India - Trombay IV Fertilizer Expansion And Plant Operations Improvement Project : Credit 0481 - Credit Agreement - Conformed

- 6 7 CONFORMED COPY CREDIT NUMBER 481 IN Development Credit Agreement (Trombay IV Fertilizer Expansion and Plant Operations Improvement Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 19, 1974 CONFORMED COPY CREDIT NUMBER 481 IN Development Credit Agreement (Trombay IV Fertilizer Expansion and Plant Operations Improvement Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 19, 1974 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 19, 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) Parts A and B of 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 part of the proceeds of the Credit as hereinafter provided; (C) Part C of the Project will be carried out by the Fortilisers and Chemicals, Travancore Limited with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Fertilisers and Chemicals, Travancore Limited part of the proceeds of the Credit as hereinafter provided; and (D) The Association is willing to make the Credit available upon the terms and conditions set forth 1ereinafter 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." 4 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: (a) "FCI" means the Fertilizer Corporation of India, a company established under the Companies Act, 1956, as amended, of India; (b) "FACT" means the Fertilisers and Chemicals, Travancore Limited, a company established under the Companies Act, 1956, as amended, of India; (c) "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; (d) "Subsidiary Loa- 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; (e) "Power-Gas" means Davy Power Gas GmbH, Cologne, Federal Republic of Germany; (f) "Uhde" means Friedrich Uhde GmbH, Dortmund, Federal Republic of Germany; (g) "Trombay IV" means the proposed expansion of nitric acid and nitrophosphate fertilizer production in the Trombay Unit under Part A of the Project; (h) "Trombay V" means the proposed ammonia/urea project in the Trombay Unit; (i) "Trombay Unit" means the fertilizer production facilities owned by FCI and located in Bombay, Maharashtra, including proposed expansion under the Trombay IV and the Trombay V; and (j) "Plant Operations Improvement Program" means a program for the commissioning and improvement of operations of FCI and FACT fertilizer plants. 5 ARTICLE II 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 in various currencies equivalent to fifty million dollars ($50,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to 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. Section 2.04. The Closing Date shall be December 31, 1977 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 January 1 and July 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each January I and July 1 commencing July 1, 1984 and ending January 1, 2024, each installment to and including the installment payable on January 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. 6 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 perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth, cause FACT to perform its undertakings in accordance with the provisions referred to in Section 3.03 of this Agreement, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable FCI and FACT 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 by FCI and FACT. (b) To carry out Part A of the Project, the Borrower shall relend the equivalent of $33,000,000 out of the proceeds of the Credit to FCI under a subsidiary loan agreement to be entered into between the 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 the rate of nine and one-half per cent (9-1/2%) per annum. (c) To carry out Parts B and C of the Project, the Borrower shall make available to FCI and FACT such part of the proceeds of the Credit as shall be agreed to by the Association, under terms and conditions satisfactory to the Association. (d) 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. Section 3.02. The Borrower shall take, or cause to be taken, all steps necessary to implement the Plant Operations Improvement Program Implementation Plan, dated May 15, 1974, submitted to and approved by the Association. 7 Section 3.03. The Borrower shall obtain from FACT an undertaking, in a form approved by the Association: (i) to carry out Part C of the Project with due diligence and efficiency and in conformity with sound engineering, financial and administrative practices; (ii) in carrying out Part C of the Project, to employ, where necessary, consultants acceptable to the Association, upon terms and conditions satisfactory to the Association; (iii) to procure equipment, spares and materials to be financed out of the proceeds of the Credit made available to it by the Borrower, in accordance with the provisions of Schedule I to the Project Agreement and to use such goods exclusively in the carrying out of Part C of the Project; (iv) to furnish to the Association through the Borrower promptly upon their preparation, reports, contract documents and construction and procurement schedules for Part C of the Project and any material modifications subsequently made therein, in such detail as the Association shall from time to time request; (v) to maintain records adequate to identify the goods and services acquired out of the proceeds of the Credit made available to it by the Borrower, to disclose the use thereof in the Project, to record the progress of Part C of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of FACT; (vi) to allow the Association's representatives to inspect Part C of the Project, the goods financed out of the proceeds of the Credit and to examine all plants, installations, sites, works, buildings, property and equipment of FACT, included in the Project, the operation thereof and any relevant records and documents; (vii) to insure with responsible insurers, or make adequate provision for the insurance of, all goods acquired out of the proceeds of the Credit made available to it by the Borrower, such insurance shall cover such marine, transit and other risks incident to the acquisition, transportation and delivery thereof to the place of use or installation; shall be for such amounts as shall be 8 consistent with sound business practices; and for such insurance any indemnity shall be payable in a currency freely usable by FACT to replace or repair such goods; (viii) in addition, to insure against such risks and in such amounts as shall be consistent with sound business and engineering practices or to make other adequate arrangements to cover promptly any damage or losses resulting from such risks; (ix) to inform the Borrower and the Association promptly of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the carrying out of Part C of the Project; (x) to give all such information as the Association shall reasonably request relating to the financial condition, the operation and administration of FACT; (xi) to furnish to the Association all such information as the Association shall reasonably request concerning Part C of the Project, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds; and (xii) to (A) have its accounts and financial statements (balance sheets, statements of income and expenses and related stater.ments) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (B) furnish to the Association as soon as available, but, in any case not later than four months after the end of each such year, (1) certified copies of its financial statements for such year as so audited and (2) report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (C) furnish to the Association such other information concerning the foregoing accounts and financial statements as the Association shall from time to time reasonably request. 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 9 C (as defined in paragraph B(2)(b) of Schedule 1 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 1 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. Section 4.02. The Borrower shall make arrangements satisfactory to the Association for the supply of all materials, including ammonia and phosphate rock, by permitting imports if and when necessary, in such quantities as shall be adequate to operate the Trombay Unit up to full capacity. Section 4.03. The Borrower shall take all action necessary to ensure that adequate electrical power is made available to FCI for operations of the Trombay Unit. Section 4.04. The Borrower covenants to make available to FCI sufficient funds to satisfy any third party claims filed prior to the date of this Agreement and awarded against FCI by a court or tribunal of competent jurisdiction. Section 4.05. The Borrower shall provide FCI with sufficient funds, promptly as needed, to complete all of FCI's ongoing fertilizer production projects and such other similar projects as m-y 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 maintained an average daily production rate of 80% of full capacity, during a period of thirty consecutive days. 10 Section 4.06. 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. 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) a default shall have occurred on the part of FACT in the performance of any undertaking referred to in Section 3.03 of this Agreement; (c) 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; (d) FCI or any authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Trombay Unit or for the suspension of its operations; (e) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of FACT or for the suspension of its operations; and (f) 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 Conditions, the following additional events are specified: (a) the event specified in paragraphs (a) or (b) 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, and FCI or FACT, as the case may be; and -VP. (b) any event specified in paragraphs (c), (d) or (e) of Section 5.01 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 FCl 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 event is specified as an additional condition to the effectiveness of the portion of the Credit allocated under Category 2 of Table I set out in Schedule 1 to this Agreement, and to be withdrawn from the Credit Account for carrying out Part C of the Project, namely, that the Association has approved the undertaking referred to in Section 3.03 of this Agreement. Section 6.03. 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 constitutes a valid and binding obligation of FCI in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been authorized or ratified by, and executed and delivered on behalf of, the Borrower and FCI, respectively, and constitutes a valid and binding obligation of the Borrower and FCI in accordance with its terms. Section 6.03. The date August 30, 1974 is hereby specified for the purposes of Section 12.04 of the General Conditions. 12 Section 6.04. The obligations of the Borrower under Sections 4.02, 4.03, 4.05, 4.06 and 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 Serretary, 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 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 13 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 Acting Regional Vice President Asia 14 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 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 Dollar Equivalent) to be Financed 1. For Trombay Unit (a) Equipment, 19,500,000 100% of total raterials expenditures and spares (b) License fees 3,600,000 100% of total and design expenditures engineering (c) Erection and 4,600,000 100% of total commissioning expenditures of plants (d) Project man- 1,800,000 100% of total agement and expenditures training 2. For FCI and FACT operations included in Parts B and C of the Project (a) Equipment and 12,000,000 100% of foreign spares expenditures (b) Consumable 2,000,000 100% of foreign materials expenditures 15 Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (c) Technical 3,000,000 100% of foreign Services expenditures 3. Unallocated 3,500,000 TOTAL 50,000,000 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: (a) in respect of expenditures prior to May 1, 1974; (b) payments for taxes imposed under the laws of the Borrower or laws in effect in its territory on goods or services, or on the importation, manufacture, 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; (c) expenditures for freight and insurance in the territory of the Borrower; and 16 (d) in respect of expenditures uider Category 2 of the table set forth in paragraph 1 of this Schedule, until the Association's prior approval shall have been obtained for the use thereof by FCI and FACT, respectively. 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. 17 SCHEDULE 2 Description of the Project The Project is an expansion of the FCI's production facilities in the Trombay Unit designed to increase the production capacity of nitric acid by 250,000 tons per year and nitrophosphate fertilizers by 355,000 tons per year (Part A), and implementation of the Plant Operations Improvement Program to assist FCI and FACT in the production of fertilizers (Parts B and C). The Project comprises: Part A: (i) Construction and commissioning of a nitrophosphate production plant with a capacity of 355,000 tons per year; (ii) Construction and commissioning of a nitric acid plant with a capacity of 250,000 tons per year; (iii) Acquisition and installation of a steam generation unit, cooling towers, bagging machine and storage equipment, water treatment plant and miscellaneous equipment for Trombay IV; and (iv) Utilization of engineering services for procurement and erection of equipment, materials and facilities for Trombay IV. Part B: Utilization of consultants' services; implementation of a training program; purchase and utilization of equipment, spares and materials for FCI to expedite commissioning of plants under construction, and to increase capacity utilization in existing facilities. Part C Utilization of consultants' services; implementation of a training program; purchase and utilization of equipment, spares and materials for FACT to expedite commissioning of plants under construction, and to increase capacity utilization in existing facilities. The Project is expected to be completed by June 30, 1977.