India - Karnataka Dairy Development Project : Credit 0482 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 482 IN Development Credit Agreement (Karnataka Dairy Development Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 19, 1974 CONFORMED COPY CREDIT NUMBER 482 IN Development Credit Agreement (Karnataka Dairy Development 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) By an agreement of even date herewith between the Association and the State of Karnataka acting by its Governor (hereinafter called Karnataka), Karnataka has agreed to undertake certain obligations in respect of the carrying out of the Project; (C) By an agreement of even date herewith between the Association and the Agricultural Refinance Corporation, certain obligations in respect of the carrying out of the Project have been undertaken by the Agricultural Refinance Corporation; and (D) The Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon terms and conditions hereinafter set forth. 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 modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions): (a) in Section 2.01, the following paragraph is substituted for paragraph 5: "5. The term Borrower means India, acting by its President."; 4 (b) Sub-paragraph (i) of paragraph (a) of Section 9.01 is deleted and the following sub-paragraph (i) is substituted therefor: "exchange views through their representatives with regard to the progress of the Project, the benefits derived therefrom and the performance of their respective obligations under the Development Credit Agreement, the performance by the parties to the Karnataka Agreement and to the Project Agreement of their respective obligations under the said agreements." 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) "Karnataka" means The State of Karnataka (formerly known as the State of Mysore) acting by its Governor, a State of India, or any successor thereof. (b) "ARC" means Agricultural Refinance Corporation, a statutory corporation established and organized under the laws of the Borrower. (c) "LDB" means Karnataka State Cooperative Land Development Bank, Limited, a cooperative society established and organized under the laws of Karnataka. (d) "Project Agreement" means the agreement of even date herewith between the Association and ARC, and all schedules thereto, as the same may be amended from time to time. (e) "Karnataka Agreement" means the agreement of even date herewith between Karnataka and the Association, as the same may be amended from time to time. (f) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ARC pursuant to Section 3.01(b) hereof, and all schedules thereto, if any, as the same may be amended from time to time. (g) "Loan" means any loan made or proposed to be made to a Beneficiary and to be financed out of the proceeds of the Credit. (h) "Beneficiary" means (i) any farmer, (ii) group of farmers (iii) a cooperative society carrying out activities relevant to the Project in the territory of Karnataka which is eligible to receive a Loan, or (iv) KDDC. 5 (i) "Participating Bank" means any bank, including Karnataka Cooperative Apex Bank (hereinafter called KCAB) listed in the Second Schedule to the Reserve Bank of India Act, 1934, which has entered into an agreement with ARC in accordance with Section 2.02(c) of the Project Agreement. (j) "KDDC" means Karnataka Dairy Development Corporation, a government corporation to be established under the laws of the Borrower. (k) "Category" means a category of the allocation of proceeds of the Credit set forth in Schedule 1 to this Agreement. (1) "KSI" means the Karnataka Serum Institute, established in the Government of Karnataka. (m) "UAS" means the University of Agricultural Sciences, an educational institution established under the laws of Karnataka. (r.) "DCS" means: (i) the dairy cooperative societies established uuder the laws of Karnataka, as set forth in Section 2.10 of the Karnataka Agreement, and (ii) such multi-purpose cooperative societies as are deemed to be DCS under the provisions of Section 2.11 of the Karnataka Agreement. (o) "Union" means the Milk Producers' Unions to be established as cooperative societies under the laws of Karnataka as set forth in Section 2.12 of the Karnataka Agreement. (p) "Project Area" means the districts of Bangalore, Mysore, Hassan, Tumkur, Chikmagalur, Kolar, Mandya and Coorg. (q) "Rs" means rupees in the currency of the Borrower. 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 thirty million dollars ($30,000,000). 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, 6 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. (a) 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 set forth or referred to in Schedule 1 to the Karnataka Agreement. (b) When, with respect to any contract for goods described in paragraph (a) above, the lowest evaluated bid falls under Group C (as defined in paragraph B(2)(a) of Schedule 1 to the Karnataka 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)(a) of Schedule 1 to the Karnataka 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. Section 2.04. The Closing Date shall be September 30, 1982 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 15 and July 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each January 15 and July 15 commencing July 15, 1984 and ending January 15, 2024, each installment to and including the installment payable on January 15, 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. 7 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) The Borrower shall carry out the Project, or cause it to be carried out, with due diligence and efficiency and in conformity with sound administrative, agricultural and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall enter into a Subsidiary Loan Agreement with ARC on terms and conditions (including inter alia those set forth in Schedule 3 to this Agreement) satisfactory to the Association for the purpose of relending to ARC for relending to the Participating Banks and LDB the equivalent of the proceeds of the Credit under Categories 1(a), II, 111(a) and V. 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 purpose of the Credit and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (c) In order to assist Karnataka in carrying out Parts Bl, C and D of the Project, the Borrower shall make available to Karnataka the proceeds of the Credit under Categories I(b), 111(b), IV and VI. Section 3.02. The Borrower shall take and shall cause all its agencies to take all action which shall be necessary on their part to enable (i) Karnataka to perform all its obligations under the Karnataka Agreement, and (ii) 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. Section 3.03. Except as tht Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.04. Except as the Association shall otherwise agree, the Borrower shall pay in, shares of KDDC in an amount of not less than Rsl,900,000 not later than March 31, 1981, such amount to be in addition to the amount set 8 forth in Section 5.01(e) of this Agreement and such payments to be made as and when needed by KDDC to qualify for loans from Participating Banks. Section 3.05. The Borrower shall take all steps necessary to ensure that the cost to each Union of such cattle feeds as such Union shall have distributed to farmers raising crossbred heifers is reimbursed to such Union. Section 3.06. It is the mutual intention of the parties to this Agreement that, after the Unions are established and operational, the Unions own the majority of the shares of KDDC. To this end, the Borrower shall offer to sell not less than 5% of its shares of KDDC to each Union, at par value, each year, starting not later than January 1, 1982. ARTICLE IV Remedies of the Association Section 4.01. The Association may, upon the occurrence of certain events specified in Sections 6.02 or 7.01 of the General Conditions or in Sections 4.02 or 4.03 of this Agreement and the continuance thereof for the period, if any, specified for the purpose: (i) suspend in whole or in part the right of the Borrower to make withdrawals from the Credit Account or (ii) declare the principal of the Credit the i outstanding to be due and payable immediately together with the interest and other charges thereon. Section 4.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) Karnataka shall have failed to perform any of its obligations under the Karnataka Agreement; ARC shall have failed to perform any of its obligations under the Project Agreement or the Subsidiary Loan Agreement. (b) An extraordinary situation shall have arisen which shall make it improbable that (i) Karnataka will be able to perform its obligations under the Karnataka Agreement, or (ii) ARC will be able to perform its obligations under the Project Agreement or under the Subsidiary Loan Agreement. (c) ARC or KDDC shall have become unable to pay any of their debts as they mature or any action or proceeding shall have been taken by ARC, KDDC or by others whereby any of the property of ARC or KDDC shall or may be distributed among its creditors. 9 (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of ARC or KDDC or any Union or for the suspension of the operations of ARC or KDDC or such Union. Section 4.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) any event specified in paragraph (a) of Section 4.02 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 (b) any event specified in paragraphs (c) and (d) of Section 4.02 of this Agreement shall occur. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) The Project Agreement has been duly executed and delivered on behalf of ARC and has been duly authorized or ratified by all necessary corporate and governmental action. (b) The Subsidiary Loan Agreement has been duly executed and delivered on behalf of the Borrower and ARC and has been duly authorized or ratified by all necessary corporate and governmental action. (c) The Karnataka Agreement has been duly executed and delivered by Karnataka and has been duly authorized or ratified by all necessary governmental action. (d) KDDC has been duly established under the laws of the Borrower and under a memorandum and articles of association satisfactory to the Association. (e) The Borrower has subscribed to shares of KDDC in an amount of not less than Rs4,400,000 and has paid in such shares in an amount of not less than Rs2,500,000. (f) Karnataka has subscribed to shares of KDDC in an amount of not less than Rs5,700,000 and paid in such shares in an amount of not less than Rs3,800,000 in accordance with the provisions of Section 4.04(a) of the Karnataka Agreement. 10 (g) KDDC has employed consultants in accordance with the provisions of Section 2.08(a)(ii) of the Karnataka Agreement and at least eight cooperative extension specialists therein referred to have been employed. (h) Karnataka has transferred to KDDC the operation of assets referred to in Section 4.04(b) of the Karnataka Agreement in accordance with the provisions of such Section. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.01(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, ARC, and constitutes a valid and binding obligation of ARC in accordance with its terms; (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and ARC, respectively, and constitutes a valid and binding obligation of the Borrower and ARC in accordance with its terms; (c) That the Karnataka Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, Karnataka and constitutes a valid and binding obligation of Karnataka in accordance with its terms. Section 5.03. The date October 21, 1974 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The provisions of Sections 4.02 and 4.03 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 25 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. Any Secretary, Additional Secretary, Joint Secretary, Director or Deputy Secretary to the Government of India in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of th-. General Conditions. 11 Section 6.02. 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 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/ Mervyn L. Weiner Acting Regional Vice President Asia 12 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 I. Civil works 60% (a) for Parts A, 3,700,000 B2 and B3 of the Project (b) for Part C 200,000 II. Equipment and ma- 8,100,000 100% of foreign terials procured expenditures (CIF) by International and 100% of local Competitive Bid- expenditures (ex- ding for Parts A, factory) B2 and B3 of the Project III. Equipment and ma- 60% terials procured under procedures other than Inter- national Competi- tive Bidding (a) for Parts A, 3,000,000 B2 and B3 of the Project (b) for Part C 1,400,000 of the Proj- ect 13 Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed IV. Imported cattle, 800,000 100% of foreign semen and related expenditures equipment (CIF) V. Loans for purchase 6,100,000 90% of ARC refi- of crossbred cattle nancing of such loans VI. Consultants' 700,000 100% services VII. Unallocated 6,000,000 TOTAL 30,000,000 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 "local expenditures" means expenditures in the currency of the Borrower, and for goods or services supplied from, the territory of the Borrower. 3. The disbursement percentages have been calculated in compliance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if any event occurs which shall affect the amount of any such taxes included in the cost of any item to be financed out of the proceeds of the Credit, the Association may, by notice to the Borrower, correspondingly adjust the disbursement percentage then applicable to such item. 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of expenditures prior to the date of this Agreement. 14 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph I above: (a) 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) with respect to Categories III, IV and V, 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; and (b) if the estimate of expenditures to be made under any Category shall decrease, the Association may by notice to the Borrower: (i) re-allocate the amount of such Category no longer required therefor to Category I and (ii) increase the percentage applicable to such Category I correspondingly (up to a maximum of 100% net of taxes). 6. 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. 15 SCHEDULE 2 Description of the Project The Project is an integrated program for increasing the production of milk in rural areas of Karnataka through the development of village dairy cooperative societies and unions thereof. The Project consists of the following Parts: A. Dairy plants and feed mills A phased program for the construction of two dairy plants in Hassan and Tumkur districts, the expansion of two existing dairy plants at Bangalore and Mysore City and the construction of four cattle feed mills, to be managed by the Unions. B. Cattle breeding and fodder production 1. The importation of exotic purebred cattle and semen and related equipment. 2. A program of Artificial Insemination for the cross breeding of native cattle of members of DCS with high producing exotic breeds. 3. The operation of five farms for the breeding and rearing of purebred and crossbred cattle, the rearing of dairy bulls and the production of fodder and seed materials. C. Animal health 1. The construction and equipping of two regional diagnostic laboratories. 2. The completion of an animal health research program. 3. The production of veterinary biologicals and vaccines. D. Project support activities 1. The establishment and operation of about 50 demonstration farms; 2. The carrying out of applied research trials on pastures and forage mixtures; 16 3. The carrying out of milk marketing studies; and 4. The training of KDDC staff in cooperative extension services. E. Credit The provision of medium- and long-term credit for the purchase of crossbred cows. The Project is expected to be completed by March 31, 1982. 17 SCHEDULE 3 Principal terms of Subsidiary Loan Agreement For ARC refinancing up to 9 years: (a) Annual interest rate of not less than 6-1/4% with a rebate of 1/4% for prompt repayment of principal and interest. (b) Repayment to be made at the end of nine years. II. For ARC refinancing from 9 to 15 years: (a) Annual interest rate of not less than 6-3/4% with a rebate of 1/4% for prompt repayment of principal and interest; (b) Repayment at the end of 15 years. III. General The exchange risk to be on the account of the Borrower.