India - Gujarat Agricultural Credit Project : Credit 0191 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 191 IN Development Credit Agreement (Gujarat Agricultural Credit Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 3, 1970 o DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 3, 1970, between INDIA, acting by its President (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) By an agreement of even date herewith between the Association and The State of Gujarat, The State of Gujarat has agreed to undertake certain obligations in respect of the carrying out of the Project; (B) By an agreement of even date herewith between the Association of the one part and Agricultural Refinance Corporation and Gujarat State Cooperative Land Development Bank Ltd. of the other part, certain other obligations in respect of the carrying out of the Project have been undertaken by Agricultural Refinance Corporation and Gujarat State Cooperative Land Development Bank Ltd. respectively; and (C) The Association, on the basis inter alia of the foregoing, has agreed to make a development credit to the Borrower on the conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Gener Conditions; Definitions Section 1.01. The parties to this Development Credit Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions): (a) Paragraph 5 of Section 2.01 is amended to read as follows: "5. The term 'Borrower' means India, acting by its President." 4 (b) The following paragraph is added to Section 2.01: "13. The terms Project Agreement and Gujarat Agreement have the meaning set forth in the Development Credit Agreement"; and (c) The words, "the Project Agreement and the Gujarat Agreement" are added after the words "the Development Credit Agreement" in Section 6.06. Section 1.02. Wherever used in this Development Credit 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) "Gujarat" means The State of Gujarat, a state of India, or any successor thereof. (b) "Gujarat Agreement" means the agreement of even date herewith between Gujarat and the Association, as the same may be amended from time to time by agreement between Gujarat and the Association. (c) "ARC" means Agricultural Refinance Corporation, a corporation established and organized under the laws of the Borrower. (d) "LDB" means Gujarat State Cooperative Land Development Bank Ltd., a cooperative society established and organized under the laws of Gujarat. (e) "Project Agreement" means the agreement of even date herewith between the Association, ARC and LDB, as the same may be amended from time to time by agreement between the Association, ARC and LDB. (f) "Subsidiary Loan Agreement" means the agreement or agreements to be entered into between the Borrower, ARC and LDB pursuant to Section 4.02 (a) and Schedule 4 hereof as the same may be amended from time to time with the approval of the Association. (g) "Project area" means the territory of Gujarat. 5 ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in this Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to thirty-five million dollars ($35,000,000). Section 2.02. (a) The Association shall open a Credit Account on its books in the name of the Borrower and shall credit to such Account the amount of the Credit. (b) The amount of the Credit may be yithdrawn from the Credit Account as provided in, and subject to the rights of cancellation and suspension set forth in, this Development Credit Agreement and in accordance with the allocation of the proceeds of the Credit set forth in Schedule 1 to this Agreement, as such allocation shall be modified from time to time by further agreement between the Borrower and the Association. Section 2.03. The Borrower shall be entitled to withdraw from the Credit Account in respect of the reasonable cost of goods or services required for the Project and to be financed under this Development Credit Agreement: (i) such amounts as shall have been paid (or, if the Association shall so agree, shall be required to meet payments to be made) for goods or services included in Categories I and III of the allocation of the proceeds of the Credit referred to in Section 2.02 of this Agreement; and (ii) the equivalent of fifty per cent (50%) of the value of investments approved by LDB for goods or services included in Category II of the allocation of the proceeds of the Credit referred to in Section 2.02 of this Agreement; provided, however, that (a) if there shall be an increase in the estimate of any such investment for goods or services included in said Category II, the Association may by notice to the Borrower adjust the stated percentage applicable to said Category as may be reqiired in order that withdrawals of the amount of the Credit then allocated to said Category and not withdrawn may continue pro rata with the payments remaining to be made for goods or services included in said Category II, and (b) if there shall be a decrease in the estimate of any such investment 6 for goods or services included in said Category 11, the Association may, at the request of the Borrower, increas- the stated percentage applicable to said Category as required to permit total withdrawal of the portion of the Credit then allocated to said Category II. Section 2.04. No withdrawals from the Credit Account shall be made under Categories I and III of the allocation of the proceeds of the Credit referred to in Section 2.02 of this Agreement on account of payments in the currency of the Borrower, or for goods produced in, or services supplied from, the territories of the Borrower. Section 2.05. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.06. 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 2.07. Service charges shall be payable semi-annually on May 15 and November 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each May 15 and November 15 commencing May 15, 1980 and ending November 15, 2019, each installment to and including the installment payable on November 15, 1989 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. ARTICLE Ill Use of Proceeds of the Credit Section 3.01. The Borrower shall cause the proceeds of the Credit to be applied, in accordance with the provisions of this Development Credit Agreement to expenditures on the Project, described in Schedule 2 to this Agreement. Section 3.02. Except as the Association shall otilerwise agree, the goods and services to be financed out of the proceeds of the Credit under Category I of the. Allocation of the Proceeds of the Credit set forth in Schedule 1 to this Agreement shall be procured in accordance with the procedures set forth in Schedule 5 to this Agreement. A Sectibn 3.03. Except as the Association may otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively in carrying out the Project. ARTICLE IV Particular Covenants Section 4.01. (a) The Borrower shall carry out, or cause to be carried out, the Project with due diligence and efficiency and in conformity with sound administrative, agricultural and financial practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without limitation or restriction upon any of the obligations of the Borrower set forth in paragraph (a) of this Section, the Borrower shall take all action including, in particular, without reconsideration of the eligibility of the items for importation, the granting of all necessary licenses, foreign exchange permits and other approvals required to ensure the prompt importation of: (i) the tractors listed in Schedule 3 to this Agreement as the same shall have been procured pursuant to the procedures set forth in paragraph I of Schedule 5 to this Agreement and as is required for the efficient carrying out of the Project; (ii) spare parts for said tractors in an amount equal to 16.5% of the value of such tractors; (iii) harvesters, discs, and plough bottoms, in an amount up to 10% of the value of tractors imported pursuant to subparagraph (i) hereof; and (iv) for a period of five years succeeding the final disbursement in respect of tractors under the Credit, spare parts for tractors in an annual amount equal to 10% of the c.i.f. value of tractors imported pursuant to subparagraph (i) hereof or such smaller amount as may from time to time be agreed to between the Borrower and the Association. Section 4.02. (a) The Borrower shall enter into a Subsidiary Loan Agreement on terms and conditions (including inter alia those set forth in Schedule 4 to this Agreeffent) satisfactory to the Association for the purpose of relending to ARC for relending to LDB the equivalent of the proceeds of the Credit in respect of Categories I and II of the allocation of the proceeds of the Credit set forth in Schedule 1 to this Agreement. The Borrower shall exercise its rights in relation to the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association. Except as the Borrower and the Association shall otherwise agree, the Borrower shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of the Subsidiary Loan Agreement. 8 (b) The operating policies and procedures for the carrying out of the Project shall be as set forth in Schedule 1 to the Project Agreement and as the same may be amended from time to time by agreement between the Association, Gujarat, ARC and LDB. (c) The Borrower shall make available the proceeds of the Credit in respect of Category III of the allocation of the proceeds of the Credit set forth in Schedule I to this Agreement to Gujarat. Section 4.03. The Borrower shall take all action which shall be necessary on its part to enable (i) Gujarat to perform all its obligations under the Gujarat Agreement, and (ii) ARC and LDB to perform their obligations under the Project Agreement and the Subsidiary Loan Agreement, and shall not take or permit any of its agencies to take any action which would prevent or interfere with the performance of any such obligations of Gujarat, ARC or LDB. Section 4.04. (a) The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accompl'shed. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Project and the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower and the international balance of payments position of the Borrower. (b) The Borrower and the Association shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Credit and the maintenance of the service thereof. The Borrower shall promptly inform the Association of any condition which interferes with. or threatens to interfere with, the accomplishment of the purposes of the Credit or the maintenance of the service thereof. (c) The Borrower shall afford all reasonable opportunity f6r accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. Section 4.05. Except as the Borrower and the Association shall otherwise agree, the Borrower undertakes to insure, or cause to be insured, the imported goods to be financed out of the proceeds of the Credit against marine, transit and other hazards incident to acquisition, transportation and delivery thereof to the place of use or installation and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. 9 Section 4.06. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes, and free from all restrictions, imposed under the laws of the Borrower or laws in effect in its territories. Section 4.07. This Development Credit Agreement, the Gujarat Agreement and the Project Agreement shall be free from any taxes that shall be imposed under the laws of the Borrower or laws in effect in its territories on or in connection with the execution, delivery or registration thereof. ARTICLE V Remedies of the Association Section 5.01. If any event specified in Section 7.01 of the General Conditions or in Section 5.02 of this Agreement shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such principal, together with such charges, shall become due and payable immediately, anything in this Development Credit Agreement to the contrary notwithstanding. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) A default shall have occurred in th,. performance of any obligation of Gujarat under the Gujarat Agreement and such nonperformance shall continue for a period of sixty days. (b) A default shall have occurred in the performaice of any obligation of ARC or LDB under the Project Agreement or the Subsidiary Loan Agreement and such nonperformance shall continue for a period of sixty days. Section 5.03. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: An extraordinary situation shall have arisen which shall make it improbable that (i) Gujarat will be able to perform its obliga ions under the Gujarat Agreement, or (ii) ARC or LDB will be able to perform their respective obligations under the Project Agreement or the Subsidiary Loan Agreement. å 10 ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effeetiveness of this Development Credit Agreement within the meaning of Section 10.01 (b) of the General Conditions: (a) The execution and delivery of the Gujarat Agreement on behalf of Gujarat have been duly authorizecd or ratified by all necessary governmental action. (b) The execution and delivery of the Project Agreement on behalf of ARC and LDB respectively have been duly authorized or ratified by all necessary corporate action. (c) The execution and delivery of the Subsidary Loan Agreernent on behalf of the Borrower, ARC and LDB respectively have been duly authorized or ratified by all necessary governmental and corporate action. (d) LDB shall have appointed the head of the technical staff at its head office and the technicians-in-charge in cach of its four division offices. (e) LDB, and, in the case of (ii) hereunder, Gujarat shall have adopted measures necessary to enable LDB to (i) raise the limit on loan valuC to at least 67% of appraised value of collateral, and (ii) grant loans to drilling contractors. Section 6.02. The following are specified as additional matters, within the rmeaning of Section 10.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to Ilie Association: (a) that the Gujarat Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, Gujarat and constitutes a valid and binding obligation of Gujarat in accordance with its terms; (b) that the Project Agreernent has been duly authorized or ratifiecd by, and executed and delivered on behalf of, ARC and LDB respectively, and constitutes a valid and bindmg obligation of ARC and LDB in accordance with its terms; . . 11 (c) that the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower, ARC and LDB respectively, and constitutes a valid and binding obligation of the Borrower, ARC and LDB in accordance with its terms; and (d) that Gujarat has issued a notification under Section 116 of the Gujarat Co-operative Societies Act, 1961 authorizing LDB to grant loans under Part II of the Project. Section 6.03. The date of September 3, 1970 is hereby specified the purposes of Section 10.04 of the General Conditions. Section 6.04. On termination of the Project Agreement in accordance with its terms, the obligations of the Borrower with respect to the Project, shall forthwith terminate. ARTICLE VII Miscellaneous Section 7.01. The Closing Date shall be June 30, 1974 or such other date as shall be agreed between the Borrower and the Association. Section 7.02. Any of a Secretary, Special Secretary or Joint Secretary to the Government of India in the Ministry of Finance of the Borrower or the Director of the Department of Economic Affairs in the Ministry of Finance of the Borrower, acting singly, is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 7.03. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: The Secretary to the Government of India Ministry of Finance Depaortment of Economic Affairs New Delhi, India 12 Alternative address for cables: Ecofairs New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Alternative address for cables: Indevas Washington, D.C. IN WITNESS WHEREOF, the partics hereto, acting through their representatives thereunto duly authorized, have caused this Development Credit Agreemnent to be signed in thieir respec-tive namecs and to be delivered ini the District of Columbia, United States of America, as of the day and year first above written. INDIA By /s/ Maharajakrishna Rasgotra Autliorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ J. Burke Knapp Vice President 13 SCHEDULE 1 Allocation of Proceeds of Credit Amounts Expressed Category in Dollar Equivalent I. Tractors, Tractor Spare Parts, Harvesters, Discs, and Plougli Bottoms 7,400,000 II. Minor Irrigation Equipment and Facilities 27,300,000 III. Consultant Services 300,000 Total 35,000,000 14 SCHEDULE 2 Description of the Project The Project is a lending program to finai,ce investments in minor irrigation facilities and equipment, and in farm mechanization (including the provision of spare parts). The Project also includes a study of Gujarat's groundwater resources and development. Specifically, the Project includes: Part 1: Provision of long-term finance to farmers in the Project area for investments in minor irrigation equipment and facilities, and specifically, in the installation of pump sets to existing open wells; construction of new open wells complete with pump sets; transformation of old wells into dug-cum-bore wells complete with pump sets; installation of shallow and deep tubewells; construction of lift irrigation schemes; laying of pipelines; lining of distributaries and field channels, and electricity connections foi installations financed under the Project. Part II: Provision of long-term finance to contractors for the purchase of drilling rigs, including necessary ancillary equipment and spare parts. Part III: Provision of long-term finance to farmers for the purchase of tractors, tractor implements and harvesters. Part IV: Study of the groundwater resources and development of the Project area. 15 SCHEDULE 3 Equiprnent Required for the Project 1. Tractors above 25 lip. 2. Tractor Implements: tillers, trailers, ridgers, terracers, seed drills, seed-cumn-fertilizer drills, disc and miould ploughs. 3. Harvesters. 4. Tractor spare parts. 5. Drilling rigs, including necessary ancillary equipment and spare parts. 6. Pumps, engines, electric motors, electric connections, lining of open wells, tubes for shallow and deep tubewclls, pipes for lift irrigation schemes, and pipes and lining for field channels and distributaries. 16 SCHEDULE 4 Principal Terms of Subsidiary Loan Agreement The following sets forth the principal terms and conditions under which the proceeds of the Credit or the equivalent thereof shall be lent to ARC and LDB: 1. Lending Terms to ARC from India: (a) Term: 9 years. (b) Repayment terms: one lump sum repayment for each drawing by ARC at the end of 9 years. (c) Interest rate: 5% per annum with 1/4% rebate for prompt payment of interest and principal. (d) Exchange risk: for account of India. 2. Lending Terms to LDB from ARC: (a) Amount: ARC would refinance no more than 75% of loans for tractors, tractor implements and harvesters, and 90% of loans for minor ) irrigation investments. (b) Repayment terms: set to coincide, more or less, with expected collections of loans granted by LDB under the Project. (c) Interest rate: 6-1/2% per annum on outstanding balance. 3. Re-use of Funds under the Credit: Except as the Association shall otherwise agree, repayments to ARC from LDB shall be deposited in a special account to be used only for refinancing ARC-approved agricultural development schemes, such schemes to be carried out in conformity with sound administrative, agricultural and financial practices. 17 SCHEDULE 5 Procurement Procedure 1. Tractors: LDB will undertake procurement of tractors in accordance with the following procedures: (a) LDB would obtain quotations for lots of at least 700-800 tractors per year in order to import about 2,200 tractors. Quotations will be sought by public invitation, on unit prices at varying quantities, from those suppliers in Bank-member countries and Switzerland who have established tractor manufacturing facilities in India, or have obtained necessary approvals of the Borrower, for the manufacture of tractors in India, prior to the date on which quotations are sought. Invitations to bid, specifications, all other tender documents and the method and plans of advertising will be submitted to the Association for its prior approval; (b) LDB would require all suppliers submitting quotations (copies of which shall be transmitted to the Association for its review and comment) to give full particulars as to after-sales service arrangements, including provision for spare parts equal to 16.5% of the c.i.f. value of tractors supplied (estimated requirement for first three years of the life of a tractor). Any supplier not providing satisfactory assurances as to after-sales service would be disqualified; (c) LDB would advertise the quoted prices and the after-sales service offered by the different suppliers. Farmers would be required to state their choices, in order of preference, of tractors which they would be willing to buy; (d) LDB would aggregate the orders received, according to first tractor choices. If the aggregate orders for the particular model came. to below the minimum acceptable order for that manufacturer at the unit prices quoted for varying quantities, LDB would discard the first choice for those farmers and proceed on the basis of second or other choices as agreed to by the Association. LDB would send to the Association its analysis of bids and its recommendations for orders before orders are placed and not place any order before its approval by the Association; (e) LDB would then enter into contracts with the selected suppliers at the unit prices quoted for the number of tractors ordered. Contracts would specify after-sales service arrangements and performance assurances including the supply of spare parts. Dealers representing suppliers would be required to sell post-warranty service. 18 2. Harvesters, discs and plough bottoms: Suppliers of harvesters selected by the farmers will be permitted to import up to ten harvesters. Manufacturers of disc and mould ploughs selected by the farmers will be allowed to import discs and plough bottoms to enable manufacture of these implements.