Document of The World BankTe o FOR OFFICIAL USE ONLY Report No. P-3457-IN REPORT AND RECONMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON. A PROPOSE]) LOAN IN AN AMOUNT EQUIVALENT TO US$222.3 MILLION TO INDIA FOR THE SOUTH BASSEIN GAS DEVELOPMENT PROJECT FEBRUARY 2, 1983 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (As of February 1983) US$1 = Rs 9.942250 Rs 1 = US$0.100580 Rs 1 million = US$100,580 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 = Rs 9.0, which represents the average exchange rate projected over the disbursement period. FISCAL YEAR April 1 - March 31 Abbreviations and Acronyms used in- this Report BOP - Bombay Offshore Project GOI - Government of India km - kilometer LPG - Liquified Petroleum Gas Mmcmd - Millions of cubic meters per day NGL - Natural Gas Liquids (or condensate) OIL - Oil India (Limited) ONGC - Oil and Natural Gas Commission OPEC - Organization of Petroleum Exporting Countries toe - Tons of oil equivalent FOR OFFICIAL USE ONLY INDIA SOUTH BASSEIN GAS DEVELOPMENT PROJECT LOAN AND PROJECT SUMARY Borrower: India, acting by its President. Beneficiary: Oil and Natural Gas Commission (ONGC). Amount: US$222.3 mill:on, including capitalized front-end fee of 1.5%. Terms: Repayment over 20 years, including five years' grace, at the standard variable interest rate. On-Lending Terms: Government of India (GOI) to ONGC (US$222.3 million): Funds will be onlent to ONGC at a rate of at least 12% per annum; repayment over a maximum of 15 years, including five years' grace. GOI would bear the foreign exchange and interest rate risks. Project Description: The project comprises Phase I of the South Bassein development program to produce gas from the Sout'h Bassein field located in the Arabian Sea, S5 km west of Bombay. This first phase will bring the production capacity of the field to 5 million cubic meters of gas per day. The development involves the supply and installation of an offshore process platform complex, the laying of subsea pipelines to connect this platform complex to the main Bombay High gas and crude oil pipelines already in service and the laying of a new 235 km gas pipeline from the South Bassein site to the shore facilities located at Hazira in the State of Gujarat. Associated shore facilities at Hazira and telecommunications equipment are included in the project. The principal risk involved is one normally associated with offshore hydrocarbon fields, viz., the reservoir may not live up to expectations. An extensive test drilling program gives every confidence that the reservoir risk is minimal. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. -ii- Estimated Costs: US$ Millions Item Local Foreign Total Process Complex 138.9 138.9 Tie-in to existing crude and gas trunklines - 30.2 30.2 Wells (6) 7.6 7.5 15.1 South Bassein - Hazira pipeline 36.2 293.2 329.4 Hazira Terminal Facilities 10.2 2.7 12.9 Telecomrmunications and Telecontrol 2.2 1.0 3.2 Land 4.0 - 4.0 Engineering & Supervision 23.0 10.1 33.1 Reservoir Consultancy - -14.1 -14.1 Subtotal 83.2 1/ 497.7 580.9 Physical. Contingencies 8.3 49.8 58.1 Price Contingencies 7.3 51.9 59.2 Subtotal 15.6 101.7 117.3 Total, Project Cost 98.8 599.4 698.2 Front:-end fee on IBRD Loan -- 3.3 3.3 Total. Financing Required 98.8 602.7 701.5 Financing Plan: IBRD- 222.3 2/ 222.3 2/ Kuwait Fund 50.0 50.0 Commercial Borrowings/Export Credits/Suppliers' Credits - 250.0 250.0 ONGC's Ilnternal Resources 98.8 80.4 179.2 Total. 98.8 602.7 701.5 1/ Including duties and taxes of US$31.2 million. 2/ Including front end fee of US$3.3 million. -iii- Estimated Disbursements: IBRD FY FY83 FY84 FY85 Annual 3.3 170.0 49.0 Cumulative 3.3 173.3 222.3 Rate of Return: About 38%. Appraisal Report: No. 4097-INa, dated January 26, 1983. I INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$222.3 MILLION TO INDIA FOR THE SOUTH BASSEIN GAS DEVELOPMENT PROJECT 1. I submit the following report and recommendation for a proposed loan to India in an amount equivalent to US$222.3 million to help finance the for- eign exchange costs of the Phase I Development of the South Bassein offshore gas field, near Bombay, to bring its production capacity to five million cubic meters per day of gas. Amortization would be over 20 years, including five years of grace at the applicable interest rate. The proceeds of the loan would be on-lent to the Oil and Natural Gas Commission (ONGC) at an interest rate of at least 12% per annum, for a maximum of 15 years, including five years of grace. The foreign exchange and interest rate risks would be borne by the Government of India (GOI). PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (3872-IN, dated April 7, 1982), was distributed to the Executive Directors on April 19, 1982. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 700 mil- lion (in mid-1982) and an annual per capita income of US$240. Economic growth has been slow in the past, averaging about 3.6% per annum over the past 30 years. The economy is dominated by agriculture which employs more than two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those with little or no land. Consequently the latter have only an insecure grasp on the means of existence. Growth of value-added in agricul- ture -- 2.3% per annum over the past 30 years -- has been slower than growth of industrial value-added (5.0% per annum). As a. result, there has been a gradual decline in the share of agriculture in GDP (at. factor cost measured in 1970/71 prices) from 60% to about 40%, while the sharE of industry rose from 15% to around 24%. But industrialization has not been rapid enough to absorb the growing labor force, or to bring about a rapid. economic transformation, with significantly higher productivity and income levels. 4. Nevertheless, there has been steady progress on several fronts. In the face of a large and rapidly growing population, India has been able to increase agricultural output faster than total population while eliminating persistent 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Haryana Irrigation II Project (No. P-3443-IN), dated January 3, 1983. -2- dependence on foodgrain imports. Savings and investment have increased markedly since 1950/51: gross domestic savings more than doubled from 10.8% of GDP (at factor cost) to 24.8%, while gross domestic investment rose from 12.5% of GDP to 26.2%. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20% was reached during the early 1960s; for a few years in the late 1970s, surpluses arose, and at the present time, foreign savings are about 10% of investment. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP, and was less than 1% at the end of the 1970s. 5. Before the 1970s, India placed relatively less emphasis on export promotion and more on import substitution. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.5% per annum, only marginally higher than the volume growth of imports over the same period. In the early to mid-1970s, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.6% per annum for the 1970s as a whole, a performance which demonstrates that sustained rapid growth is pos- sible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. 6. Moving into the second half of the 1970s, the Indian economy was buoyed by relatively rapid export growth and an expanding level of foodgrain output, which culminated in a record 132 million tons of foodgrain production in 1978/79. As a result, growth in real GDP, agricultural and industrial value-added, substantially exceeded the historical 30-year trends (paragraph 3). In 1979/80, however, this momentum was broken when the worst drought in recent years, combined with a doubling of international oil prices and domestic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a large trade deficit. Severe inflation- ary pressures also emerged after several years of virtual price stability. The impact of these setbacks is still being felt in the Indian economy, par- ticularly in the balance of payments, and adjustments will be needed for some years to come. However, the short-term recovery process is almost completed and the economy has regained its growth momentum. Recent Trends 7. In 1980/81, the economy substantially recovered with real GDP growing by 7.5%. While industrial output expanded by 4%, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15%. Increased foodgrain production, along with judicious use of Government buffer stocks built up in earlier years, also helped moderate price rises. Inflation remained a serious problem with the annual average wholesale price index rising 18%, although the second half of the year provided clear evidence of a deceleration in inflation. 8. 1981/82 was a year of solid growth after the rebound in 1980/81 and GDP grew by 5.5%. While foodgrain production rose only modestly over its -3- 1980/81 level, other crops including oilseeds and sugarcane performed well and tot:al agricultural output grew by 4%. The ava:ilability of power, coal and rail transport, already improved in 1980/81, was even better in 1981/82, recording growth rates of about 10%, 9.4% and 15% respectively. As constraints on the supply of infrastructure and basic commodities continued to ease, industrial output responded with an 8% increase. The downward trend in inflation con- tinued. Wholesale prices rose by about 9% on an average annual basis, while the increase on a March 1981 to March 1982 basis was less than 2%, showing a continued deceleration. Easier supply conditions, combined with a more restrictive monetary policy, contributed to the sharp decline in the rate of inflation. 9. The performance of the agriculture sector in 1981/82 ensured that supply conditions in the country remained quite favorable. It also provided continuing evidence of the positive effects of large investments and appropriate policies in past years. Foodgrain production reached between 132 and 134 million tons, thus matching or perhaps surpassing the previous record. Irrigated area expanded by 2.5 million hectares, while fertilizer consumption improved over its 1980/81 level by more than 7%, despite substantial price increases. Recent performance and probable future trends suggest that on average foodgrain supplies will exceed demand. However, the balance remains delicate with some imports likely to be required from time to time. Indeed, the effects of the severe 1979/80 drought were still being felt in 1981/82 when 2.25 million tons of wheat were imported to rebuild depleted stocks. Neverthe- less, the relatively low import requirement, the ability of the Government to delay imports for as long as two years after the production shortfall, and the decline in foodgrain prices in real terms demonstrate the flexibility and resilience provided by the public foodgrain system. 10. Shortages of basic commodities and infrastructural services were major contributors to industrial stagnation and the onset of high inflation in 1979/80. This was the culmination of several years of declining capacity utilization in important, interrelated sectors such as power, coal, and rail transport. A major cause of the improved economic climate over the last two years has been a much improved level of output. in these sectors, due mainly to greater efficiency and utilization of installed capacity. Expansion of coal output by about 10 million tons for the second successive year and of rail freight traffic to a record level were particularly noteworthy features of the 1981/82 economic performance. The shortfalls in domestic energy production which contributed so heavily to the poor 1979/80 performance have also been reduced. However, even though there remains large scope for improving efficiency, further improvements in capacity utilization will become increas- ingly difficult, and increases in capacity are needed to meet increasing demand. 11. Despite a brief phase in the late 1970s, when savings rates exceeded investment rates and foreign exchange reserves actually increased, recent experience shows that the needs of the Indian economy continue to outstrip the availability of resources, both internal and external. Investment exceeds domestic savings. The latter, at nearly 25% of GDP, are already high and further increases, particularly from the household sector, will be increasingly difficult to obtain. However, over the last t:wo years, the Government has -4- taken a number of measures to generate higher savings in the public sector. Principal among these were price and tax increases, and subsidy reductions, on a range of commodities produced mainly in the public sector. 12. The shortage of resources is even more apparent in the foreign sector. Problems became serious after 1979/80 when the cost of India's POL imports rose sharply and the terms of trade deteriorated. Coupled with domestic supply shortages and a slowing down in export growth, these factors caused India's current iaccount deficit to rise from only 0.6% of GDP in 1979/80 to 2% of GDP in 1980/81. In 1981/82, the current account deficit rose to US$4.3 billion, represeniting 2.7% of GDP. Unfavorable movements in export prices and the terms of trade threatened a worse outcome. However, the much improved performance of basic import-substituting industries and a resumption of healthy export volume growth (8.3%) prevented this. To finance this gap in the face of inadequate concessional aid flows, the Government drew down a record US$2.36 billion in foreign exchange reserves, withdrew almost US$700 million under the recently negotiated IMF Extended Fund Facility, and turned increasingly to other non-concessional sources of finance. In 1980/81 and 1981/82 for example, new government guaranteed commitments for commercial borrowing totalling over US$1.3 billion were contracted for major projects. 13. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into reasonable balance at an acceptable level of growth. In particular, there is a need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently, in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to further reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has maintained and extended the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export and industrial policy measures have improved the prospects for accelerating export growth. Development Prospects 14. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufac- turing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, power, roads and ports -- is exten- sive compared to many countries, although there is considerable need for addi- tional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institutional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and reasonable access -5- to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 15. The medium-term framework for advancing India's development objectives is the Sixth Five Year Plan (1980/81-1984/85), which is now about halfway completed. The Plan assigns priority to agriculture, energy development, the growth of exports and domestic import: substitutes where appropriate, and the removal of infrastructural bottlenecks. Overall performance has so far been encouraging, although the likelihood of contirnued bottlenecks in key sectors such as power and transport is growing. Moreover, fulfillment of the Plan targets will require an acceleration of domest:ic savings rates. The efforts of the Central Government to raise resources have so far been impressive and are likely to be broadly sufficient to meet the f:Lnancing requirements of the Central Government's share in plan investment, if inflation can be kept in check. However, a significant shortfall in savings is likely to occur in some states unless further measures are introduced. There will be a need also for continuous efforts to maintain and raise furtlher the already high level of private savings. Recent increases in interest rates and tax concessions on time deposits should stimulate such savings. The further dampening of infla- tiLonary expectations, the prospects for which look bright, will be an important part of this effort. 16. The higher capital formation rates of the past few years augur well for future income growth. Thus far, however, output growth has not matched the size of India's investment programs. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investment has been needed to build up basic infrastructure. These services, such as power, transport: and irrigation, have inherently high capital output ratios. However, at least some of the rise in the sectoral capital output ratios has been due to a deterioration in efficiency and is avoidable through better management. Bottlenecks in these basic sectors clearly can prejudice growth in other sectors where large investments have been made. As demon- strated in the last two years, performance in the basic service sectors can be improved through better planning and management, thus leading to higher produc- tivity and capacity utilization, throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of tradeable commodities like coal, steel and cement, this is justified on the grounds of comparative advantage. For sectors such as power and transportation, expansion of planned capacity in accordance with the requirements of the rest of the economy will be vital to overall medium- and long-term prospects. At present rates of development, however, an adequate balance between supply and demand in these sectors will be difficult to sustain. Performance in the power sector to date suggests that India's power deficit will continue into the early 1990s, although more rapid project implementation and efficiency could narrow the size of the gap. For railways, real investment lEvels may be inadequate to meet demand projections and will need to be monitored closely and adjusted upward as necessary if serious bottlenecks are to be avoided in the next few years. 17. Under the Sixth Plan, India has an ambitious energy production program backed by substantial financial commitment. While the gap between domestic consumption of petroleum and production remains large, the prospects for progressive substitution of domestic petroleum for imports are quite bright. -6- In 1981, resources for exploration were raised by successive price increases for petroleum products. On the production side, scheduled expansion is expected to raise domestic production of crude from the current 46% to about 64% of demand by 1984/85. The rapidly expanding level of exploratory activity, combined with the possibilities for accelerated offtake from known fields offer much encouragement for India's longer term energy prospects. 18. The continuation of India's balance of payments difficulties has been marked by the progressive use of foreign exchange reserves and non-concessional borrowing to finance the deficit. Use of reserves reached a record level in 1981/82, leaving less than four months of import coverage by the end of the year. At the same time, India also made use of the IMF Extended Fund Facility. Entering this period with a favorable debt service profile, India has so far also been able to tap commercial capital markets at favorable spreads (over, of course, relatively high underlying rates) and in the last two years commercial borrowing has been stepped up. These sources will be important in the future since India's current account deficits, though not large relative to the size of the economy, will nevertheless be large in absolute terms and will neces- sitate external borrowing beyond levels expected to be available from normal concessio-aal sources. 19. India's development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and external balance, while at the same time maintaining reasonably high growth. In the longer term, income growth represents the best strategy for achieving these needed adjustments, both by generating higher savings for further investment, and by fostering the development of export and import-substituting industry to realign the balance of payments. In the short-term, significant external borrowing, including an increased emphasis on commercial borrowing, will be necessary to cope with the balance of payments consequences of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of concessional assistance. Although India is currently in a position to increase borrowing on commercial terms from the very low levels of the past, there are limits to India's creditworthiness in world markets. Maintaining an adequate rate of growth while adjusting the structure of the Indian economy to a more open and efficient environment as intended by the Government requires foreign resources in addition to the level of commercial borrowing available to India. Indeed, along with increasing exports, higher levels of investment to support an adequate rate of growth is a key element in maintaining India's recently improved creditworthiness. India is still a very poor country with a large rural sector and enormous investment requirements for human development and basic infrastructure. The fact that India has been able to maintain over the past seven years a rate of growth above the long term trend, despite the severe setbacks of 1979/80, lends sub- stance to the hope that a more open trade policy and concerted efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization of savings both foreign and domestic, can sustain a rate of growth closer to 5.0% per annum than the long run trend of 3.6% per annum. Combined with a reduction in the rate of population increase to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of less than 1.4% per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India. -7- 20. A large and growing population and severe poverty underline the need for India's development efforts to be protected and accelerated if possible. The 1981 Census placed India's population at 683.4 million, or about 12 million higher than official projections. The fact that there was no decline in inter-census rates of population growth, equivalent to about 2.2% per annum, is a cause for concern. While further analysis may suggest this rate of growth to be slightly overestimated, the expectation of a measurable decline in the population growth rate has not materialized. Until full details of the Census are released, firm judgements about the reasons for this outcome are not pos- sible. However, the results re-emphasize the need for continuing efforts to strengthen the family planning program in a broad range of activities and services. These efforts are given high prior:Lty in the Sixth Plan which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979/80 level of about 23% to over 35% by 1984/85. 21. Reduction of poverty remains the central goal of Indian economic growth. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51% of the rural population and 38% of the urban popula- tion subsist below the poverty line. Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy, particularly on increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1981 resulting from India's sustained effort to raise agricultural production, reflects such developments. There is also a role for direct Government action in faster implementation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary educa- tion, the extension of rural health facilities and the provision of secure village water supplies. Operations such as the community health volunteer program and the national adult literacy campaign provide encouraging evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor. PART II - BANK GROUP OPERArIONS IN INDIA 22. Since 1949, the Bank Group has made 63 loans and 153 development credits to India totalling US$4,095 million and US$10,956 million (both net of cancellation), respectively. Of these amounts, US$1,280 million has been repaid, and US$5,291 million was still undisbursed as of September 30, 1982. Bank Group disbursements to India in the current fiscal year through Septem- ber 30, 1982 totalled US$287 million, representing an increase of about 76 percent over the same period last year. AnneK II contains a summary statement -8- of disbursements as of September 30, 1982, and notes on the execution of ongo- ing projects. 23. Since 1959, IFC has made 28 commitments in India totalling US$219.6 million, of which US$26.4 million has been repaid, US$55.6 million sold and US$7.5 million cancelled. Of the balance of US$130.1 million, US$121.9 million represents loans and US$8.2 million equity. A summary statement of IFC opera- tions as of September 30, 1982, is also included in Annex II (page 5). 24. The thrust of Bank Group assistance to India has been consistent with the country's development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricultural produc- tivity, and efforts to improve the availability of basic agricultural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of development finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 25. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the Sixth Plan. The continued active involvement of the Bank Group in agriculture, energy and infrastructure developmenlt will appropriately contribute to India's adjustment and growth prospects. Irrigation will need continuing support, with emphasis on improved efficiency in water conveyance systems to ensure reliable delivery to farmers' fields. ]:n addition, major investments to develop the large Narmada River basin will be vital to India's efforts to increase agricultural production. Important complements to these efforts, such as fertilizer production and distribution, agricultural credit and extension, will continue to receive support. A continued program of investments aimed at rapidly increasing the domestic supply of energy will clearly be necessary if India is to curb the cost of oil imports and alleviate the critical power shortages which constrain output in both the agricultural and industrial sectors. Exploitation of oil and gas resources is a central element of this program, which should be supple- mented by investments in hydro and thermal power generation, and in the expan- sion of the transmission and distribution networks. Industrial projects to increase the domestic production of basic commodities, which have been in short supply and which India has a comparative advantage in producing, should also receive high priority. Finally, raising the efficiency and levels of transpor- tation infrastructure would mitigate a key constraint to achieving higher levels of economic growth so that further support of the railways and for ports development will be particularly appropriate. -9- 26. The need for a substantial net transier of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions w:Lthin the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, there is now a need for increased foreign assistance to adjust to an even greater deterioration in balance of payments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Bank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Conse- quently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, and water supply. 27. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support. This requirement for additional assistance can be met, in part, through Bank lending. Given its development Frospects and policies, India is judged credit-worthy for Bank lending to supplement IDA assistance. A con- tinuation of efforts already underway to achieve growth in productive capacity, trade expansion, higher levels of savings, foodgrains self-sufficiency and a reduction in the rate of population growth should result in continued economic growth and improvement in the balance of payments. Despite recent setbacks, India's external payments position is still manageable. The ratio of India's debt service to the level of exports was aboul: 11% in 1981/82 and is projected to remain below 20% through 1995/96. As of September 30, 1982, outstanding loans to India held by the Bank totalled US$2,922 million, of which US$1,308 million remain to be disbursed, leaving a net amount outstanding of US$1,614 million. 28. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with 54%, 42% and 52%, respectively, in 1981/82. On December 31, 1981, India's outstanding and disbursed external public debt was about US$17.4 billion, of which the Bank Group's share was US$6.6 billion or 38% (IDA's US$5.6 billion and IBRD's US$1.0 billion). In 1981/82, about 16.0% of India's total debt service payments were to the Bank Group. -10- PART III - THE ENERGY SECTOR General 29. Commercial primary energy (coal, oil, gas, hydro and nuclear power) accounts for about 46% of total energy consumption in India, with the balance (54%) being derived from non-commercial sources such as firewood and agricultural and animal wastes. over the past ten years, the growth of energy consumption in India averaged 4% per annum, which was marginally below GDP growth for the period. Over the same period, commercial energy consumption increased by 5.3% per annum, but this was not suifficiently rapid to raise per capita consumption of commercial primary energy above 166 kg of oil equivalent, which is half the average for low-income developing countries. The share of oil products in commercial primary energy consumption at 33% is low for developing countries, but it is growing rapidly. Firewood is the most widely consumed fuel in India, accounting for about 65% of total non-commercial energy consumption. Other sources of fuel, such as vegetable and animal wastes, account for the remaining 35% of non-commercial energy consumrption. 30. Coal remains the most important domestic source of commercial energy in India. Coal production, which stagnated between 1976/77 and 1979/80 because of power shortages, delays in commissioning new mines, labor difficulties and transportation bottlenecks, has risen substantially from about 104 million tons in 1979/80 to 124.7 million tons in 1981/82. Installed electric generating capacity in 1981/82 is estimated at 35,000 MW, of which hydroelectric plants account for about 36%. Potential demand for power has consistently exceeded supply in recent years. The estimated deficit (calculated as actual supply compared to potential unrestricted demand) was about 13% in 1980/81. 31. Inadequate supplies of energy have been a major constraint hindering India's economic growth. Although considerable indigenous energy resources exist, their development has not kept pace with demand. In November 1979, a high-level Working Group on Energy Policy recommended measures to limit growth in energy demand. Prominent among the recommendations were improvement in the efficiency of energy use, reduction of transportation demand, reduction of the energy intensity of industrial investment, and inter-fuel substitution from commercial to non-comnmercial and renewable energy resources. These recommendations address the need to contain commercial energy consumption without impeding economic growth. Petroleum 32. Petroleum reservoirs are found in sedimentary basins. In India, there are i7 sedimentary basins with a total area of approximately 1.7 million km , of which about 1.4 million km (81%) are onshore and the remainder offshore (to a water depth of 200 meters). Commercial petroleum production has been established in only three sedimentary basins, viz., --1 1- the Upper Assam Shelf in north-eastern India., the Cambay basin in Gujarat, and the Bombay offshore basin which has several petroleum fields, namely, Bombay High, North Bassein (Panna), South Bassein, Heera and Ratnagiri (Ratna). Many of India's potential petroleul-bearing areas are still unexplored and production is concentrated in only a few regions. Historically, the pace and scope of explorat:ion activity has been uneven and resources have been concentrated on a fewq promising areas. Since the discovery of the giant Bombay High field off the West Coast of India in the mid-1970s, India has not made a new major commercial discovery. Ongoing exploration efforts of ONGC, however, have been encouraging and have identified several petroleum-bearing areas which need further exploratory drilling to determine their commercial potential Indications of petroleum have been found in seven other basins: Krishna-Godavari, Cauvery, Rajasthan, Bengal, Andaman Islands, Himalayan Foothills-Ganga Valley and the Assam-Arakan Fold Belt. Furthermore, four other basins are considered prospective on general geological grounds, although hydrocarbons have not yet been discovered. These basins are Saurashtra, IKutch, Konkan-Kerala and Mahanadi. The Krishna-Godavari and Cauvery basins indicate the most promising undeveloped potential to date, with Krishna-Godavari standing out as the next likely major discovery after Bombay High. 33. Estimates of India's potential total recoverable hydrocarbon reserves are 4.5 billion tons of oil equivalent (toe), of which about two-thirds are located offshore and of which about 75% is expected to be in the form of natural gas. Proven recoverable hydrocarbon reserves are about 470 million tons of oil and 410 billicn cubic meters of natural gas (about 330 million toe). Natural gas is becoming increasingly important to the Indian economy with the development of the Bombay High oilfield with its associated gas flows and planned development of the large offshore South Bassein gas fields. Gas consumption in 1981/82 is estimated at 1.6 million toe, and is forecast to rise to about 6.3 million toe by 1989. 34. Crude oil production from domestic: reserves has increased steadily over the past 20 years from 0.45 million tons in 1960/61 to almost 7 million tons in 1970/71 and an estimated 16.2 million tons in 1981/82. Consumption of crude oil grew at about 6.5% per annum over the past five years, and reached an estimated 31j.8 million tons in 1981/82. In that year imported crude oil accounted for 20.6 million tons or about 56% of consumption. The import bill for crude oil and petroleum products was over US$6 billion that year, representing 38% of total merchandise imports and 70% of India's merchandise export earnings. By the end of the Sixth Plan period (1984/85), consumption is expected to reach about 46 million tons. This would exceed expected domestic production by about 16 million tons on the basis of expected production from known petroleum reserves. 35. While there are good prospects for increasing production from existing fields, particularly Bombay High, India will need to import about 34% of its crude oil requirements in 1984/85 and this proportion will rise -12- in later years unless there are major new discoveries. Thus a concerted effort to explore and develop India's petroleum resources, in order to reduce imports, is of vital importance and is a central objective of Government policy. Recent exploration results indicate the existence of promising sedimentary basins where additional and more intensive exploration efforts appear justified. To this end, the investment programs of ONGC and Oil India Limited (OIL), the Government-owned institutions engaged in exploration and development of hydrocarbon resources, have been stepped up. The Sixth Five-Year Plan (1980/81-1984/85) originally allocated about US$3.7 billion 1/ for petroleum exploration and development, which itself represented an increase of almost 50% in real terms over such expenditures in the previous Plan. Revised allocations for the Plan period are now about US$6 billion 1/, a further increase of more than 60%. At the same time, in recognition of the need to supplement these resources yet further, India is making concerted efforts to attract risk capital by inviting foreign oil companies to assist in exploring for oil, both onshore and offshore. About half of the country's sedimentary basin areas have been offered to private oil companies to participate in exploration under production-sharing contracts. Petroleum Pricing 36. India is fully aware of the need to conserve energy and, to this end, the Government has consistently set petroleum prices at levels designed to ensure efficient energy use. Natural gas is sold directly by the producers (ONGC and OIL) to the consumer on the basis of long-term contracts that require Government approval. Natural gas prices vary according to use and source. Offshore gas is priced at between US$1.49 and US$7.44 per thousand cubic feet. Onshore gas which was priced at US$0.45-US$0.89 per thousand cubic feet in years past, is now being substantially increased for gas originating in Gujarat to closely approximate that of offshore gas. On a use basis, gas is priced at the same energy equivalent price as the alternative fuel for which it is substituting. On average, ONGC receives about US$4.11 per thousand cubic feet for offshore gas, which is well above its production cost and is in line with its economic value. The average level of gas prices is currently satisfactory; it will be monitored closely during project supervision to ensure that prices stay competitive as the number and type of customers change with expanding supplies. 37. Domestic petroleum product and crude oil prices are also regulated by the Government. Crude oil prices to ONGC and OIL, which were raised in July 1981 from US$6.1 per barrel to US$17.3 per barrel, ensure satisfactory profits for the companies. In 1981/82, ONGC's profit per barrel of oil (US$4/Bbl) was in line with the average for international oil companies, primarily due to the lower royalty taxes and low production 1/ In 1980/81 prices. -13- cost of Bombay High oil. The profits provide adequate cash flow to enable the companies to finance a major portion of their investment programs from internally-generated funds. Although the current domestic crude prices are below international levels, exploration anld development decisions are based on international prices, and hence the lower domestic selling price does not act as a disincentive to exploration and development. Under the new production-sharing contracts, foreign oil companies will receive the full international price for their share of production. Retail product prices have been maintained, on average, at or above international levels. At the present time, both the level and the structure of petroleum prices in India are satisfactory. Sector Institutions 38. Within the Government, the Ministry of Petroleum, is charged with policy-making in the petroleum sector. Together with the Ministry of Finance and the Planning Commission, it approves all investments and the budgets of public companies operating in the sector. ONGC and OIL, both public sector undertakings, are engagedl in the exploration for, and development of, hydrocarbon resources. Another public entity, the Indian Oil Corporation, handles all of India's crude oil imports. The Oil Industry Development Board is a financial institution which obtains funds through a cess levied on domestic crude production and provides some financing for public sector enterprises engaged in petroleum exploration, production and refining. ONGC, the organization undertaking the South Bassein development, is a Government-owned statutory body created in 1959 to plan, promote and implement the developrient of petroleum resources. ONGC's statutes provide it with authority to acquire, hold and dispose of property, to contract and to borrow. ONGC has evolved into a full-fledged and competent oil coompany. Petroleum Exploration and Production Policies, and Investment Strategy 39. Until the 1950s, petroleum exploration was concentrated in northeastern India, specifically, in Assami, Tripura and Nagaland. OIL was established in 1959 following an oil discovery in Assam by Burmah Oil Company (UK). The Government of India in:itially took a one-third equity interest in OIL, increasing it to 50% in 1961. In October 1981, GOI acquired all the Indian assets of the Burnah Oil Company, comprising its interest in OIL and in the Assam Oil Company, a small firm whose production units had been absorbed by OIL. In 1959 ONGC discovered petroleum reserves in Gujarat, but Assam remained the major petroleum-producing area in the country (4.2 million tons per year) until the early 1970s when production in Gujarat exceeded 4 million tons per year. Following the oil crisis of 1973, exploration activities accelerated, particularly offshore, resu:Lting in the discovery by ONGC in 1974 of the Bombay High field and a number of significant but smaller fields in its vicinity. The South Bassein gas field was identified and drilled initially in early 1976. By 1981/82, oil production from Bombay High had reached 8 million tons per annum, accounting for 50% of India's oil production. -14- 40. To develop and efficiently utilize its petroleum resources, the Government's investment program contains the following elements: increased production from existing oil and gas fields, primarily by accelerating the development programs of ONGC and OIL in areas where petroleum has already been discovered; accelerated exploration programs for ONGC and OIL; attraction of risk capital for exploration activities through production-sharing agreements with foreign oil companies; construction of new refineries and modernization of existing refineries, especially through the introduction of conversion facilities to reduce middle distillate imports; and development of the gas pipeline system and construction of additional plants using gas as feedstock (e.g. fertilizer and petrochemical plants). As an example of attracting risk capital for exploration, in late 1980, thirty-two blocks, each ranging in size from 10,000 to 30,000 km offshore and onshore, were offered 2to international bidders. The total area offered, almost 0.9 million km , represented about 50% of the country's sedimentary basin area. One production-sharing agreement has so2far been signed with a consortium led by Chevron (USA) for an 18,500 km block in the Saurasthra basin offshore Gujarat, north of the Bombay High field. The terms of the production sharing agreement provide for Chevron to drill at least three wells, spending a minimum of US$29 million over a three-year period, at its own risk. Upon commercial discovery, ONGC may assume up to 50% joint venture in future development (without payment of exploration costs), and production will be split according to a scale which escalates with field profitability. Until India achieves self-sufficiency in oil, GOI has the option to purchase Chevron's share of the oil produced at international prices. Meanwhile, invitations to bid on a second round of offerings have been issued. The second offering includes about 50 blocks both onshore and offshore, including new areas such as west of the Bombay High field (in 200 m of water), and the outer-shelves of the Krishna-Godavari and Mahanadi deltas. 41. GOT has extensively reviewed possible gas utilization strategies with assistance from the Bank. An earlier (1979) study concluded that the Liquified Petroleum Gas (C3/C4) fractions 1/ should be used as a kerosene substitute, the C2/C3 fractions should be used as a petrochemical plant feedstock as a substitute for imported naphtha and the Cl (lean) gas fraction should be used as a fertilizer feedstock. As a result, GOI accepted a recommendation that an additional six new gas-based ammonia/urea fertilizer plants be constructed in addition to the four already under construction. With a greater availability of natural gas now being forecast through a further study commissioned in late 1981, GOI has concluded that potential end-uses of gas should also include liquid hydrocarbon fuel replacement (fuel and diesel oil in boilers and gas turbines, kerosene for household use) and in some cases, as a supplement 1/ Natural gas consists of a number of chemical components or "frac- tions," including inter alia Cl - methane; C2 - ethane; C3 - propane; C4 - butane; C5+ - pentane and heavier fractions. -15- to coal in boilers and gas power generation. The current study will be completed in detail in April 1983 but the Bank has concluded that the Government's overall policies are reasonable. GOI would, whenever necessary, update the gas supply and demand forecasts for the South Bassein and Bombay High fields and provide the Bank an opportunity to comment on it (Section 4.02, draft Loan Agreement). Bank Group Involvement in the Petroleum Sector 42. The Bank has made two loans totalling US$550 million for the development of the offshore Bombay High oil field. The first loan of US$150 million (Ln. 1473-IN) was made in 1977 and financed Phase III of ONGC's Bombay High development program. The project was essentially completed in March 1981, about two years behind the appraisal schedule, due to a necessary change in the project scope resulting from new information which resulted in higher prioril:y being given to the development of the South Bombay High area rather than to the North Bassein area. Nevertheless, about 70% of the targeted daily rate of production had been attained by the project completion date anticipated at appraisal. The facilities are operating satisfactorily. A Project Performance Audit Report was issued to the Executive Directors on October 13, 1982. The report contained a favorable review of the project. A second loan for US$400 million (Ln. 1925-IN) was made in December 1980 to assist in the financing of Phase IV and advanced action on Phase V of the program. Project implementation is proceeding satisfactorily. A US$200 million loan (Ln. 2123-IN) for a Refineries Rationalization Project was approved in May 1982. Progress under it is satisfactory. Finally, a loan of US$165.5 million (Ln. 2205-IN) was approved in October 1982 to support exploration in the Krishna-Godavari basin. 43. The Bank's role in the Indian petroleum sub-sector continues to address several inter-related aspects with varying degrees of emphasis depending on the specific projects. These aspects are: (i) providing policy advice on hydrocarbon exploration, development, processing and utilization strategy through Bank involvement in key projects; (ii) assisting the domestic petroleum companies develop their technical expertise and capability in each major phase of hydrocarbon exploration development and processing; (iii) contributing to improve the technical design and implementation arrangements of major projects; and (iv) strengthening the profitability and financial structure of project entities so that they can self-finance a substantial portion of their investments and attract more commercial :,'inancing for such investments. Over the past two years the Bank has had an extensive dialogue with ONGC and GOI with respect to the development of India's offshore gas reserves, concentrating in particular on the optimization of the design and development of the largest offshore gas discovery so far, i.e., South Bassein. The development of South Bassein presents a new challenge to ONGC as it is the first major gas develcpment project in India. Such a project, unlike crude oil projects, has to be optimized not only in terms of reservoir considerations but also in relation to the future expected market for natural gas given the extensive processing, pipeline and marketing facilities required. The Bank therefore discussed with GOI, ONGC, and its consultants, at various stages of project preparation, the scope of market studies to be carried out and their conclusions. As a result the main components of the project have been optimized in terms of the anticipated market. During the implementation of the proposed project, the Bank intends to continue helping GOI formulate a long-term gas strategy designed, to accelerate the development of free gas reserves while building a market for gas both as feedstock, and as a replacement of liqu;id hydrocarbons. PART IV - THE PROJECT 44. The project was appraised in March 1982. The Staff Appraisal Report (Report No. 4097-INa, dated January 26, 1983) is being distributed to the Executive Directors separately. A Supplementary Project Data sheet appears as Annex III. Negotiations were held in Washington, D.C. in November 1982. The Borower was represented by Mr. Misra of the Department of Economic Affairs, Ministry of Finance, as coordinator of the Indian delegation. 45. The purpose of the proposed project would be to accelerate the sound and economic utilization of natural gas by establishing the basic policy framework and the cornerstone physical infrastructure for developing the market for gas. It will also support ONGC's strategy of developing known petroleum reserves as quickly as possible. The project will therefore contribute to a reduction in imports of petroleum, fertilizer and petrochemicals. 46. The South Bassein gas field is located approximately 65 kilometers west of Bombay in the Arabian Sea at a water depth of 57 meters (see Map 16184 attached). The initial discovery well was drilled and completed in early 1976 and, since then, twelve wells have been drilled to delineate the structure of the reservoir. The reservoir is large and it is conservatively estimated by McCord and Associates (USA) and ONGC to be capable of maintaining a production rate of some 20 million cubic meters per day (Mmcmd) for at least 20 years through some 24 production wells. 47, Gas from the South Bassein production wells must first be processed at the platform site to separate condensed and entrained natural gas liquids (NGL). Subsequently, the gas would be transported via an underwater pipeline to the shore facilities. Following location studies, a pipeline route was chosen from the South Bassein field to a landfall point near Umrat in the State of Gujarat, continuing overland to Hazira (see Map 16184). A Bank-financed fertilizer plant being built at Hazira will utilize the gas from this project. Simulation studies determined that a 36-inch diameter pipeline would be the optimal pipe diameter for the 235 km pipeline route, most of which (217 km) will be under water. 48. The project comprises Phase I of ONGC's overall development of the South Bassein gas field and will bring the production capacity to 5 Mmcmd of gas by June 1, 1985. Phase II would raise the production -17- capacity from 5 Mmcmd to 20 Mmcmd over the period 1984/85-1987/88. The Phase I development consists of: (i) Drilling Platform: to accomodate six production wells with provision for three additional wells to test oil recovery techniques at a later date; (ii) Process Platform: a two-deck platform containing NGL separation and gas dehydration facilities with a design capacity of 10 Mmcmd of gas; (iii) Living Quarters Platform: a two-deck platform, connected to the others by bridges, to provide living facilities for 125 persons with the necessary utilities and helideck; (iv) Flare Platform: a simple platform connected by a bridge to the process platform and containing the gas flare; (v) South Bassein to.Umrat Pipeline: a 36-inch diameter, 217-km long submarine pipeline designed to carry 20 Mmcmd of gas; (vi) Umrat to Hazira Pipeline: a 36-inch diameter, 18-km long buried pipeline to the terminal at Kawas, adjacent to the Hazira fertilizer complex: (vii) South Bassein - Bombay High Gas Tie-in: a 20-inch diameter, 17-km long submarine pipeline from the South Bassein processing platform to the existing 26-inch diameter Bombay High gas :ransmission line; (viii) NGL Line: a 12-inch diameter, 17-km submarine pipeline from the South Bassein process platform to the 30-inch diameter Bombay High crude oil transmission line; (ix) Hazira Terminal Facilities: condensate separation, stabilization and storage, utilities and ancillary facilities; and (x) Engineering and Technical Services and Reservoir Consultancy: consultants to prepare engineering design and bid packages and assist in construction, supervision and overall project management -- (approximately 800 man-months at US$12,000 per man-month); to provide other project services such as surveys and certification of offshore installations; and to assist ONGC in implementing and monitoring the gas production program. The Reservoir consultancvr work will involve some 850 man-months at some US$17,500 per man month. -18- The pipelines would be installed by June 1984, the platform complex would be completed by the end of May 1985 and South Bassein gas would begin flowing to the Hazira fertilizer complex (the major customer in the early years) by June 1985. From June 1984, gas for the Hazira plant start-up operations would be met from associated gas produced from the Bombay High field and transmitted through the South Bassein pipeline. Project: Costs-and Financing 49. The financing requirements of the project, including contingencies, price escalation, and the front-end fee, are estimated at US$701.5 million (in January 1983 prices) of which US$602.7 million represents the foreign exchange costs. Taxes and duties included in the above total costs are estimated at US$31.2 million. Physical contingencies are estimated at 10% of base costs, and price escalations were calculated on projections of price increases of 7.5% per year for local goods and services and 8.0% in 1983/84 and 7.5% in 1984/85 and 1985/86 for foreign goods and services. 50. ONGC is making substantial progress in arranging financing for this development. The Kuwait Fund has agreed to provide US$50 million as part of the financing package. The financing plan for the total developmnent can be expected to include commercial loans and supplier's/export credits for the fabrication and supply of the offshore platforms and pipe materials to a value of US$250 million. In addition, ONGC would provide US$179.2 million from its own internal resources. The IBRD loan would represent about 32% of total costs and 37% of the foreign exchange costs. 51. The Bank loan would be made to GOI on standard IBRD terms--20 years, including five years' grace, at variable interest rates. GOI would onlend the proceeds of the Bank loan to ONGC at a minimum interest rate of 12% per annum over a maximum of 15 years, including a five-year grace period. The foreign exchange and interest rate risks would be borne by GOI. The onlending rate is expected to exceed domestic inflation rates, which are forecast not to exceed 8% annually over the next five years. The five-year grace period is justified by the need for substantial additional investments (US$1.6 billion in 1983 prices) for the Phase II development program that will raise the production capacity to 20 Mmcmd by 1987/88. Execution of a Subsidiary Loan Agreement on terms and conditions satisfactory to the Bank would be a condition of effectiveness of the proposed loan (Section 6.01, draft Loan Agreement). Procurement and Disbursement 52. ONGC's procurement procedures, which for imported items are similar to the Bank's international competitive bidding (ICB) procedures, will be used for the bare pipe materials, fabrication and supply of platforms, well materials and supplies, equipment and instruments for the Hazira terminal, as well as telecommunications and telecontrol equipment (US$304 million). These components will not be financed by the Bank, -19- however, and will include requests for supp]iers' and exim-bank financing proposals. Bank ICB procedures will be followed for the platform (US$47 million) and the pipeline (US$200 million) installation contracts, the foreign exchange costs of which would be financed 100% and about 85%, respectively, from the proposed Bank loan. The other 15% of the pipeline installation foreign exchange cost (i.e. US$30 million) will be financed by the Kuwait Fund. The procurement procedures of the Kuwait Fund will be used for the pipe coating and wrapping contract (US$18 million), which it will fully finance. The Bank will review and approve all the bidding documents, bid evaluation and contracts to be fully or partially financed from the proposed loan. In order to enable Engineering and Technical services to go ahead without interruption, retroactive financing in an amount not exceeding US$1 million for expenditures incurred after December 1, 1982 is proposed (Schedule 1, draft Loan Agreement). Disbursement of the Bank loan is expected to be completed by March 1985, and the closing date would be December 31, 1985. Project Execution 53. ONGC is managed by a Commission consisting of a Chairman, six full-time Members (Finance, Materials, Personnel, Exploration, Offshore and Onshore) and two part-time members representing GOI's Ministries of Finance and of Petroleum. ONGC's main administrative and financial functions (planning, procurement and stores, accounting, personnel, computer activities, etc.) are centralized in the corporate headquarters at Dehra Dun in Uttar Pradesh, along with the main research and development and training facilities. Operational staff are divided among three regional offices (Central, Western and Eastern) and the Bombay Offshore Project (BOP). Operational res-onsibility and the authority to commit funds within their approved budgets have been delegated to Regional Managers. ONGC would be responsible for implementing the project and would utilize experienced foreign engineering and contracting firms for designing and installing the platforms and pipelines. The basic engineering design for the offshore platform complex was carried out by Earl and Wright (USA) and that for the offshore pipeline and Hazira terminal complex by Snamprogetti (Italy). The platform installation and pipe-laying activities require a very h:igh level of technical competence and know-how, as well as the utilization of very sophisticated equipment. These tasks are the primary determinants of successful project implementation and will be entrusted to experienced and qualified foreign contractors. 54. The South Bassein development, is being supervised by the Bombay Offshore Project (BOP) group which is r-esponsible for all offshore operations of ONGC. BOP's arrangements for implementing past projects have been effective and are satisfactory to the Bank. The central platform complex, and the onshore and offshore portions of the South Bassein/Hazira pipeline would be under the supervision of the Construction Division of the BOP. The wells would be drilled either with an ONGC-owned drilling rig or a contract rig, depending on which is available during the time slot allotted for drilling. In addition to specific consultant -20- assistance to be contracted to assist ONGC's BOP Division in supervising the installation of the platform complex, the pipeline laying, and the well drilling activities, ONGC has also engaged the services of an experienced group (King-Wilkinson, USA) to provide back-up support for its entire offshore construction program. The latter consultant's assignment would be to provide advice and assistance during all facets of offshore construction. With no unforeseen major equipment delivery or construction setbacks, ONGC should succeed in meeting its project completion targets. ONGC - Financial Evaluation 55. ONGC's overall financial position is sound, with a debt/equity ratio of 50:50, a current ratio of 1.2 as at March 31, 1982, and a debt service coverage ratio of approximately 8 for 1981/82. This satisfactory situation is due both to the rapid increase in oil production from Bombay High and to the increase in oil prices in July 1981. The debt service coverage ratio is expected to decline to about 5.5 in the mid-1980s, but this lower ratio is satisfactory. While its key financial parameters (selling prices, investment programs) are decided by GOI, ONGC is able to operate in a financially sound manner. ONGC's income statements over the past four years demonstrate the Commission's rapid growth, primarily because of expanding offshore production. Revenues have increased from Rs 3.8 billion (US$422 million) in 1978/79 to Rs 13.8 billion (US$1,533 million) in 1981/82. Its financial performance during this period was satisfactory, although its profits deteriorated somewhat in 1980/81, reflecting the income foregone as a result of a lengthy stoppage of oil production in Assam. During the period 1978/79-1981/82, ONGC's overall investment amounted to Rs 17.6 billion (US$1,956 million), of which 55% was financed from internal cash generation. ONGC's assets as of March 31, 1982 total Rs 22.6 billion (US$2,511 million), of which net fixed assets totalled Rs 11.2 billion (US$1,244 million). 56. Financial projections over the period 1982/83-1985/86 indicate that ONGC's financial performance should continue to be satisfactory. This forecast conservatively assumes that prices of crude oil and natural gas to ONGC will remain constant in current terms, that the bulk of ONGC's external financing requirements will be met by borrowings, with no additional Government equity, and that no new discoveries of crude oil or gas will be made during this period. The volume of crude oil sales would continue to grow from 17.9 million tons in 1982/83 to 27 million tons in 1985/86, however, with steadily increasing profits as a result of the accelerated development efforts, particularly in the Bombay High and South Bassein fields. 57. There is also the possibility that, in the event of large new discoveries, ONGC would need to seek additional heavy borrowings to finance unforeseen development costs. In order to protect ONGC's financial position, GOI would periodically carry out a review of the prices of crude oil and natural gas to ONGC and set such prices at a level which would enable ONGC to earn a return on capital employed sufficient to meet its debt service obligations, maintain adequate working capital, and -2 1 finance a substantial portion (about 65%-70,', see para 58 below) of its proposed capital expansion (Section 4.03, draft Loan Agreement). In addition ONGC will submit annually to GO, an economic and financial evaluation of the Project and of any subsequent major developments which will indicate the level of prices required by ONGC to earn an after-tax financial rate of return (i.e., discounted cash flow return) of at least 15% on the project and any other major developments (Section 4.03, draft Project Agreement). Similar agreements have been reached under the three previous Bank loans to ONGC and are being observed. 58. ONGC's investment program for 1982/83-1985/86 is Rs 109.6 billion (US$12.2 billion). While this program is ambitious, it is well-balanced, and concentrates appropriately on accelerating the exploration in the more prospective areas, such as the Krishna-Godavari basin, and development of the more productive known oil and gas resources, such as the Bombay High and South Bassein fields. The program anticipates that ONGC will finance about 68% of investments from internal sources. To help finance the balance of the investment program including the foreign exchange requirements, ONGC is expected to utilize foreign borrowings, both commercial and official. In line with this approach, ONGC's international invitations to contractors and suppliers bidding on ONGC investment projects now include requests for financing proposals. There remains the possibility that, in the event of large new discoveries, ONGC would seek additional heavy external borrowrings to finance development costs which should be able to be accommodated given the conservative proportion of loan financing of 32% of its planned investment during the period. 59. ONGC has already obtained commitrients for about US$254 million of commercial loans/credits (Exim Bank, suppliers' credits, commercial banks, etc.) during the first nine months of its fiscal year through December 1982, in addition to about US$206 million of bilateral and multilateral loans (including US$165.5 million from the World Bank for the Krishna-Godavari project). Furthermore, bids with an aggregate value of about US$167 million for which financing proposals have been received and/or finalised, are under evaluation and will be awarded shortly. Finally, several major bid packages requesting financing proposals with a combined value of about US$283 million have been recently issued or will be issued before the end of March 1983. The above figures do not include the US$272 million being sought from the World Bank and the Kuwait Fund for the specific financing requirements of the South Bassein Gas Development Project. Additionally, ONGC is considering a euro-dollar loan of approximately US$300 million. The Bank's contribution to ONGC's overall foreign exchange financing requirenents over the project period is expected to be about 9%. Benefits and Risks 60. The economic benefits of the South Bassein project are essentially savings of imports of both liquid hydrocarbons and fertilizers or fertilizer feedstocks resulting from the use of domestically produced -22- gas from South Bassein. The economic rate of return (ERR) of the project is 38%. Should investment costs increase by 20%, the rate of return falls to 32% and should revenues be reduced by 20%, a 29% ERR results. In a "worst-case" scenario whereby investment costs are up 20%, revenue is down 20%, and the development is delayed by one year, the ERR falls to 21%, which is still acceptable. The economic payback period of the project is about 6 years. When the Phase II development is completed, the ERR of the total development increases to 49% since, at the higher utilization rate, economies of scale result. In arriving at these expected returns, no increases in the real prices of energy have been assumed between the early 1980's and the 1990's and the estimates are therefore conservative. On an after--tax basis, the financial rate of return is 19% and 26% for the Phase I and Phase II developments respectively. 61. The major risks facing this project fall essentially into two categories: i. reservoirs may not live up to expectations; and ii. technical difficulties may affect the implementation timetable and therefore the project costs. With regard to the reservoir, the consultants (DeGolyer and McNaughton [US] aLnd McCord and Associates [US]) and ONGC have independently concluded that, with twelve wells already drilled on the structure (in excess of what oil industry practice would normally require), it is highly unlikely that the reservoir production targets would be in error. With respect to technical difficulties in constructing the facilities, in drilling the wells or in connecting the platforms and laying the pipeline, the risks are normal for this type of project. ONGC has little previous experience in developing offshore free gas fields. On the other hand, it has already gained considerable expertise in managing offshore construction and pipeline laying. Moreover, foreign consultants have been hired to assist in all phases of the development. With respect to the utilization of the gas, even if the Phase II development were to be delayed, production from this project could be readily absorbed by the Bombay gas reticulation system and the Hazira fertilizer complex. Even if the gas is used primarily for liquid hydrocarbon replacement, the rate of return would be satisfactory. Since the main risks of the project have been recognized early and satisfactory precautions have been taken to minimize them, the project remains economically justified and will provide significant savings to the Indian economy in terms of both fertilizer and petroleum imports. Ecology and Safety 62. The proposed project will cause few environmental disturbances since offshore platforms, after installation, generally attract a large aggregation of marine life and are not considered to be detrimental to the ecology. Since this is a gas producing complex, there is essentially no risk of oil spillage or other oil pollution. Both the onshore and the -23- offshore portions of the pipeline will be buried and, onshore, the original surface features along the pipeline route will be restored. A major international certifying agency will inspect and approve the various stages of design, fabrication and installat:ion of the offshore facilities--the commonly accepted practice -For such projects. All measures will be taken to minimize fire and other hazards. The platforms will have the usual extensive array of gas detectors, deluge water spray systems, dry chemical fire fighting systems, Halon fire suppressant systems, and personnel safety and recovery equipment including survival rafts, etc. ONGC's insurance practices were examined and found to be satisfactory, and satisfactory arrangements will be made for insuring project facilities (Section 3.03, draft Project Agreement). PART V - LEGAL INSTRUMENTS AND AUTHORITY 63. The draft Loan Agreement between India and the Bank, the draft Project Agreement between the Bank and ONGC and the Report of the Committee provided for in Article III, Section 4(iii), of the Articles of Agreement of the Bank are being distributed to the Executive Directors separately. 64. Special conditions of the project: are listed in Section III of Annex III. Execution of the Subsidiary Loan Agreement between India and ONGC would be made a condition of loan effectiveness (Section 6.01, draft Loan Agreement). 65. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI -- RECOMMENDATION 66. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President February 2, 1983 ANNEX I INDIA - SOCIAL INDICATORS DATA SHEET Page 1 of 5 INDIA REFERENCE GROUPS (WEIGHTED AVERAGES AREA (THOUSAND SQ XjM.) MOST RECENT ESTIMATE-a rOTAL 3287.6 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 1818.2 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC GNP PER CAPITA (US$) 70.0 110.0 240.0 261.4 890.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 111.2 152.5 194.4 448.7 701.7 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THO'S.) 434850.0 547569.0 673207.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.3 17.3 32.4 lPOPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 994.1 STATIONARY POPULATION (MILLIONS) 1694.4 YEAR STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY PER SQ. KM. 132.3 166.6 200.6 158.1 255.9 PER SQ. KM. AGRICULTURAL LAND 247.0 307.8 362.8 355.9 1748.0 P'OPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.9 42.7 40.2 36.8 39.9 15-64 YRS. 54.5 54.2 56.8 59.7 56.8 65 YRS. AND ABOVE 4.6 3.1 3.0 3.5 3.3 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3, 2.1 2.0 2.3 URBAN 2.5 3.3 3.3 3.3 3.9 CRUDE BIRTH RATE (PER THOUSAND) 43.7 40.0 35.6 29.3 31.8 CRUDE DEATH RATE (PER THOUSAND) 21.8 16.7 13.6 11.0 9.8 GROSS REPRODUCTION RATE 2.9 2.7 2.4 2.0 2.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 19.3 36.3 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 99.0 108.1 115.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 95.6 90.4 88.8/c 97.3 106.4 PROTEINS (GRAMS PER DAY) 53.6 49.7 48.4/c 56.9 54.4 OF WHICH ANIMAL AND PULSE 17.2 14.8 13.1/ 20.0 13.9 CHILD (AGES 1-4) MORTALITY RATE 26.2 20.7 17.4 10.9 6.7 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 43.2 48.1 51.8 57.8 59.8 INFANT MORTALITY RATE (PER THOUSAND) 165.0 139.0 123.4 89.1 63.7 ACCESS TO SAFE WATER (PERCENT OF PCPULATION) TOTAL .. 17.0 33.0 32.9 32.0 URBAN .. 60.0 83.0 70.7 51.9 RURAL .. 6.0 20.0 22.2 20.5 ACCESS TO EXCPETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 18.1 37.7 URBAN .. 85.0 87.0 72.7 65.7 RURAL .. 1.0 2.0 4.7 24.0 POPULATION PER PHYSICIAN 4850.4 4889.0 3630.6 3297.8 8540.4 POPULATION PER NURSING PERSON 10975.3/d 8296.5 5696.1 4929.3 4829.4 POPULATION PER HOSPITAL BED TOTAL 217B.7 1612.9 1311.0/e 1100.4 1047.5 URBAN .. .. 362.3/i 301.3 651.6 RiURAL .. .. 10432.8/e 5815.7 2597.6 ADMISSIONS PER HOSPITAL BED .. .. .. .. 27.0 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 URBAN 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 URBAN 2.6 2.8 R'JRAL 2.6 2.8 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. .. ANNEX I Page 2 of 5 INDIA-1SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVENGES - MOST RECENT ESTIMATE)- MOST RECE,NT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 73.0 78.0/c 97.4 96.2 MALE 80.0 90.0 92.0/c 101.0 99.8 FEMALE 40.0 56.0 63.0/c 87.8 92.1 SECONDARY: TOTAL 20.0 26.0 27.0,'c 53.0 37.6 MALE 30.0 36.0 36.0,' 63.8 41.1 FEMALE 10.0 15.0 17.0,'- 41.3 34.1 VOCATIONAL ENROL. (X OF SECONDARY) 8.0 1.0 0.7.1f 1.7 20.8 PUPIL-TEACHER RATIO PRIMARY 46.1 41.5 51.81c 37.7 35.5 SECONDARY 16.0 20.9 .. 20.2 25.0 ADULT LITERACY RATE (PERCENT) 28.0 33.4 36.0 52.1 73.1 CONSUMPTION PASSsNGER CARS PER THOUSAND POPULATION 0.6 1.1 1.3/c 1.5 9.8 RADIO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 33.t 35.4 116.5 TV RECEIVERS PER THOUSAND POPULATION 0.0 0.0 l.C 3.2 37.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 10.6 16.0 19.i/ 16.4 53.7 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.1 4.1 3.2' 3.6 2.8 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 185951.1 219194.2 264204.4 FEMALE (PERCENT) 30.7 32.5 31.3 29.5 33.6 AGRICULTURE (PERCENT) 74.0 74.0 69.3 70.0 52.2 INDUSTRY (PERCENT) 11.0 11.0 13.2 15.0 17.9 PARTICIPATION RATE (PERCENT) TOTAL 42.8 40.0 39.2 40.0 38.5 MALE 57.0 52.4 51.8 51.8 50.5 FEMALE 27.3 26.9 25.9 23.8 26.6 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.0 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/ 22.2/f HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.97i 49.4/i LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.7F 70/. LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.2A 16,2/.. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 133.8 194.7 RURAL .. .. 114.0 111.1 155.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 178.2 RURAL .. .. .. .. 164.9 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 4C.3 43.8 24.4 RURAL .. .. 5C.7 51.7 41.1 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1978 and 1980. Ic 1977; Id 1962; /e 1976; /f 1975; /. 1964-65. May, 1982 ANNEX I Page 3 of 5 DOEFINITIONS OF SDCIA INDICATOIS Nee lhog h data are drawn Eros eoucesg .ttely judged the -co cu .iatnedr-Iiebl, It abc14 alec tote.d tha thrn say no-b ntr ntoaly -osprati int tute of the lar of taderdzd deW I'tnted conept use d by dilffere..coutr. e ineletn he data. Th daft ere. tor- theta,., seful toOwerriteoriere.o I. gtde. idiat trns.ed rhtrso_r cado salon elf ..oeoletttteeco trOt.. of he ujc o r (xetfr 'ch In-oom, 01 byonr''aoc hr "Middle T-os North Aftll ccced Nnddlt tact" J. nhtoce b_. of .rt.oger soc te-oltucelaffiniteol In Ine refracce roup dit h oee1 r pplto eIhtd tclrh=I,romo o ai lao n sh-a onl.eI, eajrit oftheccuurte t a rou ha dae tc tat ndiato. trcethetoooeg ofcoutrIs congthelcdtoaoocdrptdc_c.he tNlsblltpof at for croc. csue.ece u luiro gedeson. bed fallue; 19?S dare. Ochotcitcntr.4 bopyal ar tallhetbpratsly rfe 1970, srd linil date. d indlca-d-lI, It b :cealater cuse Pci-lf,po)chc fe n-atr rc Islcadpoieable aa fadttntlOle o ola codPE IlNFIctA eUsoslc,ntrl a o pn- nucearet gptinrsl ter-go rua epraa oa o ue ncptl adedolan ceet PlfiPidtIlfl diAl 9114i1. -rr-rA_O'in lli Iccen Porulatlun. ibId-tear Ithousende) - Al uP dulp to 0167. lPPO. ond :_78P.1_incoitt;c aeoftcccooctee; 167 61.cd18 dote the holath60ld170cr tdo1979ccgl p. np.. t. - 1- . - Prjcio,-eetn o srdlo ea ccru o he Itclono- cocupe parte. - l- fb.. d-.l log lne eyac ecryt iicn. ccreeiccltincuntt 'tper apot iccst gteaeo Elcini Ito(roneno f celllno) -tota, utan, od rral lecel and esel litrcope reoc togll lone a I PP- 9pe. iaan-CtAnitnldhlyclec lcrlicto10d qgnn ooeucr enibo ri ec oeocor eel wano dcie.nc Sit_l cya,gdrya ell t cpcic froolloty enrondtnt to onnoce cccl ard poet fealty plecooco cerfcrsaocs.d r.r.1 feIonr fecrntcodoeo decoffnIc bihttoec oraly lbIIi end ftotlotptreod for d pn Iclorcca.dOte ootetttc Sltlnrp nllotlon - "00s ic _r pouaIntec-so rohlo Playtho .ct..acedPeucGuote, aeadfnl nociloheO I cuC o tne eah oc, ndgle heetaacucuc P-'h";lwc ofal b.ee tdth pItar lcc on enentge of1l, Jepcr sent iwoe... educglonqorrg _eafu yotc Plrcdnsnoaroi "ita'l anY .116, 170ao 119det._nloc taoode, lder-l rch"pone hc yrc oee Osrn.A.0-onocu~ltucl- odOsp-do cocortIdoortoo et-1ednucae do -ljd.nocroo- ocp e coI; 160.191 ed- 179 ahf PpIl th,h,,ct I - riory co u.oo.rpI... nod.... oc..e.I paco pueCt_ e 191.-.in 19 --in und 17-1-..... pnro>elcnrcotoooluncroi-dcIlyoo-douguot, canulotect- IntOynO leo ont on 151-I, 191-70 ond197191.PoeeurCr pe oeco uulocl-Ptoca unotno Occc lro an (oo betood -totu lIe oohope oouondonsi-pan coe e"ndglan ha eglt prcnt cnl-d ehulotn,heurneo i ocotlutlon Ighf. 190, god 199 dunn. hncdcceoeccoounel rulO..yen ohoeooudoP rccoullcoltud1fcoc- lrel'hd.ulo othorIduocfa6oenecae*liral ico-deocenpooonlenlrteehtagsnaon9fal P-sc o ohl-balo ge15-1nerl h c fnhnurn donet OWpua lntooct(onfcecdnotooo.)-ndoc h dnag 0 eli-snee co60r 197 teso 1979 grup ulrloofdal goca lco---eeppn'.dl 00 eatellt Otnl ifIn mtd prcaily1 eedn eee nw.I ctnlee PALO#017 nyllOIt c ha'alY I I ftpec e-Plg-f ccctdmea-eh PaIt1of t-ccoe 1950u 60r 1960occ rdthe 1970-60. 190dn 91dt,ft:tbofca(lcenc)-ineoul elepPcl.bc.dc pe 19p.Anlltl s9pyl lee 198yola- hoenceootIn noo onto cnhs 9 90ad16 ac qu 9etot 0oe 1970 fo d p It'SC. n lcetO dendc. thit-u1t1cca(eoun -Ltr eoco -n 0 foefoy --ocg-o r .di ao atIerioic fpeuuh-.coatlPlg 7cacn frcah f o eerlor, ac cdo Y npecotg f od cn too hocltl leor tfl-t,-00 c ...otoc. I. nh6. 1670 cod 1990 eeoc.l Pen rchol-, turleof-necln(oer w p)-pncocna-e e alo fnllcloto rntn -Onto. 0 T00 unOi t..la-er. clnb In n 000 coply nOfond on Icy lot cpply If folatOn. dfIned o p oor, in-r.. ucn-lyc1 ccnenrun 01cicI tale,nod ro...leTo d.ryn Pnl oo- ooo;11-S,17 cd17dco.t tOo2! octalUleho- lornc.- .-- cue ernue I-I nocco, to chtldnen On ohon u~t gnecp, f f POOO -ccnplotlcn-_ if itcen, icrell -`cn ,' pue-o P- p-nto cd ncrtor olpfct toln deco, IcledIo lIf tehlcd- 960,d1-7 godd1980 Icok.n hnthldnd,l cilIph P0010d7i-dglid GROUP othtot; 9f0,197 end .-1960d000 ccd bhcldtuorpccdthenutctou- lnathrclouolrnletto-cul too fuceoonwoone Eceocdeltcotnntnooaolllncoyoltnocdr.o of_Apnolucdlc g...... LAB6ORlO n 161dcc ddCEroethcctlalInr nn ce ecolhcoolu Aeccsoncfruocroplnoeeonuootn)If Io.opu,onI pl Ie u.oiolrdecfdcplccoolln-ct-llomoono harupoelo loIu.cotc.ulnunllnocccocctloletn19uee ufordhle notrdcchA-thclrccnnoccchuohopc,ontc......ucroelec .onoioltoPoooptcerlca_toi-npo ccacpecpI forpc,oaow nO hel. coooo ItoPoploon honofuotcnhloyncnl ooc ftf nccn tu oclOgcne reote-ug longicncdpeolcucdo--bccteo00.copePre960t,eoclcce1970conn icohog 980 concl- Igoohouoe notlsnde 016 ontonucocOcecoe f 1s boe. ccoorc oca ucsec Polu -e F.c- telf eciIlnerte ioed og lteecoueclendtbi(FADcr-d hynclaon.ceal.... cdur lonben ....cl Idf..... co. uoouolo- - chnnnenntpnaI P_ eI cnncdcoool he ltru Incuod 19 Ot0adttoet plae peltlecnoo u eloalochel i ule-olo ioey Iunocc tolaalcen a.lc-d co franoat !ppholeooon py Ofunt 01 p enon - pocluIdc do d20oldoc 9 ind 1 a ouhhf-n.p-enheon ha" 1900pli,.i nupatno; eucll lerttro.,IIf 1d I ANNEX I Page 4 of S ICONlUIC DEVELOPMKNT DATA GNP PIR CAPITA IN 19 80 US$ 24 GROSS NATIONAL PRODUCT IN 1980/81 - ANNUAL RATE OF GROWTH (%. constant prices) US$ Bln. , 19 5556-1959160 126016l-1964J6 1965/66-1969770 1970/71-1974/7 1975/76-197 980 GNP at Market Prices 159.37 100.0 3.7 3.6 3.6 2.9 4.1 Gross Domestic Investment 38.46 24.1 Gross National Saving 35.30 22.1 Current Account Balance -3.16 -2.0 OUTPUT. LABOR FORCE AND PRODUCTIVITY IN 1978 Value Added (at factor cost) Labor Force / V.A. Per Worker US$ Bln. % Mil. 7 US$ i of National Average Agriculture 39.8 39.6 180.6 70.7 220 56 Industry 25.2 15.1 32.2 12.6 783 199 Services 35.5 35.3 42.6 16.7 833 211 Total/Average 100.5 1*7 ZZw lO N GOVERNMENT FINANCE General Government e/ Central Government Rs. BIn. 7 % of GDP Rs. Bln. 7 of GDP 1980/81 1980/81 1976/77 1980181 1980/81 1980/81 1976177-1980/81 Current Receipts 238.19 19.0 19.1 125.41 10.0 10.6 Current Expenditures 238.93 19.0 18.0 133.29 10.6 10.6 Current Surplus/leficit -0.74 -0.1 1.1 - 7.88 - 0.6 N.S. Capital Expenditures f/ 107.35 8.5 7.6 79.99 6.4 5.4 External Assistance (net) d/ 12.86 1.0 1.0 MONEY, CREDIT AND PRICES 1970/71 177 1975io 6 1o t n 976/77d 197277 1978179 1979/80 1980/81 Fab2fary 1981 February 1982 (Re Billion outatanding at end of period) Money and Quasi Money 109.8 194.6 223.2 273.2 329.1 398.6 467.9 553.1 536.13 615.53 Bank Credit to Government (net) 54.6 95.3 97.9 118.5 137.3 162.4 201.0 258.1 238.22 292.18 Bank Credit to Commercial Sector 64.6 126.5 153.7 185.1 212.2 253.5 306.3 363.2 349.03 422.15 (Percentage or Index Numbers) April-Feb 1980181 April-Feb 1981/82 Money and Quasi Money as 7 of GDP 27.3 28.0 30.1 33.9 40.8 40.9 44.1 44.0 Wholesale Price Index (1970/71 - 100) 100.0 174.9 173.0 176.6 185.8 185.8 217.6 257.0 255.9 280.5 Annual percentage changes in: Wholesale Price Index 7.7 25.2 -1.1 2.1 5.2 - 17.1 18.1 18.4 9.6 Bank Credit to Government (net) 15.0 9.2 2.7 21.0 15.9 18.3 23.8 28.4 28.6 S' 1227 h/ Bank Credit to Comercial Sector 29.4 18.2 21.5 20.4 14.6 19.5 20.8 18.6 16.6 S/ 20.9 hI a/ The par capita GNP eltimate is at mrket prices, calculated by the cowversios technique used in the World Bank Atlas, 1-81. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. b/ Quick Estimates, Central Statistical Organization. c/ Computed from trend line of GNP at factor cost series, including one observation before first year and one observation after last year of listed period. d/ World Bank *stimates; not necessarily consistent vith official figures. a/ Transfers between Centre and States have been netted out. f/ All loans and advances to third parties hevecbeen netted out. j/ Percentage change from end-February, 1980 to end-February 1981. hc Percentage change from end-February, 1981 to ed-February 1982. iI Total labor Force and per-enta.e breakdovo fron Sixth Five Year Pln., Tble .6 and Annexure Table 13.8. ANNEX I Page 5 of 5 BALANCE OF PAYmENTS 1978/79 1979/80 1980/81 A 1981/82 MERCHANDISE EXFORTS (AVERAGE 1977/78 - 1980/81) (US $ Xln.) us$ HM. Exports of Goods 6,978 7,998 8,504 8,700 Engineering Goods 908 12 Imports of Goods -8,519 -11,302 -15,838 -16,000 Tea 506 7 Trade Balance -1,541 -3,304 - 7,334 - 7,300 Gems 403 5 NFS (net) 717 1,100 722 915 Clothing 501 7 Leather and Leather Resource Balance - 824 -2,204 - 6,612 - 6,385 Products 457 6 Jute ManLufactures 303 4 Interest Income (rnet) k/ 14 196 370 212 Iron Ore 321 4 Net Transfers 1/ 1,185 1,577 3,079 1,840 Cotton Textiles 316 4 Sugar 102 1 Balance on Current Account 375 - 431 -3.163 -4,333 Others 3,541 48 Official Aid Total 7.448 100 Disbursements 1,695 1,738 2,337 2,724 ,/ EXTERNAL DEBT, MARCH 31, 1981 Amortization - 702 - 608 - 707 - 659 US$ billion Transactions with IMF - 158 - 1,035 690 Outstanding and Disbursed 17.2 All Other Items 265 - 475 147 - 797 Undisburaed 7.5 Outstanding, including 24.7 Increase in Reserves (-) -1,475 - 224 351 2,375 Undiabursed Gross Reserves (end year)Ep/ 7,357 7,579 7,228 4,853 Net Reserves (end year) f/ 7,357 7,579 6,901 3,876 DEBT SERVICE RATIO FOR 1980/81 i / n/ 11.2 per cent Fuel and Related Materials IBRD/IDA LENDING, DECEMBER 31. 1981 Imports (Petroleum) 2,043 4,045 6,657 6,075 US8 million IBRD IDA Exports 24 26 33 na Outstanding and Disbursed 984 5646 Undisbursed 880 4634 outstanding, including Undisbursed 1864 10280 RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 - Rs 7.5 Re 1.00 - US$0.13333 Mid-December 1971 to end-June 1972 US$1.00 - Rs 7.27927 Re 1.00 - US$0.137376 After end-June 1972 Floating Rate Spot Rate eod-December 1980 US$1.00 - Rs 7.930 Re 1.00 - US$0.126 Spot Rate end-December 1981 US$1.00 - Rs 9.099 Re 1.00 - US$0.110 ]/ Estimated. %/ Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to IMF, and major receipt is interest earned on foreign assets. 1/ Figures given include workers' remittances but exclude official grant assistance, which is - included within official aid disbursements. m/ Excludes net use of IMF credit. 74 Amortization and interest payments on foreign loans as a percentage of exports of goods and services. o / Includes $ 234 million of cosmercial borrowings. p/ Including gold. ANNEX II Page 1 of 23 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND ]'DA CREDITS (As of September 30, 1982) US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 46 Loans/ 1,568.0 75 Credits fully disbursed - 4,352.4 - 342-IN 1973 Education - 12.0 0.79 482-IN 1974 Karnataka Dairy - 30.0 13.36 502-IN 1975 Rajasthan Canal CAD - 83.0 21.60 521-IN 1975 Rajasthan Dairy - 27.7 9.78 522-IN 1975 Madhya Pradesh Dairy - 16.4 1.24 585-IN 1976 Uttar Pradesh Water Supply - 40.0 10.98 598-IN 1976 Fertilizer Industry - 105.0 5.95 604-IN 1976 Power Transmission IV - 150.0 27.19 609-IN 1976 Madhya Pradesh Forestry T.A. - 4.0 1.19 610-IN 1976 Integrated Cotton Development - 18.0 8.02 1251-IN 1976 Andhra Pradesh Irrigation 145.0 - 57.10 1260-IN 1976 IDBI II 40.0 - 4.34 1273-IN 1976 National Seeds I 25.0 - 19.47 1313-IN 1977 Telecommunications VI 80.0 - 7.07 1335-IN 1977 Bombay Urban Transport 25.0 - 6.31 680-IN 1977 Kerala Agric. Development - 30.0 17.07 682-IN 1977 Orissa Agric. Development - 20.0 4.48 685-IN 1977 Singrauli Thermal Power - 150.0 14.13 690-IN 1977 WB Agric. Extension & Research - 12.0 11.80 1394-IN 1977 Gujarat Fisheries 14.0 - 5.86 712-IN 1977 M.P. Agric. Development - 10.0 2.71 720-IN 1977 Periyar Vaigai Irrigation 23.0 11.81 ANNEX II Page 2 of 23 US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 728-IN 1977 Assam Agricultural Development - 8.0 4.86 736-IN 1978 Maharashtra Irrigation - 70.0 14.19 737-IN 1978 Rajasthan Agric. Extension - 13.0 2.47 740-IN 1978 Orissa Irrigation - 58.0 7.30 1475-IN 1978 Industry DFC XII 78.5 - 4.00 747-IN 1978 Second Foodgrain Storage - 107.0 71.45 756-IN 1978 Calcutta Urban Development II - 87.0 10.06 761-IN 1978 Bihar Agric. Extension & Research - 8.0 6.67 1511-IN 1978 IDBI Joint/Public Sector 25.0 - 7.17 1549-IN 1978 Third Trombay Thermal Power 105.0 - 22.25 788-IN 1978 Karnataka Irrigation - 117.6 64.06 793-IN 1978 Korba Thermal Power - 200.0 71.61 806-IN 1978 Jammu-Kashmir Horticulture - 14.0 11.74 808-IN 1978 Gujarat Irrigation - 85.0 48.21 815-IN 1978 Andhra Pradesh Fisheries - 17.5 11.20 816-IN 1978 National Seeds II - 16.0 12.69 1592-IN 1978 Telecommunications VII 120.0 - 37.00 824-IN 1978 National Dairy - 150.0 103.36 842-IN 1979 Bombay Water Supply II - 196.0 174.69 843-IN 1979 Haryana Irrigation - 111.0 13.07 844-IN 1979 Railway Modernization & Maintenance - 190.0 97.94 848-IN 1979 Punjab Water Supply & Sewerage - 38.0 13.19 855-IN 1979 National Agricultural Research - 27.0 22.28 862-IN 1979 Composite Agricultural Extension - 25.0 12.16 871-IN 1979 NCDC - 30.0 10.16 1648-IN 1979 Ramagundam Thermal Power 50.0 - 50.00 874-IN 1979 Ramagundam Thermal Power - 200.0 101.84 889-IN 1979 Punjab Irrigation - 129.0 80.38 899-IN 1979 Maharashtra Water Supply - 48.0 24.15 911-IN 1979 Rural Electrification Corp. II - 175.0 39.07 925-IN 1979 Uttar Pradesh Social Forestry - 23.0 12.79 954-IN 1980 Maharashtra Irrigation II - 210.0 123.37 961-IN 1980 Gujarat Community Forestry - 37.0 22.55 963-IN 1980 Inland Fisheries - 20.0 18.90 981-IN 1980 Population II - 46.0 42.20 1003-IN 1980 Tamil Nadu Nutrition - 32.0 27.07 1004-IN 1980 U.P. Tubewells - 18.0 10.59 1011-IN 1980 Gujarat Irrigation II - 175.0 150.89 ANNEX II Page 3 of 23 US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 1012-IN 1980 Cashewnut - 22.0 19.90 1027-IN 1980 Singrauli Thermal II - 300.0 239.39 1028-IN 1980 Kerala Agricultural Extension - 10.0 9.58 1033-IN 1980 Calcutta Urban Transport - 56.0 45.91 1034-IN 1980 Karnataka Sericulture - 54.0 50.L6 1046-IN 1980 Rajasthan Water Supply and Sewerage - 80.0 69.47 1843-IN 1980 Industry DFC XIII 100.0 - 20.35 1887-IN 1980 Farakka Thermal Power 25.0 - 25.00 1053-IN 1980 Farakka Thermal Power - 225.0 194.24 1897-IN 1981 Kandi Watershed and Area Development 30.0 - 26.67 1925-IN 1981 Bombay High Offshore Development 400.0 - 82.69 1072-IN 1981 Bihar Rural Roads - 35.0 24.25 1078-IN 1981 Mahanadi Barrages - 83.0 63.01 1082-IN 1981 Madras Urban Development II - 42.0 29.53 1108-IN 1981 M.P. Medium Irrigation - 140.0 117.07 1112-IN 1981 Telecommunications VIII - 314.0 193.52 1116-IN 1981 Karnataka Tank Irrigation - 54.0 46.49 1125-IN 1981 Hazira Fertilizer Project - 400.0 314.42 1135-IN 1981 Maharashtra Agricultural Ext. - 23.0 19.60 1137-IN 1981 Tamil Nadu Agricultural Ext. - 28.0 23.28 1138-IN 1981 M.P. Agricultural Ext. II - 37.0 31.98 1146-IN 1981 National Cooperative Development Corp. II - 125.0 101.29 1172-IN 1982 Korba Thermal Power Project - [I - 400.0 400.00 1177-IN 1982 Madhya Pradesh Major Irrigation - 220.0 206.02 2050-IN 1982 Tamil Nadu Newsprint 100.0 - 81.29 1178-IN 1982 West Bengal Social Forestry - 29.0 26.94 1185-IN 1982 Kanpur Urban Development - 25.0 25.00 2051-IN 1982 ICICI XIV 150.0 - 141.49 2076-IN 1982 Ramagundam Thermal Power II 300.0 - 300.00 2095-IN 1982 ARDC IV 190.0 - 190.00 1209-IN 1982 ARDC IV - 160.0 66.36 1219-IN 1982 Andhra Pradesh Agricultural Extension - 6.0 6.00 2123-IN 1982 Refineries Rationalization 200.0 200.00 2165-IN 1982 Rural Electrification III* 304.5 304.50 2186-IN 1982 Kallada Irrigation 20.3 20.00 ANNEX II Page 4 of 23 US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 1269-IN 1982 Kallada Irrigation 60.0 60.00 1280-IN 1983 Gujarat Water Supply+* 72.0 72.00 1286-IN 1983 Jammu/Kashmir and Haryana Social Forestry* 33.0 33.00 1288-IN 1983 Chambal Madhya Pradesh II 31.0 31.00 Irrigation* 1289-IN 1983 Subernarekha Irrigation+* 127.0 127.00 rotal 4,095.3 10,955.6 of which has been repaid 1,173.0 106.7 Total now outstanding 2,922.3 10,848.9 Amount Sold 133.8 of which has been repaid 133.8 - - Total now held by Bank and IDA 3/ 2,922.3 10,848.9 Total undisbursed (excluding *) 1,308.1 3,982.7 1/ IDA Credit amounts for SDR-denominated Credits are expressed in terms of their US dollar equivalents, as established at the time of Credit negotiations and as subsequently presented to the Board. 2/ Undisbursed amounts for SDR-denominated IDA Credits are derived from cumulative disbursements converted to their US dollar equivalents on the basis of the SDR/US dollar exchange rate (1 SDR = US$1.07234) in effect on September 30, 1982. 3/ Prior to exchange adjustment. * Not yet effective. + Not yet signed. ANNEX II Page 5 of 23 B. STATEMENT OF ]FC INVESTMENTS (As of September 30, 1982) Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.6 0.4 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 1964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.3 13.1 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.1 0.1 1.2 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 1978 Housing Development Finance Corporation 4.0 1.2 5.2 1980 Deepak Fertilizer and Petrochemicals Corporation Ltd. 7.5 1.2 8.7 1981 Coromandel Fertilizers Limited 15.9 15.9 1981 Tata Iron and Steel Company Ltd. 38.0 - 38.0 1981 Mahindra, Mahindra Limited 15.0 - 15.0 1981 Nagarjuna Coated Tubes Ltd. 2.9 0.3 3.2 1981 Nagarjuna Signode Limited 2.3 - 2.3 1981 Nagarjuna Steels Limited 1.5 0.2 1.7 1982 Ashok Leyland Limited 28.0 - 28.0 1982 The Bombay Dyeing and Manufacturing Co. Ltd. 18.8 - 18.8 1982 Bharat Forge Company Ltd. 15.9 - 15.9 1982 The Indian Rayon Corp. Ltd.. 8.1 - 8.1 TOTAL GROSS COMMITMENTS 207.5 12.1 219.6 Less: Sold 53.0 2.6 55.6 Repaid 26.4 - 26.4 Cancelled 6.2 1.3 7.5 Now Held 121.9 8.2 130.1 Undisbursed 103.0 0.5 103.5 ANNEX II Page 6 of 23 C. PROJECTS IN EXECUTION 1/ (As of September 30, 1982) Generally, the implementation of projects has been proceeding reasonably well. Brief notes on the execution of individual projects are below. The level of disbursements was US$1,245 million in FY82, compared to US$962 million in the previous year. Disbursements in the current fiscal year through September 30, 1982 total US$287 million, representing an increase of about 76% over the same period last year. The undisbursed pipeline as of September 30, 1982, is US$5,291 million. Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation of India Project; US$80 million loan of July 22, 1977; Effective Date: October 4, 1977; Closing Date: March 31, 1983 Ln. No. 1843 Thirteenth Industrial Credit and Investment Corporation of India Project; US$100 million loan of May 16, 1980; Effective Date: June 27, 1980; Closing Date: December 31, 1985 Ln. No. 2051 Fourteenth Industrial Credit and Investment Corporation of India Project; US$150 million loan of October 8, 1981; Effective Date: December 3, 1981; Closing Date: March 31, 1988 These loans are supporting industrial development in India through a well-established development finance company and are designed to finance the foreign exchange cost of industrial projects. ICICI continues to be a well-managed and efficient development bank financing nedium- and large-scale industries, often in the high technology fields and are also mostly export-oriented. Disbursements are on schedule for the twelfth loan and ahead of schedule for the thirteenth and fourteenth loans. Ln. No. 1260 Second Industrial Development Bank of India Project; US$40 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: March 31, 1983 Ln. No. 1511 IDBI Joint/Public Sector Project; US$25 million loan of March 1, 1978; Effective Date: May 31, 1978; Closing Date: March 31, 1983 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 7 of 23 Loan 1260 is designed to assist the Industrial Development Bank of India in promoting small- and medium-scale industries and in strengthening the State Financial Corporations involved. Loan funds were fully committed in December 1981, but close supervision has been necessary to ensure timely implementation of sub-projects and full disbursement of the loan by the closing date. Loan 1511 is designed to encourage the pooling of private and public capital in medium-scale joint venl:ures. The project also assists IDBI in carrying out industrial sector investment studies and in strengthening the financial institutions dealing with the state joint/public sector. Progress is satisfactory. Ln. No. 2050 Tamil Nadu Newsprint Projezt; US$100 million loan of September 23, 1981; Effective Date: March 22, 1982; Closing Date: August 31, 1985 Project progress is good. Land acquisition has been completed and construction began in July 1982. Basic engineering work was completed on schedule at the end of August. Procurement is proceeding as planned. Cr. No. 598 Fertilizer Industry Project; US$105 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: December 31, 1982 Cr. No. 1125 Hazira Fertilizer Project; US$400 million credit of October 28, 1981; Effective Date: January 21, 1982; Closing Date: June 30, 1986 As of June 1982, 31 of the 37 fertilizer sub-projects being funded by Credit 598 have been completed and a:re in operation. IDA has agreed to a six-month extension of the closing date to December 31, 1982, by which date the remaining six sub-projects will be zompleted and the credit fully disbursed. Credit 1125 is proceeding satisfactorily. Site preparation is well advanced. All major design and critical procurement work is essentially complete, and detailed engineering is now being carried out. Disbursements are ahead of schedule. Ln. No. 2123 Refineries Rationalizaticn Project; US$200 million loan of May 5, 1982; Effective Date: June 29, 1982; Closing Date: September 30, 1986 Project implementation is satisfactory. The conversion component is making very good progress. Preparal:ion work and investment approvals for the energy efficiency and pollution control components are expected to be completed on schedule. Attention is now being turned to the construction programs under the project. ANNEX II Page 8 of 23 Ln. No. 1925 Second Bombay High Offshore Development Project; US$400 million loan of December 11, 1980; Effective Date: February 24, 1981; Closing Date: March 31, 1984 The project is progressing well. All platforms and subsea pipelines have been installed essentially on schedule. ONGC reached its targetted production level of 240,000 Bbl/day in May 1982, and is presently producing 250,000 Bbl/day, 44% of which comes from project wells. Cr. No. 604 Power Transmission IV Project; US$150 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: December 31, 1982 Cr. No. 685 Singrauli Thermal Power Project; US$150 nillion credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 793 Korba Thermal Power Project; US$200 million credit of May 12, 1978; Effective Date: August 14, 1978; Closing Date: March 31, 1985 Ln. No. 1549 Third Trombay Thermal Power Project; US$105 million loan of June 19, 1978; Effective Date: February 8, 1979; Closing Date: March 31, 1984 Ln. No. 1648 Ramagundam Thermal Power Project; US$50 nillion loan and and US$200 million credit of February 2, 1979; Effective Date: Cr. No. 874 May 22, 1979; Closing Date: December 31, 1985 Cr. No. 1027 Second Singrauli Thermal Power Project; US$300 million credit of June 5, 1980; Effective Date: July 30, 1980; Closing Date: March 31, 1988 Ln. No. 1887 Farakka Thermal Power Project; US$25 million loan and and US$225 million credit of July 11, 1980; Effective Date: Cr. No. 1053 December 10, 1980; Closing Date: March 31, 1987 Ln. No. 2076 Second Ramagundam Thermal Power Project; US$300 million loan of January 6, 1982; Effective Date: March 16, 1982; Closing Date: June 30, 1988 Cr. No. 1172 Second Korba Thermal Power Project; US$400 million credit of February 4, 1982; Effective Date: March 16, 1982; Closing Date: December 31, 1989 Credits 685 and 1027 assist in financing the 2,000 MW Singrauli development, which is the first of four power stations in the Government's program for the development of large central thermal power stations feeding power into an interconnected grid. Credit 793, together with Credit 1172, which became effective March 16, 1982, support the construction of the 2100 MW development, consisting of three 200 MW and three 500 MW generating units, at the second such station, at Korba, together with related facilities and associated transmission. Loan 1648/Credit 874, together with Loan 2076, ANNEX II Page 9 of 23 which also became effective March 16, 1982, support sinilar investments at Ramagundam. Loan 1887/Credit 1053 assists: in financing the first three 200 MW generating units at the Farakka station. The National Thermal Power Corporation (NTPC) has been carrying out construction and operation of these power stations. Loan 1549 supports the construction of a 500 MW extension of the Tata Electric Companies- station at T:.ombay, designed to help meet the forecast load growth in the Bombay area. All these large-scale thermal power projects are progressing satisfactorily. Construction works for the Singrauli, Korba, and Farakka stations are on or ahead of schedule, although some slippage has occurred in the implementation schedule for the Ramagundam project. The first unit at the Singrauli station was commissioned on schedule in February 1982, and the second unit in October 1982. The first unit at the Korba station is scheduled to be commissioned in January 1983. In the Third Trombay project, design modifications for plant equipment, price increases for materials, and increases in customs duties have resulted in an increase in the total cost of the project. The Government of India is raising additional funds from internal sources to meet the additional cost. Cr. No. 911 Second Rural Electrification Corporation Project; US$175 million credit of June 21, 1979; Effective Date: October 17, 1979; Closing Date: March 31, 1984 Ln. No. 2165 Third Rural Electrification Corporation Project; US$304.5 million loan of June 22, 1982; Effective Date: October 21, 1982; Closing Date: June 30, 1936 Under Credit 911,. project implementation is progressing approximately on schedule without major problems. Procurement of materials and equipment is well advanced. Disbursements of the credit proceeds are ahead of appraisal projections. Under Loan 2165, initial project progress is satisfactory. Procurement is approximately on schedule, with the State Electricity Boards (SEBs) now proceeding with bid invitations. REC is reorganizing its capability to monitor financial performance of the individual SEBs, which is likely to have a beneficial effect on this project as well as on Credit 911. Ln. No. 1313 Telecommunications VI Project; US$80 million loan of July 22, 1976; Effective Date: September 14, 1976 Closing Date: March 31, 1983 Ln. No. 1592 Telecommunications VII Project; US$120 million loan of June 19, 1978; Effective Date: October 30, 1978; Closing Date: December 31, 1983 Cr. No. 1112 Telecommunications VIII Project; US$314 million credit of March 26, 1981; Effective Date: June 24, 1981; Closing Date: December 31, 1984 Loans 1313 and 1592 are progressing satisfactorily. They are overcoming initial delays caused by procurement problems and a five-month labor strike against one of the indigenous suppliers. All funds from Loan 1313 have been committed and procurement action under Loan 1592 is well advanced. Disbursements are expected to accelerate as work progresses. The ANNEX II Page 10 of 23 Posts and Telegraphs Department remains a financially sound and efficiently-managed organization. Credit 1112 provides for the continued expansion of the Indian telecommunications network, particularly in rural areas, the establishment of three new telecommunication equipment factories and the modernization and upgrading of three existing ones. Bid evaluation is progressing satisfactorily and it is expected that the project and its individual sub-projects will proceed according to schedule. Cr. No. 844 Railway Modernization and Maintenance Project; US$190 million credit of November 13, 1978; Effective Date: January 10, 1979; Closing Date: December 31, 1984 Credit 844 was designed to help the Indian Railways reduce manufacturing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. Physical execution of the project is proceeding satisfactorily. The wheel and axle plant is expected to be operational by December 1982, and Indian Railways' financial and traffic performance continues to improve. Cr. No. 1072 Bihar Rural Roads Project; US$35 million credit of December 5, 1980; Effective Date: January 15, 1981; Closing Date: June 30, 1986 The project aims to construct or rehabilitate 700 km of rural roads and to improve maintenance of the rural road network in Bihar. It is proceeding on schedule. The majority of the equipment required for the project has been delivered. Contracts have been awarded for civil works totalling to about US$13 million and work began last March. Ln. No. 1335 Bombay Urban Transport Project; US$25 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1983 Cr. No. 1033 Calcutta Urban Transport Project; US$56 million credit of October 27, 1980; Effective Date: December 18, 1980; Closing Date: December 31, 1984 Implementation of the Bombay project is satisfactory, with over 70% of the loan disbursed. Construction of new workshop facilities began in January 1982, but to allow for completion the loan closing date may have to be extended one year. A bus fare revision on April 1, 1982 increased revenues by 20% and will enable the project authority to achieve its targeted operating ratio. There has been good progress in meeting the physical investments under Credit 1033. Delivery of more than 600 buses and trams required for the project should be completed by March 1983. However, management performance of the project authorities must be improved if they are to achieve the operational and financial performance targets agreed to. IDA is engaged in detailed discussions with the Government of West Bengal of measures required to alleviate existing and possible ftuture problems. ANNEX II Page 11 of 23 Cr. No. 687 Madras Urban Development Project; US$24 nillion credit of April 11, 1977; Effective Daze: June 30, 1977; Closing Date: December 31, 1982 Cr. No. 756 Second Calcutta Urban Development Project; US$87 million credit of January 6, 1978; Effective Date: April 7, 1978; Closing Date: March 31, 1983 Cr. No. 1082 Second Madras Urban Development Project; US$42 credit of January 14, 1981; Effective Date: March 2, 1981; Closing Date: March 31, 1986 Cr. No. 1185 Kanpur Urban Development Project; US$25 rillion credit of February 4, 1982; Effective Date: April 22, 1982; Closing Date: June 30, 1986 Madras Urban Development I, Credit: 687, is fully disbursed and scheduled to close on December 31, 1982. The project was implemented satisfactorily and met its basic objectives, introducing low-cost design standards to provide slum improvements to over 25,000 households, sites and services development on 14,000 plots, and improved water supplies; introducing improved urban management systems; and augmenting the city-s bus fleet and the operational management capabilities of the bus company. The second project, Credit 1082, is proceeding satisfactorily, with the exception of the sites and services component, where legal challenges are causing delays in land acquisition. The Government of Tamil Nadu (GOTN) is actively pursuing the resolution of these court cases so that land acquisition can be completed by October 1982 and the sites and services works finished by the project closing date. Under both credits, the financial performance of the Pallavan Transport Corporation (PTC), the project implementing agency, is unsatisfactory. It is not generating funds sufficient to meet its financial targets. An action plan to cut operating costs, reduce new investment, and raise revenues has recently been formulated and, subject to the agreement of GOTN, will enable PTC to achieve the required targets by 1983/84 and maintain them thereafter. Physical performance in the Calcutta project is generally good. All sub-projects presently under implementation are scheduled to be completed by March 31, 1983. Following a review of the overall program for Calcutta's further development, the Government of West Bengal shifted its investment priorities somewhat and consequently requested a revision of some components of this project. IDA agreed to the suggested changes, and the closing date has been extended by nine months to allow for completion of the redefined project. Credit 1185, which became effective in April 1982, is aimed at providing shelter and urban services in Kanpur, the largest city in Uttar Pradesh. Initial progress has been mixed. The project authority is hampered by lack of adequate staff with proper atnagement expertise, and land acquisition disputes are causing delays in civil works. However, there has been good progress in the slum-upgrading component, where improvements benefitting about 3,700 households are nearing completion, and the institution-strengthening aspects of the project are proceeding well. ANNEX II Page 12 of 23 Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: December 31, 1982 Physical works under the project are approximately 90% complete. However, financial performance of the implementing agencies has been generally poor, and it is likely that many of them may not be able to meet the financial performance targets agreed with IDA. Cr. No. 842 Second Bombay Water Supply and Sewerage Project; US$196 million credit of November 13, 1978; Effective Date: June 12, 1979; Closing Date: March 31, 1985 Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38 million credit of October 27, 1978; Effective Date: January 25, 1979; Closing Date: March 31, 1983 Cr. No. 899 Maharashtra Water Supply and Sewerage Project; US$48 million credit of June 21, 1979; Effective Date: November 9, 1979; Closing Date: June 30, 1984 Cr. No. 1046 Rajasthan Water Supply and Sewerage Project; US$80 million credit of June 25, 1980; Effective Date: August 5, 1980; Closing Date: December 31, 1985 Under Credit 842, construction is in progress on the Panjrapur Treatment Plant, on several reservoirs, and on major water mains; and procurement contracts are well advanced for the remaining project works. Revised cost estimates have been prepared because of the delay in the start of construction. The financial performance of the project authority has been good. Implementation under Credit 848 is satisfactory, and the overall financial performance of the project authorities has improved considerably. Recent progress under Credit 899 is encouraging. Land acquisition and construction are proceeding according to the revised implementation schedule. Following a recent tariff revision, the project entities financial performance should improve in FY83. Under the Rajasthan project, Credit 1046, the rural water supply schemes are well advanced and engineering designs for the urban schemes are nearly finalized. The financial performance of the Rajasthan Water Supply and Sewerage Board has been good. A recent Cabinet decision has deferred the construction of the planned Hemawas/Kuri Pipeline to provide water to the city of Jodhpur, in order to consider the possibility of accessing water from the Rajasthan Canal instead. A consultant has been hired to analyze the engineering and cost alternatives which would be fully assessed when the alternative proposals are received in about one year s time. ANNEX II Page 13 of 23 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83 million credit of July 31, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1983 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145 million loan (Third Window) of June 10, 1976; Effective Date: September 7, 1976; Closing Date: December 31, 1982 Cr. No. 720 Periyar Vaigai Irrigation Project; US$23 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 736 Maharashtra Irrigation Project; US$70 million credit of October 11, 1977; Effective Date: January 13, 1978; Closing Date: March 31, 1983 Cr. No. 740 Orissa Irrigation Project; US$58 million of October 11, 1977; Effective Date: January 16, 1978; Closing Date: October 31, 1983 Cr. No. 788 Karnataka Irrigation Project; US$126 million credit of May 12, 1978; Effective Date: August 10, 1978; Closing Date: March 31, 1984 Cr. No. 808 Gujarat Medium Irrigation Project; US$85 million credit of July 17, 1978; Effective Date: October 31, 1978; Closing Date: June 30, 1984 Cr. No. 843 Haryana Irrigation Project; US$111 million credit of August 16, 1978; Effective Dale: December 14, 1978; Closing Date: August 31, 1983 Cr. No. 889 Punjab Irrigation Project; US$129 million credit of March 30, 1979; Effective Date: June 20, 1979; Closing Date: June 30, 1985 Cr. No. 954 Second Maharashtra Irrigation Project; US$210 million credit of April 14, 1980; Effective Date: June 6, 1980; Closing Date: December 31, 1985 Cr. No. 1011 Second Gujarat Irrigation Project; US$175 million credit of May 12, 1980; Effective Date: June 27, 1980; Closing Date: April 30, 1986 Cr. No. 1078 Mahanadi Barrages Project; US$83 million credit of December 5, 1980; Effective Date: February 11, 1981; Closing Date: March 31, 1987 Cr. No. 1108 Madhya Pradesh Medium Irrigat:ion Project; US$140 million credit of March 26, 1981; Effective Date: May 13, 1981; Closing Date: March 31, 1987 ANNEX II Page 14 of 23 Cr. No. 1177 Madhya Pradesh Major Irrigation Project; US$220 million credit of February 24, 1982; Effective Date: April 16, 1982; Closing Date: June 30, 1987 Ln. No. 2186 Kallada Irrigation Project; US$20.3 million loan and US$60 million and credit of July 6, 1982; Effective Date: September 21, 1982; Cr, No. 1269 Closing Date: March 31, 1987 Cr. No. 1288 Second Chambal Madhya Pradesh Irrigation Project; US$31 million credit of September 7, 1982; Effective Date: Expected November 1982; Closing Date: March 31, 1987 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructure, drainage, and land shaping are prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Delays in construction caused by initial shortages of cement caused the Maharashtra I project to fall considerably behind schedule. For the future, cement will be allotted to the project on a priority basis. In both Maharashtra projects, increased attention is needed to improve the quality of construction work in accordance with agreed and appropriate technical staindards, and to correcting the deficiencies which are now present in the systems. The Karnataka project is experiencing serious delays in command area development and completion of construction of the distribution system, due mainly to lack of proper support from the State Government and inadequate staffing of the project entity. The urgent attention of the State Government must be devoted to the early resolution of these implementation problems. The Gujarat Medium project is substantially behind schedule, but performance is expected to improve with the recent resolution of technical design problems. A detailed review of the project in July established a revised implementation schedule for the duration of the project. Lack of proper management and planning in the Gujarat II project have contributed to serious delays, which may contribute to considerable cost overruns. Due to unresolved political problems, the Heran component (16% of project costs) has been deleted. In March 1982, the Government of Gujarat sanctioned nearly 300 new staff positions in the Irrigation Department to be assigned exclusively to the implementation of World Bank projects. This is expected to help improve progress in both Gujarat projects, although the project authorities and State Government officials will need to devote considerable time and effort if the problems are to be overcome and momentum re-established. Progress in canal and watercourse lining is behind schedule in the Punjab project due to shortages of cement and inadequate provision of budgetary resources. The Government of Punjab has recently completed a ANNEX II Page 15 of 23 review of the project and a revised implemenatation plan for the duration of the project is to be presented to IDA in November 1982. The Madhya Pradesh Medium Irrigation Project got off to a slow start due to delays in selecting the sub-projects to be included. Eleven sub-projects have now been appraised, and tendering is underway. The pace of implementation, and the rate of disbursements, are therefore expected to accelerate. Initial progress under the Maclhya Pradesh Major Irrigation Project was delayed by serious start-up problems--among them, considerable staffing vacancies in the project entity, tuse of inefficient and cumbersome procurement procedures, delays in the appoLntment of consultants, and deficiencies in technical designs of the irrigation works. The Government of Madhya Pradesh is keely aware of these problems and is taking steps to correct them. Project progress is expected to improve soon. Progress of the remaining projects is generally satisfactory. Cr. No. 1116 Karnataka Tank Irrigation Project; US$54 million credit of March 26, 1981; Effective Date: May 5, 1981; Closing Date: March 31, 1986 The project is designed to finance the construction of about 160 tank irrigation schemes throughout the State o:r Karnataka. As of February 1982, six of these schemes had been sanctioned :Eor implementation, and another 28 were in various stages of preparation. Initial progress with project preparation has been slow due to staff constraints and unfamiliarity of local engineers with the design criteria agreed under the project. Cr. No. 1004 Uttar Pradesh Public Tubewells Project; US$18 million credit of May 12, 1980; Effective Date: June 27, 1980; Closing Date: March 31, 1983 Physical progress is proceeding satisfactorily, with approximately 40% of planned tubewells completed. The operation and maintenance units to be set up in the Irrigation Department a-re not yet established. The Government of Uttar Pradesh has been urged to fulfill this requirement expeditiously. Project completion may be delayed by six months due to initial procurement delays. Cr. No. 682 Orissa Agricultural Development Project; US$20 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 * Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12 million credit of June 1, 1977; Effective Date: August 30, 1977; Closing Date: September 30, 1983 Cr. No. 712 Madhya Pradesh Agricultural Extension and Research Project; US$10 million credit of June 1, 1977; Effective Date: September 2, 1977; Closing Date: September 30, 1983 ANNEX II Page 16 of 23 Cr. No. 728 Assam Agricultural Development Project; IUS$8 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 737 Rajasthan Agricultural Extension and Research Project; US$13 million credit of November 14, 1977; Effective Date: February 6, 1978; Closing Date: June 30, 1983 Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8 million credit of January 6, 1978; Effective Date: May 2, 1978; Closing Date: October 31, 1983 Cr. No. 862 Composite Agricultural Extension Project, US$25 million credit of February 16, 1979; Effective Date: December 14, 1979; Closing Date: December 31, 1984 Cr. No. 1028 Kerala Agricultural Extension Project; US$10 million credit of June 25, 1980; Effective Date: August 18, 1980; Closing Date: June 30, 1986 Cr. No. 1137 Tamil Nadu Agricultural Extension Project; US$28 million credit of May 7,1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1135 Maharashtra Agricultural Extension Project; US$23 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1138 Second Madhya Pradesh Agricultural Extension Project; US$37 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1219 Andhra Pradesh Agricultural Extension and Research Project; US$6 million credit of May 5, 1982; Effective Date: July 27, 1982; Closing Date: March 31, 1988 These twelve credits finance the reorganization and strengthening of agricultural extension services and the development of adaptive research capabilities in thirteen States in India. In areas where the reformed extension system is in operation, field results have been most encouraging, both in terms of adoption of new agricultural techniques and of increased crop yields. In Rajasthan, Madhya Pradesh I and Orissa, in particular, significant gains have been made under the projects. In Assam, after some delays field work continues to improve, the field research stations are focussing their activities on local requirements, and the agricultural university is providing good support to extension training and research. In West Bengal, a change in government brought a two-year hiatus in project implementation, but the new State Government has reaffirmed its ANNEX II Page 17 of 23 support, and project activities have resumed. There has been considerable progress in all project components. However, completion of the project in accordance with its original objectives has required an extension of the closing date. Following the decision by the Government of Bihar (GOB) in January 1982 to provide necessary funds for the project and fill key posts there has been considerable improvement. The project is being extended to a further 11 districts, bringing the total under implementation to 16 out of a possible 31. GOB has made provision for adequate budgetary resources for 1982-83, and all extension and research staff required have been appointed, except among village extension workers where some vacancies persist. GOB plans to consolidate the extension system in the ctLrrent 16 districts before extending it to the entire State. In Gujarat, Haryana and Karnataka, all covered under the Composite Agricultural Extension Project, the basic extension system has been established and attention now needs to focus on the quality of extension recommendations and the filling of remaining staff vacancies. In Kerala, project implementation has begun in three of eleven districts and is operating satisfactorily. Further progress on the project will require an early decision by the State Government to extend the T & V system to the remaining eight districts. In Tamil Nadu and Maharashtra, project implementation is going extremely well. Field activities by extension staff are generally well organized and conducted. Recommendations are widely accepted by farmers. Initial implementation of the Madhya Pradesh II project has been slow due to the Government's delay in sanctioning necessary budget resources, and transferring of Department of Agriculture staff to work in the extension service. Field activities are being carried out in only two of the four Year I districts, and have not yet begun in the seven Year II districts. Considerable orientation in the objectives and procedures of the reformed extension service is required by staff at: all levels. Early steps are being taken in the Andhra Pradesh project for the commencement of training, monitoring and evaluation, and civil works activities, and the procurement of equipment and vehicles. Field work has yet to begin, pending the issuance of required governmental orders for the transfer of staff to the reformed extension service. Cr. No. 680 Kerala Agricultural Development Project; US$30 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 Project progress continue satisfactorily. Implementation of the small-holder component, the project's largest, is gaining momentum. The banking program is functioning well, with the volume of loans sanctioned up 35% over the previous year. The three crumb rubber factories included in the project are in operation and the cashewrut plantations are 85% complete. ANNEX II Page 18 of 23 Ln. No. 2095 Agricultural Refinance and Development Corporation IV Project; and US$190 million loan and US$160 million credit of February 24, Cr. No. 1209 1982; Effective Date: May 25, 1982; Closing Date: June 30, 1984 The project, which is a continuation of ARDC III, consists of a two-year time slice of ARDC's lending program to farmers, mainly for minor irrigation, and including amounts for diversified lending and for the support of training programs for the staff of participating banks. Implementation is proceeding satisfactorily. Cr. No. 855 National Agriculture Research Project; US$27 million credit of December 7, 1978; Effective Date: January 22, 1979; Closing Date: September 30, 1983 The project requires improvement in several areas. Civil works and procurement are both somewhat behind schedule, the Project Unit needs additional staff and there are technical deficiencies in the experimental agricultural activities being carried out under the project. However, the pace of sub-project approval during 1981-82 has been satisfactory and implementation of the sub-projects in the States of Gujarat and Andhra Pradesh is good. Cr. No. 342 Agricultural Universities Project; US$12 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1982 The primary aim of this project is to assist in the development of the agricultural universities in Bihar and Assam, improve the quality of practical training provided to students and enhance their employment opportunities. Implementation of the civil works component of this project was initially delayed at both locations on account of frequent top management changes, shortages in raw materials and political unrest (in Assam). Project implementation has accelerated recently and disbursements are expected to be completed by the closing date. Cr. No. 747 Second Foodgrain Storage Project; US$107 million credit of January 6, 1978; Effective Date: May 17, 1978; Closing Date June 30, 1983 Construction of storage capacity of 1.5 million tons has been completed, with another 300,000 tons in progress. GOI-s proposals to delete the bulk storage component and provide additional bag storage capacity have been accepted by IDA. A one-year extension of the closing date has been granted with the possibility of a further extension on the basis of progress achieved during this fiscal year. Cr. No. 871 National Cooperative Development Corporation (NCDC) Project; US$30 million credit of February 2, 1979; Effective Date: May 3, 1979; Closing date: December 31, 1984 ANNEX II Page 19 of 23 Cr. No. 1146 Second National Cooperative Development Corporation (NCDC) Project; US$125 million credit of July 21, 1981; Effective Date: November 11, 1981; Closing Date: June 30, 1987 These credits provide funds to rural cooperatives in various States for the construction and operation of godcwns (warehouses) and cold storage and marketing facilities. Major emphasis is placed on institution building in order to make NCDC grow into a more effective development institution to serve India's rural cooperative sector. I]mplementation of Credit 871 has slowed down over the last six months due t:o shortages in cement supplies and inadequate project coordination at the State level. Implementation of Credit 1146 was initially slow due to poor preparation in most States in the pre-project year. However, since December 1981 the project has gained some momentum with about 1300 godowns and 40 cold storage units now sanctioned for construction. TJnder both projects, the s1lortage of cement presents a serious bottleneck; and construction costs have risen considerably, which may necessitate a reduction in the total number of storage units to be constructed. NCDC and the State agencies concerned have resolved to do what is required to speed up implementation of these projects. Cr. No. 482 Karnataka Dairy Development Project; US$30 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1983 Cr. No. 521 Rajasthan Dairy Development. Project; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: March 31, 1983 Cr. No. 824 National Dairy Project; US$150 million credit of June 19, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1985 These four credits, totalling US$224.1 million, support dairy development projects organized along the lines of the successful AMUL dairy cooperative scheme in Gujarat. Farmer response has been excellent. About 18,000 dairy cooperative societies (DCS) have been established, with over two million members. Profitability of most DCSs is good and construction of dairy and feed plants is proceeding well. In Credit 482, construction of the mother dairy at Bangalore, the key processing facility, was delayed by litigation. Construction by an experienced civil works contractor has now begun. To allow for near completion of this dairy, and for the Government of Karnataka to implement improvements in their management support: of the dairy producers unions as required under the project, the closing date has been extended by one year. Credit 522 project has proceeded well and is excellently managed. The processing facilities have been com?leted and are operational. However, ANNEX II Page 20 of 23 the project authorities postponed formation of the DCSs until the processing facilities and marketing studies were completed. Extension work is now underway (550 DCSs are already established), but the credit closing date has been extended by nine months to allow for creation of the total 1200 DCSs planned, together with their complementary extension and training services. Under Credit 824, the Operation Flood II Agreements, which allow for the establishment of federations of DCSs, have now been signed by most of the participating States. The major obstacle to the project at the moment is the delay in providing loans to States due to their reluctance to issue the guarantees required by the IDC for commitment of funds. This is currently under review by the project authorities. Ln. No. 1273 National Seed Project; US$25 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1984 Cr. No. 816 Second National Seed Project; US$16 million credit of July 17, 1978; Effective. Date: December 20, 1978; Closing Date: December 31, 1984 These projects were designed to increase the availability of high quality agricultural seed, and cover nine States. Although they are two to three years behind schedule because of initial problems in coordination and monitoring mainly at the national level, there has been significant progress over the last year. Plans for the 24 seed development farms are complete and production has commenced. Procurement is satisfactory, with six of ten ICB tenders awarded and two more in process. Most of the seed processing plants have been sanctioned for construction, and hence disbursements are expected to improve with the inception of civil works. It is expected that all works under both projects will be completed by June 1984. Cr. No. 1012 Cashewnut Project; US$22 million credit of June 10, 1980; Effective Date: September 3, 1980; Closing Date: September 30, 1985 This project helps to finance cashew planting and plantation improvement programs in the States of Andhra Pradesh, Karnataka, Kerala and Orissa. The planting and improvement programs have made very good progress and the area covered is ahead of appraisal estimates. There is every expectation that the project will fulfill its objective of significantly increasing cashew production and improving the incomes of the farmers. In Orissa there is already evidence of a significant improvement in the farmers- welfare as a result of participation in the project. Cr. No. 610 Integrated Cotton Development Project; US$18 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1983 Project implementation continues to improve. The area to be covered by the project (183,000 ha) has been attained, and yields are increasing. Major processing facilities in Maharashtra and Haryana are under contract and bid evaluation. The link between university research and project activity is excellent. However, because of poor performance in the ANNEX II Page 21 of 23 early stages, the project closing date has been extended by two years to December 31, 1983, to allow for completion of the project works and full utilization of the credit proceeds. Cr. No. 1034 Karnataka Sericulture Project:; US$54 million credit of October 27, 1980; Effective Date: December 18, 1980 Closing Date: December 31, 1985 Serious staff shortages in the Department of Sericulture have caused inadequate research and extension work and prevented increases in the production of bivoltine silk, one of the project's principal objectives. This situation is expected to improve soon, as the Chief Secretary, Government of Karnataka, is endeavoring to streamline the cumbersome recruitment procedures to permit more rapid hiring of staff. All other project components are progressing satisfactorily. Cr. No. 806 Jammu-Kashmir Horticulture Project; US$14 million credit of July 17, 1978; Effective Date: January 16, 1979; Closing Date: June 30, 1984 There has been sufficient progress in civil works and the acquisition of equipment to enable 11 of the 17 apple packing houses and all seven walnut processing centers to become operational by October 1982. Therefore, it is most urgent that the project implementing agency fill their positions of financial and marketing directors in order to formulate appropriate financial and marketing strategies for their first operating season with the new facilities. The training program under the project is progressing well, but research activities are behind schedule ,lue to delays in the appointment of consultants. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4 million credit of February 26, 1976; Effective Date: May 17, 1976; Closing Date: December 31, 1982 A study completed in November 1979 established the feasibility of developing a forest-based industry in Bastar district. However, following a GOI review of the study, it was decided that conversion of the natural forest to pine plantations, as proposed, would not be compatible with the Government's social, economic, and envi:-onmental policies for the area. Further project activities have therefore ceased. The project is expected to close on schedule in December 1982. Cr. No. 925 Uttar Pradesh Social Forestry Project; US$23 million credit of June 21, 1979; Effective Date: January 3, 1980; Closing Date: December 31, 1984 Cr. No. 961 Gujarat Community Forestry Project; US$37 million credit of April 14, 1980; Effective Date: June 24, 1980; Closing Date: December 31, 1985 ANNEX II Page 2 f 23 Cr. No. 1178 West Bengal Social Forestry Project; US$29 million credit of February 24, 1982; Effective Date: April 9, 1982; Closing Date: December 31, 1987 Cr. No. 1286 Jammu-Kashmir and Haryana Social Forestry Project; US$33 million credit of September 7, 1982; Effective Date: Expected December 1982; Closing Date: March 31, 1988 Under the Uttar Pradesh and Gujarat projects very impressive results have been achieved in the tree plantation programs. However, both projects suffer from serious understaffing, especially among forestry extension workers, and inefficiences in the management and organization of the social forestry programs. A special review to be carried out jointly by GOI and A IDA in November 1982, is designed to address these problems. Initial implementation of the West Bengal project, which became effective in April 1982, has been satisfactory. Most senior staff are in position, the monitoring and evaluation unit has been established, and physical planting so far has exceeded appraisal report targets. Initial project activities are underway on Credit 1286, signed on September 7, 1982. Ln. No. 1897 Kandi Watershed and Area Development Project; US$30 million loan of September 12, 1980; Effective Date: November 18, 1980; Closing Date: March 31, 1986 There has been considerable progress in project implementation since the last review in June 1981. In the upper catchment, cattle grazing has decreased and afforestation increased, with a consequent improvement in the vegetative cover to reduce erosion and floods--a main project objective. Construction of the Dholbaha dam has started, and feasibility studies of other watershed schemes to be financed by the project are well in hand. Ln. No. 1394 Gujarat Fisheries Project; US$14 million loan and US$4 (TW) and million credit of April 22, 1977; Effective date: July 19, 1977; Cr. No. 695 Closing Date: June 30, 1983 Cr. No. 815 Andhra Pradesh Fisheries Project; US$17.5 million credit of June 19, 1978; Effective Date: October 31, 1978; Closing Date: September 30, 1984 In Gujarat, the construction of harbor and shore facilities has been delayed by a contractual dispute. This has now been resolved, and harbor works should be finished by mid-1984. Village roads and water supply components of the project are proceeding satisfactorily. In Andhra Pradesh, the project harbor at Visakhapatnam was officially opened in February 1982; harbor works at Kakinada and Nizampatnam are progressing satisfactorily following the resolution of design problems. ANNEX II Page 23 of 23 Cr. No. 963 Inland Fisheries Project; US$20 million credit of January 18, 1980; Effective Date: May 5, 1980; Closing Date: September 30, 1985 Project implementation is satisfactory. The Central and State Project Units are functioning efficiently., Detailed designs for the first two fish seed hatcheries in each of the five project States have been completed. The pond improvement schemes are progressing rapidly, with large numbers of loan applications having been submitted to the participating banks for approval of financing. Cr. No. 981 Second Population Project; lJS$46 million credit of April 14, 1980; Effective Date: June 26, 1980; Closing Date: December 31, 1985 The project has as its major objectives the lowering of infant and child morbidity and mortality, the improvement in the health status of mothers and children and the lowering of fertility in three districts in Andhra Pradesh and in six districts in Uttar Pradesh. Implementation of the project is proceeding well. Marked improvement has occurred in several components especially construction, now that cement is being allocated to the project on a priority basis. As a consequence, disbursements are accelerating. The Director of the Population Centre in Uttar Pradesh has been appointed and the training program is well underway. Cr. No. 1003 Tamil Nadu Nutrition Project; US$32 million credit of May 12, 1980; Effective Date: AuguEt 5, 1980; Closing Date: March 31, 1987 Following an impressive start in one test block where malnourishment rates fell by 50% during the test period, the nutrition program is being expanded to the other 32 blocks in Madurai District. Progress in civil works is now satisfactory despite early shortages of cement and the construction work for the training facilities is to be completed this year. ANNEX III Page 1 of 2 INDIA SOUTH BASSEIN GAS DEVELOPMENT PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by the country to prepare the project About three years. (b) The agency which has prepared the project Oil and Natural Gas Commission (ONGC). (c) Date of- first presentation to the Bank and date of first-mission to-consider the project May 1981 and October 1981, respectively. (d) Date of.departure of appraisal mission March 1982. (e) Date of completion of negotiations December 1982. (f) Planned date of effectiveness May 1983. Section II: Special Bank Implementation Actions None ANNEX III Page 2 of 2 Section III: Special Conditions (a) GOI will update as necessary the gas supply/demand forecast for the South Bassein gas field and provide the Bank an opportunity to comment on it (para 41). (b) GOI will periodically review crude oil and gas prices and set them at levels required to permit ONGC to meet its operating expenses and earn an adequate return on its investments (para 57). (c) ONGC will submit, annually, to GOI an economic and financial evaluation of the project and of any subsequent major developments which will inter alia indicate the level of prices required by ONGC to earn a DCF return of at least 15% on the project and other major developments (para 57). BRD 16184 20 A b- 30-. Z l.f q -40 1 N D i A SOUTH 9ASSEIN OFFSHORE GAS DEVELOPMEN'r PROJECT BOMBAY OFFSHORE AREA 04-d/., G,, P--, 0, t,;"j A- -I'd C-) PI 11 Id 1-1- Al-I llkd: l-,-,", N- I I- rl f- N-,, PI,ff-, 20 ',Ah' !V. -h ll-, I -,4 IVNA AIIITIUI SUC R, 90MB, HIGH N\1 ico IS 0F 3A 5SE1,V I Wwc7oRF5 t N I A Al l-, i2v -so,
World Bank Group · Memorandum & Recommendation of the President
India - South Bassein Offshore Gas Development Project
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World Bank Group
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Memorandum & Recommendation of the President
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India
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