India - Cement Industry Project

Docum of The World Bank - JOE OmCL USE ONLY IN(/. QG6I d - JA lain No. P-4207-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON TWO PROPOSED LOANS TO INDIA (IN THE AMOUNT OF $165 MILLION EQUIVALENT) AND TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED (IN THE AMOUNT OF US$35 MILLION EQUIVALENT) FOR THE CEMENT INDUSTRY PROJECT February 14, 1986 Ith damet hs a a ist ddIm ad ma be and by redplkals only In the performane Of dher chl dfth. It Wteat w nu edrwie b. dlshS e h Werd Dank andetta I  CURRENCY EQUIVALENTS US$1.00 = Rsl3.O Rs 1.00 = US$0.077 Rs 1 million = US$76.92 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were, except as otherwise noted, made at the rate of US$1.00 = Rs 13 which represents the projected exchange rate over the disbursement period. FISCAL YEAR Covernment : ApriL 1 - March 31 ICICI : April 1 - March 31 IDRI : ApriL 1 - March 31 Companies : Birla, CCI, ICL - April 1 - March 31 KCP - July 1 - June 30 ACC - August 1 - July 31 ABBREVIATIONS AND ACRONYMS ACC - Associated Cement Companies Birla - Birla Jute and Industries, Ltd. CCI - Cement Corporation of India CMA - Cement Manufacturers' Association DEA - Department of Economic Affairs FOB - Free on Board GDP - Gross Domestic Product GNP - Cross National Product Government (GOI) - Government of India HLC - High Level Committee on the Cement Industry ICB - International Competitive Bidding ICICi - Industrial Credit and Investment Corporation of India ICL - India Cements, Ltd. IDBT - Industrial Development Bank of India OPC - Ordinary Portland Cement PPC - Pozzolana Portland Cement - Shree Dig Vijay Cement Co. Ltd. STC - State Trading Corporat-%n TPD - Tons per Day TYP - Tons per Year UP - Uttar Pradesh  FOR OMCIAL USE ONLY INDIA CEMENT INDUSTRY PROJECT LOAN AND PROJECT SUMMARY Borrower: GOI Loan: India acting by its President. ICICI Loan: Industrial Credit and Investment Corporation of India Limited (ICICI) Amount: US$200 million equivalent consisting of: GOI Loan: US$165 million; and ICICI Loan: US$35 million. Terms: GOI and l-ICI Loans: 20 years, including 5 years' grace at the standard variable interest rate. On-lending Terms: GOI Loan: GOI would provide US$1.5 million equivalent to ICICI as a nonreimbursable grant. The balance of US$163.5 million would be onlent to the ICICI and the Industrial Development Bank of India (IDBI) in equal proportions, to be repaid over a period not exceeding 20 years with a grace period not exceeding 5 years, and would bear GOI's standard interest rates for loans to finan- cial institutions (currently 10.25Z per annum). GOI would bear the foreign exchange risk on the loan. Subloans would be repaid over a period not exceeding 13 years includ- ing 4.5 years' grace, with interest at ICICI and IDBI standard rates on rupee loans (currently 14% per annum). Proceeds of the US$35 million ICICI loan would be relent to subborrowers on terms ranging between 7-10 years and up to 2 years' grace, with an interest rate at the variable IBRD rate plus a spread of 2Z per annum. Project Description: The project would help the cement industry of India to achieve a higher operating efficiency through (i) modernization of its facilities including conversion of six private sector cement plants (Associated Cement Companies' Mudukkarai and Shahabad, Birla Jute and Industries Satna, India Cements Limited Sankarnagar KCP's Macherla and Sri Digvijay Cement Company Sikka), and one public sector plant (Cement Corporation This document has a restrited disrbuto and may be used by recipients only in the performanCe of| Ithde ofricisl dume Its wntents may not otherwise be discled without World Bank autborization.  of India's Mandhar Plant), from the inefficient wet process to a modern dry process-precalciner technology, and small- scale rehabilitation and modernization investments at other cement plants; (ii) training programs and curriculum development; and (iii) technical assistance. The project would improve fuel efficiency, increase cement output, enhance environmental control, upgrade operator skills, and promote the policy for complete decontrol of pricing and output. The project faces no specific risks, except those associated with infrastructure constraints including, inter alia, shortage of transport facilities, coal, and power supply. Estimated Cost /a (US$ Millions) Local Foreign Total (a) Conversion Subprojects, Training and Technical Assistance - Base Cost (June 1985 Prices) 141.1 131.2 272.3 - Physical Contingencies 10.6 - 9.0 19.6 - Price Escalation 24.6 18.8 43.4 TOTAL 176.3 159.0 335.3 - Interest during Construction 30.1 15.6 45.7 Total Financing Required (Conversion, Training 206.4 174.6 381.0 and Technical Assistance) (b) Small Scale Modernization and Rehabilitation 52.3 36.5 88.8 GRAND TOTAL 258.7 211.1 469.8 /a Includes US$55 of taxes and duties.  Financing Plan: US$ Millions Local Foreign Total GOI 113.5 15.6 129.1 ICICI/IDBI & Other 133.3 7.4 140.7 IBRD 11.9 188.1 200.0 258.7 211.1 469.8 Estimated Disbursements: (US$ Millions) IBRD FY FY86 FY87 FY88 FY89 FY90 FY91 FY92 Annual 6.5 46.7 74.6 47.8 17.5 5.7 1.2 Cumulative 6.5 53.2 127.8 175.6 193.1 198.8 200.0 Rate of Return: About 25X. Appraisal Report: No. 5901-IN, dated December 23, 1985.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON TWO PROPOSED LOANS TO INDIA AND ICICI FOR THE CEMENT INDUSTRY PROJECT 1. I submit the following report and recommendation on two proposed loans to India and ICICI for US$175 million equivalent on standard IBRD terms, to help finance a cement industry project, in order to enhance the operating efficiency of the cement industry, increase production of cement and upgrade operator skills. Of the proceeds of the US$140 million loan to India, US$1.5 million would be passed on by GOI to the Industrial Credit and Investment Corporation of India Ltd., (ICICI) as a non-refundable grant to finance training and technical assistance at the subsectoral level; US$138.5 million would be onlent in equal proportions to ICICI and the Industrial Development Bank of India (IDBI) to finance conversion of six cement plants, provide project related training and technical assistance and assist in upgrading major training facilities. US$35 million would be a loan to ICICI,with the guarantee of the Government of India, to finance small-scale modernization and rehabilitation of other cement plants. PART I - THE ECONOMY 1 / 2. An economic report, "India: Structural Change and Development Perspectives" (5593-IN, dated April 24, 1985), was distributed to the Executive Directors on May 1, 1985. Country data sheets are attached as Annex I. Backtround 3. India is a large and diverse country with a population of about 760 million (in mid-1985) and an average per capita income of about US$260. Agriculture continues to dominate the economy, accounting for 36Z of GDP, 23% of exports and about two-thirds of employment. The steady increase in population, which continues at a rate of 2.2% a year, has put increasing pressure on natural resources, in particular cultivable land. By the mid- 1960s, nearly all productive land had been brought under cultivation. While irrigation continues to increase total cultivable area, an increasing share of the labor force will have to be absorbed in non-agricultural activities. Industrial deve'lopment has not progressed rapidly enough to provide employment opportunities for the growing labor force, or to bring about a rapid economic transformation, with significantly higher productivity and income levels. As a result the long-term growth of per capita income has only averaged about 1.4% p.a. and close to one-half of India's population continues to live below the poverty line. The pervasiveness and intensity of poverty is such that its alleviation has been and remains at the core of India's development strategy. ]j Parts I and 11 of the report are similar to Parts I and II of the President's Report for the NABARD Credit Project (No. P-4225-IN), dated February 3, 1986.  -2- 4. During the 1950s and 1960s, India's economic performance was generally characterized by slow economic growth, moderate inflation and a sustainable external position. GDP rose at about 3.5%, with agriculture and industry growing at 1.8% and 4.8% respectively; imports increased by 4.6% and exports by 5.8Z a year. India was able to reduce its dependence on foodgrain imports from a peak of 14Z of total foodgrain consumption in 1966/67 to 4.5Z by 1969/70 through improvements in agricultural production, but progress in poverty alleviation was slow mainly because of continued high population growth. 5. In the early to mid-1970s, in response to a sharp deterioration in India's terms of trade, the Government introduced various policy measures designed to stimulate exports. This resulted in a large increase in export growth to about 7.3X per annum in the 1970s compared with only 2.2% per annum between 1950/51 and 1969/70. While expanding world markets, particularly in the Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. The success in the export expansion effort coupled with continued import substitution, particularly of foodgrains resulted in a surplus on current account between 1976/77 and 1978/79, which was further enhanced by increased concessional aid flows. India was thus in a relatively favorable position to deal with the increases in international oil prices, the sharp deterioration in the terms of trade and a series of poor harvests. The comfortable foreign exchange position also played a major role in the Government's decision to initiate import liberalization. 6. Towards the end of the 1970s, India again faced considerable domestic difficulties. In 1979/80 it experienced one of the country's worst droughts which caused a large reduction in agricultural production. In addition, industrial production, plagued by labor unrest and a vicious circle of supply shortages (coal, power and transportation), failed to expand. These events coincided with a second round of international oil price increases. As a result, the current account reverted to a deficit position and the remarkable price stability that the Indian economy enjoyed after 1975 came to an abrupt end. The Government responded by mounting an adjustment program, which was embodied in the Sixth Five Year Plan (1980/81 - 1984/85). The program aimed at raising the GDP growth rate from its historical level of 3.6% to 5.2% per annum while adjusting the country's external balance to the adverse price develop- ments in world markets. The major elements of the program were alleviation of infrastructure and supply constraints, increased energy independence, improved efficiency in resource use, promotion of exports and efficient import substitution. Economic Performance Under the Sixth Plan 7. Overall the Government's adjustment program has been effective despite the severe drought in 1982/83 and a worsening of the external environment in the early 1980s. During the Sixth Plan period, GDP grew by 5.1% per annum, 1/ l/ Actual GDP growth rate during the 1979/80-1984/85 period was 5.1% per annum. However, this figure overstates the trend in recent years because of the relatively low base year (1979/80). The 4.5% GDP growth per annum and 3.3% annual agricultural growth between 1980/81-1983184 (two "normal" years) are more representative of the growth rates during the period.  -3- vell above India's long-term growth rate of 3.6%. However, overall growth during the first half of the 1980s has not been steady, mainly because of the effect of uneven rainfall on agricultural production. In 1980/81 and 1981/82, the economy substantially recovered from the 1979 drought, with real GDP groving by 7.6Z and 5.3%, respectively. The recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15% in 1980/81 and 5.5% in 1981182. A severe drought in mid-1982 brought the economic recovery to a halt. Agricultural output declined by 4Z, which in turn reduced GDP growth to only 1.8Z, and put further strains on the balance of payments and domestic resource situation. The timely implementation of various economic policies relating to foodgrain imports, procurement and distribution, and the increased allocation of power to irrigation pumps mitigated the adverse effects of the poor monsoon. An excellent monsoon combined with satisfactory perfor- mance of the infrastructure sectors, in particular coal and transport, led to a recovery of the economy in 1983/84. Agricultural output rose by 9%, industrial output by 4.5% and overall GDP by 7.4%. The power sector, however, emerged again as a constraint on higher growth, especially in industry. In 1984/85, despite a mediocre monsoon and difficult political circumstances, the aggregate growth of the economy is likely to range between 4 and 4.5%. 8. During the Sixth Plan period, foodgrain production continued to grow at an average annual rate of 2.6% a year-sufficient to maintain a broad balance between supply and steadily increasing domestic demand. The progress achieved is an indication of the effectiveness of programs to expand irrigation, strengthen extension and encourage efficient use of other agricul- tural inputs which are being implemented. Bountiful harvests have led to record foodgrain stocks in recent years. Over the past year, Government held stocks have increased by more than 40%. Maintenance of ample, balanced operat- ing stocks to ensure smooth operation and even expansion of the public distribution system remains a top priority of Indian agricultural policy. Yet, the financial cost of foodgrain storage and subsidies represent a rapidly growing burden on the budget. 9. Growth of the industrial sector during the Sixth Plan period was slow and uneven. Industrial growth averaged about 3.4% a year--below the growth rates achieved in the 1960s and 1970s. An inadequate policy environment, coupled with depressed domestic demand, power and raw material shortages, as well as labor unrest are the main causes for the slower than anticipated growth of the industrial sector. After the severe drought in 1979/80, manufacturing output grew at 1.7% in 1980/81 and 3.32 1981/82. The drought in 1982/83, which led to widespread shortfalls of agro-based raw materials and a sharp drop in the demand for consumer durables, combined with a prolonged textile strike in Bombay, reduced the growth of industrial output to 1.7% in that year. Following the excellent monsoon in 1983/84, industrial output gained momentum and grew by 5.0%. Preliminary estimates place the growth of the manufacturing sector at about 5.5Z in 1984185. 10. The performance of the infrastructure sectors was mixed under the Sixth Plan. While electric power generation, coal production and railway traffic grew by 8.7%, 6% and 2.5% a year respectively, oil and gas production increased by 22.6%. The rapid expansion of domestic oil production is largely the result of India-s oil development program. Backed by substantial financial commitment, performance under the program has been excellent with real invest- ment and oil production levels running well ahead of Plan targets. In 1984/85  -4- domestic oil production is estimated to have reached 29.4 million tons. While the gap between domestic consumption of petroleum and production remains large, Iudia's dependence on oil imports dropped from 63% of consumption in 1979/80 to 30% in 1984/85. About two-thirds of current output comes from offshore fields around Bombay High. As most of these fields have now reached thei.: mature stage, further increases in domestic oil production will have to c : mainly from new discoveries. 11. India's economy nias reverted from a situation of a resource eurplus iu the late 1970s to an aggregate resource deficit during the Sixth Plan period. The gap between gross investment and national savings increased from negligible levels to an average of 2.1% of GDP in 1980-85. Gross domestic capital forma- tion increased from an average of 22.6% of GDP in 1975-80 to 24.7% in 1980-85 while gross national savings remair.'d constant at an average of 22.6% of GDP in both periods. The increase in capital formation mainly resulted from an increase in the public investment rate, but it was largely a financial rather than a real phenomenon since prices of investment goods increased considerably faster than the general price level. 12. The basic thrust of fiscal policy during the Sixth Plan was to provide sufficient- r-esources for growth and planned investment while maintaining infla- tion under control. However, the SiKth Plan period was characterized by Sig- nificant budgetary resource constraints. Despite massive additional resource mobilization efforts, public sector deficits exceeded 7% of GDP as compared to only 4-5% of GDP during the mid-1970s. The shortfall was met by additional market borrowings, both domestically and from abroad and by deficit financing. Major reasons behind the large deficits were continued losses by most departmentally-run undertakings, unsatisfactory performance of the two major non-departmental undertakings of the States (the State Electricity Boards and the State Road Transport Corporations), and the increasing importance of sub- sidies which are estimated to have reached 2.8% of GDP in 1984/85. Of these, fertilizer accounted for more than 0Q8% of GDP, and food subsidies nearly 0.5% of GDP. 13. D-:velopments in the savings-investment balances were mirrored in the balance of payments. Thus, India's current account balance, which had recorded surpluses between 1976/77 and 1978/79, reverted to deficits averaging US$3.5 billion and 2.1% of GDP during 1980-85. Several developments con- tributed to these relatively large deficits. First, the terms of trade deteriorated sharply in I079/80 due to Lhe secord round of oil price increases and continued to move against India during the first three years of the 1980s. Second, a more liberal import policy towards industrial inputs was pursued. Third, net invisibles d.eclined as travel. receipts fell off, workers' remit- tances stagnated (reflecting slower development acti'Ji1ty in the Middle East), and payment of interest on highP7 levels of foreign debt increased. Fourth, export growth was sluggish partly due to growing domestic demand, and, perhaps most significantly, due to depressed foreign markets and prices. Faced with a growing need for external capital inflows and stagnatior in the availability of concessional assistance, India drew SDR 3.9 billion .rom the Extended Fund Facility of the IMF and borrtrwed sigvificant amounts on commercial terms from the Euro-dollar market and inicxeased rhe use of suppliers' and export credits. 14. Price performance during -.he Sixth Plan period has been mixed. The overall improvemert in economic performance in .he e;rly 1980s, combined with more restrictive monetary poll- es in 1981j82 and i982/g3, resulted in a sharp  -5- decline in the rate of inflation. The growth rate of wholesale prices declined from 18Z in 1980/81 to only 2.6Z in 1982/83. The lagged effects of shortages of foodgrains in 1982/83 and of other agricultural products and industrial goods in 1983/84 coupled with a rise in the domestic cost of imports and rapid liquidity growth, gave a boost to inflationary pressures towards the end of 1983/84. The annual average growth of wholesale prices rose to over 9% in 1983/84, and the rate of growth of consumer prices exceeded 12Z. In September 1984, the Government took a number of measures to dampen pressure on prices including increased imports of important agricultural comodities (sugar, jute, coconut oil and others), releases of sugar stocks for distribution through fair price shops, and a reduction in wheat prices for flour mills. These measures, together with a decline in cereal prices as a result of the bumper crop in 1983/84 and a generally restrictive budgetary policy, led to a slowdown in the rate of increase of wholesale prices to about 7.1% in 1984/85. 15. Developments in the Indian economy during the Sixth Plan underscore the progress that has been made in recent years towards accelerated GDP growth, external adjustment, and increased investment. The experience of recent years illustrates that India has the capacity to grow and develop at a more rapid pace. It is a tribute both to the fundamental soundness of key policies and programs, particularly in agriculture, and to the strength and effectiveness of public administration, that neither the serious political disturbances in Punjab, nor the assassination of Prime Minister Indira Gandhi, resulted in significant disruptions to the performance of the economy in the last year of the Sixth Plan. But the results during the Plan period also highlight the disappointing performance of industry, the continuing shortfalls in electric power generation, the rising public sector deficits, the importance of regain- ing and sustaining momentum in export growth and the need for continued prudent economic management so as to avoid a resurgence of inflation while generating adequate resources for development. This mixture of achievements and challenges provides the context for an assessment of development prospects and policies. Development Prospects and Policies 16. To deal effectively with its dual challenges of alleviating pervasive poverty and expanding employment opportunities for a growing labor force, the Seventh Plan is expected to aim at sustaining an annual rate of growth of GDP of at least 5Z. The Seventh Plan which will lay down the development strategy for 1985/86-1989/90 is alsn likely to continue the emphasis on agriculture, energy development, export promotion, domestic import substitution where economically justifiable and the removal of infrastructural bottlenecks. 17. Achieving a GDP growth of around 5Z a year will place heavy demands on policy adjustment and entail major challenges. India will need to: (a) maintain the recent higher rate of expansion of agricultural production; (b) accelerate industrial production and export growth through policy changes which enhance competition and efficiency; (c) expand supply capacities in the economy by improving basic infrastructure services and the availability of energy; (d) improve the efficiency with which resources are used, including particularly the existing capital stock in infrastructure and industry; and (e) further improve the already high resource mobilization effort.  -6- 18. Agriculture. Despite an impressive performance under the Sixth Plan, Indian agriculture faces many challenges in the second half of the decade. As possibilities for extending cultivated acreage shrink, agricultural growth will depend on finding new ways of increasing the productivity of land through further development of irrigation, better water management, more intensive use of new technology, efficient delivery of inputs and services, and appropriate pricing policies. High priority must be given to the expansion of the country's irrigable area through completion of ongoing irrigation projects, as well as selective investment in new undertakings. Besides creating new irriga- tion potential, the efficiency of irrigated farming will have to be enhanced through the improvement of water management practices in existing irrigation systems. Greater emphasis should also be given to obtaining higher yields under rainfed and dryland farming conditions. Finally, even greater efforts must be made to build and strengthen institutions to ensure the efficient delivery of agricultural services, input supplies, credit and technology. 19. Industry and Trade. Prospects for raising India's GDP growth rate will, to a large extent, depend on more rapid industrial production and export growth to be attained through improved productivity and efficiency. A key requirement will be greater competitive pressure on industry than has been the case in the past. The size and domestic orientation of the Indian economy make it necessary that this competitive pressure come mainly from within the domestic economy. An important complement, however, will be greater exposure to foreign trade to stimulate domestic competition as well as to induce technological innovation and modernization. 20. To increase domestic competition, domestic policies will need to allow freer entry and exit of firms in the industrial sector and greater reliance on market price signals. While the Government has taken various initiatives in the above directions during the past several years, the most significant were announced in the context of the 1985186 Budget. These include the broadening of licensing categories for certain industries, delicensing for others, increases in the size limits for MRTP 1/ and small-scale industries, reductions in the incentive for small-scale industries to stay small and various initia- tives to stimulate efficient indigenization of 'sunrise' industries (energy exploration equipment, computers, telecommunication equipment, motor vehicles and parts, general electronics). These are significant advances that need to be sustained in future years. 21. Changes in external trade policy will also be required to stimulate export growth which is essential not only for current financing of imports, but to enhance borrowing capacity, to service debt, to provide an impetus to the economy from the demand side, and to expose entrepreneurs to the quality- consciousness of competitive external markets. While some changes have been recently introduced, there remains a need to: (a) provide greater access to imported inputs and capital goods through continued import liberalization (b) review tariffs, eliminating anomalies and lowering their overall level; and (c) modify trade policies in such a way that the net impact of incentives is more neutral between exports and import substitution. 1/ Monopolies and Restrictive Trade Practices Act, 1969.  -7- 22. Infrastructure Sectors. Investments in these sectors currently con- stitute about one-third of total investment in India, and the efficiency with which these investments are managed has an important bearing on the efficiency of total investment and the growth rate of the entire economy. There is substantial evidence that better planning and management of public investments in power, coal, railways and irrigation could improve returns and lower the current capital-output ratios. For example, more efficient use of investment couli be achieved by better water management in irrigation projects, improved load factors in thermal power generation, better capacity utilization in the fertilizer industry and improved efficiency in railway transport. 23. Resource Mobilization. India's gross national savings rate (22.6% in 1980-85) is already high for a country at India's level of income. Nevertheless, the investment required to sustain the relatively high GDP growth rates realized during the Sixth Plan period--while holding foreign savings as a share of GDP at prudent levels--will require some further increase in the aggregate savings rate especially in public savings. Because there will continue to be well-founded demands for expansion of current and capital expenditures in the public sector, the burden for a reduction in the savings investment gap has to be put on the revenue side. Increasing tax rates beyond their current high levels would be counter productive. Thus, economically efficient pricing policies in public enterprises, supported by improvements in their operational efficiency, are to be preferred over tax increases as vehicles for increased public resource mobilization. The sheer size of past and present public enterprise investment indicates that if proper returns were made even only a part of them, an increase in revenues of about 3% of GDP would be attainable. In a number of sectors, e.g. thermal power, railways, and fertilizer, concerted efforts are being made-with Bank assistance-to increase efficiency and reduce costs. These efforts need to be improved and expanded into new areas. 24. Balance of Payments. A policy of sustained GDP growth of 5Z per annum will need to be complemented by measures which assure a viable balance of payments position. Acceleration of industrial growth will lead to a substan- tial increase in import requirements, even after allowing for continued import substitution of key bulk commodity items. Bank staff estimates place the export volume growth necessary to support these growing import requirements without excessive increases in external borrowing at about 8% a year over the Seventh Plan period. Prospects for India to attain the needed higher export growth rates appear to be reasonably good because India's share in total world exports in value terms is only about 0.4Z, leaving ample room for growth. Furthermore, India's exports are relatively less sensitive to fluctuations in demand in the OECD industrial countries because exports are well diversified with respect to both products and markets. Nevertheless, success in India's export drive will depend heavily on changes in domestic policy to improve the supply and profitability of exports. 25. Even assuming favorable export performance, India will continue to need substantial external capital flows to augment its own resources for the foreseeable future. Even with 8% export growth, the 5% GDP growth implies an increase in gross capital inflows from US$17.5 billion to US$34.5 billion between the Sixth and Seventh Plan periods. In the past, the bulk of this financing was provided in the forn of official development assistance. In more recent years the availability of concessional assistance to India has declined.  -8- Total bilateral grants and concessional loans declined from a level of about US$1.3 billiou per annum over the years 1979/80-1981182 to US$1 billion in 1983184. Moreover, there was a large deterioration in the terms of aid from multilateral sources. For example, while total lending from the Bank Group continued to increase in nominal terms, the grant element declined from 71% to 41% as new commitments of IDA declined from a peak of US$1,535 million in FY80 to US$673 million in FY85. 26. In the event that official development assistance does not increase significantly from recent levels, nearly the full additional financing required would have to be provided from additional non-concessional borrowing from official and commercial sources. This vill increase India's debt service ratio from the present level of 15.5% to 21.6Z by 1989/90. Provided India can in fact, expand export earnings along the lines described earlier, and provided India's past record of prudent borrowing and debt management continues, the country should be able to raise the projected amounts. While its foreign resource requirements would be manageable, the increase in its external debt exposure would leave it with little cushion to deal with unfavorable even- tualities and with the risks of policy change. 27. In the short term, a relatively large level of external borrowing, including an increased emphasis on commercial borrowing, will be necessary to cope with the balance of payments cousequences of the growth strategy described earlier. Although India is currently in a position to increase borrowing on commercial terms from the very low levels of the past, there are, of course, limits beyond which India will choose to sacrifice growth objectives rather than accept debt on unfavorable or ntmanageable terms. While therefore a greater volume of both official concessional and non-concessional assistance is warranted, concessional assistance, in particular, will be invaluable in moderating the build-up in India's debt service burden. Apart from the quan- titative arguments for concessional aid, there remains the imperative to assist Tndia in addressing the problems of pervasive poverty. While India is now better placed than other poor countries to tackle its development problems, the mobilization of additional resources to address poverty problems is heavily constrained. Concessional assistance can also play a very important role in relieving this constraint. 28. Summary. India has demonstrated that it can sustain a rate of growth closer to 5.0% per annum than to the long-run trend of 3.6% per auuum. If the rate of population growth can be brought to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of 1.4% per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India. Development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and external balance, while at the same time achiev- ing more rapid growth than in the past. This will require the continuation of the current development strategy which assigns high priority to export promotion, public finance discipline, improvement of economic efficiency, and investment in infrastructure, supported by adequate flows of external borrowing and aid.  -9- PART II - BANK GROUP OPERATIONS IN INDIA 29. Since 1949, the Bank Group has made 91 loans and 182 development credits to India totalling US$8,487 million and US$13,753 million (both net of cancellation), respectively. Of these amounts, US$1,544 million has been repaid, and US$7,360 million was still undisbursed as of September 30, 1985. Bank Group disbursements to India in the current fiscal year through September 30, 1985 totalled US$179 million, representing an increase of about 5 percent over the same period last year. Annex II contains a sumary state- ment of disbursements as of September 30, 1985. 30. Since 1959, IFC has made 35 commitments in India totalling US$301 million, of which a total of US$168 million has been repaid, sold, terminated or cancelled. Of the balance of US$133 million, US$126 million represents loans and US$7 million equity. A sumary statement of IFC disburse- ments as of September 30, 1985, is also included in Annex II (page 5). 31. The thrust of Bank Group assistance to India has been consistent with the country's development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricultural productivity, and efforts to improve the availability of basic agricultural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of develop- ment finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 32. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the the Seventh Plan. First, high priority will continue to be given to GOI's agricultural program. While India has made significant progress in agriculture, productivity growth will have to be sustained to improve the balance between food demand and supply and to contribute to poverty alleviation and employment. Thus, the Bank Group will continue to support irrigation, fertilizer production and distribution, and agricultural extension and credit. Second, alongside GOI's efforts in promot- ing greater efficiency and faster development of the industrial sector, increased assistance will be provided for industrial development. Third, in line with the stress which the Seventh Plan gives to the expansion and more efficient use of basic infrastructure capacity and to the development of India's indigenous hydrocarbon resources, the Bank Group will continue to provide substantial support to the development of the energy, transport and telecommunications sectors to alleviate critical shortages which constrain output in both the agricultural and industrial secto2s. Fourth, support of urban development and other GOI basic social services programs for the poor  -10- vill also continue in light of the growth in population which, despite succes- ses in lowering birth and death rates, still increases by about 16 million each year. 33. The need for a substantial net transfer of external resources in sup- port 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, India continues to require a substantial level of foreign assistance both to offset the overall deterioration in the world trade environment, and to sustain the relatively higher investment and growth rates achieved during the Sixth Plan period. As in the past, Bank Group assistance for projects in India should aim to include the financing 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 sectc-rs as agriculture and irrigation. 34. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessional terms. Accordingly, the bulk of the Bank Group assistance to India in the past was provided from IDA. However, IDA lending to India is declining from a peak of US$1.5 billion in FY80, mostly due to funding constraints related to IDA. The amount of IDA funds available to India is likely to remain small in relation to India's needs for external support. Thus, this requirement for additional assistance will have to be met, in part, through larger Bank lending. Given its development prospects and policies, India is judged creditworthy for Bank lending to sup- plement IDA assistance. A continuation of efforts already underway to achieve growth in productive capacity, trade expansion, higher levels of savings, foodgrains self-sufficiency and a reduction in the rate of population growth should result in continued economic growth and improvement in the balance of payments. India's debt service ratio is estimated at about 15.2% in 1984/85. This ratio is projected to rise to around 20% by 1989/90, mainly due to the hardening structure of India's debt; and to increase slightly over this level through the mid-1990's. Although the projected debt service ratios are con- siderably above historical levels, they are still manageable and will not adversely affect India's creditworthiness. 35. Of the external assistance received by India, the proportion con- tributed by the Lank Group has grown significantly. In 1970/71, the Bank Group accounted for 22% of total commitments, 11% of gross disbursements, and 10% of net disbursements as compared with 68%, 38% and 47%, respectively, in 1984/85. In 1984/85, about 26.3% of India's total debt service payments were to the Bank Group. On March 31, 1985, India's outstanding and disbursed external public debt was estimated to be about US$26.5 billion, of which the Bank Group's share was US$11.1 billion or 42% (IDA's US$8.9 billion and IBRD's US$2.2 billion). As of September 30, 1985 outstanding loans and credits to India held by the Bank totalled US$20,696 million, of which US$7,360 million remain to be disbursed, leaving a net amount outstanding of US$13,336 million.  -11- PART III - CEMENqT INDUSTRY iN InDI Background 36. India's cement industry accounts for about 3.5Z of the total production of the industrial sector, and in 1984/85 represented about 1Z of GDP at factor cost. In 1983/84, the subsector including limestone quarries, employed about 100,000 people, or about 1.2% of total employment in the organized industrial sector (cement plants alone account for 70,000, or 0.8Z of the total industrial employment). 37. The industry comprises 73 integrated plants, six grinding units, one clinkerization unit, one white cement plant, and 26 mini cement plants with a total installed capacity of 42.6 million tons per year (TPY). About 58% of the total kiln capacity is based on energy-efficient dry or semi-dry processes, and the balance (34 plants) on wet-process technology. The average size of the plants is expected to increase from 535,000 TPY in 1984/85 to 650,000 TPY by the end of the Seventh Plan period in 1989/90. The private sector owns 82Z of installed cement manufacturing capacity and accounts for 86Z of total cement production. A few major industrial groups including Associated Cement Companies (ACC), Birla House, J.K. Singahnia, Sahu Jain, Bangurs and India Cements, control about 60% of the cenent production in the private sector. The public sector accounts for about 14% of total cement production, of which the Cement Corporation of India (CCI) accounts for about 6.6%, and eight State Government-owned small companies account for the balance of 7.4%. Of the installed capacity, about 68% is located in the South and West regions of the country. Subsector-s Performance 38. India's first cement plant was established in 1914, but the industry grew slowly until a policy to protect infant industries was introduced in the mid-1930s. By 1950/51, capacity had reached 3.5 million TPY, and reached 15 million TPY by 1974. While capacity grew by almost 5.7Z per year, due to various infrastructure and input constraints, including a shortage of transpor- tation facilities and power supply and labor problems, output grew by only 1.5% per year. Since 1974 cement production has grown at an average rate of 7.4% per annum, and between 1982 and 1985, annual production increased from 21.1 million tons to 30.2 million tons. During the Sixth Plan period (1980-85), rapid growth has been stimulated by changes in GOI-s policies with regard to pricing, output control and distribution. Following the dual pricing system introduced in 1982, capacity utilization and production increased substantially, imports decreased and the free market prices declined in real terms. Nevertheless, gaps remain between potential and actual production, and between supply and demand for cement. Although capacity grew by about 10% per year during 1980-85, capacity utilization declined to about 72.7%, because of a unmber of factors including declining quality and quantity of coal, the shortage of electricity and railway wagons, labor and maintenance problems and "teething" problems with respect to the new and expanded units. In order to mimimize the problems caused by interruptions in power supply, the industry has installed capt.ve power generation plants. However, due to the old age of the cement plants accounting for about 30% of the total installed plant capacity, low capacity utilization persists. In addition, the problems associated with  -12- the use of high ash coal have been aggravated by these old plants vhich are based on wet process technology. Costs and Viability 39. Notwithstanding the above problems, the subsector is an ect.i-aic producer of cement. The 1985 investment cost of a plant with a capa-ity of one million TPY is estimated at US$90-120 per annual ton of cement in India, compared with US$170-200 internationally. The average operating costs of the Indian plants estimated at US$30 per ton of unbagged cement are comparable to costs in some European countries including France, West Germany and the United Kingdom. However, India's comparative advantage vith regard to operating costs, deriving from the low price of coal as well as low wage rates, is fast eroding, particularly for the old wet-process plants. In order to avoid further deterioration, India must modernize the existing plants and equipment and upgrade operator skills. The Indian Cement Market 40. SUpDly and Demand. Cement has been continuously in short supply in India over the last two decades. While a part of the shortfall has been met through imports, a large unsatisfied demand continues to exist. The gap between supply and demand has been narrowing, however, since the Governments introduced decontrol measures. Indeed, some government agencies project a slight excess in supply in the near future. The Bank's estimates hawever, indicate that the cement shortage will continue into the next decade although to a lesser extent. 41. Distribution and Pricimu. At present the Government partially controls the distribution and pricing of cement, but it is steadily moving toward sub- stantial decontrol. Under the dual pricing system introduced in 1982, cement manufacturers are required to sell a specific portion of their production to the Government at a fixed (levy) price; the balance may be sold at the open market price. The price formula was intended to assure the cement industry a post tax return of 12% on net vorth. The levy cement is allocated and dis- tributed to different regions of the country by the Office of the Cement Controller. A freight equalization system ensures a uniform levy price throughout the country. The present FOR levy price is Rs 1042/ton of Ordinary Portland Cement (OPC), and Rs 1037/ton for other types of cement. Most of the levy cement is for the Central and State goverrments~ projects. The levy price was to be adjusted periodically in line with changes in the costs of inputs. Since 1982, GOI has progressively increased the levy price and reduced the levy share from about 61% to under 50% of the total production, thereby bringing the average price to about 90% of the current border price. 42. The price of non-levy cement is determined by the cement manufacturers who adhere to voluntary price restraints. The basic consideration is that the average ex-factory price-levy plus non levy, should provide a manufacturer a 12Z post tax return on average networth. In this context, a ceiling was set at Rs 1,380/ton (including excise duty of Rs 225/ton) in Kerala, Maharashtra, GOA, Jasu and Kashmir and the Northeasteria States, and Rs 1,280/ton in all the other states. Hlowever, due to seasonal variations in demand and distribution bottlenecks, price levels have risen to as high as Rs 1,700/ton in some urban areas. Cement is sold through stockists functioning both as retailers and as  -13- wholesalers. However, as increasing amounts of cement become available in the free market, manufacturers have begun to appreciate the need to establish effective marketing and distribution facilities to smooth out short-term price swings, capture and retain market share and reach new segments of consumers. 43. Cement imports have been handled by the State Trading Corporation (STC) which is the only body now authorized to import cement. The price of recent imports has been around US$50/ton, which, after a 15Z import duty and an excise duty of Rs 205/ton, retails at Rs 1,200/ton. Large increases in imports would be difficult to handle by the existing distribution systems, and until bulk facilities are available, imported cement can only have a marginal effect on the overall supply-demand balance and pricing. 44. As already stated, GOI's longer-term objective is substantial decontrol of the cement industry. However, in order to minimize the budgetary impact and partly because of the need for time to modernize their plants and become more competitive, and improve marketing and distribution systems, GOI has decided to decontrol progressively. It intends to continue to review its policies from time to time in order to effect further and progressive liberalization of distribution and pricing. GOI has agreed to: (i) a steady reduction in the quantity of cement subject to levy; (ii) continue to raise the levy price until it is equated with the market price; and (iii) exchange views with the Bank regarding progress on achieving the policy objectives in the cement subsector during the Seventh Plan period. Simultaneously, the industry must address the following problems: Ci) obsolete cement plants and equipment; (ii) outdated and inefficient wet process technology in respect of 42Z of the installed capacity; (iii) lack of effective marketing organization and distribution systems; (iv) inadequate attention to product quality; (v) poor coal quality and its effect on management of the limestone resource base; and (vi) lack of industry-wide operator training programs. Priority needs include upgrading of the old plant facilities and operator training-the focus of the proposed project. The issue of coal quality which has a direct bearing on the manage- ment and operating life of existing limestone reserves is being addressed through the ongoing Bank assisted program of modernization in the coal sector. As the market becomes increasingly competitive, the need to improve the market- ing and distribution system is being addressed by the industry by training personnel and establishing the required facilities. Sufficient incentives would be available under the Governent's policy to deregulate of prices to accelerate this trend and to allow for substantial improvements in the area of marketing and distribution. Finally, GOI is aiming at improving the efficiency of the units owned by the various state Governments so that they can also attain industrywide standards of performance. Bank Grou, Involvement 45. Following our 1980 subsector study, the Bank has pursued an active dialogue with GOI, culminating in the preparation of the proposed project (Para 39). Bank involvement has contributed to the design and structuring of the project including the proposed procurement arrangements (ICB). The IPC made its first investment in the cement subsector in 1981, when it financed a greenfield plant for Coromandel Fertilizer Limited. Since then it has supported other greenfield plants as well as major expansions for the Indian Rayon Corporation Ltd., Modi Cements Ltd., Gvalior Rayon Silk Manufacturing Company, and Larsen and Toubro Ltd. In addition, IFC has assisted in arranging  -14- financing for expansion and large-scale greenfield plants for new entrants in the cement industry. The IFC assistance covers about 4 million TPY of cement manufacturing capacity expected to be fully operational by 1990, representing about 101 of present installed capacity. The IFC's further involvement in the subsector is limited because its cement portfolio now represents about 32% of IFC's total exposure in India. The justification for Bank involvement is detailed below (Para 48). PART IV - THE PROJECT Backs round 46. The project was appraised in May 1985. Negotiations were held in Washington in December 1985 with the Indian delegation coordinated by Mr. Malhotra of the Government of India's Department of Economic Affairs, Ministry of Finance. The Staff Appraisal Report (No. 5901-IN) dated December 23, 1985 is being circulated separately. A supplementary data sheet is attached as Annex III. Proiect Objectives and Rationale for Bank Involvement 47. The project's primary objectives are to: (i) improve the operating efficiency of old wet-process cement plants by conversion to the modern, dry process; (ii) implement improvements in fuel efficiency, product quality, environmental control, labor productivity and marketing and distribution system; and (iii) upgrade plant operator skills. Over the past five years, the Bank and GOI have been involved in an extensive dialogue regarding the cement industry on the basis of the Banks 1980 comprehensive cement subsector analysis. Its Report (No. 3141-IN) recommended, inter alia, that (i) the production and pricing of cement be gradually decontrolled; (ii) technology be upgraded; and (iii) product quality be improved. During the past three years, the Government demonstrated its willingness to decontrol the cement industry by instituting substantial changes in the cement pricing mechanism and in tariffs applicable to machinery for manufacturing cement. The Government has agreed to further decontrol cement prices and production. 48. The rationale for Bank involvement in the cement subsector is twofold: it would assist the Government in bringing about further progress in pricing policy and tariff reforms to promote efficiency in the subsector. It would enable it to realize its long-Term growth potential in the cement industry by introducing modern, energy-efficient manufacturing technology. Bank involve- ment in this project now would confirm that, where the environment is conducive to efficient and competitive operations, the Bank could actively support the Government in its efforts to modernize and expand capacity. The focus of the proposed project is consistent with the Bank's strategy for the industry sector, which supports the goal, inter alia, of productive investments in critical industries, and other measures to enhance efficiency and facilitate industrial growth. The focus of the proposed project is consistent with the Bank's strategy for the industry sector, which supports the goal, inter alia, of productive investments in critical industries, and other measures to enhance efficiency and facilitate industrial growth.  -15- 49. The project would finance (i) conversion of six private sector cement plants (Associated Cement Companies' Madukkarai and Shaiabad plants, Birla Jute and Industries Ltd. Satna plant, India Cements Ltd. Sanlcarnagar Plant, KCP's Macherla Plant and Sri Digvijay Cement Company Sikka Plant), and one public sector plant (Cement Corporation of India Mandhar Plant) from the inefficient wet process technology, to a modern dry process precalciner technology; (ii) small scale rehabilitation and modernization investments of other cement plants; (iii) improvement of marketing and distribution systems; (iv) training and curricular development; and (v) technical assistance. DETAILED FEATURES Plant Conversion 50. ACC - Madukkarai Plant. The subproject would consist of converting the Nadukkarai plant located in Coimbatore district in Tamil Nadu from a wet to semi-dry process. Under the project, funds would be provided for the installation of two additional flotation cells for the limestone benification plant, a new vacuum filter plant and a crusherldryer for dewatering of the kilnfeed, a new dry process kiln department (3-stage, preheater, with a rated capacity of 520,000 TmY), and a 6-MW diesel generator for captive power generation. 51. ACC - Shahabad Plant. The project would provide funds for converting the Shahabad plant located in Gulbarga district of Karnataka State from the wet to the dry process. One preheater, precalciner kiln would replace the old kilnas, and the proposed plant would have a clinker capacity of 2,400 TPD (corresponding to 830,000 TPY of cement). The new kiln would operate at a coal consumption of 850 Kcal/Kg clincker, and power consumption of 120 IWh/ton of cement. The equipment to be procured would include a limestone crusher, an aerial ropeway for transporting crushed limestone, preblending facilities for limestone, new dry process rawmill and kiln departments with dust collection equipment, preblending facilities for coal, and a rotary cement-packing machine. In addition, the existing 10-MW coal-fired power plant would be either rehabilitated or replaced. 52. Birla Satna Plant. Under the project, Birla's plant located at Satna, in Madhya Pradesh, would be converted from the wet to the dry process. Three existing wet process kilns with a combined capacity of 1,750 TPD would be replaced by a single preheater precalciner kiln with a rated capacity of 2,250 TPD; thus the Satna plant's rated capacity would increase from 581,000 TPY to 750,000 TPY, or by about 292. The major equipment to be procured would include quarry equipment, dry-process rawmill, kiln department with dust collection and cement packaging machines, and a coalmill for kiln precalciner with associated coal feeders and dust collection equipment. 53. CCI - Mandhar Plant. The subproject would consist of converting the Mandhar plant located in Raipur district, Madhya Pradesh, from a wet to a dry operation. The converted plant would have a rated clinker capacity of 1,200 TPD and would produce 700,000 TPY of cement. It would operate at a fuel efficiency of 850 Kcal/Kg clinker, which would correspond to coal consumption of 0.20 ton of coal per ton clinker. Power consumption would be 107 KWh/ton of cement. The equipment to be procured under the project would include quarry equipment, limestone preblending facilities, new dry process ravmill and kiln  -16- departments with dust collection equipment, cement storage silos, and a rotary cement packing machine. The existing rawmills would be converted to cement mills. 54. ICL - Sankarnasar Plant. The project would provide funds for convert- ing the Sankarnagar plant located in Tirunelveli district, Tamil Nadu, from a wet to a dry operation. The converted plant would have a clinker capacity of 3,000 TPD, which would correspond to 1,042,000 TPY of cement. It would require 850/Kcal/Kg clinker of coal, or 0.2 tons of coal per ton of clinker, and power consumption of 116/KWH/ton of cement. The equipment to be procured for the subproject would include a limestone crusher, a limestene preblending system, a new dry process raw mill, and a kiln system with elecrrostatic precipitator for gas cleaning, clinkers storage silo, a rwt-=y ce=at packing machine, and a 4-MW diesel-power generating plant. 55. KCP - Macherla Plant. Under the project, the Macherla plant, which is located in Guntur district, Andhra Pradesh, would be modernized by replacing two present kilns with a new precalciner preheater kiln, and converting one rawaill to a cement mill. The modernized plant would have a kiln with a capacity of 1,200 TPD of clinker, which would correspond to 370,000 TPY of cement. It would need 800 Kcal/Kg clincker of coal with a power consumption of 120 KWE/ton of cement. The equipment to be procured would include quarry equipment, new dry-process ravmill and kiln departments, and two rotary cement- packing machines. 56. SDC - Sikka Plant. The project would finance the company's second phase conversion of the Sikka Plant, located in Jamnagar district, Gujarat. The converted plant would have a clinker capacity of 1,770 TPD, an increase of 38% from its existing capacity of 1,285 TPD. The existing wet process kiln would be replaced by a dry kiln. Equipment to be procured under the project would include quarry equipment, limestone crushing plant, aerial ropeway, belt conveyor, limestone preblending system, a new dry process saw mill, a kiln system with electrostatic precipitator for gas cleaning , clinker storage silo, cement silo and rotary packing machine, a ceal mill for kiln precalciner and associated coal feeders and dust collection equipment. Inputs. Infrastructure and Environmental Impact 57. The Bank has fully appraised six of the seven conversion subprojects and found Lhlere are adequate suitable raw materials and all the required inputs for them. The seventh subproject (SDC-Sikka Plant) will be appraised by ICICI and IDBI with Bank participation on the basis of the criteria employed in respect of the other six subprojects. The companies have been assured of obtaining the incremental power needed. In addition, nearly all of the sub- projects provide for the installation of captive power generation plants where needed to guarantee continued operation during power outages. Attention would be given to environmental concerns and in this regard, all subprojects are expected to purchase and install pollution control equipment and to meet all existing pollution standards, which are acceptable to the Bank. In addition, the project would finance development of distribution facilities, transport equipment for bulk cement handling, modern instrumentation and control systems.  -17- Small-Scale Modernization and Rehabilitation at Other Cement Plants 58. The project would provide funds for a line of credit of US$35 million to ICICI to finance the estimated foreign exchange requirements for small-scale modernization, rehabilitation, energy conservation, environmental control, and balancing schemes at existing plants other than the seven conversion sub- projects described above and for development of improved marketing and distribution system. This would cover the acquisition of software for process control, installation of modern instrumentation and control systems, energy saving devices, dust collection equipment, balancing equipment, distribution facilities, transport equipment for bulk cement handling and technical assis- tance to improve operations and management. This credit would help companies acquire advanced technology and know-how with respect to modern operations and thereby enable them to improve productivity, fuel efficiency, and environmental control in their plants. ICICI would identify and appraise the subprojects, and the appraisals vould be submitted to the Bank for review and approval. The average subproject size would be about US$10-15 million equivalent, and the average subloan would be about US$5-8 million. ICICI would submit to the Bank for review appraisal reports for all subprojects whose funding from the proceeds of the loan exceed US$6 million equivalent, before it agrees to fund such subprojects. The total financing required for the program over a 2-3 year period is estimated at about US$89 million, and the proposed line of credit would cover about 40Z of the total financing required. Training and Technical Asssistance 59. With the rapid expansion and technological changes that are occurring in the cement industry in India, the existing shortage of skilled plant operators has become even more acute. Therefore, under the project, funds would be provided for training and technical assistance. In particular, ACC and CCI would be assisted in: (1) improving and upgrading their training facilities (this would include purchasing modern training equipment and related software); (ii) constructing new dormitory facilities; (iii) designing training programs; and (iv) training trainers. About 6 man-years of technical assis- tance would be provided for this purpose. In addition, the project would finance management assistance and training needs for the six companies under- taking conversion subprojects. The management assistance would consist of reviewing technical specifications, evaluating bids, supervising detailed engineering design, and overall project management. About 150 man-months of total consultant assistance would be provided. ICICI and IDBI would ensure that the companies would employ consultants on the basis of a work program satisfactory to the Bank; consultants would be employed in accordance with Bank guidelines and their terms and conditions of employment would be satisfactory to the Bank. Terms of reference for the consultants have been agreed with the Bank and selection of consultants is at an advanced stage. 60. At the subsector level, under the sponsorship of the Cement Manufacturers' Association (CMA), consultants would assist in preparing a manpower development strategy for the cement industry covering manpower needs, training requirements, and a plan for medium- and long-term manpower development. The consultants would propose the actions needed at each individual company and industry-wide in order to upgrade existing skillls to respond to changing technology. The actions would include, inter alia, train- ing new personnel at pre-entry and post-entry stages, developing suitable  -18- curricula and upgrading training facilities in existing academic institutions and new training centers to be established by the industry. The strategy study would be completed by December 31, 1986. Terms of reference have been agreed and consultant selection is underway. The existing regional technical training institutions in India would also be assisted in developing curricula specifi- cally related to the industry's urgent manpower needs, particularly with respect to maintenance personnel, plant operators, and first-level supervisors. A total of 50 man-months of expert assistance would be provided for this reason. In addition, some training equipment and teaching aids would be provided. The equipment lists would be subject to prior Bank review and approval. ManaRemrent and Implementation 61. Both ICICI and IDBI are well managed institutions, capable of implementing the project as assigned. The participating companies have employed consultants to help formulate the project, evaluate bids, prepare construction drawings, and manage construction. The consultants and most of the cement companies have up-to-date knowledge and experience in cement plant design and construction. All the companies have increased their staff of engineers and skilled personnel in order to facilitate project start-up and ensure smooth implementation. Personnel selected to operate the new machinery will be trained mostly in India but also overseas. 62. All the companies have historically been strong financial performers, have had sound capital structures and the project is expected to enhance even further both their competitiveness and profitability. Except for CCI (a Government company), all the companies are actively traded in the stock market, and are considered very attractive for both institutional and individual investors. Even CCI has been able to raise funds in the financial markets through public debenture issues, which have been oversubscribed. Proiect Costs and FinancinR 63. The total project cost is estimated at US$469.8 million equivalent, including taxes and duties estimated at US$55 million equivalent. The foreign exchange component is estimated at US$211.1 million, or 45% of the total project cost. Physical contingencies were estimated at 10% of base costs for civil works and certain categories of equipment. However, only a 5% contin- gency has been applied for most equipment and machinery. Price escalation amounts to an average of 14.3% on the base costs plus physical contingencies, and reflects the wide mix of project implementation schedules. Bank guidelines for international and domestic price escalation have been followed. Expected inflation rates for foreign goods and services are 7% in 1986 and 1987, 72 in 1988, 7.5% in 1990 and 4.5% in 1991 and 1992; for local goods and services the rates are 7% in 1986, 7.5% in 1987-90 and 5% in 1991 and 1992. 64. The Bank loans of US$200 million would cover about 43% of the total project cost, net of taxes and duties. GOI, ICICI, IDBI, and the project sponsors would contribute the balance of the required project financing.  -19- Onlendina Terms 65. Bank assistance would cover three specific components for which terms would differ: (i) conversion subprojects; (ii) mall-scale modernization and rehabilitation; (iii) technical assistance and training. Of the proposed Bank loan of US$165 million equivalent to GOI, US$163.5 million equivalent vould be onlent to ICICI and IDBI in equal proportions for financing major conversions in seven plants, as well as company specific technical assistance and training. ICICI and IDBI would conclude subloan agreements that would include provisions for: ti) adequate cost overrun financing; (ii) maintenance of financial posi- tion and capital adequacy ratios; and (iii) limitations on assumption of new debt. Repayment from ICICI and IDBI to GOI would be over 20 years including a grace period not exceeding five years. Standard GOI rates of interest for loans to financial institutions (currently 10.25Z per annum) would apply. Loans from the institutions to subborrovers would be on prevailing rates of rupee loans (currently at 14Z). GOI would assume the exchange risk. Signing of subsidiary Loan Agreements between GOI and ICICI and IDBI for the use of funds earmarked for conversion subprojects, would be a condition of effective- ness of the Bank Loan to GOI. GOI would pass on to ICICI US$1.5 million as a nonreimbursable grant to finance training and technical assistance at the subsector level. Signing of a Grant Agreement between GOI and ICICI for the use of funds earmarked for training and technical assistance, would also be a condition of effectiveness of the Bank Loan. To ensure the maintenance of a sound financial position, the companies would maintain a current ratio of not less than 1.2 times and a debt/equity ratio not greater than 67:33. In addition, the companies would not incur additional debt, if to do so would cause their debt/equity to exceed 67:33 or its projected debt service coverage to fall below 1.5 times. 66. The proceeds of the direct Bank loan (US$35 million) to ICICI would be relent to subborrovers on standard ICICI credit terms varying from 7 to 10 years for repayment with up to 2 years of grace. The interest rate would be the variable IBRD rate plus 2Z per annum. The subborrowers would bear the foreign exchange risk. Procurement and Disbursement 67. Annex IV summarizes the manner in which items would be procured under the project. The Bank's international competitive bidding (ICB) procedures would be used for all goods financed by the Loan to GOI; prequalification would be used for major equipment packages. A preference margin of 15Z, or the applicable rate of customs duties if lower, would be allowed to domestic equip- ment suppliers in evaluation of bids received under ICB. Under the major conversion component, the Bank has already identified and agreed with each subproject sponsor, the bidding packages for items to be procured under ICB procedures and most sponsors have completed the prequalification procedures. To ensure compatibility with existing facilities, a small amount (less than US$3 million) of equipment would be procured on the basis of international shopping. This equipment would consist of diesel generating sets for the ACC plants, and other miscellaneous items. Most major packages would include supervision of erection/installation to ensure satisfactory performance, and in some cases may include a limited "turnkey" bid covering erection/installation and engineering. Civil works would not be included in any of the proposed equipment supply/erection packages. The agreement with the five sponsors of  -20- the conversion subprojects, for which appraisals have been completed, covers a total of 54 packages at a combined base cost of US$106 million equivalent; of these, 4 packages at a total base cost of US$43.4 million (or 41Z of all ICB packages) each exceed US$5 million equivalent in base costs, and another 14 packages at a combined total base cost of US$31.2 million equivalent (or 29% of the total) each exceed US$1.5 million equivalent. The remaining pa Gages average a base cost of US$1 million equivalent and may be bid sing.y ur may be grouped at the bidder's preference. The packages are sufficiently attractive to stimulate interest among foreign bidders. The bidding packages for Sikka plant to be appraised later, are expected to follow a similar pattern. Consultant services would be procured following IBRD guidelines. Local bidding procedures used in other line-of-credit operations with ICICI are satisfactory to the Bank, and would be followed for the small-scale modernizations and rehabilitation component under the direct loan to ICICI; only the direct for- eign exchange content of equipment purchases for this component would be financed by the Bank loan. A very small amount of retroactive financing (US$1.5 million), amounting to about 1% of the proposed loan, would be provided under the loan to GOI to enable the companies to engage foreign consultants in time to assist with the preparation and review of technical bids, and would cover expenditures incurred after July 1, 1985. 68. The proceeds of the loans would be disbursed as follows: (a) lOOZ of foreign expenditures and 100Z of local ex-factory cost of agreed ICB packages for major conversion activities and training and technical assistance at sub- sector level; (b) 100% of foreign expenditure of small-scale rehabilitation and modernization; (c) 100% of foreign and 60% of local expenditure for plant-level technical assistance; and (d) 1002 of total expenditures for plant-level training. Documentation in support of payment claims relative to contracts below US$1.5 million in the case of Part A and US$800,000 in the case of Part B of the project would not be required, as these would be covered by statements of expenditure. The disbursement schedule has been based on the standard profiles for the Region and in the industry. Signing of acceptable subloan Agreements by ICICI and IDBI with each of the companies sponsoring the conver- sion subprojects would be a condition of disbursements. Accounts and Audit 69. The sponsoring companies would submit on a timely basis, audit reports, periodic progress reports and financial information concerning the project. ICICI and IDBI would also provide annual audit reports, project progress reports and financial information. After project completion, each company and financial institution would prepare and furnish to the Bank a project comple- tion report within six months of the project closing date. Benefits Justification and Risks 70. The project's main benefit would be increased production of cement at a much reduced fuel consumption level. At full production, the incremental output of the project is expected to be about 1.8 million tons or 3.1% of projected total domestic demand. The project would therefore help to reduce the shortage of a key commodity, which in the past has been a critical con- straint to the development of India's economy. Fuel consumption would decrease by an average of about 42% for the seven subconversion projects. Furthermore, the project is expected to generate substantial additional employment iu the domestic equipment manufacturing industry, the cement manufacturing industry,  -21- and the construction industry. Finally, the project would have a positive environmental impact because all the converted and modernized cement plants would be provided with efficient dust collection equipment which would meet the national environmental standards. 71. The overall economic rate of return is estimated at about 25%. The individual rates of return for the subprojects range from 21% for Madukkarai (ACC) to 511 for Macherla (KCP). The results of the sensitivity analysis carried out with regard to key assumptions including a decrease in border pricing, capital cost increases and delays in project implementation; indicate that only very large and highly unlikely deviations would make the project economically unviable. 72. The project faces no major risks. However, inadequate implementation capability could delay project implementation. The risk has been minimized because all the companies involved have already assembled competent staff and have retained qualified and experienced consultant engineers to assist in most phases of project implementation. Moreover, she construction would take place at the existing plants with infrastructure already in place. In the past the lack of continuous and adequate power prevented companies from attaining the rated output. This risk has now been largely overcome by the installed captive pover-generating capacity. A shortage of coal and transport facilities remains a potential risk. However, projects designed to improve railway capability, and hence coal haulage, are under execution. In addition, the fuel savings resulting from wet to dry conversion would also reduce the demand for coal and enable the companies to perform better with the present level of coal. Finally, should price decontrol measures be implemented more slolwy than has been assumed, the companies internal cash generation could be reduced. However, these companies are in a strong financial position. Furthermore, the future retention price expected after full decontrol is only about 18% higher than the average price under the existing controls. Moreover, the bulk of the incremental benefits are expected to emanate from more efficient fuel use. The risk regarding price decontrol is therefore minimal. PART V - RECOMMENDATION 73. I am satisfied that the proposed loans would comply with the Articles of Agreement of the Bank, and recommend that the Executive Directors approve the proposed loans. A.W. Clausen President Washington, D.C. February 14, 1986  ANNEX 1 T A a A L S 3 Page 1 of 6 lNDIA - SOCIAL XICICATIJAN DATA 511tH INDIA WBIEM GROUPS CWIWCHED AVCkACZS) is 1ST (lUST RECENT SsTSIATE) /b MCKEE? LOW INCSt MIDDLE INC 196i,o 19701k KSTUIArl ASIA & PACIFIC ASIA & PACIFIC ARE CTUOSUS EQ. *) TOTAL 3287.6 3267.6 3287.6 ACRICILTTRAL 1763.5 1780.5 1111.4 OUR PER WET (t .. .. 260.0 278.3 1011.1 u1_r musasnaw Cen (CSILOQA aF OIL EQUIVALENTJ 79.0 113.0 156.0 285.7 5b6.8 nwwana A vna sTnSI POPULATIOU.rO-YEAR CTIODUSA ) 434849.0 547569.0 733248.0 URM POPULATION tS OF TOTAL) 18.0 19.6 24Z4 22.3 35.9 POPUILATION PROJECTIONS POPULATION IN YEAR 2000 (MILL) 9Y4.4 STATIONAY POPULATION C1IL1) 1700.0 POPULATION IfHENhUM 1.8 POPULATION DEoSn PER Sq. IDI. 132.3 166.6 223.0 173.8 386.9 PER SO. E1. ACIT. LAND 246.6 307.5 395.8 353.3 1591.2 POPULATION ACE STRiCTURE (CZ 0-14 YRS 40.8 42.7 39.5 38.3 3S.2 15-64 IRS 54.4 54.1 56.5 59.4 57.7 65 SD AIOVE 4.6 3.0 3.9 4.3 3.5 POPULATION CRO11 RATE (S) TOTAL 1.8 2.3 2.2 2.0 2.3 URbN 2.5 3.3 3.9 4.1 4.1 CIOE UIRTN RATE (PER THOUS) 47.7 41.5 33.9 27.5 30.1 CRUDE OEATH RATE (PER TouS) 23.9 17.9 12.5 10.2 9.4 CROSS REPRODOCTION RATE 2.9 2.8 2.3 1.7 I.Y FAKrLY PUNNLINC ACCFPTORS. ANtNUAL (THOUS) 64.0 3782.0 6828.0 IC USERS (S OF MARED E) * 11.7 32.0 49.4 56.5 Pl a sA znlOi INDER OF FOOD PROD. PER CAPITA (1969-71-100) 98.0 102.0 113.0 116.6 124.4 PER CAPITA SUPPLY OF CALORIES (1 OF RSQUIIMlWTS) 98.0 91.0 92.0 106.3 115,7 PROEINS (CGRAIS PER DAY) 56.0 50.0 50.0 60.1 60.3 oF Wtic AIMAL AND PULSE 17.0 15.0 13.0 Id 14.4 14.1 NILD (ACES 1-4) DEATH RATE 26.3 19.7 11.0 7.3 7.2 RIMLTS LIFE ErPEL.- AT DIRTS C(ARs) 42.2 47.3 54.9 60.5 6U.6 INFANT OR. RATE (PER THOUS) 165.0 139.0 93.0 69.2 64.9 ACCESS TO SAFE UATR (SPoP) TOTAL . 17.0 41.0 Ic 44.2 46.0 URAN .. 60.0 77.0 7W 77.2 57.6 RDRAL *- 6.0 31.0 /c 34.6 37.1 ACCESS TO EXCRETA DISPOSAL (2 OF POPULATIOS) TOTAL *- 18.0 6.0 Ic 7.8 504.1 URNS .. 5.0 27.o 7- 28.8 52.9 RURAL .. 1.0 1.0 7T 5.5 44.7 POPULATION PER PHYSICIAN 4850.0 4890.0 3690.0 le 3318.0 7751.7 POP. PER NUING PERSON 10980.0 If 7420.0 5460.0 7e 4690.7 2464.8 POP. PER HOSPITAL BLD TOTAL 2180.0 1650.0 1290.0 /c IU39.2 1112.1 URAN .. .. 370.0 7 299.1 651.4 RURAL .. .. 10410.0 1i 6028.2 259.9 AD!IISSIOIS PER HOSPITAL SEW .. .. .. 52.3 41.1 lBOIS7M AVERArE SIZE oF HOUSEHOLD TOTAL 5.2 5.6 URBAN 5.2 5.6 RURAL 5.2 5.6 AVERAGE NO. OF PERSDNS/ROOhI TOTAL 2.6 2.8 URANS 2.6 2.6 RURAL 2.6 2.6 PERCENTAGE OF DUELLINS WIH "LCT. TOTAL .. URBA ... RURAL ..  ANNE 1 T A B L E 3A Page 2 of 6 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFRENCE RUPS (WEIGII AVERACS T) /a hOST (MOST RECENT ESTIMATE) lb R llglENT LOW 1m100 MDLE INCOME 1969b 197n/b EST, TE_ ASIA & PACIFIC AStA & PACIFIC MuCATI- ADJUSTD roLLME RATIOS PRIMARY: TOTAL 61.0 73.0 79.0 /c 92.6 100.7 MALE 80.0 90.0 93.0 7;7 105.5 104.4 FEMALE 40.0 56.0 64.0 Weh 79.3 97.2 SECONDARY: TOTAL 20.0 26.0 30.0 Ic 31.3 47.8 KALE 30.0 36.0 39.0o7W 40.8 50.6 FEKALE 10.0 15.0 20.0 7-' 21.9 44.8 VOCATIONAL CZ OF SECDNIA) 2.8 1.0 .. 3.2 18.4 PUPIL-TEACHER RATIO PRMRT 46.0 41.0 54.0 /c 38.0 30.4 SECONDY 16.0 21.0 .. 17.4 22.2 PASSENEIR CARS/THDUSAWD POP 0.6 1.1 1.4 /h 0.1 10.1 RADIO RCEZVERS/THOUSAND POP 4.9 21.5 55.8 129.8 172.9 TV RECZIVERS/T1USAND POP 0.0 0.0 2.9 19.8 58.5 NEWSPAPEL ( 'DAT GENCEtAL INTEREST") CIRlATON PER THOUSAND POPULATION 10.6 16.2 19.4 /h 25.7 65.3 CINEMA ANNUAL ATTENDANCE/CAPITA 3.2 6.2 6.6 6.0 3.4 TOrAL LABOR FORCE (TEOUS) 185951.0 Z19194.0 284251.0 FEMALE (PERCENT) 30.7 32.5 31.4 33.2 33.6 aGRICULTURE (PERCENT) 74.0 74.0 71.0 /c 69.6 52.2 XNDUSTRY (PECENT) 11.0 11.0 13.2 7T' 15.8 17.9 PARTICIPATTON RATE (PERCENT) TOTAL 42.8 40.0 38.3 41.9 38.9 MALE 57.0 52.4 51.7 53.6 50.8 FEMALE 27.3 26.9 25.3 29.1 26.8 ECONOMIC DEPENDENCT RATIO 1.1 1.1 1.1 1.0 1.1 INCONE DISTIUTIU PERCEN OP PRIVATE INCOME RCIVED BI HICNeST 51 OF BW1SEHOLDS 26.7 26.3 / . HIGST 20Z OF IOUSE8OLDS 51.7 48.9 7 .. .. 48.0 LOST 201 OF HUSEHOLDS 4.1 6.7 7i ' 6.4 LOWST 405 OF 8WSE3OLDS 13.6 17.2 7i .. .. 15.5 POPERr T1 GROWS ESTIATlED ABSOLUTE POVERTY INCOME LEVm (sS PER CAPITA) URBN .. .. 132.0 /h 133.9 RURAL ' ' 114.0 7r 111.6 151.9 ESTIIMAED REATIE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 177.9 RUL .. .. .. 61.7 164.7 ESTIDM POP. BELOW ABSOLUTE POVERTI DCAM LEZVEL (;) URBAN .. .. 40.3 /h 43.8 23.5 RULAL ., .. 50.7 Th- 51.7 37.8 NOT AVAILABLE NOT APPLICABLE N OTES /a The group averae. for each indicator are population-weghted aritmetic _man. Coverage of countries amog the indieatorn deends on availability of data and Is not uniform. lb Unless otbarvire noted, "Data for 1960" refer to any yer between 1959 and 1961; 'Data for 1970" between 1969 and 197'; and data for "Kost Recent Ratimate" between 1981 and 1983. /c 1980; /d 1977; /a 1978; /f 1962; /g 1976; /h 1979; /i 1964-65. JUN, 1985  ANNEX 1 ~~~~~~~~~~~ - P~~~~~~~~~kage 3 of 6 DEFINMONS OF SOCIAL INDICATORS Note Although thedatima drawn from souns generlly judged the most muthoritativeand reliable it should alwo be noted that they may nol beainrnatuonally comparable because of the lack of standerdized dfiniions and concepts used by different coun tnc in ollcting the dst. Th data are nonetheless. ucfiul to describe orders ofmagnitude. indicatc trends, and characterize cenain major diffnences betwecn countrics. The rcference groups are (1) the same country group of ihe subject country and 12) a country group with somewhat higher average income than the counlry groupofthe subjectcountry (exccpt for -High Income Oil Esportcrs group wher-Me iide Income Nortb Afrnc and Middle Eas-i isLhoseo becauscofstronger soio-culturml affinities). In the refcrence group data the averags are population weighted arithmetic mcans for ecah indicator and shown only when majority ofthe countries in agroup has data for that indicator Since the coverage of countries among the indicatorsdepends on the availabilitv of data and is not uniform. caution must he exercised kn relatingaverageofone indicator to another. These averges are only useful in comparing the valueofone indicator at a timcamong the country and reference groups. AREA (thousand sq.km.) Cnde Birth Rate (per rhaand)-Number of live births in the year Total-Total surface area comprising land area and inland waters; per thousand of mid-year population. 1960. 1970. and 1983 data. 1960. 1970 and 1983 data. Crude Death Rate (per thousandJ-Numlber of deaths in the year Agricutur-l-Estimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970. and 1983 data. permanently for crops, pastures. market and kitchen gardens or to Gross Reprodeaetion Rate-Average n umber of daughters a woman lie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive period if she experiences present age-specific fertility rates; usually five-year averages cnding GNP PER CAPITA (USS)-GNP per capita estimates at current in 1960. 1970. and 1983. market prices, calculated by same conversion method as World Fomily Planinzq-Acceptors. Ausal (thowsnds. Annual num- Bank Atlas (I1981-83 basis). 1983 data ber of acceptors of birth-control devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy (coal and lignite. Fandly Pla,ing-Users (percent ofmarried won:nJ - The percen- petroleum. natural gas and hydro-. nuclear and geothermal celc- tage of married women of child-bearing age who are practicing or tricity) in kilograms of oil equivalent per capita. 1960. 1970. and whose husbands are practicing any form of contraception. Women 1982 data. ofchild-bearing age are generally women aged 15-49. although for some countries contraceptive usage is measured for other age POPULATION AND VITAL STATISTCS groups. Total Popaion, Mid- Year (thousads)---As of July 1; 1960. 1970. FOODAND NUTRITION and 1983 data. FO N URrO index ofFoodPrioction PerCapita (1969-71= 100j- Index of per .6 Popdat.vpercewoftotal - Ratioorurbantoto capita annual production of all food commodities. Production population; different definitions of urban areas may affect compar- excudes animal feed and see for agriculture. Food COMModities ability of data among countries: 1960. 1970. and 1983 data, include primary commodities (e.g. sugarcane instead of sugar) Populatio Projectis which are edible and contain nutrients (e.g. coffee and tea are Popdulation in year 2000-The projection of population for 2000. excluded): they comprise cereals. root crops. pulses. oil seeds. made for each economy separately. Starting with information on vegetabies. fruits. nuts. sugarcane and sugar beets. livestock, and total population by age and sex. fertility rates, mortality rates, and livestock products. Aggregate production of each country is based international migration in the base year 1980. these parameters on national average producer price weights. 1961-65. 1970. and wre projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. Per Capita Supply ofCaloris (percent of requrentenrs -Cornput- Stationarr population-Is one in which age- and sex-specific mor- ed from calorie equivalent of net food supplies available in country tality rates have not changed over a long period, whik age-specific per capita per day. Available supplies comprise domestic produc- fertility rates have simultaneously remained at replacement levei tion. imports less exports, and changes in stock. Net supplies (net reproduction rate= 1). In such a population. the birth rate is exclude animal feed. seeds for use in agriculture. quantities used in constant and equal to the death rate. the age structure is also food processing. and losses in distribution. Requirements were constant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected cha:racteristics of and health considering environmental temperature. body weights. the population in the year 2000. and the rmie of decline of fertility age and sex distribution of population, and allowing 10 percent for rate to replacement level. waste at household level; 1961. 1970 and 1982 data. Population Momentwnm-Is the tendency for population growth to Per Capita Sapply of Protein (ram per dayJ----Protcin content of continue beyond the time that replacement-level fertility has been per capita net supply of food per day. Net suppiv of food is dcfined achieved; that is. even after the net reproduction rate has reached as above. Requirements for all countries established hv USDA unity. The momentum of a population in the year r is measured as provide for minimum allowances of 60 grams of total protein per a ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 grams the year t. given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those of ment lcvcl from year t onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as an Population Density average for the world. proposed by FAO in the Third World Food Per sqkn.--Mid-year population per square kilometer 1100 hec- Supply: 1961. 1970 and 1982 data. tares) of total area: 1960. 1970. and 1983 data. Per Capita Protein Supply From Anrimal and Pulse- Protein suppl) Per sqkm. agracultural land- Computed as above for agricultural offood derived trom animals and pulses in grams per day: 1961-65. land only. 1960. 1970. and 1982 data. 1970 and 1977 data. Popnltim Age Structure (percent)-Children (0-14 vears). work- Child qa'er1 1-4 Death Rate (perthousand) - -Number ofdeaths of ing age (15-64 years). and retired (65 years and overl as percentage children aged 1-4 years per thousand children in the same age or mid-year population: 1960. 1970. and 19$3 data. group in a given year. For most developing countries data derived Fopulation Growth Rate (prcent)--oral-- Annual growth rates o f from life tables: 1960. 1970 and 1983 data. total mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH Popuwaion Growth Rate (percent)-urban -Annual growth rates Life Erpectancy at Birth (years)-Number of years a newhorn of urban population for 1950-60. 1960-70. and 1970-83 data. infant would livc if prevailing patterns of mortalitv for ail people  ANNEX 1 Page4of6 at the time of of its birth wer to Kay the same throughout its life; Pup -teacher Ratfo - primary, ad secondarp-Total students en- 1960. 1970 and 1983 data. rolled in primury and secondary klve divided by numbes of hbaw Mortmky Rate (per thosand)-Number of infants who die teachers in the corresponding levels befor reaching one year of age per thousand live births in a given yeasr, 1960, 1970 and 1983 data. CONSUMPTION Acces to Sefa Water (pereet of peabrim)-toiaJ ain, and 1 Paser Cars (per thoxsd popularlou)-Passenger cars comn- nral-Number of people (total, urban, and rural) with reasonable prise motor cars seating ls than deight persos; excludes ambul- access to safe water supply micludes teated surface waters or ances. hearses and military vehis. untreated but uncontaminated water such as that from protected Rado Recevers (per thrl d populatlen)-All types of receier borehoks, spnnps and sanitary wells) as percentages of their respec- for radio broadcasts to general public per thousand of population; tive populatons. In an urban area a public fountain or standpost excludes un-licensed receivers in countries and in years when located not more than 200 metesP from a house may be considered rgistration of radio sets was in effect; data for recent years may as being within reasonable aces of that house. In ru areas not be comparable since most countries abolished licensing. masonable access would imply that the housewife or members of the TV Reci (pp o receivers for broadcast houelhold do not have to spend a disproportionate part of the day to genera p pe th op ulTi ecludes fnlcenedTV in fetching the fBnl' ae ed to gcnsaa public per thousand population: cxchudes unicanw etIV in fetching the family's water ui~*receivers in countries and in years when rgsration of TV sets was Access to Ereta Disposl (percent of popalation)-teora, mrban, i inegnect. nd rral-Number of people (total. urban, and rural) served by in e excreta disposal as percentages or their respective populations. Aewsipper Circua ,i (per thousand populaion)-Shows tie aver- Excreta disposal may include the collection and disposal, with or age circulation of daily geral interest newspaper." defined as a without treatment, of human cxcreta and waste-water by water- penodl publcation devoted primarily to recording geeral news. bome systems or the use of pit privies abd similar instaUations. It is considered to be daily' if it appears at kast four times a week Poplaion per Physidan-Population divided by number of prac- Cinea Annual Attendance per Capita per Year-Based on the tising physicians qualified from a medical school at university level number of tickets sold during the year, including admissions to Popiuadno per Nursing Person-Population divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurse assistant nurses, practical nurses and nursing auxiliaries. LABOR FORCE Popukadon per osptal Bf-4ot;4