The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) REPORT NO.: RES38465 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SRI LANKA AGRICULTURE SECTOR MODERNIZATION PROJECT APPROVED ON JUNE 28, 2016 TO MINISTRY OF FINANCE, ECONOMY AND POLICY DEVELOPMENT AGRICULTURE AND FOOD SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Idah Z. Pswarayi-Riddihough Regional Director: John A. Roome Practice Manager/Manager: Kathryn Hollifield Task Team Leader(s): Andrew D. Goodland, Seenithamby Manoharan The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) ABBREVIATIONS AND ACRONYMS ASMP Agriculture Sector Modernization Project ATDP Agriculture Technology Demonstration Parks CPCC Central Project Coordinating Committee DOA Department of Agriculture FOP Farmer Outreach Program FPO Farmer Producer Organization ISP International Service Provider KPI Key Performance Indicator M&E Monitoring and Evaluation MG Matching Grant MMAIRD Ministry of Mahaweli, Agriculture, Irrigation and Rural Development MPIEA Ministry of Plantation Industries and Export Agriculture MTR Mid-term Review OM Operational Manual PCG Partial Credit Guarantee PDO Project Development Objective PMU Project Management Unit PPMU Provincial Project Management Unit RF Results Framework SME Small and Medium Enterprise The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) 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 P156019 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 28-Jun-2016 31-Dec-2021 Organizations Borrower Responsible Agency Ministry of Mahaweli, Agriculture, Irrigation and Rural Ministry of Finance, Economy and Policy Development Development,Ministry of Plantation Industries and Export Agriculture Project Development Objective (PDO) Original PDO The Project Development Objectives (PDO) are to support increasing agriculture productivity, improving market access, and enhancing value addition of smallholder farmers and agribusinesses in the project areas. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-58730 28-Jun-2016 17-Jan-2017 17-Mar-2017 31-Dec-2021 125.00 38.64 84.70 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Context 1. The Restructuring Paper seeks approval to restructure the Agriculture Sector Modernization Project (ASMP) to reflect changes agreed during the Mid-Term Review (MTR) to increase the effectiveness and impact of project interventions, including the design revision of Component 1, the geographical expansion (within the originally identified project provinces) of Component 2, and the subsequent necessary revisions of the disbursement schedule, a reallocation between expenditure categories and revisions to the results framework. A request for the restructuring was received on June 23, 2020 from the Ministry of Finance. B. Background and Status 2. The IDA-financed ASMP was approved by the World Bank Board on June 28, 2016 and became effective on March 17, 2017. The closing date in December 31, 2021. The Project Development Objective (PDO) is to support increasing agriculture productivity, improving market access, and enhancing value addition of smallholder farmers and agribusinesses in the project areas. 3. The project consists of two main investment components: Component A - Agriculture Value Chain Development; Component B: Productivity Enhancement and Diversification Demonstrations; and a supporting Project Management, Monitoring and Evaluation (M&E) component. 4. Component A: Agriculture Value Chain Development (Total US$ 102.73 million, IDA US$ 58.63 million). This component promotes commercial and export-oriented agriculture; leverages investments from farmer producer organizations and agribusinesses for high value agriculture production and value addition; and provides the enabling environment, incentives, and access to finance for such investments through matching grants, technical assistance support, linkages to the commercial banking sector, and a Partial Credit Guarantee (PCG) facility. The component is implemented by the Ministry of Plantation Industries and Export Agriculture (MPIEA), formerly the Ministry of Primary Industries. 5. Status: Matching grant (MG) awards were initially delayed as the detailed institutional and procedural arrangements for the submission, screening, technical review and approval took time to be finalized and tested. The system is now well-established and the awards of grants accelerated considerably during the course of 2019 and into 2020, with 238 total awards as of June 2020. The number of proponents receiving the funds after the award has also increased significantly, reaching 125 as of June 2020, up from 67 at the MTR in October 2019. There are more than twenty fully completed projects. The total approved projects amount to US$87.5m including MGs worth US$26.7m, ie with over US$60m mobilized private capital, demonstrating the contribution of the project for the Maximizing Finance for Development agenda. With this trajectory, the component remains on course to fully utilize the funds by the project’s close. While there have been delays in 2020, due to the lack of sufficient budget allocation under the Government’s Vote on Account and economic uncertainty caused by Covid-19, it is still expected that the MGs will be fully committed (actually over-committed to allow for drop-outs) by December 2020. The impact of the MG scheme is already being observed, including: i) the upgrading of standards in the food processing industry; ii) achieving transformation change in specific sub-sectors (such as shrimp and ornamental fish) through addressing sector-wide The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) challenges; iii) creating more and better quality jobs; and iv) creating competitiveness and new markets through clustering and scale. 6. Component B: Productivity Enhancement and Diversification Demonstrations (Total US$ 58.63 million, IDA US$ 58.63 million). This component supports smallholder farmers to produce competitive and marketable commodities, improve their ability to respond to market requirements and move towards increased commercialization. It supports: (a) farmer training and capacity building and the establishment of farmer producer organizations; (b) establishment of Agriculture Technology Demonstration Parks (ATDPs), supporting the introduction, demonstration, and scale-up of innovative agriculture technology packages which support productivity improvements, diversification, commercialization, as well as more sustainable and climate resilient production patterns; (c) production and market infrastructure, complementing productive investments in the ATDPs; and (d) analytical and policy advisory support. The component is implemented by the Ministry of Mahaweli, Agriculture, Irrigation and Rural Development (MMAIRD) in the five participating provinces of Northern, Eastern, Central, Uva, and North-Central. 7. Status: The design of the component involved the recruitment of an International Service Provide (ISP) to provide direct technical support for the identification, preparation and delivery of the ATDPs. Due to a prolonged procurement process for the ISP, it was agreed for the MMAIIRD to proceed with the implementation of 48 pilot schemes, plus 100+ small-scale infrastructure projects. The ISP was eventually mobilized in October 2019, given fresh impetus to the component. The role of the ISP is to support the scale up of the approach and to address sustainability concerns observed in the pilots with relation of farmer producer organizations and market linkages. The Feasibility Study was submitted in April 2020 and is pending formal approval from MMAIRD. Until this is done, the specific Cluster Development Plans which will detail the ATDPs including specifying the required project investments cannot be finalized. With only 18 months remaining to the closing date, the timeline for completing the ATDPs is very tight, though still achievable. 8. The current ratings of the project are as follows: Project Ratings: Current PDO MS IP MU Component 1: Agriculture Value Chain Development MS Component 2: Productivity Enhancement and Diversification Demonstrations MU Component 3: Project Management, Monitoring and Evaluation MS Project Management MS Procurement MS Financial Management S Overall safeguards (Environment MS / Social MU) MU 9. The project has been in problem project status since March 2019 (ie for 15 months) due to the delays on both Component 1 and Component 2 which caused the downgrade of the Implementation Progress (IP) rating to MU. Component 1 was upgraded from MU to MS at the MTR due to the acceleration in implementation of MGs, however for Component 2, because of the significant delays for the recruitment of the ISP it remains MU. Overall safeguards rating is also MU because of social safeguards implementation, specifically due to the quality issues identified in the screening conducted by MOPIEA, limited community engagement by MMIARD to manage social risks and inadequate documents maintained on land related transactions by both PMUs in line with the procedures set forth in the Resettlement Policy Framework. It should be noted that since the MTR there has been positive progress, though an The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) inability to assess progress in the field during Covid-19 and delays to the approval of the ISP Feasibility Study meant that at the May 2020 ISR ratings were maintained. An upgrade is expected for the next ISR, expected following a implementation support mission scheduled for August, 2020. 10. Covid-19 response: A priority for government following the Covid-19 outbreak was to ensure that there is sufficient supply of strategic food crops in the months ahead, based on concerns regarding the availability of commodities on which the country depends on imports. This led the government to introduce an emergency measure to boost domestic production of 15 identified crops through a package of incentives to smallholder farmers including subsidized seeds, crop insurance and guaranteed output prices. ASMP utilized approximately US$50k to provide seed and planting material to farmers under existing pilots to cultivate these crops, both as intercropping for existing perennials and as a rotation crop. The Government considers the project important to support the recovery from Covid-19, as it will: support rural economies and the livelihoods of smallholder farmers, including women, who have been impacted; increase export revenues during the period where other sources of revenue, including from the tourism sector will remain low; and through the generating of new jobs in the agri-business sector. C. Rationale for Restructuring 11. As noted above, the project IP is currently rated as MU, which reflects the initial start-up delays under both of the components. Disbursement is also lagging and is currently 28 percent. While there has been considerable improvement in the implementation progress during the course of 2019, it has been considered premature to upgrade the rating. In 2020 the project has been impacted by the current political situation in the run up to the Parliamentary Elections during which time budget allocations to ministries and projects has been restricted. Under Component A there is more than US$10 million waiting to be disbursed. Covid-19 has also had an impact, especially on the work of the ISP, with most international team members unable to return to Sri Lanka. 12. Despite the delays and the relatively low disbursement, the MTR which was completed in October 2019, 2.5 years since effectiveness, found that the project design remains highly relevant, noted the improved capacity of implementation agencies to accelerate project implementation, and reported that at the PDO level, progress with respect to key performance indicators, as recorded below: YR2 YR3 MTR PDO level indicator target target Actual Direct project beneficiaries (Number) (Core) 25000 55000 37368 Clients who have adopted an improved agriculture technology promoted 5000 15000 32791 by the project – (Productivity Indicator); (Number) - (Core) Clients who adopted an improved agriculture technology promoted by 800 3000 12408 the project – female (Productivity Indicator) (Number) - (Core) 13. Following the MTR, the Government agreed to submit a request for restructuring which would make several changes to improve the effectiveness of project implementation based on the experience gained in the first 2.5 years of implementation. This would be a level 2 restructuring: a) Component A: Introduction of new financing window for farmer partnerships: to address constraints faced by matching grant recipients in sourcing sufficient quality and quantity of raw materials, a new product has been developed to provide inputs to farmers supplying these agribusinesses. A new operational manual has been The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) prepared and is under review. This would be funded by reallocating funds (US$6m) currently allocated to the PCG, for which there has been little demand from participating banks. b) Component B: Expansion to additional districts: There is a strong interest from the MMAIRD to expand the geographic coverage of the project. It is proposed to scale up to the four districts of Badulla, Killinochi, Ampara and Vavuniya and to conduct diagnostic activities and pilots. All four districts are within the existing component provinces. This would be funded by reallocating funds from activities for which there is no longer demand including the Center of Excellence proposed in the original design. c) In addition to these changes, the Results Framework would be revised to adjust targets based on the experience to date, add additional core indicators where appropriate and to clarify the definition of certain indicators. A reallocation between expenditure categories would be required due to the reduction of the PCG amount and the disbursement profile would be adjusted. II. DESCRIPTION OF PROPOSED CHANGES D. Adjustments to design: 14. While the overall concept and approaches under the project remain valid, there are several adjustments that aim to increase the coverage of the project and thereby to increase the benefits and accelerate implementation. The PDO is unchanged, as are the component allocations. 15. Component A: Agriculture Value Chain Development: a) Introduction of new financing window for farmer partnerships: Many of the existing MG recipients face a constraint to further scaling up due to a lack of reliable supply of raw materials from their supplier farmers. The farmers themselves are unable to meet the market demand due to difficulty in accessing improved seed and planting materials, as well as limited access to credit facilities to make investments in field level improvements such as irrigation. The restructuring will therefore introduce a new product under the component which will finance farmer groups to make investments to increase productivity. This will be called the Farmer Outreach Program (FOP). Under the FOP, the project will work with the MG recipients, mainly agro-processors, and with their smallholder supplies, to identify suitable technology packages to boost the productivity and quality of farmers’ crops. These would be procured and distributed by the PMU, under a cost sharing arrangement to be specified in the operations manual. Technical support would be provided through the agro-processors and if required through the local Department of Agriculture (DoA). To assess the demand for this support, a survey was conducted following the MTR to determine the interest and specific needs of agro-processors and farmers. The demand is high including for improved seeds and planting material and other on-farm investment. A draft Operational Manual has been prepared to determine the details of how the program will work. It will be conducted in line with the Government policy, introduced following the Covid-19 outbreak, to provide farmers with inputs (predominantly planting material). The product will only be available to existing MG recipients, though could be scaled up if successful. The finalized OM would need to be approved by the Central Project Coordinating Committee (CPCC) before being sent to the World Bank for review. A legal covenant requiring the approval of the OM by August 31, 2020 will be included in the amended Financing Agreement. Once established the program will be closely monitored to ensure that farmers and agro- enterprises are benefiting, and if necessary the program can be amended through changes to the OM, The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) satisfactory to the World Bank and with the approval of the CPCC, to include an additional range of support, such as on-field micro-irrigation or further technological inputs as appropriate. b) Partial Credit Guarantee: there has been no uptake of the PCG, for which US$7m was allocated. There is one application for the PCG under processing (for approximately US$40k), and there are several other companies and banks which have expressed an interest. However, it is clear that the original demand for the PCG was over-estimated and therefore funds can be reallocated to the Farmer Outreach Program (above). This will require a reallocation between expenditure categories (see below). US$1 million will be left under the PCG, though this could also be reallocated in the future if demand doesn’t grow. This will be closely monitored during regular project supervision. 16. Component B: Productivity Enhancement and Diversification Demonstrations a) Expansion to additional districts: There is a strong interest from the MMAIRD to expand the geographic coverage of the project. This was illustrated with the inclusion of Treasury funds for scale up in the Government’s 2020 Budget. The European Union has also agreed in principle with the Government to use Euro25million to scale up to the four districts of Badulla, Killinochi, Ampara and Vavuniya. All four districts are in provinces already under the project. Government has requested additional support for these districts through an Additional Financing (AF) and a Concept Memorandum (P173297) was approved on December 20, 2019. However, with the component and the overall project implementation currently rated as MU, moving ahead would not be possible unless the overall performance of the project improves, and so the AF is currently on hold. However, even though the AF is not secured there is benefit in demonstrating the approach, albeit on a pilot scale, in the new districts. Investigations and diagnostics have taken place in the proposed new districts, and potential pilots have been identified following the same approach as was used in the current seven districts, including consultations with the community. The pilots will also be conducted in line with the existing approach, including the identification of beneficiaries and creation of farmer producer organizations, identification of appropriate technology and cropping patterns, the identification of off-takers and negotiation of purchase agreements, and the provision of training in technology and business skills. b) Dropping of activities: there are two activities, the creation of an agricultural Center of Excellence and the development of the national information system, included under the sub component 2.4, “Analytical and Policy Advisory Support”, for which there has been little or no progress and for which the MMAIRD is no longer interested in pursuing under the project. The dropping of these activities will not have any impact on the achievement of the PDO and therefore it was agreed to reallocate the funds to the provisional activities in four new districts. E. Revision of disbursement projections. 17. To reflect the initial delays in project implementation and the changes being introduced as a result of the restructuring, the disbursement profile for the project is revised as follows: TABLE 1. PROPOSED DISBURSEMENT ESTIMATES, US$ MILLION Fiscal year 2017 2018 2019 2020 2021 2022 Original Annual 20 25 40 30 10 0 Original 20 45 85 115 125 125 Cumulative The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) Revised Annual 3 12 7 16 47 40 Revised 3 15 22 38 85 125 Cumulative 18. The revised disbursement estimates takes into account the estimates made by the two Project Management Units (PMUs). Since the start of the Sri Lankan financial year in January 2020 the government has been under a Vote on Account, which has capped allocations in line with actual expenditure in 2019. This has slowed the disbursement considerably as due payments under the MGs have not been made, nor has it been prudent for the PMU to enter into new MG agreements, although proposals have been approved. Therefore, a considerable backlog has built up (more than US$10 million) which will be disbursed once the budgetary allocations are made, expected in the first full budget following the Parliamentary elections scheduled for August 5, 2020. Full disbursement under Component 1 is still highly probable before the project’s closing date of December 31, 2021. Under Component 2, the bulk of expenditure is linked to the implementation of Cluster Development Plans, being prepared by the ISP. These are nearing completion. The procurement will be straightforward for the investment under these plans including small scale works and goods, and although tight, full disbursement is possible under before the current closing date. For both components, the key to full disbursement will be the allocations made under the Government budget. F. Reallocation between expenditure categories 19. The aforementioned change in design for Component 1 requires a reallocation of funds from Category (3) to Category (1). As noted above, the utilization of the PCG (disbursement category (3)) has been significantly less than had been anticipated during the project preparation and therefore will be reduced from SDR 5.1 million (US$7 million equivalent) to SDR 0.725 million (US$1 million equivalent). The funds will be reallocated to Category (1), and utilized for the FOP as indicated above. Category Original Amount of Revised Amount of the the Credit Allocated Credit Allocated (expressed in SDR) (expressed in SDR) (1) Goods, non-consulting services, 5,300,000 9,675,000 consultants’ services, Incremental Operating Costs, and Training under Part 1 of the Project (2) Matching Grants under Part 1 (b) of 31,450,000 31,450,000 the Project (3) Transfers to the Partial Credit 5,100,000 725,000 Guarantee Account for purposes of issuing Partial Credit Guarantees under Part 1 (c) of the Project (4) Goods, works, non-consulting 41,800,000 41,800,000 services, consultants’ services, Incremental Operating Costs, and Training under Part 2 of the Project (5) Non-consulting services, 5,550,000 5,550,000 consultants’ services, goods, works, Incremental Operating Costs, and Training under Part 3 of the Project The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) TOTAL AMOUNT 89,200,000 89,200,000 G. Results Framework 20. Through the process of establishing the M&E system for the project, both PMUs have highlighted opportunities to strengthen the Results Framework. These relate to: i) lack of clarity in the phrasing and definition of indicators; ii) project targets that are either too low or too high given the experience of project implementation to date and the changes introduced in this restructuring; and, iii) aspects of the project design (such as infrastructure) which are not adequately captured in indicators. 21. Revision of indicator definitions: The description of some indicators will be modified to clarify what exactly has to be measured and to better track progress and achievements. Specific modifications made in the indicator descriptions are as below. The revised list of indicator definitions is annexed to this Restructuring Paper. PDO Indicators: a) Direct project beneficiaries: The definition of ‘direct project beneficiaries’ was unclear and has been clarified. Also, to support the reporting of this indicator, an additional source of data in the form of independent survey conducted by an independent M&E service provider was added. b) Clients who have adopted an improved agriculture technology promoted by the project (Productivity Indicator): The definitions of ‘clients’ and ‘adoption’ were missing in the original description and have been added in the indicator description section of the RF. Also, an additional source of data in the form of independent survey conducted by an independent M&E service provider was added. c) Increase in average value of sales of agriculture products due to project interventions (Market Access Indicator) (Percentage): In the indicator description section of the revised RF, it was clarified that ‘this indicator would be measured for farmers and agribusiness organizations’. The ‘agribusiness organizations’ have been defined as i) Farmer Producer Organizations (FPOs) registered with relevant authorities; ii) Cooperatives; iii) Agribusiness private companies registered under the Company Act; and iv) Farmer Producer companies. In addition, the data source of tracking this indicator was changed to independent surveys (conducted by an independent M&E service provider) from annual progress reports. d) New Jobs generated through investments in agriculture SMEs under the project: In this indicator, the term ‘agriculture SMEs’ was replaced by ‘agribusiness organizations’ which changed the indicator to: ‘New Jobs generated through investments in agribusiness organizations under the project’, in order to capture the jobs generated in all the agribusiness organizations rather than only in agriculture SMEs. SMEs in Sri Lanka are defined as enterprises that have a revenue less than US$5 million per annum and less than 300 employees. Additionally, ‘new jobs’ was defined in the revised RF as ‘long term salary-based employment created in the agribusiness organization where ‘long term’ was considered as more than one year’. Intermediate results indicators: a) Number of Matching Grants approved (small and large windows) (Number): The indicator was modified to ‘Number of Matching Grants approved (Window 1 & Window 2)’ where small and large windows were replaced by window 1 and window 2 respectively to be consistent with the Project Appraisal Document component description. The description of the indicator was also simplified to better explain what is being measured by the indicator. The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) b) Share of project supported farmer producer organizations and agribusiness partnerships making profit (Percentage): Although business entities or organizations involved in agribusiness partnerships can make profits, the ‘agribusiness partnerships’ by itself cannot make profits as it’s only a form of business engagement among two or more business entities. Hence, the indicator was replaced by two new indicators which can better measure the performance of project supported FPOs in terms of functionality and profitability. i. Share of farmer producer organizations functional: Where a FPO is considered functional if it is meeting the following conditions: i) FPOs are maintaining proper records; ii) FPO management committees are conducting meetings regularly; and iii) business operations are ongoing. ii. Share of project-supported famer producer organizations making profit: As it is not likely that every functional FPO will make a profit in the lifetime of the project, this indicator was included separately to capture the percentage of FPOs making a profit where profit was being calculated annually. c) Share of Matching Grant recipients operating based on updated business plans (Percentage): The indicator was changed to: Share of Matching Grant recipients operating based on approved business plans (Percentage) in the revised results framework. This was done because the word ‘updated’ in the indicator was not adequate to show the approval granted from the project. d) Targeted clients satisfied with agricultural services (percentage): This indicator’s description was revised to better define clients and agriculture services, with the new wording: ‘Targeted clients here are defined as the farmers who are present in the cluster being developed by the project. Agricultural services are defined as extension services being provided through (a) farmers training and demonstration; (b) farmer field days; and (c) advice/demonstrations by DOAs and project staff on farmers plots and other sites. This indicator is gender disaggregated.’ e) Client days of training provided (Number) (Core): The indicator description was clarified by including the additional information about the types of training that would be measured. The new revised indicator’s description is as follows: ‘This indicator measures the number of client days of training provided, i.e. the number of clients who completed training multiplied by the duration of training expressed in days. The training would include, but not limited to, business/financial trainings, organizational trainings and technical training. This indicator is gender disaggregated.’ f) Share of beneficiaries reporting improved access to markets (Percentage): This indicator couldn’t be tracked for all ‘beneficiaries’ as improved access to markets couldn’t be tracked for staff and owners of private companies. Hence, this indicator will be replaced by two new indicators in the revised results framework: i. Share of matching grant recipients reporting improved access to markets (percentage): The indicator description is: ‘The matching grant recipient is considered to have improved market access if it is able to complete at least one sales agreement with a new and unique buyer. Therefore, the ‘improved market access’ is being measured through the increase in number of sales agreements with new and unique buyers. ii. Number of commercial partnerships or market contracts signed between producer groups and domestic/international agribusiness actors (processors, wholesalers, retailers, exporters, etc.) (Number): The indicator description is provided below: ‘This indicator assesses the effectiveness of improving market access and establishing commercial linkages between farmer groups or cooperatives and domestic, regional and international agribusiness actors such as processors, wholesalers, retailers, exporters, etc. Producer groups are defined as FPOs registered under the relevant authorities such as DOA, DEA; cooperatives; and farmer producer companies.’ The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) g) Number of new farmer producer organizations registered (Number): The definition of farmer producer organization was revised in the indicator description section of the RF to define FPOs as i) Farmer organizations registered with relevant authority such as DOA, DEA, etc.; ii) Cooperatives; and, iii) Farmer producer companies. This was done because the definition of farmer producer organization in the original RF was not covering all the types of FPOs which were involved in the project. h) Policy Notes prepared and published (Number): This indicator was revised to: ‘Research reports completed (Number)’. This is because the indicator was unclear as the term ‘Policy Notes’ was not defined appropriately in the indicator description section. The revised indicator description is now “‘The research reports refer to the research documents prepared under the separate sub component 2.4 of ‘Analytical and Policy Advisory Support’. This may include, but not limited, to policy notes, strategic notes and short technical papers.’ i) Research Papers completed and delivered to the CPCC (Number): The indicator was revised to ‘Policy/Strategic notes delivered to CPCC (Number)’. This was done because the project team was delivering ‘Policy /Strategic notes’ and not general ‘Research Papers’ to CPCC. Therefore, the ‘research papers’ was replaced by ‘policy/ strategic notes’ in the indicator and the description revised accordingly. j) Training in project management taken by project staff at all levels (Person times – cumulative) (Number): The indicator was revised to- ‘Training taken by project staff at all levels’. The revision was done to include all types of trainings, and not just the training related to the project management. The description of the indicator was revised to: ‘This indicator measures the number of days of training for improving the technical and managerial capacity of project staff at the central and provincial level.’ The indicator description specified ‘central and provincial level’ because ‘all levels’ mentioned in the indicator was not defined in the indicator description section of original RF. 22. Proposed new indicators, including core indicators: a) Farmers adopting improved agricultural technology (Number) - (Core): This indicator measures the adoption of improved agricultural technology by farmer. The indicator is a proxy indicator for measuring the productivity and was added to assess the impact at the level of farmers associated with the project. b) Area provided with new/improved irrigation or drainage services. (Acre) - (Core): There were no indicators in the original RF to measure the progress of- ‘the up-grading and rehabilitation of small-scale irrigation infrastructure, existing water tanks and other irrigation systems’ as mentioned under the Sub-component 2.3 (Production and Market Infrastructure). To address this shortcoming, this indicator was added to the results framework. c) Km of roads constructed and rehabilitated under the project. (Number): There were no indicators mentioned in the original RF to measure the progress of ‘the improvement of selected production and market access roads and construction of new field access tracks to improve transportation, access to markets and accessibility for agricultural machinery’ as mentioned under the Sub-component 2.3 (Production and Market Infrastructure). To address this gap, this indicator was added to the RF. d) Number of clusters completed in accordance with the Cluster Development Plan (Number): This indicator measured the number of clusters to be completed in accordance with the cluster development plan under the component 2. This indicator was added as there was no indicator tracking the implementation progress of cluster development, and its quality of implementation. The quality of implementation was being measured through the number of clusters complying with the cluster development plan. The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) 23. Deleted indicator a) Number of Technology Parks completed and handed over. (Number): The indicator was dropped because the negotiated contract of the ISP does not include “handing over”. The ISP would be providing technical assistance and not implementing the clusters in ATDPs. The ATDPs are owned by the FPOs and therefore no handing over would be necessary. 24. Change in measurement units a) The measurement unit of the gender disaggregated indicator- ‘Targeted clients satisfied with agricultural services - Female’ was modified from number to percentage. This was done to make its measurement unit consistent with main indicator of ‘Targeted clients satisfied with agricultural services’ that was being measured in percentage. b) Training in project management taken by project staff at all levels (Person times – cumulative) (Number): The measurement unit for the indicator was changed to- ‘Training days Cumulative’. This was done because it was unclear what the measuring unit of ‘person times’ meant. 25. Revised project targets: For some indicators, the end of project targets were revised. The revisions and their reasons are provided below: a) Female beneficiaries (Number - Supplemental) - (Core): The target value of this indicator was decreased from 40,000 to 33,000 in the revised RF. This makes it consistent with the other indicators for the project which has an overall target of 30 percent of direct project beneficiaries to be the target for female beneficiaries for all the indicators which are gender disaggregated. b) New Jobs generated through investments in agribusiness organizations under the project (Value addition Indicator) (Number; gender disaggregated): The target value of the indicator was decreased from 12,500 to 10,000 in the revised results framework. The rationale for the reduction was the new definition of ‘new jobs’ which was defined as the ‘long term salary-based employment’ and excluded short-term wage-based employment. c) Share of Matching Grant recipients operating based on approved business plans (percentage): The target value of the indicator is increased from 70 percent to 80 percent. This was done because by the MTR, the project was able to over-achieve the target, thus justifying the need to increase the targets. d) Share of matching grant recipients reporting improved access to markets (percentage): The target value of the indicator was increased from 30 percent to 50 percent in the revised results framework. This was done because a significant number of the present matching grant recipients are being approached by ‘new and unique’ buyers. e) Number of new farmer producer organizations registered (number): The target value of the indicator was decreased from 250 to 80 in the revised results framework. This was done because MMAIRD was focusing on creation of fewer FPOs with large membership base instead of many FPOs with small membership base. The new targets were formulated in consultation with the project team. f) Share of farmer producer organizations functional (percentage): The target value of the indicator was set at 75 percent after consultations with the project team. This was a new indicator which was added. g) Share of project-supported famer producer organizations making profit (Percentage): This was a new indicator added to the revised results framework to replace the previous indicator of Share of project- supported famer producer organizations and agribusiness partnerships making profit (percentage) The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) (mentioned in the original RF). The target value of the new indicator is same as that of the indicator it replaced (70 %). h) Targeted clients satisfied with agricultural services (Percentage): The indicator’s target assigned for Year 3 in the original RF is shifted and placed as the target to be achieved in Year 4. This was done because the independent M&E Service provider (responsible for conducting the survey for this indicator) has not yet been contracted. i) Client days of training provided (Number): The target value of the indicator was decreased from 350,000 to 150,000 in the revised results framework. The target value was decreased because the number of farmer business trainings (Sub-component 2.1: Farmer Training and Capacity Building) have been reduced by the project and would now be taking place only in target districts and not island-wide as it was originally planned. j) Client days of training provided – female (Number): The target value of the indicator was decreased from 150,000 to 45,000 in the revised results framework. This was done because the project had decided on 30% of the total target value of main indicator as a target for all gender disaggregated indicator. k) Farmers adopting improved agricultural technology (Number): The target value of the indicator was set as 60,000 in consultation with the project team. This is a new indicator. l) Number of commercial partnerships or market contracts signed between producer groups and domestic/international agribusiness actors (processors, wholesalers, retailers, exporters, etc.) (Number). The target value of the indicator was set at 90 in consultation with the project team. This is a new indicator. m) There are two new infrastructure related indicators: i. Area provided with new/improved irrigation or drainage services. (Acre) - (Core). The target value of the indicator was set as 8000. ii. Km of roads constructed and rehabilitated under the project. (Number). The target value of the indicator was set at 60. n) Research reports completed (Number): The target value of this indicator is increased from 17 to 25 to include short technical papers which would be completed until the end of project. o) Training taken by project staff at all levels (Training days Cumulative): The target value of the indicator was increased from 300 to 500 in the revised results framework. This was done because the measurement unit was modified from ‘person times cumulative’ to ‘training days cumulative’ and the scope of the indicator was broadened to include all training and not just project management trainings. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) Economic and Financial Analysis ✔ Technical Analysis ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ 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) Agriculture Value Chain Agriculture Value Chain 102.73 102.73 Development Development Productivity Enhancement and Productivity Enhancement and 58.63 58.63 Diversification Demonstrations Diversification Demonstrations Project Management, Project Management, 8.48 8.48 Monitoring and Evaluation Monitoring and Evaluation The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) TOTAL 169.84 169.84 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-58730-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: Gds Ncs CS IOC Trng Part1 5,300,000.00 0.00 9,675,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Matching grants Part 1b 31,450,000.00 6,912,498.90 31,450,000.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: Trnf to prtial Cr Gurtee acc Part1c 5,100,000.00 0.00 725,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: Gds Wks NCS CS IOC Trng Part 2 41,800,000.00 7,445,602.74 41,800,000.00 100.00 100.00 iLap Category Sequence No: 5 Current Expenditure Category: Gds Wks NCS CS IOC Trng Part 3 5,550,000.00 4,827,071.62 5,550,000.00 100.00 100.00 Total 89,200,000.00 19,185,173.26 89,200,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) 2016 0.00 0.00 2017 20,000,000.04 3,000,000.00 2018 24,999,999.96 12,000,000.00 2019 39,999,999.96 7,000,000.00 2020 30,000,000.00 16,000,000.00 2021 9,999,999.96 47,000,000.00 2022 0.00 40,000,000.00 2023 0.00 0.00 2024 0.00 0.00 2025 0.00 0.00 . The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) . Results framework COUNTRY: Sri Lanka Sri Lanka Agriculture Sector Modernization Project Project Development Objectives(s) The Project Development Objectives (PDO) are to support increasing agriculture productivity, improving market access, and enhancing value addition of smallholder farmers and agribusinesses in the project areas. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 PDO Direct project beneficiaries 0.00 1,500.00 25,000.00 55,000.00 90,000.00 110,000.00 110,000.00 (Number) Action: This indicator has been Revised Female beneficiaries 0.00 200.00 5,000.00 14,000.00 20,000.00 33,000.00 (Number) Action: This indicator has been Revised Clients who have adopted an improved agr. 0.00 500.00 5,000.00 15,000.00 35,000.00 80,000.00 80,000.00 technology promoted by the project (CRI, Number) Rationale: Action: This indicator has The description is updated to clarify the definition of adopt and technology been Revised This indicator measures the number of client (direct project beneficiary) who have adopted an improved agricultural technology promoted by the project. Adoption refers to a change of practice or change in use of a technology that was introduced/promoted by the project. The term technology includes a change The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 in practices compared to currently used practices or technologies associated with matching grant investments, farmer training or farmer producer organization development. This indicator is disaggregated by gender. Clients who adopted an improved agr. technology promoted by 0.00 0.00 800.00 3,000.00 16,000.00 24,000.00 24,000.00 project – female (Number) Increase in average value of sales of agriculture products due to project interventions 0.00 10.00 25.00 25.00 (Market Access Indicator) (Percentage) Action: This indicator has been Revised New Jobs generated through investments in agribusiness organizations 0.00 2,500.00 10,000.00 10,000.00 under the project. (Number) Action: This indicator has been Revised PDO Table SPACE The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Agriculture Value Chain Development Number of Matching Grants approved (Window A) 0.00 10.00 45.00 150.00 250.00 350.00 350.00 (Number) Action: This indicator has been Revised Number of Matching Grants approved (Window B) 0.00 4.00 10.00 15.00 21.00 50.00 50.00 (Number) Action: This indicator has been Revised Share of project-supported farmer producer 0.00 50.00 70.00 organizations making profit (Percentage) Action: This indicator has been Revised Share of project- supported women-led farmer producer 0.00 50.00 70.00 organizations making profit (Percent) (Percentage) The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Revised Share of Matching Grant recipients operating based 0.00 50.00 60.00 80.00 on approved business plans (Percentage) Action: This indicator has been Revised Share of matching grant recipients reporting 0.00 20.00 30.00 50.00 improved access to markets (Percentage) Action: This indicator is New Productivity Enhancement and Diversification Demonstrations Targeted clients satisfied with agricultural services 0.00 30.00 60.00 75.00 (Percentage) Action: This indicator has been Revised Targeted clients satisfied with agricultural services - 0.00 30.00 60.00 75.00 female - (Core) (Percentage) Action: This indicator has been Revised Client days of training 10,000.00 15,000.00 30,000.00 60,000.00 100,000.00 150,000.00 provided (Number) The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Revised Client days of training provided female (Number) 3,000.00 4,500.00 9,000.00 18,000.00 30,000.00 45,000.00 (Core) (Number) Action: This indicator has been Revised Number of new farmer producer organizations 0.00 35.00 60.00 80.00 registered (Number) Action: This indicator has been Revised Share of farmer producer organizations functional 0.00 75.00 (Percentage) Action: This indicator has been Revised Number of clusters completed in accordance 0.00 21.00 with cluster development plans (Number) Action: This indicator has been Revised Policy/Strategic notes 0.00 2.00 5.00 8.00 10.00 delivered to CPCC (Number) Action: This indicator has been Revised The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Research reports completed 0.00 2.00 5.00 10.00 15.00 25.00 (Number) Action: This indicator has been Revised Number of commercial partnerships or market contracts signed between producer groups and domestic/international 0.00 20.00 70.00 90.00 agribusiness actors (processors, wholesalers, retailers, exporters, etc.) (Number) Action: This indicator is New Farmers adopting improved agricultural technology (CRI, 0.00 10,000.00 18,000.00 20,500.00 Number) Action: This indicator is New Farmers adopting improved agricultural 0.00 3,000.00 6,000.00 6,150.00 technology - Female (CRI, Number) Action: This indicator is New Farmers adopting 0.00 7,000.00 12,000.00 14,350.00 improved agricultural The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 technology - male (CRI, Number) Action: This indicator is New Area provided with new/improved irrigation or 0.00 1,000.00 5,520.00 8,000.00 drainage services (CRI, Hectare(Ha)) Action: This indicator is New Area provided with new irrigation or drainage 0.00 800.00 5,000.00 6,000.00 services (CRI, Hectare(Ha)) Action: This indicator is New Area provided with improved irrigation or 0.00 200.00 520.00 2,000.00 drainage services (CRI, Hectare(Ha)) Action: This indicator is New km roads constructed and rehabilitated under the 0.00 30.00 50.00 60.00 project (Kilometers) Action: This indicator is New The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Project Management, Monitoring and Evaluation Training taken by project 0.00 100.00 250.00 400.00 500.00 500.00 staff at all levels (Days) Action: This indicator has been Revised IO Table SPACE The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) Indicator Descriptions Project Development Objective Indicators Indicator Name Description (indicator definition etc.) Frequency Data source/ Responsibility Methodology for Data collection Direct project beneficiaries Direct beneficiaries are people who directly Baseline Independent MOPIEA, (Number) (Core) deriving benefits from the project, including End of-Project Survey MMAIRD, PPMU from physical investments, access to finance, or Independent through training and capacity building. This M&E Service indicator is disaggregated by gender. Provider Annually Progress MOPIEA, Reports MMAIRD, PPMU Clients who have adopted an This indicator measures the number of client Baseline Independent MOPIEA, improved agriculture technology (direct project beneficiary) who have adopted an End of-Project Survey MMAIRD, PPMU promoted by the project – improved agricultural technology promoted by Independent (Productivity Indicator); (Number) the project. Adoption refers to a change of M&E Service - (Core) practice or change in use of a technology that Provider was introduced/promoted by the project. The term technology includes a change in practices Annually Progress MOPIEA, compared to currently used practices or Reports MMAIRD, PPMU technologies associated with matching grant investments, farmer training or farmer producer organization development. This indicator is disaggregated by gender. Increase in average value of sales The indicator measures the increase in average Baseline Independent MOPIEA, of agriculture products due to value of sales of the product resulting from End of-Project Survey MMAIRD, PPMU project interventions (Market improvements in quantity and quality of Independent Access Indicator) (Percentage) products through project interventions. The M&E Service indicator would be measured for farmers and Provider The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) agribusiness organizations. Agribusiness organizations are defined as the following; 1. FPOs registered with relevant authorities such as DOA, DEA, etc. 2. Cooperatives 3. Agribusiness private companies registered under Company Act. 4. Farmer Producer companies New Jobs generated through New jobs are defined as long term salary based Baseline Independent MOPIEA, investments in agribusiness employment created in the agribusiness End of-Project Survey MMAIRD, PPMU organizations under the project organization where long term is considered as Independent (Value addition Indicator) more than one year. Agribusiness organizations M&E Service (Number; gender disaggregated) are defined as the following; Provider 1. FPOs registered with relevant authorities such as DOA, DEA, etc. Annually Progress MOPIEA, 2. Cooperatives Reports MMAIRD, PPMU 3. Agribusiness private companies registered under Company Act 4. Farmer Producer Companies This indicator is gender disaggregated. Intermediate Results Indictors Indicator Name Description (indicator definition etc.) Frequency Data source/ Responsibility Methodology for Data collection Number of Matching Grants This indicator measures the number of matching Annually Progress MOPIEA approved (Window 1 & Window grants provided to agribusiness organizations Reports 2). (Number) (proponent) under the subcomponent 1.2. There are separate indicators for measuring the small matching grants under window 1 and large matching grant under window 2. The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) Share of Matching Grant recipients This indicator measures the compliance of the Annually Progress MOPIEA operating based on approved usage of the matching grant in accordance to the Reports business plans (Percentage) business plan by grant recipients. Approved business plan refers to the most updated business plan which has been approved by the project Share of matching grant recipients The matching grant recipient is considered to Annually Progress MOPIEA reporting improved access to have improved market access if it is able to Reports markets (percentage) complete at least one sales agreement with a new and unique buyer. Therefore, the ‘improved market access’ is being measured through the increase in number of sales agreements with new and unique buyers. Number of new farmer producer The farmer producer organizations are defined Annually Progress MMAIRD, PPMU organizations registered as follows: Reports (Number) 1. Farmer organizations registered with relevant authority such as DOA, DEA, etc. 2. Cooperatives 3. Farmer producer companies Share of farmer producer Where a Farmer Producer Organization (FPO) is Baseline, End-of- Independent MMAIRD, PPMU organizations functional considered functional if it is meeting the Project Survey Independent (Percentage) following conditions: M&E Service  FPOs are maintaining proper records Provider  FPO management committee are conducting meetings regularly  Business operations are ongoing Annually Progress Reports MMAIRD, PPMU Share of project-supported famer Where profit is calculated per annum Baseline, End-of- Independent MOPIEA, producer organizations making Project Survey MMAIRD, PPMU profit (Percentage) Independent M&E Service Provider The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) Targeted clients satisfied with Targeted clients here are defined as the farmers Baseline, End-of- Independent MMAIRD, PPMU agricultural services (Percentage) - who are present in the cluster being developed Project Survey Independent (Core) by the project. Agricultural services are defined M&E Service as extension services being provided through (a) Provider farmers training and demonstration; (b) farmer field days; and (c) advice/demonstrations by DOAs & project staff on farmers plots and other site. This indicator is gender disaggregated. Client days of training provided This indicator measures the number of client Annually Progress MOPIEA, (Number) (Core) days of training provided, i.e. the number of Reports MMAIRD, PPMU clients who completed training multiplied by the duration of training expressed in days. The training would include, but not limited to, business/financial trainings, organizational trainings and technical training. This indicator is gender disaggregated. Farmers adopting improved This indicator measures the number of farmers Baseline Independent MOPIEA, agricultural technology (Number) - who have adopted an improved agricultural End of-Project Survey MMAIRD, (Core) technology promoted by the project. Adoption PPMU refers to a change of practice or change in use of Independent a technology that was introduced/promoted by M&E Service the project. The term technology includes a Provider change in practices compared to currently used Annually Progress MOPIEA, practices or technologies. Report MMAIRD, PPMU Number of commercial This indicator assesses the effectiveness of Annually Progress MOPIEA, partnerships or market contracts improving market access and establishing Reports MMAIRD, PPMU signed between producer groups commercial linkages between farmer groups or and domestic/international cooperatives and domestic, regional and agribusiness actors (processors, international agribusiness actors such as wholesalers, retailers, exporters, processors, wholesalers, retailers, exporters, etc.) (Number) etc. Producer groups are defined as FPOs registered under the relevant authorities such as The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) DOA, DEA; cooperatives; and Farmer producer companies Area provided with new/improved Irrigation and drainage services refers to the Annually Progress MMAIRD, PPMU irrigation or drainage services better delivery of water to, and drainage of reports (Acre) - (Core) water from, arable land, including better timing, quantity, quality, and cost-effectiveness for the water users. Km of roads constructed and The roads constructed in the project would be Annually Progress MMAIRD, PPMU rehabilitated under the project. with the aim of easy access to market and reports (Number) farmlands. Number of clusters completed in International Service Provider has the overall Baseline, End-of- Independent MMAIRD, PPMU accordance with the Cluster responsibility of formulating Cluster Project Survey Independent Development Plan. (Number) Development Plan (CDP). Based on these CDPs, M&E Service the clusters would be developed by investments Provider from the project. The cluster would be considered completed when all the planned investments are done. Research reports completed The research reports refer to the research Annually Progress MMAIRD, PPMU (Number) documents prepared under the separate sub reports component 2.4 of ‘Analytical and Policy Advisory Support’. This may include, but not limited, to policy notes, strategic notes and short technical papers. Policy/ Strategic notes delivered to Policy and strategic notes are documents Annually Progress MMAIRD, PPMU CPCC (Number) relating to internal sector policy analysis which reports are direct input into the national strategy and policy formulation. The CPCC is Central Project Coordination Committee set up in the Ministry of National Policies and Economic Affairs with representation from important government stakeholders. The World Bank Sri Lanka Agriculture Sector Modernization Project (P156019) Training taken by project staff at This indicator measures the number of days of Annually Progress MOPIEA, all levels (Training days training for improving the technical and reports MMAIRD, PPMU Cumulative) managerial capacity of project staff at the central and provincial level.