The World Bank Climate Smart Staple Crop Production (P144531) REPORT NO.: RES35263 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CLIMATE SMART STAPLE CROP PRODUCTION APPROVED ON AUGUST 29, 2014 TO PEOPLE'S REPUBLIC OF CHINA AGRICULTURE EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Martin Raiser Senior Global Practice Director: Juergen Voegele Practice Manager/Manager: Nathan M. Belete Task Team Leader: William R. Sutton, Jianwen Liu The World Bank Climate Smart Staple Crop Production (P144531) I. BASIC DATA Product Information Project ID Financing Instrument P144531 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 29-Aug-2014 31-Mar-2020 Organizations Borrower Responsible Agency PEOPLE'S REPUBLIC OF CHINA Ministry of Agriculture Project Development Objective (PDO) Original PDO The project’s Development Objective (PDO) and its Global Environmental Objective (GEO) is to demonstrate climate smart and sustainable staple crop production in Huaiyuan County of Anhui Province and Yexian County of Henan Province. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-17649 29-Sep-2014 29-Sep-2014 01-Dec-2014 31-Mar-2020 5.10 3.22 1.88 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Climate Smart Staple Crop Production (P144531) I. Project implementation status: The project had experienced some delays in the first year due to slow process of signing grant transfer agreement between Ministry of Finance and Ministry of Agriculture. Although the project was launched on September 19, 2014, 10 days prior to the Grant Agreement was signed by the Government of China (GOC) and the World Bank, the Grant Transfer Agreement between Ministry of Finance (MOF) and Ministry of Agriculture (MOA) was not signed until March 6, 2015. This resulted in project implementation missing the spring wheat season. However, the project has been making solid progress since the MTR mission in May 2018. As of January 2019, the disbursement rate of GEF grant was 63.1%, or $3.22 million US dollars, of which the disbursement of category I and II were $1.94 million and $3.16 million respectively. As of the latest interim ISR using 2017 data, the PDO level results are: (1) carbon sequestration (CO2-eq) reached 14,563.46 metric tons, or 33% of the end target, (2) GHG emissions (CO2-eq) reduction reached 12,324.11 metric tons, or 58.7% of the end target, and (3) change in average crop yield was 5.86%, or 73.3% of the end target. The overall ratings for the project Implementation Progress (IP) and Progress towards achievement of PDO are both MS due to slow progress in project implementation and no full conservation agriculture has been implemented prior to the MTR mission. The PMO has agreed with the bank team to carry out a full CA piloting in small scale after the MTR mission, which is expected to generate experiences/lessons of CA implementation in the project areas, and to provide references to non-project regions in China. II. Reasons for project restructuring 1. The slow start of the project implementation led to the need to allow extra time for the implementation of activities related to spring wheat. Lengthier preparation and delays in implementation have resulted in missing the spring season for wheat in 2015, and activities could only be implemented in autumn 2015. Although project implementation has recently been progressing better, bringing indicators of GHG emissions reduction and crop yield to 58% and 73% of the end targets respectively, the project would need one more crop season to complete the planned activities for spring wheat. 2. Piloting CA activities would need more time to complete, not only because of the initial delays, but also due to the recent agreement to introduce new technologies to be tested under the project, which require some time for collecting and assessing the results. The PMOs recognize the difficulties and challenges to implement full CA in China due to: a) no big/heavy no-till planter is available in China, therefore sowing quality cannot be ensured; b) double cropping in the project areas leaves little time for crop straws breakdown before the second crop is planted; and c) wheat is drill-sowing crop and difficult to sow on straw mulching. The implementing agencies plan to increase conservation agriculture piloting to test three modalities: a) traditional tillage (CK): straw return + deep ploughing; b) CA with Chinese characteristics CA (T1): straw return + rotary tillage; and c) system-based CA (T2): straw mulching + no-tillage + crop rotation. The PMO also plans to introduce new technologies to be piloted in the project counties, including adopting new varieties of seeds and seed treatment techniques, low-till/no-till, and crop straw mulching, etc. The PMOs will continue to implement demonstration of soil testing fertilization and mechanized deep fertilization techniques and increase ecological interception technology demonstration in Huiyuan County. All these activities would need more time to be completed, as well as for collecting and assessing results. 3. Monitoring and evaluation of GHG emissions reduction and CO2 sequestration results would need time for data collection and analysis. Coupled with the delay in project implementation, M&E data for spring wheat also missed one crop season. The extension of the project closing date would provide time to monitor and evaluate all planned and The World Bank Climate Smart Staple Crop Production (P144531) implemented activities including those related to spring wheat, enabling the fair evaluation of project implementation results against project targets. 4. The extension would also allow more time for policy studies and knowledge management which could highlight outcomes/outputs of the project and provide policy references and recommendations for climate smart agriculture (CSA) promotion in China and elsewhere in the globe. III. Project restructuring This restructuring is seeking Bank’s approval on: a) Closing date extension: extending the closing date from March 31, 2020 to September 30, 2020; and b) Fund reallocation: reduce funds for sub-grants and subsidies in Category (1) from US$1,936,000 to US$1,590,000 and increase funds for goods and non-consulting and consulting services in Category (2) from US$3,164000 to US$3,510,000. The fund re-allocation would allow project implementation units to have additional funds to be able to purchase machinery to implement full CA activities. Funds being re-allocated would be within 12% of the respective budget categories and enable piloting activities of introducing new technologies such as fertigation, full conservation agriculture, climate adaptive planting technologies and ecological interception technologies to enhance GHG emissions reduction and CO2 sequestration, while increasing crop yields. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-17649 Effective 31-Mar-2020 30-Sep-2020 30-Jan-2021 REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed TF-17649- Sub-grants and 001 Subsidies under 1,936,000.00 634,445.69 1,590,000.00 100.00 100 Currency: Pt.1 The World Bank Climate Smart Staple Crop Production (P144531) USD GDs/nonCSs/CSs 3,164,000.00 1,583,763.95 3,510,000.00 100.00 100.00 /IOCs/TRN/WSs Total 5,100,000.00 2,218,209.64 5,100,000.00