India - Binar Agricultural Markets Project : Credit 0294 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 294 IN Project Agreement (Bihar Agricultural Markets Project) BETWEEN 0 INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND STATE BANK OF INDIA DATED MARCH 29, 1972 CONFORMED COPY CREDIT NUMBER 294 IN Project Agreement (Bihar Agricultural Markets Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND STATE BANK OF INDIA DATED MARCH 29, 1972 PROJECT AGREEMENT AGREEMENT, dated March 29, 1972, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and AGRICULTURAL REFINANCE CORPORATION (hereinafter called ARC) and STATE BANK OF INDIA (hereinafter called SBI). WHEREAS by a development credit agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association (hereinafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to fourteen million dollars ($14,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition inter alia that ARC and SBI agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by an agreement of even date herewith between the State of Bihar, acting by its Governor, (hereinafter called Bihar) and the Association, Bihar * has agreed to undertake certain obligations in respect of the carrying out of the Project; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and ARC, the proceeds of the Credit under Category I will be made available to ARC, and ARC in turn will make the said proceeds available to SBI by a refinance agreement to be entered into between ARC and SBI; and WHEREAS ARC and SBI, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. 4 ARTICLE II Execution of the Project Section 2.01. ARC and SBI shall carry out that portion of Part A of the Project for which they are respectively required to make funds available under the Project, or cause said portion to be carried out, with due diligence and efficiency and in conformity with sound financial, administrative, engineering and town planning practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. The operating policies and procedures for the carrying out of the Project shall be as set forth in Schedule 1 hereto as the same may be amended by agreement between the Association, ARC and SBl. Section 2.03. (a) ARC shall enter into a subsidiary loan agreement with the Borrower under terms and conditions which shall have been approved by the Association, including those set forth in Schedule 4 to the Development Credit Agreement. (b) ARC and SBI shall enter into a refinance agreement under terms and conditions which shall have been approved by the Association, including those set forth in Schedule 2 hereto. (c) ARC shall duly perform all its obligations under the Subsidiary Loan Agreement and ARC and SBI shall duly perform all their respective obligations under the Refinance Agreement. Except as the Association shall otherwise agree, ARC and SBI shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving said Agreements or any provision thereof. Section 2.04. Except as the Association shall otherwise agree, SBI shall, as far as practicable, cause Market Committee beneficiaries of loans to lease the storage godowns and the traders' shops to be constructed under the Project in accordance with the requirements of paragraph 3 of Schedule I hereto. Section 2.05. SBI shall designate an officer of appropriate rank in its Central Office in Bombay to be responsible for overall loan operations of SBI. Section 2.06. SBI shall appoint and maintain an agricultural marketing unit in its regional office in Patna to appraise loan applications, which unit shall include one marketing specialist, one financial analyst and one civil engineer, with 5 qualifications and experience acceptable to the Association. SBI shall provide these personnel with expenses and transportation for field work in connection with appraisals of proposed loans, monitoring of expenditures, and supervision of Market Committees during the loan repayment period. Section 2.07. SBI: (i) shall maintain, or cause to be maintained, records adequate to record the progress of Part A of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit, and to disclose the use thereof in the Project; (ii) shall enable the Association's representatives, or cause them to be enabled, to inspect the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association or cause the Association to be furnished all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. Section 2.08. Except as the Association shall otherwise agree, SBI shall ensure that all goods and services to be financed out of the proceeds of the Credit under Category I shall be procured in accordance with, and subject to, the provisions set forth in Schedule 3 to the Development Credit Agreement. ARTICLE III Management and Operations of ARC and SBI Section 3.01. ARC and SBI shall: (a) at all times manage their affairs, maintain their financial position, plan their future expansion and carry on their operations, all in accordance with sound business and financial practices and under the supervision of experienced and competent management assisted by experienced and competent staff in adequate number; and (b) take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of their business or in the carrying out of the Project. ARTICLE IV Financial Covenants Section 4.01. ARC and SBI shall, and SBI shall cause Market Committee beneficiaries of loans to, maintain records adequate to reflect in accordance with consistently maintained sound accounting practices their operations and financial condition. 6 Section 4.02. ARC and SBI shall, and SBI shall cause Market Committee beneficiaries of loans to: (i) establish and maintain separate accounts in respect of all funds disbursed and received on account of the Project; (ii) have their accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (iii) furnish to the Association as soon as available, but in any case not later than four 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, including a certification that to the best of the auditors' knowledge, all loans have been made for purposes of the Project; and (iv) furnish to the Association such other information concerning their accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association, ARC and SBI shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association, ARC and SBI shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the obligations of ARC under the Subsidiary Loan Agreement, the respective obligations of ARC and SBI under the Refinance Agreement, the administration, operations and financial condition of ARC or SBI and other matters relating to the purpose of the Credit. Section 5.02. The Association, ARC and SBI shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, or the performance by any of them of their respective obligations under the Agreements referred to in Section 5.01 hereof. Section 5.03. ARC and SBI shall enable the Association's representatives to inspect all properties and their respective records and documents relevant to the Project. 7 ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the Effective Date. Section 6.02. (a) This Agreement and all obligations of the Association and of ARC and SBI thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date when all principal amounts withdrawn by ARC under the Subsidiary Loan Agreement, and by SBI under the Refinance Agreement, shall have been repaid. (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 ARC and SBI of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any partial cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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 designated by notice to the party giving such notice or making such request. The addresses so specified are: 8 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. For ARC: Managing Director Agricultural Refinance Corporation Shri Niketan F Block Shiv Sagar Estate Dr. Annie Besant Road Worli, Bombay, 18 W.B. India Cable address: Agrofinans Bombay For SBI: State Bank of India Central Office Bombay 1, B.R. India Cable address: Apex Bombay Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf 9 of (i) ARC may be taken or executed by its Managing Director or such other person or persons as ARC shall designate in writing; and (ii) SBI may be taken or executed by its Managing Director or such other person or persons as SBI shall designate in writing. Section 7.03. ARC and SBI shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ARC and SBI, take any action or execute any documents required or permitted to be taken or executed by ARC and SBI, respectively, pursuant to any of the provisions of this Agreement. Section 7.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / J. Burke Knapp Vice President AGRICULTURAL REFINANCE CORPORATION By /s / L. K. Jha Authorized Representative STATE BANK OF INDIA By /s / L. K. Jha Authorized Representative 10 SCHEDULE 1 Operating Policies and Procedures 1. Plans for market development All Market Committees wishing to participate in the Project shall, with the assistance of TPO and REO, prepare plans for the development of market yards and shall submit them to SMB for final approval. Such plans shall include: (a) survey and land preparation to ensure adequate drainage and sanitary facilities in an area sufficient to handle arrivals projected at least 10 years in the future; (b) lay-outs including entrance roads; (c) internal surfacing; (d) fencing; (e) utilities, including electricity and potable water for human and animal consumption; (f) office complex; (g) platforms; (h) cleaning and grading equipment; (i) godowns to be operated as a public warehouse for use by the farmers through the State Warehousing Corporation or other appropriate agency or organization recognized in this behalf by Bihar and as an overflow for the traders in the market area. This storage shall be in addition to the private storage to be owned and operated by the traders; and (j) traders' shops. The plans for the market shall wherever necessary also provide for locations for a bank, a post office, extension services, cooperative marketing and credit associations and input shops. * 11 In designing said plans, the following shall inter alia be taken into account: (a) current and projected quantities of produce coming to the market; (b) the total land area needed, based on the projected quantities; (c) the availability of alternative sites within or near the market town; (d) the availability of utilities and access to roads and other modes of transport, and traffic flows of the town in relation to the prospective site; (e) a topographic survey of the prospective site for sanitary and drainage purposes; and (f) the buildings, equipment, roadways and other facilities necessary for proper development of the market yard. 2. Appraisal of loan applications The market development plans approved by SMB shall be submitted to SBI. SBI shall prepare an appraisal report which shall include an evaluation of the technical, financial and organizational aspects of the market for which finance is sought. SBI shall submit the loan application and all supporting documentation and its appraisal report to ARC. ARC, after reviewing such documents and verifying the date and conclusions therein to its satisfaction will advise SBI of its approval or disapproval of the particular loan for purposes of refinancing. Except as the Association shall otherwise agree, loans shall be made only where the appraisal report shows that: (a) the area of the market yard shall be at least 6 hectares, and shall be increased by 1 hectare for every 20 ton/day of average market arrivals (calculated on an annual basis) in excess of 125 ton/day; (b) the main roads within the market yard and the entrance road connecting the market yard to main thoroughfare shall be hard-surfaced; (c) a fence shall be constructed; 12 (d) water and sewer supply system shall be constructed in accordance with minimum standards of the Indian Standards Institute; (e) a minimum of 20 traders' shops shall be built; (f) display platforms having a surfaced area of at least 1,000 m2 in the aggregate shall be built; and (g) a storage godown of 1,000 ton capacity shall be built in each market having an average arrival of more than 150 ton/day, or promptly after the market reaches said rate of arrivals. 3. Leases of market facilities Market Committee beneficiaries of loans shall lease land within the market yard financed thereunder for banks, post offices, cooperative marketing and credit associations, and to private vendors for input shops. A Market Committee shall also lease the storage godowns to the State Warehousing Corporation or any organization or agency mentioned in paragraph 1 (i) of this Schedule and the traders' shops to private wholesalers and traders. These leases shall have terms of not less than one year, and shall carry a rental based on all operating costs to the Market Committee concerned, including a proper portion of administrative costs, interest expense, depreciation, maintenance costs and utility services. All leases shall be conditioned upon proper use and maintenance of the facility. No construction shall be permitted on such leases without approval of the specific plans and specifications by SMB and TPO to ensure conformity with marketing planning. 13 SCHEDULE 2 Principal Terms of Relending Agreements 1. To SBI from ARC (a) Amount: ARC shall refinance 85% of the total investment costs other than land. (b) Repayment terms: set to coincide, more or less, with expected collections of loans. (c) Interest rate: 6-1/2% per annum. 2. To Market Committees from SBI (a) Amount: SBI shall finance 95% of the total investment costs other than land. (b) Repayment terms: up to 15 years including 2, and exceptionally up to 3, years of grace. (c) Interest rate: 9% per annum. (d) Interest to be paid on outstanding balance.