Conformed Copy - C2223 - Second Technician Education Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2223 IN (Second Technician Education Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated December 16, 1991 CREDIT NUMBER 2223 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated December 16, 1991, 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 Project will be carried out by the Borrower, in respect of the Union Territory (as herein defined), and the Project States (as herein defined), in respect thereto, with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Project States the proceeds of the Credit as provided in this Agreement; and Page 2 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 between the Association 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 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) "Project Agreement" means the agreement between the Association 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; (b) "Project States" mean the following States of the Borrower: Andhra Pradesh, Assam, Haryana, Himachal Pradesh, Maharashtra, Punjab, Tamil Nadu, West Bengal and include any successor or successors thereto; (c) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (d) "Union Territory" means the Union Territory of Delhi administered by the Borrower, and includes (i) any other Union Territory or Union Territories of the Borrower selected on the basis of criteria acceptable to the Association for the carrying out of the Project, and (ii) any successor or successors thereto. 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 two hundred thirteen million five hundred thousand Special Drawing Rights (SDR 213,500,000). 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, works 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 June 30, 1999 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 Page 3 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 restric- tions 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 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 semiannually on June 1 and December 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 June 1 and December 1 commencing June 1, 2001 and ending December 1, 2025. Each installment to and including the installment payable on December 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 Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due considera- tion 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. 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 Page 4 Section 3.01. (a) 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 (i) carry out the Project in respect of the Union Territory with due diligence and efficiency and in conformity with appropriate administrative, financial, and educational practices, and shall provide promptly as needed, the funds, facilities, services and other resources required for the Project, and (ii) without any limitation or restriction upon any of its other obligations under this Agreement, cause the Project States to perform in accordance with the provisions of the Project Agreement all the respective obligations of the Project States therein set forth, shall take and cause to be taken all actions, 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) Without limitation upon the provisions of paragraph (a) (i) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall in respect of the Union Territory carry out the Project mutatis mutandis in accordance with the Implementation Program set forth in Schedule 2 of the Project Agreement. (c) The Borrower shall make part of the proceeds of the Credit available to the Project States for such parts of the Project as are to be carried out by each Project State in accordance with the Borrower's standard arrangements for development assistance to the States 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 Agree- ment. 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 portions of the Project to be carried out by the Project States shall be carried out by the respective Project States pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall, by December 1, 1991, jointly with the Project States, develop and institute and thereafter maintain fellowship training programs, including study tours, agreed to by the Borrower and the Association. Section 3.05. The Borrower shall (a) develop and establish a Management Information System (MIS) in the National Project Implementation Unit for monitoring and supervision of the Project, (b) implement, in conjunction with the Project States, a supervision plan agreed to by the Association, and (c) undertake, in conjunction with the Association and the Project States, an annual review of Project progress on the basis of monitorable benchmarks agreed to by the Borrower and the Association. Section 3.06. The Borrower shall withhold and cause the Project States to withhold the establishment of any new publicly funded polytechnic in the Project States without the prior approval of the All India Council for Technical Education. Section 3.07. The Borrower shall maintain adequate staff in the National Project Implementation Unit and the Technical Teacher Training Institutes of the Borrower in accordance with the Schedule of Deployment of Key Additional Staff agreed to by the Borrower and the Association. ARTICLE IV Page 5 Financial Covenants Section 4.01. (a) The Borrower shall maintain and cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of (i) the departments or agencies of the Borrower responsible for the Project, and (ii) the Project States responsible for carrying out their respective parts of the Project. (b) The Borrower shall: (i) have or cause to 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 or cause to be furnished to the Associa- tion, 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 or cause to be furnished to the Associa- tion such other information concerning such records, accounts and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. (a) 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 practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; and (iii) enable the Association's representatives to examine such records. (b) The Borrower shall: (i) have or cause to have the records and accounts referred to in paragraph (a) (i) of this Section and those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Associa- tion; (ii) furnish or cause to be furnished to the Associa- tion as soon as available, but in any case not later than nine months after the end of each such year the report of such audit by said auditors, of such scope and in such detail as the Associa- tion shall have reasonably requested, including a separate opinion by said auditors as to whether the statements of expenditures submitted during such fiscal year, together with the procedures Page 6 and internal controls involved in their prepara- tion, can be relied upon to support the related withdrawals; and (iii) furnish or cause to be furnished to the Associa- tion such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. 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) Any of the Project States shall have failed to perform any of its obligations under the Project Agreement. (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 any 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 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 each of the Project States, and is legally binding upon them in accordance with its terms. Section 6.02. 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 6.03. The obligations of the Borrower under Sec- tion 3.03 of this Agreement and the provisions of Section 5.02 of this Agreement shall cease and determine on the date on which this 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, Director, Joint Secretary, 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 Ministry of Finance Department of Economic Affairs New Delhi, India Page 7 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. INDIA By /s/ Lalit Mansingh Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Joseph Wood Regional Vice President South Asia SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated (Expressed % of in SDR Expenditures Category Equivalent) to be Financed (1) Civil works 76,700,000 90% (2) Furniture, 72,300,000 100% of foreign equipment, expenditures, 100% vehicles, of local expendi- and books and tures (ex-factory instructional cost) and 80% of materials local expenditures for other items procured locally (3) Consultants' 6,200,000 100% Page 8 services and training (4) Incremental 40,400,000 80% of local operating expenditures costs incurred until June 30, 1995, and 65% of local expenditures incurred thereafter (5) Unallocated 17,900,000 ___________ TOTAL 213,500,000 =========== 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; (c) the term "Incremental operating costs" means the incremental costs for (i) salaries of additional staff, and (ii) supplies as may be agreed to by the Association. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 2,100,000 may be made on account of payments made for expenditures before that date but after September 30, 1990. SCHEDULE 2 Description of the Project The objectives of the Project are to support the Borrower's National Policy on Education and its Ten-Year Technician Education Investment Program (1990-1999) and to specifically: (a) expand the capacity of the polytechnic system; (b) improve the quality of polytechnic programs; and (c) improve the efficiency of the manage- ment and operation of the polytechnic system at both the Center and State levels. 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: Expansion of Capacity 1. Construction, furnishing and equipping of polytechnics including academic buildings, hostels, staff and faculty housing, workshops, libraries, laboratories and other necessary amenities. 2. Staffing of polytechnics. 3. Introduction and development of diploma, post-diploma, and continuing education programs in new and emerging technologies at polytechnics. 4. Increasing facilities and opportunities for women at all polytechnics, development of women's residential polytechnics, and granting of scholarships for girls. Page 9 5. Expansion of the community polytechnic program. 6. Expansion of selected programs in conventional engineering disciplines at the polytechnics. Part B: Improvement of Quality 1. Improvement of facilities and works including construction, furnishing, equipping and staffing of selected polytechnics. 2. Initiation, strengthening and expansion of teacher training programs and career development opportunities for teachers of the polytechnics in the Project States and the Union Territory. 3. Improvement and expansion of curriculum development activities and research programs including environmental orientation. 4. Modernization of diploma programs through the replacement of obsolete equipment and materials in classrooms, laboratories, workshops and other academic and instructional facilities. 5. Development and implementation of maintenance programs for equipment and facilities. Part C: Improvement of Efficiency 1. Deployment of additional staff and the provision of equipment, vehicles, books and other materials. 2. Strengthening of the Directorates and Boards of Technical Education in the Project States and the Union Territory. 3. Introducing greater academic autonomy and delegation of enhanced financial powers to a selected number of polytechnics. 4. Establishment of Industry-Institute Interaction programs at the polytechnics. 5. Encouraging internal revenue generation in the polytechnics of the Project States and the Union Territory. Part D: Training and Studies Provision of local and foreign consultants, training and study tours related to the Project including award of fellowships and scholarships for the purpose; and undertaking of studies related to the Project and selected in consultation with the Association. * * * * The Project is expected to be completed by December 31, 1998. SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2), (3) and (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods, works and services required for the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $13,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. Page 10 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 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. (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 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 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 deter- mined 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 Sec- tion 2.02 of this Agreement; or (ii) once the total unwithdrawn amount of the Credit allocated to the eligible Categories for Parts of the Project, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the 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 of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be Page 11 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; or (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) 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 such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account, for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.