Conformed Copy - C2173 - Integrated Child Development Services Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2173 IN (Integrated Child Development Services Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated October 23, 1990 CREDIT NUMBER 2173 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated October 23, 1990, between INDIA, acting by its President, (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Borrower has also requested the Interna- tional Bank for Reconstruction and Development (the Bank) to provide additional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (the Loan Agreement as herein further defined), the Bank is agreeing to provide such assistance in an aggregate principal amount equiva- lent to ten million dollars ($10,000,000) (the Loan); (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit Page 2 provided for in this Agreement be disbursed on account of expenditures in respect of the Project before disburse- ments of the proceeds of the Loan are made; (D) the Project will be carried out by the State of Andhra Pradesh and the State of Orissa with the Borrower- 's assistance and, as part of such assistance, the Borrower will make available to such States the proceeds of the Credit as provided in this Agreement and the proceeds of the Loan as provided in the Loan Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith among the Association, the Bank and the Project States; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise re- quires, the several terms defined in the General Condi- tions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Loan Agreement" means the agreement of even date herewith between the Borrower and the Bank for the Project, as such agreement may be amended from time to time; and such term includes the "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, as applied to such agreement, and all schedules and agreements supplemental to the Loan Agreement; (b) "Project Agreement" means the agreement among the Association, the Bank and the Project States of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (c) "Andhra Pradesh" means the State of Andhra Pradesh, a state of the Borrower, or any successor thereto; (d) "Orissa" means the State of Orissa, a State of the Borrower, or any successor thereto; (e) "Project States" means, as the context may require, Andhra Pradesh and Orissa, and any other State or States selected by the Borrower in consultation with the Association, which has or have entered into an agreement, on terms and conditions satisfactory to the Association, for the carrying out of the Project or any part thereof in such State or States; (f) "Project State" means, as the context may require, any one of the Project States referred to in sub-paragraph (f) of this section; (g) "Project Area" means the districts of Adilabad, Page 3 Anantpur, Chittor, Cuddapah, East Godavari, Karimnagar, Khammam, Kurnool, Srikakulam, Vishakhapatnam, Vizianagar- am, Warangal and West Godavari in Andhra Pradesh, and the districts of Bolangir, Cuttack, Dhenkanal, Ganjam, Kalahandi, Keonjhar, Koraput, Mayurbhanj, Phulbani, Puri, Sambalpur and Sundargarh in Orissa and includes such other districts in the Project States as may be agreed to by the Association; (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (i) "ICDS" means Integrated Child Development Services, the Borrower's national program of child development; (j) "AW" means Anganwadi center, a village center established for delivering the services of ICDS; (k) "PMU" means Project Management Unit to be established in each Project State under Part D (2) of the Project; and (l) "Fiscal Year" means the fiscal year of the Borrower beginning on April 1 and ending on March 31. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to seventy three million six hundred thousand Special Drawing Rights (SDR 73,600,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expendi- tures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in the Reserve Bank of India on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1997 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date and at such other rates as may be set from time to time thereaf- ter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next date Page 4 in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Associ- ation a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each April 1 and October 1 commencing October 1, 2000 and ending April 1, 2025. Each installment to and including the installment payable on April 1, 2010 shall be one and one-fourth percent (1-1/4%) of such principal amount, and each installment thereafter shall be two and one-half percent (2-1/2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Associa- tion may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such install- ment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association deter- mines that the Borrower's economic condition has deterio- rated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commit- ment to the objectives of the Project as set forth in Page 5 Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause the Project States to perform in accordance with the provisions of the Project Agreement all the obliga- tions of the Project States therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Project States to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make the proceeds of the Credit available to the Project States in accordance with the Borrower's standard arrangements for development assistance to the State of India. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project shall be carried out by the Project States pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall: (a) participate in the carrying out of the mid-term review of the Project referred to in paragraph 5 (a) of Schedule 2 to the Project Agreement; and (b) participate in a final evaluation of the Project referred to in paragraph 5 (b) of Schedule 2 to the Project Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section includ- ing those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association, as soon as available, but in any case not later than nine months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other Page 6 information concerning such records, accounts and the audit thereof as the Association shall from time to time rea- sonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, the Borrower shall: (i) maintain or cause to be maintained in accordance with sound accounting practic- es, records and accounts reflecting such expenditures; (ii) retain until at least one year after the Association has received the audit for the fiscal year in which the last withdrawal from the Credit Account was made all records (con- tracts, orders, invoices, bills, receipts and other documents) evi- dencing such expenditures; (iii) enable the Association's representa- tives to examine such records; and (iv) ensure that such records and ac- counts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whet- her the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) The Project States shall have failed to perform any of their obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraor- dinary situation shall have arisen which shall make it improbable that either of the Project States will be able to perform its obligations under the Project Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely, that the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that Page 7 all conditions precedent to the effectiveness of the Loan Agreement have been fulfilled, other than those related to the effectiveness of this Agreement. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the Project Agreement has been duly autho- rized or ratified by the Project States, and is legally binding upon them in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Section 3.03 of this Agreement and the provisions of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on the date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary, or Under Secretary of the Department of Economic Affairs in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Condi- tions: For the Borrower: The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India Cable address: Telex: ECOFAIRS 953-3166175 New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. Page 8 INDIA By /s/ Abid Hussain Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Attila Karaosmanoglu Regional Vice President Asia SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of the amounts of the Credit and of the Loan to each Category and the percentage of expenditures for items so to be financed in each Catego- ry: Amount of Amount of the Credit the Loan Allocated Allocated (Expressed (Expressed % of in SDR in Dollar Expenditures Category Equivalent) Equivalent) to be Financed (1) Civil works 12,100,000 1,700,000 90% (2) Medicines, 13,000,000 1,800,000 100% of drugs, foreign ex- equipment, penditures, materials, 100% of local vehicles, expenditures, and furni- (ex-factory ture costs) and 80% of local expenditures for other items procured locally (3)Consultants' 6,100,000 2,300,000 100% services and training Amount of Amount of the Credit the Loan Allocated Allocated (Expressed (Expressed % of in SDR in Dollar Expenditures Category Equivalent) Equivalent) to be Financed (4)Incremental 1,500,000 200,000 60% of local therapeutic expenditures nutrition supplements under Part D.1 (b) of the Project Page 9 (5)Incremental 25,800,000 3,700,000 60% of local Operating expenditures Costs (6)Unallocated 5,100,000 300,000 __________ __________ TOTAL 73,600,000 10,000,000 ========== ========== 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expendi- tures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expendi- tures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "Incremental Operating Costs" means the incremental costs for salaries, supplies and vehicle operating and maintenance costs except under Part C.1 of the Project. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 1,500,000, may be made on account of payments made for expenditures before that date but after September 30, 1989. SCHEDULE 2 Description of the Project The objectives of the Project are to improve the nutrition and health status of children under 6 years of age, and pregnant and nursing women, focussing on households below the poverty line through strengthening and expanding ICDS in the Project Area with the aim to: (a) reduce severe and moderate malnutrition among young children, (b) increase the proportion of adequately nourished children up to 36 months of age, and (c) contribute towards a reduction in the infant mortality rate and the incidence of low birth weight. The Project consists of the following parts, to be carried out in the Project Area, subject to such modifi- cations thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: 1. Establishment and strengthening of AWs. 2. Placement of additional supervisors of AWs at the block level for the purpose of facilitating increased communication, community mobilization and training activities in the areas of health and nutrition. 3. Establishment and strengthening of ICDS offices at the block and district levels. 4. Training of ICDS staff, of the medical and paramedi- cal staff, and of trainers, and establishment and strengthening of training institutions including techni- cal assistance for curriculum review and development. 5. Facilitating the coordination and delivery of Page 10 nutrition and health services, including the carrying out of the ICDS nutrition supplementation program in the Project area. 6. Strengthening of the referral system for children under 72 months of age and pregnant and nursing women. 7. Provision of services and facilities at the block level for obstetrical risk management and rehabilitation of severely malnourished children under 6 years of age. 8. Strengthening of pre-school educational activities and facilities, including the provision of educational toys and play materials for AWs. 9. Construction of AW buildings and handpumps. 10. Construction at the block-level of ICDS offices and storage facilities. 11. Provision of medicines, drugs and equipment for maternal and child health care, vehicles, furniture, equipment and supplies required for this part of the Project. Part B: Communications 1. Carrying out of a program of enhanced communications activities to promote appropriate nutrition and health practices and stimulate demand for nutrition and health services under the Project. 2. Establishing a communications cell in the ICDS Directorate in each Project State. 3. Consultant services and training for staff develop- ment, for formulation of a detailed communication plan, and for design and development of materials. 4. Provision of equipment and supplies required for this Part of the Project. Part C: Community Mobilization 1. Support to women's groups in strengthening their involvement in AW activities and in undertaking income generating activities. 2. Conducting of educational courses for adult women emphasizing functional literacy, health and nutrition, and other skills for improving the quality of life. 3. Training of adolescent girls in AW activities. Part D: Project Management, Monitoring and Evaluation 1. Carrying out of a program of studies on nutrition and health, including the carrying out of operations research on: (a) the organization, management and work routines of ICDS and health staff at the block, sector and village level; and (b) alternate ways of providing therapeutic supplementation to growth faltering, and moderately and severely malnourished children under three years of age. 2. Establishment of a PMU in each Project State. 3. Carrying out of monitoring and evaluation of the project, including strengthening of software systems for Page 11 data processing and analysis and training of personnel in monitoring and evaluation methodologies and techniques. 4. Provision of equipment, supplies and vehicles required for this part of the Project. * * * The Project is expected to be completed by March 31, 1997. SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2), (3), (4) and (5) set forth in the table in paragraph 1 of Schedule 1 to the Development Credit Agreement; (b) the term "eligible expenditures" means expendi- tures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit or the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to the Development Credit Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $5,000,000 to be withdrawn from the Credit Account or the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satis- factory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Alloca- tion. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account or the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Asso- ciation requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenish- ment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account or the Loan Account and deposit into the Special Account such Page 12 amount as the Borrower shall have re- quested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account or the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (i) if, at any time, the Association shall have determined that all further with- drawals should be made by the Borrower directly from the Credit Account in ac- cordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of the Development Credit Agreement or from the Loan Ac- count in accordance with the provisions of Section 2.02 of the Loan Agreement and Article V of the General Conditions ap- plicable thereto; or (ii) once the total unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories for Parts of the Project, less the amount of any outstand- ing special commitment entered into by the Association or the Bank pursuant to Section 5.02 of the respective General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account and the Loan Account of the remaining unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories shall follow such procedures as the Associa- tion shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association or the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower Page 13 has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association or the Bank such outstanding amount. (c) The Borrower may, upon notice to the Associa- tion, refund to the Association or the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association or the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account or the Loan Account, as the case may be, for subsequent withdrawal or for cancellation in accordance with the relevant provisions of the Development Credit Agreement or the Loan Agreement, including the General Conditions applicable thereto.