India - Railway Modernization And Maintenance Project : Credit 0844 - Development Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 844 IN Development Credit Agreement (Railway Modernization and Maintenance Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated November 13, 1978 CREDIT NUMBER 844 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated November 13, 1978, between INDIA, acting by its President (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). 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: (a) "Railways" means the railways owned and operated by the Borrower and includes all railway property, equipment and materials of the Borrower; and (b) "Yelahanka Plant" means the wheel and axle plant to be established at Yelahanka under Part B of the Project. 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 one hundred ninety million dollars ($190,000,000). 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 The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement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 -2- be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1984 or such later date as the Association shall establish. The Association 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 semiannually on February 1 and August 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each Feb- ruary 1 and August 1 commencing February 1, 1989 and ending August 1, 2028, each installment to and including the installment payable on August 1, 1998, 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) The Borrower shall carry out the Project and conduct the operations of the Railways with due diligence and efficiency and in conformity with appropriate engineering, finan- cial and administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. -3- (b) The Project shall be carried out by the Borrower sub- stantially in accordance with an implementation schedule agreed upon between the Borrower and the Association. (c) The Borrower shall carry out the workshop modernization and rationalization program referred to in Part A of the Project in accordance with the Plan of Action agreed upon between the Borrower and the Association. Section 3.02. In order to assist the Borrower in carrying out the Project, the Borrower shall employ experts whose quali- fications, experience and terms and conditions of employment shall be satisfactory to the Borrower and the Association. Section 3.03. (a) The Borrower undertakes 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 inci- dent to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payabl in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the 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. (a) The Borrower shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain or cause to be main- tained records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) shall enable the Association's accredited represen- tatives, for the purposes related to the Credit, to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit 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, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit. ARTICLE IV Other Covenants Section 4.01. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consis- tently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. Section 4.02. Except as the Association shall otherwise agree, the Borrower shall maintain passenger fares and freight rates, and shall take all other action as may be necessary or appropriate, so as to provide to the Railways net revenue suf- ficient to enable the Railways to meet annually out of internally generated resources all operating expenses and dividend payments on capital-at-charge. For the purpose of this Section: (i) the term "net revenue" means the revenue accruing from the operation of the Railways excluding any net revenues or losses which may result from the operation of mass rapid transit systems in the principal cities of India. Such revenues or losses from mass rapid transit systems, if included Li the Railways' budget, will be separately shown therein and in the financial accounts of the Rail- ways; -5- (ii) the term "operating expenses" means all ordinary working expenses of the Railways, and appropria- tion for the Depreciation Reserve Fund and for the Pension Fund of the Railways; and (iii) the term "capital-at-charge" means the capital pro- vided by the Borrower to the Railways and appearing as such in the Railways' accounts. Section 4.03. When, with respect to any goods to be financed out of the proceeds of the Credit, the lowest evaluated bid, after taking into account the price preference for domestic manufac- turers, is for goods manufactured from outside of India, the Borrower shall promptly grant permission to import the goods covered by the contract, and no review 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. Section 4.04. The Borrower shall, by December 31, 1978, cause to be prepared and furnished to the Association, a training program satisfactory to the Association for the training of technical staff and work force to be employed at the Yelahanka Plant, and shall implement said training program. Section 4.05. The Borrower shall ensure that the Yelahanka Plant shall at all times carry on its operations, manage its affairs and maintain its financial position in accordance with sound engineering, financial and administrative practices, includ- ing an appropriate management information system, and with ade- quate staff under the supervision of experienced and competent management. Section 4.06. The Borrower shall fix such transfer prices for the supply of wheels and axles to be produced at the Yelahanka Plant as shall be sufficient to cover direct manufacturing costs, overhead costs and full depreciation. ARTICLE V Termination Section 5.01. The date January 15, 1979 is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. -6- Section 5.02. The obligations of the Borrower under Sections 4.02, 4.05 and 4.06 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 15 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VT Representatives of the Borrower; Addresses Section 6.01. Any Secretary, Additional Secretary, Joint Secretary, Director or Deputy Secretary in the Ministry of Finance, Department of Economic Affairs of the Borrower is desig- nated as representative 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 Affiirs New Delhi, India Cable address: Telex: ECOFAIRS 953-313546 New Delhi 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) 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/ W. David Hopper 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 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) Workshop modernization: (a) plant and 95,000,000 100% of foreign machinery expenditures and 100% of local expenditures (ex-factory) (b) components for 30,000,000 100% of foreign unit-exchange expenditures system (2) Plant, machinery 30,000,000 100% of foreign and materials for expenditures and the Yelahanka Plant 100% of local expenditures (ex-factory) (3) Proprietary items 8,000,000 100% of foreign for the Yelahanka expenditures Plant (4) Wheels, tires, 15,000,000 100% of foreign axles and wheel expenditures sets -9- Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (5) Development support: (a) thyristor 9,000,000 100% of foreign control trans- expenditures former sets (b) equipment and 1,000,000 100% of foreign components expenditures and for product 100% of local improvement expendi tures (ex-factory) (c) technical 2,000,000 100% advisory services and staff training TOTAL 190,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory 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 com- pliance 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 - 10 - decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item qs required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category, except Category (3), 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 expendi- tures, and (ii) if such reallocation cannot fully meet the esti- mated shortfall, reduce the disbursement percentage then applica- ble to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 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 restric- ting or limiting any other right, power or remedy of the Associa- tion under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Associa- tion's reasonable opinion, represents the amount of such expendi- tures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 11- SCHEDULE 2 Description of the Project The Project is a part of the Borrower's program of moderniza- tion and improvement of maintenance and manufacture of diesel and electric locomotives and rolling stock of the Railways and con- sists of the following: Part A: The acquisition of workshop machinery and tools for implementing the first phase of the Railways' workshop modernization and rationalization program in its main work- shops and supporting units, including the acquisition of parts and components for the establishment of a unit-exchange maintenance system. Part B: The establishment at Yelahanka in the State of Karnataka of a wheel and axle ,lant, including ancillary facilities, with an annual rated manufacturing capacity of about 70,000 wheels and about 23,000 axles and the acquisition of wheels, tires and axles for two years of the Railways' motive power and rolling stock manufacturing and maintenance program. Part C: The provision of product improvement facilities for diesel engines at the Research, Designs and Standards Organ- ization of the Railways; and the acquisition of thyristor control transformer sets for the testing of thyristor tech- nology for application in alternating current electric locomotives. Part D: T, provision of technical advisory services and over- seas st.,ff training for manufacturing, quality control, cost control and design personnel. The Project is expected to be completed by March 31, 1984. - 12 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international compe- titive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding, (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 similar taxes on domestically supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures desc.ibed in Part A of this Schedule, goods manufactured in - 13 - India may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. 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 satisfaction of the Borrower 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) Group C: bids offering any other goods. 3. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evalu- ated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this compari- son, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 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 evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs 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.i4f. 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 - 14 - which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Contracts for equipment and materials estimated to cost the equivalent of $100,000 or less may be procured in accordance with the usual business practice of the Railways, provided, however, that the aggregate of such contracts shall not exceed the equivalent of $5,000,000. 2. Contracts for, (i) plant and machinery up to $10,000,000, (ii) components for unit-exchange system up to $5,000,000, (iii) plant, machinery and materials for the Yelahanka Plant up to $5,000,000, and (iv) equipment and components for product improve- ment up to $1,000,000 to be financed under Categories (1) (a), (1) (b), (2) and (5) (b), respectively, of the table set forth in paragraph 1 of Schedule 1 to this Agreement may be procured through limited tenders from established manufacturers, provided, that the list of such items and the firms selected for the bidding for each such item shall be agreed upon between the Borrower and the Association. 3. With respect to any contract for plant, machinery and mate- rials for the Yelahanka Plant to be financed under Category 3 of the table set forth in paragraph 1 of Schedule 1 to this Agree- ment, the Borrower may place contracts through negotiation pro- vided, that, (a) the terms and conditions of negotiated contracts conform to the Railways' standard form of contract, and (b) the Association's prior approval of such standard form of contract (and any modifications thereof) shall have been obtained. D. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $1,000,000 or more: (a) Before bids are invited, the Borrower 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 - 15 - 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, the Bor- rower shall, before a final decision on the award is made, 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 evalua- tion and comparison of the bids received, and such other informa- tion as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsis- tent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification 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 withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the submission 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 the Borrower and state the reasons for such determination. 3. With respect to any contract costing in excess of $100,000 equivalent, before agreeing to any modification or waiver which affects the terms and conditions of such contract materially, or granting an extension by more than 4 months of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the - 16 - original price, the Borrower shall inform the Association of the proposed modification, waiver, extension or change order and the reasons therefor. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agree- ment, shall promptly inform the Borrower and state the reasons for its determination.