India - Farakka Thermal Power Project

Document of M C The World Bank FOR OMFCIAL USE ONLY RpWt No. P-2849-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT AND LOAN TO INDIA FOR THE FARAKKA THERMAL POWER PROJECT June 9, 1980 ITb docauent ha a restrited dlbos and may be ndb recbpients emily i he popfman I their official duoits comtents siy ot oterwtie he diod wiaot wor flsk autherlmtio.|  CURRENCY EQUIVALENT Currency Unit - Rupee (Rs) Rs 1 - Paise 100 US$1 - Rs 8.4 Rs 1 US$0.1190 Rs I million = US$116,047.62 (Since September 24, 1975, the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/Rupee ex- change rate is subject to change. As of May 30, 1980, the exchange rate was Rs 7.9 to US$1.0). FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS USED IN THIS REPORT ARDC - Agriculture Refinance and Development Corporation Limited GOI - Government of India CEA - Central Electricity Authority DVC - Damodar Valley Corporation NHPC - National Hydro Power Corporation, Limited NTPC - National Thermal Power Corporation, Limited REB - Regional Electricity Board REC - Rural Electrification Corporation, Limited SEB - State Electricity Board UNDP - United Nations Development Program kV - kilovolt - 1,000 volts kWh - kilowatt-hour - 1,000 watt-hours MW - megawatt = 1,000 kilowatts GWh - gigawatt-hour - 1,000,000 kilowatt-hours  FOR OFFICIAL USE ONLY INDIA FARAKKA THERMAL POWER PROJECT CREDIT/LOAN AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiary: National Thermal Power Corporation Limited. Amount: US$250 million (US$225 million IDA, US$25 million Bank). Terms of IBRD Loan: a) Interest Rate: 8.25 percent per annum. b) Commitment Fee: Standard. c) Repayment Term: Over 20 years, including five years' grace. Terms of IDA Credit: Standard. On-Lending Terms: From GOI to NTPC, with repayment over 20 years, including five years' grace, at an effective interest rate of 10-1/4% per annum. The exchange risk will be borne by GOI. Project Description: Installation of the first stage (three 200 MW coal-fired generating units) of the Farakka thermal power station, in the State of West Bengal, together with ancillary equipment and related works, about 410 km of associated 400 kV transmission lines, and a training simulator. Potential risks associated with the timely implementation of the project will be minimized by NTPC's previous exper- ience in installation of a number of similar 200 MW units and by technical assistance from review consultants and management and information system consultants who have broad experience in major construction programs of this nature. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 1.1 - Estimated Costs: US$ millions Local Foreign Total Preliminary Works 11.6 - 11.6 Civil Works 60.7 1.0 61.7 Electrical and Mechanical Equipment 162.0 31.7 193.7 Coal Handling and Transportation 21.9 3.9 25.8 Transmission 26.5 3.5 30.0 Training Simulator 0.1 2.9 3.0 Engineering and Administration 30.0 0.2 30.2 Duties and Taxes 8.9 - 8.9 Base Cost 321.7 43.2 364.9 Contingency (physical) 16.6 2.5 19.1 Contingency (price) 98.8 16.3 115.4 Total Project Cost 437.1 62.3 499.4 Total Project Cost Net of Duties and Taxes 428.2 62.3 490.5 Financing Plan: US$ millions Local Foreign Total IDA Credit 187.7 37.3 225.0 Bank Loan - 25.0 25.0 GOI Loan and Equity 249.4 - 249.4 Total 437.1 62.3 499.4 Estimated Disbursement: US$ Millions Bank FY FY81 FY82 FY83 FY84 FY85 FY86 FY87 Annual 20 65 85 15 25 25 15 Cumulative 20 85 170 185 210 235 250 Rate of Return: 13%. Appraisal Report: No. 2976a-IN of May 27, 1980.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT AND LOAN TO INDIA FOR THE FARAKKA THERMAL POWER PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to US$225 million on standard IDA terms, and a proposed loan to India in an amount equivalent to US$25 million, to help finance a project for the construction of the first phase of a proposed Farakka thermal power station. Amortization of the loan would be over 20 years, including five years' grace, at the standard Bank interest rate. The proceeds of the credit and loan would be onlent by the Government to the National Thermal Power Corporation Limited, for 20 years, including five years' grace, at an interest rate of 10-1/4% per annum. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (2933-IN, dated May 1, 1980), was distributed to the Executive Directors on May 12, 1980. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of 663 mil- lion (in mid-1980) and an annual per capita income of US$180. Agriculture continues to dominate India's economy, employing over two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to all those engaged in agricultural activities, especially the landless or nearly landless who have only an insecure grasp on the means of existence. The share of agriculture in GDP at factor cost (measured in 1970/71 prices) has declined from 59.6% in 1950/51 to 40.7% in 1978/79. The share of industry has increased over the same period from 14.5% to 22.7%. But industrialization has not been rapid enough to absorb the growing labor force, nor to bring about the substantial economic transformation that has led to higher productivity and rapid urbanization in some other developing countries. The urban population was 18% of the total in 1960, and is 21% now. 4. Economic growth has been slow in the past. The trend growth rate of GDP was 3.7% per annum from 1950/51 to 1978/79. Slow growth in agriculture -- 2.5% per annum over the same period -- has constrained overall growth, not only because of the high share of agriculture in GDP but also because scarce foreign exchange has often been required to import food. Industrial valued-added has grown more rapidly, at 5.4% per annum between 1950/51 and 1978/79, but this growth has not been as high as in many other countries, nor as high as required if the overall growth of the economy is to be accelerated. Slow growth has 1/ Parts I and II of this report are the same as Parts I and II of the President's Report for the Rajasthan Water Supply Project (Report No. P-2831-IN), dated June 2, 1980.  - 2 - persisted despite a quite creditable domestic saving and investment performance. Gross domestic saving more than doubled from 10% of GDP in 1950/51 to 24% in 1978/79. Similarly, gross domestic investment as a fraction of GDP rose from 10% in 1950/51 to just over 24% in 1978/79. Foreign savings have never financed a large portion of domestic investment: a peak of about 20% was reached during the early 1960s; by the end of the 1970s, the proportion had returned to much lower levels. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP. 5. Except during periods of balance of payments crisis, exports have received relatively little emphasis in India, which has primarily pursued a strategy of import subsitution. As a result, India's share of world trade has fallen consistently since 1950/51. The volume growth of exports between 1950/51 and 1978/79 averaged only 3.0 per annum. The volume of growth of imports over the same period has slightly exceeded that of exports. During the early 1970s, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated drastically, spurring a relatively rapid period of export growth through the mid-1970s. For the five years ending in 1976/77 the volume of India's exports grew on average over 10% per annum, demonstrating that sustained rapid growth was possible. While expanding world markets, par- ticularly in the near-by Middle East, contributed to this process, adjustments in trade policies designed to improve the profitability of exports played a major role. Recent Trends 6. Over the period 1975/76 to 1978/79, growth in real GDP (at factor cost), agricultural value-added and industrial value-added averaged 4.7%, 2.8% and 7.3% per annum, respectively. These trends represent a marginally better growth performance than the long-term trends from 1950/51 to 1975/76. However, GNP is expected to have declined by about 3% in 1979/80 as a result of the drought-induced decrease in agricultural production and input con- straints in other sectors, bringing recent trends back in line with the long- term picture. Industrial production stagnated in 1979/80, largely due to shortfalls in the production of major inputs such as coal, steel and cement, as well as constraints in the provision of infrastructure, notably power and transportation. As a consequence of these developments, the remarkable price stability that characterized the Indian economy after 1975 came to an abrupt end at the close of fiscal year 1978/79. During the Spring and Summer of 1979 the price index rose sharply, so that by September it stood at 18.4% above that of the previous September. Foodgrain prices rose over the Summer and Fall of 1979 but in most markets still prevailed close to the Government's ration prices. Low income groups in urban areas were assured adequate sup- plies of grain at stable prices through the public distribution system. The substantial stocks of foodgrains also provided resources for a large-scale drought relief employment program for low income groups in rural areas. 7. In agriculture the positive results of large investments and appro- priate policies over the past few years are becoming increasingly evident and have withstood the test of a severe drought. Agricultural production, which had increased by 14.5% in 1977/78 and 3.4% in 1978/79 to record levels each year, fell about 8-9% in 1979/80. Foodgrain production is estimated to have  - 3 - declined from 131.4 million tons in 1978/79 to 118-120 million tons in 1979/80. Considering that 1979/80 was a year of acute drought, coming after two succes- sive years of record output, the foodgrain production achieved - still the fourth highest in Indian history - provides a measure of the contribution that expanded irrigation, extension and other inputs have made to Indian agriculture. Furthermore, the capacity of India's irrigation potential to counteract drought conditions was not adequately tested because of the diesel shortages which inhibited the utilization of groundwater resources. Rapid growth in the use * of basic inputs for agricultural production has continued. Additions to the area under irrigation have almost doubled from 1.3 million hectares during the five-year period ending in 1973/74 to about 2.5 million additional hectares a year during the most recent three-year period. Fertilizer consumption in 1979/80 exceeded five million nutrient tons, a level almost 80% higher than in 1975/76. 8. As the new decade begins, the Indian economy is shifting from a situation of resource surplus, which had been a temporary phenomenon of the late 1970s, to one of resource scarcity. Investment has again overtaken domestic savings, and the scope for further increases in the latter appears limited. Marginal savings rates have recently been well above 30% in the household sector. Future increases in savings will depend largely on enhanced profitability of public sector enterprises. Impeding resource scarcity is even more apparent in the foreign sector. Between 1975/76 and 1978/79 India's current account deficit had remained comfortably small in relation both to GDP and to a growing pipeline of aid commitments. This was primarily due to favorable terms of trade movements and rapidly growing net invisibles which masked adverse underlying trends in the volume of exports, which has barely grown since 1976/77. Particularly serious is the evident decline in the quantum of manufactured non-traditional exports which had contributed much to the export growth of the first half of the decade. A combination of strong domestic, and slack international demand, exacerbated until recently by apparent lessened interest in export promotion, have been the major casual factors. 9. In constrast, imports have grown rapidly in volume terms and there have been important changes in composition. As a result of the accumulation and maintenance of foodgrain stocks, foodgrain imports - which had been a traditional item in the balance of payments - have declined to insignificant levels since 1977/78. Reflecting the impact of the liberalized import policy adopted by the Government, non-foodgrain imports increased sharply, so that their level in 1978/79 was over 80% higher than in 1975/76. In large part, the liberalization in import policy and increase in imports were limited to raw materials, basic commodities and intermediate goods; consumer goods remained banned and capital goods imports were permitted only on a selective basis. Strong new pressures on the balance of payments have developed during 1979/80. The terms of trade again deteriorated markedly as a consequence of unexpectedly large increases in petroleum prices, which caused the oil import bill to double in 1979/80, accounting for more than 80% of the total estimated US$2.5 billion increase in imports, and bringing India's total import bill to about US$11 billion. Petroleum imports as a proportion of exports now exceed 50%.  -4- Development Prospects 10. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless has a highly diversified structure and is capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure--irrigation, railways, telecommunications, roads and ports--is extensive compared to many countries, although there is considerable scope for expansion as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institutional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and sufficient access to foreign savings, India has the capability for managing these considerable resources to accelerate its long- term growth. 11. The new Indian Government installed in January 1980 is in the process of formulating its policies and programs. A new Plan for the period 1981-86 is being prepared to replace the Draft Five-Year Plan for 1978-83. At this stage it is not possible to comment on the new development strategy; however, it is unlikely that the priorities accorded to agriculture and power will be lessened. Furthermore, developments in India as well as in the world economy during 1979/80 have brought to the surface urgent issues which will need the attention of policy-makers, irrespective of the broader context of development strategy that the new Government may adopt. Among these issues are the following: (a) the bottlenecks in infrastructure and related constraints in production of several basic industrial inputs; (b) the new policy options emerging in agriculture; (c) the need to substitute less costly energy sources for imported petroleum; and (d) the anticipated deterioration of the balance of payments in the near future. 12. The higher capital formation rates of the past few years augur well for future income growth. However, there are signs that, relative to existing demands, the past investment program has led to disproportionally low growth in certain crucial sectors, namely power, coal, transport services, steel and cement. Potential output growth in sectors which have benefitted from large investments in the recent past may not materialize unless these input bottle- necks are alleviated. In the case of coal, steel and cement, domestic produc- tion appears to be clearly justified on grounds of comparative advantage, and the aim of policy is self-sufficiency. All these are tradeable commodities. Although in 1979/80 they were not imported in sufficient amounts to eliminate the shortages, increased short-term reliance on imports may be necessary to alleviate slowdowns and dislocation in using industries. In the case of sectors in which there is no option to import--power and transportation-- the planning of capacity expansion becomes even more crucial. Although there is scope for improvement in the shortrun performance of these sectors, major investments in balancing and modernization programs as well as new capacity are needed in order to provide adequate and stable growth in the medium term. The presence of infrastructural constraints and shortages of basic industrial inputs demonstrates that the expansion of industrial outout leads to competing claims on scarce resources which must be efficiently allocated among different industries.  - 5 - 13. The substantial increase in the world price of petroleum in 1979, together with the expectation that this pattern will not be reversed in the near future, raises several issues concerning energy prospects for India. India imports the equivalent of about 50% of its petroleum consumption. In order to implement its policy of minimizing dependence on foreign oil, the Government intends to rapidly expand its oil exploration program, to increase the utilization of its vast coal reserves and to increase the development of India's considerable hydroelectric potential. However, recent shortages of coal and power are symptomatic of operational problems reflecting, in part, past planning and investment decisions which are inhibiting the timely imple- mentation of India's long-term conversion program. The interdependencies in the economy currently make petroleum demand a residual which is contingent on the operation of many other sectors and which has significant implications for the balance of payments. 14. In agriculture, despite the 1979 drought, economic policies, devel- opment programs and secular trends all seem favorable for sustaining a period of high growth during the 1980s. India should end the 1979/80 rabi season with grain stocks of about 15 million tons, without having imported foodgrains during the year. This is partly due to the bumper crop of 1978/79, but also reflects the trends of the last decade which point to a consistent improvement in foodgrain availability in the economy. In view of the acceleration in the use of agricultural inputs and the projected fall in the population growth rate, the long-run prospects for foodgrain supply and demand balances look favorable. Persistent shortage seems unlikely, and it is probable that a wide range of policy options will become much more practical as the overriding emphasis on foodgrains can be somewhat relaxed. These options include a slowly falling real price of foodgrains to increase the affordability of foodgrains to low- income families, further rationalization of domestic markets and prices, and diversification to the production of other higher value crops. This prospect will involve only a gradual shift in emphasis rather than a dramatic break with past policies. 15. Foreign exchange reserves still provide some cushion that can help the Government of India in short-term supply management, but this situation is likely to be short-lived. Rising import prices and uncertainties in the prospects for exports and invisible receipts have led to a serious and rapid deterioration in India's balance of payments prospects. Reserves were only marginally higher in March 1980 than the level of a year earlier and, in terms of import coverage, fell below the 8-month level for the first time since 1977. A sharp decline in the reserve level is expected in 1980/81. At best, India's reserves may provide a cushion for two more years, and even that is conditional on the maintenance of aid flows and workers' remittances and on moderation in oil price rises. 16. India's medium-term development prospects are mixed. Progress has been made and continues to be made, particularly in agriculture, but the economy faces a period of difficult adjustments in the coming years. Invest- ments required to relieve short-term supply constraints must compete with longer-term programs to accelerate growth and to develop India's considerable  physical and human resources. The balancing of these objectives will place a difficult burden on the framers of India's next Five-Year Plan. The primary focus must be on the implementation of appropriate domestic adjustment policies, although the aid community can and should play an important role in ensuring that India's efforts do not fail due to inadequate foreign resources. 17. The annual population growth rate declined from 2.2% in the late 1960s to below 2% at present and is expected to continue falling to around 1.6% by the latter half of the 1980s. Despite the declining trend in the rate of population increase, a net reproduction rate of one (replacement level) will only be achieved around the year 2020. At that time, the population of India is estimated to reach 1.2 billion persons, an increase of about 81% over the mid 1980 level of 663 million. Family planning has played an important role in achieving the fertility decline in the past decade, and the extent of a further decline will be greatly influenced by the continuation of a success- ful official family planning program. The family planning performance data for 1978/79 and the first ten months of 1979/80 clearly indicate a come back from the sharp decline observed in virtually all major contraceptive methods during 1977/78. Except for male sterilizations, the number of acceptors for all contraceptive methods surpassed the 1974/75 levels in 1978/79. While the increase in the total acceptors of IUD and conventional contraceptives was modest, female sterilizations increased by about 40% between 1977/78 and 1978/79. Data for the first ten months of 1979/80 confirm a secular upward trend in overall performance. So far, policy makers have not made major attempts to accelerate the male sterilization program. Instead, they have opted for policies that would yield relatively modest but sustainable results with increased emphasis on non-terminal methods. 18. Beyond the effects of overall economic growth and constrained popula- tion growth, the reduction of poverty in India requires special attention to ways of raising the income and productivity of low-income groups. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. In addition to marginal holdings of physical assets, the poor are ill-endowed with human resources, being disproportionately represented among the illiterate, the malnourished and those having otherwise poor health status. Improvements in the living standards of the poor will depend to a large extent on the over- all growth of the economy, mainly on productivity increases in agriculture and non-farm rural employment, but also on the expansion of employment oppor- tunities in urban areas. These developments will have to stem largely from market forces which, however, can be greatly facilitated by appropriate gov- ernment policies and investment priorities. There is also a role for direct government actions in faster implementation of land reform (though the scope for significant reduction in poverty through redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural  - 7 - health facilities and the provision of secure village water supplies. Recent innovations, including the community health volunteer program and the national adult literacy campaign, are encouraging evidence that well-targetted, rela- tively low-cost programs can lead to enhanced prospects for India's poor. PART II - BANK GROUP OPERATIONS IN INDIA 19. Since 1949, the Bank Group has made 57 loans and 118 development credits to India totalling US$2,529 million and US$7,255 million (both net of cancellation), respectively. Of these amounts, US$1,055 million had been repaid, and US$3,226 million was still undisbursed as of March 31, 1980. Bank Group disbursements to India in the current fiscal year through March 31, 1980, totalled US$517 million, representing an increase of about 44% over the same period last year. Annex II contains a summary statement of disbursements as of March 31, 1980, and notes on the execution of ongoing projects. 20. Since 1959, IFC has made 18 commitments in India totalling US$72.5 million, of which US$17.4 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$40.6 million, US$31.5 mil- lion represents loans and US$9.1 million equity. A summary statement of IFC operations as of March 31, 1980, is also included in Annex II (page 5). 21. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit operations and in providing direct support to major and medium irrigation. Marketing, seed development, agricultural extension, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capacity utilization in industry. The Bank Group has also been active in supporting infrastructure development for power, telecommunications, and railways. Family planning, water supply development, and urban investments have also received Bank Group support in recent years. 22. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, power, water supply and other infrastructure sectors remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs, particularly water and credit for on-farm investments, will continue to receive emphasis. Improved water management and intensification and streamlining of extension systems form an important institution-building aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefit- ting small farmers. The Bank Group's continuing role in the fertilizer sector also assists India in the more efficient provision of another key input in the agricultural growth process. Projects supporting water supply, sewerage,  - 8 - and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infra- structure and industrial investments will focus on those subsectors which have recently emerged as key constraints on India's overall growth, primarily power and transportation. 23. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid 1970s. However, the need for increased foreign assistance to adjust to an even greater deter- ioration in balance of payments prospects during the 1980s by augmenting domestic resources and stimulating investment, remains. As in the past, Bank Group assistance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, and water supply. 24. India's poverty and needs are such that as much as possible of India's external capital requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and India should be regarded as credit- worthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was 12% in 1978/79 and is projected to remain below 20% through 1995/96. As of March 31, 1980, outstanding loans to India held by the Bank totaled US$1,516 million, of which US$556 million remained to be disbursed, leaving a net amount outstanding of US$960 million. 25. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 62%, 27% and 38%, respectively, in 1978/79. On March 31, 1979, India's outstanding and dis- bursed external public debt was US$15.3 billion, of which the Bank Group's share was US$4.6 billion or 30% (IDA's US$4.0 billion and IBRD's US$0.6 bil- lion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1978/79, about 17.5% of India's total debt service payments were to the Bank Group. PART III - THE POWER SECTOR Background 26. The performance of the Indian power supply industry and the economy as a whole are closely linked, and economic growth and improvement of the  - 9 - standard of living depend critically on the development of the power sector. Since alternative sources of energy are not readily available in the amounts needed, shortage of power has an immediate impact on activities of the economy. In recent years, energy matters have been receiving top priority consideration in policy planning of Central and State Governments, on a par with food pro- duction and distribution. Resources allocated to the power sector have signi- ficantly increased during this period. 1/ While per capita consumption of electricity has been rising in India, it remains among the lowest in the world at about 130 kWh per annum. Although investment in the development of the power sector has been emphasized, demand for power has been outstripping sup- ply. The direct loss of value added due to power shortages is estimated at about 3% of GDP. Development of the Power Sector 27. In the past, investments in power generation, transmission and dis- tribution were made largely by the States and, while transfer of power between States took place as the power system expanded and demand grew, there was limited attempt at the development of power on a broad Regional or national basis. Promising hydro power sites were identified throughout India, but budget constraints, water rights problems between States, and other consider- ations prevented any large-scale development, leaving hydro power potential largely untapped except for relatively few developments. 28. Overall Power Supply and Demand of Power. In the 1950s and 1960s, installed capacity and power generation managed to keep pace with the nation's demand for power, both growing at an average annual rate of about 12%. Since 1970, the situation has deteriorated. Delays in commissioning new power proj- ects, operation and maintenance problems and insufficient investment under severe budget constraints have led to a critical situation in which demand for power outstrips supply. This was exacerbated by monsoons and an unstable coal supply caused by disruptions in coal mining and transport. Between 1970/71 and 1974/ 75, growth in power generation averaged only 5% annually. In the follow- ing years, 1975/76 and 1976/77, the situation improved as the result of two successive good monsoons, improved coal supply, and a concerted effort to improve project implementation, thermal capacity utilization and overall power system management. Capacity grew by 10% in 1975/76 and 8% in 1976/77, while generation increased by 13% and 11.5%, respectively, reflecting improved capacity utilization. In 1977/78, however, generation increased by less than 4% in spite of a 9% increase in capacity, due mainly to longer outage periods than normal and longer periods required for commissioning new plants than expected. The higher growth trend resumed in 1978/79, with an increase of about 12% in installed capacity and 7% in power generation. Even so, power shortages persisted in many parts of the country, particularly in the Eastern Region, and India's economic activity, particularly in the industrial sector, was adversely affected. Total installed generating capacity as of March 1979 was about 29,000 MW, including non-utility plant. Of this total generating capacity, about 60% was conventional thermal, 38% hydro and the balance nuclear. 1/ From 16% of public sector outlays during the Fourth Plan to 19% in the Fifth Plan and an estimated 23% earmarked in the draft Sixth Plan.  - 10 - Although additional new generation capacity of about 10% (3,000 MW) is expected to have been commissioned in 1979/80, power shortages will continue to prevail. Industry consumes about 66% of all electricity sold, while agriculture (mainly irrigation) accounts for another 14-15%. As a result of accelerated agricul- tural development programs, there has been a marked growth of power consumption in the rural areas where more than 80% of India's population live. The number of electrified villages, for example, grew from just over 3,000 in 1950/51 to some 230,000, or over one-third of all the villages in India, by March 1979. During the five-year period 1979/80-1983/84, new generating capacity is ex- pected to grow at an annual rate of about 11% to total some 18,900 MW, of which about 13,000 would be thermal and 4,700 MW hydro and 900 MW nuclear. The construction of some 15,000 km of 400 kV transmission is planned to dis- tribute the power output through the integrated Regional systems. 29. Power Supply and Demand in the Eastern Region. In the Eastern Region, installed capacity as of March 1979 was 4,700 MW, consisting of 3,800 MW thermal and 900 MW hydro. During 1979/80-1983/84 new capacity of about 3,000 MW is expected to be commissioned, which would bring the installed capacity to about 7,700 MW. In 1980/81, the Eastern Region is likely to have a capacity deficit of some 8%, and the anticipated shortfall is still likely to be 8% (or about 400 MW) in 1983/84. Power shortages will, therefore, continue to persist until well beyond 1984. 30. Recent Development. With the rapid growth of the power sector accompanied by the increasing complexity of its operation, the need to under- take an integrated national approach to sectoral development is recognizel by GOI. Some encouraging developments have been initiated. For example, the unified operation of power systems on a Regional basis has commenced. The Southern Regional grid has been in operation since 1972 with interconnected 220 kV transmission, and progressive integration of power systems in other Regions is intended to pave the way for a national grid. GOI undertook under the Fourth Power Transmission project (Credit 604-IN) to carry out, with assistance of consultants, a 400 kV system study designed to establish primary grid configurations to be adopted in developing the national power grid. The 400 kV system study was commenced by CEA and the first phase of the study has been completed. The study provides essential inputs for formulating sound policies for future development of the sector; GOI intends to continue it as part of ongoing long-term national power planning. The operation of Regional systems, which will be ultimately integrated into a national grid, requires large numbers of technical personnel trained to use sophisticated load dispatch equipment to control interconnected systems operation. A UNDP project designed to assist CEA in developing programs for staff training for operation of the future load dispatch centers is expected to be implemented shortly upon sub- mission of a project proposal by GOI. Sector Institutions 31. The institutional structure of the Indian power sector is complex. One of the main reasons is that electricity supply is a concurrent subject, within the jurisdiction of both the Central Government and the State Govern- ments under the Indian Constitution and the Electricity (Supply) Act, 1948.  - 11 - This means that the responsibility for supplying power is shared between the Central Government and the State Governments, and full agreement between the Center and the States is required for the implementation of most actions. With the rapid expansion of the power sector, there has been the increasing need to coordinate the activities in the power industry beyond State bound- aries, and various agencies have been established with a view to promoting integrated power development in the country. The principal agencies in the sector are: (i) the State Electricity Boards (SEBs); (ii) Regional Electricity Boards (REBs); (iii) the Central Electricity Authority (CEA); (iv) the two Central power corporations--the National Thermal Power Corporation (NTPC) and the National Hydro Power Corporation (NHPC); and (v) the Rural Electrification Corporation (REC). 32. State and Regional Electricity Boards. The SEBs were established by the State Governments under the Electricity (Supply) Act, 1948. Their major task at the time of establishment was to bring together the small individual, often independent privately owned power plants and facilities within their respective States. The SEBs continue to promote the coordinated development of the generation, supply and distribution of power within their respective States and to control and regulate private sector power supply undertakings. At the present time, the States own or control about 90% of India's power generation facilities. While the SEBs are corporate entities in their own right and enjoy some autonomy in the management of their day-to-day operations, they are under the effective control of their State Governments in such policy matters as capital investment, finance, tariff changes and personnel. As a means of improving collaboration between the SEBs and establishing power systems on a broader Regional basis, four Regional Electricity Boards (REBs) were established between 1964 and 1966 by common resolution of the State and Central Governments, to help develop integrated power systems in their respective Regions, and thus prepare for the transition from separate power systems at State level to Regional systems and finally to an interconnected national grid. The chairmanship of each REB is assumed in rotation by the Chairmen of the SEBs in the Region, and engineers of constituent SEBs are seconded to the REBs. At present, the REBs function in an advisory capacity for coordination of maintenance programs, generation schedules, interstate power transfer and pricing. The potential role of the REBs in the light of the progressive integration of Indian power sector operations is being reviewed by the Government of India (GOI). The SEBs of Orissa, West Bengal and Bihar and the Damodar Valley Corporation (DVC) are the major power supply authorities in the Eastern Region, and will be the recipients of power from the Farakka station. 33. Central Electricity Authority. The CEA was set up in 1950 to be responsible for developing a national policy for power development, and to coordinate the activities of the various planning agencies involved in elec- tricity supply. As a result of the amendments to the general provisions of the Electricity (Supply) Act, 1948, which became effective in October 1976, the scope of the CEA's functions was expanded. In addition to its general responsibility outlined above, CEA was made responsible for the formulation of power development plans, optimization of investments in the power sector, training of personnel, interconnected system operations, and research and development. The SEBs are required to submit their investment proposals to the CEA for technical and economic appraisal in a national context.  - 12 - 34. NTPC and NHPC. In order to cope with the persistent inadequacy of power supply to meet the growing demand--a situation which has increasingly prevailed since 1970--GOI made a policy shift and has undertaken to supplement the efforts of the States by constructing large-scale Centrally-owned thermal power stations at coal fields and hydro stations in the four Regions, as well as associated high voltage transmission lines--a step to interconnect the systems beyond conventional State boundaries. This would lead ultimately to an integrated national power grid. Accordingly, the National Thermal Power Corporation (NTPC) and the National Hydro Power Corporation (NHPC) were estab- lished in November 1975 under the Companies Act, 1956, as public corporations, wholly owned by GOI, with authority to design, construct, own and operate generating and associated transmission facilities and supply power in bulk directly to the States. The Centrally owned generating stations, including the Farakka plant, are designed to supplement the States' activities and add on new power generation capacity effectively within the shortest period of time. They will be integrated in the future national power system and will supplement power supply under bulk supply contracts to the States each in the Region in which it is located. 35. Rural Electrification Corporation. To help SEBs undertake the task of rural electrification, the REC was established in 1969 under the Companies Act, 1956 as a public corporation, wholly owned by the Government. Its main institutional objective is to finance rural electrification schemes prepared by SEBs throughout India, functioning as a financial intermediary with tech- nical expertise, and ensuring the efficient on-lending of funds drawn primarily from GOI. In undertaking the task, REC is directed to coordinate its lending operations with the activities of other agencies, such as the Agricultural Refinance and Development Corporation (ARDC), which provide financing for rural development. Although the amount of REC financial support is small in relation to total SEB operations in the power sector, REC supports today more than half of total rural electrification expenditures. Bank Group Operations and Strategy in the Power Sector 36. Since 1954, the Bank has made nine loans to India for power projects amounting to US$334.5 million and IDA thirteen credits totalling US$1,471 mil- lion. Of this amount, US$1,170.5 million is for financing of generating plant; US$23 million for the purchase of construction equipment for the Beas hydro- electric project; US$380 million for the provision of high voltage trans- mission; and US$232 million for the support of rural electrification schemes. Nine loans and credits for generating plant, the Beas project (Credit 89-IN) and the first three transmission projects (Loan 416-IN and Credits 242-IN and 377-IN), have been completed. The Fourth Transmission project (Credit 604-IN) is proceeding satisfactorily notwithstanding initial delays in preparation of specifications and in contract awards for highly sophisticated load dispatch equipment; the credit proceeds of US$150 million were fully committed by the end of 1979. The loan to the Tata Electric Companies under the Third Trombay Thermal Power project (Loan 1549-IN), which was approved in April 1978, is progressing satisfactorily. The First Singrauli (Credit 685-IN of April 1977) and Korba (Credit 793-IN of May 1978) projects are also on schedule. The First Rural Electrification project (Credit 572-IN of July 1975) has been fully committed. The Ramagundam project (Credit 874-IN and Loan 1648-IN of February  - 13 - 1979) and the Second Rural Electrification project (Credit 911-IN of June 1979) are in the early stages of implementation. The Second Singrauli project (Credit 1027-IN) was approved recently. 37. The Bank Group has had a continuing dialogue with the Government in seeking solutions to a number of complex and politically sensitive problems which have confronted the Indian electricity supply industry since Indepen- dence. The sensitivity of Center-State relations and the political constraints arising from the fact that electricity supply is within the concurrent juris- diction of the Central and State Governments, have dictated a policy of seek- ing progress through cooperation. More specifically, the Bank Group's main objectives of lending operations to the Indian power sector are: (a) accel- erating the installation of generating capacity and promoting measures to improve the technical levels of operation and maintenance of existing plant; (b) fostering development of comprehensive long-range Regional and national system plans which would assure implementation of a least-cost power devel- opment program; (c) strengthening of the sector organization; and (d) strengthening of the finances of the institutions involved in the sector, particularly of the SEBs. 38. Some noteworthy results have been achieved, which include: (i) amendment of the general provisions of the Electricity (Supply) Act in 1976, to strengthen the role of the CEA and to authorize the establishment of NTPC and NHPC; (ii) the establishment of the Regional Electricity Boards and later of the Centrally-owned power companies, which mark the first important steps towards nationwide power operation; (iii) the recent amendments to the finan- cial provisions of the Electricity (Supply) Act, which provide for the dev- elopment of SEBs on a more commercial basis through financing from internal sources a reasonable proportion of their investments; (iv) tariff studies by a number of SEBs with a view to reassessing tariff policies; (v) preparation of action plans by a number of SEBs, which are designed to restore the 9-1/2% rate of return through tariff increases, rationalization of manpower require- ments and other cost-effective schemes; and (vi) progress of NTPC's generation/ transmission construction program with Bank Group assistance. Implementation of the program will make a significant contribution to the gradual elimination of the shortfall of power; further improvements are anticipated. 39. Going beyond these achievements, Indian authorities have recognized that all aspects of the sector need to be reviewed in depth and that satisfac- tory solutions have to be found for outstanding sector development problems. Consequently, GOI established a high-level Committee on Power under the chair- manship of V.G. Rajadhyaksha, former Member of the Planning Commission, with seven working panels of leading experts in both public and private sectors to review: (a) power planning; (b) project formulation and implementation; (c) operation and maintenance; (d) organization and management; (e) finance, financial management and tariffs; (f) rural electrification; and (g) research and development. Draft reports by the seven expert panels assembled for this purpose have been completed and have been reviewed by the Committee which is expected to submit its findings and recommendations to GOI during 1980. The Bank Group will take a continuing interest in the Committee's findings and GOI's follow-up actions.  - 14 - 40. There remain a number of areas which have been a particular cause of continuing concern to the Bank Group and also have been the subject of contin- uing dialogue with the Government. These include: (i) nationwide long-range planning for power development; and (ii) the financial position of some SEBs. In the continued effort of the Bank Group in helping GOI deal with the long- range problems of the power sector in India, it was decided to concentrate on the above two areas. During appraisal and negotiations for the Second Singrauli Thermal Power project as well as this project, discussions were held with GOI, CEA, NTPC and NHPC on the content of a long-range national power development study designed to prepare a least-cost power development program and CEA's capability to undertake such study with its own staff. The govern- ment agreed with the terms of reference for long term development suggested by the Bank Group and stated that the study which has been commenced would be completed by April 1982. From a commercial point of view, the financial performance of several SEBs has been marginal and even in years where 9-1/2% rates of return were achieved, a number of SEBs were not able to meet their debt service requirements. There are several reasons for such performance-- e.g., insufficient generating capacity which does not permit utilization of the market potential to the fullest extent, maintenance problems, lack of monsoon rains leading to severe load shedding and blackouts, disruptions in transport and coal mining resulting in insufficient coal supply, and low tariff levels. There is scope for improvement in the finances of the agencies concerned through increased generation and sales, reduced auxiliary consumption and lower transmission losses. There is also scope for more stringent cost controls and more effective management, particularly in Bihar. Recognizing the need to enhance financial performance of the Eastern Region SEBs, GOI through CEA held discussions with the State Governments concerned in late 1979 and agreement was reached about enhanced monitoring and improved accountability to achieve improved operational and financial management of the SEBs. In the context of this project, special attention was directed to the Eastern States, the beneficiaries of Farakka power (paras 53-55). PART IV - THE PROJECT 41. The project was appraised by a mission which visited India in May/ June 1979. A report entitled "India - Farakka Thermal Power Project Staff Appraisal Report" (No. 2976a-IN, dated May 27, 1980) is being distributed separately to the Executive Directors. Negotiations were held in Washington in May 1980. GOI and NTPC were represented by a delegation coordinated by Mr. S.C. Jain of the Department of Economic Affairs, Ministry of Finance. A supplementary Project Data Sheet is attached as Annex III. Project Description 42. The proposed project represents the first stage of the fourth large- scale thermal power development in India, comprising three 200 MW coal-fired generating units, together with ancillary equipment and related works, about 410 km of associated 400 kV transmission lines, and a training simulator. The site of the power station is in the Murshidabad District in the State of West  - 15 - Bengal, on the west bank of the Farakka feeder canal. The total project is expected to be commissioned by the end of 1985. Project Cost and Financing 43. The project cost, including contingencies but excluding duties and taxes, is estimated at about US$491 million equivalent, of which about US$62 million represents the estimated foreign exchange costs. Duties and taxes add about US$9 million to the financing required. Physical contingencies of 10% on civil works, and of 5% on plant and transmission have been included. Costs for equipment and erection have been escalated at 6% for 1979, 10% for 1980, 7% for the years 1981-1983 and 5% for the years after 1983. 44. The proposed credit and loan of US$250 million would provide about 51% of the cost of the project, excluding interest during construction and duties and taxes. The balance of the funds required, aggregating about US$249 million equivalent, would be provided by the Government in the form of loan and equity capital. Procurement and Disbursement 45. The major items financed under the proposed credit and loan are three 200 MW generating units; electrical and other power station equipment; coal handling and transportation equipment, transmission facilities; a training simulator and consultants' services for plant engineering work. All equipment financed under the proposed credit and loan, would be procured by NTPC through international competitive bidding in accordance with the Bank/IDA guidelines. The proceeds of the credit would be disbursed against 100% of: (a) the c.i.f. cost of imported items; (b) the ex-factory cost, net of duties and taxes, of items procured from Indian suppliers; and (c) the cost of technical advisory services by consultants. Indian manufacturers competing under international competitive bidding would be granted a preference margin of 15% or the current rate of import duty, whichever is less. It is expected that local manufac- turers of equipment and machinery would submit the lowest conforming bids for most of the items financed under the credit and loan. Documents for indivi- dual contracts estimated to cost US$1,500,000 or more will be subject to prior review by the Bank Group. All work not financed from the proposed credit and loan will be subject to NTPC's procurement procedures, which are satisfactory. Project Implementation 46. NTPC will implement the proposed project as part of its ongoing power development program. NTPC has a Board of Directors, which presently consists of seven members, two of whom are part time. A competent and experienced Chairman and Managing Director was appointed in early 1976 and NTPC is making good progress in building up its organization and manpower since then. As a growing organization, NTPC places special importance on the training of engineers, supervisors and operating staff as well as managerial and adminis- trative staff, and is implementing an acceptable training program covering spheres of activity such as planning, design, constuction and start-up operation.  - 16 - 47. A master plan for project implementation has been prepared by NTPC. Preparatory civil works have commenced at the plant site. The detailed engineering and design work carried out for the ongoing Bank Group-assisted thermal power development is largely applicable to the proposed project. NTPC has developed a comprehensive project management and information system, including program coordination and supervision of construction of the power stations. However, in view of the magnitude of its construction program, NTPC agreed to appoint, by October 15, 1980, consultants with broad exper- ience in major construction programs of this nature to review its project management and information system and their initial implementation (Section 2.02 of Project Agreement). 48. Large reserves of coal are available at the Rajmahal coal field, some 50 km from the Farakka plant and coal will be transported by a "merry-go- round" rail transport system which will be installed for this purpose. The Government has agreed to take all necessary steps to ensure adequate coal supplies for the final installed capacity of the Farakka plant (Section 3.04 of Development Credit Agreement). No problem is foreseen with regard to the availability of adequate quantities for the proposed thermal power station. Cooling water arrangements are adequate. 49. Adequate measures will be taken to minimize potential adverse eco- logical effects of the project. The measures include stack emission control by electrostatic precipitators and appropriate ash disposal facilities. The approval of the National Committee on Environmental Planning and Coordination has been obtained, and appropriate occupational safety standards will be strictly enforced (Section 2.10 of Project Agreement). NTPC Finances 50. NTPC would begin to earn revenues in 1981/82 when commissioning of the first 200 MW generating unit under the First Singrauli project (Credit 685-IN) is scheduled. As the generating capacity increases, NTPC's annual revenue is expected to increase at a faster rate than its operating expenses and produce rates of return on the capital base rising gradually to reach 9.5% by 1988/89 and about 11% by 1990/91. NTPC has agreed to achieve in 1988/89, and maintain thereafter, a rate of return of not less than 9.5% on the cost of the average net fixed assets in service, and to set tariffs from the time of commissioning of its first 200 MW generating unit at the Singrauli thermal power station at levels not lower than those estimated to be required to meet this target (Section 4.03 of Project Agreement). This would result in lower returns in the earlier years, but in view of the high initial capital invest- ment in the early stages of NTPC's power development and the time involved in commissioning generating capacity, this approach to setting the tariff and reaching the target rate of return by 1988/89 is appropriate. 51. In accordance with the provisions of the Companies Act, the Govern- ment would provide funds so that NTPC's debt/equity ratio would not exceed 1:1. NTPC's initial authorized share capital of Rs 1,250 million (US$149 million) was increased in May 1979 to Rs 3,000 million (US$357 million). Further progressive increases of share capital are planned during the construction period, reaching about Rs 22,000 million (US$2,620 million) by 1983/84. NTPC would inform the Association of any proposal for modification of existing  - 17 - limitations on NTPC's borrowing powers prior to submission to its annual shareholders' meeting (Section 3.03 of Project Agreement). The proceeds of the proposed credit and loan would be onlent to NTPC, and conclusion of a subsidiary loan agreement satisfactory to the Association is a condition of effectiveness (Section 5.01 (a) of Development Credit Agreement and Section 6.01 of Loan Agreement). The GOI loan would be for a term of 20 years, including five years grace, with interest at the rate of 10-1/4% per annum. This is the standard rate at which GOI currently lends to public sector enterprises. The exchange risk will be borne by the Government. Inflation in India between 1974/75 and 1978/79 averaged only 1.5% per annum. With the sharp increase in oil prices during 1979 coinciding with a severe drought, prices spurted by almost 15% between April and December 1979 and are anti- cipated to increase another 10% during 1980/81. Given past GOI determination and success in containing inflation, and the likelihood of a strong agricul- tural recovery and improved supply of industrial inputs, the rate of price increase over the project period is expected to average somewhat below 7% per annum. 52. As in the case of the previous Bank Group-assisted projects, Farakka's power output will be supplied in bulk to the Eastern Region SEBs through 400 kV transmission lines. GOI has undertaken to obtain, not later than October 10, 1980, undertakings from the recipient SEBs and Damodar Valley Corporation (DVC) in the Eastern Region that they purchase at least 85% of the power generated by the project units (three 200 MW units) of the Farakka station (Section 3.05 of Development Credit Agreement). The remaining 15% would be sold in accordance with priorities to be determined by GOI to the States with the greatest need. NTPC has agreed to sell the output of power under bulk supply contracts satisfactory to the Association (Section 2.09 of Project Agreement). NTPC has prepared a draft bulk supply contract which is presently being examined in the context of a proposal to study the feasibility of an agency selling power from all central projects in a Region at a common rate and to ensure that the tariff is consistent with overall economic consid- erations and the financial viability aspects of NTPC. GOI has indicated that agreement on the bulk supply of Farakka power would be reached at least six months before the start of commercial operation of the first 200 MW unit of the Farakka station scheduled for December 1984. The Bank Group will review the commercial arrangements before they are finalized. Operational and Financial Performance of SEBs 53. The operational and financial performance of SEBs has been the subject of a continuous dialogue between GOI and the Bank Group. The Bank Group has sought, under the previous lending operations, to improve their performance and work toward a rate of return target of 9.5%. While actual performance has varied among SEBs, the overall trend showed an improvement through 1976/77, when seven out of the sixteen major SEBs reached the target rate of return, compared with only four in the previous year, 1975/76. A further two reached their targets in 1977/78 with the help of rural electri- fication subsidies from their State Governments. Another SEB is expected to achieve the agreed rate of return in 1979/80. Returns generally contracted in 1977/78 and 1978/79 due to the adverse financial impact of forced plant outages caused by the natural disasters of flooding and drought, increased  - 18 - purchases of relatively expensive thermal power and disruptions in the coal mining industry and in the transport sector, leaving ten out of the sixteen SEBs, including two Eastern Region SEBs--Orissa and Bihar--unable to reach the agreed rate of return. 1/ The situation faced by some hard-hit SEBs did not constitute "normal circumstances", and it can be justifiably argued that the achievement of the 9.5% could not be realistically expected. 54. There are special problems associated with the power industry in the Eastern Region which require special treatment. This Region is the most vulnerable area in India as regards power availability. Installation of additional generating capacity has been constrained primarily because of a lack of financial resources. The financial performance of the Eastern Region SEBs and DVC was discussed in detail with GOI and CEA officials during appraisal and negotiations for the Second Singrauli Thermal Power project as well as this project; the performance of the DVC, a statutory body which was set up under GOI Act in 1948 and operates about 40% of the installed capacity in the Eastern Region, was satisfactory during recent years with a rate of return exceeding 20%. This creditable performance is likely to be maintained for the immediate future. On the other hand, the financial records of the Eastern Region SEBs, particularly that of Bihar indicate their weak position partly because generat- ing stations have had operational problems which have curtailed electricity output. The Bihar SEB has undertaken a thorough investigation of these prob- lems, and CEA was made responsible for monitoring this program of studies with a view to the introduction of an action plan for overall improvement. In the circumstances, the immediate restoration of a rate of return of 9.5% cannot realistically be expected. During negotiations, the GOI representatives undertook to send a report on the position of the Bihar SEB to the Bank Group within the next six months. In the case of the Orissa SEB, the rate of State electricity duty recovered from consumers is as high as 5% of capital base, as against a target of 1.5%. Consequently, if the gross return is compared with the target of 11% (9.5% plus 1.5% for duties) the annual projections through FY1983 show that the target rate of return will be achieved in FY1982. This performance is acceptable, considering the periodic low availability of hydro power in recent years in what is a predominantly hydro system, coupled with low output of some thermal plant. The West Bengal SEB exceeded its 9.5% rate of return in FY1979. However, because of the doubling of installed capacity projected during the three years to March 1983 and the phased build up to stabilized generation by the new plant, additional revenues will not be received in proportion to increases in capital base. While efforts are being made to complete modifications and improvements in existing installed capacity in order to improve availability factors and boost revenues, rates of return projected for the four years ending March 1983 of 7% rising to 9.3% must be regarded as reasonable. 1/ Duties are levied on electricity sales in all States, except one. Inclusion of such taxes as a benefit to the States/SEBs would increase the returns by up to 5 percentage points. Furthermore, a recently enacted GOI tax on kWh generated is equivalent to a return of additional 2-3 percentage points.  - 19 - 55. In November 1979, GOI through CEA held discussions with the State Governments and their SEBs. There was general consensus that concerted efforts were necessary to improve the operational performance of the Boards. While improvements in operational efficiency and financial performance can be brought about over time, GOI and the State Governments and their SEBs have agreed to introduce various monitoring measures, including a system of accountability, a monthly reporting system on project implementation and capacity utilization, and setting of targets for reducing transmission and distribution losses. Measures are in hand to accelerate the stabilization of newly installed thermal power units, to better monitor breakdowns, to ensure adequate supplies of spares and to initiate rehabilitation programs for units which require it. Training programs at all levels are being strengthened. The introduction of the above measures would bring greater surveillance over the operations and finances of the SEBs. The Bank Group will receive comprehensive periodic information on the power sector which will enable it to monitor progress in the implementation of these improvement measures. The financial provisions of the Electricity (Supply) Act, 1948, have been amended to put the operations of the SEBs on a more commercial basis by enabling them to finance from internal sources a reasonable portion of their investment program. The manner in which this will be achieved is a subject which has been under evaluation by both the State Governments in conjunction with their SEBs, and by the Rajadhyaksha Committee. Project Justification and Risks 56. The proposed project is the least-cost solution to ease the acute power shortages in the Eastern Region within reasonable time. Compared to the practical alternative of smaller coal-based stations that would be in- stalled by individual SEBs in the absence of the project, the present value of the cost stream of the proposed project is the least-cost alternative at discount rate up to 35%. The economic rate of return of the project, using tariff revenues together with observed willingness to pay for continuous power supply as a proxy for economic benefits, is 13%. This must be regarded as well below the true economic rate of return on the proposed expansion of power generating capacity, since additional benefits which are expected from proj- ect implementation but whose quantification is difficult--e.g., industrial, agricultural and commercial output maintained by the reduction of shortages-- are not included. 57. Project risks are no greater than can normally be expected with operations of this type. The principal risk would be the possibility of delay in the scheduled commissioning of plant. The progress of project implementa- tion will be closely monitored during engineering and construction, and the use of experienced review consultants and management and information system consultants would help minimize delays in project implementation. The fact that a number of 200 MW units will have been in operation in India before the project is commissioned will reduce the possibility of operational dif- ficulties during start-up and the early stages of operation.  - 20 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 58. The draft Development Credit and Loan Agreements between India, and the Association and the Bank, respectively, the draft Project Agreement between the Association, the Bank and NTPC, the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Association and the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank are being distributed to the Executive Directors separately. 59. Special conditions of the project are listed in Section III of Annex III. Execution of a Subsidiary Loan Agreement between India and NTPC has been made an additional condition of effectiveness of the credit and loan (Sections 5.01 of Development Credit Agreement and Loan Agreement). 60. I am satisfied that the proposed credit and loan would comply with the Articles of Agreement of the Association and the Bank. PART VI - RECOMMENDATION 61. I recommend that the Executive Directors approve the proposed credit and loan. Robert S. McNamara President June 9, 1980  ANNEX I INDIA - SOCIAL INDICATORS DATA SOM Page 1 of 5 REIENCE GRDUPS (ADJUSTED AyU&GES LAND AMEA (THOUSAND SQ. m3.) nmDL - NOST RRCERT ESTIMTE) TOTAL 3287.6 SAME SAME IZXT HIGHE AGRECULTURAL 1818. 3 MOST RECmaT GEOGRAC INcoME INCOME 1960 Lb 1970 A ESTUITE /b REGION I CROVP ld GROUP S GNP PeR CAPITA (US) 60.0 90.0 180.0 191.1 209.6 467.5 ENEaGY CONSUMVPTION P CAPITA (KiLoGRS or COAL EQV4LEII) 142.0 181.0 218.0 69.1 83.9 262.1 POPULATION AND VITAL STATISTICS POPULATION, ID-TEA (DLIONS) 434.9 547.6 631. .L,. IUSII POPULATION (PERCENT Or TOTML) 17.9 19.7 20.7J 13.2 16.2 24.6 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 973.0 STATIONARY POPULATION (MILLIONS) 1643.0 TEAR STATIONARY POPULATION IS REACHED 2150 POPULATION DENSIY PeR SQ. IN. 132.0 167.0 192.0 86.6 49.4 45.3 PER SQ. DI. AGRICULTURL LAND 247.0 308.0 347.0 330.2 252.0 149.0 POPULATION AGE STRUCTUR (PUCMcT) 0-14 TES. 40.8 62.5 42.0 44.3 43.1 45.2 15-64 TRS. 55.7 54.6 55.0 52.4 53.2 51.9 65 YES. AND ABOVE 3.5 2.9 3.0 3.1 3.0 2.8 POPULATION GROWTH RAE (PERCENT) TOTAL 1.9 2.3 2.1 2.4 2.4 2.7 UBAN 2. 5L 3.3 3.1 4.1 4.6 4.3 CRUDE 3IRTR RATe (PUa THOUSAND) 43.0 40.0 35.0 44.4 42.4 39.4 CRUDE DEATE RATE (PEu TSOUSAND) 21.0 17.0 14.0 16.4 15.9 11.7 GROSS REPRODUCTION RATe 3.2 2.9 2.4 3.2 2.9 2.7 FAMILY PLANNING ACCEPTORS. ANNUAL (THOUSANDS) 64.0 3782.0 45LB.0 USERS (PERCENT OF MARRIED WOHEN) .. 12.0 16.9 7.9 12.2 13.2 FOOD AND NUTRITION INDEX OF FOWD PRODUCTION PER CAPITA (1969-71-100) 100.0 102.0 101.0 99.4 98.2 99.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OP REQUIREMENTS) 95.0 92.0 89.0 93.0 93.3 94.7 PROTEINS (GRAMS Pra DAY) 51.0 53.0 48.0 56.1 52.1 54.3 OP WHICH ANIMAL ND PULSE 19.0 16.0 12.6 10.4 13.6 17.4 CHILD (AGES 1-4) HORTALTY RATE 28.0 22.0 18.0 19.2 18.5 11.4 HEALTH LIFE EXPECTANCT AT 3IRTH (YEARS) 43.0 48.0 51.0 49.1 49.3 54.7 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 .. .. 105.4 68.1 ACCESS TO SAFE WATZR (PERCENT OF POPULATION) TOTAL .. 17.0 33. 0 31.5 26.3 34.4 URBAN .. 60.0 83.0 63.9 58.5 57.9 RURAL .. 6.0 20.0 20.1 15.8 21.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 15.7 16.0 40.8 URBAN .. 85.0 87.0 66.8 65.1 71.3 RVRAL .. 1.0 2.0 2.5 3.5 27.7 POPULATION PER PHYSICLN 58oo.0oh 4890.0 3135.0 7107.9 11396.4 6799.. POPULATION PER NURSING PERSON 9630.O/h 5220.0 6320.0 12064.0 5552.4 1522.1 POPULATION PER HOSPITAL BED TOTAL 259.0-Li Z020.0 1231.0 2738.4 1417.1 726.5 'R,AN .. .. .. .. 197.3 272.7 RLRAL .. .. .. .. 2445.9 1404.4 ADMISSIONS PER HOSPITAL BED . . 24.8 27.5 HOUSING AVERAGE SIZE OF HOUSEHOLD 7OTAL 5.2 .. 5.2 . 5.3 5.4 URBAN 5.2 4. . .8 .. 4.9 5.1 RURAL 5.2 .. 5.3 5. .4 5.5 AVERAGE NUMBER OF PERSONS PER ROOM -TAOL 2.6 2.3 .. JRSAN . .. .. .. VIRAL .. .. .. ACCESS 0 -L ECTRICITY PERCENT OF 3WE'L.NGS, 7CTAL .... .. .. .22. 5 .I R3AN .. .. .. .. . .5.1 RKRAL .. .. .. .. .. 9.3  ANNEX I Page 2 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (ADJUSTED AEAGES - HOST RECENT ESTIN&SE) - SAME SAKE NCST HIGHER MOST RECENT GROGRAPHIC INCOME INCOME 1f0 lb 1970 /b ESTIMATE lb REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMSNT RATIOS PRIDARY: TOTAL 61.0 72.0 79.0 59.5 63.3 82.7 MALE 80.0 87.0 94.0 74.9 79.1 87.3 FaALE 40.0 55.0 63.0 43.7 48.4 75.8 SECONDARY: TOTAL 20.0 29.0 28.0 19.5 16.7 21.4 MALE 30.0 39.0 38.0 27.8 22.1 33.0 FEMALZ 10.0 17.0 18.0 10.0 10.2 15.5 VOCATIONAL ENROL. (Z OF SECONDARY) 8.0 6.01 .. 1.3 5.6 9.8 PUPIL-TEACHER RATIO PIMIARY 29.0 40.0 42.0 42.2 41.0 34.1 SECONDARY 16.0 17.0 .. .. 21.7 23.4 ADULT LITERACY RATE (PERCENT) 28.0 33.0 36.0 25.5 31.2 54.0 CONSUmPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.0 1.2 2.3 2.8 9.3 RADIO RECEIVERS PER TOUSAND POPULATION 5.0 21.0 24.0 15.5 27.2 76.9 TV RECEIVERS PCR THOUSAND POPULATION .. 0.1 0.5 .. 2.4 13.5 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11.0 16.0 16.0 6.2 5.3 18.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 .. 1.1 2.5 LABOR FORCE TDTAL LABOR FORCE (THOUSANDS) 188670.0 226870.0 261000.0/k FEMALE (PERCENT) 31.3 32.6 32.2 21.4 24.8 29.2 AGRICULTURE (PERCENT) 73.0 73.0 73.0 66.3 69.4 62. 7 INDUSTRY (PERCENT) 11.0 11.0 11.0 9.6 10.0 11.9 PARTICIPATION RATE (PERCENT) TOTAL 43.0 40.2 39.2 35.8 36.9 37.1 MALE 57.1 52.3 51.3 52.3 52.4 48.8 FEMALE 27.9 27.1 26.2 15.7 18.0 20.4 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.3 1.2 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OP HOUSEHOLDS 26.7 26.3/1 .. .. 15.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.971 48.2 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.771 .. .. .. 6.3 LOWEST 40 PERCENT Or HOUSEHOLDS 13.6 17.27i .. .. .. 16.3 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) L'RBAN .. .. 83.0 86.5 99.2 241.3 RURAL .. .. 73.0 74.2 78.9 136.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. .. 91.9 179.7 RURAL .. .. 50.0 50.4 54.8 103.7 ESTIIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) 'RBAN .. .. 47.0 46.3 44.1 24.8 RURAL .. .. 52.0 52.4 53.9 37.5 Not available Noc applicable. NOTES ia The adjusred group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populaced country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. lb Unless ocherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977. Ic Souch Asia; /d Low Income (S280 or less per capita 1976); /e Lower Middle income (S281-550 per capita, 1976); 1' i978 mid-year population is estimated ac 640.4 nillion; /j 1951-60; 'h 1962; - 1958; / i i967; /k 1978 mid-year labor force is estimated at 261 million; _ 1964-65. Most Recenc Escitmate of GNP per capita is for 1978. August. 1979  ANNEX I PEP5ITTIONS OF SOCIALIinDICATORS Page 3 of 5 No-tes: Although the data ar d-an fern soucegnealy Judged the sat a.thoebtmtie and reliable, it should an be noted that they sp not be inten-- tIona lly o-p-rble be-.sa of the laos of standardisd defbnltioa and I.sa.ePt, used by differet coutries In colleting the data. The data are,nnteeo u_eful to Idecorbe orders of Magitde, idicate treda, andoaaneis etain. major differer- beao outIs The aldJusted group aceage if orIch indio-torar -pepuattic-nighted geemtrir aean, eioluoisg the -tre- -ai fte noao mn i on osae conr i ah group W.s to lain of data, grop averges of all idio-t.ra for Capital urplun Oil op-ter an ofidictr ofArot oWter cd orEt. Disposal1, Husig, Inton iintrinotion and Paverty for other coutry rops ar pepslatis-ueigbted neo-tric aca- onthut etc-on of thc otrene oaloe and the nun populated conr..be herrrga of o-utrbes s-` th det-r depeds Id ealbiabliby of dta and Is sot unif.-, o-tie suit bees-rc-nd Is relting arrgr fon nbTtr oaote,maeasens r nal seu a prodatbatfhepend eAr ae iasis h odeio n indicator at I tins smng the oc-tony and referenc grosss. LANDb ARM (thousad nibs,I.)Acs to teists Diepossl (peroet of population) - 'tI, urban end ruri Ttl-Total sufac_ae _npi ad are and Inndote-. Mushe of people (total, urban, en ual eod by -orrta dipIua Ia pgrio,1tursl - Stint recet osnn-n of agrIcltra ara sd temprarLy Peroetenes of thrie rospetioc pniilti.ao. docrets dooponab mo inolau or peranetly for oroP, paut-e, aarlct and kiteban garde or to the oollsction end disposal1, ebtb sir thbst treataet, of h tuna rrts lIeI falle. adwseanrby aster-hos Wyatea or the sac of pitprivisad -u GNP PER CAPITA (Ui$) - GNP Per espita estieatesaeu. n maktptrn Ppid.toncrPhsoa -Pplainuonety ubrOfpnt--n hyson -aolae y ss oceniantbnd en WInd B-as Atlat (1976-t bais); qaiidfo ein tols nerot ee i96o, 1970, end 1978 daafpplaltdr BunubeI Person Ptiai tydvIe bynnero-ratcngm ENERGY CONSUMPTION PEc CAPITA -Annual onsspIoof Itm-c-n enrg end feasle g-nduate nurse, p-ati-mI nre,nd n-otet torte -. (..Ia and lignite, petroleu, natural gas end hynro-, cuoler end gro- Popoilhoe osital hodi- to.tni~, bcn n ror.i- I.oition (total, ubc thee-s eletricity) In kibioram of oal equivalent per capta; 1960, and rura) dved by tihe repoio-tne ofb-ooibdsas tlo in i9I0. end 1976 data. public end pr-onte generl and s,prioi-c bontpotni und r-btilntsto- voc,t-r Hoopitalo ar- cnltmcopee-oetly otnffcd bp at teI o oyicn PhUi,ATIOiM AND VITAL STATISTICS tnalsoospoiIgpicply'sollor r otocluded burs Tttal Population Mud-tear (miio.s) A- Inf duly i; i9dyo, 197), end hocpitnic, bouot, include h-ltb and mcdios1 -rter sot p-ranotlp ots I`d- UrbanPopultion peroet of tonsl) - st-o of u-ben to tots1 population; .it-pa ipt atamdatios and proide s limitedrnoolein aiioo difrn efntoso urha neen sap affect ...spaability of dais Adnobn e optlhd oa ue fs sitt to o douct9rge feco amon Icut-ie; 196t, 1970, end 1975 data. bocpitalo dionded bp tieh ube fes Populat-tits briJdetOiiIN i979 totalppd intb by age and onen tbei"r jnrtalu1ty and fertility Peraelie fhonotd (pes-noperono-hod - otl,ub`t end -Iru rates_ r.toto saeesfrnranyrtscarco be tuhi ossso oroP of Ieduvioal nbcib Rs Idigqatr e-ci anomig life eopeotany at bthihiebitenn u -iuteYo their uni ms A hoarder or 10cr nay or cup cot ho itliord on to- pe onpita inom been, and fecial life enpeteny stbhilining at bo 'eb ,i or,tninti-nl popue.- 71.5 year.- The paranter fo fertility rate alut bh.e three leeds ceA-ge -1,-e of peen-- per rontotal,_ra,edrrl-A..eage t-bo -ousngdeoIice In fertility croodo-g to inem bred end past of per..no pe roI a in all urban, and -or.l copiod --oet~on ...i oo1 femil clning perforane Ench ountry In tben asine neo these respeticly. hoellicnp e-lude ou-.persoet ott-oue end --ocp-o p-r nice cohinntbo of motality aso fertility trends foe projetio Pofea to Kleotriot (preto2 utao otl,re!idrri-Co OSt InyPopoIntocs - in I o.taio..ary populatii. there II so g9ath tctsl, urban, end rrlde ig ePeto nioce tho birth rate In equsl to the death rate, end also tie age Itruo tirert-i-soontat. Thit an shietd only sfter fertility -atou fLiDATION dcicto tbe replaceert level of en-nt reiproduction rate, abet Adjunted &lne1luset Patl -ob ucoeabo of unma replaces itself e-atly. The sattionar y PoIP- Prss-y cbhnb- totlIst en Iesl - drono tonsl, asIc n denoIle oo inti 01c ant co Ime on the Iac of thepojce ehrotr_so et ofaiae.ttepiasyltls eonaeIo cpote rmr otcppatiosi hbc , pea 00,-en 0t5 -sta of de-Is- of fertility u-b-l-ag oltitI omal i IIodI ohlro ged f-li poar Oct rate torPlaemntI ociIdidoted foe differct 1etgt of p-io-Y edustion; i-eoloccouth ea ttoaypIpaisti.. in r hobd - The yea hen stationar.y population --ncrol tdu..aoio ecr.... nic- asp --ted 100 p-ret 0c mae p.,pl fte hen bee race. arel,Il Ielom or o the officil notol age. Popula.tion Tent ty e_idoryool-total, male end femle - 0 eputed no oli, unooIsu ern.i.-Mio-peac PP,tilti.c Per qaarc kilomter (100 be-taren if eductionreuie nletforyeant aprvdpr-"enro iotPd_i0 Per to. ia Ugi-ulturn lano - Ctsputrd an shone for agriruI1furi land usIlly of 12 to 17 yearn of' ho;orepondenoo-sr... III gio-rulp only. valudr.d (1376 yeanI yrtired year end oe)aopeceag If mid-year trehoi-aI, ird-ntebI, or other p-ogr- ohio oh rt idpndi "pnpolatboe; 1160,t1970, end 1977 data. depar_tent of neco.ndary tistottions. PouaiciroaRn (percent) - tata-Annual -rotb rates of toti mid- Psotec eratio-piay ~end -eo -y -Total ooudltnt e-rlio yer ioulnirnfo ISihO 190-0,I ad17 .pri_ne and necndr-y le-ei diobded by n.-rI I f heaoernsoi,eorro Ponalation iroth hate Itret ra nulaot ae f urbanncoo rno Iuuaba foe1506, 090-0 end 1970 -75. dl ieayrt pret irncaut sn vra aainn Crude hieth Rate or- thoucad )- Annua Ili-o bletho per thtoand of mid- ap--oetage of total dolt populoi-o aged 11 py- end doer. year popuisti_n; 1960, 1970, mad i977 data. frudl ManRte(r thooomd) - Aonos1 dantho Ile thousand usts -pear- CONBOPgPTIbN poplaion; 1950, 1970, and 1977 data. Pnesrfr sr boedPoltso aono uororl ioec rntl eProdd-tiot Rte - hvAge cubec of dnightr- -1na 1 il bc- tenting lest than light Pe-.c.; -ldolode IIalenceI haeoaneItioo- in bee o,-e -urp-od-ti- periods f tb h p cte prest ISr- -ciioie- opetifoc f_tablty _uten; ...oolly fir-year neergr -ndoog Ic 1960, Radio poori-rr (per thounad --Rultsn .. ill tYP-, of eoI"I ro for -d-, 1970, and 1975. braocnto genera plIc erohosdo ppiato;- oldnubcne Panipy Plannig - Aceeton. A.noal(thco-ads~) - AnnoIl -ui- of reie-cr onnt-e and inyee abe h eio-.si of; -euis tioI atoi neet rso birtb-o....... de-ie uder auPIcs of nationalI fami ly ,ffect. dats f-r --et pyre an nut be ,oap-eole tier- a. so o-ociri planing p-ngr- s`olinbed licenin. PaiilyPlsnog -Ilnro paven ofecie sours) -Pretage of marrid T0ptevrV(t thoonnd opuanit-) - TOIroeloert fc brondotot t oece onset ofchild-hering age(iT~4 yses) rhoour olet-citrI droice ulcoc huad osai etrid _oitveed TVrecoe to all married sonen I san ag getup. end in year ' cuerreitraioc of TV ceta si onffet. aNsesper C-rluition(oetpq8 ltion) -Stb_ tih. i--ergoe--lati- FOOD ANI) NUTRIT__ of dail genera1 l I_ca nu pape ,dfed aa n- perodca puIetc Iles- of Pnnd ren_-d-ot- per fInts (1196971=100) - ideo of Pee -spita devted ~ crs ly toedoing ge-rlo1s-- It i~ e--nod-e oot. 'dii -nua production of all ftId _osdine.-oieoludes necd end if it nIiear- at least f.o tbmacauIe.- fedad is on o-l-d-e Yea laIaI. CoasditoeItotr piasep gonde Cinem AsuiAttendaoc Per Captaat ea d thm l O -ib-o f t-k-ci (eg.suaratitetead of og,, shio are edhi s ..on utiniIod d-r.e the year, ioii- totssiocor nO eni_ t n) (g.offeean tenar riobde). iggregat producti- of mobh toefy ot in Inn..d on aetioa aveag 1 producer Price ..ighto. Per capita _ulIp cfIalo . (percet of trouemen) - Computed from tAPIR FiObC ene 1-e 1-vlet of net food naPPIec. avilable ic on-ony par tsPbtn ns.ao borneL(b ouas ..c.n...lynoie oio ... loing,. neec pe ay vilbl nPple tuIprise do-et1i production, inp-et.la forcs ad Inenlopedl lo to-ladi ooein, n t Io hItfiobt e Iot', and ohug In 'tIlk, Bet nuppIIn ealode ei-sl feed, needs, ocvron dc.ot ar nt odyarble qunIto se i foo PeoeIng, and lite dindtteib.toos. teqaie easyfot - ni ai f- Irr a perteage o P tomb. .nbo-fre sc,-tr, eteso by AOl bsond on pylyssnionica -nd, fcc ocioa Igpoyy,jreti lbor fo-o cc nIsIog, fo-oatrY, bunting arc neniy adbe1th to-ider- ag.....i..nte1a teapert-r, body -eighto, fichicg anpereetage of totall1 c forte. age end -e dosteictitc ofpopaatioc, and allosig lb peroect for ondasty (pret-lbor ifloo in mining, Io.n.t-uti.t, enufatocito and -ate no hbou..boin leteI. eleot-ilt ao an P_na -erectgt of total InIo borer. (-or epita spply f protin urao prtday) - -rnicit-t .5 pe-attiI..Pae(ecet otl ae andfen -irils io espits et coplp of ood pe day. et cuply of fnnd Iis em oacivt rates ar e%tmptd as t.Ita, male, un .fase Ic fore ter abot Req.uietmet foe~1 all .nutrie- eatblished by blo pred a sngo fttl aead female ptpulti-n of all agSn -cpelr eisolsin a.looeno 605A gr-, of ntalt` oei pe 2m o 0 g _as of iS LI ,' and 17 aa Thes arc, thin parti-patoi cns elec anma end polar protein o oho 10 gr-s should bEl anml-rnic -ootoouef te PoPulation, end long nos tred. P feesioc Thec atanda-d see Iare nth those of 75 gram of total Protein and sef... ..atiosa.sIur.e.I- 25 grass of animal poto,, as an averag for the sneld, p-npo-d by PAO Inninml _lependean.y Ratio - On-io of ppulno- order 15 end t~,Idon o1,tnI. orteTidWorld Food sroe.. the labo for_ In age grop of 15-61 yearn Pmro"Pit, nrtebc suply ro nnma and pulse - Protein supply of find dsveedfro anmaltad pulaes. It gran roe day.iCinfI0B3I0 Ci'ld sn -a tentybn I tI(per thousand) - isA-1 deathb poe thoosand PIrcetge of Peltat Pnn (boon In o-.b end hood) R- ee-od by -ite- Is ag grop 1-1fear, to chTlee It thIa agr grop; for e _t er 5 .poten, richest PT peroot, poores t 20 percent, and pon-en4ubper-en oping --tn-re dutn derived from I if. tables of households. HELTHiC POVERTY fAPGITI GROtUPS jlife letancy at P11-th (OraI- -_ea-ge -eb-r of year oflift Estimateld Abobute Poverty . inis level (00$ Per capo'ta - urban aid rurl remaInng atbirth 1950,1975,and 177 dan.t iAlt pnvet inot lVet i that (sco I...e lee -eo hith a rin,le Infant F-tetltA,t,pe husn) - lsna drtb ofifnsudroe ntritionlly adeqonte dirt pIIc -ssetiaI tofoo .eq...e_eto is eon Attens to Safe dater (pe-oennof pc taton - tnl. urban and rurl Ectimated Pelatee Pocety Incim I-el (00$ Per -pIta) - urban and corl Bomba of people )tntal,uba, ndrua uith~... reaonbl uI_es to Rural relatVle poesty iteone leorl Is os-third of -erag pe 05-Pital caester supply I insi.de treted surface astss ir entreated hueP-- pe a Incis of nth country. Ueban Ieeli deeoosd feco the cora ir_e un.toaainaned o-t- suh a, that Cra protected .hosn-e, sPrings, aith siJotment f-r higher .totfli Ingbeubanae and sanItary slle) as Pereentage_of their -p-etioe populations. be Estimated opltIo- belt AbnuePtet rar Ire erct' - ubnad 200 antee fremaIbo... s.apb be seierd sne, sithln r55-bl5 a Ies f tbstlue nrrlaeseanml sasud-ieply that Itlhe boseIfe or neabar of the houshod do nt hae n ped Rsni and SInoa bans bIobs_ dla1pe-trin...te part of the dsp on fetching the fanlly's .t sa .e neds bec_oi iAOlyci and Projeetno- bepartoent August 1979  ANNEX I Page 4 of 5 ECONOMIC DEVELOPMENT DATA a/ GNP PER CAPITA IN 1978: USS 180 b/ c/ GROSS NATIONAL PRODUCT IN 1978/79 ANNUAL RATE OF GROWTH (M. constant prices) US5 Bln. % 1955/56-1959/60 1960/61-1964/65 1965/66-1969/70 1970/71-1974/75 1975/76-1977/78 GNP at Market Prices 117.08 100.0 3.7 3.6 3.7 2.8 5.6 Grass Do.estic Investeent 28.28 24.2 Crass National Saving 28.11 24.0 C-rrent Account Balance d/ 0.50 0.4 OUTPUT. LABOR FORCE AND PRODUCTIVITY IN 1971 Value Added (at factor cost) Labor Force V.A. Per Worker US$ Bln. % Mil. % US0$ of National Averaee Agriculture 24.5 46.6 130.0 72.1 188 64 Indastry 11.8- 22.3 20.2 11.2 582 199 Services 16.3 31.1 30.2 16.7 542 186 Total/average 52.6 100.0 180.4 100.0 292 100 GOVERNMENT FINANCE Genoral Goverment Central Government R.. Bc. of GDP Rs'Brs %o GiOP Rs9 79 _97 1974/75-1978/79 1978179 1974/75-1978/79 Corrent Receipts 183.65 19.1 18.3 107.71 11.2 10.6 Current Expenditures 177.26 18.4 16.7 108.99 11.3 10,1 Current Surplun/Deficit 6.41 0.7 1.6 - 1.28 -0.1 0.5 Capital Expenditures f/ 78.41 8.1 7.2 57.34 6.0 5.1 External Assistan-e (net) d/ 8.15 0.8 1.4 8.15 0.8 1.4 MONEY. CREDIT AND PRICES 1970171 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Sente-ber 1978 September 1979 (Rs Billion outstanding at end of period) Money aod Quasi Money 121.4 198.4 220.3 254.7 308.9 370.4 445.6 398.5 473.7 Back Credit to Governaent (net) 52.6 87.3 95.3 101.1 110.2 134.7 153.9 139.5 161.7 Bank Credit to Cornercial Sector 64.6 107.0 126.7 153.9 185.1 212.2 253.3 225.8 273.8 (Percentage or Index Numbers) January 1979 January 1980 Money and Quasi Money as % of GDP 30.1 33.5 31.5 34.5 38.8 41.5 46.3 Wholesale Price Index (1970/71 - 100) 100.0 139.7 174.9 173.0 176.6 185.8 185.8 185.3 224.0 Annaul percentage changes in: Wholesale Price Index 7.7 20.2 25.2 - 1.1 2.1 5.2 - 0.4 20.9 Bank Credit to Government (net) 10.8 12.3 9.2 6.1 9.0 22.2 14.3 16.9 15.9 Bank Credit to Coesercial Sector 19.4 22.6 18.4 21.5 20.3 14.6 19.4 15.6 21.3 I/ The per capita GNP estimate is at market prices, calculated by the conversion technique used in the World Bank Atlas, 1979. All other co-versions to dollars in this table are at the average exchange rate prevailing during the period covered. b/ Quick Estimates. c/ Computed from trend line of GNP at factor cost series, including one observation before first year and one observation after last year of listed period. d/ World Bomk estimates; not necessarily consistent with official figures. e/ Transfers between Centre and States have been netted out. f/ All leans and advances to third parties have been netted out.  ANNEX I Page 5 of 5 BALANCE OF PAYMENTS 1976/77 1977/78 1978/79 h 1979/80 h MERCH4NDISE EXPORTS (AVERAGE 1975/76 - 1978/79) US$ Mlni, !E Exports of Goods 5,753 6,315 6,976 7,800 Engineering Goods 671 11 Imports of Goods -5,928 -7,188 -8,488 -11,000 Tea 420 7 Trade Balance - 175 - 873 -1,512 -3,200 Gems 499 8 NFS (net) 379 692 882 1,050 Clothing 378 6 Leather and Leather Resource Balance 204 - 181 - 630 -2,15D Products 319 5 Jute Manufactures 251 4 Interest Payments (net) i/ -182 - 89 130 400 Iron Ore 270 5 Other Factor Payments (net) - - - - Cotton Textiles 248 4 Net Transfers j/ 695 1,077 1,000 1,000 Sugar 224 4 -750 Others 2,649 45 Balance on Current Account 717 807 500 -750 Iotal 5.929 100O Official Aid Disbursements 1,955 1,628 1,695 1,870 EXTERNiAL DEBT, M4RCH 31. 1979 Amortization -560 -645 -702 - 687 US$ billion Transactions with IMF -337 -330 -158 - Outstanding and Disbursed 15.5 All Other Items -200 616 199 -183 Undisbursed 5.2 Outstanding, including 20.7 Increase in Reserves (-) -1,575 -2,076 -1,534 - 250 Undisbursed Gross Reserves (end year) 3,747 5,823 7,357 7,607 h/l/ Net Reserves (end year) k/ 3,276 5,668 7,357 7,607 DEBT SERVICE RATIO FOR 1978/79 15.0 percent Fuel and Related Materials IBRD/IDA LENDING, DECEMBER 31. 1979 Imports 1,581 1,811 2,043 4,050 US million of which: Petroleum 1,581 1,811 2,043 1,050 IBRD IDA exports 37 32 24 _ Outstanding and Disbursed 689 4,286 of which: Petroleum 21 18 n.a. - Undisbursed 614 2,621 Outstanding, including 1,303 6,907 Undisbursed RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 - Rs 7.5 Rs 1.00 - US$0.133333 Mid-December 1971 to end-June 1972 US$1.00 - Rs 7.27927 Rs 1.00 - US$0.137376 After ned-June 1972 Floating Rate Spot Rate end-December 1978 : US$1.00 - Rs 8.188 Rs 1.00 - U050.122 End-Decmber 1979 : US$1.00 - R 7.907 Rs 1.00 - U5S0.126 hi Estimated. i/ Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to IMF, and major receipt ta interest earned on foreign assets. J/ Figures given include workers' remittances but exclude official grant assistance, which is included within official aid disbursements, h1i Excludes net use of Itl credit. 1/ A-otisation and interest payments on foreign leans as a percentage of merchandise exports.  ANNEX II Page 1 of 17 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of March 31, 1980) US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 41 Loans/ 1,163.2 60 Credits fully disbursed 3,624.6 312-IN 1972 India Population -- 21.2 .33 342-IN 1972 India Education -- 12.0 5.31 356-IN 1973 India IDBI I -- 25.0 8.44 378-IN 1973 India Karnataka Agricultural Markets -- 8.0 3.19 390-IN 1973 India Bombay Water Supply I -- 55.0 6.09 456-IN 1974 India HP Apple Processing & Marketing -- 13.0 7.63 481-IN 1974 India Trombay IV Fertilizer -- 50.0 .20 1011-IN 1974 India Chambal (Rajasthan) CAD 52.0 -- 21.99 482-IN 1974 India Karnataka Dairy -- 30.0 20.55 502-TN 1974 India Rajasthan Canal CAD -- 83.0 34.24 520-IN 1974 India Sindri Fertilizer -- 91.0 .24 521-IN 1974 India Rajasthan Dairy -- 27.7 15.60 522-IN 1974 India Madhya Pradesh Dairy -- 16.4 6.28 526-IN 1975 India Drought Prone Areas -- 35.0 9.95 1079-IN 1975 IFFCO IFFCO Fertilizer 109.0 -- 10.03 1097-IN 1975 ICICI Industry DFC XI 95.6 -- 3.88 532-IN 1975 India Godavari Barrage Irrigation -- 45.0 10.27 541-IN 1975 India West Bengal Agric. Development -- 34.0 12.98 562-IN 1975 India Chambal (Madhya Pradesh) CAD -- 24.0 6.40 572-IN 1975 India Rural Electrification I -- 57.0 12.46 585-IN 1975 India Uttar Pradesh Water Supply -- 40.0 22.02 598-IN 1975 India Fertilizer Industry -- 105.0 54.05 604-IN 1976 India Power Transmission IV -- 150.0 78.89  ANNEX II Page 2 of 17 US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 609-IN 1976 India Madhya Pradesh Forestry T.A. -- 4.0 2.22 610-IN 1976 India Integrated Cotton Development -- 18.0 13.60 1251-IN 1976 India Andhra Pradesh Irrigation 145.0 -- 105.52 1260-IN 1976 India IDBI II 40.0 -- 23.72 1273-IN 1976 India National Seeds I 25.0 -- 24.00 1313-IN 1976 India Telecommunications VI 80.0 -- 23.42 1335-IN 1976 India Bombay Urban Transport 25.0 -- 10.12 680-IN 1977 India Kerala Agric. Development -- 30.0 27.82 682-IN 1977 India Orissa Agric. Development -- 20.0 94.18 685-IN 1977 India Singrauli Thermal Power -- 150.0 15.15 687-IN 1977 India Madras Urban Development -- 24.0 15.74 690-IN 1977 India WB Agric. Exten- sion & Research -- 12.0 12.00 695-IN 1977 India Gujarat Fisheries -- 4.0 .98 1394-IN 1977 India Gujarat Fisheries 14.0 -- 14.00 712-IN 1977 India Madhya Pradesh Agric. Dev. -- 10.0 9.09 720-IN 1977 India Periyar Vaigai Irrigation -- 23.0 17.16 728-IN 1977 India Assam Agricultural Development -- 8.0 7.04 1473-IN 1977 India Bombay High Offshore Development 150.0 -- 54.84 736-IN 1977 India Maharasbtra Irrigation -- 70.0 50.03 737-IN 1977 India Rajasthan Agricul- tural Extension -- 13.0 10.54 740-IN 1977 India Orissa Irrigation -- 58.0 48.31 1475-IN 1977 ICICI Industry DFC XII 80.0 -- 35.81 747-IN 1978 India Second Foodgrain Storage -- 107.0 93.84 756-IN 1978 India Calcutta Urban Development II -- 87.0 50.80 761-IN 1978 India Bihar Agric. Extension & Research -- 8.0 7.48  ANNEX II Page 3 of 17 US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 1511-IN 1978 India IDBI Joint/Public Sector 25.0 -- 24.72 1549-IN 1978 TEC Third Trombay Thermal Power 105.0 -- 93.75 788-IN 1978 India Karnataka Irrigation -- 117.6 99.74 793-IN 1978 India Korba Thermal Power -- 200.0 178.77 806-IN 1978 India Jammu-Kashmir Horticulture -- 14.0 13.91 808-IN 1978 India Gujarat Irrigation -- 85.0 78.99 815-IN 1978 India Andhra Pradesh Fisheries -- 17.5 17.15 816-IN 1978 India National Seeds II -- 16.0 15.87 1592-IN 1978 India Telecommunications VII 120.0 -- 59.80 824-IN 1978 India National Dairy -- 150.0 141.98 842-IN 1979 India Bombay Water Supply II -- 196.0 193.44 843-IN 1979 India Haryana Irrigation -- 111.0 79.84 844-IN 1979 India Railway Modernization & Maintenance -- 190.0 172.69 848-IN 1979 India Punjab Water Supply & Sewerage -- 38.0 34.07 855-IN 1979 India National Agricultural Research -- 27.0 26.84 862-IN 1979 India Composite Agricultural Extension -- 25.0 23.50 871-IN 1979 India NCDC -- 30.0 23.00 1648-IN 1979 India Ramagundam Thermal Power 50.0 -- 50.00 874-IN 1979 India Ramagundam Thermal Power -- 200.0 182.38 889-IN 1979 India Punjab Irrigation -- 129.0 120.30 899-IN 1979 India Maharashtra Water Supply -- 48.0 47.73 911-IN 1979 India Rural Electrification Corp. II -- 175.0 175.00 925-IN 19-79 India Uttar Pradesh Social Forestry -- 23.0 21.68  ANNEX II Page 4 of 17 US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 947-IN 1979 India ARDC III -- 250.0 230.86 1743-IN* 1979 India Thal Fertilizer 250.0 -- 250.00 963-IN* 1979 India Inland Fisheries 20.0 20.00 Total 2,528.8 7,255.0 of which has been repaid 995.3 59.8 Total now outstanding 1,533.5 7,195.2 Amount Sold 133.8 of which has been repaid 116.2 17.6 Total now held by Bank and IDA 1/ 1,515.9 7,195.2 Total undisbursed (excluding*) 555.6 2,669.9 * Not yet effective 1/ Prior to exchange adjustment.  ANNEX II Page 5 of 17 B. STATEMENT OF IFC INVESTMENTS (As of March 31, 1980) Fiscal Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.6 0.4 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 1964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.3 13.1 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 1978 Housing Development Finance Corporation 4.0 1.2 5.2 1980 Deepak Fertilizer and Petrochemicals Corporation Ltd. 7.5 1.1 8.6 TOTAL 61.0 11.5 72.5 Less: Sold 5.9 1.7 7.6 Repaid 17.4 - 17.4 Cancelled 6.2 0.7 6.9 Now Held 31.5 9.1 40.6 Undisbursed 10.5 1.7 12.2  ANNEX II Page 6 of 17 C. PROJECTS IN EXECUTION 1/ Generally, the implementation of projects has been proceeding reason- ably well. Details on the execution of individual projects are below. The level of disbursements was US$538 million in FY79, compared to US$497 million in the previous year. Disbursements in the current fiscal year through March 31, 1980 totalled US$517 million, representing an increase of about 44% over the same period last year. The undisbursed pipeline of US$3,226 million as of March 31, 1980, reflects the lead time which would be expected given the mix of fast- and slow-disbursing projects in the India program. Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation of India Project; US$100.0 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: December 31, 1980 Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation of India Project; US$80.0 million loan of July 22, 1977 Effective Date: October 4, 1977; Closing Date: March 31, 1983 These loans are supporting industrial development in India through a well-established development finance company and are designed to finance the foreign exchange cost of industrial projects. ICICI continues to be a - well-managed and efficient development bank financing medium- and large-scale industries, which often employ high technology and are export-oriented. Loan 1097 is fully committed and disbursements are slightly ahead of schedule. Disbursements under Loan 1475 are also ahead of schedule. Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: June 30, 1981 Loan No. 1511 IDBI Joint/Public Sector Project; US$25.0 million loan of March 1, 1978; Effective Date: May 31, 1978; Closing Date: March 31, 1983 Loan 1260 is designed to assist the Industrial Development Bank of India in promoting small- and medium-scale industries and in strengthening the State Financial Corporations involved. Loan 1511 is designed to encourage the pooling of private and public capital in medium-scale joint ventures. The project also assists IDBI in carrying out industrial sector investment studies and in strengthening the financial institutions dealing with the state joint/ public sector. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to retort any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II _ Page 7 of 17 Cr. No. 947 Third Agricultural Refinance and Development Corporation (ARDC) Project; US$250.0 million credit of August 20, 1979; Effective Date: January 2, 1980; Closing Date: June 30, 1982 Refinancing of lending to farmers has been started under this project after the completion of the Second ARDC Project towards the end of 1979. Cr. No. 747 Second Foodgrain Storage Project; US$107.0 million credit of January 6, 1978; Effective Date: May 17, 1978; Closing Date: June 30, 1982 As of September 1979, satisfactory progress was being made in the construction of bag storage warehouses, despite problems of land acqui- sition at some sites. However, construction of flat bulk warehouses and port silos is not expected to be completed until 1985, as a result of delays in the employment of consultants and the longer time required for the prepa- ration of technical specifications and tenders and the construction itself. Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project; US$13.0 million credit of January 22, 1974; Effective Date: September 26, 1974; Closing Date: December 31, 1980 The project encountered prolonged initial delays due to managerial and technical problems. These problems have been largely resolved, but con- struction progress remains slow due to material shortages and severe winter conditions. Initial packing house operations were undertaken in the last two seasons with favorable response from farmers. The project is scheduled for completion by December 1980. Cr. No. 806 Jammu-Kashmir Horticulture Project; US$US$14.0 million credit of July 17, 1978; Effective Date: January 16, 1979; Closing Date: June 30, 1984 The principal executing agency, J&K Horticulture Produce Marketing and Processing Corporation, is under strong management and rapid progress has been made in start-up operations with only minor slippage. The project's research activities, however, are behind the original schedule due to poor organization. Ln. No. 1313 Telecommunications VI Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 1976 Closing Date: March 31, 1982 Ln. No. 1592 Telecommunications VII Project; US$US$120.0 million loan of June 19, 1978; Effective Date: October 30, 1978; Closing Date: March 31, 1982 Both projects are progressing satisfactorily, although as of November 1979, when they were last reviewed, imports of electronic switching equipment and local production of electro-mechanical switching equipment  ANNEX II Page 8 of 17 were behind schedule, resulting in a reduced growth rate for the installa- tion of direct exchange lines. Institutional improvements envisaged under the projects have been achieved, and the financial situation of the Posts and Telegraphs Department remains sound. Ln. No. 1079 IFFCO Fertilizer Project; US$US$109.0 million loan of January 24, 1975; Effective Date: April 28, 1975; Closing Date: December 31, 1980 Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1980 Ln. No. 1743 Thai Fertilizer Project; US$250.0 million loan of August 20, 1979; Effective Date: July 31, 1980 (expected); Closing Date: November 30, 1984 The IFFCO project was delayed by about a year as a result of a change in feedstock from fuel oil to naphta and delays in completion of engineering contracts. However, project construction is now proceeding satisfactorily and commissioning is expected within the next six months. Credit 598 is designed to increase the utilization of existing fertilizer production capacity. The project has encountered delays in sub-project preparation and investment approvals by the Government. Further, some of the sub-projects identified earlier may not materialize because of reconsideration by the Central and State governments. IDA has agreed to a list of sub-projects to replace the ones that are likely to be dropped. Because of the above, the project is likely to be delayed by about 18 months. Cr. No. 378 Karnataka Wholesale Agricultural Markets Project; US$8.0 mil- lion credit of May 9, 1973; Effective Date: September 7, 1973; Closing Date: June 30, 1981 Delays in project implementation were encountered as a result of frequent changes in management in the early stages, and these have necessi- tated an extension of the closing date by 18 months to June 30, 1981, to allow for completion of works and withdrawal of the credit. Progress is improving, however. As of May, 1979, construction on 36 of the 39 markets envisaged under the project was underway or completed, and trade had shifted to about half of these. An additional five markets may be included in the project at the request of the State government. Cr. No. 312 Population Project; US$21.2 million credit of June 14, 1972; Effective Date: May 9, 1973; Closing Date: June 30, 1980 This credit is designed to finance an experimental and research oriented population project in Karnataka and Uttar Pradesh. The project's infrastructure, which would provide the optimum facilities (buildings, equip- ment, staff and transport) according to GOI standards in selected districts in each state, is virtually complete. The two Population Centers, established to design and monitor research aimed at improving the family planning program,  ANNEX II Page 9 of 17 are now functioning. The Population Centers are expected to complete their evaluation of family planning strategies and the introduction of management information and evaluation systems by the present closing date. Cr. No. 342 Agricultural Universities Project; US$12.0 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1981 The project involves the development of the agricultural univer- sities in Assam and Bihar. The primary aim of the AUs project is to improve the quality and practical training of undergraduates and so the spectrum of their employment opportunities; and to strengthen university structure to enable it to give an impetus to agricultural and rural development. Consider- able progress has been made in achieving the latter objective; but achieving educational objectives is more slowly attainable, constrained by traditional attitudes and structures where consistent effective leadership falters. Changes to a more functional orientation are now planned. The Project Director and others responsible are aware of the constraints and are support- ing efforts to remove them. Cr. No. 390 Bombay Water Supply and Sewerage Project; US$55.0 million credit of January 22, 1974; Effective Date: March 13, 1974; Closing Date: June 30, 1981 Cr. No. 842 Second Bombay Water Supply and Sewerage Project; US$196.0 million credit of November 13, 1978; Effective Date: June 12, 1979; Closing Date: March 31, 1985 Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38.0 million credit of October 27, 1978; Effective Date: January 25, 1979, Closing Date: March 31, 1983 Cr. No. 899 Maharashtra Water Supply and Sewerage Project; US$48.0 mil- lion credit of June 21, 1979; Effective Date: November 9, 1979; Closing Date: June 30, 1984 Having overcome earlier difficulties, including cost overruns caused by inflation (requiring project redefinition in February 1975), redesign of major project components and the addition of a supplementary study on sewage disposal, Credit 390 is now progressing satisfactorily. The water treatment works were successfully completed on schedule at the end of 1979. Completion of construction of the project sewerage works is scheduled for mid-1980. Financial performance of the project entity is satisfactory. Implementation of Credit 842, a second stage of the ongoing Credit 390, is proceeding to schedule. Preliminary work in connection with implementation of Credit 848 is progressing satisfactorily.  ANNEX II Page 10 of 17 Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: June 30, 1980 The Project has had a slow start due to delays in the preparation of technical reports for regional and local water authorities and in the engagement of consultants. While improvements have been made in the physical execution, other aspects of project implementation continue to lag so that disbursements under the Credit have fallen short of estimates at the time of appraisal. In order to improve the situation, arrangements have been made to closely supervise and coordinate implementation. Cr. No. 756 Second Calcutta Urban Development Project; US$87.0 million credit of January 6, 1978; Effective Date: April 7, 1978; Closing Date: March 31, 1983 The project is proceeding quite well in most sectors, in spite of the severe floods of September 1978 and serious Statewide electric power shortages. Procurement is generally on schedule for equipment and consultants' services, though somewhat behind for larger civil works contracts. Staff shortages in some of the implementing agencies continue, although more exten- sive use of consultants has to a great degree alleviated this problem. Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977; Closing Date: September 30, 1981 Physical progress is generally satisfactory and costs are within appraisal estimates on most components. However, land acquisition problems and consequent delays in construction on one of the three sites and service areas will result in about 15 months delay in the completion of the final sections of these areas. Inadequate attention and staff has been given to the financial analysis and marketing strategies required to ensure that anti- cipated cost recovery in the sites and services and slum upgrading components and thus replicability is actually achieved. However, there is still ample time to deal effectively with these problems; technical assistance is being sought to strengthen financial management and analysis. Cr. No. 482 Karnataka Dairy Development Project; US$30.0 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: June 30, 1982  ANNEX II Page 11 of 17 Cr. No. 824 National Dairy Project; US$150.0 million credit of June 19, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1985 These four credits, totalling US$224.1 million, support dairy devel- opment projects organized along the lines of the successful AMUL dairy coopera- tive scheme in Gujarat State. More than 2,100 dairy cooperative societies (DCS) have been established under the three state projects (Karnataka 923, Rajasthan-926, Madhya Pradesh-272). Farmer response had been excellent and project authorities are under considerable producer pressure to speed up the establishment of DCS. Profitability in almost all of the DCS is good and con- struction of dairy and feed plants is now proceeding at a satisfactory pace. Limited milk processing capacity has been the major constraint to DCS formation in all three projects. Under the National Dairy Project, three subprojects with an estimated total cost of approximately Rs 1,000 million have been appraised by the Indian Dairy Corporation and a further eight subprojects are in various stages of preparation and appraisal. Advance procurement of dairy equipment is well underway though disbursements have been slow, mainly as a result in the start of project operations. Cr. No. 532 Godavari Barrage Project; US$45.0 million credit of March 7, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Both the civil works and equipment tenders have been awarded after international competitive bidding. Work is proceeding satisfactorily. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52.0 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83.0 million credit of July 31, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project; US$24.0 million credit of June 20, 1975; Effective Date: September 18, 1975; Closing Date: June 30, 1981 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development TW) Composite Project; US$145.0 million loan (Third Window) of June 10, 1976; Effective Date: September 7, 1976; Closing Date: December 31, 1982 Cr. No. 720 Periyar Vaigai Irrigation Project; US$23.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 736 Maharashtra Irrigation Project; US$70.0 million credit of October 11, 1977; Effective Date: January 13, 1978; Closing Date: March 31, 1983  ANNEX II Page 12 of 17 Cr. No. 740 Orissa Irrigation Project; US$58.0 million of October 11, 1977; Effective Date: January 16, 1978; Closing Date: October 31, 1983 Cr. No. 788 Karnataka Irrigation Project; US$126.0 million credit of May 12, 1978; Effective Date: August 10, 1978; Closing Date: March 31, 1984 Cr. No. 808 Gujarat Irrigation Project; US$85.0 million credit of July 17, 1978; Effective Date: October 31, 1978; Closing-Date: June 30, 1984 Cr. No. 843 Haryana Irrigation Project; US$111.0 million credit of August 16, 1978; Effective Date: December 14, 1978; Closing Date: August 31, 1983 Cr. No. 889 Punjab Irrigation Project; US$120.0 million credit of March 30, 1979; Effective Date: June 20, 1979; Closing Date: June 30, 1985 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructure, drainage, and land shaping are prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory with the exception of the Nagarjunasagar compo- nent of Loan 1251 where water losses have proven higher than anticipated. Specific efforts are underway to redesign this project so that it can achieve its original objectives. Cr. No. 541 West Bengal Agricultural Development Project; US$34.0 million credit of April 28, 1975; Effective Date: August 28, 1975; Closing Date: March 31, 1981 The progress of shallow tubewells is well ahead of the appraisal schedule, but progress in all other areas is slow. The project will not fully disburse by the closing date, and GOI's request for an extension is expected. Cr. No. 682 Orissa Agricultural Development Project; US$20.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12.0 million credit of June 1, 1977; Effective Date: August 30, 1977; Closing Date: September 30, 1982  ANNEX II Page 13 of 17 Cr. No. 712 Madhya Pradesh Agricultural Extension and Research Project; US$10.0 million credit of June 1, 1977; Effective Date: September 2, 1977; Closing Date: September 30, 1983 Cr. No. 728 Assam Agricultural Development Project; US$8.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 737 Rajasthan Agricultural Extension and Research Project; US$13.0 million credit of November 14, 1977; Effective Date: February 6, 1978; Closing Date: June 30, 1983 Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8.0 million credit of January 6, 1978; Effective Date: May 2, 1978; Closing Date: October 31, 1983 Cr. No. 862 Composite Agricultural Extension Project, US$25.0 million credit of February 16, 1979; Effective Date (expected): December 14, 1979; Closing Date: December 31, 1984 These seven credits finance the reorganization and strengthening of agricultural extension services and the development of adaptive research capabilities in nine States in India. In areas where the reformed extension system is in full operation, field results have been very good, both in terms of adoption of new agricultural techniques and of increased crop yields. In Rajasthan, Assam, and Orissa, in particular, significant gains have been made under the projects. In West Bengal, where a change in government brought a review of the organizational principles underlying the new extension system and an accompanying hiatus in project implementation, a recent Cabinet deci- sion has reaffirmed the State Government's commitment to the project and revised implementation plans are under preparation. In Bihar and Madhya Pradesh, staff shortages, particularly in supervisory and managerial posts, have hampered project implementation, although progress in areas where regular extension visits are being made attests to the efficacy of the system itself. Finally, in Gujarat, Haryana and Karnataka, all covered under the Composite Agricultural Extension Project (which is not yet effec- tive), project implementation is still in the very early stages, although important early administrative and financial steps have been taken which should pave the way for effective operation of the reorganized extension system. Cr. No. 855 National Agriculture Research Project; US$27.0 million credit of December 7, 1978; Effective Date: January 22, 1979; Closing Date: September 30, 1983 While the initial sanctioning of research subprojects under this project was somewhat slower than expected, due to staff shortages in the Project Unit, the pace has picked up considerably in recent months. Commit- ment of funds to research subprojects in FY80 is expected to meet or even exceed appraisal estimates, although corresponding disbursements may lag somewhat behind the original estimates. Additions to the staff of the Project Unit are being recommended to expedite further progress under the project.  ANNEX II Page 14 of 17 Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit of January 24, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Overall progress of this project continues to be satisfactory. Implementation of most components is proceeding well. Dairying and dryland farming components show particular promise for the drought-prone areas. Cr. No. 680 Kerala Agricultural Development Project; US$30.0 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 Project implementation started slowly due to initial staffing and funding delays. The project has now gained momentum and the planting opera- tions, which were one season behind original schedule, have been rephased to make up for lost time. Cr. No. 871 National Cooperative Development Corporation (NCDC) Project; US$30.0 million credit of Februtary 2, 1979; Effective Date: May 3, 1979; Closing Date: December 31, 1984 As of October, 1979, when the project was last reviewed, construc- tion of godowns had begun in the three participating States of Haryana, Orissa, and Uttar Pradesh. Consultants were being recruited to assist NCDC and State- Cooperative Banks in strengthening their institutions. Initial project preparations have been completed on schedule; disbursements are therefore expected to follow the appraisal targets. Cr. No. 844 Railway Modernization and Maintenance Project; US$190.0 million credit of November 13, 1978; Effective Date: January 10, 1979; Closing Date: December 31, 1984 Credit 844 was designed to help the Indian Railways reduce manu- facturing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. The project is still at an early stage of implementation but is progressing satisfactorily. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26, 1976; Effective Date: May 17, 1976; Closing Date: December 31, 1981 A feasibility study financed under this Credit and completed in November 1979 has recommended the establishment of two mills, one for sawn- wood and one for pulp, as the basis of the development of a forest-based industry in Bastar district. Cr. No. 925 Uttar Pradesh Social Forestry Project; US$23.0 million credit of June 21, 1979; Effective Date: January 3, 1980; Closing Date: December 31, 1984 This project was designed to expand the social forestry program in Uttar Pradesh, to provide a source of energy to the villages, and supply  ANNEX II Page 15 of 17 raw materials to cottage industries. The project provides for large-scale tree plantation on 48,600 ha of public and village lands, primarily along roads, rails and canals, and on village common lands and degraded forest reserves. Cr. No. 610 Integrated Cotton Development Project; US$18.0 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1981 The project's progress remained very disappointing in all areas until the 1978 season, resulting in negligible disbursements. Due to renewed interests from GOI and the States, the project has now started to progress well. Short-term credits are increasing significantly, new processing units are being established in Haryana and Maharashtra, and plant protection activities have started progressing well. Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1981 Cr. No. 816 Second National Seed Project; US$16.0 million credit of July 17, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1984 These projects were designed to increase the availability of high quality agricultural seed, and cover nine States (four by Ln. 1273-IN and five by CR. 816-IN). The first project started slowly due to organizational difficulties and is almost two years behind schedule. Progress in the second project States is more satisfactory. The role of various organizations (National and State) in the production and processing of seed is being reviewed. Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1980 The bus procurement program supported by the project has proceeded on schedule, with all 700 bus chassis and bodies having been ordered and 589 already in service. Total fleet strength has increased from 1,530 buses at the inception of the project to 1,900 buses in September 1979, in accordance with appraisal estimates. Depot capacity expansion is lagging somewhat behind fleet expansion, but should match fleet size by early 1980. However, delays in construction of new workshop facilities have been more substantial and will not be fully recoverable. Traffic management civil works are also somewhat behind schedule, although efforts are being made to speed up the works program. Ln. No. 1394 Gujarat Fisheries Project; US$14.0 million loan and US$4.0 (TW) and million credit of April 22, 1977; Effective Date: Cr. No. 695 July 19, 1977; Closing Date: June 30, 1983  ANNEX II Page 16 of 17 Cr. No. 815 Andhra Pradesh Fisheries Project; US$17.5 million credit ofJune 19, 1978; Effective Date: October 31, 1978; Closing Date: September 30, 1984 In Gujarat, harbor construction at Mangrol and Veraval are under way, and although some delays have been encountered, the project is progress- ing satisfactorily and no major problems are evident. In Andhra Pradesh, preliminary work on implementation is progressing satisfactorily, and harbor works at Visakhapatnam and Kakinada are scheduled to commence shortly. Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit of May 12, 1978; Effective Date: August 14, 1978; Closing Date: March 31, 1985 Ln. No. 1549 Third Trombay Thermal Power Project; US$105.0'million loan of June 19, 1978; Effective Date: February 8, 1979; Closing Date: March 31, 1984 Ln. No. 1648 Ramagundam Thermal Power Project; US$50.0 million loan and and Cr. US$200 million credit of February 2, 1979; Effective Date: No. 874 May 22, 1979; Closing Date: December 31, 1985 Cr. No. 604 Power Transmission IV Project; US$150 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: June 30, 1981 Credit 685 assists in financing the first stage of the 2,000 MW Singrauli development which is the first of four power stations in the Government's program for the development of large central thermal power stations feeding power into an interconnected grid. The second such station, at Korba, is being financed under Credit 793. The National Thermal Power Corporation (NTPC) has been carrying out construction and operation of these power stations. Organization and staffing of NTPC is proceeding satisfactorily. Loan 1549 is supporting the construction of a 500 MW extension of the Tata Electric Companies' station, in order to help meet the forecast load growth in the Bombay area. Loan 1648 and Credit 874 sup- port the construction of the first three 200 MW generating units in Andhra Pradesh together with related facilities and associated transmission. All these large-scale thermal power projects are progressing satisfactorily. Under Credit 604, contracts aggregating about US$114 million have been ap- proved to date. Although this project suffered delays in preparation of technical specifications and evaluation of bids for highly sophisticated equipment, the project is now progressing satisfactorily. Cr. No. 572 Rural Electrification Project; US$57.0 million credit of July 23, 1975; Effective Date: October 23, 1975; Closing Date: December 31, 1980  ANNEX II Page 17 of 17 Cr. No. 911 Rural Electrification Corporation II Project; US$175.0 million credit of June 21, 1979; Effective Date: October 17, 1979; Closing Date: March 31, 1984 Credit 572 consists of a tranche of rural electrification schemes financed by the Rural Electrification Corporation. There are now thirteen State Electricity Boards (SEBs) eligible for onlending, compared with six at the time of appraisal. The project got off to a slow start, due principally to the need to adapt the specifications and tendering procedures to interna- tional competitive bidding, but the position has improved and the full amount of the Credit has been committed. Credit 911 provides continued support to the Rural Electrification Corporation's lending program, and is helping to finance about 1,700 rural electrification schemes in fourteen SEBs, including the newly participating Uttar Pradesh SEB. The project is at an early stage of implementation, and procurement is progressing satisfactorily. Ln. No. 1473 Bombay High Offshore Development Project; US$150.0 million loan of June 30, 1977; Effective Date: October 20, 1977; Closing Date: December 31, 1980 The project is progressing satisfactorily. Gas and oil pipelines from Bombay High to shore were commissioned in June 1978. Most contracts for Phase III of Bombay High development have been laid, construction should be completed by mid-1980 and the loan should be fully disbursed by its original closing date.  ANNEX III Page 1 INDIA FARAKKA THERMAL POWER PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: (a) Timetable of Key Events This project is the first stage of the fourth Centrally owned large power station in India. A report on the project site was published in December 1974 and a supplemental feasibility report was prepared in May 1979. (b) The agencies which have prepared the project Ministry of Energy/Central Electricity Authority/ National Thermal Power Corporation Limited. (c) Date of first presentation to the Bank, and date of the first mission to consider the project Preliminary report was submitted to the Bank in early 1975. The scope of this project was dis- cussed at the time of appraisal of the first stage of the Singrauli development in April 1976. (d) Date of departure of appraisal mission May 25, 1979. (e) Date of completion of negotiations May 22, 1980. (f) Planned date of effectiveness October 10, 1980. Section II: Special Conditions (a) NTPC to appoint project management and information system consultants by October 15, 1980 (para 47). (b) GOI to ensure adequate coal supplies (para 48);  ANNEX III Page 2 (c) NTPC to have due regard for ecological and environ- mental factors (para 49); (d) NTPC to achieve and maintain 9.5% rate of return (para 50); (e) NTPC to inform the Association of any proposal to modify existing limitation on its borrowing powers (para 51); (f) GOI to conclude a subsidiary loan agreement with NTPC satisfactory to the Association as a condition of effectiveness (para 51); (g) NTPC to sell power under satisfactory bulk supply contracts (para 52); and (h) GOI to obtain, by October 10, 1980 undertakings from the recipient SEBs in the Eastern Region and DVC to purchase power (para 52).  11- 12- 1. 80- 84 DE
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