Development of the Mahaweli Ganga has been a centerpiece of Sri
Lanka’s development thinking for 35 years. Formal work on the Mahaweli
Ganga Development Program started in 1958 and a 30-year master plan was
formulated in 1964-68. The program expected to provide, and in large
measure has provided, employment in construction, land for the landless,
food, and electric power, together with an appealing focus for foreign
The World Bank extended IDA credits for a series of projects that
supported the Mahaweli Authority, which managed the program. Though the
Bank provided relatively little money (6.2 percent of the total funding
for Mahaweli by 1990) it played an active role in advising on the size
and composition of the Mahaweli program and in coordinating external
OED recently audited the third of the Bank-assisted projects, which
was executed in 1982-92. It finds that the project was soundly conceived
and well, if slowly, executed, assisting large numbers of poor
families. But environmental aspects were neglected. And economic returns
were much lower than expected, due partly to a long delay in
implementation and partly to a dramatic fall in the price of rice to
producers. The audit draws lessons.
During the 1970s Sri Lanka’s annual growth of agricultural
production fell behind that of population. Real per capita GDP declined
by 1.3 percent a year and open unemployment increased. The new more
market-oriented government elected in 1977 accelerated the development
of the Mahaweli Ganga Development Program.
To assist the accelerated program, the Bank-assisted Third Mahaweli
Ganga Development Project was approved in 1981; a credit of $90 million
supported a total project cost of $200 million. This was an archetypal
integrated rural development project, which started from raw jungle to
provide productive investments and all social infrastructure and
services for a population projected to reach about 180,000. The project
was expected to produce 186,000 additional tons of paddy, with
significant volumes of other crops. Most importantly, it would provide
land to the landless, and relieve population pressure.
Before development most of the project area was virtually
unpopulated, but population pressure from the wet zone (southwest and
central highlands) was leading to increased immigration, with associated
shifting cultivation. The project involved jungle clearing, land
leveling, and on-farm development over a gross area of about 31,000 ha,
and settlement of a projected 18,500 families each with 1 ha of
irrigated land and a 0.2 ha homestead plot, as well as 5,500 nonfarming
families, also with homestead plots. The project also provided for
fuelwood (3,000 ha) and cashew plantations (2,000 ha). The Mahaweli
Authority provided support services such as extension, marketed inputs
and outputs, and operated and maintained the irrigation system. It
installed roads, urban centers, and social infrastructure including
Implementation took twice as long as originally planned. The cost of
Rs. 8.45 billion ($263 million) was about 30 percent higher, in real
terms, than originally budgeted.
The proposed project size and phasing were too optimistic, given the
experience with earlier phases of the scheme and the capacity of the
implementing agency. The schedule at appraisal called for jungle
clearing at around 5,300 ha/year, on-farm development at 5,700 ha/year,
and settlement of 5,300 farm families/year. The implementing agency was
already overstretched, and the project posed new technical and
organizational issues. Many agency staff were newly recruited and were
working with contractors from a recently emancipated private sector.
Civil unrest caused disruptions.
Delays in providing water to cleared land led to problems with
spontaneous settlement and to jungle regrowth. As designed, the project
gave priority to farmers displaced from areas flooded by other parts of
the Mahaweli scheme. It did not foresee that these involuntary
resettlers–and also refugees from civil disorder–would arrive before
enough irrigated land was ready for distribution. Some would-be settlers
had to be accommodated for two years before they could be assigned
land; the World Food Program played a major role in feeding them.
The relationship between the borrower and the three cofinancing
agencies — Japan’s Overseas Economic Cooperation Fund, the Kuwait Fund,
and IDA — was generally satisfactory. Project managers responded well to
advice provided by Bank supervision missions, which was relevant and
realistic. The good relationships were especially helpful in maintaining
activities through periods of civil unrest in the project area, and in
agreeing the four extensions of the credit closing date.
The project achieved close to its targets for physical works,
numbers of beneficiaries, and rice production. It provided irrigated
farms to 16,136 settler families (87 percent of the number estimated at
appraisal) at a total cost of $17,350 per irrigated farm. This gross
cost includes forest clearing, irrigation works, roads, social
infrastructure, supporting towns, and more than 2,000 families who were
settled without irrigation. Jobs were created for 8,000 landless
families. Training under the project upgraded the technical competence
of project staff and farmers.
The project significantly expanded the land available for paddy
production. By 1993, allowing for double cropping, the project was
contributing 122,000 hectares of paddy from about 100,000 ha of new
arable land formerly under forest. Additional rice production is
estimated at 145,000 tons, or 95 percent of the appraisal estimate.
Incomes were much lower than expected. The project turned out to be
unsatisfactory in economic terms, less because of poor design, or poor
implementation, but because the terms of trade shifted against rice
The present income of farming settler families is about twice their
estimated “without project” income. This is much lower than the five or
sixfold increase projected at appraisal.
Land sales to settlers were deferred. Settlers did not receive title
to their land. The project design provided that the cost of land
improvements was to be recovered by sale of the farm and house plot
given to each settler, and that settlers would receive clear title to
their land. But no payments have been made by settlers and ownership
rests with the government.
Farmers remain dependent on the government. Most farmers, and
especially those in the most recently settled areas, still depend
heavily on government initiatives and services.
Maintenance has been inadequately managed and funded. Operation and
maintenance arrangements are deficient and the irrigation facilities
built under the project face premature deterioration. Though it actively
provided support for farmer organizations, the project had limited
success in transferring management responsibility to farmers for
planning water use and cooperating to maintain the distribution system.
Water charges were collected from farmers at first, covering about
half the cost of operating and maintaining the irrigation facilities.
But cost recovery was abandoned as farm incomes turned out to be lower
than expected. Collections fell from 90 percent of the amounts due in
1985 to 25 percent in 1989 and 5 percent in 1990. Farmers’ organizations
have willingly contributed labor for cleaning and for minor maintenance
of distributor and field canals, but have not supplied even small
amounts of cash for needed hardware. (The same pattern was observed in
the recently audited Village Irrigation Rehabilitation Project in Sri
Lanka.) As noted by the project completion report on this operation,
government maintenance budgets have been used mainly for salaries.
Issues and lessons
Speed of execution. The accelerated program was an idea that
energized all parties. Recruitment of some of the “best and the
brightest” from national line agencies was meant to speed up
implementation. But in practice the staff appraisal report was
overoptimistic in projecting what could be achieved by an overstretched
organization facing new technical issues. Elsewhere in Sri Lanka, as the
project completion report pointed out, budgetary pressures forced the
national extension service to employ fewer, better qualified staff, but
the Mahaweli Authority retained a large number of low level, poorly
qualified field assistants. Staffing difficulties made it necessary to
hand over responsibility for public safety, education, and health to the
relevant line ministries.
Ultimately the rate of farm development in the project area seems to
have been determined as much by factors outside the control of project
staff as by those within their competence. Civil strife, credit
problems, poor availability of suitable varieties of paddy, and lack of
area-specific fertilizer recommendations are all nationwide concerns.
Farmers’ organizations. Farmers in the project area will need to
take more responsibility for their own affairs and play a greater role
in managing the irrigation system. Project design and government
administration of services can help make farmers’ organizations more
effective, but village dynamics and the relations among the members have
a more important influence (see Precis No. 85 — ed.).
Environment. Environmental issues in this project were largely
subordinated to the task of building the irrigation infrastructure.
Mitigatory measures can have only a partial impact in a situation where
so much land is to be cleared. But conditions on the Bank’s credit
called for an environmental action plan to be submitted for review and
concurrence by the end of 1981 and to be implemented by March 1982. In
fact a very unsatisfactory document was submitted in March 1983.
Concerns expressed by the Bank’s Environmental Advisor and Agriculture
Department were not addressed.
Today, increased population pressure as a result of the settlement
of nonfarming families and the children of original settler families is
leading to encroachment on remaining forest areas for shifting
cultivation or for fuelwood. Thus much more attention is needed to the
management and protection of the remaining forest within the project
Cropping in unirrigated areas. The appraisal seems to have misjudged
the suitability of unirrigated land for cashews. Even the highly
permeable soils in the area get very waterlogged in the long rainy
season. Possibilities demonstrated by an NGO for changing to mixed
cropping, taking advantage of the different soil moisture regimes on the
ridges, slopes, and gully bottoms, should be taken seriously.
Economic viability. By the early 1990s rice production was much less
attractive than when this project was approved in 1980. The halving of
the world price of rice was not foreseen by the Bank’s commodities
analysts. In part, it came from the increased supply of small grains
that resulted from the Green Revolution, the Common Agricultural Policy
of the European Community, and farming subsidies in other OECD
For Sri Lankan rice producers, yields were reflecting most of the
benefits of the Green Revolution by 1980. Yields rose little in the
ensuing decade, while world paddy prices fell, but production costs per
hectare rose steeply. The opening of the economy led to an increase in
real wages. Fertilizer prices rose, following the abolition of
subsidies. Using constant production technology, in 1980 paddy
production costs accounted for 40 percent of the revenue from paddy
production; by 1993 production costs accounted for 80 percent of the
revenue (Table 2). In practice, farmers have been changing technology in
response to the changes in prices.
In the light of the changed price ratios, it may now be difficult to
design any new investment or national project that would yield a 10
percent economic rate of return on the basis of increased irrigation
water for paddy production. Independent studies have warned that Sri
Lanka cannot afford to provide much additional employment through
schemes as capital intensive as the Mahaweli.
Other possible alternatives for assisting small and poor farmers are:
- Agricultural research (local or imported) to increase the genetic merit of rice plants.
- Diversification into higher value crops. While the Mahaweli
Agricultural and Rural Development Project on Crop Diversification,
funded by USAID, has not yet shown the successes first hoped for, this
direction of public sector research should continue to be supported.
- Better education and assistance for entrepreneurial young farmers.
Education, at least to the diploma level, of two young farmers per
village would seem to hold the highest promise for increasing the
dynamism of smallholder agriculture.