Conformed Copy - C2100 - Integrated Watershed Development (Hills) Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2100 IN (Integrated Watershed Development (Hills) Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated January 11, 1991 CREDIT NUMBER 2100 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated January 11, 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 Borrower has also requested the International Bank for Reconstruction and Development (the Bank) to provide addi- tional 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 assist- ance in an aggregate principal amount equivalent to thirteen million ($13,000,000) (the Loan); (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Page 2 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 Haryana (Haryana), the State of Himachal Pradesh (Himachal Pradesh), the State of Jammu and Kashmir (Jammu & Kashmir), and the State of Punjab (Punjab) (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: 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) "Additional Sub-watersheds" mean the additional sub- watersheds in the Project States indicated in Part A.1 (b) of Schedule 2 to this Agreement; (b) "Initial Sub-watersheds" mean the initial sub-watersheds in the Project States indicated in Part A.1 (a) of Schedule 2 to this Agreement; (c) "Loan Agreement" means the agreement of even date here- with 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; (d) "Micro-Watershed" means a part of a sub-watershed; (e) "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; (f) "Project Area" means the subtropical Shivalik and temperate Karewas ranges of the Himalayan foothills in the Project States; (g) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (h) "WPIO" means the Watershed Planning and Implementation Office. Page 3 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 fifty-six million eight hundred thousand Special Drawing Rights (SDR 56,800,000). 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 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, 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 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 speci- fied 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 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 May 1 and November 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 May 1 and November 1 commencing May 1, 2000 and ending November 1, 2024. Each installment to and including the installment payable on November 1, 2009 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 Page 4 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. 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, without any limitation or restriction upon any of its other obligations under this Agreement: (a) shall carry out Parts B.3, C.1, C.3 and D.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, engineering and agricultural practices, and shall provide promptly as needed the funds, facilities, services and other resources required for Parts B.3, C.1, C.3 and D.5 of the Project and for the Watershed Development Council to carry out its monitoring activities under the Project; and (b) 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 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. Section 3.02. 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 4 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.1, B.2, C.2 and D.1 through D.4 of the Project shall be carried out by the Project States pursuant to Page 5 Section 2.03 of the Project Agreement. Section 3.05. In carrying out Part D.5 of the Project, the Borrower shall employ specialists for purposes of Part A.1 of the Project by December 31, 1990. 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 Parts B.3, C.1, C.3 and D.5 of the Project of the departments or agencies of the Borrower responsible for carrying out Parts B.3, C.1, C.3 and D.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 (iii) furnish to the Association such other information concerning said records and 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 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 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 the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, Page 6 including a separate opinion by said auditors as to whether 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; and (iii) furnish to the Association 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) A Project State 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 the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that a Project State or the Project States will be able to perform its or their 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 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 their 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. ARTICLE VII Representatives 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 Page 7 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 31-61430 New Delhi 31-66175 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/ Anil Kumar 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 Category: Amount of Amount of the Credit the Loan Allocated Allocated % of Page 8 (Expressed (Expressed Expendi- in SDR in Dollar tures to Category Equivalent) Equivalent) be Financed (1) Civil works: 80% (a) Borrower 130,000 30,000 (b) Haryana 1,740,000 400,000 (c) Himachal 1,030,000 240,000 Pradesh (d) Jammu & 2,580,000 590,000 Kashmir (e) Punjab 2,710,000 620,000 (2) Equipment, 100% of foreign furniture and expenditures, vehicles: 100% of local expenditures (a) Haryana 90,000 20,000 (ex-factory cost) and 50% (b) Himachal 180,000 40,000 of local ex- Pradesh penditures for other items pro- cured locally Amount Amount of the of the Credit Loan Allocated Allocated % of (Expressed (Expressed Expendi- in SDR in Dollar tures to Category Equivalent) Equivalent) be Financed (c) Jammu & 60,000 10,000 Kashmir (d) Punjab 150,000 40,000 (3) Consultants' 100% services and training: (a) Borrower 460,000 110,000 (b) Haryana 580,000 130,000 (c) Himachal 260,000 60,000 Pradesh (d) Jammu & 130,000 30,000 Kashmir (e) Punjab 450,000 100,000 (4) Operating 60% costs: (a) Haryana 970,000 220,000 (b) Himachal 980,000 230,000 Pradesh (c) Jammu & 1,910,000 440,000 Kashmir (d) Punjab 2,860,000 660,000 Page 9 Amount Amount of the of the Credit Loan Allocated Allocated % of (Expressed (Expressed Expendi- in SDR in Dollar tures to Category Equivalent) Equivalent) be Financed (5) Field opera- 70% tions and materials under Parts A.1 (a), A.2, B.1 and B.2 of the Project: (a) Haryana 1,130,000 260,000 (b) Himachal 2,120,000 490,000 Pradesh (c) Jammu & 4,070,000 930,000 Kashmir (d) Punjab 6,240,000 1,430,000 (6) Field opera- 70% tions and materials under Part A.1 (b) of the Project: (a) Haryana 8,970,000 2,050,000 (b) Himachal 4,920,000 1,130,000 Pradesh (c) Jammu & 2,970,000 690,000 Kashmir (d) Punjab 3,420,000 780,000 Amount Amount of the of the Credit Loan Allocated Allocated % of (Expressed (Expressed Expendi- in SDR in Dollar tures to Category Equivalent) Equivalent) be Financed (7) Unallocated 5,690,000 1,270,000 _________ __________ TOTAL 56,800,000 13,000,000 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 Page 10 (c) the term "operating costs" means incremental costs for salaries and wages, vehicles and equipment operation and maintenance, and office supplies. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made: (a) for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 3,000,000, may, subject to paragraph 4 of this Schedule, be made in respect of Categories (2), (3) and (5) on account of payments made for expenditures before that date but after July 31, 1989; (b) for expenditures: (i) in respect of Categories (1)(b), (2)(a), (3)(b), (4)(a) and (5)(a) until Haryana has fulfilled the conditions set forth in paragraph 4 below; (ii) in respect of Categories (1)(c), (2)(b), (3)(c), (4)(b), and (5)(b) until Himachal Pradesh has fulfilled the conditions set forth in paragraph 4 below; (iii) in respect of Categories (1)(d), (2)(c), (3)(d), (4)(c) and (5)(c) until Jammu & Kashmir has fulfilled the conditions set forth in paragraph 4 below; (iv) in respect of Categories (1)(e), (2)(d), (3)(e), (4)(d) and (5)(d) until Punjab has fulfilled the conditions set forth in paragraph 4 below; and (v) in respect of Category (6)(a), (6)(b), (6)(c) and (6)(d), respectively, until Haryana, Himachal Pradesh, Jammu & Kashmir, and Punjab, respectively, has made progress, satisfactory to the Association and the Bank, in the carrying out of Part A.1 (a) of the Project. 4. No withdrawals shall be made in respect of payments made for expenditures referred to in paragraph 3 above until: (i) the WPIO referred to in Part D.1 of the Project shall have been established, and the Steering Committee referred to in paragraph 2 of the Schedule to the Project Agreement shall have been constituted; (ii) the Director of the WPIO shall have been appointed pursuant to paragraph 1 of the Schedule to the Project Agreement; and (iii) an independent agency for carrying out baseline studies shall have been designated pursuant to paragraph 4 of Section II of Schedule 4 to this Agreement. SCHEDULE 2 Description of the Project The objectives of the Project are to slow and reverse degradation of the natural environment, through the development, support, promotion, and use of appropriate soil and moisture conservation technology, primarily vegetative conservation technology, and to introduce sustainable production systems to keep pace with population growth. Page 11 The Project shall be carried out in the Project Area. It 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: Sub-watershed Treatments 1. Treatment, as defined in the Annex to this Schedule, of (a) initially fifteen sub-watersheds distributed in the Project States covering an area of about 110,000 hectares; and (b) additional sub-watersheds in Haryana, Himachal Pradesh and Punjab, and additional micro-watersheds in Jammu & Kashmir within the initial sub-watersheds, pursuant to identification, preparation and appraisal thereof satisfactory to the Association. 2. Treatment, as defined in the Annex to this Schedule, of the upper catchment areas of Ropar and Hoshiarpur districts of Punjab covering an estimated area of about 16,000 hectares. 3. Construction of small water harvesting tanks, generally with a height of about 10 to 15 meters and with a command area of about 40 to 100 hectares, in the Project States after the upper catchment for such tanks has been stabilized. Part B: Technology Improvement and Application 1. Development of nurseries for vetiver and other appropriate conservation flora, for forage species and for horticultural and tree seedlings to ensure adequate supply of planting material in the Project Area. 2. Carrying out demonstrations and dissemination of rainfed farming technology, particularly vegetative soil and moisture conservation technology, throughout the districts in which sub- watersheds are located by providing planting material and inputs and training extension subject matter specialists and university trainers in the rainfed farming technology. 3. Carrying out of on-farm applied research by zonal research stations of the Project States' Agricultural Universities in selected sub-watersheds to determine the impact of the treatments and to study possible constraints in their adoption. Part C: Training 1. Establishment of a training facility at the Punjab Agricultural University Zonal Research Station at Ballowal Saunkheri to be used by the Project States to train selected staff dealing with arable and non-arable lands in conservation technology, production systems and in interactive planning; including construction of additional facilities, acquisition of equipment and provision of related technical assistance. 2. In-service training of field staff in interdisciplinary watershed planning and in interaction with beneficiaries, and training of farmers in conservation technology and production systems by the Project States. 3. Establishment of a training facility at the Punjab Remote Sensing Centre in Ludhiana (Punjab) to be used by the Project States to train selected staff on geographic information systems for watershed planning and monitoring, including acquisition of equipment and provision of technical assistance. Part D: Project Implementation 1. Establishment of a WPIO in each of the Project States, including construction of offices and staff housing, and acquisition of equipment and vehicles. 2. Provision of training and study tours related to Project implementation for the staff of the WPIOs. Page 12 3. Establishment of a Geographical Information System in each of the Project State to assist in the planning and the monitoring of Project activities. 4. Provision of technical assistance to the Project States for production of information materials, for pasture improvement and fodder production, and for Project evaluation. 5. Provision of technical assistance to the Project States for the development and implementation of procedures for preparing interactive multidisciplinary watershed management plans. * * * The Project is expected to be completed by December 31, 1996. ANNEX TO SCHEDULE 2 Eligible Treatments Any of the treatments listed below are eligible for financing under Part A.1 and A.2 of the Project: (a) Arable Land (i) Contour vegetative barriers (ii) Terrace repair and vegetative reinforcement (iii) Vegetative field boundaries (iv) Silvipasture (v) Rainfed horticulture (vi) Farm forestry/agro-forestry (vii) On-farm fodder production (viii) Rainfed horticultural demonstrations (ix) Rainfed cropping system demonstrations (b) Private Non-Arable, Common and Forest Lands (i) Vegetative/shrub barriers in contour trenches (ii) Pasture development (iii) Silvipasture (iv) Afforestation (c) Drainage Lines (i) Gully stabilization (ii) Streambank protection (iii) Village ponds and tank construction (iv) Rehabilitation of village ponds (v) Water harvesting structures (d) Roadside Erosion Control (e) Landslide Treatment Page 13 (f) Animal Husbandry (i) Natural breeding centers (ii) Livestock reduction (iii) Supplementary feeding iv) Construction and rehabilitation of stalls (g) Post-Harvest Loss Prevention (i) Grain storage bins SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (6) 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 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 four million dollars ($ 4,000,000) to be withdrawn from the Credit Account or the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, 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) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, 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) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of each such requests, the Association shall withdraw from the Credit Account or the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account or from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Page 14 Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) 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 paragraph (a) of Section 2.02 of the Development Credit Agreement and Article V of the General Conditions or from the Loan Account in accordance with Section 2.02 of the Loan Agreement and Article V of the General Conditions applicable thereto; or (ii) the total unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories, minus the amount of any outstanding 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 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 any expenditure or in any 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 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. 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. (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 for crediting to the Credit Account or the Loan Account, as the case may be. SCHEDULE 4 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: Procurement Procedures 1. Force Account Civil works and field operations shall be carried out through Page 15 force account. 2. Local Competitive Bidding Equipment, furniture and vehicles shall be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association and the Bank. 3. Shopping 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 $200,000, 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 and the Bank. Part B: Review by the Association and the Bank of Procurement Decisions 1. Review of final contracts: (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 and the Bank pursuant to said paragraph 3 shall be furnished to the Association and the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 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 or the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.02 (a)(ii) of this Agreement and Section 3.01 of the Loan Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants 1. In order to assist the Borrower in carrying out Part C.1 of the Project, the Borrower shall employ visiting specialists whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association and the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association and the Bank 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 Borrower in carrying out Part C.3 of the Project, the Borrower shall employ short-term specialists whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association and the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association and the Bank 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. 3. In order to assist the Borrower in carrying out Part D.5 of the Project, the Borrower shall employ short-term specialists for purposes of Part A.1 of the Project for the initial period of the Project, whose qualifications, experience and terms and conditions Page 16 of employment shall be satisfactory to the Association and the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association and the Bank 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. 4. In order to assist the Project States in carrying out Part D.4 of the Project, each State shall employ short-term specialists whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association and the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association and the Bank 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.