India - Nadhya Pradesh Agricultural : Credit 0391 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 391 IN Project Agreement (Madhya Pradesh Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND MADHYA PRADESH STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED DATED JUNE 8, 1973 CONFORMED COPY CREDIT NUMBER 391 IN Project Agreement (Madhya Pradesh Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND MADHYA PRADESH STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED DATED JUNE 8, 1973 PROJECT AGREEMENT AGREEMENT, dated June 8, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and AGRICULTURAL REFINANCE CORPORATION (hereinafter called ARC) and MADHYA PRADESH STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED (hereinafter called LDB). WHEREAS by a development credit agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, (hereinafter referred to as the Credit Agreement) the Association has agreed to make available to the Borrower an amount in various currencies equivalent to thirty three million dollars ($33,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition inter alia that ARC and LDB 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 Madhya Pradesh acting by its Governor, the said State 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 and LDB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have agreed to undertake the obligations hereinafter set forth; 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 defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the term "Rs" means rupees in the currency of the Borrower. 4 ARTICLE II Execution of the Project Section 2.01. ARC and LDB shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and agricultural 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 conditions (including inter alia those set forth in Schedule 3 to the Devzlopment Credit Agreement) satisfactory to the Association. ARC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association 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, in sufficient time before the Effective Date, invite to participate in the Project the banks listed in the Second Schedule to the Reserve Bank of India Act, 1934, on terms and conditions (including inter alia those set forth in Schedule 2 to this Agreement) satisfactory to the Association. (c) ARC shall enter into agreements with LDB and each bank responding to ARC's invitation under paragraph (b) of this Section on terms and conditions (including inter alia those set forth in Schedule 2 to this Agreement) satisfactory to the Association. (d) ARC shall: (i) require Participating Banks to maintain separate accounts for Project lending and (ii) ensure that the annual audited accounts of such Banks are submitted to the Association within four months of the end of their fiscal year together with a statement of project lending for such Banks, certified by ARC. Section 2.03. LDB shall enter into an agreement with each Primary Bank on terms and conditions (including inter alia those set forth in paragraphs 2 and 3 of Schedule 2 to this Agreement) satisfactory to ARC. Section 2.04. (a) The operating policies and procedures and the lending terms and conditions for carrying out the Project shall be as set forth in Schedules I and 2 hereto, as the same may be amended from time to time by agreement between the Association, ARC and LDB. W 5 (b) ARC shall take all necessary measures to ensure that LDB, the Participating Banks and Primary Banks in their operations adhere to the lending terms and conditions and the appraisal criteria and procedures relating to minor irrigation set forth in said Schedules 1 and 2. Section 2.05. Except as the Association may otherwise agree, ARC shall ensure that all goods and services financed out of the proceeds of the Credit under Categories I and II of the allocation of the proceeds of the Credit set forth in Schedule 1 to the Development Credit Agreement are used exclusively for the Project. Section 2.06. ARC and LDB: (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 Association'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 information 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 2.07. ARC and LDB shall at all times charge interest on all of their loans at rates sufficient to enable ARC and LDB, respectively, to (a) cover all operating expenditures and charges including taxes (if any) and interest payments on borrowings; and (b) maintain adequate provisions for bad debts and maintain adequate general reserves in accorda'nce with sound commercial practice. Section 2.08. ARC in consultation with the Association shall continue to assist in the maintenance by LDB and the Primary Banks in Madhya Pradesh of sound business and financial practices. Section 2.09. ARC shall as soon as possible after the date of this Agreement establish a system, satisfactory to the Association, for evaluating in Madhya Pradesh on a continuing basis the financial and economic benefits of agricultural credit projects financed by the Association. Section 2. 10. ARC and LDB shall take all such steps as shall be necessary on their parts to implement the banking plan agreed between Madhya Pradesh, ARC, LDB id the Association. Section 2.11. ARC shall, after consultation with and agreement by the Association, withhold refinancing under the Project from any Primary Bank which 6 fails to achieve a recovery rate of 75% in respect of all demands (principal and interest) falling due during the fiscal year ending June 30 of each year. Section 2.12. ARC shall take due measures to ensure that all banks listed in the Second Schedule to the Reserve Bank of India Act, 1934 lend for all minor irrigation and land development investments in the Project Area only where such lending conforms to the criteria and terms and conditions set out in Schedules 1 and 2 hereto except for schemes submitted under the aegis of the Small Farmers and Marginal Farmers' Development Agencies in Madhya Pradesh. Section 2.13. Any Primary Bank which has suffered disqualification from refinance facilities by virtue of Section 2.11 hereof may be allowed by ARC to participate in Project lending on the default leading to the disqualification being subsequently rectified. Section 2.14. ARC shall give such assistance as shall be necessary to Madhya Pradesh in conducting the survey referred to in Section 2.08 of the Madhya Pradesh Agreement. ARTICLE III Management and Operations of ARC and LDB Section 3.01. ARC and LDB 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 inder the supervision of experienced and competent management assisted by experienced and competent staff in adequate number; and (b) take all steps necessary to acquire, maintain and renew 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. Except as the Association shall otherwise agree, LDB and the Primary 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 than are offered under Project lending except for schemes submitted under the aegis of the Small Farmers and Marginal Farmers Development Agencies in Madhya Pradesh. ARTICLE IV Financial Covenants Section 4.01. ARC and LDB shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. 7 Section 4.02. ARC and LDB shall: (i) establish and maintain separate accounts in respect of all funds disbursed and received on account of the Project; (ii) have such accounts and financial statements (balance sheets, statements 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 Association as soon as available, and, except as the Association shall otherwise agree, not later than four months after the end of each such year, (A) certified copies of said separate accounts and their financial statements 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 concerning their accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association, ARC and LDB shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association, ARC and LDB shall from time to time, at the request of any party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of ARC or LDB and other matters relating to the purpose of the Credit. Section 5.02. The Association, ARC and LDB shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, or the performance by either of them of its obligations under this Agreement or the performance by the Borrower and ARC of their respective obligations under the Subsidiary Loan Agreement. Section 5.03. ARC and LDB, 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. 8 Section 6.02. (a) This Agreement and all obligations of the Association and of ARC and LDB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement 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 paragraph (a)(ii) of this Section, the Association shall promptly notify ARC and LDB of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or roade when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated 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 9 Cable address: INDEVAS Washington, D.C. For ARC: Managing Director Agricultural Refinance Corporation Shri Niketan F Block Shiv Sagar Estate Dr. Annie Besant Road Worli, Bombay, 18 W.B. India Cable address: AGROFINANS Bombay For LDB: Managing Director Madhya Pradesh State Cooperative Land Development Bank, Limited Sultania Road, Bhopal Cable address: KISANBANK Bhopal Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, 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) LDB may be taken or executed by its Managing Director or such other person or persons as LDB shall designate in writing. 10 Section 7.03. ARC and LDB 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 and LDB, take any action or execute any documents required or permitted to be taken or executed by ARC and LDB respectively, pursuant to any of the provisions of this Agreement. Section 7.04. This Agreement may be executed in several 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/ I.P.M. Cargill Regional Vice President Asia AGRICULTURAL REFINANCE CORPORATION By /s/ E. Gonsalves Authorized Representative MADHYA PRADESH STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED By /s/ E. Gonsalves Authorized Representative 11 SCHEDULE 1 Minor Irrigation: Program, Appraisal Criteria and Procedures I. Dugwell Program 1. The construction of new dugwells, the improvement of existing dugwells and installation of electric and diesel pumpsets and persian wheel lifting devices with ancilliary development would involve the following six river basins and 35 administrative districts: Non-Project Districts River Basin Project Districts* with included in State Minor Regions Dugwell Investments Irrigation Program (a) Narmada Betul, Chhindwara, Dewas, Mandla Hosangabad, Indore, Jabalpur Jhabua, Khandwa, Khargone, Narsingpur, Sehore, Bhopal, Seoni (b) Ganga Jabalpur, Raigarh, Sarguja, Rewa Satna, Shahdol, Sidhi (c) Yamuna Bhind, Chhattarpur, Dewas, Damoh, Daria, Dhar, Guna, Gwalior, Indore, Raisen Jabalpur, Mandsaur, Morena** Panna, Rajgarh, Rat/am, Sagar, Sehore, Bhopal, Shajapur, Shivpuri, Tikamgarh, Ujjaain, Vidisha (d) Godavari Balaghat, Betul, Chhindwara -- Seoni (e) Tapti Betul, Khandwa, Khargone -- (f) Mahi Jhabua, Ratlam * District names italicized overlap two or more river basins. ** The portion of this District covered by the Chambal command area is excluded from the Project area. 12 II. Appraisal Criteria 2. Pump: 3 to 5 hp centrifugal. 3. Minimum Well Discharge At the time of appraisal the proposed new dugwell or dugwell improvement should indicate good prospects of realizing discharge normally sufficient to irrigate about one and one-half hectare of total farmland of the borrower or of the borrowers and his neighbors at a cropping intensity of 140 per cent and in any case sufficient to achieve an incremental return adequate to support the investment. 4. Density of Dugwells The density of dugwells within an elementary watershed shall be detennined by the application of the following formula: d = r x 100 RxAx c 100 Where d = density (wells/ki-) r = recharge in basin (mm) R = water requirement for the average cropping patterm (mm) c = cropping intensity (%) A average area irrigated by a well (ha) 5. Spacing of' Wells The spacing of wells for any area shall be determined by the application of the following formula: / c S = 1,000 / R x A x 100 /O rxl100 where s = spacing (mm) (other symbols as under 4 above) No investment for a dugwell, or dugwell improvement shall be approved if the proposed investment was sited less than the specified distance from another well. 13 6. Investment in Persian Wheels Investments shall normally be made in Persian wheels where: (i) in the opinion of DTGS, the well discharge does not justify the installation of an electric or diesel pumpset, or (ii) electric power is likely to become available in the near future so as not to justify purchase of a diesel pumpset. 7. Irrigation and Drainage Facilities If adequate irrigation and drainage pipes or channels do not already exist on farms to benefit from the investment, the provision of such facilities shall be a condition of lending and may be included in the financing. 8. Approval by DTGS No loan for minor irrigation shall be approved in any area before DTGS has approved the area on technical grounds. III. Lending Criteria and Procedures Applying to Similar Investments Outside the Project Area 9. Outside the Project area with effect from 12 months after the effective date, LDB, and all agencies within the control of the State Government shall only lend for minor irrigation investments where: (a) approval has been given by DTGS; (b) such lending conforms to the appraisal criteria and procedures set out in this schedule. 14 SCHEDULE 2 Principal Terms and Conditions The following lending terms and conditions shall be used in implementing the Project and shall not be altered without the prior agreement of IDA: 1. Lending terms from ARC to Lending Banks (LDB and Participating Banks) (a) Interest rate to be not less than 6-1/2% per annum; (b) Refinancing to be by way of purchase of debentures or by loans at the rate of 90% of individual loans for minor irrigation and 75% of individual loans for land development; (c) Repayments to be in installments set to coincide, more or less with the maturity period of special debentures purchased by ARC or, as the case may be, with expected collections of Agricultural Loans refinanced. 2. LDB to Primary Banks (a) Interest rate to be not less than 7-1/2% per annum; (b) Repayments to be in installments set to coincide approximately with collections from ultimate borrowers; (c) Loans shall cover the total amount of Primary Bank's lending to ultimate borrowers. 3. Primary Banks and Participating Banks to Ultimate Borrowers (a) Interest rate to be not less than 9% per annum; (b) A once-and-for-all evaluation fee of 1/2% of the cost of project investments may be charged; (c) Borowers' contributions (for lending through Primary Banks) to be: (i) for normal lending, a minimum of 15% for dugwells and land development and 5% for pumpsets and persian wheels of the cost of the project investment (including the beneficiaries' own labor contribution); 15 (ii) for lending to small farmers* 5% (including the beneficiaries' own labor contribution) in the case of minor irrigation investments costing less than Rs 10,000 each and for land development. In addition to the contribution towards the cost of the investment, borrowers would contribute to LDB share capital an amount equal to 5% of their loans. (d) Borrowers' contributions (for lending through Participating Banks) to be: (i) for normal lending a minimum of 20% of the cost of the project investment (including the beneficiaries' own labor contribution) for dugwells and land development and 10% for pumpsets and persian wheels; (ii) for lending to small farmers* a minimum of 10% of the cost of minor irrigation investments (including the beneficiaries' own labor contribution) costing less than Rs 10,000 each and for land development. (e) Repayment periods, which shall not exceed the life of the asset financed shall be: (i) for normal lending a maximum of: (1) Nine years with no grace period on loans for dugwells, dugwell improvements and land development on dugwell projects where such dugwells are energized by an electric or diesel engine; (2) Nine years, including two years of grace in which interest only shall be payable, on loans for new dugwells where such dugwells are powered by persian wheels; * "Small farmers" shall have the meaning assigned to it from time to time by the Association and ARC, as the same may be incorporated in any agreement between ARC and LDB or a Participating Bank concluded pursuant to Section 2.02(c) of this Agreement. 16 (3) Seven years with no grace period on loans for electric or diesel pumpsets including the electricity connection deposit; (4) Seven years, including two years of grace in which interest only shall be payable on loans for persian wheels where installed on new dugwells; (5) Ten years, with no grace period, for land development loans; (ii) for lending to small farmers as defined, repayment periods for dugwells and dugwell improvement loans may be increased to 15 years including two years of grace in which interest only shall be paid. Except when grace periods are specified, repayments shall commence in the year following the completion of the investment. 4. Other LDB Lending Operations LDB and Primary Banks shall apply the same borrowers' contribution and repayment requirements to all their similar lending operations and the same interest rates, evaluation fees and collateral requirements to all their lending operations (except in the case of schemes submitted under the aegis of the Small Farmers and Marginal Farmers Development Agencies in Madhya Pradesh).