India - Tamilnadu Newsprint Project

Document of The World Bank FILE COpy FOR OFFICIAL USE ONLY Report No. P-3114-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE TAMIL NADU NEWSPRINT PROJECT August 25, 1981 This document has a restricted distribution and may be used by recipients only in the performance of their oflicizd duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (As of August 10, 1981) US$1.00 5 Rs 9.264 Rs 1.00 = US$0.1079 Rs 1 million = US$107,940 The U.S. Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 8.0, which represents the projected average exchange rate over the disbursement period. FISCAL YEAR April 1 - March 31 ABBREVIATIONS BCE - Base Cost Estimate CIF - Cost, Insurance and Freight DAF - Development Assistance Fund GOI - Government of India GOTN - Government of Tamil Nadu HPC - Hindustan Paper Corporation ICICI - Industrial Credit and Investment Corporation of India IDBI - Industrial Development Bank of India IFCI - Industrial Finance Corporation of India IFI's - Indian Financial Institutions LICI - Life Insurance Corporation of India NLC - Neyveli Lignite Corporation SPB - Seshasayee Paper and Boards Limited TAFCORN - Tamil Nadu Forest Plantations Corporation TNEB - Tamil Nadu Electricity Board TNPL - Tamil Nadu Newsprint and Papers Limited tpd - tons per day tpy - tons per year  FOR OFFICIAL USE ONLY INDIA TAMIL NADU NEWSPRINT PROJECT LOAN AND PROJECT SUMMARY Borrower: India, acting by its President (GOI) Beneficiary: Tamil Nadu Newsprint and Papers Limited (TNPL) Amount: US$100 million equivalent Terms: Twenty years, including five years' grace, at 10.6% interest per annum. Relending Terms: GOI to IDBI/DAF: At an interest rate of 8-1/4% per annum repayable over 15 years including 5 years' grace. IDBI/DAF to TNPL: US$77.5 million at an interest rate of 14% per annum repayable over 15 years including 5 years' grace. US$22.5 million as equity. GOI would bear the foreign exchange risk. Project Description: The project would provide for the construction of a dual-purpose pulp and paper mill with the capacity to produce 100,000 tpy of newsprint or 80,000 tpy of printing and writing paper (or any combination thereof) from bagasse, a by-product of sugar production. Benefits to be gained include the alleviation of India's shortage of newsprint through the introduction of a new technology utilizing a readily- available raw material. The risk of using a new technology would be minimized by the fact that the mill could easily be converted to the production of 80,000 tpy of printing and writing paper from bagasse by a commercially proven process. The risk of an inadequate coal supply would be minimized by the securing of alterna- tive fuels. I This document has a restricted distribution and may be used by recipients only in the perforrnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Costs: (US$ Millions) Local Foreign Total Equipment and Spares 23.2 67.8 91.0 Civil Works 9.0 1.0 10.0 Engineering and Supervision 3.9 3.9 7.8 Erection 3.0 0.4 3.4 Taxes and Duties 23.9 - 23.9 Total Plant Cost 63.0 73.1 136.1 Facilities at Sugar Mills 6.2 7.7 13.9 Railway Sidings 0.7 0.1 0.8 Housing and Amenities 1.7 0.2 1.9 Training & Technical Assistance 0.9 0.9 1.8 Pre-Operating Expenses 2.3 0.2 2.5 Sub-total 11.8 9.1 20.9 Base Cost Estimate (BCE) 74.8 82.2 157.0 Physical Contingencies 6.0 6.6 12.6 Price Contingencies 10.3 9.9 20.2 Total Installed Cost 91.1 98.7 189.8 Working Capital 17.o 0.9 17.9 Total Project Cost 108.1 99.6 207.7 Interest During Construction 14.4 15.4 29.8 Total Financing Required 122.5 115.0 237.5 Financing Plan: (US$ Millions) Local Foreign Total Equity - GOTN 39.4 - 39.4 - Participating Sugar Mills 3.1 - 3.1 - SPB 1.9 - 1.9 - IFI's 16.2 - 16.2 - IBRD through IDBI/DAF - 22.5 22.5 Long-Term Debt - IFI's 49.4 15.0 64.4 - IBRD through IDBI/DAF 77.5 77.5 Short-Term Debt 12.5 - 12.5 Total 122.5 115.0 237.5  - iii - Estimated Disbursements: (US$ Million) FY82 FY83 FY84 FY85 Annual 31.0 36.0 29.0 4.0 Cumulative 31.0 67.0 96.0 100.0 Rate of Return: About 19%. Appraisal Report: No. 3251-IN, dated August 14, 1981.   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE TAMIL NADU NEWSPRINT PROJECT 1. I submit the following report and recommendation for a proposed loan to India for the equivalent of US$100 million to help finance a project to establish an integrated pulp and paper mill in the State of Tamil Nadu. The loan would have a term of twenty years, including five years' grace, with interest at 10.6% per annum. The Government of India (GOI) would on-lend the proceeds of the loan to the Development Assistance Fund (DAF) of the Industrial Development Bank of India (IDBI) for 15 years, including five years' grace, with interest at 8.25% per annum. IDBI would make US$22.5 million of the loan proceeds available to the project sponsor, Tamil Nadu Newsprint and Papers Limited (TNPL), as equity, and US$77.5 million as a loan for 15 years, including five years' grace, at 14% per annum. GOI would bear the foreign exchange risk. PART I - THE ECONOMY 2. An economic report, "Economic Situation and Prospects of India" (3401-IN, dated April 15, 1981), was distributed to the Executive Directors on April 16, 1981. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 688 million (in mid-1981) and an annual per capita income of US$190. 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. Over the past 30 years, the share of agriculture in GDP at factor cost (measured in 1970/71 prices) has declined from 60% to about 40%, while the share of industry has increased from 15% to about 24%. But industrialization has not been rapid enough to absorb the growing labor force, nor to bring about the economic transformation that has led to sig- nificantly higher productivity in some other developing countries. 4. Economic growth has been slow in the past, averaging about 3.5% per annum over the past 30 years. Slow growth of value-added in agriculture -- 2.1% per annum over the three decades -- 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 value-added has grown more rapidly, at 5.4% per annum between 1950/51 and 1979/80. Over the same period, gross domestic savings more than doubled from 10% of GDP to 21.2%, while gross domestic investment rose from 10% of GDP to  -2- just over 21.8%. 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 below 3%. 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, and was less than 1% at the end of the 1970s. 5. Over the past 30 years as a whole, India has placed relatively little emphasis on exports and has tended to pursue a strategy of import substitu- tion. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.6% per annum, about the same as the volume growth of imports over the same period. Between 1970 and 1977, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. The volume of India's exports grew on average about 9% per annum between 1971/72 and 1976/77. Although export growth has slowed in recent years, due in large part to domestic supply constraints, this experience demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives 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 5.4%, 3.1% and 7.9% per annum, respectively. These trends represent a substan- tially better growth performance than the historical 30-year trends (paragraph 4). However, GDP declined by about 4.5% in 1979/80 due both to the severe drought which reduced agricultural production and to input con- straints in other sectors. Agricultural output fell by about 16% in 1979/80. Industrial production stagnated, largely due to shortfalls in the production of major inputs such as coal, steel and cement, as well as infrastructural constraints, notably in power and transportation. As a consequence of these developments, the remarkable price stability that India had enjoyed after 1975 came to an abrupt end at the close of fiscal year 1978/79, with prices increasing 21% during 1979/80. 7. In 1980/81, the economy recovered substantially, so that real GDP growth for the year was about 6%-7%. During the summer and fall of 1980 foodgrain prices rose, but more slowly than other prices and more slowly than the drop in production in 1979/80 would have suggested. This was made pos- sible through the drawdown of substantial buffer stocks built up by the Government in years of good harvests. These stocks ensured adequate supplies of grain to low-income groups in urban areas through the public distribution system and also provided resources for a large-scale drought relief employ- ment program for low-income groups in rural areas. Aided by a normal monsoon in the summer of 1980, agricultural production rose by about 17%-19%. The industrial sector recovered more slowly, with production in 1980/81 rising only about 4% above the average for 1979/80, but output increased substan- tially during the year so that production in April 1981 was about 9% higher than in April 1980. The rise in prices slowed during the second half of 1980/81 so that by March 1981 the wholesale price index was 15.7% above its level a year earlier.  -3- 8. In agriculture the positive results of large investments and appropriate policies in the past years are becoming increasingly apparent. The rate of expansion of irrigation has increased significantly from 1.3 mil- lion ha per year in the early 1970s to about 2.3 million ha in 1980/81. Fertilizer use reached about 5.6 million tons of nutrients in 1980/81, more than double 1974/75 levels. Over the decade before 1979/80, foodgrain production grew at about 2.75% per annum -- sufficient to meet consumer demand, to eliminate imports (which had averaged nearly 5 million tons per year for the 15 years preceding 1976), and to reduce real foodgrain prices for consumers. At the same time, India was able to build up substantial foodgrain buffer stocks which made it possible to limit the effects of the 1979/80 drought, and to export a modest amount of grain in 1980. While the management of the foodgrain economy after the drought was a significant achievement, the effect of the drought on production re-emphasized the con- tinued importance of the monsoon in India's agriculture. The normal monsoon of 1980/81 brought foodgrain production back to around the previous record level of 132 million tons. While the performance of the recent past and the probable future trends suggest that on average foodgrain supplies will exceed demand, the balance remains delicate and the need for foodgrain imports to maintain consumer supplies or adequate buffer stocks could arise from time to time. For example, some wheat imports are likely in 1981/82 to ensure ade- quate build up of stocks. Programs to expand irrigation, strengthen exten- sion and encourage the efficient use of other agricultural inputs continue to receive high priority. 9. The Indian economy has shifted back 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 heavily upon the enhanced profitability of public sector enterprises. Impending 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 due to fav6rable terms of trade movements after 1977 and to rapidly growing workers' remittances as well as to the growth of exports. In 1980/81, however, the balance of pay- ments deteriorated sharply, with the current account deficit rising from US$850 million in 1979/80 to nearly US$3.4 billion in 1980/81. In part this was due to unique events during the year, such as the disruption of oil production in the Northeast, which, though the flows resumed again in February 1981, alone added over US$1 billion to the oil import bill. Com- bined with unprecedented oil price increases, this caused the oil import bill to rise by over 75%, to a level equivalent to three-fourths of India's mer- chandise export earnings. The deficit on current account rose to 2% of GDP. India was able to finance this gap through a substantial drawing on IMF resources (the Trust Fund and the Compensatory Financing Facility), and through an increase in aid disbursements and a modest drawdown in foreign exchange reserves. 10. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into reasonable balance at a high level of growth. In  -4- particular, there is a need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has left in place the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export policy measures have improved the prospects for accelerating export growth. Development Prospects 11. 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 is large in absolute terms and has a highly diversified structure, capable of manufac- turing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, the power grid, roads and ports -- is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institu- tional 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. 12. A new Sixth Five-Year Plan (1980-85) was approved in February 1981. The new Plan continues to assign priority to agriculture and power. Further- more, the Plan reflects the Government's efforts to bring about the necessary adjustments in the economy by emphasizing several priority areas. These include: (i) expansion of exports and an investment program to support increased production to replace imports of goods such as fertilizer, cement and steel which India produces competitively; (ii) an investment program and policy framework for more efficient development and use of energy resour- ces; (iii) removal of bottlenecks in infrastructure and related constraints on production of basic industrial inputs; and (iv) continuing emphasis on the development of agriculture. 13. The higher capital formation rates of the past few years augur well for future income growth. However, there are signs that the past programs and policies have led to relatively 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 bottlenecks are alleviated. In the case of coal, steel and cement, domestic production appears to be clearly justified on grounds of comparative advantage, indicating an a priori case for policies to promote further investment. In 1980/81 these commodities were not imported in sufficient amounts to eliminate the shortages; increased short-term reliance on imports may be necessary to alleviate slowdowns and  -5- dislocation in user industries. In the case of sectors in which there is little scope to import the final product -- power and transportation -- the planning of capacity expansion becomes even more crucial. Although there is scope for improvement in the short-run performance of these sectors, major investments in balancing and modernization programs as well as in new capacity are essential for adequate growth in the medium term. 14. Despite the relatively large investment programs for the develop- ment of domestic energy resources such as coal and hydroelectricity, and the recent development of offshore petroleum resources, India has not been able to eliminate the gap between its total energy demand and domestic production. During the past year, India continued to face power and coal shortages, but the situation improved substantially during the year so that power generation in June 1981 was around 20% higher than a year earlier. India is entering the Sixth Plan period with an ambitious energy production program backed by substantial financial commitment. In the oil sector, GOI is now accelerating its oil exploration capabilities and is opening up prospective areas for exploration by foreign firms. Prices of petroleum products were raised substantially in 1980 and again in July 1981 to bring domestic prices into line with world market prices, to raise resources for further oil and gas development and to encourage efficient use of energy. India is now committed to an expanded power program that emphasizes exploitation of its large hydro potential and development of its transmission and distribution system. In the coal sector, a policy decision in favor of mechanization has been made in order to achieve more rapid growth of coal production. 15. Agricultural policies, development programs and secular trends all seem favorable for sustaining the past agricultural growth during the 1980s. India ended 1980 with grain stocks of about 12 million tons, without having imported foodgrains during the year. This reflects the trends of the last decade which point to an improvement in foodgrain availability in the economy. Growing output, combined with the projected fall in the population growth rate, suggest favorable long-run prospects for foodgrain supply and demand balances. An occasional need to import grains, particularly wheat, could arise, but if the efforts to develop agriculture over the past decade are sustained and intensified, as suggested in the new Plan, persistent shortage seems unlikely. This development could give rise to a range of policy options including a slowly falling real price of foodgrains to increase the affordability of foodgrains to low-income families, foodgrain exports, and diversification to the production of other, higher-value crops. 16. Foreign exchange reserves are providing a cushion that helps the Government of India in short-term supply management. In March 1981, however, gross reserves were $320 million lower than the level of a year earlier and, in terms of import coverage, fell below the six-month level for the first time since 1977. A much larger decline in the reserve level would have been necessary in 1980/81 had IMF Trust Fund and Compensatory Financing Facilities, amounting to over US$1 billion, not been available. India's reserves provide some limited scope for narrowing the financing gap over the next few years, but successful management of the balance of payments will depend mainly on improved export performance, on import replacement, on the maintenance of aid flows and workers' remittances, and on a moderation in price increases for oil imports. While India's current account balance of payments deficits are not expected to be large relative to the size of the  -6- economy (e.g., on the order of two percent of GDP), the absolute amounts are large and will necessitate external borrowing beyond levels expected to be available from normal concessional sources. Accordingly, India has recently begun to undertake substantial borrowings in the financial markets to help finance selected major investment projects. 17. India's medium-term development prospects are mixed. Considerable progress continues to be made, particularly in agriculture, but the economy faces a period of difficult adjustments in the coming years. Investments 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 those implementing India's Sixth Five-Year Plan. The primary focus must be on the implementation of appropriate domestic adjust- ment 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. 18. Preliminary results from the March 1, 1981 Census, combined with 1971 Census figures adjusted for under-enumeration, suggest that the popula- tion growth rate declined from 2.3% p.a. in the late 1960s to about 2% at present. The rate of increase of population is expected to continue falling to around 1.8% by the first half of the 1990s. While the growth rate appears to be declining slowly, the 1981 Census population estimate was substantially higher than previous Government projections. The 1981 Census data are still incomplete but preliminary reports indicate that the rise in life expectancy was more than anticipated, suggesting that, on average, Indians can expect to live five years longer than they did a decade ago. This no doubt reflects improved availability of food and health services. This implies, however, an even greater need to reduce the birth rate to bring about the needed reduc- tion in the rate of growth of population. The Census results, therefore, re-emphasize the need for continuing efforts to strengthen a broad range of family planning activities to develop a wider clientele and to provide that clientele with a professional, technically competent advisory service which can provide the full variety of available birth prevention methods. The new Plan continues the high priority given to these efforts in earlier Plans. The ambition of its targets - implying a rise in the proportion of protected couples in the reproductive age group from its present estimated level of about 23% to over 35% by 1984/85 - seems fully justified. Such targets imply a serious long term commitment to moderating the population growth rate through an improved family planning program. 19. Reduction of poverty remains the central goal of Indian economic growth. 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. About 51% of the rural population and 38% of the urban population subsist below the poverty line (estimated at about US$114 and US$132 per capita per year for rural and urban areas, respectively). Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy; the circumstances require increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies  -7- and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1979 reflects such develop- ments. There is also a role for direct Government action in faster implemen- tation of land reform (though the scope for significant reduction in poverty through land 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 health facilities and the provision of secure village water supplies. Innovations such as the community health volunteer program and the national adult literacy campaign provide encourag- ing evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor. PART II - BANK GROUP OPERATIONS IN INDIA 20. Since 1949, the Bank Group has made 61 loans and 141 development credits to India totalling US$2,833 million and US$9,323 million (both net of cancellation), respectively. Of these amounts, US$1,168 million had been repaid, and US$4,494 million was still undisbursed as of June 30, 1981. Bank Group disbursements to India in fiscal year 1981 totalled US$962 million, representing an increase of about 32% over the previous year. Annex II contains a summary statement of disbursements as of June 30, 1981, and notes on the execution of ongoing projects. 21. Since 1959, IFC has made 24 commitments in India totalling US$148.7 million, of which US$22.2 million has been repaid, US$27.7 million sold and US$7.5 million cancelled. Of the balance of US$91.3 million, US$82.3 million represents loans and US$9.0 million equity. A summary statement of IFC operations as of June 30, 1981, is also included in Annex II (page 4). 22. In recent years, Bank Group lending has emphasized 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, dairying, and forestry 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. The Bank Group has also been active in supporting infrastruc- ture development for power, telecommunications, and railways. Family plan- ning, water supply development, urban investments and the development of oil and natural gas have also received Bank Group support in recent years. 23. 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  -8- 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 benefitting small farmers. The Bank Group's continuing role in the fer- tilizer sector assists India in the more efficient provision of another key input in the agricultural growth process. Projects supporting water supply, sewerage, urban development and investments in the petroleum sector also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on those subsectors which have recently emerged as key constraints on India's overall growth, primarily power and transportation. 24. 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, there is now a need for increased foreign assistance to adjust to an even greater deterioration in balance of payments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Bank Group assistance for projects in India should aim to include the financ- ing 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 sec- tors as agriculture, irrigation, and water supply. 25. India's poverty and needs are such that whenever possible, 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. Therefore, India should be eligible and regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was about 10% in 1980/81 and is projected to remain below 20% through 1995/96. As of June 30, 1981, outstanding loans to India held by the Bank totalled US$1,742 million, of which US$874 million remain to be disbursed, leaving a net amount outstanding of US$868 million. 26. 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 49%, 36% and 44%, respectively, in 1980/81. On March 31, 1981, India's outstanding and disbursed external public debt was about US$17 billion, of which the Bank Group's share was US$6.2 billion or 36% (IDA's US$5.3 billion and IBRD's US$0.9 billion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1980/81, about 18.0% of India's total debt service payments were to the Bank Group.  -9- PART III - THE PULP AND PAPER INDUSTRY IN INDIA 27. Within the constraint imposed by shortages of conventional raw materials, India's pulp and paper industry has been relatively successful in achieving one of its principal objectives: that of efficiently and economically maintaining a high level of self-sufficiency in domestic paper production. In 1980, there were 107 plants in operation, producing a total of approximately 1.2 million tons of paper and paperboard, or 80% of India's total paper con- sumption. Domestic production accounted for some 98% of the country's require- ments of printing and writing paper, and 96% of industrial paper and board; imports generally have been limited to specialty products. Because of the shortage of fibers suitable for traditional methods of newsprint manufacture, however, substantial imports of newsprint are still required; in 1980, domestic production accounted for only about 15% of the total consumption of 315,000 tons. 28. Total output of the pulp and paper sector is currently valued at some Rs 6 billion annually; the industry contributes about 2% of industrial output in India, and employs about 100,000 people. In addition, at least twice that number are engaged in related activities such as the collection of fibrous raw materials. With real output having increased at an average annual rate of more than 6% over the past 20 years, the rate of growth of the industry has exceeded that of the economy as a whole, reflecting rising literacy rates, expanding educational programs and increasing use of paper for packaging of food and other commodities. However, India's average per capita consumption of paper, at less than 2 kg per year, is among the lowest in the world. Fibrous Raw Materials 29. The pulp and paper industry consumes about 2.5 million tons of fibrous raw material annually, primarily bamboo and indigenous hardwoods, and plant location has largely been determined by the proximity of these raw materials. Bamboo, the fiber most frequently used, provides about 65% of the industry's fibrous raw material. While actual production of bamboo is only 3 million tons per year (tpy) (of which 50% is consumed by the paper sector), compared to an estimated potential of 5.5 million tpy, there is little scope for pulp and paper expansion based on this resource for three reasons: (i) the bulk of the unutilized bamboo is in relatively inaccessible areas; (ii) competing end uses--primarily construction--restrict the supply available to the paper industry; and (iii) since the bamboo plant flowers unpredictably and is often unproductive for 5-6 years thereafter, there is significant risk in establishing a mill in any area where other raw materials are not also readily available. 30. Another 21% of the industry's fibrous raw material is derived from indigenous hardwoods (20%) and softwoods (1%). Although this amounts to less than one half of one percent of the nation's total wood consumption, the percentage available for pulp and paper production is not likely to increase. Forest land is becoming increasingly scarce because of overcutting, conversion to agricultural use, a rising demand for wood for fuel and construction uses, and inundation as a result of implementation of irrigation schemes.  - 10 - 31. Of the remaining fibrous raw material sources now used for paper manufacture--grass, bagasse and others (straw, jute, waste paper, linters)-- the only one with any scope for significant expansion that would not be at the cost of existing agricultural production or competing end uses is bagasse, a by-product of sugar production. India is one of the world's largest sugarcane producers. If all the cane produced were crushed and the bagasse made avail- able for paper production, the fiber could support an output of about 7 million tpy of paper, almost six times current domestic consumption. Bagasse is currently used in India by sugar mills as process fuel but it could be economically replaced by coal, which is available in India, albeit subject to extraction and transport problems. Bagasse is being used to produce printing and writing paper in other parts of the world, and to some extent in India, but to date there is no commercially proven technology for bagasse- based newsprint production. Production and Pricing Controls 32. For most grades, delivered paper prices in India are comparable to international prices. In order to ensure the availability of certain grades of paper used in educational institutions, GOI has instituted some mandatory production requirements: (i) mills producing printing and writing paper must make 30% of their production as white printing paper, to Government specifi- cations, and deliver it to specified consumers at a fixed price, currently about 50% of the free market price; and (ii) these same mills must produce five other specified grades of printing and writing paper to the extent of an additional 33% of production, but this production can be sold freely on the open market. These restrictions do not apply to mills of less than 10,000 tpy capacity, mills using fibrous raw material which is at least 75% not wood or bamboo, and new mills for at least the first five years of operation. Exise duties are applied to domestic production at rates ranging from 20-40% depending on the type of paper, but no exise duties are applied to newsprint, and small mills and new mills using non-conventional raw materials to produce printing and writing paper are exempted from a percentage of the excise duties. 33. A shortage of both newsprint and printing and writing paper in the early 1970's led the Government to institute a number of actions designed to stimulate the sector's growth. The Government-owned Hindustan Paper Corpora- tion Limited (HPC) was created to establish new pulp and paper mills and is expected to produce 64% of the 500,000 tpy of new capacity now under construc- tion. Mills designed to produce newsprint were declared priority investments and permitted to import equipment at a concessional rate of duty (35% compared to 45% for other pulp and paper plants). A 15% duty was recently levied on imported newsprint. Although these measures have served to stimulate expansion of capacity in the sector during the past decade, there has also been a steady increase in paper consumption during the same period. Projected demands for both newsprint and printing and writing paper indicate a supply gap of 170,000 tpy of newsprint and 85,000 tpy of printing and writing paper by 1985 even after taking into account projected new capacity, including this project.  - 11 - Marketing and Distribution 34. The marketing of newsprint in India is controlled by the Government through the Registrar of Newspapers who allocates domestic production and imports to newspapers, periodicals and magazines, in an attempt to distribute the various qualities equitably. Once the allocation has been made (generally annually), consumers deal directly with the producer. Because of these arrangements, selling expenses for newsprint are minimal. Newsprint from the project would be marketed through this system. Except for mandatory production requirements for white printing paper, the market for printing and writing paper is not controlled. Printing and writing paper produced under this project would be marketed through a network of agents, covering the entire country, a system usual for the larger Indian producers. Price lists are established on an ex-factory basis with agents' commissions ranging from 3-1/2 to 10% of ex-factory price. Bank Group Operations in the Sector 35. The Bank Group has not financed any projects in India's pulp and paper sector to date, although it has helped to finance a feasibility study for a paper project in the Bastar region of Madhya Pradesh under the Madhya Pradesh Forestry Technical Assistance Project (Credit 609-IN, May 17, 1976). PART IV - THE PROJECT 36. The proposed project was prepared by the Government of Tamil Nadu (GOTN) with the assistance of the Seshasayee Paper and Boards Ltd. (SPB), project consultants. It was appraised in October 1980 and February 1981. The Staff Appraisal Report (No. 3251-IN), is being distributed separately to the Executive Directors. Negotiations were held in Washington in July 1981 with the Borrower represented by Mr. S. Kaul of the Department of Economic Affairs, Ministry of Finance, as coordinator of the Indian delegation. Project Description 37. The proposed Bank loan would help to finance the establishment of an integrated pulp and paper mill, with the capacity to produce 100,000 tpy of newsprint or 80,000 tpy of printing and writing paper (or any combination thereof) using bagasse (an average of about 80% overall) and eucalyptus wood as fibrous raw material. Facilities to be provided include: bagasse depithing equipment and a chemical pulp mill for bagasse, chipping equipment and a chemical pulp mill for wood, full chemical recovery facilities, a bleach plant, a dual-purpose paper machine and associated stock-preparation equipment, pollution abatement facilities, and some supporting infrastructure. In addition, coal handling equipment and coal-fired boilers would be installed and operated at five sugar mills, to permit the release of bagasse (currently used as fuel for process steam) for use in the paper mill as a raw material. At full production (from 1988), a product mix of 50,000 tpy of newsprint and 40,000 tpy of printing and writing paper is proposed. Although this product mix is specified on the industrial license issued by GOI to TNPL, it could be adjusted to meet technical and market requirements.  - 12 - Raw Materials 38. The project, which was conceived to meet the Government's dual objectives of expanding production of both newsprint and printing and writing paper, and of using bagasse as a fibrous raw material, would produce newsprint from 85% high-yield bagasse pulp and 15% hardwood (eucalyptus) chemical pulp and printing and writing paper from 75% bagasse chemical pulp and 25% hardwood chemical pulp. The bagasse required--about 420,000 tpy at full production-- would be obtained from five sugar mills, located between 5 km and 140 km from the plant site and each producing between 53,000 and 183,000 tons of bagasse a year on average. These mills currently use their bagasse as fuel to generate process steam. In order to release the bagasse for use in paper making, Tamil Nadu Newsprint and Papers Ltd. (TNPL), the project sponsor, would install, operate and maintain coal-fired boilers at the sugar mills, and supply the mills with sufficient coal to generate their steam requirement. TNPL has signed contracts with six sugar mills; boilers would actually be installed only in five, with the sixth held in reserve in case additional bagasse is required. 39. The wood required by the project would be supplied from the exist- ing plantations of the Tamil Nadu Forest Plantations Corporation (TAFCOKN). TAFCORN is a State Government corporation with some 32,000 ha currently planted with a eucalyptus hybrid which is grown on a seven-year cycle. Bank staff have reviewed the supply capacity of TAFCORN's plantations and concluded that the margin of safety in the wood supply is adequate. GOTN would ensure that the necessary volume of pulpwood for the project would be made available including, in the event that coal supplies are disrupted for any reason, expanded deliveries to allow the mill to continue operations (Section 3.01 of the Tamil Nadu Agreement). 40. The project's total coal requirement, including that to be supplied to the sugar mills, would be about 330,000 tpy. TNPL has obtained a letter of commitment from Singareni Collieries in Andhra Pradesh for 150,000 tpy, and TNPL has signed a contract with Coal India Limited for 190,000 tpy from 1983 onwards. Coal would be delivered by rail from the coal fields to a dump at the paper mill; from there the amount required by the sugar mills would be transported by truck. In view of India's chronic coal production and supply problems, TNPL has considered it prudent to make arrangements for an alterna- tive fuel - lignite -- to cover a part of the total fuel requirement, and the paper mill's boilers are being designed to burn lignite as well as coal. Lignite is available in substantial quantites from a briquetting and carboniza- tion plant owned by the Neyveli Lignite Corporation Ltd. (NLC), a public sector company. Since lignite is more expensive than coal (in terms of contained thermal units), it would be used only if coal were unavailable, but TNPL has obtained a letter of commitment from NLC for the supply of 60,000 tpy of lignite, if necessary. GOI would ensure that TNPL's demand for coal and, if necessary lignite, would be met on schedule. If there is any temporary disruption in the mill's operation due to lack of fuel or technical problems with the furnish (fiber composition), TNPL would be allowed to procure alter- native fuels or to import pulp in order to continue operations economically (Section 4.02 of the Loan Agreement).  - 13 - Project Implementation 41. The proposed project would be owned and operated by Tamil Nadu Newsprint and Papers Ltd. (TNPL), a company established by the Government of Tamil Nadu and incorporated on April 16, 1979. Initial shareholders in TNPL would be: GOTN (47%); the Industrial Development Bank of India (IDBI) as lead agency in a consortium with other Indian financial institutions (IFI's) (47%); 1/ two of the cooperatively-owned sugar mills which would supply bagasse to the mill (4%); and SPB, the owners and operators of a pulp and paper mill in Tamil Nadu as well as project consultants (2%). GOTN would give only policy directives to TNPL and not interfere in day-to-day operation. IDBI and GOTN would limit their respective shareholdings to less than 50% (Sections 3.02 of the Tamil Nadu Agreement and 4.02 of the IDBI Agreement). TNPL would be managed by a Board of Directors appointed by the shareholders. The Chairman of the Board, the current Managing Director of SPB, has already been appointed as have the Executive Director and the Project Manager. A Project Implementation Group has been formed within TNPL and staffed by experienced professionals, many of whom have been transferred from SPB, to implement the project. The Project Implementation Group would be supported by SPB, whose functions and responsibilities are outlined in a contract between TNPL and SPB which has been reviewed by Bank staff. TNPL would maintain in effect a technical assistance agreement during the first five years of plant operation (Section 3.04 of the Project Agreement). TNPL is developing a training program, which would make use of SPB facilities to provide on-the- job training for staff operating the plant. It would provide by December 31, 1982 a detailed report on the recruitment and training of staff (Section 3.06 of the Project Agreement). 42. In order to ensure coordination of process design and project imple- mentation, the major equipment package and the basic engineering services for the project would be provided by a consortium of engineers and equipment suppliers headed by Beloit Walmsley Ltd. of the UK. The consortium includes a consulting engineering firm (Reed International of the UK) which would be responsible for basic engineering as well as supervision of the local engineer- ing firm, selected by Reed, which would undertake detailed engineering. Bank staff have reviewed the TNPL contracts with Beloit Walmsley and with Reed and will review the terms and conditions of the contract with the local engineering firm (Section 2.02 of the Project Agreement). 43. Infrastucture. The mill would be located on a site near Pugalur, on the Cauvery River, about 300 km southwest of Madras. Indian Railways would construct a 3 km railway spur from Pugalur to the mill site, which would be financed under the project. This would be completed by the end of 1983 (Section 4.04 of the Loan Agreement). The proposed mill site is close to a national highway and, by December 31, 1983, GOTN would both upgrade existing 1/ In addtion to IDBI, other IFI's expected to participate, all in a minor way, are the Industrial Credit and Investment Corporation of India (ICICI), The Industrial Finance Corporation of India (IFCI), and the Life Insurance Corporation of India (LICI).  - 14 - road connections between the site and the nearby national highway, and under- take any other modification of the local road system as might be required to ensure an efficient traffic flow for the project (Section 3.05 of the Tamil Nadu Agreement). The mill would normally generate 75% of its total power requirements; the balance would be purchased from the Tamil Nadu Electricity Board (TNEB) which would construct a 1 km power line from its Pugalur sub- station to the mill site. TNPL has arranged with GOTN to establish a housing colony of 670 units and related community facilities at the plant site. The community facilities, 70 houses for senior management and technical staff, and 25% of the cost of an additional 600 housing units would be financed under the project. GOTN would assist TNPL in arranging for staff housing which is not provided under the project and would permit TNPL to draw water from the Cauvery River to meet the full requirements of the plant and the housing colony (Sections 3.04 and 3.06 of the Tamil Nadu Agreement). 44. Environmental Impact. GOI has issued standards for the discharge of industrial effluents to inland surface waters; these are generally in line with international standards, and are satisfactory to the Bank. Indian regulations permit some relaxation of standards if the effluent is to be discharged to an irrigation canal. The TNPL mill would normally discharge to such canals, and the irrigation of up to 2,000 ha of dry corn land, which without irrigation would be only marginally suited for agriculture, would be a side benefit. To avoid any potential problems, however, the project would provide for full primary and secondary treatment of effluent to meet the more stringent standards for surface water discharge. TNPL's proposals for the design of the mill's effluent treatment plant and for air emission systems have been reviewed by Bank staff and are satisfactory. TNPL would build and operate the project in accordance with environmentally sound standards and maintain adequate monitoring stations to gather information on meteorological conditions and base pollution levels (Section 3.05 of the Project Agreement). Project Costs and Financing 45. The total financing required for the proposed project, including contingencies, working capital and interest during construction, is estimated at US$237.5 million, of which US$115 million is the estimated foreign exchange cost, and US$23.9 million are duties and taxes. The estimated project cost includes provision for all necessary infrastructure, for the facilities to be located at the sugar mills, for training and technical assistance, and for pre-operating expenses. Physical contingencies have been calculated at 8% of the base cost estimate and provision for price escalation has been made assuming rates of 12.5% in 1980, 9% in 1981, 8.5% in 1982 and 7.5% in subse- quent years. 46. The proposed Bank loan of US$100 million would provide about 47% of the estimated financing required excluding duties and taxes. The proceeds of the proposed loan would be channelled to the project through IDBI's Develop- ment Assistance Fund (DAF). I/ The fund is operated as an integral part of 1/ IDBI's role in the project is thus two-fold: as the leader of the IFI's who are investing in the project and as the administrating agency for the DAF through which Bank Group funds would flow.  - 15 - IDBI's financing operations, but risks are borne by, and profits accrue to, GOI, with IDBI receiving a management fee. The proceeds would be on-lent by GOI for a term of 15 years, including 5 years? grace, at an interest rate of 8-1/4% per year (Section 3.01(b) of the Loan Agreement). To maintain an acceptable debt:equity ratio of 63:37 for the project, while limiting GOTN's shareholdings to less than 50%, US$22.5 million of the proposed loan would be passed to the project as equity, and the remaining US$77.5 million of Bank funds would be passed on as debt for 15 years, including 5 years' grace, at an interest rate of 14% per year. The remaining financing required would be provided as indicated in the Loan and Project Summary. IDBI and the other IFI's would offer their shareholdings in TNPL to the public as soon as market conditions permit and would apportion the proceeds of any such sale on a pari passu basis between the funds made available from the proceeds of the loan and their own equity (Section 4.03 of the IDBI Agreement). Procurement and Disbursement 47. Procurement for the major engineering and equipment package supplied by the Beloit Walmsley/Reed consortium was initiated prior to the request for Bank Group financing of the project. The procedures used have been reviewed by Bank staff and found to be consistent with international competitive bidding (ICB) and in accordance with the Bank's guidelines for procurement. The balance of the goods and services required by the project and financed by the loan would be procured by ICB, except for critical or proprietary imported items, and items costing less than US$100,000 (up to a combined maximum of US$5 million), which would be procured by international shopping, according to a list of goods and vendors agreed with the Bank. Indian manufacturers competing under ICB would be eligible for a preference margin of 15%, or the applicable customs duty, whichever is lower. Civil works and erection will be carried out by Indian contractors to be selected under competitive bidding procedures which are satisfactory. 48. The proposed loan would be disbursed against 100% of the CIF or ex-factory cost of equipment, materials and spares procured after ICB (US$90 million) and 100% of the cost of training and technical assistance (US$1 million). It is expected that Indian manufacturers would supply about US$45 million (or 36%) of the total equipment, spares and services required for the project (estimated at US$125 million including contingencies) while the balance US$80 million (or 64%) would be imported. It is also estimated that the Bank loan would finance approximately US$20 million of local supplies, won by Indian suppliers under the Bank's procurement guidelines. Retroactive financing of up to US$10 million of expenditures incurred after April 1, 1981 is proposed to cover down payments on major contracts, which were made in order to avoid delays in project execution. Financial Evaluation 49. Sales revenue from the project is expected to increase from Rs 561.8 million (US$70.2 million) in 1984/85, the first full year of plant operation, to Rs 813.2 million (US$101.7 million) in 1987/88, by which time capacity utilization will have reached 90%. Net profits (after tax)  - 16 - are expected to increase from a loss of Rs 18.6 million (US$2.3 million) in 1984/85, to a profit of Rs 152.3 million (US$19.0 million) in 1987/88. After start up, the project is expected to generate sufficient cash flow to meet all its obligations. Debt service coverage is expected to remain above 1.4 through the life of the project. The long-term debt:equity ratio, 63:37 at start-up, is expected to decrease to 65:35 as a result of losses in the first two years of operation but to improve rapidly thereafter. The current ratio is expected to increase steadily from its initial value of 1.6 in 1984. Profit and cash projections show that the project can pay a yearly dividend of 10% on its share capital from the sixth year of operation. The base case financial rate of return is 15.4% before taxes and 12.4% after taxes. Sensi- tivity analysis indicates that the after-tax rate of return is not likely to drop below 10.7% even without the excise duty concession. 50. In order to ensure a continuing satisfactory financial performance, TNPL has agreed that it would: (i) maintain a debt:equity ratio not greater than 65:35; (ii) not borrow funds for new investment if, as a result, its debt service coverage would fall below 1.5; (iii) maintain a current ratio of at least 1.2; and (iv) prior to project completion, not enter into arrangements for any major new investments in excess of US$5 million per year without the Bank's approval (Section 4.03 of the Project Agreement). Benefits and Risks 51. The project's economic rate of return is about 19% based on current international prices for paper and newsprint. If newsprint production proved difficult, and the project had to produce more printing and writing paper, the rate of return would actually increase. For 100% printing and writing paper production (with no newsprint), the rate of return is about 22%. The production of newsprint is nonetheless justified, since, if successful, it would open the door to future newsprint projects in India, yielding an economic rate of return of about 20%, as compared with future printing and writing paper projects for export which would only yield an economic rate of return of 15%. Further, it would enable India to offer technical assistance and consulting services to other developing countries wishing to implement similar bagasse-based newsprint projects. Industrial countries have suffi- cient wood-based long fiber resources to produce newsprint and thus have limited incentive to undertake the full development effort and risk associ- ated with bagasse technology. Consequently the developing countries will have to assume at least some of the risk. Among the developing countries India, with its extensive supply of bagasse and ready market for both news- print and printing and writing paper, is well placed to test this new technology. 52. The project would help to meet India's growing demand for paper and provide a prototype for bagasse-based newsprint production, not only for India but for all developing countries which produce sugarcane. At full production, the project would supply about 10% of India's forecast demand for newsprint, and 4% of the forecast demand for printing and writing paper. The net foreign exchange savings over the project's 17-year life, due to reduced imports of paper and newsprint, are estimated at about US$980 million in 1981  - 17 - dollars, after providing for interest payments on foreign loans and deducting the foreign exchange component of operating costs. The project would create about 2,000 permanent jobs, in addition to about 4,000 jobs through secondary and tertiary employment. Through the availability of treated effluent, the project would also help to irrigate 2,000 ha of farm land which would allow it to be converted from low-productivity dry corn land to high-productivity paddy. 53. There are two principal risks associated with the project. The first is that of introducing the relatively new technology of producing newsprint from bagasse which, while technically established, has not been commercially proven. However, a number of safeguards have been incorporated to reduce this risk to an acceptable level. 54. TNPL decided to procure the entire pulp line and paper machine from a single consortium with satisfactory technical experience, which would be responsible for guaranteeing production variables through the process, from pulp to the finished paper product. The consortium which was selected has developed a modified process for fiber separation which, in pilot-scale tests, has produced newsprint with satisfactory specifications. Although the newsprint ran well in tests on an experimental paper machine at a speed close to that proposed for the project machine, bagasse pulp furnish has an inherently low strength and this shortcoming could contribute to more paper breaks than normal during commercial production. The use of 15% eucalyptus chemical pulp would improve wet strength, but if this addition proves inade- quate, the use of approximately 10% imported long fiber pulp could overcome the strength problem. Sensitivity analysis indicates that under this condition the economic rate of return would drop from the base case of 19% to l6.7%. 55. Should the newsprint technology malfunction at any time, the plant could switch to the production of printing and writing paper, a procedure which should not take more than a few hours; bagasse-based production of printing and writing paper is a proven commercial technology. Simultaneously, without interfering with the normal production of printing and writing paper, repairs or modifications to the newsprint pulping equipment would be carried out. Provision for such adjustment during the first few years has been reflected in the financial projections which are based on relatively lower pulp yields and a slower build-up to full-production in newsprint than in printing and writing paper. 56. If the effort to produce newsprint should fail completely, the company should have no problem in marketing the additional production of printing and writing paper. The marketing channels already exist and the projected demand indicates that the plant's entire potential production of printing and writing paper could be absorbed by the Indian market. As a result there is little risk associated with the production of printing and writing paper. The potential benefits accruing to the successful production of bagasse-based newsprint, on the other hand, are substantial; at an addi- tional capital cost of US$8 million equivalent for the ancillary equipment, the technological risk is well worth taking.  - 18 - 57. The second risk is that of coal supply. It is a risk shared by many economic activities in India, and stems from the fact that the mining and rail transport of coal is, for India, a national problem which is unlikely to be resolved in the immediate future. Although a coal supply adequate to meet the project's full requirements of 330,000 tpy has been secured, the project sponsors have also made alternative provisional arrangements: (i) to substitute lignite or fuel oil for coal in the paper mill boilers; and (ii) to substitute wood or imported pulp for bagasse as a fibrous raw material, in case bagasse is needed as fuel for the sugar mill boilers or is not available because of production shortfalls. PART V - LEGAL INSTRUMENTS AND AUTHORITY 58. The draft Loan Agreement between India and the Bank, the draft Project Agreement between the Bank and Tamil Nadu Newsprint and Papers Limited, the draft Tamil Nadu Agreement between the Bank and the State of Tamil Nadu, the draft IDBI Agreement between the Bank and the Industrial Development Bank of India, and the Report of the Committee provided for in Article V, Section I (d) 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. The signing of a Subsidiary Loan Agreement between GOI and IDBI and a Finance Agreement between IDBI and TNPL have been made additional conditions of effectiveness of the loan (Section 6.01 of the Development Loan Agreement). 60. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 61. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President August 25, 1981  ANNEX I Page 1 of 5 TABLE 3A INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AV_jRAOES LAND AREA (THOUSAND SQ. KM.) MOST RECENT ESTIMATE- TOTAL 3287.6 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 1809.5 1960 /b 1970 /b ESTIMATE lb ASIA & PACIFIC ASIA & PACIFIC GNP PER CAPiTA (US5) 60.0 100.0 190.0 232.3 1136.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 111.1 152.5 241.8 499.4 1150.6 POPULATION AND VITAL STATISTICS POPULATION. MID-YEAR (THOUS.) 434850.0 547569.0 659217.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.0 17.3 40.8 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 974.7 STATIONARY POPULATION (MILLIONS) 1621.0 YEAR STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY PER SQ. KM. 132.3 166.6 200.5 153.6 373.1 PER SQ. KM. AGRICULTURAL LAND 246.7 308.0 355.8 360.3 2382.8 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.1 42.4 41.1 37.4 39.8 15-64 YRS. 56.8 54.7 56.0 59.2 56.7 65 YRS. AND ABOVE 3.1 2.9 2.9 3.5 3.5 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3 2.1 2.1 2.3 URBAN 2.5 3.3 3.3 3.4 3.8 CRUDE BIRTH RATE (PER THOUSAND) 44.2 40.3 34.0 27.7 29.7 CRUDE DEATH RATE (PER THOUSAND) 22.7 17.4 13.5 10.2 7.5 GROSS REPRODUCTION RATE 3.1 2.8 2.3 2.5 1.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 20.4 44.1 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 93.0 107.1 123.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 93.0 92.0 91.0 98.6 112.6 PROTEINS (GRAMS PER DAY) 52.0 51.0 50.0 56.9 62.5 OF WHICH ANIMAL AND PULSE 17.0 15.0 13.0 14.2 19.7 CHILD (AGES 1-4) MORTALITY RATE 27.1 20.4 14.8 14.6 4.8 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 42.2 47.5 51.9 57.7 64.0 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 125.0 89.1 50.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL *- 17.0 33.0 30.1 45.9 URBAN .. 60.0 83.0 65.8 68.0 RURAL .. 6.0 20.0 20.1 34.4 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 17.6 53.4 URBAN .. 85.0 87.0 71.0 71.0 RURAL * 1.0 2.0 4.8 42.4 POPULATION PER PHYSICIAN 4850.4/c 4889.0 3617.4 3857.7 4428.7 POPULATION PER NURSING PERSON 9630.0T 8296.5 6429.4 6411.8 2229.7 POPULATION PER HOSPITAL BED TOTAL 2149.0/d 1612.9 1311.1 1132.8 588.5 URBAN .. .. 363.5 322.3 579.6 RURAL .. .. 10429.1 5600.5 1138.5 ADMISSIONS PER HOSPITAL BED .. .. HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 URBAN 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 URBAN 2.6 2.8 RURAL 2.6 2.8 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. ..  ANNEX I Page 2 of 5 TABLE 3A INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIQ4TED AVE!.AGES - HOST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC EDUCATIUN ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 73.0 79.0 85.9 99.8 MALE 80.0 90.0 94.0 94.4 100.6 FEMALE 40.0 56.0 63.0 64.5 98.8 SECONDARY: TOTAL 20.0 26.0 28.0 38.0/aa 53.5 MALE 30.0 36.0 37.0 34.67iaa 58.4 FEMALE 10.0 15.0 18.0 18.0/6a 48.6 VOCATIONAL ENROL. (X OF SECONDARY) 8.0 1.0 1.0 3.8 21.1 PUPIL-TEACbER RATIO PRIMARY 29.0 41.0 41.0 32.8 34.2 SECONDARY 16.0 21.0 .. 19.9 31.7 ADULT LITERACY RATE (PERCENT) 28.0 33.4 36.0 52.8 86.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.1 1.3 1.7 12.7 RADIO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 32.5 35.3 174.1 TV RECEIVERS PER THOUSAND POPULATION 0.0 0.0 1.0 3.7 50.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11.0 16.0 16.9 14.6 106.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 3.4 4.3 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 189761.4 220670.5 256699.4 FEMALE (PERCENT) 31.2 32.4 31.9 29.3 37.4 AGRICULTURE (PERCENT) 74.0 74.0 71.0 69.8 50.2 INDUSTRY (PERCENT) 11.0 11.0 11.0 14.1 21.9 PARTICIPATION RATE (PERCENT) TOTAL 43.6 40.3 38.9 39.7 40.2 MALE 58.0 52.6 51.3 51.5 49.8 FEMALE 28.2 27.1 25.7 23.3 31.1 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.1 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY hIGhEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/e 22.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.9/e 49.4 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.77e 7.0 LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.27e 16.2 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 134.1 248.6 RURAL ,. .. 114.0 111.6 193.7 ESTLMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 249.8 RUKAL .. .. .. .. 234.3 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 40.3 41.7 21.2 RURAL .. .. 50.7 51.7 32.2 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmeLic means. Coverage of coantries among the indicators depends on availability of data and is not uniform. /aa China included in total only. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961: for 1970, between 1969 and I971; and for Most Recent Estimate, between 1976 and 1979. /c 1962; /d 1958; /e 1964-65. May, 1981  '4.4 - A I I .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Z~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ A-CCCC.C-C CC-C-CCCCCC -C- SAC C-CI I - R~~~~~~~~~~~~~- C-CC CC ACC-CCCCC. C . . .- .-C C. P4 SC~~'C CCCCCCC C m- CC~ -CC-C-C C CC, C C-CC CC ICC C C~ CIC2A -CC C CCC- SC, C ~ ~~~~~~~~~ ~ ~ 7  Aoinex 1 Page 4 of 5 ECONOIIC DEVEOPIMENT DAIA a/ GNP PER CAPITA IN 1979 US$190 GROSS NATIONAL PROWCT IN 1979/80 ANNUAL RATE OF GROWTH (7. constant pricesl iJ US$ Bln. 7 1955/56-1959/60 1960/61-1964/65 1965/66-1969/70 1970/71-1974/75 1975/76-1978/79 GNP at Market Pice.. 134.16 100.0 3.7 3.6 3.6 2.8 4.5 Gross Domestic Investment 29.24 21.8 Gross National Savirg 28.55 21.3 Current Account Balance d/ -0.85 - 0.6 OUTPUT. tABOR FORCE AND PRODUCTIVITY 1N 1978 Value Added (at factor coot) Labor Force V.A. Per Worker USS Bln, 2 Mil. 2 USS 2 of National Average Agriculture 39.8 39.6 181.3 71 220 56 Industry 25.5 25.3 28.1 11 906 230 Services 35.3 35.1 46.0 18 767 195 Total/aver-ge 100.6 100.0 255.4 100 394 100 GOVERNMENT FINANCE General Government Central Gov-rn-ent Re. El,. 7. of GDP Rs. BIn. 0 7 of GD? 1979/SO 1979/80 1975/76-t979/80 1979/8 1979/80 1975/76-1979/80 Curront Receipts 208.18 19.2 18.9 108.96 10.0 10.6 Corrent E.penditures 206.44 19.0 17.7 117.67 10.8 10.6 Current Surplus/Deficit 1.74 0.2 1.2 - 8.71 - 0.8 Capital Expenditur.s f/ 81.81 7.5 7.4 56.93 5.2 5.1 foternal Assistance (net) d/ 7.97 0.7 0.9 7.97 0.7 0.9 MONEY. CREDIT AND PRICES 1970/71 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 December 1979 December 1980 (Rs Billion outstanding at end of period) Money and Quasi Money 109.6 175.7 194.6 222.9 272.8 329.1 398.9 468.2 448.3 521.7 Bank Credit to Government (net) 52.6 87.3 95.3 101.1 110.2 134.7 153.9 192.2 176.4 231.4 Bank Crodit to C-.ercil Sector 64.6 107.0 126.7 153.9 185.0 212.2 253.5 306.5 294.7 335.9 (Percentage or Index Numbers) April-Oec 1979 Anril-D.c 1980 Money and Quasi Money as 2 of GDP 27.2 29.8 27.9 30.2 34.0 36.5 40.8 43.1 W4holesale Price Inde. (1970/71 100) 100.0 139.7 174.9 173.0 176.6 185.8 185.8 217.6 212.2 2S3.5 Annual percentage changes in: Wholesale Price Inden 7.7 20.2 25.2 - 1.1 2.1 5.2 - 17.1 14.6 19.5 Bank Credit to Government (net) 10.8 12.3 9.2 6.1 9.0 22.2 14.3 24.9 24.9 ,/ 31.2 h/ Bsnk Credit to Cercisl Sector 19.4 22.6 18.4 21.5 20.2 14.7 19.5 20.9 17.5 l/ 14.0 h/ t/ The per capita GNP estiwate is at market prices, calculated by the conversion technique used in the World Bank Atlas, 1979. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered, J Quick EstiSates. 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 Bank estiuates; not necessarily consistent with official figures. SI Transfers between Centrs and States have been netted out. ft All loans and advances to third parties have been nett.d out. &J Percentage change from end-December 1978 to end-December 1979. _/ Percentage change from end-December 1979 to end-December 1980.  Annex I Page 5 of 5 BALANCE OF PAYMENTS 1977/78 1978/79 1979/80 1980/81 MERCHANDISE EXPORTS (AVERAGE 1976/77 - 1979180) US$ Mln. 7. Exports of Goods 6,315 6,978 7,958 8,998 Engineering Goods 768 1/ 11 Imports of Goods -7,188 -8,519 -11,249 -15,624 Tea 462 7 Trade Balance - 873 -1,541 - 3,291 - 6,626 Gems 605 9 NFS (net) 691 773 633 463 Clothing 460 7 Leather and Leather Resource Balance - 182 - 768 - 2.658 - 6.163 Products 425 6 Jute Manufactures 284 4 Interest Payments (net) i/ - 89 - 35 350 303 Iron Ore 298 5 Other Factor Payments (net) - - - - Cotton Textiles 289 4 Net Transfers i/ 1,077 1,216 1,458 2,462 Sugar 32 2 Others 3,028 45 Balance on Current Account 806 413 - 850 -3,398 Total675 10 Official Aid Disbursements 1,628 1,695 1,891 2,389 EXTERNAL DEBT, MARCH 31. 1980 Amortization - 645 - 702 - 676 - 707 US$ billion Transactions with IKF - 330 - 158 - 1,035 Outstanding and Disbursed 15.6 All Other Items 617 286 - 143 133 Undisbursed 5.7 Outstanding, including 21.3 Increase in Reserves (-) -2,076 -1,534 - 222 548 Undisbursed Gross Reserves (end year) 5,823 7,357 7,579 7,031 Net Reserves (end year) k/ 5,668 7,357 7,579 6,691 DEBT SERVICE RATIO FOR 1979/80 J/i! 10.4 per cent Fuel and Related Materials IBRD/IDA LENDING. DECEtBER 31. 1980 Imports 1,811 2,043 3,977 7,012 USS million of which: Petroleum 1,811 2,043 3,977 7,012 IBRD IDA Exports 32 24 26 n.a. Outstanding and Disbursed 806 4,895 Undisbursed 572 3,547 Outstanding, including 1,378 8,442 Undisbursed RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 - Rs 7.5 Re 1.00 - US$0.133333 Mid-December 1971 to end-June 1972 US$1.00 - Rs 7.27927 Re 1.00 - US$0.137376 After end-June 1972 Floating Rate Spot Rate end-December 1979 US$1.00 - Rs 7.907 Re 1.00 - US$O.126 Spot Rate end-December 1980 US$1.00 - Rs 7.930 Re 1.00 - US$0.126 / Estimated. i Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to 1HF, and major receipt is interest earned on foreign assets. jI Figures given include workers' remittances but exclude official grant assistance, which is included within official aid disbursements. / Excludes net use of IMP credit. 1/ Figure for 1979/80 is estimated. !/ Amortization and interest payments on foreign loans as a percentage of exports of goods and services. ApriL 1981  ANNEX II Page 1 of 18 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of June 30, 1981) US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 44 Loans/ 1,422.2 71 Credits fully disbursed - 4,023.4 - 342-IN 1972 India Education - 12.0 3.23 378-IN 1973 India Karnataka Agricultural Markets - 8.0 0t06 456-IN 1974 India HP Apple Processing & Marketing - 13.0 5.24 1011-IN 1974 India Chambal (Rajasthan) CAD 52.0 - 10.51 482-IN 1974 India Karnataka Dairy - 30.0 15.86 502-IN 1974 India Rajasthan Canal CAD - 83.0 28.53 521-IN 1974 India Rajasthan Dairy - 27.7 12.37 522-IN 1974 India Madhya Pradesh Dairy - 16.4 4.82 1097-IN 1975 ICICI Industry DFC XI 94.6 - 0.79 541-IN 1975 India West Bengal Agric. Development - 34.0 1.29 585-IN 1975 India Uttar Pradesh Water Supply - 40.0 13.73 598-IN 1975 India Fertilizer Industry - 105.0 21.37 604-IN 1976 India Power Transmission IV - 150.0 43.24 609-IN 1976 India Madhya Pradesh Forestry T.A. - 4.0 1.51 610-IN 1976 India Integrated Cotton Development - 18.0 10.23 1251-IN 1976 India Andhra Pradesh Irrigation 145.0 - 77.09 1260-IN 1976 India IDBI II 40.0 - 10.94 1273-IN 1976 India National Seeds I 25.0 - 21.86 1313-IN 1976 India Telecommunications VI 80.0 - 18.25 1335-IN 1976 India Bombay Urban Transport 25.0 - 7.72 680-IN 1977 India Kerala Agric. Development - 30.0 22.98 682-IN 1977 India Orissa Agric. Development - 20.0 7.93 685-IN 1977 India Singrauli Thermal Power - 150.0 37.72 687-IN 1977 India Madras Urban Development - 24.0 4.57 690-IN 1977 India WB Agric. Extension & Research - 12.0 12.00 1394-IN 1977 India Gujarat Fisheries 14.0 - 7.75 712-IN 1977 India Madhya Pradesh Agric. Development - 10.0 5.35 720-IN 1977 India Periyar Vaigai Irrigation - 23.0 13.68 728-IN 1977 India Assam Agricultural Development - 8.0 5.64 736-IN 1977 India Maharashtra Irrigation - 70.0 30.33 737-IN 1977 India Rajasthan Agric. Extension - 13.0 7.29 740-IN 1977 India Orissa Irrigation - 58.0 29.65 1475-IN 1977 ICICI Industry DFC XII 80.0 - 10.36  ANNEX II Page 2 of 18 US$ million Loan or (Net of Cancellations) Credit Vo. Year Borrower Purpose Bank IDA Undisbursed 747-IN 1978 India Second Foodgrain Storage - 107.0 79.00 756-IN 1978 India Calcutta Urban Development II - 87.0 19.11 761-IN 1978 India Bihar Agric. Extension & Research - 8.0 7.11 1511-IN 1978 India IDBI Joint/Public Sector 25.0 - 17.49 1549-IN 1978 TEC Third Trombay Thermal Power 105.0 - 62.96 788-IN 1978 India Karnataka Irrigation - 117.6 77.28 793-IN 1978 India Korba Thermal Power - 200.0 128.89 806-IN 1978 India Jammu-Kashmir Horticulture - 14.0 13.75 808-IN 1978 India Gujarat Irrigation - 85.0 63.60 815-IN 1978 India Andhra Pradesh Fisheries - 17.5 14.52 816-IN 1978 India National Seeds II - 16.0 15.21 1592-IN 1978 India Telecommunications VII 120.0 - 53.14 824-IN 1978 India National Dairy - 150.0 130.60 842-IN 1979 India Bombay Water Supply II - 196.0 183.12 843-IN 1979 India Haryana Irrigation - 111.0 43.66 844-IN 1979 India Railway Modernization & Maintenance - 190.0 148.97 848-IN 1979 India Punjab Water Supply & Sewerage - 38.0 21.46 855-IN 1979 India National Agricultural Research - 27.0 25.41 862-IN 1979 India Composite Agricultural Extension - 25.0 16.54 871-IN 1979 India NCDC - 30.0 15.55 1648-IN 1979 India Ramagundam Thermal Power 50.0 - 50.00 874-IN 1979 India Ramagundam Thermal Power - 200.0 171.17 889-IN 1979 India Punjab Irrigation - 129.0 100.81 899-IN 1979 India Maharashtra Water Supply - 48.0 44.85 911-IN 1979 India Rural Electrification Corp. II - 175.0 108.09 925-IN 1979 India Uttar Pradesh Social Forestry - 23.0 18.47 947-IN 1979 India ARDC III - 250.0 64.73 963-IN 1979 India Inland Fisheries - 20.0 19.64 954-IN 1979 India Maharashtra Irrigation II - 210.0 174.13 961-IN 1979 India Gujarat Community Forestry - 37.0 30.31 981-IN 1980 India Population II - 46.0 45.44 1003-IN 1980 India Tamil Nadu Nutrition - 32.0 30.87 1004-IN 1980 India U.P. Tubewells - 18.0 16.95 1011-IN 1980 India Gujarat Irrigation II - 175.0 165.00 1027-IN 1980 India Singrauli Thermal II - 300.0 279.15 1012-IN 1980 India Cashewnut - 22.0 21.75 1028-IN 1980 India Kerala Agricultural Extension - 10.0 10.00 1033-IN 1980 India Calcutta Urban Transport - 56.0 56.00 1034-IN 1980 India Karnataka Sericulture - 54.0 52.85 1046-IN 1980 India Rajasthan Water Supply  ANNEX II Page 3 of 18 US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed and Sewerage - 80.0 77.22 1843-IN 1980 ICICI Industry DFC XIII 100.0 - 77.97 1887-IN 1980 India Farakka Thermal Power 25.0 - 25.00 1053-IN 1980 India Farakka Thermal Power - 225.0 201.16 1897-IN 1980 India Kandi Watershed and Area Development 30.0 - 29.01 1072-IN 1980 India Bihar Rural Roads - 30.7 30.30 1078-IN 1980 India Mahanadi Barrages - 72.8 72.80 1925-IN 1980 India Bombay High Offshore Development 400.0 - 393.42 1082-IN 1981 India Madras Urban Dev. II - 37.5 37.50 1108-IN 1981 India M.P. Medium Irrigation - 129.6 129.60 1112-IN 1981 India Telecommunications VIII - 290.4 268.70 1116-IN 1981 India Karnataka Tank Irrigation - 50.1 50.10 1135-IN* 1981 India Maharashtra Agr. Extension - 21.7 21.70 1137-IN* 1981 India Tamil Nadu Agr. Extension - 26.3 26.30 1138-IN* 1981 India Madhya Pradesh Agr. Extension II - 34.9 34.90 1146-IN* 1981 India NCDC II - 117.1 117.10 Total 2,832.8 9,322.7 of which has been repaid 1,090.2 77.7 Total now outstanding T7,2976 9,2475. Amount Sold 133.8 of which has been repaid 133.3 0.5 - Total now held by Bank and IDA 1/ 1,742.1 9,245.0 Total undisbursed (excluding*) 874.3 3,620.0 1/ Prior to exchange adjustment. * Not yet effective.  ANNEX II k'age 4 of 18 B. STATEMENT OF IFC INVESTMENTS (As of June 30, 1981) 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. 1.1 0.1 1.2 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 1.0 8.6 1981 Coromandel Fertilizers Limited 15.9 15.9 1981 Tata Iron and Steel Company Ltd. 38.0 - 38.0 1981 Mahindra, Mahindra Limited 15.0 - 15.0 1981 Nagarjuna Coated Tubes Ltd. 2.9 0.3 3.2 1981 Nagarjuna Signode Limited 2.3 - 2.3 1981 Nagarjuna Steels Limited 1.5 0.3 1.8 TOTAL GROSS COMMITMENTS 136.7 12.0 148.7 Less: Sold 26.0 1.7 27.7 Repaid 22.2 - 22.2 Cancelled 6.2 1.3 7.5 Now Held 82.3 9.0 91.3 Undisbursed 79.3 1.5 80.8  ANNEX II Page 5 of 18 C. PROJECTS IN EXECUTION 1/ Generally, the implementation of projects has been proceeding reasonably well. Details on the execution of individual projects are below. The level of disbursements was US$962 million in FY81, compared to US$729 million in the previous year, representing an increase of about 32%. The undisbursed pipeline of US$4,494 million as of June 30, 1981, 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 Pr0ject; US$100.0 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: June 30, 1981 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 Ln. No. 1843 Thirteenth Industrial Credit and Investment Corporation of India Project; US$100.0 million loan of May 16, 1980; Effective Date: June 27, 1980; Closing Date: December 31, 1985 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. Disbursements under both loans 1475 and 1843 are 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: March 31, 1983 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 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 6 of 18 investment studies and in strengthening the financial institutions dealing with the state joint/public sector. 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 progressing very well. 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 Satisfactory progress is being made in the construction of bag storage warehouses, despite problems of land acquisition at some sites. However, construction of flat bulk warehouses and port silos is not expected to be completed until 1984, as a result of delays in the employment of con- sultants and the longer time required for the preparation of technical specifications and tenders and the construction itself. In view of the high increases in bulk storage construction costs, the Government is proposing to reduce the bulk storage component of the project in favor of additional bag storage capacity; this proposal is currently under consideration by the Association. 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, 1981 The project encountered prolonged initial delays due to managerial and technical problems. These problems have been largely resolved, but construction 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 1981. Cr. No. 806 Jammu-Kashmir Horticulture Project; 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$120.0 million loan of June 19, 1978; Effective Date: October 30, 1978; Closing Date: March 31, 1982  ANNEX II Page 7 of 18 Cr. No. 1112 Telecommunications VIII Project; US$314 million credit of March 26, 1981; Effective Date: June 24, 1981; Closing Date: December 31, 1984 Loans 1313 and 1592 are progressing satisfactorily, although as of June 1981, when they were last reviewed, imports of electronic switching equipment for the projects were behind schedule, resulting in a reduced growth rate for the installation of direct exchange lines. Institutional improvements envisaged under the projects have been achieved, and the finan- cial situation of the Posts and Telegraphs Department remains sound. Credit 1112, which became effective in June 1981, provides for the continued expansion, over a three-year period, of the Indian telecommunications net- work, particularly in rural areas. It also provides for the modernization and upgrading of three existing telecommunications equipment factories, and the establishment of three additional ones. Initial implementation and procurement actions are proceeding on schedule. Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of Decem- ber 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1982 Credit 598 is designed to increase the utilization of existing fer- tilizer 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 have not materialized because of reconsideration by the Central and State governments. IDA has agreed to a list of sub-projects to replace the ones that have been dropped. Because of the above, the project completion date has been delayed. 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 universities 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. Considerable 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 Direc- tor and others responsible are aware of the constraints and are supporting efforts to remove them. 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  ANNEX II Page 8 of 18 Cr. No. 899 Maharashtra Water Supply and Sewerage Project; US$48.0 million credit of June 21, 1979; Effective Date: November 9, 1979; Closing Date: June 30, 1984 Cr. No. 1046 Rajasthan Water Supply and Sewerage Project; US$80 million credit of June 25, 1980; Effective Date: August 5, 1980; Closing Date: September 31, 1985 Implementation of Credit 842, a second stage of the recently com- pleted first Bombay Water Supply and Sewerage Project (Credit 390), is proceeding to schedule. Preliminary work in connection with implementation of Credit 848 has been completed but subsequent procurement delays and slow release of construction funds are likely to delay the project by about 12 months and result in cost increases. Physical progress under Credit 899 is satisfactory. Initial delays in implemention of institutional arrangements and tariff measures proposed for the project are now being overcome. Project progress in this area is being closely monitored. Implementation of Credit 1046 is proceeding satisfactorily. Detailed construction programs have been prepared for rural schemes, and preparation of tender documents for urban schemes have been completed. 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: December 31, 1982 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 engage- ment 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 country-wide materials shortages and serious Statewide electric power shortages. Procurement is generally on schedule for equipment and consult- ants' services, though somewhat behind for larger civil works contracts. Staff shortages in some of the implementing agencies continue, although more extensive 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 With respect to the first Madras project, 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.  ANNEX II Page 9 of 18 Increased attention should be turned to the financial analysis and marketing strategies required to ensure that anticipated cost recovery in the sites and services and slum upgrading components and thus replicability is actually achieved. Technical assistance is being sought to strengthen financial management and analysis. Cr. No. 1082 Second Madras Urban Development Project; US$42.0 credit of January 14, 1981; Effectiveness Date: March 2, 1981; Closing Date: March 31, 1986. With respect to the second project, only recently signed and declared effective, early project implementation is proceeding satisfac- torily, with evidence that the lessons learned under the first project are being heeded. 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 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 development projects organized along the lines of the successful AMUL dairy cooperative scheme in Gujarat State. More than 2,100 dairy cooperative societies (DCS) have been established under the three state projects (Kar- nataka-923, Rajasthan-926, Madhya Pradesh-272). Farmer response has 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 construction 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. 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, 1982  ANNEX II Page 10 of 18 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 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 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 Cr. No. 954 Second Maharashtra Irrigation Project; US$210 million credit of April 14, 1980; Effective Date: June 6, 1980; Closing Date: December 31, 1985 Cr. No. 1011 Second Gujarat Irrigation Project; US$175 million credit of May 12, 1980; Effective Date: June 27, 1980; Closing Date: April 30, 1986 Cr. No. 1078 Mahanadi Barrages Project; US$83 million credit of December 5, 1980; Effective Date: February 11, 1981; Closing Date: March 31, 1987 Cr. No. 1108 Madhya Pradesh Medium Irrigation Project; US$140 million credit of March 26, 1981; Effective Date: May 13, 1981; Closing Date: March 31, 1987 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible,  ANNEX II Page 11 of 18 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. 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 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: December 14, 1979; Closing Date: December 31, 1984 Cr. No. 1028 Kerala Agricultural Extension Project; US$10 million credit of June 25, 1980; Effective Date: August 18, 1980; Closing Date: June 30, 1986 Cr. No. 1137 Tamil Nadu Agricultural Extension Project; US$28 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1135 Maharashtra Agricultural Extension Project; US$23 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987  ANNEX II Page 12 of 18 Cr. No. 1138 Madhya Pradesh Agricultural Extension Project; US$23 million credit of May /, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 These eleven credits finance the reorganization and strengthening of agricultural extension services and the development of adaptive research capabilities in twelve States in India. In areas where the reformed exten- sion 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, Madhya Pradesh 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 under- lying the new extension system and an accompanying hiatus in project implementation, a Cabinet decision has reaffirmed the State Government's commitment to the project, revised implementation plans have been prepared, and project activities are resuming. In Bihar, 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. In Gujarat, Haryana and Kar- nataka, all covered under the Composite Agricultural Extension Project, important early administrative and financial steps have been taken to pave the way for effective operation of the reorganized extension system and field work is off to a good start. In Kerala, project implementation has begun in three of eleven districts after some initial start-up delays. Early progress on civil works and initiation of the program in the remaining eight districts will be required to regain the initial implementation schedule. In Tamil Nadu and Maharashtra, project implementation has just begun, as these credits became effective only recently. Early project review missions are scheduled to assist in project initiation. 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 is proceeding satisfactorily, although corresponding disbursements may lag somewhat behind the original estimates. Additions to the staff of the Project Unit have been made to expedite further progress under the project. 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, 1981 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.  ANNEX II Page 13 of 18 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 February 2, 1979; Effective Date: May 3, 1979; Closing date: December 31, 1984 Cr. No. 1146 Second National Cooperative Development Corporation (NCDC) Project; US$125 million credit of July 21, 1981; Effective Date (expected): October 21, 1981; Closing Date: June 30, 1987 As of October 1980, when Credit 871 was last reviewed, and according to quarterly reports through March 1981, construction of godowns was progressing well in the States of Haryana and Uttar Pradesh, although some delays had occurred in the State of Orissa. Consultants had been recruited to assist NCDC and State Cooperative Banks in strengthening their institu- tions, although some consultants were yet to be recruited in Haryana. Dis- bursements have been progressing well and are ahead of the appraisal targets. Credit 1146, which was signed in July 1981, provides credit for the construc- tion of cooperative godowns and cold-storage and marketing facilities to support the pre- and post-harvest supply and markting requirements in nine States; promote the development of cooperative institutions in these States; and expand cooperative subproject preparation and appraisal activities within the cooperative sector. Preparatory implementation work is well advanced in most of the participating States. 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 manufac- turing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. Project implementation is satisfactory. 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 sawnwood 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  ANNEX II Page 14 of 18 Cr. No. 961 Gujarat Community Forestry Project; US$37 million credit of April 14, 1980; Effective Date: June 24, 1980; Closing Date: December 31, 1985 These projects, designed to expand the social forestry program in Uttar Pradesh and Gujarat, to provide a source of energy to the villages, and to supply raw materials to cottage industries, are proceeding well. The projects provide for large-scale tree plantations on public lands, primarily along roads, rails and canals, on village common lands and on 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: 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, 1983 Cr. No. 1033 Calcutta Urban Transport Project; US$56 million credit of October 27, 1980; Effective Date: December 18, 1980; Closing Date: December 31, 1984 The bus procurement program supported by the Bombay project (Ln. 1335) has proceeded on schedule, with all 700 bus chassis and bodies having been ordered and 672 already in service. Total fleet strength has increased from 1,530 buses at the inception of the project to 1,935 buses in September 1980, in accordance with appraisal estimates. Depot capacity expansion has lagged somewhat behind fleet expansion, but caught up in Novem- ber 1980. However, delays in construction of new workshop facilities have been more substantial and will not be fully recoverable. As a result, the  ANNEX II Page 15 of 18 loan closing date has been extended by three years. Traffic management civil works are also somewhat behind schedule, although now proceeding satisfac- torily. Implementation of works under Cr. 1033 is proceeding satisfactorily, a good start having been made on the important early procurement steps. However, fnancial and managerial performance is lagging somewhat behing expectations and must now receive project authorities' full attention if physical and financial performance targets are to be achieved. Cr. No. 1072 Bihar Rural Roads Project; US$35.0 million credit of December 5, 1980; Effective Date: January 15, 1981; Closing Date: June 30, 1986. Bids have been invited for the first year program of rural road construction to allow work to start following the monsoon. The whole project aims to construct or rehabilitate 700 km of rural roads and to improve main- tenance of the rural road network in Bihar as part of the State's overall rural development efforts. Equipment has been ordered and is starting to arrive. 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: July 19, 1977; Cr. No. 695 Closing Date: June 30, 1983 Cr. No. 815 Andhra Pradesh Fisheries Project; US$17.5 million credit of June 19, 1978; Effective Date: October 31, 1978; Closing Date: September 30, 1984 As of October 1980 when the first of these projects was last reviewed, the harbor construction works at Mangrol and Veraval in Gujarat had encountered delays, although the problem with shortages of cement supplies had been overcome. In Andhra Pradesh, the harbor works at Visakhapatnam, Kakinada and Nizampatnam are progressing satisfactorily following the resolu- tion of design problems. The road component is also progressing satisfac- torily. Cr. No. 963 Inland Fisheries Project; US$20 million credit of January 18, 1980; Effective Date: May 5, 1980; Closing Date: September JO, 1 985 This project, which is the first of its kind in India, is designed to increase carp production in five states--West Bengal, Bihar, Orissa, Madhya Pradesh, and Uttar Pradesh--through the construction of hatcheries, improvements to fish ponds, strengthening of extension services, and the establishment of training centers. The project became effective in May 1980. The initial implementation tasks, primarily involving the establishment of State Fish Seed Development Corporations and Central and State project monitoring units, are progressing satisfactorily. However, hatchery planning has been delayed as a result of a delay in the establishment of the engineer- ing cell within the Central Project Unit. 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  ANNEX II Page 16 of 18 Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit of May 12, 19/8; 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. 874 US$200 million credit of February 2, 1979; Effective Date: 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: December 31, 1982 Cr. No. 1027 Second Singrauli Thermal Power Project; US$300 million credit of June 5, 1980; Effective Date: July 30, 1980; Closing Date: March 31, 1988 Ln. No. 1887 Farakka Thermal Power Project; US$25 million loan and and US$225 million credit of July 11, 1980; Effective Date: Cr. No. 1053 December 10, 1980; Closing Date: March 31, 1987 Credits 685 and 1027 assist in financing 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. Credit 793 supports the construction of the first three 200 MW generating units at the second such station, at Korba, together with related facilities and associated transmission. Loan 1648/ Credit 874 support similar investments at Ramagundam, and Loan 1887/ Credit 1053, at Farakka. The National Thermal Power Corporation (NTPC) has been carrying out construction and operation of these power stations. Loan 1549 is supporting the construction of a 500 MW extension of the Tata Electric Companies' station at Trombay, in order to help meet the forecast load growth in the Bombay area. All these large-scale thermal power projects are progressing satisfactorily. For Singrauli and Korba, construction works are on or ahead of schedule, although some slippage has occurred in the implementation schedule for the Ramagundam project. 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 The project is progressing satisfactorily. Ln. No. 1925 Second Bombay High Offshore Development Project; US$400.0 million loan of December 11, 1980; Effective Date: February 24, 1981 Closing Date: March 31, 1984 The project is progressing satisfactorily.  ANNEX II Page 17 of 18 Cr. No. 981 Second Population Project; US$46 million credit of April 14, 1980; Effective Date: June 26, 1980; Closing Date: December 31, 1985 The project has as its major objectives the lowering of infant and child mortality and morbidity, the improvement in the health status of mothers and children and the lowering of fertility. Implementation works have started in both project States--Andhra Pradesh and Uttar Pradesh. Cr. No. 1012 Cashewnut Project; US$22 million credit of June 10, 1980; Effective Date: September 3, 1980; Closing Date: September 30, 1985 Implementation has started on this project which is designed to expand cashewnut production in the States of Kerala, Karnataka, Andhra Pradesh and Orissa. Cr. No. 1003 Tamil Nadu Nutrition Project; US$32 million credit of May 12, 1980; Effective Date: August 5, 1980; Closing Date: March 31, 1987 First year's implementation in one test block is proceeding according to schedule. Cr. No. 1004 Uttar Pradesh Public Tubewells Project; US$18 million credit of May 12, 1980; Effective Date: June 27, 1980; Closing Date: March 31, 1983 Initial procurement delays having now been overcome, implementation is proceeding satisfactorily on this project. However, project completion will likely be delayed by approximately six months due to the initial delays. Ln. No. 1897 Kandi Watershed and Area Development Project; US$30.0 million loan of September 12, 1980; Effective Date:. November 18, 1980; Closing Date: March 31, 1986. Contract for the construction of Dholbaha dam has been awarded. Progress in other components are satisfactory. Cr. No. 1034 Karnataka Sericulture Project; US$54 million credit of October 27, 1980; Effective Date: December 18, 1980 Closing Date: December 31, 1985 Overall progress in project implementation is satisfactory. Minor start up delays in staffing are being corrected.  ANNEX II Page 18 of 18 Cr. No. 1116 Karnataka Tank Irrigation Project; US$54 million credit of March 26, 1981; Effective Date: May 5, 1981; Closing Date: March 31, 1986 The project is designed to finance the construction, over a four-year period, of about 160 tank irrigation schemes throughout the State of Karnataka. Start-up activities have commenced.  ANNEX III Page I INDIA TAMIL NADU NEWSPRINT PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by the country to prepare the project 12 months (b) The agency which has prepared the project Seshasayee Paper and Boards Ltd. (c) Date of first presentation to the Bank and date of first mission to consider the project April 1980 (d) Date of departure of appraisal mission October 1980 (e) Date of completion of negotiations July 27, 1981 (f) Planned date of effectiveness December 28, 1981 Section II: Special Bank Implementation Action None Section III: Special Conditions (a) GOTN and IDBI each to limit its shareholdings in TNPL to less than 50% (para 41). (b) IDBI and the other IFI's to offer their shareholdings to the public as soon as possible (para 46).  ANNEX III Page 2 (c) TNPL to maintain a debt:equity ratio not greater than 65:35 and a current ratio of at least 1.2, not to allow debt service coverage to fall below 1.5 and not to make major investments without Bank approval (para 50). (d) GOI to ensure that coal and lignite be made available as required and that the project be allowed to import pulp, if necessary (para 40). (e) GOI to complete railway spur and GOTN to upgrade road connections by December 1983 and permit project to draw water from Cauvery River (para 43). (f) TNPL to contract for technical assistance during the implementation period and the first five years of plant operation (para 41) and to employ consultants for basic and detailed engineering (para 42). (g) GOTN to ensure that project is supplied with sufficient pulpwood for normal operations, with expanded deliveries if necessary (para 39). (h) TNPL to develop a training program for plant staff by December 31, 1982 (para 41). (i) GOTN to assist TNPL in arranging for balance of staff housing (para 43).   BRD 15475R I N D I A ; D 1 R A N A 98 0-- -7 - Pi p. D S H >, J V< -H TAMIL NADU NEWSPRINT PROJECT R N Jt (<t->> e, <~ 2Si / g U T ( \ -< ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~r 4 0N9 9RT 'RCOT., / '~~~~~~~~~~~~~~~~~~~~~~N \V91 9T