Malagasy - Railway Project : Credit 0488 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 488 MAG Project Agreement (Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND RESEAU NATIONAL DES CHEMINS DE FER MALAGASY DATED JUNE 27, 1974 CONFORMED COPY CREDIT NUMBER 488 MAG Project Agreement (Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND RESEAU NATIONAL DES CHEMINS DE FER MALAGASY DATED JUNE 27, 1974 9 (c) ARC shall have become unable to pay any of its debts as they mature or any action or proceeding shall have been taken by ARC or by others whereby any of the property of ARC shall or may be distributed among its creditors. (d) The Borrower or any other authority having jurisdiction shall have taken, any action for the dissolution or disestablishment of ARC or for the susnfnsion of the operations of ARC. Section 5.03. 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 5.02 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and (b) any event specified in paragraphs (c) and (d) of Section 5.02 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 Loan Agreement within the meaning of Section 12.01(c) of the General Conditions: (a) The ARC 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 Project Agreement has been duly executed and delivered by Rajasthan and has been duly authorized or ratified by all necessary governmental action. (d) RLDC has been duly established under the laws of Rajasthan with capitalization, board membership and powers satisfactory to the Bank. (e) CAA has been duly established by Rajasthan, with organization, board membership and powers satisfactory to the Bank. 10 Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02(c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) That the ARC 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 Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, Rajasthan and constitutes a valid and binding obligation of Rajasthan in accordance with its terms. Section 6.03. The date September 19, 1974 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Any Secretary, Additional Secretary, Joint Secretary or Director/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 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 5 ARTICLE III Management and Operations of RNCFM Section 3.01. RNCFM shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate administrative, financial, engineering and railway practices and under the supervision of experienced and competent management assisted by qualified and competent staff. Section 3.02. RNCFM shall at all times take all such action as shall be necessary on its part to acquire, maintain and renew all rights, powers and privileges which are necessary or useful in its operations. Section 3.03. RNCFM shall at all times operate, maintain, renew and repair its facilities, equipment and machinery in accordance with appropriate engineering, railway and management practices. Section 3.04. RNCFM shall 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 practices. Section 3.05. (a) In order to assist RNCFM in: (i) the improvement of its management, operation, financial and accounting policies and procedures, and the appropriate adjustment of its tariff structure and tariff levels; and (ii) the identification of its investment needs, the rationalization of its services, the refinement of its commercial policy, the further improvement of its tariff structure and tariff levels, and the training of its staff, RNCFM shall employ consultants acceptable to the Association upon terms and conditions satisfactory to the Association. (b) RNCFM shall, after study of the reports and recommendations made by the consultants referred to in paragraph (a) promptly consult with the Association regarding the decisions that it proposes to take in the light of such recommendations and the means of their implementation. Section 3.06. RNCFM shall carry out the 1973-1975 Investment Plan with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and railway management practices. 6 ARTICLE IV Financial Covenants Section 4.01. RNCFM shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. RNCFM shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of RNCFM and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. (a) Except as the Association shall otherwise agree, RNCFM shall from time to time take all such measures (including but not limited to adjustments of its tariffs and tariff structures) as shall be required to obtain an annual rate of return of not less than 2.5% through the fiscal year 1976, and not less than 3% in the subsequent fiscal years, so as to provide revenues sufficient to enable RNCFM, out of internally generated funds: (A) to meet debt service requirements, (B) to maintain adequate working capital, and (C) to make a reasonable contribution toward investment needs including replacements. (b) For the purposes of this Section: (i) The annual rate of return shall be calculated by relating the operating income for the year in question to the average of the value of the net fixed assets of RNCFM in operation at the beginning and at the end of each year. (ii) The term "value of net fixed assets in operation" shall mean the gross book value of such assets, less the amount of accumulated depreciation, both as valued from time to time in accordance with sound and consistently maintained methods of valuation acceptable to the Association. 7 (iii) The term "operating income" shall mean the difference between: (A) gross operating revenue accruing from RNCFM's services; and (B) the operating and administration expenses, taxes (if any) and adequate maintenance and depreciation but excluding interest and other charges on debt. (iv) The term "internally generated funds" means the total of operating income plus the provision for depreciations. Section 4.04. Without limiting the generality of the foregoing Section 4.03, RNCFM shall by a date not later than March 3 1, 1975 or such later date as shall be agreed to by the Association, in consultation with the Association, make appropriate changes in tariffs and tariff structures on the basis of the findings and recommendations of the study referred to in Section 3.05 of this Agreement and in accordance with appropriate economic and commercial principles for railway operations, to ensure that the economic cost of individual services and carriage of goods and services are covered and the rates of return referred to in Section 4.03 of this Agreement are obtained. Section 4.05. Except as the Association shall otherwise agree, RNCFM shall not incur any debt unless the amount of its net cash revenue for its fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever amount is the greater, shall be not less than two times the maximum debt service requirements for any succeeding fiscal year on all its debt including the debt to be incurred. For the purposes of this Section: (a) "debt" means all debt, except debt incurred in the ordinary course of business and maturing by its terms less than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred (i) under a loan contract or agreement, on the date and to the extent it is drawn down and outstanding pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the underlying debt is outstanding; (c) the term "net cash revenue" means gross operating revenue from all sources, adjusted to take account of RNCFM's tariffs in effect at the time of the 8 incurrence of debt even though they were not in effect during the entire fiscal year or twelve-month period to which such revenues relate, less all operating expenses, including adequate maintenance, taxes, if any, and administrative expenses, but before provision for depreciation and debt service requirements; (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (e) whenever in connection with this Section it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is obtainable by RNCFM, at the time such valuation is made, for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Association. Section 4.06. RNCFM shall introduce, in consultation with the Association, and thereafter maintain a traffic costing system designed to determine the relevant costs of the services provided by RNCFM. Section 4.07. Until the Project shall have been completed, RNCFM shall not, without the prior approval of the Association, commit itself to any capital expenditures not required under the 1973-1975 Investment Plan exceeding, together with any such expenditures by the Borrower, in the aggregate for any fiscal year of RNCFM an amount of one hundred million Malagasy Francs (FMG 100,000,000) or relating to any individual capital item estimated to cost forty million Malagasy Francs (FMG40,000,000) or more. A RZTICLE V Consultation, Information and Inspection Section 5.0 1. The Association and RNCFM shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and RNCFM 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 administration, operations and financial condition of RNCFM and other matters relating to the purpose of the Credit. Section 5.02. The Association and RNCFM shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the 11 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Mervyn L. Weiner Acting Regional Vice President Asia 12 SCHEDULE I Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works: (a) infrastructure 18,000,000 59% (b) on-farm devel- 8,600,000 59% opment (2) Equipment and 4,400,000 materials under Parts A through H, and L of the Project (a) directly 100% of foreign imported expenditures (CIF) (b) locally 100% of local manufactured expenditures (ex-factory) (c) imported items 70% prOcurect locally (3) Fertilizer 6,100,000 100% of foreign expenditures (CIF) (4) Technical assistance 100,0 100% of foreign and training under expenditures Parts E and K of the Project (5) Interest and other 11,000,000 charges on the Loan accrued on or before December 31, 1980 (6) Unallocated 3,800,000 TOTAL 52,000,000 11 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have cased this Agreement to be signed in their respective names and delivered in the Dist-ict of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVEIOPMENT ASSOCIATION By /s / Bernard R. Bell Regional Vice President Eastern Africa RESEAU NATIONAL DES CHEMINS DE FER MALAGASY By /s/ Bernardin Rajonhanes Authorized Representative 12 SCHEDULE 1 Procurement With respect to any contract for equipment and materials: (a) Before bids are invited, RNCFM 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 procedure 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. A period of at least 45 days shall be allowed for the submission of bids. (b) After bids have been received and evaluated, RNCFM shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report by RNCFM's procurement services, on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures 7 set forth or referred to in Section 2.02 of this Agreement, promptly inform RNCFM and the Borrower, and state the reasons for such determination and advise RNCFM of any cancellation pursuant to the provisions of paragraph 3(c) of Schedule I to the Development Credit Agreement. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract.