The World Bank Nepal Livestock Sector Innovation Project (P156797) REPORT NO.: RES56234 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NEPAL LIVESTOCK SECTOR INNOVATION PROJECT APPROVED ON DECEMBER 7, 2017 TO GOVERNMENT OF NEPAL AGRICULTURE AND FOOD SOUTH ASIA Regional Vice President: Martin Raiser Country Director: Faris H. Hadad-Zervos Regional Director: John A. Roome Practice Manager/Manager: Gayatri Acharya Task Team Leader(s): Karishma Wasti The World Bank Nepal Livestock Sector Innovation Project (P156797) ABBREVIATIONS AND ACRONYMS GON Government of Nepal MOALD Ministry of Agriculture and Livestock Development MOF Ministry of Finance NLSIP Nepal Livestock Sector Innovation Project NVC Nepal Veterinary Council PDO Project Development Objective SOP Standard Operating Procedure TA Technical Assistance VSDLR Veterinary Standard and Drug Regulatory Laboratory The World Bank Nepal Livestock Sector Innovation Project (P156797) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P156797 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 07-Dec-2017 30-Jun-2023 Organizations Borrower Responsible Agency Government of Nepal Project Development Objective (PDO) Original PDO The Project Development Objectives (PDO) are to increase productivity, enhance value addition, and improve climate resilience of smallholder farms and agro-enterprises in selected livestock value-chains in Nepal. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-61490 07-Dec-2017 21-Jan-2018 28-Feb-2018 30-Jun-2023 55.00 32.61 20.00 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Nepal Livestock Sector Innovation Project (P156797) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Executive Summary 1. This Project Paper seeks the approval of the Country Director to extend the Nepal Livestock Sector Innovation Project (NLSIP) closing date by 12 months to June 30, 2024 as requested by the Government of Nepal (GON) in their letter dated 11 June 2023. The Paper also seeks to cancel US$8.8 million from the current allocation of US$55 million following the discussion with the Ministry of Finance (MoF) and the Ministry of Agriculture and Livestock Development (MoALD) as stated in the letter from the Bank to MOF dated June 27, 2023. The original allocation is US$80.0 million which was reduced to US$55.0 million through a January 2022 restructuring which cancelled US$25.0 million. There are no outstanding audit reports, nor any major observations reported in the Fiscal Year (FY) 2021/22 audit report. B. Project Development Objective (PDO) 2. The project development objective of the NLSIP is to increase productivity, enhance value addition, and improve climate resilience of smallholder farmers and agro-enterprise in selected livestock value chains in Nepal. C. Project Status and Results 3. Progress towards achievement of PDO is rated as Satisfactory and Implementation Progress is Moderately Satisfactory for NLSIP. The PDO continues to remain relevant and achievable during the remaining implementation period. The eighth Implementation Review in March 2023 noted substantial progress in implementation exceeding targets for many of the Results framework indicators. Component-wise progress is briefly summarized below. 4. Component A: Strengthening Critical Regulatory and Institutional Capacity. Activities under this component are focused on two main pillars: (a) policies and regulatory framework; and (b) institutional capacity strengthening. 5. Out of the four policies supported by the Project, the National Livestock Breeding Policy (2022) and the National Animal Health Policy (2022) were approved by the Cabinet in January 2022 which are now being disseminated at provincial levels. Animal Welfare Act and Infectious Disease Act are currently being drafted and are expected to be completed by June 2023. The Animal Nutrition Strategy has now been reviewed and cleared by the Department of Livestock Services and submitted to the Ministry of Agriculture and Livestock Development (MoALD) for approval. The Emergency Preparedness Plan is awaiting finalization of the Infectious Animal Disease Act as a pertinent input into this plan. Other notable achievements include: (a) completion of standard operating manuals for veterinary standards and drug regulatory laboratory; (b) development of laboratory protocol and standard operating procedure (SOP) for Veterinary Standard and Drug Regulatory Laboratory (VSDRL) which include 10 new SOPs for drug residual testing, updating of 15 existing SOPs, and development of five new protocols for five poultry vaccine testing facilities; and (c) completion of prototype for livestock management information system (LMIS) currently under testing in Gandaki Province. 6. Component B: Promoting Sector Innovation and Modernizing Service Delivery. Activities under this component focus on: (a) mobilize and strengthen producer groups; (b) modernize livestock extension services through infrastructure upgrade; and (c) develop extension training curriculum and strengthen extension agency staff capacity. 7. The Project continues to support strengthening of producers’ groups to secure services and participate in livestock value chain. So far, the project has supported 1,354 groups reaching 87,985 farmer members. The 1,354 groups comprise of 1,049 Farmer Groups (FGs) and 305 Cooperatives with 52 percent of total members being female. As The World Bank Nepal Livestock Sector Innovation Project (P156797) part of the capacity building initiative, the project has so far trained 4,331 staff members through 149 training events and 7,665 farmers through 257 events. In FY 2022/23 the Project procured 5.325 million doses of FMD vaccine supplying a total of 12.669 million doses to the animals. Similarly, 29,325 million doses of vaccines were made available to vaccinate small ruminants. A total of 5,562 animals have been registered under the pedigree performance recording system (PPRS) which helps in identifying and locating good quality breeding stocks as part of national level breed improvement initiative. Cold chain facilities have been established in 21 locations. Of the planned 56 construction activities the Project has completed 41. 8. Component C: Promoting Inclusive Value Chains for Selected Livestock Commodities. Activities supported by this component are: (a) develop productive partnerships between producers and buyers and providing food safety services; and (b) provide matching grants for investments. 9. So far, the Project has established 34 stakeholder dialogue platforms to facilitate productive partnerships (PP). Of the total investment of US$43.6 million among the 577 Sub Project (SP) business plans, US$21.49 million is the matching grant from the Project, US$15.17 million from the Bank and Financial Institutions (BFI) and US$6.97 million as equity from the beneficiaries. While all the sub-projects under Call 1 and 2 have been completed the deadline for completion of implementation for sub projects under Call 3 has been extended to 30 June 2023.The construction of four livestock markets supported by the Project have been completed and are now fully operational. D. Rationale For Restructuring 10. Extension of closing date by 12 months to 30 June 2024. Due to a court case following a complaint by one of the unsuccessful beneficiaries of Call 1, the release of Matching Grant Schemes (MGS) instalments to Call 3 sub-projects was put on hold for several months. While the final verdict is yet to be announced, the MoALD has provided approval to the Project to release instalments to Call 3 sub-projects. MoF through their letter dated June 11, 2023 has requested the Bank to extend the closing date by 12 months to allow the Project to complete the implementation and payments of the sub-projects and complete any other pending activities. While this request is approved as per the Bank’s letter to MOF dated June 27, 2023, due to reduced scope of activities in the extension period following discussions with the Ministry of Finance, the Bank has suggested an early closure of the Project preferably within nine months. 11. Cancellation of US$ 8.8 million. As a result of competitive bidding for the construction activities and foreign exchange rate variation, the Project has saved US$ 6 million. In addition, against the requested budget of around US$ 10 million, US$ 7.2 million was approved for the next FY 2023/24. MoF has requested cancellation of funds that have not been allocated for the upcoming Fiscal Year. Hence, a cumulative amount of US$ 8.8 million is proposed for cancellation. II. DESCRIPTION OF PROPOSED CHANGES A. Extension of the Closing Date. A letter from MOF dated June 11, 2023, requested to extend the project closing date by 12 months. The current closing date for NLSIP is June 30, 2023, and the revised closing date is proposed to be June 30, 2024. B. Cancellation of IDA Funds. Proactive cancellation of US$8.8 million is proposed as per the table below: Table 1: Category-wise Cancellation amount and revised allocation in US$ Mn The World Bank Nepal Livestock Sector Innovation Project (P156797) Allocation before Category Amount Cancelled Revised Allocation this Restructuring (1) Goods and works 19.02 1.26 17.76 (2) Non-consulting services, consultants’ 8.09 1.72 6.37 services, Training and Workshops (3) Incremental Operating Costs 2.83 0.18 2.65 (4) Matching Grants 25.00 5.59 19.41 (5) Refund of Preparation Advance 0.06 0.05 0.01 (6) Emergency Expenditures under Part 3 - - - of the project. TOTAL AMOUNT 55.00 8.80 46.20 III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ The World Bank Nepal Livestock Sector Innovation Project (P156797) Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component E: Contingency Component E: Contingency 0.00 No Change Emergency Response 0.00 Emergency Response Component Component Component A: Strengthening Component A: Strengthening Critical regulatory and 5.00 Revised Critical regulatory and 0.31 Institutional Capacity Institutional Capacity Component B: Promoting sector Component B: Promoting innovation and modernizing 40.00 Revised sector innovation and 23.90 service delivery modernizing service delivery Component C: Promoting Component C: Promoting Smallholder Inclusive Value Smallholder Inclusive Value 30.00 Revised 21.81 Chains for Selected Livestock Chains for Selected Livestock Commodities Commodities Component D: Project Component D: Project Management and Knowledge 5.00 Revised Management and Knowledge 7.23 Generation Generation TOTAL 80.00 53.25 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Nepal Livestock Sector Innovation Project (P156797) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-61490 Effective 30-Jun-2023 30-Jun-2024 30-Oct-2024 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation BORROWER' S REQUEST IDA-61490- Disburs XDR 38,866,550.00 6,562,255.00 11-Jun-2023 32,304,295.00 FOR 001 ing COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-61490-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: Gds wrk Prt A B C (excl C.2a) D 13,381,636.00 9,106,627.57 12,445,663.00 85.00 85.00 iLap Category Sequence No: 2 Current Expenditure Category: NCS CS Tng Wrp Prt A B C(ex C.2a) D 5,668,909.00 3,405,106.96 4,386,140.00 85.00 85.00 iLap Category Sequence No: 3 Current Expenditure Category: IOC Prt A B C (excl C.2a) D 2,031,443.00 1,386,420.76 1,897,200.00 72.00 72.00 iLap Category Sequence No: 4 Current Expenditure Category: Matching Grants - part C.2a 17,700,000.00 8,561,296.86 13,531,003.00 50.00 50.00 The World Bank Nepal Livestock Sector Innovation Project (P156797) iLap Category Sequence No: 5 Current Expenditure Category: PPF REFINANCING 84,562.00 40,319.91 44,289.00 iLap Category Sequence No: 6 Current Expenditure Category: CERC 0.00 0.00 0.00 100.00 100.00 Total 38,866,550.00 22,499,772.06 32,304,295.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 0000 0.00 0.00 2017 0.00 0.00 2018 3,460,000.00 2,058,348.16 2019 8,950,000.00 1,731,541.38 2020 28,390,000.00 2,960,353.32 2021 12,200,000.00 4,703,404.69 2022 0.00 6,252,651.24 2023 0.00 26,755,020.00 2024 0.00 41,900,000.00 .