India - Nangal Fertilizer Expansion Project : Credit 0357 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 357 IN Project Agreement (Nangal Fertilizer Expansion Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND FERTILIZER CORPORATION OF INDIA DATED FEBRUARY 9, 1973 CONFORMED COPY CREDIT NUMBER 357 IN Project Agreement (Nangal Fertilizer Expansion Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND FERTILIZER CORPORATION OF INDIA DATED FEBRUARY 9, 1973 PROJECT AGREEMENT AGREEMENT, dated February 9, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and FERTILIZER CORPORATION OF INDIA (hereinafter called FCI). WHEREAS by the Development Credit Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to fifty-eight million dollars ($58,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that FCI agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and FCI, funds equivalent to the proceeds of the credit provided for under the Development Credit Agreement will be made available to FCI on the terms and conditions therein set forth; and WHEREAS FCI, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has 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 and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE H Execution of the Project Section 2.01. FCI shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, 4 services and other resources required for the purpose. FCI will use its best efforts to carry out the Project in accordance with (i) the Nangal Project Implementation Plan and (ii) the Critical Path Schedule and, in that regard, will give special attention to the critical equipment procurement times. Section 2.02. In order to assist FCI in process and engineering design, procurement, supply of proprietary equipment, construction and start-up, FCI shall, under agreements with Montedison and Uhde, obtain process licenses, plant designs and consultant services acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.03. Except as the Association shall otherwise agree, FCI shall: (a) in carrying out the Project, act as managing contractor. In addition, FCI shall employ competent and experienced contractors as necessary to carry out the Project; (b) employ, for the duration of the Project, a suitably qualified and experienced Project Manager to be responsible for the execution of the Project, including inter alia budget and schedule control and general engineering, procurement, and construction duties, and provide the Project Manager with adequate staff and facilities to carry out such functions; (c) consult with the Association before making any change in the position of the Project Manager in the Nangal Plant; (d) appoint, after consultation with the Association, a suitably qualified successor if it appears that a vacancy will occur in the position of the General Manager of the Nangal Plant prior to start of commercial production; and (e) promptly enter into arrangements satisfactory to the Association with Indian Oil Corporation for the supply of fuel oil, Indian Railways for the provision of appropriate rail facilities, the Punjab State Electricity Board for the supply of electricity and coal suppliers in India for the supply of coal so as to ensure the availability of such supplies in sufficient quantity and of appropriate quality for the full utilization of the facilities to be constructed under the Project. Section 2.04. (a) Except as the Association shall otherwise agree, goods and services (other than services of consultants) required for the Project and to be financed under Category I of the allocation of the proceeds of the Credit set forth in Schedule I to the Development Credit Agreement shall be procured on the basis of international competition under procedures consistent with the Guidelines 5 for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, as revised in October 1972, and in accordance with, and subject to, the provisions set forth in Schedule 1 to this Agreement. (b) Goods to be financed under Category II of the said allocation of the proceeds of the Credit shall be procured directly from foreign suppliers. (c) FCI may reserve certain specified equipment, with the approval of the Association, from procurement by international competition and procure such equipment from Indian suppliers, provided that such equipment meets all specifications established by the consultants referred to in Section 2.02 of this Agreement, and that such equipment can be provided pursuant to the Critical Path Schedule. The estimated cost of such reserved equipment is Rs 13 million. (d) If at any time the Association or FCI determines, after consultation with the other and the Borrower, that any equipment or material cannot be delivered on or prior to its scheduled delivery date and that such delay would adversely affect the completion of the Project, FCI shall promptly take all necessary action to procure such equipment or material by such procedures as shall be satisfactory to the Borrower and the Association. Section 2.05. (a) FCI undertakes to insure, or make adequate provision for the insurance of, the equipment and materials to be financed under the Subsidiary Loan Agreement against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by FCI to replace or repair such goods. (b) Except as the Association may otherwise agree, FCI shall cause all equipment, materials and services financed under the Subsidiary Loan Agreement to be used exclusively for the Project. Section 2.06. (a) FCI shall furnish to the Association promptly upon their preparation, the plans, reports, specifications, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) FCI: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed under the Subsidiary Loan Agreement, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of Section 5.03 of this Agreement, enable the Association's representatives to examine the Project, the equipment 6 financed thereunder and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed thereunder. Section 2.07. FCI shall duly perform all its obligations tinder the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, FCI shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. ARTICLE III Management and Operations of FCI Section 3.01. (a) FCI shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, in accordance with appropriate business, financial and engineering practices and under the supervision of experienced and competent management assisted by adequate and competent staff. (b) FCI shall promptly fill any vacant position in connection with the Project by experienced and competent personnel. Section 3.02. Except as the Association shall otherwise agree, FCJ shall: (a) at all times take all steps which are necessary to maintain its existence and its right to carry on operations and to acquire and retain ownership of all lands and to maintain and renew all interests in land and other properties and all rights, powers, privileges and franchises which are necessary or useful in the carrying out of the Project or in the conduct of its business; (b) at all times operate and maintain its plants, machinery, equipment and other property, and promptly make all necessary repairs and renewals thereof, in accordance with appropriate engineering practices; (c) not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business and undertaking; and (d) not alter its corporate structure or amend its Memorandum of Association in any way that will materially and adversely affect its ability to perform its obligations under this Agreement. 7 Section 3.03. FCI shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. FCI shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. FCI shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association: (ii) Cxcept as the Association shall otherwise agree, furnish to the Association as soon as available, but in any case not later than four 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 (iii) furnish to the Association such other information concerning the accounts and financial statements of FCI and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree. FCI shall: (a) maintain separate accounts for the Nangal Unit and consolidated accounts for all its operations: (b) furnish to the Association as soon as available, but in any case not later than 30 days after the end of each quarter and fiscal year: (i) quarterly consolidated financial statements (balance sheets, statements of income and expenses and cash flow) for FCI; (ii) quarterly and annual financial statements (balance sheets, statements of income and expenses, cash flow and related statements) for the Nangal Unit: and (iii) quarterly and annual forecast statements of production, income and cash flow for FCI and for the Nangal Unit; and 8 (c) consult with the Association for reviewing and, where necessary, changing its accounting system and management information system and implement mutually agreed changes as promptly as appropriate financial management practices permit. Section 4.04. FCI shall take all necessary steps, including in particular limiting its indebtedness (excluding debt incurred in the ordinary course of business and payable on demand or not more than one year after the date of such determination), to maintain a long-term debt-equity ratio not greater than 50:50. For the purpose of this Section: (a) The term "long-term debt" means all debt maturing after one year from the date of such determination; and (b) The term "equity" means all unimpaired paid-in share capital plus accumulated earnings or losses from prior fiscal years not set apart for specific purposes. Section 4.05. Except as the Association shall otherwise agree, FCI: (i) shall maintain a ratio of current assets to current liabilities (hereinafter referred to as current ratio) of at least 1.2:1; (ii) shall not declare dividends or prepay any debt if, after the payment of such dividend (assuming such payment was made on the date of such declaration) or debt, FCI's current ratio shall be less than 1.5:1: and (iii) shall not cause or permit its Nangal Unit to prepay any of its outstanding debts or to transfer amounts from its accounts to the rest of FCI's accounts, if such prepayment or transfer would reduce the Nangal Unit's current ratio below 1.1 :1. For the purpose of this Section: (a) The term "current assets" means stock of spares, cash (excluding advances to contractors for construction of projects and for additions to fixed assets), assets readily convertible into cash, and all other assets which could in the ordinary course of business be converted within one year into cash or assets readily convertible into cash. (b) The term "current liabilities" means liabilities due and payable and all other liabilities which would be due and payable, or could be called for payment, within one year including the portion of long-term indebtedness falling due within one year. 9 (c) The term "debt" does not include debt payable on demand or maturing not more than one year after its date. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and FCI shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and FCI shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of FCI and other matters relating to the purpose of the Credit. Section 5.02. The Association and FCI shall promptly inform each other of any c)ndition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and FC1 of their respective obligations under the Subsidiary Loan Agreement. Section 5.03. FCI shall enable the Association's representatives to examine all plants, sites, works, properties and equipment of FCI and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the Effective Date. Section 6.02. (a) This Agreement and all obligations of the Association and of FCI thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date 16 years after the date of this Agreement. 10 (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify FCI of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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: INDEVAS Washington, D.C. For FCI: Fertilizer Corporation of India F-43, South Extension Area Part I Ring Road New Delhi - 49 India 11 Cable address: FERTILIZER New Delhi Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of FCI may be taken or executed by its Managing Director or such other person or persons as FCI shall designate in writing. Section 7.03. FCI shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of FCI, take any action or execute any documents required or permitted to be taken or executed by FCI pursuant to any of the provisions of this Agreement. Section 7.04. 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 representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ I.P.M. Cargill Regional Vice President Asia FERTILIZER CORPORATION OF INDIA By /s / L. K. Jha Authorized Representative 12 SCHEDULE 1 Procurement 1. Except as the Association shall otherwise agree: (a) With respect to any contract for goods and associated services estimated to cost the equivalent of $200,000 or more: (i) If bidders are required to prequalify, FCI shall, before qualification is invited, inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification, shall be furnished by FCI to the Association for its comments before the applicants are notified and FCI shall make such additions to or deletions from the said list as the Association shall reasonably request. (ii) Before bids are invited, FCI shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedure as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (iii) After bids have been received and evaluated, FCI shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review and comments, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall, if it determines, after having consulted with the Borrower and FCI, that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform the Borrower and FCI, state the reasons for such determination and advise the Borrower and FCI of any possible 13 cancellation pursuant to the provisions of paragraph 4(d) of Schedule I to the Development Credit Agreement. (iv) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (v) FCI shall furnish to the Association two conformed copies of the contract promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. (b) With respect to any contract for goods and associated services estimated to cost the equivalent of more than $25,000 but less than $200,000, FCI shall furnish, to the Association, promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, two conformed copies of such contract, together with copies of all tender documents, the analysis of bids, recommendations for award and sich other information as the Association shall reasonably request. The Association shall, if it determines, after having consulted with the Borrower and FCI, that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform the Borrower and FCI, state the reasons for such determination and advise the Borrower and FCl of any cancellation pursuant to the provisions of paragraph 4(d) of Schedule I to the Dcvelopment Credit Agreement; and (c) With respect to any contract for goods and associated services estimated to cost less than the equivalent of $25,000, FCl shall procure them by obtaining price quotations for each contract from no less than three suppliers (local and foreign) FCI shall furnish to the Association, promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, two conformed copies of such contract. The Association shall, if it determines that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform the Borrower and FCI, state the reasons for such determination and advise the Borrower and FCI of any cancellation pursuant to the provisions of paragraph 4(d) of Schedule I to the Development Credit Agreement. 2. For the purpose of evaluation and comparison of bids, customs duties and other import taxes on imported goods, and sales and similar taxes on locally 14 produced goods, shall be excluded, except to the extent hereinafter provided, and bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for locally produced goods. The cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be taken into account in the evaluation of bids in accordance with paragraph 4.7 of the Guidelines for Procurement referred to in Section 2.04 of this Agreement. 3. For purposes of the provisions hereinafter set forth, the following terms shall have the following meanings: (a) "Preferred Domestic Bid" means a bid offering goods manufactured in India if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in India of not less than 20% of the ex-factory bid price; (b) "Non-preferred Domestic Bid" means any other bid offering goods manufactured in India; and (c) "Foreign Bid" means any bid other than those specified in (a) or (b) above. 4. For goods included in Category I of the Allocation of Credit Proceeds, a margin of preference may be granted by the Borrower to Preferred Domestic Bids. Such preference shall be granted by adding to each Foreign Bid, for the purpose only of comparison with Preferred Domestic Bids, an amount (hereinafter called "Domestic Preference Margin") equal to the smaller of (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the goods offered in the bid, or (ii) 15% of the c.i.f. bid price of such goods. 5. If Preferred Domestic Bids are received, the comparison among all evaluated bids for each contract shall be made in the stages and with the preferences indicated below: Stage Bids to be Compared Preference I All Preferred Domestic Bids None and Non-preferred Domestic Bids. II (a) Lowest evaluated bid under Add Domestic Stage 1, if Preferred Preference Domestic Bid, with all Margin to Foreign Bids; Foreign Bids or (b) Lowest evaluated bid under None Stage I, if Non-Preferred Domestic Bid, with all Foreign Bids. 15 Stage Bids to be Compared Preference III If lowest evaluated bid under None Stage 11 is not the lowest evaluated bid under Stage 1, all Foreign Bids. 6. The bidding documents shall clearly indicate any preference which will be granted to Preferred Domestic Bids, the information required to establish the eligibility of a bid for such preference and the methods and stages that will be followed in the evaluation and comparison of bids to give effect to such preference.