India - Refineries Rationalization Project

Document of FILE Copy The World Bank FOR OFFICIAL USE ONLY Report No. P-3229-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE REFINERIES RATIONALIZATION PROJECT March 8, 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.  CURRENCY EQUIVALENTS (as of March 1, 1982) US$1 = Rs 9.246049 Rs 1 = US$0.108154 Rs 1 million = US$108,154 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 8.5, which represents the projected average exchange rate over the disbursement period. FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS BPCL - Bharat Petroleum Corporation Ltd. CRL - Cochin Refineries Ltd. EIL - Engineers India Ltd. FCC - Fluid Catalytic Cracker HPCL - Hindustan Petroleum Corporation Ltd. IOC - Indian Oil Corporation GOI - Government of India MRL - Madras Refineries Ltd. ONGC - Oil and Natural Gas Commission OIL - Oil India Ltd. tpy - tons per year UOP - Universal Oil Products Co. (USA)  FOR OFFICIAL USZ ONLY ISDIA REFINERIES RATIONALIZATION PROJECT LOAN AND PROJECT SUMARY Borrower: India, acting by its President. Beneficiary: Bharat Petroleum Corporation Ltd., Hindustan Petroleum Corporation Ltd., Madras Refineries Ltd., Cochin Refineries Ltd., and several other Indian refinery companies. Amount: US$200 million., Terms: Repayment over twenty years, including five years of grace, at 11.6% per annum. Relending Maturities not to exceed 15 years, including four years of Terms: grace, at 12% per annum. GOI would bear the foreign exchange risk. Project The project would assist the Government to redress the Description: imbalance between domestic demand for and supply of petroleum products, and to improve energy efficiency in the sector. Its main components include: (a) instalation at four refineries of additional capacity and secondary processing facilities to convert fuel oil into higher-value products; (b) additions to petroleum tankage and distribution facilities; (c) facilities to reduce energy requirements; (d) pollution control facilities. The project faces only limited risks in that it involves primarily the expansion and rationalization of existing facilities, using conmercially proven technology. This docta t has a resuicted distribution and may be used by recipients only in the performance of | lthsi official duties Its contents may not otherwie be disclosed without World Bank authorization.  Estimated Cost: Refineries Conversion and (US$ millions) Expansion Component Local Foreign Total Equipment, Materials and Spares 106.0 210.3 316.3 Freight, Duties and Taxesl/ 83.7 9.7 93.4 Licensing, Engineering and Project Management Services 32.2 3.9 36.1 Civil Works 49.0 5.4 54.4 Erection 52.9 3.9 56.8 Pre-operating and Commissioning Charges 13.3 2.0 15.3 Sub-total 317.1 23. Energy Efficiency and Pollution Control Component Equipment, Materials and Spares 31.5 18.9 50.4 Freight, Taxes and Dutiesl/ 13.2 1.6 14.8 Licensing, Engineering and - Project Management Services 4.1 0.1 4.2 Civil Works 3.2 0.4 3.6 Erection 4.5 0.2 4.7 Pre-operating and Commissioning Charges 1.2 0.4 1.6 Sub-total 57.7 21.6 79.3 Base Cost Estimates 394.8 256.8 651.6 Physical Contingencies 36.3 25.3 61.6 Price Contingencies 71.3 45.8 117.1 Total Installed Cost 502.4 327.9 830.3 Working Capital 18.9 106.9 125.8 Interest During Construction 96.4 33.2 129.6 Total Financing Required 617.7 468.0 1,085.7 1/ Of which, duties and taxes total US$93.2 million.  -iii- Financing Plan: kLSf millions) Local Foreign Total Equity 111.7 268.0 379.7 GOI Loan 506.0 - 506.0 IBRD Loan - 200.0 200.0 Total 617.7 468.0 1,085.7 Estimated (US$ millions) Disbursements: FY82 FY83 FY84 FY85 FY86 Annual 5.0 59.0 64.0 48.6 23.4 Cumulative 5.0 64.0 128.0 176.6 200.0 Rate of Return: Over 80%. Appraisal Report: No. 3645-IN, dated March 2, 1982.   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT KEPUKr AND ECUMMhNUAriONU ut iRE rKuSiLhNT- TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE REFINERIES RATIONALIZATION PROJECT 1. I submit the following report and recommendation for a proposed loan in an amount equivalent to US$200 million to India (GOI) to help finance the foreign exchange costs of a refineries rationalization project. Amor- tization would be over 20 years, including five years of grace, at an inter- est rate of 11.6% per annum. The proceeds of the loan would be onlent to various Indian refinery companies at 12% per annum, with maturities not exceeding 15 years, including four years of grace. The exchange risk would be borne by GOI. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (3401-IN, dated April 15, 1981), was distributed to the Executive Directors on April 16, 1981. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 688 million (in mid-1981) and an annual per capita income of US$190. Agriculture continues to dominate India's economy, employing over two-thirds of the labor fo _e. However, the land base is not sufficient to provide an adequate livelihood to all those engaged in agricultural activities, especially the landless or nearly landless who have only an insecure grasp on the means of existence. Over the past 30 years, the share of agriculture in GDP at factor cost (measured in 1970/71 prices) has declined from 60% to about 40%, while the share of industry has increased from 15% to about 24%. But industrialization has not been rapid enough to absorb the growing labor force, nor to bring about the economic transformation that has led to sig- nificantly higher productivity in some other developing countries. 4. Economic growth has been slow in the past, averaging about 3.5% per annum over the past 30 years. Slow growth of value-added in agriculture -- 2.1% per annum over the three decades -- has constrained overall growth, not only because of the high share of agriculture in GDP but also because scarce foreign exchange has often been required to import food. Industrial value-added has grown more rapidly, at 5.4% per annum between 1950/51 and 1979/80. Over the same period, gross domestic savings more than doubled from 10% of GDP to 21.2%, while gross domestic investment rose from 10% of GDP to just over 21.8%. Foreign savings have never financed a large portion of domestic investment: a peak of about 20% was reached during the early 1960s; by the end of the 1970s, the proportion had returned to below 3%. External 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Fourth Agricultural Refinance and Development Corporation Credit Project (No. P-3196-IN), dated February 1, 1982.  -2- assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP, and was less than 1% at the end of the 1970s. 5. Over the past 30 years as a whole, India has placed relatively little emphasis on exports and has tended to pursue a strategy of import substitu- tion. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.6% per annum, about the same as the volume growth of imports over the same period. Between 1970 and 1977, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. The volume of India's exports grew on average about 9% per annum between 1971/72 and 1976/77. Although export growth has slowed in recent years, due in large part to domestic supply constraints, this experience demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. Recent Trends 6. Over the period 1975/76 to 1978/79, growth in real GDP (at factor cost), agricultural value-added and industrial value-added averaged 5.4%, 3.1% and 7.9% per annum, respectively. These trends represent a substan- tially better growth performance than the historical 30-year trends (paragraph 4). However, GDP declined by about 4.5% in 1979/80 due both to the severe drought which reduced agricultural production and to input con- straints in other sectors. Agricultural output fell by about 16% in 1979/80. Industrial production stagnated, largely due to shortfalls in the production of major inputs such as coal, steel and cement, as well as infrastructural constraints, notably in power and transportation. As a consequence of these developments, the remarkable price stability that India had enjoyed after 1975 came to an abrupt end at the close of fiscal year 1978/79, with prices increasing 21% during 1979/80. 7. In 1980/81, the economy recovered substantially, so that real GDP growth for the year was about 6%-7%. During the summer and fall of 1980 foodgrain prices rose, but more slowly than other prices and more slowly than the drop in production in 1979/80 would have suggested. This was made pos- sible through the drawdown of substantial buffer stocks built up by the Government in years of good harvests. These stocks ensured adequate supplies of grain to low-income groups in urban areas through the public distribution system and also provided resources for a large-scale drought relief employ- ment program for low-income groups in rural areas. Aided by a normal monsoon in the summer of 1980, agricultural production rose by about 17%-19%. The industrial sector recovered more slowly, with production in 1980/81 rising only about 4% above the average for 1979/80, but output increased substan- tially during the year so that production in April 1981 was about 9% higher than in April 1980. The rise in prices slowed during the second half of 1980/81 so that by March 1981 the wholesale price index was 15.7% above its level a year earlier. 8. In agriculture the positive results of large investments and appropriate policies in the past years are becoming increasingly apparent.  -3- The rate of expansion of irrigation has increased significantly from 1.3 mil- lion ha per year in the early 1970s to about 2.3 million ha in 1980/81. Fertilizer use reached about 5.6 million tons of nutrients in 1980/81, more than double 1974/75 levels. Over the decade before 1979/80, foodgrain production grew at about 2.75% per annum -- sufficient to meet consumer demand, to eliminate imports (which had averaged nearly 5 million tons per year for the 15 years preceding 1976), and to reduce real foodgrain prices for consumers. At the same time, India was able to build up substantial foodgrain buffer stocks which made it possible to limit the effects of the 1979/80 drought, and to export a modest amount of grain in 1980. While the management of the foodgrain economy after the drought was a significant achievement, the effect of the drought on production re-emphasized the con- tinued importance of the monsoon in India's agriculture. The normal monsoon of 1980/81 brought foodgrain production back to around 130 million tons. While the performance of the recent past and the probable future trends suggest that on average foodgrain supplies will exceed demand, the balance remains delicate and the need for foodgrain imports to maintain consumer supplies or adequate buffer stocks could arise from time to time. For example, some wheat imports are likely in 1981/82 to ensure adequate build up of stocks. Programs to expand irrigation, strengthen extension and encourage the efficient use of other agricultural inputs continue to receive high priority. 9. The Indian economy has shifted back from a situation of resource surplus, which had been a temporary phenomenon of the late 1970s, to one of resource scarcity. Investment has again overtaken domestic savings, and the scope for further increases in the latter appears limited. Marginal savings rates have recently been well above 30% in the household sector. Future increases in savings will depend heavily upon the enhanced profitability of public sector enterprises. Impending resource scarcity is even more apparent in the foreign sector. Between 1975/76 and 1978/79, India's current account deficit had remained comfortably small in relation both to GDP and to a growing pipeline of aid commitments. This was due to favorable terms of trade movements after 1977 and to rapidly growing workers' remittances as well as to the growth of exports. In 1980/81, however, the balance of pay- ments deteriorated sharply, with the current account deficit rising from US$850 million in 1979/80 to nearly US$3.4 billion in 1980/81. In part this was due to unique events during the year, such as the disruption of oil production in the Northeast, which, though the flows resumed again in February 1981, alone added over US$1 billion to the oil import bill. Com- bined with unprecedented oil price increases, this caused the oil import bill to rise by over 75%, to a level equivalent to three-fourths of India's mer- chandise export earnings. The deficit on current account rose to 2% of GDP. India was able to finance this gap through a substantial drawing on IMF resources (the Trust Fund and the Compensatory Financing Facility), and through an increase in aid disbursements and a modest drawdown in foreign exchange reserves. 10. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into balance at a reasonable level of growth. In an effort to make these adjustments, the Government has developed an investment program for the Sixth Plan period and implenented a number of policy measures which are designed to bring the economy closer to external equilibrium. These  -4- measures recognize the need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has left in place the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export policy measures have improved the prospects for accelerating export growth. To assist the Government in its adjustment effort, the IMF approved an Extended Fund Facility for India for SDR 5.0 billion on November 9, 1981. Over the next three years, this facility will provide India with a significant share of the external resour- ces required to bring about the necessary changes in the structure of the economy and will substantially increase India's flexibility in dealing with its external account imbalance. Development Prospects 11. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufac- turing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, the power grid, roads and ports - is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institu- tional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and sufficient access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 12. A new Sixth Five-Year Plan (1980-85) was approved in February 1981. The new Plan continues to assign priority to agriculture and power. Further- more, the Plan reflects the Government's efforts to bring about the necessary adjustments in the economy by emphasizing several priority areas. These include: (i) expansion of exports and an investment program to support increased production to replace imports of goods such as fertilizer, cement and steel which India produces competitively; (ii) an investment program and policy framework for more efficient development and use of energy resour- ces; (iii) removal of bottlenecks in infrastructure and related constraints on production of basic industrial inputs; and (iv) continuing emphasis on the development of agriculture. 13. The higher capital formation rates of the past few years augur well for future income growth. However, there are signs that the past programs and policies have led to relatively low growth in certain crucial sectors, namely power, coal, transport services, steel and cement. Potential output growth in sectors which have benefitted from large investments in the recent  -5- past may nac materialize unless these input bottlenecks are alleviated. In the case of coal, steel and cement, domestic production appears to be clearly justified on grounds of comparative advantage, indicating an a priori case for policies to promote further investment. In 1980/81 these commodities were not imported in sufficient amounts to eliminate the shortages; increased short-term reliance on imports may be necessary to alleviate slowdowns and dislocation in user industries. In the case of sectors in which there is little scope to import the final product -- power and transportation -- the planning of capacity expansion becomes even more crucial. Although there is scope for improvement in the short-run performance of these sectors, major investments in balancing and modernization programs as well as in new capacity are essential for adequate growth in the medium term. 14. Despite the relatively large investment programs for the develop- ment of domestic energy resources such as coal and hydroelectricity, and the recent development of offshore petroleum resources, India has not been able to eliminate the gap between its total energy demand and domestic production. During the past year, India continued to face power and coal shortages, but the situation improved substantially during the year so that power generation in June 1981 was around 20% higher than a year earlier. India is entering the Sixth Plan period with an ambitious energy production program backed by substantial financial commitment. In the oil sector, GOI is now accelerating its oil exploration capabilities and is opening up prospective areas for exploration by foreign firms. Prices of petroleum products were raised substantially in 1980 and again in July 1981 to bring domestic prices into lir with world market prices, to raise resources for further oil and gas development and to encourage efficient use of energy. India is now committed to an expanded power program that emphasizes exploitation of its large hydro potential and development of its transmission and distribution system. In the coal sector, a policy decision in favor of mechanization has been made in order to achieve more rapid growth of coal production. 15. Agricultural policies, development programs and secular trends all seem favorable for sustaining the past agricultural growth during the 1980s. India ended 1980 with grain stocks of about 12 million tons, without having imported foodgrains during the year. This reflects the trends of the last decade which point to an improvement in foodgrain availability in the economy. Growing output, combined with the projected fall in the population growth rate, suggest favorable long-run prospects for foodgrain supply and demand balances. An occasional need to import grains, particularly wheat, could arise, but if the efforts to develop agriculture over the past decade are sustained and intensified, as suggested in the new Plan, persistent shortage seems unlikely. This development could give rise to a range of policy options including a slowly falling real price of foodgrains to increase the affordability of foodgrains to low-income families, foodgrain exports, and diversification to the production of other, higher-value crops. 16. Foreign exchange reserves are providing a cushion that helps the Government of India in short-term supply management. In March 1981, however, gross reserves were $320 million lower than the level of a year earlier and, in terms of import coverage, fell below the six-month level for the first time since 1977. A much larger decline in the reserve level would have been necessary in 1980/81 had IMF Trust Fund and Compensatory Financing Facilities, amounting to over US$1 billion, not been available. India's  -6- reserves provide some limited scope for narrowing the financing gap over the next few years, but successful management of the balance of payments will depend mainly on improved export performance, on import replacement, on the maintenance of aid flows and workers' remittances, and on a moderation in price increases for oil imports. While India's current account balance of payments deficits are not expected to be large relative to the size of the economy (e.g., on the order of two percent of GDP), the absolute amounts are large and will necessitate external borrowing beyond levels expected to be available from normal concessional sources. Accordingly, over the past year India has begun to make judicious use of a mix of sources of external financ- ing, including borrowing from financial markets of about US$1 billion and, most recently, the SDR 5 billion Extended Fund Facility. 17. India's medium-term development prospects are mixed. Considerable progress continues to be made, particularly in agriculture, but the economy faces a period of difficult adjustments in the coming years. Investments required to relieve short-term supply constraints must compete with longer-term programs to accelerate growth and to develop India's considerable physical and human resources. The balancing of these objectives will place a difficult burden on those implementing India's Sixth Five-Year Plan. The primary focus must be on the implementation of appropriate domestic adjust- ment policies, although the aid community can and should play an important role in ensuring that India's efforts do not fail due to inadequate foreign resources. 18. Preliminary results from the March 1, 1981 Census, combined with 1971 Census figures adjusted for under-enumeration, suggest that the popula- tion growth rate declined from 2.3% p.a. in the late 1960s to about 2% at present. The rate of increase of population is expected to continue falling to around 1.8% by the first half of the 1990s. While the growth rate appears to be declining slowly, the 1981 Census population estimate was substantially higher than previous Government projections. The 1981 Census data are still incomplete but preliminary reports indicate that the rise in life expectancy was more than anticipated, suggesting that, on average, Indians can expect to live five years longer than they did a decade ago. This no doubt reflects improved availability of food and health services. This implies, however, an even greater need to reduce the birth rate to bring about the needed reduc- tion in the rate of-growth of population. The Census results, therefore, re-emphasize the need for continuing efforts to strengthen a broad range of family planning activities to develop a wider clientele and to provide that clientele with a professional, technically competent advisory service which can provide the full variety of available birth prevention methods. The new Plan continues the high priority given to these efforts in earlier Plans. The ambition of its targets - implying a rise in the proportion of protected couples in the reproductive age group from its present estimated level of about 23% to over 35% by 1984/85 - seems fully justified. Such targets imply a serious long term commitment to moderating the population growth rate through an improved family planning program. 19. Reduction of poverty remains the central goal of Indian economic growth. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51% of the rural population and 38% of the urban population subsist below the poverty line (estimated at about US$114 and  -7- US$132 per capita per year for rural and urban areas, respectively). Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy; the circumstances require increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1979 reflects such develop- ments. There is also a role for direct Government action in faster implemen- tation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural health facilities and the provision of secure village water supplies. Innovations such as the community health volunteer program and the national adult literacy campaign provide encourag- ing evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor. PART II - BANK GROUP OPERATIONS IN INDIA 20. Since 1949, the Bank Group has made 62 loans and 144 development credits to India totalling US$2,931 million and US$10,283 million (both net of cancellation), respectively. Of these amounts, US$1,188 million had been repaid, and US$4,408 million was still undisbursed as of September 30, 1981. Bank Group disbursements to India in 1980/81 totalled US$962 million, repre- senting an increase of about 32 percent over the previous year. Annex II contains a summary statement of disbursements as of September 30, 1981, and notes on the execution of ongoing projects. 21. Since 1959, IFC has made 24 commitments in India totalling US$148.6 million, of which US$22.6 million has been repaid, US$27.7 million sold and US$7.5 million cancelled. Of the balance of US$90.8 million, US$81.9 million represents loans and US$8.9 million equity. A summary statement of IFC operations as of September 30, 1981, is also included in Annex II (page 4). 22. In recent years, Bank Group lending has emphasized agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit operations and in providing direct support to major and medium irrigation. Marketing, seed development, agricultural extension, dairying, and forestry are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. The Bank Group has also been active in supporting infrastruc- ture development for power, telecommunications, and railways. Family plan- ning, water supply development, urban investments and the development of oil and natural gas have also received Bank Group support in recent years.  -8- 23. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, power, water supply and other infrastructure sectors remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs, particularly water and credit for on-farm investments, will continue to receive emphasis. Improved water management and intensification and streamlining of extension systems form an important institution-building aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers. The Bank Group's continuing role in the fer- tilizer sector assists India in the more efficient provision of another key input in the agricultural growth process. Projects supporting water supply, sewerage, urban development and investments in the petroleum sector also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on those subsectors which have recently emerged as key constraints on India's overall growth, primarily power and transportation. 24. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, there is now a need for increased foreign assistance to adjust to an even greater deterioration in balance of payments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Bank Group assistance for projects in India should aim to include the financ- ing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sec- tors as agriculture, irrigation, and water supply. 25. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support. Therefore, India should be eligible and regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was about 10% in 1980/81 and is projected to remain below 20% through 1995/96. As of September 30, 1981, outstanding loans to India held by the Bank totalled US$1,828 million, of which US$819 million remain to be disbursed, leaving a net amount outstanding of US$1,009 million. 26. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with 49%, 36% and 44%, respectively, in 1980/81. On March 31, 1981, India's outstanding and disbursed external public debt was about US$17 billion, of which the Bank Group's share was US$6.2 billion or 36% (IDA's US$5.3 billion and IBRD's US$0.9 billion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1980/81, about 18.0% of India's total debt service payments were to the Bank Group.  -9- PART III - THE ENERGY SECTOR General 27. Commercial primary energy (coal, oil, gas, hydro and nuclear) accounts for about 47% of total energy consumption in India, with the balance (53%) being derived from non-commercial sources such as firewood and agricultural and animal wastes. Over the past ten years, the growth of energy consumption in India has averaged 4% per annum, but this has not been sufficiently rapid to raise per capita consumption above 410 kg of coal equivalent, which is average for developing countries. The share of oil products in total and commercial energy consumption is growing rapidly and in 1979/80 accounted for 23% of commercial energy consumption. Electricity consumption has shown the sharpest growth and accounts for 43% of total commercial energy consumption followed by coal (34%). Firewood is the most widely consumed fuel in India, accounting for about 65% of total non-commercial energy consumption. Other non-commercial sources of fuel, such as vegetable and animal wastes, account for the remaining 35% of consumption. 28. Inadequate supplies of energy have been a major constraint hindering India's economic growth. Although considerable indigenous resources of energy exist, their development has not kept pace with consumption 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, introduction of fuel-efficient technologies, reduction of transportation demand, reduction of the energy intensity of industrial investment, and inter-fuel substitution from commercial to non-commercial and renewable energy resources. In addition to containing the demand for petroleum products to the extent feasible, India has made concerted efforts to explore and develop its domestic energy resources. The Sixth Five-Year Plan contains significant policy measures and investments to achieve a better balance of supply and demand, although energy shortfalls are likely to persist in the medium term. 29. Coal remains the primary domestic source of commercial energy in India. Coal production has risen from about 78 million tons in 1973/74 to 107 million tons in 1980/81. Coal production has been constrained by power shortages, delays in commissioning new mines, labor difficulties and transportation bottlenecks, and shortages have resulted. Installed electric generating capacity in 1980/81 is estimated at 33,000 MW, of which hydroelectric plants account for about 33%. 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 12.6% in 1980/81. Faced with sharp increases in demand for electricity, generation has been constrained by low capacity utilization and delays in completing planned thermal generation capacity. In 1980, a Government Committee recommended broad-ranging reform of the  -10- power sector. Measures are underway to improve efficiency of thermal power plants, improve the coordination of power planning, strengthen the role of the Center in power development, intensify hydroelectric generation and improve the finances of State Electricity Boards. Natural gas has assumed considerable importance in the Indian economy with the development of the Bombay High and Bassein offshore fields which provide both associated and non-associated gas. Gas reserves in 1978 were estimated at 344 billion cubic meters. The gas is intended for use mainly as feedstock for fertilizers and petrochemicals, with the heavier fractions being sold as bottled gas to substitute for kerosene and other fuels. Petroleum 30. 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 10.6 million tons in 1980/81. India's total hydrocarbon reserves have recently been estimated at 6.5 billion tons, of which about two-thirds were offshore. Commercial production is confined to two fields, one in the northeastern states centering in Assam, the other in the offshore Bombay High fields. The Government has initiated efforts to expand oil exploration activities and has offered selected blocks to foreign firms under production-sharing arrangements. Discussions are underway with interested foreign firms. 31. Consumption of crude oil, which has been growing at over 7% in recent years, is currently estimated at 34.7 million tons. By the end of the Plan period (1984/85), consumption is expected to reach about 42 million tons. This would exceed expected domestic production by over 22 million tons on current estimates. The import bill for crude oil and petroleum products has risen to US$6.7 billion in 1980/81, representing 42% of total merchandise imports and 78% of India's merchandise export earnings. Although there are good prospects for increasing production from existing fields, which are being pursued by the Government, significant efforts will be needed in oil exploration and development if India is to achieve a better balance between energy demand and supply. Sector Institutions. 32. The Ministry of Petroleum, Chemicals and Fertilizers is charged with policy-making in the petroleum sector. Together with the Planning Commission, it approves all investments and the budgets of public companies operating in the sector. The Oil and Natural Gas Commission (ONGC) and Oil India Limited (OIL), both public sector undertakings, are engaged in the exploration and development of hydrocarbon resources. Indian Oil Corporation (IOC) handles all of India's crude oil imports. The Oil Industry Development Board is a financial institution which obtains funds through a cess levied on domestic crude production and provides financing for organizations engaged in oil development. As mentioned above, India has invited foreign private oil companies to help explore for oil, both onshore and offshore.  -1 1- Refining in India 33. Six companies operate eleven petroleum refineries in the country. Four of these companies are wholly-owned by GOI, viz, Indian Oil Corporation (I0C), Bharat Petroleum Corporation Ltd. (BPCL), Hindustan Petroleum Corporation Ltd. (HPCL), and Bongaigaon Refinery and Petrochemicals Ltd. (BRPL). Of the two companies in the joint sector, Cochin Refineries Ltd. (CRL) is owned by GOI, Phillips Petroleum Company (USA) and other Indian public and private shareholders and the Madras Refineries Ltd. (MRL) is owned by GOI, the National Iranian Oil Company Ltd. and Amoco (USA). In both cases, the Government is the majority shareholder. The largest refinery company is I0C, which operates four refineries and is also responsible for the country's import of crude oil and petroleum products. Marketing and distribution are mainly in the hands of IOC, HPCL and BPCL. All other companies rely on I0C for the marketing and distribution of their products. Retail outlets are operated almost completely by private dealers. The existing refineries have simple configurations with only a few having secondary processing facilities. This results in sub-optimum crude throughput and limited production of middle distillates (kerosene and diesel oil) which are in substantial demand and need to be imported. 34. In 1980/81, India's total production of refinery products was 24 million tons per year (tpy).l/ Capacity utilization in the industry is the highest among process industries in India, averaging 86% in the late 1970s, which is satisfactory by international standards. Capacity utilization fell to 81% in 1980/81, due to a shortage of crude caused partly by the Iran/Iraq war and disruptions in supply from Assam. Since March 1981, these problems have been contained and, under normal conditions of crude availability, it is expected that on average capacity utilization could be sustained at or near 90% in future. 35. Over the past decade, refinery production did not keep pace with demand, particularly in the period 1975-81 when significant amounts of kerosene and high-speed diesel oil had to be imported. Consumption of refined products grew at 5.6% per annum to almost 31 million tons in 1980/81. Demand *for petroleum products is expected to reach 60 million tpy by 1989/90. There is relatively limited scope for curtailing consumption, given that consumption levels are already low and overall petroleum prices are high by international standards, and that the demand for most products is relatively inelastic since they are used principally in the transport and agricultural sectors for productive purposes. Low levels of energy consumption, high prices and supply constraints of other fuel sources (firewood, coal and electric power) combine to limit further possibilities for inter-fuel substitution. 1/ In addition to the eleven refineries currently in operation, a new refinery of 6.0 million tpy at Mathura is now under construction and is expected to be commissioned in mid-1982.  -12- 36. In addition to the Mathura refinery mentioned in the footnote above, the Sixth Five-Year Plan includes major investments totalling over US$2.6 billion to (i) increase installed refining capacity by 55% to 58.7 million tpy; (ii) add 5.5 million tpy of conversion capacity; and (iii) improve the energy efficiency of existing refineries. Investments are also planned to increase product storage capacity, to extend the oil pipeline from Mathura in Uttar Pradesh into the Punjab and to mitigate pollution. These investments will substantially narrow the current gap between supply and demand of refined products, but domestic production would reach only about 50 million tpy, and meet only 80-85% of projected product requirements, in 1989/90. The supply gap, applying particularly to middle distillates, would have to be met through imports. Product Pricing 37. Given the high rate of growth of petroleum products, GOI is taking several measures to control future demand growth, including efforts to channel some demand into other domestic sources, such as coal and hydroelectric power, which are relatively plentiful in the country. Another measure is to shift goods and passenger traffic from diesel motor vehicles to railways, and provide the railway with electrification capacity. As mentioned, however, the structure of petroleum consumption in India is such that the scope for significant inter-fuel substitution is limited. Therefore, the most important tool being used by GOI as a conservation measure is to set petroleum prices at levels which will reduce the energy intensity of the economy. 38. In July 1981, GOI, continuing a practice of passing on to consumers increased prices of imported crude oil, further increased petroleum prices substantially. The prices for gasoline, high speed diesel and fuel oil are significantly above comparable CIF prices, as can be seen below. India - Retail Prices of Petroleum Products (in US$ per gallon) Current Prices Prices as Before Import % of July Current CIF Bombay Import 1981 Prices Price a/ Prices Gasoline 2.45 2.70 1.04 260 High-Speed Diesel 1.19 1.34 1.10 122 Kerosene 0.73 0.81 1.10 74 Fuel Oil 1.11 1.24 0.72 172 a/ Based on crude oil at US$34 per barrel, and recent ratios of crude oil prices to product prices in the Far East.  -13- Kerosene prices were also increased, but they still remain below CIF prices; this gap, however, is more than compensated by the higher prices for other products. The price of kerosene is kept low by GOI principally for social reasons. Kerosene is used by households in urban areas as the principal fuel for cooking, and for cooking and lighting in rural areas, where it substitutes in part for scarce fuels such as firewood and cow dung. Low kerosene prices are not likely to result in significant diversion of kerosene to other uses. The supply of kerosene, considered as an essential commodity, is closely monitored by GOI, in that it is released only in small quantities and through fair price shops, primarily to restrain diversion to uses other than essential household needs. The Government's allocative mechanism is effective in restraining demand and reducing diversion. Kerosene consumption presently represents only 14% of total petroleum product consumption (which is lower than in many developing countries), and in the decade from 1970 to 1980 consumption of kerosene has grown at a low rate of 2.5% per annum. Despite relatively low kerosene prices, the average price level for petroleum products in India, among the highest in developing countries, is satisfactorily above average CIF import prices. GOI periodically reviews petroleum prices and generally raises them at least once a year to reflect changes in international conditions. Domestic crude prices were also increased substantially in July 1981,1/ and provide adequate cash flow and rate of return to oil producing companies. At the present time, both the levels and the structure of petroleum prices in India are considered appropriate. 39. The Government sets retention prices for refinery companies to allow each to earn a reasonable return2/ on investment when operated under defined efficient operating norms. The current system of setting ex-refinery prices is working well, as indicated by the high capacity utilization rates and satisfactory cash generation levels achieved by most refineries. On the average, it is based on economic costs and is considered satisfactory. Bank Group Involvement 40. The Bank has made two loans totalling US$550 million for the development of the offshore Bombay High oil fields. The first loan (Ln 1473-IN) was made in 1977 and financed Phase III of ONGC's Bombay High development program. The project was completed in March 1981, about nine months behind schedule. The facilities are operating satisfactorily. A Project Performance Audit is under preparation. A second loan for US$400 million (Ln 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. 1/ From US$6.1 per barrel to about US$18.8 per barrel. 2/ The pricing formula would enable a refinery company operating effi- ciently to earn a rate of return of 15% (before tax) on fixed assets and working capital.  -14- PART IV - THE PROJECT 41. The project was identified in November 1980 and appraised in July 1981. The Staff Appraisal Report (No. 3645-IN, dated March 2, 1982) is being distributed to the Executive Directors separately. A Supplementary Project Data sheet appears as Annex III. Negotiations were held in Washington in December 1981. The Borrower was represented by Mr. N. Misra of the Department of Economic Affairs, Ministry of Finance, as coordinator of the Indian delegation. Project Sponsors 42. The principal refinery companies participating in the project are Bharat Petroleum Corporation Ltd., Hindustan Petroleum Corporation Ltd., Madras Refineries Ltd. and Cochin Refineries Ltd. The first two companies are wholly Government-owned, while the latter two have partial private ownership (see para 33 above). 43. All the companies have experienced, capable management and are organized on a sound basis to handle their refinery operations, supply and distribution, marketing and finances. Satisfactory preventive maintenance has contributed to high rates of capacity utilization. The overall financial position of the companies is sound, although each suffered temporary setbacks in 1980/81 when rapidly rising imported crude prices resulted in heavy borrowing by the refining companies. The July 1981 rise in prices of domestic crude and petroleum products restored the companies' financial health. All companies have raised a substantial portion of their investment requirements from internally generated funds. The financial and cost accounting systems of the companies are modern and effective. Their auditing requirements and procedures are sound. Project Objectives and Description 44. The principal thrust of the Government's investment in energy - in projects such as coal, gas and hydropower - has been to substitute for fuel oil. The program could not focus on substituting for higher-value middle distillates (e.g., diesel oil and kerosene) since it is not at present economic to do so on a large scale. As a result, middle distillates now comprise about 75% of India's imports of petroleum products. The proposed project would be the first Bank Group operation in refining in India. The main objectives of the project are to expand and modify refining capacity in order to reduce the imbalance between domestic demand for and supply of petroleum products in India and complement other investments in energy supply. The proposed project represents a major effort by GOI to improve utilization of existing facilities by installing economically-sized facilities to increase the yield of middle distillates which are currently in deficit. It will substantially reduce India's import bill through the substitution of crude oil imports, thereby reducing imports of higher value products, namely, diesel oil and kerosene. In addition to the proposed refinery expansions and conversions, the project includes energy saving investments, namely, measures aimed at reducing internal fuel and process heat requirements at the four refineries (Bombay, Cochin, Madras and Visakh), and energy conservation and pollution control devices in other refineries. By  -15- supporting this program, the Bank could expect to play a meaningful role in advising the Government on the optimal design, configuration and location of new refineries, in introducing an integrated approach to energy efficiency, and in assisting in implementation of the projects it finances. 45. The two major project components are: Ci) a capacity expansion and secondary processing component; and (ii) an energy efficiency and pollution control component. The first component will include: (a) at the Cochin Refinery of CRL, expansion of crude processing capacity from the present 3.3 million metric tons per year (tpy) to 4.5 million tpy with a new fluid catalytic cracker (FCC) facility of 1.0 million tpy; (b) at the Madras Refinery of MRL, doubling the crude processing capacity from the present 2.8 million tpy to 5.6 million tpy with a new FCC facility of 0.6 million tpy capacity; (c) at the Visakh refinery of Hindustan Petroleum Corporation Ltd., expansion of crude processing capacity from 1.5 million tpy to 4.5 million tpy with a new FCC facility of 0.6 million tpy capacity; (d) at the Bombay refinery of Bharat Petroleum Corporation Ltd., revamping and restoring the crude processing capacity to 6 million tpy and installing a new FCC unit of 0.6 million tpy capacity; and (e) at the Bombay Refinery of Hindustan Petroleum Corporation Ltd., installation of a sulfur recovery unit. All the above sub-projects will also include modifications and additions to power utilities generation, tankage, distribution and other infrastructural facilities to the extent necessary to achieve sustained operation at the enhanced capacities. 46. The energy efficiency and pollution control component consists of priority investments in several refineries in the country. The investments proposed for improving the energy efficiency of the refineries involve (i) the complete replacement or modification of low-efficiency crude distillation and cracking furnaces (to increase efficiency from about 50% to 90%); (ii) installation of air preheaters and waste heat boilers; and (iii) installation of sulfur recovery units and pollution control devices. Many, though not all the energy efficiency and pollution control investments have been identified. After all have been identified but before Bank financing will become available, each investment will be subject to detailed techno-economic evaluation by GOI, to be submitted to the Bank prior to December 31, 1982. Approval by the Bank will be accorded to those investments in energy efficiency which yield satisfactory economic returns. Investment proposals in pollution control will be based on least cost solutions to meet agreed environmental standards (Section 3.03 of draft Loan Agreement). Subsidiary Loan Agreements between benefitting companies and GOI will contain appropriate provisions. Project Execution 47. Technologies for secondary processing, for liquid petroleum gas and distillate treatment and sulfur recovery have been selected and agreements have been concluded with process licensors for supplying the technology. These arrangements are considered satisfactory. 48. Although there are no atmospheric pollution control standards in India, the air quality and emission standards and practices required in  -16- the US have prevailed in all refinery projects engineered in India since the mid-1970s. Similar design standards will be applied under the project. For liquid effluents control, either the Indian Standard Specifications or local Government standards, both of which are satisfactory, will be applied. The refinery companies will design, build and operate facilities constructed under the project with due regard for satisfactory environmental and safety norms (Sections 2.09 and 3.01(b) of draft Project Agreement). 49. An international firm, Universal Oil Products Company (UOP) of the US, which is experienced in the refineries and petrochemicals industry, will provide basic engineering for the fluid catalytic crackers (FCC) and the Merox liquid petroleum gas and distillate treatment plants, and detailed engineering for critical sections of the FCC, together with necessary technical assistance during engineering, construction and start-up. UOP was selected after an evaluation and comparison of its offer with those of two other experienced international firms. A local engineering firm, Engineers India Ltd. (EIL), with considerable experience in engineering and project management, will provide all basic and detailed engineering not required to be provided by UOP, procurement services for equipment and materials, and construction supervision and management. These engineering arrangements are satisfactory. Contracts between each company and the engineering firms have been reviewed and are satisfactory. 50. EIL's Manager of Projects (Refineries), who has substantial prior experience in the job, will have overall responsibility for coordinating project implementation. He will be assisted by a separate project manager for each of the refinery projects who in turn will be assisted by a task force of core personnel (coordinators) seconded from EIL's central departments dealing with various disciplines of engineering, procurement, construction, accounting and finance. Under the overall supervision of the EIL project manager, the task force personnel will be responsible for supervising the jobs pertaining to their respective specialties. All such personnel are in place. During the site construction phase, EIL will establish at the project sites full-time task forces under resident construction managers, who will report to the concerned project manager. The site task force will be responsible on a day-to-day basis until plant start-up, for field engineering, construction quality control, construction supervision, stores management, time scheduling and cost control. 51. The organizational set-up in each of the project sponsoring companies consists of a full-time company project manager who reports to the Managing Director. These project managers have all been appointed and are responsible for coordination among the various concerned agencies, including the company's technical divisions, the process licensors, EIL, the Central and State Governments and other statutory bodies. The company project managers have been delegated adequate authority to approve purchase and work contract awards. Where decisions are required in matters which exceed the project manager's or Managing Director's authorities, Board subcommittees can be constituted and meet at short notice to provide quick decisions on issues pertaining to project execution. Each refinery will place a small resident team at EIL's  -17- offices to participate in, and expedite decisions concerning, engineering, procurement and works contracting. 52. The additional staff and training requirements of the project are limited, since the project involves primarily rehabilitation of and additions to existing facilities. Most training of additional operators and maintenance staff will be carried out under existing training programs in the refineries. A limited number of selected personnel will be trained abroad, provision for which has been made in the cost estimates. Satisfactory arrangements will be made for the provision of utilities and transport infrastructure facilities (Section 3.04 of draft Project Agreement). Project Costs and Financing 53. The total financing requirements of the project, including contingencies, escalation, working capital and interest during construction, are estimated at US$1,086 million, of which about US$618 million represents foreign exchange costs. Taxes and duties are estimated at US$93.2 million. 54. The proposed Bank loan of US$200 million would provide about 27% of the total installed cost (net of taxes and duties), and 43% of the foreign exchange requirement. The proposed Bank loan will be utilized as follows: US$45 million for the BPCL refinery, US$45 million for the Visakh and Bombay refineries of HPCL, US$45 million for the Madras refinery, US$35 million for the Cochin refinery and US$30 million for the et rgy efficiency and pollution control investments. The Government will provide US$506.0 million. The sponsoring companies will contribute US$379.7 million from internally-generated funds. On the basis of existing prices, the companies are expected to be able to mobilize these funds during project implementation. Should they fail to do so, GOI will provide funds promptly to cover any financing gap, as well as any cost overruns that may develop (Section 3.02 of draft Loan Agreement). The Government will also maintain prices at levels which permit the companies, under conditions of efficient operation, to meet all their expenses, service their debt and earn a reasonable rate of return on invested capital (Section 4.02 of the draft Loan Agreement). 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. The proceeds of the loan will be onlent in rupees to the sponsoring companies at 12% per annum for 15 years, including 4 years of grace, the standard rate for industrial and commercial undertakings in the public sector. Execution of two subsidiary loan agreements is a condition of effectiveness of the Bank loan, while execution of the other subsidiary loan agreements on terms satisfactory to the Bank would be conditions of disbursement for the relevant components of the project (Section 6.01 and Schedule 1, paragraphs 4(b) and (c) of draft Loan Agreement). The exchange risk will be borne by the Government. Inflation in India over the past five years has averaged about 9.5% per annum, although this reflects the unusual conditions prevailing after the 1979 drought (see paras 6 and 7). The rate of inflation has fallen sharply during 1981/82, so that the average annual inflation rate over the next five years is not expected to exceed 8%. The on-lending rate of 12% is, therefore, considerably above the expected rate of inflation.  -18- Procurement and Disbursement 55. Equipment financed under the loan will be procured by international competitive bidding (ICB) in accordance with the Bank's guidelines, except for equipment proprietary to the process design, items whose timely supply is critical to efficient project execution, and small items estimated to cost less than US$200,000 each. These would be procured after limited international tendering from qualified suppliers from at least three Bank member countries, provided that the aggregate value of such contracts does not exceed US$30 million equivalent. For the purposes of bid evaluation under ICB, qualified local suppliers will receive a margin of preference of 15% or the applicable duty, whichever is lower. The Bank loan will also be used to finance the licenses and services provided by foreign and local engineering firms. The basic engineering work is well-advanced and detailed engineering is currently underway. 56. The proposed loan would be disbursed against 100% of foreign expenditures, 100% of local expenditures ex-factory and 70% of other local expenditures on equipment, materials, and spare parts eligible for Bank financing and 100% of the total costs of engineering services and licensing. Of the US$200 million Bank loan, it is expected that US$90 million will be used to finance imported equipment, US$80 million to finance local equipment procured after international competitive bidding under Bank guidelines, and US$30 million to finance licenses and engineering services. It is recommended that the Bank loan retroactively finance up to US$20 million of eligible expenditures incurred after July 1, 1981 on engineering services and downpayments on critical equipment. The payments were made to avoid delays in project execution. The Bank loan is expected to be completely disbursed by June 30, 1986. Financial Evaluation 57. The project will have a major positive impact on the financial situation of the sponsoring companies. Madras Refinery Limited would increase its net income from Rs 47 million in 1982 to Rs 283 million in 1986, the first year of operation. Internal cash generation would increase from Rs 68 million to Rs 492 million in the same period; the minimum debt service is projected at a satisfactory level of 1.8, and the current ratio at 1.1 after 1982. In the case of Hindustan Petroleum, net income is projected to increase from Rs 145 million to Rs 498 million and internal cash generation from Rs 297 million to Rs 984 million between FY82 and FY86; the minimum debt service ratio and the current ratio are calculated at 1.5 and 1.1, respectively. For Bharat Petroleum, net income is calculated to increase from Rs 160 million in FY82 to Rs 728 million in FY86 and cash generation from Rs 334 million to Rs 1,119 million during the same period; minimum debt service ratio is calculated at 1.8 and the current ratio at 1.3, indicating comfortable liquidity situations throughout. Cochin Refinery is projected to almost triple net income from Rs 47 million in FY82 to Rs 127 million in FY86 and also to increase cash generation from Rs 61 million to Rs 282 million. While its debt service situation in 1982 will be tight, thereafter it will improve significantly. Overall, all companies are projected to maintain and improve their  -19- financial performance as a result of the project. The financial rates of return are calculated at 9% and 14% for the projects sponsored by the four refinery companies. These financial rates of return are moderate and below the economic rate of return for the projects, due to the fact that the retention price formula for petroleum products is designed to allow the refineries to earn a 15% rate of return on invested assets. Domestic prices for petroleum products, however, are high, and the difference between domestic and refinery prices accrues to the Government. Nevertheless, the financial rates of return are sufficient to provide the companies with reasonable profits and positive cash flow in each case, beginning in the first year of operation. 58. In order to ensure a continued satisfactory financial performance, the sponsoring companies will: (i) maintain at all times a long-term debt to equity ratio of 65:35, except for CRL and MRL which will maintain this ratio after December 31, 1987; (ii) maintain a current ratio of at least 1.1 until December 31, 1985 and at least 1.2 thereafter; (iii) not incur additional debt in any fiscal year if by so doing the projected debt service coverage ratio (as agreed with the Bank) would fall below 1.4; (iv) not take any action, such as prepayment of debt or distribution of dividends, if these actions would reduce the current ratio below 1.3; and (v) not make, during implementation of the project, any investments in fixed assets (other than the project or for on-going or already planned works and for maintenance purposes) in excess of US$10 million for each refinery in any year without approval of the Bank (Section 4.03 of draft Project Agreement). The companies will submit periodic progress reports on the project components (Section 2.05(b) of draft Project Agreement). Annual audited reports will be submitted to the Bank within six months of the close of their fiscal year (Section 4.02 of draft Project Agreement) .1/ Benefits and Risks 59. The economic rates of return for the four expansion and conversion components and the sulfur recovery unit have been calculated separately; the rate of return of the project as a whole has also been calculated. Rates of return of individual components range from 52% to nearly 100% and for the project overall the return is about 84%. The returns are high because the investments are primarily in expansion and conversion facilities and require limited supplemental infrastructure. Also, they result from the conversion of low-value fuel oil to higher-value middle distillates. The rates of return are affected in only minor respects by adverse changes in assumptions about increased capital costs, decreased capacity utilization and lower revenues. 60. The net foreign exchange savings that would be generated by the project amount to more than US$10 billion over the expected 12-year life of the project, on the assumption that crude oil is imported. 1/ Those companies which are not parties to the Project Agreement will meet similar reporting requirements, to be specified in Subsidiary Loan Agreements between the companies and GOI.  -20- 61. The project would result in the additional employment of about 5,000 persons during the construction phase and 760 persons once the project components go into production. Through the provision of storage and tankage facilities, the project will also enable the country to increase its reserves of petroleum products and thereby minimize risk of petroleum supply interruptions. EIL, the local engineering firm, will get valuable experience in design and implementation of large refinery projects, which should prove beneficial for future projects that may be implemented by Indian refinery companies. 62. The project faces only limited technical risks since (i) the technologies to be used are commercially proven and will be supplied by qualified and experienced firms, and (ii) the project involves expansion and rationalization of existing facilities at sites which are already developed and with adequate infrastructure. The sustained performance of the refineries at the projected operating levels will depend on the timely availability of adequate amounts of crude feedstock, either from domestic sources or from imports. International oil supplies are not within the control of GOI. However, measures being taken to increase substantially supplies of domestic crude should help reduce uncertainties of overall supplies. Marketing risks are also minimal, since the output from the project facilities will principally substitute for imports, which are currently marketed and distributed through existing channels. GOI's pricing policy is expected to be adequate to protect the project from any financial risk in that it has agreed to administer petroleum prices in a manner that will permit the benefitting refinery companies to earn a reasonable return on their capital (Section 4.02 of the draft Loan Agreement). PART V - LEGAL INSTRUMENTS AND AUTHORITY 63. The draft Loan Agreement between India and the Bank, the draft Project Agreement with BPCL, CRL, HPCL and MRL and the 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. 64. Special conditions of the project are listed in Section III of Annex III. The signing of two of the Subsidiary Loan Agreements between GOI and the Refinery Companies would be an additional condition of effectiveness of the loan (Section 6.01 of draft Loan Agreement). Signing of the remaining Subsidiary Loan Agreements would be conditions of disbursement for the remaining Project components (Schedule 1, Part 4(b) and (c), of the draft Loan Agreement). 65. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.  -21- PART VI - RECOMMENDATION 66. I recommend that the Executive Directors approve the proposed loan. A.W. Clausen President By Moeen A. Qureshi March 8, 1982   ANNEX I TABLE 3A Page 1 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVERACES LAND AREA (THOUSAND SQ. KM.) MST RECENT ESTIMATEI TOTAL 3281.6 MOST RECENT LOW INCOME MIDDLE INCOIE AGRICULTURAL 1809.5 1960 /b 1970 lb ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC GNP PER CAPITA (US$) 60.0 100.0 190.0 232.3 1136.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 111.1 152.5 241.8 499.4 1150.6 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (TPOUS.) 434850.0 547569.0 659217.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.0 17.3 40.8 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 974.7 STATIONARY POPULATION (MILLIONS) 1621.0 YEAR STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY PER SQ. 1M. 132.3 166.6 200.5 153.6 373.1 PER SQ. KM. AGRICULTURAL LAND 246.7 308.0 355.8 360.3 2382.8 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.1 42.4 41.1 37.4 39.8 15-64 YRS. 56.8 54.7 56.0 59.2 56.7 65 YRS. AND ABOVE 3.1 2.9 2.9 3.5 3.5 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3 2.1 2.1 2.3 URBAN 2.5 3.3 3.3 3.4 3.8 CRUDE BIRTH RATE (PER THOUSAND) 44.2 40.3 34.0 27.7 29.7 CRUDE DEATH RATE (PER THOUSAND) 22.7 17.4 13.5 10.2 7.5 GROSS REPRODUCTION RATE 3.1 2.8 2.3 2.5 1.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 20.4 44.1 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 93.0 107.1 123.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 93.0 92.0 91.0 98.6 112.6 PROTEINS (GRAMS PER DAY) 52.0 51.0 50.0 56.9 62.5 OF WHICH ANIMAL AND PULSE 17.0 15.0 13.0 14.2 19.7 CHILD (AGES 1-4) MORTALITY RATE 27.1 20.4 14.8 14.6 4.8 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 42.2 47.5 51.9 57.7 64.0 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 125.0 89.1 50.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL 17.0 33.0 30.1 45.9 URBAN .. 60.0 83.0 65.8 68.0 RURAL .. 6.0 20.0 20.1 34.4 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 17.6 53.4 URBAN .. 85.0 87.0 71.0 71.0 RURAL .. 1.0 2.0 4.8 42.4 POPDULATION PER PHYSICIAN 4850.4/c 4889.0 3617.4 3857.7 4428.7 POPULATION PER NURSING PERSON 9630.o7;T 8296.5 6429.4 6411.8 2229.7 POPULATION PER HOSPITAL BED TOTAL 2149.0/d 1612.9 1311.1 1132.8 588.5 URUAN .. .. 363.5 322.3 579.6 RURAL .. .. 10429.1 5600.5 1138.5 ADMISSIONS PER HOSPITAL BED .. .. HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 URBAN 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 URBAN 2.6 2.8 RURAL 2.6 2.8 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. . -  ANNEX I Page 2 of 5 TABLE 3A INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVE MES - MOST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA 6 PACIFIC ASIA & PACIFIC EDUCATION ADUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 73.0 79.0 85.9 99.8 MALE 80.0 90.0 94.0 94.4 100.6 FEMALE 40.0 56.0 63.0 64.5 98.8 SECONDARY: TOTAL 20.0 26.0 28.0 38.0/as 53.5 MALE 30.0 36.0 37.0 34.6/as 58.4 FEMALE 10.0 15.0 18.0 18.0/as 48.6 VOCATIONAL ENROL. (2 OF SECONDARY) 8.0 1.0 1.0 3.8 21.1 PUPIL-TEAChER RATIO PRIMARY 29.0 41.0 41.0 32.8 34.2 SECONDARY 16.0 21.0 .. 19.9 31.7 ADULT LITERACY RATE (PERCENT) 28.0 33.4 36.0 52.8 86.5 CONSUMPTION PASSE NGER CARS PER THOUSAND POPULATIUN 0.7 1.1 1.3 1.7 12.7 RADIO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 32.5 35.3 174.1 TV RECEIVERS PER THOUSAND POPULAT1ON 0.0 0.0 1.0 3.7 50.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER TROUSAND POPULATION 11.0 16.0 16.9 14.6 106.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 3.4 4.3 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 189761.4 220670.5 256699.4 FEMALE (PERCENT) 31.2 32.4 31.9 29.3 37.4 AGRICULTURE (PERCENT) 74.0 74.0 71.D 69.8 50.2 INDUSTRY (PERCENT) 11.0 11.0 11.0 14.1 21.9 PARTICIPATION RATE (PERCENT) TOTAL 43.6 40.3 38.9 39.7 40.2 MALE 58.0 52.6 51.3 51.5 49.8 FEMALE 28.2 27.1 25.7 23.3 31.1 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.1 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGhEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/e 22.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.9/e 49.4 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6./77l 7.0 LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.27e 16.2 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 134.1 248.6 RURAL . . 114.0 111.6 193.7 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 249.8 RURAL .. .. .. .. 234.3 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 40.3 41.7 21.2 RURAL .. .. 50.7 51.7 32.2 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted ar-ithetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. laa China included in total only. /b Unless otherwise noted, data fur 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Host Recent Estimate, between 1976 and 1979. /c 1962; /d 1958; /e 1964-65. May, 1981  ANNEX I Page 3 of 5 IfIINITIONt OF _SOCIALINI, ttATgeS Not.: Although the date err don ro ac -te geerlY Judged the -otauh-itt-i- an -sIiable, it shold also be noted that they may not ha ne- eett YtalotoPeeahbteb he.oe of the took of aadtdtddeti~ln i..o and ..t..t nsed bIly dtff.tsnt nt-nrti- te so111lleetg h data. The dets st, oe st1ins,, uestn to f de..e te. cetr of megeltode lndte- toted., ted thas _etee -soaf eaje differs...nse . hates o ieoe.. The I ..eeoc .t.npe are Ill the -ome coote getp ft the.o ..je- unr n ()nneo gosee soe.ho, hn hee -o-tge moo- then the c..nnecy g..ap of th aut ect coety (eneps oo 'tpota -hpo t eote"gop hc eol ee,fet Afes nd tftddls tEst" S. cheese hsosoae of... eono-oolorl afitiee) shocfee Sutgco d.t. the .......- e pletotoighead site?-oat teems feest eitteadsee nyom sa tSy fth ousta ot eoprit oe o to ldletc.Snc heeneag f oetla segte eItcosdeedso tenetehltyo dt and etotelfoe. ootle aun to noecned o toottooneogas f et it etrc nte. he nrpeeao lydstid - t h.-ato they h-neo LOOt ASIA lehooaeoftq.jco.)did, -th- Th_ e hsle _ad - _fn,ohr n ua o.100 tt ToalTta.tofotnoncnpf tstedocnardtotd ner nbm,sd oal lodd_yshe repotnn he lhope 1sd oetoloru lemee fagiolurl to ne meorylyorpomot lyetclha n ult adgooesgeeotae aalatedhopIatedht LADoRE tryt pe ce,nehrad loeego1aeort-toflee 98 aa Petttato sensiate fopnleaeseatadt emaetye e T ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~h 5' astoe hytoatltaebler-ed pe-ddm ptellllcuec oe E 101 It)-IP e ote nOntae toot nIoocon al tl aeae e elue.fta heptte osne,seld hst oftte hyeS cnrlcmto eOt0ec te 17-9hea hs n ete etr menpataenlyetffd Sc sJ p :Ita (hupt, hy tolt1 try) in Itoeee of oca nuln les peek Aellt; 1977. 1970..and 1979 , teese ISpetistee _ep l aretl tecffdd ony cedar' total. y data.ldddmtsastoin .en Ioetlfd-Ttltte f dlaoeSo shro data. IObeeArane..t..' 1-,RYCOSNTdt. . Ple -of dhusehldiferorera honishld- -oe. ra, o ma7 Ichas PenIeS Io (pecorttf rorel - mobof uphe SoSotpyuntn henesheld onabsae agr of p tnd.l'nd enHO lis eho share - hlyogtoote, tn1960nr.ee;1919191,and199 ec, he9oca9ldfe dnmelolPrcese d Pdplaoo Poetln Aretace nether of rerde-om - raco -tote cohensod pua- heg h ue, PPLTIOtN ANpD et VITL T egoIC an c ndIo_ortlt e iefltty atn.diatlgd bepStey.th lnaitmeenlofbdsnccreeeertre nn eIeep re_o a lrt Screcoo 0ccretoy'aHrc..t..bo hecaden...enmtole..oence, of .dee hin de - t tet. uha, d eud -, ted,rb fml lfrnL.,rct Rtoohlll lb-og no 7.. yenta.. ly en nnenoe eiloent 1eetiyI ttnte h-rtr at"l . ferclcoyeooodcngto roon 'ne oopay fn p dioe dicehrfdoreasrAbe- d.l- -- .tb f..ddi tot occc t then, 1970lged 1979 ofthmeson ohIctln o ecclff 1110f enfcooeanct ThI toorhloed ufy fterferllty moo deole c preiynhotag ppoctoc;ooeol enlde hlden dd1 the arop,loorsp-nboo of~ -doeoreocoosao.ee enothegrnerecular u edutedfedff- n oeteo rrayfonrc. ofonrrptrtittleorty. Thattloeyyycoeooteoc rceoln..h...o.ldrcoo"tolteoriroortO p0'0 retneced c thehatleof oo pruerco oh acotertrlo of to porenolo anor toe yoile oe hI tn coohtco sheoffurol thyoi ne.i cchyor c,cdnennfelroferltcotoplr-Socoyohc-oa,nlnd onrIeorncuoc rcdr ceot locol. eduoet~~~~~~~~~~torqleo uaobs nc t yrcrpcmcynooolo Yone moeluc-d f u: tno o.enrhd 11,-e ry theilienr cO 7r. yonoltaTh. Folloro prce gesroly.ot0O 0 rre ociolo coatortope oo-ori only 191, 170 od 176 are-. . h. .... hi. -ril-Steeh ratI - c ltec cod fncncfer -.. Total ntdto otu""cI1 r ,hc.nc Aite ste-oor Iq-1erothe I - Ih ldoo (-t yenc . oeki.g-eg 01$tor.cc an. e goono tosl decIdedy I-eor of onoho c . olo " th1eref Th csdrtee -(hpare-d -ceofran fertrilitdnecfeod-yantcopr roecetpyolhog ....es...eyleld,dil- g,1 Pooohetoo d -rois b-ern f er hec - ocol- Aore tonlenof oct0 eofai -l.-en ppc peilg of tbsl dot b- co ethc aged It y-h-e .end0. Icotce fr 199-00 190-70.e ccd 97-79h. Poteeseh oon (erito-yed Ifpo.. ioc) -..h -Igli"aofucyr "Ill'o Pecd elot teen be-tPnenod)- perca leon keehope so- er- o sld-y-eac ~ onresenIn -ea11OS- ecghtd yoson -Rrodary -no noose. .....na.nod coptatoc 1960, 1970 cod 1979 dnoc. a.lt dar -ehrle-n idr 1 hrp... hRdl.di -d oc1yolot96o 196.170, ne 1 1979 dd n.hrodeenegornlptit oelhid o of pepota- Ion; tooIeeon Omen coroduitos nts-ueccge Cehiludcunteceaoeay cf...r plElmyee d r --icea IoIuelfesoditd bynn-b-hreoelescoofhdc d d Iy ata 6atotisyeas. aneuft -ecdfg tri 90l 90 n 99 noes-e- tprdire 1h-ihe trs g PenIl PlnolonAoceTon ..ca (td_ ne nul ohro oetc 701 leolce-re ( rateoan cp-c-)-Llcob - 1 doncecceot ect hoocdtell 00 ofh 1hocso; enoeude nyoeo aioo ell locn oge. eea pht inroecdpplstc tdon rlroe V rnoc Fealty Fnoslro-oocs (ororet o -,cA.' noneol.- - Pceog of saite-d- lneooce-agd In yent nhlo prpglteoc- ofd 00 te-ts -s offer. ofoll-ooct f (54 yna(oo e brh-ctoldols c encre locc In(crhce7dcola on 7bn ttcceo Indele. i,l c.I Pon PooduorShl.n coodoyls A--9~l= 0If b-h pore fppalooulItenlsa nodnnyr Incise.no So dr-Se d cc th.one Io Isen 60odo yn hol.I97d0troeeptnc,od (e.g.1eugar-co andlnohlye-hite.. leseedofaugol hlt et dihie ande.ocoo Itr ctrlo .. e.gl. offidry Alopsdf-i e d meolocol anoraso 970 prcc de potor delht- 1950,17,cd17 ae uatbhrPre(t-nf ccolnl rceprct ol eh, im o rhettesetok schcpplotoIdoo l feePdifient-on, - ilpecet f-reai d tehofr --oro ...a - pe r-eg of t-s-blloh boor hocenhun lend 196ly1-05 90 o 1977. -dic.g 1970 en90 d 91d ...t79e daab.-dl...S deeep iofo .p..e. so.y.efodnncfse ontse. p ail-trneofecou,d etnl,at,eodIclI'llyrca octiocetot of0 rn ftslpoesprdondt os fcblad10. 1970, ns-f 197 dote Theseeaoedo SLe yocoptoca anlel pccecsencmee.I Icr'y ohs nc If yh oae ho60 in sh TId IceeeTpsdny. &so - ald -lPoputeilo ShArs 17hes hIrud 0000 todd 00u uror. 101-65 1970 csd 1977ido-c. sopthe rdru-eInhoo foer Pee osof So ceo sccn tocole fria acirul.....d cot en-Proerlo supply of fcod de- CIld. (nn F-cl P frdallt- Per (pc hcoo1(-10 Anul.d-eh per shoono. I....nerleso-o oApoord -oo-e C(hioD 0 roYea ri - ..d: -. thc oc - o Igegcourl-)ynnce,coch.ltfdtnootoi_cnfeeduy;drtimk-eseoldego:tp (prh.to yecO error picondit, yero-sl...fpcornri 00i prorcoc roe codeecd) Agroom gcf tnhcn:lOh, 1970 .. l 1 ..d970 arn IAOf hOusEhls or ahith;190 1970 nodC1979 dcn- nd Idoul heItcrrd I_ t rooideRah.. tao-o.: -f-geyeIhoon o lto..Amteponerelsooelea...st ..cec .i.ir .....r...omstoo 000m t S t Oor feroc o ocueroo- or),crce od urat- eecirltnely drcop ie po_nncsOc co-cu rqucoooe e o her ofperyl (sotl, usco. od Oi ul... recblnoicorone so. na. ifffoofctte'i P.,rendylyA lalooon nrplentdnrcr-p eSr uocd eeocd r dhroosci SnmccteoI ttcf-llslr reb ; I7cmlrclIl ocpic-chnor-ot cato....hcth-g-foot p-crehrk otoole,pli e.dldg. .-cId e e1atlr-o-oryrebllf-n(o-r 1b. f,- i _ntl cner idyc -t 1 ...c.co eoro Stun 1- enorr d- hcib a- ho pernoing Inom of-l olson tf.. .rha toieS In fe..rA tsrco e OnnOIc' S corro rondo- ~ ~ ~ ~ ~ ~ ~ r. r g. e ... -d0 - di .. to: o i-syo.l p,noo 'flo,j. 1i g -r'o rotor. cod coccI -.dir- Me ..he ofd peopl 9ccc, Oror, 1rdror7 netoe hy 70000S Oloned a the roteotun and napcrcl, mlh on lthouStroosesieo hunrot- en trocoec- asI SorIl.. Dor to-oii 1cr Isninl I'll P"ertusmPI Poculos-c co I.,olo-Poun .1cc dfdlOnd by oUnDer. - dpsfrtru p0r--0crdfs Fotlooo pr OoncgForur- opl ttcoAbde ho-i o aeho of Scrccocfn mnlccdfrnoegondnorrioent,poncorel itans.nndE-neittoetnsrent.  Page 4 of 5 ECONOMIC DEVELOPMENT DATA ONP PER CAPITA IN 1979 USS190 GROSS NATIONAL PRODUCT IN 1979180 ANNUAL RATE OF GROWTH M7.. cnsotsnt Prices) US$ Bln. 7. 1955/56-1959/60 1960/61-1964/65 1965/66-1969/70 1970/71-1974/75 1975176-1978/79 GNP at Macket Prices 134.16 100.0 3.7 3.6 3.6 2.8 4.5 Gross Do-estic Investment 29.24 21,8 Gross Nat-onal S-ving 78.55 21.3 Currect Account Balance d/ -0.85 - 0.6 OUTPUT. LABOR FORCE AND PRODUCTIVITY IN 197/ Value Added (at factor .o.tl Labor Force V.A. Per Worker US$ Bln. % mil. T US$ E of Nation.l Averse Agriculture 39, 39.6 181.J 71 220 56 Industry 25.5 25.3 28.1 11 9C6 230 Services 35.3 35.1 46.0 18 767 195 Total/average 30. 6 L00.3 255.4 ino 394 lo0 GOVERNMENT FINANCE General Government Central Geverment Ra. RIn., 7 of GDP Rs. Bln. 76 of GOP 1979/80 1979/80 1975176-1979O6 1979/80 1979/80 1975/76-1979180 Correct Receipts 208.18 19.2 18.9 108.96 10.0 10.6 Correct Eopeedit-res 206.44 19.0 17,7 117.67 10.8 10.6 Correct Surplus/Deficit 1.74 0.2 1.2 - 8.71 - 0.8 - Capital E.pondit.res f/ 51.81 7.5 7.4 56.93 5.2 5.1 Enternal Assistanc- (net) d/ 7.97 0.7 0.9 7.97 0.7 0.9 MONEY, CREDIT AND PRICES 1970/71 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979180 December 1979 December 1980 (R. Billion Ou.ttanding at end of period) Money and Qual Mhoney 109.6 175.7 194.6 222.9 272.8 329.1 398.9 468.2 448.3 521.7 Bank Credit to Government (net) 52.6 87.3 95.3 101.1 110.2 134.7 153.9 192.2 176.4 231.4 Bank Credit to Cosmerial Sector 64.6 107.0 126.7 153.9 185.0 212.2 253.5 306.5 294.7 335.9 (Percentage or I.den Number-) April-Dec 1979 April-De, 1980 M.oney and Qooni M.oney as E of GDP 27.2 29.8 27.9 30.2 34.0 36.5 40.8 43.1 Whholesale Price Index (1970/71 = 100) 100.0 139.7 174.9 173.0 176.6 185.8 185.8 217.6 212.2 253.5 Annual percentage changek in: Wholesale Price Index 7.7 20.2 25.2 - 1.1 2.1 5.2 - 17.1 14.6 19.5 R.nk Credit to Government (net) 10.8 12.3 9.2 6.1 9.0 22.2 14.3 24.9 24.9 jM/ 31.2 h/ Bank Credit to Co-seroial Sectcr 19.4 22.6 18.4 21.5 20.2 14.7 19.5 20.9 17.5 I/ 14.0 h/ I/ The por capita GNP estimate is at market prices, calclated by the conversion te-hnique osed in the World Beek Atlas, 1979. All other conveesioes to dollars in thin table are at the aversge -change rate prevailing during tho period covered. t/ Qocck Estimates. */ Computed from trend line of GNP at factor cost series, including one observ-tion before first year and one observation After last year of listed period. d/ World BRnk ..ti-ateO; not necessarily con.sitent with offiai.l figure-. e/ Transfers between Centre and States have been netted oct. f/ All loans end advances to third parties have beec netted out. 1/ Percentage change from end-December 1978 fo eod-December 1979. h/ Percentage change from end-December 1979 to end-December 1980.  Annex I Page 5 of 5 BALANCE OF PAmENTS 1977/78 1978/79 1979/80 1980/81 MERCHANDISE EXPORTS (AVERAGE 1976/77 - 1979/80) US$ Mln. 7. Exports of Goods 6,315 6,978 7,958 8,998 Engineering Goods 768 I/ 11 Imports of Goods -7,188 -8,519 -11,249 -15,624 Tea 462 7 Trade Balance - 873 -1,541 - 3,291 - 6,626 Gems 605 9 NFS (net) 691 773 633 463 Clothing 460 7 Leather and Leather Resource Balance 182 - 768 - 2,658 - 6.163 Products 425 6 Jute Manufactures 284 4 Interest Payments (net) i/ - 89 - 35 350 303 Iron Ore 298 5 Other Factor Payments (net) - - - - Cotton Textiles 289 4 Net Transfers 1/ 1,077 1,216 1,458 2,462 Sugar 132 2 Others 3,028 45 Balance on Current Account 806 413 - 850 -3.398 Total 6a.751 100 Official Aid Disbursements 1,628 1,695 1,891 2,389 EXTERNAL DEBT, MARCH 31. 1980 Amortization - 645 - 702 - 676 - 707 USS billion Transactions with DMF - 330 - 158 _ 1,035 Outstanding and Disbursed 15.6 All Other Items 617 286 - 143 133 Undisbursed 5.7 Outstanding, including 21.3 Increase in Reserves () -2,076 -1,534 - 222 548 Undisbursed Gross Reserves (end year) 5,823 7,357 7,579 7,031 Net Reserves (end year) / 5,668 7,357 7,579 6,691 DEBT SERVICE RATIO FOR 1979/80 10.4 per cent Fuel and Related Materials IBRD/IDA LENDING. DECD(BER 31. 1980 Imports 1,811 2,043 3,977 7,012 US$ million of which: Petroleum 1,811 2,043 3,977 7,012 IBRD IDA Exports 32 24 26 n.a. Outstanding and Disbursed 806 4,895 Undisbursed 572 3,547 Outstanding, including 1,378 8,442 Undisbursed RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 --Rs 7.5 Re 1.00 - US$0.133333 Mid-December 1971 to end-June 1972 US$1.00 - Rs 7.27927 Re 1.00 - USS0.137376 After end-June 1972 Floating Rate Spot Rate end-December 1979 US$1.00 - Rs 7.907 Re 1.00 - US$0.126 Spot Rate end-December 1980 US$1.00 - Rs 7.930 Re 1.00 - US$0.126 _/ Estimated. i/ Figures given cover all investment income (net). Major payents are interest on foreign loans and charges paid to IMF, and major receipt is interest earned on foreign assets. J/ Figures given include workers' remittances but exclude official grant assistance, which is included within official aid disbursements. t/ Excludes net use of IMF credit. 1/ Figure for 1979/80 is estimated. / Amortization and interest payments on foreign loans as a percentage of exports of goods and services. Apri L 1981  ANNEX II Page 1 of 17 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30, 1981) 1/ US$ million (Net of Cancellations) Loan or Fiscal IDA IDA Credit Year of (US$ (SDR No. Approval Purpose Bank Credits) Credits) Undisbursed 45 Loans/ 1,515.98 - 72 Credits fully disbursed - 4,065.4 342-IN 1973 Education - 12.0 2.42 456-IN 1974 HP Apple Processing & Marketing - 13.0 5.01 1011-IN 1974 Chambal (Rajasthan) CAD 52.0 - 9.15 482-IN 1974 Karnataka Dairy - 30.0 15.80 502-IN 1975 Rajasthan Canal CAD - 83.0 28.16 521-IN 1975 Rajasthan Dairy - 27.7 12.37 522-IN 1975 Madhya Pradesh Dairy - 16.4 4.70 585-IN 1976 Uttar Pradesh Water Supply - 40.0 13.47 598-IN 1976 Fertilizer Industry - 105.0 17.09 604-IN 1976 Power Transmission IV - 150.0 40.11 609-IN 1976 Madhya Pradesh Forestry T.A. - 4.0 1.46 610-IN 1976 Integrated Cotton Development - 18.0 10.23 1251-IN 1976 Andhra Pradesh Irrigation 145.0 - 74.58 1260-IN 1976 IDBI II 40.0 - 10.77 1273-IN 1976 National Seeds I 25.0 - 21.59 1313-IN 1977 Telecommunications VI 80.0 - 16.09 1335-IN 1977 Bombay Urban Transport 25.0 - 7.36 680-IN 1977 Kerala Agric. Development - 30.0 22.06 682-IN 1977 Orissa Agric. Development - 20.0 6.98 685-IN 1977 Singrauli Thermal Power - 150.0 36.81 687-IN 1977 Madras Urban Development - 24.0 4.08 690-IN 1977 WB Agric. Extension & Research - 12.0 12.00 1394-IN 1977 Gujarat Fisheries 14.0 - 7.23 712-IN 1977 M.P. Agric. Development - 10.0 5.10 720-IN 1977 Periyar Vaigai Irrigation - 23.0 13.49 728-IN 1977 Assam Agricultural Development - 8.0 5.46 736-IN 1978 Maharashtra Irrigation - 70.0 28.83 737-IN 1978 Rajasthan Agric. Extension - 13.0 6.84 740-IN 1978 Orissa Irrigation - 58.0 25.71 1475-IN 1978 Industry DFC XII 79.2 - 7.81 747-IN 1978 Second Foodgrain Storage - 107.0 77.58 756-IN 1978 Calcutta Urban Development II - 87.0 19.11  ANNEX II Page 2 of 17 US$ million (Net of Cancellations) Loan or Fiscal IDA IDA Credit Year of (US$ (SDR No. Approval Purpose Bank Credits) Credits) Undisbursed 761-IN 1978 Bihar Agric. Extension & Research - 8.0 6.81 1511-IN 1978 IDBI Joint/Public Sector 25.0 - 12.87 1549-IN 1978 Third Trombay Thermal Power 105.0 - 53.99 788-IN 1978 Karnataka Irrigation - 117.6 76.35 793-IN 1978 Korba Thermal Power - 200.0 126.45 806-IN 1978 Jammu-Kashmir Horticulture - 14.0 13.75 808-IN 1978 Gujarat Irrigation - 85.0 62.96 815-IN 1978 Andhra Pradesh Fisheries - 17.5 13.97 816-IN 1978 National Seeds II - 16.0 14.97 1592-IN 1978 Telecommunications VII 120.0 - 46.76 824-IN 1978 National Dairy - 150.0 130.60 842-IN 1979 Bombay Water Supply II - 196.0 182.09 843-IN 1979 Haryana Irrigation - 111.0 39.98 844-IN 1979 Railway Modernization & Maintenance - 190.0 145.84 848-IN 1979 Punjab Water Supply & Sewerage - 38.0 20.17 855-IN 1979 National Agricultural Research - 27.0 24.82 862-IN 1979 Composite Agricultural Extension - 25.0 15.86 871-IN 1979 NCDC - 30.0 15.55 1648-IN 1979 Ramagundam Thermal Power 50.0 - 50.00 874-IN 1979 Ramagundam Thermal Power - 200.0 170.31 889-IN 1979 Punjab Irrigation - 129.0 98.57 899-IN 1979 Maharashtra Water Supply - 48.0 44.06 911-IN 1979 Rural Electrification Corp. II - 175.0 95.54 925-IN 1979 Uttar Pradesh Social Forestry - 23.0 18.39 947-IN 1980 ARDC III - 250.0 23.24 963-IN 1980 Inland Fisheries - 20.0 19.52 954-IN 1980 Maharashtra Irrigation II - 210.0 170.70 961-IN 1980 Gujarat Community Forestry - 37.0 29.62 981-IN 1980 Population II - 46.0 45.22 1003-IN 1980 Tamil Nadu Nutrition - 32.0 30.44 1004-IN 1980 U.P. Tubewells - 18.0 16.56 1011-IN 1980 Gujarat Irrigation II - 175.0 164.42 1027-IN 1980 Singrauli Thermal II - 300.0 278.36 1012-IN 1980 Cashewnut - 22.0 21.65 1028-IN 1980 Kerala Agricultural Extension - 10.0 9.81 1033-IN 1980 Calcutta Urban Transport - 56.0 53.71 1034-IN 1980 Karnataka Sericulture - 54.0 52.38  ANNEX II Page 3 f 17 US$ million (Net of Cancellations) Loan or Fiscal IDA IDA Credit Year of (US$ (SDR No. Approval Purpose Bank Credits) Credits) Undisbursed 1046-IN 1980 Rajasthan Water Supply and Sewerage - 80.0 76.65 1843-IN 1980 Industry DFC XIII 100.0 - 66.71 1887-IN 1980 Farakka Thermal Power 25.0 - 25.00 1053-IN 1980 Farakka Thermal Power - 225.0 201.16 1897-IN 1981 Kandi Watershed and Area Development 30.0 - 28.92 1925-IN 1981 Bombay High Offshore Development 400.0 - 379.77 2050-IN* 1982 Tamil Nadu Newsprint 100.0 - 100.0 1072-IN 1981 Bihar Rural Roads - - 30.6 29.8 1078-IN 1981 Mahanadi Barrages - - 72.4 72.4 1082-IN 1981 Madras Urban Development II - - 37.3 37.3 1108-IN 1981 M.P. Medium Irrigation - - 128.9 128.9 1112-IN 1981 Telecommunications VIII - - 288.9 263.6 1116-IN 1981 Karnataka Tank Irrigation - - 49.8 49.8 1125-IN*+ 1981 Hazira Fertilizer Project - - 368.0 368.0 1135-IN 1981 Maharashtra Agricultural Ext. - - 21.6 21.6 1137-IN 1981 Tamil Nadu Agricultural Ext. - - 26.2 26.2 1138-IN 1981 M.P. Agricultural Ext. II - - 34.7 34.7 1146-IN* 1981 National Cooperative Development Corp. II - - 116.5 116.5 1172-IN*+ 1982 Korba Thermal Power Project - II - - 372.7 372.7 1177-IN*+ 1982 Madhya Pradesh Major Irrigation - - 223.4 223.4 Total 2,931.2 8,511.6 1,771.0 of which has been repaid 1,103.4 84.6 - Total now outstanding 1,T7T8 ,4727.0 T,771.0 Amount Sold 133.8 of which has been repaid 133.3 0.5 - Total now held by Bank and IDA 1/ 1,827.4 8,427.0 1,771.0 Total undisbursed (excluding *) 818.6 2,925.3 664.3 1/ Prior to exchange adjustment. * Not yet effective. + Net yet signed.  ANNEX II Page 4 of 17 B. STATEMENT OF IFC INVESTMENTS (As of September 30, 1981) Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.6 0.4 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 1964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.3 13.1 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.1 0.1 1.2 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 1978 Housing Development Finance Corporation 4.0 1.2 5.2 1980 Deepak Fertilizer and Petrochemicals Corporation Ltd. 7.5 1.0 8.6 1981 Coromandel Fertilizers Limited 15.9 15.9 1981 Tata Iron and Steel Company Ltd. 38.0 - 38.0 1981 Mahindra, Mahindra Limited 15.0 - 15.0 1981 Nagarjuna Coated Tubes Ltd. 2.9 0.3 3.2 1981 Nagarjuna Signode Limited 2.3 - 2.3 1981 Nagarjuna Steels Limited 1.5 0.2 1.8 TOTAL GROSS COMMITMENTS 136.7 11.9 148.6 Less: Sold 26.0 1.7 27.7 Repaid 22.6 - 22.6 Cancelled - 1.3 7.5 Now Held 81.9 8.9 90.8 Undisbursed 66.1 1.5 67.6  ANNEX II Page 5 of 17 C. PROJECTS IN EXECUTION 1/ (As of September 30, 1981) 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 September 30, 1981 totalled US$164 million, representing an increase of about 6% over the same period last year. The undisbursed pipeline Of US$4,408 million as of September 30, 1981, reflects the lead time which would be expected given the mix of fast- and slow-disbursing projects in the India program. Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation of India Project; US$80.0 million loan of July 22, 1977; Effective Date: October 4, 1977; Closing Date: March 31, 1983 Ln. No. 1843 Thirteenth Industrial Credit and Investment Corporation of India Project; US$100.0 million loan of May 16, 1980; Effective Date: June 27, 1980; Closing Date: December 31, 1985 These loans are supporting industrial development in India through a well-established development finance company and are designed to finance the foreign exchange cost of industrial projects. ICICI continues to be a well-managed and efficient development bank financing medium- and large-scale industries, which often employ high technology and are export-oriented. Disbursements under both loans 1475 and 1843 are ahead of schedule. Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: March 31, 1983 Loan No. 1511 IDBI Joint/Public Sector Project; US$25.0 million loan of March 1, 1978; Effective Date: May 31, 1978; Closing Date: March 31, 1983 Loan 1260 is designed to assist the Industrial Development Bank of India in promoting small- and medium-scale industries and in strengthening the State Financial Corporations involved. Loan 1511 is designed to encourage the pooling of private and public capital in medium-scale joint ventures. The project also assists IDBI in carrying out industrial sector 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 6 of 17 investment studies and in strengthening the financial institutions dealing with the state joint/public sector. Cr. No. 747 Second Foodgrain Storage Project; US$107.0 million credit of January 6, 1978; Effective Date: May 17, 1978; Closing Date: June 30, 1982 Satisfactory progress is being made in the construction of bag storage warehouses, despite problems of land acquisition at some sites. However, construction of flat bulk warehouses and port silos is not expected to be completed until 1984, as a result of delays in the employment of con- sultants and the longer time required for the preparation of technical specifications and tenders and the construction itself. In view of the high increases in bulk storage construction costs, the Government is proposing to reduce the bulk storage component of the project in favor of additional bag storage capacity; this proposal is currently under consideration by the Association. Cr. No. 806 Jammu-Kashmir Horticulture Project; US$14.0 million credit of July 17, 1978; Effective Date: January 16, 1979; Closing Date: June 30, 1984 The principal executing agency, J&K Horticulture Produce Marketing and Processing Corporation, is 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. Ln. No. 1313 Telecommunications VI Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 19/6 Closing Date: March 31, 1983 Ln. No. 1592 Telecommunications VII Project; US$120.0 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, although as of June 1981, when they were last reviewed, imports of electronic switching equipment for the projects were behind schedule, resulting in a reduced growth rate for the installation of direct exchange lines. Institutional improvements envisaged under the projects have been achieved, and the finan- cial situation of the Posts and Telegraphs Department remains sound. Credit 1112, which became effective in June 1981, provides for the continued expansion, over a three-year period, of the Indian telecommunications net- work, particularly in rural areas. It also provides for the modernization and upgrading of three existing telecommunications equipment factories, and the establishment of three additional ones. Initial implementation and procurement actions are proceeding on schedule.  ANNEX II Page 7 of 17 Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1982 Cr. No. 1125 Hazira Fertilizer Project; US$400.0 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. Further, some of the sub-projects identified earlier have not materialized because of reconsideration by the Central and State governments. IDA has agreed to a list of sub-projects to replace the ones that have been dropped. Because of the above, the project completion date has been delayed. Credit 1125 is proceeding satisfactorily with initial implementation and procurement actions proceeding to schedule. Cr. No. 342 Agricultural Universities Project; US$12.0 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1982 The project involves the development of the agricultural universities in Assam and Bihar. The primary aim of the AUs project is to improve the quality and practical training of undergraduates and so the spectrum of their employment opportunities; and to strengthen university structure to enable it to give an impetus to agricultural and rural development. Considerable progress has been made in achieving the latter objective; but achieving educational objectives is more slowly attainable, constrained by traditional attitudes and structures where consistent effective leadership falters. Changes to a more functional orientation are now planned. The Project Direc- tor and others responsible are aware of the constraints and are supporting efforts to remove them. Cr. No. 842 Second Bombay Water Supply and Sewerage Project; US$196.0 million credit of November 13, 1978; Effective Date: June 12, 1979; Closing Date: March 31, 1985 Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38.0 million credit of October 27, 1978; Effective Date: January 25, 1979; Closing Date: March 31, 1983 Cr. No. 899 Maharashtra Water Supply and Sewerage Project; US$48.0 million credit of June 21, 1979; Effective Date: November 9, 1979; Closing Date: June 30, 1984 Cr. No. 1046 Rajasthan Water Supply and Sewerage Project; US$80 million credit of June 25, 1980; Effective Date: August 5, 1980; Closing Date: September 31, 1985 Implementation of Credit 842, a second stage of the recently com- pleted first Bombay Water Supply and Sewerage Project (Credit 390), is proceeding to schedule. Preliminary work in connection with implementation  ANNEX II Page 8 of 17 of Credit 848 has been completed but subsequent procurement delays and slow release of construction funds are likely to delay the project by about 12 months and result in cost increases. Physical progress under Credit 899 is satisfactory. Initial delays in implementation of institutional arrangements and tariff measures proposed for the project are now being overcome. Project progress in this area is being closely monitored. Implementation of Credit 1046 is proceeding satisfactorily. Detailed construction programs have been prepared for rural schemes, and preparation of tender documents for urban schemes have been completed. Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: December 31, 1982 The Project has had a slow start due to delays in the preparation of technical reports for regional and local water authorities and in the engage- ment of consultants. While improvements have been made in the physical execution, other aspects of project implementation continue to lag so that disbursements under the Credit have fallen short of estimates at the time of appraisal. In order to improve the situation, arrangements have been made to closely supervise and coordinate implementation. Cr. No. 756 Second Calcutta Urban Development Project; US$87.0 million credit of January 6, 1978; Effective Date: April 7, 1978; Closing Date: March 31, 1983 The project is proceeding quite well in most sectors, in spite of country-wide materials shortages and serious Statewide electric power shortages. Procurement is generally on schedule for equipment and consult- ants' services, though somewhat behind for larger civil works contracts. Staff shortages in some of the implementing agencies continue, although more extensive use of consultants has to a great degree alleviated this problem. Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977; Closing Date: September 30, 1981 With respect to the first Madras project, physical progress is generally satisfactory and costs are within appraisal estimates on most components. However, land acquisition problems and consequent delays in construction on one of the three sites and service areas will result in about 15 months delay in the completion of the final sections of these areas. Increased attention should be turned to the financial analysis and marketing strategies required to ensure that anticipated cost recovery in the sites and services and slum upgrading components and thus replicability is actually achieved. Technical assistance is being sought to strengthen financial management and analysis. Cr. No. 1082 Second Madras Urban Development Project; US$42.0 credit of January 14, 1981; Effecztiveness Date: March 2, 1981; Closing Date: March 31, 1986.  ANNEX II Page 9 of 17 With respect to the second project, early project implementa- tion is proceeding satisfactorily, with evidence that the lessons learned under the first project are being heeded. Cr. No. 482 Karnataka Dairy Development Project; US$30.0 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: June 30, 1982 Cr. No. 824 National Dairy Project; US$150.0 million credit of June 19, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1985 These four credits, totalling US$224.1 million, support dairy development projects organized along the lines of the successful AMUL dairy cooperative scheme in Gujarat State. More than 2,100 dairy cooperative societies (DCS) have been established under the three state projects (Kar- nataka-923, Rajasthan-926, Madhya Pradesh-272). Farmer response has been excellent and project authorities are under considerable producer pressure to speed up the establishment of DCS. Profitability in almost all DCS is good and construction of dairy and feed plants is now proceeding at a satisfactory pace. Limited milk processing capacity has been the major constraint to DCS formation in all three projects. Under the National Dairy Project, thirteen subprojects have been appraised by the Indian Dairy Cor- poration and a further five subprojects are in various stages of preparation and appraisal. Advance procurement of dairy equipment is well underway though disbursements have been slow, mainly as a result in the start of project operations. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52.0 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1982 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83.0 million credit of July 31, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1982 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145.0 million loan (Third Window) of June 10, 1976; Effective Date: September 7, 1976; Closing Date: December 31, 1982 Cr. No. 720 Periyar Vaigai Irrigation Project; US$23.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983  ANNEX II Page 10 of 17 Cr. No. 736 Maharashtra Irrigation Project; US$70.0 million credit of October 11, 1977; Effective Date: January 13, 1978; Closing Date: March 31, 1983 Cr. No. 740 Orissa Irrigation Project; US$58.0 million of October 11, 1977; Effective Date: January 16, 1978; Closing date: October 31, 1983 Cr. No. 788 Karnataka Irrigation Project; US$126.0 million credit of May 12, 1978; Effective Date: August 10, 1978; Closing Date: March 31, 1984 Cr. No. 808 Gujarat Irrigation Project; US$85.0 million credit of July 17, 1978; Effective Date: October 31, 1978; Closing Date: June 30, 1984 Cr. No. 843 Haryana Irrigation Project; US$111.0 million credit of August 16, 1978; Effective Date: December 14, 1978; Closing Date: August 31, 1983 Cr. No. 889 Punjab Irrigation Project; US$120.0 million credit of March 30, 1979; Effective Date: June 20, 1979; Closing Date: June 30, 1985 Cr. No. 954 Second Maharashtra Irrigation Project; US$210 million credit of April 14, 1980; Effective Date: June 6, 1980; Closing Date: December 31, 1985 Cr. No. 1011 Second Gujarat Irrigation Project; US$175 million credit of May 12, 1980; Effective Date: June 27, 1980; Closing Date: April 30, 1986 - Cr. No. 1078 Mahanadi Barrages Project; US$83 million credit of December 5, 1980; Effective Date: February 11, 1981; Closing Date: March 31, 1987 Cr. No. 1108 Madhya Pradesh Medium Irrigation Project; US$140 million credit of March 26, 1981; Effective Date: May 13, 1981; Closing Date: March 31, 1987 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructure, drainage, and land shaping are prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory. Cr. No. 682 Orissa Agricultural Development Project; US$20.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983  ANNEX II Page 11 of 17 Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12.0 million credit of June 1, 1977; Effective Date: August 30, 1977; Closing Date: September 3U, _l"2 Cr. No. 712 Madhya Pradesh Agricultural Extension and Research Project; US$10.0 million credit of June 1, 1977; Effective Date: September 2, 1977; Closing Date: September 30, 1983 Cr. No. 728 Assam Agricultural Development Project; US$8.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 737 Rajasthan Agricultural Extension and Research Project; US$13.0 million credit of November 14, 1977; Effective Date: February 6, 1978; Closing Date: June 30, 1983 Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8.0 million credit of January 6, 1978; Effective Date: May 2, 1978; Closing Date: October 31, 1983 Cr. No. 862 Composite Agricultural Extension Project, US$25.0 million credit of February 16, 1979; Effective Date: December 14, 1979; Closing Date: December 31, 1984 Cr. No. 1028 Kerala Agricultural Extension Project; US$10 million credit of June 25, 1980; Effective Date: August 18, 1980; Closing Date: June 30, 1986 Cr. No. 1137 Tamil Nadu Agricultural Extension Project; US$28 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 Cr. No. 1135 Maharashtra Agricultural Extension Project; US$23 million credit of May 7, 1981; Effective Date: July 22, 1981; Closing Date: June 30, 1987 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 These eleven credits finance the reorganization and strengthening of agricultural extension services and the development of adaptive research capabilities in twelve States in India. In areas where the reformed exten- sion system is in operation, field results have been very good, both in terms of adoption of new agricultural techniques and of increased crop yields. In Rajasthan, Assam, Madhya Pradesh and Orissa, in particular, significant gains have been made under the projects. In West Bengal, where a change in govern- ment brought a review of the organizational principles underlying the new extension system and an accompanying hiatus in project implementation, a Cabinet decision has reaffirmed the State Government's commitment to the project, revised implementation plans have been prepared, and project activities are resuming. In Bihar, staff shortages, particularly in key  ANNEX II Page 12 of 17 supervisory and managerial posts, are severely hampering project implementa- tion; a review is underway to reassess whether the project can be implemented as intended. In Gujarat, Haryana and Karnataka, all covered under the Com- posite Agricultural Extension Project, field work is off to a good start. In Kerala, project implementation began in three of eleven districts after some initial start-up delays. Early progress on civil works and initiation of the program in the remaining eight districts will be required to regain the initial implementation schedule. In Tamil Nadu and Maharashtra, project implementation is encouraging. Project review missions are helping sustain project momentum. Cr. No. 855 National Agriculture Research Project; US$27.0 million credit of December 7, 1978; Effective Date: January 22, 1979; Closing Date: September 30, 1983 While the initial sanctioning of research subprojects under this project was somewhat slower than expected, due to staff shortages in the Project Unit, the pace has picked up considerably in recent months. Commit- ment of funds to research subprojects is proceeding satisfactorily, although corresponding disbursements may lag somewhat behind the original estimates. Additions to the staff of the Project Unit have been made to expedite further progress under the project. Cr. No. 680 Kerala Agricultural Development Project; US$30.0 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 Project implementation started slowly due to initial staffing and funding delays. The project has now gained momentum and the planting opera- tions, which were one season behind original schedule, have been rephased to make up for lost time. Some of the coconut rehabilitation areas are being changed based on the demand of credit from the farmers. Cr. No. 871 National Cooperative Development Corporation (NCDC) Project; US$30.0 million credit of February 2, 1979; Effective Date: May 3, 1979; Closing date: December 31, 1984 Cr. No. 1146 Second National Cooperative Development Corporation (NCDC) Project; US$125 million credit of July 21, 1981; Effective Date: November 11, 1981; Closing Date: June 30, 1987 As of December 1981, when Credit 871 was last reviewed, the construc- tion program has progressed slightly more slowly than anticipated due to shortages in supplies of steel and cement. Disbursements have been progress- ing well and are ahead of the appraisal targets. Credit 1146, which was signed in July 1981, provides credit for the construction of cooperative godowns and cold-storage and marketing facilities to support the pre- and post-harvest supply and marketing requirements in nine States; promote the development of cooperative institutions in these States; and expand coopera- tive subproject preparation and appraisal activities within the cooperative sector. Project implementation has been slower than anticipated, and disbur- sements as of December 1981 are considerably less than projected at  ANNEX II Page 13 of 17 appraisal. NCDC is taking steps to ensure that adequate preparatory work is done in all nine participating States. Cr. No. 844 Railway Modernization and Maintenance Project; US$190.0 million credit of November 13, 1978; Effective Date: January 10, 19/9; Closing Date: December 31, 1984 Credit 844 was designed to help the Indian Railways reduce manufac- turing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. Project implementation is satisfactory. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26, 1976; Effective Date: May 17, 1976; Closing Date: December 31, 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 industry in Bastar district. Further studies are underway to assess the socio-economic impact of such investments. Cr. No. 925 Uttar Pradesh Social Forestry Project; US$23.0 million credit of June 21, 1979; Effective Date: January 3, 1980; Closing Date: December 31, 1984 Cr. No. 961 Gujarat Community Forestry Project; US$37 million credit of April 14, 1980; Effective Date: June 24, 1980; Closing Date: December 31, 1985 These projects, designed to expand the social forestry program in Uttar Pradesh and Gujarat, to provide a source of energy to the villages, and to supply raw materials to cottage industries, are proceeding well. The projects provide for large-scale tree plantations on public lands, primarily along roads, rails and canals, on village common lands and on degraded forest reserves. Cr. No. 610 Integrated Cotton Development Project; US$18.0 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1981 The project's progress remained very disappointing in all areas until the 1978 season, resulting in negligible disbursements. Due to renewed interests from GOI and the States, the project has now started to progress well. Short-term credits are increasing significantly, new processing units are being established in Haryana and Maharashtra, and plant protection activities are progressing well. Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1984 Cr. No. 816 Second National Seed Project; US$16.0 million credit of July 17, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1984  ANNEX II Page 14 of 17 These projects were designed to increase the availability of high quality agricultural seed, and cover nine States (four by Ln. 1273-IN and five by Cr. 816-IN). Project implementation has been slow because of initial problems in coordination and monitoring particularly at the national level. 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. Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1983 Cr. No. 1033 Calcutta Urban Transport Project; US$56 million credit of October 27, 1980; Effective Date: December 18, 1980; Closing Date: December 31, 1984 The bus procurement program supported by the Bombay project (Ln. 1335) has proceeded on schedule, with all 700 bus chassis and bodies financed and delivered in service. Total fleet strength has increased from 1,530 buses at the inception of the project to nearly 2,000 buses, in accord- ance with appraisal estimates. Depot capacity expansion has lagged somewhat behind fleet expansion, but caught up in November 1980. However, delays in construction of new workshop facilities have been more substantial and will no- be fully recoverable. As a result, the loan closing date has been extended by three years. Traffic management civil works are also somewhat behind schedule, although now proceeding satisfactorily. 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. 1072 Bihar Rural Roads Project; US$35.0 million credit of December 5, 1980; Effective Date: January 15, 1981; Closing Date: June 30, 1986. The first year program of rural road construction is underway. The whole project aims to construct or rehabilitate 700 km of rural roads and to improve maintenance of the rural road network in Bihar as part of the State's overall rural development efforts. Equipment has been ordered and is being delivered. Ln. No. 1394 Gujarat Fisheries Project; US$14.0 million loan and US$4.0 (TW) and million credit of April 22, 1977; Effective date: July 19, 1977; Cr. No. 695 Closing Date: June 30, 1983 Cr. No. 815 Andhra Pradesh Fisheries Project; US$17.5 million credit of June 19, 1978; Effective Date: October 31, 1978; Closing Date: September 30, 1984  ANNEX II Page 15 of 17 As of July 1981 when the first of these projects was last reviewed, the harbor construction works at Mangrol and Veraval in Gujarat had encountered delays, although the problem with shortages of cement supplies had been overcome. In Andhra Pradesh, the harbor works at Visakhapatnam, Kakinada and Nizampatnam are progressing satisfactorily following the resolu- tion of design problems. The road component is also progressing satisfac- torily. Cr. No. 963 Inland Fisheries Project; US$20 million credit of Jarnuary 18, 1980; Effective Date: May 5, 1980; Closing Date: September 30, 1985 This project, which is the first of its kind in India, is designed to increase carp production in five states--West Bengal, Bihar, Orissa, Madhya Pradesh, and Uttar Pradesh--through the construction of hatcheries, improvements to fish ponds, strengthening of extension services, and the establishment of training centers. The project became effective in May 1980. The initial implementation tasks, primarily involving the establishment of State Fish Seed Development Corporations and Central and State project monitoring units, are progressing satisfactorily. However, hatchery planning has been delayed as a result of a delay in the establishment of the engineer- ing cell within the Central Project Unit. Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit of May 12, 1978; Effective Date: August 14, 1978; Closing Date: March 31, 1985 Ln. No. 1549 Third Trombay Thermal Power Project; US$105.0 million loan of June 19, 1978; Effective Date: February 8, 1979; Closing Date: March 31, 1984 Ln. No. 1648 Ramagundam Thermal Power Project; US$50.0 million loan and and Cr. 874 US$200 million credit of February 2, 1979; Effective Date: May 22, 1979; Closing Date: December 31, 1985 Cr. No. 604 Power Transmission IV Project; US$150 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: December 31, 1982 Cr. No. 1027 Second Singrauli Thermal Power Project; US$300 million credit of June 5, 1980; Effective Date: July 30, 1980; Closing Date: March 31, 1988 Ln. No. 1887 Farakka Thermal Power Project; US$25 million loan and and US$225 million credit of July 11, 1980; Effective Date: Cr. No. 1053 December 10, 1980; Closing Date: March 31, 1987  ANNEX II Page 16 of 17 Ln. No. 2076 Second Ramagundam Thermal Power Project; US$300 million loan of January 6, 1982; Effective Date (expected): April 6, 1982; Closing Date: June 30, 1988 Credits 685 and 1027 assist in financing the 2,000 MW Singrauli development, which is the first of four power stations in the Government's program for the development of large central thermal power stations feeding power into an interconnected grid. Credit 793 supports the construction of the first three 200 MW generating units at the second such station, at Korba, together with related facilities and associated transmission. Loan 1648/ Credit 874 support similar investments at Ramagundam, and Loan 1887/ Credit 1053, at Farakka. Loan 2076 supports the development of the second stage of the Ramagundam plant, involving the construction of three 500 MW generating units. The National Thermal Power Corporation (NTPC) has been carrying out construction and operation of these power stations. Loan 1549 is supporting the construction of a 500 MW extension of the Tata Electric Companies' station at Trombay, in order to help meet the forecast load growth in the Bombay area. All these large-scale thermal power projects are progressing satisfactorily. For Singrauli and Korba, construction works are on or ahead of schedule, although some slippage has occurred in the implemen- tation schedule for the Ramagundam project. Cr. No. 911 Rural Electrification Corporation II Project; US$175.0 million credit of June 21, 1979; Effective Date: October 17, 1979; Closing Date: March 31, 1984 The project is progressing satisfactorily. Ln. No. 1925 Second Bombay High Offshore Development Project; US$400.0 million loan of December 11, 1980; Effective Date: February 24, 1981 Closing Date: March 31, 1984 The project is progressing satisfactorily. 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 proceed- ing satisfactorily in both project States--Andhra Pradesh and Uttar Pradesh--in all major components except construction activities which remain about 18 months behind appraisal targets. Cr. No. 1012 Cashewnut Project; US$22 million credit of June 10, 1980; Effective Date: September 3, 1980; Closing Date: September 30, 1985 This project is designed to expand cashewnut production in the States of Kerala, Karnataka, Andhra Pradesh and Orissa. The progress in cashew plantations as well as other components is satisfactory.  ANNEX II Page 17 of 17 Cr. No. 1003 Tamil Nadu Nutrition Project; US$32 million credit of May 12, 1980; Effective Date: August 5, 1980; Closing Date: March 31, 1987 First year's implementation in one test block is proceeding according to schedule. Cr. No. 1004 Uttar Pradesh Public Tubewells Project; US$18 million credit of May 12, 1980; Effective Date: June 27, 1980; Closing Date: March 31, 1983 Initial procurement delays having now been overcome, implementation is proceeding satisfactorily on this project. However, project completion will likely be delayed by approximately six months due to the initial delays. Ln. No. 1897 Kandi Watershed and Area Development Project; US$30.0 million loan of September 12, 1980; Effective Date: November 18, 1980; Closing Date: March 31, 1986. Contract for the construction of Dholbaha dam has been awarded, and consultants are preparing feasibility reports of other watershed schemes. Progress in other components are satisfactory. Cr. No. 1034 Karnataka Sericulture Project; US$54 million credit of October 27, 1980; Effective Date: December 18, 1980 Closing Date: December 31, 1985 Overall progress in project implementation is satisfactory. Minor start up delays in staffing are being corrected. Cr. No. 1116 Karnataka Tank Irrigation Project; US$54 million credit of March 26, 1981; Effective Date: May 5, 1981; Closing Date: March 31, 1986 The project is designed to finance the construction, over a four-year period, of about 160 tank irrigation schemes throughout the State of Kar- nataka. Start-up activities have commenced. 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 Loan not yet effective. Tendering for major equipment is underway.  ANNEX III Page 1 of 2 INDIA REFINERIES RATIONALIZATION PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: (a) Time taken by the country to prepare the project About 2 years. (b) The agencies which have prepared the project GOI (Ministry of Petroleum), EIL and the Refinery Companies. (c) Date of first presentation to the Bank and date of the first mission to consider the project November 1980. (d) Date of departure of appraisal mission July 1981. (e) Date of completion of negotiations December 15, 1981. (f) Planned date of effectiveness June 30, 1982. Section II: Special IDA Implementation Actions None. Section III: Special Conditions (a) GOI will evaluate each proposed investment in energy efficiency and pollution control facilities and submit to Bank for concurrence (para 46). (b) The Government and the Refinery Companies will design, build and operate facilities constructed under the project with due regard for satisfactory environmental and safety norms (para 48).  ANNEX III Page 2 of 2 (c) The Government will provide any funds required to cover cost overruns (para 54). (d) The Government will maintain prices at levels which permit the Refinery Companies under conditions of efficient operations to meet all their expenses, service their debt and earn a reasonable return on invested capital (para 54).  IBRD 15947 70 X- T > ,>, /