India - Eighth Telecommunications Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2964-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE EIGHTH TELECOMMUNICATIONS PROJECT February 25, 1981 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of February 18, 1981) Rs 1 = Paise 100 US$1.00 = Rs 8.185 Rs 1.00 = US$ 0.1222 Rs 1 million US$122,200 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 8.40, which represents the projected exchange rate over the disbursement period. FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS USED IN THIS REPORT GOI - Government of India P&T - Posts and Telegraphs Department OCS - Overseas Communications Service ITI - Indian Telephone Industries Limited HCL - Hindustan Cables Limited HTL - Hindustan Teleprinters Limited BPE - Bureau of Public Enterprises ERC - Economic Research Cell DEL - Direct Exchange Line PCO - Public Call Office OYT - 'Own Your Telephone' Program SDR - Special Drawing Right  FOR OFFICIAL USE ONLY INDIA EIGHTH TELECOMMUNICATIONS PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President Beneficiaries: Posts and Telegraphs Department (P&T); Indian Telephone Industries Ltd. (ITI); Hindustan Cables Ltd. (HCL); and Hindustan Teleprinters Ltd. (HTL) Amount: SDR 252.4 million. (US$314 million equivalent on January 31, 1981) Terms: Standard Relending Terms: For P&T Subproject: Government of India (GOI) would channel the proceeds as GOI's capital-at-charge to P&T, in accordance with its standard arrangements for financing telecommunications development. P&T pays a dividend on the total capital-at-charge at a rate determined by GOI, currently 6% per annum. For Factories Subprojects: GOI to ITI, HCL, and HTL: at an interest rate to be determined by GOI at the time of lending, comparable to the prevailing interest rate, and acceptable to the Association. Currently the terms are 11% per annum, less 1/4% prompt payment discount, over fifteen years, including three years' grace. GOI to carry exchange risk. Project Description: The project comprises four subprojects. The main subproject covers a three-year time slice, from fiscal year 1981 to 1983, of the P&T Telecommunications Branch's investment program. It involves expansion of the present telecommunications network through the provision of addi- tional local telephone switching and direct exchange lines, long-distance public call offices and rural tele- phone exchanges, and trunk and telex facilities. The subproject also includes the provision of equipment and raw materials for P&T's telecommunications workshops; equipment for P&T's Telecommunications Research Center and its Technical and Development Circle; transmission equipment; and computing equipment for the four major metropolitan districts. The three remaining subprojects comprise the upgrading and modernization of the produc- tion facilities of the three major Government-owned telecommunications equipment manufacturers -- Indian This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -ii- Telephone Industries Ltd., Hindustan Cables Ltd., and Hindustan Teleprinters Ltd. -- and the construction of a new factory for each. The upgrading and modernization activities involve the replacement of machinery in the production and tool-making units, and the addition of modern testing and measuring equipment to replace and supplement obsolete existing equipment. New factories to be established comprise an ITI electronic switching pro- duction facility at Palghat in Kerala, an HCL cable fac- tory at Hyderabad in Andhra Pradesh, and an HTL elec- tronic teleprinter factory at Hosur in Tamil Nadu. There are no serious technical risks in implementing the pro- ject. Estimated Costs: US$ million Subproject Local Foreign Total P&T Subproject: 1,074.0 211.0 1,285.0 ITI Subproject: a) Factory Upgrading and Modernization 5.3 11.0 16.3 b) New Factory 10.1 10.7 20.8 HCL Subprolect: a) Factory Upgrading and Modernization 5.9 9.4 15.3 b) New Factory 20.1 21.9 42.0 HTL Subprolect: a) Factory Upgrading and 2.1 2.6 4.7 Modernization b) New Factory 4.8 5.1 9.9 Total Before Contingencies 1,122.3 271.7 1,394.0 Contingencies 183.1 42.3 225.4 Total Project Cost 1,305.4 314.0 1,619.4 Taxes and Duties included 239.9 - 239.9 Project Cost Net of Taxes 1,065.5 314.0 1,379.5 and Duties  -iii- Financing Plan: US$ million Local Foreign Total IDA - 314.0 314.0 P&T 1,250.0 - l1,250.0 ITI 18.2 - 18.2 HCL 29.3 - 29.3 HTL 7.9 - 7.9 Total 1,305.4 314.0 1,619.4 Estimated Disbursements: US$ million IDA Fiscal Year FY81 FY82 FY83 FY84 FY85 Annual 40.0 73.0 108.5 77.5 15.0 Cumulative 40.0 113.0 221.5 299.0 314.0 Rate of Return: 17%, for the P&T Subproject (including purehases from domestic factories). Staff Appraisal Report: No. 3169-IN, dated February 23, 1981.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE EIGHTH TELECOMMUNICATIONS PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to SDR 252.4 million (US$314 million on January 31, 1981) on standard IDA terms to help finance an eighth telecommunications project. The major portion of the credit amount (about US$243 million) would be channelled to the Posts and Tele- graphs (P&T) Department as part of GOI's capital-at-charge, in accordance with GOI's standard terms and arrangements for financing telecommunica- tions development. P&T pays a dividend on total capital-at-charge at a rate fixed by GOI, currently 6% per annum. The balance of the credit (about US$71 million) would be relent to the public sector companies par- ticipating in the project, at an interest rate to be determined by GOI at the time of lending, comparable to the prevailing commercial interest rate, and acceptable to the Association. Currently the terms are 11% per annum, less 1/4% prompt payment discount, for 15 years, including three years' grace. The exchange risk would be borne by GOI. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (2933-IN, dated May 1, 1980), was distributed to the Executive Directors on May 14, 1980. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of 663 mil- lion (in mid-1980) and an annual per capita income of US$180. Agriculture continues to dominate India's economy, employing over two-thirds of the labor force. However, the land base is not sufficient to provide an ade- quate livelihood to all those engaged in agricultural activities, espe- cially the landless or nearly landless who have only an insecure grasp on the means of existence. The share of agriculture in GDP at factor cost (measured in 1970/71 prices) has declined from 59.6% in 1950/51 to 40.7% in 1978/79. The share of industry has increased over the same period from 14.5% to 22.7%. But industrialization has not been rapid enough to absorb the growing labor force, nor to bring about the substantial economic transformation that has led to higher productivity and rapid urbanization 1/ Parts I and II of the report are substantially the same ass Parts I and II of the President's Report for Madhya Pradesh Medium Irriga- tion Project (No. P-2961-IN dated February 18, 1981).  -2- in some other developing countries. The urban population was 18% of the total in 1960, and is 21% now. 4. Economic growth has been slow in the past. The trend growth rate of GDP was 3.7% per annum from 1950/51 to 1978/79. Slow growth in agri- culture -- 2.5% per annum over the same period -- has constrained overall growth, not only because of the high share of agriculture in GDP but also because scarce foreign exchange has often been required to import food. Industrial value-added has grown more rapidly, at 5.4% per annum between 1950/51 and 1978/79, but this growth has not been as high as in many other countries, nor as high as required. Gross domestic saving more than dou- bled from 10% of GDP in 1Q50/51 to 24% in 1978/79. Similarly, gross domestic investment as a fraction of GDP rose from 10% in 1950/51 to just over 24% in 1978/79. Foreign savings have never financed a large portion of domestic investment: a peak of about 20% was reached during the early 1960s; by the end of the 1970s, the proportion had returned to much lower levels. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of CTP. 5. Except during periods of balance of payments crisis, exports have received relatively little emphasis in India, which has primarily pursued a strategy of import substitution. As a result, India's share of world trade has fallen consistently since 1950/51. The volume growth of exports between 1950/51 and 1978/79 averaged only 3.0 per annum. The volume of growth of imports over the same period has slightly exceeded that of exports. During the early 1970s, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated drastically, spurring a relatively rapid period of export growth through the mid-1970s. For the five years ending in 1976/77 the volume of India's exports grew on average over 10% per annum, demonstrating that sustained rapid growth was possible. While expanding world markets, particularly in the nearby Mid- dle East, contributed to this process, adjustments in trade policies designed to improve the profitability of exports played a major role. Recent Trends 6. Over the period 1975/76 to lQ78/79, growth in real GDP (at fac- tor cost), agricultural value-added and industrial value-added averaged 4.7%, 2.8% and 7.3% per annum, respectively. These trends represent a marginally better growth performance than the long-term trends from 1950/51 to 1975/76. However, GNP is expected to have declined by about 3% in 1979/80 as a result of the drought-induced decrease in agricultural production and input constraints in other sectors, bringing recent trends back in line with the long-term picture. Industrial production stagnated in 1979/80, largely due to shortfalls in the production of major inputs such as coal, steel and cement, as well as constraints in the provision of  -3- infrastructure, notably power and transportation. As a consequence of these developments, the remarkable price stability that characterized the Indian economy after 1475 came to an abrupt end at the close of fiscal year 1978/79. During the spring and summer of 1Q79 the price index rose sharply, and under the drought conditions, which were then quite serious, prices failed to make the normal downward adjustment over the winter. The result was that the level of prices at the end of the year (1979/80) were almost 20% above the level at the beginning of the year. Foodgrain prices rose over the summer and fall of 1979 but in most markets still prevailed close to the Goverment's ration prices. Low income groups in urban areas were assured adequate supplies of grain at stable prices through the pub- lic distribution system. The substantial stocks of foodgrains also pro- vided resources for a large-scale drought relief employment program for low income groups in rural areas. 7. In agriculture the positive results of large investments and apDropriate policies over the past few years are becoming increasingly evident and have withstood the test of a severe drought. Agricultural production, which had increased by 14.5% in 1977/78 and 3.4% in 1978/79 to record levels each year, fell about 10% in 1979/80. Foodgrain production is estimated to have declined from 131.4 million tons in 1978/79 to 116 million tons in 1979/80. Considering that 1979/80 was a year of acute drought, coming after two successive years of record output, the foodgrain production achieved -- still the fourth highest in Indian history -- pro- vides a measure of the contribution that expanded irrigation, extension and other inputs have made to Indian agriculture. Furthermore, the capa- city of India's irrigation potential to counteract drought conditions might have been even more clearly demonstrated had not the diesel shor- tages inhibited the utilization of groundwater resources. Rapid growth in the use of basic inputs for agricultural production has continued. Addi- tions to the area under irrigation have almost doubled from 1.3 million hectares during the five-year period ending in 1973/74 to about 2.5 mil- lion additional hectares a year during the most recent three-year period. Fertilizer consumption in 1q79/80 exceeded five million nutrient tons, twice the level consumed in 1974/75. 8. As the new decade begins, the Indian economy is shifting from a situation of resource surplus, which had been a temporary phenomenon of the late lQ7Os, to one of resource scarcity. Investment has again over- taken domestic savings, and the scope for further increases in the latter appears limited. Marginal savings rates have recently been well above 30% in the household sector. Future increases in savings will depend largely on enhanced profitability of public sector enterprises. Impending resource scarcity is even more apparent in the foreign sector. Between 1975/76 and lQ78/79 India's current account deficit had remained comfort- ably small in relation both to GDP and to a growing pipeline of aid com- mitments. This was primarily due to favorable terms of trade movements and rapidly growing net invisibles which masked adverse underlying trends  -4- in the volume of exports, which has barely grown since 1976/77. Particu- larly serious is the evident decline in the quantum of manufactured non- traditional exports which had contributed much to the export growth of the first half of the decade. A combination of strong domestic and slack international demand, exacerbated until recently by apparent lessened interest in export promotion, have been the major causal factors. 9. In contrast, imports have grown rapidly in volume terms and there have been important changes in composition. As a result of the accumulation and maintenance of foodgrain stocks, foodgrain imports -- which had been a traditional item in the balance of payments -- have declined to insignificant levels since 1977/78. Reflecting the impact of the liberalized import policy adopted by the Government, non-foodgrain imports increased sharply, so that their level in 1978/79 was over 80% higher than in 1975/76. In large part, the liberalization in import pol- icy and increase in imports were limited to raw materials, basic commodi- ties and intermediate goods; consumer goods remained banned and capital goods imports were permitted only on a selective basis. Strong new pres- sures on the balance of payments have developed during 1979/80. The terms of trade again deteriorated markedly as a consequence of unexpectedly large increases in petroleum prices, which caused the oil import bill to double in 1979/80, accounting for more than 80% of the total estimated US82.5 hillion increase in imports, and bringing India's total import bill to about USSl1 billion. Petroleum imports as a proportion of merchandise exports now exceed 44%. Development Prospects 10. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless has a highly diversified structure and is capable of manufac- turing a wide variety of consumer and capital goods. Rasic infrastructure -- irrigation, railways, telecommunications, roads and ports -- is exten- sive compared to many countries, although there is considerable scope for expansion as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institutional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and suf- ficient access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 11. The new Indian Government installed in January 1980 is in the pro- cess of formulating its policies and programs. AKnew Plan for the period 1OP1485 is being prepared to replace the Draft Five-Year Plan for 1978-83. At this stage it is not possible to corment in detail on the new develop- ment strategy; however, it is clear that the priorities accorded to  -5- agriculture and power will be maintained. Furthermore, developments in India as well as in the world economy during 1979/80 have brought to the surface urgent issues which will need the attention of policy-makers, irrespective of the broader context of development strategy that the new Government may adopt. Armong these issues are the following: (a) the bottlenecks in infrastructure and related constraints in production of several basic industrial inputs; (b) the new policy options emerging in agriculture; (c) the need to substitute less costly energy sources for imported petroleum; and, (d) the anticipated deterioration of the balance of payments in the near future. 12. The higher capital formation rates of the past few years augur well for future income growth. However, there are signs that, relative to existing demands, the past investment program has led to disproportionally low growth in certain crucial sectors, namely power, coal, transport ser- vices, 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 pro- mote further investment. All these are tradeable commodities. Although in 197Q/80 they were not imported in sufficient amounts to eliminate the shortages, increased short-term reliance on imports may be necessary to alleviate slowdowns and dislocation in using industries. In the case of sectors in which there is no option to import the final product ---power and transportation-- the planning of capacity expansion becomes even more crucial. Although there is scope for improvement in the shortrun perfor- mance of these sectors, major investments in balancing and modernization programs as well as new capacity are needed in order to provide adequate and stable growth in the mediurt term. The presence of infrastructual con- straints and shortages of basic industrial inputs demonstrates that the expansion of industrial output leads to competing claims on scarc:e resources with significant implications for public versus private and short versus long-term investments. 13. The substantial increase in the world price of petroleum in 1979, together with the expectation that this pattern will not be rever sed in the near future, raises several issues concerning energy prospects for India. India imports the equivalent of almost two-thirds of its petroleum consumption. In order to implement its policy of minimizing dependence on foreign oil, the Government intends to rapidly expand its oil exploration program, to increase the utilization of its vast coal reserves and to increase the development of India's considerable hydroelectric potential. However, recent shortages of coal and power are symptomatic of operational problems reflecting, in part, past planning and investment decisions which are inhibiting the timely implementation of India's long-term conversion program.  -6- 14. In agriculture, despite the 1979 drought, economic policies, development programs and secular trends all seem favorable for sustaining a period of high growth during the 1980s. India ended the 1979/80 rabi season with grain stocks of about 15 million tons, without having imported foodgrains during the year. This is partly due to the bumper crop of 1978/79, but also reflects the trends of the last five years during which substantial foodgrain stocks were built up while imports were reduced to negligible levels. In view of the acceleration in the use of agricultural inputs and the projected fall in the population growth rate, the long-run prospects for foodgrain supply and demand balances look favorable. Per- sistent shortage seems unlikely, and it is probable that a wide range of policy options will become much more practical as the overriding emphasis on foodgrains can be somewhat relaxed. These options include a slowly falling real price of foodgrains to increase the affordability of foodgrains to low-income families, further rationalization of domestic markets and prices, and diversification to the production of other higher value crops. This prospect will involve only a gradual shift in emphasis rather than a dramatic break with past policies. 15. Foreien exchange reserves still provide some cushion that can help the Government of India in short-term supply management, but this situa- tion is likely to be short-lived. Rising import prices and uncertainties in the prospects for exports and invisible receipts have led to a serious and rapid deterioration in India's balance of payments prospects. Reserves were only marginally higher in March 1980 than the level of a year earlier and, in terms of import coverage, fell below the 8-month level for the first time since 1977. A sharp decline in the reserve level is expected in 1980/Rl. At best, India's reserves may provide a cushion for two more years, and even that is conditional on the maintenance of aid flows and workers' remittances and on moderation in oil price rises. 16. India's medium-term development prospects are mixed. Progress has been made and continues to be made, particularly in agriculture, but the economy faces a period of difficult adjustments in the coming years. Investments required to relieve short-term supply constraints must compete with longer-term programs to accelerate growth and to develop India's con- liderable physical and human resources. The balancing of these objectives will place a difficult burden on the framers of India's next Five-Year Plan. The primary focus must be on the implementation of appropriate domestic adjustment policies, although the aid community can and should play an important role in ensuring that India's efforts do not fail due to inadequate foreign resources. 17. The annual population growth rate declined from 2.2% in the late 1960s to below 2% at present and is expected to continue falling to around 1.6% by the latter half of the 1980s. Despite the declining trend in the rate of population increase, a net reproduction rate of one (replacement level) will only be achieved around the year 2020. At that time, the  -7- population of India is estimated to reach 1.2 billion persons, an increase of about 81% over the mid-1080 level of 663 million. Family planning has played an important role in achieving the fertility decline in the past decade, and the extent of a further decline will be greatly influenced by the continuation of a successful official family planning program. The family planning performance data for 1978/79 and the first ten months of lQ7Q/80 clearly indicate a comeback from the sharp decline observed in virtually all major contraceptive methods during 1977/78. Except for male sterilizations, the number of acceptors for all contraceptive methods sur- passed the 1974/75 levels in 1978/79. While the increase in the total acceptors of IPT) and conventional contraceptives was modest, female sterilizations increased by about 40% between 1977/78 and 1978/79. Data for the first ten months of 197Q/80 confirm a secular upward trend in overall performance. So far, policy makers have not made major attempts to accelerate the male sterilization program. Instead, they have opted for policies that would yield relatively modest but sustainable results with increased emphasis on non-terminal methods. 18. Beyond the effects of overall economic growth and constrained population growth, the reduction of poverty in India requires special attention to ways of raising the income and productivity of low-income groups. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. In addition to marginal holdings of physical assets, the poor are ill-endowed with human resources, being dispropor- tionately represented among the illiterate, the malnourished and those having otherwise poor health status. Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy, mainly on productivity increases in agriculture and non-farm rural employment, but also on the expansion of employment opportunities in urban areas. These developments will have to stem largely from market forces which, however, can be greatly facilitated by appropriate govern- ment policies and investment priorities. There is also a role for direct government actions in faster implementation of land reform (though the scope for significant reduction in poverty through redistribution is quite limited in India), in increasing the supply of credit available to small farners 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. Recent innovations, including the commmn- ity health volunteer program and the national adult literacy campaign, are encouraging evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor.  -8- PART II - BANK GROUP OPEPATIONS IN INDIA 19. Since 1949, the Bank Group has made 61 loans and 134 development credits to India totalling US$2,833 million and US$8,672 million (both net of cancellation), respectively. Of these amounts, ITS$1,133 million had been repaid, and US$4,107 million was still undisbursed as of January 31, 1981. Bank Group disbursements to India in the current fiscal year through January 31, 1981, totalled US$373 million, representing an increase of about 20% over the same period last year. Annex II contains a summary statement of disbursements as of January 31, 1981, and notes on the execution of ongoing projects. 20. Since 1959, IFC has made 19 commitments in India totalling US$110.6 million, of which US$20.8 million has been repaid, US$27.6 mil- lion sold and US$7.5 million cancelled. Of the balance of US$54.7 mil- lion, USA46.2 million represents loans and US$8.5 million equity. A sum- mary statement of IFC operations as of January 31, 1981, is also included in Annex II (page 5). 21. In recent years, Bank Group lending has emphasized agriculture. The Bank r-roup 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, a7ricultural extension, and dairying are other agricul- tural activities supported by the Bank rroup. 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 indus- trial enterprises. IDA financing of industrial raw materials and com- ponents for selected priority sectors has been instrumental in facilitat- ing better capacity utilization in industry. The Bank Group has also been active in supporting infrastructure development for power, telecommunica- tions, and railways. Family planning, water supply development, urban investments and the development of oil and natural gas have also received Bank Group support in recent years. 22. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Goverment's priorities. The emphasis of the program on agriculture, power, water supply and other infrastructure sectors remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs, particularly water and credit for on-farm investments, will continue to receive emphasis. Improved water management and intensification and streamlining of extension systems form an important institution-building aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers. The Bank Group's continuing role in the fertilizer sector also assists India in the more efficient provision of another key input in the agricultural growth  process. Projects supporting water supply, sewerage, 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. 23. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consor- tium. Thanks in part to the response of the aid community, India success- fully 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 pavments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Pank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to he small in most projects. This is partibularly the case in such high-priority sectors as agriculture, irrigation, and water supp:Ly. 24. 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 oE IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support. Therefore, India should be eligi- ble and regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was 12% in 1978/79 and is projected to remain below 20% through 1995/96. As of January 31, 1981, outstanding loans to India held by the Rank totalled US$1,766 mil- lion, of which US$561 million remain to be disbursed, leaving a net amount outstanding of US$1,206 million. 25. Of the external assistance received by India, the proportion contributed by the Rank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disburse- ments, and 12% of net disbursements as compared with 64%, 60% and over 100%, respectively, in 1979/80. On March 31, 1980, India's outstanding and disbursed external public debt was US$15.6 billion, of which the Bank Group's share was US$5.2 billion or 34% (IDA's IJS$4.5 billion and IBRD's US$0.7 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 1979/80, about 18.O0 of India's total debt service payments were to the Bank Group.  -10- PART III - THE TELECOMMUNICATIONS SECTOR Background 26. W4hile India has a comparatively large telecommunications network by world standards, with more than two million direct exchange lines (DELs) and more than two and a half million telephones, the quantity and quality of telephone and telex services is poor compared to many other countries. India's 1978 telephone density (number of telephones per 100 population) of 0.36 is low compared with other countries in Asia: Malaysia - 2.86; Philippines - 1.26; Thailand - 0.8; and Sri Lanka - 0.5. The average for developing countries in Asia for which statistics are available is about 0.6, while the world average is 10.2. The telephone density in the major cities of India is also low compared with principal cities in other countries. Densities vary from about 2 for cities such as Hyderabad, Calcutta and Lucknow, to close to 4 for Delhi and Bombay. This compares with telephone densities of 4.8 for Bangkok; 7.7 for Manila; 8.7 for Tehran; 11.2 for Yairobi; and 19.6 for Singapore. 27. The present official waiting list for telephone service in India is about 336,000, of which about 197,000 are in the four major cities. The waiting list has grown at an average rate of 16% per year over the past four years, and more than 30% per year in the last two years. Moreover, manv rural areas and towns are without service, and thus have no officially recorded waiting list. Consequently there is a high level of suppressed or hidden demand. 28. Away from the larger towns the telephone service is provided by a network of long distance public call offices (PCOs) which comprise a single line with a telephone connecting the town or village to the national telephone network. As demand in a town grows, a small telephone exchange is installed at the PCO and the original line used as a trunk circuit to the network. In March 1980, there were about 14,000 PCOs and 5,000 small (less than 100 lines) telephone exchanges. However, of the 45,000 towns with a population exceeding 2,000, less than half have telephone facilities, either in the form of a long distance PCO or a telephone exchange. 29. Due to the significant shortage of telephone lines and the resultant network overloading, the calling rates in most large cities in India are extremely high, and the probability of making a successful call at the first attempt is relatively low. This situation brings about repeated call attempts to busy numbers and, as a result, generates additional traffic throughout the network. This not only creates congestion in the call handling plant, which is shared by all subscribers, but also substantially increases the overall probability of encountering a busy subscriber. 30. Such congestion is not limited to the local network. A high  -11- level of congestion also exists in the long distance network, this being brought about partly as a result of the local network congestion, and partly by the inadequate provision of trunk switching equipment. For example, only about 77% of attempted manual trunk calls are ultimately successful and the probability of a successful automatic subscriber dialled trunk call at the first attempt is less than 50%. Manual trunk calls often encounter delays of more than four hours, although it is possible to pay higher charges for a priority connection. In the longer term, however, the most effective method of improving the trunk service will be to expand the automatic trunk network and upgrade the quality and reliability of the network overall. The new five-year plan (covering fiscal years 1981-85), currently in preparation, provides for additions to the automatic trunk switching system and for measures to monitor and improve system performance, both of which will help alleviate congestion. Sector Organization 31. The telecommunications sector in India is largely State-owned9 the most important entities being the Posts and Telegraphs Department (P&T), the Overseas Communications Service (OrS), and three major public sector telecommunications manufacturing companies. In addition, there are numerous smaller private manufacturers who act as subcontractors to the major manufacturers, as well as supplying direct to the P&T. 32. The P&T is a Government department under the Jurisdiction of the Ministry of Communications. It is controlled by a seven-member board of senior executives, whose chairman is the Secretary of the Ministry of Connunications. The board has adequate autonomy in policy formulation and day-to-day operations. The Telecommunications Branch of P&T operates all public telecommunications facilities within India and to adjacent countries. It also carries out telecommunications research, development and training activities through its Telecommunications Research Center and its Technical and Development Circle. The Overseas Communications Service, a separate agency also under the Ministry of Communications, operates all international communications with non-adjacent countries. The telecommunications manufacturing industry consists in the main of three public sector companies: Indian Telephone Industries Limited (ITI), Hindustan Cables Limited (HCL), and Hindustan Teleprinters Limited (HTL) (see paras 43, 46 and 49). ITI manufactures telephone exchange equipment, transmission equipment and telephone instruments. HCL manufactures almost all of the telephone cable now used in the P&T network. HTL manufactures teleprinters and miscellaneous telegraph, telex and data terminal equipment. The Telecommunications Branch of P&T employs approximately 310,000 full-time staff, and the three manufacturers together have about 32,000 employees.  -12- Sector Objectives 33. The Government's new five-year plan, covering fiscal years 1981-85, supersedes and extends the previous 1979-83 five-year plan which provided the basis for the Seventh Telecommunications Project. To provide a sound, sectoral basis for its part of the new five-year plan, the P&T prepared a ten-year plan designed to achieve a series of service objectives by 1990. P&T's five-year plan (1981-85) has been established within this longer-term context. The major objectives of the ten-year plan are to expand the network to make telephone services more widely available, to reduce the unsatisfied demand for access to telephone and telex services, and to reduce the congestion that now exists in the network. These objectives include the provision in urban areas of telephone services, either through telephone exchanges or long distance public telephones, to within five kilometers of most inhabited locations in the country; the provision of an automatic long distance subscriber trunk dialling network connecting all cities and towns with a population of 50,000 or more; and the provision of telephone and telex connections on demand by 1990. Other important sector objectives, concerned primarily with improvements to the quality of service, include the adoption of new technologies, the full automation of the local telephone exchange network, and the replacement of obsolete and worn out equipment in the network as needed. Domestic equipment manufacturing capabilities are also to be greatly expanded. 34. With regard to new technologies, the Government of India, in a recent policy decision, plans to embark on a major program for the introduction of modern electronic switching systems technology. The decision is consistent with the Bank's view, which is based upon a recognition of the world-wide trend toward the use of this type of technology, and the belief that its early adoption is critical for the successful least-cost development of the sector in India. In addition to including new electronic switching and electronic teleprinter factories under the proposed project, the Government has approved the establishment, within P&T's current five-year plan period (1981-85), of two 500,000- line-per-year local electronic switching equipment factories. These factories would not only produce switching equipment at a lower cost than with the present technology, but would also provide equipment of considerably greater reliability and flexibility. The use of the new technology should lead to reductions in equipment failure, reduced traffic congestion in the national network, more efficient use of equipment space, and improved services to subscribers. 35. Given the scarcity of resources allocated to the telecommunications sector in India, pricing policy is one means by which the benefits of the sector can be focussed on high priority users. This is being applied in India where currently the pricing mechanism is used to  -13- control access to, and priority usage of, the system. Pricing policy is further used to promote cheaper local service for those residing outside the larger urban areas. In general, both subscri'?r deposits and monthly telephone rental charges are lower in the smaller rural telephone service areas. The Bank's Role in the Sector 36. The Bank Group has made seven loans and credits for telecommunications since 1962. 7)uring this period, the number of telephones installed has increased from 373,000 in 1962 to more than 2.6 million today; the trunk network has been expanded and modernized, and an automatic telex network of about 18,000 subscribers has been established. The Bank Group has also assisted the P&T in modernizing its organizational and management structure, and in establishing an Economic Research Cell (ERC) which has begun to analyze pricing, demand, and investment issues in the sector. Bank Group support has also been instrumental in making possible higher levels of investment in the telecommunications sector. Equally important have been the Bank's contributions to institutional improvement, which have helped P&T make more efficient use of available resources. The success of Bank Group involvement with the Indian telecommunications sector may also be judged by the declining dependence of the P&T capital works programs on Bank Group financing. The Bank Group's financing of the P&T construction program will drop from about 32% in 1964 to a projected 15% in the period of the proposed project. 37. In line with these developments, Bank emphasis within the sector has heen changing during recent years. Present emphasis is directed more towards alleviating the chronic congestion of the existing services, and to pursuing the large-scale introduction of modern electronic telecommunications technology. The problems of the three major manufacturing entities in the sector are being addressed primarily through the provision of the necessary capital equipment for upgrading and modernizing the existing factories, and for establishing new factories to exploit the benefits of modern technology. These steps will hetlp to enhance the overall efficiency of factory operations and the manufacturers' ability to supply reliable equipment and materiaLls to P&T in adequate quantities and at reasonable cost. 38. A project performance audit has been conducted on the third, fourth and fifth lending operations to the telecommunications sector in India. These projects were considered by the audit to be successful. The audit for the fifth project observed that the aims for institutional and organizational improvement had largely been achieved. However, the provision of direct exchange lines had not been commensurate with the growth in demand, and the quality of service continued to be inadequate. In addition, the price rationing system for obtaining and using telephone service needed to he retained as a means of allocating telephones and  -14- alleviating some of the traffic congestion. The audit also stressed the desirability of adopting electronic switching technology as a long-term objective within the sector. These concerns have been addressed to a considerable extent in the present project. The P&T's present five-year plan, which forms the basis for the P&T subproject, raises considerably the levels of investment in telecommunications. Although the prolections show the unsatisfied demand for direct exchange lines rising in the short term, they also indicate that based on an average growth rate of 12% per annum, much of the demand can be satisfied as it occurs by 1990. The subproject also contains a network upgrading component as a direct attempt to improve the quality of service. For the time being, it will be necessary for the relatively high prices for subscriber telephone access and usage, which serve to depress demand and to allocate existing supplies to high productivity users, to be maintained. Electronic switching technology is also being introduced under the present project through the establishment of an initial manufacturing capacity for these systems. The proposed project will therefore assist considerably in satisfying the maior recommendations of the project performance audit. PART IV - THE PROJECT 39. The project was appraised in July, 1980, and a Staff Appraisal Report is being circulated separately to the Executive Directors. Negotiations were held in Washington in February, 1981. The Government of India was represented by a delegation with Mr. B. S. Lamba as coordinator. A Supplementary Project Data Sheet is attached as Annex III. Project Description 40. The P&T's 1981-85 five-year plan, involving a total capital program of some US$4.3 billion, envisages the installation of 1.4 million direct exchange lines, 3,500 telephone exchanges, 20,000 long distance public call offices, and 1.5 million lines of automatic switching equipment. In addition, new technologies such as electronic local, trunk and telex exchanges will be introduced in the four large metropolitan areas of Bombay, Calcutta, Delhi and Madras. The long distance telephone system will also be improved through the use of communications satellites, digital microwave systems, and other digital transmission media. New technologies for the extension of telecommunications facilities to rural regions and to backward, hilly and tribal areas are also planned for field testing with a view to developing alternative technologies to meet the particular needs in these areas. 41. The proposed project is designed to help achieve these objectives during the first three years (fiscal years 1981-83) of the five-year plan, and includes the major part of the P&T's construction program as well as the capital investment programs for ITI, HCL and HTL in  -15- these years. It consists of four subprojects: (i) the Posts and Telegraphs subproject; (ii) the Indian Telephone Industries subproject; (iii) the Hindustan Cables subproject; and (iv) the Hindustan Teleprinters subproject. The P&T Subproject 42. The P&T subproject accounts for almost US$1.5 billion of P&T's three-year capital investment program of about US$2.1 billion. The subproject will use a major portion of the credit proceeds (about US$243 million) to support P&T's investment program over the three-year period to improve the quantity and quality of telecommunications services in India. The investments to be financed for the expansion of the telecommtunications network include the installation of 700,000 lines of local telephone exchange equipment; the provision of subscribers' cable and associated equipment which will permit the connection of 630,000 new direct exchange lines; the provision of about 11,000 long distance public call offices and 1,600 telephone exchanges, mostly in rural areas; the extension of the automatic trunk network by the provision of about 40,000 automatic trunk switching terminals; the provision of about 6,200 telex facilities and 12,000 telegraph offices; and the installation of about 3.7 million pair kilometers of underground telephone cables. In addition to these network-related investments, several other important components are included in the subproject: computing equipment to handle accounting, directory enquiry, and telecommunications management activities for the four metropolitan districts of Bombay, Calcutta, Delhi and Madras; plant, equipment and raw materials for the P&T telecommunications workshops; testing and measuring equipment for P&T's Telecommunications Research Center and its Technical and Development Circle; and transmission equipment for trunks and junctions. A network upgrading program, designed to improve the overall performance of the telephone network by reducing the frequency and duration of faulty conditions and by improving the quality of transmission and switching performance, is also included as part of the subproject; plant and equipment for this program will also be provided. The ITI Subproject 43. ITI is the largest of the three main telecommunications equipment manufacturers, with total sales of about Rs 1,000 million (US$119 million) in fiscal year 1980. Its production units consist of factories located at Bangalore in Karnataka, Naini and Rae Bareli in Uttar Pradesh, and Srinagar in Kashmir, employing a total of about 26,000 people, and an electronic switching division at Palghat in Kerala. The company manufactures switching equipment, transmission equipment, telephone instruments and other miscellaneous telecommunications equipment. Approximately 85% of its output is purchased by P&T. A further 13Z is sold to GOI entities such as the Indian Railways and the  -16- Overseas Communications Service and to private industry, and about 2% is exported. 44. The ITI subproject accounts for about US$43 million of ITI's three-year capital investment program of about US$122 million. The subproject is intended to increase the quality and quantity of ITI's current products and to commence larger scale production of electronic switching equipment for rural trunk and private automatic exchanges, based upon P&T's requirements for expansion of the telecommunications network. It comprises two major components: the continuation of the upgrading and modernization program begun under the Seventh Telecommunications Project; and the establishment of a 150,000-line-per-year electronic switching facility at Palghat. The upgrading and modernization activities for the existing factories at Bangalore, Naini and Rae Bareli involve improving the manufacturing processes for telephone instruments through redesign of the instrument and through automation of the production processes for key elements, in order to attain higher standards of quality and reliability for the finished instrument. The total production of telephones at ITI is expected to increase from the current level of about 500,000 per year to about 750,000 per year by fiscal year 1983. The manufacturing processes for transmission equipment at the Bangalore and Naini factories will also be improved. The emphasis in this case is on improved quality control and higher reliability of transmission equipment products. This will be brought about primarily through the introduction of automatic testing facilities for electronic components and associated systems, and a new facilitity for the manufacture of modern printed circuit boards. The value of the total annual production of transmission equipment is expected to increase from about Rs 300 million (US$36 million) in fiscal year 1980 to about Rs 500 million (US$60 million) by fiscal year 1983. Additional upgrading activities include the expansion of the research and development facilities throughout the company, the replacement of tooling and production equipment in the Bangalore and Rae Bareli factories, and extension of the use of consultancy services for product and reliability engineering which was commenced under the Seventh Project. 45. The second component of the ITI subproject, involving the establishment of new production facilities at Palghat for electronic switching equipment, represents the first indigenous move into large scale production of electronic telephone switching systems and is of vital importance to the telecommunications and electronics industries in India. The Palghat facility will be designed to manufacture annually 150,000 equivalent lines of electronic switching equipment, comprising 30,000 lines of digital electronic trunk switching equipment, 50,000 lines of integrated electronic low-capacity exchanges, and 40,000 lines of private digital electronic automatic exchanges.  -17- The HCL Subproject 46. HCL produces a wide variety of telephone cables and line wire with total sales of approximately Rs 550 million (US$65 million) in fiscal year 1980. It has factories at Rupnarainpur in West Bengal and Hyderabad in Andhra Pradesh, where it employs a total of about 4,000 people. Its output is sold primarily to the P&T with a small part of its production going to other customers such as the Indian Pailways. 47. The HCL subproject accounts for about US$66 million of HCL's three-year capital investment program of about US$102 million. As with the ITI subproject, the HCL subproject comprises an upgrading and modernization component for its two factories at Rupnarainpur and Hyderabad, together with the establishment of a new cable manufacturing plant at Hyderabad. The upgrading and modernization involves the replacement of obsolete and worn-out production machinery and the addition of new testing equipment for production line and research and development purposes. At the Rupnarainpur facility, modern cable sheathing equipment will replace the obsolete and worn-out equipment, and modern automated testing equipment will be provided. 48. The second component of the subproject covers the establishment of a new cable manufacturing plant at Hyderabad. This factory is required to meet-the growing demands for cable to satisfy P&T's development plans. For this purpose, a new factory with a potential capacity of three million pair kilometers per year will be established. By 1988, the P&T's cable requirements will reach about seven million pair kilometers per year; the proposed new factory, together with the two existing factories., should be adequate until that time. The HTL Subproject 49. RTL produces teleprinters, electric typewriters, data communication modems and miscellaneous items of telegraph and data equipment, with total sales of Rs 75 million (US$9 million) in fiscal year 1980. Its main product line is the teleprinter, which, togetheer with spares and accessories, accounts for more than 95% of its output. The company has a factory at Madras in Tamil Nadu, where it employs about 2,000 people. HTL produces on average about 7,000 teleprinters per year, of which 60% to 70% are sold to P&T, about 30% to other customers and about 2% exported. 50. The HTL subproject accounts for about US$17 million of HTL's three-year capital investment program of about US$20 million. As with the ITI and HCL subprojects, the HTL subproject consists of two components -- the upgrading and modernization of the existing factory in Madras, and the establishment of a new electronic teleprinter manufacturing faLctory at Hosur in Tamil Nadu. The upgrading and modernization involves the  -18- replacement of machines and equipment in the machine shop, production line, and tool room in a manner which will enable a changeover to the manufacture of electronic teleprinters to be made. The proposed new factory will manufacture the electronic components of the teleprinters and carry out the final assembly, testing and packaging. Offers are being invited from electronic teleprinter manufacturers for a collaborative arrangement with HTL in establishing the indigenous teleprinter manufacturing facility. Project Implementation a) The P&T Subproject 51. The P&T subproject, which comprises many separate works spread throughout the country, will be executed by the P&T with its own staff of engineers, technicians, linemen and tradesmen. To facilitate project implementation, some bids will be called prior to approval of the credit. This applies particularly to the new computing equipment for Bombay, Calcutta, New Delhi and Madras, the medium-capacity digital electronic trunk switching system, and the local switching system for rural subscribers' small exchanges. A key policy decision concerning the establishment of electronic switching equipment factories has already been made by GOI (see para 34). 52. The network upgrading program, designed to improve the overall performance of the telephone network in terms of frequency of faulty conditions, duration of faults, and quality of transmission and switching performance, will be implemented by the P&T. During project negotiations, GOI and the Association reached an understanding on the performance indicators and program monitoring indices to be used to measure.the implementation of the program and the quality performance of the network. 53. As part of its regular progress reporting procedures to the Association, the P&T will review and report on the annual performance of the three domestic equipment manufacturing companies participating in the project. In particular, the P&T report will include data on product prices and on factory output measured against established targets. The information requirements and reporting methodology were agreed upon in principle during project negotiations. 54. The Economic Research Cell, established under the Seventh Project, carries out economic analyses of demand, investment, and tariff structures, and similar economic studies for the P&T. During negotiations, GOI and the Association reached an understanding that as part of its ongoing research program, the ERC would undertake appropriate pricing and tariff studies under the project. These studies would be designed to assess the effect of tariff policies on traffic distribution in the Indian telecommunications sector. Terms of reference and a  -19- schedule for these studies will be provided to the Association by P&T by June 30, 1981. GOI and the Association also agreed that appropriate action would be taken, as considered necessary by GOI, on the recommendations arising from these studies. With regard to ERC staffing, -&T plans to appoint an additional economist and a statistical officer to e ERC during 1081, and has submitted a proposal to the Ministry of Finance for these additional positions. (b) Factory Upgrading and Modernization, and Establishment: of New Factories 55. In the case of ITI, factory modernization was part of its earlier 1979-83 five-year plan and certain of these works were incorporated into the Seventh Telecommunications Project. The company is therefore aLready in a position to implement further improvements along these lines. Quality assurance aspects of ITI's products were also addressed under the Seventh Project, and a quality assurance manual, explaining quality control methodology, was developed by ITI. Quality assurance procedures adopted under the Seventh Project would continue under the proposed project, and a quality standards manual for ITI's operations, specifying quality levels and methods of inspection, has been drafted by ITI. The agreed ITI/P&T version of the manual will be submitted to the Association by June 1981. 56. For HCL, factory upgrading will proceed with bids called during fiscal year 1981 and equipment delivered and installed in fiscal years 1Q82 and 1983. A quality assurance department is presently being established within HCL as a result of recommendations made by Bank missions last year. BCL's proposals for the department were discussed during project negotiations, and we expect that it will be established and adequately staffed by June, 1981. 57. For HTL, as for ITI, the upgrading and modernization component will continue along the lines established under the Seventh Telecommunications Project. Bids will be called during fiscal year 1981 and equipment delivery and installation will take place in fiscal years 19P2-1Q83. 58. The ITI electronic switching plant at Palghat, the HCL cable factory at Hyderabad and the HTL teleprinter factory at Hosur are scheduled to be completed in fiscal year 1983 and in production in fiscal year 1984. The implementation schedules for these factories will therefore need to be closely monitored. The implementation schedule for the new ITI factory is particularly important in view of the urgent: need for electronic trunk switching equipment in the P&T network, so a stringent implementation plan for this establishment is essential. The Government recently approved the establishment of the three factoriLes, and bids for the system and collaborator for the proposed ITI factory iwere  -20- called in November, 1980. Bids for the system and collaborator for the proposed HTL factory are expected to be called in March 1981. Project Costs and Financing 59. The total project cost, including contingencies, of the four subprojects is estimated at about US$1,619 million, including about US$240 million in taxes and duties. The proposed credit of US$314 million would finance all of the foreign exchange costs, or about 23% of the project costs net of taxes and duties. Retroactive financing of up to US$30 million (about 10% of the credit amount) is proposed to cover expenditures incurred since June 30, 1980 for the purchase by the P&T of telecommunications equipment and components from ITI, HCL and HTL. Such retroactive financing is considered appropriate in this case in view of the expected timing of the credit approval and agreement, which will be close to the end of fiscal year 1980/81, the first year of the project. Project appraisal took place considerably later than originally intended, due to the Association's concern that the complex policy decisions that had to be made by GOI concerning the introduction of electronic switching technology into India be finalized prior to appraisal, and that equipment specifications be well advanced by the date of Board presentation. By the expected time of credit signing, most of the project's anticipated first- year expenditures of about US$40 million will have been made; the proposed retroactive financing amount of US$30 million will therefore cover about 75% of these expenditures (para 4 of Schedule 1 to the Development Credit Agreement). 60. The cost of the P&T subproject is estimated at US$1,493 million, including about US$243 million in foreign exchange. The total cost of the three factories subprojects is estimated at about US$126 million, including US$71 million of foreign exchange. For the factories subprojects, GOI will on-lend the credit proceeds contribution to the individual factories under subsidiary loan agreements to be entered into between GOI and each of the three companies (ITI, HCL and HTL), and to be approved by the Association. On-lending arrangements will be in line with prevailing commercial terms (currently 11% per annum, less 1/4% prompt payment discount, with repayment over fifteen years, including three years' grace). Execution of the subsidiary loan agreements has been made a condition of effectiveness for the credit (Section 6.01(b) of the Development Credit Agreement). The balance of about US$1,250 million of P&T's investment requirements will be met from internal cash generation, GOI contributions, supplier credits and subscriber deposits. The remaining US$55 million approximately of the investment requirements of the factories will be similarly met from internal cash generation or GOI equity contribution. 61. The project also provides for price contingencies of about US$225 million, based on projected price escalation of about 7% per annum  -21- for local and 7% to 9% per annum for foreign cost components over the project period. As is customary in the telecommunications industry, no physical contingencies have been included, since engineering designs for equipment and buildings are standardized and quantities are accurately known. Within the P&T, average unit costs for the many small components making up the subproject are well known, and a high degree of standardization in engineering design for transmission works and for technical buildings has been adopted. Upgrading requirements for the factories subprojects are well defined and costs are well established. Details of the cost estimates and financing plan are given in the Credit and Project Summary. Procurement and Disbursement 62. All equipment imported directly by P&T for the P&T subproject (US$80 million) will be procured on the basis of interna.onal competitive bidding (ICB) in accordance with the Bank Group's guidelines. All equipment to be financed by the Association for the ITI, HCL and HTL factories subprojects (US$71 million) will also be procured under ICB. Procurement associated with the choice of collaborator and acquisition of technical expertise for the new electronic switching manufacturing plant at Palghat and the new electronic teleprinter factory at Hosur, will also be made under ICB. 63. As with previous lending operations, ICB is not proposed for those equipment items in the P&T subproject for which considerations of economy and efficiency give a clear advantage to domestic factories. Items produced by the three domestic telecommunications equipment manufacturers are comparable in quality with internationally procured equipment and costs are competitive. For switching and transmission equipment, there is further strong justification for domestic acquisition on the basis of economy, compatibility, and standardization. In the case of cables, different sizes and wire gauges are required in thcusands of individual works throughout India and a well-coordinated local cable supply is particularly important for the efficient implementation of telecommunication systems of this size. IDA financing (US$163 million) in this case is limited to the foreign exchange content (imported raw materials and components required for production) of the domestically procured goods. These materials and components will be procured by the three factories under ICB arrangements in line with Bank Group guidelines. 64. For direct imports by the P&T under the P&T subproject, and procurement of imported items of machinery, equipment, and services for the factories subprojects, disbursements will be made against 100% of the foreign exchange expenditures. In the case of P&T purchases from the local factories, disbursements will be made against invoices to the P&T of a percentage of the purchase price calculated to represent the foreign exchange costs of the imported raw materials and components included in  -22- the goods and equipment purchased for the subproject. These percentages are currently estimated as follows: for purchases from ITI: 24% of the selling price for purchases from HCL: 40% of the selling price for purchases from HTL: 6% of the selling price These percentages will be subject to review during the project period and revised if necessary in the light of changed conditions. Financial Aspects (a) P&T 65. As a department of the Central Government of India, P&T's finances form part of the national budget. Funds provided by the Government in excess of P&T's internal generation are called capital-at- charge, and the Government requires that P&T pay dividends on these funds at a rate currently set at 6%. P&T keeps separate accounts for its telecommunications and postal operations. For the Telecommunications Branch, P&T maintains commercial accrual accounts in addition to the conventional Government cash accounts. Present arrangements of submitting unaudited accounts within four months, and audited accounts within a reasonable time after the close of the fiscal year will continue under the proposed Credit (Section 4.01 of the Development Credit Agreement). 66. The Telecommunications Branch transfers a substantial amount from its profits to cover Postal Branch losses. The Government has maintained telecommunications tariffs at a level which permits such transfer of funds to the Postal Branch without damaging the Telecommunications Branch's ability to meet its financial needs. Such transfers during the three-year project period, fiscal year 1981 to 1983, are estimated to be about Rs 1,163 million. 67. In compliance with the legal agreements under the Seventh Telecommunications Project, the Telecommunications Branch completed in March 1980 a revaluation study on the various categories of its fixed assets. The rate of return on the revalued assets (22% in fiscal year 1979 and 18% in fiscal year 1980) was significantly higher than the rate of return (11%) required under the legal agreements. Projections for fiscal years 1981 through 1983 show the rate of return falling from about 16% to 14%. P&T will continue, on a memorandum basis, to revalue annually its telecommunications assets and periodically review the adequacy of depreciation rates; it will also continue to attain a rate of return of at least 11% on these assets (Section 4.02 of the Development Credit Agreement). 68. Other financial indicators for fiscal years 1977-80, based on  -23- P&T's commercial accounts, showed an acceptable performance with current ratios of at least 3.5 times, and debt-equity ratios remaining fairly constant at around 18/82, reflecting the Telecommunications Branch's strong equity base; operating ratios ranged between 54% and 57%. P&T's collection performance has improved over the past few years and subscriber accounts receivable amount to about two months' billings, which is considered satisfactory by the Association. 69. Financial projections, based on existing tariffs, indicate continued satisfactory performance. Over the fiscal years 1981-85, the debt-equity ratio is projected to be no more than 20/80, current ratios at least 3.4, and debt service and transfers coverage ratio of at least 4.7. Internal cash generation, net of debt service and transfers, wilL average about 65% of total funds requirements through the proiect period. (b) Domestic Manufacturers 70. The three domestic telecommunications equipment manufacturers, ITI, HTL, and HCL, are operating in what is essentially a vertically integrated telecommunications industry. Historically, these companies have performed reasonably well and have had no cash deficit probLems since their inception. On the basis of the companies' investment programs and projected sales to P&T, this situation is expected to continue in the future. Forecast financial results show that gross margin ratios are expected to be above 13%, and return on net fixed assets is expected to range from 12% to 22% over the project period. 71. The financial and management performance of the three companies is investigated annually by an independent Government body, the Bureau of Public Enterprises (BPE); the results are included in BPE's Annual Survey and reported to Parliament. The survey is thorough and critical. During negotiations, GOI and the Association reached an understanding on the reporting procedures for the companies under this project. Beginning in fiscal year 1981, all three companies will submit to the Association the BPE's analyses and recommendatiois together with the companies' comments and planned corrective actions, if necessary. Also beginning in fiscal year 1981, the three companies will submit to the Bank through the P&T copies of any new pricing agreements concluded with P&T. Economic Justification and Risks 72. In India there is a large and growing unsatisfied demand for telecommunications services which is unlikely to be met before 1990. Hence, GOI is paying increasing attention to how the limited resources allocated to the telecommunications sector are used. On the manufacturing side, the emphasis is on assuring that appropriate technical decisions are taken in a timely manner. On the telecommunications services side, a high priority is being given to investment in rural and smaller district  -24- centers, and in those sections of the large metropolitan areas in which there is a large OYT 1/ demand. With regard to quality of service, GOI's continuing attention to its improvement is reflected by the inclusion of the network upgrading program in the P&T subproject. 73. The distribution of benefits from the proposed project should touch all segments of the population in India. Goverment administration and private business should incur communications-related efficiency increases, or lower costs, since telecommunications is the least-cost means of communication for a wide variety of economic and social welfare activities. As a result of the emphasis on investment outside the larger metropolitan areas, a major improvement in quality of service will be made in smaller cities and district centers, while in smaller towns and villages, potentially 40 million people will receive local public access to telephone facilities for the first time during the fiscal 1981-83 period. The 11,000 additional rural PCOs, the 1,500 additional small rural exchanges, and the 405,000 new DELs allocated to districts centers and to those cities other than Bombay, Calcutta, Delhi or Madras during the project period will facilitate achievement of the Government's goals of stimulating economic development outside the major metropolitan areas, encouraging decentralization, and reducing transport and communications- related costs in a wide spectrum of economic and social activities. 74. The Telecommunications Branch of P&T has a much wider impact on the communications and other sectors in India than is apparent from telephone statistics. Overall, during the fiscal 1981-83 period, the Telecommunications Branch will contribute to the Government's consolidated fund a net amount of about Rs 3,296 million, which includes transfers to the Postal Branch to cover postal losses (see para 66). 75. Given the scarcity of resources allocated to the telecommunications sector in India, pricing policy is another means by which the benefits of the sector can be focused on high priority users. However, despite the healthy financial position of the P&T, there is need for a continuing review of the tariff structure. To this end, the ERC will undertake appropriate pricing and tariff studies under the project (see para 54). 76. Given the externalities associated with telecommunications service, the discount rate which equalizes the expected streams of revenues with the capital and operating costs of P&T's fiscal 1981-85 investment program is at best a very conservative estimate of the total 1/ 'Own Your Telephone' - a system whereby advance payment of a re- latively large deposit gives an applicant priority status for ob- taining telephone service.  -25- program benefits. With labor costs shadow-priced at 80% of the market wage rate and foreign exchange at a conversion factor of 0.8, the economic rate of return is estimated to be a minimum of 17%. 77. The program is technically feasible and least cost, and involves no special risks. No adverse environmental or health effects are expected from the project. The subprojects are well defined and the implementing agencies are adequately staffed and experienced to carry out the project without undue difficulties. PART V - LEGAL INSTRUMENTS AND AUTHORITY 78. The draft Development Credit Agreement between India and the Association; the draft Project Agreement between the Association, Indian Telephone Industries Ltd., Hindustan Cables Ltd., and Hindustan Teleprinters Ltd.; and the Recommendation of the Committee provided for in Article V Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 79. Special conditions of the project are listed in Section III of Annex III. The execution of Subsidiary Loan Agreements between GOI and each of ITI, HCL, and HTL, has been made an additional condition of credit effectiveness (Section 6.01(b) of the draft Development Credit Agreement). 80. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 81. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President February 25, 1981   ANNEX I Page 1 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED A'V7RAGES LAND AEA (THOUSAND SO. KM.) MOST RECENT ESTIMATIE- TOTAL 3287.6 AGRICULTURAL 1824.0 MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIHATE /b ASIA & PACIFIC ASIA 6 PACIFIC GNP PER CAPITA (1US$) 60.0 100.0 190.0 212.4 1114. 7 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 106.0/c 141.0k 176.0/c 166.0 342.4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 434.9 547.6 643.9 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 21.7 20.8 39.1 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 974.0 STATIONARY POPULATION (MILLIONS) 1645.0 YEAR STATIONARY POPULATION IS REACHED 2150 POPULATION DENSITY PER SQ. KM. 132.0 167.0 196.0 193.2 376.1 PER SQ. KM. AGRICULTURAL LAND 247.0 308.0 353.0 409.6 2:150. 4 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.0 42.5 41.4 42.0 40.4 15-64 YRS. 56.5 54.6 55.6 55.0 56.2 65 YRS. AND ABOVE 3. 5 2. 9 3.0 3.0 3.4 POPULATION GROWTH RATE (PERCENT) TOTAL 1.9 2.5 2.0 2.2 2.4 UTRBAN 2. 5/d 3.3 3.3 3. 9 4. 1 CRUDE BIRTH RATE (PER THOUSAND) 43.0 40.0 35.0 37.4 28. 7 CRUDE DEATH RATE (PER THOUSAND) 21.0 17.0 14.0 14.6 7.9 GROSS REPRODUCTION RATE 3.2 2.9 2.4 2.6 1.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 4714.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 16.9 15.6 39.0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 103.0 101.4 116.9 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 93.0 92. 0 91.0 92.4 !i08.9 PROTEINS (GRAMS PER DAY) 52.0 51.0 50.0 49.8 60.3 OF WHICH ANIMAL AND PULSE 17.0 15.0 13.0 12.0 18.8 CHILD (AGES 1-4) MORTALITY RATE 28.0 22.0 18.0 17.9 5.3 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 43.0 48.0 51.0 50.8 63.0 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 .. .. 52.8 ACCESS TO SAFE WATER (PERCENT OF. POPULATION) TOTAL .. 17.0 33.0 30.2 42.4 URBAN .. 60.0 83.0 66.0 62.1 RURAL .. 6.0 20.0 20.0 29.7 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 17.7 52.8 URBAN .. 85.0 87.0 71.3 71.1 RURAL .. 1.0 2.0 .. 42.4 POPULATION PER PHYSICIAN 5800.0/e 4890.0 3617.0 6322.7 4120.1 POPULATION PER NURSING PERSON 9630. O/e 5220.0 5675.0 9459.0 2213.6 POPULATION PER HOSPITAL BED TOTAL 2149. 0/f 1629.0 1289.0 1758.4 819.4 URBAN .. .. RIURAL .. .. ADMISSIONS PER HOSPITAL BED .. .. .. .. 28.8 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 .. 5.2 URBAN 5.2 .. 4.8 RURAL 5.2 .. 5.3 AVERAGE NIMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 URBAN .. .. RtlRAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL ..  ANNEX I Page 2 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVERAGES - MDST RECENT ESTIMATE) / MOST RECENT LOW INCOME MIDDLE INC(ME 1960 /b 1970 /b ESTIMATE lb ASIA & PACIFIC ASIA & PACIFIC EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 72. 0 80.0 80.9 98.6 MALE 80.0 87.0 95.0 94.3 99.2 FEMALE 40.0 55.0 64.0 66.7 97.7 SECONDARY: TOTAL 20.0 29.0 28.0 26.6 55.5 MALE 30.0 39.0 38.0 34.8 60.7 FEMALE 10.0 17.0 18.0 18.2 49.9 VOCATIONAL ENROL. (2 OF SECONDARY) 8.0 6.04 .. 9.9 13.7 PUPIL-TEACHER RATIO PRIMARY 29.0 40.0 42.0 41. 1 34.6 SECONDARY 16.0 17.0 .. 20.5 28.5 ADULT LITERACY RATE (PERCENT) 28.0 33. 0 36.0 40.9 85. 8 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.0 1.3 1.8 9.0 RADIO RECEIVERS PER THOUSAND POPULATION 5.0 21.0 24.0 25.8 118.9 TV RECEIVERS PER THOUSAND POPULATION .. 0.1 D. 5 2.4 39.4 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPUIATION 11.0 16.0 16.0 13.4 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3. 8 .. 4.9 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 189761.4 220670.5 252235.8 FEMALE (PERCENT) 31.3 32.6 32.0 29.4 36.8 AGRICULTURE (PERCENT) 74.0 74.0 74.0 70.5 51. 9 INDUSTRY (PERCENT) 11.0 11.0 11.0 11.6 21.9 PARTICIPATION RATE (PERCENT) TOTAL 43.0 40.2 39.2 37.9 39.1 MALE 57. 1 52.3 51.3 51.3 48.5 FEMALE 27.9 27.1 26.2 23.7 29.6 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1. 1 1.2 1. 1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3 .1 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.9/h LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.7/h LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.2 ... POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 88.0 107.8 RURAL .. .. 76.0 86.5 192.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. RURAL .. .. .. .. 182.5 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. ,. 40.7 46.2 RURAL .. .. 47.9 51.7 33.2 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1978. /c Solid fuel conversion factors revised, 1d 1951-60; Le 1962; /f 1958; /R 1967; /h 1964-65. Most recent estimate of GNP per capita is for 1979, all other data are as of April, 1980. October, 1980  ANNEX I Page 3 of 5 DEFINITIONS OF SOCIAL INDICATORS Notes: Althoagh the e t a drn fro sources goner.ally judged the moot utho-itative and reliable, it hould also be noted thbt they say rIot be inter- nationally oepavuble because of the laob of atandordi-ed deftiitinon and concepts used by differet tcoetelen in colleotfng the data. The dote are, enne- theles, oneful tO describe ordors of magnitude, indicato trends, and characterize certain sorjo differencea betweencounrtres The reference gronpa are (I) the same country group of the sobiect country and (2) accoutry gcoup etch sosoohat higher average income than the co=*try group of the sob)iect country (excopt for 'Capital Surplu- 01 Exporter:" group where Middle Isco-o North Africo and MEddle tact" is chosen because of stroeger soe.o-rul. ural offiuitie). In hn toftereece group data the averages are populanion weighted ar-ith -et mesans for each indicator and shown only abet at least half of the c.ouneres in a group has data far thot indicator Sincet the f c.unori- oote biodietors depends co the avoai]ability of data and is not -nifarm, caution est beeexrcied in relating averages of coo inditatcr to another Thb eaverges ore only useful is nusparieg the value of one indicator at a rime _mong she -ountry and reference groups. LAND AREA (thousand sq.m.k( Puralati.n tee Physictan- Fopulation dividea bysntsert 5 preosictag phy- Total - roctal surface area comprising laed arrea std tnland eaters, siciane qualIfied from a medical school as university levl. Agricultural - fteit:ae of agricultural area used temporarily or permanently Population Per Nursing Person - Populatiol dinided by number of practoicig for crops, pastures, nrbet and kitches gardens or to lie fallow; 19(7 data, sale and female gradute nurses, practical nurses, and asaisat euraa. Population per goseital Bed - total, urban. aad enrol - Pepslaties (tonal, GNP PER CAPITA (USS) - GNp per capita _etteo at current macbet priors, cal- orban and rural) dtvided by their respective sasber of hospital beds 9ulatad by ndat -coversion method as Wovld Dent Atlas (1977-79 basis); 1960, availble in public and private general and aperiaised hospital and e- 1970, and 1979 data. h bilitatie ce9tes. hospitals are estabDishme fts perranently staffod Elf OiNCENEMFIID it AFIA -Annal cssuprlo o comerool nery (oal by at least one physiotan. Establishments providing peiocipally tsatodial ENERdY CONSUgPTION PER CAoITA - A s... endh cptio.n of Scc erand geoermal e(c-a care are not included. toral bspitale, however, include health tff mdiral centers not permanently staffed bp a physicies (hot by a p edicol saisaetd, teSiciy) in hilogoans of coal equivalent per capita; 1960, 1970, and 1979 nurse, odotifo, etc.) which offer in-patient acrommodastos and provide a d lta. El_t_ed range of medical facilities. Poe sttistirAl panpoaes urbe beapi- 911 Id hyd,.- -I__ g_tal,isoude 110 pdsia d erladseiaie optas's sa POPULATEED AND VITAL. STATISTICS bep itc7ud local orinrural hositarls ad mledical nd matrrnitp casters Tottl Population. Mid-Near (aillious) - As of July li 1960, 1970. and 1970 Admissioco per hspitnal ded - Total somber of admissions to or diacharges data. from hospirals divided by the ether of bads. Urban Population (percent of total) - Ratio of urban to total popoultion; different definitions of orbaun arosemay affect comparability of datu NOUSING am ong countries; 1960, 19707 and 1979 dot. Average tie of Eusehold (persons per hoehold) - toal, urhba, sand eal- ?orulatioe Pro(ectioos A household consists of a group of individuals who shoes living quarters Povulation to Your 21000 - Current population Projections see based on 1990 sod their solo me1sls A hoarder or lodger may or mFay rot ha included Es total population by age and son end their sorsality and fertility rates. the household for statisttcal purposes. Projootios pacomatocs foe mortality rates comprise of three levels auss=- Averages amnber of poersos oar room - total, urban and rural - Average sum lug life eucectaucy at birth inreaosing sith country's per toapita income her of persoc: per root Ia all urbsn, snd runel nccupied tonventionel level, and femle life eupecttoty stabilizing at 77.5 years. Tbo pare- dwellings, respectively. foellings ruclude non-per=maeat structures rand meters for fertility rate also have three levels assuming docline tn ucoccupied parts fertility acoreding to ieccme level and peast family plannieg peefoe neca. Ateesa to Electricity forercast of dvellisga) - toteS, urban,g asd rorel - Each country tz thee assigued one of those site combisotions of mertalisy Convontionol dwellings sith electricity to living quarsafa aa porceatasge and fertility treeds for projection purposes. of itetl, urhan, and rural dwyellings respectively. Stationary poculation - Eu a stationary population thero is no growth since she birth rate is oquel to obe death rea, and can- she age structure re- EDUCATION mlains conatant. Thia is achieved only after fertility 7 ates decline to Adlusted torolioent laneos the coplactesst level of unti net reproduction rate, sirs eonh generatioe Primary school - total, male and female - irosa tonal, male med famle of woseo replaces itself exaitly. The stationary populanion star was trsollmout of all ages at the primacy level as perreo:togea of respective earimated on the haste of the projectod oharacteristics of the population primlary school-age populationss eorcally includes ohilidreas agad b-Il is the year 20500, and the rate of declcne of fertility crate to re place- years but odisarod for differens lengths of petrzary eIducatira; for tnent lel ~~~~~~~~~~~~~~~~coantoimnsvith aniversal ednoation enrallment may exceaed 100 percent Tear stationaro population Is maacbed - The year when stationary populotion sInce some pupils are below or above rho off icial school age. sies has her reached. Seondar noo -. tota,nal en deml -ICmue msoe eodr PorulotioA oloysiy reached 1dec97a. iocrqp tr 7 r-i-i s.t moe yess of approved pImtary inetraceion; Pro.b.- did-year popuiation yer sqearo bilonoter (lOt hectares) ofyrovides gecocal, vocational, or teacher training instructtons foe peptk d' ares ` f"usually of 12 to 17 years of abge; correspondnce courses are geserally Pet sq. hkc agricultural laid - Competed as above for agricultural land exoluded. veily tiIOofcatto-nit erime rreto eode)-Octo:llsiuis Popu7ation Ags Diruetore (rercent) - Children (0-li years), worlolof-age (IS- istludea technicl,Industerial, or oethnery p-gs Vcairba opeat tit dept a- 64 pears), and ratitred (65 years and over) as porceseegee of mid-year popu- doetly or an departmarts of asecondary inatitutionss latio t; 196D, 1970, and 1970 dare. uc-l-teachor eaioy - ofdars e and seonedery - Totl sudests enrslled ie Population Erowth tate (rercest) - total - Ameual groeth rates of total mid- penmary tand secondary levels divided by sombees of teacohers is the year popi latirsa for 1957-60, 1960-78, aod 1970-78 aorrespouding levels Popolatios irovth hate (percent) - urban - Annoal grosth raeea of urban popu- idolS literaoy rate (pot-ent) - itereeadulse (able so road and wtite) tiona for 1950-6P 1960-70 and 1970-78 ah pr .tag. of total adult pop lation aged OS yess and over. Crude Birth sate (oar thoneaud) - Annual love births poe thousand of mid-yae population; 1960, 1970, and 1979 daa. CONSU'PTION Crude Death Rato (Per thousand) - Annual deaths per thousand of rid-year Passessee Cara (car thooeed populatiot) - Passenger cars oompriss mosar populatios; 1960, 1970, aed 1979 dnata ours seatring less than sight psesons; atxlades ambelasree * hsarsesoand Eross Reorodantton R te-Average unubee of daughters senor I will tear io eElitory vehicle her normal reyroductive ported if she experiences peresent age-spec if ic fee- Radio Receivers (pee thausaid populatior) - All typos of rsoeivers fof rado olity rates; usually fivo-year averages ndiog to 1960, 1970 and 1977. broadcasts to general poblic pee thousand of populatine excludes asi- Family Plaanning-Acceptors, Annual (thoosands) - Asnnual unhber of acceptors ceouse receivers in countrels and is years shoen rogirs atist of radia asmt of hirth-control devices under auspices of rational family plaening program. san in effect; data for recent years ma not hr cospatshlo ainoe most family Plamelna- Users (percent of married enseol - Percentage of married countries ahP-ched licersing. 00mmn of ohild-hearing age (15-44 years) who use birth-control devices to TO tceivors (per thousand copulation) - TV receioora fos broadcast to all married women is samne age grnoy. general public per thoosand population; eaeludos usliom!nsed TV receivers Iedtn of toed Froduction car farina (1969-71-100) - ledeo of per capita anoual tEar of "daily georea interehstn swpopeivn d hf o as a psertda gab-t produontcon of all ford cossoditien. Prod.sotionexacludes seed and fend sod lEcation devoted primarily to recording grerarl sees. It is considneed is on calendar year basis. Cosmcoditirs cover primaxry goods (e.g. sgoaroase to be 'daily' if it appears at least fear rises awveeb. insttmad of euger) slich are edible end contain nuscients (0.0. coffee sod Ciena= Annual Atrendasce oer Cacita oreOrYar-DEased non the susber of tea are excluded). Ag gestate prodoction of ouch country is based 00 tichots sold during the year, including admissIons to seine-is tisema- national average producer price eights 1961-65 1970, and 197 data d obil it oer cuotta suarlv of calories (cercent of reciretohnta) - Computed from an = e un t. eneorgyequivalest of net food supplies acailable in coontry per toapita hABORn FORCE pee day. Avstlahle supplies oamprin domestic production, isprts lean Total Labor Force (thousands) - tono=itally active perstes d incltding exports, end changes in stock. Net supplies exclude animal read, seeds, armed forces and unemployed boo exoluding housewives, students, eto. qoanotetats used in food processing, and lotses is distribution. Reqoire- Definitions in varioun countries are rot cosporoahle; 19E60 1971 sand sects were estimated by Pit based on physiologinal needs for narul act- 1975 d viry and hlealth considsring eeviroomental tesperarure, body weights, age Fematle (ceeceot) - Fem Iaher fac en preag of ctaJtl labor forte. and sen distribution of populatio, and alloring 10 percent foe wuote at -er tur (cceni) - l aor forcs ht adt aI household level; 1961-65, 1970, and 1977 dotea fishing an percentag of total labor force; i960, 1970 and 1978 data For capita sucely of protein (grams per day) - Protein content of pee ca pine Indausec (percent) - Lahor force is mining, construction, masufattutiug set supply of food per day. Not sapply of food is defined at above, to- and electricity, netor and gas as percentage of total labor force; 196D, quiroarots for all countries established by USDA provide for minimum 1970 and 1978 dae allowance of 60 grams of ttotl protein yer day aol 20 gesms of suinatl end Participation Rato (percent) - total, male, end female - Paritiipation or pulse ororeo, of which 10 grams should he anital protein. Theeestand- activity rates are .omputed as total, sale, and female lebor forts as and- are loser than those of 75 gras of total preteSt and 2) grana of percentaget of total, malle and fele populotion of slI sages respectively; aeal pro tein aa as evernge fee the world, proposed by FAt in the Third 1960, 1970, ead 1975 data, Tbds are OLD's participatIon rtes eflatlg Uorld Pond Darmey; 1961-65 1970 und 1977 dana. age-se of tir Pee carita prental surely from ae-tmal end pulse - Protein supply of food de- ae-se tc W t outn ,n lge A Y~~~~~~~~~~~~~~~~~b-aePaefo ntoa 1nurte.. rived trama asials and pulses to grams per day; 1961-65, 1970 und 1977 data. Economic Derendency Rttnio - Ratio of population under 15 and 65 *nd svees Child (agee 1-4,) Mortality Rote (per thousand) - Annual deaths per thossapd in to the total labor forcee age group 1-, years, to cbildren in this age group; for mast developing coos- trier data derived from lots tables; 1960, 1970 end 1977 data. INCObE DISTRIDUTION EEALT2 Peecantage of Private tucose (both is cash asd tied) - Itteived by riobest LifeaEst ctascya s ( ) - A g Y. o7 yatoff Snig pel, richest 2 percent, pooest 2D percent end poorest IS pertent Infant iMortality Rate (Per thansend) - Annual deaths of infants under ode oer POttTf TAEIST OUPS of age per theusd ive births tsttmated Ahsolute Poverty Income level (01$ cer 00pita) - urban and rural- Access to S -f Migu ..r (percent of Ropulation) - total. urban, ad rural - No Absolote poverty lienie level is that income level beltw which a misimal Namtber of people (renal, urban, sand rural) wtith reaosoable access to safea nutritionallyeadequate diet plus essential use-food reet;uiresasten is eno water supply ( includes treated surfaen wators or untreated hut anronsamcinatad affordabe water such as that foomt protecned bsmebelaa, springs, aad seantatry wells) as Estimated tolarive Povarto ICeome Level (11$ per oaeita) - urhtam tad rsral - perceotagoa of their respective popaunaionse Esnoa rham aresaapublic tural relative poverty inceee level is one-third of ave rage pee ea pita fountain or satndpnen loeamed sot mere rhas 2OS meters fromu a housee may he prsalicmofteoury OusevlIdrve:fnsheel conaidered as being with is reasonableo acoesa of thatt house. In rural areas leveonl incot t adjuthes founryg cs ofba living is aeheaeero he ura reasonable accets svold imtply that the bousonife or seahern of the leasehold Etuimatsd Pocalarirn Doeso Ahsolute Poverty Osreme Level (rercttst) - urbon do nt have to speed a disproportionate part of the day in fetoting the and rural - Percent of populotion (urban aed rorol) vat are "tihYluta pas". metess to lEotresa Disaosal (rarneaqt of kooulatioa.- tota 1 ham -- and rural - Nusher of poople (esatal, urbun, and rural) earmad hyssoreta diaposal as percentages of their reepeotive popolationsa georeta dia- Econodio and Social Dlata Dt!aisio poass nay include the collection and disposal, with or wtthnut treatment fcoogemic Anal ysis and Projectiosxt Departssnt of homo sooreto a ad wasearmater bY water-horse systems or the use of Ortober 1990 pin privies and eimllae tuseallttio ss  ANNEX I Page 4 of 5 ICONCIEC DRVWIWPMINT DAlh GNP PER CAPITA IN 1978: ISS 0IS GROSS NATIONAL PRODUCT IN 197S/79 ANNUAL RATE OF SROWTH 1%. constant Prices) US$ Bln. 7, 1955156-1959/60 1960/61-1964/65 1965/66-1969/70 1970/71-1974175 1975/76-1977/78 GNP at Market Prices 117.08 100.0 3.7 3.6 3.7 2.8 5.6 Gross DoIenetio Investment 28.28 24.2 Gross National Saving 28.11 24.0 Current Account Balance d/ 0.50 0.4 OUTPUT. LABOR FORCE AND PRODUCTIVITY IN 1971 Val.e Added (at factor cost) Labor Porte V.A. Per Worker USS Bln. % Nil. % ASS L of National Average Agriculture 24.5 46.6 130.0 72.1 188 64 Industry 11.8 22.3 20.2 11.2 582 199 Services 16.3 31.1 30.2 16.7 542 186 Tot-l/average 52.6 100.0 180.4 100.0 292 100 GOVERNKENT FINANCE S/ General Goverment Central Goveroment Ra Bln f Z s.o.f GDP RI 871n 197/ 1974/75-1978/7i9 71 ofGD Current R.ecipts 183.65 19.1 18.3 107.71 11.2 10.6 Current enpenditures 177.26 18.4 16.7 108.99 11.3 10.1 Current Surplus/Deficit 6.41 0.7 1.6 - 1.28 -0.1 0.5 Capital Expenditures f/ 78.41 8.1 7.2 57.34 6.0 5.1 Enternal Assistance (net) d/ 8.15 0.8 1.4 8.15 0.8 1.4 MONEY, CREDIT AND PRICES 1970/71 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 September 1978 SesteMber 1979 (Rs Billion outtanding at end of pertod) Money and Quasi Money 121.4 198.4 220.3 254.7 308.9 370.4 445.6 398.5 473.7 Bank Credit to Government (net) 52.6 87.3 95.3 101.1 110.2 134.7 153.9 139.5 161.7 B.nk Credit to Co-mierial Sector 64.6 107.0 126.7 153.9 185.1 212.2 253.3 225.8 273.8 (Percentage or Index Numbers) January 1979 January 1980 Money and Quasi Money as 2 of GDP 30.1 33.5 31.5 34.5 38.8 41.5 46.3 Wholesale Price Index (1970/71 - 100) 100.0 139.7 174.9 173.0 176.6 185.8 185.8 185.3 224.0 Annual percentage changes in: Wholesale Price Index 7.7 20.2 25.2 - 1.1 2.1 5.2 - 0.4 20.9 Rank Credit to Government (net) 10.8 12.3 9.2 6.1 9.0 20.2 14.3 16.9 15.9 Bank Credit to Commercial Sector 19.4 22.6 18.4 21.5 20.3 14.6 19.4 15.6 21.3 _/ The per capita GNP ostimate is at market pricen, calculated by the conversion technique used in the World Bank Atlas, 1979. All other conver-ions to dollarn in this table are et the overage exchange rate prevailing daring the period covered. bl Quick Estimates. El Computed from trend line of GNP at f-cto- coat serina, including one obherv-tion before first year and one obsery-tion after last year of listed period. d/ World Bonk estim tee; not necessarily consistent with official figures. e/ Transfers between Centre and States have been netted out. f/ All Inane and advances to third parti.a havs bean -ntted out.  ANNEX I Page 5 of 5 BALANCE OF PAYNINS 1976/77 1977/78 1978/79 h 1979/80 M HERCIMNISE EXPORTS (AVERAGE 1975/76 - 1978179) US$ KIn. X Exports of Goods 5,753 6,315 6,976 7,800 Engineering Goods 671 11 Imports of Goods -5,928 -7,188 -8,488 -11,000 Tea 420 7 Trade Balance - 175 - 873 -1,512 -3,200 Gems 499 8 NFS (net) 379 692 882 1,050 Clothing 378 6 Leather and Leather ,ource Balance 204 - 181 - 630 -2,150 Product. 319 5 Jute Manufactures 251 4 Interest Payments (net) _/ -182 - 89 130 400 Iron Ore 270 5 Other Factor Payments (net) - - - - Cotton Textiles 248 4 Net Transfers j/ 695 1,077 1,000 1,000 Sugar 224 4 - Others 2,649 45 Balance on Current Account 717 807 500 -750 otal 2,649 45 Total 5.929 100 Official Aid Disbursements 1,955 1,628 1,695 1,870 EXTIERNIL DEBT. MAIRCH 31. 1979 Amortization -560 -645 -702 - 687 US$ billion Transactions with 1MF -337 -330 -158 - Outstanding and Disbursed 15.5 All Other Items -200 616 199 - -183 Undisbursed 5.2 Outstanding, including 20.7 Increase in Reserves () -1.575 -2,076 -1,534 - 250 Undisbursed Gross Reserves (end year) 3,747 5,823 7,357 7,607 h/l/ Net Reserves (end year) k/ 3,276 5,668 7,357 7,607 DEBT SERVICE RATIO FOR 1978/79 15.0 percent Fuel and Related Materials IBRD/IWA LENDING, DECEMBER 31. 1979 Imports 1,581 1,811 2,043 4,050 USS million of which: Petroleum 1,581 1,811 2,043 4,050 IBRD LID Exports 37 32 24 - Outstanding and Disbursed 689 4,286 of which: Petroleum 21 18 n.e. Undisbursed 614 2,621 Outstanding, including 1,303 6,907 Undisbursed RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 - Bs 7.5 Re 1.00 - US$0.133333 Mid-December 1971 to end-June 1972 US$1.00 - Bs 7.27927 Rs 1.00 - US$0.137376 After end-June 1972 Floating Rate Spot Rate end-December 1978 US$1.00 - Re 8.188 Rs 1.00 - U8$0.122 End-December 1979 US$1.00 - Rs 7.907 Re 1.00 - US$0.126 h/ Estimated. T/ Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to DIF, and major receipt is interest earned on foreign assets. j/ Figures given include workers' remittances but exclude official grant assistance, which is - included within official aid disbursements. k/ Excludes net use of IMF credit. 1/ Amortization end interest payments on foreign loans as a percentage of merchandise exports.  ANNEX II Page 1 of 20 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of January 31, 1981) US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 43 Loans/ 1,313.2 65 Credits fully disbursed 3,807.4 342-IN 1972 India Education -- 12.0 4.47 378-IN 1973 India Karnataka Agricultural Markets -- 8.0 1.12 390-IN 1973 India Bombay Water Supply I -- 55.0 1.87 456-IN 1974 India HP Apple Processing & Marketing -- 13.0 6.43 1011-IN 1974 India Chambal (Rajasthan) CAD 52.0 -- 14.83 482-IN 1974 India Karnataka Dairy -- 30.0 19.56 502-IN 1974 India Rajasthan Canal CAD -- 83.0 31.32 521-IN 1974 India Rajasthan Dairy -- 27.7 14.36 522-IN 1974 India Madhya Pradesh Dairy -- 16.4 6.17 526-IN 1975 India Drought Prone Areas -- 35.0 2.29 1079-IN 1975 IFFCO IFFCO Fertilizer 109.0 -- 1.24 1097-IN 1975 ICICI Industry DFC XI 94.8 -- 1.32 532-IN 1975 India Godavari Barrage Irrigation -- 45.0 4.81 541-IN 1975 India West Bengal Agric. Development -- 34.0 9.22 562-IN 1975 India Chambal (Madhya Pradesh) CAD -- 24.0 2.05 572-IN 1975 India Rural Electrification I -- 57.0 .04 585-IN 1975 India Uttar Pradesh Water Supply -- 40.0 17.37 598-IN 1975 India Fertilizer Industry -- 105.0 35.16 604-IN 1976 India Power Transmission IV -- 150.0 60.16  ANNEX II Page 2 of 20 US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 609-IN 1976 India Madhya Pradesh Forestry T.A. -- 4.0 1.71 610-IN 1976 India Integrated Cotton Development -- 18.0 11.61 1251-IN 1976 India Andhra Pradesh Irrigation 145.0 90.34 1260-IN 1976 India IDBI II 40.0 16.13 1273-IN 1976 India National Seeds I 25.0 -- 23.14 1313-IN 1976 India Telecommunications VI 80.0 -- 21.98 1335-IN 1976 India Bombay Urban Transport 25.0 -- 8.25 680-IN 1977 India Kerala Agric. Development -- 30.0 25.15 682-IN 1977 India Orissa Agric. Development -- 20.0 12.00 685-IN 1977 India Singrauli Thermal Power -- 150.0 67.31 687-IN 1977 India Madras Urban Development -- 24.0 9.47 690-IN 1977 India WB Agric. Exten- sion & Research -- 12.0 12.00 1394-IN 1977 India Gujarat Fisheries 14.0 -- 11.18 712-IN 1977 India Madhya Pradesh Agric. Dev. -- 10.0 6.94 720-IN 1977 India Periyar Vaigai Irrigation -- 23.0 14.68 728-IN 1977 India Assam Agricultural Development -- 8.0 6.87 736-IN 1977 India Maharashtra Irrigation -- 70.0 39.26 737-IN 1977 India Rajasthan Agricul- tural Extension -- 13.0 9.49 740-IN 1977 India Orissa Irrigation -- 58.0 39.11 1475-IN 1977 ICICI Industry DFC XII 80.0 --- 15.27 747-IN 1978 India Second Foodgrain Storage -- 107.0 85.53 756-IN 1978 India Calcutta Urban Development II -- 87.0 37.29 761-IN 1978 India Bihar Agric. Extension & Research -- 8.0 7.33  ANNEX II Page 3 of 20 US$ million Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 1511-IN 1978 India IDBI Joint/Public Sector 25.0 -- 21.17 1549-IN 1978 TEC Third Trombay Thermal Power 105.0 -- 79.66 788-IN 1978 India Karnataka Irrigation -- 117.6 88.01 793-IN 1978 India Korba Thermal Power -- 200.0 161.27 806-IN 1978 India Jammu-Kashmir Horticulture -- 14.0 13.79 808-IN 1978 India Gujarat Irrigation -- 85.0 73.23 815-IN 1978 India Andhra Pradesh Fisheries -- 17.5 16.08 816-IN 1978 India National Seeds II -- 16.0 15.58 1592-IN 1978 India Telecommunications VII 120.0 -- 56.35 824-IN 1978 India National Dairy -- 150.0 135.44 842-IN 1979 India Bombay Water Supply II -- 196.0 189.33 843-IN 1979 India Haryana Irrigation -- 111.0 59.81 844-IN 1979 India Railway Modernization & Maintenance -- 190.0 154.33 848-IN 1979 India Punjab Water Supply & Sewerage -- 38.0 27.12 855-IN 1979 India National Agricultural Research -- 27.0 26.21 862-IN 1979 India Composite Agricultural Extension -- 25.0 20.47 871-IN 1979 India NCDC -- 30.0 19.90 1648-IN 1979 India Ramagundam Thermal Power 50.0 -- 50.00 874-IN 1979 India Ramagundam Thermal Power -- 200.0 176.70 889-IN 1979 India Punjab Irrigation -- 129.0 112.29 899-IN 1979 India Maharashtra Water Supply 48.0 47.21 911-IN 1979 India Rural Electrification Corp. II 175.0 151.91 925-IN 1979 India Uttar Pradesh Social Forestry -- 23.0 21.32  ANNEX II Page 4 of 20 US$ miLlllon Loan or (Net of Cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed 947-IN 1979 India ARDC III -- 250.0 145.98 963-IN 1979 India Inland Fisheries -- 20.0 20.00 954-IN 1979 India Maharashtra Irrigation II -- 210.0 192.52 961-IN 1979 India Gujarat Community Forestry -- 37.0 34.03 981-IN 1980 India Population II -- 46.0 45.97 1003-IN 1980 India Tamil Nadu Nutrition -- 32.0 32.00 1004-IN 1980 India U.P. Tubewells -- 18.0 17.52 1011-IN 1980 India Gujarat Irrigation II -- 175.0 175.00 1027-IN 1980 India Singrauli Thermal II -- 300.0 289.17 1012-IN 1980 India Cashewnut -- 22.0 21.95 1028-IN 1980 Indla 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 54.00 1046-IN 1980 India Rajasthan Water Supply and Sewerage -- 80.0 79.88 1843-IN 1980 ICICI Industry DFC XIII 100.0 -- 94.87 1887-IN 1980 India Farakka Thermal Power 25.0 -- 25.00 1053-IN 1980 India Farakka Thermal Power -- 225.0 225.00 1897-IN 1980 India Kandi Watershed and Area Development 30.0 -- 30.00 1072-IN 1980 India Bihar Rural Roads -- 35.0 35.0 1078-IN* 1980 India Mahanadi Barrages -- 83.0 83.00 1925-IN* 1980 India Bombay High Offshore Development 400.0 -- 400.0 1082-IN* 1981 India Madras Urban Dev. II -- 42.0 42.0 Total 2,833.0 8,671.6 of which has been repaid 1,060.9 71.7 Total now outstanding 1,772.0 8,599.9 Amount Sold 133.8 of which has been repaid 128.1 5.7 Total now held by Bank and IDA 1/ 1,766.3 8,599.9 Total undisbursed (excluding*) 560.7 3,546.2 * Not yet effective 1/ Prior to exchange adjustment.  ANNEX II Page 5 of 20 B. STATEMENT OF IFC INVESTMENTS (As of January 31, 1981) Amount (US$ million) Fiscal 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 1.1 8.6 1981 Tata Iron and Steel Company Ltd. 38.0 - 38.0 TOTAL GROSS COMMITMENTS 99.1 11.5 110.6 Less: Sold 25.9 1.7 27.6 Repaid 20.8 - 20.8 Cancelled 6.2 1.3 7.5 Now Held 46.2 8.5 54.7 Undisbursed 44.5 1.1 45.6  ANNEX II Page 6 of 20 C. PROJECTS IN EXECUTION 1/ Generally, the implementation of projects has been proceeding rea- sonably well. Details on the execution of individual projects are below. The level of disbursements was US$729 million in FY80, compared to US$538 million in the previous year. Disbursements in the current fiscal year through January 31, 1981 totalled US$373 million, representing an increase of about 20% over the same period last year. The undisbursed pipeline of US$4,107 million as of January 31, 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 Project; 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 Corpora:ion 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, L980; 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. Loan 1097 is fully committed and disbursements are slightly ahead of schedule. Disbursements under Loans 1475 and 1843 are also ahead of schedule. Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10. 1976; Closing Date: June 30, 1981 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 bal- anced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 7 of 20 Loan No. 1511 IDBI Joint/Public Sector Project; US$25.0 million loan of March 1, 1978; Effective Date: May 31, 1978; Closing Date: March 31, 1983 Loan 1260 is designed to assist the Industrial Development Bank of India in promoting small- and medium-scale industries and in strengthening the State Financial Corporations involved. Loan 1511 is designed to encourage the pooling of private and public capital in medium-scale joint ventures. The project also assists IDBI in carrying out industrial sector investment studies and in strengthening the financial institutions dealing with the state joint/public sector. 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 1985, as a result of delays in the employ- ment of consultants and the longer time required for the preparation of technical specifications and tenders and the construction itself. The project is currently under review by the Government of India and some changes to its scope may be made in April 1981. 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  ANNEX II Page 8 of 20 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 Both projects are progressing satisfactorily, although as of July 1980, when they were last reviewed, imports of electronic switching equipment for the sixth project were behind schedule, resulting in a reduced growth rate for the installation of direct exchange lines. Insti- tutional improvements envisaged under the projects have been achieved, and the financial situation of the Posts and Telegraphs Department: remains sound. Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1981 Credit 598 is designed to increase the utilization of existing fertilizer production capacity. The project has encountered delays in sub-project preparation and investment approvals by the Government. Further, some of the sub-projects identified earlier may not materialize because of reconsideration by the Central and State governments. IDA has agreed to a list of sub-projects to replace the ones that are likely to be dropped. Because of the above, the project is likely to be delayed by about 18 months. Cr. No. 378 Karnataka Wholesale Agricultural Markets Project:; US$8.0 million credit of May 9, 1973; Effective Date: September 7, 1973; Closing Date: June 30, 1981 Progress is satisfactory. As of December 1980, construction of the 39 markets originally envisaged under the project was almost completed, and trade had shifted to more than half of these. An additional eight markets have been included in the project at the request of the State government, and these are expected to be completed by June 1981. The credit is expected to be fully disbursed by the closing date of June 30, 1981.  ANNEX II Page 9 of 20 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 universi- ties 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 Director and others responsible are aware of the constraints and are supporting efforts to remove them. Cr. No. 390 Bombay Water Supply and Sewerage Project; US$55.0 million credit of January 22, 1974; Effective Date: March 13, 1974; Closing Date: June 30, 1981 Cr. No. 842 Second Bombay Water Supply and Sewerage Project; US$196.0 million credit of November 13, 1978: Effective Date: June 12, 1979; Closing Date: March 31, 1985 Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38.0 million credit of October 27, 1978; Effective Date: January 25, 1979; Closing Date: March 31, 1983 Cr. No. 899 Maharashtra Water Supply and Sewerage Project; US$48.0 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 Having overcome earlier difficulties, including cost overruns caused by inflation (requiring project redefinition in February 1975), redesign of major project components and the addition of a supplementary study on sewage disposal, Credit 390 is now progressing satisfactorily. The water treatment works were successfully completed on schedule at the end of 1979. Completion of construction of the project sewerage works is scheduled for mid-1980. Financial performance of the project entity is satisfactory. Implementation of Credit 842, a second stage of the ongoing Credit 390, is proceeding to schedule. Preliminary work in connection with implementation of Credit 848 is progressing satisfactorily. Imple- mentation of Credit 1046 is proceeding satisfactorily. Detailed  ANNEX II Page 10 of 20 construction programs have been prepared for rural schemes, and prepara- tion 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: June 30, 1981 The Project has had a slow start due to delays in the preparation of technical reports for regional and local water authorities and in the engagement of consultants. While improvements have been made i n the phy- sical execution, other aspects of project implementation continiue 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 consul- tants' 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 Physical progress is generally satisfactory and costs are within appraisal estimates on most components. However, land acquisition prob- lems 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. 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 assis- tance is being sought to strengthen financial management and analysis. Cr. No. 482 Karnataka Dairy Development Project; US$30.0 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982  ANNEX II Page 11 of 20 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 coopera- tive societies (DCS) have been established under the three state projects (Karnataka-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. Cr. No. 532 Godavari Barrage Project; US$45.0 million credit of March 7, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1981 Both the civil works and equipment tenders have been awarded after international competitive bidding. Work is proceeding satisfactorily. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52.0 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 1078 Mahanadi Barrages Project; US$83 million credit of December 5, 1980; Effective Date: February 11, 1981; Closing Date: March 31, 1987 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  ANNEX II Page 12 of 20 Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project; US$24.0 million credit of June 20, 1975; Effective Date: September 18, 1975; Closing Date: June 30, 1981 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Prolect; 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 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possi- ble, to use water savings for bringing additional areas under irrigation.  ANNEX II Page 13 of 20 Canal lining and other irrigation infrastructure, drainage, and land shap- ing are prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory with the exception of the Periyar Vaigai Project (Cr. 720-IN) where cost overruns have occurred due to sub- stantial increases of both quantities and unit cost over the original engineers' estimates. Specific efforts are now underway to redesign this project so that it can still achieve its original objectives. Difficul- ties had also arisen earlier in connection with the Nagarjunasagar com- ponent of Loan 1251, where water losses proved to be higher than antici- pated. Additional assurances have been obtained from the State Government concerned, regarding the enforcement of cropping patterns and the sequence and timing of main canal construction and lining, which should ensure that this project will also achieve its objectives. Cr. No. 541 West Bengal Agricultural Development Project; US$34.0 million credit of April 28, 1975; Effective Date: August 28, 1975; Closing Date: March 31, 1981 The progress of shallow tubewells is well ahead of the appraisal schedule, but progress in all other areas is slow. The project is not expected to be fully disbursed by the closing date, and GOI's request for an extension is expected. Cr. No. 682 Orissa Agricultural Development Project; US$20.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12.0 million credit of June 1, 1977: Effective Date: August 30, 1977; Closing Date: September 30, 1982 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  ANNEX II Page 14 of 20 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 These eight credits finance the reorganization and strengthening of agricultural extension services and the development of adaptive research capabilities in nine States in India. In areas where the reformed extension system is in full operation, field results have been very good, both in terms of adoption of new agricultural techniques and of increased crop yields. In Rajasthan, Assam, 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 organiza- tional principles underlying 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 Blihar, 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 Karnataka, all covered under the Composite Agricul- tural Extension Project, important early administrative and financial steps have been taken to pave the way for effective operation of the reor- ganized extension system and field work is off to a good start. In Kerala, project implementation has just begun. 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. Com- mitment of funds to research subprojects is proceeding satisfactorily, although corresponding disbursements may lag somewhat behind ithe original estimates. Additions to the staff of the Project Unit have been made to expedite further progress under the project.  ANNEX II Page 15 of 20 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 dry- land farming components show particular promise for the drought-prone areas. Cr. No. 680 Kerala Agricultural Development Project; US$30.0 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 Project implementation started slowly due to initial staffing and funding delays. The project has now gained momentum and the planting operations, 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 As of October 1980, when the project was last reviewed, construc- tion of godowns was progressing well in the States of Haryana and Uttar Pradesh, although some delays had occurred in the State of Orissa. Con- sultants had been recruited to assist NCDC and State Cooperative Banks in strengthening their institutions, although some consultants were yet to be recruited in Haryana. Disbursements have been progressing well and are now ahead of the appraisal targets. Cr. No. 844 Railway Modernization and Maintenance Project; US$190.0 million credit of November 13, 1978; Effective Date: January 10. 1979; Closing Date: December 31, 1984 Credit 844 was designed to help the Indian Railways reduce manufacturing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. The project is still at an early stage of implementation but is progressing satisfactorily. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26, 1976; Effective Date: May 17, 1976; Closing Date: December 31, 1981 A feasibility study financed under this Credit and completed in November 1979 has recommended the establishment of two mills, one for sawnwood and one for pulp, as the basis of the development of a forest- based industry in Bastar district.  ANNEX II Page 16 of 20 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 Cr. No. 961 Guiarat 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 Proiect; 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 pro- cessing 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: Tune 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 organiza- tional 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  ANNEX II Page 17 of 20 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 November 1980. However, delays in construction of new workshop facilities have been more substantial and will not be fully recoverable. As a result, the loan closing date has been extended by three years. Traffic management civil works are also somewhat behind schedule, although now proceeding satisfactorily. Project implementation under Cr. 1033 is proceeding satisfactorily, a good start having been made on the important early procurement steps. 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 these projects were last reviewed, the harbor construction works at Mangrol and Veraval in Gujarat had encoun- tered delays, although the problem with shortages of cement supplies had been overcome. In Andhra Pradesh, the harbor works at Visakhapatnam, Kak- inada and Nizampatnam were under way and the pace of implementation had increased at all three sites. Cr. No. 963 Inland Fisheries Project; US$20 million credit of January 18, 1980; Effective Date: May 5, 1980; Closing Date: September 30, 1985 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. Site selection and hatchery design work is under way.  ANNEX II Page 18 of 20 Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 28. 1977; Closing Date: December 31, 1983 Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit of May 12, 1978; Effective Date: August 14, 1978; Closing Date: March 31, 1985 Ln. No. 1549 Third Trombay Thermal Power Project; US$105.0 million loan of June 19, 1978; Effective Date: February 8, 1979; Closing Date: March 31, 1984 Ln. No. 1648 Ramagundam Thermal Power Project; US$50.0 million loan and and Cr. 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: June 30, 1981 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 feed- ing power into an interconnected grid. Credit 793 supports the construc- tion of the first three 200 MW generating units at the second such sta- tion, at Korba, together with related facilities and associated transmis- sion. 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 M.W 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 ther- mal power projects are progressing satisfactorily. For Singrauli and Korba, construction works are on or ahead of schedule, although some slip- page has occurred in the implementation schedule for the Ramagundam pro- ject.  ANNEX II Page 19 of 20 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 This project provides continued support to the Rural Electrifica- tion Corporation's lending program, and is helping to finance about 1,700 rural electrification schemes in fourteen State Electricity Boards (SEB), including the newly participating Uttar Pradesh SEB. The project is pro- gressing satisfactorily. Ln. No. 1925 Second Bombay High Offshore Development Project; US$400.0 million loan of December 11, 1980; Expected Effectiveness Date: March 13, 1981; Closing Date: March 31, 1984 The project is progressing satisfactorily. 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 Implementation is proceeding satisfactorily on this project.  ANNEX II Page 20 of 20 Cr. No. 1034 Karnataka Sericulture Project; US$54 million credit of October 27, 1980; Effective Date: December 18, 1980 Closing Date: December 31, 1985 Project implementation is proceeding well with encouraging pro- gress in all components.  Annex III Page 1 of 2 INDIA EIGHTH TELECOMMUNICATIONS PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken by the country to prepare the project Program and project planning is a continuous process in telecommunications in India. (b) The agency which prepared the prolect Telecommunications Branch, Posts and Telegraphs Department (c) Date of first presentation to the Bank and date of the first mission to consider the proJect May 1979 (d) Date of departure of appraisal mission June 30, 1980 (e) Date of completion of negotiations February 9, 1981 (f) Planned date of effectiveness June 1981 Section II: Special Bank Implementation Actions None Section III: Special Conditions (a) GOI would establish suitable subsidiary loan agreements with each of the three factories (ITI, HCL, HTL), as a condition of effectiveness (paragraph 60).  Annex III Page 2 of 2 (b) P&T would maintain its telecommunications tariffs at a level adequate to achieve an annual rate of return of at least 11 percent on the average net value of its fixed assets in operation (paragraph 67). (c) P&T would continue to revalue, on a memorandum basis, its telecommunications assets in a manner acceptable to the Association, and periodically review the adequacy of depreciation rates for the purpose of calculating rate of return (paragraph 67).   ,LX~~~~~~~~ ~~~~ ~INDIA DEMOCRATIC %N REPUBLIC TELECOMMUNICATIONS OF AFGHANISTAN ~~~ U,A~~AAA~A Coaxial and Microwave Systems EXISTING UNDER'I PLANNED 3 \OAAMop~~~~~~~~~~~~or ~ ~ ~ ~ CO~~~NSTRUCT[C PA K-I--T-A N I PAKISTAN / LXMRXMqMIMLO~Y' B UTAN OAMO..O C~~~~~~~~~~~~~~~~~~~~ MA~~~~~~~~AAMM~~~.. T NOVA CCLXI COOLA C'~J.- A- 00"~~~~~ 00508CC MACDIX C ZAMA~~~~~~~~~~~~~~~~~~..A- ALCOMO sooojo~~2\ >~ PA r<-fl/7~ ) v AAAO\ \MALAABURM -I ~ ~ ~ ~ ~ ~ ~ A I-A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- LOCCOOMACA C SRI LANKA