The World Bank Neeranchal National Watershed Project (P132739) REPORT NO.: RES32826 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NEERANCHAL NATIONAL WATERSHED PROJECT APPROVED ON JULY 17, 2014 TO REPUBLIC OF INDIA AGRICULTURE SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Senior Global Practice Director: Juergen Voegele Practice Manager/Manager: Kathryn Hollifield Task Team Leader: Grant Milne, Priti Kumar, Amos Abu The World Bank Neeranchal National Watershed Project (P132739) ABBREVIATIONS AND ACRONYMS ASCI Administrative Staff College of India DoLR Department of Land Resources DPR Detailed Project Report DSS Decision Support Systems FRI Forest Research Institute GoI Government of India IISc Indian Institute of Science INR Indian Rupee IPDF Indigenous Peoples Development Framework IWMP Integrated Watershed Management Program LRI Land Resource Inventory M&E Monitoring and Evaluation MIS Management Information System MoRD Ministry of Rural Development MOU Memorandum of Understanding NBSS&LUP National Bureau of Soil Survey and Land Use Planning NIH National Institute of Hydrology NPIU National Project Implementation Unit PDO Project Development Objective PIA Project Implementation Agency PIP Project Implementation Plan PIU Project Implementation Unit (State) PMKSY Pradhan Mantri Krishi Sinchayee Yojana SESA Strategic Environmental and Social Assessment SLNA State Level Nodal Agency USD United States Dollar WCDC Watershed cum Data Center The World Bank Neeranchal National Watershed Project (P132739) BASIC DATA Product Information Project ID Financing Instrument P132739 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 17-Jul-2014 31-Mar-2022 Organizations Borrower Responsible Agency Republic of India Department of Land Resources Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to support IWMP through technical assistance to improve incremental conservationoutcomes and agricultural yields for communities in selected sites, and adoption of more effective processes and technologies intothe broader IWMP in participating states. Current PDO The Project Development Objective (PDO) is to support the watershed development component of PMKSY through technical assistance to improve incremental conservation outcomes and agricultural yields for communities in selected sites, and adoption of more effective processes and technologies in participating states. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-55240 17-Jul-2014 14-Jan-2016 08-Feb-2016 31-Mar-2022 178.50 1.06 177.44 The World Bank Neeranchal National Watershed Project (P132739) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. BACKGROUND The Neeranchal National Watershed Project (the “Project”) was approved by the Executive Directors on July 17, 2014. The project was to be implemented through the Department of Land Resources (DoLR) and the State Level Nodal Agencies (SLNAs) for watershed management in nine participating states (Andhra Pradesh, Telangana, Madhya Pradesh, Gujarat, Odisha, Rajasthan, Maharashtra, Jharkhand, and Chhattisgarh). The project became effective February 8, 2016 for a total project cost of USD357 million, of which USD178.50 million (50 percent). The original closing date was June 30, 2020. Following the May 2014 national election, the Government of India started developing a new national scheme; the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) which aimed to converge three centrally supported schemes covering water, agriculture and watershed management. The Ministry of Agriculture was the designated national nodal agency for PMKSY. The national IWMP under DoLR would transition to become the watershed development component of the new PMKSY scheme, but DoLR would continue to implement these activities as per existing guidelines and norms. The PMKSY scheme was approved by Cabinet on July 1, 2015. A separate Cabinet note on the Neeranchal project, linking it to PMKSY, was approved on October 7, 2015. Following these Cabinet approvals, a Level 1 restructuring was completed by the Bank in December 2015 to align the project with the approved Cabinet notes and extend the closing date by 21 months to March 31, 2022. B. PROJECT STATUS The project has failed to be implemented as planned due to weak leadership and coordination by the Department of Land Resources (DoLR) with nine participating states. The project has been characterized by poor performance with disbursements in the portal (form the loan system dated August 8, 2019) of USD1.06 million versus the IDA Credit of USD 178.5 million, on legal obligations in the Financing Agreement to establish a fully-staffed Project Implementation Unit, and agreements made in mission aide memoires related to a proposed project restructuring from August 2018. Expected final disbursements will be $1,220,000. As a result of failing to meet these actions and timelines, the Bank issued a notice of threat to suspend the project (dated November 9) to DoLR, indicating that the project would be formally suspended if four specific actions were not completed within 30 days following receipt of the letter. Two out of four actions were not completed as per the deadline and the project was put under suspension effective February 6, 2019. On February 21, 2019, DoLR completed one out of the two pending remedial actions. On March 13, 2019, the Department of Economic Affairs (DEA), World Bank and DoLR agreed that the unfulfilled remedial action is no longer relevant for the Neeranchal Project and could be dropped. The Bank lifted the suspension (effective June 11) because it assessed that conditions were met. C. RATIONALE FOR RESTRUCTURING The World Bank Neeranchal National Watershed Project (P132739) On March 13, 2019, the Department of Economic Affairs (DEA), DoLR and World Bank met and discussed the implementation status of the Project where it was agreed that the envisaged institutional structure particularly at the national level impeded implementation of the Project, and that these institutional issues need to be addressed through a new operation. It was also agreed that completing remedial action related to the Project Management Consultancy (PMC) Firm is no longer required to achieve the Project’s development objectives and should therefore be dropped. On July 22, 2019 DEA sent a formal request to the Bank for cancellation of the undisbursed IDA Credit 55240 of USD177.28 million and to also initiate dialogue with DoLR and participating States on the contours and design of the new project including provision for retroactive financing. II. DESCRIPTION OF PROPOSED CHANGES The proposed change is to cancel the remaining undisbursed balance of 177.28 million (99.3 percent of total financing). III. SUMMARY OF CHANGES Changed Not Changed Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ The World Bank Neeranchal National Watershed Project (P132739) Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) 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-55240- Disburs 178,500,000.0 177,280,000.0 USD 22-Jul-2019 1,220,000.00 FOR 001 ing 0 0 COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-55240-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: Gds,Wks,NCS,CS,Trng,Op Csts 178,500,000.00 1,064,249.11 1,220,000.00 50.00 50.00 Total 178,500,000.00 1,064,249.11 1,220,000.00 The World Bank Neeranchal National Watershed Project (P132739)