expected to play a significant role in the implementation of various central/state level seed development programs. 76. Even in the case of corporations which are profitable it is seen that a large part of the profits can be attributed to the subsidy available to the corporations under State/GOI sponsored programs. It is likely that many of these subsidies will be phased out in the years to come. The competitiveness of public sector seeds corporation in the absence of subsidy is also an important issue. It has generally been seen that the private sector does not appear to be seriously interested in getting into production and distribution of seeds of self pollinated crops where margins are relatively lower. If seed corporations find their profitability reduced owing to phasing out of the subsidy, it could affect the availability of seeds of important self pollinated cereal crops. A situation could arise where the public sector corporations are unable to sustain seed production of these crops with the private sector not inclined to make large investments in for these crops. 77. Several public sector corporations are still faced with the problem of surplus staff which they are unable to dispense with due to number of reasons. Even voluntary separation schemes have not been effective in many cases. Unless this issue is tackled it will have long term implications for the financial viability of these corporations. 78. While SSCAs have made substantial investment in infrastructure as a result of implementation of NSP- III, many of these are still not financially viable. Unless they are able to rationalize certification fees and enforce productivity norms for staff they will continue to remain dependent on State Governments for financial support. The SSCAs continue constituted to remain dependent on staff on deputation from other agencies and are yet to build up their own specialized cadres. The SSCAs need to develop their own technical cadres to ensure continuity and ensure technical competence. 79. The SSCAs also appear to have constraints in expanding the area under certified seed production significantly. If SSCAs are unable to handle significantly higher volumes then certified seeds will continue to remain a small portion of the total seeds consumed in the country. 80. The infrastructure for varietal development and breeder seed production created in ICAR and SAU institutions needs to be backed up with adequate provisions for maintenance in the coming years. In the absence of maintenance expenditure, many of the investments could become infructuous. 81. The off-take of credit by the private sector for investment in the seed sector is being hampered by the prohibitively high rates of interests ranging from 15.5% to nearly 20%. Such high rates are affecting the projected viability of many investments in the seeds sector. The enactment of a legislation on plant variety protection will necessitate substantial investments to create facilities for DUS (Distinctness, Uniformity and Stability) testing under an autonomous authority. The liberalization of seed imports with the objective of making available the best plant seed/planting material available anywhere in the world to Indian farmers will necessitate very large investments in building up the necessary quarantine infrastructure.