PART 3: NGAMO EXERCISES

Introduction
1. NGAMO 1
2. NGAMO 2
3. NGAMO 3
4. NGAMO 4

Introduction

The first and second parts of the manual illustrate how to install the WinDASI software, how to operate it and how the calculations are carried out. The third part of the manual presents a set of four practical step-by-step exercises, called NGAMO1, NGAMO2, NGAMO3 and NGAMO4 (the word NGAMO comes from the original project that was located in Myanmar). The objective of this section is to allow the user to practice using the software by analysing a real project (although simplified). In each exercise he/she is guided through a path, from a background of a given exercise to its solution, as shown in the flowchart in Figure A.

The objective of each exercise, the "With Project" and "Without Project" situations (WiP and WoP), the constraints of the project context and the improvements introduced by the proposed actions, together with other project items are synoptically summarised in Table A.

To assist the trainer, each exercise is complemented by Trainer's Notes. Frequently asked questions, critical issues and practical suggestions are also discussed.

Furthermore, all NGAMO exercises are supported by WinDASI files that contain the full data sets (NGAMO1, 2, 3, 4.WDS).

To access these files, carry out the following instructions: · Run WinDASI program (see "Installation", Part 1 of the WinDASI manual). · Click on File Open · Click on the folder Exercise. Inside this folder you will see two folders named Exedisk1 and Exedisk2, which contain the NGAMO exercises and other exercises related to WinDASI. Select the exercise required (i.e., files with a.WDS extension).

In order to allow the trainer to control the data entry process as he/she carries out the exercises, each of these files is complemented by a set of consecutive files. The consecutive files are marked a,b,c etc (e.g.: NGAMO1a.WDS, NGAMO1b.WDS etc.). The first file of the set contains only a small fraction of the data and each subsequent file contains additional data until the data set is complete.

Each consecutive file will be loaded as indicated by the trainer as he/she goes through the exercises, thus enabling him/her to:

i. keep all the trainees at the same level during the data entry process
ii. recover partial data-sets in case of computer/power failure
iii. manage a step-by-step entry of the data
iv. speed up the data entry process, if necessary, by skipping some steps
v. allow slow trainees in the data entry process to catch up
vi. run the calculations starting with a common database

Figure A: Structure of the NGAMO Exercises

Table A - Synoptic summary of the NGAMO exercises

Exercise and step	Goals of the analyst	Farm plan used	WiP situation	WoP situation	Key constraints WiP	Activities	Main changes WiP vs WoP
NGAMO1	Analyse the technical feasibility of the irrigation project at farm level	TRADIT	Irrigated traditional farm (Note that the investment for irrigation is not envisaged at farm level, and so not included here)	Non-irrigated traditional farm	1) Labour requirements at farm level 2) Increased need for bullock services	1) HY paddy (CUL-HYV) 2) Traditional paddy (CUL-TRA) 3) Sesame (CUL-SES) 4) Sunflower (CUL-SES)	1) More water available to farmers 2) Increased area cultivated in dry season 3) Substitution of traditional paddy with HY paddy 4) Increased yields 5) Increased use of some inputs
NGAMO2	Formulate two farm models to: 1) Solve the labour constraint at farm level 2) Solve the bullock constraint	AN-FARM	Irrigated traditional farm + hired labour	Non-irrigated traditional farm	The labour constraint is removed, but the bullock constraint is unresolved	As for TRADIT	As for TRADIT, plus the use of hired labour
		MEC-FARM	Irrigated with mechanized activities. The power tiller investment is added	Non irrigated traditional farm	1) The labour and bullock constraints are resolved 2) A financing constraint is generated by the investment	1) HY paddy (MEC-HYV) 2) Traditional paddy (MEC-TRA) 3) Sesame (MEC-SES) 4) Sunflower (MEC-SES)	The same changes as AN-FARM, plus: 1) Introduction of the investment 2) Substitution of bullock services by tractor services 3) Introduction of running costs for tractor
	1) Solve the financing constraint 2) Analyse the economic impact of the credit component	MEC-FARM1	The same as MEC-FARM + credit component	Non-irrigated traditional farm	Improve fit of the financing plan to the mechanized farmer's cash flow	The same as in MEC-FARM + the credit component	The same as in MEC-FARM + the credit component
NGAMO3	Analyse the overall economic impact of the irrigation project	AN-FARM MEC-FARM + Zone NGAMO3	600 MEC-FARM and 400 AN-FARM	1 000 non-irrigated traditional farms	Low economic viability of the overall irrigation project	Mechanized activities for 600 farms Animal activities for 400 farms	1) Irrigation of 1 000 farms 2) Investment in the irrigation scheme 3) Increased crop production 4) Increased use of hired labour
NGAMO4	Analyse the financial viability of newly established coffee farm in a phased mode	COFF-FARM	The coffee activity starts on 0.2 ha in year 1; 0.3 ha in year 2; & 0.5 ha in year 3	No activities are run without project	No major constraints highlighted	Coffee production COFF.A	A coffee production activity is started on unused land Coffee planting starts in a phased mode
	Analyse overall viability of a zone with 250 farms joining the project in a phased mode	COFF-FARM + zone PROJECT	100 farms join the project in year 1 150 join the project in year 2	No activities are run without project	No major constraints highlighted	Coffee production COFF.A	250 new farms are established in a phased mode

1. NGAMO 1

1.1 Background
1.2 Data Set
1.3 Question Set
1.4 Hints
1.5 Solution Set
1.6 Trainer's Notes

1.1 Background

A project formulation mission in the region of NGAMO, about two hours drive from the capital, identified one of the causes of poor agricultural development as being a lack of irrigation water in the dry season and an irregular supply of water for the rest of the year.

On these grounds, a project formulation team is designing a development project to restructure the irrigation network in the lowlands near to the river. Of course, one of the tasks of the formulation team is to analyse the impact of the envisaged project options of the farmers in the zone.

To accomplish this task, the analysts decide to classify the existing farms according to their agronomic and socio-economic features to identify some farm models. Each farm model would allow a schematic description of the farming activities, investments and other socio-economic features for this class of farm, both in without-project (WoP) and with-project (WiP) scenarios. The likely impact of the project on such enterprises would then be used to investigate the overall impact of the project by aggregation, considering the existing number of farms described by each farm model.

In the project area there are about 1 000 farms, characterized by a relative agronomic, socio-economic and cultural homogeneity. This homogeneity allows the analysts to work with only a single farm model that satisfactorily describes almost all the farms.

The prevailing type of farm in the zone is one of about 5.5 ha, run by one household. Currently, during the humid season, most of the farmers grow paddy rice, both traditional and high yielding varieties (HYVs). This crop is used mainly for home consumption. In the dry season, only a portion of land is cultivated and then planted to sunflower and sesame. This practice is predicted to continue in the future if a project is not implemented.

The irrigation project would hopefully allow both an intensification of crops and an increase of yields. For paddy, an increase of about 15% is envisaged, therefore improving the food supply for the rural people. Furthermore, the project should allow a sharp increase in sunflower and sesame production, typical cash crops, thus increasing the purchasing power of farming households. Due to the increase in cash crops, it is crucial that marketing issues be addressed by the project formulation team. The existence of suitable commodity chains should be ascertained and actions planned to build up or reinforce them as necessary.

Without the project, almost all the agricultural tasks are carried out by the household labour force, estimated by the analysts to be 555 working days. Currently, there is no use of hired labour.

Even if the farms in the project area are very similar, some differences can be seen. Only some households have bullocks at their disposal, which provide animal traction for agricultural work and transportation. This uneven distribution of animals, however, does not cause major problems in the project zone, because a market for animal traction services is well developed. Indeed, the observed market price of the animal services corresponds to the opportunity cost of renting out animals.

To assess the viability of the project, data on the activities of the selected farm model, in both WiP and WoP scenarios have been collected and forecasted. They are considered in detail below.

1.2 Data Set

1.2.1 Tabulated data used as the basis for calculations

1.2.1 Tabulated data used as the basis for calculations

Table 1 reports the forecasts for the cultivated area with and without the irrigation project. Notice that the project will lead to: (i) a shift of land use from traditional paddy to high yield (HY) paddy; and (ii) a progressive increase in the area of land cultivated in the dry season.

Table 1 - Plan TRADIT - forecast of the cultivated area (hectares)

Without the project, the cultivated area and its use is deemed to continue unchanged for the duration of the project.

Table 1a
Plan TRADIT - forecast of the cultivated area WiP (hectares)

Item		Code	Years
			1	2	3	4	5	6-15
a) Humid season
	- high yield paddy	CUL-HYV	3.85	3.85	3.90	3.95	4.00	4.05
	- traditional paddy	CUL-TRA	1.65	1.65	1.60	1.55	1.50	1.45
Total			5.50	5.50	5.50	5.50	5.50	5.50
b) Dry season
	- sunflower	CUL-SUN	0.10	0.10	0.20	0.25	0.35	0.45
	- sesame	CUL-SES	1.10	1.10	1.25	1.45	1.65	1.80
Total			1.20	1.20	1.45	1.70	2.00	2.25

Table 1b - Plan TRADIT - forecast of the cultivated area WoP (hectares)

Note: The arrows mean that the coefficients are constant for the remaining periods.

Table 2 - Inputs and outputs per hectare for high yield paddy variety (CUL-HYV)

As far as paddy is concerned, the project will lead to a progressive increase in yields from year 3.

Table 2a
WiP HY paddy variety (CUL-HYV)

Item	Code	Years
		1	2	3	4	5	6-15
Seeds (Kg)	S-PADDY	70.0	70.0	70.0	70.0	70.0	70.0
Urea (kg)	UREA	112.0	112.0	112.0	112.0	112.0	112.0
TSP (kg)	TSP	56.0	56.0	56.0	56.0	56.0	56.0
MOP (kg)	MOP	28.0	28.0	28.0	28.0	28.0	28.0
Manure (barrows)	MANURE	1.0	1.0	1.0	1.0	1.0	1.0
Pesticides (francs)	PESTIC	5.0	5.0	5.0	5.0	5.0	5.0
Workforce (man/days)	LABOUR	102.0	102.0	100.0	100.0	100.0	100.0
Draft Animals (days)	BULLOCKS	32.0	32.0	32.0	32.0	32.0	32.0
Yield Paddy H.Y. (tons)	Pad-HY	3.6	3.6	3.8	3.8	4.2	4.2

Table 2b - WoP HY paddy variety (CUL-HYV)

Table 3 - Inputs and outputs per hectare for traditional paddy (CUL-TRA)

The project will also lead to an increase in yields of traditional paddy, but this increase will need to be supported by an increased use of labour and draught animals.

Table 3a
WiP traditional paddy (CUL-TRA)

Item	Code	Years
		1	2	3	4	5	6-15
Seeds (Kg)	S-PADDY	46.0	46.0	46.0	46.0	46.0	46.0
Urea (kg)	UREA	28.0	28.0	28.0	28.0	28.0	28.0
TSP (kg)	TSP	-	-	-	-	-	-
MOP (kg)	MOP	-	-	-	-	-	-
Manure (barrows)	MANURE	1.0	1.0	1.0	1.0	1.0	1.0
Pesticides (francs)	PESTIC	5.0	5.0	5.0	5.0	5.0	5.0
Workforce (man/days)	LABOUR	68.0	68.0	86.0	86.0	86.0	86.0
Draft Animals (days)	BULLOCKS	22.0	22.0	26.0	26.0	26.0	26.0
Yield Paddy Traditional (tons)	Pad-TRA	2.0	2.0	2.2	2.2	2.2	2.2

Table 3b - WoP traditional paddy (CUL-TRA)

Table 4 - Inputs and outputs per hectare for sunflower (CUL-SUN)

Sunflower yields will increase without any change in the inputs except the increased water available in the dry season. The forecast yields are shown below.

Table 4a
WiP sunflower (CUL-SUN)

Item	Code	Years
		1	2	3	4	5	6-15
Seeds (Kg)	S-SUNF	11.0	11.0	11.0	11.0	11.0	11.0
Urea (kg)	UREA	84.0	84.0	84.0	84.0	84.0	84.0
TSP (kg)	TSP	56.0	56.0	56.0	56.0	56.0	56.0
MOP (kg)	MOP	28.0	28.0	28.0	28.0	28.0	28.0
Manure (barrows)	MANURE	-	-	-	-	-	-
Pesticides (francs)	PESTIC	5.0	5.0	5.0	5.0	5.0	5.0
Workforce (man/days)	LABOUR	32.0	32.0	50.0	50.0	50.0	50.0
Draft Animals (days)	BULLOCKS	12.0	12.0	18.0	18.0	18.0	18.0
Yield Sunflower (tons)	SUNF	0.8	0.8	0.8	1.2	1.2	1.2

Table 4b - WoP sunflower (CUL-SUN)

Table 5 - Inputs and outputs per hectare for sesame (CUL-SES)

The increased yields of sesame forecast with the project need to be supported by both an increase in man/days per hectare and an increase of days of draught animal use, as shown in the table below.

Table 5a
WiP sesame (CUL-SES)

Item	Code	Years
		1	2	3	4	5	6-15
Seeds (Kg)	S-SESAME	15.0	15.0	17.0	17.0	17.0	17.0
Urea (kg)	UREA	84.0	84.0	84.0	84.0	84.0	84.0
TSP (kg)	TSP	56.0	56.0	56.0	56.0	56.0	56.0
MOP (kg)	MOP	-	-	-	-	-	-
Manure (barrows)	MANURE	-	-	-	-	-	-
Pesticides (francs)	PESTIC	20.0	20.0	20.0	20.0	20.0	20.0
Workforce (man/days)	LABOUR	42.0	42.0	66.0	66.0	66.0	66.0
Draft Animals (days)	BULLOCKS	18.0	18.0	20.0	20.0	20.0	20.0
Yield Sesame (tons)	SESAME	0.2	0.2	0.4	0.6	0.6	0.6

Table 5b - WoP sesame (CUL-SES)

Table 6 - Prices of inputs and outputs

The prices, which are expressed in Francs monetary units, are assumed to remain constant for the time span of the project, both with and without project scenarios.

Table 6
Prices of inputs and outputs

Item	Code	Price Francs
Seeds H.Y.paddy (kg)	S-PADDY	0.60
Seeds trad. paddy (kg)	S-PADDY	0.60
Seeds sunflower (kg)	S-SUNF	6.00
Seeds sesame (kg)	S-SESAME	10.40
Urea (kg)	UREA	0.34
TSP (kg)	TSP	1.14
MOP (kg)	MOP	0.54
Manure (barrows)	MANURE	15.00
Pesticides (francs)	PESTIC	1.00
Hired workforce (man/day)	HIR-LAB	7.00
Workforce (man/day)	LABOUR	-
Draft Animals (days)	BULLOCKS	30.00
Land tax (francs)*	LAND-TAX	1.00
Irrigation tax (francs) *	IRR-TAX	1.00
Other (francs) *	OTHER	1.00
Paddy high yield (ton)	Pad-HY	441.0
paddy traditional (ton)	Pad-TRA	662.0
Sunflower (ton)	SUNF	4,550.0
Sesame (ton)	SESAME	7,674.0

Table 7 - Other data

In the WiP situation, the farmers will be charged with an irrigation tax to partially recover the investment in the irrigation scheme. The project will also involve a progressive increase in other farm expenses, as summarized below.

Table 7a - Other data for WiP scenario

Table 7b - Other data for WoP scenario

1.3 Question Set

The project analyst is faced with the following set of questions:

Main questions

[inceput284](i) Define the feasibility in terms of labour requirements at farm level. Is the annual household labour force (555 man/days) sufficient to support the planned shifts of activity in the humid season and the increased land cultivated in the dry season?

(ii) Calculate the WiP needs of draught animal services at farm level.

· Does the project lead to a substantial change in the draught service requirements?

· Is this change likely to be sustainable for the farm?¹

1. It is mandatory to go through the main questions to follow the whole flow of the NGAMO exercise.

(iii) Are the changes in the quantities of inputs and outputs likely to generate stocking facility problems for the farm?

· What main aspects should be verified by the formulation team in order to secure the marketing of the cash crops?

(iv) How do the costs, benefits and net cash flow change over the duration of the project?

(v) Calculate the ratios profits/household workforce and profits/land, both without project and at the full development of the project. How do they change?

(vi) From the Cost/Benefit table, derive the net cash flow and the net incremental cash flow in a full development year for the farmers hiring the bullocks, knowing that about 3t of paddy are home-consumed. Why in project analysis is it useful, besides costs and benefits flows, to also consider cash flows?

1.4 Hints

To work out the answers, follow the hints listed below².

i. Codify all the goods, services, charges (inputs and outputs) to be used in the analysis (e.g., manure, paddy, irrigation tax, etc. For example, use the codification listed in the tables of the data set). Then enter each component following the instructions given in section 2.4.2, part 1 of the WinDASI manual.

ii. Create a commodity for each good and service and insert the appropriate price.

iii. Assign a code to the activities of the project, i.e., to all operations requiring some inputs and delivering one or more outputs (production of HY paddy, production of sesame, etc. For example, use the codification listed in the tables of the data set).

iv. Create the record of each activity, specifying the unit of the activity (hectares) and the technical coefficients of the activity, i.e., the quantity of each input and output for one unit of activity (hectare) for all the years of the project.

v. Create a record of the farm plan, named, for example, TRADIT, indicating the "quantity" of each activity per year, i.e., the number of hectares for each activity for a typical farm and the charges not related to any specific activity.

vi. Obtain the totals of inputs and outputs in physical terms for the plan TRADIT.

vii. For the plan TRADIT, obtain the totals of inputs and outputs in monetary terms, the net cash flow and the net incremental cash flow.

2. For steps 1 to 5, refer to Part 1 of the manual, especially the paragraph on "The components window." For steps 5 and 6, see Part 1, on "Calculations carried out by WinDASI".

1.5 Solution Set

1.5.1 Answer to question (i)
1.5.2 Answer to question (ii)
1.5.3 Answer to question (iii)
1.5.4 Answer to question (iv)
1.5.5 Answer to question (v)
1.5.6 Answer to question (vi)

1.5.1 Answer to question (i)

To answer Question 1, the inputs in physical units need to be analysed. They are reported in Table 8.

Table 8
Inputs requirements of the plan TRADIT in physical terms

Inputs.	Unit	Wo.P.	Years
			1	2	3	4	5	6	7 - 15
BULLOCKS	DAYS	180.50	180.50	180.50	195.00	200.20	206.30	211.40	211.40
IRR-TAX	FRANC				110.00	110.00	110.00	110.00	110.00
LABOUR	DAYS	554.30	554.30	554.30	620.10	636.50	655.40	671.00	671.00
LAND-TAX	FRANC	28.00	28.00	28.00	28.00	28.00	28.00	28.00	28.00
MANURE	CART	5.50	5.50	5.50	5.50	5.50	5.50	5.50	5.50
MOP	KG	110.60	110.60	110.60	114.80	117.60	121.80	126.00	126.00
OTHER	FRANC	90.00	90.00	90.00	120.00	136.00	152.00	169.00	185.00
PESTIC	FRANC	50.00	50.00	50.00	53.50	57.75	62.25	65.75	65.75
S-PADDY	KG	345.40	345.40	345.40	346.60	347.80	349.00	350.20	350.20
S-SESAME	KG	16.50	16.50	16.50	21.25	24.65	28.05	30.60	30.60
S-SUNF	KG	1.10	1.10	1.10	2.20	2.75	3.85	4.95	4.95
TSP	KG	282.80	282.80	282.80	299.60	316.40	336.00	352.80	352.80
UREA	KG	578.20	578.20	578.20	603.40	628.60	658.00	683.20	683.20

The detail of the calculation of the input requirements in physical terms, such as the labour force requirements in the WoP situation, is shown in Table 9.

Table 9
Detail of the calculation of the WoP labour requirements in physical terms

WoP situation	Man/day/ha (activity) (a)	Ha (plan) (b)	man/day (result) (c = a * b)
1) Pad-HY	102.00	3.85	392.70
2) Pad-TRA	68.00	1.65	112.20
3) SESAME	42.00	1.10	46.20
4) SUNF	32.00	0.10	3.20
Total (from 1 to 4)			554.30

Notice that the labour requirements (row LABOUR) from year 3 are well above the available household labour. To fill this gap, some labour force must be hired. The calculation of the labour force to be hired is shown in Table 10.

Table 10
Hired labour requirements

Item	Years
	1	2	3	4	5	6-15
Labour requirements (m/days)	554.3	554.3	620.1	636.5	655.4	671.0
Labour availability (man/days)	555.0	555.0	555.0	555.0	555.0	555.0
Hired-Labour (man/days)	-	-	65.1	81.5	100.4	116.0
Share of hir.lab.on tot.	0.00%	0.00%	10.50%	12.80%	15.32%	17.29%

The labour requirements for plan TRADIT are shown graphically in Figure 1.

Figure 1: Labour requirements for the plan TRADIT

1.5.2 Answer to question (ii)

As can be seen from Table 8, (row BULLOCKS), the requirement for draught animals will increase by about 17% in six years. The WiP and WoP situations are shown in Table 11 and depicted graphically in Figure 2.

Table 11
Draught animal requirements

Item	Years
	1	2	3	4	5	6 - 15
WoP	180.50	180.50	180.50	180.50	180.50	180.50
WiP	180.50	180.50	195.00	200.20	206.30	211.40
Difference	0.00	0.00	14.50	19.70	25.80	30.90
Index WoP =100	100.00	100.00	108.03	110.91	114.29	117.12

Figure 2: Draught animal requirements with and without project

The increased requirements for draught animals could generate shortages in the medium term, particularly in the peak seasons. Some response should be envisaged, such as increasing the supply of draught animals or introducing some mechanization of agricultural activities³.

3. This issue will be addressed in the NGAMO 2 exercise.

1.5.3 Answer to question (iii)

Besides the changes in the inputs already considered, the only other significant changes are observed in the quantities of urea and TSP, which increase by about 25% and 15% respectively in six years. Little storage difficulties are however envisaged due to the distribution over the two cropping seasons of these changes and the formulation team foresees no difficulties in the supply of additional quantities of these items.

Concerning the outputs, the physical quantities⁴ are tabulated in Table 12, and shown graphically in Figures 3 and 4.

4. They are obtained using the suitable function, "Outputs - by quantity". See part 1 of the WinDASI manual.

Table 12
Physical outputs of the plan TRADIT

Output	Unit	WoP	Years
			1	2	3	4	5	6 - 15
Pad-HY	Tons	13.86	13.86	13.86	14.82	15.01	16.8	17.01
Pad-TRA	Tons	3.3	3.3	3.3	3.52	3.41	3.3	3.19
SESAME	Tons	0.22	0.22	0.22	0.5	0.87	0.99	1.08
SUNF	Tons	0.08	0.08	0.08	0.16	0.3	0.42	0.54

The major change in the output is due to the high yield paddy, increasing by about 4t in six years. Some additional assessments of the transport and marketing facilities of the farmers could be required for a further refinement of project design. Also, sesame and sunflower production shows a sharp percentage increase in six years. These changes are, however, small in weight and should not lead to storage difficulties. In spite of that, due to the high value per ton of the sesame (almost twenty times the value of paddy), the storage facilities should secure it against theft and accidental loss.

Figure 3: Paddy production with and without project

Figure 4: Sesame and sunflower production with and without project

As sesame and sunflower are primarily cash crops, the feasibility (and success) of the project is very much linked to the possibility of disposing of this production on the market.

Therefore, as a first step, the project formulation team should verify that there will be a market for the additional production generated by the project, considering also the likely price of the product (or some transformation of it) to the final consumers; natural changes in demand, due to population dynamics (growth, migration); possible competition with the same products from other areas of production; and competition with substitutes (e.g., sunflower oil versus soybean oil) or possible synergies with complements.

Secondly, the team should verify that all the links in the commodity chains connecting producers to consumers would work properly. Notably, besides the possibilities of storage at farm level, the team will have to check the availability and suitability of transport facilities, processing agents, wholesale market places and agents or exporters, dealers and retailers.

1.5.4 Answer to question (iv)

The trends in costs and benefits by value are given in Table 13. Note that the benefits almost double in six years while the costs increase by only about 20% in the same period. Note also that the monetary flows corresponding to household labour are zero, having assigned a price of zero to household labour⁵. Thus, in Table 13 family labour is not included as a cost and, consequently, Net Benefits correspond to the income of the farm household.

5. Note, however, that this item needs to be adjusted, being the required quantity of labour unavailable at household level.

Table 13
Inputs and outputs of the plan TRADIT in monetary terms (francs)

Item	WoP	Years
		1	2	3	4	5	6	7-15
OUTPUT
Pad-HY	6,112.3	6,112.3	6,112.3	6,535.6	6,619.4	7,408.8	7,501.4	7,501.4
Pad-TRA	2,184.6	2,184.6	2,184.6	2,330.2	2,257.4	2,184.6	2,111.8	2,111.8
SESAME	1,688.3	1,688.3	1,688.3	3,837.0	6,676.4	7,597.3	8,287.9	8,287.9
SUNF	364.0	364.0	364.0	728.0	1,365.0	1,911.0	2,457.0	2,457.0
Total	10,349.1	10,349.1	10,349.1	13,430.9	16,918.2	19,101.7	20,358.1	20,358.1
INPUTS and FACTORS
BULLOCKS	5415.0	5415.0	5415.0	5850.0	6006.0	6189.0	6342.0	6342.0
IRR-TAX	-	-	-	110.0	110.0	110.0	110.0	110.0
LABOUR	-	-	-	-	-	-	-	-
LAND-TAX	28.0	28.0	28.0	28.0	28.0	28.0	28.0	28.0
MANURE	82.5	82.5	82.5	82.5	82.5	82.5	82.5	82.5
MOP	59.7	59.7	59.7	62.0	63.5	65.8	68.0	68.0
OTHER	90.0	90.0	90.0	120.0	136.0	152.0	169.0	185.0
PESTIC	50.0	50.0	50.0	53.5	57.8	62.3	65.8	65.8
S-PADDY	207.2	207.2	207.2	208.0	208.7	209.4	210.1	210.1
S-SESAME	171.6	171.6	171.6	221.0	256.4	291.7	318.2	318.2
S-SUNF	6.6	6.6	6.6	13.2	16.5	23.1	29.7	29.7
TSP	322.4	322.4	322.4	341.5	360.7	383.0	402.2	402.2
UREA	196.6	196.6	196.6	205.2	213.7	223.7	232.3	232.3
Total Inputs and factors	6,629.6	6,629.6	6,629.6	7,294.9	7,539.7	7,820.5	8,057.8	8,073.8
Net Benefits	3,719.5	3,719.5	3,719.5	6,136.0	9,378.5	11,281.2	12,300.3	12,284.3
Net Incremental Benefits	-	-	-	2,416.5	5,659.0	7,561.7	8,580.8	8,564.8

Figure 5: Costs and benefits with and without project

The net incremental flows of benefits in the last row of Table 13 are obtained as the difference of the flow of the WiP period and the WoP flow of the same year. The WoP value is assumed to be constant across the periods and equal to the value in the first column (WoP column). Notice that the incremental net flows for years 1 and 2 are zero, as the flows of these periods equals the WoP situation. All the other annual net incremental flows are positive. This means that, in each period, the project will bring additional benefits to the farmer with respect to the WoP situation. Of course, the aggregate incremental benefits across all periods will be positive as well.

Figure 5 shows the costs and benefits of WoP and WiP, while Figure 6 illustrates the trends of WoP and WiP net cash flows, and the incremental ones.

Figure 6: Net Benefits WoP and WiP, and incremental Net Benefits

1.5.5 Answer to question (v)

The ratios Net Benefits/Household Labour and Net Benefits/Land both without project and at full development of the project are calculated in Table 14. Note that the project allows an increase in both the Net Benefits per unit of labour and per hectare. The irrigation leads almost to triple the average productivity of labour (in terms of Net Benefits)⁶. The average productivity of the land is also drastically increasing due to the intensification of cultivation on the same surface area.

6. Note, however, that the plan TRADIT uses more units of unpriced labour that those available at household level.

Table 14
Ratios Net Benefits/Labour and Net Benefits/Land

Item	WoP	WiP*
Net Benefits (M.u.)	3719.5	12284.3
Labour(man/day)	554.3	671.0
Land (hectares)	5.5	5.5
Ratio Net Benefits/Labour	6.7	18.3
Ratio Net Benefits/Land	676.3	2233.5

* at full development of the project

1.5.6 Answer to question (vi)

The cash flow of the farmers without bullocks can be derived from the costs and benefit table, with some adjustments.

The cash inflows in both WiP and WoP scenarios are derived from the benefit flows after adjusting for the circa 3t of paddy that used for household consumption.

The cash outflows can be assumed in this case to be equivalent to the costs.

Table 15 shows the calculations of the Net Benefits, net cash flows with and without project, net incremental benefits and net incremental cash flows. Note that it is assumed that the home consumption intake comes from the HY paddy (the paddy variety with the lowest market price). In our simple case, in the WoP scenario the only difference between the Net Benefits and the Net Cash Flows is due to home consumption of part of the paddy produced on the farm⁷. The same applies in the WiP scenario (column f), leading to net incremental benefits (column g) equal to net incremental cash flows (column h)⁸.

⁷. Differences between Net Benefits and Net Cash Flows could also be due to inputs both produced and consumed on the farm, such as animal traction and manure.

8. Notice that the itemization of the incremental benefits allows detection of a negative incremental benefit (a decrease in the production of paddy), to be correctly interpreted as a reduction of a benefit in the WiP context with respect to the WoP one.

Table 15
Net Benefits versus net cash flows with and without project

	Without project			With project*			Incremental
	Ben & Costs	Infl.& Outfl.	B&C. - I&O	Ben.& Costs	Infl.& Outfl.	B&C. - I&O	Ben.& Costs	Infl. & Outfl.
	(a)	(b)	(c = a-b)	(d)	(e)	(f = d-e)	(g = d-a)	(h = e-b)
Benefits (inflows) Items
Pad-HY	6112.3	4789.26	1323.0	7,501.4	6178.4	1323.0	1,389.2	1,389.2
Pad-TRA	2184.6	2184.6	0.0	2,111.8	2111.8	0.0	- 72.8	- 72.8
SESAME	1688.3	1688.3	0.0	8,287.9	8287.9	0.0	6,599.6	6,599.6
SUNF	364.0	364.0	0.0	2,457.0	2457.0	0.0	2,093.0	2,093.0
TOTAL of Benefits (inflow) items	10349.1	9026.1	1323.0	20,358.1	19035.1	1323.0	10,009.0	10,009.0
Costs (outflows) items
BULLOCKS	5415.0	5415.0	0.0	6,342.0	6342.0	0.0	927.0	927.0
IRR-TAX	0.0	0.0	0.0	110.0	110.0	0.0	110.0	110.0
LAND-TAX	28.0	28.0	0.0	28.0	28.0	0.0	-	-
MANURE	82.5	82.5	0.0	82.5	82.5	0.0	-	-
MOP	59.7	59.7	0.0	68.0	68.0	0.0	8.3	8.3
OTHER	90.0	90.0	0.0	185.0	185.0	0.0	95.0	95.0
PESTIC	50.0	50.0	0.0	65.8	65.8	0.0	15.8	15.8
S-PADDY	207.2	207.2	0.0	210.1	210.1	0.0	2.9	2.9
S-SESAME	171.6	171.6	0.0	318.2	318.2	0.0	146.6	146.6
S-SUNF	6.6	6.6	0.0	29.7	29.7	0.0	23.1	23.1
TSP	322.4	322.4	0.0	402.2	402.2	0.0	79.8	79.8
UREA	196.6	196.6	0.0	232.3	232.3	0.0	35.7	35.7
TOTAL costs (outflow) items	6629.6	6629.6	0.0	8,073.8	8073.8	0.0	1444.2	1444.2
Net Benefits (net cash flows)	3719.5	2396.5	1323.0	12,284.3	10961.3	1323.0	8564.8	8564.8

* at full development of the project (year 6)

In the WiP scenario, the farmers must be left with enough cash, after paying for the investment goods and/or the instalments of the loan, to satisfy at least the basic needs of themselves and their households. If this happens, the project is feasible on financial grounds. This issue will be further addressed in the next steps of the exercise, mostly when dealing with investment and credit.

If we were to also consider the cash flows of the farmers who own bullocks, we should include a cash inflow for hiring out their bullocks and cash outflows for expenses such as veterinarian services and feeding costs.

1.6 Trainer's Notes

1.6.1 Frequently Asked Questions
1.6.2 Use of the Files for the Exercise NGAMO 1

The exercise NGAMO 1 in this current formulation has been kept as simple as possible to allow the trainees to retain the basic elements of agricultural project analysis. If the trainer feels it necessary, they could introduce some variations and further elements of discussion.

In principle, no constraint applies to changing the unit of measurement of activities, by, say, using the unit of output (tons) instead of the hectare. Of course, all the inputs should be related to such a unit. An additional item to include in the analysis would be the land required to support the production of one ton of each crop. To check the available land constraint, two kinds of land should probably be included: dry season land and humid season land.

The labour requirements could be better-specified month by month to schedule the use of hired labour.

To run the full NGAMO 1 exercise in a computer room with trainees with a weak knowledge of both the theory of project analysis and computing, a full day at least should be allowed.

When the trainees' background is weak, the trainer could deliver the questions one at a time and verify their execution step by step, rather than delivering the full question set at once.

The verification by hand of some sample calculations (notably the products of the goods per activity unit multiplied by the quantity of each activity multiplied by the prices) is extremely important to help the participants understand the way the software works.

1.6.1 Frequently Asked Questions

1. Where does the increased production come from? Stress the background of the exercise, reminding them that NGAMO is an irrigation project where the project is supposed to deliver the irrigation system free of charge (except IRR-TAX).

2. Incremental benefits with negative values (the case of traditional paddy production) are commonly rationalized by the participants as typing errors or software bugs. They are indeed reductions in benefits in the WiP situation compared to the WoP situation.

3. The interpretation of the "additional annual balance". It must be emphasized that this balance is an incremental one, i.e., calculated as a difference with respect to the WoP scenario.

The use of a spreadsheet can be helpful as a support for verifying the results of the other calculations made by WinDASI.

Further discussions can compare the farmers with bullocks to the farmers without, looking at the impact on these two categories of the increased needs of animal traction resulting from the project.

1.6.2 Use of the Files for the Exercise NGAMO 1

The set of files complementing NGAMO1 may be used step-by-step by the trainer as follows:

Step 1

After explaining the general framework of the NGAMO exercise, the trainer may start the exercise NGAMO1. NGAMO1 starts with the empty (default) file. The trainees are required to enter the commodity data.

Step 2

If possible, the trainer should show how to do this by means of a PC projector, and/or by directly assisting the trainees.

Step 3

After checking the progress of their work, the file NGAMO1a.WDS, which already contains the data-set of the commodities, may be loaded. In this file the activities of the traditional farm are created.

Step 4

At this stage the file NGAMO1b.WDS has to be loaded. In the file NGAMO1b.WDS, the plan TRADIT is created.

The results of the data entry may be checked with the full data-set file NGAMO1.WDS. This file may be used by all the trainees to run the required calculations.

The above steps are summarised in Table 16.

Table 16
Files for the Exercise NGAMO1

Step	File to be used	File content	Task to accomplish in the file
1	Empty (default) file	Nothing	Insert the set of commodities
2	NGAMO1a.WDS	The set of commodities	Create the activities
3	NGAMO1b.WDS	The set of commodities and the traditional activities	Create the plan TRADIT
4	NGAMO1.WDS	The full NGAMO1 data-set	Run all the required calculations

2. NGAMO 2

2.1 Background
2.2 Data Set
2.3 Question Set
2.4 Hints
2.5 Solution Set
2.6 Trainer's Notes

2.1 Background

The irrigation scheme rehabilitation project analysed in the previous NGAMO 1 exercise has raised two major problems at the farm level:

· excess demand of labour compared with the supply available from the farm household; and

· a lack of draught animals in the peak periods.

i. the lack of household labour at farm level has to be solved by hiring some labour force from outside the farm;

ii. a number of farmers should purchase a power-tiller each, in order to overcome the problem of shortage of draught animals; and

iii. given that farmers cannot afford to pay for the whole investment, a credit component should also be added to the project.

i. viability to the farmers of the irrigation project, once the hired labour force is introduced;

ii. viability to the farmers of the mechanization; and

iii. credit requirements and the impacts on project feasibility and profitability.

2.2 Data Set

To address the issues listed above, the following actions need to be carried out by the formulation team:

· According to the requirements for hired labour identified in NGAMO1, the hired labour component will be added to the plan TRADIT to generate a new plan (e.g., AN-FARM). Table 18 shows the price of hired labour.

· A new plan (e.g., MEC-FARM) has to be developed for the irrigated mechanized farm model. It is assumed that mechanization will not affect yields. Moreover, it is assumed that hired labour requirements for the mechanized farm model is the same as for the non-mechanized model, i.e., mechanization does not affect labour requirements, but only draught services. The mechanized farm model includes the investment component, and the four mechanized activities (high yield paddy, traditional paddy, sunflower and sesame), which in turn include the cost of utilization of the power tiller. To build the mechanized farm model, the following components have to be taken into account:

a. Cost of power-tiller utilization. Table 18 shows the list of commodities to be considered in the NGAMO2 exercise, which includes the cost of power tiller utilization (TRACTOR).

b. Investment. One power-tiller per farm. Farmers are supposed to purchase one power-tiller in the first year of the project. Its cost is estimated at Francs 20 000. The characteristics of the investment are displayed in Table 19.

c. Mechanized activities. Four new activities will be created, based on irrigated and mechanized technology. Tables 20a-d show the coefficients of inputs and outputs for each individual activity in the WoP and WiP situations.

d. Other costs. Land tax, irrigation tax, and other expenses are the same as in NGAMO1. They are reported in Table 21.

e. Land utilization. Land use is unaffected by mechanization, and the same areas are used for the same crops as in the plan TRADIT. Land utilization by activity is reported in Table 22.

f. Credit. As mentioned earlier, a credit component is added to the project, as farmers require some external financial resources to purchase the tiller. It is assumed that 95% of the total cost of the tiller will be financed by the credit institution. The credit and reimbursement conditions likely to be suitable for the envisaged investment are presented in Table 23.

Table 17a-d - Updated list of codes

Table 17a
Commodities

Name	Code
High Yield Paddy Paddy Traditional Seed - Paddy Sunflower Seed - Sunflower Sesame Seed - Sesame Urea TSP [triplesuperphosphate] MOP [muriate of potash] Manure Draught Animals Hired Labour Pesticides Workforce Land-tax Irrigation Tax Other Expenses Power-tiller cost of utilization	Pad-HY Pad-TRA S-PADDY SUNF S-SUNF SESAME S-SESAME UREA TSP MOP MANURE BULLOCKS HIR-LAB PESTIC LABOUR LAND-TAX IRR-TAX OTHER TRACTOR

Table 17b
Investments

Name	Code
Power-Tiller Investment	TRACT-I

Table 17c
Activities

Name	Code
Irrigated Non-Mechanized HY Paddy Production Irrigated Non-Mechanized TRA Paddy Production Irrigated Non-Mechanized Sunflower Production Irrigated Non-Mechanized Sesame Production Irrigated Mechanized HY Paddy Production Irrigated Mechanized TRA Paddy Production Irrigated Mechanized Sunflower Production Irrigated Mechanized Sesame Production	CUL-HYV CUL-TRA CUL-SUN CUL-SES MEC-HYV MEC-TRA MEC-SUN MEC-SES

Table 17d
Plans

Name	Code
Irrigated Animal Traction Farm Model Irrigated Mechanized Farm Model	AN-FARM MEC-FARM

Table 18
Commodity financial prices (inputs and outputs)

Item	Code	Price
Seeds - HY paddy (kg) Seeds - Traditional paddy (kg) Seeds - Sunflower(kg) Seeds - Sesame (kg) Fertilizer - Urea (kg) Fertilizer - TSP [triplesuperphosphate] (kg) Fertilizer - MOP [muriate of potash] (kg) Fertilizer - manure (per cart) Pesticide (Francs) Hired labour (per day) Workforce - Family (per day) Draught animals (per day) Power-tiller (per hour)	S-PADDY S-PADDY S-SUNF S-SESAME UREA TSP MOP MANURE PESTIC HIR-LAB LABOUR BULLOCKS TRACTOR	0.60 0.60 6.00 10.40 0.34 1.14 0.54 15.00 1.00 7.00 - 30.00 2.00
Yield - HY paddy (ton) Yield - Traditional paddy (ton) Yield - Sunflower (ton) Yield - Sesame (ton)	PAD-HY PAD-TRA SUNF SESAME	441 662 4 550 7 674

Table 19
Investment dataset (Code: TRACT-I)

Name	Parameters
Life time (years)	8
Price (from Year 1 to Year 15) (Francs)	20 000
Maintenance (% of cost)	10%
Lag period for maintenance (years)	1
Residual value (% of cost)	10%
Contingency costs (% of cost)	5%

Note: The entries in boldface are new entries, i.e., those not used previously in NGAMO1.

Table 20a
1. Mechanized HY paddy (MEC-HY) WiP

Item	Code	Year
		1	2	3	4	5	6	7 - 15
Seed (kg) Urea (kg) TSP (kg) MOP (kg) Manure (carts) Pesticide (Francs) Workforce (workdays) Power-tiller (hours) Draught animals (days)	S-PADDY UREA TSP MOP MANURE PESTIC LABOUR TRACTOR BULLOCKS	70.0 112.0 56.0 28.0 1.0 5.0 102.0 64.0 -	70.0 112.0 56.0 28.0 1.0 5.0 102.0 64.0 -	70.0 112.0 56.0 28.0 1.0 5.0 100.0 64.0 -	70.0 112.0 56.0 28.0 1.0 5.0 100.0 64.0 -	70.0 112.0 56.0 28.0 1.0 5.0 100.0 64.0 -	70.0 112.0 56.0 28.0 1.0 5.0 100.0 64.0 -	70.0 112.0 56.0 28.0 1.0 5.0 100.0 64.0 -
Yield - HY paddy (tons)	PAD-HY	3.6	3.6	3.8	3.8	4.2	4.2	4.2

Table 20a - 2. Mechanized HY paddy (MEC-HY) WoP

Table 20b
1. Mechanized traditional paddy (MEC-TRA) WiP

Item	Code	Year
		1	2	3	4	5	6	7-15
Seed (kg)	S-PADDY	46.0	46.0	46.0	46.0	46.0	46.0	46.0
Urea (kg)	UREA	28.0	28.0	28.0	28.0	28.0	28.0	28.0
TSP(kg)	TSP	-	-	-	-	-	-	-
MOP (kg)	MOP	-	-	-	-	-	-	-
Manure (carts)	MANURE	1 0	1 0	1 0	1 0	1 0	1 0	1 0
Pesticide (Francs)	PESTIC	50	50	50	50	50	50	50
Workforce (workdays)	LABOUR	68.0	68.0	86.0	86.0	86.0	86.0	86.0
Power-tiller (hours)	TRACTOR	44.0	44.0	52.0	52.0	52.0	52.0	52.0
Draught animals (days)	BULLOCKS	-	-	-	-	-	-	-
Yield - trad paddy (tons)	PAD-TRA	20	20	22	22	22	22	22

Table 20b - 2. Mechanized traditional paddy (MEC-TRA) WoP

Table 20c
1. Mechanized sunflower (MEC-SUN) WiP

Item	Code	Year
		1	2	3	4	5	6	7-15
Seed (kg)	S-SUNF	11 0	11 0	11 0	11 0	11 0	11 0	11 0
Urea (kg)	UREA	84.0	84.0	84.0	84.0	84.0	84.0	84.0
TSP(kg)	TSP	56.0	56.0	56.0	56.0	56.0	56.0	56.0
MOP (kg)	MOP	28.0	28.0	28.0	28.0	28.0	28.0	28.0
Manure (carts)	MANURE	-	-	-	-	-	-	-
Pesticide (Francs)	PESTIC	50	50	50	50	50	50	50
Workforce (workdays)	LABOUR	32.0	32.0	50.0	50.0	50.0	50.0	50.0
Power-tiller (hours)	TRACTOR	24.0	24.0	36.0	36.0	36.0	36.0	36.0
Draught animals (days)	BULLOCKS	-	-	-	-	-	-	-
Yield - sunflower (tons)	SUNF	0.8	0.8	0.8	1.2	1.2	1.2	1.2

Table 20c - 2. Mechanized sunflower (MEC-SUN) WoP

Table 20d
1. Mechanized sesame (MEC-SES) WiP

Item	Code	Year
		1	2	3	4	5	6	7-15
Seed (kg)	S-SESAME	15.0	15.0	17.0	17.0	17.0	17.0	17.0
Urea (kg)	UREA	84.0	84.0	84.0	84.0	84.0	84.0	84.0
TSP (kg)	TSP	56.0	56.0	56.0	56.0	56.0	56.0	56.0
MOP (kg)	MOP	-	-	-	-	-	-	-
Manure (carts)	MANURE	-	-	-	-	-	-	-
Pesticide (Francs)	PESTIC	20.0	20.0	20.0	20.0	20.0	20.0	20.0
Workforce (workdays)	LABOUR	42.0	42.0	66.0	66.0	66.0	66.0	66.0
Power-tiller (hours)	TRACTOR	36.0	36.0	40.0	40.0	40.0	40.0	40.0
Draught animals (days)	BULLOCKS	-	-	-	-	-	-	-
Yield - sesame (tons)	SESAME	0.2	0.2	0.4	0.6	0.6	0.6	0.6

Table 20d - 2. Mechanized sesame (MEC-SES) WoP

Table 21a - Plan MEC-FARM (WiP) - 1. Other cost items - WiP

Table 21b - Plan MEC-FARM (WoP) - 2. Other cost items - WoP

Table 22a
Plan mechanized farm (MEC-FARM) land utilization (ha.) (WiP)

1. WiP situation

Item	Activity code	Year
		1	2	3	4	5	6	7-15
(a) Humid season
HY paddy	MEC-HYV	3.85	3.85	3.90	3.95	4.00	4.05	4.05
Traditional paddy	MEC-TRA	1.65	1.65	1.60	1.55	1.45	1.45	1.45
Total		5.50	5.50	5.50	5.50	5.50	5.50	5.50
(b) Dry season
Sunflower	MEC-SUN	0.10	0.10	0.20	0.25	0.35	0.45	0.45
Sesame	MEC-SES	1.10	1.10	1.25	1.45	1.65	1.80	1.80
Total		1.20	1.20	1.45	1.70	2.00	2.25	2.25

Table 22b - Plan mechanized farm (MEC-FARM) land utilization (ha.) (WoP) - 2. WoP situation - 2. WoP situation

Table 23
Credit component dataset

Item	Code	Credit	Parameters
Amount of loan (principal) (L)	PRINCIPAL	% of investment	95
Duration (D)		years	5
Interest rate (I)	INTEREST	%	10
Grace period (GP)		years	1
Payment of interest during grace period		yes/no	yes
Constant Capital Reimbursement (CCR)	INSTALM	yes/no	yes

2.3 Question Set

The analyst is required to provide the decision-makers and farmers with information on expected project outcomes.

Main questions

(i) Once the hired labour force is introduced at farm level, is it financially viable for the farmer (AN-FARM) to enter the irrigation project? Assuming a 12% actualization rate and a project length of 15 years, work out its cash flow.

(ii) After inserting the MEC-FARM model, and after checking that the data has been entered correctly, compare inputs and outputs in physical terms of the plan MEC-FARM with those of the plan AN-FARM. What are the differences?

(iii) Assuming 12% discount rate and a timespan of 15 years, is the proposed mechanized farm model (MEC-FARM) financially viable and profitable to farmers, compared with the WoP situation? Work out its cash flow.

(iv) How do the Net Benefits evolve during the lifetime of the project?

(v) How does the credit component affect the cash situation of the farmers? Compare the project indicators before and after financing.

(vi) In the plan AN-FARM, what is the maximum irrigation tax the farmer is willing to pay to enter the irrigation project? (Always assuming the same discount rate and the timespan of the projects).

(vii) Is the second farm model (MEC-FARM) more viable and profitable to farmers than the first farm model (AN-FARM)?

2.4 Hints

Most of the data necessary to develop the exercise with WinDASI have already been inserted during the NGAMO1 exercise. For the NGAMO2 analysis, the user should therefore duplicate the NGAMO1 file (to duplicate files, see section 5.1 in part 1 of the WinDASI manual) and provide the entry of additional data as required in the following steps:

i. Create a new plan equal to TRADIT (call it, e.g., AN-FARM). Codify the new commodity "HIR-LAB" and insert the hired labour requirements as calculated in NGAMO1 at plan level, compute the financial indicators of the new plan and the suitable critical changes and switching values. Recall that in WoP the hired labour requirements are zero, as the household labour is just sufficient to run the current agricultural activities.

ii. The answer to question (i) can be obtained by calculating the project indicators of the plan AN-FARM.

iii. Insert the cost of use of the power-tiller (commodity TRACTOR).

iv. Insert the mechanized activities using the appropriate "duplicate" function of WinDASI to duplicate the non-mechanized activities (to duplicate activities see section 3.3 in part 1 of WinDASI the manual), assign the new name (boldfaced in Table 17c) and add the cost of use for the power-tiller.

v. Insert the investment with its code (Table 17b) as well as all its characteristics (Table 19).

vi. After inserting in the database the cost of use of the power-tiller, the mechanized activities and the investment, create a new plan MEC-FARM using the land utilization data in Table 22. Recall that the WoP situation of MEC-FARM assumes non-mechanized activities, as used in the plan AN-FARM. Also include investment in the plan.

vii. The answer to question (ii) can be obtained by calculating the MEC-FARM inputs and outputs in physical units, using the relevant WinDASI function.

viii. The answer to question (iii) is easily obtained by computing the Net Present Value and the project indicators of the plan MEC-FARM.

ix. Concerning question (iv), the trend of the Net Benefits can be analysed by looking at the results obtained from the plan MEC-FARM

x. The flows of the credit component can be calculated on a spreadsheet, using a table similar to the following:

Table 24
Credit component items

Item	Code	WoP	Year
			1	2	3	4	5	6	7
Principal	PRINCIPAL	-	19 000	0	0	0	0	0	0
Payment of principal	INSTALM	-
Payment of interest	INTEREST	-
Total debt service
Outstanding balance at end of period

New "commodities" called, for example, PRINCIPAL, INSTALM and INTEREST, have to be added, with the value set to 1 (in monetary units). A new plan, called, for example, MEC-FARM-LR, identical to MEC-FARM, could be created. The credit component will be added to the plan by means of a dummy activity that includes the credit-related items. The project indicators of the plan MEC-FARM-LR can then be compared with those of the plan MEC-FARM.

xi. The answer to question (vi) is easily obtained by using the Switching Value (SV) of the irrigation tax, (see 4.2.2, Project Indicators in Part 1 of the WinDASI manual).

xii. The answer to question (vii) can be obtained by looking at the project indicators of the plan MEC-FARM and comparing them with those of the plan AN-FARM (recall that, for both of them, the WoP situation is the non-irrigated non mechanized situation).

2.5 Solution Set

2.5.1 Answer to question (i)
2.5.2 Answer to question (ii)
2.5.3 Answer to question (iii)
2.5.4 Answer to question (iv)
2.5.5 Answer to question (v)
2.5.6 Answer to question (vi)
2.5.7 Answer to question (vii)

2.5.1 Answer to question (i)

After inserting the hired labour requirements costs in the plan TRADIT to obtain the plan AN-FARM, an analysis of the overall flow of Net Benefits is required. The costs and benefits are shown in Table 25. Note that hired labour now appears among the cost items.

Table 25
Costs and benefits of the plan AN-FARM

	WoP	Years
		1	2	3	4	5	6	7 - 15
OUTPUT
Pad-HY	6,112.3	6,112.3	6,112.3	6,535.6	6,619.4	7,408.8	7,501.4	7,501.4
Pad-TRA	2,184.6	2,184.6	2,184.6	2,330.2	2,257.4	2,184.6	2,111.8	2,111.8
SESAME	1,688.3	1,688.3	1,688.3	3,837.0	6,676.4	7,597.3	8,287.9	8,287.9
SUNF	364.0	364.0	364.0	728.0	1,365.0	1,911.0	2,457.0	2,457.0
TOTAL	10,349.1	10,349.1	10,349.1	13,430.9	16,918.2	19,101.7	20,358.1	20,358.1
INPUTS and FACTORS
BULLOCKS	5415	5415	5415	5850	6006	6189	6342	6342
HIR-LAB	-	-	-	455.7	570.5	702.8	812	812
IRR-TAX	-	-	-	110	110	110	110	110
LABOUR	-	-	-	-	-	-	-	-
LAND-TAX	28	28	28	28	28	28	28	28
MANURE	82.5	82.5	82.5	82.5	82.5	82.5	82.5	82.5
MOP	59.72	59.72	59.72	61.99	63.5	65.77	68.04	68.04
OTHER	90	90	90	120	136	152	169	185
PESTIC	50	50	50	53.5	57.75	62.25	65.75	65.75
S-PADDY	207.24	207.24	207.24	207.96	208.68	209.4	210.12	210.12
S-SESAME	171.6	171.6	171.6	221	256.36	291.72	318.24	318.24
S-SUNF	6.6	6.6	6.6	13.2	16.5	23.1	29.7	29.7
TSP	322.39	322.39	322.39	341.54	360.7	383.04	402.19	402.19
UREA	196.59	196.59	196.59	205.16	213.72	223.72	232.29	232.29
TOTAL Inputs and factors	6,629.6	6,629.6	6,629.6	7,750.6	8,110.2	8,523.3	8,869.8	8,885.8
Net Benefits	3,719.5	3,719.5	3,719.5	5,680.3	8,808.0	10,578.4	11,488.3	11,472.3
Net Incremental Benefits	-	-	-	1,960.8	5,088.5	6,858.9	7,768.8	7,752.8

To judge the farmers' economic interest in joining the project, the Net Present Value (NPV) of the incremental Net Benefits must be calculated. Assuming an opportunity cost of capital of 12%, the incremental net discounted cumulated benefits over 15 years, i.e., the incremental NPV, is 33 385.6. It is positive, indicating that the project is economically viable for the farmer. Table 26 shows the incremental NPV, together with the incremental Net Benefits and the incremental net discounted benefits year by year.

Note that if the summary project indicators are calculated with the SV function, then both the incremental NPV and the Internal Rate of Return (IRR) are reported. In this case, the IRR is reported to be greater than 100%. This is due to the fact that since there is no investment there is no change in the sign of the net incremental flows (all of them are positive). This implies that no finite discount rate exists to lead to an incremental NPV = 0 (remember that the definition of the IRR of a project is the discount rate generating an NPV = 0 for a project. The IRR here is infinite.

Table 26
Net Incremental discounted benefits of the plan AN-FARM and incremental NPV
(Net Incremental Discounted Cumulated benefits at year 15)

Item	Years
	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
Net incremental benefits	-	-	1,960.8	5,088.5	6,858.9	7,768.8	7,752.8	7,752.8	7,752.8	7,752.8	7,752.8	7,752.8	7,752.8	7,752.8	7,752.8
Discount factor (@12%)	0.893	0.797	0.712	0.636	0.567	0.507	0.452	0.404	0.361	0.322	0.287	0.257	0.229	0.205	0.183
Net incremental discounted benefits (@12%)	-	-	1,395.7	3,233.8	3,891.9	3,935.9	3,507.0	3,131.2	2,795.7	2,496.2	2,228.7	1,989.9	1,776.7	1,586.4	1,416.4
Net incremental discounted benefits	-	-	1,395.7	4,629.5	8,521.4	12,457.3	15,964.3	19,095.5	21,891.2	24,387.4	26,616.1	28,606.1	30,382.8	31,969.2	33,385.6

2.5.2 Answer to question (ii)

Once all the data have been entered in WinDASI, calculations can be run to provide the decision-makers and farmers with the inputs and outputs in physical units.

Table 27a
Plan MEC-FARM. Inputs, outputs and investments in physical units
1. Inputs

Item	Unit	WoP	Years
			1	2	3	4	5	6	7-15
BULLOCKS	DAYS	180.50
HIR-LAB	DAYS				65.10	81.50	100.40	116.00	116.00
IRR-TAX	FRANC				110.00	110.00	110.00	110.00	110.00
LABOUR	DAYS	554.30	554.30	554.30	620.10	636.50	655.40	671.00	671.00
LAND-TAX	FRANC	28.00	28.00	28.00	28.00	28.00	28.00	28.00	28.00
MANURE	CART	5.50	5.50	5.50	5.50	5.50	5.50	5.50	5.50
MOP	KG	110.60	110.60	110.60	114.80	117.60	121.80	126.00	126.00
OTHER	FRANC	90.00	90.00	90.00	120.00	136.00	152.00	169.00	185.00
PESTIC	FRANC	50.00	50.00	50.00	53.50	57.75	62.25	65.75	65.75
S-PADDY	KG	345.40	345.40	345.40	346.60	347.80	349.00	350.20	350.20
S-SESAME	KG	16.50	16.50	16.50	21.25	24.65	28.05	30.60	30.60
S-SUNF	KG	1.10	1.10	1.10	2.20	2.75	3.85	4.95	4.95
TRACTOR	HR		361.00	361.00	390.00	400.40	412.60	422.80	422.80
TSP	KG	282.80	282.80	282.80	299.60	316.40	336.00	352.80	352.80
UREA	KG	578.20	578.20	578.20	603.40	628.60	658.00	683.20	683.20