India - Kerala Water Supply And Sanitation Project : Credit 1622 - Kerala Agreement - Conformed

OFFICIAL IT NUMBER 1622 IN DOCUME NTS Kerala Agreement (Kerala Water Supply and Sanitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and STATE OF KERALA Dated , 1985 CREDIT NUMBER 1622 IN KERALA AGREEMENT AGREEMENT, dated b L'9k $tld 7f , 1985, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and STATE OF KERALA, acting by its Governor (Kerala). WHEREAS by the Development Credit Agreement of even date herewith between India, acting by its President (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to forty-two million seven hundred thousand Special Drawing Rights (SDR 42,700,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Kerala agree to undertake such obligations toward the Association as are set forth in this Agreement; WHEREAS Kerala, in consideration of the Association's enter- ing into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) Kerala declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out and cause to be carried out Parts C and D of the Project described in said Schedule with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. -2- (b) For the purpose of carrying out the Project, Kerala shall make available to KWWA, Quilon and the Local Bodies the proceeds of the Development Credit made available to it by the Borrower under financial arrangements which shall provide, inter alia, for a loan in an amount in Rs equivalent to $19,000,000 to be repayable over a period of 25 years, including a grace period of 5 years, and bearing interest at the rate of not less than (8.75%) per annum on the principal amount withdrawn and outstand- ing from time to time. (c) Kerala shall exercise its rights under the preceeding financial arrangements in such manner as to protect the interests of the Borrower, the Association and Kerala and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, Kerala shall not assign, amend, abrogate or waive any provision thereof. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to the Project Agreement. Section 2.03. Kerala shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Kerala Agreement and Parts C and D of the Project. Section 2.04. (a) Kerala shall, at the request of the Association, exchange views with the Association with regard to the progress of its Parts of the Project, the performance of its obligations under this Agreement, and other matters relating to the purposes of the Credit. (b) Kerala shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of its Parts of the Project, the accomplishment of the purposes of the Credit, or the performance by Kerala of its obligations under this Agreement. Section 2.05. Kerala shall ensure that the KWWA is fully staffed and all senior posts are sanctioned and filled by Octo- ber 15, 1985. -3- Section 2.06. By December 31, 1985, Kerala shall cause, all Local Bodies participating in carry4ta out Parts (C) and (D) of the Project to pass by-laws, satisfactory to the Association, to regulate the construction of low-cost sanitation units and to restrict their use to areas where the pollution of water sources will not result therefrom. Section 2.07. Kerala shall provide the necessary legal cover to maintain KWWA's legal status, powers and functions sub- stantially as vested in it by virtue of the Ordinance. ARTICLE III Financial Covenants Section 3.01. Kerala shall cause Quilon to: (a) set up a separate cell for monitoring and reporting of its water supply sector's accounts by October 15, 1985; (b) maintain records and accounts adequate to reflect in accordance with accrual accounting practices its operations and financial condition pertaining to its water supply sector; (c) (i) have said accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each financial year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Associaticn as soon as available, but in any case not later than nine months after the end of each such year, (A) certified copies of said financial statements for such year as so audited and (B) 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 information concerning said accounts and financial statements as well as the audit thereof and said records, as the Association shall from time to time reasonably request; -4- Section 3.02. Kerala shall ensure that: (a) expenditures and cost recovery accounts for Parts C and D of the Project are maintained; (b) have said accounts audited by independent auditors, acceptable to the Association; and (c) have said audited accounts furnished to the Association not later than nine months after the end of each financial year, beginning FY 1987. Section 3.03. Kerala shall cause the Local Bodies to take responsibility for the cost recovery from the household beneficiaries under Parts C and D of the Project, in accordance with the Action Plan. Section 3.04. In accordance with the terms set out in Annex 1 to this Agreement, Kerala shall, not later than December 31, 1987; (a) cause Quilon to implement an interim tariff increase; and (b) implement an interim tariff increase in KWWA service area and in respect of the bulk rate to Cochin. Section 3.05. Kerala shall: (a) by December 31, 1987 initi- ate a cost and revenue study in KWWA's service area and Quilon; and (b) by April 1, 1990, cause and enable KWWA to adopt appro- priate new tariffs taking into consideration the findings of said study. Section 3.06. (a) Except as the Association may otherwise agree, Kerala shall cause and enable: (i) Quilon to make such suitable adjustments to water supply tariffs as shall be required to produce each financial year, beginning FY 1991 and there- after, revenues sufficient to cover all its oper- ation and maintenance costs, and debt service requirement on its debt outstanding from its water supply operations; (ii) Local Bodies referred to in Part A.2 of the Pro- ject to make such suitable adjustments to water supply tariffs as shall be required to produce in each financial year, beginning FY 1991 and there- after, revenues sufficient to cover all their operation and maintenance costs, and debt service requirement on their debt outstanding from their water supply operations; and -5- (iii) Local Bodies referred to in Part A.1 of the Pro- ject to make such suitable adjustments to water supply tariffs as shall be required to produce in each financial year, beginning FY 1990 and there- after, revenues sufficient to cover all their operation and maintenance costs. (b) Kerala shall undertake to compensate KWWA for any shortfall in revenues on account of its operations and maintenance, and debt service requirement, for the financial years 1986 through 1989. (c) For the purposes of this Section, the following terms have the following meanings only with respect to water supply operations: (i) "revenues" means gross revenues from all sources less provision for uncollectable accounts; (ii) "operation and maintenance costs" means all costs incurred on account of operations, including expenses of administration, adequate maintenance and taxes or any payments in lieu of taxes, if any, excluding provision of depreciation, and interest and other charges on debt; and (iii) "debt service requirement" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of Kerala thereunder shall terminate on the earlier of the following two dates: -6- (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date 20 years after the date of this Agree- ment. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Kerala of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For State of Kerala: Chief Secretary Government of Kerala Secretariat Trivandrum, Kerala, India -7- Cable address: CHIEFSEC Trivandrum Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Kerala, may be taken or executed by the Chief Secretary or such other person or persons as the Chief Secretary shall designate in writing, and Kerala shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. -8- IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By W,96/vt I Regional Vice President South Asia STATE OF KERALA By/Authoridereti Authorized Representative -9- ANNEX 1 INTERIM TARIFF INCREASE (Metered rates in Rs/1000 liters) Domestic Commercial KWWA service area 0.60 1.20 Quilon Municipality 0.60 1.20 Bulk rate Cochin Municipality 0.25 INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 198 S R. FOR SECRETARY