|Project Rationale and Linkage to Country/Regional Strategy
In Nepal, irrigation is an essential input to improve agriculture productivity, which remains the lowest among the neighboring countries. The 20-year Agriculture Perspective Plan (APP) that was launched in 1995 with Asian Development Bank (ADB) assistance has prioritized irrigation as the foundation of a modern production system, with emphasis on improving the performance of traditional surface water FMIS, which account for 55% of the total irrigated area and 23% of net cultivated area of 2.6 million ha. Many FMIS suffer from low productivity that is barely above subsistence level, due to unreliable diversion and high distribution loss and maintenance costs caused by fragile and rudimentary intake and distribution structures. FMIS offer good scope for enhancing productivity, expanding the command area at relatively low cost, and short lead time, and building on the existing WUA capacities through a participatory approach.
ADB has assisted in improving FMIS since 1987 including the recently completed Second Irrigation Sector Project. While project performance has been positive, with many FMIS yielding reasonable economic benefits to smallholders, there is still scope for improvement in delivering maximum benefits particularly to the poor in the community, and enhancing WUA capacity to become more active agents that can drive dynamic agriculture development within the locality. There is need to further improve the project design by ensuring sufficient attention, time, and resources for nonstructural activities such as empowering WUAs and supporting agriculture and livelihood enhancement, and sound governance of public sector institutions for monitoring and quality control. Essential changes in the management system and behavior of public institutions to become genuine service-oriented
facilitators are also called for. Improving FMIS productivity is still a priority in the agriculture sector, with 0.3 million ha currently requiring urgent rehabilitation. However, a new approach is needed following the Government's 2002 Poverty Reduction Strategy Paper (PRSP) that committed itself to (i) reorientation of APP to strengthen its integrated and coordinated market-oriented approach, its pro-poor focus with targeting, and support for decentralization; and (ii) reforms of sector institutions for sound governance. There is a pressing need to operate the improved service delivery mechanisms for FMIS renovation that fully address these new sector needs and the lessons of previous assistance, while pursuing policy and institutional reforms that provide a sound basis for their operation.
The Project is designed to address these challenges and is needed to renovate the remaining subsistence FMIS to attain their maximum sustainable benefits, particularly those for the poor and the disadvantaged, with sound sector governance. The sector loan modality is adopted in view of the Government's sound policy and plan framework in the sector such as APP, PRSP, and the 2003 Irrigation Policy; and its progressively improving capacity to support FMIS renovation, building on the existing WUAs.
ADB's Country Strategy and Program for Nepal 2004 prioritizes investments in rural areas that generate quick benefits and support the inclusive process of development. In view of large FMIS areas still suffering from low productivity and poverty, and of the scope for promoting minor irrigation that targets the poor in nonirrigated areas, the CSP recognized that community-based irrigation is one of the strategic pillars for supporting rural development. As to FMIS, a pressing need now is to define and operate improved delivery mechanisms for their renovation, incorporating the lessons and addressing the new challenges identified in the Government's Poverty Reduction Strategy Paper, including decentralization, private sector and NGO engagement, and community participation. This objective should be pursued with necessary policy and institutional reforms that provide a sound basis for their operation. Addressing these tasks is consistent with ADB?s water policy, and will contribute to attaining maximum benefits from FMIS renovation with further empowered WUAs, and improved governance of public sector institutions.