India - Dudhichua Coal Project : Loan 2393 - Project Agreement - Conformed

L OFFICIAL LOAN NUMBER 2393 IN DOCUMENTS Project Agreement (Dudhichua Coal Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and COAL INDIA LIMITED and CENTRAL COALFIELDS LIMITED Dated , 1984 LOAN NUMBER 2393 IN PROJECT AGREEMENT AGREEMENT, dated , 1984, between INTERNATIONAL BANK FOR RECONS AND DEVELOPMENT (herein- after called the Bank) and COAL INDIA LIMITED (hereinirter called Coal India) and CENTRAL COALFIELDS LIMITED (hereinafter called Central Coalfields). WHEREAS (A) by the Loan Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred fifty-one million dollars ($151,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Coal India and Central Coalfields agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and Coal India, the proceeds of the Loan provided for under the Loan Agreement will be made available to Coal India on the terms and conditions therein set forth; (C) by a financial arrangement to be made between Coal India and Central Coalfields, the proceeds of the Loan relent by the Borrower to Coal India will be made available by Coal India to Central Coalfields on the terms and conditions therein set forth; and WHEREAS Coal India and Central Coalfields, in consideration of the Bank's entering into the Loan Agreement with the Borrower, have agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. -2- ARTICLE II Execution of the Project Section 2.01. (a) Coal India and Central Coalfields declare their commitment to the objective of the Project as set forth in Schedule 2 to the Loan Agreement, and to this end, Central Coalfields shall carry out Parts A and B of the Project and Coal India shall carry out Part C of the Project, with due diligence and efficiency and in conformity with appropriate administrative and financial practices. (b) Without any lititation or restriction upon any of its other obligations under this Agreement, Coal India shall cause Central Coalfields to perform in accordance with the provisions of this Agreement all its obligations herein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Central Coalfields to perform such obliga- tions, and shall not take or permit to be taken any action which would prevent or interfere with such performance by Central Coalfields. Section 2.02. For purposes of carrying out Part A of the Project, Coal India shall make available the proceeds of the Loan relent to it by the Borrower to Central Coalfields under a financial arrangement to be made between Coal India and Central Coalfields under terms and conditions which shall be identical to those on which the Borrower shall have relent the proceeds of the Loan to Coal India. Section 2.03. In order to assist Central Coalfields in carrying out Parts A (iii) and (iv) of the Project, Central Coalfields shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 2.04. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. -3- Section 2.05. (a) Central Coalfields undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by Coal India against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by Central Coalfields to replace or repair such goods. (b) Central Coalfields shall cause all goods and services financed out of the proceeds of the Loan relent to it by Coal India to be used exclusively for the purposes of the Project. Section 2.06. (a) Central Coalfields shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Part A of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) Central Coalfields shall: (i) maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the pro- ceeds of the Loan relent to it by Coal India and the goods and services financed out of such proceeds, including, without limitation to the foregoing periodic progress reports on the execution of the Project. (c) Upon the award by Central Coalfields of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such -4- later date as may be agreed for this purpose between Central Coalfields and the Bank, Central Coalfields shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by Central Coalfields and the Bank of their respective obligations under the Project Agree- ment and the accomplishment of the purposes of the Loan. (e) Central Coalfields shall enable the Bank's representa- tives to examine all plants, installations, sites, works, build- ings, property and equipment and any records and documents of Central Coalfields related to the performance of Central Coal- field's obligations under this Agreement. Section 2.07. Coal India shall duly perform its obligations under the Subsidiary Loan Agreement, and, except as the Bank shall otherwise agree, Coal India shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provi- sion thereof. Section 2.08. (a) Coal India and Central Coalfields shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of their respective obligations under this Agreement, under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) Coal India and Central Coalfields shall promptly inform the Bank of any condition which interferes or threatens to inter- fere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by Coal India and Central Coalfields of their respective obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.09. Coal India and Central Coalfields shall take all measures necessary to ensure that the design, construction and operation of the Project is carried out with due regard to ecological, environmental and safety standards satisfactory to the Bank. Section 2.10. Central Coalfields shall, not later than September 30, 1984, formulate and furnish to the Bank, a schedule to meet the needs of the Project for the provision of housing and service facilities under Part B (i) of the Project, and, there- after, carry out said Part of the Project in accordance with such schedule. Section 2.11. Central Coalfields shall on January 1 of each year, commencing January 1, 1985, furnish to the Bank a report regarding the training activities undertaken under Part B (ii) of the Proj ct during the prior calendar year. Section 2.12. Central Coalfields shall ensure that the organizational structure, functions, staffing, funds, powers and responsibilities of its Dudhichua Project Management Unit shall be such as shall be necessary for timely and efficient implemen- tation of the Project. Section 2.13. Central Coalfields shall take all such action as shall be necessary to acquire, as and when needed all such land and rights in respect of land as shall be required for the construction and operation of the facilities under Part A of the Project, and shall, upon request, furnish to the Bank evidence satisfactory to the Bank that such land and rights in respect of land are available for such purposes. Section 2.14. (a) Central Coalfields shall, by June 30, 1985, complete the study referred to in Part A (iii) (a) of the Project, and shall exchange views with the Bank on the findings of said study; and (b) Central Coalfields shall: (i) complete, by June 30, 1985, the study referred to in Part A (iii) (b) of the Project, (ii) after processing the report and reviewing the recommenda- tions of the study, exchange views with the Bank on the findings of the study, and (iii) take appropriate actions to implement the recommendations arising from said study. Section 2.15. Central Coalfields shall, (i) by June 30, 1984, complete the preparation of an implementation manual for the Project, (ii) exchange views with the Bank on the draft manual as prepared, and (iii) by September 30, 1984 adopt said manual for the purposes of implementation of the Project. Section 2.16. Coal India undertakes to, (i) complete, by June 30, 1985, the study referred to in Part C of the Project, (ii) after processing the report and reviewing the recommenda- tions of the study, exchange views with the Bank on the findings -6- of the study, and (iii) take appropriate actions to implement the recommendations arising from said study. ARTICLE III Management and Operations of Coal India and Central Coalfields Section 3.01. Coal India and Central Coalfields shall carry on their operations and conduct their affairs in accordance with sound administrative, financial and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. Coal India and Central Coalfields shall at all times operate and maintain their plant, machinery, equipment and other property, and, promptly as needed, make all necessary repairs and renewals thereof, all ii accordance with sound engineering and financial practices. Section 3.03. Coal India and Central Coalfields shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. (a) Coal India and Central Coalfields shall at all times take all steps necessary to maintain its corporate existence and the right to carry on its operations, and shall take all steps necessary to acquire and to retain such land, interests in land and properties, and to acquire, maintain and renew such powers, privileges, licenses, franchises or other rights as may be necessary, or useful for the conduct of its business and the execution and operation of such Part(s) of the Project whose execution, is their responsibility. (b) Except as the Bank shall otherwise agree, Central Coalfields shall not sell, lease, transfer or otherwise dispose of any of their property or assets required for the efficient operation of its business and undertaking. Section 3.05. For the purpose of efficient and reliable operation of the Dudhichua Mine, Central Coalfields shall enter into arrangements with appropriate agencies and authorities for the provision of adequate supplies of electrical power and - 7 - potable water to ensure the timely availability in sufficient quantity for full utilization of the facilities to be constructed under the Project. ARTICLE IV Financial Covenants Section 4.01. Coal India and Central Coalfields shall main- tain records adequate to reflect in accordance with consistently maintained appropriate accounting practices their operations and financial condition. Section 4.02. Coal India and Central Coalfields shall: (a) have their accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than nine months after the end of each such year: (i) certified copies of their financial statements for such year as so audited; and (ii) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested; and (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.03. (a) Coal India shall take all steps necessary, within its powers, to ensure that at all times its consolidated internal cash generation for each year shall be at least 1.3 times the consolidated debt service requirements of its con- solidated debt for that year. (b) Except as the Bank shall otherwise agree, Coal India shall, and shall cause the Subsidiaries to: (i) not incur any debt, if after the incurrence of such debt, the aggregate principal amount of the - 8 - consolidated debt then incurred and outstanding would be greater than 1.5 times the consolidated equity; and (ii) maintain, at all times, a ratio of consolidated current assets to consolidated current liabilities of not less than 1.2 times; (c) For the purposes of this Section: (i) The term "debt" means any indebtedness of Coal India and the Subsidiaries (excluding indebtedness between Coal India and the Subsidiaries and between each of the Subsidiaries) maturing by its terms more than one year after the date on which it is originally incurred, and the term "consoli- dated debt" means the aggregate of the total debt, as defined herein, of Coal India and the Subsidia- ries; (ii) Debt shall be deemed to be incurred under: (A) a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become out- standing pursuant to such contract, agreement or instrument; and (B) a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt shall be outstanding. (iii) The term "consolidated equity" means the aggregate amount of the total unimpaired paid-up capital, retained earnings and reserves not allocated to cover specific liabilities of Coal India and the Subsidiaries. (iv) The term "current assets" means cash, accounts receivable due within twelve months, marketable securities, pre-paid expenses properly chargeable to operating expenses within the next twelve months following the date in which such pre-paid expenses were made, and all other assets which could, in the ordinary course of business, be con- verted into cash within twelve months, and the - 9 - term "consolidated current assets" means the aggregate of the total current assets, as defined herein, of Coal India and the Subsidiaries. (v) The term "current liabilities" means accounts pay- able within twelve months, income taxes, dividends, bonuses and all other liabilities (in- cluding debt) which, pursuant to their terms, will become due and payable or could under circum- stances then existing be called for payment within twelve months, and the term "consolidated current liabilities" means the aggregate of the total current liabilities, as defined herein, of Coal India and the Subsidiaries. (vi) The term "Consolidated internal cash generation" means the aggregate amount of the gross revenues of Coal India and the Subsidiaries from all sources, less the aggregate amount of the operat- ing expenses of Coal India and the Subsidiaries, including expenses accountable to administration, maintenance and taxes (or payments in lieu of taxes), but before provision for depreciation of assets and interest and other charges on debt. ? > The term "debt service requirement" means the -tcegaLe amount of amortization (11aluding sink- ILig fund payments, if any) of, and interest and other charges on, debt, and the term "consolidated debt service requirement" means the aggregate of the total debt service requirement, as defined herein, of Coal India and the Subsidiaries. (viii) Whenever for the purposes of this Section it shall be necessary to value, in terms of currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the pre- vailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, with absence of such rpte, on the basis of a rate of exchange acceptable to the Bank. - 10 - ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of Coal India and Central Coalfields thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify Coal India and Central Coalfields thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. - 11 - For Coal India: Coal India Limited 10 Netaji Subhas Road Calcutta - 700001 India Cable Address: COAL INDIA Calcutta For Central Coalfields: Central Coalfields Limited Darbhanga House Ranchi Bihar, India Cable Address: COALFIELDS Ranchi, India Section 6.02. (a) Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Coal India may be taken or executed by its Chairman-cum-Managing Director or such other person or persons as Coal India shall designate in writing, and Coal India shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. (b) Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agree- ment on behalf of Central Coalfields may be taken or executed by its Chairman-cum-Managing Director or such other person or persons as Central Coalfields shall designate in writing, and Central Coalfields shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. - 12 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By #C-rlVq Regional Vice President South Asia COAL INDIA LIMITED By Authorized Representative CENTRAL COALFIELDS LIMITED By Authorized Representative - 13 - SCHEDULE Procurement A. International Competitive Bidding 1. Goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, Central Coalfields shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. Central Coalfields shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port-of-entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. - 14 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which would be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or - 15 - (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which, as a result of the comparison under paragraph 3 is the lowest evaluated bid, shall be selected. C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to the first ten contracts, and, thereafter, with respect to all contracts estimated to cost the equivalent of $5,000,000 or more: (a) Before bids are invited, Central Coalfields shall furnish to the Bank, for its comments, the text of the invita- tions to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to t,e prospective bidders. (b) After bids have been received and evaluated, Central Coalfields shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it deter- mines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform Central Coalfields and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. - 16 - 2. With respect to each contract not governed by the preceding paragraph, Central Coalfields shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform Central Coalfields and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, Central Coalfields shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform Central Coalfields and state the reasons for its determination. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this J day of,/(a-, 1984. FOR SECRETARY