India - Sindri Fertilizer Project : Credit 0520 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 520 IN Project Agreement (Sindri Fertilizer Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND FERTILIZER CORPORATION OF INDIA DATED DECEMBER 18, 1974 CONFORMED COPY CREDIT NUMBER 520 IN Project Agreement (Sindri Fertilizer Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND FERTILIZER CORPORATION OF INDIA DATED DECEMBER 18, 1974 PROJECT AGREEMENT AGREEMENT, dated December 18, 1974, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and FERTILIZER CORPORATION OF INDIA (hereinafter called FCI). WHEREAS by the Development Credit Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to ninety-one million dollars ($91,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that FCI agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and FCI, the proceeds of the credit provided for under the Development Credit Agreement will be made available to FCI on the terms and conditions therein set forth; and WHEREAS FCI, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has 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. ARTICLE II Execution of the Project Section 2.01. FCI 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 engineering practices, and 4 shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. In order to assist FCI in process and engineering design, procurement, construction and start-up, FCI shall obtain licenses and plant designs and engage consultant services acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.03. Except as the Association shall otherwise agree, FCI shall: (a) in carrying out the Project, act as managing contractor and employ competent and experienced contractors, as necessary, to carry out any part of the Project; (b) employ, for the duration of the Project, a suitably qualified and experienced Project Manager to be responsible for the execution of the Project, including, inter alia, budget and schedule control and general engineering, procurement, and construction duties, and provide the Project Manager with adequate staff and facilities to carry out such functions; and (c) consult with the Association before making any change in the position of th: Project Manager in the Sindri Unit. Section 2.04. (a) Except as the Association shall otherwise agree, the goods, works and services (other than consultants' services) for the Project to be financed out of the proceeds of the Credit, shall be procured in accordance with the provisions of Schedule I to this Agreement. (b) If at any time the Association or FCI determines, after consultation with each other and the Borrower, that any equipment or material cannot be delivered on or prior to its scheduled delivery date, and that such delay would adversely affect completion of the Project, FCI shall promptly take necessary action to procure such equipment or material by such procedures as shall be satisfactory to the Borrower and the Association. Section 2.05. (a) FCI undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by FCI to replace or repair such goods. 5 (b) Except as the Association may otherwise agree, FCI shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.06. (a) FCI shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) FCI: (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 it by the Borrower, and to disclose the use thereof in the Project- (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project, and to examine 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 relent to it and the goods and services financed out of such proceeds. (c) FCI shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of FCI and any relevant records and documents. Section 2.07. FCI shall use its best endeavors to carry out the Project: (i) in accordance with a critical path network set forth in the Drawing No. CPM-IE-1017 of FCI, submitted to and approved by the Association and, in that regard, shall give special attention to the timely procurement of critical equipment; and (ii) in accordance with an implementation plan set forth in Sindri Fertilizer Project Implementation Plan dated October 10, 1974, submitted to and approved by the Association. Section 2.08. Except as the Association shall otherwise agree, FCI shall: (a) complete the Sindri Renovation Program prior to June 30, 1977: (b) prior to December 31, 1975, make arrangements satisfactory to the Association with appropriate agencies and corporations for the supply of heavy 6 fuel oil, phosphate rock, water and coal, to ensure the timely availability of such supplies in sufficient quantity and of appropriate quality for the full utilization of the facilities at the Sindri Unit after completion of the Project; and (c) prior to February 28, 1975, engage consultants for undertaking a study entitled Works Transformation and Environmental Study of the Sindri Unit, set forth in the document dated October 10, 1974 submitted to and approved by the Association. FCI shall consult with the Association with a view to the implementation of recommendations arising from the said study in a form and in accordance with a schedule satisfactory to the Association. Section 2.09. FCI shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, FCI 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. Section 2.10. (a) FCI shall at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations tinder this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) FCI shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by FCI of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.11. FCI shall take all measures necessary to ensure that the execution and operation of the Project is carried out with due regard to ecological and environmental factors, and shall comply with the environmental quality standards satisfactory to the Association. ARTICLE III Management and Operations of FCI Section 3.01. FCI shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. FCi shall: (a) at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations in accordance with appropriate 7 business, financial and engineering practices and under the supervision of experienced and competent management assisted by adequate and competent staff; (b) promptly staff with experienced and competent personnel any vacant position related to the construction and operation of the facilities under the Project; and (c) appoint, after consultation with the Association, a suitably qualified successor if it appears that a vacancy will occur in the position of the General Manager of the Sindri Unit. Section 3.03. Except as the Association shall otherwise agree, FCl shall: (a) at all times take all steps which are necessary to maintain its existence and its right to carry on operations and to acquire and retain ownership of all lands and to maintain and renew all interests in land and other properties and all rights, powers, privileges and franchises which are necessary or useful in the carrying out of the Project or in the conduct of its business; (b) at all times operate and maintain its plants, machinery, equipment and other property, and promptly make all necessary repairs and renewals thereof, in accordance with appropriate engineering practices; (c) not sell, lease, transfer or otherwise dispose of' any of its property or assets which shall be required for the efficient operation of its business and undertaking; and (d) not alter its corporate structure or amend its Memorandum or Articles of Association in any way that will materially and adversely affect its ability to perform its obligations under this Agreement. Section 3.04. In the event of any operational problems after start-up of the facilities constructed under the Project, FCI shall secure such outside operational assistance as necessary, in consultation with the Association. ARTICLE IV Financial Covenants Section 4.01. FCI shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. 8 Section 4.02. FCI shall: (i) have the Sindri Unit's and FC1's 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; (ii) except as the Association shall otherwise agree, furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of the 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 (iii) furnish to the Association such other information concerning the accounts and financial statements of the Sindri Unit and FCL and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, FCL shall: (a) maintain separate accounts for the Sindri Unit and consolidated accounts for all FCI's operations; and (b) furnish to the Association as soon as available, but in any case not later than 30 days after the end of each quarter and fiscal year: (i) quarterly consolidated financial statements (balance sheets, statements of income and expenses and cash flow) for FCI; (ii) quarterly financial statements (balance sheets, statements of income and expenses, cash flow and related statements) for the Sindri Unit; and (iii) quarterly and annual forecast statements of production, income and cash flow for FCI and for the Sindri Unit. Section 4.04. Except as the Association shall otherwise agree: (a) FCI shall take all necessary steps, including in particular limiting its indebtedness, to maintain a debt-equity ratio not greater than 50:50 for the Sindri Unit and also for FCI on a consolidated basis. (b) FCI shall: (i) maintain a ratio of current assets to current liabilities (hereinafter referred to as current ratio) of at least 1.2: 1; (ii) not declare dividends or prepay any debt if, after the payment of such dividend (assuming such payment was made on the date of such declaration) or debt, FCl's current ratio shall be less than 1.5:1; and (iii) not cause or permit its Sindri Unit to prepay any of 9 its outstanding debts or to transfer amounts from its accounts to the rest of FC1's accounts, if such prepayment or transfer would reduce the Sindri Unit's current ratio below 1.2: 1. For the purpose of this Section: (i) the term "debt" means any debt maturing by its terms more than twelve months after the date on which it is originally incurred; (ii) the term "equity" means all unimpaired paid-in share capital plus accumulated earnings or losses from prior fiscal years not set apart for specific purposes; (iii) the term "current assets" means stock of spares, cash (excluding advances to contractors for construction of projects and for additions to fixed assets), assets readily convertible into cash, and all other assets which could in the ordinary course of business be converted within one year into cash or assets readily convertible into cash; and (iv) the term "current liabilities" means liabilities due and payable and all other liabilities which would be due and payable, or could be called for payment, within one year, including the portion of indebtedness falling due within one year. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of FCI 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 terns' or (ii) a date 16 years after the date of this Agreement. 10 (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 FCI of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. 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 made 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 Cable address: INDEVAS Washington, D.C. For FC1: Fertilizer Corporation of India F-43 South Extension Area Part I Ring Road New Delhi - 49, India Cable address: FERTILIZER New Delhi 11 Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of FCI may be taken or executed by its Managing Director or such other person or persons as FCI shall designate in writing. Section 6.03. FCI 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 FCI take any action or execute any documents required or permitted to be taken or executed by FCI pursuant to any of the provisions of this Agreement. Section 6.04. 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 in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By Is / M. L. Weiner Regional Vice President South Asia FERTILIZER CORPORATION OF INDIA By /s / T. N. Kaul Authorized Representative 12 SCHEDULE 1 Procurement A. General Procedures 1. Contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding, except as provided hereunder. 2. Contracts for the procurement of (i) items proprietory or critical to the process design, (ii) items or groups of items with limited sources of availability whose timely supply is critical to efficient execution of the Project, and (iii) items or groups of items estimated to cost the equivalent of $50,000 or less may be placed after obtaining quotations from a restricted list of suppliers, provided that prior approval of the Association is obtained for said items and, in respect of (i) and (ii) above, for the list of suppliers. 3. Except as the Association shall otherwise agree, FCI shall prequalify all bidders. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-suppled goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 13 (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in India. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among- themselves, eycluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. The lowest evaluated bid of each group shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 151/ of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award, if not, the lowest evaluated bid from group C shall be selected. C. Review of Procurement Decisions by Association 1. Except as provided for in paragraph A.2 above, FCI shall, before initiating procurement for equipment and materials, including qualification of suppliers, inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. 2. With respect to all contracts for equipment or materials estimated to cost the equivalent of S300,000 or more: 14 (a) FCI shall furnish to the Association, in sufficient time for its comments, but not being later than the date upon which invitations to bid are issued, the text of the invitations to bid and the specifications and other bidding documents, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, FCI shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and .FCI and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 3. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, FCI shall furnish to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together, in the case of any such contract estimated to cost the equivalent of $50,000 or more, with copies of the tender documents, the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and FCI and state the reasons for such determination.