India - Orissa Irrigation Project : Credit 0740 - Development Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 740 IN Development Credit Agreement (Orissa Irrigation Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated October 11, 1977 CREDIT NUMBER 740 IN DEVELOPMENT CREDIT AGREEMENT AGREENENT, dated October 11, 1977, 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 Orissa, the State of Orissa 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 and Development Corporation, the Agricultural Refinance and Development Corpora- tion has agreed to undertake certain obligations in respect of the carrying out of the Project; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Agreements of even date herewith referred to in Recitals (B) and (C) above; 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 (said General Conditions Applicable to Development Credit Agree- ments of the Association being hereinafter called the General Conditions). 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: -2- (a) "Orissa" means the State of Orissa, a State of India, or any successor thereof; (b) "Project Agreement" means the agreement between the Association and the State of Orissa of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements suppleiental to the Project Agreement; (c) "ARDC" means the Agricultural Refinance and Development Corporation, a statutory corporation established and organized under the laws of the Borrower; (d) "ARDC Agreement" means the agreement between the Association and ARDC of even date herewith, as the same may be amended from time to time and such term includes all agreements supplemental to the ARDC Agreement; (e) "Lending Banks" means Orissa State Cooperative Land Development Bank and Commercial Banks in Orissa participating in lending to farmers under the Project; (f) "MIP" means a medium irrigation project comprising a cultivable command area of between 2,000 and 12,000 hectares; and (g) "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 equiva- lent to fifty-eight million dollars ($58,000,000). 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 by agreement between the Borrower and the Association, 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. -3- Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for civil works to be financed out of the proceeds of the Credit, shall be procured in accordance with the provisions set forth or referred to in Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be October 31, 1983 or such later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. 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 Janu- ary 15 and July 15 commencing January 15, 1988, and ending July 15, 2027, each installment to and including the installment payable on July 15, 1997, 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 obligations under the Development Credit Agreement, the Borrower shall enable Orissa and ARDC to perform in accordance with the provisions of the Project Agreement and the ARDC Agree- ment all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facil- ities, services and other resources, necessary or appropriate to enable Orissa and ARDC to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. -4- (b) The Borrower shall make available out of the proceeds of the Credit funds equivalent to $55,600,000 to Orissa in accordance with the Borrower's standard arrangements for developmental assistance to the States of India. (c) The Borrower shall relend funds equivalent to $2,400,000 out of the proceeds of the Credit to ARDC under financial arrange- ments to be entered into between the Borrower and ARDC under terms and conditions which shall include inter alia those set forth in Schedule 3 to this Agreement. Section 3.02. The Borrower shall ensure that the procedures for approval and monitoring of MIPs as set forth in Schedule 4 to this Agreement are adhered to. ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) Orissa shall have failed to perform any of its obliga- tions under the Project Agreement; (b) ARDC shall have failed to perform any of its obligations under the ARDC Agreement; (c) ARDC shall have become unable to pay any of its debts as they mature or any action or proceeding shall have been taken by ARDC or by others whereby any of the property of ARDC 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 disestablish- ment of ARDC or for the suspension of its operations; and (e) An extraordinary situation shall have arisen which shall make it improbable that (i) Orissa will be able to perform its obligations under the Project Agreement, or (ii) ARDC will be able to perform its obligations under the ARDC Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: -5- (s) any events specified in paragraphs (a) or (b) of Section 4.01 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 Orissa or ARDC, as the case may be; and (b) any events specified in paragraphs (c) or (d) of Section 4.01 of this Agreement shall occur. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the execution of the Project Agreement on behalf of Orissa has been duly authorized or ratified by all necessary governmental action; (b) the execution of the ARDC Agreement on behalf of ARDC, has been duly authorized or ratified by all necessary corporate and governmental action; and (c) the Borrower has made arrangements satisfactory to the Association for the staffing of the Appraisal Committee referred to in Schedule 4 to this Agreement and a Director for said Committee has been appointed. Section 5.02. 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 Orissa, and is legally binding upon Orissa in accordance with its terms; and (b) that the ARDC Agreement has been duly authorized or ratified by ARDC and, is legally binding upon ARDC in accordance with its terms. -6- Section 5.03. The date January 16, 1978 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The provisions of paragraph (b) of Section 4.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. Any Secretary, Additional Secretary, Joint Secretary, Director or Deputy Secretary of the Department of Economic Affairs in the Ministry of Finance of the Borrower is designated as representative,s of the Borrower for the purposes of Section 11.03 of the General Conditions. 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 aoddress: 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. -7- 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 Is N. A. Palkhivala Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ E. Stern Regional Vice President South Asia -8- 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 amount of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil Works for 52,300,000 65% MIPs (2) Land Consolidation 3,300,000 Rs.150 per con- solidated hec- tare (3) On-farm Derelop- 2,400,000 55% of ARDC ment Refinancing TOTAL 58,000,000 2. The disbursement percentages have been calculated in compli- ance 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 the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disburse- ment percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for: (a) expenditures prior to the date of this Agreement; and -9- (b) expenditures in respect of Part C of the Project until (i) evidence satisfactory to the Association has been furnished to the Association that the financial arrangements referred to in Section 3.01 (c) have been made, and (ii) the Special Loans Account referred to in Part II of Schedule 3 to this Agreement has been set up. 4. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- grapi 1 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 expendi- tures 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 reason- able opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 10 - SCHEDULE 2 Description of the Project The Project consists of the following: Part A: Completion of ongoing and execution of new MIPs in Orissa. Part B: Consolidation of about 200,000 hectares of irrigated lands located In the Hirakud, Salandi and Mahanadi Delta irrigation systems of Orissa. Part C: On-farm development (field channels, drains, and struc- tures) of about 57,000 hectares of irrigated lands located in the Hirakud, Salandi and Mahanadi Delta irrigation systems of Orissa. The Project is expected to be completed by October 31, 1982. -11 - SCHEDULE 3 Principal Lending Terms and Conditions I. Ordinary Land Development Loans 1. Borrower to ARDC (a) For ARDC refinancing up to 9 years: (i) annual interest rate of not less than 6.75%, less 0.25% for prompt payment; and (ii) repayment at the end of 9 years. (b) For ARDC refinancing for more than 9 and up to 15 years: (i) annual interest rate of not less than 7.25%, less 0.25% for prompt payment; and (ii) repayment at the end of 15 years. (c) Borrower to carry exchange risk. 2. ARDC to Lending Banks (a) Annual interest rate of 7.5% minimum. (b) Installment repayments to coincide approximately with collections from ultimate borrowers. (c) Refinancing by purchase of debentures or by loans not exceeding 90% of individual loans. 3. Lending Banks to Ultimate Borrowers (a) Annual Interest rate of 10.5% minimum. (b) A once and for all evaluation fee of 0.5% of the cost of project investments may be charged. - 12 - (c) Repayment periods to be based on the ultimate borrower's repayment capacity, but not to exceed 15 years. (d) Grace periods not exceeding 2 years from the date of disbursement of the loans, may be granted at the discretion of ARDC provided that the repay- ment period of such loans is not exceeded. II. Special Loans Terms and interest rates for lendings by the Borrower, Orissa and ARDC to the Special Loans Account (SLA); for lending from the SLA through the Lending Banks to the Command Area Devel- opment Authority (CADA); and for recovering by the CADA from farmers who have benefited from on-farm development shall be in accordance with the Guidelines for the Special Loans to Finance On-Farm Development Works in the Command Area Proj- ects issued by ARDC on October 29, 1976. Except as the Association shall otherwise agree, these Guidelines shall not be amended for this Project. III. General (a) Security would be as determined by the Lending Banks and ARDC. (b) Technical standards acceptable to ARDC would be observed. (c) Where the land development works are executed by centralized agencies and no cash is paid to the individual farmer to carry out the work, no cash contribution by the beneficiary will be necessary. In any other cases the contribution described in the respective loan agreement with ARDC will apply. (d) In respect of lendings by the Orissa State Cooper- ative Land Development Bank, the borrower will have to purchase at least one share to become a member. - 13 - SCHEDULE 4 Procedures for Appraisal and Progress Monitoring of Medium Irrigation Projects (MIPs) A. The Central Water Commission under the Ministry of Agricul- ture and Irrigation of the Borrower shall maintain an Ap- praisal Committee which shall be responsible for appraisal and monitoring of the progress of individual MIPs. Except as the Association shall otherwise agree, the procedures for appraisal and monitoring shall be as follows: 1. Preparation. Orissa shall be responsible for the preparation of each MIP. The Appraisal Committee shall monitor the progress of the preparation of MIPs through field visits and review of reports, plans, specifications, contract documents, construc- tion and procurement schedules. 2. Appraisal. Orissa shall submit each MIP to the Appraisal Committee for appraisal. The committee or its representatives shall (a) visit the MIP area, (b) review reports, plans, designs and specifications to ensure that the MIP has been designd in accordance with (i) established technical criteria, and (ii) sound engineering practices with special emphasis given to the safety of the dam structure, (c) review and, if required, adjust cost estimates and sc_Ldules of expenditures to properly reflect the likely cost of the MIP, (d) review the cropping pattern to ensure that it is realistic and suitable for the MIP area, (e) review arrangements for resettlement of families affected by the MIP in accordance with Orissa's policies, and (f) review the adequacy of extension, credit, input supply, transport and marketing facilities available to farmers in the MIP area. 3. Approval. The first three MIPs proposed to be financed from the proceeds of the Credit shall be submitted to the Association for approval. Thereafter, any MIP that meets the established criteria, is designed in accordance with sound engineering practices, costs less than Rs. seventy million excluding -14- expected price increases, has a benefit cost ratio of not less than 1.0 as calculated in accordance with the estab- lished economic criteria, and has a cropping pattern that is realistic and suitable for the MIP area, may be approved by the Appraisal Committee for financing from the proceeds of the Credit. Any other MIP shall be submitted to the Associ- ation for approval. 4. Implementation. The Appraisal Committee or its representatives shall visit the site of each MIP under construction, and review relevant records, plans, specifications and procurement schedules in order to (a) ensure that the MIP is constructed in accordance with the established technical criteria, (b) monitor the progress of the construction, and (c) assist Orissa in solving any technical problems that might arise. 5. Operation and Maintenance. The Appraisal Committee shall review for each MIP, for a period not exceeding two years after completion of each MIP, records maintained by Orissa on (a) the area irrigated in each irrigation season, (b) monthly inflow and water release data, (c) costs of and organization for operation and maintenance of the MIP, in order to ensure that the MIP is operated and maintained in accordance with sound economic and engineering standards. B. Orissa shall make available to the Appraisal Committee or its representatives plans, specifications, reports, contract documents, construction and procurement schedules and other records in respect of MIPs to be financed under the Project, as the Appraisal Committee might reasonably request. C. The Appraisal Committee shall prepare reports on the conclu- sions of its appraisal and monitoring, of such timing, scope and detail, as have been agreed between the Borrower and the Association.