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CONFORMED COPY
CREDIT NUMBER 844 IN
Development Credit Agreement(Railway Modernization and Maintenance Project)
between
INDIA
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated November 13, 1978
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CREDIT NUMBER 844 IN
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated November 13, 1978, between INDIA, acting byits President (hereinafter called the Borrower) and INTERNATIONALDEVELOPMENT ASSOCIATION (hereinafter called the Association).
ARTICLE I
General Conditions; Definitions
Section 1.01. The parties to this Agreement accept all theprovisions of the General Conditions Applicable to DevelopmentCredit Agreements of the Association, dated March 15, 1974, withthe same force and effect as if they were fully set forth herein(said General Conditions Applicable to Development Credit Agree-ments of the Association being hereinafter called the GeneralConditions).
Section 1.02. Wherever used in this Agreement, unless thecontext otherwise requires, the several terms defined in theGeneral Conditions have the respective meanings therein set forthand the following additional terms have the following meanings:
(a) "Railways" means the railways owned and operated bythe Borrower and includes all railway property, equipment andmaterials of the Borrower; and
(b) "Yelahanka Plant" means the wheel and axle plant to beestablished at Yelahanka under Part B of the Project.
ARTICLE II
The Credit
Section 2.01. The Association agrees to lend to the Borrower,on the terms and conditions in the Development Credit Agreementset forth or referred to, an amount in various currencies equiva-lent to one hundred ninety million dollars ($190,000,000).
Section 2.02. The amount of the Credit may be withdrawn fromthe Credit Account in accordance with the provisions of Schedule1 to this Agreement, as such Schedule may be amended from timeto time by agreement between the Borrower and the Association,for expenditures made (or, if the Association shall so agree, to
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be made) in respect of the reasonable cost of goods and services
required for the Project described in Schedule 2 to this Agreement
and to be financed out of the proceeds of the Credit.
Section 2.03. Except as the Association shall otherwise
agree, procurement of the goods and civil works to be financed out
of the proceeds of the Credit, shall be governed by the provisions
of Schedule 3 to this Agreement.
Section 2.04. The Closing Date shall be December 31, 1984
or such later date as the Association shall establish. The
Association shall promptly notify the Borrower of such later
date.
Section 2.05. The Borrower shall pay to the Association
a service charge at the rate of three-fourths of one per cent
(3/4 of 1%) per annum on the principal amount of the Credit
withdrawn and outstanding from time to time.
Section 2.06. Service charges shall be payable semiannually
on February 1 and August 1 in each year.
Section 2.07. The Borrower shall repay the principal amount
of the Credit in semiannual installments payable on each Feb-
ruary 1 and August 1 commencing February 1, 1989 and ending
August 1, 2028, each installment to and including the installment
payable on August 1, 1998, to be one-half of one per cent (1/2 of
1%) of such principal amount, and each installment thereafter to
be one and one-half per cent (1-1/2%) of such principal amount.
Section 2.08. The currency of the United Kingdom of Great
Britain and Northern Ireland is hereby specified for the purposes
of Section 4.02 of the General Conditions.
ARTICLE III
Execution of the Project
Section 3.01. (a) The Borrower shall carry out the Project
and conduct the operations of the Railways with due diligence and
efficiency and in conformity with appropriate engineering, finan-
cial and administrative practices, and shall provide, promptly as
needed, the funds, facilities, services and other resources
required for the purpose.
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(b) The Project shall be carried out by the Borrower sub-stantially in accordance with an implementation schedule agreedupon between the Borrower and the Association.
(c) The Borrower shall carry out the workshop modernizationand rationalization program referred to in Part A of the Projectin accordance with the Plan of Action agreed upon between theBorrower and the Association.
Section 3.02. In order to assist the Borrower in carryingout the Project, the Borrower shall employ experts whose quali-fications, experience and terms and conditions of employmentshall be satisfactory to the Borrower and the Association.
Section 3.03. (a) The Borrower undertakes to insure, or makeadequate provision for the insurance of, the imported goods to befinanced out of the proceeds of the Credit against hazards inci-dent to the acquisition, transportation and delivery thereof
to the place of use or installation, and for such insuranceany indemnity shall be payabl in a currency freely usable bythe Borrower to replace or repair such goods.
(b) Except as the Association shall otherwise agree, theBorrower shall cause all goods and services financed out of theproceeds of the Credit to be used exclusively for the Project.
Section 3.04. (a) The Borrower shall furnish to the Associa-tion, promptly upon their preparation, the plans, specifications,reports, contract documents and work and procurement schedules forthe Project, and any material modifications thereof or additionsthereto, in such detail as the Association shall reasonablyrequest.
(b) The Borrower: (i) shall maintain or cause to be main-tained records and procedures adequate to record and monitor theprogress of the Project (including its cost and the benefits to bederived from it), to identify the goods and services financed outof the proceeds of the Credit, and to disclose their use in theProject; (ii) shall enable the Association's accredited represen-tatives, for the purposes related to the Credit, to visit thefacilities and construction sites included in the Project and toexamine the goods financed out of the proceeds of the Credit andany relevant records and documents; and (iii) shall furnish tothe Association all such information as the Association shallreasonably request concerning the Project, its cost and, where
appropriate, the benefits to be derived from it, the expenditureof the proceeds of the Credit and the goods and services financed
out of such proceeds.
(c) Promptly after completion of the Project, but in any
event not later than six months after the Closing Date or such
later date as may be agreed for this purpose between the Borrower
and the Association, the Borrower shall prepare and furnish to the
Association a report, of such scope and in such detail as the
Association shall reasonably request, on the execution and initial
operation of the Project, its cost and the benefits derived and to
be derived from it, the performance by the Borrower and the
Association of their respective obligations under the Development
Credit Agreement and the accomplishment of the purposes of the
Credit.
ARTICLE IV
Other Covenants
Section 4.01. The Borrower shall maintain or cause to be
maintained records adequate to reflect in accordance with consis-
tently maintained appropriate accounting practices the operations,
resources and expenditures, in respect of the Project, of the
departments or agencies of the Borrower responsible for carrying
out the Project or any part thereof.
Section 4.02. Except as the Association shall otherwise
agree, the Borrower shall maintain passenger fares and freight
rates, and shall take all other action as may be necessary or
appropriate, so as to provide to the Railways net revenue suf-
ficient to enable the Railways to meet annually out of internally
generated resources all operating expenses and dividend payments
on capital-at-charge.
For the purpose of this Section:
(i) the term "net revenue" means the revenue accruingfrom the operation of the Railways excluding any
net revenues or losses which may result from the
operation of mass rapid transit systems in the
principal cities of India. Such revenues or losses
from mass rapid transit systems, if included Li
the Railways' budget, will be separately shown
therein and in the financial accounts of the Rail-
ways;
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(ii) the term "operating expenses" means all ordinaryworking expenses of the Railways, and appropria-tion for the Depreciation Reserve Fund and for thePension Fund of the Railways; and
(iii) the term "capital-at-charge" means the capital pro-vided by the Borrower to the Railways and appearingas such in the Railways' accounts.
Section 4.03. When, with respect to any goods to be financedout of the proceeds of the Credit, the lowest evaluated bid, aftertaking into account the price preference for domestic manufac-turers, is for goods manufactured from outside of India, theBorrower shall promptly grant permission to import the goodscovered by the contract, and no review of such permission toimport shall be made by the Borrower or by any of its agencies,and all foreign exchange required therefor shall be promptly madeavailable.
Section 4.04. The Borrower shall, by December 31, 1978,cause to be prepared and furnished to the Association, a trainingprogram satisfactory to the Association for the training oftechnical staff and work force to be employed at the YelahankaPlant, and shall implement said training program.
Section 4.05. The Borrower shall ensure that the YelahankaPlant shall at all times carry on its operations, manage itsaffairs and maintain its financial position in accordance withsound engineering, financial and administrative practices, includ-ing an appropriate management information system, and with ade-quate staff under the supervision of experienced and competentmanagement.
Section 4.06. The Borrower shall fix such transfer pricesfor the supply of wheels and axles to be produced at the YelahankaPlant as shall be sufficient to cover direct manufacturing costs,overhead costs and full depreciation.
ARTICLE V
Termination
Section 5.01. The date January 15, 1979 is hereby speci-fied for the purposes of Section 12.04 of the General Conditions.
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Section 5.02. The obligations of the Borrower under Sections
4.02, 4.05 and 4.06 of this Agreement shall cease and determine on
the date on which the Development Credit Agreement shall terminate
or on a date 15 years after the date of this Agreement, whichevershall be the earlier.
ARTICLE VT
Representatives of the Borrower; Addresses
Section 6.01. Any Secretary, Additional Secretary, Joint
Secretary, Director or Deputy Secretary in the Ministry of
Finance, Department of Economic Affairs of the Borrower is desig-
nated as representative of the Borrower for the purposes of
Section 11.03 of the General Conditions.
Section 6.02. 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 IndiaMinistry of FinanceDepartment of Economic AffiirsNew Delhi, India
Cable address: Telex:
ECOFAIRS 953-313546New Delhi
For the Association:
International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America
Cable address: Telex:
INDEVAS 440098 (ITT)Washington, D.C. 248423 (RCA) or
64145 (WUI)
IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused thisAgreement to be signed in their respective names in the Districtof Columbia, United States of America, as of the day and yearfirst above written.
INDIA
By Is/ N.A. PalkhivalaAuthorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ W. David HopperRegional Vice President
South Asia
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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 theCredit Allocated % of
(Expressed in Expenditures
Category Dollar Equivalent) to be Financed
(1) Workshopmodernization:
(a) plant and 95,000,000 100% of foreign
machinery expenditures and100% of localexpenditures(ex-factory)
(b) components for 30,000,000 100% of foreignunit-exchange expenditures
system
(2) Plant, machinery 30,000,000 100% of foreign
and materials for expenditures and
the Yelahanka Plant 100% of localexpenditures(ex-factory)
(3) Proprietary items 8,000,000 100% of foreign
for the Yelahanka expendituresPlant
(4) Wheels, tires, 15,000,000 100% of foreign
axles and wheel expenditures
sets
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Amount of theCredit Allocated % of(Expressed in Expenditures
Category Dollar Equivalent) to be Financed
(5) Development support:
(a) thyristor 9,000,000 100% of foreigncontrol trans- expendituresformer sets
(b) equipment and 1,000,000 100% of foreigncomponents expenditures and
for product 100% of localimprovement expendi tures
(ex-factory)
(c) technical 2,000,000 100%advisoryservices andstaff training
TOTAL 190,000,000
2. For the purposes of this Schedule:
(a) the term "foreign expenditures" means expendituresin the currency of any country other than the Borrower and forgoods or services supplied from the territory of any country other
than the Borrower; and
(b) the term "local expenditures" means expenditures inthe currency of the Borrower and for goods or services suppliedfrom the territory of the Borrower.
3. The disbursement percentages have been calculated in com-
pliance with the policy of the Association that no proceeds of the
Credit shall be disbursed on account of payments for taxes leviedby, or in the territory of, the Borrower on goods or services, or
on the importation, manufacture, procurement or supply thereof; to
that end, if the amount of any such taxes levied on or in respectof any item to be financed out of the proceeds of the Credit
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decreases or increases, the Association may, by notice to theBorrower, increase or decrease the disbursement percentage thenapplicable to such item qs required to be consistent with theaforementioned policy of the Association.
4. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made in respect of payments made for expendi-tures prior to the date of this Agreement.
5. Notwithstanding the allocation of an amount of the Credit orthe disbursement percentages set forth in the table in paragraph 1above, if the Association has reasonably estimated that the amountof the Credit then allocated to any Category, except Category (3),will be insufficient to finance the agreed percentage of allexpenditures in that Category, the Association may, by notice tothe Borrower: (i) reallocate to such Category, to the extentrequired to meet the estimated shortfall, proceeds of the Creditwhich are then allocated to another Category and which in theopinion of the Association are not needed to meet other expendi-tures, and (ii) if such reallocation cannot fully meet the esti-mated shortfall, reduce the disbursement percentage then applica-ble to such expenditures in order that further withdrawals undersuch Category may continue until all expenditures thereundershall have been made.
6. If the Association shall have reasonably determined thatthe procurement of any item in any Category is inconsistent withthe procedures set forth or referred to in this Agreement, noexpenditures for such item shall be financed out of the proceedsof the Credit and the Association may, without in any way restric-ting or limiting any other right, power or remedy of the Associa-tion under the Development Credit Agreement, by notice to theBorrower, cancel such amount of the Credit as, in the Associa-tion's reasonable opinion, represents the amount of such expendi-tures which would otherwise have been eligible for financing outof the proceeds of the Credit.
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SCHEDULE 2
Description of the Project
The Project is a part of the Borrower's program of moderniza-
tion and improvement of maintenance and manufacture of diesel and
electric locomotives and rolling stock of the Railways and con-
sists of the following:
Part A:The acquisition of workshop machinery and tools for
implementing the first phase of the Railways' workshop
modernization and rationalization program in its main work-
shops and supporting units, including the acquisition ofparts and components for the establishment of a unit-exchange
maintenance system.
Part B:The establishment at Yelahanka in the State of Karnataka
of a wheel and axle ,lant, including ancillary facilities,
with an annual rated manufacturing capacity of about 70,000
wheels and about 23,000 axles and the acquisition of wheels,
tires and axles for two years of the Railways' motive power
and rolling stock manufacturing and maintenance program.
Part C:The provision of product improvement facilities for
diesel engines at the Research, Designs and Standards Organ-
ization of the Railways; and the acquisition of thyristor
control transformer sets for the testing of thyristor tech-
nology for application in alternating current electric
locomotives.
Part D:T, provision of technical advisory services and over-
seas st.,ff training for manufacturing, quality control, cost
control and design personnel.
The Project is expected to be completed by March 31, 1984.
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SCHEDULE 3
Procurement
A. International Competitive Bidding
1. Except as provided in Part C hereof, goods and civil worksshall be procured under contracts awarded in accordance withprocedures consistent with those set forth in the "Guidelines forProcurement under World Bank Loans and IDA Credits" published bythe Bank in March 1977 (hereinafter called the Guidelines), on thebasis of international competitive bidding as described in Part Aof the Guidelines.
2. For goods and works to be procured on the basis of inter-national competitive bidding, in addition to the requirements ofparagraph 1.2 of the Guidelines, the Borrower shall prepare andforward to the Association as soon as possible, and in any eventnot later than 60 days prior to the date of availability to thepublic of the first tender or prequalification documents relatingthereto, as the case may be, a general procurement notice, in suchform and detail and containing such information as the Associationshall reasonably request; the Association will arrange for thepublication of such notice in order to provide timely notificationto prospective bidders of the opportunity to bid for the goods andworks in question. The Borrower shall provide the necessaryinformation to update such notice annually so long as any goods orworks remain to be procured on the basis of international compe-titive bidding.
3. For the purpose of evaluation and comparison of bids forthe supply of goods to be procured on the basis of internationalcompetitive bidding, (i) bidders shall be required to statein their bid the c.i.f. (port of entry) price for imported goods,or the ex-factory price for domestically manufactured goods;(ii) customs duties and other import taxes on imported goods,and sales and similar taxes on domestically supplied goods, shallbe excluded; and (iii) the cost to the Borrower of inland freightand other expenditures incidental to the delivery of goods tothe place of their use or installation shall be included.
B. Preference for Domestic Manufacturers
In the procurement of goods in accordance with the proceduresdesc.ibed in Part A of this Schedule, goods manufactured in
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India may be granted a margin of preference in accordance with,and subject to, the following provisions:
1. All bidding documents for the procurement of goods
shall clearly indicate any preference which will be granted,the information required to establish the eligibility of a bid
for such preference and the following methods and stages that will
be followed in the evaluation and comparison of bids.
2. After evaluation, responsive bids will be classified
in one of the following three groups:
(1) Group A: bids offering goods manufactured in
India if the bidder shall have established to the
satisfaction of the Borrower and the Association
that the manufacturing cost of such goods includes
a value added in India equal to at least 20% of the
ex-factory bid price of such goods.
(2) Group B: all other bids offering goods
manufactured in India.
(3) Group C: bids offering any other goods.
3. All evaluated bids in each group shall be first compared
among themselves, excluding any customs duties and other import
taxes on goods to be imported and any sales or similar taxes on
goods to be supplied domestically, to determine the lowest evalu-
ated bid of each group. Such lowest evaluated bids shall then
be compared with each other, and if, as a result of this compari-
son, a bid from group A or group B is the lowest, it shall be
selected for the award.
4. If, as a result of the comparison under paragraph 3
above, the lowest bid is a bid from group C, all group C bids
shall be further compared with the lowest evaluated bid from
group A after adding to the evaluated bid price of the imported
goods offered in each group C bid, for the purpose of this further
comparison only, an amount equal to: (i) the amount of customs
duties and other import taxes which a non-exempt importer would
have to pay for the importation of the goods offered in such
group C bid; or (ii) 15% of the c.i 4 f. bid price of such goods
if said customs duties and taxes exceed 15% of such price. If
the group A bid in such further comparison is the lowest, it
shall be selected for the award; if not, the bid from group C
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which as a result of the comparison under paragraph 3 is thelowest evaluated bid shall be selected.
C. Other Procurement Procedures
1. Contracts for equipment and materials estimated to costthe equivalent of $100,000 or less may be procured in accordancewith the usual business practice of the Railways, provided,however, that the aggregate of such contracts shall not exceedthe equivalent of $5,000,000.
2. Contracts for, (i) plant and machinery up to $10,000,000,(ii) components for unit-exchange system up to $5,000,000, (iii)plant, machinery and materials for the Yelahanka Plant up to$5,000,000, and (iv) equipment and components for product improve-ment up to $1,000,000 to be financed under Categories (1) (a), (1)(b), (2) and (5) (b), respectively, of the table set forth inparagraph 1 of Schedule 1 to this Agreement may be procuredthrough limited tenders from established manufacturers, provided,that the list of such items and the firms selected for the biddingfor each such item shall be agreed upon between the Borrower andthe Association.
3. With respect to any contract for plant, machinery and mate-rials for the Yelahanka Plant to be financed under Category 3 ofthe table set forth in paragraph 1 of Schedule 1 to this Agree-ment, the Borrower may place contracts through negotiation pro-vided, that, (a) the terms and conditions of negotiated contractsconform to the Railways' standard form of contract, and (b) theAssociation's prior approval of such standard form of contract(and any modifications thereof) shall have been obtained.
D. Review of Procurement Decisions by the Association
1. Review of invitations to bid and of proposed awards andfinal contracts:
With respect to all contracts estimated to cost the equiva-lent of $1,000,000 or more:
(a) Before bids are invited, the Borrower shall furnish tothe Association, for its comments, the text of the invitations tobid and the specifications and other bidding documents, togetherwith a description of the advertising procedures to be followedfor the bidding, and shall make such modifications in the said
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documents or procedures as the Association shall reasonably
request. Any further modification to the bidding documents shall
require the Association's concurrence before it is issued to theprospective bidders.
(b) After bids have been received and evaluated, the Bor-
rower shall, before a final decision on the award is made, inform
the Association of the name of the bidder to which it intends to
award the contract and shall furnish to the Association, in
sufficient time for its review, a detailed report, on the evalua-tion and comparison of the bids received, and such other informa-
tion as the Association shall reasonably request. The Associationshall, if it determines that the intended award would be inconsis-
tent with the Guidelines or this Schedule, promptly inform the
Borrower and state the reasons for such determination.
(c) The terms and conditions of the contract shall not,without the Association's concurrence, materially differ from
those on which bids were asked or prequalification invited.
(d) Two conformed copies of the contract shall be furnished
to the Association promptly after its execution and prior to
the submission to the Association of the first application for
withdrawal of funds from the Credit Account in respect of such
contract.
2. With respect to each contract not governed by the precedingparagraph, the Borrower shall furnish to the Association, promptly
after its execution and prior to the submission to the Association
of the first application for withdrawal of funds from the Credit
Account in respect of such contract, two conformed copies of such
contract, together with the analysis of the respective bids,recommendations for award and such other information as the
Association shall reasonably request. The Association shall, if it
determines that the award of the contract was not consistent withthe Guidelines or this Schedule, promptly inform the Borrower and
state the reasons for such determination.
3. With respect to any contract costing in excess of $100,000equivalent, before agreeing to any modification or waiver whichaffects the terms and conditions of such contract materially, or
granting an extension by more than 4 months of the stipulated time
for performance of such contract, or issuing any change orderunder such contract (except in cases of extreme urgency) which
would increase the cost of the contract by more than 15% of the
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original price, the Borrower shall inform the Association of the
proposed modification, waiver, extension or change order and thereasons therefor. The Association, if it determines that the
proposal would be inconsistent with the provisions of this Agree-
ment, shall promptly inform the Borrower and state the reasons forits determination.