■ AT*W
V
i -A
T?
ETH /B8/013
V■
’ •        ■"
WATER RESOURCES DEVELOPMENT AUTHORITY
XU
,(
ANNEX F
FINANCIAL AND ECONOMIC ANALYSIS
FINAL REPORT
*7
k-£
- • v‘- r •. ,• .• ,
: j &;
.IVT
.
1“ ■ <
* • V'
/ vs ; *
r
BY
TARAFDER R. ISLAM
FAO AGRICULTURAL ECONOMIST
UNITED NATIONS DEVELOPMENT PROGRAMME
i
ADDIS ABABA DECEMBER 1992J
I^'0'^'.^ A'1
ETH/88/013
TRANSITIONAL GOVERNMENT OF ETHIOPIA WATER RESOURCES DEVELOPMENT AUTHORITY
BALE GADULA IRRIGATION PROJECT
ANNEX F
ADDIS ABABA
UNITED NATIONS DEVELOPMENT PROGRAMME
DECEMBER 1992
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
In preparing this report, Mr. Dilenesaw in making estimates and preparing tables.rBALE GADULA IRRIGATION PROJECT ANNEX F
FINANCIAL AND ECONOMIC ANALYSIS
T abJLe„_of Conants
1.        INTRODUCTION
2 .        PROJECT AREA
2.1        Location
2.2         Socio-Economicand AgriculturalEnvironment 2.2.1       Source of Information and Project    Site 2.2.2       Population and Family     Size
2.2.3       Target Group
2.2.4       Land Availability and FarmSize 2.2.5       Crops and Yield
2.2.6       Irrigated Farming
2.2.7       Livestock
2.2.8      Market
2.2.9       Transport and Communication 2.2.10 Water Supply and Electricity 2.2.11 Health and Education
1
3
3
3
3
3
3
4
4
5
5
5
6ASHA ■ ■
-THE PROJECT 
Project Components 
Irrigation and Drainage       Works Physical Infrastructure 
Project Control Centre 
Settlement of Peasant Farmers 
METHODOLOGY FOR FINANCIAL ANALYSIS Purpose of Financial Analysis 
Comparison Between With and Without Project Benefits 
Crop Budget 
Farm Budget 
Relevant Prices 
Constant Price 
Farm Gate Price 
Time of Sale 
Treatment of Transfer Payment 
Measures of Financial Viability 
Technique of Calculating IRR and NPV Project Period 
Residual Value 
Application of the Methodology 
FINANCIAL PRICES OF INPUTS AND OUTPUTS Input Prices 
Prices of Fertilizers Prices of Insecticides 
~ 
7
7
7
8
8
9
10
10
10
11
11
11
12
12
12
12
13
13
13
14
14
15
16
16
16
16
i i5.1.3                   Prices of Seeds
5.1.4                   Prices of Tools and Sacks 5.1.5                  Wage of Unskilled Labour
5.2
Output Prices
5.2.1                   Present Situation on Marketing of Agricultural Crops in the Area
5.2.2                   Demand and Supply Situation
5.2.3                   Data on Prices
5.2.4                  Methods Used for Estimating Prices
5.2.5                  Estimated Prices
6.                       CROP BUDGETS (FINANCIAL)
6.1                      Crop Budgets with Project
6.1.1                   Farm Operators
6.1.2                   Components of Crop Budgets
6.1.3                   Selected Crops
6.1.4                  Optimum Yield and Input Use
6.1.5                  Yield Build-up Pattern
6.1.6                   Input Use Pattern
6.1.7                   Input Requirements and Production Cost under Peasant Farms
6.1.7.1           Labour
6.1.7.2           Oxen Power
6.1.7.3             Fertilizers
6.1.7.4             Seeds
6.1.7.5             Pesticides
6.1.7.6       Agricultural Practices and Management iii
16
17
17
18
18
18
19
19
20
21
22
22
23
23
25
27
28
28
29
296.1.7.7     Tools and Sacks
6.1.7.8     Interest and Contingency
6.1.7.9    Estimation of Crop Budgets with Project 6.1.7.10   Estimation of Crop Budgets without Project
7 .
FARM BUDGETS  (FINANCIAL)
7.1         Typical Peasant Farm
7.1.1       Components for Estimating Incremental
Net Return with Project to a Typical Peasant 7.1.2       Cropped Area for Typical Peasant Farm
7.1.3       Yield, Prices and Production Cost
7.1.4       Investment Cost
7.1.5       Credit, Interest Payment and 
Repayment of Principal
7.1.6      Net Return to a Typical Peasant Farm with and without Project Before Financing
7.1.7       Incremental Net Return to a Typical Peasant Farm Before Financing
7.1.8       Incremental Net Return to a Typical 
30
30
31
31
32
32
Farm 32
33
33
34
34
35
35
Peasant Farm After Financing
36
7.1.9
Incremental Net Cash Income 
to a Typical 
Peasant Farm After Financing
36
8. 
PROJECT’S COST AND RETURN
 (FINANCIAL)
38
8.1         Project Cost
8.1.1       Investment Cost
8.1.1.1     Components of Investment Cost 8.1.1.2    Estimated Investment Cost
8.1.2       Operation and Maintenance Cost 8.1.3      Replacement Cost
8.2        Return to Project
•3
38
38
39
39
39
39
1 v*:■ fi‘-'
? 7fr
n. v: '■ .®
XI'
1
♦S" /? r■&!-)■:
I'* jiw sitf". WS.2 i
■
0>
7 r.$
a
3T
J.1.8
♦of
■' ! 'Aifc®.-
$'a8.2.1      Net Return with Project
8.2.2      Net Return Without Project
9.          FINANCIAL RATE OF RETURN TO PROJECT
9.1         Incremental Cash Flow
9.2        Net Return With and Without Project
9.3         Investment, Operation and Maintenance 
and Replacement Costs
9.4         Prices
9.5         Project Life and Residual Value
9.6         Financial Internal Rate of Return and 
Financial Net Present Value
10.        COST RECOVERY
10. 1       Policy on Cost Recovery in Ethiopia
10.2       Methods of Cost Recovery
10. 3       Alternative Amounts of Cost Recovery 
and Implication on Farmers' Incentive
10.3.1 Recovery of only Operation and Maintenance Cost 45
10.3.2     Recovery of Full Investment Cost with 
and without Interest Plus Operation 
and Maintenance Cost
10.3.3     Recovery of a Part of Investment Cost without Interest Plus Operation and Maintenance Cost
11.        METHODOLOGY FOR ECONOMIC ANALYSIS
11.1        Purpose of Economic Analysis
11.2       Comparison Between With and Without Project
11.3       Benefits
11.4       Externality
11.5        Theoretical Basis of Economic Analysis
40
40
41
41
41
42
42
42
42
43
43
44
45
46
46
47
47
47
47
48
48
v11.6
Conceptual Framework for Determining Economic Pricee
11.7       Application of Little-Mirrlees Method
11.8  World Prices and National Economic Parameters
11.9        Determination of Economic Values
11.9.1
11.9.2
Import Parity Prices
Export Parity Prices
11.9.3     Valuation of Nontraded Items 11.9.4      Constant Prices
11.9.5      Treatment of Transfer Payments
11.10
11.11
11.12
11.13
11.14
Project Period
Residual Value
Measures of Economic Viability
Technique of Calculating Economic Internal Rate of Return and 
Economic Net Present Value Discount Rate
49
49
50
50
50
51
51
51
52
52
52
53
11.15       Sensitivity Analysis
11.16     Application of the Methodology
12.         ECONOMIC PRICES OF INPUTS AND OUTPUTS
12.1      Conversion Factors in National Economic Parameters
12.2        Procedure of Estimating Conversion Factors for Other Nontraded Items
12.3        Economic Prices of Traded Inputs
12.3. 1     Economic Prices of Fertilizers 12.3. 2     Economic Prices of Pesticides
12.4        Economic Prices of Nontraded Inputs
53
53
54
54
55
55
55
55
56
56
56
v 1i . V- - .
.11
,fr
>7‘ II
X12.4.1      Economic  Price of Ox Power
12.4.2      Economic  Prices of Seeds
12.4.3      Economic  Prices of Tools and  Sacks
12.5        Economic  Prices of Traded Outputs
12.5.1      Economic  Prices of Importable Outputs
12.6        Economic  Prices of Nontraded
Outputs 
13.        CROP BUDGETS ( ECONOMIC )
13.1       Components of Economic Crop Budgets
13.2        Preparation of Economic Crop Budgets
13.3       Economic Crop Budgets with and 
without project
14 .       PROJECT’S COST AND RETURN (ECONOMIC)
14.1       Project Cost (Economic)
14.1.1 Investment Cost (Economic)
14.1.2       Operation and Maintenance     Cost (Economic) 14.1.3 Replacement Cost   (Economic)
14.2       Return to  Proj ect (Economic)
15.        ECONOMIC ANALYSIS
RATE OF RETURN, SENSITIVITY AND OTHER BENEFITS
15.1        Economic  Rate of Return
15.2        Incremental Cash Flow
15.3        Prices
15.4        Project Life and Residual Value (Economic)
15.5       Economic Internal Rate of Return
and Economic Net Present Value
15.6        Sensitivity Analysis
15.6.1 Delay in the Accrual of Benefit by One Year
57
57
• 57
57
58
58
59
59
59
60
71
61
61
61
62
62
63
63
63
64
64
65
65
65’ i*ww«'
sr-.,i4 at
■,A- Map'«8ft.
'pwl15.6.2       Increase in Investment Cost by 15%
15.6.3      Delay in the Accrual of Benefit by One Year and Increase in Investment Cost by 15%
15.6.4      Decrease in Net Return by 15%
15.6.5      Decrease in Net Return by 15% and Increase in Investment Cost by 15%
15.6.6       Implication of the Results of Sensitivity Tests
15.7        Other Benefits
15.7.1      Improved Food Self-Sufficiency
15.7.2      Favourable Impact on Balance of Payment
15.7.3       Increased Employment and Income and Improvement in Nutrition
15.7.4      Favourable Impact Economic Activities in Other Sectors of the Economy
15.7.5      Externality
16.         CONCLUSION AND RECOMMENDATION
16.1        Financial Viability
16.2         Incentive to Farmers and Utilization of Project Facilities
16.3        Cost Recovery
17.4        Economic Viability
16.5        Sensitivity Tests
16.6        Recommendation
66
66
66
67
67
69
69
69
70
70
70
71
71
71
71
72
72
73
VI 1 1LIST 0? TABLES, PIHANCIAL AND IC0M0MIC BAL! GADULLA IRRIGATION PROJECT
ANALYSIS. 
TABU NO. 
TITLE 
PAGE
5.1 
Crop Budget (Financial) for Maize per Hectare under Peasant Para with Project froa Tear 1 to E\ill Developaent.Baie Gadulle 
Irrgation Project.................................................
 74
5.2 
Crop Budget (Financial) for Wheat per Hectare under Peasant
Pan with Project froa Tear 1 to Full Developient,Bale Gadulla 
Irrigation Project...............................................
75
6.3 
Crop Budget (Financial) for Barely per Hectare under Peasant
Para with Project froa Tear 1 to Pull Developient.Bale Gadulla ...
. 
76
Irrigation Project
5.4 
Crop Budget (!itat:ial| for Oats per Hectare under Peasant
Para with Project froa Tear 1 to Pull Developient. Bale Gadulla ..
.. 
77
irrigation Project 
5.5 
Cron Budget (Tiaanctal! for Broad Bean per Hectare under Peasant
lam with Project froa Tear 1 to Full Developaent. Sale Gadulla ..
.. 
78
Irrigation Project
5.5 
Crop Budget (Financial!, for Onion per Hectare under Peasant Fars with Project froa Tear 1 to Pull Devei:paent,Bale Gadulla ...
. 
79
Irrigation Pro’ert
5.1 Crop Budget (Financial; for Pepper per Hectare under Peasant 
Fam with Project froa Tear 1 to Full Developaent,3sle Gadulla:... irrigation Project
5.8  Crop Budget (Financial! for Black Cuain per Hectare under Peasant
80
Para with Project froa Tear I to Pull Develos^eat.Eale C-adulla ....        81
Irrigation Project
5.9    Crop Budget (Financial) for Maize per Hectare under Feasant
Jara without Project, Bale Gadulla irrigation Project............  82
5.10 Crop Budget (Financial) for Wheat. Far Hectare under Peasant
Fam without Project, Bale Gadulla Irrigation Project.............  83
6.11 Crop Budget (Financial) for Barley per Hectare under Peasant
Fam without Project, Bale Gadulla Irrigation Project..............  84
5.11 Crop Budget Financial) for Oats per Hectare under Peasant
?am without Project, Sale Gadulla Irrigation Project..............  85J
1
1
1
] ]
Page
6.12 Crop B-Jdget (Financial) for Field Pea per Hectare under Peasant Pari without Project, Bale Gadulla Irrigation Project 
S.14 Crop Budget (Financial) for Black Cuiin per Hectare under Peasant Parn without Project, Sale Gadulla Irrigation Project 
7.1 Cropping Pattern with and without Project 
7.2 Fan Budget (Met Beturn) for a Typical Peasant Pari with Porject 
86
87
88
■]
before Financing frcu Pear 1 to Full Developient, Bale Gadulla ....        89
Irrigation Project
7.2 Pan Budget (Het Return) for a Typical Peasant Fari without 
n
] "]
']
_■
Project, Bale Gadulla Irrigation Project 
7.4 Para Budget (Increiental Het Return) for a Typical Peasant fan with Project before Financing froa Tear 1 to Full Developient,
90
Sale Gadulla Irrigation Project91
7.5    Bstisated Faaily Ccnsuaption of Para Produced outputs fcr a Typical peasant Paiily'i person' , Bale Gadulla Irrigation Project        92
7.6    Fan Budget (Cash Intcie fcr a Typical Peasant Fara with Project
After Financing, Sale Gadulla Irrigation Project 
93
5.1    Total Investaent Cost for Prtoiect Construction (Financial) end its
Phasing Over Tears. Bale Gadulla Irrigation Project 5.2 Cast [Financial) of Rquipuent for Project Centre! Centre (RCC
94
Bale Gadulla Irrigation Project  95
5.3    Fara Investaen: Cost (Financial) Bals Gadulla Irrigation Project .        96
3.1  Cost (Financial) of Personnel tor Project Control Centre (PCC)
I
Bale Gadulla Irrigation Project
97
—- ■
I
-■
I
8.5   Annual Operation and Maintenance Cost (Fianacia!)
Bale Gadulla Irrigation Project............................... . 98
5.6    Replacenent Cost (Financial) of Machinery and Squipient,
Bale Gadulla Irrigation Project............................... . . 98
3.7  Total Net Return (Financial) with Project frcu Tear 1 to Pull Develcpaent, Bale Gadulla Irrigation Project.................. . 100
3.3  Total Het Return (Financial) without Project, Bale gadulla Irrigation Project............................................ . 101
5.1  Lstuated Financial Internal Rate of Return (Base Case)
Bale Gadulla Irrigation Project............................... . 102
'.2.1 Inpcct Parity Price of Urea, per Tea, Bale Gadulla irrigation 'rej ect 
103
]
,■
Iir(R J‘(!
IplPage
12.2  liport Parity Price of DAP, per Ton, Bale Gadulla
irrigation Project
 104
12.3 Ieport Parity Price of Maize, per Ton, Bale Gadulla
Irrigation Project. 
12.4 liport Parity Price of Wheat, per Ton, Bale Gadulla
13.1  Crop Budget (Iconoaic) for Maize per Hectare under Peasant
105
Irrigation Project 106
Pan with Project froi Tear 1 to Full Developient, Bale Gadulla
Irrigation Project
12.2   Crop Budget (Bconoiic) for Wheat per Hectare under Peasant
Pan with Project froi Tear 1 to Pull Developient, Bale Gadulla
Irrigation Project
 108
13.3    Crop Budget (Iccnoiic) for Barley per Hectare under Peasant
Pan with Project froi Tear 1 to Pull Developient, Bale Gadulla
Irrigation Project.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  109
13.4    Crop Budget (Sccnonicl for Oats per Hectare under Peasant Pan with Project frcs Tear 1 to Pull Developient, Bale Gadulla
Irrigation Project-
.i
Crop Budget (Bconcnc) '::r Broad Bean per Hectare under Peasant
Pan with Project frn                    Tearltc Pull Develonient Bale Gadulla
Irrigation Project
z»z ferop Budget ,’conosic.                        for Omen per Hectare under Peasant
Pan with Project froi Tear Ito Puli Developient, 3ale Gadulla
Irrigation'reject. 
.7.* Crop Budge: (Dconoiic; cor Pepper per Hectare under Peasant
Pars with Project cm Tear 1 to Pull Developient, Bale Gadulla
irrigation Projectl 13
13.B Crop Budget (Dcc-nni:’ :cr Black' Cumn per Hectare under Peasant
Pan with Project free Tear 1 tc Pull Developient, Bale Gadulla
Irrigation Project.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
13.': Crop Budget (Kccnoiic) for Maize per Hectare under Peasant
Pan without Project, Bale Gadulla Irrigation Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    115
’.3.10 Crop Budget ;Bccnciic| for Wheat per Hectare under Peasant
Fan without Project. Bale Gadulla Irrigation Project116
110
111
112IF1 IJ- !fj If4l if 4
||«JIPage15.$ Sensitivity Test • Estimated Sconcii: Internal Rate o: Return with
a decrease in Net Return by and with ah Increase in Investment
Cost by 151, Bale Gadulla irrigation Project1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  133IT®
II®BALE GADULA IRRIGATION PROJECT FINANCIAL AND ECONOMIC ANALYSIS
INTRODUCTION
The Water Resources Development Authority (WRDA)
embarked
on the study of        Bale   Gadula   Irrigation   Project   with   the 
assistance from 
people’s Republic
a team of 
experts 
from Democratic
Korea. This 
study 
was completed in
1990.
No financial and
economic
analysis was
the study. Based on the technical
done as a part investigations r
of
the
study
however,
recommended    the    implementation     of   the
project in two phases. The first phase envisaged
irrigation of diversion weir construction of
550 hectares through the construction
whereas
the second phase
the
of a
involved the
15 m high dam upstream
of
the weir
to
irrigate an  additional  area 3400 hectares.
The WRDA
reviewed
the study in 1991
and   decided   to
undertake     additional     investigations     and    collection     of
data so
can be
that the design of the first done. The WRDA embarked on
phase these
of the project
tasks with the
support from FAO/UNDP project ETH/88/013 in late 1991.[fJI
ir® U-(e lb®
XThe present
 study on 
financial 
and economic analysis of
the first
: phase
of Bale
a part
of the
process
Gadula Irrigation Project forms in designing the project. In 
preparing    this    financial   and economic analysis of the
pro j ectr agronomic used.
data available      from
latest engineering report1,
study2 and
socio-economic survey3
have been
Water    Resources    Development    Authority,    Bale    Gadula Irrigation Project (Phase 1), Final Design,
Technical Design Report, Addis Ababa, 1992.
S. Goodbody, Bale Gadula Irrigation Project, Annex B:    Agriculture Report, Water Resources Development Authority, Addis Ababa,1992
Water Resources Development Authority, ’Socio- Economic Study of the Bale Gadula Irrigation Project’ Addis Ababa, 1991.
22.        PROJECT AREA
2.1      Location
The project area is located on the left bank of the Weyib river in Gadula Awraja under Bale; Region . It lies about 30 km from Gorro, the capital of Gadula Awraj a and about 90 km from Goba, the capital of Bale Region.
2.2       Socio-Economic and Agricultural Environment 2.2.1     Source of Information and Project Site
All the  relevant information was collected
socio-economic
conducted
survey
in August,
actual project   site    lies within    Kubsa village.
the proposed command       area under    the project is
through a 1991. The A part of cultivated
at present by the
inhabitants    of Kubsa village. The
remaining part of the    command area and is used as communal pasture.
is covered with bush
2.2.2     Population and Family Size
The population density in Bale Region as a whole is relatively low. Gadula Awraja in which the project is located is no exception to this. Kubsa village is inhabited by only 74 families with a population of 697. The average size of family thus works out to over 9 persons per family. The size of a family in the area is much larger than the national average.
2.2.3    Target Group
Seventy   four   families   of   kubsa   village   will   have   the first claim to be the beneficiaries of the project. Since
3additional 464 families will also be needed to farm in 
the project area, these farm families from the surrounding villages. Just 
village are the villages of Guracha good portion of  the farmers  from
interested to     farm in are also other villages
the project
in the area
will have to come adjacent to kubsa and Solemitana. A
these villages will be area. Moreover, there
and given
the problem
of frequent drought in the area, villages will also be willing to move to cultivate under the project.
farmers   from   these
to the
project   area
2.2.4    Land Availability and Farm Size
Kubsa  village  covers  a  land  area  of  1854  hectares.  The land  use  of  this  village  includes  294  hectares  under cultivation,  600  hectares  under  pasture,  960  hectares under  forest  and  other  uses.  Each  family  thus  has  a cultivated  area  of  about  4  hectares.  It  is  noteworthy that  land  is  relatively  plentiful  in  the  Awraja  and  the land - man ratio is rather high in the area.
2.2.5    Crops and yield
Main Crops grown in Kubsa village include wheat,
barley, maize, oats, and spices. Barley is the most important crop in terms of area covered followed by
wheat, oats, maize and spices respectively. Among the spices grown, black cumin is the most important one.
All these crops are grown under rainfed condition and as 
a result the yield per hectare is quite low. The area has two cropping seasons traditionally known as Belg and 
Meher. The Belg constitutes the more important cropping season with around 65          % of crops grown during this season.
42.2.6     Irrigated Farming
While no irrigation is at present practiced within the project  area,  farmers  were  reported  to  have  tried unsuccessfully in the past to divert water from the Weyib river  for  irrigation.  The  area  is  prone  to  frequent drought and the lack of timely rain in adequate quantity 
is the severest constraint on the crop production
activities in the area, highly interested in
Farmers in the the availability
area will  thus be  of irrigation
2.2.7
water.
Livestock
The farmers in the area own relatively a large number of 
livestock. Each farm family owns an average of about 15 
livestock consisting of oxen, cows, heifers, goats, mules 
and horses. While cows are more numerous with an average 
ownership of about 4 heads per family, the number of ox 
is less than 2 per family.
2.2.8 Market
Gorro, the Awraja capital which is about 30 kilometers 
from the project site is the main local market. At 
present, farmers have usually small marketable surplus 
and most of these are sold in this local market. Goba, 
the regional capital and Robe which are about 105 and 90 kilometers respectively from the project site are the two 
most important regional markets. Gorro is connected with 
the regional markets through an all weather road. The 
stretch of 15-   20 kilometers of dirt road between the project site and Gorro is in rather poor condition and needs  improvement  for  ensuring  easier  and  year  round access of the project’s crops to the outside markets.
5■M?
'
/a."*-"'-
<
w-
VS7  V.
-svsfe T.C ■ -2.2.9      Transport and Communication As indicated above,
Gorro is linked with all weather
road. Gorro      Ginir  all weather road passes about       15-20
kilometers from the
proj ect
site. Equines   are the
main
source
of transport
in the   local area. The
nearest town
where   telephone   and  postal   services are    available   is Gorro.
2.2.10    Water Supply and Electricity
River  water  used  to be used    for both drinking and other purposes in   the past. However,two boreholes were recently
dug. No electricity is available in the area.
2.2.11    Health and  Education
There are no health facilities in the project area. There is a health clinic at Amalama village which is about 15 kilometers from the project area. There is one elementary school in the area. Junior and secondary schools are located at Gorro, Ginir, Goba and Robe.
63.        THE PROJECT
The Project is designed to irrigate a net area of 538 
hectare by diverting water from the Weyib river. Water 
will be provided to farmers" fields through furrow 
irrigation method.
3.1        Project Components
The main components of the project will include:
1)   Irrigation and drainageworks
2)   Physical infrastructure
3)   Project control centre
4)   Settlement of peasant farmers
3.1.1      Irrigation and Drainage Works
The  irrigation  and  drainage  works  will  have  the  following components.
1) _Divp_. rj_q. inri_ wp. ir: It will have a total length of 65 m consisting of concrete gravity weir with a length
44 m and the natural rock weir of 21 m in length.
2)  Main—Canal.      The main canal will be unlined and
5 kilometers in     length. A to enlarge the canal at a
provision has
been made
meet the dem
and for
phase 2 of
later date in    order to the project.
3)
Primary,,
canal:
There will
a length of 
kilometers.
be a primary It will be 
canal with
lined with
boulders in
cement m
ortar.
7' -fol
.#■ ? **w
W«!O’3A5<?».C.'7 '.
hww* *<*
- ar
'.’55* hr
-
;r ••
r
r
r
r
r
r
r r r
r4)   Secondary. TertiaryandFiddCanalfl: Seven
secondary canals, 2 tertiary canals and 44 field canals with total lengths of 5.55, 1.35 and 26.27 kilometers respectively will be constructed. All these canals will be unlined.
5)   Drains: There will be 3.5 kilometer long interceptor drains, 12.1 kilometer long collector drains and
30.85 kilometer long field drains.
6) Land Levelling:
The land levelling will involve the earthmoving of about 11000 m . The topography of the project area is not very undulating and moreover, the alignment of furrow is designed in such a way that land levelling is minimized.
Physical  Infrastructure
A gravel      road of 14 km in length will be constructed.   This road will run from Asendabo river
3
3.1.2
crossing to the area.
diversion weir    through the project
3.1.3
Project  Control Centre
A Project Control Centre (PCC) will be established
for    operating
structures  and
and maintaining facilities.    The
provided    with necessary personnel, workshop,     and equipments
responsibilities.
to carry
the proj ect PCC will be 
office, store out    its3.1.4          Settlement of Peasant Farmers
]
At  present 
only 
74  farm  families 
live 
in  Kubsa 
village  which
will
come  under  the 
command 
area  of 
1
]
1
] ] 1
]
the  project.  Irrigated  farming  will  increase substantially  the  demand  for  labour.  In  view  of increased labour requirement, supply of family
labour  per  family  and  wider distribution  of irrigation  benefits  among  peasants,  a  farm  family 
may  be  allotted  one  hectare  of  irrigated  land1. 
Therefore,  an  additional  464  farm  families  will 
]
have   to 
be 
settled 
in   the 
project 
area. 
The 
inhabitants
of 
Kubsa 
village  are
reported
to 
have 
indicated  their  willingness  to  share  the  irrigated area with others coming from surrounding villages.
The  settlement  of  farm  families  will  involve investment  with  respect  to  house  building 
materials,  hand  tools,  plough,  oxen  and  subsistence allowance for 6 months.
]
]
]
l
For further
allocating one
discussion
on   rationale
of
hectare per
peasant family, (Financial).
see
the Chapter 7 on
Farm Budget
]
']
9
4
4J ■4.       METHODOLOGY FOR FINANCIAL ANALYSIS
4.1      Purpose of Financial Analysis
The  financial  analysis  is  intended  to  assess  the financial  impacts  on  project  participants.  In  case  of this  project,  therefore,  this  analysis  will  seek  to assess the financial effects on the farm families as well as  on  the public  sector agency which will  be involved in investing  in  and  operating  the  project.  It  will  show  the rate  of  return  to  the  project  which  will  indicate  the degree  of  financial  viability  of  the  project.  The analysis  will  also  indicate the  net  returns  which  will accrue  to  the  peasant  farmers.  The  magnitude  of  these  net returns  will  in  turn,  reflect  the extent of incentive for them  in  order  to  adopt  new  and  improved  inputs  and practices.
4.2     Comparison Between With and Without Project
This   analysis   involves   the   comparison   of   financial
situation with project with that without the project.
It
is noteworthy that the     analysis      does not seek to compare the financial situation     before   and after   the project.In making this    analysis,  therefore ,  all the    relevant  cost and benefit items with and without the project have to be identified    and   valued   with    appropriate   prices   and incremental   net  return   with   the project      have to  be calculated.
Net return arises because  of the project and the net return also arises without the project as well in many cases. Therefore, incremental net return as a result of
10the project has to be calculated. This is determined by deducting the net return without project from the net return with the project.
4.3      Benefits
Benefits may be tangible
be direct and indirect. Direct benefits may
and intangible. Tangible benefits
agricultural     proj ect production,improvement   in 
may
result    from
quality, increase in
reduction in coat project like this
important tangible tangible benefits
etc.
one,
In case increased
of a production
production is
for an increased
value or oriented
the most
benefit. In
financial
are normally quantified
analysis, the
and analyzed.
Intangible and indirect benefits examined in the such analysis.
are
not
generally
4.4      Crop Budget
In an irrigation project,     gross and  net returns  with and without the   project will   arise out   of  crop production. Therefore,   in order to     estimate   the  gross, net and incremental   net returns,   crop budgets   with and without the project  will have to   be prepared.
4.5      Farm Budget
The  calculation  of  net  income  to  peasant  farmers  under the  project  involves  the  preparation  of  farm  budget.  The preparation  of  farm  budget  in  turn,  requires  the determination  of  a  typical  farm  and  calculation  of  net return to be available to the typical farm.
11I4.6       Relevant Prices
4.6.1    Constant Price
Prices for both cost and benefit items will have to be in constant terms. This means that prices should not vary 
with inflation over years, although consideration will 
have to be given if there is a distinct possibility of
changes in relative prices.
4.6.2    Farm Gate Price
Prices of    crops  should  be      those which arc b actually received by  farmers  and  are   attributable to   their  crop
production activities    and     not to any  other  services.In other words ,  these  prices should therefore,      relate  to
farm gate    ones which    are   actually   received by   the farmers. Farmers may   sell  their crops   at their farm gate or at    the   nearest  village  markets   without   involving marketing services.    These  prices are   considered as   farm gate prices.  However,r if  the  sale of  their crops involve marketing     and    other     services     like    transport,
speculation, storage etc, cost on account of these
services should be    deducted  to arrive    at the  farm gate prices.
Time of Sale
The prices of farmers' crops should be those which prevail around harvest months. Since farmers normally 
sell most of their surplus crops during two to four months after harvest and higher prices which may be possible if crops are stored for a longer period 
involving storage loss and cost are attributable to
12• r.istorage and speculation, prices of crops to be used to estimate  crop  budgets  are  those  which  should  relate  to the period that is close to the harvest months.
4.7      Treatment of Transfer Payments
Transfer payments represent the transfer of claim to real resources from one person to another. The most common transfer payments in an agricultural pro'ject like this one includes taxes, duties, subsidies, loan receipt, interest and repayment of principal. In financial analysis, taxes and duties are treated as outflows since these are considered as expenses while subsidies are treated as inflows. Loan receipt is an inflow but payment of interest and repayment of principal are treated as outflows.
4.8      Measures of Financial Viability
Internal rate of return (IRR), net present value (NPV), and benefit cost (B-C) ratio are generally used to determine the financial viability of projects. Either one or two of these measures may be used. The IRR is most widely used. Most of the international financial 
institutions including the World Bank use the IRR in making financial analysis of projects. In this study, 
financial IRR (FIRR) and financial NPV (FNPV) will be used in determining the financial viability of the proj ect.
4.9      Technique of Calculating IRR and NPV
Since different amounts of costs
are incurred     and
different quantities of benefits arise       in different  years 134.10
4.11
over the life of a project, present values of both costs 
and benefits have to be determined in order to compare 
them. The process of estimating present values of costs 
and benefits is called discounting. The FIRR and FNPV are determined by discounting incremental benefit (return) 
stream or incremental cash flow.
Project Period
There  is  no  hard  and  fast  rule  about  the  length  of  the project  period  to  be  analyzed.  One  of  the  indicators  for the  length  of  the  project  period  for  which  analysis  has to  be  carried  out  is  the  technical  life  of  the  major capital  assets.  However,  the  economic  life  of  such capital  assets  may  be  shorter  because  of  technological obsolescence.  The  effect  of such  capital  assets  for  which investment  is  made  at  the  initial  stage  on  the  rate  of return  based  on  discounted  cash  flow  after  30  years  is so  insignificant  that  it  makes  little  difference  in  the degree  of  viability  of  a  project.  Therefore,  a  period  of about  30  years  would  be  appropriate  for  the  project analysis.
Residual Value
The useful life of some of the capital assets may not be used  up  entirely  at  the  end of  project  period  for  which analysis is carried out. That is why a residual value on account  of  such  capital  assets  is  treated  as  the  benefit at the terminal year of the project period.
144.12
Application of the Methodology
In this study, financial analysis of Bale Gadula
Irrigation Project has been made indicating FIRR and FNPV and net cash income after financing to the typical
peasant farm. In making 'this analysis and 'determining FIRR, FNPV and net cash income, the methodology as discussed above has been applied.
S-'US!
155.        FINANCIAL PRICES OF INPUTS AND OUTPUTS
All prices of inputs and outputs relate to those of
1990. The year 1991 and the beginning of 1992 are not
considered to be normal time period. It is therefore, 
advisable not to use the prices of this period in valuing 
costs and benefits. Since the latest normal year was
1990, it is conceptually more plausible to use the prices
of this period for the analysis of the project.
5.1      Input Prices
5.1.1    Prices of Fertilizers
The Agricultural Input Supply Corporation (AISCO)
distributes fertilizers throughout, the country. AISCO
charges the same price irrespective of location. The
prices of urea and DAP are Birr 750 and Birr 890 per ton 
respectively.
5.1.2    Prices of Pesticides
The Ministry  of Agriculture (MOA) offices at Regional and Awraja levels supply  pesticides.  Pesticides are used  only when  there is incidence of pests and  diseases.  Different
types of pesticides are required  according  to  the types of pest attack  and  diseases.  Each  type of pesticides has
different
prices.             Cost
on             account             of             pesticides             has
therefore,          been          calculated          for          each          crop          on          an          average basis based on past experience in the country.
5.1.3  Prices of Seeds
Ethiopian Seed improved seeds for
Corporation
(ESC) normally supplies
cereals, pulses and oil seeds.
16According to the available information, the ESC has not so far distributed any improved seed in the area. Farmers do not need improved seed of a given crop every year. Once a farmer uses improved seeds for a certain crop, he can generate improved seeds from the harvest of that crop for some years. On the other hand, seed is needed 6-7 
months after harvest involving storage cost and loss in storage. In view of all these factors, costs of seeds to farmers are estimated at 20% higher than the farm gate
prices of respective crops except onion and pepper. Prices of seeds for onion and pepper are Birr 50 and Birr 20 per kg respectively.
5.1.4     Prices of Tools and Sacks
Farmers will require hand tools like sickle, hoe, spade etc as well as plough for carrying out farming operations. Each item of tools has different price. Since these tools will normally last for several years, annual cost for these items is estimated by taking into account their annual repair and maintenance requirement. Accordingly, costs on account of tools are determined at Birr 20 per hectare for irrigated crops and Birr 15 for rainfed crops without project. The price of a sack is taken at Birr 3.
5.1.5    Wage for unskilled Labour
The wage per man  day  of unskilled  labour has been  taken at Birr 3  on  the basis of prevailing  wage rates in  the area.
17I ^15.2                        Output Prices
5.2.1                     Present Situation on Marketing of Agricultural Crops in the Area
Farmers type sell
in They
their
the
area           are
predominantly
of
subsistence
generate             a
limited
surplus.              They         generally
surplus
crops         in the important ones.
local          markets
of which
Gorro and Melyu are the
These             subsistence             farmers          have        little
holding           power         and
they         often          try         to bring
their        small        surplus           immediately
or       a       few      months           after        harvest.
That       is        why      prices of
crops             within        2-4        months          after         harvest            are         the :      relevant
ones for the project
analysis.
Gorro market         is about 105 km and               90 km from Goba and Robe
which
Bale
area
are
the
two most
important about 52
regional markets
in
Region. Addis Ababa is
0 km
Although Gorro is linked with Goba, Robe and
Ababa, about 15-20 km stretch of dirt road
from the project
Addis
between          Gorro
and project area is in poor situation, big traders
to the project
local markets at
that some sort
condition exist there.
5.2.2                     Demand and Supply Situation From the available data,
condition. In
from outside do not Local traders
and Melyu.
view of
this
generally             come
area. Gorro
predominate is thus quite
in the
likely
of oligopolistic
It or
monopolistic                market
the area appears to
be
characterized supply of major
may be enough
by
precarious food crops
balance             between           demand          and
During the good
years,
supply
to meet the demand and
generate             some
surplus but in other years, the area shortage. In view of the distance of the
may experience area from the
some
18main national market like Addis Ababa, whatever surplus
is generated Region.
5.2.3                    Data on Prices Data on prices
at
present is
generally              absorbed                   within the
on     agricultural
crops for
the area          are
extremely inadequate.                 Whatever
are
mostly less reliable
Often the data
data are .available
are incomplete some year are
such
as data on prices for only a part of available.
In view of this situation, the from the socio-economic survey1 in 1991 and retail prices
Goba market collected
data examined
conducted in
on       agricultural commodities at from Ethiopian Central Statistical
were
those
the          area
Authority,               Addis      Ababa.         Although the
data        from the
i socio-
economic
survey        were         more         relevant      ,         data            for         only          9
months of               1990
were available        Moreover,          prices for
a few
months
Similarly,
with
retail
respect               to           some prices             at          Goba
crops
market
were
have
missing.
subjected
to a
lot of adjustments
before
using
to 
them
be
in
this study.
5.2.4
Methods Used for Estimating Prices
At first, prices from all these sources were compared to identify the more probable ones and make some calculation and some kind of 'enlightened guesses' to make some
adjustments. Then some refinements were made by making
1  Water Resources Development Authority, Socio- Economic Survey of Bale Gadula Irrigation Project, Addis Ababa, 1991
191 I• L -1these data relate to  farm gate and  harvest months through deducting  transport cost and  marketing  services etc and taking into account the prices which prevailed during 3-4
months after harvest.
In making crops
also been
these adjustments,
the relationships between in terms substitutability and complementarity        have
taken into consideration. For example,
price            has        relationship                   with          the prices of wheat
barleyn       and
been  made to relate to
so prices of       this
each
group of commodities other according to
maize and
have their
mutual        price       relationship.
In cases of
less perishable     crops     like pepper,teff etc,
checks        have    been made with
to find         out      whether such prices can another.
5.2.5                    Estimated           Prices
prices        in Addis Ababa market
relate
to one
it will special attempted,
appear            that estimation of
problems.
Inspite           of            all
prices the
these            estimates           may       have         certain
and should be viewed in encountered.
the         context of
presented adjustments deficiencies
the problems
20-
i
*6.                          CROP BUDGETS (FINANCIAL)
The financial crop budgets are designed to
financial costs of returns tc         > crops crop budgets are
production and financial per hectare under the
used           to prepare
calculate the gross and net
project. These
and the financial financial
project     budget internal rate
which are of return
financial then used
for the
farm budgets
to calculate project. The
crop,         farm        and project
budgets           form the bases
of        the         preparation 
of          economic         crop,           farm         and        project
budgets           which         are         used          for         the             estimation           of        economic
internal
the project.
Generally, conditions have
of determining attributed to the
rate of return  economic net present value for
the           crop           budgets          with           and         without            project
to be
the incremental project.
prepared           because of            the
requirement
return          which         can       be       solely
6.1                      Crop Budgets with Project
6.1.1                    Farm Operators
At present, 74 peasant families are cultivating land within the proposed command area of the project. Additional peasant families will therefore, have to be brought in from the surrounding villages to utilize
optimally the total
6.1.2 Components of Crop Budgets
The preparation selection of crops optimum yield for
command area of          538 hectares.
of
crop
budgets
involves                 (1)
the
to be           grown           (2)
each crop to
be achieved,
determination of (3) yield
214build-up period from year 1 yield is achieved,
to the year when (4)      optimum       level of uses of
the optimum yield level                                    (5)        pattern of uses
optimum
inputs at of inputs
from       year 1 to the year and        (6)       prices of outputs
when optimum yield is achieved
and inputs. All the components
of        the          crop          budgets           except         the        prices           of        outputs           and
inputs
discussed
which
in the
have been
examined
in
chapter 5 
are
following
6.1.3 
Selected Cr
ops
Eight
crops
in
different
combinatio
n are proposed to be
grown
under
the
proj ect.
In
addition, forage
is proposed
to be
raised
in
5    % of
the
area. These crops
are maize,
wheat,
barley,
oats, broad
bean
, cumin, onion and
pepper.
In selecting the crops, various relevant factors such as soil capabilities, climate and agronomic characteristics
have been taken into account ("Agriculture Report", Annex B) . In addition, however, given these physical
factors, relative financial returns for competing crops have also been taken into consideration in selecting 
crops.
6.1.4                   Optimum Yield and Input Use
Based           on features,
soil
qualities
properties,
climatic
of         recommended use, the optimum
been determined
crop
factors, varieties,
agronomic
and
assumed of each optimum levels
levels of input selected crop has
achievable            yield
(Annex      B)
yield will be achieved with the
use
of input use
The optimum yield and use
of
of
This optimum optimum
levels of inputs will be achieved at full development
226.1.5                    Yield Build-up Pattern
As      indicated      above,      the      optimum      levels be achieved instantly i.e in the very
first
of yield can year of
not
the
start of
experience
crop production            activities
Based          on the             past
in
this
countries,          it is assumed
to achieve optimum levels
country that
of
from the starting
year of
the
The 6th year is defined as the for peasant farms.
and             other farmers
yield          and uses crop production
stage           of full
years will not
for the farmer by
developing
will take 6 years
of inputs activities.
development
The
yield build-up pattern
over
The
are
patterns of yield build-up
assumed to be as follows:
be linear. crops
 InJcrcentagcalL..-
'
Yrs->
1
2
3
4
5
6
Wheat
57
70
80
9Ci
95
100
Oats
60
70
80
9C1
95
100
Barley
60
70
80
90
95
100
Maize
75
80
85
90
95
100
Broad Bean
67
75
85
90
95
100
Cumin
67
75
85
90
95
100
Onion
60
70
80
90
95
100
Pepper
67
75
85
90
95
100
6.1.6
Input Use          Pattern
Given other      ' physical pattern of           yield build-up
related  to the rate of
factors,
the          optimum yield
over years are essentially
and the
adoption       of yield increasing
236inputs and  practices such  as fertilizers,  better quality seeds and  improved  agricultural practices and  management. 
Although some general information about the farmers in
Kubsa              village characteristics
innovativeness,
surrounding areas was collected, their and              nature                 with 
extent of seriousness about farming
respect
to
activities and
hard work
etc are difficult
to gauze from
this information
Moreover,
nothing is
known about the
additional              farmers who will have to be selected from the
adj oining           villages
for settlement in the project area.
Therefore, less developed
projecting the
past
experiences in countries have time frame and
this
country
and other
been       used as             bases for
the
probable
input use
pattern in conformity with the Other             relevant
yield build-up             pattern.
factors             with             respect
to 
input-output
relationship           in           addition           to           time           frame           and           farmers' attitude         and         incentive        to         use         inputs        over         time         is        the extent         of         contribution         which         each         of         the         major         inputs will         make         to         the         yield         build-up.         Again,         reliable         research results        in        these        respects        as        applicable        for        this        area        are lacking.         In         view         of         this         situation,         based         on         available information and impression in the country, the
24IT* r® r*
r*
r-
r®
p .*>
r®
ir®contributions  of  major  inputs  to  yields  are  specified  as follows:
Inputs and
Practices
Extent of contribution to yield increase
Fertilizers
Better Seeds
Improved Agricultural Practices and management
40
20
40
6.1.7       Input Requirements and Production Cost
6.1.7.1 Labour The
the
crop production
use of farmers"
activities will involve
family labour. The demand
increased substantially
importantly
for labour
will obviously
intensification
be of
with
the
agricultural      activities     under
irrigation.   All  the  relevant   operations involving      crop
production    requiring
human
labour have first
labour for each operation
been
identified
at optimum
and the demand     for
level of yield
then estimated. The demand
(i.e at full development) is for labour from the production
year 1 to the year when optimum level attained is distributed on the basis of pattern.
of yield is
yield build-up
25The demand       for   labour differs among crops importantly,     it   fluctuates markedly between slack periods within the single season for
The demand for labour also varies
seasons depending    on the cropping pattern. It will appear      from the crop budgets
and   more
peak    and each   crop.
between two crop
(Tables 6.1   to
that the demand
for broad bean
for labour will vary
380 man-days for onion to
between 90 under
man-days
irrigated
condition.
It is
however,
noteworthy that a considerable
portion of       this
total   demand occurs
during the two
important
peak
periods
involving
land
preparation
including    planting    and
harvesting.
The demand 
ranges
between
periods
40-50% of    the total during these  two major peak which cover relatively short time. In  addition,
there during labour
are minor peaks in labour demand which weeding and threshing. However, to meet
demand during the two major
critically pressed for
In view
important and farm families
labour during these two peak periods.
occurs
the
peak periods is are generally hard
of
intensity with
the proposed cropping pattern and the project condition, the annual
cropping
demand
for labour     per peasant
farm (one ha) is estimated      at 239
person- days      under irrigation.      However,   the distribution of demand       for labour during the two crop seasons in a
year will       be uneven.       During the Belg season July) ,  89 man-days will be demanded as against 150 man- days during Meher season (August-January).
(March-
It for
is important to assess the extent to labour for crop production activities
which for
the demand
a peasant
farm will be met from the supply of family labour of the
26pj
1
r-1
1
]
farm. The average family size for the population in Kubsa village is found to be about 9 persons. Given the age
structure and work habits in the area etc, the supply of family labour will be adequate to meet the demand for labour as estimated above.
6.1.7.2   Oxen Power
Oxen  power  will  be  used  by the  peasants  for  land preparation, threshing and transport of crops. With the proposed cropping pattern under the project condition, a peasant farm (one ha) will need 33 ox-pair days during a year.
The supply of oxen in the area is rather limited although 
the ownership of livestock per family is relatively high. According to the survey in the area, a farm family owns 
an average of less than two oxen. The shortage in supply
of oxen for a good number    of families may  be an
important  constraint  on  the   carrying  out  of  crop production activities.
The hiring charge for oxen is relatively high at Birr 5 
per ox-pair day for ploughing in the area. This high 
charge is mainly due to shortage in supply of oxen in the area.
The area is subject to occasional shortage of
fodder for their animals. It is therefore, proposed that 5%  of  the  irrigated  land  under  the  project  will  be devoted to the production of forage. Since there is no market for any forage crops in the area, it presents a 
special problem of how to value this forage crop. In the absence of any market price for forage crops, it isi
Iassumed that the production of forage will contribute to the maintenance of oxen and the cost per ox-pair day for crop production activities under irrigation is reduced by 20%  to  Birr  4  per  ox-pair  day  to  allow  for  this  net benefit arising out of the cultivation of forage.
6.1.7.3    Fertilizers
Under the project
condition,
two
types of
fertilizers, urea and DAP for the proposed crops. In 
(Annex B) , optimum doses of recommended at the levels of soil properties and other characteristics. The pattern the year when optimum level been determined on the
are recommended to
chemical be used
the - Agriculture Report’
urea and DAP have been optimum yield in view of 
physical and agronomic of  uses  from  year  1  to
of  yield  is  reached has basis    of    fertilizers’
contribution   to the yield increase   at t she rate   of 40%
and the basal dose in year dose.
1 at  20%  of  the  optimum
The supply  of fertilizers in   required quantify and  at the right time    will be essential  for their  use.  Until now, the supply    situation of fertilizers   for  this   Awraja is reported  to  be  unsatisfactory.  The  Agricultural  Input Supply Corporation will therefore, have to make necessary arrangements  for  the  timely  supply  of  fertilizers  in adequate  quantities  to  this  Awraja  in  general  and  the project area in particular.
6.1-7-4    Seeds
It is envisaged that the 
peasant   farmers will   use
improved seeds under the project condition. The time
281 •- . ■.period for the optimum use of improved seeds to be achieved by them is assumed to take 6 years. The seed will have to be used in fixed quantity per unit of land. The contribution of seed to yield will vary in accordance with the difference in quality of seed. The difference in the quality of seed is reflected in its cost. The cost of
improved seeds
is estimated at 20% higher than
the farm
gate price of
seeds between
crops. The amount year 1 and year 6
of change in
when optimum
That is why
cost
of
yield is
attained is rather insignificant.
cost
of
seed has not been varied between these years.
6.1.7.5 Pesticides
Pesticides are to be used to save crops from damage by pests  and  diseases.  Different  types  of  pesticides  will be used depending on the types of pests and diseases and prices are different for different types of chemicals.
Cost on account of pesticides has therefore, been calculated in lump sum per hectare . The increase in the use and the cost of pesticides over years during the yield build-up period has been related to each other for each year .
6.1.7.6 Agricultural Practices and Management
- The quality of agricultural practices and management will have significant role in increasing the yield of crops. As indicated earlier, agricultural practices and management are expected to contribute 40% of the increase 
in yield. Detailed information about the characteristics of farmers is largely unknown. In the absence of any such information, it is assumed that the farmers who will operate under the project will be of average type i.e not
29much   innovative   but   not   laggard   either   and   the improvement in agricultural practices and management are assumed to occur simultaneously with the increase in the use of fertilizers over years from year 1 to year 6 when optimum yield will be achieved.
6.1.7.7   Tools and Sacks
The tools and include plough, for a number of
implements of
sickle,
hoe,
peasant
spade, axe
farmers generally
etc. These
years.
has been estimated in
The cost on account of these
lump sum per hectare for
last
items
crop
production  activities  in  accordance  with  the  annual repair  and  maintenance  requirement.  Sacks  are  needed  to transport and store crops. A sack is expected to last for
3 years. The requirement
of
sack is
calculated
the on
basis of the amount and type of harvested crops.
6.1.7.8    Interest and  Contingency
Peasant  farmers  will  require  credit  for  buying  inputs like fertilizers, pesticides, seeds etc. Cost on account of interest is calculated on the basis of cash costs for six months at 6% rate of interest per anum. There is a provision for contingency to allow for any under
estimation  of  prices  or  quantity  for  those  items  which involve  cash  payment.  The  cost  for  contingency  is estimated at the rate of 5% on all cash costs for the crop in question.
306.1.7.9 Estimation of Crop Budgets with Project
In the light of the foregoing discussion, crop budgets have been prepared and presented in Tables 6.1 to 6.8. It may be noted that the years indicated in the Tables relate to crop production years.
6.1.7.10  Estimation of Crop Budgets Without Project
At present, the farmers in the project area are growing mostly 6 crops - maize, wheat, barley, oats, field pea and  cumin.  All  these  crops are  grown  under  rainfed condition. No fertilizers are used. The use of other inputs are also at low levels. As a result, the yields of crops are low. Crop budgets for these crops without project have been prepared and presented in Tables 6.9 to 6.14.
317 .        FARM BUDGETS ( FINANCIAL )
There will be one type of farm in the project area, namely peasant farm. Therefore, farm budgets for the peasant farm will be prepared.
7.1       Typical Peasant Farm
The crop production
under labour.
irrigation
involves much
increased quantity of
In view of
the work habits
observed in
the area
involved
in irrigated farming
r
and it
requirement of is considered
labour
that one
hectare
of
irrigated
land is
more
likely to be optimally   utilized
by a peasant
family.
Net
return will
at
Birr
6676 at
full  development
also be quite high
(Table 7.2). Since
frequent  drought  and
erratic and    inadequate rainfall
constitute
production
irrigated
the   most
in the
area,
limiting constraint
allocation of one
on   crop hectare of
land will lead
of the project’s benefit.
is available outside the
peasant family which will
to more However,
widespread distribution
since additional land
of surplus labour and
proj ect area, want and has
other resources
any hard working
ability
will be
in terms
free to
cultivate additional land outside the project area.
7.1.1     Components for Estimating Incremental
Net Return With Project to a Typical
Peasant Farm
The incremental net return to a typical peasant farm will depend  on  the  farm  size  (  cultivated  land  ),  cropping pattern, cropping intensity, yield level, prices of farm produces  and  production  cost  of  crops  with  and  without project. The typical peasant family will derive its
32entire income from the crop production. At present, there is hardly any off-farm income to the farm families.
7.1.2      Cropped Area for Typical Peasant Farm
As already indicated,
the size of
a typical
peasant farm
will be one hectare
under project
condition.
The cropped
area for a typical
calculated at 1.55
peasant farm
hectares in
with project has been
cropping pattern. The farm families farming in the project area have 3.97 hectares. No information
view of the who are at
an
average farm
proposed
present
size of
is  available
potential
settlers who will come
to
farm in
about the
the project
In
area. potential
the absence of settlers, estimates
information  about  the
net
settlers
size and
have been made on
any of
the
return
of the
for  these
farm same
farmers in
same cropping pattern the project area. It is
for as
somewhat
the existing
arbitrary and
potential  settlers
are likely
to
status. But in
the
absence of
any
this assumption
has
been made.
The
be of poorer economic data in this respect, incremental net return
to the typical
peasant farm as estimated in this study
should therefore, be considered the as the lower bound.
The levels  of yield with  project will vary from year 1 until  year  6 when optimum  yield will be reached. Yields
of crops   without project     under the existing   condition were  collected during the    socio-economic survey  in 1991. Prices of  crops and inputs    and production cost  of crops are discussed earlier   ( for details see   chapter 5 and 6 ) .
33Me
.
i
if •.-.tf--
t& ;
. •• •-■> ,
- .      j$5'.7.1.4      Investment Cost
In order get settled and carry out farming operations, the peasant families  to be settled in the  project area will require houses,  oxen, farming tools and implements
and subsistence allowances     for 6   months.  Out of   538
peasant families who   will be able to use the  command area of the project, 464 families i.e 86 % of the total
families will have to come from the surrounding villages. Only the poorer section of the farmers are expected to move  to  the  new  area  for  farming.  They  may  have  some tools and oxen but these are unlikely to be adequate for farming  under  irrigated  condition.  The  existing families in the project area (74 i.e about 14 % of the total) will also have some tools, oxen etc but these are also not likely  to  be  fully  adequate  to  undertake  effectively farming  under  irrigated  condition.  In  order  to  enable them  to  have  a  vigorous  start  in  the  context  of  such possible inadequacies, it is proposed to let each family invest  required  amount at  the beginning. Total cost of these requirements is estimated at Birr 3000 per peasant family. It may be noted that the subsistence requirements of  farmers  do  not  normally fall  in  the  category  of investment but in this case, it is needed to enable them to undertake production and maintain them for the first
6 months before they can have the first harvest. This cost for 6 months thus pertakes the nature of investment.
7.1.5 Credit, Interest Payment and
Repayment of Principal
The peasant families will need loan to finance their investment cost. It- is assumed that the investment cost of the peasant families will be financed in the form of
34
-1
-z.■
rl
[
rJ r*long term loan for 10 years. The payment of interest is
calculated at 6% per anum and the repayment of principal is
worked out      on      the basis of 5      equal     installments    of Birr    600
per year with a grace period of 5 years. It may be noted that
the short term credit
requirement for crop production has
been
taken into account while       estimating the crop budgets.
7.1.6        Net Return to a Typical Peasant
Farm With and Without Project
Before Financing
The   net   return   to   a   typical   peasant   farm   as   estimated   in this    respect    is    attributable    to    the    family    labour, capital    and    management.    The    net    return    before    financing refers   to   the   net   return   before   any   payment   is   made   with respect    to    interest    on    capital    borrowed    for    investment and    instalment   towards    repayment    of   principal.   The    annual net   returns   with   project   before   financing   vary   from   Birr 4178 in year 1 to Birr 6676 in year 6 and onwards (Table
7.2).   On   the   other   hand,   the   annual   net   return   without project is estimated at Birr 2030 (Table 7.3).
7.1.7         Incremental Net Return to a Typical
Peasant Farm Before Financing
The incremental net return to the typical peasant farm before financing has been determined by deducting the net return without project from the net return with project before financing. Such returns are estimated to vary from Birr 2148 in year 1 to Birr 4646 in year 6 and onwards 
(Table 7.6).
357.1.8           Incremental Net Return to a Typical 
Peasant Farm After Financing
The    incremental    net    return after     financing   is   determined
by   taking into
account the loan     and   debt     service. Such
net    returns to    the     typical farm    are from Birr     1968 to Birr 4586 during
(Table 7.6).
calculated to vary years 1 through 30
7.1.9 Incremental Net Cash Peasant
Income to a Typical Farm After Financing
The net financing
cash
are
income and
critically
incremental     cash
the farm
typical peasant farm.
the
net
income after
incentive of
return to a
family may
appear
important for The estimated
very high but
after   meeting    the
debt    obligations      and    deducting     the
produces consumed
in the
family,
the
with first then
no or little surplus. The their food needs out of
they will have to pay
farm
their
amount farmer may be
families will
of farm left meet
farm   produces    and
interest
on
loan
surplus
after
and repay meeting these
the
principal. Whatever
is left
reguirements purposes.
can
then    be    used    for    other    essential
The incremental cash income to the typical farm family begins at Birr 9 in year 1 and rises steadily to Birr 2139 in year 5 (Table 7.6). During years 6 to 30, this income fluctuates between Birr 1907 and Birr 2627. However, it should be noted that the actual net cash 
income which will accrue to the typical peasant family is always higher by Birr 2030 which are deducted to find out the incremental cash income. Thus the actual cash income to be received by a typical peasant family will range
36X
r
1 ”
p-jllfrom 2039 to   4169 during years    1 to 5 and Birr 3937 to Birr
4657 between
are expected
years 6 to 30.
to constitute a
of peasant       farms to adopt practices      and to utilize envisaged under the     proj ect.
These amounts of net cash incomes positive incentive    for this   type
the     modern inputs and improved
the     irrigation      facilities     as
378.          PROJECT’S COST AND RETURN (FINANCIAL)
Costs   of   the   project   as   well   as   returns   to   the   project are estimated on the basis of 1990 prices.
The period subsequent to 1990 has been marked by economic instability and prices have been subject to various unstable and abnormal influences.The year 1990
was the latest normal year.
In view of these     factors
prices of 1990 are considered    to be appropriate   for valuing items  of project's costs and returns.
8.1         Project Cost
The    costs     of the project
include     the    costs     on
account of
investment,
operation and
maintenance      and
replacement.     In addition, for settlement of farm 
(Chapter 7).
there will      be investment       cost families -as       discussed earlier
8.1.1      Investment Cost
8.1.1.1  Components of Investment Cost
The investment cost   is
the sum total drainage
of investment costs
for
irrigation
equipments       for
and Pro j
works,
ect
Control
Centre
infrastructure, (PCC)    and
settlement of  farm
families
The project       infrastructure
consists
for the
of
access road a
nd
office,
store
and   workshop
PCC    Peasant
farmers
have to
proj
ect  area
and the
account
investment cost
of house building
be settled
for them
materials, hand
in the
includes
the cost
on
tools, plough    and oxen    (one pair per family).
381 ir*
u8.1.1.2    Estimated Investment Cost
The total investment cost thousand with a foreign
3311.5 thousand  distributed
is estimated at Birr 10211.3 exchange component
over   a period of
of Birr
2 years
(Tables  8.1,   8.2  and 8.3     )   The   drainage    and   irrigation
works constitute the   highest
amount   of cost    with   about   74
%.  The cost for farm investment for the settlement of
farmers is second in importance with 16 %. The costs for
land levelling
constitute about 7
and    road     and
% and 2% respectively.
equipments
for
PCC
8.1.2 
Operation and Maintenance Cost
The operation and maintenance salaries of PCC personnel (b) cost of equipments of PCC maintenance of infrastructure, maintenance costs are estimated 
Table 8.5).
costs consist of
(a)
operation and maintenance 
(c) materials and (d) 
The annual operation and at Birr 108.5 thousand (
8.1.3
Replacement  Cost
The machinery and equipment will have to be replaced periodically according to the life span of each items during the life time of the project. The replacement costs over years are presented in Table 8.6.
8.2        Return to Project
The return to project includes net return with project. However, the calculation of incremental net return
involves the deduction of net return without project from the net return with project.
398.2.1       Net Return with Project
The return     with project will result from crop     production.
Total net return
total area under
with project will be cultivation, cropping
intensity and
net     return per with  proj ect
hectare of
determined by the
pattern, cropping
each of the crop3
to be
grown
It may be
proposed to      be
cultivated     in
5% of
noted the
that forage is command area
Since there
be determined. But the peasant farms
is no market     for   fodder   crops,   no
price can
the
se fodder
crops 
will be of
value to
in
the project
area
because
these will
the
maintenance
of
their
contribute      to
specially  oxen which will be used for farming operations.
livestock
In order        to    allow     for    the    benefit of
increased
availability of fodder cost on account of
crops    from   the project     area, the the use of       ox pair for farming
operation is reduced   by    20 % i.e Birr   1 per day.
Net returns per hectare for all the crops proposed under the project are estimated in Chapter 7 on crop budgets.
The cropped area under the project excluding the area under forage will be 807 hectares.
Total net return with project is thousand in production year 1 i.e
gradually climbs
estimated at project year
ir production
Birr 1919
3 and it
to 3206 thousand
year 6
i.e project year 9   and onwards
8.2.2      Net Return Without   Project
At present, 74 farm families cultivate 294 hectares of land with a cropped area of 352 hectares within the 
project area. Total net return without project is estimated at Birr 77.4 thousand per year ( Table 3. S') .
409.          FINANCIAL RATE OF RETURN TO PROJECT
In order to determine the extent of viability of the project from the financial point of view, the financial 
internal rate of return (FIRR) to the project has been
calculated
According
to the
the    methodology
enunciated     in
Chapter 5,     the FIRR to
project has
been   calculated   by
discounting  the incremental   cash flow
9.1 Incremental Cash Flow
The
incremental
cash    flow net return without
over    years
is   estimated
deducting the
project
and all
by the
relevant costs       of the project
and maintenance
and replacement
the like
costs
investment, from   the
operation net return
with project   Symbolically, these are as follows: IRN = NRw - NRx - (Cl + C2 +C3)
Where:
IRn =     Incremental  net return
NRw =
NRx =
Net return
Net return
with project without project
Cl =
Investment  cost
C2 =
Operation and maintenance ■cost
03 =
Replacement  cost
9.2
Net Return
with and without Project
Total net
return per year with project
(para
(NRw)
is already
estimated
of
the proposed
command area
of the project is currently under
41cultivation, total net return per year without project (NRx) has also been calculated (para 8.2.2).
9.3         Investment, Operation and Maintenance
and Replacement Costs
The investment cost (Cl), operation and maintenance cost
(C2) and replacement presented in Tables 8.1
cost
, 8.2,
(C3)
have been    estimated
and
8.3,   8.5 and 8.6) .
9.4        Prices
As indicated in the
Chapter on
Methodology
(Chapter
4) r
constant prices have
been used.
Since the
year 1990
was
the latest normal year, the   valuation of    all items    of costs and returns has been made at 1990 constant prices.
9.5        Project Life and Residual Value
The life of
the project is assumed
at   30   years.   The
residual value     of all the capital assets years is estimated at Birr 3307 thousand.
9.6        Financial Internal Rate of Return and Financial Net Present Value
at
the
end of
30
The financial      internal
rate
of return to
the  project    is
estimated
at    21.66 %
(Table 9.1)
The
financial
net
present value at 11 thousand. The proj ect financial point of view.
rate of discount    is Birr 10015 is thus highly viable from the
42j i . ls^10.         COST RECOVERY
Since the income of will increase because
the beneficiaries   of the project
of the project,
it is reasonable
to expect      that they     should contribute       to the payment the cost     which   make     it possible for       them to reap benefit.     Because     of    overall     resource  constraint,
of the the
Government     often    has    to find      resources     to   invest    in
development  projects
through     borrowing    from    home    and
abroad.      Moreover,       if     such      costs     are     recovered
from beneficiaries overall investment. of recovery of attempts in the strong resistance
the Government Inspite of      good
cost from
the
can    increase its rationale in favour beneficiaries,       Such
past in     many countries were met with
and were
totally
frustrated or became
only  partially  successful, is financially viable,
However,     since this project
it would
be worthwhile costs could
to
be
10.1
explore     possibilities  about whether recovered   from the beneficiaries.
Policy on Cost Recovery in Ethiopia
There is
no
established
and
firm
policy
in Ethiopia
with
respect
to
recovery
of
cost
from
beneficiaries
of
irrigation    projects.
Before
nationalization
of    land
in
1974,
private
companies
and
concessionaires     developed    a
few
irrigation
facilities
and
they
charged
some
water
charges from the water users
After 
1974,
attempt in mid beneficiaries     of
1980's about the
recovery of
noted that all
Amibara Irrigation Project
the beneficiaries were public
there was an cost from the
It may be agencies and
not the farmers. Thia attempt did not however, succeed
4310.2       Methods of Cost Recovery
If the    Government decides to recover the
direct    beneficiaries     from    whom    the
cost cost
this
to
recovered
The direct beneficiaries for
, it is
has project
the be
will
be 538 peasant families. The recovery
on the basis of the actual volume of water used
be may
made either
(volumetric irrespective
volumetric
water
charge) or
flat rare       per hectare
of
the amount
of use
Although
the
water
charge has
certain
advantages,
its
implementation requires installation
meters and additional administrative
and
expenses
maintenance
rate per hectare a possibility
is easy    to administer
The
although there
of
some
water use
flat rate
if   unchecked
is considered to be
reduction in Under the present preferable.
the
efficiency
condition,
of flat
is of
the
Different     alternative approaches may be
attempted     to
recover
follows
cost from     the  beneficiaries of   this project
as
Recovery
of only
operation and
maintenance cost
b)  Recovery   of full  investment cost  with interest in addition  to operation and maintenance cost.
Recovery of
interest in
full investment cost without addition to operation and
maintenance   cost
d)   Recovery of   only without interest cost
a part of the investment cost plus operation and maintenance
4410.3 Alternative Amounts of   Cost Recovery 
and Implications
on Farmers' Incentive
The  incremental   cash income    to farm families      should serve
as
a basis for determining
to
from  them
The cash
income
farmers
net  return
be the basis because in cash out of the credit obligations of outputs produced
the amount and not the
are expected
be recovered
to
make
have   met
should
payment their
and on
surplus after they
satisfied their
family   consumption
their farms
The  payment
should be
out
of
incremental
cash
required to pay out of
part should be deducted
income because income without
from
income on
they project which
were
not
and that the amount
10.3.1
of recovery from farmers should be assessed.
Recovery of   Only Operation and Maintenance    Cost
The recovery of full operation that a typical farm  family will
and maintenance cost means
have to pay Birr 202      per
hectare per year. The
incremental cash     income   during   the
production years     1 and   2 will   be too    low to   justify   any recovery during      these   years.   However,    during   production years 3 through       30, the full      recovery of operation       and maintenance     cost   will claim      8   % to 15       % of     the
incremental  cash income of a farm family. The recovery at this rate  is thus less likely to affect unduly the farmers' incentive.
45* *.’ • •              er‘<-
. •         : S?': • ssjftftx :..^
710.3.2 Recovery of Full Investment Cost with 
and without Interest Plus Operation 
and Maintenance Cost
The  recovery  of  full  investment  cost  without  interest plus  full  operation  and  maintenance  cost  will  require farmers to pay the amounts ranging from 28 % to 55 % of their  incremental  cash  income  during  production  years  3 through  30.  To  recover  costs  at  these  rates  will  very adversely  affect  the  incentive  of  farmers  and  would  be unrealistic to try to recover costs at these rates.
Therefore, it would be even more unrealistic to try to recover  full  investment  cost  with  interest  plus  full operation and maintenance cost.
10.3.3   Recovery of a Part of Investment Cost
without Interest Plus Operation and
Maintenance Coat
Since  the  recovery  of  full investment  cost  with  and without  interest  is  found  to  be  unrealistic,  it  is worthwhile to explore possibilities for recovering a part of  investment  cost  without interest  plus  operation  and maintenance  cost.  The  Government  will  have  to  determine the  actual  amount  to be recovered keeping in view the criterion that farmers’ incentive is maintained.
46LI J
J
J
J
I
I11.      METHODOLOGY FOR ECONOMIC ANALYSIS
11.1
11.2
11.3
Purpose of Economic Analysis
The purpose of economic analysis of a project like Bale Gadula  Irrigation  Project  is  to  measure  the  real contribution which the project will make to the national income. Since in case of a public sector project as this one,  the  nation  as  a  whole invests  its  resources,  it should have to determine the extent of contribution such an investment of resources makes to the national income in order to decide whether it is worthwhile to invest in this project.
Comparison Between With and Without Project
As  in  the  case  of  financial  analysis,  the  economic analysis involves the comparison of economic outcome with project  with  that  without  the  project.  Since  benefit without the project if any, has to be foregone when the project  is  established,  net  return  attributable  to  the project will have to exclude such benefits without the proj ect.
Benefits
Benefits may be direct and indirect. Direct benefits may be  tangible  and  intangible.  Tangible  benefits  for  an agricultural  project  may  result  from  increased production, improvement in quality, increase in value or reduction in cost etc. In case of a production oriented project like this one, increased production is the most important tangible benefit.
47r«
I
I11.4
11.5
Intangible benefits are very difficult to quantify. 
However, such benefits may be identified and mentioned to 
the extent possible.
Indirect  benefits  are  those  which  arise  outside  the project.  These  benefits  are  generally  enjoyed  by  those who  are  not  participants  in  the  project.  Such  benefits often arise in the form of increased profit to traders transport  operators,  processors  of  agricultural  crops etc.
Externality
Some costs are incurred outside the project and are borne 
by other than those who are participants in the project. 
These are often referred to as externalities. Some 
examples of such costs include damage to environment, 
increase in the incidence of some water borne diseases, 
loss of water use by the previous users etc.
Theoretical Basis of Economic Valuation
Prices to be used in the economic analysis have to be real  reflecting  the  true  scarcity  value  or  opportunity cost value. However, market prices as used in financial analysis  do  not  often  reflect  such  opportunity  cost values  because  there  are  various  imperfections  in  the market.  In  addition,  there  are  government  fixed  prices such  as  in  cases  of  fertilizers,  pesticides,  improved seeds etc. Such prices are also not expected to reflect true  values.  Therefore,  in  making  economic  analysis, opportunity  cost  values  (real  values)  of  all  items  of costs and benefits have to be estimated.
48I11.6      Conceptual Framework for Determining Economic Prices
All  the  financial  accounts on  costs  and  benefits  which have been estimated for making financial analysis have to be  adjusted  to  reflect  the opportunity  cost  values.  In order  to  determine  appropriate  prices  and  conversion factors  for  converting  financial  values  into  economic values,  the  well  known  Little  and  Mirrlees  method  of 
project  analysis  has  been  used  in  this 
1     This case . 
11.7
method  essentially  consists  of  expressing  all  the  costs and  benefits  of  a  project  at  world  prices  (border prices).
Application of Little-Mirrlees Method
World prices are to be used to measure the opportunity cost to the economy of goods and services which can be bought and sold in the international market. However,in case of any project as this one, there is a wide range of goods and services which are internationally non-traded and for which there will be no direct world prices. But since according to this approach, all items have to be valued in terms of world prices, some world price equivalent figures will have to be estimated for these nontraded items.
1
Little, I.M.D. and Mirrlees, J.A. Project Appraisa 1___and----Planning for Develo.pin.CL Gauntries^. New York, Basic Books, 1974.
49t-u r1
r1
ir
Lr
1
J
r111.0     World Prices and National Economic Parameters
The  calculation  of  direct  world  prices  or  world  price equivalent ones for traded and nontraded items is related to   macro-economic   phenomena.   Once   such   prices   or conversion factors are worked out, these can be used to projects with slight and no adjustments depending on how these  have  been  estimated.  That  is  why  each  country normally has to work out a set of such figures to be used for the analysis of various projects. In Ethiopia a set  of  appropriate  values  and  conversion  factors  called 
’National Economic Parameters for Ethiopia’ have already been worked out on the basis of a detailed study . These parameters have been used in valuing the cost and benefit items for this project.
11.9     Determination of Economic Values
In order to determine the economic values, appropriate changes in financial values have to be made by (1) 
adjusting values for traded items (2) adjusting values 
for nontraded items and (3) eliminating transfer 
payments like taxes and subsidies.
11.9.1 Import Parity Prices
In  case  of  traded  items,  import  parity  prices  as applicable to various inputs and outputs have to be
1
People’s Democratic Republic of Ethiopia, National—Economic- Parameters, _fo.r., __ Ethiopia Addis Ababa, February 1989.
50estimated. 
The 
est
imation 
of 
import 
parity 
prices 
involves the
cif
pri
ce and
o
ther
relevant 
costs
. 
These 
costs other 
than 
the 
cif hav
e 
to 
be adjuste
d
on 
the
basis 
of appropriate conversion factors.
11.9.2 Export Parity Prices
In  case  of  inputs  and  outputs  which  are  exportable, export  parity  prices  have  to  be  calculated.  The calculation of such prices involves the fob prices at the port of export and other relevant costs from the project area upto the exporting port. These costs other than the fob price have to be adjusted with the appropriate
conversion  factors.
11.9.3   Valuation of Non-Traded  Items
With  respect  to  nontraded  items,  competitive  prices  in the domestic market have to be determined first and these prices  are  then  adjusted  with  the  appropriate  conversion factors.  The  unskilled  and skilled  labour  fall  in  the special  category  of  nontraded  items.  The  conversion factors for unskilled labour for Bale Region and for the skilled labour for Ethiopia as a whole have been worked out as a part of the "National Economic Parameters ’ as mentioned above.
11.9.4   Constant Prices
Internationally  traded  items  involve  prices  in international  market  while nontraded  items  requires competitive  prices  in  the  domestic  market.  But  in  both cases prices in constant terms have to be used.
5111.9.5   Treatment of Transfer Payments
Transfer  payments  such  as  taxes,  duties,  subsidies, loans, payment of interest and repayment of principal are excluded  from  the  calculation  of  economic  cost  or benefit.  This  is  done  because  these  are  considered  as transfer payments and do not reduce or increase national income.
11.10    Project Period
As stated in case of financial analysis, there is no hard and fast rule about the length of the project period to be analyzed. One of the indicators for the length of the project period for which analysis has to be carried out is the technical life of the major capital assets. However, the effect of such capital assets for which investment is made at the initial stage on the rate of return based on discounted cash flow after 30 years is 
so insignificant that it makes hardly any difference in the degree of viability of a project. Therefore, a period of about 30 years will be appropriate for the project analysis.
11.11
Residual Value
The useful life of some of the capital assets may not be used up entirely at the end of project period for which analysis is carried out. That is why a residual value on account of such capital assets is treated as benefit at the terminal year of the project period.
52r1
rJ
r111.12    Measures of Economic Viability
Three  measures  of  project’s  viability  such  as  internal rate  of  return  (IRR)r net  present  value  (NPV),  and benefit cost (B-C) ratio are generally used to determine the  economic  viability  of  projects.  Of  these measures,  the  IRR  is  most  widely  used.  Most  of  the international  financial  institutions  including  the  World Bank use the IRR in making economic analysis of projects. In  this  study,  economic  IRR  (EIRR)  and  economic  NPV 
(ENPV) will be used in determining the economic viability of the project.
11.13    Technique of Calculating Economic Internal
Rate of Return and Economic Net Present Value
Since  different  amounts  of costs  are  incurred  and different quantities of benefits arise in different years over the life of a project, present values of both costs and benefits have to be determined in order to compare them. The process of estimating present values of costs and benefits is called discounting. The economic internal rate  of  return  (EIRR)  and  economic  net  present  value 
(ENPV)  are  determined  by  discounting  incremental  benefit (return) stream or incremental cash flow.
11.14       Discount Rate
An appropriate discount rate which is supposed to reflect the opportunity cost of capital to the economy should be determined. This discount rate indicates the cut off rate i.e the economic internal rate of return below this rate for  any  project  in  general,  make  it  economically  non- viable given other factors constant. In accordance with
53the findings of the study on the ’National Economic Parameters for Ethiopia’, this cut off discount rate is 11 % and the Government of Ethiopia has accepted this rate for economic analysis of projects.
11.15    Sensitivity Analysis
In order to allow for various uncertainties and unforeseen circumstances, sensitivity analysis has to be carried out to test the soundness of economic results. Sensitivity tests are generally carried out by changing variables like net return, output price, yield, investment cost, delay in the accrual of benefits etc. Different variables are selected for sensitivity tests depending on the purpose and type of projects.
11.16    Application of the Methodology
In this study, economic viability of Bale Gadula Irrigation Project has been made by estimating the EIRR and ENPV. In estimating EIRR and ENPV, the methodology as discussed above has been applied.
5412.       ECONOMIC PRICES OF INPUTS AND OUTPUTS
12.1
Conversion Factors in National Economic Parameters
In determining economic prices the conversion factors
estimated Parameters
and recommended
for in
of inputs and outputs,
nontraded items as
the ’National Economic
for
Ethiopia*
have been used. These
conversion  factors are as follows:
Items
Unskilled Labour (Bale Region)
Skilled Labour Construction Transport
Power
Average Conversion
C o.nvex.sion Jactor 0.60
1.03
0.75
0.75
0.85
Factor(ACF) 0.80
12.2
12.3
Procedure of Estimating Conversion Factors for Other NonTraded Items
There are however, non-traded items other than labour, construction, transport, and power. In case of such items, specific conversion factor for each item has been estimated by (a) multiplying foreign exchange component, if any, with 1, (b) adjusting local cost components with ACF and (c) excluding transfer payments.
Economic Prices of Traded Inputs
As indicated earlier, in case of inputs and outputs which are traded internationally, the economic prices
55pi12.3.1
12.3.2
have been estimated on the basis of import or export 
parity prices as the case may be.
Economic Prices of Fertilizers
Fertilizers are imported and so    the import parity prices of both urea and DAP     have been  calculated to  determine their economic prices.   The  import parity prices  of urea and DAP are   estimated at Birr 692   and Birr 746  per ton respectively.   These prices   have been estimated   on  the basis of cif Assab     price and adjustment of all local costs with appropriate conversion factors.
Economic Prices of Pesticides
All types of pesticides are imported.
of economic prices
of pesticides is
each crop
requires various
types of
But the calculation
quite complex since
pesticides depending
on theworked out on the basis of                   kind  of  pests  and  diseases. Therefore,
financial
cost
account on
of
pesticides per hectare
the
for
each
0.96
crop has
been adjusted
by a
conversion factor
of
12.4
component and 20% local cost. Economic Prices of Nontraded Inputs
Important nontraded inputs labour  include  ox  power, economic prices have been procedure mentioned above.
for crop production other than seeds,tools and sacks. Their 
estimated on the basis of the
56r«12.4.1     Economic Price of Ox Power
Ox power is a nontraded item and no foreign exchange or tax is involved. Therefore, the ACF should have been used to adjust the cost of using the ox power. But it has other economic characteristics such as seasonal unemployment and underemployment and the question of
alternative uses etc. The conversion factor for this item is therefore, assumed to be equivalent 
to that for unskilled labour.
12.4.2
12.4.3
Economic Prices of Seeds
Seeds are not normally imported except in emergency situation. The seeds for the proposed crops under the project will be available locally and are treated as nontraded items. The economic prices of seeds are 
therefore, estimated by adjusting the financial prices with the ACF.
Economic Prices of Tools and Sacks
The financial price of ones by taking into component,tax and local
tools is  converted into economic account   the   foreign exchange
component. The conversion factor
12.5
calculated accordingly coincides with the ACF. Sacks are produced domestically and their domestic prices have been converted with the ACF.
Economic Prices of Traded Outputs
Out of 8 crops proposed under the project,2 crops - maize and wheat fall under the category of
57I r112.5.1
internationally traded commodities as far as Ethiopia is concerned. The rest of the crops belong to the category of nontraded items.
Economic Prices of Importable Outputs
The country is deficit in at varying quantities production of cereals like
food and cereals are imported every year. The increased 
maize and wheat from the
12.6
project will therefore, be import substitutes. Therefore, import parity prices of maize and wheat have been 
estimated at Birr 612 and Birr 713 per ton respectively (Tables 12.3 and 12.4).
Economic Prices of Nontraded Outputs
Barley, oats, broad bean, cumin, pepper, and onion fail in  the  category  of  nontraded  crops.  Although  Ethiopia used to export dry pepper in the past, this has already
been
the
stopped. However,
main raw material
oleoresin for
which dry
is exported.
fraction of the
oleoresin. The
total
pepper
production of
But only
pepper is
pepper is a small
used for
is therefore,
nontraded
have been
item.
The economic prices of
treated
all these
as a crops
determined by adjusting their
financial prices
with the ACF.
58•313.                   CROP BUDGETS ( ECONOMIC )
Economic crop budgets will indicate the net returns to
crop production in real terms. Both the production costs and returns of crops have been estimated in accordance
with the methodology
enunciated earlier. The economic net
returns required
arising out
to estimate
of
the
crop production activities are
economic internal rate of return
to and economic net present value of the project.
13.1                 Components of Economic Crop Budgets
As in the case of financial crop budgets, the preparation of  economic  crop  budgets  includes  (1)  the  selection  of crops to be grown (2) determination of optimum yield for each crop to be achieved, (3) yield build-up period from year 1 to the year when optimum yield is achieved, (4)- optimum  level  of  uses  of  inputs  at  the  optimum  yield level (5) pattern of uses of inputs from year 1 to the year  when  optimum  yield  is  achieved  and  (6)  economic prices of outputs and inputs. In case of economic crop budgets, all the components except prices of inputs and outputs are the same as in financial crop budgets.
13.2                  Preparation of Economic Crop Budgets
Economic crop budgets essentially involve the change in the valuation of financial costs and returns by using
appropriate  opportunity  cost  prices  and  conversion factors. Suitable adjustments in the values of financial crop budgets which are prepared for financial
analysis  have  therefore,  been  made  to  determine  the economic crop budgets.
59I1 r1
■
r1 r113.3       Economic Crop Budgets with
and without Project
Economic  net  return  per  hectare  at  full  development  with project  varies  from  lowest  of  Birr  452  for  barley  to  the highest  of  Birr  13163  for  onion.  The  economic  net return per  hectare  without  project ranges  from  Birr  78  for  field pea to Birr 949 for cumin.
60. It ill
.i f •»-n
,i>'i mitPROJECT'S COST AND RETURN (ECONOMIC)
Economic costs of
to it
costs
prices
have been
and returns
the project
determined by
into economic
and conversion factors.
and the economic returns converting its financial ones through appropriate Thus,the calculation of
economic  costs  of  and  returns  to  the  project  is essentially  the  appropriate  valuation  of  financial  costs and returns as estimated earlier. The financial costs and returns will be converted into economic costs and returns on  the  basis  of  methodology  and  appropriate  prices  as stated earlier ( Chapters 11 and 12 ) .
Project Cost (Economic )
The economic costs of the project include the costs 
on account of investment, operation and maintenance and replacement.
Investment Cost (Economic)
The total economic investment cost consists of the costs
for project- construction, 
for Project Control Centre (farm development) and is 
thousand (Tables 15.1-    15.3) over 2 years.
infrastructures,  equipments and  settlement  of  farmers estimated at Birr 8924.7
This cost will be spread
Operation and Maintenance Cost   (Economic)
As already indicated in case of financial analysis, the economic operation and maintenance costs include costs on account of personnel for Project Control Centre, operation and maintenance of equipments for PCC,r*14.1.3
14.2
materials and maintenance of infrastructure. These costs are estimated at Birr 94.7 thousand per year (Table
14.5).
Replacement Cost (Economic)
The machinery and equipment will have to be replaced periodically according to the life span of each items during the life time of the project.’ The economic replacement costs over years are presented in Table 14.6.
Return to Project (Economic)
The economic return to project includes
project.
However,
return
involves
the the
of net
project  from  the  net
calculation
deduction of return with
net return with incremental net
return without
project. The total
economic net
return per year with   project starts at Birr
1734 thousand in production year 1   and gradually rises to
Birr
The
2829 thousand in year 6
economic net return per
and
onwards (Table 14.7) .
year without project is
estimated at Birr 100.3 thousand
62ECONOMIC RATE OF RETURN, SENSITIVITY ANALYSIS AND OTHER BENEFITS
In order to viable from
internal rate
determine the
degree to
national  point the
of
which the project is
view, the economic
of
return
(EIRR) and
economic
value (ENPV)
have been
calculated. The
EIRR
net present
(base case)
has also been subjected
to sensitivity
tests
the
by changing
important variables in
order to assess
soundness of
the estimates for the economic viability of the project. Economic Rate of Return
Economic costs, economic returns and incremental returns (incremental cash flow) have been estimated by applying the methodology enunciated earlier (Chapter
11).The incremental cash flow has been discounted to determine the EIRR and ENPV as stated in the methodology.
Incremental Cash Flow
The  incremental  cash  flow  over  years  is  estimated  by deducting net return without project and all the project costs-investment,  operation  and  maintenance  and replacement from the net return with project.
6315.3
Symbolically, this may be presented as follows:
EIRn = ENRw - ENRx - (ECi+ EC2 + ECs)
Where:
EIRn = Economic incremental net return
ENRw = Economic net return with project
ENRx = Economic net return without project
ECi = Economic investment cost
EC2 = Economic operation and maintenance cost
EC3 = Economic replacement cost
The economic net returns with and without project (ENRw and ENRx ) , economic investment cost (ECi>, economic operation and  maintenance  cost (EC2) and economic replacement cost  (ECs) have  already been estimated
(Chapter 14)
Prices
As  indicated  in  the  Chapter  on  Methodology,  constant 
prices have been used. Since the year 1990 was the latest 
normal year, the valuation 01" all items of 
costs and 
returns has been made at 1990 constant price Project Life and  Residual Value (Economic)
s.
15.4
The life of  the project  is assumed at 30
years.
The li
ves
of some capital   assets   of the project
such
as proj
ect
structures,  roads,  buildings  etc  will 
last 
beyond 
30 
years. The economic residual value of all
these
assets
at 
the end of 30 years is estimated at Birr 2646 thousand.
64r
[ r“Economic Internal Rate of Return and
Economic Net Present Value
The economic internal rate of return (EIRR) of the project (base case) is estimated at 21.63% (Table 15.1). 
The economic net present value (ENPV) at 11% becomes Birr 
8746 thousand. The project is thus highly viable from the 
economic standpoint.
Sensitivity Analysis
Although efforts have been made to make the estimates as realistic as possible, there always remains some 
uncertainties. In order to determine the soundness of the results on the economic viability of the project, 
allowances for such probable uncertainties have to be 
made. Therefore, the EIRRs have to be subjected to sensitivity tests  by changing important   variables.
The important    variables  which  might  adversely affect the rate of   return include    delay  in the    accrual of  benefit, increase   in   investment   cost,     decrease in net     return, decrease   in   prices of      outputs etc .  In case      of this project,   the  sensitivity   tests  have  been carried     out by changing the important variables in the following.
Delay in the Accrual of Benefit by One Year
The accrual of benefit is often delayed because of failure to complete construction of the project facilities in time and consequently to undertake production activities in time. It is therefore, worthwhile to test the impact of such delays on the rate of return of the project. The EIRR is reduced byt
»
i s
5
a15.6.2
15.6.3
2.93  % to 18.6    % if the accrual of benefit is delayed by one year ( Table 15.2).
Increase in Investment Cost by 15%
Generally,there  occurs  cost  over  run  during  the implementation  of  medium  and  large  scale  projects.  It  is therefore,  necessary  to  test  the  effect  of  such  cost  over run  on  the  viability  of  such  projects.  The  EIRR  is decreased  by  2.37  %  to  21.63  %  if  the  investment  cost  is increased by 15% (Table 15.3)
Delay in the accrual of benefit by One Year and Increase in Investment Cost by 15%
The delay increase to test viability occurrence accrual of cost by 15
in implementation results      in many cases in
the
in investment cost. It is
therefore, worthwhile
the
to and
sensitivity of the such an eventuality. the combined effect
degree The
benefit by % reduces
one
the
year and EIRR to
of rhe
increase
16.73  %
of economic simultaneous
delay in the in investment
representing a
reduction by 4.9 % from
the base case  (Table 15.4).
15.6.4
Decrease in Net Return by 15% The net return can decrease either
by a fall
of output
production
variables.
prediction
price may
or fall in the price of output or cost or a combination of all
Some uncertainties are always of these variables. Sometimes,
move in opposite direction and
in the yield increase in
these three
the
and
out
the effects  of respective movements. However,
involved in the yield
may cancel it would be
66quite   pertinent   to   test   the   probable which  may  be  brought  about  by  a  decline decrease in net return by 15        % results net return by about 3      % from base case
15.5).
15.6.5    Decrease in Net Return by 15% and Increase in Investment Cost by 15%
negative effects in net return. A 
in the decline of to  18.64  % (Table
Although
it is
not
very common but
possibility that
like a decrease
the  two in   net
very unfavourable return and
there is some circumstances
an
increase in
investment  cost  may  occur  simultaneously.  In  case  of  this project,  a  decrease  in  net  return  by  15%  and  an  increase in  investment  cost  by  15  %  results  in  the  fall  of  EIRR  to 16.54  % representing a decrease of 5.09  % from base case
(Table 15.6).
15.6.6     Implication  of the Results of Sensitivity Tests
The results of the sensitivity tests indicate that the degree  of economic viability of the project is considerably high with the EIRRs under all the
67unfavourable circumstances ranging from 16.54 % as reflected below:
to 19.26
EIRR
1)   Delay in accrual of benefit
by one year
2)    Increase in investment cost by 15%
3)    Delay in the accrual of benefit
by one year and increase in investment cost by 15 %
4)   Decrease in net return 
by 15%
5)   Decrease in net return by 15 % and increase in investment cost by 15
18.60%
19.26%
16.73%
18.64%
16.54%
The
single variable having the
heaviest
negative impact
is the delay in   the accrual of benefit     by one year. Every
possible effort
the project in
should
time as
therefore, be
envisaged so
made
chat
to implement
there is no
delay in
the
accrual
of benefit.
An
increase in
investment
cost
by 15 %
has the lowest
impact
on the rate
of return.
It
indicates
increased    considerably
that even if with the
investment cost is
inclusion
additional
better water contingency
social infrastructure like health supply ,   school etc as well as
of some clinic   r
increase in
allowance,
the
pro j ect  will    still
be
economically  viable.
6815.7      Other Benefits
15.7.1 Improved Food Self-Sufficiency
The food
project will give rise to additional production
( maize, wheat,
barley and
thousand ql at food production either through
full  development.
oats ) amounting to
Ethiopia is deficit
of
15
in
and
it has
to
make
import or
aid or
up this deficit donation    from
international sources. This
additional   production   will
therefore, contribute towards reducing the deficit.
15.7.2 Favourable Impact on Balance of Payment
The project
the balance
is
of
expected to have
payment through
a favourable impact on
export. As indicated     above, there
substitution and be increased food
production and this
will save
exchange through
import  substitution.   There might
of the
food aid
to Ethiopia
import will
foreign be an
is at
relief   supplies
Government does not
from international
argument present sources
that most
coming as
and the
have to spend any foreign exchange
for this purpose. But the critical point is whether such relief supplies will continue indefinitely. It is realistic to assume that relief supplies on a scale adequate to make up fully the deficit is unlikely to continue and if so, the country will have to import to fill the gap between the demand and supply of food.
6915.7.3              Increased Employment and Income and Improvement in Nutrition
As a result of the project, labour will be generated on production activities alone.
128  thousand  person-days  of a  continuing  basis  for  crop In addition, a considerable
amount of labour both skilled and unskilled will be used during the construction period of the project. Annual 
cash income per peasant family in the  project area will
also increase substantially. All these production on the farm and income
considerable improvement in nutrition families under the project.
increases in food
will
for
lead to a the peasant
15.7.4 Favourable Impact on Economic Activities in Other Sectors of the Economy
There will sectors of activities involving consumer
activities
be an increase in the economy as a
include marketing
economic activities in ether
result of the project. Such
traders and goods etc.
will have
merchants,
agricultural of
transportation,
Those who     are involved their income increased.
increased    incomes will have tertiary effects stimulating other economic activities.
produces sale of
in   such These
on
15.7.5             Externality
The  irrigation projects sometimes give rise  to some negative effects by imposing cost on others who are not
direct project participants and on     society  at large.   Such costs are imposed in the form environmental degradation, 
loss of water use by the previous users, increase in water borne disease like schistosomiasis etc. However, no such adverse effects are foreseen in case of this project
7016.         CONCLUSION AND RECOMMENDATION
16.1
Financial Viability
The project is highly
viable from the     financial point of
view. The and until commercial
lending rate   by the Ministry
recently
the interest on
banks was around 8     % which is
%. The financial rate of return to the
of Finance is 6     % deposit by the
now raised to 11
pro j ect of 21.66
% compares very favourably with
even the
highest
rate
of
11 %.
16.2
Incentive to Farmers and Uti
lization
of Project Facilities
The amount of net returns
and cash
incomes
to
the farm
families under the project
are big
enough
to
provide a
strong incentive to and adopt and use practices as envisaged
16.3      Cost Recovery
them
modern
under
to utilize project
facilities
inputs and improved cultural the project.
From the purely financial possible to recover the
point of view, it would be
full operation and maintenance
cost from the peasants who are the direct beneficiaries without unduly affecting their incentive. Since there is no precedence in this country for recovering cost of irrigation from farmers,  there is likely to be some resistance from them against paying any water charge.
Given the
recovery
net
returns and
cash
incomes to farmers,
of   full
investment
cost
in addition
the to
operation  and maintenance cost even   assuming that
7116.4
16.5
investment cost does not bear any interest will very 
adversely affect their incentive structure and will be 
totally unrealistic. .
If  the  Government  wants  to  recover  any  portion  of  the investment   cost,   it   would   be   advisable   to   attempt   at recovering  only  a  part  of  this  cost  without  charging  any interest.  In  view  of  the  absence  of  any  precedence  of payment  of  water  charges  by  the  farmers  in  the  country, administrative  and  social  feasibility  of  such  an  attempt should   be   considered   very   carefully.   However,   if   the Government  wants  to  give  it  a  try,  it  must  have  to  be preceded   by   a   strong   persuasion   campaign   and   also   it would be     advisable to     inform the farmers about the possibility of such a recovery right at the beginning of 
settlement and starting of any production activities.
Economic Viability
The  project  is  highly  viable  from  the  economic standpoint.  With  the  economic internal  rate  of  return  of 21.63  % (base case), the project belongs to the category
of highly promising ones.
Sensitivity Tests
The   sensitivity   tests   with   adverse   changes   in   probable variables -    (a) delay in the accrual of benefit by one
year (b) increase in investment cost by 15 
simultaneous occurrence of a delay in the accrual of benefit by one year and an increase in investment cost by
15 %, (d) decrease in net return by 15 % and (e)
%   (c)
simultaneous occurrence of a decrease in net return by 15 % and an increase in investment cost by 15 % have been
72made.  The  results  of  these  tests  demonstrate  that  the degree  of  economic  viability  of  the  project  is significantly  high  enough  to  absorb  these  highly  adverse effects and to remain comfortably viable economically.
Reconmendat ion
The project deserves
a very high priority.
It is
recommended that      the Government should undertake the implementation of the project as early as possible.I
r
rTable 6.1: Crop Budget (Financial) for Maize Per Hectare under Peasant Fan with Project froi Tear 1 to Full 0e7elopient, Bale Gadulla Irrigation Project
(Birr/ha)
Tears •
Iteic 1 2 3 4 5 6
Cost
Labour(KD)
99
101
103
106
108
110
Price
3
3
3
3
3
3
Value
297
303
309
318
324
330
Oxen(Pt)
21
21
21
21
21
21
Price
4
4
4
4
4
4
Value
84
84
84
84
84
84
Seedlkg)
15
15
15
15
15
15
Price
0.72
0.72
0.72
0.72
0.72
0.72
Value
11
11
11
11
11
11
Orea(kg)
20
36
52
68-
84
100
Price
0.75
0.75
0.15
0.75
0.75
0.75
Value
15
27
39
51
63
75
DAP(kg)
20
36
52
68
84
100
Puce
0.89
0.89
0.89
0.89
0.89
0.89
Value
18
32
46
61
75
89
Pesticides(lunp sui)
45
48
51
54
57
60
Sacks
33
32
34
36
38
40
Toois(luap sui)
20
20
20
20
20
20
Interest
4
5
5
7
3
9
Land tax
St
2
2
2
2
5
Contingency
s
9
10
12
14
15
Total cost
533
573
613
555
695
735
Return
Tield
30
32
14
36
38
40
Price
60
60
60
60
60
60
Gross return
1800
1920
2040
2150
2280
2400
Met return
1267
1347
1427
1505
1515
1665
74Table 6.2: Crop Budget (financial) for Wheat Per Hectare under Peasant Pan with Project froa Pear 1 to Pull Development, Bale Gadulla Irrigation Project
(Birr/ha)
Tears
Iteis 1 2 3 4 5 6
Cost
Labour(MB)
91
97
101
106
108
110
Price
3
3
3
3
3
3
Value
273
291
303
318
324
330
Oxen(PD)
21
21
21
21
21
21
Price
4
4
4
4
4
4
Value
84
84
B4
84
84
84
Seed(kg)
125
125
125
125
125
125
Price
0.82
0.82
0.82
0.82
0.12
0.82
Value
102
103
103
103
103
103
Urea(kg)
20
94
63
81
91
10C
Price
0.75
0.75
0.75
0.75
0.75
0.75
Value
15
33
47
61
68
75
DAP(kg)
20
44
53
81
91
100
Price
0.89
0.89
0.39
0.89
0.89
0.89
Value
18
39
56
72
81
19
Pesticides(luip sui)
35
42
48
54
57
60
Sacks
20
25
28
31
33
35
Pools (kip sui)
20
20
20
20
20
20
Interest
6
3
9
10
11
1!
Land tax
n
L
2
2
2
2
Contingency
11
14
16
18
19
20
Total cos:
587
GEO
716
772
801
829
Peturn
Yield
20
24.5
28
31.5
33.3
35
Price
68
58
68
68
68
68
Gross return
1360
1666
1904
2142
2264
2380
Met return
773
1006
1188
1370
1153
1551
75Table 6.3: Crop Budget (Financial) for Baris? Per Hectare under Peasant Pari with Project froi Tear I to Tull Deuelopient, Bale Cedilla
Irrigation Project
(Birr/ha)
Tears
Iteis                                                          1                      2                      3                     <          5
f
Cost
Labour(KD)
12
17
101
106
100
no
Price
3
3
3
3
3
3
Value
276
2J1
303
310
324
330
Oxen(PD)
21
21
21
21
21
21
Price
<
4
4
4
4
4
Value
14
84
11
84
14
14
Seed(kg)
125
125
125
125
125
125
Price
0.6
0.6
0.6
0.6
0.6
0.6
Value
75
75
75
75
75
75
Urea(kg
20
40
60
80
)0
100
Price
0.75
0.75
0.75
C.75
0.75
0.75
Value
15
30
45
50
63
75
DAP(kg)
20
40
60
30
90
100
Price
0.89
0.89
0.89
0.35
0.89
0.89
Value
18
36
53
71
80
89
Pesticides(lunp sui)
36
42
48
54
57
60
Sacks
15
18
20
23
24
25
Tools(luip sui)
20
20
20
20
’20
20
Interest
5
7
a
9
10
10
Lard tax
2
1
?
2
2
Contingency
9
11
14
15
17
IS
Total cos:
555
616
672
732
760
738
Return
Tield 15
17.5
20                22.5                23;8                     25
Price 50 50 50 50 50 50
Gross return 750 875 1000 1125 1190 1250
Bet return
195                 259                  321                  393                  430                  462rJ
r*
rJTable 6.4: Crop Budget (Financial) for oats Per Hectare under Peasant Fan with Project iron Tear 1 to Full Derelopnent, Bale Gadulla Irrigation Project
(Birr/ha)
Tears
Iteis 1 2 3 4 5 6
Cost
LabourKD)
92
97
101
106
108
no
Price
3
3
3
3
3
3
Value
276
291
303
311
324
330
Oien(PD)
21
21
21
21
21
21
Price
4
4
4
4
4
4
Value
84
91
64
84
14
14
Seed(kg)
130
130
130
130
130
130
Price
1.08
1.08
1.08
1.06
1.08
1.08
value
140
no
140
140
140
140
Urea(kg)
10
20
30
40
45
50
Price
0.75
0.75
0.75
0.75
0.75
0.75
Value
8
”15
23
30
34
38
DAP(ig)
20
40
60
80
90
100
Price
0.89
0.89
0.89
0.89
0.89
0.89
Value
18
36
53
71
80
39
?esticides(lunp sui)
36
42
48
54
57
60
Sacks
18
21
24
27
28.5
30
?D01s(lUip SUI)
20
20
20
20
20
20
Interest
7
9
9
10
11
11
Land tai
2
2
2
2
£
2
contingency
12
14
16
19
19
20
Total cost
621
673
723
775
799
824
Return
held
18
21
24
27
28.5
30
Price
90
90
90
90
90
90
Gress return
1620
1890
2160
2430
2565
2700
Set return
999
1217
1437
1655
1766
1876
77Table 6.5: Crop Budget (Financial) for Broad 3eaa Per Hectare under Peasant Jin with Project froi Tear I to Pull Developient, Bale- Gadulla
Irrigation Project
(Birr/ha)
Tears
Iteis
Cost
1’                   2                     3                     4                      5                     6
Labour(MD)
78
11
84
86
88
90
Price
3
3
3
3
3
3
Value
231
243
252
258
264
270
Oxen(PD)
17
17
17
17
17
17
Price
4
4
4
4
4
4
Value
68
SB
68
68
68
68
Seed(kg)
200
200
200
2C0
200
200
Price
0.9
0.9
0.9
0.9
0.9
0.9
Value
180
180
190
180
180
180
'Jrea(kg)
6
12
18
22
25
30
Price
0.75
0.75
0.75
0.75
0.75
0.75
Value
5
9
14
17
20
23
DXP(kg)
20
40
60
73
86
100
Price
0.B9
0.89
0.89
0.89
0.89
0.89
Value
18
36
53
65
7?
89
Pesticides(luip sui)
27
30
34
36
38
40
Sacks
12
14
15
16
17
18
Tools luip sui)
20
20
20
20
20
20
Interest
9
9
9
10
11
11
Land tax
2
2
2
2
2
Contingency
14
15
16
17
IS
19
Total cost
587
625
664
689
714
740
Return
Held
12
13.5
15
16
1?
18
Price
75
75
75
75
75
75
Gress return
900
1013
1125
1200
1275
1350
Vet return
313
337
46!
511
561
610
78Table 6.6: Crop Budget (Financial) for Onion Per Hectare under Peasant Pan
with Project froi Tear 1 to Full Deielopient, Bale Gadulla
Irrigation Project
(Birr/ha)
Tears
Iteis
1
2
3
4
5
6
Cost
Labour(MD)
319
334
350
365
372
380
Price
3
3
3
3
3
3
Value
957
1002
1050
1095
1116
1140
Oien(PD)
25
25
25
25
25
25
Price
4
4
4
4
4
4
value
100
100
100
100
100
100
Seed(kg)
3.5
3.5
3.5
3.5
3.5
3.5
Price
50
50
50
50
50
50
Value
175
175
175
175
175
175
Urea(kg)
11
28
42
56
63
70
Price
0.75
0.75
0.75
0.75
0.75
0.75
value
11
21
32
42
47
53
DAP(kg)
14
23
42
56
63
70
Price
0.39
0.89
0.89
0.39
0.89
0.89
Value
12
25
37
50
56
62
Pesticides(luap sui)
55
64
74
82
87
92
Sacks
120
140
160
180
190
2G0
Toolsflwp SUB)
20
20
20
20
20
20
Interest
12
13
15
16
17
18
land tax
2
n
2
2
2
2
Contingency
20
23’
26
23
30
31
Total cost                                                  1484               1585               1691                1792                1840               1393 Return
Tield
120
140
160
130
190
20C
Price
90
-90
90
90
90
90
Gross return
10300
12600
1440C
16200
17100
18000
Met return
9316
11015
12709
14408
15260
16107
79Table 6.7: Crop Budget (financial) for Pepper Per Hectare under Peasant Pan nth Project froi Tear 1 to Full Developient, Bale Gadulla Irrigation Project
(Birr/ha)
Tears
Iteis                                               1                     2          3                       4
5
6
Cost
Labour(U))
217
223
237
240
243
250
Price
3
3
3
3
3
3
Value
651
66!
711
720
72!
750
Oien(PD)
25
25
25
25
25
25
Price
4
4
4
4
4
4
Value
100
100
100
100
100
100
Seed(tg)
1.5
1.5
1.5
1.5
1.5
1.5
Price
20
20
20
20
20
20
Value
30
30
30
30
30
30
Drea(kg)
14
25
<7
52
58
70
Price
0.15
0.75
0.75
0.75
0.75
0.75
Value
11
19
35
39
44
53
DAP(kg)
14
25
47
52
59
70
Price
0.39
0.89
0.89
0.89
0.89
0.89
Value
12
22
42
46
52
62
Pesticides|luip su
61
69
78
83
87
92
Sacks
33
37
43
45
47
50
Toolsfluip SU1)
20
20
20
20
20
20
Interest
5
6
7
a
8
9
Land tax
2
2
2
2
2
2
Contingency
9
10
13
14
14
16
Total cost
934
934
1082
1107
1133
1184
Return
Yield
10
11
13
13.5
14
15
Price
350
350
350
350
350
350
Gross return
3500
3850
4550
4725
4900
5250
Met return
2566
2866
3468
3618
3767
4065
80Table 6.8: Crop Budget (financial) for Black Cuain Per Hectare under Peasant Fari with Project froi Tear 1 to Full Developieut, Bale Gadulla Irrigation Project
(Birr/ha)
Tears
Iteis 1 2 3 4 5 6
Cost
Labour(ND)
104
107
114
115
117
120
Price
3
3
3
3
3
3
Value
312
321
342
345-
351
360
Oxeu(PD)
25
25
25
25
25
25
Price
4
4
4
4
4
4
Value
100
100
100
100
100
100
Seed(kg)
20
20
20
20
20
20
Pries
6
6
6
6
6
6
Value
120
120
120
120
120
120
Orea(kg)
6
11
21
22
25
30
Price
0.75
0.75
0.75
0.75
0.75
0.75
Value
5
B
16
17
19
23
UA’ikg’
14
25
47
53
59
70
Price
0.89
0.B9
0.89
0.39
0.B9
0.89
Value
12
22
42
47
53
62
Pesticidesflunp sun'.
53
60
64
72
76
30
Sacks
10
11
13
14
14
15
Tools {Imp sui
20
20
20
20
20
20
Interest
7
7
S
9
9
10
Land tax
2
2
n
2
2
Contingency
11
13
14
15
16
17
Total cost
652
684
741
751
779
808
Return
Field
10
11
ft
13.5
14
15
Price
400
400
400
400
400
400
Gross return
4000
4400
5270
5400
5600
6000
Met return
3348
3715
4455
4639
4821
5192
81Table 5.9: Crop Budget (Financial) for Maize Per Hectare under Peasant ’an without Project, Bale Gadulla Irrigation Project.
Birr/ha
Iteis
Qty
Price
Value
Cost
Labour'KD;
62
3
1B6
Oxea(PD)
19
1
76
Seed!kg;
15
0.72
11
Pesticides Iluap sui)
9
Sacks (luap sua:
12
Tools'hap sai
15
Land taa
*
Contingency
16
Total cost
326
•ielc(ql)
9.6
Price/gl
50
Cross return
575
Met return
29?
82Table 6.10: Crop Budget (Pmancial) for 'rteat Per Hectare under Peasant Pan without Project, Bale Gadulia Irrigation Project.
Birr/ha
Iteis
Cost
Qty
Price
Value
Labour(MD) 70 3 210
OienlPD)                                                      19                                                4                                            76
Seed(tg) 125
Pesticidesfluip sui;
Sacks (Imp sui)
Toolsfluap sui)
Land tax
Contingency
Total cost
Return
0.82
103
7
IQ
15
20
Pieid (ql)
Price.ql
Gross return
Net return
$
5:
544
102
83-Table 6.11 :Crnp Budget (Financial) for Barley Per Hectare under Peasant Para without Project, Bale Gaduila Irrigation Project.
Birr/ha
Iteis
Cost
Qty
Price
Labour(KD)                                                    65                                             3                                           195
Oxen fPD) 19 4 76
Seed(kg) 125 
Pesticideslluap sua)
Sacks (luip sun
Tools <l np sua
:
Land tax
Contingency
Total cost
leturs
0.72
90
7
12
15
5
i
20
41?
(ql,
3.3
Gross return
Net return
440
23
84Table 6.12 :Crop Budget (financial) for Oats Per Hectare under Peasant fare
without Project, Bale Gadulla Irrigation Project.
Birr/aa
Iteis
Qty
Price
Value
Cost
Labour I ND)
70
3
210
Oxen(PD)
19
4
76
Seed(kg)
130
1.03
140
Pesticides(iuip sui|
7
Sacks lluip sui|
’cols(kip sun)
15
Land tax
-
2
Contingency
23
Total :cs:
434
Bern:
Net return
3.33
85rJTable 6.13 :Crop Budget (financial} for field Pea Per Hectare under Peasant fan without Project, Bale Gadulla Irrigation Project.
Birr/ha
Iteis
Cost
Jty 
Price
Value
Labour(KD)                                                    58                                              3                                           174
Cien(PD)
16
6
64
Seed(kg)
200
1.2
240
Pesticides!lunp sui)
5
Sacks i.luap sui)
7
"ocls(iui; sua
15
Land tax
A
contingency
25
Ictal cost
Peturn
field (gl
D-.--       -1
512
• c
10
C-rcss recur:                                                                   5SC
Het return
23
86”<■
* ’•■.-? -fr ■ .'•$«£
• ! •;.
,>w
t        ,l      r
’ ■ '- 5i's ' i''' 
r
‘ WAv,
■ <•'.» "
;>v.<
: to
5' 
•s
A.
■ :;
- ■ 7;.. . 
....................
.'-’V- :?W"'
• . -r:. i
" iX • - S* •' 
7  - ./.• , •, 
., ’ ■’>
’KJ- *■•»'♦»
l’.,’’<->••. s
* ' s?^'^
< . %£.i •?■ fe*' -
V »• 
.*
.<o 4w>
^ ■  ^ : V ■ V
:
i>
i■
■
.... '•■'■5? • 
? - ■'• •
:
■ 'C . .. 
W
'.’A'.<.'■• ' 
•V'r** *»?■£■• <•
fcft
y^-^nTable 5.14 :Crop Budget (Financial) for Black Cuiia Per Hectare under Peasant Pan without Project, Bale Gaduila Irrigation Project.
Btrr/ha
Iteic
Cost
Labour (KD)
Qty
Price
Value
82
3
246
Oxen(PD)
22
4
18
Seed(kg)
20
6
120
Pesticides(luap sun)
11
4
Tools(luap SUll
Land taz
Contingency
Total cost
’eturn
Yield (q:                                                                         i
*
24
510
?ri:e/ql
Gross return
Set return
SCO
1500
1090
87r'
rJ
rJ
rJI
Table 7.1 :Cropping Pattern With and Without Project,
Cropping Pattern (%)
Crops
With Project
Without Project
Maize
25
17.0
Wheat
30
23.5
Barely
12
45.6
Oats
15
18.0
Broad Bean
12
3.7
Field Pea
-
-
11
Black Cumin
20
11.9
Onion
18
-
‘l
Pepper
18
-
S-I
Forage
5
-
Total
155
119.7
“l
S1
88
“i £
■ *
•aTable 7.2 Fan Budget (Met Return) for a Typical Peasant Fars with Project before Financing froi Tear 1 to Full Developient, Bale Gadulla irrigation Project
Teara
1
2
3
4
5
6
wheat
NP/ba
1046
1297
1491
1698
1797
1391
Area (ba)
0.3
0.3
0.3
0.3
0.3
0.3
Total MR [Birr)
314
389
447
506
536
564
Barely
KR/ba
471
550
531
71!
754
792
Area (ba)
0.12
0.12
0.12
0.12
0.12
0.12
Total NR (Birr)
57
66
76
35
90
95
oa:s
’l.’.'ha
1275
1503
1742
1973
::so
2236
Area (ba!
•3.15
W . . J    n  r.
7.1:
0.15
0.15
0.15
Total NR IBirr
15!
22*
26!
295
314
231
Maize
NR,‘ha
1554
1650
1735
1323
19C9
1:95
Area Jaa
0.25
0.25
r.
0.25
0.2:
0.25
Total NR
39!
413
434
456
477
496
Broad Bean (Birr'
NR/aa
54’
53C
• A“11w
769
• ‘ x
u;
Area
0.12
r- ’ ?
c.i:
3.12
0.12
». «■*
Total NR IBorr!
$6
* r
£C
Slack Cento
99
NR,-ba
•55C
4027
■i •.
4801
Area :h-
*
4934
5172
0.2
2.2
F
• • • t
r?
Total NR (Birr
722
337
960
997
1C34
1112
NR'ba
10273
12017
13759
Area (bal
15593
15375
0. IE
17247
0.13
0.18
Total NR (Birr}
0.18
0.18
0.13
1849
:i53
Perper
2477
2791
2945
31C4
NR,'ha
3217
3535
4179
Area (ba;
4333
4436
?.!:
4315
0.13
tflo • • wu
0.18
_. * >
?::a. SR Birr.
579
•c*
0.18
535
73;
803
357
Grand Total (Barn
4179
4175
. j
5004
* wC b’f w.c
66*6
89r*
r1
rJ
rJ
1
r*
cJTable 7.3 :Farm Budget (Net Return) for a Typical Peasant Farm
without Project, Bale Gadull Irrigation Project
NR/ha
(Birr)
Area
(ha)
Total NR
Crop
(Birr)
Wheat
312
0.92
287
Barley
218
1.84
400
Maize
436
0.68
296
Oats
518
0.72
373
Black Cumin
1336
0.48
641
Field peas
202
0.16
32
Total
4.8
2030
90f 7 ’ 4, •;Table 7.4 :Farm Budget (Incremental Net Return) for a Typical Peasant farm with Project before Financing from Year 1 to Full
Development, Bale Gadulla Irrigation Project
(NR in Birr)
Total NR
Total NR
Years
with Project
without project
Total
Incremental
1
4178
2030
2148
2
4776
2030
2746
3
5493
2030
3463
4
6004
2030
3974
5
6308
2030
4278
6
6676
2030
4646
91•rTable 7.5 :Estimated Family Consumption of Farm Produced
Outputs         for         a         Typical         Peasant         Family         (9         Persons), 
Bale Gadulla Irrigation Project
Item
Ql
Price/ql
(in Birr)
Value
(in Birr)
Maize
1.80
60
108.0
wheat
7.20
68
489.6
Barley
4.50
50
225.0
Oats
4.50
90
405.0
Broad Bean
5.94
75
445.5
Onion
1.08
90
97.2
Pepper
0.54
350
189.0
Total
1959.3
92Title 7.6:?ara Budget (Cash Inccae) for a Typical Peasant ?ara with Project After Financing, Bale Gaduila Irrigation Project
(in Birr)
Total Increaental
Net Return (INR)
Before Financing Total
INR
c ’“ Inc0,£
'Het Loan Debt After Faarly After
'/ear |Inflcw)|l) 0utflow(2) Inflcw(3) Receipt Senicej4) Financing Cowuiptica Financing
1
2148
3000
-852
3000
180
1968
1959
9
A•a
2746
2746
180
2566
1959
607
3
3463
3463
180
3283
1959
1324
1
3974
3974
180
3794
1959
1335
5
4278
4278
180
4098
1959
2139
6
4646
4646
780
3866
1959
1907
7
4646
4646
744
3902
1959
1943
9
464:
4646
70S
3938
1959
1979
9
4646
4646
672
3974
1959
2015
1 T
10
4646
464:
536
1012
1959
205!
4646
LOCO
3646
1000
60
452$
1959
2:2?
1 '
464:
4:4:
C£
4:2$
195:
‘C?“
• to - -
U
464:
4646
50
* *
453$
1:5:
252"
• c
14
4:45
4:46
453:
1:5$
2:27
4:4:
4:46
• * F*
452:
1:5:
2627
454:
464:
433:
2:5:
Al
464$
4646
24:
4393
i:
A•:::- *
2429
4:46
4:4:
4411
i
• i :•
464:
464:
• W •.
•5 1..1
* 11 a
ll-l
4422
1959
24:3
• ♦
4:4:
4:4:
1:5:
• i-:
_T . -
4646
1000
364:
1000
c;
:
453$
1:59
• X "*
4:4:
4646
•:
4535
1959
• r • •
— «•
4646
*. :*x:
s:
453:
2:2
*:
• • ■ 5
ii:£ t»::
.:Z:
4646
JAJA
; •
••3A
“A'"
2:
4:4:
4:4:
252
4336
195:
ni'«
-•»-.
2?
4646
454:
24:
4333
1959
2439
23
4646
4:4:
23$
Hit
1959
245’
29
464$
4645
224
4422
1959
2463
30
4646
4:4$
•12
4434
1959
2475
Total INR before financing is deterained by deducting net return without project
froa the net return with project
Total outflow is eqivalent to bank loan to finance investient
Net inflow is equal to total INR nous total outflow
’mire initial imestient is assuned to  be available as let; ten loan trci the bank of interest per annua  and repayaem of principal will be aide in : equal mstalaents 10 Tears with a grace period of 5 Years
at     SA     rate within
93Table 3.1 :?atil Investient Cast for Project Ccnstrutticn (Pinaacial) end Its Phasing Over Tears,Bale Gadolla Irrigation Project.
(000 Birr)
Years
Iteas
Preparatory Works
weir and Associated
Structures
Main Canals end
Pniary Canals
Se::ndarv Canals
Teruarv Canals
Field Canals
Field Crains
lass Leveling and
Roads
1
250.0
203.5
IM* A
2
- .J
3:4.3
400.3
150. G
13?.:
399.0
475.?
1C6.3
Total
250.0 308.5
4:10. '3
524.5
13?.5
393.2 475.7
:
HC
35.0
117.3
1751.3
191.9
40.3 341.8 130.3 183.8
Deaoci.icati::
office
50.0
50.0
35.0
5C.C
** •
19.3
19.0
C*!»F£
Kcrkshop
35.0
20.2
13.3
7.5
Contingency !5V
291.5
20.0
109.4
400.9
152.3I
I
I
»
■
■
r1 rJTable 8.2 :Cost (Financial) of Equipment for Project Control Centre
(PCC) Bale Gadulla Irrigtion Project
(000 Birr)
Items
Total
Cost
FEC
Vehicle (Four Wheel Drive)
55
28.6
Tractor
50
35.0
Trailer
15
10.5
Portable Pump
5
2.5
Tractor Accessories
20
14.0
Hand Tools
6
2.4
Tools
10
7.0
Survey Equipment
10
7.0
Office Equipment
8
5.6
Total
179
112.6
95Table 8.3 :Farm Investment Cost (Financial)
Bale Gadulla Irrigation Project
(000 Birr)
Item
Cost
Housing
269
Oxen
753
Tools
162
Subsistance Requirement
(for six months)
430
Total
1614
96I
I
i
1
r“
r*
r*
r«Table 8.4 :Cost (Financial) of Personnel for Project Control Centre (PCC)
Bale Gadulla Irrigtion Project
(Birr)
Personnel
No
Salary per
Month
Annual
Cost
Agronomist
1
600
7200
Irrigation
Tecchnician
1
600
7200
Extension
Agent
1
500
6000
Clerk
1
500
6000
Tractor
Operator
1
300
3600
Driver
1
300
3600
Mason
2
300
7200
Guard
2
300
7200
Total
48000
97■
■
r1
1
-Table 8.5 :Annual Operation and Maintenance Cost (Financial)
Bale Gadulla Irrigation Project
(000 Birr)
Items
Cost
Personnel
48
Operation cost of Equipments
17.8
Maintenance Cost of Equipments
15.1
Materials
12
Maintenance of Infrstructures
15.6
Total
108.5
Table 8.6 :Replacement Cost (Financial) of Machinery and Equipment, 
Bale Gadulla Irrigation Project
(000 Birr)
Item
Life Span 
(Years)
Replacement
Years
Cost
Tractor, Trailer, Tractor accessories, Office Equipment
Survey Equipment
6
9,15,21,27
103
Vehicle, Pump Hand Tools, Tools
5
8,13,18,23,28
76
98:.-
•« jw-W-
•* •<
I’C,Table 8.7 :Total Het Beturn (financial) with Project froi Tear 1 to mil Develrpwn:
Bale Gadulla Irrigation Project.
Tears
123456
Wheat
ll/ba 771 1006 1188 1310 1463 1551
Area (ba)
161.4 161.4 1      161.4 1 161.4         161.4       161.4
Total IK (000 Birr)
125
162
192
221
236
250
Barley
H/ha
195
259
328
393
430
462
Area (ba)
54.6
64.6
64.6
64.6
64.6
64.6
Total NR (000 Birr)
13
17
21
25
28
30
Oats
NR/ha
999
1217
1437
1655
1766
1876
Area (ha)
80.7
80.7
30.7
80.7
80.7
80.7
Total Ml (000 Birr)
Bl
98
116
134
143
151
Maize
NR/ha
1267
1347
1427
1505
1535
1665
Area (ha)
134.5
138.5
134.5
134.5
134.5
134.5
Total NR 1000 Birr)
17C
181
192
202
213
224
Broad Beu
NR/ha
313
387
461
511
561
610
Area (ha)
64.6
64.5
64.6
64.6
64.6
64.6
Total NR (000 Birr)
20
25
30
33
36
39
Black Cub it
KR/ba
3348
3716
4453
4539
4821
5192
Area (ba)
107.5
107.6
101.6
107.6
107.6
107.6
Total NR (000 Birr)
36G
400
480
499
519
559
Onioa
NR/ha
9316
11015
12709
144C8
1526C
16107
Area (ha)
96.8
96.3
96.3
96.3
96.3
96.8
Total NR (000 Birr)
902
1066
1230
1395
1477
1559
Pepper
NR/ha
2566
2866
3468
3618
3167
4066
Area (ba)
96.8
96.8
96.8
96.8
96.8
96.8
Total NR (000 Birr)
248
211
336
350
365
394
Grand Total (000 Birr)
1919
2227
2596
2860
3015
3206
100-
■
rJTable 8.8 -.Total Net Return (Financial) without project, Bale Gadulla Irrigation Project
NR/ha
Total NR
Crop
(Birr)
Area (ha)
(000 Birr)
Wheat
102
69
7.0
Barley
23
134
3.1
Maize
250
50
12.5
Oats
308
53
16.3
Black Cumin 1090 35
Field peas 28 11
Total 352
38.2
0.3
77.4
101Table 9.1 : Bstiaated Financial Internal Rate of Return
(Base case), Bale Gandulla irrigation Project.
(Thousand Birr)
TEARS
Cl
C2
C3
C4
RRk
MRz
Ito
1
6121.7
6121.7
• 6121.7
2
4089.6
4089.5
4089.5
3
108.5
108.5
1919
77.4
1733.1
4
108.5
103.5
2227
77.4
2041.1
5
108.5
108.5
2596
77.4
2410.1
6
108.5
108.5
2860
77.4
2674.1
7
108.5
103.5
3016
77.4
2830.1
8
108.5
76
184.5
3206
77.4
2944.1
9
108.5
103
211.5
3206
77.4
2917.1
10
108.5
108.5
3206
77.4
3020.1
11
108.5
103.5
3206
77.4
3020.1
12
108.5
108.5
3206
77.4
3020.1
13
108.5
76
184.5
3206
77.4
2944.1
14
108.5
10B.5
3206
77.4
3020.1
15
108.5
103
211.5
3206
77.4
2917.1
16
108.5
108.5
3205
77.4
3020.1
17
108.5
108.5
3206
77.4
3020.1
18
108.5
76
184.5
3205
77.4
2944.1
15
103.5
108.5
3206
77.4
3020.1
• u
108.5
108.5
2206
77.4
3023.1
21
* *
109.5                193            211.5              2206             77.4       2917.1
108.5
- 108.5              2206               ’7.4      3020.1
23
103.5
76
184.5
2206
77.4
2944.1
2$
24
ICS.5
108.5
3206
a
;. . i
3320.1
103.5
128.5
•206
77.4
3020.1
26
108.5
108.5
2206
77.4
3320.1
27
108.5
103
211.5
2206
77.4
2917.1
28
108.5
’’5
134.5
3235
77.4
2944.1
•9
193.5
• * • • •   •0  '
:
3206
77.4
3020.1
30
109.5
•58.5
2206
77.4
6327.3 ’
10211.2
2029.5
• * • • *     IQ" f
14041.3
86356.1
2167.2:
734:4.4
Set ?- sent Value
at 1H 0
isreust
late
K01:. 28
Financial Internal Rate :: Return -BIRR' O.'liS Cl- Project Investaent Cost
C2- Cperaticn i Kaintetaace Ccsts
Cl- Replaceaent Costs
C4- Total Costs (C1K2+C3)
SP.u- Het Returns With Project HRx- Set Returns without Project
lie- lEtreiental Wet Returns
t
Includes residual value of Birr 330? Thousand
102Table 12.1 .-Import Parity Price of Urea, Per Ton, Bale Gadulla Irrigation Project
(Birr)
Items
Financial
Economic
FOB - Northern Europe Ports
325 
($157)
325
Ocean Freight to Assab
79 
($38)
79
C & F - Assab
404
404
Insurance (2.2% of C & F)
10
8
Bank Charges (4% of C & F) Port Dues (0.3% of C & F and Bank
17
14
Charges)
1
1
Port Transit/Storage Charges
25
20
MTSC Commission
35
28
Interest
22
-
AISCO Overhead
25
20
Contingencies
Transport, Handling etc from Assab
30
24
to the Project Area
230
173
Import Parity Price at the
Project Site
799
692
103Table 12.2 : Import Parity Price of DAP, Per Ton, Bale Gadulla
Irrigation Project
(Birr)
Items
Financial
Economic
FOB - Northern Europe Ports
354 
($171)
354
Ocean Freight to Assab
104 
($50)
104
C & F - Assab
458
458
Insurance (2.2% of C & F)
10
8
Bank charges (4% of C & F)
17
14
Port   Dues   (0.3%   of   C
&
F   and 
Bank 
Charges)
1
1
Port Transit/Storage Charges
25
20
MTSC Commission
35
28
Interest
23
-
AISCO Overhead
25
20
Contingencies
30
24
Transport,       Handling 
etc
from
Assab 
to the project area
230
173
Import      Parity      Price
at
the
Project Site
854
746
104Table 12.3 : Import Parity Price of Maize, Per Ton, Bale Gadulla
Irrigation Project
(Birr)
Items
Financial
Economic
FOB - US Gulf Port 1
226 
($109)
226
Ocean Freight to Assab
104 
($50)
104
C & F - Assab
330
330
Insurance (2.2% of C & F)
7
6
Bank charges (4% of c & F)
13
11
Port Dues (0.3% of C & F and Bank charges)
1
1
Port Transit/Storage Charges
25
20
MTSC Commission
35
28
Interest
17
-
AMC Overheads
25
20
Contingencies
30
24
Transport,       Handling       etc
from
Assab 
to the Project Area 2
230
173
Import      Parity      Price      at
the
Project Site
713
612
US     No.     2     yellow     and     so     no     quality     adjustment     is considerd necessary.
The cost is determined by deducting cost for transpor handling, etc from project site to Robe/Goba from the cost involved in transport, handling, etc from assab to Robe/Goba.
105* rJ
rJ rJ rJ cJTable 12.4 :Import Parity Price of Wheat, Per Ton, Bale Gadulla
Irrigation Project
(Birr)
Items
Financial
Economic
FOB - Thunder Bay
323 
($156)
323
Ocean Freight to Assab
104
($50)
104
C & F - Assab
427
427
Insurance (2.2% of C & F)
9
7
Bank Charges (4% of C & F)
17
14
Port Dues (0.3% of C & F and Bank 
Charges)
1
1
Port Transit/Storage Charges
25
20
MTSC commission
35
28
Interest
17
-
AMC Overheads
25
20
Contingencies
30
24
Transport, Handling etc from Assab to the Project Area 1
230
173
Import Parity Price at the Project Site 
816
713
1
The cost is determined by deducting cost for transport, handling, etc from project site to Robe/Goba from the cost involved in transport, handling, etc from assab to Robe/Goba.
106rJ
rJ
rJ
plTable 13.1 :Crop Budget (Bconoiicl for Maize Per Hectare under Peasant Pan with Project
frcn Tear 1 to Full Developnent,Bale Gadulla Irrigation Project.
(Sirr/ha)
Conversion
Tears
Itens
Cost
factor                            1                    2                    3                    4                    5                    6
labour: Financial
297
303
309
318
324
330
Iconoiic
5.57
169
173
176
131
195
188
Oxen: Financial
96
94
94
94
84
94
Iconoiic
0.51
48
49
48
49
49
49
seed: Financial
11
11
11
11
11
11
iconoiic
0.80
9
9
9
9
9
9
Urea: Financial
15
2?
39
51
53
75
Jconoiic
0.92
14
25
36
47
58
69
DAP: Financial
18
32
46
61
75
89
Fccnoii:
0.84
15
27
39
51
63
75
Pesticides: Financial
45
49
51
54
57
60
Iconoiic
0.98
43
46
49
52
55
58
Sacks: Financial
30
32
34
36
Fccnoaic
38
40
0.83
24
26
27
29
39
32
Tools: Financial
20
20
20
20
20
• *
Bconoaic
3.80
16
16
15
16
15
15
InUres:: Financial
4
:
3r
Bccnoiic
7
a
0.00
9
0
0
0
0
0
A
y
Land tax: Financial
2
2
2
2
2
5
Iconoiic
0.00
0
0
0
0
0
0
Contingency: Financial
7
9
10
Iconoiic
12
0.80
14
6
15
7
8
10
11
12
Total cost: Financial
531
573
612
Economic
656
696
344
735
376
407
442
475
506
Return
Gross Return‘.Financial
1300
1920
2040
2160
Sconcaic
2290
2400
1.02
1336
1953
2081
2203
2326
2446
Met Return: Financial
1261
1347
1423
1504
1584
Iconoiic
1665
1492
1582
1673
1761
1851
1942
107Table 13.2 :Crop Budget (Iconoiic) for Wheat Per Hectare under Peasant Pan with Project
froa Tear 1 to full Develnpient.Bale Gadulla Irrigation Project.
(Birr/ha)
Iteis
Cost
Conversion
factors 1 2
Years
3
4
5
6
Labour: Financial
273
291
303
318
324
330
Iconoiic
0.57
156
166
173
111
185
188
Oxen: Financial
84
84
84
34
84
84
Iconoiic
0.57
48
48
48
48
48
48
Seed: Financial
103
103
103
103
103
103
Iconoiic
0.80
82
82
32
32
82
82
Urea: Financial
15
33
47
61
68
75
Iconoiic
0.92
14
30
43
56
63
69
DA?: Financial
18
39
56
72
31
39
iconoiic
5.84
15
33
47
50
6 =
75
Pesticides: Financial
35
42
49
54
57
50
iconcnc
9.96
34
40
45
52
55
58
Sacks; Financial
20
25
29
31
Iconoiic
33
0.8-:
35
16
20
22
25
26
28
Tools: Financial
•.A
-V
20
20
Iccnon:
20
3.SO
20
20
16
16
15
15
16
16
Interest: Financial
6
3
Iconoiic
G*
10
0.00
f
u
11
11
0
n
0
0
0
Land tax: Financial
2
A
4
2
2
■a
Iconoiic
C.00
0
0
0
0
0
0
Contingency: Financial
11
14
Iconoiic
16
0.80
19
9
19
20
11
13
14
15
16
Total cost: Financial
597
661
Iconoiic
716
773
339
802
447
329
491
535
558
580
Return
Gross Return-.Financial
1360
1566
1904
Iconoiic
2142
1.05
2264
1428
2330
1749
1939
2249
2377
2199
Net Return: Financial
773
1905
iconoiic
1198
•369
1039
1462
1303
1551
1:09
1714
1619
1519
108Table 13.3 :Crop Budget (Kconoaic) for Barely Per Hectare under Peasant Pari with Project
froi Tear 1 to Pull Developient,Bale Gadulla Irrigation Project.
(Birr/ha)
Iteis
cost
Conversion
Factors 1 2
Tears
3456
Labour: financial
276
291
303
318
324
330
Iconoiic
0.57
157
166
173
181
185
188
Oxen; Financial
94
84
84
84
84
84
Iconoiic
0.57
48
48
48
48
48
48
Seed: Pinancial
75
75
75
75
75
75
Iconoiic
0.80
60
60
60
60
60
60
Brea: Pinancial
15
30
45
60
68
75
Fconcxic
0.92
14
' 28
41
55
63
59
DAP: Pinancial
13
26
53
71
30
89
Iconoiic
0.84
15
20
45
60
67
75
Pesticide-; Financial
26
42
48
54
57
6G
Iconoiic
3.96
35
40
46
52
55
59
Sacks: Financial
15
18
2G
Iconoiic
23
24
25
0.30
U
14
16
13
19
20
Tools: Financial
20
23
2G
sccno-i:
r.jt
20
23
20
16
H
16
16
15
1:
Interest: Financial
5
;
•
9
10
Icnncsic
10
0.00
0
0
Vr.
0
0
3
Lana tax: Financial
•>
2
2
2
2
Iconoaic
G.GC
2
0
0
0
0
0
0
Contingency: Financial
9
11
14
16
Iconoiic
17
0.30
7
18
9
11
13
14
14
Total cost: Financial
555
615
£72
732
761
Iconoiic
364
788
411
456
503
526
548
Return
Gross P.eturn:Pinancial
Iconoiic
Net Beturn: Financial
0.8
Iccnoiic
750
600
195
236
375
700
259
285
1000
800
228
344
1125
900
392
297
1190
952
429
42:
1250
1000
462
452
109ITable 13.4 :Crop Budget (Bconoiicj for Oats Per Hectare under Peasant Jan with Project
froi Tear 1 to full Developaeat,Bale Gadulla Irrigation Project.
(Birr/ha)
Conversion
Years
Iteis
Factors
1
2
3
4
5
6
Cost
Labour: Financial
276
291
303
318
324
330
Sconoiic
0.57
157
166
172
181
185
188
Oxen: Financial
84
84
84
84
84
84
Bconoiic
0.57
48
43
48
48
48
48
Seed: Financial
140
140
140
140
140
140
Iconoiic
0.80
112
112
112
112
112
112
Urea: Financial
3
15
23
30
34
33
Fconoiic
0.92
•»
t
14
21
28
31
35
DAP; Financial
13
36
?2
71
30
39
BconoBtc
0.84
15
30
45
60
67
75
Pesticides: Financial
2$
42
43
54
57
60
Fccnouc
0.96
35
40
46
52
55
58
Sacks: Financial
13                   21                   24                    27                   28                   20
Bccnonic                            0.80                 u  17                   19                   22                    22                   24
Teels: Financial
Jconoiic
0.80
20
16
20
16
20
1C
20
IS
29
15
v
: *
Interest: Financial
7
3
9
10
11
«*
;a
Zconciic
0.00
0
0
c
0
c
0
Land tax: Financial
2
2
A
2
n
2
Econoaic
0.00
0
0
0
0
0
0
Contingency: Financial
12
14
16
13
19
20
Iconoiic
0.80
10
11
13
14
15
16
Total cost: Financial
621
673
722
774
799
Sccnoaic
414
824
454
192
532
551
571
Return
Gress Return:Financial
1520
1390
2160
2430
2565
2700
Icononic
0.8
1296
1512
1723
1944
2052
2160
Net Return: Financial
999
121?
1438
1656
1766
Econoiic
1376
382
1058
1236
1412
1501
1589
110Table 13.5 :Crop Budget (Econcaic) for Broad 3ean Per Hectare under Peasant Ten with Project
fron year 1 to full Developient,Bale Gadulla Irrigation Project.
(Birr/ha)
Conversion
Tears
Iteas
Factors
1
2
3
4
5
5
Cost
Labour: Financial
234
243
252
258
254
270
lconoiic
0.57
133
139
144
147
150
154
Oxen: Financial
69
68
63
68
68
63
Iconoiic
0.57
39
39
39
39
39
39
Seed: Financial
180
180
180
130
180
130
fconouc
0.80
144
144
141
144
144
144
Urea: Financial
c
9
14
17
20
23
lconoiic
0.92
5
8
u
16
13
21
DAP: Financial
13
36
53
65
ft*
ii
33
Iconoiic
0.84
15
30
45
55
$5
75
Pesticides: Financial
27
30
34
♦* * A
• *
C 5
u
42
Iconoiic
0.95
26
29
23
35
38
Sacks: Financial
12
14
15
15
1 •
23
lconoiic
0.80
10
11
12
13
14
14
’cols: Financial
20
20
20
20
*
?ft
XV
UcnoiK
16
K
16
1£
Interest: Financial
3
AW
9
3
15
Ecouoni:
o.c:
r
r
u
i*
ii
ft
u
11
Land tax: Financial
2
ft
ft
Fcoaoni:
0.00
ft
0
0
0
wft
Contingency: Financial
14
• ?a •
16
17
13
iconoiic
0.80
13
11
12
13
14
14
15
Total cost: Financial
583
626
663
639
Iccnoiic
715
399
740
423
457
477
49?
517
Return
Gross Return:?inancial
903
1013
1125
1200
Iconom:
0.9
1215
1350
720
810
900
960
1020
1080
Set Return: Financial
311
337
462
Iccnouc
511
560
321
610
313
443
433
523
563
1111Table 13,6 :Crop Budget (Zconoaic) for Onion Per Hectare under Peasant Para with Projec
froa Tear 1 to full Developient.Bale Sadulla Irrigation Project.
IBirr/ha)
conversion
Tears
Iteas
Cost
factors                              1                      2                     3                      4                     5                      6
Labour: Financial
957
1002
1050
1095
1116
1140
Econoii:
0.57
545
571
599
624
636
650
Oxen: Financial
100
100
100
100
100
100
KconoBic
0.57
57
57
57
57
57
57
Seed: Financial
175
175
175
175
175
175
ZCDDOlic
0.80
140
140
140
140
140
140
Jrea: Financial
11
21
32
42
47
53
Sconoaic
0.92
10
19
29
39
43
49
DAP: Financial
12
25
3?
50
55
62
Econcaic
0.84
10
2!
31
42
47
52
Pesticides: Financial
55
54
74
83
87
Econcai:
12
0.96
53
61
71
80
84
83
Sacks: Financial
120
140
160
130
Sccncaic
190
200
0.80
96
112
128
144
152
160
Teels: Financial
29
22
5 A
L'4
Eccnomc
20
0.80
20
20
15
• r.3
it
16
16
15
Interest: Financial
12
* «• *
25
16
Econouc
17
0.00
13
0
n
0
C
0
n
Land tax: Financial
2
54
2
2
2
2
Econoiic
0.00
0
0
n
0
0
9
Contingency: Financial
20
23
26
Econoiic
28
30
0.89
16
31
18
21
22
24
25
Total cost: Financial
1484
1585
1691
Econoaic
1791
1840
1893
943
1016
1092
1164
1199
1237
Return
Gross Return:Financial
10800
12600
14400
16202
Economic
O.S
nice
18000
3540
10080
11520
12950
13680
1440C
Net Return: Financial
9316
11015
12709
Econcm:
14409
15260
16107
759?
9064
1C428
11796
12481
13163
112Table 13.7 :Crop Budget (Bconoiic) for Pepper Per Hectare under Peasant Pan with Project,
froa Tear 1 to Pull Developaent,Bale Gadulla Irrigation Project.
(Birr/hal
conversion
Tears
Iteis
Cost
Factors                             1                     2                     3                     4                     5                      6
Labour: Financial
651
(69
711
720
729
750
Xconoiic
0.57
371
381
405
410
416
427
Oxen: Financial
100
100
100
100
100
100
Bconoiic
0.57
57
57
57
57
57
57
Seed: Financial
30
30
30
30
30
30
Bconoiic
0.80
24
24
24
24
24
24
Urea: Financial
11
19
25
39
44
53
Bconoiic
0.92
10
17
32
36
40
49
DA?: Financial
12
22
42
46
57
o
Bconoiic
0.84
10
18
35
39
44
52
Pesticides: Financial
51
63
73
33
87
£2
Bconoiic
0.96
59
66
75
80
34
88
Sacks; Financial
33
2?
43
45
17
50
iccnonic
0.80
26
20
24
36
35
40
Teels; Financial
20
22
sn
20
;r
■a A
Bccnoiic
0.81
16
1:
16
1:
Interest: Financial
5
i
8
3
9
Bconoiic
0.00
c
?
0
0
0
Land taz: Financial
2
2
a
2
5
2
Fconouc
0.00
0
0
0
0
0
0
Contingency: Financial
9
10
13
14
14
16
Bconoiic
0.80
7
8
10
11
11
13
Total cost; Financial
934
984
1081
1107
1133
1184
Bconoiic
580
618
589
709
729
766
Return
Gross Retnra:!inancial                                    3500               3850               4550               4725               4900                5250
Bconoiic
Net Return: Financial
Bconoiic
0.8 2900 3080 3640 3780 3920 4200
2:66 2865 •469 3618 3767 4066 2210 2462 2951 3071 3191 3424froa Tear 1 to Jull Developaent.Bale Gadnlla Irrigation Project.
(Birr/ha)
Conversion
Tears
Iteas
factors
1
2
3
4
5
6
Cost
Labour: Financial
312
321
342
345
351
360
Iconoiic
0.5?
178
183
195
197
200
205
oxen: Financial
100
10C
100
100
1C0
100
Iconoiic
0.5?
57
57
57
57
57
57
Seed: Financial
120
120
120
120
120
120
Iconoaic
0.80
95
96
96
95
96
96
Urea: Financial
5
8
16
17
19
23
Eccnoai:
0.92
•
?
15
16
17
21
DA?: Financial
12
22
42
47
53
62
Iconoaic
3.34
ID-
18
3;
39
45
52
Pesticides: Financial
X• •* *
50
Ci
72
a*
30
Iconoaic
0.95
51
58
Cl
69
5?
??
Sacks: Financial
10
11
i0
9
14
14
Iconoaic
15
0.30
3
10
11
11
12
Tools: Financial
20
20
23
1A
•ft
Iconoaic
12-
0.8(
16
1C
16
16
?c
16
Interest: Financial
;
1
3
9
9
1 A
Iconoaic
0.00
0
0
•3
0
0
0
Land tax: Financial
A
2
A
2
•
Iconoiic
0.00
ft
0
0
0
0
0
Contingency: Financial
11
n
24
Iconoiic
0.80
15
16
1?
9
10
11
12
13
14
Total cost: Financial
652
634
741
Iconoiic
761
730
429
309
455
497
513
52!
550
Return
Gross Return;Financial
iconoaic
0.3
4000
3200
4400
3520
5203
4150
5400
4320
5600
4480
5000
4800
Net Return: Financial
3343
3716
4459
Iconoiic
4639
4320
519!
2771
306:
3663
380?
’952
4250Table 13.9 :Crop Budget (Kcobomic) for Maize Per Hectare under Peasant Pan without Project
Bale Gadulla Irrigation Project.
Birr/ha
Iteis
financial
C.P
Iccnoiic
Cost
Labour(MD)
186
0.57
106
Oxen(PD)
76
0.57
43
Seed(kg)
11
0.80
9
Pesticides(luap sua)
9
0.96
9
Sacks (lunp sui)
12
0.80
10
Tools(luap sua)
15
0.80
M •>*4
Land tax
54
0.00
Contingency
16
0.80
13
Total cost
327
201
Beturi
Yield ,ql;
9.6
Prtce/q!
60
Gross return
5:6
1.02
538
Set return
249
33;
115Table 13.10 :Crop Budget (Zconomc) for Wheat Per Hectare under Peasant Para without Proje
Bale Gadulla Irrigation Project.
Birr/ha
I teas
Financial
C.P
Kconouc
Cost
Labour(MD)
210
0.57
120
Oxen(PD)
76
0.57
43
Seeding)
103
o.ao
82
?asti:ides;luip sujJ
n
i
0.96
7
Sacks (luap sub)
to
0.30
3
"o:ls(lwf ssa)
15
O.BC
12
Land tax
0.00
Contingency
2:
0.90
16
"ctai cos:
443
238
Return
Piels (cl
s
’rice/gl
53
Gross return
544 '
1.05
571
Set return
10!
283
116rJ
rJ
rJTable 13.11 :Crop Budget (Econoaic) for Barely Per Hectare under Peasant Para without Project, Bale Gadulla Irrigation Project.
Birr/ha
Iteis
Cost
Financial
Labour (ND;                                                                 195
C.!
0.57
Iconoiic
111
Oxen(PD)
75
0.57
43
Seed(kg)
90
0.80
72
Pesticides(lusp sub)
7
0.95
7
Sacks (luap sub)
12
0.90
10
Tools(lujp_ sua)
15
0.80
12
Land tax
2
0.00
Contingency
20
3.80
IE
Total cost
117
271
Return
Yield igl-
Price/ql
E.8
50
Gross return                                                            440
0.80
352
Net return                                                                  23                                                                                  91
117•<4-*'*•■'.z-'7'•,
’ S'-
'■?
■
■
•S-
[
I
I
rI
■ ' ...
z
I
'-I
I
'■?         y '• /
Jr
Vrt'" '
1 '*+. :.
»**t**'>
»
'■&' ■ /.V -i M •■
.rfh
rJ
>r
?-’ >’
r r ■-"
■!? ..■•
r1
rJ
jTable 13,12 :Crop Budget (Bconoiic) for Oats Per Hectare under Peasant Pan without
Project, Bale Gadulla Irrigation Project.
Birr/ha
I teas
Financial
C.!
Iconciic
Cost
Labour(MD)
210
0.57
120
Oien(PD)
76
0.57
43
Seed(kg)
140
3.8C
112
Pest-cideslluip sui)
7
* 
0.96
7
Sacks (luap sui)
11
0.80
9
Toolsfluip suit
15
0.30
• i
Land tax
2
0.00
Contingency
23
0.80
13
Total cost
184
321
Return
Tield !ql|
3.3
?rice/qi
30
Gross return
792
0.90
£34
Set return
308
313
118Table 13.13 :Crop Budget (Iconoiic) for Field Pea Per Hectare under Peasant Fan without Project, Bale Gadulla Irrigation Project.
Birr/ha
Iteis
Cost
Financial
Labour(HD)                                                                 174
C.F
0.57
Iconoiic
99
Oien(PD)
(4
0.57
36
Seed(kg)
240
o.ao
192
Pesticides!lwp sub)
5
0.95
5
Sacks (luap sua)
7
0.3C
6
Toolsilunp sui)
15
0.30
*4
Land tax
->
3.00
Contingency
25
0.80
20
Total cost
532
370
Return
Field Iql)
5.5
Pnce/ql 100
Gross return 550
•
3.30
443
Net return                                                                  28                                                                                   78
119■
rJ
rJ
rJTable 13.14 :Crop Budget (Btcnouc) for Black Cunin Per Hectare under Peasant Pan nithont Project, Bale C-adulla Irrigation Project.
Birr/ha
Iteis
Cost
Financial
Labour(MB) 246
Oxen(PD) 88
Seed(kg) 120
Pesticides (Imp sui) 11
sacks (luap soi) 4 Tools (kip sui! 15 Land taz 2
Contingency 24
C.!
0.57
0.57
0.80
0.96
0.80
0.80
0.00
0.80
Bccnoiic
140
50
96
11
3
12
Total cos:                                                                   510                                                                                 331
Batura
Tieli uli
Price.:!
3.2
500
Gress return
Set return
1600
1090
0.30
1280
549Table 14.1 :Total Investaent Cost for Project Ccnstncticn 'Sooaci
Phasing Oier Tears, Bale Sadulla Irrigation Project
{000 Birr}
Tears
ItfilS
1
2
Total
Preparatory Boris
222.9
O.G
222.9
ieir and Associated
Structures
275.1
0.0
275.1
Main Canals and
Priiar? Canals
3753.7
356.6
4110.3
Secondary canals
316.4
133.7
450.1
Tertiary Canals
95.S
95.3
Field Canals
301.5
301.5
Field Drains
424.1
424.1
Land Leveling and
Boids
630.2
3.0
633.2
Deiobilizarion
44.6
44.6
office
44.6
44.6
•?^T£
-« «i
• * •»
Xcrkshor
Contingency (51)
2:9.9
1;.S
97.5
12.9
357.4
Snh 7ctal
w
5458.1
2047.5
75D5.5
121Table 14.2 :Cost (Economic) of Equipments for Project Control Centre
(PCC) Bale Gadulla Irrigtion Project
(000 Birr)
Cost
(Fin)
Cost
Items
(Econ)
Vehicle (Four Wheel Drive)
55
31.9
Tractor
50
39.0
Trailer
15
11.6
Portable Pump
5
3.9
Tractor Accessories
—
20
15.6
Hand Tools
6
4.8
Tools
10
7.5
Survey Equipment
10
7.7
Office Equipment
8
6.2
Total
179
128.1
122r*Table 14.3 :Farm Investment Cost (Economic)
Bale Gadulla Irrigation Project
(000 Birr)
Items
Cost
Housing
215
Oxen
602
Tools
130
Subsistance Requirement
(for six months)
344
Total
1291
123Table 14.4 :Cost of Personnel (Economic) for Project Control Centre (PCC)
Bale Gadulla Irrigtion Project
(Birr)
Salary per Month
Cost
Cost
Personnel
No
(Fin)
(Econ)
Agronomist
1
600
7200
7416
Irrigation
Technician
1
600
7200
7416
Extension
Agent
1
500
6000
6180
Clerk
1
500
6000
6180
Tractor
operator
1
300
3600
3708
Driver
1
300
3600
3708
Mason
2
300
7200
7416
Guard
2
300
7200
4320
Total
48000
46344
124't-T
• ..
. i-f ? $3*
.‘W
!, .; ..
' ■:
■. W* /
w
WF&
■/
I
y 
’*■ r'.’ .
is$»u£)
**’!* :*
:.'4i
*' *-,*-•*'—?*' **> — *• *■
■ X&-3«T
■ 7^W Wr
a
?>»
. • -’ *JT’ ‘
fe?Table 14.5:Annual Operation and Maintenance Cost, (Economic)
Bale Gadulla Irrigation Project
(000 Birr)
Cost
Cost
Items
(Fin)
(Econ)
Personnel
48.0
46.3
operation cost of Equipments
17.8
14.2
Maintenance Cost of Equipments
15.1
12.1
Materials
12.0
9.6
Maintenance of Infrstructures
15.6
12.5
Total
108.5
94.7
Table 14.6 : Replacement Cost (Economic) of Machinery and Equipment, Bale Gadulla Irrigation Project
(000 Birr)
Life Span Repl
acement Cost
Cost
Item
(Years) Years
(Fin) (Econ)
Tractor, Trailer, Tractor accessories, Office Equipment Survey Equipment
/
6
9,15,21,27
103
80.1
Vehicle, Pump Hand Tools, Tools
5
8,13,18,23,28
76
48.1
125I'
!
<
' it-.
«<»-•> ■•«.»• < •*»
/50!9-
»WT
<^4s.^cr           '
:
1^??A/?." <*‘«^ v A-w •■ .*»,.*'
‘s*' **’*k'^ ■* •* ’l •• A *•• —
-
r
■ ’ ?'■'
■; l‘‘. r?
. -r
■■
-■
£
r-
J
<<*??>•$?
WWW- awlO
MiwWi.
.^r -,ww ^'S|fef^
' ' ^; % c‘
JipWwTable 14.7 :Tctal Met Return (Rconoaic) with Project froi Tear 1 to Pull De7elapaent, Bale Gadulla Irrigation Project.
Years
1
2
3
4
5
6
Wheat
NR/hi
1039
1303
1509
1714
1819
1919
Area (bi)
161.4
161.4
161.4
161.4
161.4
161.4
Total NR (000 Birr)
168
210
244
277
294
310
Barely
Nl/bi
236
289
344
397
426
452
Area (ba)
64.6
64.6
64.6
64.6
64.6
64.6
Total NR (000 Birr)
15
19
22
26
28
29
Oats
NR/ha
882
1058
1236
1412
1501
1589
Area (ha)
8C .7
80.7
80.7
90.7
80.7
80.7
Total NR (000 Birr-
71
85
1C0
114
121
128
Maize
Nl/ha
1492
1582
1673
1761
1851
1942
Area (ba)
134.5
134.5
134.5
134.5
134.5
134.5
Total NR I000 Birr)
2C1
212
225
237
249
261
Broad Bean
NR/:a
321
332
443
483
423
563
Aree ibi)
64.6
64.6
25
64.6
64.6
64.6
64.5
Total NR (000 Birr
21
29
31
27
36
Bh:k emit
NR ba
2771
3065
3662
3807
3952
4250
Aree ■ha)
107.6
107.6
107.6
107.6
107.6
137.6
Ten! SR (COO Birr.
293
330
394
410
42:
45?
Suez
N’/'ha
7697
9064
10428
11796
12481
13163
Area (ha;
96.8
96.3
95.3
95.6
96.8
95.8
Total NA (050 Birr)
745
-877
1099
1142
1208
1274
PepFer
NR/ha
2220
2462
2951
3071
3191
3434
Area (haj
96.9
96.8
96.8
96.3
96.8
96.8
Total NR (000 Birr)
215
233
286
297
309
332
Grand Total (003 Birr)
1734
1997
2308
2533
2661
2829
126Table 14.8 : Total Net Return (Economic) without project, Bale Gadulla
Irrigation Project
NR/ha
Total NR
Crop
(Birr)
Area (ha)
(000 Birr)
Wheat
283
69
19.5
Barley
81
134
10.9
Maize
386
50
19.3
Oats
313
53
16.6
Black Cumin
949
35
33.2
Field peas
78
11
0.9
Total
352
100.3TEARS
V 1 
vu
C2                04                NRk       Mh               IRn
1 5481.1
2 3466.3
54:1.1
3466.9
-5431.1
-3466.3
w
1
5
6
7
8
9
It
11
12
13
14
15
IE
. ■
'C-
19
*r.
*1
- -i
< •
14
•:
25
t
’C
29
94.7
94.7
94.7
94.7
94.7
94.7                 1734        IOC.3           1539.0
94.7                199?        IOC.2           1802.0
94.7                 2303        105.3             2113.0
94.7                 2532        100.3             2338.0
94.7               2551       ICG. 2          2456.0
94.7 46.1 142.6 2829 100.3 2585.9
94.7 30.1 174.3 2329 100.2 2553.9
94.7
94.7
94.7
94.7 2329 100.3 2534.C
94.7 1829 IOC.3 2634.0
94.7 1829 100.3 2634.0
94.7                 43.1            tr a                  1329        100.2             2535.9
94/
-i '
94/
94/
94/                  2829        1C3.3            2634.0
ai.i
tii -
94/ 2819 •, r r - 1634.0
94/ 1329 1-10.2 2:34.C
1329         13 1   *.        1553.9
51 “              •: •          U- *
‘6*0        t .• r •                 w a
94/
5 • .
••-
31 “
94/
94/ 43/.
94/
94/                  2819
2534.0
*    t . ■                     2329        ’ -f 0              26-4.0
w        * *.
94/                  2819
a
1534.0
* •' ■:
-1-.:
1:29        il‘1.2             2535.9
94/
94/
31 ’
94/ 1829 It/. 2 2634.0
94/ 2329 IGO. 2 1524.0
94/
* a* r
• ft ft •
•* • — *
2624.1
:>d 3
; i -        «C ’      • f *.      •.
• • • * • • • • • -        «...               -xv a
*vt
Q
94/
94/
94.7                  2:2:         • • w • «•        1624 /
94/                2329
• 
• * • • *
r. •
:g;“ : 'c:- :
t-t;-
•
• W • • * • 1
• • * • • • • r C      .... 2                     CXC’" '
Set ? sScXZ          £1 lit 2tS:     ::unt   ?.ete               9         74:/./
Scene ate Internal Rate :: ?.•
c>     Prrect >-;=s:j-nt c-     5-
2.2153
Operation i Maintenance C:s                     ts
03-     Rephceaet: Costs
04-     Total Costs (C1-CK3
H?.a- Net Returns Vith Preset
sax-     nr. leans ’K'thnt’
IB:- Incremental Net letur
t
9
1
Pro* e  r*
ns
Includes residue’ val                   Ce c:  3:rr 1546          Tins’::r1
r*Table l:.2:Sea$itivitj Test istiaated irnsnai: Inrernal Rate :f Re
in the Accrual of Benefit by 3ne Tear, Bale uanduila irr
(Thousand Bini
YEARS
Cl
C2
C3
r* 1
vl
X?.¥
m
Ilfi
1
5481.1
5481.1
-5481.1
3465.8
3465.8
•3466.8
0
94.7
94.7
-94.7
4
94.7
94.7
1734
100.3
1539.0
5
94.7
94.7
1997
100.3
1802.0
5
94.7
94.7
2308
100.3
2113.0
1
94.7
94.7
2533
100.3
2338.0
8
94,7
48.1
142.8
2661
100.3
2417.9
9
94.7
80.1
174.8
2829
1C0.3
2553.9
10
94.7
94.7
2829
100.3
2634.0
11
94.7
94.7
2829
100.3
2634.0
12
94.7
94.7
2829
100.3
13
2634.0
94.7
43.1
142.8
2829
100.3
2535.9
14
94.7
94.7
2829
ice.3
2534.0
15
94.7
3C.1
174.8
2329
100.3
2552.9
15
94.7
94.7
2829
100.3
4. O-'» . U
5p1f
17
32 ’
9- '
•CU a
18
94.7
48.1
142.3
2829
100.3
2585.9
19
94.7
94.7
2829
100.2
-. . Wcu «
20
:4.7
94.7
2:29
100.2
2:34.0
5»
94.7
$ f' '
174.8
2329
• » * . •
2551.:
94.7
94."
2829
• • * • M
94.7
48.1
142.3
2829
.V. . «
^*95.9
24
94.7
94.7
1829
**r o
2$
4.■
-
1:24.2
94.7
94.7
2329
inr i
• J...
2634.2
2:
94.7
5» •
is:;
.er
“
4- - • -
2:34.2
-r
94.7
SC.l
174.3
2:29
•55
.-W..
2553.9
1:
94. ‘
48.1
1  1  •  A
li-.S
2329
« • •
t
I:*:.:
29
94.'
A|-
Jt. .
2329
’?
• * • • w
•
on
94.'
A1 "
.
2514.2
2:29
AA
A
51:1.1 ’
894;.9
2:51.6
5:0.9
121:1.4
73472.2
5-A.
,
5124:.:
V   -   -   t   .   -   .-
,1C. rcsza.
w <5-U=
a: 111 2
•a:e
‘928.954
Eccncai:
Xeraal
Rate of
Return
(B22R
2.1350
r»„
}c:t X
estaen:
cost
Cl- Operation i Xaratenatre Costs Ci- Rep'.acenent Costs
Cl- Total Costs ICHCl-C’l
NR>- Bet Returns Kith Project NRs- Net Returns ’Without’ Project I?.n- Inrreiental Net Returns
t
Includes residual value of Birr 2;U Thousand
129rJ
r*
rJTable 15.3    : Sensitivity Test - ’stinated iooao-aic Internal Rate of Return
in investjent
Cost by
154 Bale
Sedalia
Irrigation
 Project
(Thousan
d Birr)
mas                          Cl
C2
C2
C4
N?.¥
NRl
I8d
1                6303.3
5303.3
•5303.3
2               3985.B
3985.8
-3986.8
2
94.7
94.7
1734
1C0.3
1539.0
4
94.7
94.7
1997
100.3
1802.0
5
94.7
94.7
2303
100.3
2113.0
6
94.?
94.7
2533
100.3
2338.0
r
94.7
94.7
2661
10C.3
2465.0
!
94.7
48.1
142.8
2829
100.3
2585.9
9
94.7
80.1
174.8
2829
100.3
2553.9
10
94.7
94.7
2829
100.3
2634.0
11
94.7
94.7
2329
10C.2
2634.0
12
94.7
94.7
2829
100.3
2634.0
12
94.7
43.1
in      a i'.„. 5
2829
100.3
2585.9
14
94.7
94.7
2829
100.3
2534.0
15
94.7
30.1
174.3
2929
100.2
2:53.9
a •?
1 t
1c
94.7
94.7
2329
100.3
2524.0
94.7
94.7
2829
102.2
2524.0
18
94.7
48.1
142.8
2329
100.2
2:8:.9
19
iij
94.7
2329
103.2
2624.0
* i
20
94.7
94.’
2829
2534.2
*1A
94.’
30.1
174.3
2:29
100.2
25:3.9
22
94.7
94.’
2829
100.3
2534.2
94.7
43.1
142.9
2329
a r, *
’*85 -
24
94.7
94.7
2829
103.2
n * z 1 r.
94.’
94.7
2329
Ag-Q
w • • -
* • * •
- * - *
A - q * -  ■ * ’
A A.A T
2624.2
25
94.’
94.7
100.2
*12-• ?
AA
i a ",
•
» A- -
• •
“ ** k
9- ’
4  ’
:
• < • A
• *.f -
* *u
ci ■
■;*o
• * • • • a r:
%• • * * -  r r. •
• • • • • <
• rfw-cl » •  :« *
3[
g: •»
5‘ ‘
C-lf: f f
10290.1 2:51.6
:5L9
•3*2* :
a
- • . > «
2808.4
52525.C
lie: Peser
: .’alts a: Hi I
:s::us:
Rate
7533.425
E:oa:sic Internal Rate ::                           Return ci- ?r:            ie:t Investment  Cos:
CZ- Operation i XiinteSiECe CCStS Ci- Replaoeient Costs
Total costs ;ci-c>c3:
H?.m- Net returns With ’reject NRz- Net Returns ’Nithaut* Project ZRn- Inorenental Net Returns
t
0.1925
Includes residual value a: Birr Z‘45 Thousand
130Table 15.4 : Sensitivity Test - Istiaated Jconoiic Internal Sate of Return with
a Delay in the Accrual of Benefit by One Tear and with an Increase in Investient Cost by 15%, 3ale Sadulla Irrigation Project
(thousand Birr)
EARS
Cl
C2 
C3
C4
NRw
MBi
IRa
1
6303.3
6303.3
-6303.3
2
3985.8
3986.8
-3996.8
3
94.7
94.7
-94.7
4
94.7
94.7
1734
100.3
1539.0
5
94.7
94.7
1557
100.3
1802.0
6
94.7
94.7
2308
100.3
2113.0
7
94.7
94.7
2533
100.3
233B.0
8
94.7 
4B.1
142.3
2661
100.3
2417.9
9
94.7 
80.1
174.3
2829
100.3
2553.9
10
94.7
94.7
2929
100.3
2634.0
11
94.7
94.7
2829
100.3
2634.0
12
94.7
94.7
2829
100.3
2634.0
13
94.7 
48.1
142.8
2929
100.2
2585.9
ii
94.7
94.7
2329
100.3
2634.0
15
94.7 
30.1
174.8
2329
100.3
2552.9
• "
i;
• *
94.7
94.7
2329
100.3
2634.0
94.7
94.7
2329
100.2
2634.0
94.7 
48.1
142.3
2329
100.3
2585.9
1$
94.7
94.7
2529
100.3
2524.0
• «i
94.7
94.7
2929
2634.0
21
94.7 
8-1.1
174.3
2829
102.3
2552.9
94.7
94.7
2929
100.3
2524.0
13
94.7 
48.1
141.3
• * *
2329
100.3
2585.9
-ii
‘•C
94.“
2329
10C.3
2634.0
=4.7
94.7
2829
100.3
2624.0
• -
94/
94.’
2329
100.3
2:34.1
94.7 
=1.1
174.8
232=
100.3
2552.9
* •
IE
94.7 
48.1
141.=
2=29
10-0.2
2:85.9
94.7
• • *
94.7
2329
100.3
2634.2
94.’
2825
l’t.3
5280.0 T
t V * •. •
2:51.6 
560.9
12502.6
’np
.Jij. . u r
2708.1
59926.3
Net ?e
SitZ Value
az 111 D:s::u:z
late
5776.205
Zcznczic Intersil                  Rate cf Return                 EIRR                  2.1672
A.
V. ’
rtOjeOt If.’estiett C:st
CI-       Operation       4       Maintenance       Costs C3- ’eplaceaent Costs
C4- Total Costs Cl-C2<3!
N’w- Met Returns With Project Six- Net Returns 'Without’ Project
I?.:- Increiental Net Returns
131Table 15.5 : Sensitivity Test - Btiaated Iccnonic Internal Rate of Return
Tecrease id Set Return b7 151, Bale Gandulla Irrigation Project
(Thousand Birr)
TEARS
Cl
C2
C3
C4
NRw
NRx
IRn
1
5481.1
5481.1
-5481.1
2
2456.8
3466.8
-3466.8
3
54.7
94.7
1474
100.3
1278.9
4
94.7
94.7
1597
100.3
1502.5
5
94.7
94.7
1952
100.3
1765.8
6
94.7
94.7
2153
100.3
1958.0
7
94.7
94.7
2262
100.3
2066.9
8
94.7
48.1
142.8
2405
100.3
2161.6
9
94.7
80.1
174.8
2405
100.3
2129.6
10
94.7
94.7
2405
100.3
2209.7
11
94.7
94.7
2405
100.2
2209.7
12
94.7
94.7
2405
100.3
2209.7
13
94.7
43.1
142.8
2405
109.3
2161.6
14
94.7
94.7
2405
100.3
2209.7
15
• *is
94.7
80.1
174.3
2495
103.3
2129.6
94.7
94.7
2405
106.3
2269.7
1?
94.7
94.7
2405
1-30.2
2209.7
18
94.7
48.1
142.8
2405
100.3
2161.6
19
94.7
94.7
2405
100.3
2209.7
20
94.7
94.7
2405
1G0.3
2209.7
21
94.7
8C.1
174.3
2405
100.2
2129.5
22
94.7
94.7
2405
100.2
2209.7
23
94.7
48.1
142.3
2405
109.3
2161.6
“C
24
94.7
94.7
2405
100.3
2209.7
94.7
94.7
2405
190.2
2209.7
27
94.7
94."
2405
100.3
2209.7
94.7
80.1
174.8
2405
100.3
2129.6
28
94.7
43.1
142.8
2405
109.3
2161.6
94.7
94.7
2405
100.3
20
220$.7
94.7
94.7
2405
130.3
4855.7
8947.9
2:51.5
560.9
121:9.4
64555.0
2808.4
52532.3
Nez Resent Value a: 1H Discount Rate 5068.220 Eccnoii: Internal Rate c: Return ;£•?.?.)
Cl- Project Investneat Cost
C2- Operation i Maintenance Costs
C3- Replaceient Costs
C4- Total Costs (CltC2iC3)
K?.w- Met Returns With Project NRx- Net Returns ’Without’ Project IRn- Incremental Net Returns
r
0.1364
Includes residual value of Birr 2616 Thousand
132•.       - 11.’V -  1Table 15.5 : Sensitivity Test - Sstiiated Bccnoaic Internal Hate of Return with a
Decrease in Set Return by 151 and with an Increase in Investaent Cost
by 151, Bale Gadulla Irrigation Project.
(Thousand Birr)
TEARS
Cl
C2
C3
C4
MRw
MRX
I Rd
1
6303.3
6303.3
-6303.3
2
3986.8
3986.8
-3986.8
3
94.7
94.7
1474
100.3
1278.9
4
94.7
94.7
1697
100.3
1502.5
5
94.7
94.7
1962
100.3
1766.8
6
94.7
94.7
2153
100.3
1958.0
7
94.7
94.7
2262
100.3
2066.9
8
91.7
48.1
142.8
2405
100.3
2161.6
9
94.7
80.1
174.8
2405
100.3
2129.6
10
94.7
94.7
2405
100.3
2209.7
11
94.7
94.7
2405
100.3
2209.7
12
94.7
94.7
2405
100.3
2209.7
13
94.7
48.1
142.8
2405
100.3
2161.6
14
94.7
94.7
2405
100.3
2209.7
15
94.7
30.1
174.8
2405
100.3
2129.6
16
$4.7
94.7
2405
100.3
2209.7
17
94.7
94.7
2405
100.3
2209.7
19
54.7
48.1
142.8
2405
100.3
2161.6
19
*r
94.7
94.7
2405
10C.3
2209.7
94.;
94.7
2405
100.3
2209.7
21
94.7
30.!
174.S
24C5
100.3
2129.6
22
94.;
94.7
2405
100.3
2209.7
23
94.7
43.1
ip a
2405
100.3
2161.5
24
94.7
94.7
2405
100.3
2209.7
25
94.7
94.7
2405
100.3
2209.7
•< ■
94.7
94.7
2405
100.3
2209.7
•,;
94.7
30.1
174.8
2405
100.3
2129.5
94.7
48.1
142.5
2425
200.2
2161.6
29
94.7
94.7
2405
100.3
2209.7
2*6
94.7
94.;
2405
103.3
4855.7 *
K29C.1
2c:'..*
550.9
22502.6
w • « J - • w
2805.4
51191.1
Set Resent Value at 111 D-sctur. ’ate 15I5.fl ;::no:i: Internal Rate cf Return -
CI- Project Invastnent Cost
C2- Operatttn i Xaintetance Costs
C3- Reclacenent Costs
C4- Total Costs (C1+C2+C3)
NR«- Met Returns tilth Project
11’.-- Met Returns ’Without' Project IP.n- Incremental Net Returns
3.1554
Includes restdual value of Birr 2646 Thcusani
133r* rJ
1
rJDate Due
1
Call No.
Copy No------- -----------------------
L1
Iq
Iq
X.

Summery