India - Punjab Agricultural Credit Project : Credit 0203 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 203 IN Project Agreement (Punjab Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND PUNJAB STATE CO-OPERATIVE LAND MORTGAGE BANK LTD. AND THE PUNJAB AGRO-INDUSTRIES CORPORATION LTD. DATED JUNE 24, 1970 CONFORMED COPY CREDIT NUMBER 203 IN Project Agreement (Punjab Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND PUNJAB STATE CO-OPERATIVE LAND MORTGAGE BANK LTD. AND THE PUNJAB AGRO-INDUSTRIES CORPORATION LTD. DATED JUNE 24, 1970 PROJECT AGREEMENT AGREEMENT, dated June 24, 1970, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) of the one part and AGRICULTURAL REFINANCE CORPORATION (hereinafter called ARC), PUNJAB STATE CO-OPERATIVE LAND MORTGAGE BANK LTD. (hereinafter called LMB) and THE PUNJAB AGRO-INDUSTRIES CORPORATION LTD. (hereinafter called PAIC) of the other part. WHEREAS (A) by an agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, which agreement, the Schedules thereto and the General Conditions Applicable to Development Credit Agreements of the Association dated January 31, 1969, made applicable thereto are hereinafter called the Development Credit Agreement, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to twenty-seven million five hundred thousand dollars ($27,500,000), on the terms and conditions set forth in the Development Credit Agreement; (B) the Association has agreed to the foregoing only on condition inter alia that ARC, LMB and PAIC agree to undertake certain obligations to the Association as hereinafter provided; and WHEREAS ARC, LMB and PAIC in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement shall have the respective meanings therein set forth. 4 ARTICLE II Particular Covenants of ARC, LMB and PAIC Section 2.01. ARC, LMB and PAIC shall carry out the Project with due diligence and efficiency and in conformity with sound administrative, agricultural and financial practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. (a) ARC shall enter into a Subsidiary Loan Agreement with the Borrower on terms and conditions (including inter alia those set forth in paragraph 1 of Schedule 4 to the Development Credit Agreement) satisfactory to the Association. ARC shall exercise its rights in relation to the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association. Except as the Association shall otherwise agree, ARC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. (b) ARC shall invite commercial banks listed in the Second Schedule to the Reserve Bank of India Act, 1935, to participate in the Project. ARC shall within one year after the date of this Agreement determine which of said banks shall so participate, the scope of such participation and the date on which such participation shall commence. The aggregate amount of the Agricultural Loans made by Participating Barks shall at no time exceed the equivalent of twenty per cent (20%) of all Agricultural Loans made or estimated to be made. (c) ARC shall enter into an agreoment with each Participating Bank which shall contain the same obligations on the part of the Participating Bank as LMB has undertaken under this Agreement. Section 2.03. (a) Until all Agricultural Loans have been made, LMB shall follow lending terms, criteria and procedures uniform to those set forth in Schedule 1 to this Agreement with respect to its other lending activities for tractors, harvesters and implements. (b) LMB shall cause the Primary Banks to carry out with due diligence and efficiency, and in conformity with sound administrative, agricultural and financial practices the operating policies and procedures for making Agricultural Loans set forth in Schedule 1 to this Agreement, as the same may be amended from time to time by agreement between the Association, ARC, LMB and PAIC. 5 Section 2.04. PAIC shall organize the procurement of equipment to be financed out of the proceeds of the Credit in accordance with the procedures set forth or referred to in Schedule 5 to the Development Credit Agreement. Section 2.05. (a) ARC, LMB and PAIC shall at all times manage their affairs, maintain their financial position, plan their future expansion and carry on their operations, all in accordance with sound business and financial practices and under the supervision of experienced and competent management assisted by experienced and competent staff in adequate number. (b) LMB shall employ two competent and experienced agricultural economists, one senior and one junior. (c) ARC, LMB and PAIC shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the carrying out of the Project or in the conduct of their business. Section 2.06. (a) ARC and LMB shall (i) establish and maintain separate accounts in respect of all funds disbursed and received on account of the Project, (ii) have all its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (iii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of said separate accounts and its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iv) furnish to the Association such information concerning arrears in debt service under loans made by ARC and LMB and such other information concerning their respective accounts and financial statements and the audit thereof as the Association shall from time to time request. (b) PAIC shall (i) establish and maintain separate accounts in respect of all funds paid and received on account of the Project, (ii) have such accounts for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (iii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of said accounts for such year as so audited and (B) the report of such audit by said auditors of such scope and in such detail as the Association shall have reasonably requested; and (iv) furnish to the Association such other information concerning said accounts and the audit thereof as the Association shall from time to time request. 6 Section 2.07. ARC, LMB and PAIC shall maintain or cause to be maintained records adequate to identify the goods and services financed out of the proceeds of the Credit, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to show the results achieved by the Project; shall enable the Association's representatives to inspect such goods and any relevant records and documents; and shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the expenditure of the proceeds of the Credit, the Project, such goods and services, and the operations, administration and financial condition of ARC, LMB and PAIC. Section 2.08. (a) ARC, LMB, PAIC and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, ARC, LMB, PAIC and the Association shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Credit, the Project and to the performance by ARC, LMB and PAIC of their obligations under this Agreement. (b) ARC, LMB and PAIC shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit or the performance by ARC, LMB or PAIC of its obligations under this Agreement. Section 2.09. ARC and LMB shall at all times charge interest on all of their loans at rates sufficient to enable ARC and LMB, respectively, to: (a) cover all operating expenditures and charges including taxes (if any) and interest payments on borrowings; (b) maintain adequate provisions for bad and doubtful debts; and (c) maintain adequate general reserves. ARTICLE III Effective Date; Termination Section 3.01. This Project Agreement shall enter into force and effect on the Effective Date. If the Development Credit Agreement shall terminate pursuant to Section 10.04 of the General Conditions, the Association shall promptly notify ARC, LMB and PAIC of this event and, upon the giving of such notice, this Project Agreement and all obligations of the parties hereunder shall forthwith terminate. Section 3.02. This Project Agreement and all obligations of the Association, ARC, LMB and PAIC hereunder shall terminate on the date on which the Development Credit Agreement terminates, or on the date when all principal 7 amounts withdrawn by ARC under the Subsidiary Loan Agreement prior to the Closing Date and interest thereon shall have been repaid by ARC to the Borrower, whichever is the earlier. ARTICLE IV Miscellaneous Provisions Section 4.01. No delay in exercising, or omission to exercise, any right, power, or remedy accruing to either party under this Project Agreement upon any default shall impair any such right, power or remedy or be construed to be a waiver thereof or an acquiescence in such default; nor shall the action of such party in respect of any default or any acquiescence in any default, affect or impair any right, power or remedy of such party in respect of any other or subsequent default. Section 4.02. Any notice, demand or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable or radiogram to the party to which it is required or permitted to be given or made at its address hereinafter specified, or at such other address as such party shall have designated by notice to the party giving such notice or making such demand or request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Alternative address for cables: Indevas Washington, D.C. For ARC: Managing Director Agricultural Refinance Corporation Garment House Dr. Annie Besant Road Worli, Bombay, 18 WB India 8 Alternative address for cables: Agrefinans Bombay For LMB: Secretary Punjab State Co-operative Land Mortgage Bank Ltd. Chandigarh India Alternative address for cables: Bhoomibank Chandigarh For PAIC: Managing Director The Punjab Agro-Industries Corporation Ltd. Chandigarh India Alternative address for cables: Farmaid Chandigarh Section 4.03. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of (i) ARC may be taken or executed by its Managing Director or such other person or persons as he shall designate in writing, (ii) LMB may be taken or executed by its Secretary or such other person or persons as he shall designate in writing, and (iii) PAIC may be taken or executed by its Managing Director or such other person or persons as he shall designate in writing. Section 4.04. ARC, LMB and PAIC shall furnish to the Association sufficient evidence of the authority of the person or persons who will, on behalf of ARC, LMB and PAIC, take any action or execute any documents required or permitted 9 to be taken or executed by ARC, LMB and PAIC pursuant to any of the provisions of this Agreement and the authenticated specimen signature of each such person. Section 4.05. This Agreement may be executed in several counterparts, each of which shall be an original and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / J. Burke Knapp Vice President AGRICULTURAL REFINANCE CORPORATION By /s / L. K. Jha Authorized Representative PUNJAB STATE CO-OPERATIVE LAND MORTGAGE BANK LTD. By /s / L. K. Jha Authorized Representative THE PUNJAB AGRO-INDUSTRIES CORPORATION LTD. By /s L. K. Jha Authorized Representative 10 SCHEDULE 1 Operating Policies and Procedures 1. Appraisal of Proposed Agricultural Loans ARC shall ensure that the following policies and procedures shall be carried out in appraising Agricultural Loans: (a) No investment shall be proposed which in relation to other investments by the Beneficiary in question cannot be expected to generate an adequate incremental net income - ARC shall prescribe appropriate methods to evaluate the investment in such terms. (b) In case of an Agricultural Loan for tractors, adequate provision shall be made for implements and for post-warranty service on tractors and implements for the life of such Loan; such Loans shall be granted only to Beneficiaries owning such minimum area of land as shall be required under LMB's policies and procedures; in making such Loans, the Primary Banks and the Participating Banks shall work towards applying as a norm for appraisal that a Beneficiary should be able to demonstrate that the tractor can be used for cultivating not less than 40 ha of cropped area per year or for 1,000 hours of productive work in agriculture per year. (c) In case of Agricultural Loans for self-propelled combines or tractor-drawn harvesters, the Beneficiary applying for such Loan shall have an assured annual work load of at least 200 ha for self-propelled combines or 100 ha for tractor-drawn harvesters. 2. Agricultural Loans to PAIC Except as the Borrower and the Association shall otherwise agree, self-propelled combines and tractor-drawn harvesters financed under Agricultural Loans to PAIC shall be limited to twenty and one hundred, respectively. 3. Financial Terms and Conditions of Agricultural Loans (a) Loan Amount: Beneficiaries shall be required to make down payments toward equipment purchases. If an Agricultural Loan is made by a Primary Bank the principal amount shall be determined in such a manner that the down payment plus any required contribution to the 11 capital stock of such Bank, if any, shall be not less than twenty-five per cent (25%) of the cost of a tractor or twenty per cent (20%) of the cost of other equipment. If an Agricultural Loan is made by a Participating Bank the down payment shall be not less than twenty-five per cent (25%) of the cost of a tractor or twenty per cent (20%) of the cost of other equipment. (b) Interest Rate: 9% per annum on outstanding balance. (c) Loan Maturity: maturities shall be calculated to take into account the useful life of equipment to be financed and the repayment capacity of the Beneficiary, provided, however, that the maturity of Agricultural Loans for tractors, tractor implements and tractor-drawn harvesters shall not exceed seven years and the maturity of Agricultural Loans for self-propelled combines shall not exceed five years.