India - Third Ardc Credit Project : Credit 0947 - Project Agreement - Conformed

- CREDIT NUMBER 947 IN Project Agreement (Third ARDC Credit Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION Dated , 1979 CREDIT NUMBER 947 IN PROJECT AGREEMENT AGREEMENT, dated , 1979, between INTERNATIONAL DEVELOPMENT ASSOMATION (hereinafter called the Association) and AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORA- TION (hereinafter called ARDC). 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 two hundred and fifty million dollars ($250,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ARDC agrees to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS by a subsidiary loan agreement and other arrangements to be entered into between the Borrower and ARDC, the proceeds of the credit provided for under the Development Credit Agreement will be made available to ARDC on the terms and conditions therein set forth; and WHEREAS ARDC, 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 II Execution of the Project Section 2.01. ARDC 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, agricultural and engineering practices. -2- Section 2.02. (a) ARDC shall enter into a Subsidiary Loan Agreement with the Borrower on terms and conditions (including, inter alia, those set forth in Schedule 3 to the Development Credit Agreement) satisfactory to the Association. ARDC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ARDC 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. (b) ARDC shall, for the purpose of on-lending to the Parti- cipating Banks the funds lent to ARDC by the Borrower, enter into agreements with such Participating Banks upon terms and conditions which shall include those set forth in Schedule 1 to this Agree- ment. Section 2.03. ARDC shall, in consultation with the Associ- ation, take all such steps as shall be necessary to ensure that not less than $125,000,000 equivalent of the proceeds of the Credit under Categories (1) and (2) under paragraph 1 of Sched- ule 1 to the Development Credit Agreement shall be used to refi- nance loans to Small Farmers. Section 2.04. ARDC shall, by December 31, 1979 or such later date as the Association may agree, appoint a Senior Officer with suitable qualifications and experience to be next in command to the Managing Director of ARDC. Section 2.05. ARDC shall establish and maintain at all times criteria satisfactory to the Association with respect to the eli- gibility of LDB and SCB for refinance by ARDC under the Project. Section 2.06. ARDC shall establish and maintain a Banking Committee with such membership and functions as are mutually agreed between the Association and ARDC, to advise ARDC on in- creasing the capabilities of the Commercial Banks and developing them into efficient instruments for agricultural investment. Section 2.07. With regard to all lending under Part A of the Project, ARDC shall ensure that Participating Banks apply such lending terms and conditions as are mutually agreed between the Association and ARDC including those set forth in Schedule 1 to this Agreement. -3- Section 2.08. With respect to Part A of the Project, ARDC shall apply (-) guidelines for evaluation of groundwater resources and (b) guidelines for evaluation of loans for public deep tube- wells and augmentation wells, as may be mutually agreed between the Borrower, the Association and ARDC. Section 2.09. ARDC shall refinance minor irrigation schemes under Part A of the Project in a State only where ARDC is satis- fied that the SGO in that State has been suitably strengthened to enable the said SGO to carry out groundwater investigation pur- suant to the guidelines for evaluation of groundwater resources specified in Section 2.08 of this Agreement. Section 2.10. ARDC shall review existing compensation schemes for failed wells, and shall, on the basis of such review, recom- mend by June 30, 1980 a model compensation scheme for failed wells for adoption by all States. Section 2.11. ARDC shall, prior to refinancing a loan made by a Participating Bank to a State Electricity Board for pumpset electrification, require the Participating Bank to obtain from the State Electricity Board confirmation that the connection of the pumpsets would not lead to overloading the local power system or to any other effects detrimental to the State electrical power system. Section 2.12. With the objective of introducing, by Decem- ber 31, 1981, an all-India program for the supervision and im- provement of quality control over minor irrigation works under Part A of the Project, ARDC shall: (a) carry out pilot quality control programs in selected areas in at least four States, such programs to be completed by December 31, 1980; (b) prepare, by June 30, 1981, a phased quality control program satisfactory to the Association, for implementation in other States; and (c) appoint or cause to be appointed by Participating Banks, such number of suitably qualified technical officers as may be required to carry out the programs referred to in sub-Section (a) and (b) of this Section above. -4- Section 2.13. ARDC shall establish or cause to be established such monitoring, evaluation and reporting procedures under the Project as are mutually agreed between the Association and ARDC. Section 2.14. (a) ARDC shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and work schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) ARDC: (i) shall maintain records and procedures ade- quate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it and including separate records for lending to Small Farmers), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) shall enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between ARDC and the Association, ARDC shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by ARDC and the Association of their respec- tive obligations under the Project Agreement and the accomplish- ment of the purposes of the Credit. (d) ARDC shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of ARDC and any relevant records and documents. Section 2.15. (a) ARDC shall at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress of the Project, the performance of its obligations under -5 - this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) ARDC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by ARDC of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of ARDC Section 3.01. ARDC shall: (i) at all times manage its af- fairs, maintain its financial position, plan its future expansion and carry on its operations, all ia accordance with sound business and financial practices and under the supervision of experienced and competent management assisted by experienced and competent staff in adequate number; and (ii) take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business or in the carrying out of the Project. ARTICLE IV Financial Covenants Section 4.01. ARDC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. ARDC 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) 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 ARDC and the audit thereof as the Association shall from time to time reason- ably request. -6- Section 4.03. ARDC shall: (i) require Participating Banks to maintain separate accounts for Project lending; and (ii) ensure that the annual audited accounts of such Banks are submitted to the Association within four months of the end of their fiscal year together with a statement of Project lending for such Banks certi- fied by ARDC. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes, effective. Section 5.02. (a) This Agreement and all obligations of the Association and of ARDC 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 fifteen years after the date of this Agree- ment. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify ARDC of this event. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. 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 -7- permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have des- ignated 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: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For ARDC: Managing Director Agricultural Refinance and Development Corporation Shri Niketan F Block Shiv Sagar Estate Dr. Annie Besant Road Worli, Bombay, 400018 India Cable address: AGREFINANS Bombay Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of ARDC may be taken or executed by its Mana- ging Director or such other person or persons as ARDC shall designate in writing, and ARDC shall furnish to the Association sufficient evidence of the authority and the authenticated speci- men signature of each such person. Section 6.03. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. -8- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President South Asia AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION By Authorized Representative -9- SCHEDULE 1 Project Lending Terms and Conditions A. ARDC to Participating Banks: 1. interest rate to be 6.5% per annum for minor irrigation, 6.5% per annum for diversified lending to Small Farmers, and 7.5% for all other diversified lending; 2. installment repayments to coincide approximately with * collections from ultimate borrowers; and 3. refinancing to be by purchase of debentures or by loans, generally up to 90% of individual loans. B. Participating Banks to Ultimate Borrowers: 1. Minor Irrigation and Land Development: (a) interest rate to be 9.5% per annum; (b) a once-and-for-all evaluation fee of 0.5% of the cost of project investment may be charged; this fee may be waived with the concurrence of ARDC; (c) Farmers' contribution (including obligatory pur- chase of LDB shares, own labor, and other contri- butions in cash or kind): (i) for lending to Small Farmers, a minimum of 5% of investment cost; (ii) for Farmers cultivating land providing a pre- development net return to family resources to such Farmer and his family ranging from Rs2,001 to Rs3,500 based on 1972 prices, a minimum of 10% of the investment cost; (iii) for other Farmers, a minimum of 10%* of the cost of pumpsets and 15%** for other minor irrigation investments; and 7% for two or more Farmers in a group loan. 10% for two or more Farmers in a group loan. - 10 - (iv) for corporate borrowers, public trusts, etc. a minimum of 10%. (d) repayment periods to be based on the ultimate bor- rower's repayment capacity, but generally not to exceed: For lending to Small Farmers: (i) 7 years on loans for pumpsets, whether fi- nanced as separate loans or included in other minor irrigation loans; and (ii) 15 years on loans for all other minor irriga- tion loans; and For lending to other Farmers: (i) 7 years on loans for pumpsets, whether fi- nanced as separate loans or included in other minor irrigation loans; and (ii) 9 years on loans for minor irrigation, other than pumpsets; and For lending to other Beneficiaries: 15 years maximum for minor irrigation invest- ment. (e) grace periods may be granted at the discretion of ARDC, provided that the repayment period of such loans is not exceeded; (f) technical standards, as laid down by ARDC taking into consideration IDA guidelines where applicable, to be observed; and (g) if his own cultivated area is significantly smaller than that which can be adequately irrigated by the irrigation unit so financed, the borrower must undertake to sell water surplus to his needs, or to hire out his pumps6t. - 11 - 2. Diversified Lending: (a) annual interest rate to be 9.5% per annum for lending to Small Farmers, and 10.5% for all other diversified lending; (b) a once-and-for-all evaluation fee of 0.5% of the cost of investment may be charged; this fee may be waived with the concurrence of ARDC; (c) Farmers' contribution (including obligatory pur- chase of LDB shares, own labor and other contribu- tions in cash or kind): (i) for lending to Small Farmers, a minimum of 5% of the investment costs; (ii) for Farmers cultivating land providing a pre- development net return to family resources to such farmer and his family ranging from RS2,001 to Rs3,500 based on 1972 prices, a minimum of 10%* of the investment cost; and (iii) for other Farmers a minimum of 15%** of the investment cost. For the purpose of diversified lending, the terms "Small Farmer" and "Farmer" shall include all Beneficiaries of Schemes other than minor irrigation; for the purpose of determining the equivalent of Small Farmers and Farmers among such Beneficiaries, the definition of Small Farmer and the description of Farmers set forth in sub-paragraph (ii) hereof shall be adapted to mean "any person primarily engaged in an activity relevant to a Scheme other than minor irrigation which provides a pre-development net return to family resources not exceeding Rs2,000" and "ranging from Rs2,001 to Rs3,500" respectively. "Net return to family resources" shall mean gross family income from the activity less costs actually incurred; and (d) repayment periods to be based on the ultimate bor- rower's repayment capacity, but not to exceed 15 years (including grace periods where necessary). * 7% for two or more Farmers in a group loan. ** 10% for two or more Farmers in a group loan. - 12 - 3. General: (a) ARDC and Participating Banks to maintain separate accounts for lending to Small Farmers; (b) security to be in accordance with arrangements between Participating Banks and ARDC; (c) ARDC shall refinance only sound schemes which, on the basis of careful study are considered to be financially viable, have a minimum financial rate of return of 15% to total investment cost, and are backed with satisfactory technical and administra- tive management to be identified at the time of scheme approval; (d) ARDC shall forward all applications for refinance of diversified lending schemes having total invest- ment costs of $500,000 equivalent or more together with appraisal reports and all other relevant data, to the Association for its approval; (e) where necessary, ARDC may approve rescheduling of loans particularly when requests for rescheduling of loans are from districts suffering from adverse climatic conditions; and (f) Lending Terms and Conditions from ARDC to Parti- cipating Banks, and to ultimate borrowers, for similar purposes to be identical irrespective of source of funds. C. These Lending Terms and Conditions may be amended from time to time as agreed between the Association and ARDC. - 13 - SCHEDULE 2 Definition of Small Farmer 1. "Small Farmer" shall mean any Farmer cultivating land pro- viding a pre-development net return to family resources to such farmer and his family not exceeding Rs2,000 based on 1972 prices (1977/78 All-India equivalent Rs3,100). 2. For the purpose of determining said net return, the following criteria shall apply: (a) "land" shall include all land actually cultivated by the farmer notwithstanding the fact that ownership of such land may vest in one or more persons; (b) "net return to family resources" shall mean gross family income from the land, less costs actually incurred (including cash value of the farmer's own input, includ- ing seed, fertilizer, hired human labor, hired bullock labor, feed consumed by family bullocks, irrigation charges, land revenue, interest on crop loan, and rent on leased land); and (c) the amounts for the current year shall be arrived at by applying the current Agricultural Laborers Consumer Price Index for the State in which the land is located to the 1972 base set forth in paragraph I hereto. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the 40c20 day of 197A. FOR SECRETARY