India - Maharashtra Forestry Project : Credit 2328 - Credit Agreement - Conformed

CREDIT NUMBER 2328 IN Development Credit Agreement (MAharashtra Forestry Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1992 CREDIT NUMBER 2328 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated o2-uLa19 , 1992, between INDIA, acting by its Pres dent (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Project will be carried out by the State of Maharashtra with the Borrower's assistance and, as part of such assistance, the Borrower r .Ll make available to such State the proceeds of the Credit as provided in this Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association and the State of Maharashtra; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and the State of Maharashtra of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; -2- (c) "Maharashtra" means the State of Maharashtra, a State of the Borrower, or any successor thereto; (d) "FD" means the Forest Department of Maharashtra; (a) "AHD" means the Animal Husbandry Department of Maharashtra; (f) "PCU" means the Project Coordinating Unit established within FD; (g) "PMIU" means the Planning and Marketing Intelligence Unit to be established within PCU; and (h) "FDCM" means the Forestry Development Corporation of Maharashtra. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to eighty eight million nine hundred thousand Special Drawing Rights (SDR 88,900,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association 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 Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in the Reserve Bank of India on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement, Section 2.03. The Closing Date shall be September 30, 1998 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. -3- Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date and at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restric- tions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on January 1 and July 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each January 1 and July 1 commencing July 1, 2002 and ending January 1, 2027. Each installment to and including the installment payable on January 1, 2012 shall be one and one-fourth percent (1-1/4%) of such principal amount, and each installment thereafter shall be two and one-half percent (2-1/2%) of such principal amount. (b) Whenever (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the -4- Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due considera- tion by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time ,.o time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause Maharashtra to perform in accordance with the provisions of the Project Agreement all the obligations of Maharashtra therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Maharashtra to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make the proceeds of the Credit available to Maharashtra in accordance with the Borrower's standard arrangements for developmental assistance to the States of India. -5- Section 3.02. 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 the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that 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 shall be carried out by Maharashtra pursuant to Section 2.03 of the Project Agreement. Section 3.04. Without any limitation or restriction upon the provisions of Section 3.01 (a) of this Agreement, the Borrower shall (i) provide, or cause to be provided, to Maharashtra or its relevant departments or agencies in a prompt and efficient manner all clearances and approvals as may be required or necessary for the purpose of enabling Maharashtra or its relevant departments or agencies to implement the activities under the Project, and (ii) process in the utmost expeditious manner any proposals for clear- felling of limited areas under Parts A.1 and A.2 of the Project. Section 3.05. The Borrower shall, by March 31, 1995, review and discuss with the Association the possibility of permitting FDCM to raise captive plantations for industrial utilization on forest lands other than reserve forests. ARTICLE IV Financial Covenants Section 4.01. (a) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, the Borrower shall: (i) maintain or cause to be maintained in accordance with sound accounting practices, records and accounts reflecting such expend_tures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has -6- received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; and (iii) enable the Association's representatives to examine such records. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) (i) of this Section and those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent 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 the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including a separate opinion by said auditors as to whether the statements of expendi- ture submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) Maharashtra shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation -7- shall have arisen which shall make it improbable that Maharashtra will be able to perform its obligations under the Project Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely, that the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the Project Agreement has been duly authorized or ratified by Maharashtra, and is legally binding upon Maharashtra in accordance with its terms. Section 6.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.03. The obligations of the Borrower under Section 3.03 of this Agreement and the provisions of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on the date twenty years after the date of this Agreement, whichever shall be the earlier. 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 of 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: -8- For the Borrower: The Secretary to the Government of India Department of Economic Affairs Ministry of Finance New Delhi, PIN 110001, India Cable address: Telex: ECOFAIRS 953-3166175 New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) -9- 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. INDIA By S I ' Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION ByS Regional Vice Preside-it South Asia - 10 - SCHEDULE I Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Plantation costs 64,200,000 90% (2) Civil works 7,500,000 90% (3) Seeds and planting 3,200,000 100% of foreign materials under expenditures Parts A.6, B.l, B.2 100% of local and B.4 of the expenditures Project, equipment (ex-factory and vehicles cost) and 80% of local ex- penditures for other items pro- cured locally - 11 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (4) Consultants' 3,900,000 100% services and training (5) Incremental 2,800,000 50% of expendi- operating tures incurred costs until March 31, 1994, 40% of expenditures incurred there- after until March 31, 1996, and 30% of ex- penditures in- curred thereafter (6) Unallocated 7,300,000 TOTAL 88,900,000 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; (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; (c) the term "plantation costs" means the aLgregate total of: (i) costs of nurseries, land preparation, including labor, inputs for tree plantations, maintenance and protection; and (ii) direct supervision costs related thereto varying between 5-10% of the total costs under (i) depending upon the treatment model applied; and - 12 - (d) the term "incremental operating costs" means the incremental costs for salaries and allowances of staff of FD and for operation and maintenance of offices and vehicles, incurred by Maharashtra and its relevant departments and agencies for purposes of implementing the Project. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 3,600,000, may be made on account of payments made for expenditures before that date but after June 30, 1991. 4. No withdrawal shall be made and no commitment shall be entered into to pay amounts to or on the order of the Borrower in respect of expenditures to be financed under Category (1) out of the proceeds of the Credit after March 31, 1995, unless the Association shall be satisfied, based on evidence satisfactory to the Associa- tion, that Maharashtra has formulated the plan of action referred to in paragraph 9 (b) (iii) of Schedule 2 to the Project Agreement and has made progress, satisfactory to the Association, in implementing such plan. - 13 - SCHEDULE 2 Description of the Project The objectives of the Project are to increase the productivity of forest lands, arrest environmental degradation, maintain or improve bio-diversity conservation, develop wastelands, raise bio- mass self-sufficiency, generate rural income and promote community participation in forestry activities. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Plantation Development Plantation development on about 360,000 ha of degraded public forest and wasteland, and about 9,000 ha of private lands consisting of: 1. establishment of about 165,000 ha of production forestry and enrichment plantings on public degraded forest lands, and boundary plantings, agro-forestry and horticulture on private lands; 2. rehabilitation of about 195,000 ha of wastelands and degraded lands on public forests, particularly unclas- sified forest areas and revenue lands, accompanied by vegetative soil and moisture conservation practices, to be carried out on marginal sites or sites with shallow soils or with excessive slopes and rocky outcrops, including testing of Jatropha curcas for such rehabili- tation; 3. carrying out of pasture development, including fodder research, and range development and management improve- ment for about 10,000 ha of public degraded forest and revenue lands; 4. formulating and implementing a program of village eco- development, and tribal development in about 210 villages consisting of rehabilitation, soil and moisture conservation, allied works, and biomass production activities to be carried out involving men and women on degraded private and public lands used by village -14- communities, and initiating joint management with local people in appropriate state forest lands in these and other villages in Maharashtra; 5. establishment of an integrated development strategy to enhance the conservation and management of protected areas, including: (a) rationalizing the existing protected area network, reviewing and updating their management plans, and developing such plans for new areas; (b) improving the management of about ten priority protected areas and development of procedures to facilitate notification and settlement of such areas; (c) carrying out the activities under paragraph (4) of this Part of the Project in protected areas of selected districts; (d) strengthening the wildlife wing of FD through, inter alia, research and training; 6. Establishment of nurseries with a total productive capacity of about 12 million seedlings. Part B: Technology Improvement 1. Estabi.shment of a seed unit under FD with sole respon- sibilities for selecting and developing suitable seed sources, organizing harvesting, and storing and distributing adequate quantities of seed. 2. Upgrading of nurseries through installing overhead irrigation and development of root trainers. 3. Carrying out of a review of the current forestry research program and identifying research priorities for the near and long term. 4. Restructuring the pasture development unit for developing fodder and pasture treatment models, enhancing sylvi-pasture management and seed production. - 15 - Part C: Institutional Development 1. Provision of staff, offices, vehicles, equipment and training for purposes of carrying out the Project. 2. Establishment of specialized units for purposes of carrying out the Project, including PCU for coordination, PMIU for strategic planning and market intelligence, and other units in the areas of management information system, research, extension, village eco- development, training and publicity, and provision of technical assistance relating thereto. 3. Carrying out of studies on: (a) forest administration restructuring; (b) assessing the capacity of existing training institutions and future needs; (c) analyzing seedling pricing and demand; (d) identifying interventions on timber forest products; (e) analyzing the policy and incentives framework; and (f) bio- diversity conservation for designing an integrated protected area strategy. The Project is expected to be completed by March 31, 1998. - 16 - SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2), (3), (4) and (5) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $6,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the - 17 - documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such - 18 - notice will be utilized in making payments for eligible expendi- tures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs .6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY