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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE NATIONAL AGRICULTURAL TECHNOLOGY PROJECT CREDIT NO BD (Approved on February 7, 2008) TO THE PEOPLE'S REPUBLIC OF BANGLADESH FEBRUARY 12, 2014 Sustainable Development Department Agriculture, Irrigation and Natural Resources Unit Bangladesh Country Management Unit South Asia Region Report No: BD This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective December 29, 2013) Currency Unit = Bangladeshi Taka (tk) Taka = US$1 US$ = SDR 1 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS AGDP Agricultural Gross Domestic Product IPM Integrated pest management APL Adaptable Program Loan KGF Krishi Gobeshona Foundation AWD Alternate Wetting and Drying m million BARC Bangladesh Agricultural Research Council MT metric ton CCMC Community Collection Marketing Center M&E Monitoring and Evaluation CGP Competitive Grants Program MIS Management Information System CIG Common Interest Group NAEP National Agricultural Extension Policy DAE Department of Agricultural Extension NARS National Agricultural Research System DLS Department of Livestock Services NATP National Agricultural Technology Project DOF Department of Fisheries NATS National Agricultural Technology System EMF Environmental Management Framework NPV Net Present Value EOP End of Project PCT Procurement Core Team ERR Economic Rate of Return PCU Project Coordination Unit FIAC Farmers' Information and Advisory Center PDO Project Development Objective FM Financial Management PIU Project Implementation Unit FRR Financial Rate of Return PSC Project Steering Committee GAAP Governance and Accountability Action PVB present value of benefit Plans PVC present value of cost GOB Government of Bangladesh PY project year Ha hectare RDPP Revised Development Project Proposal Hortex Horticulture Export Development RYGM Rice Yield Gap Minimization Foundation SCDC Supply chain development component HVC High Value Crops SMF Social Assessment and Social HH Household Management Framework IA Implementing Agency SPGR Sponsored Public Goods Research IDA International Development Association USAID United States Agency for International IFAD International Fund for Agricultural Development Development WOP without project Regional Vice President: Country Director: Sector Director: Sector Manager: Task Team Leader: Philippe Le Houerou Johannes C.M. Zutt John H. Stein Simeon K. Ehui Ousmane Seck/Pushina Kunda Ng'andwe i

3 BANGLADESH RESTRUCTURING FOR THE NATIONAL AGRICULTURAL TECHNOLOGY PROJECT CONTENTS A. SUMMARY... 5 B. BACKGROUND AND RATIONAL FOR RESTRUCTURING... 6 C. PROJECT STATUS D. PROPOSED CHANGES E. APPRAISAL SUMMARY ANNEX 1. Results Framework and Monitoring ANNEX 2. Operational Risk Assessment Framework (ORAF) ANNEX 3. Economic and Financial Analysis ANNEX 4. Revised Project Costs and Financing ANNEX 5. Proposed Reallocation (SDR) ANNEX 6. Geographic coverage of the original project and the restructured project Annex 6(a). List of Selected Upazilas & Districts for NATP Annex 6(b). List of Selected Upazilas & Districts Being Added in the Restructuring ANNEX 7. Governance and Accountability Action Plan ANNEX 8. NATP (IDA 43860): Refund Status/Actions taken

4 BANGLADESH RESTRUCTURING OF THE NATIONAL AGRICULTURAL TECHNOLOGY PROJECT DATA SHEET Basic Information Date: February 12, 2014 Country Director: Johannes Sectors: Agricultural extension and research C.M. Zutt (50%); Crops (30%); Animal production Sector Manager/Director: Simeon K. Ehui/ John (20%) Henry Stein Themes Rural policies and institutions (P); Project ID: P Rural services and infrastructure (P) Team Leader: Ousmane Seck/Pushina K. Ng'andwe Environmental Category: B - Partial (co-ttl) Assessment Expected Effectiveness Date: March 12, 2014 Expected Closing Date: December 31, 2014 Lending Instrument: Adaptable Program Loan (APL) Additional Financing Type: Scaling-up Basic Information - Original Project Project ID: P Environmental Category: Category C Project Name: National Agricultural Technology Project Lending Instrument: Adaptable Program Loan (APL) Expected Closing Date: December 31, 2014 Project ID: P Restructured Project Financing Data []Loan [] Credit [X] Grant [] Guarantee[ ] Other Restructured Financing Plan (US$ m) Source Total Amount (US Sm) Trust Fund Grant: (TFO 16036) Total Project Cost: Recipient: People's Republic of Bangladesh Implementing Agencies: Ministry of Agriculture Building 4, Room 534 Bangladesh Secretariat Dhaka 1000, Bangladesh Tel (880-2) ; Fax: (880-2) agrsec@bacc-moe.gov.bd and Ministry of Fisheries and Livestock Building 6, Room 509 Bangladesh Secretariat Dhaka 1000, Bangladesh Tel: (880-2) Fax: (880-2) fishlivsec@pace-moe.gov.bd Client Information 111

5 Estimated Disbursements (Bank FY/US$m) FY Annual Cumulative Project Development Objective and Description Original project development objective: The objective of the project, which is the first phase in a series of three APLs, is to improve the effectiveness of the National Agricultural Technology System (NATS) in Bangladesh. Revised project development objective: The objective of the project is to improve the effectiveness of the national agricultural technology system, as measured by increase in agricultural productivity and farm income in selected districts. Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) Does the project require any waivers of Bank policies? [x]yes [] No []Yes [x] No []Yes [x] No [x]yes [] No []Yes [x] No [x]yes [] No []Yes [x] No []Yes [x] No []Yes [x] No []Yes [x] No []Yes [x] No Conditions and Legal Covenants: There are no conditions of effectiveness. Other standard covenants, including for project execution and fiduciary issues will be the same as in the Original Credit Agreement. 1v

6 A. SUMMARY 1. This Project Paper seeks Board approval for a Level-I restructuring of the National Agricultural Technology Project (NATP). The proposed changes include: (a) revision of the Project Development Objective; (b) triggering of new safeguard policies; (c) up-grading of the environmental category from C to B; (d) reallocation of Credit proceeds; and (d) the addition of grant financing in the form of a US$ million grant from the United States Agency for International Development (USAID) to support the costs linked to the scaling up of NATP. 1 This is the fourth restructuring of the project. The first restructuring became effective on June 16, 2011 and aimed at increasing the threshold for contracts for goods, works and consultants' services subject to Prior Review. The second was approved on December 23, 2012 with the objective of removing inconsistencies between the Development Project Proposal and the Financing Agreement. The third restructuring was approved on December 2, 2013 and extended the International Development Association (IDA) Credit closing date to December 31, Under the original Credit, research activities are national in scope, while extension investments cover 120 Upazillas in 25 of the 64 districts, and supply chain investments cover 20 Upazillas in 20 districts. The Government of Bangladesh (GoB) now considers the program to be its flagship program in the agriculture sector for institutional and policy reforms and for technology generation and dissemination. 3. Total financing of NATP currently amounts to US$82.0 million, financed through:(a) an IDA Credit (Credit 4386-BD - US$62.6 million), approved on February 7, 2008; and (b) an International Fund for Agricultural Development (IFAD) Loan (No. 739-BD - US$19.4 million), approved on December 13, Currently, US$ million have been disbursed, of which US$7.4 million during this fiscal year. Another US$8.4 million will be disbursed by June 30, 2014 bringing the total to US$15.8 million for this fiscal year. It is expected that further to the US$8.85 million of the projected unspent balance as of June 30, 2013 and the US$7.055 of the first tranche of the grant will also be fully exhausted by the closing of the project. 4. In the restructured project, agricultural research and project management activities would be national in scope; while the agricultural extension and supply chain development activities (SCDC) would be scaled up in a number of the most agro-climatically constrained and 2 underserved districts. For extension services, six new districts will be covered, and work in 5,000 villages located in 321 unions and 30 Upazillas. Supply Chain Development services will cover only five of these districts and within these, only five Upazillas (See Annex 6). 5. The restructuring would shift NATP's focus to a more intensive approach that would lead to a significantly higher increase in the adoption ratio of existing low-risk, high-reward technologies and foster farmers' linkages to markets. the target beneficiaries remain the samee.g., small and marginal farmers, including tenant/share cropping, landless, and female farmers. 1 The United States Agency for International Development (USAID) has pledged US$ million in grant financing through March 31, 2017 (TF071940). The first tranche of that grant, US$7.055 million, has already been approved and transferred to a child trust fund (TFO 16036). Additional tranches will be released based on grant funding requests and availability of the money, as per specifications of the donor. 2 Gopalgonj; Madaripur; Shariatpur; Magura; Sirajganj; and Bhola. 5

7 The restructured project is estimated to directly benefit about one million farmers, of which 30 percent of the adopters would be women, and it is expected to foster 530,000 sustained adopters. B. BACKGROUND AND RATIONAL FOR RESTRUCTURING 6. In its Sixth Five Year Plan (FY201 1-FY2015), GoB recognizes the need to enhance the income earning opportunities for workers remaining in agriculture by raising land productivity and increasing the diversification of agricultural production to address growth and employment imbalances. Agriculture is recognized as essential to poverty reduction and food security, and the binding constraints to land that result from population growth and the pressures of urbanization make enhancing land productivity a top priority. In addition to improvements in productivity, significant emphasis is also placed on diversifying both crop and non-crop agriculture in order to raise farm incomes and promote commercialization. The Bangladesh Country Investment Plan (CIP), approved in 2010, provides guidance on priority investments to increase and diversify food availability in a sustainable manner and to improve access to food and nutrition. 7. GoB has made impressive progress in enacting institutional and policy reforms to support a more decentralized and demand-driven agricultural research and extension system. Some of the key achievements include: (i) successfully passing an amendment to the Bangladesh Agricultural Research Council (BARC) Act that provides a legal framework for BARC to set the agenda for agricultural research and have greater control over resource generation and management; (ii) setting up, for the first time in the country, a comprehensive framework and a multidisciplinary platform for both competitive and sponsored public goods agricultural research; (iii) promoting a demand-led and decentralized planning and funding mechanism for agricultural extension; and (iv) developing new agricultural extension policies for crops and for livestock. Apart from the institutional reforms being implemented, NATP has had notable achievements which are elaborated below. 8. A demand-led priority setting of research activities, along with a competitive grant mechanism has been established for the first time in the country and demonstrated to be effective in accelerating technology generation and transfer. Twelve public institutions are implementing 108 Sponsored Public Good Research sub-projects and 92 competitive grant sub-projects have been awarded and are being successfully implemented. This has led to delivery of an increased number of improved agricultural technology packages; translated into technical bulletins for easy use by extension agents and farmers. This includes inter alia high yielding stress tolerant varieties, especially for coastal saline, drought, and flood prone areas for rice as well as summer tomato and jute. 9. Farmers' Information and Advisory Services (FIACs) established at the sub-district level are becoming active one-stop rural hubs for technology access and dissemination that integrate crop, livestock, and fishery services. This has resulted in widespread adoption of recommended technologies and agricultural practices. Over 2.1 million farmers, representing 43 percent of the farm households in the project area, have adopted recommended technology packages and agricultural best practices that have increased their productivity. A special drive has been initiated to quickly multiply and make seeds available to farmers where Seed Producer Groups are fast emerging as specialized seed producing small and medium enterprises. It is expected that 6

8 adoption of recommended technology packages will be enhanced with an additional 250,000 farmers during the next season. 10. Finally, a program on supply chain development is also being successfully piloted in 20 Upazillas involving 12,438 farmers and will enable them to access city-based traders and supermarkets. An independent impact evaluation is being carried out for the project and will inform on the change in household incomes. 11. In terms of enhancing institutional efficiency of national agricultural research and extension systems, an enabling environment and an appropriate incentive framework for career development is being pursued. The skills gap and shortfall in manpower in research and extension are being addressed through continuous on the job training, mentoring and coaching, and through long term in-country and overseas training. The grant will leverage all these emerging good practices, lessons and impacts to further accelerate agricultural productivity and increase farmer incomes for the future. 12. USAID is providing the grant as part of its assistance strategy to help harmonize, coordinate and improve cost effectiveness in service delivery by streamlining implementation and simplifying administrative procedures through common implementation arrangements. The Grant will contribute to further improving the effectiveness of the implementation of the new National Agricultural Extension Policy (NAEP), strengthen the system created by the amended BARC Act, and further harmonize with Government programs in line with the Paris Declaration and the five Rome Principles for Sustainable Global Food Security. C. PROJECT STATUS 13. Despite a slow start, the project picked momentum and disbursed about 80 percent by December 31, The Project is rated satisfactory given that most outcome indicators and project end-targets have already been met. The GoB has made impressive progress in enacting institutional and policy reforms to support a more decentralized and demand-driven agricultural research and extension system. Some of the key project achievements include: (a) the Bangladesh Agricultural Research Council (BARC) 3 Act amendment, which provides a legal framework for improved governance, institutional responsibility and management systems of the national agricultural research institutes; (b) establishing a comprehensive framework and a multidisciplinary platform for competitive and for sponsored public goods agricultural research, of which about 40 percent cover the most agro-ecologically constrained ecosystems; (c) demandled and decentralized planning and funding mechanism for agricultural extension; (d) new agricultural extension policies for crops and for livestock; and (e) improved research and extension services, through continuous on the job training, mentoring and coaching, and long term in-country and overseas training. 14. An independent impact evaluation (September 2013) based on a sample survey of 6044 Common Interest Groups (CIG), and Non-CIG/control farmers, evaluated the major agriculture The amended Act is yet to be operationalized due to substantial delays in the selection process of consultants and the limited local capacity for implementing critical related studies. 7

9 technologies under NATP, which account for 60 percent of the demonstrations. The major findings include: (a) The number of total adopters in the project area is estimated at 1,180,7654 which are 50 percent more than the end of project (EOP) target. Weighted by farm size wise distribution, the targeted adoption rate by EOP is 19.1 percent of the total farmers, as against 28.7 percent estimated for the project. The highest adoption rate is among marginal farmers (31. percent). (b) Agriculture productivity in the project area has increased between 14 to 52 percent for crops, 54 to 65percent for livestock, and 60 to 76 percent for fisheries (as compared to a projected average increase of 8 percent over the baseline values established in the Project Appraisal Document). Productivity increases are higher for paddy, wheat, mustard, tomato and eggplant (brinjal) amongst marginal farmers; for cow rearing and tilapia farming for small farmers; and for lentil and carps farming for medium farmers; and (c) Household net income increased up to 159 percent from 47 percent for marginal farmers; 31 percent for small farmers, and 23 percent for medium farmers over the baseline. Depending on farm type, the net income increase are as follows: (i) 23 to 47 percent for rice based farming system; (ii) 58 to 78 percent for rice plus diversification with pulses/oilseeds/vegetables; (iii) 54 to 55 percent for rice with diversification plus cow rearing; and (iv) 77 to 135 percent for rice plus diversification with beef fattening. Farm income of landless and near landless families who adopted technology has increased by: (i) 51 percent for cow rearing; (ii) 68 percent for fish rearing; and (iii) 159 percent for beef fattening. The results show that mixed farming system with livestock and/or fish farming generate substantial impact on farm incomes, particularly for the 89 percent of farm families who are near landless, marginal, and small farmers. These achievements are highly commendable with regard to the set target of 10 percent on average by EOP. Further improving the performance of the project requires strengthening the effectiveness of Producer Organizations at Union and Upazila levels, the federations of CIGs, to leverage other services for farmers through close partnership with Local Government, financial institutions and private operators. D. PROPOSED CHANGES 15. The original Project Development Objective (PDO) is to improve the effectiveness of the NATS in Bangladesh. The PDO is proposed to be revised to match the performance indicators. The proposed new PDO is to improve the effectiveness of the NATS, as measured by increase in agricultural productivity and farm income in selected districts. The restructured project will contribute to achieving the objective by scaling-up best agricultural technology packages and practices under the original credit to six more districts. 16. The restructuring will trigger safeguard policies on Environmental Assessment (OP/BP 4.01) and Pest Management (OP 4.09) that were not triggered for the original credit, which was largely perceived as a research project with limited project activities on the ground. The project 4 Technology adoption is considered, only if adopted for more than one season and adopters are counted only once irrespective of number of technologies adopted by them. 8

10 will also trigger the Indigenous Peoples Safeguard (OP 4.10) given that the project to cover areas with some tribal population (less than one percent of total project beneficiaries). Hence, the safeguard category for the restructured project will be category B and the original project would be reclassified as category "B". 17. Other changes include: (a) reallocating credit proceeds amongst expenditure categories to meet the actual project cost requirements; and (b) integrating the activities to be financed by the USAID grant into the overall NATP project scope, and thereby also integrating the baseline and target values of performance indicators into the Results Framework, which has been further streamlined. The updated version of the project Operational Manual was finalized on June 10, 2013 to reflect the proposed changes. 18. The proposed reallocation involves: (a) a decrease in Category (2) "CGP Grants under Part L.A of the Project" by SDR 650,000.00; (b) a decrease by SDR 1,220, of Category (3) "SPGR Grants under Part 1.B of the Project"; (c) an allocation of SDR 543, to 5(a) "Works, goods, local consultants' services, and Operating Costs"; and (d) an allocation of SDR 1,326, to 5(b) "Training and foreign consultants' services" for additional training for farmers, fiduciary teams of agricultural research institutes and scientists. The decrease in category (2) and in category (3) is justified given that the project was not in position to call for a 3rd round of sub-projects' proposals in the absence of clear direction for a follow-up operation to allow completion of these sub-projects. The percentage of expenditures to be financed (including taxes) remains unchanged. The revised allocation by category of expenditure is presented in Annex 5. Changes in the components are described below. 19. Component 1. Agricultural Research Support (Total: Original Credit: US$33.60 million; new USAID grant: US$1.7 million). The main objective of the restructuring is to scale-up the CGP and Sponsored Public Goods Research (SPGR) activities that were initiated under sub-components 1.A and 1.B of the project. The restructured project will support additional batches of CGP and SPGR Grants. The grants will have national coverage, but particular emphasis on coastal zones and hill districts that are more prone to natural disasters and climate risks and that have proportionately higher populations of poor and vulnerable people. The activities will build on the pluralistic agricultural research structure developed under NATP, particularly participatory and demand driven research methodologies. This component will help develop and refine technologies that can bridge yield gaps and diversify production, including the introduction of high-value commodities and low-cost, high-impact post-harvest technologies and marketing services. It would finance small equipment for subprojects, allowances for scientists and operating costs. 20. The restructured project will also contribute to enhancing institutional efficiency of the National Agricultural Research System (NARS) by supporting a selected program of skills development through short-term in-country training and a number of trainings abroad. These trainings would predominantly focus on the development of the technical skills and research capacity that are specifically needed to manage the SPGR and CGP sub-projects. 21. Component 2. Agriculture Extension Support (Total: Original Credit: US$ million; USAID Grant: US$4.355 million). The objective of this component is to promote 9

11 access to appropriate technology packages (including quality seeds and small equipment) and enhance their adoption by beneficiaries through a decentralized, demand-led extension service that is knowledge-based and accountable to farmers. It will extend the activities related to formation, mobilization, training and strengthening of CIGs under sub-components 2.A and 2.B to six new districts and 30 new Upazilas using USAID grant money. The component will focus on better targeting, formation and strengthening of village level CIGs. It will use the same institutional arrangements as set-up under the original credit. 22. To facilitate two way flow of information between farmers and other stakeholders, restructured project will also assist with additional short term training, exchange visits and workshops on key technologies in the new districts as set under Sub-component 2.C. Finally, the component will support the establishment of 200 FIACs at Union level as one-stop shops to bring knowledge exchange and interaction with extension services closer to the farmers. Thirty of the best performing FIACs will be equipped with ICT devices on a pilot basis. This component will be implemented by the Department of Agricultural Extension (DAE), the Department of Livestock Extension (DLS), and the Department of Fisheries (DOF). 23. Component 3. Development of Supply Chains (Total: Original Credit: US$9.8 million; USAID Grant: US$0.5 million). The objective of this component is to increase and diversify sources of income for project beneficiaries. Sub-component 3.A, will assist in developing additional Commodity Collection and Marketing Centers for high value commodities; pilot demonstration of post-harvest technologies; and provide capacity building of farmers, traders and entrepreneurs. It will further promote linkages of beneficiaries with traders, processors, transporters, and other private service providers. A prototype IT system will test how such actors can be linked to the supply chain network. Sub-component 3.B, will provide funds for training of the line departments' staff to improve their support to farmers in production and marketing. This sub-component will also support training on business development, workshops and exposure visits to emerging entrepreneurs in the value chain. Additional short term training will be provided to the implementing agency (IA), both in-country and abroad. 24. Component 4. Project Management and Coordination (Total: Original Credit: US$10.8 million; USAID Grant: US$0.5 million).the objective of the component is to ensure efficient coordination and implementation of the project as a whole. The implementation arrangements for project management and coordination remain the same. The USAID grant will finance the additional costs associated with the project management and coordination of project activities. 25. Results Monitoring and Evaluation. The Monitoring and Evaluation (M&E) system established under NATP will be continued, consisting of: (a) internal implementation monitoring by each Project Implementation Unit (PIU); (b) annual participatory monitoring by beneficiaries/groups; and (c) internal and external periodic assessments and evaluations, including concurrent progress monitoring, participatory stakeholder workshops, mid-term review, and EoP outcome evaluation and implementation completion review. The Management Information System (MIS) of NATP will be updated to accommodate the activities under the restructuring. The results framework under NATP has been revised to incorporate the baseline 10

12 and targets for the new districts as outlined in Annex 1. There will be a consolidated Implementation Completion and Results Report at project closure (December 31, 2014). 26. Sustainability. The key indicator for the sustainability of the design, strategy, and operational models of the project is the strategic support that the Government of Bangladesh is providing to NATP. The Ministry of Agriculture is showcasing NATP as its flagship program for the sector. This is further reinforced by the promulgation of the newly drafted Agriculture Extension Policy and Livestock Extension Policy both of which were substantially informed by the successful implementation experience of NATP. 27. Institutional Sustainability will be ensured by establishing robust farmers' institutions in the form of CIGs, and building their capacity at the village level prior to networking at the intervillage level. All management efforts and coordinating activities aim to institutionalize and build capacity among these groups and organizations to ensure their effective functioning to benefit farmers and apply principles of good governance and accountability. 28. Financial Sustainability of farmer institutions is being ensured through: (a) all equipment and investments are owned and managed by farmer institutions, thus ensuring proper maintenance by generating adequate revenue (e.g. commissions in marketing and user fees for collective equipment); (b) support through the project is restricted to one time investments, including capacity building costs; and (c) all operational expenses are generated by the farmers out of their increased incomes through adoption, marketing, input supply and/or value addition. E. APPRAISAL SUMMARY 29. The restructuring would provide parallel co-financing through the USAID grant to support additional project activities as follows: (a) provision of additional batches of CGP Grants and SPGR Grants for the carrying out of additional sub-projects under Parts 1.A and 1.B of the Project; (b) carrying out of activities under Parts 2.A, 2.B, 3.A and 3.B of the Project in selected additional districts and Upazilas; (c) carrying out of selected additional short-term training activities under Parts 1.C and 2.C of the Project, and establishment of FIACs as a one stop shop for farmers for knowledge exchange and interaction with extension services; and (d) provision of technical and logistical support for administering and coordinating the above-mentioned additional Project activities. The above-mentioned activities will be incorporated under a new Part 5 of the Project in Schedule 1 to the Financing Agreement. More details of the additional activities financed with the additional financing under each component are provided in the following. F. Financial and Economic Analysis. NPV= US$28.0 Million; FRR= 23.4%; ERR= 25.2% 30. Grant Benefits. A cost-benefit analysis has been conducted to estimate the benefits associated with the Additional Financing based on the ongoing NATP experiences. Major sources of benefits quantified are from: (a) increase in the yield of major cereal and high value crops (HVC)-for example, paddy, cabbage, tomato, brinjal, cucumber, bitter gourd, and potato by about 12 to 16 percent in 360,445 farms; (b) reduction in production cost for boro paddy by about 18 percent in 44,555 farms; (c) increase in livestock productivity by about 26 to 40 percent 11

13 for milk and meat in 78,003 farms; (d) increase in fish productivity by about 45 percent in 39,002 fish farms; and (e) increase in producer price realization by about 15 percent in 8,100 farms. These farm level benefits are generated mainly through improved and tested technologies and practices selected from NATP area impacts. As compared to NATP, the intensity of coverage in the expanded project area (6 new districts) will be 50 percent higher and is expected to be more cost-effective. In addition, contrary to NATP, further interventions will include: (a) development of more integrated CIGs covering crops, livestock and fisheries; (b) provision of small collective equipment and quality seeds to CIGs; and (c) inclusion of non-cig members in trainings and exposure visits. The Economic and Financial Analysis (EFA) has conservatively considered a phased technology adoption process extending over a five year period from initial adoption in order to capture the full technology benefits. 31. Returns to Investment: The project beneficiary profile includes women (30 percent), landless agricultural labor households (5 percent), landless farm households with less than 0.02 ha of land (17 percent), marginal and small farm households with less than one ha of land (68% percent).the estimated economic rate of return (ERR) varies from 16.3 percent (value chain development) to 25.8 percent (agricultural extension support).the overall ERR for the project is 25.2 percent, with a NPV of US$28 million. Agricultural research investments are allocated proportionately to the crop, livestock, fisheries, and value chain development extension interventions. Annual incremental financial benefits are projected at US$16.8 million, contributed by agricultural extension support-crops (54 percent), livestock (26 percent), fish (16 percent), and supply chain development (4 percent).the financial rate of return (FRR) is estimated at 23.4 percent. Sensitivity of project returns to 20 percent cost escalation, 20 percent drop in technology adoption, CIG sustainability and agricultural productivity levels and delay in benefits by two years was tested. The ERR remained above 17.3 percent and its probability of exceeding the 12 percent is 91 percent. 32. Income, Employment and Poverty Impacts. On an average farm, financial income is projected to increase by 35 to 46 percent as a result of the intervention. Mixed farming systems are predominantly practiced with a combination of crops, livestock and/or fisheries in the new area. With convergence, and full adoption of demonstrated technologies, incremental farm financial income for mixed farming systems will range from US$157 to US$172 per annum. Based on the poverty lines defined for rural Bangladesh, incremental gross margin will be able to lift at least 308,300 rural poor above poverty line, which is equivalent to 11 percent of the beneficiaries. Annual farm employment incrementally generated will be 421,440 person days to benefit about 40 percent of the total landless labor households within the new area. 33. Technical. The restructured project is designed to address technology gaps in the most sensitive and hitherto underserved areas of Bangladesh. These areas are characterized by geophysical and bio-ecological constraints that limit production and hinder productivity improvement. The grant also seeks to coordinate the delivery of services by crop, fishery, and livestock line agencies. To raise rural incomes, the grant addresses issues throughout the supply chain. Farm advisory services will be strengthened to disseminate information about farming systems, post-harvest solutions, and issues involving grading, transporting, and marketing. Farmers' adoption of technologies is facilitated by effective village and inter-village farmer organizations which are well-informed and well-placed to influence farm-level decision making 12

14 among their peers. The provision of seeds, improved livestock breeds, and demonstration of small equipment and machinery, and services that link farmers to markets are strategically planned to overcome the constraints that have traditionally impaired adoption rates of technology packages. The inclusion of the bottom poorest farmers through wealth ranking and participatory targeting will ensure that the technology packages are appropriately customized to their resources and capabilities. The focus on agro-ecological issues such as climatic vulnerabilities and resulting mitigation measures will further improve the coping mechanisms and resilience of farmers to external shocks including disasters. 34. Social Safeguards. The expanded activities under the restructured project are unlikely to adversely affect any disadvantaged group. Research activities are determined through effective consultations with the relevant stakeholders to ensure that the technologies developed by the researchers are needs-based and suited to local agro-ecological conditions. The technology adoption activities are highly participatory in nature and can therefore be expected to be selfselectively pro-poor, including the landless and women. Because the restructured project will expand into areas where tribal people might live, OP 4.10 will be triggered. The Social Assessment and Social Management Framework (SMF) for the original Project dated December 9, 2007 has been updated in May 2013 to include Tribal People's Management Framework and disclosed again. The plans include appropriate screening formats for project areas to determine whether tribal people are present on specific project locations and templates to prepare location specific Tribal People's Development Plans in accordance with the SMF as and when required. Because no land acquisition or displacement of people is expected, OP 4.12 on Involuntary Resettlement is not triggered. However, Component 2 involves the use of buried pipes for irrigation through consultation and agreement among farmers and land owners on mutually beneficial terms. 35. Environment Safeguards. All the districts selected under the restructured project expansion experience normal flooding during the monsoon season. There are also occasional aggravated floods and droughts during winter while few other districts are prone to cyclones and tidal surges. The key environmental issues that require particular attention include: (a) saline water intrusion into groundwater and surface water in select sites; (b) decrease in soil quality; (c) decrease of water quality particularly in ponds; (d) increase in the use of pesticides and chemical fertilizers; (e) possible depletion of groundwater due to irrigation; and (f) food safety risks due to pesticide residues. Because some of the target sites experience high levels of groundwater depletion, technologies and strategies that promote efficient use of irrigation water will continue to be emphasized. 36. The proposed project is reclassified as safeguard Category "B" from Category "C". The reclassification is necessary to reflect the potential impacts associated with the implementation in the new project areas. The potential adverse environmental impacts on human populations or environmentally important areas are less adverse than those of Category "A" projects, sitespecific with no irreversible impacts and mitigation measures can be designed more readily. Environmental Assessment OP/BP 4.01 and Pest Management OP 4.09 are triggered. The reclassification is necessary because the original project was largely judged as a research project with limited project activities on the ground. Therefore, the only requirement for the project was to screen research projects for potential adverse impacts. However, NATP and the restructuring 13

15 implement numerous demonstration projects at the village level and has extensive adoption of technologies and activities in fisheries, animal husbandry, and agriculture by farmers. These activities raise potential issues outlined in the previous that need to be addressed. The reclassification requires the project to establish a proper environmental management and monitoring framework for ensuring that adverse impacts are prevented or minimized and that the positive impacts of the newly introduced technologies are monitored. The Environmental Management Framework (EMF) prepared for the original Project dated December 9, 2007 has been updated on April 18, 2013 and disclosed again. 37. While neither OP 4.12 nor OP 4.10 were triggered for the original project, environmental management has been an integral part of NATP. Existing staff have been designated as the environment focal persons and the project implementation and monitoring budget also covers the activities outlined in the revised EMF. The Project Coordination Unit (PCU) and each PIU have designated Environmental Management focal persons on the PIU, Upazila and CIG levels. Indicative budget allocation for environmental monitoring and implementation of activities has been allocated by the PCU and each of the Implementing Agencies (las). 38. Governance and Accountability. Governance and accountability practices under NATP are considered to be reasonably effective in mitigating the risks of fraud and corruption associated with the implementation of the project and will continue to be used in the new districts covered by the restructured project (see Annex 7).The objective is to ensure institutional effectiveness and unhindered project implementation by adhering to three principal governance challenges: (a) strengthening transparency and accountability; (b) developing capacity; and (c) fostering demand for good governance. 39. Strong farmer engagement has been developed under the districts so far covered by NATP in targeting beneficiaries, visioning, planning and implementing extension and supply chain activities as well as in selecting research priorities as a means to raise transparency and accountability in program delivery at the local level. The project has adopted a Governance Checklist as a tool to identify and tackle these and other governance challenges at every stage of project design, the checklist will also be used during implementation to update the status of challenges and identify new risks and opportunities to strengthen governance in project activities. The main tools in the Governance and Accountability Action Plan (GAAP) for the project would be: (a) Information Disclosure Policy; (b) Grievance and Complaints Redress Mechanism; (c) Zero tolerance to corruption; (d) Fiduciary Best Practices; and (e) Farmer Score Cards. 40. Information Disclosure Policy: All information about project objectives, activities, institutional arrangement, and benefits to farmers, researchers and traders, list of beneficiaries will be disclosed in the NATP website. 5 In compliance with the Right to Information Act 2009, information disclosure policy under the project envisages that all information, except those which are likely to affect a competitive and fare bidding process, are made available to the key stake holders: farmers, researchers, traders and input suppliers. In the PCU and each of the las, one officer is designated as the Information Officer for this purpose. The las will publicly display the list of beneficiaries under the project at various levels

16 41. Grievance and Complaints Redress Mechanism: In each of the las, a hierarchical system for receiving and redressing complaints relating to project implementation will be established. The system will have 2-3 levels for redress and appeal. If the complainants are not satisfied by the IA, the PCU will be the appellate body. 42. Zero Tolerance to Corruption: Any report on the financial misappropriation, fraud and enjoyment of undue personal benefits using project funds, assets or other resources will be immediately investigated by the PIU/PCU and the persons responsible shall be immediately removed from project responsibilities. If the persons involved are employees of the implementing organizations, the matter needs to be reported to the organization with recommendation to take appropriate disciplinary action. Where ever project funds are misappropriated, appropriate action to recover the same from the person/s responsible shall be initiated by PIU/PCU. In cases where demonstrating farmers, CIGs/ POs, Community Collection and Marketing Centers (CCMCs), and Research Institutes/Researchers are involved, the project funding will be immediately suspended until the issue is resolved. 43. Fiduciary Best Practices: The procurement, financial management and accounting systems remain the same. The procurement activities have to follow the approved procurement plans complying with the procurement methods, processes and procedures. The internal check and balance mechanisms and external audits are also part of the fiduciary arrangement. 44. Farmer Score Cards: The project will use the farmer score card system to assess performance and rate CIGs. This peer review system will check the functioning of CIGs using indicators of institutional efficiency, participation, equity, and transparency and accountability aspects. The score card system in addition to ranking the performance will also have recommendations for improving performance including a follow up action plan. 45. Other routine tools like review workshops at various levels, Bank's Implementation Support Missions and process monitoring of NATP will remain and continue to be used to check whether systems set up under the GAAP framework are functioning. 46. Implementation Arrangements. No changes in the institutional arrangements. 47. Financial Management (FM). An assessment of the las' FM arrangements was carried out to determine whether the PCU of NATP (responsible for the implementation of the project) has adequate FM arrangements in place to implement the expanded activities and meet the minimum requirements stipulated in OP/BP1O.00.The FM arrangements assessed included the system of planning and budgeting, accounting, accountability mechanisms put in place for reporting, auditing, and internal controls. The PIU's arrangements, which would remain unchanged, are deemed as acceptable and considered capable of recording correctly all transactions and balances, supporting the preparation of regular and reliable financial statements, safeguarding the project assets, and are subject to auditing arrangements acceptable to the World Bank. The annual audit report for the financial year by the Foreign Aided Projects Audit Directorate was submitted to the Bank in a timely manner. There is no material audit observation identified by the Bank. The project submitted financial reports in a timely manner. However, it is 15

17 worth noting that during the previous restructuring in December 2012, a retrospective decrease in financing percentage was proposed. As a result, US$2, had to be refunded to the Bank, since disbursements were made, but the financing percentage was subsequently decreased. The Bank issued a letter requesting refund of this amount in March 14, 2013 and a letter on February 27, 2013 requesting refund of US$166, for expenses claimed in excess of financing percentage from The status of these refunds and actions planned are presented in Annex 8.While the US$2, was already received by the Bank on December 26, 2013, the refund of the US$166, is expected to be received by March 31, As per the last FM review during 1 0 th mission, the ISR rating is 'Moderately Satisfactory'. 48. For utilization of eligible project expenditure, the PCU will maintain one Designated Account where IDA and IFAD funds will flow on parallel mode under agreed terms and conditions. As in the present FM arrangement for NATP, Krishi Gobeshona Foundation (KGF), Horticulture Export Development Foundation (Hortex) and Project Implementation Units (PIUs) in other executing agencies, such as DAE, DOF, DLS, and BARC, will maintain separate operating accounts. The PCU will be responsible for transferring IDA and IFAD funds to the operating accounts on the basis of six-month estimated expenditure and approved work plans of these agencies. The PCU has also made a provision in the Revised Development Project Proposal (RDPP) to cover the amount of taxes required under the restructuring with with USAID grant. 49. Since the activities under Component-I (Agriculture Research Support) will be implemented by KGF in association with implementing partners (NARS Universities, nongovernment organizations, and private sector) as is the case under NATP, funds will be given initially to these implementing partners as mobilization advances and subsequent payments for the completed activities will be made by KGF as per agreed terms and conditions. In respect of grants and transfers relating to operating accounts, withdrawal applications for documentation would include only incurred expenses. 50. Procurement. The procurement of goods, works, consulting and non-consulting services will be handled by the PCU and PIUs. All procurement activities, except procurement activities under CGP and SPGR and expenditures under the headings of Incremental Operating Cost and Training, will be governed by the Procurement Plans agreed upon between the Bank and the las involved. Each plan includes detailed information on the procurement guidelines, planning, particular methods of goods, works, consultancy, non-consulting services, and prior/post review requirements. 51. Procurement Risks and Recommended Mitigating Measures. The procurement risk assessment for the operation can be considered as "substantial" from a public procurement point of view. The assessment considered the impact of complexity in design resulting from the high number of procuring entities, the general environment for public procurement in the country, and the procurement management capacity of the las involved. The las agreed on an action plan to mitigate risks and a relevant monitoring mechanism, involving sufficient staff, systematic capacity building, as well as relevant monitoring and review. 16

18 52. Oversight and Monitoring Arrangement for Procurement. The procurement plans dated March 18, 2013 for the first 18 months of the grant have been prepared by the las and reflects the increase in the allocation of category 5a. The procurement plans will be updated once every six months and will be the basis of the Bank's procurement supervision plan. Fiduciary reviews during supervision missions will include reviews of a random sample of contracts and spot checks of accounting records and financial reporting systems at the central, regional, district and village/site levels. Internal auditor reports will be reviewed and meetings held with them to gain additional perspective. Issues identified will be recorded in the aide-memoires with post-mission follow ups. 53. The Procurement Core Team (PCT), as already set up under NATP, will continue to be responsible for supervising procurement activities under SPGR and CGP. It will also monitor all issues related to procurement fraud, corruption, collusion, coercion and obstruction, including relevant complaints from individuals or firms and relevant reports in the media, on behalf of the PCU and will advise the PCU on remedial measures. Grant Effectiveness 54. There are no conditions for the effectiveness of the additional grant financing under the restructuring. 17

19 ANNEX 1. Results Framework and Monitoring Ori2inal Project Development Objective (PDO): Project Development Objective is to improve effectiveness of the national agricultural technology system in Bangladesh. Revised Project Development Objective: Project Development Objective is to improve the effectiveness of the national agricultural technology system, as measured by increase in agricultural productivity and farm income in selected districts. D= Dropped Cumulative Target Value Responsibili PDO Level Results E C= Continue Unit of Data Source/ a Current Value Baseline Frequency ty for Data Indicators N= New Measure Methodology Cleto R=Revised PDO1: Clients who have Baseline, adopted an improved D/R (moved 2014 and Independent agricultural technology Z to interm. Number 1,180, ,000 1,231,000 1,431,000 1,710, Impact PCU/PIUs promoted by the project Outcomes) Evaluation, EoP reviews PD02: Increase in agricultural Baseline, productivity producivityindependent R ecnae and Inendt Crops R Percentage 2016 Impact PCU/PIUs Livestock R Percentage Evaluation, EoP Fisheries reviews R Percentage PD03: Increase in household incomes Baseline, Marginal farmers C Percentage and Independent Small farmers Impact PCU/PIUs Medium farmers C Percentage Evaluation, EoP C Percentage reviews 18

20 Intermediate Result (Component One): Agricultural Research Support Intermediate Results C= Dropped Cumulative Target Value Responsibili Indicators ot. Unit of Baseline Data Source/ + Contmnue Current Value Frequency ty for Data SMeasure Methodology frdt N= New Collection R=Revised 1: Public investment in D Percentage of agricultural research AGDP' Annual Annual report BARC 2: Scientists trained in identified skill gaps. * NA TP R Number * Annual Annual report BARC * Restructured project : Research Proposals approved and implemented uder CGP * NA TP R Number 92 Annual Annual report KGF * Restructured project : Research Proposals approved and implemented under SPGR. * NA TP R Number Annual Annual report BARC * Restructured project : Non-NARS partners participating in CGP and share of CGP funds allocated to 0 68* them Number 30 Annual Annual report KGF * NA TP R Percentage 757 * Restructuredproject AGDP= Agricultural Gross Domestic Product 7 27 independently and 48 in partnership with NARS Institutes/Universities 19

21 t td= Dropped Baseline Cumulative Target Value Responsibilit Intermediate Results C= Continue IData Source/ + Unit of Measure Current Value Restruc- Frequency y for Data Indicators 0 N= New Methodology R=Revised tured Collection 6: New Research proposals that respond to technology needs identified in Upazila Extension Plans. D Number Annual Annual report BARC * NATP 7: Validation trials conducted with CIGs and DAE. NA TP C Number Annual Annual report BARC * Restructured project : New Technologies made available for Extension. 0 * NA TP N Number 259 Annual Annual report BARC * Restructured project Revised Intermediate Result (Component Two): Agricultural Extension Support 1: Public investment in agricultural extension D Percentage of Annual Concurrent PCU/PIUs AGDP M&E 2: Functional CIGs formed Concurrent * NA TP D Number Annual M&E PIUs 3: Participation of Women. D Concurrent (AT-)Percentage Annual ConurEn PIUs (NA TP-]1)M& 4: Upazila Extension Plans Concurrent prepared. D Number * Annual M&E PIUs * NATP 5: Extension micro plans implemented at the Union * Concurrent level C Number Annual M&E PIUs * NATP * Restructured project 8 14 in saline/ coastal zone; 7 in hilly ecosystem; 3 in haor ecosystem; 1 in drought; 1 in char land; 3 in ICT; 6 in policy; 7 in pollution and adulteration; 9 in pest management; 9 3 variety of chickpea, lentil and garlic; 2 salt tolerant rice variety and hybrid tomato; 2 aromatic rice and jute varieties and 18 improved management practices. 20

22 D= Droped Baseline D tfopp lee Basut Cumulative Target Value Responsibilit Intermediate Results C= Continue Restruc- Data Source/ +Unit of Measure Current Value Frequency y for Data Indicators 0 N= New tured qy Methodology R=Revised Collection 6: Client days training provided to farmers of which to women 9 R Number Annual Concurrent PIUs 0NAT * Additional Financing : Target beneficiary Marginalfarmers adopting new Marginal agricultural technologies or Smallmanagement practices, of Small which % women Marginal Medium- Medium Concurrent * NATP N R Number Medium Sml M i M&E Annual Restructured project Percentage ( ) Mar8gal- PIUs 24 Small Medium ( ) 24 8: FIACS functioning * NA TP * Restructured project N Number Annual Concurrent M&E PIUs Revised Intermediate Result (Component Three): Supply Chain Development Component 1: Client days of training provided to farmers, traders, public and private staff, of which women. R Number * NATP Percentage Annual Concurrent M&E Hortex * Restructured project farmers and traders and 1891 line agencies officials " There was a mistake in the PAD. 100 should be read as

23 D= Dropped D= DrppedCumulative Target Value Responsibilit Intermediate Results a C= Continue Unit of Baseline C Data Source/ Current Value Frequency y for Data Indicators N= New Measure Restrutured Methodology R=Revised Collection 2: CIGs linked to markets Concurrent *NTPD Number Annual M EHortex 9 NA TP M&E 3: Improved post-harvest technologies and management practices demonstrated and C Number 32 Annual Mce Hortex adopted. * NATP Restructured project : Farmers adopting improved production, and post-harvest technology Marginal-3259 and/or management Small-4307 Concurrent practices, by farm size D Number Medium Annual M&E Hortex and farm type. (10478) * NATP 5: Commodity Collection and Marketing Centers functioning. N Number Annual Concurrent Hortex * NATP M&E * Restructured project

24 ANNEX 2. Operational Risk Assessment Framework (ORAF) Project Stakeholder Risks Rating Moderate Description: The target farmers, landless, marginal and small Risk Management: Project activities start with participatory identification of target farmers whose capacities farmers may be excluded due to economic and social reasons. are built upfront to appreciate benefits of improved technology and systematically mobilized to form village farmer institution (CIG) that will own the project and is the focal point for all project related activities. Res: Satu: Nt Sag. Client yet Due Implementation Recurrent: 4 Due Date :Frequency: Implementing Agency Risks (including fiduciary) Capacity Rating: Low Description : The main project implementing agencies, BARC, Risk Management: There is a dedicated PIU/Team consisting of experienced and knowledgeable staff to KGF, DAE, DLS, DOF and HORTEX management and staff may spear head implementation. Similarly PCU will provide coordinating and back stopping support to PIUs. The not understand, accept and commit themselves to the farmer project will also invest in capacity building of all staff involved in project implementation including trainings, centered, de centralized, demand responsive and coordinate exposure visits, and workshops both within the country and outside. implementation mode Resp: Status: Not Stage: Client yet due Implementation Recurrent 1 Due Date: Frequency: Governance Rating: Low Description: Political and bureaucratic interference in resource Risk Management: Governance and Accountability Action Plans (GAAP) have been prepared for all levels allocation and selection of village for support, complaints and of project implementation including farmer organization level with the participation of relevant stakeholders grievances from staff and farmers not properly addressed and will be implemented. The GAAP will be reviewed annually and implemented. insufficient information disclosure on project activities. Res: Satu: Nt Sag. Both yet due Implementation Recurrent 4 Due Date :Frequency: Project Risks Design Rating: Moderate Description: The implementing agencies may spend more project Risk Management: The project has been designed to restrict delivery cost around 10 percent with - resources for delivery cost diluting program investments as well percentage of the program costs directly going for investments at farmer level. Clear implementation manuals as farm level investments. The process of inviting, appraising and detailing rules, guidelines and processes of implementation are being prepared followed by capacity building selecting research sub projects may take longer time. The project of project staff and farmer leaders. inputs will be distributed before targeting of farmers and their Resp: Status: Not Stage: institution building. The CCMCs may be working to accrue Client yet due Implementation Recurrent Due Date Frequency: benefits to traders than farmers. Social & Environmental Rating: Moderate Description: Environmental: Since the districts targeted by the Risk Management: An EMF has been prepared and outlines clear guidelines on water, soil and project are located in climatically vulnerable areas, the potential pesticide/chemical management and specific indicators have been identified to monitor the implementation. risks are (1) possible depletion of groundwater due to irrigation; Project focal persons have been identified and staff will be trained. (2) saline water intrusion in groundwater and surface water in Inclusion of women in decision making positions within the farmer institutions are mandated in the bye-laws select sites; (3) decrease of soil and water quality; (4) increased and reinforced in the manuals. There are separate project indicators for women beneficiaries which will be use of pesticides and chemical fertilizers; and (5) Food safety closely monitored. An SMF has been prepared. issues due to pesticide residues. Women farmers may be excluded. Resp: Status: Stage: Both Recurrent 1 Due Date: Frequencys: 23

25 Client Completed Program & Donor Rating: Low Description: The project is funded by US Aid as part of its Risk Management: The Administrative Agreement entered into between UAID and the World Bank detailing harmonization assistance to Bangladesh in coordination with common objectives, for the fund as well as respective roles and responsibilities have already been elaborated International Development Association (IDA).There are chances and agreed upon. There will be joint supervisions. of changes in the policies and priorities of both institutions. Resp: Status: Not Stage: Bank yet due Implementation Recurrent 1 Due Date: Frequency Delivery Monitoring & Sustainability Rating: Moderate Description: The implementing agencies may accelerate Risk Management: The process monitoring agency will monitor quality of implementation and instances of implementation sacrificing quality of delivery to show quick by passing implementation processes. The farmer institutional model with matured CIGs as foundation and results. So also scaling up of the NATP model within the limited higher level Producer Organizations monitoring implementation quality will ensure sustainability of project period may also affect sustainability of institutions and institutions as well as the results achieved during the project. The monitoring of CGP and SPGR have results. specialized mechanisms. The farmer institution score cards will be implemented. Overall Risk Resp: Status: Not Stage: Recurrent 1 Due Date: Frequency Both yet due Implementation Implementation Risk Rating: Moderate Comments: 24

26 ANNEX 3. Economic and Financial Analysis 1. The grant focuses on efficiency-led agricultural technology management to increase productivity and farm income for about 1.2 million small and marginal farm holders from six project districts (T-1).Total estimated cost of the project is $23.715M, including contingencies. The project is designed to enhance NARS institutional efficiency to support demand led competitive and sponsored agricultural research (38%). Ready-to-use available agricultural technologies (crops, livestock, and fisheries) will be effectively disseminated along with support for supply chain development to cover all the project area farmers through 6905 CIGs (57%). T-1: Project Beneficiaries Project Supply Beneficiaries Crops Livestock Fisheries Chain Total CIGs CIG Farmers Non-CIG Farmers Total Project Technology Sustained Adopters Selected NATP technologies will be intensively disseminated through 21,326 technology demonstrations. These demos will be organized through 6,905 CIGs covering 134,890 farmers, which in turn are linked to potential adopting farmers consisting of over one million non-cig farmers in the new area. While quantifying the project benefits, it is assumed that only 45 percent of all the farmers (about 530,000) directly impacted by the project through demonstrations and adoption groups will sustainably increase their farm level productivity. Benefits accruing to farmers outside project sites and neighboring districts are not considered. The design of the grant is based on lessons learned from the low adoption ratio between CIG and Non-CIG farmers under NATP due to its extensive approach (1345 Unions spread over 120 UZs of 25 Districts, 14 CIGs per Union).About 1,180,765 farmers have sustainably adopted recommended technology under NATP in four years of implementation. 3. About 134,890 CIG farmer members will be trained to catalyze the technology dissemination and adoption process by targeting over one million non-cig farmers in the project villages (T- 1).During the project life, farmer-led extension strategies are projected to achieve a sustainable adoption rate of at least 45 percent among the project area farmers participated and/or exposed to the demonstrated technologies. Expected project impacts for the technology adopters are: (a) increased crop productivity (cereals, pulses, oilseeds and high value crops); (ii) increased livestock productivity (milk and meat); increased fish productivity; and (iii) reduced production cost (boro paddy). 4. The grant follows NATP design for scaling up best practices to cover newer areas within and beyond NATP districts with focus on efficiency in the use of scarce resources and equity to cover resource constrained regions. Since NATP is in the fourth year of its implementation, available documentation on NATP impacts are used to project the likely impact of grant investments. Project benefits, due to agricultural extension support investments, are quantified as 25

27 follows: For crops, four major technologies namely, Rice Yield Gap Minimization (RYGM) and Alternate Wetting and Drying (AWD) in paddy; HVC and integrated pest management (IPM) in high value crops accounting for 60 percent of the demos, 72 percent of the technology adopters and 69 percent of the crop CIGs; for livestock, two technologies namely cow rearing for milk and beef fattening accounting for 90 percent of the demos and for fisheries, two technologies namely polyculture and tilapia culture accounting for 85 percent of the demos under NATP are considered for quantifying the benefits due to investments in agricultural extension. Database and Methodology Assumptions 5. The NATP unit has documented the yield, cost, and gross margin impact of the RYGM, AWD, HVC and IPM technology adopters while conducting the demo in which control plot performance is also documented (PIU-DAE, 2012).12 Similarly, impact of livestock and fish production technologies demonstrated in NATP areas are documented by PIUs of DLS and DoF. When farmers adopt the demonstrated technology package on their own, increases in productivity and gross margin will be lower than what is realized under the intensive guidance of the department staff in the CIG demos. To factor this, only 50 percent of the incremental benefits documented by the NATP demos over the respective control plots in the CIG demos are conservatively considered for this analysis. Progress in technology adoption depends on the phasing of CIGs, technology demos, adoption and diffusion rates over time. To capture this, an adoption matrix was constructed based on the following assumptions: (i) adoption will start from the year following the completion of technology demo through CIGs; (ii) adoption progress to match with the phasing of CIGs in the NATP villages; (iii) adoption rate to reach a maximum of 60 percent of the cumulative adopters as documented by DAE until now (until PY-4 of NATP); and (iv) full technology impact to be realized by the adopters in phases and with gradual progression starting with 5 percent and ending with 60 percent after five years from the start of the adoption process. Based on secondary published data, the cost of production data as documented by PIU (DAE) in the demo and control CIGs is disaggregated by major input categories like labor, fertilizer, irrigation and all other remaining costs (UCPSCP, 2010). 13 This is based on 24,625 farm surveys covering ten major crops representing all major production regions. 6. For financial analysis, all inputs and paddy output are valued at market prices (2012) for the financial analysis. Project costs are converted into constant 2012 prices using appropriate inflators based on the Consumer Price Index for Bangladesh. For economic analysis, parity prices for relevant tradable goods like paddy, urea, diesel, TSP and MOP have been calculated using World Bank Commodity Price Projections. Financial prices of non-traded goods and services have been adjusted using the SCF. For project analysis, 12 percent opportunity cost of capital and 20-year project life is considered. For the project period beyond the implementation 1 2 Annual Progress Report, , and , National Agricultural Technology Project: Phase-1, PIU, Department of Agricultural Extension (DAE), Dhaka, March 2012.National Agricultural Technology Project (NATP-I):Phase-1, Progress Reports for Implementation Support Missions (ISM) (Livestock and Fisheries Extension Support), DLS and DoF. 13 Report on the Cost of Production of Aman, Aus and Boro Paddy, , Updating and Extension of Agriculture Cluster Plots and Survey of Cost of Production Project (UCPSCP), Bangladesh Bureau of Statistics, Statistics Division, Ministry of Planning, Government of Bangladesh, Nov 2010.This is based on 24,625 farm surveys covering ten major crops representing all major production regions. 26

28 period, recurring 2.5 percent of the total costs is used for ensuring the operation and maintenance of the project interventions. Quantification of Benefits: RYGM Technology: 7. Rice yield gap minimization T-2 NATP: RYGM Technogy Impact Summa technology was intensively promoted in Ipett PWit the NATP villages. Key elements of Unit Wot Wit RYGM technology are: quality seeds, CIG s Covered Number 10 optimum age of seedlings, timely Toa Farmers exposed Number 100 planting, balanced nutrient, water, and Total farmer adoe Number 400 pest management. A total of 9410 demos were organized wee rgniedthoghcls through CIGs covering ovrig Sustained farmer adopters Number Aman, Aus and Boro seasons (T-2).Until Area under RYGM Ha now, 188,200 CIG farmers are exposed Paddy Productivity t/ha and trained in RYGM technology. Gross Margin $/ha Through them, about 752,800 farmers Hired Labor Man-day are targeted for diffusing the Financial net surplus $ M/year demonstrated RYGM technology. Among these RYGM technology exposed farmers in the NATP villages, about 51 percent of them have so far adopted the demonstrated technology covering all three seasons. Beyond project implementation period, it is projected that at least 60 percent of the total adopters will sustain their adoption levels every year. 8. Sustainability of RYGM is more likely at this level, since to meet the incremental seed demand, the project has also trained 3971 farmers in quality seed production and preservation techniques in the project villages. Annually, about 100 MT of quality paddy seed is produced by the project trained farmers to supplement the seed availability to meet the demand from the RYGM technology adopters. 9. Averaged over three years (2008/09 to 20 10/11), RYGM demos registered 26 percent increase in paddy productivity. This is scaled down to 12 percent increase in paddy productivity, and 27 percent increase in financial gross margin due to the project led large scale adoption of RYGM technology by the project beneficiaries. Based on the agricultural census data, average operated area of the farm holding is 0.5 ha, with a cropping intensity of 165 percent. Paddy occupies 75 percent of gross cropped area. 14 For RYGM adoption, we considered 80 percent of the paddy area of the adopters. Average paddy area under RYGM technology comes to 0.5 ha for the adopting farmers. Following the adoption matrix approach, the project will gradually progress to reach the full potentials of RYGM adoption benefits by PY-l. 10. Total project costs (including management) for agricultural extension support for RYGM technology promotion during the implementation period, at constant 2012 prices, is estimated at Year S2010 Book of Agricultural Statistics, 22nd edition, May 2011, Bangladesh Bureau of Statistics, Statistics Division, Ministry of Planning, GoB. 27

29 $8.13 M. Annual incremental financial net surplus from RYGM technology investments, based on the assumptions as explained above, are projected at $6.4 million at full development, which covers 79 percent of the total project costs. Farm financial income will increase by $45 per ha by adopting the RYGM technology. Economic analysis of RYGM extension investments projected an ERR of 35 percent with a NPV of $15.1 M over 20-year project life at constant 2012 prices (T-3). 11. Employment impacts. Landless agricultural labor households (HHs) constitute 5 percent of all T-3 NATP: ERR Summary for RYGM (Million HHs in the project area (HIES, 2010), which is equivalent to 49,500 HHs in the project area. A 15 Technology PVC PVB NPV ERR percent increase in the use of hired agricultural RYGM labor for farming operations is reported under $6.5 $21.6 $ % RYGM in case of technology adopting farms. Scaling up over the RYGM technology adopted areas, about 575,480 man-days are incrementally generated for the hired agricultural labor HHs. Due to seasonal nature of demand for hired labor, it is assumed that adoption of RYGM technology will provide at least 48 man-days of employment per landless HHs. This will benefit 12,000 landless HHs, constituting 24 percent of the landless HHs in the project area. Annual wage income due to additional demand for hired farm labor will increase their HH income by $95 per year, which is 11 percent more than the without project (WOP) income (HIES, 2010).15 AWD Technology: T-4 NATP: AWD act Summa Without With 12. Boro rice, grown entirely with impact Unit Proect Proect irrigation support, uses up to 4000 CIGs Covered Number 1824 liters of water per kg of paddy CIG Farmers Covered Number produced, due to flooding method of Total farmers exposed Number irrigation throughout the growing Total farmers adopters Number period. This results in wastage of Sustained farmer adopters Number ground water and increased production cost due to increased fuel cost for pumping irrigation. To minimize Paddy Priv $/ha irrigation cost and reduce groundwater abstraction, NATP is intensively promoting Alternate Wetting and $/ Drying (AWD) method of irrigation instead of flooding method. 13. AWD technology was demonstrated through 1824 demos, organized through CGs covering boro season. Until now, 36,480 CIG farmers are exposed and trained in AWD technology. Through them, about 145,920 farmers are targeted for diffusing the demonstrated AWD technology (T-4).Among these AWD technology exposed farmers in the NATP villages, about 49 percent of them have so far adopted the demonstrated technology in Boro season. Beyond project implementation period, it is projected that at least 60 percent of the total adopters will sustain their adoption levels every year. "Average income for rural Bangladesh is $ 840 per annum for landless agricultural labor HHs, at constant 2012 prices (HIES, 2010). 28

30 14. Averaged over three years (2008/09 to 2010/11), AWD demonstrations registered 16 percent increase in paddy productivity and 31 percent savings in water use. This is scaled down to 8 percent increase in paddy productivity, and 48 percent increase in financial gross margin due to project led large scale adoption of AWD technology by the project beneficiaries. Financial gross margin from boro paddy cultivation is $ 189 per ha under WOP. Adoption of AWD in boro paddy cultivation enhanced the financial gross margin by $91 per ha, 48 percent more than the WOP gross margin levels. Incremental gross margin due to AWD is contributed by two sources. One, productivity increase by 8 percent, accounted for 68 percent of the incremental gross margin (Fig. 1).Two, adoption of AWD helped in reducing the irrigation water use by 31 percent. Hence, unit cost of production came down by 12 percent, contributing to 32 percent of the incremental gross margin from AWD in boro paddy cultivation. 15. For AWD adoption, we considered 40 percent of the paddy area of the adopters, since this technology is demonstrated only for boro paddy. Average paddy area under AWD technology comes to 0.25 ha for the adopting farmers. Progress in AWD technology adoption is similar to the adoption matrix formulated for RYGM technology adoption, with all the underlying assumptions remaining same. Following this adoption matrix approach, the project will reach the full potentials of AWD adoption benefits by PY Total project costs (including management) for agricultural extension support for AWD technology promotion during the implementation period, at constant 2012 prices, is estimated at m Reduced Cost 250 Impacts m Productivity Impacts 100 Base Level Without Project With Project Fig 1 AWD: Financial Gross Margin ($/ha) $2.1 M. Annual incremental financial benefits from AWD technology investments, based on the T-5 NATP: ERR Summary for AWD assumptions as explained above, are projected at (Million $) $1.2 million at full development, which covers 57 Technology PVC PVB NPV ERR percent of total project costs. Farm financial income will increase by $91 per ha by adopting the AWD technology. Economic analysis of AWD extension investments projected an ERR of 29 percent with a NPV of $2.6 M over 20-year project life at constant 2012 prices (T-5). High Value Crops with IPM Technology: 17. The project demonstrated the safe and efficient production of high value crops (cabbage, tomato, brinjal, cucumber, bitter gourd and potato) with quality HYV seeds and technology 29

31 package, including sex pheromone traps (for controlling fruit fly, shoot and fruit borer in vegetables like cucurbits, brinjal etc.) and compost use. HVC with IPM technology was demonstrated through 5,346 demos, organized through CIGs. Until now, 106,920 CIG farmers are exposed and trained in this technology. Through them, about 427,680 farmers are targeted for diffusing the demonstrated HVC technology. W Gross Margin WP Production Cost WOP Fig.2 IIVC/IPM: Efficiency Impact ($/t) 18. Among these HVC technology exposed farmers in the NATP villages, about 27 percent of them have so far adopted the demonstrated technologies. Beyond project implementation period, it is projected that at least 60 percent of the total adopters will sustain their adoption levels every year (T-6). Averaged over three years (2008/09 to 20 10/11), HVC and IPM demos registered 15 percent and 6 percent increase in productivity and 32 percent and 42 percent increase in gross margins respectively. This is scaled down to overall 5 percent increase in productivity, and 18 percent increase in financial gross margin due to the large scale adoption of HVC and IPM technology packages by the project beneficiaries. 19. Averaged across high value crops, financial gross margin is estimated at $1,779 per ha under WOP. With the adoption of HVC and IPM technology, average financial gross margin increased by $375 per ha, 21 percent more than the WOP gross margin levels. Incremental gross margin due to HVC/IPM is contributed by two sources. One, productivity increase by 3 percent, accounted for 60 percent of the incremental gross margin. Two, adoption of pheromone sex traps helped in reducing the pesticide use by 37 percent, accounting for 40 percent of the incremental gross margin. Consequently, unit cost of production came down by 8 percent, expanding the profit margin by 18 percent in HVC cultivation (Fig. 2).For both HVC and IPM technology adoption, we considered one-third of the non-paddy area of the adopters, since this technology is demonstrated only for high value crops. Average land area under HVC/IPM technology comes to 0.07 ha for the adopting farmers. Following similar adoption matrix formulated for other NATP technologies, the project will reach the full potentials of HVC/IPM adoption benefits by PY-10. T-6 NATP: HVC and IPM Technology Impact Summary HVC HVC & IPM Combined Unit Without With Without With Without With Impacts Project Project Project Project Project Project CIGs Covered Number CIG Farmers Covered Number Total farmers exposed Number

32 Total farmer adopters Number Sustained farmer adopters Number Area under HVC ha Gross Margin $/ha Annual financial net surplus million $ For economic analysis, we considered both these HVC and IPM technologies together. Total project costs (including management) for agricultural extension support for HVC and IPM technology promotion during the implementation period, at constant 2012 prices, is estimated at $2.23 M. Annual incremental financial benefits from HVC/IPM technology investments, based on the assumptions as explained above, are projected at $1.9 million at full development, which covers 85 percent of total project costs. Averaged across the adopters of both these technologies, farm financial income will increase by $327 per ha for the technology adopters. T-7 NATP: ERR Summary for HVC/IPM 21. Economic analysis of HVC/IPM extension (Million $) investments projected an ERR of 34 percent with a NPV of $4 M over 20-year project life at constant Technology PVC PVB NPV ERR 2012 prices (T-7).Sustainability of HVC/IPM technologies for safe vegetable production proposed by NATP is more likely at this level. To meet the incremental demand for compost, the project has also promoted compost production and soil health management technologies thorough CIG based 4,794 demos. About 95,880 CIG farmers are trained in these technologies and through them, 383,520 non-cig farmers are exposed to these technologies until now. As per PIU-DAE documentation, 23 percent of total exposed farmers are active in producing annually 42,550 MT of compost for its use in safe production of HVCs. 22. It needs to be highlighted here that the capital cost of the development of RYGM, AWD, HVC and IPM technologies that happened in the past, before NATP is not captured here and to that extent, the estimated returns to NATP investments can be considered over estimate. But at the same time, as evidenced from the DAE documents, the NATP led diffusion effect of these technologies is substantial and has already started spreading to farms outside the NATP project areas, which are not captured in this analysis and to that extent, the estimated returns to the investments is considered to be very conservative. Dhap Cultivation (Floating method) 23. While scaling up above major NATP-led technologies under the grant, the focus is also to consider other technology options for promoting efficiency led agriculture technology development and adoption in the project areas. Among such technologies like sex pheromone traps and compost production picked up based on NATP experience, some new techniques which are indigenous technical knowledge (ITK) based will also be adapted and scaled up for large scale adoption. One example is dhap cultivation observed in the grant project area (Box. 1) Haseeb Md. Irfanullah, Md. Abul Kalam Azad, Md. Kamruzzaman and Md. Ahsanul Wahed, Floating Gardening in Bangladesh:A means to rebuild lives after devastating flood, Indian Journal of Traditional Knowledge, Vol.10 (1), January 2011, pp

33 Box.lDhap Cultivation in grant project areas In Gopalganj district, almost half of the agricultural land area is low lying and remain submerged for six months in a year and even for longer period due to increased frequency of severe flooding.the farmers use their traditional techniques, knowledge and the conventional wisdom to cope with the flood and submerged condition. With an average farm holding size of only 0.5 ha and more than 15% of the households being landless, innovative methods of enhancing land use efficiency with adaptation to climate change is critical for the most vulnerable communities in the water logged project areas.resource poor farmers of Gopalganj district have adopted an indigenous technical knowledge of floating cultivation (Dhap cultivation), using the aquatic water hyacinth weeds, available during the water submergence period. Floating platform or organic bed is prepared using layers of water hyacinth, and allowed to decompose fully before packing it with ash and plant compost to form a fertile cultivation ground for a wide range of crops and seedlings like spices and vegetables (chilies, water melon, musk melon, beans, cauliflower, cabbage, radish, tomato, eggplant, turnip, amaranth, spinach, coriander and ginger) during monsoon and/or winter seasons.dhap residues, after floating cultivation, are used on land plots to raise homestead vegetable gardens.the year-round activity promotes efficient land and water resource use, organic farming, organic biomass production, soil quality, crop productivity, labor employment more in favor of women, house hold level nutrition security, and year round income for resource poor landless and marginal farmers especially during post-monsoon months. 24. The economic analysis of dhap cultivation is based on secondary published data. In Gopalganj district, 9,877 dhaps are used covering 82 ha of floating bed area, benefiting 7,565 farmers. Average bed size is 80 M 2 per dhap and 108 M 2 per farmer. Studies have documented that by cultivating okra, ridge gourd, red amaranthus, and Indian spinach, the financial gross margin realized is $101 per dhap and $137 per farmer (Fig 3). Gross Margin Returns Cost Fig. 3 Dhap Cultivation ($/farmer) 25. Dhap cultivation generated 25 person days of employment per dhap, half of which is for women labor. About 15 MT of compost material will be produced from 108 m 2 of dhap cultivated area through soil-less agriculture that can be used in agricultural land as compost manure for enriching organic content of the soil. Promoting dhap cultivation by standardizing the indigenous techniques will contribute to effective adaptation strategies to mitigate the ecospecific climate change impacts. 32

34 Project Impacts 26. Based on the NATP evidences as highlighted above and on the documentation done by PCU/PIUs, projected impacts for grant investments are assessed with the underlying assumptions as follows: (i) maximum adoption rate to be sustained at 45 percent of the farmers exposed to the technologies; and (ii) full technology impact to be realized by the adopters in phases and with gradual progression starting with 5 percent and ending with 60 percent after five years from the start of the adoption process. The rest of the assumptions and sources of data are similar to the NATP experiences as explained in para.4. Agricultural Extension Support: 27. Impacts of agricultural extension support are summarized in T-8.Weighted agricultural productivity will improve by 12 to 16 percent for paddy and HVC, 26 to 40 percent for livestock (milk and meat), and 45 percent for fish for the technology adopters. Adoption of improved technology in case of paddy will also save irrigation water and reduce the use of diesel in boro season to reduce the cost of production by 18 percent. Adoption of sex pheromone traps for IPM in HVC will also reduce the cost of production. To achieve these impacts on a larger scale, about 20,926 demos will be conducted covering seven technologies selected based on NATP experience. 28. Paddy production technologies (RYGM and T-8 Grant: Impact Su mary AWD) will be sustainably adopted by 274,413 Impacts Unit WOP WP farmers, covering an area of 124,807 ha. Annual Paddy financial gross margin from paddy technology Yield t/ha adopters will be $6.1 M at full development. HVC Gross Margin and IPM technologies will be sustainably adopted Production $/ha by 130,587 farmers, covering an area of 8,888 ha. Cost $/t Annual financial gross margin from HVC and IPM Gross Margin technology adopters will be $3.0 M at full HVC $/ha development. Fish production technologies IPM $/ha 2154 (polyculture, semi-intensive tilapia culture and Fis intensive tilapia culture) will be sustainably adopted Fish Yedt/ha by 39,002 farmers, covering water spread area of Yield 3,432 ha. Annual financial gross margin from fish Gross Margin $/ha technology adopters will be $2.6 M at full Livestock, per development. Livestock production technologies a il (cow rearing for milk and beef fattening) will be Milk 1/day sustainably adopted by 78,003 farmers. Annual Meat k financial gross margin from livestock technology adopters will be $4.4 M at full development. Agricultural extension support investments will generate incremental financial benefits of $16 M at full development, contributed by the adoption of crops (57%), livestock (27%) and fish (16%) production technologies by about 522,005 farmers in the project area. Supply Chain Development Support 29. The SCDC of NATP benefitted 4,000 small farm holders to sell 10,000 MT of fresh farm produce through project led network of 12 commodity collection and marketing centers 33

35 (CCMCs).CCMCs served both as a market place and a forum for CIG farmers to locally aggregate, sort, grade and sell their products, in more significant quantities, guided by market information. Promotion of business linkages between farmers, traders, and other service providers helped each participating farmer to realize an additional income of $25 per MT in its six months of operation during 2012.Annual turnover of NATP supported CCMCs varied from a median value of $57,810 to an average value of $130,400.NATP CCMCs are still in growing phase as many of them are yet to start their full operations. The potential annual turnover per CCMC is taken as 1800 MT, as one of the NATP CCMC has already reached a maximum annual turnover of 1,600 MT of fresh farm produce. In order to achieve this, it is important to reach non-cig farmers through project CIGs. 30. Under the grant, 300 CIGs will be intensively guided to facilitate integration of 6,000 small farm holders and agribusiness enterprises into modern supply chains. Efficient market linkages for selected high value agro commodities will be promoted. About 400 demos of 20 selective technologies from NATP experiences (post-harvest management, product aggregation, sanitary and phytosanitary systems, value addition and market intelligence support, farmers-traders linkages supply management) will be organized besides supporting ten CCMCs both as a market place and a forum for CIG farmers who can sell their products well sorted and graded, in more significant quantities, with more market information. Through 6,000 CIG farmers, another 12,000 non-cig farmers in the neighborhood villages will be targeted to increase the turnover of CCMCs and make them financially self-sustainable beyond the project implementation period. Beyond project implementation period, it is projected that at least 45 percent of the total farmers who are covered under SCDC interventions will sustain their adoption levels every year. Each beneficiary farmer will gain incremental financial gross margin of $33 per MT of fresh farm produce traded through CCMCs, while contributing 5 percent of the turnover as CCMC charges. All ten CCMCs are projected to generate incremental financial gross margin of $0.72 M per year at full project development. Economic Analysis 31. Total project cost including project management costs and contingencies, is estimated at $23.7 M. Agricultural research investment costs will generate location specific technologies contributing to productivity enhancement and cost reduction. Such technologies will be channelized through the decentralized agricultural extension support through 6,905 CIGs. About 134,890 CIG farmers will act as potential extension agents to diffuse the technologies, developed by agricultural research investments, for large scale adoption. This will sustain the incremental benefit flow for the 20-year project life considered in the analysis. Hence, agricultural research investment component costs are proportionately allocated to the crop, livestock, fisheries and value chain development extension investments. T-9 Grant: Economic Analysis Summary Impacts NPV ($ M) FRR (%) NPV ($ M) ERR (%) Agricultural Extension Support $ % $ % Value Chain Development $ % $ % Overall Project $ % $ % 34

36 T-10 Grant: Sensitivity Analysis Su mary ($ Million) Sensitivity Scenarios NPV ERR Base Level $ % Falling short of projected targets Agriculture Productivity by 20% $ % CIG sustainability less by 20% $ % Adoption levels by 20% $ % Escalation in project costs by 20% $ % Delayed implementation by two years $ % Change in base level Costs & Benefits Costs at 120% and Benefits at 80%1 $ % 32. Economic analysis is conducted for two components, namely agricultural extension support and value chain development components and then aggregated for the project as a whole. Project investments in agricultural extension support generated an ERR of 25.8 percent with a NPV of $30.2 M, at constant 2012 prices over 20-year project life (T-9).Value chain development investments returned an ERR of 16.3 percent with a NPV of $0.6 M. Overall project investments in both agricultural extension and value chain development components resulted in ERR of 25.2 percent with a NPV of $30.8 M. For the project as a whole, FRR is estimated at 23.4 percent with a NPV of $28 M. 33. Sensitivity analysis considered several scenarios like changes in costs and benefits, fall in projected targets covering adoption rates, CIG's sustainability and agricultural productivity levels (T-10).Minimum ERR of 17.3 percent is recorded when both costs and benefits changed by 20 percent from the projected levels. Next, delays in implementation and fall in agriculture productivity levels reduced the ERR but still remained above 19 percent. 34. Risk analysis considered up to 20 percent escalation in costs, up to 20 percent fall in productivity levels and up to two year delay in Risk analysis NPV, $M ERR the realization of technology benefits and Expected value % evaluated their joint impact on ERR. Simulated ERRs, based on multiple runs, ranged from 6.1 to 24 percent, with a Minimum (9.5) 6.1% coefficient of variation of 18 percent. Maximum % Expected ERR, estimated by the risk model at 17.1 percent is considered reasonably stable, since the probability of ERR exceeding 12 Probability of-ye outcome 5.5% percent level is 91 percent as predicted by the risk model (T- 11). Farm level Impacts 35. Equity Impacts: The grant will directly impact 883,508 farmers during the project implementation period, out of which about 60 percent of the farmers will sustain the project impacts during the project life. About 17 percent of these farmers are considered landless with a 35

37 farm holding size of less than 0.02 ha. Thirty-nine percent of the farmers are marginal farm holders with a farm holding size varying from 0.02 to 0.6 ha. Another 29 percent of the farmers are small farm holders with a farm holding size varying from 0.6 to 1 ha. Only 15 percent of the farmers are holding more than 1 ha and remaining 85 percent are holding less than 1 ha of land. Thus small, marginal and landless farm families are predominantly targeted by the project. Livestock and fisheries interventions will help resource poor landless families. 36. Convergence Effects: The grant design will facilitate convergence of agricultural technology extension interventions covering crops, livestock and fisheries with supply chain development interventions. For instance, one union has about 3,800 families. As per design, each union will have 15 crop CIGs, 02 fish CIGs and 03 livestock CIGs. The project interventions will impact 2,100 crop farmers, 405 livestock farmers, and 200 fish farmers within one union. This includes both CIG and non-cig farmers. Thus, about 2/3rd of the farmers within the union will be directly impacted by the project interventions. Hence, convergence of crops, livestock and fisheries technologies demonstrated through CIGs and disseminated to non-cig farmers within the union are more likely. This will be further aided through cross learning and experience sharing among the CIGs within and across unions. Hence, the impact of technologies will be much more than what is captured in this economic analysis WOP m WP Crop based Crop and livestock Crop and fisheries Fig. 4 Grant: Farm income impacts 37. Income Impacts: For instance, in the project area, major farming systems are paddy based (21%), livestock based (5%), fish based (18%) and the rest are mixed farming systems (56%) with a combination of crops, livestock and/or fisheries. With convergence, and full adoption of demonstrated technologies, farm financial income for different farming systems are estimated (Fig. 4).Incremental gross margin is more ($156 to 172 per farm) in case of mixed farming types as compared to crop based farms ($95 per farm).on an average farm financial income is projected to increase by 35 to 46 percent due to project interventions, aided by both enhanced productivity and reduced production cost in case of full technology adopters (Fig. 3). 38. Employment Impacts: Landless agricultural labor HHs constitute 5 percent of all HHs in the project area (HIES, 2010), which is equivalent to 20,800 HHs in the project area. A 15 percent sustainable increase in the use of hired agricultural labor for farming operations is projected for the technology adopting 530,105 farmers. This is equivalent to about 421,440 man-days of hired 36

38 farm labor. Due to seasonal nature of demand for hired labor, it is assumed that adoption of agricultural technologies will provide at least 48 man-days of employment per landless labor HHs. This will benefit about 40 percent of the total landless labor households within the project area. Annual wage income due to additional demand for hired farm labor will increase their HH income by $95 per family. 39. Poverty Alleviation Impacts: Averaged across major farm categories like crop, livestock, fish and mixed farming types, farm financial gross margin will increase by 43 percent. Incremental financial gross margin for mixed farming HHs vary from $157 to 172 per annum. Based on the poverty lines defined for rural Bangladesh, incremental gross margin for the mixed farming HHs benefited by grant interventions will be able to lift at least 308,300 rural poor above poverty line, which is equivalent to 11 percent of the project benefited rural population. 17 Average annual farm HH income in rural Bangladesh is $435/HH/year at constant 2012 prices (estimated from HIES, 2010, Bangladesh Bureau of Statistics, Statistics Division, Ministry of Planning, GoB). Rural HHs, with an average family size of five, needs an annual per capita income of $178 and $206 (at 2012 prices) to be above lower and upper poverty lines respectively. 37

39 ANNEX 4. Revised Project Costs and Financing Project Costs and Financing (US$ Million) IDA (For districts covered by IDA USAID Grant Component Credit) Percent (For districts added in the restructuring) Percent A. Agricultural Research Support 25,400,000 9, % A. 1 Competitive Grants Program 19,100,000 77% 4,100,000 A.2 Sponsored Public Goods Research 6,300,000 72% 5,000,000 B. Agricultural Extension Support 28,600,000 72% 11,445, % C. Development of Supply Chains 3,600,000 77% 2,170, % D. Project Management and Coordination 4,700,000 77% 1,000, % Project Preparation Facility 300,000 62,600, % 23,715, % USAID Grant Costs - By Expenditure Category Allocation % of Financing Category of Expenditure (already committed) (exclusive of taxes) (1) Works, goods, services, training, and Operating Costs under Part 5 of the Project 16,335, %- (6,169,470) (2) CGP Grants under Part 5 of the Project 3,000, % (334,2 10)* (3) SPGR Grant under Part 5 of the Project 3,587, % (551,320) (4) Unallocated 792,500, % (0)* Total Amount 23,715, % (7,055,000)' ()' refers to the currently Committed Grant amount of $7,055,000 pursuant to the Administration Agreement with USAID, which is the first of several expected installments towards a total grant of estimated US$23,715,000 for recipient executed activities. 38

40 ANNEX 5. Proposed Reallocation (SDR) Allocation according to existing Financing Agreement Proposed Reallocation Addition/(Reduction) Revised Allocation_ Category IDA IFAD Total IDA IFAD Total IDA IFAD Total (1) Works, goods, 16,146, ,940, ,086, ,146, ,940, ,086, services, training and operating costs (2) CGP Grants 2,900, , ,800, , , ,017, ,250, , ,930, under Part 1.A of the Project (3) SPGR Grants 7,200, ,300, ,500, ,220, , ,658, ,980, ,000, ,980, under Part 1.B of the Project (4) Refund of 171, , , , Project Preparation Advance 5 (a) Works, 8,308, ,800, ,108, , , , ,852, ,870, ,722, goods, local consultants' services, and Operating Costs 5 (b) Training and 4,673, ,360, ,033, ,326, , ,213, ,000, ,810, ,810, foreign consultants' services Total 39,400, ,300, ,700, ,400, ,300, ,700,

41 ANNEX 6. Geographic coverage of the original project and the restructured project Annex 6(a). List of Selected Upazilas & Districts for NATP -I Districts Number Of Upazilas Per Year of Inclusion District Total Selected 1st Year 2 nd Year 3rd Year Mymensingh 12 8 Sadar, Trishal Fulbaria, Phulpur, Gafargaon, Haluaghat, MGuaa Kishoregonj 12 4 Sadar Bhairab, Kuliarchar Katiadi Sherpur 5 3 Nalitabari Sribordi Nakla Tangail 11 8 Sadar,Madhupur Bhuapur, Deldwar*, Ghatail, Kalihati Shakipur, Goplalpur Gazipur 5 4 Sadar Kaliakoir, Kapasia* Sreepur Narshindhi 6 5 Sadar Belabo*, Monohardi, Sibpur Polash Dhaka 6 2 Savar* Dhamrai Comilla 15 6 Daudkandi, Sadar* Chandina, Laksam, Nagolkot, Chadhagram Bramanbaria 8 4 Sadar Akhaura, Kasba Nabinagar Chandpur 8 4 Sadar, Hajigonj, Shaharasti Matlab (Uttar) Chittagong 14 6 Mirsharai*, Hathazari, Anwara, Patya, Sandwip Rangunia Cox's Bazaar 8 3 Sadar Ramu Teknaf Sy1het 12 6 Sadar, Golapgonj Beanibazar, Jaintapur Fenchugonjn Dakhin Surma Moulavibazar 7 6 Sadar, Kulaura Barlekha, Srimongal*, Kamalgonj, Rajnagar Kustia 6 4 Sadar Bheramar, Mirpur Kumarkhali Jhenaidha 6 3 Sadar Kaigonj, Kutchandpur Jessore 8 8 Sadar Chowgacha Abhoynagar, SarshaBhagerpara, Monirampur Keshobpur, Jhikorgacha* Khulna 9 5 Dakope, Paikgacha Batiaghata, Dumuria Rupsha Satkhira 7 3 Sadar Kalaroa, Tala Rajbari 4 3 Sadar Baliakandi, Pangsa Faridpur 8 3 Sadar Modhukhali, Alphadanga Natore 6 4 Natore Baroigram, Lalpur Singra Bogra 12 6 Sadar, Shibganj* Shrerpur, Sonatola, Kahalu Dhunot Dinajpur 13 6 Sadar, Parbatipur*, Khansama, Kaharol, Chirir Birganj Dinajpur 13 6 Sadar' Bandar Rangpur 8 6 Sadar, Pirganj Pirgacha, Mithapukur Badarganj, Kaunia Total

42 Annex 6(b). List of Selected Upazilas & Districts Being Added in the Restructuring Total Nos. Proposed Upazilas proposed for restructured District under Special features of the district of Upazilas Restructuring project Gopalgonj Sadar; Low lying area with salinity and water logged, erratic rainfall with low cropping intensity. Potential for "Dhap" oksudlpr; Kasgipani cultivation and high value crop introduction at the border of ponds, Gher, fallow lands. Low lying area with salinity and water logged, erratic Madaripur Sadar; Rajoir; Kalkini rainfall with low cropping intensity. Potential for "Dhap" Shibchar cultivation and high value crop introduction at the border of ponds, Gher, fellow lands. Sadar;Zajira;Bhedarganj Low lying area with salinity and water logged, erratic rainfall with low cropping intensity. Potential for "Dhap".a6ara cultivation and high value crop introduction at the border of Gosairhat ponds, Gher, fellow lands. Drought prone and erratic rainfall area. Potential for crop Magura 4 4 Sadar; Sreepur; Mohommadpur; Shalikha intensification and diversification, especially high value crops, oil seeds, spices, etc. aygong;kamarkhanda Flood prone area with dishes. Potential for crop Sirajgang 9elkuchi; Chauhali intensification and diversification, especially high value crops, oil seeds, spices, etc. Sadar; Char Fasson Saline area with sudden storm and water logged. Potential Bhola 7 7 Doulatkhan;Borhanuddin; Tojumuddin; for "Dhap" cultivation, crop intensification and Monpura diversification, especially high value crops, oil seeds, spices, Lalmahan ec 6 districts Upazilas etc. 41