Report No. 14761 -IN Impact Evaluation Report · 2016. 8. 31. · This report was prepared by...

Report No. 14761 -IN

Impact Evaluation ReportBangladesh: Cereal Seeds Project (Credit 41 O-BD)India: National Seeds Project (Loan 1273-IN)India: Second National Seeds Project (Credit 81 6-IN)Pakistan: Seed Project (Credit 620-PAK)June 30, 1995

Operations Evaluation Departmnent

Document of the World Bank

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Abbreviations and Acronyms

AP Andhra PradeshAU Agricultural UniversityADC Agricultural Development CorporationBADC Bangladesh Agricultural Development CorporationBRRI Bangladesh Rice Research InstituteCIMMYT Centro Internacional de Mejoramiento de Maiz y Trigo

International Maize and Wheat Improvement CentreDOA Department of AgricultureERR Internal Economic Rate of RetumFAO Food and Agricultural OrganizationFSCD Federal Seed Certification Department (of Pakistan)HYV High Yielding Variety[AS Indian Administrative ServiceICAR Indian Council of Agricultural ResearchIDA International Development AgencyIE Impact EvaluationIRRI Intemational Rice Research InstituteNSB National Seed BoardNSC National Seed Company (of India)NSRD National Seed Registration Department (of Pakistan)NSDC National Seeds Development Council (of India)NSP National Seed ProgramNSPs National Seeds Projects (i.e. NSI and NS2)NSI National Seeds Project (Loan 1273-lN)NS2 Second National Seeds Project (Credit 0816-[NlNUFT National Uniform Farm TrialsNUYT National Uniform Yield TrialsNWFP North-West Frontier ProvinceOED Operations Evaluation DepartmentOPV Open-Pollinated VarietyPPAM Project Performance Audit MemorandumPPAR Project Performance Audit Report

(Consists of a PPAM and PCR)PCGA Private Cotton Ginners AssociationPCR Project Completion ReportPSC Provincial Seed CompanyPSCo Punjab Seed CorporationPSSC Private Sector Seed CompanySAR Staff Appraisal ReportSCA Seed Certification AgencySFCI State Farm Corporation of IndiaSPV Self-Pollinated VarietySSC State Seed CompanySSCA Stato Seed Certification AgenciesSSCo Sindh Seed CorporationSSCs State Seed CompaniesUP Uttar PradeshUPAU Uttar Pradesh Agricultural University

The World BankWashington, D.C. 20A1

U.S.A.

Office of the Director-GeneralOperations Evaluation

June 30, 1995

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Impact Evaluation Report on Four Seeds ProjectsBangladesh: Cereal Seeds Project (Credit 410-BD)India: National Seeds Project (Loan 1273-IN)India: Second National Seeds Project (Credit 816-IN)Pakistan: Seed Project (Credit 620-PAK)

Attached is the Impact Evaluation Report (IER) prepared by the Operations EvaluationDepartment on the Bangladesh Cereal Seeds project (Credit 410-BD, approved in FY73), theIndia National Seeds project (Loan-1273-IN, approved in FY76), the India Second NationalSeeds project (Credit-816-IN, approved in FY78) and the Pakistan Seeds project (Credit 620-PAK, approved in FY76). Comments on the IER from all three borrowers have beenreceived and are attached.

These four projects were modeled on the Bank's successful Tarai Seeds Project inIndia (Loan 614-IN) which took a comprehensive approach to improving the availability ofhigh yield varieties (HYVs) principally of rice and wheat. The projects did not seek tochange existing national policies in the seed industry. Thus, seed breeding, registration andcertification, bulking-up, seed processing and distribution were all assisted through publicsector seed corporations. Instead of fostering monopolistic national corporations, the projectsencouraged the development of state (India) or provincial (Pakistan) companies. Thefortuitous result was to introduce competition within the public sector, which subsequentlyfacilitated the entry into the sector of local and multinational private sector seed companies.The main project investments were in large seed processing plants, plus necessary office,laboratory, communications and transport equipment; staff housing was supplied as needed.Technical assistance and significant training components were also included. The resultingcadre of well trained seed professionals provided a pool of local expertise fundamental to theemergence of private seed companies.

The projects were intended to popularize and greatly expand the supply of early HYVseed. But, by the time they were implemented, most farmers had access to HYV seed.Thus, the projects missed the seed boom associated with the first HYVs, and project aidedinstitutions had difficulty in persuading farmers that the project-promoted certified seedperformed better than HYV based seed saved by farmers from their own crops.

Due to their positive, albeit unplanned, institutional development results, the impactevaluation finds a more positive situation in the seeds industry. This includes a cadre of welltrained staff and an active private sector. In India there are 500 private seed companies, 24of them with links to multinational seed companies. In Pakistan there is a highlyprofessional Seed Certification Department and in the Punjab Seed Corporation, a wellmanaged company similar to US farmer-owned cooperatives. In Bangladesh the project wasdescribed as the "rock" on which other donors had built and continue to build. With thebenefit of hindsight, it now appears that in all three countries, the Bank used its influencerealistically and successfully to support liberalization of the seed sector. Farmer interviewsduring the impact evaluation and a survey in Bangladesh, showed farmers to be aware of theimportance of good seed and satisfied with their access to improved seed, but inclined toover-value seed saved from crops in their own village.

In sum, the impact evaluation finds that the projects achieved a large measure ofsuccess. The key elements of seed project design were: (a) technical training, of value toboth the public and private sectors, (b) creation of a basic institutional infrastructure (seedbreeding, certification, processing etc.), (c) break-up of national parastatal seed monopoliesand (d) removal of barriers to entry. The IER also notes that if seed is to be subsidized, thesubsidy should be the same regardless of whether the seed is distributed by public or privateagents. A key missing element in these projects was any direct assistance (e.g., on farmstorage, and seed cleaning) to the informal sector for farmer saved (non-hybrid) seed. Thisgap is being addressed in the India Third National Seeds Project (Credit 1952-IN).

Attachment

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Contents

Preface ................................................................ SBasic Data Sheet ......................................................... 7Executive Summary. ..................................................... 15

1. Bank Seeds Projects ................................................... 21

A. Sample Selection ................................................... 22B. Design Features of the Impact Evaluation .................................. 23C. Key Issues ..................................................... 23D. The Environment, Women, Privatization, Governance and Poverty ................. 24

2. Project Design ..................................................... 27

A. Common Features ................................................... 27B. Bangladesh ..................................................... 27C. India .................................................... 29D. Pakistan ..................................................... 31

3. Project Performance at Completion or Audit ................................ 35

A. Common Features ................................................... 35B. Bangladesh ..................................................... 36C. India ...................................................... 39D. Pakistan ..................................................... 42

4. Project Impact ..................................................... 45

A. Common Features ................................................... 45B. Bangladesh ..................................................... 45

The Agricultural Program ............................................... 45Impact of the Seeds Project . ............................................ 48The Economic Rate of Return. ........................................... 50Remaining Challenges ................................................. 52

C. India ...................................................... 54The National Seed Company . ............................................ 54State and Private Seed Companies ............. ............................ 55Economic Rate of Return ............................................... 57Remaining Challenges ................................................. 58

This report was prepared by Wilfred Candler (Task Manager). Pilar Barquero provided administrativesupport.

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D. Pakistan ................................. 59Impact on Breeder Seed Production . ................................. 59Impact on Production and Marketing . ................................. 62Impact on Farmers ................................. 65The Economic Rate of Return ........... ...................... 66Remaining Challenges ................................. 68

5. Conclusions and Future Impact . .................................... 75

A. Institutional Evolution .................................. 75B. Sustainability ................................. 76C. Lessons ................................. 77

Technical Training ................................. 77Institutional Infrastructure ................................. 78Seed Production ................................. 78Break-up of Monopoly ................................. 78Remove Barriers to Entry ................................. 78Subsidy ................................. 79Independent Testing and Certification .................................. 79Support for Informal System ................................. 79

D. Bangladesh and the Small Country Problem ................................ 79E. Wider Lessons ................................. 80

Boxes

Bangladesh

B 1. Cost Recovery (PPAM para. 22) . ................................. 38B2. The Seed System Through Farmer's Eye ................................. 49

Pakistan

Pl. Contrasting Perspective of SAR and PCR ................................. 33P2. Re-inventing the Public Sector . ................................. 63P3. When is a Playing-Field Level? ........................................ 71P4. The Sindh Seed Corporation ............................. 74

Tables

2.1 Key Statistics from the Four Projects . ............................. 28

Bangladesh

B1. Seed Production by Seed Multiplication Farms and Contract Growers .... .......... 36B2. Seed and Grain Prices of Paddy and Wheat, and Price Ratios .................... 37B3. Some Indicators of Progress towards Food Self-Sufficiency ..................... 47

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Pakistan

P 1. Yields and Production of Major Crops .. 60P2. Rice and Wheat Procurement and Sales by SSCs .. 64P3. Distribution of Certified Seed of Wheat, Paddy and Cotton by Supplier . .64P4. Cumulative Projected Disbursement Profile ................................ 67P5. Seed Sales in Selected Years .. 68

Annexes

A. Existing Reports on Completed Seed Projects .81B. Statistical Annexes .83C. Comments from the Governments .89

References . . .87

Map IBRD I1 61R 2

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Preface

It is almost a decade since the first impact evaluation of Bank seeds projects,'one in India and the other in Indonesia. This second impact evaluation covers fourproject, two in India and one each in Bangladesh and Pakistan. In concept, these fourprojects were modelled on the Indian Tarai project, which was the subject of theprevious evaluation. An important issue for this impact evaluation is the extent towhich the leading role assigned to the public sector in these projects has affected theemergence of the private seed industry. The evaluation concludes that thedevelopment strategy followed by the Governments and the Bank worked well. Theinitial injection of training and expertise to assist the public sector provided the basisfor private sector development. Decentralization of the seed parastatals in India andPakistan helped defuse potential opposition to the growth of the private sector. Andthe Bank's initial support of the public sector has assured it a "seat at the table" fromwhich to argue for a level-playing field for the private sector.

The Bangladesh project was supported by an IDA Credit of $7.5 millionequivalent, approved in June 1973; the Indian projects were supported by a Bank Loanof $25 million approved in May 1976 and an IDA Credit of $25 million equivalentapproved in June 1978; and the Pakistan project was supported by an IDA of $23million approved equivalent in March 1976.

The Bangladesh project was audited by OED in 1984,2 a PCR was submittedfor the Indian projects in 19863, and the Pakistan project was audited in the sameyear.4 At completion the performance of these projects was felt to be disappointing incomparison to the Tarai project on which they were modelled. Accordingly, it is ofinterest to see how these seed industries have evolved after a rather troubled start.

The report is based on the above mentioned audits and PCRs, examination ofother Bank documents, and interviews with Bank staff. Missions visited the threecountries in the fall of 1994. A formal farmer survey was commissioned in

1. "Impact Evaluation Report: India Tarai Seeds Project (Loan 0614-1N) and Indonesia Seeds I Project (Credit 0246-IND),"OED, Report No. 6575, December 1986.

2. Project Performance Audit Report: Bangladesh Cereal Seeds Project (Credit 0410-BD), OED, April 1984, Report No.5057.

3. Project Completion Report: India National Seed I and II Projects (Loan 1273-IN and Credit 816-IN), OED, June 1987,Report No. 6836.

4. Project Performance Audit Report: Pakistan Seed Project (Credit 620-PAK), OED, May 1987, Report No. 6780.

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Bangladesh. In India and Pakistan, the wide geographical scope of the projectsrequired primary focus on the institutions created by the project, with more limitedfarmer interviews.

The valuable assistance provided to the mission in the preparation of this reportby the Governments of Bangladesh, India and Pakistan and all those associated withthe seed industry who gave generously of their time to be interviewed is gratefullyacknowledged.

The draft version of this impact evaluation report was sent to the Governmentsof Bangladesh, India and Pakistan. The text and footnotes reflect comments receivedfrom officials in the three countries and they are also attached as Annex C.

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Basic Data Sheet

BANGLADESH CEREAL SEEDS PROJECT (CREDIT 410-BD)

Key Project Data (Amounts in US$ million)

Appraisal Actual or Actual as % ofestimate estimated actual appraisal estimate

Project Costs 10.62 17.1 162Credit Amount 7.5 7.5 100Disbursed ) 7.5 7.4 99Repaid ) to July 31, 1982 - 0.0Outstanding ) - 7.4 100Cancelled - 0.1Date Physical Components Completed 1978 1982

Proportion then completed (%) 100 96'Economic rate of return (%) 72 39Institutional Performance

a Credit Disbursement.

Cumulative Estimated and Actual Disbursements (Amounts in US$ million)

FY74 FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83

Appraisal Estimate 2.0 4.8 7.0 7.4 7.5 7.5 7.5 7.5 7.5 7.5Actual - 0.05 0.80 1.20 2.10 2.53 3.67 4.73 7.30 7.40Actual as % of - - 11 16 28 34 49 63 97 99

Appraisal

Date of Final Disbursement July 28, 1982

Project Dates

Item Planned date Actual date

Initiating Memorandum

Negotiations

Board Approval 06/73 06/73

Signing 06/73 06/73

Effectiveness 09/30/73 01/30/74

Closing Date 1978 12/31/81

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Staff Inputs (staff weeks)

FY73 FY93

Preappraisal

Appraisal

Negotiation Not Available

Supervision

Other 20.4

Total

Mission Data

Mission Month/l No. of Staff Specializations Performance Trendf Type ofyear persons weeks represented' Ratingb problemsd

Identification 06/69 1 15 aPreparation 11-12/69 4 36 a,b,cAppraisal 02-03/71 5 35 a,bReappraisal 11-12/72 6 35 a,b,c,d

Supervision 1 06/74 2 17 a,b - - P,T,MSupervision 2 07/74 1 6 b 2 2 P,TSupervision 3 08/74 2 8 a,b 2 2 P,TSupervision 4 01/75 1 - b 3 2 P,TSupervision 5 03-04/75 2 12 a,b 3 2 F,MSupervision 6 10/75 - - b - - -

Supervision 7 12/75 2 11 a,b 3 2 MSupervision 8 06/76 2 9 a,b 2 1 MSupervision 9 02/77 2 10 a,d 2 1 MSupervision 10 02-03/78 2 21 a,b,c 2 1 M,FSupervision 11 06/78 1 - a 2 1 M,FSupervision 12 11/79 1 - b 2 1 M,FSupervision 13 03/80 2 - b,c - - F

Completiona E = economist; L = livestock specialist; F = financial analyst.b. I = problem-free or minor problems; 2 = moderate problems; and 3 = major problems.c. I = improving; 2 = stationary; and 3 = deteriorating.d. F = financial; M = managerial; T = technical; P = political

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Basic Data Sheet

INDIA: NATIONAL SEEDS I PRoJEcT (LOAN 1273-IN)

Key Project Data

Appraisal Actual Actual as % ofestimate appraisal estimate

Total Project Cost (US$ Million equivalent) 52.7 42.65 81Total Project Cost (Rs Million) 461.0 499.00 108Loan Amount (USS Million equivalent) 25.0 21.00 85

Disbursed (US$ Million equivalent)Cancelled (US$ Million equivalent)

Date Physical Components Completed FY80 FY85Proportion then completed (%) 90.00

Economic rate of return (%) 65.0 MarginalInstitutional Performance Satisfactory PoorFinancial Rate of Return (%) Marginal

Large Farm Development 22State Seed Corp. Fixed Investment 30National Seed Corporation (Veg. Seed) 50

Number of Direct Beneficiaries (million farmers) 3.0 1.0 33Agronomic Performance/Annual Incremental Yields' 915,000 T 305,000 T* Less than OCC = 10-12%a. Cereals and cotton.

Cumulative Estimated and Actual Disbursements (Amounts in US$S million)

FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85

Appraisal Estimate(US$ M equivalent) 2.15 10.1 19.5 24.4 25.0 - - -

Actual (US$ M equivalent) - 0.1 0.6 1.4 2.5 3.5 8.5 12.1 21.3Actual as % of Estimate 0 0.1 3.0 6.0 10.0 14.0 34.0 48.0 85.0

Date of Final Disbursement March 29, 1985

Amount Repaid 3.10

Project Dates

Item Planned date Actual Date


Negotiations

Board Approval 05/27/76 05/27/76

Signing 06/10/76 06/10/76


Closing Dates 12/31/80 03/29/85

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Staff Inputs (staff weeks)'

Fiscal year 77 78 79 80 81 82 83 84 85 86 87 Total

Identific./Prep. - - - - - - - - - - - -

Appraisal

Negotiations

Supervision 23.7 23.5 24.2 6.8 8.5 23.5 21.7 13.6 5.9 - 0.1 151.5

PCR 4.6 2.5 7.1

Other (NDO & HQ) 2.3 0.9 7.8 5.3 7.9 1.3 0.4 2.0 5.4 - 0.2 33.5

Total 26.0 24.4 32.0 12.1 16.4 24.8 22.1 15.6 11.3 4.6 2.8 192.1a. No staff inputs for preappraisal, appraisa and negotiation are reflected in records.

Mission Data

Mission MontlW No. of Staffpdays Specializations Performance Trendc Type ofyear persons in field represented3 rating' problemsd

Preparation by 02/75 3-IBRD Not g,h n.a. n.a. n.a.Joint IBRD/GOI 8-GOI knownWorking Group

Assist in Prepn. 04/75 1 6 d n.a. n.a. n.a.Appraisal 10/75 5 163 a,b,d,i n.a. n.a. n.a.

Supervision 1 07/76 1 2 b 1 2 dSupervision 2 10/76 1 9 a I I fSupervision 3 11/77 2 21 a,d 2 2 mSupervision 4 08/78 2 20 a,d 2 1 m,fSupervision 5 05/79 2 16 d 3 2 m,fSupervision 6 03/80 2 25 a,d 2 1 m,f,oSupervision 7 02/81 2 28 a,d 2 2 m,f,oSupervision 8 11/81 3 30 a,d 2 1 m,oSupervision 9 08/82 2 20 a 2 1 m,oSupervision 10 10/83 2 20 a,d 2 2 m,oSupervision 11 05/84 1 27 a 2 2 m,o

Subtotal(Supervision) 218

Total 387'a. Agr = Agriculturalist; B 5 Economist; C - Agriculture Credit Specialist; Gi = Agricultural Economist; H = Seed Specialist;

I= Other.b. I = Problem-free or minor problems; 2 = Moderate problems; 3 = Major problems.c. I = Improving; 2 = Stationary; 3 = Deteriorating.d. F = Financial; M = Managerial; T Technical; P = Political; 0 = Other.e. Excluding considerable time spent by all members of joint IBRD/GOI working group in 1974175 which is not available.

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Basic Data Sheet

INDIA: NATIONAL SEEDS II PROJECT (LOAN 816-IN)

Key Project Data

Appraisal Actual Actual as % ofestimate appraisal estimate

Total Project Cost (US$ Million equivalent) 34.86 27.12 78Total Project Cost (Rs Million) 305.00 399.00 111Loan Amount (US$ Million equivalent) 25.00 16.00 100

Disbursed (US$ Million equivalent)Cancelled (US$ Million equivalent)

Date Physical Components Completed FY83 FY86Proportion then completed (%) 90.00

Economic rate of return (%) 158.00 Marginal*Financial Rate of Return (%)

SFCI Farms (Assuming entire 4,000 hawould be utilized for cert. seeds) 24 marginal

SSC Processing and other operations(based on Rajasthan SSC Model) 20 marginal

Number of Direct Beneficiaries (million farmers) 1.35 0.27 20Institutional Performance Satisfactory Poor

Agronomic Performance/ 945,000 T 189,000 TAnnual/Incremental Yields (Various Crops) (Various crops)Less than OCC = 10-12%


FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY86

Appraisal Estimate 1.00 5.80 11.80 15.00 16.00 16.00 16.00 16.00Actual - 0.20 0.80 2.50 6.00 10.10 14.20 16.00Actual as % of Estimate - 0.03 0.07 0.17 0.38 0.63 0.89 1.00

Date of Final Disbursement February 19, 1985

Project Dates

Item Original Actual


Negotiations

Board Approval 05/30/78 05/30/78

Signing 07/17/78 07/17/78


Credit Closing 12/31/84 12/31/85

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Fiscalyear 76 77 78 79 80 81 82 83 84 85 86 87 Total

Identific./Prep. 8.1 18.2 0.5 - - - - - - - - - 26.8

Appraisal - 73.4 34.8 - - - - - - - - - 108.2

Negotiations - - 11.0 - - - - - - - - - 11.0

Supervision - - 0.5 11.6 7.5 10.2 23.0 17.0 21.6 6.5 - - 97.9

PCR 4.8 1.6 6.4

Other (NDO & HQ) - 0.2 15.5 6.9 21.7 9.4 3.4 0.4 1.0 1.2 0.1 - 59.8

Total 8.1 91.8 62.3 18.5 29.2 19.6 26.4 17.4 22.6 7.7 4.9 1.6 310.1

Mission Data

Mission Month/ No. of Staff/days in Specializations Performance Trendc Type ofyear persons field represented' rating" problemsd

Review of Government 03/77 2 8 b,e n.a. n.a. n.a.ProjectPreparation

Appraisal 04/77 5 165 a,d,h n.a. n.a. n.a.

Supervision 1 08/78 1 15 b 1 2 mSupervision 2 09/79 1 17 a 2 2 m,fSupervision 3 03/80 2 39 a,d 2 1 m,f,oSupervision 4 02/81 2 32 a,d 2 2 m,f,pSupervision 5 11/81 3 74 a,d 2 I m,oSupervision 6 08/82 2 34 a 2 1 m,oSupervision 7 03/83 1 4 a 2 1 m,oSupervision 8 10/83 3 42 a,d,i 2 2 m,oSupervision 9 05/84 1 26 a 2 2 m,o

Subtotal(Supervision) 283

Total 456a. Agr = Agriculturalist; B = Economist; C = Agriculture Industry Specialist; D = Financial Analyst; E = Agricultural Engineer;

F = Agricultural Credit Specialist; G = Agricultural Economist; H - Seed Specialist; I = Other.b. I = Problem-free or minor problems; 2 - Moderate problems; 3 = Major problems.c. I = Improving; 2 = Stationary; 3 = Deteriorating.d. F = Financial; M = Managerial; T = Technical; P = Political; 0 = Other.

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Basic Data Sheet

PAKISTAN: SEED PROJECT (CREDIT 620-PAK)

Key Project Data (Amounts in US$ million)

Original Plan Actual orcurrent estimated

Project Cost 56.5 44.0'Credit Amount 23.0 18.6

Disbursed 23.0 18.6Cancelled 4.40

Date for Completion of Physical Components 12/31/80 06/30/83"Proportion completed by target date (%) 100 80

Economic rate of return (%) 82 300Institutional Performance - Poora. Estimated cost when project completed, tentatively 1986.b. Project was incomplete at Cosing Date, June 30, 1983; two of the four processing plants were badly constructed and their

futurereplacement is planned by the borrower.c. The audit considers an economic rate of retum of 10-12 percent more likely (PPAM, para 14).


FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84

Appraisal Estimate 1.5 8.7 19.0 22.6 23.0 - -

Actual 0.2 0.7 5.1 11.5 14.8 16.2 17.8 18.6Actual as % of Estimate 13 8 27 51 65 70 77 80

Date of Final Disbursement March 21, 1984

Project Dates

Item Original Actual

Initiating Memorandum 1972

Negotiations 09/75 09/75

Board Approval 03/76 03/76

Signing 03/76 03/16/76

Effectiveness 09/76 11/29/76

Closing Date 12/31/80 06/30/83

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Fiscal year 74 75 76 77 78 79 80 81 82 83 84 85 Total

Identific./Prep. 1.0 27.6 0.6 29.2

Appraisal 80.1 12.6 92.7

Negotiations 0.2 24.7 24.9

Supervision 6.1 24.5 50.8 47.4 26.3 24.2 22.8 23.5 17.9 3.6 247.1

Other 0.7 0.1 0.8

Total 1.0 108.6 44.1 24.5 50.8 47.4 26.3 24.2 22.8 23.5 17.9 3.6 394.7

Mission Data

Mission Monthl No. of No. ofpersons Staff Weeks Date of Reportyear weeks

Preparation 05/73Appraisal 11/74 5 6 30 01/21/76

Supervision 1 02/76 1 1 1 11/03/76Supervision 2 11/76 2 1 2 01/12/77Supervision 3 03/77 2 2 3 05/13/77Supervision 4 07/77 4 1 3 09/22/77Supervision 5 02/78 3 2 6 03/14/78Supervision 6 05/78 1.5 3 4.5 07/13/78Supervision 7 11/78 5 3 15 12/22/78Supervision 8 01/79 1 2 2 03/06/79Supervision 9 05/79 3 1 3 06/12/79Supervision 10 07/79 4 5 20 08/06/79Supervision 11 02/80 3 2 6 04/15/80Supervision 12 10/80 1 2 2 11/03/80Supervision 13 12/80 2 2 4 01/16/81Supervision 14 06/81 2 2 4 07/31/81Supervision 15 04/82 2 2 4 05/26/82Supervision 16 11/82 2 3 6 12/15/82Supervision 17 04/83 1 1 1 04/28/83

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Executive Summary

1. The four seeds projects covered by this report were approved in the period1973 to 1978, and closed from 1982 to 1985. They were similar in concept,concerned to ensure that a seed multiplication and marketing system was in place toprovide Green Revolution, High Yielding Variety (HYV) seeds to farmers, and weremodelled on the Bank's first seeds project, the Tarai Seeds Project (Ln 0614-IN) inUttar Pradesh. The Bangladesh Cereal Seeds Project (Credit 0410-BAN) wassupported by an IDA credit of $7.5 million equivalent approved in June 1973. Thiswas followed by India National Seeds Project (Ln 1273-IN) supported by a Bank loanof $25 million and the Pakistan Seeds Project (Credit 0620-PAK) supported by an IDAcredit of $23 million equivalent, both approved in 1976. The final project beingevaluated was India Second National Seeds Project (Credit 0816-IN) supported by anIDA credit of $25 million equivalent, and approved in May 1978.

2. The successful Bank-supported Tarai project was taken as a model. With hind-sight this can be seen as a good, but second best, design. The option of maximizingthe role of a competitive private sector was never seriously considered. Rather theprojects took a "systems approach" and included resources for seed breeding,multiplication, processing, marketing and certification. Major investments were inlarge seed processing plants, plus necessary office, laboratory, communications andtransport equipment; accommodation was provided as needed. Technical assistanceand significant training components were also included. In India and Pakistan newState (and Provincial) seed corporations were established, and in Bangladesh a newSeed Wing was added to the existing Bangladesh Agricultural DevelopmentCorporation (BADC). New seed certification and registration units were alsoestablished. As was common at the time, almost all investments were in the publicsector.

3. Despite some delays, implementation experience was satisfactory with theexception of Pakistan, where despite Bank approved site engineers provided undertechnical assistance, two of the four seed processing plants were found to bestructurally unsound, and had to be rebuilt (an expense shouldered by the PunjabProvincial Government).

4. At completion project outcome was judged to be at best uncertain, in the caseof Pakistan the project was canceled after a two and a half year extension to thesurprise and against the wishes of the Borrower. The projects came too late tocapitalize on the seed boom associated with the introduction of seed for the first

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HYVs, and had difficulty in persuading farmers that Certified seed performed betterthan HYV based seeds saved from the farmer's own fields, and indeed the yield gains,from new seed releases were too small to be readily identified. Thus the projectsfound themselves demand constrained. In effect the project rationale "there is no pointin breeding higher yielding seed if there is no multiplication and marketing system inplace" was stood on its head, and the projects found "there is no point in having a seedmultiplication and marketing system, if there is no recognizably better seed emergingfrom seed breeders."' This is too severe a judgment, since farmer saved seed doesdecline in productivity and become contaminated with weeds over time. Thus evenwithout any increase in yield, a valuable function is performed by feeding good qualityCertified seed into the informal seed multiplication system.

Impact: General Perspective

5. Seven years after their PCRs, it is evident that the seeds projects in India andPakistan used a sophisticated strategy of "creative institutional obsolescence." No lesssophisticated for being in large measure unconscious. By promoting state or provincialparastatal seed companies at the expense of a monopolistic national parastatal seedcompany, the projects mobilized an effective constituency within the public sector insupport of decentralization. Not only did this undermine the political and bureaucraticpower of the national company, but the decentralized seed companies were lessinclined, or less able, to resist the entry of private sector companies. Just as thenational seed companies were asked to give way to state companies, so the statecompanies will be increasingly asked to compete on a level playing field with theprivate sector, or to give way entirely to the new competition.

6. The original national parastatals made a major contribution by (a) an increasein the physical supply of seed, (b) making farmers, politicians and the agriculturalsector in general "seed conscious," and (c) providing an initial cadre of seed scientistsand technologists. However, the natural evolution of a monopolistic parastal is tobecome increasingly bureaucratic, inefficient, politically powerful and indispensable.The decentralization of the seed industry from a single national monopoly to a seriesof state or provincial seed companies was thus a brilliant move. It provided a publicsector dynamic, including many promotion possibilities, which the central companycould not resist. Moreover, it could not be couched in terms of public versus privatesector interests. It was an evolution entirely within the public sector.

7. The seed industries have thus evolved from a single parastatal company, todecentralized state or provincial parastatals, to a mixed private-public system, wherethe public sector supplies predominantly self-pollinated varieties (SPVs), and the

1. Or, as Ahmad (1994, page 347) says "All efforts to produce quality seed will fail if there is no demand."

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private sector supplies hybrids and specialized varieties. Further evolution of the seedindustries awaits a re-thinking of seed policy. The project paradigm that there shouldbe a 20 percent replacement rate for SPVs, and the cost should be paid for in full byfarmers, may simply be untenable. A re-examination could well lead to a lowerreplacement rate or a change in the way the subsidy is paid and an enhanced role forthe private sector. The argument that the government should be willing to pay the fullcost of varietal development and of agricultural extension (because they are publicgoods), but none of the costs of seed production (even though SPVs are in largemeasure public goods) does not have intuitive appeal.

8. In like vein, the continued existence of the seed companies brought intoexistence by the projects, is basically irrelevant to a judgement as to the sustainabilityof the projects. It is the continued supply of good quality seed to farmers atreasonable prices which is the index of project "sustainability", not which organizationsare involved in seed supply. In those cases where parastatal companies evolve to thepoint where they can compete without differential subsidy with the private sector, theircontinued existence is to be welcomed. The projects have had a very positive effecton the evolution of the seeds industries in the three countries; that the industries maybe in the process of outgrowing some of the institutions which originally fostered theirgrowth is an indication of sustainability, rather than unsustainability.

Country Impacts

9. The Cereal Seeds Project in Bangladesh provided the first donor assistance tothe seeds sector, a "rock" on which many other donors have subsequently built. Thesupport for the Bangladesh Rice Research Institute was entirely appropriate; and thesupport of the parastatal Bangladesh Agricultural Development Corporation's (BADC)seed-wing, played a constructive role in the popularization of HYVs. Fortunately thede jure monopoly position conferred on BADC was not reflected de facto due to theself-pollinating characteristics of rice and wheat, which allow farmer multiplication ofHYV seeds. Indeed the most widely sown variety "paijam" was imported informallyand its multiplication has entirely by-passed the official system. Bangladesh has notbenefitted from the competition within the public sector, and hence the expansion of aprivate sector seed industry has been slower than in India and Pakistan. In the contextof a subsequent operation, and in conjunction with other donors, the Bank hasprevailed upon the Government to publish a Seeds Policy. Whilst liberalizing the seedindustry generally, and allowing both private and public participation in the productionand distribution of seeds, this new policy still controls varietal release for five keycrops.2 Project outcome was judged saiisfactory, however less satisfactory than in

2. Varietal release committees, managed by government, also operate in India and Pakistan.

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India and Pakistan where competition within the public sector set the stage forcompetition with the private sector.

10. In India (as in Pakistan) the projects had clearly had a more beneficial impactat the time of the evaluation than seemed likely at project completion. In addition tothe SSCs, there were over 500 private seed companies, 24 of them with links tomultinational seed companies, and many of them with their own hybrid developmentprograms. This represents a critical mass of commercial interest and expertise whichis almost certainly a new and permanent feature of the agricultural sector in India. Acritical mass drawn in large part from seed breeders and other professionals whogained their initial expertise under the auspices of the projects. One of these privateseed companies has been successful in pioneering the production and export of hybridcotton, thus marrying cheap Indian labor with high technology genetics.

11. In Pakistan despite a shaky start, there are now four solid artifacts of the seedproject. An active and routine wheat and cotton breeding program, a rigorous seedregistration and certification program, a major certified wheat and cotton seedmarketing organization, and an extensive cadre of well trained seed industryprofessionals. The Bank's initial sponsorship of monopoly Provincial seed companieshas not prevented the entry of multi-national seed companies and the emergence ofsome modest private sector national seed companies. The Punjab Seed Corporationhaving benefitted from five years of able and stable management now operates muchas a large farmer-owned cooperative in the United States; whilst breaking-even isimportant, it does not operate to maximize profits, but rather to maximize benefits tofarmers.

Brief Lessons

12. Key elements of project design, most of which these projects got right, are:

1. Technical Training. The seed industry stretches all theway from genetic research, through varietal development,bulking up, certification, registration, production andmarketing. Many of these topics are highly technical, andit follows that a cadre of well trained seed scientists andtechnologists is a necessary condition for success of theindustry. Thus an active training component is anessential element of a good project; technical assistance isa very limited, temporary and imperfect substitute.

ii. Institutional Infrastructure. An initial core of publiclysupported genetic research, seed breeding and seed testingis essential for the rapid development of the industry.

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There is no point in the training component, if trainedstaff have nowhere to practice their professions. At alater date, there is room for debate and experimentationas to the relative roles of the public and private sectors inresearch, breeding and certification. However, indeveloping an industry, the public sector has to standready to fulfiil any roles not yet satisfactorily performedby the private sector.

iii. Seed Production. Public production and marketing ofseed may well be a necessary initial step to (a)demonstrate the existence of a market, and (b) to makeseed available pending the development of private sectorseed companies. There is every reason such parastatalcompanies should be encouraged to compete, and if freedfrom the more onerous of public sector bureaucraticprocedures they may be able to do so.

iv. Break-up of Monopoly. It is essential to find some wayto avoid the emergence of a single all powerful parastatalmonopoly. One alternative may be to foster competingparastatals, another would be to provide for seedimportation by companies, other than the seed productionparastatal. The apparent confusion due to imbalance inseed supplies from different sources is a small price topay for avoidance of the policy inertia and bureaucraticprocedures which characterize dominance of an industryby a single parastatal, or other forms of central planning.

v. Remove Barriers to Entry. It is important to ensure thatthere are no unnecessary barriers to entry of private firmsinto the industry; that government not impose regulationsthat prevent the private sector from functioningefficiently; and that the private sector have equal accessto improved seeds and germ plasm produced from theresearch system. It is not necessary to have an activepro-private policy stance; but it is essential not to have ananti-private sector stance.

vi. Subsidy. Under no circumstances should a subsidy beused to give differential advantage to the public sector.Any subsidy should be available to all. The

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administrative problems of doing this, are a significantadditional argument against subsidy.

vii. Independent Testing and Certification. National UniformVarietal Trial open to all; and a highly professional andindependent Seed Certification Authority to establishstandards for germination, purity, and genetic compositionare essential. A truly rigorous Seed CertificationAuthority is perhaps the most important indicator of amature seed industry. In India certification is optional,and this has worked well; but farmers need the option ofbuying certified seed.

viii. Support for Informal System. At least for the next twentyyears the bulk of non-hybrid seed planted is likely to befarmer saved. Farmers need increased advice on roguingfor off-types, minimizing weed contamination, seedcleaning and storage, and germination testing.3

3. This is being addressed in the Third National Seeds Project for India (Credit 1952-IN).

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1. Bank Seeds Projects

1.1 Of the twelve seeds projects for which Project Completion or ProjectPerformance Audit Reports (PCRs or PPARs) are available all but two have been inAsia, (Annex I). The exceptions are projects in Zaire and Ecuador. Designed, for themost part, in the 1970s or early 1980 these projects fostered a public sector seedproduction and delivery system. Often seed was under-priced so that public sectorseed production required continuing subsidies; subsidies which governments were ableand willing to pay.

1.2 The most successful aspects of these projects were usually training and thecreation of institutions for seed testing and certification. Weaknesses were,surprisingly, a failure of research to produce improved self-pollinated varieties (SPVs)and composites. and less surprisingly in multiplication and distribution. The latterweaknesses were more often over-supply due to over-estimating the replacement ratefor SPVs,' than production shortfalls. Laying the foundations for a new generation ofprojects, the lessons learned focussed on "letting the private sector do what it doesbest." This is interpreted to mean the breeding of hybrids, and their production andmarketing. This may leave the breeding, and often the production and distribution, ofSPVs and composites to the public and informal sectors.2 Seed certification andtesting are also key functions for the public sector. The public and private sectorsdescribed above are referred to collectively as the "formal" sector.

1.3 Farmer retained seed such as wheat, rice and cotton provides a third "informal"sector. This informal sector which includes use of the farmers own saved seed, or seed

I. A key distinction is between hybrid and non-hybrid seed. Non-hybrid seed whether open- on self-pollinatedcan be saved by farmers with only gradual deterioration (due to off-types. weed seeds and other impurit' 2s). Self-pollinated varieties. such as wheat and rice are easier to maintain, but even open-pollinated varieties such as maizeand sorghum can return their vigor for several generations when bred as "composites." Development of an improvedhybrid assures the developer of repeat sales year after year, since any retained seed will greatly under-perform itsparents. Release of a non-hybrid, only assures first-time sales, since farmers can keep their grain as seed, or sell itto neighbors. The fraction of seed which is purchased commercially is called "the replacement rate," for hybrids itis 100 percent; for non-hybrid varieties it can be as low as five percent. This replacement rate will increase as theyield of the commercial seed exceeds the yield of farmer retained seed, and of course, the cheaper the commercialseed. Non-hybrid commercial seed may yield more than farmer retained seed, either because of a successfulbreeding program, or due to contamination of farmer retained seeds with other varieties and weeds or decliningdisease resistance. In any case, it is clear that hybrid breeding can generate private profit, wvhilst the breeding ofnon-hybrids has for the most part to be done as a public service. Vegetatively reproduced crops (by cuttings ortubers, e.g. potatoes and cassava) though included in principle, have not featured widely in Bank projects. Thesusceptibility of vegetatively reproduced plants to accumulate viral infections, should dictate a high replacementrate.

2. Maharashtra Hybrid Seed Corporation (a private company) has been very successful in pioneering theproduction of hybrid cotton seed using hand sterilization. Andra Pradesh Seed Corporation (a state seedcorporation) expects to produce its first generation of hybrid rice in 1995. The Indian seed industry has thus gonebeyond technology transfer, to produce indigenous innovation.

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exchanged or bought from neighbors or even traded through village merchants, is themajor source of seed for non-hybrid seed. How the informal sector operates is crucialto the success of any seed system.3 More than 90 percent of wheat and rice seed isprovided from the informal sector in the three countries studied. Taking the extremecase, of only one percent of seed sown being Certified (a one percent replacementrate), and assuming no informal trade, the average generations of sown seed fromCertified seed would be 50. If all seed sown for the first three generations were soldto other farmers through the informal system, the average generations from Certifiedseed would be two. The impact of improved seed thus depends not so much on howmuch Certified seed is bought, as to how actively the informal system multiples what itbuys. All projects recognized the existence of the informal sector (and assumed areplacement rate of 20 percent), but made no attempt to influence the efficiency of itsoperations.4

A. Sample Selection

1.4 The population of seeds projects for which a PCR or PPAR is available islisted in Arnex I. It was felt that neither Zaire nor Ecuador were sufficientlyrepresentative of their continents, to provide what otherwise might have been aninteresting "global comparison." Instead Bangladesh, India and Pakistan were selectedwith (some) very similar agricultural areas and a similar origin for their public sectorinstitutions. India provides an example of a country with "a reasonably effective anddiversified seed industry," whilst in Bangladesh and Pakistan some problems remain.5

The PAR for Bangladesh suggested that the project had operated quite satisfactorily inthe public sector, whilst India and Pakistan had had varying degrees of difficulty. TheIndian seeds projects have already been the subject of one Impact Evaluation6

published in 1986. however the size of the industry and the Bank's continuing supportfor it, suggested that another look by OED would be timely. In India with the twoprojects covering nine States, it was impossible to visit them all. The three Statesvisited Uttar Pradesh, Andara Pradesh and Maharashtra were selected to give a goodgeographic spread, and as being representative of the more successful States. This biasis designed to maximize our understanding of successful projects, which it may beprofitable to imitate.

3. Srivastava (1993. p. 7) and Venkatesan (1994).

4. India: Third National Seeds Project (Credit 1952-lN) includes assistance to the informal sector as one of its keycomponents.

5. Groups I and 2 (Stivastava, 1993, p. viii).

6. "Impact Evaluation Report: India Tarai Seeds Project (Loan 614-IN) and Indonesia Seeds I Project (Credit 246-IND)," OED, Report No 6575.

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B. Design Features of the Impact Evaluation

1.5 Five to ten years after a project's closure, too many additional factors havecome into play for it to be very useful to try to hypothesize a "without project"scenario.7 Rather an impact evaluation has to be concerned whether the combinedeffects of the project, other investments and changed institutional and economic factorshas resulted in a satisfactory outcome. In particular, the last decade has seen a markedshift from the "public sector lead development" paradigm to a paradigm whichemphasizes the key role of competitive private and inforrmal sectors. A significantquestion is thus whether the seeds projects have facilitated or hindered a growing, andappropriate, role for the private and informal sectors.

1.6 The Impact Evaluation (IE) used a two pronged approach to assessing theperformance of the seeds industry. The first was to question participants in theindustry, the "service providers," as to how the industry has changed, whatimprovements have been made, what constraints still adversely affected the industry'sefficiency, and to what extent any of these changes can be associated with the projectsbeing studied. The second approach was to ask farmers, the "customers," how theyfelt the industry has changed, and how well it now serves their needs. The basicapproach has thus been to infer the success of the project from the current status of theindustry, rather than to focus purely on those impacts directly traceable to the project.As pointed out in footnote 7, five or ten years after project closure such "tracing" mayin any case be a chimera depending primarily on the perspective of the observer, ratherthan the facts being observed. The key issues discussed below, provide furtherinsights into the approach used.

C. Key Issues

1.7 Key issues can be arranged around three themes: (a) Sustainability of the publicsector institutions created by the project, (b) any crowding out of the private sector bypublic sector seed companies, and the associated issue of a level playing field, and (c)support to the informal sector involving farmer saved seed for own use, or trade withinthe village.

1.8 Breeding of SPVs such as wheat, rice and cotton is in the nature of a publicgood, since the benefits to society are far greater than can be captured by theorganization developing the variety.8 Thus breeding and crop certification are

7. The problem is not that a scenario cannot be hypothesized, but rather that a very wide range of very different.but equally plausible, scenarios can be described. Any conclusions about project performance then depend more onthe choice of the hypothesized "without project" scenario, than on the known project performance.

8. However, the common practice of having (public sector) breeding research organizations transfer seeds andgerm plasm at nominal cost annecessarily divorces seed breeders from a market test of the demand for theirproducts. They would be better to auction foundation seed, and seeds of inbred lines.

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"natural" public sector activities, and the projects created or supported public sectorinstitutions to carry out these functions. Our interest is primarily in the sustainabilityof the function and the quality of the product, which may or may not imply thesustainability of the institutions created. In particular, a partial or complete take-overof parastatal seed supply functions by the private sector need not imply that the projectbenefits are unsustainable, nor indeed that the support of the public sector to "force"the growth of the seed industry was ill-advised.

1.9 Necessary perhaps as a "quick-fix," the monopoly public sector seed companiescreated by the projects could be managed so as to preclude entry by competitiveprivate sector companies. To what extent was this quick-fix, the enemy of a longer-term private-sector based solution? Did the public sector emphasis of the projects lock-out the private sector?

1.10 World-wide in developed as well as developing countries, the majority of SPVseeds sown is seed saved by farmers from the previous crop. Often this is traded"informally" between farmers, or through village merchants, but it is seed saved byfarmers in the vicinity in which it is grown. How adequately did the "systemsapproach" used in project design meet the needs of this informal sector?

1.11 Though differing between projects, there was a common implicit bias againstthe private sector due to one or more of the following: (a) public sector seedsubsidies, (b) price controls, (c) lack of access to new varieties and germ plasm, (d)prohibition of import of some seeds, (e) restrictions on inter-regional trade, and (f) adisappointing flow of improved varieties from the public research system. In India,the established enabling seed law, which made varietal seed certification optional andthe large market help explain why private sector seed companies evolved more rapidlythan in Pakistan and Bangladesh.

D. The Environment, Women, Privatization, Governance and Poverty

1.12 Privatization and governance have been at the heart of the above discussion.Not as ends in themselves, but as means to serving farmers better; and in particular,finding the right complementary roles for the public and private sectors.

1.13 Seeds projects are unsuited to the direct pursuit of environmental, poverty orgender objectives. However, as one component in programs designed to raise yields,there are clear pay-offs to environmental and poverty concerns. Unless yield increasescan keep pace with population growth, additional land will have to be devoted toagriculture; which means that it has to be taken from other uses, often environmentallypreferable uses. New disease resistant and pest tolerant varieties can reduce the needfor chemical treatments and hence reduce adverse environmental effects. Forsubsistence farmers, a very important poverty group, an increase in yield due to betterseed provides and immediate increase in real income. Further, the decline in real

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grain prices which has characterized particularly the last two decades, and can in largepart be attributed to the Green Revolution, has transferred huge sums to consumers,many of them poor. The impact on subsistence farmers has been positive, but forother farmers the income effects may have been negative. On balance, higher yieldsclearly have to be welcomed.

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2. Project Design

A. Common Features

2.1 All four projects were strongly influenced by the successful experience of theTarai Seed Project (Loan 614-IN) in Uttar Pradesh. Conceived as an integral part ofthe Green Revolution, this project was designed to make the semi-dwarf, irrigation-and fertilizer-responsive, high yielding varieties (HYV) of wheat and rice developed atCIMMYT and IRRI, widely available to farmers in Uttar Pradesh (UP). Project designincluded (a) a lead role for the public sector, including the Uttar Pradesh AgriculturalUniversity (UPAU) (b) plant breeding and variety testing, (c) proximity of plantbreeding, seed production and seed processing, (d) a compact area for seed production,and (e) a significant training element. With hindsight, it can now be seen that thetiming, location and size of this project were key factors in its success. Timingbecause the HYV seeds being supplied by the project were significantly moreproductive than farmer saved seeds from established varieties,9 location because of thedominance of large farms, many of them mechanized, and size because thisrepresented an incremental and local improvement of the national seed distributionsystem, and not a revolution. In addition the evident benefits of the project'simproved seeds, generated whole-hearted enthusiasm in the various organizationscalled on to cooperate in project implementation. The dampening effect of lower grainprices reflecting the very success of the Green Revolution had not yet made themselvesfelt. Key statistics for the four projects are given in Table 2.1.

2.2 From the perspective of the mid-1990s, it appears that these projects missed the"first-best" design, which would have supported public sector breeding research andseed certification; but would have left multiplication, marketing and intemational tradeto the private sector. As discussed below the project in India and Pakistan used a"good second-best" design, which provided for a competitive public sector.

B. Bangladesh

2.3 Starting from a very unsatisfactory food grain and seed production situation,the project was expected, by accelerating the adoption of HYV of rice and wheat byone year, to yield an intemal economic rate of return (ERR) in excess of 70 percent.There was no doubt as to the food crisis facing Bangladesh. During the 1960s riceproduction had risen at two percent a year, whilst population had increased at threepercent. Forced to import 1.5 million tons per year of grain in the late 1960s, acombination of adverse weather and the disorganization caused by the separation fromWest Pakistan, necessitated the importation of 2.5 million tons of grain in 1972.

9. India: Third National Seeds Project (Credit 1952-IN), SAR, August 1988, para. 1.16.

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Table 2.1: Key Statistics from the Four Projects

Bangladesh India I India II Pakistan

Board Date 06/73 05/76 05/78 03/76Closed 12/82 03/85 12/85 06/83

Project Total ($M)IDA 7.5 25.0 23.0IBRD 25.0Governrment 3.1 27.7 9.9 26.5Other 7.0

Species Wheat Wheat Wheat WheatRice Rice Rice Rice

Cotton Cotton CottonOther Other Maize

PulsesForage

AP Kamataka

Geographical Coverage National Haryana Bihar PunjabMaharashtna UP SindhPunjab Rajasthan

Orissa

Seed Production (Tons) 12.000 113,700 136,400 100,000

2.4 The first HYV of rice (IR8) was released in the 1960s. The second HYV(IR20) release. involved the importation of 1.800 tons of seed from the Philippines inthe summer of 1970. This was enough to plant 180,000 acres and was supported by apackage of inputs and trained personnel. Total area under HYV expanded from200,000 acres in 1970 to 3 million acres in 1973 (of a total of 17.5 million acressuitable for HYV). Improved rice seed production by the Bangladesh AgriculturalDevelopment Corporation (BADC) accounted for only 4,400 tons per year, versus anannual usage of 600,000 tons of seed. Rice is self-pollinating so that varietal puritycan be easily maintained for farmer saved seed. However, the change-over to newHYVs clearly required the introduction of more than 4,400 tons (0.7 percent) of thenew seeds each year. Also there was no capacity to produce a continuing stream oflocally adapted HYVs.

2.5 The Staff Appraisal Report (SAR) notes that whereas imported HYV wheatseed could command up to a 100 percent price premium over food wheat; HYV riceseed, after bulking up by BADC, commanded almost no premium from growers. Inpart this may have reflected BADC pricing policy, or a lack of demonstration andextension of improved yield, but the SAR attributed this equally to lack of farmer

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demand for the poor quality seed then being produced by BADC. The Governmentand Bank were clearly right in their diagnosis that a major increase in the effectivenessof the seed industry was called for and, if achieved, would earn a high rate of return.

2.6 Project design called for a focus on rice and wheat, and the strengthening ofBADC. an input supply parastatal under the Ministry of Agriculture. Seedsrepresented about 1.5 to 3 percent of BADC turn-over, fertilizer, chemicals, farm andirrigation equipment representing the bulk of its activities. BADC was to be left withits monopolv of seed imports and the bulking up of rice and wheat seeds for sale tofarmers. However, it was to be supplied with additional hardware (in the form offarm equipmenL warehouse space, seed cleaning equipment), a cadre of expatriateexperts (to advise and improve management), and new institutions (a National SeedBoard and Seed Certification Agency also reporting to the Minister of Agriculture) tosupport its activities. Contract seed production for BADC was to be rationalized intofewer locations. but with larger contiguous areas (at least 10 acres) devoted to seed forany given variety. A National Seed Board (NSB) was to advise government on thepricing of improved seed, the resulting subsidy to BADC, the release of new seedvarieties. and the level of seed imports, if any. Support was also provided for seedbreeding principally to the Bangladesh Rice Research Institute (BRRI). A substantialtraining program for rice breeders and BADC staff rounded out the project.

2.7 It was expected that the project would result in both increased quantity of seedfor sale (from 4.400 tons per year to 10,000 tons of paddy and 2,000 tons of wheat),and an increase in quality (higher germination rates, increased seed purity and reducedweed seed content). Initially this increased quality was expected to allow a premiumof 40 percent for BADC rice seed over food rice; rising to a 100 percent premiumover five vears at which stage BADC and support services would be on a full costrecoverv and amortization basis. This vision of a self-financing parastatal based onsales of SPV is common to all four projects. It is a vision which seems easier todescribe in the SAR, than to achieve in practice. If it were not for the Punjab SeedCorporation. one might be tempted to believe it is a mirage.

C. India

2.8 Prior to the introduction of HYVs in 1961, India had a skewed andundeveloped seed industry (Venkatesan, 1994). A small private sector producedquantities of high-valued flower and vegetable seeds; whilst the public sectordisseminated improved seed from small, government-run farms located in eachCommunity Development Block. As successive HYVs were released in India, and asfarmers recognized the need to change varieties, private sector seed companies sprangup to meet the demand, and there was a rapid change-over to the new varieties.However, in the case of SPVs (notably wheat and rice) this was a temporary shift inthe demand for commercial seed, since farmers quickly reverted to replacing less than

30

ten percent of self-pollinated seed each year. In the face of collapsed demand, manyof the weaker seed companies were liquidated or otherwise left the industry.

2.9 Realizing that its small and dispersed seed farms were poorly designed topromote these new varieties, and recognizing a public sector responsibility to certifythe quality of seed being sold, the Government established the National Seed Company(NSC) in 1963 charged with promoting seed industry development, from productionthrough processing, storage and marketing; and to establish a system of quality control.The initial efforts of the NSC to fulfill its mandate were themselves quite fragmented.In 1969, the Bank supported Tarai Seed Project, provided the first systematic approachto the provision of HYV seed, attuned to the needs of scientific plant breeding. Thiswas a cooperative effort of NSC, UPAU and farmers around the University who wouldact as contract growers.

2.10 The Tarai Seed Project was generally regarded as successful. However, it wasa success which, if it was to be replicated, demanded a much reduced role for the NSCin the physical aspects of seed production and distribution. The logic of generatingnew HYVs and their basic seeds at the State Agricultural Universities was irrefutable,but dictated a seed supply system decentralized, at least to the state level. NationalSeeds Projects I and II, which are the subject of this evaluation, were a misnomer.Their key objective was to "down-size" the NSC, and transfer seed improvement,production and marketing to State Seed Companies (SSCs) modeled on the Taraiproject. In the case of Uttar Pradesh. the Tarai Seed Company was to be incorporatedinto the Uttar Pradesh Seed Corporation. The National Seeds Project (NS1), supportedthe creation of seed companies in Andhra Pradesh, Harvana, Maharashtra, and Punjab.The Second National Seeds Project (NS2), supported the creation of seed companies inBihar, Karnataka. Orissa. Rajasthan and Uttar Pradesh.

2.11 Project designs were similar. They called for (a) the creation of SSCs in thenominated states, with NSC handing over relevant assets to these corporations inexchange for equity, and the State Government taking equity, (b) the provision ofoffices. vehicle, stores. and processing equipment, as needed by the SSCs, (c) on farminvestments in State Farm Corporation of India (SFCI) farms for seed production, anda line of credit for similar improvements on the farms of private contract growers, (d)assistance for seeds research and basic seed production at Indian Council ofAgricultural Research (ICAR) stations, and the Agricultural Universities (AUs), (e)credit for storage and cleaning equipment for private traders, and (f) technicalassistance. Project conditionality involved (a) NSC withdrawing from seed productionor intra-state trade in the affected States, (b) establishment of a National SeedsDevelopment Councili.(NSDC) to advise government, and a Project Planning andMonitoring Committee (PPMC) to monitor and coordinate project activities including

31

procurement. and (c) the establishment of State Seed Certification Agencies(SSCAs).1 '

2.12 The rump of NSC was thus supposed to focus on (a) national policies, (b) theforecasting of seed demand, (c) the management of a reserve stock of seed, (d) inter-state seed trade, (e) promotion of improved seed, and (f) seed registration. Assuranceswere also obtained that (a) the private trade would not be discriminated against, and(b) it would be consulted on all policy or regulatory decisions. Some national controlon inter-state trade in rice (and hence a continued role for NSC) was necessitated bythe existence of a two-price scheme, with rice being significantly lower priced insurplus areas, than deficit areas. To make improved seed affordable, its price was to berelated to the regional price of paddy. Retail sales of seed would be handled byregistered distributors, who for the most part were expected to be cooperatives whichalreadv handled the bulk of sales of fertilizer and chemicals to farmers.

2.13 From the perspective of the mid-nineties, the treatment of the private sector inthese projects is interesting. On the one hand, the projects were forward looking, inrequiring that the private sector not be discriminated against, on the other hand theabsence of any clear positive and constructive role for the private sector is striking.The actions taken under the projects discriminated in favor of the public sector.However. the voluntary nature of seed certification allowed the private sector toexpand despite lack of direct encouragement and poor access to germ plasm. SSCswere expected to be profitable despite paying 11 percent on equity and borrowing, inpart due to a projected decline in the price to seed growers of 20 to 30 percent overthe life of the project (SAR for NSI, para. 7.04).Projected yield increases from the projects were about ten percent on sown area in therespective states. This resulted in estimated ERRs of 65 percent and 158 percent forthe first and second projects respectively.

D. Pakistan

2.14 The Pakistan Seed Project is very similar to the Indian projects. It involvestwo Provinces. Sindh and Punjab. and on a pilot basis Baluchistan and NorthwestFrontier Province (NWFP). It covers not only wheat and rice, but also cotton andmaize with support for pulses, oilseeds, fodder crops, potatoes and vegetables (thelatter two on a strictly pilot basis). Full production was to involve 103,000 tons ofseed per year. It would create two new Provincial Seed Corporations (PSCs) as wellas a National Seeds Council and Federal Seed Certification Department (FSCD) andNational Seed Registration Departrnent (NSRD). Passage of supporting legislation wasa condition of effectiveness.

10. Pre-existing seed legislation. made certification of varieties optional. This provision was left in place.

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2.15 This was the third effort to establish a modem, public sector. seed industry inPakistan. Earlier national efforts first under the aegis of the Department ofAgriculture. and secondly under a parastatal Agricultural Development Corporation(ADC) had given unsatisfactory results, indeed the ADC was disbanded in 1972.Government continued its policy of excluding the private sector from the seedindustry, and pinned its hopes on the creation of PSCs in the Punjab and Sindh, seeBox P1. In contrast to India, the expansion of the PSCs in Pakistan was not intendedto shrink the activities of an existing national organization, since this had already beendisbanded. The PSCs were to be legally, operationally and financially autonomous.Pilot schemes involving potatoes and vegetable seeds were also to be supported underthe auspices of the Northwest Frontier Province Agricultural Development Authority,and Baluchistan Department of Agriculture. It was recognized that the earlier seedsupply schemes had left farmers suspicious regarding seed produced by Governmentinstitutions (SAR para. 2.03).

2.16 Provincial Govermnents were to provide loan and equity capital for companydevelopment. The SAR identified the challenge this would present to companymanagement, since current public sector seed prices were only marginally above grainprices, but to break-even the companies would need seeds prices 90 percent higherthan grain prices, and 60 percent higher for cotton, (SAR para. 5.04). In the face of abad track record by the public sector. and farmer indifference to public sector seed,provision was made for achieving these margins over a 5-year period. with governmentsubsidies in the mean time. Subsidies were to be paid monthly "until such date asIDA shall establish," (SAR para. 5.05). Principal project components for the PSCswere (a) four seed processing plants tthree in Punjab and one in Sindh), (b)development of farms for basic seed production, (c) 33 person-years of technicalassistance. (d) farm equipment for contract seed growers. and (e) offices, vehicle andlaboratories for the FSCD and Research Institutes. Whilst seed production was toremain largely a provincial monopoiy. (often using contract growers), retail saleswould be in the hands of (private) authorized distributors and cooperatives; alwayssubject to retail prices fixed by the seed corporations. Competition (presumably non-price competition) would be encouraged between distributors, (SAR para. 5.03).

2.17 Yield increases were projected as 20 percent for maize (due to variety changes)and ten percent for wheat, rice and cotton (due to quality of seed with unchangedvarieties), on area sown to these crops. On the basis of these apparently modestestimates a net value of US$267 million per annum was projected. leading to an ERRestimate of 82 percent, (SAR paras 6.01 and 6.08).

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Box P1: Contrasting Perspectives of SAR and PCR

The following two quotes suggest that the staff's reservations about thewisdom of further public sector involvement in seed production was not fullyconveyed to the Board when the project was proposed for approval. The SARsaid:

"1.03 The project was formulated by GOP (Government of Pakistan)with the assistance of FAO/IBRD Cooperative Program mission which visitedPakistan in the Spring of 1973. Following a subsequent policy decision by GOPto exclude private sector participation and to make agriculture a Provincialresponsibility, instead of a Federal one, the Provinces submitted to IDA, in thefall of 1974, separate proposals ....... "(SAR, para 1.03, emphasis added).

The PCR, describing the same events said:

"3.01 . FAO made a feasibility study in 1973 under the auspices of theFAO/CP (Cooperative Program with the World Bank). The Bank andGovernment accepted the FAO Report, with exceptions.

3.02 One of the principal FAO recommendations was to have the privatesector develop the new seed industry. FAO listed four alternatives in order ofmerit: private enterprise; cooperatives; a semi-autonomous agency; and, lastly agovernment agency. Government and Bank accepted the private sectorrecommendation. However, discussion in favor of public ownership developed.Eventually, the Government decided on public ownership, over the strong andcontinuing objections of the Bank's project staff and FAO. It was obviousfiromthe history that public ownership of the seed industry had not worked, andGovernment, FAQ and the Bank were all aware of this. Bank staff tried toimprove the prospects of success of public ownership by introducing undertakingsof a safeguard nature in the project legal documents, but to no avail ........." (PCR,paras 3.01-3.02. emphasis added).

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3. Project Performance at Completion or Audit

A. Common Features

3.1 Project implementation experience has already been reviewed in PCRs andPPAMs, and will not be summarized again. Some general perceptions of performanceat completion are reviewed here. The most significant factor is that the projects weretoo late to capitalize on the introductory demand for HYV seeds. Wheat and rice areSPVs and by the time the projects were operational, most farmers were already usingHYV derived seed; much of it obtained as farmer saved seed. This was in markedcontrast to the Tarai project on which the projects had been modelled.

3.2 The projects took a "systems approach" and explicitly included resources tosupport the generation, release and multiplication of new and improved varieties;however, actual performance was more successful in introducing new varieties, thanimproved varieties. With hindsight, some form of market mechanism should havebeen used to transfer seed and germ plasm from research stations to the seed industry.The resulting competition (or lack of it) for new germ plasm would have providedguidance on needed breeding priorities. In practices, the breeding effort was moreeffective in defending the existing genetic gains than in improving yields per se."The lack of a stream of new and improved varieties, on which the projects had beenpredicted, was quickly noticed by farmers, who for the most part had not had goodexperiences with public sector seed supplies, and seed demand failed to expand.'2

The projects then found themselves demand constrained, with several adverse effects.They were over-capitalized for the actual level of demand; and were unable to raiseseed prices to the levels needed to break-even. The SAR projections of a virtuouscircle of increased farmer recognition of the superiority of project produced seedpermitting prices to be raised progressively until in five years all production costs werebeing covered, never came near being realized, prior to project closure (Box BI, for amore optimistic view see Section IV). During project implementation the basic patternof monopolistic parastatal supply of seed (from domestic production or imports)remained firmly in place; and the task of demand creation went by default. The"magic of the market-place," whereby even for SPVs private traders might haveidentified and promoted import opportunities, was not unleashed.

3.3 As against the above rather pessimistic view at project completion, the trainingcomponents of the projects had worked well, SSCAs and SSCs were established andample, not to say excess, seed storage and processing facilities were put in place. At

11. World-wide experience indicates genetic gains of only 0.5 to 1.5 percent per year (Byerlee (1994, Table 5).Thus it is no surprise that further genetic gains, following the introduction of HYVs were not readily apparent tofarmers.

12. Wheat in Bangladesh being a notable exception, see Table BI.

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the very least, existing genetic gains were defended; a not inconsiderable achievementwhen the potential losses from rust in the absence of an active breeding program areconsidered. In all three countries the technical expertise on seed production andquality control available in the public sector at project completion was very muchbetter than at project inception. With this general view in mind, we now turn toindividual project experiences.

B. Bangladesh

3.4 The Cereal Seeds Project, was subject to an audit, hence there are two views asto the project's performance at closure. The PPAM was more positive, than the PCR,perhaps too positive. In particular. the PPAM says:

"partly as a result of this project, the concept of a system approach toseed production is now recognized in Bangladesh; institutionscontributing to the function of seed production recognize theircomplementarities and the need to coordinate their developmentprograms; this observation contrasts with the PCR conclusion (para.6.03) that support to BRRI should have been reduced to simplify projectdesign," (PPAM page iii).

3.5 By contrast the PCR focussed on the increases in seed production achieved byBADC and its contract growers; and the establishment of the Seed CertificationAgency (SAC). The expansion of BADC seed production is given in Table B1.

Table B1: Seed Production by Seed Multiplication Farms and Contract Growers(Metric Tons of Seed)

SM Farms Contract Growers Total

Year Paddy Wheat Total Paddy WVheat Total /addy Wheat Total

1973/74 2097 319 2416 0 0 0 2097 319 24161974/75 1960 654 2614 0 0 0 1960 654 26141975/76 1923 714 2636 0 0 0 1923 714 26361976/77 1841 1067 2908 192 328 520 2034 1395 34281977/78 2414 1627 4040 652 910 1562 3065 2537 56031978/79 2450 1534 3984 976 1566 2542 3427 3099 65261979/80 3061 1666 4727 954 6235 7189 4014 7901 119161980/81 2898 1180 4078 424 2664 3087 3321 3844 71651981/82 2671 1340 4011 1008 5769 6777 3679 7108 10787Source: Bangladesh Agricultural Development Corporation.

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Table B2: Seed and Grain Prices of Paddy and Wheat, and Price Ratios(Tk/md)

Paddy Wheat

Year Seed Grain Ratio Seed Grain Ratio

1973/74 90 55 1.64 100 50 2.001974/75 90 70 1.29 100 50 2.001975/76 90 70 1.29 100 60 1.671976/77 90 65 1.38 100 80 1.251977/78 116 75 1.55 100 80 1.251978/79 118 90 1.31 130 100 1.301979/80 142 115 1.23 145 100 1.451980/81 128 105 1.22 150 125 1.201981/82 165 135 1.22 240 175 1.37

Source: Bangladesh Agricultural Development Corporation.

3.6 Total BADC seed production approximated the SAR projections (11,916 tonsin 1979/80 and 10.788 tons in 1981/82 versus projection of 12,000 tons in project yearsix (1978/79), SAR Annex 15, page 2). In 1979/80 total production was 98 percent ofprojected. However, as Table B1 clearly shows this was as a result of greatlyovershooting wheat seed production projections (7,901 tons versus 2,000) with a morethan compensating shortfall in paddy seed production (4,014 versus 10,000). Thisimbalance is not directly addressed in the PCR/PPAM, and hence it is not possible tojudge whether this represented a conscious policy decision to emphasize wheat seed atthe expense of paddy, or whether it represented what BADC could sell, or some otherreason. Wheat seed continued to be imported in large quantities. It is notable thatcontract growers were willing to expand production quite rapidly, while public sectorseed multiplication farm production remained static.

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Box B1: Cost Recovery (PPAM para 22)

The Development Credit Agreement called for BADC to set and maintain pricesfor rice and wheat seeds at a level sufficient to cover full production costs. This was notachieved under the project. Government officials in charge of project implementationquestioned both the feasibility and the desirability of full cost recovery at this stage inthe development of the seeds industry in Bangladesh for the following reasons:

i. the national capability for developing varieties promising a high probabilityof improved yields and acceptable quality has been weak. As a result, BADC could notalways supply seeds of proven varieties, even if it had the capability to do so;

ii. the utility of quality seeds has not become obvious to the majority offarmers, partly due to lack of evidence at the farm level of higher yields unquestionablydue to better seeds. Thus, BADC has had to slowly create a demand for its seeds andattempt to meet it within the constraints under which it had to operate;

iii. BADC has had no control over the selection of varieties to be multiplied.It has been repeatedly asked to multiply seeds of varieties which its staff regarded as notfully stabilized or which were known to be susceptible to diseases;

iv. as a result, BADC was neither in a position to guarantee the quality of theseeds it sold (a prerequisite for creating a steady demand) nor in a position to beresponsive to farmers' needs by supplying varieties they preferred or ones with provensuperior potential (a basis for expecting farmers to pay prices commensurate with thecost of producing quality seeds);

v. BADC's overhead cost have, so far, been high in relation to the quantity ofseeds it has been supplying. Although such overhead cost would likely be justified inview of the potential market to be served, it would take a tripling of the quantity ofseeds presently produced before BADC could be expected to fully reflect all its overheadcosts in its selling price and still have a market for its seeds; and

vi. although the seeds unit was given responsibility for managing the day-to-day operations of seeds production, processing and marketing, it was not given theauthority needed to assume that responsibility, particularly in relation to manpower andfinancial resources management. Staff recruiting, transfer, promotion and training werehandled centrally within BADC without sufficient consideration for the particular needsof the seeds industry; budgetary allocations and accounts were also handled centrally,with the result that the seeds unit was allocated financial resources in relation to itsrelative importance within BADC (five percent of BADC operations) rather than inrelation to its needs.

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3.7 The paddy and wheat seed prices are given in Table B.2. Wheat seed price fellrapidly relative to feed wheat over the first four years of the project. The SAR calledfor paddy seed prices to be double the price of paddy for food rice by the fifth year ofthe project. This was never in sight; after achieving a 55 percent premium over paddyfor rice in 1977/78, the premium declined to 22 percent. That this was basically dueto BADC being unable to supply paddy seed of recognizably superior quality isgraphically described in the PPAM, see Box B1.'3

3.8 In summarv, at its closing the project had dramatically increased the technicalsophistication of people throughout the public seed sector, due to the projects majoremphasis on training. It had developed new institutions BRRI,'4 the SCA and NSB,and very substantially expanded the production of wheat seed, without yet fullysatisfying domestic demand. The indications are that real value was provided by thiswheat seed since the price was one at which contract growers were willing to expand,and consumers were also willing to increase their demand."5 As against this, -heSCA's funding was by no means secure,'6 and the questions of price policy and theappropriate role for the public sector had not been addressed. A price policy studypromised in the SAR, was not undertaken, so that even at completion the likely cost ofcontinuing BADC's monopoly was not yet evident. The PCR wistfully notes that"today emphasis is given to greater involvement of the private sector" (PCR para.6.05). An emphasis that derailed a proposed Seeds II project; even though seedproduction was to remain the monopoly of a new parastatal, Seed Corporation ofBangladesh, with only seed distribution to be fully privatized.

C. India

3.9 The two National Seeds Projects under review, presupposed that theperformance of the Tarai Seed Project, could be reproduced nationally, albeit on astate by state basis. This proved to be an unjustified assumption, for a number ofreasons. In place of the orderly implementation of investments to support rational and

13. Ironically, farmers in trading amongst themselves would swap two measures of food grain for one measure ofseed, thus paying well in excess of BADC's price for farmer saved seed. (SAR, Seeds Project II, para. 1.06).

14. BRRI feels that this assessment is too generous to the project and has commented that "the impact of the creditwas minimal or negligible to BRRI. Under the credit there was some infrastructural development but there was nohuman resource development in the seed technology sector. Bangladesh still lacks human resources in the areas ofseed science and seed technology."

IS. Indeed, there was evidence of excess demand at these prices, since the PCR notes BADC's wheat seed wasoften resold at over double BADC's price. (PCR, para. 4.01).

16. The PCR is typically upbeat saying "Despite these problems, rules for seed production have been producedand seed certification manual prepared.... SCA has now become a major force in the industry," (PCR para. 3.19).This contrasts with the PPAM's assessment "SCA, although established, remains weak, mostly due to limited staff,and experience," (para. 7).

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agreed allocation of tasks between public sector institutions to meet well defineddemand for seed envisaged in the SARs, the PCR reports delays, design changes,duplication and construction of surplus capacity, due in part to very differentperceptions of institutional roles, and vastly over-estimated demand. For details thereader is referred to the excellent joint PCR,'7 including the NSC's careful statementof the circumstances of the noted delays and changes.

3.10 A vicious triangle of mutually reinforcing design features help explain thisrelatively poor performance:'8

i. key rationale for the projects was that the breeding of a streamof ever higher yielding varieties would not translate intohigher crop production unless there was a delivery systemcapable of multiplying the seeds and getting them into thehands of farmers. However, the project experience, at least upthe time of the PCR stood this proposition on its head. Nomatter how efficiently the multiplication and distributionaspects of the project might have functioned its impact wouldhave been modest in the absence of higher yielding varieties todistribute to farmers. There was no lack of new varietiesdeveloped and released by the ICAR research stations andAUs. but these new varieties were very little, if any, betterthan the already released HYVs. Farmers quickly noted thatnew was not necessarily better, and demand collapsed.

ii. NSC was given a totally impossible task: it was expected toequate inter-state supply and demand balances, by commandand control techniques, wvithout being able either to commandor control. Like any exercise in central planning it presentedno problem in theory, but was not capable of implementation.NSC could not go into the market to assure its seed supplies;rather it was limited to the amounts SSCs were willing tomake available to it. SSCs in turn were expected by theirpolitical masters to supply seed to the State's own farmersbefore making sales to other states via NSC. Thoughcontracts were entered into, there were virtually irresistibleforces militating against full contractual compliance. With

17. Project Completion Report: India National Seeds I and II Projects (Loan 1273-IN and Credit 816-IN), OED.June 1987, Report No. 6836.

18. Poor performance relative to the SAR projections which implied ERRs of 65 percent and 158 percent. Seedproduction, or perhaps more importantly seed demand, fell well short of SAR projections; however, as the PCRremarks, the basic institutional infrastructure for a modern seed industry was successfully put in place, and demandfor seed, albeit at a lower level, was met.

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hindsight it would have been better to ensure unrestrictedinter-state trade."9 Faced with de facto unenforceablecontracts with its SSC suppliers, it was inevitable that NSCshould be reluctant to give up its assured source of supplybased on direct contracting with producers. SSCs, on theother hand, faced with "over-supply" in good seasons, flatsales in their home state and no interest from NSC to taketheir unforseen surpluses off their hands, were naturallytempted to make inter-state sales on their own account, oftenat discounted prices. For this inter-state trade by SSCs, theNSC was at best superfluous, and at worst a competitor.

iii. These projects involved a very large number of overlappingorganizations, in particular NSC, SFCI, and ICAR and PMMCat the Federal Level, the SSCs, SSCAs, AUs and StateDepartments of Agriculture at the state level and within thestates, the seed growers. Since the project involved reducingthe production responsibilities of NSC, SFCI and the StateDepartments of Agriculture it is no surprise that theseorganizations were not totally committed to the projectconcept.

3.11 At least implicitly, the PCR makes a strong case that at project completion theseed industry was in need of a fundamental policy review:

"Most, if not all, SSCs are in varying degrees of financial difficulty withthe continued existence of some in doubt. Likewise, a number of AUsare in financial difficulty as regards their foundation seed programs.Four State Seed Certification Agencies run at a substantial loss largelyas a result of state policies (on pricing of services. etc) and another twohave been forced into considerable retrenchment of activities," (PCRpara. 5).

"It seems clear that the marketing problems faced by the SSCs are duemainly to the fact that their certified seed does not necessarily givesignificantly higher yields than other seed used bv farmners (eitherretained from an earlier crop or obtained from another farmer),particularly for self-pollinated varieties," (PCR para. 4.16).

19. However, this would have forced major retrenchment on NSC, since the market would not have required theassistance of NSC's quite extensive staff, and, would have exposed SSCs to price competition. No wonder thebureaucrats preferred to "muddle through."

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"The SSCs suffer from competition by NSC, SFCI and sometimes DOA(all undermining the NSP principle of well-defined public sector roles)and the private sector. The latter not only compete with varieties buttheir public variety certified seed is frequently cited as being of betterquality and often cheaper. The quality aspect is possible with regard tofield performance as this is sometimes determined by vigor, a qualityenhanced by good production and handling techniques but notcontrolled by certification. Lower prices may result from greaterflexibility in the market, greater efficiency, and less fixed investment inlarge plant and machinery," (PCR para. 6.6).

3.12 This all contrasts with the Tarai model where a single state company in theaftermath of the Green Revolution could offer better seed, where all organizationswere enthusiastic participants, and NSC could factor excess seed production into itsoverall procurement and stock holding plans. The Tarai Project had brought newplayers into the industry, without challenging the dominant role of the existing players.

3.13 None of the above should detract from what was achieved. The level ofexpertise in the seed industry was greatly improved, SSCs and SSCAs were broughtinto existence, the key role of ICAR and the AUs in generating improved varieties wasincreasingly acknowledged, and substantial investments in production, processing andstorage capacity were put in place. As mentioned in para. 2.2, in a first-best world therole of NSC and SFCI would have been drastically cut back, thus greatly reducing theneed for public subsidies. But whether this was politically feasible given thedevelopment paradigm of the times is at best moot.

D. Pakistan

3.14 The project had severe implementation problems, which are very fully andfrankly discussed in the PCR (paras 4.01-4.29). In particular, none of the four seedprocessing plants were completed at project closing, despite an 30 month extension;and the civil works for two of the plants were so poor, that they had to beabandoned.'° These fundamental problems encountered during implementation madeit very difficult to assess impact at completion in any definitive way. Both the PCRand PPAR are highly ambiguous in their judgements. The PSCs and FSCD wereestablished, and substantial volumes of seed (about 66 percent of SAR projection of103,000 tons) were processed by the two companies. However, reservations areexpressed in the PCR (para. 5.04) as to the quality of this seed. Both PSCs werefinancially viable at project completion, albeit dependent on subsidies which werebeing paid in a timely manner. Perhaps most importantly, in 1984 CargillInternational was invited to establish a breeding and marketing program for oilseeds.

20. It says a great deal for the Punjab Government's commitment to the project, that this rebuilding was to beundertaken using their own funds.

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This suggested the possibility of a new approach to the role of multinational and otherprivate companies in the seed industry.

3.15 The PPAM noted "some ambivalence towards the project by those involved inthe seed industry. Many farmers, commercial interests, civil servants and others heldthe opinion that the seed industry was already adequate and prosperous. As projectimplementation progressed the difficulties experienced, particularly those of the seedplants, may have reinforced these reservations, which were in many ways self-fulfilling," (PPAM para. 11). However, on balance it concluded that the project wassustainable. "The audit considers the seed certification and quality controlachievements of the project to be highly sustainable. Certification is the main way ofassuring the farmer that he is receiving genetically pure seed of the variety identifiedon the label. Seed certification is now well established as an independent function.Whether the provincial governments will continue their present level of support for thetwo parastatal firms will depend on budget limitations and policy considerations aswell as the effectiveness of these firms in providing farmers with a reliable supply ofquality seed in a timely manner," (PPAM para. 26).

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4. Project Impact

A. Common Features

4.1 There has never been any doubt that the seeds projects would have a long termimpact. Introduced in response to the availability of HYV seeds and food crises, seedhas been recognized since project inception as a key agricultural input. The parastatalseed companies supported, or indeed established, by these projects have had mixedsuccess in dealing with the challenge of operating efficiently whilst subject to publicservice regulations and procedures. However, in every case, the way has been openedfor an expansion of the role of the private sector in seed supply. In practice theprivate sector has been more interested in hybrid and vegetable seeds, so that therehave not been major problems with respect to wheat and rice. Thus the Bank'ssupport for the public sector has not inadvertently crowded out the private sector, inpart due to the Bank having pointed to the positive and complementary role that theprivate sector could be called upon to play.

4.2 The institutions established by these projects were all in existence andfunctioning at the time of the IE.2 ' In particular, the generation of new varieties wasoperating routinely in all three countries. All three also had the same problem thatthough secondary characteristics were being improved, significant yield increasescontinued to elude the breeders (see, however, footnote 11). With respect to seedcertification and marketing, project institutions continued to function, but at verydifferent levels of effectiveness in the three countries. Seed supply is dominated bythe informal sector, which continued to be largely invisible to those responsible forseed policy. The little evidence gathered by the IE, suggested marked differences, inthe efficiency with which the informal sector disseminated the improved germ plasmbrought from the formal sector as certified seed.

B. Bangladesh

"The Bank's seed projects were one strand in an enormously successfulagricultural program." Comment by Bank Project Officer.

4.3 The Agricultural Program. The above is a subtle comment, since it makes nojudgement as to whether the seeds projects were indeed crucial to the success of theagricultural program or even held it back. It is, in the IE's view, a justified comment

21. The continued existence of these institutions, is not direct evidence of sustainability. The issue is not theircontinued existence, but rather the continued satisfactory provision of the services they were designed to provide.The demise of a parastatal and its replacement by private sector companies indicates neither that the project wasunsustainable, nor that the original investment in the parastatal was unwise. The parastatal could have had a vitalrole as mid-wife to private sector investments.

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on Bangladesh's agricultural progress; but leaves open the whole issue of the seedprojects and seed industry in the march to self-sufficiency.

4.4 Some key variables indicative of the success of the agricultural program as awhole are given in Table B3. Self-sufficiency in rice has been achieved in Bangladeshbased primarily on an increased area under irrigation, and associated switch to the useof HYV. If the apparent promise of several new HYVs released in 1994 from BRRIis fulfilled, and if earlier problems of varietal stability are not encountered thensignificant exportable surpluses could emerge.

4.5 Despite the rapid rise in the sales of improved seed by BADC, directly in linewith the increase in fertilizer and modem irrigation, the area sown to certified seedwas only about 296,900 ha to rice and 166,400 ha to wheat (or about 3 and 29 percentof total area respectively). Indirect influence due to farmer saving of BADC derivedseed would of course affect a much larger area. Information on varietal yields issparse.

4.6 It is not possible to disentangle completely the individual contributions of seedquality, fertilizer, modem irrigation, and other cash inputs; hence the above commentthat the total program was a success.22 What is significant is that dramatic expansionin modem irrigation and fertilizers was associated with their removal from BADC'smonopoly control, and the springing into being of a vast network of village merchantsselling fertilizer, and entry of new irrigation supply dealers. This liberalization ofagricultural input markets was indeed the core of the successful agricultural program.A program which was least successful with respect to seeds.

4.7 Announcement of a new "Seeds Policy of Bangladesh" in April 1993, promisedequal treatment for the private trade in all aspects of seed production and supply.Whilst the seed policy is quite restrictive on import of the five key crops:

"8.1 Except for appropriate plant quarantine safeguards, restrictions onimportation of seeds are to be eliminated. Approved varieties of rice,wheat, jute, potato and sugar cane may be imported for commercial sale.However, registered seed growers will be permitted to import smallquantities of seeds of rice, wheat, jute, potato and sugar cane foradaptability testing." (emphasis added).

Actual practice is quite permissive; import permits are routinely issued forspecies not varieties. Thus allowing the importer to select the variety to be imported.

22. Note however, that investment in irrigation (typically through tube-wells or low-lift pumps) leads to animmediate switch to the use of HYV, or HYV derived seed. This gain is not dependent on the release of newvarieties; however as irrigated, and hence HYV using, area increases, so does the potential gain from the release ofeven higher yielding HYVs.

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Table B3: Bangladesh: Some Indicators of Progress towards Food Self-Sufficiency

Item 1982/83 1990/91 Change

(%o)

Population (Million) 93.22 113.68 21.9Total Cropped Area (M. Ha) 13.20 14.03 5.6Irrigated Area (M. Ha)

Modem 1.34 2.70 107.4Traditional 0.55 0.57 3.6

Rice Production (M. Tn) 14.5 1* 22.22** 53.1Wheat Production (M. Tn) 1.21* 1.33** 9.9Fertilizer ('000 Tn)

Urea 697.00* 1,547.00+ 122.0TSP 256.00* 407.00+ 59.0MP 62.00* 126.00+ 103.2

BADC Seed Sales (Tn)Rice

Aus 371.00* 781.00++ 110.5Aman 1,580.00* 3,126.00+ 97.8Boro 840.00* 2,157.00++ 156.8

Wheat 14,005.00* 16,284.00++ 16.31983/84

1993/94+ 1983/84++ 1991/92

Source: Bangladesh Bureau of Statistics.Bangladesh: From Stabilization to Growth, Bank Report No. 12724-BD.Handbook of Agricultural Statistics, Ministry of Agriculture, January 1994.The Agricultural Sector in Bangladesh-A Database, Md. Ibrahim Khalil, USAID, September 1991.

4.8 We have already seen that BADC sales of certified rice seed were only enoughto sow about three percent of the crop; thus BADC's degree of "monopoly control"was greatly tempered by the ability of farmers to save seed from one crop for use inthe next. The key role for commercial certified seed supplies is thus to feed in newgenetic material which is in effect multiplied further in farmer to farmer, and villagemerchant, trade. Breeding of new self-pollinating varieties, seldom provides a profitpotential for the private sector.23 However, a profitable trade, with major benefits torice farmers, can be based on the "once-off' sale of new varieties whether produced bylocal research stations, or imported. It is this rapid distribution to farmers of the bestnew varieties which has been adversely affected by the retained monopoly on varietal

23. Wheat, though self-pollinating, provides a partial exception to this rule, due to the difficulty of storage inBangladesh's very humid climate, Srivastava (1993, p. I1).

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releases. Currently, the selection of varieties to be multiplied by BADC is decided bythe NSB, often resulting in BADC having to market a balance of varieties, that it doesnot consider optimal.24 This will be changed once the new seed policy is adopted byParliament.

4.9 Impact of the Seeds Project. The Cereal Seeds Project, was the first of threeBank sponsored projects. The second, National Seeds Project was appraised, but theBank and the Government could not agree on appropriate policy conditionality, and itwas withdrawn from the lending program. The third "project" was financially a minorcomponent of the Agricultural Support Services Project2 5 (Credit 2233-BAN), but hadimportant policy conditionality, since the Government undertook to publish a SeedsPolicy, which would greatly reduce BADC's role, and ensure a level playing field forprivate seed production, importation and distribution.

4.10 Two decades later, it is difficult to envisage either the public sectordevelopment paradigm which dominated donor thinking, or apparent "problem" facedin getting green revolution HYV's adopted by farmers. The Tarai experience fittedwell with this paradigm. The somewhat "brute-force" approach of getting BADC, themonopsony agricultural input supply parastatal to add seeds to its offering, did at leastprovide some HYV's to farmers. Support for seed breeding in Bangladesh providedanother small source of high quality seed in the form of improved varieties releasedinformally from the experiment station (Supervision Report, April 6, 1978, para.6.01).26 Whether by informal importation, official purchases of BADC seed, farmermultiplication or other means, there was a fairly rapid, though not universal, adoptionof HYVs.

24. However, the quantity of seed multiplied appears to be under the control of BADC (though not closelycoordinated with the agricultural research stations): in 1993, BADC took only 30 percent of the available breederseed for rice, 17 percent for wheat and 66 percent for jute.

25. In addition the Asian Development Bank's (ADB's) Food Crop Sector Policy Loan contained strongconditionality calling for liberalization of the seed trade, as did the Bank's Shallow-Tubewell, and Low-Lift PumpProject (Credit 2253-BAN) and National Minor Irrigation Project (Credit 2246-BAN). None of these projects calledfor direct physical assistance to BADC or the seeds sector.

26. As pointed out in footnote 25, of the breeder seed produced by the agricultural research institutes 70 percentof the rice, 87 percent of the wheat and 34 percent of the jute was not used by BADC; it "leaked" to the researchinstitutes themselves, to regional agricultural research stations, NGOs or farmers, or was wasted.

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Box B2: The Seed System Through Farmer's Eyesa

Farmers consulted in focus group discussions in five districts of Bangladesh in the fall of1994, had remarkably consistent views of the seed supply system. These views included:

1. That seed obtained from BADC had eight to ten percent higher yields than farmer savedseeds of the same varieties.

2. That farmer saved seed was preferable to BADC seed purchased from private traders, dueto the possible contamination with uncertified seed. Farmer's (and some traders) complained ofthe variability of trader supplied seed. Sometimes it was up to the best BADC seed, but on otheroccasions very poor yields resulted.

3. BADC could not be relied upon to have its certified seed available when needed, a monthprior to planting.

4. A few progressive farmers got seed by direct contact with experiment stations.

5. The best HYV releases, in terms of yield, occurred in the early 1980s. Current yieldswere thought to be about five percent lower on new varieties, though grain quality is better.

6. The typical pattern was for certified seed for a new variety to be obtained from BADC,or possibly a research station, and then to be saved by farmers for from 3 to 10 generations beforeanother new variety was adopted. Most villages had seen three to eight HYV's be dominant(sometimes in parallel) since the introduction of HYV's.

7. Where applicable, HYV's were thought to yield twice as much as traditional varieties.

8. In the district bordering India, several Indian varieties were nominated as performingbetter than the varieties which could be obtained from BADC.

9. Suggestions for improvements to the existing seed system, from both farmers and traders,focussed not on the official BADC/Seed Certification/Seed Breeding system, but on the need tohelp farmers improve the quality of their own saved seed. Storage methods, seed cleaning,maintenance of varietal purity were mentioned. In addition, they mentioned lack of financialresources to allow them to purchase good threshing, drying, and storing equipment and chemicalsfor protection.

10. Seed supply and quality were not a major felt problem.

a. Bangladesh Cereal Seed Use and Farmer's Perception of Adequacy of Seed Supply System," Intemational ConsultantsLimited House #38, Road #1 1, Block G, Banani, Dhaka-1213, Bangladesh, December 1994. A modified Rapid RuralAppraisal using focus group discussions in ten villages, two in each of five districts.

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4.11 The project was successful in establishing three new public sector institutions,BRRI, SCA and the seed wing of BADC. The first should be a significant nationalasset (with over 200 scientists and economists devoted to various aspects of riceproduction, see however footnote 14). However, the full potential of the BRRIremains to be realized. In particular, BRRI has not "followed its breeder seed to thefield." The reasons for the relatively poor farmer reputation of "Government" seed(only eight to ten percent higher yielding than farmer saved seed), including whether itis justified or merely a perceptual problem, has not been studied. Since most seed isfrom farmer's own fields, there is also a need for improved seed storage systems forfarmers, in the light of Bangladesh's very humid climate. SCA has not been able todemonstrate any very clear value since it has been confined to testing of rice, wheatand jute seed produced by BADC,2̀ and judging by farmer skepticism as to thequality of "Government" paddy seed, has not been fully effective. The third, the seedwing of BADC, is now seen to be severely handicapped by having to operate in thepublic sector. Direct exposure to the operational problems of BADC2" reinforcedBank disappointing experience world-wide in trying to strengthen production andmarketing parastatals. The result was a changed perspective from seeing public sectorinvolvement as the solution, to seeing it as the problem.29

4.12 The Economic Rate of Return. Some of the major changes which have takenplace in Bangladesh's agriculture since 1982/83 are summarized in Table B3. Over ahundred percent increase in irrigated area, fertilizer and BADC seed use, and over afifty percent increase in rice production. Any number of hypotheses can be advancedfor the direction of causation amongst these changes. As explained earlier (para. 4.06)

27. The SCA is currently quite run-down, with inadequate transport, much of its equipment in need of repair, andstaff rotated with the regular extension staff. Dutch Aid has agreed to provide support to the SCA, which shouldresult in a marked increase in professionalism and effectiveness. A necessary condition for which may be fulloperational and financial independence.

28. The inherent difficulty of operating a commercial enterprise under public sector procedures cannot be over-stated. Is it realistic to ask BADC to "respond to the market" when any extra revenue goes directly back toTreasury? And when BADC management does not have the right to hire and fire? Worse still, where there is noprotection against politicians who seek to have names added to the payroll whether or not there is work to be done.The original project concept was "technocratic," it being assumed that sufficient technical assistance and trainingcould overcome the inherent difficulties of working in the public sector; that all that was needed was "bettermanagement." We now recognize that the better the management, the more important it is to have the right pricesignals and other incentives.

29. In discussions with BADC, the IE observed that the Bank was only one of many donors who had providedassistance to the seed sector in general, and BADC in particular. The response was, "Oh, no! It was the Bankwhich got BADC into seed distribution, it provided the rock on which others built!" And it is true, that there arestill donors whose assistance presupposes that with enough technical assistance and enough training the inherentstructural difficulties of production and marketing within the public sector can be overcome. In addition to theBank's ongoing Agricultural Support Services Project (Credit 2233-BD), there are five other bilaterally supportedprojects providing assistance to the seed industry; with a further seven projects proposed. Should the privatizationproposals being pushed by the donors be successful, there would be no need for the mass of Technical Assistancecurrently proposed which results in some aid projects being defacto expert employment projects for the donors.

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the IE believes that the major driving force was the removal of BADC's monopoly onirrigation equipment and fertilizer supplies; increased private investment in liftirrigation helped explain the increased use of certified seed.

4.13 The direct impact of BADC supplied certified seed was quite small; about threepercent of the area in rice, and 29 percent of the much smaller area planted to wheat(para. 4.05). Accepting the SAR estimate of a 10 percent yield, confirmed by the fieldsurvey reported in Box B2, increase due to the use of certified seed would yieldincremental annual production of about 66,660 tons of rice and 1,200 tons of wheat in1993/94. Valued at 1985 world prices this direct product has a value of about $14.6million per year. (Reference to Table IIB in the Statistical Annex, indicates thatdepending on the year chosen this sum could be any where between $30.7 and $11.9).This compares with total (undiscounted) project costs of $17.1 million.

4.14 Indirect impacts of certified seed include (a) the benefits from farmer savedseed for several generations until yields regress to average levels, and (b) the increaseddisease resistance, which implies an unknown (but nevertheless significant) reductionin the probability of a rust or insect epidemic. Assuming these indirect benefits morethan cover the 45 percent of BADC seeds costs not recovered in seed sales, andrecurrent expenditures on seed breeding and certification, we only need to compareproject capital costs with direct benefits.

4.15 Only a 2.2 percent direct increase in yield due to sowing certified seedproduced from the project is needed to generate a 12 percent ERR over a 20 year lifefor the project. Since it is highly probable that the yield increase was in excess of thisamount, we conclude that the re-estimated ERR confirms that the project wassatisfactory. An important factor leading to this result is that the initial seven years ofproduction of certified seed by the project took place before the drastic decline inworld grain prices which has characterized the latter part of the project.

4.16 In summary, the Cereal Seeds Project, provided the first direct donor assistanceto the seeds sector, a "rock" on which many other donors have subsequently built.The public sector strategy employed was characteristic of Bank projects in the 70s andwas entirely appropriate in the strong support for BRRI. Even the seed-wing ofBADC played a constructive role in the initial popularization of HYVs. Fortunately,the de jure monopsony position conferred on BADC was not reflected de facto, due tothe self-pollinating characteristics of rice and wheat, which allow farmer multiplicationof HYV seeds, and provides the potential for a total by-pass of the official system.30

30. The most popular rice variety in Bangladesh, and the only variety significant enough for the BangladeshStatistical Service to classify individually, is "paijam." This is not a product of the formal research and HYVdistribution system, but was reportedly originally imported informally. BRRI researchers are concemed that it maybe vulnerable to disease, but this fear has not materialized over 20 years. BRRI now has a breeding programdesigned to improve the yield of paijam, and add needed disease resistance.

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Subsequently, the Bank reversed itself, putting increased emphasis on the constructiverole of the private sector, particularly in seed distribution. It, together with a numberof other donors, has prevailed upon Government to publish a Seeds Policy whichpromises a level playing field for the private sector in production and distribution.3 'In the words of PCR project summaries the project impact would now have to bedescribed a satisfactory and sustainable. Its institution building impact wassubstantial. Four challenges remain, before it can be judged that "all's well that endswell."

4.17 Remaining Challenges. Through current importation practice is more liberalthan the policy (para. 4.7), the first and most important challenge, will be to get theannounced Seed Policy approved by Parliament and implemented in a timely andconstructive fashion. "Time is money" to the private sector, but "time is power" to thepublic sector. Quarantine, varietal testing, varietal release, quality assurance allprovide needed protection to the seed user, and hence are logical responsibilities forindependent public agencies. However, if carried out in a dilatory or obstructivemanner, they can be used to deny farmers and private traders access to the best seed.The most popular HYV used by farners has not had the benefit of these services.Having agreed a policy, Government now needs to turn to implementation, such asinternational agreements to accept the certification of other countries, set maximumelapsed time for functions to be performed, properly staff and fund the responsibleagencies, and the like. In particular, the freedom of traders to import new varietieswhich have been tested and released elsewhere is vital. It is this trade which providesthe litmus test that Bangladesh institutions are indeed adding value.

4.18 Likely the most important political challenge in the policy is the need to runthe seed-wing of BADC "on a commercial basis as far as possible" (Seeds Policy,para. 11.2.1). Already considerable progress has been made in down-sizing the seed-wing, but this is only one aspect of operating on a commercial basis. Much moreimportantly will be to allow the management of the seed wing to appoint staff simplyon merit (i.e. without reference to seniority, second guessing by public service unionsor special pleading by politicians and other powerful figures), to chose which varietiesit will multiply, to set selling prices, to be able to retain all earnings, to be paid(subsidized) for any mandated unprofitable activities, and to be able to replace worn-out equipment. Much is made in the Seed Policy, and Bank advice to governmentsgenerally, of the virtues of a level playing-field for the private sector. The IE is atleast equally concerned for a level-playing field for the public sector. If the SeedPolicy's directive to manage commercially within the public sector turns out to be an

31. It is ironic that the long sought Seeds Policy does not jibe precisely with the views of some donors. They arenow faced with a written policy, which enshrines some element of important controls on varietal release of five keycrops. The Audit was not privy to the negotiations underlying the Seeds Policy, but it is clear that the AsianDevelopment Bank took a strong policy position, from which Bank conditionality retreated.

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oxymoron, then a choice will have to be made between having the seed wing operatecommercially, or in the public sector.

4.19 If the seed wing were privatized and told to "maximize profits" it would likelymove out of seed multiplication. This then raises a question of subsidizing theproduction of certified seed. Currently only about 55 percent of BADC's Seed Wing'sbudget is recovered from seed sales. Even at this subsidized price BADC suppliesonly about three percent of the rice seed, and about a third of the wheat seed. IfBADC raised its prices, demand would decline even further. With its present coststructure and farmer demand for its seed, it is quite conceivable that there is no priceat which BADC could fully cover its costs. If BADC requires a subsidy, then thisshould be paid per kilogram of certified seed sold (not produced) to all suppliers. Ifthe private sector is interested, and has a lower cost structure, it will gain market shareat the expense of BADC, until BADC's seed supply functions can be shut down. It isa fundamental policy "error" to pay a subsidy to a monopoly, when a competitivemarket structure could be encouraged.

4.20 A second challenge is to provide the public sector institutions with the rightincentive structure. This involves independence, a secure budget preferably related toperformance, and public recognition for services well performed. In particular, it isdesirable that the SCA charge for its services, and retain the revenues. Similarly, theResearch Stations should be given the revenue from breeder seed sales, rather thanhave this money paid into the Treasury. Finally, it should be born in upon seedbreeders, that they serve the country as well by borrowing successful seeds fromresearch institutes abroad, as if all breeding were done domestically. They shouldscour the world for good genotypes, at the same time that they attempt to produceeven better varieties domestically.

4.21 The third challenge is to get the level playing field promised by the SeedPolicy applied to all crops. In particular both Wheat and Potatoes could proviOe asufficient demand and profit margin to warrant significant investment by privatetraders, and even private seed production. The level playing field does not demandthat BADC stop the production of certified seed for these crops, merely that anysubsidy be paid per kilogram of certified seed sold.

4.22 The fourth challenge, is to adapt the Seed Policy to benefit from applications ofgenetic engineering. This involves issues of intellectual property right, not currentlyaddressed, and quite possibly willingness to purchase technology.

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C. India

"Despite looking like a disappointment at project completion, it is safeto say that few World Bank projects have had as much long term impactas the Bank assisted National Seeds Projects." Consultant's comment.32

4.23 Conditionality for the National Seeds Projects (NSPs) required that privatesector seed companies not be discriminated against. However, no clear positive rolefor the private sector was defined. Relative neglect of the private sector at theNational level and in most states continued until in the mid-1980s a delegation ofsenior officials from the seed sector, led by the Prime Minister, visited Turkey andsaw at first hand the rapid and effective development of the seed industry which hadfollowed from positive encouragement of private sector participation. A new NationalSeed Policy followed in 1988 which emphasized the role of the private sector andpromised government sanctions for private operations. As one private sector seedsmansaid "since the national Seeds Policy was enacted, there has been a sea change; theseed industry is working wonders; there is great cooperation between government andthe private sector." For the most part this cooperation reflects the natural split betweenSPVs supported by the public sector and hybrids varieties produced by the privatesector.

4.24 The National Seed Company. Starting with the Tarai project33 and continuingwith the two projects being evaluated, the Bank's support of the seed industry can beseen as catalytic in the emergence and acceptance of a strong private sector.34 TheTarai project helped persuade the Government to take the seed industry seriously. TheNSPs greatly increased the depth of seed industry expertise in India, and introduced anactive competitive element, albeit predominantly within the public sector. With nomonopoly to break, the resulting SSCs were not as threatened by the entry of privatesector seed companies, as might have been the case had the Bank's projects focussedon building up one single monolithic monopolistic National Seed Company. Tlecindustry structure supported by the projects had no one focus of political andbureaucratic power which could be used to inhibit an expanded role for the privatesector seed companies (PSSCs). In addition the pre-existing seed law made

32. A knowledgeable reviewer of the "glass is half-empty" philosophical persuasion, would rather emphasize themissed opportunity. Ideally the industry would have used a market mechanism (say auction, or other competitivelydetermined prices) to distribute Breeding and Foundation seed from the Research Stations to seed companies(public and private). In place of this, the project relied on a quasi-central planning operation where the NSC wasintended to play a key role in inter-state trade, and the provision of technical assistance to the SSCs. "NSC wasboth advisor and competitor. It thought in terms of seed and market 'allocations', not of competition."

33. Activities non managed by an SSC "U.P. Seeds and Tarai Development Corporation Ltd."

34. Para. 2.2 has already remarked that the projects missed the "first-best" design option of primary reliance onthe private sector. The design adopted was, however, in the IE's view a "good second-best." (see also para. 3.14).

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certification optional, and thus prevented the use of seed certification as a barrier tothe private sector.

4.25 This said, and despite the intentions of the SAR (para. 2.16 above), the NSCdid not consolidate into a core national seed industry support institution but hascontinued to play a major, if unprofitable, role in seed production and distribution.This tendency was evident at project completion (see para. 3.1 l(ii) above), and hasonly partially been reversed in recent years.

4.26 With hindsight, it was almost certainly a mistake to leave commercial and non-commercial responsibilities within the one organization. Had seed policy, demandforecasting, management of a reserve stock of seed, promotion of improved seed andseed registration been hived of into, say a National Seed Secretariat, its costs couldhave been kept under control, and would have been a logical expense for the nationalgovernment. Operation of facilities not yet transferred to SSCs and inter-state tradecould have been left with a NSC which would have down-sized by attrition asfacilities, and associated staff, were transferred to the SSCs. This separation wouldhave quickly revealed that central management of inter-state trade in a decentralizedsystem was an oxymoron, impossible to implement in a satisfactory manner.

4.27 The SAR provided for the disposition of processing plants and farms to theSSCs. We can now see that more attention should have been given to the transfer ofstaff, since able staff in danger of being made redundant or idle can powerfullyobstruct the transfer of facilities or find new work for themselves. In the event, NSCcontinues to have a major staff of seed specialists, 33 processing plants, 10 regionaloffices, 7,000 private sector seed retailers, and 10,000 farmers who serve as seeddealers; and a total staff of 1,468. This despite having closed 18 processing plants, 34area offices, 7 regional offices and 3 divisional offices and used early retirement toreduce staff size by over 500. The most recent operating loss was Rs 37 million, orabout $1.2 million at the official exchange rate. This operating loss is in part theresult of a policy of under-pricing seed, so as to "keep prices low"; perhaps not asensible objective if other suppliers are expected to cover costs.

4.28 State and Private Seed Companies. The NSPs supported the establishment ofSSCs, and provided much of the needed initial hardware. However, relatively littleattention was paid to the managerial structure of the SSCs, implicit faith being placedin the magic of the market-place and the Indian Administrative Service (IAS) tostraighten out any managerial problems which might surface.35 Despite some initialproblems, all SSCs have survived, some in better condition than others. The key taskof providing an assured supply of HYV of the basic self-pollinated crops has beenperformed adequately, often involving inter-state trade from better organized SSCs to

35. The Third National Seeds Project (Credit 1952) involves a number of institution building and strengtheningcomponents designed to assist the SSCs.

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states encountering organizational difficulties. However, the SSCs have been supportedby subsidies in the 20 to 25 percent range.36

4.29 A key issue is the role of the IAS in providing the Chief Executive Officer,usually designated the Managing Director (MD), of the SSCs. On the positive side,this gives the SSCs access to a pool of top flight and experienced managers;37 but atthe expense of relatively short tenure in the MD slot, and at the cost of foreshorteningthe career path for professional seed technologists. As a general principle, it does notseem to the IE that it can be in the best interests of the seed industry to have the MDslot in SSCs used for the career development of IAS officers.38

4.30 For the time being there is little sign of "subsidy-fatigue" and little dispositionof the PSSCs to compete seriously for a major, but unsubsidized, share of the marketfor SPVs. The Bank's Third National Seeds Project is designed to reduce the need forsubsidies by improved cost control and increased managerial discretion. It remains to

36. A comment from an SSC on a draft of this report, emphasizes that these "subsidies" are often for mandatednon-commercial activities. In particular: "It is out come of crude analysis of facts to state that the State SeedsCorporations (SSCs) have been supported for its survival by subsidies in the 20 to 25 percent range. Rathersubsidies have been passed on to SSCs for doing mandate function of undertaking production and marketing ofseeds to support ambitious Agriculture Production Program where the SSCs fate gets tied up with success or failureof Agriculture Production Plan, putting them into risks and constraints which cannot be fully recovered by the inputof subsidies."

"The consultant who has made a study of Indian conditions seems to have been carried away byincomplete facts in as much as he has come out with the conclusion of lack of opportunity of the "level playing" forPSSC's, ignoring the fact that most of the PSSCs in India are, in fact, willing to get subsidies, with a pre-condition,that they are not subjected to the same constraint to which SSCs are subjected to, about dovetailing its activitieswith National Agriculture Development Programmes. Hence his concept of "level playing" is only hypothetical."

A second SSC confirms that the subsidies are not to the SSC as such but are applicable to sale of seeds bygovernment agencies.

37. In practice MD of an SSC is not a logical career step for high-flyers within the IAS. Since most members ofthe IAS are high-flyers, it can prove difficult to staff the MD slots. A SSC has commented that this focus on theMD position diverts attention from managerial problems: "Similarly apparently, there seems to be lack of properunderstanding of Management of SSCs which is visible from the statement in para. 4.29 of the report that in SSCsonly IAS Officers are posted as Managing Director shortening career path of profession Seed Technologist to servethe purpose of career promotion of IAS. I think the visit of evaluation making team to Andhra Pradesh State SeedsDevelopment Corporation (APSSDC) Hyderabad, Madhya Pradesh State Seeds and Farm Development Corporation(MPSSFDC), Bhopal etc. should have given better understanding of facts to the team, if efforts were made toanalyze the facts critically, instead of finding easy solution to major management problems.

38. An SSC, commenting on the draft of this report, does not agree with comments on managerial structure. It reportsthat it is being managed by highly qualified agricultural scientists and professional managers and that plant capacityutilization is full and vertical and horizontal integration is adequate.

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be seen how far it will prove possible to relax the normal checks and balances ofpublic sector regulations (paras 4.18).39

4.31 There are now over 500 private sector seed companies,4 0 24 of them withlinks to multi-national seed companies, and many with their own hybrid developmentprograms. The largest seed company has a turn-over of over Rs 100 crores (aboutUS$3 million at official exchange rates), many others have turn-over close to US$1million. This is a critical mass of comnmercial interest and expertise that is almostcertainly a new and permanent feature of the agricultural sector in India. The publicand private sectors both develop new varieties, but the systems used differ markedly.We have already noted that the private sector has done little work on SPVs due to theoption farmers have to retain their own grain for seed, and thus avoid having topurchase seed after the first release.41 However, as mentioned in footnote 2, a PSSCis pioneering the production of hybrid cotton, marrying cheap Indian labor with hightechnology genetics.

4.32 Economic Rate of Return. The PCR for the Indian seeds projects, estimatesthat impacts (i.e. benefits) from the two projects were much delayed and only aboutone-third and one-fifth of the SAR estimates for NSI and NS2 respectively. This isguestimated to translate into ERRs which are likely to be less than the opportunity costof capital (PCR, para. 4.17).

4.33 Annex 7 of the PCR contains the Governments comments which stronglychallenge the Bank's assumptions. The reconciliation of Bank and Borrower figures inPCR paras 4.3 and 4.6 can be described as opaque at best. However, one majordifference stands out. The Government believes that the NSC sales (about 76,000 tonsversus 136,000 tons produced by the SSCs)42 should be included as project benefits;whilst these were excluded by the PCR. The IE agrees with the Government; the"with project" situation included both SSC and NSC sales albeit that the NSC saleswere unplanned (and indeed NSC production was intended to decline as SSCproduction increased).43 Inclusion of NSC sales, and recognition of the Seeds Policyannounced in 1988, would yield a recalculated ERR well above the PCRs estimate,

39. An SSC arguesthat governmentsubsidyisdesirableto achievethetechnically-optimal seedreplacementrate, 8-10percent annually for cereals and 2.5 percent for pulses, which (presumably) would not be achieved by farmers withoutsubsidy.

40. Companies, not traders. These companies produce, process package and distribute seed.

41. An SSC points to additional reasons for private seed companies avoiding production of self-pollinated varieties,including the need for extensive infrastructure and high investment relative to the comparatively small flexible margins.

42. U.P.Seeds and Tarai Development Corporation points out that it produces about two-thirds of that total.

43. Despite the systems approach used for project design, the SAR does not include specific projections as to theintended rate of decline of NSC production.

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and thus above the opportunity cost of capital. As described elsewhere there nowseems little doubt that the projects are sustainable, even though some of the SSCscreated by the project may cease to exist in their original form. In the words ofPCRs, they are also satisfactory, and with a substantial institution building impact.

4.34 Remaining Challenges. A key assumption of the seeds projects being evaluatedwas that the SSCs, or more generally public sector seed companies, would be able tobreak-even on the basis of selling predominantly SPVs. This assumption needs to bere-examined carefully both by the Bank and Borrower (see also Box BI). Of thepublic sector seed companies visited, only PSCo claimed to be breaking-even, andeven in this case the time series is too short to allow a confident judgement that theneed for subsidy will not eventually re-appear.

4.35 Even the IAS has been unable to operate the SSCs on a break-even basis."This raises a question as to realism of the assumption that SSCs can operateunsubsidized in the public sector. Two alternative strategies would appear relevant.The first would be to greatly reduce the volume of certified seed sold, and raise itsprice. This would leave a big gap between the price of certified seed and grain; whichin turn would provide an incentive for private companies, or farmers, to multiply theseed for one or two generations before selling it to farrners for grain production.Alternatively, if it is thought to be in the public interest to distribute present volumesof certified seed at present prices, then a permanent subsidy needs to be considered;and a question arises as to how this should be paid. Paying a subsidy to both privateand public companies per kilogram of seed sold would "level the playing field" andquite possibly tempt more efficient private companies to provide seed for SPVs.45 46

4.36 NSC has made considerable progress in cutting costs and expanding output overthe last few years, with a further doubling of output planned, nevertheless thequestions about its future role, for which one scenario was sketched in the SAR, needto be resolved. The national seed policy functions should surely be hived off, so thattheir costs do not weigh down any remaining commercial interests of NSC; and so thatthe possibility of conflict of interest in the provision of policy advice can beeliminated. A question would still remain as to whether the production and marketingof at least some types of seed should be subsidized. If so, the efficiency arguments in

44. An SSC has commented that this is too general a comment: "To be specific Maharashtra State SeedsCorporation Ltd. (MSSCL), Akola's working is a proof that PSCs can survive, even if subsidies were withdrawn."

45. Note that there is no need to take a decision to 'play God" and privatize or close public sector companies.Competition and expansion of the private sector will determine an appropriate size for public sector companies, ifthe differential subsidy is withdrawn.

46. An SSC indicates its preference for the second option. Indian farmers, it argues, do not have the economic statusto afford the higher, unsubsidized seed prices. If the private sector is to share in subsidies, they should share in theresponsibilities for producing the seeds as per government directives, including SPVs.

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favor of paying the subsidy per kilogram of qualifying seed sold, no matter by whom,need to be given proper consideration. If NSC is able to survive once relieved ofpolicy related overheads, but with any subsidy paid in proportion to seed sold nomatter who the supplier then consideration could be given to its privatization, sincethere is no evident need for a federal seed production company in he public sector.

D. Pakistan

"The Bank pulled the plug on this project in 1983 because it seemed tohave nothing but problems; ten years later, I think it would have to becounted as a success." Comment by a Project Officer.

4.37 The summary (paragraph 3.15 above) of the PAR and PCR, amply supports thefirst half of the above statement. After a two and a half year extension, virtually noimproved seed had been sold in Sindh; and in Punjab two of the three major seedprocessing plants were having to be rebuilt because as originally constructed, underBank financed consultants and contractors, they were structurally unsound. Todaythere are four solid artifacts of the project. An active and routine wheat and cottonbreeding program, a rigorous seed registration and certification program, a majorcertified wheat and cotton seed marketing organization, and an extensive cadre of welltrained seed industry professionals. Moreover, the Bank's initial sponsorship ofmonopoly parastatals to produce and market certified seed has not prevented the entryof several multi-national seed companies and the emergence of some modest privatesector national companies.

4.38 Impact on Breeder Seed Production. Plant breeding in Pakistan is dominatedby the public sector, but it is a competitive public sector, with varieties beingdeveloped in the Provincial Departments of Agriculture, Agricultural Universities, andthe National Agricultural Research Centre; and in principle new varieties could beimported directly by the private sector if they so wished. The results of these wheatand cotton breeding efforts are entered into standardized annual National UniformYield Trials (NUYT),47 for which the results are published. These results arediscussed at an annual meeting of the interested plant breeders and other seed industrystake-holders; and recommendations made as to which varieties should be put forwardfor registration." Varieties are tested informally in a wide range of sites beforebeing entered in the NUYT, and at the Punjab Seed Corporation (PSCo) farm atKahnewal. Two years of NUYT results are needed before application can be made for

47. The breadth of the wheat breeding program can be appreciated by the fact that in 1994 eight institutionscontributed a total of 36 varieties. One institution (AARI-Faisalbad) contributed 15 varieties. Only one variety wascontributed by the National Agricultural Research Centre, at Islamabad.

48. If not accepted for national registration, but there is consensus amongst the plant breeders for a province, thenthe variety can be forwarded for registration for sale within the province, but not nationally.

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registration. About twelve wheats are tested in each of three classes (normal irrigated,early irrigated and rainfed) each year, and similarly for other crops. About fortywheat varieties have been registered and released. In contrast to Bangladesh where theproject fostered a single centre of excellence, BRRI, in Pakistan a seed breedingsystem has emerged which allows "a thousand flowers to bloom."

Table P1. Yields and Production of Major Crops

1972 1982 1992

Yield Prod. Yield Prod. Yield Prod.MT/Ha '000 MT MT/Ha '000 MT Mt/Ha '000 MT

Maize 1.09 705.9 1.27 1,005.4 1.36 1,177.6Rice (Paddy) 2.36 3,495.2 2.61 5,167.0 2.36 4,674.1Wheat 1.18 6,890.9 1.56 11,304.2 1.99 15,684.4Cotton4 9 701.8 823.9 1,540.0

4.39 Yields of the major grains are given in Table P1. Whilst rice has faced thesame problem of stagnant yields, faced by India and Bangladesh, considerable progresshas been made in wheat yields. This is not to decry the rice breeding program sinceover time established HYV's become susceptible to attack as viruses, rusts, nematodesand insects adapt. A substantial breeding program is thus needed, even to maintainyield levels. For wheat the NUYT results for individual sites show test varietiesyielding 0 to 50 percent above the Local Check Variety appropriate to the site. Overall sites the best (single) demonstrated wheat variety in 1992-93 yielded seven percentmore than the local check variety.50 After a serious set-back in the last two seasonsdue to viral infections, cotton varieties, together with the appropriate husbandrypractices are achieving significant increases in yields and quality.

4.40 The PSCo fulfills several vital roles in helping identify and propagatepromising varieties. In the first instance it provides land, labor and cash expenses fortrials conducted for, and under the direction, of researchers. Secondly, it conducts astandardized trial at its Khanewal seed farm for all varieties currently approved forsale, and varieties in the approval and registration process. Data from these trials isavailable back to 1976, at four planting dates each year. This provides a valuable"level-playing field" for breeders to compare promising strains, and puts them inperspective with respect to existing popular varieties and fading greats. Thirdly, at the

49. At the PSC's farm at Khanewal seed cotton yield has been increased from 1.44 tons/hectare before theproject, to 3.63 in 1987; national yield was estimated at 1.21 tons hectare. (PAR page 12).

50. This is a comparison of one variety, WS-10 over all sites in Pakistan when compared to the variety thoughtto be most suitable to the site; a very tough comparison. The average gain for the best variety tested at each siteagainst that sites test variety would be nearer to 25 percent.

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same time that the breeder starts the formal process of seed approval by submission ofsamples to the NUYTs, the PSCo starts a parallel process of bulking-up, under thesupervision of the breeder and Federal Seed Certification Department (FSCD). Thismeans that when a small volume of pre-basic seed emerges from theapproval/registration process, a larger volume is on hand to allow the imrnediategeneration of a significant volume of breeder seed.51 Seed Registration is theresponsibility of the National Seed Registration Department (NSRD) a small sisterdepartment to FSCD. The remarks on FSCD can be taken to apply equally to NSRD.The overall seed registration and certification process appears to work well, and addvalue.

4.41 There are official and unofficial channels for the release of new varieties, anddistribution of registered varieties. There have been unofficial releases of pre-basicseed by breeders to the private sector; just how or whether this is certified by FSCD,remains obscure at the present time.

4.42 The official route, at least in the Punjab, is for PSCo to produce Basic seedfrom its stock of Pre-Basic seed. This Basic seed is certified by the FSCD, and maybe used by PSCo to produce Certified seed,5 2 or for sale to growers or the privatesector. When Basic or Pre-Basic seed is sold to PSCo's contract growers, it comeswith a very complete package of agronomic and managerial advice. This is a mostimpressive service, and involves PSCo advisory staff visiting growers' fields at leastonce a fortnight, and often more frequently. They advise on all aspects of production,particularly on the discretionary spraying program needed for disease and pest control.This free farm advisory service serves three vital functions. It promotes confidence bythe grower in PSCo, thus minimizing the possibility that contract growers will defectunder the blandishments of the private sector companies. It maximizes seed yield forPSCo and the resulting good crop provides a visual advertisement to neighboringfarmers for the variety of PSCo seed, and it also hones the PSCo agronomy team'sknowledge of the variety specific husbandry requirements. This is a first class qualityprogram. Seed sales to non-contract growers, are made without the accompanyingagronomic managerial package.

4.43 The disposition of Basic seed, from which Certified seed is produced, is themajor bone of contention between the private seed companies and PSCo. Privatecompanies believe that they should be given a "fair" share of the Basic seed producedby PSCo. As described to the IE, PSCo management is willing in principle to provide

51. This accords with a recommendation in Heiser (1990), page 86.

52. The double use of "certified" here should not confuse the reader. The FSCD, when convinced of theparentage, germination, purity, etc, of a seed sample will issue a certificate that this seed is of the Breeder orCertified generation. In the former case it certifies that it is Breeder seed, in that latter case it certifies that it isCertified seed. There is probably no ambiguity in Urdu, though in English if has all the makings of an Abbott andCostello routine.

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Basic seed to the private sector, provided that it is ordered prior to planting, and witha ten percent deposit as earnest money. Some tension will always remain in theprovision of Basic seed for attractive new varieties, since PSCo itself, despite theefforts of the Nuclear Seed Cell at Khanewal (see para. 4.48), would often like to havemore of this seed than it has been able to produce.53

4.44 Impact on Production and Marketing. Though the public sector dominates theproduction of certified wheat and rice seed, the public sector bias of the followingcomments should not be taken to detract from the existence of a lively private seedsector for cotton and hybrid crops such as maize and sunflower; with some initialinterest in potatoes and an unexploited market for vegetable seeds. Far fromcrowding-out the private sector, the PSCs have provided most of the entrepreneurialtalent needed to found local seed companies, either from former employees or contractgrowers. The PSCo has evolved to operate very much like a large farmer controlledcooperative in the United States, such as Land-O-Lakes/Felco, or Southern StatesCooperative (Box P2).

4.45 PSCo is the only large scale producer of Certified Seed of wheat and rice. TheSindh Seed Corporation (SSCo) reports production of between 2,400 and 3,600 tons ofCertified wheat seed per year; reported production of Basic, Nucleus and Approvedseed can best be described as erratic (Annex B). The multi-national companies havesold small quantities of seed produced for them by contract growers. In the case ofimported seed the companies rely on their own good name to persuade farmers to paya premium for their attractively packaged products.

53. Ahmed (1994) page 348, also notes that sometimes PSCo is unable to meet its own requirements for basicseed.

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Box P2. Re-inventing the Public Sector.

The PSCo has enjoyed a period of stable management for the last five years.Four steps have transformed the PSCo from a chronic loss making situation into amodestly profitable public corporation. The first step was a frank recognition that thefarmers were right when they felt that PSCo seed was little better than the best of theirown retained seed. Initially only 50 percent of seed submitted to FSCD by PSCo couldbe certified. Much tighter attention to all aspect of quality control has raised this to over95 percent. Not only has this given farmers better seed, it has almost halved the cost perkilogram of seed produced. At the same time stock control has been tightened up, thusreducing unaccounted for losses, again contributing to profitability. With better qualityseed, the PSCo has in the last two years moved into an aggressive demonstrationprogram where it provides farmers with free seed for an acre of crop, provided that theywill follow recommended husbandry procedures, and have a notice describing husbandryand cost structure. About a thousand of these plots are now distributed widely in thePunjab. Based on the increased acceptance of its seeds, the PSCo is projecting over a 20percent growth in seed sales, based in part on a lottery of prizes for seed purchasers (seehowever para 4.44 and Table P2). The fourth step has been to distribute some of thenew found profits to employees as bonuses, thus giving them tangible proof that theirefforts have resulted in a profitable enterprise.

The atmosphere at PSCo is strongly reminiscent of big, farner-ownedcooperatives in the United States such as Land-O-Lakes/Felco or Southern StatesCooperative. These are large and efficient organizations (Land-O-Lakes is a Fortune 100company), which are not profit maximizing, since their objective is to (a) break-even,and (b) maximize the benefit to their farmer members. Profits are earned, but with theobjective of ploughing them back into the business to provide even better service tofarmers. Otherwise prices are held down to farmers, common property activities' areundertaken, and employee morale is high on the basis of doing more for farmers thansimple profit driven companies.

A recent focus group study carried out by OED in connection with an impactevaluation of irrigation projects in Pakistan confirned the difference in performance ofthe PSCo and SSCo (see Box P4). It found that of those focus groups that had changed(increased) their seed as in Punjab 83 percent had increased the use of certified seed; inSindh 72% had increased the use of non-certified seed.

a. I.e. activities where the benefit to farmers in general, exceeds the benefit which can be captured by PSCoitself; such as the supply of SPVs.

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Table P2: Rice and Wheat Procurement and Sales by SSCs(Metric tons)

Year PSCo SSCo

Paddy Wheat Paddy

Bought Sold Bought Sold Bought Sold

1989/90 1,282 871 1,400 1,1001990/91 1,543 992 479 4791991/92 1,456 896 46,917 40,756 967 9671992/93 1,093 912 46,691 41,4821993/94 1,806 963 57,088 43,719

Source: PSCo and SSCo

Table P3: Distribution of Certified Seed of Wheat, Paddy and Cotton by Supplier,1993-94 (Metric tons)

Year Wheat Paddy Cotton

Punjab Seed Corp. 43,719.00 963.00 10,000.00Sindh Seed Corp. 5,058.00** 960.00 1,260.00Ag. Dept. NWFP 2,092.00 42.00 10.00Ag. Dept. Baluch. 765.00Cargill 1,962.00 175.00 120.00Lever Brothers 220.00Darwood Seed Corp. 424.00Data Agro 1,155.00Jullundhar Seed 1,805.00 16.00 2,640.00Kurshid Seed 280.00 200.00Zaheerabad Seed 224.00 12.00 404.00Other Private 140.00 2.00 4,865.00PCGA* Punjab 1,687.00PCGA Sindh 11,715.00

Total 56,045.00 2,170.00 34,700.00Source: FSCD* PCGA = Private Cotton Ginners Association* Basic, Nucleus, Certified and Approved seeds, including 3,493 tons of Certified seed.

4.46 With 2.5 million hectares under rice in Punjab and Sindh, about 25,000 tons ofseed will have been used, of which only 2,170 tons came from the formal sector, (ofwhich 1,923 tons came from the public sector). This is a replacement rate of 8.7percent. Table P2 suggests that the distribution of seed in Punjab was demand

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constrained.54 In 1991 and 1992 in the Sindh, it appears that rice sales were supplyconstrained. However only in 1990/91 does there appear to have been a significantshortfall. Since the price of seed is only about 25 percent above the price for grainconsumption; and since seed is less than one percent of the cost of production, it isevident that the key requirement is to shift farmer's demand for certified seed. Thebasic problem in the case of grain is to improve the farmer's image of certified seed.This may not be easy, since the IE was not able to locate a data series which could beused as the basis for such an image enhancement campaign.

4.47 The absolute dominance of the public sector (87 percent) and PSCo inparticular (78 percent) in wheat seed supply is illustrated in Table P3. However, themodest (13 percent) penetration of this market by the private sector serves to illustratethat they have not been "locked out" (See Box P3). The higher seed volumes sold,translate also into a higher replacement rate for seed. With just over 8 millionhectares under wheat, about 0.725 million tons of seed will have been used. Totalsales of 56,045 tons, represents a replacement rate of 7.7 percent. The Seed Projecthad a target replacement rate for wheat of 20 percent over 75 percent of the sownarea; actual performance is 51.3 percent of this target55 (see, however, para. 4.48).For the time being, the SSCs created by the project play a vital and significant role infeeding certified seed into the infornal seed re-supply system. The efficiency withwhich the PSCo carries out this function has been transformed in the last five years(See Box P2).

4.48 Cotton presents quite a different picture, with the market shared about equallybetween the Private Cotton Ginners Associations (PCGAs), other private sectorcompanies and the public sector. As Table P3 shows the private sector has madesignificant and broad fronted entry into the supply of cotton seed. As a by-product ofthis active competition, the replacement rate for cotton is about 40 percent.

4.49 Impact on Farmers. The most significant implication of Table P3, is that thereis a flourishing-informal trade in farmer retained seed. Approximately 92 percent ofrice and wheat seed56 and about 60 percent of cotton seed, represents use of ownseed, farmer to farmer transactions, or purchase of farmer retained seed from anetwork of small traders, of whom there are 4,000 in the Punjab alone.

4.50 The project has not had, nor was it intended to have, an impact on thisinformal trade; except as the intake of Certified seed influenced the quality of farmer

54. Wheat sales in 1993/94 were depressed due to low rainfall, resulting in almost no sales in rainfed areas.

55. Note however, that SAR projected wheat seed volume was 60,700 tons, so actual sales are at 92 percent ofthe SAR projection. The difference is the very significant expansion of wheat area which has taken place sinceproject inception.

56. Slightly higher estimates based on a farm survey in the early 80's are given Heisey (1990), page 54.

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retained seed in subsequent generations. This impact cannot be measured by the crudestatistic of "replacement-rate," since it is the disposition of the early generations fromCertified seed which influences its impact. Thus with a eight percent replacement ratefor rice, if no seed were traded between farmers, the average farmer would be usingseed six generations away from Certified. However, the small sample of purchasers ofPSCo Certified seed interviewed by the IE sold on average three times as much seedto their neighbors from their first harvest, as they bought from PSC. In this case, ifeight percent of seed used is PSCo Certified seed, 32 percent of seed is at most onegeneration away from Certified; and all farmers have ready access to seed at most twogenerations from Certified. These farmer sales seem to take place without anypremium being charged for the better quality seed. It is not clear why the SAR set ahigher volume target for Certified seed sales. What seems to happen is that farmersuse the best seed they have seen growing in farmers' fields. If, as with the originalintroduction of HYVs, the yield difference is spectacular and evident, then the informalmarket serves to provide almost universal adoption within a few generations; if thedifference is marginal or negative, then it may be very many generations before aswitch is made. Note that this risk-averse behavior means that most farmers facedwith even a strikingly increased yield in demonstration plots would rather have hisneighbor use the seed this year; and buy it from him next year, when he had observedthe higher harvest in his neighbor'sfield. 57

4.51 The Economic Rate of Return. The SAR (Annex 14) provided a very detailedset of projections to underpin an estimated ERR of 80 percent, based in part on aninternational price for rice of $300 per ton (1975 dollars, $455 in 1985 dollars) versusa realized price in recent years of about $200 (in 1985 dollars). Though the initialbenefits were realized at close to the SAR projected prices, additional grain productionin the later years has been half as valuable as projected. The PCR (para. 5.06)provides a very sketchy description of revised estimates, mainly a five-year lag inbenefits and revised price expectations, to underpin an ERR of 30 percent. Prices havenot deteriorated since the PCR, and performance has been better than expected, whichsuggests that the ERR estimate should be higher for the IE than the PCR.

4.52 As shown in Table P1, yields have improved markedly since 1972, and forwheat have continued to improve from 1982 to 1992. In the Sindh, cotton yield hasincreased roughly ten percent from 1972-77 to 1990-91. Total project cost was $56.5million (PCR, Annex 1). PSCo is currently operating on a break-even basis, so that itsrecurrent costs are being met by seed sales. The SSCs provided about 49,000 tons ofcertified wheat seed, 1,900 tons of certified paddy seed and 11,000 tons of certifiedcotton seed in 1993-94. Using the same conversion figures as for Bangladesh forgrains and the SAR conversion for cotton, tH.s translates into 426,000 hectares ofwheat, 82,500 hectares of rice and 101,000 hectares of cotton. Using average yields

57. See also, Venkatesan (1994), footnote 26.

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from Table P1 1992 prices (in 1985 constant dollars) gives a value at internationalprices of this output as $102 million. Assuming that ten percent of this value is due tothe use of Certified seed, we get an annual benefit of $10.2 million, from the directeffects of using Certified seed in one year. (This leaves indirect effects to pay for thesubsidized costs of the SSCo, research and certification expenditures, etc).

4.53 The disbursement profile for this project was not included in the PPAR, and isnot available from the Bank's electronic data base.58 We know that the project wasclosed in June 1983 with $4.4 million of the credit undisbursed. As against this, twoof the four seed processing plants built by the project had to be rebuilt at theBorrower's expense, and should thus be added to the budgeted project cost. Buildingsand storage were budgeted at $3.22 million in 1975 dollars. Allowing half this for therebuilding adds $1.61 million, with additional equipment which had to be replaced, itseems likely that the Government will have had to spend at least $4.4 million more(i.e. equivalent to the canceled amount of the credit) to complete the project.Spreading the SAR projected expenditures over four additional years, gives a projectcapital cost profile as shown in Table P4.

4.54 Table P5 shows project seed sales in 1985/86 and 1993/94. The PPAR used1979 as the first year for project seed sales (PPAR, para. 20), allowing for a build upto 45,000 tons of wheat, 2,000 tons of paddy and 20,000 tons of cotton seed in 1985,with level sales from then on requires 1.5 percent increase in yield from certified seedsales in their first year to give a 12 percent ERR.

Table P4: Pakistan: Cumulative Projected Disbursement Profile(1975$ million)

Year Bank Borrower Total

1977 0.4 0.6 1.01978 0.8 1.2 2.01979 3.5 5.1 8.61980 6.2 9.0 15.21981 12.6 18.4 31.01982 19.0 27.7 46.71983 20.8 30.3 51.11984 22.6 33.0 55.61985 23.0 33.5 56.5

source: ib estimates.

58. Due to the project being completed before the Bank's computerized accounting system was instituted.

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Table P5: Pakistan: Seed Sales in Selected Years('000 tons seed)

Wheat Paddy Cotton

1985/86 44,500 23,5001993/94 49,000 1,900 11,000

4.55 Rough though this calculation is, it is sufficient to demonstrate convincingly tothe IE that the ERR for this project exceeded 12 percent by a wide margin. Excludedfrom this calculation are the benefits from the other crops, and the benefits fromfarmer saved seed descended from certified seed; as against this recurrent cost ofrunning the project have also been excluded, and the international prices have not beencorrected to domestic parity. However, it is clear that excluded benefits would greatlyexceed excluded costs, and hence only reinforce the conclusion that the ERR exceeded12 percent.

4.56 Summarizing the above observed impacts, we can say that the project (a) hasproduced a cadre of well trained and dedicated seed breeding professionals, (b) there isan active and well organized breeding research program which is defending past gainsand indicating potential for modest yield increases, (c) the SSCs, particularly PSCo,are currently crucial for the introduction of new germ plasm into the highly flexibleinformal farmer-to-farmer market, where observed yields in farmers fields dictate therate of adoption, (d) the project's public sector bias has not prevented the emergenceof private sector suppliers of hybrid, and of wheat and cotton seed. In the words ofPCR project summaries the project impact would now have to be described assatisfactory and sustainable. Its institution building impact was substantial. This said,problems remain.

4.57 Remaining Challenges.5 9 In the view of this evaluation, the key challengefacing the seed industry in Pakistan is that the yield gains being demonstrated by seedbreeders in the NUYT, are not affecting farmer demand for seed. This has twoadverse impacts. On the one hand it limits the genetic potential of the seed used byfarmers and, perhaps more importantly, it leads to increased disease risk since distinctgenotypes are not being used in their appropriate ecological niches.' A second

59. The rather didactic tone of this section does not represent a delusion that a very brief visit by an OED generalpurpose evaluator can yield truths not evident to full-time specialized operational staff (and even more evident tothe public and private sector managers who have built the industry); rather it is used as a device to highlight issuesand focus debate within the Bank. In this same spirit of focussing debate, it might be remarked that in theevaluator's view, the sole policy prescription for the seed sector contained in the green cover "A Strategy forSustainable Agricultural Growth," to privatize the SSCs, is orthogonal to the problem at hand and probably counterproductive, unless implemented as a farmer owned cooperative of possibly as (a series of) joint ventures.

60. An abstruse point perhaps; but the more genotypes in use, the less the damage if the disease resistance of oneof them breaks down; and the larger the area planted to a variety, the greater the probability of a break-down.

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challenge is that, as discussed in Box P3, agreed rules do not yet exist for giving thepublic and private sector seed companies equitable access to improved varietiesdeveloped by the research system. A third challenge is that both the research systemand FSCD have little, if any, spare capacity. This applies to manpower and especiallyrecurrent resources and capital equipment vehicles, computers, faxes, laboratoryequipment, etc).6" A fourth challenge is that Pakistan's stock of highly trained seedspecialists is not being maintained. There is not the needed continual flow of youngPh.D's into the system.62 There is no reason to expect the provision of a levelplaying field to the private sector to help with the latter three problems.

4.58 Once farmer demand is recognized as the key constraint, the remedies becomeself-evident. Firstly, it is absolutely essential to know that the cultivar can betranslated into more money in the farmer's pocket. The cost of fertilizer and otherinputs thus has to be taken into account, as does the farming system as a whole in theevent that days to maturity differ. This is why the PSCo's involvement with researchand its Farm Advisory Service are so vital. Once confident of higher income, itremains to demonstrate this to farmers. One possibility would be to introduce aNUFT (National Uniform Farm Trials) to compliment the NUYT. This would onlytest released varieties; new varieties, and those established varieties with more than sayten percent of the area locally. For the major varieties, or varieties of special interest,certified seed purchased locally from different companies should also be compared. Inevery case, the dominant local farmer varieties should be included in the trial. Theresults should record not only yield, but days to maturity, lint characteristics in the

61. It may not be possible for Pakistan to pay its professionals what they are worth; but at least they should begiven the equipment to allow them to be productive. See also "Pakistan: A Strategy for Sustainable AgriculturalGrowth," Green Cover, June 24, 1994, para 5.08. The FSCD is still highly dependent on equipment bought underthe project, thus 15 to 20 years old. In every case newer models are available, and in many cases spares are simplynot available. The FSCD's vital role is thus vulnerable to the eventual demise of this project funded equipment. Itis inspiring to see an office handling 5,000 samples per year, with the entire data-base maintained by hand; but it isno way to build morale amongst professionals. Not to belabor a point, but in 1978 the project provided for 20vehicles, FSCD is now operating with only 16 but with a much larger work load (the private sector needs theirservices for traditional crops, and forages, oil seeds, hybrids and pulses have been added without significantadditional resources being made available for seed certification and registration). Seed certification without fieldinspection is an oxymoron. Similarly, Certified seed is being distributed by PSCo without the official FSCDidentifying tags, because FSCD does not have the budget to print enough. The full cost of certification is beingmet, yet the evidence of this for an illiterate farmer is missing. "A ship is being lost for a ha'pennorth of tar."(See also Ahmad (1994) pages 344 and 349).

62. It is sometimes mistakenly believed that technical assistance provided in sufficient volume can substitute forindigenous Ph.D's. This is not so, on at least four grounds. The technical assistance person, even if she (or he asthe case may be) gets to understand the problem, does not have to live with the solution she recommends. She isnot around to help, when the result differs from what was expected. Secondly, there is no way an expatriate canabsorb the mores of the society in which she is working. This should affect not only the solution proposed, but theway in which it is proposed. Thirdly, an expatriate cannot have the old-girl net-work that comes with having beento the same agricultural college, or served in the same department; or married her brother. Fourthly, the indigenousPh.D. is a walking and permanent political lobby for the properfunding of research and adoption of sensiblepolicies.

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case of cotton, costs and hence return per hectare and per hour. Another possibilitywould be simply publish the same information for the ongoing PSCo sponsored farmerdemonstrations, preferably compared to results for other variety(ies) grown by thefarmer. The IE is very impressed with the value of this husbandry and farmmanagement information, as well as variety identification being displayed on a metalnotice board in the demonstration area. (Metal so as not to contribute to localfirewood supply). To accelerate the farmer testing of new varieties, a fraction of theseed being multiplied by the Foundation Seed Cell could be made available for keyfarmer trials in parallel with the production of basic seed. Farmers would thus knowwhat they were buying when the first release of certified seed appeared on the market.The correct balance between stimulating supply and demand (by allocating seed tomultiplication or demonstration) is a difficult judgement to be made in each case.

4.59 In principle the proposed NUFT could be run by the plant breeders orextension. In the evaluations's view, consideration should be given to using theFSCD, since it has a network of offices, and a reputation for objective testing.Appropriate additional staff and budget would of course be needed.

4.60 The above is going to cost money, not least the NUFT, putting the FSCD andNSRD on a self-financing basis and provision of adequate recurrent resources for seedindustry technologists and scientists. This raises the possibility that PSCs are sellingtheir seed too cheaply.63

63. Sec also Heisey (1990), page 51.

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Box P3: When is a Playing-Field Level?

The Bank's recent "Strategy for Sustainable Agricultural Growth" calls for the provision of a level-playing field for the private sector seed companies (World Bank (1994), para 5.08). This is not a policyprescription, rather it is an analogy and a cliche at that.

There is no difficulty in getfing public and private seed company managers to endorse the Bank'sprescription, indeed it would not be exaggerating to describe it as "passed with acclaim"; since it turns out that bothpublic and private companies feel that the current arrangements asked their team to "play up hill"! One looks invain to the Bank's strategy for guidance on the operational implementation of the analogy.

The primary plea from the private sector was to be given "fair" access to Basic seed, in order that theycould bulk it up with their contract growers into Certified seed. Knowing all about tar-baby, the IE will make noeffort to judge whether the private sector currendy has "fair" access. The demand for fair access to Basic seed,implies agreement that there should continue to be a public sector monopoly on its production. There seems alsoto be agreement by all parties that notification of seed requirements should be made prior to planting the crop, thatan earnest of ten percent should be paid, and that this should be a firm contracL

Even with this element of agreement, and a commitment from PSCo management to attempt toaccommodate the requests of the private sector, continued tension is to be expected. This is because the demandfor new introductions is likely to be high (with associated opportunities to sell the fust one or two generations ofCertified seed at much higher prices than established varieties), whilst the supply of Breeder seed, at least in thefirst season is likely to be limited. Raising the price of this scarce seed in the initial one or two years of varietyrelease, and p50 facto the Certified seed produced from it, would help some. It appeared that provided good-willcan be maintained, the prospect for iterating towards an acceptable set of rules for distribution of Basic seed weregood. Another possibility would be to auction Basic seed, with some portion of profits retained in the ResearchSystem.

Understandably, the private sector was concerned about the assets acquired by the public corporations atconcessional prices (many of them under the project). On this the IE retreats to the principle that a sunk cost is nocost, and as a corollary a sunk subsidy is not subsidy. Cheap processing facilities available to the public sectormay affect the private sector's decision whether to compete, but no purpose would be served by providing theprivate sector with equally cheap facilities. There seems to be some popular misunderstanding of the conditionsattached to the PSCo's farmn at Khanewal. This land, free" to PSCo, came complete with tenants and entrenchedtenant right, which raise production costs above what could be negotiated in the absence of these rights. PSCo'scompetitive position would be improved if it could acquire (or substitute) land on which it did not have it to act asa benevolent patemalistic employer. Access to more tenant-free govemment land would create PSCs to increasethe production of Basic Seed for sale to the private sector.

A current subsidy, on the other hand, is a real cost to the economy. Should this become necessary thena "level playing-field" would seem to imply that it should be paid on a per kg basis to all suppliers.'

Since access to Basic seed is currently seen by the private sector as the key to a level playing-field, itwould seem reasonable to charge the FSCD to monitor production and distribution.b

a. Contrary to many economists the Evaluaton does not reject seed distribution subsidies out of hand. Especiallyfor SPVs; exactly the same arguments used to justify public support of agricultural research and seed breeding,spill over into getting the results of this research into the hands of farmers, just as they spill over into the provisionof extension. Srivastava (1993, page 12) also notes the possible need for persistent subsidy, in some cases.

b. A further analogy, the FSCD should be "referee" on the level playing-field.

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4.61 Finally, it is incumbent on the evaluation to relate these findings to the Bank'scurrent policy recommendations for the seed industry. These can be summarized as:

"5.08 There is no need for government presence in the marketing ofimproved certified seed. Government seed corporations should be runalong strictly commercial lines and be privatized as soon as possible.Private-sector seed companies should be provided with a level playingfield. 64

4.62 If the PSCs can be privatized and an equal or better service provided, then onecan only say "Amen" to the above recommendation. In the case of the SSCo, it is notdifficult to imagine an equal or better service being provided (Box P4). However, inthe case of PSCo, as Table P3 shows, a significant service to wheat producers is beingprovided. It is not clear that even with a level playing field, there would be anincentive for the private sector to sell this much seed at PSCo prices. Furthermore, theargument which supports public sector agricultural research in general and seedbreeding in particular, equally makes a case for subsidizing, if necessary, some flow ofimproved germ plasm into the pool of seed being traded informally amongst farmers.Currently PSCo is providing a very valuable service to farmers without recurrentsubsidy. It is not clear to the IE what deficiencies the proposed privatization isdesigned to remedy.65

4.63 This suggests that, like porcupines making love, privatization of the PSCs (atleast of PSCo) should be approached very carefully. What has happened in the case ofcotton can only be applauded. Expansion of sales by the PSGAs and private sectorhave eroded the PSCs market share to the point that a decision to withdraw from thesupply of Certified cotton seed would not be enormously disruptive in the market.66

This has not happened for wheat; and PSCo has not had a public subsidy for the lasttwo years, and it has had profits which it has returned to its employees as bonuses. Itsrecurrent costs have never been a major drain on the Treasury.

4.64 To level the playing field, Government could undertake to pay any neededsubsidy to the PSCs on a per ton basis; and to make this available also to the privatesector. If the PSCs become an unacceptable drain on the Treasury, or there issufficient dissatisfaction with the level of service, then consideration could be given toformation of a farmer owned cooperative or joint ventures based on individualprocessing plants and a complement of seed multiplication farms; where the joint

64. World Bank (1994).

65. Para 4.51 has already noted that private sector access to breeder seed remains a bone of contention, but itappears that progress is being made towards resolution.

66. However, PSCo's role in sponsoring research and the production of Basic seed would remain vital.

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venture would commit itself to specified levels of service. This would allow theGovernment to write down its investments (without writing them to zero) withouttotally disrupting the availability of seed.

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Box P4. The Sindh Seed Corporation

Box P3 summarizes some of the key changes made by PSCo over the last five years. Sindh SeedCorporation (SSCo) still has many of these changes to make. If it can make them, then in five years SSCocould represent another clearly successful Bank investment.

A key difference between the two corporations is that while the PSCo has had stablemanagement for the last five years, the SSCo has had roughly one manager per year since itsinception, with two changes during the last year. Judging by experience, a more stablemanagement team may require a clearer separation from the Public Sector.'

Fundamental problems for the SSCo are a lack of working capital for needed repairs andreplacements and supplies of second generation Certified Seed bought from contract growers,(about four tons returned per ton of Certified seed supplied). The highest total intake of wheatseed has been 6,721 tons in 1992/93, versus a processing capacity of 9,600 tons. Several factorsunderlie this low purchase level including (a) high (up to 50 percent) rejection of crops grown fromSSCo supplied first generation Certified seed, (b) the relatively modest price premium (ten percentabove the floor price) offered to contract growers for second generation Certified Seed, which canresult in the market price for grain exceeding the SSCo price, and (c) lack of a revolving fund tofinance seed purchases.

As the supply constraint is overcome, additional processing capacity will be needed. Anumber of projects to add capacity have been prepared, and funding is being actively sought. Thetechnical deficiencies in cotton ginning and seed cleaning equipment supplied under the originalproject, will have finally been fully corrected by next season.

As these constraints are relaxed, SSCo will need to follow PSCo in (a) improving thepurity of farmers crops so that rejection drops to the five percent level achieved by PSCo, (b)pending release of a popular cotton variety for the Sindh, consideration should be given to testingestablished and new varieties from other regions, in order to be able to supply good quality seed ofa varieties in demand by farners, processors and ginners (SSCo's current practice of importingseed from the Punjab is a sensible initial response to this problem) (c) to add a Nucleus Seed Cellto multiply-up the seed of promising varieties in the process of registration and approval, so thatthey can be released quickly and in significant volumes, and (d) a pricing structure needs to beadopted which will reduce the transport costs to SSCo of buying from remote growers. This lattermay also require organizational change, since the political demand for pan-territorial pricing islikely to be overwhelming whilst SSCo remains in the public sector.

SSCo expects to make a crucial break-through this year, 1994/5, by achieving break-even operation for the first time. The groundwork is also being laid for the creation of a NucleusSeed Cell.

If the needed independence from public sector regulations cannot be obtained whileSSCo is publicly owned, consideration could, perhaps, be given to the formation of a Joint Venturewith an established seed company. This would allow an injection of working capital and lead tocontinuity of management, whilst ensuring that improved seed was made available for the SPVswhich are the backbone of Sindh agriculture. Straight privatization could lead the new enterpriseto simply withdraw from the provision of seed for SPVs, thus increasing the firms income, butleaving Sindh farmers without a reliable source of pure seed for their major crops.

a. It has been argued for continued public service control that it is ability, not stability, that is important.Without knocking the importance of ability, the IE believes that SSCo needs the sort of combination of abilityand stability that PSCo has experienced recently.

75

5. Conclusions and Future Impact

A. Institutional Evolution.

5.1 Seven years after their PCRs, it is evident that the seeds projects in India andPakistan used a sophisticated strategy of "creative institutional obsolescence." No lesssophisticated for being in large measure unconscious. By promoting state or provincialparastatal seed companies at the expense of a monopolistic national parastatal seedcompany, the projects mobilized an effective constituency within the public sector insupport of decentralization. Not only did this undermine the political and bureaucraticpower of the national company, but the decentralized seed companies were lessinclined, or less able, to resist the entry of private sector companies. Just as thenational seed companies were asked to give way to state companies, so the statecompanies will be increasingly asked to compete on a level playing field with theprivate sector, or to give way entirely to the new competition. That decentralizedSSCs could be expected to better cater to the needs of the state's farmers than acentralized NSC, was an additional bonus.

5.2 This has been a healthy, if not entirely painless, evolution. The HYVs (and toa lesser extent the advances in hybrid maize and other open-pollinated varieties)released in the late 60s and early 70s required the creation of a seed industry capableof rapid dissemination of improved seeds, many of them for SPVs and compositevarieties. It was not within the power of governments to create viable, high capacityprivate sector seed industries on a crash basis. Indeed, given the lack of repeatbusiness for key SPVs, it was not even obvious that private companies would find theactivity profitable. What governments could do, often with the assistance of the Bankand other donors was to create a public sector seed industry. Initially at least on amonopolist and national basis.

5.3 These national companies made a major contribution by (a) an increase in thephysical supply of seed, (b) making farmers, politicians and the agricultural sector ingeneral "seed conscious," and (c) providing an initial cadre of seed scientists andtechnologists. The natural evolution of a monopolistic parastatal is to becomeincreasingly bureaucratic, inefficient, politically powerful and indispensable. (If it isthe sole source of seed, for example, policy makers are likely to be unwilling to takethe risk of major dislocation of the parastatal's activities). The slow adoption of aSeed Policy in Bangladesh, where BADC continues to be the sole public sector seedcompany, illustrates this tendency.

5.4 Decentralization of the seed industry from a single national monopoly to aseries of state or provincial seed companies was a brilliant move. It provided a publicsector dynamic which the central company could not resist; it opened up so manypromotion possibilities to national seed company staff. Moreover, it could not be

76

couched in terms of public versus private sector interests. It was an evolution entirelywithin the public sector.

5.5 That the NSC in India continues to be a major player in the seed industry doesnot vitiate this analysis. It is now a player, not the player. So long as the governmentis willing to make the necessary subsidy payments, NSC will continue to operate.However, should the government withdraw its support, there are several othercompanies clearly able to take up any slack created.

5.6 The performance of the decentralized seed companies has been mixed; somesuch as PSCo and Andhra Pradesh Seed Company have achieved quality and costlevels which would make them serious competitors even if all restraints on the privateseed companies were removed. Other parastatal companies would be unable tocompete in the absence of state subsidies; however the breadth of the industry meansthat their customers would be readily supplied from other sources. Having served theirpurpose, they could be allowed to fold.6"

B. Sustainability.

5.7 With the passage of time, with the demonstration of a substantial market forimproved seed, and with increased indigenous expertise in the seed industry, theindustry has become of interest to the private sector; particularly where much of thegain in productivity can be captured by the private supplier, as in the case of hybrids.

5.8 The seed industries have thus evolved from a single parastatal company, todecentralized state or provincial parastatals, to a mixed private-public system, wherethe public sector supplies predominantly SPVs, and the private sector supplies hybridsand specialized varieties.

5.9 In large part, this current equilibrium is due to the historic "accident" thatsubsidization of seed for SPVs is paid directly to the parastatal companies involved.Were the subsidy paid per kilogram of seed sold a significantly larger market sharemight be captured by the private sector, in some cases leading to the demise orprivatization of uncompetitive parastatals; the required subsidy might well be lower.68

67. An Indian SSC generally agreed, citing decentralization as the reason it can do a better job than NSC in gettingseed to the farmers' doorstep through various means. This has opened the door for private seed companies to cater tofarmers' needs, including SPVs.

68. An SSC explains that the current equilibrium is not an accident, also that the SSCs can't run away from their moralduty to produce SPVs, which private seed companies avoid because of their low margin and high handling cost. TheSSC reiterates that seed subsidy is not to SSCs but to the farmers as part of the Agriculture Department's effort toenhance the seed replacement rate.

77

5.10 Further evolution of the seed industries studied thus awaits a re-thinking ofseed policy. The paradigm that the production of seeds for SPVs should be paid for infull by farmers, may simply be untenable.69 A re-examination could well lead to achange in the way the subsidy is paid and an enhanced role for the private sector. Anargument that the government should be willing to pay the full cost of varietaldevelopment and of agricultural extension (because they are public goods), but none ofthe costs of seed production (even though SPVs are in large measure public goods)does not have intuitive appeal.

5.11 In like vein, the continued existence of the seed companies brought intoexistence by the projects, is basically irrelevant to a judgement as to the sustainabilityof the projects. It is the continued supply of good quality seed to farmers atreasonable prices which is the index of project "sustainability," not which organizationsare involved in seed supply. In those cases where parastatal companies evolve to thepoint where they can compete without subsidy with the private sector, their continuedexistence is to be welcomed. Should all of the project companies succumb tocompetition, this would not detract from the value of the projects, or indeed reflectadversely on their design. The projects have clearly had a very positive effect on theevolution of the seeds industries in their three countries; that the industries may be inthe process of outgrowing some of the institutions which originally fostered theirgrowth is, in the circumstances, an indication of sustainability, rather thanunsustainability.

C. Lessons.7"

5.12 Key elements of project design, most of which these projects got right, arethus:

i. Technical Training. The seed industry stretches all theway from genetic research, through varietal development,through bulking up, certification, registration, productionand marketing. Many of these topics are highly technical,and it follows that a cadre of well trained seed scientistsand technologists is a necessary condition for success ofthe industry. Thus an active training component is anessential element of a good project. (As remarked in

69. Alternatively, it may be tenable, in a world where certified seed was sold at a sufficiently high price (and insufficiently low volume) as to allow one or two generations of multiplication by farmers or the private sector beforebeing sold for grain production. The point is that the project paradigm of 20 percent of wheat and paddy seedbeing certified seed, the production of which is paid for in full by farmers, does not appear to be viable.

70. Srivastava (1994) contains many of the same lessons, based upon a wider literature review.

78

footnote 49, technical assistance is a very limited,temporary and imperfect substitute).

ii. Institutional InfJastructure. An initial core of publiclysupported genetic research, seed breeding and seed testingis essential for the rapid development of the industry.There is no point in the training component, if trainedstaff have nowhere to practice their professions. At alater date, in a mature industry, there is room for debateand experimentation as to the relative roles of the publicand private sectors in research, breeding and certification.However, in developing an industry, the public sector hasto stand ready to fulfill any roles not yet satisfactorilyperformed by the private sector.

iii. Seed Production. Public production and marketing ofseed may well be a necessary initial step to (a)demonstrate the existence of a market, and (b) to makeseed available pending the development of private sectorseed companies. There is every reason such parastatalcompanies should be encouraged to compete, and if freedfrom the more onerous of public sector bureaucraticprocedures they may be able to do so.

iv. Break-up of Monopoly. It is essential to find some wayto avoid the emergence of a single all powerful parastatalmonopoly. One alternative may be to foster competingparastatals, another would be to provide for seedimportation by companies, other than the seed productionparastatal. The apparent confusion due to imbalance inseed supplies from different sources is a small price topay for avoidance of the policy inertia and bureaucraticprocedures which characterize dominance of an industryby a single parastatal, or other forms of central planning.

v. Remove Barriers to Entry. It is important to ensure thatthere are no unnecessary barriers to entry of private firmsinto the industry; that government not impose regulationsthat prevent the private sector from functioningefficiently; and that the private sector have equal accessto improved seeds and germ plasm produced from theresearch system. It is not necessary to have an activepro-private policy stance; but it is essential not to have ananti-private sector stance.

79

vi. Subsidy. Under no circumstances should a subsidy beused to give differential advantage to the public sector.Any subsidy should be available to all. Theadministrative problems of doing this, are a significantadditional argument against subsidy.

vii. Independent Testing and Certification. National UniformVarietal Trial open to all; and a highly professional andindependent Seed Certification Authority to establishstandards for germination, purity, and genetic compositionare essential. A truly rigorous Seed CertificationAuthority is perhaps the most important indicator of amature seed industry. In India certification is optional,and this has worked well; but farmers need the option ofbuying certified seed.

viii. Support for Informal System. At least for the next twentyyears the bulk of non-hybrid seed planted is likely to befarmer saved. Farmers need increased advice onroughing for off-types, minimizing weed contamination,seed cleaning and storage, and germination testing.7 '

D. Bangladesh and the Small Country Problem

5.13 With a population of about 100 million, Bangladesh is not a small country,however in the context of this evaluation it differs from India and Pakistan in thatpublic sector seed supply has remained with a single entity, BADC. Thus the processof undermining public sector monopoly with public sector (limited) competition, as aprecursor to competition from the private sector has not taken place. And, desirablethough it may be, this evolution is unlikely to take place in the myriad smallercountries where a transfer of economic functions to the private sector might be sought.It will not take place, since the diseconomies of several small parastatals with the samefunction prohibit it.

5.14 However, a single parastatal monopoly is likely to mobilize more political andbureaucratic support for the continuation of its monopoly, than parastatal oligopolists.Rather than seek to foster alternative sources of domestic production, in such cases, itmay be more effective to facilitate trade in seeds; with its monopoly broken aparastatal is less likely to offer resistance to the expansion of private seed production.

71. This is being addressed in the Third National Seeds Project for India (Credit 1952-IN).

80

5.15 There is no reason that seed imports should not be subject to the same type ofrigorous varietal trials used to approve the release of new domestic varieties. Wherethe exporting country has no certification system, two or three years in the NUYTmight reasonably be required, but given adequate performance importation subject toexport country certification could be fully liberalized. In the more usual case whereforeign country seed certification is available, theirs should be accepted on anequivalency basis. With hindsight, the continuation of quantitative import controls andpublic sector imports (para. 2.06) was a design error, which could only help delay thefull entry of private companies into the supply of the affected seeds.

E. Wider Lessons

5.16 The above lessons are thought to be directly applicable to seeds projects, yetthey may also suggest considerations to be borne in mind for agricultural projectsgenerally, or even more widely. Such tentative lessons might include:

i. User-Pays. Desirable though it is in principle that theuser should pay, collection may prove difficult or evenimpossible in the case of public goods. Hence,recommendations for cost recovery, or other applicationsof the user-pays principle should include a demonstrationthat the good or service in question is not a public good.Much past experience with cost-recovery efforts inirrigation schemes has foundered on exactly thisconsideration. (Recent Bank experience in Mexico andTurkey holds promise that appropriate social organizationcan reduce collection problems).

ii. Wither on the Vine. Faced with an inefficientmonopolistic parastatal, there are two policy options. Thefirst attacks the parastatal problem by privatization andmay or may not introduce competition. The secondattacks the monopoly by removing subsidies andregulatory controls, leaving the parastatal to compete, orwither on the vine.

iii. The Market Test of Competition. Even in a market whichis too small for several domestic firms to compete,competition can be ensured by permitting internationaltrade. It is not necessary that a lively trade beestablished, merely that importers get open access toforeign exchange, and that quarantine and other health orenvironmental regulations not be used to provide non-tariff barriers. This is the market test of competition.

81

iv. Technical Assistance versus Training. As discussed infootnote 56, at best technical assistance is an imperfectsubstitute for training indigenous experts. It can providea short-term stop-gap. But if there is need for technicalassistance, provision of training to alleviate the need overthe long term should in most cases be a necessarycondition for provision of technical assistance.

83

Annex A

Existing Reports on Completed Seed Projects

Country Project Number PCR PPAR IE

Bangladesh Cereal Seeds Cr. 0410 04/84

China Seeds Cr. 1577 10/91

Ecuador Seeds Ln. 1229 04/86

India Seeds I Ln. 0614 06/79 12/86National Seeds Cr. 0816 06/87National Seeds II Ln. 1273 06/87

Indonesia Seeds I Cr. 0246 12/79 12/86Seeds II Ln. 2066 10/90

Korea Seeds Ln. 0942 06/81

Myanmar Seeds Cr. 0745 06/87

Pakistan Seeds Ln. 0620 05/87

Zaire Seeds Ln. 1609 05/93

85

Annex B

Statistical Annex

L Bangladesh

Table IA: Inferred Project Cost Profile (Annual $ million)

Fiscal year Bank Total 1985 $

1975 0.052 0.121 0.184

1976 0.748 1.737 2.600

1977 0.400 0.929 1.266

1978 0.900 2.090 2.473

1979 0.430 0.999 1.044

1980 1.140 2.648 2.524

1981 1.060 2.462 2.338

1982 2.570 5.929 5.756

1983 0.101 0.235 0.232

Total 7.401 17.190 18.417

a. Total project cost S17.16 million, PCR Table 3.01, page 29. Actual disbursements 1979, PCR Table 2, pp. 36 and 37.a Total cost profile inferred from known Bank disbursements.

86

Table 1B: HYV Seed Distributed to Farmers, (Metric Tons)' and World Prices(1990 $ metric ton)b

Seed World

Fiscal Quantities Area Prices Index benefityear (metric ton) (hectare) (198S$/ton) 198S $

Paddy Wheat Rice Wheat Rice Wheat MUV

1976 1,978 4,662 86,000 40,500 382 223 66.8

1977 1,027 1,781 44,618 15,470 371 158 73.4

1978 1,576 3,488 68,429 30,302 436 160 84.5

1979 1,321 4,864 57,435 42,259 346 180 95.7

1980 2,038 13,995 88,609 121,590 414 182 104.9

1981 1,260 14,139 54,782 122,841 458 186 105.3

1982 1,634 11,069 71,044 96,169 282 161 103.7

1983* 2,212 12,537 96,174 108,923 273 168 101.4

1984 2,791 14,005 121,348 121,677 254 166 99.2

1985* 3,200 14,290 139,130 124,153 216 173 100.0

1986* 3,609 14,575 156,193 126,629 179 137 117.9

1987* 4,018 14,860 174,696 129,105 177 104 129.5

1988* 4,427 15,145 192,478 131,581 216 129 138.9

1989* 4,836 15,430 210,261 134,057 232 145 138.0

1990* 5,425 15,715 235,870 136,533 197 107 145.8

1991* 5,654 16,000 245,826 139,010 211 96 148.7

1992 6,064 16,284 263,652 141,477 192 114 152.9

a. FY76 to FY82 for paddy from PCR Table 5, page 40, for wheat from PCR Table 6, page 41. FY84 and FY92, BADC datasupplied to mission.b. World Bank data base, 1985S/metric ton.* Seed distribution is interpolation.MUV - manufacture unit value index.For yield calculations in FY92 see para. 4.14.

87

II. Pakistan

Table IIA: Public and Private Sector Seed Prices 1993/94 (Rp/kg)

PSC Cargill Sandosz Jarinda Kisan

WheatUntreated 5.60 8.00 6.00 8.75Treated 6.80 9.00 7.00

CottonLinted 9.50 12.50Delinted 20.00 32.33 20.00 35.00

RiceMin 6.50 16.00 7.00Max 8.50 10.00

MaizeComposite 5.50Hybrid 55-95

Table JIB: Wheat Seed Production by Sindh Seed Corporation

output

Year Intake Basic Nucleus Certified Approved Total

1989/90 3,195 141 180 2,438 204 2,940

1990/91 3,800 80 485 2,899 45 3,510

1991/92 3,388 36 3 2,440 713 3,192

1992/93 6,726 8 18 2,402 3,756 6,185

1993/94 5,666 6 696 3,592 762 5,057

1994/95 6,560

89

References

Ahmad, Syred Irfan, and M. Tousaf Chaudhri, 1994. "Seed Research, Production andAvailability to Farmers," in Institutional Reforms to Accelerate IrrigatedAgriculture, John Mellor Associates, Washington, DC.

Byerlee, D., 1994. Modern Varieties, Productivity, and Sustainability: RecentExperience and Emerging Challenges, Mexico, DF: CIMMYT.

Douglas, J.E. (ed.), 1990. Successful Seed Programs: A Planning and ManagementGuide, Westview Press, Boulder, CO.

Heisey, P.W. (ed.), 1990. Accelerating the Transfer of Wheat Breeding Gains toFarmers: A Study of the Dynamics of Varietal Replacement in Pakistan. CIMMYTResearch Report No. 1, Mexico, DF: CIMMYT.

Srivastra, Jitendra P. and Steven Jaffee, 1993. Best Practice for Moving SeedTechnology: New Approaches to Doing Business. World Bank Technical PaperNo. 213. World Bank, Washington, DC.

Venkatesan, V. 1994. Seed Systems in Sub-Saharan Africa: Issues and Options. WorldBank Discussion Papers (Africa Technical Department Series) No. 266, WorldBank, Washington, DC.

World Bank, 1994. "Pakistan: A Strategy for Sustainable Agricultural Growth," GreenCover, June 24, 1994.

91 Annex C

05/06. 95 10:45 FAX 880 2 883416 ROEBOUND tl

BNGt DESH RICE RESEAR 6H'jIN Ul1TEJJ.YD. E3LR. C- Ga.zip-37ol..

R;e Ei--185/2100.. D?^*;*.9

Opera,tions Evaluaaio4' Dept.This World BaP*l816 .* Street -N.W..

;"gpp,y;.r;: ::20433,1

r {(202) 522-3123.

.e-FAizPact iiauatiom Report or Bangladoh Ceel S**d PrbjeoCredit (410-3D)

Bangladesh Rice Rtseu1Ch inUrt± t :a9 of thi

reci.pLents of the above cr:edit but the. ipacta ot credit tInimt or reglegIble to BRRZ.UaidsN tiet q;iN.eLtt t v glow

* ifrasi.ruc2irial develo,pmnt. but there: was zo han rpaour .development in the ase teckmology. sector. B"riladeih 4L,.chvman--resotrdii thei areas of seed .ic . t.

We have no nts on the reporit 0ceBt. thq s"tuMet inPara 9 of Paged *19 -whe it states * While I4b-*i5±4 th ajd Now p. 17;indutry geAeral * is r poULcy *ezp1±c±te1y for a

monopoly of production &-diutzribut±on ;of T4kaf rzr f A CI understand thex five kty crops are 47*yt.j . , .poi .boand suga;xwcane. In act,. in the n seed. poXI..,? . ;distribution of seeds is opez th .L1, both P41 (hD.private. 'There is no m&mopolj.for IADc. Th.;is{n pivapi seed.co s.o rice. wheat,. 1Lte a. sug.cs bpi t * ia sector& informa.l arstem.

Yours . ,.ezj l.

N.Dlrq: . .

- 93 -B17AY KUMAR I.A.S.

- mA~~~~~z

MAHARASHTRA STATESEEDS CORPORATION LIMIUTD

Ref: D.O.No.MSSCW1DI139195I > C I30 May, 1995

Subject : Impact Evaluation Report - India

Reference: i) National Seeds Project (Loan 1273-IN)ii) Second National Seed Project (Credit 816-IN)

Dear Mr. Roger Slade,

Thank you very much for forwarding a copy of draft Impact EvaluationReport for NSP-1 & II for India, Pakisatan and Bangla Desh for mycomments..

I have to offer comments on contents of para No. 4.28, 4.29 and 4.35 ofthe Report which are as under:

First of all, please refer to Para 4.28 , Page No.70 of the Impart Now p. 55Evaluation Report on India. My comments on the contents of this paraare as under:

It is out come of crude analysis of facts to state that the State SeedsCorporations (SSCs) have been supported for its survival by subsidies inthe 20 to 25 % range. Rather subsidies have been passed on to SSCs fordoing mandate function of undertaking production and marketing ofseeds to support ambitious Agriculture Production Programme; therebythe SSCs fate gets tied up with success or failure of AgricultureProduction Plan, putting them into risks and constraints which cannot befully recovered by the input of subsidies.

Mr. Gregg who has made study of lndian condition seems to have beencarried away by incomplete facts in as much as he has come out withthe conclusion of lack of opportunity of the "level playing" for PSSC's,ignoring the fact that most of the PSSCs in India are, in fact ,willing toget subsidies, with a pre-condition, that they are not subjected to thesame constraint to which SSCs are subjected to, about dovetailing itsactivities with National Agriculture Development Programmes. Hencehis concept of "level playing "is only hypotectical.

Regd. Off.: Shastri Nagar, Post Box 119, Akola 444 001 (INDIA)Phone : Off. : 25 380, Resi. :26 882, Fax: 0724 - 28291 Gram: MAHABEEJ

94

Similarly, apparently, there seems to be lack of proper understanding ofManagement of SSCs which is visible from the statement in Para.4.29 ofthe report that in SSCs only IAS Officers are posted as ManagingDirector, shortening career path of profession Seed Technologist,to servethe purpose of career promotion of LAS. I think the visit of evaluationmaking team to Andhra Pradesh State Seeds Development Corporation(APSSDC) Hyderabad, Madhya Pradesh State Seeds & FarmDevelopment Corporation (MPSSFDC), Bhopal etc. should have givenbetter understanding of facts to the team; if efforts were made to analysethe facts critically; instead of finding easy solution to major managementproblems.

Further, the contents of Para 4.35 of the report is too general . To bespecific Maharashtra State Seeds Corporation Ltd. (MSSCL),Akola'sworking is a proof that PSCs can survive even if subsidies werewithdrawn.

However, I appreciate that a lot of effort has gone in preparing thereport ,which needs only looking at the facts from correct perspective, tomake valuable suggestion for progress of Seed Industry in Developingcountries. If suggested facts are over looked we may come out with mis-leading conclusion which will lead us to setting of skewed targets forfuture.

Yours sincerely,

(Bijay Kumar)

Mr. Roger SladeChief Agriculture &Human Development DivisionOperation Evaluation DepartmentThe World Bank1818 H Street N.W.Washington, D.C. 20433U.S.A.

Copy submitted to Shri Asoke saks LAS, Secretary (Agril.) andChairman, MSSCL, Agricuhwe & AEJ Deptt. Governmet ofMaharashtra, NfMralaya Annexe, E6mtiy 400 032 (India)

95

01-JUN-1995 14:0 FID H2S LAHORE PAKISTAN 92 042 7235?9 P.90j

BRIG:tR)MUH1NMAD AZIZ AMAD r-AN

D.O.NePSC/ IQ--DID /95/ 24/,/ RID. O. io ........... ,,Hg. D.D/95 24 Sl pjA.PUJ SEED CORPORATION

.4-LYTTON ROAD.

.FA NO.(2OZ)522-312 3 01L.06.t995SLhor*. the ........ . . . . lo

Mr.Roger Slade,Chief,..Agriculture and XumanDevelopment DIivion,OperatIon. EvaluationMDeartment188 H Street N.WWWashinston D.C.20433U.S.A

Re: IMPACT EVALUATION REPORTON BANGLADES: CEREA SEEDSRe: pROJECT ICREDIT 410-BD), INDIA NATIONAL SEEDS

*PRbJECT (LOAN 1273-IN),. PAKISTAN; SEED PROJECT(CREDIT 62O-PAKQ.

Dear Roger Slade,

I have received your letter dated April. 28,1995. alongwith the report of your Mission .

I will like to congratulate you on this verycomprehensive report and thank you for appreciating the work.:of Punjab Seed Corporation. I assure you that we shall do oti:'best to overcome the shortfalls and come upto your expectatlon..

It is recommended that In page 89 Box P3, It may beadded that more tenant free Govt Land should be provided toPunjab Seed Corporation to increase the production of BasicSeed to meet the requirement of private sector.

*Now p. 71.

..

97

,ll.ASeedsAnd ?arai DevelopmentCorpora tion ftd.

Pantnagar, P. 0. Haldi - 263140, Distt.-Nalnital (U. P.) IndiaTelephone: 20222 E 20238. Gram: BQej Nigam. Haldi

S.T.D.: 05948 - 33606. Fax: 05948 - 33830

BY AIR WE.INo.UPS&TDC/b1D/IBRD/5267

Dated: 16.6.1995.Mr. Roger Slade,Chief : Agriculture and HumanDevelopment Dlvision,Operation Evaluation Department,1818 H Street N.W.Washington, D.C. 20433,U. S. A.

Dear Mr. Roger Slade.

Refer your letter No.(202)477-1234 dated April 28,1995regarding Impact Evaluatlon Report on India: National SeedsProject (Loan 1273-IN) India: Second National Seeds Project(Credit 816-IN). The comments of the Corporation on thlsreport may be offered as below:

1. It has been Indicated In thls Evaluatlon Report thatthe NSP model was based on Indian Taral Project. As aware,the mother TaraL Project has taken shape of U.P.Seeds AndTaral Development Corporation Ltd. and, therefore, the nameof the Corporation may also be included.

2. CHAPTER - 4: PROJECT IMPACT

Para 'C' - INDIA - Page-67

Now p. 55 Para-4.28 (Page-70)

i.The U.P.Seeds & T.D.C. do not agree with the reportregarding managerial structure. The Corporationis belng managed by the hlghly qualified AgrlcultureScientists and professional Managers in their respect-ive fields.

ii.The Corporation is utillzlng the full capacltyof its plant and there is adequate vertical andhorlzontal growth ln its affalrs.

iii.As regards support to S.S.C. by way of subsidylt ls to be clarifled that the subsldy is not provldedto UPS&TDC as such. ThLs subsidy ls appllcableffor sale of seeds by Govt. agencies on seeds producedat Govt.Farms procured by them from other sourcesincluding S.S.C.

4.30 : Since the replacement rate ln case of Cereal is 8to 10% and in case of Pulses is about 2.5%. the subsidy facllityby the Government in the form of direct assistance to thefarmer Is desirable to achleve the targetted replacementrate In U.P.

4.31 : The llttle work on development of SPV's by PrlvateSector is not only due to the retention from own graln forseed by the farmer, but lt ls due to the fact that SPV'srequire a voluminous infrastrcture.huge investment and highhandling cost of production leaving very meagre margln as

98

against the conscize infrastructure and high margin of profitin case of hybrids. They avoid dealing in SPV's. Rather,the factor of retaining the grain as seed by farmer is equallyapplicable in case of SSC's who mainly deal in SPV's. S.S.C. Israther, have creative platform for the Private sector byhabituating the farmer for using SVS's certified seeds andthere is a huge gap to fill the replacement rate and privateseed growers can go to any extent.

Now para. 4.33 4.32 : The sale of N.S.C.and S.S.C. has been indicated as76,000 tonnes V/s 1,36.000 tonnes respectively. Here it isto be pointed-out that out of 1,36,000 tonnes produced byS.S.C's the share of U.P.Seeds and T.D.C. by the end of 1993-94 production alone is about 89,000 tonnes and in 1994-95it is more than 90.000 tonnes.

4.35 : Not agreed with the ISI strategy to reduce the volumeof certified seed sold and raise its price because the economicstatus of the Indian farmers are not enough to afford higherprices.

In case of the 2nd strategy to distribute presentvolume of certified seeds at present prices the subsidy shouldbe continued. If private sector has to have a claim in subsidythey must share the responsibilities for producing seedsas per directives of the Government specially for SPVS requiredvarieties.

J.36 : The U.P.Seds & T.D.C. being SSCs., has been giventhe responsibility to meet demands of various kinds of cereals/pulses/oil seeds/forage crops and even vegetable seeds aeiper targetted seed plan either -py prbdu'cipg 'the ; seeds throughtheir growers in U.P.State or by making arrangements of seedsfrom other sources i.e.from SSCs./NSC/SFCI or Private SeedCompanies. Even after meeting the demands of the State, weare supplying the seeds to other States In India. So, thesurplus seeds being produced in Private Sector and procuredby Govt. Sector are also being distributed under subsidyto farmers of U.P.State providing platform of healthy growthof Private Seed Companies.

CHAPTER -5 : CONCLUSION : FUTURE IMPACT

A) 5.1: U.P.Seeds & T.D.C. have created sufficient back-ground at field level by distributing seeds through Cooperative,Agriculture Deptt. at door step of the farmers. The job doneby U.P.Seeds & T.D.C. is far better than N.S.C. Now doorIs open for Private Companies to cater the need of the farmerspecially SPVs.

B) 5.9: The comment is proper because the subsidy Isnot paid to UPS&TDC (SSC) rather it is directly passed onto the farmer by Cooperative/Agriculture Deptt. as part ofcredit facility or under extension programme so as to enhancethe replacement rate.

The current equalibrium is not an accident, but is aresult of very difficult task done by the Corporation fororienting the seed producing farmers and encouraging thefarmers to use SPVs certified seeds.Moreover the Private

99

Seed Companies are least interested in dealing with SPV8.because of low margin and high handling cost while on theother hand U.P.S. & T.D.C.(SSC) can't run away from its moralduty to fullfil Its commitment to produce assigned qualityas per State Seed Plan.

Yours sincaly.

( V.X.Bharndini1LI

MAP SECTION

IBRD 1 1616R2

60- 65 70- I TAJIKISTAN 75-

j ,. )o r ^;CHINAPAKISTAN r , , C

SEED PROJECT - ,' , \

Alt- CEREAL PROJECT AREAS %xChifrnI r Gilgit

CEREAL/COTTON PROJECT AREAS ;

POTATO PILOT PROJECTS Y / rVEGETABLE PILOT PROJECT . ,j,

35-> (Mra ~e 35. C, ,*--x': ,.5 ,s, X | -$,<, Approxmalte 35'

fs NATIONAL CAPITAL '& a SAAAD0 CITIES AND TOWNS Pv-le r MB pi JAMMU~ 4~Ra$pind nd KASHMIR

ROADS / ,r

RAILROADS J ,. -',-v

w + ~~~~~AIRPORTS / ' 4.<6 urEi2

PROVINCE BOUNDARIES |

. -- INTERNATIONAL EOUNDARIES i 'tSar-odha rortw-l'

'-* t RIVERS v A I Jais w --d

. > . t._ . * v $; ->_ a~~~~~~~~~~~~~~~~~isaiabd ,' $ / 4twz 2S/ ; J - kiiL /;- Xqsur> _ -

/ f i~~~~~~~~~~~~~~~beraAFGHANISTAN i Ghazi %,

30~~~~~~~~~ <2' ~~~~~~~~~~~~'~QuettE&- I Khj,'M 30-

-~ -%-- / \& - ! ° & a a.e W Bahawalnagar

"-5-- 9\ __ .0u , * v / 8 s , Bahawolpur '/\ _ § - ~/ 8 -'so -

BALOCHIS TA.N '\ ''Ra, y:K . INDIA| f 1 ,,^f + | ;- _<-/+ ~~~~~"'RahimyairKhan

ISLAMIC , %huzdar .. k j_

REPUBLIC OF - ukkur ./IRAN Ur..--I k akn>

IRAN /o i Lark 100 200 300 Kilometersj I Panjgur ;DokriC r

25> C- 7> s_r, ; 100 200 Miles

Gwadar (~" ~ -yeaa%The boundaries, colors.denominations ond any

4- - .2 M ..................... \ other information shownKarachi ""''- ~~~~~~~~~~~on this mop do not

Karachi --- ,imply on the port ofr __*-* _ * ? S ^IThe World Bank Group.

any judgment on the legal

r~ stotus of any territory.or any endorsemen,tor acceptance of suchboundanres

600 650 70- 75'

JUNE 1995

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Report No. 14761 -IN Impact Evaluation Report · 2016. 8. 31. · This report was prepared by...

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