India - Gujarat Water Supply And Sewerage Project : Credit 1280 - AMC Project Agreement - Conformed

GREDIT NUMBER 1280 IN AMC Project Agreement (Gujarat Water Supply and Sewerage Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and AMEDABAD MUNICIPAL CORPORATION Dated , 1982 CREDIT NUMBER 1280 IN AMC PROJECT AGREEMENT AGREEMENT, dated c, 1982, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and AHMEDABAD MUNICIPAL CORPORATION (hereinafter called AMC). WHEREAS by the Development Credit Agreement of even date herewith between India acting by its President (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to sixty three million eight hundred thousand Special Drawing Rights (SDR 63,800,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that AMC agree to undertake such obligations toward the Association as are hereinafter set forth; and WHEREAS AMC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. AMC shall carry out Part H of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility prac- tices. Section 2,02. In order to assist AMC in detailed design for Part H of the Project, AMC shall employ consultants whose selec- tion, qualifications, experience and terms and conditions of -2- employment shall be satisfactory to the Association in accordance with the principles and procedures described in the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for Part H of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to the GWSSB Project Agreement. Section 2.04. (a) AMC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by Gujarat against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insur- ance any indemnity shall be payable in a currency freely usable by AMC to replace or repair such goods. (b) AMC shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.05 (a) AMC shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction, work and procure- ment schedules for Part H of the Project, and any material modi- fications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) AMC shall: (i) maintain records and procedures adequate to record and monitor the progress of Part H of the Project (in- cluding its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association' s representatives to visit the facilities and construction sites incl,ded in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning Part H of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. -3- (c) Upon the award by AMC of any contract for goods, works or services to be financed out of the proceeds of the Credit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of Part H of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between AMC and the Association, AMC shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of Part H of the Project, its cost and the benefits derived and to be derived from it, the performance by AMC and the Association of their reEpective obligations under the AMC Project Agreement and the accomplishment of the purposes of the Credit. (e) A4C shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment and any relevant records and documents related to its water supply and sewerage sector. Section 2.06. (a) AMC shall, at the request of the Asso- ciation, exchange views with the Association with regard to the progress of Part H of the Project, the performance of its obliga- tions under this Agreement and other matters relating to the purposes of the Credit. (b) AMC shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of Part H of the Project, the accomplishment of the purposes of the Credit, or the performance by AC of its obligations under this Agreement. ARTICLE III Management and Operations of AMC Section 3.01. (a) AMC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utility practices. (b) AMC shall at all times operate and maintain its plant, machinery, equipment and other property related to its water supply and sewerage sector, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and commercial prac- tices. (c) Except as the Association shall otherwise agree, AMC shall not sell, lease, transfer or otherwise dispose of any of its property or assets required for the efficient operation of Part H of the Project, except in the normal course of business. Section 3.02. AMC shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice, in respect of its water supply and sewerage operations. Section 3.03. AMC shall (a) furnish to the Association, by June 30, 1983 or such other date as the Association may agree, the findings of the organization and management study of its water supply and sewerage sector, and (b) implement such recom- mendation arising from said study as shall be agreed upon between AMC and the Association in accordance with a timetable satisfac- tory to the Association. Section 3.04. AMC shall by December 31, 1983, or such other date as the Association shall agree, complete a study of the use of domestic metering in accordance with terms of reference satis- factory to the Association as a basis for determining its future metering policy. ARTICLE IV Financial Covenants Section 4.01. AMC shall maintain records, and commencing with fiscal year 1983, separate commercial accounts, adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition related to its water supply and sewerage operations. Section 4.02. AMC shall: (a) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) referred to in Section 4.01 of this Agreement for each fiscal year audited, in accordance with appropriate auditing principles -5- consistently applied, by independent auditors acceptable to the Association; (b) commencing with Fiscal year 1983 furnish to the Asso- ciation as soon as available, but in any case not later than nine months after the end of each such year, (i) certified copies of the financial statements for such year as so audited and (ii) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, and (c) furnish to the Association such other information con- cerning the accounts and financial statements of AMC and the audit thereof, as the Association shall from time to time reason- ably request. Section 4.03. Except as the Association shall otherwise agree, AMC shall: (a) by April 1, 1983, increase its user charges and special taxes so as to double by March 31, 1984 the revenues currently received therefrom; (b) apply, as appropriate, revenue increase and/or cost reduction policies so as to ensure that by March 31, 1988, or such other date as may be agreed between AMC and the Association, in accordance with a schedule agreed to by the Association, the cost of operation, including depreciation, and maintenance are covered by user charges for water supply and special taxes for sewerage imposed and collected from said users; (c) thereafter apply, as appropriate revenue increase and/ or cost reduction policies so as to ensure that, by March 31, 1993 or such other date as may be agreed between GWSSB and the Association, in accordance with a schedule agreed to by the Asso- ciation, the cost of operation, maintenance and debt service excluding depreciation, are covered by user charges for water supply and special taxes for sewerage imposed and collected from said users; (d) until revenues derived from charges to users cover all service costs including operation, maintenance and debt service, allocate from other specific revenues, funds to cover its water supply and sewerage revenue shortfall; and -6- (e) based on the findings of the tariff study furnished to the Association and taking into account its comments, if any, develop a tariff structure consistent with the objectives of the foregoing provisions of this section. Section 4.04. AMC shall improve, in accordance with a sched- ule satisfactory to the Association, its water supply and sewer- age billing and collection practices, so as to achieve by March 31, 1986 and thereafter, an aggregate unpaid customer account balance at fiscal year end, not in excess of 30% of the billings for such fiscal year. Section 4.05. Except as the Association shall otherwise agree, AMC shall not, in its water supply and sewerage sector incur any debt unless the net revenues of AMC for the fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall not be less than 1.3 times the maximum debt service requirements for any succeeding fiscal year on all debt of MC including the debt to be incurred, For the purpose of this Section: (a) the term "debt" means all debt related to its water supply and sewerage sector incurred by AMC including debt assumed or guaranteed by AMC, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (b) the term "incur" with reference to any such debt in- cludes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred by AMC: (i) under a contract or loan agreement, on the date the contract or loan agreement providing for such debt is entered into; and (ii) under a guaran- tee agreement, on the date the agreement providing for such gua- rantee shall have been entered into but only to the extent that the guaranteed debt is outstanding; (c) the term "net revenues" means gross revenues received by AMC from water supply and sewerage services, less all oper- ating expenses, including adequate maintenance, taxes or payment in lieu of taxes, if any, and administrative expenses, but before provision for straight-line depreciation and interest and other charges on debt; -7- (d) the term "debt service requirements" means the aggre- gate amount of amortization (including sinking fund payments, if any), interest and other charges on such debt; and (e) whenever it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of ex- change at which such other currency, at the time such valuation is made, is obtainable by AMC for the purpose of servicing such debt, or if such other currency is not so obtainable, at such rate of exchange as shall be acceptable to the Association. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of AMC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify AMC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between -8- the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For AMC: Ahmedabad Municipal Corporation Sadar Patel Bhavan Ahmedabad, Gujarat India Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of AMC may be taken or executed by the Municipal Commissioner or such other person or persons as AMC shall designate in writing, and AMC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. - 9 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President South Asia AHMEDABAD MUNICIPAL CORPORATION By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the --day of , 198 L. FOR SECRETARY