India - Rainfed Areas Watershed Development Project : Credit 1424 - Credit Agreement - Conformed

CREDIT NUMBER 1424 IN DOCUMENTS Development Credit Agreement (Rainfed Areas Watershed Development Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 198 L+ CREDIT NUMBER 1424 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 3 , 1984, between INDIA, acting by its President (hereinafter called the Borrower) and INTERNATIONAL DEVELOPKENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) Part A of the Project will be carried out by the States of Andhra Pradesh, Karnataka, Madhya Pradesh and Maharashtra (hereinafter collectively called the Project States) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Project States part of the proceeds of the Credit as hereinafter provided; WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and the Project States; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated June 30, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project States" mean the States of Andhra Pradesh, Karnataka, Madhaya Pradesh and Maharashtra of India, acting - 2 - through their respective Governors, and includes any successor to said States; (b) "Project Agreement" means the agreement between the Association and the Project States of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (c) "Watershed" means a drainage area from which water drains towards a single channel; (d) "Sub-Watershed" means a specific area within a water- shed in which activities will be carried out under the Project; (e) "Master Watershed Plan" means an overall description of the watershed area to be developed and indicating the type and schedule of Project activities to be undertaken; and (f) "WDC" means Watershed Development Council of the Borrower. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions set forth or referred to in this Agreement, an amount in various currencies equivalent to twenty-nine million four hundred thousand Special Drawing Rights (SDR 29,400,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Aczount in accordance with the provisions of Schedule I to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the A-sociation, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit, Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Credit shall be governed by the proviiions of the Schedule to the Project Agreement. -3- Section 2.04. The Closing Date shall be December 31, 1991 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. (a) The Borrower shall pay to the Association a commitment charge a'- the rate of one-half of one per cent (1/2 of 1%) per annum on the principal amount of the Credit not withdrawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.06. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.07. Commitment charges and service charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each Febru- ary 15 and August 15 commencing February 15, 1994, and ending August 15, 2033, each installment to and including the install- ment payable on August 15, 2003, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.09. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. -4- ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agree- ment, the Borrower shall cause the Project States to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Project States to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) For the purpose of carrying out Part A of the Project, the Borrower shall make the proceeds of the Credit allocated in Category (1) of the table set forth in paragraph 1 of Schedule 1 to this Agreement available to the Project States in accordance with the Borrower's standard arrangements for developmental assistance to the States of India. Section 3.02. The Borrower shall carry out Part B of the Project with due diligence and efficiency and in conformity with appropriate administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.03. (a) The Borrower shall: (i) maintain records - and procedures adequate to record and monitor the progress of the Project (including its cost and, where appropriate, the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association's representatives to visit the facilities included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Associa- tion at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expen- diture of the proceeds of the Credit and the goods and services financed out of such proceeds. (b) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of -5- th- Credit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respective obligations under the Development Credit Agreement and the accomplishmment of the purposes of the Credit. Section 3.04. The Borrower shall appraise the Sub-Watershed projects to be carried out under Part A of the Project in accordance with criteria agreed upon between the Borrower and the Association. Section 3.05. In order to assist the Borrower in the carry- ing out of the Project, the Borrower shall employ consultants whose qualifications and experience shall be satisfactory to the Association. Section 3.06. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards inci- dent to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the purposes of the Project. ARTICLE IV Particular Covenants Section 4.01. (a) The Borrower shall cause its departments and other agencies and authorities responsible for carrying out Part B of the Project to: (i) maintain separate records and -6- accounts adequate to reflect, in accordance with sound accounting principles and procedures consistently applied, their resources, expenditures and operations related to Part B of the Project; and (ii) furnish to the Association copies of their accounts and financial statements related to Part B of the Project for each fiscal year, certified as to their accuracy and authenticity by an independent auditor acceptable to the Association, as soon as available but in any case not later than nine months after the end of such year. (b) The Borrower shall cause its departments and other agencies and authorities responsible for carrying out Part B of the Project to: (i) have their accounts and financial statements related to Part B of the Project for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association immediately following its final- ization, the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other in- formation concerning such accounts and records, financial state- ments and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. The Borrower shall undertake a joint mid-term review of the Project with the Association within the first quarter of the third year of the Project, and until the said mid-term review is completed, all Sub-Watershed projects, after appraisal, shall be sent to the Association for review and approval. Section 4.03. The Borrower shall make available the research grants to the State Agriculture Universities in the Project States in accordance with the Borrower's standard arrangements. Section 4.04. The Borrower shall, prior to approval of the Master Watershed Plan, identify the sources of availability of funds in order to avoid duplication of funding. Section 4.05. The Borrower shall, prior to approval of Watershed and Sub-Watershed projects in each Project State ensure that each such Project State shall establish and maintain during Project implementation (i) a State Watershed Develoment Policy Committee, (ii) a State Watershed Development Cell, (iii) a District Watershed Development Committee, and (iv) a Watershed Development Team. -7- Section 4.06. The Borrower shall ensure that the Sub- Watershed projects approved and started under the Project are completed. Section 4.07. The Borrower shall ensure that the representa- tives of WDC will make on-site supervision visits at least twice in each of the Borrower's fiscal year to watershed projects under implementation and communicate to the Association the results of such visits. Section 4.08. The Borrower shall cause the Joint Secretary/ Watershed Development Commissioner to furnish the Association, by March 31 of each year, the annual work program of WDC. Section 4.09. The Borrower shall appoint on a full-time basis to the WDC a research zoordinator, soil conservationist (land use planner) and an economist, by March 31, 1984. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) Any Project State shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that any Project State will be able to perform its obligations under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (d) thereof, namely, that the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower and the Project States. ARTICLE VI Effective Date; Termination Section 6.01. The following is specified as an additional matter, vithin the meaning of Section 12.02(b) of the General - 8 - Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the Project Agreement has been duly authorized or ratified by the Project States, and is legally binding upon the Project States in accordance with its terms. Section 6.02. The date Ise 1'ibL , is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.03. The provisions of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary or Under Secretary of the Department of Economic Affairs in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi - 110001, India Cable address: ECOFAIRS New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America -9- Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INDIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President South Asia - 10 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) The Project States: (a) Civil works 12,360,000 70% (b) Vehicles, 940,000 100% of foreign equipment, expenditures, furniture and 100% of local materials expenditures (ex-factory cost) and 75% of local expen- ditures for other items procured locally (c) Loans for 200,000 75% of amounts motor cycles disbursed and bicycles (d) Incremental 2,500,000 70% staff and operating costs (e) Forest Plant- 6,920,000 70% ation (2) The Borrower: (a) Research 1,640,000 100% - 11 - Amount cf the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (b) Mid-term 220,000 100% review and follow-up project (3) Unallocated 4,620,000 TOTAL 29,400,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Association that the proceeds of the Credit shall not be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; on this basis, if the amount of any such taxes levied on or in respect of items in any Category decreases or increases, the Association may, by notice to the Borrower, in- crease or decrease the disbursement percentage then applicable to such Category as required to be consistent with the aforemen- tioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of expenditures made prior to the date of this Agreement except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 200,000 may be made on account of expenditures made before that date but after March 1, 1983. - 12 - 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph I above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be in- sufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Cate- gory may continue until all expenditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditure for such item shall be financed out of the proceeds of the Credit, and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Asso- ciation's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 13 - SCHEDULE 2 Description of the Project The Project is designed to increase crop and forage yields and production of fuelwood in selected rainfed farming areas in the Project States through development of about eight Watersheds (about 250,000 ha). The Project consists of the following: Part A: The Project States (1) The carrying out of a program of crop production activ- ities including strengthening of extension services through provision of staff, equipment and training, and provision of credit and input supplies for crop produc- tion and development of storage and marketing facili- ties. (2) The construction of soil conservation works on crop- lands to include drains, drop structures, graded bunds/terraces and waterways over about 140,000 ha of privately owned farmland including land smoothing (60,000 ha), and land shaping (10,500 ha) and rehabili- tation of existing soil conservation structures on about 30,000 ha. Construction of soil conservation structures to protect about 55,000 ha of public lands, including brushwood/stone check dams, wire crate dams and drop structures. (3) Oversowing of 45,000 ha of grazing lands with fc-dder legumes, replanting with fuel and fodder trees of about 14,000 ha (30%) of forest reserves and revenue land and distribution of seedlings sufficient for tree planting on about 8,000 ha of privately owned permanent fallow and marginal waste land. (4) Development of rainwater utilization through limited Project investment in farm ponds and the construction of wells through available institutional credit. Part B: The Borrower (1) The strengthening of the Watershed Development Council in the Ministry of Agriculture of the Borrower for appraisal of sub-projects, monitoring and evaluation of - 14 - progress of the Project and preparation of a possible follow-on project. (2) Provision of increased staff training, research and operational research programs at four State Agriculture Universities in the Project States and three institu- tions of Indian Council for Agricultural Research, and technical assistance and overseas training. The Project is expected to be completed by June 30, 1991. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of ri 1 198 . FOR SECRETARY