India - Madras Urban Development Project : Credit 0687 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 687 IN PROJECT AGREEMENT (Madras Urban Development Project) between THE STATE OF TAMIL NADU and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated April 1, 1977 PROJECT AGREEMENT AGREEENT, dated April 1, 1977, between THE STATE OF TAMIL NADU acting by its Governor (hereinafter called Tamil Nadu) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the As- sociation). WHEREAS by the Development Credit Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty-four million dollars ($24,ooo,ooo), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Tamil Nadu agree to undertake such obligations toward the Association as hereinafter set forth; and WHEREAS Tamil Nadu, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2 - ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Tamil Nadu" means the State of Tamil Nadu, acting by its Governor, or any successor thereof; (b) "TNHB" means the Tamil Nadu Housing Board; (c) "TNSCB" means the Tamil Nadu Slum Clearance Board; (d) "SIDCO" means the Tamil Nadu Small Industries Develop- ment Corporation; (e) "TNHDC" means the Tamil Nadu Handicrafts Development Corporation Limited; (f) "DSW" means the Tamil Nadu Department of Social Welfare; (g) "TWAD" means the Tamil Nadu Water Supply and Drainage Board; (h) "MC" means the City Municipal Corporation of Madras; -3- (i) "MMDA" means the Madras Metropolitan Development Author- ity defined in Section 9-A of the Tamil Nadu Town and Country Planning Act, 1971, as amended; (j) "DHRW" means the Tamil Nadu Department of Highways and Rural Works; (k) "PTC" means the Metropolitan Wing of the Pallavan Trans- port Corporation; (1) "Police Department" means the Tamil Nadu Department of Police; (m) "Executing Agencies" means the agencies and legal enti- ties defined in sub-sections (b), (c), (d), (e), (f), (g), (h), (i), (j), (k) and (1) of this Section; (n) "Madras" means the area notified under Section 2 (1) of the Tamil Nadu Town and Country Planning (Amendment) Act 1973; (o) "Ha" means hectares of land; and (p) "Rs" means the currency of the Borrower. ARTICLE II Execution of the Project Section 2.01. (a) Tamil Nadu shall cause the Project described in Schedule 2 to the Development Credit Agreement to be carried out by the Executing Agencies or any successors thereto, with due diligence and efficiency and in conformity with appropriate admini- strative, financial and engineeriag practices, and Tamil Nadu shall provide, or cause to be provided, promptly as needed, the funds required by each of the Executing Agencies for this purpose, on terms and conditions satisfactory to the Association, together with such other facilities, services and resources as may be needed. (b) The MMDA is hereby designated as the representative of Tamil Nadu for the purpose of coordinating, in a manner mutually acceptable to Tamil Nadu and the Association, the carrying out of the Project. (c) Until the completion of the Project, Tamil Nadu shall cause the MNDA to furnish to the Association within thirty days of the end of each quarter, commencing with the quarter ending June 30, 1977, a report, in a form mutually acceptable to Tamil Nadu and the Association, on the progress being made in carrying out the Project. Section 2.02. In order to assist the Executing Agencies in carrying out the Project, Tamil Nadu shall, whenever it is neces- sary, cause the Executing Agencies to employ consultants and ad- visers whose qualifications, experience and terms and conditions - 5- of employment shall be mutually acceptable to Tamil Nadu and the Association. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for civil works to be fi- nanced out of the proceeds of the Credit, shall be procured in ac- cordance with the provisions of the Schedule to this Agreement. Section 2.04. (a) Tamil Nadu shall cause the Executing Agen- cies to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Executing Agencies to replace or repair such goods. (b) Except as the Association may othervise agree, all goods and services financed out of the proceeds of the Credit shall be used exclusively for the Project until its completion. Section 2.05. (a) Tamil Nadu shall cause the Executing Agen- cies to furnish to the Association promptly upon their preparation, the plans, specifications, contract documents and construction and procurement schedules for the Project, and any material modi- fications thereof or additions thereto, in such detail as the As- sociation shall reasonably request. (b) Tamil Nadu: (i) shall cause the Executing Agencies to maintain records adequate to record the progress of the Part of the Project being carried out by each of them (including the cost -6- thereof) and to identify the goods and services financed out 6f the proceeds of the Credit relent to Tamil Nadu by the Borrower, and to disclose the use thereof in the Project; (ii) shall, with- out limitation upon the provisions of paragraph (c) of this Sec- tion, enable the Association's representatives to visit the facil- ities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so re- lent to it and the goods and services financed out of such proceeds. (c) Tamil Nadu shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Executing Agencies that are related to the Project and any relevant records and documents. Section 2.06. (a) Tamil Nadu shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. (b) Tamil Nadu shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by Tamil Nadu of its obligations under this Agreement. -7- Section 2.07. Tamil Nadu shall cause TNHB, in carrying out Part A of the Project (i) to adopt settler selection criteria and terms and conditions for the sale of plots that are satisfactory to the Association; (ii) to sell at market prices the land to be used for commercial and industrial purposes in the sites and ser- vices areas included in this Part of the Project; and (iii) to establish by April 1, 1978, or such other date as may be agreed with the Association, and thereafter maintain in existence, a re- volving fund or a basis satisfactory to the Association for finan- cing the provision of sites and services in Madras. Section 2.08. (a) Tamil Nadu shall cause TNSCB, in carrying out Part B of the Project: (i) to issue freehold titles to resi- dents in the slum improvement areas included in this Part of the Project promptly after the payment by such residents of the full amount due for the plots purchased by them and the monthly service charges that have accrued thereon during the payment period, with both the aforesaid purchase price and service charges being deter- mined on a basis satisfactory to the Association; (ii) to sell at market prices the land to be used for commercial and industrial purposes that is included in such slum improvement areas; (iii) to establish by April 1, 1978, or such other date as may be agreed with the Association, and thereafter maintain in existence, a re- volving fund on a basis satisfactory to the Association for finan- cing slum improvement programs in Madras; (iv) to limit its slum clearance program primarily to committed schemes, with any addi- tional slum clearance schemes to be taken up only in accordance with the slum improvement program referred to in Section 2.09 of this Agreement, and to limit its expenditures on slum clearance during the period April 1, 1977 to March 31, 1981 to not more -8- than Rs 37,500,000 per annum; and (v) to complete by December 31, 1977, an income survey to determine the level to which rents for flats in resettlement areas in Madras could reasonably be raised, the terms of reference for such survey to be satisfactory to the Association. (b) Tamil Nadu shall provide to the revolving fund referred to in sub-paragraph (a) (iii) above the additional funds required, over and above cost recoveries from beneficiaries, to improve by March 31, 1985 all slum areas in Madras in accordance with the slum improvement program referred to in Section 2.09 of this Agree- ment. Section 2.09. Tamil Nadu shall cause MMDA, in consultation with the Executing Agencies, to prepare by June 30, 1978, a long- term program for slum improvement in Madras, the terms of reference for the preparation of such program to be satisfactory to the As- sociation. Section 2.10. Tamil Nadu shall cause MC: (i) with effect from April 1, 1978, to maintain water supply and sewerage accounts and all funds related thereto separately from all other MC accounts and funds; and (ii) with effect from April 1, 1979, to ensure that specified taxes and charges attributable to water supply and sewerage services are sufficient to meet MC's annual expenditures on water supply and sewerage services, as well as to provide MC with an adequate working capital for the maintenance of such ser- vices. -9- Section 2.11. Tamil Nadu shall cause TWAD and MC, in carrying out Part E of the Project, to ensure that (i) the final selection of the works to be undertaken; (ii) the final engineering designs of such works; and (iii) the arrangements for implementing such works, are all agreed to by the Association in consultation with Tamil Nadu. Section 2.12. Tamil Nadu shall cause MC, in carrying out the portion of Part F of the Project to be undertaken by it: (i) to review by December 31, 1977, in consultation-with the Association, the organization of its road maintenance activities to ensure that uniform and satisfactory standards of maintenance are applied in Madras; and (ii) to establish by July 1, 1977, and thereafter main- tain in existence, a traffic engineering unit for the improvement and construction of footpaths and cycle tracks. Section 2.13. To assist them in carrying out the portions of Part F of the Project to be undertaken by them, Tami Nadu shall (i) cause DHRW to establish by July 1, 1977, or such other date as may be agreed with the Association, and thereafter maintain in existence, a traffic engineering unit that will develop and im- plement traffic engineering measures appropriate to Madras; and (ii) establish by the same date as is provided for in sub-paragraph (i) of this Section and thereafter maintain in existence a traffic management unit in the Tamil Nadu Police Department that will be responsible for traffic control and monitoring in Madras. - 10 - ARTICLE III Management and Operation of the Executing Agencies Section 3.01. Tamil Nadu shall cause the Executing Agencies at all times to carry on their operations, manage their affairs, plan their future development and maintain their organization and financial position all in accordance with appropriate town planning, financial and administrative practices, and under the supervision of experienced and competent management. Section 3.02. Tamil Nadu shall cause the Executing Agencies to take out and maintain with responsible insurers, or to make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.03. Tamil Nadu shall cause MMDA to establish, staff and maintain a monitoring and evaluation system which will, inter alia, monitor and evaluate the progress of the Project. Section 3.04. Tamil Nadu shall cause the Executing Agencies, whenever this is necessary, to make satisfactory arrangements to assist in relocating any residents in Madras who are required to move as a result of the carrying out of the Project. - 11 - ARTICLE IV Financial Covenants Section 4.01. Tamil Nadu (i) shall cause each of the Executing Agencies except MMDA to maintain separate Project accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices their operations in respect of the Part or Parts of the Project being carried out by them, and shall cause MMDA to maintain a Project account in a similar manner that re- flects the operations of all the Executing Agencies in connection with the carrying out of the Project; and (ii) shall cause MC to bring the audit of its accounts and financial statements up to date in a manner and in accordance with a timetable satisfactory to the Association. Section 4.02. Tamil Nadu shall cause all the Executing Agen- cies, except DHRW, DSW and the Police Department, to henceforth: (i) have their accounts and financial statements for each fiscal year audited, in accordance with appropriate 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 eight months after the end of each such year, (A) certified copies of their 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 ha\, reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial state- ments of any of the Executing Agencies and the audit thereof as the Association shall from time to time reasonably request. - 12- Section 4.03. Tamil Nadu shall cause MC to: (i) establish by July 1, 1977 a Financial Management Unit under the direction of a qualified and experienced Financial Adviser who will, inter alia, be responsible for reorganizing by April 1, 1978, or such other date as may be agreed with the Association, MC's accounting system in a manner satisfactory to the Association; (ii) increase its self-generated revenues, excluding water supply and sewerage re- venues, during the three fiscal years commencing April 1, 1978, and ending March 31, 1981 by at least 8% in each such fiscal year, over and above revenue increases achieved through the quinquennial revision of property taxes; and (iii) take such action as is neces- sary to ensure that until March 31, 1984, debt service payments by MC in any fiscal year do not exceed 20% of its self-generated re- venues, excluding water'supply and sewerage debt service payments end revenues. Section 4.04. Except as the Association may otherwise agree, Tamil Nadu shall cause PTC to take such action as is necessary to: (i) ensure that PTC's operating costs (which will include depreci- ation but exclude interest and other charges on debt, corporate taxes and subventions) do not exceed 99% of its operating revenues for the fiscal year ending March 31, 1978, such percentage to be progressively reduced to 95% for the fiscal year ending March 31, 1981; and (ii) ensure that PTC does not, during the period April 1, 1978 through March 31, 1983, incur any long-term debt unless the net revenue of PTC for the fiscal year preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever net revenue is the greater, shall be not less than 1.5 times the maximum debt service require- ments for any succeeding fiscal year on all long-term debt of PTC including the proposed long-term debt. - 13 - For the purposes of this Section: (a) The term "long-term debt" means all debt incurred, includ- ing debt assumed or guaranteed by PTC, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (b) The term "incur" with reference to any debt includes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred (i) under a contract or loan agreement, on the date the contract or loan agreement providing for such debt is entered id, (ii) under a guarantee agreement, on the date the agreement providing for such guarantee shall have been entered into; (c) The term "net revenue" means gross revenue from transport operations, less all operating expenses, including adequate main- tenance, taxes other than corporate taxes or payments in lieu of taxes, if any, and administrative expenses, but before provision for depreciation and interest and other charges on debt; and (d) The term "debt service requirements" means the aggregate amount of principal repayments (including sinking fund payments, if any), interest and other charges on long-term debt. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of Tamil Nadu thereunder shall terminate on the earlier of the following two dates: (i) the date.on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date fifteen years after the date of this Agreement. (b) If the Development Credit Agreement terminates in ac- cordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Tamil Nadu of this event. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement: - 15 - ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have des- ignated by notice to the party giving such notice or making such request. The addresses so specified are: For Tamil Nadu: The Secretary to the Government of Tamil Nadu Finance Department Fort St. George Madras 600009 India Cable address: Telex: FORT ST. GEORGE 238 MADRAS MADRAS For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (wUI) Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of Tamil Nadu may be taken or executed by a Secretary to the Government of Tamil Nadu or such other person or persons as Tamil Nadu shall designate in writing. Section 6.03. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. - 17 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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. THE STATE OF TAMIL NADU By /s/ Keval Singh Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Is/ Ernest Stern Regional Vice President South Asia - 18 - SCHEDULE Procurement A. International Competitive Bidding Except as provided in Part B hereof, contracts for the purchase of goods shall be awarded in accordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), in- cluding the pertinent provisions of the General Introduction there- to, on the basis of international competitive bidding. B. Other Procurement Procedures Contracts for (i) civil works and (ii) goods other than bus chassis and certain equipment for Part E of the Project, shall be awarded in accordance with local procedures acceptable to the As- sociation. C. Evaluation and CoMparison of Bids for Goods; Preference for Damestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods except those to be procured in accordance with local procedures: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and sim- ilar taxes on domestically-supplied goods, shall be excluded; and - 19 - (iii) the cost to Tamil Nadu of inland freight and other expendi- tures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in India may be granted a margin of prefer- ence in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fol- lowed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satis- faction of Tamil Nadu and the Association that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex- factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in India. (3) GroupC: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import - 20 - taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evalu- sted bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this fur- ther comparison only, an amount equal to (i) the amount of cus- toms duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. D. Review of Procurement Decisions by the Association 1. With respect to all contracts for civil works estimated to cost the equivalent of $500,000 or more and all contracts for goods estimated to cost the equivalent of $200,000 or more: (a) Before bids are invited, Tamil Nadu shall cause the Executing Agencies to furnish to the Association, for its comments, - 21 - 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 procedures 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. (b) After bids have been received and evaluated, Tamil Nadu shall cause the Executing Agencies, before a final decision on the award is made, to inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly in- form Tamil Nadu and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Association's concurrence, materially differ from those on which bids were invited. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for with- drawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the pro- ceeds of the Credit and not governed by the preceding paragraph, - 22 - Tamil Nadu shall cause the Executing Agencies to furnish to the Association, pramptly after its execution and mrior to the sub- mission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform Tamil Nadu and state the reasons for such determination.