India - Madhya Pradesh Fertilizer Project : Loan 2415 - Loan Agreement - Conformed

OFFICIAL D)OCUMENTS LOAN NUMBER 2415 IN Loan Agreement (Madhya Pradesh Fertilizer Project) between INDIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1984 LOAN NUMBER 2415 IN OAN AGREEMENT AGREEMENT, dated , 1984, between INDIA, acting by its President (Mreinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) Part A of the Project will be carried out by National Fertilizers Limited with the Borrower's assistance and, as part of such assistance, the Borrower will make available to National Fertilizers Limited part of the proceeds of the Loan as herein- after provided; and - WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and National Fertilizers Limited; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "NFL" means National Fertilizers Limited, a Government company registered under the Companies Act, 1956, as amended, of the Borrower; -2- (b) "Project Agreement" means the agreement between the Bank and NFL of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (c) "FCI" means Fertilizer Corporation of India Limited, a Government company registered under the Companies Act, 1956, as amended, of the Borrower; (d) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and NFL pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; and (e) "Rs" means rupees in the currency unit of the Borrower. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to two hundred three million six hundred thousand dollars ($203,600,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expen- ditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan -hqll h;i governed by the provisions of the Schedule Lo the Project Agree- ment. Section 2.04. The Closing Date shall be June 30, 1989 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. - 3 - Section 2.05. (a) The Borrower shall pay to the Bank a fee equivalent to five hundred seven thousand seven hundred thirty- one dollars ($507,731). (b) On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine. Section 2.06. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.07. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.08 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) hereunder shall be reckoned at a cost of 10.93% per annum. (iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. -4- (iv) "Semester" means the first six months or the second six months of a calendar year. Section 2.08. Interest and other charges shall be payable semiannually on March 15 and September 15 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the Amortization Schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall: (i) cause NFL to perform in accordance with the provisions of the Project Agreement all the obligations of NFL therein set forth; (ii) take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable NFL to perform such obligations; and (iii) not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Loan allocated under Categories (1) and (2) of the table set forth in Schedule 1 to this Agreement to NFL under a subsidiary loan agreement to be entered into between the Borrower and NFL, under terms and conditions which shall have been approved by the Bank which shall, except as the Bank may otherwise agree, include interest at an effective rate of not less than 12-3/4% per annum on the principal amount so relent and withdrawn by NFL and outstanding from time to time and repayment over a period of fifteen years, including therein a period of grace of five years. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. Without limitation or restriction upon the provisions of Section 3.01 of this Agreement, the Borrower speci- fically undertakes to make available to NFL: (i) an equity -5- contribution up to an aggregate amount of Rs 2.115 billion to be paid in annual instaLILments according to the requirements of Part A of the Project; and (ii) such other equity as may be required to cover any shortfall in the internally generated cash by NFL required for timely completion of Part A of the Project. Section 3.03. The Borrower shall: (i) cause to be carried out the studies under Part B of the Project through FCI; and (ii) make available the proceeds of the Loan allocated under Category (3) of the table set forth in Schedule 1 to this Agreement to FCI for the purposes of carrying out Part B of the Project under a financial arrangement to be entered into between the Borrower and FCI. Section 3.04. The Borrower shall cause FCI to employ consul- tants to assist FCI in carrying out the studies under Part B of the Project whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guide- lines for the Use of Consultants by World Bank Borrowers and by World Bank as Executing Agency", published by the Bank in August 1981. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be -6- made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by- an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall: (i) cause the accounts related to Part B of the Project to be audited in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank; and (ii) cause FCI to furnish to the Bank such information concerning said accounts, records, expenditures and audit thereof, as the Bank may reason- ably request. Section 4.03. The Borrower shall, by October 1, 1986, or such other date as the Bank may agree, ensure adequate and timely supply of gas for the Project, and to that end, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources necessary or appropriate for the completion of a gas project in accordance with a schedule agreed with the Bank. Section 4.04. The Borrower shall not take, or cause to be taken, any action which, assuming production under conditions of efficient operation, would prevent fertilizer manufacturers in the territories of the Borrower from meeting their expenses and servicing their debt out of their revenues, and from earning a reasonble return on invested capital. -7- ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) NFL shall have failed to perform any of its obligations under the Project Agreement; (b) A subisidiary or any other entity shall have been created or acquiri:d, if such creation or acquisition would materially and adver-sely affect the efficient conduct of NFL's business or NFL's financial condition or the carrying out of the Project; (c) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that NFL will be able to perform its obligations under the Project Agreement; (d) A change shall have been made in the Memorandum and Articles of Association of NFL dated August 20, 1974, as amended to the date of this Agreement, without prior consultation with the Bank, which would materially and adversely affect the finan- cial condition or operations of NFL or the ability of NFL to perform any of its obligations under the Project Agreement; and (e) NFL or any other authority having jurisdiction shall have taken any action for the dissolution or liquidation of NFL. Section 5.02. For the purposes of Section 7.01 of the Gen- eral Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) Any event specified in paragraphs (a) and (b) of Sec- tion 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower and NFL; and (b) Any event specified in paragraphs (d) and (e) of Sec- tion 5.01 of the Agreement shall occur. -8- ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement with- in the meaning of Section 12.01 (c) of the General Conditions, namely, that the Subsidiary Loan Agreement has been executed on behalf of the Borrower and NFL. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by NFL, and is legally binding upon NFL in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and NFL and is legally binding upon the Borrower and NFL in accordance with its terms. Section 6.03. The date A% / , is breby specified for the purposes of Section 1.04 of the General (onditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary or Under Secretary of the Department of Economic Affairs in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions. For the Borrower: The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India -9- Cable address: ECOFAIRS New Delhi For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INDIA /s/ J,. P.4 -L9 By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT B ?'/Afq Regional Vice President South Asia - 10 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment, mate- 169,000,000 100% of foreign rials and spare expenditures and parts 100% of local expenditures (ex- factory cost) (2) Technical ser- 11,000,000 100% vices for NFL (3) Consultants' 3,000,000 100% services for FCI (4) Fee 507,731 Amount due under Section 2.05 (a) of this Agreement (5) Unallocated 20,092,269 TOTAL 203,600,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. - 11 - 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that the proceeds of the Loan shall not be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; on this basis, if the amount of any such taxes levied on or in respect of items in any Category decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the dis- bursement percentage then applicable to such Category as required to be conloistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $5,000,000 may be made on account of payments made for such expenditures before that date but after January 1, 1984. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by rotice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disburse- ment percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditure for such item shall be financed out of the proceeds of the Loan, and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 12 - SCHEDULE 2 Description of the Project The objective of the Project is to expand the domestic nitrogenous fertilizer capacity through the design, construction and start-up of a fertilizer plant at Vijaipur in the State of Madhya Pradesh. The Project consists of the following: Part A: NFL (i) The acquisition and installation of a single-train 1,350 tons per day ammonia unit. (ii) The acquistion and installation of two 1,100 tons per day urea units. (iii) The acquistion and installation of integrated power and steam generation facilities. (iv) The construction of raw water storage and treatment facilities, demineralized water plant and cooling water systems. (v) The construction of storage for 10,000 tons of refri- gerated ammonia and 50,000 tons of bulk urea and faci- lities for bagging urea. (vi) The construction of related offsites, including main- tenance workshops, warehouse, administration buildings, laboratory, transport facilities and effluent treat- ment. (vii) The construction of infrastructure, including a township of about 1,000 housing units and social facilities, road and rail links, and transmission lines for power supply from the grid. - 13 - Part B: FCI Carrying out of a study to identify rehabilitation require- ments of FCI's coal-based fertilizer plants at Ramagundam and Thalcher. The Project is expected to be completed* by September 30, 1988. * The Project will be deemed completed only when the facili- ties included therein shall have been in satisfactory opera- tion for not less than 60 consecutive days at an average production rate per day of not less than 80% of its respec- tive daily capacity stated above. - 14 - SCHEDULE 3 Amortization Schelule Payment of Principal Date of Payment Due (Expressed in dollars)* On each March 15 and September 15 beginning September 15, 1989 through September 15, 2003 6,785,000 On March 15, 2004 6,835,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 15 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of.prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than 11 years before maturity More than 11 years but not 0.80 more than 16 years before maturity More than 16 years but not 0.90 more than 18 years before maturity More than 18 years before 1.00 maturity INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day of/M 4-198i- FOR SECRETARY