India - Haryana Agricultural Credit Project : Credit 0249 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 249-IN Project Agreement (Haryana Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND THE HARYANA STATE CO-OPERATIVE LAND MORTGAGE BANK LIMITED AND THE HARYANA AGRO-INDUSTRIES CORPORATION LIMITED DATED JUNE 11, 1971 CONFORMED COPY CREDIT NUMBER 249-IN Project Agreement (Haryana Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND THE HARYANA STATE CO-OPERATIVE LAND MORTGAGE BANK LIMITED AND THE HARYANA AGRO-INDUSTRIES CORPORATION LIMITED DATED JUNE 11, 1971 AGREEMENT, dated June 11, 1971 between INTERNA- TIONAL DEVELOPMENT AssOCIATION (hereinafter called the Association) and AGRICULTURAL REFINANCE CORPORATION (hereinafter called ARC) and THE HARYANA STATE CO- OPERATIVE LAND MORTGAGE BANK LIMITED (hereinafter called LMB) and THE HARYANA AGRO-INDUSTRIES CORPORATION LIMITED (hereinafter called HAIC). WHEREAS by a development credit agreement of even date herewith between India, acting by its President, (here- inafter called the Borrower) and the Association (here- inafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Bor- rower an amount in various currencies equivalent to twenty- five million dollars ($25,000,000), on the terms and condi- tions set forth in the Development Credit Agreement, but only on condition inter alia that ARC, LMB and HAIC agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by an agreement of even date herewith between the Association and the State of Haryana, the State of Haryana has agreed to undertake certain obligations in respect of the carrying out of the Project; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and ARC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to ARC on the terms and conditions therein set forth; and WHEREAS ARC, LMB and HAIC, in consideration of the Association's entering into the Development Credit Agree- ment with the Borrower, have agreed to undertake the obligations hereinafter set forth; 4 Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions SECTION 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms de- fined in the Development Credit Agreement and in the Gen- eral Conditions (as so defined) have the respective mean- ings therein set forth and the term "Rs" means rupees in the currency of the Borrower. ARTICLE II Execution of the Project SECTION 2.01. ARC, LMB and HAIC shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in con- formity with sound administrative, financial and agricul- tural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. SECTION 2.02. (a) ARC shall enter into a Subsidiary Loan Agreement with the Borrower on terms and condi- tions (including inter alia those set forth in Schedule 5 to the Development Credit Agreement) satisfactory to the Association. ARC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Asso- ciation shall otherwise agree, ARC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. (b) ARC shall invite banks listed in the Second Schedule to the Reserve Bank of India Act, 1934, to participate in the Project, other than making and obtaining refinancing of loans for sprinkler irrigation sets. ARC shall within six 5 months after the date of this Agreement determine which of said banks shall so participate, the scope of such par- ticipation and the date on which such participation shall commence. (c) ARC shall enter into agreements with LMB and each bank selected by it in accordance with Section 2.02 (b) of this Agreement on terms and conditions (including inter alia those set forth in paragraph 1 of Schedule 2 to this Agreement) satisfactory to the Association. (d) ARC shall instruct Participating Banks to maintain separate accounts for Project lending. SECTION 2.03. LMB shall enter into an agreement with each Primary Land Mortgage Bank on terms and conditions (including inter alia those set forth in paragraph 2 of Schedule 2 to this Agreement) satisfactory to ARC. SECTION 2.04. The operating policies and procedures for carrying out the Project shall be as set forth in Schedule 1 to this Agreement, as the same may be amended from time to time by agreement between the Association, ARC, LMB and HAIC. SECTION 2.05. ARC shall take all such measures as shall be necessary to ensure that appraisals of Agricultural Loans are in conformity with agreed lending criteria and to ensure that no more than one Agricultural Loan is granted for the same investment. SECTIoN 2.06. LMB shall provide each Primary Bank with a qualified manager and technical officer within twelve months after the Effective Date. SECTION 2.07. HAIC shall organize the procurement of goods to be financed out of the proceeds of the Credit in accordance with the procedures set forth or referred to in Schedule 3 to the Development Credit Agreement. 6 SECTION 2.08. (a) HAIC shall cause all imported goods to be financed out of the proceeds of the Credit to be insured against hazards incident to the acquisition, trans- portation and delivery thereof to the place of use or instal- lation, or ensure that adequate provision is made for the insurance thereof, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods. HAIC shall keep the Association in- formed of such insurance arrangements. (b) Except as the Association may otherwise agree, ARC, and, as the case may be, LMB and HAIC, shall cause all goods and services financed out of the proceeds of the Credit under Categories II, III and IV of the allocation of the proceeds of the Credit set forth in Schedule 1 to the Development Credit Agreement, and tractor implements and trailers acquired for the purposes of the Project, to be used exclusively for the Project. SECTION 2.09. ARC and LMB: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and -services financed out of the proceeds of the Credit relent to them by the Borrower and by ARC, respectively, and to disclose the use thereof in the Project; (ii) shall enable the Asso- ciation's representatives to inspect the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such informa- tion as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to them and the goods and services financed out of such proceeds. SECTION 2.10. ARC and LMB shall at all times charge interest on all of their loans at rates sufficient to enable ARC and LMB, respectively, to (a) cover all operating expenditures and charges including taxes (if any) and interest payments on borrowings; and (b) maintain ade- 7 quate provisions for bad debts and maintain adequate gen- eral reserves in accordance with sound commercial practice. ARTICLE III Management and Operations of ARC, LMB and HAIC SECTION 3.01. ARC, LMB and HAIC shall: (a) At all times manage their affairs, maintain their financial position, plan their future expansion and carry on their operations, all in accordance with sound business and financial practices and under the supervision of expe- rienced and competent management assisted by experienced and competent staff in adequate number. (b) Take all steps necessary to acquire, maintain and review all rights, powers, privileges and franchises which are necessary or useful in the conduct of their business or in the carrying out of the Project. SECTION 3.02. Save as the Association shall otherwise agree, LMB, Primary Banks and Participating Banks shall apply the same criteria to all similar types of lending that they apply to Project lending and, with respect to such similar types of lending, shall not offer more favorable terms of lending than are offered under Project lending except for schemes submitted under the aegis of the Small Farmers Development Agency in Haryana. ARTICLE IV Financial Covenants SECTION 4.01. ARC, LMB and HAIC shall maintain rec- ords adequate to reflect in 'accordance with consistently maintained sound accounting practices their operations and financial condition. SECTION 4.02. ARC and LMB shall: (i) establish and maintain separate accounts in respect of all funds disbursed 8 and received on account of the Project; (ii) have their accounts and financial statements (balance sheets, state- ments of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (iii) furnish to the Associa- tion as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of said separate accounts and their financial state- ments for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iv) furnish to the Association. such other information con- cerning their accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. SECTION 4.03. LMB shall cause the accounts of the Pri- mary Banks to continue to be audited by independent audi- tors acceptable to the Association. SECTION 4.04. ARC shall require the separate Project accounts of the Participating Banks to be audited by inde- pendent auditors acceptable to the Association. ARTICLE V Consultation, Information and Inspection SECTION 5.01. The Association, ARC, LMB and HAIC shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association, ARC, LMB and HAIC shall from time to time, at the re- quest of either party, exchange views through their repre- sentatives with regard to the performance of their respec- tive obligations under this Agreement, the administration, operations and financial condition of ARC, LMB or HAIC and other matters relating to the purpose of the Credit. 9 SECTION 5.02. The Association, ARC, LMB and HAIC shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accom- plishment of the purposes of the Credit, or the perform- ance by any of them of its obligations under this Agreement or the performance by the Borrower and ARC of their respective obligations under the Subsidiary Loan Agree- ment. SECTION 5.03. ARC, LMB and HAIC, respectively, shall enable the Association's representatives to inspect all their records and documents relevant to the Project. ARTICLE VI Effective Date; Termination; Cancellation and Suspension SECTION 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. SECTION 6.02. (a) This Agreement and all obligations of the Association and ARC, LMB and HAIC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agree- ment shall terminate in accordance with its terms; or (ii) a, date when all principal amounts withdrawn by ARC under the Subsidiary Loan Agreement and interest thereon shall have been repaid by ARC to the Borrower. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in para- graph (a) (ii) of this Section, the Association shall promptly notify ARC, LMB and HAIC of this event and, upon the giving of such notice, this Agreement and all obli- gations of the parties thereunder shall forthwith terminate. 10 SECTION 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any partial cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions SECTION 7.01. Any notice or request required or per- mitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agree- ment shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radio- gram to the party to which it is required or permitted to be given or made at such party's address hereinafter speci- fied or at such other address as such party shall have desig- hated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. For ARC: Managing Director Agricultural Refinance Corporation Shreeniketan F Block Shiv Sagar Estate Dr. Annie Besant Road Worli, Bombay, 18 W.B. India 11 Cable address: Agrefinans Bombay For LMB: The Haryana State Co-operative Land Mortgage Bank Limited Chandigarh India Cable address: Krishibank Chandigarh India For HAIC Managing Director The Haryana Agro-Industries Corporation Limited Kothi No. 8, Sector 9 Chandigarh India Cable address: Haragin Chandigarh India SECTION 7.02. Any action required or permitted to be taken, and any documents required or permitted to be exe- cuted, under this Agreement on behalf of (i) ARC may be taken or executed by its Managing Director or such other person or persons as ARC shall designate in writing; (ii) LMB may be taken or executed by its Managing Direc- tor or such other person or persons as LMB shall designate in writing; and (iii) HAIC may be taken or executed by its Managing Director or such other person or persons as HAIC shall designate in writing. SECTION 7.03. ARC, LMB and HAIC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ARC, LMB and HAIC, take any action or execute any documents required or permitted to be taken or executed by ARC, LMB and HAIC, respec- tively, pursuant to any of the provisions of this Agreement. SECTION 7.04. This Agreement may be executed in sev- eral counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT AssociATioN By /s/ J. BURKE KNAPP Vice President AGRICULUTRAL REFINANCE CORPORATION By /s/ L. K. JHA Authorized Representative 13 THE HARYANA STATE CO-OPERATIVE LAND MORTGAGE BANI LIMITED By /s/ L. K. JHA .Authorized Representative THE HARYANA AGRO-INDUSTRIES CORPORATION LIMITED By /s/ L. K. JHA ÅAuthorized Representative 14 SCHEDULE 1 Operating Policies and Procedures 1. Technical Feasibility of Minor Irrigation Investments (a) Loans for minor irrigation investments (tubewells and sprinkler irrigation) would include not more than Rs 500 for electricity connections for each tube- well and each sprinkler set. (b) Minor irrigation loans would be individually ap- praised and would require the technical approval of the Haryana Department of Agriculture. 2. Financial Feasibility of Farm Investments (a) All investments shall be evaluated in terms of incre- mental returns from the additional investment, in accord- ance with the evaluation method prescribed by ARC. (b) Loans for tractor purchases shall be granted only to Beneficiaries who shall (i) offer assurances that they have or will have at the time they receive the tractor, at least three implements, which may include a trailer, for use with the tractor; and (ii) demonstrate that the tractor will be used for cultivating not less than 40 ha of cropped area per year or for 1,000 hours of productive work in agricul- ture per year. (c) Loans for self-propelled combine purchases shall be granted only to Beneficiaries who shall demonstrate that the combine will be used for a workload of at least 200 ha per unit per annum. (d) Loans for tractor drawn harvesters shall be granted only to Beneficiaries who shall demonstrate that the har- vester will be used for a workload of at least 100 ha per unit per annum. (e) Not more than 10 combines and 50 harvesters shall be provided for HAIC. 15 (f) Tractor borrowers shall be required to buy post- warranty service on their tractors for the life of the tractor loan. 3. Financial Terms and Conditions of Agricultural Loans (a) Contributions by Beneficiaries: Beneficiaries would be required to contribute 25% of total costs for tractors, implements, combines, and harvesters and, except as provided in sub-paragraph (d) below with respect to small farmer Beneficiaries, 20% of other investments. (b) Interest rate: 9% per annum of outstanding balance. (c) Loan maturity: shall be based on the Beneficiary's capacity to repay but shall not exceed, in the case of (i) minor irrigation investments, 7 years, includ- ing one year of grace (except as provided in sub- paragraph (d) below with respect to tubewell invest- ments by small farmer Beneficiaries); (ii) self- propelled combine investments, 5 years.; and (iii) tractors and tractor-drawn harvesters, 7 years. (d) Small farmer Beneficiaries (as designated in the agreements referred to in Section 2.02 (c) of this Agreement) will be required to contribute 10% of total costs for minor irrigation (tubewells) costing less than Rs 10,009.each; and for such investments the loan maturity shall not exceed nine years. 16 SCHEDULE 2 Principal Terms of Relending Agreements The following sets forth the principal terms and condi- tions under which part of the proceeds of the Credit or the equivalent thereof shall be relent to LMB, Participating Banks and the Primary Banks: 1. Lending Terms to LMB and Participating Banks from ARC: (a) Amount: ARC shall refinance no more than 90% of Agricultural Loans for minor irrigation investments and 75% of Agricultural Loans for mechanization. (b) Repayment Terms: set to coincide, more or less, with expected collections of Agricultural Loans refinanced. (c) Interest Rate: 6:12% per annum on outstanding bal- ance. 2. Lending Terms to Primary Banks from LMB: (a) Amount: LMB shall refinance 100% of Agricultural Loans made by Primary Banks. (b) Repayment Terms: set to coincide, more or less, with expected collections of Agricultural Loans refinanced. (c) Interest Rate: 71/2% per annum on outstanding bal- ance. 3. Re-use of Funds under the Credit: Except as the Association shall otherwise agree, repay- ments to ARC from LMB and the Participating Banks shall be deposited in a special account to be used only for refinancing ARC-approved agricultural development schemes, such schemes to be carried out in conformity with sound administrative, agricultural and financial practices.