Conformed Copy - C2010 - Upper Krishna (Phase II Irrigation Project) - Project Agreement 2

Page 1 LOAN NUMBER 3050 IN CREDIT NUMBER 2010 IN Project Agreement (Upper Krishna (Phase II) Irrigation Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and STATE OF KARNATAKA Dated June 16, 1989 LOAN NUMBER 3050 IN CREDIT NUMBER 2010 IN PROJECT AGREEMENT AGREEMENT, dated June 16, 1989, among INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association), INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and STATE OF KARNATAKA, acting by its Governor (Karnataka). WHEREAS (A) by the Development Credit Agreement of even date herewith between India, acting by its President (the Borrower) and the Association (the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred nineteen million Special Drawing Rights (SDR 119,000,000) on the terms and condi- tions set forth in the Development Credit Agreement, but only on condition that Karnataka agrees to undertake such obligations towards the Association as are set forth in this Agreement; (B) by the Loan Agreement of even date herewith between the Borrower and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred sixty-five million dollars ($165,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Karnataka agree to undertake such obligations toward the Bank as are set forth in this Agreement; and (C) the Project will be carried out by Karnataka with the Borrower's assistance and, as part of such Page 2 assistance, the Borrower will make available to Karnataka the proceeds of the Credit as provided in the Development Credit Agreement and the proceeds of the Loan as provided in the Loan Agreement; and WHEREAS Karnataka, in consideration of the Association's entering into the Development Credit Agreement with the Borrower and the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined in the Loan Agreement and Development Credit Agreement, respectively) have the respective meanings therein set forth and wherever used in this Agreement (except in Section 6.03 hereof) reference to the Association, the Credit or the Credit Account shall also be deemed as a reference to the Bank, the Loan or the Loan Account, respectively. ARTICLE II Execution of the Project Section 2.01. (a) Karnataka declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, irrigation and resettlement and rehabilitation practices and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services, land and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and Karnataka shall otherwise agree, Karnataka shall carry out Part A of the Project in accordance with the Implementation Program set forth ln Schedule l to this Agreement and Part B of the Project in accordance with Schedule 2 to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.03. Karnataka shall carry out or cause to be carried out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions applicable to the Development Credit Agreement and Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions applicable to the Loan Agreement (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. (a) Karnataka shall, at the request of Page 3 the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement, and other matters relating to the purposes of the Credit. (b) Karnataka shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of Credit, or the performance by Karnataka of its obligations under this Agreement. ARTICLE III Financial Covenants Section 3.01. (a) Karnataka shall maintain records and accounts adequate to monitor and record the progress of the Project and reflect in accordance with sound accounting practices its operations and financial condition in respect of the Project. (b) Karnataka shall: (i) have its records and accounts for each financial year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than nine months after the end of each such year, (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors of such scope and in such detail as the Association shall have reasonably requested; and (c) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which both the Development Credit Agreement and the Loan Agreement become effective. Section 4.02. (a) This Agreement and all obligations of the Association and of Karnataka thereunder shall terminate on the earlier of the following two dates: (i) the date on which both the Development Credit Agreement and the Loan Agreement shall terminate in accordance with their respective terms; or (ii) the date 20 years after the date of this Agreement. (b) If the Development Credit Agreement or the Loan Agreement or both of said Agreements terminate in accordance with their respective terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify Karnataka of this event. Page 4 Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions applicable to the Development Credit Agreement or the Loan Agreement. ARTICLE V Miscellaneous Provisions Section 5.01. 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 Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For Karnataka: Secretary to the Government of Karnataka Department of Irrigation II Bangalore Karnataka, India Cable address: Telex: POWER 953-845239 Bangalore Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Karnataka may be taken or executed by a Secretary to the Government of Karnataka or such other person or persons as Karnataka shall designate in writing, and Karnataka shall furnish Page 5 to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. As long as the Bank has not given notice to the contrary to Karnataka and so long as the Development Credit Agreement shall not have terminated prior to the termination of the Loan Agreement: (a) the obligations of Karnataka to consult with, and to furnish information, documents, plans, reports, records and statements to, the Bank shall be satisfied to the extent performance in respect of such obligations is rendered to the Association; (b) the obligations of the Bank to consult with, and to furnish information to, Karnataka shall be satisfied to the extent such obligations are fulfilled by the Association; and (c) all actions taken (including the giving of approvals or granting of waivers) by the Association pursuant to the Development Credit Agreement shall be deemed to be taken pursuant to both the Development Credit Agreement and the Loan Agreement, and in the name and on behalf of both the Association and the Bank. Section 5.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 DEVELOPMENT ASSOCIATION INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Bilsel Alisbah Acting Regional Vice President Asia STATE OF KARNATAKA By /s/ Anil Kumar Authorized Representative SCHEDULE 1 Implementation Program for Part A of the Project Almatti and Narayanpur Reservoirs and Dams 1. Prior to undertaking any construction work on the Almatti dam under the Project, Karnataka shall ensure that such construction is needed to meet the design irrigation water demand for the irrigated areas likely to be commissioned in the three years following the commencement of any such construction. Page 6 2. Karnataka shall take necessary steps for the elimination of mosquito breeding and the introduction and spread of malaria in the Project Area including by ensuring that (i) the shores of the Almatti and Narayanpur reservoirs are maintained clean of debris and stagnant water pools; (ii) stagnant water pools in the command area that contain standing water are filled or drained; and (iii) at least three anti-malaria units are established and maintained with adequate staff and resources. Water Resources 3. Karnataka shall take necessary action to monitor ground water levels and water quality of surface and sub-surface water throughout the Project Area and provide drainage as necessary to prevent water logging and a rise of ground water tables and salinity levels in a manner that could endanger crops. 4. Karnataka shall, through its Irrigation Department and CADA take necessary steps to (i) establish water user groups in the command area at least one year in advance of actual construction activities; (ii) ensure adequate farmer participation in decisions concerning Project construction which directly affect them such as layouts of field channels and location of turnouts; and (iii) without limitation to the obligations of Karnataka pursuant to this Agreement regarding the operation and maintenance of Project facilities, train water user groups in the operation and maintenance of field channel systems and continue to entrust responsibility to such groups for such maintenance. Cost Recovery 5. Karnataka shall take necessary action to recover from water users the cost of operation and maintenance of irrigation facilities to full functionality through water charges from the date of commissioning of each irrigation system under the Project in a phased manner so as to ensure such recovery commencing the fourth year after such date. Rotational Irrigation Water Supply System 6. Karnataka shall ensure that irrigated water is distributed in areas irrigated under the Project on the basis of the rotational irrigation water supply system. Project Management 7. Karnataka shall confer on the Engineer-in-chief of Karnataka's Irrigation Department all powers necessary to enforce quality standards in project construction and operation. 8. Karnataka shall take steps to maintain a dam review panel with membership and terms of reference agreed with the Bank and shall ensure that the panel meets as often as such panel deems necessary. 9. (a) Karnataka shall ensure that a separate operation and maintenance unit, with adequate staff, resources, powers and responsibilities is maintained within its Irrigation Department under the Project. (b) Karnataka shall ensure that within one year after the commencement of the supply of water through irrigation facilities constructed under the Project, responsibility for such facilities is transferred from the construction wing of its Irrigation Department to the Page 7 operation and maintenance unit referred to in sub-paragraph (a) above. 10. Karnataka shall take necessary action to (i) provide an adequate number of extension workers and subject matter specialists in irrigation, water management and input output monitoring and coordination; (ii) complete establishment of agricultural research facilities at Bheemarayangudi and two research sub-stations in the Project Area (one for each major soil type) by June 30, 1991, with adequate staff and resources in each case; and (iii) establish a management information services cell for the Project by June 30, 1990 with adequate staff and resources. 11. Karnataka shall ensure that all relevant site engineers and executive engineers responsible for construction supervision under the Project are trained in contract administration. 12. Karnataka shall take necessary steps to protect the watershed of the immediate catchment areas of the reservoir within Karnataka from risks of soil erosion. Financing of On-Farm Development Work 13. In the event institutional credit is not available to farmers for on-farm development works under the Project, Karnataka shall make alternative arrangements for the financing of such works. SCHEDULE 2 Resettlement and Rehabilitation of Displaced Persons 1. (a) Karnataka shall undertake the resettlement and rehabilitation of displaced persons and displaced families in accordance with the provisions of this Agreement and the Development Credit Agreement including Part B of Schedule 2 to the Development Credit Agreement and such principles and guidelines as shall be agreed between the Association and Karnataka. (b) Karnataka shall take all necessary steps to carry out the resettlement and rehabilitation plan agreed with the Association (the R&R Plan). 2. The resettlement and rehabilitation of displaced persons and displaced families shall have the following main objectives: (a) to ensure that displaced persons, will improve or at least regain, within a reasonable time of transition, the standard of living they enjoyed prior to the commencement of the implementation of Phase I or the Project as the case may be; (b) to minimize the hardship of displaced persons in moving out of a familiar habitat and into a new place and way of living; and (c) to minimize adverse social, economic and environmental effects of resettlement upon the host areas and communities. 3. Karnataka shall continue to allocate funds required for Part B of the Project to CADA as a separate budgetary item. 4. Karnataka shall (i) ensure that the process of resettlement and rehabilitation shall be evaluated at Page 8 annual intervals beginning with the date of transfer of displaced persons to new sites, by an independent, qualified, non-governmental, rural development institution acceptable to the Association; and (ii) make available to the Association the results of such evaluation. 5. Karnataka shall extend to all villages in the command area its ongoing program for village woodlot development administered by its Department of Forests. 6. Displaced persons who have not been provided at least 1.5 ha of irrigated land or unirrigated land of equivalent potential under the Project whose acquired lands or some portion thereof are seasonally exposed due to the drawdown of reservoirs shall be granted long terms renewable leases for such lands. 7. (a) Karnataka shall make available and finance income-generating schemes to affected families through its line department and agencies. (b) Utilization of funds transferred to such line department and agencies pursuant to sub-paragraph (a) above shall be monitored semi-annually. 8. Karnataka shall establish by December 31, 1989 an appropriate grievance mechanism with terms of reference agreed with the Association to enable displaced persons to settle disputes relating to, and recover damages arising from, their resettlement in a prompt and effective manner. 9. Karnataka shall furnish to the Association by December 31, 1990 an action plan, acceptable to the Association, for the resettlement and rehabilitation of displaced families involuntarily resettled as a result of backwater effect in Bagalkot town. 10. Cash payments shall not be made in substitution of land or income-generating schemes under Part B of the Project. SCHEDULE 3 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part D hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A hereof, a margin of preference to domestic contractors may be granted in Page 9 accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Contracts for civil works estimated to cost less than the equivalent of $10,000,000 each up to an aggregate amount of $140,000,000 equivalent may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Goods and vehicles estimated to cost less than the equivalent of $200,000 per contract up to an aggregate amount of $4,000,000 equivalent may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. Part E: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract referred to in Part A of this Schedule, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that two conformed copies of the contract together with other information required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said procedures shall be modified to ensure that two conformed copies of the contract together with other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 3 of Schedule 4 to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Development Credit Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist Karnataka in carrying out the Project, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association shall be employed. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association 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. Page 10