India - Bombay Urban Transport Project : Loan 1335 - Project Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1335 IN PROJECT AGREEMENT (Bombay Urban Transport Project) betveen INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and MUNICIPAL CORPORATION OF GREATER BOMBAY Dated December 20, 1976 PROJECT AGREEMENT AGREEMENT, dated December 20, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and MUNICIPAL CORPORATION OF GREATER BOMBAY (hereinafter called BMC). WHEREAS (A) by the Loan Agreement of even date herewith be- tween Bombay Metropolitan Region Development Authority (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equiv- alent to $25,000,000, on the terms and conditions set forth in the Loan Agreement, but only on condition that BMC agree to undertake such obligations toward the Bank as hereinafter set forth; (B) by a subsidiary loan agreement between the Borrower and BMC, a portion of the proceeds of the loan provided for under the Loan Agreement will be made available to BMC on the terms and con- ditions therein set forth; and WHEREAS BMC, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. 93 - ARTICLE II Execution of the Project Section 2.01. (a) BMC shall carry out Parts A and B of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate ad- ministrative, financial and engineering practices, and shall pro- vide, or cause to be provided, promptly as needed, the funds, fa- cilities, services and other resources required for the purpose. BMC shall carry out Part A of the Project through BEST. (b) BMC shall provide the funds lent to it by the Borrower pursuant to the Subsidiary Loan Agreement for purposes of Part A of the Project to BEST on terms and conditions not inconsistent with those set out in Schedule 4 to the Loan Agreement. Section 2.02. In order to assist B?4C in carrying out Parts A (5) and B (3) of the Project and the studies described in Section 4.04 (a) of this Agreement, BMC shall employ, or with respect to Part A (5) of the Project and such studies cause BEST to employ, consultants whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Bank. Section 2.03. Except as the Bank shall otherwise agree, contracts for the purchase of goods or for civil works for Parts A and B of the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of the Schedule to this Agreement. S4 Section 2.04. (a) BMC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan 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 BMC to replace or repair such goods. (b) Except as the Bank may otherwise agree, BMC shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) BMC shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, con- tract documents and construction, work and procurement schedules for the Project, and any material modifications thereof or addi- tions thereto, in such detail as the Bank shall reasonably request. (b) BMC: (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 Loan 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 Bank'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 Bank its annual budgets, accounts and financial statements in respect of Traffic Operations, Roads and Bridges, and any audit reports relating thereto, in each case, promptly after their preparation -5- and all such other information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan so relent to it and the goods and services financed out of such proceeds. (c) BMC shall enable the Bank's representatives to examine all Project-related installations, sites, works, buildings, property and equipment of BMC and BEST and any relevant records and docu- ments in relation thereto. Section 2.06. BMC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, BMC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Sub- sidiary Loan Agreement or any provision thereof. Section 2.07. (a) BMC shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) BMC shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by BMC of its obligations under this Agreement and under the Subsidiary Loan Agreement. -6- ARTICLE III Management and Operations of BMC and BEST Section 3.01. Except as the Bank shall otherwise agree, BMC shall maintain the existence of BEST within BMC and shall cause BEST to employ competent and qualified staff in adequate numbers for the efficient operation of BEST. Section 3.02. BMC shall not make any material modification in the structure, organization, functions, responsibilities and tech- nical and financial operations of BEST without prior consultation with the Bank. Section 3.03. BMC shall cause BEST to operate its business and conduct its affairs in accordance with sound administrative, financial and public utility practices under the supervision of qualified and experienced management and shall operate, maintain, renew and repair its plant, equipment and property in accordance with sound engineering and public utility practices. Section 3.04. Except as the Bank may otherwise agree, BMC shall not itself, and shall not permit BEST to, sell, lease, trans- fer or dispose of any of the properties or assets of BEST except in the ordinary course of business. Section 3.05. BMC shall cause BEST to take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with sound public utility practice. * -T - Section 3.06. BMC shall cause BEST to establish by October 1976, or such later time as the Bank may accept, and maintain a Bus Opera- tions and Management Task Force, with composition and terms of reference satisfactory to the Bank for the purposes inter alia of re-examining BEST's bus routes and schedules and preparing an improved management costing system for BEST's transport operations. Section 3.07. BMC shall prepare a staff training program for transport and related activities of BMC and BEST under the Project, including estimates of foreign and local expenditures for financing by the Bank, BMC and BEST, respectively, and shall furnish such program to the Bank for its approval by December 31, 1976 or such later date as the Bank may accept. - 8 - ARTICLE IV Financial Covenants Section 4.01. BMC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices (a) its Project-related operations and (b) the operations and financial condition of BEST, including records which show separately the result of its operations in respect of (i) transport and (ii) electricity distribution. Section 4.02. BMC shall cause BEST to, (i) have an annual audit satisfactory to the Bank made of its accounts and financial state- ments (balance sheets, statements of income and expenses and re- lated statements) for each fiscal year in accordance with sound auditing principles consistently applied by independent and quali- fied auditors; (ii) furnish to the Bank as soon as available, but in any case not later than five months after the end of each such year its unaudited financial statements; (iii) furnish to the Bank as soon as available, but in any case not later than nine months after the end of each such year, (A) certified copies of its fi- nancial 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 Bank shall have reasonably requested; and (iv) furnish to the Bank such other information concerning the accounts and fi- nancial statements of BEST and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. Except as the Bank may otherwise agree, BMC shall take, or cause to be taken by BEST all such action as will -9- ensure that BEST does not incur any long-term debt unless the net revenue of BEST for the fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall be not less than 1.4 times the maximum debt service requirements for any succeeding fiscal year on all long-term debt of BEST including the long-term debt to be incurred. For the purposes of this section and Section 4.05: (a) The term "long-term debt" means all debt incurred includ- ing debt assumed or guaranteed by BMC on behalf of BEST, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (b) The term "incur" with reference to any debt includes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred (i) under a contract or loan agreement, on the date the contract or loan agreement providing for such debt is entered and, (ii) under a guarantee agreement, on the date the agreement providing for such guarantee shall have been entered into; (c) The term "net revenue" means gross revenue from transport and electricity operations, less all operating expenses, including adequate maintenance, taxes or payments in lieu of taxes, if any, and administrative expenses, but before provision for depreciation and interest and other charges on debt; (d) The term "debt service requirements" means the aggregate amount of principal repayments (including sinking fund payments, if any), interest and other charges on long-term debt; - 10 - Section 4.04. Except as the Bank may otherwise agree, BMC shall ensure that BEST's short-term debt does not at any time exceed 35 per cent of BEST's long-term debt. Section 4.05. BMC confirms that it is one of the objectives of the Project to enable BEST to finance the costs of BEST's trans- port operations out of BEST's transport revenues, and to this end BMC shall cause BEST to continue to improve the operating and fi- nancial performance of its transport operations. BMC and BEST shall take appropriate actions in this regard including: (a) carrying out by December 31, 1978, or such later date as the Bank may accept, studies pursuant to terms of reference accept- able to the Bank to: (i) examine the capacity of bus users to meet the costs of BEST's transport operations; (ii) review the bus fare structure of BEST by the Bus Operations and Management Task Force referred to in Section 3.06 of this Agreement, with the objective of determining the optimum bus routing and fare structure and setting a schedule for their implementation; (b) implementation by BEST of recommendations resulting from the studies described in the foregoing paragraph (a) acceptable to the Bank and BMC; - 11 - (c) (i) furnishing the Bank by August 31 each year, for discussion, BEST's operating performance targets for the next following financial year, in light of the benefits expected from the Project, with financial quantification of such improvements; and not later than August 31 in each year, reviewing with the Bank BEST's performance targets for the preceding financial year; and (ii) making provision in BEST's budget for the financial effect of the achievement of such improved operating performance targets. (d) Subject to the recommendations of the studies described * in paragraph (a) above, BEST shall make provision in the transport operations section of BEST's budget for the financial year ending in 1981 for traffic revenues to finance operating expenses for that year and, in the event operating expenses for such year exceed traffic revenues, BEST shall consult with the Bank not later than six months after the end of such financial year on the financing or other provision to be made in respect of such deficit. Section 4.06. BMC shall cause BEST to provide for depreciation in its accounts in accordance with accounting principles satisfactory to the Bank. Section 4.07. (a) To the extent consistent with the BMC Act, BMC shall not take any action to recover from BEST any arrears in payments to BMC contemplated by Section 460KK thereof owing as of March 31, 1976 if such action is likely to leave BEST with insuffi- cient working capital. - 12 - (b) Except as the Bank may otherwise agree, BMC shall take, or cause to be taken, such actions including bus fare and electricity tariff revisions by BEST as are required to ensure that: (i) For each financial year commencing with the financial year ending in 1978, BEST will: (A) recover its operating expenses, taxes, debt service including provisions for sinking funds and statutory contributions to BMC; (B) make adequate allowance for working capital; (C) take all reasonable steps to recover any loss incurred by BEST in the previous financial year; and (D) to the extent that any such loss not recovered in the financial year after the one in which it is incurred, recover such loss in the next financial year; and (ii) BEST's Transport Operating Division is provided until the end o"' te BEST financial year ending in 1981 with sufficient revenues to meet operating expenses, taxes (including Government of Maharashtra passenger taxes), payment of interest and principal on loans allocated to the Transport Operating Division and a reasonable allowance for working capital. -13- (c) BMC shall furnish the Bank, by May 31 of each year, or such later date as the Bank may accept, the approved budget of BEST for its then current financial year. Section 4.08. (a) BMC shall cause BEST, by April 1978 or such later time as the Bank may accept, to revise its financial plan- ning and costing procedures so as to improve its setting of finan- cial targets and financial reporting and shall implement improved costing procedures. (b) BMC shall adopt a job description for the Chief Accounts Officer of BEST acceptable to the Bank by the Effective Date, or such later date as the Bank may accept. Section 4.09. As used in this Article: (a) "Short-term debt" means debt other than long-term debt as defined in Section 4.03. (b) "Traffic revenue", in respect of BEST's transport opera- tions, means gross revenues from all sources related to bus opera- tion excluding sale of fixed or semi-fixed assets or any components thereof, revenues or other income from property, income from invest- ments and deposits from contractors, hirers and licensees. (c) "Operating expenses", in respect of BEST's transport operations, means all expenses of bus operations, including adequate provision for maintenance and depreciation (computed in accordance with the requirements of Section 4.06), taxes and levies, and pro- portions of BEST and BMC administration costs determined in accordance with allocation bases acceptable to the Bank, but excluding any charges for interest (including interest on internal funds) or debt service. "Taxes and levies" includes all wheel taxes, vehicle license fees, fuel and oil taxes, and levies and imposts incurred to enable buses or other vehicles to operate; "taxes and levies" do not include Government of Maharashtra passenger taxes, nor any proportion of surpluses transferred annually to BMC by BEST under Sections 460KK and 460LL of the BMC Act. - 15 - 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 Loan Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Bank and of BMC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Loan Agreement shall terminate in accordance with its terms; or (ii) a date twenty years after the date of this Agreement. (b) If the Loan Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Bank shall promptly notify BMC of this event. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. - 16 - 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 desig- nated by notice to the party giving such notice or making such re- quest. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For BMC: Municipal Comissioner for Greater Bombay Mahapalika Marg Fort, Bombay 1 (400-001) India Cable address: BOWASEP Bombay 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 BMC may be taken or executed by its Municipal Commissioner or such other person or persons as its Municipal Com- missioner shall designate in writing. Section 6.03. BMC shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons vho will, on behalf of BMC, take any action or execute any documents required or permitted to be taken or executed by BMC pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. - 18 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Ernest Stern Regional Vice President South Asia MUNICIPAL CORPORATION OF GREATER BOMBAY By /a/ Keval Singh Authorized Representative -19- SCHEDULE Procurement A. International Competitive Bidding Except as provided in Part B hereof, contracts for the pur- chase of goods or for civil works shall be procured in accordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guide- lines), on the basis of international competitive bidding. B. Other Procurement Procedures All contracts (a) for civil works, (b) for the supply and mounting of bus bodies and (c) for bus depot equipment, may be let pursuant to competitive bidding in accordance with local pro- cedures satisfactory to the Bank, provided that civil works for relocation of utility facilities may be carried out by force account. C. 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 except those to be procured pursuant to competitive bidding with local advertisement: (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; - 20 (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to BMC 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 pref- erence 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 infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fol- lowed in the evaluation and comparison of bids. (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 satis- faction of BMC and the Bank 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 : bids offering any other goods. -21 - (c) All evaluated bids in each group shall be first compared among themselves, excluding 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 evalu- ated bid of each group. Such lowest evaluated bids 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 fur- ther comparison only, an amount equal to (i) the amount of cus- toms 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 15% 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 bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: - 22 - With respect to all contracts estimated to cost the equiva- lent of $200,000 or more: (a) Before bids are invited, BMC shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a de- scription of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, BMC shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform BMC and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Bank'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 Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. -23 - 3. With respect to each contract to be financed out of the pro- ceeds of the Loan and not governed by the preceding paragraph, BMC shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such con- tract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not con- sistent with the Guidelines or this Schedule, promptly inform BMC and state the reasons for such determination.