India - Krishna - Godavari Petroleum Exploration Project

FEPY1 Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-3386-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$165.5 MILLION To INDIA FOR THE K-RISHNA-GODAVARI PETROLEUM EXPLORATION PROJE September 16, 1982 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.  I CURRENCY EQUIVALENTS (as of September 9, 1982) US$1 Rs 9.648358 Rs 1 = US$0.103644 Rs 1 million = US$103,644 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 9.0, which represents the projected average exchange rate over the disbursement period. FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS D-P - Dynamically-Positioned GOI - Government of India OIDB - Oil Industry Development Board OIL - Oil India Ltd. ONGC - Oil and Natural Gas Commission  FOR OFFICIAL USE ONLY INDIA KRISHNA-GODAVARI PETROLEUM EXPLORATION PROJECT LOAN AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiary: Oil and Natural Gas Commission (ONGC). Amount: US$165.5 million, including capitalized front-end fee. Terms: Repayment over 20 years, including 5 years of grace, at an interest rate of 11.6% per annum. Relending Maturity not to exceed 20 years, including 5 years of Terms: grace, at an interest rate of 12% per annum. GOI would bear the foreign exchange risk. Project The project would assist ONGC to establish the commercial Description: potential of hydrocarbon reserves within part of the Krishna-Godavari basin and further enhance ONGC's overall technical capability in petroleum exploration in complex geological and environmental conditions. The project would aim at: (i) improving the definition of onshore and offshore petroleum prospects through additional seismic surveys; (ii) accelerating ONGC's onshore and offshore exploratory drilling programs in the project area; and (iii) providing technical assistance in the drilling, testing and completion of deep high-pressure gas wells and drilling in the outer shelf and, as required, for improv- ing the quality control of geophysical data acquisition and processing. While the exploration of the area presents significant technical challenges, prospects for establishing substantial commercial petroleum resources are reasonably high. The risks will be mitigated through careful preparation and limitation of deep water drilling, and through the employment of consultants to advise on drilling and testing deep, high-pressure formations and to assist in supervising outer shelf drilling operations, as well as provide periodic reassessments of exploration results. This document has a restricted distribution and may be used by recipients only in the performance of t,Qeir official duties. Its contents may not otherwise be disclosed without World Bank authorization.|  -il- Estimated Cost: (US$ millions) Onshore Local Foreign Total Seismic Surveys and Data Processing 4.1 3.1 7.2 Well Drilling 40.3 58.6 98.9 Technical Assistance 1.6 2.7 4.3 Sub-total 46.0 64.4 110.4 Offshore Seismic Surveys and Data Processing 3.7 15.1 18.8 Well Drilling 63.2 207.3 270.5 Technical Assistance 4.0 6.6 10.6 Sub-total 70.9 229.0 299.9 Taxes and Duties 70.2 - 70.2 Base Cost Estimate 187.1 293.4 480.5 Physical Contingencies 25.8 66.7 92.5 Price Contingencies 22.0 36.4 58.4 Sub-total 47.8 103.1 150.9 Total Project Cost 234.9 396.5 631.4 Front End Fee on IBRD Loan - 2.4 2.4 Total Financing Required 234.9 398.9 633.8 Z==== 1====S m^  -iii- Financing Plan for ONGC's Investment Rs Million US$ Million Program 1982/83-1985/86 ONGC Internal Sources 82,720.0 9,191.0 Long Term Borrowings: 1/ 32,639.0 3,627.0 of which IBRD 2/ (4,086.0) (454.0) Commercial and GOI 3/ (28,553.0) (3,173.0) GOI Equity Contributions and OIDB Grants 147.0 16.0 Total Financing 115,507.0 12,834.0 Estimated (US$ millions) Disbursements: FY83 FY84 FY85 FY86 Annual 40.0 4/ 68.0 53.0 4.5 Cumulative 40.0 108.0 161.0 165.5 Rate of Return: Not applicable. Appraisal Report: No. 3887a-IN, dated September 10, 1982. 1/ Includes loans approved and those under consideration 2/ Estimated disbursements under loans committed and under consideration. 3/ GOI loans would be needed only to the extent commercial loans will be insufficient to cover the remaining financing requirements. 4/ Including front-end fee of US$2.4 million.  I  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE KRISHNA-GODAVARI PETROLEUM EXPLORATION PROJECT 1. I submit the following report and recommendation for a proposed loan to India in an amount equivalent to US$165.5 million to help finance the foreign exchange costs of a petroleum exploration project in the Krishna-Godavari-basin in eastern India. Amortization would be over 20 years, including 5 years of grace, at an interest rate of 11.6% per annum. The proceeds of the loan would be onlent to the Oil and Natural Gas Commission (ONGC) at 12% per annum, for a term not exceeding 20 years, including 5 years of grace. The foreign exchange risk would be borne by the Government (GOI). PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (3872-IN, dated April 7, 1982), was distributed to the Executive Directors on April 19, 1982. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 700 million (in mid-1982) and an annual per capita income of US$240. Economic growth has been slow in the past, averaging about 3.6% per annum over the past 30 years. The economy is dominated by agriculture which employs more than two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those with little or no land. Consequently the latter have only an insecure grasp on the means of ex:Lstence. Growth of value-added in agriculture -- 2.3% per annum over the past 30 years -- has been slower than growth of industrial value-added (5.0% per annum). As a result, there has been a gradual decline in the share of agriculture in GDP (at factor cost measured in 1970/71 prices) from 60% to about 40%, while the share of industry rose from 15% to around 24%,. But industrialization has not been rapid enough to absorb the growing labor force, or to bring about a rapid economic transformation, wilth significantly higher productivity and income levels. 4. Nevertheless, there has been steady progress on several fronts. In the face of a large and rapidly growing population, India has been able to increase agricultural output faster than total population while eliminating persistent dependence on foodgrain imports. Savings and 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Subernarekha Irrigation Project (No. P-3375-IN), dated July 28, 1982.  -2- investment have increased markedly since 1950/51: gross domestic savings more than doubled from 10.8% of GDP (at factor cost) to 24.8%, while gross domestic investment rose from 12.5% of GDP to 26.2%. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20% was reached during the early 1960s; for a few years in the late 1970s, surpluses arose, and at the present time, foreign savings are about 10% of investment. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP, and was less than 1% at the end of the 1970s. 5. Before the 1970s, India placed relatively less emphasis on export promotion and more on import substitution. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.5% per annum, only marginally higher than the volume growth of imports over the same period. In the early to mid-1970s, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.6% per annum for the 1970s as a whole, a performance which demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. 6. Moving into the second half of the 1970s, the Indian economy was buoyed by relatively rapid export growth and an expanding level of foodgrain output, which culminated in a record 132 million tons of foodgrain production in 1978/79. As a result, growth in real GDP, agricultural and industrial value-added, substantially exceeded the historical 30-year trends (paragraph 3). In 1979/80, however, this momentum was broken when the worst drought in recent years, combined with a doubling of international oil prices and domestic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a large trade deficit. Severe inflationary pressures also emerged after several years of virtual price stability. The impact of these setbacks is still being felt in the Indian economy, particularly in the balance of payments, and adjustments will be needed for some years to come. However, the short-term recovery process is almost completed and the economy has regained its growth momentum. Recent Trends 7. In 1980/81, the economy substantially recovered with real GDP growing by 7.5%. While industrial output expanded by 4%, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15%. Increased foodgrain production, along with judicious use of Government buffer stocks built up in earlier years, also helped moderate price rises. Inflation remained a serious problem with the annual average wholesale price index rising 18%, although the second half of the year provided clear evidence of a deceleration in inflation. 8. 1981/82 was a year of solid growth after the rebound in 1980/81 and GDP grew by 5.5%. While foodgrain production rose only modestly over  its 1980/81 level, other crops including oilseeds and sugarcane performed well and total agricultural output grew by 4%. The availability of power, cOaLl and rail transport, already improved in 1980/81, was even better in 1981/82, recording growth rates of about 10%, 9.4% and 15% respectively. As constraints on the supply of infrastructure and basic commodities continued to ease, industrial output responded with an 8% increase. The downward trend in inflation continued. Wholesale prices rose by about 9% on an average annual basis, while the increase on a March 1981 to March 1982 basis was less than 2%, showing a continued deceleration. Easier supply conditions, combined with a more restrictive monetary policy, contributed to the sharp decline in the rate of inflation. 9. The performance of the agriculture sector in 1981/82 ensured that supply conditions in the country remained quite favorable. It also provided continuing evidence of the positive effects of large investments and appropriate policies in past years. Foodgrain production reached between 132 and 134 million tons, thus matching or perhaps surpassing the previous record. Irrigated area expanded by 2.5 million hectares, while fertilizer consumption improved over its 1980/81 level by more than 7%, despite substantial price increases. Recent performance and probable future trends suggest that on average foodgrain supplies will exceed demand. However, the balance remains delicate with some imports likely to be required from time to time. Indeed, the effects of the severe 1979/80 drought were still being felt in 1981/82 when 2.25 million tons of wheat were imported to rebuild depleted stocks. Nevertheless, the relatively low import requirement, the ability of the Government to delay imports for as long as two years after the production shortfall, and the decline in foodgrain prices in real terms demonstrate the flexibility and resilience provided by the public foodgrain system. 10. Shortages of basic commodities and infrastructural services were major contributors to industrial stagnation and the onset of high inflation in 1979/80. This was the culmination of several years of declining capacity utilization in important, interrelated sectors such as power, coal, and rail transport. A major cause of the improved economic climate over the last two years has been a much improved level of output in these sectors, due mainly to greater efficiency and utilization of installed capacity. Expansion of coal output by about 10 million tons for the second successive year and of rail freight traffic to a record level were particularly noteworthy features of the 1981/82 economic performance. The shortfalls in domestic energy production which contributed so heavily to the poor 1979/80 performance have also been reduced. However, even though there remains large scope for improving efficiency, further improvements in capacity utilization will become increasingly difficult, and increases in capacity are needed to meet increasing demand. 1]. Despite a brief phase in the late 1970s, when savings rates exceeded investment rates and foreign exchange reserves actually increased, recent experience shows that the needs of the Indian economy continue to outstrip the availability of resources, both internal and external. Investment exceeds domestic savings. The latter, at nearly 25% of GDP, are already high and further increases, particularly from the household sector, will be increasingly difficult to obtain. However, over  -4- the last two years, the Government has taken a number of measures to generate higher savings in the public sector. Principal among these were price and tax increases, and subsidy reductions, on a range of commodities produced mainly in the public sector. 12. The shortage of resources is even more apparent in the foreign sector. Problems became serious after 1979/80 when the cost of India's POL imports rose sharply and the terms of trade deteriorated. Coupled with domestic supply shortages and a slowing down in export growth, these factors caused India's current account deficit to rise from only 0.6% of GDP in 1979/80 to 2% of GDP in 1980/81. In 1981/82, the current account deficit rose to US$4.3 billion, representing 2.7% of GDP. Unfavorable movements in export prices and the terms of trade threatened a worse outcome. However, the much improved performance of basic import-substituting industries and a resumption of healthy export volume growth (8.3%) prevented this. To finance this gap in the face of inadequate concessional aid flows, the Government drew down a record US$2.36 billion in foreign exchange reserves, withdrew almost US$700 million under the recently negotiated IMF Extended Fund Facility, and turned increasingly to other non-concessional sources of finance. In 1980/81 and 1981/82 for example, new government guaranteed commitments for commercial borrowing totalling over US$1.3 billion were contracted for major projects. 13. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into reasonable balance at an acceptable level of growth. In particular, there is a need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently, in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to further reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has maintained and extended the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export and industrial policy measures have improved the prospects for accelerating export growth. Development Prospects 14. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, power, roads and ports -- is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institutional infrastructure  -5- 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 reasonable access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 15. The medium-term framework for advancing India's development objectives is the Sixth Five Year Plan (1980/81-1984/85), which is now aabout halfway completed. The Plan assigns priority to agriculture, energy development, the growth of exports and domestic import substitutes where appropriate, and the removal of infrastructural bottlenecks. Overall performance has so far been encouraging, although the likelihood of continued bottlenecks in key sectors such as power and transport is growing. Moreover, fulfillment of the Plan targets will require an acceleration of domestic savings rates. The efforts of the Central Government to raise resources have so far been impressive and are likely to be broadly sufficient to meet the financing requirements of the Central Government's share in plan investment, if inflation can be kept in check. However, a significant shortfall in savings is likely to occur in some states unless further measures are introduced. There will be a need also for continuous efforts to maintain .and raise further the already high level of private savings. Recent increases in interest rates and tax concessions on time deposits should stimulate such savings. The further dampening of inflationary expectations, the prospects for which look bright, will be an important part of this effort. 16. The higher capital formation rates of the past few years augur well for future income growth. Thus far, however, output growth has not matched the size of India's investment programs. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investment has been needed to build up basic infrastructure. These services, such as power, transport and irrigation, have inherently high capital output ratios. However, at least some of the rise in the sectoral capital output ratios has been due to a deterioration in efficiency and is avoidable through better management. Bottlenecks in these basic sectors clearly can prejudice growth in other sectors where large investments have been made. As demonstrated in the last two years, performance in the basic service sectors can be improved through better planning and management, thus leading to higher productivity and capacity utilization, throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of tradeable commodities like coal, steel and cement, this is justified on the grounds of comparative a'dvantage. For sectors such as power and transportation, expansion of planned capacity in accordance with the requirements of the rest of the economy will be vital to overall medium- and long-term prospects. At present rates of development, however, an adequate balance between supply and demand in these sectors will be difficult to sustain. Performance in the power sector to date suggests that India's power deficit will continue .into the early 1990s, although more rapid project implementation and efficiency could narrow the size of the gap. For railways, real i!nvestment levels may be inadequate to meet demand projections and will need to be monitored closely and adjusted upward as necessary if serious bottlenecks are to be avoided in the next few years.  --6- 17. Under the Sixth Plan, India has an ambitious energy production program backed by substantial financial commitment. While the gap between domestic consumption of petroleum and production remains large, the prospects for progressive substitution of domestic petroleum for imports are quite bright. In 1981, resources for exploration were raised by successive price increases for petroleum products. On the production side, scheduled expansion is expected to raise domestic production of crude from the current 46% to about 64% of demand by 1984/85. The rapidly expanding level of exploratory activity, combined with the possibilities for accelerated offtake from known fields offer much encouragement for India's longer term energy prospects. 18. The continuation of India's balance of payments difficulties has been marked by the progressive use of foreign exchange reserves and non-concessional borrowing to finance the deficit. Use of reserves reached a record level in 1981/82, leaving less than four months of import coverage by the end of the year. At the same time, India also made use of the IMF Extended Fund Facility. Entering this period with a favorable debt service profile, India has so far also been able to tap commercial capital markets at favorable spreads (over, of course, relatively high underlying rates) and in the last two years commercial borrowing has been stepped up. These sources will be important in the future since India's current account deficits, though not large relative to the size of the economy, will nevertheless be large in absolute terms and will necessitate external borrowing beyond levels expected to be available from normal concessional sources. 19. India's development prospects over the next few years wiLl hinge on the extent to which the economy can be brought into both internal and external balance, while at the same time maintaining reasonably high growth. In the longer term, income growth represents the best strategy for achieving these needed adjustments, both by generating higher savings for further investment, and by fostering the development of export and import-substituting industry to realign the balance of payments. In the short-term, significant external borrowing, including an increased emphasis on commercial borrowing, will be necessary to cope with the balance of payments consequences of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of concessional assistance. Although India is currently in a position to increase borrowing on commercial terms from the very low levels of the past, there are limits to India's creditworthiness in world markets. Maintaining an adequate rate of growth while adjusting the structure of the Indian economy to a more open and efficient environment as intended by the Government requires foreign resources in addition to the level of commercial borrowing available to India. Indeed, along with increasing exports, higher levels of investment to support an adequate rate of growth is a key element in maintaining India's recently improved creditworthiness. India is still a very poor country with a large rural sector and enormous investment requirements for human development and basic infrastructure. The fact that India has been able to maintain over the past seven years a rate of growth above the long term trend, despite the severe setbacks of 1979/80, lends substance to the hope that a more open trade policy and concerted efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization  -7- of savings both foreign and domestic, can sustain a rate of growth closer to 5.0% per annum than the long run trend of 3.6% per annum. Combined with a reduction in the rate of population increase to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of less than 1.4% per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India. 20. A large and growing population and severe poverty underline the rLeed for India's development efforts to be protected and accelerated if possible. The 1981 Census placed India's population at 683.4 million, or about 12 million higher than official projections. The fact that there was no decline in inter-census rates of population growth, equivalent to about 2.2% per annum, is a cause for concern. While further analysis may sluggest this rate of growth to be slightly overestimated, the expectation of a measurable decline in the population growth rate has not materialized. Until full details of the Census are released, firm J;udgements about the reasons for this outcome are not possible. However, the results re-emphasize the need for continuing efforts to strengthen the family planning program in a broad range of activities and services. These efforts are given high priority in the Sixth Plan which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979/80 level of about 23% to over 35% by 1984/85. 21. Reduction of poverty remains the central goal of Indian economic growth. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51% of the rural population and 38% of the urban population subsist below the poverty line. Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy, particularly on increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1981 resulting from India's sustained effort to raise agricultural production, reflects such developments. There is also a role for direct Government action in faster implementation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural health facilities and the provision of secure village water supplies. Operations such as the community health volunteer program and the national adult literacy campaign provide encouraging evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor.  -8- PART II - BANK GROUP OPERATIONS IN INDIA 22. Since 1949, the Bank Group has made 65 loans and 148 development credits to India totalling US$3,571 million and US$10,633 million (both net of cancellation), respectively. Of these amounts, US$1,232 million has been repaid, and US$5,254 million was still undisbursed as of March 31, 1982. Bank Group disbursements to India in the current fiscal year through March 31, 1982 totalled US$858 million, representing an increase of about 28 percent over the same period last year. Annex II contains a summary statement of disbursements as of March 31, 1982, and notes on the execution of ongoing projects. 23. Since 1959, IFC has made 25 commitments in India totalling US$176.5 million, of which US$24.5 million has been repaid, US$42.6 million sold and US$7.5 million cancelled. Of the balance of US$101.9 million, US$94.0 million represents loans and US$7.9 million equity. A summary statement of IFC operations as of March 31, 1982, is also included in Annex II (page 5). 24. The thrust of Bank Group assistance to India has been consistent with the country's development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricultural productivity, and efforts to improve the availability of basic agricultural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of development finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 25. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the Sixth Plan. The continued active involvement of the Bank Group in agriculture, energy and infrastructure development will appropriately contribute to India's adjustment and growth prospects. Irrigation will need continuing support, with emphasis on improved efficiency in water conveyance systems to ensure reliable delivery to farmers' fields. In addition, major investments to develop the large Narmada River basin will be vital to India's efforts to increase agricultural production. Important complements to these efforts, such as fertilizer production and distribution, agricultural credit and extension, will continue to receive support. A continued program of investments aimed at rapidly increasing the domestic supply of energy will clearly be necessary if India is to curb the cost of oil imports and alleviate the critical power shortages which constrain output in both the agricultural and industrial sectors. Exploitation of oil and gas  - 9-. resources is a central element of this program, which should be supplemented by investments in hydro and thermal power generation, and in the expansion of the transmission and distribution networks. Industrial projects to increase the domestic production of basic commodities, which have been in short supply and which India has a comparative advantage in producing, should also receive high priority. Finally, raising the efficiency and levels of transportation infrastructure would mitigate a key constraint to achieving higher levels of economic growth so that further support of the railways and for ports development will be particularly appropriate. 26. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, there is now a need for increased foreign assistance to adjust to an even greater deterioration in balance of payments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Bank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, and water supply. 27. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support. Therefore, India should be eligible and regarded as creditworthy for supplemental Bank lending. The ratio of India's debt service to the level of exports was about 11% in 1981/82 and is projected to remain below 20% through 1995/96. As of March 31, 1982, outstanding loans to India held by the Bank totalled US$2,433 million, of which US$1,062 million remain to be disbursed, leaving a net amount outstanding of US$1,371 million. 28. Of the external assistance received by India, the proportion c:ontributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with 54%, 42% and 52%, respectively, in 1981/82. On December 31, 1981, India's outstanding and disbursed external public debt was about US$17.4 billion, of which the Bank Group's share was US$6.6 billion or 38% (IDA's US$5.6 billion and ]BRD's US$1.0 billion). In 1981/82, about 16.0% of India's total debt service payments were to the Bank Group.  -10- PART III - THE ENERGY SECTOR General 29. Commercial primary energy (coal, oil, gas, hydro and nuclear power) accounts for about 46% of total energy consumption in India, with the balance (53%) being derived from non-commercial sources such as firewood and agricul- tural and animal wastes. Over the past ten years, the growth of energy consumption in India averaged 4% per annum, which was marginally below GDP growth for the period. Over the same period, commercial energy consumption increased by 5.3% per annum, but this was not sufficiently rapid to raise per capita consumption of commercial primary energy above 166 kg of oil equiv- alent, which is half the average for low income developing countries. The share of oil products in commercial primary energy consumption at 23% is low for developing countries, but it is growing rapidly. Firewood is the most widely consumed fuel in India, accounting for about 65% of total non-commercial energy consumption. Other sources of fuel, such as vegetable and animal wastes, account for the remaining 35% of non-commercial energy consumption. 30. Coal remains the most important domestic source of commercial energy in India. Coal production, which stagnated between 1976177 and 1979/80 because of power shortages, delays in commissioning new mines, labor difficulties and transportation bottlenecks has risen substantially from about 104 million tons in 1979/80 to 124.7 million tons in 1981/82. Installed electric generating capacity in 1981/82 is estimated at 35,000 MW, of which hydroelectric plants account for about 36%. Potential demand for power has consistently exceeded supply in recent years. The estimated deficit (calculated as actual supply compared to potential unrestricted demand) widened to about 13% in 1980/81. 31. Inadequate supplies of energy have been a major constraint hinder- ing India's economic growth. Although considerable indigenous resources of energy exist, their development has not kept pace with demand. In November 1979, a high-level Working Group on Energy Policy recommended measures to reduce energy demand. Prominent among the recommendations were improvement in the efficiency of energy use, reduction of transportation demand, reduc- tion of the energy intensity of industrial investment, and inter-fuel sub- stitution from commercial to non-commercial and renewable energy resources. These recommendations address the need to contain commercial energy consump- tion without impeding economic growth. Petroleum 32. Estimates of India's total recoverable hydrocarbon reserves are 4.5 billion tons of oil equivalent, of which about two-thirds are offshore. Proven recoverable reserves are about 470 million tons of oil and 410 billion cubic meters of natural gas (about 330 million tons of oil equivalent). Natural gas is becoming increasingly important to the Indian economy with the development of the Bombay High and planned development of the large offshore South Bassein fields. Consumption in 1981/82 is estimated at 1.52 million tons of oil equivalent, but this is forecast to rise to about 7 million tons by 1989. Gas is intended to be used largely as feedstock for fertilizers and petrochemicals, with the heavier fractions being sold as bottled gas to  -1 1- substitute for kerosene and other fuels. Crude oil production from domestic reserves has increased steadily over the past 20 years from as little as 0.45 million tons in 1960/61 to almost 7 million tons in 1970/71 and an estimated 16.2 million tons in 1981/82. 33. Consumption of crude oil grew at about 6.5% per annum over the past 5 years, and reached an estimated 36.8 million tons in 1981/82. Imported crude oil accounted for 20.6 million or about 56% of consumption. The import bill for crude oil and petroleum products was over US$6 billion that year, representing 38% of total merchandise imports and 70% of India's merchandise export earnings. By the end of the Plan period (1984/85), consumption is expected to reach about 46 million tons. This would exceed expected domestic production by about 16 million tons on current estimates. 34. While there are good prospects for increasing production from existing fields, particularly Bombay High, India will need to import about 34% of its crude oil requirements in 1984/85 and this proportion could rise unless there are major new discoveries. Thus a concerted effort to explore and develop India's petroleum resources, in order to reduce imports, is of vital importance and is a central objective of Government policy. Recent exploration results indicate the existence of promising sedimentary basins where additional and more intensive exploration efforts appear justified. To this end, the investment programs of the ONGC and Oil India Limited (OIL), the Government-owned institutions engaged in exploration and development of hydrocarbon resources, have been stepped up. The Sixth Five-Year Plan (1980/81-1984/85) originally allocated about US$3.7 billion 1/ for petroleum exploration and development, which itself represented an increase of almost 50% in real terms over such expenditures in the previous Plan. Revised allocations for the Plan period are now about US$6 billion 1/, a further increase of more than 60%. At the same time, in recognition of the need to supplement these resources yet further, India is making concerted efforts to attract risk capital by inviting foreign oil companies to assist in exploring for oil, both onshore and offshore. About half of the country's sedimentary basin areas have been offered to private oil companies to participate in exploration under production-sharing contracts (see para 40 below). Petroleum Pricing 35. India is fully aware of the need to conserve energy and, to this end, the Government has consistently set petroleum prices at levels designed tc ensure efficient energy use. Retail prices of oil products have been maintained, on average, at or above international levels. The most recent increases were in July 1981 which established the following retail prices: 1/ In 1980/81 prices.  -12- India - Retail Prices of Petroleum Products (in US$ per US gallon) Current Prices as % of Current CIF Import Import Prices Prices Prices Gasoline 2.55 1.07 238 High-Speed Diesel 1.27 1.10 115 Kerosene 0.76 1.14 67 Fuel Oil 1.20 0.75 160 Domestic crude oil prices are also regulated by the Government. Prices to ONGC and OIL, which were raised in July 1981 from US$6.1 per barrel to US$17.3 per barrel, ensure a satisfactory financial performance by the producers and enable these to finance a major portion of their investment programs from internally-generated funds. Although the current domestic crude prices are below international levels, exploration and development decisions are based on international prices, and hence the lower domestic selling price does not act as a disincentive to exploration and development. Under the new production sharing contracts, foreign oil companies will receive the full international price for their share of production. At the present time, both the level and the structure of petroleum prices in India are considered satisfactory. Sector Institutions 36. The Ministry of Petroleum, Chemicals and Fertilizers is charged with policy-making in the petroleum sector. Together with the Ministry of Finance and the Planning Commission, it approves all investments and the budgets of public companies operating in the sector. ONGC and OIL, both public sector undertakings, are engaged in the exploration for and develop- ment of hydrocarbon resources. The Indian Oil Corporation handles all of India's crude oil imports. The Oil Industry Development Board (OIDB) is a financial institution which obtains funds through a cess levied on domestic crude production and provides some financing for public sector enterprises engaged in petroleum exploration, production and refining. Petroleum Resources 37. Petroleum reservoirs are found in sedimentary basins. In India, there are 37 sedimentary basins with a totdl area of approximately 1.72 million km , of which about 1.4 million km (81%) are onshore and the remainder offshore (to a water depth of 200 meters). Commercial petroleum production has been established in only two sedimentary basins. The first is the Assam-Arakan basin in parts of Assam and extending to Nagaland, Meghalaya, Tripura, Manipur and Mizoram in the north eastern part of the country. The second is the Cambay basin comprising an area in Gujarat, which also includes the Bombay High offshore petroleum fields. Many of India's potential petroleum-bearing areas are still unexplored and production is concentrated in only a few regions. Historically, the pace and scope of  -13- exploration activity has been uneven and resources have been concentrated on a few promising areas. Since the discovery of the giant Bombay High field off the West Coast of India in the mid-1970s, India has not made a new major commercial discovery. Ongoing exploration efforts of ONGC, however, have been encouraging and have identified several petroleum-bearing areas which need further exploratory drilling to determine their commercial potential. Indications of petroleum have been found in six basins: Konkan, Krishna-Godavari, Cauvery, Rajasthan, Andaman Islands and the Tripura fold belt. The Ratnagiri oil field in the Konkan basin is being developed and is expected to start production in late 1982. The Krishna-Godavari and Cauvery basins indicate the most promising undeveloped potential to date, with Krishna-Godavari particularly standing out as the next likely major discovery after Bombay High. Petroleum Exploration Policies, Activities and Investment Strategy 38. Until the 1950s, petroleum exploration was concentrated in north- eastern India, specifically, in Assam, Tripura and Nagaland. OIL was estab- lished in 1959 following an oil discovery in Assam by Burmah Oil Company (UK). The Government of India initially took a one-third equity interest in OIL, increasing it to 50% in 1961. In October 1981, GOI acquired all the Indian assets of the Burmah Oil Company, comprising its interest in OIL and in the Assam Oil Company, a small firm whose production units had been absorbed by OIL. In 1959 ONGC discovered petroleum reserves in Gujarat, but AsEam remained the major petroleum-producing area in the country (4.2 million tons per year) until the early 1970s when production in Gujarat exceeded 4 million tons per year. Following the oil crisis of 1973, exploration activities accelerated, particularly offshore, resulting in the discovery by ONGC in 1974 of the Bombay High field and a number of significant but smaller fields in its vicinity. By 1981/82, oil production from Bombay High had reached 8 million tons per annum, accounting for 50% of India's oil produc- tion. 39. International oil companies have been involved in petroleum exploration in India intermittently. Prior to 1950, the Assam Oil Company and the Burmah Oil Company were the only '-rms active in petroleum explora- tion. In 1954, an agreement was signed between GOI (with a 25% interest) and Indo-Stanvac (Standard Oil and Socony Vacuum, now Exx an and Mobil (USA), respectively), providing for exploration of 10,000 km in West Bengal. The venture was abandoned in 1959, after 10 (dry) wells had been drilled. From 1974 to 1277, three joint-venture exploration agreements, each covering 25,000 km of offshore area, were concluded with Asamera (Canada), Natomas (USA), and Reading and Bates (USA), but the companies withdrew following completion of the minimum work requirements because the results were dis- cou-raging. 40. In late 1980, against the background of a sharply deteriorating ba:Lance of payments position brought about, in part, by sharp increases in itsg oil import bill, the Government recognized the urgent need to accelerate the pace of oil exploration. Given that there were technical and financial limits on the extent to which ONGC and OIL were able to expand their explora- tion activities over India's immense prospective acreage, the Government decided to supplement the national oil companies' involvement in exploration by actively promoting participation by foreign firms on a production sharing  -14- basis. Thirty two blocks, ranging in size from 10,000 to 30,000 km2 offshore and onshore, were off red to international bidders. The total area offered, almost 0.9 million km , represented about 50% of the country's sedimentary basin area. Although 34 foreign oil companies were invited, only seven submitted bids and offers were concentrated on just two offshore blocks in the vicinity of oil producing areas. This response was cautious and con- sidered disappointing by the Government. The guarded approach by the oil industry was not entirely surprising in that the initial round of bidding involved relatively unknown areas with what at that time appeared to be uncertain or modest geological potential. One production sharing agreement was signed on March 26, 1982 with a consortium led by Chevron (USA) for an 18,500 km block offshore Gujarat, north of the Bombay High field. The terms of the production sharing agreement with Chevron are consistent with industry practice and provide, inter alia, for Chevron to drill at least three wells, spending a minimum of US$29 million over a three-year period, at its own risk. Upon commercial discovery, ONGC may assume a 50% interest in future development (without payment of exploration costs) and production will be split according to a scale which escalates with field profitability. Until India achieves self-sufficiency in oil, GOI has the option to purchase Chev- ron's share of the oil produced at international prices. Seismic surveys were completed in July 1982 and Chevron is expected to begin drilling after the monsoon. Execution of a contract with a second (partially Govern- ment-owned) company was reportedly prevented by a requirement in the com- pany's Charter that it export a portion of any oil discovered. A second invitation for international bids was issued in August to 37 foreign oil companies. The areas offered consist of 50 onshore and offshore blocks, including onshore and offshore areas in the Krishna-Godavari basin adjacent to the project area. In view of the improved knowledge of geological poten- tial of the blocks being offered and the inclusion of new areas, not pre- viously offered, which have considerable petroleum potential, and the Govern- ment's success in finalizing terms with one consortium, the response to the second offering is expected to be more encouraging. The decision to invite foreign oil companies is a welcome move in providing a balance of oppor- tunities between them and Indian oil companies. Foreign companies can thus explore and develop areas that are of interest to them, while allowing the national oil companies to concentrate their efforts in those areas where prior exploration activities have already identified promising hydrocarbon potential. 41. To develop and utilize efficiently its petroleum resources, the Government's investment program contains the following elements: increased production from existing fields, primarily by accelerating the development programs of ONGC and OIL in areas where petroleum has already been dis- covered; accelerated exploration programs for ONGC and OIL; attraction of risk capital for exploration activities through production-sharing agreements with foreign oil companies; construction of new refineries and modernization of existing refineries, especially through the introduction of conversion facilities to reduce middle distillate imports; and development of the gas pipeline system and construction of additional plants using gas as feedstock (e.g., fertilizer and petrochemical plants).  -15- Bank Group Involvement in the Petroleum Sector 42. The Bank has made two loans totalling US$550 million for the development of the offshore Bombay High oil field. The first loan (Ln. 1473-IN) was made in 1977 and financed Phase III of ONGC's Bombay High development program. The project was essentially completed in March 1981, about two years behind the appraisal schedule, due to a necessary change in the project scope resulting from new information which resulted in higher priority being given to the development of the South Bombay High area than to the North Bassein area. Nevertheless, about 70% of the targeted daily rate of production had been attained by the project completion date anticipated at appraisal. The facilities are operating satisfactorily. A Project Perfor- marnce Audit Report is under preparation. A second loan for US$400 million (Lri. 1925-IN) was made in December 1980 to assist in the financing of Phase IV and advanced action on Phase V of the program. Project implementation is proceeding satisfactorily. A US$200 million loan for a Refineries Rationalization Project was recently approved. Further operations in oil development and a gas development project are under consideration. 43. The proposed project aims to support India's strategy of accelerat- ing exploration of the country's petroleum prospects by obtaining foreign oil company investments and focussing and strengthening the activities of the national companies. With respect to foreign participation, the Bank has, since 1980, been advising GOI and ONGC, at their invitation, regarding (i) the preparation of offerings to foreign oil companies, with emphasis on average block size and the selection of blocks to be offered; (ii) the types and content of contracts currently expected by the international oil industry; and (iii) the monitoring of the foreign oil companies' exploration and development activities after contracts have been signed. In this connec- tion, Bank staff reviewed in late 1980 the draft contract terms and minimum wc,rk commitments on each block offered for bidding by international oil companies (para 40). As regards the national oil companies, the Bank has concentrated on ONGC exploration activities to help improve the balance and design of its program, selecting the Krishna-Godavari basin because of its complex geological and environmental conditions, as well as its significant potential. Already considerable modification has taken place in the composi- tion and emphasis of the program as a result of discussions between the Bank and ONGC. A sharper focus has been given to exploration activities which had previously been spread somewhat thinly across sizeable prospective areas, helping broaden the scope for the involvement of foreign oil companies. The Bank has also helped identify additional needs for specialized consulting and contractor inputs in key elements of ONGC's program, contributing to terms of reference and selection of the required expertise and review of results. The dialogue on policies and technical issues has been constructive and will be further pursued during project implementation. PART IV - THE PROJECT 44. The project was appraised in November/December 1981. The Staff Appraisal Report (Report No. 3887a-IN, dated September 10, 1982) is being distributed to the Executive Directors separately. A Supplementary Project Data sheet appears as Annex III. Negotiations were held in Washington, D.C.  -16- in June 1982. The Borrower was represented by Mr. S.C. Jain of the Depart- ment of Economic Affairs, Ministry of Finance, as coordinator of the Indian delegation. Project Description 45. The Krishna-Godavari basin in eastern India has the prospect of becoming a major new oil province, where successful exploration is likely to result in significant additions to India's petroleum reserves. Exploration activities in the onshore part of the basin by ONGC began as far back as 1959. In the late 1970s, drilling activities revealed the existence of hydrocarbons in considerable quantities, although technical difficulties limited drilling activities. ONGC has invested over US$70 million thus far in exploration activities in the Krishna-Godavari basin. In the offshore area, one of the numerous identified prospects was drilled and produced significant quantities of oil and gas. The wells drilled onshore have indi- cated substantial gas flows. The principal objectives of the project are to focus and accelerate ONGC's activities in those specific areas of the Krishna-Godavari basin where past exploration has identified highly promising potential for commercially exploitable oil and gas reserves; to assist ONGC in verifying this potential through further seismic surveys and exploratory drilling; and to enhance ONGC's exploration capabilities under the very difficult geological and environmental conditions in the Krishna-Godavari project area. The project will constitute about a quarter of ONGC's explora- tion activities during the project period. During appraisal, the project area was carefully delineated, and limited to less than half of the Krishna-Godavari offshore basin, comprising the areas where ONGC has already made substantial exploration investments which have resulted in discoveries, and which ONGC can explore further and develop efficiently in the near future with available resources and technology. 46. The project consists of the 1982/83-1985/86 time slice of ONGC's exploration program in the project area. Its components are: A. Onshore (i) about 1,700 line-km of seismic surveys, of which about 1,000 line-km would be high-resolution seismic lines centered on the deep, high-pressure zone; (ii) drilling of 12 exploratory wells, of which 5 will be in deep high-pressure gas prospects; and B. Offshore (i) about 3,500 line-km of special shallow water seismic surveys and up to 4,000 line-km of infill seismic surveys in the remaining offshore area of the project;  -17- (ii) drilling of 16 exploratory wells, of which 5 would be on the outer shelf;l/ and C. Technical Assistance. External support to ONGC for the super- vision of drilling, testing and completing of wells in the onshore high pressure gas areas and in the outer shelf areas; and, as required, for the improvement of quality control of geophysical data acquisition, processing and integration. 47. The project area has been delineated following an integrated geo:Logical evaluation by Bank staff and ONGC of onshore, inner shelf and outer shelf prospects, and the drilling program has been designed to care- fulLy balance potential prospects on the one hand and investment costs and technical risks on the other. However, it is recognized that as new informa- tionl becomes available, both the scope and location of seismic surveys and the well locations and drilling programs may need to be changed. Therefore, as project implementation proceeds, ONGC will periodically review and revise the exploration program in the project area and submit the revised program to the Bank; the Bank will be given adequate opportunity to comment on the revised program before it is implemented (Section 2.01(b)), draft Project Agreement. Project Execution 48. ONGC is responsible for execution of the project. The Commission, which was established by an Act of Parliament in 1959, consists of a Chair- man, six full-time Members (Finance, Materials, Personnel, Exploration, Offshore and Onshore) and two part-time members representing GOI's Ministries of Finance and Petroleum, Chemicals and Fertilizers. ONGC's main administra- tive and financial functions (planning, procurement and stores, accounting, personnel, computer activities, etc.) are centralized in the corporate head- quarters at Dehra Dun in Uttar Pradesh, along with the main research and development and training facilities. Operational staff are divided among three regional offices (Central, Western and Eastern) and the Bombay Offshore Project. Operational responsibility and the authority to commit funds within their approved budgets have been delegated to Regional Managers. The Madras Division of the Bombay Offshore Project will execute the project. It will be supported, as necessary, by ONGC's central services. The staff of ONGC is motivated, experienced and technically competent, as is demonstrated by their success in developing the highly productive Bombay High field and by the progress they have made thus far, without outside assistance, in exploring the Krishna-Godavari and other fields. However, aware of the rapid tech- nological progress in oil exploration and in the development of oil and gas reservoirs, ONGC continues to use foreign consultants when in-house capability is insufficient or to verify critical results obtained in-house. ONGC has consistently followed a policy of ensuring that techniques developed in India reflect the latest technology available worldwide, and are properly applied. 1/ The inner and outer shelf areas refer to the offshore areas of less than 165 meters depth, and between 165 and 300 meters depth, respectively.  -18- 49. Compagnie Francaise des Petroles (CFP, France) has been assisting ONGC since 1977 in the evaluation of reservoirs in Bombay High. It has also been retained to assist in supervising the drilling of outer shelf wells in Krishna-Godavari. Suitable consultants will be retained for similar services for the deep, high-pressure onshore gas wells. These services will be obtained promptly as needed from consultants whose qualifications, experience and terms of reference are satisfactory to the Bank (Section 2.02, draft Project Agreement). Foreign contractors will execute the deep onshore and the offshore drilling programs and the specialized seismic surveys. Project Costs and Financing 50. The total financing requirements of the project, including contin- gencies, escalation, and the front-end fee, are estimated at US$633.8 mil- lion, of which US$398.9 million represent the foreign exchange costs. Taxes and duties are estimated at US$70.2 million. Physical contingencies, which are a little less than 20% of base cost, have been applied at 10% for onshore seismic surveys, 15% for offshore seismic surveys, and 25% for well drilling. Price contingencies are about 12% of base cost, and are calculated on projec- tions of price increases from 1982/83-1985/86 in a declining range of 8.5-7.0% for local goods and services and 8.0-6.0% for foreign goods and services. 51. The proposed Bank loan of US$165.5 million would provide about 29% of the financing requirements of the project, net of taxes and duties, and about 41% of its foreign exchange costs. It would cover critical seismic surveys, both onshore and offshore; rig-hire charges for 5 onshore wells and the D-P vessel for 8 offshore wells; drilling materials and supplies for 5 onshore and 13 offshore wells; and technical well services (such as core analysis, mud logging and engineering) for 9 onshore and 13 offshore wells; as well as the front-end fee, which has been capitalized. The project represents about 5% of ONGC's overall investment program of US$12.8 billion over the period 1982/83-1985/86. No difficulties are anticipated by ONGC in mustering the resources required to carry out the project. Nevertheless, if required, GOI would promptly provide the necessary funds (Section 3.02, draft Loan Agree- ment). The Bank loan would be made to GOI for 20 years, including 5 years of grace, at an interest rate of 11.6% per annum, and with a front-end fee of 1.5%. The proceeds of the loan would be onlent to ONGC at 12% per annum for 20 years, including five years of grace. GOI would bear the foreign exchange risk. Execution of a subsidiary loan agreement on terms and conditions satisfactory to the Bank would be a condition of effectiveness of the Bank loan (Section 6.01, draft Loan Agreement). Inflation in India over the past five years has averaged about 9.5% per annum. This rate reflects the unusual conditions prevailing after the 1979 drought (see para 6); the rate of infla- tion has fallen sharply during 1981/82 so that the annual inflation rate over the next five years is not expected to exceed 8%. The onlending rate of 12% is, therefore, considerably above the expected rate of inflation. Procurement and Disbursement 52. ONGC has contracted for two drilling rigs required for the offshore program. An anchored drillship for inner-shelf drilling was hired in June 1981 from Atwood Oceanics (USA) on the basis of a renewed hire arrangement which dated back to 1977 and which at that time was made after international  -19- tendering. For outer-shelf drilling, a dynamically positioned (D-P) vessel was hired from Sedco (USA) in April 1981, after international advertisement for a non-D-P drillship.l/ These arrangements were appropriate in the tight markets for such equipment prevailing at the time. The contracts were reasonably priced in the circumstances and contractor services are being rendered satisfactorily. Renewals or substitutions of the D-P vessel con- tract--to be partly financed by the Bank--will be on terms and conditions satisfactory to the Bank. For the deep onshore drilling rigs, the infill offshore seismic survey, most drilling materials and supplies, and equipment and materials for completion of successful onshore wells, international comLpetitive bidding (ICB) procedures in accordance with Bank guidelines will be followed. With respect to the specialized high-resolution onshore and shallow water offshore seismic surveys, ONGC has followed international tendering procedures consistent with the Bank guidelines. Certain special- ized well services (e.g., cementing, logging and core and mud analysis) with few, qualified suppliers, items costing less than US$200,000 and items in limiited supply which are needed for timely project execution, will be procured by soliciting bids from a list of qualified suppliers agreed with the Bank. The aggregate amount of such procurement (excluding the cost of specialized well services) will not exceed US$6 million. For the purposes of bid evaluation, a preference of 15% or the applicable customs duty, whichever is lower, will be applied to bids from qualified local manufacturers of goods procured after ICB. 53. The proposed loan would be disbursed against 100% of foreign or 100% of local expenditures ex-factory for drilling materials and equipment ancd supplies; 100% of foreign expenditures for the specialized high resolu- tion and in-fill seismic surveys, specialized well services and the onshore rig-hire charges; 25% of foreign expenditures for offshore (D-P vessely only) rig-hire charges; and the front-end fee. It is recommended that the Bank finiance up to US$6 million for expenditures incurred after May 1, 1982 on schedule-critical contracts for seismic surveys and the D-P vessel rig-hire charges. The Bank loan is expected to be fully disbursed by September 30, 19135. Ecology and Safety 54. Appropriate industry practices will be followed to protect the safety of people and the environment. Seismic operations of the kind to be conducted are not a cause for concern. The drilling contractors are experienced, and ONGC follows standards developed in North Sea operations with respect to inspections, safety drill and waste handling. Drilling opierations can cause blow-outs and/or oil spills. However, offshore wells will not be drilled below the top of the abnormal pressure zones without 1/ Although a D-P vessel was appropriate for ONGC's needs, none was avail- able at that time. Therefore, the advertisement was for a non-D-P ves- sel. However, a D-P vessel unexpectedly became available after the advertisement was issued.  -20- special precautions 1/, to mitigate against the risks of blow-out have been or will be taken. With respect to the 5 deep onshore wells and for the off- shore wells, ONGC or the drilling contractors will arrange to insure rigs, all equipment and personnel. The arrangements will cover blow-outs and clean-up and pollution liability in the event of offshore oil spills. These arrangements are satisfactory (Sections 2.08 (a) and (b), draft Project Agreement). ONGC - Financial Evaluation 55. ONGC's overall financial position is sound, with a debt/equity ratio of 50:50, a current ratio of 1.4 on March 31, 1982, and a debt service coverage ratio of almost 8 times for 1981/82. This satisfactory situation is due to the rapid increase in oil production from Bombay High, the increase in oil prices in July 1981 and ONGC's low level of debt until that year. The debt service coverage ratio is expected to decline, but still remain satis- factory, through the 1980s. While its key financial parameters (selling prices, investment programs) are decided by GOI, ONGC is able to operate in a financially responsible manner. ONGC's income statements over the past four years demonstrate the Commission's rapid growth, primarily because of expand- ing offshore production. Revenues have increased from Rs 3.8 billion (US$422 million) in 1978/79 to Rs 13.8 billion (US$1,534 million) in 1981/82. Its financial performance during this period was satisfactory, although its profits deteriorated somewhat in 1980/81, reflecting the income foregone as a result of a lengthy stoppage of oil production in Assam. During the period 1978/79-1981/82, ONGC's overall investment amounted to Rs 17.6 billion (US$2.0 billion), of which 55% was financed from internal cash generation. 56. ONGC's balance sheet as of March 31, 1982 totals Rs 22.6 billion (US$2.5 billion), of which net fixed assets are worth Rs 11.2 billion (US$1,245 million). 57. Financial projections over the period 1982/83-1985/86 indicate that ONGC's financial performance should continue to be satisfactory. This forecast conservatively assumes that prices of crude oil and natural gas to ONGC will remain constant, that the bulk of ONGC's external financing requirements will be met by borrowings, with no additional Government equity, and that no new discoveries of crude oil or gas will be made during this period. The volume of crude oil sales would continue to grow from 17.9 million tons in 1982/83 to 27.9 million tons in 1985/86, with steadily increasing profits. There is a possibility that, in the event of large discoveries, ONGC would need to seek heavy borrowings to finance development costs. In order to protect ONGC's financial position, GOI will periodically carry out a review of the prices of crude oil and natural gas to ONGC and set such prices at a level which will enable ONGC to earn a return on capital employed sufficient to meet its debt service obligations, maintain adequate working capital, and finance a substantial portion of its proposed capital 1/ Specifically, (i) detailed surveys of deep water and bottom conditions; (ii) avoidance of drilling during adverse weather conditions; (iii) location of initial outer-shelf wells to the shoreward areas; and (iv) use of a dynamically-positioned drillship.  -21- expansion (Section 4.02, draft Loan Agreement). ONGC's investment program for 1982/83-1985/86 is Rs 115.5 billion (US$12.8 billion). While this program is ambitious, it is well-balanced, and concentrates appropriately on accelerating the exploration of the more prospective areas, such as the Krishna-Godavari basin, and development of the more productive known oil and gas resources, such as the Bombay High and South Bassein fields. However, ONGC is expected to finance almost 75% of its investments from internal sources. In addition, as it has done in the past, ONGC is expected to resort to foreign borrowings, both commercial and official, to help finance the foreign exchange portion of its investment program. In line with this approach, ONGC's international invitations to contractors and suppliers to subimit bids for ONGC investment projects now include a request for financing proposals. During 1980/81-1981/82, disbursements of US$230 million from commercial loans and credits and of US$385 million from overseas development assistance covered 56% of the foreign exchange requirements of ONGC's invest- ments. For the remaining years of its investment program through 1985/86, between 40-60% of the foreign exchange requirement is expected to be financed from commercial borrowings. So far, during 1982/83, ONGC has already obtained commitments of about US$245 million from foreign commercial sources and nearly US$60 million from bilateral development assistance sources; an additional US$200 million, including some for the Krishna-Godavari project, is likely to be contracted from commercial sources (commercial banks and export credits) in the current fiscal year. Bid packages with a foreign exchange component of at least US$500 million will be issued this year with the invitation to submit financing proposals. The Bank's contribution to ONGC's overall foreign exchange financing requirements over the project period is expected to be about 6%. Accounts and Audit 58. Each project unit has a Finance and Accounts Section which reports through the Project Manager to the Member (Finance) of ONGC. The Internal Audit Section reports to the Member, Finance and performs satisfactorily. ONGC's accounts are audited by the Comptroller and Auditor General of India, which is considered acceptable. ONGC's financial statements will be sub- mitted to the Bank semi-annually, and its audited accounts will be submitted to the Bank not later than 12 months after the end of each fiscal year (Sec- tion 4.02, draft Project Agreement). Benefits and Risks 59. Notwithstanding strenuous efforts to develop existing oil reserves, India remains heavily dependent on imported oil to meet its energy needs. Discovery of additional oil reserves will have a marked impact on the balance of payments and assist the economy to adjust without unduly constraining its growth. On the basis of seismic surveys and drilling results to date, it is clear that the Krishna-Godavari basin is highly prospective, and that the lik,elihood of establishing commercial reserves in the project area, both onslhore and offshore, is high. The proposed project is, therefore, a criti- cal element in India's investment strategy. Even relatively modest dis- coveries would have a beneficial impact on the balance of payments and the  -22- economy and yield satisfactory 1/ returns. 60. ONGC has a vital role to play in India's exploration efforts, a role whose importance will not diminish as foreign oil firms step up their exploration activities. The project would significantly improve ONGC's exploration capability. During project preparation, the Bank has already had an important influence in shaping the project, and GOI's exploration strategy in the Krishna-Godavari basin. Through technical assistance and association with experienced foreign contractors who will execute the difficult drilling and specialized seismic survey programs, ONGC will gain valuable experience in designing its exploration program, in specialized seismic survey work, and in drilling in deep, high-pressure gas zones and difficult deep water areas. 61. The project involves some risk that insufficient hydrocarbons will be discovered to justify the investments, particularly in the outer shelf where larger finds are necessary to justify the high cost of exploration. On the basis of the data available to date, however, the geological risk appears acceptable. There is also a technical risk that difficult drilling and testing conditions will prevent efficient or timely completion of the project. To mitigate these risks, experienced foreign contractors will execute the most complex portions of the drilling programs. In addition, technical assistance is provided to assist ONGC in supervising the onshore and outer shelf drilling programs which will be carefully designed. Also, the maximum evaluation of data provided by each outer shelf well will be undertaken so as to reduce the number of wells required to determine whether the discovery is of commercial proportion and to re-orient the program should results so justify. During implementation, Bank and ONGC staff will closely monitor the data being obtained, and review the comparative economics of alternative exploration prospects. The flexibility of the program (see para 47 above) will contribute to reducing the financial risks to acceptable levels. PART V - LEGAL INSTRUNENTS AND AUTHORITY 62. The draft Loan Agreement between India and the Bank, the draft Project Agreement between the Bank and ONGC and the draft Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 63. Special conditions of the project are listed in Section III of Annex III. The signing of a Subsidiary Loan Agreement between GOI and ONGC would be an additional condition of loan effectiveness (Section 6.01, draft Loan Agreement). 1/ E.g., discoveries of 5 million barrels of oil onshore, or about 30-50 million barrels in the inner shelf or 150 million barrels in the outer shelf would yield a 20% rate of return. The equivalent figures for gas are 3.5 billion cubic meters onshore, and about 15-22.5 billion cubic meters in the inner shelf. Based on existing geological data, the poten- tial accumulation in each environment is estimated to be at least as large as these amounts.  -23- 64., I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 65. I recommend that the Executive Directors approve the proposed loan. A.W. Clausen President September 16, 1982  ANNEX I INDIA - SOCIAL INDICATORS DATA SHEET Page 1 of 5 INDIA REFERENCE GROUPS (WEIGHTED AV5RAGES AREA (THOUSAND SQ. RM.) M0ST RECENT ESTIMATE- TOTAL i76 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 1818.2 1960 /b 1970 Lb ESTIMATE /b ASIA & PACIFIC ASIA 6 PACIFIC GNPP!RCA!ITA(US$) 70.0 110.0 240.0 261.4 890.1 ENERGY CONSUMPTION PER CAPITA (KILOaRAMS OF COAL EQUIVALENT) 111.2 152.5 194.4 448.7 701.7 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUS.) 434850.0 547569.0 673207.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.3 17.3 32.4 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 994.1 STATIONARY POPULATION (MILLIONS) 1694.4 YEAR-STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY - PER SQ. KM. 132.3 166.6 200.6 158.1 255.9 PER SQ. KM. AGRICULTURAL LAND 247.0 307.8 362.8 355.9 1748.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.9 42.7 40.2 36.8 39.9 15-64 YRS. 54.5 54.2 56.8 59.7 56.8 65 YRS. AND ABOVE 4.6 3.1 3.0 3.5 3.3 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3 2.1 2.0 2.3 URBAN 2.5 3.3 3.3 3.3 3.9 CRUDE BIRTH RATE (PER THOUSAND) 43.7 40.0 35.6 29.3 31.8 CRUDE DEATH RATE (PER THOUSAND) 21.8 16.7 13.6 11.0 9.8 GROSS REPRODUCTION RATE 2.9 2.7 2.4 2.0 2.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 19.3 36.3 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 99.0 108.1 115.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 95.6 90.4 88.8/c 97.3 106.4 PROTEINS (GRAMS PER DAY) 53.6 49.7 48.4/i 56.9 54.4 OF WHICH ANIMAL AND PULSE 17.2 14.8 13.1Cr 20.0 13.9 CHILD (AGES 1-4) MORTALITY RATE 26.2 20.7 17.4 10.9 6.7 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 43.2 48.1 51.8 57.8 59.8 INFANT MORTALITY RATE (PER THOUSAND) 165.0 139.0 123.4 89.1 63.7 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 17.0 33.0 32.9 32.0 URBAN .. 60.0 83.0 70.7 51.9 RURAL .. 6.0 20.0 22.2 20.5 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 18.1 37.7 URBAN .. 85.0 87.0 72.7 65.7 RURAL .. 1.0 2.0 4.7 24.0 POPULATION PER PHYSICIAN 4850.4 4889.0 3630.6 3297.8 8540.4 POPULATION PER NURSING PERSON 10975.3/d 8296.5 5696.1 4929.3 4829.4 POPULATION PER HOSPITAL BED TOTAL 2178.7 1612.9 1311.0/e 1100.4 1047.5 URBAN .. .. 362.3/i 301.3 651.6 RURAL .. .. 10432.8/e 5815.7 2597.6 ADMISSIONS PER HOSPITAL BED .. .. .. .. 27.0 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 URBAN 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 .. URBAN 2.6 2.8 .. RURAL 2.6 2.8 .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. .. URBAN .. .. .. RURAL .. .. ..  ANNEX I Page 2 of 5 INDIAI80CIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVEI4ES - MOST RECENT ESTIMATE)t M08T RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 73.0 78.0/c 97.4 96.2 MALE 80.0 90.0 92.0/i 101.0 99.8 FEMALE 40.0 56.0 63.0/? 87.8 92.1 SECONDARY: TOTAL 20.0 26.0 27.0/c 53.0 37.6 MALE 30.0 36.0 36.0/;? 63.8 41.1 FEMALE 10.0 15.0 17.ore 41.3 34.1 VOCATIONAL ENROL. (X OF SECONDARY) 8.0 1.0 0.7/f 1.7 20.8 PUPIL-TEACHER RATIO PRIMARY 46.1 41.5 51.8/c 37.7 35.5 SECONDARY 16.0 20.9 .. 20.2 25.0 ADULT LITERACY RATE (PERCENT) 28.0 33.4 36.0 52.1 73.1 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.6 1.1 1.3/c 1.5 9.8 RADIO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 33.6 35.4 116.5 TV RECEIVERS PER THOUSAND POPULATION 0.0 0.0 1.0 3.2 37.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 10.6 16.0 19.8 16.4 53.7 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.1 4.1 3.7 3.6 2.8 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 185951.1 219194.2 264204.4 FEMALE (PERCENT) 30.7 32.5 31.8 29.5 33.6 AGRICULTURE (PERCENT) 74.0 74.0 69.3 70.0 52.2 INDUSTRY (PERCENT) 11.0 11.0 13.2 15.0 17.9 PARTICIPATION RATE (PERCENT) TOTAL 42.8 40.0 39.2 40.0 38.5 MALE 57.0 52.4 51.8 51.8 50.5 FEMALE 27.3 26.9 25.9 23.8 26.6 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.0 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIG2EST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/ 22.2/f HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.91j 49.4/i LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.77j 7.0/. LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.27 16.2/f PCOVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 132.0 133.8 194.7 RURAL .. .. 114.0 111.1 155.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 178.2 RURAL .. .. .. .. 164.9 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOHE LEVEL (PERCENT) URBAIN .. .. 40.3 43.8 24.4 RURAL .. .. 50.7 51.7 41.1 Not available Not applicable. NOTES /al 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. /lb 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 1978 and 1980. I.: 1977; /d 1962; /e 1976; /f 1975; /I 1964-65. May, 1982  ANNX I Page 3 of 5 DEFINITIONS OF SOCIAL INDICATORS Not..: Although lhs date ar drso fro- n e generlly judged ibs mas eubriaieed reliable, In should als be noted that they say no bentr ognionally coepereble becose of the lack of scadnladieed definition en...d -oipte osd by different.. ontrin in to1lectiag the date. The date a. e eras-... thelass,.. ueful no dsertibe ordersof magnitude, indi.tat trends, eel the-strie- -eeti. mejor differen.ee ben....tIoo..ris. . Thea osfarare groups se 11) the s. m ....untry group of tha sob j.e I. tooty and '(2) s nouniry getp etob etehthiho eeemonis ihe tourney grop oftb sabj-r co...try (eotpo for "Ighl Ioose Oil Onporier" group eft-re "iddle Inca- North Afriosan Middletet Is choeen bacatee of sr e ot-ultrl- effinities. Itth reerac gop data the -n-rage ar Populetion eeightsd eritbheti Ian lfo eac ildicatr ed hoeny h"e majority of th couoiries in group toe der fortihet indiosto. .Sinc the oene-g of c..tnie o-n ths indicetors dlenda or the onailabiliny of data and isnnlioe tcinms c enr teed in Iee nmeea f le. indicetor to rthr The. --erges are. oty oeful .In cmpring the -ale of cos lndiraot. ate i.e ti mog th. coun try end referor grops. AREA (thousan.d sqAk.) Populetiro Per teie e P oe,oht o oa Popultion (tonl Total - Total surface aret cet ol.01aeasd itiandetr; 1979 data. rbn, md ror) divided by their V.repetire tueber of bompitel hede Eaioiua-tetien of agrtclt...aI area usdcepraiy rpemoty -nallble in public mnd prirate geerlan1 maieiadhsie n s for croPs, pastres market td kitchen gardet-o to lie fallo; 1979 deoc . hebilitani-n ceners Hspiltol ar Iaa oheente per-retly staffed by at Iees.t one physicior. thiesoapro-idieg principal1yrto GNP pog CAPITA (0591) - GMP per copita- cmtem tretmre prics ...a.l- dltaerenticdr. oalhsiem bovr,inluide heaItb tclatsd hy ame conneraiteahod .e Worltak Ata lP-0 basis); 1960, rdimdia. cntr eon ier ifetiyaefd b heoa boo by 1970, and 19b0 dens, mdclastnt. nre ief,etc.) eich oIffer in-patienl ato, datIoln and Pr-ide a linitedl rage of medile failtis For stuim- fENERG CONSU(MPTION ff0 CAPITA A-Anua onsoe..pti-r of co_erial etrgy (coal' tic-Iprpseuban hoopioml, ilclude . p W rH ciO.ga .re ..spia.la, and lignite, petroleum ... raoa 1O ed bl ydre-, roc-eer d geotherm-i .1e- aol rora hoapitai. loca or oure heapcoals eel mdical mod matern.ity oriclt,y) in iormso o qicalenoper..Pita; 1960. 1970, aol 1979 ostrs pelire1d hopitais art ittloded only under total dart.. Adiseito pe b"'Pa Bad - -Ttl uber of adier t rdiet barges From hoeplculs dliiidedBby rho nuber of brdu. POPULATfION AfND VIfT STATISTICS Total Ppoplation, Mid-Year thousads) - As of Jolt 1; 1960. 1970, old 1990 01151MG Crbao yneair(ereto oa) .ueo.rant oa oulto;Abuebel~d cniacaofe rop f idlniluall "Ih ebore ll,, quarcerm differntdefittina l urban areas nay affect comParability of date sod tbeir ait -.aIa. A boarlar or lodger soy or maynet be nilald it Ibb_Ii; 96. 1970, rod 19-60 Iota. ....outhold for -noatisicl p-tposeo. Pcpulanlo- PreJen ie-o Aneragenueke of parsota pro roo- toal brht end rara1 -ateragenm "PorlaionI at 0 Curen populatio .orjeoi-n fbased et 1980 be fpmn e coo it dlubn n rrlocpedonrone toa ouaionby t elldot n tbeir mortalty aol fetilit rne.Inllle --eepecti-ely. cool ~ing rtluda t-enrt otc n PoctinPer,noinra fo erey rae..pien hoeleesacn uocpIed par-a in lte necs Ipa brth inoe .. nb.00r npr001einoomo Atle-aco Elai.-rioIy (peo-eo of d-llingo) - otal., urban, and rurel1 lenel, and f.eel liferIcunyna iiugt7.5 yaa Tha per-.otetloa d-eloaut lorot nlcn uress eotrt meter for fertility cace elno hu.a th- le-e1a au 'In elte in of tcu, ocet an urldallg reepoiry. Eah counrov It chaIlal te ln fcet- riacautceto EuDaiy UCATIOfN od fertilit y treode for p-ojeo-Lon pupne dutdfrlso oion Sltsio..sry pplelr- In, a stat trey populatiot tb.r. it no groath since Prnr-oho lnl and fea~. i-Cr-a coa,sle and finale the irob rar in lequal to rho deat rcr, -od alue the ogeetrut.rere- orlla,to of all g.. an the prinaryIenrl an Prc..ncagee of ore.part- matcntc.Thie oab r only atrforility rcsdecline t (cey cho-age pplco osiyinoludet childre aged b-li nba rrplooeseotboth 0f unit... ..rdoco rt,ubI, thgnra0c yeaut djcncrd for dlfferan lrnch of primary edu-tirn; for ofwmnrpluoc ttsrl fca 'y. The,tclnr oua nnsr eroonao eith Iner.Ia ... rdcatotoolmt say -enrd .101 percan.o eatlotd enthr boet of tie proetd ohtcaicie0 h pplco ince -nappllaarblwo ho h fi o colae it tIbe yea 2000, and the rate of decOlue nf feccilityraeteceplor-S-codaro school -lttl ooad ren1l - Computeda-abono;st-odsry meno p_ Irtel-. educa tio reursa ... a.. . co- pr I apyr-ed pr-lnayinrcir yer ta luay p..olarioc ia oroobed - Tha yran oh-n ocation..ry populacio- prnd Iegnrltctoa.o trader craitiog I_ntr-cto_ frr pupils elan -ill hars.bd..tully of 17 cr 17 year.o- gr; oor-oy-d-etcuner eeal Populmoico Density eucludd. Per so. km..- Mid-year.... opolain- par q-ar kilometer (1fI heocsoea) Ifo oa oa Vnretloct Ioren f aec-dory - e-aico.. losti-tot i..s aa;1960, 1(70 Iad 179 den. IncludeehIa, indueolel, or other prognami ofich t errae independ- Paq~ e gioccl - lat- - Coopored ae ebone for ugiuirl.lad rotly or at dryain__I _f ecdary Into. lotct._ only; 1960,g 1970 tol 1979 date Pupil-trte raio-rrtry, and aooao - Totl1 ndroteI enrolled in -oaeitArnrcunfeocr)- Children fl-l4 ye..r. , -ok tog-age 115- poloryan seodry lantle divided ty ..uohert of tochero in the by ... a)-elcd (160Y, yeoadon-r) an per-teoogesofsid-year popo- coo-podogerl. latc 1986, 1971 an 199 data. bllt literacyrat oaroant) I- Lite-atrade1ta (etlo to rod ard trite) cpu2latir- iro-b Moto lren-t) - total - A,nuo1 gr-oh rat- of necal nid- anpercr -ge of tota eb1b yoypla-i- agad 15 yrart atd ever. yerpouaio o 1911-60, 1960-71, ond 1970-90. Puai_n Irc_h Mte (perroc -ohneta nocbao o ra u 'ONbtU(PTION lanioro for 1950-h6 96-0, end-1 1971-91. Penger Cor. po.h.ud ouat10 Poso.gr S., tem eamoo Crd irOMte (per chooseo d) - Alot-1 lIce hiotha per th-o...d of nid-yoar cor ..a log lan ibnel ight per....; -1olda-aboaoe,heartees.d pcaro;1960, 1970, end l9M0 Inca. nil ...ry orhia Crude Dtan Rlto ((or ch-ua.-(-Acldoatba pero oo-nad of ud-y... Modjo Recei--r Iper tomn ooatr -Ii yr f arn o radio p..olacioc; 1960, 1970, soS99.at...a.st .ogaeal bIc a huedofPopltin ecIldea - i...o ..... grdcill aR-unr-A-ge ounha of da-gorero . ea oily hear in licece..d retainers in .....trlra and it ye... ohr registracill of radio bar cornl rpodotio oiod if ala -p-rie_r prsn g-soli er- ont toe it nifooc; dta fcIecnIpao a cot hcrmprablrsi... colic p rats; usool 1yfine -year tuI'agl ding In 19t0, 1970, an.1.1 mee o-u- e. abolished lllc-oOo.S y..ill Plencng- Aco adorn, Annua (ohoonacla) A _oa _ner of accoytona- T`I MaRnera. (pro1 . IIneadpoua TV)-forrn for br-doaIt to c.hrb-eoo da-ces under auspice' ofnoioa frily planning P,orm aee yubl IPar tho...ond popuociot; rothda- -1i .ornard TVrcler relyyano-.'aer (paceo of-ocieed women) - Peraccmge fmare i nctoortlet and in years oht re giatra ion of TI seta wo in effec.. omnoohild-barig agr (15-u yedni nc ua cloth-cou_toIda-ior to Nsoapuper Circlatio rpo thutd population) - ibhr- thna-rraeIr-. al oried otoocin aae a'ge group. Iooio f "dolly gecaru ll .n.r.neopspeo', defined anapriodical publi-otion denoted primail to _ering enea en Iti ronsidered P10D ADft n'TRITION to be 'doily' Of it oppearoa. . to foot i mo a oak. Ildac of Food Prooto r aia(99- 71-400) - oe fPar "aPit ao...a. Citema Ancoe1 Att-ndanc par Capto per Year - eard or the number of production of all food comendicla. Pooduotio out leden seedd ao teed and tiobros ao1d durig the year. Ocoludiog adminirna to drine-ioIi-eea on ca.ledar peer bonin. Comedlcten-uoa prinary g0010 (e.g. tugerca.e and sohle units insted of aogaor)nich are edibla cod curtain ouctiecta (e.g. cuffae and 'etea _o _clded). Aggregea produo-ion of aech IoI_t. is baa on. dLAB0R FORCE naioa Saarg Proue_ rceoihe 1961-65, 1970, and 1990 deco. Total Labor Porte (,h..oaoda) - toE,--t-Ily attire pern.t.., inoleding Par -arirs -upply ofclre rcetofCrq.rect) - Cnpd from ermed froat and unemplyed hut necd lutg hoela tdns energ eqlal_ of trfood tapyl ir -nilable ic .ountry per cnpioa _cering populationo l gt eit o i n etoacutr_ r per day. A aIal eup l e roep,ise domesic pr-d-ci-, inportn laos ret p-rarle; 1960, 19(0ad190Iota enpoca, end changas in a-ok. tat 1uyis r uI nmlefed, soda, fnale (pyrerteo - Female labor frrr I oP.rc.ccagao totalbo forte. qurnbteued 10 foo oocetg d rlssed ndicbuo. eqire giuloeferoi- Labor o-c to farsng, 0fo-ory, brio n marts. trr atieitod by FAO haoed onphyeiclcgical r-de for c a1an-flabhtog no perc Sag of total labor force; 1960, 1970'and 1991 data. Ifyod health to-idering rci...orat c- at-i o body meiht. ag I.d-ery(poat -Lbor fyrra in mIring. .. ontr-ction,mauaur ad an btot i-ufo I0 popu laric, ald aliocog 11 ecn for inae atad ele- rio ty,..aser atd too u p-erorge of otol. labor forte; houoholdlnr;96-5 190 n 197 dat._ 1960, 1970 end 1980 da. Pe airsply of -rtrln ICosa..r lay) d -P.. ...rona el of yent -pita ParticipationAto(ecet tota.mlr, and _femae 1 ar I Pa o net _nypl to fod per day. Net soply of food ta dafload ana Rne - aotioioyreIenarroo-putrd rool ol, and female Isbrfroa qulan -t fr llr ...olnaa lihru hy loDe p-oide for nhio P......e of totl, male utd femal popolenlon of all a -e ep-c ti-ly; a1lloao.e o- f g6 ._as f tcoolp irei yet oy end 70 gra- of ecieal ond 1960, 1970, ad 1900 data. O heteore natal on lILa' P..tioipsoi-aa pulse prr Io f ohiob 10 Eruam should heanma pro-ain. Thes -cod- Stlnrngae-e Itctr f thr populaion, and long time rend.A arde aro lonerIra. no o 5orm f o yrnticaod 75 goama of fewenimanur fro nonoca a.ur.e.. anima proneito anaa Be m te tnorld y 'yAeDbOIn th Third EcotonloI Dpen.drocy Rato .Mtt of puaItloo under 15 and 65 and oner World Ford Surre.y; 1961-65, 1970 ad 1977 dr.to th total labor rorce. Pe ait orin aupply foota. a an ue - otio auppl o,f food de- rOved foon nimaa and pul... trgoaa.. prr day; 1961-65, 1970 ond 19(7 data. IfNCOME DISTRIBUTION Child (.... 1-41 loath Mot (yer tho....od) - Atn-l d.toht par thb....nd io kerntg fPoanIcm 1t not n hod) - Moc.ne b, y richest aegop14year-, cc children in this age gEol , fo -ordr-lep ig tot ecn,ribec't percen, poorent1 pacat,ad lpoet40p paroo tlino dora derioad free lida tablat, 1960, 190cl10 aa f I..ieholln. ooAL,Tft POPtETI TARGET GROUPS LIfe taceuanoy ao Slth fyrers A--uerge oubet of year of lifa ormaei.ig Thn rololg aori"ate er er pyrco -aemaur fpnrty le-ela at birth; 196, 970 ad 191 dat. and should hr nnerprte.d oih Ion idaralateutlt Ifnfon M-tal' icRata Irro thousan d) .- unu1 deaths of ioda-nauclero -Y-r Etni-arad Absolutr PonryIcm ne olpar carial. - orb an -olrorl of age per rhonood lir ith;190 1970 no11ed 190 ae Ansolu- po..erty Incm lnlcita "onIolblooih a inm bocte no afe acerlyrocnt c poplatin) -total, orha.- d al rura - oN- nutrlitionlly adequt dIrt plot. enaec1til nonfodV raqurhm ais no bin of pe...lr (total ora,ad rurl) alth reooeblncceetaae ffrlat _arrrsPpy oolden craooaed tuf_o o_ ao u_ traie ho _....t...nled oEri-ard Rbilat e P-n-t Ioor lae fItS1 per oia ra n ua percetagesI o1f.theIr -pnclina pepu,lA,lo_s It an urban npablic Peroalicoeo tle coutry. Irbar lroei in derin-d from the .rura focri roadpono 1ocatad nor mor that 200 meer (roe a h...a mayb lenr i othadju_tent for higheor 000 of linning In urban. areas. c--ideo-d baehing cithic r...ceonbla ac.e.a of nha,c booe Ir-rel ar..ae rimated Poclaci-n Sel_ Annol-e Povert Income _Ie peoo) ra rescbl tre ol impl'y obhtrc torola0 ehr f tca h..e.hold and -orl1 Porent of Ppopulaion fur- atsd recal ho are esl boot.. hel te yrnularrpooltatprn hd io facIItirg thaor' fanily' n et no-adn. Aortas to Soornta Ooeo-a-l lprcer.c of _cpu.lurll -total, uat end ourol- tiur--of etyl f toaleior n I atdo-o'l7 anrt oorotal dlypooala the onomo chaI deapa..rn l tonpo it.- re . lo, orr doapoal nup Io lod PP,polfio pe Pyuca --I, lri dinided by nub-r of prtfiniog phyoi- tEocoi end Social Data Vinisi-n data. quapifield from o-diouI -chool at .....eaiy venl. Eonoio Anlypein and Poe Depart-en Poruleti-c per ONraia ecn Poua ltvbIlda by ne-ber of poa-iotogfts 198 2 nusig uili isoa.  Page 4 of S ECONOMIC DEVE OPT DATA GNP PER CAPITA IN 19 80 US$ 24D GROSS N4TIONAL PRODUCT IN 1980/81 S ANNUAL RATE OF GROQ j (z. constant prices) cS USS Bln. 195556-1959160 1960/61-1964165 1965/66-1969f70 1970h71-1974f75 1975/76-197 9f80 GNP at Market Prices 159.37 100.0 3.7 3.6 3.6 2.9 4.1 Gross Domestic Investment 38.46 24.1 Gross National Saving 35.30 22.1 Current Account Balance -3.16 -2.0 OUTPUT. LABOR FORCE AND PRODUCTIVITY IN 1978 Value Added (at factor cost) Labor Force i/ V.A. Per Worker US$ Bln. % Nil. % USS % of Nationl Averase Agriculture 39.8 39.6 180.6 70.7 220 56 Industry 25.2 25.1 32.2 12.6 783 199 Services 35.5 35.3 42.6 16.7 833 211 Total/Average 100.5 TFU 25.ii 4 GOVERNMENT FINANCE General Government e/ Central Government Rs. Bln. _ of GDP Rs. Bln. 7 of GDP 1980/81 1980/81 1976/77-1980/81 1980/81 1980/81 1976/77-1980/81 Current Receipts 238.19 19.0 19.1 125.41 10.0 10.6 Current Expenditures 238.93 19.0 18.0 133.29 10.6 10.6 Current Surolus/Deficit -0.74 -0.1 1.1 - 7.88 - 0.6 N.S. Capital Expenditures f/ 107.35 8.5 7.6 79.99 6.4 5.4 ExternaL Assistance (net) d/ 12.86 1.5 1.0 MONEY, nREDIT AND PRICES 1970/71 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 February 1981 February 1982 (R. Billion outstanding at end of period) Money and Quasi Roney 109.8 194.6 223.2 273.2 329.1 398.6 467.9 553.1 536.13 615.53 Bank Credit to Government (net) 54.6 95.3 97.9 118.5 137.3 162.4 201.0 258.1 238.22 292.18 Bank Credit to Com-ercil Sector 64.6 126.5 153.7 185.1 212.2 253.5 306.3 363.2 349.03 422.15 (Percentage or Index Numbers) April-Feb 1980/81 April-Feb 1981/82 Money and Quasi Money as R of GDP 27.3 28.0 30.1 33.9 40.8 40.9 44.1 44.0 Wholesale Price Index (1970/71 - 100) 100.0 174.9 173.0 176.6 185.8 185.8 217.6 257.0 255.9 280.5 Annusl percentage changes in: Wholesale Price Index 7.7 25.2 -1.1 2.1 5.2 - 17.1 18.1 18.4 9.6 Bank Credit to Governoaent (net) 15.0 9.2 2.7 21.0 15.9 18.3 23.8 28.4 28.6 2/ 22.7 h/ Bank Credit to Commercial Sector 19.4 18.2 21.5 20.4 14.6 19.5 20.8 18.6 16.6 g/ 20.9 h/ a/ The per capita GNP estimate is at arket prices, calculated by the conversion technique used in the World Bank Atlas, 1981. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. b/ Quick Estimates, Central Statistical Organization. c/ Computed from trend line of GNP at factor cost series, including one observation before first year and one observation after last year of listed period. d/ World Bank estimates; not necessarily consistent with official figures. e/ Transfers between Centre and States have been netted out. f/ All. loans and advances to third parties have-been netted out. R/ Percentage change from end-February, 1980 to ecd-February 1981. h/ Percentage change from end-February, 1981 to end-February 1982. i/ Total Labor Force and percentage breakdown fro,n Sixth Five Year Plan, Table 2.6 and Annexure Table 13.8.  ANMEX I Page 5 of 5 BALANCE OF PAY}ENTS 1978/79 1979/80 1980/81 1981/82 MERCHANDISE EXPORTS (AVERAGE 1977/78 - 1980/81) (US $ Mln.) US$ Mln. J Exports of Goods 6,978 7,998 8,504 8,700 Engineering Goods 908 12 Imports of Goods -8,519 -11,302 -15,838 -16,000 Te 506 7 Trade Balance -1,541 -3,304 - 7,334 - 7,300 Gems 403 5 NFS (net) 717 1,100 722 915 Clothing 501 7 Leather and Leather Resource Balance - 824 -2.204 - 6.612 - 6J85J Products 457 6 Jute Manufactures 303 4 Interest Income (net) k/ 14 196 370 212 Iron Ore 321 4 Net Transfers 1/ 1,185 1,577 3,079 1,840 Cotton Textiles 316 4 Sugar 102 1 Balance on Current Account 375 - 431 -3.163 -4 333 Others 3,541 48 Official Aid Total 710 Disburements 1,695 1,738 2,337 2,724 S/ XTERL DEBT, MARCH 31. 1981 Amortization - 702 - 608 - 707 - 659 USS billion Transactions with IMF - 158 - 1,035 690 Outstanding and Disbursed 17.2 All Other Items 265 - 475 147 - 797 Undisburead 7.5 Outstanding, including 24.7 Increase in Raeerves (-) -1,475 - 224 351 2,375 Undieburced Gross Reserves (end year)p/ 7,357 7,579 7,228 4,853. Not Reserves (end year) rL/ 7,357 7,579 6,901 3,876 DEBT SERVICE RATIO FOR 1980/81 LI/ D/ 11.2 per cent Fuel and Related Materials IBRD/DA LENDING DECEMBR 31. 1981 Imports (Petroleum) 2,043 4,045 6,657 6,075 US$ million Exports 24 26 33 .BRD IDA Outstanding and Disbursed 984 5646 Undisbureed 880 4634 Outstanding, including Undisbursed 1864 10280 RATE OF ZXCHANGE June 1966 to mid-December 1971 US$1.00 - Rs 7.5 Re 1.00 * US$0.13333 Mid-December 1971 to end-June 1972 US$1.00 - Re 7.27927 Re 1.00 - US$O.137376 After and-June 1972 Floating Rate Spot Rate and-December 1980 US$1.00 - Rs 7.930 Re 1.00 - US$O.126 Spot Rate end-December 1981 US$1.00 - Rs 9.099 Re 1.00 - U050.110 1/ Estim ted. / Figuras given cover all investment income (not). major payments are interest on foreign loans and charges paid to IMF, and major receipt is interest earned on foreign asea. 1/ Figures given include workers' remittances but exclude official grant assistance, which is included within official aid disbursements. m/ Excludes net use of IMF credit. F4 Amortization and interest payments on foreign loan as a percentage of exports of goods and services. o / Includes $ 234 million of cosercial borrowings. p/ Including gold.  ANNEX II Page 1 of 20 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of March 31, 1982) US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 45 Loans/ 1,516.0 - 73 Credits fully disbursed - 4,315.4 - 342-IN 1973 Education 12.0 1.70 456-IN 1974 HP Apple Proc. & Marketing - 13.0 1.15 1011-IN 1974 Chambal (Rajasthan) CAD 52.0 - 8.38 482-IN 1974 Karnataka Dairy - 30.0 15.19 502-IN 1975 Rajasthan Canal CAD - 83.0 27.24 521-IN 1975 Rajasthan Dairy - 27.7 10.71 522-IN 1975 Madhya Pradesh Dairy - 16.4 2.41 585-IN 1976 Uttar Pradesh Water Supply - 40.0 12.40 598-IN 1976 Fertilizer Industry - 105.0 12.71 604-IN 1976 Power Transmission IV - 150.0 34.00 609-IN 1976 Madhya Pradesh Forestry T.A. - 4.0 1.30 610-IN 1976 Integrated Cotton Development - 18.0 9.24 1251-IN 1976 Andhra Pradesh Irrigation 145.0 - 68.27 1260-IN 1976 IDBI II 40.0 - 8.17 1273-IN 1976 National Seeds I 25.0 - 20.90 1313-IN 1977 Telecommunications VI 80.0 - 11.52 1335-IN 1977 Bombay Urban Transport 25.0 - 6.94 680-IN 1977 Kerala Agric. Development - 30.0 20.86 682-IN 1977 Orissa Agric. Development - 20.0 5.82 685-IN 1977 Singrauli Thermal Power - 150.0 19.37 687-IN 1977 Madras Urban Development - 24.0 0.10 690-IN 1977 WB Agric. Extension & Research - 12.0 12.00 1394-IN 1977 Gujarat Fisheries 14.0 - 6.57 712-IN 1977 M.P. Agric. Development - 10.0 4.40 720-IN 1977 Periyar Vaigai Irrigation 23.0 12.88  ANNEX II Page 2 of 20 US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 728-IN 1977 Assam Agricultural Development - 8.0 5.18 736-IN 1978 Maharashtra Irrigation - 70.0 23.76 737-IN 1978 Rajasthan Agric. Extension - 13.0 3.43 740-IN 1978 Orissa Irrigation - 58.0 21.29 1475-IN 1978 Industry DFC XII 78.5 - 4.24 747-IN 1978 Second Foodgrain Storage - 107.0 75.63 756-IN 1978 Calcutta Urban Development II - 87.0 16.59 761-IN 1978 Bihar Agric. Extension & Research - 8.0 6.81 1511-IN 1978 IDBI Joint/Public Sector 25.0 - 10.04 1549-IN 1978 Third Trombay Thermal Power 105.0 - 38.55 788-IN 1978 Karnataka Irrigation - 117.6 70.93 793-IN 1978 Korba Thermal Power - 200.0 90.86 806-IN 1978 Jammu-Kashmir Horticulture - 14.0 12.37 808-IN 1978 Gujarat Irrigation - 85.0 56.51 815-IN 1978 Andhra Pradesh Fisheries - 17.5 12.48 816-IN 1978 National Seeds II - 16.0 13.74 1592-IN 1978 Telecommunications VII 120.0 - 43.46 824-IN 1978 National Dairy - 150.0 112.81 842-IN 1979 Bombay Water Supply II - 196.0 181.19 843-IN 1979 Haryana Irrigation - 111.0 27.64 844-IN 1979 Railway Modernization & Maintenance - 190.0 130.32 848-IN 1979 Punjab Water Supply & Sewerage - 38.0 15.56 855-IN 1979 National Agricultural Research - 27.0 24.01 862-IN 1979 Composite Agricultural Extension - 25.0 14.95 871-IN 1979 NCDC - 30.0 15.14 1648-IN 1979 Ramagundam Thermal Power 50.0 - 50.00 874-IN 1979 Ramagundam Thermal Power - 200.0 135.20 889-IN 1979 Punjab Irrigation - 129.0 88.33 899-IN 1979 Maharashtra Water Supply - 48.0 35.25 911-IN 1979 Rural Electrification Corp. II - 175.0 59.52 925-IN 1979 Uttar Pradesh Social Forestry - 23.0 14.63 963-IN 1980 Inland Fisheries - 20.0 19.22 954-IN 1980 Maharashtra Irrigation II - 210.0 155.28  ANNEX II Page 3 of 20 US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 961-IN 1980 Gujarat Community Forestry - 37.0 26.50 981-IN 1980 Population II - 46.0 44.73 1003-IN 1980 Tamil Nadu Nutrition - 32.0 29.33 1004-IN 1980 U.P. Tubewells - 18.0 14.05 1011-IN 1980 Gujarat Irrigation II - 175.0 160.24 1027-IN 1980 Singrauli Thermal II - 300.0 249.36 1012-IN 1980 Cashewnut - 22.0 20.95 1028-IN 1980 Kerala Agricultural Extension - 10.0 9.64 1033-IN 1980 Calcutta Urban Transport - 56.0 51.85 1034-IN 1980 Karnataka Sericulture - 54.0 51.69 1046-IN 1980 Rajasthan Water Supply and Sewerage - 80.0 73.53 1843-IN .1980 Industry DFC XIII 100.0 - 33.50 1887-IN 1980 Farakka Thermal Power 25.0 - 25.00 1053-IN 1980 Farakka Thermal Power - 225.0 199.63 1897-IN 1981 Kandi Watershed and Area Development 30.0 - 28.09 1925-IN 1981 Bombay High Offshore Development 400.0 - 148.49 1072-IN 1981 Bihar Rural Roads - 35.0 34.20 1078-IN 1981 Mahanadi Barrages - 83.0 80.70 1082-IN 1981 Madras Urban Development II - 42.0 42.00 1108-IN 1981 M.P. Medium Irrigation - 140.0 140.00 1112-IN 1981 Telecommunications VIII - 314.0 267.50 1116-IN 1981 Karnataka Tank Irrigation - 54.0 54.00 1125-IN 1981 Hazira Fertilizer Project - 400.0 387.90 1135-IN 1981 Maharashtra Agricultural Ext. - 23.0 23.00 1137-IN 1981 Tamil Nadu Agricultural Ext. - 28.0 28.00 1138-IN 1981 M.P. Agricultural Ext. II - 37.0 37.00 1146-IN 1981 National Cooperative Development Corp. II - 125.0 124.30  ANNEX II Page 4 of 20 US$ million (Net of Cancellations) Loan or Fiscal Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 1172-IN 1982 Korba Thermal Power Project - II - 400.0 400.00 1177-IN* 1982 Madhya Pradesh Major Irrigation - 220.0 220.00 2050-IN 1982 Tamil Nadu Newsprint 100.0 - 100.00 1178-IN* 1982 West Bengal Social Forestry - 29.0 29.00 1185-IN* 1982 Kanpur Urban Development - 25.0 25.00 2051-IN 1982 ICICI XIV 150.0 - 150.00 2076-IN 1982 Ramagundam Thermal Power II 300.0 - 300.00 2095-IN* 1982 ARDC IV 190.0 - 190.00 1209-IN* 1982 ARDC IV - 160.0 160.00 1219-IN*+ 1982 Andhra Pradesh Agricultural Extension - 6.0 6.00 Total 3,570.5 10,632.6 of which has been repaid 1,137.4 94.7 Total now outstanding 2,433.1 10,537.9 Amount Sold .133.8 of which has been repaid 133.8 - - Total now held by Bank and IDA 3/ 2,433.1 10,537.9 Total undisbursed (excluding *) 1,062.1 4,192.2 1/ IDA Credit amounts for SDR-denominated Credits are expressed in terms of their US dollar equivalents, as established at the time of Credit negotiations and as subsequently presented to the Board. 2/ Undisbursed amounts for SDR-denominated IDA Credits are derived from cumulative disbursements converted to their US dollar equivalents on the basis of the SDR/US dollar exchange rate (1 SDR = US$1.11309) in effect on March 31,1982. 3/ Prior to exchange adjustment. * Not yet effective. + Not yet signed.  ANNEX II Page 5 of 20 B. STATEMENT OF IFC INVESTMENTS (As of March 31, 1982) Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 :1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 :1963-66 Precision Bearings India Ltd. 0.6 0.4 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 ]L964-75-79 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 :L967 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 1,978 Housing Development Finance Corporation 4.0 1.2 5.2 1980 Deepak Fertilizer and Petrochemicals Corporation Ltd. 7.5 0.9 8.4 1981 Coromandel Fertilizers Limited 15.9 15.9 1981 Tata Iron and Steel Company Ltd. 38.0 - 38.0 1981 Mahindra, Mahindra Limited 15.0 - 15.0 1981 Nagarjuna Coated Tubes Ltd. 2.9 0.3 3.2 1981 Nagarjuna Signode Limited 2.3 - 2.3 1981 Nagarjuna Steels Limited 1.5 0.2 1.7 1982 Ashok Leyland Limited 28.0 - 28.0 TOTAL GROSS COMMITMENTS 164.7 11.8 176.5 Less: Sold 40.0 2.6 42.6 Repaid 24.5 - 24.5 Cancelled 6.2 1.3 7.5 Now Held 94.0 7.9 101.9 Undisbursed 84.9 1.4 86.3  ANNEX II Page 6 of 20 C. PROJECTS IN EXECUTION 1/ (As of March 31, 1982) Generally, the implementation of projects has been proceeding reasonably well. Brief notes on the execution of individual projects are below. The level of disbursements was US$962 million in FY81, compared to US$729 million in the previous year. Disbursements in the current fiscal year through March 31, 1982 total US$858 million, representing an increase of about 28% over the same period last year. The undisbursed pipeline as of March 31, 1982, is US$5,254 million. Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation of India Project; US$80 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 million loan of May 16, 1980; Effective Date: June 27, 1980; Closing Date: December 31, 1985 Ln. No. 2051 Fourteenth Industrial Credit and Investment Corporation of India Project; US$150 million loan of October 8, 1981; Effective Date: December 3, 1981; Closing Date: March 31, 1988 These loans are supporting industrial development in India through a well-established development finance company and are designed to finance the foreign exchange cost of industrial projects. ICICI continues to be a well-managed and efficient development bank financing medium- and large-scale industries, which often employ high technology and are export-oriented. Disbursements under all loans are ahead of schedule. Ln. No. 1260 Second Industrial Development Bank of India Project; US$40 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: March 31, 1983 Ln. No. 1511 IDBI Joint/Public Sector Project; US$25 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. It is fully committed, but close 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 7 of 20 supervision is required to ensure timely implementation of sub-projects and full disbursement of the loan by the closing date. 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. Ln. No. 2050 Tamil Nadu Newsprint Project; US$100 million loan of September 23, 1981; Effective Date: March 22, 1982; Closing Date: August 31, 1985 Land acquisition has been completed. Basic engineering work is expected to be finished by June, and construction to commence in July 1982. Tendering for major equipment is underway. Project progress is satisfactory. Cr. No. 598 Fertilizer Industry Project; US$105 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1982 Cr. No. 1125 Hazira Fertilizer Project; US$400 million credit of October 28, 1981; Effective Date: January 21, 1982; Closing Date: June 30, 1986 Credit 598 is designed to increase the utilization of existing fer- tilizer production capacity. The project has encountered delays in sub-project preparation and investment approvals by the Government, and in order to bring the project to a close in a timely manner, no new sub-project proposals will be approved. Credit 1125 is proceeding satisfactorily with initial implementation and procurement actions on schedule. Ln. No. 1925 Second Bombay High Offshore Development Project; US$400 million loan of December 11, 1980; Effective Date: February 24, 1981; Closing Date: March 31, 1984 The project is progressing well. Engineering and construction activities are proceeding on schedule. As of January 1982, four of the fifteen well platforms included in the project were already producing, con- tributing over 30,000 bls/day to Bombay High's total oil production. The project is expected to be fully disbursed on schedule. Cr. No. 604 Power Transmission IV Project; US$150 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: December 31, 1982 Cr. No. 685 Singrauli Thermal Power Project; US$150 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 million credit of May 12, 1978; Effective Date: August 14, 1978; Closing Date: March 31, 1985  ANNEX II Page 8 of 20 Ln. No. 1549 Third Trombay Thermal Power Project; US$105 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 million loan and and US$200 million credit of February 2, 1979; Effective Date: Cr. No. 874 May 22, 1979; Closing Date: December 31, 1985 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 Ln. No. 2076 Second Ramagundam Thermal Power Project; US$300 million loan of January 6, 1982; Effective Date: March 16, 1982; Closing Date: June 30, 1988 Cr. No. 1172 Second Korba Thermal Power Project; US$400 million credit of February 4, 1982; Effective Date: March 16, 1982; Closing Date: December 31, 1989 Credits 685 and 1027 assist in financing the 2,000 MW Singrauli development, which is the first of four power stations in the Government's program for the development of large central thermal power stations feeding power into an interconnected grid. Credit 793 together with Credit 1172, which became effective March 16, 1982, support the construction of the 2100 MW development, consisting of three 200 MW and three 500 MW generating units, at the second such station, at Korba, together with related facilities and associated transmission. Loan 1648/Credit 874, together with Loan 2076, which also became effective March 16, 1982, support similar investments at Ramagundam. Loan 1887/Credit 1053, assist in financing the first three 200 MW generating units at the Farakka station. The National Thermal Power Corporation (NTPC) has been carrying out construction and operation of these power stations. Loan 1549 is supporting the construction of a 500 MW exten- sion of the Tata Electric Companies' station at Trombay, in order to help meet the forecast load growth in the Bombay area. All these large-scale thermal power projects are progressing satisfactorily. For Singrauli and Korba, construction works are on or ahead of schedule, although some slippage has occurred in the implementation schedule for the Ramagundam project. The first unit at the Singrauli station was commissioned on schedule in February 1982. In the Third Trombay project, design modifications for plant equipment, price increases for materials, and increases in customs duties have resulted in an increase in the total cost of the project. The Govern- ment of India is raising additional funds from internal sources to meet the additional cost.  ANNEX II Page 9 of 20 Cr. No. 911 Rural Electrification Corporation II Project; US$175 million credit of June 21, 1979; Effective Date: October 17, 1979; Closing Date: March 31, 1984 The project is progressing satisfactorily; disbursements are ahead of appraisal projections. Ln. No. 1313 Telecommunications VI Project; US$80 million loan of July 22, 1976; Effective Date: September 14, 1976 Closing Date: March 31, 1983 Ln. No. 1592 Telecommunications VII Project; US$120 million loan of June 19, 1978; Effective Date: October 30, 1978; Closing Date: December 31, 1983 Cr. No. 1112 Telecommunications VIII Project; US$314 million credit of March 26, 1981; Effective Date: June 24, 1981; Closing Date: December 31, 1984 Loans 1313 and 1592 are progressing satisfactorily and there are no major problems. Imports of electronic switching equipment for the projects were behind schedule, but procurement contracts have now been finalized and the loan amounts fully committed. Institutional improvements envisaged under the projects have been achieved, and the financial situation of the Posts and Telegraphs Department remains sound. Credit 1112, which became effective in June 1981, provides for the continued expansion, over a three-year period, of the Indian telecommunications network, particularly in rural areas. It also provides for the modernization and upgrading of three existing telecom- munications equipment factories, and the establishment of three additional ones. Progress with bidding procedures is excellent and it is expected that the project will proceed according to schedule. Cr. No. 844 Railway Modernization and Maintenance Project; US$190 million credit of November 13, 1978; Effective Date: January 10, 1979; Closing Date: December 31, 1984 Credit 844 was designed to help the Indian Railways reduce manufac- turing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. Physical execution of the project is proceeding satisfactorily, with procurement for the two major components over 75% completed. Cr. No. 1072 Bihar Rural Roads Project; US$35 million credit of December 5, 1980; Effective Date: January 15, 1981; Closing Date: June 30, 1986 The project aims to construct or rehabilitate 700 km of rural roads and to improve maintenance of the rural road network in Bihar. It is proceeding on schedule, with the first year's program of rural road construc- ticin well underway and agreement reached on much of the second year's program.  ANNEX II Page 10 of 20 Ln. No. 1335 Bombay Urban Transport Project; US$25 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1983 Cr. No. 1033 Calcutta Urban Transport Project; US$56 million credit of October 27, 1980; Effective Date: December 18, 1980; Closing Date: December 31, 1984 Implementation of the Bombay project is satisfactory, with over 70% of the loan disbursed. All project-financed buses are in service, increasing the fleet to nearly 2,000, in accordance with appraisal estimates. However, delays in construction of new workshop facilities have been substantial; construction began in January 1982, but to allow for completion the loan closing date may have to be extended one year. Traffic management civil works are also somewhat behind schedule, although now proceeding satisfac- torily. Implementation of works under Cr. 1033 is proceeding satisfactorily, a good start having been made on the important early procurement steps. However, financial and managerial performance is lagging behind expectations and must now receive project authorities' full attention if physical and financial performance targets are to be achieved. Cr. No. 687 Madras Urban Development Project; US$24 million credit of April 1, 1977; Effective Date: June 30, 1977; Closing Date: December 31, 1982 Cr. No. 756 Second Calcutta Urban Development Project; US$87 million credit of January 6, 1978; Effective Date: April 7, 1978; Closing Date: March 31, 1983 Cr. No. 1082 Second Madras Urban Development Project; US$42 credit of January 14, 1981; Effective Date: March 2, 1981; Closing Date: March 31, 1986 Cr. No. 1185 Kanpur Urban Development Project; US$25 million credit of February 4, 1982; Effective Date: April 22, 1982; Closing Date: June 30, 1986 Progress on Credit 687 is generally satisfactory; costs are within appraisal targets on most components and the credit is nearly fully dis- bursed. Construction is complete and cost recovery is excellent in the first sites and services area. For the other two areas, land acquisition problems and consequent delays in construction required a one-year extension of the closing date. Slum improvements benefitting about 30,000 families are com- plete. Legal constraints and initially poor maintenance of improvements hindered cost recovery for slum improvement at the outset. However, project authorities have taken action to resolve these problems and cost recovery has improved markedly. Early project implementation of the second Madras project is proceeding satisfactorily, with evidence that the lessons learned under the first project are being heeded.  ANNEX II Page 11 of 20 The Calcutta project is proceeding quite well in most sectors. Ini- tial delays caused by materials shortages have eased and the pace of implementation has picked up. Procurement and financial management issues are being hanid]ed satisfactorily. Staff shortages in some of ahe implement- ing agcncies :Gi,tinule, and institutional development remains a priority. Disbursements are ahead of schedule, but revised cost estimates for the project, together with the initial implementation delays, may necessitate a revision of the implementation timetable and adjustments to project scope. Credit 1185 is aimed at providing shelter and urban services in Kanpur, the largest city in Uttar Pradesh. Initial tendering is underway. Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: December 31, 1982 The Project has had a slow start due to delays in the preparation of technical reports for regional and local water authorities and in the engage- merit of consultants. While improvements have been made in the physical execution, other aspects of project implementation continue to lag so that disbursements under the Credit have fallen short of estimates at the time of appraisal. In order to improve the situation, arrangements have been made to closely supervise and coordinate implementation. Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38 million credit of October 27, 1978; Effective Date: January 25, 1979; Closing Date: March 31, 1983 Cr. No. 842 Second Bombay Water Supply and Sewerage Project; US$196 million credit of November 13, 1978; Effective Date: June 12, 1979; Closing Date: March 31, 1985 Cr. No. 899 Maharashtra Water Supply and Sewerage Project; US$48 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: December 31, 1985 Implementation under Credit 848 is satisfactory and the institution building aspects of the project are nearing completion. However, initial procurement problems and the Government's slow release of construction funds may delay the project by about 12 months and result in cost overruns. Con- struction work under Credit 842 is now gaining momentum and a large number of contracts are due to be awarded shortly. However, the Government has had to prepare a revised financing plan since the delay in the appointment of con- struction consultants, together with last-minute design changes, caused a two-year delay in the start of construction and consequent substantial cost overruns. Initial delays in implementation of institutional arrangements and tariff measures proposed for Credit 899 have been overcome and the project is progressing satisfactorily. Implementation of Credit 1046 is proceeding satisfactorily. Construction of rural schemes has commenced, and work on  ANNEX II Page 12 of 20 urban schemes is expected to begin shortly. All major materials contracts for the first two years' requirements of the project have been awarded. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1982 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83 million credit of July 31, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1982 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145 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 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 736 Maharashtra Irrigation Project; US$70 million credit of October 11, 1977; Effective Date: January 13, 1978; Closing Date: March 31, 1983 Cr. No. 740 Orissa Irrigation Project; US$58 million of October 11, 1977; Effective Date: January 16, 1978; Closing Date: October 31, 1983 Cr. No. 788 Karnataka Irrigation Project; US$126 million credit of May 12 1978; Effective Date: August 10. 1978; Closing Date: March 31, 1984 Cr. No. 808 Gujarat Medium Irrigation Project; US$85 million credit of July 17, 1978; Effective Date: October 31, 1978; Closing Date: June 30, 1984 Cr. No. 843 Haryana Irrigation Project; US$111 million credit of August 16, 1978; Effective Date: December 14, 1978; Closing Date: August 31, 1983 Cr. No. 889 Punjab Irrigation Project; US$129 million credit of March 30, 1979; Effective Date: June 20, 1979; Closing Date: June 30, 1985 Cr. No. 954 Second Maharashtra Irrigation Project; US$210 million credit of April 14, 1980; Effective Date: June 6, 1980; Closing Date: December 31, 1985 Cr. No. 1011 Second Gujarat Irrigation Project; US$175 million credit of May 12, 1980; Effective Date: June 27, 1980; Closing Date: April 30, 1986 Cr. No. 1078 Mahanadi Barrages Project; US$83 million credit of December 5, 1980; Effective Date: February 11, 1981; Closing Date: March 31, 1987  ANNEX II Page 13 of 20 Cr. No. 1108 Madhya Pradesh Medium Irrigation Project; US$140 million credit of March 26, 1981; Effective Date: May 13, 1981; Closing Date: March 31, 1987 Cr. No. 1177 Madhya Pradesh Major Irrigation Project; US$220 million credit of February 24, 1982; Effective Date: Expected May 1982; Closing Date: June 30, 1987 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructure, drainage, and land shaping are prominent components of these projects. In addition, provisions have been madea to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. The Periyar Vaigai project in Tamil Nadu experienced a 50% cost overrun due mainly to an underestimation of rehabilitation work required and higher-than-anticipated unit costs. An IDA mission undertook a comprehensive review and reformulation of the project in 1981. Project completion is now scheduled for March 1984. In the Maharashtra I project, civil works in some project components are well behind schiedule and of poor quality. Remedial measures are under discussion. The overall management and planning for implementation of the Gujarat II project has been disappointing. The State Government and GOI are discussing ways to resolve staffing difficulties and expedite progress. Progress of the remain- ing projects is generally satisfactory. Cr. No. 1116 Karnataka Tank Irrigation Project; US$54 million credit of March 26, 1981; Effective Date: May 5, 1981; Closing Date: March 31, 1986 The project is designed to finance the construction of about 160 tank irrigation schemes throughout the State of Karnataka. As of February 1982, six of these schemes had been sanctioned for implementation, and another 28 were in various stages of preparation. Initial progress with project preparation has been slow due to staff constraints and unfamiliarity of local engineers with the design criteria agreed under the project. 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 Physical progress is proceeding satisfactorily, with approximately 40% of planned tubewells completed. The operation and maintenance, and monitoring and evaluation components of the project need considerable strengthening. The Government of UP has agreed to undertake specific actions designed to address these deficiencies. Project completion may be delayed by six months due to initial procurement delays. Cr. No. 682 Orissa Agricultural Development Project; US$20 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983  ANNEX II Page 14 of 20 Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12 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 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 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 million credit of November 14, 1977; Effective Date: February 6, 1978; Closing Date: June 30, 1983 Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8 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 million credit of February 16, 1979; Effective Date: December 14, 1979; Closing Date: December 31, 1984 Cr. No. 1028 Kerala Agricultural Extension Project; US$10 million credit of June 25, 1980; Effective Date: August 18, 1980; Closing Date: June 30, 1986 Cr. No. 1137 Tamil Nadu Agricultural Extension Project; US$28 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1135 Maharashtra Agricultural Extension Project; US$23 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1138 Second Madhya Pradesh Agricultural Extension Project; US$23 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1219 Andhra Pradesh Agricultural Extension and Research Project; US$6 million credit approved March 30, 1982; Effective Date: Expected August 1982; Closing Date: March 31, 1988 These twelve credits finance the reorganization and strengthening of agricultural extension services and the development of adaptive research capabilities in twelve States in India. In areas where the reformed exten- sion system is in 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 I and Orissa, in particular, significant gains have been made under the projects. In West Bengal, a change in govern- ment brought a temporary hiatus in project implementation, but the new State  .ANNEX II Page 15 of 20 Government has reaffirmed its commitment, and project activities are resum- ing. There has been considerable progress in staffing and civil works, but the initial delays are likely to cause a two-year extension of the project. In Bihar, project progress had been disappointing mainly due to serious staffing vacancies. However, the pace of project implementation is expected to accelerate following the decision by the Government of Bihar in January 1982 to provide necessary funds for the project and fill key posts. A revised implementation schedule is under preparation. In Gujarat, Haryana and Karnataka, all covered under the Composite Agricultural Extension Project, the basic extension system has been established and attention now needs to focus on the quality of extension recommendations and the filling of remaining staff vacancies. In Kerala, project implementation has begun in three of eleven districts; but further progress on the project will require an early decision by the State Government to extend the T & V system to the remaining eight districts. In Tamil Nadu and Maharashtra, initial project implementation is encouraging. Most extension workers have been posted and are undergoing training. There is good evidence that extension recommenda- tions are having a positive impact on farmers' activities. In the Madhya Pradesh II project, implementation has begun in five of the twelve districts. Extension workers are undergoing training and all staff are expected to be on board by early May 1982. Cr. No. 680 Kerala Agricultural Development Project; US$30 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 Following the resolution of initial implementation delays caused by staffing and funding problems, the project progress continues satisfactorily. However, farmers' demand for coconut rehabilitation has been disappointing and is not likely to meet the target. This shortfall will be offset by increased implementation of new coconut planting and pepper rehabilitation. Ln. No. 2095 Agricultural Refinance and Development Corporation IV Project; and US$190 million loan and US$160 million credit of February 24, Cr. No. 1209 1982; Effective Date: Expected May 1982; Closing Date: June 30, 1984 The project, which is a continuation of ARDC III, consists of a two-year time slice of ARDC's lending program to farmers, mainly for minor irrigation, and including amounts for diversified lending and for the support of training programs for the staff of participating banks. Implementation is proceeding satisfactorily. Cr. No. 855 National Agriculture Research Project; US$27 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, there has been significant recent progress, especially in Haryana and Andhra Pradesh. Commitment of funds to research subprojects is proceeding satisfactorily, although corresponding disbursements lag behind the original estimates. Additions to the staff of  ANNEX II Page 16 of 20 the Project Unit have been made to expedite further progress under the project. Cr. No. 342 Agricultural Universities Project; US$12 million credit of November 10, 1972; Effective Date: June 8, 1973; Closin8 Date: December 31, 1982 The primary aim of this project is to assist in the development of the agricultural universities in Bihar and Assam, improve the quality of practical training provided to students and enhance their employment oppor- tunities. Implementation of the civil works component of this project was initially delayed at both locations on account of frequent top management changes, shortages in raw materials and political unrest (in Assam). Project implementation has picked up since and disbursements are expected to be completed by the extended closing date. The technical assistance component of this project has been satisfactorily completed and the computer for the Institute of Agricultural Research Statistics is fully operational. Cr. No. 747 Second Foodgrain Storage Project; US$107 million credit of January 6, 1978; Effective Date: May 17, 1978; Closing Date June 30, 1982 There has been progress in the construction of bag storage warehouses. However, difficulties in land acquisition and in providing rail sidings, exacerbated by management problems, have caused GOI to propose modifications to the project to provide additional bag storage capacity in lieu of bulk storage facilities. Land acquisition for the additional bag storage warehouses is proceeding, but a significant extension of the closing date would be necessary to complete the project. GOI's proposals are cur- rently under review by the Association. Cr. No. 871 National Cooperative Development Corporation (NCDC) Project; US$30 million credit of February 2, 1979; Effective Date: May 3, 1979; Closing date: December 31, 1984 Cr. No. 1146 Second National Cooperative Development Corporation (NCDC) Project; US$125 million credit of July 21, 1981; Effective Date: November 11, 1981; Closing Date: June 30, 1987 These credits provide funds to rural cooperatives in various States for the construction and operation of godowns (warehouses) and cold storage and marketing facilities. Major emphasis is placed on institution building in order to make NCDC grow into a more effective development institution to serve India's rural cooperative sector. Credit 871 is proceeding well. Subproject appraisal and loan sanctioning are in accord with appraisal tar- gets, and disbursements are ahead of schedule. However, as a result of initial shortages in the supply of steel and cement, construction costs have risen 30-40%, necessitating a revision of quantitative targets. Implementa- tion of Credit 1146, which became effective in November 1981, was slower than anticipated in the initial stages due mainly to poor preparation in most States in the pre-project year. However, during the first 5 months of the planned project period, development has been satisfactory, although disburse- ments are currently considerably less than projected at appraisal. NCDC is  ANNEX II Page 17 of 20 taking steps to ensure that the progress in preparatory work attained during the last few months is maintained. Cr. No. 482 Karnataka Dairy Development Project; US$30 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: June 30, 1982 Cr. No. 824 National Dairy Project; US$150 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. Nearly 3,000 dairy cooperative societies (DCS) have been established under the three state projects, with membership of almost 300,000. Farmer response has been excellent and project authorities are under considerable producer pressure to speed up the estab- lishment of DCSs. Profitability in almost all DCSs is good and construction of dairy and feed plants is proceeding at a satisfactory pace. The coal fired boilers being installed in the dairy plants throughout the State projects appear to have a design flaw. The NDDB has assured IDA that this flaw will be corrected or the boilers replaced. The project in Madhya Pradesh has had significant success in the conversion of wasteland to pas- tureland. Under the National Dairy Project, six sub-projects are under implementation, and further sub-projects are in various stages of preparation and appraisal by the Indian Dairy Corporation. Progress has been slow due to the longer-than-anticipated time required to secure the appropriate agree- ments on institutional structure and guarantees on loans to the sub-projects. The IDC is considering the establishment of a special review committee to deal more expeditiously with this issue. Ln. No. 1273 National Seed Project; US$25 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1984 Cr. No. 816 Second National Seed Project; US$16 million credit of July 17, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1984 These projects were designed to increase the availability of high quaLlity agricultural seed, and cover nine States (four by Ln. 1273-IN and five by Cr. 816-IN). Project implementation has been slow because of initial problems in coordination and monitoring particularly at the national level.  ANNEX II Page 18 of 20 Although the projects are generally about three years behind appraisal tar- gets, their implementation has gained greater momentum since 1980 and the stage is now set for all infrastructure and investments planned under the projects to be completed by June 1984. Cr. No. 1012 Cashewnut Project; US$22 million credit of June 10, 1980; Effective Date: September 3, 1980; Closing Date: September 30, 1985 Cashew planting and improvement programs are proceeding well and the targets are expected to be fully met. Economic effects of cashew planta- tion, particularly in Orissa State, are expected to be very significantly favorable. Cashew research and cashew study components are behind schedule but are expected to pick up soon. Cr. No. 610 Integrated Cotton Development Project; US$18 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1983 Project implementation continues to improve. The area to be covered by the project (183,000 ha) has been attained, and yields are increasing. Major processing facilities in Maharashtra and Haryana are under contract and bid evaluation. The link between university research and project activity is excellent. However, because of poor performance in the early stages, the project closing date has been extended by two years to December 31, 1983, to allow for completion of the project works and full utilization of the credit proceeds. 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 satisfactory and, based on revised planning by the project authorities in late 1981, it is expected that the time lost in the initial stages of the project can be recouped during 1982. The research staff has commenced operations and the overseas training component of the project has been initiated with the collaboration of Japanese experts. Cr. No. 806 Jammu-Kashmir Horticulture Project; US$14 million credit of July 17, 1978; Effective Date: January 16, 1979; Closing Date: June 30, 1984 The principal executing agency, J&K Horticulture Produce Marketing and Processing Corporation, is making good progress, but project facilities will have to be reduced due to cost escalations. The project's research activities, however, are behind the original schedule due to difficulties in obtaining technical assistance.  ANNEX II Page 19 of 20 Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4 million credit of February 26, 1976; Effective Date: May 17, 1976; Closing Date: December 31, 1982 A study financed under this Credit and completed in November 1979 established the technical feasibility of setting up two mills, one for sawnwood and one for pulp, as the basis of the development of a forest-based inclustry in Bastar district. The GOI is now reviewing a study on the soc:io-economic impact of such investments, and the State Government is assessing the industrial development proposal. Cr.. No. 925 Uttar Pradesh Social Forestry Project; US$23 million credit of June 21, 1979; Effective Date: January 3, 1980; Closing Date: December 31, 1984 Cr. No. 961 Gujarat Community Forestry Project; US$37 million credit of April 14, 1980; Effective Date: June 24, 1980; Closing Date: December 31, 1985 Cr. No. 1178 West Bengal Social Forestry Project; US$29 million credit of February 24, 1982; Effective Date: April 9, 1982; Closing Date: December 31, 1987 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. There has been excellent performance in establishing healthy plantations in UP and Gujarat, exceeding appraisal targets, but the staffing of the forestry extension service is behind schedule and requires the atten- tion of the project authorities. Initial implementation of the West Bengal project is proceeding very well. Ln. No. 1897 Kandi Watershed and Area Development Project; US$30 million loan of September 12, 1980; Effective Date: November 18, 1980; Closing Date: March 31, 1986 There has been considerable progress in project implementation since the last review in June 1981. In the upper catchment, cattle grazing has decreased and afforestation increased, with a consequent improvement in the vegetative cover to reduce erosion and floods--a main project objective. Construction of the Dholbaha dam has started, a feasibility studies of other watershed schemes to be financed by the project are well in hand. Ln. No. 1394 Gujarat Fisheries Project; US$14 million loan and US$4 (TW) and million credit of April 22, 1977; Effective date: July 19, 1977; Cr. No. 695 Closing Date: June 30, 1983  ANNEX II Page 20 of 20 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 In Gujarat, the construction of harbor and shore facilities has been delayed by a contractual dispute. This is expected to be resolved by June 1982, in which case harbor works should be finished by mid-1984. Village roads and water supply components of the project are proceeding satisfac- torily. In Andhra Pradesh, the project harbor at Visakhapatnam was offi- cially opened in February 1982; harbor works at Kakinada and Nizampatnam are progressing satisfactorily following the resolution of design problems. 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. After a slow start in the first 18 months, project implementation is now satisfactory. Detailed designs for the first two fish seed hatcheries in each of the five project States has been completed and construction work is expected to start in June 1982. 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 is proceeding generally satisfactorily and there has been a large build-up of activity since the last review in April 1981. The major delay is in the construction area where, despite good progress in site selection for popula- tion centers, the shortage of architects and construction materials and slow progress in staffing of construction units are causing problems. 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 has proceeded according to schedule. Based on this experience, the nutrition program is being expanded to the other 32 blocks.  ANNEX III Page 1 of 2 INDIA KRISHNA-GODAVARI PETROLEUM EXPLORATION PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: (a) Time taken by the country to prepare the project About nine months. (b) The agency which has prepared the project Oil and Natural Gas Commission (ONGC). (c) Date of first presentation to the Bank and date of the first mission to consider the project June and November 1980, respectively. (d) Date of departure of appraisal mission November 1981. (e) Date of completion of negotiations June 30, 1982. (f) Planned date of effectiveness December 15, 1982. Section II: Special Bank Implementation Actions None Section III: Special Conditions (a) ONGC will periodically submit the revised exploration program for Bank review (para 47); (b) ONGC will obtain advisory services for initial well drilling from consultants when needed (para 49);  ANNEX III Page 2 of 2 (c) ONGC will make adequate arrangements for the insurance of project wells against blow-outs and spills (para 54); (d) ONGC will ensure that appropriate safety norms are followed (para 54); and (e) GOI will periodically review crude oil and gas prices and set them at levels required to permit ONGC to meet its operating expenses and earn an adequate rate of return (para 57).  7'\ _ . >