India - Railway Modernization and Maintenance Project

Document of FILE COPY The World Bank FOR OMCIAL USE ONLY Repor Ng. P-2307-IN REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR A RAILWAY MODERNIZATION AND MAINTENANCE PROJECT July 24, 197R IThis doenmat ba a restlct dbbuWd. mmd m be m_d by rclpi emy In Xb. _ Iuf.xm f d their oelali dutis. Its ceteb my _t e&uwwise be d_slosd _Wlbu Wold DSn 0iborkmlh.  CURRENCY EQUIVALENTS Currency Unit = Rupee (Rs) Rs 1 Paise 100 US$l Rs 8.6 Rs 1 = US$0.1163 Rs 1 million = US$116,279.07 Rs 1 billion US$116,279,068;.77 (Since September 25, 1975, the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/Rupee ex- change rate is subject to change. As of July 10, 1978, the exchange rate was Rs 8.18 to US$1.0). FISCAL YEAR April 1 - March 31 LIST OF ABBREVIATIONS AND ACRONYMS USED IN THIS REPORT GOI - Government of India IR - Indian Railways CLW - Chittaranjan Locomotive Works of Indian Railways TISCO - Tata Iron and Steel Company DLW - Diesel Locomotive Works of Indian Railways ICF - Integral Coach Factory of Indian,Railways RDSO - Research, Designs and Standards Organization of Indian Railways MIS - Management Information System DSP - Durgapur Steel Plant BHEL - Bharat Heavy Electricals Limited UNDP - United Nations Development Programme  FOR OFFICIAL USE ONLY INDIA RAILWAY MODERNIZATION AND MAINTENANCE PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiary: Indian Railways. Amount: US$l90 million. Terms: Standard. Project Description: In order to help the Indian Railways (IR) reduce manufac- turing and maintenance costs of locomotives and rolling stock and to improve their performance and availability, the project provides for: (i) acquisition of workshop machinery and equipment, together with necessary parts and components for implementation of a unit exchange system; (ii) construction at Yelahanka in the State of Karnataka of a wheel and axle plant, with an annual rated manufacturing capacity of 70,000 wheels and 23,000 axles, and supply of about two years' requirements of imported wheels, tires, axles and wheel sets; and (iii) development support for a product improvement program for IR's manufacturing units, including technical advisory services and overseas staff training. These project components form part of Indian Railways' invest- ment plan covering the period 1978/79 - 1982/83, which amounts to about US$3,750 million equivalent. There are no significant project risks. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated (US$ million) Project Costs: Items Local Foreign Total Workshop Modernization i) Workshop Modernization 33 95 128 ii) Unit Exchange 105 56 161 Sub-total 138 151 289 Wheels and Axles i) Wheel and Axle Plant 37 38 75 ii) Wheels and Axles 49 28 77 Sub-total 86 66 152 Development Support 6 12 18 Total Project Cost /a 230 229 459 /a The project cost estimates are based on January 1978 prices and include a price contingency averaging 7% per annum for local and foreign costs. A physical contingency of 10% is included in the cost of the wheel and axle plant component. Financing (US$ million) Plan Local Foreign Total IDA - 190 190 Proceeds of Credit 582-IN - 7 7 COI 230 32 262 Total 230 229 459 Estimated Disbursements: IDA FY FY79 FY80 FY81 FY82 FY83 FY84 FY85 Annual 6 23 52 61 36 10 2 Cumulative 6 29 81 142 178 188 190 Rate of Return: Workshops, 27%; wheel and axle plant, 19%; weighted average, 23%. Appraisal Report: No. 2020-IN, dated July 24, 1978.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR A RAILWAY MODERNIZATION AND MAINTENANCE PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to US$190 million on standard IDA terms, to help finance a project designed to support workshop modernization, wheel and axle manufacture and product development for Indian Railways' manufacturing units. These components are part of the Indian Railways' investment plan covering the period 1978/79-1982/83. Because Indian Railways is part of the Government of India, the proceeds of the proposed credit will not be on-lent but will be channeled to the Indian Railways as part of the railway budget. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (2008-IN dated April 17, 1978), was distributed to the Executive Directors on April 18, 1978. Country data sheets are attached as Annex I. Background 3. India is a vast, continental country with over twenty States divided on linguistic and ethnic grounds with a population of over 620 million people, almost as many as live in Africa and Latin America combined. It has a dual economy. While 79% of its population lives in rural areas, their productivity is low. Agriculture's share in value added declined only gradually from about 50% to 43% over the last twenty years. The share of manufacturing has in- creased slowly and, since the late 1960s, has remained approximately constant at about 16%. Industry has a highly diversified structure with import substi- tution and self-sufficiency pushed to the point where India has the capacity to produce virtually every type of consumer and capital good required for a modern economy. As in the case of many other large economies, the foreign sector plays a relatively minor role; both exports and imports represent about 7% of GDP; foreign saving has supplied only about 5% of gross investment in the recent past. 4. Even though growth has been slow in the past, the economy enjoys many of the prerequisites for sustaining faster growth and development. Although literacy is far from universal, India has large resources of well trained administrative, scientific and technical manpower and a dynamic entre- preneurial class. Per capita consumption of commercial energy is low by 1/ Parts I and II of this report are the same as Parts I and II of the President's Report for the Haryana Irrigation Project (Report No. P-2349-IN), dated July 19, 1978.  - 2 - international comparison and power shortages are a way of life; but India is relatively well-placed with regard to primary fuel sources. There are very large reserves of coal and nuclear ores, and considerable hydro-electric potential. Recent petroleum and gas discoveries have begun to be exploited and prospects are bright for further discoveries. The basic elements of the infrastructure needed to serve the economy have been established; in absolute terms the irrigation, railway, telecommunication, road and power systems are each among the largest in the developing, and in some cases the developed, world. However, considerable gaps remain as the situation varies greatly from state to state. 5. Given the size of India's population, its annual increase of 13 mil- lion people is such as to absorb a large portion of any provision to increase standards of living. It is not possible to discern any significant increase in the incomes of the vast mass of the rural and urban poor, who number 200 million with a per capita income of US$70 per annum or less. Although food- grain production may be persistently underestimated, there has been no perma- nent increase in per capita foodgrain consumption recorded in aggregate statistics since 1960/61. Many years after the initial target, primary educa- tion is still not universal. The labor force has grown faster than employment and a considerable backlog of unemployed exists. Nevertheless, there has been progress, with per capita income increasing on trend 1%-1.5% per annum; birth rates falling to below 37 per thousand from levels of 45-50 per thousand at the start of the 1950s, life expectancy increasing from about 32 years in the 1940s to 45-50 years in the 1970s, school enrollment rising from 32% to 65% of children of primary school age and from 5% to 29% of children of secondary school age since 1950/51. 6. The rate of growth of GDP has been 3.5% per annum over the period since Independence and 2.8% per annum over the period 1969/70 to 1976/77. These low rates of growth are only partly due to low availability of inves- tible resources, although there have been times that foreign exchange was a severe bottleneck. The net transfer of resources from abroad has never been above 3% of GDP and fell to as little as 0.8% between 1969/70 and 1973/74. India's saving effort has grown steadily since the beginning of planning in 1951, when it was 9% of GDP, to its recent level of 20% of GDP, which compares well with other countries' saving performance at the same level of per capita incomes. Despite a doubling in the rate of investment, from about 10% of GDP in the early 1950s to about 20% at present, the trend rate of GDP growth has not increased. This marks a decline in the efficiency of capital use which transcends fluctuations due to weather, war or international terms of trade shifts. Recent Trends 7. In many respects economic conditions during the last three years have been significantly different from those prevailing in previous years. In the late 1960s and early 1970s, the economy faced several shortages-- foodgrains, agricultural and industrial inputs and foreign exchange--which retarded production and investment and often led to price increases. An ad- verse shift in terms of trade, starting with the oil price hike in 1973 and  -3- continuing with the foodgrain and fertilizer price rises in the following year, greatly increased the cost of acquiring these essential commodities abroad. These external shocks combined with a spate of bad weather played havoc with the economy through 1974/75, causing slow growth in production and investment and a record level of inflation. 8. Since the excellent monsoon in the summer of 1975, a new situation has arisen. The period 1975 to 1978 has been characterized by much greater price stability, enhanced agricultural and industrial outptlt and comfortable foodgrain and foreign exchange reserves. The new situation was a combined result of domestic policies and fortuitous circumstances. The increase in foodgrain stocks was only in part due to improved policies and programs. The more decisive factor has been the three good-to-excellent monsoons coming on top of substantial foodgrain imports in 1975 and 1976. Industrial output increased on average by 7% a year in 1975-1978 compared to 3% in 1970-75, due to greater power availability, better management in the public sector, improved labor relations, better transport and some increase in demand derived from increased incomes due to improved harvests, greater exports and higher levels of public investment. The most dramatic turnaround ocurred in the balance of payments, with a sharp real reduction of the import bill helped by good harvests and increased domestic production of iron and steel, fertilizer and oil, which reduced demand for imports. The supply of foreign exchange was also greatly increased by a significant step-up in the volume of exports, an increase in foreign aid and a substantial jump in remittances from Indians working in the Middle East, Europe and America. 9. In 1977/78, the growth of GDP was about 5%, a recovery over the rate of 1.6% in 1976/77 but less than the 8.5% reached two years earlier. Prices, which had been rising during 1976/77 after a decline in 1975/76, were stabilized; wholesale prices at the end of March 1978 stood at about the same level as in March 1977, and the yearly average was only 5.4% above that of the previous year. Exports in 1977/78 are estimated at US$6.4 billion and imports at US$6.6 billion. The inflow of invisibles from abroad at US$1.4 billion and net aid disbursements of US$1.2 billion more than offset the small trade deficit of US$200 million and IMF repurchases of US$330 million to in- crease reserves by US$2.1 billion to USU5.8 billion by end of March 1978. 10. The 1977/78 foodgrain crop may exceed the 1975/76 record level of 121 million tons due to very good weather and increased input use. Support purchases could result in peak foodgrain stocks as high or even higher than in 1977, when they were 21 million tons. In addition to ample and evenly distributed rainfall, more intensive and widespread use of three crucial inputs--irrigation water, fertilizer and extension advice--contributed to the bumper harvest. Fertilizer consumption surged 30% in 1977/78, continuing its recovery from the depressed level of 1974/75. Annual additions to irri- gated area have averaged 2 million hectares since 1975/76 compared with 1.3 million hectares per annum achieved from 1969 to 1975. An improved extension system, which has been getting heartening results, has been intro- duced in several states and is slated for further coverage.  -4- Development Prospects 11. India faces the future with large stocks of foodgrains, high and rising external reserves, excellent crop expectations, price stability and good prospects for sustaining the improved supply of foreign exchange. The circum- stances present a great opportunity for further promoting the development of the Indian economy. The Draft Five Year Plan for 1978-83, discussed though not yet approved by the National Development Council, responds to this chal- lenge by projecting a rapid growth in real terms of both overall investment and public Plan expenditures. Investment is to rise on average by 10.7% per annum and the economy is expected to grow on average by 4.7% per annum during the years 1978-83. 12. The new Draft Plan reveals an intention to reorient the country's development toward improving the living conditions of the poor. This is reflected in its principal objectives: (i) the removal of unemployment and significant underemployment; (ii) an appreciable rise in the standard of living of the poorest sections; and (iii) the provision of basic needs to low-income groups. To achieve these objectives, the Government proposes to emphasize agricultural development, cottage and small-scale industries, area planning for integrated rural development and the provision of minimum needs. As a first step toward complete removal of unemployment, the Plan envisages the creation of a large number of new jobs through a considerable expansion of construction activity as well as a boost in the consumption levels of the poor--which in turn would require the production of the necessary wage goods, largely in small-scale, labor-intensive units. Specific programs to achieve these objectives are still in the making. 13. In order to achieve a sizable rise in the income of the poorest classes of society, the Draft Plan--in conformity with the Janata Party policy-- places prime emphasis on the development of rural areas. A major impulse for agricultural development will be provided by the expansion of irrigation and related agricultural inputs, such as fertilizers and better farming techniques. The Draft Plan argues that efforts to increase productivity should be sup- plemented by measures with a redistributive impact such as supporting small farmers and small industry with institutional credit and material supplies and assistance for marketing. The Draft Plan also intends to complement the creation of employment and the increase in rural productivity by providing basic services to those groups which have so far been unaffected. For this purpose, the minimum needs program launched at the onset of the Fifth Plan is being revitalized and accelerated. 14. The allocation of the Draft Plan outlay for the next five years reflects these priorities. Out of a total expected spending of US$81 billion, US$35 billion--43%--have been earmarked for rural development programs includ- ing agriculture, irrigation, fertilizer and social infrastructure expenditures directly benefitting the rural areas. The share of these sectors amounted to 37% during the Fifth Plan period and to 40% in the Annual Plan for 1978/79. It can thus be expected to rise further during the next four years. Similarly, spending on the minimum needs program in 1978-83 will absorb 6% of the Plan resources, as compared to less than 3% in the Fifth Plan. On the other hand, the shares of industry and of transport and communication have been reduced.  - 5 - 15. There is considerable scope for stepping up growth in agriculture. The most promising development is the sharp increase in government outlays and improved project implementation for irrigation. There are also indica- tions that private investment in tubewells is picking up again after a slump in the early 1970s. Other favorable indicators include the spread of an improved system of extension to more states and the recovery of fertilizer demand. With regard to more productive use of existing capacity, there is an increased awareness in the Government that the benefits of irrigation projects can be much increased, not only through command area development, but also through improved design standards in major surface irrigation infrastructure. Nevertheless, comprehensive improvement in water management remains a distant goal, particularly in existing systems and where farms are small and frag- mented. The bulk of the increase in private tubewell development in the last few years has come from the Eastern Region, where more and more farmers are sinking wells to enable them to grow a winter crop of wheat in addition to providing better water control for the summer rice crop. Improved water man- agement would make such investments even more productive. Increased farmer incomes from the recent good harvests, somewhat lower fertilizer prices, and grain prices supported at incentive levels have encouraged farmers to apply considerably more fertilizer. Finally, the reorganized and improved extension and research system which has been introduced recently in several states in northern and eastern India holds out the hope that sound advice will reach many more farmers in both irrigated and rainfed areas and will raise their productivity significantly. The improved extension system is an excellent example of how the growth effort can and must be structured so as to increase the incomes of small and marginal farmers, who work 25% of the cultivated land and account for somewhat more than 25% of production; more importantly, these farmers make up about 70% of the rural population and constitute the majority of those living below the poverty level in India. 16. Industrial prospects are somewhat more difficult to discern. Moderate growth in 1977/78 after an excellent year in 1976/77 suggests the persistence of problems plaguing the sector since the mid-1960s--large un- utilized capacity, stagnant capital formation in the private sector and low productivity growth. Lower investment than expected, of course, is one of the reasons for low capacity utilization in capital goods industries, which make up a significant portion of the sector. Sluggish demand for industrial products from all sources--not only from investments but also from agricui- ture, exports and import substitution--has been a basic constraint. Further import substitution cannot be a major source of growth for manufactured goods in the future because most opportunities for efficient import substitution have been exploited. Increased growth of real incomes from greater produc- tivity in both agriculture and manufacturing, sustained increases in exports and increased investment, particularly by the public sector, all can raise demand for industrial production. 17. The new industrial policy of the Janata government and the orienta- tion of the Draft Five-Year Plan emphasize small-scale industry over heavy industry and have accordingly promoted such measures as product reservation, credit rationing and, within the small-scale sector, plans to initiate special  efforts for the growth of the "tiny" sector. While the priority accorded to the small-scale sector is laudable, there are doubts about the efficacy of the policy measures chosen. Past experience indicates that other factors are also crucial to its development, particularly effective demand, quality control, prices and marketing techniques. Some small-scale industry is cap- ital intensive and not well suited to as rapid employment generation as is hoped; nor can all goods be efficiently produced using small-scale technology. 18. India's population growth rate of about 2% is not high in comparison with that of most developing countries. Moreover, the rate is on the decline, after growing steadily census to census from 1920 through 1970, both because the birth rate continues to fall and because mortality is not falling as steeply as in the past. Family planning acceptor rates slowed down in the wake of the abandonment of the 1976 population policy after the 1977 general elections and the momentum of the program has yet to be recaptured, particu- larly in Northern India. However, the new Government has reaffirmed its com- mitment to a voluntary family planning program and has budgeted the resources to carry it out. Over the longer term, with a sustained family planning effort, it should be possible to bring the birth rate down from its 1970-75 level of about 37 per thousand to about 23 per thousand by the end of the century, implying a population growth rate somewhat under 1.1%. Our "best guess" pro- jection of India's population in the year 2000 is 885 million. Many of the benefits of family planning policy will only be 'felt beyond the turn of the century; the decline in fertility will, however, bring about an earlier change in the age structure of the population. The school age group will grow more slowly or not at all after 1981, thereby reducing the pressures on the primary and secondary education systems. However, the labor force will continue to grow at a faster rate -- 2.5% per annum -- until well into the 1990s, result- ing in an increasing proportion of the population in the labor force from 40.8% to 45% in 1991. 19. The Government's goal of eliminating unemployment in 10 years implies an expansion of the number of jobs at the rate of 9 million per annum -- 7 million new entrants to the labor force and the absorption of 2 million or so formerly unemployed. The majority of these will have to continue to be absorbed -- judging from the prevailing composition of the labor force -- in agriculture and the unorganized small-scale sector. The absorptive capacity of the modern organized sector is unfortunately low; its employment elasticity is expected to be no more than 0.5. Given its low current share of output, even rapid growth of this sector would not make much of a dent in the backlog of the unemployed. Employment in the organized sector has been growing at about 2.2% per annum in the past ten years, less than the labor force growth rate, and all of this in the public sector. Private sector employment has not grown at all since 1966. While the labor absorption elasticities of the small- scale sector may be higher in some cases than that of the large-scale sector, a major effort to expand production must succeed before an appreciable employ- ment impact will materialize. 20. In the short run India's balance of payments should not be a con- straint on growth and development. With good medium-term prospects for India's exports, the expected continuation of growth in invisible receipts  - 7 - and the potential for an increase in net aid disbursments, the net availability of foreign exchange to finance merchandise imports is projected to rise over the next five years, in current prices, from US$8.7 billion in 1977/78 to US$16.7 billion in 1982/83, an average of 14% per annum. Given the unlikely need to increase rapidly imports of some traditionally important items -- e.g., petroleum, fertilizer, foodgrains, edible oil and cotton -- other imports can increase at the rate of 20% a year over the next five years. 21. Altogether, these currently favorable circumstances present the opportunity to double India's trend rate of growth of per capita income from the average annual rate of 1.5% that prevailed for the last thirty years to 3% over the next five, and thereafter. This requires a continued fall in the rate of population growth to below 2% per annum and a rise in the growth of GDP from the historical rate of 3.5% to 5.0% per annum. Both of these targets are within reach. The first should be achieved barring a total abandonment of the family planning program. The second requires improved efficiency and increased investment by both the public and private sectors; it also means more fully harnessing the gains from trade through international specializa- tion, implying a strong export effort and continued easier access to imports. in addition to enabling a faster rate of per capita income growth, the pre- sent situation allows for increasing the coverage of the population's minimum needs. This requires formulating and administering effective, efficient programs of public investment and, of course, requires larger public outlays. 22. With the enhanced resources at India's disposal, the economy is poised for a higher rate of economic growth. The Government is moving to take advantage of this opportunity with increased public expenditure envi- sioned over the next five years, and the liberalized trade policies recently announced. It is yet too early to know whether the moves made so far will be sufficient to achieve the desired targets or whether additional steps will be necessary. Assured international support for India's development effort will be an important factor in moving the Government to take greater risks in pursuing a dynamic development program directed at meeting the huge needs of its large and impoverished population. PART II - BANK GROUP OPERATIONS IN INDIA 23. Since 1949, the Bank Group has made 54 loans and 103 development credits to India totalling US$2,117 million and US$5,932 million (both net of cancellation), respectively. Of these amounts, US$901 million had been repaid, and US$2,236 million was still undisbursed as of May 31, 1978. Annex II contains a summary statement of disbursements as of May 31, 1978, and notes on the execution of ongoing projects. 24. Since 1957, IFC has made 15 commitments in India totalling US$63.6 million, of which US$14.5 million has been repaid, US$1.6 million sold and US$6.9 million cancelled. Of the balance of US$34.6 million, US$26.9 mil- lion represents loans and US$7.7 million equity. A summary statement of IFC operations as of May 31, 1978, is also included in Annex II (page 2).  - 8 - 25. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit opera- tions. Major irrigation, marketing, seed development, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capac- ity utilization in industry. The Bank Group has also been active in support- ing infrastructure development for power, telecommunications, and railways. Family planning, education, water supply development, and urban investments have also received Bank Group support in recent years. 26. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, industry, power, urban development and water supply remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs such as credit for on-farm investments, command area development of existing irrigation schemes, intensification and streamlining of extension systems, and seed production form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers. Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on agriculture-, export- and energy-related projects. 27. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has success- fully adjusted to the changed world price situation. However, the basic need for foreign assistance, to augment domestic resources, stimulate investment and accelerate economic growth, remains. As in the past, Bank Group assist- ance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Con- sequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, rural water supply and medium- and small-scale industry. 28. Although the growth prospects of the economy have improved, India's poverty and needs are such that as much as possible of India's external capi- tal requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and India may be regarded as creditworthy for some supplemental Bank  - 9 - lending. As of May 31, 1978, outstanding loans to India totaled US$1,254 million, of which US$591 million remained to be disbursed, leaving a net amount outstanding of US$663 million. 29. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 62%, 27% and 38%, respectively, in 1977/78. On March 31, 1977, India's outstanding and dis- bursed external public debt was US$13.3 billion, of which the Bank Group's share was 28%. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1977/78, about 16% of India's total debt service payments were to the Bank Group. PART III - THE TRANSPORT SECTOR Background 30. Rail transport has been the traditional mode of motorized transport in India and still retains an important position, carrying 60% of total freight traffic and 45% of total passenger traffic, with highways carrying most of the remaining traffic. In 1977 the railways carried about 246 million tons and 3.1 billion passengers. Growth in traffic over the coming five years is pro- jected to be about 4% annually for both freight and passengers. Compared to railways and road transport, the other modes of commercial transport -- i.e., shipping, coastal and inland waterways, airlines and pipelines -- are at pre- sent of minor importance, carrying only 5% of freight traffic and less than 1% of passenger traffic, although these modes perform important functions within their specialized areas. Indian Railways 31. Indian Railways (IR) is the nation's largest undertaking with about 1.7 million employees. IR operates a system of over 60,000 route-km, of which about 60% is broad gauge (1.676 m), 35% is meter gauge (1.000 m) and the remaining 5% narrow gauge (0.762 m and 0.610 m). About 80% of IR's traffic is carried on its broad gauge network. It operates a large number of various types of locomotives, passenger coaches and freight wagons. 1/ IR is one of few railways in the world which are operated with a surplus. 32. IR is owned by the Central Government and its operations are managed by a Board of five members headed by a Chairman who is ex-officio a Principal Secretary to the Government reporting to the Minister of Railways. One Board member, the Financial Commissioner, has discretionary powers to report directly 1/ About 8,300 steam locomotives, 2,000 diesel-electric and diesel-hydraulic locomotives, 850 electric locomotives, 2,300 electric multiple units, 34,000 coaches and 397,000 freight wagons are in service.  - 10 - to the Minister of Finance on financial matters. The Railway Board manages the railway network through nine Zonal Railways, each of which is administered by a General Manager, and each Zonal Railway has multiple Divisions as the basic units of operation. Oversight of railway finance and policy is exercised by Parliament through consideration of the IR budget and of recommendations sub- mitted by the Railway Convention Committee and other Parliamentary committees. 33. In addition to its role as a major transporter of freight and pas- sengers, IR performs an important role as India's sole manufacturer of diesel and electric locomotives, and a major manufacturer of passenger coaches. The IR's main manufacturing units are the Chittaranjan Locomotive Works (CLW) at Chittaranjan in Bihar State, the Diesel Locomotive Works (DLW) at Varanasi in Uttar Pradesh State, and the Integral Coach Factory (ICF) at Madras in Tamil Nadu State. At present IR's annual manufacturing capacity for new locomotives amounts to 120 diesel-electric locomotives, 60 electric loco- motives, and 50 diesel-hydraulic shunting locomotives. New steam locomotives are no longer produced. The capacity for the manufacture and remanufacture of parts and components for maintenance is becoming increasingly inadequate. Accordingly, IR is making plans for its expansion. Total passenger coach manufacturing capacity in India is currently about 1,550 units per year, of which IR's capacity amounts to 750, with two private companies accounting for the remainder. Total wagon manufacturing capacity in India is about 30,000 four-wheeler units annually, shared by nine private and public sector companies. IR workshops manufacture a very limited number of special purpose wagons. 34. At the same time, IR is also the principal buyer of wheels, tires and axles and a major buyer of electrical and mechanical goods for its manu- facturing units. The largest domestic suppliers of electrical goods for locomotives are Bharat Heavy Electricals Limited (BHEL), a public undertaking, and CLW. Installed capacity at BHEL for manufacture of equipment relevant to IR is currently 1,300 traction motors for diesel-electric locomotives, 220 transformers, and 100 blower motors. Capacity at CLW amounts to 400-500 traction motors for electric locomotives. For manufacture of wheels, axles and tires, there are currently two indigenous sources of supply: Durgapur Steel Plant (DSP) at Durgapur, West Bengal State, and Tata Iron and Steel Company (TISCO) at Jamshedpur, Bihar State. The DSP wheel and axle plant is part of an integrated steel complex controlled by the Steel Authority of India Limited, a holding company for public sector steel plants; the TISCO wheel, axle and tire plant is part of an integrated steel complex of a private sector undertaking. The combined rated capacity of these two plants is about 90,000 wheels, 27,500 tires and 50,000 axles. Capacity utilization at DSP during the past 10 years has been on the average only about 30%, mainly because of very poor management/labor relations, high rejection rates due to poor quality of raw material and lack of proper quality control, and inadequate equipment and machinery. While DSP is currently engaged in a productivity improvement program, it is unlikely that utilization of current rated capacity will be substantially improved in the short term; in the long term, annual capacity utilization is not expected to exceed 75%. Capacity utilization of TISCO over the past decade has been close to 100%. Even if total capacity at both plants were utilized, domestic production could cover only about 60% of wheel demand and 85% of axle demand. The proposed project would support the construction of a new plant to cover the shortfall in domestic production.  - 11 - 35. IR's maintenance workshops were set up and equipped in the latter half of the nineteenth and early twentieth centuries by the State and Company Railways. At the time of integration of the Railways in 1952, there were 41 workshops dealing with the overhaul of rolling stock and motive power, and the size of these workshops varied from 150 to 15,000 employees. These work- shops were designed primarily to meet the operational need of each individual State/Company Railway. Since little effort has been made to integrate the maintenance network nation-wide, individual workshops had to carry out mul- tiple activities, instead of specializing in certain areas of repair and remanufacturing work; their operational efficiency has consequently been low. Meanwhile, extensive changes in the mode of traction have taken place, from steam to diesel and electric motive power which now together carry about 80% of the total freight traffic, although about 8,300 steam locomotives are still in service. Since 1952, the number of freight wagons has grown two and a half times and the number of passenger coaches has doubled, but IR's investments in workshop have not kept pace with the growth of the Railways as is shown by the fact that, in the past two decades, IR's investments in workshops have been only about 3.5% of the investment made in rolling stock and motive power. In- adequate capability and poor quality of maintenance work have resulted in a decrease in the availability of effective motive power and rolling stock. In an attempt to provide improved maintenance, IR developed a workshop rational- ization plan, which is intended to maximize the efficiency of the total net- work instead of achieving self-sufficiency on a Zonal level. The proposed project would support such workshop rationalization and modernization and help IR establish a unit exchange maintenance system -- i.e., a system by which major parts and components of locomotives are repaired or remanufactured centrally and made available for immediate installation in workshops in order to reduce time and cost of maintenance and to increase availability of locomotives. 36. The Research, Designs and Standards Organization (RDSO) is a sepa- rate functional unit under IR. Guidelines for its research and development activities, which have been directed mainly towards domestic production of railway equipment,are laid down by the Railway Board. The most urgent long- range research and development efforts of RDSO are directed towards tech- nological improvements in power packs for diesel locomotives, and transmission and auxiliaries for diesel and electric locomotives. The proposed project will assist the RDSO in acquisition of technology and testing apparatus for the development of improved technology relating to power packs for diesel electric locomotives. 37. Since India began to manufacture diesel and electric locomotives in the 1960s, considerable improvements and innovations have taken place in traction technology, resulting in reduced manufacturing, operating and main- tenance costs and improved operating performance. Some major technological innovations and improvements remain to be incorporated in locomotives manu- factured by IR. IR recognizes the need to upgrade the existing locomotives and to adopt traction technology specifically suited to the operating condi- tions in India; a study of the Railways' requirements for motive power by a committee established for this purpose is now underway.  - 12 - Transport Policy, Planning and Coordination 38. The Indian transport sector is under the concurrent jurisdiction of various ministries: railway planning, construction and operation is under the Ministry of Railways; civil aviation under the Ministry of Tourism and Civil Aviation; pipelines under the Ministry of Petroleum; and roads, ports and shipping under the Ministry of Shipping and Transport. Planning and coordination is undertaken within the context of overall national and regional plans. The Government carried out a transport sector review in 1973/74 in accordance with a program agreed during negotiations of the Eleventh Railway project (Credit 280-IN of December 1971). As a result of this review, a Corporate Plan for the railway sector was completed in 1976. It provides a long-term perspective of IR development, on which five-year plans will be based. It outlines a development strategy for IR for the period from 1977/78 to 1988/89 and covers inter alia forecasts of passenger and freight traffic, requirements for traction and rolling stock, strategies for research and development, management and manpower and financial aspects. Planning cells have been established in each of the nine Zonal regions of IR to enable the initial Plan to be updated and revised as appropriate. The draft Five-Year Plan (1978/79 - 1982/83) of IR envisages a 25% increase in freight traffic over the five-year period (5% per year) and an increase of nearly 20% in passenger traffic (4% per year). In 1982/83 IR is expected to be carrying about 300 million tons of freight and 3.8 billion passengers, compared with 254 million tons and 3.3 billion passengers in 1978/79. Compared with the previous Fifth Plan period considerably more investments in machinery and plant are needed to replace assets installed in the IR's manufacturing units and workshops which are of an advanced age. Thus, in order to support pro- jected traffic growth and to replace of assets, IR's investment during the five years would total about Rs 32.3 billion (US$3.8 billion equivalent). The proposed project finances part of this program. Bank Group Operations in the Transport Sector 39. The Bank Group has long been associated with the Indian transport sector and IR. The first Bank operation in India in 1949 was a loan of US$34 million for IR (Loan No. 17-IN of August 1949), and since then the transport sector has received direct assistance totalling about US$1,135 million. Sub- stantial indirect support has also been provided through industrial imports credits, under which imports of components and materials for the manufacture of commercial vehicles have been financed. From the late 1950s to the mid- 1960s, Bank Group lending included finance for three of India's major ports (Bombay, Madras, and Calcutta) and for a highway project serving Eastern India. Oil tankers for coastal and international service have also been financed. There was also, in the 1960s, a loan for purchase of aircraft by Air India. All transport projects have been successfully completed except the Bombay Urban Transport project (Loan 1335-IN of December 1976). In the case of Loan 1335-IN, disbursements have been somewhat slow because of delays in procurement action. However, contracts for major hardware components have been awarded, and steps are being taken, with the assistance of consultants, to minimize the delay in project implementation.  - 13 - 40. Over the past 29 years, IR has been the beneficiary of six loans and seven credits, totalling US$896.5 million, which has been the major share of the Bank Group's assistance to the transport sector. Previous lending operations to IR have been satisfactorily completed, and the ongoing Credit (582-IN of August 1975), is expected to be successfully completed by September 1978. These loans and credits have assisted IR in increasing the volume of freight carried and its passenger traffic by more than 50% and 86%, respec- tively, between 1965/66 and 1975/76. Project audits have been carried out for Credits 280-IN and 448-IN, and the audit findings are contained in Report No. 1658 of June 30, 1977. The report found that the original investment pro- gram was scaled down because of higher costs and lower than expected traffic. The projects were implemented on time, and the re-estimated rates of return were similar to the appraisal forecast. Because of unusual economic and political circumstances, the financial situation of IR deteriorated during the 12th project period, but has improved since. The report also found that in spite of many years of dialogue between the Government and the Bank Group, transport planning and coordination remain rather weak. An ongoing transport study by the Planning Commission with UNDP assistance is expected to help overcome this weakness. IR has been complying with all its covenants under the loan and credit agreements. 41. The thirteen previous lending operations to IR, which have financed a time slice of the Railway investment program, have contributed to high engineering standards and to the present managerial and financial strength of IR. Because of achievements to date, the opportunities for further institution-building through this approach are limited. At the same time, the Government wished, in view of IR's importance to India's economy, that the Bank Group continue its association with the development of the railway system. In the light of these considerations, the Bank and the Government agreed on a fundamental change in the approach to lending for the sector -- focusing on certain key aspects of IR operations and directing Bank Group assistance to the specific steps that need to be taken in these areas to improve railway efficiency. The proposed project, while prepared and appraised against the background of IR's overall investment program, is the first to embody this new project-oriented approach; it is designed to improve the operational efficiency of the railways by rationalizing and modernizing main- tenance, removing existing bottlenecks in manufacturing capabilities, and supporting research and development activities related to improvements in motive power. PART IV - THE PROJECT 42. The project was appraised by a mission which visited India in January/February 1978. The Staff Appraisal Report entitled "A Railway Modernization and Maintenance Project" (No. 2020-IN, dated July 24, 1978) is being distributed separately to the Executive Directors. Negotiations were held in Washington in June 1978. The Indian delegation was headed by Mr. K. S. Rajan, Chairman, the Railway Board. A Supplementary Project Data Sheet is attached as Annex III.  - 14 - Project Description 43. The proposed project consists of: (i) acquisition of workshop ma- chinery and equipment to be installed in the main and supporting workshops 1/; (ii) construction and installation of a wheel and axle plant, with an annual manufacturing capacity of 70,000 wheels and 23,000 axles, and import of two years' requirements of wheels, tires, axles and wheel sets; (iii) development support for a product improvement program for IR's manufacturing units, includ- ing thyristor control transformer sets for IR's present AC electric locomotives and technical advisory services and overseas staff training for manufacturing, quality control, cost control and design personnel. The workshop moderniza- tion component of the project is the first phase of the IR's workshop modern- ization and rationalization program and is scheduled to be implemented by December 1983. The new wheel and axle plant will be erected at Yelahanka, 16 km from Bangalore, in the State of Karnataka; it is expected to begin ini- tial operation in January 1982. The development support component includes acquisition of testing facilities in support of product improvement to be carried out by IR's Research, Designs and Standards Organization (RDSO), supply of thyristor control transformer sets, and technical assistance and overseas staff training. Project Cost and Financing 44. IR's investment program for the period 1978/79 to 1982/83 totals about Rs 32.3 billion (US$ 3.8 billion). The proposed project, which forms part of the program, is estimated to cost Rs 3,949 million (US$459 million), including US$80 million in duties and taxes. The project cost estimates are based on January 1978 prices and include a price contingency averaging 7% per annum for local and foreign costs. A physical contingency of 10% is included in the cost of the wheel and axle plant component. The foreign exchange com- ponent of the project is estimated to cost US$229 million. It is expected that Indian suppliers would submit the lowest conforming bids for items to be procured by international competitive bidding amounting in total to about US$45 million equivalent, therefore reducing the direct and indirect foreign exchange component of the project to US$198 million. The proposed credit, together with the balance of about US$7 million remaining from Credit 582-IN and US$1 million allocated from bilateral sources for imports of wheels and axles and unit exchange components, would cover the estimated foreign exchange costs; it constitutes about 50% of estimated project costs excluding duties and taxes. The balance of the funds required for the project will be provided by the Government. The exchange risk will be borne by the Government. Procurement and Disbursement 45. All items financed under the proposed credit would be procured by IR through international competitive bidding and limited tender from estab- lished manufacturers in accordance with Bank/IDA guidelines, except for: 1/ One manufacturing unit, Chittaranjan Locomotive Works (CLW); four major repair workshops, Kancharapara, Kharagpur, Matunga and Parel Workshops; and about 47 sheds and repair facilities.  - 15 - (i) contracts for equipment and materials of US$100,000 equivalent or less, which would be too low in value to warrant the administrative complications and cost of international bidding procedures, with a total value of not more than US$5 million equivalent; and (ii) contracts with an aggregate value of up to US$8 million for proprietary items to be installed at the wheel and axle plant at Yelahanka. Due to proprietary technical know-how and patents applied to certain critical plant components, procurement of these items through international competitive bidding is not feasible. The aggregate value of contracts for the workshops modernization component and the wheel and axle plant component under the project which would be awarded on the basis of limited tenders from establish manufacturers is estimated to be at US$21 million. Such contracts will be placed using IR's internal procedures for procurement which is found satisfactory to the Association. Indian suppliers would be granted a preference margin of 15% or the current rate of import duty, whichever is less. It is expected that Indian manufacturers of equip- ment and machinery would submit the lowest conforming bids for items amounting in total to about US$45 million equivalent, or about 24% of the value of items financed under the credit. The proceeds of the credit would be disbursed against 100% of: (a) the c.i.f. cost of imported items; (b) the ex-factory cost, net of duties and taxes, of items procured from Indian suppliers; and (c) the cost incurred for training, technical advisory services and overseas staff training. Project Implementation 46. IR will implement the project as part of its ongoing works and manufacturing program. An acceptable master plan for project implementation was submitted to the Association by IR. It was discussed in detail and was agreed upon with the Association during negotiations (Section 3.01 (b) of the Development Credit Agreement). In order to enable the Association to monitor the progress in project implementation, a project reporting system satisfactory to the Association will be employed and the reporting requirements were dis- cussed in detail during negotiations. 47. Under the workshop modernization component, IR will take action as necessary for modernizaton of its workshops and will introduce a unit exchange maintenance system. As part of project implementation, IR will complete a workshop modernization and rationalization program based on a plan of action which was discussed with the Association during negotiations and was found acceptable, and introduce new expertise in machine tool technology and a method for monitoring work performance. 48. The location of the wheel and axle plant was chosen with a view to minimizing costs of electricity and transport of raw materials and finished goods. The Karnataka State Electricity Board has provided assurances to IR that it will supply power to meet the requirements of the wheel and axle plant (about 23 MW) from its power distribution centers at Peena and Hoody, which would transmit power dispatched from the Kalinadhi hydro-electric scheme. Karnataka has also assured IR that it will meet the requirement of water (2.3 million liters or 0.6 million gallons per day) by the time of the initial operation of the plant scheduled for 1982. A water pipeline and two power transmission lines to the plant site are under construction.  - 16 - 49. Installation of the wheel and axle plant would generate job oppor- tunities for about 1,200 workers and staff for plant operation, out of which about 800 employees will be engaged in manufacture, plant engineering, quality control and material management, the balance being general management, railway colony and security workers. Appointment of managerial, supervisory and tech- nical personnel would be done in sufficient time to permit prompt implementa- tion of the project and the Government has confirmed that the plant would maintain adequate staff under the supervision of experienced and competent management (Section 4.05 of the Development Credit Agreement). Technical advisory services for detailed engineering, preparation of specifications, plant construction and start-up would be provided by the technical collabora- tors, and an adequate staff training program is being prepared and would be carried out in consultation with the collaborators. The Government has agreed to implement a training program for the technical staff and work force of the wheel and axle plant, which will be submitted to the Association by December 31, 1978 (Section 4.04 of the Development Credit Agreement). The targets for building up production of the wheel and axle plant are: (i) for the wheel unit: 10,000 in 1982/83, 26,000 in 1983/84, 50,000 in 1984/95 and normal operation at rated capacity thereafter, and (ii) for the axle unit: 4,000 in 1982/83, 13,000 in 1984/85, 16,000 in 1985/86 and normal operation thereafter. 50. The development support component under the proposed project would support technical advisory services through experts with qualifications, ex- perience and on terms and conditions acceptable to the Association (Section 3.02 of the Development Credit Agreement). The experts would provide assistance to IR in the following areas: (i) for the wheel and axle plant to be estab- lished at Yelahanka: in detailed engineering, preparation of specifications, and plant construction, commissioning and start-up; (ii) for the product im- provement program of RDSO: the development of improved designs and products for incorporation in existing diesel locomotives; and (iii) for the workshop modernization program: to supplement the multi-disciplinary expertise required for program implementation in the fields of machine tool technology, mechanical handling, industrial engineering, costing systems, etc. IR has concluded a technical collaboration agreement on the wheel manufacturing process with Amsted Industries of the U.S. 51. In 1977, a task force was appointed by the Railway Board to study application of a management information system (MIS) at IR's production units. The task force submitted its findings and recommendations on improvement of production planning and control systems at IR's manufacturing units, inter alia, in the areas of product costing and departmental performance measurement. IR intends to introduce the MIS at IR's manufacturing units, including the wheel and axle plant at Yelahanka. Implementation of this system is expected to facilitate better cost control and improve operational efficiency. IR Finances 52. In financial matters, the Government, through Parliament, exercises control over IR based on recommendations submitted by the Railway Convention Committee and other Parliamentary committees. IR's earnings are regulated by financial policy guidelines set by the Government. The Government had in the  - 17 - past applied a tariff policy which had tended to subsidize large segments of freight and passenger traffic. Rail freight for coal over longer distances in the past has been a prime example of subsidized transport, which annually resulted in considerable losses to the railways. The latest rate and fare increases in 1975/76 represent a distinct step towards cost-based tariffs. Coal freight rates are now close to actual costs and freight rates for other commodities are also primarily based on actual costs. As a result, most sub- sidies on freight traffic have been eliminated. A similar cost-based tariff policy had been applied to passenger fares. In addition to the recent rate increases, the Government set up a Rail Tariff Enquiry Committee in September 1977 to examine primarily the structure of fares, rates and other charges for public traffic carried by passenger trains and/or goods trains and to recommend improvements. The Committee is expected to submit its report by December 1979. 53. IR's financial objectives are to generate net revenues to meet the 6% dividend payment due to the Government on capital provided to IR (capital- at-charge), after covering working expenses 1/ and certain appropriations to statutory reserves 2/, and to generate surplus. Due to the fuel cost hike, wage increase and the reduced level of freight caused by the shortfall in domestic output of major bulk commodities such as steel and coal, IR registered operational deficits of Rs 1,155 million and Rs 1,139 million in 1973/74 and 1974/75, respectively. The operating ratio during these two years increased from 84.5% in 1972/73 to 93.7% in 1973/74 and 93.5% in 1974/75. In 1975/76, however, reflecting the recovery of Indian economic activity and improved in- dustrial relations, freight and passenger traffic increased by 10% and 18% compared with the previous year, and IR could meet all operating expenses and 85% of the dividend payable out of internally generated resources. In 1976/77, IR's financial situation further improved. The operating ratio dropped to 84.4% and IR registered a net surplus of Rs 872 million and fully met its dividend liability. Given the favorable current economic situation, the out- look for the immediate futute is encouraging. The result for 1977/78 indicates a surplus of Rs 893 million, with a further reduction of the operating ratio to 84.0%. This represents a marked improvement, since no tariff increases were granted for this fiscal year despite cost escalation. Operating expenses were kept about Rs 377 million below the budget figure, although traffic ex- ceeded the budget forecast, primarily because of increased efficiency and tighter expenditure controls. 54. New capital investment has been financed primarily from capital pro- vided by the Government through the railway budget along with any internally retained surplus available to IR, and any cash flow shortfall is met by bor- rowing from the Government ("temporary loans"). Although IR earned a net 1/ Working expenses of IR consist of following elements: personnel cost (about 60%), fuel cost (about 20%) and other costs of miscellaneous items (about 20%). 2/ Depreciation Reserve Fund for replacement of fixed assets, Development Fund for general improvement of passenger and other amenities, and Pension Fund.  - 18 - surplus of Rs 872 million for 1976/77, it had to draw temporary loans from the Government amounting to Rs 1,469 million because of the deficit carried over from earlier years. IR's outstanding loans drawn from the Government amounted to Rs 4,619 million as of March 31, 1977 and the amount reduced to Rs 3,686 million in 1977/78. It is projected that IR would need to cotninue to borrow temporary loans from the Government in the foreseeable future. A Committee on Capital Restructuring of the Government has been set up to in- vestigate the various alternatives to handle this. It is expected that the Committee will submit its recommendations on financial arrangements to be made between IR and the Government shortly. Assurances were obtained from the Government that it will maintain freight rates and passenger fares and shall take necessary action to provide IR with such net revenues as to enable IR to meet, out of internally generated resources, all operating expenses, appro- priations to statutory reserves and dividend on capital-at-charge (Section 4.02 of the Development Credit Agreement). 55. The capital costs of the wheel and axle plant, including working capital and taxes, is estimated at Rs 647 million (about US$75 million equiv- alent). The foreign exchange portion of the capital investment of the plant is about US$38 million equivalent, or about 50% of the total outlay. The amount required for construction will be included in the railway budget pre- sented annually to the Parliament. Dividend on capital-at-charge is payable by IR to the Government on plant investment at a rate of 6% per annum. Since the wheel and axle plant will be installed as a captive manufacturing unit of the Railways, the output from the plant will be transferred to IR at prices to be determined on the basis of internal transfer price system used in IR's existing manufacturing units. IR has agreed that the transfer price will be based on direct manufacturing costs, overhead costs and full depreciation (Section 4.06 of the Development Credit Agreement). Project Justification and Risks 56. The proposed project would help improve the maintenance of motive power and rolling stock and thereby reduce the cost of their maintenance as well as improve their performance and availability. Cost savings derived from the project which are not passed on to IR's customers or retained by IR will be returned to the general GOI account for use in accordance with over- all Government policies. 57. The weighted average economic return on all project components in- cluding technical assistance is 23%, with the workshop component having a return of 27% and the wheel and axle plant component a return of 19%. 58. All project components will use proven technology that has been in extended use in other parts of the world. Thus, construction, installation and initial operation are not subject to significant risks. IR has been successfully managing large-scale railway operations and manufacturing enter- prises for decades. It has competent management and suitable technical expertise to execute the project.  - 19 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 59. The draft Development Credit Agreement between India and the Association, and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 60. Special conditions of the project are listed in Section III of Annex III. 61. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 62. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President July 24, 1978   ANNEX I Fage I~ INDIA - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) - - -- -- --- --- - --- -- TOTAL 3280.5 l-- INDIA REFERENCE COUNTRIES (1970) TOTAL 3280.5 MOST RECENT AGRIC. 1797.5 1960 1970 ESTIMATE INDONESIA PHILIPPINES BRAZIL** ONtP PLR CAPITA (USS) 60.0 100.0 150.0 130.0 230.0 550.0 ----------- POPULATION AND VITAL STATISTICS _______________________________ POPULATION (MID-YR. MILLION) 434.9 547.6 620.4 /a 117.6 36.9 92.9 POPULATION DENSITY PER SQUARE KM. 133.0 167.0 189.0 62.0 123.0 11.0 PER SQ. KM. AGRICULTURAL LAND 247.0 308.0 345,0 411.0 375.0 49.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 43.2 41.0 37.0 45.9 44.2 36.4 CRUDE DEATH RATE (/THOU,AV) 23.9 19.0 17.0 20.6 13.2 9.9 INFANT MORTALITY RATE (/THOU) 139.0/a . 130.0 * 81.0 110.0 LIFE EXPECTANCY AT BIRTH (YRS) 41.7 47.2 49.5 .. 55.6 59.4 GROSS REPRODUCTION RATE 3.2 2.9 2.8 3.2 3.3 2.6 POPULATION GROWTH RATE (%) TOTAL 2.0 2.3 2.1 2.0 3.0 2.9 URBAN 2.5]b 3.2 3.1 3.7/a 4.0 5.0 URBAN POPULAtION (x OF TOTAL) 17.9 19.8 20.6 17.5]b 27.6 56.0 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 41.0 41.6 40.1 44.0 45.6 42.0 I5 TO 64 YEARS S5.9 55.3 56.7 53.5 51.6 55.0 65 YEARS AND OVER 3.1 3.1 3.2 2.5 2.8 3.0 AGE DEPENDENCY RATIO 0.8 0 0.9 0.9 0.8 ECONOMIC DEPENDENCY RATIO t.1.. 1.1/a l.L.L ,, 1.5 1.5 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) 71.0 14585.0 37658.0 259.3 320.0 250.0 USERS (% OF MARRIED WOMEN) .. .- 18.7 *- 2.0 1.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 175000.0 218000.0 261000.0/a 12400.0 29400. LABOR FORCE IN AGRICULTURE (x) 71.0 69.0 69.0 * 55.0/a 40.4 UNEMPLOYED (% OF LABOR FORCE) 4.8 /d 4.4 /b 4.41c,d 7.6 7.5 INCOME DISTRIBUTION S OF PRIVATE INCOME RECOD BY- HIGHEST S% OF HOUSEHOLDS 26.7 25.0 /C 35.0/a HIGHEST 20X OF HOUSEHOLDS 51.7 53.1 7? ,. . 54.0 62.07i LOWEST 20X OF HOUSEHOLDS 4.1 4.7 t? .. 30-t LowE5T 40X Of HOUSEHOLDS 13.6 13.1 3 .. -76 .i DISTRIBUTION OF LAND OWNERSHIP % DWNEo EY TOP 10% OF OWNERS .. .. .. .. .. 4S.0 S OWNED BY SMALLEST 1OX OWNERS .. . .. ., . 1.5 HEALTH AND NUTRITION POPULATION PER PHYSICIAN 5840.0 Le 4890.0 4220.0 26370.0 . 1910.0 POPULATION PER NURSING PERSON 5310.0 220.0/d 368o.0oL 7630.0/c . . 3220.0/b POPULATION PER HOSPITAL BED 259o.0uhl 1610.0 , 1640.0 850.0 260.0 PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 95.0 92.0 89.0 91.0 93.0 109.0 PROTEIN (GRAMS PER DAY) 55.0 53.0 48 43.0 45.0 64.0 -OF WHICH ANIMAL AND PULSE 19.0li 16.0 12.6 14.0 22.0 39.0 DEATH RATE (/THOU) AGES 1-4 44.0 . .. .. 6.6 EDUCATION ADuUSTED ENROLLMENT RATIO 41.0 63.0 65.0 75.0 PRIMARY SCHOOL 4. 30 6. 50 130 8. SECONDARY SCHOOL 23.0 30.0 29.0 15.0 49.0 6H.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 12.0 11.0 12.0 10.0 11.0 VOCATIONAL ENROLLMENT (x OF SECONDARY) 6.0 . .. 29.0 6.0 /b 17.0 ADULT LITERACY RATE (%) 24.0 33.0 36.0A 59.0 .. 64.0 HOUS I NG PERSONS PER ROOM (URBAN) 2.6 2.8 .. .. 2.1 1.0 OCCUPIED DWELLINGS WITHOUT PIPED WATER (%) .7. .. .. ., 7.0 73.0 /C ACCESS TO ELECTRICITY (% OF ALL DWELLINGS) .. .. .. .. 23.0 48.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (%) .. .. .. .. 7.0 8.0 CONSUMPT ION RADIO RECEIVERS (PER THOU POP) 5.0 21.0 25.0 114.0 39.0 60.0 PASSENGER CARS (PER THOU POP) 0.7 1.0 1.0 2.0 8.0 25.0 ELECTRICITY (KWH/YR PER CAP) 48.0 114.0 143.0 20.0 235.0 491.0 NEWSPRINT (KG/YR PER CAP) 0.2 0.3 0.3 0.3 2.0 2.7 E _ A- N D----EI--- N ----R------------------------_-----------_---------------- -------------- --_--_----- SEE NOTES AND DEFINITIONS ON REVERSE  ANNEX I Page 2 NOTES Unless otherwise noted, data for 1960 refer to sany year between 1959 and 1961, for 197f between 1969 and 1971, and for Moat Recent Eatimate between 1973 end 1976. Brail baa been ealected as an ob)ective country becau.e of ire else end cmparable probilia of regional inequality. IDA 1960 1a 95i-61 average; to 1951-601 Ic Ratio of population under 1) and 65 ard over to labor force age 15 and -vr; Id Estimated by, National Sacpla Survey, in tretin of the average namber of pereon/wseeka of unemploymnteo aS percentage o-f total person/we..ke In ch. labor Earns; /s 1962- /f Reeietmond, noat all practicing in the country; LA Including midwives; /h 1958; /i 1960-62. 1970 Ratio of population under 15 and 65 and over to total labor -force age 15 and ove; lb Eatimated by National Sample Survey, in treti, of the average number of peren/weeke of unmaploymeent an percentage o-f total pereon/wee.ke in the total labor force; Ic 1967-689 Id Including midwives. MOST RECENT ESTIMATE: LA 1978 nid-year population and labor forte eatimated at 640.4 end 261 millione reepectively; /b Ratio of population under 15 and 63 and over to total labor forte; Ic 1977; Id Estimated by Rational Sample Survey, in tarma of the average number of peraono/eeks of unemployment aa percentage of total pernon/weeke in tbe labor force; Ia Including midwivee; IL Population 10 yeara and over. IND)ONESIA 1970 / 1961-71; lb 1971; Ic Includingniwva PHILIPPINES 197i IA.N perantage of employment; lb Not including private voctional nohools. BRAZIL 1970 Ia Economically active, population; lb Hoepital personnel; /c Inside only. R13, May 2, 1978 nD5EXITIWC OIF SOCIAL ISCOICATORS Lend Area (thou in2; PoPuILaion pee nureina pareon Population divided by numben of practicing Total -TocL. suface rStacceeprielig land area and inland waters. male and femsale graduate nures., 'trained' or 'certified" nurses, and m.rc Mot rece.nt eatimate of agricultura area uaed temporarily or patin- eumiliary prarsonne with training or enp-rince. nantly for crupe, paatures, metbat & k1tchan gardens or to lie follow. Population pae hosnita1 bed - Population divided by ..bar of bospital bode availabla It publio and private genara-1 end sp-oilse.d hospital and or? Par caPita fUl$) - GNP? per capita eatimatse, atcurrent markat prices, rahabilitation centears; enclodsa onring home.S ead setablihalannts for catlculted by Same converaion metbod aS World Rank Atlee (1974-76 basia) ; custodial and preventive cars. 1960; 1970 and 1976 data. Par capita Supply of calories ft of -eeuirements) - Computed from energy equivalent of net food supplies available in country per capita par day; Population sand vital atatistic available Supplies compriee domeatic production, imnports loae seports, and Popolation (,eid--ran million) - ua Of July firtat if no -vilhe,aaro chenge In stock; net euppliae -1clde animal fend, seeds, qu.stitiauae.d of tw.oend-year estimates; 1960, 1970 and 1976 data, in food proceasing and losas. In distribution ; -aqoiremente were estimasted by FAO based on pbysiological madea for normal activity and health consid- Population decaity- pan eqoaro km - Mid-year population par equate kilomter ering enironasottel temperature, body weights, *ge end see dietributions of (100 bectrare) of itetl carea population, and allowing 10% for waste at houaebold level. Population demaity- per equare he of agric. lend - Computed an above for Per capita supply of protein farama par day) - Protein c-ontnt of per capita agiutrl.lad only. net Supply Of fond per day; ear Supply of food is defined as above:; eaquis- mente for all countrises establiahed by USDA Economic Reasearch Services Vital etatistica provide for a minim,a alwneOf 60 grame of total protein per day, and Crude birtch rate per tbousand, average - Annua live birdie par thousand Of 20 grate of animal end pulse protein, of which 10 grate shoald be animal aid-year population ; ten-yser arithmetic averagee ending in 1960 and 1970, protein; these Standards are lower than those of 75 grate of total protein and fiv-yea average ending in 1975 for most recen.t aetimate. and 23 grateo of animal protein as Son average for the werld, proposed by FAO iC-ode death rate oar thousand, aveage - Annual deathe pan thouaand of mid-year in the Third World Pond Survy- population; ten-year erithstric yavrages ending in 1960 and 1970 and five- Par capita protein supply from animal end pulse - Protein Supply of food year average ending in 1971 for moat recent eatima te. derived fr-as nimala end pulsesa in grate, par day. Infant mortality rate f/thou)- Annual deaths of infante under on year Of age Death rtet f/thou) Saona 1-4 - Annual dearbe per th.onead in age grtoup 1-4 per thousand live biritba. years, to children in this age group; Suggested os en indicator of Life anpactancy at birth fyra) -Average noaber of years of life remSaining at nelnutrition. birth; usua lly five-year -onragn ndine in 1960, 1970 end 1971 for develop- ing counotries. Education Gross reproduction rats - Average naber of live deoghtars a woman will beer Adiusted enrollmet ratio - rmry school - Enrollmenr of all ages as pat- In her noomal reproductive period if She amperiences pra..ent age-specific tg o rmr scoo-ag populatiom; includes childrem aged 6-11 years fertility rates; usually five-year average, ending in 1960, 1970 end 1971 but adjuatd foar diffareat lengths Of primary educa.tion; for countnias with for developing coutries. universal education, enrollment may emcee.d 150% amose .- pupils aen below Population xrnth rts. (it - itotl - Compound annual growth ratee Of mid-year or above the official sohoal age. population for 1950-60, 1960-70 and 1970.75. Adlueted enro1l,asnt ratio - secoondary school - Computed as above; eacondary Population growth rate Cl) - urban - Computad like growth rtet of total educa.tion raquirse at least four yeara of approved primary inetruction; population; different dafinitiona Of urban erase may affect comparability of provides general, vocational or reacher training inatructiona for pupila data among cototriss. of 12 to 17 years of age; correapondSnca corss r generally enclodad. Urban population (% of toisS) - Patio of urben in total population ; diffarant Tens of Schooling provided firtte en -eod levels1) - Total years of definition of -rben ers may affect comparability Of data amon oountniae. schooling; at e-modar lee, oatoa i-atruc tln may be partially Or cmpletely secluded. age structure (percet) - Children (0-14 yactel, working-age (15-64 yers, oction1 esre1llatm ft of secondaryl - Vocational institutions, include and retired (65 yaars sod over) as parn...ragee of eid-yeeo ppulation. technicsl, industrial or other prngrema which operate independently otra Ann' dependency ratio - Ratio of population under 15 and 65 and Ovar to those d.partmente of Secondary i-stitutiona, of agas 11 throogh 64. Adult literacy rate (%) - Literate adu1ta (able to read and write) as per- icnmcdepandeocy ratio - Ratio of population under 15 and 65 Sod over to acamge of total adult population aged 15 yeara end over. the labor Corns in age grop of 11-64 yeare. Fasily pla...ine - ecceptcr focu tlative thou) - Cumlation nuber of acceptors Sous.ing of birth-cotrol devices order auspicee of national faily plannig prgpre Person par room (urban) - Average nnber of pereons par roo in occupied Sios inception convectional dwellings in urban ara;dwellings enolde non-pe-meneta Femily planning - uaera ft of married women) - Percentegee of married women of strutures end unoccupied pane. child-heaing age (11-4 years) who use birth-control device to all ne-rrind Occu.pied de11ia withot piped water ) -Ocpied convenional dwellings women to som age group. in urban and trura areas without inside or outaide piped water f-ollitiaa en parc...tage of all occupied dwellings. Poapicymat Ac--S to electricity ft Of all dwellings) - Convetional dwellings with Total labor force fthouseed) - Economically active persons, including armed electricity in living quarters as percent of total dwellings in urban and fortes and unemsployed but aecluding boosawi-e, Srudents, etc..; definitions rura areas. in -aicue -tmnioci era not comparable- cRalI dwnllinae connectad to electricity i)-Computed as above fur trura Labor force in eaiutasC) - Alricultoral labor force (in faeing, forestry, dwellings only. hunting end fishing) So perontage Of total labor forc.. oremploy.d ft Of labor Eane) - Unemployed are usually deined aSo person who Consuptio are able and willing to tak aJob, out of a job on a giver day, remained out Radio rece ivers (per thou pop) - All ty-pe of receivers for radio brond-eSts of a Job, aod seeking work for a specified minimom period not e..ceading one to gene ral public per thousand of population; secludes on.cengsdreies wek; may cot hr oepar-blo heven outre due to different definitions it conties end In years when registration of redic sets wa in effect; of unemployed end S ource of dais, e.g., employmet office etatttis, Saemple data for recent years may nut be comparable Since most countries ebolished Passen:ger.cars (par thou top) -, Paseg r.cr comPri- motor cars seating income dietributina - Percentage of private income (both in ceeb and kind) leste ight personsa; e..Iodes atbolencea, hearses sand ailitary re..nived by rirhest 5%, tichea 202, poores 202, -vd poorest h0t of hove- vehicle.a holds. El-tncricty (kshlrr Per raP) - Annual -rmaption of industial,cria public and private electricity in kilowatt houre per capita, gene.rally Distribotion of lend -smrehip - Percentages Of lend ownd by wealIthiest 102 based on production dais, withou.t almne for lossee in grids hut allow- and poorestr 1012 of land oennra, ing fo iparts and sepot Of electricity. Newsprint (ha/yr per cap) - Per capita annual ccmaeaption in kilogrema, Health and NuttritIon estimated from domestic production pius net imports Of newsprint. Populaion per ebyslitar - Popuoarton divided by n-h5r Of pract.icig physiciane qualIfied from a madical schuol at university level.  ANNEX I Page 3 ECONOMIC DEVELOPItCNT DATA GNP PER CAPITA IN 1976 4 US$ 1SO GRtOSS NATIONAL PRODUCT IN 1'376/77 i/ ANNUAL RATE OF GROWTH (%. constant prices) S/ C SS n. 16 t1960/61-1964/65 1965/66-1969/70 1970/71-1975/7t GNP at Market Prices 86.04 100.0 3.9 3.8 2.9 Gross Domestic Investment 16.62 19.3 Gross National Saving 18.18 21.1 t Current Account Balance 1.56 1.8 Resource Gap 0.95 1.1 OLTPUT, LABOR FORCE AND PRODUTCTIVITY IN 1975/76 Value Added (at factor cost) Labor Force V.A Per Worker UsS Bin. _____ _ _il. o ANl verage Agriculture 30.2 43 179.0 69 169 63 Industry 16.7 24 33.9 13 494 193 Services 23.4 33 48.0 18 488 133 Total/average 70.3 100 261 100 277 100 GOVERElENT FINANCE General Government / Central Government 7!s _B11n) __ of GOP jR Bln)o GOP 1976/77 1076/77 1974/75-1976/77 19;6/77 1976/77 1974/75-1976/77 Current Receipts 147.46 19.1 17.9 83-78 10.9 10.4 Current Expenditures 140.18 18.2 16.2 84.25 10,9 9.6 Current Surplus/Deficit 7.28 0.9 1.7 - 0.47 - 0.8 Capital Expenditures e/ 59-05 7.6 7.1 40-39 5.2 5.0 External Assistance (net) 11.21 1.5 1.7 11.21 1.5 1.7 MONEY, CREDIT AND PRICES 1970/71 2i2L3 1973/74 1974/75 195/756 1976/77 September 1976 September 1977 (Billion Re outstanding at end of period) Money and Quasi Money 105.7 142.2 169.0 186.9 215.0 262.6 238.2 284.8 Bank Credit to Public Sector(net) 56.9 82.5 92.9 102.6 109.1 117.3 112.7 130.7 Bank Credit to Private Sector 56.7 76.0 90.1 109.5 127.5 161.0 144.0 170.0 (Percentage or Index Numbers) J=v 1977 January 1978 Money and Quasi Money as % of GDP 24.3 27.3 26.4 25.5 27.6 31.5 Wholesale Pri ce Index (1970/71 = 100) 100.0 116.2 139.7 174.9 173.0 176.6 178.8 183.3 Annual percentage changes in: Wholesale Price Index 7.7 10.0 20.2 25.2 -1.1 2.1 7.5 2.5 Bank Credit to Public Sector (net) 8.6 19.6 12.6 10.4 6.3 7.5 4.7 XI 15 8 V/ Bank Credit to Private Sector 17.3 18.0 18.5 21.5 16.4 26.3 24.9S./ 11.9i a/ The per capita GNP estimate is at market prices, calculated by the conversion technique used in the World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing 4uring the period covered. ./ 4Quick Estimates. S/ Computed from trend line of GNP at factor cost series, including one observation before first year and one observation after last year of listed period. / Transfers between Center and States have been netted out. !/ All loans and advances to third parties have been netted out. t Net bank credit to Government Sector. 5/ Bank credit to Commercial Sector.  ANNEX I Page 4 RALLNCE OF PAYMENTS 1974/75 1975176 1976117 1977/78 " XERCRAN DISI EXPORTS (AVERAGE 1974/75 - 12 USi Yillion US Yln. Exports of Goods 4,174 4,665 5,760 6,400 Engineering Goode 515 11 Importe of Goods -5,665 -6,084 -5,950 -6,600 Sugar 379 a Trade Relanoe -1,491 -1 .419 - 190 - 200 Tea 296 6 NP3S net) 2t1 310 405 500 Jute Manufactures 294 6 Leather and Leather Resource Gap -1,278 -1,109 215 300 Products 268 5 Clothing 257 5 Interest Payments (net) - 198 - 216 - 135 - 130 Iron Ore 238 5 Other Factor Paymente (net) - - - - Cotton Textilee 223 5 Net Transfere &/ 257 470 73D 1,000 Otherm 2396 49 Total 4866 100 Balance on Correct A..ount -1,217 - 855 810 1,170 Official Aid EXTERNAL DEBT. MARCE Ht, 1977 Disbursements 1,761 2,341 1,553 1,840 US$ Billion dAortilation -515 -531 -560 - 630 Outstanding and Dieboreed 13.6 Transactions with IFli 522 242 -336 -330 findisbureed 3.2 all Other Items .58 9 -403 -292 23 Outstanding, including Undiebursed 16.8 Increase in Reeerves (-) 38 -794 -1,575 -2,073 DEBT SERVICE RATIO FOR 1976/77 14.4 peroent Grosa Reserves (end year) 1,378 2,172 3,747 5,820 Net Reservea (end year) k/ 758 1,365 9,276 5,670 IBRD/IDA LENDNG, December 51. 1977 (US5 En.) Fuel and Related Materials IBRD IDA Irporte 1,451 1,417 1,580 1,800 Outstanding and Disbureed 489.0 3,560.5 of chinh: Petroleun 1,451 1,417 1,580 1,800 Oundisbured 674.9 1,257.0 Outetanding, including Export. 26 43 37 ..a. Undiebureed 1,163.9 4,817.5 of which, Petroleum 17 22 21 n.a. RATE OF EXCHANGE Prior to mid-Deeomber 1971 s uS$1.00 = Re 7.5 After end Jane 1972 : Floating Rate Re 1.00 = UStO.133333 Spot Rats January 31, 1978 Mid-Deoe3mber 1971 to s Usi1.00 = Re 7.27927 approx. USSt.00 = Re 8.063 end June 1972 Re 1.00 = US50.137376 approx. Rs 1.00 = US10.124 h/ Eetinated. i/ Figures given cover all investment income (net). Major paymente are interest on foreign loana and oharges paid to IMF, and major receipt ie interest earned on foreign assete. j/ Figuree given include workere' remittancee but exclude official grant aseistance, which is included sithin official aid disbursemente. 4/ Eboludac net ue of DIP oredit. 1/ Amortization and intermet paymento on foreign lgana as a percentage of -euchandite exports.  ANNEX II Page 1 of 15 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of May 31, 1978) US$ Million-/ Loan or (Net of Cancellation) Credit No. Year Borrower Purpose Bank IDA Undisbursed 40 Loans/ 1,100.6 51 Credits fully disbursed 2,604.6 267-IN 1971 India Wheat Storage -- 5.0 3.3 294-IN 1972 India Bihar Agricultural Markets -- 14.0 8.8 312-IN 1972 India Population -- 21.2 5.7 342-IN 1972 India Education -- 12.0 8.9 356-IN 1972 India IDBI -_ 25.0 10.3 377-IN 1973 India Power Transmission III -- 85.0 1.5 378-IN 1973 India Mysore Agricultural Markets -- 8.0 6.9 902-IN 1973 ICICI Industry DFC X 66.5 -- 4.8 390-IN 1973 India Bombay Water Supply -- 55.0 24.4 403-IN 1973 India Telecommunications V -- 80.0 3.4 427-IN 1973 India Calcutta Urban Development -- 35.0 9.2 440-IN 1973 India Bihar Agricultural Credit -- 32.0 13.7 456-IN 1974 India HP Apple Processing & Marketing -- 13.0 9.9 481-IN 1974 India Trombay IV -- 50.0 10.9 1011-IN 1974 India Chambal (Rajasthan) CAD 52.0 -- 33.9 482-IN 1974 India Karnataka Dairy -- 30.0 25.9 502-IN 1974 India Rajasthan Canal CAD -- 83.0 48.9 520-IN 1974 India Sindri Fertilizer -- 91.0 13.6 521-IN 1974 India Rajasthan Dairy -- 27.7 25.2 522-IN 1974 India Madhya Pradesh Dairy -- 16.4 13.9 526-IN 1975 India Drought Prone Areas -- 35.0 22.8 1079-IN 1975 IFFCO IFFCO Fertilizer 109.0 -- 61.6 1097-IN 1975 ICICI Industry DFC XI 100.0 -- 24.0 532-IN 1975 India Godavari Barrage Irrigation -- 45.0 22.2 541-IN 1975 India West Bengal Agricultural Development -- 34.0 24.8 562-IN 1975 India Chambal (Madhya Pradesh) CAD -- 24.0 17.4 572-IN 1975 India Rural Electrification -- 57.0 45.3 582-IN 1975 India Railways XIII -- 110.0 11.5 585-IN 1975 India Uttar Pradesh Water Supply -- 40.0 35.8 598-IN 1975 India Fertilizer Industry -- 105.0 87.4 604-IN 1976 India Power Transmission IV -- 150.0 140.3 609-IN 1976 India Madhya Pradesh Forestry T.A. -- 4.0 3.6 610-IN 1976 India Integrated Cotton Development -- 18.0 17.7 616-IN 1976 India Industrial Imports XI -- 200.0 0.6 1251-IN(TW) 1976 India Andhra Pradesh Irrigation 145.0 -- 140.3 1260-IN 1976 India IDBI II 40.0 -- 36.4 1273-IN 1976 India National Seed 25.0 -- 25.0 1313-IN 1976 India Telecommunications VI 80.0 -- 32.3 1335-IN 1976 BMRDA Bombay Urban Transport 25.0 -- 20.5 680-IN 1977 India Kerala Agricultural Development -- 30.0 30.0 682-IN 1977 India Orissa Agricultural Development -- 20.0 19.8 685-IN 1977 India Singrauli Thermal Power -- 150.0 137.0 687-IN 1977 India Madras Urban Development -- 24.0 23.4 695-IN 1977 India Gujarat Fisheries -- 4.0 4.0 1394-IN(TW) 1977 India Gujarat Fisheries 14.0 -- 14.0 690-IN 1977 India West Bengal Agricultural Development -- 12.0 12.0 712-IN 1977 India Madhya Pradesh Agricultural Development -- 10.0 10.0 715-IN 1977 India Second ARDC Credit -- 200.0 159.1 720-IN 1977 India Periyar Vaigai Irrigation -- 23.0 22.8 728-IN 1977 India Assam Agricultural Development -- 8.0 8.0 1473-IN 1977 India Bombay High Offshore Development 150.0 -- 95.6 736-IN 1977 India Maharashtra Irrigation -- 70.0 70.0 737-IN 1977 India Rajasthan Agricultural Extension -- 13.0 13.0 740-IN 1977 India Orissa Irrigation -- 58.0 58.0 1475-IN 1977 ICICI Industry DFC XII 80.0 -- 77.9 747-IN 1978 India Second Foodgrain Storage -- 107.0 107.0 * 756-IN 1978 India Second Calcutta Urban Development -- 87.0 87.0 761-IN 1978 India Bihar Agricultural Extension & Research -- 8.0 8.0 1511-IN* 1978 India IDBI Joint/Public Sector 25.0 -- 25.0 1549-IN* 1978 TEC Third Trombay Thermal Power 105.0 -- 105.0 788-IN 1978 India Karnataka Irrigation -- 126.0 126.0 793-IN* 1978 India Korba Thermal Power -- 200.0 200.0 806-IN* 1978 India Jarrsmu-Kashmir Horticulture -- 14.0 14.0 808-IN* 1978 India Gujarat lrrigation -- 85.0 85.0 815-IN* 1978 India Andhra Pradesh Fisheries -- 17.5 17.5 816-TN* 1978 India Second National Seed -- 16.0 16.0 Total 2,117.1 5,392.4 of which has been repaid 863.2 37.6 Total now outstanding 1,253.9 5,354.8 Amount Sold 133.3 of which has been repaid 111.5 21.8 Total now held by Bank and IDA 1,232.1 5,354.8 Total undisbursed (excluding *) 591.3 1,645.1 * Not yet effective. Juily 1978 1/ Prior to exchange adjustments.  ANNEX II Page 2 of 15 B. STATEMENT OF IFC INVESTMENTS (As of May 31, 1978) Fiscal Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.7 0.3 1.0 1964 Fort Gloser Industries Ltd. 0.8 0.4 1.2 1964-75 Mahindra Ugine Steel Co. Ltd. 11.8 1.0 12.8 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 1978 Housing Development Finance Corporation 4.0 1.2 5.2 TOTAL 53.6 10.0 63.6 Less: Sold 6.0 1.6 7.6 Repaid 14.5 - 14.5 Cancelled 6.2 0.7 6.9 Now Held 26.9 7.7 34.6 Undisbursed 6.5 1.2 7.7  ANNEX II Page 3 of 15 C. PROJECTS IN EXECUTION- Generally, the implementation of projects has been proceeding rea- sonably well. Details on the execution of individual projects are below. The level of disbursements was US$598.6 million in FY77 or 80% of Bank Group com- mitments to India in that year. The undisbursed pipeline of US$2,236 million as of May 31, 1978, corresponds roughly to commitments over the preceding two-year period and reflects the lead time which would be expected given the mix of fast- and slow-disbursing projects in the India program. Ln. No. 902 Tenth Industrial Credit and Investment Corporation of India Project; US$70.0 million loan of June 8, 1973; Effective Date: August 16, 1973; Closing Date: December 31, 1978 Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation of India Project; US$100.0 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: December 31, 1980 Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation of India Project; US$80.0 million loan of July 22, 1977 Effective Date: October 4, 1977; Closing Date: March 31, 1983 These loans are supporting industrial development in India through a well-established development finance company and are designed to finance the foreign exchange cost of industrial projects. ICICI continues to be a well-managed and efficient development bank financing medium- and large-scale industries, which often employ high technology and are export-oriented. Loans 902-IN and 1097-IN are fully committed and disbursements are slightly ahead of schedule. Disbursements under Loan 1475-IN (US$2.1 million) are also ahead of schedule. Cr. No. 440 Bihar Agricultural Credit Project; US$32.0 million credit of November 29, 1973; Effective Date: March 29, 1974; Closing Date: March 31, 1980 This Credit was originally intended to provide three years' support for a lending program for 50,000 tubewells and pumpsets in the Tirhut Division of Bihar. Because of slow disbursements caused by a lower-than- estimated Dollar/Rupee exchange rate and by low unit investment costs com- pared with appraisal estimates, IDA agreed to extend the closing date and 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 4 of 15 and to extend the project area to cover the whole State of Bihar. Disburse- ments are expected to accelerate, and the physical targets should be achieved by the revised closing date. Cr. No. 715 Second Agricultural Refinance and Development Corporation (ARDC) Project; US$200.0 million credit of June 1, 1977; Effective Date: August 24, 1977; Closing Date: December 31, 1979 This project is designed to provide long- and medium-term credit to farmers through credit institutions, for on-farm investments, primarily in minor irrigation. As of May 31, 1978, disbursements amounted to about US$41 million, of which some 87% have been for minor irrigation and 13% for diversified lending. The proportion of disbursements to small farmers is estimated at about 60% compared with the appraisal target of 50%. Training programs for staff of the financing institutions are progressing satisfactor- ily. Preparation of a third line of credit is underway and the preparation report is expected to be submitted to the Association by September 1978. Cr. No. 267 Wheat Storage Project; US$5.0 million credit of August 23, 1971; Effective Date: November 14, 1972; Closing Date: September 30, 1978 Cr. No. 747 Second Foodgrain Storage Project; US$107.0 million credit of January 6, 1978; Effective Date: May 17, 1978; Closing Date: June 30, 1982 Credit 267-IN, which is being co-financed with Sweden, finances (i) the construction of bag and bulk grain storage and handling facilities, (ii) staff training, and (iii) an All-India Grain Storage Study. The government-owned Food Corporation of India is responsible for the storage construction. All the nine 10,000-ton-capacity bag warehouses envisaged under the project as revised became operational in 1975. The construction of five grain silos is progressing satisfactorily after delays due to cement shortages. The training component is being implemented. The All-India Grain Storage Study was completed in October 1976 and proved useful in formulating the proposal for Credit 747-IN, which is progressing satisfactorily. Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project; US$13.0 million credit of January 22, 1974; Effective Date: September 26, 1974; Closing Date: December 31, 1978 This project includes grading and packing centers, cold storage facilities, a juice processing plant, road improvements and cableways. It also includes cold storage facilities and a pilot project to promote oak mushroom production. The project encountered initial delays due to managerial and technical problems; however remedial measures have been taken to overcome these difficulties. Land has been acquired for 8 of the 10 packing and grad- ing sites, and procurement and construction activities are well underway. The Project Preparation Report for the juice processing plant has been completed,  ANNEX II Page 5 of 15 and the equipment is being ordered. The road improvement program is progres- sing satisfactorily, and the feasibility reports on aerial cableways at the packing/grading sites have been completed. Cr. No. 403 Telecommunications V Project; US$80.0 million credit of June 25, 1973; Effective Date: July 30, 1973; Closing Date: December 31, 1978 Ln. No. 1313 Telecommunications VI Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 1976; Closing Date: March 31, 1980 Both projects are progressing satisfactorily. The closing date of Credit 403-IN was extended by one year to cover the delivery and installation of imported transmission and switching equipment. Disbursements under Loan 1313-IN reached US$47.7 million as of May 31, 1978. Cr. No. 377 Power Transmission III Project; US$85.0 million credit of May 9, 1973; Effective Date: September 28, 1973; Closing Date: September 30, 1978 Cr. No. 604 Power Transmission IV Project; US$150.0 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: June 30, 1981 The drawdown of Credit 377-IN was slow initially and as a consequence it has been necessary to postpone the Closing Date by one year. However, an amount of US$83.5 million had been disbursed by the end of May 1978 and the balance should be disbursed well before the revised Closing Date. Disburse- ments under Credit 604-IN have been slow, with only US$9.7 million disbursed at May 31, 1978. However, contracts aggregating about US$50 million had been awarded by March 1978 and disbursements should now accelerate. This Credit included a supplementary Credit of US$30 million to meet increased costs of equipment scheduled under Credit 377-IN; all but US$4 million of this amount has also been committed. Cr. No. 481 Trombay IV Fertilizer Expansion Project; US$50.0 million credit of June 19, 1974; Effective Date: August 21, 1974; Closing Date: June 30, 1979 Cr. No. 520 Sindri Fertilizer Project; US$91.0 million credit of December 18, 1974; Effective Date: February 27, 1975; Closing Date: September 30, 1978 Ln. No. 1079 IFFCO Fertilizer Project; US$109.0 million loan of January 24, 1975; Effective Date: April 28, 1975; Closing Date: March 31, 1979  ANNEX II Page 6 of 15 Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1980 The Trombay IV project is now being commissioned, about 18 months behind schedule due to longer-than-expected delivery times for critical equip- ment. The Sindri project is also being commissioned. The IFFCO project was delayed by about a year as a result of a change in feedstock from fuel oil to naphtha and delays in completion of engineering contracts. However, project construction is now proceeding satisfactorily. Mechanical completion of the entire plant should result in August 1979. Credit 598-IN is designed to increase the utilization of existing fertilizer production capacity. The project has encountered delays in sub-project preparation and investment approvals by the Government. Further, some of the sub-projects identified earlier may not materialize because of reconsideration by the Central and State governments. IDA has agreed to a list of sub-projects to replace the ones that are likely to be dropped. Because of the above, the project is likely to be delayed by 6-12 months. Cr. No. 294 Bihar Agricultural Markets Project; US$14.0 million credit of March 29, 1972; Effective Date: July 31, 1972; Closing Date: December 31, 1978 Cr. No. 378 Karnataka Wholesale Agricultural Markets Project; US$8.0 mil- lion credit of May 9, 1973; Effective Date: September 7, 1973; Closing Date: December 31, 1979 These projects were designed to help with establishment of whole- sale markets in a number of towns in Bihar and Karnataka. Progress under the Bihar project has generally been satisfactory. The project includes training of the Agricultural Produce Marketing Committee (APMC) staff and evaluation of the project's economic impact. Development plans have been completed for 53 market yards to ensure the project target of 50 markets is met. As of March 1978, appraisals had been completed for 50, and loans approved for 47 markets. Construction had been completed for 16 and was in progress for 23 markets. Farmers and traders served by the 8 market yards now in operation report more efficient marketing activities and improved farmers' terms of trade. Progress under the Karnataka project is improving. As of June 1977, when the project was last reviewed, construction was underway for 36 of the 39 project markets. Plans and land acquisition are nearing completion at the remaining sites. Both projects are expected to be completed by their respective closing dates. Cr. No. 312 Population Project; US$21.2 million credit of June 14, 1972; Effective Date: May 9, 1973; Closing Date: June 30, 1979 This credit is designed to finance an experimental and research oriented population project in Karnataka and Uttar Pradesh. The project's infrastructure, which would provide the optimum facilities (buildings, equip- ment, staff and transport) according to GOI standards in selected districts  ANNEX II Page 7 of 15 in each state, is almost complete. The two Population Centers, which will design and monitor research aimed at improving the family planning program, are now functioning. To allow adequate time for the Population Centers to complete their evaluation of family planning strategies and the introduction of management information and evaluation systems, the closing date has been extended by one year. Cr. No. 342 Agricultural Universities Project; US$12.0 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1979 The project involves the development of the agricultural uni- versities in Assam and Bihar. An initial lag in implementation on account of late appointment of project staff has been overcome. Campus plans have been approved, and construction has started in both Assam and Bihar. Disbursements, which have been slow because of initial delays, should accelerate now that construction and equipment procurement are under way. Cr. No. 356 Industrial Development Bank of India Project; US$25.0 million credit of February 9, 1973; Effective Date: June 22, 1973; Closing Date: September 30, 1978 Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: June 30, 1981 Loan No. 1511 IDBI Joint/Public Sector Project; US$25.0 million loan of March 1, 1978; Effective Date: May 31, 1978; Closing Date: March 31, 1983 The first IDBI Project had a slow start mainly due to institutional problems in the participating State Financial Corporations. However, the credit is now fully committed, and disbursements had reached US$14.7 million by the end of May 1978. In order to continue the Bank Group's involvement in assisting small- and medium-scale industries and in strengthening the State Financial Corporations involved, a second operation (Loan 1260-IN) was approved in 1976, and more than 25% of the loan amount had been committed by mid-March 1978. Loan 1511-IN is designed to encourage the pooling of private and public capital in medium-scale joint ventures. The project will also assist IDBI in carrying out industrial sector investment studies and in strengthening the financial institutions dealing with the state joint/public sector. Cr. No. 390 Bombay Water Supply and Sewerage Project; US$55.0 million credit of January 22, 1974; Effective Date: March 13, 1974; Closing Date: December 31, 1978 Having overcome earlier difficulties, including cost overruns caused by inflation (requiring project redefinition in February 1975), redesign of major project components and the addition of a supplementary study on sewage disposal, the project is now progressing relatively well. All of the major  ANNEX II Page 8 of 15 contracts for the water supply components have been awarded and it is forecast that works will be sufficiently advanced to permit the supply of additional water (455 mld) in the last quarter of 1978; completion of water treatment works for the whole supply by the end of 1979 is realistically forecast. Completion of additional sewage disposal studies (August 1977) has allowed engineering design of the project sewerage components to proceed, so that completion of construction of these works is now scheduled for 1980, two years later than originally forecast. Financial performance of the project entity is satisfactory. Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: June 30, 1980 The Project has had a slow start due to delays in the preparation of technical reports for regional and local water authorities and in the engagement of consultants. While improvements have been made in the physical execution, other aspects of project implementation continue to lag so that disbursements under the Credit have fallen short of estimates at the time of appraisal. In order to improve the situation, arrangements are being made to appoint a full-time management adviser to closely supervise and coordinate implementation. Cr. No. 616 Eleventh Industrial Imports Project; US$200.0 million credit of February 26, 1976; Effective Date: April 1, 1976; Closing Date: June 30, 1978 Utilization of the Technical Development Fund picked up in 1978 and it is anticipated that the project will close on schedule at the end of June 1978. Cr. No. 427 Calcutta Urban Development Project; US$35.0 million credit of September 12, 1973; Effective Date: January 10, 1974; Closing Date: December 31, 1979 Cr. No. 756 Second Calcutta Urban Development Project; US$87.0 million credit of January 6, 1978; Effective Date: April 7, 1978; Closing Date: March 31, 1983 For the first of these projects, following considerable increases in project costs, GOI and IDA finalized a project redefinition in April 1976. It is now expected to be substantially completed by March 1979. Credit 756-IN is designed to expand and upgrade the capabilities of Calcutta's administra- tive authorities, to strengthen the city's fiscal base, and to rehabilitate and extend its urban service system. Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977; Closing Date: September 30, 1981 The project is designed to develop and promote low-cost solutions to the problems of providing improved services to the urban poor in the  ANNEX II Page 9 of 15 Madras Metropolitan Area (MMA) and to strengthen metropolitan planning. Project components consisting of sites and services, slum improvement, small- scale and cottage industry, and maternal and child health are designed to benefit directly some 250,000 persons in low-income areas of the city. The water supply and sewerage, road and traffic, bus transport and technical assistance components are designed to eliminate bottlenecks in water supply and transport. Project implementation is proceeding satisfactorily, and disbursements are slightly ahead of appraisal estimates. Cr. No. 482 Karnataka Dairy Development Project; US$30.0 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: June 30, 1982 These three credits, totalling US$74.1 million, support dairy devel- opment projects organized along the lines of the successful AMUL dairy coop- erative scheme in Gujarat State. The Karnataka Project, which got off to a slow start, has begun to show considerable improvement under new management appointed recently. Farmer response has been good and over 600 dairy coop- eratives with small farmer participation are functioning effectively. All four dairy unions envisaged under the project have been established and are functioning satisfactorily. In Madhya Pradesh good progress has been made. About 310 new dairy cooperatives societies have been established. Detailed design studies for plant construction are complete. The response of small farmers to the project is excellent. GOMP has plans to cover all districts in the State. Technical services investments are being made. Contracts have been placed for livestock imports. The Rajasthan project is also doing well. Four milk unions have been formed and excellent progress has been made in organizing the servicing of nearly 450 dairy cooperatives at the village level. Plant designs are ready, and procurement is making adequate progress. Based upon the good results experienced, GOR is planning to expand the form of dairy development to all other districts of the State. Karnataka's decision to procure plant equipment jointly with Rajasthan and Madhya Pradesh on the same tender should lead to a recovery of considerable time lost earlier in the Karnataka project. Cr. No. 532 Godavari Barrage Project; US$45.0 million credit of March 7, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Both the civil works and equipment tenders have been awarded after international competitive bidding. Work is in progress and is proceeding satisfactorily. Disbursements stood at US$22.8 million on May 31, 1978.  ANNEX II Page 10 of 15 Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52.0 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83.0 mil- lion credit of July 31, 1974; Effective Date: December 30, 1974; Closing Date: June 30, 1981 Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project; US$24.0 million credit of June 20, 1975; Effective Date: September 18, 1975; Closing Date: December 31, 1979 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145.0 million loan (Third Window) of June 10, 1976; Effective Date: September 7, 1976; Closing Date: December 31, 1982 Cr. No. 720 Periyar Vaigai Irrigation Project; US$23.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 736 Maharashtra Irrigation Project; US$70.0 million credit of October 11, 1977; Effective Date: January 13, 1978; Closing Date: March 31, 1983 Cr. No. 740 Orissa Irrigation Project; US$58.0 million of October 11, 1977; Effective Date: January 16, 1978; Closing Date: October 31, 1983 Cr. No. 788 Karnataka Irrigation Project; US$126.0 million credit of May 12, 1978; (expected) Effective Date: August 12, 1978; Closing Date: March 31, 1984 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructure, drainage, and land shaping are prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory. Cr. No. 541 West Bengal Agricultural Development Project; US$34.0 million credit of April 28, 1975; Effective Date: August 28, 1975; Closing Date: March 31, 1980 The project provides financing over four years mainly for minor irrigation investments but also for development of markets, agro service  ANNEX II Page 11 of 15 centers, and support of related government extension services. Although dis- bursements have been slower than anticipated, there has been a considerable improvement in project organization and administration and disbursements are expected to improve considerably. The physical progress of shallow tubewells, and of deep tubewells for the Minor Irrigation Corporation, is satisfactory. IDA, GOWB and ARDC are combining efforts in order to solve difficulties such as organizational problems at the farm level; lack of demand for agro service centers; and completion of designs for water distribution systems and irriga- tion schemes. Positive results, particularly for the redesigned water distri- bution systems have been achieved. Cr. No. 682 Orissa Agricultural Development Project; US$20.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 728 Assam Agricultural Development Project; US$8.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12.0 million credit of June 1, 1977; Effective Date: August 30, 1977; Closing Date: September 30, 1982 Cr. No. 712 Madhya Pradesh Agricultural Extension and Research Project; US$10.0 million credit of June 1, 1977; Effective Date: September 2, 1977; Closing Date: September 30, 1983 Cr. No. 737 Rajasthan Agricultural Extension and Research Project; US$13.0 million credit of November 14, 1977; Effective Date: February 6, 1978; Closing Date: June 30, 1983 Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8.0 million credit of January 6, 1978; Effective Date: May 2, 1978; Closing Date: October 31, 1983 These projects, totalling US$71 million, finance the re-organization and strengthening of agricultural extension and the development of adaptive agricultural research services with the objective of achieving early and sustained improvements in agricultural production, particularly foodgrains. Arrangement for monitoring and evaluation of project progress and impact is an essential feature of these projects. The Orissa and Assam projects also provide funds for laying the basis for longer term improvements in ground- water development in the States. The projects' components include provision of additional staff, training facilities, housing, offices, laboratory facilities, equipment and transportation. Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit of January 24, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Overall physical progress of the Drought Prone Areas project (DPAP) continues to be satisfactory. The rate of disbursement is improving and  ANNEX II Page 12 of 15 implementation of most components is proceeding, by and large, according to schedule. However, progress may be affected by possible changes in thinking at the national level. GOI is presently reviewing all national rural develop- ment programs, including the DPAP, in order to determine ways to improve over- all performance in the rural sector. The Government's review is being fol- lowed closely to determine whether any recommendations would have an impact on the ongoing project and require changes. Cr. No. 680 Kerala Agricultural Development Project; US$30.0 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 This project would improve tree crop production in Kerala and has particular emphasis on increasing benefits to small farmers. It comprises rehabilitation of 30,000 ha coconut and 10,000 ha pepper and 2,240 ha cashew, and new plantings of 5,000 ha coconut and 1,500 ha cashew. About 25% of the coconut area would be irrigated for intensive intercropping. Funds have been provided for development of a seed garden for tree crops and for strengthening tree crops research. Ten crumb rubber factories would also be established to process smallholder rubber. Project implementation started slowly due to initial staffing and funding delays but has recently gained momentum. Proj- ect actions for 1978/79 have been rephased and advance action planned so as to make up for lost time. Cr. No. 572 Rural Electrification Project; US$57.0 million credit of July 23, 1975; Effective Date: October 23, 1975; Closing Date: December 31, 1979 The Project consists of a tranche of rural electrification schemes which, at about Rs 5 million each, would cover about 140 schemes. There are now thirteen States eligible for onlending (compared with six at the time of appraisal). The project got off to a slow start, due principally to the need to adapt the specifications and tendering procedures to international competitive bidding, but the position has now improved and the full amount of the Credit has been committed. Cr. No. 582 Railways XIII Project; US$110.0 million credit of August 26, 1975; Effective Date: October 10, 1975; Closing Date: September 30, 1978 The project was designed to cover most of the foreign exchange requirements of Indian Railway's (IR) investment program for two years, from April 1, 1975, through March 31, 1977. However, since the approval of the project, increased production of steel products in India and further develop- ments in IR's indigenization program slowed down the rate at which IR requires foreign exchange. Therefore, the Closing Date was extended for one year in order to complete implementation of the project. Disbursements as of May 31, 1978 were 90% of the total credit amount.  ANNEX II Page 13 of 15 Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26, 1976; Effective Date: May 26, 1976; Closing Date: December 31, 1981 This project will identify a sound resource base for pulp and paper manufacture and related industries, develop suitable logging systems, and undertake a feasibility study to determine optimal use of the existing wood resources in the Bastar District of southern Madhya Pradesh. It also includes a study of ways to integrate the area's tribal population with future develop- ment. Cr. No. 610 Integrated Cotton Development Project; US$18.0 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1981 The project finances equipment, civil works and crop production credit to support programs for cotton research and cotton production increase in three states. The project also provides credit for improving cotton gin- neries, new ginneries, cotton seed oil extraction plants and vegetable oil processing factories. Effectiveness was delayed by slow appointment of consultants, but the cotton extension services program was started without delay and has now been in operation for two years. Disbursements have been small mainly due to poor demand to date for project credit. A recent super- vision mission, working with technical consultants, has made detailed recom- mendations for more appropriate pest control practices and more adaptive research to identify and introduce better varieties. These measures are under discussion with GOI, and when agreed to and implemented, should speed up project disbursements. Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1981 Loan 1273-IN supports the first phase of India's national seed program, consisting of: seed industry expansion in the public and private sectors, improvements in seed quality control, strengthening of breeding and seed technology research, and development of a reserve stock scheme. Insti- tutional development and managerial arrangements, particularly at the state level, have proceeded fairly satisfactorily. Project implementation, however, slowed down after loan effectiveness mainly due to organizational problems. Project progress is now being made since endorsement of the project by the new Government in September 1977 and is expected to gain further momentum as GOI has filled the two top posts of the National Seeds Corporation, which were vacant for several months and adversely affected the project. A project supporting the second phase of India's national seed program (Credit 816-IN) was approved by the Executive Directors on May 30, 1978, but has not yet been signed pending receipt of signing authority from one of the project states.  ANNEX II Page 14 of 15 Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1980 Contracts for bodies and chassis for 325 single deck and 175 double deck buses have been awarded and some 144 buses have been delivered. Bids for an additional 200 buses are being evaluated. Civil works contracts have been awarded for 8 bus facilities, and 13 traffic engineering schemes. Delays are expected in implementing some BMC traffic engineering schemes and the BEST workshop schemes although steps are being taken to minimize such delays. Consultants in organization, administration, financial management systems, accounting and development planning are at work assisting the Borrower, the Bombay Metropolitan Regional Development Authority. Other beneficiaries of the loan, the Bombay Municipal Corporation and the Bombay Electric Supply and Transport Undertaking, have selected consultants in traffic engineering and operations and management assistance, respectively. Ln. No. 1394 Gujarat Fisheries Project; US$14.0 million loan and US$4.0 (Tw) and million credit of April 22, 1977; Effective Date: Cr. No. 695 July 19, 1977; Closing Date: June 30, 1983 Progress is good. All project implementation units appear to be competent and enthusiastic and the project is progressing as antici- pated at appraisal. Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit of May 12, 1978; (expected) Effective Date: August 14, 1978; Closing Date: March 31, 1985. Ln. No. 1549 Trombay Thermal Power Project; US$105.0 million loan of June 19, 1978; (expected) Effective Date: September 19, 1978; Closing Date: March 31, 1984. Credit 685-IN assists in financing the first stage of the 2,000 MW Singrauli development which is, in turn, the first of four power stations in the Government's program for the development of large Central thermal power stations feeding power into an interconnected grid. The second such station, at Korba, is being financed through Credit 793-IN. It is proposed that the Bank Group will have a continuing involvement in this development program. The National Thermal Power Corporation (NTPC) has been formed to construct and operate these power stations, and the development program has gotten off to a good start. Organization and staffing of NTPC is proceeding satisfac- torily, and the Singrauli project is proceeding on schedule. Civil works are in progress and contracts have been awarded for major plant (turbogenerators, boilers, transformers). Loan 1549-IN is supporting the construction of a 500 MW extension of the Tata Electric Companies' station, in order to help meet the forecast load growth in the Bombay area.  ANNEX II Page 15 of 15 Ln. No. 1473 Bombay High Offshore Development Project; US$150.0 million loan of June 30, 1977; Effective Date: October 20, 1977; Closing Date: December 31, 1980 The project is progressing satisfactorily. CGs and oil pipelines from Bombay High to shore have been laid and were commissioned in June 1978. Disbursements stood at US$54.4 million on May 31, 1978.  ANNEX III Page 1 of 2 INDIA RAILWAY MODERNIZATION AND MAINTENANCE PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by the Borrower to prepare the project. About eighteen months. This credit is the fourteenth in a series of Bank Group operations with Indian Railways, and preparation of the proposed credit has formed part of a continuing process. (b) The agency which has prepared the project. Indian Railways. (c) Date of first presentation to the Bank and date of the first mission to consider the project. The project was first presented to the Bank in October 1977, when a preappraisal mission was in field; appraisal was carried out in January 1978. (d) Date of departure of appraisal mission. January 7, 1978. (e) Date of completion of negotiations. June 16, 1978. (f) Planned date of effectiveness. October 1978.  ANNEX III Page 2 of 2 Section II: Special IDA Implementation Actions None. Section III: Special Conditions (a) GOI to maintain adequate staff of the wheel and axle plant under the supervision of experienced and competent management (para 49). (b) GOI to submit, by December 31, 1978 a training program for the technical staff and work force of the wheel and axle plant and implement it (para 49). (c) GOI to employ experts to assist IR in carrying out implementation of the project (para 50). (d) GOl to maintain freight rates and passenger fares and take necessary actions to enable IR to meet all operating expenses and special appropriations (para. 54). (e) GOI to fix transfer prices for the supply of wheels and axles to be produced at the wheel and axle plant at Yelahanka at levels which cover direct manufactur- ing costs, overhead costs and full depreciation (para 55).   'C "I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I ' ;41 ;SM X 2 e m0 )o: is.0t L 0 3 i /C p'_ Cd-I~~~~~~~~~~~~~~~~~~~L o~~~~~~~~~~~~~~~t : -~~~~~~to- >14 -4~ ~ ~~- 1L61 IDdV 69tCL thSBI