India - Third Bombay Water Supply And Sewerage : Credit 1750 - Project Agreement - Conformed

OFFICIAL DOCUMENTS CREDIT NUMBER 1750 IN LOAN NUMBER 2769 IN Project Agreement (Third Bombay Water Supply and Sewerage Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and MUNICIPAL CORPORATION OF GREATER BOMBAY Dated M /c2 , 1987 CREDIT NUMBER 1750 IN LOAN NUMBER 2769 IN PROJECT AGREEMENT AGREEMENT, dated -1 7Qy Io2 , 1987, among INTERNATIONAL DEVELOPMENT AYSOCIATION (the Association), INTERNATIONAL BANK FOR RECONSTRUCTON AND DEVELOPMENT (the Bank) and MUNICIPAL CORPORATION OF GREATER BOMBAY (hereinafter called BMC). WHEREAS (A) 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 one hundred five million five hundred thousand Special Drawing Rights (SDR 105,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that BMC agrees to undertake such obligations toward the Association as are set forth in this Agreement; (B) by the Loan Agreement of even date herewith between the Borrower and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to forty million dollars ($40,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that BMC agrees to undertake such obligations toward the Bank as are set forth iii this Agreement; (C) by an agreement of even date herewith among the Association, the Bank and the State of Maharashtra, acting by its Governor, (hereinafter called Maharashtra), Maharashtra has agreed to assist BMC in carrying out the Project described in Schedule 2 to the Development Credit Agreement; (D) the proceeds of the Credit and the Loan provided for under the Development Credit Agreement and the Loan Agree- merit respectively, will he made available by the Borrower to Maharashtra La accordance with the Borrower's standard arrange- ment for developmental assistance to the states of India; (E) by a subsidiary loan agreement to be entered into between Maharashtra arid BMC, the proceeds of the Credit and the Loan provided for under the Development Credit Agreement and the Loan Agreement respectively, will be made available to BMC on the terms arid conditions set forch in said Subsidiary Loan Agreement; arid - 2 - WHEREAS BMC, in consideration of the Association's entering into the Development Credit Agreement and the Bank's entering into the Loan 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 and in the General Conditions applicable thereto (as so defined), in the Loan Agreement and in the General Conditions applicable thereto (as so defined) and in the Preamble to this Agreement have the respective meanings therein set forth and the term "Action Plan" means the Action Plan dated April 29, 1986 which indicates the series of operational, financial and administrative actions to be undertaken under the Project. ARTICLE II Execution of the Project Section 2.01. (a) BMC 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 the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering prac- tices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of para- graph (a) of this Section, BMC shall carry out the Project in accordance with the Implementation Procedures set forth in Schedule 2 to this Agreement, as such Schedule may be amended from time to time by agreement between the Association and BMC. 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 and the Loan shall be governed by the provisions of Schedule 1 to this Agreement. -3 - Section 2.03. (a) BMC 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 applicable to Development Credit Agreements of the Association, dated January 1, 1985, (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. (b) BMC shall carry out the obligations set forth in Section 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions applicable to Loan and Guarantee Agreements of the Bank, dated January 1, 1985, (relating to insurance, use of goods and services, plans and schedules, records and reports, mainte- nance and land acquisition, respectively) in respect of the Project. Section 2.04. BMC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, BMC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) BMC shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) BMC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by BMC of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of BHC Section 3.01. BMC shall cause WSSD to carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. BMC shall cause WSSD at all times to operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and engineering and public utility practices. Section 3.03. (a) BMC shall, in respect of WSSD, take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. (b) BMC shall cause WSSD to maintain its existing separate fire/accident and third party insurance. Section 3.04. BMC shall consult the Association prior to making any material modifications in the structure, organization, responsibilites and technical and financial operations of WSSD. Section 3.05. BMC shall consult the Association prior to the sale, lease, transfer or disposal of any of the properties or assets of WSSD except in the ordinary course of business. ARTICLE IV Financial Covenants Section 4.01. (a) BMC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) BMC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) of WSSD 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 as soon as available, but in any case not later than six months after the end of each such year: (A) certified copies of - 5 - its financial statements of WSSD 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. (c) For all expenditures .,ith respect to which withdrawals are requested from the Credit Account on the basis of statements of expenditure, BMC shall: (i) maintain, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by the said auditors as to whether the proceeds of the Credit withdrawn in respect of such expenditures have been used for the purpose for which they were provided. Section 4.02. (a) Except as the Association shall otherwise agree, BMC shall, with effect from its financial year commencing April 1, 1987, and for each financial year thereafter, set and maintain tariffs for water supply and sewerage services to ensure that operating revenues are sufficient to meet all of WSSD's operating expenses and debt service and, together with any inter- nal funds of WSSD available for investment, provide at least 40% of annual capital expenditure. -6- (b) For the purposes of this Section: (i) the requirement to meet a percentage of capital expenditure shall be deemed to be satisfied if BMC covers in any two consecutive financial years, at least 40% of the aggregate of its actual capital expenditures or the capital expenditure as stipu- lated in the Annex to this Agreement, whichever is higher, for such two years, and BMC covers in each of such years at least 33% of said capital expenditures; (ii) the term "capital expenditure" means any expendi- ture incurred in the financial year on fixed or semi-fixed assets for water supply, sewerage, sewage treatment or sewage disposal services of WSSD or which may be charged to work-in-progress for such services pending commissioning of fixed or semi-fixed assets, including expenditures on engineering services and interest chargeable to capital assets under construction; (iii) the term "operating revenues" means all revenues from the sale of water and all taxes and charges pertaining to water supply, sewerage and sewage disposal services and other incidental revenues of WSSD including net consumers' contributions; (iv) the term "operating expenses" means all costs of operation of WSSD, including adequate maintenance and a reasonable proportion of central administra- tive charges of BMC but excluding depreciation and other non-cash expenses; (v) the term "debt service" means the repayment of loans and other debt obligations as they mature, including payment of interest in respect of such loans and other debt obligations; and (vi) the term "internal funds of WSSD available for investment" means net accretions from consumers' and contractors' deposits, provident and pension fund contributions of WSSD and its employees, insurance and similar reserve funds of WSSD, but -7- excluding any loans from any source to (A) WSSD or (B) its reserve funds. Section 4.03. By March 31, 1987, BMC shall cause WSSD to: (a) establish a specific cash account for the eventual replace- ment or rehabilitation of capital assets; (b) ensure that all annual operating surpluses (after meeting 40% of capital expen- diture from internal cash generation, and allowing for sufficient unrestricted cash to maintain a quick current ratio of not more than 2:1) are allocated to the said account until the amount in the said account equals accumulated depreciation charges; and (c) for the purpose of this Section the term "quick current ratio" means current assets, excluding inventories divided by current liabilities. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association, of thi Bank and of BMC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement and the Loan Agreement shall terminate in accor- dance with their respective terms; or (ii) the date 25 years after the date of this Agree- ment. (b) If the Development Credit Agreement and the Loan Agreement terminate in accordance with their respective terms before the date specified in paragraph (a) (ii) of this Section, the Association and the Bank shall promptly notify BMC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any can- cellation or suspension under the General Conditions. -8- ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (wUI) For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -9- For BMC: Municipal Commissioner for Greater Bombay Mahapalika Marg Fort, Bombay - 1 India Cable address: Telex: BOWASEP 011-4325 Bombay Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of BMC may be taken or executed by the Municipal Commissioner for Greater Bombay or such other person or persons as he shall designate in writing, and BMC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. - 10 - TN 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 A08 A0~ 4f Regional Vice President South Asia INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By bl ~ct{OC4 Ao,,oe Regional Vice President South Asia MUNICIPAL CORPORATION OF GREATER BOMBAY BAy 4/ eprsetai / / Authorized Representative - 11 - SCHEDULE 1 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A. International Competitive Bidding 1. Except as provided in Part D hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits"' published by the Bank in May 1985 (the Guidelines). 2. Bidders for major contracts under the Project shall be prequalified as described in paragraph 2.10 of the Guidelines. Part B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A 1 hereof, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C. Preference for Domestic Contractors In the procurement of works in accordance with the proce- dures described in Part A 1 hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D. Other Procurement Procedures Contracts for: (a) laying distribution mains, supplying and laying sewers, construction of small sewage pumping stations, staff quarters, provision of improved water service and sani- tation facilities; (b) the fabrication of steel pipes; and (c) equipment and materials, may be procured on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. Individual con- tracts under (a), (b) and (c) shall not exceed the equivalent of $1,750,000, $1,000,000 and $200,000, respectively. The aggregate - 12 - value for contracts under (a) shall not exceed the equivalent of $56,400,000 and for contracts under (b) and (c) shall not exceed the equivalent of $7,400,000. Part E. Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to all contracts for civil works esti- mated to cost the equivalent of $500,000 or more and all contracts for material and equipment estimated to cost the equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Asso- ciation has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 3. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist BMC in carrying out the Project, BMC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 2 Implementation Procedures In the implementation of the Project, BMC shall annually review and update the Action Plan in a manner satisfactory to the Association and in particular BMC shall furnish the Assoqiation wlth data according to agreed criteria for monitoring Project implementation within six months from the end of each quarter. - 14 - ANNEX Stipulated Capital Expenditures as referred to in Section 4.02 (b)(i) of this Agreement Fiscal year Rs Million 1986-87 1,595 1987-88 715 1988-89 593 1989-90 785 1990-91 835 1991-92 768 1992-93 518 1993-94 189 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Bank for Reconstruction and Development and the International Development Association. FOR SECRETARY