$ Report No: RES00192 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Nepal Livestock Sector Innovation Project APPROVED ON 07-Dec-2017 TO Government of Nepal Agriculture and Food South Asia Regional Vice President: Martin Raiser Regional Director: Dina Umali-Deininger Country Director: Faris H. Hadad-Zervos Practice Manager: Gayatri Acharya Task Team Leader(s): Asuka Okumura The World Bank Nepal Livestock Sector Innovation Project (P156797) ABBREVIATIONS AND ACRONYMS FMD: Foot and Mouth Disease IDA: International Development Association LSD: Lumpy Skin Disease MoALD: Ministry of Agriculture and Livestock Development MoF: Ministry of Finance NLSIP: Nepal Livestock Sector Innovation Project PDO: Project Development Objective PPR: Pestel des Petits Ruminants The World Bank Nepal Livestock Sector Innovation Project (P156797) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P156797 Nepal Livestock Sector Innovation Project Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Nepal Approval Date Current Closing Date 07-Dec-2017 30-Jun-2024 Original EA Category Partial Assessment (B) (PAD Approval Package-02 Apr 2018) Organizations Borrower Responsible Agency Government of Nepal Ministry of Agriculture and Livestock Development @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective 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. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD -- -- -- 0 IDA 46.26 36.32 9.94 78.50 i The World Bank Nepal Livestock Sector Innovation Project (P156797) Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Nepal Livestock Sector Innovation Project (P156797) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................2 III. PROPOSED CHANGES ................................................................................................................................................3 IV. DETAILED CHANGE(S) ...............................................................................................................................................3 The World Bank Nepal Livestock Sector Innovation Project (P156797) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Nepal Livestock Sector Innovation Project (NLSIP) was approved by the Board on December 7, 2017, and declared effective on February 28, 2018. The project is financed by a credit from International Development Association (IDA). Original IDA allocation was SDR56,700,000 (equivalent to US$80.0 million as of approval), which was reduced to SDR 38,866,500 in January 2022 and further reduced to SDR32,304,295 (equivalent to US$42.26 million as of June 25, 2024) in June 2023 through two project restructurings. Government of Nepal’s original contribution was US$10.0 million, which decreased to US$5.9 million. 2. The project development objective (PDO) is to increase productivity, enhance value addition, and improve climate resilience of stallholder famers and agro-entreprises in selected livestock value chains in Nepal. The PDO remains relevant. There is no pending audit report under the project. 3. The project is scheduled to close on June 30, 2024. Most of the activities under the project have been already completed. Key achievements under three main components are as follows. 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. 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 and are now being disseminated at provincial levels. Other regulatory works including Infectious Animal Disease Control Act, Animal Welfare Act, Animal Nutrition Strategy, and Animal Identification and Traceability Strategy, have been drafted with support from the project and submitted to Ministry of Agriculture and Livestock Development (MoALD). Other notable achievements include: (a) development of laboratory protocol and standard operating procedure for Veterinary Standard and Drug Regulatory Laboratory; and (b) completion of prototype for livestock management information system currently under piloting in Gandaki Province. 5. Component B - Promoting Sector Innovation and Modernizing Service Delivery: Activities under this component focus on: (a) supporting producer groups; (b) modernizing animal health and breeding services; and (c) training of farmers and extension service staff. The project has supported 1,354 groups reaching 87,985 farmer members. Supported by the project, the cumulative number of vaccinations against Pestel des Petits Ruminants (PPR) has reached 45.5 million heads, 16.0 million for against Foot and Mouth Disease (FMD), and 1.1 million for Lumpy Skin Disease (LSD). Other notable achievements include: (a) constructing of 28 livestock service centers which are equipped with basic modern tools and instruments; (b) equipping central and regional veterinary laboratories with modern equipment such as ultrasound sonography, X-ray machines, and automatic semen analyzers; (c) introducing cold equipment at various locations including central and regional veterinary laboratories that contributed to the logistics for COVID-19 vaccines during the pandemic period; and (d) establishing the pedigree performance recording system as part of the livestock genetic improvement program. 6. Component C - Promoting Inclusive Value Chains for Selected Livestock: Activities supported by this component are to: (a) develop productive partnerships between producers and buyers and provide food safety services; and (b) provide matching grants for investments. The project supported 446 sub-projects through the matching grant program and mobilized US$18.6 Page 1 The World Bank Nepal Livestock Sector Innovation Project (P156797) million in private capital (beneficiary contribution of US$5.95 million and loans from financial institution of US$12.66 million). Other notable achievements under this component include the construction/completion of five livestock markets. B. Rational for restructuring 7. The project has realized savings as a result of competitive bidding for the procurement activities, foreign exchange rate variation, and a reduction in the matching grant program. No further activity is planned for the project and US$4.5 million is projected to remain undisbursed at project closing. The Government of Nepal wants to commit the undisbursed balance to supplement other activities, and a letter dated June 25, 2024 to cancel US$4.5 million from Ministry of Finance has been received by the Bank. The proposed restructuring is in response to this MOF cancellation request. II. DESCRIPTION OF PROPOSED CHANGES A. Description of proposed changes 8. The only change proposed through this restructuring is the cancelation of US$4.5 million from the IDA credit. Table 1 below shows the reallocation of commitment across components. Table 1: Category wise cancellation amount and revised allocation (US$ million) Allocation before Proposed cancelation Revised allocation restructuring Category 1 (Goods and works) 16.51 0.72 15.79 Category 2 (Consulting, non-consulting, 5.91 0.54 5.37 Training and workshop Category 3 (Incremental Operating Cost) 2.52 0.00 2.52 Category 4 (Matching Grant) 18.00 3.24 14.76 Refund of Preparation Advance 0.06 0.00 0.06 Total 43.00 4.50 38.50 @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes Page 2 The World Bank Nepal Livestock Sector Innovation Project (P156797) III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Disbursements Estimates Yes Loan Cancellations Yes Development Objective No Reallocations Yes Safeguard Policies Triggered No Loan Closing Date Extension No ISDS No Financial Management No MFD/PCE No Procurement No Results No Institutional Arrangement No Risks No Implementation Schedule No Legal Covenants No Conditions No Implementation Modalities No Disbursements Arrangements No DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Cancellations Page 3 The World Bank Nepal Livestock Sector Innovation Project (P156797) Reason Value Loan/Credit/ Current Cancellation New for Status Currency Date of Trust Fund Amount Amount Amount Cancellati Cancellation on LOAN Disbursi RESTRUCT IDA-61490- 32,304,295.0 ng&Rep XDR 3,416,000.00 25-Jun-2024 28,888,295.00 URING, 001 0 aying COST SAVINGS Reallocations IDA-61490-001 Cancellations (if any): New Allocation: Currency: XDR 3,416,000.00 28,888,295.00 Financing % (Type Total) Category Expenditure Current Actuals + Proposed No. Category Allocation Committed Allocation Current Proposed 1 Gds wrk Prt A B C (excl 12,445,663.00 10,025,740.45 11,899,163.00 85.00 85.00 C.2a) D; 2 NCS CS Tng Wrp Prt A 4,386,140.00 3,583,694.17 3,976,340.00 85.00 85.00 B C(ex C.2a) D; 3 IOC Prt A B C (excl 1,897,200.00 1,529,053.51 1,897,200.00 72.00 72.00 C.2a) D; 4 Matching Grants - 13,531,003.00 10,885,855.32 11,071,303.00 50.00 50.00 part C.2a; 5 PPF REFINANCING; 44,289.00 40,319.91 0.00 0.00 0.00 6 CERC; 0.00 0.00 44,289.00 100.00 100.00 Total 32,304,295.00 28,888,295.00 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Restructuring Implementation Start Date Operation Closing Date 07-Dec-2017 30-Jun-2024 Projected Date for Full Disbursement 31-Oct-2024 Page 4 The World Bank Nepal Livestock Sector Innovation Project (P156797) Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 02 Apr 2018) FY2018 1,467,566.10 2,000,463.02 2,000,463.02 FY2019 8,133,274.80 1,731,541.38 1,731,541.38 FY2020 14,047,425.00 2,960,353.32 2,960,353.32 FY2021 13,450,657.50 4,703,404.69 4,703,404.69 FY2022 10,025,637.30 6,252,651.24 6,252,651.24 FY2023 0.00 14,903,309.30 14,903,309.30 FY2024 0.00 5,948,277.00 3,705,394.57 FY2025 0.00 0.00 0.00 FY2026 0.00 0.00 0.00 Page 5