The World Bank Project for Strengthening the National Rural Transport Program (P132750) REPORT NO.: RES32135 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PROJECT FOR STRENGTHENING THE NATIONAL RURAL TRANSPORT PROGRAM APPROVED ON DECEMBER 23, 2013 TO THE GOVERNMENT OF NEPAL TRANSPORT & DIGITAL DEVELOPMENT SOUTH ASIA Regional Vice President: Ethel Sennhauser Country Director: Qimiao Fan Senior Global Practice Director: Jose Luis Irigoyen Practice Manager/Manager: Karla Gonzalez Carvajal Country Manager: Task Team Leader: Faris H. Hadad-Zervos Sri Kumar Tadimalla Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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The World BankProject for Strengthening the National Rural Transport Program (P132750)
REPORT NO.: RES32135
RESTRUCTURING PAPER
ON A
PROPOSED PROJECT RESTRUCTURING
OF
PROJECT FOR STRENGTHENING THE NATIONAL RURAL TRANSPORT PROGRAM
APPROVED ON DECEMBER 23, 2013
TO
THE GOVERNMENT OF NEPAL
TRANSPORT & DIGITAL DEVELOPMENT
SOUTH ASIA
Regional Vice President: Ethel Sennhauser Country Director: Qimiao Fan
Senior Global Practice Director: Jose Luis IrigoyenPractice Manager/Manager: Karla Gonzalez Carvajal
Country Manager:Task Team Leader:
Faris H. Hadad-ZervosSri Kumar Tadimalla
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The World BankProject for Strengthening the National Rural Transport Program (P132750)
ABBREVIATIONS AND ACRONYMS
CSMS Construction Site Monitoring SystemDO Development ObjectiveDOLIDAR Department of Local Infrastructure Development and
Agricultural RoadsDTO District Technical OfficeFY Financial YearGON Government of NepalIDA International Development AssociationM MillionMTR Mid Term ReviewMPI Maintenance Performance IndicatorOHS Occupational Health and SafetyPAD Project Appraisal DocumentPDO Project Development ObjectiveRAIDP Rural Access Improvement and Decentralization ProjectRuTIMS Rural Transport Infrastructure Management SystemSDR Special Drawing RightsSNRTP Strengthening the National Rural Transport Program USD United States Dollar
The World BankProject for Strengthening the National Rural Transport Program (P132750)
Note to Task Teams: The following sections are system generated and can only be edited online in the Portal.
BASIC DATA
Product Information
Project ID Financing Instrument
P132750 Investment Project Financing
Original EA Category Current EA Category
Partial Assessment (B) Partial Assessment (B)
Approval Date Current Closing Date
23-Dec-2013 15-Jul-2019
Organizations
Borrower Responsible Agency
Government of Nepal represented by Ministry of Finance Department of Local Infrastructure Development and Agricultural Roads (DoLIDAR)
Project Development Objective (PDO)
Original PDOThe project development objective for this operation is to enhance the availability and reliability of transport connectivity for rural communities in participating districts.OPS_TABLE_PDO_CURRENTPDOSummary Status of Financing
The World BankProject for Strengthening the National Rural Transport Program (P132750)
Policy Waiver(s)
Does this restructuring trigger the need for any policy waiver(s)?No
Note to Task Teams: End of system generated content, document is editable from here.
I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING
A. Project Status
1. The Project for Strengthening the National Rural Transport Program (SNRTP: IDA Credit 5336-NP and IDA Grant H899-NP) became effective on April 02, 2014. The current closing date of the Project is July 15, 2019. The total Grant and Credit amount from the International Development Association (IDA) is SDR 46.9 million (US$ 72 million equivalent) and SDR 18.36 million (US$ 28 million equivalent). The objective of the project is to enhance the availability and reliability of transport connectivity for rural communities in participating districts. The project has the following two components:
(a) Component A: Institutional Strengthening and Technical Assistance (US$ 19.7 million); and (b) Component B: Civil works (US$ 155.7 million), comprising: (i) routine and periodic maintenance of roads and crossing
structures (Window 1: US$ 50million); and (ii) road upgrading and rehabilitation, and new crossing structure construction and rehabilitation (Window 2: US$ 105.7 million).
2. The last implementation review carried out in March 2018 observed notable progress in many of the works already awarded and in completing the preparatory work for procurement of the balance of works. The review also noted that the Project has been addressing various concerns identified and actions agreed in the earlier implementation support review in August 2017), e.g., (i) enhanced monitoring of labor camps; (ii) developing Occupational Health and Safety (OHS) guidelines and training of contractors and project teams; (iii) revision of model bid documents with explicit provisions for OHS and prevention of child labor; and (iv) significant increase in use of Rural Transport Infrastructure Management System (RuTIMS) and Construction Site Monitoring System (CSMS). In view of this good progress, the ratings for Implementation Progress (IP) and Safeguards compliance have been upgraded to Moderately Satisfactory. The rating for the achievement of Development Objective (DO), however, has been retained as ‘Moderately Unsatisfactory’ as the Project is unlikely to meet some of its current physical targets, mainly because of the increase in per unit cost of some of the civil works, further explained in the following section.
3. As of May 10, 2018, out of total US$ 100 million of IDA support, the project has disbursed US$ 41.5 million and an additional US$ 13 million is in the pipeline in terms of works completed for which claims are under preparation. Of the balance, US$ 38 million is already committed and in various stages of implementation and the remaining about US$ 7 million is also expected to be committed within Q1 of FY19. Based on the current state of progress of implementation and procurement, the Project is likely to substantially utilize all the funds and achieve the revised targets being proposed before the current closing date of July 15, 2019. There are no outstanding audit reports or audit issues.
B. Rationale for Restructuring
4. Although the project has been making reasonable progress on several fronts, targets of various categories of civil works, component costs and category allocations need revision due to inter alia increases in costs of some activities and actual field-level requirements encountered at the time of implementation, as detailed below.
(a) Component A: Institutional Strengthening and Technical Assistance: the cost of this component has significantly increased (by an estimated US$7m) mainly because the Project had to significantly shore up the level and quality of
The World BankProject for Strengthening the National Rural Transport Program (P132750)
implementation to come out of problem-status, through more intensive monitoring as well as enlist additional consulting support. These costs also increased due to inclusion of three additional districts that were severely affected by the devastating earthquake of April 2015, which added about 500 km of roads under routine maintenance, about 70 km of roads under periodic maintenance, and about 22 meters of crossing structure under new construction.
(b) Component B: Civil Works - Upgradation and rehabilitation of Roads and Crossing Structures: At the time of the appraisal, it was presumed that the roads that would be upgraded would be selected primarily from among the roads that were brought up to a specified quality standard as part of an earlier roads Project (Rural Access Improvement and Decentralization Development Project – RAIDP; closed: 2013). However, during implementation, quite a few other roads with relatively lower quality standard were included. Also, after the appraisal, the Nepal Rural Road Standard 2071 (geometric) was upgraded, which resulted in increase of drainage works, structural works and/or earthworks in the case of roads as well as crossing structures. In addition, the costs of labor and construction materials – originally estimated based on the earlier Project – turned out to be substantially higher during implementation. Due to a combination of these factors, the cost of upgradation has substantially increased in the case of both roads and crossing structures. In view of this, and the amount of funds available, it is proposed to revise the targets for upgradation downwards: from 2,221 km to 1,210 km in the case of roads and from 4,500 meters to 1,270 meters in the case of crossing structures.
(c) Component B: Civil Works - Periodic and Routine Maintenance of Roads: The length of roads that required periodic maintenance turned out to be lower than that envisaged at the time of appraisal, mainly because the road network in hill districts was mostly comprised of earthen roads, wherein the demand is more for upgradation to a gravel or black-top road instead of periodic maintenance (which only includes works such as grading to cover loss of camber, maintaining shoulders and repairing corrugations). Conversely, the length of roads being covered under routine maintenance turned out to be substantially higher because of the higher share of earthen roads in the hill districts, and the addition of three earth-quake affected districts (see bullet (a) above). Accordingly, in keeping with the actual requirements, the target for periodic maintenance of roads is being revised from 2,309 km to 1,400 km, and that of routine maintenance from 3,067 km to 5,500 km.
(d) Component B: Civil Works - Periodic and Routine maintenance of Crossing Structures: Here, the bridges that required maintenance, especially routine maintenance, turned out to be less than the numbers envisaged at the time of appraisal. In keeping with the actual requirements, the targets for the periodic maintenance and routine maintenance of the crossing structures are proposed to be revised from 2,469 meters to 2,100 meters and 5,850 meters to 4,000 meters, respectively.
(e) At the time of project preparation (see Maintenance Performance Indicators table attached to Schedule 2), it was envisaged that the payments under category (2) – that is, for Works under Part B.1 (Periodic and Routine Maintenance) of the project – would be met with funds from IDA (2%), other Donors (23%), and the Government of Nepal (75%). Accordingly, the per unit payments from IDA/Donors for each type of maintenance works were determined at a level of 25% (representing the then envisaged share of funding from IDA and other donors) of the estimated per unit cost of that type of maintenance. However, during project implementation, no other donors came on board, resulting in IDA and GoN sharing the costs of these works in the ratio of 2:98. In line with this, it is proposed to revise the per unit payments in the MPI table to a level of 2% - that is, the share of IDA support - of the per unit cost of undertaking the respective type of maintenance. Correspondingly, it is proposed to limit the Percentage of Expenditures to be Financed for Category (2) Works to 2%.
5. The Ministry of Finance, Government of Nepal, has endorsed the proposal of the implementation agency to restructure the Project, through formal revision of the indicator targets, component costs and loan allocation, in line with the current realities and requirements and what could be realistically achievable within the current closing date, that is, July 15, 2019 (Ref. Government letter No. IECCD/MoFALD/WB/2074-75/2587, dated June 4, 2018).
II. DESCRIPTION OF PROPOSED CHANGES
C. Proposed Changes
The World BankProject for Strengthening the National Rural Transport Program (P132750)
6. In view of the above, it is proposed to restructure the project with the following changes:
(a) Revision of costs of the two components, and the corresponding amounts to be financed through IDA credit and the Government of Nepal, as indicated in Table below:
Table 1: Revision of Components CostsFinancing Structure (US$ Million)
Original-PAD Proposed RevisionComponents/ActivitiesTotal GoN IDA Total GoN IDA
(b) Revision of the results framework, with changes of targets related to selected civil works, as listed in Table below:
Table 2: Revision of Results FrameworksCumulative Target Values for
Y5 (End of Project)Intermediate Results Indicators Unit of Measure
As per PAD Proposed Revision
Improved maintenance planning Number of participating districts generating Annual Road Maintenance Plan
33 36
Improved transparency and accountability in the implementation of physical works
Number of participating districts using beneficiary monitoring mechanisms
33 36
Improved quality of civil works Number of participating districts with material testing laboratories that meet DoLIDAR standards
33 36
Rehabilitation and upgrading of district core road network roads to all-weather standards
km of roads upgraded/rehabilitated in participating districts.
2,221 1,210
Improved periodic maintenance of district core road network roads
km of maintainable district core road network roads undergoing periodic maintenance.
2,309 1,400
Improved routine maintenance of district core road network
km of maintainable district core road network roads undergoing routine maintenance annually
3,067 5,500
New or rehabilitated crossing structures on district core road network
Meters of new / rehabilitated crossing structures in participating districts
4,500 1,270
Improved periodic maintenance of crossing structures on district core road network roads
Meters of maintainable crossing structures on district core road network roads undergoing periodic maintenance
2,469 2,100
Improved routine maintenance of crossing structures on district core road network
Meters of maintainable crossing structures undergoing routine maintenance annually
5,850 4,000
(c) Reallocation of the IDA Grants across various categories in accordance with the above changes, in Section IV under Schedule 2 of the Finance Agreement as indicated in the Table below:
Table 3: IDA Category AllocationOriginal Proposed Revision
Category Amount of the Credit Allocated (expressed
in SDR)
Amount of the Grant
Allocated
Percentage Expenditure
Amount of the Credit
Allocated
Amount of the Grant
Allocated
Percentage Expenditure
The World BankProject for Strengthening the National Rural Transport Program (P132750)
(expressed in SDR)
to be Financed
(expressed in SDR)
(expressed in SDR)
to be Financed
1) Goods, works, non-consulting services, Training, Incremental Operating Costs and consultants’ services for the Project, other than Part B.1 thereof
TOTAL AMOUNT 18,300,000 46,900,000 18,300,000 46,900,000
(d) Revision to the Maintenance Performance Indicators (MPI) table to limit the Per Unit Payments to the share of IDA support only, that is, 2% of the Estimated Per Unit Costs of the works under part B1 of the project, as shown below.
Original[Basis:25% of estimated cost to be paid by IDA (2%) & other Donors (23%)]
Proposed Revised[Basis:2% of estimated cost to be paid by IDA]