Conformed Copy - TF025404 - DSM Planning in State Power Sector Restructuring Projects - Japanese Grant Agreement 2

Page 1 July 23, 1998 The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India Re: Japanese Grant for DSM Planning in State Power Sector Restructuring Projects Grant Number TF 029705 Dear Sir/Madam: I am writing on behalf of the International Bank for Reconstruction and Development (the Bank) to indicate the Bank's agreement, as administrator of grant funds provided by Japan, to make a grant in an amount not exceeding four hundred thousand United States dollars ($400,000) (the Grant) to India (the Recipient). The Grant is made in response to the Recipient's request for financial assistance and for the purposes and on the terms and conditions set forth in the Annex to this Letter Agreement. The Recipient represents, by confirming its agreement below, that it is authorized to contract and withdraw the Grant for the said purposes and on the said terms and conditions. Please confirm your agreement with the foregoing, on behalf of the Recipient, by signing, dating, and returning to us the enclosed copy of this Letter Agreement. Upon receipt by the Bank of the copy of this Letter Agreement countersigned by you, this Letter Agreement will become effective as of the date of the countersignature. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Edwin R. Lim Country Director India AGREED: INDIA By /s/ Jitesh Khosla Authorized Representative Date: September 18, 1998 ANNEX Purposes, Terms, and Conditions of the Grant 1. Purposes and Activities 1.1. The purpose of the Grant is to assist in the preparation of the Demand Side Management components of the power sector reform projects in Rajasthan, Haryana, Andhra Pradesh, Karnataka, Uttar Pradesh, Punjab, Delhi and such other states as the Bank may agree (the Project States), which has as main objectives: (a) the preparation of programs of structural, institutional, regulatory, tariff and financial reforms to commercialize and develop autonomy in the state power generation, transmission and distribution activities; and (b) the implementation of priority investment programs, including Demand Side Management (DSM), to improve the efficiency of the state power systems (the Projects). The activities (the Activities) for which the Grant is given Page 2 are as follows: (i) carrying out pre-investment studies in identified sectors with a view to preparing technically and financially viable DSM projects; (ii) developing a pipeline of DSM subprojects for consideration under the reform programs in the Project States through carrying out feasibility studies among various end-use sectors such as industrial, commercial, agricultural and others; (iii) developing the capacity of State Electricity Boards of Project States to design and execute DSM projects and conduct load research; and (iv) establishing monitoring and verification protocols to track the implementation and energy savings results of DSM projects. 2. Implementation Generally 2.1. The Recipient shall: (a) carry out the Activities with due diligence and efficiency; (b) promptly provide the funds, facilities, services and other resources required for that purpose; (c) furnish all information covering the Activities and the use of the proceeds of the Grant as the Bank shall reasonably request; (d) from time to time exchange views with the Bank's representatives on the progress and results of the Activities; and (e) take all necessary measures required to enable the Bank to visit the territory of India for purposes related to the Grant. Without limitation on the foregoing, the Recipient shall, if the Bank shall so request, prepare and furnish to the Bank promptly upon completion of the Activities a report, in form and substance satisfactory to the Bank, on the results and impact of the Activities. 2.2. The Recipient shall enter into appropriate arrangements with the Project States for purposes of enabling them to implement the Activities in accordance with the provisions of this Letter Agreement. The Recipient shall cause the Project States to carry out the Activities in accordance with such arrangements. The Recipient shall make the proceeds of the grant available to the Project States in accordance with the Recipient