Documentof The World Bank FOR OFFICIAL USEONLY Report No. 45503-NP EMERGENCY PROJECTPAPER UNDERTHE GLOBAL FOOD CRISISRESPONSEPROGRAM TO NEPAL ONA PROPOSEDSOCIAL SAFETY NETPROJECT CONSISTINGOF A PROPOSEDCREDIT INTHE AMOUNT OF SDR 10.6 MILLION (US$16.7 MILLIONEQUIVALENT) AND A GRANT FROMTHE FOODPRICE CRISISRESPONSETRUST FUND FORUS$5.0 MILLION AND AN ADDITIONAL FINANCING CREDIT TO THE IRRIGATIONAND WATER RESOURCEMANAGEMENT PROJECT INTHE AMOUNT OF SDR 9.1 MILLION (US$14.3 MILLIONEQUIVALENT) September 18,2008 SustainableDevelopmentDepartment Agriculture and Rural DevelopmentUnit NepalCountry ManagementUnit SouthAsia Region This document has a restricted distribution and may be used by recipients only inthe performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective September, 2008) Currency Unit = Nepalese Rupees(NRs) 1US$ = 74NRs. 1US$ = SDR0.6347 FISCAL YEAR JULY 15 - JULY 14(Nepali fiscal year) JULY 1- JUNE 30 (World Bank fiscal year) ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ARCS Audit Report Compliance System BOQ BillofQuantity CA Constituent Assembly CAP Community's Consolidated Appeal CFAA Country FinancialAccountability Assessment CPI Consumer Price Index CPN-M Communist Party of Nepal-Maoists CQ Consultant Qualifications DDCs District Development Committees DFID Department for InternationalDevelopment DISSPRO DistrictSeed Self Sufficiency Program DOs DevelopmentObjectives DOA Department of Agriculture DO1 Department of Irrigation EMP Environmental Management Plan EPP Emergency Project Paper ESMF Environmental and Social Management Framework F A 0 Food and Agriculture Organization FAR FinancialAdministration Regulations FCGO Financial Controller General's Office FM FinancialManagement FPCRTF Food Price Crisis ResponseTrust Fund FPR Financial ProceduresRegulations GDP Gross Domestic Product GON Government of Nepal GFRP Global Food Crisis ResponseProgram GTZ German Agency for Technical Cooperation IBRD International Bank for Reconstruction and Development IC Individual Consultants ICB International Competitive Bidding ICWMP Integrated Crop and Water Management Program IDA International Development Agency IEE Initial Environmental Examination ILO International Labor Organization .. 11 FOROFFICIAL USE ONLY IPDP Indigenous PeopleDevelopment Plan IPR Implementation ProgressReport ISE InitialSocial Examination ISN InterimStrategyNote IWRMP Irrigationand Water ResourceManagementProject LOU Letter of Understanding MDG MillenniumDevelopment Goals MIS ManagementInformation System MOF Ministry of Finance MOLD MinistryofLocalDevelopment MoAC MinistryofAgriculture and Cooperatives MOU Memorandum of Understanding MOWR Ministry of Water Resources NARC Nepal AgricultureResearchCouncil NASC Nepal Administrative Staff College NCB National Competitive Bidding NDRI Nepal Development Research Institute NFCRP Nepal FoodCrisis Response Program NFC Nepal Food Corporation NGO Non-Governmental Organization NIT Non-conventional IrrigationTechnology NLTA Non-lendingTechnical Assistance NPC National Planning Commission NPSU National Program SupportUnit NRB Nepal RastraBank NSC Nepal SeedCompany OECD Organization for Economic Cooperation and Development OAG Office of the Auditor General OP/BP Operational Policy/Business Policy OPD Office of the Project Director PEFA Public Expenditure Financial Accountability PEM Public Expenditure Management PFAA Public Financial Accountability Assessment PFM Public Financial Management PCT Project Coordination Team PIM Project ImplementationManual PIP Project Implementation Plan PPRO ProtractedReliefand Recovery Operations PSC Policy Steering Committee QBS Quality Based Selection QCBS Quality and Cost Based Selection RAIDP Rural Access Improvement and Decentralization Project RAP ResettlementAction Plan RCIW Rural Community Infrastructure Works RFP Request for Proposal R & R Resettlement& Rehabilitation RPF Resettlement Policy Framework SDC Swiss Agency for Development and Cooperation SEMP Social & Environmental ManagementPlan SOEs Statements of Expenditures ~ This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not be otherwise disclosed without World Bank authorization. SPP SimplifiedProcurementPlan SSMP SustainableSoilManagementProject TA TechnicalAssistance TFs Trust Funds TORS Terms of Reference TYIF' Three Year InterimPlan UN UnitedNations UNICEF UnitedNationsChildren's Fund VAM VulnerabilityAnalysis andMapping VAT Value Added Tax vc Vice Chairman VCDF VulnerableCommunities DevelopmentFramework VDC Village Development Committee VGDP VulnerableGroup DevelopmentPlan WFP World FoodProgramme WHO World HealthOrganization Vice President: IsabelGuerrero, SARVP Country Director: Susan Goldmark, SACNP Sector Managers: Adolfo Brizzi, SASDA MansooraRashid, SASHD Task TeamLeaders: GayatriAcharya, SASDA MohammedIhsanAjwad, SASHD ShyamRanjitkar, SASDA iv Nepal Food Price Crisis Response Project TABLE OF CONTENTS Social Safety Nets Project -Project Paper Data Sheet vi Irrigationand Water ResourceDevelopment Project -Project Data Sheet vii A. Introduction 1 B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for Emergency Program 2 C. BankResponse: The Program 9 Annex 1: DetailedDescription of Projects and Components 26 Annex 2: ResultsFramework and Monitoring 35 Annex 3: Summary of Estimated Project Costs 40 Annex 4: Financial Management and DisbursementArrangements 41 Annex 5: Procurement Arrangements 58 Annex 6: Implementation and MonitoringArrangements 63 Annex 7:Environmental and Social Safeguards 66 Annex 8: Project Preparation and Appraisal Team Members 78 Project Map (NEP-36460) 79 V Social Safety Nets Project - Project Paper Data Sheet Date: 9/18/2008 Team Leaders: Gayatri AcharydIhsan Ajwad Country Director: Susan Goldmark Sectors: Social protection, Agriculture Sector ManageriDirector: Adolfo B r i z d Constance Environmental category: B Bernard; MansooraRashidMichal Rutkowski Lending instrument: Emergencyoperation (OPIBP 8.00) Project ID(s): P113002 Total Amount: SDR 10.6Million (USS16.7 Million Equivalent) plus US$ 5 Million FPCR Trust Fund Proposedterms: IDA crediugrant Expectedimplementation period: 36 months Expectedeffectivenessdate: September 30, 2008 Expectedrevised closing date: September 30,20 10 Recipient: GovernmentofNepal Responsible agency: Ministryof Local DevelopmentMinistry of Agriculture and Cooperatives Source Local Foreign Total Borrower 0 0 Total IBRD/IDA 16.7 16.7 FPCRTF 5.O 5.0 Others 0 0 Total 0 21.7 21.7 2009 2010 Total IBRD/IDA 12.0 10.4 Trust Funds Doesthe emergency operation require any exceptionsfrom Bank policies? Yes[X] N o [ ] Havethese been approvedby Bankmanagement? Yes[X] No[ 3 Are there any critical risks rated"substantial" or "high"? Yes [ X I No [ ] What safeguardpolicies are triggered, if any? Significant, nonstandard conditions, if any: Prior to effectiveness,Government ofNepal and WFP would conclude a Subsidiary Grant Agreement (SGA) setting forth the scope of the program and delivery modalities, targeting of beneficiaries and other matters. Ministry of Local Development and Ministry of Agriculture and Cooperatives would enter into an agreement with regardto project coordination, data sharingandbeneficiary assessments. vi Irrigation and Water ResourceDevelopment Project - Project Data Sheet Responsible agency: Department o f Irrigationhlepartment o f Agriculture Revisedproject development objectives/outcomes The project development objective remains the same. The additional financing supports the intermediate outcome o f Component D:farmers in selected districts adopt better agriculturalproduction and water managementtechniques.Additional monitoring indicators are however identified in Annex 2. Does the scaled-up or restructured project trigger any new safeguard policies? No. - For Additional Financing [ ] Loan [XI []Grant Credit For Loans/Credits/Grants: Total Bank financing (US$m): SDR 9.1 Million (US$14.3 Million Equivalent) Proposed terms: Source Local Foreign Total Borrower IBRD/IDA 14.3 14.3 Water Users Associations Total 14.3 14.3 vii A. Introduction 1. This project paper proposes support for a Nepal Food Crisis Response Program (NFCRP) consisting o f (i) a credit and grant totaling o f US$21.7 million for a new project on Social Safety Nets and (ii) US$14.3 million o f additional financing to the Irrigation and Water Resource Development Project. These funds are to be made available from the restructured and cancelled creditdgrants under the Financial Sector TA Project (PO71291); the Financial Sector Restructuring Project (PO84219) and the Telecom Sector Reform Project (P050671), as well as a US$5 million grant from the Food Price Crisis Response Trust Fund. The additional financing o f the Irrigation and Water Resource Development Project and the financing o f the new emergency project, in a total amount o f U S 3 6 million. The proposed program i s consistent with the framework set out inthe Global Food Crisis Response Program and will constitute the Bank's overall support o f the Government of Nepal's Food Crisis Response Program. 2. The proposed NFCRP will finance activities to mitigate both the short-term and the medium to long-term impact o f rising food prices in Nepal as a result o f the global food price trends. The proposed program will support the Government o f Nepal's (GON's) national strategy to maintain and enhance food security. It includes support to the implementation o f social safety net measures to maintain access to basic needs (mainly food) among vulnerable households infood insecure districts; and agricultural productivity activities to expedite a supply response through the implementation o f measures to raise the yields and consequently the production of staples. 3. Specific interventions under the Social Safety Nets Project include: (a) a short term program for vulnerable districts through the food/cash for work program and (b) the provision of essential inputs (seeddfertilizer) to remote districts. Additional Jinancing to the IWRMP includes activities focused on: (a) small scale and non-conventional irrigation and (b) increased local production o f improved seeds. 4. The proposed overall allocation is as follows: and soil management activities Project Coordination, Impact evaluation and 500,000 MoACMoWR DOA/DOI participatory beneficiary assessments Total 36 million 1 B. EmergencyChallenge: CountryContext,RecoveryStrategyandRationalefor EmergencyProgram 5. Increasing world food prices threaten to undermine recent progress towards the millenniumdevelopment goals (MDGs) by reducing household and national food security and threatening macroeconomic stability. In post-conflict and fragile states, social unrest and instability is a real prospect. Food grain prices have more than doubled since January 2006 and over 60 percent o f this increase has occurred since January 2008 alone. The impact o f highworld food prices i s compounded by increases infuel prices, which adds to distributioncosts and is resulting inhigh food price inflation in many countries. There are strong indications that the volatility in global food prices will remain for the foreseeable future coupled with an upward shift to higher (real) prices inthe mediumterm. The FAO- OECD Agricultural Outlook 2008-2017 forecasts that world prices will retreat from current highs but will remain firm over the medium term. This shift in food prices sharply focuses attention on reversing the declining trend o f investments in agriculture, especially in agriculture dependent countries, as a pivotal strategy in addressing food security and poverty. 6. The Bank has recently put forward a Global Food Crisis Response Program (GFRP) which allows a comprehensive response to the crisis across a range o f different instruments. GFRP provides an overall framework for the Bank to coordinate its own contribution to addressing the crisis in partnership with other multi-lateral organizations and donor agencies. The initial approach will be to facilitate a rapid Bank response with all available tools as soon as possible, while supporting the evolving coordination role o f the UnitedNations Task Forceonthe Global Food Crisis established recently inBerne. Country Context 7. Targeted food assistance i s immediately required for 2.5 million rural people severely affected by the price increases while a further 3.9 million rural poor will be at highrisk of food insecurity if food prices continue to rise. An estimated 43 o f 75 districts are reported to be food deficit. According to WFP, at least 23 districts Nepal are now chronically food insecure, with more than 6 million people food insecure o f which 2.5 million are inimmediate need of food assistance. Unlikethe Terai area where markets are reasonably integrated both domestically and with India, poor road access in Mid and WesternNepal leads to highand increasingtransportationcosts (aggravated by serious fuel shortages) which in turn pushes grain prices up even further. Severe drought has aggravated the already precarious situation for many communities where crop production has decreased by as much as 70 percent insome areas. 8. In addition to the impact of higher food pries, the country is now facing a flood crisis as well. The districts o f Sunsari and Saptari have been inundatedby severe floods as a result o f a catastrophic break inthe embankments o f the Koshi river'. Flood waters o f the Koshi River in the eastern Terai have severely impacted several VDCs2 in Sunsari and Saptari districts. Besides displacing over 50,000 people and resulting in subsequent food 1The Koshi River broke through its easternembankmenton 18 August. 4 VDCs are completely flooded and 7 other VDCs are partially affected.The total population that has been affected is estimatedto be 107,255. 2 shortages, the population has experienced severe losses interms o f livelihoods with loss o f agricultural land totaling 6000 hectares and total loss o f agricultural products totaling 3.7 million USD3. 9. The project will therefore target the chronic and marginally food deficit districts o f Nepal as well as the severely affected districts o f Saptari and Sunsari inthe Terai, through the foodkash for work programs while the medium term agriculture production support would also include districts where remoteness creates a constraint for access to inputs. 10. Duringthe first 7 months o fFY08, food prices have grown at an average rate o f 8.7 percent as compared to overall inflation o f 6.3 percent but variation o f increases across the country i s considerable. However, the overall inflation rate i s misleading because vulnerable districts have seen an increase o f over 30 percent for cereals prices over the last year. Highest increases inreal prices duringthe past six months were observed for cooking oil (26 percent), coarse rice (19 percent) and kerosene (13 percent). This has occurred during a period when rice prices normally declined by about 11percent. Inwestern Nepal where 5 out o f every 6 households are poor, price inflation for coarse rice (the main food staple) has varied between 10 and 40 percent this year (2008).4 11, As a result, over the period May - August 2008, the number o f people highly and/or severely food insecure has increased due to poor winter harvests in parts o f the Far and Mid-west, rise infood prices and transportation costs, market closures due to syndicate strikes, inaccessibility o f areas due to monsoon weather conditions, and flooding o f agricultural land in the Koshi areas with subsequent loss o f crops and destruction o f livelihoods. The joint market assessment by WFP and Nepal Development Research Institute (NDRI) identified 2.5 million rural people across Nepal in immediate need o f food support due to rising food prices. More than half o f those (1.3 million) have currently been classified as highly to severely food insecure in the 39 WFP Food Security Monitoring and Analysis System (FSMAS) monitoring districts. In urban areas 525,000 vulnerable poor are at risk while 67,000 o f these people may require immediate emergency support. 12. Nepal i s also facing a serious fuel shortage, heavily affecting transportation costs, one o f the most important factors in determining food prices. The average cost o f transportation increased by almost 27 percent during the six months period covered by the survey and further increases are imminent. The chronic shortages o f petroleum, cooking gas and diesel - due to a particularly debilitating combination o f poor policies, inadequate revenue generation by the Nepal Oil Corporation, and frequent disruptions o f supply due to strikes - have become a critical factor in food price inflation and impact transportation o f food and agricultural inputsto remote parts o f the country. 13. While high food price inflation forms a challenge for virtually every country, it presents particularly serious problems for Nepal in view o f the following characteristics: These are initial estimates provided by the District Agriculture Office 4 Even though on average percentage price changes for coarse rice inthe Terai and Hillshave exceeded those inthe Western Mountains, rice is more than twice as expensive inremote mountains comparedto the Terai so the absolute price increases have been highest inthe Mountains. 3 (i) averageper-capitaincomeof$363/year (2007); (ii)highoverallpovertyrate(31 low percent in 2004); (iii)high child malnutrition rate (39 percent in 2006); (iv) lack o f an institutionally well-established safety net program to effectively safeguard the impact o f the crisis on poor and vulnerable populations; (v) small average farm size and low agricultural productivity, resulting in four out o f every five households in Nepal being net food buyers; (vi) nominal wage rates for unskilled have risen but do not keep up with food price inflation (i.e. decreasing real wages); and (vii) fragile government and highpolitical pressure to provide relief from highfood prices and chronic fuel shortages. 14. Part o f the problem i s that productivity has remained very low and the supply response to higher prices i s severely constrained. Three crops - rice (54 percent), wheat (19 percent), and maize (23 percent) -account for 96 percent o f total cereal production and cultivated land. While production has generally kept pace with population growth, over the past 8 years (2000-08), rice yields have been stagnant and wheat and maize have shown limitedgrowth inyields. Table 2 illustrates how low yields are inNepal when compared with better performing states in India and with China and Vietnam. This emphasizes the needfor improvedtechnologies and farm practices by farmers including inthe Terai, and a needto revisit the effectiveness o fresearch, extension and input supply systems. 15. Eventhough costs o f production inthe Terai are generally low, difficult access in the hillsand mountain areas greatly increases the costs o f input delivery leadingto low use o f fertilizer and pesticides and low levels o f mechanization. Inthe 23 most remote districts, where the private sector cannot profitably supply inputs, the government subsidizes the transportation of fertilizer and seeds. Rising energy prices will affect current costs o f cultivation, both directly for the operation o f machinery and indirectly for fertilizers and other chemicals. Fertilizer prices are estimated to have increased by 30 percent during 2007 and reduced use o f fertilizers i s a likely response. The supply o f these inputs to district headquarters has been affected by fuel shortages and risingfuel prices. 16. Long-term declines in agricultural investment, leading to underperformance in the sector are having a severe impact on the ability o f the sector to respond to increased demand and to capture the rise inprices. InNepal, public spending in agriculture as a share o f agriculture GDP i s approximately 3 percent, lower than the average o f 4 percent for agriculture based countries, and significantly lower than transforming countries which investedat least 10 percent during their agriculture growth spwt'. The result o f this long WorldDevelopment Report (2008), Agriculture for Development 4 period o f underinvestment i s that the supply response i s severely constrained, with farmers being unable to take advantage of the highfood prices. 17. Nepal also does not have a national safety net program that can be expanded rapidly to reduce the hardships that poor and vulnerable households face duringthe current food crisis. The main existing public social assistance programs comprising an elderly pension, a widow's pension and an allowance for severely disabled people have very low coverage (about half a million beneficiaries), with public expenditure on all three programs amounting to less than 0.14 percent o f GDP (2006-07). The low coverage relative to the needs o f the population and the limitedtarget groups do not make it a useful candidate for providing benefits to vulnerable groups in the current food crisis. The program currently uses outdated paper-based and variable reporting standarddformats, incomplete information collection for oversight and policy purposes, a rudimentary payments system especially below the district level, and an unevaluated targeting system. Improving program administration could increase the efficiency o f delivery o f current programs and serve as a building block for an effective national safety net system that i s fiscally viable and targets the chronic poor. 18. Given the low supply response to higher food prices and the chronic lack o f adequate safety net measures, the Bank's response requires a combination o f short and mediumterm interventions to address urgent requirements for food and to trigger a supply response, particularly inthe remote andmost vulnerable districts o f the country. Economicand Social Impact of the Crisis 19. Nepal i s one o f the poorest countries in the world, with a GDP per capita of US$363 in2007, with low, though insome cases improving, social indicators. Despitethis, the country has made substantial progress inpoverty reduction inthe last decade. Between 1996 and 2004 the headcount poverty rate fell from 42 to 31 percent. This i s remarkable considering that an armed conflict ran from 1996 to 2006 which imposed a heavy toll in terms o f human lives: over 14,000 people were killed, many displaced (with estimates over recent years ranging from around 25,000 to around 100,000 people), and others disabled or "disappeared". 20. Overall the poorer sections o f society depend more on coarse rice, maize, and millet. 64 percent o f total coarse rice consumed inthe country i s by the bottom 3 quintiles i.e. the poorest 60 percent. Similarly, the bottom 3 quintiles account for 69 percent and 66 percent respectively o f total maize and millet consumption and 74 percent o f total maize flour consumption. On average, rice constitutes about 67 percent o f total grains and cereal consumption in Nepal6 while wheat and maize constitute 12-15 percent each, and millet and barley make up 3-5 percent. Coarse rice makes up half o f total grain consumption o f the poor. Maize, particularly maize flour, i s the next important food-item to the poor making up 17-19 percent o f their consumption. Wheat makes up about 5 percent of the 6 Inthe NRE3's CPI basket, rice makes up 78 percentofall grains andcerealconsumption.According to NLSS-11, rice constitutes 67 percent oftotal grain consumptionby households.The difference probably arises becausethe NRE3's CPI only measuresurban inflation. The NLSS-I1 data can be consideredmore representativeo f nationwide consumption pattern. 5 grain basket for the middle three quintiles. Millet makes up around 5 percent o f the consumption o f the poorer classes. Increases in the price o f rice have a larger impact on both the rural and the urban consumer. Rice makes up 84 percent o f the total grain basket o f the urban consumer, compared to only 5 percent for maize and millet together. Maize and millet account for more than a fifth o f the grain consumption of the rural population (96-97 percent o f maize and millet i s consumed inrural areas), while coarse rice accounts for 47 percent of total expenditure. 21. Giventrends inconsumption patterns, the policy implication is that rice cultivation and processing to maize flour have to be given due attention, as we can expect demandfor these items to increase further assuming incomes continue to grow. From a regional perspective, it will be important to ensure adequate wheat supplies to the far-western region, while also supporting the production o f local grains which can contribute to local food security and nutrition. 22. Highand variable price rise will not only affect vulnerable people; but, could also wipe out most of the impressive reduction rate inpoverty head count observed inthe last decade7, unless price increases are successfully passed on to producers, and in particular, smallholders. Supporting farmers to increase production will be an important strategy. For the poorest households, on-farm income and agricultural wages account for 71 percent of the share o fhousehold income. Interms o f livelihood strategies, approximately 29 percent o f rural households are labour-oriented and are therefore likely to be net buyers o f food. These households will be adversely affected by the higher food prices and associated increases in input costs. However, households which are market-oriented and are net sellers o f food, could benefit from the higher food prices provided these are passed through to them'. GovernmentResponseto the Crisis 23. Nepal i s coming out o f a long period o f conflict and internal strife and the political situation remains unsteady. Nepal's Poverty Reduction Strategy (PRS) i s based on the Tenth Five-Year Plan 2002-07 and sets reduction o f the overall poverty ratio as its main objective. A new strategy i s expected to be prepared by the new government. Nepal's political landscape has changed considerably over the last three years. The ending o f royal rule in April 2006 and immediate establishment o f an interim Government opened a new chapter inthe Nepal's history. The signing o f a comprehensive peace agreement between the Government of Nepal (GON) and the Communist Party ofNepal-Maoists (CPN-M) in November 2006 laid out a roadmap to a lasting peace and the construction o f a new governance structure. Constituent Assembly (CA) elections were peacefully held on April 10, 2008 and were judged by observers to have been credible. While the post-electoral 'Povertyreduction o f 1.4 percentper annum (period: 1996-2004). 8As definedinthe WDR (2008): Market-orientedsmallholdersderive mostoftheir income from engagingin agriculturalmarkets.Subsistence farmers primarily dependon farming for their livelihoods, but usethe majorityoftheir produce for home consumption. Only a very small share of all agriculturalproductssold is producedby these households(less than 2 percentinNepal). Labour orientedhouseholdsderivethe larger part oftheir incomesfrom wage work in agricultureor the ruralnonfarmeconomy-or from nonagricultural self-employment. 6 period has seen delays in formation o f a new Government, the C A i s fwnctioning and Cabinet has recently been appointed. 24. Box 1 summarizes the Government's proposed strategies for addressing food security. The impoverishment o f households, as resultant o f price increase, will be o f serious concern to the new government. Any reduction in the welfare o f the marginalized population may lead to another round o f disturbances within the country. With 53 percent o f the consumer basket made up o f `food and beverages', price rises will certainly impact the consumption ofthe marginalizedgroups more than others. The Government's response has been to request assistance to maintain the programs they have in place to address the most vulnerable groups and districts o f the country and to support the food security strategy outlined in the 3 year interim plan. This program i s geared towards assisting the Government o f Nepal make the right policy choices that least distort price signals, provide effective safety nets and increase productivity. Donor Strategies and Programs 25. Extensive discussions on support for the government's efforts inresponding to the crises have taken place among donor agencies and the Government. These have included primarily FAO, WFP, ADB and the World Bank. WFP and FA0 have provided emergency assistance under on-going programs to support food/cash for work and seed supply to remote areas. Through a joint assessment o f the food price crisis, agencies have contributed their particular perspectives and areas o f comparative advantage to leverage synergies and avoid duplicationg. The joint effort i s reflected inthis proposed World Bank support and i s aligned with Donor and Government's response to the crisis and the Government's food security action planoutlined inthe 3 year InterimStrategy. 9A numberofearlier assessmentssuch as the FoodSecurityAssessment Missionto Nepal(2007) and World FoodProgrammeassessmentsof food insecurity inreport districts have takenplace. The WorldBank prepareda policynote in June 2008 drawingon macro data, agricultureand vulnerability data sharedby the Governmentandthe WFP. 7 Box 1-Proposed GON Response and Strategies for Soaring Food Prices Immediate Reponses (6 months-One Year) Mobilization of food assistance Implementation of various support schemes to farmersto enhance productivity and production for the next crop season Distributionof improved seed kitsto farmers on large scale Supportto rehabilitation of micro-irrigationschemes Strengtheningexisting farmer managedirrigationschemes Implementation ofpro-poor incomeenhancementprogramsto increase access of the poor to food Restriction of food grain exports from Nepal Short Term Responses (1 to 3 Years) Revisethe domestic food procurement policy ofthe NFC to o Enhancenational food production o Stabilizemarketprices o Estimationof cost ofproduction ofmajor food crops to beprocured indifferent ecological zones o Differentialprocurementprice for different ecological zones o Prepare a food grain distribution plan for differentecological belts o Domestic procurement and stocking of food through NFC to capacity Increasethe supply of chemical fertilizers through the provisionof sofi loans for fertilizer import and transport subsidy Promotion of location specific product diversification e.g. bread, buckwheat, millet and oats etc Utilization ofunder andunusedproductive naturalresources such as swamps, river sides, streams and forests Discourageconversionof staple foods into alcohol MediumTerm Strategies (3 -5 years) Strengthenthe seed multiplicationprograms with farmer groups, the private sector and the Nepal Seed Company (NSC) Promotion of research and development of location specific andminor crops Whole sale lending at nominal interest rates to micro-finance institutions and cooperatives including small farmer cooperatives Increase investmentinagriculture infrastructure development, processing, marketing and distribution Expansionof ruralroads to production areas Reduction ofpost-harvest losses andthe use of waste for compost and bio-gas Improve soil fertility management LongTerm Strategies Development of a landutilizationpolicy to reduce land fragmentation and use of agricultural lands for non agriculture purposes Enhanceprograms for the development ofbio-diversity Crop insuranceschemes Watershedconservationand management Source:Govt o fNepal-FAOIWFPIIFADIAsianDevelopmentBanklWorld Bank InteragencyRapidAssessment Mission 21-31July2008 Draft Report of MissionFindingsandRecommendations. Presentationby MoAC at Thematic Group Meeting 8 C. BankResponse: The Program 26. The Bank's strategy for emergency support is aligned with the Government's strategic approach and takes place in the context o f the agreed joint UN response. The Bank's emergency program focuses on measures to address the short and mediumto long term implications o f the global food crisis for the country, including on going efforts to strengthen agricultural production and safety net mechanisms on a broad scale. It i s fully consistent with the Bank's Global Food Crisis Response Program (GFRP). The food crisis interventions will be financed out o f the newly created Food Price Crisis Response Trust Fundandthrough the restructuring ofthe existingportfolio. ProjectDevelopmentObjectives 27. Program Goal: To address the short and medium term implications o f the global food crisis for the country by improving access to food and strengthening agricultural production, particularly for food insecure districts and smallholders. 28. The project development objective o f the Social Safety Nets Project is to ensure access to food and basic needs for vulnerable households inthe short term in food insecure districts. The expected outcomes o f the project are improved access to food in food insecure districts for vulnerable groups inthe short term. 29. The project development objective o f the Irrigation and Water Resource Management Project remains unchanged and is to improve irrigated agriculture productivity and management o f selected irrigation schemes and enhance institutional capacity for integrated water resources management. The additional financing supports the intermediate outcome o f Component D in the parent project: farmers in selected districts adopt better agricultural production and water management techniques. Additional monitoring indicators are identified and included in Annex 2. The additional financing does not add new components to the IWRMP but provides financing to cover districts which are not currently included inthe parent project. Summary of ProgramInterventions 30. The NFCRP would help finance activities to mitigate both the short-term and the medium- to long-term impact o f rising food prices inNepal as a result o f the global food price trends. The proposed interventions will support the Government o f Nepal's (GON's) national strategy to maintain and enhance food security. It includes support to the implementation o f social safety net measures to maintain access to food and basic needs among vulnerable households in food insecure districts in the short term; and awiculture productivity to expedite a supply response through the implementation o f measures to raise the yields and consequently the production o f staples. The program has an indicative outlay o f USD 36 million. 31. Specific activities under the proposed new project include: (a) a short term program for vulnerable districts through the food/cash for work program and (b) improved fertilizer access and better targeting of fertilizer uptake by small holders. This project will focus its activities infood insecure and remote districts. 9 32. Under the additional financing, activities will support (a) rehabilitation o f farmer- managed small scale irrigation schemes and non-conventional irrigation technologies; (b) increased local production of improved seeds and soil management. This additional financing will prioritize food insecure and remote districts thereby extending the geographical focus o f the parent project inthese activities and creating synergies with the food/cash for work and fertilizer access support under the Social Safety Nets projects. Social Safety Nets Project Ensuringaccess to food and basicneedsfor vulnerable householdsinthe short term 33. Component I (USsI6.2 million): Inthe very short run, the project would, in food insecure districts, support food/cash for work programs. This will include WFP programs focused on critical infrastructure and livelihood activities and the Rural Community Infrastructure Works (RCIW) program, which i s supportedby the World Food Pro ramme (and in the past has been supported by other donors such as GTZ and DFID)19. This support will provide food and basic needs in the short term to vulnerable households by providing 50 to 70 days o f employment in public works to about 400,000 individuals. As such, the program has two layers o f targeting: (i) geographic according to the level o f food insecurity in districts; and (ii) at the household level, self-targeting o f the poor within food insecure communities. Details o f the components are listedinannex 1. 34. The public works activities will be o f immediate relevance to communities, including rural roads in remote areas in 21 o f the most food insecure districts. The rural roads identified are identified in the Roads Master Plan. The wage rate will be no higher than the market wage for unskilled labor (agricultural daily wage) in different locations. The wage will be paid in-kind(food, with added micronutrient supplementation) inregions where food is not available in the market, but cash will be paid out in regions where markets function well. In addition, the component will also promote livelihood/income generation activities in food insecure districts, thus contributing to improving temporary food/income security inthese remote regions. For example, small-scale enterprise projects such as cultivation o f medicinal and aromatic plants and high value cash crops in the Mountain regions can generate income and reduce community vulnerability to food insecurity, climatic variability and food price hikes, generally making households more resilient to external shocks. 35. Responding to Nepal's food price crisis through food/cash for work program i s based on the specific request o f GON, the logistical capacity o f WFP in very inaccessible terrain and the possibility o f rapid start-up o f support. WFP has a good track record o f providing immediate food assistance to vulnerable and marginalized communities under their food/cash-for-work programs." Inthe most food insecure regions, WFP was able to lo The RCIW gives cash and in-kindpayments to the poor in return for work done in labor-intensive public works projects. l1 Foodcash for work programs have the potential to alleviate family's basic needs but they also could distort markets when the program's impact on communities is very significant. Similarly, ifthe cash for work program is sufficiently large relative to the local economy, the program can cause inflation, which in turn can adversely affect non-beneficiary households. WFP has experience with foodcash for work 10 reach as many as 1.25 million households with food support. WFP's comparative advantage i s its ongoing work that can easily adjust and expand to those high food insecure areas where the impact o f consecutive crop harvest failures and food price hikes are greatest, including those areas heavily impacted by the conflict. A further advantage o f the WFP program i s that it has a robust field monitoring system which provides timely and reliable feedback both on food security and program coverage and impacts. As in the RCIW program, where WFP works closely with MoLD, close collaboration with WFP, M o L D and MoAC and local partners will be critical to target the most vulnerable. 36. In addition, MoLD and WFP have agreed to add micro nutrient suDplementation (such as "sprinkles") in the food that will be provided under the food/cash for work program to promote better nutrition outcomes. This aspect will also be monitored to track the added value of such interventions. WFP will work with partners such as UNICEF on the nutrition supplementation program, which will be approved by the Ministry o f Health, and the program will add value to on-going discussions under the Health SWAPto include a larger nutrition program inthe next phase o f financing. 37. Component 2 (US3 million): This component will provide support for fertilizer use in remote areas12. The price o f fertilizer has increased by 30 percent over the last 6 months and fuel shortages and rising fuel prices are placing additional constraints. Inorder to promote private sector development and distribution in remote districts where transportation costs combined with higher fertilizer prices results in low incentives for the private sector to attempt to distribute in these areas, the Government provides a transport subsidy for private sector transport fertilizers and seeds up to the district headquarters (mostly by road or animal, a few districts by air). As a result farmers inthese districts pay the same price for fertilizer as farmers in other districts where transport costs are not excessive. The program has seen a 40 percent decrease in supply over the last 12 months due to increased transportation costs, thereby making local production even more unlikely to recover inthe short run. The transport subsidy i s aimed at providing an increased supply o f fertilizer for the wheat crop in these districts and total budget provided by the GON i s approximately USD 600,000 per annum. Fertilizer i s provided by suppliers who sell the fertilizer at the market price (less transportation costs) and register the total amount sold at the district headquarters before they can claim the transport subsidy. The transport rates per unit o f fertilizer are set by a district agriculture committee and suppliers are asked to bid against a stated target of fertilizer demandineach ofthe 23 districts. The responsibility o f sellingthe fertilizer remains with the supplier. programsand is well aware ofhow to ensure that marketdistortions are minimized. Inaddition, WFP could pay wages with both food and cashto minimizethe above issues. l2The GFRP states that targetedsubsidyprograms for inputshave a mixedtrackedrecord.Targetedsubsidy programscan greatly increasefarmer access to andapplicationoffarm inputs,but their designshouldtake intoaccountthe followingprinciples:(i) ensure that the subsidy is transparentandfiscallycappedat for example25 percentof the Ministryof Agriculture budget, so that it does not crowdout other priority agricultural public investmentsor derailthe overallnationalfiscal budget;(ii) ensure that the subsidy is targetedto those who cannot affordfertilizerto avoid displacingcommercialsales; (iii)ensurethat the administrative costs o fthe subsidyare kept to a minimum; (v) ensurethat the subsidydoes not createthe dependency syndrome; (v) ensurethere is an exit strategy characterizedby reductionofthe subsidy element annually towards an explicit exit point and(vi) makethe entire structureofthe subsidy program, including its timeframe and allocationscheme, publiclyknowninadvance. 11 38. The iustification for supporting, this program is to ensure a basic level o f input supply and maintain local food production in the remote districts to abate the impact o f food insecurity in these areas. However, the program also needs to be evaluated and eventually phased out. Supporting the program at this time can serve as an important demonstration effect but i s a temporary solution to ensure access to fertilizer inputs in remote areas. Given the increase in food prices, fertilizer should eventually become affordable once farmers are able to see the productivity impacts o f using these inputs. The Government would like to use this opportunity to assess the effectiveness o f the program in reaching targeted farmers and farmer groups. Transporting the fertilizer to district headquarters i s resulting inbenefitsto farmers in and around the headquarters but does not reach the more remote farmers. The next year's program (starting September 2008) would therefore require suppliers to transport fertilizer all the way to the service centers. From that point additional targeting will be required to ensure that small farmers are fully informed about the program and are given access to purchase the fertilizer. A pilot voucher scheme can also be developed as a part o f this program following a full analysis o f the programand detailed data ontargeted beneficiaries. 39. Activities to be financed under this subcomponent will be a) increased budget for transport subsidy (to extendtransport to service centers); b) data collection, monitoring and targeting activities to ensure small farmers are getting the subsidized fertilizer, including the design and piloting o f a voucher scheme for poor farmers and farmer sensitization on the proper use of fertilizer. Activities under monitoring will include independent verification by an implementing partner (NGO). Linkages betweenthese activities and the seed and extension services support under IWRMP will be emphasized and monitored in the programmingofactivities under the two projects. 40. Targeting: As with most food/cash for work programs around the world, the targeting mechanism adopted here i s a combination of geographic targeting (according to the degree of food insecurity spatially) and self selection at the household level (through a lower-than-market wage rate in the program). Tentatively, 30 districts will be selected by MoLD/WFP using poverty maps and information from WFP's food security surveillance system and the recent WFP Market and Price Impact Assessment Report.13 Within these, 21 districts will implement RCIW type (public works) activities, and livelihood activities will be launched in some or all o f the districts. As for project selection for public works, WFP will seek to work with DDCsNDCs and project activities will be chosen by the communities, prioritizing the most food insecure areas. A Subsidiary Grant Agreement will be entered into between WFP and the Government of Nepal, which will include an appendix containing detailed implementation modalities and the relative roles and responsibilities of WFP and the MoLD. A detailed monitoring plan will be agreed to between WFP and MoLD. The fertilizer support program is expected to reach 15,600 farmers across 23 districts (an average o f 600 farmers per district). Expansion o f the program to service centers will provide access to remote farmers within these districts. 13Foodcash for work program districts: Acham, Baitadi, Bajhang, Bajura, Darchula,Dadeldhura, Dailekh, Dolakha, Doti, Dhanusha, Dolpa, Humla, Jajrkot, Jumla, Kalikot, Kavrepalanchok, Makwanpur, Mugu, Pyuthan, Ramechap, Rolpa, Salyan, Rukum, Saptari, Sindhuli, Sindhupalchok, Siraha, Sunsari, Surkhet and Udaypur. 12 Monitoring will be carried out in partnership with an established institution outside o f government, which has a good network inthese remote areas. 41. Component3 (USS2.5 million): Project coordination, monitoring and evaluation, beneficiary assessments will be financed under this component. Independent monitoring and beneficiary assessments will be emphasized to evaluate the impacts of all three earlier components o f this project. Capacity building for central, district and village level administrative officers will also be supported under this component. This component will support a detailed evaluation o f existing cash transfer programs. The focus o f this analysis will be to identify specific actions the Government can take to strengthen the current social assistance programs. This should contribute in the medium term to enhancing state capacity to equitably and fairly deliver critical support that can help mitigate social tensions in a fragile and fluid environment. The financing would support activities including: (a) review o f the existing program administration system (e.g. targeting, record keeping, payments, staffing and skills); (b) design o f an improved program administration, including assessing the current targeting systems and payment methods. The assessment will propose how shifting from a paper based system to a computerized record keeping system can improve the efficiency and effectiveness o fthese programs. Irrigation and Wafer ResourceManagement Project Enhancingagriculture production 42. All activities identified below are taken to be sub-components of Component D in the parent project. Therefore the description below i s meant to elaborate the activities and the geographical targeting expected from the additional financing. 43. ComponentDI (US$ 6.8 million): A primary area o f support will be rehabilitation o f farmer-managed small scale irrigation schemes and non-conventional irrigation technologies (for example, shallow tubewells, rainwater harvesting, lift irrigation, drip and sprinkler systems and small scale surface irrigation). This component would: (i)support quick turnaround physical investments in rehabilitation o f existing small-scale irrigation schemes; (ii) finance technical support to carry out assessments o f groundwater or surface water hydrology to ensure that the recharge i s sufficient for anticipated usage, (iii) provide technical assistance and training in areas such as water harvesting and water resource management; (iv) finance investments in water pumping, storage and distribution, (v) finance training for local artisans, technicians, and water user groups on operation and maintenance o f investments; (vi) finance investments in rehabilitation or development o f field drainage and collector drains to reduce problems o f water-logging and soil salinity, and to enable rapid increases in crop yields. Support under this area will help provide support to areas not covered by the current irrigation project and in particular address the needs o f small holders in remote food insecure areas. Support will be channeled through the implementing arrangements in place under the irrigation and water resource management project but will target areas that are currently not covered by the project. Department of Irrigation and the Department of Agriculture will coordinate in the implementation o f this component as currently expected under the existing modalities o f the Irrigation and Water Resources Management Project. 13 44. Component 0 2 (US$ 7.0 million): Increase Local Production o f Improved Seeds and Soil Fertility Management. Poor quality seed i s considered to be a binding constraint to improving productivity and overall production. The current seed replacement rate i s about six percent. This has resulted in deterioration o f seed quality leading to low crop production and productivity. The Nepal Agricultural Research Council (NARC) has released several crop varieties in the last 5 years, but adoption by farmers has been lower thanexpected. A significant yield impact can be expected from use of improvedvariety of seeds and a general improvement in seed replacement levels. Alternative approaches to raising soil fertility will be promoted alongside the seed program since the combined effect o f increased replacement levels o f seeds, access to irrigation and soil fertility programs can contribute significantly to the integrated crop and water management objectives o f the sector. On-going programs within the D o A already provide these linkages. The integrated crop and water management sub-component in IWRMP also supports farmer to farmer extension activities which i s the approach used by, among others, the long running Sustainable Soil Management Programme (SSMP) financed by the SDC and implemented by Helvetas and DOA. 45. Activities to be financed will include: (i) procurement and distribution (by project) o f high-yielding varieties o f foundation seeds from research stations, relevant market outlets; (ii)provision o f basic training to local farmers in using these foundation seeds to produce improved seed varieties (segregation, more intensive weeding/management etc); (iii)support for forming relevant community groups for production, sharingandfurther propagation o f these seeds; and (iv) complementary inputs to improve soil management practices. The project would support seed production at a local level for only a few seasons, and in this time will support the development o f stocks o f improved seeds as well as systems and capacities for continuing production and use o f better seeds, which should provide a sustainable source o f yield increase. The Ministry o f Agriculture and Cooperatives would implement this component, using other service providers (including FAO, WFP and Helvetas) as required. 46. Targeting: Small scale and non-conventional irrigation i s expectedto reach 12,400 farming households. Farm sizes in target areas are on average 0.2 hectares while household sizes are on average 6.7. Priority will be given to areas inhabited by marginalized poor communities with no potential for future development o f surface irrigation. The community seed program i s expected to increase local production o f quality seed by 30 percent and increase average replacement levels to 10 percent. Geographical targeting should be aligned with recent WFP-MoAC assessmentswhere districts have been identified as particularly vulnerable to continuing food shortages, including the districts affected by the Koshi floods. 47. Component 0 3 (US$ 500,000): The additional financing will include some financing for increased project coordination, monitoring and evaluation and beneficiary assessments. This i s to augment project coordination and M&E financing already provided inthe IWRMP. 14 FinancingInstruments 48. The proposed interventions will be financed by a US$ 5 million grant from the Food Price Crisis Response Trust Fund (FPCRTF)14 and through restructuring o f the existing IDA portfolio resulting inan additional US$31million. The financing instrument will include an additional financing of the Irrigation and Water Resources Management project and a new credit/grant facility for the proposed Social Safety Net Project interventions. Consistency with Country Strategy 49. The proposed activities are consistent with the current Interim Strategy Note (ISN) and with the country's 3 year interim plan. This project will benefit from the forthcoming proposed non-lending technical assistance (NLTA) to support GON's Social Protection system. That social protection NLTA combines social protection program assessments, technical assistance to central and local tiers o f government to improve data for implementation and evaluates existing social protection programs, and advisory support to central government as it develops its active labor market programs, amendments to social protection program eligibility and targeting mechanisms, and social care services and related implementationmechanisms. 50. The project also complements the planned support under IDA 15 for agribusiness development through farmer based organization and value chain development. The emergency response will also add value to the on-going irrigation project by providing support for complementary inputs such as seed and fertilizer. Taken together, these agriculture programs can address the needs o f small scale farmers both with regard to supporting their basic production and consumption requirements and more efficient market integration to take advantage o f higher prices and niche markets. ExpectedOutcomes and MonitoringArrangements 51. The program's overall development objectives are: (i)to ensure access to foodhasic needs and essential agricultural inputs for vulnerable households in food insecure districts in the short term; and (ii)to promote domestic food production by ensuring access to inputs and improved technologies. The expected outcomes o f the program are: (a) improved access to food infood insecure districts for poor households and vulnerable groups inthe short term; and (b) increased production o f food crops. 52. Results frameworks and M&E arrangements are described in Annex 2; for the additional financing, monitoring arrangements are included in the existing project's M&E arrangements with measurable indicators to be added as described inAnnex 2. Monitoring and oversight o f the Government's overall food crisis response program will be carried out by the Ministry o f Local Development together with the Ministry o f Agriculture and Cooperatives through the DOA. 14The FPCR TF was establishedin conjunction with the Bank's Global Food Crisis Response Program (GFRP), and is subjectto Executive Directors' approval and hnded out of IBRDsurplus subject to the approval ofthe Board of Governors. 15 Appraisal of ProgramActivities 53. Technical: Inthe short term, a scale up o f the foodcash for work program would be important for households suffering from the food/commodity price crisis. Close collaboration with the MoLD, MoAC, WFP and local partners will be critical to target the most vulnerable. Inthis respect, WFP has a good track record in working with M o L D in implementingRural Community Infrastructure Works (RCIW) program - a public works program and in providing food assistance to vulnerable and marginalized communities under their food-for-work and combined food-for-work and cash-for-work programs. In the most food insecure regions, WFP was able to reach as many as 1.25 millionhouseholds with food support. WFP's comparative advantage is that it can easily adjust its program to reach those high food insecure areas where the impact o f consecutive crop harvest failures and food price hikes are greatest, and to areas also heavily impacted by the conflict. Evaluations o f the RCIW public works program have shown positive impacts on food security o f vulnerable households in times o f need. In Dholaka, Ramechap, Sindupalchowk, Kavre districts, 415 km o f roads were completed. Inaddition, 20 percent o f participating workers belonged to Dalit groups most frequently affected by social exclusion. Significant output indicators were also in evidence. Given the WFP's comparative advantage in reaching the most food insecure regions and the vulnerable in such regions, and its past successful track record in working collaboratively with MoLD, the WFP and M o L D collaboration i s likely to be particularly useful in the current food price crisis situation. 54. The lack o f an effective safety net system makes it difficult for the Government to respond to this and other crises affecting vulnerable groups. At present, as in several other countries in the region, Nepal does not have a national safety net program that can be expanded rapidly to reduce the hardships that poor and vulnerable households face during the current crisis. The main existing public social assistance cash transfer programs comprise non-contributory pensions to the elderly, widows and the disabled. These programs have very low coverage, public expenditure on all three programs amounting to less than 0.14 percent o f GDP (2006-07). While the program contains a small component that targets benefits to the disabled and widows, the bulk o f program spending i s on a social pensiontargeted to the elderly o f age 75 or older. The rogram has beenshown to be effective in meeting its objective o f reaching the elderly,` but its small coverage and limitedtarget groups do not make it a viable candidate for providing either cash or food based transfers to vulnerable groups during the current food price crisis. Moreover, the program's administrative efficiency, e.g. record keeping, management information systems, payment systems and targeting are weak and could be significantly improved. Improving program administration could also allow the program to develop an administrative platform for benefit delivery that would contribute to an effective and efficient national safety net system that i s fiscally viable and targets the poor, but also i s capable o f scaling up effectively in case o f future crises. This system will therefore be analyzed and an action plan will be prepared for the proposed Local Government and Community Development Program. 15See Palacios and Rajan (2004) for a survey-based assessment of program incidence. 16 55. The agriculture related activities are identified in various assessments as particularly important for Nepal to address food security inthe medium to long term. The IWRMP has evaluated these activities (minor irri ation, non-conventional irrigation and community seed program) as technically sound'? District Seed Self Sufficiency Program (DISSPRO) currently covers 55 o f the 75 districts inthe country but coverage within each district is highly variable since it i s a demand driven program. It has however been effective in expanding the reach o f good quality seeds in these areas through farmer to farmer informal exchanges. 56. Component D o f the IWRMP i s also based on demand-driven principles. Support under this additional financing therefore creates additional space to invest in the improvement o f irrigation schemes through small scale and non-conventional irrigation technologies which are appropriate for the difficult terrain and the scale o f landholdings. The extension o f these appropriate technologies will add significantly to the expansion of irrigated land but will focus on including small holders. Current reach by DO1 for non- conventional irrigation schemes i s 80 per year, largely inthe mid hills and mountain areas, while demand is for around 200 schemes per year. Similarly, the DOA carries out very small scale repairs using a matching grant mechanism to help farmers address system failures (such as landslides which block irrigation canals) or extensions through additional pipes to direct water to where it i s needed at the field level. 20-25 schemes per district per year i s the typical outreach o f the DOA. 57. Additionally, by linking these efforts with improvements in the seed supply chain and encouraging farmers and cooperatives to participate in the DISSPRO program, the integrated crop-water management approach supported by IWRMP will be strengthened. Water management at the farm level would be an integral part o f each project scheme. Economicand Financial: 58. The benefits from the proposed program are both direct and indirect as well as short- term and medium-term. The programs supported by this project are in line with the Framework Document and seek to mitigate the worst effects o f food shortages and price increases on the poorest households through the rapid adoption o f responses that will have immediate to medium term effects if implemented as soon as possible. These include measures to stabilize food prices and improve food policies, the strengthening o f those aspects o f social protection, human nutrition and health systems related to the price o f food; and promotion o f rapid responses infood supply chains. 59. Under the GFRP the following procedure is offered for the appraisal of specific investments proposed for funding in each country program. This rapid appraisal process will review the following factors, based on standard good practice for the economic evaluation o f public investments: (1) the sector policy context; (2) the proposed target beneficiary group(s) (3) the expected effect, or benefit, and cost-effect and/or cost-benefit l6Inaddition, an independentFA0 assessmentofthe seedsupply chain (andDISSPROinparticular) will be carried out inAugust 2008. 17 ratios; and (4) analysis o f fiscal sustainability. The proposed program i s consistent with the framework set out inthe GFRP. 60. The sector policy context: The overall policy context recognizes the post-conflict nature o f the country and fragile political situation, the market failures evident particularly for key agricultural inputs, and the absence o f alternative budget resources. 61. Targeting is explicit in all components and focuses on food insecure populations/areas (in the new project), smallholder farmers (existing project receiving additional financing) and the most vulnerable (through geographical targeting in both projects and self-targeting o f the poor within food insecure districts in the new project). Smallholder farmers and food insecure populations are targeted in both projects. Verification through GON and WFP monitoring and independent monitoring by partner organizations will be used. 62. Expected benefits: The combination o f social protection and productivity- enhancing interventions will support immediate objectives o f alleviating food insecurity and start addressing the longer-term agricultural productivity concerns. The added value o f nutritional supplements to the food to be distributed will also be monitored and studied for possible replication in subsequent programs. The additional financing to the irrigation and water resources project i s expected to result in longer term benefits by promoting appropriate irrigation technologies and local availability o f improved seeds. 63. Over the longer term, a more effective and efficient safety net can help reduce the social and economic costs o f instability and reduce adverse welfare impacts o f both exogenous shocks and reforms on the poor. The proposed analysis o f safety net delivery mechanisms will address ways in which we can help reduce household vulnerability to risks, cope with shocks of different forms, facilitate highriskheward production decisions by poor households, and even facilitate structural reforms by cushioning their impacts on the poor. These effects can be both equity enhancing and contribute to dynamic efficiency, suggestingthat greater attention to equity neednot be a trade off, but can be a complement to growth. Detailed monitoring o f the food/cash for work programs and investment projects under IWRMP, as well as improved targeting o f the fertilizer subsidy program, together with this analysis will provide important data for improving targeting and service deliveryinthe subsequent Government programs. 64. Fiscal sustainability. The proposed program does not give rise to the creation o f open-ended commitments o f public resources (e.g. for price support or for subsidies). All proposed programs build on on-going Government programs and are aimed at providing short term financing and associated technical assistance to improve the efficiency and reach o f these programs. Subsequent support, where needed, can be provided within the fiscal envelope o f the country's macroeconomic program. The proposed program could also result in reducing the need for certain on-going government subsidized programs in the future, for example by improving local production of seeds. The absorption capacity o f Government expenditure has improved with the peace agreement. Preliminary estimates indicate that 96 percent o f the budgeted expenditure (19.8 percent of GDP) was realized in FY08 compared to 87 percent in FY05/06, the year conflict ended. Financial support to 18 conflict-affected people, liabilities o f public enterprises, a rise in civil servant allowances, election and other conflict-management related costs pushed up current expenditures to 13.4 percent o f GDP, an increase o f 6 percent over FY05/06. Capital expenditure o f 6.3 percent o f GDP (in FY 05/06, capital expenditure was 4.6 percent o f GDP) was achieved after the Maoists joined the government in January, as peace helped more construction related activities in the latter half o f the fiscal year. With a more conducive environment for economic activities inFY08, revenue growth was an impressive 22 percent, the highest infourteen year period. Reforms incustoms, a widening of the tax-net, an increase inthe excise duty rate, and a significant rise in income tax payments all contributed to this healthy rise. Consequently, total revenue stood at 13 percent o f GDP (in FY06/07 it was 11.97 percent o f GDP), a full one percentage o f GDP increase in revenue collection. The estimated deficit financing i s 3.9 percent o f GDP financed by foreign loan o f 1.4 percent o f GDP and domestic borrowing o f 2.5 percent o f GDP, well within approved limits o f the Three Year InterimPlan (TYIP). FiduciaryAspects 65. The decision to align with the government's systems and procedures for implementing the project will contribute to enhancing institutional capacity. The overall fiduciary risk associated with the project i s rated as "substantial" for financial management, the proposed risk mitigation action plans are deemed to be adequate (see Annex 4 for details). Efforts will be made to build capacity in project coordination including for financial management. FinancialManagement 66. Social Safety Netsproject: One o f the proposed implementing agencies, Ministryo f Local Development (MOLD),has not directly implemented IDA-financed projects. Hence, the implementation capacity needs to be strengthened. However, since the major part of the Social Safety Nets project is being implementedthrough WFP, established guidelines and mechanisms provide adequate assurance to the implementation o f the program. 67. Additional Jnancing for IWRMP: Activities to be implemented through additional financing will follow the financial management procedures o f the parent project. However, implementation o f Component D o f the IWRMP was planned to start only from FY2008/09. Due to the delay inthe formation o f a new government, the government has not yet announced the budget for FY2008/09. D O N D O I will be required to revise the work program and budget for FY2008/09. In addition to this, actions related to improving procedures for financial management have been identified and are critical for the implementation o f the new scope o f work under this program. Other than these, implementation arrangements as agreed for IWRMP will apply. To address gaps in financial management capacity identified during the assessment for Component 1 and Component 2, risk mitigation action plans have been developed, and the risks will be reduced as the action plans are implemented. 68. With the recent enactment of the Rights to Information Act, 2007, disclosure requirements will be complied with to make information transparent and all information 19 readily available for public disclosure. M o L D and D O A will disseminate all available guidelines, procedures, and other key information related to respective programs through their websites and other communication means such as newspapers, radio broadcast, and site board. M o L D and D O A have specifically agreed to disclose the following items through their websites: Overall Nepal Food Crisis Response Program Budget, Allocation by Activity and Budget Line; Trimester Implementation Progress Reports (approved versions); and Annual Audited Financial Statements. At the decentralized level, details on recipients o f food under the food/cash for work program will be displayed at site boards or by other means as perthe existing procedure. ProcurementArrangements 69. Procurement for the two sub-projects o f proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. General scope and procedure o f the procurement would be as described in Annex 5 to this document. Procurement o f the contracts listed in the procurement plan shall be carried out inthe manner stated therein. Most of the contracts for works and goods would be o f medium or small value and shall be procured through National Competitive Bidding (NCB) using national procedures and model documents agreed with or satisfactory to the Bank or through community contracting and where appropriate through quotations and shopping. Assignments that require the services o f firms or individual consultants include studies and assessments, will be procured as stated in the approved procurement plan. Compliancewith Safeguards Policies: Social Safety Nets Project SafeguardPolicies Triggeredby the Project Yes N o Environmental Assessment (OP/BP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) [XI [I Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OP/BP 4.10) [XI [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects inDisputedAreas (OP/BP 7.60) [I [XI Projects on International Waterways (OP/BP 7.50) [I [XI 70. Environmental concerns o f the program are related to: i)dry-season rural roads, trails, and micro-scale critical infrastructure; ii)micro-scale irrigation schemes; and iii)improvedaccessto seedsandfertilizer. Alloftheseinterventionswillbesmall-scale and will be distributed in different places in the country. The rehabilitatiodcompletion o f roads (and trails), environmental risk o f which i s higher in comparison to other 20 interventions proposed under the project, will follow environment-friendly construction approach ("green road approach") in which there i s considerable experience in Nepal. Therefore, any adverse environmental consequence o f the project supported activities would be minor, likely to be limited to the immediate vicinity of the sites, and can be managed easily by good construction and management practices. Some o f the intervention such as promotion and conservation o f indigenous crop variety, cultivation o f herbs, protection o f local water sources/ springs, conservation ponds etc would be environmentally positive. 71. Social Safety Nets Project: Overall the project is rated as environmental category B. However, a separate Environmental and Social Management Framework (ESMF) i s not required because assessmentsmade inthe existing RAIDproject are valid to this project as well. The project implementation manual should refer to the guidelines under RAIDP ESMF. Management provisions of existing ESMFs need to be adapted to this project because the scales o f the schemes to be supported under this project are smaller than those under RAIDP, and institutional modality for the project i s different than those for RAIDP. Therefore, it i s necessary to prepare operational procedures and an implementation manual for environmental and social management in this project drawing from the ESMF of RAIDP as well as environmental and social guidelines o f the RCIW and the green road approach (See Annex 7 for more detailed description on safeguard). The guidelines can be incorporatedinto the existing RCIW and WFP guidelines for community works. 72. Capacity o f the involved agencies, particularly the dry-road under RCIW food-for- work, to implementenvironmental and social requirements i s weak. Inthe past, RCIW was availing o f external support/TA which now i s limited to few roads only. The project, therefore, has provided for additional TA for supporting the implementation o f social and environmental safeguards. Also, a mechanism needs to be in place to assure quality and check compliance with the environmental and social requirements by a non-implementing party inorder to ensure effective environmental and social management. 73. Additional Financing through the IWRMP: The ESMF for IWRMP remains valid for the additional financing activities. However agricultural seed technologies for increased production and productivity may require additional expenses for inputs. While it i s anticipated that efforts will be focused on multiplication o f existing varieties, crop budgets for new and improved varieties should be assessed to see if they are economically sustainable inthe context o f small marginal producers. ImplementationArrangements 74. Implementation arrangements will be simplified in two ways: Under the Social Safety Nets project, the foodkash-for-work programs will be implemented by MOLDin partnership with WFP and technical assistance while the agriculture production support will be carried out under the on-going World Bank IWRMP. This approach will ensure that the emergency responses are carried out efficiently and are well targeted to vulnerable areas and populations while the agriculture production support i s embedded in existing modalities and builds synergies with on-going support. 21 75. The Safety Nets Project will be coordinated by the Ministry o f Local Development, with primary responsibility for component 1 falling under MoLD and for component 2 under DONDOI. A Project Implementation Team (PIT) will be established with an adequate number o f key professionals with skills, qualifications, experience and terms o f reference satisfactory to the Association, including: (i) a Project Manager; (ii) Engineer; an (iii)a Section Officer; (iv) an Overseer; and (v) anAccounts Officer. There will be representation from DOA inthis team as an implementingdepartmento f MoAC. 76. Additional financing will be implemented under the existing implementation arrangements as described for Component D o f the IWRMP. Both the D O A and the Department of Irrigation (DOI) will be the implementing agency. Existing project monitoring and evaluation modalities would be applied to additional activities proposed under the IWRMP. 77. The overall program (ie the Nepal Food Price Crisis Response Program) will be guidedby a HighLevel Policy Steering Committee (SC) chaired by a nominee of the Vice Chairman (VC) o fNPC. The SC will guide and monitor the implementation o f the overall emergency response to rising food prices. The SC will meet at least twice a year or as required, and will include Secretaries (MoF, MoWR, MoAC and MoLD) and DGs (DoI, DoA) as members. The Secretary, Ministry of Local Development will be the member secretary. The SC will require the two Project Coordination Units (Social Safety Nets and IWRMP) to report to it in order to have a consolidated view o f the country's response to rising food prices andimpacts on food insecure districts. 22 Program Risks and Mitigating Measures: Social Safety Nets Project Riskfactors Description of risk Rating Mitigation measures Rating of Of risk residual risk Implementati Implementationcapacity is S A strong coordination S on capacity weak andsupervisionwill need mechanismwill be developed and to be strengthened. Two to ensure close coordination sustainability Ministriesare responsiblefor betweentwo line ministries - the project. MoLD andMoAC. Capacity buildingefforts will also be put inplaceto strengthencapacity ofMoLD. Locallevel implementationwill be supportedbythe use ofWFP for the foodcash for work program. Technical Risk that decisionsregarding M WFP will ensurethat all M infrastructure projectsto be proposedtargeting is both built usingthe foodcash for clearly explained,through work get delayedor are subject outreachactivities by WFP and to local elite capture. GoN Geographicaltargeting may raise sociallpolitical WFP districttargetingwill be tension inuntargetedareas. transparent and fair Financial MoLD has not implemented An ActionPlanhas been S management Bank financedprojects discussedandagreedwhich andhence is not familiar with will be closely monitored Bank policies and fiduciary during implementation. The requirements. Risk of Bank will ensure providing insufficientcoordinationwith briefingandoverview about the DOA for managingtransport Bank's fiduciary requirements subsidy, andhence riskof during project launch. obtaining informationon subsidy for the purposeof timely reporting. There is a risk of delayedreporting includingsubmissionofaudit reports. Procurement Risk of intimidationof bidders H or interference inbiddingfor publicprocurementcontracts Social and Implementationcapacityis low, Projectwill emphasizethe use M environ- weak follow throughof agreed of safeguardapproachesin on- mental actions. goingprojects(for example safeguards ruralroads,IWRMP)thereby buildingon on-goingefforts and capacitybuilding. 111. Overall Risk (including Reputational Risks) M 23 Program Risksand MitigatingMeasures: IWRMP (updated) - Risk RiskMitigation II Residual RiskRating dectives I Project designis flexible inorder to allow project works to S situation impedes move betweenDistricts or project areas dependingon the project situation implementation in Use local NGOs to undertake situation assessments in various districts project Districts, develop communication strategies and outreachcampaigns, and provide implementation support Fosterwider community participation inplanning, implementation, and monitoringthrough appropriatesocial mobilization Ensuretransparencyincontracting anduse of funds Greateremphasis is Project designemphasizes centrality of improved water M placedon physical management anduse: physical investmentswill be improvementsin explicitly linkedto better water management arrangements irrigation schemes and agricultural developmentplans at the scheme level thanon Extensiveawareness and capacitybuilding efforts, at start- enhancement of up andthrough implementation, would aim to induce community systems communities to take ownership of local water resource and capacitiesfor management and distribution issues better management Multi-disciplinary implementation teams will aim to of water resources balancephysical investments with social and economic andtheir more interventions productive use O&M of irrigation Proper training of WUA members; signedagreement with M schemes suffers the farmers finalized before executionof the rehabilitation becauseof and improvement works unwillingness of The improvement work is carried out instages depending WUAs to assume upon the capacity ofthe WUA to organize and mobilize responsibilities, or local resources inadequacyof water Project will emphasize through awarenessand training charge collections sessions the importance of timely O&M and hence of water by W A S ,or charge collections weakness on part of Project interventionsthat enhance irrigated agricultural DO1to undertake production andproductivitywill strengthenincentive to complementary pay water charges O&M. MOUto be signedbetweenWUAs and government commits government to augment resourcesto undertake schemerepair and maintenance Risksto Component0 :omes Lack of Do1and Project includesusing local consultantsfor detaileddesign M WUA capacity to and specializedtasks managehmplement Capacity building will strengthenthe capacity ofDo1and the IMTprocess WUAs Beneficiaries face Sub-projects with major technical challenges have been M technical problems excluded with O&M after The technology involved inthe sub-projectswill be simple project completion andrequire the least amount of maintenance leading to continued Do1will continueto advise the WUAs after the IMT dependence on Initial"consolidation" period ensuredfor providing government sustainability of the project during the initial period of assistance and 24 Risk RiskMitigation Residual RiskRating subsidies. Continued government support for technical backstopping and fimding for major repair work provided for incidences of natural disaster Irregular or late The project has been included inthe list of Core Projects S flow of project for which funding will be releasedon apriority basis. The funds from the governmentwould release one-third ofthe approvedbudget government. to Do1and DOA as soon as the work program i s approved during the f r s t trimester and the other two-third during the second andthird trimesters. DO1and DOA will monitor to ensure that trimester reportsare timely submitted to ensure the flow offunds. Coordination At the scheme level, DTT, comprising representativesfrom S betweenDo1and Do1and DoA, willjointly implementICWM DoA with regardto At the district level, ICWM activities will be planned and ICWM (Component supervisedby the DCC, comprising staff from Do1and D) is weak or DoA ineffective, Joint structures/platformsfor ICWMplanning and adversely impacting implementation also provided at regional and central levels implementation to ensure effective coordination betweenDo1and DoA Overall Risk S Rating. 25 Annex 1: DetailedDescriptionof Projectsand Components 1. The Bank's strategy for emergency support i s aligned with the Government's strategic approach and takes place in the context o f the agreed joint UN response. The Bank emergency program focuses on measures to address the short and medium to long term implications o f the global food crisis for the country, including on going efforts to strengthen agricultural production and safety net mechanisms on a broad scale. It i s fully consistent with the Bank's Global Food Crisis Response Program (GFRP). The food crisis interventions will be financed out o f the newly created Food Price Crisis Response Trust Fundandthroughthe restructuringo fthe existing portfolio. ProjectDevelopmentObjectives 2. Program Goal: To address the short and medium term implications o f the global food crisis for the country by improving access to food and strengthening agricultural production, particularly for food insecure districts and smallholders. 3. The project development objective o f the Social Safety Nets Project is to ensure access to food and basic needs for vulnerable households inthe short term infood insecure districts. The expected outcomes o f the project are improved access to food in food insecure districts for vulnerable groups inthe short term. 4. The project development objective o f the Irrigation and Water Resource Management Project remains unchanged and is to improve irrigated agriculture productivity and management o f selected irrigation schemes and enhance institutional capacity for integrated water resources management. The additional financing supports the intermediate outcome o f Component D: farmers in selected districts adopt better agricultural production and water management techniques. Additional monitoring indicators are identified and included in Annex 2. The additional financing does not add new components to the IWRMP but provides financing to cover districts which are not currently included inthe parent project. Summary of ProgramComponents 5. The NFCRP would help finance activities to mitigate both the short-term and the medium- to long-term impact o f rising food prices inNepal as a result o f the global food price trends. The proposed interventions will support the Government o f Nepal's (GON's) national strategy to maintain and enhance food security. It includes support to the implementation o f social safety net measures to maintain access to food and basic needs among vulnerable households in food insecure districts in the short term; and agriculture productivity to expedite a supply response through the implementationo f measures to raise the yields and consequently the production o f staples. The program has an indicative outlay o f USD 36 million. 6. Specific activities under the proposed new project include: (a) a short term program for vulnerable districts through the food/cash for work program and (b) improved fertilizer 26 access and better targeting o f fertilizer uptake by small holders. This project will focus its activities inthe food insecure districts. 7. Under the additional financing, activities will support (a) small scale and non- conventional irrigation; (b) increased local production o f improved seeds and soil management. This additional financing will prioritize food insecure and remote districts thereby extending the geographical focus o f the parent project in these activities and creating synergies with the foodcash for work and fertilizer access support under the Social Safety Nets projects. SafetyNets:Ensuringaccess to food and basic needsfor vulnerable households in the short term. 8. Component I (USsI6.2 million): Inthe very short run, the project would, in food insecure districts, support food/cash for work programs, including the Rural Community InfrastructureWorks (RCIW)Frogram, which i s implemented by MOLDwith support from the World Food Programme.' This support will provide food and basic needs inthe short term to vulnerable households by providing 50 to 70 days o f employment in public works to about 400,000 individuals. The projects are usually focused on rural road rehabilitation and community based projects such as irrigation, flood control, soil conservation structures. Beneficiaries are targeted within a 2 kmcorridor from the plannedrural road. 9. This support will provide short term food security to vulnerable households by providing 50 to 70 days o f employment in public works annually on activities o f immediate relevance to communities, including rural roads in remote areas. WFP will support both programs under their protractedrelief and recovery operations (PPRO). 10. The choice o f WFP as the main implementingpartner for the food/cash for work program i s based on the specific request o f GON, the logistical capacity o f WFP in very inaccessible terrain and the possibility o f rapid start-up o f support". The top-up would allow it to expand to additional food insecure districts for 3-4 months. The wage rate will be no higher than the market wage for unskilledlabor (agricultural daily wage) indifferent locations. This sub-component will ensure continuation of this program in 21 districts experiencing vulnerability due to the food price crisis with WFP participation, using a food/cash for works modality, and complete critical community infrastructure projects. In addition, the component will also promote livelihood creation or income generation activities in food insecure districts, thus contributing to improving food security in these remote regions. For example, small-scale enterprise projects such as cultivation o f medicinal and aromatic plants and high value cash crops in the Mountain regions will The RCIW gives cash and in-kind payments to the poor in return for work done in labor-intensive public works projects. The Private Sector, the Nepal Food Corporation and other NGOs are also important players in food distribution. The Government provides transport subsidies for food distribution by NFC to remote areas. This program is expensive for the public sector, in particular since the cost of transportation has been increasingwith fuel shortages and rising fuel prices. NFC distribution is estimatedat 5-6 percent of the total food deficit inthese areas. 27 generate income and reduce community vulnerability to food insecurity, climatic variability and food price hikes, making households more resilient to external shocks. 11. In addition, MoLD and WFP have agreed to add micro nutrient supplementation (such as "sprinkles") in the food that will be provided under the food/cash for work program to promote better nutrition outcomes. This aspect will also be monitored to track the added value o f such interventions. WFP will work with partners such as UNICEF on the nutrition supplementation program, which will be approved by the Ministry of Health, and the program will add value to on-going discussions under the Health SWAP to include a larger nutrition program inthe next phase o f financing. 12. Targeting: As with most food/cash for work programs around the world, the targeting mechanism adopted here i s a combination o f geographic targeting and self selection (through a lower-than-market wage rate). Tentatively, 30 districts will be selected for these programs usingpoverty maps and information from WFP's food security surveillance system and the recent WFP Market and Price Impact Assessment Report, and will include the Koshi flood affected districts. Within these, 21 districts will implement infrastructure activities that are typically included in the RCIW program. As for project selection, WFP will seek to work with DDCsNDCs and project activities will be chosen by the communities, prioritizing the most food insecure areas. A Subsidiary Agreement will be signed between the WFP and Government o f Nepal, which will include an appendix containing detailed implementation modalities and the relative roles and responsibilities o f WFP and the MoLD. A detailed monitoring plan will be agreed to betweenWFP and MoLD. 13. Component2 (US$3 million): This component will provide support for fertilizer use in remote area^'^. The price of fertilizer has increased by 30 percent over the last 6 months and fuel shortages and rising fuel prices are placing additional constraints. Inorder to promote private sector development and distribution in remote districts where transportation costs combined with higher fertilizer prices results in low incentives for the private sector to attempt to distribute in these areas, the Government provides a transport subsidy for private sector transport fertilizers and seeds up to the district headquarters (mostly by road or animal, a few districts by air)*'. As a result farmers inthese districts pay the same price for fertilizer as farmers in other districts where transport costs are not excessive. 19The GFRP statesthat targetedsubsidyprogramsfor inputshave a mixedtrackedrecord.Targetedsubsidy programscan greatly increasefarmer access to andapplicationof farm inputs, but their designshouldtake into accountthe followingprinciples: (i) ensure that the subsidy is transparent andfiscally capped at for example 25 percentof the Ministry ofAgriculture budget,so that it does not crowd out other priority agriculturalpublic investmentsor derail the overall national fiscal budget; (ii)ensure that the subsidy is targetedto those who cannotaffordfertilizerto avoid displacingcommercialsales; (iii) ensurethat the administrative costs ofthe subsidyare kept to a minimum; (v) ensure that the subsidy does not create the dependency syndrome; (v) ensure there is an exit strategy characterizedby reductionofthe subsidy element annually towards an explicit exit pointand(vi) makethe entire structure ofthe subsidyprogram, includingits timeframeand allocationscheme,publicly knowninadvance. 20Districtsthat receivethe fertilizer transportsubsidy are Darchula,Bajhang,Humla, Mugu, Bajura, Achham, Dailekh, Jajarkot, Rukum,Salyan, Rolpa, Mustang,Manang,Gorkha, Okhaldhunga, Solukhumbu, Khotang,Bhojpur, Sankhuwasabha,Terhathum, Taplejung, Ramechhap, Myagdi 28 14. The program has seen a 40 percent decrease in target rates over the last 12 months due to increased transportation costs, thereby making local production even more unlikely to recover inthe short run.The transport subsidy i s aimed at providing an increased supply o f fertilizer for the wheat crop in these districts and total budget provided by the GON i s approximately USD 600,000 per annum. Support for this program i s included under the D O A budget line 40-3/4/-464. Fertilizer i s provided by suppliers who must sell the fertilizer at the market price and register the total amount sold at the district headquarters before they can claim the transport subsidy. The transport rates per unit o f fertilizer are set by a district agriculture committee and suppliers are asked to bid against a stated target of fertilizer demand in each o f the 26 districts. Suppliers submit their bids based on these rates. The responsibility o f selling the fertilizer remains with the supplier. Seeds are similarly transported under this program but the bulk of the effort and demand is for fertilizer. The demand for fertilizer is typically three times higher than the amount the GON can encourage suppliers to provide under this program due the limited transport budget. 15. An estimated allocation of 5-6 lakhs (NRS) per district is made through the GON budget. Expenditures can be tracked and will be assessed for each o f the 23 districts to understand the level to which the demand for fertilizer i s being met through this scheme. The MoAC has asked for the subsidy to be extended to cover transport to community or agriculture service centers (average o f 4 per district) in order to be able to fully meet demandand encourage suppliers to bid for the contracts. 16. The justification for supporting this program is to maintain a basic level o f local production in the remote districts to abate the impact o f food insecurity in these areas. However, the program also needs to be evaluated and eventually phased out. The Government would like to use this opportunity to assess the effectiveness of the program in reaching targeted farmers and farmer groups. Transporting the fertilizer to district headquarters i s resulting inbenefitsto farmers inand around the headquarters but does not reach the more remote farmers. The next year's program (starting September 2008) would therefore require suppliers to transport fertilizer all the way to the service centers. From that point additional targeting will be required to ensure that small farmers are fully informed about the program and are given access to purchase the fertilizer. 17. Activities to be financed under this subcomponent will be a) increased budget for transport subsidy (to extendtransport to service centers); b) data collection, monitoring and targeting activities to ensure small farmers are getting the subsidized fertilizer, including the design and piloting o f a voucher scheme for poor farmers and farmer sensitization on the proper use o f fertilizer. Activities under (b) will include independentverification by an implementing partner (NGO). Linkages between these activities and the seed and extension services support under IWRMP will be emphasized and monitored in the programming o f activities under the two projects. 18. Targeting: The fertilizer support program is expected to reach 15,000 farmers across 23 districts. Expansion o f the program to service centers will provide access to remote farmers within these districts. Monitoring will be carried out with the help o f 29 partner organizations such as FA0 and CARE who are also working in these remote districts. 19. Component3 (US2.5 million): Project coordination, monitoring and evaluation, beneficiary assessments will be financed under this component. Independentmonitoring and beneficiary assessments will be emphasizedto evaluate the impacts of all three earlier components of this project. Capacity building for district and village level administrative officers will also be supported under this component. This component will support a detailed evaluation of existing cashtransfer programs. The focus of this analysis will be to identify specific actions the Government can take to strengthen the current social assistance programs. This should contribute in the medium term to enhancing state capacity to equitably and fairly deliver critical support that can help mitigate social tensions in a fragile and fluid environment. The financing would support activities including: (a) review of the existing program administration system (e.g. targeting, record keeping, payments, staffing and skills); (b) design of an improved program administration, including assessing the current targeting systems and payment methods. The assessment will propose how shifting from a paper based system to a computerized record keeping system can improve the efficiency and effectiveness of these programs. Irrigation and WaterResourceManagement Project (additionaljinancing) Enhancingdomestic food productionand supply response 20. Low productivity of food crops remains a serious constraint to increasing production and improving the income earning potential of small scale farmers. The Agriculture Perspective Plan, which remains the main agriculture strategy of the Government, places productivity improvements at the center of its framework. Fertilizer use, water management (including irrigation) and low quality seeds are limiting constraints to increasing productivity. 21. ComponentDI (US$ 6.8 million): A primary area of support will be rehabilitation and improvements of farmer-managed small scale irrigation schemes and non-conventional irrigation technologies (for example, shallow tubewells, rainwater harvesting, lift irrigation, drip and sprinkler systems and small surface irrigation). Support under this area will help provide support to areas not currently covered by the on-going irrigation project and in particular address the needs of small holders in remote and food insecure areas. Support will be channeled through the implementing arrangements in place under the irrigation and water resource management project but will target areas that are currently not covered by the project. Distribution will be carried out through the district level irrigation and extension bodies. Department of Irrigation and the Department of Agriculture will coordinate in the implementation of this sub-component through the existing modalities of the Irrigationand Water ResourcesManagement Project. 22. Total agricultural land in Nepal i s about 2640 thousand hectares. Out of which there i s potential to develop irrigation facility to only 1766 thousand hectares either through surface irrigation or by utilizing ground water leaving almost 0.88 Mha of rain fed land (Irrigation Master Plan, 1996). Much of these so called non-irrigable areas lie in the 30 hills and mountains inhibited by the poor small landholders farming on the marginal sloping terraces, scattered patches or inthe water scare regions. The agriculture system of this region is predominantly rain-fed with high risk due to erratic rainfall. Although the hills and mountains ofNepal have comparative advantage inthe production ofnatural off- season vegetables and other high value crops, lack of dry season irrigation is one of the major constraints for its success (Gurung, 2000). Enhancing the capacities and incomes of these poor and excluded groups i s one o f the most critical challenges for the country. The initial experience of the DO1 and some encouraging results from the private sector have generated a lot of information regarding existing technologies, different modalities of implementation and funding, cost comparison, change in the cropping pattern, trend of irrigation service delivery, water productivity andenvironmental concerns. 23. The National Agricultural Policy 2004 emphasizes providing special facilities to the target groups to build and install infrastructure facilities for small and micro-irrigation such as pedal pumps, rower pumps, sprinklers, drips and water harvesting ponds. Ministry of Agriculture and Cooperatives has been implementing special small scale irrigation program since 2000/2001 with the financial assistance of Japanese Government under the KR-2 program. 24. SmaWminor irrigation inNepal is defined to include command areas less than 25 ha in the hills and mountains and less than 200 ha in the Terai (Irrigation Policy 2003). Cooperative basedfarming entails not less than 10 ha inthe Terai, 5 ha inthe mid-hillsand 2 ha in the high mountain regions. This program currently provides grants up to Rs.100,000 with the mandatory contribution of at least 15 percent from the user groups. Farmers' contribution is collected in terms of cash contribution or in-kind or both. The grants fund rehabilitation or repair of small scale water diversion structures, temporary barriers, irrigation channels, pipes, rainwater harvesting tanks, ponds, pumps, treadle pumps, dug wells, sprinklers anddrips. 25. Inline with the goals of Agricultural Perspective Plan, the IrrigationPolicy (2003) envisages to reduce level of poverty by improving agricultural production and increased employmentfor the marginal farmers through the promotion of non-conventional irrigation technologies (NIT) such as drip irrigation, sprinkler irrigation, pond irrigation, treadle pumpetc., inaddition to traditional irrigation systems. To achievethese goals, the policy is guided by the principle of integrated water resource management (IWRM). As per the Irrigation Policy, 2003, DO1 will implement projects even smaller than 25 ha under the non-conventional irrigation and ground water irrigation program. The NWP has given high priority to non-conventional irrigation technology for poor and the marginal farmers by expanding the use of such technologies over the next 20 years. It is estimated that approximately 42,000 hectare land area has been brought under irrigation through the use of non-conventional irrigation technologies benefiting over 162,000 households. The following table provides a list of projects supporting NIT and their results in terms of irrigation and household coverage: 31 NITP / Do1 1823 4850 85 I ADB/Neual I 28987 I 29035 I I IIDE/Neual and Consortium Proiectsl 9815 I 119406 I 64 I I SAPPROS /Nepal I 335 I 3852 I 113 I I DEPROSC I 1211 I 4139 I 117 I I CEAPRED I 129 I 741 I 31 I VDRC 21 229 37 LILI/ Helvetas 5 27 1 Total 42326 162279 26. The Government's Non-Conventional Irrigation Technology project is aimed to reduce the rural poverty through increased agricultural production in conjunction with employment generation for the poor living in water scare areas or difficult terrain. The project has completed a database and implementation procedures o f the non-conventional irrigation program. At present there are 96 projects (1588 ha) under construction. It i s expected that 16 o f these projects will complete by the end o f this fiscal year providing irrigation to an additional 224 hectare o f land. Total budget allocated to NITP for fiscal year 2064/05 was Rs. 429 million. The average cost o f projects i s about 150 thousand rupees including the cost o fthe micro irrigation component. 27. Component 0 2 (US$ 7.0 million): Increase Local Production o f Immoved Seeds. Poor quality seed i s considered to be a binding constraint to improving productivity and overall production. The Government's policy i s to promote private sector involvement in seed production and distribution. The National Seed Company, private seed operators and informal trade from India are the three main sources o f seed. The Government's main program to promote local production o f quality seeds i s the District Seed Self-sufficiency Program (DISSPRO). In Nepal, the MoAC estimates that the average seed replacement rate is approximately 5 percent, with significant variations betweencrops: rice (6 percent); wheat (7 percent); maize (6 percent); pulses 2 percent and oilseed 1percent. This leads to very significant reductions in productivity (with all other production factors remaining constant) leading to limiteddomestic supply and heightened household food security. This has resulted in deterioration o f seed quality leading to low crop production and productivity. Nepal Agricultural Research Council (NARC) has released several crop varieties but only a few o f them have been adopted by the farmers. M o A C i s seeking to implement a three-year Program that will: (i)improve source seed production and management; (ii)strengthen DISSPRO and corresponding private sector seed multiplication; (iii)build-upand maintain appropriate seedbuffer stocks; (iv) develop seed quality control and marketing systems; (v) build technical and institutional capacity in the seed sector; (vi) support private sector development in the seed sector; and (vii) promote indigenous crops. 28. The objective of this intervention would be to improve capacity o f local communities to grow "truthful seeds'' and locally, store, share/trade and propagate them. The DISSPRO program which supports village level seed enterprises would be supported 32 under the NFCRP. A significant yield impact can be expected from use of improved variety seeds. The project would support seed production at a local level for only a few seasons, and inthis time will support the development o f stocks o f improved seeds as well as systems and capacities for continuing production and use o f better seeds, which should provide a sustainable source o f yield increase. As part o f this support, the extension o f the DISSPRO into remote areas in the Mid-west and Far-West regions will also be encouraged. It will establish farmers' groups and community seed program to produce quality seeds, including o f indigenous grains which are critical for local food security, and for local marketingto other farmers. 29. In particular, the component will link up with ongoing emergency seed supply activities, such as by the FAO, to identify appropriate local farmers to undertake seed multiplication and to ensure sustainable productivity increases. FA0 re-activated an emergency seed program in Nepal in March 2008 and its current program i s part of the international community's consolidated appeal (CAP) for 2008. FAO's emergency seed program supports government efforts to boost agricultural production inthe worst drought- affected areas o f the Mid-West and Far-West. More recently, FA0 has provided immediate support in direct response to soaring food prices. FA0 support provides high quality, certified and locally-adapted wheat, maize and/or vegetable seed to the worst- affected food insecure households. The program i s undertaken in very close collaboration with the WFP emergency food aid program. This ensures that the worst-affected households receive both food and seeds and i s in line with international good practice which recommends that food and seeds are bundledtogether in order to minimize the risk o f high food insecure people consuming the (chemically treated) seeds. Districts are selected on the basis of WFP food insecurity assessments, government priority and underlyinghuman development indicators. The choice o f seeds is determined by general production patterns and the cropping calendar. 30. Alternative approaches to raising soil fertility will be promoted alongside the seed program since the combined effect o f increased replacement levels o f seeds, access to irrigation and soil fertility programs can contribute significantly to the integratedcrop and water management objectives o f the sector. On-going programs within the MoAC already provide these linkages. The integrated crop and water management sub-component in IWRMP also supports farmer to farmer extension activities which i s the approach used by the long running Sustainable Soil Management Programme (SSMP) financed by the SDC andimplementedby Helvetas andMoAC. 3 1. Activities to be financed will include: (i) procurement and distribution (by project) o f high-yielding varieties o f foundation seeds from research stations, relevant market outlets; (ii)provision o f basic training to local farmers in using these foundation seeds to produce improved seed varieties (segregation, more intensive weedinglmanagement etc); (iii)support for formingrelevantcommunity groups for production, sharing andfurther propagation o f these seeds; and (iv) complementary inputs to improve soil management practices. The project would support seed production at a local level for only a few seasons, and inthis time will support the development o f stocks o f improved seeds as well as systems and capacities for continuing production and use o f better seeds, which should provide a sustainable source o f yield increase. The Ministry o f Agriculture and 33 Cooperatives would implement this component, using other service providers (including FA0 and Helvetas) as required. 32. Targeting; Small scale and non-traditional irrigation i s expected to reach 12,400 farming households. Under non-conventional irrigation implemented by the DOI, an expected 100 additional schemes can be financed (average cost o f NRS 175,000 per ha for average o f 12 ha per project, approximately 30,000 USD per scheme) while the small scale irrigation implemented by the MoAC would finance an additional 1,000 (very small scale) interventions. Priority will be given to areas inhabited by marginalized poor communities with no potential for future development o f surface irrigation. The community seed program i s expected to increase local production o f quality seed by 30 percent and increase average replacement levels to 10 percent. Geographical targeting should be aligned with recent WFP-MoAC assessments where districts have been identified as particularly vulnerable to continuing food shortages and will include the Koshi flood affected districts. 33. Component 0 3 (US$ 500,000); The additional financing will include some financing for increased project coordination, monitoring and evaluation and beneficiary assessments. This i s to augment project coordination and M&E financing already provided inthe IWRMP. 34 Annex 2: Results Framework and Monitoring food crisis for the country by )rfoodinsecuredistricts and Indicator Social Safety Nets Project to ensure that vulnerable householdsmeet number of (or YO)of people fiom their requirementsfor food andbasicneeds poor and vulnerable households receiving food/cash improved access to food for poor householdsand vulnerable groups Maintain or increase current level of fertilizer and seed availability inremotedistricts Irrigation and Water to improve irrigated agriculture productivity increasedproduction of food ResourceManagement and management of selectedirrigation crops Project schemes and enhance institutional capacity for integratedwater resources management2' SocialSafety Nets Project Project Outcome Indicators Use of Project Outcome Information to ensure that vulnerable improved access to food for poor Track welfare impact householdsmeet their householdsandvulnerable groups Improve targeting for input requirements for food support andbasic needs Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring Address immediate food % oftargetedhouseholdsreporting Track impact of foodcash for andbasic needs of increasedability to meet their food and work program vulnerablepopulations basic needs Determine efficiency of participating infoodcash # of days of foodcash for work per fertilizer transport subsidy for work program householdper annum program inreachingpoor Targetedremotedistrict farmers/developalternatives Maintain or increase current level of headquarters maintain fertilizer availability inremote districts Assess satisfaction with access to fertilizer project with aparticipatory Improved targeting of small holder beneficiary assessment farmers for fertilizer use inremote Verify transparency inthe use districts of project finds with wider Satisfactorybeneficiary community scorecards/assessments Monitoring: Component 1 wi be monitored by the WFP; Component2 will be monitored by MoAC and partnerNGO; Independentbeneficiary assessments and score cardto be implementedfor all programs 21IWRMP PDO -unchanged 35 PDO to improve irrigated 0 farmers inthe selected districts adopt 0 Improve targeting for agriculture productivity and better agricultural production and water input support managementof selected management techniques irrigation schemes and enhance institutional capacity for integratedwater resources management ( I M P PDO -unchanged) IntermediateOutcomes22 Inte local production of improved increasedreplacement level of seeds verify effectiveness of seeds is increased (current level4%; target 10%) approachesto improve local production and small-scaleand non- no. of small scale farmers adopting small availability of seed conventional irrigation and non-conventional technologies technologies are extendedto track uptake of non- targetedsmall holders in satisfactorybeneficiary conventional and small remote and food insecure scorecards/assessments scale irrigationschemes areas Monitoring will follow IWRMP implementation and monitoring modalities. Independent beneficiary assessments and score cardto be implemented for all programs 22Additional outcomes to on-going IWRMP 23Additional indicators to on-going IWRMP 36 3 v) 9 v) v) LL LL I B I m 00 E -L a e .C e I d z d z d z Annex 3: Summary of EstimatedProjectCosts 2. ImplementationSupport including training as needed 650,000 3.00% 3. Analysis o f cashtransfer systems 500,000 2.30% Subtotal project coordination 2,500,000 11.52% 1Total 1 21,700,000 I 100.00%I IWRMPAdditional Financing Yo Component/Sub-component costs 1. Monitoring and evaluation, beneficiary assessments 300,000 2.1 1% 2. Project managementand coordination 200,000 1.41% Subtotal project coordination 500,000 3.52% Total 14,300,000 100.00% 40 Annex 4: FinancialManagementand DisbursementArrangements Country FinancialManagementEnvironment 1. The Nepal Country Financial Accountability Assessment (CFAA) conducted jointly by the Government ofNepal (GON) and IDA in 2002 and subsequently updated in 2005, concludedthat failure to comply with the impressive legal and regulatory fiduciary framework makes the fiduciary risk in Nepal "High", but that the risk is similar to that in most developingcountries. The situation has not significantly changed. The draft Public FinancialManagement (PFM) Review (May 2007) have reaffirmedthat the PFM system inNepalis well designed butunevenlyimplemented. The Public FinancialAccountability Assessment (PFAA) issued in February2008, has also reiteratedthat the fiduciary risk in Nepalcontinues to be "High". 2. The GON, however, is committedto improvingthe overall financial accountability framework. This has been demonstrated by promulgatingthe Public ProcurementAct and Public Procurement Regulations in 2007, amending the Financial Administration Regulationsin2007, and also leadingthe self-assessmentofvariousPFMIndicatorsas per Public ExpenditureFinancial Accountability (PEFA) Guidelines. Further work on PFM includingsettingup the PFMbenchmarks as per the PEFA Guidelinescarriedout in2007, and subsequent implementationo f actions that need to be agreed with GON will help to mitigatethe inherentcountryrisk. Backgroundon the Programand ImplementingAgencies 3. The Social Safety Nets project will be implemented by the Ministry o f Local Development(MoLD) in coordinationwith the Ministry of Agriculture and Cooperatives (MoAC). MoLD will implement the food/cash for work program through the existing mechanism by partneringwith the World FoodProgramme (WFP). A SubsidiaryFunding Agreement will be signedbetweenthe Government ofNepaland the WFP to carry out the agreeduponactivitiesrelatedto the foodhash for work program. 4. The Projectwill also includetransportsubsidies for seeds and fertilizers which will be implemented by the Department of Agriculture (DOA) under the Ministry of Agriculture and Cooperatives (MoAC). Agriculture productivity will be implementedas Additional Financing under the existing Irrigation and Water Resources Management Project (IWRMP) (P099296) under Component D o f the IWRMP to be implementedby the MoAC, andthe Department o f Irrigation(DOI) under the Ministry of Water Resources (MOWR). This will be implementedunder the existing implementationarrangements as described for Component D o f the IWRMP. The DOA and the Departmentof Irrigation (DOI) will bethe implementingagencies. Adequacy of FinancialManagementArrangements 5. The proposed foodhash for work program is expected to be implementedwithin one year. All funds under foodhash for work programs will be managed by the WFP. This will be carried out through a subsidiary grant agreement between GON and WFP under the blanket application approach based upon an agreed work program and disbursement mechanisms as set out in the agreement. Under this arrangement, WFP would report to the government based on actual expenditures and outputs and then refund the unusedfunds towards the completiono fthe program. Inview o fthe emergency nature 41 of the program and in-country capacity constraints to distribute foods in food deficient districts including flood affected districts caused by Koshi flood, the government has requested the partnership arrangements with WFP based on its comparative advantages and significant experience to respond on the foodkash for work program. WFP policies and procedures as agreed with the Bank will apply for this part of the project. As referred inparagraph 164ofthe FrameworkDocumentfor a GlobalFoodCrisisResponseProgram (dated June 26,2008), to ensurethat there are no delays, the Bankhas agreedto an interim understandingthat relates to applying the UN agencies rules (in this case that of WFP) until the new framework is put inplace. 6. The WFP and RCIWP will coordinate on implementation of activities. The RCIWP is being implementedby a Central Program Coordination Unit located at MoLD which is headed by the Program Manager and staffed with one Engineer, one Section Officer, one Overseer, and one Accounts Officer. The Unit reportsto the Joint Secretary. This core team will be responsible to manage the Social Safety Nets Project which includes the implementation o f the fertilizer transport subsidy program by coordinating with the MoAC. The GON has an established practice of funding subsidies for seeds and fertilizer access, and the transportationsubsidy portion of the programwill be transferred to the DOA budget under this Project. 7. Additional financing to the ongoing IWRMP will augment ongoing efforts to strengthen agricultural productionand the safety net mechanism on a broad scale. This will supplement Component D of the IWRMP which will be implemented by DOA and DO1to finance: (i)small-scaleand non-conventionalirrigationschemes, (ii)scalingup of community-led seed program and soil management activities. Implementation arrangements for the additional financing will be the same as for Component D of the IWRMP. 8. Overall, for both the new project and for additional financing of the IWRMP, existing implementation arrangements will be adopted with specific modifications that will be required in the context of this program which are addressed in this assessment. The FM arrangements are adequate at this initial stage o f project implementation, with some modifications, as described in this assessment. The areas indicatedbelow will need to be improved to help ensure a satisfactory FM system throughout the project implementation. RiskAnalysis 9. From the FMperspective, the overall risk ratingfor the Social Safety Nets project is "Substantial". One of the proposed implementing agencies, Ministry of Local Development(MoLD), has not directly implementedIDA-financedprojects. Hence, the implementationcapacity needs to be strengthened. Further, MoLD has the responsibility to monitor and report on the transport subsidy element which will be implementedby the MoAC/DOA. A strongcoordinationmechanism needs to be put in placeto ensure strong coordination between two agencies. Because the major part of the Social Safety Nets Project is being implementedthrough WFP which have been coordinating the foodhash for work programs, established guidelines and mechanismsprovide adequate assurance to implementthis emergency program. 10. In terms of the agricultural productivity response which will be implemented through additionalfinancingfor IWRMP, implementationofComponentDofthe IWRMP 42 has not yet started mainly because this program was planned to start only from FY2008/09. Due to the delay inthe formation o f a new government, the government has not yet announced the budget for FY2008/09. Taking the work program envisaged under additional financing for IWRMP, DOA and DO1 will be required to revise the work program and budget for FY2008/09. 11. Inaddition to this, certain other actions have been identified that are critical for the implementation o f the new scope o f work under additional financing. Other than these, implementation arrangements as agreed for IWRMP will apply. To address certain gaps that have been identified duringthe FMassessmentrisk, mitigation action plans have been agreed; FM risks are expected to be reduced as the action steps are completed. Currently, based on assessment, the residual FM risk for Additional Financing i s "Substantial" which has changed from the original risk assessment for IWRMP which was "Modest". 12. Implementation o f the proposed Nepal Food Crisis Response Program will require three legal documents to accommodate the arrangements for the Program: (1) Financing Agreement for the Social Safety Nets Project to reflect credit/grant allocations from IDA resulting from cancellation o f three projects, (2) Trust Fund Agreement under the Food Price Response Trust Fund(grant financing), and (3) Additional Financing for IWRMP to reflect credit allocations from IDA. Details o f financial management's arrangements will be presented separately for the Social Safety Nets Project (Financing Agreement and Trust Fund Agreement) and Agricultural Productivity (Additional Financing for IWRMP) following the analysis o f overall project strengths and weaknesses describedbelow. Strengths 13. The proposed operation hasthe following FMstrengths: (i)high-level government commitment to respond to food crisis, (ii)GONResponse and Strategies for Soaring Food Prices articulated in the 3-year Interim Plan, (iii)successful working modality to respond to food crisis program under close collaboration between M o L D and WFP under the RCIWP, (iv) WFP's expertise and proven experience in dealing with foodhash for work programs, (v) a project team in MoLD coordinating the RCIWP, (vi) sound implementation arrangements and project coordination arrangements agreed in IWRMP for Agricultural productivity, (vii) proposed program aligned with the country's financial management system, and (viii) capacity building component built into the program to strengthen skills of MOLDand DOADO1officials. Weaknesses and Resolutions 14. Deputation o f core staff in the project implementation team and their continuity throughout project implementation i s important for the successful implementation. An emergency operation like this requires strong commitment and high level coordination both at the political and the bureaucratic levels. Strong donor coordination i s also key to help ensure a successful implementation o f the food crisis response program. Developing the FM system and accountability framework in the MoLD for the Social Safety Nets Project is also critical to ensure better accountability over funds disbursed and to provide information on food distribution that i s accessible to the public. Completion o f the previously agreed Action Plan in IWRMP is also critical to help ensure better accountability for both Component D o f the IWRMP and the Additional Financing. 43 Arrangements for Social Safetv Netsprojectto be implementedby MoLD Planningand Budgeting 15. The proposed operationwill follow the same government procedures as used with any normal budget line item. The budgeting procedures for preparation, approval, implementation, and monitoring are elaborated in the Financial Procedure Regulations (FPR). The annual work programand budget will be based uponthe work program to be prepared by MoLD. Annual work programs and budgets are submitted to the National PlanningCommission(NPC) and MOF for discussion. A separate budget line will need to be created for programs to be implemented by MoLD under this project in the `Appropriation Book' (Red Book or Budget) for FY2008/09.The Ministry of Finance has agreed to create a separate budget line in the Red Book. Because this is an emergency response program, MoLD will need to submit its annual work program and budget immediately to NPC and MOF with a request for a separate budget item on which implementationand financial progress will be reported. The food/cash for work programs will be implementedby MoLD by partneringwith WFP. The fertilizer transport subsidy programwill be implementedby the MoACDOA. 16. MOF will release authorizations for expenditure to the MoLD. The Secretary of MoLD will provide authorization for expenditure to the Program Coordination of the Program Coordination Unit of the RCIWP which is responsiblefor overall coordination and reportingo f activities under the Social Safety nets project. The MoLD, as authorized by MOF, will enter into a subsidiary agreement with WFP under a blanket withdrawal arrangement for the foodkash for work program under terms and conditions agreeable to GON, WFP, and IDA. On behalf of the GON, the MoLD submits a blanket withdrawal application to IDA for the total amount as per the Subsidiary Agreement between GON and WFP. IDA reviews and approvesthe blanketwithdrawal applicationby "committing" the funds in the stated accounts. WFP then sends a request directly to IDA which will transfer the funds to WFP if the blanket application is approved. At the same time that WFP sends the request to IDA, WFP also sends a copy of the request to GON (for information only). If GON objects to what is claimed on the request, GON will inform IDA to withhold the transfer of hnds until the issue is resolvedbetween GON and WFP. WFP will implement the program in close coordination with the Program Coordination Unit. Funds will be disbursed to WFP for all food for work programs, including designated remote districts and flood affected districts, and also for other critical infrastructure. 17. Transport subsidies for seeds and fertilizer access to 23 remote districts will be managed through the established procedures of GON. Currently, the subsidies are providedin23 districts of which 18 districts are IWRMP districts, and 5 districtsare non- IWRMP districts. MoAC has describedthe procedure for transport subsidies described in the Implementation Guidelines. In order to cover additional districts and define some additional norms, MoAC will revise the procedures for subsidies. The proposed interim transportationsubsidies are designed to meet the immediate financing gap in the first two years of implementationthat is, FY2008/09and FY2009/10.The GON has an established practice of funding subsidies for seeds and fertilizer access, and the new transportation subsidy portionof the programwill betransferredto the MoAC budget under this project. While revising the procedures for subsidies, MoAC will also articulate coordination arrangementswith MoLD includingthe reportingmechanism. 44 18. Approximately US$2.5 million has been allocated for strengthening project coordination arrangements, capacity building, and impact evaluation. The project coordination costs, impact evaluation, and participatory beneficiary assessments will be implementedby MoLDand DOA throughthe project implementingunit.The Secretary of MoLDandMoAC will beheldaccountablefor disbursements offunds underthisproject. Funds Flow Arrangements 19. GONwill release the budget as per the approved work programto the MoLD (and to MoAC in case of transport subsidies for seeds and fertilizer access) inthree tranches as per its fund release procedures. The budget approved by GON will be indicated in the government's budget (RedBook). Priorto approvalofthe work programand budget, one- third of the expenditures from the previousyear or the projected expenditures for the first trimester, whichever is greater, will be released to the MoLD through the respective DTCO. Fund release to WFP under the blanket application will be made through direct payments from IDA to WFP upon the request of the signatory of the MoLD under the payment terms and conditionsto be includedin the contract; these will be indicated as a "direct payment" in the source book of the government. Fundrelease for procurementof goods and consultants will be made directly from the special designated accounts which will be maintained by the MoLD. Fund release for other IDA'S share of other expenditures which includes incrementaloperatingcosts and other small payments will be pre-financedthrough GON's consolidatedfund. 20. Upon approval of the work program and budget, appropriate adjustments will be made against the advance for the first trimester release. Subsequent second and third trimester releases will be based on perfomance reflected by the physicalprogress reports as requiredby Schedule 2 o fthe FPR. Due to unusualcircumstancesthis year, the budget for FY2008/09 has not yet been announced. Because this is an emergency program, MoLD will be requiredto immediately submit a work programand budget for FY2008/09 to be spent through a separate identifiablebudget line as discussed above. 21. For reimbursement of IDA'Sshare of expenditures to GON's consolidatedfund, a Special Designated Account will be established in U S Dollars at NRB to facilitate quick payments o f various activities under the project includingreimbursement under terms and conditions acceptable to IDA. The MoLD will designate the signatories to operate the special designated accounts, and it will normally be the Project Coordinator and the AccountsOfficer. Transaction-based (traditional) disbursement procedures will be applied for withdrawal of funds from the IDA Financing Agreement and Food Price Crisis ResponseTrust Fund. Project Financial Accounting, Reporting and Internal Controls 22. In order to produce consolidated project financial statements, the Program CoordinationUnit ofthe RCIWP inthe MoLDwill ensurethat separate books o f accounts are maintained for the Project and that accounts are prepared on a cash basis. The Program CoordinationUnit will coordinateoverall activities and work under the guidance ofthe MoLD Secretary. 23. Accounting information will be regularly updated to generate timely financial reports. As required by the government system, the MoLD will maintainrequiredledgers includingthe Withdrawal Monitoring Register and Special Designated Accounts Ledger. 45 GON's internal control system will be applied to monitor the progress of the project in accordance with sound accounting practices. The accounting systems contain the following features: (i)application o f consistent cash accounting principles for documenting, recording, and reporting its financial transactions; (ii)a well-defined chart of accounts that enables meaningfulsummarizationof financial transactions for financial reporting purposes; (iii) maintenance of withdrawal monitoringregister, records of SOEs and Designated Accounts register; (iv) the asset register; (v) monthly closing and reconciliation of accounts and statements; and (vi) the production of annual financial statements. With regard to the foodkash for work program, WFP will administer the contributionsinaccordance with standardWFP RulesandRegulations. 24. The Unit will be accountable to prepare trimesterly Implementation Progress Reports (IPRs) and project financial statements. The Unit will prepare a consolidatedIPRs and project financial statements covering the use o f funds from both the Trust Fund and IDA Credit/Grantas requiredby two sets of legalagreements. The interim financial report of the Project ImplementationProgressReport (IPR) of the Social Safety Nets Projectwill report total investments in the Project to be separated by specific activity so that total investments as envisaged can be trackedand monitored. The project IPR will be prepared from the outset, showing the sources and uses o f funds, output monitoring report, procurement management report, and narrative progress report in formats to be agreed upon during negotiations. The WFP will provide necessary inputs to the MoLD for trimester reporting. The WFP as per its procedure will submit the annual progress report within three months after the end ofthe calendar year. 25. To matchthe public sector planningand reportingcycle, IPRswill be producedon a trimester basis and submittedwithin 45 days from the end of the precedingtrimester. WFP will provide necessary inputs to MoLD on information related to the foodhash for work program for trimester reporting. WFP, however, will submit the following reports: (i)StandardProjectReportsonanannualcalendarbasis, intheformatagreedwithGON and IDA, to be submitted by end March, (ii)Each Standard Project Report will also contain a financial report prepared in accordance with accounting standards established pursuant to the WFP Financial Regulations, adequate to reflect the sources and expenditures relatedto sub-grantactivities. The sub-grant control account shall be subject exclusively to the internal and external audit arrangements applicable to WFP. Such financial statement of accounts will be providedwithin three months after the closure o f the WFP accountsfor the year to whichthe annual financial statementrelates. FinancialManagementStaffing 26. The Program CoordinationUnit o f the RCIWP of the MoLD, which is currently managing the RCIW foodhash for work program, will be responsible for the overall coordination o f the implementationand management o f project activities. The Accounts Officer o f the Unit will maintainthe accounts of the Project. He will be supported by his assistants. Component 1, foodkash for work, will be implementedby WFP. Therefore, the current team of staffi s capable o fhandlingprojecttransactions. Internal Control 27. The existing Program Guidelines for implementation of the foodkash for work program will be used for the new foodhash for work program to be executed through WFP. The Guidelinesprovidethe basis for programimplementationfor users committees, 46 village development committees, district development committees, and other agencies involved in the program. They also provide the basis for effective program monitoring and provide detail norms of food supplies and food transportation. The Guidelines also specify the pre-requisites for program implementation and describe the roles of various agencies involved inthe execution of the program including that of the WFP. Inaddition, they describe the arrangements for social audit of the program. WFP will ensure that the program is executed per the Guidelines. InternalAudit 28. DTCO will be responsible to carry out internal audits of this operation on a trimester basis as fund release to be pre-financed by the government i s made through respective DTCO. DTCOs submit their internal audit reports to respective cost centers, copies ofwhich are sent to the MoLD and FCGO. External Audit 29. The annual audit24requirements for the Social Safety Nets Project (a consolidated audit report covering the use of funds from the Trust Fund and IDA Credit) under the Project are: Annual consolidatedprojectfinancial statements and Designated Accounts statements will be audited by OAG, which is considered acceptable by IDA for this purpose, and submitted to IDA within six months after the end of thefiscal year -January 15. Implementing Audit Auditors Audit Due Date Agency MoLD ConsolidatedProject Financial OAG 6 months after the Statements reflecting funds end of fiscal year disbursedto WFP as per (January 15th) SubsidiaryAgreement (including SOE Statementand Special DesignatedAccounts) FinancialManagementAction Plan 29. Action plans to strengthen the financial management capacity of the project were agreed betweenthe Recipient and IDA and are summarized below: 24Terms o f reference acceptable to IDA needto be discussed and agreed with OAG for their portion o f the external audit. Separate agreed upon WFP procedures will also be used. 47 Action Responsibility CompletionDate 1. Preparea detailedannual work program and MoLD Priorto budget (including foodhash for work program) MoAC/DOA Negotiations and submit to NPC andMOF for approval. 2. Assign a separate identifiable budget line inthe MOF September30, RedBook for FY2008/09. 2008 3. Develop and agree on the TOR for audit. MoLD, OAG September30, and IDA 2008 30. Following are other program related actions which will impact financial managementactivities: Action Responsibility CompletionDate 1. Complete all formalities of reviewing terms of MOF Effectiveness reference and paymentsterms and conditions with MoLD Condition WFP, and sign Subsidiary Agreement between WFP Government-ofNepal and WFP. IDA 2. Prepareand finalize the Implementation MoAC/DOA Disbursement Guidelines for implementingthe transport subsidy MoLD Condition for for seeds and fertilizer access and submit to IDA for Subsidy review. StandardFMCovenants 31. There are two standard F M covenants: (i)submission of annual audited project financial statements within 6 months after the end of fiscal year; (ii)submission of IPR each trimester. WFP exceptions have been agreedupon. SpecialFMCovenant 32. There is one special FM covenant that the annual work program and budget for each component will be shared with IDA Disclosureof Information and Corporate Governance 33. With recent enactment of the Rights to Information Act, 2007, disclosure requirements will be complied with to make information transparent and all information readily available for public disclosure. The MoLD will disseminate all available guidelines, procedures, and other key information related to the food/cash for work program through its website and other communication means such as newspapers, radio broadcast, and site board. The MoLD has specifically agreed to disclose the following items through its website: Overall budget for the Nepal Food Crisis Response Program, Allocation by Activity and Budget Line; Trimester Implementation Progress Reports (approved versions); and Annual Audited Financial Statements. At the decentralized level, details on recipients of food under the foodkash for work program will be displayed at site boards or by other means as per the existing procedure. 48 Supervision Plan 34. Project implementationprogress will be closely monitored by the MoLD, DOA, WFP, and IDA. IDA will closely supervise project implementation on fiduciary aspects related to financial management until key systems are in place. WFP through its procedures will implementthe program with due diligence. The MoLD and MoAC will report on project implementationprogress through a trimester report, the IPR. The agreed FM action plan will be closely monitored to ensure appropriate actions are being implemented. Key FM fiduciary work includes: (i)conducting ex-post reviews of financial management arrangements and SOE reviews; (ii)conducting reviews of implementation progress reports and audit reports and preparing summaries of such reports; and (c) participating in supervision missions and keeping the team informed of FM issues or improvements. Particular attention will be paid to timely and accurate capture of financial informationand complete and informative reporting, areas designated as a source of substantial FM risk. Disbursement Allocation of grant proceeds 35. Disbursement under the proposed TF grant and IDA credit/grant will be made as specified in Table C, which indicatesthe sources, amounts, and percentages of financing for different categories of project expenditures. Foodhashfor work program is expected to be disbursed over a 12-monthperiod from the retroactive financing date, and the total amount will be disbursed over three years. The Closing Date of the project is September 30, 2010. Expenditure Food Crisis IDA Grant IDA Credit Financing Category ResponseTrust (USD) (USW Percentage Fund (USD) 1. Foodcashfor work 5,000,000 11,200,000 100% program(to be providedto WFP under SubsidiaryAgreement) 2. Transport Subsidy 3,000,000 100% for seeds andfertilizer access 3. Works, Goods, 2,500,000 100% Services,Trainingand IncrementalOperating costs DisbursementArrangements 36. Disbursements from IDA will be made in accordance with traditionaldisbursement procedures includingfull documentationfor contracts above the Prior Reviewthresholdor SOEs. To facilitate disbursements, a Designated Account in U S Dollars will be established. Payments to WFP will be made through direct payments from IDA under a 49 blanket application approach under the standard UN Model contract with payment terms and conditions included in the contract and upon receipt o f requests from the MoLD. For other major payments related to procurement o f works, goods and services, the MoLD will use the special designated accounts for direct payments. For small payments, including for training and operating costs, GON will pre-fund the activities; disbursements from IDA will be made via replenishment ofthe DesignatedAccount. RetroactiveFinancing 37. To facilitate speedy support to the emergency food crisis response by the WFP, the GON, and IDA, the Project will allow retroactive financing in the amount o f USD5 million (close to 40% o f the IDA grant amount) for expenditures related to implementation o f foodhash for work program that occurred after August 15, 2008. A clause will be included in the Subsidiary Agreement that will be signed between the Government o f Nepal and WFP upon the signing of the Financing Agreement with IDA. 38. The WFP has agreed to pre-finance on behalf of the government on the program scope as will be agreed between GON, WFP, and IDA. Until a formal contract is signed after project effectiveness, arrangements will be discussed during negotiations and recorded inthe Minuteso fNegotiations. Use of Statementof Expenditures(SOEs) 39. SOEs will be used for the following expenditures:(i)training, workshop and study tours; (ii)incremental operating costs; (iii)contracts for works and goods, costing less than USD 100,000 equivalent per contract; (iv) contracts for services o f consulting firms costing less than USD 50,000 equivalent per contract; and (v) contracts for services of individual consultants costing less than USD 25,000 equivalent per contract. Duringthe IDA initial supervision, the mission will closely review the SOE claims to ensure that funds are utilized for the intended purposes. Any ineligible expenditureidentified during this and subsequent reviewswill needto be refundedto IDA. Designated Accounts 40. A separate Designated Account in US Dollars will be established on terms and conditions satisfactory to IDA. The authorized allocations for the Designated Account under the Grant (Financing Agreement) will be USD500,OOO. For the utilization of IDA'S share o f project expenditures, the MoLD may open and maintain the DesignatedAccounts in US Dollars at the Nepal Rastra Bank under terms and conditions acceptable to IDA. The Designated Accounts will be managed under the joint signatures of the Project Coordinator and the Accounts Officer. 41. The M o L D will ensure that the bank/cash books are reconciled with bank statements every month. M o L D will separately submit replenishment applications for the Designated Accounts on a monthly basis, or when 25 percent o f the authorized allocation has been used, whichever occurs first. Replenishment applications will be accompanied by reconciled statements from the bank in which the account is maintained, showing all Designated Account transactions. Supporting documentation will be maintained by the respective cost centers for at least one fiscal year after the year in which the last disbursement from the grant took place, and will be available for review by IDA staff and independent auditors. 50 42. A separate DesignatedAccount will not berequired under Trust FundAgreement. Arrangements for Agricultural Productivityactivitiesto be implementedbv MoAC underAdditionalFinancingfor IWRMP Adequacy of FinancialManagement(FM) Arrangements 43. The Irrigation and Water Resources Management Project was approved by the Board on December 6, 2007. The Project was effective on April 24, 2008 with the closing date of June 30, 2013. The medium-termimplications on the food crisis will be addressed through the additional financing to the ongoing IWRMP through ongoing efforts to strengthenagricultural production and safety net mechanismon a broad scale. Component D of the IWRMP will be implemented by the DOA and DO1to finance small-scale and non-conventional irrigation schemes, scaling up of community led seed program, soil management activities. Implementation arrangements will be same as for Component D ofthe IWRMP. 44. Implementation of Component D o f the IWRMP has not yet started mainly because this program was planned to start only from FY2008/09. This means that the Project has not yet disbursed any amount under Component D. Due to delays in the formation of a new government, the government has not yet announced the budget for FY2008/09. Taking the work program envisaged under additional financing for IWRMP, DOA and DO1will be required to revisethe work program and budget for FY2008/09. 45. Activities envisaged under additional financing in Component D of the IWRMP are: (1) small-scale and non-conventional irrigation schemes, (2) scaling up o f community led seed program and soil management activities, and (3) impact evaluation and participatory beneficiary assessments. Implementation arrangements as agreed for IWRMP will apply. DOA and DO1 are revising their work programs and budgets to include this program under additional financing. 46. Progress on agricultural activities of the proposed Nepal Food Crisis Response Program has to be closely monitored. In view of this, unlike normal additional financing which is provided when the hnd allocated under the ongoing Project is exhausted, the additional financing provided for IWRMP is in response to the food crisis response program. The new scope ofwork which meets the Development Objective ofthe IWRMP has been identified. Hence, the reporting arrangements will be kept separate from the outset so that disbursement progress can be observed from the beginning o f the implementation o f the additional financing. In view of this, MoAC will maintain a separate books of accounts as explained in the F M Assessment of IWRMP for additional financing, a separate DesignatedAccount will be provided, trimester progress report will be made through a separate Implementation Progress Report and a separate audited accounts for additional financing will be provided. Because the disbursements under IWRMP are report-based, disbursements for the additional financing will also be report- based. 47. The revised work program and budget that MoAC will prepare and submit to NPC and MOF will include the new activities as envisaged under additional financing. Identifiable budget codes have been provided for implementing Component D of the IWRMP. All activities under Component D of the IWRMP including new activities as 51 envisaged under additional financing which include transport subsidies for seeds and fertilizer access in approximately 23 districts will now be budgetedunder the given codes. However, work program and budget under additional financing will be separated when submitting to NPC and MOF. MoAC has revised its work program and budget for FY2008109. 48. With regard to the implementation of the FM Action Plan as envisaged in the IWRMP, MoAC has not yet been able to develop a computerized system using appropriate software to convert the manual system to a computerized system to track project expenditures in order to produce timely financial statements. This action is critical to ensure timely consolidation of financial statements and submissionof reports. A new date has been agreed to comply with this action. Because of this and other factors, the risk level has changed in the IWRMP for additional financing which is reflected as the attachment. 49. Overall, the F M arrangements for the Project are adequate for project implementation. In order to implement the new program under additional financing, a few actions have been discussed and agreed with the MoAC which is detailed in the Action Plan. ImplementationProgressReports 50. MoAC will be accountable to prepare a separate trimesterly Implementation Progress Reports (IPRs) and project financial statements. Because the books of accounts for Component D o f the IWRMP and for additional financing will be separately maintained, MoAC will preparetwo separate IPRs and project financial statementsfor two sources of finding. The interim financial report of the project Implementation Progress Report (IPR) of Additional Financing will present total investments in agricultural productivity activities to be separated by specific activity so that total investments can be tracked and monitored. The project IPR will be prepared from the outset showing the sources and uses of finds, output monitoring report, procurement management report, and narrative progress report in formats to be agreed upon during negotiations. To match the public sector planning and reporting cycle, the IPR will be produced on a trimester basis and submittedwithin 45 days from the end ofthe precedingtrimester. External Audit Implementing Audit Auditors Audit Due Date Agency MoAC Project Financial Office ofthe 6 months after the Statementsfor additional Auditor General end of fiscal year financing for IWRMP (OAG) (January 15th) 52 Financial Management Action Plan 52. Action plans to strengthen the financial management capacity of the project were agreed betweenthe Recipient and IDA and are summarizedbelow: Action Responsibility CompletionDate 1. Revisethe annual work program and budget for DONDOI September30, FY2008/09 to include activities under additional 2008 financing - activities and budget will be separated for Component D and for activities under additional financing - and submit to NPC and MOF for approval. 2. Develop and agree onthe TOR for audit. MoAC, OAG September 30, and IDA 2008 3. Develop a computerized system using appropriate MoAC November30, software to convert the manual systemto a 2008 computerized systemto track project expenditures and producetimely financial statements (pending from IWRMP Action Plan). 53. The program relatedaction which will impact financial managementactivities is: Action Responsibility CompletionDate 1. Complete assessment of DISSPRO program and MoAC November30, develop action plan for scaling up. 2008 Standard FMCovenants 54. There are two standard FM covenants: (i)submission of annual audited project financial statements within 6 months after the end of fiscal year; and (ii) submission of IPR each trimester. SpecialFMCovenant 55. There is one special FM covenant to share an annual work program and budget for each component with IDA. Disclosureof Information and Corporate Governance 56. With recent enactment of the Rights to Information Act, 2007, disclosure requirements will be complied with to make information transparent and information readily available for public disclosure. MoAC will disseminate all available guidelines, procedures, and other key information related to the program including information transport subsidies through its website and other communication means such as newsletters, and site board. MoAC has specifically agreedto disclose the following items through its website: Overall Food Crisis Response Budget, Allocation by Activity and 53 Budget Line; Trimester ImplementationProgress Reports (approved versions); and Annual Audited FinancialStatements. Supervision Plan 57. Project implementationprogress will be closely monitoredby the MoAC, MoAC, DOI, and IDA. IDA will initially supervise project implementationo f fiduciary aspects related to financial management more closely until key systems are in place. The MoAC will report on project implementationprogress through a trimester report, the IPR. The agreed FM action plan will be closely monitoredto ensure appropriate actions are being implemented. Key FM fiduciary work includes:(i) conductingex-post reviewsof financial management arrangements; (ii)conducting reviews of implementation progress reports and audit reports and preparing summaries of such reports; and (c) participating in supervision missions and keeping the team informed of FM issues or improvements. Particularattentionwill be paidto timely and accurate capture of financial informationand complete and informativereporting,areas designatedas a source o f substantialFMrisk. Disbursement Allocationof grant proceeds 58. Disbursement under the proposed IDA credit additional financing will be made as specified in Table C, which indicates the amounts and percentages of financing for different categorieso fprojectexpenditures. The total projectcost is estimated at USD 14.3 million. All project costs will be financed 100 percent except for incrementaloperating costs which IDA will finance 80 percent to be consistent with arrangements for IWRMP. The closing date of the Project is June 30, 2013, consistent with the closing date of IWRMP. Table C: Allocationof Grant Proceeds ExpenditureCategory IDA Credit (USD) FinancingPercentage 1. InvestmentSupport Grants 12,350,000 100% 2. Goods, Services, Training 1,450,000 100% 3. IncrementalOperatingCosts 500,000 80% Total ProjectCosts 14,300,000 DisbursementArrangements 59. As envisaged in the I M P Action Plan, MoAC has not yet established a computerized system. MoAC, however, is committed to this pending action. MoAC is committedto produce reportsin the agreed format on a timely basis. Disbursements from IDA will be report based from the beginning o f the project to be consistent with the disbursement arrangements under IWRMP. To facilitate disbursements, a special DesignatedAccount will be established. For other major payments relatedto procurement of goods and services, MoAC will use the special designated accounts for direct payments. For smallpaymentsincludingcivil works, trainingand operatingcosts, GONwill pre-fund the activities. 54 RetroactiveFinancing 60. The Project would allow retroactive financing in the amount of USD100,OOO for implementation of the work programthat occurred after October 1, 2008. DesignatedAccounts 61. A separate Designated Account in US Dollars will be established on terms and conditions satisfactoryto IDA. The authorized allocations for the DesignatedAccount will be equivalent of two trimester cash requirements as per approved annual work program and budget. Actual expenditures will be accounted in each trimester report, and then adjusted against the next trimester cash requirement, to determine the need for further advance deducting the actual expenditures reported during the trimester, or recovery of expenditures, ifthere are enough cash balances inthe accounts, on a trimester basisthat is, three times a year. 62. For the utilization o f IDA'Sshare of project expenditures, MoAC may open and maintain the DesignatedAccounts inUS dollars at the Nepal Rastra Bank under terms and conditions acceptable to IDA. Accounts will be operated under joint signatures of the Coordinator and Accounts Officer. 63. MoAC will ensure that the banWcash books are reconciled with bank statements every month. Supporting documentation will be maintained by the respective cost centers for at least one fiscal year after the year inwhich the last disbursement from the grant took place, and will be available for review by IDA staff and independent auditors. Supervision 64. Progressof project implementation will be continuously monitored by the Ministry ofAgriculture and Cooperatives, Ministry o f Water Resourcesand by IDA from the Nepal Country Office. The Project Coordination unit will submit project progress every trimester. Action plans agreed will be closely monitored to ensure effective implementation. Key areas of FMfiduciary work are to: (a) periodically visit cost centers for ex-post reviews, and if ineligible expenditures are noted, report to the FMS for hrther remedial action; (b) review audit reports and prepare summary of reports; and (c) participate in supervision missions and keep the Team informed of financial management issues or needed improvements. Particular attention will be paid to timely and accurate capture of financial information and complete and informative reporting, areas designated as a source of substantial F Mrisk. 55 Financial Management RiskRating Summary for Social Safety Nets Project Risk Risk Residual AssessmentRisk Mitigating Measures Risk U Implementationof CFAA, (see PEFA-PMF,CFAA, CPAR action plan; PFM CPAR, CPIA and other sector work and diagnostics), standard of implementation of actions; financial accounting, country dialogue reporting and auditing, quality of F M profession. Entity level Implementation of F M S - Independenceof entity's Improvement Action Plan management, appropriateness o f the organizational structure, impact of civil servicerules Project level M M - Relative size of the Bank Continuity of staff. Close loan, type of lending coordination between instrument, complexity of the MoLD and WFP. Close project (e.g. sectors involved, monitoring o f program. number of implementing and sub-implementingentities, multi-donor etc.) OVERALL INHERENT S Implementation S RISK o f Action Plan CONTROL RISKS Budget M Assign separate budget M code and allocation of budget for FY2008/09 Accounting S Development of a separate S booksof accounts for the Project andmaintain inthe computerizedspreadsheet inExcel or appropriate software Internal Controls M Segregationof duties and M monitoring o fprocedures Funds flow M M Financial Reporting S Develop an excel S spreadsheetto capture financial information. Auditing S Better coordination S through the MoLD OVERALL CONTROL S RISK RESIDUAL RISK s S ' RATING H-High S - Substantial M-Modest L-Low 56 FinancialManagementRiskRating Summary for Additional Financingunder IWRMP Risk Risk Risk Mitigating Measures Residual Assessment Risk INHERENT RISKS Country level H H - Quality of PFM Implementation of CFAA, institutions (see PEFA- CPAR action plan; PFM PMF,CFAA, CPAR, CPIA sector work and and other diagnostics), implementation of actions; standard of financial country dialogue accounting, reporting and auditing, quality of F M profession. Entitv level M M - Independenceof entity's Implementation of F M management, Improvement Action Plan appropriatenessofthe organizational structure, impact of civil service rules Project level - S S Relative size of the Bank Continuity o f staff; full loan, type of lending functioning of the Steering instrument, complexity of Committee. the project (e.g. sectors involved, number of implementing and sub- implementing entities, multi-donor etc.) OVERALL INHERENT S Implementation S RISK of Action Plan CONTROL RISKS Budget M Assign separate budget code M and allocation of budget for FY2008/09 Accounting S Development of a separate S books of accountsfor the Project and maintain inthe computerizedspreadsheet in Excel or appropriate software Internal Controls M Segregationof duties and M monitoring o f procedures Fundsflow M M Financial Reporting S Develop an excel spreadsheet S to capturefinancial information. Auditing S Better coordination through S the MOLD OVERALL CONTROL S RISK RESIDUAL RISK s S RATING 57 Annex 5: ProcurementArrangements General 1. Procurement for the proposed project would be carried out in accordancewith the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 revised October, 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, revised August, 2006, and the provisions stipulated in the Financing Agreement. The general description of various items under different expenditure categories are described below. For each contract to be financed by the Grant, the different procurementmethodsor consultant selectionmethods, the needfor prequalification, estimated costs, prior review requirements, and timeframe are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvementsin institutional capacity. A. Procurementunder the Social Safety Net Project 2. Procurementof Works: Works procuredunder this would include: Component 1: Works related to RCIW, Critical Infrastructure and Livelihood Support Programto be implemented by WFP. Because of ongoing activities in similar programs in Nepal and their unique expertise, and based on the Government's preference for responding to the food crisis through the WFP programs, WFP will be selected on sole source basisto implement this component on behalfof the Government of Nepal through a subsidiary grant agreement betweenWFP and GON. 3. Procurementof Goods: Goods procuredunder this project would include; Component 1:Food Component 3: Computers, Server and furniture etc 3 (a) Methods of procurement: Goods may be procured through ICB, NCB, shopping or direct contract as described inthe Procurement plan. 3 (b) All contracts whose estimated value exceeds US$500,000 equivalent per contract shall be procuredthrough ICB proceduresusingthe Bank's StandardBid Documents. Contracts estimatedto cost below US$500,000 equivalent per contract may be procured in accordancewith local proceduresas described inthe Nepal Public Procurement Act, 2007 and the related Regulations, 2007 using model bid documents that are satisfactory to and agreed with the Bank. 4. Procurement of Non-consulting Services: The services to be procured will include transportation o f fertilizer and services for conducting workshops, seminars, study tours, trainings, etc. 5. Selection of Consultants:Consultancy services procured under this project would include assignments in all the 3 components. 5(a) Short lists of consultants for services estimated to cost less than $250,000 equivalent per contract may be composed entirely of national consultants in accordance 58 with the provisions of paragraph 2.7 of the Consultant Guidelines. All selection will be carried out using Bank's StandardRFP documents and proceduresfor international as well as local consultants. 6. Operational Costs: Besides usual operational costs like office rentals, utility payments, incremental staff costs, there would be many workshops, seminars etc, under the project the costs of which may be financed by this project. These would be procured using the implementing agency's administrative procedures which were reviewed and found acceptableto the Bank. B. Procurementunder the Irrigation and Water ResourcesManagementProject 7. Procurement of Works: Works procured under project through additional financing would include rehabilitation and improvements of non-conventional and small scale irrigation schemes under the Investment Support Grant (ISG). Small value works involving non-conventional technologies shall be procured and implemented through the divisional and sub-divisional irrigation and extension offices. Other small-scale works involving matching cash contribution by the beneficiaries would be carried out by the beneficiary group inaccordancewith community procurementprocedures. 8. Procurement of Goods: Goods procured under this project would be related to small-scale and non-conventional irrigation in selected districts (component D1) and Seed Supply Chain (component D2). 8 (a) Methods o f procurement: Goods may be procured through ICB, NCB, shopping or direct contracting as describedinthe Procurementplan. 8 (b) All contracts whose estimatedvalue exceeds US$500,000 equivalent per contract shall be procured through ICB proceduresusing the Bank's Standard Bid Documents. Contracts estimated to cost below US$500,000 equivalent per contract may be procured in accordance with local procedures as described in the Nepal Public Procurement Act, 2007 and the related Regulations, 2007 using model bid documents that are satisfactoryto and agreed with the Bank. 9. Procurementof Non-consultingServices: These services will mostly be procured for conducting workshops, seminars, study tours, trainings, etc. 10. Selection of Consultants: Consultancy services procured under this project would essentially include TA for non-conventional and small-scale irrigation and Extension Activities and some small value assignments. 10 (a) Short lists of consultants for services estimated to cost less than $250,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. All selectionwill be carried out using Bank's StandardRFP documentsand proceduresfor international as well as local consultants. 11. Operational Costs: Besides usual operational costs like office rentals, utility payments, incremental staff costs, there would be many workshops, seminars etc, under the project the costs of which may be financed by this project. These would be procured 59 using the implementing agency's administrative procedures which were reviewed and found acceptableto the Bank. C. Assessment of the Agency's Capacity to implementProcurement 12. Irrigation sector project design, for which additional financing is proposed, envisages two different agencies responsible for implementing their corresponding componentof the project.Underthis arrangement procurementactivities for the additional financing activitieswill be carried out by the Do1and DOA. For the Social Safety Nets Project,MoLDwill be responsiblefor all procurements. 13. Thus the procurement assessment is not limitedto one single entity, and the overall risk assessmentis basedon a consolidatedperceptionfor the three different agencies based on the volume of procurementto be carried out by each and their present capacity. The findings are summarizedbelow. (i)Department of Irrigation: As assessed for Report 41404 - NP, this agency has adequate experience and capacity to execute its planned project procurement needs at the central levelbut most of the procurement under the project would be carriedout at the field level by field offices who have limited experience of carrying out procurement under proceduresprescribedinthe law. Consequently, risk is assessedto be MEDIUM (ii)DepartmentofAgriculture:TheDoAprocuremententity,chargedwithvariousother administrative functions, has little experience in procurement other than petty purchases. The Departmentalso demonstrated little capacity and sub-par performance in procurement following Bank procedures in a previous Bank financed project (Agricultural Research and Extension Project). The procurement team proposed by DoA would include an Agriculture Engineer that is responsible for carrying out procurement for the agriculture component o f the project. However, substantial procurement, particularly works, under this additional financing would be carried by the field offices of DoA where there is minimal capacity and experience of such procurement. Therefore, for this agency, the Risk is assessedas HIGH. (iii)Ministry of Local Development (MoLD): MoLD is relatively new to Bank procurement procedures though it has a procurement entity and a National Program Support Unit (NPSU) which deals with Rural Community Infrastructure Works (RCIW) programs involving other donors - though in these most of the procurement was carried out by the an INGO (GTZ). At the district level, the MoLD financed procurement is carriedout by DDCLDO supportedby engineeringand accounts staff. However, as most of the procurement, including works related to Critical Infrastructureand Livelihood Support Program would be implementedthrough WFP selectedon sole-sourcebasisby MoLD, the risk is assessedto be MEDIUM. 14. Risks and Remedies: Most of the issueshisks concerning the procurement component for implementation of the project and corresponding remedies have been identifiedand include: 60 RISKS REMEDIES Staff Capacity: 0 The core teams at Do1 consist o f DO1 has taken the lead in updating the model procurement proficient staff. bid documents developed under the Public Improvement in the area o f developing Works Directives as well as the documents and updating o f the procurement plans jointly developed by GoN and the World Bank would require training o f staff. in 1997 (for use in Bank financed Works and Frequent changes in staff positioning Goods procurement) to incorporate provisions o f being common, may affect the the Public Procurement Act and the Regulations efficiency. Core team o f D O A lacks in and some o f the provisions o f the relevant latest proficiency in procurement related edition o f Bank SBDs. For consistency, all aspects. Similarly, procurement entity agencies (MoLD, DoA) would be required to o f the D o A lacks in experience and use the same formats. exposure. Thus there is risk lack o f or Continuity o f staff within civil service rules and incomplete procurement planning, use capacity enhancement through training would be o f improper procedures and one o f the remedial measures. documents, poor monitoring and Ensure that procurement Units at D o A and contract administration capacities. M o L D (at both central and decentralised levels) 0 Except that o f some small value petty which are established as per the requirement o f purchases, staff at M o L D neither have the new Law, are staffed by designating the procurement capacity nor the procurement officials to these units, and make experience o f carrying out W B arrangements with Nepal Administrative Staff financed project related procurement. College (NASC) or other institution to provide However as bulk o f the procurement training to staff o f these units in procurement will be carried out through WFP there procedures as per the new Law on a priority may not much o f risk involved. basis. Coordination: 0 Experience with previous Bank funded 0 Due to the presence o f procurement expertise projects having multiple implementing and prior experience in the central office o f DoI, agencies has shown that coordination the procurement personnel in the core project between these agencies was weak team at Do1to be designated as the procurement leading to different quality o f bid focal point for the project such that all other documents for similar kind of agencies take the advice and assistance o f this procurement. unit infinalizing procurement documents and in contract administration matters. Monitoring and Reporting: 0 Due to differing capacities at each o f 0 Central unit at Do1 to take lead in arranging the implementing agencies, there is regular joint meetings with D o A and M o L D to risk o f delays in inter-related activities, review project procurement status at each weak mechanism for overall agency as compared to the annual procurement supervision or monitoring o f project plan and to decide on corrective measures to procurement and delays in receiving expedite delayed procurement. consolidated status reports. Community Procurement (Component D): 0 Risk of inflated cost proposals: In 0 District units o f Do1to conduct periodic market order to minimize their share o f surveys and to establish cost ceilings and quality matching contribution, beneficiaries specifications for different components o f may inflate the cost o f their sub-project shallow tubewell installations (e.g. boring, proposal. tubewell cost, pipe costs). 0 Risk o f misuse o f funds by 0 Social audit mechanism to be disclosed to the beneficiaries, and/or poor quality o f members o f the concerned V D C supplemented works. by quality check o f the installation by staff o f the concerned district based Do1unit. 61 15. Even if the abovementioned remedial measures are agreed and fully in place for the perceivedrisks stated above, basedon the prevailingprocurementenvironment, where incidents of intimidation of bidders or interference in bidding for public procurement contracts havebeen increasinglyreported, the overallresidualproject risk for procurement is HIGH. For larger bids (few in this case) the bid documents shall also be placed in the borrower'swebsite where interestedBidders may read the documents and also download the critical partsofthe same (i.e. bid form, price schedule etc.). Bidderswill be allowedto submit their interest in biddingthrough email, and allowed to submit only the duly filled up bid form, price schedule, bid security and qualificationdetails, with an undertakingthat the qualificationsdetails are correct and that originals of all certificates evidencingtheir qualifications shall be submitted on demand. The borrower will request and arrange for adequate security at the place of submission for at least three days preceding bid submissiondate and on the bid submission day itself.The Invitation for Bids will provide contact details of Government institutions where biddershtakeholders can submit their grievances and complaints on the bidding process, including the Bank's fraud and corruptionhotline:http://go.worldbank.org/OBUOB60810. D. ProcurementPlan 16. Based on the comprehensive list ofthe procurementneeds for each component that has been drawn up, the Borrower is currently developing a comprehensive plan for all components. The plan shall provide the basis for the procurement methods. The plan has been finalized and submittedto the Bank at Appraisal and agreed between the Borrower and the Project Team on ...The plan will be available at the offices of the Departmentof Irrigation,the Department of Agriculture and Ministry of Local Development. It will also be availableinthe Project's databaseand inthe Bank's externalwebsite. 17. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvementsin institutionalcapacity. E. Frequencyof ProcurementSupervision 18. Inadditionto the prior review supervisionto be carriedout from Bank offices, the capacity assessment of the Implementing Agency has recommended two supervision missionsper year to visit the field to carry out post review ofprocurement actions. 62 Annex 6: Implementationand MonitoringArrangements 1. The overall program (ie the Nepal Food Price Crisis Response Program) will be guided by a High Level Policy Steering Committee (SC) chaired by a nominee of the Vice Chairman (VC) ofNPC. The SC will guide and monitor the implementation of the overall emergency response to rising food prices. The SC will meet at least twice a year or as required, and will include Secretaries (MoF, MoWR, MoAC and MoLD) and DGs (DoI, DoA) as members. The Secretary, Ministry of Local Development will be the member secretary. The SC will require the two Project Coordination Units (Social Safety Nets and IWRMP)to report to it in order to have a consolidatedview of the country's response to rising food prices and impacts on food insecuredistricts. A. Social Safety NetsProject PartnershipArrangements 2. A subsidiary agreement between the Government of Nepal and the World Food Programme will be concluded. Other agencies, including CARE, Helvetas and UNICEF, as well as local NGOs may provide support as required, in particular for monitoring impacts and beneficiary assessments. Institutionaland ImplementationArrangements 3. The interventions will be implemented over a period of three years. However, the food/cash for work and fertilizer subsidy program is expected to be implemented in the first 18 months. Overall responsibility for managementofthe new project would rest with MoLD. With regard to the individual components in the new Social Safev Nets Project, Component 1will be implemented by MoLD in partnershipwith WFP; Component 2 will be implemented by MoAC/DoA and Component 3 jointly implemented by MoAC and MoLD. A Project Implementation Team (PIT) will be established with an adequate number of key professionalswith skills, qualifications, experience and terms of reference satisfactory to the Association, including: (i)a Project Manager; (ii)an Engineer; (iii)a Section Officer; (iv) an Overseer; and (v) an Accounts Officer. There will be representationfrom DOA inthis team as an implementing department of MoAC. 4. The office of the RCIW coordinator is already established at MoLD under the National Project Steering Unit of the RCIW and will also be the Project Implementation Team for the Safety Nets Project, with representation from DoA. The PIT will be responsible for overall coordination of the project and arranging technical support for project implementation at the central level and also for coordinating various implementing agencies and their activities. The main responsibilities o f the PIT would include: (a) overall implementation of the project including management of the annual work plan and budget; (b) financial management; (c) monitoring and quality assurance; (d) preparation and timely delivery of periodic progress and performance reports; (e) provision of technical assistance for field operations, where needed; and(0supervision of cross-cutting issues including gender, indigenous people, resettlement and other social and environmental matters. 63 5. A Project Steering Committee will meet at least twice a year or as required. Secretaries (MoF, MoAC and MoLD), DGs (DoA), and representatives from Ministry o f Local Development (MoLD) will be members of the PSC. The Head of the National Programme Support Unit (NPSU, RCIW)) will be the member secretary. The PSC will guide and resolve implementation issues as needed and will ensure that the PSC is represented in the meetings of the High Level Policy Steering Committee to report on the achievements ofthe project. 6. A project implementation manual (PIM) needs to be prepared. It will include measures to be taken to ensure that social and environmental impacts are mitigated through a) initial screening of sub-projects and b) follow through with remedial measures if impacts are expected. The PIM will be drawn from the existing guidelines of the RCIW and WFP food for work programs but will include procedures for financial managementand reporting as described inthis project paper. 7. The Project Manager of the PIT will have overall responsibility for planning and coordinating M&E activities in coordination with WFP and DoA. Inthis role, the PIT will collate and maintain M&E data relevant to this project from the following sources: (i)WFP;(ii)MoACand(iii)beneficiaryassessmentsandotherrelevantstakeholders. 8. The M&E unit under the PIT will analyze the data and produce simplified informative formats for distribution to the Government, World Bank, and other concerned agencies for their review and timely feedback. Overall, the M&E activities undertaken within the project would include: regular performance tracking of inputs and outputs by concerned implementing agencies; beneficiary assessments; and pre-ICR impact evaluation. Both IDA and GON will carry out twice a year formal reviews o f project implementation progress and achievement o f project development objectives. This will allow for necessary mid-course corrections in response to changing local conditions, including with respect to the security situation. C. Additional FinancingIWRMP: Enhancing agriculture productionand supply response 9. Implementation arrangements under Component D of the IWRMP apply to this additional financing. The program will bejointly implemented by MoAC and DoI. At the central level an ICWMP (integrated crop and water management program) Program Coordinator would liaise with the I W W Project coordinator for overall coordination, implementation and M&E of the program. The Program Coordinator will also supervise the respective regional and district organizations implementing respective parts of the program parts. At the Regional level, a regional ICWMP Implementation and M&E Unit of MoAC will jointly implement the component activities in conjunction with the Do1 Implementation and M&E Unit of DoI. The agricultural activities at the field level would be carried out by private sector service providers or NGOs inthose locations where MoAC capacity are limited. 10. The project would be implemented according to norms, rules and procedures outlined inthe IWRMP Project Implementation Plan (PIP) and the Project Implementation Manual (PIM). These documents lay out roles and responsibilities of different stakeholders and provide details of project processes and project cycle. They incorporate experiences gained through implementation of similar projects in Nepal as well as the 64 outcomes of various preparatory workshops, studies and analyses that were carried out as part of project preparation. 11. The Project Implementation Plan and Project Implementation Manual will be subject to periodic reviews conducted jointly by GON and IDA with stakeholder participation to address any constraints to the successful implementation o fthe project. 65 Annex 7: Environmental and Social Safeguards Social Safety Nets project 1. The Social Safety Nets project includes support for the foodhash for work programs and fertilizer transport subsidies. The type of activities under the foodhash for work includes rehabilitation and improvement of demand-driven small scale community infrastructures in food deficit and/or vulnerable areas. These are grouped into: i)Rural Community Infrastructure Works (RCIW) which includes rehabilitation and completion of dry-season community roads, and foot/ mule trails; ii)Critical Infrastructure and Livelihood Support which includes micro-irrigation and drinking water schemes, small ruralmarket sheddcenters, community/ village buildings, and similar works demandedby the community. 2. Environmental concerns of Critical Infrastructure and Livelihood Support: The environmental concerns of the improvement and completion of these small scale infrastructures are minor at the most that can be managed easily by good construction practices and impacts, if any, are likely to be limited to the immediate vicinity of construction sites. The investments under critical infrastructure and livelihood support might also include local natural resource conservationrelated works which are expected to have positive environmental results, e.g. promotion and conservation of indigenous crop variety, cultivation of herbs, protection of local water sources/ springs, conservation ponds, etc. The detailed operational procedure and implementation manual of the project will contain a checklist for good environmental practicesfor these micro-scale schemes. 3. Environmental concerns of RCIW dw-season community roads. and foot/ mule &: The environmental concerns of the rehabilitation and completion of dry season roads, particularly in the fragile hills/ mountains of Nepal, are typically related to landslides and erosion, loss of forest/ vegetation, degradation of local resources and infrastructures (water source/ lines, agricultural field, etc). These impacts, although not-so- significant considering the scale of the intervention (Table l), need to be properly addressed in the planning, design and rehabilitatiordcompletion of these roads. These concerns mainly arise from activities such as cutting of hill slopes and disturbing the fragile spots, disposal of excess materials, road passing through forests, diversion of surface runoff, etc. Over the years, Nepal has gathered considerable experiences in environmental friendly road construction techniques in the hills/ mountains. The RCIW Program implementation guidelines require using green road approach in order to mitigate the potential adverse environmental impacts. Some important features of the green road approach are: use of labour and hand-tools instead of heavy machines, no blasting, staged or gradual widening of road width (typical over 3 to 4 years), reusehecycle of materials such as stones and earth (theoretically zero waste production or no excess spoil to dispose off), use of vegetation and small/ simple locally built structures such as dry-wall for protecting the slopes, promotion of vegetation in the road corridor, etc. Besides, as per Nepal's legal requirement, an RCIW guideline requires each road to have initial environmental examination (IEE), which contains Environmental Management Plan (EMP). 4. Food Quality Issue. The RCIW and other infrastructure works will be carried out through food-for-work programjointly implemented by the MOLDand WFP. WFP, which is an expert international agency on the food related matter, will solely be responsible for 66 purchasing, transportation, storage and distribution of food. WFP has substantial experience of working in Nepal besides bringing international know-how on the subject including food-for-work. WFP uses only food that is approved as safe for human consumption and follows guidelines developed by F A 0 & WHO. Besides, it follows a standard commodity quality control system: this includes inspection of purchase by independent surveyors prior to delivery as well as quality control inspections along the entire supply chains to ensure quality and fitness of the food for human consumption. 5. Fertilizer transuort subsidy: The Social Safety Nets project also provides support for improved access to seeds and fertilizer, which is mainly targeted to the remote districts where availability and use of chemical fertilizer as well as pesticides is very limited. The proposed level of support under this category is small (mainly supporting government's existing fertilizer transport subsidy for the remote district during a fixed period/season only). Consequently, only marginal increase in the use of fertilizer is expected during the project period and is actually targeted to communities which are currently unable to access good quality fertilizer. Furthermore, although increasedaccess to fertilizer i s likely to also encourage increaseduse of pesticides by farmers, availability of pesticides is very limited in those remote districts and support to pesticide is beyond the scope of this project. Although environmental concerns related to use of chemical fertilizers and pesticides is not significant inthe short time frame o fthis project, it is a longer term concern because of two reasons: i)as accessibility increases there is possibility that use of chemical fertilizers and pesticides will increase in longer run (beyond project period scenario), ii)level of knowledge and skill of farmers on the proper use of fertilizer and pesticide is low. It would be desirable to promote proper use of chemical fertilizers and pesticides as well as alternative approaches such as organic farming, soil fertility protection, bio-pesticides etc. Therefore, there is a needto aware and train the farmers these aspects. MOAand its offices at the field have basic know-how on these aspects, which needs to be transferred to the farmers. The project, should, therefore emphasize strengthen this aspect and ensure provision of adequate extension service to the farmers to aware and train them - these aspects are in fact included in the additional financing activities and are therefore a good off-set to the short term support for fertilizer transport. 6. Environmental and Social Management Framework: The existing Environmental and Social Management Frameworks (ESMF) for the RuralAccess Improvement Projects (RAIDP) is applicable to dry-roads and trails to be developed in this project, and the ESMF of the Irrigation Water Resources and Management ( I M P ) is applicable to irrigatiodagriculture related activities. The provisions of those existing ESMFs needto be adaptedto this project because the scales of the schemes to be supportedunder this project are smaller than those under RAIDP and IWRMP. Therefore, although there is no need for separate environmental and social assessment and ESMF for this project, it is necessary to include environmental and social management guidelines in the ouerutionul procedures and implementation manual for this project, drawing from the ESMFs of RAIDP and IWRMP as well as environmental and social guidelines of the RCIW and green road approach. RCIW will prepare a draft Social and Environmental addendum to the RCIW PIM by mobilizing Ministry'sRCIW and DoLIDAW RAIDP resources including human resources. The WFP and MOLDS Environment Sections will also be included in a task team that will oversee and advise the addendum preparationprocess and progress. RALDP's ESMF will be adapted considering the smaller scale of operation, use of only labour and hand tools (no blasting, no heavy machines). This will simplify screening and EMP preparation. Screening and EMPs (as needed) will be prepared by the 67 social and environmental team o f the PIT. The Public audit system in use at present will also cover road specific environmental and social issues included in road EMPs. A four- monthly environmental compliance monitoring will be undertaken - results o f which will feed into the government's four monthly portfolio progress review (held at MOLD). 7. The addendum will have three attachments: i)a sample o f the simple site specific EMP, ii)a table summarizing current conditions o f the roads and proposed actions/ activities under the project as well as environmental and social sensitivity (from the readily available secondary information), and iii)A checklist o f workers health and safety items to be provided. Additional financingfor IWRMP 8. Environmental concerns of additional financing activities (enhancing domestic food production). Infrastructure support under this component includes micro-scale irrigation schemes such as shallow tube-wells, rainwater harvesting, lift irrigation and minor surface irrigation (smaller than 25 ha, commonly improvement and rehabilitation o f existing community schemes). These are also very small scale interventions and scattered far and wide in different places in the country. Any environmental concern, therefore, is minor and limited to the scheme sites. Main Featuresof the IWRMP and RAIDP ESMFs 9. 1 W . P ESMF's Main features: The ESMF, through screening, identifies potential social and environmental issues early in the subproject cycle, and requires internalization o f the subproject specific concerns into the planning and design (including in Bill o f Quantity), as well as participation o f stakeholders through-out the subproject cycle. The ESMFrequires the following : . Social and Environmental Screening. All subprojects are subject to the social and environmental screening and field verification. The screening criteria include subproject type threshold, location and potential impacts as well as negative list that cannot be funded under the project. The screening outcome outlines the adverse potential impacts o f the subprojects in terms o f loss o f lands, loss o f residential and business structures, loss o f livelihoods, loss o f access to traditional resources and adverse impacts to indigenous people. The community willingness and interest to contribute their lands and other assets voluntarily are also documented during social screening and people are informed to refuse or make their choice for such donations so that involuntary acquisition does not occur at all. Only in cases o f voluntary surrender o f lands and other properties the policy mandates the Project to sign the Memorandum o f Understanding (MOU) to this effect. However, if the screening shows losses o f private properties and displacement o f people the Project should mitigate the issues in compliance with the stipulated compensation procedure specified inthe R&R framework. Detailed Social and Environmental Investigation. Initial Social and Environmental Examination (IEE/ISE) or detailed Social and Environmental Assessment (EIA/SIA) are .undertaken, ifrequired, by the screening. Social and Environmental Management Plan (SEMP). Each subproject will have specific SEMP, if required following screening. This will be prepared following simplified and participatory approach including walk-through surveys, field 68 observations, simple measurements, interviews with the key informants and consultation with local communities and stakeholders. Guidelines for Preparation of Social and Environmental Management Plan and a Model Social and Environmental Management Plan have been prepared. SEMP will be summarized in a simple matrix-table and supported by map showing subproject components as well as social and environmental features/ issues identified. The SEMP of a subproject identifies site-specific appropriate and cost-effective measures that will mitigate or reducethe identifiedadverse social and environmental impacts to acceptable levels. The mitigation measures should be integratedinto sub-project plan/design, estimates and tender documents including in Bill of Quantity (BoQ). Subproject SEMP also covers capacity development and training, institutional arrangement implementation and monitoring and the required budget. No construction activities in a subproject will be undertaken unless mitigation measures stipulated under SEMP (and requiredto be completed before taking up civil works) are implemented. The cost o f SEMP at the subproject level will be an integral part of the detailed project report. 9 Resettlement Action Plan (RAP) and Indigenous People Development Plan (IPDP). Subproject level RAP and IPDP, wherever required, is prepared. The Resettlement and Rehabilitation (R&R) Framework emphasizes avoidance or minimization of the losses of private properties and displacement of households to the extent possible and where this is unavoidable, they improve, if not restore their lost livelihood. No one regardless of their ownership to the land and other assets lost for the project would be forced unless compensated for losses and /or provided their entitlements. Categories of the likely losses identified in the R&R policy framework include: i)loss of private land ii)lossofoccupiedland(encroachers/squatters) iii)lossofcropsiv)lossofprivateand community structures, etc. In addition, the affected people will be provided counseling services to find suitable lands for resettlements. Indigenous peoples' development includes a set of activities including specific programs proposed to be extended to the indigenous peoples (referred asjanajtis) and other vulnerable groups (including dalits) as well as dovetailing ongoing development programs for the socio-economic benefit of these groups. This requires concerted and coordinated efforts of the project and other government agencies. The strategy also requires subproject preparation and implementation of subproject specific Vulnerable Group Development Plan (VGDP), envisaged under IPDP, to help them take advantage of the proposed subproject level project activities and access benefitsat par with others. Stakeholder Consultation. Consultation with the stakeholders and affected parties will be carried out throughout the subproject cycle. Emphasis is given on the involvement of and consultation with the affected people in all the process o f subproject planning and . implementation so that their genuine voices and demands are not left unheard. Social and Environmental Monitoring. Social and environmental monitoring will be ensured at different levels - Centre, Region and subproject. The central level monitoring will include monitoring of social and environmental aspects thrice a year (four-monthly) matching with GON review schedule. The subproject level monitoring will be conducted routinely during pre-construction, construction and operation/ maintenance stages. Social and environmental auditing will be undertaken on representative samples on annual basis through an external agency (which will be hired by the project). 69 10. RAlDP ESMF's Main -features: RAIDP's ESMF include Environmental Assessment and Management Framework, Resettlement Policy Framework, and Vulnerable Communities Development Framework. Environmental Assessment and Management Framework. The assessment has identified a host of generic/ typical environmental issues that may be encountered in rural road activities inNepal, and also suggest environmental code of practice (table 2 and table 3). However, not all of them are likely to be encountered in one road subproject. The assessment concluded that highly significant environmental and social impacts are unlikely because almost all subprojects are upgrading or improving the existing road, the project will use labor-basedtechnology, use protection structures and bio-engineering, each road subproject will have its own EMP, and local community will be involved inmonitoring. The environmental assessment and management framework defines steps and process/ procedures for environmental screening, IEE, EIA and Environmental Management Plan (EMP) preparation. Each road subproject is required to have its own site specific EMP. The road specific EMP need to have specific mitigation measures, institutional mechanismsand capacity building needs necessary for the implementation o fthe plan. The appropriate mitigation measures will be agreed upon in a joint Memorandum o f Understanding (MoU) by the local community representatives, VDCDDC representatives and contractor before the implementation of the final design and works. The communities will play an active role in monitoring the implementation of the mitigation activities. Monitoring will be carried out at district (once every four- month) as well as central level (once in six months in sample subprojects). Besides, community based performance monitoring, a transparent and participatory open community assembly, will also cover social and environmental aspects. Resettlement Policy Framework (RPF). The RPF has been prepared to address impacts arising from: (i)loss of land; (ii)loss of homes/structures; (iii)loss of livelihood; and (iv) loss of community property resources such as religious or cultural structures. The RPF defines the legal, institutional and implementation framework to guide the compensation for lost assets, livelihoods, community property and resettlement and rehabilitation of project affected people in accordancewith the World Bank's Operational Policy 4.12 on Involuntary Resettlement and GON's relevant legislation and guidelines. Vulnerable Communities Development Framework (VCDF). A VCDP has been prepared to define the policy and implementation framework to address impacts on vulnerable peoples, ensure meaningful consultations with these people throughout project preparationand implementation, and ensure that they are provided assistance in accordance with their own priorities. The VCDF has been prepared in accordance with the World Bank's Operational Directive 4.20 on Indigenous Peoples and relevant GON's policies articulated inthe Tenth Plan Institutionalcapacity for implementationof environmentaland social safeguards 11. Capacity of the involved agencies to implement environmental and social requirements as provisioned in the said ESMFs, green road approach and existing guidelines of the RCIW is a concern and needs to be addressed. Inthe past, GTZ and SDC 70 were providing technical assistance on the RCIW works. At present, DRSPBDC is providing technical assistance which is limited to few roads only. The project, therefore, will have provision for separate TA for supporting implementation of social and environmental safeguards. Besides, it is necessary to orient the users and on-site staff on the social andenvironmental requirementsprior to implementation. 12. The capacity of Do1 and DoA staff is expected to benefit from the parent project (IWRMP). Under IWRMP there are dedicated staff to address social and environmental aspects of the schemes, including an environmentalist and a sociologist who are members of a mobile irrigation team which monitors the status of SEMPs in sub-projects every four months. 13. Qualitv assurance and comuliance checks. Quality assurance and compliance check is a potentially weak link in the overall environmental and social performance in this project. This arises from the relatively weak institutional capacity to implement social and environmental safeguards, as well as lack of dependable mechanism to ensure compliance with the requirements from early stage of subproject selection, preparation, and implementation. Besides the TA to address capacity concern, there should be a provision for quality assurance and compliance checks by a non-implementing party at some defined points in the process of subproject selection, preparation and implementation. 71 2 00 vi N r- vi m N a a v1 r- 0 W z 0 K W N z m d vi 0 a d a 0 x 0 L" d I N Table 2: Environmentalmitigation measuresappropriate to RAIDP (rural road) Potential Problem*-" 8 . Slope Landslides or other forms Geological/geomorphologic studies conducted to stability o f mass instability on the investigate and recommend best available options. slopes Civil engineering structures andbio-engineering measuresused. Measures taken to avoid undercutting o f slope toes. Quarrying prohibited inriver beds, where flood discharge is significant. Development o f erosion or Check dams and bio-engineering measures used as gullying. necessary. Road crosses major areas o f Width and surfacing slander (relaxed for short lengths, deep- seated instability as required. Spoil Highvolume o fwastehpoil Minimize spoil by balancing cut and fill wherever disposal possible Spoil tipped away from Safe tipping areas identified and enforced. designated areas Spoil failing or being Spoil traps constructed. washed on the farmland Land owner compensated. Water Scour and erosion below Mattresses, check dams and other protection measures manageme unprotected drainage out constructed as necessary. nt falls Cascades constructed, io be as long as necessary. Disruption o f drinkingor Measures to resolve these problems incorporated into irrigation water project works, or compensation paid. Land use Houses need to be removed ............................................................................................................................................................................................... Compensation paid to house owners. Loss o f agricultural land ................................................................................................................................................ Compensation paid to landowners. ........................................ Loss o f forest land Forest User Groups compensated for trees and products lost. Check impacts are limitedto compensated trees and products. Plants and Large numbers o ftrees Felled trees replaced, usingthe same species if wildlife being removed appropriate. Trees planted wherever land i s available. Disturbance to wildlife Damage to wildlife habitats avoided as far as possible. Habitats re-created on marginal roadside land. Quarries Pollution, disturbance and Construct bunds to screen noise and dust. and borrow danger from quarry Enforce access restrictions. pits operations Safety risks from Quarries made safe by re-grading slopes and installing abandoned quarries or structures as necessary. borrow pits Land seriously disturbed or Quarry and borrow areas rehabilitated to productive lost from production plantations usingbio-engineering techniques. Quarries continue to be Unauthorized quarrying stopped, where necessary by used by unauthorized working with the Districts Development Committee. persons Stone Dustand noise pollution Plants re-sited or compensation arranged ifpollution is crushing & caused. asphalt Large earthbunds constructed and vegetated to reduce plants hazard. 74 PotentialProblem \ AppropriateMitigation Measures t Hazardous Spills, leaks or injuries Checks to ensure that storage is good and that there materials from any type o f hazardous are no losses or leaks. material (e.g. bitumen, Checks to ensure that protective clothing and safety cement, paint, explosives, measures are used. fuels, lubricants) Bleeding bitumen Appropriate chippings spread androlledinto the affected areas. Camp Pollution from work and Checks to ensure that camps are not polluting operation labor camps neighboring areas, especially from sewerage and rubbishdisposal. Laborers cut trees for Kerosene stoves and kerosene provided to laborers. firewood Land remains damaged Checks to ensure camp areas are fully restored, after construction including re-top soiling and tree planting if appropriate. Dustand Dustgenerated from Speed controlled using speed bumps. Ifwater is noise construction works available, the road surface can be sprayed on a frequent schedule. Dust from a roadwith an Permanent speed bumps installedinvillages and earth or gravel surface bazaars to reduce traffic speeds ininhabited areas. Bitumen surface constructed in bazaars, with speed controls. Dense vegetation planted on roadside. Noise from large work sites Large earth bundsconstructed and vegetated to reduce noise. Work schedule to minimize disturbance. Social Positive impact o f road Other agencies encouraged to develop activities issues confined to wealthier beneficial to poor and excluded sections o f society. sections o f society Local people excluded from Designs incorporate methods within the skills o f local project activities people. Contractors encouraged usinglocal labor wherever possible. Promises were made to Checks to ensure that the promises are fulfilled; ifthey local people during prove to be not possible, reasonable alternatives must feasibility and planning be negotiated. phases Significant disparities Compensation levels rationalized to ensure reasonable emerge in levels o f parity. compensation Road Safety: faster traffic Traffic safety measures installed, such as warning resulting from a new, signs, delineators and barriers. smoother road surface Awareness o f road safety raised among affected communities. Road safety audits carried out and recommendations implemented. 75 Table 3: Environmental Code of Conduct for RAIDP PotentialEnvironmenhlIssuet . . ' Impact ., I_. < 1 Road alignment may pass through xltivated and forested land resulting ina permanent loss o fthe resources. ..Plan road alignment to minimize loss o fresources. While the landowner has to part away Avoid width of road o f more than 4.5 m inhilly with his land ownership, the area. Znvironmental effects can amplify if Demarcate ROWto avoid encroachment. proper operation and maintenance schedules are overruled. Excess extraction o f local resources, such as wood, sand, soil, boulders, etc. Degradation o f forests, erosion and .. Extract materials only on need basis. landslide at steep locales due to Avoid sensitive areas, such as steep slopes and boulder, stone extraction. water-ways. Change inriverhtream ecosystem due to unchecked sand extraction. Extract carefully and secure the top soil within 25 Extraction o f forest products and cm from the surface. cutting o ftrees inthe steep slopes ... Limit down grading ofthe roadto 5 percent. increases soil erosiodlandslide due to Ifdown grading exceeds 7 percent, construction of loss o f soil binding materials. side drainage i s necessary. Wrong alignment can trigger slope Keep optimum balance inextraction and filling o f failure . soil works. Haphazard disposal o f construction geo-hazardous assessment and mapping waste can disturb slopes Use designated disposal site and avoid side casting Improper drainage facilities can result o f spoil inerosion and landslides Wildlife habitats at forests, shrub land Efficient movement o f machinery and other traffic. along road alignment are affected ..... Provide proper drainage Use bio-engineering on exposed slopes Avoid as much as possible areas with high biodiversity. Control poaching activities and regulate movement from the road construction activities. o f labor force and their dependents into the forest Wildlife and human conflicts increase . area. as wildlife might destroy the crops or District Forest Office and its subsidiary body should attack the construction worker. be involved inmonitoring the activities o f the construction workers and officials to minimize ................. ......................................................................................................... . wildlife harassing, trapping and poaching. Higher flow rate o f surface water and water logging induce land slides, It is strongly recommended that the cross drainage . outlets must be channeledto the confirmed natural erosion. Quality o f road diminishes due to poor drains. drainage such as water logging, Ifslope exceeds 5 percent, construction of flow control device necessary every 20m. .......................................................................................................................... immense flow rate o f surface water. Protected areas and highly forested Use minimum and efficient use o f wood products """""""" areas. for construction. Degradation o f forest areas. Initiate plantation at damaged and damage prone Degradation o f agricultural land. ...areas. Increase liability o f local forest user groups. 76 PotentialEnvironmentalIssue/ Impact Code.ofConduct 1Avoid protected areas or densely forested areas 1Selected spoil dumping sites should be used. 1After disposal, the area should be leveled and Dumping o f wastes along the road or compacted. elsewhere. 1It is recommended to conserve the soil by planting indigenous plants including grasses. 1Wastes could also be used as leveling materials along the roadside. Unmanaged sanitary waste disposal creating health problems and public 1Proper sanitation area needs to be demarked. 1Check for hygiene o f work force. ... ....... nuisance. ^ .................. ^. .................... Road crossings at water supply, irrigation lines may be disturbed 1Avoid as much as possible the crossing over such amenities. ............................................................... damaged. ............................... ............................................ ^ Dustgeneration from construction 1Possibly construction period should be during activities, construction vehicular August to December when soil moisture content is movement increases air pollution. most. Noise pollution likely from 1Consider construction o f road at 50 m from construction machinery operation and settlement. vehicular movement. 1Enforce speed limit o f vehicles and construct the Sanitary problems likely at the road according to volume and size o ftraffic construction and workforce auarters. movement. Unmanaged settlement, construction Establish ROWproperly and enforce its limits. .... along the ROW. 1 ".......................................... "." ......................................."...."........................................................... 1Cross drain structures, namely pipe culverts, slab culverts, box culverts, need to be maintained. Concentrated flow left unattended 1Outlet o f these structures would be carrying the might have severe impact at the concentrated runoff flow o f the respective downhill alignment o f the road. catchment, which will be quite high during rainy season, which inturn would require proper planning o f drainage systems. Dustgeneration from vehicular movement increases air pollution. 1Enforce speed limit o f vehicles. Noise pollution likely from vehicular 1Maintain traffic size movement. movement. 1Discourage use o f horns. ........................................................................................................................................................... Road construction i s likely to increase landscape scars along the road alignment. 1Such damage cannot be avoided but can be Inaddition ifthe construction spoils minimized through re-plantation o f indigenous are disposed off improperly, the species and greenery development. ground vegetation would be destroyed which will be visible from a distance. 77 Annex 8: ProjectPreparation and AppraisalTeam Members Table 1: ProjectProcessingSchedule Planned Actual PCN Review Initial PID to PIC Initial ISDS to PIC Appraisal 7/14/2008 7/25/2008 Negotiations 911212008 Board/RVP approval 9/30/2008 913Q/2008 Planned date of mid-term review 9/30/2009 Planned closing date (Social Safety 9/30/2010 Nets Project) Key institutionsresponsiblefor preparationof the Program: Ministry of LocalDevelopment Ministry of Agriculture and Cooperatives(Department of Agriculture) Ministry of Water Resources(Department of Irrigation) Table 2: ProjectPreparationand AppraisalTeam Members Name Title Unit Gayatri Acharya Sr. Economist, Task Team Leader SASDA Mohamed Ihsan Ajwad Economist, co-Task Team Leader SASHD Shyam S. Ranjitkar Sr. Irrigation Engineer SASDA RoshanDarshan Bajracharya Sr. Economist SASEP Bigyan Pradhan Sr. FinancialManagement Specialist SARFM Nastu P. Sharma Public Health Specialist SASHD Hiroko Imamura Sr. Counsel LEGES Kishor Uprety Sr. Counsel LEGES Thao Le Nguyen Sr. Finance Officer LOAFC Narayan D. Sharma Procurement Consultant ConsultantISASDT Kiran Ranjan Baral Sr. Procurement Specialist SARPS Surendra G. Joshi Sr. Transport Specialist SASDT Drona Raj Ghimire Consultant, Environment ETCISASDI SamanthaForusz Sr. Social Development Specialist SASDI ChaohuaZhang Sr. Social Development Specialist SASDI Stephanie Borsboom Consultant SACNA Kalanidhi Subbarao Consultant Human Development Consultant/AFTH1 Tara Shrestha Team Assistant SASDO Lilac Thomas Program Assistant SASDO Inaddition to the core team membersnoted above, the project benefited from the inputs of country and thematic specialists in and outside the Bank in the rapid review and preparation process required for an emergency operation preparedunder OPIBP 8.00. These included Sima W. Kanaan (Sr. Operations Officer, OPCFC); Laura E. Bailey (Sr. Operations Specialist, OPCFC); Talib Esmail (Sr. Operations Officer, SARDE); Rajib Upadhya, (Sr. External Affairs Officer, SAREX); Daniel J. Boyce (Country Program Coordinator, SACNA); Rajashree S. Paralkar (Sr. Country Officer, SACSA); Animesh Shrivastava (Sr. Agriculture Economist, SASDA); Johannes Georges Pius Jansen (Sr. Agriculture Economist, SASDA); Gregory Keith Ellis (Sr. Operations Officer, 78 OPCFC); Pauline C. Zwaans (Consultant, OPCCS); Donna Thompson (Sr. Financial Management Specialist, SARFM); Qaiser M. Khan (Lead Human Development Specialist, SASHD); Sean Bradley (Sr. Social Development Specialist, AFTCS); Carlo del Ninno (Sr. Economist, HDNSP); Brigitte Duces (Consultant, SARDE); Lalima Maskey (Country Program Assistant, SACSA); Philip B. O'Keefe ((Lead Social Protection Specialist, SASHD; Mona Sur (Sr Economist, ARD); Dominique Hyde (Deputy Country Director), Siemon Holleman, Kimberly Deni and Leela Raj Upadhyay from World Food Programme (WFP); Gillian Mellsop (Representative) and Monique Beunfrom UNICEF; Representatives of SIMUWinrock,, United Missionto Nepal (UMN),CARE- Nepal, AECIFNCCI, Practical Action Nepal, Oxfam Nepal and NEFEJ who joined a CSO consultation held at the Public Information Centre on July 24th and members of the Government of Nepal-FAO/WFP/IFAD/AsianDevelopment Bank/World Bank Interagency Rapid Assessment Mission 21-31July 2008. 79 MAP SECTION IBRD 36460 80° 82° 84° EMERGENCY FOOD PROJECT Humla MID AND FAR WESTERN DISTRICTS Crop loss: 40-60% and For detail, see even more in few VDCs inset at right. FOOD SECURITY PHASE: People affected: 18,800 NOT REPORTED AS CRITICAL Mugu C H I N A PHASE III ­ WARNING OF DETERIORATING FOOD INSECURITY Crop loss: 20-50% HUMLA People affected: 14,300 PHASE IV ­ ACUTE FOOD AND LIVELIHOOD CRISIS BAJHANG DISTRICT BOUNDARIES 30° 30° Dolpa ZONE BOUNDARIES DARCHULA Bajura Crop loss: 40% Crop loss: >40% People affected: 5,200 DARCHULA HUMLA INTERNATIONAL BOUNDARIES People affected: 32,600 DarchulaI Source: Food Security Phase Classification Map, June 2008, World Food Kalikot MUGU BAJHANG Programme, Food Security Monitoring and Analysis System. BAJURA L Crop loss: 50-70% I People affected: 42,400 A Chainpur MUGU Saifaidi C BAITADI K T BAJURA H JUMLA DOLPA I ACHHAM KALIKOT A N DOTI NEPAL Dadeldhura Dipayal K A R N A L I H E Jumla DOLPA JUMLA A DADELDHURA ACHHAM DOTI KALIKOT DAILEKH A Achham JAJARKOT Mahendranagar Achham S Crop loss: >45% M MUSTANG People affected: 95,500 RUKUM KANCHANPUR Ataria DAILEKH I (further verification underway) SURKHET KAILALI JAJARKOT MYAGDI I I R KAILALI Dailekh G SALYAN Crop loss: 60-70% Dhangadhi SURKHET Jajarkot RUKUM R A MANANG People affected: 22,800 Jajarkot L Rukum Kailali Crop loss: 40-80% ROLPA Birendranagar A BARDIYA People affected: 55,800 Crop loss: >20% E People affected: 13,700 BAGLUNG SALYAN H AWMYAGDI BANKE BARDIYA Salyan H T I D G A N D A K I I N D I A Chisapani A P 86° 88° Libang BAGLUNG KASKI LAMJUNG GORKHA B R ROLPA Baglung Gulariya Kohalpur T Pokhara Besishahar RASUWA Tulsipur PYUTHAN GULMI B Dhunche Tribhuuvannagar Pyuthan Tamghas PARBA A Mt. Everest 28° 28° Nepalganj BANKE G SYANGJA Gorkha M Sandikharka A DHADING NUWAKOT T I Kodari TANAHU Bidur A ARGHAKHANCHI Tansen Mugling SINDHUPALCHWAK R DANGDEUKHURI PALPA BarhabiseDOLAKHA L U M B I N I KATHMANDU U H Koilabas KAPILBASTU Butwal Bharatpur Naubise Lamosangu BHAKTAPUR SOLUKHUMBU NAWALPARASI Lalitpur P Jiri T SANKHUWASABHA TAPLEJUNG RUPANDEHI Dhulikhel CHITWAN Banepa M Bhairahawa Bhimphedi Bhaktapur Taulihawa N K A Parasi A K R MAKWANPUR LALITPUR KAVRE RAMECHHAP Num NEPAL A Hetauda A E Bhikhathori Y A M Taplejung Ramechhap N O INDIA EMERGENCY FOOD PROJECT I N OKHALDHUNGA R BHOJPUR C SINDHULI I N D I A PARSA A Sindhulimadi KHOTANG Bhojpur S THUM Phidim BARA A To Ghazipur T Bhaduare TERHA H FOOD SUFFICIENCY STATUS: PRIMARY ALL-WEATHER HIGHWAYS Birgunj Kalaiya J AHA ARI G HDhankuta PANCHTHAR To Gangtok FLOOD AFFECTED/FOOD INSECURE GRAVELLED/EARTHEN ROADS SARLAHI Dholkebar DHANKUTA Ilam Raxaul RAUTMalangwa DHANUSHA UDAYPUR I DEFICIT (PRODUCTION LESS BY MORE THAN INTERNATIONAL AIRPORTS MAHOTT A Dharan I ILAM 10% REQUIREMENT) SIRAHA Gaighat Gaur SUNSARI DOMESTIC (PAVED) AIRPORTS Janakpur S Siliguri Lahan MARGINALLY DEFICIT (PRODUCTION LESS BY UP TO Damak Siraha 10% OF REQUIREMENT) SELECTED TOWNS AND VILLAGES Jaleswar To Muzaffarpur SAPTARI MORANG Inaruwa Chandragadhi MARGINALLY SURPLUS (PRODUCTION WITHIN MUNICIPALITIES Jaynagar JHAPA Rajbiraj 10% MORE THAN REQUIREMENT) Bhadrapur BANGLADESH NATIONAL CAPITAL Biratnagar SURPLUS (PRODUCTION MORE BY >10% REQUIREMENT) Jogbani DISTRICT BOUNDARIES ZONE BOUNDARIES This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information 0 25 50 75 100 Kilometers shown on this map do not imply, on the part of The World Bank INTERNATIONAL BOUNDARIES Group, any judgment on the legal status of any territory, or any To endorsement or acceptance of such boundaries. To 0 25 50 Miles Purnia Dinajpur 26°80° 82° 84° 86° 88° 26° SEPTEMBER 2008