Conformed Copy - C2365 - Second National Highway Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2365 IN (Second National Highway Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 18, 1992 CREDIT NUMBER 2365 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 18, 1992, between INDIA, acting by its President (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Borrower has also requested the International Bank for Reconstruction and Development (the Bank) to provide additional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (the Loan Agreement), the Bank is agreeing to provide such assistance in an aggregate principal amount equivalent to one hundred fifty-three million dollars ($153,000,000) (the Loan); (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Agreement (the Credit) be disbursed on account of expenditures in Page 2 respect of the Project before disbursements of the proceeds of the Loan provided for in the Loan Agreement are made; and (D) Part B of the Project will be carried out by State of Orissa (Orissa) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Orissa a portion of the proceeds of the Credit as provided in this Agreement and the proceeds of the Loan as provided in the Loan Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith among the Association, the Bank and Orissa; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Loan Agreement" means the agreement of even date herewith between the Borrower and the Bank for the Project, as such agreement may be amended from time to time; and such term includes the "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, as applied to such agreement, and all schedules and agreements supplemental to the Loan Agreement; (b) "Orissa" means State of Orissa, a state of India, acting by its Governor, and includes any successor thereto; (c) "Project Agreement" means the agreement among the Association, the Bank and Orissa of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (d) "Project States" means the States of Haryana, Madhya Pradesh, Maharashtra, Orissa, Punjab and West Bengal, and includes successors of any such State; and (e) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to one hundred sixteen million two hundred thousand Special Drawing Rights (SDR 116,200,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in US dollars a special deposit account in the Page 3 Reserve Bank of India on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be June 30, 2001 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restric- tions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on March 1 and September 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each March 1 and September 1 commencing September 1, 2002 and ending March 1, 2027. Each installment to and including the installment payable on March 1, 2012 shall be one and one-fourth percent (1-1/4%) of such principal amount, and each installment thereafter shall be two and one-half percent (2-1/2%) of such principal amount. (b) Whenever (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years, and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consider- ation by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Page 4 Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative and financial practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Part of the Project. (b) Without limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause Orissa to perform all its obligations set forth in the Project Agreement, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Orissa to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) For the purpose of carrying out Part B of the Project, the Borrower shall make part of the proceeds of the Credit available to Orissa in accordance with the Borrower's standard arrangements for developmental assistance to the States of India. Section 3.02. 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 3.03. The Borrower shall, for the purpose of implemen- tation of Part A of the Project, establish an agreed contract management framework, which shall include, inter alia, use of qualified consultants with international experience for supervision of construction of all civil works procured in accordance with the provisions of Part A.1 of Schedule 3 to this Agreement. Section 3.04. For the purpose of resettlement of families displaced from the land acquired for the purposes of Part A of the Project, the Borrower shall ensure that the Project States shall implement an agreed resettlement plan in a timely manner. Section 3.05. The Borrower shall ensure that in respect of import of equipment by contractors for civil works under the Project, no further indigenous clearance will be required after the essentiality certificate is issued by the Ministry of Surface Transport of the Borrower. Section 3.06. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Part B of the Project shall be carried out by Orissa pursuant to Section 2.03 of the Project Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and Page 5 expenditures in respect of Part A of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing princi- ples consistently applied, by independent audi- tors 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 copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Associ- ation has received the audit report for the fiscal year in which the last withdrawal from the Credit Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are includ- ed in the annual audit referred to in para- graph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expendi- ture submitted during such fiscal year, together with the procedures and internal controls in- volved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. The Borrower shall, not later than December 31, 1992, or such other date as the Borrower and the Association may agree, formulate in consultation with the Association, an action plan regarding the implementation of the recommendations arising from the Vehicle Fleet Modernization/Road User Charges Study carried out by the Borrower, and shall thereafter implement said action plan. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) Orissa shall have failed to perform any of its obliga- tions under the Project Agreement. Page 6 (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that Orissa will be able to perform its obligations under the Project Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely, that the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that all conditions precedent to the effective- ness of the Loan Agreement have been fulfilled, other than those related to the effectiveness of this Agreement. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the Project Agreement has been duly authorized or ratified by Orissa, and is legally binding upon Orissa in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary or Under Secretary in the Ministry of Finance, Department of Economic Affairs of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India Cable address: Telex: ECOFAIRS 953-3166175 New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) Page 7 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. INDIA By /s/ Lalit Mansingh Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ D. Joseph Wood Regional Vice President South Asia SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of the amounts of the Credit and of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount Amount of the of the Credit Loan % of Allocated Allocated Expendi- (Expressed (Expressed tures in SDR in Dollar to be Category Equivalent) Equivalent) Financed (1) Civil works 86,600,000 126,000,000 80% (2) Equipment 1,700,000 - 100% of foreign and furni- expenditures, ture 100% of local expenditures (ex-factory cost) and 75% of local ex- penditures for other items procured locally (3) Consultants' 16,300,000 11,700,000 100% services, fellowships and training (4) Unallocated 11,600,000 15,300,000 TOTAL 116,200,000 153,000,000 =========== =========== 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and Page 8 (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement. SCHEDULE 2 Description of the Project The objectives of the Project are to (i) modernize key sections of the national highway network, (ii) promote the use of improved road construction and engineering as well as network and contract management techniques, and (iii) assist Orissa in the reconstruction of flood damaged bridges. The Project consists of the following parts subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: The Borrower: (i) Road Modernization The carrying out of a program of road modernization of selected sections of the national highway network in the Project States. (ii) Management of Road Networks The carrying out of a program of monitoring and managing of road networks including provision of road monitoring equipment. (iii) Institutional Strengthening (a) Provision of training for professional and field staff in supervision of construction of roads, including the construction and furnishing of a training center in Delhi. (b) Provision of technical assistance to develop training programs, technical guidelines and manuals, and assistance in carrying out road modernization works under Part A (i) of the Project and studies under Part A (iv) of the Project. (iv) Studies The carrying out of studies to prepare a follow-up project including pre-investment studies and preparation of detailed engineering and bidding documents. Part B: Orissa The carrying out of a program of reconstruction of selected flood damaged bridges in Orissa. * * * The Project is expected to be completed by December 31, 2000. SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. 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 Page 9 "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Bidders for civil works to be procured pursuant to paragraph 1 above shall be prequalified as provided in paragraph 2.10 of the Guidelines. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 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.1 hereof, the Borrower may grant a margin of preference to domestic contractors in 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 Contracts for the construction of rail overpass and underpass bridges and the training center in Delhi, including its furnishing, estimated to cost the equivalent of $5,000,000 or less per contract, up to an aggregate amount equivalent to $36,600,000, and for reconstruction of bridges under Part B of the Project, may be procured 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 prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for equipment estimated to cost the equivalent of $500,000 or more, and for civil works referred to in Part A.2 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 the two conformed copies of the contract 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, such procedures shall be modified to ensure that the two conformed copies of the contract together with the 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 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Association has authorized withdrawals on the basis of statements of expenditure. 3. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Page 10 Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfac- tory to the Association. 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 Consul- tants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2) and (3) set forth in the table in paragraph 1 of Schedule 1 to the Development Credit Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit or the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to the Development Credit Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $11,000,000 to be withdrawn from the Credit Account or the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account or the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association re- quests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account or the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account or the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have Page 11 been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of the Development Credit Agreement or from the Loan Account in accordance with the provisions of Section 2.02 of the Loan Agreement and Article V of the General Conditions applicable thereto; or (b) once the total unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories for the Project, less the amount of any outstanding special commitment entered into by the Association or the Bank pursuant to Section 5.02 of the respective General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account and the Loan Account of the remaining unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories for the Project shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association or the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Associa- tion shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association or the Bank such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association or the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association or the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account or the Loan Account, as the case may be, for subsequent withdrawal or for cancellation in accordance with the relevant provisions of the Development Credit Agreement or the Loan Agreement, including the General Conditions applicable thereto. Page 12