India - Madhya Pradesh Dairy Development Project : Credit 0522 - Madhya Pradesh Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 522 IN Madhya Pradesh Agreement (Madhya Pradesh Dairy Development Project) BETWEEN THE STATE OF MADHYA PRADESH AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED DECEMBER 18, 1974 MADHYA PRADESH AGREEMENT AGREEMENT, dated December 18, 1974, between THE STATE OF MADHYA PRADESH acting by its Governor (hereinafter called Madlhya Pradesh) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) 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 sixteen million four hundred thousand dollars ($16,400,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition, inter alia, that Madhya Pradesh agrees to undertake the obligations toward the Association hereinafter set forth; (B) by an agreement of even date herewith between the Association and Agricultural Refinance Corporation, Agricultural Refinance Corporation has agreed to undertake certain obligations in respect of the carrying out of the Project; and WHEREAS Madhya Pradesh, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has 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 (a so defined) have the respective meanings therein set forth. ARTICLE II Particular Covenants Section 2.01. Madhya Pradesh shall cause MPDDC to carry out Parts A, B, C, D, and E of the Project with due diligence and efficiency and in conformity 4 with sound agricultural, 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 purpose. Section 2.02. Madhya Pradesh shall, and shall cause MPDDC to: (i) maintain records adequate to record the progress 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) enable the Association's representatives to inspect the Project and any relevant records and documents; and (iii) furnish or cause to be furnished to the Association all such information as the Association shall reasonably request, concerning the Project, the services and the operations and financial condition with respect to the Project of the agency or agencies responsible for the carrying out of the Project or any part thereof. Section 2.03. Madhya Pradesh and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, Madhya Pradesh and the Association 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 Project, and other matters relating to the purpose of the Credit. Section 2.04. Madhya Pradesh shall take all action which shall be necessary on its part to enable ARC to perform its obligations under the Project 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 ARC or of Participating Banks associated therewith. Section 2.05. Madhya Pradesh and the Association 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 either of them of its obligations under this Agreement. Section 2.06. (a) Madhya Pradesh shall cause MPDDC to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to MPDDC by ARC against hazards incident to the 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 MPDDC to replace or repair such goods. (b) Except as the Association may otherwise agree, Madhya Pradesh shall cause MPDDC to ensure that all goods and services financed out of the proceeds 5 of the Credit relent or made available to MPDDC to be used exclusively for the Proje ct. Section 2.07. Except as the Association shall otherwise agree, contracts for the purchase of goods, the carrying out of works or services (other than consultants' services) for the Project and to be financed out of the proceeds of the Credit shall be awarded in accordance with the provisions of Schedule I to this Agreement. Section 2.08. Except as the Association shall otherwise agree, MPDDC shall be appointed as sole procurement agent for all items financed out of the proceeds of the Credit. Section 2.09. Madhya Pradesh shall take all steps necessary to ensure that consultants acceptable to the Association, recruited upon terms and conditions satisfactory to the Association, will be employed by MPDDC to assist the Unions in dairy plant engineering, dairy marketing, dairy processing engineering, mass-media communications and tropical pasture/animal production. Section 2.10. Madhya Pradesh shall make available, quarterly in advance, based on estimates prepared by the Unions: (i) to the Unions through MPDDC * funds required to carry out Part Cl of the Project, and (ii) to MPDDC funds required to carry out Part C2 of the Project. Section 2.11. (a) Madhya Pradesh shall, or shall cause MPDDC and the Unions to, take all steps necessary to promote the establishment of approximately 1200 DCS in the Project Area not later than July 1, 1980, or such other date as the Association shall agree. The DCS shall be established under by-laws in conformity with a model acceptable to the Association and shall have been empowered, inter alia, to act as centers for milk collection and for supply of all technical inputs necessary for accelerating milk production. (b) Madhya Pradesh shall make available to each DCS, except as the Association shall otherwise agree, as and when such DCS is established: (i) equipment for milk testing, first-aid and artificial insemination; and (ii) the operating deficit, if any, of each such DCS during the initial period of its operation. Section 2.12. (a) Madhya Pradesh shall take all steps necessary to promote the establishment of three Unions of DCS not later than April 1, 1976, or such other date as the Association shall agree. The said Unions shall be established under by-laws acceptable to the Association and shall be empowered to, inter alia, (i) assist the DCS in organization and management; (ii) establish and supervise milk and cattle feed transportation; (iii) process and market the milk collected from 6 its members; (iv) operate feed mills; (v) provide animal health and breeding services to DCS members of such Union; and (vi) organize training and extension programs. (b) Madhya Pradesh shall at the recommendation of MPDDC, make available to each Union, except as the Association shall otherwise agree, the start-up costs and initial operating deficits of the Unions, such financing to be in the form of share capital, redeemable at par value. Section 2.13. Madhya Pradesh shall make available to MPDDC, except as the Association shall otherwise agree, its start-up costs and initial operating deficits, in the form of redeemable share capital. Section 2.14. Milk producers' unions and cooperative societies in the Project Area in existence at the time of the execution of this Agreement shall not be eligible to participate in the Project. Section 2.15. Madhya Pradesh shall establish and operate a calf-rearing subsidy program in the Project Area. Section 2.16. Madhya Pradesh shall cause MPDDC to make arrangements satisfactory to the Association to: (i) train consultants and executive staff of MPDDC and the Unions, and Union spearhead teams for DCS implementation; (ii) provide first year field supervision; (iii) furnish consulting services to effect a dairy marketing study; and (iv) assist in the preparation of specifications for, and evaluation and award of, tenders for construction of the dairy plants and feed mills. Section 2.17. Madhya Pradesh shall phase out operations at its dairy plants in the cities where Union milk is marketed upon commencement of production at the Union dairy plants. Section 2.18. Madhya Pradesh shall ensure that not later than January 1, 1982, the future role and status of MPDDC is reviewed with the Association. ARTICLE III Management and Operations of MPDDC Section 3.01. Madhya Pradesh shall cause MPDDC to: (i) at all times manage its affairs, maintain its financial position, and carry on its operation, all in accordance with sound business, financial and agricultural practices and under the 7 supervision of experienced and competent management assisted by experienced and competent staff in adequate number; and (ii) 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. Section 3.02. Madhya Pradesh shall cause MPDDC to take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. Madhya Pradesh shall cause MPDDC to maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. Madhya Pradesh shall cause MPDDC to: (i) have an annual audit satisfactory to the Association made of its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year, in accordance with sound auditing principles consistently applied, by independent and qualified auditors; (ii) furnish to the Association as soon as available, and except as the Association shall otherwise agree, not later than six 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 the accounts and financial statements of MPDDC and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. (a) Madhya Pradesh shall cause all DCS and the Unions, as and when they are established, to: (i) 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 its Registrar of Cooperative Societies; (ii) furnish to the Association as soon as available, and, except as the Association shall otherwise agree, not later than six months after the end of each such year, (A) certified copies of the financial statements of the said Unions for such year as so audited and (B) the report of such audit of the financial statements of the said Unions by said Registrar, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such othei information concerning the accounts 8 and financial statements of all DCS and the Unions and the audit thereof as the Association shall from time to time reasonably request. (b) In order to ensure the continuous monitoring of the accounts of the DCS, Madhya Pradesh shall cause the accounts of all DCS to be inspected at least twice a year by the Registrar of Cooperative Societies, in addition to the audit referred to in paragraph (a) of this Section. (c) Madhya Pradesh shall appoint such additional staff as shall be necessary to enable Madhya Pradesh to comply with the provisions of paragraphs (a) and (b) of this Section. Section 4.04. It is the mutual intention of the parties to this Agreement that after the Unions and the DCS are established and operational: (i) the DCS own at least 75% of the shares of the Unions of which they are members; and (ii) that the Unions own at least 75% of the shares of MPDDC. To this end, except as the Association shall otherwise agree: (a) Madhya Pradesh shall offer to sell not less than 75% of its shares of MPDDC, at par value, to the Unions, not later than January 1, 1980. (b) Madhya Pradesh shall offer to sell not less than 75% of its shares of the capital of each Union, at par value, to the DCS members of such Unions, not later than January 1, 1980. (c) these offers shall be made each year until the objectives stated in Section 4.04(i) and (ii) have been attained. Section 4.05. Madhya Pradesh shall make available equity financing required to ensure that MPDDC and the Unions qualify for loans from Participating Banks. Section 4.06. Madhya Pradesh shall take measures to assure that Participating Banks make funds available to MPDDC and the Unions for investments and working capital as required by the Project. Section 4.07. Madhya Pradesh shall ensure that MPDDC and the Unions are served by the optimum number of Banks selected in consultation with ARC. Section 4.08. Madhya Pradesh shall not take any action to restrict the power of the Unions to set, in accordance with sound economic and financial practices, the price for their products, the price paid for milk collected from their members and the charges to be paid by their members for services rendered to them by N, 9 the Unions, provided, however, that Madhya Pradesh may, in such cases as it shall determine, consult with the Unions in respect of their selling price policies. Section 4.09. Madhya Pradesh shall ensure the requisite availability of loans under existing or new lending arrangements, to eligible members of the DCS for minor irrigation for forage production. 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. If the Development Credit Agreement shall terminate pursuant to Section 12.04 of the General Conditions, the Association shall promptly notify Madhya Pradesh of this event and, upon the giving of such notice, this Agreement and all obligations of the parties hereunder shall forthwith terminate. Section 5.02. This Agreement shall terminate and all obligations of Madhya Pradesh and the Association hereunder shall cease and determine on the date on which the Project Agreement terminates in accordance with its terms. Section 5.03. 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 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 designated by notice to the party giving such notice or making such re(quest. The addresses so specified are: 10 For Madhya Pradesh: The Chief Secretary Government of Madhya Pradesh Vallabh Bhawan Bhopal - 462-006 Madhya Pradesh India Cable address: CHIEFSEC Bhopal 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. Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of Madhya Pradesh may be taken or executed by the Chief Secretary, Government of Madhya Pradesh, or such other person or persons as Madhya Pradesh shall designate in writing. Section 6.03. Madhya Pradesh 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 Madhya Pradesh, take any action or execute any documents required or permitted to be taken or executed by Madhya Pradesh pursuant to any of the provisions of this Agreement. Section 6.04. 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 Agreemncnt to be signed in their respective narnes and delivered in the District of Columbia, United States of America, as of the day and year first above written. THE STATE OF MADHYA PRADESH By /s/ T. N. Kaul Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s: Mervyn L. Weiner Regional Vice President South Asia 12 SCHEDULE 1 Procurement A. General Pro cedures 1. Contracts for the major pieces of equipment and materials for Parts A, B2 and B3 of the Project shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. With respect to breeding stock, semen and related equipment included in Category 4 of Schedule I to the Development Credit Agreement, Madhya Pradesh shall cause MPDDC to purchase such goods by inviting quotations from at least three countries free from foot-and-mouth disease, to be selected in agreement with the Association. All purchases under the said Category 4 shall be subject to the approval of the Association as regards age, price, quality, source and suitability of livestock and semen. 3. (a) Contracts for civil works shall be awarded on the basis of competitive bidding advertised locally and in accordance with local procedures, which are satisfactory to the Association. (b) Contracts for goods other than those mentioned or referred to in paragraphs Al and A2 above, shall be let on the basis of prudent shopping. 4. Identical or similar goods shall be grouped together, whenever practicable, for the purpose of procurement. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded, and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the following provisions: 13 (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A': bids offering goods manufactured in India if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in India. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. The lowest evaluated bid of each group shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the lowest evaluated bid from group C shall be selected. C. Review of Procurement Decisions by the Association 1. Review of invitation to bid and of proposed awards and final contracts with respect to equipment and materials referred to in Part Al of this Schedule: With respect to all contracts for such equipment and materials estimated to cost the equivalent of $50,000 or more: 14 (a) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination.