Conformed Copy - C1923 - Tamil Nadu Urban Development Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1923 IN (Tamil Nadu Urban Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and STATE OF TAMIL NADU Dated September 16, 1988 PROJECT AGREEMENT AGREEMENT, dated September 16, 1988, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and STATE OF TAMIL NADU, acting by its Governor (Tamil Nadu). WHEREAS by the Development Credit Agreement of even date herewith between India, acting by its President (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to two hundred sixteen million five hundred thousand Special Drawing Rights (SDR 216,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Tamil Nadu agree to undertake such obligations toward the Association as are set forth in this Agreement; WHEREAS Tamil Nadu, in consideration of the Association's entering into the Development Credit Agreement with the Borrower has agreed to undertake the obligations set forth in this Agree- ment; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth, and the term "Empowered Committee" means the Committee established by Tamil Nadu by its G.O.Ms No. 467 dated April 11, 1988. ARTICLE II Execution of the Project Section 2.01. (a) Tamil Nadu declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out or cause to be carried out through the Implementing Agencies, the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and Tamil Nadu shall otherwise agree, Tamil Nadu shall cause the Project to be carried out in accordance with: (i) the Implementation Program set forth in Schedule 2 to this Agreement; and (ii) an operational action plan agreed upon between the Association and Tamil Nadu, as such plan may be reviewed annually and amended, as necessary, by agreement between the Association and Tamil Nadu. (c) Tamil Nadu shall make available to the Implementing Agencies funds equivalent to the proceeds of the Credit made available by the Borrower to Tamil Nadu on terms and conditions satisfactory to the Association. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. Tamil Nadu shall cause the Implementing Agencies to carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. (a) Tamil Nadu shall, at the request of the Association exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. (b) Tamil Nadu shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by Tamil Nadu of its obligations under this Agreement. ARTICLE III Management and Operations of the Implementing Agencies Section 3.01. Tamil Nadu shall cause the Implementing Agencies to: (i) carry on their operations and conduct their affairs in accordance with sound administrative, financial and Page 3 engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers; (ii) at all times operate and maintain their plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering and financial practices; and (iii) take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Particular Covenants Section 4.01. (a) Tamil Nadu shall cause the Implementing Agencies to maintain records and accounts adequate to reflect in accordance with sound accounting practices their operations and financial condition, including separate records and accounts in respect of the Project. (b) Tamil Nadu shall cause TNHB, TNSCB, PTC, the Municipal Corporations of Madras and Coimbatore, and the municipalities of Madurai, Salem and Trichy to: (i) have their records, accounts and financial state- ments (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by inde- pendent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than nine months after the end of each such year, (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.02. Except as the Association may otherwise agree, Tamil Nadu shall cause PTC to take all such action as is necessary to ensure that PTC's operating costs (which shall include depreciation but exclude interest and other charges on debt, corporate taxes and subvention) do not exceed 98% of its operating revenues, for the average of the last, current and next following financial year. Section 4.03. Tamil Nadu shall reimburse PTC at the rate of 70% for PTC's losses on subsidized student riders in two installments every year in accordance with a formula acceptable to the Association. Section 4.04. (a) Except as the Association may otherwise agree, Tamil Nadu shall cause PTC to take all such action as shall be required to produce, for each of its financial years, funds from internal sources equivalent to not less than 20% of the annual average of PTC's capital expenditures incurred, or expected to be incurred, during the last, current and the next following financial years. (b) For the purposes of this Section: (i) The term "funds from internal sources" means the difference between: Page 4 (1) The sum of gross revenues from all sources related to PTC operations, net non-operating income and any reduction in non-cash working capital; and (2) The sum of all expenses of PTC operations, including maintenance and administration (excluding depreciation and other non-cash operating charges), interest and other charges on debt (excluding interest financed under a loan contract), repayment of loans (including sinking fund payments, if any), all taxes or payments in lieu of taxes, all cash dividends and other cash distributions of surplus, increase in net working capital other than cash, and any other cash outflows other than cash expenditures related to PTC operations. (ii) The term "capital expenditures" means all expendi- tures incurred on account of fixed or capital assets, including interest charged to construction, related to PTC operations. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of Tamil Nadu thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall have terminated in accordance with its terms; or (ii) the date 25 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Tamil Nadu of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have desig- nated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Page 5 Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For Tamil Nadu: Chief Secretary to the Government of Tamil Nadu Fort St. George, Madras 600009 India Cable address: Telex: CHIEFSEC 41-238-7400 Madras Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Tamil Nadu may be taken or executed by a Secretary to the Government of Tamil Nadu or such other person or persons as Tamil Nadu shall designate in writing, and Tamil Nadu shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Attila Karaosmanoglu Regional Vice President Asia STATE OF TAMIL NADU By /s/ Anil Kumar Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part C hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers Page 6 In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures (i) Contracts for civil works may be awarded on the basis of competitive bidding advertised locally in accordance with procedures satisfactory to the Association. (ii) Contracts for equipment and materials estimated to cost the equivalent of $200,000 each or less up to an aggregate amount equivalent of $10,000,000 may be procured on the basis of competitive bidding advertised locally in accordance with procedures satisfactory to the Association. (iii) Small items of specialized nature up to an aggregate amount of $1,000,000 equivalent may be procured through normal commercial channels by inviting quotations from at least three suppliers. (iv) Bus bodies may be built by PTC in its own workshops through force account. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for (i) civil works esti- mated to cost the equivalent of $650,000 or more, and (ii) equip- ment and materials estimated to cost the equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract for civil works estimated to cost the equivalent of more than $450,000 but less than $650,000, the procedures set forth in sub-paragraphs (b), (c) and (d) of paragraph 2, and paragraph 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (c) With respect to each contract not governed by the preceding paragraphs (a) and (b), the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other informa- tion required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the Development Credit Agreement. (d) The provisions of the preceding subparagraphs (a), (b) and (c) shall not apply to contracts on account of which the Asso- ciation has authorized withdrawals from the Credit Account on the Page 7 basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Development Credit Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist Tamil Nadu in carrying out Part A (ii) of the Project, Tamil Nadu shall employ or cause to be employed, consultants whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 2 Implementation Program 1. The rules and procedures for the operation of MUDF, and the terms and conditions under which loans/grants would be made avail- able to the municipalities shall be satisfactory to the Associa- tion. 2. LAND schemes shall be implemented only on sites which are selected in accordance with a criteria satisfactory to the Association. 3. The plans, layouts, engineering designs and standards, and the development and building regulations, in respect of LAND, GUD and SIP schemes shall be satisfactory to the Association. 4. In respect of LAND, GUD and SIP schemes, Tamil Nadu shall recover all chargeable costs (as agreed between Tamil Nadu and the Association) from the beneficiaries, and the terms and conditions of leases and home improvement loans, and the beneficiary selection criteria and procedures, shall be satisfactory to the Association. 5. In order to ensure adequate planning, coordination, implemen- tation and management of the Project, Tamil Nadu shall maintain the Empowered Committee, PMG and CMCs.