DRA1T
■
DILATE RIViX BASIN STUDY: ANALYSIS OF SOCXO- ECOIJOMIC ASPECTS
• •
laralder R. Islam
I7'0 Senior Pl?rnir’g Economist Project: '.’AO/EIH/82'008
Addie- Ababa
*s.DRAFT
BILATE RIVER BASIN STUDY: ANALYSIS 
OF SOCIO-ECONOMIC ASPECTS
Tarafder R. Islam
FAO Senior Planning Economist Project: FAO/EIH/82/008
Addis Ababa
December 1985BILATE RIVER BASIN STUDY: ANALYSIS OF SOCIO-ECONOMIC ASPECTS1
TABLE OF CONTENTS
PAGE
I.     INTRODUCTION--------------------------------------------------- 1
II.    SOCIAL ASPECTS-----------------------------------------------------
 3
III.   ORGANISATION AND MANAGEMENT---------------------------------------
10
A.  Bilate-Abaya Farm---------------------------------------------
10
B.  Bilate Tobacco Farm-------------------------------------------
14
C.  Peasant Agriculture-------------------------------------------
15
IV.    MARKETING AND PRICES----------------------------------------------
19
A.  Marketing-----------------------------------------------------
19
B.  Prices--------------------------------------------------------
21
V.     EVALUATION OF IRRIGATED AGRICULTURE    IN BILATE-ABAYA AND
BILATE TOBACCO FARM-----------------------------------------------
23
VI.    IRRIGATION DEVELOPMENT ALTERNATIVES    IN IHE BASIN--------------  42
A.  Socio-Economic Implication   of Boyo Dam--------------------- 43
B.  Financial Analysis of Development Alternatives------------       45
VII.   CONCLUDING REMARKS------------------------------------------------- 67
This paper is circulated for consents. Economic analysis could not be included because the necessary breakdown of engineering cost estimates into local and foreign exchange component was not available. This analysis will however be added in the final report.I. INTRODUCTION
1.01 
Bilate river basin covers an area of about 5,650 km2 . It
encompasses partly or fully 10 Woredas under U Awrajas of Haykoch & Butajira, Kembata & Hadiya, Sidama and Welayita. The basin area is inhabited by a 
population of about one million.
1.02           Agriculture in the basin is mostly rainfed except in Bilate-Abay a area which is located at the lower part of the basin. In this area, there are two State Farms (SF) - Bilate-Abaya State Farm and Bilate Tobacco Farm. These SFs have a gross area of 3,562 ha of which 3,023 ha are net area. Of this net area, 2,553 ha were under irrigated crops in 198U/85.
1.03            One of the inportant reasons as to why total net area was not irrigated and the timely supply of irrigation water in adequate quantity could not be ensured to the existing cropped area is the inadequacy of the existing irrigation structures and facilities in the area. On the other hand, the water available in the basin has the estimated potential of irrigating about 25,000 ha. This situation calls for the assessment of physical resources as well as exploitable potential for irrigation development in the basin.
1.0U           The studies undertaken in the past on the development prospect and problems in the area are few*. These studies are found to be inadequate to
1.  Ministry of Overseas, Development, Development Prospects in the Southern Rift Valley, Ethiopia, U.K., 1973
2.  Jovanovic, D. Bilate River Basin. Development Study-Preliminarv Report National Water Resources Conmission, Addis Ababa, 1974         •
3.  Brownie, D.G. Economic Feasibility Study of Development Proposals for The Bilate Valley, National Water Resources Commission. Addas Aha ha  1Q7C>
3
U. Ministry of State Farm Development, A Study on the Farming Problem of Three Fdrms in the Lower Bilate River Basin, Addis Ababa. 1980--------------2-
serve reliable bases for definitive conclusions about the nature and extent 
of development potentials in the area. The study by the Ministry of Overseas Development covers a large geographical area and the investigation and analysis specifically related to the Bilate basin are too broad and general to allow definitive conclusions. Brownie dealt very superficially with the question of economic feasibility and his study lacks very much in required data. Moreover, it is far out of date. The study by the Ministry of State Farm Development is relatively recent but its scope is rather limited.
1.05           The Water Resources Development Authority (WRDA) has identified the Bilate River basin as one of the prospective areas where investigation 
and study have to be undertaken in order to determine the nature and extent 
of development potential in the area.
1.06           The main purpose of this paper is to examine the socio-econcmic implications of the proposed irrigation development in the basin. In doing this, existing operations of the SFs involved in crop production activities will also be analysed.-3-
II SOCIAL ASPECTS
7
2
2
2
2.01         Bilate river basin encompasses partly four Awrajas- Haykoch & Butajira, Kembata & Hadiya, Sidana and Welayita. The Woredas covered fully or partly by the basin are ten - (1) Alaba, (2) Siraro, (3) Limu, (4) Kedida Gamila, (5) Sike, (6) Shebedino, (7) Dale, (8) Daunt Gale, (9) Damut 
Weyde and (10) Humbo.
2.02         While the total population in the four Awrajasis 4.95 million, the ten Woredas contain a population of 1.7 million (Tables 2.1 & 2.3). The density of population in the Awrajas ranges from 111 to 239 per km  while in case of Woredas it varies from 88 to 470 per km . It thus appears that these Awrajas and Woredas are quite densely populated as compared to the national density of about 35 persons per km .
2.03         Total population inhabiting the Bilate river basin area is
that 
estinated at about one million (Table 2.4). It means/about 59% of the 
population of ten Woredas live within the basin. The density of population within the basin is about 177 per km . The basin is thus relatively heavily populated.
2.04         People inhabiting the Boyo Swamp area totals about 24,000 (Table
2.5). They belong tol2 peasant associations encompassing the area. Total number of families is about 5,600.
2.05         The average family size in the ten woredas ranges between 4.2
and 5.1 person. The family size in Boyo Swamp area averages 4.3 persons.
2.06         High population density in rhe basin area as well as in the ten Woredas indicate that supply of labour will not be a constraint on the way 
to development of irrigated agriculture either under peasant farming or under state farm operation. It is noteworthy that average farm size in the basin 
area is also relatively small.
2.07         The high density of population in the area will have the
implication for the resettlement of any displaced families from the area. As mentioned before, all the four Awrajas are relatively densley populated.Linn Woreda in which lies the Boyo Swamp has a density of 269 people per km . 
2
Of the ten Woredas, the three adjoining the swamp under Kembata & Hadiya Awraja have the highest density of population. Thus any families displaced 
by the dam at Boyo have little scope for resettlement either in Kembata & Hadiya Awraja or. in other 3 Awrajas.
2.08         There are 872 primary and 79 secondary schools with total enrollment of 339,000 and 62,000 students respectively (Table 2.6). The enrollment is quite heavy with 390 students per primary school and 784 students per secondary school.
2.09         There are 126 clinics, 11 health centres and 5 hospitals in the 4 Awrajas (Table 2.7). According to the existing population and health facilities, there are over 39,000 people per clinic and 450,000 people per health centre.-5-
Table 2.1: Population, Families, Population Density and Average Family size in 4 Awrajas covering Bilate River Basin
Awra j a
Area
km2
Population
Families
Population
Density/km2
Average
Family
Size
1. Haykoch & Butajira
2. Kembata & Hadiya
3. Sidane
4. Welayita
11,633
5,296
6,794
4,472
1,288,178
1,266,715
1,415,830
969,929
286,262
258,672
321,780
210,669
111
239
208
217
4.5
4.9
4.4
4.6
Total
28,195
4,940,652
1,077,383
Source;- Awra ja Offices
Table 2.2: Age Distribution of population in 4 Awrajas covering Bilate River Basin
Woreda
0-14
15-59
Over 59
1. Haykoch & Butajira
2. Kembata & Hadiya
3. Sidama
4. Welayita
579,680
570,022
707,915
484,963
618,325
608,023
637,124
436,467
90,173
88,670
70,791
48,496
Total
2,342,580 2  ,299,939
298,130 
|
Source:- Central Statistical Office, Addis Ababa-6-
Table 2.3: Population, Families, Population Density and Average Family size in 11 Woredas covering the Bilate River Basin
Awraja
Woreda
Area
(km )
2
Population
Families
Population
Density/ 
km2
Average
Family
Size
1. Haykoch & Butajira
2. Kembata & Hadiya
3. Sidama
4. Welayita
Alaba
Siraro
Limn
Kedida Gamela Sike
Shebedion
Dale
Danut Gale Danut Weyde Humbo
1,192 1,423
905
301
543
930
1,411
362
748
-
134,513
125,032
234,477
126,720
145,427
305,150
248,036
170,082
129,447
81,327
31,885
27,199
49,812
24,875
29,700
69,321
55,936
34,693
28,797
16,597
113
88
259
421
268,
328
176
470
173 
t
-
'
4.2
4.6
4.7
5.1
4.9
4.4
4.4
4.9
4.5
4.9
Total
7,815
1,700,211
368,815
Source:- Awraja Office-7-
Table 2.4: Estimated Population in Bilate River Basin by Woredas
Awraja
Woreda
Population
1. Haykoch & Butajira
2. Kembata & Hadiya
3. Sidana
4. Welayita
Alaba
Siraro
Linn
Kedida Gamela Sike
Shebedino
Dale
Damut Gale Damut Weyde Humbo
80,708
62,516
234,477
114,048
58,171
61,030
24,804
153,074
129,447
81,327
Total
999,602
Note:- Estimated on the basis of Woreda population and proportion of the area falling within the basin.-8-
Table 2.5: Population and Families in the Boyo Swamp Area
Peasant Association
Population
Families
1. Musagsana Habbera
2. Shemoajacho
3. Amarkeba Shamu
U. Moblicho
5. Suta
6. Kemecho Borora 7. Alegena Ambichu 8. Shetamge Wanckota
9. Dada
10. Attatoma Golicha
11. Ourbarcha
12. Jemiya
3,225
2,654
2,068
2,103
2,110
2,477
855
436
1,437
2,342
1,404
2,687
732
637
493
465
517
599
196
89
322
551
354
638
Total
23,798
5,593-9-
Table 2.6: Education facilities in U Awrajas covering Bilate River Basin
Primary
School
Secondary
School
Technical
School
Other
Awraja
1. Haykoch & Butajira
2. Kambata & Hadiya
3. Sidama
4. Welayita
182
282
210
198
69,320
98,163
85,883
85,282
3U
5
20
20
16,470
8,3U8
19,481
17,720
1
-
1
-
N.A
-
61
-
-
-
-
-
-
-
-
-
Total
872
339,648
79
62,019
2
61
Source;- Awraja offices and Branch offices of the Ministry of Education.
Table 2.7: Health facilities in 0 Awrajas covering Bilate River 
Basin
Awraja
No. of
Clinics
No. of
Health centers
No. of Hospitals
1. Haykoch & Butajira
2.  Kambata & Hadiya
3.  Sidama
4.  Welayita
25
43
39
19
5
2
2
2
2
1
1
1
Total
126
11
5
Source:- Awraja offices and Health centres in the Awrajas
No. of Schools
No. of Students
No. of Schools
No. of Students
No. of Schools
No. of Students
No. of Schools
No. of Students-10-
III ORGANISATION AND MANAGEMENT
A. 
Bilate-Abaya Farm
3-01 
Bilate-Abaya Fa
nn is one of many State Farms under the
Ministry of State Fann Development (MSFD). The organisational hierarachy 
from national to field level extends from the MSFD at the national level, the Southern Agricultural Development Corporation (SADC) at the regional level 
with its Headquarters in Addis Ababa, Sidamo Agricultural Development Enterprise (SADE) with its Headquarter situated at Awassa and then the 
Bilate-Abaya Farm at the field level which is about 80 kilometers away from Awassa.
3.02           The SADC is responsible for the overall planning and operating guidelines to the SADE and the Farm. The SADC finalizes the budget for the 
SADE and Farm, gets it approved by the MSFD. The SADC is also concerned with 
the supervision of SADE and providing of supporting services relating to research, marketing, supply of inputs etc.
3.03           The SADE is responsible for providing planning, programming
and operating guidelines and instructions to the Farm. It also supervises and provides all kinds supporting services to the Farm.
3.04            The Farm is divided into 4 units of which 3 units are located
at Bilate area and the fourth unit is located at Abaya which is 27 kilometres 
away from Bilate. The Farm office is located at Bilate headed by a Manager 
and each unit has a Unit Manager. The agricultural machinery and workshop are located at the Farm’s office at Bilate and units are provided with services 
as and when required. The Farm’s focus is concentrated on production activities while the marketing of its produces, supply of inputs and machinery, detailed financial accounting and other supporting services are provided by the SADC 
and SADE.
3.05  Research  support  and  services  which  are  supposed  to  be  provided to the Farm by the SADC and SADE have been identified to be highly inadequate. Very little research and field experiments have so far been carried out on the farm. There is only one Research officer posted at SADE Headquarters at-11-
Awassa and he is responsible for field research and experiments for 5 State Farms, including Bilate-Abaya. He is assisted by only a few Field Assistants in this task. Thus the manpower for research and experiment is totally inadequate. In addition, they are constrained by lack of required facilities such as transport, materials etc. This explains why very little research and experimental activities were accomplished on the Farm. According to the available information, experiments on fertilizer responses and optimum planting dates with respect to cotton and haricot bean were conducted for the last two years. However, any action based on the findings has not so far been taken.
In. view of virtual absence of research and experimental results and findings on the whole range of relevant areas such as suitability of various crops, fertilizer responses, cultural practices, varietal adaptability of important crops etc, applied research and field experiments should be given one of the highest priorities. For this purpose, adequate trained manpower, required facilities, and sufficient financial support should be provided.
3.06            An Action Plan is generally prepared every year for the Farm with the purpose of guiding various activities in a systematic manner. However, the actual performance has not so far been checked and compared 
with targets set in the Action Plan in order to take appropriate action to improve performance. Thus although an Action Plan is an inportant management tool, it could not serve its purpose. The Action Plan should be strictly enforced and in order to make it serve its purpose, actual performance should be compared periodically with the targets and suitable remedial measures taken.
3.07            The on-farm supervision and field activities by the managers, field supervisors and technicians play an important role in improving the efficiency and productivity of a farm. A close supervision by the field level operators is needed for enforcing work norm and the quality of work done by the workers every day. However, all these functions are being greatly handicapped at the Farm due to the shortage of transport facilities. It is believed that a good deal of improvement in agricultural operations can take place if this constraint is removed. The adequate provision of on-farm transport facility specially in the farm of motor cycles and bycycles thus deserves a high priority.-12-
3.08           At present, much of the field works by labourers is done through piece rate system rather than through time rate. We feel that the piece rate system of work is very much appropriate since it requires less management resources and relatively high productivity can be achieved. However, in order to ensure this outcome, appropriate and detailed work 
nonns based the close observation of the conditions in each Farm should be developed. Moreover, these work norms should be periodically adjusted and revised in the light of experience and observations. The nature and comprehensiveness of the work norms now in force could not be examined but 
it was gathered that these nonns apply to all State Farms under the SADC and that these are not subject to periodic revision based on field observations. Also, the enforcement of work norms will require the adequate provision of 
on-farm transport facilities as mentioned above.
3.09           The Farm has been experiencing the problem of redundant manpower consisting mainly of unskilled and semi skilled labour. The SADE is now in 
the process of identifying and estimating the extent of redundant manpower in all its Farms including this one. Although no firm estimate is yet available, one guesstimate puts the redundancy at the Bilate-Abaya Farm at 100-200. The financial implication is thus quite substantial. This not only involves huge financial cost but also is counterproductive. The lack of work and squatting of a large number of redundant persons vitiate the whole work environment creating problem for management, discipline and productivity of other employees Under the existing Government policy, it is difficult to get rid of this redundant manpower and at the same time there is limited scope of relocation of this manpower with SADE. However, seme solution to this problem must be found in orxler to move the Farm towards financial viability.
3.10            It is rather paradoxical that side by side with the problem
of redundant manpower, the Farm was reported to experience periodic shortage of seasonal labour specially during weeding and harvesting of cotton. This shortage was cited by the Farm officials as one of the constraints resulting in low yield. The extent of yield loss due to this shortage could not be ascertained although a sizable farm area could be observed having weed problems The question of this shortage was examined. It appeared that the shortage 
was not due to lack of surplus labour in the area but due to the unwillingness of these surplus workers to work at the Farm. This unwillingness was mainly the result of the lack of required facilities such as housing, transport,-13-
market for essential consumer goods, monthly ration etc. The Walayita Awaraja in which the Farm is located is one of the most densely populated areas in the country. The average farm holding per family is 1-2 hectares in the area. With such a small holding and agriculture being the predominant activity, a substantial portion of the people is underemployed 
during a year. As against this,
appeared to be relatively small.
from 1239 to 3686 persons during
a fraction of the surplus labour
the Fann’s requirement of seasonal labour The Fann’s use of seasonal labour ranged 
1983/8U. Such an amount of labour is only in the area. It was also interesting to note
that a sizable supply of labour to Awash Valley Farms emanates from this area. So the problem is not of shortage of surplus labour in the area. There are indications that lack of facilities discourages the effective supply of labour. For example, reduction in monthly ration quota resulted in the lower supply of labour at the Farm. This shows that necessary facilities are positively related to rhe labour supply here. On the other hand, Bilate Tobacco Fann which provides better facilities was reported to have adequate supply of labour throughout the year. Thus it is very nuch likely that the problem of labour shortage will be solved at the Bilate-Abaya Fann with the improvement of necessary facilities.
3.11           A system of incentive to inprove efficiency at the Fann was introduced at the Farm a year ago. The system covered only the machinery operation. In the current year (1985/86) the coverage of the system has been slightly expanded but still it does not include management and supervisory activities. The initial outcome of the introduction of the incentive system was reported to be encouraging. However, the incentive system focused only 
on quantity of work done and the norm fixed for this purpose relates only to quantity and not to quality. Thus in some cases, for exanple, in case of preparation of land with tractor, quality was reported to be adversely affected. In order to increase the effectiveness, quantity should be linked with quality in the incentive system. It was too early to assess the appropriateness of the levels of the norms currently in force. However, in general, if the norm is too high to be attainable, that kind of incentive system has little effect. So a good deal will depend on the fixation of reasonable levels of norms for various activities and for this purpose, the norms should be under constant review. Moreover, in order to have greater inpact, the coverage of the incentive system should be expanded to include most of the farm operations, including the management and supervisory activities-14-
B.     Bilate Tobacco Farm
3.12           Bilate Tobacco Farm is under the administrative' control and management of Ethiopia Tobacco and Matches Corporation (ETMC) based in Addis Ababa. While the .ETMC gives planning and operating guidelines as well as provides various supporting services such as supply of inputs, marketing of cured tobacco etc, the Farm itself concentrates on the production activities.
3.13           The Farm is headed by a Manager who is supported by various staff member belonging to different disciplines. All the relevant aspects with respect to on-farm management could not be examined in detail. However, our discussion at the Farm revealed that the research and experiments have been weak. Only an attempt was made to determine the fertilizer response. The result was inconclusive and the attempt was rather feeble. Except that, there were no experiments and trials on varietal suitability, optimum planting dates, optimum number of plant population, irrigation and other cultural practices etc. Obviously, the personnel and budget for experiments and trials are lacking.
3.14           The Farm appeared to be relatively well equipped with various facilities like buildings, curing bams, sophisticated water diversion weir etc. The maintenance of some of these physical facilities like diversion weir, canals need be inproved.
3.15           Unlike the neighbouring Bilate-Abaya Farm, this Farm has no problem of labour shortage. The labour is reported to be used on time rate basis. Since the productivity aspect of labour was not examined, no 
.definitive comment can be made. But given the generally favourable impact of piece rate system on labour productivity, it would be worthwhile for the Farm to explore the possibility of introducing piece rate system of work.-15-
C.  Peasant Agriculture
3.16            Ministry of Agriculture (MOA) has the overall responsibility for the development of crop, livestock and fisheries in the peasant sector. Four Departments under the MOA are directly concerned with the development of irrigated crop agriculture. These are Irrigation Department, Peasant Association and Cooperative Development Department, Marketing and Credit Department and Agricultural Development Department. Ministry personnel work
at different levels - Zonal, Awraja and Woreda and extends upto peasant level though its Development Agents.
3.17            At the farm level, peasant organisations - Peasant Association (PA), Producers Cooperative (PC) and Service Cooperatives (SC) have emerged 
as most inportant for the development of agriculture in the peasant sector. According to the Government policy, supply of agricultural inputs and credit and other services will be increasingly channeled through these organisations and their role in all aspects of agricultural development will be strengthened.
3.18            The data on the PAs, PCs, and SCs so far organised in the Awrajas and Woredas encompassing the basin have been collected and presented in Table 3.1, 3.2 and 3.3. According to these information, 654 PAs, 41 
PCs and 125 SCs have so far been organised in the 9 Woredas encompassing the basing It appears that almost the entire farm families have joined the PAs in these Woredas. Of the PAs, over 90% have become members of the SCs.
1-16-
Table 3.1: Peasant Association in 4 Awrajas and 9 Woredas covering 1 
Bilate River Basin
Awraja/Woreda
Number
of
PAs
Membership (Farm families)
Cultivated
Area 
(ha)
Families Organized 
%
1. Haykock & Butajira (Total)
- Alaba Woreda
- Siraro Woreda
2. Kembata & Hadiya (Total)
- Linn Woreda
- Kedida Gamela Woreda
- SikeDWoreda
3. Sidana (Total)
- Shebedino Woreda
- Dale Woreda
4. Welayita (Total)
- Dainut Gale Woreda
- Damut Weyde Woreda
849
83
118
444
81
42
49
526
92
77
283
54
58
242,243
29,480
26,687
230,540
44,348
21,606
22,169
240,027
63,700
44,120
202,615
51,885
28,233
472,563
35,640
73,876
270,494 34,689
21,680
26,540
196,639 44,480
55,440
144,188 30,340
29,200
93
99
100
92
100
100
100
100
100
100
100
99
99
Awraja Total:
Woreda Total:
2,108
654
915,425
332,228
1,083,884 351,885
1 Awraja total includes figures for all its Woredas irrespective of their location within and outside the basin. Woredas indicated in the total are fully or partly located within the basin. The infonnation on Humbo Woreda which encompasses the basin is not included here.
Source:- Awraja offices-17-
Table 3.1: Producers Cooperatives in 4 Awrajas and 9 Woredas in Bilate 1 
River Basin
Awraja/Woreda
No. of
PCs
Membership
(families)
Cultivated Area
(ha)
Registered
1. Haykoch & Butajira (total
- Alaba Woreda
- Siraro Woreda
2. Kembata & Hadiya (total)
- Linu Woreda
- Kedida Gamela(Woreda
- Sike moreda .
3. Sidane (total) •
- Shebedino Woreda
- Dale Woreda
4. Welayita (total)
- Damut Gale Woreda
- Danut Weyde Woreda
)  49
1
3
14
1
3
2
52
2
26
16
2
1
2,802
80
370
815
22
82
244
7,081
130
4,971
2,038
222
58
6,988
100
1,800
1,424
30
103
331
2,727
37
1,954
2,280
597
26
7
-
-
2
-
-
1
5
1
3
-
-
-
Awraja Total
Woreda Total
131
41
12,736
6,179
15,373
4,978
14
5
Awraja total includes figures for all its Woredas irrespective 
of their location within and outside the basin. Woredas indicated in the table are fully or partly located within the basin. The information on Humbo Woreda which encompasses the basin is not included here.
Source:- Awraja Branch offices of the Ministry of Agriculture-18-
Table 3.3: Service Cooperatives in 4 Awrajas and 9 Woredas in 1
Bilate River Basin
Awraja/Woreda
No. oj SCs
: Membership (PAs)
% of
PAs
Registered
1. Haykoch & Butajira (total)
- Alaba Woreda
- Siraro Woreda
2. Kembata & Hadiya (total)
- Linn Woreda
- Kedida Gamela Woreda
- Sike Woreda
2. Sidama (total)
- Shebedino Woreda
- Dale Woreda
4. Welayita (total)
- Demur Gale Woreda
- Damut Weyde Woreda
157
23
17
78
20
5
9
98
14
17
56
10
10
835
81
97
406
74
37
44
431
92
73
269
52
46
98
98
82
91
91
88
90
82
100
95
95
96
96
22
1
1
18
2
1
3
57
6
15
41
7
6
Awraja Total
Woreda Total
389
125
1,941
596
138
42
Awraja total includes figures for all its Woredas irrespective of their location within and outside the basin. Woreda indicated in the table are fully or partly located within the basin. The information on Humbo Woreda which encompasses the basin is not included here.
Source.-'- Awraja Branch offices of the Ministry of Agriculture-19-
IV MARKETING AND PRICES
A. Marketing
4.01                     The marketing of agricultural produces from both the Bi late- Abaya and Bilate Tobacco Farms and of inputs for these Farms are organised and carried out by the public sector agencies. Marketing activities have so 
far been going on rather smoothly and the Farms did not face any significant problems in this respect.
^•02 
In’case of cotton, the corporation (SADC) transports the
seed cotton from the Farm to the ginnery in Addis Ababa for ginning. After it
is ginned, the SADC arranges for its sale to the Ministry of Industries for its
use in the textile mills. There is the standard procedure for this and the
SADC did not encounter any problem in disposing off the cotton.
4.03                      There is adequate demand for cotton. Domestic demand is
rising and the export potential and demand for Ethiopian cotton which is
generally of good quality is also high. Ethiopia used to export cotton 
previously but due to increasing demand, the entire production of cotton is
currently consumed domestically and the export had to be stopped. Thus with 
this demand situation, marketing of cotton both internally and externally is
unlikely to be a problem in the foreseable future.
4.04                      The Ethiopian Fruits and Vegetables Corporation called ETFRUIT arranges for the narketing of fruits from the Farm. The ETFRUIT arranges for
the collection, transportation, storage, grading and sale of these fruits. The
wst important market for fruits is Addis Ababa. The data on the size of
market and demand potential of fruits are mostly lacking. A study relating to 
these aspects is now being carried out by the Ministry of Agriculture in 
with
cooperation /the German Agency for Technical Cooperation (GTZ). The Bilate-
Abaya Farm produces only a very small portion of fruits marketed by the
ETFRUIT  and  hardly  any  problem  was  experienced  by  the  Farm  in  disposing  off its fruits.
4.05                       Ethiopia's export of fruits is limited, though rising in recent years. Ihe quality of fruits produced at the Bilate-Abaya Farm however precludes any possibility of their exports.-20-
4-06  Agricultural Marketing  Corporation  (AMC) is responsible for the marketing  in  the domestic market of raize produced  in  the State Fanns. Danes tic demand of maize exceeds supply requiring a large amount of import.
4.07                     At present, no vegetables are grown on the Fann although the original private owners of Fann before its nationalisation were reported to have produced a considerable amount of green beans for export. However, even if the field experiment and trials confinn that a reasonably high yield of vegetables is attainable, their marketing will be a severe constraint. Hie marketing opportwiities of vegetables in nearby town is extremely limited. These will have to be tranported to Awassa and Addis Ababa which are respectively 80 and 350 kilometers away from the Fann. The condition of the first stretch of 80 kilometers of earth road is so poor that it will make the transport of any perishable commodity extremely difficult and transport cost prohibitive. On the other hand, the possibility of processing which will require
a certain scale of operation involving a large amount of production appears to be rather remote at this stage. Thus any prospect of producing vegetables
on the Fann will be extremely limited. Similar will be the situation with 
respect to other perishable comnodities like milk.
4.08                      The size of present livestock herd at the Farm is very small. The small quantity of milk which is now produced is sold and consumed at the Farm. Only bulls are generally sold annually to Awassa Feedlot Farm for fattening. While, scope for the marketing of milk is extremely limited, there
is a good possibility of the marketing of cattle for fattening to Awassa
and Addis Ababa.
4.09                      Tobacco produced at the Bilate Tobacco Farm is cured there: and the cured tobacco is then sent to Addis Ababa for use at the cigarette manufacturing factory of the Ethiopian Tobacco and Matches Corporation (EINC). The EINC arranges for the transport of cured tobacco from the Farm. At
present, domestic supply of Virginia tobacco which is produced at this Farm falls short of domestic requirement and Ethiopia has to import about .8 to one mill ion kilograms of Virginia tobacco. Given such a level of domestic demand which is steadily rising, it would be possible to absorb a substantial increase in the production of Virginia tobacco internally.-21-
4.10                     At present, AMC is responsible for the import of fertilizers required for all the State Fanns. The pesticides and agricultural machinery required for the State Farms are imported by Agricultural Equipment and Technical Services Corporation. After their imports, the SADC and SADE in 
case of Bilate-Abaya Farm and EIMC in case of Tobacco Farm arrange for their transport and delivery to these Farms. These Farms have not so far
experienced any significant difficulty in getting their supply of fertilizer
and pesticides.
4.11                     Government procures a wide range of agricultural produces from the peasant sector at fixed farm gate prices. These produces are procured mainly through the Peasant Associations, Producers’ Cooperatives, Service Cooperative and private traders.
4.12 
In Alaba Colito, two major crops are maize and red chillies
which are of interest for this study. Maize from the peasant sector is procured by the Agricultural Marketing Corporation (AMC) through the various peasant organisations or private traders. Peasants also can sell the amount
in excess of the quota fixed for supply to Government to open market. Government does not have prograjune of procuring dry chillies and this produce is bought and sold freely in the market.
4.13                     With respect to agricultural inputs, Agricultural Irput Supply Corporation under the Ministry of Agriculture distributes these inputs to the peasant sector through a network of distribution centres of the Ministry of Agriculture. Government has the policy of gradually handing over the task
of distribution of inputs for the peasant sector to peasant organisations.
B. Prices
4.14                      The farm gate prices of agricultural produces from the State Farms and peasant sector are fixed by the Government. In case of horticultural produces the farm gate prices are determined on the basis of deduction of the costs of packing material and transport and 6% commission from the wholesale prices at which ETFRUIT sells the produces. But the wholesale prices are fixed and controlled by the Government. In case of tobacco from State Farms, prices ex-factory gate of cured leaves by different grades are fixed by the Governnent-22-
4.15                      Since the Government policy with respect to inputs is not to allow any subsidy, their prices are determined on the basis of costs which 
nay differ slightly among Farms depending on their location due to variation 
in the internal transport cost.
4.16                      The Government fixed prices now in force with respect to cotton and maize (farm gate price) and fruits are as follows:
Produces
Seed Cotton
Maize
Banana  (Grade  1) Banana  (Grade  2) Orange  (Grade  1) Orange  (Grade  2) Mandarin  (Grade  1) Mandarin  (Grade  2) Lemon (Grade 1) Lemon (Grade 2)
Prices (Birr/Q) 112.65
31
50
35
80
40
80
40
40
20
4.17                      The factory gate (Addis Ababa) prices of different grades of cured virgina tobacco produced at the Bilate Tobacco Farm are as follows:
Grades
1
2
3
4
5
6
Price (Birr/kg)
6.35
5.49
4.36
2.58
0.99
0.66
7 (scrap)
0.40-23-
V EVALUATION OF EXISTING BILATE-ABAYA AND BILATE TOBACCO FARMS
5.01                      Since Bilate-Abaya Fann and Bilare Tobacco Fann are two
seperate   entities,   the   analysis   has   been   done   seperately   for   each   of   them in order to find out the financial and economic viability of each.
5.02                     This analysis mainly focuses on the financial and economic viability of the farms under the present conditions of operations. The
present analysis is designed to measure the extent of their operational viability on the basis of their existing operations by assuming the previous capital investment as the sunk cost having zero alternative value. If the farms are not viable under this condition, they will be even more non viable with the initial capital investment taken into account.
Financial Aspects Bilate-Abaya Farm
5-03
The overall financial profitability of the Bilate-Abaya Farm is
highly negative. The financial loss ranged from Birr 1.44 million in 1980/81 to Birr 3.22 in 1983/84 (Table 5.1). This loss is almost steadily on the rise. Thus not only the total magnitude of loss is high but also more menacing is its upward trend over years.
5.04                                 The financial loss per hectare of the area under crop production activity is quite substantial. The loss per hectare of cotton ranged from Birr 907 to Birr 2,287 during 1980-84(Table 5.2). Similarly, the losses per hectare for fruits and haricot bean varied from Birr 1,141 to Birr 1,946 for fruits and Birr 425 to Birr 1,275 for haricot bean.
5.05 
In addition to the absolute amount about the profitability as
ind-irAted   above   the   relationship   between   cost   and   return   also   reveals   the equally distrubing picture. The cost-return ratio has ranged from 1.64 to
4.97   for   cotton   during   1980-84   (Table   5.3).   The   ratios   for   fruits   and haricot bean which are minor crops in the farm show equally depressing situation-24-
5.06                    The cost and price per unit of output of crops produced at the farm reveals also the disturbing nature of the problem. The average cost
per quintal of cotton for 1980-84 fluctuated from Birr 185 to Birr 560 as against its price of Birr 112.65 per quintal. The per unit cost thus exceeds price substantially.
5.07                     The main reasons for the high financial loss (negative profitability) include relatively low yield, high cost structure and the fixed price. The Government fixed prices of crops apply equally to and thus affect equally all the State Farms. The efficiency of a change in price is a much bigger issue of national policy and is not discussed here. But the issues of yield and cost structure specifically ralate to the Farm itself and its
associated institutions. So the responsibility and initiative for taking appropriate measures to modify and change the situation in these respects lie mostly with these institutions.
5.08                     As mentioned above, low productivity of crops obviously contributes in a major way to the high negative profitability of the Farm. 
The yield of cotton per hectare is only about one third of what is attained at the State Farms in Awash Valley. Similarly, the yield of fruits is about
one fifth of that at Awara Melka Farm in the middle Awash Valley. It is therefore obvious that much improvement will have to be made with respect to crop productivity at this Farm to increase its viability.
5.09                     The second most important factor contributing to the non viability of the Farm is its high cost structure. The detailed cost of
production per hectare for 1980-84 is presented in Tables 5.4 to 5.7. While both the cost per hectare and per unit of production is high, it is nuch 
higher per unit of production because of low yield per hectare.
5.10                     Of the various cost items, the Farm overhead seems to be excessively high pushing up the total cost. /The share of Farm overhead in total operational expenditure varied between 36% and 52% during 1980-84 (Table 5.1). If the Enterprise overhead is added, this share ranges between 51% and 56%. The salary and allowances are major elements in the Farm overhead, for example, these items constituted about 45% of the Farm overhead in 1982/83.One of the important reasons for this is the existence of a considerable number of redundant manpower. The Enterprise is now in the process of finalising the amount of redundant manpower. The relocation of this manpower will substantially reduce the Fann overhead.
5.11                     The second important element in the Farm overhead is the repair and maintenance of agricultural machinery constituting about 21% of this overhead. The major portion of the machinery and equipment was reported to be relatively old contributing to the high repair and maintenance cost. Moreover, the shortage of spare parts hampering timely repair and maintenance also adds to the cost. The efficiency with which these activities are carried out could not be examined. However, this issue should be examined to devise ways and means to reduce the cost. The incentive system now in operation and arrangement for the timely availability of spares are likely to reduce this cost.
5.12                      The total magnitude of financial loss and the relationship between the cost and return of the Farm are such that the Farm is unlikely to be financially profitable by solely relying on yield increase because
the extent of yield increase necessary to neutralise the loss is too large to 
be attainable under the existing condition or under the improved condition in the foreseeable future. Therefore, determined efforts will be necessary to reduce the costs.-26-
Table 5.1: Financial Profitability of Bilate-Abaya State Farm for 1980/81, 1981/82, 1982/83 and 1983/84
X
Financial Profitability (in 000 Br.)
Items
1980/81
1981/82
1982/83
1983/84
A. Total Revenu
1. Sales
2. Increase (Decrease) in
stock
3. Sundry Income
U. Total Revenue
B. Total Expenditure
1. Operating Expenditure
- labour
- Material
- Machinery
- Faun overhead
- Sub-total
2. Other Expenditure
- Enterprise overhead
- Interest on Borrowed
Fund
- Sub-total
3. Total Expenditure
C. Profit (or loss)
6,13U (1,945)
61
4,250
1,695
3,779
59
5,533
3,867
(16)
62
3,913
3,459
990
758
780
1,431
3,959
801
934
1,735
5,694 (1,444)
1,071
975
934
3,251
6,232
212
1,449
1,661
7,893
(2,360)
934
932
733
1,580 4,179
533
1,442
1,975
6,154
.2,241)
658
1,025
825
2,620
5,128
1,553
1,553
6,681
(3,222)-27-
Table 5.2: Net Revenue of Crops per hectare at Bilate-Abaya Farms During 1980 - 84
(Birr)
••
1980/81
1981/82
1982/83
1983/84
Cotton
- Gross Revenue
- Production cost
- Net revenue
Fruits
- Gross Revenuw
- Production cost
- Net Revenue
Haricot Bean
- Gross Revenue
- Production cost
- Net Revenue
1,408
2,315
-907
3,210
2,042
1,168
48
476
-428
1,352
3,639 -2,287
2,880 4,508
-1,628
48
863
-815
1,014 2,583
-1,569
1,860 3,806
-1,946
96
1,371 -1,275
484
2,407 -1,923
2,760
3,901 -1,141
!-28-
Table 5.3: Estimated Annual Cost-Return Ratios of Crops at Bilate-Abaya Faxir. During 1980 - 84
1980/81
1981/82
1982/83
1983/84
Cotton
- Cost/ha
- Retum/ha
- Cost-Return Ratio
Fruits
- Cost/ha
- Retum/ha
- Cost-Return Ratio
Haricot Bean
“ Cost/ha
“ Retum/ha
“ Cost-Return Ratio
2,315
1,408
1.64
2,042
3,210
0.64
476
*48
9.92
3,639
1,352
2.69
*4,508
2,880
1.57
863
*48
17.98
2,583
1,014
2.55
3,806
1,860
2.05
1,371
96
1*4.28
2,407
*48*4
4.97
3,901
2,760
1.41-29-
Table 5.4:       Production Cost of crops per hectare at Bilate-Abaya State Farm in 1980/81 (Birr)
Cost Items
Crops
Cotton
H. Bean
Fruits
1. Labour
- Land preparation
- Canal & dyke mint.
- Seedling preparatioi
- Planting
- Weeding/Hoeing
- Fertilizing
■ Thinning
“ Stumping
- Irrigation
Insecticide appl.
Herbicide appl.
Crop guarding Harvesting operation
Sub-total
2 • Material
" Seed & Seedling
~ Herbicide
Pesticide/Insecticid
~ Fertilizer
Irrigation materials
Sub-total
Machine Operation
II   p
arm Overhead
^erprise Overhead
Ir iterest Cost
y
Tot *l cost/ha.
Q
Yle ld per ha/qi
37
3U
11
135
3
3
1
48
2
-
17
110
401
-
-
-
20
39
-
-
- •
29
-
-
-
12
100
-
1
-
15
206
2
1
—
38
-
1
71
335
47
a 194
86
327
242
649
316
380
2,315
12.5
185
-
-
89
138
72
77
476
0.94
506
91
-
91
485
506
290
335
2,042
53.5
38Table 5.5:
-30-
Production cost of crops per hectare at Bilate-Abaya State Farm in 1981/82 (Birth
Cost Items
C r o    P s
Cotton
Beans
Tcmatoes
Fruits
1. Labour
- Land preparation
“ Canal & dyke maint.
- Seedling preparation
” Planting
- Weeding/Hoeing
" Fertilizing
• Thinning
* Stumping
- Irrigation
~ Insecticide appl.
Crop guarding
Harvesting operation
Sub-total
2 - Mat erial
Seed & Seedling
“ Herbicide
Pesticide/Insect ic ide
Fertilizer
Irrigation material
Sagging material
Sub-total
Machine operation
ann OVerhead absorbed
Enterprise overhead
Merest cost
y
Tot al cost/ha
Y
'  ^ld per hectar/ql
23
36
—
19
154
3
4
2
62
2
45
109
459
63
205
184
5
10
467
667
1,301
106
645
3,639
12
303
39
33
1
10
50
109
196
6
1
62
936
25
—
—
—
48
121
220
26
105
.  722
116
85
-
116
196
259
23
148
863
2
432
-
85
244
764
51
327
2,193
41
52
239
2
96
1,361
16
43
325
32
416
484
1,511
99
637
4,508
48
94-31-
Table 5.6: Production cost of crops per hectare at Bilat-Abaya State Farm in 1982/83 (Birr)
Cost Item
Crops
Cotton
Fruit
H. Bean
2
3.
4
5
6
7 8.
1 . Labour
- Land Preparation
- Canal & dyke mint.
- Planting
- Weeding/Hoeing
- Thinning
- Fertilizing
- Irrigation
- Chemical Spraying
- Crop guarding
- Harvesting operation
Sub-total
.   Material
• Seed & Seedling
• Pesticide
" Fertilizer
- Irrigation materials Harvesting material s Bagging materials
Sub-total
Machine Operation
Farm Overhead
Enterprise Overhead
Interest cost
Total Cost/ha
Yield/ha. (Ql)
Cost/qi
16
24
16
133
3
4
45
2
38
99
380
23
223
146
2
1
13
408
364
598
250
583
2,583
9
287
5
1
48
709
-
10
113
53
3
85
1,036
-
19
17
-
4
26
266
151
-
-
-
417
230
902
367
854
3,806
31
123
-
22
88
32
-
49
-
-
-
81
333
430
132
307
1,371
2
686-32-
Table 5.7: Production cost of crops per hectare at Bilat-Abaya State Farm in 1983/8*4 (Birr)
C  R 0 P
Cost Item
Cotton
Fruit
1. labour
- Land preparation
- Canal & dyke neint.
- Planting
- Fertilizing
- Weeding/Hoeing
- Thinning
- Prunning
- Irrigation
" Chemical Spraying
- Crop guarding
” Harvesting operation
Sub-total
2 • Material
“ Seed and Seedling
~ Pesticide
Fertilizer
* irrigation material
Harvesting material
Bagging material
Sub-total
3  • Machine Operation
Fann Overhead
5 - Enterprise Overhead
• Interest Cost
7 - Total cost/ha.
8
Yield per hectare (Qt.)
—_l°st^per
12
19
7
2-
103
2
-
32
5
26
38
246
28
266
110
1
2
5
412
250
822
206
471
2,407
4.3
560
-
19
16
18
369
2
21
148
20
-
60
673
-
222
292
-
-
-
514
388
1,275
319
732
3,901
47
83-33-
Bilate Tobacco Fann
5.13                   Direct production cost of tobacco in 198U/85 is estimated at Birr 2,866 per hectare (Table 5.8). In the absence of data on actual direct production cost, the above estimate has been made on the basis of data on actual input use collected fran the Farm office. This amount of estimated direct cost of tobacco compares well with that estimated for Awara Melka Farm in the middle Awash valley.
5.14                  The data relating specifically to the indirect cost are lacking because the Ethiopian Tobacco and Matches Corporation (ETMC) to which the Farm belongs keeps the data on both direct and indirect expenditure togetht Although the actual expenditure by specific time period may diverge somewhat From the cost data related to that period because of timing of payment, the data on expenditure for 3 years which are available frcm the ETMC have been used to have an idea about the total cost of production (direct + indirect) per hectare at the Farm. It will appear from the Table 5.9, that average expendiu both direct and indirect (average of 3 years) amounted to Birr 7,308 per hectare during 1980/81 - 1982/83. This figure exceeds estimated direct production cost by Birr 4,442 per hectare. Obviously the indirect expenditure is very high.
S.1S                  Since overhead item gene
of direct expenditure (or cost), the overhead expen extremely high. Analysis of some individ 
the excessive nature of overhead. For exanip year on account of salary, pension and allowan 
hectare during 1980 - 83. Snarly, 
for vehicle running and fuel and lubrican 
llv  accounts for the major portion RXDenditure appears to be
also
hectare respectively during this P^1 expenditure per hectare for overhead 
'’XW be difficult to be made profitable. 
of  expenditure could not be ascertained. 
on  salaries and allowances indicate the n 
»f balance with the scale of operation of
’
average expenditure per estimated at Birr l,7
expenditures per year lj268 Birr 639
level of prx3duction activities
for  such a
item, liKe expendi ^^yed manpower which is parw--3U-
5.16                     The financial profitability of the Farm on actual basis could not be ascertained because no profit and loss account specifically relating to this Farm is prepared by the EINC. In the absence of such data, gross revenue has been estimated on the basis of actual yield figure obtained from the Farm and the Government fixed factory gate price of different grades of tobacco. The gross revenue thus estimated comes to Birr 5,069 per hectare in 198U/85. The revenue net of estimated direct cost amounts to Birr 2,203 per hectare. But when the indirect expenditure is taken into account, the situation gets reversed. If we deduct the average expenditure, both direct and indirect from the gross revenue, there is a loss of Birr 2,239 per hectare. This
situation calls for the close review of the cost structure specially the indirect ones of the Farm and for remedial measures to reduce them.-35-
Me S.S: Estimated Direct
------------------ Hectare in 198j/Rg
Qf
Qty.
Price/ Unit (Birr)
200 400
y
0.9
1.10
14
Cost
(Birr)
700
180
440
126
12
Price/ Unit
Qty.
A.
Price/
Unit
L  Seed (kg)
2 - Fertilizer,, 
(Rg)
:  DAP (kg)
Insecticide (Lit )
*»• Spray
5 - Others
•
B.
c.
(T.H.)
Lab °ur (M.D)
16
352
D.
20
2
Curing
^tai ———___
320
704
384
2,866-36-
Table 5.9: Total Expenditure per year for Bilate Tobacco Farm
During 1980/81 - 1982/83 
(000 Birr)
Item
1980/81
1981/82
1982/83
Average for
3 years
Salaries, Pension & Allowances
Wages
Uniform
Medical
Insurance
Travelling
& Power
Fuel & Lubricant
Vehicle running 
charge
Penance of Building
" Machinery
„            able material
Asportation
^Uaneous
materials
materials
Seeds
r '«Ui2er
Stationary & „ .
Sr
^  ,"   ? “ting
er Consuir
t0
, ‘“£
'^-C^^P^ehase, Land Tax
242.9
114.3
7.3
1.7
7 1
13.3
2.5
120
185.9
0.4
5.8
19.5
8.0
0.2
8.1
9.9
18.8
0.7
81.1
0.4
35.2
-
224.3
128.1
2.3
—
/ . O7 A
21.2
0.3
45.2
126.4
0.3
1.2
54.4
7.5
0.5
3.2
14.6
202.4
1.8
79.9
0.3
38.6
-
251.2
127.7
2.5
4.0
c a
16.2
1.6
96.5
208
4.4
0.1
4.9
12
13.0
13.4
1.7
199.4
0.5
162
0.5
1.7
6.6
239
123
;
12
2
7
17
2
87
173
2
2
26
9
5
8
9
140
1
108
25.
2
Total
883.1
959.8
1134.8
999
\J^irr)
---- ---- ----------------------
(h a->
6  ^nditure (3 
yearS)/
-------------- _____
119
142
149
136.7
7,308-37-
5.17 
Economic Aspects
In this section, an attempt has been made to find out the
operational viability from the economic standpoint of the existing production activities being carried out at these Farms. This will be done through the calculation of net economic return per hectare of major crops i.e. cotton 
and tobacco. Most of the capital investment was made about a decade or so ago and so for the purpose of evaluating impact of any new and additional investment, the initial capital investment is to be considered as sunk cost having zero opportunity value. In order to provide an approximate idea about the economic profitability of the existing operations, economic returns of najor crops have been estimated without attempting at calculating the internal rate of return.
1) The unskilled labour cost is valued (shadow price ) 50% of the going wage.
2) The foreign exchange is valued at the prevailing off exchange rate i.e. US$ 1 = 2.07.
3)
The local currency has been shadow priced by using the standard conversion factor of 0.75.
*-38-
5.21                    The economic value of seed cotton has been estimated at Birr 1,621 per ton (Table 5.12). This figure is calculated on the basis
of export parity price of cotton lint and import parity prices of cotton seed oil and cotton seed cake (Tables 5.10 & 5.11). The yield per hectare of seed cotton was 1.297 ton in 1984/85 and the gross economic return is estimated at Birr 2,102 per hectare.
5.22                    The economic cost of production is estimated at Birr 1,809 per hectare (Table 5.13). This means that net economic return for seed cotton per hectare in 1984/85 was Birr 393. However, net economic return estimated on the basis of last 5 years average yield which is 9.53 ton per hectare becomes negative (-Birr 264).
s a                      The economic net return . XUth sorm inprovenent in
wuld be profitable economically^ ^^t of capital
per hectare for seed cotton
cultivation at Bilate AM?
indicates
 considerable
a
-t-mpnt if m^e are
ration
may be noted here that if
mde         aM/or         the         cost         of         any         new         wvesFaOT              operation increase in yield of cotton would
economically profitable. 
The gross economic: re at Birr U,852 per ton (Table 5.1 )• 
« the Bilate Tobacco Farm, the
hectare as compared to estima
5,812 • Thus the tobacco cultivation resu BilT 360. The magnitude of negative return 
estimated
for Virginia tobacco is of  i.y
-_ic return cones
MS t of P—of
ne gatiV
iggu/85
er
t h efore far
to ° . slig^1
economic standpoint than from the finan<' ^^^en point eco t in ,X. the Farm can achieve ^^capital
“ tm mated here tMt if cost of the
Steady nade is included, the negative pro ^ Cl?ease considerably.
t of vieWt i ^^cally. of  Farm-39-
Table 5.10: Estimated Export Parity Value of Cotton Lint Per Ton (Birr)
Financial .
Economic
1. FOB Value (Assab)
2. Handling & Other charges
at Port
3. Duties and Taxes
4. Value ex-Assab
5. Processing Cost
6. Internal Transport, Handling etc. from Port to Fann
7. Export Parity Value ex-farm
U,2UU
147
84
4,013
257
130
3,626
110
-
4,134
238
120
3,776-40-
Table 5.11: Estimated Inport Parity Value of Cotton Seed Oil Per Ton (Birr)
Financial
Economic
1. C&F Assab
2. Handling & other charges
at Port
3- Duties and Taxes
*+. Value ex-Assab
5. Internal Transport, Handling etc. from Port to Farm
6. Processing Cost
7. Import Parity Value ex-Farm
2,513
244
1,483
4,240
130
775
3,995
2,513
183
-
2,696
120
717
2,099
Table 5.12: Estimated Economic Value of Seed Cotton Per Ton (Birr)
Item
Conversion Factor
Export/Inport Parity Value
Equivalent
ex-Farm Economic Price
Lint
Oil
Cake
Lass ----- -
0.35
0.11
0.52
0.02
3,776
2,099
130
-
1,322
231
68
- •
1,621-m-
Table 5.13:              Cost of Production (Economic) of Cotton Per Hectar (Birr)
. Item
Financial
Economic
1- labour
2. Material
3. Machinery Operation
4. Farm Overhead
5. Enterprise overhead
6 • Interest
414
401
351
988
200
514
212
381
325
741
150
-
2,868
1,809
Table 5.14: Extimated Import Parity Value of Tobacco (Virginia) Per Ton (Birr)
Item •
Financial
Economic
C&F As sab
Adjustment for Quality
(Reduction by 15%)
Handling & other Charges
a t Port
**• Duties and Taxes
Transport, Handling etc
Port    Addis Ababa
to
5,180
4,430
340
19,620
180
5,180
4,430
255
-
167
24,543
4,852-42-
VI irrigation development alternatives in the basin
6.01                      Based on the present state of information of rhe area, three
Droad     alternatives     have     been     identified     for     the     development     of     irrigated agriculture in the basin. These alternatives are as follows:
1.     Full development with dam at Boyo: This includes the following components:
-    Alaba Colito: 2,000 ha new area (net)
-     Lower Bilate Rehabilitation: 3,023 ha (net) consistingc 2,553 ha under existing crop and 470 ha without
any crop
-     Lower Bilate Expansion: 4,700 ha (net) new area.
2. • Rehabilitation and expansion of Lower Bilate with dam at Boyo:
-     Rehabilitation: 3,023 ha (net)
-     Expansion: 4,700 ha (net)
3.     Rehabilitation and expansion of Lower Bilate with dam at Dendo:
• Rehabilitation: 3,023 ha (net)
Expansion: 4,700 ha (net) 5.02 
of all the deserves a
^^Although     the     rehabilitation     of     lower     Bilate     is     an     integral     part
s Pecifa^erTlat^VeS’
(sub-alternative) which
precede other
c   cons^-deration. For rehahil iration should normally 
the ^
n
>Orien^s ^>ecause a considerable investment in irrigation was
for
returj^ and ^rovement of the facilities normally holds premiseA. Socio-Economic Implication of Boyo Dam
6.03                    The proposed dam at Boyo is estimated to submerge 50km2 area
2
of Boyo Swamp which covers an area of about 120 km  . This has important socio-econanic implications for both people and livestock inhabiting the area. About 23,000 people in 5,600 households live in the area. In 
addition, about 100,000 heads of cattle are estimated to graze in the Boyo Swanp. The submergence of 50 km  will results in the foregone production of cattle and involve the resettlement of 2,500 families elsewhere.
Loss in Meat Production
About 50,000 heads of cattle are expected grazing in the Boyo Swamp due to the innundation 
in meat production is estimated at 3.15 million farmgate price of Birr 1 per kilogram, the ann
t-rms comes to Birr 3.15 million2.
2
1
financial
months of a year.
Birth weight is 15 kgs/calf
Laily weight gain is 200 grams/head 
50,000    heads    of    cattle    graze
• cin n 'Km  area or
2
f Boyo Swamp ®
fanngate
Cattle is to be marketed at 3 
Loss in meat production = (200 S^_  million kgs
. aae at Birr 1/kg 
days * ^for 3 yr Q00s.
a
x
for
Ms x 3 yrs = 63 kgs x 50,000 X 3 -
Annual meat loss - 3.15   ^'''^^
m
Annual financial loss - Birr 3.
< n  ^B nlion
|1
l6.08
-UU-
In case of resettlement of these people elsewhere other than
in irrigated area, the cost of such resettlement is difficult to estimate
at this stage, although seme indication of magnitude nay be given. As
irentioned before, the cost is estimated to range between Birr 2,070 and Birr
7,500 per family. Since the Boyo people who will need resettlement are well
settled in a reasonably good productive land having a relatively large
ownership of cattle, they differ from those who come from drought affected 
areas where land has been seriously degraded. This indicates that resettlement
of these people will have to involve a relatively high cost. Moreover, if
adequate arrangements are to be made so that the livestock herds of these
people remain unaffected involving no meat production foregone (loss is
estimated at 3.1 million kilograms per year due to inundation of Boyo Swamp), 
the cost should be high. In view of these factors, the average of the high 
end lew cost estimate for resettlement i.e. Birr 5,000^ per family may be
USed in this case. This estimate assumes that with this cost of resettlement, 
SS         meat production due to Boyo Swamp inundation is fully avoided and that
in which these livestock herds will be rehabilitated did not produce anything before. If the area was producing som __ethi — #  ng before, that production
^d-ll be foregone and that wi'l-l- a--ga---in a ----dd t   ----o*------------ f resettlement frcm the national point of view.
6.09
Apart from the finanrial aspects, there is a very sensitive
tx J^asonably good crop and fertile grazing land in moving them people to possible consequences of Boyo dam.
1
the average of Birr 2,050 and Birr 7,500.-45-
B. Financial Analysis of Development Alternatives
In this section, benefits and costs arising out of the developmeni 6.10 
of irrigation facilities under all the alternatives have been estimated and compared in financial terms. In estimating and comparing financial benefits ana costs, the standard methodology for this purpose has been followed.
Benefits
6.11
direct benefit benefits which
6.12
farm operation area.
Increase in crop and livestock production constitutes the from the project. There are also indirect and secondary have however not been estimated or analysed here.
The crop and farm budgets have been prepared both for state for lower Bi 1 ate area and for peasant farming in Alaba Coli
Bilate
direct
__ ...
highest    for    tobacco    (Birr
(D-
The estimated direct production costs for crops to be grown in lower are presented in Tables b.l to 6.4. The net return (gross return production cost) per ha under state farm operation is estimated to be
------- ---  3,456), followed by cotton (Birr 772), forage crops
(Bi rr 534) and maize with Birr 121 (Table 6.5). It will appear that cotton Wri^ will be the major crop in the area yields a relatively lew return as
n^
ar e
' d to good cotton growing area like Awash basin. This lew return is
a
c   7 dUS tO low Yield. The net return for maize is rather low even though 
^t^lderably hieher yield rate over the existing one has been assumed. The
r  i°bacco is considerably high as compared to other crops but the under this crop has to be limited because of limited bam capacity.
6 -l3
98  the ^se
In case of Alaba Colito, maize and dry chi
^Presentative crops to be grown under irrigation because a the major crops in the area . The Alaba area uhich «
Ration is already under rainfed crops and in estimating yie condition, some drought effect has been included
Lillies have been taken 
.
1
see  the annex on agriculture.6.14                             As discussed in the annex on agriculture, the cropping pattern in lcwer Bilate area is projected by taking into consideration the following factors:
-   Major foodgrain should be produced to meet the full requirement of the population in the state farm.
-    Either haricot bean or forage crops should be used as the rotational crop.
-   The existing fruit trees should be left undisturbed.
- Area under tobacco should not exceed the existing bam capacity.
• The remaining area will go for cotton which will be the major crop.
6,15
Financialy, forage crops outcompete haricot bean and so forag
cr °ps have been selected for rotation. Although maize has one of th
Costs-U7-
6  18                     Although Alaba Colito has not been considered as a distinct . alternative, its per ha capital cost can be estimated since the difference m
cost between alternative 1 and 2 is fully attributable to Alaba Colito. 
Accordingly, the per ha capital cost for Alaba Colito is the highest at Birr
11,400.
6.19                    The capital cost per ha for these alternatives may appear to be relatively low as compared to other areas such as middle Awash. The major factors for this relatively lew cost are that (1) a considerable amount of investment was already made in lower Bilate area and (2) the proposed 
are
facilities/designed for irrigating one crop only.
6.20                     With this low capital cost, the irrigation development in the
basin could be financially attractive if the yield of crops specially the raj or
one were high enough. But the reasonably attainable yield in this area is low. For instance, the projected yield of cotton which is the major crop is only 66%
of what is achieved in middle Awash. With such a low yield, it is difficult
for any large scale irrigation project under state farm operation to be viable.
6.21                    Annual operation and maintenance cost for 3 alternatives varies from Birr 3,063 million for alternative 2 to Birr 3,812 /for alternative 3 
(Table 6.13). These costs for lower dilate development are relatively low
due to allowance made for the existing overhead cost item. For example, permanent employees for the existing Bilate-Abaya farm already exist and they will be there irrespective of the proposed project. Moreover, this farm as
well as Bilate Tobacco farm have surplus manpower in excess of present requirement. In order to make the operational and maintenance cost reflect
tne  incremental part, the existing cost has been deducted.
The three variables - total capital cost, annual operation and "^tenance cost and annual incremental return at full development can give a
gh indication of the viability of each development alternatives. In case rnat:'-ve 1> the annual incremental net return (Incremental return minus
(Tawi 31X5 maintenance cost) at full development is Birr 6.589 million '         6 liii *
ye ^r rea" • 
annual net return which starts flowing in from 4th
g full development on 8th year, the project involving a capital-U8-
cost of 96.8 million (Alternative Dis unlikely to be viable. In case of altemati
2 and 3, the annual net incremental returns at full development are Birr
2.643 million and Birr 2,517 million respectively (Tables 6.15 and 6.16). 
With such incremental net returns stream, these alternatives involving capital
costs of Birr 74 million and Birr 75.3 million are also less likely to be viable.
6.23                     Costs and returns differ only slightly between alternatives 2
and 3. The capital cost for alternative 3 which involves the construction of
dam at Denda exceeds that for alternative 2 involving the construction of Boyo 
dam by only Birr 1.3 million. On the other hand, the incremental net return, 
at full development is the same for these two alternatives. Thus in terms of
costs and return, the difference between alternative 2 and 3 is negligible. 
These costs and returns situations for alternative 2 and 3 do not seem to 
financially
justify/the   construction   of   dam   at   Boyo   for   irrigating   only   lower   Bilate   area since it involves a much higher unquantifiable social cost in terms of
displacement of settled people with all its attendant adverse social consequences.
6.24                     With respect to comparative advantage between alternative 1 and alternative 2 or 3, the annual incremental return at full development for alternative 1 is higher by Birr 0.883 million as compared to alternative 2 and 3. Such a snail difference in return as compared with the additional capital cost
of about Birr 22 million over alternatives 2 and 3 nnkes the alternative 1 less viable. This relative unattractiveness of alternative 1 results from both benefit and cost sides. On the benefit side, since the Alaba Colito area is already being cropped, the incremental benefit which will arise from the benefit with irrigation minus the benefit without irrigation will be low. The cropping ^tensity is taken to be 100% (i.e. one crop in a year) as the irrigation 
system is designed to provide only supplementary irrigation to one crop. On the cost side, unlike in lower Bilate, Alaba Colito does not have any previous Vestment on irrigation development.
6.25
facilities forms ar ’
The rehabilitation of lower Bilate farms and irrigation does not involve any new dam construction. Although rehabilitation 
integral part of all the 3 alternatives, this can be considered as a distinct
— option. In that case, its financial viability appears to be very ________ ________ _
The capital cost involved is Birr 6.5 million i.e. Birr 2,150 per ha-49-
The capital cost per ha is thus only about 22% of such costs in case of alternative 1,2 and 3. At full development, incremental return per year
is estimated at Birr 2,382 million as against the incremental operation and maintenance cost of only 0.275 million per year (Table 6.17). The low incremental operation and maintenance cost is due to the fact that the existing farms and facilities are now in operation and the rehabilitation will only add very little new to this cost. This benefit and cost streams indicate that the rate of return will be very attractive for rehabilitation.
6.26                       The financial rates of return for the three alternatives
-1
have been estimated (Tables 6.14, 6.15 and 6.16). The rates of the returns for all these alternatives, 1,2, and 3 are highly negative. The discounting of net incremental return at 1% rate of discount results in a net present worth of Birr -58.2, -37.95 and-41.96 million for alternatives 1,2 and 3 respectively. This shows that the rates of return are highly negative for
^11 these alternatives and the iragnitude of negative rates of return is the highest for alternative 1 followed by alternative 3 and 2 respectively. Hcwever, the difference between alternative 2 and 3 is small.
The rehabilitation of lower Bilate re
-in a financial financial
. « zrr, wi c rate of return of 26.55% (Table 6.1 )• viability of rehabilitation option. Normally, 
This indicates a ru.gr
. vestnent for rehabilit
. .
ation
of     existing     project     under     operation     has     a     blSh^a^
i
portun ty
earlier
value and  the
investment is treated as a sunk cost having incremental benefit with additional investment costs is generally high.
operation and maintenance-50-
Table 6.1: Estimated Direct Cost (Financial) of Production per hectare of irrigated cotton under State Farm Operation 
in Lower Bilate Basin
11
Cotton
11. Material
Qty.
Unit
Price (Birr)
Cost
(Birr)
a.     Seed (kg)
b.  Fertilizer - Urea (kg)
c.  Fertilizer - DAP (kg)
d - Insecticide (Lit)
e  • Others
25
75
100
20
1.3
.9
1.1
14
33
68
110
280
2 ‘ Machinery Work (TH)
20
20
400
1 3 • Tools
4 ‘ Labour (md)
|-il__^22L^ i s (10%)
10
200
1.92
38U
ngenc: e
129
—_^2^        working capital
rest on
64
tax
3-51-
Table 6.2: Estimated Direct Cost (Financial) of Production Per Hectare of Irrigated Tobacco under State Fann Operation in Lower
Bilate Basin
1
T  o b a c c o
1 1. Materials
Qty-
Unit
Price (Birr)
Cost
(Birr’)
1        a. Seed (kg)
b.     Fertilizer - Urea (kg)
c.     Fertilizer - DAP (kg)
d- Insecticide (Lit)
e - Others
5                       1,100
•I
200 .9
250 1.1
9 '
1U
550  1
180
275
126
2 - Machinery Work (TH)
16 1             20
320
3  • Tools
10
4
1  - Labour (MD)
400                   1.92
768
1   • Curing
1 6
^^Conting       (iq%)
550
encies
278
1—_—^Jterest on working capital
92 1
Ij^^Land use tax
3
Total
3,152-52-
Table 6.3: Estimated Direct Cost (Financial) of Production Per Hectare of Irrigated Maize under State Fann Operation 
in Lower Bilate Basin
Maize
1. Materials
Qty
Unit
Price (Birr)
Cost
(Birr)
a. Seed (kg)
b. Fertilizer - Urea (kg)
C. Fertilizer - DAP (kg)
d. Insecticide (Lit)
e  • Others
30
100
75
u
.8
.9
1.1  G
3
24
90
83
12
20
2 - Machinery Work (TH)
15
20
300
3  • Tools
10
J^J-dbcur (MD)
90
192
173
-l^^tingencies (io%)
71
on working capital
23
tax
3
Total
809-53-
Table 6.4: Estimated Direct Cost (Financial) of Production Per Hectare of Irrigated Pasture under State Farm Operation in Lower
Bilate Basin
Qty
Unit Price (Birr)
Cost
(Birr)
A. Establishment
1.    Materials
-    Seeds (kg)
-    Herbicide (Lit)
2.
3.
4.
5.
Machine Operation (TH) Labour (MD)
Contingencies
Interest on working capital
Total
Annual Establishment cost
8
6
15
16
12
10
20
1.92
96
60
300
31
49
12
548
110
Annual Operation Cost
1.    Materials
-    Urea (Kg)
-    DAP (kg)
-    Herbicides (Lit)
2.
3.
4.
5.
6.
Machine operation (TH) Labour (MD) Contingency
Interest on working capital Land use tax
Total Total (A + B)
100
100
6
4
5
.9
1.1
10
20
1.92
90
110
60
80
10
35
18
3
371
481-54-
Table 6.5: Estimated Net Return (Financial) Per Hectare of Irrigated crops under State Fam operation (at Full Development)
Crop
Yield (QI)
Price
Birr/ql
Gross Return (Birr)
Direct Production
Cost
(Birr)
Net Return (Birr)
Cotton
Maize
Tobacco
Forage crops (Meat) Haricot Bean
20
30
16
9.23
15
112.65
31
413
110
48
2,253
930
6,608 1,015
720
1,481
809
3,152
481
656
772
121
3,456
534
64-55-
Table 6.6: Estimated Incremental Return to Crops under Irrigation in Alaba Colito 
Per Hectare
Maize
Dry Chillies
Existing
Yield (QI)
Price (Birr/ql)
Gross Return (Birr)
Production cost (Birr)
Net Return (Birr) Projected
9
31
279
75
204
u
200
800
272
528
Yield (Ql)
Price (Birr/Ql)
Gross Return (Birr)
Production cost (Birr)
Net Return (Birr)
Cerement al Return (Birr)
(1,000): Incremental return     393,000
25
31
775
178
597
393
7
200
1,400
382
1,018
490
Chillies :                 "
fl
490,000
883,000-56-
Table 6.7:
Estimated Incremental Return in Lower Bilate Basin Farms ('000 Birr)
Year
4
5
6
7
8
9-35
New Area (5,170 ha)
Cotton (3,410 ha)
Maize (360 ha)
Tobacco (100 ha)
Forage (1,300 ha)
Area which was under -Sl22 (2,553 ha)
2,106
35
277
555
2,238
37
294
590
2,370
40
311
625
2,501
42
329
659
2,633
44
346
694
2,633
44
346
694
Cotton (2,312 ha)
Tobacco (150 ha)
Fr ^it ( 91 ha)
Total
1,356
214
22
4,565
1,441
227
23
4,850
1,526
240
24
5,136
1,610
254
26
5,421
1,695 267
27
5,706
1,695
267
27-57-
Table 6.8: Estimated Incremental Return due to Rehabilitation
of Existing Lower Bilate Farms
<
('000 Birr)
Year
u
5
6
7
8-25
New Area (470)
Cotton
Maize (1,400 ha)
Tobacco (50 ha)
Forage (380 ha)
Existing Area
Cotton (2,312 ha)
Tobacco (150 ha)
Fruit (91 ha)
14
138
162
1,356
214
22
14
147
172
1,441
227
23
15
156
183 1,526
240
24
16
164
193
1,610
254
26
17
173
203
1,695
267
27
Total
1,906
2,024
2,144
2,263
2,382-58-
Table 6.9: Capital Cost for Alternative 1
Item
Cost
(000 Birr)
1   1. Boyo Dam
2. Resettlement
1   3. Construction cost of Irrigation Facilities, Infrastructures
and Land Development
a) < Koiito Plain Development b) Lower Bilate Rehabilitation
i               c) Lower Bilate Expansion 1          Fann Buildings
1 S. Farm Machinery
1,250
12,500
22,800
5,000
41,750
7,000
6,500
Total
96,800
k-60-
Table 6.11: Capital Cost for Alternative 3
1------------- -
1 
Item
f   Cost
(000 Birr)
1 1. Denda Dam
1 2. Resettlement
I 3. Construction Cost of Irrigation Facilities, Infrastructures and
1          Land Development
1              a) Lower Bilate Rehabilitation 1              b) Lower Bilate Expansion
1         Farm Buildings 1          Farm Machinery
13,800 1,250
•
|           5,000 41,750
7,000 6,500
Total
75,300-61-
Table 6.12: Capital Cost for Irrigation Development Per Hectare for 3 Alternatives
Capital cost
(000 Birr)
Net Area
(ha)
Capital
Cost/ha
(Birr)
1. Alternative 1
2. Alternative 2
3. Alternative 3
**• Alaba Colito
96,800
74,000
75,300
22,800
9,723
7,723
7,723
2,000
9,956
9,582
9,750
11,400-62-
Table 6.13: Annual Cost of Operation and Maintenance with the Completion of Full Construction
Cost
(000 Birr)
Alt. 1
Alt. 2
Alt. 3
1. Boyo Dam
2. Kolito Plains Development
3. Lower Bilate Development — 4  • Fann Buildings
Fann Machinery
6 - Permanent Staff-7
General Services & Pol
12
749
918
70
32U
1,452
287
12
-
918
70
324 1,452
287
138
-
918
70
324
1,452
287
Total
3,812
3,063
3,189
Figures on these items are reduced >.0 by de
the figures for existing permanent srai
figures reflect only incremental costs.
. o-t-aff to make tnese-63-
T ^le 5 14. Estimated Financial Rate of Return for Alternative 1
(000 Birr)
Year
Capital
cost
0 & M cost
Incremental Return
Net
Incremental Return
D.F.
at 1%
Net Pr. 
worth
D.F.
at %
Net Pr. 
worth
1
2
3
4
5
6
7
8
9
10
11
12
•10
14
15
16
17
18
19
20
21
22
23
2U
16,330 31,820 24,650 15,800
8,200
5,271
5,600
5,930
6,260
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
6,589
-16,320
*31,820
-24,650
-13,579
- 5,840
2,499
2,639
2,777
2,777
2,777
- 6,223
2,777
2,777
2,777
2,777
2,777
2,777
- 6,223
2,777
2,777
2,777
2,777
2,777
2,777
2,777
.990
.980
.970
.960
.951
.942
.933
.923
.914
.905
.896
.887
.879
.870
.861
.853
.844
.836
.828
.820
.811
.803
.795
.788
.780
-16,167
-31,184
-23,911
-13,036
- 5,554
2,354
2,462
2,563
2,538
2,513
- 5,576
2,463
2,441
2,416
2,391
2,369
2,3UU
- 5,202
2,299
2,277
2,252
2,230
2,208
2,188
2,166
•
9,000
9,000
3,050
3,240
3,431
3,621
3,812
3,812
3,812
3,812
3,812
3,812
3,812
.3,812
3,812
3,812
3,812
3,812
3,812
3,812
3,812
3,812
3,812
3^812
(-58,156)fljh
-6«l-
Table 6.15: Estimated Financial Rate of Return for Alternative 2
1
(000 Birr )
Capital
cost
0 & M
cost
Incremental Return
Net
Incremental
D.F.
it 1%
Net Pr. worth L
D.F. it 30%
Net Pr worth
Return
1
12,330 23,520 18,150 11,300
8,200
-12,330 
-23,520 
-18,150
.990
-12,207
.769
-    9,482 
2
3
.980
-23,050
.592
-13,924
.971
-17,624
.455
-  8,258
M
2,4f0 
2,b04 
[2,757
2,910
3,063
3,063
3,063
3,063
3,063
3,063
3,063
3,063
3.063
3.063
3,063
3,063
3,063
3.063
3,063
3,063
3,063
3,063
4,565
4,850
5,136
5,421
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
-   9,185
.961
- 8,827
.350
740
5
-   5,954
.951
- 5,662
.269
604
6
2,379
2,511
2,643
2,643
2,643
.942
2,241
.207 1
492
7
.933
2,343
.159
.923
2,439
.123
399
325
9
.914
2,416
.094
10
11
12
13
.905
2,392
.073
248
193
9,000
-  6,357
.896
- 5,696
.056
2,643
2,643
2,643
2,643
2,643
2,643
.887 1
2,344
.043
.879
2,323
.033
m
15
16
17
18
19
20
21
22
23 29 25
.870
2,299
.025
.861
2,276
.020
.853
2,254
.015
.844
2,231
.012
356
114
87
66
53
40
317
9,000
-   6,357
.836
- 5,314
.009
2,643
2,643
2,643
2,643
2,643
2,643
2,643
.828
2,188
.007
.820
2,167
.005
.811
2,143
.004
.803
2,122
.003
.795
2,101
.002
.788
2,083
.002
.780
2,062
.001
57
19
13
11
8
5
5
3
(-37,956)-65-
Table
6.16:       Estimated Financial Rate of Return for Alternative 3
(000 Birr)
Capital
cost
0 & M
Year
. 1
2
3
u
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
29
25
cost
Incremental
Return
Net
Incremental Return
D.F.
at 1%
Net Pr.
worth
-12,207 -20,845 -21,486
D.F. at30%
.769 
.592 
.455 
.350 
.269 
.207 
.159 
.123 
.094 
.073 
.043 
.033 
.025 
.020 
.015 
.012 
.009 
.007 
.005 
.004 
.033
Net. Pr. worth
12,330 21,270 22,150 11,300
8,200
-12,330 
-21,270 
-22,150
2,266
2,391
2,517
2,517
2,517
.990 
.980 
.970 
.961 
.951 
.942 
.933 
.923 
.914 
.905 
.896 
.887 
.879 
.870 
.861 
.852 
.844 
.836 
.828 
.820 
.811 
.803 
.795 
.788
-    9,482 
2,551
2,711
2,870
3,030
3,189
3,189
3,189
12,189
3,189
3,189
3,189
3,189
3,189
3,189
12,189
3,189
3,189
3,189
3,189
3,189
3,189
4,565
4,856
5,136
5,421
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
5,706
-  9,286
-  8,924
-   6,061
-   5,764
2,135
2,231
2,323
2,301
2,278
-12,592 -10,078
705
575
469
380
310
237
184
9,000
-   6,483
-   5,809
-     279
2,517
2,517
2,517
2,517
2,517
2,517
2,233
2,212
2,190
2,167
2,144
2,124
83
63
50
38
30
27
9,000
-   6,483
-  5,420
-     45
2,517
2,517
2,517
2,517
2,517
2,517
2,084
2,064
2,041
2,021
2,001
1,983
13
10
83
5
5
5Table6.17:       Estimated Financial Rate of Return for Rehabilitation of Lower Bilate Farms
(000 Birr)
Year
Capital
cost
0 & M cost
Incremental Return
Net
Incremental Return
D.F.
at 2b‘-o
Met Pr. 
worth
D.F.
at 30%
Net Pr.
worth
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
29
21
22
23
24
25
2,000
3,000
1,500
3,000
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
275
1,906
2,02*4
2,144
2,263
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
2,382
- 2,000
- 3,000
131
1,749
1,869
1,988
2,107
2,107
2,107
343
2,107
2,107
2,107
2,107
2,107
2,107
343
2,107
2,107
2,107
2,107
2,107
2,107
2,107
2,107
.800
.640
.512
.410
.328
.262
.512
.107
- 1,600
- 1,920
67
717
613
521
1,079
- 37
.769
.592
.455
.350
.269
.207
.376
.073
.317
668
.192
- 1,538
- 1,776
60
612
503
412
792
(25)
404
3,000
.023
- 9
.012
(4)
.057
120
.034
72
?
+ 219
- 488VII CONCLUDING REMARKS
7.01                       All the three alternatives are highly nonviable financially.
The estimated rates of return are highly negative for all the three
alternatives. The alternative 1 (Irrigation of Alaba Colito and rehabilitation 
and expansion of Lower Bilate) appears to be most nonviable with the highest
negative profitability. While the negative profitability for both alternatives
2 (Rehabilitation and Expansion of Lower Bilate with Boyo Dam) and
alternative 3 (Rehabilitation and expansion of Lower Bilate with Denda Dam)
is high, the negative profitability of alternative 2 is slightly less than that
of alternative 3.
7.02                       The most crucial factor for the high negative profitability 
ls  Relatively low productivity of crops specially that of the major crop which
13  cotton in the area. This negative profitability is the out cone even with
assumed increase in yield of cotton by about 70% at full development, 
^css varietal improvement of existing crops or new crops with high yield
P°Iential are found out through vigorous research and experiment, the irrigation development in  Bilate river basin as envisaged under alternatives 1,2 and 3
URlikely to be financially nonviable.
7.03
fac iliti
 i
es
^b^ilitation 7.0i+
The rehabilitation of lower Bilate farms and irrigation is financially viable. It would be advisable to proceed with — i works as early as possible.
The analysis of existing operations of Bilate-Abaya and
Tobacco Farms shows that there is a substantial scope for improvement to  their operational efficiency and productivity. The operational
efft • 
of s' enCy
of
s
Orne
brought about through improvement in management, introduction e  system and reduction in excess manpower on the farms and provision
 needed facilities.Date Due
Acct
C'/OVrDJV —  ---
—Q
aut
TITL
===
AUTHOR
TITLE
-------- "                       CALL NO.
EDITION
VOLUME CAcc NO.™

Summery

Bilate River Basin Study Summary

Bilate River Basin Study: Analysis of Socio-Economic Aspects

Introduction

The Bilate River Basin covers approximately 5,650 km² across 10 Woredas in Ethiopia, with a population of about one million. The study examines socio-economic implications of proposed irrigation development, focusing on existing state farms (Bilate-Abaya and Bilate Tobacco Farms) and potential expansion.

Key Findings:

Current irrigated area: 2,553 ha (of 3,023 ha net area)
Estimated irrigation potential: 25,000 ha
Previous studies found inadequate for definitive conclusions

Social Aspects

The basin is densely populated (177 persons/km² vs national average of 35/km²) with high population density in surrounding areas limiting resettlement options.

Population Statistics:

Metric	Value
Total basin population	~1 million
Boyo Swamp population	24,000 (5,600 families)
Average family size	4.3 persons

State Farm Operations

Bilate-Abaya Farm

Under Ministry of State Farm Development hierarchy
Chronic financial losses (Birr 1.44-3.22 million annually)
High costs (36-52% farm overhead) and low productivity
Labor shortages despite area's high population density

Bilate Tobacco Farm

Managed by Ethiopia Tobacco and Matches Corporation
Better facilities but similar research deficiencies
Estimated economic loss: Birr 360/ha (1984/85)

Development Alternatives Analysis

Three Main Alternatives:

Full development with Boyo Dam (9,723 ha, Birr 96.8M cost)
Rehabilitation + expansion with Boyo Dam (7,723 ha, Birr 74M)
Rehabilitation + expansion with Dendo Dam (7,723 ha, Birr 75.3M)

Key Findings:

All alternatives show negative financial viability
Boyo Dam would displace 2,500 families (23,000 people)
Estimated annual meat production loss: 3.15M kg (Birr 3.15M)
Rehabilitation alone shows 26.55% financial return

Recommendations

Prioritize rehabilitation of existing farms (high return)
Improve farm management and reduce overhead costs
Address labor issues through better facilities
Conduct more research on crop varieties and practices
Consider social impacts of Boyo Dam carefully