India - Integrated Watershed Development (Plains) Project : Credit 2131 - Credit Agreement - Conformed

-CUMENTS, CREDIT NUMBER 2131 IN Development Credit Agreement (Integrated Watershed Development (Plains) Project) between INPIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1990 CREDIT NUMBER 2131 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated \ LLS , 1990, between INDIA, acting by its President, (the B rower) 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 International 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), the Bank is agreeing to provide such assistance in an aggregate principal amount equivalent to seven million dollars ($7,000,000) (the Loan); (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Agreement be disbursed on account of expenditures in respect of the Project before disbursements of the proceeds of the Loan are made; (D) part of the Project will be carried out by the State of Gujarat (Gujarat), the State of Orissa (Orissa), and the State of Rajasthan (Rajasthan) (individually "the Project State" and collectively "the Project States") with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Project States part of the proceeds of the Credit as provided in this Agreement and part of 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: -2- ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment 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 requires, the several terms defined in the General Conditions 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) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (c) "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; (d) "Project Area" means the Districts of Rajkot, Sabarkantha and Vadorara/Bharuch in the State of Gujarat, the Districts of Ganjam and Phulbani in the State of Orissa, and the Districts of Ajmer, Bhilwara, Jodhpur and Udaipur in the State of Rajasthan; and (e) "GLDC" means the Gujarat State Land Development Corporation Ltd., a company wholly-owned by the State of Gujarat. 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 this Agreement, an amount in various currencies equivalent to forty two -3- million six hundred thousand Special Drawing Rights (SDR 42,600,000). 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 expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement 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 4 to this Agreement. Section 2.03. The Closing Date shall be March 31, 1998 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 thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next date 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 ii 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 Association 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 semi-annually on January 15 and July 15 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 installmen±ts payable on each January 15 and July 15 commencing July 15, 2000 and ending January 15, 2025. Each installment to and including the installment payable on January 15, 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 Association 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 installment 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 determines that the Borrower's economic condition has deteriorated 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. -5- 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. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out Part E.5 of the Project through the Watershed Development Council in its Ministry of Agriculture with due diligence and efficiency and in conformity with appropriate administrative, financial and agricultural practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for Part E.5 of the Project. Section 3.02. (a) Without any limitation or restriction upon any of its other obligations under this Agreement the Borrower shall cause the Project States to perform in accordance with the provisions of the Project Agreement all the obligations 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 part of the proceeds of the Credit available to the Project States in accordance with the Borrower's standard arrangements for developmental assistance to the States of India. Section 3.03. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.04. 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 Parts A, B, C, D and E.1 through E.4 of the Project shall be carried out -6- by the Project States pursuant to Section 2.03 of the Project Agreement. Section 3.05. (a) The Borrower shall participate in the carrying out of a mid-term review of the Project by September 30, 1993. (b) the review shall include: treatment technology; incentives to beneficiaries; cost recovery and benefit sharing on private, public, and common lands; consultative planning; beneficiary participation, organization and management, including Non-Governmental Organization involvement; review of strategic plans for additional watershed development; and review of Credit and Loan amount allocations to the Project States under the Project. (c) The Borrower shall, promptly thereafter, carry out the agreed recommendations of the review in a manner acceptable to the Association. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of Part E.5 of the Project of the departments or agencies of the Borrower responsible for carrying out Part E.5 of the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including 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 - 7 - (iii) furnish to the Association such other information concerning said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Associa- tion has received the audit for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts 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 whether the statements of expenditure submitted during such fiscal year, together with the proce- dures 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) A Project State shall have failed to perform any of its obligations under the Project Agreement. -8- (b) As a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that a Project State 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 fcllowing 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 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 authorized or ratified by the Project States, and is legally binding upon the Project States 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 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. -9- ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Any 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 Conditions: For the Borrower: The Secretary to the Government of India Department of Economic Affairs Ministry of Finance New Delhi, India Cable address: Telex: ECOFAIRS 953-31-66175 FINE-IN New Delhi 953-31-61430 FINE-IN 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) - 10 - 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. INDIA Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By A!'oc OYLAJ O Regional Vice Presiden Asia - 11 - 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 Category: Amount Amount of the of the Credit Loan % of Allocated Allocated Expendi- (Expressed (Expressed tures in SDR in Dollar to be Category Equivalent) E2uivalent) Financed (1) Treatments 70% under Part A.1 of the Project: (a) Gujarat 1,210,000 190,000 (b) Orissa 1,300,000 220,000 (c) Rajasthan 1,450,000 230,000 (2) Treatments 7,380,000 1,210,000 70% under Part A.2 (a) of the Project - 12 - Amount Amount of the of the Credit Loan % of Allocated Allocated Expendi- (Expressed (Expressed tures in SDR in Dollar to be Category Equivalent) Equivalent) Financed (3) Treatments 70% under Part A.2 (b) and (c) of the Project: (a) Gujarat 2,230,000 360,000 (b) Orissa 5,380,000 880,000 (c) Rajasthan 5,690,000 940,000 (4) Treatments 70% and activi- ties under Part B of the Project: (a) Gujarat 690,000 1.20,000 (b) Orissa 680,000 100,000 (c) Rajasthan 690,000 120,000 (5) Civil works 1,370,000 230,000 80% for buildings (6) Equipment, 1,300,000 220,000 100% of foreign furniture, expenditures, materials 100% of local and vehicles expenditures (ex-factory cost) and 50% of local ex- penditures for other items procured locally - 13 - Amount Amount of the of the Credit Loan % of Allocated Allocated Expendi- (Expressed (Expressed tures in SDR in Dollar to be Category Equivalent) Equivalent) Financed (7) Services under 800,000 40,000 100% Part D.4 of the Project (8) Consultants' 1,270,000 290,000 100% services and training (9) Incremental 6,930,000 1,150,000 55% operating costs (10) Unallocated 4,230,000 700,000 TOTAL 42,600,000 7,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "incremental operating costs" means salaries for incremental staff under Parts D and E of the Project, operation and maintenance cost for vehicles, equipment and buildings, and cost of office supplies. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: - 14 - (a) 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 in respect of Categories (1), (2) and (5) through (9) on account of payments made for expenditures before that date but after July 31, 1989; (b) expenditures in respect of Category (1) (a) until: (i) the Borrower has furnished to the Association and the Bank terms of reference, satisfactory to the Association and the Bank, for the consultants to be employed for purposes of Part E.5 of the Project, such terms of reference to include the composition of the team of consultants, the operational framework for their recruitment, and the framework for their work in the Project States; and (ii) Gujarat: (A) has caused GLDC to appoint a Project Coordinator and four Watershed Project Directors in accordance with paragraphs 2 and 8 of the Schedule to the Project Agreement; and (B) has employed the consultants required to assist Gujarat in carrying out the monitoring and evaluation activities under Parts D.2 and E.4 of the Project; (c) expenditures in respect of Category (1) (b) until: (i) the Borrower has furnished to the Association and the Bank terms of reference, satisfactory to the Association and the Bank, for the consultants to be employed for purposes of Part E.5 of the Project, such terms of reference to include the composition of the team of consultants, the operational framework for their recruitment, and the framework for their work in the Project States; and (ii) Orissa: (A) has appointed a Project Coordinator and two Watershed Project Directors in accordance with paragraphs 2 and 8 of the Schedule to the Project Agreement; and (B) has employed the consultants required to assist Orissa in carrying out the monitoring and evaluation activities under Parts D.2 and E.4 of the Project; (d) expenditures in respect of Category (1) (c), until: (i) the Borrower has furnished to the Association and the Bank terms of reference, satisfactory to the Association and the Bank, for the consultants to be employed for purposes of Part E.5 of the Project, such terms of reference to include the composition of the team of consultants, the operational framework for their recruitment, and the framework for their work in the Project States; and (ii) Rajasthan: (A) has appointed a Project Coordinator and four Watershed Project Directors in accordance with paragraphs 2 and 8 of the Schedule to the Project Agreement; and (B) has employed the consultants required to assist Rajasthan in carrying out the - 15 - monitoring and evaluation activities under Parts D.2 and E.4 of the Proj ect; (e) expenditures in respect of Category (3) (a), (3) (b) and (3) (c), respectively, until Gujarat, Orissa and Rajasthan, respectively, has furnished to the Association and the Bank operational models, satisfactory to the Association and the Bank, for the joint management of non-arable lands; and (f) expenditures in respect of Category (4) (a), (4) (b) and (4) (c), respectively, until Gujarat, Orissa and Rajasthan, respectively, has identified, prepared and appraised, in a manner satisfactory to the Association and the Bank, the particular activity to be carried out under Part B of the Project. - 16 - SCHEDULE 2 Description of the Project The objectives of the Project are: (i) to slow down and reverse ecological degradation in a variety of agro-ecological zones to promote sustainable and replicable production systems which emphasize vegetative soil and moisture conservation technologies; (ii) to introduce effective arrangements for - inter-agency coordination in watershed planning and, implementation; and (iii) to establish sustainable systems of joint user management of treated non-arable lands. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Watershed Development Works in the Project Area 1. Treatment of about 37,000 ha. of land, as defined in the Annex to this Schedule, in four selected pilot sub-watersheds or cluster of micro-watersheds in each of the Project States, covering an area of about 2,500 to 7,500 ha. each of: (a) private arable land; (b) public degraded forest land and common land; and (c) natural drainage lines and associated gullies on private and public land. 2. Treatment, as defined in the Annex to this Schedule, of the expansion watershed areas in the Project Area, pursuant to identification, preparation and appraisal thereof satisfactory to the Association, of (a) private arable land; (b) public degraded forest land and common land; and (c) natural drainage lines and associated gullies on private and public land. Part B: Supporting Activities 1. Development of nurseries, including acquisition of planting materials for such nurseries, for planting outside the Project Area, for vegetative soil and moisture conservation, silvi-pasture, pasture, horticulture and forestry. 2. Improvement of alignment and drainage on selected roads. 3. Improvement of selected village water supply and storage. - 17 - 4. Acquisition and installation of energy saving devices including biogas plants and fuel efficient stoves in selected villages. 5. Carrying out of other selected treatments for watershed stabilization. Part C: Technology Development and Application 1. Provision of technical support to farmers, including dissemination of soil and moisture conservation practices and improved farming systems. 2. Development of nurseries, including acquisition of planting materials for such nurseries, for the Project Area, for vegetative soil and moisture conservation, silvi-pasture, pasture, horticulture and forestry. 3. Carrying out of priority operational research on: (i) identification of indigenous and exotic plant species for effective soil and moisture practices; (ii) identification of suitable indigenous and exotic species for agro-forestry, fodder and silvi- pasture development; (iii) development of optimal land use systems for the Project Area; and (iv) impact evaluation of technologies introduced for soil and moisture conservation. Part D: Project Implementation 1. Establishment of a Watershed Planning and Coordination Organization in Orissa and in Rajasthan, and strengthening of GLDC in Gujarat, including construction of office buildings and housing for staff. 2. Strengthening the Project States' capabilities for planning and monitoring and evaluation; and strengthening their geographical information systems. 3. Acquisition of office equipment and vehicles required for Project implementation by the Project States and GLDC; acquisition of equipment for the Project States' and GLDC's geographical information systems; and financing of operating expenses and salaries of incremental staff of the Project States' agencies and GLDC. - 18 - 4. Provision of contractual services by Non-Governmental Organizations for assistance in the carrying out of any of the activities set out in Parts B, C, D.2 and E.1 through E.4 of the Project. Part E: Training and Technical Assistance 1. Provision of technical assistance for: (a) local testing and refinement of treatment technologies; (b) establishment of procedures for consultative and physical planning, including geographical information systems; and (c) development of training materials for watershed development. 2. Training of trainers, and of field, research and Non- Governmental Organizations staff, in watershed planning and treatment approaches and techniques. 3. Training of beneficiaries in land treatments and sustainable joint management of non-arable lands. 4. Training of monitoring and evaluation staff of the Project States and of GLDC. 5. Provision of technical assistance for: (a) development of multi-disciplinary watershed treatment planning and beneficiary participation in such activities; and (b) testing and development of appropriate technologies for treatments under the Project. The Project is expected to be completed by September 30, 1997. - 19 - ANNEX TO SCHEDULE 2 Eligible Treatments (a) Arable Lands (i) Vegetative contour barrier hedges. (ii) Vegetative re-inforcements of terraces and of field boundaries of small field plots. (iii) Contour cultivation and associated inter-hedge land management. (iv) Treatment of saline/alkaline areas. (v) Conversion to perennial/intercropping, including agro- forestry, horticulture, pasture and silvi-pasture. (vi) Demonstrations of farming systems. (b) Non-arable Lands (i) Multi-tier canopy cover of grasses, shrubs and trees. (ii) Rehabilitation of degraded forests. (iii) Conversion of shifting cultivation to sustainable farming systems. (iv) Reclamation of saline/alkaline areas. (v) Pasture and silvi-pasture development. (c) Natural Drainage (i) Vegetative stabilization along and across gully lines. (ii) Diversion drains and gully control measures, with vegetative re-inforcement. (iii) Stream bank erosion protection with vegetative, loose stone and masonry measures. (iv) Run-off water management structures. - 20 - (v) Special problem treatment for flood control, roadside erosion and rehabilitation of village ponds. (d) Associated Measures (i) Development of mother nurseries. (ii) Protection of areas with live fencing. (iii) Livestock development programs pertaining to Rajasthan. - 21 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods, Works and Services Part A: Procurement Procedures 1. Equipment and materials shall be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Items or groups of items estimated to cost less than the equivalent of $20,000 per contract, up to an aggregate amount not to exceed the equivalent of $1,000,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers eligible under the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines), in accordance with procedures acceptable to the Association. 3. Civil works and watershed development works shall be carried out through force account in accordance with procedures satisfactory to the Association. 4. Imported planting material shall be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers from at least two different countries eligible under the Guidelines, in accordance with procedures acceptable to the Association. 5. Service contracts under Part D.4 of the Project shall be procured under procedures acceptable to the Association. Such service contracts may be procured on a sole-source basis. Part B: Review by the Association of Procurement Decisions 1. Review of final contract: (a) With respect to all contracts the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said - 22 - paragraph 4 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (b) The provisions of the preceding subparagraph (a) shall not apply to contracts on account .of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. In order to assist the Borrower in carrying out Part E.5 of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. 2. In order to assist the Project States in carrying out each of Part E.1, E.2, E.3 and E.4 of the Project, the Project States shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. - 23 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (9) set forth in the table in paragraph 1 of Schedule 1 to the Development Credit Agreement; (b) the term "eligible expenditures" means expenditures 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 three million dollars ($3,000,000) 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 satisfactory 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 Allocation. 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 Association requests for deposits into the Special Account at such intervals as the Association shall specify. -24 - (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 replenishment 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 amount as the Borrower shall have requested 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. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance 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 Account in accordance with the provisions of Section 2.02 of the Loan Agreement and Article V of the General Conditions applicable thereto; or (b) once the total unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories less the amount of any outstanding special commitment entered into by the Association or the Bank pursuant to Section 5.02 of the respective General - 25 - Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. 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 Association 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 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 Association, 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. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY