India - Sixth Telecommunications Project : Loan 1313 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1313-IN LOAN AGREEMENT (Sixth Telecommunications Project) between INDIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 22, 1976 LOAN AGREEMENT AGREEMENT, dated July 22, 1976, between INDIA, acting by its President (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS the Bank has previously assisted the financing of the foreign exchange cost of a project forming part of the program for expansion and development of telecommunication facilities operated by the Borrower and has entered into a loan agreement with the Bor- rover No. 615-IN dated June 18, 1969; WHEREAS the International Development Association (herein- after called the Association) has previously assisted in the financing of the foreign exchange cost of five projects forming part of the programs for expansion and development of telecommuni- cation facilities operated by the Borrower and has entered into development credit agreements with the Borrower Nos. 28-IN dated September 14, 1962, 58-IN dated July 6, 1964, 153-IN dated June 18, 1969, 241-IN dated May 3, 1971 and 403-IN dated June 25, 1973 pro- viding for such projects; WHEREAS the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; and -2- WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -3- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "P&T" means the Posts and Telegraphs Department of the Ministry of Communications of the Borrower; and (b) "Branch" means the Telecommunications Branch of P&T. 14 ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or re- ferred to, an amount in various currencies equivalent to eighty million dollars ($80,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in re- spect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, contracts for the purchase of goods or for civil works required for the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be March 31, 1980 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. -5- Section 2.06. The Borrower shall pay interest at the rate of eight and eighty-five hundredths per cent (8.85%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on June 15 and December 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -6- ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project through its P&T with due diligence and efficiency and in conformity with appropriate administrative, financial, engineer- ing and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources re- quired for the purpose. Section 3.02. The Borrower shall operate and maintain its telecommunications facilities, and from time to time make all necessary renewals and repairs thereof, all in accordance with sound public utility and engineering practices. Section 3.03. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan 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 the Borrower to re- place or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. -7- Section 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, con- tract documents and work and procurement schedules for the Proj- ect, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (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 pro- ceeds of the Loan, and to disclose the use thereof in the Pro- ject; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in the Prcj- ect and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall fur- nish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. -8- ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of for- eign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or per- mitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or admini- strative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfac- tory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking trans- actions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdi- vision thereof and of any entity owned or controlled by, or oper- ating for the account or benefit of, the Borrower or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with con- sistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carry- ing out the Project or for the operation of the telecommunications facilities, or any part thereof. Section 4.03. The Borrower shall have the commercial accounts of the Branch for each fiscal year audited annually by the Comp- troller and Auditor General of the Borrower. The Borrower shall transmit to the Bank for each fiscal year, provisional commercial accounts (balance sheet and related statement of earnings and expenses) of the Branch not later than four months after the close of the fiscal year to which they relate, and within a reasonable time thereafter, certified copies of the audited statements (balance sheet and related statement of earnings and expenses) - 10 - and signed copies of the auditors' reports relating to the commer- cial accounts. Setion 4.04. (a) Except as the Bank shall otherwise agree, the Borrower shall establish and maintain tariffs for telecommuni- cations services, and shall take all other action which may be necessary or appropriate, so as to provide revenues sufficient to produce an annual rate of return of not less than 11% on the value of the net fixed assets in operation of the Branch, com- puted in accordance with the provisions of Schedule 5 to this Agreement. (b) Whenever appropriate, and in any case not less frequently than every five years, the Borrower shall review, or cause to be reviewed, the value of the net fixed assets in operation of the Branch to determine whether, because of substantial changes in current prices, adjustments to such values are required, and shall notify the Bank of the result of any such review. Appropriate adjustments to the value of the net fixed assets in operation of the Branch for purposes of paragraph (a) of this Section shall then be made to the extent agreed between the Borrower and the Bank. At the same time, the minimum annual rate of return specified in paragraph (a) of this Section and the minimum average rate of depreciation for purposes of computing costs specified in paragraph 2 (a) (ii) of Schedule 5 to this Agreement will also be reviewed by the Borrower and the Bank in order to determine whether any adjust- ments are called for. Section 4.05. Except as the Bank shall otherwise agree, the Borrover shall cause P&T to continue the financial reorganization - 11 - of the Branch that will result in progressively providing adequate financial information to management in the Circles/Districts. For this purpose the Borrower shall cause P&T to extend and develop commercial accounts in the Circles/Districts to furnish a clear financial picture of the operations of such Circles/Districts with a target for completion by the Project completion date referred to in Schedule 2 to this Agreement and to inform the Bank every six months commencing with December 31, 1976 of the steps being taken and progress being made. Section 4.06. (a) The Borrower shall cause P&T to establish not later than December 31, 1976, or such other date as may be agreed upon between the Borrower and the Bank, a special unit within the Branch consisting of one or more economists, one or more financial analysts and telecommunication engineers to under- take economic analyses in telecommunications, which shall include, inter alia, an analysis of demand and usage, costs and benefits, tariffs and investment priorities. (b) The Borrower shall cause P&T to furnish to the Bank for its comment: (i) not later than June 30, 1977, or such other date as may be agreed upon between the Borrower and the Bank, details of the work program relating to the foregoing economic analyses; and (ii) progress reports of such economic analyses every six months starting from December 31, 1977. - 12 - ART70LE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely, that a default shall have occurred in the performance of any obligation on the part of the Borrower under Development Credit Agreement No. 403-IN dated June 25, 1973 granted by the Association to the Borrower. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that the event specified in Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. - 13 - ARTICLE VI Termination Section 6.01. The date October 20, 1976, is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Any Secretary, Additional Secretary, Joint Sec- retary, Director or Deputy Secretary of the Department of Economic Afl.airs in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India Cable address: ECOFAIRS New Delhi For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. - 15 - 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. INDIA By /s/ T. N. Kaul Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is! Ernest Stern Regional Vice President South Asia -16- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of ex- penditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Goods to be imported by P&T: (a) Local and trunk 17,000,000 100% of foreign telephone exchange expenditures systems; Telex and Gentex Equipment (b) Cable systems, 8,000,000 100% of foreign and radio systems expenditures and equipment (c) Materials, Compo- 2,000,000 100% of foreign nents for P&T expenditures workshops (d) Equipment and in- 3,000,000 100% of foreign struments for expenditures research, testing and training -17 Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (2) Goods to be purchased by P&T from the Government telecommu- nication factories: (a) Telephones, switch- 27,500,000 25% of total ing and transmission expenditures equipment manufac- tured by Indian Telephone Industries Limited (b) Cable and wire 22v200,000 30% of total manufactured by expenditures Hindustan Cables Limited (c) Teleprinters manu- 300,000 6% of total factured by Hindus- expenditures tan Teleprinters Limited TOTAL 80,000,000 - 18 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "total expenditures" means the aggregate of foreign expenditures and of expenditures for goods or services sup- plied from the territories of the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of -19- the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then appli- cable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or lim- iting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 20 - SCHEDULE 2 Description of the Project The Project consists of the following parts: A. Installation of about 274,000 line units of local telephone exchange equipment including modern electronic switching equipment. B. Provision of cables and associated equipment which will permit the connection of about 220,000 DELs. C. Extension of existing trunk exchange and installation of new trunk exchanges including those using modern electro- nic switching equipment. D. Provision of transmission equipment including radio, coaxial cable and multiplex equipment to increase capacity on routes between major cities. E. Provision of a small satellite earth station to provide relia- ble communication between the Andaman Islands and the main land. F. Expansion of the trunk line network to remote rural areas by spur routes using VHF and UHF radio and open wire system. -21- G. Expansion of the telex network. The Project is expected to be completed by March 31, 1979. 0 22 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* June 15, 1979 760,000 December 15, 1979 795,000 June 15, 1980 830,000 December 15, 1980 865,000 June 15, 1981 905,000 December 15, 1981 945,000 June 15, 1982 985,000 December 15, 1982 1,030,000 June 15, 1983 1,075,000 December 15, 1983 1,125,000 June 15, 1984 1,175,000 December 15, 1984 1,225,000 June 15, 1985 1,280,000 December 15, 1985 1,335,000 June 15, 1986 1,395,000 December 15, 1986 1,455,000 June 15, 1987 1,520,000 December 15, 1987 1,590,000 June 15, 1988 1,660,000 December 15, 1988 1,730,000 June 15, 1989 1,810,000 December 15, 1989 1,890,000 June 15, 1990 1,970,000 December 15, 1990 2,060,000 June 15, 1991 2,155,000 December 15, 1991 2,245,000 June 15, 1992 2,345,000 December 15, 1992 2,450,000 - 23 - Payment of Principal Date Payment Due (expressed in dollars) June 15, 1993 2,555,000 December 15, 1993 2,675,000 June 15, 1994 2,785,000 December 15, 1994 2,915,000 June 15, 1995 3,040,ooo December 15, 1995 3,175,000 June 15, 1996 3,320,000 December 15, 1996 3,460,000 June 15, 1997 3,620,000 December 15, 1997 3,775,000 June 15, 1998 3,945,000 December 15, 1998 4,130,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.15% More than three years but not more than six years before maturity 2.30% More than six years but not more than eleven years before maturity .25% More than eleven years but not more than sixteen years before maturity 6.15% More than sixteen years but not more than nineteen years before maturity 7.30% More than nineteen years but not more than twenty-one years before maturity 8.10% More than twenty-one years before maturity 8.85% - 25 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as the Bank shall otherwise agree, the goods included in Category (1) of paragraph 1 in Schedule 1 to this Agreement shall be procured in accordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement un- der World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. With respect to all contracts for goods under Category (1) estimated to cost the equivalent of $100,000 or more: (a) Before bids are invited, the Borrower 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 description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said docu- ments 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, the Borrower 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 -26- 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 the Borrower and state the reason 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 sub- mission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract under Category (1) to be fi- nanced out of the proceeds of the Loan and not governed by the preceding paragraph, the Borrower 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 contract, two conformed copies of such contract, together with the analysis of bids, recommenda- tions for award and such other information as the Bank shall rea- sonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. B. Other Procurement Procedures 1. The goods included in Category (2) of paragraph 1 in Sched- ule 1 to this Agreement (Category (2) goods) shall be supplied from the domestic factories as specified in such Schedule (the domestic factories), upon terms and conditions satisfactory to the Bank. 2. With respect to any contract for the purchase of imported goods costing $100,000 equivalent or more for the production of the Category (2) goods, the Borrower shall cause the domestic factories to: (a) invite offers from not less than three major suppliers from member countries of the Bank and Switzerland; (b) award the contract to the supplier whose offer is the lowest evaluated offer; (c) keep all records and documents with respect to such contract, including, without limitation, the details of the offers sought, the names of the suppliers invited to submit offers, the analysis of offers, recommendations for award and conformed copies of such contract, for review by the Bank at its request; and (d) furnish to the Bank all such information as the Bank shall reasonably request regarding the per unit cost of the goods so procured. - 28- SCHEDULE 5 Computation of Annual Rate of Return 1. The annual rate of return on the value of the net fixed assets in operation of the Branch, referred to in Section 4.04 of this Agreement, shall be computed by relating the net operating income accruing from the telecommunications services for the year in question to the average of the value of net fixed assets in operation at the beginning and at the end of the year in question. 2. For purposes of this computation: (a) "net operating income" shall mean the difference between: (i) all operating revenues accruing from telecommu- nications services, excluding subscriber deposits, interest income and that portion of receipts under the "Own Your Telephone" scheme which relates to service to be rendered in future years; and (ii) all operating costs of the telecommunications services, including administrative expenses, ade- quate maintenance and provision for depreciation on all depreciable assets in operation, computed in accordance with the straight-line method at an average rate of not less than 4-1/2% per annum of the gross value of such depreciable assets in operation, adjusted in accordance with Section 4.04 (b) of this Agreement, but excluding interest and - 29 - other charges on debt and on the Borrower's contri- butions to P&T; and (b) "value of net fixed assets in operation" shall mean the gross value of such assets, less accumulated depreciation, adjusted in accordance with Section 4.04(b) of this Agreement. 3. The above computation shall be made on the basis of P&T's commercial accounts for the Branch, except as such accounts are inconsistent with the above provisions.