India - Calcutta Urban Development Project

- CIRCULATING COPY TO BE RETURNED TO REPORTS DESK DOCUIENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION -Not For Public Use Report No. P-1302-IN REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A -PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE CALCUTTA URBAN DEVELOPMENT PROJECT August 1, 1973 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS (As at July 13,1973) US$ 1.00 Rs 7.46 Rs 1.00 US$ 0.13 Rs 1 million 2 US$ 134,000 The Rupee is officially valued at a fixed Pound Sterling rate. As the Pound is now floating relative to the US Dollar, the US Dollar/Rupee exchange rate is subject to change. Conversions in the appraisal report and in this report have been retained at US$ 1 = Rs 7.A which was the rate prevailing at the timne of appraisal. FISCAL YEAR April 1 - March 31  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE CALCUTTA URBAN DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to India for the equivalent of US$35 million on standard IDA terms to help finance a project in support of the 1973-76 phase of the Cal-cu'tta Metrop6itan Dev0lo'mntuiAutho6rity'progroam fo'i rrehabiliEtaion and improvement of basic urban facilities in the Calcutta Metropolitan District. The Government of India would lend the proceeds of the credit to the Govern- ment of West Bengal for 10 years at 5 percent interest per annum. The Government of West Bengal would relend these funds to the Calcutta Metro- politan Development Authority on the same terms. PART I - THE ECONOMY 2. An economic report, "Economic Situation and Prospects of India" (156-IN, dated May 8, 1973), was distributed to the Executive Directors on May 2h, 1973 (R73-113). A country data sheet is attached as Annex I. 3. The performance of the Indian economy since the inception of economic development planning in 1950/51 can best be described as mixed. Progress has been impressive on many fronts but disappointing on others: the growth of the socio-economic infrastructure (transport, education, health services, etc.) has been spectacular, but has often been achieved at high cost and has yielded results of variable quality; many industrial and agricultural investment schemes have been highly successful, but others have taken excessively long to be completed and have operated well below full capacity; in some parts of the country there have been periods of rapid growth and change, but in others there has been stagnation and possibly even decline. 4. The average rate of growth of national income has only been about 3 percent per annum and with population growing at an average rate of about 2.2 percent per annum, gains in per capita income have averaged somewhat less than 1 percent per annum. Although the distribution of income in India is relatively even by comparison with many other countries, such a low rate of economic growth has meant there has been little, if any, increase in the living standards of the vast masses of the urban and rural population. The Government has become increasingly concerned about the plight of the lower income strata which, conservatively measured, consist of some 200 million people with less than US$60 per head per year, and in its pre- liminary proposals for the Fifth Five-Year Plan (197h/75-1978/79) is plan- ning to intensify its efforts to alleviate their poverty.  -2- 5. The structure of the economy has also been slow to change. Agricult ure remains the dominant sector, accounting for some 42 percent of national product in the early 1970s compared wi-th around 49 percent twenty years previously. Despite the emphasis accorded to the industrial 0e0torl particularly in the period commencing in the mid-1950s, the share of output contributed by the sector has 4ncreased only marginally over the period, and since tihe late 1960a has remained approximately constant at a level of 23 percent. The principal change bas been the increased contribution of the tertiary sector from some 27 percent in 1951 to 3L. percent in 1971. 6. Undoubtedly India's most impressive achievement has been the doubling of t1he average growth rate of productivity in foodgrain production, But it is proving difficult to maintain the momentumn of this performance, as evidenced by the drought-induced decline in production in 1972. Hence, much remains to be done to consolidate the production growth in the wheat belt and to extend it both to other areas and to other foodgrain crops, most particularly rice. Other crops have, in most cases, shown a slow but fairly constant rate of productivity increase. Irrigation has played a major part in agricultural growth in recent years and:, by reducing de- pendence on the monsoon, has reduced variability in performance. At present only about helf the potentially irrigable area has been developed. Fuller utilization of th3e existing irrigation system and thie extension of the irri- gated area are therefore matters of the highest priority in order to meet India's rising food needs and to protect the econonw against the vagaries of the weather. La-nd wbich cannot be irrigated accounts for about '0 percent of the cultivable area, and outplut from non-irrigated land will trus remrain important and substantial beaefits remain to be realized through technical change and investment. 7. Performance of the industrial sector has been variable and, given the emphasis placed on industrialization, disappointiing. Industrial growth averaged about 7 percent a year in the 1950S., rose to 9 percent in the first half of the 1960s, and then declined to around 3 percent through the early 1970s. Tne stagnation of recent years is especially worrying. To a large extent it was precipitated by the severe drouight of 1966 and 1967 and the accompanying general recession. But it has also been th,e result of marry other factors. the relatively limitea opportunities for further import substitut'ion wThich had from the outset been at the centre of the industrialization strategy; the recurring bottlenecks in the pro- duction of a num.ber of key intermediate goods such as steel and cement; shortages of imported raw materials; and cumbersome administrative pro- cedures. The improvement in output which occurred :in 1972, combined with recent measures to simplify administrative controls, should lead to better realization of India's industrial capacity and a higher rate of reinvestment. 8. Domestic savings have fluctuated in the region of 8-10 percent of net domestic product for the past decade. This has been far short of Indials resource needs and, even with substantial flows of external assist- ance, has not permitted the investment rate to rise above 13 percent except in a few years. More recently, as a result of the recession and a decline im foreign assistance, the investment rate has been only about 9-11 percent.  -3- In particular there has been a deterioration in the savings performance of the public sector, largely due to a sharp fall in the Central Govern- ment's current account savings despite a near doubling of tax revenues in the 1960s. A disturbing feature of the budgetary situation has been the expansion o! t L States' expenditures far in excess of the growth of their own revenues. The Central Government has had to meet the resulting deficits through budget transfers. This, combined with several other factors (the military events and refugee relief of 1971 and 1972, and a sharp drop in net foreign aid in 1972), has forced a massive rise in total deficit financing. The inflationary consequences of this and those arising from the food and other commodity shortages have been serious, with wbolesale prices currently rising at an annual rate of nearly 20 percent. The budget for 1973/74 introduced measures to help curb inflation while the Reserve Bank of India has also been intervening to control the expansion of money supply. 9. Ever since the balance of payments crisis of 1956/57, a shortage of foreign exchange has constituted one of the most critical constraints to the development of the economy. This has manifested itself in various ways. The authorities have necessarily acted with extreme caution in their foreign exchange management and have been left with little flexibility or margin to accommodate special and emergency needs. The exchange control and also, in large part, the import and industrial licensing procedures have thus been the result of the acute foreign exchange situation. Even though the external sector is small in relation to the national economy, the continuing shortage of foreign exchange together with these controls have retarded and distorted investment and the rate of utilization of existing capacity. This is most clearly seen in the stagnation of non- food imports: for instance, despite expansion of the economy at some 3 percent per annum, even at current prices the present level of non-food imports is approximately the same as that of the early 1960s, and there has been a continuing shortage of imported raw materials, spares, and components. While exports have expanded reasonably steadily, they have never achieved a sustained growth sufficient to make an appreciable effect on the foreign exchange problem. Traditional items such as jute, tea, cashew, and textiles, which are all beset with supply difficulties at home and highly competitive or shrinking markets abroad, still constitute the most important component of exports. And despite a rapid expansion in the 1960s, non-traditional items such as engineering goods and chemicals still form only a small share of total exports. 10. External assistance has played an important role in supplementing India's domestic resources for development, especially from the late 1950s to the end of the 1960s. But, with rising debt servJce payments and more recently a decline in gross aid, the importance of net aid has diminished, both as a supplement to domestic investment and as a means of financing imports. Nevertheless, aid remains important and there are now encouraging signs that net aid may rise somewhat in the future above its currently extremely low level.  11. As a result of substantial past borrowings, India's external public debt stood at US$8.5 billion on March 31, 1972 and in the year ending March 31, 1972 the debt service ratio was 29 percent. Annual debt service payments are currently running at a level of around US$725 million. This compares with a level of about US$200 million in the mid-1960s. In order to mitigate the negative effects on growth of such a high burden of external debt and to forestall any danger of a foreign exchange crisis, the India Consortium from 1968/69 onwards has extended debt relief to India. In addition, starting in the mid-1960s there has been a marked softening in the financial terms of official assistance offered by several major creditors, and also a shift towards program rather than project aid in order to help meet Indiats more urgent import requirements. 12. The Government is at present preparing the detailed sectoral programs to be implemented in the Fifth Plan. It is also re-examining the overall 'nternal and external resources position as well as devising the appropriate policies to achieve the Plan objectives. A first draft of the complete Plan is expected to be completed later this year, with the final document being published in March 1974. PART II - IBNK GROUP OPERATIONS IN INDIA 13. Since 19h9, the Bank Group has made 41 loans and 55 development credits to India totalling US$1,179 million and US$'2,413- million (both net of cancellations), respectively. Of these amounts US$580 million has been repaid and US$1,114 million is still undisbursed. Annex II contains a summary statement of Bank loans and IDA credits as of June 30, 1973, and notes on the exeution of on-going projects. 114. Since 1957, IFC has made 13 commitments in India totalling US$42.3 million, of which US$ 5.2 million has been repaid, US$ 7.4 midllion sold and US$ 6.3 million cancelled. Of the balance of US$23.4 mrillion, US$16.1 million represents loans and US$7.3 million equity. A summary statement of IFC operations as of June 30, 1973 is also included in Annex II (Page 2). 15. The empnasis of Bank Group assistance to India in recent years has been on agriculture and agriculture-related projects. This reflects the importance of agriculture, which contributes just over 40 percent of indiats GNP?, and the investment priorities of the Government. Agricultural projects will continue to form an important part of the Bank Group's program and this year projects are raanned for agricultural credit, domestic fertilizer production, processing facilities for special crops and for livestock develop- ment. Special emphasis is being given to projects benefitting India's small farmers through the IDA-supported agricultural credlit schemes and a project to be presented later this fiscal year in suppor-t of the Government's drought- prone areas program.  16. The industrial sector and investments in infrastructure develop- ment have received substantial amounts of Bank Group assistance over time, essentially to cover the substantial foreign exchange expenditures associated with investments in these fields. Apart from IDA credits for a number of fertilizer projects, lending to industry in recent years has been principally through the medium of development finance companies and industrial imports credits. Assistance to infrastructure development has concentrated upon the power, telecommunications,and railways sectors, and this fiscal year a twelfth railway project is proposed. 17. A special effort is being made to identify and prepare urban development projects. But preparatory work has been slow on account of the complexity of local government administration and the diversity of assistance required. At the moment work is in progress on possible projects in Madras and a selection of municipal centers in the State of Uttar Pradesh. Last year a credit was approved for Bombay Water Supply and lending for other infrastructure requirements is under consideration. As India imports relatively few capital goods, because of domestic production capacity, the Association should be prepared to finance the local costs of high priority projects, such as the proposed project, in support of India's efforts to secure a transfer of resources adequate to sustain a satisfactory rate of growth. 18. The Bank Group has come to contribute significantly towards the provision of external assistance to India. In the three years 1966/67- 1968/69 the Bank Group accounted for some 17 percent of total new commit- ments of external assistance; by the three years 1970/71-1972/73 this had risen to 34 percent. Because of disbursement lags, however, the Bank Giroupis share in total disbursements has risen more slowly from 14 percent in 1966/67-1968/69 to 16 percent in 1970/71-1972/73, but it is expected to accelerate in the future. As of March 31, 1972, the Bank Group's share in outstanding external public debt was 19 percent. If current trends continue as expected,thbe-Bank Group's share in the total amount outstand- ing will rise to approximately 30 percent by 1979. Debt service payments to the Bank Group during the year ended March 31, 1972 were 13 percent of total debt service payments made by India. By 1979, the Bank Group's share of total debt service is expected to be around 16 percent. PART III - THE CALCUTTA SITUATION Background 19. During the early part of this century, Calcutta became the largest city, and the principal industrial center in India, added to which it flour- ished as the cultural center for northeast India. Despite the pre-eminence of this great city, life was not easy for the lower income groups; nonetheless, a reasonable level of services was available to the 2.5 million people who lived there in the 1920s and 1930s. Then World War II and the subsequent partition of 1947 had such an adverse effect on Calcutta's situation that it has not yet recovered from the shock. In the 1950s and 1960s, Calcutta suffered recurring periods of political instability which owed their origin,  -6 - in large measure, to the economic impact of losing a major part of its hinter- land through the creation of East Pakistan (now Bangladesh) and to the millions of refugees who at various times after 19h7 moved from East Bengal into West Berngal and whose presence overstrained services while also adding to the vast amoun- cf unemployment. The political instability slowed down industrial investmnent and the mobilization of resources for urban and other public sector projects which, in turn, only exacerbated the political and economic situation. 20. Calcutta is the most populous urban concentration in India with about 8.5 mllion people in 1971.1/ Calcutta has now lost to Bombay the distinction of being the coantry's premier port and commercial center, but it remains the center of India's mining, steel and heavy engineering industries. Over the years, the lack of adequate investment has resulted in appallingly low standards of housing and public services. The cholera epidemic of 1958 served to demonstrate the seriousness of these conditions, and Calcutta has come to represent an extreme case of urban decline. Studies were initiated, but continued political unrest meant that little was implemented. GOI re- cognized the need for urgent action, but only after the introduction of President's rule on the dissolution of West Bengal legislature in 1970 was GOI in a position to intervene directly. 21. The basic features of GOI's intervention were the setting up of an investment program and the creation of the Calcutta Metropolitan Development Authority (CMDA) to implement it. The program will require nearly a decade of sustained effort to raise levels of urban services in the Calcutta area to that of other major urban areas in India. The present phase of the program is geared to deal with an emergency situation and is soundly based. At the same time, the Government of West Bengal (GOWB) has started to take action to bring about an improvement in the operation and financing of urban services. The Calcutta Metropolitan District (OND) 22. GMD stretches north and south along both sides of the Hooghly River. The pepulation is concentrated east of t,he river with three million living in Calcutta City surrounded by over three million or more living in municipal and semi-urban settlements outside the ci ty limits. On the west bank, another 1.4 million people live. Population density in Calcutta City averages 33,000 persons per km2 compared with 15-18,000 persons per km2 in the suburban areas. 1/ This vast urban. concentration is now more precisely called Calcutta Metropolitan District (CMD) to distinguish it fron Calcutta City, the municipality whose boundaries were established in the l9th century and which covered the main commercial and older residential areas.  - 7 - 23. Only the center part of Calcutta City was planned, and then only to urban requirements of the early 1900s, while the rest of the CMD has grown in a haphazard manner with little control or foresight. Over the past 20-25 years most of the population growth has occurred in the areas outside the city, and more recently it has been taking place on low-lying swampy land wbi .- s ill suited to urban use, As a consequence, there is a marked difference between urban services within and outside the city. 24. GOWB is the only administrative body with jurisdiction over the entire CMD area. The State, through its directorates, boards or commercial undertakings, provides many of the urban services, and also provides sub- stantial budget support for all local government units in the CMD. The Calcutta Corporation, which has a long history of local government, together with one other corporation, 33 municipalities and 37 town boards, share municipal responsibilities within CMD. The Calcutta Corporation provides a wider range of urban services, has a higher per capita revenue base and enjoys greater autononm than the other municipal bodies, which are subject to more control by the State Government. The Calcutta Metropolitan Development Authority (CMDA) 25. The GMDA is an agency of the GCJWB, with authority to plan and spend ounds on the development program. It aloo has responsibility for managing the implementation of projects within the program, some of which it executes directly. Although not autonomous, the CMDA has more independence than State Government Departments, especially .n repe_t of sanctioning ex- penditures and recruiting staff. The Board comprises three State Officials and three Municipal Officials with a State Government minister, presently the Minister of Works and Housing, as Chairman. Substantial financial support is received from the Center and performance is reviewed quarterly by the Central and the State Governments. The CMDA is organized into nine program units, four common service units, and a recently created planning unit under the Secretary, the Chief Executive. CMDA presently supervises more than 150 schemes which are being carried out by 54 different executing agencies. CMDA's control over the activities of these agencies is based on its powers of project approval and finance. 26. The CMDA acts as the agent of the State Government in the administration of a consolidated development fund for the program. This fund has been financed from the following sources: CMDA market borrowings (35 percent), State Government loans (32 percent), Central Government loans (16 percent), Central Government grants for slum improvement (7 percent), and revenues derived from the "octroi tax" (10 percent), which is tax on the movement of goods into CMD. The Central and State Governments thus provide the bulk of the investment resources. GMDA's revenues are presently restricted to part of the proceeds of the octroi tax, which is only sufficient to service its market borrowings, and so CMDA is not financially autonomous. CMDA uses these funds itself or makes them available to agencies or muni- cipalities for execution of projects in its program, on terms decided by GOWB,  -8- 27. The State Planning Board has recently presented a proposal for reorganiza-tion of local government, including financial administration, within CMD. This proposal, which has yet to be considered by the State Legislature, places the major responsibility for the development and operation of metropolitan services on a single metropolitan government with a second tier of local government comprising 23 boroughs, which would replace the present municipalities. In May 1973, a working group was set up by GOI in cooperation with GOWB to study the question of mobilizing local resources to finance the operation and maintenance of projects within the CND, and a plan for improving financial performance is scheduled to be completed within 12 months of the date of effectiveness of this proposed credit. 28. CMDA investment during the current Fourth Plan (1969/70-1973/74) is estimated at US$225 million and is projected to total US$460 million in the Fifth Plan period. The program has been derived from the "Basic Development Plan for Calcutta Metropolitan District 1966-68" which was prepared on the basis of various studies carried out in the early 1960s, with the support of the UNDP/WHO and the Ford Foundation. It includes schemes for improvements in drainage, sanitation, urban transport, water supply, housing, health services and slum amenities. Priority for invest- ment has been given to areas suffering the greatest deficiencies, with the overall objective of establishing minimum acceptable standards throughout CMD. The rate of program implementation has accelerated rapidly; expend- itures have increased from IJS$4 million in 1970 to about US$40 million in 1971 and 1972. The program of investment visualized for the Fifth Plan implies another substantial increase in the size of CMDA's activities. PART IV - THE PROJECT 29. Discussions concerning the proposed project were initiated in early 1972. A project preparation mission visited India in July/August 1972, and the project was appraised in November/December 1972. Negotiations took place in Washington from June 26 to July 9, 1973. The Borrower was repre- sented by Mr. G. Venkataramanan, Deputy Secretary, Department of Economic Affairs, Ministry of Finance, and Mr. S. Kumar, Deputy Secretary, Ministry of Works, Housing and Urban Development. GCWB was represented by its Additional Chief Secretary, Mr. B. R. Gupta. CMDA was represented by Mr. J. C. Sengupta, Vice Chairman, Mr. K. C. Sivaramakrishnan, Secretary and Mr. D. C. Mukherje, TDechnical Advisor. A report entitled "Appraisal of the Calcutta Urban Development Project" (159a-IN, dated July 27, 1973) is being circulated to the Executive Directors separately. A credit and project summary is in Annex III to this report.  -9- Project Description 30. The project forms part of the CMDA US$230 million program for tbhe period July 1973-June 1976. It comprises L4 schemes covering water supply (8 schemes), sewerage and drainage (17), roads and traffic improvements (12), garbage disposal (2), environmental hygiene (3), and housing and area develop- ment (2). Technical assistance would be provided in urban planning, and the operation and maintenance of water supply and sewerage services. 31. The schemes have been selected with a view to their priority within the sector and the overall program, and in particular to their functional or geographic interrelationship as well as their state of preparation or execution. The water supply components will contribute towards improving the distribution of filtered water in Calcutta City and its suburbs. The sewerage and drainage schemes will help to reduce the effects of storm flooding during the monsoon in Calcutta City, its northeastern suburbs, and Howral. The garbage disposal and environmental hygiene schemes will bring 'about a more tolerable environ- ment in Calcutta City, by providing adequate garbage collection and disposal eouiprent, and the installation of sanitary latrines in unsewered areas. In urban transport the thrust of the present CODA program is to increase the capacity of existing facilities, and the schemes included in the project com- prise extension and widening of roads, traffic operation measures, construction of a bus terminal and extension of street lighting in Calcutta. Slum redevelop- ment scheme will provide for rehousing in flats in Calcutta City, while a sites and services scheme will be developed on the edge of the CMD. 32. The following two examples illustrate the importance of this project. First, when the rehabilitation of the Palmers Bridge and Ballygunge pumping stations has been completed, they will be able to handle the entire storm water load which presently floods large areas of central Calcutta City. This water is difficult to dispose of and extended periods of flood conditions have had an adverse effect upon various facilities including roads, water supply and sewerage pipelines. As a result, unsanitary conditions have often been created and have on occasion led to the outbreak of epidemics. 33. The second example is the Baishnabghata-Patuli sites and services scheme about 10 km southeast from the center of Calcutta. About 130 hectares of undeveloped land will be acquired and urban services provided, including filtered water supply, sewerage, roads, a school and a health center for about 30,000 people, of whom up to 25 percent will be in the low income group. Land will be sold to middle and upper income groups for residential purposes and to commercial and industrial enterprises and the proceeds are expected to meet the cost of housing development for low income families who will be provided with the frame of a house which they can then complet'e. The scheme is expected to be the prototype for large-scale self-financing schemes to increase the supply of housing for the low income group.  - 10 - Responsibility for Project Execution .kb. The CI'DA will have overall responsibility for imnplementation of t:re pcject as it has for implementation of the whole program. CMDA will thus be responsible for technical appraisal, review of cost estimates and sanctioning of all schemes included in tne project. All works will be carried out, with minor exceptions, by contractors, who would be supervised either directly by CG1'A or by executing agencies unaer CMDA's supervision, ClDA would be directly responsible for the execution of nine of the se'ected water supply and sewerage and drainage schemes, which would account for 20 percent of the value of the infrastructure components of the project. TIhe remaining 35 schemes will be executed under the supervision of GMA by six agencies whose performance is considered adequate. 35. GDA has cornpetent technical and manageriaa staff and its perform- ance to date has been sound. It will control the scheduling of interrelated program elements and the procurement of scarce materials and will establish an engineering management unit which will be responsible for the coordination of program activities. MDA is receiving assistance from experienced and well qualified Indian management consultants. Operation and Maintenance of Facilities 36. Responsibility for the operation and maintenance of completed schemes under the program will rest with a large number of state and local agencies. Schemes constructed by CMDA will be handed over when completed to operating agencies spec'ifically designated for each project. Ir. the case of major water supply, sewerage and. drainage facilities, agencies responsible for operation and maintenance will need further strengthening. Accordingly, during negotiations it was agreed that consaltants will develop guidelines for the organization and staffing of operation and maintenance units in these sectors. 37. Revenues of the municipalities are at present limited to the property tax, which is inadequate to cover expenditures on operation and maintenance. Major improvements in the assessment and collection of taxes and charges and in the devolution of revenues to responsible operating agencies are expected to form part of the proposed reorganization of local, government in the Metropolitan District. Preparatory work for the reorgan- ization includes the ident:ification of costs for providing individual services and the establishment of consumer charges after considering such aspects as equity and ability to pay. In the meantime, funds required for the operation and maintenarnce of urban service facilities will be supple- mented as necessary from the State Government budget.  Planning Support 38. Planning support for the preparation of CMDA's program has, hitherto, been the responsibility of the Calcutta Metropolitan Planning Organization (CMPO). In June 1973, a decision was taken to transfer this responsibility to CMDA. Under the proposed project, consultant assistance to CMDA will be provided for work on water supply and traffic studies and also on the planning of urban land development. Project Costs and Financin 39. The total cost of the project is estimated at US$96.9 million equivalent, including US$20.5 million of foreign exchange costs. Of the total, US$70.7 million is for individual schemes, US$7.3 million for project management, US$0.4 million for consultant services, and US$18.5 million for contingencies (Annex III). 40. The proposed US$35 million IDA credit, equivalent to 36 percent of total project cost, would cover the following project costs (including contingencies): material and equipment, US$15.0 million; civil works, US$19.5 million; and consultants services, US$0.5 million. The proceeds of the credit would be passed on by GOI to GOWB at 5 percent for 10 years conforming to the terms specified in the 1973-74 GOI budget foi-loans from GOI to State Governments. In accordance with GOWB's standard relending procedures for CMDA's program, the same terms of interest and maturity will be applied when GOWB relends the proceeds of the credit to CMDA. Procurement and Disbursement 41. Materials and equipment valued at US$9.2 million or 10 percent of total project costs, would be procured by CMDA on the basis of inter- national competitive tender in accordance with the Association's guidelines. Domestic suppliers would be accorded the usual preference of 15 percent or the rate of customs duty, whichever is the lower. Other materials valued at US$1h.5 million would be unsuitable for international bidding either because fabrication should take place near the construction site or because standardization is necessary. The items concerned are available competitively from local suppliers.  42. Ci`vil works to..,7-i.^.g US$85 million are unsuitable for inter- national competitive biddi-incr because of their diverse natture, small size and scattered location. Civil works totalling about US$15.0 million have alreacy been contracted on the basis of acceptable procedures. Of the balance of US$33.8 million., US$32 million will be tendered on the basis of local competitive biddinr; procedures acceptable to the Association, while the construction of s.anitary lat-rines (UL,$1.8 million) will be undertaken by fcrce account. 43. The Association woula disburrse against (a) 100 percent of the cost of materials and equiip)rment p,rocured af'