India - Thal Fertilizer Project

Document of The World Bank FOR OFFICIAL USE ONLY FILE CoPY Report No. P-2599-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE THAL FERTILIZER PROJECT June 14, 1979 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.  CURRENCY EQUIVALENTS Rs 1 = Paise 100 US$1 = Rs 8.60 Rs 1 = US$0.1163 Rs 1 million = US$116,279.07 (Since September 25, 1975, the Rupee has been offi- cially valued relative to a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/ Rupee exchange rate is subject to change. As of June 4, 1979 the exchange rate was Rs 8.14 to US$1.00). FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS GOI - Government of India GOM - Government of Maharashtra FCI - Fertilizer Corporation of India FPDIL - Fertilizer (Planning and Development) India Ltd. ONGC - Oil and Natural Gas Commission RCF - Rashtriya Chemicals and Fertilizers Ltd.. MIDC - Maharashtra Industrial Development Corporation ppm - Parts per million tpd - (Metric) Tons per day tpy - (Metric) Tons per year  FOR OFFICIAL USE ONLY INDIA THAL FERTILIZER PROJECT LOAN AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiary: Rashtriya Chemicals and Fertilizers Ltd. (RCF). Amount: US$250 million. Terms: 20 years, including 5 years' of grace. Interest Rate: 7.90% per annum. Relending Terms: From India to RCF for 15 years, including 5 years' grace, with interest at 10-1/4% per annum. The foreign exchange risk will be borne by the Government of India. Project Description: Construction of a fertilizer plant at Thal, in the State of Maharashtra, with a daily capacity of about 2,700 tons of ammonia and about 4,500 tons of urea, including the provision of infrastructure, auxiliary, and offsite faciLities required for the efficient maintenance and operation of the plant. Possible risks facing the proj- ect are in the form of technical problems, implementa- tion delays and cost over-runs. These risks are mini- mized by the use of commercially proven technologies supplied by internationally recognized engineering firms and by the use of the services of the Fertilizer (Planning and Development) India Ltd. and RCF staff who are experienced in building and commissioning similar plants. Potential risks associated with the timely availability of required infrastructural facilities will be reduced by the Government of Maharashtra's confirmation that these would be provided and arrange- ments made for monitoring the execution of this work. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ii~ - Estimated Cost: (US$ million) ~ Local Foreign Total Equipment and Spares 80.6 193.7 274.3 Freight and Inland Transportation 5.6 16.9 22.5 Duties and Taxes 73.0 - 73.0 Engineering Services 18.3 23.6 41.9 Project Management Services 12.6 0.5 13.1 Erection 31.6 - 31.6 Land and Civil Works 37.4 2.0 39.4 Commissioning Charges 9.9 - 9.9 Working Capital 70.7 3.7 74.4 Rail Track 12.6 - 12.6 Power Connection 2.4 - 2.4 Township 8.0 0.5 8.5 Base Cost 362.7 240.9 603.6 Physical Contingencies 27.7 23.7 51.4 Price Contingencies 51.7 44.3 96.0 Total Project Cost 442.1 1/ 308.9 751.0 1/ Interest during Construction 27.1 34.2 61.3 Total Financing Required 469.2 343.1 812.3 Total Project Cost Net of Duties and Taxes 369.1 308.9 678.0 Financing Plan: 2/ (US$ million) Local Foreign Total Equity - GOI 253.2 - 253.2 Equity - RCF 65.0 - 65.0 Long-term Debt-GOI 22.2 93.1 3/ 115.3 Long-term Debt-IBRD - 250.0 250.0 Short-term Debt 4/ 55.8 - 55.8 Total 396.2 343.1 739.3 1/ Including US$73 million in duties and taxes. 2/ Covers total project cost including interest during construction, but excluding duties and taxes. 3/ Includes possible ODM (UK) financing of about US$45 million. 4/ Commercial bank short-term borrowings. The amount of such borrowings may be less than forecast depending upon the amount of RCF internally generated funds made available to finance the project.  - iii - Estimated Disbursements: FY80 FY81 FY82 FY83 FY84 Annual. 28.0 57.0 73.0 52.0 40.0 Cumulative 28.0 85.0 158.0 210.0 250.0 Rate of Return: About 20% Appraisal Report: 1993-]LN dated June 14, 1979.   INTERNATIONAL BIANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT ANI) RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE GOVERNMENT OF INDIA FOR THE THAL FERTILIZER PROJECT 1. I submit the following report and recommendation on a proposed loan to the Government of India (GOI) in an amount equivalent to US$250 million to help finance the construction of an ammonia/urea fertilizer complex at Thal in the State of Maharashtra. Amortization would be over 20 years, including 5 years' grace, at 7.90% interest per annum. The proceeds of the loan would be on-lent by GOI to the Rashtriya Chemicals and Fertilizers Ltd. (RCF) for a period of 15 years, including 5 years' grace, at an interest rate of 10-1/4% per annum. The proposed on--lending rate is positive and consistent with interest charged by financial institutions in India for similar loans. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (2431-IN dated April 9, 1979), was distributed to the Executive Directors on April 13, 1979. Country data sheets are attached as Annex I. Background 3. India is a large. low-income country with 640 million people whose average income is US$150 per annum. The agricultural sector dominates the economy, employing over two-thirds of the labor force and contributing over 40% of value added. Although smallholder agriculture provides a fullsome subsistence to many, the land base is inadequate to provide all families in rural areas with an adequate livelihood under current conditions, and many who are landless or nearly landless have only an insecure grasp on the means of existence. Industrialization in India has not been rapid enough to bring about the economic transformation that has led to higher productivity and rapid urbanization in some other countries. The urban population was 18% of the total in 1960, 20% in 1970 and is 21% now. The share of manufacturing has grown slowly and since the late 1960s has remained roughly constant at 16% of GD]?. 4. Economic growth has been slow in the past, with GDP growing at a trend rate of 3.6% per annum from 1950 to 1975. Agricultural output grew at 2.4% per annum over the same period. Slow growth in agriculture acted as a drag on overall growth, not only because of its sheer weight in the total, but also because of the need to use scarce foreign exchange to import food. Growth in industrial output: has been higher at 5.2% per annum between 1950 and 1975, but not as high as in many other developing countries nor as high as can be expected. 1/ Parts I and II of this report are substantially the same as Parts I and II of the President's Report for the Uttar Pradesh Social Forestry Project (Report No. P--2562-IN), dated May 23, 1979.  -2- 5. This slow growth has persisted despite a quite creditable domestic saving and investment performance. Domestic saving has grown from 9% of GDP in 1951 to the current high level of 22%. Gross domestic investment has risen from 10% to 21% of GDP over the same period. Foreign savings have never financed a large portion of domestic investment and have financed no more than 5% of investment since 1970. Foreign savings have been important in financing imports, and a shortage of foreign exchange has acted as a constraint on the economy for most of the period. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance is less than 2% of GDP now, has never risen above 3% and fell to less than 1% in the early 1970s. Exports have grown relatively slowly--5.4% per annum in US dollar terms and 2.8% per annum in volume terms between 1950/51 and 1975/76. So far during the 1970s, exports have grown much more rapidly, by 18% per annum in US dollar terms and 8% in volume terms over the period 1970/71 to 1976/77. During the same period imports grew by 17% per annum in US dollar terms but only by 2% per annum in volume terms, reflecting a 28% fall in India's terms of trade over the period. 6. India has the capacity to grow and develop at a more rapid pace than has been achieved so far. Although the industrial sector is small compared to the size of the total economy, it nevertheless has a highly diversified struc- ture and is capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure--irrigation, railways, telecommunications, roads and ports--is extensive compared to many countries, although considerable gaps remain. India is rich in human resources and institutional infrastruc- ture, although there is much scope for improvement. India is reasonably well-supplied with natural resources, not only land and water but minerals, including oil, gas and coal. With good economic policies and sufficient access to foreign savings, India should be able to manage these considerable resources to accelerate the longer-term growth trend. Recent Trends 7. India has managed faster growth during the recent past. Growth of GDP in 1978/79 is estimated to be between 3% and 4%; this is a strong perform- ance coming on top of the previous year's 7.2% growth in GDP and considering agricultural output grew less than 2%. Even this agricultural growth is highly creditable given the previous years' record harvests in most crops. Industrial output grew by 8-10% in 1978/79. Over the four years, 1975/76 to 1978/79, growth in real GDP, agricultural output and industrial output has averaged 5.3%, 4.4% and 6.9% per annum, respectively. Although these rates represent growth over the depressed base of the early 1970s, they are signi- ficantly higher than the longer-term past trend and comparable to the target growth rates for the medium-term future. 8. The 1978/79 foodgrain crop exceeded the 1977/78 riecord crop of 126 million tons, and many non-food crops did well. The 1978 monsoon rains were timely and adequate, although severe flooding in some areas destroyed both lives and property and ruined some crops. The basic inputs into agricultural production continued their rapid growth of the recent past. Additions to area under irrigation have doubled from 1.3 million hectares a year during  - 3 - the five-year period ending 1973/74 to 2.6 million hectares a year during 1977/78 and 1978/79. FertiLizer consumption in 1978/79 reached 5 million nutrient tons, an increase of 18% over 1977/78. This growth is impressive, particularly since it follows two successive years of very high growth--18% in 1976/77 and 26% in 1977/78--so that fertilizer consumption is now 75% higher than it was in 1975/76. These rates of growth in agricultural inputs and output are heartening evidence that the good harvests of 1975/76 and 1977/78 were not isolated peaks resulting from good weather alone but represent an increased agricultural production capacity. 9. The growth of industrial output in 1978/79 came from a sharp rise in the output of food industries, particularly sugar, a modest increase in textiles, important increases in the hitherto depressed engineering sector and the revival of demand for consumer durables. Production would have been still higher but for recurring shortages of steel, coal, railway wagons and electric power and capacity constraints in fertilizer, cement, vegetable oils and petroleum products. Labor unrest also constrained output in some indus- tries, particularly in textiles, steel and mining; man-days lost in 1978 ex- ceeded the high level of 1977 and only in 1974 were the number of days lost higher. P'ower production increased by 12% or more but continuing shortages in many St:ates necessitated power cuts and curbs on new demand. 10. The trade deficit grew and both the current account surplus and the balance oi- payments surplus of recent years shrank in 1978/79. The import bill is expected to reach US$8.4 billion, which brings the average rate of increase in US dollar terms to 19% per annum since 1976/77. Non-foodgrain imports rose even more dramatically by 28% per annum over the past two years. The growth of imports and the liberalization of import control policies represents a desirable adjustment to enhanced foreign resources. Although exports grew much faster during the 1970s through 1976/77 than earlier, export growth in 1977/73 and 1978/79 has slowed somewhat. After rising by 12% in 1975/76 and 23% in 1976/77 in US dollar terms (virtually all growth in export volume), export earnings rose by only 9% in 1977/78 (with little or no volume growth) and an estimated 8% in 1978/79 (with 5-8% volume growth). Although part of the decline is attributable to unfavorable conditions in foreign markets, export prDfitability has been allowed to deteriorate somewhat. With net invisible receipts in 1978/79 estimated the same as in 1977/78--US$2 billion-- the widened trade deficit resulted in a significantly reduced current account surplus, from US$1 billion in 1977/78 to US$400 million in 1978/79. Despite some increase in net aid disbursements from their low level in 1977/78, the increase in reserves declined from about US$2 billion in 1977/78 to about US$1.5 billion in 1978/79 to reach US$7.4 billion. Development Prospects 11. The circumstances that have brought about the currently favorable economic situation hold the promise of continuing into the future given conti- nued policy improvements. The faster growth of the recent past has been made possible by the much-increased inward flow of foreign exchange from increased exports, workers' remittances and external assistance; greatly improved agri- cultural performance; the impressive saving effort; the liberalization of import controls; and expanded public expenditure on development programs.  - 4 - Although sustaining the high growth rates of the recent past into the future is by no means automatically assured, India has a level of resources with which to manage the economy that had never existed before. The comfortable foreign exchange position, the large foodgrain stocks and the absence of strong inflationary pressures have eased the pressures to deal with short- term crises and freed India's economic managers to plot a more ambitious course for the economy. The policy improvements needed to achieve the better performance now possible have begun in some important areas but in others have yet to be initiated. 12. The Draft Plan, which was released in March 1978 and is expected to be finalized and approved by the National Development Council later this year, sets out India's development strategy for the five years 1978/79 to 1982/83. The principal objectives of the Draft Plan are to achieve within a period of ten years: (i) the removal of unemployment and significant under- employment, (ii) an appreciable rise in the standard of living of the poorest sections of the population, and (iii) provision by the Government of some of the basic needs of the people in these low-income groups. While the Plan recognizes the importance of achieving more rapid expansion of the economy than in the past to meet the employment and welfare objectives, the targeted rate of growth at 4.7% per annum is lower than projected in most earlier Plans. According to the planners, this reflects in part the increased emphasis given to the distribution rather than the level of income generation, and in part the need for greater realism in the macro-economic assumptions underlying the Plan. While the trade-off between growth and distribution is not immediately obvious from the Plan model, the adoption of a more realistic growth target is in itself well justified -- even at 4.7% per annum, the targeted growth rate is higher than actually achieved during any of the previous Plan periods, and is substantially above the longer-term trend growth rate. 13. In agriculture, the economic policies, development programs and secular trends all seem favorable for a period of sustained high growth. Fertilizer prices have been reduced progressively from their very high level in early 1975 and despite some fall in market foodgrain prices, the fertilizer: foodgrain price ratio has fallen to a clearly profitable range. Good harvests and higher farm incomes provide the money to finance higher fertilizer pur- chases, creating something of a virtuous circle. Pricing policies for many crops--rice, wheat, sugarcane, pulses and others--have concentrated recently on supporting prices to maintain incentives to farmers rather than trying to administratively control prices to contain inflation. The ambitious irrigation and rural electrification investment program in the new Five-Year Plan, if fully funded, will help provide the water control needed to increase yields directly and to induce further productivity-increasing investments. The highly effective reorganization of the agricultural extension service will raise yields as it takes hold progressively across India in the near future. Finally, there are several heartening trends in foodgrain production: one is the steady growth of area planted to high-yielding varieties of rice; another is the growing adoption of summer rice cultivation in the traditional wheat-producing areas (Punjab and Haryana). These two trends along with the other favorable developments have caused rice production to rise impressively in the last two years. Another good omen for foodgrain production is the  rapid growth of winter wheat cropping in traditionally rice areas (West Bengal, Assam and Orissa). 14. :[n industry, despite some uncertainty in industrial policy and the lack of strong policy stimulus to improve efficiency in the industrial structure, recently strengthened demand forces along with adroit input supply management should allow the industrial sector to continue to grow at the improved rate of the recent past, at least for the near- and medium-term future. Oer the longer term, growth of industrial production at or above the rate experienced in the recent past--e.g., 7% per annum during the last four years--will require som1e changes in policy to induce a more efficient industrial structure. Recent industrial policies have sent mixed signals to private manufactures and investors. Some, such as reserving certain lines of production for small-sca]Le enterprises or prohibiting the location of new firms in municipal areas, have been restrictive. Others have been stimula- tive, such as the raising oE the exemption limit of industrial licensing for capital investment or favorable adjustments in the pricing and production controls in several major inadustries, including cement, steel, and textiles. In addition the liberalization of import controls is of considerable benefit to increasing industrial production. However, there are some worrisome supply shortages that are currently threatening continued rapid industrial growth. Many can be handled through imports, if needed, as long as India maintains a healthy fcreign exchange position. However, two supply constraints likely to persist in the future -- namely, rail transport and power -- cannot be eased through imports. The new Plan contains a major power investment program to increase capacity rapidly. The railway investment program is more modest. Another crucial input into both of these sectors, and into most other major sectors, is coal, whose supply needs careful management. 15. The main reason for expecting sustained growth in industrial pro- duction is improvement in dlemand prospects for each of the four major sources of industrial demand. The first is market demand for manufactured consumption goods, which is expected to pick up in response to the increase in disposable income due in particular to the good agricultural harvests. Although its effect has been delayed somewhat, this broad-based demand is finally making itself feLt and is expected to continue into the future as long as the growth in agricuLtural output continues. Another source of demand is public expendi- ture on development projects, which has grown in a major way in the last few years and is scheduled to continue to grow under the new Five-Year Plan. A third source of growth is export demand for industrial goods. There has been a sustained growth in the export of manufactures such as engineering goods, garments, gems, finished lesather and some chemical products. This export growth should continue in the future with proper policy support. A final source of growing demand is private investment by both the household and corporate sectors. There are as yet only a few signs of this growth, such as increased disbursement by term lending institutions and increased use of inputs; investments should become stronger as growth in the other sources of demand continues and as capacity limitations begin to constrain production in more industries. The net result of increasing demand should be continued high growth in. industrial production in the near and medium term within existing policies.  - 6 - 16. Import policy is an area where there has been significant improve- ment in the recent past; but some improvement in export policy is required to raise incentives to export. India has liberalized import control policy significantly in the past two years and imports have responded. Future growth in imports, and in the benefits of price stability, enhanced production and increased efficiency which imports bring, will depend to a great extent on how the now liberalized policy is administered. A delicate touch is required to yield the benefits without bringing about undesirable damage to vulnerable industries. India has the foreign resources to allow imports to grow at the rapid rates of the past two years for a few more years and continue to relax the very severe restraints imposed on the economy during the early 1970s by suppression of imports. But, given the import liberalization undertaken so far and the expected growth of imports, by the end of the Plan period (1982/83), foreign exchange reserves will have fallen to six months of imports, or less, and some adjustment in the balance of payments will be required. Part of the adjustment will very likely be a reduction in the growth rate of imports; the import bill need not grow 15% in volume terms indefinitely to sustain the target growth in GDP. Part of the adjustment must come from the achievement of a growth rate of exports in the vicinity of 7-8% or higher in volume terms. Faster export growth is needed not only to provide the foreign exchange to sustain the rapid growth in imports but also to allow foreign demand and competition to improve the efficiency of Indian industry. Finally, part of the adjustment should come from an increased net transfer of external assistance. 17. India's population policy continues to aim at reducing the birth rate to 33 births per thousand people by 1983 through completely voluntary acceptance of fertility control methods supplied by a family welfare system integrated with the supply of basic health, maternal and child health and nutrition services. Since 1977, the family planning achievements in terms of number of acceptors have been below that needed to achieve the 1983 goal or even to keep the birth rate from rising above its current low level. The low performance is primarily the result of the reaction to the harsh birth control policies introduced during 1976. Since then family planning perform- ance has been gradually returning to the rising trend which was discernible before it was disrupted by the intensive drive of 1976/77. Given continued support for the program of family welfare, India's rate of population in- crease should remain below 2% per annum and fall to 1.5% by 1990. 18. In addition to stimulating overall economic growth and constraining population growth, reduction of poverty in India requires special attention to ways of raising the income and productivity of low-income groups. More than one-third of the world's poor live in India and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. The prospects for alleviating their poverty by providing these families with more land are not good because of the virtual absence of un- cultivated arable land, the slow progress in implementing land reform and the limited amount of land that would be available if land reform were carried out. Estimates of the amount of land that would be available if land reform were carried out vary greatly. One estimate is that these would be about 9 million hectares available for distribution. This compares to roughly 45 million families in the two poorest groups in rural India: landless  - 7 - families and families owing less than one hectare of land, whose average holding is 0.31 hectares. An approach to the amelioration of poverty more promising than land reform is the creation of more employment opportunities for the landless and small farmers in rural areas. Although the basic thrust must come from the market by a more rapidly increasing agricultural output, there will be a role for employment-intensive rural works programs. The new Plan provides for increased rural employment both through direct employment schemes and through ambitious programs of investment in rural infrastructure in addition to the more general rural development programs. PART II - BANK GROUP OPERATIONS IN INDIA 19. Since 1949, the Bank Group has made 56 loans and 113 development credits to India totalling US$2,281 million and US$6,747 million (both net of cancellation), respective'Ly. Of these amounts, US$978 million had been repaid, and US$2,720 million was still undisbursed as of April 30, 1979. Annex II contains a summary statement of disbursements as of April 30, 1979, and notes on the execution of ongoing projects. 20. Since 1957, IFC has made 17 commitments in India totalling US$64.0 million, of which US$15.9 mi'Llion has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$33.6 million, US$25.6 mil- lion represents loans and US$8.0 million equity. A summary statement of IFC operations as of April 30, 1979, is also included in Annex II (page 2). 21. 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 capacity ut:ilization in industry. The Bank Group has also been active in supporting infrastructure development for power, telecommunications, and railways. Family planning, wrater supply development, and urban investments have also received Bank Group support in recent years. 22. The direction of aissistance under the Bank/IDA program has been consistent with India's need[s 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, improved water management and intensification and stream- lining of extension systems, form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to pro- jects benefitting small fartners. Projects supporting water supply, sewerage,  - 8 - 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 infra- structure and industrial investments will focus on agriculture-, export- and energy-related projects. 23. 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. 24. 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 lending. The ratio of India's debt service to the level of exports was 12% in 1978/79 and is projected to remain below 20% through 1995/96. As of April 30, 1979, outstanding loans to India totaled US$1,350 million, of which US$647 million remained to be disbursed, leaving a net amount outstand- ing of US$703 million. 25. 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 1978/79. On March 31, 1978, India's outstanding and dis- bursed external public debt was US$18.7 billion, of which the Bank Group's share was 34%. 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 FERTILIZER SECTOR 26. Increased fertilizer use is an essential element in India's program to increase agricultural output. The output of foodgrains, particularly the high-yielding varieties of wheat and rice, is largely a function of the fertilizer application rate, although the availability of other inputs --  - 9 - water, seeds, pesticides, research, extension services, credit and appro- priate pricing and distribution systems -- are also essential to improved agricultural productivity. It is estimated that, under present conditions in India, the application of one nutrient ton of fertilizer yields an average incremental production of between seven and ten tons of grain. Thus, short- falls in the supply of fertilizer, whether imported or produced domestic- ally, have consequences of the utmost gravity for essential food supplies. 27. Consumption of fertilizers in India grew at an average annual rate of about 23% in the decade 1961/62-71/72. Thereafter, consumption stagnated during the period 1972/73-74/75, due primarily to sharp price increases and drought. However, as a result of improved agricultural conditions and a reduction in the price of nitrogen, consumption has now recovered; it reached a level of 4.3 million nutrient tons in 1977/78, of which 68% was nitrogen, 20% phosphates and 12% potash. The estimated level of consumption for 1978/79 is 5.1 million nutrient tons, an increase of 18% over the previous year. Although fertilizer consumption per hectare (total nutrients) has increased significantly, the current Indian average of 29.6 kg/ha of arable land still remains very low relative to (1977) usage in other countries (e.g., Pakistan 32.3; Mexico 41.9; Philippines 33.6; Egypt 175.1). The Bank's estimate of the growth rat:e of demand for the period 1978-83 is about 10.7%, which yields a conservati ve estimate of 1982/83 demand of some 6.7 million nutrient tons, of which nitrogenous fertilizers account for about 4.8 million tons. Demand in 1987/88 is projected at 11.0 million tons, including 8.2 million tons of nitrogen. At present, fertilizer consumption rests on a relatively narrow base of consumers and even the conservative growth rates that have been projected can only be achieved through implementation of proposed measures directed towards widening the base, including provision of adequate supplies, increased credit, intensive promotion campaigns and expansion of the distri- bution system. 28. Since 1950, when the modern fertilizer industry in India was in its infancy, installed capacity for the production of nitrogen and phosphate has grown from 66,000 tons per year (tpy) to its current level of 3.9 million tpy. The expansion of the industry has generally followed international trends with respect to production technologies and plant capacities. There has been a significant shift toward high-analysis products and complex fertilizers, and the typical size of a nitrogen facility has increased ten-fold from 50-100 tons per day (tpd) to 600-1,100 tpd of ammonia. Locational decisions have been made in the light of r^egional supply/demand, raw material sources and infrastructure considerations. The feedstock policies for ammonia production have emphasized full use of available natural gas and naphtha before planning projects based on fuel oil and coal. Two coal-based plants are now nearing completion; the Government intends to assess operating experience with these plants before sanctioning further investment in fertilizer capacity based on coal. The discovery in the Arabian Sea of oil with associated natural gas and of free gas reserves has once again made this very efficient feedstock avail- able for fertilizer production, which is the highest priority use to which the gas, now being used as fueL for power generation, could be put, at least for the next several years.  - 10 - Capacity Utilization 29. The average utilization of available capacity has been relatively low in India, ranging from 58% to 74% in the 1970s. However, these averages disguise a wide range of performance. Overall capacity utilization reached a peak of 74% in 1972/73 with the good performance of established plants, but declined sharply to 58% in 1973/74 as new units came into production. Since 1973/74, capacity utilization has once again increased steadily until in 1978 when it matched its earlier peak capacity utilization rate with a com- bined average of 74% for the public and private sectors, with private sector plants operating at 86% of capacity and public and joint sector plants at 69%. In addition to management, key determining factors which have affected public sector performance are plant age, size of plant, power availability and feedstock. The Government is taking several measures to further improve capacity utilization, including plant modernization, changes in feedstock, and other technological improvements as well as the establishment of a monitoring system to review weekly production statistics against unit-by-unit targets. In addition, steps are being taken to eliminate power shortages and fluctua- tions, which were responsible for about 20% of unscheduled production losses in the past three years. These measures are expected to increase output from old and technologically deficient plants to 75% of capacity and from stabil- ized plants to 85% of capacity by 1985, bringing capacity utilization for the whole industry to a satisfactory level of 84%. Production 30. Fertilizer production in India has generally lagged behind con- sumption. In the period 1971/72 to 1977/78, annual imports averaged 742,000 tons of nitrogen, 214,000 tons of phosphates and 376,000 tons of potash. (All potash requirements are imported). Thus, imports of nitrogen and phosphates were equivalent to 36% and 34%, respectively, of consumption. The Government's objective is to meet most of the requirements for nitrogen and phosphates from domestic production, supplemented by imports as necessary to ensure adequate availability. A large investment program is now being implemented with seven projects to be commissioned in 1980, two in 1981, and six (including the proposed project) during 1982 to 1985. Although, as a result, the share of imports is expected to decline by 1985 to some 12% of projected nitrogen consumption (690,000 tons) and 26% of projected phos- phate consumption (360,000 tons), the total volume of imports will increase substantially through the 1980s unless additional fertilizer capacity can be commissioned during the period. Even if fertilizer demand grew only by 9% per year during 1977-1985, planned production would only be just adequate to meet demand. Pricing 31. The Government has traditionally regulated the distribution and pricing of straight nitrogen products while allowing manufacturers greater freedom with respect to complex and phosphatic fertilizers. Farm gate  - 11 - urea prices, controlled by the Government, determine the ex-factory prices allowed to fertilizer producers. Up to mid-1973, the international urea prices were lower than the ex-factory prices allowed to the Indian plants, mainly due to the large world surpluses that were available for interna- tional trade. Between mid-1973 and early 1976, when international urea prices were much higher than domestic ex-factory prices, the Government introduced a system of "pooled" pricing. Urea was made available to the farmer at Rs 1,820 (US$212) per ton, 1/ even when the landed cost of imported urea was around Rs 2,680 (US$312) per ton. At that time, sale of locally produced urea, which had an ex-factory price of Rs 1,095 (US$127) 2/ per ton, provided Rs 610 (US$71) per ton to the pool to subsidize imports. As the imported urea price dropped, the cross subsidy has been reduced, and urea is now available to the fanner at Rs 1,297 (US$151) per ton. 1/ With the sharp increases in input prices following the 1973 oil price increases, the ex-factory realization per ton of urea increased from Rs 808 (US$94) in 1972/73 to Rs 1,158 (US$135) in 1978/79. This increase was not adequate to cover the cost increases. In November 1977, the Government announced a revised pricing policy based on an agreed return to manufacturers of straight nitrogenous fertilizers witlhout increasing the farm gate price. The new formula introduced a two-tier pricing system - an ex-factory price allowed to the industry and a subsidized retail price to make fertilizer usage attrac- tive to farmers. The pricing policy was extended to complex fertilizers in early 1979. The revised pricing policy provides each producing unit a 12% after tax-return (or a 28.4% before-tax return, whichever is higher) on net fixed assets and working capital less long-term borrowings at 80% capacity utilization; this should provide greater incentive for improving capacity utilization and significantly ease the financial pressure on the industry and encourage reinvestment by providing adequate cash flow in the initial operating years. The average domestic ex-factory price is now marginally (5%) below the landed cost of imported fertilizer. At the same time, the prices to the farmer are about 15% below the import prices as a result of Government subsidies to the farmers through the two-tier pricing system. Given India's relatively strong domestic savings performance - and the pervasive economic and social benefits associated with rapid growth in fertilizer use - this is a reasonable policy. The Government has agreed that it will not take or cause to be taken any action which, assuming production under conditions of efficient operation, would prevent fertilizer manufacturers from meeting all their expenses, servicing their debts, and earning a reasonable return on invested capital (Section 4.05 of the Loan Agreement). Previous Bank Group Operations 32. The Bank Group hais supported the fertilizer industry in India through participation in thie financing of nine projects with a total contri- bution of US$473.4 million. IDA has made Credits for the Fertilizers and 1/ Excluding dealer's margin and freight which total an additional Rs 153 (US$18) per ton. 2/ Excludes excise duty of Rs 115 (US$13).  - 12 - Chemicals, Travancore Ltd. plant in Cochin and for the Gorakhpur, Nangal, Trombay and Sindri units of the Fertilizer Corporation of India (FCI). All of these projects, which aimed at a balanced expansion of capacity while at the same time removing bottlenecks to the efficient utilization of existing capacity, have been completed. A Bank loan was made in 1975 for a new plant to be constructed by the Indian Farmers Fertilizer Cooperative, Ltd. at Phulpur; this project is proceeding satisfactorily and is scheduled to be commissioned in late 1979. The IDA-financed Fertilizer Industry Project of December 1975 included a variety of sub-projects designed to increase capacity utilization at sixteen plants; after initial delays in obtaining the necessary formal approvals, this project is now proceeding well. IFC has participated in two private sector fertilizer projects, Indian Explosives Ltd. and Zuari Agro-Chemicals Ltd., both of which are now in satisfactory operation. A project completion and OED report finalized for the Gorakhpur Expansion Project concluded that, despite some delays and a cost overrun, the project was a technical success and improved the financial and economic returns of the Fertilizer Corporation of India. Lessons learnt in this and other projects relate to improved implementation, monitoring and management systems, need for captive power and pricing policy. These and other lessons have been incorporated in the design of this project. PART IV - THE PROJECT 33. The proposed project was appraised by missions which visited India in January 1978 and February 1979. The Staff Appraisal Report (No. 1993-IN, dated June 14, 1979) is being distributed separately to the Executive Direc- tors. Negotiations were held in Washington in May 1979 with Mr. S. C. Jain of the Department of Economic Affairs, Ministry of Finance as coordinator of the Indian delegation. A supplementary Project Data Sheet is attached as Annex III. Project Description 34. The proposed loan would help finance the construction of a fertilizer plant at Thal in the State of Maharashtra, to produce 2,700 tons per day (tpd) of ammonia and 4,500 tpd of urea. It would consist of two gas-based ammonia units with a capacity of 1,350 tpd each, and three urea units with a capacity of 1,500 tpd each, as well as all necessary auxiliary and off-site facilities including steam boilers, power generators, product handling and storage facilities, and maintenance shops. The project also includes the cost of a township, rail siding and power link estimated to cost about US$26 million, or about 3% of total project costs 1/. 1/ Other infrastructure items not included in the project costs are a gas transmission pipeline, road transportation and water supply to the project. These will be implemented by the relevant State and Central Government agencies in conformity with the project sche,dule and their costs recovered from RCF and other users.  - 13 - 35. The project is expected to be mechanically completed in February 1983 (first: units of ammonia and urea) and to start commercial production in August 1.983. It is part of the Government's overall plan to use the associated and non-associated gas from the Bombay High offshore oil fields. The ammonia units would be the largest steam reformation plants yet to be built in Inidia. Plants of similar capacity are successfully in operation in the US and elsewhere and a 1,100 tpd plant is already operating successfully in India. Project Implementation 36. The Thal project would be implemented by Rashtriya Chemicals and Fertilizers Ltd. (RCF), a new public sector fertilizer enterprise established on April 1, 1978, as a result of the restructuring of the Fertilizer Corpora- tion of India (FCI). RCF is also responsible for the operation of the Trombay unit, formerly with FCI. The issued capital of RCF, when formed, was Rs 1,126 million (U:3$131 million). RtCF is headed by a 12-member Board of Directors appointed by the Government. The former General Manager of the Trombay unit has been appointed as RCF's Chairman and Managing Director. An experienced Finance Mamager, already in the Trombay Unit, has been appointed RCF's Finance Director. 37. 'Even though India has developed considerable capabilities in the design, engineering and construction of fertilizer plants, Indian engineering firms do not have adequate experience with plants of the size proposed for this project. RCF, therefore, intends to select two foreign engineering firms with adequate experience in building ammonia and urea plants of similar capa- city to provide process know-how and to assume full responsibility for sound engineering, process guarantees and timely completion of the plants. Selec- tion of these firms is undeirway. Contracts should be signed by October 1979 (for ammonia) and December 1979 (for urea). As the engineering works for the ammonia plants are critical to timely project implementation, the appointment of the ammonia plant engineesring consultants is a condition of effectiveness of the loan (Section 6.01(b) of the Loan Agreement). The Project is expected to be completed in 48 months from the date the ammonia engineering firm com- mences work, provided satisfactory agreements are entered into by RCF for the supply of the steam gen,eration facilities required for the project by September 30, 1979 (Section 3.05 (ii) of the Project Agreement). RCF will utilize Indian engineering expertise provided by Fertilizer (Planning and Development) India Ltd. (FPDIL) (formerly a part of FCI), to the extent possible for detailed engineering, procurement, shop inspection, etc. A General Manager with extensive experience in project implementation and plant operation has already been appointed by RCF to coordinate implementation of the project with the process engineering firms, FPDIL and other contractors. The General Manager will be assisted by a Project Manager with experience in coordinating and monitoring project construction, who has also been appointed, and by man,agement teams drawn from engineering and other concerned disciplines. A draft Project Implementation Manual discussed during negotiations will be finalized by RCF and submitted to the Bank before November 30, 1979 (Section 3.03(c) of' the Project Agreement).  - 14 - Staffing and Training 38. The Project will employ about 1,565 persons including managers, supervisors, skilled technicians and semi-skilled workers. The core of the managers and supervisors will be drawn from the pool of about 9,000 managers and supervisors now available in the Indian Fertilizer industry. The remaining staff will be recruited from the technical colleges and schools and trained in RCF's training facilities at Trombay. After initial orienta- tion the staff will be given on-the-job training overseas in plants similar to the proposed plants at Thal to enable them to gain sufficient experience in plant management and operation. RCF has already hired an experienced Training Manager to formulate its training plans for the operational staff of the project and will submit a detailed training plan to the Bank before December 31, 1979 (Section 2.10 (i) of the Project Agreement). Infrastructure 39. The project's infrastructure requirements will be built as follows: township by RCF; road strengthening, water supply and power line by State Government agencies; gas supply and rail siding by Central iGovernment agencies. GOI has agreed to provide the railway facilities for the movement of raw mate- rials required for the project and for the finished products to be manufactured under the project (Section 4.04 of the Loan Agreement). RCF has already taken possession of about 320 hectares of land required for the construction and operation of the project and detailed soil investigations of the entire area have been completed. The Government of Maharashtra (GOM) has formed a Coordinating Committee to review the progress of construction of the infra- structure facilities by the various State agencies concerned and to provide the needed inputs and resources for their timely completion. GOM will pro- vide adequate funds and facilities for the project's water, roads and power requirements and will monitor their execution through the Coordinating Committee referred to above which will continue to function throughout the project implementation period. The finalization of satisfactory agreements by RCF for adequate supplies of natural gas, coal, power and water to enable the proposed plant to operate at full capacity is a condition of loan effec- tiveness (Section 6.01(c) of the Loan Agreement). Environmental Aspects and Safety 40. As the project will create a major industry in a relatively under- developed rural area adjoining Bombay, the Bank has carefulLy reviewed its environmental aspects to ensure that project design and location will not adversely affect the region. The major potential pollutants from the complex are ammonia and urea from the main process plants and the fly ash dust and sulfur dioxide from the coal fired boilers. The only other important effluent will be the waste from the water treatment and demineralizing facilities. The plants will be designed and engineered to minimize the introduction of ammonia and urea into the liquid effluent streams. Effluents containing ammonia and urea will be collected separately, hydrolyzed to decompose t:he urea to ammonia and stripped. The effluent leaving the plants will contain less than 25 parts per million (ppm) of ammonia and 200 ppm of urea. The urea dust escape from  - 15 - the prilling tower into the atmosphere will be reduced by scrubbing the dust laden gases with water. The combined liquid effluent of the project will be monitored, treated suitably and discharged into the sea. The coal-fired boilers will use Grade I coal (below 0.6% sulphur) and will change-over to using natural gas instead of coal, whenever stack emissions from burning coal exceed agreed levels. The boilers will be fitted with electrostatic precip- itators and stacks of minimum 150 meters height to minimize fly ash dust allowed into the atmosphere. The pollution control and monitoring arrange- ments planned for the project have been reviewed by the competent regulatory agency, the Maharashtra Prevention of Water Pollution Board, which has issued a no-objection certificate prescribing the norms and conditions to be followed by the project. The prescribed norms are in conformity with internationally accepted standards and in some cases are even more stringent. The Bank, with the help of an internationally reputed firm of pollution control consultants, has reviewed the arrangements made for the project and the norms prescribed by the State authorities, and is satisfied that the standards can be met and are acceptable. RCF has agreed to implement specific measures satisfactory to the bank to meet the environmental requirements for the project (Section 2.09 of the Loan Agreement). For this purpose, RCF will appoint independent con- sultants satisfactory to the Bank by December 31, 1979 to design overall project pollution control systems, and present them for review by the Bank before June 30, 1980. RCF will also be required to ensure that the proposed pollution control measures are fully implemented and will be responsible for continuing to monitor them (Sections 2.02(b), 2.09 and 2.10 (iii) of the Project Agreement). The Bank has also been concerned to ensure that the broader environmental aspects of this project are not overlooked, in par- ticular, the project's immediate impact on the nearby town of Alibag and the longer-term possibility of the unplanned development that could result from the availability of the infrastructure associated with this project. GOM will accordingly carry out a study of the infrastructural requirements of the area in the context of this project through the Bombay Metropolitan Region Development Authority, and prepare an action program, including a timetable for its implementation by June 30, 1980. 41. Safety norms employed by RCF will be in conformity with those laid down by the State Inspectorate of Factories for industrial plants. Plant designs and plans will be reviewed by the Inspectorate as part of their normal industrial safety responsibilities. The project's fire-fighting system provides for emergency pumps, overhead reservoir and fire hydrants, and facilities for combatting chemical fires. These systems will be engi- neered to norms prescribed by the public sector General Insurance Company, which are satisfactory. RCF staff will include well trained and qualified personnel to operate its safety and fire-fighting systems. Resettlement 42. RCF has already made provision for the payment of adequate compen- sation for all private land acquired for the project and will additionally recruit and employ after training at least one person from each family whose land has been acquired. In this connection, RCF has already appointed a Rehabilitation Officer whose services will be retained as long as necessary to assist in the rehabilitation of the families affected by the acquisition of land f-or the project (Section 2.08(b) of the Project Agreement).  - 16 - Project Costs and Financing 43. The total project cost, including contingencies and working capital but excluding duties and taxes, is estimated at US$678.0 million equivalent, of which US$308.9 million represents the estimated foreign exchange cost. Interest during construction adds another US$61.3 million to the total financ- ing required for the project. The cost estimates include the infrastructure investments for the township, power line and rail siding, but exclude those for water supply, road strengthening and the proposed gas pipeline from the Bombay High terminal at Uran, which would be borne by the Maharashtra Industrial Development Corporation, the State Government and the Oil and Natural Gas Commission, respectively and paid for by RCF and other consumers through user charges. The proposed loan would provide about 37% of the estimated project cost of US$678 million, net of duties and taxes, and approximately 81% of the estimated foreign exchange cost. The proceeds of the Bank loan would be on-lent to RCF for a period of 15 years, including 5 years' grace, at a net interest rate of 10-1/4% per annum. The execution of a Subsidiary Loan Agreement between GOI and RCF incorporating these terms and conditions is a condition of loan effectiveness (Section 6.01 (a) of the Loan Agreement). The balance of financing required would be in the form of loans and equity contribution from GOI, (US$368.5 million) including possible UK financing of part of the offsites plus equity from RCF (IJS$65.0 million), and short-term financing, either from RCF's internal resources, or from commercial banks (US$55.8 million). Procurement and Disbursement 44. The design and engineering services for the ammonia and urea plants are being obtained in accordance with the Bank's guidelines for the use of consultants. All equipment and material for the project to be financed under the proposed loan would be procured from qualified suppliers in accordance with the Bank's procurement guidelines. International competitive bidding will be used for all items except for critical or proprietary imported items and items with a value of US$100,000 or less, both totalling an amount not exceeding US$25 million, which would be procured by prudent international shopping in accordance with an agreed list of goods. Indian manufacturers competing under international competitive bidding will be granted a preference margin of 15% or the current rate of import duty, whichever is less. 45. The proposed loan would be disbursed against 100% of the foreign cost of consultants' services (US$25 million), and against 100% of the c.i.f. or ex-factory cost of equipment and materials for the ammonia and urea plants (US$215 million). US$10 million would be unallocated. It is estimated that Indian suppliers will supply about 32% (US$80 million) of the total cost of equipment and materials financed under the Bank loan (US$250 million), and the balance (US$170 million) will be imported. Marketing 46. At a 90% production level, the Thal unit would sell about 1.34 mil- lion tons per year (tpy) of urea and about 26,730 tpy of ammonia. A national  - 17 - fertilizer marketing plan has been developed, which is designed to minimize cross-movements of products from different producers in the country and to ensure that each consuming area has more than one source of supply. As part of this marketing strategy, following the restructuring of FCI, its Western Marketing Division (which was responsible for marketing the fertilizer pro- duced at its Trombay plant) has become a part of RCF with responsibility for marketing fertilizer products in Maharashtra and other relevant markets. RCF expects to strengthen and expand its marketing organization, especially in Uttar Pradesh, by the addition of about 150 sales staff and by increasing the number of fertilizer distributors handling its products from 2,000 to 4,500 by the early 1980s. By 1985, about 35% of the urea produced at Thal is expected to be abscrbed by farmers in Maharashtra, where the plant is situated, and the balance will be marketed in Uttar Pradesh. Subsequently, as demand grows in the Southern States during the late 1980s, a part of the project's output would be sold there, reducing the volume of urea sales in the North. The surplus ammonia is expected to be taken up by other fertilizer plants and industrial users, mainly substituting for imports. Given the overall short- fall in supply of nitrogenous fertilizer expected to prevail in India for the foreseeable future, together with the fact that the intensity of fertilizer use in Indlia is generally low, even with the proposed project and other planned investments, there should be no problem in marketing the urea output of the project. RCF Finances 47. The sales revenue from the project is expected to increase from Rs 772 million (US$90 million) in 1983/84, when the plants are commissioned, to Rs 3,563 million (US$414 million) in 1986/87, when capacity utilization is expected to reach 90%. Net profits (after taxes) are expected to increase from Rs 1()0 million (US$11.6 million) to Rs 964 million (US$112.1 million) over the same period. Thal is expected to generate, immediately after commission- ing, sufficient cash to meet all its obligations. Its 1985/86 debt service coverage of 2.7, current ratio of 6.7 and debt/equity ratio of 34/66 are all satisfactory. These financial indicators remain satisfactory throughout the life of the project. 48. While the new pricing formula (para 31) provides a strong incentive to producers to reinvest their earnings in fixed assets, no reinvestment pro- gram has been assumed for purposes of the financial projections since RCF has just been formed and investment programs of Government companies are centrally coordinated. The project has good financial ratios for the initial years of operation., From the fourthb year of operation, the project will be able to pay a yearly dlividend of 10% orL share capital. Although the new pricing formula allows, in current terms, the higher of the 12% after tax or a 28.4% pre-tax annual relurn on net worth for each producing unit, the same pricing formula also resu'Lts in a before tax discounted financial rate of return in constant 1978 rupees of about 9% for the project compared to an economic rate of return of about 20% (para 51). The large difference between the financial and the economic rates of return is mainly due to the difference between the financial price for urea, calculated according to the retention price formula, and the forecast international urea price.  - 18 - 49. RCF will be required to maintain for itself and the Thal unit a debt/equity ratio of not more than 50/50, and a current ratio of at least 1.2:1. RCF will also be required not to declare dividends, prepay any debt or make other cash distributions not related to its own internal corporate operations which would reduce its current ratio below 1.5:1 and not to incur additional debt if, as a result its projected debt service coverage would fall below 1.4 (Section 4.04 of the Project Agreement). Benefits and Risks 50. The project's net annual foreign exchange savings, due to reduced fertilizer imports, will be about US$200 million in 1978 dollars before foreign debt service. Thus, the project's estimated foreign exchange require- ment would be covered by savings in 1.7 years. The project will create about 1,500 jobs, in addition to the employment of more than 5,000 people during the peak period of construction. Moreover, it is expected to support another 5,000 or more jobs through secondary and tertiary employment. 51. The project's economic rate of return is calculated at about 20%, based on estimated international fertilizer prices projected to prevail in the mid-1980s. Sensitivity analysis indicates that a 10% drop in revenues would reduce the return to 17%; a one-year delay in project completion, together with a 10% increase in capital costs and a 10% reduction in capacity utili- zation, would reduce it to 15%. If the economic cost of gas increases, without any corresponding increase in product prices, by 1984 to US$110 per 1,000 normal cubic meters in 1978 dollars, instead of US$73.4 assumed in the base case, the economic rate of return will drop to about 17% from 20%. Thus, even under severe adverse circumstances, the project would yield a satisfac- tory economic rate of return. 52. The project faces possible risks in the form of (a) technical problems, (b) delays in implementation, (c) cost over-runs and (d) delays in the provision of necessary infrastructure. The risk of serious techical problems arising during engineering, construction, erection or commissioning, as well as the risk of delays in implementation and consequent cost over-runs, are minimized by the use of commercially proven technologies supplied by internationally recognized engineering firms. Moreover, RCF's staff and FPDIL, who have ample experience in building and commissioning similar plants, will supervise the implementation of the project. Potential risks associated with the availability of the necessary infrastructural facilities will be reduced by the arrangements referred to in paragraph 39 above. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Loan Agreement between India and the Bank, the draft Project Agreement between the Bank and RCF, and the Report Df the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank are being distributed to the Executive Directors separately.  - 19 - 54. Special conditions of the project are listed in Section III of Annex III. The execution of a Subsidiary Loan Agreement between GOI and RCF; the appointment of the ammonia plant engineering consultants and the conclusion of satisfactory contracts for adequate supplies of natural gas, coal (grade 1), power and water, are additional conditions of effectiveness of the Loan (Section 6.01 of the draft Loan Agreement). ( 55. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 56. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President June 14, 1979   ANNEX I Page 1 of 5 INDIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES INDIA LAND AREA (THOUSAND SQ. XM.) - MOST RECENT ESTIMATE) /a TOTAL 3287.6 SAME SAME NEXT HIGHER AGRICULTURAL 1818.3 MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE lb REGION /c GROUP /d GROUP /e GNP PER CAPITA(LSS) 60.0 90.0 350.0 167.4 182.9 432.3 ENERGY CONSUMPTION PER CAPIT'A (KILOGRAMS OF COAL EQUIVALENT) 142.0 181.0 218.0(76) 65.7 88.9 251.7 POPULATION AND VITAL STATISTICS TOTAL POPULATION, HID-YEAR (MILLIONS) 434.9 547.6 631.7 /f URBAN POPULATION (PERCENT OF TOTAL) 17.6 19.5 20.6 12.8 15.0 24.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 973.0 STATIONARY POPULATION (MILLIONS) 1643.0 YEAR STATIONARY POPULATION IS REACHED 2150 POPULATION DENSITY PER SQ. KM. 132.0 167.0 192.0 85.2 46.8 42.7 PER SQ. KM. AGRICULTURAL LAND 247.0 308.0 347.0 322.6 254.1 95.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 41.0 41.6 42.0(77) 44.0 43.6 44.9 15-64 YRS. 55.9 55.3 55.0(77) 52.9 53.3 52.8 65 YRS. AND ABOVE 3.1 3.1 3.0(77) 2.9 2.9 3.0 POPULATION GROWTH RATE (PERCENT) TOTAL 1.9 2.3 2.0 2.2 2.4 2.7 URBAN 2. _pB 3.4 3.5 4.2 4.0 8.8 CRUDE BIRTH RATE (PER THOUSAND) 44.0 40.0 35.0(77) 45.1 44.3 42.2 CRUDE DEATH PATE (PER THOUSAND) 21.0 17.0 14.0(77) 17.3 19.7 12.4 GROSS REPRODUCTION RATE 3.2 2.9 2.4(77) 3.2 2.9 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 3768.0 4518.0 USERS(PERCENT OF MARRIED WOMEN) .. 12.0 11.2 13.7 14.6 14.2 FOOD AND NUTRITION INDEX OF FOOD PRODUCTICN 100.0 102.0 101.0 95.6 96.4 104.3 PER CAPITA (1969-71 = 100) PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 95.0 92.0 89.0 91.1 92.3 99.5 PROTEINS (GRAMS PER DAN) 31.0 53.0 48.0 49.6 50.0 56.8 OF WHICH ANIMAL AND PULSE 19.0 16.0 12.6 12.6 13.9 17.5 CHILD (AGES 1-4) MORTALITY RATE 28.0 22.0 10.0 .. .. 7.5 HIEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 41.7 48.0 51.0(77) 43.1 45.8 53.3 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 134.0 99.5 102.7 82.5 ACCESS TO SAFE WATER (PIERCEhT OF POPULATION TOTAL . . 17.0 33.0 30.0 26.4 31.1 URBAN .. 60.0 83.0 66.3 63.5 68.5 RURAL .. 6.0 20.0 17.2 14.1 18.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 15.7 16.1 37.5 URBAN .. 85.0 87.0 66.9 65.9 69.5 RURAL .. 1.0 2.0 2.5 3.4 25.4 POPULATION PER PHYSICIAN 5840.0/h 4890.0 3135.0(77) 8830.8 13432.7 9359.2 POPULATION PER NURSING PERSON 11590.0/h 5220.0 6320.0(76) 8479.3 6983.3 2762.5 POPULATION PER HOSPITAL BED TOTAL 2590.0/i 2020.0 1231.0(77) 1624.5 1157.6 786.5 URBAN .. ,. .. .. 183.3 278.4 RURAL .. ' ' 1348.8 1358.4 ADMISSIONS PER HOSPITAL BED .. .. . .. 19.5 19.2 HOUSING AVERAGE SIZE OF HOUSE3ILD TOTAL 5.2 .. 5.2 .. 5.2 URBAN 5.2 .. 4.8 .. 4.8 RURAL 5.2 .. 5.3 .. 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 . 8 URBAN 5.8 2.3 RURAL .. .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS TOTAL 25.9 28.3 URBAN RURAL .. .. .. .. 8.7 10.3  ANNFX I INDIA - SOCIAL INDICATORS DATA SHEET Page 2 of 5 REFERENCE GROUPS (ADJUSTED AVERAGES INDIA /a - MOST RECENT ESTIMATE) SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 72.0 79.0(76) 59.1 62.9 75.8 FEMALE 40.0 55.0 63.0(76) 38.4 45.9 67.9 MALE 80.0 87.0 94.0(76) SECONDARY: TOTAL 20.0 29.0 28.0(76) 19.9 14.4 17.7 FEMALE 10.0 17.0 18.0(76) 9.9 8.8 12.9 MALE 30.0 39.0 38.0(76) VOCATIONAL (PERCENT OF SECONDARY) 8.0 6.0_ .. 1.5 6.6 7.4 Pb'PIL-TEACHER RATIO PRIMARY 29.0 38.0 40.0 38.2 38.5 34.3 SECONDARY 16.0 17.0 .. 23.5 19.8 23.5 ADULT LITERACY RATE (PERCENT) 28.0 33.0 36.0 35.6 36.7 63.7 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.0 1.2(76) 2.2 3.1 7.2 RADIO RECEIVERS PER THOUSAND POPtLATION 5.0 21.0 24.0(76) 14.9 31.1 71.1 TV RECEIVERS PER THOUSAND POPULATION .. 0.1 0.5 .. 2.8 14.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11.0 16.0 16.0(75) 6.4 6.0 16.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 .. 1.4 1.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) 175000.0 218000.0 261000.0/k FEMALE (PERCENT) 31.3 32.6 32.2 21.3 24.2 28.0 AGRICULTURE (PERCENT) 73.0 73.8 72.5 62.8 60.7 54.1 INDUSTRY (PERCENT) 10.4 9.8 PARTICIPATION RATE (PERCENT) TOTAL 43.0 40.2 39.2 35.8 39.8 37.8 MALE 57.1 52.3 51.3 52.4 53.3 50.3 FEMALE 27.9 27.1 26.2 15.6 19.6 20.9 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.3 1.3 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 25.0/1 .- 18.6 20.3 19.5 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 53.1/1 .. 42.8 45.1 48.9 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 4.7/1 .. 7.3 5.7 5.9 LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 13.1/1 .. 19.3 16.8 15.7 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 83.0(77) 80.2 88.5 155.9 RURAL .. .. 73.0(77) 67.2 71.9 97.9 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN ., .. 80.0(75) .. 100.8 143.7 RURAL .. .. 50.0(77) 39.8 42.0 87.3 ESTIMATED POPU,LATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN ., .. 47.0(77) 50.3 46.0 22.9 RURAL .. .. 52.0(77) 44.6 48.0 36.7 Not available Not applicable NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in eacb group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977. /c South Asia; /d Low Income ($280 or less per capita 1976); /e Lower Middle Income ($281-550 per capita, 1976); /f 1978 mid-year population is estimated at 640.4 million; /g 1951-60; /h 1962; Ji 1958; /; 1967; Tk 1978 mid-year labor force is estimated at 261 million; /1 1964-65. -March, 1979  ANNEX I Page 3 of 5 No0te. :Although the fa.tar Staten- Era oore gaely Judged the mot suthoritotine sd reLiable, it sho-ld also he notd tot they soy toot be intosga nisoolly usop..r.ol --cos of the Lak ofsI dadsddefinitions she co-pte used by different countries L.t coloottog the date. The dais are, ,ton.thelsss useful to des..ribe orders of magnitude, indi.cat tresda, std chersotrieties certain ajr differeecee hecse.asnncie The odju-ted cr0u0 voracee for euh IndIcator are pop,cLstise-ighted gestri.c asses, exclding the se - -e1-e of the idictoIr she the eoe populated countryis eah group Duo to taco of data, groupseae ofoltidi.cator for Capital Surplus Oil teportere end of todiceicre,, of Occese to, ster sad . enrt dSpoal iccig, bo,-o, dlooriborlon sod Povatrt for othe coenry groops .-m populstios-slghtsd gaintnio semototsa-oino thehntesaluas sod and eoat populated csnntrv. Si.ce th cveae "f ouoriaS s ann the Indicatore d.asedoso svstiebility of datsansd ho not clfo.r. caution -tet be anercised io relotina evoroses of one inleor tohuother.. These oversans on sastly useful1 asasee,onl.sicion of assented" vaLues unen icebariemt the -sas1 f n loioo sa tine actono the couctrv and rfrosrue LANS AREo (th uoettdfIs. h)Ponulation oar seicise - Population divided by nahr of practictig physi- Total - Totse.crftarea -mpoteing land ae she lod esters. clas quaife fr aSmdical school at iIiereiy I.-Il. Agri-Icua M.tos vcnt esimate of agriculurl era asd capororily Poettletion e .- ..reia -cr - P.pulotlu divided by ntber of procticing or poe-notly fuc crpe, pseturs, oarket and kitchen gardens or to malese f raedgradost urese., practical ncrsea.. an d ass istantoum. lie tallc, ouaIosor _seeitl bed - total. rorha. and rural - Population (total, urban, ad ruaral) divided by theaire -pactiva naober of hospita bode cNP ZtR CAPITA (Uq$) mop prcptsonte attrnt aktpis.svilol in public ad private general sod ap-olei-ed heeito -adre cacltd by sascnesiomthod ase Wor Bak ArIe (1975-77 beels); habilitatison centes. gos-pitale are secoblietinece persanoetlp staffed by l9b0, 1970. and 1977 Sao t least oneph"sicist. Eteibilsh-nce providing pr.incpally .cuatel1 Eln L1PTION E! CAPTA Annal ...-ptionof thbner.i -Scare are sat intleded. Rural hospitals, hosere, include heelth sod mdl- RG001 CCONSLIPISP7CPT nulco piso aca nry(coal Ia caters not perueseotly etaffed by a phv.icien (but by a medical as- and lignite p -r t-on crl gas and y,dro nucle .. sh tentharea1 citt.an,sdsie .) ehih offer Is-patient eccbasdation end electrficit)' in kIt.t.orans of coal oquivlant prcpita. r-id. Ia imitdrange o at edinal Iscilitlee. s&jineion or hoantoL bed - Ttota onebar of adi.ains. to or diech-etee POPL'LATION Aill VFAL 7TATTSTICS crnhsptl dividd by the ocabr of beds. Tota onpolatic.. o,d-year tilco.- A. of July 1; 19650, 1970, -d 1977 data. ltt lrbu oocaco (c,rc... c on ctota) - atio of urban to total popolation; OaaeeSe. of housheld fboresoe. -e -oeodl - total. icbae. sed rurel - Sliler...t duflolt cr-ofu -noo arease nay affsct otop-ability of dais, A hosesab.Ld consists of a group of indivyiduals h. thara lIoig quarters un_n _csrios and their mai osale. A boarder or lodger say or my net he included in the ?pun.uloto hrftic-oheebld for~ Steet ica. Pturplae. Puusloin Yeer 15 - Curre.t population projoctice are baeed on inton teshmr oft=ren se no - uctt. rha.edrturel - Aoersgs tooshe tO -ttlPopl loo by age und eso and their -ortalLry end fertilit of persons per roa in all, orbs., she rursl oucupied .oe...tmoneSI deLlings. aseoioglif scptccnoyat birth iocre.. log sich cotcry's par caPita ACcess to electriity Joarnen ofdsl e - totl, urban sond rural - inton love, and fonsle life scetac tabiliningo 775years. iurhina sellg u electricity inLivn. tatr a mcne o The Paraneter. Ic, fertilIty ruts also have I levels seoing declios total, trhen, SWd rural duellinge reepsotio-ly. to frtIlIty scco-dicg in inc-n level and Past lat p..esingse- fuotance. loch -cutry L. then. seigotd on. of thoso 9 conhination EDICATIO9S of oortcitty and 'ortility trende for proJection purr....e. t 'cid osrollsoet ratios Stationaryt Ponulat (to - Ito a Stacionary population, the re is Os greeth PrMar arhoal - total, male and femae Gross. tonal, male asd fetleS.. enol- clots the birth r:tts isequs i to the deoth rate, end also the age oso at 1 alegos at tics primary lee a.. I paree.t.ags of respartina priaerr utrut-r ve,eineo-t.tan. Thiu is achieved only slier fertility raiese shosl-age peptelti-n; nornly incide c hildree aged 6-tipers hoc dolnot the'etacnn level of colt net reprdaction rter, ohs each adjusted for differet lesgihe of priary education; foe cosorio th goetion of 'c_t -opac.. itself ancly. The Stteionary Pupuistion uciv'real eduatio enol -tmy eatocd tOO pernent ains Sine popiL.aere ale atatimaco on th. noule ofteprojected chrScte tristics cf the halos or abs the of1fltial aubhoal age. nopularlo in tho yea 2000, and thet rel of danlios of fertility rats ecbondary schao -inel mlansh fosoe - Captatd as abas; seondary edua- tu replacenst lrre. tion requires atlntfo pests f epp-ve primary intruction; proides Yar Stationary potulation iu Reached - The year than lSttiseary Popula- generel yoncotIga o teaher training instructions for pupils usually of clot nios has hon. reached. 12 to 17 peer of ag; orepoedanc cau--s Ste genrall secluded. PPunlatlon d.n.liryPctoa L slas ornee of ceadr - - toaiaIit icaitttion 4 inclde Po s s i-roar populetton par eqnsre kilo catr (110 hetares.) techicl,idaro,rabrprgn icuateldpsatyor of total area. dSpot te af se idr nstltuti"'. Por u. h- agricultural land - Conpured ae shov for agricultural 1ed Psltabrratio - orim trn. ien escodsrr - Total Students anroiled Le onip. primary and aotondary levels divided by toabert of teachers in the oe Pouaio u Stucus(Parc...t) - Children(0-14 peers), .orking-ege epoediog level.. (15-64 Years). s.) votived (hi yeart and over) us perrentagee of old- AduIilitercyraets eo )-Ltrt adults (able to read and trite) as yaar population, ub.a percetag of total adult popul-imon eed 15 peace and oner. Ponulatio nr_otrt (orst-total.Anura - Coepound anua grouth -etee of Ltoa and ure.anied-er populations for 1950-60, CNiPl 1960-7I, and170-77. Pesestcre (oar thouaed ..nulation) - asegrca oprie mo.torca Crude birtch vote ( or thouu..aod - unual live birthe p.o thousand of -Smting less then eight persons; eucid-saoacs he.rem. en military aid-ee ..Population; 1960, 1970 and 1977 da ta,vehicles. Crud.de ath vats (p.r theusod) -uAnnual dneiths par thousand of eLd- radio receiver (nerthbnueand soonition -All cypse of re.si-ne far radio year poplation; 1960, 1970 and 1977 data..brnadcaet ta eea public e th.-osed of population; u.cludes doniicessd Gross r.eord-ction outo _- uvrege -tsr ef daughters S -oa till hear re...iesr in oco_triesh indL pears than egitrt-tiae ofradio Seam sea in to her noma nopruduccio period if She aperianco present gs- effect; data for recat peare may not he co.tsecsble sinsce most cottriss epc feclrtility rates ; usually five-year averages ending is 1960, aeibed I=oans"ng 1970, sod 19T5. TOreeie (see thusn nulaton) - TV reosiosre for hbeadcat to genera PFnily PIsn-Log-o--ethors. anua (thuaeds)- Ases1 tuaker ofpublie par thousand popuition; soldee aclineesad TV r_siver incon acptors of hivtt-on_ro devices( unde .-Picee ofrational (ally trims se in peers deke rsgitretion of IV aSct use in infat. PL.SlO progron. tiaeernruei ot Ihtsn neatol- Sho the verege sirnul- F-il olortiga-osere (roceo ofmarrIed aeo - eeetagea i fdiygas insre esese ed, dfied aSSa periedino pukIi- nrriod o -c of.cidherc ag 15 -44 yes h a birth-contro canton devoted primersily is recording gan-n es I t to cons-idered to dvice oal aro ionn _on ag grn e"diy if It appea rsu leest loe tm Satsk Clan one Stt"ndance oa usnita oayr - .ate on- the umber of tickets FOOl Arm NtUnTRIT told during the Year. Including ebieoeto drive-in tina and sbus. loden of foodrru2ction nor canito (1O69-71el10 rodeo naber of pat uni". caPita eui rdudction of oIl food tasditir.. Por Zarico ounolo of ctre vre f rosuireseti) - Caopoted Ira ElIFLOISCtt -urgy oquilvant of ncfood uuppiit ov ilahIe inountry per capit. Total labor arcsd fthousandst - fc-onaloallo sours. peren, macbodingard Pot day. uoeilabla -uppL los cupi doseetic pr-dution, imports less fore and unemloyed hot aetluding houcemivee., etudents, sto. Ifiri7- orpcrte, and changes i Stuck. Me.t Supplies ncluda animal feed, seeds, clon in verits countries are not cosparshls. q_st itlo- ut.d in food pruceusig, and I....e to dis tribut ion, in- Female' grante -female abor force uSo psontg f totel1 labor fume.1 qurnoture Stimatd by EU basd on phyaialogiuci nee ds fcr nor- _riulus oacst - Lbor forc in faoning, foresry, busting sd fishing Iat actIvityad heal"th cune idsriog anrscna ceprtua ody asprcontege of total labor force usigh., ago o-d cs disrcibutions of population, andSiLouing 10 Per- luduacry lamet)- - Labor forco, is ite.lg conatroction, -sf-cturig sod --ncfru- co obostodtol electriciy uster adge s erenag of Iotl .abr foce 7evoa .Its opov of orutot, (oven pet day) - pores contet of Per Petocto et ecei-tta as n eal oa,ml, and catunoc cplpoffod arca. et fopl c 0(ot to defined- at sal lhort fcrce as percentages othirepcvepop.lation; 19h0, (9.70 ahovo. tqu1rtemninfaralcutie talue by'USIA pvovide for acd 1975 data. Th... are ILOs. ad)uucad part icipation ras onflecting oge- a micccun allnanco 6ofi gruS: ofcarol poucot, per day so.d 20 grae ostuture of thc population, and lung tna trend. ofaImladpuapruilct o hic grn n~hccld heosl- Protein. Econmio donnoero redo. - utlo af population undor 15 and 65 and over to 'heceacandards aretractchec h... of 75 gR_n of total protein and the labor laroo in ag rtP of 15-64 year. 23 grs ol fo-coaL prcreio an.o ovrage fnr the aortd, proposed by FAQ in the Third could FudSuteyNUCutE DIITThO3 I Per ourita Proteiocndofa nnlsd-Iu-su-pr-cic' ouppip of food F.roets of privtcs inton (both in coeb sed hind) reneiced by richoet 5 derived fra -"nioulo ad pu1.es in gran per day. patboot, riches 2t percent, pooret 20 percent, sod Poorest 40 parnot Child orI-4) . -.rietr rete (net thonosod) -Annual deaths per thous- of households. and to ago group 1-4 peart, no chttdrMr ith is age group. POVElTY TAffliT GROU PS HEALTH I Eio,ccd.enolat cuvr "Ina lanaI (715 orrc-itu - urban sod rura LIferonetanc at hi-ro --arn cAerug oobar of yeore of life resin- uhblar poer_ ooeslee is ha Inca leve hems othi o nh a ing an irth; 1900, 5970 sod 97dta nutritionally adequate dint plus .. steoia1 eo-lou.d rsquiraoeunt Inan Ion(t' - ito he not thousan d - Annu-1 douche uf -inecs ta flordable. Nacsr of pros (-tota, urca, sod rut- -iconSubleuc..... to Ina f outy cocatorupul fio-uaetd e te. cd -urfoco -cor o oc.teid but-ontedoolso sn bclc ceu oo lv(P(or--t - orbo sod _nocrond uhrs -ohat u fran --ueord cvhl pilngs, norel-Pecn of pupuletton lubcadorDaoae'bsolute pour". nonnouapublic fc-cuiornadpccloatd ou.t ouro than 20 aot ro ;vus vvhocotb otoa -Iding ci :hi roes onSi I cat.cuu. n ut) rrc ec,cocl acec ctiS P" I obcto o- ci orvebec of hr ctbld cnono tosond ofcprvcotionr p rto the Ian to -(n'.vt the fuou(voas-or-edo -oeic end Scol1 Dets Eioli.i- '000cc tonoon to aiuc"tul uonottvtouulutcoc,-o:a I. obu.ad Eonorc .Laysic and Pro 7-tion- lepsor-e rooven 00 (0 0010 cocc. otbat , coooolt ,erodbnttcret I)- ach, 7,979 va ;c-urro cc)ct onor --y-a. ti -o ucuth150 -r. of prtlio and toZl cn)n calctv.  ANNEX I ZOOSc DVm.emTM2D Page 4 of 5 03 IPU C WIT IN 1977: UN 150 b/ c/ GROSS ATIONAL PF0DUCT IN 1977/7S ANUL MtU I GmONI C contont prices) UW$ un. J 1960/61-1964/65 1965/66-1969/70 1970/71-1976/77 GNP *t Market Prices 101.47 100.0 3-9 3.8 3.2 ,ros Domestic Invetmt 21.65 21.3 Gross Netional Saving 22.77 22.4 Current Account Science d/ 1.04 1.0 Resource Balance _/ - 0.31 - 0.3 OuThi. WJOR PsCZ AND PRnUcTa T IN 1971 Value Added (at factor cost) labor Force V.A. Per Dorker U1# l.ln, 7, M1. S 11_ 1 of National Averase Agriculture 24.5 46.6 130.0 72.1 18U 64 Industry 11.8 22.3 20.2 11.2 582 199 Services 16.3 31.1 30.2 16.7 542 i8 Total/average 52.6 100.0 160.4 100.0 292 100 GCEvT PINUCR / Geeral Government Central GCermmnt Re. lln I of Clll si 3lr of 1977/?S 1977/78 mm^/51T28l 7 17/8 19i7-977 Current Receipts 164.42 18.9 18.2 95.62 11.0 10.5 Current Rdenditures 157.29 18.1 16.5 95.27 10.9 9.9 Current Surplus/Deficit 7.13 0.8 1.6 0.35 ns. 0.6 Capitel Exesditures f/ 62.58 7.2 7.0 43.31 5.0 5.0 External Assistance (net) Al 9.82 1.1 1.6 9.82 1.1 1.6 MONEY. CIRDIT AID PucKS 1970/71 1973/74 1974/75 1975/76 1976/77 1977/78 Sestmber 1977 S.,tmber 1978 (Is Billion outstanding at end of period) mony and Quasi Honey 121.4 198.4 220.3 254.7 308.9 365.1 334.8 395.8 Sank Credit to Goverinnt (net) 52.6 87.3 95.3 101.1 110.2 129.7 119.3 139.5 Blak Credit to Comercial Sector 64.6 107.0 126.7 153.9 185.1 210.0 195.3 223.5 (Percentage or Index Numbers) January 1978 January 1979 Money and Quasi Money as Z of GDP 30.1 33.5 31.5 34.5 38.8 41.9 Wholesale Price Index (1970/71 - 100) 100.0 139.7 174.9 173.0 176.6 185.8 1S4.5 184.6 Annual percentage changes in: Wholesale Price Index 7.7 20.2 25.2 - 1.1 2.1 5.2 3.2 0.1 6nlnk Credit to Goverment (net) 10.8 12.3 9.2 6.1 9.0 17.7 13.4 16.9 Rank Credit to Coercial Sector 19.4 22.6 18.4 21.5 20.3 13.5 16.6 14.4 */ The per capita CH estimate is at mrket prices, calculated by the conversion technique uned in the World Atlas. All other conversions to dollars in this table are at the svrage exchange rate provailing daring Ahe period covered. b/ Quick Setimates. S/ Computed from trend line of GNP at factor cost series, including one obervation before first year and one observation after lest year of listed period. d/ World lank estimates; not necessarily consistent with official National Account Statistics. e/ Transfers between Centre and States have been netted out. f/ All loans and advances to third parties have been netted out. jI External grants and loans, less principal repayments, as recorded in the Central Budget.  ANNEX I Page 5 of 5 BALANCE OF PAYMENTS 1975/76 1976/77 1977/78 1978/79 MERCHAANDISE EXPOILTS (AVERAGE 1975/76 - 1977/78) (US$ million) U0S$ KID. 7. Exports of Goods 4,672 5,753 6,276 6,800 Engineering Goods 610 11 Imports of Goods -6,449 -5,928 -7,237 -8,400 Tea 417 7 Trade Balance -1,777 - 175 - 961 -1,600 Gems 377 7 NFS (net) 310 360 650 700 Clothing 331 6 Leather and Leather Resource Balance -1.467 185 - 311 - 900 Producta 278 5 Jute Manufactures 267 5 Interest Payments (net) - 216 - 180 - 50 - Iron Ore 265 5 Other Factor Payments (list) - - - - Cotton Textiles 248 4 Net Transfers J/ 470 730 1,400 1,300 Sugar 244 4 Others 2,530 45 Balance on Current Account -1.213 735 1.039 400 Total 5.567 100 Official Aid Disbursements 2,341 1,953 1,628 1,805 EXTERNL DEBT. MARCH 31. 1978 k Amortization - 531 - 560 - 645 - 725 Us$ billion Transactions with IMF 242 - 337 - 330 - 158 Outstanding and Disbursed 14.8 All Other Items - 45 - 216 384 205 Undisbursed 4.3 Outstanding, including Increase in Reserves (-) - 794 -1,575 -2,076 -1,527 Undisbursed 19.1 Gross Reserves (end year) 2,172 3,747 5,823 7,350 h/l/ Net Reserves (end year) kI 1,365 3,276 5,668 7,350 DEBT SERVICE RATIO FMF 1977/78 15.0 percent Fuel and Related Materials IBRD/IDA LENDING. DECEMBER 31. 1978 Imports 1,417 1,581 1,817 1,980 US$ million of which: Petroleum 1,417 1,581 1,817 1,980 IBRD IDA Exports 43 37 33 n.a. Outstanding and Disbursed 613 3,864 of which: Petroleum 22 21 18 n.a. Undisbursed 615 1,992 oOutstanding, including Undisbursed 1,228 5,856 RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 - Rs 7.5 Rs 1,00 - US$o.133333 Mid-December 1971 to ecd-June 1972 US$1.00 - PA 7.27927 Rs 1.00 - uS$0.137376 After end-June 1972 Floating Rate Spot Rate end-December 1978 US$1.00 - Rs 8.188 US$1.00 - FLs 0.122 h/ Estimated. i/ Figures given cover all investment income (ne:). Major payments are interest on foreign loans and charges paid tc I2F, and major receipt is interest earned on foreign assets. j/ Figures given inclutde workers' remittances but: exclude official grant assistance, which is included within official aid disbursements. k/ Excludes net use of IMF credit. 1/ Amortization and initerest payments on foreign loans as a percentage of merchandise exports. m/ Excludes exchange aidjustment, but includes US$ 22 million due to third parties.  X~~~~~~~~~~ . . . . . . . . . S. 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