India - Gujarat Agricultural Credit Project : Credit 0191 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 191 IN Project Agreement (Gujarat Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND GUJARAT STATE COOPERATIVE LAND DEVELOPMENT BANK LTD. DATED JUNE 3, 1970 CONFORMED COPY CREDIT NUMBER 191 IN Project Agreement (Gujarat Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND GUJARAT STATE COOPERATIVE LAND DEVELOPMENT BANK LTD. DATED JUNE 3, 1970 0 PROJECT AGREEMENT AGREEMENT, dated June 3, 1970, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) of the one part and AGRICULTURAL REFINANCE CORPORATION (hereinafter called ARC) and GUJARAT STATE COOPERATIVE LAND DEVELOPMENT BANK LTD. (hereinafter called LDB) of the other part. WHEREAS (A) by an agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, which agreement, the Schedules thereto and the General Conditions Applicable to Development Credit Agreements of the Association dated January 31, 1969, made applicable thereto are hereinafter called the Development Credit Agreement, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to thirty-five million dollars ($35,000,000), on the terms and conditions set. forth in the Development Credit Agreement; (B) by an agreement of even date herewith between the Association and the State of Gujarat, the State of Gujarat has agreed to undertake certain obligations in respect of the carrying out of the Project; (C) the Association has agreed to the foregoing only on condition inter alia that ARC and LDB agree to undertake certain obligations to the Association as hereinafter provided; and WHEREAS ARC and LDB, in consideration of the Association's entering into the Development Credit 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 Development Credit Agreement shall have the respective meanings therein set forth. 0 4 ARTICLE II Particular Covenants of ARC and LDB Section 2.01. ARC and LDB shall carry out Parts 1, 11 and III of the Project with due diligence and efficiency and in conformity with sound administrative, agricultural and financial practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. (a) ARC and LDB shall enter into a Subsidiary Loan Agreement with the Borrower on terms and conditions (including inter alia those set forth in Schedule 4 to the Development Credit Agreement) satisfactory to the Borrower and the Association. ARC and LDB shall exercise their rights in relation to the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association. Except as the Association shall otherwise agree, ARC and LDB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of the Subsidiary Loan Agreement. (b) The operating policies and procedures for the carrying out of Parts 1, II and III of the Project shall be as set forth in Schedule I to this Agreement and as the same may be amended from time to time by agreement between the Association, Gujarat, ARC and LDB. (c) LDB shall follow lending terms, criteria and procedures uniform to those set forth in Schedule I to this Agreement with respect to its lending activities similar to those under the Project. With respect to its other lending activities, LDB shall follow lending terms, criteria and procedures consistent with those set forth in said Schedule 1. Section 2.03. (a) LDB will arrange for tubewell drilling under the Project and will ensure that drilling contractors who are entrusted with the installation of tubewells under the Project are equipped with adequate numbers of drilling rigs suitable for efficient operations. LDB will ascertain the number of tubewells proposed to be installed in different blocks of the Project area, and invite bids from contractors for the installation of such numbers of tubewells in defined areas and within specific periods of time. LDB would select for each number of tubewells the contractor who offered the most favorable terms with satisfactory assurances as to equipment to be used. LDB would draw up the terms of individual contracts to be entered into between individual farmers (or groups of farmers) and the contractor. The contract terms would stipulate that each individual installation 5 would be part of the indicated number of tubewells to be installed in the defined areas within the specified time periods. To the extent practical, all individual contracts resulting from each bidding operation would be signed at the same time. Contracts would include suitable penalty clauses in case of default by the contractor. If requested, LDB will assist contractors in obtaining drilling rigs, and/or provide financing for such rigs. (b) LDB will send to the Association for its prior approval: the form of the notice to be used in calling for bids for tubewell installation, before the first such call; its analysis of the bids and its recommendations for awards before the first and all subsequent awards are made; and the form of the individual contracts to be signed between farmers and contractors before the first such contracts are signed. (c) LDB will send to the Association for its review and comment all subsequent notices used in calling for bids and specimen contracts under each number of tubewells awarded to contractors. Section 2.04. ARC and LDB shall (i) establish separate accounts in respect of all funds disbursed and received on account of the Project, (ii) have such accounts audited annually by an independent auditor acceptable to the Association, and (iii) promptly after the preparation of the audit, and not later than four months after the close of their financial year, respectively, transmit to the Association certified copies of such audited accounts and a signed copy of the auditor's report. Section 2.05. LDB shall not, without the prior approval of the Association to be given on the basis of the results of the study referred to in Section 2.01 (b) (i) of the Gujarat Agreement, grant loans (i) for more than a total of four hundred (400) deep tubewells, and (ii) for tubewells or tubewell installations in the Kaira District. Section 2.06. ARC and LDB shall maintain or cause to be maintained records adequate to identify the goods and services financed out of the proceeds of the Subsidiary Loan Agreement, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to show the results achieved by the Project; shall enable the Association's representatives to inspect such goods and any relevant records and documents; and shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the expenditure of the proceeds of the Subsidiary Loan Agreement, the Project, such goods and services, and the operations, administ,ation and financial condition of ARC and LDB. 6 Section 2.07. (a) ARC, LDB and the Association shall cooperate fully to assure that the purposes of The Credit will be accomplished. To that end, ARC, LDB and the Association shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Credit, the Project and to the performance by ARC and LDB of their obligations under this Agreement and the Subsidiary Loan Agreement. (b) ARC and LDB shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit or the performance by ARC and LDB of their obligations tinder this Agreement or the Subsidiary Loan Agreement. Section 2.08. ARC and LDB shall at all times charge interest on all of their loans at rates sufficient to enable ARC and LDB, respectively, to: (a) cover all operating expenditures and charges including taxes (if any) and interest payments on borrowings; (b) maintain adequate provisions for bad and doubtful debts; and (c) maintain adequate general reserves. ARTICLE III Effective Date; Termination Section 3.01. This Project Agreement shall enter into force and effect on the Effective Date. If the Development Credit Agreement shall terminate pursuant to Section 10.04 of the General Conditions, the Association shall promptly notify ARC and LDB of this event and, upon the giving of such notice, this Project Agreement and all obligations of the parties hereunder shall forthwith terminate. Section 3.02. This Project Agreement shall terminate and all obligations of the Association, ARC and LDB hereunder shall cease and determine on the date on which the Development Credit Agreement terminates, or on the date when all principal withdrawn by LDB under the Subsidiary Loan Agreement prior to the Closing Date and interest thereon shall have been repaid by LDB to ARC, whichever is the earlier. ARTICLE IV Miscellaneous Provisions Section 4.01. No delay in exercising, or omission to exercise, any right, power, or remedy accruing to either party under this Project Agreement upon any default shall impair any such right, power or remedy or be construed to be a 7 waiver thereof or an acquiescence in such default; nor shall the action of such party in respect of any default or any acquiescence in any default, affect or impair any right, power or remedy of such party in respect of any other or subsequent default. Section 4.02. Any notice, demand 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 or radiogram to the party to which it is required or permitted to be given or made at its 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 demand or 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 Alternative address for cables: Indevas Washington, D.C. For ARC: Managing Director Agricultural Refinance Corporation Garment House Dr. Annie Besant Road Worli, Bombay, 18 WB India 8 Alternative address for cables: Agricultural Refinance Corporation Garment House Bombay For LDB: Managing Director Gujarat State Cooperative Land Development Bank Ltd. 489 Ashram Road Ahmedabad 9, Gujarat India Alternative address for cables: Kheti Bank Ahmedabad Gujarat Section 4.03. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of (i) ARC may be taken or executed by its Managing Director or such other person or persons as he shall designate in writing; (ii) LDB may be taken or executed by its Managing Director or such other person or persons as he shall designate in writing. Section 4.04. ARC and LDB shall furnisl to the Association sufficient evidence of the authority of the person or persons who will, on behalf of ARC and LDB, take any action or execute any documents required or permitted to be taken or executed by ARC and LDB pursuant to any of the provisions of this Agreement and the authenticated specimen signature of each such person. Section 4.05. 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 representatives thereunto duly authorized, have caused this Agreement to be signed 9 in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / J. Burke Knapp Vice President AGRICULTURAL REFINANCE CORPORATION By /s/ Maharajakrishna Rasgotra Authorized Representative GUJARAT STATE COOPERATIVE LAND DEVELOPMENT BANK LTD. By /s / Maharajakrishna Rasgotra Authorized Representative 10 SCHEDULE 1 Operating Policies and Procedures 1. Technical Feasibility of Minor Irrigation Investments: To help assure technical feasibility of minor irrigation investments, deep tubewell projects should have the approval of the State Groundwater Directorate, and lift irrigation projects, the approval of the State Irrigation Department; both of these agencies should approve, among other things, the design of the irrigation improvement as technically feasible. 2. Financial Feasibility of Farm Ivestments: To help assure financial feasibility of individual farm investments: (a) All investments would be evaluated in terms of the incremental returns from the additional investment, with investments in tubewells, lift irrigation, and farm mechanization evaluated on a case by case basis. ARC would prescribe the method of evaluation. (b) Loans for tractor purchase would be granted to a farmer or groups of farmers cultivating at least 40 ha of irrigated land, unless the tractor can be used for farm custom work to make the investment financially feasible. In no case would a tractor loan be made to a farmer or a group of farmers owning less than 15 ha of land. (c) Tractor borrowers would be required to buy post-warranty service on their tractors for the life of the tractor loan. 3. Lending Terms from LDB to Farmers/Contractors: (a) Loan Size: All loans should be for no more than 80% of investment, except loans for tractor purchase which should be for no more than 75% of the cost of the tractor to the Borrower. (b) Interest Rate: 9% per annum on all loans. (c) Loan Maturity: The maturity of loans would in no case exceed the useful life of the asset to be financed and should take the repayment capacity of borrowers into consideration. Specifically, under the Project loans for (i) farm mechanization shall be for a period not exceeding 7 years; (ii) minor irrigation facilities for a period not exceeding 9 years; and (iii) drilling rigs for a period not exceeding 9 years.