India - Maharasthtra Water Supply & Sewerage : Credit 0899 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 899 IN Proj ect Agreement (Maharashtra Water Supply and Sewerage Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD Dated June 21, 1979 p* CREDIT NUMBER 899 IN PROJECT AGREEMENT AGREEMENT, dated June 21, 1979, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD (hereinafter called MWSSB). 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 forty-eight million dollars ($48,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that MWSSB agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS the Borrower has agreed to make available to Maha- rashtra the proceeds of the credit provided for under the Devel- opment Credit Agreement; WHEREAS by an agreement of even date herewith between the Association and the State of Maharashtra, acting by its Governor (hereinafter called Maharashtra), Maharashtra has agreed to assist MWSSB in the carrying out of the Project described in Schedule 2 to the Development Credit Agreement; WHEREAS under arrangements between Maharashtra and MWSSB, the proceeds of the credit provided for under the Development Credit Agreement will be relent to MWSSB; and WHEREAS MWSSB, 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. MWSSB shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with sound administrative, financial and engineering practices. Section 2.02. (a) In order to assist MWSSB in the engineering design of the Project, MWSSB shall employ consulting engineers whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association and MWSSB; and (b) In carrying out Parts I and II of the Project, MWSSB shall employ suitably qualified and experienced contractors. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) MWSSB undertakes to insure, or make ade- quate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by Maha-ashtra against hazards incident to the acquisition, transpor- tation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a cur- rency freely usable by MWSSB to replace or repair such goods. (b) Except as the Association may otherwise agree, MWSSB shall cause all goods and services financed out of the proceeds of the Credit relent to it by Maharashtra to be used exclusively for the Project. Section 2.05. (a) MWSSB shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, 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) MWSSB: (i) shall maintain records and procedures ade- quate to record and monitor the progress of the Project (including -3- its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, ard 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) MWSSB shall enable the Association's representatives to examine plants, installations, sites, works, buildings, property and equipment of MWSSB and any relevant records and documents related thereto, as the Association's representatives shall reasonably request. (d) 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 MWSSB and the Association, MWSSB 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 MWSSB and the Association of their respective obligations under this Agreement and the accomplishment of the purposes of the Credit. Section 2.06. (a) MWSSB shall at the request of the Associa- tion, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. (b) MWSSB 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 MWSSB of its obligations under this Agreement. Section 2.07. MWSSB shall strengthen its operations for the detection of transmission and distribution system losses and for the repair of mains, in the Project Area, in accordance with a program satisfactory to the Association. Section 2.08. MWSSB shall take all such action as shall be necessary to acquire or to initiate action for Maharashtra to acquire as and when needed, all such land and rights in respect of land as shall be required for the carrying out of the Project. ARTICLE III Management and Operations of MWSSB Section 3.01. MWSSB shall at all times manage its affairs, maintain its financial position, plan its future expansion -nd carry on its operations, all in accordance with sound financial, administrative, engineering and public utility practices. Section 3.02. (a) MWSSB shall at all times operate and maintain its machinery, equipment and other property, and make all necessary repairs and renewals thereof, in accordance with sound engineering practices. (b) Except as the Association shall otherwise agree, MWSSB shall not sell, lease, transfer or otherwise dispose of any of its property or assets required for the efficient operation of the Project, except in the normal course of business. Section 3.03. MWSSB shall take out and maintain with respon- sible insurers, or make other provision satisfactory to the Association, for insurance against such risks and in such amounts as shall be consistent with appropriate public utility practices. ARTICLE IV Financial Covenants Section 4.01. MWSSB shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. (a) MWSSB shall establish and maintain separate accounts for its water supply and sewerage services in the Project Area in accordance with commercial accounting practices. (b) MWSSB 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 auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the -5- Association as soon as available, but in any case not later than nine 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 MWSSB and the audit thereof as the Association shall from time to time reason- ably request. Section 4.03. MWSSB shall prepare and furnish to the Associ- ation for its review, by September 30, 1979, a program for the establishment of financial management and information systems for the operations thereof. Section 4.04. Except as the Association may otherwise agree, MWSSB shall, before the commencement of each fiscal year, review and adjust, if necessary, its tariffs for bulk water supply: (a) in the Project Area, to ensure that operating revenues are sufficient to: (i) meet MWSSB's operating expenses, and straight-line depreciation of the fixed assets in operation, for each of the fiscal years 1981 through 1983 and (ii) produce an annual rate of return on the average value of MWSSB's net fixed assets in operation in the Project Area of at least 4% in fiscal years 1984 and 1985, 5% in fiscal year 1986 and 6% thereafter; (b) outside the Project Area, for each fiscal year starting with fiscal year 1981, to ensure that operating revenues are sufficient to meet MWSSB's operating expenses and the greater of: (i) debt service requirements or (ii) straight-line depreciation of the fixed assets in operation. (c) For the purposes of this Section: (i) the annual rate of return shall be calculated by using, as the denominator, the value of the net fixed assets in operation of MWSSB at the beginning and at the end of the fiscal year in question, and dividing the total by two and, as the numerator, an amount equal to the net revenues of MWSSB for that year; (ii) the term "value of the net fixed assets in opera- tion of MWSSB" means the gross value of the fixed -6- assets in operation, as revalued from time to time, based on appropriate valuation methods approved by the Association, less accumulated straight-line depreciation; (iii) the term "net revenues" means the difference between the (A) operating revenues and (B) operat- ing expenses together with straight-line deprecia- tion; (iv) the term "operating revenues" means all revenues from the sale of water; (v) the term "operating expenses" means all costs of operation of MWSSB including adequate maintenance and a reasonable proportion of MWSSB's administra- tive costs but excluding straight-line deprecia- tion; and (vi) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on such debt. Section 4.05. Except as the Association may otherwise agree, MWSSB shall not incur any debt unless the net revenues of MWSSB for the fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall be not less than 1.3 times the maximum debt service requirements for any succeeding fiscal year on all debt of MWSSB including the debt to be incurred. For the purpose of this Section: (a) the term "debt" means all debt incurred by MWSSB including debt assumed or guaranteed by MWSSB, except debt incur- red in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (b) the term "incur" with reference to any such debt includes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred by MWSSB: (i) under a contract or loan agreement, on the date the contract or loan agreement providing for such debt is entered into; and (ii) under a guar- antee agreement, on the date the agreement providing for such guarantee shall have been entered into; -7- (c) the term "net revenues" means gross revenues received by MWSSB from water supply services, less all operating expenses, including adequate maintenance, taxes or payment in lieu of taxes, if any, and administrative expenses, but before provision for straight-line depreciation and interest and other charges on debt; (d) the term "debt service requirements" has the meaning set forth in paragraph (c)(vi) of Section 4.04 hereof; and (e) whenever it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency, at the time such valuation is made, is obtainable by MWSSB for the purpose of servicing such debt. Section 4.06. MWSSB shall: (i) endeavor to transfer to each of the local authorities in the Project Area, under arrangements satisfactory to the Association, the assets pertaining to the water distribution and sewerage systems of each such local authority, upon completion of that part of the Project related to such assets, and (ii) recover from each such local authority the amount required to service loans, or any other instrument pro- viding for the debt, entered into for the purpose of financing such assets and still outstanding. 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 MWSSB thereunder shall terminate on the earlier of the following two dates: (i) a date 20 years after the date of this Agreement; or (ii) the date on which the Development Credit Agreement shall terminate in accordance with its terms. -8- (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (i) of this Section, the Association shall promptly notify MWSSB of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE 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 permitted to be given or made at such party's address herein- after 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: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For MWSSB: Maharashtra Water Supply and Sewerage Board 401 Main Building, Mantralaya Bombay, 400 032 India IFI -9 - Cable address: Telex: RESTIPULAR 0112443 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 MWSSB may be taken or executed by the Chairman or the Member-Secretary or such other person or persons as he shall designate in writing, and MWSSB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively 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 in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By Is/ David Hopper Regional Vice President South Asia MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD By Is! N. A. Palkhivala Authorized Representative - 10 - SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part D hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, MWSSB shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. MWSSB shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding, (i) 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 domestically manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) 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 included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in - 11 - India may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference wiich will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids 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 equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in India. (3) Group C: bids offering any other goods. 3. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of thls further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. 1.7 - 12 - C. Preference for Domestic Contractors With respect to the evaluation of bids for any contract for civil works included under Category (2) of Schedule 1 to the Development Credit Agreement and to be procured in accordance with the procedures described in Part A of this Schedule, MWSSB may grant a margin of preference of 7-1/2% to domestic contractors, in accordance with, and subject to, the following provisions: 1. Contractors applying for such preference shall be asked to provide, as part of the data for qualification, such informa- tion, including details of ownership, as shall be required to determine whether, according to the classification established by MWSSB accepted by the Association, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. 2. After bids have been received and reviewed by MWSSB, respon- sive bids will be classified into the following groups: (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal to 7-1/2% of the bid amount shall be added to bids received under group (ii) above. D. Other Procurement Procedures 1. Contracts for civil works other than those for Part I (A) (1) of the Project and contracts for sewer pipes and fabri- cated steel pipes may be let on the basis of competitive bidding advertised locally and in accordance with procedures of Mahara- shtra satisfactory to the Association. 2. Contracts for other equipment and materials costing less than $50,000 and aggregating not more than $1,000,000, may be let in accordance with the usual procurement procedures of Maharashtra for such items satisfactory to the Association. - 13 - E. Review ,f Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for goods estimated to cost the equivalent of $500,000 or more, and all contracts for civil works: (a) Before bids are invited, MWSSB 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 procedures 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. (b) After bids have been received and evaluated, MWSSB shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Association .shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially. differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, MWSSB shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such tit _ __ __ _ - 14 - contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, MWSSB shall inform the Association of the proposed modification, waiver, extension or change order and the reasons therefor. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination.