Conformed Copy - C2573 - Andhra Pradesh Forestry Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2573 IN Development Credit Agreement (Andhra Pradesh Forestry Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated March 9, 1994 CREDIT NUMBER 2573 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated March 9, 1994, between INDIA, acting by its President (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Association has received a letter dated November 27, 1993 from the State of Andhra Pradesh (Andhra Pradesh) attaching sector reforms that constitute the framework for improving forest development in Andhra Pradesh including policy, institutional and technical reforms (hereinafter called the Forestry Sector Reform Program), and declaring Andhra Pradesh's Commitment to carry out such Forestry Sector Reform Program; (B) 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; (C) the Project will be carried out by the State of Andhra Pradesh (Andhra Pradesh) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Andhra Pradesh the proceeds of the Credit as provided in this Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the Page 2 terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association and Andhra Pradesh; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (b) "Andhra Pradesh" means State of Andhra Pradesh, a State of the Borrower, or any successor thereto; (c) "Project Agreement" means the agreement between the Association and Andhra Pradesh 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) "NGO" means non-governmental organization; (e) "Rs" means Rupees in the currency of the Borrower; (f) "ha" means hectares; (g) "FD" means the Forest Department of Andhra Pradesh; (h) "FDC" means the Forest Development Corporation of Andhra Pradesh; and (i) "DSW" means the Department of Social Welfare of Andhra Pradesh. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to fifty five million six hundred thousand Special Drawing Rights (SDR 55,600,000). 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 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 September 30, 2000 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Page 3 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 or 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 payment 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 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 January 1 and July 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 January 1 and July 1 commencing July 1, 2004 and ending January 1, 2029. Each installment to and including the installment payable on January 1, 2014 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. 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. Page 4 ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objective 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 the Development Credit Agreement, shall cause Andhra Pradesh to perform in accordance with the provisions of the Project Agreement all the obligations of Andhra Pradesh 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 Andhra Pradesh to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make the proceeds of the Credit available to Andhra Pradesh in accordance with the Borrower's standard arrangements for developmental 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 Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project shall be carried out by Andhra Pradesh pursuant to Section 2.03 of the Project Agreement. Section 3.04. Without any limitation or restriction upon the provisions of Section 3.01 (a) of this Agreement, the Borrower shall provide, or cause to be provided, to Andhra Pradesh or its relevant departments or agencies in a prompt and efficient manner all clearances and approvals as may be required or necessary for the purpose of enabling Andhra Pradesh or its relevant departments or agencies to implement the activities under the Project. ARTICLE IV Financial Covenants Section 4.01. (a) 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 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, Page 5 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, 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) Andhra Pradesh shall have failed to perform any of its obligations under the Project Agreement. (b) An event has occurred which shall make it improbable that the Forestry Sector Reform Program or a significant part thereof will be carried out. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely, that any event specified in Section 5.01 (a) 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 consultants shall have been appointed in accordance with the procedures referred to in Section II of Schedule 1 to the Project Agreement for: (i) preparation of the institutional development study under Part C.2 (i) of the Project; and (ii) developing the management information system and the geographical information system under Parts C.2 (iii) and (iv), respectively, of the Project. 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 Andhra Pradesh, and is legally binding upon Andhra Pradesh 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. ARTICLE VII Page 6 Representatives of the Borrower; Addresses Section 7.01. The Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary, or Under Secretary of the Department of Economic Affairs in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Government of India Department of Economic Affairs Ministry of Finance New Delhi, PIN 110001 India Cable address: Telex: ECOFAIRS 953-3166175 New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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/ N. Valluri Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ D. 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: Page 7 Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Plantation costs: 90% (a) for Part A.2 7,600,000 (ii) (b) of the Project (b) for other 24,500,000 Parts of the Project (2) Civil works 7,300,000 85% (3) Goods 7,200,000 100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 80% of local expenditures for other items procured locally (4) Consultants' 3,900,000 100% services and training (including NGOs' services) Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (5) Incremental 1,200,000 60% until operating costs March 31, 1996, 50% until March 31, 1998, and 40% thereafter (6) Unallocated 3,900,000 __________ TOTAL 55,600,000 ========== 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 "plantation costs" means the aggregate total of: (i) costs of nurseries, land preparation, including labor, inputs for tree plantations, maintenance and protection; and (ii) direct supervision costs related thereto not exceeding 7% of the total costs under (i) above; and (d) the term "incremental operating costs" means the incremental costs for salaries and allowances of additional staff of FD engaged on a full time basis in the implementation of the Project, and for operation and maintenance of additional offices and Page 8 vehicles incurred by Andhra Pradesh for the purpose of implementing the Project. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (i) in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed SDR 1,440,000, may be made on account of payments made for expenditures before that date but after March 31, 1993; and (ii) under Category (1) (a) until land shall have been made available to FDC as specified in paragraph 13 of Schedule 2 to the Project Agreement. 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for expenditures under contracts for goods, works and services not exceeding $200,000 equivalent, under such terms and conditions as the Association shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objective of the Project is to assist in increasing forest productivity and quality, protecting the environment and strengthen- ing and streamlining the policies of the forestry sector in Andhra Pradesh. 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 objective: Part A: Forest Management Rehabilitation and regeneration development on about 355,000 ha, consisting of: 1. Joint Forest Management of Forest Lands Development of about 173,000 ha of degraded forest lands under joint forest management arrangements between villagers and FD, of which (i) about 152,000 ha would be developed through regeneration and protection of degraded areas with viable rootstock, and (ii) about 21,000 ha would be developed through multi-tier treatment of larger severely degraded forest areas. 2. Production Forestry on Forest Lands Regeneration development on about 104,000 ha, consisting of: (i) regeneration of bamboo bearing forests in about 59,000 ha; (ii) new plantations on heavily degraded forest reserve lands of about 30,000 ha, including: (a) about 12,500 ha of plantations by FD, and (b) 17,500 ha of high-yield plantations by FDC; and (iii) provision of silvicultural operations to rehabilitate about 15,000 ha of viable teak plantations. 3. Forestry Development of Lands Outside Designated Forests Expanding community and farm forest coverage through deve- lopment of about 77,000 ha, including about 34,500 ha for small- Page 9 holders, 12,500 ha of community lands, and about 30,000 ha of private wastelands. Part B: Special Action Program 1. Improvement of forestry research and plant propagation through the provision of office and research laboratories, seed processing and nurseries, research and seed handling equipment, vehicles, library, training and consultants' services. 2. Supporting the joint forest management process through the provision of training, study tours, research, community infrastructure and NGOs' services. 3. Improvement of biodiversity conservation and protected areas management through the provision of: (i) studies, boundary demarcation, fire protection, upgrading of roads, habitat improvement, captive breeding programs and eco-development in and around selected parks and sanctuaries; and (ii) buildings, equipment, vehicles and training and consultants' services. 4. Provision of collaborative fodder program between FD and the Department of Animal Husbandry and other relevant organizations, through the provision of research, training, consultants' services, vehicles and equipment. 5. Carrying out a tribal development plan to ensure and enhance positive effects of the Project activities on tribal groups, and to complement existing programs in Andhra Pradesh that are aimed at improving development in tribal areas. Part C: Service Support 1. Provision of housing, office buildings, vehicles, equipment, training and consultants' services to FD and FDC. 2. Carrying out the following studies and technical services: (i) institutional development study; (ii) forest inventory; (iii) management information system; and (iv) geographical information system. * * * The Project is expected to be completed by March 31, 2000. SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2), (3), (4) and (5) set forth in the table in paragraph 1 of Schedule 1 to 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 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 $4,000,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively Page 10 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. 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 this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, 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. 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 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. Page 11 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.