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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4353-NEP STAFF APPRAISAL REPORT Public Disclosure Authorized NEPAL SECOND FORESTRY PROJECT Public Disclosure Authorized June 8, 1983 Public Disclosure Authorized 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. CURRENCY EQUIVALENTS US$1.00 = Nepalese Rupee (NR) 14.30 WEIGHTS AND MEASURES Metric System FISCAL YEAR July 16 - July 15 FOR OFFICIAL USE ONLY ABBREVIATIONS ADBN - Agricultural Development Bank of Nepal AF - Assistant Forester AO - Attached Officer AU - Afforestation Unit CCF - Chief Conservator of Forests CDO - Chief District Officer CFAD - Community Forestry and Afforestation Division CFDTP - Community Forestry Development and Training Project CFO - Community Forestry Officer CFU - Community Forestry Unit CR - Community Ranger DCCF - Deputy Chief Conservator of Forests DDP - District Development Plan DFO - Divisional Forest Officer FAO - Food and Agriculture Organization FCN - Fuelwood Corporation of Nepal FD - Forest Department FI - Institute of Forestry FM - Forest Motivator FPDB - Forest Products Development Board FR - Forest Rangers GDP - Gross Domestic Product GNP - Gross National Product .IMG - His Majesty's Government of Nepal ICB - International Competitive Bidding LCB - Local Competitive Bidding LDO - Local Development Officer MEDU - Motivation and Education Unit MEU - Monitoring and Evaluation Unit MFTW - Ministry of Forest Training Wing MPLD - Ministry of Panchayat and Local Development MFSC - Ministry of Forests and Soil Conservation NPC - National Planning Commission NPV - Net Present Value ODA - Overseas Development Administration (UK) PF - Panchayat Forest PO - Plantation Offices PPF - Panchayat Protected Forest SCF - Standard Conversion Factor SIU - Stove Improvement Unit SP - Stove Promoter TCN - Timber Corporation of Nepal TCFPU - Terai Community Forestry Project Unit USAID - United States Agency for International Development VDP - Village Development Plan 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. -ii- NEPAL SECOND FORESTRY PROJECT Table of Contents Page I. INTRODUCTION ............................................. 1 I. BACKGROUND.. 1 A. The Panchayat System of Government. 2 B. Forestry in Nepal. 3 The Sector. 3 Importance to the Economy. 4 Policy for Forestry Development. 6 Forestry Institutions. 6 Forestry Training. 7 Forestry Projects. 8 III. THE PROJECT. 9 A. General Description. 9 Project Phasing ..................................... 11 B. Detailed Features ...................................... 12 Nurseries and Planting Materials .................... 12 Planting and Tending ................................ 13 Panchayat Forests ................................... 14 Tree Planting on Private Land ....................... 15 Strip Plantations ................................... 16 Demonstration Woodlots .............................. 16 Forest Department Agro-forestry Plantations ......... 17 Forest Improvement .................................. 17 Support for Forestry Department ..................... 18 Forestry Research ................................... 21 Improved Stoves ..................................... 22 Monitoring and Evaluation ........................... 23 Forestry Training ................................... 23 Forestry Development Planning ....................... 25 Technical Assistance ................................ 25 -iii- IV. COST ESTIMATES AND FINANCING ............................... 27 A. Cost Estimates ......................................... 27 B. Financing.......................................... 28 C. Procurement and Disbursement........................... 28 D. Accounts and Audit..30 V. ORGANIZATION AND MANAGEMENT ................................ 30 Project Coordination................................... 30 Forestry and Agro-forestry ............................. 31 Improved Stoves........................................ 32 Forestry Research ...................................... 33 Training.......................................... 33 National Forestry Development Plan ............... 33 VI. PRODUCTION, MARKETS AND COST RECOVERY...................... 34 Production and Yields.................................. 34 Markets.......................................... 34 Distribution of Produce................................ 35 Financial Results...................................... 35 Cost Recovery.......................................... 35 VII. BENEFITS, JUSTIFICATION, AND RISKS.36 Benefits and Beneficiaries.36 Economic Analysis and Rates of Return .37 Project Risks.38 VIII. RECOMMENDATIONS.39 -iv- ANNEXES I. Forestry Sector Background Information Table 1 - Main Physical Forestry Targets in Sixth Plan Table 2 - Forestry Sector Revenue and Expenditure Table 3 - Forestry Royalty Rates Table 4 - Current Internationaland Bilateral Assistance in Forestry Table 5 - Departments of Ministry of Forest and Soil Conservation Table 6 - Civil Works at Institute of Forestry, Hetauda and Pokhara II. Project Costs Table 1 - Project Component bv Time Table 2 - Farm, Institutional and Panchayat Plantings Table 3 - Road and Canalside and Riverbank Plantings Table 4 - Demonstration Woodlots Table 5 - Promotion and Distributionof Improved Stoves Table 6 - Incremental Staff Table 7 - Vehicles and Equipment Table 8 - Building, Furniture, and Fittings Table 9 - Nursery Construction Table 10 - State Agro-ForestryPlantations Table 11 - State Agro-ForestryNursery ConstructionCosts Table 12 - Improvementof Natural Forests Table 13 - Research Operational Costs Table 14 - Training Table 15 - Technical Assistance and Monitoring and Evaluation Table 16 - Road Constructionand Fire Protection Table 17 - University and Training Wing Construction Table 18 - Summary Account by Time Table 19 - Summary Account by Project Component Table 20 - Community Forestry Plantation Program Table 21 - State Forestry PlantationsNursery Production Costs -V- III. Assumptions for Financial and Economic Analysis Table 1 - Yields by Ha per Component Table 2 - Forestry Output Shares Table 3 - Financial and Economic Prices Table 4 - Financial Price for Fuelwood Table 5 - Economic Price for Fuelwood Table 6 - Financial Prices of Sawlogs Table 7 - Economic Prices of Sawlogs Table 8 - Financial and Economic Prices of Poles Table 9 - Economic Prices of Fertilizer Table 10 - Agricultural Activity on One Hectare of Agro-Forestry Table 11 - Agricultural Activity on One Hectare of Agro-Forestry (Financial Input/Output) Table 12 - One Hectare Financial Flow to Private Plantings and Agricultural Activity Table 13 - Economic Costs and Benefit Stream by Component Table 14 - Economic Costs and Benefits by Type Table 15 - Switching Values IV. Implementation Schedule V. Estimated IDA Disbursement Schedule VI. Chart 24655 - Proposed Organization Chart VII. List of Materials Available in Project File MAP - IBRD 16908 - Project Area NEPAL SECOND FORESTRY PROJECT I. INTRODUCTION 1.01 In order to remedy the deteriorating forestry situation in Nepal, His Majesty's Government of Nepal (HMG), together with IDA and several bilateral aid agencies, has embarked upon a program of reforesta- tion and forest improvement. Initial efforts were concentrated in the north (Hills), where a reforestation project is now operating in each administrative district. As part of its strategy for development, HMG has now decided to pay increased attention to the forestry needs of the southern plains (Terai), where shortage of fuelwood supply is becoming critical. Together with the FAO/IBRD Cooperative Program, HMG has prepared a report entitled "Nepal Terai Forestry Project", which forms the basis for its request for IDA assistance in the financing of a forestry project in the eastern Terai. The proposed project is in line with the objectives and priorities of HMG's Sixth Development Plan. This report is based on the findings of an IDA appraisal mission consisting of A. J. Pritchard, R. Moreno (IDA); and F. B. Armitage and N. Chatterjee (consult- ants), which visited Nepal in November/December 1982. II. BACKGROUND 2.01 Nepal is landlocked between China and India. It is divided into three parallel ecological zones running east-west: the Terai Plain, an extension of the Gangetic Plain of India; the Hills, actually the foothills of the Himalayas, ranging from 500 m to 4,000 m in elevation; and the Himalayan Mountains to the north. These three zones account for 17%, 68% and 15% of the total area (140,800 sq km), respectively. Rivers and streams, running north-south, cut the Hills into isolated areas and varying microclimatic conditions provide a range of environments for plant growth, depending on elevation, aspect, cloud cover, slope, etc. 2.02 Nepal's population, 96% of which is rural, is currently estimated at 15 M and is increasing at a rate of 2.7% annually. About 44% of the population lives in the Terai, where a higher annual rate of population increase (4.1%) is partially due to migration from the Hills and India. GNP per capita in Nepal, at about US$156, is one of the lowest in the world. 2.03 Agriculture dominates the country's economy, providing a livelihood to over 90% of the population and generating about two-thirds of GDP and 60% of all exports. The major
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