India - Sindri Fertilizer Project : Credit 0520 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 520 IN Development Credit Agreement (Sindri Fertilizer Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED DECEMBER 18, 1974 I CONFORMED COPY CREDIT NUMBER 520 IN Development Credit Agreement (Sindri Fertilizer Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED DECEMBER 18, 1974 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated December 18, 1974, between INDIA, acting by its President (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) The Project will be carried out by the Fertilizer Corporation of India with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Fertilizer Corporation of India the proceeds of the Credit as hereinafter provided; and (C) The Association is willing to make the Credit available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Association and the Fertilizer Corporation of India; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the following modification thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions), namely, that paragraph 5 of Section 2.01 is amended to read as follows: "5. The term Borrower means India, acting by its President." Section 1.02. Wherever used in this 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: 4 (a) "FC" means the Fertilizer Corporation of India, a company established under the Companies Act, 1956, as amended, of India; (b) "Project Agreement" means the agreement between the Association and FCI of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and FCI pursuant to Section 3.01(b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement, if any; (d) "Sindri Unit" means the fertilizer production facilities owned by FCI and located in Sindri, Bihar; (e) "Rs" means rupees in the currency of the Borrower; and (f) "Sindri Renovation Program" means renovation to be undertaken by FC1 at the Sindri Unit, set forth in the document dated October 9, 1974, as the same may be amended by FCI in consultation with the Borrower and the Association. ARTICLE 11 The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount ini various currencies equivalent to ninety-one million dollars ($9 1,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 LO this Agreement, as such Schedule may be amended from time to time, 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. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for the carrying out of works or services (other than consultants' services) for the Project to be financed out of the proceeds of the Credit, shall be awarded in accordance with the provisions set forth or referred to in Section 2.04 of the Project Agreement. 5 Section 2.04. The Closing Date shall be September 30, 1978 or such other date as shall be agreed between the Borrower and the Association. 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. Service charges shall be payable semi-annually on May I and November I in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each May I and November 1 commencing May 1, 1985 and ending November 1, 2024, each installment to and including the installment payable on November 1, 1994 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. Section 2.08. 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. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause FCI to perforn in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth, shall take or cause to be taken all action, including the provision of funds (an investment estimated at Rs.1,416 million), facilities, services and other resources, necessary or appropriate to enable FCI to perform such obligations, and shall not take or cause or permit any of its political subdivisions or any of its agencies or any agency of any such political subdivisions to take any action which would prevent or interfere with such performance. Funds, (i) equivalent to the proceeds of the Credit shall be provided in the form of debt pursuant to the Subsidiary Loan Agreement, (ii) estimated at Rs.72 million may be provided in the form of short-term debt, and (iii) remaining within the said estimate shall be provided in the form of equity. Funds in excess of the present cost estimate, if needed, shall be provided with at least half as equity. (b) The Borrower shall relend funds equivalent to the proceeds of the Credit to FCI under a subsidiary loan agreement to be entered into between the 6 Borrower and FCI under terms and conditions acceptable to the Association which shall include, inter alia, the following: (i) the loan will be repaid by FCI to the Borrower in ten equal annual installments commencing five years from the Effective Date, and (ii) interest, including special charges, if any, shall be paid on the outstanding balance from time to time at an effective rate of ten and one-fourth per cent (10-1/4%) per annum. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. ARTICLE IV Other Covenants Section 4.01. (a) When, with respect to any equipment to be procured under Section 2.04 of the Project Agreement, the lowest evaluated bid falls under Group C (as defined in paragraph B(2)(b) of Schedule I to the Project Agreement), the Borrower shall immediately grant permission to import the goods covered by the contract, and no reviews of such permission to import shall be made by the Borrower or by any of its agencies, and all foreign exchange required therefor shall be promptly made available. When, with respect to any contract, the lowest evaluated bid falls under Group A or under Group B (as defined in paragraph B(2)(b) of Schedule I to the Project Agreement), the Borrower shall (i) promptly upon receipt of the appropriate applications, issue, or cause to be issued, such import licenses as shall be required to implement the contract, (ii) make available, or cause to be made available, promptly as needed, all foreign exchange which shall be required therefor, and (iii) with respect to locally produced materials which are subject to allocation, make, or cause to be made, allocations of such materials promptly and in such quantities as shall be required for such contract. (b) Whenever it is determined, pursuant to Section 2.04(b) of the Project Agreement, that any equipment or material cannot be delivered on or prior to its scheduled delivery date and that such delay would adversely affect the completion of the Project, the Borrower shall promptly take all necessary action to permit FCI to procure such equipment or material by such procedures as shall be satisfactory to the Association. 7 Section 4.02. (a) The Borrower shall make arrangements satisfactory to the Association for the supply of all materials, including the importation of phosphate rock, if and when necessary, in such quantities as sha. be adequate to operate the Sindri Unit up to full capacity. (b) The Borrower shall take or cause to be taken all action necessary to ensure that adequate railway wagons are made available to FC1 for the operations of the Sindri Unit. Section 4.03. The Borrower shall make available to FCI sufficient funds, promptly as needed, to complete all of FCI's ongoing fertilizer production projects and such other similar projects as may be undertaken by FCI, on terms which shall not undermine FCI's sound financial position. For the purposes of this Section, the term "complete" means the date upon which the manufacturing facilities included in the aforesaid projects have been tested and proven to be satisfactory in accordance with sound engineering procedures and practices, and have maintained an average daily production rate of 8095 of full capacity during a period of thirty consecutive days. Section 4.04. The Borrower shall not take or cause to be taken any action which, assuming production under conditions of efficient operation, would prevent fertilizer manufacturers in the territories of the Borrower from meeting their expenses and servicing debt out of their revenues, and from earning a reasonable return on invested capital. Section 4.05. The Borrower shall make available to FC1 funds sufficient to complete the Sindri Renovation Program of which at least 50(r shall be in the form of equity and the remainder as a medium- to long-term loan on terms and conditions normally applicable to the Borrower's loans to FC. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) FCI shall have failed to perform any covenant, agreement or obligation under the Project Agreement or the Subsidiary Loan Agreement; (b) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of FCI or for the suspension of its operations; 8 (c) FCI or any authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Sindri Unit or for the suspension of its operations; and (d) an extraordinary situation shall have arisen which shall make it improbable that FCI will be able to perform its obligations under the Project Agreement or the Subsidiary Loan Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditiol1s, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.0 1 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower and FCI; and (b) any event specified in paragraph (b) or (c) of Section 5.0 1 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01(b) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of FCI have been duly authorized or ratified by all necessary corporate and governmental action; and (b) the execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and FCI, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. Section 6.02. The following are specified as additional matters, 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: (a) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, FCI, and is legally binding upon FCI in accordance with its terms; and 9 (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and FCI, and is legally binding upon the Borrower and FC1 in accordance with its terms. Section 6.03. The date February 28, 1975 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Sections 4.02, 4.03 and 4.04 of this Agreement and the provisions of paragraph (b) of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 16 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Any Secretary, Additional Secretary, Joint Secretary, Officer on Special Duty, or Director/Deputy Secretary in the Ministry of Finance, Department of Economic Affairs 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: For the Borrower: The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India Cable address: ECOFAIRS New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America 10 Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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/ T. N. Kaul Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s!/ M. L. Weiner Regional Vice President South Asia 11 SCHEDULE 1 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 all cation 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 Dollar Equivalent) to be Financed (1) Equipment, material 81,200,000 100% of total and spare parts expenditures (2) Engineering and 5,800,000 100% of foreign consultants' ser- expenditures vices (3) Unallocated 4,000,000 TOTAL 91,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods or services supplied from, the territory, and in the currency, of any country other than the Borrower; and (b) the term "total expenditures" means the aggregate of foreign expenditures and of expenditures for goods produced in or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to September 20, 1974; (b) payments for taxes imposed under the laws of the Borrower or laws in effect in its territory on guods or services, or on the importation, manufacture, 12 procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph I above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes; and (c) expenditures for freight and insurance for transportation within the territory of the Borrower. 4. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph I above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category to the extent required to meet the estimated shortfall proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 5. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 13 SCHEDULE 2 Description of the Project The Project consists of the design, construction and start-up of a fertilizer plant to produce ammonia and urea at FCI's Sindri Unit with daily capacity of about 900 tons of ammonia and about 1,000 tons of urea. Total annual production would be about 297,000 tons of ammonia of which about 191,000 tons would be converted into approximately 330,000 tons of urea, leaving approximately 94,000 tons for conversion into ammonium sulphate and approximately 12,000 tons for conversion into ammonium nitrate or nitric acid or for sale as ammonia. The proposed plant will be located within the confines of the Sindri Unit situated on the west bank of the Damodar River about 25 km from Dhanbad in the State of Bihar and will include facilities for the storage of ammonia and for the bagging, storage and rail shipment of urea. The Project includes utilization of engineering and consultant services, acquisition and installation of plant and equipment and acquisition and utilization of materials and spare parts. The Project is expected to be completed by March 31, 1978.