The World Bank Nepal Livestock Sector Innovation Project (P156797) REPORT NO.: RES48097 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NEPAL LIVESTOCK SECTOR INNOVATION PROJECT APPROVED ON DECEMBER 7, 2017 TO NEPAL AGRICULTURE AND FOOD SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Faris H. Hadad-Zervos Regional Director: John A. Roome Practice Manager/Manager: Loraine Ronchi Task Team Leader(s): Karishma Wasti The World Bank Nepal Livestock Sector Innovation Project (P156797) ABBREVIATIONS AND ACRONYMS FMD Foot and Mouth Disease GON Government of Nepal NLSIP Nepal Livestock Sector Innovation Project NVC Nepal Veterinary Council PDO Project Development Objective 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 Ministry of Agriculture and Livestock Development 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$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-61490 07-Dec-2017 21-Jan-2018 28-Feb-2018 30-Jun-2023 80.00 14.94 64.47 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Nepal Livestock Sector Innovation Project (P156797) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Introduction This Project Paper seeks the approval of the Country Director to restructure the Nepal Livestock Sector Innovation Project (NLSIP) to cancel US$ 25 million (IDA) from original allocation of US$ 80 million as requested by the Government of Nepal (GON) in their January 12, 2022 letter. The restructuring also reflects changes in project activities and targets for certain indicators that were agreed with GON during the August 2021 mid-term review. B. Project Development Objective The project development objective of the Nepal Livestock Sector Innovation Project 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 Rationale for Restructuring Progress towards achievement of Project Development Objective (PDO) is rated as Moderately Satisfactory. The PDO continues to remain relevant and achievable during the remaining implementation period. The August 2021 Mid-term Review noted substantial progress in implementation, and all indicators were rated as Moderately Satisfactory except Implementation Progress which would be confirmed as Moderately Satisfactory with the completion of this restructuring. Component-wise progress is briefly summarized below. Component A: Strengthening Critical Regulatory and Institutional Capacity. Activities were to focus on three main pillars: (a) developing and operationalizing policies and acts affecting the sector; (b) strengthening government agencies’ capacity; and (c) developing a Livestock Information Management System. Regarding (a), the Animal Health Policy and the Livestock Breeding Policy and Strategy have been approved by the Cabinet. The following acts, strategies and policies are under review by GON: (a) Infectious Disease Control Act; (b) Road Maps for the prevention and control of FMD and PPR; (c) Animal Nutrition Strategy; (d) One Health Action Plan; and (e) Animal Identification and Traceability Strategy. Under (b), a Capacity Enhancement Needs Assessment (CENA) has been completed and a total of 4,202 farmers/producers were trained on various skills through 147 events, in addition to 3,450 staff members through 118 events. Regarding the Livestock Information Management System, due to its complexity and shortage of time, the project was to first develop and test a prototype and upscale it based on the experience. This activity is seriously delayed and has been proposed to be dropped. Component B: Activities under this component were to: (a) mobilize and strengthen producer groups and develop business plans for investment; (b) modernize livestock extension services through infrastructure upgrade; and (c) develop extension training curriculum and strengthen extension agency staff capacity. The World Bank Nepal Livestock Sector Innovation Project (P156797) A total of 1,048 groups (768 farmer groups (FG) and 280 cooperatives) have been formed. Under (b), the project has completed 12 livestock service centers; constructed the Nepal Veterinary Council (NVC) building, bull mother sheds in Pokhara and Lahan, goat sheds in Buditoda farm, several veterinary laboratories and quarantine offices; developed standard operating procedures for semen collection center, milk collection stations, and slaughterhouse facilities; established cold rooms in all the seven provinces for storage of vaccines; and vaccinated 2.65 million cattle against Foot and Mouth Disease (FMD) and 7.86 million small ruminants against PPR in FY 2020-21. The project’s support on chyangra value chain could not progress due to the COVID 19 pandemic induced travel ban to Mustang and Manang districts where chyangra goats are raised. The extension staff curriculum developed by the Agriculture Information and Training Center has been found to be adequate. Component C: Activities were to: (a) develop productive partnerships between producers and buyers, and providing food safety services; and (b) provide matching grants for investments. About 250 agreements have been signed following Calls for proposals 1 and 2 under the matching grant scheme. The first instalment of about US$ 15 million is anticipated to be released by end-February 2022. For Call 3, the selection process is on-going which is expected to be completed by March 7, 2022. Rolling out food safety activities is delayed. The rational for restructuring stems from: (a) Proactive cancellation of US$ 25 million IDA allocation following a request from the Government of Nepal to support the national level COVID-19 recovery initiative; and (b) the recommendations of the August 2021 Mid-term Review based on an exhaustive assessment of project performance. The restructuring therefore involves changes to the Results Framework, including in the PDO indicators and targets to some of the indicators, and dropping some activities as a result of the reduction in funds available for project activities. There is no change in the PDO. II. DESCRIPTION OF PROPOSED CHANGES Description of proposed changes The proposed restructuring involves following: (a) Partial cancellation of US$25 million. (b) Revision to the project Results framework: i. PDO indicator 1, sub-indicator 1.2: revise end target for ‘percentage increase in offtake rate expressed as carcass weight for goats’ from 40 to 20 percent. ii. PDO indicator 1, sub-indicator 1.3: Drop the sub-indicator on ‘percentage increase in chyangra wool production’. iii. Intermediate Results Indicator A.1: Drop indicator A.1 ‘development of master plan for livestock sector’. iv. Intermediate Results Indicator A.3: Drop indicator A.3 ‘development of LMIS’. v. Intermediate Results Indicator B.1: Revise end target for number of producer groups to be strengthened or mobilized from 3,000 to 1,700. vi. Intermediate Results Indicator C.2: Revise end target of financing 500 business plans to 350 business plans. The World Bank Nepal Livestock Sector Innovation Project (P156797) (c) Reducing the area to be covered under fodder and forage production from 30,000 ha to 10,000 ha, and the number of nurseries to be established from 70 to 40. (d) Creation of online information system, which was to be embedded into LMIS (on market, price, services, and financial products) is proposed to be reduced in scope to installation of digital market information boards in the livestock markets developed by the project. (e) The number of stakeholder dialogue platforms to be established and operational at the national, provincial and district levels would be 34 platforms as follows: 1 at the center, 1 per province in the five provinces supported by the project and one per district in the 28 districts covered by the project. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Other Change(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ The World Bank Nepal Livestock Sector Innovation Project (P156797) 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 0.50 Institutional Capacity Institutional Capacity Component B: Promoting sector Component B: Promoting innovation and modernizing 40.00 Revised sector innovation and 21.79 service delivery modernizing service delivery Component C: Promoting Component C: Promoting Smallholder Inclusive Value Smallholder Inclusive Value 30.00 Revised 27.81 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 4.90 Generation Generation TOTAL 80.00 55.00 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation BORROWER' IDA-61490- Disburs XDR 56,700,000.00 17,833,450.00 12-Jan-2022 38,866,550.00 S REQUEST 001 ing FOR The World Bank Nepal Livestock Sector Innovation Project (P156797) 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 23,000,000.00 6,034,194.77 13,381,636.00 85.00 85.00 iLap Category Sequence No: 2 Current Expenditure Category: NCS CS Tng Wrp Prt A B C(ex C.2a) D 13,450,000.00 2,351,725.07 5,668,909.00 85.00 85.00 iLap Category Sequence No: 3 Current Expenditure Category: IOC Prt A B C (excl C.2a) D 2,150,000.00 779,260.92 2,031,443.00 72.00 72.00 iLap Category Sequence No: 4 Current Expenditure Category: Matching Grants - part C.2a 17,700,000.00 0.00 17,700,000.00 50.00 50.00 iLap Category Sequence No: 5 Current Expenditure Category: PPF REFINANCING 400,000.00 40,319.91 84,562.00 0 iLap Category Sequence No: 6 Current Expenditure Category: CERC 0.00 0.00 0.00 100.00 100.00 Total 56,700,000.00 9,205,500.67 38,866,550.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes The World Bank Nepal Livestock Sector Innovation Project (P156797) Year Current Proposed 2017 0.00 0.06 2018 0.00 2,000,000.00 2019 0.00 3,460,000.00 2020 8,000,000.00 8,950,000.00 2021 0.00 28,390,000.00 2022 0.00 12,200,000.00 . The World Bank Nepal Livestock Sector Innovation Project (P156797) . Results framework COUNTRY: Nepal Nepal Livestock Sector Innovation Project Project Development Objectives(s) 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. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Productivity of targeted livestock commodities (milk, goat meat, chyangra) among beneficiaries Percentage increase of average milk production per cow/buffalo 545.00 40.00 (Percentage) Percentage increase of average milk production for cow 450.00 40.00 (Percentage) Percentage increase of average milk production for per 640.00 40.00 buffalo (Percentage) Percentage increase in offtake rate expressed as carcass weight 0.00 20.00 for goats (Percentage) Rationale: Baseline value was not available at the time of appraisal. The baseline value of 5, expressed in kg, is based on the household survey taken in December 2020. Using that figure as baseline, the progress of 3.90 kg is lower than the baseline. It was not possible to add negative value, hence the actual above is presented in kgs (3.90).The low progress is due to late Action: This indicator has been Revised implementation of project support , the project interventions had not started by the time the actual value was calculated. The MTR recommended downward revision of the end target from 40 percent (7 kg if 5 kg as used as the new baseline) to 20 percent (6 kg over the baseline of 6 kg) as the project interventions are starting now with delays due to COVID and the project will not have sufficient time to record 40 percent progress. Hence, the revision. The World Bank Nepal Livestock Sector Innovation Project (P156797) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Percentage increase in Chyangra wool production (Percentage) 150.00 80.00 Action: This indicator has been Marked for Deletion Increased sales of value added products in targeted value chains through increase in production Increased sales value in targeted value chains (Percentage) 0.00 30.00 Farmers Adopting Climate Smart Agricultural Technology by target farmers Farmers adopting improved agricultural technology (CRI, 0.00 75.00 Number) Farmers adopting improved agricultural technology - Female 0.00 45.00 (CRI, Number) Farmers reached with agricultural assets or services Farmers reached with agricultural assets or services (CRI, 0.00 200.00 Number) Farmers reached with agricultural assets or services - Female 0.00 45.00 (CRI, Number) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Component A: Strengthening Critical regulatory and Institutional Capacity Livestock Master Plan updated and endorsed (Yes/No) No Yes Action: This indicator has been Marked for Deletion Client days of training provided (of which female) (Percentage) 0.00 5,500.00 The World Bank Nepal Livestock Sector Innovation Project (P156797) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Client days of training provided (female) (Percentage) 0.00 1,925.00 Livestock Management Information System (LMIS) developed No Yes and operational (Yes/No) Action: This indicator has been Marked for Deletion Component B: Promoting sector innovation and modernizing service delivery Number of Producer Organizations/Cooperatives newly established or formalized and offering an increased range of 0.00 1,700.00 services to members. (Number) Action: This indicator has been Revised Number of animals vaccinated against PPR and FMD through the 0.00 14,600.00 project - PPR for small ruminants (Number (Thousand)) Rationale: Change in the definition to make reporting easier, the project will report the actual numbers of animals vaccinated each Action: This indicator has been Revised year. The progress on FMD and PPR will be reported in terms of number of animals vaccinated as per year wise target in thousand. The year wise target is well aligned with Nation’s RBSP of FMD and National PPR Control Program. No of cattle vaccinated with FMD (Number (Thousand)) 0.00 5,000.00 No of small ruminants vaccinated against PPR (Number 0.00 9,600.00 (Thousand)) Beneficiary satisfaction rate with relevance, timeliness and effectiveness of sercies provided by the project for the livestock 19.00 75.00 sector (Percentage) Of which Female (Percentage) 0.00 75.00 Component C: Promoting Smallholder Inclusive Value Chains for Selected Livestock Commodities The World Bank Nepal Livestock Sector Innovation Project (P156797) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Dialog platform between actors of the targeted value chains established and operational at national, provincial and district 0.00 34.00 level (Number) Rationale: The numbers of the platforms have been increased to cover the ones at national (one in number), provincial (five in number) Action: This indicator has been Revised and districts (28 in number). Number of business plans financed by the project on a matching 0.00 350.00 grant basis (Number) Rationale: Given the delay in rolling out of the matching grant schemes due to COVID induced travel restrictions and project team Action: This indicator has been Revised members being infected, the target has been reduced from 500 to 350. Share of project beneficiaries with a livestock risk insurance 0.00 60.00 policy (Percentage) Component D: Project Management and Knowledge Generation Grievances registered related to delivery of project benefits 0.00 75.00 satisfactorily addressed. (Percentage) IO Table SPACE The World Bank Nepal Livestock Sector Innovation Project (P156797)